2008年-世界发展银行全球_Sri_Lanka_-_Financial_Sector_Assessment_11页_1mb

Sri Lanka Financial Sector Assessment Summary (January 2008)

Core Content Overview

This Financial Sector Assessment (FSA) is based on the 2007 FSAP Update conducted by the World Bank and IMF. It evaluates the state of Sri Lanka's financial sector, progress made since the 2002 FSAP, and outlines key recommendations for future development and stability.

Main Findings of the 2007 FSAP Update

1. Financial Sector Development

• Overall Progress: Significant improvements have been made in the financial sector since 2002, including updated legal and regulatory frameworks, enhanced banking supervision, and increased competition and innovation.
• Banking System: Banks remain the dominant part of the financial system, with commercial and specialized banks accounting for 67% of total financial sector assets. State-owned banks still hold 47% of the banking system assets, despite a decline in their share since 2002.
• Capital Adequacy: The system-wide capital adequacy ratio was 11.7% at the end of 2006, indicating strong capital positions. However, some banks, particularly one private and one state-owned, were undercapitalized.
• NPL Reduction: Gross nonperforming loans (NPLs) as a share of total loans dropped from 12.5% in 2002 to 5.2% in 2006 due to improved credit risk management and supervision. Rising NPLs in 2007 signaled a potential reversal.

2. Nonbank Financial Institutions (NBFIs)

• Performance: NBFIs showed improved profitability, capital positions, and asset quality.
• Regulatory Enhancements: The Central Bank of Sri Lanka (CBSL) introduced stronger prudential regulations, including capital requirements, deposit interest rate caps, and enhanced supervision.
• Challenges: Regulatory enforcement lags behind improvements, and the legal authority of CBSL to take corrective actions is unclear. NBFIs rely heavily on deposits, and their asset concentration in vehicle leasing and purchase facilities poses risks.

3. State Bank Restructuring

• Systemically Important Banks: The two state-owned commercial banks (SCBs) hold 25% of total financial system assets and are considered systemically important.
• Progress and Concerns: Restructuring efforts have improved the financial profile of one SCB, but the other (BOC) has not seen similar progress. The SCBs' weak performance and potential recapitalization risks raise concerns about financial system stability.

4. Pension Funds

• Dominance of EPF: The Employee Provident Fund (EPF) manages nearly 15% of financial sector assets and 18% of GDP, with heavy investments in government securities.
• Underperformance: Pension reform has stagnated, and the EPF and ETF have not adopted a funding-based model. The EPF has limited diversification and avoids external fund managers.
• Private Pension Funds: Only 4% of GDP is managed by private provident funds (APPFs), which are not subject to a unified regulatory framework.

5. Insurance Sector

• Growth and Challenges: The insurance sector has grown but remains small, with less than 10% of the population insured. The sector is highly competitive, but pricing may be unsustainable.
• Privatization and Supervision: The privatization of state insurance companies and the establishment of the Insurance Board of Sri Lanka (IBSL) as an independent supervisor have been positive steps.
• IBSL Constraints: The IBSL is under-resourced and faces challenges in staffing and regulatory enforcement. It is also restricted in hiring by directives from the Ministry of Finance.

6. Capital Markets

• Government Initiatives: The government has introduced several measures to improve capital market development, including RTGS, SSSS, and the Central Depository System.
• Market Challenges: The capital market remains underdeveloped, with a narrow investor base and limited issuer diversity. The EPF and NSB dominate the government securities market, limiting the development of a benchmark yield curve.
• Recommendations: Diversifying the investor base, relaxing foreign investor participation, and promoting private securities through securitization and corporate listings are key to market development.

7. Supervisory Framework

• Progress: The CBSL has strengthened its supervisory capacity and legal framework since 2002.
• Weaknesses: Supervision remains compliance-based and lacks a comprehensive risk assessment framework. Internal audit practices are underdeveloped, and bank boards are not effective in guiding risk management.
• Credit Concentration Risk: High single borrower limits and lack of consolidated supervision pose risks to financial stability.

8. Access to Finance

• Rural Finance: Private commercial banks play a modest role in financing rural enterprises, but they are using the postal network to expand services to SMEs and households.
• CRIB Expansion: The Credit Information Bureau (CRIB) has expanded to include nonbank financial institutions, improving access to credit for SMEs.
• Government Policies: Past policies to improve access to finance have not been effective. The proposed merger of several institutions into a single entity is viewed with caution.

9. Legal and Judicial Reforms

• Legal Updates: Several laws have been updated, including the Companies Act, Payment and Settlement Systems Act, and Anti-Money Laundering Legislation.
• Delays and Gaps: Delays in law enactment, such as the 13-year process for the Companies Act, hinder regulatory modernization. The legal framework for microfinance and securitization remains incomplete.

Key Recommendations

Short-Term Recommendations

• Strengthen bank supervisory and regulatory framework.
• Move to risk-focused supervision and develop a clear approach before Basel II implementation.
• Review and strengthen regulations on large exposure limits and related party lending.
• Apply prudential requirements on a consolidated basis and improve communication with other supervisors.

Medium-Term Recommendations

• Finalize the securitization law and remove tax impediments for securitization.
• Amend the Companies Act to include effective restructuring provisions or introduce a comprehensive Insolvency Law.
• Introduce a secured transaction law and registry for movable securities.
• Establish formal information sharing among regulators.
• Revamp the Monetary Law Act and Banking Act for enactment.
• Review the draft microfinance law to address capacity and moral hazard issues.
• Allocate sufficient resources to the Registrar of Companies to implement the new Companies Act.
• Prepare a clear road map for AML/CFT implementation.

Conclusion

The 2007 FSAP Update highlights both progress and ongoing challenges in Sri Lanka's financial sector. While regulatory and supervisory frameworks have improved, key areas such as state bank restructuring, pension reform, and legal and judicial updates remain incomplete. Continued efforts are needed to enhance financial stability, promote market development, and ensure equitable access to financial services.