Central Bank of Sri Lanka Act 2023 · As enacted · Part XVIII · General Provisions
108. Power of the Central Bank to suspend or restrict business of a banking institution
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
Where an employee of the Central Bank or a qualified person authorized by the Central Bank is satisfied, after examination by himself or any examiner of the affairs of any banking institution, or upon information received from the banking institution, that the banking institution is insolvent or is likely to become unable to meet the demands of its depositors, or that its continuance in business is likely to involve loss to its depositors or creditors, the employee of the Central Bank or the qualified person authorized by the
Central Bank shall make a report accordingly to the Governor of the Central Bank for submission to the Central Bank.
Where the Central Bank, upon review of the facts and circumstances, is of opinion that action should be taken as hereinafter provided, the Central Bank may make Order directing the banking institution forthwith to suspend business in Sri Lanka and directing an employee of the
Central Bank or a qualified person authorized by the Central
Bank to take charge of all books, records and assets of the banking institution and to take such measures as may be necessary to prevent the continuance of business by the banking institution.
Subject to the provisions of Articles 126 and 140 of the Constitution, no action or proceeding may be instituted in any court for the purpose of securing the review or revocation of any Order made under subsection (2) or in respect of any loss or damage incurred, or likely to be or alleged to be incurred, by reason of such Order.
An Order made by the Central Bank under subsection (2) in respect of any banking institution shall cease to have effect upon the expiration of a period of six months from the date on which it is made, and it shall be the duty of the
Central Bank, as soon as practicable and in any event before expiration of the said period–
to make Order permitting the banking institution to resume business, either unconditionally or subject to such conditions as the Central Bank may consider necessary in the public interest or in the interest of the depositors and other creditors of the banking institution;
to cause an employee of the Central Bank or a qualified person authorized by the Central Bank to make an application to the competent court under such written law as may be applicable in that behalf for the winding up of the banking institution; or
to cause an employee of the Central Bank or a qualified person authorized by the Central Bank to make an application to the competent court, to wind up the affairs of a branch of the banking institution, incorporated outside Sri Lanka.
Where an order has been made by the Central Bank under subsection (4) permitting the resumption of business by any banking institution subject to such conditions as may be specified in the Order, the competent court may, on an application made to it in that behalf by the banking institution at any time while the Order is in force, make an order permitting the banking institution to resume business unconditionally, or varying or altering, in such manner as the court may determine, any or all of the conditions specified by the Central Bank, and any such order shall have effect notwithstanding anything in the Order made by the Central Bank under subsection (4).
The employee of the Central Bank or the qualified person authorized by the Central Bank shall be named respondent to any such application and shall be entitled on behalf of the Central Bank to be heard and to adduce evidence at the hearing thereof.
Where an application is made by an employee of the
Central Bank or a qualified person authorized by the Central
Bank as provided for in subsection (4) for the winding up of any banking institution-
the banking institution shall not carry on business during the pendency of the application unless it is authorized so to do by the court and except in accordance with such conditions, if any, as may be specified by the court; and
the court, if it is of opinion after such inquiry as it may consider necessary, that the banking institution is not insolvent, may make an order permitting the banking institution to resume business either unconditionally or subject to such conditions as the court may consider necessary in the public interest or in the interest of the depositors and other creditors of the banking institution.
Every order made by a competent court under this section shall be subject to an appeal to the Court of Appeal and the provisions of the Civil Procedure Code relating to appeals in civil actions shall mutatis mutandis apply in the case of any such appeal:
Provided however, an order under paragraph (b) of subsection (7) shall be final and shall not be subject to appeal.
Every application to a competent court under this section shall be deemed to be an action of the value of five thousand rupees.
In this section–
“competent court”, in relation to any banking institution, means the High Court established by Article 154P of the Constitution and exercising civil jurisdiction under the High
Court of the Provinces (Special Provisions) Act,
No. 10 of 1996.
Where the business of a banking institution has been suspended under subsection (2), the Central Bank may–
require such banking institution to forthwith take any action or to do any act or thing which the
Central Bank may consider necessary for carrying on the business of such banking institution;
appoint a fit and proper person to advise such banking institution with regard to the proper conduct of the business of such banking institution;
assume control of, and carry on the business of such banking institution or delegate to another person, the carrying on of the business of the banking institution;
reorganize such banking institution by increasing its capital and arranging for new shareholders and by the reconstitution of its board of directors; and
make such arrangements as are necessary for the amalgamation of such banking institution with any other banking institution that consents to such amalgamation.
Where an Order has been made by the Central
Bank under subsection (1) of section 76M of the Banking
Act, No. 30 of 1988 in respect of a licensed specialised bank, the provisions of subsections (4), (5), (7), (8), (9), (10) and (11) of this section shall, notwithstanding subsections (3)
and (4) of section 76M of the Banking Act and subject to paragraph (ii) of this subsection, mutatis mutandis, apply to such bank as if it were a banking institution.
Where the application of the provisions of subsection (4) of this section requires -
the winding up of a licensed specialised bank, the
Central Bank shall cancel the licence issued to such bank under Part IXA of the Banking Act and the provisions of Part VIII of that Act shall apply to such winding up as if it were a compulsory winding up of the bank, in the case of a bank incorporated or established within Sri Lanka or a compulsory winding up of the affairs or closure of the business of the bank, in the case of a bank incorporated outside Sri Lanka; or
the resumption of business of a licensed specialized bank, the Central Bank may exercise the powers conferred on it under section 76N of the Banking
Act;
In this subsection “licensed specialised bank” shall have the same meaning as in the Banking Act, No. 30 of 1988.
Part XIX