Branding Sri Lanka’s Banking As High Risk: Hurling Charges Not The Best Cure For Healing
By W.A. Wijewardena -
Dr. W.A. Wijewardena
Differences of opinion are normal
It is not unusual for one to find instances where there is a difference of opinion as to how one sees oneself and how others see him. Such differences invariably lead to hurling charges at each other and even making counter-charges to prove that the original opinions expressed had all been wrong. Such angry reactions, though not uncommon, prevent one from finding cures to heal one’s ailments if they had been working stealthily within one’s system without showing any symptom.
The recent episode of Sri Lanka’s banking industry being branded as ‘high risk’ by the global rating agency, Standard and Poor’s, and the angry reaction of the authorities to that branding is a classic example of the existence of and reaction to such differences of opinion.
The Central Bank: “Sri Lanka’s financial system is stable and sound”
The Central Bank’s Financial System Stability Review, also known as FSSR, for 2011, released a few months ago, has categorically assured its readers, based on the information available to the Bank as at the time of writing, that the country’s financial system continued to remain “stable and resilient” in 2011 “sustained by strong domestic economic growth despite the increasingly turbulent global economic and financial environment”. In a message to the FSSR, the Governor of the Bank has attributed several reasons for the strengthening of the overall soundness of the country’s financial system: “Growth in assets, higher capitalisation, adequate liquidity buffers, low risk levels and healthy earnings”. In six chapters and seven box articles in FSSR, the Central Bank has argued cogently and assuredly that the country’s financial system is sound, without threats or risks and free from worries. The FSSR has used historical data to prove its point and even conducted some stress testing, a way to look at the system’s ability to withstand extremely hazardous events that might hit it unexpectedly.
The Central Bank: “The financial system is not overly stressed”
