Regulatory Alerts2021-09-08 | Circular No. 9 of 2021Recognition of Lanka Rating Agency Ltd as an Acceptable Credit Rating Agency
The Central Bank of Sri Lanka has formally recognized Lanka Rating Agency Ltd as an acceptable External Credit Assessment Institution for licensed commercial and specialised banks. This designation updates Banking Act Directions No. 01 of 2016 by revising Tables 1 and 3 to map Lanka Rating Agency’s long-term and short-term credit notations to specific capital risk weights under the Basel III framework. Consequently, financial institutions may now utilize Lanka Rating Agency’s assessments to calculate regulatory capital requirements alongside other established rating agencies.
MONETARY BOARD CENTRAL BANK OF SRI LANKA
08 September 2021 | CIRCULAR | No. 09 of 2021
RECOGNITION OF LANKA RATING AGENCY LTD AS AN ACCEPTABLE CREDIT RATING AGENCY
The Central Bank of Sri Lanka recognises Lanka Rating Agency Ltd (LRA) as an acceptable External Credit Assessment Institution for the purpose of Banking Act Directions No. 01 of 2016 on Capital Requirements Under Basel III for Licensed Commercial Banks and Licensed Specialised Banks and other related regulatory requirements pertaining to licensed commercial banks and licensed specialised banks.
Accordingly, Table 1 and Table 3 under the item No. 2.3 of Schedule I Appendix IV of the Banking Act Directions No. 01 of 2016 on Capital Requirements Under Basel III for Licensed Commercial Banks and Licensed Specialised Banks are revised as in Annex.
(Signature)
Prof. W D Lakshman Chairman of the Monetary Board and Governor of the Central Bank of Sri Lanka
1
Table 1 - Mapping of Notations of the Credit Rating Agencies in Sri Lanka
| Fitch Rating Lanka | ICRA Lanka Limited | Lanka Rating Agency Limited | Rating Scale for Capital Ratios |
|---|---|---|---|
| AAA (lka) | (SL) AAA | AAA | AAA |
| AA+ (lka) | (SL) AA+ | AA+ | AA+ |
| AA (lka) | (SL) AA | AA | AA |
| AA- (lka) | (SL) AA- | AA- | AA- |
| A+ (lka) | (SL) A+ | A+ | A+ |
| A (lka) | (SL) A | A | A |
| A- (lka) | (SL) A- | A- | A- |
| BBB+ (lka) | (SL) BBB+ | BBB+ | BBB+ |
| BBB (lka) | (SL) BBB | BBB | BBB |
| BBB- (lka) | (SL) BBB- | BBB- | BBB- |
| BB+ (lka) | (SL) BB+ | BB+ | BB+ |
| BB (lka) | (SL) BB | BB | BB |
| BB- (lka) | (SL) BB- | BB- | BB- |
| B+ (lka) | (SL) B+ | B+ | B+ |
| B (lka) | (SL) B | B | B |
| B-(lka) & Lower | (SL) B- & Lower | B- & Lower | B- & Lower |
Table 3 - Mapping of Short-Term Ratings
| Standard and Poor's | Moody's | Fitch Ratings | ICRA Lanka Limited | Lanka Rating Agency Limited | Risk weights |
|---|---|---|---|---|---|
| A - 1+/A - 1 | P - 1 | F1+/ F1 | (SL) A1+ / A1 | A1+/A1 | 20% |
| A - 2+/A - 2 | P - 2 | F2 | (SL) A2+ / A2 | A2 | 50% |
| A - 3+/A - 3 | P - 3 | F3 | (SL) A3+ / A3 | A3 | 100% |
| Below A - 3 | NP | Below F3 | (SL) Below A3 | A4 | 150% |
2