Indonesia approves DBS purchase of Bank Danamon stake
Singapore's DBS Group has received approval to buy a 40% stake in Indonesia's Bank Danamon, more than a year after it launched a multi-billion dollar takeover bid.
DBS had originally offered about $6.8bn (£4.5bn) for full control of Danamon.
However, the deal was delayed after Indonesian regulators moved to limit foreign ownership in local lenders.
Indonesia says a full takeover is still possible, but only if Singapore opens up its banking sector in return.
Under Indonesia's new bank rules, DBS will also have to pass three financial tests over 18 months.
"We can approve the 40% ownership of Danamon by DBS and will not give them more unless there is some reciprocity," said Indonesia's outgoing central bank governor Darmin Nasution.
DBS received a boost to its takeover ambitions after Singapore's de-facto central bank said it was exploring the possibility of giving Indonesian banks more access to its markets.
"In the case of Indonesian banks in Singapore, this will be by way of a broader provision of financial services, both in wholesale banking and to, for example, Indonesian students and work permit holders in Singapore," the Monetary Authority of Singapore said in a statement.
DBS, which is Southeast Asia's biggest bank, said it was still awaiting official written notice of the approval but hoped "the application will be approved as originally submitted".
The Singapore-based firm has been looking to expand its lending operations in Indonesia, with the country's economy forecast to grow by more than 6% this year thanks to robust domestic demand.
DBS had proposed to pay 7,000 Indonesian rupiah per share for Danamon, which is a 17% premium to Tuesday's closing share price.
That amount that would have made the deal Southeast Asia's biggest banking acquisition to date.
However, many analysts have questioned the price, saying it is too high.