July 14, 2013 (LBO) – Sri Lanka is looking to be flexible on banks share ownership limits to make it easier to merge and allow sector consolidation, a top regulatory official said. However analysts say financial institutions play in different risk categories. Non bank financial institutions generally play in the more risky categories not accessed by the licensed commercial banks.
But analysts say smaller licensed commercial banks may also be pushed into more riskier clients though their ability to absorb such risks may not be the same.
However in countries like the US partly due to historical factors on branch banking laws, there are many banks.
In the US there are more than 6,500 commercial banks and it had not prevented big banks being created.
In Sri Lanka a single shareholder can own only 10 percent of a bank, except without special approval.
“I know the concern is about the share ownership limits,” Yvette Fernando, head of bank ownership at the Central Bank said.
“We have taken note of the concern raised and we are working on whatever possible mechanisms.”
Fernando was speaking at an LBR – LBO CFO Forum on the future of banking.