Regulatory Alerts2018-08-21 | Banking Act Directions No. 4 of 2018Financial Derivative Transactions for Licensed Commercial and Specialised Banks
The Monetary Board of the Central Bank of Sri Lanka has issued Banking Act Directions No. 04 of 2018 to regulate financial derivative transactions for licensed commercial and specialised banks. Eligible institutions must implement board-approved risk management frameworks, ensure derivatives are backed by valid underlying exposures, and limit contract maturities to ten years while permitting hedging, non-market maker, and market maker deals. The updated framework mandates ISDA master agreements, standardized monthly reporting to the International Operations Department, strict customer awareness protocols, and revokes prior derivative directions to streamline foreign currency risk management.
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