Bank Bailout

June 29, 2009 (LBO) – Sri Lanka Insurance Corporation (SLIC) may take up the bulk of risk capital in bailing out Seylan Bank, while state-run Bank of Ceylon and National Savings Bank (NSB) may take smaller stakes, a media report said. SLIC was recently returned to state ownership and management following a court order, and a board was approved by courts last Friday.

The Sunday Island newspaper quoting and unnamed source said NSB will take up the least volume of shares at it already has 3.47 percent of its voting shares and 3.67 percent of its non-voting shares.

The report said Sri Lanka Insurance will take up the “most number of shares” while Bank of Ceylon will come second.

Seylan was quickly put under the guidance of Bank of Ceylon by the Central Bank following a run on Seylan’s deposits when an unregulated firm in its controlling Ceylinco group collapsed last year.

The Central Bank said about 3.0 billion rupees was needed to boost Seylan’s capital.

The Sunday Island did not say whether the SLIC’s life or general fund will take up the shares.

Analysts say that if SLIC’s life fund is forced to take up Seylan shares on terms that a private sector player was not willing to do so, the burde