Banking Industry: Central Bank of Sri Lanka

To accommodate dynamic economic and financial system developments upon gaining independence in 1948, the post-independence Government of Ceylon (as Sri Lanka was then known) established the Central Bank of Ceylon to maintain an active monetary policy regime and a dynamic financial sector to support and promote economic growth.

Vision

“A credible and dynamic central bank contributing to the prosperity of Sri Lanka.”

Mission

"Maintaining economic and price stability and financial system stability to support sustainable growth through policy stimulus, advice, commitment and excellence.”

Values

Commitment to inspirational leadership
Transparency in what we do
Accountability to our key stakeholders - the public, government, financial institutions and employees
Integrity - trust, dependability, honesty
Commitment to professional competence
Commitment to lifelong learning, knowledge sharing and innovation
Consistency, accuracy and timeliness of all actions taken by the Bank
Managing and ensuring operational autonomy for policy formulation and implementation
Urgent and continuous commitment to results and outputs
Commitment to collaborative and participatory work practices

Objectives of Central Bank of Sri Lanka (CBSL)

Economic and Price Stability

Price stability safeguards the value of the currency in terms of what it will purchase at home and in terms of other currencies. Price stability or stable prices means low inflation. Experience has shown that the economy performs well when inflation is low and is expected to be low. Interest rates are also low in these conditions. Such an environment allows an economy to achieve its growth potential and fosters high employment. Free from the disruptive effects of high and variable inflation, both consumers and producers make economic decisions with confidence. Low inflation or price stability fosters sustainable long-term economic growth and employment. The Central Bank uses monetary policy measures to control inflation.

Financial System Stability

A stable financial system creates a favorable environment for depositors and investors, encourages efficient financial intermediation and the effective functioning of markets, and hence, promotes investment and economic growth. Financial system stability means the effective functioning of the financial system (financial institutions and markets) and the absence of banking, currency and balance of payments crisis. Financial instability is caused by bank failures, excessive asset price volatility, and collapse of market liquidity or a disruption to the payments system. Financial system stability requires a stable macro-economic environment, effective regulatory framework, well organized financial markets, sound financial institutions and safe and robust payments infrastructure. The maintenance of financial stability entails the prevention, detection and reduction of threats to the financial system as a whole, through the surveillance of markets and financial institutions, oversight of the payments system and crisis resolution.

Functions of Central Bank of Sri Lanka (CBSL)

Core Functions

Conduct of Monetary Policy
Conduct of Exchange Rate Policy
Management of the Official International Reserves
Oversight of the Financial System
Licensing, Regulating and Supervising of Banks and Selected Non-Bank Financial Institutions
Provision of Settlement Facilities and the Regulation of the Payment System
Issue and Distribution of the National Currency
Compilation, Dissemination and Analysis of Economic Data and Statistics
Banker to the Government and its agencies, and provision of current account facilities to LCBs and non-commercial bank Primary Dealers for Government Securities

Agency Functions

In addition, the CBSL also performs the following agency functions on behalf of the Government of Sri Lanka:
Management of the Public Debt
Foreign Exchange Management
Fund Management and Custodian of the Employees’ Provident Fund
Facilitating Financial Inclusion
Financial Intelligence services to prevent, detect, investigate and prosecute Money Laundering and Terrorist Financing

Monetary board of Central Bank

The Central Bank has a unique legal structure in which the Central Bank is not an incorporated body. In terms of the Monetary Law Act, the corporate status is conferred on the Monetary Board, which is vested with all powers, functions and duties. As the governing body, the Monetary Board is responsible for making all policy decisions related to the management, operation and administration of the Central Bank.

The Monetary Board of the Central Bank consists of five (5) members

The Governor

The Secretary to the Ministry of Finance ( ex-officio )

Three (3) non - executive members

Departments

For the smooth functioning of the CBSL, the departments of the Bank are grouped into four key business areas, namely -Economic and Price Stability; Financial System Stability; Currency Issue & Management and Agency Services to Government and three support services areas , namely -Human Resources Development and Management; Corporate Services; and Policy Review and Monitoring.

Economic Policy Advisory Cluster