9 January 2025 01:05 am Views - 347
The Central Bank plans to introduce stress testing frameworks for the finance companies this year, along with identifying systemically important finance companies in the near future, to strengthen the financial sector resilience and oversight.
Central Bank Governor Dr. Nandalal Weerasinghe said the reassessment of the domestic systemically important banks (DSIBs) would be announced this year, with the corresponding DSIB capital buffers expected in 2025.
A targeted policy approach using appropriate macroprudential tools was expected to strengthen the oversight of the banking sector credit.
“This will improve the risk management among the lending institutions and ensure financial system stability,” Dr. Weerasinghe said.
The Central Bank has taken a wide range of policy measures to ensure financial stability, with further policies underway covering multiple aspects of the financial system.
“As the economy recovers and credit cycle moves into the expansionary phase, vulnerabilities may arise due to increased risk-taking and heightened exuberance. As such, the Central Bank will diligently monitor systemic risks and promptly implement appropriate macroprudential and microprudential policy measures to address any emerging risks, to ensure continued financial system stability,” Dr. Weerasinghe said.
Meanwhile, to strengthen the regulatory oversight, enhance risk management and promote the stability of the non-bank financial institutions sector, amendments were expected to be made to Finance Business Act No. 42 of 2011 and Finance Leasing Act No. 56 of 2000, in line with the developments in the sector.
“To broaden the regulatory framework and thereby improve risk management and stability, rules and regulations are to be issued. In addition, automation will be embraced to improve the effectiveness of the supervisory process while enhancing public disclosures to raise awareness of the performance of finance companies,” the Central Bank said. (NF)