Regulatory measures introduced:

CB strengthens risk management systems

The Central Bank of Sri Lanka has introduced several regulatory measures to strengthen the risk management systems in financial institutions.

This includes licensed commercial banks, registered fiance companies specialized leasing companies and primary dealers in Government securities.

Central Bank Deputy Governor (Financial Stability Cluster) P.D.J. Fernando said financial institutions, financial markets and financial infrastructure are the three pillars of the financial sector, and the weakening of one pillar will create stress conditions on the other two pillars, through systematic effect, leading to an eventual collapse of the financial sector. Speaking at the inauguration of international seminar on Internal Capital Adequacy Assessment Process and Supervisory Review organized by Centre for Banking Studies of the Central Bank recently he said efforts of all regulators, individual institutions, Governments and stakeholders are to safeguard the strength of these pillars to mitigate the risks of financial instability.

He said a large degree of transparency and availability of financial information at low cost are pre-requisites for financial market prices to develop its potential in market steering and contain excessive risk taking.

He pointed out that architecture of risk management should be institution specific, dictated by its size, complexity of functions operating environment and technical expertise.

The disciplinary effect of the financial market encourages financial institutions to act responsibly and to individually undertake risk management.

The objective of the five day seminar was to enable participants to work within the Basel 2 Framework.

There were 30 participants including foreign participants from Malaysia,Saudi Arabia and Bangladesh.RK