EY concludes Sri Lanka Banking Conference ‘Surfing Through the Crisis’

From left: EY Sri Lanka Country Managing Partner Manil Jayesinghe, EY Sri Lanka Senior Partner and Head of Consulting Arjuna Herath, EY Sri Lanka Financial Accounting Advisory Services and Partner Rajith Perera, EY UK Head of Turnaround, Restructuring and Portfolio Solutions and Partner Saleem Malik, EY UK Turnaround, Restructuring and Portfolio Solutions Director Bogdan Ioan, Verité Research Executive Director and Head of Research Dr. Nishan De Mel, Standard Chartered Bank Sri Lanka CEO and Head of CCIB business Bingumal Thewarathanthri, Hatton National Bank Managing Director and CEO Jonathan Alles

• Can the banking sector survive this economy, or can it help the economy survive?

EY successfully concluded its inaugural Sri Lanka Banking Conference themed ‘Surfing Through the Crisis’ on 14 November. The event builds on a series of similarly themed sessions conducted by the firm over the past two years aiming to support the banking sector navigate through these challenging times.

The Banking Conference hosted the CEOs, CROs, CFOs, the chairperson of the Board Audit Committees, and the chairperson of the Board Integrated Risk Management Committees of Banks in Sri Lanka. EY Sri Lanka and Maldives Country Managing Partner Manil Jayesinghe launched the conference addressing the need for banks to be equipped for the difficult task of holding together a fragmented economy. He commented that banks must understand their customers and understand the cashflows of the customers to accurately evaluate their credit quality. Special units with specially trained and skilled officers should evaluate and decide the recoverability of the loans and take a decision post haste because NPL under an economic crisis will not cure as a function of time.

In his session on ‘Key Considerations for Credit and Liquidity Risk Management for banks’, EY Sri Lanka Financial Accounting Advisory Services Partner Rajith Perera further stressed the importance of banks performing multiple scenario analysis on Non-Performing Ratio, the impact to its capital; understanding the level of risk tolerance in terms of credit risk, and working backward the NPA management strategy. The need for such scrutiny comes with the high propensity for NPLs to increase exponentially, even beyond the range of 15%, an all-time high for the country. The retail portfolio and SME portfolio which collectively contribute to more than 40% would be particularly vulnerable to these choppy economic waves.

EY UK Head of Turnaround, Restructuring and Portfolio Solutions, Partner Saleem Malik together with EY UK Turnaround, Restructuring and Portfolio Solutions Director Bogdan Ioan in their technical session on Impact of the Debt Restructuring Process to the Financial Services Sector, and Non-performing resolution strategy built strong cases for consideration by referring to the Euro Zone debt crises of Greece and Cyprus. In their presentation they drew parallels to the Sri Lankan Crisis and valuable considerations for bank recapitalisation, NPL Resolution and management strategies, liquidity support, and the importance of private sector involvement.

The Technical Sessions thus concluded, the stage was set for a lively discussion among the ‘Fire Side Chat’ panellists Standard Chartered Sri Lanka CEO Bingumal Thewarathanthri, Hatton National Bank PLC MD/CEO Jonathan Alles, Verité Research Executive Director Dr. Nishan De Mel and Manil Jayesinghe, moderated by EY Sri Lanka Head of Consulting, Senior Partner Arjuna Herath. This unconstrained Q&A session discussed the economic revival curve that could be anticipated and the likely effects of inflation and interest rates in reviving the economy, the implications to the financial services sector of the potential budget proposals, the debt restructuring process and the NPL Management strategies that banks would have to strategically implement.