Business Times

CB to continue monitoring finance companies

The Central Bank (CB) is expected to continue monitoring the finance companies’ industry to strengthen its position and financial system stability. Additional Director of the CB’s Department of Non-Banking Supervision N.H.E.R. Siriwardena told the Business Times this week that a recent decision by the Monetary Board to give CB guarantees to banks for loans given to finance companies is easing the burden for the industry. “Banks were unwilling to give credit facilities to stressed companies,” Ms. Siriwardena said. She explained that one of the most important requests by finance companies to the CB was to assist them in getting financial facilities and loans from the banking industry.

“We also issued corporate governance directions this year,” she said. “It has a lot of directions for companies which they will have to comply with in the coming year and we will be monitoring those developments as well.”

The CB also introduced a Rs.4 billion stimulus package earlier this year, with Cabinet approval, in order to strengthen the liquidity positions of the finance companies which were facing big liquidity crises. However, Ms. Siriwardena said none of the companies availed themselves to the stimulus package. “Under the package, the companies were allowed to sell their assets and land at 67% of the valuation amount. They did not want to take a hit in their profit and loss accounts and balance sheets so they did not take any action to get liquidity under the scheme.”

Ms. Siriwardena said the financial distress that companies were facing in the beginning of the year is somewhat controlled now. Following the collapse of Golden Key and Sakvithi finance companies, both unregistered, she said there has not been any new information on other unauthorized companies that are doing business. “The conditions of the regulated companies that were in distress are improving. Even though they faced liquidity problems, they managed.” The hardest hi twere the finance companies that came under the Ceylinco Group.

With regard to unregistered finance companies, Ms Siriwardena said the Department of Non Banking Supervision, upon receiving any information, has the authority to examine and investigate those companies under section 11 of the Finance Companies Act. “If we can determine that those companies are doing finance business, the CB can request them to register under the Finance Companies Act and fulfill all the requirements.” If companies fail to do so, the CB can inform the courts of the illegal business companies are involved in and also publish their names to inform the public.

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