Three dealers confirmed that the rupee was traded at 157.30 on the dollar. It surpassed the previous all-time low of 156.90 hit on Monday.
“Still we don’t see exporters in the market after the long New Year holiday. They are also waiting to see if the rupee is depreciating further,” a currency dealer said.
The rupee has fallen 0.6% so far this week and 1.1% for the month.
A rating agency has said that Sri Lanka’s banking regulation is weakened compared to international standards by political interference and conflicts of interest but is improving.
“The operations of the Central Bank of Sri Lanka were closely tied to the government through its supervisory structure.
“The appointment of the governor appears to be susceptible to political influence,” Standard and Poor’s said in a sector risk assessment report. “A new governor tended to be appointed with every change in government.”
S & P said the central bank is also managing the employees’ provident fund (EPF), which has also bought into banks.
Dealers at the EPF were also involved in the securities scam involving bonds and had earlier been under fire for stock scams.
“The EPF is a large investor in Sri Lankan banking stocks,” S & P noted. “We believe the Sri Lanka central bank is exposed to potential conflicts of interest, although we have no information on any specific
incidences.”
The government was also using its equity stakes to influence board positions, the rating agency said.
There appeared to be gaps in regulation, but the central bank with small thrift institutions not coming under it.
However the central bank was taking steps to strengthen the system, the rating agency said.
The absence of loan to value ratios in pawning (lending against gold) was being tackled, with risk weight applied when the loan value is in excess of 70%.
Higher minimum capital requirements under Basel III are being implemented.
The risk weight is 200 basis points higher in Sri Lanka under the Basel III. Minimum absolute capital will also be raised.
“In the medium to long run, Sri Lanka’s banking system would benefit from good capital buffers to absorb unexpected losses,” S & P said.
“Nevertheless most banks will have to step up capital (including hybrid) issuances
in 2018.