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TFC Employees Union President Duminda Thilakarathne speaking on TFC’s problems at the press conference yesterday – Pic by Kushan Pathiraja
By Uditha Jayasinghe
Depositors and employees of beleaguered The Finance Company (TFC) yesterday appealed for the President and the Prime Minister to intervene and revive the ailing entity, faulting the Central Bank for what they termed as inadequate and irresponsible oversight in the last decade, and outlining plans to stage a protest at Galle Face on Friday.
A coalition of TFC employees and depositors yesterday told reporters that they were facing severe hardships due to multiple decisions made by the Central Bank, with the latest being to cancel the license of The Finance Company in October 2019. They argued that the Central Bank had ten years to address the financial challenges of the company and set it back on track, but had failed to do so despite numerous Boards of Directors being appointed.
TFC was handed over to the Central Bank in 2009, after the meltdown of Ceylinco Group in the throes of the global financial crisis in 2008. At the time, the total assets of the company, which was established over 80 years ago, was tabulated at Rs. 36.7 billion and total liabilities amounted to Rs. 35.54 billion.
“TFC was the first finance company set up in Sri Lanka. It has been in existence for more than 80 years. When the company was handed over to the Central Bank it had a positive value of Rs. 1427 million. At that point the Central Bank talked about reviving the company. The Central Bank confirmed the credibility and stability of the company so as much as 75% of depositors chose to remain. However, ten years later, we are now facing a situation where the Central Bank had cancelled our license, and is trying to liquidate the company. If this was what they were going to do, then why did they not do that in 2009, when we would have been assured we would get all our money back? Why are they doing this after such a long time?” questioned TFC Employees Union President Duminda Thilakarathne.
Thilakaratne argued that due to repeated, and in his view, inconsistent, decisions made by the Central Bank, including the decision to stop taking deposits last year, but keep paying interest, TFC had made Rs. 26 billion in losses, necessitating an investor to funnel a large amount of cash to revive the company. He contended that the Central Bank had repeatedly made statements to undermine the chances of TFC attracting an investor, even though Expressions of Interest (EoIs) have been floated twice, once last December and again in January 2020.
The Central Bank had earlier announced that as no investor could provide proof of funds, both rounds of calling for EOIs were unsuccessful. The Central Bank in January said as there was no investor they had received approval from the Monetary Board to start dissolution of the company. The Central Bank has pointed out that once the company is dissolved, depositors were eligible to receive up to Rs. 600,000 in compensation from the Deposit Insurance Fund, which they have said covers 94% of the 140,000 odd depositors.
However, Thilakarathne argues that the Central Bank never gave reasons as to what happened to potential investors, and faulted the monetary authority for making negative statements about the finance industry of Sri Lanka, which he insisted discouraged investors from coming forward.
“This is not the first time the Central Bank has made decisions to undermine TFC’s chances of revival. In January 2019, the company, on the written request of Executive Directors and with the knowledge of the Central Bank, initiated a fundraising drive, which collected Rs. 946 million in one month. However, the Central Bank then prevented the company from even paying one month of interest on these new deposits. So obviously the public has lost faith in us.”
TFC stakeholders pointed out around 60% of the depositors were senior citizens, and unable to earn their losses again. They also highlighted examples of how depositors, some of them seriously ill, were unable to pay for their medications and live, due to their funds being tied up with TFC for such a long time.
“It is completely unfair that the depositors have to suffer like this because of the mistakes of the Central Bank. Not only is it depositors, but also the about Rs. 300 million in funds of TFC employees are also tied up. For the past ten years, all the Board of Directors were appointed by the Central Bank and the company functioned under their directions. So the Central Bank has a clear responsibility in this instance,” Thilakarathne said.
The Union President also argued that if steps had been taken to recoup Non-Performing Loans of TFC, and put in place a proper restructuring plan, it was possible to revive the company.
“We are appealing for President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa to intervene. We have already met with Senior Economic Advisor to the Prime Minister and former Central Bank Governor Ajith Nivard Cabraal, and many top officials, including from the Central Bank, were present at that meeting. We are hoping for a clear commitment from them, giving us details of how the company can be revived. This needs to happen soon as the company is already in a precarious state, and we cannot take more time about this. It is a sick patient that needs medicine fast.”
As part of its efforts to draw attention to the plight of TFC and its depositors, TFC Employees Union plans to stage a protest at Galle Face Green on 14 February.
