Regulatory Framework Technology Risk

1 09 December 2021 MONETARY BOARDCENTRAL BANK OF SRI LANKABANKING ACT DIRECTIONSNo. 16 of 2021 Regulatory Framework on Technology Risk Management and Resiliencefor Licensed BanksIn the exercise of the powers conferred by Sections a6(l) and 76(J)(1) of the Banking Act, No. 30of 1988, as amended, the Monetary Board hereby issues the following Directions on RegulatoryFramework on Technology Risk Management and Resilience for licensedtommercial banks andlicensed specialised banks, hereinafter referred to as licensed banks, with a view to furtherstrengthening the Technology risk managernent and resilience in licensed In terms of Section a6(1)

2 Of the Banking Act, in order to ensure thesoundness of the banking system, the Monetary Board is empoweredto issue Directions to all licensed commercial banks, regarding themanner in which any aspect of the business of such bank or banks isto be lnterms of Section 76(J)(1) of the Banking Act, the Monetary Boardis empowered to give Directions to licensed specialised banks or toany category of licensed specialised banks, regarding the manner inwhich any aspect of the business of such banks is to be Scope andAppHcability3. RegulatoryFramework onTechnologyRiskManagementand Resilience4. Responsibilitiesof the These Directions shall be applicable to all licensed banks includingoperations conducted through agents and third-party licensed banks shall ensure compliance with the requirementsimposed by the Regulatory Framework on Technology riskmanagement and resilience in the Schedule I to these Directions(hereinafter referred to as Regulatory Framework ).

3 Requirements in the Regulatory Framework shall be applicable to theentire operations of licensed banks including operations conductedthrough agents and third-party service Board of Directors of licensed banks shall establish adequateoversight measures to ensure implementation of the Technology riskmanagement and resilience requirements specified in the regulatoryframework by the licensed December 2021 MONETARY BOARI)CENTRAL BANK OF SRI LANKABANKING ACT of202l5. GovernanceFramework6. Assessment ofTechnologyRisk underSupervisoryReview Process7. Role of theInternal Audit8. Steps to Licensed banks shall establish an effective governance frameworkapproved by the Board of Directors of the licensed bank incompliance with the requirernents specified in Section 4 of theregulatory Framework , to ensure prudent management of Licensed banks shall ensure Technology risk is assessed as a part ofthe comprehensive assessment of risks in the bank's Internal CapitalAdequacy Assessment Process (ICAAP)

4 And adequate level ofcapital is held to meet any potential Technology The internal audit function of the licensed banks shall ensure thatcompliance with Regulatory requirements on Technology riskmanagement is assessed and reported to the Board of Directors ofthe licensed bank through the Board Audit Committee, at banks shall ensure all new Technology initiatives complywith Section 9 of the Regulatory Framework on requirements basedon information system infrastructure ownership, management, andlocation from the date of these banks shall ensure compliance with all other requirementsof the Regulatory Framework as per the timelines set out in Sectionl0 of the Regulatory frarnework on implementation and banks designated as Domestic Systemically ImportantBanks (D-SIBs) shall ensure compliance with the requirernentsspecifically applicable to D-SIBs within 12 months from the date ofnotification of being designated as a D-SIB or as per Section 10 ofthe Regulatory Framework , whichever falls ,* i*)

5 U-Nivard Ajith Leslie CabraalChairman of the Monetary Board andGovernor of the Central Bank of Sri 3 Banking Act Directions No. 16 of 2021 Regulatory Framework on Technology Risk Management and Resilience for Licensed Banks SCHEDULE I 4 Regulatory Framework on Technology Risk Management and Resilience for Licensed Banks 1. Objective This Framework intends to set minimum Regulatory requirements on Technology risk management and resilience for licensed banks in general as well as based on sensitivity of data, criticality of information systems, and type of information system infrastructure used.

6 2. Applicability Requirements in this Framework shall be applicable to entire operations of licensed banks including operations conducted through agents and third-party service providers. All information systems and related infrastructure used by licensed banks including primary, disaster recovery, and any other types shall comply with the requirements specified in this Framework . 3. Definitions Following definitions shall be applicable for the purposes of this Framework . Data Public data Data that is freely available to everyone to use and republish without any restriction.

7 Customer data Any non-public data relating to a past, existing, or potential customer. However, de-identified customer data need not be considered as customer data. De-identified customer data Intentionally altered customer data that cannot be used alone or in combination with any other data to identify the customer to whom the data was originally related to. Confidential non-customer data Any non-public data that do not fall within the definition of customer data and can cause significant financial or reputational loss if used maliciously or leaked, including the licensed bank s financial transactions, submissions to the Board of Directors and management, sensitive employee data, and any other data as determined by the licensed bank.

8 5 Critical information system Any information system that is essential to the functioning of the financial system of the country and/or to the functioning of the licensed bank as identified by the Board of Directors of the licensed bank, including information systems of the licensed bank and relevant information systems of third-party service providers and agents. Third-party service provider A service provider with whom the licensed bank has entered into an outsourcing arrangement as defined in the Banking Act Direction No. 2 of 2012 on Outsourcing of Business Operations of a Licensed Commercial Bank and a Licensed Specialised Bank, or any succeeding Direction.

9 Agent An agent or sub-agent as defined in the Banking Act Direction No. 2 of 2018 on Appointment of Agents of Licensed Banks, or any succeeding Direction. Accredited certification body A management system certification body accredited for the specified ISO standard by the Sri Lanka Accreditation Board for Conformity Assessment (SLAB) or by an accreditation body which is a member of International Accreditation Forum (IAF). Domestic Systemically Important Bank (D-SIB) Any licensed bank designated as a D-SIB as per the Banking Act Directions No. 10 of 2019 on Framework for Dealing with Domestic Systemically Important Banks, or any succeeding Direction.

10 Board of Directors For licensed banks incorporated in Sri Lanka, this shall mean the Board of Directors of the bank. For licensed banks incorporated outside Sri Lanka, this shall mean the senior most management level committee in Sri Lanka together with the head office executive responsible for Sri Lanka operations or any appropriate higher-level committee at the head office. Board Integrated Risk Management Committee (BIRMC) For licensed banks incorporated in Sri Lanka, this shall mean the integrated risk management committee of the Board of Directors of the bank. For licensed banks incorporated outside Sri Lanka, this shall mean the local risk management committee or in the absence of such committee head of risk management, together with the risk management function in head office or any appropriate higher-level committee at the head office.