Indonesia approves DBS purchase of Danamon stake

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Indonesia on Tuesday approved the purchase by Singapore's DBS of a 40 percent stake in Bank Danamon, but demanded the city-state open up its financial sector before any full takeover.

More than a year after DBS launched its bid to make the biggest ever bank acquisition in Indonesia, central bank governor Darmin Nasution said it could acquire part of Danamon but could not yet take a controlling stake.

This in line with new bank rules, brought in several months after DBS launched its takeover bid, that limit bank purchases to 40 percent initially and allow full takeovers only later.

DBS will now have to undergo three financial health checks before a full takeover can be approved, which will take 18 months.

It is seeking to buy the controlling stake from Fullerton Financial Holdings, owned by Singapore's Temasek Holdings.

The deal was launched in April last year but stopped in its tracks when the Indonesian central bank announced the new rules to replace some of the loosest in Asia.