DBS Group’s Bid for Alliance Bank Stake Encountered Regulatory Hurdles
DBS Group Holdings’ plan to acquire a strategic stake in Alliance Bank Malaysia Berhad has reportedly stalled because Singapore’s largest bank, DBS, has yet to receive the necessary regulatory approval to formally commence discussions with the seller.
According to sources familiar with the private matter, both DBS and Vertical Theme, the largest current shareholder of Alliance Bank, submitted separate applications to Malaysia’s central bank, Bank Negara Malaysia (BNM), approximately eight months ago.
However, they have not yet received any response from the regulator.
Local financial regulations require both parties to obtain this initial approval before they are permitted to begin any formal negotiations or discussions regarding the potential transaction.
This regulatory silence is the primary factor holding up the deal.
Bloomberg News had previously reported in January that Vertical Theme—a Malaysian holding company which is backed by the Singaporean investment company Temasek Holdings— was actively considering the sale of its 29 per cent stake in Alliance Bank to DBS.
If the deal were to proceed and gain clearance, sources indicated that DBS may have an ambition to raise its total stake in Alliance to as much as 49 per cent through a voluntary partial general offer to other shareholders.
The Foreign Ownership Cap and Regulatory Assessment
A key complexity in the potential acquisition involves Malaysia’s existing foreign ownership cap on commercial banks and the central bank’s detailed assessment process for licensed financial entities.
Malaysia currently maintains a policy that caps foreign ownership of commercial banks at 30 per cent.
However, there have been recent discussions regarding the possibility of the government selectively relaxing this limit in certain sectors, a potential change that would be critical for DBS’s larger ambition.
A deal for the Alliance Bank stake is considered unlikely to proceed unless DBS can secure a regulatory green light to acquire a stake as high as 49 per cent of the Malaysian lender, according to informed sources.
The bank representatives have declined to comment on the matter, and Alliance Bank has stated it has no knowledge of the ongoing discussions regarding its shares.
Bank Negara Malaysia (BNM) maintained its policy of not commenting publicly on specific applications concerning the acquisition or disposal of interest in shares of its regulated entities.
BNM did, however, issue a statement in response to media queries, confirming that all applications concerning the shareholding of licensed banks, including those submitted by foreign entities like DBS, are assessed strictly in accordance with the relevant provisions stipulated under the Financial Services Act 2013 and the Islamic Financial Services Act 2013, ensuring a thorough and legal review process for any proposed transaction.
Strategic Market Expansion and Ownership Links
A successful transaction for Alliance Bank would significantly expand the presence of DBS in the Malaysian market, providing it with a wider operational footprint to compete with other Singaporean rivals already established there.
Singaporean banking rivals like OCBC and UOB already maintain a well-established and sizable presence in Malaysia, making this potential acquisition a strategic move for DBS to catch up and increase its regional competitiveness.
DBS is already recognized as South-east Asia’s largest bank when measured by total assets.
The ownership structure of Vertical Theme, the selling shareholder, adds another layer of complexity and interest to the deal, given its links to DBS’s own major shareholder.
Temasek Holdings owns a 49 per cent stake in Vertical Theme through its subsidiary, Duxton Investment & Development.
The remaining stake in Vertical Theme is held by Richard Ong, founder of RRJ Capital, hotelier Ong Beng Seng, and corporate adviser Seow Lun Hoo, through their entity Langkah Bahagia.
Furthermore, Temasek is also the single largest shareholder of DBS itself, holding a 28.3 per cent stake in the company, creating intertwined interests between the potential buyer and seller.
Alliance Bank’s shares have seen a decline of 4.8 per cent this year, a performance roughly in line with the overall movement of the Kuala Lumpur main stock benchmark index.
The Malaysian lender currently maintains a market capitalization of approximately US$1.8 billion.
