CB cancels licence of The Finance Company

Saturday, 23 May 2020 00:00 -     - {{hitsCtrl.values.hits}}

  • Cancellation due to repeated efforts to revive company failing
  • No reliable investor found despite several rounds of EOIs called
  • CB says 93% or 135,100 of depositors will be paid in full using deposit insurance scheme
  • Remaining 10,072 depositors to get Rs. 600,000 until assets liquidated

The Central Bank yesterday cancelled the licence of The Finance Company after it failed to raise fresh investment earlier this year and said it would work to repay over 90% of depositors. 

Issuing a statement, the Central Bank said it would draw on the Sri Lanka Deposit Insurance and Liquidity Support Scheme to pay compensation to the insured depositors under the applicable laws and regulations.

“The insurance scheme will 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 may be able to recover the remaining balance in the process of liquidation subject to the priority of claims,” the statement said. 

The Finance Company PLC (TFC) is a finance company which carried out its finance business activities under the Finance Business Act No. 42 of 2011 (FBA) and was severely impacted by the failure of a number of financial institutions within the Ceylinco Group in 2008. Since then, the financial status of the company deteriorated gradually, leading to a severe liquidity crisis, the Central Bank said. 

“All efforts made to revive the company through different strategies have failed and the continuity of current status will be further detrimental to the interest of the depositors and other stakeholders of the company. Further, the depositors of TFC were unable to withdraw their money over the last 15 months.”

As previously informed by the press release dated 23 October 2019, the Monetary Board of the Central Bank of Sri Lanka (MB) 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 23 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 FBA. Accordingly, licence of TFC can be cancelled after 21 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 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 has failed to identify such investor up to date.

“Therefore, the MB decided to cancel the finance business licence issued to TFC, in terms of the FBA with effect from 22 May 2020. Accordingly, TFC is not permitted to engage in finance business under the FBA with effect from such date,” the statement added. 

Further, the Director of the Department of Supervision of Non-Bank Financial Institutions of the Central Bank of Sri Lanka (CBSL) has decided to cancel the Certificate of Registration of TFC as a Registered Finance Leasing Establishment under the provisions of the Finance Leasing Act No. 56 of 2000. Further information regarding the payment of compensation will be communicated in due course.

Contact details for depositors: Department of Supervision of Non-Bank Financial Institutions for inquiries on cancellation of the licence 011 2477573, 011 2477229 and 011 2477504 or email snbfi_query@cbsl.lk. Resolution and Enforcement Department for payment of compensation under deposit insurance 011 2398788 or email dred@cbsl.lk. The Finance Company PLC for inquiries on deposits 011 2557888, 011 2580210 or email info@thefinance.lk.