Finance Ministry wants its nominees as independent directors in private banks
Questions are being raised on the much promoted meritocracy by the current government with the Ministry of Finance (MOF) moving to remove certain independent directors in some private banks.
These commercial banks are being pressurised by the MOF to remove certain independent directors, in a bid to replace them with political cronies.
Sources close to the Treasury say that the MOF had written to certain banks directing them to remove at least two directors each and appoint MOF nominees. “Technically the Finance Ministry cannot direct this because they don’t have a direct shareholding,” a source pointed out to the Business Times. He said the Employees Provident Fund (EPF) and Sri Lanka Insurance Corporation (SLIC) have shareholdings in these banks.
The EPF has 9.63 per cent in Commercial, 8.01 per cent in DFCC and 9.76 per cent in HNB. SLIC has 14.63 per cent in HNB, 8.71 per cent in DFCC and 5.83 per cent in Commercial as at last year. The MOF is probably acting on behalf of the government institutions, one source pointed out.
In 2015 during the last government, on the back of getting HNB to appoint their nominee senior attorney Rienzie Arsekuleratne as a director that June, also made inroads to the Commercial Bank to appoint another nominee – Nissanka Nanayakkara as their nominee to the board – despite resistance by many stakeholders at the time.
That year, on March 29, N.G. Wickramaratne was appointed as a director and he later became the chairman of NDB, while another Government nominee Ananda Athukorala was appointed a director at DFCC Bank that June.
However, the state agencies own stakes in these banks for ‘investment’ purposes and not to ‘interfere’ in their management, an industry source noted. “If the MOF doesn’t like these directors, they can vote them out at the Annual General Meeting.”
These banks need to go to the international market to raise funds and capital. Such blatant acts will not stand in good stead during these unprecedented times, industry sources pointed out. “Earlier, these two institutions had written to the banks suggesting their nominees and not ‘directing’. When a meritocracy is being promoted by the government, it is sad to note such things happening through one of their agencies,” one source said.
He added that the concerns in this new turn of events also come in the face of unprecedented challenges these banks are faced by the pandemic-related issues.