204 The COVID-19 pandemic has brought about significant changes in the financial services landscape, reshaping business models, customer relationships, and work practices. However, at the core of these changes lies the resilience and relevance of the banking industry in responding to the crisis. Sri Lanka’s banks have played a crucial role in delivering emergency measures and supporting customers as the government, central bank, and regulators introduced various relief initiatives. To alleviate the pressure on banks and ensure their ability to continue supporting customers, the Central Bank of Sri Lanka (CBSL) relaxed capital and liquidity requirements, extended reporting deadlines, and reprioritized supervisory programs. Some non-critical activities were even canceled or postponed. These measures were vital in maintaining the stability of the banking sector amidst the evolving pandemic landscape. While the pandemic continues to present challenges, the banking industry in Sri Lanka faces a shifting landscape. Changing customer behaviors, economic headwinds, intense competition, regulatory pressures, and technological disruptions are among the factors banks must navigate. COVID-19 has reshaped the social and economic fabric, leading to dynamic shifts in customer needs and expectations. Customer loyalty now hinges on both value and price, while consumer spending has been impacted by decreased disposable income and the psychological effects of the pandemic. Cost efficiency has become paramount, and many banks are intensifying and accelerating their cost transformation programs. The ability to achieve cost efficiencies while maintaining robust cybersecurity has become even more complex in the remote working environment spurred by the pandemic. Banks must adapt their security frameworks to defend against adversaries seeking to exploit vulnerabilities arising from employees working from home. As Sri Lanka emerges from the third wave of the pandemic and vaccination distribution gains momentum, questions arise about the future. Uncertainty looms over the changes that this new reality will bring and whether pandemic-induced trends will persist. However, the banking sector in Sri Lanka demonstrates high capital strength, particularly for larger banks that are well-diversified across investment banking, wholesale and consumer lending, and asset and wealth management. Smaller or mid-sized banks with less diversification may face more significant challenges if the crisis deepens or prolongs. Fintech and challenger banks may also experience pressure, as they cannot differentiate themselves solely through higher interest rates, potentially leading to a “flight to safety” by customers depositing with established players. As the Sri Lankan economy gradually recovers, banks and financial institutions play a vital role in supporting businesses of all sizes. They must shift gears from crisis response to recovery, considering key issues that will shape their resilience and relevance in the new reality. Leadership in this context resides at the intersection of resilience and relevance, and banks must adapt and drive change to thrive in the post-pandemic era. The Sri Lanka Banking Report highlights the performance and trends of the banking sector in the second half of 2021, focusing on the implications of COVID-19 and the importance of driving change for a stronger future. The report acknowledges the impact of the pandemic on the economy, the banking sector’s role in supporting recovery, and the challenges faced in terms of cost efficiency, cybersecurity, and the evolving customer landscape. With resilience and relevance as guiding principles, Sri Lanka’s banks can position themselves for success in the transformed economic landscape. You Might Be Interested In BMW and Jaguar Land Rover Found Using Banned Chinese Parts, US Probe Reveals Indian Refiners Boost US Crude Purchases Amidst Russian Sanctions Tightening TIM CEO Foresees Nearly €5 Billion Benefits from New Business Plan Ookla Speedtest Recognizes OoklaOptimum’s 100% Fiber Internet as Fastest and Most Reliable in New York and New Jersey Saudi Oil Faces Sunset as Global Energy Landscape Shifts Fed Chair Powell Expresses Caution on Inflation Progress, Hints at Possible Further Tightening