Ranee Jayamaha: Policy framework for regional cooperation and the role of the central banks Speech by Dr Ranee Jayamaha, Deputy Governor of the Central Bank of Sri Lanka, at the Central Bank of Sri Lanka, Colombo, 6 July 2007. *  *  *  Thank you for this opportunity to share some thoughts on the need for cooperation to develop a regional payment initiative and the role of the central banks in that endeavour. 1. Background  As articulated by the Governor, the SAARC region’s trade and financial services are developing at a faster rate, with India achieving a rapid growth of around 8-9%. Most of the SAARC Group of countries, including India, have opened up or are considering to open their capital accounts in keeping up with global trends and the regional needs. Accordingly, trade and investment flows and demand for financial services will exceed the present levels over the next couple of years. Hence, payment system gains much importance as it is a critical facilitator in cross-border flows, as well as domestic transactions. It should be able to cater not only to the present needs, but also the future demands. For purposes of this presentation, the payment system is treated in a broader sense to encompass the payments, clearing and settlement systems. At a national level, some of the SAARC and ACU countries have already reformed or are about to reform their payment systems to minimize risks and increase safety and efficiency, although the degree of such reforms vary widely.
The current move through SEPA is to establish an integrated non-cash payments system throughout the Union. This means that individuals, banks and financial institutions, corporations and all other entities in the Euro region will be able to make cashless payments throughout the Euro area from a single payment account anywhere, from any country, using a single set of payment instruments, easily, efficiently and safely on the same way that they make payments at the national level. 4. Lessons learned  It is worth mentioning some of the challenges and problems encountered in the SEPA process in order to avoid similar problems that may come up in establishing a SAARC payment initiative, or to remember them if and when SAARC countries wish to move towards a single payment area at a future date. It also highlights the need for a committed leadership when undertaking sophisticated region-wide projects like SEPA. From the beginning, when the SEPA policy framework was set by the authorities in the EU area, it was shared with the market led by banks and financial institutions which were entrusted to implement it. However, due to lack of high-level commitment, the difficulties encountered in the coordination of the diverse interests of the banking and financial service industry and the severe competition among service providers have caused delays in implementing this project.