September 11, 2019 (LBO) - The Finance Company (TFC), once one of Sri Lanka's largest non-bank financial institutions, reported a loss of Rs1bn for the quarter ended June 30, 2019. This brings total losses since inception of the company to a staggering Rs27bn (US$150mn).
The company still has deposit liabilities of over Rs27bn on its balance sheet, with assets of just Rs10.8bn.
TFC, along with several other large finance companies in Sri Lanka, collapsed during the Golden Key crisis. Golden Key was an unregulated finance company that amassed a massive deposit base by offering extraordinarily high rates of interest. Because it was affiliated with the blue chip Ceylinco Group, there was a false perception that deposits with the institution were safe.
The collapse of golden key happened in 2008, however many of the collapsed finance entities were able to be operated as zombie companies without being completely wound down over a reasonable period. This lackadaisical regulatory attitude led to the collapse other major finance companies like ETI Finance in later years.
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Eleven years after the Golden Key Collapse, companies like TFC still exist, with massive personnel costs having been absorbed by the funds of depositors for over a decade.