If it were to go through, GE would hold a 25-per-cent stake in BAY, which is against the Bank of Thailand's rule prohibiting one financial institution from holding a stake of more than 5 per cent in another.

BAY first senior executive vice president Charlotte Donavanik said GE would have to seek approval from the BOT for the stock acquisition.

Charlotte said another issue was the single-presence rule, which permits local and foreign financial institutions to operate as only one entity in the Kingdom. She said there were a number of possible ways to resolve this, subject to BOT regulatory approval.

A source close to the deal expects that GE might have to hand the banking licence of GE Money Retail Bank over to the Finance Ministry.

The source also said that despite the acquisition, both parties would not need to merge their financial subsidiaries. These subsidiaries include a credit-card company that GE has jointly invested in with BAY. If viable on its own, it can be left alone.

GE also has alliances with other financial institutions in the credit-card business.

Meanwhile, caretaker Finance Minister Thanong Bidaya said yesterday he would welcome a merger between GE Money Retail Bank, which is a local unit of GE Consumer Finance, and BAY.

"If there is a merger, I would be glad. GE specialises in personal finance and it will be good for Bank of Ayudhya," he told reporters.

BAY announced last week that GE Capital Asia Pacific Ltd, a financial institution under GE Consumer Finance, was in talks to buy a 25-per-cent stake in the bank through the private placement of new shares priced at Bt16 each.

 Somruedi Banchongduang

 The Nation,

 Dow Jones Newswires