‘Zero tolerance policy to prevent illegal operations vital’

Ramani KANGARAARACHCHI

The collapsing of financial institutions cannot be totally eliminated but a ‘zero tolerance' policy to prevent illegal operations and mismanagement will go a long way. President Counsel Dr Dayanath Jayasuriya said at a seminar on “Implications of the new Finance Business Act” (FB) at the Cinnamon Lakeside Colombo recently.

He said there is no fixed manner to deal with excessive greed or irrational exuberance but moderation even in risk taking can yield rich dividends. Referring to some of the achievements of the new FB Act he said it has a new framework and definitions for strictly regulating FB operations. It also has restricted the scope of unauthorized or illegal deposit taking operations while augmenting the regulatory powers.

It has also raised level of prudential accounting and auditing requirements. The new FBA also casts a wide net to capture illegal operators and those who have caused a wrongful gain or a wrongful loss in authorized or licensed businesses, he said.

However, markets must be permitted to evolve and product development must not be stifled in implementing the FBA , because markets tend to follow paths studded with pitfalls but damage control on a timely basis could be possible through prudent regulatory intervention.

Harmonization with banking act, application of Companies Act-solvency margin, additional provisions such as whistle blowing, immunity, alert by auditors , need to prioritize interventions, capacity of monetary board will be the issues and challenges when implementing the new FBA he said.