S'pore banks ready for competition

S'pore banks ready for competition

Martin Abbugao, Agence France-Presse/Singapore

Singapore banks say they are prepared for increased domestic
competition from the big boys of global finance even as they look
to expand overseas to sustain future growth.

A consolidation over recent years that has seen the number of
homegrown banks shrink to three major players from the original
seven smaller entities has strengthened and prepared the sector
for the entry of major foreign lenders, they say.

Their defiant comments come after the Monetary Authority of
Singapore, the city-state's central bank, last week announced the
third installment of banking sector liberalization measures
initiated in 1999.

From January 2005, six foreign banks with qualifying full
banking licenses will be allowed to set up as many as 25 branches
or cash machines, up from 15 currently.

With immediate effect, these banks -- ABN AMRO, BNP Paribas,
Citibank, Standard Chartered Bank, Hong Kong and Shanghai Banking
Corp. and Malayan Banking Bhd. -- can negotiate with Singapore
lenders to allow their credit card holders to obtain cash
advances through the local banks' ATMs.

Top Singapore lender DBS Group has 792 ATMs island-wide, while
United Overseas Bank and Oversea-Chinese Banking Corp. have a
combined network of more than 700 cash machines -- giving them an
edge over foreign banks which have much fewer outlets.

Bank stocks fell on Friday in a knee-jerk reaction to the
announcement.

However, bank executives declared they were ready for the
competition, which they said would bring vibrancy to Singapore's
ambitions to become a key Asian financial hub.

"The local banks have actually invested an awful lot in people
and resources. The local banks are now very competitive with
local and international banks," DBS Group chief executive Jackson
Tai said.

Oversea-Chinese Banking Corp. spokesman Peter Zheng said local
players "are well positioned to compete effectively with new and
existing foreign entrants as each would have its unique strengths
and niches."

United Overseas Bank president Wee Ee Chong said: "We have to
compete. To be a financial center, it's the only way to go."

The increased competition in the local sector is one of two
major new business challenges the three Singapore banks face.

Deputy Prime Minister Lee Hsien Loong warned on Thursday that
Singapore banks remained small by international standards and
needed to look beyond the small domestic market for more growth.

"Possibilities for domestic growth are limited other than
through further consolidation," said Lee, who is also the finance
minister, in a speech to the city-state's financial elite.

"But the region offers considerable opportunities. Asia is
poised for sustained growth, having emerged from the (Asian
financial) crisis as one of the most promising regions in the
world."

Singapore banks have recently stamped their footprints in
selected Southeast Asian markets as well as in Hong Kong, which
is seen as a gateway to the Greater China region.

But despite towering over their peers in Southeast Asia, their
size is nowhere near that of the Japanese banking giants, for
example.

Lee said Asian countries are now progressively opening up
their economies to major regional and global players after
putting in place structural reforms and transforming their
financial sectors.

"Our local banks cannot ignore this game. They need to
consider their options carefully.... Their long-term
profitability and viability depends on their finding the right
answers," he said.

"Competition will intensify, within the domestic market
because of liberalization, and internationally because
globalization is continuing. The local banks may well find that
in order to hold their own and be viable they need to grow
bigger."