New policy on share ownership in banks
COLOMBO: The Central Bank has issued new Directions under the
Banking Act to licensed banks to implement a new policy on share
ownership in banks.
Accordingly, the maximum percentage of ownership permitted in the
issued share capital carrying voting rights in a bank will be 15 per
cent of the issued share capital (carrying voting rights), the Bank said
yesterday.
This limit will apply to acquisition or holding of shares by all
categories of shareholders, individually or in group (as specified in
the Banking Act) whether acquired/held directly or indirectly or through
a nominee or acting in concert with any other categories of
shareholders.
However, in the case of licensed commercial banks, to acquire shares
carrying voting rights in excess of 10 per cent requires prior approval
of the Monetary Board given with the concurrence of Hon. Minister of
Finance.
However, the Monetary Board may grant permission to acquire shares in
excess of 15 per cent in the case of a licensed bank which requires
restructuring to avoid inadequacy of capital, insolvency or potential
failure, subject to the condition that the ownership of shares so
acquired shall be reduced to 15 per cent within a specified period as
may be determined by the Monetary Board on a case-by-case basis,
provided also that such period shall not exceed five years from the date
of granting permission.
Names of any shareholders who acquire shares of a bank in excess of
the specified thresholds without the prior approval of the Monetary
Board will not be entered in the share register of the bank.
All shareholders who now hold shares carrying voting rights in excess
of 15 per cent will be required to dispose of and/or reduce their
shareholding to 15 per cent during the period not exceeding five years
specified by the Monetary Board on a case-by-case basis.
One of the policy measures proposed in the Road Map: Monetary and
Financial Sector Policies for 2007 and Beyond announced by the Central
Bank on January 2, 2007 is to issue new policies on share ownership in
banks to promote better corporate governance and to address conflicts of
interest that may arise due to large shareholding. |