Is Seylan a predicament for more choppy financial waters?
by A Special Correspondent
'The bank is functioning normally and we are stable, CEO of Seylan bank Ajitha Pasqual said today Dec 30th. But the matter continued to unnerve the financial markets today in Colombo.
The second largest listed lender Hatton National Bank plummeted 7 percent to 69.75 rupees a share in thin trade, while development lender DFCC Bank shed 7.52 percent to 52.25 rupees, according to Thomson Financial News.
Analysts said investors were concerned about the banking sector after a credit crunch created by large number of withdrawals from banks following the credit card scam reported last week.
Golden Key customers at the BMICH premises last week-pic: Virakesari.lk
Ceylinco Consolidated reported a credit card scam last week in one of its non-listed companies. Analysts estimate the amount to be around 26 billion rupees. ($228.8 million).
The central bank on Monday Dec 29th said it had decided to dissolve Seylan Bank's board of directors with immediate effect to maintain the stability of the financial system after the liquidity crunch prompted by the scam.
Trading in Seylan Bank resumed on Tuesday -- having been suspended for Monday -- more than three hours after the bourse opened. The shares jumped 28.57 percent to 20.25 rupees in thin trade.
On Saturday parent group Ceylinco Consolidated said it had decided to sell its stake in Seylan Bank to pay depositors of the credit card company.
The decision was made because of increased deposit withdrawals and suspected liquidity problems, the Central Bank said.
Lalith Kotelawala, listening to Golden Key customers
Lalith Kotelawala, chairman of Ceylinco Group said last week he would sell his shares to repay investors in failed Golden Key Credit Card Company. Both Seylan Bank and Golden Key are subsidiaries of Ceylinco Group.
However, the main opposition United National Party (UNP) has demanded a Parliamentary select Committee to investigate the role of the monetary Board and the Central Bank.
The UNP has said the move is to probe whether these Institutions responsible for the protection of public funds and regulating the activities of the Financial Institutions have duly and legitimately discharged their duties.
Mr. Anura disssanayake, Member of the Political Bureau of the Jantha Vimukthi Peramuna (JVP) has pointed out that people have lost confidence in private banks and as a result there is a threat that financial institutions would breakdown and emphasized that breakdown of banks would jeopardize the whole financial sphere.
He further pointed out that taking over Seylan Bank by the Central Bank only would not solve the issue. A statement should be made by the government regarding who would be responsible for its depositors and whether a valuation has been made or not regarding its assets.
A Seylan customer coming out from a branch on Tuesday, Dec 30th-pic: Virakesari.lk
The bank won't lend you money for a house and stand by while you use that money to buy a car. Shouldn't some one do the same and track every rupee the Government is spending through the Central Bank and Bank of Ceylon to 'steady' Seylan, said a Seylan bank customer.
Has the government failed to anticipate a crisis in the financial sector in its broad outline even though independent writers and economists, apart from the main opposition parties had been warning of the coming collapse for a period of time,? an analyst with a Colombo Brokerage house said.
He further said the most important economic anchor of any economy the finance sector is being challenged today even in the most versatile and dynamic economies of the world, and Sri Lanka with several other multiple issues at hand must navigate these conditions with transparency and zero corruption
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31 Dec 2008 11:41:41 GMT 
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31 Dec 2008 11:50:26 GMT 