Fact Check
To evaluate this claim, FactCheck consulted the Monetary Law Act, Finance Companies Act and Sri Lanka Deposit Insurance Scheme Regulations. The legislative framework for deposit insurance in Sri Lanka is established by Sections 32A to 32E of the Monetary Law Act and Sections 27 to 30 of the Finance Companies Act—both of which place the responsibility for deposit insurance with the CBSL. Meanwhile, the operative framework for deposit insurance arises from the Sri Lanka Deposit Insurance Scheme Regulations, No. 1 of 2010, as amended.
Section 4.1 of the regulations specifies that “all Commercial Banks, Licensed Specialized Banks and Registered Finance Companies shall be members of the scheme”.
Section 9.6 of the regulations specifies that “the amount of compensation payable to a depositor shall be limited to the total insured deposits computed as above, subject to a maximum of Rs. 600,000 or its equivalent…”
This means that under current regulations deposits in banks and finance companies are guaranteed only up to LKR 600,000 by the Sri Lanka Deposit Insurance Fund, which is managed by CBSL and has assets amounting to LKR 65.1 billion. FactCheck assumed that Gunawardana’s claim that the “CBSL is responsible” was meant to indicate the responsibility placed on CBSL through laws and regulations with regard to deposit insurance.
Therefore, we classify the Cabinet Spokesperson’s statement as TRUE.
*FactCheck’s verdict is based on the most recent information that is publicly accessible. As with every fact check, if new information becomes available, FactCheck will revisit the assessment.
NB:
Section 9.9 of the Sri Lanka Deposit Insurance Scheme Regulations, No. 1 of 2010 states that:
“The payment of compensation shall not be a liability of the Monetary Board or the Central Bank or Sri Lanka, and shall be limited to funds available or raised in the Deposit Insurance Fund including any borrowings permitted and contributions received. The Monetary Board and the Central Bank shall not be responsible for any liability that exceeds the total amount lying to the credit of the Fund”.
Thus, although the Deposit Insurance Scheme is managed by the CBSL, payments under it are limited to those funds made available through the Deposit Insurance Fund.
As per the CBSL’s April 2020 Monthly Economic Indicators “Total Deposits” in commercial banks alone amount to LKR 7.7 trillion. Meanwhile, the CBSL Annual Report 2019 states that the Deposit Insurance Fund has LKR. 65.1 billion in assets.
Sources
- Parliament of Sri Lanka, Monetary Law Act, available at: https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/laws/acts/en/monetary_law_act.pdf
- Parliament of Sri Lanka, Finance Companies Act, available at: https://www.imolin.org/doc/amlid/Sri_Lanka_finance_companies_act_no_78of1988.pdf
- Monetary Board of the Central Bank of Sri Lanka, Sri Lanka Deposit Insurance Scheme Regulations, 28 September 2010, available at: https://dfsobservatory.com/sites/default/files/Central%20Bank%20of%20Sri%20Lanka%20-%20Sri%20Lanka%20Insurance%20Scheme%20Regulations%2C%20No.%201%20of%202010.pdf
- Monetary Board of the Central Bank of Sri Lanka, Sri Lanka Deposit Insurance and Liquidity Support Scheme Regulations; Amendment to the Sri Lanka Deposit Insurance Scheme Regulations, No. 1 of 2010, 09 January 2018, available at: https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/laws/cdg/RED_gazette_regulation_no_01_of_2018_amendments_to_sri_lanka_deposit_insurance_scheme_e_0.pdf
- Central Bank of Sri Lanka,Monthly Economic Indicators-April 2020, available at: https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/statistics/mei/MEI_202004_e.pdf
- Central Bank of Sri Lanka, Annual Report 2019, available at: https://www.cbsl.gov.lk/en/publications/economic-and-financial-reports/annual-reports/annual-report-2019