UPDATE 2-StanChart board moves offer brief respite from Temasek pressure

(Adds comment from Standard Chartered on board structure)

By Saeed Azhar and Kelvin Soh SINGAPORE/HONG KONG, Oct 4 (Reuters) - Standard Chartered's

Singapore investor is holding tight to its view thatthe board is too heavy with bank executives after theappointment of four independent directors.

According to a source familiar with the matter, theSingaporean state investment fund Temasek saw StandardChartered's board appointments last week as "a step in the rightdirection", but added the board's make-up still falls short ofwhat Temasek, the bank's biggest shareholder, would like to see.

Standard Chartered has produced 10 consecutive years ofstrong profits but the relationship with its main shareholderhas come under strain with frequent market talk that Temasek islooking to offload its 6.4 billion pound ($10.4 billion) stakeand as it pressures the bank over governance issues.

Temasek, which owns 18 percent of Asia-focused StandardChartered, abstained from voting in May to re-elect all of thebank's executives apart from Chief Executive Peter Sands andseveral of the non-executive directors - sending a clear signalit disagreed with how the bank constructed its board.

The source familiar with Temasek's views cited the exampleof Singapore Telecommunications , which has a 10-memberboard which includes just a single executive from the company -the CEO. Temasek owns more than 50 percent of SingTel.

Six of Standard Chartered's 16 directors also hold executivepositions at the bank, including CEO Peter Sands, FinanceDirector Richard Meddings and Asia Chief Executive JaspalBindra.

It is standard practice for UK companies to have one boardcomprising a mix of executives and non-executives.

"We firmly believe in the unitary model for board governanceand it has served us extremely well," said Shaun Gamble, aspokesman for Standard Chartered in London.

A spokesman for Temasek declined to comment.

Standard Chartered on Friday said Lars Thunell and MargaretEwing would join the board as non-executive directors next monthand Om Prakash Bhatt and Louis Chi-Yan Cheung would join asnon-executives in January.

RIGHT PRICE

Temasek's investment, dating back to 2006, was well-timed asthe bank's emerging market focus and basic banking model allowedit to avoid the 2008 financial crisis.

Sources familiar with the issue say Temasek, like anyshareholder, would be willing to sell at the right price, butmay find it tough to find anyone willing to pay a premium for analready highly valued holding. Standard Chartered currentlytrades at 1.3 times the book value of its assets. Among itspeers and rivals, HSBC trades at about 1.1 times, andJP Morgan at 0.9 times.

The Wall Street Journal on Thursday said Temasek is pushingfor more independent directors at Standard Chartered, promptingthe bank to respond with an emailed statement.

"As a long-term investor, we enjoy a close relationship withTemasek," bank spokeswoman Doris Fan said in the statement,noting that Temasek's abstention in the voting at the May annualmeeting related to a "misinterpretation of UK corporategovernance requirements."

The bank's governance was in the spotlight again in Augustwhen a New York state regulator accused the bank of improperlyhiding money transactions with Iran. Standard Chartered agreedlast month to pay $340 million to settle the allegations.

(Additional reporting by Avik Das in BANGALORE and Steve Slaterin LONDON; Editing by Ian Geoghegan and Elaine Hardcastle)

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Keywords: STANCHART TEMASEK/