We also intend to introduce Internet Banking Guidelines and Security Standards for mobile Central Bank of Sri Lanka – ROAD MAP 2017  Sri Lanka needs to strengthen the AMF/CFT regime by effectively implementing Financial Action Task Force (FATF) recommendations in order to upgrade the country rating. If Sri Lanka fails to achieve the expected level of compliance, the country may be considered as a high risk country, resulting in adverse implications on the financial sector. In order to overcome such challenges and hence to ensure compliance, the Central Bank will focus on a number of strategic actions in the medium-term. I would also like to note that the Microfinance Act came into effect on 15 July 2016. In line with this, the Department of Supervision of Microfinance Institutions (DSMI) was 24  established at the Central Bank of Sri  management model, where the  Lanka to carry out the responsibilities, as  operational managers form the first line  stipulated in the Microfinance Act No. of defense, and the Risk Management  06 of 2016 and implement policies  and Internal Audit Departments  approved by the Monetary Board to  constitute the second and third lines of  ensure good governance, transparency  defense, respectively. and stability of Microfinance Institutions  Moreover, in view of the need to build a  (MFIs).
It is calibrated to ensure that a bank has enough highly liquid assets to meet its outflows for the first week of a liquidity crisis without recourse to the market for renewed wholesale funding, in order to allow the authorities time to explore options for an orderly resolution. It was designed as one component of a wider crisis management regime, and not as a means for a bank to manage its precautionary buffer for addressing liquidity strain on a going concern basis 3 . Chart 4 shows how actual liquid reserves fell in line with minimum requirement levels until 1981, and continued to decline afterwards, albeit more slowly. Clearly, over this same period, banks also diversified their liquid asset holdings to include other currencies, and started using repo markets extensively. So the chart may exaggerate the decline somewhat. Nonetheless, the overall historical pattern has clearly been one of a marked secular decline in cushions of high quality liquid assets. Similar trends also prevailed in countries other than the UK, such as the US, Canada and Sweden. 4 And focusing on the past decade, whilst holdings of very high quality liquid assets have remained relatively stable, they have not increased to match banks’ rising vulnerability to liquidity risk described above. 3  See Financial Services Authority: “Review of the liquidity requirements for banks and building societies” Discussion Paper 07/7. December 2007. The UK regime is under review. 4  See Goodhart, C.A.E. (2008), “Liquidity and Money Market Operations: A Proposal”, London School of Economics, mimeo.