Sri Lanka’s financial system remained stable and resilient in 2010, stated the Central Bank in its 'Financial System Stability Review 2010'.

The stability of the financial system strengthened with the resurgence in domestic economic growth and the recovery in international trade, and underpinned by a more stable macroeconomic environment and improved investor confidence, the Bank said.

It also said the soundness and resilience of domestic financial institutions was maintained with adequate capital and liquidity buffers and improvements in asset quality and earnings, within a regulatory framework with prudential safeguards to mitigate excessive risk-taking. Overall, credit risk, market risk and liquidity risk in financial institutions declined during the year, the bank adds.

Referring to the world economy, the report said that it is forecast to expand by 4.8 per cent in 2010 and 4.2 per cent in 2011, from a contraction of 0.6 per cent in 2009, according to the latest estimates by the International Monetary Fund (IMF) - World Development Outlook. International trade has also rebounded and is estimated to grow by 11 per cent in 2010 and 7 per cent in 2011. The extent of the economic recovery differs across regions, with Asia in the lead, the report further stated.

The Sri Lankan economy is forecast to grow by 8 per cent for 2010 from 3.5 per cent in 2009, underpinned by the gradual recovery in international trade and an expansion in domestic economic activities and (reconstruction) after the end of the conflict output grew by7.8 per cent in the first half of 2010, with higher growth in all major sectors – agriculture (7.1per cent), industry (8.1 per cent) and services (7.8 per cent).


The full text of the 'Financial System Stability Review 2010' is found at:

http://www.cbsl.gov.lk/pics_n_docs/latest_news/fssr_2010e.pdf