Pushing the Pace in
a Resurgent Sri Lanka
a Resurgent Sri Lanka
The Central Bank of Sri Lanka (CBSL) has prescribed the minimum risk sensitive capital, and effective from 1 January 2008, required the Bank to compute the minimum capital in accordance with the ‘International Convergence of Capital Measurement and Capital Standards - a Revised Framework’ (BASEL II). The aim is to ensure minimum capital,commensurate with risks assumed by the Bank, is maintained as a buffer to absorb credit, market & operational losses in the foreseeable future.
The core capital ratio is expressed as total Tier I capital as a percentage of total risk weighted assets.
The total capital adequacy ratio is expressed as total Tier I capital and Tier II capital as a percentage of total risk-weighted assets.
The composition of capital and risk weights assigned to the on and off balance sheet assets are as prescribed by the Central Bank of Sri Lanka.
The Tier I capital of the Bank consists of the stated capital, retained earnings and other reserves after deducting intangible assets, 50 % of the investments in unconsolidated banking and financial subsidiaries and 50% investments in capital of other banks and financial institutions.
The Tier II capital of the Bank includes CBSL approved subordinated term debts, 50% of the revaluation reserve and the general loan loss provision after deducting 50% of the investments in unconsolidated banking and financial subsidiaries and 50% investments in capital of other banks and financial institutions.
In arriving at the Risk-Weighted Assets (RWA) of the Bank, the Standardized Approach for credit risk, Standardized Measurement Method for market risk and the Basic Indicator Approach for operational risk have been used.
| BANK | ||
| Capital Base as at 31 December | 2014
LKR ’000 |
2013
LKR ’000 |
| Tier I: Core Capital | ||
| Capital | 1,225,162 | 1,172,904 |
| Statutory Reserve Fund | 1,010,785 | 958,527 |
| Investment Fund Account | – | 1,706,751 |
| Available-for-Sale Reserve | 105,250 | 106,669 |
| Share Based Payment Reserve | 20,243 | 22,367 |
| Cash Flow Hedge Reserve | 397,852 | – |
| Revaluation Reserve net of tax | 853,456 | – |
| Retained Earnings | 18,625,444 | 15,653,260 |
| Total Equity | 22,238,192 | 19,620,478 |
| Less: Reserves not eligible for Tier I and charges to Statement of Comprehensive Income | 1,201,649 | 74,598 |
| Total equity considered for Tier I Capital | 21,036,543 | 19,545,880 |
| Deductions - Tier I | ||
| Intangible assets | 253,132 | 260,425 |
| 50% investments in unconsolidated banking and financial subsidiaries | 886,070 | 904,717 |
| 50% investments in capital of other banks and financial institutions | 9,263 | 30,984 |
| 1,148,465 | 1,196,126 | |
| Total Tier I Capital | 19,888,078 | 18,349,754 |
| Tier II: Supplementary Capital | ||
| General loan loss provision | 786,362 | 641,815 |
| Approved Revaluation Reserve | 542,092 | – |
| Approved subordinated term debts | 8,610,732 | 9,163,692 |
| 9,939,186 | 9,805,507 | |
| Deductions - Tier II | ||
| 50% investments in unconsolidated banking and financial subsidiaries | 886,070 | 904,717 |
| 50% investments in capital of other banks and financial institutions | 9,263 | 30,984 |
| 895,333 | 935,701 | |
| Eligible Tier II Capital | 9,043,853 | 8,869,806 |
| Capital Base (Tier I + Tier II) | 28,931,931 | 27,219,560 |
| BANK | |||||
| Assets for Credit Risk | Risk Weights | Risk-Weighted Assets | |||
| 2014
LKR ’000 |
2013
LKR ’000 |
% |
2014
LKR ’000 |
2013
LKR ’000 |
|
Risk-Weighted Assets and Off-Balance Sheet Exposure |
|||||
| Cash and claims on Central Government and Central Bank of Sri Lanka | 57,012,321 | 43,974,128 | 0 | – | – |
| Claims secured by cash deposits, gold and guarantees | 16,178,539 | 11,507,606 | 0 | – | – |
| Claims on banks | 8,103,229 | 2,602,746 | 20-100 | 3,235,305 | 836,820 |
| Claims on financial institutions | 9,210,855 | 9,244,553 | 50-100 | 5,223,618 | 4,916,134 |
| Loans secured by residential property | 7,047,969 | 5,360,620 | 50 | 3,523,984 | 2,680,310 |
| Past due loans | 2,236,918 | 1,702,511 | 50-150 | 3,071,530 | 2,304,397 |
| Retail claims and corporate claims | 162,166,523 | 129,441,089 | 20-150 | 151,514,624 | 119,745,877 |
| Property, plant and equipment | 1,927,494 | 872,890 | 100 | 1,927,494 | 872,890 |
| Other assets | 3,573,443 | 2,554,940 | 100 | 3,573,443 | 2,554,940 |
| Total Assets considered for Credit Risk | 267,457,291 | 207,261,083 | 172,069,998 | 133,911,368 | |
| BANK | |||||
| Principal Amount of Off-Balance Sheet Items |
Credit Conversion
Factor |
Credit Equivalent of
Off-Balance Sheet Items |
|||
| 2014
LKR ’000 |
2013
LKR ’000 |
% |
2014
LKR ’000 |
2013
LKR ’000 |
|
| General guarantees of indebtedness | 11,215,680 | 11,587,079 | 100 | 11,215,680 | 11,587,079 |
| Standby Letters of credit relating to particular transactions | 65,950 | 35,168 | 50 | 32,975 | 17,584 |
| Performance bonds and bid bonds | 6,503,688 | 3,909,259 | 50 | 3,251,844 | 1,954,630 |
| Trade related acceptances and advance documents endorsed | 8,014,553 | 8,301,839 | 20 | 1,602,911 | 1,660,368 |
| Shipping guarantees | 1,167,685 | 678,659 | 20 | 233,537 | 135,732 |
| Documentary letters of credit | 7,455,645 | 6,986,428 | 20 | 1,491,129 | 1,397,286 |
| Undrawn term loans | 10,120,524 | 2,882,331 | 0, 20 & 50 | 5,060,262 | 1,385,899 |
| Foreign exchange contracts | 97,569,796 | 62,235,214 | 2, 5 & 8 | 2,673,123 | 1,244,704 |
| Undrawn overdrafts and credit lines | 10,745,652 | 7,004,968 | 0 | – | – |
| Other unutilized facilities | 73,070,852 | 54,112,275 | 0, 20 & 50 | 51,643 | 88,206 |
| Total Credit Equivalent of Off-Balance Sheet Items | 225,930,025 | 157,733,220 | 25,613,104 | 19,471,488 | |
| 2014
LKR ’000 |
2013
LKR ’000 |
|
| Capital Charge for Market Risk | ||
| Capital charge for interest rate risk | 362,267 | 85,493 |
| Capital charge for equity securities and unit trusts | 450,602 | 321,015 |
| Capital charge for foreign exchange and gold | 146,740 | 131,679 |
| Total Capital Charge for Market Risk | 959,609 | 538,187 |
| Total Risk-Weighted Assets Equivalent for Market Risk | 9,596,090 | 5,381,870 |
| Capital Charge for Operational Risk | ||
| Gross Income: | ||
| Year 1 | 8,216,803 | 7,015,947 |
| Year 2 | 10,842,463 | 8,216,803 |
| Year 3 | 11,901,793 | 10,842,463 |
| Average gross income | 10,320,353 | 8,691,737 |
| Total Capital Charge for Operational Risk at 15% | 1,548,053 | 1,303,761 |
| Total Risk-Weighted Assets Equivalent for Operational Risk | 15,480,530 | 13,037,606 |
| Total Risk-Weighted Assets | 197,146,618 | 152,330,844 |
| Capital Adequacy Ratios | ||
| Tier I (Required statutory minimum ratio is 5%) | 10.09% | 12.05% |
| Tier I & Tier II (Required statutory minimum ratio is 10%) | 14.68% | 17.87% |
| GROUP | ||
| Capital Base as at 31 December | 2014
LKR ’000 |
2013
LKR ’000 |
| Tier I: Core Capital | ||
| Capital | 1,145,353 | 943,746 |
| Statutory Reserve Fund | 1,010,785 | 958,527 |
| Investment Fund Account | – | 1,706,751 |
| Available-for-Sale Reserve | 162,355 | 150,614 |
| Share-Based Payment Reserve | 60,148 | 22,367 |
| Cash Flow Hedge Reserve | 397,852 | – |
| Revaluation Reserve net of tax | 853,456 | – |
| Retained Earnings | 24,245,824 | 20,731,801 |
| Non-controlling interests | 922,646 | 847,848 |
| Total Equity | 28,798,419 | 25,361,654 |
| Less: Reserves not eligible for Tier I and charges to the Statement of Comprehensive Income | 1,269,861 | 129,169 |
| Total Equity Considered for Tier I Capital | 27,528,558 | 25,232,485 |
| Deductions - Tier I | ||
| Intangible assets | 297,070 | 296,678 |
| 50% investments in the capital of other banks and financial institutions | 279,762 | 199,153 |
| 576,832 | 495,831 | |
| Eligible Tier I Capital | 26,951,726 | 24,736,654 |
| Tier II: Supplementary Capital | ||
| General loan loss provision | 786,362 | 641,815 |
| Approved Revaluation Reserve | 542,092 | – |
| Approved subordinated term debts | 8,610,732 | 9,163,692 |
| 9,939,186 | 9,805,507 | |
| Deductions - Tier II | ||
| 50% investments in the capital of other banks and financial institutions | 279,762 | 199,153 |
| Eligible Tier II Capital | 9,659,424 | 9,606,354 |
| Capital base (Tier I + Tier II) | 36,611,150 | 34,343,008 |
| GROUP | |||||
| Assets for Credit Risk | Risk Weights | Risk-Weighted Assets | |||
| 2014
LKR ’000 |
2013
LKR ’000 |
% |
2014
LKR ’000 |
2013
LKR ’000 |
|
Risk-Weighted Assets and Off-Balance Sheet Exposure |
|||||
| Cash and claims on Central Government and Central Bank of Sri Lanka | 57,012,415 | 43,981,843 | 0 | – | – |
| Claims secured by cash deposits, gold and guarantees | 16,178,539 | 11,507,606 | 0 | – | – |
| Claims on banks | 8,386,190 | 2,775,499 | 20-100 | 3,332,205 | 909,136 |
| Claims on financial institutions | 9,936,776 | 10,175,395 | 20-100 | 5,566,363 | 5,281,526 |
| Loans secured by residential property | 7,047,969 | 5,360,620 | 50 | 3,523,984 | 2,680,310 |
| Past due loans | 2,236,918 | 1,702,511 | 50-150 | 3,071,530 | 2,304,397 |
| Retail claims and corporate claims | 163,634,509 | 130,116,473 | 20-150 | 152,755,397 | 120,056,895 |
| Property, plant & equipment | 3,798,342 | 2,612,330 | 100 | 3,798,342 | 2,612,330 |
| Other assets | 3,996,044 | 2,812,925 | 100 | 3,996,044 | 2,812,925 |
| Total Assets considered for credit risk | 272,227,702 | 211,045,202 | 176,043,865 | 136,657,519 | |
| GROUP | |||||
| Principal Amount of Off-Balance Sheet Items |
Credit Conversion
Factor |
Credit Equivalent of
Off-Balance Sheet Items |
|||
| 2014
LKR ’000 |
2013
LKR ’000 |
% |
2014
LKR ’000 |
2013
LKR ’000 |
|
| General guarantees of indebtedness | 11,217,699 | 11,587,079 | 100 | 11,217,699 | 11,587,079 |
| Standby letters of credit relating to particular transactions | 65,950 | 35,168 | 50 | 32,975 | 17,584 |
| Performance bonds and bid bonds | 6,503,688 | 3,909,259 | 50 | 3,251,844 | 1,954,630 |
| Trade-related acceptances and advance documents endorsed | 8,014,553 | 8,301,839 | 20 | 1,602,911 | 1,660,368 |
| Shipping guarantees | 1,167,685 | 678,659 | 20 | 233,537 | 135,732 |
| Documentary letters of credit | 7,455,645 | 6,986,428 | 20 | 1,491,129 | 1,397,286 |
| Undrawn term loans | 10,120,524 | 2,882,331 | 0, 20 & 50 | 5,060,262 | 1,385,899 |
| Foreign exchange contracts | 97,569,796 | 62,235,214 | 2, 5 & 8 | 2,673,123 | 1,244,704 |
| Undrawn overdrafts and credit lines | 10,745,652 | 7,004,968 | 0 | – | – |
| Other unutilized facilities | 73,074,062 | 54,112,275 | 0, 20 & 50 | 53,248 | 88,206 |
| Total Off-Balance Sheet Exposure | 225,935,254 | 157,733,220 | 25,616,728 | 19,471,488 | |
| 2014
LKR ’000 |
2013
LKR ’000 |
|
| Capital Charge for Market Risk | ||
| Capital charge for interest rate risk | 362,267 | 85,493 |
| Capital charge for equity securities and unit trusts | 1,009,140 | 969,583 |
| Capital charge for foreign exchange and gold | 146,740 | 131,679 |
| Total Capital charge for Market Risk | 1,518,147 | 1,186,755 |
| Total Risk-Weighted Assets Equivalent for Market Risk | 15,181,470 | 11,867,554 |
| Capital Charge for Operational Risk | ||
| Gross Income: | ||
| Year 1 | 9,255,352 | 8,180,934 |
| Year 2 | 12,001,151 | 9,255,352 |
| Year 3 | 13,588,231 | 12,001,151 |
| Average gross income | 11,614,911 | 9,812,479 |
| Total Capital Charge for Operational Risk at 15% | 1,742,237 | 1,471,872 |
| Total Risk-Weighted Assets Equivalent for Operational Risk | 17,422,370 | 14,718,719 |
| Total Risk-Weighted Assets | 208,647,705 | 163,243,792 |
| Capital Adequacy Ratios | ||
| Tier I (Required statutory minimum ratio is 5%) | 12.92% | 15.15% |
| Tier I & Tier II (Required statutory minimum ratio is 10%) | 17.55% | 21.04% |