The Central Bank strongly denied the assessment made by Standard and Poor placing the country's banking system in a very high risk category and assured the public that Sri Lanka has a sound banking system.
In a statement Wednesday, the Central Bank assured the public that the Sri Lankan banking system is sound and resilient and is not prone to high risk as indicated in the statement of Standard and Poor's.
The Bank said it is gravely concerned over the S&P statement issued Tuesday on the Sri Lankan banking system saying that the banking regulations in Sri Lanka as somewhat weaker than international standards.
The Standard and Poor said their assessment of economic imbalance is based on the recent growth of private sector credit although the Central Bank's recent directive to apply a credit growth ceiling for banks should help to partially curb the risk.
The Central Bank disputing the S&P reasoning said the statement is factually incorrect, illogically analysed, and is highly contradictory.
Quite contrary to the S&P statement, the country's banking system is sound and resilient with the performance of the banking industry improving over past few years, the Central Bank noted in its statement.
Responding to the S&P statement that Sri Lanka's governance and transparency of banks are weak by global standards, the Central Bank said Sri Lanka possesses a well-developed payments and settlement system to facilitate banking transactions, which is subject to the provisions of the Payments and Settlements Act.
In addition, Anti Money Laundering procedures and Know Your Customer requirements are also in place with respect to all banking transactions.
"The views of Standard and Poor's that 'the risk management practices are evolving' and that 'the banking regulations in Sri Lanka are somewhat weaker than international standards' and specifically 'governance and transparency are weak by global standards' are baseless," the Central Bank said.
"Importantly, this statement of Standard and Poor's is self-contradictory with their contentment on key regulations for Sri Lankan banks," the statement pointed out.