Banks likely to bow out from Leasing Association

• Bank members blame industry body for failing to take any proactive steps to safeguard members’ interests
• Commend Govt. and PM for reconsidering Budget proposal
• Insist benefit of choice open to customers

By Charumini de Silva

Disgruntled banking members of the Leasing Association of Sri Lanka (LASL) are likely to pull out of the organisation on the charge it has failed to fully protect their interests following the contentious Budget 2016 proposal to end banks extending leasing services.

The Daily FT learns that the commercial bank members of the LASL are likely to form a separate Leasing Association/Council for themselves within the next few weeks.

Noting that LASL consists of commercial banks, finance companies and specialised leasing companies, they said the ‘double standards’ of the LASL exposed themselves when they failed to take any proactive steps to safeguard commercial bank members from the Budget proposals.

“Commercial bank members were helpless. The LASL is only concerned about the finance and specialised leasing companies,” the sources claimed.

However, stakeholders were grateful to the Government and the Prime Minister for reconsidering Budget proposal and allowing the banks to continue their leasing business.

“Having realised the gravity and the consequences of the Budget proposal to prevent commercial banks from continuing leasing business, sanity has prevailed,” the sources added.

Sources pointed out that commercial banks are an integral part of the industry, having been in the leasing industry for over two decades, with an estimated industry share of about Rs 220 billion, and they are also the major funder with which finance and specialised leasing companies engage.

They also commended the support rendered by Sri Lanka Bankers’ Association (SLBA), Ceylon Bank Employees Union (CBEU), professionals, academics and economists for their valuable insights to make the Government reconsider the Budget proposal.

The sources said that in an Extraordinary General Meeting (EGM) of LASL held on 2 December had allegedly revealed that the Finance House Association of Sri Lanka (FHASL) had been lobbying the Government to push banks out of leasing.

“After much deliberation the LASL agreed to facilitate a discussion between the banks and the FHASL and requested both parties to nominate a five-member committee to discuss the matter. Although the banks nominated a five-member committee with immediate effect no meeting has taken place yet as FHASL didn’t want to engage in any formal discussion,” the sources stressed.

The reason given for the Budget to discontinue commercial banks from engaging in leasing, is that commercial banks have neglected their core banking activities and have focused on leasing. However, banks insist their exposure to leasing is limited to a mere 5.8% of their loan book as at 30 September. Banks have also stressed that leasing is part of a holistic financial package offered to customers.

 LASL representatives were not available for comment.