ECONOMYNEXT – Sri Lanka’s Central Bank has called out reports that The Finance Company was in talks with three investors keen to acquire its banking license by injecting funds to revive the firm, as ‘not true and correct’.
The Finance Co. (TFC) earlier this week said in a stock exchange filing that it had asked the Central Bank for more time to negotiate with investors after the regulator issued the cancellation notice.
“Since publication of the ‘Notice of Cancellation’, TFC was approached by three interested parties to consider an investment on the basis the banking license could be obtained with sufficient investment,” the troubled sub-prime lender said in a statement earlier this week that was published in the media
However, the Central Bank on Wednesday questioned the credibility of the statement and denied any knowledge of the three investment proposals.
“Even though aforementioned news articles mentioned that TFC informed the Colombo Stock Exchange that it has been approached by three interested parties to consider investing in the company, no such proposals have been submitted to the CBSL, so far,” the Department of Supervision of Non-Bank Financial Institutions said.
“Therefore, CBSL wishes to clarify that the information published in the articles in newspapers and news websites regarding any potential investments is not true and correct.”
The central bank last month said it had decided to cancel the license of The Finance Co from 23rd October 2019, after failing to find an investor to revive the troubled finance company, with the aim of safeguarding the interests of depositors and other creditors.
“TFC is continuing to facilitate potential investors locally and overseas. Some discussions with potential investors are continuing,” TFC said in its statement to the stock exchange.
TFC had 27.7 billion rupees in deposits at the end of June 2019. Its loan book was 3.7 billion rupees. The firm had 10.8 billion rupees in assets to its liabilities of 30.9 billion rupees.
A crisis in the Ceylinco Group in 2008 hit TFC with a severe liquidity shortage.
Several attempts in the past to attract a potential investor to restructure the company did not materialize to a satisfactory level.
The Central Bank’s statement is as follows:
Regulatory actions taken by the Central Bank of Sri Lanka on The Finance Company PLC
The attention of the Central Bank of Sri Lanka (CBSL) has been drawn to certain information published in newspapers and news websites on 26th November 2019 regarding the regulatory actions taken by the CBSL on The Finance Company PLC (TFC) and it wishes to clarify the following.
The CBSL issued a notice of cancellation of the license granted to TFC to carry on finance business under the Finance Business Act No. 42 of 2011 (FBA) on 23rd October 2019. The CBSL also informed that in terms of the provisions of the FBA, the company has the right to submit an acceptable proposal for investment in TFC along with proof of funds for capital infusion and a Business Restructuring Plan for the consideration of the CBSL within 30 days from the date of issuance of such notice.
Even though aforementioned news articles mentioned that TFC informed the Colombo Stock Exchange (CSE) that it has been approached by three interested parties to consider investing in the company, no such proposals have been submitted to the CBSL, so far.
Therefore, CBSL wishes to clarify that the information published in the articles in newspapers and news websites regarding any potential investments is not true and correct.
In view of the above, the CBSL wishes to inform that in terms of the FBA, the Monetary Board shall take a decision on the notice of cancellation issued to TFC after the expiration of 60 days from the date of notice of cancellation.
(COLOMBO, 27 November 2019)