Licensed banks to enhance minimum capital by end 2020

• New banks must meet capital requirement of Rs. 20 b, foreign banks Rs. 10 b

The Central Bank of Sri Lanka yesterday announced it had increased the minimum capital requirements for Licensed Commercial Banks (LCBs) and Licensed Specialised Banks (LSBs). 

The capital considered for this purpose is largely represented by high quality capital, which has a higher loss-absorbing capacity. 

This will also ensure a stronger and more dynamic banking sector, it said in a statement.

“Enhancing the minimum capital requirement will support the implementation of the Basel III framework in Sri Lanka to strengthen the resilience of banks and may lead to consolidation in the banking sector,” the statement said.

 Accordingly, with immediate effect, new banks to be established or incorporated in Sri Lanka are required to meet the capital requirements of domestic LCBs which will be Rs.20 billion and LSBs which will be Rs. 7.5 billion. Banks incorporated outside Sri Lanka will only require Rs. 10 billion.   

A time period of over three years has been granted for existing banks to enhance capital and meet the minimum capital requirement. During this period banks are expected to formulate and implement new capital infusion plans and take necessary measures to restructure or consolidate if necessary. 

Accordingly, commencing 31 December 2020, the minimum capital requirement for existing banks will be Rs. 20 billion for domestic LCB, Rs. 7.5 billion for LSBs and Rs. 5 billion for foreign banks with assets up to Rs. 100 billion and Rs. 10 billion for foreign banks with capital above Rs. 10 billion. 

“The Central Bank of Sri Lanka expects that this enhancement of minimum capital requirement will lead to stronger banks, thus preserving the viability and stability of the banking system and the interest of the national economy.”