Regulatory Alerts2021-09-14 | Banking Act Direction No. 14 of 2021Classification, Recognition and Measurement of Financial Assets Other Than Credit Facilities in Licensed Banks
The Monetary Board of the Central Bank of Sri Lanka issued binding directions requiring licensed commercial and specialised banks to classify, recognize, and measure financial assets other than credit facilities in alignment with the Sri Lanka Accounting Standard SLFRS 9. The framework mandates robust governance structures, including board-approved policies for business models, SPPI testing, impairment staging, and model validation, while establishing clear criteria for significant credit risk increases and default. These standardized requirements, which replace prior prudential norms for investment portfolios, take effect on 1 January 2022 to ensure consistent, prudent risk assessment and regulatory reporting across the banking sector.
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