Central Bank of Sri Lanka issues clarification regarding ETI Finance

Colombo (News 1st): The Central Bank yesterday (Feb 15) issued a clarification seeking to correct any misleading statements on the sale of subsidiaries and investment properties under ETI Finance (ETIF). The CBSL notes the approval granted by the Central Bank was to transfer investment properties and subsidiaries of ETI Finance Ltd., considering the best interest of the depositors, based on a proposal submitted by ETIF, which did not include the sale of shares of ETIF. The only proposal submitted by ETIF was from Blue Summit Capital Management Ltd. (BSCM), which is a foreign entity. As such, the possibility of ‘permitting a local investor’ at the time of approving the said transaction does not arise. Investors who expressed their interest in this regard to Central Bank were instructed to deal directly with ETIF, as ETIF was the owner of the assets. The press release issued yesterday says the involvement of Central Bank in any transaction to dispose of assets of a regulated entity is limited to granting necessary regulatory approvals, subject to compliance with applicable laws and regulations. As such, Central Bank only granted the approval for this particular transaction upon being satisfied that all possible steps to assess the sources of funds were taken. Central Bank, at no point in time, extended its assistance to an investor to buy the assets of ETIF. The CBSL release says no credible information was available to the Central Bank as to an ‘internationally blacklisted’ entity being involved in the transaction at the time of granting approval or at the times of receiving funds in tranches. Further, Central Bank does not become involved in assessing the ownership of entities which are not regulated by the Central Bank. CBSL says in the case of Swarnamahal Financial Services PLC, conditional approval was granted by the Monetary Board of Central Bank for a separate proposal submitted by the company. As per the said proposal, the proposed owner will be a locally incorporated entity. The statement reads, in the event, the current buyer is not able to infuse the balance US$ 5 million, ETIF would retain Swarnamahal Financial Services. In this regard, ETIF is already considering alternatives for reviving Swarnamahal Financial Services. CBSL says, as clearly mentioned in their press release dated February 11, proceeds of the already concluded US$ 54 million part of the transaction was utilised to repay 20% of the depositors, amounting to Rs. 6.4 billion. Further, all funds were directly received by ETIF. The Central Bank said it had at no time received any funds involved in this transaction. It adds that the fact that ETIF was considering investors was public information. Central Bank emphasises that the Government would not incur any cost, irrespective of whether the transaction to transfer assets of ETIF goes through or not, since ETIF is a privately owned limited liability company. Central Bank in its release stated that it would like to reiterate that Central Bank does not get directly involved in negotiations between regulated companies and potential investors. Central Bank’s involvement is for protecting the interests of the depositors.

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