No more financial institutions will collapse during my tenure and I will get my team to strengthen the financial health of all institutions, assured Central Bank Governor W.D. Lakshman, responding to the question as to what would be the status of the employees of the now defunct The Finance Company PLC (TFC).
He said that he had made a commitment to the Prime Minister to ensure the stability of all financial institutions which are being closely supervised by the Central Bank.
“I will not allow any more institutions to crash during my time and will have a solid program to re-organise and merge weak institutions with larger companies,” the Governor said, adding that there are a few institutions that need close attention.
On the status of the employees of TFC, he said there is no plan to ensure the jobs of the employees. However, all these aspects will be taken into account under a strict supervisory and monitoring program in the future.
Speculation had been growing over the stability of the country’s financial institutions and the system following the recent termination of the licence of TFC, a pioneering financial institution in the country.Depositors panicked over the safety of their deposits which is their hard-earned money, recalling the ordeal depositors went through with the institutions that went bust over the past two decades.
The Central Bank issuing a statement recently, assured depositors that it will continue to take all possible measures to ensure the safety of public deposits.
It noted that there has been speculation by various groups and individuals that Sri Lanka’s financial system and financial institutions are in a weak position and that the public is at risk of losing their deposits made at those institutions. It stated the global pandemic and the resultant slowdown in the domestic and the global economy have created a challenging environment for the operations, not only of the financial sector but also for all types of economic activities in the country. The government and the Central Bank have, therefore, called upon the financial sector, particularly the banking sector on the back of its inbuilt balance sheet strength, to continue to support the economy in various ways, while the Central Bank is providing the liquidity and regulatory support to the financial sector to meet these challenges.
Even prior to the outbreak, in 2018 and 2019, there was a rise in non-performing loans in banks and non-bank financial institutions, particularly due to the sluggish growth in private sector credit and overall economic activity.
By the time of the pandemic impact, the Government and the Central Bank had taken decisive measures to revive the economy including the establishment of a more conducive tax regime and a more favourable monetary policy stance, supporting growth of the real economy. -LF