NDB Bank PLC, DFCC Bank PLC and DFCC Vardhana Bank PLC have agreed to dissolve the Memorandum of Understanding (MoU) signed among them with an intention to operate as an amalgamated entity.
According to an announcement on the Colombo Stock Exchange trading floor, the companies would continue down their own paths, yet not rule out future amalgamation.
“(We) will not preclude re-examination of the feasibility of amalgamation at a future point in time once the policy and stance of the government becomes clearer,” it said.
The amalgamation was proposed by former President Mahinda Rajapaksa in the budget speech in 2013, as a precursor to the Central Bank’s ambitious financial sector consolidation plan. The three banks entered into the MoU in March 2014 and the CEOs/managing directors of the two groups have been supporting the amalgamation ever since, going so far as to stop expansion of ATMs and branches into regions either bank had a significant presence.
However, the new regime had opposed the move, saying that mergers must be a natural decision made by shareholders instead of being forced upon by the government.
The consolidation plan was put on hold as a report was conducted to evaluate the feasibility of implementation, which recommended against it last month. The state, through Bank of Ceylon and Sri Lanka Insurance, as well as state-managed funds such as the Employees’ Provident Fund and Employees’ Trust Fund, owns 34.45 percent of the shares in DFCC and 33.25 percent in NDB.