The government has no plans to fast-track the liberalisation of its financial industry envisaged by 2007 because there is already a strong foreign presence in the banking sector, the central bank said today.

Bank Negara Malaysia governor Zeti Akhtar Aziz said the government would maintain its "gradual approach" towards financial liberalisation.

"Liberalisation will take place but on a gradual approach. We already have significant foreign presence and interest in our banking system," she told a news conference when asked if the government would quicken the pace of opening up certain financial sectors.

The central bank has however brought forward the liberalisation of the Islamic financial sector to this year with plans to issue up to three Islamic banking licences to foreign players in a bid to make Malaysia a regional Islamic financial hub.

Under present rules, Zeti said foreign investors were allowed to hold up to 30 percent of domestic banks while a single institutional investor can hold up to 20 percent, subject to Bank Negara's approval.

Alliance Bank sold to Singaporeans?

Asked if Bank Negara has given approval for state-owned Singapore investment company Temasek Holdings Pte Ltd to commence talks to buy up to 30 percent of Malaysian Plantations, which in turn owns Alliance Bank, she declined to comment.

"From time to time, there has been (foreign) interest expressed. We will evaluate them but we are not in a position to comment," she added.

The Asian Wall Street Journal on Friday said Temasek's proposal to buy the stake in Malaysian Plantations from former finance minister Daim Zainuddin would give it an equivalent equity stake in Alliance Bank, the second smallest of Malaysia's 10 domestic banks.

Should the Alliance Bank sale proceed, the report said it would mark the first time a state-owned Singapore concern has been permitted to buy a substantial stake in a Malaysian financial institution.

The proposed deal could also be a first step to gradual liberalisation of Malaysia's domestic banking sector under its commitment to open up its door to foreign investors by 2007 in accordance with World Trade Organisation rules, it added. - AFP