Finance companies to face tougher capital requirements from July Rising minimum capital ratios
If there was any leniency enjoyed by the Sri Lanka’s finance companies on their capital and disclosure requirements thus far, such will end soon as the sector is set to come under a BASELLIKE regulatory framework.
The new capital regulations on licensed finance companies, which will take the form of BASEL rules on banks, will require the finance companies to gradually increase their capital ratios from 2018 through 2021, said Fitch Ratings on a special note on the sector ahead of the new rules coming into effect from July 1.
Accordingly, the tier I and tier II ratios of licensed finance companies will increase to 8.5 percent and 12.5 percent from the current 5 percent and 10 percent respectively, effective from next month. BASEL-LIKE model to increase minimum capital every year up to 2021 Tier I and tier II ratios to increase to 8.5% and 12.5% from current 5%t and 10% Fitch says higher capital requirements will improve sector resilience But says will add to capitalization pressures for small-scale finance firms