The BankInsight

Importance of Supervision of Banks and Their Regulatory Framework In present, banking sector of Sri Lanka is regulated by the Monetary Law Act No.58 of 1949 The Act is established by the Central Bank to administer and regulate the system and to confer and impose upon the Monetary Board of the Central Bank powers, functions and responsibilities necessary for the purpose of such administration and regulation. And also the Banking Act No.30 of 1998 has established to provide for the introduction and operation of a procedure for the licensing of persons carrying on banking business, for the regulation and control of matters relating to the banks. Regulation of banks is required to protect the public against mismanagement, bank failures and loss of confidence in the banking system. Bankers’ failures can have broader ramification hurting customers, other banks, the community and the market as a whole. To protect depositors and stock-holders CBSL has established several regulatory dep...

Banking Sector The banking sector in Sri Lanka, which comprises Licensed Commercial Banks (LCBs) and Licensed Specialized banks (LSBs), dominates the financial system and accounts for the highest share of the total assets in the financial system. Banks play a critical role within the Sri Lankan financial system, as they are engaged in provision of liquidity to the entire economy, while transforming the risk characteristics of assets. Banks also engaged in providing payment services, thereby facilitating all entities to carry out their financial transactions. On the other hand, banks can create vulnerabilities of systemic nature, partly due to a mismatch in maturity of assets and liabilities and their interconnections. Therefore, the soundness of banks is important, as it contributes towards maintaining confidence in the financial system, and any failure may have the potential to impact on activities of all other financial and non-financial entities, and finally the economy. ...

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 pub...

A financial system is a system that allows the exchange of funds between lenders and borrowers. Every financial system operates at national and global levels of an economy. They consist of complex and closely related services, markets and institutions intended to provide an efficient and regular linkage between investors and depositors.   The financial system of a country includes various units which relates to the payment system of that country through money transactions. Therefore, financial development of a country depends on the development of the money and money transactions of that country. Components of a Financial System                                                     Functioning of a financial system in a co...