Monday Feb 16, 2026
Monday Feb 16, 2026
Wednesday, 11 February 2026 00:29 - - {{hitsCtrl.values.hits}}
The Colombo Port City offshore banking framework has been materially tightened under recent legislative changes, with access to offshore banking licences now restricted to foreign-incorporated banks, according to a new analysis by Ernst & Young Sri Lanka.
In a tax alert on the Colombo Port City Economic Commission (Amendment) Act, No. 1 of 2026, EY said the amendment introduces significant changes to Part VIII of the Port City Act, which governs offshore banking business carried out in and from the Port City area.
The Port City Amendment Act, certified on 20 January 2026, removes the ability for locally licensed banks to apply for an offshore banking licence under Part VIII.
EY noted that, following the amendment, only a company established in another country and authorised to carry on banking business under the laws of that country is eligible to apply for a Port City offshore banking licence.
Under the revised framework, a foreign bank seeking to conduct offshore banking business in the Port City must hold three separate approvals: a general business licence issued by the Colombo Port City Economic Commission under Part VI, offshore company registration under Part VII, and an offshore banking licence issued under Part VIII of the Act, EY said.
The amendment also clarifies the regulatory hierarchy applicable to offshore banks. EY said that the provisions of the Port City Act will apply to offshore banking businesses licensed under Part VIII, notwithstanding anything contained in the Banking Act.
As a result, the Central Bank of Sri Lanka will continue to regulate and supervise such offshore banks, including setting liquidity requirements, minimum capital and leverage ratios, and disclosure standards in line with international norms.
The Central Bank is also empowered to issue directions, require corrective action where prudential standards are breached, and recommend the suspension, revocation or cancellation of offshore banking licences to the Minister of Finance, subject to due process, EY said.
EY highlighted that the amendment expressly excludes banks licensed under the Banking Act that operate in and from the Port City with Central Bank approval from the Part VIII offshore banking regime. The impact of the amended law on local banks will therefore need to be assessed separately on a case-by-case basis, it said.
The firm said the revised framework underscores the need for both local and foreign banks to reassess the applicability of the Port City Act to their operations, given the clearer separation now drawn between domestic banking activity and offshore banking business within the Port City.
