Central Bank of Sri Lanka - Banking Act Direction No. 1 of 2015 - Basel III Liquidity Standards on Liquidity Coverage Ratio


The recent global financial crisis that began in 2007 revealed that certain banks even with adequate capital levels experienced severe stress due to lack of prudent liquidity risk management practices and due to sudden evaporation of liquidity from the market resulting from withdrawals of credit lines by market participants. The Central Bank of Sri Lanka's Basel III Liquidity Standards on Liquidity Coverage Ratio aims to promote short-term resilience of the liquidity risk profile of banks ensuring that banks have an adequate stock of unencumbered high-quality liquid assets that can be converted easily and immediately into cash in secondary market to meet their liquidity needs for a period of 30 calendar days under a liquidity stress scenario. The framework also seeks to improve the banking sector’s ability to absorb shocks arising from financial and economic stress, whatever the source, thus reducing the risk of spillover from the financial sector to the real economy.

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Wednesday, April 1, 2015
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Central Bank of Sri Lanka
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