Action by Central Bank to support the Banking Sector. The specific measures implemented by the Central Bank are listed below:
- The Sri Lankan banking sector maintains a Capital Conservation Buffer (CCB) of 2.5% to ensure that banks have an additional layer of usable capital that can be drawn down during stress times. Industry wide flexibility is granted for banks to draw down the CCB (up to 2.5%), if needed, subject to restrictions on distribution to shareholders/ repatriation of profits and submission of a capital augmentation plan to rebuild CCB during a period up to three years.
- The current deadline for licensed banks to meet the enhanced minimum capital requirement (31.12.2022) is extended up to 31.12.2023. Licensed banks which are unable to meet the minimum capital requirement by 31.12.2022, need to submit their capital augmentation plan, including plans to consolidate or merge with suitable financial institutions, by 31.12.2022 and these licensed banks too shall refrain from distribution of dividends/ repatriation of profits until the minimum capital requirement is met.
- Licensed banks are encouraged to move to approaches such as The Standardised Approach (TSA) or alternative TSA for computation of risk weighted assets for operational risk for the purposes of computing the Capital Adequacy Ratio, subject to supervisory review.
- Licensed banks are given the flexibility to stagger the unrealised mark to market loss on Government Securities denominated in rupees on account of the recent interest rate hike for Capital Adequacy purposes until Q2 of 2024, subject to conditions.
- Licensed banks are granted flexibility on the treatment for Other Comprehensive Income (OCI) for Capital Adequacy purposes in line with the international standards.
- The deadline for licensed banks to submit the document on Internal Capital Adequacy Assessment Process (ICAAP) for 2022, to the Central Bank of Sri Lanka is extended by one month, until 30.06.2022.
- As a short-term measure to support licensed banks to adjust their liquidity profiles, licensed banks are provided with the flexibility to operate maintaining the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) not lower than 90% up to 30.09.2022.