An Echelon Media Company
Friday August 12th, 2022

Sri Lanka state private banks on watch for downgrade: Fitch

ECONOMYNEXT – Fitch Ratings has placed has placed 13 state and private banks in Sri Lanka under watch for possible downgrade (rating watch negative) due to forex shortages in the banking system.

The rating watch negative “reflects heightened near-term downside risk stemming from constrained access to foreign-currency funding and the resulting indications of stress experienced by the banks in the system,” Fitch said.

“This risk is exacerbated by the sovereign’s credit profile (Long-Term Foreign-Currency Issuer Default Rating (IDR): CC, Long-Term Local-Currency IDR: CCC) and the ensuing risks to the stability of the financial system.”

The full statement is reproduced below:

Fitch Places 13 Sri Lankan Banks on Rating Watch Negative

Fitch Ratings – Colombo – 12 Apr 2022: Fitch Ratings has placed the National Long-Term Ratings of 13 Sri Lankan banks on Rating Watch Negative (RWN). The banks are:

-People’s Bank (Sri Lanka) (PB)

-Commercial Bank of Ceylon PLC

-Hatton National Bank PLC

-Sampath Bank PLC

-National Development Bank PLC


-Seylan Bank PLC

-Nations Trust Bank PLC

-Pan Asia Banking Corporation PLC

-Union Bank of Colombo PLC

-Amana Bank PLC

-SANASA Development Bank PLC

-Housing Development Finance Corporation Bank of Sri Lanka (HDFC)

A full list of rating actions is at the end of this rating action commentary. Fitch will review the National Ratings of Sri Lankan financial institutions that are not mentioned in this commentary separately. Fitch has also taken rating action on Bank of Ceylon; please see Fitch Places Bank of Ceylon on Rating Watch Negative.


The RWN reflects heightened near-term downside risk stemming from constrained access to foreign-currency funding and the resulting indications of stress experienced by the banks in the system. This risk is exacerbated by the sovereign’s credit profile (Long-Term Foreign-Currency Issuer Default Rating (IDR): CC, Long-Term Local-Currency IDR: CCC) and the ensuing risks to the stability of the financial system.

We believe mounting currency stress increases the likelihood of restrictions being imposed on banks’ ability to service their obligations in foreign currency – excluding
HDFC, as the bank does not have any outstanding foreign-currency obligations – and local currency in the event of a sovereign default, or prior, should confidence deteriorate.

We aim to resolve the RWN in the next six months, depending on the evolution of the banks’ funding and liquidity positions, which could result in multiple notch downgrades.

We believe the domestic banks’ foreign-currency funding and liquidity positions are prone to sudden changes amid already weak creditor sentiment. Loan and deposit dollarisation for the sector was at 18% of total loans and 17% of total deposits as at end-2021.

Sri Lanka’s operating environment remains challenging and our negative outlook on the score reflects the significant near- to medium-term downside risk presented by the weakening sovereign credit profile, as spillover effects could damage the country’s economic performance.

This has lead us to revise our 2022 outlook on the banking sector to ‘Deteriorating’, from ‘Neutral’.

Macroeconomic challenges are likely to be greater than we initially anticipated which could result in a sharp deterioration in asset quality and impaired profitability metrics that expose the banks to capital deficiencies.

The RWN on the ratings of the banks’ senior unsecured debentures, where assigned, stem from the RWN on the corresponding banks’ National Long-Term Ratings. Sri Lanka rupee-denoted senior debt, where applicable, is rated at the same level as the National Long-Term Rating in accordance with Fitch criteria. This is because the issues rank equally with the claims of the banks’ other senior unsecured creditors.


The RWN on the ratings of subordinated debt, where assigned, also stems from the RWN on the corresponding National Long-Term Ratings. Sri Lanka rupee-denominated subordinated debt, where applicable, is rated two notches below banks’ National Long-Term Ratings. This is in line with our baseline notching for loss severity for this type of debt and our expectations of poor recovery.


Factors that could, individually or collectively, lead to negative rating action/downgrade:

The RWN reflects rising risks to the banks’ ratings from funding stresses, which could lead to multiple notch downgrades. We expect to resolve the RWN in the next six months once the impact on the banks’ credit profiles becomes more apparent. Potential triggers that could lead to a multiple notch downgrade include:

– funding stress that impedes banks’ repayment ability

– significant banking-sector intervention by authorities that constrain banks’ ability to service their obligations

– a temporary negotiated waiver or standstill agreement following a payment default on a large financial obligation

– where Fitch believes a bank has entered into a grace or cure period following non-payment of a large financial obligation.

A downgrade of the sovereign rating stemming from a default event could also lead to a downgrade of the banks’ ratings.

Senior and subordinated debt ratings will move in tandem with the National Long-Term Rating

Factors that could, individually or collectively, lead to positive rating action/upgrade:

There is limited scope for upward rating action given the RWN.

PB has a 1.78% equity stake in Fitch Ratings Lanka Ltd. No shareholder other than Fitch, Inc. is involved in the day-to-day rating operations of, or credit reviews undertaken by, Fitch Ratings Lanka Ltd.


The principal sources of information used in the analysis are described in the Applicable Criteria.

Leave a Comment

Your email address will not be published.

Leave a Comment

Leave a Comment

Your email address will not be published.

Sri Lanka cancels visa of Scotswoman who documented anti-govt protests

ECONOMYNEXT – Sri Lanka’s Department of Immigration and Emigration has cancelled the visa of Kayleigh Fraser, a Scotswoman who had been documenting the country’s anti-government protests on social media.

Immigration officers had approached Fraser at her home on August 02 and confiscated her passport.

“This is what will happen if you raise your voice against state violence in Sri Lanka,” Fraser wrote on Wednesday August 10, posting a letter ordering her to leave the country by August 15.

“I am proud to have been a part of this. I am proud to have met so many of you. I have… so many social enterprises I want to work on here that I know will benefit so many,” Fraser said on Instagram.

“Deporting me is a massive, massive mistake for this country. The love I have for it and its people appears to be a threat to the current rulers. Does that sound right to you?”

Fraser posted that she was not prepared for the financial cost of flights and relocation, and that all her funds were in Sri Lankan currency, and that banks were not allowing foreign transactions.

Police spokesperson Nihal Thalduwa had told a privately owned news organisation that Fraser was sharing “negative content” about Sri Lanka via her social media.

“It is not right for a foreign national to be in our country and share such mass negative content. She is not a media personnel either, to cover the protests and GotaGoGama,” he has said.

Fraser has been vocal about state sanctioned violence against protestors.

News of Fraser’s deportation has caused a small riot on social media, with many protestors voicing out their support for the foreigner who documented and showed support next to them.

Seemingly indiscriminate arrests of protestors aided by an ongoing State of Emergency have both angered and frightened Sri Lankan protestors, and many active protestors have gone into hiding to evade arrest.

Some protestors said they were “taking a break” or “distancing themselves” due to continued harassment.

However, the authorities maintain that all arrests are in accordance with the law. The government has pointed to acts of retaliatory mob violence on May 09 and the forced occupation of government buildings by protestors on July 09.

“They are calling us terrorists for holding placards. This was such a peaceful protest, the only terrorism carried out was by the government against the people,” said an active protestor, who preferred not to be named.

Fraser wrote that Sri Lankans should not forget that they got to the streets for a system change.

“Live in such a way that your children will thank you for the world they inherit,” she said.

“It’s not over till it’s over. I have an unbelievable amount of high profile people fighting this order for me to leave.”(Colombo/Aug11/2022)



Continue Reading

Sri Lanka to acquire 35,000MT of petrol; unloading on Aug 12

ECONOMYNEXT-  Sri Lanka to receive a cargo of 35,000 metric tonns of petrol on Thursday August 11 with unloading scheduled for Friday, Minister of Power & Energy Kanchana Wijesekara said.

Wijesekara tweeted that the ship will arrive at the Colombo port Thursday night, and that the payment for the cargo had been completed with the support of the Central Bank by Wednesday.

The minister had said earlier on Wednesday that a separate cargo of crude oil is also expected on Saturday August 13, and from August 19 onwards, locally produced fuel is expected to be released to the market from the Sapugaskanda refinery.

Meanwhile, in an earlier report, Lanka IOC, a local unit of the Indian Oil Corporation (OIC), said a vessel carrying 30,000 metric tons of fuel for LIOC is scheduled to arrive between August 10 and 15.

Related: Three shipments of fuel to arrive in Sri Lanka by mid, end July, August: Lanka IOC

Meanwhile, Wijesekara said that 5.7 million people have signed up for the QR-code facilitated National Fuel Pass.

From July 21 up to now, Wijesekara said, a total of 54.9 million litres of fuel had been sold through 1,053 CPC fuel stations while 207 LIOC stations have sold 11.26 million litres of fuel. (Colombo/Aug11/2022)

Continue Reading

MPs nominated to Sri Lanka’s parliamentary committee on public finance

The sun sets over the Parliament at Shri Jayewardenepura

ECONOMYNEXT – Sri Lanka’s parliament has appointed members to its Committee on Public Finance, Speaker Mahinda Yapa Abeywardena said.

According to his announcement made in parliament on Wednesday August 10, in terms of the provisions of the Standing Order 121 of Parliament, MPs Bandula Gunawardana,  Vidura Wickramanayaka,  Nalin Fernando,  Anura Priyadharshana Yapa,  Vijitha Herath,  Duminda Dissanayake,  Shehan Semasinghe,  Premitha Bandara Tennakoon and Harsha de Silva have been appointed.

Indika Anuruddha Herath,  Siripala Gamalath, Seetha Arambepola, Suren Raghavan,  M A Sumanthiran,   Kavinda Heshan Jayawardhana,  Mujibur Rahuman,  Harshana Rajakaruna,  Chaminda Wijesiri,  Isuru Dodangoda,  Anupa Pasqual and  (Prof) Ranjith Bandara also have been appointed to serve as members in the Committee on Public Finance.

President Ranil Wickremesinghe tabled a proposed framework during his time as Prime Minister under President Gotabaya Rajapaksa for sectoral oversight committees in parliament with the objective of increased bipartisan parliamentary involvement in governance and policy-making.

Wickremesinghe told parliament on July 06 that under such a system, the entire parliament irrespective of party difference will participate in governance.

On July 06, he said he had approached former Speaker of Parliament Karu Jayauriya to formulate a proposal on activating the sectoral oversight committees.

Sectoral Oversight Committees shall function for the duration of Parliament and conduct its inquiries notwithstanding any adjournment or prorogation of Parliament, according to the parliament website.

The Committee of Selection shall determine the subjects and functions to be allocated to each Sectoral Oversight Committee.

The Sectoral Oversight Committees shall have the power to examine any Bill, any subsidiary legislation including Regulation, Resolution, Treaty, Report or any other matter relating to subjects and functions within their jurisdiction.

The Parliament, any Committee or a Minister may refer any matter to a Sectoral Oversight Committee having jurisdiction over the subject or function for its consideration and report. (Colombo/Aug11/2022)


Continue Reading