over Central Bank advertisement
A Central Bank
warning last week that certain companies accepting investments from
the public were neither registered or licensed by the authorities
has drawn a sharp response from the institutions concerned, with
some even threatening legal action.
was in a Central Bank advertisement, which named 27 companies, and
said they were not licensed under the Banking Act No. 30 of 1988
or the Finance Companies Act No. 78 of 1988 for the purpose of accepting
deposits from the public.
The Central Bank said it was in response to queries from the public
whether it had registered or licensed such institutions which raise
funds from the public directly as deposits or in a manner akin to
deposit taking, i.e. on an undertaking to repay in cash or in kind.
a director of Okanda Finance (Pvt) Ltd., said that at the moment
they were in the process of instituting action against the Central
Bank, for which they were meeting with their lawyers.
He said that
they do not accept deposits but credit investments, which is different
Bank has confused the whole thing," he said, adding that the
bank's action would have been valid only if they accept money by
way of deposits.
going to go ahead with our business of borrowing from various sources,"
Mrs. L.K. Gunatilake,
Director of the Central Bank's Department of Supervision of Non-Bank
Financial Institutions, said that the notice was merely a response
to repeated requests by the public as to whether these institutions
She said that it was impossible for the Central Bank to look into
each of the institutions separately and the notice was published
merely to inform the public that these companies were not registered
under the Acts.
that they were in no way trying to dissuade the public from depositing
or investing in the companies but only to inform the public that
they will be depositing money at their own risk.
Tamara de Silva,
the assistant manager of investments at Panadura Finance and Enterprises
Ltd., said that their scheme too did not fall within the definition
of deposits but was called a 'project participation scheme'.
It is an investment,
she said, adding that "we give guaranteed profits" on
those investments. Panadura Finance was also under the Ceylinco
group and therefore had the backing of the group as well. A.R. Dissanayake,
managing director of Help Green (Pvt.) Ltd., expressed confusion
as to why the company had been named in the list. "We are not
a financial institute," he said. Their business involves the
purchase of land and its development for tea planting. Later they
sub-divide the land and transfer ownership of the property to interested
buyers. Dissanayake said that they were in no way involved with
deposits and the public notice had created a negative impact on
the company. Brigadier Neville Fernando, CEO of Touchwood Investments
Ltd., said, "we categorically deny that we are a finance company
and we don't take deposits."
He said that
they required neither the authority nor the licence of the Central
Bank for the operation of their business because they were a Board
of Investment approved company as well as being listed on the Colombo
was involved in plantations and had at no instance stated that they
were a finance company, according to Brigadier Fernando. "I
don't know what prompted the Central Bank to say this," he
said. Adding that their company had a lot of backing from many institutions,
including government institutions.
He also said
he felt that the public would not be misled by the notice because
they were wise enough to realise that it was not a finance company.
new HSBC ATM opens for business
The first HSBC
Automated Teller Machine (ATM) was declared open by Mohamed Jaleel
the Minister of State for Finance and Treasury on January 15, HSBC's
Colombo office said.
opened the ATM by making the first official transaction in the presence
of MMA (Maldivian Monetary Authority) officials, Mark Humble, Chief
Executive Officer HSBC Sri Lanka and Maldives, Sarath Weerakoon,
Manager Malé Branch and several customers.
the Malé branch is one of more than 8,400 offices of the
HSBC Group's worldwide branch network - a network that spans some
81 countries and territories.
HSBC ATM network, customers have easy and quick access to their
funds from around the world.
The ATM can
be accessed by customers carrying cards compatible with GlobalAccess,
Visa, MasterCard, and/or the Cirrus and Plus networks.
neutrality important for economic growth
should always maintain neutrality in politics and not try to play
too prominent a political role as it would be a barrier to economic
development, Yves Mersch, the Governor of the Central Bank of Luxembourg,
said last week.
countries should not play too prominent a role because you have
to pay a big price economically," he said speaking at a public
lecture on "How small open economies survive is a competitive
environment" held at the Central Bank's Centre for Banking
He said that
it is not possible to focus on the economic as well as the political
issues at the same time. Therefore, focusing on the economic scene
would lead to more jobs, lower interest rates and general economic
development of the country.
which is much smaller in size than Sri Lanka and with a much lower
population, has an average income of $50,000 - fifty times larger
than Sri Lanka's.
that neutrality in the political arena is important as "neutrality
is something foreign investors value very highly."
countries look at their size as a draw back but it is possible to
reverse that mind set. "What is important is to be outward
looking, to be open and try to make yourself bigger that you are
fostering regional co-operation using the strength of your
three important conditions, the objective advantages of a country,
which is to do with the country's culture and history, direct policy
making which he classified as the tax, accounting and legal environment,
and the way the public sector sees and projects itself.
on the role of the public sector he said that the attitude of the
public sector is important in luring foreign investments into the
country. The public sector should have a pro-business attitude and
be perceived as flexible and not bureaucratic.
"The overriding importance for small countries is to have absolute
political stability. There must be national consensus."
Sri Lanka has
to build on its experience of offering peace to the outside world,
that is both inward and outward looking, access for investors to
decision makers, and free movement of capital were all stressed
as being some of the important factors in the economic development
of small countries.
Bank can't warn public of shady financial outfits
Bank is unable to warn the public when financial institutions are
in danger, as this would lead to a collapse of the entire financial
system, its deputy governor W.A. Wijewardena said last week.
Bank performs on-site and off-site supervision of commercial banks
and if there are any irregularities they bring such mattes to the
attention of the management, he told a seminar organised by the
Sri Lanka Association of Securities and Investment Analysts to educate
the public on How to make prudent investments.
also spoke of the myth that the Central Bank could rescue financial
institutions by means of financial assistance.
He said, The
Central Bank has the right only to print money. It could only do
so to the extent the particular financial institution has government
He also said
printing money would increase inflation, which would erode the purchasing
power of the people. Speaking on investment options available, Vajira
Kulatilake, Chief Executive Officer, Citi National Investment Bank,
said, When investing, having an objective is important. And
most importantly diversification; spreading the risk of investment
by investing among different assets and institution is a must. Also
take inflation, return, risk, time horizon, taxation, and liquidity
in to account as they play an important role in making prudent investments.
of Fitch Ratings Lanka, speaking on the risk of investing, outlined
the concept of risk and types of risks.
He said, Information
is the lifeblood of financial markets. In reality the information
flow is uneven. In such situations distinguishing between good and
poor quality investment is difficult. As a result investors cannot
monitor the management's use of funds. The best protection available
for investors is financial disclosure, transparency and most importantly
good corporate governance.
He also spoke
of the credit rating system , saying, The public should try
to invest with financial institutions with credit ratings. Institutions
credit rating should not be misunderstood when purchasing debt instruments
of the same institution as debt instruments are rated individually.
Senior Manager, Legal, Securities and Exchange Commission (SEC),
said the recent amendments to the SEC Act give it enhanced powers
to investigate the books of firms, call for information and summon
witnesses. The amendments give more protection to investors .
The most shocking
description of the financial institutions came from Dr. Wickrema
Weerasooria, Legal Consultant, Central Bank , who stressed the importance
of casting a suspicious eye on financial institutions, which offer
very high interest rates that are unrealistic.
He said the
media, which carries advertisements of such institutions, can be
sued under the new Fair Trading Authority Act.
in the panel discussion, Sujeewa Mudalige, Partner PriceWaterhouseCoopers
said, When investing with plantation companies, be cautious
for the reason that the plantation companies recognise revenue and
expenses in a different manner. He also urged the public to
be more informed and to demand good governance from the business
community. Mudalige said that the independent media has a bigger
role to play in ensuring that the corporate sector adheres to good
corporate governance and that the public sector is held accountable
as well. (DM)
jitters punish stocks
Iraq, domestic political uncertainty and the shaky U.S. economy
dragged down stock prices on the Colombo bourse last week with the
All Share Price Index plunging below 800 but some investors hope
the market would rebound in the coming weeks on good corporate results.
and margin trading clients were selling off their stocks and remain
pessimistic about the market, with a US attack on Iraq looking inevitable
and looming fears that the opposition is pushing for another general
in the Gulf would send oil prices shooting up, fuelling inflation,
brokers said. But institutional and foreign investors remain hopeful
that despite these uncertainties the market would rebound this week
on reports of healthy corporate earnings.
There was no
big foreign selling last week but foreign investors were picking
up small gains as the market traded. There were small amounts of
foreign buying of secure stocks such JKH and NDB.
There was also
renewed interest in certain plantation stocks.
the massive wage hike and a tumbling Middle East market, tea shares
are not the favourite," a broker said. "With rubber prices
having recovered rubber plantation stocks would be a favourable
The share price
of SLT, the highest capitalised stock on the market, dipped below
the offer price last week and finished trading around the Rs. 13
mark. "There was some foreign buying of SLT shares, as it was
a bargain," another broker said.
With the Japanese
aid meeting to be held on June 16, Sri Lanka is expected to get
a cash injection of $500 million, which would boost the economy.
rate is seen improving to around five percent, with foreign aid
and the peace process helping to revive economic activity in the
north and east, especially in the agricultural sector.
The All Share
Price Index, which opened on Monday at 813.2 declined subsequently
and, despite a slight rebound, closed at 793.53.
Milanka Price index followed the same trend, opening the week at
1388.7 and ending at 1345.33. Top gainers on the last day of trading
were Browns, Kelani Tyres, Malwatte, and James Finlay. The top losers
were Vanik, Kandy Walk Inn, Fort Land and Browns Beach.