CB Asst. Gov. recommends 'unemotional' approach to staff issues
He urged the industry to look at the entire picture of the financial consolidation plan for the next five to 10 years and not at the immediate model. "We must not look at the short-term benefits of making 2+2=4, but we must look beyond for 2+2=6 or 7, and destination businesses".
The Finance Company PLC Chairman, Preethi Jayawardena said the financial sector contributed around 9% of the GDP and 58 companies were competing for this small market proportion, predominantly depending on short-term outlooks.
Elaborating on a recent incident in the NBFI sector he said, the weak balance sheet of CIFL had a negative impact across the board, creating an uneasy environment. Hence, the financial consolidation process would be an ideal opportunity to create a strong financial sector in our economy.
However, Jayawardena noted that the NBFI sector mainly catered to the SMEs where banks did not tap into. He therefore strongly suggested that everyone should be mindful of what President Mahinda Rajapaksa emphasized about the increasing inequality of the economy.
Central Bank Assistant Governor C.J.P. Siriwardana said, in this financial consolidation process the synergy of two financial companies depended on finding the correct partner. Companies should look for key areas such as structure, culture, IT systems, accounting systems and features of the two companies in carefully finding partners.
He said the valuation document was the base of the commencement of the financial consolidation. At present, nine audit firms selected by the Central Bank were conducting valuations on banks, and NBFIs will soon be finalized and the reports submitted on 2 May.
The first round of the consolidation process was a voluntary one, but if companies fail to find partners by 31 March 2015 the Central Bank would have to intervene.
Further explaining, Siriwardana said some of the small companies had asked for huge premiums for mergers and acquisitions. If these companies continue doing it till the last moment, the Central Bank would finally have no good partnering companies to go on with the financial consolidation, and in such a situation if companies are unable to find possible partners the Central Bank would have to intervene.
"The banks and the finance companies have already submitted their proposals, and this indicates their eagerness to actively take part in the consolidation process. With everything going as planned so far, we can finalize the first round of matchmaking soon," he said.
The Central Bank Assistant Governor, echoing Balendra, went on to say that consolidation was a sensitive issue with regard to staff, and recommended an unemotional approach.
www.ceylontoday.lk
By Charumini De Silva
Ceylon FT: The Chairman of the Colombo Stock Exchange Krishan Balendra while highlighting the benefits of financial sector consolidation said companies must be unemotional when dealing with the elimination of staff and warned the regulator against the emergence of a banking oligopoly with high lending rates and low deposit rates. "Research has shown that the majority of the consolidation processes elsewhere could not deliver shareholder value so we need to be cautious and avoid risk," Balendra said addressing a recent forum on financial sector consolidation. He pointed out that in the consolidation process, having joint managing directors and joint chief executive officers on the board would not work, as the board must comprise credible and accountable personalities.
"Therefore, the companies have to be unemotional when eliminating the over-lap," he said. "Another macro issue which could arise at the end of the financial consolidation process is the high lending rates and low deposit interest rates creating an oligopoly effect in the market," Balendra noted.
"Therefore, the companies have to be unemotional when eliminating the over-lap," he said. "Another macro issue which could arise at the end of the financial consolidation process is the high lending rates and low deposit interest rates creating an oligopoly effect in the market," Balendra noted.
Balendra, like many of the speakers at the forum welcomed the Central Bank's initiative to consolidate the financial services system of the country.
"There is a misconception in the industry that in the financial consolidation process we are forced to find partners, but I would like to rephrase it by saying that it is actually very encouraging to have a regulatory-enabled financial consolidation," NDB Bank CEO, Rajendra Theagarajah said.
"There is a misconception in the industry that in the financial consolidation process we are forced to find partners, but I would like to rephrase it by saying that it is actually very encouraging to have a regulatory-enabled financial consolidation," NDB Bank CEO, Rajendra Theagarajah said.
He urged the industry to look at the entire picture of the financial consolidation plan for the next five to 10 years and not at the immediate model. "We must not look at the short-term benefits of making 2+2=4, but we must look beyond for 2+2=6 or 7, and destination businesses".
The Finance Company PLC Chairman, Preethi Jayawardena said the financial sector contributed around 9% of the GDP and 58 companies were competing for this small market proportion, predominantly depending on short-term outlooks.
Elaborating on a recent incident in the NBFI sector he said, the weak balance sheet of CIFL had a negative impact across the board, creating an uneasy environment. Hence, the financial consolidation process would be an ideal opportunity to create a strong financial sector in our economy.
However, Jayawardena noted that the NBFI sector mainly catered to the SMEs where banks did not tap into. He therefore strongly suggested that everyone should be mindful of what President Mahinda Rajapaksa emphasized about the increasing inequality of the economy.
Central Bank Assistant Governor C.J.P. Siriwardana said, in this financial consolidation process the synergy of two financial companies depended on finding the correct partner. Companies should look for key areas such as structure, culture, IT systems, accounting systems and features of the two companies in carefully finding partners.
He said the valuation document was the base of the commencement of the financial consolidation. At present, nine audit firms selected by the Central Bank were conducting valuations on banks, and NBFIs will soon be finalized and the reports submitted on 2 May.
The first round of the consolidation process was a voluntary one, but if companies fail to find partners by 31 March 2015 the Central Bank would have to intervene.
Further explaining, Siriwardana said some of the small companies had asked for huge premiums for mergers and acquisitions. If these companies continue doing it till the last moment, the Central Bank would finally have no good partnering companies to go on with the financial consolidation, and in such a situation if companies are unable to find possible partners the Central Bank would have to intervene.
"The banks and the finance companies have already submitted their proposals, and this indicates their eagerness to actively take part in the consolidation process. With everything going as planned so far, we can finalize the first round of matchmaking soon," he said.
The Central Bank Assistant Governor, echoing Balendra, went on to say that consolidation was a sensitive issue with regard to staff, and recommended an unemotional approach.
www.ceylontoday.lk
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