SEC further relaxes stock broker credit extension
The Securities and Exchange Commission (SEC) further relaxes stock
broker credit extension.
Additional credit available will increase by Rs. 5 billion resulting
in total credit available in the market to Rs. 8.7 billion.
At the Commission meeting held on 16th January 2012, the Securities
and Exchange Commission of Sri Lanka (SEC) decided to permit Stock
Broking Firms to leverage 3 times adjusted Net Capital with immediate
effect.
Adjusted Net Capital is the Net Capital computed as per the Colombo
Stock Exchange (CSE) Member Regulations less 50% of Fixed Assets. In
line with other regional markets, 50% was deducted to take into account
the concerns of realizing illiquid assets into cash.
By permitting the Stock Broking Firms to leverage 3 times adjusted
Net Capital, the additional credit available in the market will increase
by Rs 5 billion resulting in the total credit available among Stock
Broking Firms to Rs 8.7 billion. Having considered the dimensions of
credit extension and to establish a balance between the two principals
of lending norms and risk management the SEC reviewed the Credit
Extension by Stock Broker Firms. |