Third commercial licence likely to be won through beauty contests of other hopefuls: observers
By S JAYASANKARAN
IN KUALA LUMPUR
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THE much anticipated move by Bank Negara to grant three new commercial bank licences may happen as soon as next year, say banking executives.
One is likely to go to an Indian consortium, another to one from China, and the third to the winner of a beauty contests of other hopefuls.
This measure is part of a slew of proposals to liberalise the financial sector that was announced by Prime Minister Najib Razak earlier this year.
The premier said then that Bank Negara would issue nine new banking and insurance licences by 2012 and that foreign equity thresholds would be raised immediately - from 49 per cent to 70 per - in investment banks, Islamic banks, insurance companies and takaful (Islamic insurance) operators.
Besides the three commercial bank licences, other licences that will be up for grabs include two new Islamic banking licences (minimum capital: US$1 billion); two commercial bank licences for foreign players with 'specialised expertise' and two takaful licences.
The liberalisation reflects Malaysia's intent to strengthen its services sector to become a key driver of growth and make its economy less dependent on export-oriented manufacturing.
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It also marks Malaysia's adherence to its commitments to the World Trade Organization, first spelt out for financial services in Bank Negara's 2001 financial sector master-plan, which essentially promised the sector would be liberalised by 2011.
Since then, the central bank has said almost 90 per cent of what was spelt out then has been or is being implemented.
Opening up the financial sectors highlights Bank Negara's confidence that Malaysia's nine local banks can survive new competition, after they consolidated and restructured almost a decade ago.
The central bank has said the local banks are adequately capitalised and have a 70 per cent market share. There are another 13 locally incorporated foreign banks.
On new banking licence candidates, the Indian bank in question is likely to be a consortium of three banks - Bank of Baroda (40 per cent), Indian Overseas Bank (35 per cent) and Andhra Bank (25 per cent). They are said to want to set up an entity called India BIA Bank in Kuala Lumpur.
Chinese contenders could include Bank of China, which already has a representative office in Kuala Lumpur, and Industrial and Commercial Bank of China.
The third licence up for grabs could go to any party.
Britain's Barclays is also said to be interested in a Malaysian licence, but sources say it is not clear whether other European bank will apply.
They also said it is possible that Japanese and Australian banks could submit bids.
The minimum capital adequacy required by a new entrant would be close to US$500 million, and all the newcomers would be allowed at least five branches each.
Kuala Lumpur would also be flexible on the hiring of expatriate staff by the banks.
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