Central Bank cancels The Finance licence
Cancellation of licence effective from May 22, 2020
CB says TFC was unable to attract credible investors to arrest its severe liquidity crisis
93% of TFC depositors will be compensated in full through Deposit Insurance and Liquidity Support Scheme
TFC is the oldest finance company in the country with a history of over 80 years
The Monetary Board of the Central Bank yesterday announced the cancellation of licence of The Finance Company PLC (TFC) with effect from May 22, 2020 as the company failed to lure in credible investors to rectify its serious erosion of liquidity.
TFC carried its finance business activities under the Finance Business Act No. 42 of 2011 (FBA) and was severely impacted by the failure of a number of financial institutions within the Ceylinco Group in 2008.
Since then, the financial status of the company deteriorated gradually, leading to a severe liquidity crisis.
“All efforts made to revive the company through different strategies have failed and the continuity of the current status will be further detrimental to the interest of the depositors and other stakeholders of the company,” the Central Bank said.
TFC depositors had been unable to withdraw their money over the last fifteen months.
On October 23, 2019, the Monetary Board issued a Notice of Cancellation (NOC) of the finance business licence issued to TFC, in terms of the powers vested under the FBA, in order to safeguard the interests of the depositors and other stakeholders of TFC.
TFC failed to tender a valid objection to the Monetary Board against such NOC within the stipulated time in terms of the provisions available in FBA.
Accordingly, licence of TFC could have been cancelled after 21st December 2019 onwards in terms of the FBA.
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 of funds and a viable business restructuring plan to revive the operations of the company, but TFC had failed to identify such a investor up-to-date.
“Therefore, the MB decided to cancel the finance business licence issued to TFC, in terms ofthe FBA with effect from 22nd May 2020. Accordingly, TFC is not permitted to engage in finance business under the FBA with effect from such date,” a Central Bank statement issued yesterday said.
“Further, the Director of the Department of Supervision of Nonbank Financial Institutions of the Central Bank of Sri Lanka (CBSL) has decided to cancel the Certificate of Registration of TFC as a Registered Finance Leasing Establishment under the provisions of the Finance
Leasing Act No. 56 of 2000,” it added.
The statement noted the Sri Lanka Deposit Insurance and Liquidity Support Scheme of the Central Bank will take necessary action to pay compensation to the insured depositors under the applicable laws and regulations which would facilitate to settle 93 percent of the company’s total depositors in full (135,100 depositors out of 145,172 total depositors), while each of the remaining 7 percent 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 said further information regarding the payment of compensation will be communicated in due course.
TFC is the oldest finance company in the country with a history of over 80 years.