Authorities have not discarded the thrift ethic. Rather, they are trying to wean the country's financial institutions from protectionist policies of the past. Singapore is a signatory to a World Trade Organization agreement calling for liberalization of financial sectors. Government officials have been prodding domestic banks to streamline and merge operations in order to withstand coming free-market pressure from giant foreign financial institutions such as Citibank, HongkongBank and Standard Chartered, which all have a limited presence in Singapore. The urge to merge is also building because Singapore banks lent heavily to neighboring Malaysia and Indonesia, where recession is hurting loan portfolios.
Combinations are a way to meet stringent regulatory capital requirements.
So far, government cajoling hasn't worked with Singapore's big family-owned banks, OCBC, Overseas Union and United Overseas. By merging them into a retail banking powerhouse, authorities are forcing stragglers to react. A deal between DBS and government-owned Keppel Bank, one of Singapore's four largest after its merger with Tat Lee Bank earlier this year, has long been anticipated. DBS continues to prowl for bargains in other Asian countries, with a greater Hong Kong presence a priority. And in the free market of financial services, adds Finance Minister Richard Hu, size does matter.