After all the hype that went on for months, the country’s oldest and most lucrative bank, the Bank of Bhutan, will not be divesting its shares to the public.
Following a meeting yesterday between the central bank and Druk Holding and Investments (DHI), BoB received a letter stating that divestment of its shares, which the central bank had been pushing for months, had been called off.
The bank was not fined Nu 100,000 by the central bank for missing the prospectus submission deadline on June 1. The central bank had also announced that, after June 14, it would take appropriate action if the deadline was dishonoured.
The shares of BoB were expected to be priced between Nu 600 to Nu 1,000 considering the book value of Nu 600 a share although correct valuation of the share was not carried out by DHI.
“We’re glad divestment will no more take place,” the DHI chief executive officer, Karma Yonten, said. But he sounded a little uncertain
Officials of the central bank had no comments on the issue.
The tussle between the central bank and the bank’s major shareholder DHI started last year. However, according to previous interviews with RMA officials, the central bank asked the bank to go public as early as 2007.
The issue was also seriously debated in parliament during the previous session, when most of the national council members stood against it. After that, the financial services bill, which will replace the financial institutions act of 1992, was adopted during the present session.
RMA showed little signs of backtracking its decision on divestment, saying that the bank will have to divest, and that RMA still had the law in its hand, since the FSB was not yet fully adopted without royal assent.
The justifications of both RMA and parliament members, who stood against divestment, have been valid, according to observers, and whether divestment will or will not take place was uncertain.
RMA mentioned that 90 percent of the bank’s money belongs to the public, therefore giving legal right to the public to own shares. Governor Daw Tenzin, during an earlier interview, said money from the bank’s shareholder cannot run the bank for more than two days.
Diversification will also improve the bank’s corporate governance.
On the other hand, members of parliament said divestment will not necessarily diversify the bank’s ownership. Showing details of the erstwhile profitable government-owned companies, they said that majority of the shares were mainly held by a few groups of rich individuals.
Members of parliament also said the government has the constitutional mandate of meeting recurrent expenditure from domestic revenue. BoB contributed Nu 115M in the past two years.
Divestment would mean the government would forego a certain amount of dividends and fail to meet the constitutional mandate.
Henceforth, divestment of government-owned financial institutions will solely rest with the government. The new financial services bill, which will repeal the financial institutions act of 1992, provides the government the right to list with the securities exchange or not. The bill also reduced many of RMA’s discretionary roles.
http://www.kuenselonline.com/2010/modules.php?name=News&file=article&sid=19646
Following a meeting yesterday between the central bank and Druk Holding and Investments (DHI), BoB received a letter stating that divestment of its shares, which the central bank had been pushing for months, had been called off.
The bank was not fined Nu 100,000 by the central bank for missing the prospectus submission deadline on June 1. The central bank had also announced that, after June 14, it would take appropriate action if the deadline was dishonoured.
The shares of BoB were expected to be priced between Nu 600 to Nu 1,000 considering the book value of Nu 600 a share although correct valuation of the share was not carried out by DHI.
“We’re glad divestment will no more take place,” the DHI chief executive officer, Karma Yonten, said. But he sounded a little uncertain
Officials of the central bank had no comments on the issue.
The tussle between the central bank and the bank’s major shareholder DHI started last year. However, according to previous interviews with RMA officials, the central bank asked the bank to go public as early as 2007.
The issue was also seriously debated in parliament during the previous session, when most of the national council members stood against it. After that, the financial services bill, which will replace the financial institutions act of 1992, was adopted during the present session.
RMA showed little signs of backtracking its decision on divestment, saying that the bank will have to divest, and that RMA still had the law in its hand, since the FSB was not yet fully adopted without royal assent.
The justifications of both RMA and parliament members, who stood against divestment, have been valid, according to observers, and whether divestment will or will not take place was uncertain.
RMA mentioned that 90 percent of the bank’s money belongs to the public, therefore giving legal right to the public to own shares. Governor Daw Tenzin, during an earlier interview, said money from the bank’s shareholder cannot run the bank for more than two days.
Diversification will also improve the bank’s corporate governance.
On the other hand, members of parliament said divestment will not necessarily diversify the bank’s ownership. Showing details of the erstwhile profitable government-owned companies, they said that majority of the shares were mainly held by a few groups of rich individuals.
Members of parliament also said the government has the constitutional mandate of meeting recurrent expenditure from domestic revenue. BoB contributed Nu 115M in the past two years.
Divestment would mean the government would forego a certain amount of dividends and fail to meet the constitutional mandate.
Henceforth, divestment of government-owned financial institutions will solely rest with the government. The new financial services bill, which will repeal the financial institutions act of 1992, provides the government the right to list with the securities exchange or not. The bill also reduced many of RMA’s discretionary roles.
http://www.kuenselonline.com/2010/modules.php?name=News&file=article&sid=19646
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