The collapse of financial institutions every other year is a damning indictment on the banking regulator, the main opposition United National Party charged yesterday, slamming the Central Bank for misleading innocent depositors after another registered finance company was declared to be in trouble recently.
Some 6,000 depositors have been left high and dry after it was found that Central Investments and Finance PLC (CIFL) was in deep financial trouble.
“If the Central Bank is the regulator and continues to register such companies as safe for public deposits, there is no justification for them to throw their hands up and declare they can’t do anything about it now,” UNP National List Legislator and Economist Dr. Harsha De Silva.
De Silva said that if Sri Lankan financial institutions were failing, the supervisory authority was neglecting its duty. “Otherwise, for what earthly purpose is there a regulator of banks?” an irate De Silva demanded.
The Central Bank had learnt no lessons from the Sakvithi and Golden Key catastrophes, the UNP Parliamentarian said, charging that promised legislation to prevent public deposits being jeopardised were being relegated to the bookshelves.
He said that the banking regulator had now come up with a rescue scheme for troubled financial institutions, but the last time the Central Bank had undertaken the restructuring of finance companies, it had been an unmitigated disaster.
“The Finance Company was taken over by the Central Bank for ‘restructuring’. In 2012 it turned a marginal profit of Rs. 15 million. By March 2013, it had made a loss of Rs. 1.5 billion under a Central Bank-appointed Management Board,” De Silva charged.
Citing the Central Bank’s Strategic Plan for 2010-2014, De Silva said specific mention had been made of steps to be taken to regulate non-banking financial institutions. A key goal in that plan was to “make the market and the public aware” of companies in trouble, De Silva noted.
“According to this strategic plan, the list of troubled companies was to be published every quarter by the Central Bank – this has been confined to paper,” the UNP MP said.
De Silva charged that the Central Bank was being negligent by allowing fraudsters and confidence tricksters to play out innocent depositors of their lifesavings.
“Somebody has to take responsibility – if the Central Bank is registering these companies, who’s to blame?” he charged.