Basel III changes M&A appetite for banks

[SINGAPORE] Basel III will dampen banks' appetite for minority stakes in fellow lenders, says Michael Zink, Citi's head of Asean and country officer for Singapore. This poses an issue for banks looking to gain a significant foothold in Asean through mergers and acquisitions, since several countries in Asean allow foreign buyers to snap up only a minority share of a local bank.

It also comes amid concerns over rising costs of compliance and regulations for banks across the world, said Mr Zink in an interview with BT. "These are the most profound set of regulatory changes in at least a generation," he said. "Very profound, and not yet visible."

Under Basel III, a bank that holds a minority share exceeding 10 per cent of another lender must have its holding fully deducted against its capital. This makes a controlling stake more viable, but acquisitions of a majority stake in an Asean bank are often subject to caps on foreign ownership. DBS abandoned its proposed acquisition for Indonesia's Bank Danamon last year, because it did not receive the regulator's blessing to acquire more than 40 per cent of the bank.