The Cabinet of Ministers at its meeting on Monday has approved changes to the Banking Act to set up a bank resolution framework.
“It was decided to request the Legal Draftsman to draw up the changes into a draft bill prepared by the Central Bank,” Justice Minister Wijeyadasa Rajapsakshe said at the post-Cabinet meeting media briefing yesterday.
The proposal to this effect submitted by President Ranil Wickremesinghe in his capacity as the Finance, Economic Stabilisation and National Policies was approved by the Cabinet of Ministers.
“The resolution framework will come as a Banking (Special Provisions) Act, which can be enacted faster than a new Banking Act,” a statement comprising weekly Cabinet Decisions issued by the Government Information Department noted.
It has drawn up changes to the Banking Act to cover resolution, closures of banks and deposit insurance.
“Therefore, the proposed Banking (Special Provisions) Act will be drawn up as a supplement to the Banking Act No. 30 of 1988, introducing provisions for resolution of licensed banks, deposit insurance and winding up/liquidation of licensed banks,” the statement added.
It noted that the Central Bank has identified that strengthening the Bank Resolution Framework, under the Crisis Management Framework of Financial Institutions Regulated by the Central Bank of Sri Lanka, as an urgent and priority task.
“The International Monetary Fund and the World Bank have also pointed out the importance of strengthening the resolution framework to strengthen financial sector safety nets,” it added.