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Wednesday, 3 January 2018 00:01 - - {{hitsCtrl.values.hits}}
The Central Bank yesterday confirmed that it had set up a new department from 1 January called the Resolution Enforcement Department (RED) which will now monitor wrongdoings and take legal action against finance companies.
“We are trying to improve and enhance the rigour of our regulation and supervision. At the same time if we find there has been criminality we will prosecute,” Central Bank Governor Dr. Indrajit Coomaraswamy said in Colombo yesterday.
Noting that there were five distressed finance companies, namely CIFL, ETFI, The Finance, City Finance and Standard Finance as well as one primary dealer Entrust, he stressed that in the future RED would take legal action against them.
“In some of the troubled finance companies, we probably would have to impose a haircut on the depositors and when you have to impose a haircut on the depositors, the companies will have to do its best to understand what went wrong and if there is criminality involved, then RED will prosecute,” he added.
Outlining that the Central Bank had already taken action against Entrust and CIFL, he said they wanted to be more rigorous in the way they pursue action. The enforcement unit will also look at unauthorised deposits and pyramid schemes.
Dr. Coomaraswamy said that the Central Bank official met with the Attorney General and he had promised to provide the two senior consultants comprising one criminal lawyer and one civil lawyer to put together a small unit where other counsellors were going to support the senior lawyers.
“In addition, we have three CID officers who are now fulltime,” he added.
The Governor pointed out that the non-bank financial sector has too many players for the volume of business available and they are trying to consolidate by gradually increasing the capital requirement.
Revealing that the Central Bank was upgrading its supervision, Dr. Coomaraswamy asserted that they were switching to a risk-based supervision system.
“We have a kind of traffic light system. We are getting some technical assistance from the US Treasury on this, where they have a model which has certain ratios which would trigger action much earlier in the process.”
