With the advancement of the Port City Colombo Economic Commission Act, Standard Chartered Bank Chief Executive Officer (CEO) Bingumal Thewarathanthri spoke on the opportunities available for the banking and financial services industry for both local and international banks in Sri Lanka.
The Colombo Port City Economic Commission Act envisages the establishment of offshore banks within the area of authority of the Colombo Port City. Would these entities be able to offer a wider array of services than foreign banks currently offer in Sri Lanka?
The premise of offshore banking is the deposit of funds by either a company or an individual in a bank which is situated outside their national residence. According to the draft law for Port City, offshore banking units may accept savings, fixed demand deposits, or lend to any authorised person or a non-resident in any designated foreign currency.
The success of this service depends on the framework that Port City comes up with for offshore banking. If the framework is similar to some of the other international financial centres (IFCs), the offshore units in the Port City will be able to facilitate many transactions that are currently not permitted in Sri Lanka under normal banking services. Therefore, offshore banking in the Port City will have an edge against onshore banking since it will not be governed under the current exchange control regulations.
How do you see these services supporting the wider ecosystem envisioned at Port City encompassing trade, logistics, corporate headquarters, etc.?
In Port City, the medium of exchange would be US dollars or any major foreign currency and that will protect the businesses from currency depreciation and monetary instability. We believe that the Port City will hub many regional treasury centres (RTCs) and procurement centres in future. In that context, having full offshore banking services will support areas such as regional liquidity management, inter-company funding, receivable services, and seamless cross-border payments. There will also be opportunities to do commodity trading, derivatives, and setting up of various funds. Depending on how Sri Lanka connects with the rest of the world with Double Tax Avoidance Agreements (DTAAs), Investor Protection and Promotion (IPP), and trade treaties, offshore banking in the Port City should be able to offer a range of products to support the potential offshore companies.
It is understood that these offshore banks would predominantly serve the regional markets. Why would they do so from Sri Lanka as opposed to setting up elsewhere in the region?
Though there are multiple hubs around us, we believe Sri Lanka has a business case for:
- Corporates that are already in South Asia but are managing the region from a different time zone.
- Corporates that are significantly large in India and are looking at de-risking some part of it.
- New entities that are established in South Asia; Sri Lanka to act as a gateway to the sub-continent.