Stockbrokers’ risk based capital adequacy ratio to be implemented
The Colombo Stock Exchange (CSE) is to implement a risk based Capital Adequacy Ratio (CAR), which would ensure that stockbrokers retain an appropriate level of liquid capital in relation to the total risks faced by them when trading in securities, officials said. The CAR will replace the present net capital requirement of Rs 25 million each for the 29 stockbroking houses in a move that will see the industry players consolidating, they said. “The SEC approved the CAR last Friday at their Commission meeting. We will make a presentation to the stockbrokers and the plan is to implement it before June,” a CSE official told the Business Times. He said a certain formula on the CAR will be implemented.
Industry analysts pointed out that this will push smaller players to join with their larger counterparts. They say that it’s a good move as the market is too small for 29 players and consolidation has to happen. Ravi Abeysuriya, President Colombo Stock Brokers Association (CSBA) told the Business times that the CSBA feels that there are too many stock broking licences. “The CSBA is very much for consolidation. The stock broking industry would have transitioned into universal broking and become more viable with the consolidation of the industry with increased trading volumes and broking fees which are market determined.”