Singapore banks higher, tracking broad market rise, but hardly swayed by Minister Mentor Lee Kuan Yew’s allusion to ideal of having not more than 2 local banks in order to better compete in global environment, says Dow Jones.

DBS (D05.SG) +1.5% at $13.86, OCBC (O39.SG) +1.7% at $8.81, UOB (U11.SG) +0.7% at $19.70, all lightly traded.

“Going from three to two actually poses a few problems. You don’t want a too-big-to-fail scenario. The corporates, especially the SMEs, are already complaining that they have less choice,” says an analyst at European brokerage, “I don’t think it’s the official MAS thinking (to have fewer than 3 banks).”

Besides fewer choices for customers, banks may also be wary of any consolidation as all 3 generally still cautious after emerging from last year’s global crisis, with Europe’s sovereign debt problems remaining a wild card.