Allowing higher foreign shareholding of local banks likely to be on a case-by-case basis

Reciprocity on bank stakes 

PETALING JAYA: Allowing foreign banks to hold higher stakes in local banks may be an issue of reciprocity but it will probably give local banks a run for their money.
Bankers contacted in a random poll said they were unaware of such a move and opined that a clearer picture on any liberalisation of the current shareholding structure would probably emerge next year.

It was reported over the weekend that Bank Negara may liberalise the foreign shareholding in domestic banks, which currently stands at 30%, under the second leg of the financial services masterplan.

This move, expected on a case-by-case basis, is apparently aimed at preparing local banks for regional expansion and helping them tap opportunities within the Asean region.

“Of course, there will be some nationalistic feelings but in the end, it is up to the regulators and government how they see the sector evolving and what they want out of it,'' said an industry observer.

Foreigners will want a bigger piece of the pie; they are usually part of a global group that will provide the support, resources, talent pool and products that will challenge the locals to work harder.

“Liberalisation in this aspect can result in an intense situation where the market will be crowded and there will be competition for talent,'' said analysts.
Early this year, Reuters reported from Australia, quoting Prime Minister Datuk Seri Najib Tun Razak that he was open to the idea of Australia and New Zealand Banking Group (ANZ) increasing its stake in AMMB Holdings Bhd to 49% from about 24%.

Reciprocity became an issue in the case of Indonesia considering a rule to limit the foreign shareholding in its banks.

It is suggested that such issues be solved at the level of the Asean banking framework; nevertheless, Malaysia may be studying its implications from a country's perspective.

In April, foreign ownership limit for investment banks, Islamic banks and takaful companies was raised from 49% to 70%.

Besides ANZ's stake in AMMB Holdings, other notable foreign shareholding in domestic banks include:

Temasek's effective stake in 14.5% in Alliance Financial Group (AFG); Temasek owns 49% in Vertical Theme Sdn Bhd, the holding company that owns 29% in AFG. The other 51% in Vertical Theme is held by local firm Langkah Bahagia Sdn Bhd.
Aabar Investments PJS's 25% stake in RHB Capital; Aabar is sister company of Abu Dhabi Commercial Bank which had earlier bought the block.

Bank of East Asia's 24% stake in Affin Holdings Bhd.

As part of the liberalisation, licences have been awarded to banks from different countries but these represent relatively small start-ups. Buying a higher stake in established domestic banks represent a different ballgame in a bigger arena.
Other areas of focus in the upcoming masterplan involve responsibilities of directors, CEOs and senior management under a strict corporate governance framework and the development of a dynamic Islamic banking hub in Malaysia.(The Star Online)