By Yantoultra Ngui

KUALA LUMPUR, Malaysia--Malaysia Building Society Bhd. (1171.KU), a non-banking lender backed by Malaysia's state pension fund, said Wednesday that it has received approval from the country's central bank to start negotiations for a proposed merger with Asian Finance Bank Bhd.

Malaysia Building Society said it will negotiate with the existing shareholders of Asian Finance Bank, namely Qatar Islamic Bank, RUSD Investment Bank Inc., Tadhamon International Islamic Bank and Financial Assets Bahrain WLL.

"Bank Negara Malaysia requires that the negotiations be completed within six months from the date of the central bank's letter," Malaysia Building Society said in a filing to the local stock exchange.

The announcement came 10 months after Malaysia Building Society and Bank Muamalat called off merger talks to create the country's largest standalone Islamic bank due to a disagreement on terms. Malaysia Building Society in January 2015 attempted a tie-up with lenders CIMB Group Holdings Bhd. (1023.KU) and RHB Bank Bhd. (1066.KU) to create Malaysia's biggest bank by assets, but talks fell through.

Write to Yantoultra Ngui at yantoultra.ngui@wsj.com

(END) Dow Jones Newswires

December 21, 2016 05:14 ET (10:14 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.