In The Press
New Banking Act from 2021
Sri Lanka will enact a new Banking Act in 2021, which will contain provisions to extend regulations for banks, which are to be established in the Colombo International Financial Centre.
In addition, key concepts of the proposed Act include provisions to introduce a single type of banking license for Licensed Commercial Banks (LCB) and Licensed Specialised Banks (LSB), adoption of proportionality in banking regulations commensurate with bank’s size, its nature of operations etc, subsidiarisation of banks incorporated outside Sri Lanka and allowing to ring-fence subsidiaries from adverse external shocks.
“Moreover, CBSL also intends to introduce many other provisions to the proposed act which include streamlining approval for establishment of branches and other banking outlets, strengthening consumer protection, deposit insurance, and governance, amalgamating both offshore banking unit (OBU) and domestic banking unit (DBU) operations into a single banking business, and improving resolution, enforcement and supervisory actions,” the Governor of the Central Bank Governor Prof. W.D Lakshman told the launching ceremony of CBSL’S road map for 2020 yesterday (06).
Looking forward to a strong and dynamic banking sector, the governor said capital ratios are expected to improve with the infusion of capital to meet the enhanced minimum capital requirements for banks by end 2020.
He said further that CBSL as the regulator understands that crisis preparedness and resilience of banks need to be further strengthened. Accordingly, banks will be required to implement recovery plans in order to minimise the adverse impact on troubled banks and their possible spillover effects to the financial system.
Further, Accounting Standards and existing Banking Act Directions will be reviewed and amended where necessary, with a view to strengthening prudential requirements on credit, market, liquidity, operational and other risks in line with international regulatory standards and best practices.
“In order to address technology risk, changes will be introduced in the regulatory and supervisory framework with respect to information technology and security of banks, in line with international standards and best practices.” the governor said.
He also noted that the proposed regulations will prompt banks to upgrade and strengthen their information systems and related technological platforms, enabling improved risk management.