CBSL yet to explain why so many finance companies have collapsed under its watch

Last month, CBSL suspended the licences of SFS and ETI Finance Ltd.

It said both companies became insolvent “due to various irregularities taken place, since 2011 [ sic]”. But the regulator has never successfully explained why so many finance companies--some of them groups of businesses-- have collapsed under its watch or are in the process of unraveling.

These include Mercantile Credit Limited in the late 80s. In the 90s, there was Union Trust and Investment Ltd; House and Property Traders Ltd or

HPT; Translanka Investments Ltd; and Home Finance Limited. Pramuka Savings and Development Bank buckled in 2002, becoming the first bank in Sri Lanka to cave in.

Golden Key Credit Card Company collapsed later in 2008 along with Industrial Finance Ltd ( IFL). In 2016, Central Investments and Finance Ltd (CIFL), City Finance Corporation Ltd, The Standard Credit Finance Ltd and Entrust Securities PLC were declared insolvent.

In May this year, CBSL cancelled the operating licence of The Finance Company Plc, a non-bank lender of the troubled Ceylinco group. And in July, it halted the business of ETI and SFS.

There is no secret formula for these spectacular collapses. They are a result of fraud and mismanagement of funds which lead to erosion of assets, leaving the companies unable to repay their depositors. In some cases, the money has been siphoned out of the country. The shortfall is concealed by way of inflated assets. In all cases, the public suffer. The perpetrators are free.