Remaining Challenges

Feb 27, 2015 (LBO) – Sri Lanka’s Banks likely to witness an improvement of the operating environment in 2015 and 2016 but, longer-term challenges for the banking sector remain, Fitch Ratings said in a statement. The Full Statement Reproduced Below :

The operating environment for Sri Lankan banks is likely to improve in 2015 and 2016 with pressures on asset quality and the loans/deposits ratio diminishing and the potential for loan growth to pick up, says Fitch Ratings.

The operating environment for Sri Lankan banks is likely to improve in 2015 and 2016 with pressures on asset quality and the loans/deposits ratio diminishing and the potential for loan growth to pick up, says Fitch Ratings.

However, longer-term challenges for the banking sector remain.

Foreign-currency borrowing has been rising, and capital levels are low relative to many other banking systems in other peer emerging markets.

The reported capital adequacy ratios (CAR) for Sri Lankan banks exceed the regulatory minimums of 5% and 10% set by the Central Bank of Sri Lanka (CBSL) for core CAR and total capital, respectively.

Furthermore, the capital quality of Sri Lankan banks is generally high, consisting most