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Sri Lanka to offer leeway on new regulations for small banks, finance companies

Apr 09, 2019 11:09 AM GMT+0530 | 1 Comment(s)

  

ECONOMYNEXT- Sri Lanka's central bank is offering breathing space for small and medium sized banks and non-bank finance companies to comply with new regulations, Governor Indrajit Coomaraswamy said.
 
Sri Lankan banks have to meet higher capital adequacy ratios under BASEL III regulations, while both banks and finance companies have to provision for bad loans on expected loss instead of incurred cost under International Financial Reporting Standards (IFRS) 9.
 
"The implementation of BASEL III and IFRS 9 together is also imposing certain burns on banks," Coomaraswamy told reporters on April 08.
 
"It's not in banks' interests or central bank's interest or country's interest to reverse what we've done."
 
"Sri Lanka has a good achievement in reaching global standards, but there seems to be leeway, room, to fine tune these things to address some problems," he said.
 
Bad loans have increased rapidly over the past year, which is cause for concern, Coomaraswamy said.
 
He said small and medium sized banks and finance companies facing difficulties with bad loans and meeting capital requirements could apply for flexibility in meeting the regulatory minimums.
 
"We don't want to reverse the whole process , but individual banks facing difficulty can make an application."
 
"If they are given some forbearance, there will be some conditions attached to them," Coomaraswamy said.
 
Conditions could include dividend policies, among others, the governor said.
 
Coomaraswamy then termed the new stance as offering flexibility, and not regulatory forbearance.
 
"It's not really forbearance but offering leeway."
 
The central bank has also been increasing minimum capital requirements for banks and finance companies in a bid to trigger mergers. 
 
In January 2019, Coomaraswamy had said that the regulator will not offer any forbearance for banks and especially, finance companies, which would even face early interventions. (Colombo/Apr09/2019)
 


 

1 Comments

  1. KT April 09, 08:56 AM

    Wonder which banks need leeway?

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