'No theories to create financial stability'

Hiran H.Senewiratne

The financial system stability to any country is important to face internal and external shocks in the country. Therefore one of the key objectives of all monetary bodies in the world is to focus on financial stability, Central Bank Governor Ajith Nivard Cabraal said.

"Central Bank always anticipates well ahead of others to mitigate and minimise turmoil conditions. Therefore good risk management will make it easier to maintain the stability," Cabraal told at a seminar on Financial Stability Policy yesterday.

The seminar was organised by the Bank of England and the Central Bank of Sri Lanka. Many of the occurrences could be predictable which could be minimised or avoided and the role of the Central Bank is the task of a good risk manager to looking after the stability of the financial stability in the country, he said.

Cabraal making the keynote speech said that last year the Central Bank charged one per cent commission from good loans from Banks as a risk management mechanism. Therefore, this prevented the meeting with the fallout with turmoil.

The Governor said that GSP plus agreement will expire end of this year and we must make a conscience effort to face the challenges. To do that we have to analyse and understand the problem to address issues from medium to the long term perspective, he said. He said that what we need is to watch all occurrences carefully to mitigate all problems to create financial stability in any country.

Advisor, Financial Stability Centre for Central Banking Studies Bank of England, Dr Kevin James said that there are no theories to create financial stability for any country. "Therefore we have to watch the situation carefully to establish financial stability in the country," Dr. James said.

He said organising of international seminars in this nature will facilitate the enhancement of professional sophistication in both the participants and of the centre in its knowledge management initiatives.

"Strengths in term of knowledge and experience of both the institutions, will definitely create synergy to cope up with external dynamics in the area of financial sector stability," Dr. James said.