The central bank's Department of Exchange Control imposed the fine on SCBSL on March 16, 2011 for alleged violation of Exchange Control laws.
"As SCBSL is a branch and part of the same legal entity as Standard Chartered Bank in London, there is no 'ring fencing' of the liabilities of the local branch," Fitch Ratings said.
"Therefore, SCBSL's rating reflects the financial strength of SCB, which is rated higher than Sri Lanka's Sovereign Foreign Currency Issuer Default Rating of 'B+' with a Positive Outlook."
In February 2007, SCBSL entered into oil hedging contracts with the state-owned Ceylon Petroleum Corporation (CPC), while covering its positions with back to back transactions with SCB.
Although CPC suspended payments to counterparties on these contracts at end-2008, SCBSL repatriated dues of 12.3 billion rupees to SCB until April 2009 to honour its back to back arrangement with SCB.
The branch