Dec 05, 2008 (LBO) – Sri Lanka’s Commercial Bank says its liability to a counterparty under an exotic derivative deal arranged for state-run Ceylon Petroleum Corporation (CPC) is 982 million rupees, after payments were suspended by court. Commercial Bank of Ceylon said the contract, based on WTI crude would expire on June 30, 2009 and if the payments continued to be suspended with oil at 48 dollars, the liability was 8.93 million US dollars.

Brent crude fell below 46 dollars yesterday. Court suspended payments under hedge deals last week.

Commercial Bank said the calculation was based on an exchange rate of 110 rupees per US dollar.

Sri Lanka’s central bank has been intervening in forex markets since September and injecting more than a 100 million rupees to the inter bank market in a ‘sterilized intervention’ campaign, bringing a peg with the US dollar under severe pressure.

Sri Lanka units of Citibank, Standard Chartered and Deutsche have also sold derivatives to CPC, but Standard Chartered said last week that the local unit was not affected.

According to a document released to the media last week, Commercial Bank has a sold a target redemption forward on a notional 10,000 barrels of WTI Light Sweet Crude which d