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 Web Resources on Malaysian Bank mergers

Malaysian banking reform
Chronology of Events from IBBM Web site  

Malaysia's bank mergers: Isn't there space for the smaller banks?
From Editorial, Far Eastern Economic Review  

Rethinking the merger plan
From Intelligence section, Asiaweek 

Merged banks to compete globally
From Utusan Express 

Unisys sees opportunities in bank mergers
From Utusan Express 

"Wedding over, marriage begins"


Bank mergers

"Wedding over, marriage begins"

Untold costs of integration
Renamed Bumiputra-Commerce on October 1, the bank opted for BOC's retail banking system while the ex-Bank Bumiputra provided the systems for branch delivery, treasury, trade finance and some back office operations.

Asked why this mix-and-match approach was adopted, Lazaroo explains: "You cannot take one person's system completely. We have taken the best from both sides."

Singapore-based IBM Consulting is acting as Bumiputra-Commerce's IT systems integration consultant.

Stating that the "wedding is over, the marriage is now starting," Lazaroo estimates the IT integration process will take a minimum of 18 to 24 months. With 10,000 employees, Bumiputra-Commerce has the country's largest automated teller machine (ATM) network and nearly 260 branches serving about two million customers. Its assets of RM70 billion (US$18.4 billion) put it second only to Malayan Banking Bhd.

"The integration has not thrown up hitches yet for the simple reason that we are only just starting. I am sure there will be some teething problems later," he adds.

The Y2K issue has also delayed the bank's integration process. Bumiputra-Commerce is withholding implementation of its IT integration until early next year. Till then, the bank will continue to operate on two separate IT systems.

"We are already now in the freeze period. We have already done our Y2K testing and we don't want to introduce something new that could make our tested, compliant systems become incompliant," says Lazaroo.

While the strategic benefits of mergers, such as becoming bigger, diversifying portfolios and customer base and becoming more resilient and competitive are not apparent in the short term, the teething problems are. "What are more obvious are the operational hiccups. But these will go away over time," says Andersen Consulting's Chow.

"If you have done the homework and the necessary testing, problems should not happen. But it would not be surprising if they occur. The key is not to have any adverse impact on the customer from day one of the merger," he says.

Another potential problem is the danger that the IT system of the merged bank will not be able to handle the quantum increase in transactions because of new customers and accounts. To avoid such a scenario, Chow says a capacity analysis of the system must be conducted. "This entails analyzing the capacity of the system, planning for proper capacity testing, stress testing and performance testing to verify it can handle the merged bank's volume of business."

Chow says one of the heartaches encountered in an integration process is when top management changes its mind about what products or services it wants to offer. "That can have a major impact on the work," he says.



Lee Min Keong is a regular contributor for various regional magazines and has been a journalist for over 15 years. He heads Asia-Pacific Editorial Consultants, a Kuala Lumpur-based editorial services firm. Email us your comments.


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