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
» Look at PAP very strong
Today at 8:06 pm by buddikasmart

» පාර්ලිමේන්තුවේ පිල් මාරුවක් නැහැ
Today at 8:02 pm by THILANGAF

» WHAT R BEST TO BUY ?
Today at 8:00 pm by RPPA

» Reaching the bottom is over???
Today at 7:59 pm by aran

» It is not advisable to sell to avoid further plunge.
Today at 7:26 pm by Asoka Samarakone

» Foreign Inflow/ (Outflow) 24/11/2014
Today at 7:23 pm by aran

» Trust this forum.....or get out
Today at 6:54 pm by shane001

» අය වැය 2/3න් සම්මතයි.. පොදු අපේක්‍ෂකයා අතුරුදහන්… චන්ද්‍රිකාගේ අප්පා කවුද..?
Today at 6:53 pm by Patchchasira

» Political uncertainties pushed the equities market deep into the red on Monday
Today at 6:42 pm by NZ BOY

» The final vote of 2015 budget is scheduled to be taken at 5.00 p.m. today (November 24) in Parliament.
Today at 6:40 pm by NZ BOY

» අය-වැය වැඩ් ඡන්ද 95 කින් දිනුම්
Today at 5:57 pm by NZ BOY

» Who will be considered a Senior Citizen?
Today at 5:47 pm by Senior Citizen

» Don't panic to sell...Don't Rush to collect
Today at 5:41 pm by Jana

» STOCK HUNTS IN CURRENT BEAR MARKET (RPPA)
Today at 5:22 pm by kabba

» 12 Things You Need To Know About Financial Statements - Should read
Today at 5:12 pm by 123longway

» DUNAMIS CAPITAL PLC(CSEC.N0000)
Today at 5:02 pm by kuma524

» New Section for Political and Socio-Econimic Analysis
Today at 4:49 pm by opfdo

» Market Summary 24th Nov - With net foreign buying
Today at 4:31 pm by RPPA

» Please comment
Today at 3:48 pm by sirimevan

» UNP government, will lead the Economy....
Today at 3:46 pm by Aubrey Perera

» History Daily closing prices
Today at 3:28 pm by trasantha

» WHAT IS UR STRATERGY TO MANAGE RISK AND UNCERTAINTY?
Today at 3:08 pm by aran

» ESL last 12 Month EPS 19.01 ESL value Above 200
Today at 3:04 pm by aran

» For MS lovers , Don't say these are Mada, This is written in 2013 by a reputed columnist
Today at 2:59 pm by nalban

» Worse day in a bad Month?
Today at 2:54 pm by Sstar

» Reality that I can see
Today at 2:53 pm by D-Rexton

» More to happen..........
Today at 2:53 pm by NilangaG

» Sirasa - Satana blocked on Dialog TV / Peo TV
Today at 2:53 pm by Sarabulathwita

» Bull run here to stay, hold on to your stocks, say analysts
Today at 2:52 pm by Sarabulathwita

» SL Investors = children aged < 5 years
Today at 2:43 pm by Invest_Wisely

» සෙංකොලයට ASPI තවත් සංවේදි වේ.අද අය-වැය පැරැද්දිම ඉතා අවිනිශ්චිතයි
Today at 2:34 pm by Sarabulathwita

» කොටස් වෙළඳපොල 'අයියෝ සිරිසේන' හෙවත් පොළොන්නරු සිරාගේ පැනයාම ඉෆෙක්ට් එකට බිඳවැටෙයි !
Today at 2:27 pm by NilangaG

» මෛත්‍රී සමග ආණ්ඩුවෙන් ඉවත්වන පිරිස මෙන්න.
Today at 2:25 pm by Sarabulathwita

» Snap Shot of My Share Portfolio - Latest
Today at 2:21 pm by VALUEPICK

» Seems in this market no investors
Today at 2:16 pm by Dhehan

» Today market ends in green; bet is Herr Vodka. Who bet???????
Today at 1:59 pm by Ernie Tissera

» Analyzing about AGST
Today at 1:58 pm by SM2014

» Who Will Win Next presidential Election
Today at 1:48 pm by barba

» Time to re-enter
Today at 1:33 pm by RPPA

» Dialog Axiata PLC Quartarly highlight
Today at 1:31 pm by Market R

» Today i made a great mistake?
Today at 1:21 pm by Ernie Tissera

» Selling and buying Theory...
Today at 1:10 pm by Thushara Ayya

» RPPA - IS THIS RIGHT TIME TO BUY OR WAIT AND SEE ???
Today at 12:53 pm by SM2014

» Keep Calm and Buy Buy Stocks; Still Patali, JVP didn't officially announce support to Maithripala? till Nov 24
Today at 12:50 pm by StockGuru

» 'Big Fish' To Jump Into Opposition's Net Three Days Before The Election
Today at 12:32 pm by Sstar

» Buy my own stock
Today at 12:31 pm by nirm

» Blood in the Street
Today at 12:28 pm by xmart

» DON'T GET IN TO POLITICAL CONFLICTS
Today at 12:24 pm by RPPA

» My Observation - It's recovering now -ASPI gradully going up
Today at 11:52 am by gayanath1983

» Banner complaint... Please remove..!
Today at 11:50 am by StockGuru

» Dividend KEELLS FOOD PRODUCTS PLC(KFP.N0000)
Today at 11:49 am by Dhehan

» The Best Thing to Do! - Sri Lankans Sell Your Vote for a Bid starting at Rs.1 million each! - Explanation Here Read full
Today at 11:45 am by StockGuru

» පොළොන්නරු සිරාගේ රයිස් සහ ෆිෂ් මාෆියාව? කොහොමද වෙන්නේ ?
Today at 11:35 am by Market R

» I have sold all
Today at 11:33 am by ifenny

» I cant Believe it 85 down with in 5 minites
Today at 11:29 am by RPPA

» TESS Agro...?
Today at 11:28 am by anjelo

» Welcome our New Members!
Today at 11:28 am by Sstar

» Mahinda Vs Maithri - OPINION POLL
Today at 11:27 am by Aubrey Perera

» Drop is over.....
Today at 11:25 am by kcrRanz

» CSE is going up - Donkeys are playing but not for long time
Today at 11:22 am by stocker

» WAIT untill tomorrow
Today at 11:18 am by piras

» What should we do today?
Today at 11:15 am by Ernie Tissera

» Market Reversal
Today at 11:14 am by Invest_Wisely

» Only two choice to vote.
Today at 10:53 am by Aubrey Perera

» RPPA .. Please advise ESL or CFVF
Today at 10:51 am by RPPA

» MARKET IS RECOVERING....!
Today at 10:46 am by jonny

» Udin Elluna Ayata Del
Today at 10:44 am by SHARK aka TAH

» Bairaha Farms PLC
Today at 10:44 am by VALUEPICK

» Will there be a Market Halt?
Today at 10:38 am by Ernie Tissera

» At the day end.sellers will cry.........
Today at 10:10 am by anjelo

» pass 200 unit very fast
Today at 10:05 am by buddikasmart

» Strength of Sri Lanka Capital Market
Today at 9:56 am by Nuwan Samarawickrama

» PLEASE CHANGE THIS PICTURE....
Today at 9:54 am by Nuwan Samarawickrama

» Tomorrow ASI is 150 down
Today at 9:45 am by Dhehan

» What is the motive of the Banner
Today at 9:31 am by jonny

» දිට්ට දම්ම වේදනීය!
Today at 9:26 am by jonny

» Observe the market today carefully
Today at 9:23 am by goldenboy

» Political Uncertainty and its Impact on the Stock Market
Today at 8:53 am by Sstar

» Trading stocks or short term stocks
Today at 8:37 am by RPPA

» How to Evaluate Political and Economic Risk of a Country
Today at 8:27 am by Sstar

» හෙට අයවැය පරද්දනවා.. එහෙම නොකලොත් මගේ තාත්තා බණ්ඩාරනායක නොවෙයි..
Today at 12:42 am by bakapandithaya

» AGST A HIDDEN GEM
Today at 12:21 am by man123

» AGST Introduction Reference price 9/=
Today at 12:20 am by man123

» A Critical Analysis of the 2015 Sri Lanka Presidential Election
Yesterday at 11:15 pm by Sstar

» Defections a conspiracy, won't be deterred: Sri Lanka's President Mahinda Rajapaksa
Yesterday at 11:03 pm by Sstar

» Suddenly, Sri Lanka Presidential Elections Become a Real Contest
Yesterday at 11:00 pm by Sstar

» where to get the key performance indicator of a company
Yesterday at 10:58 pm by Zenoid

» Opposition secures Buddhist backing for Sri Lanka vote
Yesterday at 10:56 pm by Sstar

» MR vs MS Election
Yesterday at 8:55 pm by sew

» don't be panic and sell the Shares , plz keep it
Yesterday at 8:52 pm by suku502

» See this, I am seeing this for the fist time in my life
Yesterday at 8:48 pm by suku502

» MR or MS for the good of the country
Yesterday at 8:29 pm by sew

» RPPA NC AKALANKA BALANCE VIEW VALUEPICK SHARK - TIME TO EXPRESS UR IDEAD ON PRESENT MARKET CONDITION.
Yesterday at 7:34 pm by SHARK aka TAH

» SLMC/ TNA / CWC / UPF support whom?
Yesterday at 7:33 pm by SHARK aka TAH

» Dont Panic
Yesterday at 2:59 pm by SHARK aka TAH

» ASIR.N0000 CAL RESEARCH REPORT
Yesterday at 11:48 am by aran

» Need a Buying advise please.
Yesterday at 11:32 am by Padonrup

» Political uncertainty to affect the stock market?
Yesterday at 11:13 am by VALUEPICK

» PLEASE REMOVE THE UNCERTAINITY BANNER OF SLEF
Yesterday at 10:36 am by schemer

Ask ORACLE Before you Buy or Sell Shares!
Ask ORACLE
Virtual Stock Market Game
Virtual Stock Market Game - Vstox
Entertainment
Sri Lanka Equity - Entertainment
Poll

WHO IS THE NEXT PRESIDENT OF SRI LANKA?

 
 
 

View results

Forum Rules & Guidelines
Sri Lanka Equity Analytic
Disclaimer

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.

www.srilankaequity.com 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, www.srilankaequity.com 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.


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: 1788
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: 1033
Points: 2928
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