Nonetheless, the IMF said CAR has been declining as rapid credit growth increases risk-weighted assets.
To strengthen the financial sector, the IMF said Sri Lanka has implemented several policy measures or they are under consideration.
The Basel III Minimum Capital Requirement has been implemented on a staggered basis since July 2017. All licensed commercial and specialised banks will have to maintain the minimum capital ratios and buffers starting July 2017 (the requirement ratio will gradually increase to reach the international standard by January 2019).
Efforts are being made to resolve distressed non-bank financial companies following IMF technical assistance in March. The World Bank is leading a program to modernise financial market infrastructure, upgrade legal and regulatory framework and strengthen the institutional capacity of financial regulators. The ongoing IMF Technical Assistance on Anti-Money Laundering/Combating Financing of Terrorism (AML/CFT) is also supporting the strengthening of the financial sector.