Central Bank cancels The Finance Company licence

The Monetary Board of the Central Bank (CB) has finally cancelled the Finance Company PLC (TFC) license with effect from today Friday May 22 after the company failed to find an investor to infuse capital.

Earlier the CB had allowed TFC to call for a fresh round of Expression of Interests to identify a credible investor with valid proof funds and a viable business restructuring plan to revive the operations of the company.

But TFC failed to identify such investor up to date and this was followed by today’s action to cancel the licence of the company.

The Finance Company, formerly from the Ceylinco Group, carried out its finance business activities under the Finance Business Act (FBA) but was severely impacted by the failure of a number of financial institutions within the Ceylinco Group in 2008, the CB said in a public announcement on Friday.

The CB Monetary Board issued a Notice of Cancellation (NOC) of the finance business licence issued to TFC, in terms of the powers vested under the FBA, with effect from 23rd October 2019, in order to safeguard the interests of the depositors and other stakeholders of TFC.

TFC had failed to tender a valid objection to the MB against such NOC within the stipulated time in terms of the provisions available in the FBA. Accordingly, the licence of TFC was noticed to be cancelled after 21st December 2019 onwards in terms of the FBA.

However, upon the request of the company, the MB allowed TFC to call for a fresh round of Expression of Interest to the Department of Supervision of Non-Bank Financial Institutions.

This approval was given to identify a credible investor with valid proof funds and a viable business restructuring plan to revive the operations of the company but TFC failed to identify such investor up to date.

Therefore its license to operate as a finance company has been cancelled. The Sri Lanka Deposit Insurance and Liquidity Support Scheme of the CB will take necessary actions to pay compensation to the insured depositors under the applicable laws and regulations.

It would facilitate to settle 93% of the company’s total depositors in full (135,100 depositors out of 145,172 total depositors), while each of the remaining 7% depositors (10,072 depositors) will also receive Rs.600,000/-as a part of their deposit amount and the remaining balance may be able to recover in the process of liquidation subject to the priority of claims. (Bandula)