New regulations to restrict cross holdings among banks

The Central Bank (CB) is to introduce new regulations to restrict cross holdings among banks to enhance corporate governance in the banking sector.

“We are looking at cross-holdings; we feel that one bank need not have controlling interest of another. There is no necessity for you to be present in the board of another bank. Therefore, we will come up with strict regulations in relation to cross holding in the near term,” CB Director Bank Supervision, A. A. M. Thassim revealed.

He made these remarks joining a technical session at the 31st Anniversary Convention of the Association of Professional Bankers of Sri Lanka, held in Colombo on Wednesday.

Thassim noted that the necessary directions are drafted and will be introduced to the banking sector soon. “In the last decade, we have seen many conflicts in the banking industry, mainly because of the share ownership issues; therefore, we will bring in new requirements,” he added.

The CB expects the amendments to shareholder policy will encourage shareholders of international repute and diverse skills to hold shares in banks.

Further, Thassim revealed that several amendments to the Banking Act and directions on corporate governance are also under considerations.

Under amendments, the CB is expected to determine several new positions including Senior Vice President, Chief Information Officer and Chief Information Security Officer as Key Management Personnel (KMP) in the banking sector. Further, a new affidavit for obtaining information to assess the fitness and propriety by merging the existing affidavit and declaration as well as imposing a cooling-off period for directors and CEOS of banks are also proposed. (NF)