Dec 29, 2008 (LBO) Sri Lanka`s Seylan Bank`s board of directors has been dissolved by the monetary board of the Central Bank and its operations brought under state-run Bank of Ceylon, the regulator said.
The Central Bank said it was `discontinuing the services` of the board of Seylan Bank but retaining the current chief executive officer and employees.
Seylan Bank will be open for usual business with customers from December 30, it said.

State-run Bank of Ceylon had been appointed to carry on the business of bank and Bank of Ceylon had also been requested to appoint a new board of directors to the bank.

`The attention of the Monetary Board has been drawn to the recent events in the Ceylinco Group and the difficulties being encountered by Seylan Bank PLC with regard to deposit withdrawals and ensuing liquidity problems,` the Central Bank said in a statement.

`The difficulties of Seylan Bank PLC presented a potential danger to the stability of the financial system.`

The Ceylinco group has already announced that it was planning to sell out of the bank to repay depositors of Golden Key Credit Card Company, which ran into a liquidity crisis.

Officials say the sale of Seylan shares can proceed while the Bank of Ceylon performs a caretaker role in running the bank.

The problems at Golden Key Credit Card Company, an unregulated firm in the Ceylinco group, came to light last week after it failed to repay its customers.

The Central Bank said that the public should continue with their normal financial transactions with Seylan Bank and that `the Monetary Board assures the public of the safety of deposits and the stability of the financial system.`