CB calls for ‘wish list’ on proposed DFCC-NDB merger
The Central Bank (CB) has requested DFCC and NDB for their input on the impending merger of the two entities, a DFCC official said.
“They’ve been very accommodative and has asked for a sort of a wish list from the banks,” Arjun Fernando, CEO DFCC told the Business times. He added that CB guidelines aren’t still clear on the merger and the regulator is calling all banks for discussions on a regular basis. The first of such discussions was held on Friday.
Arjun Fernando
Mr. Fernando explained that there are some important preliminary legal and business barricades to clear before the merging happens. “DFCC is incorporated under the DFCC Act. Initially DFCC’s subsidiary DFCC Vardhana (which is a commercial banking operation) was planned to be merged (with DFCC). Our plan was to merge both entities and with last year’s budget proposal the decision was to expedite it.”
Accordingly, DFCC and Vardhana have placed themselves to facilitate consolidation. “Towards this end, a new organizational structure that rationalizes all functions common to DFCC and Vardhana has been implemented and more work on this was envisaged for this year even before the budget proposal. All activities that are common to both are now carried out as a group under designated group heads, Mr. Fernando said, adding that this not only achieves significant synergies, but also provides holistic focus and unity of purpose as well. As a result, the full range of products and services are now seamlessly offered to all customers. He said that the regulatory landscape is evolving and DFCC is cognizant of the fact that changes and restructure of the sector is something that may be imminent. “We are supportive of this. While development banking will be the main thrust, other businesses will be complimentary.” Mr. Fernando reiterated that in the DFCC-NDB merger model, the commercial banking and personnel banking operations will continue.
He added that policy, process and governance requirements will be spelled out in these guidelines in a bid to smoothen the transition. He said that with the merger it will be easier to source international funding. “We’ll look at international markets and also probably go for local debentures.”
While no specific timeline has been given for the merger, Mr. Fernando said that the urgency and the priority of merging have been recognized. He said that in the merger model, staff allocation is a primary concern for both DFCC and NDB.
“But there’re numerous opportunities. It’s a matter of re-skilling and re-positioning. There are going to be certain areas which need consolidation, but there’ll also be natural attrition.” He added that there’ll be key opportunities and the staff has been advised on this.