Liquidity

Jan 23, 2009 (LBO) – Sri Lankan registered finance company sector (RFC) which has been shaken by recent collapses of unregulated institutions should be able to overcome liquidity problems, a rating agency has said. RAM Ratings say that the collapse of Sakvithi and Golden Key, two unregulated firms had affected public confidence.

“So much so that even regulated financial institutions have reported marked reductions in new deposits and renewals,” RAM Ratings said in a statement.

“In view of the Central Bank’s timely actions and existing prudential requirements, we are of the view that the domestic RFC industry should be able to overcome any liquidity setback.”

RAM Ratings says firms rated by it covers about 60 percent of the registered finance company sector.

The rating agency says RFCs are under prudential regulations of the Central bank, which includes the maintaining of liquid assets to meet deposit withdrawals.

“Additionally, RFCs have access to the Central Bank’s discount-window facility (via primary dealers) for short-term liquidity needs,” RAM said.

RAM said Central Bank action on Seylan Bank, whose board was dissolved and put under a state bank, had helped improve confidence