The Indonesian Banking Sector in 1998: The LegacyBank Mandiri (A)

Published 01 Sep 2003
Reference 5115
Topic Strategy
Industry Banking
Region Asia
Summary

In the midst of Indonesia’s financial and economic crisis, Bank Mandiri was formed on October 2, 1998 as a holding company for four state banks. Like most other banks in Indonesia during the Asian financial crisis, these four banks were insolvent. Bank Mandiri was recapitalized at a cost to the Indonesian government of Rp 175.3 trillion (US$17 billion approximately), one of the biggest recapitalizations for a single bank in Asia. The bank subsequently underwent a massive restructuring, encompassing a reduction of around 8,000 personnel, the closure of about 200 branches, drastic reductions in the amount of non-performing loans on its books and the wholesale creation of new systems of credit risk management, corporate governance and compliance.

Teaching objectives

The objective of these four case studies is to document the merger process leading to the creation of Bank Mandiri and the financial turnaround of the bank. Because it details the process of the merger and the management strategies subsequently employed to turn the bank around, the case studies are useful reference for policy makers, bank executives, and general managers involved in managing change in difficult times. Considering that the financial crises are becoming more frequent and expensive, and that they always require massive restructuring in the banking sector, these case studies are likely to be useful for senior banking executives in many emerging countries.

Keywords
  • AR2003
  • AR0203
  • RD0503
  • Management Of Change
  • Mergers
  • Corporate Transformation
  • State-Owned Enterprises
  • Soe
  • Asian Crisis
  • Leadership
  • Banking
  • Indonesia