Sri Lanka’s financial markets are recovering, but the vulnerabilities that triggered the 2022 crisis have not fully receded. As the country looks to deepen its capital markets and embed a stronger risk management culture, global banks have a distinct role to play.
The IMF reports domestic borrowing fell to 8% in 2025, and foreign reserves are building. Working at the intersection of global capital & the local market, where do you see financial markets headed in Sri Lanka?
That is encouraging, but it also needs to be read with some caution. The improvement in government revenues reflects the reform measures that have been implemented, and vehicle-related duties have also provided a meaningful boost following the reopening of imports after nearly five years. At the same time, the recent surcharge on vehicle imports and the depreciation of the rupee underscore how quickly external pressures can re-emerge. Reserves have improved, but they remain vulnerable given Sri Lanka’s reliance on worker remittances, tourism and imported energy, all of which are sensitive to geopolitical developments, particularly in West Asia.
It has been a year since I took on this role at Standard Chartered Sri Lanka, and it has given me a valuable perspective on both the resilience of this market and the work still required to deepen it. With each interaction, I am further convinced that Standard Chartered can play an important role in supporting Sri Lanka’s path towards greater macroeconomic stability.
“Integrity is nonnegotiable; it simply means doing the right thing even when no one is watching”
I see significant potential for growth in the financial markets space, particularly in credit markets where rated entities can issue debt using various instruments, which can then be traded in the secondary market. I also believe we need to start looking at using derivatives more extensively as a tool to mitigate risks, be it in FX, Rates, Equity, Fixed Income or Credit, subject to the right controls, risk limits and of course regulations. Given the fragile state of our economy, any developments in the market space will need to be gradual and complement the pace of growth, rather than lead to a situation where the market tries to get ahead of the ground realities and believe the regulator will need to play a role in ensuring stability as we take on these new initiatives. The imminent launch of a USDLKR spot reference rate will be a welcome step, and I look forward to working with other market participants on developing a USDLKR FX Options market in time to come.
Standard Chartered is exiting its Wealth and Retail banking business in Sri Lanka. What does your commitment to financial markets here mean in practice, and what value do you bring to the table that a domestic bank cannot?
Standard Chartered is a leader in emerging markets and has built a track record as a banker of choice in the countries and territories we operate in. We established in Sri Lanka in 1892, and that long-standing presence speaks to our brand promise of being ‘Here for good’. We have a world-class team of analysts, structurers and traders who help clients, including Governments, navigate complex situations on a regular basis, and our commitment to Sri Lanka has never been stronger. We are here for the long run, and we strongly believe Sri Lanka is on the right track towards establishing itself as a stable economy in the region. We have already started to strengthen our Corporate and Investment Banking (CIB) franchise on the ground with investments in infrastructure and people, and our intention is to remain a preferred partner for our CIB clients by offering innovative, bespoke solutions to support their growth, be it in digitisation, financing, or risk mitigation.
We are a super-connector bank, and we focus on being present where we can create the most value for clients, and in Sri Lanka, that means bringing together our network, global connectivity and risk management expertise to support the development of financial markets.
In financial markets, integrity & discipline are difficult to sustain. Why is doing the right thing in financial risk management not just an ethical imperative, but a commercial one, and are there patterns of behaviour in the market that need to change?
I am a strong advocate of these values, in life and in business. Integrity is non-negotiable; it simply means doing the right thing even when no one is watching. If you look at some of the large organisations and successful nations, you will realise that there is a culture where values take precedence over commercial gains. Discipline should not be optional, especially if we are to break out of the shackles and move towards our potential as a nation. I’ve been fortunate enough to work in high-performance environments in sport, and values such as Integrity and Discipline are at the forefront of success, whether you are an aspiring athlete or a corporate citizen working towards building a better country.
Interesting you mention ‘patterns of behaviour’ – in my opinion, if they do exist and do not seem ethical, that is because we have tolerated it for too long, and the time to change is now, not tomorrow, not next week, or next year. Whilst we are in the business of making money, it is also important to remember that we have a responsibility towards our future generations, and it is upon us to challenge the status quo and drive change to ensure the next generation of Sri Lankans inherit a culture driven by values and ethical standards.
The foreign exchange crisis exposed how poorly reserves were managed and how currency risk was managed at the state and corporate levels. What do you think was revealed about the gaps in financial risk management culture, and what has changed since then?
The crisis exposed significant gaps in how financial risk was understood, managed and governed, both at the sovereign and corporate level. In an ever-evolving world, it is important to know where we want to be and have policies that align with the trajectory of the globe and our own growth aspirations. Our main currency exposure is to USD, hence it is important to maintain a larger portion of our reserves in USD, but when drawing up a policy, it can include some degree of diversification, from tenor to the type and tools used for investments, the currencies and region of investment.
In terms of financial risk management, most large corporates have designed and implemented robust policies using the limited tools available to them, and it is our intention to work on diversifying the tools and options that can be used to manage risk in a more efficient manner.
The 2022 crisis exposed what unhedged exposure looks like. What does a disciplined hedging strategy look like?
In terms of a hedging strategy, there is no ‘one size fits all’ formula, but I believe it’s important to strike a balance between certainty and uncertainty by considering the ability to absorb the impact of higher costs versus the need to have certainty over costs. Whilst each business will have a different approach towards hedging based on their internal appetite, everything starts with a probability of 50%; i.e., between the chances of a gain or a loss, on an open exposure. Therefore, a prudent approach could mean you hedge a percentage of your exposure while keeping the rest open or use a layered approach to achieve an average cost based on desired market levels.
“I see significant potential for growth in the financial markets space, particularly in credit markets where rated entities can issue debt using various instruments, which can then be traded in the secondary market.”
Whilst a strategy can and will differ based on risk appetite, the keyword is ‘Discipline’ as we often get carried away and tend to make speculative decisions expecting large gains, which can sometimes lead to large losses. In the end, the question to ask is, ‘Am I better off with a hedge, or do I want uncertainty to keep me awake at night?’
What mindset shift does Sri Lanka need on financial risk, and what role does Standard Chartered play in driving it?
We are currently in the process of enhancing our capabilities and want to be the bank of choice for financial risk management solutions in Sri Lanka. We have already introduced several derivatives-based structured risk management solutions to help our clients manage their exposures more efficiently, and the response has been very positive.
I believe there is now a deeper appreciation of the need to manage financial risks, and I look forward to working with our clients as we strive to take Sri Lanka to the world.