The balance financial intermediaries are regulated by various authorities while some are not regulated at all. Banking companies in Sri Lanka come under several jurisdictions, but the Banking Act is the centrepiece for financial regulations. It sets out all necessary regulatory provisions for capital requirements, shareholder limits, credit operations, provisioning requirements, consolidation, acquisition and mergers, suspension, winding up of banking companies, etc. Sri Lanka’s banking sector is currently operating on Basel I, but getting ready to implement Basel II Capital Adequacy Ratios from early 2008. Basel II is basically risk mitigation in banking operations and, it allows supervisors and regulators to encourage or require banks to build up capital buffers in good times. Financial regulations have thus been set taking into consideration the cyclical situation which banking firms face in home and host countries. In addition to the provisions in the Banking Act, the Monetary Law Act which governs the operations of the Central Bank, also provide for regulation of banking companies. However, in recent times, through various amendments, most of the provisions of the Monetary Law Act have been incorporated in the Banking Act. Their stock market operations come under the purview of the SEC Act. In addition to the banks, the Central Bank regulates the finance companies under Finance Companies Act and the leasing companies under the Leasing Act. The primary dealers who deal in the government securities market irrespective of whether they are banks or not, are under the supervision of the Central Bank.
Ranee Jayamaha: Glimpse of current financial regulations Inaugural speech by Dr Ranee Jayamaha, Deputy Governor of the Central Bank of Sri Lanka, at the Client Seminar on International Trade, organized by HNB (Hatton National Bank), Colombo, 13 November 2006. *  *  *  Mr Theagarajah, officials of HNB, Mr Richard Lightbound from Wachovia Bank, distinguished participants, ladies and gentlemen. Thank you for the invitation extended to me to be present at the client seminar on Trends in International Trade. Let me congratulate HNB for taking the corporate social responsibility seriously and arranging a forum to exchange stakeholder views on an important subject. Generally, regulations are not liked by anybody. Same goes with the financial community in Sri Lanka. However, the common factor is that even regulators do not like to rule by regulation. For a better appreciation of the past and present financial regulatory environment, let me first set out the key elements underlying financial regulations. In summary: (a) regulations are mainly a reaction to an action by the financial community, although there may be instances in which regulations are brought in on hindsight with a forward-looking approach, but they are a few; (b) there is a clear difference between the objectives of regulators and market participants; (c) regulations are not necessarily a oneway street. They are not there only to tighten markets.