Central bank of Russia and Central bank of Srilanka

1
Central banking
CENTRAL BANK OF SRILANKA
Our Vision
Our vision clearly indicates that the Bank is deeply committed to contributing to the prosperity of Sri Lanka.
The term prosperity has a wide connotation: enhancement of the quality of life of people through
sustainable wealth creation and inclusion of all segments of the society in enjoying the benefits of
development.
The Central Bank would facilitate this process by ensuring economic and price stability and financial
system stability while providing prudential and pro-active policy recommendations, as the Advisor to the
Government on Economic Affairs. In doing so, the Bank would act with the highest degree of integrity and
professionalism, earning respect for its objectivity and apolitical stance.
Our Values


Commitment to inspirational leadership -
Providing strategic leadership to the financial sector.

Transparency in what we do -
Being ready to explain the rationale behind our actions.

Accountability to our key stakeholders the public, government, financial institutions and employees -
Taking responsibility for our policy advice and actions.

Integrity (trust,dependability,honesty) -
Matching words with deeds by discharging functions ethically in the best interests of our stakeholders

Commitment to professional competence -
Dedication, quality and excellence in all us do.

Commitment to lifelong learning, knowledge sharing and innovation -
Acquiring the required skills individually and collectively in a rapidly changing world.

Consistency, accuracy and timeliness of all actions taken by the Bank-
Earning respect for what we do.

Managing and ensuring operational autonomy for policy formulation and
implementation -
Providing the organizational freedom for objective decisions.
Central bank of Russia and Central bank of Srilanka

2
Central banking
Introduction:
Established in 1950 under the Monetary Law Act No.58 of 1949 (MLA), the Central Bank of Sri Lanka
(CBSL) is the apex institution in the financial sector in Sri Lanka. It is a semi-autonomous body and,
following the amendments to the MLA in December 2002, is governed by a five member Monetary
Board, comprising the Governor of the CBSL as Chairman, the Secretary to the Ministry of Finance and
Planning and three members appointed by the President of Sri Lanka, on the recommendation of the
Minister of Finance, with the concurrence of the Constitutional Council.

With a view to encouraging and promoting the development of the productive resources of Sri Lanka,
the CBSL is responsible for securing its core objectives of economic and price stability and financial
system stability. The CBSL is also responsible for currency issue and management. In addition, the CBSL
is the advisor on economic affairs as well as the banker to the Government of Sri Lanka (GOSL). On
behalf of GOSL, the CBSL, as its agent, is responsible for four agency functions of:
Management of the Employees Provident Fund
Management of the public debt of Sri Lanka
Administration of the provisions of the Exchange Control Act
Administration of foreign and government funded credit schemes for regional development


The Governor of the CBSL functions as its Chief Executive Officer. The Governor, Deputy Governors and
several Assistant Governors, along with the Heads of Departments, form the senior management of
the CBSL. Functionally, the CBSL presently consists of 27 Departments , each headed by a Director (or
equivalent), reporting to the Governor or the Deputy Governor through an Assistant Governor, with
the exception of the Internal Audit Department, which reports directly to the Governor. The Economic
Research and Bank Supervision Departments were explicitly set up under the original legislation
establishing the CBSL, with certain statutory functions. The Economic Research Department is required
to compile data and conduct economic research for the guidance of the Monetary Board and for the
information of the public, while the Bank Supervision Department is required to engage in the
continuous regulation and supervision of all banking institutions in Sri Lanka.




Central bank of Russia and Central bank of Srilanka

3
Central banking
Objectives & Functions
The Central Bank's focus and functions have evolved since its formation, in response to the
changing economic environment. In keeping with trends in central banking, the objectives of
the Central Bank were streamlined by amending the Monetary Law Act (MLA) in 2002, to
enable it to pursue its core objectives and to free it of the multiple objectives that were
originally assigned to it. The Central Bank has two core objectives:
Maintaining economic and price stability
Maintaining financial system stability
Prior to the amendment of the law, the Central Bank had multiple objectives, which could
sometimes be in conflict or be inconsistent with each other.
Meanwhile, a consensus had developed internationally that a central bank's primary goal
should be the maintenance of price stability. As price stability is crucially dependent on stable
macroeconomic conditions, one of the core objectives of the CBSL was therefore specified as
"economic and price stability". Furthermore, as the experience of other countries has
demonstrated, the stability of the financial system is crucial in improving the resilience of the
economy. Hence, financial system stability was also identified as a core objective of the CBSL.
The two objectives are correlated and complement each other. Ensuring financial system
stability is of prime importance, as monetary policy is transmitted through financial
intermediaries (institutions) to achieve price stability. Hence, the two objectives are in
harmony and this enables the Central Bank to perform its main functions more effectively. The
CBSL has been given a high degree of autonomy to achieve its objectives. In this task, the Bank
closely liaises with the Ministry of Finance in making policy decisions and the Secretary to the
Ministry of Finance is a member of the Monetary Board, which is the governing body of the
CBSL.

Economic and Price Stability

Price stability safeguards the value of the currency in terms of what it will purchase at home
and in terms of other currencies. Price stability or stable prices means low inflation. Experience
has shown that the economy performs well when inflation is low and is expected to be low.
Interest rates are also low in these conditions. Such an environment allows an economy to
achieve its growth potential and fosters high employment. Free from the disruptive effects of
high and variable inflation, both consumers and producers make economic decisions with
confidence. Low inflation or price stability fosters sustainable long-term economic growth and
Central bank of Russia and Central bank of Srilanka

4
Central banking
employment. The Central Bank uses monetary policy measures to control inflation.

Financial System Stability

A stable financial system creates a favourable environment for depositors and investors, encourages
efficient financial intermediation and the effective functioning of markets, and hence, promotes
investment and economic growth. Financial system stability means the effective functioning of the
financial system (financial institutions and markets) and the absence of banking, currency and balance of
payments crisis. Financial instability is caused by bank failures, excessive asset price volatility, and
collapse of market liquidity or a disruption to the payments system. Financial system stability requires a
stable macro-economic environment, effective regulatory framework, well organised financial markets,
sound financial institutions and safe and robust payments infrastructure. The maintenance of financial
stability entails the prevention, detection and reduction of threats to the financial system as a whole,
through the surveillance of markets and financial institutions, oversight of the payments system and
crisis resolution
Functions of the Bank :
In order to achieve its core objectives as well as to discharge its responsibilities as economic advisor
and banker to, and agent of the GOSL, the CBSL undertakes the following functions.
Core functions:
Economic and Price Stability
Financial System Stability
Ancillary to core functions:
Currency Issue and Management
Agency functions
Employees' Provident Fund Management
Foreign Exchange Management
Public Debt Management
Regional Development
Financial Intelligence
Provincial Office Monitoring






Central bank of Russia and Central bank of Srilanka

5
Central banking

Agency Functions:

The Central Bank of Sri Lanka undertakes the following four agency functions for the Government of Sri
Lanka.

Foreign Exchange Management

The foreign exchange management function in Sri Lanka
is exercised on behalf of the Government by the Central
Bank of Sri Lanka, through the Exchange Control
Department (ECD) established under the Exchange
Control Act No. 24 of 1953.

Public Debt Management

In terms of Section 113 of the Monetary Law Act, the
public debt management function is entrusted to the
Central Bank of Sri Lanka (CBSL). Accordingly, the CBSL
acts as an agent of the Government particularly in
handling domestic debt management, while several
other government institutions deal with foreign debt
management-activities.

Regional Development

The Central Bank of Sri Lanka acts as the apex agency for various donor assisted regional development
and micro finance programmes to ensure credit delivery to the lower and middle income groups in the
country, by providing refinance and credit guarantees to lending banks and financial institutions for on-
lending to micro, small and medium enterprises ( MSMEs ).


Employees' Provident Fund (EPF)

The Employees' Provident Fund (EPF) was established under EPF Act No. 15 of 1958 where the
Monetary Board as the custodian of the Fund is vested with the responsibility of receiving
contributions from employers, investing excess funds, maintaining proper accounts and paying benefits
to members





Central bank of Russia and Central bank of Srilanka

6
Central banking

Financial System Stability
One of the core objectives of the Central Bank is to maintain financial system stability. The Central
Bank discharges this role by establishing the required legal framework, regulating and supervising key
categories of financial institutions, maintaining stability in key financial markets, overseeing the
payments and settlements system, acting as lender of last resort and by regular surveillance of the
entire financial system, including insurance and stock market activities
Regulation and Supervision:
Regulation and Supervision of Banks
Regulation and Supervision of Finance Companies
Regulation and Monitoring of Finance Leasing Establishments
Regulation and Supervision of Primary Dealers
Monitoring and Surveillance:
Maintaining Stability in Money and Foreign Exchange Markets
Overseeing the Payment and Settlement System
Surveillance of Financial Conglomerates
Lender of Last Resort

Laws & Regulations:
The Central Bank of Sri Lanka was established in 1950 under the Monetary Law Act No 58 of 1949 and
is the apex institution in the financial sector. Since inception, the Central Bank has been responsible for
regulating the financial system of the country. Several key legislative enactments provide powers to
the Central Bank to carry out its functions to achieve its primary objectives of economic and price
stability and financial system stability. Under these powers, the Central Bank issues directions for the
establishment and operations of all categories of financial institutions under its supervisory and
regulatory purview. In addition, the Central Bank has been empowered to carry out certain agency
functions under other legislative enactments.

Legislative Enactments
The financial system of the country is regulated by several legislative enactments. The key Acts
relevant to the regulatory role of the Central Bank are the Monetary Law Act, the Local Treasury Bills
Ordinance, Registered Stocks and Securities Ordinance, Exchange Control Act, Banking Act, Finance

Central bank of Russia and Central bank of Srilanka

7
Central banking
Business Act, Finance Leasing Act, Payment and Settlement Systems Act and Financial Transactions
Reporting-Act.

Regulations, Directions, Rules, Guidelines, Circulars and Operating Instructions
Some departments of the Central Bank have been empowered to carry out functions directly by
statute, while other departments carry out functions and duties imposed by statute on the Central
Bank itself. Accordingly, powers are vested with those departments to issue regulations through the
Minister and directions, guidelines, circulars and operating instructions from time to time to achieve its
objective of financial system stability.

Licensing, Registration, Appointment and Authorisation Procedures
Requirements and procedures to be followed by a person to establish a local bank, foreign bank
branch, a finance co8mpany, a finance leasing company, a primary dealership, a dealership in foreign
currency and as a money changer have been issued by the Central Bank from time to time.



Central bank of Russia and Central bank of Srilanka

8
Central banking

CENTRAL BANK OF RUSSIA
Central Bank of Russia

Tsentral'nyj bank Rossijskoj Federatsii




Central Bank of Russia logo



Headquarters

Headquarters Neglinnaya 12, Moscow, Russia
Established 1860 (historic), 1990 (modern)
Chairman Elvira Nabiullina
Central bank of The Russian Federation
Currency Russian ruble
ISO 4217 Code RUB
Reserves $521bn in total Stat[show]
Bank rate 8.25%

Central bank of Russia and Central bank of Srilanka

9
Central banking
Introduction
The Central Bank of Russia is the central bank of the Russian Federation. The bank was founded in July of 1990,
and was declared a legal financial entity later that year. The headquarters of the bank are in Moscow, Russia.
The Central Bank of Russia is independent from the federal and local governments. The State Duma chooses the
Chairman of the Bank of Russia, and the bank is accountable to the State Duma as well.

The Central Bank of Russia has several responsibilities in compliance with the Russian Constitution and Federal
Law. The bank is the sole issuer of the Russian currency the ruble, and is also responsible for maintaining the
value and the stability of the currency and for the currency circulation. The Bank of Russia is also responsible
for planning and implementing the countrys monetary policy, working along with the Russian Government.
Another important duty of the bank is to oversee the Russian financial institutions and to issue/suspend banking
licenses. The bank also designs the banking industry rules (how to carry out banking operations, payment
settlement rules, etc.)

The Central Bank of Russia acts as a lender of last resort for Russian financial institutions, ensuring they have
enough liquidity in times of financial crisis. The bank also manages the Russian foreign reserves and is
responsible for foreign exchange regulation. The Central Bank of Russia also produces various analyses, reports
and projections about the Russian economy, and its interrelation with the countrys monetary policy.

The Central Bank of Russia acting on behalf of the Ministry of Finance, helped establish the Russian Government
Securities Market. The bank sets the short-term interest rates in Russia, which is one of the main instruments in
implementing its monetary policy.
Bank Of Russia Deposit Operations:
Under Article 4 and Article 46 of the Federal Law on
the Central Bank of the Russian Federation (Bank of
Russia), the Bank of Russia conducts operations to take
deposits from credit institutions for the purpose of
regulating banking sector liquidity. Deposit operations
are conducted in compliance with Bank of Russia
Regulation No. 203-P, dated November 5, 2002, "On the
Procedure for Conducting Deposit Operations by the
Central Bank of the Russian Federation with Credit
Institutions in the Currency of the Russian Federation"
(with amendments).
At present the Bank of Russia conducts the following
deposit operations with resident credit institutions in
the national currency: deposit operations at fixed
interest rates and deposit operations at auction rates

Central bank of Russia and Central bank of Srilanka

10
Central banking
(deposit auctions)Deposit operations at fixed interest rates are conducted daily on standard conditions
(established by paragraph 4.3 of Bank of Russia Regulation No. 203-P, dated November 5, 2002, "On
the Procedure for Conducting Deposit Operations by the Central Bank of the Russian Federation with
Credit Institutions in the Currency of the Russian Federation" (with amendments). Deposit auctions
are held weekly on Thursday on the conditions set by the Bank of Russia (in accordance with the
quarterly schedule of deposit auctions). Deposit auctions are held according to the American auction
principle, when a credit institution may make both competitive and non-competitive bids, but Dutch
auctions are also possible. The largest possible share of non-competitive bids set by the Bank of Russia
for a credit institution is 50%.
Bank of Russia counterparty credit institutions may make bids to the Bank of Russia for participation in
a deposit operation by:
1. Passing to the Bank of Russia regional branch a tender agreement (compiled in established form);
2. Conducting negotiations through the Reuters Dealing System;
3. Making a bid to the MICEX Electronic Trading System (hereinafter MICEX ETS).
Deposit transactions via the Reuters Dealing
System and MICEX Electronic Trading System are
conducted on behalf of the Bank of Russia by its
Moscow-based authorised division, the Bank of
Russia General Economic Department. A Bank of
Russia counterparty credit institution is free to
choose any of the aforementioned ways of making
a bid for participation in a deposit operation.
Bank of Russia counterparties in deposit
operations are banks, settlement non-bank credit
institutions, and non-bank credit institutions
conducting deposit and lending operations.







Central bank of Russia and Central bank of Srilanka

11
Central banking
Role And Duties

According to the constitution, the Bank of Russia is an independent entity, with the primary
responsibility of protecting the stability of the national currency, the ruble. It also holds the exclusive
right to issue ruble banknotes and coins through the Goznak mint. The Central Bank issues
commemorative coins made of precious and non precious metals as well as investment ones made of
precious metals, which are distributed inside and outside the country.
[5]
The coins of the Bank of Russia
are struck in the Moscow and St. Petersburg mints. The Bank's headquarters are on Neglinnaya Street
in Moscow.
In its monetary policy decisions the Russian Central Bank is less independent than many other central
banks. Although the Law on the Central Bank states that the central bank performs its duties
independently of other state organs, the law also says that the central bank plans and carries out
monetary and financial policy in cooperation with theRussian government. The Central bank annually
prepares a basic outline of monetary and financial policy for the following three years, which is
submitted to the government for discussion and presented to the State Duma. Its basic assumptions
are consistent with the governments economic forecasts. The central bank's monetary policy tools are
listed in the Law "On the Central Bank":
Interest rates on Central Bank operations
Reserve requirements
Open market operations
Refinancing of credit organisations
Currency interventions
Setting of money-supply targets
Direct quantitative restrictions
Bond issues

Function of Central Bank Russia:

The Bank of Russia is the main regulator of the banking industry. It is responsible for issuing
banking licenses and setting rules of banking operations and accounting standards. The bank serves as
a lender of last resort for credit organizations.
The Bank of Russia performs its functions in compliance with the Constitution of the Russian
Federation, Federal Law On the Central Bank of the Russian Federation (Bank of Russia) (hereinafter
referred to as the Bank of Russia Law) and other federal laws. According to Article 75 of the
Constitution of the Russian Federation, the principal function of the Bank of Russia is to protect the
ruble and ensure its stability. The Bank of Russia is the sole issuer of currency.



Central bank of Russia and Central bank of Srilanka

12
Central banking
Pursuant to Article 4 of the Bank of Russia Law, the Bank of Russia performs the following functions:
In collaboration with the federal government it elaborates and implements a single state monetary
policy.
It is the sole issuer of cash and organiser of cash circulation.
It approves the graphic designation of the ruble as a sign.
It is the creditor of last resort for credit institutions and it organises the credit institution refinance
system.
It sets the settlement rules in the Russian Federation.
It sets the rules for conducting banking operations.
it services budget accounts on all levels of the Russian budget system, unless the federal laws
stipulate otherwise, by effecting settlements at the instruction of the authorised bodies of
executive power and government extra-budgetary funds, which are assigned the task of organising
the execution of and executing the budgets.
It efficiently manages the Bank of Russia international reserves.
It takes the decision on the state registration of credit institutions, issues banking licences to credit
institutions and suspends and revokes them.
It supervises the activities of credit institutions and banking groups.
It registers securities issues by credit institutions in compliance with federal laws.
It conducts independently or at the instruction of the Russian Government all types of banking
operations and other transactions necessary for the performance of Bank of Russia functions.
It organises and exercises foreign exchange regulation and control pursuant to federal legislation.
It sets the procedure for effecting settlements with international organisations, foreign states and
legal entities and natural persons.
It sets accounting and reporting rules for the Russian banking system.
It sets and publishes official exchange rates of foreign currencies against the ruble.
it takes part in the compiling of Russias balance of payments forecast and organises the compiling
of Russias balance of payments.
It sets the procedure for and conditions of foreign exchange purchases and sales by currency
exchanges and issues, suspends and revokes permits for the currency exchanges to organise
foreign exchange purchases and sales (the Bank of Russia will issue, suspend and revoke permits
for the currency exchanges to organise foreign exchange purchases and sales as of the day of the
coming into force of the corresponding amendments to the Federal Law on the Licensing of
Individual Types of Activities).
It analyses and makes forecasts for the situation in the Russian economy as a whole and by region,
especially the monetary, financial and price relations, and publishes the corresponding materials
and statistical data.
It pays compensation for household deposits with bankrupt banks uncovered by the compulsory
deposit insurance system in the cases and according to the procedure established by the federal
law.
It is the depository of the International Monetary Fund in the Russian currency and it conducts
operations and transactions provided by the Articles of Agreement of the International Monetary
Fund and the agreements with the International Monetary Fund.
It performs other functions in compliance with federal laws.

Central bank of Russia and Central bank of Srilanka

13
Central banking
Central Bank Monetary Policy &Methods Of CBR Monetary Policy:

According to the Law on the Central Bank of Russia, the banks monetary-policy objective
is to maintain the stability of the ruble. In the early years, the CBR financed state budget deficits by
issuing credits to cover Government expenditures. The availability of such credits played a central role
in the high inflation that the Russian economy endured between 1991 and 1994. In 1995 new
legislation and regulations reduced this type of credit by prohibiting the use of credit to finance state
budget deficitsControl of the money supply by lending funds to commercial banks and by establishing
their reserve requirements.
In practice, the CBR has since 2009 been gradually relaxing ruble exchange rate targeting in favour of
inflation targeting. Other objectives of the CBR are the development and strengthening of the banking
system and ensuring the effective and reliable functioning of the payments system. In its monetary
policy decisions the CBR is less independent than many other central banks. Although the Law on the
Central Bank states that the CBR performs its duties independently of other state organs, the law also
says that the CBR plans and carries out monetary and financial policy in cooperation with the Russian
government. The CBR annually prepares a basic outline of monetary and financial policy for the
following three years, which is submitted to the government for discussion and presented to the
Duma. Its basic assumptions are consistent with the governments economic forecasts. The CBRs
monetary policy tools are listed in the Central Bank Law:
Central Bank of Russia provides the monetary policy by:
Establishing of Central Bank rate
Establishing of the norms of required reserves for commercial banks
Refinancing operations
Operations on the open market
Currency operations and regulation
Issuing and impressments of money
Issues bond




Central bank of Russia and Central bank of Srilanka

14
Central banking
The goals of banking sector development (strategy of CBR)
Increasing the protection of interests of depositors and other creditors of banks
Enhancing the effectiveness of the banking sectors activity in accumulating household and
enterprise sector funds and transforming them into loans and investments.
Making russian credit institutions more competitive.
Preventing the use of credit institutions in dishonest commercial practices and illegal activities,
especially the financing of terrorism and money laundering.
Promoting the development of the competitive environment and ensuring the transparency of
credit institutions.
Building up investor, creditor and depositor confidence in the banking sector.

Exchange rate policy
A definite change occurred in CBR exchange rate policy after the 20082009 crises. Before the crisis
the CBR had tightly steered the external value of the rubble, whereas after the crisis the CBR began to
gradually withdraw from active intervention. This change in policy has long been recommended to
Russia by international financial institutions, and the CBR has on several occasions cited it as a final
aim. The CBR states in its basic outlines of monetary and financial policy for 20122014 that the main
task of the bank during the period in consideration is to consistently reduce its direct influence on the
ruble exchange rate and to move to a floating exchange rate regime (Bank Rossii (2011f)). Russias
current currency regime can be classified as a managed float. The CBR steers the rubles exchange rate
vis--vis a currency basket consisting of 55 dollar cents and 45 euro cents. After the 20082009 crisis
the CBR introduced a rule for managing the rate. Accordingly, the ruble exchange rate vis--vis the
basket is to move within a corridor rather freely in line with supply and demand. When necessary, the
CBR intervenes in the market to keep the rate inside the corridor. Whenever the banks accumulated
interventions aimed at keeping the exchange rate within the corridor exceed a certain amount of
dollars, the CBR moves the position of the corridor by 0.05 rubles in response to what it considers a
permanent change in the operating environment.