de Silva said the CB did publicize unregistered finance companies, particularly after the recent Sakvithi scandal. Seylan Bank has given some funds, but what happened to them was not known. He added that Golden Key had a major liquidity problem with a deposit portfolio of approximately Rs.20 billion. He said that in the past, the CB had inquired into unregistered finance companies and although people were aware that Golden Key was a credit card company, the CB was preparing some guidelines for credit card companies and issuers of credit cards.
The CB can take some regulatory or legal action against Golden Key even though it is not registered, Bankers Association Secretary General Upali de Silva said. Jayaratne said the CB in theory, cannot take any action against Golden Key because it is not registered but he claimed that the CB including big business players in Sri Lanka had been aware of its activities over the past 10 to 15 years. Jayaratne also pointed out that if anyone has been watching the stock market from October to November, there have been certain company transactions that have taken place with large quantities of sales but the regulators and analysts have not inquired into who the buyers and the sellers are and if it was even between companies in the same group.
He said more than one bank, finance company and leasing company which is in any way connected to Golden Key could be in trouble. On the other hand, the point was also made that the people are to blame as well because they put their money into high-interest offering companies to get bigger returns.Ĭhandra Jayaratne, former chairman of the Ceylon Chamber of Commerce said that contrary to claims by the Central Bank and a majority of leaders with accountability for policy, governance and business, Sri Lanka is not removed from the impacts of the global economic crisis and financial meltdown. They expect more and more people to put their money into established banks. Public faith in finance companies and institutions which collect deposits will only worsen, say analysts. Has the bubble burst?Ĭeylinco Consolidated Chairman Lalith Kotelawala seen pacifying anxious depositors of the crisis-hit Golden Key Credit Card Co., who gathered at the BMICH, after he said his company will meet all the liabilities. Furthermore, analysts are saying Ceylinco's problems could have a serious impact on the market. Moreover, there are various cross-holdings in most of the companies in Ceylinco Group so it is very difficult to ascertain where the money has come from and where it has gone, the sources said. There are also problems when companies charge high interest rates in the range of 20 to 24% because they simply do not have a mechanism to get 30 to 40% returns except in leasing. Due to the fact that there are a lot of private companies which make up the Ceylinco Group, its exposure might be high.
There are serious doubts being expressed about the mechanism through which deposits have been taken by Golden Key. Sources at the Securities and Exchange Commission (SEC) said the SEC had called a meeting with Ceylinco Shriram Securities on Friday to discuss the possible fallout from the Golden Key crisis but all of Shriram's directors were on holiday. Reliable sources told The Sunday Times FT that the Central Bank (CB) called for an emergency meeting with the banks on Wednesday to discuss the crisis. The collapse of the Golden Key Credit Card Company could signal a systemic collapse of some large finance companies as well as banks and could be the impetus for the global financial crisis to spill into Sri Lanka.
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