Finance Support

Feb 20, 2009 (LBO) – Sri Lanka’s government is offering four billion rupees in bonds and guarantees to improve liquidity in registered finance and leasing companies facing liquidity problems, central bank governor Nivard Cabraal said. A liquidity ratio of 15 percent required to be maintained against fixed deposits would be cut to 10 percent and a 20 percent liquidity ratio against savings deposits would be cut to 15 percent.

Cabraal said the government will also specify limits on the remuneration and salaries of senior executives of finance and leasing companies which make use of the support package.

Those who make greater use of the facility will be subject to more stringent rules.

A three member committee would be appointed to liaise with the Treasury, the Central Bank and finance companies and monitor the facilities that are extended and also develop new ones if needed.

The regulator will also open its Medium and Long Term Credit Fund, a central bank liquidity facility that had been used in the 1980s to help collapsing financing if there is a need.

“At the moment there is no need for such a facility,” Cabraal said. “We believe the measures we have announced would be sufficient to deal with the liquidity