LOLC Holdings PLC has told the Colombo Stock Exchange that its rupee borrowing from state-owned People’s Bank is fully secured against a US dollar deposit the group holds at that same bank, rejecting what it called a misleading narrative circulating online and on social media, EconomyNext reported on Thursday afternoon.
The company’s market filing is headed “Public clarification on misleading information concerning People’s Bank Facility”.
The fundamental fact is straightforward: the local-currency borrowing is secured against a US dollar deposit maintained with People’s Bank itself.
The mechanism LOLC describes
On the company’s account, the structure is a currency-preserving one rather than a conversion.
LOLC Group entities maintain US dollar deposits with a number of international and local banks, including People’s Bank, as part of what it calls its global treasury operations. Sri Lankan group entities then use the value of those deposits as security to raise local-currency funding.
The point LOLC presses is where the collateral sits: “People’s Bank itself holds full collateral supporting the facility, which is the most secure form of bank credit.” The lender is also the custodian of the security.
The company describes the commercial logic as avoiding a conversion it does not want to make. Rather than turning an existing dollar asset into rupees, the group preserves the foreign-currency asset while using its value to raise rupee funding in Sri Lanka and across international operations it says span 27 countries. It characterises such structures as commonly used treasury and foreign-exchange risk-management practice among multinational groups.
The three specific claims it denies
The filing is unusually precise about what it is rejecting. LOLC says there is no factual basis for suggestions that:
- the existence or location of the deposit is uncertain;
- People’s Bank would have to pursue or recover an unidentified asset situated overseas; and
- the transaction represents an unsecured exposure of public deposits.
Read together, those three describe a specific allegation: that a state bank had lent rupees against a dollar asset held somewhere offshore that it might struggle to reach. The company’s answer is that the asset is not offshore relative to the lender at all — the deposit is at People’s Bank.
LOLC adds that attempts to portray the transaction as evidence of questionable banking practices, foreign-exchange speculation or improper use of public funds are “without factual foundation and create a materially distorted impression”.
The part that goes beyond a clarification
The filing does not stop at explaining the facility. It sets out two courses of action.
First, LOLC says it is bringing the relevant publications, and the dissemination of materially misleading information in them, to the attention of the appropriate regulatory and other authorities.
Second, it reserves and intends to exercise all rights and remedies available under law against persons and organisations responsible for “originating, publishing, knowingly republishing or recklessly continuing to disseminate” materially false or misleading information about the group — “where the applicable legal thresholds are satisfied”.
That last clause is a real qualification rather than boilerplate, and the phrase “knowingly republishing or recklessly continuing to disseminate” extends the stated exposure beyond whoever originated the claims to those who carry them on.
Why a state bank’s collateral is a public question
The reason this clarification exists is that People’s Bank is state-owned, which is why the allegation LOLC describes was framed in terms of “public deposits” rather than a private lender’s credit risk. A loss on a state bank’s exposure is a public loss.
LOLC’s answer is a structural one: cash collateral held by the lender itself is the strongest form of security in commercial banking, and if the facility is collateralised in the way described, the credit risk to People’s Bank — and so to the state — is close to nil regardless of the borrower’s standing.
This desk notes that it has not seen the underlying publications LOLC is responding to, and cannot assess what was alleged or by whom beyond the company’s own characterisation. The filing is a listed issuer’s account of a dispute, published through the exchange, and should be read as such.
Not reported
EconomyNext’s account gives no size for the facility. Neither the rupee amount borrowed nor the dollar value of the pledged deposit appears, which leaves the scale of the exposure being argued about unstated — and it is the figure that would determine how much turns on the question.
A figure and a corporate-resolution date for the arrangement are circulating on aggregator and non-newsroom sites. This desk has not found either in a verified newsroom’s reporting or in the filing text EconomyNext reproduces, and does not repeat them here. They are noted as unverified rather than used.
The filing does not name the publications or the persons it is referring to the authorities, does not say which authorities, and does not say whether any complaint has actually been lodged or any legal step taken. It gives no date for the facility, no tenor, no pricing, and does not say which group entity is the borrower or which holds the deposit — the statement refers generally to “Sri Lankan Group entities” and “LOLC Group entities”.
There is no response from People’s Bank. The bank has not confirmed the existence of the deposit, the collateral arrangement or the facility, and no regulator — not the Central Bank, which supervises People’s Bank, nor the Securities and Exchange Commission — has commented. A confirmation from the lender would corroborate the central factual claim; none is reported.
A note on sourcing
This article rests on one verified newsroom, and EconomyNext reproduces the company’s statement in full, so the account of what LOLC said is complete.
A search across verified Sri Lankan outlets returned no second verified newsroom carrying the clarification at the time of writing. The story was picked up by several aggregator and non-newsroom sites, which under this desk’s sourcing rules do not count toward credibility and are not linked. The primary document is a Colombo Stock Exchange disclosure, so the company’s words are on the public record independently of any newsroom’s account of them.
Sources: EconomyNext.
