Cabinet approves new credit risk assessment methodology for financial institutions

EconomyNext reports that Sri Lanka’s Cabinet approved a new approach to evaluating credit risks involving financial institutions. Cabinet spokesman Nalinda Jayatissa announced the decision on October 20, 2026, according to EconomyNext; Hiru News also reports Cabinet approval of the methodology.

EconomyNext says the assessment concerns risks arising when the government considers guarantees or sub-loans for state-owned enterprises. It links the measure to the Public Debt Management Act, which EconomyNext reports was enacted under the previous government.

EconomyNext reports that the Act’s definition of public enterprises does not cover the Central Bank or financial institutions that lend or borrow to support their own operations. Jayatissa said a separate method was needed because these institutions have distinct characteristics, including greater reliance on debt funding, exposure to liquidation and market risks, regulatory requirements, and possible systemic significance.

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