Banks are facing serious challenges

It appears that our banking system is facing a serious challenge in the area of cash management, with critical internal controls seemingly having broken down. A series of major financial irregularities has raised concerns about the robustness of governance.

The reported losses include approximately US$2.5 billion involving the Treasury/Central Bank, along with substantial amounts at several banks: Rs. 13.1 billion at one institution, Rs. 626 million at another, Rs. 680 million at a third, millions at a bank branch in Kandy and day light robbery of cash being transported said to be an internal job at another bank.

These incidents stand in stark contrast to the numerous awards and accolades prominently advertised by banks, such as “Best Customer Service Bank,” “Best Trade Bank,” and “Best Money Management Bank.” It is often reported that banks spend significant sums, including foreign exchange, on award applications and overseas travel to receive such recognitions.

In light of these large-scale frauds and control failures, credibility of such claims are questionable and it is reasonable to ask whether the Central Bank should more closely scrutinise the governance, internal controls, and risk management practices of commercial banks.  Public confidence in the banking system depends not only on awards and marketing but also on strong internal controls, accountability, and the protection of depositors’ funds.

Upali Weerasinghe