Published July 11, 2009

Credit Suisse's OCBC conundrum

Its deemed stake in Singapore bank crosses 5% which may require regulator's approval

By CONRAD TAN

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CREDIT Suisse this week became a substantial indirect shareholder of OCBC Bank as a result of an earlier deal with Aberdeen Asset Management, taking its deemed stake in OCBC above the 5 per cent threshold that would normally require explicit approval from regulators here.

It is still unclear whether the Swiss banking group will now need to seek approval from the Monetary Authority of Singapore (MAS) and the Finance Ministry, or whether it may be required to reduce its deemed stake in OCBC, either by selling some of its shareholdings in Aberdeen, or by persuading Aberdeen to sell some of its OCBC shares.

Credit Suisse acquired a 23.9 per cent stake in UK-based fund manager Aberdeen on July 1 - the result of a share transfer marking the completion of a deal announced on Dec 31 last year, when Credit Suisse agreed to sell most of its global fund management business to Aberdeen for some £pounds;250 million (S$593 million) in Aberdeen stock.

That share transfer on July 1, and the purchase of 10,000 OCBC shares by an unnamed affiliate of Credit Suisse on the same day, boosted the Swiss bank's deemed stake in OCBC from 0.49 per cent to 5.66 per cent, or some 179.7 million shares, according to stock exchange filings by OCBC.

When contacted last night, a spokesman for Credit Suisse was unable to say if the bank had sought approval from regulators here for the increase in its deemed stake in OCBC. An MAS spokesman was unable to confirm immediately whether the bank would need to ask for approval to keep its indirect shareholding in OCBC at the current level.

According to the Banking Act, no individual or firm is allowed to own interests in 5 per cent or more of the voting shares of a Singapore-incorporated bank without the explicit approval of the Finance Minister. Further, the Act says that no person, including corporations, may 'enter into any agreement or arrangement ... to act together with any person with respect to the acquisition, holding or disposal of, or the exercise of rights in relation to, their interests in voting shares of an aggregate of 5 per cent or more' of the voting shares of a Singapore bank, without first seeking the Finance Minister's approval.

The other thresholds for shareholdings in Singapore banks that require explicit approval before they can be crossed are 12 per cent and 20 per cent.

It is not immediately clear how these restrictions would apply to Credit Suisse, which has no direct shareholdings in OCBC, and which acquired its indirect stake of more than 5 per cent in OCBC as a result of a transaction that did not involve the Singapore bank.

But the Banking Act specifies clearly that the 5 per cent threshold also applies to indirect shareholdings, as long as the person or company is deemed to have an interest in the shares according to the Companies Act.