Risks for banks may rise on end of restriction on ISB investments : Fitch Ratings
The end of the suspension on Sri Lankan banks’ investments in international sovereign bonds (ISBs) issued by the Sri Lanka sovereign (CCC) has the potential to increase banks’ exposure to sovereign and foreign-currency funding and liquidity risks, says Fitch Ratings. Banks’ credit profiles are already significantly exposed to the sovereign, with Fitch-rated Sri Lankan banks having about a third of their combined assets exposed to the central government at end-2020. In addition, they face foreign-currency risks, including through their US dollar-denominated ISB investments.
The Central Bank of Sri Lanka (CBSL) on 16 June 2021 revoked the previous indefinite suspension on investments in ISBs by banks. Sri Lankan banks had invested heavily in ISBs, which prompted the CBSL to halt investments in ISBs by banks from December 2020, due to concerns about the pressure on the domestic foreign-exchange market through dollar outflows.
The CBSL now permits banks to purchase ISBs in the secondary market, provided this investment is funded by fresh overseas borrowings.The directive requires banks to adopt risk mitigation measures to bridge maturity mismatches that could arise. Fitch expects Sri Lankan banks to continue to face difficulties in accessing foreign-currency funding due to the sovereign’s low credit rating.
Foreign-currency borrowings declined to LKR881 billion by end-1Q21, from LKR984 billion at end-2019, accounting for 5.8% of sector assets. Refinancing needs remain high as short-term loans made up around 63% of the banking system’s external debt at end-2020.The latest directive stipulates that fresh offshore borrowings sourced to buy foreign-currency government securities have to be invested in both ISBs and Sri Lanka Development Bonds (SLDBs) in equal proportion, and as such would also contribute to increased investments in SLDBs by banks. Banks are the main investors in SLDBs, but their holdings of these securities declined 15% in 2020 to LKR448 billion.
Take-up in SLDBs by banks has been less than the higher-yielding ISBs, which are listed and more widely held. There are no limits on banks’ subscription to SLDB issuances.Fitch-rated Sri Lankan banks’ investments in ISBs and SLDBs accounted for 6.4% of their assets at end-2020. The extent of incremental investments in ISBs and SLDBs by banks remains to be seen, but Fitch expects the banks to add only a limited amount of ISBs and SLDBs.
This is due to the lower appetite of some banks to add to their exposure to foreign-currency government securities and potential funding access challenges. The risks to banks from their holdings of foreign-currency government securities are exacerbated by recent measures that have reduced minimum buffers, such as a reduction in the risk weights on foreign-currency claims on the government held by banks to 10% in 2021 from 20%, and cut in the loss-given-default rates to 10% from 20% when computing expected losses in 2021.
The ‘CCC’ rating on Sri Lanka reflects the sovereign’s challenging foreign-currency external debt repayment burden over the medium term, low foreign-exchange reserves, and high and rising government debt that gives rise to sustainability risks. Sri Lankan banks’ ratings continue to remain constrained by the sovereign credit profile, says Fitch Ratings.
Women led LPO services firm Velox Partners enters new office space in Colombo
Velox Partners, a tech-based legal process outsourcing (LPO) firm, expanded its presence into Colombo to augment its existing law firm. Velox commenced operations in January 2020 prior to the onset of the pandemic. Today, it has expanded its services across numerous verticals Commercial law, Litigation, Conveyancing and Company Secretarial Services, with Legal Process Outsourcing (LPO) Services being the core. It is geared as a fully-fledged legal service provider servicing clients across United Kingdom, Australia, Singapore and Southeast Asia.
Velox is female-led with over 90% being women comprising versatile and experienced lawyers. Their expertise bridges multiple disciplines of law with a local and global clientele. The two powerhouses leading the firm are its founding partners Lihini Fernando and Dakshika Perera whose collective experience spans over three decades.
Velox Partners saw Covid-19 restrictions and remote working as an opportunity to position the firm as a tech-based entity and launched its LPO arm. Providing back office legal services to law firms across continents was seen as a viable business model that is both functional and lucrative. Furthermore, the partners of Velox realized the potential of positioning Sri Lanka as a LPO Hub, where the LPO sector enables foreign remittance to the island nation to rebuild its economy. This also provided an opportunity particularly as LPO services can be offered remotely, without a physical office presence.
Velox has serviced clients in over 14 jurisdictions worldwide providing solutions on the ethos, ‘Beyond Legal’. Velox believes in combining business efficiency and tech enabled processes to differentiate itself from the conventional law firms.
Lawyers at Velox are solution providers guided by industry expertise. The team comprises professionals based in Australia, the United States of America, Singapore, and Sri Lanka which enables them to draw cross country perspectives in providing services. Velox is now poised to use their multiple years of experience across continents to provide smart legal solutions.
Estonian TV crew gets a taste of Sri Lanka for the first time
Sri Lanka Tourism, under its Scandinavian market promotions hosted a Media FAM with 4 Media personnel from Kanal2 TV from Estonia. The tour started off on February 28 and ended on March 8. The purpose of hosting this tour was to receive more high-end tourist arrivals from Estonia, as well as the other Scandinavian markets including Lithuania and Latvia.
Subsequently, this tour was hosted in collaboration with the Sri Lanka embassy in Sweden which contributed to make this tour a success. The FAM Tour covered all the main tourist attractions in Sri Lanka, including wild life, Ayurveda, Boutique hotels, and also cultural attractions.
All these attractions were filmed and the destination will be promoted on air via Kanal2 TV, through the TV show ‘’ Kaugele Siit’’ (far from here). The first episode of this programme is scheduled to be telecast for 45 minutes. This travel programme has 420,000 followers as their audience. Kanal2 TV was also the official Media partner for the Winter Olympics 2018, a Sri Lanka Tourism press release said.
The release adds: ‘The visitors were quite impressed with the 8-day tour which they had, enjoying every moment of their tour. They were equally mesmerized with the warm hospitality which they received from the Sri Lankans, which they are mostly renowned for. They enjoyed the traditional Sri Lankan cuisine, and the variety of dishes which they tasted. Nevertheless, they had the opportunity of exploring every attraction of the paradise island to convey the message to their fellow Estonians, that Sri Lanka is a unique travel destination which has everything in store for the enthusiastic traveler.
‘They also had a cooking demonstration by courtesy of Siddhalepa Ayurveda Resorts & Spas Wadduwa, and also a Yoga treat at the same venue. Visiting the Turtle Hatchery at Kosgoda , the Elephant orphanage at Pinnawala, going through a safari at Eco park was also another amazing experience which they had during their stay.’
The Academy of International Business signs Memorandum of Understanding with the University of the Pacific
Academy of International Business Sri Lanka (AIB) held its second graduation at the Bandaranaike Memorial International Conference Hall with over fifty graduates successfully passing out. At the recent graduation, the business academy signed its MOU with the University of the Pacific.
The signing of the MOU is a major milestone for the business academy. The courses offered are DBA, MBA, and BBA top-up programs through AIB. Prof Liam, Rector – of the University of Pacific, expressed confidence that the program delivered by AIB will be very beneficial.
The event was graced by passed graduates, teachers, and lecturers, the ceremony was hosted by the chief guest and the regional director of ABE(UK) Dr Praveen Mahendran. “The ABE(UK) is one of the long-standing professional awarding bodies from the UK and AIB is proud to be associated with ABE and approved by the awarding body.
Hard work, competency and capability are the values that produce results, through the AIB and its programs these are achievable. Every student is encouraged to show their full potential”.
The distinguished guests were the Vice President of the BNI Pioneer Chapter, Dilan Fonseka. He emphasized, the importance of students gaining experience in entrepreneurial skills and business development by enrolling at BNI. AIB is a member of BNI, which creates multiple opportunities.
About the Academy of International Business: AIB is recognized for its management programs, digital marketing, marketing, and English language programs such as IELTS, and PTE. It’s widely popular among students in search of pursuing business and management courses.The Director of AIB Sri Lanka, Chrishankar Janathanan, expressed the institute’s commitment to providing the best quality education. It’s not only a center that is simply cornered to the education sector but also has focused its efforts on recruitment services and digital agency services.
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