Tue, 09 February 2010  13:02:58
Restructuring 6 Comment(s)
05 Mar, 2009 10:17:12
Sri Lanka investment bank looks at troubled financial group: report
Mar 05, 2009 (LBO) – An investment banking unit linked to a state bank is examining several troubled finance and real estate firms of Sri Lanka's Ceylinco group, a media report said.
The Daily Mirror newspaper said the Merchant Bank of Sri Lanka, a listed subsidiary of state-run Bank of Ceylon, is planning to re-structure a part of the Ceylinco group known as 'F&G group', and has stopped refunds.

Ceylinco has a licensed finance company known as Finance and Guarantee Co. Ltd as well as several others with the pre-fix F&G.

The Daily Mirror quoted Merchant Bank chairman Janaka Ratnayake as saying that F&G group liabilities were 12,879 billion according to book value and assets were around 13,487 million rupees.

F&G Real Estate Company Ltd had been offering 42 percent interest per year for some customers and has been rolling over deposits, he said.

While F & G Co. Ltd and F&G Properties have a "sufficient" asset base investors in F&G Real Estate Co. Ltd, "might have to sacrifice a certain period" to get refunds, Ratnayake was quoted as saying.

The report said refunds have been stopped to prevent influential people from taking out money at the expense of others and a recovery plan would be devised in two weeks.

Investors started to pull out money from Ceylinco group companies after Golden Key Credit Card, another company, folded.
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READER COMMENT(S)
6. lakshman Dalpadado Mar 08
The government is already guaranteeing the licensed banks and authorised financial institutions. The CBSL has no obligation to others and it's these institutions I am talking about.

Bailing out greedy, stupid criminals is not the function of well run responsible government. Tax evasion is a criminal offense by the way.

5. rex19 Mar 08
Mr. Lakshman Dalpadado
the government has to intervent in these type of situation, if not it would affect the whole financial industries ,du to the golden key scam most of the top leasing companies are facing withdrawals. if this continues pepole will loose confidence in the financial sector.

Eventulaly people will loose confidence in banks as well.as a monitering agent the central bank has to act and regulate finance companies

4. Lakshman Dalpadado Mar 06
Why should the government bail out private companies of questionable legal (and corporate) structures and fraudulent practices ? These companies should be allowed to go bankrupt and whatever assets liquidated and distributed amongst the investors.

Essentially, these financial companies have been acting as money managers and investing in real estate. When real estate prices were skyrocketing they were able to cover up the payments on their deposits. Quite a few investors, I am sure, must have profited from these practices. So, why should anyone bail them out when they are on to a losing streak?

What next ? shareholders asking for a bailout because they have lost out? Ultimate welfare nation?

Most Sri Lankans want to have the cake and eat it too!!

3. Jagath Mar 06
I realised this problem one year before but unfortunately the company management unaware financial systemic risk.The other main reasone for the F & G group unqualified people are in the management.This situation central bank bail out plan will not be worked.At last F&G Group will be nationalised. Jagath Vithanage.
2. Jude Mar 06
CBSL claims that these organizations do not come within its purview. However given that one of the explicitly stated aims of CBSL is to maintain financial system stability I dont think that CBSL can adopt a hands-off approach anymore. Lack of regulatory oversight is what happened in the US and that is what is happening in SL too.
1. Owllll Mar 05
The ongoing collapse of the Ceylinco Group raises questions as to the competence of investors in Sri Lanka. How many of them stop to consider what kind of investment will bring in profits of around 50% per annum to allow the payment of interest at 42% to depositors? And what kind of regulator sits by and watches while such offers are being made? What kind of professionals work for companies making such absurd offers?

For starters I would like to see all those who have served in senior management over the last five years as well as those who continue to do so in the financial sector, being questioned about their business models and asked to explain how these models are going to generate the kind of returns that will enable them to pay the kind of interest that they offer depositors. I would like to see all those whose business models are unable to generate such returns, jailed for fraud. This is another case of rice from the moon and those who make such promises must be exposed for the frauds that they are.