Financial Times

Ombudsman, code for banks
By Dinesha Matthias
The government has called for the establishment of a banking ombudsman to deal with complaints by customers while bankers are working on a code of conduct to regulate commercial banks.

The moves come amid concern that both depositors and borrowers are being fleeced by commercial banks, which have reported huge profits at a time when many other corporate entities are struggling to survive.

"Issues such as lack of competition should be addressed through a banking ombudsman," said Dr. Wickrema Weerasooria, Legal Consultant, Central Bank of Sri Lanka. "Self-regulation is the best form of regulation. At present the Bankers' Association is working on a code of conduct for bankers and the government is insisting on having a banking ombudsman."

Asked about moves by certain banks to merge with each other, Weerasooria said, "It is universally accepted that financial institutions are merging. We are over banked with regard to the number of banks."

The proposed code of conduct for bankers is now being studied by the Central Bank, banking sector sources said. The proposal for a banking ombudsman is being discussed by the financial sector reform commission.

The banking ombudsman would handle complaints on discriminatory treatment, unfair treatment and poor services by commercial banks. Under the ombudsman system, customers should first complain to the relevant bank authorities and, if a satisfactory response is not received, complain to the banking ombudsman.
The ombudsman would bring both parties together and help arrange a settlement between the bank and the customer.

It was not yet clear whether the banking ombudsman would be established through an act of parliament as an independent body or come under the regulatory authority of the Central Bank, sources said. The members of the ombudsman's organisation would be banks like in other countries, as funding for this office would flow from member banks.

This proposal will be prepared after studying the role and functions of the banking ombudsman in countries like the United Kingdom and Australia. In other countries the banking ombudsman is an independent organisation that investigates customer complaints against financial services providers, including banks and other deposit-taking institutions.

The ombudsman in these countries has the power to direct a bank to compensate a customer in the event of a dispute. Banking analysts said there were concerns in the corporate world that commercial banks might not be providing small businesses with the financing they need to succeed and create jobs and that they favour big corporate interests.

"Do the banks serve everyone fairly or are some treated differently?" asked one analyst. "Bankers should give something in return to the people, competitive interest rates, better customer service, value-added products and services and to the society, reinvest in communities, meet the credit and service needs of the communities they serve, meet specific goals for investing in community economic development," he said.

Businessmen have complained that they have to pay high interest rates to obtain loans and that commercial banks were making "excessive profits" as a result.
Senior banking sector officials said the proposal of a banking ombudsman had been brought as a move towards self-regulation.

"It's time for the banks to address their social responsibilities. It is time to demand a good deal more accountability in return," said a banking expert. Meanwhile, the Sri Lanka Bankers' Association has made representations to Prime Minister Ranil Wickremesinghe requesting that bankers be removed from the new Consumers Affairs Authority Bill.

Bankers, like other professions, were displeased that they were included in the new Bill along with trades.

Potential to develop paint industry
Sri Lanka has the potential to develop a paint industry given the presence of high-grade minerals such as rutile in beach deposits, said S.A. Nandadeva, General Manager, Lanka Mineral Sands Ltd. "In addition to the main uses of the minerals, an industry that can be developed locally is the paint industry," he said.

The potential exists to develop a metallic paint using rutile, which is reddish in color, has negligible thermal expansion properties, is non-corrosive and has good reflection properties, he said. The company mines the rich deposits of ilmenite and rutile at its Pulmoddai beach site.

"If this modified paint is applied selectively to vehicles, good light reflection at night can be expected in addition to the additional beauty of the colour due to its metallic appearance," he told a seminar on the occurrence and processing of industrial raw materials in Sri Lanka. It was organized by the Postgraduate Institute of Science of the University of Peradeniya last week.

Nandadeva said ilmenite and rutile are processed to make titanium dioxide, the basis for high quality white pigment, which has replaced lead oxide as a non-toxic pigment base for paint. They are also used to make titanium metal-a light, strong, durable non-corrosive metal essential for aerospace industries and also for surgical use as in human spare parts and pacemaker.

Because of its special properties such as light weight, high strength, ability to withstand high temperature, high resistant to chemical attacks and corrosion, it is largely used in various types of guns, rockets, missiles, engines, and submarines, directly or in the form of alloys, Nandadeva said.

Predicted demand for ilmenite in 2005 is ten million tones. Present consumption is about seven million tonnes. Lanka Mineral Sands produces only 80,000 tonnes. "This low quantity is to our disadvantage in finding a better market," Nandadeva said. "We have been a residual supplier in the world market due to low tonnage."

Cooray quits Aitken Spence
Aitken Spence chairman Prema Cooray resigned on Friday after a long spell in the company and just over a year in the top job, confirming The Sunday Times FT report last week that he was quitting. "It is time for a change," Cooray told the paper. "I will remain on the Board for the time being as a non-working director."

It was not immediately known who his successor would be although tycoon Harry Jayawardena, a big shareholder and a director, is known to be interested in taking charge of the conglomerate. Other sources said Cooray had reached the usual retirement age and was stepping down.

Cooray, appointed to the Board of Aitken Spence and Co Ltd in April 1998, became chairman one year ago with the retirement of the previous chairman Ratna Sivaratnam.

He is regarded as being largely responsible for the conglomerate's expansion into tourism in the Maldive islands whose resorts are important sources of revenue for the company and helped cushion the impact of the downturn in tourism in Sri Lanka owing to the Eelam war.

Jayawardena, managing director of the Stassen Group and Distilleries Company, came on the board of Aitken Spence in April 2000 after he acquired a sizeable stake in the company.

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