Sri Lanka bank consolidation likely to force specialisation

EconomyNext – Sri Lanka’s banks will be forced to specialise and focus more on their niche market segments with a regulator-prompted consolidation exercise that’s underway, a senior global strategy consultancy official said.

"Specialisation will come in," declared Ruwindhu Peiris, Managing Director of Stax, a global strategy consulting firm headquartered in Boston, USA. "That’s what we’ve been advising."

Stax has been advising clients in the banking sector to seek and focus on market niches where they can excel in, he told a news conference held to mark the firm’s 10th year of operations in Sri Lanka.

"We tell banks ‘know your clients, know what your strong in’, which sectors you can excel in," Peiris said in response to a question on how the consultancy sees the consolidation exercise.

"Each bank needs to figure out their segment which is not there now," he noted, adding that all banks were trying to be everything to everyone.

Sri Lanka’s Central Bank last year began a consolidation effort, asking financial sector firms to merge with each other to weed out smaller, weak companies and create a fewer number of bigger, more financially stable entities.

Peiris gave as an example the island’s fast-growing and profitable information technology sector whose firms found it difficult to borrow as they lacked hard assets and collateral that Sri Lankan banks insist on for giving loans.

""The IT sector is growing at a phenomenal rate but none can borrow from banks because banks have not acquired the IT knowledge to be able to put a valuation on firms in this sector."

 

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