Report on financial sector consolidation out this week

Wednesday, 8 April 2015 01:24 -     - {{hitsCtrl.values.hits}}

The report compiled by the committee appointed to provide advice on the previous regime’s financial sector consolidation program will be handed over to Prime Minister Ranil Wickremesinghe this week. The expert committee is headed by top professional Dinesh Weerakkody. It was tasked with reviewing the financial sector consolidation process initiated by the previous regime, report its findings and suggest the best way forward. The Central Bank last year held discussions with select NBFIs with a view to facilitating the implementation of the respective merger plans. By the end of October 41 Non-Bank Financial Institutions (NBFIs) and nine banks had confirmed their consolidation plans. Out of this, eight NBFIs and two banks have already completed their respective consolidation plans, whilst 33 NBFIs and seven banks were still progressing and are at different stages in their plans. The progress of the implementation of these consolidation plans were closely monitored by the Central Bank of Sri Lanka. In its November 2014 update, the Central Bank said the consolidation process of seven NBFIs was completed and another 22 NBFIs and four banks were in progress for completion in due course. In the December update, which was the final in the series, the Central Bank said the Ministry of Finance had issued the gazette notification in relation to the exemption of stamp duty, for the issue of share certificates for mergers and acquisitions under the financial sector consolidation process. The Central Bank, in collaboration with the Ministry of Finance and Planning, issued guidelines on the ascertainment of cost of acquisition/merger as a qualifying payment and on the claimability of any unabsorbed input credit in terms of the Inland Revenue Act and the Value Added Tax Act respectively. The guidelines are applicable to licensed banks, licensed finance companies and specialised leasing companies and are effective from 1 April 2014. These guidelines specify the items of costs in relation to the acquisition of a business as an ongoing concern or the acquisition of shares or the merger with another bank, finance company or leasing company. This concession is expected to further promote the financial sector consolidation process and ensure the expeditious completion of ongoing mergers and acquisitions of banks, finance companies and leasing companies.