By: Staff Writer
July 19, Colombo (LNW): Sri Lanka’s financial authorities insist the country has built a more resilient banking system following the economic crisis. Yet experts increasingly warn that institutional inefficiencies and growing cyber threats could become the next major test of financial stability.
Speaking at the Sri Lanka Economic Association and Gamani Corea Foundation Economic Forum, Central Bank Deputy Governor K.G.P. Sirikumara argued that traditional measures of financial health are no longer sufficient. Capital buffers, profitability and liquidity remain important, but resilience now depends equally on governance, operational preparedness and the ability to withstand increasingly complex external shocks.
His assessment reflects a global shift in financial risk. Modern cyber attacks rarely target banks alone. Criminal networks increasingly exploit weaknesses across government agencies, payment systems, regulatory institutions and interconnected financial infrastructure.
Sri Lanka has responded to its recent economic crisis through significant legal reforms, including the Central Bank of Sri Lanka Act No.16 of 2023, amendments to banking legislation and the creation of new coordination bodies responsible for fiscal, monetary and financial stability.
However, financial governance specialists question whether institutional reforms have translated into operational efficiency across all public financial institutions.
Treasury procedures remain criticised for slow implementation, fragmented information systems and bureaucratic delays that can complicate oversight and increase operational risks. While commercial banks have accelerated investments in cyber security, Treasury digital infrastructure has progressed more unevenly, creating potential vulnerabilities within the broader financial ecosystem.
Sirikumara cautioned that external shocks increasingly interact with domestic governance weaknesses. Cyber threats represent one of the clearest examples of this interaction, where international criminal groups often exploit administrative failures instead of breaking sophisticated security systems.
Former Central Bank Deputy Governor J.P.R. Karunaratne reinforced these concerns by highlighting that operational risks and cyber vulnerabilities remain inadequately captured by existing financial indicators. This raises questions over whether current supervisory frameworks fully reflect emerging threats.
Banking industry leaders acknowledge that the nature of risk has fundamentally changed. HNB Managing Director Damith Pallewatte identified cyber security, geopolitical uncertainty, climate risks and talent shortages as overlapping challenges confronting financial institutions.
Professor Priyanga Dunusinghe added another dimension, warning that excessive caution by financial institutions could reduce credit available for productive sectors. Financial resilience, he argued, should strengthen economic growth rather than restrict it.
Alliance Finance Deputy Chairman Romani de Silva similarly called for greater coordination among policymakers, banks and non-bank financial institutions to improve financial inclusion and strengthen support for underserved communities.
Together, these observations suggest that resilience cannot be achieved through legislation or stronger banking ratios alone. Effective implementation, efficient Treasury management, modern digital infrastructure and continuous cyber preparedness are becoming equally important pillars of financial stability.
As Sri Lanka accelerates digital financial services and electronic government transactions, institutional inefficiency itself may become a national security concern. Without sustained investment in administrative reforms, cyber governance and operational accountability, the country’s financial system could remain vulnerable to increasingly sophisticated scams capable of undermining confidence in both public institutions and the wider economy.
The challenge now is not simply surviving the next financial shock but ensuring that weaknesses within public financial administration do not provide cyber criminals with the opportunity to create one.
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