Support Package

Feb 03, 2009 (LBO) – Sri Lanka is developing a policy support package for registered finance and leasing companies that are facing liquidity problems, the Central Bank said. The Central Bank intervened to stop a run on Seylan Bank, dissolved its board of directors and put the bank under state-run Bank of Ceylon.

Depositors says finance companies have asked for more time from depositors to repay money, declined to pay back deposits until maturity while some have offered land instead of cash.

Finance companies which deal in the sub-prime market were also heavily exposed to a property bubble, which has since burst.

Leasing companies have also had difficulty in rolling over commercial paper and lease-backed securities as investors fled toward treasury securities, debt dealers have said.

“It is a joint Treasury and central bank policy package,” Central Bank Governor Nivard Cabraal said.

“We are working on it and it will be announced in a matter of days.”

Following the collapse of two unregistered finance firms, depositors of Sri Lanka’s registered finance companies have seen higher levels of withdrawals.

Central Bank said it had observed “str