“Sri Lanka is facing little wins and losses, and ups and downs, as we try to make it through the economic crisis,” the Acting CEO and General Manager of People’s Bank Clive Fonseka asserted.

In a recent LMDtv interview, he maintained an optimistic view of the banking sector, noting that it was navigating the tough times well: “In 2019, and during the COVID-19 breakout and economic crisis over the past four years, banks performed well relative to other sectors.”

He stated: “The credit should go to the regulator, and the directors and management of the banks, for what they have done to get to this position.”

Fonseka pointed to measures that the regulator took in 2017, specifying the likes of “imposing additional buffers with regard to liquidity and capital under the Basel III requirements,” which he opined is “one of the reasons that banks maintained this strong position despite the turbulent times we have had.”

With high inflation and fluctuating interest rates, the need for strong safety nets is a must for banks.

“My assessment is that safety nets are already in place,” said Fonseka, observing: “Despite the adverse economic conditions we are experiencing, banks have performed well with regard to liquidity and capital adequacy.”

Maintaining liquidity is a compulsory requirement for banks – especially against the backdrop of an economic crisis.

Given this context, he asserted: “Liquidity is the most important aspect so I would say the key is sticking to the fundamentals. In a situation such as with the prevailing economic environment, this is important. Banks are facing a challenging situation in the face of volatility in interest and exchange rates.”

“As far as liquidity is concerned, quality lending is a must,” he stressed.

He continued: “We are of the view that banks should be careful in providing fixed rate facilities. On the contrary, we should offer floating rate facilities as much as possible so that whatever the volatility in interest rates, we’ll be able to manage the situation.”

Fonseka also shared his views on the Central Bank of Sri Lanka recently assuring banks that their stability will not be at stake in the wake of ongoing domestic debt optimisation discussions.

“It is very reassuring for us and we have trust in the regulator,” he said, elaborating that “the regulator has been proactive and taken the required measures to ensure a resilient banking sector in the past.”

And he commented on the fears of a global banking crisis following incidents like the collapse of Silicon Valley Bank (SVB) and eroding investor confidence worldwide: “Due to the strength of the US government and measures taken by the Federal Reserve, the impact on the banking system was manageable.”

Furthermore, Fonseka maintained that there’s no need for concern in the local banking sector.

He elaborated: “As far as Sri Lankan banks are concerned, their exposure to US Treasuries and similar instruments is insignificant. So there will not be any adverse impacts on local banks. Even during previous crises, Sri Lankan banks weren’t exposed due to their limited exposure to these instruments.”

People’s Bank’s Acting CEO and General Manager commended LMD’s Refresh Sri Lanka campaign. “This campaign centres on a number of pillars that are the foundation of building a model nation – namely civic-mindedness, honesty, professionalism, ethics, law and order, zero tolerance for bribery and corruption, paying our tax dues and waste disposal. Sri Lankan citizens and corporates should follow and support these initiatives,” he urged.

“The banking sector in Sri Lanka is expected to play a key role in the economic revival of the country,” Fonseka said, highlighting the expectation that “authorities will make the correct decisions with regard to the issues faced by the banking sector.”

He cautioned that “if not, the repercussions of the above will prevail over an extended period of time.”