Sri Lanka state banks most in need capital for Basel III, new risk identified

ECONOMYNEXT - Sri Lanka's large banks need 19 billion rupees more to meet Basel III capital adequacy in 2019, with state banks accounting for 72 percent of the shortfall, Fitch, a ratings agency said.

A risk has also been identified for the capital of state banks, in the wake of dividends demanded from the banks to reduce budget deficits in recent years without following a dividend policy.

"Sri Lankan state banks are the most in need of capital," Fitch Ratings said. "Their capital levels are vulnerable to dividend demands from the state."

"The state banks' ability to raise capital is in certain instances also constrained by limitations placed on them through the respective acts that govern their establishment."

Large Sri Lankan banks have already raised about 42 billion rupees of capital.

Commercial Bank of Ceylon PLC had raised 10.1 billion rupees, Hatton National Bank 14.2 billion rupees, and Sampath Bank 20 billion rupees.

State-run People’s Bank (Sri Lanka) (AA+(lka)) and Bank of Ceylon have got a 5 billion rupee capital infusion from the state. (Colombo/May30/2018

http://economynext.com/Sri_Lanka_state_banks_most_in_need_capital_for_Basel_III,_new_risk_identified-3-10760-17.html

Yes... During last couple of years specially under the FinMin of RK, state banks were forced to pay massive dividends to the Government.

A risk has also been identified for the capital of state banks, in the wake of dividends demanded from the banks to reduce budget deficits in recent years without following a dividend policy

Now is the turn of state to repay by way of infusion of Capital.

This is what I was really concerned.

http://forum.lankaninvestor.com/t10486-dividends-dividends-dividends-what-a-damage?highlight=what+a+damage

Thanks Invisible & YK for sharing valuable info. This is why these banks should be listed in the CSE.

However, SLFP guys oppose this timely move, though UNP had some plans towards privatization of state banks.

Having said that, I have certain doubts about the real intentions of the UNP guys in the backdrop of CB Bond scam.

Ultimately, our tax money have to be diverted as capital infusion needed. This is not the best solution as these banks are often misused  by the ruling party.