Bank Consolidations - Incentives and a Threat

The issue of RegulationNo. 8/17/PBI/2006by the Governor of Bank Indonesia (BI) is ostensibly a means to provide incentives to banks to consolidate in order to strengthen the banking industry as a whole. The Regulation would seem to imply that the impetus to merge or consolidate is not going to come from the banks themselves and to therefore to facilitate this initiative it is necessary to provide some sweeteners to encourage these consolidations to occur.