In Asia, irony is never in short supply. No one knows this better than Tan Sri Rashid Hussain.

In February 1998, the Malaysian banker was on the verge of acquiring the Renong-controlled banking group Commerce Asset. Today, many analysts are wondering whether Commerce will get control of his bank instead. This may be the upshot of a recent decision by Malaysia’s Finance Ministry to allegedly veto the sale of a 15% stake in RHB Bank to RHB Capital.

The 15% stake was set to be sold by the bank restructuring agency Danamodal to RHB Capital for M$1.38 billion ($363 million), netting the government agency M$380 million in profit.

However, the Finance Ministry – controlled by Tun Daim Zainuddin – is reckoned to have blocked the sale and is said to favour a sale to either the Ministry of Finance’s investment fund, Khazanah, or Bumiputra-Commerce – the result of a merger between Commerce Asset and Bank Bumiputra – instead. In effect, it is government controlled. The government owns 32% of Bumiputra-Commerce’s parent, while government-linked company Renong is also a major shareholder.

Meanwhile, Khazanah already owns 30% of RHB Bank and if a further 15% were owned by either it or Bumiputra-Commerce that would loosen Tan Sri Rashid’s control over the bank.

This is all very distressing for Rashid, who built his stockbroking firm RHB Securities into a major banking group through some clever mergers prior to the Asian financial crisis. Since then he has faced problems. Signs of trouble first appeared for Rashid in 1999 when his bank was excluded by the central bank from a list of six anchor banks – so called because they were set to buy other banks and create six major groups. Rashid received a last minute reprieve.

However, last November his position was undermined by MRCB, which is one of his major shareholders. MRCB had opposed Rashid’s plan to raise fresh equity and then later opposed a bond issue – both of which were designed to improve RHB’s financial position. Local analysts noted that MRCB used to be closely affiliated with former Deputy Prime Ministers Anwar Ibrahim (as was Rashid), but had undergone a management and shareholder overhaul whereby its key personnel were now closer to Tun Daim, the Finance Minister.

Why is this relevant?

Daim and Rashid used to be very close, but ever since the financial crisis their relationship has been strained. With this latest move the relationship looks more strained than ever.

Local analysts say the authorities are opposed to the idea of a single individual – such as Rashid – controlling a banking group. The preference would be for RHB Bank to see its shareholding gradually institutionalized, giving major shareholders less say in the day-to-day running of the bank.

The possibility of a merger with Bumiputra-Commerce is also interesting, as it would create an enormous bank. In a country which is very keen on the concept of national champions, this might be the outcome most favoured by Tun Daim.

Indeed, the bank would – through Renong, MRCB and Khazanah – have impeccable links to the government. This is also always an important consideration in Malaysia.