Regulatory Alerts2018-12-31 | Circular No. 04 of 2018Guidelines to Licensed Banks on Adopting SLFRS 9 for Financial Instruments
The Central Bank of Sri Lanka issued these guidelines to mandate licensed banks adopt the SLFRS 9 accounting standard for financial instruments, requiring rigorous classification, measurement, and impairment calculations based on expected credit losses. Banks must implement robust credit risk management frameworks, validate impairment models using forward-looking economic forecasts, and apply a four-year staggered transitional schedule to absorb the first-day impact on their Capital Adequacy Ratio. Licensed institutions are further required to maintain standardized internal audit validation, document collateral valuations, and submit quarterly regulatory disclosures detailing probability of defaults, loss given defaults, and stage upgrades to ensure consistent sector-wide compliance.