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As enacted
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Part II · Resolution Measures

36. Compensating shareholders and creditors

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

(1)

Notwithstanding anything to the contrary in any other written law, where the Central Bank, in the exercise, performance or discharge of its powers, duties or functions under this Act, considers that it is necessary-

(a)

to mitigate any impact of the failure of a licensed bank in the economy and avoid contagion risk of such failure across the financial system; or

(b)

to maximize the value for the benefit of all depositors and creditors of a licensed bank, it shall be lawful for the Central Bank to apply different treatments to a class or classes of persons among the creditors of a licensed bank subject to resolution having considered the impact of losses to be attributable to such class or classes of creditors as a whole, the interests of the depositors and creditors of such licensed bank, and the financial system stability of Sri Lanka.

(2)

(a)

A shareholder or creditor who incurs higher losses than what he would have incurred if the licensed bank subject to resolution had been liquidated through winding up, may be compensated for the difference.

(b)

The difference to be compensated under paragraph (a) shall be determined based on a valuation, carried out after completion of the resolution, by an independent professional valuer possessing such qualifications and experience referred to in subsection (1) of section 16.

(3)

The valuation referred to in subsection (2), shall be carried out on the basis that such licensed bank would be wound up immediately before the initiation of such resolution by the Central Bank and shall be based on the value that could be given at the time of winding up:

Provided however, any value created or preserved in such licensed bank as a result of any public financial support or emergency liquidity assistance provided by the Central Bank or the Government, as the case may be, shall be deducted in the calculation of difference.

(4)

The compensation referred to in subsection (2) may be provided by the Government through temporary financial assistance as provided for in section 33.

(5)

The Central Bank may give effect to the provisions of this section by issuing directions, from time to time.

Read on from s 37

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