Foreign banks barred from repatriating profits; Share buybacks suspended for all banks

18 May 2020 11:30 am - 0     - {{hitsCtrl.values.hits}}

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  • The measures will be in effect until year end 
  • Aimed at preserving banking sector liquidity

The Monetary Board last week sent instructions to Sri Lankan operations of foreign banks against repatriation of profits and suspended share buybacks for all banks until the end of this year.


The move is believed to be among early measures taken by the country’s Central Bank to alleviate possible pressure on banking sector liquidity coming from business interruptions due to the COVID-19 crisis.


Accordingly, the Monetary Board had asked licensed commercial banks incorporated outside Sri Lanka to refrain from sending out their profits, which are not already declared for the financial years 2019 and 2020.  


The measure came as part of broader set of guidelines issued on banks temporarily restricting discretionary payments of licensed banks.  


In late March, the Monetary Board suspended declaring dividends and payment of bonus to the staff to preserve banking sector liquidity as it granted reprieve on minimum capital, allowed drawing down from capital buffers and eased rules on accounting for non-performing loans arising from the defaults related to the pandemic. 


In a latest move the Monetary Board last week eased certain guidelines on liquidity parameters on banks and made available the Sri Lanka Deposit Insurance and Liquidity Support Scheme to allow loans under the Framework of Emergency Loans and Advances to Licensed Banks on acceptable collateral and liquidity forecast.


The latest direction also suspended all licensed banks—both local and foreign—from buying back their own shares until the end of this year. 


Share buybacks are typically prohibited under most stimulus programmes given by governments or Central Banks around the world to overcome financial crises. 


In a share repurchase, the company buys back its own shares from the existing investors using its own money back in shareholders’ pockets resulting in an increase in higher earnings per share and thereby enhancing the value of the company due to less number of shares that will be available consequent to the move. Meanwhile, the Central Bank also wants the banks to refrain from increasing management allowances and payments to their director boards. The Monetary Board urged all banks to exercise prudence and refrain to the extent possible from incurring non-essential expenditure, such as advertising, business promotions, sponsorships, travelling, training etc. while asking to exercise extreme due diligence when incurring capital expenditure.   

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See Kapruka's top selling online shopping categories such as Toys, Grocery, Flowers, Birthday Cakes, Fruits, Chocolates, Clothing and Electronics. Also see Kapruka's unique online services such as Money Remittence,News, Courier/Delivery, Food Delivery and over 700 top brands. Also get products from Amazon & Ebay via Kapruka Gloabal Shop into Sri Lanka.

 

 

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