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Central Bank of Sri Lanka. The bank will commence its primary dealer activities on 16 September 2013.
A primary dealer has the direct access to bid for primary auctions conducted by the Public Debt Department of Central Bank of Sri Lanka for Treasury Bills, Bonds and any other Government/Central Bank securities. Currently the five largest commercial banks in the country have their own primary dealer arms and there are seven non-banking primary dealers as well. With the addition of Pan Asia Bank to this league, now there are 13 primary dealers in Sri Lanka.
Some of the key functions of a Primary Dealer are as follows;
Bidding for primary auctions conducted by the Central Bank of Sri Lanka for Treasury Bills, Bonds and any other government/Central Bank securities.
Engaging, promoting and developing a secondary market in Treasury Bills/Bonds and any other government securities.
To invest in quoted corporate Debentures/Bonds/Commercial Paper etc.
To act as a broker in quoted Corporate Bonds/Debentures.
To engage in services to earn fee income in loan syndication services, mergers, acquisition advisory services.
Consultancy services and portfolio management etc with prior approval from the monetary board.
Government Securities are issued by the Public Debt Department of the Central Bank of Sri Lanka to fund the government’s budget requirements and are considered as extremely safe and highly liquid investments with an attractive return on investments. The key products in this regard are Treasury Bills and Treasury Bonds. Other securities such as Sri Lanka Development Bonds are also issued to the market by the Central Bank through dedicated primary dealers.
Treasury Bills are short-term (3, 6, 12-month) debt instruments issued at weekly auctions while Treasury Bonds are considered long-term (2-30 year) debt instruments.
Treasury Bills and Bonds both are tradable instrument in the secondary market and carry zero risk since the capital plus interest is guaranteed. In addition, for both types of investments there is no added cost as the10% withholding tax is collected at primary issue. Also, these investments are exempted from Debit Tax and no Stamp Duty (subject to government regulations).
Sri Lanka Development Bonds which is a US dollar denominated Sri Lankan Government bond with tenures of 3 and 5 years are issued through designated agents. Some of the key features of this instrument are as follows;
Interest paid semi-annually and computed on variable rate based on six-month LIBOR plus a fixed margin.
Minimum investment at the auction is $ 100,000. In the secondary market minimum investment is $ 10,000.
Foreign citizens and entities, non-resident Sri Lankans, Sri Lankan dual citizens, authorised dealers, primary dealers and specified companies that have entered into agreements with the Board of Investment of Sri Lanka and insurance companies registered under the Regulation of Insurance Industry Act.
Securities are redeemed at par upon maturity income tax paid in Sri Lanka will be reimbursed by the issuer.
Pan Asia Bank Treasury has been maintaining a fairly large government securities portfolio for the bank with a proven track record of generating good revenue by way of capital gains in managing these funds during the recent past. In addition, they have also been successful in attracting large foreign investments to government securities in the recent past and the bank’s new accreditation as a primary dealer is expected to further strengthen the bank’s ability promote more foreign investments to government securities in the future.
Pan Asia Bank Treasury also deals with the corporate debt market in Sri Lanka which enjoys attractive tax incentives. These tax incentives have prompted many large corporates to successfully issue quoted debentures in the recent past allowing them to raise required funds for growth of their business. Another positive sign has been the number foreign clients who have been increasingly interested in investing in listed corporate debt which bodes well for the corporate debt market in Sri Lanka.
In light of the exciting growth opportunities opening up in Sri Lankan economy, Pan Asia Bank Treasury expects to introduce new products and services relating to government securities and be a “One-stop-shop” for all customers investment needs which will enable the bank to attract new customers, new markets and new businesses going forward.
For more information, Pan Asia Bank treasury can be contacted on (011) 2565561 or by email via [email protected].
