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DBS, Danamon bank deals collapses

Munshi Ahmed | Bloomberg | Getty Images

Southeast Asia's largest bank DBS announced late on Wednesday that it would walk away from a $7.2 billion deal to acquire Indonesia's Bank Danamon.

The takeover of Danamon, agreed in April 2012, was aimed at giving Singapore-based DBS a bigger slice of the fast-growing Indonesian market.

(Read more: Fed Tapering Won't Push 'Asia Off a Cliff')

The agreement, however, ran into regulatory hurdles in Indonesia after the country's central bank announced a cap of 40 percent on foreign ownership in Indonesian banks.

In announcing that it would walk away from the deal, DBS's CEO Piyush Gupta said the company was still very positive about Indonesia's long-term potential.

(Read more: End of 'Old Boys Club' for Singapore Banks?)

"[We] will continue to grow our DBS Indonesia franchise, while remaining open to opportunities as they arise. In all that we do, DBS is committed to financial discipline and shareholder value creation," Gupta said.

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