Regulatory Alerts2021-04-25 | Banking Act Directions No. 07 of 2021Forward Sales and Purchases of Foreign Exchange by Licensed Commercial Banks
The Central Bank of Sri Lanka has directed licensed commercial banks to restrict forward foreign exchange contracts with value dates extending beyond the spot date in order to mitigate market volatility and manage institutional risk. This directive permits six specific exceptions, including forward purchases from customers, SWAP arrangements for regulated specialized and finance companies as well as corporate clients, extensions of existing contracts at historical rates upon verified requests, inter-bank forward and SWAP transactions with single counterparties, and cross-currency forward contracts. The restrictions remain in effect until further notice, effectively streamlining how licensed commercial banks manage foreign exchange exposures while maintaining necessary hedging and client facilitation mechanisms.