Japan’s Sumitomo Mitsui Banking Corp and Singapore’s DBS are among the foreign banks believed to be vying for the new banking licences to be issued as Malaysia’s financial services sector is further liberalised.

“Sumitomo Mitsui is believed to have submitted an application to the central bank. It has always had a soft spot for Malaysia and has a long history with the country that can be traced back to the 1970s. Currently, it has a Japanese desk in RHB Bank,” says a source. “It used to have a stake in RHB Capital Bhd but sold it in 2004.”

Some two years ago, there was talk that the Japanese bank  was eyeing a stake of up to 15% in RHB Capital but that did not materialise.

Sumitomo Mitsui, the second largest bank in Japan in terms of market value, will be the second Japanese bank eyeing the new licences. Mizuho Financial Group Inc, Japan’s third largest bank, announced last month that it is keen on obtaining a banking licence in Malaysia.

It has been nearly two months since the deadline expired for applications for the six new licences to be issued to foreign financial institutions this year. It is understood that Bank Negara Malaysia is currently reviewing the applications.

It is believed BNM has received enquiries from Europe, the Middle East and Asia. Apart from the Japanese banks, interested parties include a consortium of three Indian banks (the Bank of Baroda, the Indian Overseas Bank and Andhra Bank) as well an Indonesian bank, which some say is likely to be PT Bank Mandiri, Indonesia’s largest financial services company by assets.

“DBS Bank Singapore is said to be one of the interested foreign parties. It is unclear whether it had submitted an application by the deadline last year. However, it is believed that a top official from the bank will be in Malaysia this week to explore this matter,” says a banking source.

The Malaysian government had last April announced the further liberalisation of the financial services sector last. Of the six new banking licences to be issued this year, two are for commercial banks, two for Islamic banks, and another two for takaful. On top of that, another three commercial banking licences will be issued in 2011.

For the commercial banking licence, the successful banks will have to be locally incorporated and must have a minimum capital of RM300 million unimpaired by losses. In addition, they must be specialists in areas of business that Malaysia lacks at present.

For the Islamic bank licence, the minimum capital is RM1 billion. There has been talk  that the National Bank of Abu Dhabi is one of the recipients.

Last November, the world’s biggest bank by market value —  the Industrial and Commercial Bank of China Ltd (ICBC) — was given a commercial banking licence in Malaysia under a bilateral arrangement after the visit of China’s president, Hu Jintao, late last year.

This article appeared in Corporate page of The Edge Malaysia, Issue 792, Feb 8 – 14, 2010