Financial consolidation
By Charumini de Silva
Ceylon FT: Sri Lanka's banking watchdog – the Central Bank – will provide funds to a few non-bank financial institutions (NBFIs) via Sri Lanka Deposit Insurance Scheme (SLDI) in order to make them attractive to investors for mergers and acquisitions.
Speaking to Ceylon FT Central Bank Deputy Governor, Ananda Silva said, "During the financial consolidation process we saw that there were a few NBFIs that needed further financial support to attract investors for mergers and acquisitions. Hence, the Monetary Board approved providing such financial support to those entities."
He said Sri Lanka Deposit Insurance Scheme had grown to Rs 14 billion to date. Refusing to reveal the amount the Central Bank would provide to these companies Silva said, "Depending on the requirement of the entities we will allocate funds to strengthen their financial condition."
Central Bank formulated the scheme on 2 October 2010, where the member institutions paid the premium on a monthly or quarterly basis. However the liability was allowed after 1 January 2012. The main reason for this gap was to allow the fund to grow substantially by 2012.
According to the Central Bank the deposits of the funds were re-invested on government papers.
The premium levied on eligible deposits ranges between 0.10% and 0.15% per annum.
The DIF is separate from the Central Bank and its liability is limited to the level of fund balance and the DIF will be audited by the Auditor General.
Silva said the setting up of the deposit insurance scheme had a positive impact on the industry. The scheme improved depositors' confidence and has a self-corrective mechanism where companies would not have to take it as a burden. Having this kind of scheme would also help to strengthen the financial system, he said.
www.ceylontoday.lk
By Charumini de Silva
Ceylon FT: Sri Lanka's banking watchdog – the Central Bank – will provide funds to a few non-bank financial institutions (NBFIs) via Sri Lanka Deposit Insurance Scheme (SLDI) in order to make them attractive to investors for mergers and acquisitions.
Speaking to Ceylon FT Central Bank Deputy Governor, Ananda Silva said, "During the financial consolidation process we saw that there were a few NBFIs that needed further financial support to attract investors for mergers and acquisitions. Hence, the Monetary Board approved providing such financial support to those entities."
He said Sri Lanka Deposit Insurance Scheme had grown to Rs 14 billion to date. Refusing to reveal the amount the Central Bank would provide to these companies Silva said, "Depending on the requirement of the entities we will allocate funds to strengthen their financial condition."
Central Bank formulated the scheme on 2 October 2010, where the member institutions paid the premium on a monthly or quarterly basis. However the liability was allowed after 1 January 2012. The main reason for this gap was to allow the fund to grow substantially by 2012.
According to the Central Bank the deposits of the funds were re-invested on government papers.
The premium levied on eligible deposits ranges between 0.10% and 0.15% per annum.
These premiums are credited to the Deposit Insurance Fund (DIF) operated and managed by the Monetary Board of the Central Bank.
The DIF is separate from the Central Bank and its liability is limited to the level of fund balance and the DIF will be audited by the Auditor General.
Silva said the setting up of the deposit insurance scheme had a positive impact on the industry. The scheme improved depositors' confidence and has a self-corrective mechanism where companies would not have to take it as a burden. Having this kind of scheme would also help to strengthen the financial system, he said.
www.ceylontoday.lk
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