The National Savings Bank’s (NSB) role as a custodial bank has been suspended by the Colombo Stock Exchange following its failure to honour the payment on its purchase of a 13% stake on 27 April, the Daily FT learns.
CSE officials refused to comment about the suspension whilst there was no official statement either.
The suspension of NSB’s custodial role was anticipated by the capital market after it originally failed to reject the original buy order within the T+1 window after the transaction whilst it has failed to make the payment amounting to Rs. 390 million to date.
In a related development, Sampath Bank yesterday cleared the backlog of settlements it didn’t carry out on Friday after it was overdrawn to the tune of Rs. 390 million on account of settling the sellers of TFC shares to NSB on 27 April without having funds in place from NSB.
Market talk was that outstanding T+3 settlements due on Friday were estimated at around Rs. 100 million. Sampath is the leading settlement bank with a base of at least 15 brokers. It refused to participate in settlements on Friday on the grounds funds hadn’t been cleared.
Speculation was that it had settled all brokers except Taprobane Securities Ltd. This appears to be a direct fallout of the NSB-TFC deal for which the major broker was Taprobane Securities.
Meanwhile, Daily FT learns a meeting between NSB Chairman Prasad Kariyawasam and the Secretary to the Treasury was scheduled yesterday afternoon to resolve the impasse whilst a Board meeting of the NSB was on last evening.
These meetings were taking place amidst market talk that the Securities and Exchange Commission (SEC), which is probing the ill-fated deal, may in fact cancel it in its entirety. This however will require the buyer and seller making a joint request to the SEC.
Other analysts however have cautioned against such a move since a reversal will have major repercussions. The suggested compromise is for NSB to pay and then divest the stake to a willing buyer.
The controversial NSB-TFC deal is also expected to come under fire today during a media briefing convened by UNP MP and its Chief Spokesman on Economic Matters Dr. Harsha De Silva.