Central Bank rolls out stimulus package
for finance companies
The Central Bank of Sri Lanka (CBSL) is currently implementing
the stimulus package for the banking, financing and
leasing industry which was approved by the Cabinet of
Ministers on February 25, 2009. In this regard, the
following steps have already been taken within the past
week in the implementation of the eight point stimulus
package.
(1) Lankaputhra Development Bank Ltd has been appointed
as one of the implementing banks by the CBSL and it
has already prepared the operating guidelines for the
sale of land stocks belonging to registered finance
companies (RFCs) and specialsed leasing companies (SLCs).
Accordingly, RFCs & SLCs that wish to avail themselves
of the facilities as per the Stimulus Package would
be able to access this window shortly.
(2)The CBSL has advised RFCs that they would be permitted
to reduce the liquidity requirements from 15% to 10%
of outstanding term deposits and 20% to 15% of outstanding
savings deposits.
(3)The CBSL has prescribed the conditions that would
be applicable to RFCs and SLCs which obtain any facilities
or concessions under the new scheme in respect of :
(a)transfer of funds to related companies;
(b)curtailment of remuneration and other incentive payments
to directors and key personnel; and
(c)the new reporting formats and frequency.
(4)The CBSL is currently finalising the operating instructions
in order to give effect to the Cabinet decision pertaining
to repossessed vehicles and equipment in a manner that
ensures that such vehicles and equipment are put to
productive use, preferably by the original owners. These
instructions are due to be finalised soon and announced
by March 14, 2009.
(5)An Expert Group has been appointed as per the Cabinet
decision, and such group will initially consist of the
following persons:
(a)Mr Nishan Fernando, Chartered Accountant, President,
Institute of Chartered Accountants of Sri Lanka.
(b)Mr Arittha Wikramanayake, Attorney-at-Law, Precedent
Partner, Nithya Partners and former Director General
of the Securities & Exchange Commission.
(c)Mr H M Hennayake Bandara, Chartered Accountant, President
of the Association of Accounting Technicians of Sri
Lanka and Additional General Manager, National Savings
Bank.
(d)Mr Ajith Devasurendra, Former President, Primary
Dealers’ Association and Deputy Chairman, Browns
Group of Companies.
This Expert Group will advise and assist in the implementation
of the eight point stimulus package.
Crisis-hit Ceylinco Group finance companies
(6)The CBSL has also taken the following special measures
of intervention in relation to four RFCs of the Ceylinco
Group:
(a)The Finance and Guarantee Company Ltd –
The Merchant Bank of Sri Lanka PLC has been permitted
to enter into a management agreement with The Finance
and Guarantee Company Ltd., so that the activities of
The Finance and Guarantee Company Ltd would be managed
and monitored by the Merchant Bank of Sri Lanka PLC.
(b)Ceylinco Investment and Realty Ltd –
Negotiations are presently underway in relation to the
engagement of a suitable managing agent. The CBSL is
closely monitoring the progress of such negotiations.
(c)Asian Finance Ltd –
Negotiations are presently underway in relation to the
engagement of a suitable managing agent. The CBSL is
closely monitoring the progress of such negotiations.
(d)The Finance Company PLC –
The CBSL has identified certain key executives who would
be entrusted with the overall management responsibilities
of this company and these appointments are due to be
made within the next two days. Meanwhile, assessments
are made in relation to the current situation so that
the necessary interventions can be made by the selected
management team expeditiously, under the guidance and
advice of the Expert Group.
Further, in the case of the above companies, the Expert
Group would be advising the respective management teams
of the steps to be taken, while also assisting in the
facilitation of the necessary financing support from
the implementing bank.
(7) The above measures and the quick implementation
of the new measures are expected to stabilise the above
mentioned companies of the Ceylinco Group in the near
term, and as a result, the business operations of such
institutions are expected to be restored to normalcy.
Accordingly, those engaged in business with the above
mentioned institutions are advised to exercise a certain
degree of patience, and co-operate closely with these
institutions, so that the new measures that are being
implemented would serve to stabilise these institutions.
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