Mar 27, 2015 (LBO) – Sri Lanka’s National Development Bank (NDB) and DFCC Bank says that they are still awaiting a decision from a committee appointed by the new government who are investigating all the consolidations which were done and pending under the previous regime.
“We have made our submissions and as of today NDB is optimistic that the merger will go through,” Rajendra Thiyagarajah, Chief Executive of NDB told LBO.
“We were given an opportunity ten days ago to make a representation to the committee and we did this.”
Former Commercial Bank chairman Dinesh Weerakkody was appointed as the Chairman of a Committee under the Banking and Finance Sector of the Ministry of Policy Planning and Economic Development, who is also a Senior Advisor to Prime Minister Ranil Wickremasinghe who will be investigating all the consolidations that were done under the previous regime and make recommendations.
The committee also includes four other members , W.A. Wijewardena- former Central banker, Nihal Fonseka- former DFCC CEO, a Treasury official and a Central Bank official.
The committee is to issue a report in April 2015.
Analysts say banking consolidation allows banks to raise bonds and equity positively but the merger process can also have a negative impact by having a lesser number of banks in the Island which will create less competition and gives fewer options for the clients.
DFCC Bank Director/CEO, Arjun Fernando also told LBO that they were awaiting some direction from the committee to proceed with the consolidation process.
“Our decisions will be based on what comes out of the directions we get from the decision makers.” Fernando told LBO today.
“All the background work is done but shareholder’s approval is needed.”
The two banks embarked on the merging under a regulatory move made by the previous regime to create a bigger entity.
However analysts say that the state entities which collectively own over 30 per cent in each bank will not vote for a merger.
Meanwhile there has not been any communique issued by the Central bank of Sri Lanka on financial sector consolidation since 31st December 2014.
The last press release by Central bank stated that the Act to facilitate the proposed merger of the three banks, viz., DFCC Bank, National Development Bank PLC and the DFCC Vardhana Bank PLC, had been enacted.