Ravi K defends presence at Union Bank-Cabraal meeting

Sri Lanka’s banking industry was intrigued last week to learn that UNP parliamentarian Ravi Karunanayake was present at what was perceived as a confidential meeting between Central Bank Governor Nivard Cabraal and Union Bank officials.

However both Karunanayake and Cabraal defended the former’s presence at the December 7 meeting saying that it was by invitation.

Cabraal had met with directors of both Union Bank and Sampath Bank, which has a major stake in Union Bank, to discuss issues relating to new investors being brought into the bank. Karunanayake, also a business professional who in the past has expressed interest in acquiring a stake in the bank, was also present.

With the UNP pushing for a Parliamentary Select Committee investigation on Cabraal over his alleged links to Goldquest, banking industry sources have raised the issue of a possible conflict of interest through Karunanayake’s presence. But Karunanayake, when contacted by The Sunday Times FT this week on this concern, said, "I don't think so. Do you think it was a conflict of interest?" When questioned if the deal had been signed between Union Bank and the investor group backed by Karunanayake, he said to wait until the end of the year because there are still some issues that have to be clarified. Karunanayake further stated the meeting between the CB and Union Bank was not a secret meeting and that he was present at a ‘public’ meeting.

Cabraal told The Sunday Times FT that the UNP MP was not there at the CB’s invitation but may have been brought in by other investors. “We said the investors (Union Bank and Sampath Bank) were welcome to bring other investors in,” he said.

Anil Amarasuriya, Managing Director of Sampath Bank who was also present at the meeting and whose bank holds a 24% stake in Union Bank, told The Sunday Times FT that even though the CB issued the circular about the postponement of implementing the minimum capital requirement and also the strict enforcement of the 10% limit for shareholders in banks, the CB has issued a timeframe which is adequate for abiding by the new regulations. Union Bank had been under severe financial problems a few years back when Sampath Bank entered the picture and bought a 24% stake in a restructuring exercise.

A new Chairman was appointed and former UNP Chairman Malik Samarawickrema and Sri Lanka cricket legend Aravinda De Silva were among those who invested at that time.

Recently, there has been acute pressure on Union Bank due to investors demanding their dividends. The Bank had from a Rs 150 million loss about three and a half years ago returned to profits of Rs.150 million profit pre tax but half of this would go on taxes. In the new deals surrounding the Union Bank, a Malaysian investor was interested in acquiring a 60% of Union Bank even though the current rules stipulate a limitation of 10%.

However, the CB was going to allow a 30% stake for the Malaysian investor with special permission and the other 30% was being invested by three connected parties with 10% each. Subsequently, permission was denied. The sources said the group backed by Karunanayake was also hoping to buy a major stake through connected parties.