Strong financial stability now - Dy Governor

Charumini de Silva

A stable financial system creates favourable environment depositors and investors, encourages financial institutions and markets to function effectively and hence promotes investment and economic growth.

Central Bank Deputy Governor, K.G.D.D. Dheerasinghe said financial system stability is vital for the growth of a country’s economy.

“To have a well-established financial system in a country, we need to focus on new trends in financial markets, basis of allocation of financial responsibilities, importance of financial infrastructure, micro and macro perspectives and global trends in financial supervision.

He was speaking at the International Training Program on Banking Supervision and Regulations at the Centre for Banking Studies, Rajagiriya. This two week training program on Banking Supervision and Regulation, is a continuation of the series of training programs organized by the CBS for Bank Examiners of Bangladesh Bank.

It is timely to analyze and discuss the recent global trends in financial supervision and regulations in the light of the lessons of the recent global financial crisis in conjunction with the issues and challenges before the regulators. As the Deputy Governor of the Central Bank of Sri Lanka I thank the Bangladesh Bank for choosing the Centre for Banking Studies for training their officers, he said. “Banks play a central role within the financial system, as they have the capacity to provide liquidity to the entire economy.

Banks are also responsible for providing payment services and facilitating economic agents to carry out their financial transactions,” he said.

Dheerasinghe said Banks could create vulnerabilities of systemic nature, partly due to a mismatch in maturity of assets and liabilities. Maintaining a sound and a stable financial system is critically dependent on an efficient and resilient banking system since the banking sector is the single most important segment of the financial system.

The Deputy Governor said Sri Lanka has strong financial stability now and had and positive economic growth despite the global economic meltdown.

“Advanced economies such as the USA, UK, and Japan had negative impacts on the global financial downturn.

However Sri Lanka had a minimal impact from the economic meltdown as the Government and the Central Bank intervened and came through the difficulty in an extraordinary manner,” he said.

“Access to credit is key for development and at present there is a high demand for banks in the Northern and Eastern province to continue their regular activities.

With the opening of these two provinces more economic activities are expected and the country’s economy will grow rapidly as it was before the war”, Dheerasinghe said. He said it is important that the financial system remains flexible and capable of managing the multitude of risks that arise in the dynamic environment. The requirement of promoting strong risk management practices in banks is highlighted by the recent international economic and financial turmoil.

CBS has been a strategic partner in providing life-long learning opportunities for financial sector professionals in Sri Lanka and other Central Banks in the region.