Join the newsletter that everyone in finance secretly reads. 1M+ subscribers, 100% free.

DBS Group's bid to buy a major stake in Alliance Bank Malaysia has been put on hold, with regulators yet to sign off on the Singapore lender's next steps.

What does this mean?

DBS Group is well-versed in cross-border expansion, but entering Malaysia's retail banking market has run into red tape. Since teaming up with major shareholder Vertical Theme, the bank has waited eight months for Malaysia's central bank to even approve talks about buying in - a delay that's paused DBS's push into one of Southeast Asia's largest economies. Local rules require official approval before foreign investors can negotiate acquisitions, and current regulations cap foreign bank ownership at 30%. DBS has its eye on Temasek's 29.1% stake in Alliance Bank for about $460 million, likely hoping to increase its holding to 49% if given the chance. If successful, the deal would give DBS its first big retail presence in Malaysia, putting it on more equal footing with rivals OCBC and UOB, who already have strong consumer operations in the country.

DBS's potential entry into Malaysia stands to shake up the local banking sector, pushing competitors to rethink their growth strategies. A deal of this size could open the door to more cross-border acquisitions across Southeast Asia, fueling investor interest in the region. For now, though, regulatory hurdles and strict ownership limits mean these shifts will likely be slow to unfold.

The bigger picture: Regional rules set the pace for financial integration.

Malaysia's foreign ownership policies spotlight the broader challenges facing banks aiming to expand across ASEAN. While there's ongoing chatter about relaxing these restrictions, real reforms haven't happened yet. Until regulations catch up, regional integration and investment flows will remain tightly controlled, limiting how much foreign banks can drive change in Southeast Asia's financial sector.