Jakarta, May 25 (IslamOnline & News Agencies) - The Singapore Monetary Authority (MAS) has urged local banks to seek regional mergers and to consolidate themselves on a regional basis.
Chairman Lee Hsien Loon of MAS said on Friday that Singapore is too small for the five local banks to expand.
"The domestic market is too small to sustain five local banks of adequate size to compete regionally. Only one [significant] merger has taken place so far between DBS and POSBank," the chairman said.
Brigadier-General Lee, the son of Chief Minister Lee Kuan Yew, said in a speech at the opening of the ACI World Congress here: "I know all the banks are alive to the competitive trends and are continually reassessing their position. It is a dynamic situation, and the present configuration is unlikely to be permanent."
Singapore has one of the most competitive banking sectors in the region and a merger of banks to limit any negative impact of heavy competition is needed.
The only merger that has occurred in Singapore recently is that of the Keppel Bank and Tatlee Bank. Both have formed a powerful financial structure offering various facilities to the local market.
Among local banks, DBS Group and United Overseas Bank had been the most active in making regional acquisitions. Both banks have acquired banks in Thailand and the Philippines, while DBS had recently concluded a deal to buy Dao Heng Bank in Hong Kong.
"The stronger local banks have concluded that they need to develop into significant regional players, in order to diversify their earnings base and exploit new growth opportunities," BG Lee said.
"A few have taken the first steps in this direction. Not all their ventures have been successful. But mistakes are the price of experience and the banks must learn from them, rather than abandon the effort to grow abroad," he said.
