Sri Lanka Equity Forum
Dear Reader,

Registration with the Sri Lanka Equity Forum would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
Sri Lanka Equity Forum
Latest topics
» Exclusive - Sunil Wijesinghe's fate at NDB decided by his Cousin Ranil Wickremasinghe - Views from People in the Sri Lanka's Cocktail Circles
Today at 5:05 pm by StockGuru

» AUS Vs IND Who is the Winner?
Today at 4:54 pm by Senior Citizen

» PLZ Help me...
Today at 4:05 pm by keeper

» Lanka Century Investments (GREG) to increase CLPL and PHAR ownership stake to 100%
Today at 3:29 pm by Jana

» Is it time to rotate stocks and sectors?
Today at 2:24 pm by VALUEPICK

» Guard Your Portfolio With Defensive Stocks
Today at 2:14 pm by Invest_Wisely

» Most shares artificially low
Today at 2:13 pm by Invest_Wisely

» President's brother attacked with an axe
Today at 1:45 pm by Invest_Wisely

» Buy CLPL.N in the bear market.. you will WIN
Today at 1:19 pm by Gainer

» What is the difference between these two warrants? When will they expire?
Today at 12:36 pm by VALUEPICK

» Mr. SHARK aka TAH and other Technical advisers.....
Today at 9:32 am by Quibit

» If this is true,Can someone explain this
Today at 5:44 am by dsam

» Is there any specific reason for CFVF and ESL to go down badly.
Yesterday at 11:42 pm by anges

» Check LGL It will Hit on May....
Yesterday at 11:41 pm by anges

» AEL ask some staff to retire
Yesterday at 9:01 pm by Teller

» Sri Lankans Complain that Bond Market Manipulator turned Singaporean Arjuna Mahendran on paid leave of over US $ 6000 monthly from Sri Lankan State Treasuries financed by Sri Lankan Populace' which comes as Tax
Yesterday at 8:55 pm by DealKing

» COMBANK has become a CON BANK
Yesterday at 8:46 pm by Senior Citizen

» Sri Lanka:Govt. and Financial Market regulators investigating Dinesh De Zoysa's and Ajith Fernando's Capital Alliance for Routing Ceylon Electricity Board Massive Fixed Deposit to People's Leasing Company (PLC)
Yesterday at 8:35 pm by DealKing

» VUCA : Its meaning and Theory
Yesterday at 6:48 pm by Senior Citizen

» ADMIN Please slow it down
Yesterday at 12:20 pm by Gamunu

» ASI sheds further 100 points to reach 6900
Yesterday at 11:39 am by stockback

» Thalawakele Plantation (TPL)
Yesterday at 7:40 am by VALUEPICK

» Sri Lanka: Dialog in a Deal with Mubasher Technology to give low quality Internet Bandwidth to Stock Broker backbone so that Retail Online Traders Buy and Sell orders get further delayed amid a falling Market
Yesterday at 6:34 am by nimantha80

» Sri Lanka:Ranil and UNP Goons trying to remove Ranee Jayamaha from HNB Board since she exposed N.R.Gajendran and Rajendra Theagarajah's Rs.3.5 billion Tax Fraud - HNB Insiders
Yesterday at 5:00 am by DealKing

» යහපාලනයෙන් රවී ගේ ලියුමෙන් පත්වී, හැරී ගේ හොරා 'ටැංකි' වික්‍රමරත්න ජාතික සංවර්ධන බැංකුව NDB කා දමයිද?
Yesterday at 3:54 am by DealKing

» Sri Lanka: Finance Minister Ravi K becomes Cashier of Harry J, appointing Dirty Harry's friend 'Tanky' as NDB Chairman?
Yesterday at 3:45 am by DealKing

» My losses from the Colombo Stock Exchange
Yesterday at 3:00 am by Quibit

» Pls dont do Unethical moments in this forum
Yesterday at 2:48 am by chutiputha

» WALKING WITH THE DINOSAURS - By Dr. Nalaka Godahewa
Yesterday at 1:02 am by Quibit

» PEG Ratio Nails Down Value Stocks
Yesterday at 12:15 am by Quibit

» WALKING WITH THE DINOSAURS PART II by Dr. Nalaka Godahewa
Fri Mar 27, 2015 11:20 pm by thamiragamm

» වරාය නගරය නවත්වන්නේ නෑ… ජනපති මෛත‍්‍රී චීන ජනපතිට පොරොන්දු වෙයි..
Fri Mar 27, 2015 10:05 pm by fireshelter

» Sri Lanka: Supreme court says 'No need to pay Rs.200 Mn tax per month' for Beer & liquor Companies
Fri Mar 27, 2015 9:51 pm by fireshelter

» Commerial credit
Fri Mar 27, 2015 9:13 pm by nimantha80

»  ශීත කලය පැමිනෙවි.. තද ශීත කුනටු හමාවි.. හිම කැට සහිත මහ නපුරු සුලි සුලන් හමවි.. එහෙත් වසන්තය එනව සත්තමය්...............
Fri Mar 27, 2015 9:08 pm by nimantha80

» Cover Picture of the Forum.
Fri Mar 27, 2015 8:57 pm by Gamunu

» UNP Daya Gamage lead Bimputh Finance and Fame getting ready for Next Phase of Sinhaputhra Finance share manipulation via Sub-Division?
Fri Mar 27, 2015 7:44 pm by fireshelter

» Thilake Thilake.
Fri Mar 27, 2015 7:30 pm by fireshelter

» සූර්ය බලය භාවිතා කර විදුලි බිල 100% කින් අඩු කරගෙන අායෝජනයට ඉහළම ප්‍රතිලාභයක් ලබා ගනිමු
Fri Mar 27, 2015 3:26 pm by buddhika.naween

» There’s No Need to Fear Stock Market Corrections
Fri Mar 27, 2015 1:17 pm by fireshelter

» Asian Morning Briefing: U.S. Stocks Extend Slide
Fri Mar 27, 2015 12:59 pm by VALUEPICK

» වැලි රාජු නොහොත් ජනපති සොහොයුරු ප්‍රියන්ත සිරිසේනට එල්ලවූ ප්‍රහාරයට හේතුව !
Fri Mar 27, 2015 11:50 am by ranferdi

» සිරිසේනගෙ හාමිනෙය් පුතය් දුවය් ඔක්කොම ඔන්න චීනේ
Fri Mar 27, 2015 11:01 am by bandulawee

» As China slows, opportunities still exist on Asia's frontiers
Fri Mar 27, 2015 10:52 am by fireshelter

» today situation.
Fri Mar 27, 2015 10:48 am by fireshelter

» India can fish in our sea
Fri Mar 27, 2015 10:38 am by Teller

» Value stocks in the Market
Fri Mar 27, 2015 8:26 am by Ernie Tissera

» green market today ?
Fri Mar 27, 2015 8:01 am by Dissa

» ASI below magical 7000. Where is the bottom?
Fri Mar 27, 2015 7:36 am by Invest_Wisely

» Lanka’s brand value to reach US$ 79 b in 2015
Fri Mar 27, 2015 4:01 am by Teller

» Exposé: Dirty Harry Jayawardena ‘More Equal’ Than Tissa Before The Law - Colombo Telegraph
Fri Mar 27, 2015 2:20 am by Business Basil

» good to buy now
Fri Mar 27, 2015 1:37 am by anges

» Market Reaching Over Sold stage
Fri Mar 27, 2015 1:36 am by anges

» Do Not Enter
Thu Mar 26, 2015 9:34 pm by hawklk

» Don't Touch any warrant, I also lost
Thu Mar 26, 2015 8:27 pm by Invest_Wisely

» Sri Lankan president seeks to mend ties with China after port suspension
Thu Mar 26, 2015 4:45 pm by NZ BOY

» රත්නපුර රැළියේ සජීව විකාශණය මෙන්න
Thu Mar 26, 2015 4:45 pm by piyalpy

» කොටස් වෙළඳ පොල නැවත වරක් කඩා වැටෙමින් පවතී- නාලක ගොඩහේවා දියව්
Thu Mar 26, 2015 3:08 pm by Sylvester1234

» Watch out for market correction, experts say
Thu Mar 26, 2015 3:06 pm by Sylvester1234

» T Rowe Price's Bell: the key to frontier markets
Thu Mar 26, 2015 2:11 pm by VALUEPICK

» Australia stocks follow Wall Street down sharply; banks weak
Thu Mar 26, 2015 2:00 pm by VALUEPICK

» Dream on JKH by mark
Thu Mar 26, 2015 1:45 pm by kash1989

» The top two reasons to focus on consumer staples
Thu Mar 26, 2015 1:04 pm by VALUEPICK

» COLOMBO PORT CITY
Thu Mar 26, 2015 12:41 pm by Dhehan

» හරෂයෝ නුඹ දැන් කොහේද හැබෑවටම ?
Thu Mar 26, 2015 12:39 pm by fireshelter

» JKH Warrants are Short term GEM
Thu Mar 26, 2015 12:33 pm by sisira.wijeweera

» Sri Lanka:Yahapalana Regime to lose Rs.2.4 Bn tax annually from each Liquor player, as a result of K.Sripavan lead Supreme Court appointed by Ranil-MY3?
Thu Mar 26, 2015 12:28 pm by dsam

» The Financial Markets: When Fear And Greed Take Over
Thu Mar 26, 2015 11:42 am by Daniel260476

»  If election postpone ?????
Thu Mar 26, 2015 11:39 am by worthiness

» Huge loss with Fundamental Warrants
Thu Mar 26, 2015 11:16 am by Jana

» Technical Analysis - Snap Shot : Asha Philips
Thu Mar 26, 2015 7:51 am by Nuwan Prasad

» Sri Lanka:K Sripavan lead Supreme Court says 'At a glance' it appears per sections of the Excise Act, that the Minister 'Does Not have Authority' to Impose tax - Report
Thu Mar 26, 2015 3:24 am by Business Basil

» who says China is bad?
Wed Mar 25, 2015 9:27 pm by Teller

» ASCO half rate of NAV
Wed Mar 25, 2015 9:12 pm by sharemarket

» Shell we orgernized protest against this pissu ballo?
Wed Mar 25, 2015 9:04 pm by sharemarket

» My pick 3-CINS
Wed Mar 25, 2015 7:59 pm by mark

» How to collect expected income by yahapalanaya
Wed Mar 25, 2015 4:12 pm by Senior Citizen

» Treasury bill auction held on 25 March 2015
Wed Mar 25, 2015 2:17 pm by Cricket Boy

» Bears have entered the Market!!!!
Wed Mar 25, 2015 12:59 pm by kash1989

» All Share Index (ASI) to reach 6618 in year 2020
Wed Mar 25, 2015 12:41 pm by Quibit

» මහින්ද සමරසිංහ ඇමතිතුමනි කොටස් වෙළඳ පොල බාරගෙන තිලක්ව එලවන්න
Wed Mar 25, 2015 12:30 pm by fireshelter

» Mr. Thilak Crash Master where are you
Wed Mar 25, 2015 11:49 am by fireshelter

» Don,t sell now,RSI-25...
Wed Mar 25, 2015 11:45 am by sureshot

» News coming from SL.....!
Wed Mar 25, 2015 11:16 am by Octopus

»  Committee appointed to hear grievances of low-income families relocated from Sri Lankan capital
Wed Mar 25, 2015 11:10 am by Octopus

» Sri Lankan President hands back Army-held lands in North to original owners
Wed Mar 25, 2015 11:09 am by Octopus

» jkhw22...........
Wed Mar 25, 2015 10:59 am by visionstar

» Government call for US $ 1.4b Chinese project to continue
Wed Mar 25, 2015 10:50 am by Dhehan

» Fort land lawfully belongs to Sirasa-Rajitha
Wed Mar 25, 2015 10:29 am by gamagevidana

» Who will save share market?
Wed Mar 25, 2015 10:19 am by kash1989

» ඉතිහාසය නැවත ලියවෙන්නට පටන් ගෙන ඇත.
Wed Mar 25, 2015 10:16 am by nalban

» වැඩ බැරි රනිල් හා කටපමනය් හර්ෂ
Wed Mar 25, 2015 10:15 am by sharemarket

» Mangala pl don't sell my country while majority is sleeping
Wed Mar 25, 2015 9:50 am by jayawardane

» Sri Lanka to grow 7.0-pct in 2015
Wed Mar 25, 2015 9:22 am by cse_investor1

» තුනෙන් දෙකක බලයක් සමග ස්ථාවර රජයක් තිබු රටක් අස්ථාවර කල සිරිසේනගේ යහපාලන මෙහෙයුම
Wed Mar 25, 2015 9:21 am by NZ BOY

» Market Condition
Wed Mar 25, 2015 9:18 am by Invest_Wisely

» Asha Philips Valuation Guide 23/03/2015
Wed Mar 25, 2015 9:18 am by Nuwan Prasad

» AEL HUGE COLLECTION ....
Wed Mar 25, 2015 9:13 am by Invest_Wisely

» 15% interest rate for senior citizens-terms & conditions
Wed Mar 25, 2015 7:46 am by bandulawee

Sri Lanka bank liquid assets shrink amid peg defence

View previous topic View next topic Go down

Sri Lanka bank liquid assets shrink amid peg defence

Post by monash on Sat Jan 28, 2012 11:28 pm

Jan 28, 2012 (LBO) - Liquid assets in Sri Lankan banks are falling and loan to deposit ratios are deteriorating, with some banks reaching 100 percent, Fitch Ratings Lanka said as authorities continued to defend a dollar peg creating a liquidity crunch.
Fitch said in an report on the outlook on Sri Lankan banks that loan to deposit ratios of some banks with "less mature deposit franchises" are approaching 100 percent.

Loan to deposit ratios have risen from about 77 percent by end-2010 to 80 percent by June 2011. By September loan to deposit ratios of banks tracked by Fitch had risen to 90 percent.

Sri Lanka's Central Bank started to defend a dollar peg actively from around July by selling foreign exchange to banks in return for rupees as credit growth picked up and put pressure on a dollar soft peg.

The foreign exchange interventions caused liquidity shortages, forcing rates up, even though there has been no formal raising of policy rates.

Fitch said deposit rates have risen and bank net interest margins were shrinking.

To prevent rates rising further, the Central Bank offset or 'sterilized' interventions in the forex market by purchasing Treasury bills including from banks and injecting liquidity (printing money) in to money markets.

The liquidity fuels new credit, triggering fresh imports, resulting in further reserve losses, creating a vicious cycle of expansionary sterilized interventions.

Balance of payments crisis are a problem associated with so-called 'soft-pegged' central banks which try to target an exchange rate and then also tries to control interest rates by printing money.

Fitch said banks have been selling down liquid assets held largely in the form of government securities which are gradually channelled into lending, though lenders have to keep at least a 20 percent liquid asset to total liabilities ratio to meet regulations.

The Central Bank held 180 billion rupees of Treasury bills in its domestic asset portfolio by January 2012 from near zero in July 2011 as balance of payments pressure gathered pace.

Banks are now paying as much as 12 percent or more for customer deposits but 3-month Treasury bills yield as little as 8.67 percent and 12-month bills only 9.30 percent creating an incentive to get rid of Treasuries.

LBO's economics column warned over five months ago that banks were not raising enough deposits to fund rising credit growth and that the country was heading towards a balance of payments pressure and rates have to be allowed to move up fast to prevent the peg breaking.

"There is a persistent imbalance between loans made and deposits raised by the banking system, indicating that a market clearing interest rate is needed to maintain the peg to the US dollar," LBO's economics columnist fussbudget warned in August.

"To head off any 'balance of payments' problem the central bank has to weaken the rupee or allow interest rates to go up. If neither happens, credit expansion is on track to crash land in the balance of payments."

When banks raise deposits consumption is curbed (reducing pressure on the forex market) and only that 'demand' is released as credit.

But when Treasury bills are sold to the Central Bank, newly printed money is expansionary generating new aggregate demand and pressure on the peg through imports.

"Deteriorating loan to deposit ratios and declining liquid assets demonstrates in practice how this phenomenon works through the balance sheets of banks," LBO's economics columnist fuss-budget says.

"It is also interesting to note that the decline in liquid assets is the first step of how a currency crisis transforms into a banking crisis.

"The emerging trends in the banking system should be carefully noted and not forgotten so that interest rates are allowed to move up in the future without delay so as to head off episodes to balance of payments pressure as soon as credit growth becomes too strong."

A fully fledged banking crisis happens when interest rates rise and remain at levels for long enough so that it no longer makes sense for businesses to borrow and they start to default and bad loans mount.

http://www.lankabusinessonline.com/fullstory.php?nid=332752896[b]

monash
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics

Posts: 334
Points: 1913
Reputation: 16
Join date: 2011-01-22

Back to top Go down

Re: Sri Lanka bank liquid assets shrink amid peg defence

Post by Antonym on Sun Jan 29, 2012 12:10 am

This is a concern, folks... It looks like CBSL will need to depreciate the rupee sooner or later.
Do you think foreign funds will hold back equity purchases in anticipation of another devaluation?

Antonym
Vice President - Equity Analytics
Vice President - Equity Analytics

Posts: 1034
Points: 3054
Reputation: 272
Join date: 2011-02-09

Back to top Go down

View previous topic View next topic Back to top

- Similar topics

Permissions in this forum:
You cannot reply to topics in this forum