Small SL bank may seek partners
All Sri Lankan banks bar one are capital resilient, according to Central Bank (CB) officials. The unnamed bank with assets less than Rs. 200 billion has some tedious tasks ahead in meeting the Basel III minimum capital requirements by 1 January 2019, they say, declining to divulge the name of the entity.
This bank has less than 1 per cent of market share and the CB is expecting a final report on its financials by October to gauge the position in terms of capital in relation to its risk-weighted assets. Then the CB will make a final decision on the way forward, officials added.
“This bank will have to submit these reports by end October,” Rukshana Jayatilake, CB Deputy Director, Bank Supervision told journalists on Friday. She was speaking at an awareness programme for media personnel on Basel III, an international standard that spells out all the guidelines on capital adequacy which is a measure of the financial strength of a bank expressed as a ratio of its capital to its risk weighted assets. The higher the capital adequacy ratios a bank has, the greater the level of unexpected losses it can absorb before becoming insolvent.
She said that many measures can be used to resuscitate a financial institution and in this case should the entity fail to raise capital consolidation is an option. “It’s also being discussed.” But she added that should anything go wrong, it won’t impact the system stability as the size of this bank is too small for a major shock.
CB officials also told media that a new department called the Resolution and Enforcement is to be set up by the Central Bank (CB) early next year.
This was revealed by A.A.M. Thassim, CB’s Director Bank Supervision who said that the new department is to be set up in a bid to streamline the enforcement of the legal aspects of bank supervision. The CB is also in the process of amending and upgrading its Monetary Law Act and Finance Business Act to enable more powers to the CB, officials said.
The regulator is also to issue a consultation paper next month on the implementation of net stable funding ratio, a longer term structural ratio designed to address liquidity mismatches.