Regulatory Alerts2024-05-03 | Finance Business Act Directions No.02 of 2024Credit Risk Management
The Central Bank of Sri Lanka has issued Credit Risk Management Directions requiring all licensed Finance Companies to establish a comprehensive framework encompassing strategy, policy, governance, and operational processes. The directive mandates specific prudential lending limits, restricts certain accommodations to directors and subsidiaries, and enforces internal rating systems, stress testing, and a three-lines-of-defense governance model. Taking effect on 1 January 2025, the directions replace five prior regulations and require Finance Companies to align their credit exposures with core capital while ensuring robust monitoring of impaired loans and write-offs.
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