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Ceylon Finance Today: Sri Lanka plans to increase the banking and finance sector's minimum capital requirements to promote sector consolidation and stronger balance sheets,Central Bank Governor Dr. Indrajit Coomaraswamy said on Friday (30th).
"We don't have any intention for forceful consolidation. But next year we (the Monetary Board) will definitely consider imposing new minimum capital requirements to the banking and financial sector and it will encourage sector consolidation". He was delivering a lecture titled 'Development Challenges in Sri Lanka' organized by the Institute of Certified Management Accountants of Sri Lanka (CMA).
The Governor also stressed the importance of larger Sri Lankan banks with bigger and stronger balance sheet to tap global funding resources and mitigate risks.
"Increasing capital will further provide a cushion for banks to enhance their... ... contribution to the new growth sectors of the economy and to absorb any unexpected losses," he elaborated.
The sector has also will, adhere to the Basel III international Minimum Capital Requirements as well, he said.
Sri Lanka's prevailing,Minimum Capital Requirements for Licensed Commercial Banks and Licensed specialised Banks is Rs10 B and Rs 5 B respectively and branches of foreign banks is Rs 5 B.
There were 25 Licensed Commercial Banks/branches of foreign banks, seven Licensed Specialized Banks and 46 finance companies serving in Sri Lanka with limited international presence.
However, unconfirmed Treasury sources said that the new banking sector Minimum Capital Requirements will be around Rs 20 B.
They said there will be a sector consultation before implementation of any capital revision.
Basel III is an international regulatory accord which introduced a set of reforms designed to improve regulation, supervision and risk management within the banking sector.
The Basel Committee on Banking Supervision published the first version of Basel III in late 2009, giving banks approximately three years to satisfy all requirements. Largely in response to the credit crisis, banks are required to maintain proper leverage ratios and meet certain minimum capital requirements.
"We don't have any intention for forceful consolidation. But next year we (the Monetary Board) will definitely consider imposing new minimum capital requirements to the banking and financial sector and it will encourage sector consolidation". He was delivering a lecture titled 'Development Challenges in Sri Lanka' organized by the Institute of Certified Management Accountants of Sri Lanka (CMA).
The Governor also stressed the importance of larger Sri Lankan banks with bigger and stronger balance sheet to tap global funding resources and mitigate risks.
"Increasing capital will further provide a cushion for banks to enhance their... ... contribution to the new growth sectors of the economy and to absorb any unexpected losses," he elaborated.
The sector has also will, adhere to the Basel III international Minimum Capital Requirements as well, he said.
Sri Lanka's prevailing,Minimum Capital Requirements for Licensed Commercial Banks and Licensed specialised Banks is Rs10 B and Rs 5 B respectively and branches of foreign banks is Rs 5 B.
There were 25 Licensed Commercial Banks/branches of foreign banks, seven Licensed Specialized Banks and 46 finance companies serving in Sri Lanka with limited international presence.
However, unconfirmed Treasury sources said that the new banking sector Minimum Capital Requirements will be around Rs 20 B.
They said there will be a sector consultation before implementation of any capital revision.
Basel III is an international regulatory accord which introduced a set of reforms designed to improve regulation, supervision and risk management within the banking sector.
The Basel Committee on Banking Supervision published the first version of Basel III in late 2009, giving banks approximately three years to satisfy all requirements. Largely in response to the credit crisis, banks are required to maintain proper leverage ratios and meet certain minimum capital requirements.
