CENTRAL BANK OF SRI LANKA

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Overview

 The Central Bank of Sri Lanka (CBSL) is the apex institution in the financial sector in Sri Lanka. It was established in 1950 under the Monetary Law Act No. 58 of 1949 (MLA) as a semi-autonomous body and is governed by a five member Monetary Board.

The CBSL seeks to achieve and maintain two core objectives to maintain a healthy and stable economic and financial system while maximizing resource utilization effectively. These objectives are:

      1.    The maintaining of economic and price stability
      2.    The maintaining of financial system stability

The MLA has also granted the CBSL sole authority to issue currency notes and coins to the public. Therefore, the Bank is responsible for currency issuance and management.

The CBSL is adviser on economic affairs and Banker to the Government of Sri Lanka (GoSL). As agent to GOSL the CBSL is tasked with managing the Employees’ Provident Fund, managing the country’s public debt, providing exchange control services and administration of foreign and government funded credit schemes to enhance access to finance for regional development.

The Governor of the CBSL functions as its Chief Executive Officer while the senior management consists of the Senior Deputy Governor, Deputy Governors, Assistant Governors and Heads of Departments in addition to the Governor. The Bank consists of 30 Departments headed by a Director or its equivalent and 6 Regional Offices headed by a Regional Manager. Apart from the Internal Audit Department and Financial Intelligence Unit which report directly to the Governor, all other Departments report to the Governor or Deputy Governor through an Assistant Governor.

Vision
“A credible and dynamic central bank contributing to the prosperity of Sri Lanka.”

 Mission 
"Maintaining economic and price stability and financial system stability to support sustainable growth through policy stimulus, advice, commitment and excellence.”

Our Values

  • Commitment to inspirational leadership
  • Transparency in what we do
  • Accountability to our key stakeholders - the public, government, financial institutions and employees 
  • Integrity - trust, dependability, honesty
  •  Commitment to professional competence
  • Commitment to lifelong learning, knowledge sharing and innovation 
  • Consistency, accuracy and timeliness of all actions taken by the Bank
  •  Managing and ensuring operational autonomy for policy formulation and implementation
  •  Urgent and continuous commitment to results and outputs
  • Commitment to collaborative and participatory work practices

Objectives of Central Bank of Sri Lanka (CBSL)

The CBSL's focus and functions have evolved since its formation, in response to the changing economic environment. In keeping with trends in central banking, the objectives of the CBSL were streamlined by amending the Monetary Law Act (MLA) in 2002, to enable it to pursue its two core objectives and to free it of the multiple objectives that were originally assigned to it.

The Central Bank has two core objectives:

            1.Maintaining economic and price stability
            2.Maintaining financial system stability

With a view to encouraging and promoting the development of the productive resources of Sri Lanka.
Prior to the amendment of the law, the Central Bank had multiple objectives, which could sometimes be in conflict or be inconsistent with each other.
                                           Meanwhile, a consensus had developed internationally that a central bank's primary goal should be the maintenance of price stability. As price stability is crucially dependent on stable macroeconomic conditions, one of the core objectives of the CBSL was therefore specified as "economic and price stability".  Furthermore, as the experience of other countries has demonstrated, the stability of the financial system is crucial in improving the resilience of the economy. Hence, financial system stability was also identified as a core objective of the CBSL. The two objectives are correlated and complement each other. Ensuring financial system stability is of prime importance, as monetary policy is transmitted through financial intermediaries (institutions) to achieve price stability. Hence, the two objectives are in harmony and this enables the Central Bank to perform its main functions more effectively. The CBSL has been given a high degree of autonomy to achieve its objectives. In this task, the Bank closely liaises with the Ministry of Finance in making policy decisions and the Secretary to the Ministry of Finance is a member of the Monetary Board, which is the governing body of the CBSL.



Economic and Price Stability

Price stability safeguards the value of the currency in terms of what it will purchase at home and in terms of other currencies. Price stability or stable prices means low inflation. Experience has shown that the economy performs well when inflation is low and is expected to be low. Interest rates are also low in these conditions. Such an environment allows an economy to achieve its growth potential and fosters high employment. Free from the disruptive effects of high and variable inflation, both consumers and producers make economic decisions with confidence. Low inflation or price stability fosters sustainable long-term economic growth and employment. The Central Bank uses monetary policy measures to control inflation.



Financial System Stability

A stable financial system creates a favorable environment for depositors and investors, encourages efficient financial intermediation and the effective functioning of markets, and hence, promotes investment and economic growth. Financial system stability means the effective functioning of the financial system (financial institutions and markets) and the absence of banking, currency and balance of payments crisis. Financial instability is caused by bank failures, excessive asset price volatility, and collapse of market liquidity or a disruption to the payments system. Financial system stability requires a stable macro-economic environment, effective regulatory framework, well organized financial markets, sound financial institutions and safe and robust payments infrastructure. The maintenance of financial stability entails the prevention, detection and reduction of threats to the financial system as a whole, through the surveillance of markets and financial institutions, oversight of the payments system and crisis resolution.



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