Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.

Thank You

Join the forum, it's quick and easy

Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.

Thank You
Would you like to react to this message? Create an account in a few clicks or log in to continue.

Encyclopedia of Latest news, reviews, discussions and analysis of stock market and investment opportunities in Sri Lanka

Click Link to get instant AI answers to all business queries.
Click Link to find latest Economic Outlook of Sri Lanka
Click Link to view latest Research and Analysis of the key Sectors and Industries of Sri Lanka
Worried about Paying Taxes? Click Link to find answers to all your Tax related matters
Do you have a legal issues? Find instant answers to all Sri Lanka Legal queries. Click Link
Latest images

Latest topics

» Japanese Gratitude to Sri Lanka (日本の感謝)
by God Father Today at 12:13 am

» Maharaja Foods PLC (MFL) - IPO Analysis
by ChooBoy Mon Jul 22, 2024 12:27 am

» කොළඹ කොටස් වෙළඳපොල විශ්ලේෂණය - 2024
by ChooBoy Fri Jul 19, 2024 11:53 am

» Winds of Change: Sri Lanka's Banking Crisis is Stalling Renewable Energy Ambitions of Local Stalwarts of Wind & Solar Power
by God Father Wed Jul 17, 2024 10:11 pm

» Banking Sector Analysis
by God Father Sat Jul 13, 2024 7:57 am

» Impact of Elections on Colombo Stock Market Sentiment
by Quibit Tue Jul 09, 2024 9:01 am

» LankaBIZ Unveils AI-Driven On-Demand Financial Research and Analysis Service
by Quibit Thu Jul 04, 2024 12:49 pm

» CDB Non voting
by Nandun Sun Jun 30, 2024 9:45 pm

» The Parsi Power Play: How a Small Community of Iranian Parsis are Controling Sri Lanka's US $ 85 billion Economy & 22 Million Population & Politics driving away FDIs
by MalakaDesmond Sun Jun 30, 2024 10:19 am

» Richard Pieris Group: Mismanaged?
by Walbaba Sat Jun 29, 2024 7:04 pm

» සොෆ්ට්ලොජික් හෝල්ඩිංග්ස් පීඑල්සී: අඳුරු අපේක්ෂාවන් සහිත ඉහළ අවදානම් ආයෝජනයක්
by D.G.Dayaratne Tue Jun 25, 2024 5:45 am

» සොෆ්ට්ලොජික් ප්‍රාග්ධනයට වන්දි ගෙවන Share BuyBack නිසා Softlogic ජීවිත රක්‍ෂණය බංකොලොත් වීමේ අවදානමක
by MalakaDesmond Tue Jun 25, 2024 1:49 am

» Softlogic Life insurance face Danger of Bankruptcy due to Share BuyBack that compensate Softlogic Capital
by MalakaDesmond Tue Jun 25, 2024 1:33 am

» Softlogic Holdings PLC: A High-Risk Investment with Bleak Prospects
by MalakaDesmond Tue Jun 25, 2024 12:52 am

by SL-INVESTOR Sat Jun 22, 2024 12:48 am

by ErangaDS Wed Jun 19, 2024 9:21 pm

» How will proposed Tax Reforms affect Sri Lankans in 2025
by Quibit Wed Jun 19, 2024 9:27 am

» Falsified accounts and financial misrepresentation at Arpico Insurance PLC (AINS)
by ChooBoy Tue Jun 18, 2024 11:31 pm

» Impact of IMF reforms to Sri Lanka Economy
by D.G.Dayaratne Mon Jun 17, 2024 6:36 pm

» Richard Pieris Finance Ltd continue to endanger the Depositors with negative performance
by ddindika Mon Jun 17, 2024 3:17 pm

» Richard Pieris Exports reports 97% decline in Net Profits
by Biggy Sat Jun 15, 2024 11:26 am

» Do your own Stock Market Research using AI Tools
by Quibit Fri Jun 14, 2024 10:50 am

» What will happen tomorrow?
by cheetah Thu Jun 13, 2024 12:07 pm


Submit Post
ශ්‍රී ලංකා මූල්‍ය වංශකථාව - සිංහල
Submit Post


Send your suggestions and comments

* - required fields






You are not connected. Please login or register

CB to launch study to assess banks’ need for fresh capital

Go down  Message [Page 1 of 1]



  • “Diagnostic study” to be centered around big banks which have substantial exposure to Fx bonds and loans

  • State-owned Bank of Ceylon and Peoples’ Bank included in the list of nine big banks to be studied

  •  Depending on the need, CBSL says might opt for re-capitalisation

Certain Sri Lankan banks might have to be infused with fresh capital after the conclusion of what the officials call a “diagnostic study” launched into big banks to assess the extent of the implications coming from higher provisions made for losses on foreign currency-denominated financial assets and the additional losses stemming from possible bad loans. 

Although there aren’t any imminent concerns about their stability, Sri Lanka’s banks are currently undergoing their most painful stretch of combined stress coming from the worst economic crisis the country has ever confronted this year, just as they were coming out of pandemic-related complexities, testing their resilience for the second time within a matter of two years.     

For instance, cracks were already seen in their asset quality as scores of borrowers fell behind their loan payments amid soaring interest rates and runaway inflation, together with the provisions made entirely for the investment they held in the bonds the Sri Lankan government issued in foreign currency which started to weigh significantly on their profits and thereby the capital buffers. 

Meanwhile, the growth prospects are muted except for certain pockets in the loan portfolio such as the gold-backed loans as the economy is on course to shed nearly 9.0 percent of its size by the year’s end, reflecting how deep the cuts on consumption and investment spending by the economic actors.

Amid these concerns, the Central Bank has undertaken a diagnostic study of all big banks including the two State commercial lenders to identify any potential capital deficiencies arising out of the above shocks.  
Separate reports on the matter have shown that nine systematically important banks, including Bank of Ceylon and People’s Bank, are subjected to the said study and would be conducted by an auditor, different from the bank’s present external auditor. 

If there are any signs of want of fresh capital, the Central Bank officials said they may have to go recapitalisations. 
 “There is an effort to do a diagnostic study, especially on the big banks. And after that study, we will be doing an assessment. And based on that assessment if capital requirements are needed, we have to go for recapitalisation also,” said Central Bank Deputy Governor M.T. J.Y.P Fernando. 
It is immediately not clear if the said diagnostic study is part of the staff-level agreement entered into with the International Monetary Fund to bail out Sri Lanka from its current depths to reassure that the country’s banking system remains relatively sound. 

However,​ ​Fernando said the study would help them to make a proper assessment of the banking sector which they were prevented from doing during the two years of the pandemic due to the moratoria and other concessions which may have hidden the true nature of the asset quality. 

Currently, as an interim measure to soften the sudden shocks on their capital, the Central Bank practices some forbearance on banks’ capital standards as the banks are allowed to make use of the additional capital buffers which are available under BASEL III.

Further, the regulator has also made provisions to make possible the staggered recognition of the impacts on their balance sheets coming from the sudden surge in the interest rates by way of hefty provisions against possible loan losses.

Besides the above, the Central Bank will also stand ready to provide further relief if required, depending on how the rates and other elements in the market develop to alleviate undue pressure on their capital.

Back to top  Message [Page 1 of 1]

Permissions in this forum:
You cannot reply to topics in this forum