By: Staff Writer March 18, Colombo (LNW): A fully fledged Development Bank is to be set up in Sri Lanka mainly for the serving of SME/Manufacturing and Tourism sector. It is being considered by President Ranil Wickremasighe as the finance minister to kick start the economy, according to official sources. The proposed Development Bank will have a minimum Rs. 500 billion Tier 1 capital, total assets of around Rs. 1 trillion, a rationalised branch network of around 150 – 200 and a staff of around 2,000 and governed by an independent board comprising professionals and FDI partners. State Minister of Finance Shehan Semasinghe will lead the initiative according to ministry sources. “A committee of experts will propose the way forward. The Government will look at the stakes in several private banks and Government banks in structuring the development bank. Several international funds have shown interest,” a senior official added. The new Development Bank’s business profile reflects the elevated vulnerability to heightened risks in the domestic market, which continue to affect its ability to generate and defend business volumes. The finance ministry expects the new DB’s earnings and profitability to remain challenged by asset quality, loan growth prospects, sharp downward adjustment of interest rates and any potential impact to earnings from the proposed domestic debt optimisation strategy. It believes that the bank’s overall funding and liquidity position is prone to sudden changes amid already weak creditor sentiment, similar to peers. However stress on foreign-currency liquidity has somewhat eased. Even so, the bank’s access to foreign-currency wholesale funding remains as its strength the bank’s local-currency funding and liquidity position is also susceptible to any setbacks to the domestic debt restructuring. Forthcoming laws and commissions would enhance market access, foster trade and investment and ensure the competitiveness of the island’s economy becessating the importance of a development bank. President Ranil Wickremesinghe sought to reassure foreign investors by mentioning the removal of restrictions and ongoing economic reforms. He pointed out the country’s ongoing and pending FTAs with Singapore, Thailand, India and China, its initiatives to join the Regional Comprehensive Economic Partnership (RCEP), and the benefits of GSP Plus for access to European markets. with an affirmation could be driven by our view that risks from funding and capital stresses have abated, at both the individual bank and the sector level, to the extent that the bank’s ability to service its obligations in local and foreign currency is not hindered and/or banks are able to continue as a going concern and avoid failure.