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
» Any prediction on PC Pharma PLCPCP.N0000:CS
Today at 3:44 pm by RPPA

» VEHICLE TAX
Today at 3:43 pm by fernando123op

» Budget 2015 result out......
Today at 3:38 pm by VALUEPICK

» CALF & NIFL FOR TRADING
Today at 3:29 pm by RPPA

» PCH good to enter
Today at 3:17 pm by RPPA

» K9 is silent
Today at 3:01 pm by stocker

» MADU Ready for bull
Today at 2:44 pm by Aubrey Perera

» Budget 2015 - Live
Today at 2:26 pm by RPPA

» Economy favourable Budget 2015
Today at 2:20 pm by Sarabulathwita

» Amana Takaful ATL
Today at 2:14 pm by puliyanam

» Now Don't miss the train for these stocks:Madu Bfl Tafl Gran Mprh Udpl Bala Tpl Mask Bopl cars hari Soy Rcl Cera Shl flch rwsl Sfl Elpl Hopl
Today at 2:09 pm by dow

» GREG W 6 will pass 5 this time ..
Today at 2:07 pm by sureshot

» What happen to SUGA.N?
Today at 2:05 pm by omegaplus

» Ayyooo COLO
Today at 1:45 pm by CSE1

» What will be the tomorrow Gems ?
Today at 1:42 pm by Damithsam

» TJL HOLD......
Today at 1:40 pm by kadik

» අය වැය අද පස්වරු 1.00 ......
Today at 1:36 pm by CSE1

» Moving Averages Don’t Move Stocks
Today at 1:34 pm by MARKETWATCH2

» SUNSHINE HOLDINGS-ANY COMMENTS
Today at 1:23 pm by MoneyTree

» Market will up !
Today at 1:22 pm by OzTRADER

» Technical Analytics & Charts
Today at 1:14 pm by OzTRADER

» IS THIS MESSAGING SYSTEM WORKS
Today at 1:09 pm by zoozzoo

» What is your time frame for "Long Term" investment.
Today at 1:06 pm by RPPA

» Interest rates likely to go up before elections.
Today at 1:05 pm by D.G.Dayaratne

» Don’t miss the train! SDB, AAIC, SPEN, ALUFAB, ALUMEX, AAIC, DFCC, FLCH, MGT, TYRE, SFIN, SHL, TAP, AHUN
Today at 12:36 pm by MARKETWATCH2

» Asia Asset Finance
Today at 12:12 pm by Aubrey Perera

» is WATA start a plantation Rally ??
Today at 11:58 am by CSE1

» ACME some thing happening
Today at 11:54 am by CSE1

» Results out for OSEA
Today at 11:52 am by Nuwan Samarawickrama

» TODAY CHRISTMAS...........
Today at 11:27 am by worthiness

» Best shares in 2014
Today at 11:16 am by FLOWER2

» CFVF to keep
Today at 11:09 am by swarnasana

» Budget easing or uneasing the market
Today at 11:00 am by worthiness

» After 1.45 pm Market will up.
Today at 10:56 am by Harry82

» REFERENDUM IN THE OFFING?
Today at 10:40 am by KPP

» MADU- keep on eye
Today at 9:52 am by Gainer

» Rs 32.4B in foreign investments exit Govt. securities market
Today at 9:23 am by RPPA

» WAPO -another hidden gem
Today at 9:16 am by Hawk Eye

» COLO and UML
Today at 9:08 am by CSE1

» Best plantaion stock
Today at 9:05 am by podda2

» Switch to John Keells (JKH) Warrants
Today at 8:56 am by sampath.anuradha

» Beware of BIL - Browns Investments Manipulation from Today by LOLC fame will rock share with a disclosure that only said they have signed up to build a hotel in Maldives!
Today at 8:50 am by Wessa123

» What Will be Today Best ?
Today at 8:49 am by CSE1

» A possible rate cut is on the cards
Today at 8:35 am by NZ BOY

» Incumbent Edge
Today at 8:35 am by anjelo

» Last chance to BUY
Today at 7:39 am by windi5

» Technical Journal Book of NC
Today at 6:53 am by NC

» People Trying to discourage our Experts and Seniors
Today at 3:42 am by sfmpp

» එව බලව!මේ ජොන් කීල්ස් බේරේ වැවේ නවතම Waterfront සිරි!
Today at 2:12 am by marusira

» Budjet 2015
Today at 1:59 am by Market R

» maskeliya will shine soon.....????????
Today at 1:07 am by fireshelter

» CFLB I still believe it will move faster
Today at 1:00 am by fireshelter

» AAF results out......looking good
Today at 12:47 am by kuma524

» Dipped produts
Yesterday at 11:54 pm by Nitro 7

» AAF Profit increased by 130%
Yesterday at 11:31 pm by dineshfernando

» OSEA - very good results
Yesterday at 9:48 pm by Balanced_Views

» MAL (HOW IS IT)
Yesterday at 9:22 pm by lakmal87

» AAF.R000 conversion
Yesterday at 9:08 pm by Top Trader

» AAF.N000 run started...
Yesterday at 9:01 pm by zy

»  එජාප විකල්ප අයවැය යෝජනා මෙන්න
Yesterday at 7:49 pm by RPPA

» මෙවර අයවැය නවෝත්පාදනය පදනම්ව යෝජනාවීම සතුටක්
Yesterday at 7:44 pm by CSE1

» Metro politan resource holdings( MPRH )
Yesterday at 6:50 pm by CSE1

» FOREIGN PURCHASES........
Yesterday at 6:03 pm by OzTRADER

» time to enter csf
Yesterday at 5:27 pm by buddikasmart

» Please anybody tell me why people are buying GREG.W0006 @ 10 cents ??
Yesterday at 4:49 pm by aiwa

» Market Summary 23 rd Oct
Yesterday at 4:41 pm by fff4sl

» Madu & Bala Acquisition
Yesterday at 4:28 pm by fff4sl

» where is AAF R promoters?
Yesterday at 3:56 pm by Aubrey Perera

» CFVF Why did you make profits buddy......... We are loosing our Money
Yesterday at 3:49 pm by Aubrey Perera

» BlackRock funds collecting John Keells shares, eyeing a 30 million share block of JKH?
Yesterday at 3:05 pm by DealKing

» BlackRock said to be eyeing a minimum of 2 million share Blocks of John Keells to buy a total of 30 million shares
Yesterday at 3:04 pm by DealKing

» Next is LFIN or VFIN or CFIN
Yesterday at 2:59 pm by kadik

» Today is the Day for ACAP holders - Target price Rs 15.00
Yesterday at 2:49 pm by zy

» WHAT HAPPEN SFL.P000
Yesterday at 2:26 pm by sampath.anuradha

» CFVF sell now...
Yesterday at 2:25 pm by OzTRADER

» What happen to ATL.N000
Yesterday at 2:00 pm by fff4sl

» why vpel is silent yet?
Yesterday at 1:56 pm by RPPA

» Still I believe ESL rather than CFVF
Yesterday at 1:50 pm by stockback

» SUN SHINES
Yesterday at 1:19 pm by VALUEPICK

» Balangoda plantation undervalue?
Yesterday at 1:10 pm by VALUEPICK

» market might come down again ?
Yesterday at 1:01 pm by Nuwan Samarawickrama

» Investment Advise???
Yesterday at 12:53 pm by fatmanlk

» ඒෂීයා ඇසෙට් හි සියයට 51 කට වඩා තීරණාත්මක බලයක් අත්පත් කර ගැනිම සදහා ඉන්දියාවේ Kochi මුලස්ථානය කර ගත් ඉන්දියාවේ විශාලතම රන් ණය සපයන්නා වන Muthoot Finance පියවර ගනිමින් සිටි...............
Yesterday at 12:40 pm by kuma524

» LIOC 46.90
Yesterday at 12:05 pm by CSE1

» CFL price ??????
Yesterday at 11:46 am by Ernie Tissera

» Is ODEL good to buy at this price level
Yesterday at 11:45 am by Nuwan Samarawickrama

» Buying Oppertunity
Yesterday at 11:43 am by VALUEPICK

» Keep On Eye MPRH
Yesterday at 11:38 am by CSE1

» DON'T HOLD ON TO ALUF
Yesterday at 11:17 am by Nuwan Samarawickrama

» Peoples Leasing Finance...
Yesterday at 11:04 am by kadik

» Asia Capital PLC: Still No disclosure about Asia Securities Sale Purchase Agreement -But New Buyer and Asia Securities People have given Press Interviews.
Yesterday at 11:02 am by DealKing

» Attention: SHARK (VPEL)
Yesterday at 10:54 am by GroundedKestrel

» Whats going on with LIOC ?
Yesterday at 10:48 am by PriyanDV

» 10 golden rules of investing in stock markets
Yesterday at 10:35 am by Octopus

» LCEM have an eye
Yesterday at 10:27 am by sureshot

» LOOKS LIKE ANOTHER RED DAY
Yesterday at 10:15 am by Nuwan Samarawickrama

» PABC profit
Yesterday at 9:57 am by Hawk Eye

» Why Stock Market Regulator Never Send Letters to Rohini & LOLC other Directors fame in Touchwood Case?
Yesterday at 9:29 am by Kouprey

» CEB Allocation Cut
Yesterday at 9:17 am by Sarabulathwita

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

What would be the highest ASI point during 2014?

 
 
 
 
 

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: 1757
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: 1028
Points: 2892
Reputation: 272
Join date: 2011-02-09

Back to top Go down

View previous topic View next topic Back to top


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