Pushing the Pace in
a Resurgent Sri Lanka
a Resurgent Sri Lanka
The specific principles, bases, conventions, rules and practices adopted by an entity in preparing and presenting Financial Statements.
Promise to pay, created when the drawee of a time draft, stamps or writes the word ‘accepted’ above his signature and a designated payment date.
Recognizing the effects of transaction and other events when they occur without waiting for receipt or payment of cash or its equivalent.
The systematic allocation of the depreciable amount of an intangible asset over its useful life.
The amount at which the financial asset or financial liability is measured at initial recognition minus principal prepayments, plus or minus the cumulative amortization using the effective interest rate method of any difference between that initial amount and the maturity amount, and minus any reduction (directly or through the use of an allowance account) for impairment or uncollectability.
A risk-management committee in a bank that generally comprises the senior management of the institution. The ALCO’s primary goal is to evaluate, monitor and approve practices relating to risk due to imbalances in the capital structure. Among the factors considered are liquidity risk, interest rate risk, operational risk and external events that may affect the Bank’s forecast and strategic balance sheet allocations.
An entity, including an unincorporated entity such as a partnership, over which the investor has significant influence and that is neither a subsidiary nor an interest in a joint venture.
A debt or equity security that is purchased with the intent of selling before it reaches maturity, or selling prior to a lengthy time period in the event the security does not have a maturity.
Money deposited by account holders. Such funds are recorded as liabilities.
A bill of exchange drawn by an exporter usually at a term, on an importer overseas and brought by the exporter to his bank with a request to collect the proceeds.
The relationship between capital and risk-weighted assets as defined in the framework developed by the Bank for International Settlements (BIS) and as modified by the Central Bank of Sri Lanka to suit local requirements.
Refer to any stock of value such as customer base, staff strength, relationships with the community etc. that will increase, decrease or transform through the activities of an organisation and that will help it generate earnings in future.
Short term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
Also known as portfolio impairment provisions. Impairment assessment on a collective basis for homogenous groups of loans that are not considered individually significant and to cover losses that has been incurred but has not yet been identified at the reporting date. Typically assets within the Retail Banking business (Housing, personal, vehicle loans etc.) are assessed on a portfolio basis.
Credit facilities approved but not yet utilised by the clients at the date of the Statement of Financial Position.
A condition or situation existing at the date of the Statement of Financial Position where the outcome will be confirmed only by occurrence or non-occurrence of one or more future events.
Operating expenses excluding impairment for loans and receivables and other losses as a percentage of total operating income.
The process by which corporate entities are governed. It is concerned with the way in which power is exercised over the management and direction of entity, the supervision of executive actions and accountability to owners and others.
A bank in a foreign country that offers banking facilities to the customers of a bank in another country.
Credit risk or default risk is most simply defined as the potential that a borrower or counterparty will fail to meet its obligations in accordance with agreed terms and conditions.
An evaluation of a corporate’s ability to repay its obligations or the likelihood of not defaulting, carried out by an independent rating agency.
Money deposited by account holders. Such funds are recorded as liabilities.
A method of accounting whereby the investment is recorded at cost. The Statement of Profit or Loss reflects income from the investment only to the extent that the investor receives distributions from accumulated net profits of the investee arising subsequent to the date of acquisition.
Sum set aside for tax in the Financial Statements that may become payable/receivable in a financial year other than the current financial year.
The systematic allocation of the depreciable amount of an asset over its useful life.
Profit after tax divided by gross dividends. This ratio measures the number of times dividend is covered by current year’s distributable profits.
A debt or other financial obligation is considered to be in a state of delinquency when payments are overdue. Loans and receivables are considered to be delinquent when consecutive payments are missed. Also known as ‘Arrears’.
A derivative is a financial instrument or other contract, the value of which changes in response to some underlying variable (e.g., an interest rate).
Removal of a previously recognized financial asset or financial liability from an entity’s Statement of Financial Position.
Dividend earned per share as a percentage of its market value.
Commercial letters of credit provided for payment by a bank to the named beneficiary usually the seller of merchandise, against delivery of documents specified in the credit.
Profit attributable to ordinary shareholders divided by the weighted average number of ordinary shares in issue.
Provision for taxation including deferred tax divided by the profit before taxation.
This is a method of accounting whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition changes in the investor’s share of net assets of the investee. The profit or loss of the investor includes the investor’s share of the profit or loss of the investee.
A measure of productivity which takes into consideration cost of total invested equity.
Rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instruments or when appropriate a shorter period to the net carrying amount of the financial asset or financial liability.
A method of giving employees shares in the business for which they work.
The amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.
An adjustment to the fair value of a financial instrument which is determined using a valuation technique (level 2 and level 3) to include additional factors that would be considered by a market participant that are not incorporated within the valuation model.
A financial asset/liability: Acquired/incurred principally for the purpose of selling or repurchasing it in the near term, part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of a short-term profit-taking, or a derivative (except for a derivative that is a financial guarantee contract).
A financial instrument is any contract that gives rise to both a financial asset in one entity and a financial liability or equity instrument in another entity.
Any assets that is cash, equity instrument of another entity, a contractual right to receive cash or contractual right to receive another financial asset from another entity.
A contractual obligation to deliver cash or another financial asset to another entity or to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the entity.
A contract whereby a lessor conveys to the lessee the right to use an asset for rent over an agreed period of time which is sufficient to amortize the capital outlay of the lessor. The lessor retains ownership of the asset but transfers substantially all the risks and rewards of ownership to the lessee.
Profit earned on foreign currency transactions arising from the difference in foreign exchange rates between the transaction/last date of the Statement of Financial Position and the settlement/date of the Statement of Financial Position. Also arises from trading in foreign currencies.
Agreement between two parties to exchange one currency for another at a future date at a rate agreed upon today.
A Group is a parent and all its subsidiaries and associates.
Three party agreement involving a promise by one party (the guarantor) to fulfil the obligations of a person owing a debt if that person fails to perform.
The portion of profits distributed to the shareholders including the tax withheld.
Investments and debt securities that a Company has the ability and intent to hold until maturity.
Debt and equity investments that are purchased with the intent of selling them within a short period of time (usually less than one year).
A strategy under which transactions are effected with the aim of providing cover against the risk of unfavourable price movements (Interest rate, Prices and Commodities, etc.).
Historical cost is the original nominal value of an economic item.
This occurs when recoverable amount of an asset is less than its carrying amount.
Amounts set aside against possible losses on loans, receivables and other credit facilities as a result of such facilities becoming partly or wholly uncollectible.
An intangible asset is an identifiable non-monetary asset without physical substance.
Loans where identified impairment provisions have been raised and also include loans which are collateralized or where indebtedness has already been written down to the expected realizable value. The impaired loan category may include loans, which, while impaired, are still performing.
Management’s best estimate of losses incurred in the loan portfolios at the reporting date.
A methodology of reporting an organisation's strategy, governance, financial performance and prospects in relation to the creation of value over the short, medium and long term in its economic, social and environmental context.
A real estate property that has been purchased with the intention of earning a return on the investment (purchase), either through rent (income), the future resale of the property, or both
The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
Joint control is the contractually agreed sharing of the control over an economic activity, and exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control.
A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any Director (whether Executive or otherwise) of that entity and key employees who are holding directorships in subsidiary companies and other key employees who meet the criteria mentioned above.
Assets that are held in cash or in a form that can be converted to cash readily, such as deposits with other banks, Bills of Exchange, Treasury Bills and Bonds.
The risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.
Conventional loan assets that are unquoted (originated or acquired).
The estimated ratio (percentage) of the loss on an exposure to the amount outstanding at default (EAD) upon default of counterparty.
Number of ordinary shares in issue multiplied by the market value of a share as at a date.
This refers to the possibility of loss arising from changes in the value of a financial instrument as a result of changes in market variables such as interest rates, exchange rates, credit spreads and other asset prices.
The relative significance of a transaction or an event, the omission or misstatement of which could influence the economic decisions of users of Financial Statements.
The interest of individual shareholders, in a company more than 50% of which is owned by a holding company.
Shareholders’ funds excluding preference shares, if any, divided by the number of ordinary shares in issue.
The difference between the amount a bank earns on assets such as loans and securities and the amount it pays on liabilities such as deposits, refinance funds and inter-bank borrowings.
Net interest income expressed as a percentage of average interest earning assets.
A loan or an receivables placed on cash basis (i.e. Interest income is only recognised when cash is received) because, in the opinion of management, there is reasonable doubt regarding the collectability of principal or interest.
Cumulative loan provision as a percentage of total non-performing Loans (net of interest in suspense).
Total non-performing loans and receivables (net of interest in suspense) divided by total loans and receivables portfolio (net of interest in suspense).
Equity in a subsidiary not attributable, directly or indirectly, to a Parent.
Total net non-performing loans and advances expressed as a percentage of shareholders' fund.
This refers to the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.
A parent is an entity that has one or more subsidiaries.
Market price of a share divided by earnings per share.
Total provisions for loan losses expressed as a percentage of net non-performing loans and receivables before discounting for provisions on non-performing loans and receivables.
Parties where one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions, directly or indirectly.
Profit after tax divided by the average assets.
On-Balance Sheet assets and the credit equivalent of off-Balance Sheet assets multiplied by the relevant risk weighting factors.
Contract to sell and subsequently repurchase securities at a specified date and price.
Transaction involving the purchase of securities by a bank or dealer and resale back to the seller at a future date and specified price.
Net profit for the year, less preference share dividends, if any, expressed as a percentage of average ordinary shareholders’ equity.
Reserves that are set aside for future distribution and investments.
Part of the shareholders’ equity that arises from changes in the current value of property, plant and equipment.
Analysis of financial information by segments of an entity specifically, the different industries and the different geographical areas in which it operates.
Total of stated capital and capital and revenue reserves.
33% of the regulatory capital base.
A capital reserve created as per the provisions of the Banking Act No. 30 of 1988.
The consideration that the accounting treatment and the presentation in Financial Statements of transactions and events should be governed by their substance and financial reality and not merely by legal form.
An entity, including an unincorporated entity such as a partnership, which is controlled by another entity (known as the Parent).
The simultaneous purchase of an amount of a currency for spot settlement and the sale of the same amount of the same currency for forward settlement.
Impairment is measured individually for loans that are individually significant to the Bank.
Core capital representing permanent shareholders' equity and reserves created or increased by appropriations of retained earnings or other surpluses.
Supplementary capital representing revaluation reserves, general provisions and other capital instruments, which combine certain characteristics of equity and debt such as hybrid capital instruments and subordinated term debts.
Capital base is summation of the core capital (Tier I) and the supplementary capital (Tier II).
An undertaking formed to invest in securities under the terms of a trust deed.
Value of wealth created by providing banking and other related services less the cost of providing such services.
The discount rate at which a security’s present value of future cash flows will be equal to the security’s current price.