Financial Times

Financial institutions rating to be made compulsory
By Duruthu Edirimuni
The Central Bank has extended the second deadline for banks to obtain a compulsory rating to the end of December this year. The Central Bank issued a mandatory guideline to all licensed commercial banks (LCBs) and licensed specialised banks (LSBs) to obtain a rating by 1 January this year, but extended the date up to 30 June.

The regulator's guideline was suggested by last year's budget proposal highlighting a mandatory requirement for all financial institutions to obtain an accepted international rating to minimise the risk for depositors and investors, when investing.

There are 22 LCBs in the country out of which 11 are local and the balance foreign. Seven local commercial banks, namely Commercial Bank, Nation's Trust Bank, Sampath Bank, Seylan Bank, Hatton National Bank, Bank of Ceylon and People's Bank have been rated so far and CitiBank is the only foreign bank that is rated.

However, the regulator feels that the foreign banks do not need a rating as their foreign headquarters have been rated. There are four more local LSBs that need to be rated and sources said that the banks have approached Fitch Rating Lanka Ltd., the only rating agency in the country.

DFCC, National Savings Bank and State Mortgage and Investment Bank, Housing Development and Finance Corporation (HDFC) have been rated out of the 13 LSBs. Dr. Rani Jayamaha, Deputy Governor Central Bank says that the regulator will be tolerant of the remaining banks till the end of December, this year. Registered finance companies and leasing firms have been requested by the regulator to be rated by January 1, 2005.

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