Port City Offshore Banking Rules Tightened 📈

The Colombo Port City Economic Commission (Amendment) Act, No. 1 of 2026 has significantly revised the offshore banking framework, restricting license access and clarifying regulatory oversight. • Offshore Banking Licenses: Under the new law, eligibility is now strictly limited to foreign-incorporated banks. Locally licensed banks are no longer permitted to apply for offshore licenses under Part VIII of the Act. • Licensing Requirements: Eligible foreign banks must obtain three distinct approvals: a general business license, offshore company registration, and a specific offshore banking license. • Regulatory Oversight: The Central Bank of Sri Lanka (CBSL) retains full supervisory and prudential authority. This includes setting liquidity requirements, minimum capital, and leverage ratios in accordance with international standards. • Enforcement: The CBSL is empowered to issue directions and recommend the suspension or revocation of licenses to the Minister of Finance if prudential standards are breached. • Impact on Local Banks: Banks already licensed under the Banking Act operating within the Port City are excluded from this specific Part VIII regime. EY Sri Lanka notes that local institutions must reassess the Act's applicability to their operations on a case-by-case basis. The amendment underscores a clear separation between domestic activity and specialized offshore banking to enhance the Port City's alignment with global financial norms.