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Banking
sector looks for stability, confidence
The
banking sector is looking for greater stability and
public confidence in the New Year in the aftermath of
fiascos involving some of the peers in the industry
coupled with global shocks and unfavourable market conditions
domestically.
“The industry is certainly facing a crisis of confidence,”
emphasized a senior banker.
“Some of the measures taken by the Central Bank
are welcome though it would be desirable to see greater
proactive action. This is crucial if public confidence
is to be restored,” he added.
However there was consensus that the bulk of the banking
and financial sector is sound though the entire industry
is under tremendous pressure largely owing to a multitude
of factors.
“The year 2008 was extremely challenging due to
external and internal issues. The market conditions
such as high interest rates, inflation rate and an unrealistic
exchange rate weren’t very favourable. Furthermore
the macro economic conditions as well as investor confidence
weren’t conducive for overall growth momentum experienced
in 2007,” industry analysts said.
Beginning from the Sakvithi crisis mid this year followed
by the Golden Key fiasco leading up to the state takeover
of Seylan Bank on Monday, have sent shock waves within
the industry as well as investing and saving public.
Several other financial institutions have been affected
by concerned public withdrawing their deposits as a
precaution.
“The latter course is somewhat unwarranted but
it is difficult to prevent when confidence is shaken,”
the veteran banker added.
Some analysts blamed the perilous state of the economy
for the crisis in the financial sector whilst others
don’t agree but pinned the onus on improper as
well as unethical business models and practices pursued
by certain players in the industry.
Those who found weak macro economic factors as the cause
noted that for any business to make money the country
and economic conditions must be conducive. “Past
investments have gone sour or have failed to give adequate
returns in 2008. This is one reason for the crisis,”
they opined. “Cash flows have been severely hampered
and the impact of a mismanaged economy coupled with
global shocks will be felt across many industries more
severely in the first half of 2009,” they claimed.
However others who don’t agree were of the view
that though market conditions were challenging sound
practices and better risk management would have ensured
survival.
Nevertheless there is consensus that for financial sector
to grow in confidence and stability greater prudential
requirements, best practices and proactive supervision
were necessary within the industry in tandem with improved
good governance on the part of the Government in terms
of rejuvenating the economy.
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