Central Bank cuts Harry J’s stake in ComBank

The Central Bank is cutting Harry Jayawardene’s direct stake in Commercial Bank but has refused to acknowledge ‘acting in concert’ with regard to control in the bank that he has through other parties. The Central Bank ruling follows a general order to banks to restrict an individual’s stake to a maximum 15 percent under the the Banking Law.

DFCC bank, controlled by Jayawardene, was requested by the Central Bank to reduce its 29 percent shareholding in Commercial Bank by October 2008. Commercial Bank staff however say that Jayawardena-controlled entities hold a 42.6 percent stake in Commercial Bank through direct and indirect parties which is construed as acting in concert. “The court has also restricted Jayawardena’s voting rights of the 42.6 percent shares in Commercial Bank through direct and indirect parties to 10 percent,” a Commercial Bank official.

He said the Central Bank should take note of this interim order by the court and give a proper ruling. The official said that the regulator has taken the Commercial Bank shareholding of DFCC in isolation and has not considered the related parties that hold the bank together with DFCC.

Central Bank Governor Nivard Cabraal, told The Sunday Times FT that, “We have not looked at Commercial Bank shareholding of DFCC in isolation. We have in fact done a complete analysis on this and given a directive. As far as we are concerned we have gone by the facts.” He said that acting in concert has to be proved in a court of law. “Acting in concert is a matter of fact. If there is an allegation of acting in concert, we will certainly examine it,” he explained.

K.C. Vignarajah, a shareholder of Commercial Bank, said that the Jayawardena-controlled group should be granted time to dispose their excess shares up to 15 percent, but until such time the Appeal Court's directive to limit their holding to 10 percent should prevail.