With more state entities flocking to make forays into the publicly listed banks in the country, Sri Lanka Insurance Corporation (SLIC) recently received special approval from the Monetary Board of the Central Bank to purchase more than 10% in NDB Bank, according to SLIC sources.
“Presently we own 10%. But we got special permission to go for a further stake of 5% (which purchase would be made later,” an SLIC source told the Business Times.
The Banking Act bars individuals or institutions from owning more than 10% in a bank unless special permission is given by the Monetary Board. SLIC also got approval to increase its 6.08% stake to 15% in Hatton National Bank (HNB) about two weeks ago with that transaction being done on Thursday. SLIC also has stakes in DFCC and Seylan.
Industry analysts question these forays by state-owned entities into the commercial banking sector. “They’re essentially trying to take over the entire economy. Already 65% of the banking sector is state-owned,” claims Dr. Harsha de Silva, a leading economist and a UNF National list candidate.
But stockmarket analysts said that for nearly 20 years the stock market industry has been lobbying for captive funds such as EPF, ETF, National Savings Bank (NSB), etc to invest in the Colombo Stock Exchange and it’s a good thing that this is happening now.
Among these analysts, some believe there may be political reasons behind these investments. “Are these made purely from an investment point of view since the banking sector is under valued or is it to influence the board, or exercise control in the lending of these institutions?,” one analyst asked. He said the strategy to buy these share at high prices does not make sense.
The NDB Bank, which saw state entities such as EPF acquire some major stakes in its shareholding recently, is likely to see more government nominees on the director board, now that three directors have quit ahead of the banks’ Annual General Meeting (AGM) next Wednesday.
The SLIC is expected to get one board position while other state agencies -- EPF and the BOC – would seek two board positions later, the SLIC source said.
At present, Dr Sena Yaddehige (with a 5% stake in NDB Bank) is the the only government nominee director at the bank in which state agencies have a total stake of little over 31%. Current directors are P.M. Nagahawatte (Chairman), Hemaka Amarasuriya, Trevine Jayasekara, A.R. Gunasekera, Richard Vokes, N.S.Welikala, G.C.B. Wijeyesinghe and Lal de Mel. The last three-mentioned directors have announced their intention not to seek re-election at next week’s meeting to enable other board positions to be made.
These developments came as the bank’s Director/CEO Eran Wickremaratne quit this week to contest the parliamentary election and was replaced by his number two, Russel de Mel. |
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