Regulatory Alerts2017-10-26 | Banking Act Directions No. 5 of 2017Enhancement of Minimum Capital Requirement of Banks
The Monetary Board of the Central Bank of Sri Lanka has issued Banking Act Direction No. 05 of 2017 to increase the minimum capital requirements for licensed commercial and specialised banks, establishing tiered thresholds of Rs 5.0 Bn to Rs 20.0 Bn based on incorporation status and asset size. Banks must incorporate capital augmentation plans into their annual Internal Capital Adequacy Assessment Process submissions and calculate compliance using designated Basel III return codes. Non-compliant institutions face immediate restrictions on dividend distributions, profit repatriation, asset growth, and branch expansion until the Director of Bank Supervision confirms their capital levels meet the mandated standards.
MONETARY BOARI) CENTRAL BANK OF SRI LANKA 16 October 2017 BANKING ACT DIRECTIONS No.05 of20l7 ENHANCEMENT OF MINIMUM CAPITAL REQUIREMENT OF BANKS In terms of Sections 46(l) and76J(l) read with Sections 19(3) and 76G, respectively, of the Banking Act, No. 30 of 1988, last amended by the Banking Act, No. 46 of 2006, the Monetary Board has determined with the concurrence of the Minister to increase the minimum capital requirements for licensed commercial banks (LCBs) and licensed specialised banks (LSBs), respectively:
- Empowerment 1 . 1 In terms of Sections 46( I ) and 7 6J(1) of the Banking Act, in order to ensure under the the soundness of the banking system, the Monetary Board is empowered to Banking Act issue Directions to all or any LCB or LSB, respectively, regarding the manner in which any aspect of the business of such banks is to be conducted. Minimum Capital Requirements 1.2 In terms of the provisions of Sections 19(3) and 76G of the Banking Act, the Monetary Board may vary the amounts specified as the minimum amount of capital required to be maintained by LCBs and LSBs, respectively, having regard to the assets, liabilities and the viability and stability of the banking system and the interest of the national economy. 2.1 Commencing 31.12.2020, the minimum capital requirement of all existing LCBs and LSBs shall be as given in Table 1: Table 1: Minimum Capital Requirements for Banks Type,rof Bank, Locally Incorporated LCBs 20.0 Banks Incorporated Outside Sri Lanka with assets over Rs.100 Bn with assets upto Rs.100 Bn 10.0 5.0 Locally Incorporated LSBs 7.5
}b October 2017 /^ffi. s&:, WZH MONETARY BOARI) CENTRAL BANK OF SRI LANKA BANKING ACT DIRECTIONS No.05 of20l7 3. Interpretation 4. Capital Planning Process 5. Steps to Secure Compliance 3.1 Capital for this purpose shall mean the sum of the following Web Based Return Codes of Appendix I of Schedule I to the Banking Act Direction No. 01 of 2016 dated 29 December 2016 on Capital Requirements under Basel III for LCBs and LSBs. LCBs and LSBs shall, where necessary, include capital augmentation plans to meet the above capital requirements in the annual Intemal Capital Adequacy Assessment Process (ICAAP) and submit such ICAAP document to the Director of Bank Supervision. Where an LCB or LSB has failed to comply with these Directions, such LCB or LSB shall not pay dividends or repatriate profits or adopt any other measure that will further deteriorate the capital of such LCB or LSB until such compliance is effected and confirmed by the Director of Bank Supervision. Restrictions in terms of asset growth and branch expansion will be imposed
- on LCBs and LSBs which are non-compliant with the above Directions. t/.e $^^--7 Dr. Indrajit Coomaraswamy Chairman of the Monetary Board and Governor of the Central Bank of Sri Lanka 4.1 5.1 5.2 20.2.t.t.t.1 Equity capital or stated capital/assigned capital 20.2.r.1.t.2 Reserve fund Published retained eamings/(Accumulated retained losses) 20.2.t.t.1.3 20.2.t.1.1.5 General or other disclosed reserves 20.2.t.1.1.6 Only unpublished current year's profit/(losses) included in this Web based retum code 20.2.2.1.t.1 Qualifuing additional Tier I capital instruments