Sri Lanka banking sector less sophisticated
Updated - 6/1/2009 - DailyMirror.
A senior banker termed the Sri Lankan banking system as "less sophisticated", which is why it was "fortunate" that the global crisis had not hit the local financial sector.
Nations Trust Bank CEO Zulfiqar Zavahir speaking with the Daily Financial Times said that despite the present global economic turmoil, the momentum has been maintained within the financial sector.
He noted that while there were challenges in terms of high interest rates, inflation in terms of demand for goods and services, a downward trend could be expected as liquidity is still tight overseas and the central banks around the world are bringing down in interest.
Liquidity, it was pointed out was something all banks would have to "watch out for so that enough deposits will be available to fund lending". In terms of credit and market risk, Mr. Zavahir noted that the right policies must be in place. He also said that the cost incurred would be tough in terms of revenue. Further commenting on the cost he observed that the effective income tax rate on banks is much high and while the return on the capital needed to run banks was not enough. It was pointed out that it was not possible to growth without adequate capital and it was noted that in the long term banks would be constrained due to the high tax regime adopted by the country. Mr. Zavahir observed that the banking and financial sector in the country is based on the level of confidence established by its customers. "When an organisation fails then there are questions as to whether money is safe in other banks. But customers would need to check on their relationships with these banks and the checks and balances and risk control measures adopted by these financial institutions," he explained.
Commenting on the current status of NTB it was noted that they would be carefully continuing to grow “so that it does not add risk to our portfolios and hope to maintain the same momentum”.
NTB is currently looking at M-Commerce with the mobile phone being used as a tool for transactions. The bank will be also looking to establish the “Bank at Your Doorstep” concept with increased personal banking facilities available at selected supermarkets.
Global Crisis and Sri Lanka
Mr. Zavahir observed that with the changes taking place in the wake of the global crisis, the local financial sector will be looking towards learning from the checks and balances of the crisis in a bid to move forward.
It was observed that the accountancy standards and other control regulations could change in view of the presence of the global crisis in the financial sector.
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