Also, under the Basel III requirements in the run-up to 2019, the  BIS central bankers’ speeches  11  quantity and quality of capital needed to be maintained is higher to meet the regulatory requirements of core capital and leverage ratios. Under the capital enhancement plan, the Central Bank will increase the entry capital requirement for new banks incorporated in Sri Lanka from its current level of Rs. 5 billion to Rs. 10 billion, commencing 2016. Meanwhile, for existing banks incorporated in Sri Lanka, commencing 2016, minimum Tier I capital requirement will be increased for Licensed Commercial Banks and Licensed Specialised Banks from Rs. 5 billion in 2015 to Rs. 10 billion, and from Rs. 3 billion in 2015 to Rs. 5 billion, respectively. However, branches of Foreign Banks operating in Sri Lanka are excluded from the capital enhancement requirement as they have backup funding arrangements from their parent banks. Similarly, the NBFIs are required to enhance the core capital from Rs. 400 million in 2014 to Rs. 1.0 billion by 2015 and further to Rs. 1.5 billion by 2018. Third: Human resources aspects Ladies and gentlemen, managing the concerns of employees and winning their confidence and support for the consolidation programme is very important for the smooth execution of this process. The Central Bank has informed all financial institutions involved in the consolidation programme that this process should not adversely affect the staff of the respective financial institutions.
Under the consolidation approach for NBFIs as stipulated in our Master Plan, local banks and Category A NBFIs are encouraged to acquire upto 3 Category B NBFIs, while all Category B NBFIs are required to merge with local banks or Category A NBFIs, or merge among themselves, so that they fulfill conditions to become Category A NBFIs. Further, where groups of banks and NBFIs have multiple NBFIs in that group, we have requested such NBFIs to be merged so that only 1 NBFI would remain in the group. It was decided to permit banks to operate a newly acquired NBFI as a subsidiary considering the structural, operational and cultural differences that exist between these two types of financial institutions. Further, in the case that a bank or Category A NBFI acquires a negative net worth Category B NBFI and requires additional capital infusion, we will provide an equivalent amount of funding support to the acquiring entity through the SLDILSS. Second: Capital enhancement plan Ladies and gentlemen, one of the key factors underpinning the stability in the financial sector is capital, which needs to be maintained at adequate levels to absorb unexpected losses. Capital is required to be increased gradually in order to ensure that sufficient buffers are built during good times to strengthen resilience of the financial sector for such capital to be drawn down during bad times.