Sri Lanka bank risk management culture under scrutiny

ECONOMYNEXT – Sri Lanka’s banking regulator is keeping a close watch on the risk management culture of financial institutions it regulates, a forum on the banking sector was told.

Yvette Fernando, Assistant Governor of the Central Bank, said the banking sector was strong, having withstood the 2008 global financial crisis, with systems and a close watch on practices needed to ensure compliance with regulations.

“The ratios are good, so we can say the banking sector has become stronger,” she told a forum held by the Ceylon Chamber of Commerce to hold discuss regulatory and compliance challenges in the banking sector.

“But as director of bank supervision I always wanted to know of the risk management culture, that managements know what risks they face.”

A culture of compliance results in a healthy banking sector, she said.

She said regulators need to know if banks are proactively taking action when faced with problems.

“Accountability is important,” Fernando said. “In most cases accountability is not looked at. You have to investigate the staff, see why losses have occurred and correct it.

“You have to see a system put in place, so non-compliance does not happen."

However, she said, developments in the banking sector in the past decade had been positive.

Sanjiva Senanayake, Non-Executive Director of Sampath Bank, said big banks like Sampath take risk management seriously.
 
“Risk management is something beyond numbers – we make it more intuitive, analytical, and forward looking.”

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Senanayake said the central bank has told bankers the regulator needs to go beyond numbers in checking on banking sector risk management.

“They need to see the minutes of risk manageemnt committees and boards to see if there is discussion of risks coming up, and how we manage them, so they can take comfort the bank is being prudently managed.”

(COLOMBO, March 28, 2018)
 

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