Finance Minister’s promise to Golden Key customers

Monday, 18 May 2015 00:00 - - {{hitsCtrl.values.hits}}

Finance Minister Ravi Karunanayake seems to have given an undertaking to the depositors of The Finance Co that the Central Bank will reimburse Golden Key (GK) investors.

How can the Minister give such an undertaking to the depositors on behalf of the Central Bank? Does it mean that in future all finance companies will reimburse their depositors if the company is unable to do so?

The Central Bank has so far not reimbursed the depositors of failed companies because it is not a proper function of the Central Bank to do so. The Central Bank creates money when it disburses money and it is irresponsible for the Central Bank to do so.

Several finance companies have failed in the past and their depositors lost their money. Although the Central Bank registers them, the finance companies’ liabilities are not guaranteed by it. Nor should it do so. The depositors know that there is a risk of failure not only of finance companies but even banks. Has the Minister of Finance changed this policy?

R.M.B. Senanayake