12 weak finance Cos. to be consolidated
The Central Bank’s (CB) plan to revive at least 12 weak finance companies will see daylight by mid-next year.
This plan will involve consolidation and have some mergers and acquisitions, CB officials told the Business Times. According to their size, and the trouble they are in, the finance companies will be consolidated, they said. "We told the industry to come up with some proposals in line with our suggestions. Now the valuations are being done on 12,” a CB official told the Business Times.
He said there are three types of companies that the CB has identified in the finance companies' sector. "One is strong companies, mid-tier companies, and weaker companies. There are a couple of avenues available (for revival) for these and one is consolidation. We have a type of framework for mergers and acquisitions," he explained.
This is done in a bid to strengthen the sector to withstand shocks. The CB last June said in a statement that, “In respect of the non-bank financial sector, the Central Bank message is the need for consolidation.” It also said that CB will use its “authority and powers” to push finance companies and smaller banks to merge as consolidation was necessary given there were too many financial institutions for an economy the size of Sri Lanka’s. “The smaller ones should consider consolidating with the stronger. We have highlighted, time and again, that Sri Lanka has too many financial institutions given the size of its economy," it said.