GE's stake is about half of the maximum 49-per-cent foreign shareholding in BAY as authorised by the BOT, said Sorasit Soontornkes, a senior director of the BOT's Supervision Group. The Commercial Act statute normally caps overall foreign ownership in banks to 25 per cent.

Even counting BAY's existing foreign shareholders, GE's acquisition is not likely to cause it to exceed the 49-per-cent ceiling, he said.

However, GE's move has breached a rule whereby a foreign investor cannot hold more than 5 per cent in a Thai financial institution. As a result, GE's plan needs to be approved by the Finance Ministry via the central bank, said Sorasit.

"The company has never consulted the BOT about the deal. But it is unlikely to face any problem," he said.

After the selling the shares, BAY would also be in breach of the central bank's master plan, which stipulates one bank cannot have a stake in another.

Sorasit said that GE had understood the one-presence rule and would be in talks with the BOT over the next few days to find a solution. The US company has two choices: a merger between BAY and GE Retail Bank or handing over the banking licence of GE Retail Bank to make it a non-banking company, said Sorasit.

"They will decide what is good for them," he said.

The BOT's governor, MR Pridiyathorn Devakula, said late on Friday he wanted to know if GE wanted to merge the two banks. He asked the company to follow the rules.

Tarisa Watanagase, the central bank's deputy governor, earlier said the BOT would approve the deal if GE aimed to help improve BAY's performance.

She added that the BOT needed to study the entire purchase package.

BAY informed the Stock Exchange of Thailand of the deal last week after holding negotiations since last year.

Anoma Srisukkasem

The Nation