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Part I · Resolution Authority of the Central Bank

12. Resolvability assessment

Official English translation. Where it differs from the Sinhala or Tamil text, the Act itself says which text prevails.

(1)

The Central Bank shall, having regard to the systemic importance or impact of any licensed bank in respect of which a resolution plan has been prepared under subsection (1) of section 11, assess whether such licensed bank is resolvable and develop such resolution measures as it may consider appropriate and feasible for each such licensed bank, in a manner that allows for credible strategies to resolve the licensed bank without using–

(a)

extraordinary public financial support, except for the financing mechanisms established under this

Act; and

(b)

liquidity assistance in emergency situations from the Central Bank, whether guaranteed or otherwise.

(2)

Without prejudice to the provisions of subsections (3) and (4), the Central Bank shall, in determining the resolvability of such licensed bank,take such measures as may be necessary to direct a licensed bank including any one or more of the following:–

(a)

to revise and conclude an intra-group financial support agreement with other entities pertaining to the financial group of the licensed bank;

(b)

to enter into a service agreement with third parties, or to include clauses in existing agreements aiming at ensuring that such agreements will not be affected in the case the Central Bank places the licensed bank under resolution;

(c)

to limit its exposure to a single entity or to a group of related entities;

(d)

to dispose of specific assets;

(e)

to limit or cease the performance or development of specific activities, or commencing new activities;

(f)

to introduce appropriate legal and organizational changes to the licensed bank, ensuring that critical functions may be separated from other functions in the resolution procedure;

(g)

to establish mechanisms, including insurance mechanisms, to cover specific losses; and

(h)

to take any measures that are necessary to meet the minimum requirements for capital and liabilities, including loss-absorbing liabilities.

(3)

The Central Bank may, from time to time, issue directions to ensure resolvability of any licensed bank, specifying key elements, standards, and criteria to be used to conduct an assessment on resolvability of such licensed bank.

(4)

The Central Bank shall, during the assessment of resolvability under subsection (3), grant the licensed bank an opportunity of being heard.

(5)

The Central Bank may, if it deems necessary, take into consideration the group-wide exposure of a licensed bank in assessing the resolvability of such licensed bank.

Read on from s 13

Part II

Resolution Measures

Read on from Part II

Part III

Sri Lanka Deposit Insurance Scheme

Read on from Part III

Part IV

Financial Sector Crisis Management Committee

Read on from Part IV

Part V

Winding Up of Licensed Bank

Read on from Part V

Schedules