The Central Bank of Sri Lanka (CBSL) announced that it has issued a notice of cancellation of the license issued to The Finance Company PLC (TFC) in a letter dated 23^rd October. It has said that TFC could tender its objections, if any, in writing to the Central Bank against this notice of cancellation within 30 days of the date of the letter. The decision on the actual cancellation of license would depend on whether the objections provide sufficient and substantial grounds for the Central Bank to withdraw the notice of cancellation of the licence. The notice has been given due to the “continuous violation” of the Finance Business Act (FBA) Directions, including Minimum Core Capital, Capital Adequacy and Liquid Assets requirements as well as “the critical financial condition of TFC” due to negative capital, poor liquidity position, continuous losses, significantly deteriorated asset quality, poor governance practices. This notice follows several regulatory measures taken with effect from 15th February 2019, which included the suspension of accepting new deposits, withdrawal of deposits and disbursement of loans and advances to facilitate the restructuring process of TFC. The primary objective of these regulatory actions was to identify a potential investor for TFC within a reasonable time period. However, TFC has not been able to find an acceptable investor to date to revive the company. TFC’s troubles could be traced back to 2008, when it was severely impacted by the failure of a number of financial institutions within the Ceylinco Group. Since then the financial status of the company has deteriorated gradually, leading to a severe liquidity crisis. Although, several efforts were made to identify prospective investors and to restructure the company, such efforts have not materialized to a satisfactory level yet. The Central Bank took the above regulatory actions in February to safeguard the interests of the depositors and other stakeholders of the company. Thereafter, it instructed TFC to call Expressions of Interest (EOIs) from potential investors and to request such investors to submit their Business Restructuring Proposals to revive TFC. However, TFC had not been able to receive an acceptable EOI from any credible investor along with evidence for the availability of funds. The company is incurring a monthly loss of around Rs. 200 million and hence it is obvious that operation of the company in this manner would be further detrimental to the interest of the depositors and other stakeholders, the Central Bank said. It added that, despite the notice of license cancellation, any credible investor could still submit an acceptable EOI along with proof of funds for capital infusion and a Business Restructuring Plan for the consideration of TFC and Central Bank. Interest due for deposits will be paid continuously to the depositors as per the CBSL directions. At the same time, all borrowers of the company are strictly advised to pay their dues, CBSL said. It said that such borrowers are encouraged to pay their dues via bank accounts designated by TFC or to the nearest TFC branch and that they should also ensure to obtain receipts for the repayments they make,” it said. “Attention is also drawn to the fact that the deposit insurance and liquidity support scheme will also safeguard the interest of all depositors to a maximum of Rs.600,000/- per depositor, which will cover 94 per cent of the TFC depositors in full. Therefore, the depositors are kindly requested to cooperate with the CBSL,” it added. The cancellation of the TFC license came just over a month after the Central Bank cancelled the license issued to TKS Finance Limited with effect from 19 September.