CSE discontinues with trading floor

                           Officials say it’s a security precaution, trading will not be affected                          

By Gamini Abeywardane
The Board of Directors of the Colombo Stock Exchange (CSE) at its last meeting held on March 17 decided to discontinue the age old practice of having a trading floor with effect from April 1 as a security precaution.

The Chairman of the Colombo Stock Exchange Nihal Fonseka said that it was a well considered decision taken after much discussion. He said that, “The paramount consideration was security which cannot be compromised,” while they also considered other factors such as the small number of people using the floor.

However, he said that depending on the security situation, if the CSE board feels it necessary, they are ready to reconsider the decision at the correct time.

A senior CSE official said that it will not have any impact on trading as only about 4 % of trading is done on the floor. He pointed out that on any given day, less than 100 people visit the floor and that with the current Automated Trading System (ATS) all trading can be done from the offices of the stock broking firms.

The CSE’s Manager Business Development, Tushara Jayaratne said that the decision has been taken in view of the current security situation in the country, as it is difficult to keep a tab on various people entering the World Trade Center in Colombo, where the CSE trading floor is currently located.

The CSE currently has 20 stock broking firms but only nine of them have their presence on the CSE floor. “It is more or less a meeting point for some of the brokers and a few investors, mostly those involved in speculative trading,” a senior broker said.
The CSE also operates 4 regional offices in Matara, Kandy, Kurunegala and Negombo.

He further said that many stock exchanges in the world have now stopped the practice of having physical trading floors although some exchanges like the New York Stock Exchange still continue to have trading floors mostly for historic reasons.

He pointed out that with the introduction of the new system of trading and abolition of the open out cry system, the traditional trading floor had become a mere public gallery and its discontinuance will have no impact on the market activities.

The CSE was one of the first exchanges in the region to successfully automate its activities in 1991, with the installation of a Central Depository and an electronic clearing and settlement system for share transactions, and an Automated Trading System (ATS) in 1997.

The CSE provides companies the opportunity of raising equity and debt capital required for their expansion from the primary market. It also provides a mechanism for price discovery in an active secondary market. The equity and debt securities of a public company can be listed on either the Main or Second Board of the CSE; a Main Board for larger companies and a Second Board for medium to small companies and for start up companies


SAARC central banks collaborate on payment and settlement system

The Central Bank of Sri Lanka inaugurated the SAARC Payments Initiative (SPI) on Friday (28) at the John Exter International Conference Hall.

The SPI is a regional initiative to facilitate and co-ordinate a regional forum for the national payment and settlement systems (PSS) of member countries.

It is anticipated that through the SPI, the Central Banks of SAARC countries will work collectively to develop effective institutional arrangements to enhance payment system mechanisms between the countries.
Such a mechanism will assist in the promotion of trade and investment in the region.

The SPI will also provide regional central banks with the opportunity to upgrade their payment systems to international standards, and thereby enable them to become partners in the global payment system community.

The SAARC Payments Council (SPC), which also held its first meeting on Friday, will take the lead role in providing direction for reforming PSS in the region.

Improving the safety and efficiency of PSS are high on the council’s agenda.
National, regional, and international experts in the field of PSS will provide advice to the council.

The idea of establishing an SPI was first floated at a SAARC conference held in Sri Lanka last July.
Several months later, Sri Lanka’s Central Bank was asked to lead the process and has now established a secretariat for the SPI.


CB puts ceiling on finance company interest rates

The Monetary Board of the Central Bank of Sri Lanka has issued a new direction titled ‘The Finance Companies (Interest) Direction No. 1 of 2008’ to the registered finance companies, lowering the maximum interest rate that can be paid on term deposits by 0.5 percent and 1 percent based on the term to maturity of term deposits, and by 1 percent in respect of savings deposits. This new direction will come into force from April 1, the bank said in a news release.

As per the new direction, the maximum annual rate of interest which may be paid by a finance company on a time deposit which carries a maturity period of 12 months or less shall not exceed the weighted average yield applicable to 364-day Treasury Bills issued during the immediately preceding quarter, plus 2.5 percentage points.

For the deposits which carry a maturity period of more than 12 months, the interest rate may not be more than 5 percentage points over the weighted average yield applicable to 364-day Treasury Bills issued during the immediately preceding quarter. The previous limits were 3 and 6 percentage points, respectively, above the relevant Treasury Bills yields.

The interest rate that can be paid on savings deposits has also been changed. The maximum annual rate of interest on any savings deposit should not exceed the weighted average yield applicable to 91-day Treasury Bills issued during the immediately preceding quarter, less 1 percentage point. Prior to the new direction, the maximum rate was the weighted average yield applicable to 91-day Treasury Bills issued during the immediately preceding quarter.

The deposit interest rate ceilings imposed under the new direction are shown in the table.
All registered finance companies are required to comply with the direction. The relevant weighted average yields applicable to Treasury Bills are sent to all registered finance companies by the Department of Supervision of Non-Bank Financial Institutions of the Central Bank of Sri Lanka at the end of each quarter to enable the finance companies to adjust the interest rates as required by the direction.

The Central Bank expects that these revisions of the deposit interest rate ceilings would, in turn, lead to the reduction of the lending rates of finance companies.

Deposit Category Interest Rate Ceiling (% per annum)
Time deposits, bond or other instruments WAY on 364-day TB + 2.5%
maturing in 12 months or less
Time deposits, bond or other instruments WAY on 364-day TB + 5%
maturing in more than 12 months
Savings deposits WAY on 91-day TB – 1%


SLSB to pay 12000 Pramuka depositors

Chairman says depositors money will not be used for the payments

By Indika Sakalasooriya
Around twelve thousand depositors of the failed Pramuka Savings and Development Bank are to be reimbursed starting from June 3 subject to a maximum of Rs.100, 000, Chairman of the newly formed Sri Lanka Savings Bank (SLSB) Ariyatilake Dahanayake told The Nation Economist.

The Central Bank of Sri Lanka recently formed SLSB primarily to settle all the transactions performed by the defunct Pramuka Bank, by transferring the Pramuka assets worth of over Rs.800 million to SLSB.

“We have already sent letters to the deposit holders of Pramuka Bank to address their woes. There are about 14000 deposit holders who should be paid back. But as a start we will be paying only 12000 of them” Dahanayake said.

According to him the full amount will be paid for deposit holders who had less than Rs.100, 000 in their accounts.
“But for the people who had above Rs.100,000 we will be able to pay only Rs.100,000 even though they had millions in their accounts”

However, according to Dahanayake, moneys of the SLSB’s depositors would be utilised to repay Pramuka depositors.
He also said that the Treasury has promised the SLSB a sum of Rs.1.5 billion and they have already received Rs.200 million.

“All the money we are getting from the Treasury will be used to strengthen the financial structure of the bank,” he explained.
However during the latter part of last year it was reported that there had been 15,495 Pramuka depositors out of whom 3,500 had accounts amounting to less than Rs. 100,000. State institutions too had deposited around Rs. 350 million in the bank.


Government appoints SriLankan Airlines Chairman & Directors

The Government has appointed a new chairman and directors to SriLankan Airlines, with immediate effect.
Dr P B Jayasundera has been appointed Chairman with Nishantha Wickremasinghe, Lalith De Silva and Sunil Wijesinha as Nominee Directors to represent the government which holds 51.05% shares while the Emirates Airline holding 43.63% shares will be represented by Tim Clark, Gary Chapman and Nigel Hopkins.


Lion-Carlsberg joint venture in India kicks off as scheduled

By Indika Sakalasooriya
The Lion Brewery’s joint venture with Carlsberg Breweries of Denmark in Rajasthan, India to set up a Greenfield brewery will come into operation as planned, Suresh Shah Ceylon Brewery PLC’s Director/CEO told The Nation Economist.
“The plant will come up as planned in 2008 and what we have said back in 2006 is still valid,” Shah remarked.

However, he said that he was not in a position at present to divulge further details about the plant since it was a joint venture with Carlsberg and mainly handled by Carlsberg.

He also said that the intense competition and the growth potential for the beer market in India were significant factors, due to which he would not disclose more details about the plant.

Lion Brewery entered into a joint venture partnership with Carlsberg Breweries of Denmark in 2006 to set up a Greenfield brewery in Rajasthan in India.

Lion Brewery owns 22.5% in the venture whilst Carlsberg Breweries holds 45%. IFU (Industrialisation Fund for developing countries) Denmark holds 10% and the others hold the remaining 22.5% of the equity.

The brewery will have a capacity of 450,000 hl and is scheduled to come into operation in the first quarter, affirmed the Carlsberg website.

According to industry analysts, there is a significant potential for growth in the Indian beer market. India is among the lowest in Asia on the annual beer consumption rate per person, at only 0.7 litres per year, with an annual GDP growth rate at more than 9%.