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A critical component of financial market infrastructure in the making

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Viraj Dayaratne PC- Chairman of the SEC

The initiative is considered as part of the SEC‘s broader vision of taking the Capital Market of Sri Lanka to the next phase of growth

The effectiveness of CCPs in acting as firewalls have been proven in other markets

It would not only enhance the post-trade risk management, but also unlock the potential for the launch of new instruments such as derivatives

The new Securities and Exchange Commission of Sri Lanka (SEC) Act which came into force from 19th September 2021 contains provisions which enable the setting up of a Central Counterparty (CCP).

Further, the need for setting up a CCP in order to enhance the efficiency of post trade risk management had been spoken of for a long period of time and as the first step towards this, the launch of Delivery vs Payment (DvP) mechanism was successfully completed on 16th August 2021. Accordingly, the SEC and the Colombo Stock Exchange (CSE) engaged in several rounds of discussions to determine how such a project could be taken forward.

The initiative was considered as part of the SEC‘s broader vision of taking the Capital Market of Sri Lanka to the next phase of growth and having noted the benefits of such an initiative, the Commission resolved that steps be taken in this regard as early as possible and decided that the task be undertaken by a joint Committee comprising of members of the SEC and the CSE. It was also decided to have a close dialogue with the Central Bank of Sri Lanka (CBSL) since the CBSL is in the process of setting up of a CCP mechanism for government securities which is also one of the policy actions under the Capital Market Development Project of the Asian Development Bank (ADB).

Accordingly, the Chairman of the SEC Viraj Dayaratne PC has nominated Commission Member Sunil Lankatilaka to head the Joint Committee which will include Director General, Chinthaka Mendis and Acting Director Capital Market Development, Prabash Wanigatunga from the SEC. The CSE has nominated Dilshan Wirasekera Director , Suren De Silva Director , Rajeeva Bandaranaike CEO , Renuke Wijayawardhane CRO, Ms. Dulani Warnakulasooriya Head ERM and Ms. Lankesha Molligoda Head Compliance and Regulatory Policy . The Committee’s key mandate will be to identify the manner of implementation of a CCP and to recommend the entire procedure including matters pertaining to procurement. The expectation is that it could be completed before the end of next year. The first meeting of the Committee will be held during the first week of January 2022.

A CCP can offer significant benefits to the Financial Market in Sri Lanka and can be considered as part of the critical Financial Market Infrastructure that is needed and is of national interest. The effectiveness of CCPs in acting as firewalls have been proven in other markets especially during the global financial crisis in 2008 where they successfully contained the contagion of losses resulting as consequences of default by certain financial institutions spreading to other financial institutions active in markets cleared by those CCPs.

In order to complete the transitioning of the market towards adopting a full-blown CCP mechanism for clearing and settlement that would not only enhance the post trade risk management but also unlock the potential for the launch of other complex and new instruments such as derivatives, for which provision is made in the SEC Act.



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Berendina bags Silver at the CA Sri Lanka 56th Annual Report Awards

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From left: Sarath Chandra Fernando - Director-BMIC, Charith Fernando - Deputy Managing Director-BMIC, Saman Manatunga - Acting Head of Finance-BMIC, Dilhara Jayasinghe - Assistant Manager Compliance & Corporate Relationship-BMIC, Ranel T Wijesinha - Past President CA Sri Lanka, Jagath Godakanda – Chairman-BMIC, Chaaminda Kumarasiri – Chairman-Annual Report Awards Committee 2021 and Chamila Cooray - Alternate Chairperson-Annual Report Awards Committee 2021

Berendina Micro Investments Company Limited, better known as BMIC among its microfinance clientele and partners, won the Silver award at the 56th Annual Report Awards organized by the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka), under the category of Finance Companies and Leasing Companies (total assets up to Rs. 20 Billion). Over 70 companies, ranging from conglomerates, multinationals to non-profit organisations, and SMEs, were honoured at this year’s competition for their excellence in financial reporting. The gala event of this year held on 09th December 2021 at BMICH. Being the first Microfinance Company licensed by the Central Bank of Sri Lanka, BMIC is no stranger to this annual competition having won a prestigious Gold Award in 2017 and Merit Award in 2018.

The award from CA Sri Lanka is the fourth award to be won by BMIC during the financial year 2021, having won 3 international awards, namely, ‘The Best Microfinance Company in Sri Lanka’ and ‘The Best Agricultural Lending Company in Sri Lanka’ awards from the UK based Global Banking and Finance Review magazine as well as ‘Donor’s Choice Award’ at the international competition conducted by SCALE Green Creative Adaptation Awards in USA in 2021. Focused on poverty alleviation, BMIC as a Microfinance Institution (MFI) extends micro-credit facilities and enterprise development services that ensure long term sustainability and growth of business ventures of its clients, providing loans at the lowest interest rate compared to other MFIs in Sri Lanka. At present, BMIC manages a loan portfolio of over Rs. 3.1 billion and an annual turnover exceeding Rs. 900 million. It supports well over 70,000 microfinance clients through its 30 Branches in 11 districts. The CA award bestowed on BMIC is another testament to its commitment in continuously supporting its clients to overcome the obstacles during difficult times, while preserving its transparency in reporting, corporate governance, sustainability and social responsibility.

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SLIC repositions Business Club insurance with more focus on SMEs

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Sri Lanka Insurance last week announced repositioning of its Business Club insurance, a trade insurance policy which provides a comprehensive business insurance solution to fit for the diverse insurance need of small and Medium enterprises (SME).

“According to the Export Development Board of Sri Lanka SMEs are considered to be the backbone of the economy with a contribution up to 52% of the GDP. SMEs play a crucial role to battle the poverty in the country providing employment opportunities for the youth as the SMEs does not require capital than large firms. Further SMEs increase tax bases much quickly when compared to large firms,” an SLIC news release explained.

“Recognizing the importance and vital contribution made to the economy by SMEs, Sri Lanka Insurance went back to the drawing board to refine the “Business Club” comprehensive insurance solution to cater to the unique requirements of the businesses,” it said.”

“Therefor the insurance solution was developed to reinforce the success and safety of the businesses.”

The insurance plan will provide protection for any businesses be it retail, grocery store, supermarket, pharmacy or any other covering many perils inclusive of environmental dangers such as floods, cyclone, fire, lightning as well as other factors such as breaking and burglary, SLIC explained.

The release further said an array of main covers are available for businesses inclusive of fire and/or lightening, explosion, malicious damage, aircraft damage, earthquakes along with the free covers such as cost of removal of debris, loss of rental, architect, surveyors, consulting engineering fees, cost of alternative accommodation etc..

A range of additional covers are also available at an additional premium for businesses to choose. Money insurance during transit and while at premises, accidental breakage of glass cover, sign board cover, electronic equipment all risk cover are among the many additional covers offered.

Interested parties who’d like SLIC to assist in developing an insurance solution that covers the business risks can contact SLIC call center on 011 2 357 357.

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German fruit and tea importers stresses importance of packaging

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Jan Paul Bethke, a leading German importer of Sri Lankan fruits and tea, at a recent

EDB-organized event, urged Sri Lankan agri-product exporters to practice effective and superior packaging if they are to be successful in terms of capturing markets in Europe.

“If you package your product well, include a QR code (incorporating extensive details such as the farmer who grew products), and convey a personalized story, customers in advanced markets such as Germany and Europe would develop an affinity with your products”, Bethke noted.

He made these remarks at a Jan. 12 forum forum organized by the Sri Lanka Export Development Board (EDB) on packaging and value addition strategies to enhance Sri Lanka’s agri-product exports to Germany, an EDB news release said.

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