Govt. reiterates no sale of private banks’ stakes
Having learnt a bitter lesson in the Bank of Ceylon (BOC)-Seylan Bank drama, the government is to issue ‘clear’ and immediate guidelines on stakes in private banks coming under the purview of the Ministry of Public Enterprises.
Minister of Public Enterprises, Kabir Hashim told the Business Times that his ministry will issue a fresh circular to all state-owned-enterprises (SOEs) under his purview ‘almost immediately’ making clear the government’s stance on private bank stakes held by these SOEs. “The new circular will clearly say that until such time that it’s communicated, these holdings in banks will not be sold,” he said reiterating that it will also clearly say that this will be state policy. This new circular will cover Sri Lanka Insurance Corporation, BOC, People’s Bank, National Savings Bank (NSB), etc. He added that as a policy, the government made a decision that the shares of Seylan bank which belong to the government will not be sold. “This was a tactical decision,” he said
As for the committee to probe this matter, Mr. Hashim said they were appointed on Wednesday. However what is unclear are the stakes that the EPF and the ETF have in banks and whether these stakes too would be restricted in any sale.
Another interesting situation that emerged in this latest CSE drama is the fact that BOC acts as its own custodian bank. A custodian bank holds customers’ securities for safekeeping to minimise the risk of their theft or loss. One of the most important functions a custody bank helps to perform is to segregate customers’ money (and securities) from its own, or from investment managers. In the BOC -Seylan saga, BOC’s custodian of Seylan shares is BOC itself. “They should appoint independent custodians,” another analyst noted.
It’s learnt that there’s a strong call by the capital market to the regulators to direct BOC and all other institutions that don’t have independent custodians, to do so. “The CSE and SEC had a meeting to this effect after the Seylan transaction,” informed sources told the Business Times. They said that the two parties are gearing to revisit this area.
| Govt. stakes in private banks in 2015 | |
| Commercial Bank HNB EPF 9.73 % SLIC 11.74 % SLIC (Life) 5.04 % EPF 7.84% SLIC (General) 4.34 % NSB – 2.31% Sampath Bank Seylan Bank EPF 9.97 % SLIC 15% ETF 0.93 % EPF 9.86% SLIC (Life) 0.93 % BOC 7.50 % NSB 0.67% ETF – 1.81%
Note: BOC also has stakes in NDB |