BOC pioneers Rupee Currency Option in Sri Lanka

Thursday, 24 July 2014 00:48 - - {{hitsCtrl.values.hits}}

Sierra Cables Chairman W.A.P. Perera (left) and BOC General Manager D.M. Gunasekara exchange the agreement as BOC Chairman Retd. Air Chief Marshal Harsha Abeywickrema looks on

– Pic by Upul Abayasekara

The Bank of Ceylon (BOC) yesterday reinforced its leadership by introducing the country’s first structured product with the launch of Sri Lankan Rupee Currency Option. The custom-made, in-house developed, structured derivative solution was formulated for the bank’s long-standing client Sierra Cables Plc. With Sierra Cables wanting to hedge its foreign exchange exposure against volatile market conditions, BOC constructed a USD-LKR Currency Option, valid for six months, allowing its client to transfer exchange rate risk to the bank. The option allows having greater flexibility on the market rates, which the traditional forward exchange contract does not help exercise. BOC stated that introducing Sri Lankan Rupee Currency Option is another step in the right direction as it encourages clients to think beyond traditional foreign exchange risk hedging mechanisms. The bank’s newest product focuses on delivering better solutions for client’s requirements, enabling them to transfer their portfolio foreign exchange risk to the bank and peacefully continue to concentrate on their businesses. Although derivatives are popular in developed financial markets, in Sri Lanka its true potential is yet to be realised, noted BOC Deputy General Manager International, Treasury and Investment P.A. Lionel while addressing the media soon after the signing of the agreement. BOC pioneers... “So far we have been using plain vanilla instruments and not derivatives. This is greatly because the country is still used to the traditional conventional instruments and are not aware of the benefits new instruments offer. We are keen on developing this product and have started promoting this,” he said. Derivatives are extensively used by financial institutions, corporates, hedge funds and individuals to hedge their risk exposure to avoid adverse consequences on their asset portfolios caused by volatility of market risk factors. The bank shared that while for such products the regulations previously set by the Central Bank were restrictive, it is in the midst of issuing a new circular on this regard. “The banks and the regulator are all on one page in developing the derivative market. We have accelerated our efforts in this regard. While this year we will be concentrating on the basics, next year we will have more products,” added Lionel. Highlighting the benefits of opting for the Sri Lankan Rupee Currency Option, Sierra Constructions Financial Consultant Ruwan Cooray noted that while importers and exported have the choice of not exercising the agreement, unlike for forwards, companies presented with the opportunity of maximising their profits and minimising their costs. The agreement between the two parties was signed by BOC Senior Deputy General Manager (DGM) International, Treasury and Investment P.A. Lionel, BOC Assistant General Manager Treasury P.G.G. Tissera, Sierra Cables Chairman W.A.P. Perera and Sierra Cables Managing Director D.S. Pandith. Present to witness the signing of the agreement were BOC Chairman Retired Air Chief Marshal Harsha Abeywickrema, BOC General Manager D.M. Gunasekara, other senior members from both the institutions and members of the media.

BOC Chief defends Seychelles entry

Says no plans on entering Solomon Islands

The Bank of Ceylon yesterday defended its move in expanding to Seychelles recently and stressed the decision was a well-thought-out one. “The Bank of Ceylon does not enter markets just for the sake of expanding. We go into markets where there is potential and Seychelles has potential,” BOC Chairman Retired Air Chief Marshal Harsha Abeywickrema said yesterday on the sidelines of the launch of the bank’s first Sri Lankan Rupee Currency Option. He also refuted reports that the BOC expanded to Seychelles to serve just 100 Sri Lankans. “That is false. The country has a population of about 80,000 people and in that are about 5,000 Sri Lankans. I must say the response we have there is better than expected,” Abeywickrema added. He said that BOC branch that commenced operations in June this year is serving Seychelles nationals as well. Clarifying the bank’s expansion plans, Abeywickrema stressed the BOC was not looking to explore the Solomon Islands although reports have emerged it would. “We have no immediate plans on entering another country. Online media has reported BOC will open in the Solomon Islands. It is not so. We don’t blindly enter markets. We could rather consider Bahrain where there is immense potential,” asserted Abeywickrema. Outside Sri Lanka, BOC has direct presence in four other countries – the United Kingdom (UK), Maldives, India, and Seychelles, with the latter being its latest entry.