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Central Bank of Sri Lanka Implements Banking (Amendment) Act to Strengthen Financial Sector

June 29, Colombo (LNW): The Central Bank of Sri Lanka (CBSL) has announced the implementation of the Banking (Amendment) Act, No. 24 of 2024, which came into effect on June 15, 2024.

Key provisions of the Banking (Amendment) Act include:

  • Minimum Licensing Requirements: Establishing clear criteria for obtaining a bank license.
  • Shareholder Suitability Criteria: Defining standards for shareholder eligibility.
  • Subsidiarization of Foreign Banks: Empowering the conversion of foreign bank branches into subsidiaries if necessary.
  • Enhanced Bank Ownership Measures: Introducing stricter controls on bank ownership.
  • Consolidated Supervision: Strengthening the supervision of banking groups.
  • Proportionality in Supervision and Regulation: Allowing tailored regulatory measures based on the size and risk profile of banks.
  • Broadening Provisions on Large Exposures: Expanding regulations concerning significant credit exposures.
  • Strengthening Related Party Transactions: Implementing stricter rules to manage transactions with related parties.
  • Governance Requirements: Enhancing the assessment of the fitness and propriety of directors, CEOs, and key management personnel across all licensed banks, including state-owned banks.
  • Financial Statements and Audit Requirements: Improving standards for financial reporting and audits.
  • Capital and Liquidity Frameworks: Bolstering the requirements for bank capital and liquidity.

These amendments aim to fortify the legal and regulatory framework for licensed commercial and specialized banks, thereby enhancing the resilience of Sri Lanka’s banking sector. The last amendment to the Banking Act was in 2006, making this update crucial to reflect current economic and market developments, as well as international best practices in prudential regulation.

The CBSL incorporated feedback from various stakeholders, including the banking sector, auditing bodies, and other regulatory authorities, in drafting these amendments.

To support the implementation of the Banking (Amendment) Act, the CBSL has issued several new regulations and instructions to licensed banks.

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