Central Bank says legal action initiated against ETI Finance directors

• Says considering proposals by an investor to review ETI Finance and Swarnamahal Finance 
• Stresses ETI Finance would be paying depositors over Rs.10bn without any financial contribution from govt. or them

The Central Bank yesterday said it has initiated legal action against the directors of troubled ETI Finance Limited (ETIF) to seize their personal assets and transfer those proceeds to the ETIF, while considering proposals to revive the company and one of its listed subsidiaries. 

“CBSL would like to emphasize that as a result of the regulatory action taken since the time of identifying the issues of ETIF, the company was able to realize this amount of cash to repay the depositors by disposing the assets transferred to ETIF. 

Further, CBSL has also initiated several legal action against the ETIF directors to seize personal assets of the directors and transfer those proceeds to ETIF,” the Central Bank said in a media communiqué.  

The bank also said it is extensively considering proposals submitted by an investor to ETIF and its subsidiary Swarnamahal Financial Services PLC (SFSP).

“CBSL wishes to inform the depositors of both ETIF and SFSP that proposals submitted by an investor to the companies to revive them are being extensively considered and further developments in this regard will be communicated if these proposals are implemented.”

The Central Bank said they have taken a number measures on ETIF to address various irregularities taken place since 2011, including severe liquidity constraints faced by the company during latter part of 2017.

Considering the extremely vulnerable liquidity position of ETIF and its inability to repay the depositors, the Monetary Board (MB) of the Central Bank issued directions on January 2, 2018 restricting the operations of the company. 

Further, based on a proposal submitted by the company, MB gave its concurrences on February 21, 2018 to dispose identified subsidiary, sub-subsidiary companies and investment properties of ETIF for a total consideration of US $ 75 million, with the view of repaying the depositors utilizing the sale proceeds. 

The said transaction had to be concluded excluding certain assets for a total consideration of US $ 70 million, which was received in 4 tranches and assets to the corresponding value were transferred to the buyers. 

Since the buyer did not remit the remaining US $ 5 million, ETIF has retained its subsidiary SFSP, which was intended to be transferred for the corresponding value. 
ETIF and SFSP, along with the Central Bank, are currently considering alternative measures to revive SFSP. 

Since SFSP was retained by ETIF for the US $ 5 million not received, there has been no financial loss to ETIF despite the transaction being not completed in its entirety. 
The Central Bank said based on the exchange rates at the time of receiving money through the above 4 tranches, ETIF has received over Rs.11 billion so far and these funds have been already utilized to repay 20 percent of the deposits and accrued interest liabilities of ETIF. 

The company is currently processing a further 10 percent repayment to the depositors.

The Central Bank stressed that ETIF would be paying to its depositors a total amount in excess of Rs.10 billion without any financial contribution from the government, Sri Lanka Deposit Insurance and Liquidity Support Scheme or from them.