TFC to merge with SMIB?
Employees of several Sri Lankan banks are opposed to the financial sector reforms by the Central Bank (CB) citing for example the viability of a proposal to merge the loss-making The Finance Company (TFC) with the profitable State Mortgage and Investment Bank (SMIB).
Channa Dissanayake, acting Secretary of the CBEU, said the SMIB recorded a net profit of Rs. 400 million last year whereas it was a loss of Rs. 800 million at the TFC. “With such a weak financial institution how could the SMIB be stronger?” he asked. Officials from the institutions were unavailable for comment to verify the proposal or the figures mentioned.
Mr. Dissanayake and CBEU’s acting President S.P. Jayaratne were speaking to the Business Times on the position of employees and the planned reforms. They said the CBEU has issued statements on behalf of employees of the Bank of Ceylon, State Mortgage and Investment Bank, Seylan Bank, MBSL Savings Bank, People’s Bank, Hatton National Bank, Sarana Development Bank, Provincial Development Bank, HDFC (Housing Development Finance Corporation) Bank and the Sri Lanka Savings Bank, indicating their opposition.
Mr. Jayaratne said that the CB was not forthcoming with all the information about these reforms. He said that the CB Governor Nivard Cabraal has indicated that there could be retrenchment of employees and top jobs also, pointing out that in some countries this kind of reforms were tried and failed.
He said while state banks and state financial institutions come under the Finance Ministry, its Secretary and officials are yet to express their views on the reforms, pointing out: “Who would take the responsibility, if the financial markets are affected by the aggressive changes that are envisaged?”
Mr. Dissanayake in his comments referred to loans taken by state banks, saying foreign financial institutions have indicated that the asset base of some banks are not sufficient to stand surety for some of the loans these banks have obtained.