Strengthening Financial System Legal and Regulatory Framework in Sri Lanka
Project Development Objective (PDO)
This project aims to support the Central Bank of Sri Lanka (CBSL) to update and enhance its key legislation to ensure a stable and efficient financial sector.
The financial sector legislation in Sri Lanka has significant gaps and deficiencies. The framework governing the financial sector has been built up over a long period, with over 20 Acts and multiple rules and regulations. Many of the financial sector laws date back several decades, when the financial landscape was very different from today. Unintended consequences include regulatory gaps, overlaps, inconsistencies and regulatory arbitrage.
The urgent need for legal and regulatory reforms in all the areas of the financial system was confirmed by the FSAP report of November 2015.
Activities / Output
The objective is expected to be achieved through the following activities:
a. Reviewing the key legal and regulatory issues confronting the financial system, and providing
specific recommendations on the legal reform required to address the gaps in the key laws and
regulations in a prioritized manner;
b. Assist CBSL to draft a new MLA Law and Banking Law and amendments to the Finance Business
law and relevant, related regulations.
The main expected outcomes of the project are as follows:
1. Improved legislative frameworks for the functioning of the central bank, banking sector and non-
bank financial institutions sector adopted, addressing the gaps and inadequacies identified and
recommended by project
2. Increased stability and development of the financial sector