Act of Parliament · As enacted
Banking (Amendment) Act 2024
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
This Act may be cited as the Banking (Amendment)
Act, No. 24 of 2024.
The provisions of this Act shall come into operation on such date as the Minister may appoint by Order published in the Gazette (in this Act referred to as the “appointed date”).
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 (6) thereof by the substitution for the words “shall not include the Central Bank or a private company” of the words “shall not include the Central Bank, a shell bank or a private company”.
s 3Insertion of section 2A in the principal enactment
The following section is hereby inserted immediately after section 2 of the principal enactment and shall have effect as section 2A of that enactment:-
2A. The following matters shall be taken into consideration by the Central Bank in determining whether a company is eligible to apply for a licence under this Act:-
compliance with the initial capital requirements as may be determined by the Central Bank, from time to time;
the nature and adequacy of the financial resources as a means of continuing financial support for the licensed commercial bank to be established in
Sri Lanka;
“Eligibility criteria to apply for a licence
the capital and other funding sources shall not derive from unlawful activities;
suitability of material shareholders in terms of subsection (1B) of section 12;
fitness and propriety of directors, chief executive officer and officers performing executive functions or any other person proposed to be appointed to any of the above positions, as the case may be, in terms of the criteria set out in subsection (2) of section 42;
track record for operating in a manner consistent with the standards of good governance and integrity;
transparency in ownership structure and the beneficial ownership;
establishment of a licensed commercial bank in Sri Lanka will be in the interest of the viability and stability of the banking system and the interest of the national economy; and
compliance with any other requirements under this Act or any other written law in Sri Lanka or outside Sri Lanka.”.
s 4Amendment of section 3 of the principal enactment
Section 3 of the principal enactment is hereby amended as follows:-
in subsection (1) thereof, by the substitution for the words “in such manner” of the words “in such manner along with the application fee”; and
in subsection (2) thereof, by the repeal of subparagraph (iii) of paragraph (b) and the substitution therefor, of the following:-
“(iii)
a copy of the audited financial statements of the company for the preceding three years;”.
s 5Amendment of section 4 of the principal enactment
Section 4 of the principal enactment is hereby amended as follows:-
by the repeal of subsection (1) thereof and the substitution therefor of the following:-
“(1) The Central Bank may require any company or body corporate incorporated outside Sri Lanka, which has applied for a licence under section 3, to carry out banking business through a branch thereof, to undertake to remit to Sri Lanka, prior to the commencement of its business in Sri Lanka, a sum of money determined in United States Dollars, or its equivalent in any designated foreign currency.
The amount so remitted may form part of the assigned capital of such company or body corporate and shall be kept as a deposit with the Central Bank or in such other manner as may be determined, from time to time, by the Central Bank.”;
by the insertion immediately after subsection (3)
thereof, of the following: -
“(4) Without prejudice to the provisions of subsection (1), the Central Bank may, having regard to the soundness of the financial position, risk management, governance structure, capital adequacy and availability of liquidity, require any company or body corporate specified in subsection (1) to establish within Sri Lanka as a subsidiary of its parent company or principal body corporate to be issued with a licence to carry on banking business in Sri Lanka.
where a commercial bank incorporated outside Sri Lanka is operating as a branch in Sri
Lanka immediately preceding the appointed date, the Central Bank may direct such bank to establish a subsidiary of a parent company or principal body corporate of such commercial bank to carry on banking business in Sri Lanka, having regard to the soundness of the financial position, risk management, governance structure, capital adequacy and availability of liquidity subject to such terms and conditions as may be specified in such direction.”.
s 6Amendment of section 5 of the principal enactment
Section 5 of the principal enactment is hereby amended by the repeal of paragraph (a) of subsection (2) thereof and the substitution therefor of the following:-
“(a)
whether such company is authorized to carry on banking business;”.
s 7Amendment of section 8 of the principal enactment
Section 8 of the principal enactment is hereby amended in subsection (2) thereof by the substitution for the words and figure “(2) The Monetary Board” of the words and figure
“(2) The Director of Bank Supervision”.
s 8Amendment of section 9 of the principal enactment
Section 9 of the principal enactment is hereby amended in subsection (1) thereof by the repeal of paragraph (c) thereof and the substitution therefor of the following: -
“(c)
become insolvent and winding up proceedings have been instituted under any other written law for the time being in force, whether in or outside Sri
Lanka and a liquidator or receiver has been appointed for such bank in the interest of its depositors and creditors; or”.
s 9Amendment of section 11 of the principal enactment
Section 11 of the principal enactment is hereby amended as follows: -
in subsection (2) thereof, by the substitution for the words “shall commence in accordance with the provisions of Part VIII of this Act.” of the words
“shall commence in accordance with the provisions of any other written law for the time being in force which specifically provides for the winding up of any licenced commercial bank in Sri Lanka.”;
in subsection (3) thereof, by the substitution for the words “close down the business of such bank in and with respect to Sri Lanka, in accordance with the provisions of Part VIII of this Act.” of the words
“close down the business of such bank in accordance with the provisions of any other written law for the time being in force which specifically provides for the winding up of any licensed commercial bank in
Sri Lanka.”;
in subsection (4) thereof-
by the substitution, in paragraph (g), for the words “such measures;” of the words “such measures; and”;
by the substitution in paragraph (h), for the words “such amalgamation; and” of the words
“such amalgamation:”; and
by the repeal of all the words commencing from “(i) vesting the business of the licensed commercial bank” and ending with the words
“an acquiring bank:”.
s 10Amendment of section 12 of the principal enactment
Section 12 of the principal enactment is hereby amended as follows:-
in subsection (1) thereof,-
by the substitution for the words “written approval of the Monetary Board given with the concurrence of the Minister,” of the words
“written approval of the Central Bank,”;
in paragraph (b) thereof, by the substitution for the words “(b) for a licensed commercial bank” of the words “(b) in consultation with the Minister, for a licensed commercial bank”;
by the repeal of paragraph (c) thereof, and the substitution therefor of the following: -
“(c)
for a licensed commercial bank to acquire the business or part of the business of another licensed commercial bank, licensed specialised bank or a licensed finance company, or a branch of such licensed commercial bank, licensed specialised bank or licensed finance company, as the case may be, or to sell all or part of its business;”;
in paragraph (d) thereof, by the substitution for the words “within Sri Lanka:” of the words
“within Sri Lanka subject to an application fee as may be determined by the Central Bank, from time time;”;
in paragraph (e) thereof, by the substitution for the words “licensed commercial bank or a licensed specialised bank.” of the words
“licensed commercial bank, a licensed specialised bank or a licensed finance company;”;
by the addition, immediately after paragraph (e) thereof, of the following:-
“(f)
for a licensed commercial bank or a licensed specialised bank to acquire the business or part of the business of another financial institution which is subject to the regulation or supervision of the Central Bank.”;
by the repeal of subsection (1B) thereof, and the substitution therefor of the following:-
“(1B) An approval under paragraphs (c), (e) or (f)
of subsection (1) or subsection (1C) shall not be granted, unless the Central Bank 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 acquisition under subsection (1C) to an individual or a body corporate, the Central Bank shall, in determining whether such individual or the directors of such body corporate, as the case may be, are fit and proper persons, have regard to the criteria set out in subsection (2) of section 42 in addition to the following matters:-
track record of the individual or the directors of the body corporate;
soundness and feasibility of the business plans of the individual or body corporate;
the nature and sufficiency of the financial resources of the individual or body corporate as a source of continuing financial support to the licensed commercial bank and the legitimacy of such sources of funding;
the business record and experience of the body corporate for the preceding three years;
and
transparency in ownership structure and the beneficial ownership.”;
by the repeal of subsection (1C) thereof, and the substitution therefor of the following:-
“(1C) (a) An individual, partnership or body corporate shall not, either directly or indirectly or through a nominee or acting in concert with any other individual, partnership or body corporate, 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 Central Bank.
Without prejudice to the generality of subsection (2), approval under paragraph (a) of this subsection may be granted subject to terms and conditions as the Central Bank may deem fit.
Without prejudice to the provisions of subsection (3), the secretary of a licensed commercial bank shall not enter in the share register, the index of shareholders or in any other register maintained to keep records of shareholders of such licensed commercial bank, the name of an individual, an entity (whether corporate or unincorporate) or a nominee of such individual or entity who has acquired the material interest in contravention of paragraph (a) and such person shall not be recognized as a shareholder or a person to be deemed as a shareholder of such licensed commercial bank.
Without prejudice to the provisions of subsection (3), where the contravention of subsection (1C) has been committed by an existing shareholder of the licensed commercial bank, it shall be lawful for the Central Bank to direct such licensed commercial bank to remove the name of such shareholder from the share register, index of shareholders or any other register maintained to keep records of shareholders of such licensed commercial bank, as the case may be, within the period of time as may be specified in such directions.
It shall be the duty of such licensed commercial bank to comply with such direction with effect from the date of such direction for removal, and the said shareholder shall not be considered or deemed as a shareholder of such licensed commercial bank until such shareholder complies with the provisions of subsection (1C).
For the purposes 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 the control of that licensed commercial bank;
“material interest” means the holding of over ten per centum of the issued capital of a licensed commercial bank carrying voting rights or, if the Central Bank determines that there exists a significant influence over the licensed commercial bank to nominate, appoint or remove a director, chief executive officer or an officer performing executive functions of the licensed commercial bank or to exercise control over the policies of such bank pursuant to a contract or otherwise.”;
in subsection (2) thereof, by the substitution for the words “by the Monetary Board with the concurrence of the Minister.” of the words “by the Central Bank.”;
and
by the addition, immediately after subsection (2)
thereof, of the following:-
“(3) Notwithstanding anything to the contrary in the provisions in this Act or any other written law, where the Central Bank is satisfied based on the information submitted by the licensed commercial bank or on its own findings that any individual, partnership or body corporate specified in subsection (1C) has acquired the material interest of such bank in contravention of subsection (1C) or any terms or conditions of the approval granted thereunder, it shall be lawful for the Central Bank to direct such licensed commercial bank or such individual, partnership or body corporate, as the case may be, to dispose of such material interest subject to such terms and conditions as the Central Bank may consider necessary and after giving such bank or individual, partnership or body corporate an opportunity of being heard.
Until the disposal is effected under subsection (3), the Central Bank may direct the licensed commercial bank whose material interest has been acquired or the individual, partnership or body corporate who has contravened the provisions of this section, or both such bank and the individual, partnership and the body corporate, as the case may be, to give effect to, one or more of the following:-
suspend the exercise of voting rights entitled to such shareholding or part thereof;
notwithstanding to the contrary in any other written law, prohibit such licensed commercial bank accruing any distribution rights pertaining to such shareholding or part thereof;
prohibit the licensed commercial bank issuing further shares to or pursue any offer made by the individual, partnership or body corporate who has contravened the provisions of subsection (1C);
except in a liquidation, prohibit the licensed commercial bank paying any sums due, including any form of distribution, to such individual, partnership or body corporate who has contravened the provisions of subsection (1C);
provide further details of such shareholding acquired in contravention of subsection (1C)
to the Central Bank, in such manner as the
Central Bank may determine; or
request a licensed stock exchange or Central
Depository System to impose a restriction on trading of shares held in excess of material interest, by any shareholder as a locked balance of his share account, until further instructions to that effect is issued by the
Central Bank.”.
s 11Amendment of section 13 of the principal enactment
Section 13 of the principal enactment is hereby amended as follows:-
in subsection (1) thereof, by the substitution for the words and figure “(1) The Monetary Board may, with the approval of the Minister,” of the words and figure “(1) The Central Bank may,”; and
in subsection (3) thereof, by the substitution for the words “before the Board under subsection (2), the
Monetary Board shall, with the approval of the
Minister -” of the words “before the Central Bank under subsection (2), the Central Bank shall, –”.
s 12Amendment of section 17 of the principal enactment
Section 17 of the principal enactment is hereby amended by the insertion of the following, immediately after subsection (4) thereof:-
“(4A) Any licensed commercial bank having a non-financial subsidiary that does not provide services to such licensed commercial bank or its banking group as at the appointed date, shall divest its ownership in the equity share capital of such subsidiary within a period of five years from the appointed date, after notifying the Central Bank of such decision and the manner in which such bank will discontinue the business carried out by such subsidiary.”.
s 13Amendment of section 19 of the principal enactment
Section 19 of the principal enactment is hereby amended as follows:-
in paragraph (b) of subsection (1) thereof, by the substitution for the words “and with the concurrence of the Minister, determine, from time to time.” of the words “determine, from time to time.”;
by the repeal of paragraph (d) of subsection (3)
thereof, and the substitution therefor of the following:-
“(d) Where any licensed commercial bank is required by such variation to augment its equity capital, it shall upon application to the Central
Bank, be afforded a period of twelve months, or such other period as may be granted by the Central
Bank, in which to comply with that requirement.”;
by the repeal of paragraph (b) of subsection (7)
thereof, and the substitution therefor of the following:-
“(b) Any variation in the capital adequacy ratio referred to in paragraph (a) shall be communicated to every licensed commercial bank by the Central
Bank in writing, provided that every licensed commercial bank which is required by such variation to augment its capital, shall be afforded a period of twelve months or such other period as may be granted by the Central Bank, in which to comply with such requirement.”;
by the addition, immediately after subsection (9)
thereof, of the following:-
“(10) The Central Bank may require a licensed commercial bank to maintain additional capital as the Central Bank may consider appropriate having regard to the specific risks emanating from the business of such licensed commercial bank.”.
s 14Replacement of section 21 of the principal enactment
Section 21 of the principal enactment is hereby repealed and the following is substituted therefor: -
21. (1) Every licensed commercial bank shall, at all times maintain liquid assets that are required to meet its liabilities as may, from time to time, be determined by the
Central Bank and comply with the requirements on liquidity having regard to the developments in the regulatory requirements, and the Central Bank shall, as far as practicable, adopt international standards applicable on liquidity requirements of such licensed commercial bank.
Without prejudice to the provisions of subsection (1), the Central Bank may, from time to time, determine additional liquid assets required to be maintained by any licensed commercial bank to meet liabilities and it shall be the duty of every licensed commercial bank to maintain such assets in such ratios as may be directed by the Central
Bank.”.
s 15Replacement of section 22 of the principal enactment
Section 22 of the principal enactment is hereby repealed and the following is substituted therefor: -
“Liquid
Assets
22. The Central Bank may, from time to time, having considered the capital or liquidity levels of a licensed commercial bank, issue directions to such licensed commercial bank imposing conditions to be met by such bank prior to declaring or paying dividends, whether scrip or otherwise, or transfer of profits earned in Sri Lanka, outside Sri Lanka.”.
s 16Insertion of section 22A in the principal enactment
The following section is hereby inserted immediately after section 22 of the principal enactment and shall have effect as section 22A of that enactment:-
22A. The Central Bank may, by Order designate any foreign currency for the purpose of carrying on offshore banking business.”.
s 17Repeal of Part IV of the principal enactment
Part IV of the principal enactment is hereby repealed.
s 18Replacement of section 35 of the principal enactment
Section 35 of the principal enactment is hereby repealed and the following is substituted therefor:-
35. Every licensed commercial bank shall maintain accounts and records and prepare financial statements in accordance with applicable accounting standards. The financial statements of a licensed commercial bank shall represent a true and accurate assessment of the bank’s affairs and reflect its operations and financial condition both on a solo and consolidated basis.”.
“Payment of dividends
“Central
Bank to designate foreign currency to be used in offshore banking business
“Preparation of financial statements by licensed commercial banks
s 19Repeal of section 36 of the principal enactment
Section 36 of the principal enactment is hereby repealed.
s 20Repeal of section 37 of the principal enactment
Section 37 of the principal enactment is hereby repealed.
s 21Replacement of section 38 of the principal enactment
Section 38 of the principal enactment is hereby repealed and the following is substituted therefor:-
38. (1) Every licensed commercial bank incorporated or established within Sri
Lanka shall,-
transmit within three months after the closure of its financial year, to the
Director of
Bank
Supervision, its audited financial statements in solo and consolidated basis for such financial year in respect of its business in and outside Sri Lanka;
exhibit such statements in a conspicuous place at each of its places of business until the solo and consolidated financial statements for the succeeding financial year are prepared and exhibited; and
publish such statements at least once within the period specified in paragraph (a) in at least one
“Publication of financial statements by licensed commercial banks
Sinhala, Tamil and English daily newspaper circulating in Sri
Lanka, and in the official website of the respective bank.
Every licensed commercial bank incorporated outside Sri Lanka shall,-
transmit within three months after the closure of its financial year, to the
Director of
Bank
Supervision, its audited financial statements for such financial year in respect of its business in Sri
Lanka;
exhibit such statements in a conspicuous place at each of its places of business until the financial statements for the succeeding financial year are prepared and exhibited; and
publish such statements at least once within the period specified in paragraph (a) in at least one
Sinhala, Tamil and English daily newspaper circulating in Sri
Lanka, and in the official website of the respective bank.
The Central Bank may specify the form of the financial statements referred to in subsections (1) and (2) including any disclosure requirements to be made and where such form is specified, the financial statements of every licensed commercial bank shall be prepared in such form.
Where the Central Bank determines that a disclosure made under subsection (3)
does not contain information which is required to contain or is otherwise false or misleading, the Central Bank may, by notice in writing, require such bank –
to publish a disclosure statement including the information that was previously omitted;
to publish a disclosure statement without including false or misleading information; or
to take such other corrective action as may be specified in the notice.”.
s 22Amendment of section 39 of the principal enactment
Section 39 of the principal enactment is hereby amended as follows:-
in subsection (1) thereof, -
by the substitution in paragraph (a), for the words “the accounts balance sheet and profit and loss account” of the words “financial statements”;
by the substitution in paragraph (b), for the words “the accounts, balance sheet and the profit and loss account” of the words
“financial statements”;
by the insertion, immediately after subsection (1)
thereof, of the following:-
“(1A) Where there are findings which to the knowledge of the auditor in the performance of his duties under this Act, that-
losses have been incurred or likely to incur which may materially reduce the capital of any licensed commercial bank;
irregularities have been occurred in such bank, including the engagement of such bank in unsound or unsafe practices in carrying on of its business which is likely to jeopardize the interests of its depositors and creditors; or
the obligations to the depositors and creditors of such bank are not sufficiently covered by the assets of such bank, the auditor shall immediately report such findings or any other matter that can materially affect the safety and soundness of the licensed commercial bank to the Director of Bank Supervision.”;
by the repeal of subsection (2) thereof, and the substitution therefor of the following:-
“(2) Every report specified in subsection (1)
which shall be completed within two months of the end of the financial year, shall contain a statement by the auditor as to whether in his opinion the financial statements contain a true and fair view of the bank’s financial position including the compliance with the provisions relating to issuing of financial statements and making disclosures by a licensed commercial bank and where the auditor has called for an explanation or any information from any officer or agent of such licensed commercial bank whether such explanation or information is satisfactory.”;
in subsection (3A) thereof, by the substitution for the words “shall be met by the Central Bank.” of the words “shall be met by the respective licensed commercial bank.”;
by the insertion, immediately after subsection (3A)
thereof, of the following: -
“(3B) Where the Central Bank is of the view that an additional audit is required to be conducted in respect of one or more aspects of the business and affairs of a licensed commercial bank, the Director of Bank Supervision may require such bank to conduct an additional audit on such aspects and the cost of such additional audit shall be met by the respective licensed commercial bank.
The provisions of sections 38A and 39 in respect of the appointment, duties and powers, and remuneration of auditors shall mutatis mutandis apply in respect of any auditor employed to conduct an additional audit under this section.”;
by the insertion, immediately after subsection (7)
thereof, of the following:-
“(7A) The engagement partner of the auditor of a licensed commercial bank shall be a member of the Institute of Chartered Accountants of Sri Lanka and shall not be subject to any disqualification under any written law in Sri Lanka or abroad from being appointed as an auditor.
Every licensed commercial bank shall change the auditor of such bank once in every six years and shall change the engagement partner once in every three years.
A licensed commercial bank which has already appointed an auditor shall comply with the provisions of this section within a period of two years from the appointed date.”; and
by the repeal of subsection (8) thereof.
s 23Amendment of section 41 of the principal enactment
Section 41 of the principal enactment is hereby amended in subsection (1) thereof, by the substitution for the words “or any of its subsidiaries,” of the words “on solo and consolidated basis”.