In comments to reporters yesterday, Bank Indonesia governor Darmin Nasution, who steps down from his job tomorrow, said that approval for any larger stake in Bank Danamon may hinge on whether the Monetary Authority of Singapore grants his country's banks easier access to the Singapore market.

As of today, official written notification of the above approval has not been received from Bank Indonesia," a DBS spokesman said yesterday. "DBS hopes the application will be approved as originally submitted and will continue to be closely guided by Bank Indonesia." DBS had proposed in April 2012 a full takeover of Danamon, offering to buy Singapore investment company Temasek's 67 per cent stake and the rest from the open market for 7,000 rupiah each  ‐ a deal worth US$6.77 billion.

Temasek, which already holds a 29 per cent stake in DBS, making it the bank's biggest investor, would see its stake balloon to 40 per cent asit accepts cash and shares for its Danamon stake. DBS said in early April that it was extending by two months its application to take over Bank Danamon, which has more than 3,000 branches and six million customers.

But new regulations now before parliament already threaten to stretch out a full takeover of the Indonesian lender by up to 18 months. The investment cap for overseas banks in Indonesian lenders will shrink to 40 per cent from 99 per cent. Bids for any larger stake will hinge on three corporate reviews every six months. Despite its proliferation of banks, Indonesia is one of the least served markets and one of the most profitable. As a result, the country has seen a flurry of overseas interest from banks with deeper pockets than Indonesia's biggest lenders.

Source: AmFraser