identify a single particular location as being the operative area in respect of certain financial transactions. modern it and financial liberalization are the keys that have led to this type of banking internationalization. at the same time, it has provided for innovative electronic money and scripless settlements systems for cross - border financial transactions. financial liberalization is now leading to banking internationalization where surplus funds flow crossborder to finance deficit units, i. e., international intermediation. in this background, it is now realized by regulations that the high mobility of capital flows creates enormous risks to internationalized banks and to international systems, if the individual fund management systems of such banks are not sound. this requires regulators to place even greater weight upon the efficacy of the governance systems since the failure of such institutions could be catastrophic to the well being of the entire global financial systems. in addition, the ill effects of money laundering, financing of illegal activities, and the financing of terrorism through the banking system are further risks that are faced by banks due to this growing internationalization. these too, need to be addressed by stakeholders who are involved in the development of the evolving systems. to deal with these challenges, regulators now have to close ranks internationally as well, and attempt to harmonize prudential requirements to monitor risks of international financial conglomerates, and in this regard, we all must be somewhat relieved that the basel capital accord has provided a clear framework for us to apply on the subject. as we all know, the basel code of corporate governance for banks and financial institutions covers 8 principles. these are : • principle 1 : board members should be qualified for their positions, have a clear understanding of their role in corporate governance and be able to exercise sound judgment about the affairs of the bank. • principle 2 : the board of directors should approve and oversee the bank ’ s strategic objectives and corporate values that are communicated throughout the banking organization. • principle 3 : the board of directors should set and enforce clear lines of responsibility and accountability through the organization. • principle 4 : the board should ensure that there is appropriate oversight by senior management consistent with board policy. • principle 5 : the board and senior management should effectively utilize the work conducted by the internal audit function, external auditors, and internal control functions. • principle 6 : the board should ensure that compensation policies and practices are consistent with the bank ’ s corporate culture, long - term objectives and strategy, and control environment. • principle 7 : the bank should be governed in a

from workers ’ remittances are needed to ensure a gradual rebalancing of the current account and a strong financial account. hence, sustained measures are needed to improve investor confidence to ensure that short term vulnerabilities are not translated into long term structural deficiencies. foreign reserve management activities of the central bank will continue to be based on a model based strategic asset allocation ( saa ) framework, which was developed with the support of the reserve advisory and management program ( ramp ) of world bank. this methodology is expected to ensure that foreign reserves are managed with the objective of ensuring an adequate level of liquidity, a reasonable return in comparison to the benchmarks and to exploit any active strategies with the view of making an excess return if the market conditions permit. further, the central bank is in the process of introducing a superior alternative usd / lkr reference rate for the benefit of all stakeholders, including foreign investors. as you are aware, in view of the deterioration in the bop and to support the government ’ s reform agenda, sri lanka obtained a three - year extended fund facility ( eff ) from the imf, in 2015, and we have already received five tranches of this facility. although the developments over the past weeks have delayed the progress that sri lanka has been making under the imf programme, we hope to keep the imf programme on track this year. while this will categorically support the country ’ s external sector, the reforms would also help boost investor confidence and productivity of the economy. these are key drivers in enhancing growth of the economy. as inflation targeting involves managing and anchoring inflation expectations effectively, transparency of monetary policy, particularly in terms of plans, objectives and decisions, is of utmost importance. hence, as transparency is achieved through effective communication, as a prospective inflation targeter, the central bank is very conscious of the need for a well devised communication strategy. accordingly, a number of initiatives have already been taken by us to enhance the communication strategy. we have enhanced the analytical value of the regular monetary policy press releases with the support of the imf, while maintaining clarity, simplicity and enhancing the forward looking approach. in addition, we have initiated programmes on educating, particularly journalists and other stakeholders, regarding fit. further, several measures are in the pipeline, including the issuing of regular monetary policy reports, which will be developed into inflation reports in the future and expanding the public awareness outreach programme, which will be implemented during next two years as set out in