BNP Paribas, France's largest listed bank, is close to buying a substantial stake in Overseas Union Bank (OUB), the smallest of Singapore's so-called Big Four banks. The two have been in talks since November and market talk suggests an agreement is close to completion. A spokesman for OUB said yesterday: 'Discussions are still ongoing. Officials from BNP Paribas, which holds a retail banking licence in Singapore, declined to comment. The latest round of speculation, which has surfaced several times in the past two months, comes just weeks after senior officials signalled that banks may need to consider alliances with foreign partners. Lee Hsien Loong, deputy prime minister and head of the Monetary Authority of Singapore, said recently that the top four local banks may need to advance their commercial clout through alliances or mergers with foreign parties. Analysts said that most of the city state's financial institutions were well-capitalised, but lacked the resources to expand aggressively beyond their home market and the region. BNP Paribas wants to boost its presence in Asia, and clinching a deal with OUB could represent the first step of a more concerted expansion. According to industry analysts, Hong Kong is the next likely target. Shortly after last year's merger between BNP and Paribas, Michel Pebereau, the new group's chairman, said: 'We are ready to envisage substantial investment in another region of the world - in an emerging market in Asia for example - if we manage to find an opportunity that creates value for our shareholders.' The other main new area of interest for expansion for BNP Paribas has been Central and Eastern Europe. In Singapore, the sticking point in the negotiations appears to be the size of the stake assumed by the French. The Straits Times yesterday suggested BNP Paribas may try to secure 49 per cent of OUB, a larger share than previously thought. OUB has a market capitalisation of about S$7.75 billion (about HK$34.58 billion). To carry the deal, BNP Paribas must secure the support of founding member Lien Ying Chow, who controls almost 16 per cent of OUB. Reports have suggested BNP Paribas wants Mr Lien's stake reined in, perhaps to as little as 5 per cent. One alternative to paring down the founder's holding is that the French may be offered the near 10 per cent stake in OUB held by associate Overseas Union Enterprise. On November 4 last year, OUB said it was in preliminary talks with a strategic partner, but no terms had been agreed. It has appointed investment bank JP Morgan to advise on the search for a non-Singaporean partner. When the talks were first announced, OUB shares rallied to a high of S$9.50. Yesterday, they gained 25 Singaporean cents to close at S$8.05.