Banks must assess existing business models - Governor

Ramani KANGARAARACHCHI

Directors of licensed banks must assess the existing business models in the face of the global and local economic challenges as they have to play a significant role in repositioning the banking sector, Central Bank Governor Ajith Nivard Cabraal said.

Governor Cabraal

Delivering the key note address at the Bank Director’s Symposium held in Colombo yesterday on “Delivering stability and growth in a challenging environment” he said Sri Lanka must use its current strengths and favourable macro economic fundamentals while maintaining high economic growth.

“Global developments are likely to be challenging as it will have an impact on Sri Lanka,” he said.

Cabraal said Sri Lanka needs to have a more internationalized approach as increasing turmoil on the international front is worrying. In this effort bank should enhance credit ratings and credibility to attract new investors, increase banks branch network and their presence overseas encouraging foreign participation in Tier 2 debt capital of banks.

A time bound and limited Swap arrangement may be offered by the Central Bank, he said.

He said the country’s US $ 50 billion economy is tipped to grow at a record 8.3 percent this year, up from a 32 year high of 8.0 percent posted last year to US $ 100 billion in 2016 and Colombo Stock Market capitalization will increase from the current 30 percent of GDP to more than 70 percent by 2016.

Banking assets should expand from Rs 4 trillion to Rs 8 trillion in doubling per capita income, he said.

Elaborating further on directors role in repositioning the banking sector, Governor Cabraal insisted they must be involved in strategic issues and planning by attending all board meetings and provide clear strategic policy direction and leadership for senior management.

They should tap international sources of funds with significant foreign exchange inflows for investments in various projects such as tourism, ports telecommunications and government infrastructure projects.

“If directors carry out all functions successfully they can ensure the safety of the bank and they will contribute significantly to their own banks and towards the prosperity of the country,” he said.