2008年-世界发展银行全球_Financial_Sector_Assessment___Sri_Lanka_11页_1mb

Sri Lanka Financial Sector Assessment (January 2008)

Core Content Overview

This report is based on the 2007 FSAP Update conducted by the World Bank and IMF, assessing the development and stability of Sri Lanka's financial sector since the 2002 FSAP. It highlights both progress made and ongoing challenges in various segments of the financial system, including banks, nonbank financial institutions (NBFIs), state banks, pension funds, insurance, capital markets, and legal reforms. The report also includes recommendations for future reforms to enhance financial stability and development.

Main Findings

1. Financial Sector Development Since 2002

• Legal and Regulatory Framework: Significant improvements in the legal and regulatory environment have been made, including updates to financial sector laws and the introduction of new regulations.
• Banking System Resilience: The banking system has shown increased resilience to shocks, with a high capital adequacy ratio (11.7% in 2006) and reduced nonperforming loans (NPLs) from 12.5% in 2002 to 5.2% in 2006.
• Nonbank Financial Institutions (NBFIs): NBFIs have improved in profitability, capital, and asset quality, contributing to the financial system with a growing share of total assets.
• State Bank Restructuring: Efforts to restructure state-owned banks have had some success, but performance remains weak, raising concerns about long-term stability.
• Pension Funds: The Employee Provident Fund (EPF) dominates the pension sector, but its governance and investment practices are inefficient and lack diversification.
• Insurance Sector: The sector has grown, with privatization of state insurers and the establishment of the Insurance Board of Sri Lanka (IBSL) as an independent supervisor. However, supervision remains under-resourced and lacks transparency.
• Capital Markets: Progress has been made in promoting government securities markets, but the investor and issuer base remains narrow, and the development of a benchmark yield curve is hindered.
• Access to Finance: While commercial banks have expanded services to rural areas, access for underserved groups remains limited. Microfinance institutions (MFIs) face challenges in policy, product range, and regulation.
• Legal and Judicial Reforms: Legal updates have been made, but delays in law enactment and a lack of comprehensive regulatory frameworks continue to be major concerns.

Key Recommendations

Short Term Recommendations

• Strengthen Bank Supervision: Move toward risk-focused supervision, issue guidelines on comprehensive risk management, and review large exposure limits and related party lending.
• Improve Capital Market Transparency: Publish solvency and operating ratios for insurance companies in simple formats.
• Enhance Legal and Regulatory Frameworks: Submit a revamped Monetary Law Act (MLA) and Banking Act for enactment, and allocate sufficient resources to the Registrar of Companies.
• Prepare for AML/CFT Implementation: Develop a clear roadmap for anti-money laundering and counter-terrorist financing measures.
• Support IBSL Capacity Building: Increase staffing and improve resource allocation to enhance insurance supervision.
• Revise CRIB Act: Include utility service providers and microfinance institutions (MFIs) in the Credit Information Bureau (CRIB) to improve credit access for SMEs.

Medium Term Recommendations

• Consolidated Supervision: Implement consolidated supervision across financial institutions and improve communication among regulators.
• Securitization Law: Finalize the securitization law and remove tax impediments to promote securitization.
• Comprehensive Insolvency Law: Amend the Companies Act or introduce a new insolvency law to support restructuring.
• Secured Transaction Law: Introduce a secured transaction law and registry for movable securities.
• Pension Fund Governance: Establish a sound, independent governance structure for the EPF and create a unified regulatory framework for all pension funds.
• Microfinance Regulation: Finalize the Micro Finance Institutions (MFI) Act to address capacity, moral hazard, and ensure effective oversight.
• Capital Market Development: Promote a medium-term, benchmark-oriented issuance strategy for government securities and encourage participation from foreign investors.

Challenges and Concerns

• State Bank Weakness: Despite restructuring, state banks remain systemically important but suffer from poor performance, high NPLs, and liquidity issues.
• Pension Fund Risks: The EPF and ETF have limited diversification and are heavily invested in government securities, which may not be optimal for long-term returns.
• Insurance Sector Vulnerabilities: IBSL is under-resourced and lacks capacity to enforce regulations effectively.
• Capital Market Limitations: A narrow investor base, excessive T-bond fragmentation, and weak secondary market activity hinder market development.
• Legal Delays: Delays in enacting financial sector laws, such as the Companies Act, have hampered regulatory modernization.
• Microfinance Issues: MFIs face poor policy support, limited product variety, and a lack of a proper regulatory framework.

Conclusion

The 2007 FSAP Update highlights that Sri Lanka has made notable progress in strengthening its financial sector, particularly in legal and regulatory reforms, banking supervision, and capital market development. However, several key areas—such as state bank restructuring, pension fund governance, insurance supervision, and legal reforms—require further attention to ensure long-term financial stability and development. The report emphasizes the need for a more robust, transparent, and efficient supervisory framework, as well as the importance of enhancing access to finance and diversifying investment portfolios.