‘No adverse results from CBSL’s Rs.
16.5bn repayment plan’
By Hiran H.Senewiratne-October 19, 2016, 6:58 pm
The Central Bank has announced plans to repay Rs. 16.5 billion owed to nearly 12,000 depositors of four insolvent financial institutions, before liquidating them. This will not have an instant impact on the national economy, Assistant Governor of the Central Bank of Sri Lanka Asoka Handagama said
"This money will be distributed over eight years, Handagama told The Island Financial Review in an exclusive interview yesterday.
He said that this repayment package will help to keep banking sector stability, "if not the repercussions will be severe for the entire banking sector."
According to the Central Bank, three of the four finance companies are, The Standard Credit Finance Ltd., City Finance Corporation Ltd. and Central Investments and Finance Plc. All three companies got into a chronic financial position in 2008 and 2009 due to fraud and mismanagement of funds and therefore did not have assets to pay off depositors.
The fourth, Entrust Securities Plc, a company with a primary dealer license to trade in government securities reportedly got into a chronic liquidity and insolvency crisis during the latter part of 2015, as a result of the fraudulent use of funds placed by customers for investment in government securities.The Central Bank on January 4, 2016 suspended Entrust’s Board of Directors and vested its operations in the National Savings Bank to protect investors."The Monetary Board reviewed the lack of progress so far and took cognisance of the fact that there was no further room to revive these companies to enable them to repay depositors and investors in the foreseeable future. Given the long delay involved so far, the Monetary Board approved the company resolution plans submitted by the Department of Supervision of Non-banking Financial Institutions to repay deposits and investments annually commencing from 2017 over a reasonable period of time with a fair interest rate during this repayment period, the Central Bank said in a statement.
In the case of the three finance companies, repayment will cover Rs. 4,868 million of nearly 11,878 depositors. In the case of the Entrust, investments secured with government securities amounting to Rs. 3,100 million belonging to 107 investors will be settled in the coming weeks. In respect of unsecured investments in Entrust amounting to Rs. 8,508 million belonging to 24 individuals and entities, government securities will be allocated and be repaid under the repayment plan to be implemented with the managing support of Seylan Bank Plc, the Central Bank said.
