By Duruthu Edirimuni
The Central Bank (CB) is monitoring other registered financial institutions of the Ceylinco Group after the crisis at the Golden Key (GK) Company, while looking at the possibilities of investigating the company, according to senior Central Bank officials.
"When one company fails, it will spread to other companies as well. This is mainly because the Ceylinco Group has a lot of inter-company transactions where companies borrow money and lend money to each other. Therefore if one company fails, it will spread to the other firms as well. As such we are monitoring the registered financial institutions of the Ceylinco Group," a senior Central Bank official explained to The Sunday Times FT. He said the regulator is also 'looking at the possibility of’ investigating GK.
CB Governor Nivard Cabraal however told The Sunday Times FT that Golden Key is not a registered financial institution with the Central Bank and ‘therefore there is nothing the Central Bank can say (or do).’
Last week Golden Key was snowed under a crisis after anxious depositors began pulling out their depositors forcing the company to come out with a bailout package where all depositors won’t be paid at once. The company admitted the panic was triggered by mismanagement in the organisation. Another Central Bank official said Golden Key is a 'separate institution'. "In our supervision scope this company is not covered.
They deal in credit cards (as their primary business line) and credit cards are not under finance or leasing. But we are trying to see what can be done," he said.
He further said there were complaints by the public regarding GK and Central Bank has initiated an investigation into other registered Ceylinco Group finance firms. "We are not concerned about the GK side, but we are monitoring other Central Bank registered companies of the Ceylinco Group," he said.
He said, "We are gathering information pertaining to the other registered financial companies in the Group. We are trying to minimize the impact of their other financial institutions due to GK."
The official noted that in 2003 the regulator received complaints from the public alleging the company was accepting deposits. "We wrote to the company and (Ceylinco Chairman) Dr. Lalith Kotelawela told us that he will not allow the company to take deposits from the customers without giving them credit cards. Then we put these correspondence to the Monetary Board," the official said.
He said the Monetary Board was satisfied and the investigation had ended there. A CB Non Bank Supervision Department official said they are monitoring The Finance, Ceylinco Investments, Seylan Merchant Bank and Finance & Guarantee Company. "The CB’s Supervision department is monitoring Seylan Bank," he added.
Ceylinco and CB to discuss bailout package
All finance and investment companies in the Ceylinco Group are currently facing a liquidity crisis and an emergency meeting between the Central Bank and the Ceylinco management is to be held tomorrow to discuss a bailout package, a director of the company told The Sunday Times FT.
He said that the directors of the Group’s finance and investment banks decided a month ago not to refund the money placed in fixed deposits before the maturity date till the situation improves.
The crisis came as many people were not making investments in finance companies as a result of increasing interest rates on Treasury bills and the loss of public confidence in finance companies after the Sakvithi scam. He also attributed the situation to the current economic crisis in the country.