SL to setup Rs. 1,000mn Financial Stability Fund

Sri Lanka will establish a financial stability fund with an initial allocation of Rs. 1,000 million, provided by the Ministry of Finance, Economic Stabilisation, and National Policy, according to the Department of Government Information.

The Central Bank of Sri Lanka has prioritised strengthening the bank resolution framework as part of its crisis management measures for financial institutions under its regulation.

The financial stability fund will be created to meet the resolution objectives outlined in the Banking (Special Provisions) Act No. 17 of 2023. Under Section 15(2) of the Act, the fund will operate independently, separate from the other assets of the Central Bank of Sri Lanka and the institutions it regulates.

By July 31, 2024, indicators tied to the second subprogramme of the financial sector’s stability and reform programme will guide the implementation of the fund. The Ministry of Finance will provide comprehensive guidelines for the fund’s operation, using the initial allocation to ensure an effective resolution framework.

It is expected to obtain a loan amount of US$ 200 million this year under the stability and reform programme in the financial sector, which is funded by the Asian Development Bank for that purpose.