Questions:
Q22. To ask the Deputy Prime Minister
(a) what is the status of the process to merge the local banks
(b) has there been any change in the policy to encourage local banks to merge; and
(c) whether there are further liberalization policies to open up the banking and financial sector.
Answer:
1. MAS' view on bank consolidation remains unchanged - that the Singapore market is too small to support more than two major local banks, and that further consolidation and mergers will help banks to achieve economies of scale and compete internationally, or at least regionally.
2. Nevertheless, the decision to merge has to be made by the local banks' managements and shareholders. MAS can only encourage, not dictate. There have been no moves by the local banks to merge so far. As competition intensifies in the banking industry, through the progress of technology and our liberalisation measures, the pressure on banks to consolidate and rationalise will grow. Alternatively, banks can choose to become niche players in specific segments.
3. The measures to open up the domestic banking market that MAS announced in May 1999 were the first instalment of a five year programme to liberalise the industry. MAS will review the position next year before deciding on the next package of measures.