June 23, Colombo: Sri Lanka's Central Bank said it will continue to strengthen regulation of the financial institutions as well as the payment and settlement systems it overlooks.
The Bank Central said strong regulation coupled with supervision focused on identifying potential risks and vulnerabilities will help enhance the ability of the domestic financial system to withstand potential shocks.
The measure will further ensure the continued provision of financial services such as lending, insurance and execution of payments, even in stress situations and during periods of structural adjustment, the Bank said releasing the Financial System Stability Review for 2013 Monday.
The Financial System Stability Review (FSSR), which is published annually by the Central Bank, presents information on financial system stability.
It covers the developments in the financial sector; policy measures that have been taken to mitigate potential risks to financial system stability; and possible implications of emerging trends in the domestic economy as well as the global economy.
In the report, the Central Bank highlighted that Sri Lanka’s financial system remains sound, and continues to support the expansion of domestic economic activity
The banking and finance company sectors have maintained their soundness at healthy levels while the insurance sector also maintained its solvency and liquidity at healthy levels.
Financial markets meanwhile, have remained liquid, the Bank said.
Going forward, the monetary authority expected the continued moderation of interest rates following the easing of monetary policy in 2013 as well as in early 2014 to stimulate credit growth.
The Bank expects the recovery in global economic activity to stimulate the domestic economic activity in 2014.
Meanwhile, the ongoing consolidation in the financial sector is expected to result in the emergence of stronger and more efficient financial institutions that are able to offer a wider array of financial services, the Bank emphasized.