100 and 500 billion, accounting for a share of 23 per cent. The balance 23 banks individually hold assets less than Rs. 100 billion and account for only 11 per cent. 4  BIS central bankers’ speeches  The non-banking sector is highly fragmented and constitutes 58 NBFIs, of which 48 are Licensed Finance Companies while the balance 10 are Specialised Leasing Companies. The total assets of the NBFI sector amount to Rs. 750 billion. Similar to the structure of the banking sector, 13 large NBFIs, each holding assets over Rs. 20 billion, account for 74 per cent of the NBFIs market share. Meanwhile 13 per cent of the market share is accounted for by 8 NBFIs holding assets between Rs. 8 and 20 billion. The remaining 37 small companies, each holding assets less than Rs. 8 billion, account for only 13 per cent of the NBFI sector. Since the fragmented financial system is highly vulnerable to external shocks, consolidation would help to build a strong and stable financial system. Reason 5: Repositioning the financial sector for delivering a cost-effective service Ladies and gentlemen, as Sri Lanka is moving towards a higher growth trajectory, we will need a more focused financial sector with a higher contribution, particularly from the banking and non-banking sectors. Intermediation by the financial sector in a more productive manner is crucial for achieving a balanced and inclusive growth in the country. Recently, there was an interesting article in The Economist Magazine of 12 April 2014, captioned “The Slumps that Shaped Modern Finance”.
The primary responsibility of understanding the risks run by the bank and ensuring that such risks are appropriately controlled and are within the risk parameters of the Bank, i.e. its risk appetite, is vested with the Board of Directors. It is now a widely accepted principle of good corporate governance that bank management understands new banking products and businesses of the Bank. Without proper understanding of the risks associated with such new products the management should not give their assent to the introduction of such products. It is the responsibility, therefore, of the Board of Directors to set the parameters for risk taking beyond which banking business should not be permitted. What then are the essential pre-requisites for good and effective risk management? Timely and reliable information is the foundation upon which good risk management is built. Lots of questions come to my mind here - do those responsible for credit decisions have a knowledge of the industry they are lending to? Why do banks depend so much on collateral when we all know it is the last resort? This is where information plays an important part. If you do not have knowledge of the industry or sector to which you are lending, your credit decision is seriously flawed and sooner or later will translate itself into NPA. Why do we have high levels of NPA? Is the information necessary for evaluation of creditworthiness of a borrower available to the banks?