For the first time in the history of the Central Bank of Sri Lanka (CBSL), measures are underway to introduce a multiple currency- Scripless Government Securities Trading System for Sri Lanka Development Bonds (SLDBs), Central Bank Governor Arjuna Mahendran disclosed exclusively to Ceylon FT yesterday.
The new system will be implemented from next month, the Governor told this newspaper. "With this introduction of new the Scripless Trading System, the CBSL will not only be creating a secondary market but also a multiple currency- trading platform for SLDBs," Governor Arjuna Mahendran said. "But, initially, we will limit only to dollar denominated SLDBs", he said.
"Our main target is the Diaspora wealth. It is a more cheap and low risk borrowing methodology, when compared with the international sovereign bond issues. So, we are encouraging to issue more and more SLDBs because ,there is no exchange risk for those borrowings, when compared with the international sovereign bond issues " he further said. The Sri Lankan rupee is facing severe pressure at the moment.
In addition to prevailing one year, two year and three year maturing SLDBs, CBSL recently introduced a five year maturing SLDBs as well.
This is the first occasion country's central bank is going to provide Scripless Securities Settlement System (SSSS) facilities to SLDBs which is now having only with rupee denominated Treasury Bills and Bonds settlements.
During first six months of this year, the CBSL managed to raise US$650 million via costly international sovereign bond issues while CBSL raised US$ one billion simultaneously via cheaper SLDBs during this period.
Sri Lanka Development Bonds (SLDBs) are US Dollar- denominated Bonds, issued by the Government of Sri Lanka. Currently these Bonds could be traded only through designated agents.
SLDBs returns are totally tax free in Sri Lanka and also investors can get higher return than that of a standard deposit. This is also without exchange rate risk. Coupon interest rate is pegged to the 6-month USD London Inter-bank Offer Rate (LIBOR) thereby giving investors an opportunity to earn interest at the market rates, the bank said.
According to Central Bank web site, current, rupee denominated Lanka Secure System comprises of the Scripless Securities Settlement System and Scripless Securities Depository System (SSDS). Lanka Secure facilitates the issue of Government Securities and Central Bank Securities in electronic or scripless form and settlement of trades of such scripless securities on a Delivery versus Payment (DvP) basis.
Accordingly, transactions are settled in the system if the participant who sells securities has sufficient eligible securities in his Securities Account in Lanka Secure and the buying participant has sufficient funds in his Settlement Account in the Real Time Gross Settlement (RTGS) System to pay for the transaction.
All securities transactions settled in the system are irrevocable.
Courtesy: Ceylon Financial Times 22 June 2015