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

SLEF Market Sentiment Indicator


View results

Your ride in Minutes!
TukTuk Network Type 'reg tuk vehicle no' send to 87711 or download the Mobile App
Latest topics
» Shining future rega,rega
by Shammi Dharshana Today at 3:23 pm

» JKH will get Nearly 30 Billion Rupees Profit From this Cinnamon Life Project
by Gainer Today at 2:50 pm

» JKH Ready to Break 200 +
by Gainer Today at 2:47 pm

» Man who saved the country from tears is in tears today!
by vic19 Today at 2:24 pm

» Asia Siyaka Commodities - ASIY.N
by Dhehan Today at 2:22 pm

by VALUEPICK Today at 1:31 pm

» king goes down and up
by prabath Today at 1:25 pm

by VALUEPICK Today at 1:11 pm

» My observation of current market
by Avon Today at 1:10 pm

» SIRA- performance and its future
by Joe007 Today at 1:04 pm

» AEL, AEL, AEL AEL!!!!!
by Dhehan Today at 1:03 pm

» SIRA 3.30..........
by Joe007 Today at 12:59 pm

» Asian Markets Nikkei today 455 points up
by Gainer Today at 11:53 am

» Renuka Agri Foods...RAL
by Joe007 Today at 10:16 am

» Sharp Share Rally Spells Bad News for Short-Selling Hedge Funds
by VALUEPICK Today at 10:15 am

» Buy but don't shout!
by VALUEPICK Today at 10:12 am

» admin we need good moderator
by Joe007 Today at 8:26 am

» PARQ reports improved Financials for 30.09.2015
by EquityChamp Today at 7:25 am

» To those who are in IT field
by Chinwi Today at 1:11 am

» PABC hits 1 BILLION!!!
by udarap Today at 12:26 am

» When TAFL . GRAN Repot come?
by sisira.wijeweera Yesterday at 11:47 pm

by Gainer Yesterday at 11:06 pm

by Yahapalanaya Yesterday at 10:46 pm

» Maharaja is BACK
by Nuwan Prasad Yesterday at 8:16 pm

by Madu@1 Yesterday at 8:13 pm

» Sudden jump of CFL
by ten percent Yesterday at 8:01 pm

» How to contact Admin via pm
by nis2010 Yesterday at 12:08 pm

» Technical Analysis simulator
by chamith Yesterday at 4:55 am

» Dialog sounds authorities on possible Airtel take-over
by Gainer Yesterday at 2:21 am

» GUAR , CINV , CFT , CIT , GREG , ASCO , .....
by trader911 Yesterday at 12:59 am

» ACL One Of the Most Undervalued Shares in CSE
by Yahapalanaya Sat Feb 06, 2016 10:49 pm

» JKH W 23 still not attractive...
by Joe007 Sat Feb 06, 2016 10:09 pm

» Past OHLC Data
by hawklk Sat Feb 06, 2016 6:12 pm

» JKH to engage with Govt. on Waterfront Project Rebranded as Cinnamon Life
by Gainer Sat Feb 06, 2016 4:30 pm

» goda wuna aiyata yanda puluwan
by SUSPENS Sat Feb 06, 2016 10:57 am

» Value Partners’ Top Stocks for the Year of the Monkey
by VALUEPICK Sat Feb 06, 2016 8:20 am

» Picking Boring Stocks Pays Off for Norway Manager of $22 Billion
by VALUEPICK Sat Feb 06, 2016 8:09 am

» Bull Vs Bear Market historical view
by VALUEPICK Sat Feb 06, 2016 8:03 am

» PARQ showing colours.
by Cricketman Sat Feb 06, 2016 6:49 am

» GLAS delivered a perfect growth
by Joe007 Sat Feb 06, 2016 5:34 am

» DIPD..... Prediction.
by Joe007 Sat Feb 06, 2016 5:16 am

» SEYB?? can someone tell me
by Joe007 Sat Feb 06, 2016 5:02 am

» What happen parq
by Jana Sat Feb 06, 2016 3:24 am

» How to be a millionaire soon?
by Jana Sat Feb 06, 2016 3:20 am

» ZIKA virus Olympics at Rio in 2016
by vic19 Fri Feb 05, 2016 11:27 pm

» John Keells Holdings 2015 Profit Before Tax increases to 9% in 2015
by Gainer Fri Feb 05, 2016 8:50 pm

» Admin and Moderator Vacancies - SLEF
by wisdom78 Fri Feb 05, 2016 8:29 pm

» Lot of Interim report expected today
by shadow walker Fri Feb 05, 2016 6:36 pm

» JKH 200+ CLUB
by SUSPENS Fri Feb 05, 2016 4:02 pm

» Will TAFL beat BFL Share Price with in another 02/03 years..?
by Bull Master Fri Feb 05, 2016 1:49 pm

» so 3rd impact for gran tafl bfl
by karuna Fri Feb 05, 2016 1:23 pm

by visvajith Fri Feb 05, 2016 1:13 pm

» Sale - Super discount shares on sale.
by Bull Master Fri Feb 05, 2016 1:04 pm

» how about AEL
by Dhehan Fri Feb 05, 2016 12:11 pm

by prabath Fri Feb 05, 2016 11:59 am

» Eco-friendly living from the market leader
by GMNet Fri Feb 05, 2016 11:59 am

» New CEO makes profit after long time @ ACME
by buwr Fri Feb 05, 2016 11:32 am

by Jana Fri Feb 05, 2016 11:25 am

» its INDEPENDANCE DAY ............lets talk / share some thing good
by Dhehan Fri Feb 05, 2016 11:12 am

» Haylese would have an impact
by manager Fri Feb 05, 2016 11:10 am

» The bet against chicken producers amid stock rise
by VALUEPICK Fri Feb 05, 2016 10:36 am

by SUSPENS Fri Feb 05, 2016 10:08 am

» Get your Tuk in a click!
by chamith Thu Feb 04, 2016 9:10 pm

by soileconomy Thu Feb 04, 2016 8:40 pm

» Invest Now polls
by FIRE123 Thu Feb 04, 2016 3:53 pm

» Dont panic and fall to trap
by worthiness Thu Feb 04, 2016 3:28 pm

» Larry Fink: I'm more bullish on stocks, but not oil
by VALUEPICK Thu Feb 04, 2016 12:45 pm

» Why BlackRock’s Global Investing Chief Is Bullish on Japan
by VALUEPICK Thu Feb 04, 2016 12:45 pm

» it is time for the last ( Christmas ) quater results to come/divident announcement to come one after the another...
by vic19 Thu Feb 04, 2016 11:46 am

» Textured Jersey Lanka (TJL) net profit up last quater
by vic19 Thu Feb 04, 2016 11:36 am

» යහපාල ණය ?
by ru1ru1 Wed Feb 03, 2016 10:18 pm

» Nikkei today down by 559 points and 3.25% Came down
by Joe007 Wed Feb 03, 2016 10:08 pm

» CHEVRON profits down after 2002
by prabath Wed Feb 03, 2016 9:03 pm

by prabath Wed Feb 03, 2016 8:26 pm

» Japan’s Sagawa Group
by SUSPENS Wed Feb 03, 2016 11:36 am

by Pac-man Wed Feb 03, 2016 10:08 am

» AAIC Divident coming soon......
by sharemarket Wed Feb 03, 2016 9:36 am

» Foreign behavior recently
by prabath Wed Feb 03, 2016 9:09 am

» Big hits from big guns.
by prabath Wed Feb 03, 2016 9:03 am

by otara Wed Feb 03, 2016 8:55 am

» VFIN.. Value over 90.00
by otara Wed Feb 03, 2016 8:49 am

» SFS On The Right Path To Change Through The EAP Edirisinghe Group
by GMNet Wed Feb 03, 2016 7:59 am

» JKH Profit Down
by GMNet Wed Feb 03, 2016 7:11 am

» TJL Dividend announced
by chamith Wed Feb 03, 2016 4:08 am

» ALUM/ALUF/LALU/PARQ......Going to Brake 52Wk. High
by Gainer Tue Feb 02, 2016 11:55 pm

» JKH to delay Cinnamon Life project
by Chinwi Tue Feb 02, 2016 7:41 pm

» GREGars aren't beggers
by prabath Tue Feb 02, 2016 4:55 pm

by Harry82 Tue Feb 02, 2016 3:17 pm

» Citigroup Cautions Investors Against Dumping Stocks Over China
by VALUEPICK Tue Feb 02, 2016 2:47 pm

» Ceylon gran Elevators (GRAN.N) opportune investment.
by prabath Tue Feb 02, 2016 2:06 pm

» PARQ......PARQ.......PARQ.......PARQ......
by shadow walker Tue Feb 02, 2016 1:38 pm

» What is happening at TFC ?
by visionstar Tue Feb 02, 2016 12:18 pm

by Dhehan Tue Feb 02, 2016 12:13 pm

by SUSPENS Tue Feb 02, 2016 12:13 pm

» Why BLI (Bimputh Finance) is Gold mine ?
by SUSPENS Tue Feb 02, 2016 12:09 pm

» this is my profile
by SUSPENS Tue Feb 02, 2016 12:04 pm

» HDFC report will out soon
by otara Tue Feb 02, 2016 11:51 am

» WAPO train
by prabath Tue Feb 02, 2016 11:09 am

» 6500,R u ready
by prabath Tue Feb 02, 2016 11:04 am

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.[b]

Senior Manager - Equity Analytics
Senior Manager - Equity Analytics

Posts: 334
Equity Stars: 3229
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?

Vice President - Equity Analytics
Vice President - Equity Analytics

Posts: 1040
Equity Stars: 4376
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
Top posting users this week

Who is online?
In total there are 138 users online :: 16 Registered, 2 Hidden and 120 Guests

cseranga, Dhehan, jayathu, kuma524, kumarweerarathne, ma sha, Madu@1, nis2010, Senath, Shammi Dharshana, Shan1039, SLFINANCEWATCH, stockback, SUSPENS, troy, venura

[ View the whole list ]

Most users ever online was 541 on Mon Sep 19, 2011 11:29 am
We have 13601 registered users
The newest registered user is perera sithara

Our users have posted a total of 292421 messages in 45227 subjects
Forum Rules & Guidelines
Sri Lanka Equity Analytic

The information contained in this forum have been submitted by third parties directly without any verification by us. The information available in this forum is not researched or purported to be complete description of the subject matter referred to herein. We do not under any circumstances whatsoever guarantee the accuracy and completeness information contained herein. its blogs, forums, subdomains and/or its affiliates and/or its web masters, administrators or moderators shall not in any way be responsible or liable for loss or damage which any person or party may sustain or incur by relying on the contents of this report and acting directly or indirectly in any manner whatsoever.

Trading or investing in stocks & commodities is a high risk activity. Any action you choose to take in the markets is totally your own responsibility, its blogs, forums, subdomains and/or its affiliates and/or its web masters, administrators or moderators shall not be liable for any, direct or indirect, consequential or incidental damages or loss arising out of the use of this information. The information on this website is neither an offer to sell nor solicitation to buy any of the securities mentioned herein. The writers may or may not be trading in the securities mentioned.