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COLOMBO — A private bank saddled with bad debt that threatened to destabilize Sri Lanka's financial system was taken over Monday by the island nation's Central Bank.
The regulatory authority appointed the government-owned Bank of Ceylon to continue business operations at the troubled Seylan Bank and removed its board of directors, it said in a statement.
The decision was made because of increased deposit withdrawals and suspected liquidity problems, the Central Bank said.
"The difficulties of Seylan Bank PLC presented a potential danger to the stability of the financial system," the statement said.
Lalith Kotelawala, chairman of Ceylinco Group said last week he would sell his shares to repay investors in failed Golden Key Credit Card Company. Both Seylan Bank and Golden Key are subsidiaries of Ceylinco Group.
Kotalawela did not say how much shares he would divest or what amount he is expecting to raise from selling his shares.
But the bank's CEO Ajitha Pasqual was quoted in a newspaper saying "it could be 23-25 percent or even more."
