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The People's Bank treasury unit has, structured a Collateralised Loan Obligation (CLO), a methodology of packaging and selling commercial loans, where major commercial banks package and sell corporate loans to institutional and individual investors.

The initial tranch of this transaction consists of a LKR 250 million facility given to the leasing industry, with the issuing of CLO's for a period of five years, with annual interest payments.

This issue has been placed in full with the National Insurance Corporation Limited.

This transaction provides the bank with an opportunity of increasing liquidity and its lending capacity, accessing new sources of funding, improving return on assets/return on equity, and reducing exposure to credit concentration whilst enabling the bank to competitively position itself in the financial marketplace.

Structure of the Deal: Tenor : 5 Years, Amount: LKR 250 million, Interest Payment: Annually, Capital Redemption: At maturity.

The market for packaging and selling commercial loans is growing very fast and has been responsible for transforming commercial lending. Banks throughout the world are increasingly utilising CLO's to sell portions of large commercial loans directly to the capital markets.

Going forward we feel that this type of transaction will be essential as banks will find that their plain vanilla money market producers are not sufficient to bring in the desired revenues with competition intensifying and margins thinning.

The People's Bank intends to establish a regular program of such debt securities, as an ongoing business strategy, which we feel will be advantages in establishing a market presence and reputation, whilst helping to develop a diversified constituency of investors.

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