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A Battle For Top Seats At HNB 
Posted 4,June

By Chaveendra Dunuwille

In Local News

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The country’s second-largest private sector bank, HNB is seeing a heated battle for seats on its  Board in what analysts see as a four-way fight, involving business tycoon Harry Jayawardena,  the Finance Ministry, the Captains Group, and the latest entrant Browns investment in the form  of Ishara Nanayakkara. 

The effects of the internal battle have spilled over to the general public with some people even  resorting to using WhatsApp, sending anonymous mails and also slandering Director and veteran  banker Nilantha de Silva and Acting Chairman, the highly-respected corporate lawyer Dr.  Harsha Cabral PC. Analysts have condemned these actions calling them cheap and disgraceful tactics that should not be resorted by people aspiring to sit on private sector bank boards. 

Recently, Dinesh Weerakkody stepped down as Chairman and the battle for a seat on the HNB  Board has since intensified. At present there are 11 Directors on HNB Board and two seats are  vacant. 

It is alleged that Finance Ministry Secretary S.R. Attygalle through Sri Lanka Insurance (13.3%  shareholder) wants Samantha Rajapaksa, a former Bank of Ceylon Director during the previous  administration, and Nihal Jayawardena PC appointed as Directors. 

Ishara Nanayakkara (via Browns Investments owns a 9.9% stake in HNB) wants his LOLC  Group Managing Director veteran banker Kapila Jayawardena appointed. 

Both Captains (whose stake is around 8.4%) and Jayawardena (owning 17.8%) have one director  each. Jayawardena, who has had two directors for several years in the past, wants his second  director. 

The complaint that Jayawardena has is that though he owns nearly an 18% stake, his voting  rights are restricted to 10% whilst the State institutions can freely work together, “acting in  concert”. 

The State institutions collectively have around 23% of HNBs voting shares (Sri Lanka Insurance  Corporation (13.3%), EPF (9.75%), ETF (1%)), but are not restricted in their voting rights. This  has been raised in many public forums, but the Central Bank has ignored the concerns raised by  

several shareholders to have a uniform policy. Analysts said in certain banks such as NTB and  Union Bank this rule does not apply for the large shareholders or they have been given extended  time. 

Analysts also pointed out that many governments unfortunately have interfered in private sector  banks by using the State-Owned Enterprises (SOEs) and the EPF shareholding to either remove  or appoint directors. They have or attempted to turn them unfortunately into State-like banks and  politicising the private banks. 

Analysts exclaim that politicising of private sector banks should be stopped in order for them to  take independent lending actions. They further stated that banks live on public debt and not on share holder funds and therefore it is important for them to rid themselves off of any political  influence. 

The collapse of several finance companies due to bad governance was pointed out by analysts in  order to raise awareness of the importance a board of Directors hold in terms of their  professionalism and integrity which will decide the growth and the survival of the financial  institution.  

The four groups at HNB collectively control more than 50% of the bank, which according to  analysts is not good for a private bank since only 10% or 15% must apply to all shareholders.