Govt. to set up institution to monitor NBFIS

Amid several Non-banking Financial Institutions (NBFIS) collapsing in recent years, severely affecting the economy, the money market and the depositors, the Government is to set up an authority known as the ‘Financial Assets Management Authority’ (FAMA) to monitor such institutions. Finance Minister Ravi Karunanayake has obtained Cabinet approval to set up this unit under the Ministry of Finance. Retired Central Bank Deputy Governor B.D.W.A. Silva has been appointed as Consultant of this Unit and to prepare the necessary legal framework.

In the 2016 Budget it was proposed to establish the Financial Institutions Restructuring Agency to recapitalise failing finance companies and to acquire their assets for the purposes of restructuring these companies. The Cabinet Committee on Economic Management (CCEM), had recommended the setting up of the proposed Financial Institutions Restructuring Agency.

“Although there are provisions in the legal statutes for recapitalising and restructuring of financial institutions which are in distress, Sri Lanka does not possess a legal framework to acquire and resolve distressed assets of financial institutions. Accordingly, it is considered necessary to establish a separate entity titled “Financial Assets Management Agency (FAMA)” to acquire the assets of finance companies,” the minister said in his Cabinet memo. “It has also been considered appropriate that a separate Unit for this purpose be established initially under the Ministry of Finance. The purpose of establishing this Unit is to draft the proposed bill and implement the resolution of distressed assets of financial institutions specified under the draft Act.”

The Central Bank’s Bank Supervision Department came under heavy criticism from the public following the collapse of several NBFIS such as the Golden Key Credit Card Company and CIFL.

Meanwhile, the CB Monetary Board has approved to write off Rs.6.1 billion loaned to six finance companies that are on the verge of liquidation.

It was revealed at the Committee On Public Enterprises (COPE) that the six finance companies had repaid only Rs.18.4 million.

The COPE chairman Sunil Handunetti has recommended legal action against the CEO or the Chief Accountant of the six companies to recover the defaulted payments.