Ambiguity

Feb 03, 2008 (LBO) – Sri Lanka’s Commercial Bank says the ‘ambiguity’ behind a suspension of payments on oil derivatives sold to state-run Ceylon Petroleum Corporation (CPC) is causing uncertainty, and leaving it in a tight position. “Unless there is a strict instruction by the regulator we feel that we have to honor the counterparties for over selves as well as to maintain the credibility of the Sri Lankan market,” says Commercial Bank’s head of global markets Dudeepa Ratwatte.

Commercial Bank has to settle counterparties on two deals, one which was sold direct to CPC and another which went via People’s Bank as an inter-bank transaction.

Commercial Bank continued settling counterparties after receiving legal advice that the Supreme Court had only stopped CPC from paying banks.

“We took a stance to honor our foreign counterparts because we were a bank which operates outside Sri Lanka, because we have a big branch network in Bangladesh and we had to maintain our credibility, adds Ratwatte.

“Not paying our counterparts would have been seen very negatively by our foreign associates.”

Commercial Bank has been in the position of fighting to protect not only its own credit standing but also foreign percept