13th Feb 2008
Danny Fortson
Temasek views Standard Chartered's role in printing Hong Kong's banknotes as an irrelevance, and will increase its stake in the bank to more than 20 per cent as soon as the shares fall to a point that it deems attractive.
According to sources close to the situation, Singapore's sovereign wealth fund is ready to scoop up more of the bank's shares, which have been very volatile in recent months as a result of the financial crises that have struck the banking industry. Standard Chartered is concerned that if Temasek, which already owns 19 per cent of the company, breaches the 20 per cent barrier it will be barred from printing banknotes by a Hong Kong Monetary Authority regulation that prohibits any bank-note issuer from having links with a foreign government that give voting rights of 20 per cent or more in the company.
Standard Chartered is one of Temasek's biggest bets outside Singapore, and the fund is keen to increase its stake in the company, which it sees as well placed to capitalise on the growing financial needs of Asia's burgeoning middle class. The sovereign wealth fund is understood to be unconcerned that such a move could end Standard Chartered's note-issuing role. It views the issuing of banknotes as a colonial anachronism that contributes negligibly to the bottom line and falls well outside what should be the company's main focus of expanding its core banking business in the region.
Before Temasek can increase its holding beyond 20 per cent, the Financial Services Authority must be satisfied that it meets two criteria under change of control regulations: that it is "fit and proper", and that its increased interest will not adversely affect customers. Temasek has not yet applied for the approval, which can take up to three months but is often resolved in days or weeks.
A Standard Chartered spokes-man said: "Temasek is a responsible shareholder and is fully aware of the broader regulatory consequences of its holdings across our markets."
