Central Bank stresses on self governance, market discipline

ECONOMY: The Central Bank of Sri Lanka released its Financial Stability Review (FSR) 2005 recently. This is the second report in the series that commenced with the publication of the first FSR 2004 in May 2005.

The purpose of the FSR is to inform all stakeholders, including the public, of the Central Bank's overall assessment of financial system stability and potential risks and ways to mitigate them, and to encourage informed debate on financial stability issues in Sri Lanka.

The FSR 2005 covers information for the first half of 2005 and any subsequent information that was available up to the end of the year. It comprises 5 chapters.

The review concludes that the available information indicates no serious threat to financial stability in Sri Lanka at present an Information Department release said.

However, it stresses that self-governance and market discipline need to be strengthened, while unhealthy practices by players in the financial sector need to be curbed.

At the same time, the necessary new legislation required to meet new challenges has to be framed, approved and enacted as early as possible.

The FSR 2005 states that the Central Bank will continue to monitor potential risk factors and use its regulatory powers and policy instruments judiciously, to address any potential threats to financial stability arising from the macro economic environment, financial institutions or markets, or the financial infrastructure.

The FSR is expected to enhance public awareness of financial stability issues and to emphasise the responsibility of all stakeholder; i.e., regulators, financial institutions and financial market participants, to ensure stability of the financial system in Sri Lanka.

The FSR 2005 is now available for sale to the public. In addition, summary reports on the key issues highlighted in the FSR 2005 in both Sinhala and Tamil will be available for sale shortly.