Dao Heng Bank is understood to have pulled out of talks to acquire the controlling shareholding of Kwong On Bank, and the Development Bank of Singapore is set to take its place, according to a source. Dao Heng Bank last month confirmed it was in preliminary talks to acquire Fuji Bank's 50.1 per cent stake of Kwong On Bank, but the source said this had been shelved. The reason for the failure of talks is understood to be the Leung family's refusal to give up management rights at the bank. Kwong On Bank was founded by the Leung family in the 1940s and its controlling shareholding was sold to Fuji Bank in 1973, leaving the family as the second-largest shareholder. Fuji Bank is the controlling shareholder but it has been a passive investor, allowing the Leung family to run the daily operations of the bank for the past 25 years. The chairman of the bank, Ronald Leung Ding-bong, also comes from the Leung family. Mr Leung is also the Provisional Urban Council chairman. It is understood Fuji Bank has an agreement with the Leung family that it will ensure any new buyer allows the family to continue running the bank's daily affairs. The source said Dao Heng did not want to buy the majority stake of the bank without the authority to run its business. A Kwong On Bank source said the Development Bank of Singapore would be the most likely purchaser of the Fuji Bank stake as it was willing to allow the Leung family to run the business. Both Dao Heng and the Development Bank of Singapore refused to comment on the deal. Fuji Bank earlier said that it had decided to sell its stake in Kwong On as the investment did not match its new business strategy. Besides Dao Heng and Development Bank of Singapore, Citibank, ABN Amro Bank, Bank of East Asia and Bank of America (Asia) have all been rumoured to be other possible buyers. Kwong On said on Wednesday that Fuji Bank had reached an 'advanced stage' in its talks with an interested party to sell its controlling stake in the bank, but no details were given. Kwong On Bank said the sale, if successful, would require the potential buyer to launch a general offer for all of the bank's outstanding shareholdings.