Parliamentary Replies
Published Date: 14 January 1998

Parliamentary Question on Banking Mergers

Parliamentary question on banking mergers

Date: For Parliament Sitting on 14 Jan 1998

To ask the Deputy Prime Minister (a) if he will offer incentives to local banks to merge so that the banks may pool resources to compete with foreign banks; and (b) if he will consider reviewing shareholding ceilings of the banks incorporated in Singapore.

1.  The financial services industry is in ferment worldwide. The driving forces are information technology and globalisation. Financial institutions are merging and restructuring, in order to derive growing economies of scale and serve customers more efficiently.

2.  It is impossible to insulate our domestic banks from these larger trends. The smallness and openness of our domestic market makes us even more susceptible to them.  By international standards, our local banks are quite small. They need to grow large enough to have the economies of scale, the mass and reach to offer efficient, high quality services to Singaporeans, and to become significant regional players.

3.  Bank mergers are one way to achieve this, provided the mergers are followed through and the previously separate businesses are properly integrated and rationalised.

4.  The Minister for Finance has publicly encouraged the local banks to consider mergers. The driving forces in the industry give them strong incentive to do this, even without Government persuasion. Keppel Bank and Tat Lee Bank have just announced their intention to merge. The Government will study what more it can do to encourage the banks in this direction. 

5.  We have also informed the local banks that if they wish to bring in foreign minority partners to support a strategy of growth, and to bring in expertise and technology, the government will be supportive.

6.  MAS has no immediate plan to raise the foreign shareholding ceilings. But the matter will be studied, together with all other aspects of the Government's policy towards the financial sector, as part of the review of the sector now underway.