Dec 27, 2008 (LBO) – Sri Lanka’s central bank says it is ready to intervene if there is a risk to a registered or licensed financial institution following reported depositor ‘stress’ at some regulated Ceylinco group companies. Earlier on Saturday Ceylinco group chairman Lalith Kotelawala, said in a public advertisement that the group was selling out of Seylan Bank, a licensed commercial bank, to repay customers of Golden Key Credit Card Company.
The Ceylinco group is estimated to control about 51 percent of Seylan Bank, though Kotelawala did not specify the stake he was planning to sell.
When depositors demand their money back, even solvent institutions could run into trouble as they cannot liquidate assets quickly to repay depositors.
Commercial banks however have access to the central bank’s discount window to get printed money.
In the past week, the reverse repo volumes rose despite excess liquidity in the overall market.
During the current financial turmoil many governments in advanced countries issued blanket deposit guarantees to prevent panic withdrawals. Golden Key Credit Card Company, an unregulated firm in the Ceylinco group, failed to repay its customers.
“This emerging situation natu