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The Finance Company delisted from CSE

29 Dec 2020

Securities of The Finance Company PLC (TFC), the license of which was cancelled in May this year, were delisted from the Colombo Stock Exchange (CSE) with immediate effect yesterday (28). The edict was made under Section 53 of the Securities and Exchange Commission (SEC) Act No. 36 of 1987. TFC is a finance company that was severely impacted by the failure of a number of financial institutions within the Ceylinco Group in 2008. The financial status of the company deteriorated gradually since then, resulting in dire straits such as negative capital, poor liquidity position, continuous losses, and significantly deteriorated asset quality. This, combined with the poor governance practices of the business, led to a severe liquidity crisis that consequently required intervention from the Central Bank of Sri Lanka (CBSL).  In September 2019, the CBSL extended the regulatory actions on TFC for a period of one month. The extended regulatory actions included the suspension of accepting new deposits, withdrawal of deposits, and disbursement of loans and advances to facilitate TFC’s restructuring process. At the end of this grace period (October 2019), the CBSL issued a Notice of Cancellation (NOC) of the finance business license issued to TFC for continuous violations of the Financial Business Act No. 42 of 2011 – including minimum core capital, capital adequacy, and liquid assets requirements. Speaking on its penal measures at the time (2019), the CBSL noted that "the company (TFC) is incurring a monthly loss of around Rs. 200 million, and hence it is obvious that operation of the company in this manner would be further detrimental to the interest of the depositors and other stakeholders”. Following this, additional penal action was taken in May this year; the Monetary Board of the CBSL cancelled TFC’s licence and its Certificate of Registration as a registered finance leasing establishment under the provisions of the Finance Leasing Act No. 56 of 2000. The reason cited by CBSL for these moves was TFC’s failure to find investors to revive the company within the time period stipulated by the CBSL.


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