By Emilyn Yap

All foreign banks are free to grow their business in Singapore subject to the guidelines of the licence under which they operate, says the Monetary Authority of Singapore (MAS).

MAS was responding yesterday to queries from BT, as more politicians in Indonesia called on Singapore to give Indonesian banks more room to grow here.

The demands surfaced with DBS announcing plans to acquire Indonesia's Bank Danamon on Monday. DBS will buy Temasek Holdings' 67 per cent stake in Danamon for $6.2 billion by issuing new shares, and launch a cash offer of $2.9 billion for the rest of the bank.

The deal triggered opposition from Indonesian politicians and bankers who felt that the playing field was uneven, with Indonesia being more open than other countries to foreign investment in local banks. Foreign investors can hold up to 99 per cent of local banks in Indonesia, though any single entity trying to own a stake of 25 per cent or more needs regulatory approval.

According to The Jakarta Post yesterday, Golkar party lawmaker Lili Asdjudiredja urged the House of Representatives to prevent DBS from acquiring 99 per cent of Danamon as it would create a banking monopoly and strengthen foreign ownership in the Indonesian bank.

He also asked Bank Indonesia to meet regulators in Singapore to establish a "reciprocal principle", which would give Indonesian banks more room to set up branch offices here.

MAS did not confirm if Bank Indonesia has broached this issue or if Indonesian banks have asked to expand in Singapore, saying that its dealings with other regulators and financial institutions are confidential.

"All foreign banks are free to expand their activities in Singapore subject to the guidelines specific to the licence under which they operate," an MAS spokesman said.

There are four Indonesian banks with a presence in Singapore. Bank Mandiri is an offshore bank, Bank Negara Indonesia is a full bank, and Bank Central Asia and Pan Indonesia Bank Tbk (Panin Bank) each have a rep office.

All foreign banks which are not Qualifying Full Banks can operate only one place of business in Singapore, though they may apply for limited-purpose branches to carry out certain activities.

In Singapore, no single investor can own an interest in 5 per cent or more of the voting shares of a Singapore-incorporated bank without the approval of the finance minister.

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

On the stock market yesterday, DBS lost 14 cents to close at $13.34 while Danamon gained 50 rupiah to close at 6,450 rupiah.

This article was first published in The Business Times.