Focus on wider financial stability

To thwart another crisis:

Harshini Perera

Even though the world’s second economic crisis has subsided, the tremors are still felt in certain economies. Therefore, wider financial stability is needed, Presidential Advisor Dr. Ranee Jayamaha said. “The laws enacted in a country are important in stabilizing the financial system otherwise the normal services are

 violated,” Former Central Bank Deputy Governor, Dr. Ranee Jayamaha said.

Speaking at an international training program for Bangladesh Bank Officers at Rajagiriya, she said a stable financial system creates a favourable environment for depositors and investors.

“It encourages financial institutes and markets to function effectively and efficiently. It also promotes investment and economic growth,” she said.

“Since 1990 there were 175 systemic banking crises and 50 small scale crises have taken place.”

“In 2009 alone, 140 US banks shut down adding another 15 banks in 2010. Such financial instability results the wealth losses, public interest and investors trust,” Dr. Jayamaha said.

Banks play a central role within the financial system as they have the capacity to provide liquidity to the entire economy.

Banks are also responsible for providing payment services, thereby facilitating economic agents to carry out their financial transactions.

“The stability of the financial system deals with the financial tools and therefore, the legal and regulatory structure plays an important role. Liquidation of a bank in this region is catastrophic as the public interest and depositors’ trust is heavily depended on,” she said.

“Maintaining a sound and stable financial system is critically dependent on an efficient and resilient banking system. The banking sector is the single most important segment of the financial system,” she said.