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

Discussion Forum for Stock Market Investors in Sri Lanka

සිංහල පරිවර්තනය
Submit Post
Submit Post

Latest topics

» ලංකාවට වැස්ස කෘතිම වැස්ස it required for Sri Lanka?
by Uaecoindubai Today at 5:07 am

» Sad situation of expressway !!!!
by Yahapalanaya Today at 4:12 am

by soileconomy Yesterday at 9:14 pm

» Daily Stock Market Update
by Insights Equity Yesterday at 7:20 pm

» INSURANCE companies finally falling!
by nosf766 Yesterday at 2:00 pm

» Cinnamon Grand now Topless without Rohan Karr
by ChooBoy Yesterday at 1:47 pm

by Maharaja Yesterday at 1:47 pm

» Dusit Thani Sri Lanka project halted?
by ChooBoy Yesterday at 11:44 am

» UBC - What is going on
by Trader321 Yesterday at 9:39 am

» UBC TO HIT 24 ??
by Trader321 Yesterday at 9:38 am

» Profitable Forex Copy (over 100% profit monthly)
by princess111 Yesterday at 6:02 am

» SEC Chief welcomes PM’s remark on EPF’s return to stock market
by kalu351 Yesterday at 2:16 am

» පැලවත්ත කිරි සමාගම කොටස් වෙළද පොළට,DRINK pelawaththa milk & help sri lanka
by Miss-Sangeetha Thu Mar 21, 2019 5:39 pm

» CSE is promoting Life Insurance companies whilst Stock Market is crashing.
by ChooBoy Thu Mar 21, 2019 12:35 pm

» Singapore rejects Sri Lankan leader’s allegation on trading scam suspect
by Yahapalanaya Thu Mar 21, 2019 8:18 am

» BALA.N potential
by Yahapalanaya Thu Mar 21, 2019 6:39 am

» Sri lanka tourism income reached 4.4 billion USD 2019
by Yahapalanaya Wed Mar 20, 2019 10:03 pm

» presidential election very soon ?
by Yahapalanaya Wed Mar 20, 2019 10:01 pm

» UBC - Stake up by big invester
by Yahapalanaya Wed Mar 20, 2019 9:57 pm

» AEL.N0000 is the Next AAIC.N0000 -
by Trader321 Wed Mar 20, 2019 12:37 pm

» World Bank approves USD70Mn to Sri Lanka
by Sstar Wed Mar 20, 2019 11:13 am

» Sri Lanka shares end little changed; rupee rises
by Miss-Sangeetha Tue Mar 19, 2019 6:30 pm

» Diversification of Sri Lankan economy, must to garner more economic benefits
by ChooBoy Tue Mar 19, 2019 2:04 pm

» ALHP Right issue......!!!!1
by Miss-Sangeetha Tue Mar 19, 2019 11:47 am

» UBC.N0000- Donnt miss this
by Trader321 Tue Mar 19, 2019 10:13 am

» BFN - DEAL OVER - TO BE DE LISTED SOON AFTER THE PRIVATE PLACEMENT ඩීල් එක ඉවරයි @ 19-59 - කොටස් වෙළදපලෙනුත් ඉවත් කරගන්නා බවට ආරන්චි
by sanjulanka Mon Mar 18, 2019 7:03 am

» While waiting for the market to rebound, look for bargains if you can afford the risk. Try to be active at the right time to gain something
by Asoka Samarakone Sun Mar 17, 2019 3:18 pm

» ඉතා ඉක්මනින් සේවක අර්තසාදක අරමුදල නැවත කොටස් වෙළදපල ට
by mahasona2 Sun Mar 17, 2019 3:43 am

» Central Bank targeting early return of EPF to stock market
by mahasona2 Sun Mar 17, 2019 3:24 am

» Lofc delisting??
by Bdcdman Sat Mar 16, 2019 11:16 pm

» Weekly Stock Market Roundup
by Insights Equity Sat Mar 16, 2019 5:37 am

» Today is UBC.N0000 day.
by Trader321 Fri Mar 15, 2019 11:32 am

by Bdcdman Fri Mar 15, 2019 11:11 am

by Miss-Sangeetha Fri Mar 15, 2019 10:52 am

by mahasona2 Thu Mar 14, 2019 11:05 pm

by Yahapalanaya Thu Mar 14, 2019 6:09 pm

» ලාංකීය හෙදියකට ලක්ශ 9 ක් ගෙවන ඇමෙරිකාව
by Uaecoindubai Thu Mar 14, 2019 3:48 pm

by karuna2 Thu Mar 14, 2019 11:43 am

» රජයේ පඩි දෙගුණයක් වුන හැටි
by Uaecoindubai Thu Mar 14, 2019 9:31 am

» UBC.N0000 Vs AEL.N0000 - What will be the best
by Trader321 Thu Mar 14, 2019 9:15 am

» EFP TO start again invest in Stocks
by mahasona2 Thu Mar 14, 2019 1:10 am

» Second reading of budget passed by 119 Votes - Shows this Government is Confident
by Maharaja Wed Mar 13, 2019 11:27 pm

» Fall of stocks - Big Players are behindThis is the time to buy and collect stocks
by mahasona2 Wed Mar 13, 2019 9:49 pm

» Government salary hike almost double..
by Uaecoindubai Wed Mar 13, 2019 9:32 pm

by soileconomy Wed Mar 13, 2019 7:19 pm

» UBC.N0000 ? Expert ideas please ?
by Trader321 Wed Mar 13, 2019 2:31 pm

» UBC.N000- keep eye, something is happening
by Trader321 Wed Mar 13, 2019 2:22 pm

» How about EAST @ 10/= end of march
by karuna2 Wed Mar 13, 2019 2:21 pm

You are not connected. Please login or register

Sri Lanka Equity Forum » Stock Market Talk » CB’s power to bailout troubled finance companies challenged

CB’s power to bailout troubled finance companies challenged

Go down  Message [Page 1 of 1]


Manager - Equity Analytics
Manager - Equity Analytics
[size=32]CB’s power to bailout troubled finance companies challenged[/size]

Former Deputy Governor Wijewardena says notion of taxpayers’ money being used to pay defrauded depositors flawed

Monetary Act Law doesn’t allow Central Bank to print money and pay depositors 
The Central Bank’s plan to bailout three fraud-hit finance companies and a primary dealer is against the Monetary Law Act (MLA) as the provisions of the MLA allows the bank to lend only to licensed commercial banks in the case of liquidity requirements but not for providing redress to the defrauded depositors, according to a former Deputy Governor of the Central Bank. 

The Central Bank last week announced its plans to repay close to 12, 000 deposit holders and investors in these four companies by spending as much as Rs.16.5 billion along with interest beginning from 2017. 

While part of these depositors will be repaid using the Central Bank’s deposit insurance scheme, the balance will have to be repaid by printing money and this money will be placed in a Special Purpose Vehicle (SPV) without any collateral of security. The fund will be managed by Seylan Bank PLC.    
In this backdrop, former Central Bank Deputy Governor Dr. W.A. Wijewardena, a respected economist, whose newspaper Op-Eds are widely read, casts his doubts over the implementation of the Central Bank’s resolution to provide liquidity support to repay the depositors of three finance companies and investors of a primary dealer. 

“In terms of the Monetary Law Act, the Central Bank does not have the powers to do so. So, I don’t know how this plan is going to be implemented,” Dr. Wijewardena said, delivering the keynote address at the inauguration of the Sri Lanka Economic Association’s (SLEA) annual sessions last Friday.  

The Central Bank plans to repay as much as Rs.4.9 billion to 11, 878 depositors of The Standard Credit Finance Ltd., City Finance Corporation Ltd. and Central Investments and Finance PLC and a further Rs.11.6 billion to 131 investors of Entrust Securities PLC. 

However, Rs.3.1 billion of investments secured with the government securities invested through Entrust would be settled during the forthcoming weeks, according to the Central Bank. 
Further Dr. Wijewardena asked why as a taxpayer anyone should be paying for the wrong investment decisions made by those depositors and frauds committed by the owners/directors of these companies because money printing equivalent to bailing out costs are borne by the country’s taxpayers.  
“The resolution is good but of course the way the resolution had been done is bad. The Central Bank is planning to print money and bail-out four financial institutions,” he said in reference to the Central Bank’s plan. 

According to government data, the Treasury has allocated as much as Rs.5 billion to repay the depositors of the collapsed Golden Key Credit Card Company, of which the funds were alleged to have been misappropriated by the owners/directors. This was another instance where taxpayers’ money was used by the authorities to pay a section of individuals for their imprudent investments decisions.  The move also indirectly helped the owners/directors who brought these financial institutions down though mismanagement and fraud to claim no responsibility of their actions as depositors tend to cease their campaigns against these individuals since the government is paying them. “We have become a country which has bailed out problematic finance companies because they have become problematic because of fraud.  

“So, instead of addressing the frauds in these financial institutes, what we have done is we have got the taxpayers to pay money to the people who have lost their money in these financial institutions,” he charged. 
Asked why the Central Bank could not use the deposit insurance scheme to settle the entirety of these defrauded depositors, he said it could set a wrong precedent if the Central Bank did so.  At present the deposit insurance scheme has a balance of Rs.25.0 billion of which the largest contributors are the commercial banks.  

The entirety of the fund in the scheme is also not sufficient because these are not the only distressed finance companies which are in need of money.  Further Dr. Wijewardena said these depositors and investors who have already waited for over eight years with no return on their investment will further have to wait an undisclosed period and after which time the promised receipt of moneys by the Central Bank would have only a scant value considering the time value of money, as the value of money gradually depletes over time with inflation.  
The Monetary Board at its meeting held on October 14 approved to repay deposits and investments annually commencing from 2017 within a reasonable period of time with a fair interest rate during this repayment period.


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

Back to top  Message [Page 1 of 1]

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