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Sri Lanka regulator halts deposit taking, lending by The Finance Co

Feb 15, 2019 12:48 PM GMT+0530 | 0 Comment(s)

ECONOMYNEXT - Sri Lanka's Central Bank said The Finance Company (TFC), a troubled non-banker lender which got into difficulties in 2008, will be barred from taking new deposit or giving loans from February 15, as the firm reported more losses.

Borrowers were asked to continue repaying loans.

"Proposed regulatory measures include suspension of accepting new deposits, restrictions on withdrawal of deposits and restricting disbursement of loans and advances to facilitate the restructuring process of TFC," the regulator said.

"Since then, the financial status of the company deteriorated gradually and currently with severe liquidity issues, which need to be addressed, immediately.

"Although several efforts were made to identify prospective investors and to restructure the company, such efforts have not materialised yet. Thus, the continuity of current status will be further detrimental to the interest of depositors and other stakeholders of the company."

The Central Bank said the search for an investor was still continuing.

"At the same time, all borrowers of the company are strictly advised to pay their dues," the regulator said.

"It is further expected that these measures will greatly assist potential investors of TFC and to ensure the safety and soundness of the financial system."

In the December 2018 quarter, The Finance lost 939 million rupees, up from 598 million rupee a year earlier.

Interest income fell 35 percent to 565 million rupees and interest expense also fell 20 percent 897 million rupees. Net interest loss was 332 million rupees, up 33 percent.
 
The firm had accumulated losses of 24 billion rupees, and a gap in the balance sheet of 17 billion rupees, which grew from 14.4 billion rupees over the year.

The full statement is reproduced below:
 
 Department of Supervision of Non-Bank Financial Institutions
15th February 2019

Regulatory actions taken by the Central Bank of Sri Lanka on The Finance Co PLC

The Finance Company PLC (TFC), a Finance Company licensed under the Finance Business Act No. 42 of 2011 (FBA) was severely impacted by the failure of a number of financial institutions within the group in 2008.

Since then the financial status of the company deteriorated gradually and currently with severe liquidity issues, which need to be addressed, immediately.

Although, several efforts were made to identify prospective investors and to restructure the company, such efforts have not materialized yet. Thus the continuity of current status will be further detrimental to the interest of depositors and other stakeholders of the company.

The Monetary Board of the Central Bank of Sri Lanka (CBSL) at its meeting held on 08th February 2019, having considered the weak financial performances of TFC, decided to take a number of regulatory actions, as temporary measures, under the provisions of FBA, with effect from 15th February 2019, with a view to safeguard the interests of the depositors and other stakeholders of the company.

Proposed regulatory measures include suspension of accepting new deposits, restrictions on withdrawal of deposits and restricting disbursement of loans and advances to facilitate the restructuring process of TFC.

In order to facilitate the restructuring process, a panel of experts in banking and finance has been appointed by the CBSL. The company shall continue to negotiate and finalize the proposals of prospective investors and the CBSL will facilitate TFC to proceed with suitable investors as per the applicable laws and regulations. At the same time, all borrowers of the company are strictly advised to pay their dues. It is further expected that these measures will greatly assist potential investors of TFC and to ensure the safety and soundness of the financial system.

The depositors of TFC are further informed that the CBSL is taking additional measures and closely monitoring the operations of the company to protect the rights of the depositors. Interest due for deposits will continually be paid to the depositors as per the CBSL directions.

With the restructuring process, it is expected to improve the cash flows and facilitate the prospective investors and revival of the company. Attention is also drawn to the fact that the deposit insurance and liquidity support scheme will also safeguard the interest of all depositors, to a maximum of Rs.600,000/- per depositor, which will cover 93 percent of the depositors in full. Therefore, the depositors are kindly requested to cooperate with the CBSL, in this regard.
 
The depositors may contact the Department of Supervision on Non-Bank Financial Institutions of the Central Bank of Sri Lanka through 0112 477 573, 0112 477 229, 0112 477 504 or snbfi_query@cbsl.lk for further clarifications.

(Colombo/Feb15/2019 - SB)
 


 

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