The mainland central bank has denied speculation in a Taiwan newspaper that it plans to merge the Hong Kong operations of three banks - the Bank of China, China Construction Bank and China Everbright Bank. 'The government has not considered it so far,' a senior official with the People's Bank of China (PBOC), told China Daily yesterday. The report in Taiwan's Commercial Times said the mainland's central government had decided to merge the Hong Kong operations of the three banks into a 'mega-China Construction Bank', with assets of 600 billion yuan (about HK$558 billion), and make it one of the top 200 enterprises in the world. 'Big size alone is of no use,' countered the central bank official in the Internet edition of China Daily yesterday. The main task of the mainland's commercial banks should be strengthening internal controls, reforming management structure, obtaining more assets, developing new products and expanding into new markets, the official added. According to the Taiwan report, the merger plan would be announced in the middle of this month, but the official said there were no such plans in the offing. The report also said Premier Zhu Rongji had initiated the merger plan, and a preparatory group with the Bank of China president Liu Mingkang as director and China Construction Bank president Wang Xuebing as vice-director had been established. Mr Liu concurrently heads the Everbright Bank of China and SAR-listed China Everbright. The central bank official said that as the mainland further opened its financial sector, its domestic banks would face more challenges from foreign counterparts. The challenge would come mainly from an expected outflow of talented managers and staffers, which could not be remedied through simple mergers. 'Furthermore, the central government has always encouraged competition between financial institutions,' he added. The official said the merger rumour made no sense, because the Bank of China had enjoyed a long history and held a widely recognised name that bank executives would not want to abandon. The Bank of China is one of the four largest state-owned commercial banks. The others are the China Construction Bank, Industrial and Commercial Bank of China and Agricultural Bank of China.