Act of Parliament · As enacted
Banking (Amendment) Act 2005
Official English translation. Where it differs from the Sinhala or Tamil text, the Act itself says which text prevails.
Official translationFrom Department of Government Printing, unchanged
s 1Short title
This Act may be cited as the Banking (Amendment)
Act, No. 2 of 2005.
s 2Amendment of section 2 of Act, No. 30 of 1988
Section 2 of the Banking Act, No. 30 of 1988
(hereinafter referred to as the "principal enactment") is hereby amended in subsection (3) of that section by the substitution for the words " provisions of this Act" of the words "provisions of this Part" .
s 3Amendment of section 3 of the principal enactment
Section 3 of the principal enactment is hereby amended by the repeal of subsections (2), (3), (4) and (5) of that section and the substitution therefor of the following subsections:—
“(2) Every application for a licence shall be accompanied by —
in the case of a company to be formed for the purpose of carrying on banking business—
a copy of the draft Memorandum of
Association and the Articles of Association of the company to be formed or the draft
Constitution or any other document associated with the formation of such company; and
a statement containing the names, addresses, occupations and qualifications of the persons proposed as Directors, and if a Chief Executive
Officer has been identified, of such officer;
in the case of a company formed before the date of the application and which intends to commence banking business,—
a copy of the Memorandum of Association and the Articles of Association of such company or the Constitution or any other document associated with the formation of such company, together with the proposed amendments, if any, to such documents; and
a statement containing the names, addresses, occupations and qualifications of the Directors of the company and any Directors proposed to be nominated or appointed and of the Chief
Executive Officer of such company;
a copy of the audited balance sheet and profit and loss account of the company for the preceding three years;
in the case of an application by a company or body corporate incorporated outside Sri Lanka, such company shall in addition to the documents specified in paragraph (b) submit—
a written undertaking supported by a resolution of the Board of Directors of such company or body corporate, stating that such company or body corporate, as the case may be, shall on demand by the Central Bank, provide such funds as may be necessary to meet all obligations incurred in or in connection with, its business in Sri Lanka;
and
a report containing such information as may be determined by the Monetary Board, from the regulatory authority of the country in which such company or body corporate is incorporated.
On receipt of an application under subsection (1) by the Monetary Board, the Director of Bank Supervision may, where such Director considers it necessary, require the applicant to furnish to the Monetary Board such other documents, information or other particulars, in order to determine whether a licence should be issued or not.
Where on consideration of the documents, information and particulars submitted to the Monetary Board under subsections (1), (2) and (3) and on such further investigations as it may consider necessary, the Monetary
Board is satisfied that the application may be approved in principle, it may issue a Letter of Provisional Approval to the applicant. On receipt of the Letter of Provisional Approval, the applicant shall take all preliminary measures as may be required in terms of such Letter, prior to the issue of a licence under section 5, and specified in such Letter.
The Letter of Provisional Approval issued under subsection (4) shall be valid for the period stated in such
Letter. Such period shall however not exceed twelve months from the date of issue of such Letter and the period of validity may only be extended by the Monetary Board in writing, in exceptional circumstances.
The Monetary Board shall cause a copy of each Letter of Provisional Approval issued under subsection (4) and of any communication extending the period of validity of such
Letter under subsection (5), or any withdrawal in terms of subsection (7), to be sent to the Registrar of Companies.
The issue of Letter of Provisional Approval under subsection (4) shall not bind the Monetary Board to issue a licence under section 5 to the company or the company to be formed for the purpose of carrying on banking business
(hereinafter referred to as a "proposed company"), in respect of which the Letter of Provisional Approval has been issued, and the Monetary Board may, on the basis of investigations carried out by it under subsection (10) withdraw such Letter or refrain from issuing a licence under section 5 on any one or more of the following grounds :—
that the Monetary Board is not satisfied with the suitability of the company or the proposed company to be issued, with a licence;
that the company or proposed company has not complied with the conditions stipulated in the Letter of Provisional Approval have not been complied with;
that the company or proposed company has not complied with the requirements under this Act for the issue of a licence ;
that any information contained in the application for a licence or any information submitted in connection therewith by the company or proposed company is found to be false or incorrect; or
that there has been, in the opinion of the Monetary
Board, a sufficiently significant change in the economic and the banking environment of the country that warrants the suspension of the issue of licence under section 5:
Provided however, the Monetary Board shall before withdrawing a Letter of Provisional Approval issued in terms of the provisions of this subsection to an applicant in terms of subsection (4), or if a decision is taken by the Monetary
Board under this subsection to refrain from issuing a licence, give sufficient notice in writing to the applicant stating the grounds for such withdrawal or decision to refrain from issuing a licence and shall afford him an opportunity of being heard.
A company or a proposed company in respect of which a Letter of Provisional Approval has been issued under subsection (4) shall not commence banking business before the issue of a licence under section 5. Every advertisement, prospectus, notice or other publication issued by the company or proposed company before the issue of the licence shall be required to specify that it has not been issued a licence to carry on banking business under the Act.
A licence shall not be issued under section 5 to a company formed and incorporated under the Companies Act,
No.17 of 1982 unless —
the company is a public company;
the Memorandum of Association of the company sets out as its primary object, the carrying on of banking business as defined in this Act; and
the Memorandum of Association of the Company restricts the other forms of business the company may carry on, if any, to any or all of the forms of business specified in Schedule II to this Act.
(a) The Monetary Board may, at any time prior to the issue of a licence under section 5, conduct such investigations as it may deem necessary to satisfy itself as to the suitability of the company or proposed company to be issued with a licence, having regard to the interests of the national economy, including the banking needs of Sri Lanka.
At an investigation conducted under paragraph (a) the
Monetary Board may require the applicant to satisfy the Board on any matter relevant to the suitability of the company or the proposed company and in particular —
the validity and acceptability of the documents and particulars submitted by the applicant;
the financial status and history of the company or the proposed company;
the financial standing, experience and suitability of the Directors, Chief Executive
Officer and such other officers of the company performing executive functions as may be determined by the Monetary Board or the persons proposed to be appointed to such positions in the proposed company, as the case may be;
of the adequacy of the capital of the company or based on the information furnished by the applicant on behalf of the proposed company, the ability of the proposed company to raise adequate capital;
of the ability of the company or the proposed company to cover all obligations and liabilities incurred in the conduct of business in Sri Lanka and to comply with the provisions of the Act;
the applicant's compliance with the provisions of the Act or any directions given under the Act in relation to the application for a licence under the Act.
Any person who submits information or particulars in an application for a licence or in any other document submitted in connection therewith or in the course of any inquiry or investigation conducted to ascertain the suitability of the company or the proposed company to be issued with a licence under this Act, which to the knowledge of the person is false or misleading in any material particular, shall be guilty of an offence under this Act.”.
s 4Replacement of section 5 of the principal enactment
Section 5 of the principal enactment is hereby repealed and the following section substituted therefor :—
5. (1) Where the Monetary Board is satisfied that a licence may be issued to a company or a proposed company to carry on banking business, it may, with the approval of
“Issue of licence.
the Minister, issue a licence to the company or proposed company to carry on banking business in Sri Lanka subject to such terms and conditions as may be imposed by the Monetary
Board.
The licence issued under subsection (1)
shall specify —
whether it authorizes the company to carry on domestic banking business or off-shore banking business or both such businesses;
the place or places or the area within which such banking business may be carried on; and
the terms and conditions subject to which such licence is issued.
Every licensed commercial bank shall display a copy of the licence issued to it under subsection (1) in a conspicuous place at its principal place of business in Sri
Lanka and each of its branches.”.
s 5Replacement of section 9 of the principal enactment
Section 9 of the principal enactment is hereby repealed and the following section substituted therefor:—
9. (1) Where the Monetary Board is satisfied that any licensed commercial bank has —
failed to commence business within nine months of the issue of the licence under section 5; or
failed to pay any debts incurred by it, on such debts becoming due; or
had a petition or action for relief filed against such licensed commerial bank,
“Notice of cancellation of licence issued to a licensed commercial bank.
and has had appointed in respect of such bank under any bankruptcy law or any other law which provides for relief of debtors or which relates to debtors, a liquidator or receiver; or
ceased to carry on banking business; or
contravened any provisions of this Act or any direction, order or other requirement imposed under the Act; or
furnished false, misleading or inaccurate information or documents to the
Monetary Board or in the case of a proposed company the applicant for the licence has furnished such information or documents in connection with its application for the licence; or
carried on, or is carrying on, its business in a manner likely to be detrimental to the interests of its depositors, the Monetary Board may give notice that it would cancel the licence issued to such bank and shall communicate such notice to such licensed commercial bank.
A licensed commercial bank may tender objections in writing to the Monetary Board against the notice of intended cancellation under subsection (1), within fourteen days of the date of receipt of such notice, giving reasons why the licence issued to it under section 5 should not be so cancelled.
The Monetary Board may, within thirty days from the last date for tendering objections under subsection (2), after considering the objections if any, tendered to it under that subsection and after hearing the licensed commercial bank in support of its objections, either withdraw the notice given under subsection (1) with or without conditions or cancel the licence issued to the licensed commercial bank, and shall notify the bank in writing accordingly.
A licensed commercial bank aggrieved by a decision of the Monetary Board made under subsection (3) to impose conditions on the withdrawal of the notice given under subsection (1) or to cancel its licence, may within fourteen days of the date of receipt of the notification given under that subsection, appeal against such decision to the Court of Appeal.
Until rules are made under Article 136
of the Constitution relating to appeals under this section, the rules made under that Article relating to the hearing of applications by way of revision to the Court of Appeal, shall apply to every appeal made under this section.
The Court of Appeal may on appeal made to it under subsection (4) confirm, reverse, modify or set aside the decision against which the appeal is made and may make any other order as the interests of justice may require.
Without prejudice to subsection (1), the
Monetary Board may, where it is satisfied that any licensed commercial bank incorporated outside Sri Lanka has had its licence or authority to operate in the country in which such bank was incorporated cancelled or withdrawn by the appropriate authority or regulatory body of that country, cancel the licence issued to the bank under this Part and shall notify the bank accordingly.
(a) A cancellation of a licence of a licensed commercial bank under subsection (3)
shall take effect—
where the bank does not prefer an appeal against such cancellation under subsection (4), on the expiration of the period for tendering such appeal; or
where an appeal has been preferred against such cancellation, on the confirmation of the decision of the
Monetary Board by the Court of Appeal or the Supreme Court, as the case may be;
A cancellation of a licence of a licensed commercial bank under subsection (7), shall take effect from the date of the receipt by the bank of the notification under that subsection.
Where a cancellation of a licence of a licensed commercial bank has taken effect under paragraph (a) or paragraph (b) of subsection (8), the Monetary Board shall, as soon as possible publish once in the Gazette in Sinhala,
Tamil and English languages and once in a
Sinhala, Tamil and English daily newspaper circulating in Sri Lanka, a notification of the cancellation of such licence.”.
s 6Amendment of section 11 of the principal enactment
Section 11 of the principal enactment is hereby amended by the repeal of subsections (2), (3) and (4) of that section and the substitution therefor of the following subsections :—
“(2) Where the cancellation of a licence of a licensed commercial bank incorporated or established within Sri
Lanka by or under any written law for the time being in force, has taken effect under paragraph (a) of subsection (8) of section 9, proceedings for the compulsory winding-up of the licensed commercial bank shall commence in accordance with the provisions of Part VIII of this Act.
Where the cancellation of a licence of a licensed commercial bank incorporated outside Sri Lanka has taken effect under paragraph (a) or paragraph (b) of subsection (8) of section 9, the Director of Bank
Supervision shall forthwith inform the head office of such bank to honour the written undertaking submitted under paragraph (a) of subsection (2) of section 3 and take such steps as may be necessary to enforce such undertaking and to close down the business of the bank in and with respect to Sri Lanka, in accordance with the provisions of
Part VIII of this Act.
Notwithstanding the provisions of section 9 or any other written law for the time being in force, the
Monetary Board may, in any of the circumstances referred to in paragraphs (a) to (g) of subsection (1) of section 9
without proceeding to cancel the licence issued to a licensed commercial bank in terms of section 9, make order which may include any one or more of the following :—
directing the licensed commercial bank to suspend its business in Sri Lanka, and in the case of a licensed commercial bank incorporated or established within Sri Lanka, to immediately suspend its business outside Sri Lanka for such period as is specified in such order subject to such conditions as the Monetary Board may stipulate:
Provided that prior to such suspension, written notice shall be served on the licensed commercial bank, of the decision of the Monetary Board along with its reasons therefor, to suspend the business of such bank. The bank shall also be afforded an opportunity of being heard on such matter either orally or in writing, within a period of time which shall not be less than three working days as shall be specified in such notice;
requiring the licensed commercial bank which has been required to suspend business under paragraph (a) to hand over all books, records and assets of that licensed commercial bank to the
Director of Bank Supervision;
requiring the licensed commercial bank to forthwith take or refrain from taking any action or to do or refrain from doing any act or thing as the Board may consider necessary in relation to the business of such bank;
appointing a fit and proper person to advise such bank with regard to the proper conduct of the business of such bank;
restraining any director, manager or controller of the licensed commercial bank from carrying out any function in or in relation to the bank and appointing a fit and proper person to carry out such functions, in or in relation to, such bank;
for the assumption of control of, and for the carrying on of the business of such bank by the
Monetary Board or for delegating the control so assumed to another person in order to carry on the business of the bank;
for the re-organization of such bank, by arranging for the increase of its capital or reconstituting its board of directors or both such measures;
providing for such arrangements as are necessary for the amalgamation of such bank with any other licensed commercial bank that consents to such amalgamation; and
vesting the business of the licensed commercial bank in another licensed commercial bank which consents to such vesting and for the provisions of Part VII A to apply to such vesting, as if the licensed commercial bank whose business is vested is a defaulting bank and the licensed commercial bank in which the business is vested, is an acquiring bank:
Provided, however that any measures taken under this section shall not preclude the
Monetary Board from subsequently proceeding under section 9 where the Monetary Board is of the opinion that it is in the interest of the banking system to do so.
Notice in writing of any measures taken under subsection (4) shall be given to the licensed commercial bank and to any director, manager or controller referred to in paragraph (e) of subsection (4) and such measures shall become effective from the date of the receipt of such notification or such other date as may be specified in the notice.”.
s 7Amendment of section 12 of the principal enactment
Section 12 of the principal enactment is hereby amended as follows :—
in subsection (1) of that section —
by the repeal of paragraph (c) thereof, and the substitution therefor of the following paragraph:—
"(c)
for a licensed commercial bank to acquire the business or part of the business of another licensed commercial bank or a licensed specialised bank or of any branch of another licensed commercial bank or of a branch of a licensed specialised bank;";
by the repeal of paragraph (d) thereof and the re-lettering of paragraph (e) as paragrapgh (d)
thereof ;
by the addition, immediately after the relettered paragraph (d) of that subsection, of the following paragraph:—
“(e)
for the merger or consolidation of a licensed commercial bank or a branch thereof with any other licensed commercial bank or a licensed specialised bank.”;
by the insertion immediately after subsection (1)
thereof, of the following new subsections:—
“(1A). Application for approval of an acquisition under paragraph (c) of subsection (1) or a merger or consolidation under paragraph (e) of subsection (1) shall include —
a statement of the nature of the acquisition or merger or consolidation, as the case may be;
a copy of the proposed agreement, if any, under which the acquisition or merger or consolidation, as the case may be, is to be effected; and
such other particulars and documents as may be prescribed.
An approval under paragraph (c) of subsection (1), or paragraph (e) of subsection (1), or subsection (1C) shall not be granted, unless the Monetary Board is satisfied that such acquisition or merger or consolidation is in the interest of promotion of a safe, sound and stable banking system, and the fair competition prevailing in the banking industry. When granting approval for an aquisition under subsection (1C), to an individual or a corporate body, the Monetary Board shall, in determining whether such individual or the directors of such corporate body as the case may be, are fit and proper persons, have regard to the criteria set out in subsection (2) of section 42.
(a) An individual, partnership or corporate body shall not, either directly or indirectly or through a nominee or acting in concert with any other individual, partnership or corporate body, acquire a material interest in a licensed commercial bank incorporated or established within Sri Lanka by or under any written law without the prior written approval of the Monetary
Board given with the concurrence of the Minister.
Without prejudice to the generality of subsection (2) of this section, approval under paragraph (a) of this subsection may be granted subject to terms and conditions as the Monetary Board may deem fit.
A licensed commercial bank shall not enter in the register of members of the bank as the holder of shares of the bank, the name of any individual, partnership, corporate body, or nominee who or which has contravened the provisions of paragraph (a).
For the purpose of this subsection—
“acting in concert” means acting pursuant to an understanding (whether formal or informal) to actively co-operate in acquiring a material interest in a licensed commercial bank so as to obtain or consolidate, control of that bank.
“material interest” means the holding of over ten per centum of the issued capital of a licensed commercial bank carrying voting rights.”.
s 8Amendment of section 14 of the principal enactment
Section 14 of the principal enactment is hereby amended by the repeal of subsection (1) thereof, and the substitution, therefor of the following subsection :—
“(1)
Where the Governor of the Central Bank has reasonable grounds to believe that any persons is carrying on banking business in contravention of the provisions of this Act, the Governor may direct the
Director of Bank Supervision or any other officer of the Central Bank to examine the books, accounts and records of such person for the purpose of ascertaining whether such person has contravened, or is contravening, any of the provisions of this Act.”.
s 9Amendment of section 16 of the principal enactment
Section 16 of the principal enactment is hereby amended as follows :—
by the repeal of subsection (1) of that section and the substitution therefor of the following subsection:—
"(1)
No company other than a licensed commercial bank or a licensed specialised bank shall, except with the prior written approval of the Monetary
Board, use as part of its name or its description any of the words “bank”, “banker” or “banking”, or any of its derivatives or its transliterations, or their equivalent in any other language and no licensed commercial bank or a licensed specialized bank shall carry on business in Sri Lanka unless it uses as part of its name at least one of such words :
Provided however, a licensed commercial bank or a licensed specialised bank incorporated outside Sri
Lanka which does not have the word “bank”, “banker”
or “banking” in any language in its name may carry on business in Sri Lanka notwithstanding the omission of these words in its name.”;
by the repeal of subsection (3) of that section and the substitution therefor of the following subsection :—
“(3)
Nothing in this section shall apply—
to a subsidiary of a licensed commercial bank or of a licensed specialised bank established in accordance with the provisions of this Act or any directions given hereunder;
to any association of licensed commercial banks or licensed specialised banks formed for the protection of their interests;
to a trade union registered under the Trade
Union Ordinance (Chapter 138), which is an association or combination of workers who are employees of a banking institution within the meaning of section 127 of the Monetary Law Act, or of the
Central Bank or of a licensed specialised bank;
to an agency, institution, person or body of persons which is a banking institution in terms of paragraph (b) or paragraph (d)
of the definition of the expression
“banking institution” in section 127 of the Monetary Law Act;
to the use of the words in the manner restricted under subsection (1) for the purpose of incorporating or changing the name of a company during the period of validity of a letter of Provisional
Approval issued under section 3 or section 76B;
to the representative office of a commercial bank incorporated or established outside Sri Lanka.”.
s 10Amendment of section 17A of the principal enactment
Section 17A of the principal enactment is hereby amended in subsection (2) of that section as follows :—
in paragraph (d) of that section, by the substitution for the words “financial sectors.” of the words
“financial sectors;”; and
by the insertion immediately after paragraph (d) of that section, of the following new paragraph :—
“(e)
investments authorized by the Monetary
Board.”.
s 11Amendment of section 21 of the principal enactment
Section 21 of the principal enactment is hereby amended in subsection (1) of that section, by the substitution for the words “and to the shareholders” wherever they occur in that subsection, of the words “and to the share holders, to the holders of non-redeemable debt instruments and its liabilities on repurchase agreements in relation to treasury bills or securities issued or guaranteed by the Government of
Sri Lanka, or on such other assets as determined by the
Monetary Board.”.
s 12Amendment of section 23 of the principal enactment
Section 23 of the principal enactment is hereby amended by the substitution for the words “No off-shore banking business” of the words "Unless authorized under section 76D, no off-shore banking business”.
s 13Amendment of section 25 of the principal enactment
Section 25 of the principal enactment is hereby amended by the repeal of paragraph (a) of that section, and substitution therefor of the following paragraph :—
“(a)
accept savings, time and demand deposits from any non-resident in any designated foreign currency provided that, in the case of time deposits the value of such deposits shall not be less than ten thousand
United States dollars or its equivalent in any other designated foreign currency or such higher amount as may be determined by the Monetary Board : and provided that funds in any account maintained in an off shore unit shall not be withdrawable by cheque;”.
s 14Amendment of section 36 of the principal enactment
Section 36 of the principal enactment is hereby amended in subsection (2) of that section, by the repeal of paragraph (f) thereof and substitution therefor of the following paragraph :—
“(f)
cash flow statement;”.