|
|
 |
 |
| Sunday, 14 July 2002 |
 |
|
 |
Business |  |
| News Business Features Editorial
|
Commercial Bank tells share holders : Stick to 10 per cent limit "We like to see more and more people buying our shares, but they are requested to operate strictly within the law," said Deputy General Manager (Finance and Planning) Commercial Bank, Ranjith Samaranayake. "We are very happy about the share market becoming active and we are also happy to see that our bank shares have become so popular in the share market," he added. "However, these share transactions will have to take place strictly within the law. We are not an ordinary company, but a banking company as well." Samaranayake said that banking companies are governed by the Banking Act, which supersedes the Companies Act. Various safeguards are applicable to banks in the Banking Act and limits on share ownership is one such key safeguard. He said these share ownership limits have been laid down (in conformity with international practices) due to very good reasons. Firstly, banks have to protect the interest of depositors who contribute the bulk of funds, far exceeding the quantum of funds contributed by shareholders. This is one main difference between banking and non-banking companies. The depositor suffers most if a bank fails. Secondly, banks are exposed to various risks and the magnitude of these risks are extremely high, he added. Therefore, banks should be managed professionally, safeguarding the depositor's interest and minimising risk properly. There should be a very high degree of corporate governance in banks. Undue shareholder dominance can always be a threat to banks in fulfilling these obligations. Therefore, limits have been imposed on share ownership in banks universally. Except in the case of banking subsidiaries, a broadbased share ownership structure is always encouraged for other banks, to minimise undue pressure from dominant shareholders, he noted. "Fortunately, our country has very stringent limits on share ownership in banks as laid down in the Banking Act. Section 12 (1)(d) of the Act requires the written approval of the Monetary Board with the concurrence of the minister for an individual, partnership, company or corporation, together with their nominees to acquire more than 10 per cent in bank shares, he said. "This 10 per cent limit applies to individual foreign parties as well even though the total foreign shareholding could now go upto 100 per cent," he pointed out. "Under the circumstances, we as a bank are duty-bound under the Banking Act to implement the law and ensure that nobody exceeds the 10 per cent limit without the required approval," he added. "We simply refuse to register share acquisitions above 10 per cent. Also, if we have reasonable grounds to believe that somebody has acquired shares as a nominee of another person, we will aggregate such purchases in arriving at this 10 per cent and refuse to register the excess in the absence of required approval. We will do it in uniformity and will not make any exceptions for anybody," he noted. Samaranayake said the Central Bank had recently drawn the attention of banks to the provisions in the Banking Act on share ownership limits and advised them not to enter the names of any person in the share register of the respective banks, in violation of the limits. The Central Bank had also emphasised that the company secretary of each bank should ensure that this is implemented properly so that persons holding shares in violation of the Banking Act would not be able to exercise their rights. "This was the position taken by Sampath Bank, when attempts were made to acquire its shares by interested parties a few years ago. The stance of Sampath Bank was upheld by Court as well," he added. "If somebody buys more than 10 per cent of our bank's shares, we will take a similar stance," said Samaranayake. |
|
News | Business | Features
| Editorial | Security Produced by Lake House |
