ranee jayamaha : role of external auditor and implications of the new companies act speech by dr ranee jayamaha, deputy governor of the central bank of sri lanka, at a seminar at the central bank of sri lanka, colombo, 11 june 2007. * * * given the rapidly expanding financial landscape in sri lanka in which finance and leasing companies are making a significant contribution to the financial services industry, it is imperative that the role of each stakeholder is recognized for purposes of clarity, financial reporting and in the interest of wider financial system stability. the business of finance, hire purchase and leasing has grown significantly in the last few years, but at a lower pace than that of the banking sector. in 2006 alone, the growth in leasing portfolio of banks was 80 %, while the finance companies and leasing companies recorded growth rates of 13 % and 6 %, respectively, in their lease portfolios. banks and finance companies have access to low cost funds through deposit mobilization. here too, banks have current accounts at zero costs. leasing companies, on the other hand, rely on bank borrowing or borrowing through debt instruments which is costly to them. recently, the central bank has recommended amendments to the leasing companies act to regularize leasing company borrowings from the public through the issue of debt instruments. the central bank will monitor such borrowings to ensure that highly geared leasing companies do not borrow excessively from the market and terms and conditions will be imposed to mitigate risks to the investors in debt instruments issued by leasing companies. in addition to business growth and fund raising, the viability of the finance and leasing companies should also be monitored and watched, although their asset base accounts for a mere 4. 8 % of total financial sector assets. also, these institutions are engaged in granting credit to the more risky sectors in the economy absorbing higher credit risks which the conventional banking sector is not willing to take on. their contribution to the capital formation in the economy particularly through the provision of leasing and hire purchase facilities is significant. a failure of one or two big companies would have a far reaching impact from a stability point of view, given the ripple effects it could have on the whole financial sector. there are several stakeholders involved in examining the viability of businesses of finance and leasing companies. the chief among them are shareholders, regulators, auditors, investors, depositors and creditors. all these stakeholders have functions and responsibilities assigned to, or assumed by them by law or practice. it is becoming increasingly clear that some of

ajith nivard cabraal : overview of financial and economic developments in sri lanka keynote address by mr ajith nivard cabraal, governor of the central bank of sri lanka, at the opening of the financial services academy at the centre for banking studies, rajagiriya, 5 march 2007. * * * ladies and gentlemen : today we all have gathered here to witness an important step towards the development of the financial landscape and knowledge pool of the country, the establishment of the financial services academy, a landmark organization that we hope, would shape the future of our financial services industry. as we know, the sri lankan economy recorded a growth of 7. 8 per cent in the first three quarters of 2006 and according to current available data, it is very likely that the economic growth in 2006 would be well over 7 per cent. this will be the highest since 1978. towards such growth, the contribution of the services sector was easily the highest and of such high growth sector, the growth in financial services was highly significant. it is therefore widely acknowledged that the contribution of the financial sector for the achievement of growth of the country is enormous, and whatever we do in that connection, would be of overall immense value. the developments in the financial sector also helps the economic growth through several other channels as well : it improves the efficiency of business processes, attracts investment, reduces unemployment and enhances access to finance, to name a few. we are happy that during the recent years, our financial sector has also improved in every respect. this is clearly evident when we look around the financial institutions, financial markets and the developments in financial infrastructure. within the last five years, assets of the licensed banks in the country doubled. altogether, there has been an addition of over 400 branches of these banks. other financial institutions including registered finance companies, leasing companies, insurance companies, merchant banks, venture capital firms and unit trusts have also grown in sympathy with the banking sector. at the same time, we have also progressed rapidly in the financial infrastructure developments as well. this is particularly visible with the leap forward in the payment system development as evidenced by the implementation of a real time gross settlement system in 2003. now, 84 per cent of the value of country ’ s payments are settled through the rtgs system. in 2006, we completed the cheque image truncation project, reducing the maximum cheque clearance time to 2 working days, which is another significant achievement. the colombo stocks exchange remains one of the most technically advanced