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Central Bank
About the Bank

Overview

Established in 1950 under the Monetary Law Act No.58 of 1949 (MLA), the Central Bank of Sri Lanka (CBSL)
is the apex institution in the financial sector in Sri Lanka. It is a semi-autonomous body and, following the
amendments to the MLA in December 2002, is governed by a five member Monetary Board, comprising
the Governor of the CBSL as Chairman, the Secretary to the Ministry of Finance and Planning and three
members appointed by the President of Sri Lanka, on the recommendation of the Minister of Finance,
with the concurrence of the Constitutional Council.

With a view to encouraging and promoting the development of the productive resources of Sri Lanka, the
CBSL is responsible for securing its core objectives of economic and price stability and financial system
stability. The CBSL is also responsible for currency issue and management. In addition, the CBSL is the
advisor on economic affairs as well as the banker to the Government of Sri Lanka (GOSL). On behalf of
GOSL, the CBSL, as its agent, is responsible for four agency functions of: management of the Employees
Provident Fund; management of the public debt of Sri Lanka; administration of the provisions of the
Exchange Control Act; and administration of foreign and government funded credit schemes for regional
development.

The Governor of the CBSL functions as its Chief Executive Officer. The Governor, Deputy Governors and
several Assistant Governors, along with the Heads of Departments, form the senior management of the
CBSL. Functionally, the CBSL presently consists of 27 Departments , each headed by a Director (or
equivalent), reporting to the Governor or the Deputy Governor through an Assistant Governor, with the
exception of the Internal Audit Department, which reports directly to the Governor. The Economic
Research and Bank Supervision Departments were explicitly set up under the original legislation
establishing the CBSL, with certain statutory functions. The Economic Research Department is required to
compile data and conduct economic research for the guidance of the Monetary Board and for the
information of the public, while the Bank Supervision Department is required to engage in the continuous
regulation and supervision of all banking institutions in

Sri Lanka.
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About the Bank

Our Vision

>> A credible and dynamic central bank contributing to the prosperity of Sri Lanka.

Our vision clearly indicates that the Bank is deeply committed to contributing to the prosperity of Sri
Lanka. The term prosperity has a wide connotation: enhancement of the quality of life of people
through sustainable wealth creation and inclusion of all segments of the society in enjoying the benefits
of development.

The Central Bank would facilitate this process by ensuring economic and price stability and financial
system stability while providing prudential and pro-active policy recommendations, as the Advisor to
the Government on Economic Affairs. In doing so, the Bank would act with the highest degree of
integrity and professionalism, earning respect for its objectivity and apolitical stance.

Our Mission

>> Maintaining economic and price stability and financial system stability to support sustainable growth
through policy stimulus, advice, commitment and excellence.

Our mission emphasizes the need for the Bank to continuously fulfill its core objectives: economic and
price stability (maintenance of a low level of inflation, while attaining macroeconomic equilibrium) and
financial system stability (maintenance of stability in the financial system as a whole). The
accomplishment of this mission would enable the Bank to create a conducive environment for economic
agents to take a long-term view of the economy and make major decisions relating to resource
allocation, production, labour supply, investments, consumption and savings, accordingly. Such a long-
term focus is essential for sustainable growth and the alleviation of poverty.

The core objectives would be supplemented by appropriate policy recommendations for raising the
output of the economy to the long-term potential and desired levels. The Bank's staff, the key input in
its operations, would display the highest level of commitment, dedication and excellence in
accomplishing the mission so that the Bank would be a model for others to emulate. The staff would
also set appropriate benchmarks and service norms, when extending their services to the stakeholders.
The Bank would always strive to upgrade its services, even to standards higher than international best
practices.
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Our Values

Commitment to inspirational leadership -

Providing strategic leadership to the financial sector.

Transparency in what we do -

Being ready to explain the rationale behind our actions.

Accountability to our key stakeholders the public, government, financial institutions and
employees -

Taking responsibility for our policy advice and actions.

Integrity (trust,dependability,honesty) -

Matching words with deeds by discharging functions ethically in the best interests of our
stakeholders

Commitment to professional competence -

Dedication, quality and excellence in all we do.

Commitment to lifelong learning, knowledge sharing and innovation -

Acquiring the required skills individually and collectively in a rapidly changing world.

Consistency, accuracy and timeliness of all actions taken by the Bank-

Earning respect for what we do.

Managing and ensuring operational autonomy for policy formulation and

implementation -

Providing the organizational freedom for objective decisions.

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Urgent and continuous commitment to results and outputs -

Bringing a sense of urgency and timeliness into all our actions.

Commitment to collaborative and participatory work practices -

Organisational Structure

Monetary Board
The Central Bank has a unique legal structure in which the Central Bank is not an incorporated body. In
terms of the Monetary Law Act, the corporate status is conferred on the Monetary Board, which is
vested with all powers, functions and duties. As the governing body, the Monetary Board is responsible
for making all policy decisions related to the management, operation and administration of the Central
Bank.

The Monetary Board of the Central Bank consists of five (5) members

The Governor

The Secretary to the Ministry of Finance ( ex-officio )

Three (3) non - executive members

The Governor is the Chairman of the Monetary Board and also functions as the Chief Executive Officer
of the Central Bank. The Governor and the non-executive Board members are appointed by the
President, on the recommendation of the Minister of Finance. The approval of the Constitutional
Council is also required for the appointment of the non-executive Board members. The term of office
of the Governor and the non -executive Board members is six (6) years. The quorum for Monetary Board
meetings is three (3) members. The concurrence of three (3) members is required for decisions of the
Monetary Board to be valid. However in cases where a unanimous decision is required, the concurrence
of all five (5) members is necessary.
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Audit Committee

The three (3) member Audit Committee appointed by the Monetary Board is chaired by a non-executive
Board member. The other two members, who are required to have expertise in financial matters, have
been drawn from outside the Central Bank. The Audit Committee reviews and advises the Monetary
Board on the Central Bank's financial reporting process, the adequacy and effectiveness of the internal
controls and the scope and results of the internal and external audit. It also assists in developing and
monitoring a bank-wide risk management system for the Central Bank.

Departments

For the smooth functioning of the CBSL, the departments of the Bank are grouped into four key business
areas, namely -Economic and Price Stability; Financial System Stability; Currency Issue & Management
and Agency Services to Government and three support services areas , namely -Human Resources
Development and Management; Corporate Services; and Policy Review and Monitoring. The
departments are headed by a Director (or equivalent), reporting to the Governor or a Deputy Governor
through an Assistant Governor, while the Internal Audit Department reports directly to the Governor
and the Monetary Board.

One Deputy Governor is in charge of the Economic and Price Stability group and the other is in charge
of the Financial System Stability group. The departments under the Currency Issue and Management
and Agency Services groups report to one of the two Deputy Governors, while all departments in the
three support services groups report to the Governor, through their respective Assistant Governors.

The Organisational Chart >>

Department Key Responsibilities

Economic and Price Stability Group

Domestic Operations Responsible for implementing monetary policy measures, mainly through the
conduct of open market operations and the enforcement of the reserve requirement for commercial
banks. Operates current account facilities for the Government, commercial banks and Primary Dealers.

Economic Research Responsible for compiling data and conducting economic research for the
guidance of the Monetary Board and the Governor in formulating, implementing and executing policies
and measures and for the information of the public, in the subjects of money and banking and other
economic subjects of general interest. The department also plays a key role in providing economic
advise to the government as stipulate in the MLA.

International Operations Responsible for managing the official international reserves.

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Statistics Responsible for compiling, analyzing and forecasting socio-economic statistics and
conducting surveys.

Financial System Stability Group

Bank Supervision Responsible for the regulation and supervision of licensed banks.

Financial Stability Studies Responsible for monitoring the financial sector and maintaining
financial system stability

Payments and Settlements Responsible for the advancement, stability and efficiency of the
domestic payment and settlement system.

Supervision of Non-Bank Financial Institutions Responsible for the regulation and supervision of
Licensed finance and leasing companies.

Financial Intelligence Unit Responsible for implementation and administration of the provisions of
the Financial Transactions Reporting Act No 6 of 2006 (FTRA) to facilitate the prevention, detection,
investigation and prosecution of the offences of money laundering , the financing of terrorism and other
unlawful activities defined in the Act.

Currency Issue and Management Group

Currency Responsible for the availability and integrity of currency notes and coins and their issue
and distribution.

Agency Services Group

Employees' Provident Fund Responsible for receiving Employees' Provident Fund member
contributions, maintaining member accounts, investing funds and paying benefits to members.

Exchange Control Responsible for foreign exchange management under the Exchange Control Act.

Public Debt Responsible for the raising, servicing and managing of public debt; operating the
Scripless Securities Settlement System; maintenance of the Central Depository System for Government
Securities and the supervision of Primary Dealers.

Regional Development Responsible for promoting regional development through government and
donor assisted rural credit delivery programmes.

Human Resource Development and Management Group

Centre for Banking Studies Responsible for conducting in-house training programmes for the Bank
staff and the financial sector.

Human Resources Motivating and upgrading the competencies of existing staff, attracting
appropriate talent by ensuring a consistent, transparent and relevant system of recruitment,
evaluation, job rotation, promotion and providing opportunities for skills and competencies
development which ensures a sustainable succession planning.

Staff Services Management Department Responsible for providing welfare facilities to the staff.
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Corporate Services Group

Communications Responsible for communication of the Bank's policies and output and
dissemination of such information to the public and the Central Bank staff and providing library
services.

Governor's Secretariat (GSD) GSD which established on 29th June, 2009 provides extensive
operational assistance required by the governor. The main tasks of the GSD are managing appointments
and correspondence relating to functions of the governor, providing relevant inputs and analysis,
briefing specific matters, follow up instructions issued by the governor to other departments,
coordination of work, managing all arrangements of foreign and local travels of the governor and
protocol duties of the governor and foreign delegates.

Finance Responsible for budgeting, budgetary control and financial reporting of the Bank. .

Information Technology Responsible for the advancement, stability and efficiency of the Bank's
information technology operations and systems.

Facilities Management Responsible for the maintenance of the Bank's premises and physical assets.
Provincial Offices Monitoring Department(POMD) The Department is Responsible for formulation
and implementation of regional development finance plans in consultation and association with
relevant institutions, formulation of policies for functions and operations of Provincial Offices (POO),
monitoring of the performance of POO, Co-ordination of POO with national level institutions, making
arrangements for opening new POO and appropriate expansion of POMD to facilitate its functions in
line with policy priorities.

Secretariat Responsible for the general administration and procurement services of the Bank

Security Services Responsible for providing security to the Bank

Policy Review and Monitoring Group

Policy Review and Monitoring

Responsible for reviewing and assessing the impact of the Bank's policies and the Bank's progress vis-
à-vis strategic targets

Internal Audit

Responsible for independent audit and advice to the Bank and monitoring Bank-wise risk management.
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Objectives & Functions

Objectives of the Bank

The Central Bank's focus and functions have evolved since its formation, in response to the changing
economic environment. In keeping with trends in central banking, the objectives of the Central Bank were
streamlined by amending the Monetary Law Act (MLA) in 2002, to enable it to pursue its core objectives
and to free it of the multiple objectives that were originally assigned to it. The Central Bank has two core
objectives:

Maintaining economic and price stability

Maintaining financial system stability

with a view to encouraging and promoting the development of the productive resources of

Sri Lanka.

Prior to the amendment of the law, the Central Bank had multiple objectives, which could sometimes be
in conflict or be inconsistent with each other.

Meanwhile, a consensus had developed internationally that a central bank's primary goal should be the
maintenance of price stability. As price stability is crucially dependent on stable macroeconomic
conditions, one of the core objectives of the CBSL was therefore specified as "economic and price
stability". Furthermore, as the experience of other countries has demonstrated, the stability of the
financial system is crucial in improving the resilience of the economy. Hence, financial system stability was
also identified as a core objective of the CBSL. The two objectives are correlated and complement each
other. Ensuring financial system stability is of prime importance, as monetary policy is transmitted
through financial intermediaries (institutions) to achieve price stability. Hence, the two objectives are in
harmony and this enables the Central Bank to perform its main functions more effectively. The CBSL has
been given a high degree of autonomy to achieve its objectives. In this task, the Bank closely liaises with
the Ministry of Finance in making policy decisions and the Secretary to the Ministry of Finance is a member
of the Monetary Board, which is the governing body of the CBSL.

Economic and Price Stability

Price stability safeguards the value of the currency in terms of what it will purchase at home and in terms
of other currencies. Price stability or stable prices means low inflation. Experience has shown that the
economy performs well when inflation is low and is expected to be low. Interest rates are also low in these
conditions. Such an environment allows an economy to achieve its growth potential and fosters high
employment. Free from the disruptive effects of high and variable inflation, both consumers and
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producers make economic decisions with confidence. Low inflation or price stability fosters sustainable
long-term economic growth and employment. The Central Bank uses monetary policy measures to control
inflation.

Financial System Stability

A stable financial system creates a favorable environment for depositors and investors, encourages
efficient financial intermediation and the effective functioning of markets, and hence, promotes
investment and economic growth. Financial system stability means the effective functioning of the
financial system (financial institutions and markets) and the absence of banking, currency and balance of
payments crisis. Financial instability is caused by bank failures, excessive asset price volatility, and collapse
of market liquidity or a disruption to the payments system. Financial system stability requires a stable
macro-economic environment, effective regulatory framework, well organised financial markets, sound
financial institutions and safe and robust payments infrastructure. The maintenance of financial stability
entails the prevention, detection and reduction of threats to the financial system as a whole, through the
surveillance of markets and financial institutions, oversight of the payments system and crisis resolution.

Functions of the Bank

In order to achieve its core objectives as well as to discharge its responsibilities as economic advisor and
banker to, and agent of the GOSL, the CBSL undertakes the following functions.

Core functions

Economic and Price Stability

Financial System Stability

Ancillary to core functions

Currency Issue and Management

Agency functions

Employees' Provident Fund Management

Foreign Exchange Management

Public Debt Management

Regional Development

Financial Intelligence

Provincial Office Monitoring