Central Bank appoints audit panel to submit report on 38 NBFIs

Sri Lanka’s financial sector regulator, the Central Bank of Sri Lanka (CBSL) has appointed its nine-member accredited panel of auditors with the responsibility of performing a valuation, information memorandum and vendor due diligence on the 38 Non-Bank Financial Institutions (NBFI), an Assistant Governor of CBSL said last week. According to C. J. P Siriwardene, the panel of auditors have been tasked to submit a report to the CBSL by mid- March 2014 so that it could help determine pricing for potential buyers from Category A (Banks and the larger NBFIs).

“Since we will be paying for the services of the auditors, we will keep the report with us but will share the information with potential buyers on request,” Siriwardena said.
The CBSL has given a time period of until March 31, 2014 for local banks and category A NBFIs to identify partners of their choice from within the category B NBFI for such mergers/absorptions.

Financial sector consolidation faces numerous challenges

Financial sector confronted with HR, IT and Tax issues amongst others, say experts

With the island’s monetary watchdog recently setting the master plan towards the consolidation of the country’s financial sector, experts at a panel discussion last week suggested that the sector will be faced with numerous practical issues with some needing further clarity from the regulator. Outlining the challenges, Shiluka Goonewardene, Principal for Transactions and Restructuring at KPMG in Sri Lanka said that some of the key issues in the diligence process of amalgamation would be in relation to analyzing the quality of credit portfolio, completeness of deposits, valuation of plant, property and equipment, valuation of investment in real estate portfolio, valuation of investment in private companies, robustness of systems and procedures and tax compliance.

“One of the grey areas in the amalgamation process is in the calculation of taxes. Amalgamation should be tax neutral at least for the financial institutions. If there is no tax neutrality but additional taxes, the whole process of consolidation will not work,” KPMG Principal for Tax and Regulatory, Suresh Perera cautioned at a packed conference on consolidation held at the Galadari Hotel in Colombo last week.

Hidden motives behind forced consolidation?asks Eran

Eran Wickramaratne

Opposition Member of Parliament, Eran Wickramaratne last week accused the Central Bank (CB) of forcing the banking and financial institutions in the country to go for mergers and absorptions through the process that the regulator had spelt out. Whilst pointing out that although the consolidation of the financial sector in principle is a good move and a long felt need, he however condemned that the guidelines that has been issued in facilitating the process were very illogical and that which raised suspicions whether the regulator had ‘ulterior motives’ in forcing the consolidation.

“When consolidating, the decision to merge and who to merge with should be left to the parties by shareholders, its directors and senior managers. They will make the decision based on a certain business and commercial rationality and not driven by any political objective. But from the Master Plan that had been published by the Central Bank it mentions, for example, that the expected outcome of the Central Bank is to have a ‘large development bank’ which means though not mentioned explicitly, was obvious that the Central Bank is forcing NDB and DFCC Bank to merge,” Wickramaratne, who was the former CEO of NDB Bank said.

TRC scraps Mobile Number Portability plans

Sri Lanka’s telecommunication watchdog, the Telecommunications Regulatory Commission of Sri Lanka (TRC) has temporarily scrapped an earlier proposal to implement Mobile Number Portability (MNP), a facility which allows a mobile subscriber to change the operator without changing his/her number. According to TRC, Director-General Anusha Palpita, the proposal has been halted as the island did not proportionately have a positive balance in the number of post-paid mobile subscribers in comparison to the number of pre-paid subscribers.

“If the MNP is implemented, the main beneficiary of it and those demanding for it is the population of post-paid mobile subscribers. However, in Sri Lanka’s case, we have less than 10% of the total mobile subscriber population owning a post-paid mobile connection. Therefore, in my opinion implementation of MNP will not be cost-effective at the moment,” the Director-General explained.