SINGAPORE - Citibank plans to spend S$1.5 billion (U.S. $874 million) to set up a wholly owned subsidiary in Singapore and gain an advantage over other foreign banks in the country.
According to a report in the Financial Times, the move could give Citibank earlier access than foreign rivals to Singapore's ATM network that is operated by local banks.
Citibank, which traces its roots in Singapore to 1902, said the move would also offer local tax advantages.
In a measure to protect the local banking industry, Singapore has restricted the number of ATMs operated by foreign banks as well as access to the local bank ATM networks. The restrictions are seen as a severe handicap for foreign banks in attracting retail customers.
Under the provisions of the US-Singapore free trade agreement that went into effect at the beginning of 2004, Citibank's local incorporation would allow it to start talks with local banks from mid-2006 on acquiring access to their ATMs.
Other foreign banks without local incorporation would have to wait until the start of 2008 before they can begin similar negotiations with local banks.
The government this month said it would allow foreign banks to increase the number of branches or ATMs from 15 to 25 as part of a gradual liberalization of the banking sector.
In another small concession, Singapore said foreign banks could negotiate with local banks on a commercial basis to let their credit cardholders obtain cash advances from the local banks' ATM networks.
The three local banks -- DBS, UOB and OCBC -- have been reluctant to grant foreign access to their network of 1,500 ATMs; there is no guarantee that they will do so in the future in spite of Citibank's local incorporation.
According to the Financial Times, Citibank's move comes as parent Citigroup is reshuffling its operations in Asia, with a bid for a stake in Japanese consumer finance company Takefuji and the end of a four-year partnership in Taiwan with Fubon Financial Holding.
The incorporation "reaffirms the bank's long-term commitment" to Singapore and is one of Citibank's first outside the United States.
"Citibank believes that Singapore has one of the best-regulated banking markets in the Asia-Pacific region," said Lee Ah Boon, country business manager for Citibank's consumer business, who will head the new bank, Citibank Singapore.
