In the aftermath of the civil war in Sri Lanka, the country
has witnessed a significant increase in economic development, with the banking
sector assuming a pivotal role in financing growth and fostering economic
prosperity. This chapter investigates the importance of Corporate Governance
(CG) within Sri Lanka's banking sector, recognizing its profound influence on
public trust and confidence, essential for ensuring the stability of financial
institutions. The chapter critically examines the state of CG development and
its implications, focusing on the adequacy of regulatory frameworks provided by
key legislative Acts such as the Companies Act, Banking Acts, and Securities
Act and other pertinent regulations. It highlights the crucial role of a robust
governance culture within the banking sector and emphasizes that banking
institutions are crucial for maintaining a healthy economy. The banking
industry stands as the cornerstone of Sri Lanka's economy and operates in a
highly regulated environment. Banks play a critical role by taking public
deposits and facilitating financial transactions for individuals and
businesses, thereby contributing significantly to economic stability and
growth. Given the country's past economic challenges, establishing solid
governance practices within the banking sector is imperative for steering Sri
Lanka towards a more resilient and prosperous future. The Central Bank of Sri
Lanka (CBSL) emerges as a key player in this narrative, exhibiting continuous
improvement in its supervisory capacity. Through the enforcement of stringent
measures and the adoption of BASEL principles, the CBSL demonstrates a
steadfast commitment to enhancing CG within the banking industry. Additionally,
the CBSL has mandated a comprehensive code of CG, stressing the importance of
full compliance from banks within a specified timeframe. However, despite these
advancements, challenges persist in addressing CG issues within the banking
landscape. This study sheds light on the scope, impact, and effectiveness of
the supervisory and regulatory oversight of the CBSL, while also highlighting
ongoing challenges. By critically evaluating regulatory frameworks and
supervisory roles, this chapter aims to contribute to the ongoing discourse on
advancing CG in the banking sector in Sri Lanka, ultimately fostering a more
stable and resilient financial ecosystem.
Author(s) Details
W. Indira Nanayakkara
Faculty of Law, University of Colombo, Sri Lanka.
Please see the book here:- https://doi.org/10.9734/bpi/crbme/v6/8364E
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