The Central Bank (CB) is rejecting suggestions that state entities are acting in concert when they purchased some stakes in public listed banks recently.
The Employees’ Provident Fund (EPF), Bank of Ceylon (BOC), Employees’ Trust Fund (ETF), National Savings Bank (NSB) and Sri Lanka Insurance Corporation (SLIC) paid Rs. 4.6 billion for a 13.6% stake in Hatton National Bank (HNB) last week.
Analysts argue saying these institutions which are state owned can be construed as acting in concert – simply because they are all connected to one party which is the government. But CB says this is not the case. “Acting in concert is well defined in the Banking Act. Just because these are public institutions owning substantial stakes in banks will not mean they’re acting in concert,” K.G.D.D. Dheerasinghe, Deputy Governor CB told the Business Times.
“Acting in concert is a generic term. Unless proven in a court of law, we cannot pass judgment about these entities,” he added.
He also said these are mutually exclusive institutions who have got their own interests.
However analysts said that acting in concert should not apply only to one party. Section 12 of the Banking Act says an individual, partnership or corporate body shall not either directly or indirectly or through a nominee or acting in concert with any other individual, partnership or corporate body acquire a material interest in a licensed commercial bank without the prior written approval of the Monetary Board. The maximum holding per individual or institution is 10 %.
A corporate lawyer said that ‘acting in concert’, explained under Section 12 of the Banking Act applies when ‘acquisitions take place’. “It is not well defined, but if someone decides to go to courts there is a case they can argue on,” he added. |
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