Golden Key ...
“Even with consolidation, for example, the DFCC and NDB combined are still too small in my view to really make an impact. To me the only consolidation that would make sense is to merge say the NSB and the Bank of Ceylon and then have a US$10 billion bank which is reasonably sized,” he said adding that with his international experience any bank with less than $10 billion won’t make a dent in the market.
The CB has requested technical support from the International Monetary Fund (IMF) to look at these issues from an international perspective and they have agreed to do so. “They would be looking at the financial stability of our financial system; how stable is it and what is impeding faster growth,” he said.
Asked whether the regulator strayed from its stated role, he was of the view that sometimes it did citing the example of its annual report last year praising the Mattala airport.
“The Central Bank’s role is to be more objective… not gush about projects where the feasibility study had not been done. From that point of view, the CB seems to have strayed from its role of being an objective advisor to the Government and the people of Sri Lanka.”
But he was quick to point out that this didn’t mean the entire bank was ‘rotten’ and irredeemable. “I don’t think the CB has lost its way – we just need a slight course correction to get back on track,” Mr. Mahendran said, adding that the bank had a qualified and very competent team of officials to move forward.
On the value of the rupee, he said the currency is at a critical stage with global markets being very volatile. “… exchange rate flexibility has to be the last option; we have to preserve confidence. At the moment the markets are waiting for the budget and the parliamentary election in June, and in that situation you need an anchor and the currency plays that role,” he added.