The Case Study - Seylan Bank

Growth and Its Challenges15The complex interrelationships between Seylan Bank and many of thecompanies associated with Ceylinco are beyond the scope of this case study.What is salient is that those close connections were a further source of uneasefor analysts examining the Bank’s financial performance, management practicesand corporate governance.In short, it was widely agreed that Seylan Bank (a) had taken on excessiveand unjustified lending exposures with regard to many companies within theCeylinco Group, and (b) had signed contracts deemed unfavourable to theBank’s own interests in order to obtain services from, or deliver services to, alarge number of Ceylinco companies.Again, these specific inferences about Seylan Bank’s connection toCeylinco, and even broader public conclusions about the competence of seniormanagement, did not directly cause the Bank run of December 2008. But thereis no question that they contributed to an overall climate of uncertainty aroundSeylan Bank, such that the actual triggering event, when it did come, hadconsequences that expanded far beyond the immediate crisis.