Central Bank to change bank shareholdings

Present shareholdings in banks are expected to change with the Central Bank looking at bringing in more ‘clarity’ to the law.

“We are planning to give a ‘clarification’ as to what the new holdings are,” Nivard Cabraal, Governor Central Bank told The Sunday Times FT, adding that the present holdings in banks will change.

This follows business tycoon Harry Jayawardena's aim to control Commercial Bank making way for an acid test of the Banking Act.

Presently, under Section 12 of the Banking Act an individual, partnership or corporate body cannot 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 threshold limit in the Act is 10 percent.

A Central Bank source said that ‘acting in concert’, explained under Section 12 of the Banking Act applies when ‘acquisitions take place’. “The Commercial Bank’s present shareholders can ‘hold’ the stipulated amount, but ‘acting in concert’ applies to a point of acquisition,” the source said. He accepted that the law is not clear on certain instances and not very straightforward.

However under the directions issued under Section 46 (1) (d) of the Banking Act, the maximum percentage of shares held by a group of companies is 20 percent.

A court has presently restricted Jayawardena’s voting rights of the 42.6 percent shares in Commercial Bank through direct and indirect parties to 10 percent.