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Nov 28, 2010 (LBO) – Sri Lanka’s central bank will support friendly mergers of banks, which can be difficult due to existing regulations, a media report said. Banks – especially those catering to different classes of risk – are needed to finance small and medium businesses.

“We have had some feelers and have discussed it at the Monetary Board (the governing board of the central bank),” The Sunday Island newspaper quoted Central Bank Governor Nivard Cabraal as saying.

“We have let our thinking to be known to banking circles. But we don’t want any hostility; there must be agreement all round.”

The report said an earlier attempt to merge two large banks through a share swap had been abandoned after regulatory approval did not come.

Though mergers can also reduce competition, some banks have been pushing for mergers to create larger entities which would allow them to expand abroad and also cut operating costs.

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