THE Monetary Authority of Singapore (MAS) unveiled a much-anticipated bank reform package today which included issuing six new full banking licences and scrapping of foreign ownership limits on local banks.

MAS said the reforms were part of a five-year liberalisation plan to boost competition and strengthen the banking sector.

"In this first step, MAS will open the door to new full and restricted banking licences as well as increase access to the domestic market by foreign full, restricted and offshore banks that meet qualifying conditions," MAS said in a statement.

MAS said it would scrap the 40 percent foreign ownership ceiling on domestic banks, a move widely anticipated to herald the merger of foreign and domestic tranches of local bank shares.

MAS also said it would issue new licences and extend the lending limits of foreign banks.

Six new full licences would be issued between 1999 and 2001, taking the total number of foreign banks to 28, while the number of restricted banks would be increased to 18 from 13 over the same period.

"The aim is to move towards a more open and competitive environment, so as to spur the development and upgrading of local banks," the MAS statement said.

Singapore has not issued a full banking licence since 1970.

No new restricted bank -- one prevented from operating Singapore dollar savings accounts and accepting individual fixed deposits of less than S$250,000 (US$146,000) from non-bank customers -- has been granted access since 1983.

The new full licences would allow foreign banks to open up to 10 additional branches, set up off-premises automatic teller machines (ATM) and share ATM networks with each other.

Analysts were not convinced that more banks were necessarily good for the Singapore market.

"Six licences are a lot. It's too many for a market like Singapore," Seah Hiang Hong, banking analyst at Kim Eng Securities told Reuters.

"The danger of it is overcompetition in this market. Foreign banks want to come in while local banks want to protect their shares," Terence Chan, banking analyst at Standard & Poor's said.

But MAS Chairman Lee Hsien Loong said the moves were designed to "shape and strengthen our banking sector while maintaining confidence and stability in the financial system".

Other changes would bring greater flexibility to banks involved in Singapore dollar wholesale trade.

Qualifying offshore banks would have lending limits increased to S$1 billion from S$300 million and be allowed to trade in Sing dollar swaps without restriction. All other offshore banks would see lending limits raised to S$500 million.

Lee, also Deputy Prime Minister, said the move did not herald a change in the MAS policy of non-internationalisation of the Singapore dollar.

The reforms, scrutinised for implications for foreign banks, also took note of the need to strengthen domestic banks in order to help them retain a 50 percent market share of banking business and toughen their corporate governance standards.

"The government's policy is to maintain the local banks' share at not less than 50 percent of total resident deposits," the MAS statement said.

Singapore banks presently have about 62 percent of the market.

Lee said the reforms would strengthen the banking system, provide Singapore citizens with quality banking services and enhance Singapore's position as an international finance centre. - Reuters