The new Act will replace the Monetary Law Act, No. 58 of 1949 and includes amendments for introducing new flexible inflation targeting the monetary policy framework, enhancing the governance standards in management structure of the CBSL, introducing several disclosure requirements and recognising the CBSL as the macro prudential authority of the country.
The Bill has been drafted so as to comply with the developed international best practices and after discussions with the Monetary Board and all relevant stake holders and gives administrative and financial autonomy to the CB.
“The autonomy of the Central Bank shall be respected at all times and no person or entity shall cause any influence to the members of the Governing Board, Monetary Policy Board and Executive Board or its employees in the exercise, discharge and performance of their powers, functions and duties under this Act or interfere with the activities of the Central Bank,” the new Bill states.
Under the provisions of the new proposed Bill, the Central Bank shall have its principal place of business in Colombo, and may have such branches, agencies, and correspondents in other places in Sri Lanka or abroad, as may be necessary for the proper conduct of its business, while the capital of the CB shall be a fully subscribed and paid-up amount as may be determined by the Governing Board from time to time.
The capital of the Central Bank shall be held solely by the Government and shall not be transferable or subject to any encumbrance while the capital of the CB may be increased by such amounts as may be determined by the Governing Board with the concurrence of the Minister from funds allocated from the Consolidated Fund.
The Governing Board of the CB which is charged with the responsibility of overseeing the administration and management of the affairs of the bank and the determination of general policy of the Central Bank other than the monetary policy will consist of the Secretary to the Treasury; Governor of CBSL, who shall be the Chairperson of the Governing Board; and three members who shall have expertise in economics, banking, finance, accounting and auditing, law or risk management.
The new Act prohibits the CB from purchasing securities issued by the Government, by any Government-owned entity, or any other public entity in the primary market. The CB however may purchase such securities in the secondary market provided that such purchases do not circumvent the prohibition laid down in the proposed Act which prohibits the CB from, directly or indirectly, granting credits to the Government or any public authority owned by the Government or to any other public entity.