Troubled finance company issue raised in Parliament

By Ashwin Hemmathagama

Our Lobby Correspondent

Companies regulated by the Central Bank of Sri Lanka have been resilient during the past few years and are not experiencing financial crashes, Minister of International Monetary Co-operation and Deputy Minister of Finance and Planning Dr. Sarath Amunugama clarified in Parliament recently, in response to a question for oral answers from UNP MP Ravi Karunanayake.

“However, liquidity issues arose in City Finance Corporation Ltd., which was formerly identified as Industrial Finance Ltd. The approval for the restructuring plan submitted by them was granted by the Monetary Board of the Central Bank. Accordingly, 50 per cent of the initial amount has been transformed to shares of CFCL and the balance has to be paid off annually from 2013 at the rate of 15 per cent, 25 per cent, and 60 per cent by December 2015. In addition to the above, monthly interest for the depositors are also paid,” he said.

According to Minister Amunugama, CFCL is operating without any issues at the moment and has explored its options by holding discussions with two new investors in the company.

Turning down the question of responsibility aimed at the Central Bank’s negligence over not being alive to the problems, the Minister stated that the Monetary Law Act has assigned the Central Bank two main objectives, of economic and price stability and financial system stability.

“The nature of the supervisory role expected from the Central Bank is explicitly stated in Banking Act No. 30 of 1988 and in Finance Business Act No. 42 of 2011. Under those Acts, the Central Bank carries on its role to ensure overall financial system stability by taking necessary measures to ensure the financial soundness of the individual financial institutions licensed by the Central Bank. For this purpose, the Central Bank regulates licensed banks and finance companies by conducting on-site examinations and off-site surveillance to ascertain the actual financial condition of those institutions and identifies issues/deficiencies relating to and guidelines to resolve issues/deficiencies of those institutions and carries out continuous follow-up action,” added Minister Amunugama.