Regaining Confidence

Oct 07, 2009 (LBO) – Sri Lanka needs to introduce restrictions on single-shareholder stakes and multiple ownership of registered finance companies (RFCs) by a single individual or group, RAM Ratings Lanka has said. “However, well-rated and/or prudently managed RFCs had been able to withstand the pressures better than others. Moreover, the timely intervention of the Central Bank and a spate of ownership and stewardship changes have helped stabilise the industry.”

RAM Ratings said public reaction to the financial scandals has been very strong, with an outcry against opaque disclosures and weak risk management.

“Against this backdrop, the importance of adequate corporate governance has come to light; emphasis should be placed on the risk-management processes implemented by these organizations,” RAM Ratings said.

“Furthermore, consideration should be given to the magnitude of related-party transactions and the adequacy of internal control systems, among others.”

The rating agency noted that the level of importance placed on risk management also varies significantly among industry players. It said in a report that after the collapse of two finance firms last year, the Central Bank has taken steps to