July 2, 2022
  • July 2, 2022

Investments by authorized banks in international sovereign bonds

By on July 5, 2021 0

Communications management


Investments by authorized banks in international sovereign bonds

The Central Bank of Sri Lanka (CBSL) wishes to provide the general public and the investment community with the following information, while refuting statements by rating agencies which continue to undermine the stability of the banking sector and fuel speculation regarding investments by licensed banks in the government of Sri Lanka. Lanka International Sovereign Bonds (ISB) and Sri Lanka Development Bonds (SLDB).

In order to facilitate investment opportunities in the country and further encourage foreign currency inflows, the CBSL has authorized licensed commercial banks (LCB) and the National Savings Bank (NSB) to invest funds from outside. in equal shares of US dollar denominated ISBs and SLDBs. divide these investments into BSI and SLDB, after taking into account all relevant risks involved, including the following.

  • Capital adequacy: To mitigate the risk arising from the government’s foreign exchange exposure, CBSL specified a capital requirement under Basel III for credit risk arising from foreign exchange exposure to the government and specifying a Basel III framework capital requirement for trading book investments in government securities.
  • Limitation on foreign currency borrowing: In order to mitigate the risk arising from their foreign currency borrowing, licensed banks are required to subject such borrowings to a limit calculated on the basis of the external credit rating and capital adequacy ratios. form the bank. The limit is expressed as a percentage of total assets, between 5% and 10% according to the latest audited accounts available.
  • Foreign Currency Liquidity Ratio: Foreign currency liquidity positions are monitored through the Basel III Liquidity Coverage Ratio (LCR) and LCR monitoring tools to ensure that licensed banks maintain liquidity stocks in advance. sufficient currencies to meet their foreign exchange obligations.
  • Integrated Risk Management (IRM) Framework: Authorized banks are required to put in place IRM techniques to monitor and manage their risks, including maturity mismatches, and ensure that sufficient capital is available to do so. faced with the various risks to which they are exposed. The IRM framework covers various potential risks, the possible sources of such risks and the mechanism to identify, monitor and control these risks at conservative levels.
  • Market risk and currency risk management framework: Authorized banks are required to strengthen market risk management, currency trading activities, market conduct and treasury operations, in order to mitigate any risk exchange rate in approved banks.

The sourcing of external resources by LCBs and NSB is based on the investment opportunities available to these institutions in the market is purely based on the strength of their balance sheets and having adopted prudent risk mitigation practices.

The Central Bank of Sri Lanka would like to inform that all licensed banks comply with capital adequacy and liquidity requirements which are based on international Basel III standards and other key prudential requirements, thus indicating a resilient banking sector in the country.

In addition, the Government of Sri Lanka has reiterated its position to ensure that all of its debt service obligations are honored on time, thus maintaining Sri Lanka’s unblemished record in servicing all of its obligations. debt-related. Thus, arrangements are already in place to settle US $ 1 billion of ISBs maturing on July 27, 2021.



Central Bank of Sri Lanka published this content on July 05, 2021 and is solely responsible for the information it contains. Distributed by Public, unedited and unmodified, on 05 July 2021 12:05:03 PM UTC.