Interbank Deal

Dec 10, 2008 (LBO) – Sri Lanka's public listed Commercial Bank of Ceylon says it has sought legal advice over a derivative deal with state-run People's Bank which was sold to a state petroleum distributor. Sri Lanka's Supreme Court has halted payments to banks which provided a complex derivative to state-run Ceylon Petroleum Corporation after it suffered hundreds of millions of dollars in derivative losses when oil prices collapsed.

Commercial Bank made a stock exchange filing following a report published by Lanka Business Online which said an inter bank payment on a derivative sold to CPC via People's Bank had been delayed.

Commercial Bank said Wednesday that it had received legal advice that the Supreme Court had only stopped CPC from paying banks, "but did not refer to or prohibit the settlement of inter bank transactions."

"Commercial Bank is proceeding on the basis set out above," the bank said. "The Bank will make further disclosure if it becomes necessary after obtaining legal advice."

On an earlier disclosure, the bank said payments had been halted on a direct deal with CPC relating to a deal with a notional value of 20,000 barrels. On December 03, the exposure to CPC was 8.9