Mar 25. 2011 (LBO) - Sri Lankan companies offering forestry investments to the public are not regulated by the central bank which therefore has no supervisory role over them, a senior central bank official said.
"Tree planting is not a regulated finance business," said P Samarasiri, Assistant Governor of the Central Bank.
"Therefore, the central bank has nothing to do with it."
Samarasiri was responding to a question at a public forum organised by the regulator on the restructuring of finance companies which collapsed two years ago.
"They (forestry firms) are not registered with the central bank because they do not come within the normal financial business legislation," Samarasiri said.
"However, they are companies registered under the companies act. In any country you can have different businesses."
In recent years, a few firms offering long-term investments in forestry products like teak and sandalwood plantations have emerged.
Samarasiri said the central bank had strengthened financial sector regulations following the finance company crisis and closed loopholes in the law.
But, he added, the investing public have different "risk appetites" and should be mindful of the risks they take when investing.
"The markets have created different investment avenues (for people with different risk appetites)."
Following the collapse of finance companies, the central bank warned the public to be wary of unregulated investment schemes offering high returns, saying the higher the promised return, the higher the risk they faced.
Finance and leasing companies which form the non-bank sector face less strict regulations than banks and their risk profile is higher because of the nature of their business, Samarasiri said.
"Stakeholders approaching them bypass other institutions, so their risk appetite is also higher, although they may not say so."
source - www.lbo.lk
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