at a later time and become honourable customers, the negative label issued by the crib would not give them another chance of reaching formal credit institutions. the inevitable result would be to drive them back to the informal sources of borrowing or to seek political redress. there is no doubt that there could be several willful defaulters in this group who deserve to be blacklisted, but among them the influential ones will seek ways and means of getting back into the system. it is well known that the banks and the credit institutions do not report the full list of borrowers to the crib. it is also no secret that the institutions cherry - pick the borrowers according to the former ’ s preference. the affluent borrowers, multi national companies, large corporates, highly connected borrowers and the banks ’ other preferred customers do not get reported to the crib, even if they default altogether. the credit profiles of the affluent customers will continue to have clean records of regular payments which protect their image. the crib is totally dependent on these institutions for reliable information and given the objective of looking after its client institutions, the crib would fix negative labels on defaulting borrowers. the crib is not in a position to verify or go into details of the operations of any credit institution and establish the class, creed or social status of the customer. it only fix labels according to what is reported by the credit institution. on the other hand, the bank supervision dept. and non - bank supervision dept. of the central bank of sri lanka, within their own regulatory ambit, can detect the non - reporting by institutions to the crib, but these departments are not mandated to share such information with the crib or vice versa. hence, the injustice continues and often some of the deserving borrowers are denied access to credit institutions. in such a situation, how can the crib ensure social justice and equity in terms of public policy? the crib can be fair only if the credit institutions resolve to report on all defaulting customers with no exceptions. this situation clearly indicates that the decision to groom, retain or eliminate a customer rests largely with the bank or the credit institution. the injustice begins when the reporting institutions do not report defaults of all segments of borrowers. the extent to which the banks and credit institutions have done a disservice to some of the deserving borrowers, is known only to the banks and credit institutions themselves. it is in this context that small businesses

the regulatory challenges which have to be addressed by the regulators. in meeting these challenges, the local banks must make best use of the existing resources to minimize the cost of full compliance. they can build on their existing data bases and leverage on the default data available in institutions such as the credit information bureau. they can benefit from data pooling within the industry. all these resources must be harnessed. it is important that the banks do not lose sight of the long term benefits of basle ii of better capital allocation and consequently, better pricing, because they are embroiled in the details necessary to meet the deadline. the ultimate objective is financial stability. i am sure that this dialogue that we have initiated today will result in a fruitful exchange of views on this important subject and will help to consolidate our implementation plans on this long journey that we have all commenced. i therefore wish you all a very stimulating and useful discussion and a very successful seminar. thank you.