The Central Bank is looking to ensure diverse shareholder ownership at local commercial banks to avoid certain groups of investors from getting undue advantages from banking sector expansion, Governor of Central Bank of Sri Lanka (CBSL), Dr. Nandalal Weerasinghe said.
Speaking at a webinar organised by the International Chamber of Commerce Sri Lanka (ICCSL) on Saturday (8), he said that on a prudential basis, there should be diverse shareholder ownership of commercial banks which are taking public deposits.
He said if shareholder capital is at 10% in a bank, then public deposits are at 9%. “We have to ensure banks have proper corporate governance, diverse ownership and not give any undue advantage for a couple of investors, to take advantage of public deposit,” he added.
He said that while the banking sector sees continuous expansion with opportunities for mergers and acquisitions, there is a need for prudence in terms of diversity of shareholding, which is the global best practice.
However, he said that CBSL has the authority to provide flexibility and variations, with the permission of the Finance Ministry for new investors coming in at a time of mergers and acquisitions.
Sri Lanka’s top businessman Dhammika Perera was the eighth largest shareholder of Commercial Bank of Ceylon PLC, with a stake of 3.66% as of 31 March 2023 while Perera’s Vallibel One PLC was the largest shareholder of Sampath Bank PLC with a 14.95% stake.
Meanwhile, Phantom Investments Private Limited, the investment arm of businessman Rayynor Silva acquired a 10% stake in the voting share at Sampath Bank last week through a series of transactions during the recent past. He became the second largest shareholder of Sampath Bank after Vallibel One PLC.
Further, the Governor said that although CBSL does not expect any undue impact from the Domestic Debt Optimisation (DDO) on the banking sector, they are conducting an asset quality review on banks to see if there is any recapitalisation needed once the DDO is complete.
He added that obviously in the process of recapitalisation and strengthening the capital of the bank, there will need some mergers, acquisitions and consolidation of banks.