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

Share: 

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.

Document Details

Document Type: 
Document Topic: 
Doument Author (Entity): 
Authoring Country: 
Originating Country or Trade Block: 
Issue Status: 
Year of Document: 
2015
Date of Document: 
Wednesday, April 1, 2015
Document Authors: 
Central Bank of Sri Lanka
Language (This Document): 
English

Legal Disclaimer: The content appearing on this site is for general information purposes only and made available on an "AS-IS" basis. The law is subject to change and no representation or warranty is made with regard to accuracy or fitness for a particular purpose.