Merchant Deal

April 28, 2009 (LBO) – Merchant Bank of Sri Lanka (MBSL) said it had almost completed a deal to take control of Ceylinco Savings Bank, a member of the troubled Ceylinco group, for 100 million rupees. MBSL, a unit of state-run Bank of Ceylon, had been in talks with the banking regulator, the Central Bank, to manage and rehabilitate Ceylinco Savings Bank.

“Merchant Bank of Sri Lanka has almost finalized an arrangement to infuse fresh capital amounting to 100 million rupees into Ceylinco Savings Bank Limited (CSBL) to acquire a controlling stake of over 51 percent,” MBSL said in a stock exchange filing.

MBSL was initially appointed as managing agent of the bank by the Monetary Board of the Central Bank to resolve the liquidity crisis in Ceylinco Savings, it said.

It has now got approval “in principle” to infuse fresh capital into Ceylinco Savings Bank, MBSL said.

The Ceylinco group and its subsidiaries got into trouble after the collapse of an unlisted deposit taking subsidiary firm late last year.

The collapse caused a run on some of the Ceylinco group deposit taking firms, forcing the regulator to step in.