By Ravi Ladduwahetty
DFCC Bank Director/CEO Arjun Fernando said that his bank was waiting to repeal the DFCC Act, which was the forerunner to the merger of the DFCC Bank, DFCC Vardana Bank and the National Development Bank.
Now that the requisite parliamentary approvals have been given on 1 November, the then DFCC Bank, which was incorporated by an Act of Parliament under the name of Development Finance Corporation of Ceylon, has to be repealed and we are awaiting the gazette notification of the Ministry of Finance, Fernando told the Ceylon FT Friday night.
He said that the three banks had the time frame of as much as six months to proceed with the merger, but added that the processes have to be proceeded with.
It is very likely that the merger would be far ahead of the six-month deadline, provided the DFCC Act was repealed, which was a priority to proceed with the proposed merger, he said.
Meanwhile, NDB Bank CEO Rajendra Theagarajah when contacted by the Ceylon FT, said that the repealing of the DFCC ACT was a huge process in the merger.
"These are sensitive matters to be spoken of on a mobile phone and I need the consent of both board of directors to speak to the media, Theagarajah remarked.
Meanwhile Arjun Fernando, in an interview with the writer in "From the Boardrooms" column published in the Ceylon FT on 14 July, 2014 believed that the biggest challenge to the proposed DFCC Bank-DFCC Vardhana Bank and NDB Bank merger was the institutional resistance to change that comes naturally in the voluntary amalgamation of such strong financial institutions.
Retired DFCC Bank Director/CEO, Nihal Fonseka, in his 'Reminiscences' interview with the Ceylon FT also with the writer, dated 28 February, 2014, also said that plans were afoot for the merger between DFCC Bank and Commercial Bank at the turn of the Millennium in 2000, but the Central Bank, at that time, shelved the idea due to resistance from the unions. "The Central Bank did not want to proceed with a merger under such hostile conditions," Fonseka said in that interview.
Managing this change effectively will be the key to determining the success of the exercise. On DFCC's side, we are fortunate to have had recent firsthand experience in successful acquisitions and business amalgamation with regard to both DVB and Acuity Partners, Fernando told Ceylon FT in that 'Boardrooms' interview.
"These not only required structural re-organizations, but also is a realignment of mindsets. So we are more than ready and in this case. I am happy to say that DFCC Bank is really demonstrating its ability to adapt not just to superficial changes, but also changes to institutionalized practices like structure, processes and the way things are done."
Responding to a question on his views on the regulatory changes faced in the banking sector in Sri Lanka, he said: "The consolidation of the financial sector was designed as a policy initiative to reduce systematic risk and steer the country towards its developmental goals for 2016 and beyond.
"One thing that has become constant in this day and age is change. Our markets are characterized by aggressive competition, evolving technology, increasing customer needs and better products and across the globe we see policies being shaped by these major forces. We've seen the changes and shifts that have taken place in international financial markets in the recent past, and consolidation has been a significant outcome of these changes.
I truly think that this move is timely and is vital to the banking industry in positioning the country as a middle-income hub.
However, he said, in general there was a lot of preliminary work that needed to be done at this stage and all three banks; that is, DFCC Bank, DFCC Vardhana Bank and the National Development Bank were working together with the utmost cooperation. "Our priority in this exercise is to ensure that our stakeholders' interests are looked after and protected and we will keep our stakeholders informed at each step."
Whilst the initiative is receiving strong support from the regulators, we will need to justify the merits of the amalgamation to our shareholders, employees and other stakeholders in our business plan which draws out revenue, cost and capital synergies, the end result being that the sum of all parts is greater than the whole," he said.
Asked what will DFCC bring to the consolidation table, he said: "From a tangible standpoint we would be bringing our financial strength, diversity of financial business, untapped value of key assets and with DVB a multiplicity of distribution channels to name a few.
"In addition to this we also have unrivalled intangible assets. DFCC's stature in the banking industry is impeccable, our expertise in the realm of project financing is unmatched; time and time again we have proven ourselves as the preferred partner for project financing because we have been willing to go the extra mile to help fledgling businesses and futuristic ventures that are now thriving enterprises and in addition to all of this and of equal importance is our team of professionals that is second to none.
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