The rating agency said Sri Lanka's banks faced high economic risks and industry risks and regulation was relatively weak, in a June 19 statement.
The Central Bank has made a detailed response to concerns made by S & P.
S & P however also said that Sri Lankan bank capitalization was higher than average. A high capital buffer can absorb unexpected risks.
The regulator said it wished "to assure the public that the Sri Lankan banking system is sound and resilient and is not prone to high risk as indicated in the statement of Standard and Poor’s."
The full statement is reproduced below:
Bank Supervision Department 20 June 2012
Response of the Central Bank of Sri Lanka to the Standard and Poor’s Assessment of the Sri Lankan Banking System
The