Financial Times

People's Bank clarifies privatization move

People's Bank chairman Lal Nanayakkara has clarified reports about the bank's future saying privatization was a serious option given the government's inability to inject the required funds. However, he said in a statement, so far the government has not informed the Board of Directors of the People's Bank of any decision relating to privatization.

He quoted the letter of comfort issued by the government supporting the accounts of the People's Bank for the year ended 31st December 2002 as saying:

"The Board in connection with the People's Bank Restructuring Committee will commercialize the Bank as a single unit in an open transparent process. In case this process is not feasible, the Board will arrange to separate the People's Bank into viable units which will be commercialized," Nanayakkara said his comments about privatization were based on this statement. "It is admitted that term "restructuring" has wider connotations and it does not necessarily embrace privatization only," he said.

"However, the negative net worth position of the Bank cannot be remedied only by internally generated funds and therefore, a fresh injection of capital is vital.’’

"Since it is not feasible for the government to inject capital in such sizeable amounts for the third time to restore capital adequacy, privatisation is one of the options available."