Notice of cancellation of failed TFC licence

The Central Bank (CB) on Wednesday issued a notice of cancellation of the licence of the failed The Finance Company (TFC), in trouble since the collapse of the Ceylinco Group empire, and now totalling a monthly loss of Rs. 200 million.

The October 23 notice issued by the Monetary Board is aimed at protecting the rights of the depositors and other creditors.

Any credible investor can still submit an acceptable Expression of Interest (EOI) along with proof of funds for capital infusion and a Business Restructuring Plan for the consideration of TFC and CB, the banking regulator said in a media release.

It said interest due for deposits will be paid continuously to the depositors as per the CB directions. “At the same time, all borrowers of the company are strictly advised to pay their dues. Such borrowers are encouraged to pay their dues via bank accounts designated by TFC or to the nearest TFC branch. They should also ensure to obtain receipts for the repayments they make,” the CB said.

The deposit insurance and liquidity support scheme will also safeguard the interest of all depositors to a maximum of Rs.600,000 per depositor, which will cover 94 per cent of the TFC depositors in full.

Explaining the action, the CB said that TFC 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. Although, several efforts were made to identify prospective investors and to restructure the company, such efforts have not materialised to a satisfactory level yet.

The Monetary Board having considered the weak financial performances of TFC, took a number of regulatory actions under the provisions of FBA, with effect from February 15, 2019, with a view to safeguard the interests of the depositors and other stakeholders of the company. These measures included suspension of accepting new deposits, withdrawal of deposits and disbursement of loans and advances to facilitate the restructuring process of TFC. The primary objective of the regulatory actions was to identify a potential investor for TFC within a reasonable time period. However, TFC has not been able to find an acceptable investor to date to revive the company.

“It is important to understand that the revival of TFC entirely depends on the availability of an acceptable investor who is willing to invest in the equity capital of the company. Accordingly, the Monetary Board instructed TFC to call EOIs from potential investors and to request such investors to submit their Business Restructuring Proposals to revive TFC. However, TFC was not able to receive an acceptable EOI from any credible investor along with evidence for the availability of funds,” the CB said.