Sri Lanka’s NDB and DFCC merger not to be forced; it’s a shareholder decision: Dinesh Weerakkody

Apr 16, 2015 (LBO) – Sri Lanka’s National Development Bank (NDB) and DFCC Bank merger should not be forced, Dinesh Weerakkody, Chairman of a Committee investigating banking sector consolidation told LBO.

“We were very clear about the NDB – DFCC merger in our report that was handed to the Prime Minister. This should be decided by the shareholders and not be forced,” Weerakkody told.

“All mergers should be voluntary and done from a business perspective,”

“The role of the government should be to create the right environment for the mergers.”

The two banks embarked on the merging under a regulatory move made by the previous regime to create a bigger entity.

The new rulers which came to power in January 2015, appointed a committee to investigate all the consolidations which were done and pending under the previous regime’s directive.

This committee report was handed over to the Prime Minister by the committee head Dinesh Weerakkody a few days ago, but has not been made public yet.

“No question about banks being made stronger entities but, this should be done on a voluntary manner and with business sense,” Weerakkody said.

The committee also included W.A. Wijewardena, former Central banker, Nihal Fonseka- former DFCC CEO, a Treasury official and a Central Bank official.

DFCC Bank Director/CEO, Arjun Fernando told LBO that they have not been officially informed about the report but according to speculation the merger would go through as planned earlier.

However the merger would go following a shareholder vote first he said.

“Earlier the main shareholder, the government was very positive and supportive. Now each shareholder will decide and make the vote,”

“Anyway we were expecting 25 per cent to vote against the merger and we would have to call an extra-ordinary meeting and get the approval.”

Meanwhile, commenting on the releasing of the report and it’s impact on the merger Rajendra Thiyagarajah, Chief Executive of NDB also told LBO that they are awaiting and official communique from the PM and hoping for a positive out come.

He said the only delay for the merger is the opinion of the committee.

“We would have already been done with this merger if not for the report,”Thiyagarajah said.

“We have not yet seen the report because it has to be tabled in parliament first.”

The recent change in Sri Lanka’s political setting has added to uncertainty over the fate of the earlier administration’s policies related to economic reforms, monetary policy and banking sector consolidation.

The committee report is due to be tabled in parliament next week.

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.