Sri Lanka to revise criteria for systemically important banks

ECNOMYNEXT – Sri Lanka is in the process of revising criteria to designate systemically important banks, and not all banks that exceed an asset base of 500 billion rupees may be included, the National Development Bank has said.

“Hither to the existing regulatory directions, the Bank is deemed to be a Domestic Systemically Important Bank [D-SIB] with its total assets in excess of LKR 500 Bn, and the minimum capital adequacy ratios applicable are 10% and 14% for Tier I and total capital respectively,” NDB said in its interim accounts.

“However, the Regulator is in the process of finalising the new assessment methodology for D-SIBs, where the assessment of D-SIBs will be based on multiple factors such as size, inter-connectedness, substitutability and complexity.”

“Accordingly, new banks passing the threshold of LKR 500 Bn in asset size at present may not be selected as D-SIBs under the new framework and hence will not be required to meet the enhanced capital adequacy requirements currently applicable for D-SIBs.

“The above position has been confirmed by the regulator to the Bank.”

The banks’ capital requirement remained at 8.5 percent for Tier I and 12.5 percent for Tier II. By September the bank’s capital adequacy was 9.52 percent and 14.01 percent.

However NDB said it was continuing to boost capital for long term growth. Bad loans of Sri Lanka’s banks are rising in 2019, following the collapse of a soft-pegged regime called ‘flexible exchange rate’ (Colombo/Nov22/2019)