by worthiness Today at 2:24 pm
» This is Shameful by CB
by stockback Today at 2:21 pm
» NO GSP+ Within this year.....
by worthiness Today at 2:15 pm
» Commercial Credit COCR and Group Lease Deal Pricing story
by stockback Today at 2:08 pm
» is TKYO ready for the next step forward?
by TARGET Today at 2:02 pm
» Broker’s System Portfolio Summary on 21 Oct 2016
by worthiness Today at 11:34 am
» Liquid Shares
by gayaniwasana Today at 10:37 am
» Any body wann ?
by samaritan Today at 7:44 am
» Gsp +. What happened to mgt/tjl/amer
by Kashyapa Senarathne Yesterday at 5:21 pm
» Teejay Jersey Lanka PLC - Depreciated Rupee had a very positive impact
by Kashyapa Senarathne Yesterday at 5:20 pm
» ASI 12.10.2016
by stockback Yesterday at 4:39 pm
» Dist....and Melstacorp...
by Udith Fonseka Yesterday at 3:17 pm
» FORUM EKEMA KATTIYA NIDI WAGE.....GOOD SLEEP...
by hiransilva23 Yesterday at 2:52 pm
» Capital trust triger buying signal on ALUM Target price 23.50...
by ruwan326 Yesterday at 2:44 pm
» MULL N.000 (Expert Idea please)..
by Lucky Gamage Yesterday at 11:24 am
» be careful with SFS
by Lucky Gamage Yesterday at 10:29 am
» OBAMA !!! what did he achive ?
by worthiness Yesterday at 10:25 am
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by lal62 Yesterday at 10:07 am
» What make you motivated to buy a stock
by trader7 Yesterday at 9:38 am
» best share to buy ?
by Beta1 Yesterday at 9:24 am
» LDEV.N some thing will happen!!
by uf1991 Yesterday at 8:58 am
» Lets see your views on following stocks
by EquityChamp Yesterday at 8:44 am
» CIFL have chance to up 1.9 an 2 level..
by EquityChamp Yesterday at 8:41 am
» Need to evaluate how many members are really sharing in SLEF
by EquityChamp Yesterday at 8:40 am
» HEXP share price
by EquityChamp Yesterday at 8:15 am
» Orient Finance PLC- possible future star
by sisira.wijeweera Thu Oct 20, 2016 11:22 pm
» Financial reports.Q3-2016
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» CIFL, 100% GAIN IN FEW WEEKS !!!
by Miss-Sangeetha Thu Oct 20, 2016 7:22 pm
» CIFL 3rd RUN???????
by ruwan326 Thu Oct 20, 2016 6:38 pm
» Good news for Pc Pharma
by Neluka Karannagoda Thu Oct 20, 2016 2:31 pm
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by Eugine Fernando Thu Oct 20, 2016 2:00 pm
» YORK YORK... Still you have the chance
by Lucky Gamage Thu Oct 20, 2016 10:36 am
» Good for local manufactures
by lal62 Thu Oct 20, 2016 9:26 am
» AUTO DROME IS GOOD SHARE ?
by visvajith Thu Oct 20, 2016 9:04 am
» Sri Lanka to develop IT platform for tea worth Rs220mn
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» ASSESS PUBLIC SENTIMENT
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» Tomorrow Market Green
by samaritan Wed Oct 19, 2016 8:40 pm
» LFIN's Reports will be very good than expected .
by Harry82 Wed Oct 19, 2016 8:24 pm
» TAFL -- TAFL -- TAFL
by TARGET Wed Oct 19, 2016 7:45 pm
» CIFL.. jump 5/= . So still you don't miss
by Teller Wed Oct 19, 2016 7:44 pm
» CSE website issues - open to suggestions and complaints
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» CIFL WILL REACH XXXX /=ඔබට සතුටුයි ද දැන්... ????
by Chinwi Wed Oct 19, 2016 6:01 pm
» BFL with Ascending Triangle Pattern now.
by worthiness Wed Oct 19, 2016 5:28 pm
» GSP+ sooner than expected
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» Seylan Developments PLC
by bucky Wed Oct 19, 2016 1:17 pm
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by stockback Wed Oct 19, 2016 12:14 pm
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by Beta1 Wed Oct 19, 2016 12:03 pm
» GHLL Chart. Any ideas...
by stockback Wed Oct 19, 2016 11:14 am
» TIME TO REVEAL THE REAL MEMBERS IN THIS FORUM..1
by ruwan326 Wed Oct 19, 2016 10:43 am
» Value of ALUM - Rs. 27.00
by ruwan326 Wed Oct 19, 2016 10:28 am
» බුන්වත් මූල්ය ආයතන 4ක් මහ බැංකුව අනාවරණ කරයි (Including CIFL)
by ShiraBoy Wed Oct 19, 2016 10:16 am
» Central Bank to the rescue
by Chinwi Wed Oct 19, 2016 9:36 am
» Stocks for short to medium term investment
by uf1991 Wed Oct 19, 2016 9:35 am
» KEEP COLLECTING WHEN THERE IS BLOOD !!!!
by EquityChamp Wed Oct 19, 2016 9:20 am
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by nimantha80 Wed Oct 19, 2016 6:22 am
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by kassachandi Wed Oct 19, 2016 1:02 am
» CFVF PRICE
by kasun333 Tue Oct 18, 2016 6:52 pm
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by Fortune Teller Tue Oct 18, 2016 6:20 pm
» ACCESS ENG
by Bullrunner7 Tue Oct 18, 2016 2:40 pm
» Final round of discussions for GSP Plus successful - Minister
by kcrRanz Tue Oct 18, 2016 12:28 pm
» SHAW.N-SUB DIVISION OF SHARES
by KAS10 Tue Oct 18, 2016 11:48 am
» CSE SHOULD HAVE CONSULTED THIS MAN BEFORE THEY UPDATE THE SITE
by ruwan326 Tue Oct 18, 2016 10:53 am
» Good Hope to delist
by tharanga1979 Tue Oct 18, 2016 9:57 am
» CFVF 2 Rupee Dividend on the Way
by Ryan Hudson Tue Oct 18, 2016 8:55 am
» Galadari review and sell signal
by PrasannaMani Tue Oct 18, 2016 8:11 am
» Does anyone know what is happening to kahawatta plantations
by reyaz Tue Oct 18, 2016 7:51 am
» PRESIDENT BREAKS SILENCE & FIRES A SALVO
by nimantha80 Tue Oct 18, 2016 7:00 am
» EXPO.N ANY NEWS?
by PrasannaMani Mon Oct 17, 2016 8:43 pm
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by PrasannaMani Mon Oct 17, 2016 8:41 pm
» well done..whoever beat it with gsp +
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by kumara1126 Mon Oct 17, 2016 3:45 pm
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» Help Please,,,
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» සූර්ය බලයෙන් ඔබේ විදුලි බිල සුන් කල හැකිද?
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» CHINA PLEDGES US$10Bn INVESTMENT
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» CB INFORMATION LEAK TO BE PROBED
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» It should go up today.
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» RENAULT Kwid Call Back
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» WHAT IS THE FUTURE OF TAFL
by EquityChamp Fri Oct 14, 2016 9:06 am
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.
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