Foreign banks eyeing share of depositor market

SINGAPORE: Foreign banks with a full commercial licence in Singapore are out in force to draw customers.

They are rolling out higher-than-normal interest rates for fixed deposits.

And that's stepping up the competition, prompting Singapore banks to swing into action.

Competition is getting intense as more foreign banks are offering attractive interest rates for Singapore dollar time deposits.

In January, ANZ came out with a step-up deposit offering an increasing interest rate with an option to withdraw funds every quarter.

More foreign banks have joined the fray with interest rates of over 1 per cent per annum.

They are now offering as much as 1.5 per cent for a one-year deposit.

Wu Jinmei, head of Retail Banking Department, Bank of China (Singapore branch), said: "These promotions are in line with our long-term development strategy and serve to thank our new and existing customers for their continued support."

British bank, Standard Chartered fired the latest salvo with a 1.88 per cent rate on current account savings.

Dennis Khoo, head of Consumer Banking, Singapore Standard Chartered Bank, said: "You don't get rewards from your credit cards but you get a high interest rate of 1.88 per cent. We do believe that most customers who have fixed deposits under S$50,000 will migrate to this product."

Since its launch a week ago, Stanchart has an average daily sign-up rate of 500 accounts.

Ritesh Maheshwari, MD, Asia-Pacific Financial Services Ratings, Standard & Poor's, said: "To grow, they need funds. So, it is part and parcel of their long standing strategy. They want to grow without growing the network in a cheaper way or it is a tactical move to balance the ALM (Asset-Liability Management) in a shorter term."

However, the local banks are not resting on their laurels and have come up with promotional rates of as much as 0.9 per cent for a 13-month deposit, although, still falling short of their international counterparts.

Alfred Chan, director, Financial Institution, Fitch Ratings, said: "This goes to show that the local banks still have a strong franchise among the depositors so they don't really need to go on a price war to compete for deposits."

Local banks like OCBC take comfort in their branch network which offers convenience as a selling point, apart from interest rates.

Analysts said the aggressive funding exercise may be the result of BASEL III requirements, which demand major international banks increase their capital as a safeguard against financial crises.

Depositors in Singapore are guaranteed up to S$50,000 per depositor in case of any bank defaults.