Supplementary Information

Annex 2: Basel III – Disclosures under Pillar III as per the Banking Act Direction No. 01 of 2016


Disclosure 1


Key regulatory ratios – Capital and liquidity
GROUP Bank
As at December 31, 2022 2021 2022 2021
Regulatory capital (Rs. ’000)
Common equity 161,743,687 138,148,271 154,397,407 132,375,019
Tier 1 capital 161,743,687 138,148,271 154,397,407 132,375,019
Total capital 206,898,033 179,968,392 198,689,451 173,756,083
Regulatory capital ratios (%)
Common equity Tier 1 capital ratio (minimum requirement – 8.50%) 11.341 12.049 11.389 11.923
Tier 1 capital ratio (minimum requirement – 10.00%) 11.341 12.049 11.389 11.923
Total capital ratio (minimum requirement – 14.00%) 14.507 15.696 14.657 15.650
Leverage ratio (minimum requirement – 3%) 5.66 5.44 5.56 5.29
Regulatory liquidity
Statutory liquid assets (Rs. ’000) 622,692,705 N/A
Statutory liquid assets ratio (minimum requirement – 20%)
Domestic Banking Unit (%) 35.01 38.73
Off-shore Banking Unit (%) 32.37 36.39
Consolidated (Sri Lankan Operations) (%) 35.88 N/A
Liquidity coverage ratio – Rupee
(minimum requirement: 2022 – 90%, 2021 – 100%) (%) 		405.91 425.97
Liquidity coverage ratio – All currency
(minimum requirement: 2022 – 90%, 2021 – 100%) (%) 		293.91 242.52
Net stable funding ratio (minimum requirement: 2022 – 90%, 2021 – 100%) (%) 173.58 157.47

Disclosure 2

Basel III computation of capital ratios
GROUP Bank
As at December 31, 2022 2021 2022 2021
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000
Common equity Tier 1 (CET1) capital after adjustments 161,743,687 138,148,271 154,397,407 132,375,019
Total common equity Tier 1 (CET1) capital 196,146,974 150,107,907 191,849,110 147,698,440
Equity capital (stated capital)/Assigned Capital 58,149,621 54,566,955 58,149,621 54,566,955
Reserve fund 12,079,670 10,590,338 11,352,858 10,204,369
Published retained earnings/(Accumulated retained losses) 5,898,150 4,456,337 4,755,271 3,654,269
Published accumulated other comprehensive Income (OCI) 17,825,484 (9,337,629) 17,440,828 (9,597,685)
General and other disclosed reserves 100,150,532 88,870,532 100,150,532 88,870,532
Unpublished current year’s profit/(losses) and gains reflected in OCI – – – –
Ordinary shares issued by consolidated banking and financial subsidiaries of the Bank and held by third parties 2,043,517 961,374 – –
GROUP Bank
As at December 31, 2022 2021 2022 2021
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000
Total adjustment to CET1 capital 34,403,287 11,959,636 37,451,703 15,323,421
Goodwill (net) 445,147 445,147 – –
Intangible assets (net) 3,668,050 1,827,489 3,563,120 1,724,864
Revaluation losses of property, plant and equipment – – – –
Significant investments in the capital of financial institutions where the Bank owns more than 10% of the issued ordinary share capital of the entity – – 3,587,383 3,805,427
Deferred tax assets (net) 30,290,090 9,687,000 30,301,200 9,793,130
Additional Tier 1 (AT1) capital after adjustments – – – –
Total additional Tier 1 (AT1) capital – – – –
Qualifying additional Tier I capital instruments – – – –
Instruments issued by consolidated banking and financial subsidiaries of the Bank and held by third parties – – – –
Total adjustments to AT1 capital – – – –
Investment in own shares – – – –
Reciprocal cross holdings in AT1 capital instruments – – – –
Investments in the capital of banking and financial institutions where the Bank does not own more than 10% of the issued ordinary share capital of the entity – – – –
Significant investments in the capital of banking and financial institutions where the bank own more than 10% of the issued ordinary share capital of the entity – – – –
Regulatory adjustments applied to AT1 due to insufficient Tier 2 capital to cover adjustments – – – –
Tier 2 capital after adjustments 45,154,346 41,820,121 44,292,044 41,381,064
Total Tier 2 capital 45,154,346 41,820,121 44,292,044 41,381,064
Qualifying Tier 2 capital instruments 24,457,057 24,075,840 24,457,057 24,075,840
Revaluation gains 4,245,025 4,630,226 4,245,025 4,630,226
Eligible Impairment 16,452,264 13,114,055 15,589,962 12,674,998
Instruments issued by consolidated banking and financial subsidiaries of the Bank and held by third parties – – – –
Total adjustments to Tier 2 capital – – – –
Investment in own shares – – – –
Others – – – –
CET 1 capital 161,743,687 138,148,271 154,397,407 132,375,019
Total Tier 1 capital 161,743,687 138,148,271 154,397,407 132,375,019
Total capital 206,898,033 179,968,392 198,689,451 173,756,083
Total risk weighted amount (RWA) 1,426,170,040 1,146,567,889 1,355,629,090 1,110,253,962
Risk weighted amount for credit risk 1,316,181,150 1,049,124,433 1,247,196,997 1,013,999,808
Risk weighted amount for market risk 34,795,507 26,488,977 34,776,000 26,478,346
Risk weighted amount for operational risk 75,193,383 70,954,479 73,656,093 69,775,808
CET 1 capital ratio (including capital conservation buffer, countercyclical
capital buffer & surcharge on D-SIBs) (%) 		11.341 12.049 11.389 11.923
Of which: capital conservation buffer (%) 2.500 1.500 2.500 1.500
Of which: countercyclical buffer (%) – – – –
Of which: capital surcharge on D-SIBs (%) 1.500 1.500 1.500 1.500
Total Tier 1 capital ratio (%) 11.341 12.049 11.389 11.923
Total capital ratio (including capital conservation buffer, countercyclical capital buffer and surcharge on D-SIBs) (%) 14.507 15.696 14.657 15.650
Of which: capital conservation buffer (%) 2.500 1.500 2.500 1.500
Of which: countercyclical buffer (%) – – – –
Of which: capital surcharge on D-SIBs (%) 1.500 1.500 1.500 1.500

Disclosure 3

Leverage ratio
GROUP Bank
As at December 31, 2022 2021 2022 2021
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000
Tier 1 capital 161,743,687 138,148,271 154,397,407 132,375,019
Total exposures 2,856,960,615 2,540,662,512 2,777,299,175 2,502,461,384
On-balance sheet items (excluding derivatives and securities financing transactions, but including collateral) 2,452,984,237 1,950,600,933 2,376,179,949 1,913,202,128
Derivative exposures 190,348,706 316,862,091 190,348,706 316,862,091
Securities financing transaction exposures 105,539,671 160,995,039 103,838,277 160,995,039
Other off-balance sheet exposures 108,088,001 112,204,449 106,932,243 111,402,126
Basel III leverage ratio (minimum requirement 3%) (%) 5.66 5.44 5.56 5.29

Disclosure 4

Liquidity coverage ratio (LCR)
As at December 31, 2022 2021
Total unweighted value Total weighted value Total unweighted value Total weighted value
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000
Total stock of High Quality Liquid Assets (HQLA) 483,964,278 476,447,368 411,237,029 402,280,333
Total adjusted level 1 assets 435,146,578 435,146,578 353,800,576 353,800,576
Level 1 assets 435,146,578 435,146,578 353,800,576 353,800,576
Total adjusted level 2A assets 48,262,685 41,023,282 56,461,517 47,992,289
Level 2A assets 48,262,685 41,023,282 56,461,517 47,992,289
Total adjusted level 2B assets 555,015 277,508 974,936 487,468
Level 2B assets 555,015 277,508 974,936 487,468
Total cash outflows 2,265,841,586 462,213,957 1,800,587,157 346,248,270
Deposits 1,268,623,900 126,862,390 1,043,355,301 104,335,530
Unsecured wholesale funding 682,874,880 300,282,024 435,778,812 205,318,978
Secured funding transaction – – – –
Undrawn portion of committed (irrevocable) facilities and other contingent funding obligations 295,415,928 16,142,665 302,262,234 17,402,952
Additional requirements 18,926,878 18,926,878 19,190,810 19,190,810
Total cash inflows 458,161,587 300,105,885 283,012,740 180,375,458
Maturing secured lending transactions backed by collateral 142,604,695 141,330,270 84,188,544 78,487,428
Committed facilities – – – –
Other inflows by counterparty which are maturing within 30 calendar days 221,927,624 154,828,065 162,950,470 98,932,468
Operational deposits 85,734,167 – 29,962,602 –
Other cash inflows 7,895,101 3,947,550 5,911,124 2,955,562
Liquidity Coverage Ratio (%) (Stock of High Quality Liquid Assets/Total Net Cash Outflows over the Next 30 Calendar Days)*100 (minimum requirement – 90%) 293.91 242.52

Disclosure 5

Net stable funding ratio (NSFR)
Bank
As at December 31, 2022 2021
Rs. ‘000 Rs. ‘000
Total available stable funding (ASF) 1,767,993,757 1,447,182,314
Total required stable funding (RSF) 1,018,567,849 919,021,123
Required stable funding – On balance sheet assets 1,013,512,135 909,050,700
Required stable funding – Off balance sheet items 5,055,714 9,970,423
NSFR (minimum requirement – 90%) (%) 173.58 157.47

Disclosure 6

Main features of regulatory capital instruments
Description of the capital Instrument Stated capital 2016-2026 listed rated unsecured subordinated redeemable debentures 2016-2026 listed rated unsecured subordinated redeemable debentures 2018-2023 Basel III compliant – Tier 2 listed rated unsecured subordinated redeemable debentures with a non-viability conversion 2018-2028 Basel III Compliant – Tier 2 listed rated unsecured subordinated redeemable debentures with a non-viability Conversion 2021-2026 Basel III Compliant – Tier 2 Listed Rated Unsecured Subordinated Redeemable Debentures with a Non - viability Conversion 2021-2028 Basel III Compliant – Tier 2 Listed Rated Unsecured Subordinated Redeemable Debentures with a Non-viability Conversion 2022-2027 Basel III Compliant – Tier 2 Listed Rated Unsecured Subordinated Redeemable Debentures with a Non-viability Conversion 2022-2029 Basel III Compliant – Tier 2 Listed Rated Unsecured Subordinated Redeemable Debentures with a Non-viability Conversion 2022-2032 Basel III Compliant – Tier 2 Listed Rated Unsecured Subordinated Redeemable Debentures with a Non-viability Conversion 2013-2023 Floating rate subordinated loans – Tier 2 IFC borrowing
Issuer Commercial Bank Commercial Bank Commercial Bank Commercial Bank Commercial Bank Commercial Bank Commercial Bank Commercial Bank Commercial Bank Commercial Bank International Finance Corporation
Unique Identifier (e.g., ISIN or Bloomberg Identifier for Private Placement)
Governing law(s) of the instrument Sri Lanka Sri Lanka Sri Lanka Sri Lanka Sri Lanka Sri Lanka Sri Lanka Sri Lanka Sri Lanka Sri Lanka United States
Original date of issuance N/A March 9, 2016 October 28, 2016 July 23, 2018 July 23, 2018 September 21, 2021 September 21, 2021 December 12, 2022 December 12, 2022 December 12, 2022 March 13, 2013
Par value of instrument Rs. 100/- Rs. 100/- Rs. 100/- Rs. 100/- Rs. 100/- Rs. 100/- Rs. 100/- Rs. 100/- Rs. 100/-
Perpetual or dated Perpetual Dated Dated Dated Dated Dated Dated Dated Dated Dated Dated
Original maturity date, if applicable N/A March 8, 2026 October 27, 2026 July 22, 2023 July 22, 2028 September 20, 2026 September 20, 2028 December 11, 2027 December 11, 2029 December 11, 2032 March 14, 2023
Amount recognised in regulatory capital
(in Rs. ‘000 as at the reporting date) 		58,149,621 1,136,909 1,542,560 1,259,076 1,606,160 3,178,103 4,358,000 6,724,680 3,263,820 11,500 1,376,250
Accounting classification (equity/liability) Equity Liability Liability Liability Liability Liability Liability Liability Liability Liability Liability
Issuer call subject to prior supervisory approval
Optional call date, contingent call dates and
redemption amount (Rs. ‘000) 		N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Subsequent call dates, if applicable N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Coupons/dividends:
Fixed or floating dividend/coupon N/A Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Floating
Coupon rate and any related index 11.25% p.a. 12.25% p.a. 12.00% p.a. 12.50% p.a. 9.00% p.a. 9.50% p.a. 28.00% p.a. 27.00% p.a. 22.00% p.a. 6 Months LIBOR + 5.75%
Non-cumulative or cumulative Non-cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative
Convertible or non-convertible
If convertible, conversion trigger (s) N/A Not Convertible Not Convertible A “Trigger Event” is determined by and at the sole discretion of the Monetary Board of the Central Bank of Sri Lanka (i.e., conversion of the said Debentures upon occurrence of the Trigger Event will be affected by the Bank solely upon being instructed by the Monetary Board of the Central Bank of Sri Lanka), and is defined in the Banking Act Direction No. 1 of 2016 of Web-Based Return Code 20.2.3.1.1.1.(10) (iii) (a&b) as a point/event being the earlier of:
  • A decision that a write-down, without which the Bank would become non-viable, is necessary, as determined by the Monetary Board, OR
  • The decision to make a public sector injection of capital, or equivalent support, without which the Bank would have become non-viable, as determined by the Monetary Board.”
 A “Trigger Event” is determined by and at the sole discretion of the Monetary Board of the Central Bank of Sri Lanka (i.e., conversion of the said Debentures upon occurrence of the Trigger Event will be effected by the Bank solely upon being instructed by the Monetary Board of the Central Bank of Sri Lanka), and is defined in the Banking Act Directions No. 1 of 2016 of Web Based Return Code 20.2.3.1.1.1.(10) (iii) (a&b) as a point/event being the earlier of:
  • A decision that a write-down, without which the Bank would become non-viable, is necessary, as determined by the Monetary Board, OR
  • The decision to make a public sector injection of capital, or equivalent support, without which the Bank would have become non-viable, as determined by the Monetary Board.”
 A “Trigger Event” is determined by and at the sole discretion of the Monetary Board of the Central Bank of Sri Lanka (i.e. conversion of the said Debentures upon occurrence of the Trigger Event will be effected by the Bank solely upon being instructed by the Monetary Board of the Central Bank of Sri Lanka), and is defined in the Banking Act Directions No. 1 of 2016 of Web Based Return Code 20.2.3.1.1.1.(10) (iii) (a&b) as a point/event being the earlier of:
  • A decision that a write-down, without which the Bank would become non-viable, is necessary, as determined by the Monetary Board, OR
  • The decision to make a public sector injection of capital, or equivalent support, without which the Bank would have become non-viable, as determined by the Monetary Board.”
 A “Trigger Event” is determined by and at the sole discretion of the Monetary Board of the Central Bank of Sri Lanka (i.e. conversion of the said Debentures upon occurrence of the Trigger Event will be effected by the Bank solely upon being instructed by the Monetary Board of the Central Bank of Sri Lanka), and is defined in the Banking Act 0Directions No. 1 of 2016 of Web Based Return Code 20.2.3.1.1.1.(10) (iii) (a&b) as a point/event being the earlier of:
  • A decision that a write-down, without which the Bank would become non-viable, is necessary, as determined by the Monetary Board, OR
  • The decision to make a public sector injection of capital, or equivalent support, without which the Bank would have become non-viable, as determined by the Monetary Board.”
 A “Trigger Event” is determined by and at the sole discretion of the Monetary Board of the Central Bank of Sri Lanka (i.e. conversion of the said Debentures upon occurrence of the Trigger Event will be effected by the Bank solely upon being instructed by the Monetary Board of the Central Bank of Sri Lanka), and is defined in the Banking Act Directions No. 1 of 2016 of Web Based Return Code 20.2.3.1.1.1.(10) (iii) (a&b) as a point/event being the earlier of:
  • A decision that a write-down, without which the Bank would become non-viable, is necessary, as determined by the Monetary Board, OR
  • The decision to make a public sector injection of capital, or equivalent support, without which the Bank would have become non-viable, as determined by the Monetary Board.”
 A “Trigger Event” is determined by and at the sole discretion of the Monetary Board of the Central Bank of Sri Lanka (i.e. conversion of the said Debentures upon occurrence of the Trigger Event will be effected by the Bank solely upon being instructed by the Monetary Board of the Central Bank of Sri Lanka), and is defined in the Banking Act Directions No. 1 of 2016 of Web Based Return Code 20.2.3.1.1.1.(10) (iii) (a&b) as a point/event being the earlier of:
  • A decision that a write-down, without which the Bank would become non-viable, is necessary, as determined by the Monetary Board, OR
  • The decision to make a public sector injection of capital, or equivalent support, without which the Bank would have become non-viable, as determined by the Monetary Board.”
 A “Trigger Event” is determined by and at the sole discretion of the Monetary Board of the Central Bank of Sri Lanka (i.e. conversion of the said Debentures upon occurrence of the Trigger Event will be effected by the Bank solely upon being instructed by the Monetary Board of the Central Bank of Sri Lanka), and is defined in the Banking Act Directions No. 1 of 2016 of Web Based Return Code 20.2.3.1.1.1.(10) (iii) (a&b) as a point/event being the earlier of:
  • A decision that a write-down, without which the Bank would become non-viable, is necessary, as determined by the Monetary Board, OR
  • The decision to make a public sector injection of capital, or equivalent support, without which the Bank would have become non-viable, as determined by the Monetary Board.”
 Not Convertible
If convertible, fully or partially N/A N/A N/A Fully Fully Fully Fully Fully Fully Fully Not Applicable
If convertible, mandatory or optional N/A N/A N/A Optional. At the discretion of the monetary board of the Central Bank of Sri Lanka upon occurrence of trigger points as detailed above. Optional. At the discretion of the monetary board of the Central Bank of Sri Lanka upon occurrence of trigger points as detailed above. Optional. At the discretion of the monetary board of the Central Bank of Sri Lanka upon occurrence of trigger points as detailed above. Optional. At the discretion of the monetary board of the Central Bank of Sri Lanka upon occurrence of trigger points as detailed above. Optional. At the discretion of the monetary board of the Central Bank of Sri Lanka upon occurrence of trigger points as detailed above. Optional. At the discretion of the monetary board of the Central Bank of Sri Lanka upon occurrence of trigger points as detailed above. Optional. At the discretion of the monetary board of the Central Bank of Sri Lanka upon occurrence of trigger points as detailed above. Not Applicable
If convertible, conversion rate N/A N/A N/A The price based on the simple average of the daily volume of weighted average price (VWAP) of an ordinary voting share of the Bank during the three (03) months period, immediately preceding the date of the Trigger Event. The price based on the simple average of the daily volume of weighted average price (VWAP) of an ordinary voting share of the Bank during the three (03) months period, immediately preceding the date of the Trigger Event. The price based on the simple average of the daily volume weighted average price (VWAP) of an ordinary voting share of the Bank during the three (03) months period, immediately preceding the date of the Trigger Event. The price based on the simple average of the daily volume weighted average price (VWAP) of an ordinary voting share of the Bank during the three (03) months period, immediately preceding the date of the Trigger Event. The price based on the simple average of the daily volume weighted average price (VWAP) of an ordinary voting share of the Bank during the three (03) months period, immediately preceding the date of the Trigger Event. The price based on the simple average of the daily volume weighted average price (VWAP) of an ordinary voting share of the Bank during the three (03) months period, immediately preceding the date of the Trigger Event. The price based on the simple average of the daily volume weighted average price (VWAP) of an ordinary voting share of the Bank during the three (03) months period, immediately preceding the date of the Trigger Event. Not Applicable

Disclosure 7

Summary discussion on adequacy/meeting current and future capital requirements

The Bank prepares the Corporate Plan and Budget for a period of 5 years which is rolled over every year and contains the forecast for key ratios mentioned under Basel III accord including the Capital Adequacy ratios (CARs).

As part of the budgeting process the CARs are computed based on the movements in risk-weighted assets underlying the budgeted expansion of assets, including business volumes. The Bank has set up an internal threshhold on minimum CARs and ensures that appropriate measures are taken to maintain the CARs above the said threshhold in preparing the budget. The budget also captures the capital augmentation plan covering both internal and external capital sources. The Bank has a well established monitoring mechanism to periodically monitor the level of achievement against pre-determined targets to take timely corrective action in case of significant deviations.

Additionally, the Bank has a dynamic ICAAP process with rigorous stress testing embodied in addition to taking into consideration the qualitative aspects such as reputational and strategic risks. The ICAAP process also computes the concentration risk ensuring that the Bank has a well-diversified assets portfolio which is not overly exposed to any individual counterparty or sector. In addition ICAAP process also captures the residual risk to assess the amount of risk that remains after controls are accounted for. This process also proactively identifies the possible gaps in CARs in advance, allowing the Bank to take calculated decisions to optimise utilisation of capital.

Methods of improving the CARs are being evaluated on an ongoing basis and in extreme situations, the Bank will deliberate on strategically curtailing the expansion of risk weighted assets. However, prior to taking such decisions, the Bank will assess the impact on the internally developed thresholds of minimum CARs resulting from the short-term asset expansion plans. The Bank is committed to maintaining the internal CAR thresholds despite any leniency provided by Central Bank of Sri Lanka (CBSL) during adverse times.

The Bank’s capital adequacy as at March 31, 2022, for the first time, dropped below the regulatory minimum to 13.087%. In June 2022, the Bank’s capital adequacy remained below the regulatory minimum at 13.528%, effectively resulting in a drawdown of the Capital Conservation Buffer (CCB) as per the Banking Act Direction No. 04 of 2022, dated May 23, 2022, which allows licensed banks to drawdown CCB up to 2.5% subject to the conditions stipulated in the Banking Act Direction No. 01 of 2016 on Capital Requirements under Basel III for licensed commercial banks and licensed specialised banks. In line with this Direction the Bank submitted a Board-approved capital augmentation plan towards rebuilding the CCB to 2.5% within 3 years as required by the said Direction. Due to the actions taken, the Bank was able to record CAR's above the minimum regulatory levels for the 3rd and 4th quarters of 2022.

When deciding the dividend for Financial Year 2022, the Bank carried out numerous analysis to identify the most feasible dividend payout, while ensuring a sustainable growth for Financial Year 2023. The dividend proposed by the Bank is also in consideration of the Direction No. 01 of 2023 issued by CBSL on 02 February 2023, which states that 'Licensed banks shall give due consideration to the requirements of the Banking Act Direction No. 01 of 2016 on Capital Requirements under Basel III for Licensed Banks, expected assets growth, business expansion and the potential impact of the prevailing macro-economic conditions when deciding on payments of cash dividends and repatriation of profits for the year 2022' and 'Licensed banks shall inform the Director of Bank Supervision, the Board approved detailed assessment carried out in deciding the payments of cash dividends and repatriation of profits for the year 2022, prior to payment of such dividend/repatriation of profits.' The dividend is proposed also ensuring the Bank maintains a quarterly CAR above the minimum thresholds as per the Basel III guidelines, taking into account capital augmentation plans for the year.

A comprehensive analysis of “Managing Funding and Liquidity” given in the section on Sustainable banking – Value creation.

Disclosure 8

Credit risk under standardised approach

Credit risk exposures and credit risk mitigation (CRM) effects
GROUP
As at December 31, 2022 Exposures before credit conversion factor (CCF) and CRM Exposures post CCF and CRM RWA and RWA density (%)
On-balance sheet amount (a) Off-balance sheet amount (b) On-balance sheet amount (c) Off-balance sheet amount (d) RWA (e) RWA density {e/(c+d)}
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 (%)
Claims on Central Government and Central Bank of Sri Lanka 866,252,166 59,087,000 866,252,166 1,181,740 30,787,626 3.55
Claims on Foreign Sovereigns and their Central Banks 106,259,314 – 106,259,314 – 106,259,314 100.00
Claims on Public Sector Entities (PSEs) 5,333,014 – 5,333,014 – 1,066,603 20.00
Claims on Official Entities and Multilateral Development Banks(MDBs) 2,088,501 – 2,088,501 – – –
Claims on Banks Exposures 199,077,448 37,334,432 199,077,448 6,221,731 98,272,251 47.87
Claims on Financial Institutions 14,358,293 – 14,358,293 – 7,636,972 53.19
Claims on Corporates 695,782,201 429,119,443 626,100,186 80,064,554 667,111,184 94.47
Retail Claims 336,600,006 16,846,394 290,382,318 11,004,692 230,215,654 76.39
Claims Secured by Residential Property 86,363,440 – 86,363,440 – 49,885,641 57.76
Claims Secured by Commercial Real Estate – – – – – –
Non-Performing Assets (NPAs) 68,099,240 – 68,099,240 – 78,826,614 115.75
Higher-risk Categories – – – – – –
Cash Items and Other Assets 100,013,016 – 100,013,016 – 46,119,291 46.11
Claims on Central Government and Central Bank of Sri Lanka 864,597,453 59,087,000 864,597,453 1,181,740 30,787,626 3.56
Claims on foreign sovereigns and their central banks 58,499,578 - 58,499,578 - 58,499,578 100.00
Claims on public sector entities (PSEs) 5,333,014 - 5,333,014 - 1,066,603 20.00
Claims on Official Entities and Multilateral Development Banks (MDBs) 2,088,501 - 2,088,501 - - -
Claims on Banks exposures 198,236,270 37,334,432 198,236,270 6,221,731 97,431,073 47.65
Claims on financial institutions 14,358,293 - 14,358,293 - 7,636,972 53.19
Claims on corporates 671,555,569 427,538,094 605,533,320 78,908,796 645,388,560 94.29
Retail claims 336,600,006 16,846,394 290,382,318 11,004,692 230,215,654 76.39
Claims secured by residential property 86,363,440 - 86,363,440 - 49,885,641 57.76
Claims Secured by Commercial Real Estate - - - - - -
Non-performing assets (NPAs) 67,622,236 - 67,622,236 - 78,349,610 115.86
Higher-risk Categories 1,579,848 - 1,579,848 - 3,949,620 250.00
Cash items and other assets 96,821,792 - 96,821,792 - 43,986,060 45.43
Total 2,403,656,000 540,805,920 2,291,416,063 97,316,959 1,247,196,997 52.21

Disclosure 9

Credit risk under standardised approach

Exposures by asset classes and risk weights (Post CCF and CRM)
GROUP
As at December 31, 2022 0% 20% 35% 50% 60% 75% 100% 150% >150% Total credit exposures amount
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000
Claims on Central Government and
Central Bank of Sri Lanka 		713,495,777 153,938,129 – – – – – – – 867,433,906
Claims on Foreign Sovereigns and their Central Banks – – – – – – 106,259,314 – – 106,259,314
Claims on Public Sector Entities (PSEs) – 5,333,014 – – – – – – – 5,333,014
Claims on Official Entities and Multilateral Development Banks(MDBs) 2,088,501 – – – – – – – – 2,088,501
Claims on Banks Exposures – 113,795,464 – 31,981,117 – – 59,522,598 – – 205,299,179
Claims on Financial Institutions – 187,823 – 13,142,127 – – 1,028,343 – – 14,358,293
Claims on Corporates – 23,217,318 – 40,959,404 – – 641,988,018 – – 706,164,740
Retail Claims 13,596,731 1,981,722 – – 40,811,529 158,658,541 86,338,487 – – 301,387,010
Claims Secured by Residential Property – – 56,119,691 – – – 30,243,749 – – 86,363,440
Claims Secured by Commercial Real Estate – – – – – – – – – –
Non-Performing Assets (NPAs) – – – 359,551 – – 45,925,392 21,814,297 – 68,099,240
Higher-risk Categories – – – – – – – – – –
Cash Items and Other Assets 46,369,808 9,404,896 – – – – 44,238,312 – – 100,013,016
Claims on Central Government and Central Bank of Sri Lanka 711,841,064 153,938,129 – – – – – – – 865,779,193
Claims on Foreign Sovereigns and
their Central Banks 		– – – – – – 58,499,578 – – 58,499,578
Claims on Public Sector Entities (PSEs) – 5,333,014 – – – – – – – 5,333,014
Claims on Official Entities and Multilateral Development Banks(MDBs) 2,088,501 – – – – – – – – 2,088,501
Claims on Banks Exposures – 113,795,464 – 31,981,117 – – 58,681,420 – – 204,458,001
Claims on Financial Institutions – 187,823 – 13,142,127 – – 1,028,343 – – 14,358,293
Claims on Corporates – 23,217,318 – 40,959,404 – – 620,265,394 – – 684,442,116
Retail Claims 13,596,731 1,981,722 – – 40,811,529 158,658,541 86,338,487 – – 301,387,010
Claims Secured by Residential Property – – 56,119,691 – – – 30,243,749 – – 86,363,440
Claims Secured by Commercial
Real Estate 		– – – – – – – – – –
Non-Performing Assets (NPAs) – – – 359,551 – – 45,448,388 21,814,297 – 67,622,236
Higher-risk Categories – – – – – – – – 1,579,848 1,579,848
Cash Items and Other Assets 45,311,815 9,404,896 – – – – 42,105,081 – – 96,821,792
Total 772,838,111 307,858,366 56,119,691 86,442,199 40,811,529 158,658,541 942,610,440 21,814,297 1,579,848 2,388,733,022

Disclosure 10

Market risk under standardised measurement method
GROUP Bank
As at December 31, 2022 2021 2022 2021
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000
(a) Capital charge for interest rate risk 3,111,900 2,581,624 3,111,900 2,581,624
General interest rate risk 423,149 652,661 423,149 652,661
(i) Net long or short position 423,149 652,661 423,149 652,661
(ii) Horizontal disallowance – – – –
(iii) Vertical disallowance – – – –
(iv) Options – – – –
Specific interest rate risk 2,688,751 1,928,963 2,688,751 1,928,963
(b) Capital charge for equity 562,758 405,300 562,758 405,300
(i) General equity risk 283,473 207,593 283,473 207,593
(ii) Specific equity risk 279,285 197,707 279,285 197,707
(c) Capital charge for foreign exchange and gold 1,196,713 456,643 1,193,982 455,261
(d) Capital charge for market risk [(a) + (b) + (c)] 4,871,371 3,443,567 4,868,640 3,442,185
Total risk - weighted amount for Market Risk [ ( d )*100 / CAR ] 34,795,507 26,488,977 34,776,000 26,478,346

Disclosure 11

Operational risk under the Alternative Standardised Approach (ASA) – Group
As at December 31, 2022 2021
Gross income Gross income
Capital charge factor Fixed factor 1st year 2nd year 3rd year 1st year 2nd year 3rd year
% Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000
Corporate finance 18 160,423 285,894 385,666 167,464 157,810 285,894
Trading and sales 18 7,747,013 18,704,206 (8,868,815) 3,852,135 7,747,014 18,704,206
Payment and settlement 18 730,737 1,575,958 1,140,451 690,845 730,737 1,575,958
Agency services 15 – – – – – –
Asset management 12 – – – – – –
Retail brokerage 12 – – – – – –
Sub total (a) 8,638,173 20,566,058 (7,342,698) 4,710,444 8,635,561 20,566,058
Retail banking (Loans and advances) 12 0.035 513,177,931 550,644,113 604,715,367 487,202,436 513,177,931 550,644,113
Commercial banking (Loans and advances) 15 0.035 927,864,854 1,220,373,745 1,531,114,412 719,146,950 927,864,854 1,220,373,745
Sub total (b) 1,441,042,785 1,771,017,858 2,135,829,779 1,206,349,386 1,441,042,785 1,771,017,858
Total (a) + (b) 1,449,680,958 1,791,583,916 2,128,487,081 1,211,059,830 1,449,678,346 1,791,583,916
Capital charge for operational risk 8,581,508 12,421,557 10,578,156 6,669,652 8,581,039 12,421,558
Average capital charge (c) 10,527,074 9,224,083
RWA for operational risk [(c)*100/ CAR] 75,193,383 70,954,479

Operational risk under the Alternative Standardised Approach (ASA) – Bank

As at December 31, 2022 2021
Gross income Gross income
Capital charge factor Fixed factor 1st year 2nd year 3rd year 1st year 2nd year 3rd year
% Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000
Corporate finance 18 160,423 285,894 385,666 167,464 157,810 285,894
Trading and sales 18 7,414,973 18,457,279 (9,362,313) 3,661,995 7,414,971 18,457,281
Payment and settlement 18 730,737 1,575,958 1,140,451 690,845 730,737 1,575,958
Agency services 15 – – – – – –
Asset management 12 – – – – – –
Retail brokerage 12 – – – – – –
Sub total (a) 8,306,133 20,319,131 (7,836,196) 4,520,304 8,303,518 20,319,133
Retail banking (Loans and advances) 12 0.035 506,645,437 542,594,578 596,509,725 481,442,015 506,645,437 542,594,578
Commercial banking (Loans and advances) 15 0.035 913,988,024 1,199,495,133 1,480,967,025 708,987,024 913,988,024 1,199,495,133
Sub total (b) 1,420,633,461 1,742,089,711 2,077,476,750 1,190,429,039 1,420,633,461 1,742,089,711
Total (a) + (b) 1,428,939,594 1,762,408,842 2,069,640,554 1,194,949,343 1,428,936,979 1,762,408,844
Capital charge for operational risk 8,421,452 12,233,689 10,280,418 6,557,893 8,420,981 12,233,691
Average capital charge (c) 10,311,853 9,070,855
RWA for operational risk [(c)*100/ CAR] 73,656,093 69,775,808

Disclosure 12

Differences between accounting and regulatory scopes and mapping of financial statement categories with regulatory risk categories – Bank
As at December 31, 2022 a b c d e
Carrying values as reported in published financial statements Carrying values under scope of regulatory reporting Subject to credit risk framework Subject to market risk framework Not subject to capital requirements or subject to deduction from capital
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000
Assets 2,425,798,032 2,425,798,032 2,403,656,000 24,873,057 37,451,706
Cash and cash equivalents 149,393,611 149,393,611 149,393,611 –
Balances with Central Banks 66,493,499 66,493,499 66,493,499 – –
Placements with banks 95,899,645 95,899,645 95,899,645 – –
Securities purchased under re-sale agreements 1,517,308 1,517,308 1,517,308 – –
Derivative financial assets 8,345,091 8,345,091 8,345,091 – –
Financial assets recognised through profit or loss – Measured at fair value 24,873,057 24,873,057 – 24,873,057 –
Financial assets at amortised cost – Loans and advances to other customers 1,130,442,579 1,130,442,579 1,170,625,310 – –
Financial assets at amortised cost –
Debt and other financial instruments 		725,935,299 725,935,299 725,935,299 – –
Financial assets measured at fair value through other comprehensive income 117,056,240 117,056,240 117,056,240 – –
Investments in subsidiaries 5,808,429 5,808,429 2,221,046 – 3,587,383
Investment in associate 44,331 44,331 44,331 – –
Property, plant and equipment and right-of-use assets 25,425,452 25,425,452 25,425,452 – –
Intangible assets 3,563,120 3,563,120 – – 3,563,120
Deferred tax assets 30,301,203 30,301,203 – – 30,301,203
Other assets 40,699,168 40,699,168 40,699,168 – –
Liabilities 2,222,099,356 2,222,099,356 – – –
Due to banks 65,130,061 65,130,061 – – –
Derivative financial liabilities 2,880,667 2,880,667 – – –
Securities sold under repurchase agreements 97,726,435 97,726,435 – – –
Financial liabilities at amortised cost – Due to depositors 1,914,359,494 1,914,359,494 – – –
Financial liabilities at amortised cost – Other borrowings 16,150,356 16,150,356 – – –
Current tax liabilities 24,475,319 24,475,319 – – –
Deferred tax liabilities – – – – –
Other liabilities 39,860,573 39,860,573 – – –
Due to subsidiaries 115,484 115,484 – – –
Subordinated liabilities 61,400,967 61,400,967 – – –
Off-balance sheet liabilities 549,421,699 549,421,699 540,805,920 – –
Guarantees 62,296,878 62,296,878 58,422,006 – –
Performance bonds 71,888,851 71,888,851 71,888,851 – –
Letter of credit 49,339,057 49,339,057 49,339,057 – –
Other contingent items 231,710,737 231,710,737 229,090,888 – –
Undrawn loan commitments 132,065,118 132,065,118 132,065,118 – –
Other commitments 2,121,058 2,121,058 – – –
Shareholders’ equity 203,698,676 203,698,676 – – –
Equity capital (stated capital)/assigned capital:
Of which amount eligible for CET1 58,149,621 58,149,621 – – –
Of which amount eligible for AT1 – – – – –
Retained earnings 5,592,121 5,592,121 – – –
Accumulated other comprehensive income 78,741 78,741 – – –
Other reserves 139,878,193 139,878,193 – – –

Disclosure 13

Bank Risk Management Approach

Effective risk management is at the core of the Bank’s value creation model as we accept risk in the normal course of business. Significant resources are devoted to this critical function to ensure that it is well articulated, communicated and understood by all employees of the Bank as it is a shared responsibility. It is a dynamic and disciplined function increasing in sophistication and subject to stringent oversight by regulators and other stakeholders. The overarching objectives are to ensure that risks accepted are in line with the Bank’s risk appetite and strategic priorities and that there is an appropriate trade-off between risk and reward enabling delivery of value to key stakeholders.“ The risk governance structure, responsibilities attributed throughout the bank, risk management framework, objectives, strategies, policy framework, risk appetite and tolerance limits for key risk types, and the overall risk management approach of the Bank are discussed in the section on “Risk Governance and Management”.

Disclosure 14

Risk management related to key risk exposures

The quantitative disclosures relating to key risk areas such as credit, market, liquidity, operational, and interest rate risk in the banking book are presented and discussed in the Section on “Risk Governance and Management” and in Note 66 of the Financial Statements on Financial Risk Review.

D-SIB Assessment Exercise (As per the CBSL Direction No. 10 of 2019)

GROUP
2022 Rs. ’000 2021 Rs. ’000
Size Indicator
Section 1 – Total Exposures
Total exposures measure 2,856,960,615 2,540,662,511
Interconnectedness Indicators
Section 2 – Intra-Financial System Assets
a. Funds deposited with or lent to other financial institutions (including unused portion of committed lines extended) ( i + ii ) 211,206,903 63,989,509
(i) Funds deposited 199,077,447 50,149,790
(ii) Lending 12,129,456 13,839,719
b. Holdings of securities issued by other financial institutions 2,228,837 1,292,987
c. Net positive current exposure of securities financing transactions (SFTs) with other financial institutions 753,377 2,531,984
d. Over-the-counter (OTC) derivatives with other financial institutions that have a net positive mark to
market value 		7,917,582 4,069,292
Intra-financial system assets (a + b + c + d) 222,106,699 71,883,772
Section 3 – Intra-Financial System Liabilities
a. Funds deposited by or borrowed from other financial institutions (including unused portion of committed lines obtained) 114,365,898 130,831,756
(i) Funds deposited 32,419,099 18,622,547
(ii) Borrowings 81,946,799 112,209,209
b. Net negative current exposure of securities financing transactions with other financial institutions (103,890) 295,021
c. Over-the-counter derivatives with other financial institutions that have a net negative mark to market value 1,100,998 1,671,733
Intra-financial system liabilities (a + b + c) 115,363,006 132,798,510
Section 4 – Securities Outstanding
Securities outstanding 32,272,760 22,204,430
Substitutability/Financial Institution Infrastructure Indicators
Section 5 – Payments made in the reporting year (excluding intragroup payments)
Payments activity 12,697,577,820 10,017,954,179
GROUP
2022 Rs. ’000 2021 Rs. ’000
Section 6 – Assets Under Custody
Assets under custody 3,726,558 8,011,578
Section 7 – Underwritten Transactions in Debt and Equity Markets
Underwriting activity – –
Section 8 – Trading Volume
a. number of shares or securities 7,089 9,242
b. value of the transactions 349,929 533,950
Trading Volume (a+b) 357,018 543,192
Complexity indicators
Section 9 – Notional Amount of Over-the-Counter (OTC) Derivatives
OTC derivatives 128,727,586 222,505,837
Section 10 – Level 2 Assets
Level 2 assets 48,817,700 57,436,453
Section 11 – Trading and available for sale (AFS) securities
a. debt instruments 143,309,257 363,949,718
b. equity instruments 216,057 449,856
c. derivatives 8,345,091 3,245,120
Trading and available for sale (AFS) securities (a+b+c) 151,870,405 367,644,694
Section 12 – Cross-Jurisdictional Liabilities
Cross-jurisdictional liabilities (excluding derivatives and intragroup liabilities) 207,509,927 147,024,936
Section 13 – Cross-Jurisdictional Claims
Cross-jurisdictional claims (excluding derivatives and intragroup claims) 226,229,242 66,100,684