Tight Control

Sri Lanka limited Friday the ownership of banks to prevent individuals or groups making hostile takeover bids that could destabilise the country’s small financial market.

The Central Bank of Sri Lanka said an investor will be allowed to hold a maximum of 15 percent equity of any commercial bank and those who own more than that will have five years to reduce their holdings to 15 percent.

“The maximum percentage of ownership … in a bank will be 15 percent. This limit will apply to all categories of shareholders, individually or in groups,” the bank said in a statement.

The move followed attempts by several businessmen to take over private commercial banks as a cheap source of funding for their commercial activities, a Central Bank official said.

He said the authorities were worried that heavy concentration of ownership could lead to in-house borrowing and affect viability and even lead to the collapse of private banks.

Earlier, any group of investors could hold more than 15 percent of a bank with the approval of the Monetary Board of the Central Bank. The exception will be withdrawn from Friday, the bank said.