No new licences to be issued for finance companies, CB says
these companies. The latest initiative in this regard includes joint action by the Government, Central Bank and Finance House Association (FHA) in launching a new policy to resolve financial problems of these companies. As announced in the Government Budget 2016, the Financial Asset Management Company (FAMA) is to be set up in due course to help these companies to recover and manage their non-performing loans with state support in line with a model adopted by East Asian Countries,” the release said.
The CB will provide regulatory facilitation and arrange infusion of fresh capital from investors. A good number of investors with overseas links are in negotiations with the bank.
A new “Resolution Division” has been set up to take all necessary measures to address financial problems of these companies expeditiously. This specialised division will help the Monetary Board to implement necessary policy measures on a fast track basis. A new set of regulatory and supervisory measures will be introduced in due course in line with the above joint initiative. The examination and supervision methodology has already been revisited to assess the financial condition and the business models of the regulated entities by focusing on material risks to their future sustainability of businesses in place of the history-based assessment.
“The financial system stability of the country is one of the two statutory objectives of the Central Bank, supported with a large number of statutory powers and, therefore, the Central Bank will continue to resolve all problems affecting the financial system stability. However, the Central Bank alone is not able to do it and the support of all other stakeholders would also be necessary.”
The statement said the regulator is also aware that “certain parties who have the vested interest in taking over the management of these companies or preventing recovery action on account of large loans defaulted by them are spreading such erroneous news for their personal and business interests at the expense of depositors’ interests. In fact, these are the parties who are directly responsible for mismanagement of funds of these companies in the past which led to current financial problems”.
The CB said it was also concerned about the publication of such erroneous reports in the national newspapers without checking their validity and authenticity as they may cause unwarranted stresses on the financial system stability in the event such reports affect the public confidence in the system. “This can have an adverse impact on the whole country as any confidence issues regarding some could be easily contagious across the whole financial system. Accordingly, the Central Bank also wishes to seek the co-operation of the authorities of such newspapers and encourage them to be more concerned over national interests attached to this sensitive subject. Therefore, depositors and other stakeholders of all regulated entities are advised to be cautious regarding such misleading information and co-operate with the companies and the Central Bank to enhance business operations of these companies in their interest.”