The Monetary Board decision to call for Expressions of Interest (EOI) from prospective strategic partners of the Seylan Bank was influenced by the desire of the authorities to pump in investor rather than public funds into the bank, Central Bank Governor Ajith Nivard Cabraal said yesterday.

A notice published by the Chairperson of the Evaluation Committee, Deputy Governor Ranee Jayamaha, called for such EOIs from investors willing to take up to a third of ownership of the bank through a new investment.

However, it was clearly stated that such investor/investors would be required to reduce their ownership to 15% of the bank 15 years from the date of investment.

The Central Bank expects a sum of Rs.5.7 billion (approximately US$ 50 million) to be invested by the strategic partner of Seylan and also expects further investment in the debentures of the bank.

"The bank has been stabilized now and there is no bleeding," Cabraal said yesterday. "We wanted to find a strategic partner as quickly as possible in these circumstances."

Cabraal who with Mr. Basil Rajapaksa, MP, was in Washington last week for talks with senior officials of the IMF and World Bank said that there has been a lot of interest in what was regarded as "the timely intervention by the regulator" when Seylan’s problems surfaced.

The Governor said that it was possible that the way in which this problem was tackled will be taken as a model for similar interventions elsewhere.

Meanwhile a senior official of The Finance Company (TFC), identified as a "key executive" to run TFC under the management of the Lankaputhra Development Bank said that with the company now protected against shunting funds into other troubled group companies, normalizing its activities would become much easier.

This was stated by Mr. Kamal Yatawara, a senior official of TFC, who is working with the new managing agent to assist the country’s oldest and pioneering finance company with a deposit base of Rs.28 billion.

Mr. Sarath de Silva, Chairman of the Lankaputhra Development Bank, said that the problems besetting the troubled group would be attributed to what he called a "too big to fail syndrome."

He said that the exposure of TFC into other group companies was now under examination but declined to discuss what the extent of such exposure was.

Saying that the chief priority was to ensure that interest dues of depositors will be paid, he expressed confidence that many of TFC’s problems could be sorted out within a three-month timeframe.

Already the renewal rate on deposits had gone up substantially. The company had valuable real estate and property holdings to back it up and what needed to be achieved was to halt a run on deposits ensuring that it was able to correct the fault lines that have now surfaced.

The four key executives identified for managing TFC are Mrs. V.W. Dissanayake, Mrs. N. Rupasinghe, Mr. Kamal Yatawara and Mr. Tissa Ekanayake who will assist the Lankaputhra team comprising its Chairman (retired Bank of Ceylon GM Sarath de Silva) and Chief Risk/Operations Officer Ravi Dassanayake.

De Silva said that although a managing agent’s fee has to be decided "this is not a charity operation."