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Wednesday, 29 April 2015 01:02 - - {{hitsCtrl.values.hits}}
SEC Chairman Tilak Karunaratne
It gives me great pleasure to address the South Asian Investment Conference, the purpose of which is to accelerate economic integration within the Region by creating strong cross border capital market linkages and creating a conducive environment for cross border listings. Let me congratulate SAFE for organising the conference in collaboration with CSE after a lapse of two years.
There is systematic surge in the Region towards a greater degree of economic integration in the real sector through bilateral and multilateral trade due to geo political reasons and the wealth of the nations shifting from the West to Asia. India is projected to outperform China economically and socially. As we are aware the real economy is a mirror image of the financial economy. Thus substantial economic progress will be accelerated only when integration in the real and financial economy develops hand in hand. On that note the forum is seen as a timely initiative.
Traditionally capital markets are considered as powerful engines of economic growth that mobilises savings towards productive corporate financing. Role of financial markets have evolved further with free flow of capital, financial deepening and financial innovation. For an example it is used in the process of financial state crafting, directed at exercising soft power across countries and regions.
Even though the multi-dimensional and complex role of a capital market is widely accepted, developing a robust and efficient capital market is a difficult task for many emerging economies. Nonetheless we should promote actively a significant development the capital market in the region.
The first stock exchange in Asia is the BSE established in 1875.Sri Lanka established the CSE in 1896. These exchanges along with the rest have evolved in to vibrant markets and remain lucrative globally. The market capitalisation of NSE and BSE of India is above $ 1.6 trillion each followed by a market capitalisation of $ 72.8 billion and $ 21.5 billion in Pakistan and Sri Lanka respectively. However if we want our markets to continue their growth and penetrate into global funds we can no longer afford to remain isolated from each other.
While we promote South Asia as a lucrative destination for investment, one cannot undermine the role of a constructive regulatory regime in supporting these efforts. The financial crisis that tormented growth, in the West as well as some of the Asian giants was due to some weaknesses in the regulatory regimes that could not keep up with the rapid changes in financial markets.
Thus the regulators should keep pace with developments in the capital market. It is vital for us to understand the rapid changes (cross border listings, etc.) and product innovation just as well as the people who are involved at the grass root level. Further on, we should look closely on the risk involvement as well as the gaps in and between our regulatory regimes through which certain players or products can easily slip through.
In the context of Sri Lanka, the SEC has spearheaded many initiatives to provide impetus to the rapid changes in the capital market. The SEC has identified the major legal changes and is in the process of fine tuning the amendments to the SEC Act in order to keep up with the changes in capital markets and global best practices.
Demutualisation of the CSE has been in the air for a long time. I am indeed pleased to note that the Demutualisation Bill in the process of being finalised and is awaiting to be enacted into law by Parliament, hopefully in the not too distant future.
The SEC has identified the importance of introducing a CCP system to mitigate risk in the capital market. Thus the SEC, Central Bank of Sri Lanka (CBSL) and CSE are jointly working towards making this a reality. A consultancy firm specialising in capital market related assignments globally has been entrusted to do consultancy and provide management services for the project.
I wish to reiterate the importance of formulating a joint regulatory mechanism while safeguarding the sovereignty of the respective nations and unique characteristics in each of our markets. Joint initiatives should be taken to address overlapping concerns and interests. This might be a tedious task as each of our markets are at different levels of development, yet not impossible.
Regulators in the region should strive towards various bilateral and multilateral efforts that are structured not only to promote the fundamental objectives of securities regulation ( protecting investors, promoting fair, efficient and transparent markets and the reduction of systemic risk) but also focus on facilitating enforcement of securities laws across borders, introducing conducive tax regimes and other incentives (required infrastructure), enhancing regulatory consistency for international market participants and more over combat the ill effects of over dependence within the region. I am confident that the panel discussion to follow would penetrate further in to what I have touched on and pave the way towards a constructive dialogue.
On that note I take your leave and wish the conference every success.
