Temachecked

22 May 2013 By Peter Thal Larsen Follow @Peter_TL

DBS can buy 40 percent of local lender Danamon, says Indonesia’s central bank, but no more. That’s of little use to the Singaporean bank, which is seeking control, or to the sovereign wealth fund which has stakes in both groups. Only political intervention can break the deadlock.

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Indonesia’s outgoing central bank governor on May 21 gave his approval for DBS, the Singaporean bank, to buy a 40 percent stake in Bank Danamon. However, he said a full takeover of the Indonesian lender would depend on Singapore opening up its banking market.
The takeover, the largest-ever bank deal in southeast Asia, has been awaiting regulatory approval for over a year since it was first announced. At the time, DBS agreed to exchange its shares for a 67 percent stake in Danamon held by Temasek, the Singaporean sovereign wealth fund that also owns 29 percent of Danamon. DBS said it planned to offer Danamon’s remaining shareholders 7,000 rupiah per share in cash.
However, Indonesia subsequently passed a law restricting foreign shareholders in the country’s banks to 40 percent.
Darmin Nasution, who is stepping down as central bank governor, said Singapore should further open up its banking sector to Indonesia banks as a quid pro quo for giving DBS the right to take control of Danamon. The Monetary Authority of Singapore said the two countries were looking at ways to give each other further access.
“In the case of Indonesian banks in Singapore, this will be by way of a broader provision of financial services, both in wholesale banking and to, for example, Indonesian students and work permit holders in Singapore,” the MAS said.
DBS said it hoped the deal would be approved “as originally submitted”.
DBS shares fell 6 cents to S$17.29 ($13.72). Danamon shares fell 100 rupiah ($1.8) to 5,900 rupiah.

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