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

» Daily Foreign Transactions
by ruwan326 Today at 7:17 am

» EAST looks promising
by prabath Yesterday at 7:15 pm

» CTCE share holders get 1000 per share
by prabath Yesterday at 7:14 pm

» What companies to consider?
by mark Yesterday at 4:25 pm

» How to pick winning stocks by analysis not through predictions and gossip news-1
by ruwan326 Sat Jul 21, 2018 9:12 pm

» six-rules-to-follow-when-picking-stocks
by ruwan326 Sat Jul 21, 2018 8:59 pm

by samaritan Sat Jul 21, 2018 11:45 am

» BPPL going to be a gem
by ruwan326 Fri Jul 20, 2018 8:23 pm

» Sri Lankan shares close at 3-week high; Keells leads
by Miss-Sangeetha Fri Jul 20, 2018 7:40 pm

» expo.. @4.00
by Sameerad Fri Jul 20, 2018 12:26 pm

» ASI And The Future of Investors
by ruwan326 Fri Jul 20, 2018 9:45 am

» Keells Foods net profit grows 34-pct in June quarter, revenues up
by DS Wijesinghe Thu Jul 19, 2018 10:26 pm

by ruwan326 Thu Jul 19, 2018 9:05 pm

by ruwan326 Thu Jul 19, 2018 8:56 pm

» World Bank and Dept. of Commerce elevate Sri Lanka int’l trade to global info platform
by ruwan326 Thu Jul 19, 2018 7:19 pm

» Market will be Green today
by ruwan326 Thu Jul 19, 2018 6:52 pm

You are not connected. Please login or register

Sri Lanka Equity Forum » Stock Market News » Blanket guarantee for Finance Companies questionable: Theagarajah

Blanket guarantee for Finance Companies questionable: Theagarajah

Go down  Message [Page 1 of 1]


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

(LBO) – Sri Lanka’s Finance Ministry is to provide a blanket guarantee for finance companies which needs to be reconsidered, Chief Executive Officer of NDB, Rajendra Theagarajah said.

Finance minister delivering the budget speech said the Central Bank will provide a 100 percent guarantee on all deposits for all registered finance companies by end January 2016.

Although several countries have deposit guarantee schemes, they have been controversial for the problem of moral hazard and unbalanced taking of risk.

“As at today I don’t think any financial services industry in the world has blanket 100 percent guarantee,” Theagarajah said.

“How will you differentiate between institutions which are well managed and stable due to good governance and sound balance sheet and somebody who has just fallen back on a third-party guarantee,” he asked.

Theagarajah was speaking at the 2016 Budget Seminar organized by the Institute of Chartered Accountants.

“So that should be looked at. It must be first principle of survival of the fittest or encouragement of failure will be defeated.”

The 2016 budget has also proposed that banks should cease in engaging in leasing business from 01 June, 2016.

However, Theagarajah said it is yet to quantify the impact of providing such a guarantee as well as the real impact or the competition of it for the banking sector.

Finance minister in his budget speech said the guarantee scheme will provide the depositors with a sense of comfort and security for their deposits in the finance companies.

“To prevent undue concentration of deposits in the non-bank financial sector, I propose to impose a cap on the interest rates offered by the Finance Companies,” he said.

Even though certain state banks currently have state guarantee, it is evident that private banks are also carrying out their business activities well without such state backed guarantees.

Apart from the guarantee, a Financial Institution Restructuring Agency will also be established to help failing finance companies be recapitalized.

Troubled assets are to be taken over by this agency for purposes of restructuring and the Central Bank will be entrusted to undertake strict supervision on this restructured finance companies.

The government is to provide initial capital of 10 million rupees as equity and also issue a Treasury bond to the value of 25 billion rupees with a tenure of 5 years for the Agency.

Finance companies have been most vulnerable in the recent past and government had to provide relief to the Golden Key Depositors at a heavy cost.

see more at : -

Back to top  Message [Page 1 of 1]

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