ETI depositors cannot be paid by public funds: Eran

Thursday, 28 March 2019 01:51 - - {{hitsCtrl.values.hits}}

But says Govt. will work to finalise repayments after investor pays
Says CB role as regulator should be strengthened
Believes some level of fraud in all failed finance companies
Calls on public to rely on banks more as they are better regulated

By Ashwin Hemmathagama, Our Lobby Correspondent

The Government yesterday said it will not use taxpayer money to bail out Edirisinghe Trust Investment Finance Company (ETI) depositors but would explore the possibilities to resuscitate the business.

This was confirmed in Parliament yesterday by State Minister of Finance Eran Wickramaratne in response to an adjournment motion ‘Relief for depositors of ETI Finance Company’ moved by the Opposition, saying the Central Bank of Sri Lanka (CBSL), being the regulator, should be much stronger when it comes to monitoring and taking action.

Explaining the planned payback for 24,126 depositors, Wickramaratne held an investor has sent in $ 54 million, which will be used to pay back 20% of the deposits and expects $ 16 million more to pay another 10%.

“I spoke with the CBSL, which was anticipating $ 10 million on Wednesday (yesterday). The payments cannot be settled unless we receive this in the local bank accounts. After paying 30% of the deposits, it is expected to restructure the ETI in order to pay back all deposits. Liquidation is the next option if this fails, but liquidation will provide the depositors much less,” he said.

According to the State Minister, all collapsed finance companies had some element of fraud in them. “Ceylinco and Golden Key collapsed. We got to know Entrust finance company has also collapsed. We believe that another plan for Entrust should also be presented. Generally, there is fraud in all these failed companies. The directors and the owners should be responsible for this. The delay in the legal system is an issue. According to a recent survey, it takes 10 years to reach a judgment. Seven more years would be added to this if they appeal to the Supreme Court and the Court of Appeal. Directors know these loopholes,” he said.

“There are registered and unregistered finance companies. Higher the risk, higher the returns and lower the risk, lower the returns. But the question is whether to use taxpayer money to support these failing companies. To support the depositors, we have increased the depositor insurance cover up to Rs. 600,000,” he added.

The State Minister also confirmed that the banking sector of the country is much more stable compared to the finance companies. “During the last three decades, only one bank went down. But this is not the same as the finance companies. Once every two years, a finance company does down. The ETI has skipped taking action based on the instructions received from the CBSL from time to time. With the problem getting aggravated, on 22 May 2017 the CBSL was requested to take over the ETI. Since then, the CBSL took the management responsibility. The letter was sent at a time the depositors were demanding the money back,” he confirmed.