SL banks minimum capital requirements increased

The Central Bank on Thursday increased the minimum capital requirements for new and existing banks saying it was to ensure “a stronger and dynamic banking sector”. Banks have to reach these levels by end 2020, three years from now.

Accordingly, the minimum capital requirements for new licensed commercial banks (LCBs) is Rs. 20 billion while the requirements for licensed specialised banks (LSBs) is Rs.7.5 billion. In the case of foreign banks its Rs. 10 billion by end 2020.

In terms of existing LCBs and LSBs, the same minimum levels apply while it is Rs. 5 billion for a foreign bank with assets below Rs. 100 billion and double that (Rs. 10 billion) for foreign banks with assets above Rs. 100 billion. The capital considered for this purpose is largely represented by high quality capital, which has higher loss absorbing capacity, the banking regulator said in a media release.

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

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