Central Bank to enhance bank examination methodology

Dr. Indrajit Coomaraswamy

by Sanath Nanayakkare-January 13, 2017, 8:40 pm

Central Bank Governor Dr. Indrajit Coomaraswamy said recently that to maintain financial stability in the country in line with regulatory reforms, the Central Bank has identified the need for further strengthening its supervisory functions and expects to enhance the bank examination methodology.

"This will focus on efficiency, effectiveness and sustainability of individual banks and the banking sector, based on the Bank Sustainability Risk Index (BSRI)", he said.

The CB governor made this comment while announcing the Central Bank's Road Map titled "Monetary and Financial sector Policies for 2017 and Beyond" at the Central Bank in Colombo where the audience comprised many stakeholders from the banking and non-banking financial sector.

Further speaking the CB governor said, "We need to have a well-planned and an ambitious agenda for financial sector development and reforms ranging across financial sector policies with a vision of innovative, robust and competitive financial systems".

"As a priority, we expect to strengthen the regulatory framework pertaining to all financial institutions, including licensed banks, licensed finance companies (LFCs), specialised leasing companies (SLCs) and primary dealers".

"It will further ensure the stability of the financial sector by promoting the safety and soundness of those institutions to face unforeseen challenges in the growing business environment. In this regard, the Central Bank wishes to implement the following policies in 2017 and beyond".

"Since the last amendment to the existing Banking Act in 2006, the banking sector landscape has undergone a significant change, both nationally and internationally. Considering the need for upgrading of statutes in line with these developments, we expect to initiate amendments to the existing Banking Act".

"Accordingly, steps will be initiated to streamline and strengthen the regulatory and supervisory framework through the proposed Banking Act amendments. We will consider provisions for reinforcing the Central Banks's enforcement powers for violations of the Act and the Directions issued under it. In this regard, we wish to seek views from the banking sector as well".

"In line with these reforms, we intend to review all key regulations in the medium-term. In this regard, we will review key Banking Act Directions, such as share ownership, foreign borrowings, and corporate governance, and these will be amended where necessary", Dr. Coomaraswamy said.