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Close Eye

Jan 07, 2011 (LBO) - Sri Lanka's central bank will keep a closer eye on conglomerates with interest in banks and finance companies, governor Nivard Cabraal said.

Financial institutions connected to diversified conglomerates can have greater risks, requiring higher degree of supervision, he said in a speech on the central bank's monetary policy for 2011.
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"New mechanisms will be devised to monitor and supervise diversified groups with financial interests," Cabraal said.

This is because of the risks that can emerge from conglomerates can have impact on finance companies and banks.

"A higher degree of compliance and supervision may be necessary," Cabraal said.

New mechanisms will be needed to identify and monitor risks arising from the inter-connectedness of financial institutions, related companies and business conglomerates.

"Certain groups may have complex and sometimes opaque structures," Cabraal said.

Cabraal did not name any firms but in recent years several companies in Sri Lanka's Ceylinco group were hit during a downturn in 2008 and 09.

Several banks are also connected to conglomerates, listed and unlisted.


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