Light Touch

July 01, 2007 (LBO) – Sri Lanka’s rule book and compliance based financial regulatory system needs to be changed to one of principle based risk focused system, a top central banker has said. A rule-based intrusive supervision system doesn’t work always, Deputy Governor of the Central Bank of Sri Lanka Ranee Jayamaha, told a forum in Colombo.

Balance between rules and forbearance has been there in all economies and we need to have it at this stage.

Jayamaha heads the financial sector stability role of the Central Bank of Sri Lanka.

The rule based regulatory system which is currently active in Sri Lanka has not been successful all the time and also has hindered development, she said.

Regulation and supervision is evolving across the globe with all countries moving towards a proactive approach where the focus is on wider financial system stability.

The key trend in this method is to have one umbrella organization from which regulatory action could be done more effectively, she said.

The developed countries also lead the way to encourage financial innovation through more tolerant regulatory attitudes.

Bankers have earlier complained that they c