CB completes diagnostic study of banks
The Central Bank (CB) has completed the final phase of the asset quality review of the country’s banking sector as per the IMF recommendations in a diagnosis study, CB Governor Dr. Nandalal Weerasinghe said.
“We are discussing the report with individual banks. The report is much better than what we expected,” he told media on Thursday.
The review, comprising two phases, was done to identify stresses in different pockets of banks’ balance sheets as they provided massively on possible bad loans and other financial asset losses last year after the moratoria ended early this year.
People’s Bank, Commercial Bank of Ceylon PLC, Hatton National Bank PLC, Sampath Bank PLC, National Development Bank PLC, DFCC Bank PLC, Seylan Bank PLC, Nations Trust Bank PLC, and Pan Asia Banking Corporation PLC are amongst the entities that faced this review.
“Each bank was scrutinized for the potential risk that they could face going forward in rising NPLs, interest rate impact, and exchange rate impact and if they are going to have any pressure on capital and liquidity,” Dr. Weerasinghe said.
Separately, CB officials told The Business Times that after the first phase of the asset quality which comprised identifying risks of five major banks, the CB realised the kind of stress the banks are going to face in the future. “This is why the banks were not included in the domestic debt restructuring,” one official said. After reviewing the five banks in phase one, the tourism sector was saddled with Rs. 600 billion, and the sector NPLs were 20 per cent plus, he added.
Dr. Weerasinghe declined to comment on the report, saying it is a confidential one.
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