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Tuesday May 25, 2010

New banking licences expected in June

Several insurers eagerly awaiting Bank Negara announcement

PETALING JAYA: Come June, there will be some excitement in the banking industry when Bank Negara reveals some of the successful recipients for foreign commercial banking licences in line with the financial sector liberalisation plan.

Up to five new banking licences are expected to be issued in niche and up to two new takaful licences will also be announced.

ING, Allianz, Manulife, Great Eastern and AmAssurance are some of the insurers believed to have submitted their applications. An industry observer felt Great Eastern might be one of the successful applicants for the takaful licence.

It is learnt that the proposed two Islamic banking licences expected to be issued next month may be delayed as the central bank is still assessing the applications of suitable candidates.

Although industry observers are still speculating on the possible foreign commercial banking licensees, names like DBS Bank, UOB, The National Bank of Abu Dhabi (NBAD) and Sumitomo Mitsui Banking Corp have been popping up of late on analysts’ radar as among the potential candidates.

Bank Negara has been tight-lipped about this matter but hinted that the licences to be issued would be to banks from Asia, Europe and the Middle East.

Last year also saw the central bank issuing banking licences to Industrial and Commercial Bank of China Ltd and this year, it issued a new commercial banking licence to a consortium of Indian banks.

An analyst from a foreign brokerage felt DBS was a possible candidate for the banking licence as the Singapore government’s investment arm, Temasek Holdings, was believed to be consolidating its banking assets under its unit, DBS Group Holdings Ltd.

Since Alliance Financial Group (the parent company of Alliance Bank) is 29% owned by Fullerton Financial Holdings Ltd, which is in turn fully-owned by Temasek, it would make business sense for DBS to enter the local market via Alliance Bank, he added.

But, then again, there was a possibility that the central bank might not agree to this for the time being, the analyst added.

An analyst from an investment bank said NBAD, which had, among others, niche expertise in the small and medium enterprises, would be a good fit for the local small and medium enterprises industry.

Malaysian Rating Corp Bhd (MARC) vice-president and head of financial institution ratings Anandakumar Jegarasasingam added that it was very likely that these new international banks that would be given licences would focus on the corporate sector to finance specialised activities and to use Malaysia as a base to access the broader regional market.

Therefore, he added, it was unlikely that these new international banks would be an immediate threat to the retail banking operations of the existing banks.

While banks from the Middle East, India and Indonesia might be aggressive in their operations, banks from countries like Japan were likely to be less aggressive in their operations, he noted.

As Malaysia’s pool of bankers was rather limited, he said the entry of new banks was likely to offer attractive remuneration packages and might create a “talent crunch” in the banking sector.

RAM Ratings head of financial institution ratings Promod Dass believed that the new entrants were likely to focus on their niches at the onset, for example, facilitating international trade flows of companies domiciled in their home countries.

All said, RAM Ratings views the liberalisation initiatives in a positive light. An “open” financial sector would promote diversity in the Malaysian financial marketplace, encourage innovation and promote best practices, Dass added.

Pitted against the existing and already-established banking franchises, carving a significant foothold in the consumer, SME and wholesale banking segments would be challenging as their domestic incumbents would have a head start in terms of their first-mover advantage, he said.

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