• The Finance Ministry will introduce new business models and enhance capital adequacy for Bank of Ceylon and People’s Bank, while strengthening governance and risk management across all State Owned Banks (SOBs).
• A specialised unit under the Public Enterprises Department will be established to manage state shareholdings and monitor the performance of SOBs.

The Finance Ministry has announced significant reforms for State Owned Banks (SOBs) to address financial stability and governance issues exacerbated by the recent economic crisis. Key reforms include introducing new business models and enhancing capital adequacy for Bank of Ceylon and People’s Bank, as well as improving risk management and governance across all SOBs. To bolster capital, the government will provide budget funds or sell new shares to institutional investors, but will delay selling shares to retail investors until the banks achieve sustained profitability and compliance with Central Bank of Sri Lanka (CBSL) standards. Additionally, the government will retain a majority stake in the banks, even when minority shares are sold.

To improve oversight, a specialised unit within the Public Enterprises Department will be established to manage the state’s shareholdings in SOBs and monitor their performance. Qualified external auditors will be appointed, and new auditors with international experience will be selected for 2025. Independent directors for major SOBs will be chosen through an extraordinary procedure in 2024. These reforms aim to enhance the efficiency, transparency, and competitiveness of SOBs, reducing the fiscal burden on the government and improving financial inclusion and accountability. Approved by the Cabinet in April, these measures seek to prevent the recurrence of detrimental practices that contributed to the economic crisis.

Finance Ministry announces roll out of key reforms in State owned banks | Daily FT