BANKING SECTOR IN SRI LANKA

The Banking sector in Sri Lanka, which comprises Licensed Commercial Bank (LCBs) and Licensed Specialized Banks (LSBs), dominates the financial system and accounts for the highest share of the total assets in the financial system. Banks play a critical role within the Sri Lankan financial System, as they are engage with in provision of liquidity to the entire economy, while transforming the risk characteristics of assets.

• ·         Licensed commercial Banks
• ·         Licensed Specialized Banks

Licensed Commercial Bank

Licensed Commercial Bank is permitted to accept demand deposits from the public and maintain current accounts and engage in a full range of foreign currency activities. There are 26 commercial bank in Sri Lanka. Those bank can categorize as follows.

State banks-02

Domestic Private banks-11

Foreign banks-13

·         Amana Bank ·         Axis Bank Ltd ·         Bank of Ceylon ·         Bank of China Limited ·         Cargills Bank Ltd ·         Citibank N.A.

·         Commercial Bank of Ceylon PLC ·         Deutsche Bank AG ·         DFCC Bank PLC ·         Habib Bank Ltd ·         Hatton National Bank PLC ·         ICICI Bank Ltd

·         Indian Bank ·         Indian Overseas Bank ·         MCB Bank Ltd ·         National Development Bank PLC ·         Nations Trust Bank PLC ·         Pan Asia Banking Corporation PLC

·         People's Bank ·         Public Bank Berhad ·         Sampath Bank PLC ·         Seylan Bank PLC ·         Standard Chartered Bank ·         State Bank of India

·         The Hong Kong and Shanghai Banking Corporation Ltd (HSBC) ·         Union Bank of Colombo PLC

Licensed Specialized Banks

The licensed specialized banks are the financial institutions which have obtained a licensed from the central bank to conduct specialized banking business under the banking Act. There are 07 specialized banks in Sri Lanka.

State banks -06

Private banks-01

LSBs

Housing Development Finance  Corporation Bank of Sri Lanka  (HDFC)

Lankaputhra Development Bank Ltd.

National Savings Bank  "Savings House"

Pradeshiya Sanwardhana Bank

Sanasa Development Bank PLC

Sri Lanka Savings Bank Ltd

State Mortgage & Investment Bank

What are the assets and Liabilities of a bank? 

·         The assets of a bank are the outstanding loans of their customers. Additionally, the bank would probably have investments of its own that would be assets to the bank, as well as the normal assets of property, fixtures and equipment.

·         The liabilities of a bank are the customer checking, saving or investment account deposits. Additionally, normal liabilities such as the bank’s own loans payable or other similar obligations would be liabilities, just as they are in any other business.

Risk in the banking sector

There are many types of risks that banks face. credit risk, market risk, and operational risk are the three major risks. The other important risks are liquidity risk, business risk, and reputation risk.

Credit risk:  risk of losses that result from the inability of the bank's clients or other stakeholders to meet their financial commitments

Market risk: This risk, generated by trading activities (interest rates, foreign exchange, loss of value of financial instruments.)

Operational risk:  risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.