“We (two banks) both see some merit in consolidation, but we want to get an indication on the Treasury’s stance on this matter as the government is a major shareholder in both entities,” a NDB official told the Business Times.
A committee reviewing the previous regime’s banking sector consolidation process, headed by Dinesh Weerakkody, who is a Senior Advisor to Prime Minister Ranil Wickremasinghe, is to make a recommendation on this merger soon. This committee has four other members – former Central banker, W.A. Wijewardena, former DFCC CEO Nihal Fonseka, a Treasury official and Central Bank official.
A DFCC official stressed that it’s important to consolidate, but they too want some indication or signal from the regulator. “We realise that there’re cost reductions and synergies that are created, but we also want the response of the majority stakeholders, which are the state entities,” he said. The NDB official added that there’s no point going before the shareholders without this opinion as the state entities will also vote and if they aren’t in favour, then it’s highly unlikely this proposal will go through. Many anticipate that the state entities which collectively own over 30 per cent in each bank will not vote for a merger.
Both officials said that they will discuss the matter with both the Central Bank and the Treasury.