The Application of Corporate Governance Principles in the Banking Sector in Sri Lanka – An Overview

Jump To References Section

Authors

  • Professor and Dean, Faculty of Law, University of Colombo ,LK

DOI:

https://doi.org/10.18311/sdmimd/2021/26768

Keywords:

Banking Industry, Central Bank, Corporate Collapses, Corporate Governance
Corporate Governance

Abstract

All economies in the world are propelled by banks and the banking industry. Since the end of the war, Sri Lanka's development has been accelerated and banks play a prominent role in the economy as they finance growth and development. Corporate Governance (CG) is seen as a particularly important regime for banks, due to their engagement with public funds, the public's confidence and trust is of paramount importance to a bank's stability. It is crucial that laws and regulations provide a versatile framework for good governance of the banking sector. This study critically examined the state of CG development and its underlying implications in the banking sector. Primarily, the relevant provisions of the Companies Act, Banking Act and the Monetary Law in Sri Lanka were evaluated, in addition to the other relevant laws, in order to ascertain whether they provide an adequate framework to ensure proper CG of banks. The Central Bank of Sri Lanka (CBSL) has improved its capacity over the years to supervise, enforce and maintain financial stability. It ensures the safety and stability of banks at all times and has taken steps to implement risk management, BASEL II, for tight CG of banking. A mandatory code of CG has been issued by the CBSL, requiring all banks to fully comply with the rules on or before the 31st of January 2009. This study also explores the scope, extent, impact and the effectiveness of the supervisory and regulatory role of the CBSL and identifies the challenges faced by it when addressing the CG issues in the banking industry.

Downloads

Download data is not yet available.

Metrics

Metrics Loading ...

Downloads

Published

2021-10-01

How to Cite

Nanayakkara, W. I. (2021). The Application of Corporate Governance Principles in the Banking Sector in Sri Lanka – An Overview. SDMIMD Journal of Management, 12(2), 33–46. https://doi.org/10.18311/sdmimd/2021/26768

Issue

Section

Research Papers

 

References

Abhayawansa, S. (2008). An overview of Corporate Governance Regulations in Sri Lanka., Law and Society Trust Review. 18(242):26–46.

BASEL Committee on Bank Supervision. (2015). Corporate Governance principles for Banks. https://www.bis.org/bcbs/publ/d328.pdf.

Cabraal, A. N. (2004). Importance of corporate governance for the banking and financial sector - Keynote address at the 9th South Asia Management Forum, Dhaka. https://www.bis.org/review/r070314c.pdf.

Cobham, D, and Subramaniam. (1998). Corporate finance in developing countries: New evidence for India. World Development. 26(6):1033–47. https://doi.org/10.1016/ S0305-750X(98)00025-4.

Dinc S. (2006). Monitoring the monitors: The Corporate Governance in Japanese Banks and their real estate lending in the 1980s. The Journal of Business. 79(6):3057–82. https://doi.org/10.1086/508008.

Exter J. (1949). Report on the establishment of a Central Bank for Ceylon, Sessional Paper X1V. https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/about/Exter%20Report%20-%20CBSL.pdf.

Maw, Michael Craig-Cooper. (1994). Maw on Corporate Governance. Taylor and Francis, Dartmouth Publishing Company Limited.

Moonesinghe, J, and de. Zilva. 2005. Corporate Governance and the Board Room.17th Anniversary Convention – 2005. Financial Systems Stability and BASEL II - Way Forward. https://apbsrilanka.com/ wp-content/uploads/2021/01/2005_17th_conv_a_1_ Joan_de_Zilva_Moonesinghe.pdf.

Regulation and Supervision of banks. CBSL. https://www.cbsl.gov.lk/en/Regulation_and_Supervision.

Shleifer, Vishney. (1997). A survey of Corporate Governance. The Journal of Finance. 52(2):737–83. https://doi.org/10.1111/j.1540-6261.1997.tb04820.x.

Sivaraja, S, Wickramarathne, E. G. R. G., Samarakoon, S. M. T. I. S., Senarathne, B. N. H., and Wijethilaka, M. P. D. S. (2018). Corporate Governance practices and efficiency of commercial banks in Sri Lanka. https://mgt.sjp.ac.lk/acc/wpcontent/uploads/2018/12/ResearchArtical.pdf.

Spanos, L. J. (2005). Corporate Governance in Greece: Developments and policy implications. Corporate Governance. 5:15–30. https://doi.org/10.1108/14720700 510583430.

Weerasooriya, W. (2010). A Text Book of Commercial Law. Postgraduate Institute of Management.

Wijewardena, W. A. (2009). Governance issues in Banks: Could regulators solve the problems? 21st Anniversary Convention 2009. 25–33. http://www.apbsrilanka.org/articales/21_ann/21_pdf_docs/03_W.A_Wijewardena.pdf.

Wolfensohn, J. (1999). Corporate Governance definitions. (Quoted in Financial Times). http://www.heritageinstitute.com/governance/definitions.htm.