6. Insertion of new sections 42A, 42B, 42C, 42D, 42E, and 42F in the principal enactment

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

The following new sections are hereby inserted immediately after section 42 of the principal enactment and shall have effect as sections 42A, 42B, 42C, 42D, 42E and 42F of that enactment: -

42A. (1) The Central Bank shall carry out the regulation and supervision of a person to whom a licence has been issued to carry on offshore banking business under this Part.

“Application of international banking standards

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(2)

For the purposes of subsection (1), the

Central Bank shall have the authority to issue any Order, direction or determination as it may consider necessary, to any person to whom a licence has been issued to carry on offshore banking business under this Part, in accordance with the international standards adopted from time to time.

(3)

A person to whom a licence has been issued to carry on offshore banking business under this

Part shall comply with the Order, direction or determination referred to in subsection (2).

(4)

For the purposes of subsection (2), the international standards shall include, but not be limited to, the requirements on capital adequacy, liquidity, risk management, supervisory review, and market discipline.

42B.

Capital adequacy requirements

A person to whom a licence has been issued to carry on offshore banking business under this Part shall maintain the minimum capital requirement, capital adequacy ratio and leverage ratio as may be determined by the

Central Bank in accordance with international standards adopted from time to time.

42C.

Risk management and supervisory review

A person to whom a licence has been issued to carry on offshore banking business under this Part shall establish and maintain a robust risk management framework to identify, measure, monitor, and mitigate risks including, but not limited to, credit risk, operational risk, liquidity risk and market risk in accordance with the international standards adopted from time to time.

42D.

Liquidity requirements

A person to whom a licence has been issued to carry on offshore banking business under this Part shall maintain liquidity requirements as may be determined by the

Central Bank from time to time, in accordance with international standards adopted from time to time.

42E.

Disclosure and transparency

(1)

A person to whom a licence has been issued to carry on offshore banking business under this Part shall make periodic public disclosure including, but not limited to, of its ﬁ nancial position, capital adequacy, and liquidity, subject to the directions issued by the Central Bank in accordance with the international standards adopted from time to time.

(2)

Such disclosure shall be in a form and manner as may be speciﬁ ed by the Central Bank by way of directions.

42F.

Directives, guidelines, and prudential standards

Where a person to whom a licence has been issued to carry on offshore banking business under this Part –

(a)

fails to comply with any provision of this Act or any regulatory requirement imposed thereunder;

(b)

engages in any fraudulent, unsafe or unsound banking practices; or

(c)

carries on its operations in a manner which the Central Bank is of the view that it would be detrimental to the preservation of ﬁ nancial stability, the Central Bank may require such person to take such corrective measures as it may consider necessary, or impose such penalties and restrictions as it may determine:

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Provided that nothing contained in this section shall restrict or prevent the Central Bank from recommending to the Minister assigned the subject of Finance to suspend, revoke or cancel the licence issued to such person to carry on offshore banking business under this Part, with notice to the Commission.”.

Read on from s 7