The Cabinet of Ministers has approved the establishment of a Financial Stability Fund aimed at strengthening Sri Lanka’s bank resolution framework as part of the Central Bank of Sri Lanka’s (CBSL) financial crisis management program.
The initiative will begin with an initial allocation of Rs. 1 billion from the Ministry of Finance, Economic Stabilisation, and National Policies, with plans for gradual expansion through annual budgetary allocations, according to Cabinet Spokesman and Minister Bandula Gunawardena, who announced the decision at a media briefing.
A crucial component of the Banking (Special Provisions) Act No. 17 of 2023, the Financial Stability Fund will ensure the smooth resolution of financial institutions in crisis and promote the overall stability of the banking sector. Managed independently under Section 15(2) of the Act, the fund will operate separately from other CBSL-regulated assets.
The fund is a key priority in the financial sector stability and reform program, supported by a $200 million loan from the Asian Development Bank (ADB) to implement effective bank resolution procedures. This initiative is seen as a vital step toward improving Sri Lanka’s financial crisis management framework.
The proposal for the Financial Stability Fund was presented by President Ranil Wickremesinghe in his capacity as Minister of Finance, Economic Stabilisation, and National Policies.
This new measure is expected to play a pivotal role in bolstering the resilience of Sri Lanka’s banking sector and enhancing long-term economic stability.