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Seylan Bank, banking arm of the Ceylinco Group will curtail its lending to other Ceylinco subsidiaries from now on, according to a Seylan official.
The official told The Sunday Times FT, on the sidelines of a press conference on Thursday to give the media 'the full story', "the new strategic plan the new board will be implementing in the short term will be to reduce lending to Ceylinco subsidiaries."
He also said this was the main reason for the Central Bank to appoint a new board on December 29 last year. The Central Bank removed the former board of directors of Seylan Bank and directed the Bank of Ceylon to appoint a new board in order to assure continued financial stability.
Since the Golden Key Credit Card Company crisis and subsequent events had created concern among the depositors of Seylan Bank that led to heavy withdrawals, the Monetary Board had decided on this course of action under Section 30 (1) of the Monetary Law Act No. 56 of 1949.
Asked to what extent companies in the Ceylinco Group including Golden Key owe money to Seylan Bank, the officials declined to comment.
Eastman Narangoda, new Chairman, Seylan Bank, told reporters that the urgent and critical issues to be handled in the short term are the credit quality, expenses, investments and off balance sheet items. He advocated moving towards a slightly ‘conservative banking paradigm’ in order to improve the credit quality. He said the board will focus on medium term issues, which will include an organizational transformation and continuous improvement processes.
"The process will include preparing the team to the new environment, identifying critical issues, establishing new vision/mission/goals in line with the new environment. I am planning to introduce a new strategic plan to the bank and immediate process improvement and continuous process improvement,” he also said.
Ajita Pasqual, Seylan CEO said the Non Performing Loan (NPL) rate at Seylan is at 12 percent, but it does not need any liquid infusion by the regulator. To this Mr. Narangoda noted, "We will improve the credit quality to reduce the NPL.”
The official, who declined to be named, said “this in other words mean the inter-group exposure will be reduced. Seylan has lent to group companies and it will be reduced largely hereafter."
Mr. Pasqual said that whatever Seylan lent to the crisis hit Golden Key had been fully secured. The official confirmed this saying that the security is mostly in terms of land. Mr. Narangoda said there were about Rs. 700 million withdrawals during the past two weeks and this run was mostly by retailers. He said the Bank will meet any request to withdraw money.
He said there are no plans to retrench staff. "When compared to other (peer) banks, Seylan may be overstaffed, but we are utilizing them," he added. Mr. Pasqual said that there are certain parties interested in buying the 23 % equity in Ceylinco and connected parties at Seylan. Mr. Narangoda said Seylan has returned to normal and customers are now bringing in new deposits including some who bring the deposits that had withdrawn. "The new partnership with the Bank of Ceylon is a source of strength and will provide a solid support for Seylan Bank as the Bank resurges to its original status." |
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