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Govt. follows Rajapaksa policies in controlling private banks
View(s):Sweeping changes are set to take place on the boards of six Sri Lankan private commercial banks in which the Government has a stake, triggering concern across the banking sector. Government nominees have been named as directors, eventually to take over as chairpersons, at the Hatton National Bank (HNB), the Commercial Bank, the National Development Bank (NDB), Sampath Bank, the DFCC and Seylan Bank, the Sunday Times reliably learns.
But at least one bank, Sampath Bank, will resist a ‘request’ for its chairman Dhammika Perera to step down. “We will resist it like how we opposed Harry Jayawardena’s attempted take-over (many years back),” said a bank source connected to the founding directors of the bank. The Commercial Bank is also likely to resist the changes, it is learnt.
“These changes are a repeat of the Nivard Cabraal era where the government sought to control private commercial banks. It’s no different,” a senior banker said. During former Central Bank Governor Cabraal’s tenure, state institutions, including the Employees Provident Fund (EPF), Employees Trust Fund (ETF), Sri Lanka Insurance and the Bank of Ceylon (BOC), invested in banks like HNB and Commercial and their nominees (Ranee Jayamaha as chairperson HNB and Dharma Dheerasinghe as chairman Commercial Bank) were appointed. They were first appointed directors and subsequently, chairpersons.
The banks were learnt to have been informed of the changes during the week, raising concerns. On Friday, NDB Chairman Sunil Wijesinha said he was resigning with immediate effect while HNB Chairperson Ranee Jayamaha said she was not seeking re-election at the annual general meeting (AGM) as a director, and stepping down. Rose Cooray, a director, was appointed by the board as her successor, according to an announcement.
The annual general meetings of HNB and NDB are taking place tomorrow while Sampath Bank, Seylan Bank and Commercial Bank will hold their AGMs on Tuesday. However the changes won’t happen at these meetings as shareholders have to be informed and Central Bank approval must be given to new board positions.
Industry sources said the government nominees are Rienzie Arsecularatne P.C. (senior lawyer to HNB), N.G. Wickremaratne (former Hayleys Chairman to NDB), R. Nanayakkara (relatively unknown in the banking sector to Commercial Bank), Amitha Gooneratne (a senior retired banker to Sampath Bank), Ravi Dias (senior retired banker to Seylan Bank) and Ananda Athukorala (senior retired banker to DFCC). This is in addition to changes in other boards positions.
They are, if the Government succeeds in its plans, to replace Rose Cooray (HNB), Sunil Wijesinha (already resigned at NDB), Dharma Dheerasinghe (Commercial Bank), Dhammika Perera (Sampath Bank), Nihal Jayamanne (Seylan Bank) and Royle Jansz (DFCC). In one instance, Sri Lanka Insurance (SLI) Managing Director T.M.R. Bangsa Jayah has written to the NDB saying it would like to appoint three new directors by virtue of holding a 10.4 per cent stake but it was then pointed out that such a stake doesn’t permit it three board positions.
Subsequently, a Deputy Governor of the Central Bank acting on behalf of the EPF and the ETF (which together have a 12.9 per cent stake) had written supporting the SLI position. This was followed by a similar letter from the Bank of Ceylon (which has 9.7 per cent). Together, these state entities have a 34.2 per cent controlling stake in the NDB but under strict Central Bank rules, shareholders cannot act together in such a situation under strict ‘acting in concert’ laws. Furthermore, banking experts say that the Central Bank appears to be violating its own rule of ‘acting in concert’ as seen in the NDB case.
“One fails to understand why the new Government wants to take control of these banks after being critical of the same process during the previous regime. Ironically, the same state institutions that were criticised for exercising control (EPF/ETF) are being used again in this endeavour,” one banking analyst said.
Shares held by state institutions in these banks are as follows:
HNB: SLI/EPF/ETF/NSB (together) – 27.08 per cent.
NDB: BOC/SLI/EPF/ETF (together) – 34.20 per cent.
Commercial Bank: EPF/SLI (together) – 19.0 per cent.
Sampath Bank: EPF/ETF (together) – 12.51 per cent.
Seylan Bank: SLI/EPF/BOC (together) – 16.31per cent
DFCC: BOC/ SLI/ EPF/ ETF/ NSB (together) – 34.98 per cent.
(Note these shareholdings are as at 2014 calendar year positions)