Sunday Observer Online
 

Home

Sunday, 22 September 2013

Untitled-1

observer
 ONLINE


OTHER PUBLICATIONS


OTHER LINKS

Marriage Proposals
Classified
Government Gazette

Liquidity scheme for LFCs

The Central Bank (CB) has introduced a liquidity support scheme for licensed finance companies facing constraints

The CB said that the CIFL crisis was not a problem in the financial sector or a weakness in supervision. Director, supervision of non bank financial institutions, H.M. Ekanayake said that CIFL has faced management issues and liquidity problems due to the mishandling of funds by its management.

He stressed that this is an institutional problem and not a weakness in the system nor lack of supervision of non-bank financial institutions.

His responses on the issue:

Q. What are the reasons for liquidity and management issues at CIFL?

A. The Board of Directors and the senior management of CIFL have not performed their duties to safeguard the assets of the company.

Q. Why did CBSL fail to identify this in advance?

A. CIFL had submitted false and incorrect financial information to the Central Bank of Sri Lanka (CBSL) concealing the true position of the company.

However, on several occasions the CBSL pointed out the deficiencies and advised the Board of Directors to rectify the errors. The former Chief Executive Officer of the company was also removed, due to malpractices in the company.

Q. Will this kind of crisis lead to a crisis in the financial sector of the country?

A. No. This is an institutional issue of an individual company and this will not lead to a financial crisis.

Q. What mechanism does the CBSL use to ensure the safety of the depositors' money in this type of financial institution?

A. The CBSL has introduced a deposit insurance scheme for Licensed Banks and Licensed Finance Companies. Under this scheme deposits are insured and compensation on insured deposits will be paid when the licence of member-institutions is suspended or cancelled by the Monetary Board.

However, the payment is currently subject to a maximum of Rs. 200,000 per depositor. As per the provisions of the Finance Business Act, business restructuring plans are implemented for finance companies which face financial constraints to resolve issues faced by such companies.

The CBSL has introduced a liquidity support scheme for licensed finance companies that face financial constraints, to revive and restructure their operations.

Q. How do depositors select a safe financial company to invest their money?

A. Licensed Finance Companies are required to publish their financial statements on a periodical basis and to display financial statements at the head office and branches enabling depositors to access financial information of the company.

Licensed Finance Companies are required to publish the credit ratings given by credit rating agencies and rate of interest offered on deposits in the advertisements which solicit deposits.

No finance company can pay a rate of interest higher than the maximum interest rate declared by the Central Bank. Therefore, the public are advised to check whether the rate of interest offered by the finance company is within the limits imposed by the Central Bank and to take their deposit decisions accordingly.

Q. Do you think the measures taken by CBSL will restore the confidence of depositors?

A. Yes. The action already taken and to be taken will gradually restore the confidence of depositors of the company which is facing liquidity constraints.

EMAIL |   PRINTABLE VIEW | FEEDBACK

PR Wire
LANKAPUVATH - National News Agency of Sri Lanka
Telecommunications Regulatory Commission of Sri Lanka (TRCSL)
www.army.lk
www.news.lk
www.defence.lk
Donate Now | defence.lk
www.apiwenuwenapi.co.uk
 

| News | Editorial | Finance | Features | Political | Security | Sports | Spectrum | Montage | Impact | World | Obituaries | Junior | Youth |

 
 

Produced by Lake House Copyright © 2013 The Associated Newspapers of Ceylon Ltd.

Comments and suggestions to : Web Editor