CB bails out Seylan
Safety of depositors assured:
|“The purpose of this move
was to ensure the stability of the Banking system of the
country and to ensure the safety of depositors as Seylan
Bank PLC presented a potential danger to the system,” a
Central Bank source said.
The Central Bank’s Monetary Board yesterday discontinued the services
of the Board of Directors of Seylan Bank and appointed the Bank of
Ceylon to oversee its operations.
“The purpose of this move was to ensure the stability of the Banking
system of the country and to ensure the safety of depositors as Seylan
Bank PLC presented a potential danger to the system,” a Central Bank
However, the Monetary Board of the Central Bank stressed to the
public that they should continue with their normal financial
transactions with Seylan Bank assuring the public of the safety of
deposits and the stability of the financial system. This decision was
taken by the Monetary Board in view of the recent events in the Ceylinco
Group and the difficulties being encountered by Seylan Bank with regard
to deposit withdrawals and ensuing liquidity problems.
Therefore, the Monetary Board is of the view that immediate measures
are required to be taken to stabilise the financial system.
In that context, the Monetary Board has determined to act under
Section 30(1) of the Monetary Law Act No.58 of 1949, with immediate
Meanwhile, an official of the Bank of Ceylon said that they would
appoint a Board to oversee the operations of Seylan.
“We have been requested to continue with the services of the present
CEO of Seylan and all current employees of Seylan Bank PLC, without any
interruption,” the official said.
The Ceylinco Group has already announced that it was planning a sell
out of the bank to repay depositors of Ceylinco Golden Key Credit Card
Company, which ran into a liquidity crisis. When contacted, a senior
banker said that this is a step taken in the right direction to ensure
the smooth flow of the banking system. “We have observed that subsequent
to the Ceylinco Group Chairman’s statement that it was to divest Seylan
Bank stakes to settle depositors of the Golden Key Credit Card Company,
many depositors were withdrawing money,” he said.
This senior banker said that if this trend continued the Bank would
face a crisis and with the intervention of the Central Bank it is now
being stalled. “If 30 per cent of deposits in any bank are withdrawn in
one week any bank would collapse and it would result in a chain of
failures of the entire banking system,” he said.
He said that what is important in a bank is the public perception of
the stability of the bank. Seylan Bank PLC will be open for usual
business with customers today (30).