Golden Key Card
Posted on April 13th, 2010

orpheus perera

Dear Editor,
The “Golden” Key Card

With reference to the collapse of Golden Key card of Seylan bank, I just read an article in  the Sunday Times , 4th of January 2009 edition, written by Natasha Gunarathne.

“Some economists feel the situation at Seylan Bank, precipitated by the unfolding drama with the Golden Key Credit Card Company, has nothing to do with the global financial crisis. Instead, it is about the mismanagement of the financial market in Sri Lanka in which the Central Bank (CB) should take responsibility for, according to senior lecturer and head of the Economics Department at the University of Colombo Dr. Athula Ranasinghe. He said the CB is the only authority that can handle situations such as this. At the same time, given the global changes that have taken place in financial markets over the years and the thousands of new instruments and innovations entering the market, the present Monetary Act is not sufficient and does not give enough authority to the CB to regulate the industry. Dr. Ranasinghe said the Act must be amended”.

I am not an economist, I have not lost any money when Lalith Kothalawala’s enterprise collapsed, but I have common sense.

One investor, known to me, is blaming Mahinda Rajapakse government, for not paying the sum he invested with Golden Key card(Rs. 80 million), since now Seylan bank is under control of  the Central Bank.  Few others who have lsot their smaller investment are not sure about this..Frustrated investors have made MR a good target, when looking for an escape goat.

I invested $25,000 with AMP Australia, 10 years ago. During the credit crunch the value of my investment became $18,000(after 8 years). Australian government is not responsible for what AMP did to my funds. The money has been invested by AMP in USA in areas like Golden Key Card. Fortunately for me; I allowed them to invest only 10 percent of my Capital in so called “high returns” equities. The amount of money left in my investment is the proportion that I selected to invest with 8% -15% returns 10 years ago.

In the first place, the investors have been too greedy, expecting 30% interest. The funds have been improperly managed by the Seylon Bank. In the US only now President Obama is trying to bring laws to control these types of investments. But there are still objections from the finance companies.

I see this as one of the failures of free market economy. Only when they collapse, they expect the governments to rescue them.

The money was lend to people at higher interest rates(as high as 60%). In Australia the lender can take, the defaulted borrowers to courts. If borrowers are unable to pay(no assets or no more income), the lender will be the loser.

The Central Bank is only partially responsible for letting Lalith Kothalawala to start this risky investment. I am not sure whether Central Bank could have interfered with his new business according Sri Lankan Financial regulations. On the other hand, if the government interfered at the outset, there would have been anti-government publicity in the financial world, blaming MR government for been a dictator trying to destroy free enterprises.

Here I would like to say, hat one treacherous thing the UNP government did was to hand over corporations owned by the people(such as the textile industry, steel and profit making telecommunication), to private enterprises.

I agree with Dr. Ranasinghe where he says “present Monetary Act is not sufficient and does not give enough authority to the CB to regulate the industry. Dr. Ranasinghe said the Act must be amended”.

But the government (Mahinda Rajapakse government) should be ready to turn a deaf ear to any criticism, when amending the Act, exactly the way he did during the war against the terrorist.

Main goal of MR government is to improve the lot for the poorer people of the country.

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