‘Bad bank’ mooted to deal with tourism industry debt

23 August 2022 06:04 am - 9 - {{hitsCtrl.values.hits}}

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SLTDA says active discussions are taking place but no conclusion on setting up a ‘bad bank’
But says tourism industry stakeholders are “very much” on board with idea of a ‘bad bank’
Says a decision will be taken by end-August on way forward for tourism industry
Tourism industry debt is estimated to be over Rs.500bn, including accumulated debt

The Sri Lanka tourism authorities, led by Tourism Minister Harin Fernando, are actively contemplating on setting up what is called a ‘bad bank’ to restructure the debt of the crisis-hit tourism sector, Mirror Business learns.

The idea of establishing a bad bank was spawned mid-last year when the tourism sector stakeholders were negotiating the extension of the moratorium extended to the
industry loans.

“It (bad bank) is an option that we are very much looking into. While we have not confirmed the setting of a bad bank, we have not written it off either. Active discussions are taking place; we will finalise a way forward for the tourism sector to tackle their loans,” Sri Lanka Tourism Development Authority (SLTDA) Chairman Priantha Fernando told Mirror Business.

Bad banks are typically government-sponsored asset reconstruction companies (ARCs) set up with the primary objective of cleaning up bank balance sheets. Unlike private ARCs, bad banks are established as a one-time measure, with the primary objective of reducing the build-up of non-performing assets, post a financial or economic crisis.

Fernando shared that by end-August a decision would be reached on the way forward, after which a proposal would be presented to the Tourism Minister, which then will be tabled in Parliament.

According to the SLTDA chief, the industry stakeholders are “very much” on board with the idea of setting up of a bad bank, as it is viewed as a workable way forward to assist with the settlement of their loans. Fernando assured that the decision would be finalised only after a consultative process with the stakeholders is followed.

The tourism industry debt is estimated to be over Rs.500 billion, including the accumulated debt. The industry found itself in a rather tight situation in early June when the moratorium extended to
it expired.

The moratorium granted by the private sector banks on the loans taken by the tourism industry expired on March 31, whereas the moratorium granted by the state banks expired on June 30. The Cabinet of Ministers gave the nod to extend the facility further. However, the banks weren’t willing to prolong the concession, as they too are under pressure with the ongoing economic crisis. (Shabiya Ali Ahlam)

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Comments - 9

Jude Tuesday, 23 August 2022 08:33 AM

Bad banks is an bad idea!! Banks have fiduciary duty to depositors, shareholders etc!!

Jude Tuesday, 23 August 2022 08:48 AM

Tourism industry have over Rs.500 billion debt and if you try to restructure or write-off this massive debt then whole banking system will collapse!! Harin don't Care coz some people paying Harin big'Bucs to get this bad bank idea to implement!! If you try to save tourism industry by collapsing country:s bankig system, then the consequences would bedisastrous!!!

Nilmini welivita Tuesday, 23 August 2022 08:52 AM

"Mr Slaeze" will only increase the indebtedness of his ministry as he has 2 years to make as much money as possible and that will be his no.1 priority.

Jude Tuesday, 23 August 2022 08:55 AM

Harin in short time have become one of the most curruped politicians in SL!! Bad bank is very bad idea for banking industry!! Mainly the big hotels if they can't pay the debt sell the hotels, there's plenty of investors to buy hotels in SL !! Tourism industry in SL very poorly handled by management and it's stakeholders! Yeah!!

Jef Tuesday, 23 August 2022 10:30 AM

Very simple every sector and sectors Ruined by politicians accountability protect sector's was never a priority now dig deep to find proper solution better feed back from countries likes Malaysia Thailand Vietnam that do so we'll in tourist sectors finding a proper solution is a key factor sri lanka its self a paradise (professional team to make the difference)

Aquarius Tuesday, 23 August 2022 11:12 AM

Bad bank smell bad in its own image. What really is going through this minister's head? Jumping trees like a monkey has shaken his brain and nothing positive will come out for the tourism industry or the country.

Mizaru Tuesday, 23 August 2022 11:17 AM

Ha Ha Ha! Bad Bank, Bad Minister, Bad Prime Minister and Bad President. #GOHOMERANIL

More scams with this Tuesday, 23 August 2022 06:53 PM

These profit driven business will always try to maximise profit, with any trick they can, and they will try swindle government to rid themselves of their loans. Minister must have relatives in the industry, or friends who will benefit otherwise writing off loans, once started here will happen elsewhere too. Eventually it is general public who will carry the burden of all business loans written off.

Druvinda Rand Wednesday, 24 August 2022 03:02 AM

The idea of Bad Banks is good, it was used soon afterthe 2008 financial crisis. I think it was. Mr.Dragi's idea. If managed well it will be a success. One thing the Tourist industry should not do is ' jack up the orices' too high. Increase it make it comfortable for the tourists who are facing high prices at home. Keep standards up, clean places, good fresh food and be cheerful, the crowds will be there in 2023.

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‘Bad bank’ mooted to deal with tourism industry debt

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