CB welcomes merger of banks to strengthen banking sector

Hiran H. Senewiratne

MERGER: The Central Bank (CB) welcomes banks in the country to be merged within the sector according to specified monetary and banking regulations for the purpose of creating a strong and consolidated banking sector in the country, its sources said.

At present, two leading banks namely Commercial Bank and NDB Bank are in the process of merging with each other and the CB welcomes it if the process according to stipulated regulations, CB Governor Ajith Cabraal told the Daily News.

He said that strong banking sector is good for the country and it would support large-scale development and infrastructure projects in the country. Cabraal said that they welcome any bank to adopt an appropriate management model, which is comfortable with them as long as it adheres to all laws and regulations pertaining to the sector like the Monetary Laws, Banking Act, 15 per cent maximum shareholding rules, he said.

Commercial Bank Senior Deputy General Manager (Finance and Planning) Ranjith Samaranayake said that they are exploring the possibilities of a possible merger with the NDB in the future. Two banks are negotiating in regard to this matter. Commercial Bank sources said that board approval has been obtained for this much-talked merger and waiting till the shareholder and regulator approval.

However, HNB Chief Executive Officer (CEO) R. Theagarajah scotched the rumour that on the merger with DFCC.

HNB has no plans to deviate from their five-year development plans and also conscious of a trend setting within the banking sector, he said. Theagarajah said that mergers and acquisitions are important but the most important thing is the people factor. CEO also said that mergers are good but have to consider the company’s business model, whether it is fitting with the preservation of the brand.

Director General - Securities and Exchange Commission (SEC) Channa de Silva said that consolidation in the banking industry is very important at this juncture to face the global competition. However shareholders have to decide what is optimal to them.

He said that once merge takes place the company has to ensure its efficiency and the scale need to materialise in order to be competitive globally.

The SEC wishes that the companies to be bigger and stronger meet the capital requirement to compete regionally at least with India.