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
» Technical Analytics & Charts
Today at 4:09 am by SHARK

» Cheers everyone!
Today at 3:46 am by Gintonic

» Asia Capital to lose Park Street Hotel property management from December 2014
Today at 3:18 am by StockGuru

» Announcement - Best Contributor of The Month
Today at 3:13 am by SHARK

» Tomorrow is a LUCKY Day..........?
Today at 1:53 am by Eng Krishantha

» Any Dividend Announcements?
Today at 1:39 am by Eng Krishantha

» ELPL moving slowly
Today at 1:35 am by daminda

» CFLB,KAPI and YORK rally will start soon
Today at 12:38 am by Eng Krishantha

» I'm new here
Today at 12:35 am by Eng Krishantha

Today at 12:32 am by Eng Krishantha

» COCR target price???
Today at 12:21 am by Eng Krishantha

» CHOT at Rs14.10
Today at 12:15 am by Eng Krishantha

» Orient Finance PLC has achieved another milestone by surpassing the Rs. 2 billion
Today at 12:13 am by Eng Krishantha

Today at 12:10 am by Eng Krishantha

» 51% shares of Free Lanka Capital Holdings PLC offered to Dhammika Perera
Today at 12:04 am by Eng Krishantha

» Probable Share Holding Structure of PCHH
Yesterday at 11:57 pm by Eng Krishantha

» TKYO, HHL, TJL, LIOC soon - quarterly reports out soon!
Yesterday at 11:51 pm by Eng Krishantha

» how is mbsl ?
Yesterday at 11:39 pm by Eng Krishantha

» The Best 5 Shares to Buy
Yesterday at 11:33 pm by Eng Krishantha

» Lucky Lanka Milk Processing Company Limited
Yesterday at 10:46 pm by karuna

» Rumors going on following stocks
Yesterday at 10:07 pm by Eng Krishantha

» Lucky lanka non voting may hit @ 5 level
Yesterday at 8:54 pm by stevenapple

» What do you think about UML............?
Yesterday at 8:23 pm by

» Another Bond Deal in the Offing - COMB Chairman Dharma Dheerasinghe, CALF, TFIL and PABC and TAP Update
Yesterday at 8:05 pm by Business Basil

» SFIN MACD chart
Yesterday at 7:57 pm by NZ BOY

Yesterday at 6:39 pm by Market R

Yesterday at 6:36 pm by Market R

» What do you think about TFIL
Yesterday at 5:15 pm by Aubrey Perera

» IMF warns sri lanka
Yesterday at 4:21 pm by shadow walker

Yesterday at 3:32 pm by MoneyTree

Yesterday at 3:06 pm by nkuda

» #CFLB or #VONE?
Yesterday at 2:50 pm by GroundedKestrel

» Snap Shot of My Share Portfolio
Yesterday at 2:36 pm by Sstar

» හිගන්නො කොටස් වෙළද පොලේ
Yesterday at 2:35 pm by Sstar

» BFL not moving ??????
Yesterday at 1:56 pm by nickjava

» RWSL can be shine soon
Yesterday at 1:38 pm by cse1981

» LLMP N is going down
Yesterday at 1:31 pm by Harry82

» CLPL.W13 near to Edge.
Yesterday at 1:15 pm by Niroshana1982

» After TAFL think and win post next recommende stock MBSL
Yesterday at 1:05 pm by CARACALLA

» DPL may rock
Yesterday at 11:25 am by CARACALLA

» Riverina Hotels Plc has amalgamated with Palm Garden Hotels Plc with effect from 5 December.
Yesterday at 11:14 am by skyfall

» York Street Partners led by Osman Kassim and family buying Asia Securities
Yesterday at 11:13 am by DealKing

» SHL (Softlogic Holdings): Hidden Value
Yesterday at 11:02 am by skyfall

» Massive Growth on Watawala Plantations - WATA
Yesterday at 10:01 am by PriyanDV

» GREG...foreign selling...
Yesterday at 7:56 am by hettdas

» AMF today 25% up but no sellers
Yesterday at 1:45 am by Gainer

» What are Share Warrants? How Risky?
Tue Jul 29, 2014 10:40 pm by keeper

» lgl x may pass 40
Tue Jul 29, 2014 9:57 pm by shadow walker

» දිගටම කොටස් එකතු කරනවා නමි මොන කමිපණි එකද හොද ?
Tue Jul 29, 2014 8:56 pm by D.G.Dayaratne

» CLPL.W only 5 million shares in the market nearly 80% some one bought
Tue Jul 29, 2014 7:34 pm by sisira.wijeweera

» advice eakak danda.
Tue Jul 29, 2014 7:23 pm by sisira.wijeweera

» What will happen to WAPO
Tue Jul 29, 2014 5:27 pm by indi009

» Short Quotes
Tue Jul 29, 2014 4:29 pm by stevenapple

» FLCH very Attractive Current Price
Tue Jul 29, 2014 4:05 pm by Invest-Wise

Tue Jul 29, 2014 3:34 pm by playsmart

» Comparison of City Hotels in Colombo
Tue Jul 29, 2014 3:27 pm by D.G.Dayaratne

» CLPL 00W13 Will be Success?
Tue Jul 29, 2014 2:44 pm by Niroshana1982

» what is the next move of PCHH ?
Tue Jul 29, 2014 2:00 pm by UAEBOY

» ලකී ලංකා සුභ මූර්තියෙන් 30 දා කොළඹ කොටස් වෙළෙඳ පොළට කිරි උතුරුවා දේ
Tue Jul 29, 2014 1:42 pm by D.G.Dayaratne

» AAF at Rs.2
Tue Jul 29, 2014 1:27 pm by dineshfernando

» profit taking day
Tue Jul 29, 2014 1:18 pm by D.G.Dayaratne

Tue Jul 29, 2014 1:14 pm by Niroshana1982

» Help with CLPL W13
Tue Jul 29, 2014 12:17 pm by slmarket2

» Why Vallible One (VONE) Directors are selling out?
Tue Jul 29, 2014 12:15 pm by Pethi

» Invitation to all past and new members
Tue Jul 29, 2014 10:59 am by Sstar

» Nimal Perera is buying Lanka Ceramics. Why not you?
Tue Jul 29, 2014 10:43 am by Pethi

» Ernst & Young offers Bid to buy Free Lanka Capital 51% at Rs.3.70 per share
Tue Jul 29, 2014 10:41 am by WildBear

» how far will the ASPI go
Tue Jul 29, 2014 10:29 am by dudi

» New Breed of Members are Online!!
Tue Jul 29, 2014 9:40 am by Sstar

» LLUB is up - LIOC will do well
Tue Jul 29, 2014 9:18 am by stevenapple

» Eid Mubarak....!!
Tue Jul 29, 2014 9:15 am by stevenapple

» CSE Calendar - Ex Dates / AGM / EGM
Tue Jul 29, 2014 9:03 am by piyalpy

» PCHH will be the future winner with new share holders
Mon Jul 28, 2014 11:52 pm by Market R

» Special thanks Goes to Gainer, Jana, NZ BOY !!!
Mon Jul 28, 2014 11:30 pm by MasterBlaster

Mon Jul 28, 2014 11:18 pm by NZ BOY

» Monday Markets -වෙළෙඳ පොළ නිසොල්මනේ ! ඒ අතරේ ෆී ලංකා කැපිටල් හෝල්ඩිංග්ස් “ඉස්මතු” වේ
Mon Jul 28, 2014 11:12 pm by NZ BOY

» Portfolio Challenge: Round 1
Mon Jul 28, 2014 10:29 pm by Sstar

» GREG song
Mon Jul 28, 2014 10:19 pm by Sstar

» Sri Lanka SEC asks for lower interest on margin credit - will brokers do any thing ?
Mon Jul 28, 2014 8:57 pm by WildBear

Mon Jul 28, 2014 8:28 pm by cse1981

» CSE- Company Information Search
Mon Jul 28, 2014 4:49 pm by stevenapple

» I have 5 Million Cash To Invest in CSE
Mon Jul 28, 2014 4:30 pm by stevenapple

» Stock-Picking Strategies: Growth Investing
Mon Jul 28, 2014 3:44 pm by stevenapple

» PEG Hotel - Is it good at current level
Mon Jul 28, 2014 2:42 pm by kethees

» Fire in Eden Hotel owned by LOLC
Mon Jul 28, 2014 1:25 pm by sureshot

» Best Plantation Shares...
Mon Jul 28, 2014 12:05 pm by PriyanDV

» Details of Kaluthota Finance
Mon Jul 28, 2014 12:04 pm by Hav

» DFCC Debenture Issue
Mon Jul 28, 2014 11:07 am by hettdas

Mon Jul 28, 2014 11:07 am by suddera

» ASI 12,000 - dream or reality?
Mon Jul 28, 2014 9:53 am by lux2014

» Shares to buy NOW
Mon Jul 28, 2014 9:11 am by Harry82

» how is kapi for long term
Mon Jul 28, 2014 2:25 am by Eng Krishantha

Mon Jul 28, 2014 1:00 am by Eng Krishantha

» any prediction about SDB , PCHH , CIFL ?
Mon Jul 28, 2014 12:02 am by hasarel

» Future of REEF group
Sun Jul 27, 2014 11:08 pm by WildBear

» Analysis of REEF in depth
Sun Jul 27, 2014 10:46 pm by WildBear

» CCS next gem
Sun Jul 27, 2014 9:57 pm by NZ BOY

» Rupee gains slightly after Dr. PB’s comments
Sun Jul 27, 2014 9:33 pm by dilruk raja

» Bourse slips on profit taking; foreigners buy
Sun Jul 27, 2014 9:29 pm by dilruk raja

Virtual Stock Market Game
Virtual Stock Market Game - Vstox
Sri Lanka Equity - Entertainment
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.

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]

Manager - Equity Analytics
Manager - Equity Analytics

Posts: 290
Points: 1624
Reputation: 15
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: 1014
Points: 2790
Reputation: 270
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