Consolidation process moves forward - CB

The financial sector consolidation process made significant progress in July.

The proposed consolidation, merger and acquisition plans submitted by banks and finance and leasing companies (NBFIs) were reviewed and evaluated by the Central Bank.

The plans included acquisitions with time-lines and price indications, mergers between NBFIs, envisaged infusion of capital by shareholders and by new investors. Following the submission of such plans, the Central Bank management held meetings with members of the Board of Directors and senior management of banks and NBFIs, with some of those meetings being with the intended merger and acquisition companies, on a joint basis.

In the case of banks and NBFIs where mergers were agreed on, discussions also covered the time-lines for completion of the transactions and the way forward in the post-integration period. The Central Bank also granted in principle, approval for several consolidation arrangements.

The panel of audit firms completed information memoranda, due diligence reports and valuation reports of 38 NBFIs. The Central Bank shared these reports with 40 prospective consolidation partners after entering into Non-Disclosure Agreements. 57 NBFIs and 12 banks submitted plans for mergers and acquisitions and infusion of capital.

The Monetary Board approved 19 consolidation proposals, in principle, and the companies were proceeding with the merger and acquisition processes.Nineteen NBFIs completed the internal processes to submit their proposals for the approval of the Central Bank.

Continuation of transaction management: The panel of audit firms continued to assist in transaction management, by advising Banks and NBFIs on transactions and smooth transitions after consolidation. The Central Bank provided price guidance for proposed acquisitions and mergers on the basis of valuations carried out by the audit firms. This was done to facilitate the conclusion of transactions at reasonable values, and, thereby, prevent the creation of possible price bubbles, which could be unhealthy for financial system stability in the future.