Govt. hints at floating BOC and People’s Bank on stock market 

•  Says will keep controlling stake
•  Depositors and employees to become shareholders
•  Provides 10bn to BOC in the interim as capital buffers

Presenting the budget for 2018, Finance Minister Mangala Samaraweera said he wants to see the two state lending giants Bank of Ceylon and People’s Bank to raise debt and equity capital to beef up their capital requirements.

 As the minimum capital requirements under the BASEL III is increasing, state lenders require fresh capital from their only shareholder, the National Treasury, to be in line with the new thresholds. However Samaraweera said any divestiture of shares of BoC and People’s Bank will be made to retain the controlling stake with the government. 

 Further he said the banks must allocate shares to their depositors as well as employees in such an exercise.

 “In raising equity capital, the state will not relinquish the controlling ownership, but is willing to allow the divestitures, provided that the depositors and the employees are given the option of becoming shareholders”, Samaraweera said.

 Further, the government will also allow state lenders, which also include the National Savings Bank, to access international capital markets in raising new capital, as the government feels that these banks operate with enough previous experience and required maturity to do so.

 The previous Rajapaksa regime used Bank of Ceylon, National Savings Banks and DFCC Bank as proxies to raise capital from international capital markets through the strengths of their balance sheets.  

 “Both BoC and NSB have accessed the international capital markets successfully on the strength of their own balance sheets, signifying that our state banks are now mature enough to raise their own capital from the markets. It is in this context that we will allow the BoC and the PB to raise both debt and equity capital,” Samaraweera remarked. Meanwhile, in view of higher capital requirements under the BASEL III rules, in the interim, the government will infuse Rs.10 billion into Bank of Ceylon in equal portions in 2017 and 2018.

Further, Rs.2.5 billion will be invested in the state-owned licensed specialized bank, the Pradeshiya Sanwardena Bank.