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CB grants additional time to Amana Bank meeting capital requirements

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31 January 2017 12:01 am - 0     - {{hitsCtrl.values.hits}}

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The Central Bank for the second time has granted additional time to the licensed commercial bank, Amana Bank PLC, to meet the interim minimum core capital, required to have been met by January 1, 2017, according to a filing to the Colombo Stock Exchange.  
The Central Bank has granted time till June 30, 2017, to raise Amana Bank’s minimum core capital up to Rs.7.5 billion. The bank is currently negotiating a stock deal to inject equity in a bid to meet the Rs.10 billion minimum capital by January 1, 2018. The original directive issued in December 2014 by the Central Bank required all licensed commercial banks to raise their minimum core capital from Rs.5.0 billion to Rs.10.0 billion by January 1, 2016. 
However, Amana Bank, along with a few other small and mid-sized commercial banks, requested a deferred time frame from the Central Bank to meet the capital requirement, for which the Monetary Board gave its approval.  

According to the capital augmentation plan agreed with the regulator, the bank was required to raise its minimum core capital to Rs.7.5 billion by January 1, 2017 and further up to Rs.10.0 billion by January 1, 2018.        
 In an earlier disclosure filed in December, Amana Bank said it was in talks with prospective foreign parties to infuse equity capital to meet the regulatory minimum capital requirements. 
Yesterday the bank said it is having discussions with Islamic Corporation for the Development of the Private Sector (ICD), the fund manager of IB Growth Fund (Labuan) LLP – (IBGF), with a view to seeking participation in a proposed issue of shares. 
For this purpose, the due diligence on the bank is to commence by the ICD, the bank said in the disclosure.  
Meanwhile, the budget 2017 proposed to double the minimum core capital level to Rs.20.0 billion with no timelines attached. But the new capital levels are expected to come into effect from January 1, 2018 onwards.  
However, the Central Bank is yet to issue a clear direction to the banks because the Finance Ministry cannot specify the minimum capital levels to banks. 
Meanwhile, the new BASEL III rules demand higher capital adequacy levels in comparison to the risk- weighted assets to ensure the bank operates with higher capital buffers to withstand shocks in times of stress similar to the times of the global financial crisis in 2008/9. 
While some of the liquidity and interim capital adequacy levels are already monitored by the regulator at present, the Central Bank is mostly likely to issue directives on BASEL III early this year, which will come into full force from 2019 onwards. 
According to banking sector sources, Amana Bank has already lined up to Rs.10.0 billion in equity capital and the current talks are for the balance requirement to meet the Rs.20.0 billion capital base. 
Bank Islam Malaysia Berhad, AB Bank in Bangladesh and Islamic Development Bank based in Saudi Arabia together account for a 38.5 percent stake in Amana Bank. 
For the nine months ended September 30, 2016, Amana Bank surpassed its Rs.100 million profit mark and posted a net profit of Rs.101.5 million or 8 cents a share, which is 16.3 percent less than a year ago.  

 

 


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