Sri Lanka relaxes entry rules for foreign bond buyers

May 30, 2008 (LBO) – Sri Lanka has removed foreign funds investing in government bonds from the scrutiny of the country’s securities watchdog, the island’s central bank said. Foreign hedge funds bought into Sri Lanka government securities heavily in the first part of 2007.

But turmoil in global credit markets had made conditions in international markets much tighter of late. In January 2008, Sri Lanka doubled the volume of rupee denominated government bonds open to foreign buyers to to 10 percent of outstanding securities.

The central bank said from last week entry criteria has been relaxed to eliminate “practical issues” in participating in the bond market.

“Accordingly, foreign country funds, mutual fund or regional funds are permitted to invest in government Treasury bonds without the registration requirement at Securities and Exchange Commission of Sri Lanka,” the public debt department, which is a unit of the central bank said.

The statement said market intermediaries should apply ‘know your customer'(KYC) verification practices for “customer identification and due diligence procedures.”