The Central Bank of  Sri Lanka will enact a new Banking Act in 2021, which will also contain provisions to extend regulations for banks, which are to be established in the Colombo International Financial Centre.

"We initiated drafting a new Banking Act and expects to complete its enactment in 2021,  the central bank governor  Prof. W. D. Lakshman said whilst delivering the Central Bank roadmap for 2020.

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; 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.

Further, the new Banking Act will contain provisions to extend regulations for banks, which are to be established in the Colombo International Financial Centre.

The governor further noted that capital ratios are expected to improve with the infusion of capital to meet the enhanced minimum capital requirements for banks by end 2020.

"As the regulator, we understand 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," he added.