Government mulls single shareholder limit increase in banks

The government is strongly skewed towards increasing single shareholder limit of banks, bolstered by many requests from such main shareholders, officials said.

This came after many such shareholders in the past few months appealed to the Central Bank (CB) to ‘reconsider’ its rules because time is running out for them. Most are supposed to sell the excess stakes by the end of the year. According to the CB regulations, one party or parties acting in concert can own up to 10 per cent in a bank. This can be extended up to 15 per cent with the CB’s special approval but must be brought down to below 10 per cent during a period stipulated by the regulator.

Last November the CB after a Cabinet meeting approved an increase in the shareholding threshold in commercial banks from an earlier limit of 10 per cent to 15 per cent applicable only to those shareholders who previously held over 15 per cent but were forced to reduce it to 10 per cent.

Now the shareholders want the limit increased to a ‘ substantial’ amount, the Business Times learns.

LOLC has around 25 per cent of voting shares in Seylan Bank and 44 per cent of non- voting and John Keells Holdings (JKH) has 30 per cent of voting shares in NTB and 50 per cent of non-voting shares. The US- based global private investment firm TPG’s investment through its affiliate Culture Financial Holdings Ltd bought a 70 per cent stake in Union Bank (UB) in 2014 for US$.117 million.

In 2017 Amana Bank PLC got CB special permission for the bank’s fourth largest shareholder— Islamic Development Bank (IDB) - to own up to 29.99 per cent of the voting shares by acting in concert with IB Growth Fund (Labuan) LLP (IBGF).

A senior banker pointed out that the recent rights issues by Sampath Bank and NDB Bank were not successful and in this backdrop, banks need to have strong equity holders. NDB Bank was not even fully subscribed while Sampath was bailed out after the rights were closed by high networth investor, Prabhash Subasinghe.

Analysts said in the current dire macro-economic scenario it is difficult to find large, longterm shareholders. As such fragmented ownership in banks does not look good.

???Some say that there may be political reasons behind these forays. “Are these made purely from an investment point view or direct lending of these institutions are easy with big shareholdings,” are questions that many raise.