He was speaking on the legal responsibilities of directors of finance firms at a seminar organised by the central bank to make directors of registered finance companies aware of regulations and their governance and legal responsibilities last week.
Commercial banks may not have much of a mismatch between their assets and liabilities but finance companies' asset-liability mismatches are much greater.
The finance firms have 4-5 year lending and hire purchase agreements while their liabilities are one-year and three-month fixed deposits.
"In that scenario, with increasing interest rates, if you take the fair valuation of assets, you might actually find out that solvency is not a true reflection of actual solvency margins."
The Sinhala version of the company law says a company 'shall' take into account fair value, he added.
He said the solvency posit