Strategic Stagnation: DBS's Stalled Alliance Bank Bid and Its Implications for ASEAN Banking Expansion

DBS Group’s stalled bid to acquire a stake in Alliance Bank Malaysia has become a case study in the complexities of cross-border banking investments in Southeast Asia. Despite submitting regulatory applications eight months ago, the Singaporean bank has yet to secure approval from Bank Negara Malaysia, the central bank, which is required to unlock the deal [1]. This delay underscores the persistent regulatory hurdles in Malaysia, where foreign ownership of commercial banks is capped at 30%—a restriction that DBS must navigate to potentially increase its stake to 49% via a voluntary partial general offer [2]. The impasse reflects a broader tension between foreign financial institutions and ASEAN’s fragmented regulatory frameworks, where political, economic, and technological factors collide.

Regulatory Risk and ASEAN’s Divergent Landscapes

The DBS-Alliance Bank saga highlights the uneven regulatory environments across ASEAN. While Malaysia’s foreign ownership limits remain rigid, neighboring countries like Vietnam and Indonesia have introduced reforms to attract foreign capital. Vietnam, for instance, raised its foreign ownership cap in certain banks to 49% in 2025 through Decree No. 69/2025/ND-CP, targeting institutions like MB Bank and VPBank for restructuring [1]. This shift aligns with Vietnam’s broader strategy to liberalize its banking sector, supported by streamlined investment licensing processes under Decree 19/2025/ND-CP [2]. Similarly, Indonesia’s Otoritas Jasa Keuangan (OJK) has increased the foreign ownership cap for digital banks to 99%, while raising minimum capital requirements to 10 trillion rupiah [2]. These reforms contrast sharply with Malaysia’s cautious approach, where even discussions of relaxing ownership caps remain speculative [6].

The Philippines, meanwhile, enforces a constitutional 60% domestic control requirement for banking assets, a restriction enshrined in its 1987 Constitution and the Foreign Investment Negative List [2]. This rigidity limits foreign participation in traditional banking but has not deterred innovation in digital finance. The Bangko Sentral ng Pilipinas (BSP) has launched a Digital Banking Framework and a real-time payments system, creating opportunities for fintech-driven collaboration [3]. These examples illustrate how ASEAN’s regulatory diversity creates both challenges and openings for cross-border investors.

Opportunities Beyond Malaysia: Vietnam and Indonesia Lead the Way

For banks like DBS, the regulatory stagnation in Malaysia underscores the need to pivot toward markets with more favorable conditions. Vietnam’s liberalization of foreign ownership and its focus on restructuring underperforming banks present a compelling case. The country’s 2025 reforms, which reduce investment licensing timelines to 15 days, further enhance its appeal [2]. Indonesia’s digital banking boom offers another avenue. The OJK’s 99% foreign ownership cap for digital banks, coupled with expedited permitting processes, positions the country as a hub for tech-savvy financial services [2]. These reforms align with global trends in digital finance, where AI-driven compliance and cybersecurity measures are becoming non-negotiable [4].

Strategic Implications for ASEAN Banking

The DBS-Alliance Bank delay is not an isolated incident but a symptom of ASEAN’s evolving regulatory landscape. While Malaysia’s cautious stance reflects concerns over financial stability and national sovereignty, countries like Vietnam and Indonesia are leveraging foreign investment to drive innovation and competitiveness. For cross-border investors, the key lies in aligning with markets that balance regulatory oversight with openness.

However, success in ASEAN requires more than navigating ownership caps. Banks must also address climate risk disclosures, AI integration, and cybersecurity mandates—requirements that are intensifying across the region [4]. The ASEAN Regional Payment Connectivity (RPC) initiative and the Digital Economy Framework Agreement (DEFA) further underscore the need for digital resilience and cross-border interoperability [1].

Conclusion

DBS’s stalled bid for Alliance Bank serves as a cautionary tale and a call to action. While regulatory delays in Malaysia highlight the risks of over-reliance on a single market, the broader ASEAN region offers a mosaic of opportunities. By prioritizing countries with progressive reforms—Vietnam’s liberalized banking sector, Indonesia’s digital banking surge, and the Philippines’ fintech-friendly policies—investors can mitigate risks and capitalize on Southeast Asia’s dynamic financial ecosystem. The future of ASEAN banking lies not in circumventing regulatory barriers but in strategically aligning with markets that are redefining the rules of the game.

**Source:[1] DBS's bid for Alliance Bank stake stalls on delay in regulatory nod, Bloomberg News reports [https://www.marketscreener.com/news/dbs-s-bid-for-alliance-bank-stake-stalls-on-delay-in-regulatory-nod-bloomberg-news-reports-ce7c50d3db80f325][2] DBS' plan to buy Alliance Bank Malaysia's stake is said to have stalled [https://www.bloomberg.com/news/articles/2025-09-02/dbs-s-plan-to-buy-alliance-bank-stake-is-said-to-have-stalled][3] Fintech Laws and Regulations 2025 | Philippines [https://www.globallegalinsights.com/practice-areas/fintech-laws-and-regulations/philippines/][4] Banking Supervision and Risk Management in Asia in 2025 [https://asianbankingandfinance.net/banking-technology/commentary/navigating-future-banking-supervision-and-risk-management-in-asia-in-2025]