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| Friday, 6 August 2004 |
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CB winds up Pramuka Bank The Monetary Board of the Central Bank of Sri Lanka has decided to suspend the business of Pramuka Savings and Development Bank (PSDB), cancel its licence and cause the Director of Bank Supervision of the Central Bank to wind up the PSDB on Wednesday, a press release issued by the Central Bank said. This decision was taken by the Monetary Board after careful consideration of the feasibility of a proposal submitted by Asia Capital Ltd. (ACL) for the restructuring of the PSDB, and having considered matters placed before the Board by the Director of Bank Supervision, and a report of an independent firm of consultant. The Monetary Board wishes to assure the public that its decision was taken after having explored all available options to restructure the PSDB, including soliciting the assistance of the banking industry. The decision of the Monetary Board was taken in the interest of depositors of the PSDB. The Monetary Board is unable to accept the proposal of ACL as a viable proposition for the restructuring of PSDB or to consider it as a more advantageous alternative to liquidation. The success of the proposed restructuring would depend on two main factors i.e. strict rescheduling/transfer of PSDB's liabilities, and the restructured bank achieving its projected growth and profitability. The decision was taken after taking into consideration that no other viable alternative is available. The decision is consistent with international regulatory practice, including action taken by central banks of other countries, the release said. The Monetary Board wishes to assure members of the public again, that it has considered all options available under the law before deciding upon the winding up of the PSDB. In view of the serious financial condition of the PSDB, it is necessary that there should be substantive capitalisation of the bank for any restructuring proposal to be viable. The proposal of ACL initially committed funds up to Rs. 300 million to capitalise the bank, and thereafter, raised the commitment to Rs. 500 million. ACL had been informed that a considerably higher commitment of capital is required to restructure PSDB, based both on estimates of the Central Bank and on an independent audit conducted by a firm of auditors. Despite this concern, the Monetary Board agreed to consider the proposal of ACL further, on condition that it is able to negotiate rescheduling of PSDB's existing commitments within a reasonable time, and presents a viable business plan for the restructured bank. The time period given to ACL for the purpose was extended up to July 22. When the Monetary Board met on August 3, it decided that a decision on PSDB can no longer be postponed as each passing day results in loss to the bank to the detriment of its depositors. Every effort shall be made by the Director of Bank Supervision and the Central Bank to ensure the expeditious winding up of the PSDB, and repayment of its liabilities in accordance with the law. The co-operation of depositors and customers of the PSDB, its employees and of members of the public is solicited in this effort, the release said. |
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