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The Finance Company license cancelled after revival attempts fail

22 May 2020

Monetary Board of the Central Bank of Sri Lanka has cancelled the license of The Finance Company (TFC) with effect from today (22) as TFC failed to bring in an investor to revive the company within the stipulated time period, by the Central Bank. Further, the Central Bank has also cancelled the Certificate of Registration of TFC as a Registered Finance Leasing Establishment under the provisions of the Finance Leasing Act No. 56 of 2000. Issuing a press release announcing the cancellation of TFC’s license and registration, the Central Bank noted that the company cannot engage in financial business from today onwards as all efforts made to revive the company through different strategies have failed. “The continuity of current status will be further detrimental to the interest of the depositors and other stake holders of the company. Further, the depositors of TFC were unable to withdraw their money over the last fifteen months,” the Central Bank noted. The Central Bank noted that its Sri Lanka Deposit Insurance and Liquidity Support Scheme will take necessary actions to pay compensation to the insured depositors under the applicable laws and regulations which would facilitate to settle 93% of the company’s total depositors in full (135,100 depositors out of 145,172 total depositors). “Each of the remaining 7% depositors (10,072 depositors) will also receive Rs.600,000/-as a part of their deposit amount and the remaining balance may be able to recover in the process of liquidation subject to the priority of claims,” the Central Bank further noted. The decision of cancellation came following a number of chances given by the Central Bank to the TFC to find possibilities of bringing the company back to normal. On 23 October, 2019, Central Bank issued a Notice of Cancellation (NOC) of the finance business license issued to TFC in terms of the powers vested under the Financial Business Act No. 42 of 2011. Nevertheless, TFC failed to tender a valid objection to the Monetary Board against the NOC within the time period given to do so, therefore TFC’s license was set to be cancelled from 21 December 2019 onwards. However, upon the request of the company, the Monetary Board allowed TFC to call for a fresh round of Expression of Interests to identify a credible investor with valid proof funds and a viable business restructuring plan with which the company failed to comply once again. TFC is a finance company that was severely impacted by the failure of a number of financial institutions within the Ceylinco group in 2008 and since then the financial status of the company deteriorated gradually, leading to severe liquidity crisis, calling intervention of the Central Bank.

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