Sri Lanka banking sector moves towards ‘new normal’ with resilience
The Sri Lanka banking sector is moving towards a “new normal’ in the New Year with resilience in the second wave of COVID-19 maintaining a healthy capital adequacy last year, top bank officials said, denying reports that its LCs have been questioned by foreign banks.
This sector spearheaded by two state banks – the Bank of Ceylon (BOC) and People’s Bank (PB) – continues establishing effective ecosystems and partnerships with international banks improving risk management, they pointed out.
The BOC maintains asset quality, capital adequacy and profitability as well as a working relationship with foreign banks in the current difficult local and international operating environment, chairman of the bank Kanchana Ratwatte told the Business Times.
He noted that the bank’s international and local trade transactions are resilient with its sovereign status, full state ownership and high systemic importance.
Referring to ongoing import restrictions and bank’s facilities in local and international trade, he categorically stated that it is following the current regulations in its procedure of opening Letters of Credit for importations in close relations with foreign banks.
Referring to certain reports on the rejection of the bank’s LC’s by foreign banks, he noted that no such refusal had been made by any such bank up to now as BOC has a strong sovereign credit profile.
It has recorded the highest asset base of Rs.2.9 trillion, highest deposit base of Rs.2.3 trillion and has maintained its market leadership in trade finance, treasury operations including its’ more than 40 per cent market share of inward remittances.
The recent downgrade of the sovereign and banking institutions in Sri Lanka had a minimal impact on the soundness of the bank and its international operations continue uninterrupted, he added.
Being a bank that has maintained its international presence for over eight decades, its foreign correspondent relationships have never been questioned and have been growing from strength to strength, he reiterated.
Issuing a statement, the People’s Bank also stated that not a single Letter of Credit facility issued by the bank has been refused by any international bank to date.
The bank also possesses an impressive Rs.2.3 trillion asset base with over Rs.1.8 trillion customer deposits with internationally accepted BASEL III standards and all other applicable banking standards of the country and has one of the lowest NPL ratios in the industry, it said.
Clarifying the procedure of LCs under the present import restriction period, a senior treasury official said that operating instructions were published on May 29, 2020 to avoid uncertainty; importation can be made only in an instance prescribed by the regulations of Gazettes Extraordinary dated April 16 and May 22, 2020.
Therefore, banks are compelled to follow these regulations and importers will have to abide by it even if they placed orders pending the opening of LC’s before or after May 21 as the banks have also been issued instructions to restrict the opening of LC’s, he said.