Central bank of Sri Lanka

VISION

 A credible and dynamic central bank contributing to the prosperity of Sri Lanka.

MISSION

Maintaining economic and price stability and financial system stability to support sustainable growth through policy stimulus, advice, commitment and excellence.

History of Central Bank

The Central Bank of Sri Lanka  is the monetory authority of Sri Lanak.. It was createdin 1950 under the Monetary Law Act No.58 of 1949 (MLA), it is a government owned semi-autonomous body, and following the amendments to the MLA in December 2002, is governed by a five-member Monetary Board, comprising the Governor as chairman, the Secretary to the Ministry of Finance and Planning, and three members appointed by the President of Sri Lanka, on the recommendation of the Minister of Finance, with the concurrence of the Constitutional Council.

The objectives of the CBSL are:

01.   Maintaining economic and price stability.
Price stability safeguards the value of the currency in terms of what it will purchase at home and in terms of other currencies. Price stability is interpreted to mean low and stable inflation. Experience has shown that the economy performs well when inflation is low and is expected to remain low. Interest rates are also low in these conditions. Such an environment allows the economy to achieve its growth potential and fosters high employment. Free from the disruptive effects of high and variable inflation, both consumers and producers make economic decisions with confidence. Low inflation or price stability fosters sustainable long-term economic growth and employment. The CBSL uses monetary policy measures to control inflation.

02.   Maintaining financial system stability.
A stable financial system is able to function smoothly, helping carry out economic activity in an uninterrupted manner. Furthermore, a stable financial system generates a conducive environment for savers and investors that encourages efficient financial intermediation and promotes investment and economic growth. Financial system stability can be defined as the ability of the financial system to perform its main functions of resource mobilization and allocation, risk management and the settlement of payments, effectively at all times, even under stressful circumstances. Therefore a stable financial system is typically characterized by the effective functioning of financial institutions, markets and infrastructure.


The core functions / role of the Central Bank of Sri Lanka are
·         Conduct of Monetary Policy

·         Conduct of Exchange Rate Policy

·         Management of the Official International Reserves

·         Oversight of the Financial System

·      Licensing, Regulating and Supervising of Banks and Selected Non-Bank Financial Institutions

·         Provision of Settlement Facilities and the Regulation of the Payment System

·         Issue and Distribution of the National Currency

·         Compilation, Dissemination and Analysis of Economic Data and Statistics

 

 

According to the above function we mainly focus on Licensing, Regulating and Supervising of Banks and Selected Non-Bank Financial Institutions

The CBSL is responsible for regulating and supervising banks and selected non-bank financial institutions. The CBSL is the licensing authority for banks in Sri Lanka and issues banking licenses under two categories namely, Licensed Commercial Banks and Licensed Specialized Banks.

As a part of its regulatory and supervisory functions, the CBSL issues directives on the licensing, operations and closure of banks, the prudential requirements relating to banks, the resolution of weak banks and the enforcement of regulatory actions.

The CBSL also regulates and supervises Non-bank Financial Institutions such as Licensed Finance Companies, Specialised Leasing Companies and Licensed Microfinance Companies under the Finance Business Act, the Finance Leasing Act and Microfinance Act.

 

Scope of the regulatory responsibilities

The CBSL is responsible for regulating and supervising banks and selected non-bank financial institutions to promote their soundness and to safeguard the interests of depositors and investors. The financial system of Sri Lanka is dominated by the banking sector.


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