New Finance Business Act for Sri Lanka for Enhanced Stability of Banking and Finance Sector

24th December 2010, www.dailynews.lk, Charumini De Silva

The new Finance Business Act that will introduced soon will further enhance financial stability while giving more power to the Central Bank.

Central Bank Deputy Governor Dharma Dheerasinghe said the new Finance Business Act will be presented for Cabinet approval on December 29.

The introduction of the new Finance Business Act will provide the Central Bank more authority to regulate the banking and finance industry.

“A stable financial system creates a favourable environment for depositors and investors and encourages banking and financial institutions and markets to function effectively”.

It promotes investment and economic growth, he said.

He said the financial system in Sri Lanka maintained a flexible and capably managed multitude of risks that arose in the dynamic environment.

The industry remained with strong risk management practices in banks and financial institutions. The stability of the financial system helped to continue in line with the development programs of the country.

“It is important to have a well established financial system in the 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 as it is vital for the growth of the country’s economy,” 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 steady financial system is dependent on an efficient and resilient banking system since the banking sector is the single most important segment of the financial system.

“Sri Lanka has gained a strong financial stability now and had a positive economic growth. This year the overall macro economic fundamentals continued stronger and Central Bank is confident that it will maintain this growth momentum in the coming year,” Dheerasinghe said.