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| Sunday, 11 July 2004 |
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| News Business Features Editorial
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CBSL on restructuring of Pramuka
According to the press notice issued by the Central Bank "obtaining the consent of depositors and creditors to rescheduling of repayment of the obligations of the PSDB is of paramount importance to the completion of the proposal. Therefore the Central Bank requested the consortium to submit such evidence to the CB by June 15, 2004." In referring to the scenario of new faces, starting from the Governor, Deputy Governor, (Bank Supervision) and also new Finance Minister & Secretary to the Treasury, Chairman Pramuka Bank restructuring Committee (PBRC) K.C. Vignarajah has requested the Governor to consider the feasibility of two options of granting an interview to a delegation from the Pramuka Bank Depositors and Stakeholders Association or an extension of one or two months to finalise the Restructuring of the Bank. Meanwhile K.C. Vignarajah and Palitha Gamage the President, Pramuka Depositors & Stakeholders Association (PD & SA) have addressed letters to Asia Capital confirming some Compromise Solutions worked out, in view of Depositors' requests to improve the package, with the senior management of Asia Capital, and await Board approval. They have provided many safety clauses to ensure the strength & wellbeing of the bank, inclusive of obtaining CBSL approval. They have extended maximum cooperation to enhance the enthusiasm among the depositors & the public to support reopening of the Bank by Asia Capital led consortium, in a manner beneficial to all. The Chairman PBRC said "There is a need to draw a distinction between the depositors of Pramuka Bank who have already lost money, and are called upon to make further sacrifices until finally settled, and other well placed depositors in other healthy Banks. The fact that the present Depositors are absolutely the major risk- takers and Stakeholders must be given due consideration. While accepting total Management Control by the consortium of New Investors, the depositors need to retain a balance for monitoring, especially after their very bitter experiences. It was also the Depositors' action to take the matter before the Appeal Court which ruled in their favour to reopen Pramuka. The Supreme Court dismissing the appeal by CBSL, directed them to consult, K.C. Vignarajah the depositors' representative in the restructuring process of the Bank. (The depositors contribution of Rs. 3,000 million, which even after write off of their losses caused by earlier Directors, is approx Rs. 2,000 million, compared to Rs. 500 million by the consortium. ) A clear picture of the direct and indirect benefits to the Consortium members and their related parties have to be obtained. Then steps must be taken to monitor and agree on areas of conflicts of interest, which may arise, from time to time. Management Fees/Salaries of Executives shared with or seconded by related companies, margins to be shared between the Bank and Consortium members and related parties, commissions to be paid/earned, rentals for areas/refurbishing costs, of premises shared with R.P. Group/Consortium members, Royalty Franchise fees if any, and any other expenses related to consortium etc,. Nominees by Depositors to Committees for Audit, Good Governance etc, until at least the depositors are paid off finally, would be a healthy feature and a good sign of Corporate Social Responsibility. Whilst depositors may have been less than vigilant, is it correct to blame them for investing with approved Pramuka Bank advertised by CBSL as approved and supervised, just one month prior to closure ?. We seek to give them Hope and Happiness, that a caring civil society/private sector community have come forward to help them, supported by CBSL, obtain maximum returns. We are hopeful that we could achieve this objective". According to informed sources Paul Ratnayake, lawyer of the failed Pramuka Bank and its chairman Rohan Perera, happens to be a director of Asia Capital. His firm is the lawyer of Asia Capital as well. It is reported that they have also been involved in preparing the due diligence report of PSDB. If true, is it not a violation of rules ? Are there vested interests ? these questions are worrying impartial observers. ************** Depositors requests and compromise solutions Depositors Requests(DR1) Interest rate to be increased, indexed or linked to T.B rate, or inflation etc. Compromise Solution (CS1) It was agreed to favourably consider interest rates increase after commencement of the bank, subject to cash flow and viability. DR2 a) Pay monies due to the depositors who died after closing the bank. b) Pay enhanced instalments to those persons who have passed 55yrs age. In any case their dues to be paid by the time they reach 60yrs. CS2 a) Will be taken care of immediately, subject to any legal procedures. b) a persistent demand for income support in twilight years is noted, and basically the answer is "Yes". Will workout a very satisfactory solution after cash flow study, statistical data of Age groups, and CBSL approval. DR3 Aggregation of Deposits to be done for each category separately. CS3 It was agreed to aggregate term Deposits separately from other groups. DR4 Four year repayment period to be reduced to 2 years. DR5 Eight year repayment period to be reduced, to 4yrs for deposits Rs. (1?3) 1-3 million and to 6 years for deposits of Rs. (3?6) 3-6 million. CS4&5 Since these changes would affect cash flow/viability & also, subject to CBSL reviewing the proposal, an option will be granted to depositors to convert to equity of a percentage to be determined, as per the earlier proposals to CBSL by PBRC. Listing in the Stock Exchange would help the Depositors to gain liquidity as well as give them the required choice. DR6 a) Arrangement for day to-day cash transactions for Savings Accounts holders. CS6 a) Permit of 10% or Rs. 5,000, whichever is lower, as drawings per month. DR6 b) Require payment to the Depositors upto Rs. 100,000 within 6 months, instead of 1 year. CS6 b) Pay 1st Rs. 50,000 at end of 6 months ; 2nd Rs. 50,000 at end of 1st year. (2nd Rs. 50,000 at end of 1st year.) DR7 Repay full amount, or actuals in the event of emergencies such as Deaths, Sickness & Surgical Operations, Weddings of Depositors Children, Educational purposes, Debts incurred, etc CS7 The Bank will arrange Group Insurance Policy to cater to above. DR8 Sufficient representation of Depositors Association on the Board of Directors, reflecting an independent, open & transparent manner of business. (; also on the basis that it was their action to take the matter before the Appeal Court ; the Supreme Court dismissing the appeal by CBSL, directed the CBSL to consult Mr. K.C. Vignarajah the depositors' representative in the restructuring process of the Bank. This did not happen.) Taking the overall picture, the Banking Act also stipulates maximum shareholding of connected parties, to ensure diversity. It is also a universal practice. It is therefore suggested that at least two representatives nominated by Depositors Association be appointed to the Board of Directors. In the Depositors Association's earlier proposals for Restructuring the bank, even though the majority of Directors were from Depositors, nominees of the Attorney General, The Monetary Board, and Secretary to the Treasury were requested to further assure openness and balance, (vis?...?vis) vis-...-vis new Investors and the public. CS8 Awaiting final solution CS9 Some of the concessions sought by hard pressed depositors, (taking maximum individual positions,) could to a certain extent, be mitigated by reasonable compromise above. The remaining discontent could(,) be erased, in large part, by providing a credit facility against the deposits subject to a maximum of, say Rs. 150,000. There would be a interest charge of +2% as per normal banking practice. This is again subject to CBSL approval, of overall balances falling within Required ratios. |
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News | Business | Features
| Editorial | Security Produced by Lake House |
The Central Bank will consider the proposal of the Asia Capital led
consortium on the restructuring of the Pramuka Savings and Development
Bank(PSDB) once the final extension (one month from June 15) expires on
July 15.
