New capital is to be injected into Seylan Bank, recently taken over by the regulator, to instill confidence in the bank, according to a Central Bank (CB) plan. Senior officials says new shareholders and new cash would provide some stability to the private bank before the CB decides to exit from management control.
A board member at Seylan Bank confirmed that the recapitalization of the bank will be announced by the CB.
A CB official said the Monetary Act provides wide powers to the CB to restructure institutions for the purpose of restoring public confidence. “We feel a fresh infusion of capital is necessary so that the public can deal with this bank without fear. At some point the Central Bank has to exit and at this time the public needs to be confident,” he told The Sunday Times FT.
The CB took over the bank in end December after fears of a run on its deposits following the collapse of the Golden Key (GK) Credit Card Co. Both Seylan and Golden Key belong to the Ceylinco Group whose chairman Lalith Kotelawala is under pressure from the courts and the public to refund GK deposits. Seylan Bank was handed over to the Bank of Ceylon for management, its board of directors sacked, and a new board installed. CB officials said the regulator has received a few proposals to purchase shares owned by Mr Kotelawala and others.
They said a committee is being set up to decide the way forward and future of the bank. The Seylan Bank Board member said that under a CB directive, the suspension period is valid for six months which ends in June 2009, the time when the AGM of the bank will also have to be held. “At that time, the CB may have to come up with restrictions preventing the nomination of some persons as directors by the shareholders (otherwise the same, former directors representing Ceylinco could be elected),” he said.
He said by June new investors would have been found under the CB fresh-capital proposal, he said. The board member said Seylan’s position has been negative, in the sense that withdrawals were more than deposits coming in, for the past two months. But in the past two weeks, the situation has changed and money is coming in now, he noted, adding, “Some new products the bank has announced have also paid off.” |
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