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CB to encourage mergers of financial institutions
View(s):Over the next year, the Central Bank of Sri Lanka (CBSL) will encourage mergers and consolidations within the banking and non-banking financial institutions (NBFI) sectors, said Governor Ajith Nivard Cabraal yesterday. His comments to the Sunday Times come amidst fresh efforts by the regulator to set more stringent standards for finance companies. Last week, four new directions were issued by the Monetary Board in an effort to tighten controls.
They are listed on the official website of the Government Printing Department as the Finance Companies (Writing off of Accommodations) Direction; the Finance Companies (Debt Instruments) Direction; the Finance Companies (Liquid Assets) Direction; and the Finance Companies (Interest Rates) Direction.
The content of the directions were not immediately available. “As of now, about 90 percent of the assets, deposits and advances in the NBFI sector are held by 20 NBFIs,” Mr. Cabraal said. “The other 38 companies account for the balance 10 percent. Hence, there is a tailor-made opportunity to encourage mergers and acquisitions.”
Industry observers had warned that there were far too many finance companies than could be effectively regulated while experts had urged the CBSL to facilitate mergers of existing ones rather than issue new licences. Authoritative sources said the regulator has also made some internal changes to facilitate better monitoring of the non-banking finance sector in future.
Several finance companies were revealed to be facing liquidity pressures in recent times. The CBLS was forced to intervene in the case of one, Central Investments and Finance Ltd, which is now being managed by People’s Leasing and Finance Company PLC.
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