Buying Time

December 8, 2006 (LBO) – Sri Lanka Friday gave banks extra time till 2009 to top up their capital by five times, the Central Bank said, as some banks have fallen short of meeting a deadline set earlier.

In April 2005, monetary authorities set the capital minimum capital limit for commercial banks’ at 2.5 billion rupees, from 500 million rupees, while specialised banks were asked to set aside 1.5 billion rupees, from 200 million rupees.

The capital requirement was due to be met in two stages:
¢ 50 percent by December 2006
¢ 50 percent by December 2007

Under the fresh timetable announced today, banks have to put up:
¢ 50 percent by 2008
¢ 50 percent by 2009

Extensions will be given on a case-by-case basis, the financial regulator said, as some banks’ are finding it difficult to raise the extra cash through fresh share issues and retained earnings.

“Some banks¦made representations to the Central Bank requesting an extension of time in view of the difficulties confronted by them in meeting the new capital limits within the stipulated period of time,” the statement said.

Analysts had earlier warned that heavy taxation of the banking system was hamp