Two upcoming commercial banks, Civil Bank and Century Bank, have sought to expand the participation of public shareholders with both planning to keep 60 percent of the shares for the promoters and 40 percent for the public.
Most banks have a share structure in the ratio of 70:30. Bank promoters have also been seeking to reduce their stake by converting their shares into public shares. Nepal Rastra Bank has allowed them to reduce promoter shares to 51 percent, but the Securities Board of Nepal (SEBON) has fixed certain criteria including the requirement to go public through an offer document.
“We decided to go for a 60:40 ratio as it does not make a significant difference in representation on the bank’s board,” said Kishore Maharjan, chief executive officer of the upcoming Civil Bank. “It also makes it easier to collect enough capital.”
A commercial bank should have a paid-up capital of Rs. 2 billion as per the existing rules. A ratio of 60:40 means promoters can open banks with Rs. 1.20 billion while the public is offered 40 percent of the shares through an initial public offering.
Another upcoming bank Century Bank is also planning to keep the ratio at 60:40 as it has been finding it difficult to raise enough capital. The bank had initially planned to keep the ratio at 70:30 for the promoters and the public.
“Some promoters have not put in the money promised as they have not been able to recover their investment in real estate after prices stagnated,” said a senior Century official. It has also been struggling to recover its deposit of Rs. 40 million from Nepal Sri Lanka Merchant Bank which has announced a merger with Nepal Bangladesh Bank.
After Nepal Rastra Bank granted permission to sell promoter shares in 2008, some banks have already converted their promoter shares into public shares. The promoters of Nepal Bangladesh Bank and Nepal Credit and Commerce Bank sold their promoter shares on the secondary market. DCBL Bank has also converted its 19 percent shares into public shares.
Nepal Bangladesh Bank and Nepal Credit and Commerce Bank had been allowed to divest their promoter shares to force the NB Group to renounce its stake in these banks. However, DCBL has not been able to obtain recognition of conversion from SEBON because the Security Registration and Issue Regulation 2009 states that promoter shares can be converted into public shares through the process of offer documents and issue manager.
Siddhartha Bank had also planned to sell its promoter shares but could not do so due to SEBON regulations. After the central bank relaxed its rule regarding reduction of the number of promoter shares, many banks and financial institutions have been trying to decrease their promoter shares.
Promoters have a 58 percent stake in the Bank of Kathmandu with the public owning the rest of the stock. There are many development banks and finance companies in which promoters have a stake of less than 70 percent. For example, promoters own 60 percent of the shares in Sewa Development Bank and the public owns the rest.
Bankers have been maintaining that there shouldn’t be any minimum limit on promoter shares. In the West, promoters are not expected to hold a majority stake in the banking system. However, Nepal’s central bank has made a provision of giving more space to the promoters than the public to make them more responsible for the betterment of the bank.
(source:ekantipur)
Most banks have a share structure in the ratio of 70:30. Bank promoters have also been seeking to reduce their stake by converting their shares into public shares. Nepal Rastra Bank has allowed them to reduce promoter shares to 51 percent, but the Securities Board of Nepal (SEBON) has fixed certain criteria including the requirement to go public through an offer document.
“We decided to go for a 60:40 ratio as it does not make a significant difference in representation on the bank’s board,” said Kishore Maharjan, chief executive officer of the upcoming Civil Bank. “It also makes it easier to collect enough capital.”
A commercial bank should have a paid-up capital of Rs. 2 billion as per the existing rules. A ratio of 60:40 means promoters can open banks with Rs. 1.20 billion while the public is offered 40 percent of the shares through an initial public offering.
Another upcoming bank Century Bank is also planning to keep the ratio at 60:40 as it has been finding it difficult to raise enough capital. The bank had initially planned to keep the ratio at 70:30 for the promoters and the public.
“Some promoters have not put in the money promised as they have not been able to recover their investment in real estate after prices stagnated,” said a senior Century official. It has also been struggling to recover its deposit of Rs. 40 million from Nepal Sri Lanka Merchant Bank which has announced a merger with Nepal Bangladesh Bank.
After Nepal Rastra Bank granted permission to sell promoter shares in 2008, some banks have already converted their promoter shares into public shares. The promoters of Nepal Bangladesh Bank and Nepal Credit and Commerce Bank sold their promoter shares on the secondary market. DCBL Bank has also converted its 19 percent shares into public shares.
Nepal Bangladesh Bank and Nepal Credit and Commerce Bank had been allowed to divest their promoter shares to force the NB Group to renounce its stake in these banks. However, DCBL has not been able to obtain recognition of conversion from SEBON because the Security Registration and Issue Regulation 2009 states that promoter shares can be converted into public shares through the process of offer documents and issue manager.
Siddhartha Bank had also planned to sell its promoter shares but could not do so due to SEBON regulations. After the central bank relaxed its rule regarding reduction of the number of promoter shares, many banks and financial institutions have been trying to decrease their promoter shares.
Promoters have a 58 percent stake in the Bank of Kathmandu with the public owning the rest of the stock. There are many development banks and finance companies in which promoters have a stake of less than 70 percent. For example, promoters own 60 percent of the shares in Sewa Development Bank and the public owns the rest.
Bankers have been maintaining that there shouldn’t be any minimum limit on promoter shares. In the West, promoters are not expected to hold a majority stake in the banking system. However, Nepal’s central bank has made a provision of giving more space to the promoters than the public to make them more responsible for the betterment of the bank.
(source:ekantipur)
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