Banks redraw risk lines after 2022 crisis

People's Bank General Manager/ CEO Clive Fonseka notes State lender was among hardest hit amidst sovereign trap Hatton National Bank Managing Director/CEO Damith Pallewatte opines episode validated country's prudential framework, but revealed weaknesses in practice Bank of Ceylon Chairman Kavinda de Zoysa says crisis exposed importance of operational risk

- BY CHARUMINI DE SILVA

SRI Lanka's top bankers last week revealed that the 2022 sovereign and currency crisis permanently altered how they manage risk, forcing a decisive shift away from concentrated sovereign exposure, collateral-heavy lending, and complacency over foreign currency liquidity.

Speaking at the 36th anniversary convention of the Association of Professional Bankers of Sri Lanka (APB), industry leaders described the crisis as a structural reset rather than a temporary shock.

Three years after the country's sovereign default and the street protests known as the Aragalaya, the industry's senior figures say the crisis has delivered a lasting reset in how risk is priced, measured, and, crucially, respected.

In a panel titled'Clarity in Complexity-Steering Growth, they said banks have discovered that sovereign risk is not theoretical, collateral is not always liquid, and liquidity in rupees is not liquidity in dollars.

People's Bank General Manager/CEO Clive Fonseka said the State lender was among the hardest hit, given its role in financing essential imports at the height of the turmoil.

"At the time, nearly 60% of its loan book was exposed to State-owned enterprises (SOEs), alongside a substantial Government securities portfolio.