Sri Lanka: Training of the Foreign Exchange Dealers
The Government of Sri Lanka set out to make its financial sector a vibrant profit centre and a financial hub in the region. Proposed liberation and opening of the capital markets mandated the relaxation of the capital account. This in turn meant that Sri Lanka’s local financial sector professionals should be geared to face international challenges.
The project, which was conceptualized in November 2003, aimed to develop the capacity of participants in Sri Lanka’s forex market by providing them with internationally recognised training. There were approximately 300 dealers engaged in the foreign exchange market, money market and other sub-sectors of the financial markets. These dealers were represented by the Sri Lanka Forex Association (SLFA). The organization was formed twenty years ago to promote the rights and interests of its members and safeguard and follow international best practices.
The local forex market comprised 26 commercial banks and 7 money brokers. Direct dealing in the foreign exchange market was restricted to licensed commercial banks. The Central Bank of Sri Lanka (CBSL) was the single regulatory body of the Sri Lankan forex markets. The CBSL regulated the markets through its exchange control, bank supervision and international foreign exchange operations departments.
The CBSL floated the rupee in January 2001 and ipso facto moved out of the market. Previously the CBSL quoted a daily spot range around which the market revolved. The spread between the buying and selling rates was of the range of 2 per cent. Subsequent to the managed float, CBSL introduced restrictions on commercial banks’ open positions based on their balance sheets on overnight exposures in foreign currency as well as limits on corporate exposures in booking forward exchange transactions. Foreign exchange transactions were restricted to current account, portfolio investment and for the servicing of debt.
An FSAP mission completed in March 2003 identified a lack of trained expertise in the financial and foreign exchange markets. This project sought to address this weakness by transferring technical and other skills to financial sector professionals and thus facilitating the availability of sufficient human resources to cope with the expected expansion in the markets.
The project involved two components: (1) the provision of an accredited ACI training expert for the design and delivery of a training course for the ACI Dealership Certificate; and (2) a training needs assessment/feasibility study and technical assistance project design which would produce an action plan for building local capacity for delivering further training in this area in the future.
ACI Qualification in Sri Lanka
ACI - The Financial Markets Association, was founded in France in 1955 following an agreement between foreign exchange dealers in Paris and London. In the years that followed, other national associations were formed and there were affiliated financial markets associations in 66 countries and individual members in another 17 countries. ACI, which estimated its membership at 19,000, had the largest membership of any of the international associations in the wholesale financial markets.
ACI, through ACI Education, provided a portfolio of examinations aimed at both new entrants to the industry and the seasoned professional. The ACI qualification is generally considered to be the industry standard internationally.
Lessons learned:
In terms of technical lessons learned, the original project work plan included a provision for pre-course assessment, so as to best tailor the course to participants needs. The SLFA elected to skip the pre-course assessment. Whilst this did not negatively impact the participants’ success in the examinations, it is recommended that, for future courses, project timelines allow enough time for the pre-course assessments.
Reports:
Final Report of Consultants. This is useful because it summarizes the syllabus and training involved with ACI Certification for foreign exchange dealers and sets out recommendations for sustained training