Public Bail

June 26, 2009 (LBO) – Sri Lanka’s Seylan Bank will be bailed out with the help of money from state institutions while a bid from a private investor was rejected because it did not meet ownership limits, the Central Bank said.

There will be no change in the board.

Seylan will also continue its link with the Bank of Ceylon under Central Bank decides to “discontinue with such assistance.”

The Central Bank, which is the banking regulator, said in a stock exchange filing that Seylan will issue shares to raise 3.0 billion rupees with support from state institutions.

Lanka Orix Leasing Company submitted the only bid to buy a 33 percent stake in Seylan Bank.

The regulator said the offer “has not fulfilled all the parameters” in relation to “ownership limits” and it had not accepted the bid.

At least one prospective bidder has said a 33 percent stake was not enough because any strategic buyer would eventually want to merge with the bank.

The regulator put Seylan under the wings of state-run Bank of Ceylon and wanted a new investor to buy into it when a run on Seylan’s deposits was triggered by the collapse of an unregulated firm in its owning Ceylinco group.

In addition to state institutio