Schrodinger’s Banks: The Immediate Need for Policies to Ensure Financial Stability

Abstract

Sri Lanka is entering into a new, dangerous phase in its economic recovery. Although macroeconomic stabilisation has made progress, financial stabilisation needs immediate attention. The combination of covid-era loans and crisis-era loans with high-interest rates all coming due, and in an environment with volatility and uncertainty in loan quality, it is important that policies be put in place now, well before any crisis emanates from the banking system.