1 2 3 4 5 6 7 8

Our Vision
To be the most technologically advanced, innovative and
customer-friendly financial services organisation in Sri Lanka,
poised for further expansion in South Asia.

Our Mission
Providing reliable, innovative, customer-friendly financial
services, utilising cutting-edge technology and focusing
continuously on productivity improvement whilst
developing our staff and acquiring necessary expertise to
expand locally and regionally.
A century of experience. A year of reinvention.
 Contents
Annual Report of the Board of Directors 3 In the COVID-19 pandemic recovery
Introducing our 52nd Annual Report 4
process, the Bank has played a significant
Integrated Report role leading the private sector banks in
supporting affected sectors.
05-134 Justice K Sripavan
Organisational Overview 6 Chairman
About the Bank 6
A Snapshot of the Bank’s Profile 7 K G D D Dheerasinghe
Former Chairman
Financial Highlights 8
Strategic Highlights
Our Centennial Journey
Performance Review
9
10
13
13
Joint Message from the Chairman and his Predecessor 13
Managing Director/Chief Executive Officer’s Review 15
Financial Review 20 The question constantly on our
Operating Environment 27 minds, animating every decision
Connecting with Stakeholders 27 taken, was: when the pandemic
Material Matters 29 finally subsides, how will our
Operating Context and Outlook 32
stakeholders judge the conduct
Business Model for Sustainable Value Creation 35 of the Bank during this most
Management Discussion and Analysis 41 challenging of periods?
Strategic Imperatives
Prudent Growth
Customer Centricity
41
42
48
15 S Renganathan
Managing Director/Chief Executive Officer

Leading through Innovation 53

Operational Excellence 57 Financial Statements
Annual Report 2020

Governance and Risk Management

Board of Directors and Profiles
64
64 135-290
Corporate Management and Profiles 70 137 Financial Calendar – 2020 and 2021
Senior Management 72 138 Independent Auditors’ Report
Annual Corporate Governance Report 75 141 Financial Statements Highlights – Bank
Board Committee Reports 86 142 Financial Statements – Table of Content
Commercial Bank of Ceylon PLC

Statement of Compliance 101 143 Income Statement

Statement of Directors’ Responsibility Statement of Profit or Loss and Other
for Financial Reporting 107 144 Comprehensive Income
Directors’ Statement on Internal Control 145 Statement of Financial Position
over Financial Reporting 109 146 Statement of Changes in Equity – Group
Independent Assurance Report 111 150 Statement of Changes in Equity – Bank
Managing Director’s and Chief Financial Officer’s 154 Statement of Cash Flows
Statement of Responsibility 112 155 Notes to the Financial Statements
Directors’ Interest in Contracts with the Bank 113
Risk Governance and Management 114
Supplementary Information
291-371
Notice of Meeting – Annual General Meeting
Circular to the Shareholders on the First and
Final Dividend for 2020
Form of Proxy (Voting Shareholders)
Form of Proxy (Non-Voting Shareholders)
This Annual Report is published within three Stakeholder Feedback Form
months of the date of the Statement of Financial Corporate Information – Inner Back Cover
Position. The comprehensive end-to-end online
HTML version is also published online on the same All references to the banking industry figures in this Annual
date as the date of issue of this Annual Report at Report are based on CBSL publications which is based on
[Link] regulatory reporting requirements and may differ from the
Scan to view the online version figures published as per the Sri Lanka Accounting Standards.
2
Annual Report of the Board of Directors
The Board of Directors is pleased to present medium and long term through its business Signed in accordance with a resolution of
to the shareholders the 52nd Annual Report model (pages 36 and 37). Accordingly, the the Directors.
of the Bank comprising an integrated report, Bank identified the emerging developments
the Audited Financial Statements of the and trends that are likely to impact its
Group and the Bank for the year ended business model and value creation process.
December 31, 2020, and the Independent These trends were then categorised into Justice K Sripavan
Auditors’ Report on the Financial Statements risks and opportunities based on their Chairman
conforming to all applicable statutory importance to the Bank and its stakeholders,
requirements. together with the stakeholders that are likely
This Report, where applicable is to be affected most. The Bank identified its
presented in accordance with the Guiding strategic imperatives through its annual Prof A K W Jayawardane
Principles and Content Elements as strategic planning exercise and continued to Deputy Chairman
stipulated by the International <IR> execute the required strategies to mitigate
Framework issued by the International risks and exploit opportunities.
Integrated Reporting Council (IIRC). The Management Discussion and
Analysis (pages 41 to 62) contained in S Renganathan
Sections 150 (1), 151, 152 and 153 (1) &
this Report provides a detailed account Managing Director/Chief Executive Officer
(2) of the Companies Act No. 07 of 2007 and
amendments thereto make it a responsibility of such imperatives and strategies. The
of the Board of Directors of the Bank to underlying governance structure and the
prepare the Financial Statements of the risk management framework are detailed on
pages 77 and 120. K Dharmasiri
Group and the Bank, which reflect a true Director
and fair view of the financial position and The Bank’s External Auditors, Messrs Ernst
performance of the Group and the Bank. In & Young, who were appointed in accordance
this regard, the Board of Directors wishes with a resolution passed at the 51st Annual
to confirm that the Income Statement, General Meeting held on June 25, 2020 L D Niyangoda
Statement of Comprehensive Income, (which was postponed to the above date Director
Statement of Financial Position, Statement from its originally planned date of March 30,
of Changes in Equity, Statement of Cash 2020, due to curfew and lockdowns in many
Flows, and Significant Accounting Policies parts of the country following the outbreak
and Notes thereto appearing on pages 143 of COVID-19), have expressed their opinion, Ms N T M S Cooray
to 290 have been prepared and presented given on pages 138 to 140 of this Annual Director
in conformity with the requirements of Report. The details on the remuneration of
the Sri Lanka Accounting Standards as External Auditors are given in Note 21 on

Annual Report 2020

mandated by the Sri Lanka Accounting page 186 to the Financial Statements. As
and Auditing Standards Act No. 15 of 1995 far as the Directors are aware, the Auditors
and the Companies Act No. 07 of 2007 and do not have any other relationship with
amendments thereto. the Bank, or any of its subsidiaries and its T L B Hurulle
associate. The External Auditors do not have Director
This Report also provides the
information and disclosures as required any interest in contracts with the Bank, or
by the Companies Act No. 07 of 2007 and any of its subsidiaries and its associate.

Commercial Bank of Ceylon PLC

amendments thereto, Banking Act No. The Directors, to the best of their
30 of 1988 and amendments thereto, the knowledge and belief are satisfied that all S C U Manatunge
Directions issued thereunder including statutory payments to the Government, Director/Chief Operating Officer
the Banking Act Direction No. 11 of 2007 other regulatory institutions, and to
and subsequent amendments thereto, the employees have been made in time.
Listing Rules of the Colombo Stock Exchange The Board of Directors reviewed
(CSE) including the Rules pertaining to the business plans of the Bank and its Ms J Lee
Related Party Transactions as required by subsidiaries and is satisfied that the Bank and Director
Section 9.3.2 (c) and (d) thereof and the its subsidiaries have adequate resources to
recommended best practice. continue their operations in the foreseeable
The Financial Statements of the Group future. Accordingly, the Financial Statements
and the Bank for the year ended December of the Group and the Bank are prepared
31, 2020, including comparatives for 2019, based on a going concern basis. R Senanayake
were approved and authorised for issue by The Board has carefully considered Director
the Board of Directors in accordance with matters material to the Bank and its
the Resolution of the Directors on February stakeholders in preparing this Report and
24, 2021. The appropriate number of copies acknowledges that reasonable care has
of the Annual Report will be submitted to been exercised in the preparation and
the CSE and to the Sri Lanka Accounting S Muhseen
presentation of this Integrated Annual
and Auditing Standards Monitoring Board Director
Report while preserving its integrity.
(SLAASMB) within the statutory deadlines
The extent of compliance with the
and soft copies of same will be hosted in the
requirements of Section 168 of the Companies
website of the Bank, [Link].
Act No. 7 of 2007 and amendments thereto
This Report has been structured to effectively R A P Rajapaksha
and other relevant statutes is disclosed in
communicate the Bank’s efforts to create Company Secretary
value to all its stakeholders across the short, detail on pages 101 to 106.
February 24, 2021
3
 Introducing our 52nd Annual Report
The 52nd Annual Report of Commercial z “Handbook on Integrated Corporate Quality assurance
Bank of Ceylon PLC covers the 12-month Reporting”, published by CA Sri Lanka Six qualitative criteria were taken into
period from January 1 to December 31, 2020. in collaboration with The Integrated account in the production of both text and
Having commenced reporting in line with Reporting Council of Sri Lanka visual elements (figures, graphs, tables):
the International <IR> Framework in 2013,
this integrated report is consistent with our Report boundary z Completeness: This Annual Report
usual annual reporting cycle for financial and The financial performance of the Group includes material impacts within and
sustainability reporting and follows our most includes the Bank along with seven under the direct control of the Bank,
recent Report for the year ended December subsidiaries – Commercial Development external impacts that are indirectly
31, 2019, for which comparatives are given, Company PLC, CBC Tech Solutions Limited, influenced through our engagement with
where applicable, within this Report. CBC Finance Limited (formally Serendib stakeholders, and broader sustainability
Finance Ltd.), Commercial Insurance initiatives undertaken through the Bank’s
Transcending the medium Brokers (Pvt) Ltd., Commex Sri Lanka S.R.L. own CSR Trust.
To cater to the communications needs of Italy, Commercial Bank of Maldives Private z Comparability: This Report includes the
the Bank’s diverse stakeholder groups, this Limited and CBC Myanmar Microfinance performance of current and previous
Report is available in multiple mediums and Company Limited – and an associate – Equity reporting periods together with industry
formats. This approach also aims to balance Investments Lanka Ltd. (depicted in the benchmarks where relevant and available.
the disparate imperatives of conciseness, Consolidated Financial Statements on pages z Accuracy and Consistency: The content of
comprehensiveness, and accessibility in our 143 and 290). this Report is supported by inbuilt internal
disclosure practices. The Bank’s social and environmental controls to facilitate traceability and
impact, as discussed within the Management verifiability of information.
Strategic orientation Discussion and Analysis, focuses on both z Clarity: This report incorporates both text
In addition to a focus on performance over Sri Lankan and Bangladesh operations of and visual elements to enhance readability,
the year, this Annual Report also provides Commercial Bank of Ceylon PLC., the Parent facilitate understanding, and maintain
stakeholders with insights into the Bank’s entity of the Group, which accounts for more concision.
current and future strategies to drive growth. than 98% of revenue, assets, and borrowings
z Balance: This Report makes every possible
unless stated otherwise.
effort to present a balanced review of
Non-financial information During the year under review, no relevant material information.
significant changes in the organisation
Recent trends make it clear that in addition z Credibility and Reliability: This Report’s
type, structure, ownership, supply chain or
to traditional forms of financial reporting, financial and sustainability information has
topic boundaries took place. No significant
stakeholders in general, and providers of been vetted by reputed external assurance
changes in reporting or restatements were
Annual Report 2020

financial capital in particular, want access to service providers.

made of previously reported financial, social
non-financial information when assessing
or environmental information, other than Precautionary Principle
future potential of corporates. Accordingly,
the inclusion of GRI disclosures GRI 207: Tax
this Annual Report seeks to provide a Being keenly aware of the direct and indirect
(2019) and GRI 403: Occupational health and
holistic, integrated discussion of the Bank’s social and environmental impact of our
safety (2018).
performance, operations, and strategic actions, and the indirect consequences
imperatives. resulting from the business activities of our
Commercial Bank of Ceylon PLC

Responsibility for sustainability

customers to whom we lend in particular, the
Basis of preparation practices and external assurance Bank avoids or reduces any such negative
This Report has been prepared in line with The Bank’s Managing Director/Chief impacts through credit policies, SMES
the International <IR> framework; and the Executive Officer, Chief Operating Officer screening, post-disbursement supervision,
Bank’s social and environmental impacts and other members of the Corporate dedicated green products and risk
are presented in accordance with the GRI Management are responsible for the management processes.
Standards: Core option. It also comments on sustainability practices and disclosures made
Although the Bank’s business model and
the Bank’s contribution towards the UNDP in this Report. They have actively engaged
operations do not directly create a significant
Sustainable Development Goals. with the external assurance providers on the
negative impact on the environment, every
Report content.
The concepts, principles, and guidelines effort is made to reduce its own carbon
used in the preparation of this Report are The Bank’s External Auditors, Messrs footprint through initiatives such as offering
drawn from the following sources: Ernst & Young, have assured the Group’s digital products/channels, solar energy usage,
Financial Statements and non-financial energy efficient air conditioning and the
z The International Integrated Reporting information, while Messrs DNV GL Business minimisation of paper usage in its processes.
Framework ([Link]) Assurance Lanka (Pvt) Ltd., who represent
z The Global Reporting Initiative DNV GL, have assured the Bank’s social and Contact
Sustainability Reporting Guidelines – GRI environmental processes.
Your comments or questions on this Report
Standards ([Link]) The Board of Directors and the are welcome and we invite you to direct
z “A Preparer’s Guide to Integrated Corporate Management have no other relationship them to:
Reporting”, published by The Institute with Messrs Ernst & Young, DNV GL Business
Chief Financial Officer
of Chartered Accountants of Sri Lanka Assurance Lanka (Pvt) Ltd. or DNV GL aside
Commercial Bank of Ceylon PLC
(CA Sri Lanka) from their engagement as independent
“Commercial House”
Assurance Service providers of the Group.
21, Sir Razik Fareed Mawatha
Colombo 1
Sri Lanka
4
INTEGRATED REPORT
This Integrated Report has been
prepared in accordance with the
Guiding Principles and Content
Elements outlined in the
International <IR> Framework.

Introducing our 52nd Annual Report

It forms a discrete section within
the Annual Report of the Bank,
and is given pride of place
because it presents a multi-
dimensional view of the Bank’s

REPORT
performance over the year 2020.

Pages 05INTEGRATED
- 134
As stated in the Annual Report
of the Board of Directors on

Annual Report 2020

page 3, the Board of Directors
acknowledges that reasonable
care has been exercised in the

Commercial Bank of Ceylon PLC

preparation and presentation
of this Integrated Report while
preserving its integrity.

Organisational Overview – 6
Performance Review – 13
Operating Environment – 27
Business Model for Sustainable Value Creation – 35
Management Discussion and Analysis – 41
Governance and Risk Management – 64

5
 Organisational Overview
About the Bank
Our regional presence and global connectivity Figure – 01

Correspondent Correspondent
Banks Banks
Business Promotion
16 Correspondent Officer 25
Banks
1
Italy 11 Bangladesh
Branches
Subsidiary
Business Promotion Myanmar Subsidiary and 19
Officers a Representative Office
Sri Lanka
14 Correspondent
Branches Subsidiaries Associate Banks
The Maldives
Subsidiary 268 4 1 4

Largest and Systemically Long-term of the Bank to AA-(lka) from commensurate with the growth in deposits.
Important Bank AA+(lka) and its outlook from negative to The Bank’s asset quality is one of the best
Organisational Overview

Commercial Bank of Ceylon PLC is the largest stable in January 2021 and it is on par with in the industry, while its Current Accounts
private sector commercial bank – and the the highest rating for any local private sector and Savings Accounts (CASA) make up 42.72%
third largest bank overall – in Sri Lanka bank. The Bank’s Bangladesh Operations’ of total deposits, the highest among the
in terms of total assets, which stood at credit rating was reaffirmed at AAA by Credit peer banks.
Rs. 1.736 Tn. (USD 9.285 Bn.) as at the end of Rating Information Services Ltd in June 2020
2020. It is the only private sector Bank that has for the 10th consecutive year. The Bank’s risk Strong capitalisation
been designated by the Central Bank of Sri profile reflects a restrained risk appetite, a The Bank’s Tier 1 Capital ratio and Total
Lanka as a higher-tier Domestic Systemically robust funding base, a secure level of liquidity, Capital Ratio stood at 13.217% and 16.819%,
Important Bank (D-SIB). The Bank accounts a sound domestic franchise and stable, respectively, as at December 31, 2020,
Annual Report 2020

for approximately 10.7%, 11.2% and 11.8% consistent performance. compared to the regulatory minimum ratios
of sector loans and advances, deposits and of 9% and 13% applicable for the year. The
assets, respectively. Diversification Bank’s growth was prudent with gearing
The Bank’s business is well diversified in terms of on-balance sheet assets as well
Over Hundred Year Legacy across four main business segments: as risk-weighted assets remaining at 11.05
The Bank’s origins date back to 1920, Personal Banking, Corporate Banking, times and 5.94 times, respectively, as of the
and it marked just over a half-century of Treasury, and International Operations. end of 2020. Demonstrating the strength of
Commercial Bank of Ceylon PLC

operations under its present name in 2020. The International Operations of the Bank the franchise, the Bank’s shares reported the
The total staff cadre of the Bank stood at covers operations in Bangladesh, Maldives, highest price to Book Value of 0.60 times and
5,057 as at end 2020 and they serve over Italy, and Myanmar, which now account for the highest market capitalisation of Rs. 94 Bn.
3.5 million plus customers through a wide 11.79% of consolidated assets and 20.46% (USD 500 Mn.) among banking, finance and
local and international network of branches, of consolidated profit before taxes. Besides insurance institutions on the Colombo Stock
subsidiaries, agency arrangements, Business geographical diversification, the Bank has Exchange at year’s end (the Bank is the fifth
Promotion Officers, and correspondent successfully accomplished a high level of largest institution listed on the CSE overall).
banking relationships. diversification in its operations across many
other parameters such as customer profile, Ownership of the Bank
Growing International Footprint currency, products and services portfolio, Of the 16,820 ordinary voting shareholders
funding profile, maturity profile, economic of the Bank at end of 2020, DFCC Bank PLC
With the acquisition of the Bangladesh
sectors and the sources of revenue. held 12.02% and entities related to the
operations of Crédit Agricole Indosuez in
2003, the Bank began its expansion beyond State, including Employees’ Provident Fund,
Vibrant financial intermediation Employees’ Trust Fund Board and Sri Lanka
Sri Lanka’s shores and became the first
private sector bank to establish a branch Having being the first private sector Bank Insurance Corporation, collectively held
operation outside the country. Since then, it to cross Rs. 1 Tn. mark in assets and deposits 19.49% of Bank’s shares. While Mr Y S H I Silva
has established three subsidiaries in Italy, the in 2016 and 2019 respectively, during the (8.87%), the International Finance Corporation
Maldives and Myanmar. first half of 2020, the Bank became the first (7.12%), Citibank New York S/A Norges Bank
private sector bank in Sri Lanka to cross the Account 2 (4.16%), Melstacorp PLC (4.14 %),
Risk Profile Rs. 1.5 Tn. mark in total assets which reached CB NY S/A IFC Emerging Asia Fund LP (3.67%)
to Rs. 1.736 Tn. at the end of 2020. Customer and CB NY S/A IFC Financial Institutions
Fitch Ratings Lanka Ltd., (Fitch) revised
deposits fund 72.92% of total assets, Growth Fund LP (3.67%) are the other major
the National Long-term Rating of the Sri
demonstrating the Bank’s strong role as a shareholders, holding a combined ownership
Lankan financial institutions following the
financial intermediary. For the past five years, stake of 31.63%. Notably, the Bank has a
recalibration of its Sri Lankan national rating
the Bank’s loans to deposits ratio was over substantial foreign shareholding, with foreign
scale. As a result, Fitch revised the National
80% on average, reflecting a growth in loans shareholders owning a combined 23.66%
stake in the Bank.
6
A Snapshot of the Bank’s Profile Figure – 02

Profitability Credit Quality Stability

Profit After Taxation Gross NPL ratio Tier 1 ratio

2020 – Rs. 16.373 Bn. 2020 – Rs. 5.11% 2020 – 13.217%
2019 – Rs. 17.025 Bn. 2019 – Rs. 4.95% 2019 – 12.298%

Earnings Per Share (Basic/Diluted) Net NPL ratio Total capital ratio
2020 – Rs. 15.18 2020 – 2.18% 2020 – 16.819%
2019 – Rs. 16.19 2019 – 3.00% 2019 – 16.146%

Return on Assets Provision cover ratio Net stable funding ratio

2020 – 1.05% 2020 – 57.42% 2020 – 157.49%
2019 – 1.27% 2019 – 39.39% 2019 – 137.05%

Return on Equity Open credit exposure Leverage ratio

2020 – 11.28% 2020 – 11.88% 2020 – 5.74%
2019 – 13.54% 2019 – 17.37% 2019 – 6.45%

Rs. 1,266 Bn. Financial Intermediation

Rs. 948 Bn.
Customer deposits Gross loans and advances

Organisational Overview
(2019 – Rs. 1,053 Bn.) maturity transformation (2019 – Rs. 920 Bn.)

Over 3.5 million 5,057

Customers Employees

Rs. 1.736 Tn.

Annual Report 2020

287 56
Branches Total Assets Correspondent banks

906 8
ATMs Subsidiaries and

Commercial Bank of Ceylon PLC

Associate

AA-(lka) Top 1000 Banks 1st in Market Capitalisation

Fitch Ratings Lanka Ltd. Only Sri Lankan bank to be ranked Ranked 1st in the Banking sector
[2019 – AA(lka)] for the 10th consecutive year on the CSE

Liquidity Share Valuation

Statutory liquid assets ratio – DBU Net Assets Value per ordinary share Market capitalisation
2020 – 44.99% 2020 – Rs. 134.67 2020 – Rs. 94 Bn.
2019 – 30.42% 2019 – Rs. 129.60 2019 – Rs. 97 Bn.

Liquidity coverage ratio (All currency) Dividends Per Share Price to Book Value
2020 – 258.06% 2020 – Rs. 6.50 2020 – 0.60 times
2019 – 224.74% 2019 – Rs. 6.50 2019 – 0.73 times

7
 Financial Highlights
Table – 01 GROUP BANK
As at December 31, 2020 2019 Change 2020 2019 Change
Rs. ’000 Rs. ’000 % Rs. ’000 Rs. ’000 % 

Results for the year – (Rs. Bn.)

Gross income 151.966 150.741 0.81 149.711 148.706 0.68
Operating profit before taxes on financial services 29.047 30.230 (3.91) 28.017 29.531 (5.13)
Taxes on financial services 4.531 7.256 (37.56) 4.505 7.192 (37.36)
Profit before taxation (PBT) 24.520 22.984 6.68 23.511 22.339 5.25
Income tax expenses 7.433 5.564 33.59 7.138 5.314 34.32
Profit after tax (PAT) 17.087 17.420 (1.91) 16.373 17.025 (3.83)
Gross Dividends 7.586 6.679 13.58 7.586 6.679 13.58
Position at the year end – (Rs. Bn.)
Shareholders' Funds (Stated capital and reserves) 159.193 134.424 18.43 157.146 133.162 18.01
Financial liabilities at amortised cost - due to depositors 1,286.616 1,068.983 20.36 1,265.966 1,053.308 20.19
Gross loans and advances 961.859 930.737 3.34 947.842 920.457 2.98
Total Assets 1,762.496 1,408.941 25.09 1,736.218 1,387.345 25.15
Information per Ordinary Share (Rs.)
Earnings (Basic) 15.70 16.41 (4.33) 15.18 16.19 (6.24)
Earnings (Diluted) 15.70 16.41 (4.33) 15.18 16.19 (6.24)
Dividends – Cash – – – 4.50 4.50 –
Dividends – Shares – – – 2.00 2.00 –
Net Assets Value 136.42 130.83 4.27 134.67 129.60 3.91
Market value at the year end – Voting N/A N/A – 80.90 95.00 (14.84)
Market value at the year end – Non-voting N/A N/A – 70.10 83.00 (15.54)
Organisational Overview

Ratios
Return on average shareholders' funds – (ROE) (%) 11.64 13.73 (2.09) 11.28 13.54 (2.26)
Return on average assets – (ROA) (%) 1.08 1.28 (0.20) 1.05 1.27 (0.22)
Financial intermediation margin (%) N/A N/A – 9.59 11.05 (1.47)
Total impairment provision as a % of gross loans and advances (%) 5.41 3.96 1.45 5.38 3.89 1.49
Cost of risk on loans and advances (%) 1.88 1.11 0.77 1.88 1.09 0.79
Non-performing loans ratio – Gross (%) – – – 5.11 4.95 0.16
Non-performing loans ratio – Net (%) – – – 2.18 3.00 (0.82)
Price Earnings – Ordinary Voting Shares – (times) N/A N/A – 5.33 5.87 (0.54)
Dividend Yield – Ordinary Voting Shares (%) N/A N/A – 8.03 6.84 1.19
Annual Report 2020

Dividend Cover on Ordinary Shares (times) N/A N/A – 2.34 2.49 (0.16)
Statutory Ratios %
Liquid assets ratio – Domestic Banking Unit (DBU) N/A N/A – 44.99 30.42 14.57
Liquid assets ratio – Off Shore Banking Unit (OBC) N/A N/A – 32.70 25.25 7.45
Capital Adequacy Ratios (Under Basel III) (%)
Common Equity Tier (CET) I capital ratio
Commercial Bank of Ceylon PLC

(Minimum Requirement – 2020 – 7.500%, 2019 – 8.500%) 13.356 12.399 0.957 13.217 12.298 0.919
Tier I capital ratio (Minimum Requirement – 2020 – 9.000%, 2019 – 10.000%) 13.356 12.399 0.957 13.217 12.298 0.919
Total capital ratio (Minimum Requirement – 2020 – 13.000%, 2019 – 14.000%) 16.882 16.182 0.700 16.819 16.146 0.673
Liquidity Coverage Ratio (%)
Rupee – (Minimum Requirement – 2019 – 100%, 2018 – 90%) N/A N/A – 330.84 158.79 172.05
All Currency – (Minimum Requirement – 2019 – 100%, 2018 – 90%) N/A N/A – 258.06 224.74 33.32

Financial Goals and Achievements – Bank

Financial Indicator Goal Achievement

2020 2019 2018 2017 2016

Return on average assets ROA (After Tax) (%) Over 2% 1.05 1.27 1.43 1.54 1.53
Return on average shareholders' funds (After Tax) (%) Over 20% 11.28 13.54 15.56 17.88 19.52
Growth in income (%) Over 20% 0.68 7.72 20.72 24.10 19.62
Growth in profit for the year (%) Over 20% (3.83) (2.96) 5.81 14.25 21.92
Growth in total assets (%) Over 20% 25.15 6.43 14.00 12.96 15.05
Dividend per share (DPS) (Rs.) Over Rs.5.00 6.50 6.50 6.50 6.50 6.50
Capital Adequacy Ratios
CET I capital ratio (%) (Minimum requirement as per Basel III – 2020 – 7.500%, 2019 – 8.500%) 2% buffer over the 13.217 12.298 11.338 12.111 N/A
Tier I capital ratio (%) (Minimum requirement As per Basel III – 2020 – 9.000%, 2019 – 10.000%) regulatory minimum
requirement 13.217 12.298 11.338 12.111 N/A
Tier I capital ratio (%) Minimum requirement per Basel II – 5% N/A N/A N/A N/A N/A 11.56
Total capital ratio (%) (Minimum requirement As per Basel III – 2020 – 13.000%, 2019 – 14.000%) 2% buffer over the
regulatory minimum
requirement 16.819 16.146 15.603 15.746 N/A
Total capital ratio (%) Minimum requirement as per Basel II – 10% N/A N/A N/A N/A N/A 15.89

8
Strategic Highlights
Strategic Highlights for the year 2020 are organised around the Bank’s four Strategic Imperatives (see page 41 for
further details). While the Financial Highlights captures the key details of the Bank’s financial performance, the Strategic
Highlights encapsulates how this performance was achieved in the context of the Bank’s long-term vision. The Financial
Highlights provide the reader of this report with a snapshot of the Financial Review (pages 20 to 26), and the Strategic
Highlights are a summary of the Management Discussion and Analysis (pages 41 to 62), which is similarly structured
around the four Strategic Imperatives.

Prudent Growth Customer centricity

Made a private placement of shares with the IFC amounting Launched “Arunella”, a Financial Support Scheme that
to USD 50 Mn. (Rs. 9.215 Bn.), the first foreign equity integrated multiple relief initiatives, guided by CBSL directives
placement by the Bank. but going above and beyond them to cover as many
Bank’s overseas operations now contribute over 11% of the struggling customers as possible.
assets and 20% of the pre-tax profits. Remained the leading lender amongst the private sector
Increased the provision for impairment to Rs. 21.484 Bn. for banks in the Saubagya loan scheme.
the year 2020, the highest ever annual provision in the history Extent of loans under moratorium during wave 1 of the
of the Bank. pandemic was approximately Rs. 290 Bn. and loans under
Further strengthened the systems, processes and controls moratorium at the end of 2020 was approximately Rs. 132 Mn.
relating to the ethics and conduct of the Bank during the year. Initiated two major loan programmes for SMEs affected by
Increased Credit Card Usage Market share by 11.55% and the pandemic: a Rs. 10 Bn. scheme funded through a loan

Organisational Overview
Debit Card Usage Market share by 32%. of USD 50 Mn. from the International Finance Corporation
(IFC), and a working capital scheme, Dirishakthi, for Micro
Grew Point-of-Sale (POS) volumes by 20%, becoming the enterprises.
fastest growing POS network in the country.
Deployed “Bank-on-Wheels” Mobile Banking Units, and
Increased Imports and Exports market share to 10.17% and increased existing fleet from 5 to 11 by outfitting vehicles
19.0%, respectively. with mobile POS units.
Issued a Position Statement on Climate Change, affirming its Established seven new SME sales units and introduced the
commitment to combating Climate change at the highest level SME Lead Management System (SME LMS) to drive SME
of the Bank.

Annual Report 2020

initiatives in the Northern, Eastern and North Central Regions.
Increased membership in BizClub from 1,613 to 4,076.
Launched one-stop trilingual Integrated Contact Centre to
Operational excellence serve customers and other stakeholders 24/7.

Integrated online and mobile banking channels on a single

Commercial Bank of Ceylon PLC

omni-channel platform with the launch of “ComBank Digital”.
Upgraded Flash, the Bank’s ground-breaking, trilingual Leading through innovation
digital wallet, with various features including a module
(integrated with the UN-approved Environment Impact Index Implemented a range of operational measures, including:
for financial transactions) to allow customers to track the splitting teams and setting up protocols for working at
carbon footprint of their spending habits. alternate sites and from home; providing food, lodging,
Initiated a Digital Roadmap up to 2023 that prioritises transport, and personal protective equipment to ensure the
redesigning conventional banking processes as digital safety of all staff; and outfitting branches with partitions,
processes, integrating with other ecosystems, upgrading sanitisers and instituting other best practices for social
internal systems to be prepared to capitalise on changes distancing and hygiene to safeguard customers.
in the regulatory environment, and developing talent and Adopted an industry leading remote access solution, which
building partnerships. offers multiple layers of security, to facilitate remote working
Increased digital onboarding of existing customers by 140%. and working from home.
Launched ComBank Simple Pay, a new platform to help SMEs Paid all scheduled increments and bonuses in full, affirming
digitise their business and engage in e-commerce. financial commitments to the staff.
Concluded successful negotiation of the Bank’s collective
bargaining agreement with the Bank branch of the Ceylon
Bank Employees’ Union (CBEU).
Launched pension fund for employees recruited after 2000.
Became the first bank in Sri Lanka to achieve carbon
neutral status.

9
 Our Centennial Journey

1920 - 1979 1980 - 1998 2000 - 2009

1920 1998 2000

Eastern Bank Ltd. (EBL) opens First 365 Day Branch opened in Launched Internet Banking
a Branch in Chatham Street Colombo 07
All branches linked to ICBS
except Jaffna
2001
Opened the 100th branch at
Kaduruwela
1997
1957 Standard Chartered Bank sold its 40%
EBL was acquired by
stake in the Bank 2003
Chartered Bank Acquired operations of Credit Agricole
Indosuez in Bangladesh

1996
1969 Increased shareholding in CDC to
2005
Organisational Overview

94.5% through a share swap

Commercial Bank of Ceylon Ltd. (CBC),
incorporated with EBL holding Raised USD 65 Mn. syndicated loan,
a 40% stake becoming the 1st non-sovereign
corporate in Sri Lanka to source
1993 external funding
Introduced core banking software-
1971 International Comprehensive Banking
Business of EBL was completely System (ICBS) 2006
integrated with Chartered Bank
Issued USD 10 Mn. bond, becoming
Annual Report 2020

the first indigenous bank to do so

1990
1972 Introduced ATM facilities to customers
First two branches opened in Galewela 2008
and Matale
First Sri Lankan bank to be
ranked among the Top 1000 Banks
1987
Commercial Bank of Ceylon PLC

in the World
1973 EBL changed its name to Standard
CBC acquired Galle, Jaffna and Kandy Chartered (UK) Holdings Ltd.
branches of Mercantile Bank Ltd. 2009
First Sri Lankan Bank to be certified
1984 CMMi
1979 Head Office moved to new premises
Offshore Banking Centre formed at No. 21, Sir Razik Fareed Mawatha,
(formerly Bristol Street), Colombo 01

1980
Commercial Development Company
(CDC) formed to construct Head Office
Building for CBC with 40% equity
participation

10
 2011 - 2015 2016 - 2020

2015 2016 2020

Indra Finance, a fully-owned Commenced Commercial Celebrated 100 years of banking in
subsidiary of CBC, renamed operations of Commex Sri Lanka Sri Lanka with a series of events
Serendib Finance Ltd. S.R.L. Italy, our fully owned including a staff gathering of
subsidiary unprecedented scale.
Opened Commercial Bank of Private placement of shares with the
2014 Maldives Private Limited, 2nd IFC for USD 50 Mn.

Our Centennial Journey

Bank acquired the 100% stake of foreign subsidiary with a 55% stake Launched “ComBank Digital”
Indra Finance Ltd. The Bank became a Trillion Rupee powered by Fiserv, the US-based
Asset company global provider of financial services
Became the first Sri Lankan Bank to
technology.
be granted a license by the Central
Bank of Myanmar to operate a Commenced a project to donate
Representative Office 2017 smart STEM classes to 100 schools to
mark the Bank's centenary.
Commercial Bank of Maldives
opened its second branch in Moved up 51 places on the World’s

Organisational Overview
2013 Hulhumalé Top 1000 Banks ranking and became
the only Sri Lankan bank to be on this
Opened ‘24-Hour Automated Established 100% owned CBC
prestigious list for 10 years in a row.
Banking Centre’ at Ward Place. Myanmar Microfinance Company
Limited., 3rd foreign subsidiary ComBank declared the “Strongest
Raised a 10-year subordinated debt
Bank Brand” in Sri Lanka by Brand
of USD 75 Mn. from IFC
Finance.

2018
2012

Annual Report 2020

The second fully-owned subsidiary 2019
Raised USD 65 Mn., from the of CBC outside Sri Lanka, CBC
One of the leading mobile payment
International Finance Corporation Myanmar Microfinance Company
solutions in China, ‘WeChat Pay’
(IFC) Limited was opened in Nay Pyi Taw
acceptance launched in Sri Lanka
Launched an exclusive Savings Launched the country’s first for the first time by CBC with a
Account for Women named ‘Anagi’ fully-automated cheque deposit partnership between Tenpay
machine at City Office Branch in

Commercial Bank of Ceylon PLC

Payment Technology Ltd.
York Street Colombo
CBC became PCI-DSS (Payment
2011 Launched UnionPay cards by a Card Industry Data Security
Commenced ‘Sharia’ compliant bank in Sri Lanka for the first time, Standard) certified
Islamic Banking making Sri Lanka the 51st country
CBC’s ‘Flash’ becomes Sri Lanka’s
in the world to issue UnionPay
Opened 200th branch in first multilingual Digital Banking
cards
Kataragama App
Introduced Flash digital bank
Opened an exclusive ‘Elite’ Branch Launched ComBank Q+ Sri Lanka’s
account
at Colombo 07 for high net worth first QR based payment app under
customers LANKAQR
Reached milestone 500th Launched ‘Yasasa’ savings account
ATM located at the Maradana exclusively for pensioners
railway station CBC enables Dynamic Currency
Conversion at ATMs for foreign
Visa Cards

11
 Our Centennial Journey
Organisational Overview

Celebrating a Century of Operations

Annual Report 2020

In 2020, the Bank celebrated a century of banking in Sri Lanka, a After the surge of the COVID-19 pandemic, the calendar of centenary
century during which the Bank has become an integral part of the events, especially those involving large gatherings, were curtailed,
economic and social fabric of the country. The centrepiece of the but the Bank still marked moments of commemoration, celebration
celebrations was a massive staff gathering, held in early January and further commitment to its stakeholders. Highlights included
prior to the rise of COVID-19 infections in the country. The dreams of a series of religious ceremonies representing the four major
Commercial Bank of Ceylon PLC

the future and the history of the past were interwoven when more denominational faiths in the country, events to felicitate stakeholders,
than 4,000 staff members from all over Sri Lanka came together a country-wide community initiative that will benefit 100 schools,
in Colombo. To mark the occasion, a Bank anthem was composed, and a large scale reforestation project. A coffee table book depicting
intended to serve as a motivator and a rallying call in the years ahead the Bank’s history, Seasons of Change: Commercial Bank of Ceylon
PLC 1920-2020, was released towards the end of the year.

12
Performance Review
Joint Message from the Chairman and his Predecessor
In the COVID-19 pandemic recovery
process, the Bank has played a
significant role leading
the private sector
banks in supporting
affected sectors.

Performance Review
wish to place on record our sincere
appreciation of the effort taken by the
authorities to contain the outbreak of
the pandemic, and we look forward to
doing our part to drive the country’s
economic recovery in the coming
year. This includes, in particular, a

Annual Report 2020

commitment to supporting the SME
sector and the empowerment of
women entrepreneurs.
All matters pertaining to the
Justice K Sripavan policies and procedures of the Bank are
adequately deliberated at the Board

Commercial Bank of Ceylon PLC

KGDD
Dheerasinghe and Board Sub-Committee levels and
our discussions and decisions have
been unanimous. The decision to
Dear friends, make the highest provision ever for
impairment during the year under
In 2020, under extremely challenging In spite of these most taxing and
review was to ensure that the Bank
conditions that negatively impacted the unfavourable conditions, which hindered
would have a cushion against the
business environment locally and globally, operations, income growth and profitability,
continuing effects of the COVID-19
the Bank performed appreciably well in the Commercial Bank Group successfully
pandemic on most areas of business.
key areas of its business activities. It goes ended 2020 on a strong footing with
We feel that it is our responsibility to
without saying that the adverse impact of substantial deposits growth, better liquidity
take adequate measures to mitigate
COVID-19 affected all business operations of and higher provision cover compared to
any negative effects arising from the
the Bank and took a heavy toll on the growth most peers. This will undoubtedly enable
pandemic situation in the future,
that was sustained by the Bank over the past the Bank to benefit from an upturn in
particularly the rising and higher than
several years. The Board devoted its time envisaged credit demand in the years
normal NPL portfolio. The high liquidity
and energy providing necessary guidance ahead. However, the multi-dimensional
level we maintain will also bolster the
and direction to the management to ensure impact of the pandemic on the performance
efforts to face any cash flow shortages
uninterrupted service to our customers while of the Bank, its subsidiaries, and the
arising from deferred recoveries due
being fully compliant with directions issued associate may continue to be reflected in
to moratoriums and other concessions
by regulators and other authorities. Measures most areas of business in the immediate
granted to the borrowers.
were also taken to ensure the utmost safety future. Nevertheless, the Bank has gone
of the staff who were invariably exposed to from strength to strength to ensure its In our effort to strengthen the
the elements while performing their duties. growth while supporting the needs and capital base of the Bank, we were
aspirations of our customers as well as being able to infuse USD 50 Mn. of Tier 1
a responsible corporate that plays a role capital via an equity investment by
in achieving national economic goals. We the International Finance Corporation
13
 Group during the year. The Bank’s Tier 1 competition and risk. The COVID-19 poised for even greater success in the future.
capital adequacy ratio at 13.217% is much pandemic accelerated customer demand The Board during these challenging times
higher than the revised minimum level of for digital products and services, and has has showed an admirable spirit of unanimity,
9% imposed by the regulator consequent spurred the rapid development of our working creatively and productively to arrive
to the COVID-19 pandemic, while both Tier own digital strategy. The initiatives taken at decisions through consensus, providing
1 and Tier 2 together stands at 16.819%, and investments made over the past five sound and unified leadership at the head of
comfortably above the revised regulatory years in building its digital capacities – its the Bank, and I wish to thank them for their
minimum capital requirement of 13%. portfolio of customer facing platforms, service. I also wish to recognise the previous
The Bank reported a profit after tax digital products, and services, and back- Deputy Chairmen, Managing Directors and
for the year of Rs. 16.373 Bn., compared to end processes and infrastructure – have Chief Operating Officers I have had the
provided the Bank with a strong foundation pleasure of working with during my tenure
Joint Message from the Chairman and his Predecessor

Rs. 17.025 Bn. in 2019, a marginal decline

of 3.83% when viewed in the context of to meet these new challenges. Nevertheless, as Chairman and Board Member, as well as
the highest ever single-year impairment the Bank recognises that there are further previous Board members, all of whom have
provision of Rs. 21.484 Bn. Deposits recorded opportunities to be seized, both within the immensely contributed to the Bank’s success
the highest-ever single year growth of Bank and in the sector as a whole. The Bank and left their imprint on the Bank. My
Rs. 212.658 Bn. to end the year at has implemented a digital strategy that experience at the Bank has reinforced that
Rs. 1,265.966 Bn., which contributed will take it towards its goal of becoming a when committed, passionate, and talented
to increasing the total asset base to comprehensive ‘digital bank’ – i.e. a complete people work together, mutual success
Rs. 1,736.218 Bn. as at December 31, 2020, banking ecosystem – by 2025. As this process always follows. As I welcome the incoming
a remarkable increase of 25.15%. Taking unfolds, the traditional ‘brick and mortar’ Chairman, Deputy Chairman, and Board
into account the shareholder expectations, model will gradually shift. Innovative, members, I am supremely confident that the
the dividend policy of the Bank and the integrated thinking, guided by the Board, will Bank is in good hands, and I look forward to
potentially difficult times ahead, the Board of be the order of the day. the Bank’s continued ascent.
Directors decided to maintain the dividends The COVID-19 pandemic has brought
per share at the same level as in the recent to the fore a new kind of risk – what has Vote of thanks from Justice K Sripavan
past. Accordingly, a dividend per share of Rs. been referred to recently as conduct risk, As I assume my position as Chairman of the
6.50 has been recommended for shareholder a form of reputational risk. While the Bank, I wish to extend my sincere gratitude
approval at the Annual General Meeting to Bank’s fundamental business of financial to Mr Dharma Dheerasinghe and Mr M P
Performance Review

be held on March 30, 2021. intermediation requires adherence to Jayawardena, former Chairman and Deputy
The history of Commercial Bank can be government regulations, operating in a Chairman, respectively. Under their visionary
community of stakeholders means that it leadership, the Bank has navigated difficult
traced back to 1920 when its forerunner,
also needs a ‘Social Licence’. The latter has to times and ascended to new heights. They
Eastern Bank, established a branch and
be earned from the public through sustained leave big shoes to fill, and the current
began its operations in Sri Lanka (then
ethical and conscientious behaviour. And, at Board looks forward to building on their
Ceylon). After being incorporated locally
a time when so many are struggling under considerable achievements. I am glad to
in 1969, Commercial Bank grew over the
have at the helm of the management team
Annual Report 2020

decades to its current position as the the effects of the pandemic, anything less
than conducting business with integrity can Managing Director/Chief Executive Officer
country’s largest private sector bank, and
result in this Social Licence being revoked. Mr S Renganathan and Executive Director/
the most recognised and awarded bank,
To supplement the Bank’s robust efforts in Chief Operating Officer Mr S Manatunge.
including becoming the first Sri Lankan bank Their tireless efforts and agile, resourceful
to be ranked among the top 1000 banks this arena, the Bank is developing, as we
draft this message, a formal Anti-Bribery and management across an unprecedented year
in the world. In its status as a domestic were nothing short of remarkable.
systemically important bank, Commercial Corruption Policy, which will be submitted
Commercial Bank of Ceylon PLC

Bank has been a driving force in partnering for the approval of the Board during the first I also wish to thank our shareholders,
and cooperating with national economic quarter of 2021. The Bank’s longstanding, valued customers, indefatigable staff, and
widespread reputation for compliance to not other stakeholders for their continued
development efforts. In the COVID-19
just the letter but sprit of the law is one of support in an extremely challenging
pandemic recovery process, the Bank
our most important intangible assets, and environment across 2020. Given the context,
has played a significant role leading the
one which the Board considers imperative to the Bank’s performance was commendable,
private sector banks in granting working
safeguard and nourish. and I recognise that we have a significant
capital loans and providing concessions to
role to play in the country’s recovery from
affected sectors. The Bank has implemented
Vote of thanks from the COVID-19 pandemic. At times like
programmes under 11 different categories
these, the Bank relies on the strength of the
for affected sectors and individuals as part Mr Dharma Dheerasinghe
stakeholder relationships it has built over the
of the “Arunella” Finance Support Scheme, As I conclude my six-and-a-half-year years, and it is on this foundation of mutual
and extended these relief measures beyond tenure as the Chairman of the Bank, and trust that the Board and the Corporate
the mandated debt moratorium. These nine years service on the Board overall, I Management approach the coming year with
concessions included, among other things, want to extend my profound thanks and determination and confidence.
flexible payment options, upto 20% rebates gratitude to several crucial people whose
on accrued interest during the moratorium support was invaluable. During the last
period, and extensions of mandated two years, across which Sri Lanka has faced
moratorium periods for a further six months. unprecedented economic challenges, I have
worked closely with the outgoing Deputy
Crisis can, however, sometimes provide
Chairman Mr M P Jayawardena, the current Justice K Sripavan K G D D Dheerasinghe
an opportunity for reinvention. It is
patently clear that we are living through Managing Director/Chief Executive Officer, Chairman Former Chairman
a digital revolution, where conventional Mr S Renganathan, and the current Chief
Operating Officer, Mr S Manatunge. Their Colombo
business models and ecosystems are in
dedication and acuity have helped guide February 24, 2021
rapid transformation, and new entrants to
the financial landscape have heightened the Bank through difficult waters, and left it
14
Managing Director/
Chief Executive Officer's Review
The question constantly on our minds,
animating every decision taken, was:
when the pandemic finally subsides,
how will our stakeholders judge the
conduct of the Bank during this most
challenging of periods?

Performance Review
The Bank began 2020 in a spirit of
euphoria with celebrations to mark
a century of operations in Sri Lanka,
a period during which the Bank
has become an integral part of the S Renganathan
economic and social landscape of the

Annual Report 2020

country. A renewed sense of optimism
for recovery from the difficulties of the
previous year abounded, but soon we
were confronted by an epochal event our investors, our employees and business the safety of all our staff; and outfitting our
unlike any in memory. As we reach partners, the government, and the wider branches with partitions, sanitisers and
a year of living with the COVID-19 society – judge the conduct of the Bank instituting other best practices for social
pandemic globally and locally, it is clear during this most challenging of periods? distancing and hygiene to safeguard our

Commercial Bank of Ceylon PLC

that we are in a world that is being As a domestic systemically important customers. These measures enabled the
transformed. bank, we take our wider responsibilities Bank to provide customers with urgently
Unlike the global financial crisis seriously – and these responsibilities are required services, from opening the majority
of 2007-2008, however, the shocks entirely consistent with the Bank’s raison of our branches during the curfew, to
to the financial sector brought about d’être as a creator of value in the short, deploying our fleet of ‘Bank-on-Wheels’
by the pandemic are exogenous. The medium, and long term. A myopic focus on Mobile Banking Units to provide access to
hard-earned lessons of the last decade immediate returns would threaten the future cash, to keeping our Imports and Exports
demonstrated the need for a more profitability and sustainability of the Bank. department operational throughout to play
stringent regulatory regime, and the A long-term perspective, driven by faith in our part in facilitating the country’s trade, to
financial sector, both internationally our relationships with our stakeholders and fast-tracking digital products and services
and in Sri Lanka, was much better a commitment to our identity as a bank with to allow customers to conduct transactions
placed in terms of capital and liquidity integrity, was the order of the day. remotely.
at the outset of the present crisis. This While we pride ourselves on our As the urgency of the first wave ebbed,
time, the financial sector has a vital preparedness and BCM processes, the full the focus of the financial sector turned from
role to play in the recovery process, scale of the logistical operations necessitated providing access to banking to offering
both through its own efforts and as a by the pandemic could not have been relief and support for recovery. Many of our
channel for government support to anticipated or tested. As the first wave of customers were in urgent and desperate
affected households and businesses. COVID-19 infections surged in late March need of financial assistance, and the Bank
Moments of crisis display true 2020 and lockdowns ensued, the Bank knew it was imperative to do everything
character, true identity. The question moved swiftly into action, implementing a within its capacity to aid them. The Bank
constantly on our minds, animating range of operational measures, including: consolidated its efforts under the umbrella
every decision taken, was: when the splitting teams and setting up protocols for of ‘Arunella’, a Financial Support Scheme that
pandemic finally subsides, how will working at alternate sites and from home; integrated multiple initiatives including debt
our stakeholders – our customers, providing food, lodging, transport, and moratoriums, flexible payment options, up
personal protective equipment to ensure to 20% rebates on accrued interest during

15
 Instead of a the moratorium periods, reductions on credit
card repayments and applicable interest
rates, and debt consolidation plans. These
reached Rs. 1,762.496 Bn. as at December
2020, recording a growth of 25.09% over
Rs. 1,408.941 Bn. reported a year ago. It also

single-minded focus initiatives were guided by CBSL directives,

but went above and beyond them to cover
as many struggling customers as possible.
deserves a special mention that our overseas
operations and subsidiaries, in particular in
Bangladesh and Maldives, made substantial
on profitability Our goal was not to exclude, but to include
– not to narrowly interpret eligibility criteria
contributions to the Bank/Group profits. A
detailed analysis of our performance is given

targets, we as a to limit applications, but find ways to bring

people into the fold. Instead of a single-
minded focus on profitability targets, we as a
in the Financial Review on page 20.
Continuing on the trend in 2019, it
should also be highlighted that the Treasury
team wanted to
Managing Director/ Chief Executive Officer's Review

team wanted to stand shoulder-to-shoulder made a significant contribution to the

with our respected customers and support bottom line of the Bank in 2020, too. Treasury
them during these unprecedented times.
stand shoulder-to-
accounted for 33.95% of the total assets
Furthermore, the Bank prioritised efforts of the Group as at December 31, 2020,
to offer assistance to the SME and Micro funded through both the excess liquidity

shoulder with our enterprises sector, the engine of the national

economy. This is reflected in the fact that
as much as 24% of the applications for
channeled to them from Corporate and
Retail banking business units as well as its
own borrowings. This performance was a key
respected customers the Saubagya scheme were submitted by
the Bank and 32% of the value of the total
reason that the Bank was able to maintain
the reported level of performance even after

and support them

scheme was granted for customers of the higher impairment provisioning, lower credit
Bank as of June 2020. By the year’s end, growth and shrinking net interest margins.
the Bank remained the leading lender for Despite the challenges of the year,

during these COVID-19 relief amongst the private sector

banks. Beyond the CBSL schemes, the Bank
initiated two major loan programmes for
the Bank received an unreserved vote of
confidence: a private placement of shares

unprecedented
with the IFC amounting to USD 50 Mn.
SMEs affected by the pandemic: an
Performance Review

(Rs. 9.216 Bn.). This investment is the first

Rs. 10 Bn. scheme funded through a loan of foreign equity placement by the Bank and

times.
USD 50 Mn. from the International Finance collectively makes the IFC, the IFC Financial
Corporation (IFC), and a working capital Institutions Growth Fund LP (FIG Fund), and
scheme for Micro enterprises. This year, the IFC Emerging Asia Fund LP (EA Fund)
the Bank also placed an emphasis on SME the largest shareholder of the Bank (and
acquisition, and will seek to play an even increases the Bank’s foreign shareholder
greater role in supporting this sector in the composition to 23.66%). Importantly, this is
Annual Report 2020

years to come. the first post-pandemic equity placement

The Bank’s growth and profitability for by the IFC, and represents one of the largest
the year must be placed in this context. We foreign investments into Sri Lanka since the
view our efforts in supporting customers as start of the pandemic – a clear indication of
an investment in relationship capital, and positive sentiment for the Bank’s future.
one that will hold the Bank in good stead in And indeed, there are promising signs
the future. Profit for the year of the Group
Commercial Bank of Ceylon PLC

for the future. The demand for digital

was Rs. 17.087 Bn, a 1.91% drop compared products and services during the pandemic
to Rs. 17.420 Bn. in 2019. The Group’s profit has acted as a catalyst, spurring on our
is remarkable given two important factors. digital transformation. During the year
First, interest refunds, Day One losses and under review, the Bank integrated online
concessionary interest to be charged on EMI and mobile banking channels on a single
facilities as per the directions of the regulator omni-channel platform with the launch of
coupled with the Bank’s own voluntary ‘ComBank Digital’, positioning the Bank as
rebate scheme amounted to a loss of interest a market leader in the digital space. The
income of approximately Rs. 3.0 Bn. Second, app is highly functional and customisable,
the Bank made its highest ever single-year bringing the Bank closer to its digital vision
impairment provision of Rs. 21.484 Bn., which of being able to create user experiences that
included COVID-19 overlays of Rs. 5.189 Bn. are personal and tailored. In addition, we
for reasons of prudence taking into account upgraded Flash, the Bank’s ground-breaking,
the potential for credit losses that existing trilingual digital wallet, with several features
impairment models may not be able to that are revolutionary in the local context,
capture. launched a new WhatsApp banking tool that
Deposits grew by 20.36% during the is positioned as a low-barrier-to-entry digital
year to Rs. 1,286.616 Bn. as at December 31, solution, and made great strides in our QR
2020, recording the highest ever growth and other cashless offerings.
for any financial year todate. However, the But the pandemic has also exposed
lending portfolio recorded only a nominal limitations and areas for improvement in
growth of 1.78%, causing the excess the digital space – both within the Bank and
liquidity to be diverted to the Treasury throughout the sector. Here, it is important
for productive deployment. Total assets to always keep in mind that innovation

16
and digitalisation is, ironically, not about highest achievable rating, from the Green Viewed with honesty and clarity, the year
technology as much as it is about people. Building Council of Sri Lanka (GBCSL), and ahead will be demanding, both for the Bank
The objective of digitalisation is to create is now a popular tourist attraction as an and the country. Continued downgrades
superior customer experiences and deliver eco-friendly heritage site. In a sense, the to lending rates, implementation of special
digital services that are faster, more agile, Branch stands as a symbol of the Bank itself; loan schemes, and rising investor sentiment
cost-effective, personalised, and secure. an institution that combines a rich history is expected to drive credit growth in all
Front-end digital solutions are not enough, and tradition with an ability to adapt to the sectors of the economy in 2021. But, for the
however. The pandemic has revealed, demands of a new era. financial services sector, the full force of the
more than ever, that end-to-end digital The Board has been a source of support true NPL position will only be felt in 2021. A
processes are needed wherein the whole throughout this testing year. The outgoing prolonged low-rate environment will mean
chain of events that occur in a transaction Chairman, Mr Dharma Dheerasinghe, has anemic NIMs, and business models will need

Managing Director/ Chief Executive Officer's Review

or service increasingly become digitalised provided sound stewardship and guidance to shift to maintain profitability. 
and integrated. To that end, the Bank has over the past 9 years, a period during which But if the pandemic has taught
adopted a Digital Strategy for 2025 that the Bank has weathered major storms and us anything, it is that all of us – our
prioritises redesigning conventional banking gone from strength to strength. I extend my stakeholders, our country, our planet –
processes as digital processes, integrating profound thanks to him, and to the Deputy are connected and our fates are intertwined.
with other ecosystems, upgrading internal Chairman, Mr Preethi Jayawardena and Driving the Bank’s profitability will always
systems to be prepared to capitalise on Mr S Swarnajothi, Director, who also retired be our central concern, but no longer
changes in the regulatory environment, and from the Board during the year, for their can success or value creation be defined
developing talent and building partnerships. invaluable service to the Bank. I would like in a narrow, short-term frame. The world
The promise of digitalisation also to welcome our new Chairman, Justice K after COVID-19 will be different in so
opens new avenues for our sustainability Sripavan and the Deputy Chairman, Prof many ways, some of which we cannot
initiatives. During the year under review, Ananda Jayawardane, together with our completely anticipate, offering both risks
the Bank issued a Position Statement on new Board members, Ms Judy Lee and and opportunities.  Whatever challenges
Climate Change, affirming its commitment Mr Raja Senanayake. Their leadership will be lie ahead, however, the Bank is confident
to combating Climate change at the highest much needed as the country commences its that it has the experience, agility, and
level of the Bank. The Bank is also proud recovery from the pandemic. resourcefulness to rise to the occasion,
to announce that it met its goal of carbon as it has always done throughout its

Performance Review
I also wish to thank the Country Head of
neutrality by the end of 2020. While the Bank IFC for Sri Lanka and the Maldives, Ms Amena 101-year history.
has a relatively small environmental footprint Arif for her spontaneous and unstinted
of its own, in its capacity as a major corporate support to our call for assistance when we
and financial intermediary, it can act as an were faced with pandemic challenges and
influencer. Beyond implementing a Social for the historic equity infusion through a
and Environmental Management System private placement.
(SEMS) to assess and manage social and
I want to reserve my last word of tribute

Annual Report 2020

environmental risks and building a robust S Renganathan
to our staff – across Sri Lanka, as well as
Green Financing portfolio, the Bank also
Bangladesh, Italy, Maldives, Myanmar and Managing Director/Chief Executive Officer
seeks to give its customers the tools to play
other overseas locations. Our success during Colombo
a part in addressing climate change. During
the year under review is a testament to their February 24, 2021
2020, the Bank’s Flash app was upgraded
resilience, dedication, and tirelessness. Our
with a new module that analyses user data
staff does not operate in a vacuum – they
to estimate the carbon footprint of each

Commercial Bank of Ceylon PLC

too were gripped by the sense of anxiety
transaction made through Card payments,
and uncertainty that pervaded the country
QR code scanning, the Flash app, and other
and the globe through waves of COVID-19
sources, revealing the hidden environmental
infections, and their work and life rhythms
and social costs of the user’s consumption
were disrupted in unprecedented ways.
habits. The Bank is the first company in the
Yet, they continued to represent the Bank
region and the fourth bank in the world to
with care and integrity. Despite the financial
introduce a customer-centric tool integrated
challenges, the Bank paid all scheduled
with the UN-approved Environment Impact
increments and bonuses, affirming its
Index (Aland Index) for financial transactions,
commitment to its staff in a time of crisis.
and is the first step in our journey of raising
Also noteworthy was the successful
collective awareness about climate change.
negotiation of the Bank’s collective
Special mention should also be made of bargaining agreement with the Bank
our Galle Fort Branch, which was restored as branch of the Ceylon Bank Employees’
part of the 100th anniversary celebrations Union (CBEU) and the introduction of a new
of the Bank. The building was constructed pension fund – all indications that the Bank’s
in the 19th century, and the restoration relationship with its internal customers has
sought to preserve the unique architectural never been stronger.
and cultural elements of the space and was
carried out in consultation with the relevant
authorities. The restoration process used only
locally sourced, environmentally preferable
building materials and specifications, and the
Branch was designed to be extremely energy
efficient and use renewable energy sources.
The Branch received a Platinum Award, the
17
 CSR Initiatives 2020
The Bank carried out a series of special projects that broadly focused on education, healthcare, and environmental
conservation throughout the year. Driven by a larger vision of creating a thriving society and safeguarding the
environment, these initiatives were primarily channeled through the Bank’s Corporate Social Responsibility (CSR) Trust,
which was established in 2004 under a Deed of Trust.

Supporting education and employability

The Bank donates laptops to The Bank commences a project to donate Welioya School receives IT Lab via Bank
visually-impaired undergraduates (CSR) smart STEM classes in 100 schools as and Sri Lanka Army initiative
centenary year project The Commercial Bank of Ceylon has
funded the construction of an IT lab at
the Paranagamawewa Vidyalaya, Welioya
in collaboration with the Security Forces
Headquarters, Wanni. The contribution
of the Bank includes financial support
for the purchase of building materials
to construct a building for the lab, and
donations of furniture, solar panels to
power the school, and computers. The
engineering services and labour required
for this operation were provided free of
Performance Review

charge by the Sri Lanka Army.

The Bank donated 21 laptop computers
to visually-handicapped university
students in response to a request by the The Bank donates 200th IT Lab to
‘Centre for Sight’ of the Kandy Teaching Janadhipathi Vidyalaya, Matara
Hospital’s Department of Ophthalmology,
the institution that handles ophthalmic
disorders and helps visually handicapped
Annual Report 2020

students to gain admissions to

universities in Sri Lanka.
The latest presentation takes the
number of undergraduates in this
category that have received laptops
from the Bank to [Link] Bank previously Smart classrooms that focus on Science,
donated laptops to two groups of vision- Technology, Engineering and Mathematics
Commercial Bank of Ceylon PLC

impaired students attending universities (STEM) was established in 100 schools

around the country in 2014 and 2015. across Sri Lanka, with the backing of the
Bank to commemorate the centenary of The Bank’s nationally-scaled community
Bank-supported STEMup project helps the country’s benchmark private bank. initiative to elevate computer literacy
set up Software Coding Clubs in 50 Drawing synergies from several levels in Sri Lanka reached an important
schools ongoing education-centered initiatives milestone with the opening of the 200th
Software Coding Clubs were set up in supported by the Bank, this project IT lab donated by the Bank, a landmark
50 schools under a STEMup Educational aims to transform orthodox educational achievement in the year that the Bank
Foundation project supported by institutions to STEM centres, using digital celebrated its 100th anniversary.
the Bank. The project aims to set up learning content developed for the The recipient of the fully-equipped
100 such clubs to advance computer "Sipnena" online education website also and furnished IT Lab was the Janadhipathi
programming knowledge among school funded by the Bank, thereby giving the Vidyalaya, Matara, which also received
children and inspire students to pursue project its name: the "100 Sipnena Smart a STEM (Science, Technology, Engineering
Scientific, Technological, Engineering, and STEM Schools" initiative. and Mathematics) classroom from
Mathematical (STEM) degrees and careers. the Bank.

18
Promoting environmental conservation Healthcare Other

The Bank plants trees in Kandy City The Bank supports the battle against The Bank joins Sri Lanka Army “Thuru
COVID-19 Mithuru” project to drive Sri Lanka
The CSR Trust of the bank made a series towards self sufficiency in food
of donations of essential equipment
to hospitals to support doctors and
healthcare personnel battling to treat
victims and prevent the spread of

CSR Initiatives 2020

COVID-19.
The Bank donated Personal
Protection Equipment (PPE) kits, N95
protective masks, surgical masks, surgical
suits and hand sanitiser in bulk as well as
in dispenser form to the hospitals based
The Bank engaged in a tree planting on identified needs. The Bank also made

Performance Review
project in the hill country capital as part a cash donation to the COVID-19 fund
of its centenary celebrations. established by the government.

The Bank announced a partnership

The Bank supports marine turtle The Bank donates life-saving
with the Sri Lanka Army to financially
conservation programme in Panama equipment to Children’s Heart Centre
support the second phase of the “Thuru
The Commercial Bank of Ceylon has of LRH
Mithuru Nawa Ratak” initiative designed
pledged support to a marine turtle

Annual Report 2020

to transform Sri Lanka into a country
conservation project in Panama, a village self-sufficient in essential food.
on the east coast of Sri Lanka, to enable
the expansion of the scope of the project
from the Kumana village to Panakala The Bank provides water and
Lagoon. sanitation facilities to
The immediate objective of the Sri Nagarukkarama Temple

Commercial Bank of Ceylon PLC

programme is to protect the nests The Bank provided the 135-year old
and eggs of four endangered species Sri Nagarukkarama Temple in
of sea turtles from predators such as Kotikawatte, Angoda with water and
pigs, foxes, mongoose, spotted iguana sanitation facilities. Following a request
The Bank donated an Activated Clotting
and dogs. from the custodian of the temple, the
Time (ACT) machine and 20 syringe
Bank constructed a 50-foot water tank
pumps to the Children’s Heart Centre of
storage tower with the capacity to hold
the Lady Ridgeway Hospital in Colombo
20,000 litres of water and accommodate
to be used in three Cardiac Theatres and
four washrooms.
two Intensive Care Units.

19
 Financial Review 2020
This financial review provides details of the With due consideration to the dividend Interest expenses, which accounted for
Bank’s financial performance across the year. policy and the Bank’s commitment to 59.48% of the interest income (63.05% in
It is meant to be read in conjunction with maintaining a consistent stream of dividends 2019), decreased to Rs. 72.759 Bn. during the
the Operating Environment (pages 27 to to shareholders, the Board of Directors has year from Rs. 80.571 Bn. in 2019, recording
34), which explains the broader global, local, recommended a first and final dividend of a negative growth of 9.70% (2019: 11.10%).
and sector trends that contextualise the Rs. 6.50 per share, which is in line with the This was mainly due to timely repricing of
Bank’s performance, and the Management rate of dividend the Bank has been paying liabilities to reflect the decreasing interest
Discussion and Analysis (pages 41 to 62), over the past eight years. rate regime and a significant improvement
which analyses how the Bank grew its Given that the Bank accounted for of the CASA ratio by 562 bps. Accordingly,
financial and other capitals in relation to its 98.51% of the total assets and 95.83% of the decline in the average rate of interest on
strategic imperatives. the profit of the Group, the analysis below interest-bearing liabilities by 1.66%, partly
provides a detailed account of the Bank’s off-set by a growth in average interest-
An overview financial performance, followed by a brief bearing liabilities by Rs. 186.405 Bn.
The Bank recorded the highest ever single- commentary on the performance of the Consequently, net interest income grew
year growth in assets of Rs. 348.873 Bn. or Bank’s overseas operations, subsidiaries and by 5.01% (2019: 5.04%) to Rs. 49.571 Bn. from
25.15% (2019: 6.43%) during the year under the associate as given on pages 24 to 26. Rs. 47.208 Bn. in 2019, accounting for 66.15%
review and recorded Rs. 1,736.218 Bn. as at of the total operating income (2019: 71.51%).
December 31, 2020. This was mainly funded Income Statement Net interest margin dropped by 34 bps to
by the growth in deposits of Rs. 212.658 Bn. Financial intermediation 3.17% from 3.51% in 2019.
or 20.19% (2019: 7.15%), which reached Rs.
Gross income grew by only 0.68% (2019:
1,265.966 Bn. as at the year end. However, as Fee-based operations
7.72%) to Rs. 149.711 Bn. for the year
witnessed across the industry, net lending Fee and commission income recorded a
from Rs. 148.706 Bn. in 2019. Both interest
portfolio had only a marginal growth of negative growth of 9.17% (2019: 3.49%) to
income and the fee and commission income
1.38% (2019: 2.73%) for the year. Rs. 11.269 Bn. from Rs. 12.407 Bn. for the
recorded a negative growth, which was
Performance Review

The profit after tax of the Bank decreased more than off-set by other sources of income year due to fee waivers and relatively lower
by 3.83% (2019: -2.96%) to Rs. 16.373 Bn. mainly due to the exceptional performance card spending during the lockdown periods.
from the Rs. 17.025 Bn. reported in 2019. of the Treasury. Average assets for the year However, the impact was partly off-set by an
Yet, this can be considered a significant grew by a higher 16.08% (2019: 9.97%) to increase in the Bank’s market share in both
achievement when viewed against the Rs. 1,561.782 Bn. from Rs. 1,345.415 Bn. in the trade finance and remittance businesses
magnitude of the challenges posed by the 2019. As a result, the financial intermediation during the year.
operating environment and the significant margin (gross income/average total assets) Fee and commission expenses, which
increase in impairment provision. Growth
Annual Report 2020

decreased to 9.59% (2019: 11.05%), a drop of relate mostly to credit and debit cards
in total operating income by 13.52% 146 bps. The financial intermediation margin related services, decreased by 4.96% (2019
was not sufficient to offset the increases for the banking sector for the year was 9.57% :15.19%) to Rs. 2.012 Bn. from Rs. 2.117 Bn.
in impairment provisions, causing the compared to 11.03% for 2019. for the year. Consequently, net fee and
operating profit before taxes to decrease by commission income decreased by 10.04%
5.13% (2019: -6.68%). Fund-based operations (2019: 1.37%) to Rs. 9.256 Bn. from Rs. 10.290
Interest income, which accounted for 81.71% Bn. accounting for 12.35% of the total
Commercial Bank of Ceylon PLC

Profit growth Graph – 01 operating income (2019: 15.59%).

Rs. Bn. %
(85.93% in 2019) of the gross income of Rs.
149.711 Bn., decreased to Rs. 122.330 Bn.
32 32
during the year from Rs. 127.780 Bn. in 2019, Other income
24 24 recording a negative growth of 4.26% (2019: The Bank recorded a substantial increase in
16 16
8.78%). This was mainly attributable to the other income for the year of 89.11% (2019:
decline in the average rate of interest on -0.88%) to Rs. 16.113 Bn., from Rs. 8.520 Bn.
8 8 in 2019. This was made possible by net gains
interest-earning assets by 1.98%, partly off-
0 0 set by a growth in average interest-earning of Rs. 6.390 Bn. on derecognition of financial
assets of Rs. 220.975 Bn. The drop in market assets, growth of 462.66% (2019: 317.53%),
-8 -8
2016 2017 2018 2019 2020 interest rates, the reduction in policy rates, net gains from trading increasing by
and modification losses (Day One losses) as 38.01% (2019: 144.86%) to Rs. 1.878 Bn. and
PAT Taxes on Income PAT Growth
(Rs. Bn.) Financial Tax YoY per the SLFRS 09 on Financial Instruments net other operating income increasing by
Services (Rs. Bn.) (%) due to concessions granted to the borrowers 30.23% (2019: -46.96%) to Rs. 7.844 Bn. from
(Rs. Bn.)
affected by COVID-19 (including concessions Rs. 6.024 Bn. as a result of foreign exchange
In tandem with the lacklustre prescribed by the regulator, as well as income growing by 30.34% to Rs. 7.361 Bn.
performance in the stock market during concessions and interest rebates granted at due to a 2.81% depreciation of the Sri Lankan
most part of the year, share prices of the the Bank's discretion) all combined to exert Rupee against the US Dollar during 2020.
Bank also decreased. However, the price to pressure on the average rate of interest. The
book value and the market capitalisation of combined effect of the modification loss and Total operating income
the Bank remained the highest among peers interest rebates amounted to Rs. 2.641 Bn. Total operating income grew by 13.52%
in the Banking sector. The Bank’s market Gradual deterioration in asset quality, which (2019: 3.66%) to Rs. 74.940 Bn. from
capitalisation ranked fifth among all listed resulted in an increase of non-performing Rs. 66.018 Bn. in 2019. This was consequent
companies on the Colombo Stock Exchange advances, and excess liquidity due to lower to the increase in other income and net
as at December 31, 2020. growth in advances being channelled to low interest income being partly off-set by a
interest earning assets also impacted the decrease in net fee and commission income.
interest income.
20
Total operating income Graph – 02 Rs. 25.426 Bn. in 2019. This was as a result respectively. Nevertheless, these ratios
Rs. Bn. of the increase in personnel expenses compare well with the industry averages
75 and depreciation and amortisation being of 0.99% (2019: 0.93%) and 11.34% (2019:
off-set to a greater extent by a reduction in 10.26%).
60
other operating expenses. Consequent to
45 the substantial increase in total operating ROA and ROE Graph – 05
30 income and efforts taken to limit the increase %
in operating expenses, the Bank’s Cost to
15 20
Income ratio for the year 2020 excluding
0
2016 2017 2018 2019 2020
taxes on financial services improved to 16

33.95% (2019 : 38.51%). 12

NII Net fee and commission Other income
8
Profit before and after taxes
4
Impairment charges Negative growth in net operating income
Impairment charges and other losses by 2.73% coupled with a marginal increase 0
2016 2017 2018 2019 2020
for the year increased by Rs. 10.422 Bn. in total operating expenses by 0.06% saw
or 94.22% (2019: 28.99%) to Rs. 21.484 operating profit before taxes on financial ROA ROE

Bn. from Rs. 11.061 Bn in 2019 due to services decreased by 5.13% (2019: -6.68%).
deterioration in asset quality as a result However, the decrease in taxes on financial
Statement of Financial Position
services due to the timely abolition of

Financial Review 2020

of the lacklustre economic activities and
the Debt Repayment Levy (effective from Assets
uncertainties associated with loan portfolio
under moratorium. This is the highest ever January 1, 2020) and the Nations Building Total assets of the Bank grew substantially by
Impairment provision the Bank has ever Tax (effective from December 1, 2019), 25.15% (2019: 6.43%) during the year to reach
made for a single year in its history. This enabled the Bank to post an increase in Rs. 1.736 Tn. from Rs. 1.387 Tn. at the previous
includes additional provisions made for the operating profit after taxes on financial year end. This growth is well in excess of the
expected credit losses as a management services (Profit before tax) by 5.25% (2019: industry growth of 17.12%. Given that the net
overlay of Rs. 5.189 Bn. to account for -12.71%) to Rs. 23.511 Bn. compared to loans and advances to customers recorded
Rs. 22.339 Bn. in 2019. only a marginal growth of 1.38%, deposits

Performance Review
potential losses that the existing impairment
models may not be capturing due to high The Bank’s Cost to Income ratio for mobilised during the year had to be invested
level of uncertainty and volatility created by the year 2020 including taxes on financial in Government securities, which mostly
COVID-19 pandemic. The total impairment services also improved to 39.96% (2019: accounted for the growth in assets.
charge for the year includes Rs. 17.865 Bn. 49.41%).
for individual and collective impairment Income tax expense for the year Composition of total assets Graph – 06
of loans & advances and Rs. 3.287 Bn for increased by 34.32% (2019: -33.96%) Rs. Bn. %
other financial assets and off-balance sheet to Rs. 7.138 Bn. from Rs. 5.314 Bn. in 2019. 2,000 1.9

Annual Report 2020

exposures. The provision for other financial This was as a result of the tax expense 1,600 1.7
assets includes a provision of Rs. 2.497 Bn. for 2019 being considerably lower due to
on account of FCY denominated securities the favourable impact the entire banking 1,200 1.5

issued by the Government of Sri Lanka industry enjoyed arising from the exemption 800 1.3
consequent to the downgrading of the of interest income from investments in 400 1.1
sovereign rating. Sri Lanka Development Bonds (SLDBs)

Commercial Bank of Ceylon PLC

0 0.9
retrospectively with effect from April 1, 2018. 2016 2017 2018 2019 2020
Impairment charges Graph – 03 Consequently, the profit after tax for the year
Loans and Other interest Other ROA
Rs. Bn. reported a negative growth of 3.83% (2019: advances earing assets assets (%)
20 -2.96%) and stood at Rs. 16.373 Bn. compared (Rs. Bn.) (Rs. Bn.) (Rs. Bn.)
to Rs. 17.025 Bn. reported for 2019.
15
Loans and advances to customers
10
Profit before and after tax Graph – 04
Reflecting the continued slowdown in credit
5 Rs. Bn.
to the private sector and the significant
0 30 increase in impairment provisioning,
-5 24 the growth in net loans and advances to
2016 2017 2018 2019 2020 customers was limited to 1.38% (2019:
18
Individual impairment Collective impairment
2.73%) for the year. Accordingly, net loans
12 and advances as at December 31, 2020 was
6 Rs. 896.845 Bn. compared to Rs. 884.646 Bn.
The substantial increase in impairment a year ago. Net loans and advances
0
provision and the lower growth in the total 2016 2017 2018 2019 2020 accounted for 51.66% (2019: 63.77%) of
operating income resulted in a negative total assets as at December 31, 2020. The
Profit before tax Profit after tax
growth in the net operating income by Bank’s efforts during the year were mostly
2.73% (2019: -0.28%) to Rs. 53.457 Bn. from directed towards granting concessions and
Rs. 54.956 Bn. in 2019. Profitability accommodating moratorium requests to
Reflecting the drop in profit after tax and the the borrowers affected by both the Easter
substantial increases in assets and equity Sunday attack and the COVID-19 pandemic,
Operating expenses
during the year, Return on Assets (ROA) and following the relief packages extended by
Total operating expenses increased the regulator as well as through the Bank’s
marginally by Rs. 14.330 Mn or 0.06% (2019: Return on Equity (ROE) reduced to 1.05%
(2019: 1.27%) and 11.28% (2019: 13.54%), own initiatives.
8.34%) to Rs. 25.440 Bn. for the year from
21
 Asset quality Other liabilities Shareholders’ funds Graph – 08

Quality of the loans and advances portfolio The significant increase in deposit liabilities Rs. Bn.
is a key determinant of the sustainability in contrast to the sluggish growth in loans 175
of the Bank’s operations. Deterioration and advances meant that the Bank had 140
in asset quality witnessed industry-wide excess liquidity during most part of the
105
during most of the year caused the Bank year. As a result, external borrowings during
to also experience a further increase in the year was mainly limited to refinance 70
NPLs. The Bank’s conservative risk profile, borrowings of approximately Rs. 20 Bn. from 35
with a moderate risk appetite and a robust the Central Bank of Sri Lanka under the
0
risk management framework, helped the Saubgaya – COVID-19 Renaissance facility 2016 2017 2018 2019 2020
Bank end the year with the gross and the to assist businesses affected by COVID-19
Stated Statutory Retained Other
net NPL ratios at 5.11% (2019: 4.95%) and and a borrowing of USD 50 Mn. from the IFC capital reserves earnings reserves
2.18% (2019: 3.00%), respectively, compared to help small and medium businesses, with
to industry averages of 4.93% and 2.44%, one third being earmarked to help Woman
respectively. Entrepreneurs deal with the adverse impacts Liquidity
Cumulative impairment provisions for of COVID-19. This together with Repo and Excess liquidity, a result of substantial growth
loans and advances as a percentage of the short-term borrowings from banks increased in deposits coupled with limited lending
total loans and advances portfolio as at the total other liabilities as at the current year end opportunities, posed major challenges in
end of the year amounted to 5.38% (2019: to Rs. 313.106 Bn. from Rs. 200.875 Bn. in 2019. optimal liquidity management, ultimately
leading the Bank to invest excess liquidity
Financial Review 2020

3.89%). Further, total regulatory provisions

to gross loans and advances portfolio stood Capital in Government securities. Nevertheless, at
at 3.32% (2019: 2.37%) as at the year end. The Bank is guided by its Internal Capital a time of unprecedented uncertainty such
Specific provision coverage ratio (based Adequacy Assessment Plan and the Board as what we currently experience, excess
on regulatory provisions) increased to approved dividend policy in maintaining liquidity provides a high level of comfort
57.42% (2019: 39.39%) in 2020 compared to capital commensurate with its current and to the Bank and also, enables the Bank
51.72% for the industry. This together with projected business volumes. Accordingly, to benefit from the upturn envisaged in
the increase in the Bank’s capital improved a capital infusion of Rs. 9.216 Bn. by way credit demand in the years ahead. Given
its importance, review of liquidity is a
Performance Review

the open credit exposure ratio (which is of the landmark private equity placement
net exposure on NPLs as a percentage of with IFC, which was a first for the Bank, permanent agenda item in the fortnightly
regulatory capital) to 11.88% (2019: 17.37%) profitability and the prudent dividend policy ALCO meetings of the Bank.
at end 2020. helped the Bank to significantly grow its Liquid assets ratios of the Domestic
The loans-to-customers portfolio of the equity capital by 18.01% (2019: 12.46%) Banking Unit (DBU) and the Off-shore
Bank is fairly well diversified across a wide from Rs. 133.162 Bn. as at December 31, Banking Centre (OBC) were 44.99% (2019:
range of industry sectors with no significant 2019 to Rs. 157.146 Bn. as at December 31, 30.42%) and 32.70% (2019: 25.25%),
exposure to any particular sector. 2020. With an on-balance sheet multiplier respectively, as at end of 2020, compared to
Annual Report 2020

(gearing ratio) of 11.05 times, compared to the statutory minimum requirement of 20%.
the industry average of 11.69 times, equity Gross loans to deposits ratio stood at 74.87%
Deposits and advances Graph – 07
(2019: 87.39%). Available stable funding
funded 9.05% (2019: 9.60%) of the assets as
Rs. Bn.
at the current year end. The Bank ploughed based on definitions prescribed by the CBSL
1,500
back Rs. 12.401 Bn. out of profit for the year stood at Rs. 1,288.574 Bn. as at December
1,200 in 2019 after the payment of cash dividends 31, 2020, leading to a Net Stable Funding
and is expected to plough back Rs. 11.122 Ratio (NSFR) of 157.49% (2019: 137.05%),
Commercial Bank of Ceylon PLC

900
Bn. after the payment of cash dividends for comfortably above the statutory minimum
600 the year 2020. Profits ploughed back include of 90% (2019: 100%). Demonstrating the
300 scrip dividends as well. availability of unencumbered high-quality
However, risk weighted assets of the liquid assets at the disposal of the Bank, the
0
2016 2017 2018 2019 2020 Bank grew only by 4.77% (2019: 2.96%) Liquidity Coverage Ratio (all currency) stood
to Rs. 1,019.068 Bn. as at December 2020. at 258.06% (2019: 224.74%) as at December
Financial assets at Financial liabilities at
amortised cost – Loans and amortised cost – Consequently, both the Tier 1 and the total 31, 2020 as against the statutory minimum of
advances to other customers due to depositors
capital ratios improved to 13.217% (2019: 90% (2019: 100%).
12.298%) (minimum requirement – 9.000%
Deposits for 2020 and 10.000% for 2019) and 16.819% Segmental performance
With a solid domestic franchise in Sri Lanka, (2019 : 16.146%) (minimum requirement The contributions of the Corporate Banking
customer deposits continued to be the 13.000% for 2020 and 14.000% for 2019), and Personal Banking divisions to the profit
single biggest source of funding for the respectively, as at December 31, 2020, which before tax of the Group significantly reduced
Bank, accounting for 72.92% (2019: 75.92%) are in excess of the higher capital adequacy to 11.95% (2019: 25.78%) and 25.11%
of the total assets as at December 31, 2020. requirements imposed on the Bank under (2019: 37.18%), respectively, mainly due to
Deposits grew by 20.19% (2019: 7.15%) to Basel III requirements as a Domestic higher impairment charges and other losses
Rs. 1,265.966 Bn. as at December 31, 2020. Systemically Important Bank (D-SIB). The and reduction in total operating income.
The growth in deposits during the year was equity multiplier in terms of risk weighted However, the Bank’s Treasury division made
Rs. 212.658 Bn., which was the highest ever assets to regulatory total capital marginally a significant contribution to the profit before
growth for any financial year in the history declined to 5.95 times from 6.19 times a year tax of the Group of 40.78% (2019: 14.77%)
of the Bank. The CASA ratio also improved ago. As per the CBSL Basel III regulations, the via capital gains on the sale of Government
significantly to 42.72% (2019: 37.10%) as at Bank is a D-SIB, the highest grading currently securities, trading activities, and foreign
December 31, 2020 compared to the industry assigned to a bank along with another exchange profits. In the meantime, the
average of 34.77%. Government Bank, showcasing the Bank’s Bank’s International Operations managed
importance to the economy in Sri Lanka. to maintain its contribution at the 20% level
22
mainly due to the higher contribution from the Bangladesh and the Maldivian operations. The contribution from the International Operations
accounted for 11.79% (2019: 12.06%) of total assets and 20.46% (2019: 20.84%) of the pre-tax profit of the Group.
(All the industry related figures mentioned above have been extracted/computed based on the information published by the CBSL as at December 31, 2020)

Core Financial Soundness Indicators (FSIs)

Financial soundness indicators given below provide further insights into the financial health and stability of the Bank.
Financial soundness indicators Table – 02

Financial soundness indicator (%) 2020 2019 2018 2017 2016

Capital Adequacy (under Basel II and Basel III)    

Common Equity Tier 1 ratio (Under Basel III) 13.22 12.30 11.34 12.11 N/A
Tier 1 capital ratio (Under Basel III) 13.22 12.30 11.34 12.11 10.37 *
Total capital ratio (Under Basel III) 16.82 16.15 15.60 15.75 14.87*
Non-performing loans [net of interest in suspense and specific provisions]
to equity 12.96 20.48 12.71 6.39 8.65

Asset quality:    

Financial Review 2020

Gross NPL ratio 5.11 4.95 3.24 1.88 2.18
Net NPL ratio 2.18 3.00 1.71 0.92 1.09
Total regulatory provisions ratio on gross loans and receivables (Based on
regulatory provisions) 3.32 2.37 1.97 1.40 1.53
Specific provision coverage ratio (Based on regulatory provisions) 57.42 39.39 47.21 51.05 50.11
Provision coverage ratio (Based on SLFRS provisions) 5.38 3.89 3.27 2.29 2.74

Performance Review
Cost of risk of loans and advances 1.88 1.09 0.91 0.25 0.24
Open credit exposure ratio 11.88 17.37 10.21 5.59 6.55

Earnings and profitability:    

Net interest income to total operating income 66.15 71.51 70.56 80.00 74.43
Net fee and commission income to total operating income 12.35 15.59 15.95 17.64 15.91
Other income to total operating income 21.50 12.91 13.50 2.37 9.66

Annual Report 2020

Financial intermediation margin (Gross income to average assets) 9.59 11.05 11.28 10.61 9.85
Interest margin (Net interest income to average assets) 3.17 3.51 3.67 3.62 3.47
Operating expenses to gross income 16.99 17.10 17.00 17.33 20.20
Impairment charge to total operating income 28.67 16.76 13.46 1.39 3.47
Return on assets (ROA) – before income tax 1.51 1.66 2.09 2.15 2.12

Commercial Bank of Ceylon PLC

Return on assets (ROA) – after income tax 1.05 1.27 1.43 1.54 1.53
Return on equity (ROE) 11.28 13.54 15.56 17.88 19.52
Cost to income ratio (including taxes on financial services) 39.96 49.41 46.35 51.08 51.06
Cost to income ratio (excluding taxes on financial services) 33.95 38.51 36.85 41.08 42.67

Liquidity:    
Statutory liquid assets ratio (Domestic Banking Unit) 44.99 30.42 24.47 27.28 27.19
Statutory liquid assets ratio (Offshore Banking Unit) 32.70 25.25 30.20 30.95 30.19
Liquidity Coverage Ratio (LCR) – Rupee 330.84 158.79 236.20 272.15 196.34
Liquidity Coverage Ratio (LCR) – All currency 258.06 224.74 238.69 209.17 150.45
Net Stable Funding Ratio (NSFR) 157.49 137.05 139.18 127.87 N/A
CASA ratio (Current and Saving deposits as a % of total deposits) 42.72 37.10 37.55 39.23 41.67
Gross Loans and receivables to deposits ratio 74.87 87.39 90.56 88.78 85.64

Assets and funding structure:    

Deposits to gross loans and receivables 133.56 114.43 110.43 112.64 116.76
Deposits to total assets 72.92 75.92 75.42 74.35 73.06
Borrowings to total assets 5.35 4.41 4.86 4.28 3.37
Equity to total assets 9.05 9.60 9.08 9.37 7.74

* Computed under Basel II guidelines.

23
 Performance of the subsidiaries, Key Performance Indicators - Bangladesh Operations Table – 03
associate and overseas operations Indicator 2020 2019 2018 2017 2016 5-year CAGR
Performance of the Bank’s Bangladesh BDT Mn. BDT Mn. BDT Mn. BDT Mn. BDT Mn. %
Operations
Total Deposits 50,997.50 45,362.98 35,221.65 28,808.18 23,124.88 18.38
Performance of the Bangladesh Operations
Gross Advances 55,039.33 47,449.60 38,448.10 32,113.53 24,456.51 19.46
will have to be reviewed in the context of the
operating environment given on page 34 of Profit Before Tax 2,898.24 2,744.68 2,440.56 1,758.56 1,381.93 12.72
this report. Profit After Tax 1,709.47 1,697.40 1,407.23 988.40 785.13 13.58
Commercial Bank of Ceylon PLC (CBC)
commenced its operations in Bangladesh Key Financial Ratios – Bangladesh Operations Table – 04
(CBC Bangladesh) by acquiring the banking
business of Crédit Agricole Indosuez, a Indicator 2020 2019 2018 2017 2016
French multi-national Bank, in November Cost to Income ratio (%) 24.76 24.74 25.27 28.62 32.76
2003. Net Interest Margin (%) 4.01 4.27 4.53 4.46 5.11
During the past 17 years of operations,
NPL ratio (%) 1.04 0.70 0.96 1.22 2.03
CBC Bangladesh has established its position
well above the other Regional Banks ROA (%) 3.46 3.53 4.31 3.81 3.74
operating in the country with 11 Branches, ROE (%) 13.32 14.82 13.97 11.18 9.90
6 SME Centers and 2 Offshore Banking
Financial Review 2020

Units. Presently, CBC Bangladesh has its

presence in five main districts in the country All information given in Tables 03 and 04 non-core staff and provision of other utility
i.e. Dhaka, Chittagong, Sylhet, Narayanganj above is based on Management Accounts of services to the Bank.
and Gazipur. Despite severe competition the Bangladesh Operations. CDC recorded a post-tax profit of
among international and large local banks, Rs. 122.582 Mn. for the year 2020, recording
CBC Bangladesh has recorded a consistent a drop of 66.25% from Rs. 363.217 Mn.
growth in business especially by catering to reported in 2019. The decrease in profit was
multinationals and large local corporates by primarily attributable to the fair value loss
Performance Review

offering better services and commitments. recognised on revaluation of investment

With the expansion of branch network, property in 2020.
CBC Bangladesh operations has managed
to attract more SME and Retail clientele to CBC Tech Solutions Limited
the Bank, allowing it to improve its low-cost CBC Tech Solutions Limited is a fully
deposit base, which has resulted in lower owned subsidiary of the Bank and
cost of funds and improved profitability. provides Information Technology services
Annual Report 2020

Twenty ATM machines have been and solutions to the Bank, its subsidiaries

installed in Bangladesh (including three in Commercial Bank Bangladesh marks a decade at and to a few selected corporates.
off-site locations). In addition, an Automated the top with 10th successive "AAA" rating.
The main lines of business of CBC
Banking Centre (ABC) which comprises a real Tech Solutions are providing Information
CBC Bangladesh has planned the automation
time Cash Deposit Machine, Cheque Deposit Technology support, supply of
of the Treasury department, automation of
Machine, KIOSK machine and a digital hardware, licensed software, hardware
Central Bank reporting, Card personalisation,
signage in its Motijheel Branch.
Commercial Bank of Ceylon PLC

implementing a call centre solution, Fiserv maintenance, Point of Sale (POS)

During the year 2020, the Bank’s Digital Access, e-Leave and e-attendance Maintenance, software development, and
Bangladesh Operations has been adjudged in 2021. outsourcing of professional and skilled
the Best Foreign Bank 2019 in Bangladesh manpower to the Bank. Presently, the
by “The Global Economics Ltd.”, a UK based Subsidiaries and associate of the Group company operates from four regional
financial publication. A comparison of the support centers in Colombo, Galle, Kandy,
performance of Regional Banks operating Given below is a brief overview of the
and Jaffna to ensure prompt service.
in the country reveals that the performance operations of the subsidiaries and the
The Company is mainly focused on the
of our Bangladesh Operations is ahead of its associate of the Bank.
contemporary technologies such as mobile
peers in many aspects including deposits, apps, data analytics, dynamic websites, IOT
advances, asset quality and profitability, Local subsidiaries
and cloud computing to further strengthen
a reflection of our excellent service and Commercial Development Company PLC (CDC) its business in the future.  
commitment. Established in 1980 as the Bank’s first CBC Tech Solutions recorded a post-tax
Credit Rating Information and Services subsidiary, CDC owns the Head Office profit of Rs. 94.648 Mn. for the year 2020,
Ltd (CRISL) rated CBC Bangladesh operations building of Commercial Bank, “Commercial recording a growth of 18.76% from Rs. 79.699
AAA for the 10th consecutive year based on House”, and has two other properties in Mn. reported in 2019.
financial performance for 2019. Negombo and Tangalle. The Bank holds a
stake of 90% in CDC. CBC Finance Limited (CBCF) (Formerly
The progress of the Bank’s Bangladesh
operations in core banking areas over the CDC is the only listed Subsidiary of Serendib Finance Ltd.)
past five years is summarised below. the Group, with a market capitalisation of CBC Finance Limited is a fully-owned
Rs. 1.404 Bn. as of end 2020. The principal subsidiary of the Bank and is a Licensed
business activities of CDC include renting Finance Company (LFC) under the Finance
of premises, hiring of vehicles, outsourcing

24
Business Act No.42 of 2011. Since the During 2020, Commex recorded a loss of
acquisition of the Company in 2014 by the Rs. 104.460 Mn. and it is taking steps to
Bank, business plans and strategies of the improve its performance once normalcy
Company were aligned with the Bank’s returns after COVID-19 related disruptions
strategies, governance and risk management subside.
policies and practices.
The Company name and logo change Commercial Bank of Maldives Private Limited
from Serendib Finance Limited to CBC (CBM)
Finance Limited was one of the strategically
In partnership with Tree Top Investments
important milestones during the year, and
will enable the Company to establish its (TTI), CBM was founded in the Republic of
presence more visibly as a fully-owned Maldives as the second foreign subsidiary of
subsidiary of the Bank. the Bank. TTI contributes vital local market
Another remarkable accomplishment
knowledge to the Company and has a stake
of the Company during the year was being of 45%, while the Bank holds a 55% stake in
rated AA-(lka) by Fitch Ratings Lanka Limited. the Company. Established during the latter
This rating will enable CBCF to be one of part of 2016, CBM opened its Head Office
the highest-rated Finance Companies in the and first branch in the capital, Malé. By the
country on the strength of the parent. end 2020, CBM had two branches.

Financial Review 2020

2020 was one of the most challenging While offering an extensive range of
years in the recent past for the Company due financial services, CBM’s goal is to be the
to COVID-19-related business disruptions most technologically-advanced, innovative,
and adverse impacts on its customer base. Commercial Bank launches CBC Finance as
successor to Serendib Finance.
customer-friendly, and the most sought-after
Being a responsible corporate entity, the financial service organisation in the Republic
Company has identified the importance of
Commercial Insurance Brokers (Pvt) Ltd. of Maldives.
assisting its customers who were affected (CIBL)
due to the pandemic and accommodated a As a tourism-based economy, the
The Bank acquired the 20% stake in CIBL

Performance Review
substantial number of capital and interest Maldives was severely affected due to the
moratorium requests. As a result, the held by the Bank’s subsidiary, CDC, during COVID-19 pandemic. The Government of
Company recorded a post-tax profit of the year 2020, which, together with the Maldives initiated a nation-wide lockdown
Rs. 58.477 Mn. compared to Rs.79.129 Mn. stake of 40% already by the Bank, increased
from April 2020 for two months. The Maldives
recorded last year. However, the Company the Bank’s total stake in CIBL to 60%.
The principal business activity of CIBL is
Monetary Authority (MMA) has announced
managed to reduce the impact to the several measures to ease the stress on
bottom line by significantly growing its insurance brokering for all types of insurance
through reputed life and general insurance its financial system, including enhancing
business volumes.

Annual Report 2020

companies in Sri Lanka. system liquidity, moratoriums of six months
Since the commencement of accepting on loan repayments for specific borrower
of public deposits from the latter part of CIBL recorded a post-tax profit of
Rs. 32.078 Mn. for the year ended December segments, freezing asset classification of
2019, the Company managed to increase overdue accounts for which moratoriums
its deposits portfolio to Rs. 3.357 Bn. as at 31, 2020, a negative growth of 47.33% from
Rs. 60.903 Mn. in 2019. The CIBL’s total assets have been granted and relaxation in the
December 31, 2020, thereby changing the
stood at Rs. 711.027 Mn. as at December 31, liquidity coverage requirement. The impact
main funding source of the Company from
of the COVID-19 pandemic on the Bank’s

Commercial Bank of Ceylon PLC

bank borrowings to customer deposits and 2020.
enabling the Company to gradually reduce performance, including credit quality
its funding cost during the year under Local associate and provisions, remains uncertain and
review. Equity Investments Lanka Ltd. (EQUILL) dependent on the spread of COVID-19 and
In continuation with the Company’s The Bank owns a 22.92% stake in EQUILL, the ultimate economic recovery once the
growth strategy, advancing towards a venture capital company established 30 pandemic subsides. The Bank’s capital and
becoming a larger player has been the years ago. EQUILL invests in equity and liquidity position remains strong and will
focus for this year despite unprecedented equity-featured debt instruments. continue to be a focus area for the Bank
challenges in the business and macro- The Company recorded a post-tax profit during this period.
economic environment. Total assets grew of Rs. 17.006 Mn. in 2020 as against a loss
by Rs. 1.051 Bn., which is a notable 14.14% of Rs. 1.480 Mn. reported for the previous
growth over 2019. The Company’s net loans financial year.
grew by 15.27% despite the growth of
our core product - finance leasing – being Foreign subsidiaries
curtailed with the regulatory restrictions Commex Sri Lanka S.R.L. (Commex)
on the Loan to Value ratio. However, timely
shifting towards other products such as Commex, a fully-owned subsidiary of the
mortgage and business loans paved the Bank, commenced business under the
way to overcome possible unfavourable Authorised Payments Institute (API) Licence
impacts. Furthermore, the gross NPL ratio of issued by the Bank of Italy in 2016. As a
the Company significantly improved from result, Commercial Bank became the first
22.56% in 2019 to 16.52% as at December Sri Lankan bank to be licensed by the Bank
31, 2020. of Italy to operate as a money transfer
company. The license allows Commex to
Commercial Bank Maldives honoured for Excellence
expand across the European Union using
in Finance at Maldives Business Awards.
passporting rights.
25
 During the year 2020, CBM was able to CBC Myanmar Microfinance Company CBC Myanmar now operates with four
record a growth in its deposits and advances (CBC Myanmar) total branches, including a newly opened
by 9.19% and 12.97% respectively. Total CBC Myanmar was established in July 2018 branch. The microfinance industry was badly
assets of CBM recorded a growth of 8.42% with the opening of its Head Office and a affected due to the COVID-19 pandemic and
in 2020 and stood at MVR 1.790 Bn. as at Branch in Lewe Township in Naypyitaw as the suspension of recovery activities for one
December 31, 2020. In 2020, CBM recorded a a fully owned subsidiary of the Bank with month by the regulators. The Company was
post-tax profit of MVR 22.723 Mn., compared the focus of capitalising on opportunities able to robustly manage the effects of the
to the post-tax profit of MVR 28.368 Mn. in the Microfinance sector. A temporary pandemic by the tireless efforts of our staff
reported in 2019. Given the extremely Microfinance license from the Financial members in recoveries and by providing
challenging operating environment, the Regulatory Department (FRD) of Myanmar COVID-19 special repayment arrangements.
performance can be considered remarkable was obtained initially. The Company was The Company opened the Pyinmana branch
compared to other peer banks in the country. subsequently able to secure a permanent in July 2020 and was able to break even in
microfinance license from the government of November 2020. The loan book grew by
Myanmar with the recommendation of the USD 784,920 in 2020, a 49.91% YoY growth.
Financial Regulatory Department (FRD). CBC Myanmar was able to expand its
customer base to over 19,000 by December
2020 compared to about 10,000 customers
a year ago.
Financial Review 2020

Bank’s international operations Figure – 03

Performance Review

Italy Maldives Myanmar Bangladesh

Commex Sri Lanka Commercial Bank of Maldives Commercial Bank’s CBC Myanmar Microfinance
Annual Report 2020

S. R. L. – Italy Private Limited (CBM) Bangladesh Operation Company Limited

Year of establishment Year of establishment Year of establishment Year of establishment
2016 – commenced business 2015 2003 – banking business of 2015 – Representative Office
under the Authorised Crédit Agricole Indosuez and micro finance
Bank’s stake
Payments Institute (API) acquired license
55%
Licence issued by the Bank of 2017 – Myanmar
Tree Top Investments is the Bank’s stake
Commercial Bank of Ceylon PLC

Italy in Rome Microfinance

Bank’s Maldivian Partner which Branch operation
Company Limited
Bank’s stake was founded in 2013 and holds
Nature of business operations 2018 – Commenced business
Fully owned subsidiary the balance 45% stake in CBM.
Fully-fledged commercial operations
It provides the Bank with vital
Nature of business banking license [Reaffirmed
local market knowledge Bank’s stake
operations at AAA] in May 2019 by Credit
Fully owned subsidiary
Serves the fund-transfer Nature of business operations Rating Information and Services
needs of Sri Lankan Fully-fledged Tier 1 bank Limited Nature of business
expatriates in Italy Twelve under the license issued by the operations
Legend
agents cover all major cities Maldives Monetary Authority Offering microfinancing
The Bank’s first overseas
of Italy offering an extensive range services.
venture
of financial services using The Company also
Legend First among regional banks
advanced technology and provides savings business
This license allows the Bank and third among the nine
the regional expertise of our development services.
to expand further across foreign banks in Bangladesh
Treasury arm
Europe and plans to do so in terms of profitability Legend
are currently being laid out. Legend Includes 11 branches, 6 SME Commercial operations
One of the first Sri Lankan Two branches – in Malé and centres, 2 offshore banking begun in 2018
banks to launch money Hulhumalé units, and 20 ATM machines Contribution to the Group
transfer facilities in Italy (including three off-site)
Contribution to the Group Assets of Rs. 524.172 Mn.
Contribution to the Group Assets of Rs. 21.713 Bn. Profit Contribution to the Group and profit before tax of
Assets of Rs. 588.994 Mn. and before tax of Rs. 382.717 Mn. Accounted for 11.73% of our Rs. 17.181 Mn. in 2020
loss of Rs. 75.019 Mn. in 2020. in 2020 assets and 20.46% of our profit
before tax in 2020

26
Operating Environment
Connecting with Stakeholders
In a rapidly changing environment, Accordingly, our stakeholders are: point of contact. The changes brought
maintaining a constant dialogue with all about by the pandemic had an impact on
z Investors
our stakeholders helps shape our strategy. the way, the level and the frequency in
The emerging trends, some of which are z Customers which we engage with our stakeholders
unprecedented in terms of magnitude and z Employees as well. Given that large gatherings were
impact, affect our ability to sustainably z Society and environment
curtailed during the year, we resorted
deliver value to our stakeholders and, in turn, to digital mediums in engaging with
z Business partners
derive value from them. our stakeholders. Understanding their
z Government institutions and regulators aspirations and maintaining open channels
When an individual or a group can
be significantly impacted by our actions, of communication, especially in the context
products, and services, we consider that The above grouping helps the Bank of the pandemic, was vital in developing
party a stakeholder. At the same time, we effectively manage interactions with mutually beneficial solutions across the year.
are keenly aware that our stakeholders’ the stakeholders in terms of priority and We strongly believe that by engaging with
perceptions and behaviour can powerfully relevance. our stakeholders, we are able to better adapt
impact our ability to carry on our activities While formal mechanisms are in place ourselves to meet the challenges of today and
and meet our strategic goals. to connect with our stakeholder groups, to sustain and improve our business model,
responsibility for such engagement is drive innovation, and garner invaluable
shared across the Bank at every stakeholder insights for our strategic planning process.

Operating Environment
Our stakeholder
engagement process Figure – 04

Feedback
Feedback on performance

Annual Report 2020

negative/positive
Monitor
Measure the effectiveness, Reporting Identification
monitor lapses/ shortcomings
Report to stakeholders Identify and prioritise issues
Identify stakeholder group

Commercial Bank of Ceylon PLC

Stakeholder
Implementation engagement process Planning
Communicate policies, Establish objectives, scope,
procedures, and timelines of and timelines
implementation Identify specific stakeholders
Implementation Prioritise stakeholders
Determine engagement mode
Allocating necessary resources
Designing
Identify methods/modes of
addressing the issue
Engagement Re-engage
Formulate necessary policies
Conduct engagement Repeat engagement,
and procedures
if needed
Pre-implementation testing, if
required
Prioritisation Evaluation
Prioritise findings for Evaluate results
further action Evaluate effectiveness of the process
Determine the need forfurther
engagement

27
 How we connect with our stakeholders
Figure – 05

Investors Customers Employees

Stakeholder aspirations Stakeholder aspirations Stakeholder aspirations

Financial performance Swift service Performance and reward management
Governance Customer security and privacy Training and development
Transparency and disclosure Service quality Career advancement opportunities
Business expansion plans Affordability of services and convenience Work-life balance
Risk management Grievance handling mechanism Retirement benefit plans
Sustainable growth Financial education and literacy Diversity and inclusion
Resilience to the effects of the pandemic Financial support for revival of business Safety at workplace
Rising NPA and impairment charges Access to financial services Stable performance of the Bank
Dividend payments Enrollment to digital platforms
Connecting with Stakeholders

Mode and frequency

Operationalising of CBSL directives
Mode and frequency Engagement mechanism Frequency
Engagement mechanism Frequency
Mode and frequency Manager’s Conference Annually
Annual Reports and AGMs Annually Engagement mechanism Frequency Town hall meeting Annually
Extraordinary General Meetings As required Customer visits As required Regional review meetings Quarterly
Interim financial statements Quarterly Complaints received As required Branch marketing meeting Monthly
Investor presentations As required Complaints resolution officer, As required Training programmes As required
Press conferences and releases As required relationship managers Intranet Continuous
Announcements to CSE As required ComBank Biz Club Continuous Special staff events Annually
One-to-one discussions As required Branch network and call centre Continuous Trade union discussions As required
Operating Environment

Corporate website Continuous Media advertisements As required Employee satisfaction survey As required
Feedback surveys As required Corporate website Continuous
Customer workshops As required

Society and environment Business partners Government institutions and regulators

Annual Report 2020

Stakeholder aspirations Stakeholder aspirations Stakeholder aspirations

Responsible financing Contractual performance Compliance with directives and codes
Commitment to community Continued business opportunities Microfinance and SME development
Financial inclusion, recruitment Maintaining healthy relationships Stability of the financial system
Microfinance and SME Timely settlement of dues Migration to cashless payment platforms
Ethics and business conduct Collaboration for new technological Supporting economic recovery and
Commercial Bank of Ceylon PLC

Environmental performance advances in the financial sector growth

Employment opportunities Opportunities in the new normal
Mode and frequency
Mode and frequency Mode and frequency Engagement mechanism Frequency
Engagement mechanism Frequency Engagement mechanism Frequency Supplier relationship Annually
Supplier relationship As required management
Delivery channels Continuous
management Directives and circulars As required
Press releases, conferences and As required
media briefings On-site visits and meetings As required Meetings and consultations As required
Informal briefings and As required Press releases As required
communications Periodic returns As specified
Public events As required Submissions to policymakers As required
Corporate website Continuous Responses to consultation As specified
papers on Directions and other
regulations

28
Material Matters
The COVID-19 global pandemic has reshaped many aspects
of the business environment, compelling organisations to
transform to stay profitable and relevant. Sustaining success
during turbulent times requires fresh analysis, nimble
adaptations of strategies and business models, and creativity
in confronting challenges and seizing new opportunities
presented by the changing environment.

Operating Environment
Figure – 06

In adapting the Bank’s strategy to face this ‘new normal’, the Bank analysed its external environment to identify matters arising from changes
that were brought about by the pandemic and emerging trends that were relevant to key stakeholder groups, as given below:

Political Economic Social Technological Environmental Legal/Regulatory

Investors 1 Lack of desired 2 Economic 3 Growing 4 Unorthodox 5 Directions and guideline

level of policy slowdown due influence of social competition to counter impacts of the
consistency to pandemic media and financial pandemic

Annual Report 2020

disintermediation

6 Lack of desired 7 Depreciating 8 Demand for 9 Compliance with new

level of currencies against non-financial Basel requirements
transparency USD information and
and long termism
accountability

Commercial Bank of Ceylon PLC

10 Downgrading of 11 Demand for more 12 Higher regulatory capital
the Sovereign transparency and
rating and its accountability
cascading effect
on the Banking
industry

13 High CAPEX 14 New Banking Act

requirements

Customers 15 Envisaged upturn in 16 Changing 17 Migration towards 18 Compliance requirements

private sector credit customer digital platforms and regulations such
and improvement expectations as FATCA1, GDPR2, and
in asset quality BEPS3.

19 Import restrictions 20 Cybersecurity

threats

Employees 21 Need to enhance 22 Staff recruitment 23 Technology driving

productivity and retention change in job skills
becoming more
challenging

24 Health and Safety 25 New working

cultures

29
 Political Economic Social Technological Environmental Legal/Regulatory

Society and 26 Geopolitical 27 Declining worker 28 Need to commit 29 Increasing

environment conflicts remittances to Sustainable frequency and
Development magnitude
Goals (SDGs) of natural
disasters and
poor disaster
preparedness

30 Corruption 31 Declining global 32 Increasing 33 Increasing

competitiveness of conflicts demand for
Sri Lanka green banking
and green
lending

34 Increasing drug 35 Pandemics

pedaling and hampering
drug and alcohol world trade and
addiction economy

Business 36 A more 37 New technological

partners collaborative advances such as AI,
Material Matters

approach Robotics, blockchain

1-FATCA: Foreign Account Tax Compliance Act, 2-GDPR: General Data Protection Regulation, 3-BEPS: Base Erosion and Profit Shifting
Operating Environment

These trends present risks, opportunities or both and their impact is felt by the stakeholders and the Bank alike on varying degrees. The
risks that presented from the pandemic outweighed the risks presented by other emerging trends and its impact was felt across all of our
stakeholders at different magnitudes. The topics that stem from these trends and are material to the Bank according to their impact on
stakeholders and the Bank itself are portrayed in the matrices that follow. The Bank defines material matters as those that significantly
affect the Bank’s ability to create value over the short, medium and long term. Materiality of each matter is determined by its relevance, the
magnitude of its impact, and the probability of occurrence. The pandemic is primarily responsible for the repositioning of topics by pushing
them up or down the axes of the materiality matrix.
Annual Report 2020

Opportunities to be seized Risks to be mitigated

1, 2, 5, 6, 12,
High

High

6, 21, 28 15, 16 21, 23, 34 15, 16, 19,

20, 24, 35
Commercial Bank of Ceylon PLC

Importance to stakeholder

Importance to stakeholder
Moderate

Moderate

7, 8, 9, 22,
3, 4, 7, 11, 4, 10,
33, 37 14, 18, 26 25, 27, 29,
23, 36 17, 37
30, 31, 32
Low

Low

Low Moderate High Low Moderate High

Importance to the Bank Importance to the Bank

30
Following this study the Bank re-shaped Material matters Table – 05
its strategies to fit for the time and were
then embedded in the Corporate Plan for Material topic GRI Disclosure Page No.
execution by the Management together 1 Lack of desired level of policy consistency
with underlying KPIs for measurement of
successful implementation. Success in the 2 Economic slowdown due to pandemic
Bank’s value creation journey under the 4 Unorthodox competition and financial
four strategic imperatives is outlined in the disintermediation
section on Management Discussion and
Analysis on pages 41 to 62. 5 Directions and guideline to counter
impacts of the pandemic 20 to 26,
GRI 201: Economic Performance
Management approach 6 Lack of desired level of transparency and 42 to 47
GRI 203: Indirect Economic Impact
accountability 49 to 52
The Bank manages its material topics GRI 207: Tax
187 to 188
through its strategic planning process 10 Downgrading of the Sovereign rating
by assigning responsibility to the heads and its cascading effect on the Banking
of the relevant divisions of the Bank, industry
allocating necessary resources based on
12 Higher regulatory capital
the significance of each material topic
towards achieving the aforesaid strategic 15 Envisaged upturn in private sector credit
imperatives. Goals and targets, where and improvement in asset quality

Material Matters
relevant are embedded into the KPIs of the
16 Changing customer expectations 48 to 52
Key Management Personnel to ensure that
the organisation achieves its objectives with 17 Migration towards digital platforms 53 to 56
regard to its material topics and are reviewed 19 Import restrictions GRI 201: Economic Performance 20 to 26
at regular intervals.
20 Cyber security threats GRI 418: Customer Privacy 56
Many policies are in place guiding its

Operating Environment
people to conduct activities in a responsible, 21 Need to enhance productivity GRI 404: Training and Education 61
transparent, and ethical manner in managing
GRI 405: Diversity and Equal 60
the material topics. These policies are
Opportunity
duly adopted by the Board of Directors
and are reviewed at predetermined 23 Technology driving change in job skills GRI 404: Training and Education 61
intervals to stay current with the changing
GRI 405: Diversity and Equal 60
environment. Timely revision of these Opportunity
policies are monitored by the Integrated Risk
Management Unit and is reported to BIRMC. 24 Health and Safety GRI 403: Occupational Health and 57 to 59

Annual Report 2020

Safety
Where relevant grievance mechanisms
are in place with assigned responsibility to 28 Need to commit to Sustainable 62
the relevant divisional heads to manage, Development Goals (SDGs)
address and resolve grievances.
29 Increasing frequency and magnitude GRI 302: Energy 62
Screening is carried out into the social of natural disasters and poor disaster
and environmental aspects of the Bank’s preparedness

Commercial Bank of Ceylon PLC

lending to its customers and dealings with its
GRI 305: Emission 61
business partners.
Internal and external auditing and 33 Increasing demand for green banking and 61
verifications are carried out to ensure that green lending
the internal controls, policies and procedures 35 Pandemics hampering world trade and 32
laid down to achieve the objectives of economy
material topics are adhered to. Findings are
37 New technological advances such as AI, 53 to 56
reported to the Board of Directors and/or
Robotics, blockchain
to the respective Management Committees
on a periodic basis for information and
corrective action where necessary.
The effectiveness of the management
approach is amply demonstrated by the
awards and accolades received by the Bank
over the years.

31
 Operating Context and Outlook
Global economy promoting financial stability for advanced Standing Lending Facility Rate (SLFR) were
The COVID-19 global pandemic has been economies and improvement for emerging both reduced 5 times during the year by a
nothing short of an epochal event. It has market and developing economies. total of 250 bps (4.5% and 5.5%, respectively,
precipitated a global recession that can only at year’s end) and the Statutory Reserve
be compared to the two World Wars and the Global economic growth Graph – 09 Ratio (SRR) was reduced twice by a total of
Great Depression of the twentieth century. % 300 bps (2% at year’s end). In addition, the
At the time of the writing of this report, the 9 CBSL introduced loan moratoriums, special
virus had claimed over 2.4 million lives and lending schemes at concessionary rates,
6
infected over 110 million people across the and interest rate caps on selected lending
globe. While there has been no segment of 3 products to quicken the transmission of the
the population that has not been affected 0 monetary policy.
economically, the most vulnerable – women, -3 The economy is projected to have
youth, the poor, the informally employed, contracted by around 3.9% according to
-6
those employed in contact-intensive sectors World Advanced economies EMDEs the Central Bank of Sri Lanka (CBSL) in 2020,
– have been the most ravaged. Estimates though other sources project a more severe
2019 2020 2021 2022
fear that close to 90 million people will fall (projection) (projection)
impact in a range from 4.6% (IMF) to 6.7%
into extreme deprivation in the coming (World Bank). While the second wave of
years, reversing gains made in poverty Source: World Economic Outlook Update – January 2021, COVID-19 infections from October onwards
alleviation in the past decades, exacerbating International Monetary Fund hampered momentum, the CBSL anticipates
economic equality, and leaving lasting scars a strong growth of 6% in 2021. The CBSL
on society. While some signs of recovery Sri Lankan economy envisages continuing its accommodative
were evident during the middle of the year Just as it was starting to show signs of monetary policy stance to drive the country’s
– a result of partial easing of lockdowns – recovery from the shocks of the Easter economic recovery. In this low inflation,
Operating Environment

resurgent waves of infection have made Sunday 2019 attacks, the Sri Lanka economy low-interest rate environment, credit to
forecasting a difficult prospect. The roll out was pummeled by the COVID-19 pandemic the private sector is expected to expand by
of vaccines offers some hope, but global and contracted by 1.7% and 16.3% in the first around 14.0% in 2021 and by about 12.0
recovery will be unevenly distributed due and second quarters of 2020, respectively. -12.5% annually over the medium-term.
to emerging variants of the virus in many Downward trends in the global economy Particular attention will be given to the
parts of the world and countries’ access had swift repercussions locally. Lockdowns micro, small and medium scale enterprises
to medical interventions, along with during April-May impeded economic activity, (MSME) sector, which is the backbone of the
broader structural factors. the closure of airports to tourists from March country’s economy.
Nevertheless, bolstered by stronger 2020 to January 2021 brought the industry
Annual Report 2020

than expected momentum in the second to a standstill, and global demand remained
weak throughout. As a result, the country
half of 2020, current estimates by the IMF
puts global growth contraction at -3.5%, an experienced reduced tourism and export The global economy
earnings, capital outflows, and heightened
upwards revision of 0.9% from 2020 third-
quarter projections. The global economy pressure on government finances, and the is projected to rebound
rupee depreciated by 2.6% against the US
is projected to rebound with 5.5% growth
with 5.5% growth in
Commercial Bank of Ceylon PLC

in 2021 (an upward revision of 0.3%) and dollar in 2020.

then moderate to 4.2% in 2022. Global trade
volumes are projected to grow by 8.1% in
The economy rebounded in the third
quarter of 2020 with a GDP growth of 1.5% 2021 (an upward
2021 though services are expected to lag
behind, a pattern consistent with restricted
as a result of monetary easing, government
stimulus measures, lower global petroleum revision of 0.3%) and
cross-border travel until transmission
of the virus declines across the globe. It
prices, and larger than expected remittances
from migrant workers. The trade deficit then moderate to
should also be noted that while some
industries, like airlines and tourism, will
contracted significantly during the year
with a reduction in merchandise imports 4.2% in 2022.
continue to face challenges, others, such as (in particular, fuel imports), contributing
telecommunications and pharmaceuticals, to a strengthened external current account
are expected to surge even higher. Subdued balance.
inflation is expected to be seen across 2021– Despite some acceleration in food
22, with advanced economies projected to inflation, headline inflation remained
remain below 1.5% and emerging market muted in 2020. Under the current flexible
and developing economies at just over 4.0%, inflation targeting framework, the Colombo
which is lower than the historical average Consumer Price Index (CCPI) based headline
of the group. 2021 Oil prices are expected inflation remained broadly within 4-6%
to increase to just over 20% of their low across the year, and low levels of demand-
base in 2020, but will still remain well below drive inflationary pressures meant that core
their average for 2019. Non-oil commodity inflation remained subdued. This enabled
prices are also expected to rise, reflecting the CBSL to ease monetary policy to historic
the projected global recovery. Major central levels to buoy the ailing economy. The
banks are expected to maintain their current Standing Deposit Facility Rate (SDFR) and the
policy rate stances for the foreseeable future,

32
Inflation – CCPI and NCPI Graph – 10 Sri Lankan Banking Sector
%
As a result of the implementation of prudent
10.0
regulatory requirements, the banking sector
8.0 was well placed with capital and liquidity
6.0 buffers at the start of the year. The sector
recorded an overall expansion in credit,
4.0
although much of this must be attributed
2.0 to the increase in loans and advances to the
0
Government and State-Owned Enterprises
Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan.
2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2021
(SOEs). Credit was concentrated in six
sectors, comprising 73.1% of loans (as of
CCPI – Headline CCPI – Core NCPI – Headline NCPI – Core the end of September 2020): consumption,
construction, trade, manufacturing,
infrastructure and agriculture. Rupee
Interest rates Graph – 11
%
loans and Foreign Currency (FC) loans
(in USD terms) grew at 13.5% and 15.1%,

Operating Context and Outlook

20
respectively, on a year-on-year basis as of the
16 end of September 2020 compared to 6.9%
12
and 13.0% growth recorded at the end of
September 2019.
8
The overall NPL ratio of the banking
4 sector reached 5.3% in September 2020,
0 with the manufacturing sector reporting
Jan. Jan. Jan. Jan. Jan.
2017 2018 2019 2020 2021
the highest NPL ratio of 9.0%, followed
by agriculture (7.3%), trade (7.3%),
T bill 3M T bill 6M T bill 12M AWFDR AWPLR AWLR tourism (7.1%), construction (6.7%), and

Operating Environment
consumption (5.2%). The specific provision
coverage ratio increased from 38.2% as of
the end of September 2019 to 45.9% by end
It is of some concern, however, that Fitch, service challenges are exacerbated by its
September 2020.
Moody’s and S&P downgraded Sri Lanka’s existing financing model, which has resulted
sovereign rating in 2020, highlighting in high government interest to revenues
Sri Lanka’s increasingly challenging external ratios. The average interest to revenue
debt repayment position. The government’s ratio from 2016 to 2020 is about 50%. The
external debt obligations amount to downgrading of Sri Lanka’s sovereign credit
USD 23.2 bn between 2021 and 2025 rating will increase the country’s external

Annual Report 2020

(about USD 4 bn annually). Fitch is of the borrowing costs, though it should be noted
view that Sri Lanka’s financing and debt that the Government has challenged these
downgrades.

Sri Lanka's Sovereign Ratings Table – 06

Commercial Bank of Ceylon PLC

Rating Agency Newly assigned Rating Previous Rating

Fitch CCC in Nov 2020 B (-) (Negative) – Apr 20

S&P CCC+ (Stable) in Dec 2020 B (-) (Stable) – May 20
Moody’s Caa1 (Stable) in Sep 2020 B2 (Negative) – Nov 18

33
 Non-performing Loans to Total Loans and Advances Graph – 12
%
7.5

6.0

4.5

3.0

1.5

0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 2020 2020

Source: Central Bank of Sri Lanka

Rupee deposits were the major source of Bangladesh Economy and Banking The COVID-19 pandemic which engulfed
funding for the banking sector and showed a The economy of Bangladesh faced Bangladesh’s economy and society is
marked increased over the year. This increase expected to be brought under control in
Operating Context and Outlook

challenges during the year 2020 especially

was driven by the drop in discretionary from the second quarter on. Before the 2021. Market experts anticipate the country’s
spending due to the pandemic and by the pandemic hit the country, Bangladesh’s exports to revive along with a leap in the
movement of deposits from the Non Bank economy maintained a steady 6% plus private sector credit growth, which was
Financial Institution (NFBI) Sector to the growth rate during FY10-FY15, 7.0% plus hovering at 8.37% by the end of 2020 against
banking sector. The growth in rupee deposits growth rate during FY16-FY18, and 8.15% the fiscal target of 14.80%. The confidence
increased from 7.9% in 2019 to 19.3% in in FY19. However, the COVID-19 pandemic factor is returning to the capital market with
September 2020 YoY (foreign currency severely impacted nationwide mobility since a number of firm and directed regulatory
deposits showed a growth from 14.0% to early March and slowed the GDP growth measures and is expected to touch 6,500
14.3% across the same period). This surge of rate to 5.24%. Despite the government’s points. The internally funded Padma multi-
deposits meant that the loan-to-deposit ratio optimistic projections of 8.2% GDP growth purpose bridge is expected to be open in
fell from 88.2% in December 2019 to 84.8%
Operating Environment

for FY21, experts foresee Bangladesh’s annual 2022 and will contribute around 2.00% to the
in September 2020. The overall profitability rate of GDP growth to be approximately 7% annual GDP growth. Liquidity is expected
of the banking sector declined due to the between 2021 and 2025. to remain excess in the market allowing
falling Net Interest Margin resulting from the interest rates to be in the lower single
policy measures taken by the Monetary The Dhaka Stock Exchange (DSEX)
digits. The foreign exchange market is also
Board, though this was balanced somewhat generated a 21.3% return in 2020 after two
expected to be steady throughout 2021.    
by an increase in non-interest income bearish years (2018: -13.8%, 2019: -17.3%)
which is the second-highest return of the Bangladesh Bank has given the nod
and a decrease in non-interest expenses to two new privately owned commercial
and taxes during the nine month period world (after USA NASDAQ 43.4%). UK’s
Centre for Economics and Business Research bank, raising the total number of banks to
Annual Report 2020

ending September 2020 (compared to the 61. Agent Banking – which provides limited
corresponding period of the previous year). (CEBR) has made a recent projection that
Bangladesh’s economy will be the 28th scale banking and financial services to the
In spite of the difficult macroeconomic mostly underserved population – is booming
climate, the sector maintained healthy largest in the world by 2030 and the 25th
largest by 2035. Moreover, Goldman Sachs in Bangladesh. Banks in the country are now
capital adequacy ratios (CAR), recording a focusing on agent banking for its popularity
Tier 1 CAR of 13.0% and a total CAR of 16.5% forecasts Bangladesh as one of the countries
in "N11" after BRICS who will dominate the among people, especially in remote areas.
as of the end of September 2020. Return
Commercial Bank of Ceylon PLC

future world economy. Bangladesh is also receiving a significantly

on Assets (ROA) of the sector increased large portion of the remittance through
marginally from 0.93% to 0.97% YoY in The government debt to GDP ratio rose
agent banking.  
September 2020, while Return on Equity to 39.6% in 2020, which was 35.80% of the
(ROE) increased from 10.5% to 10.9% YoY GDP in 2019. The Bangladesh Bank injected Climate change is a priority for
during the same period. Continued drops in BDT 540 Bn. into the market through buying Bangladesh’s development objectives, as
lending rates, implementation of special loan around USD 6.37 Bn. from the banks in 2020. it is one of the countries most vulnerable
schemes, and improving investor sentiment The foreign currency reserve stood at USD to extreme weather events. Increased
is expected to drive credit growth in all 43 Bn. in December 2020 in contrast to USD investments in adaptation have made the
sectors of the economy in 2021. 32.68 Bn. a year ago. The exchange rate for country more resilient to natural disasters.  
USD/BDT had been quite stable at 84.95 for
entire 2020. The country’s current account
balance recorded a surplus for the fifth
consecutive month, reaching USD 4.10 Bn.
in November 2020. Bangladesh issued the
Islamic shariah compliant instrument, Sukuk
Bond for the first time in December 2020. 

34
Business Model for Sustainable Value Creation
The specification of an organisation’s Statement of capital position certain emerging global developments are
business model is a crucial aspect of The activities the Bank undertakes in now threatening to disrupt this conventional
the integrated reporting process. An furtherance of financial intermediation and business model. As explained later in the
organisation’s business model is its system maturity transformation, and the consequent report, the Bank has established a sound
for creating value, i.e. its system for interactions and trade-off among the capitals risk management framework with necessary
transforming inputs, through its essential in this dynamic process, serve to augment oversight of the Board of Directors and
business activities, into outputs and the capitals and reflect the value created thereby has been able to successfully
outcomes that realise the organisation’s over the year. The Statement of the Capital manage such risks.
strategic objectives. For the reader of this Position of the Bank as at January 1, 2020
report, it is helpful to briefly clarify each and December 31, 2020 is provided on pages Stakeholder returns
of those four terms to provide a guide for 38 and 39. As shown in Table 07 on pages 38 and
following the visual depiction of the Bank’s 39, Commercial Bank has been able to
Besides the value derived as reflected in
business model on page 36. improve its profitability over the years while
the enhanced positions of the other capitals,
Inputs refer to the "capitals" – stocks of the two broader categories of income – net prudently maintaining gearing at acceptable
value – the organisation uses as resources, interest income from fund-based operations levels. This improvement in profitability
or, in other words, the capitals from which and fee and commission income from reflects the net impact of the value we
an organisation derives value. These input have been able to create by delivering

Business Model for Sustainable Value Creation

fee-based operations – enable the Bank to
capitals include not only financial capital enhance its financial capital. Fund-based value to and by deriving value from our
reflected in the Statement of Financial operations involve the process of mobilising stakeholders. From investors’ perspective,
Position, but also what might be termed funds from depositors and borrowings from this value creation is reflected in the returns
“off-balance sheet” or "hidden" capitals, other sources in order to lend and invest; the Bank has been able to generate for
like the tacit knowledge of an organisation, this process generates interest income and them in terms of earnings, dividends and
the brand and reputation an organisation incurs interest expenses. The interest margin, appreciation in market price of shares. The
has built over years, or the strength of its which is the difference between the lending market capitalisation of the Bank’s shares
stakeholder relationships. These inputs rate and the borrowing rate, compensates remained the highest among the Banking,
are then put to work in the organisation’s the Bank for the credit risk, funding risk Finance and Insurance institutions as at end
business activities – literally capitalised – to and interest rate risk. All other services 2020 while its shares ranked fifth among
generate outputs (the organisation’s key provided by the Bank not involving funds all listed companies in the Colombo Stock
products and services) and outcomes (the are fee-based operations. Reflecting efficient Exchange as at end 2020. Further details on
value created by the organisation for itself financial intermediation, the Bank generated the performance of the Bank’s shares are
and for its stakeholders as a consequence of 66.15% of its total operating income by way found in the section on “Investor Relations”
the outputs). As the Bank’s business model of net interest income (2019 : 71.51%). on pages 291 to 309.

Annual Report 2020

demonstrates, this is a dynamic process While growing organically in the
where capitals are constantly circulating Gearing domestic market, the Bank has taken steps
and value is continuously being created and to leverage inorganic and regional growth
transformed. An integrated report is nothing Financial intermediation and maturity
transformation cause the business model opportunities, primarily to geographically
but the story of this dynamic process diversify its risk exposures and sources
across a single year and a snapshot of an of banks to substantially differ from other
corporates. The principal difference is the of revenue and thereby enhance its
organisation’s capital position at the year’s

Commercial Bank of Ceylon PLC

substantially lower Return on Assets (ROA), sustainability of operations and long-term
end (see page 38). value creation. These efforts have now made
which is less than 2% in general, in stark
contrast to between 10% - 20% earned by the Bank a well-established regional bank.
Financial intermediation and maturity
corporates in other sectors. This prompts
transformation banks to resort to the process of gearing in
The business model of the Bank revolves order to make the returns to the investors
around the two primary value driver attractive in terms of Return on Equity (ROE).
activities of financial intermediation Gearing involves expanding the business
and maturity transformation. Financial volumes by mobilising more and more
intermediation refers to the role the Bank funding from depositors and other providers
plays as a conduit between depositors and of funds to the banks and lending or
borrowers, allowing savings (liabilities) to investing such funds to grow the loan book
be channeled into investments and assets. and investment portfolios on the strength of
Maturity transformation refers to the process a given amount of capital.
of converting short-term funds into long-
Gearing primarily remains the foundation
term lending and investments. By ensuring
of the Bank’s business model, which
the efficient allocation of financial resources,
enables us to operate at around 10 times
these two activities are essential for the
higher business volumes compared to the
economic development of the society
shareholders’ equity. It is our license to
at large.
mobilise deposits from the public that has
made it possible. However, we are well aware
that gearing exposes the Bank to a multitude
of internal and external risks. In addition,

35
 The Bank’s business model that delivers value to and derives value from the stakeholders,
leading to sustainable value creation Figure – 07

z Shareholders’ funds 2. VALUE DRIVER ACTIVITIES

z Borrowed funds
Financial
capital

z Financial covenants
z Customer deposits Vision
Funding
ent Managemeannd Liqu
e m t (ref idit
a nage 43) er p
age y
z Property, plant & equipment l M pa g
r t Va lu e D ri v er Ac t 43)
t a r po i vi t
Manufactured

pi (ref e
Sup ies
z Information & Communication a
C Deli
capital

Technology ver
Business Model for Sustainable Value Creation

z Public goods
yC
d s a l u e D r i ve r A ha
ar y V c ti vi t nn
z Investments in process d m ar i el

e
n i e
a Pr s

77) ctur
improvements

s
st
r pa tru
Financial

ice
(refe nce S
intermediation

rv
ge
z Institutionalised knowledge

Se
Intellectual

z Best practices

na
capital

Gover
z Social & Environmental Deposits Loans
Management System (SEMS)
z Data analytics
1. INPUTS

BANK
Depositors Borrowers
z Skills
z Competencies
Repayment
Human
capital

z Creativity Withdrawals
of loans
Annual Report 2020

Prud

z Commitment Interest expense Interest income

Pro
ent

Maturity
du
gro

transformation
c ts
wt

d
an

z Services and supplies

network capital

Se
h

z Relationships rv s
ice sse
Social &

z Assurance services s oce

Commercial Bank of Ceylon PLC

pr
al
z Collaborations & alliances Intern
Cu
sto
me hip
r ce a d ers
ntric l le
z Utilities
it y Digita
z Refinance funding for (A detailed account of
Strategic i eratives
Natural
capital

solar/digitisation projects activities undertaken during mp

z Contribution to the Bank’s the year to deliver value to
CSR Trust stakeholders that enhanced capitals
is given in the MD&A on pages 41 to 62)

OPERATING ENVIRONMENT THAT PROVIDES CONTEXT

FOR VALUE CREATION

1. INPUTS 2. VALUE DRIVER ACTIVITIES

“Raw materials” for the value driver activities Include primary value driver activities that promoted growth,
drawn from capitals. Please refer page 38 of the support value driver activities that promoted positive stakeholder
Statement of Capital Position for the opening capital interactions and other value driver activities that minimised risk. It is
position as at January 1, 2020 of different capitals the inputs from the capitals together with relationships, interactions,
built by the Bank over the past 100 years. interdependencies and trade-offs among capitals that generated
outputs, leading to creation of value reflected in capitals.

36
 z Prudent growth
z Profits, taxes and dividends

Financial
capital
z Being well capitalised,

International Trade related products & services, unfunded facilities, REPO transactions, advisory services
Mission funded and liquid

Loans & advances, investments, deposits, forex products, remittance services, fee based services,
z Optimum risk-return trade-off
z Market capitalisation

z Digital leadership

Manufactured
z Omni-channel presence

capital
z Growth in capacity

Business Model for Sustainable Value Creation

z Safe work environment
M

z Enhanced productivity
an
Ris gem
a
k G ent
ove (refe

z Innovativeness
rnan r page 1
(off

Intellectual
z Creativity
erin

capital
ce an 14)

z New products
g om

z Simplicity
d

4. OUTCOMES
ni-ch

z Compliance
3. OUTPUTS
annel e

z Operational excellence
xperien

z Empowerment and engagement

Human
capital
ce

z Training & development

ce)

llen

Annual Report 2020

z Motivation and productivity
exce

z Cordial industrial relations

na l
tio
era

z Customer centricity
network capital
Op

z Growth in customer base

Social &

z Customer satisfaction

Commercial Bank of Ceylon PLC

z Customer convenience
z Strong supplier relationships
z CSR activities

z Green processes and facilities

z Solar power generation
Natural
capital

z Saving of non-renewable
energy sources
z Environmental Protection
z Improvements in quality of life

(KPIs depicting the value derived as outcomes are given in Highlights on page 39)

3. OUTPUTS 4. OUTCOMES

Products and services Consequences of our activities and outputs manifested

and negative externalities in capitals as value created. Please refer page 39 of the
generated through the value Statement of Capital Position for the closing capital position
driver activities. as at December 31, 2020 of different capitals.

37
 Statement of Capital Position Table – 07

Indicator of value derived Value derived as at Activities undertaken to Value derived as at Growth in value
January 1, 2020 create financial capital * December 31, 2020 created

Shareholders’ Funds (Rs. Bn.) 133.20 157.00 17.87%

Subordinated liabilities (Rs. Bn.) 37.90 38.20 0.79%

Financial capital
Deposits from customers 1,053.30 Grew the business volumes 1,265.90 20.18%
Borrowings from banks/ prudently through robust
other borrowings (Rs. Bn.) 51.50 and efficient financial 87.50 69.90%
intermediation and
Market share in total assets (%) 11.10 maturity transformation, 11.90 7.21%
Market capitalisation (Rs. Bn.) 96.80 thereby strengthening the 93.66 -3.24%
CSE ranking in market cap (No.) 4 leadership position 5
Price to Book Value Highest among Highest among
the Banking Sector the Banking Sector
Business Model for Sustainable Value Creation

Indicator of value derived Value derived as at Activities undertaken to Value derived as at Growth in value
January 1, 2020 create manufactured capital * December 31, 2020 created

Manufactured capital

Interactions
Branch network (No.) 287 z Maintained profitable 287 0
Number of ATMs 685 mix of owned and rented 656 -4.23%
buildings
Number of CRM 200 250 0.25
z Delivery channels
Bank on Wheels (No.) 3 11 266.67%
z Conducted cost-efficient
Investment in capital 15.20 transport arrangements 18.40 21.05%
expenditure (Rs. Bn.) z Improved procurement
services
Annual Report 2020

Indicator of value derived Value derived as at Activities undertaken to Value derived as at Growth in value
January 1, 2020 create intellectual capital * December 31, 2020 created
Commercial Bank of Ceylon PLC

Brand equity (Rs. Bn.) 37.30 z Invested in centralisation 44.01 17.99%

Value of intangible assets z Improved processes

Intellectual capital
(Rs. Bn.) 1.10 and procedures 1.20 9.09%
Receipt of awards and Most awarded z Developed new products Most awarded
accolades bank in Sri Lanka and services bank in Sri Lanka
World’s Top 1000 Banks Included in 2019 z Expanded network, Included in 2020
Fitch rating AA(lka) conducted research AA-(lka)
and development
Employees serving 791 809 2.28%
z Deepened technological
for > 20 years
expertise
z Supported knowledge
sharing initiatives

* Please refer Management Discussion and Analysis for details of the activities undertaken.
** Reflects the overall market trend
*** Over 500,000 inactive customers were deactivated during 2020.

38
 Indicator of value derived Value derived as at Activities undertaken to Value derived as at Growth in value
January 1, 2020 create Human capital * December 31, 2020 created

Number of employees 5,062 z Improved quality 5,057 -0.10%

Number of new recruits 264 of new recruits 158 -40.15%
Human capital

z Conducted
Retention ratio (%) 95.50 96.78 128 bps
employee surveys
Return to work from
z Invested in training
maternity (%) 100.0 100.0 –
and development
Profit per employee (Rs. Mn.) 3.4 z Enriched career
3.2 -5.88%
Average service period 12 years and development 14 years and
2 months z Re-enforced performance
5 months 27 months
management and
appraisals

Business Model for Sustainable Value Creation

Indicator of value derived Value derived as at Activities undertaken to Value derived as at Growth in value
January 1, 2020 create Natural capital * December 31, 2020 created
Natural capital

Energy consumption (GJ) 50,296 z Screened loans 45,045 -10.44%

Solar panel installation through SEMS
locations (No.) 49 z Promoted paper 60 22.45%
reduction and recycling
Number of facilities subjected
to SEMS screening 10,074 z Increased usage of 9,807 -2.65%
renewable energy
Online banking users 280,634 418,992 49.30%
z Switched to energy-
Mobile banking users
671,699 efficient appliances 517,378 -22.97%

Annual Report 2020

Indicator of value derived Value derived as at Activities undertaken to Value derived as at Growth in value
January 1, 2020 create Social and Network capital * December 31, 2020 created

Commercial Bank of Ceylon PLC

Number of customers Over 3.5 Mn. z Promoted financial Over 3.5 Mn. –
Social and Network capital

Market share in imports (%) 11.00 inclusion 11.34 34 bps

z Co-created products
Market share in exports (%) 18.30 18.77 47 bps
and services
CASA ratio (%) 37.10 42.72 562 bps
z Collaborated with
Number of suppliers Over 1,200 business partners Over 1,250 –
Number of z Improved capacity of SMEs
correspondent banks 55 z Expanded Bank's footprint
56 1.82%
CSR Trust investment z Supported the community
in society (Rs. Mn.) 549.2 633.6 15.37%

39
 The Most Awarded Bank
Prudent Growth Customer Centricity Leading Through Innovation

1. Best Bank in Sri Lanka 2020 – 1. Decade of Excellence in Retail 1. Best Digital Bank Sri Lanka 2020 –
Global Finance Magazine, USA Banking Sri Lanka 2020 – Global Finance Derivative, Netherlands
2. Best Commercial Bank – Sri Lanka Banking and Finance Review 2. Most Innovative Banking Services
2020, Global Business Outlook Magazine, UK – Sri Lanka 2020 – Business
Magazine, UK 2. Best Corporate Bank Sri Lanka Tabloid Magazine, UK
3. Best Foreign Bank – Bangladesh 2020 – International Business 3. Most Innovative Bank –
2020, Global Business Outlook Magazine, UAE Sri Lanka, 2020 – Global
Magazine, UK 3. Best Trade Finance Bank Sri Lanka Economics Magazine, UK
4. Best Domestic Bank – Sri Lanka, 2020 – International Business 4. Innovative Digital Bank of the
2020 – Global Economics Magazine, UAE Year 2020 – The European, UK
Magazine, UK 4. Best Bank for SMEs – AsiaMoney, 5. Winner in Banking and Financial
5. Best Commercial Bank – Hong Kong services Category of SLASSCOM
Business Model for Sustainable Value Creation

Sri Lanka, 2020 – Global 5. Best SME Bank Partner 2020 – Awards – Sri Lanka Association
Economics Magazine, UK The European, UK for Software Services Companies
6. Best Bank in Sri Lanka 2020 – 6. SME bank of the Year – Asia (SLASSCOM)
Euromoney, Hong Kong Banking and Finance (ABF)
7. Listed within the Top 1000 Banks Investment Banking Awards,
of the World for the 10th Time – Singapore
The Banker Magazine, UK 7. Best Corporate Bank – Sri Lanka
8. Best Commercial Bank – Sri Lanka – 2020 – International Finance
– 2020 – International Finance Magazine, UK
Magazine, UK 8. Best Trade Finance Bank in
9. Best Commercial Bank – Sri Lanka Sri Lanka – Transaction Finance
2020, Cosmopolitan The Daily Awards by Country, The Asian
Magazine, UK Banker, Singapore
Annual Report 2020

10. 1st in Financial Performance – Operational Excellence

LMD Most Respected Entities
1. Best Bank for CSR– AsiaMoney,
Hong Kong
2. Best Brand – Sri Lanka Leadership
Awards
Commercial Bank of Ceylon PLC

3. Most Admired Companies of

Sri Lanka 2020 – ICCSL/CIMA
4. 1st in Honesty – LMD Most
Respected Entities
5. No 1 in the Business Today’s Top
30 Corporates and Conglomerates
in Sri Lanka
6. Voted the Most Respected Bank
for the 16th consecutive years –
LMD Most Respected Entities
7. No 1 in “Most Awarded 2019/20
Hall of Fame” – LMD Magazine

40
Management Discussion and Analysis
Strategic Imperatives
Growing the business astutely with a long-term Providing the experience, simplicity and convenience that
perspective customers value most today
Creating long-term value by keeping the interests of all Growing corporate customer base by being a trusted
stakeholders at heart for sustainable value creation partner and providing better business solutions
Focusing on pure banking by remaining true to our Remaining relevant to mass market customers by
original ideals of being a banker first and foremost offering a seamlessly integrated omnichannel banking
Managing risks prudently by strengthening risk
experience
governance and management to enhance asset quality Augmenting SME customer value proposition by
and minimise operational losses providing greater opportunities for growth through
Remaining well capitalised and liquid by maintaining
networking and education
sound capital and optimum liquidity in the spirit of their Strengthening ties with micro customers by driving
requirements responsible lending and financial inclusion through
Being well diversified by minimising concentration into
closer interaction
any particular geography, customer, product, sector or Enhancing focus on high networth customers by

Management Discussion and Analysis

currency driving stronger relationships and greater engagement
Making responsible investments by financing Green Supporting the community by investing in innovative
projects and employing a Social and Environmental solutions for the well-being of both existing and
Management System to assess sustainability in all potential customers
lending activities

Prudent Growth Customer Centricity

Strategic
Imperatives

Annual Report 2020

Commercial Bank of Ceylon PLC
Leading through Innovation Operational Excellence

Innovating to enhance the quality of stakeholder Enhancing operational efficiencies for better productivity
interactions and experience and customer service

Fortifying digital leadership by leveraging platforms Centralising work processes to enable branches
and technologies to align with changing customer concentrate more on business development and
aspirations managing customer relationships
Creating complete digital banking platforms Re-engineering business processes to deploy
integrated with all system networks and eco-systems technological advancements for meeting changing
to provide a one-stop-shop experience for customers business needs and service standards
across all segments Optimising resources by maintaining an optimum mix
Increasing the proportion of digital usage by of CAPEX and OPEX models
facilitating and encouraging digital transactions and Investing in employees to better align them with the
interactions changing needs and to improve productivity
Segmenting customers through data analytics to
Safeguarding the environment by continuously
identify and serve unique banking needs and deliver reducing carbon footprint to contribute to the fight
personalised user experiences against climate change
Redesigning conventional banking processes as digital
processes to create end-to-end digital solutions

41
 Prudent Growth
The strategic imperative of Prudent Growth represents the
Bank’s recognition that value creation for all its stakeholders
must be viewed through different time frames – the short,
medium, and long term. Prudent Growth provides the
orientation for the Bank’s other three strategic imperatives
covered in this discussion – Customer Centricity, Leading
Through Innovation, and Operational Excellence – and is
realised and actualised by them in turn.
Management Discussion and Analysis

As such, Prudent Growth is fundamentally or human capital will compromise the Bank’s responsible, and ethical. The elements of
about balance: maximising current ability to adapt to a changing financial such an approach include an emphasis on
profitability without hindering the Bank’s landscape. Investments made without regard pure banking; a well-diversified asset and
capacity for prolonged success into the to social and environmental justice can have customer base; sound capital, liquidity,
future. Put in terms of the contemporary spillover effects, adversely impacting the and risk management; astute corporate
language of Integrated Reporting, Prudent wider society in which the Bank operates governance; socially and environmentally-
Annual Report 2020

Growth is about balancing trade-offs and manifesting a risk to Bank’s reputation. responsible lending and operating practices;
between capitals. A disproportionate focus Prudent growth thus signifies growth and conducting business with transparency,
on immediate gains in financial capital that is: healthy, sustainable, resilient, honesty and integrity.
without sound investments in institutional

Figure – 08
Commercial Bank of Ceylon PLC

Our commitment to
prudent growth

First private sector bank to Comfortable levels of

venture overseas capital adequacy

Highest market capitalisation in Optimum levels

the Bank, Finance and Insurance of liquidity
sector in the Colombo Bourse
Social and Environmental
First private sector bank to Management System
cross Rupees One Trillion in both
Robust Risk Management
assets and deposits
Framework
Included in the Top 1000 Banks Compliance with laws,
consecutively for ten years both in letter and in spirit

Transparency in reporting and Robust Corporate

disclosures Governance Framework
Conservative risk
profile

42
Creating Long Term Value During the year under review, the total assesses its capital requirements through
Prudent Growth is the foundation of the assets of the Bank grew by by 25.15%, rising the Internal Capital Adequacy Assessment
Bank’s success, and has allowed it to build a from Rs. 1.387 Tn. at the end of 2019 to Process (ICAAP) and the annual strategic
strong deposit and lending franchise with Rs. 1.736 Tn. at December 31, 2020. Our planning and budgeting exercise. The tools
a wide national footprint and a regional market share in total assets, which stood it deploys include: Risk Adjusted Return on
presence. This economy of scale provides at 11.08% at the end of 2019, improved Capital (RAROC), prudent capital allocation,
the Bank with the ability to access resources to 11.84% at the end of 2020. The Bank’s controlled growth in risk-weighted assets,
unavailable to its competitors in order International Operations played an expansion of fee-based services, timely
to offer a unique value proposition to its increasingly vital role in our bottom line by pricing/re-pricing, prudent dividend policy,
stakeholders. As an acceptor of deposits, the contributing 11.79% to the Group’s total products and services portfolio and capital
Bank’s moderate risk appetite has created a assets and 20.46% of profit before tax (refer instruments. The Bank also recognises that
reputation for stability, earning the trust and to pages 20 to 26 of the "Financial Review" a crucial aspect of its success is the base
confidence of the public. This year, the Bank’s for further details). of confident shareholders whom the Bank
deposits grew to Rs. 1.266 Tn., a growth of The Bank’s prudent approach also can rely on for more capital whenever
20.19% over 2019. As a result, the Bank’s applies to its dividend policy, which seeks to the need for a capital infusion arises.
CASA ratio increased from 37.10% in 2019 to balance providing substantial shareholder The Bank consistently maintains capital
adequacy ratios well in excess of minimum

Prudent Growth
42.72% in 2020. This surge in deposits was returns while supporting long-term business
driven by the drop in discretionary spending expansion. Maintaining a consistent track requirements (see page 131 to 133 for
due to the pandemic, the prolonged record, the Bank declared a first and final further details).
low-interest rate environment, and the dividend of Rs. 6.50 per share for the year,
movement of deposits from the Non-Bank which will be paid by way of a cash dividend Capital management objectives
Financial Institution (NBFI) sector to the of Rs. 4.50 and scrip dividend of Rs. 2.00 per The objectives of the Bank’s Capital
banking sector. Deposits were the Bank’s share, leading to a dividend payout ratio of Management efforts are:

Management Discussion and Analysis

largest source of funding, funding 72.92% 46.33%.
z Remaining compliant with regulatory
of the total assets (compared with 75.92% Following the lacklustre performance, requirements by maintaining internal
in 2019), indicating the robustness of its indices on the Colombo Stock Exchange capital targets that are more stringent than
financial intermediation role. (CSE) ended the year on a mixed note. ASPI the requirements
As a lender, the Bank is able to cater gained 10.52% to close the year at 6,774
z Optimum capital usage for maximum
to the largest corporates (with one of the points (6,129 in 2019) and S&P SL20 lost
profitability
highest single borrower limits in the banking 10.18% to 2,638 points (2,937 in 2019). The
sector), to SMEs and Micros (with a suite of Bank index followed a similar trend, losing z Supporting future business expansion
customised financial solutions and capacity- 16.11%. Accordingly, the Bank’s shares z Supporting desired credit rating
building programs), and to the ordinary were trading at a discount to its book value
citizen (through a wide range of pure, throughout the year. Yet, the price-to-book The Bank received a strong affirmation with
uncomplicated banking products for every value of 0.60 times as of December 31, 2020 the completion of a private placement of

Annual Report 2020

demographic, from infant to senior citizen). (0.73 times as at end 2019), was the highest shares with the IFC amounting to USD 50
Gross Loans and advances grew by a among the peer banks listed on the CSE. Mn. (Rs. 9.216 Bn.). This investment is the
modest 2.98% given the low demand for first foreign equity placement of shares by
credit throughout the year. Consequent Remaining Well Capitalised the Bank and collectively makes the IFC,
channelling of excess liquidity to the A strong base of capital is vital for a bank’s the IFC Financial Institutions Growth Fund,
Treasury heightened emphasis on sustainability. It helps a bank acquire LP (FIG Fund), and the IFC Emerging Asia

Commercial Bank of Ceylon PLC

investment in Treasury bills and bonds, property and equipment to establish, Fund, LP (EA Fund) a holder of a14.45%
resulting in net loans and advances as a perpetuate, and expand business, and offers stake. Also crucial to note that this is the
proportion of total assets decreasing to protection against uninsured depositors; first post-pandemic equity placement by
51.66% as at December 31, 2020 from 63.77% and, perhaps most importantly, it acts as a the IFC, and it is one of the largest foreign
a year ago. The Bank’s Non-Performing Loans buffer to absorb unanticipated losses and investments into Sri Lanka since the start of
(NPLs) ratio increased to 5.11% at end of serves as a regulatory restraint on unjustified the pandemic. This is a clear sign of optimism
the year. Yet, the Bank made the highest asset expansion. However, tightening for the Bank’s future.
ever single-year impairment provision of Rs. regulatory requirements and more stringent For further details on our Capital
21.484 Bn., including COVID-19 management reporting standards, while necessary and Management, please see Note 68.5 on pages
overlays of Rs. 5.189 Bn. This calculation justifiable, have created new impediments to 289 to 290 and page 336 for Disclosure 7 –
stemmed from the Bank’s prudent approach, the growth of the banking industry. Summary discussion on adequacy/meeting
anticipating the potential for credit losses As a result of more restrictive capital current and future capital requirements.
that might remain unrecognised by existing definitions, difficulty in raising fresh capital
impairment models. due to lacklustre market conditions, Managing Funding and Liquidity
Growth in Deposit base and comparatively higher risk-weighted assets, The circumstances that led to the financial
Lending portfolio Table – 08 additional capital buffers and higher capital crisis in 2007 and the events that followed
adequacy ratios (CARs) required under underscored the fact that funding and
2020 2010 10-year Basel III regulations, higher impairment
(Rs. Mn.) (Rs. Mn.) CAGR liquidity are as important, if not more
provisioning under SLFRS 9, and higher so, than capital for the financial services
Deposit base 1,265,966 259,779 17.16% taxes, banks are being more conservative in industry. Yet, unlike for capital, there had
Gross Loans 947,842 224,021 15.52% their approach and are therefore bearing the been no internationally agreed-upon
brunt of higher costs and lower returns. standards for funding and liquidity. As
To remain solvent in such a landscape, a result, Basel III regulations introduced
the Bank considers it a priority to pro-actively measures to strengthen the funding and
manage the capital at its disposal. The Bank

43
 liquidity risk management of banks. Its z Optimum usage of liquid assets to Figure – 09
aim was to promote resilience in a bank’s maximise profitability
short-term and long-term liquidity risk z Funding future business expansion at
profile through the introduction of the optimum cost Operating Segments
Liquidity Coverage Ratio (LCR, 2015) and
z Supporting desired credit rating
the Net Stable Funding Ratio (NSFR, 2019),
z Ensuring compliance with to Basel III
Contribution to operating income
respectively. In addition to the conventional
Statutory Liquid Assets Ratio, these measures funding and liquidity requirements
NBFI, Real Estate
are designed to prevent banks from relying and Services – 2.34%
excessively on short-term wholesale funding The Bank manages its funding and liquidity
to support long-term assets. Dealing/Treasury –
ratios on a daily basis and monitors the Liquid 22.07%
The Bank accords as much importance Assets Ratio to ensure adequate funding to
to funding and liquidity as it does to capital, maintain liquidity at the desired levels.
Personal
ensuring that it has sustainable sources Banking –
of funding and that it maintains adequate Being a Truly Diversified Entity 46.74%
International
levels of liquidity at all times. The Bank will Another important dimension of the operations – 12.64%
Prudent Growth

not compromise on liquidity in its drive Bank’s prudent growth is its commitment
to generate returns for investors, and this to diversification. Apart from being a
Corporate
tenet has contributed greatly towards public risk management tool to avoid excessive Banking – 16.21%
confidence in the Bank. concentrations, diversification has helped
To actively monitor the funding, the Bank remain more agile in weathering Contribution to Total Assets
liquidity requirements and pricing of assets and responding to changing market NBFI, Real Estate
Management Discussion and Analysis

and liabilities, the Assets and Liabilities conditions, thereby reducing performance and Services – 0.63%
Committee (ALCO) of the Bank meets volatility and ensuring stable, sustainable
fortnightly. It extensively deliberates on value creation. The Bank has successfully Dealing/Treasury –
accomplished a high level of diversification 33.95%
developments such as market liquidity,
current and perceived interest rates and in its operations across many parameters, Personal
exchange rates, changes in policy rates, including: Banking –
credit growth and facilities in the pipeline, 35.38%
z Geographically (Sri Lanka, Bangladesh,
capital market developments, projected
The Maldives, Myanmar, Italy and BPOs in
capital expenditure and alternative funding
several other countries) International
options etc. that affect funding and liquidity. operations – 11.79%
z Customer profile (See customer Corporate
Over the past several years, the Bank Banking – 18.25%
segmentation – Table 10 on page 48)
has further strengthened its funding and
liquidity by encouraging the use of electronic z Banking channels (See channel mix –
Annual Report 2020

cash and cards to reduce cash holdings and Table 11 on page 49)
establishing credit lines with strong overseas z Currency wise product mix (See Note 34.1
Employees
counterparties (enabling it to access foreign (b) on page 203 and Note 46.1 (b) on page
currency funds at attractive prices). Funding 232) Age Analysis
sources of the Bank for onward lending, in z Products and services portfolio Nos.
order of their assessed stability, include: (A complete suite catering to the 2,500
Commercial Bank of Ceylon PLC

z Retail deposits mobilised through the requirements of all segments of customers

2,000
branch network from infants to senior citizens).
1,500
z Low-cost foreign currency borrowing z Funding profile (Please refer the figure 09
(provided the interest and swap cost on page 44 for details) 1,000

attached to such borrowing is cheaper z Maturity profile (No serious mismatches 500
as compared to the cost of wholesale in maturity profile, particularly given the
0
deposits) growing core component of CASA balances Below 30 30 to 50 Above 50
Years Years Years
z Selected long-term wholesale deposits – See Note 61 to the Financial Statements
on pages 251 to 253). Male Female
z Re-purchase agreements
z Economic sector (A well-spread sector

Funding and Liquidity Management diversification of assets by economic sector

Service Analysis
Objectives with no excessive concentration to any
particular sector – See Note 34.1 (c) to the Above 20
The objectives of the Bank’s funding and
Financial Statements on page 203). Years – 16%
Below 5
liquidity management efforts are:
z Sources of revenue (An acceptable mix Years – 26%
z Honouring customer deposit maturities/ of fund-based and fee-based revenue
withdrawals and other cash commitments with significant market share in country’s 16 - 20
Years – 11%
efficiently under both normal as well as imports and exports as well as a market
challenging operating conditions maker in Treasury operations – See Note
z Remaining compliant with regulatory 13.1 and 14.1 to the Financial Statements
requirements by maintaining internal on pages 178 and 180). 5 - 10
11 - 15
funding and liquidity targets which are Years – 26% Years – 21%
more stringent than the requirements

44
 Deposits and Funding Loans and Advances

Loans and advances by customer

CASA
42.72% (2020)
SME – 21%

2019 - 37.10%
Corporate
customers – 52%

Prudent Growth
Retail
Deposits Mix customers – 27%

Time deposits – Rs. 725 Bn. Loans and advances by product

77% 23%

Management Discussion and Analysis

Others – 12%
Savings deposits – Rs. 440 Bn. Personal
loans – 5%
78% 22%
Housing
Current accounts – Rs. 101 Bn. loans – 7%
Long term
60% 40% Trade loans – 43%
finance – 8%

Local Foreign
Currency Currency Overdrafts – 11%

Short term
loans – 14%

Annual Report 2020

Deposits by Currency Loans and Advances by Industry

United States Consumption and Other 23%

Dollar – 14%

Commercial Bank of Ceylon PLC

Bangladesh Taka – 7%
Wholesale and retail trade 18%
Sri Lanka
Rupee – 76% Others – 3%

Lending to overseas entities 13%

Manufacturing 13%

Agriculture and Fishing 8%

Funding Structure
Tourism 7%
Construction 5%
73% 16% 9% 2% Financial services 4%
Others 9%

Deposits to Borrowings to Capital to Other Liabilities

Total Assets Total Assets Total Assets to Total Assets
Professional,scientific and technical activities
Healthcare,social services and support services
Infrasturcture development
Transport and storage
Information technology and communication services
Education
Arts,entertainment and recreation

45
 Socially and Environmentally sustainable, socially acceptable and During the year, the Bank made particular
Responsible Lending economically viable projects. The Bank’s strides in terms of the composition of its
Banking, in comparison to many other SEMS is supplemented by the adoption of an Green Loans portfolio by including a wider
industries, has a minute environmental IFC developed tool, the Climate Assessment array of projects.
footprint of its own. It consumes few natural for Financial Institutions (CAFI) tool, that
resources and creates minimal emissions assists in monitoring and reporting climate Table – 09

and waste, evidenced by the fact that impact data. In its implementation of SEMS, Green Purpose (end of 2020)
there are no mandatory requirements for the Bank adopts an approach of partnership %
environmental certifications that banks have with its stakeholders with the objective
of encouraging positive changes instead Renewable Energy Projects
to obtain. But the Bank, in its capacity as a (Solar, Hydro, Wind, Biomass) 38
Domestic Systemically Important Bank, is a of merely rejecting proposals that do not
financial intermediary with a wide national meet the Bank’s social and environmental Resource efficiency and
standards. The goal of the Bank is to be a recycling projects - Energy,
reach and influence. As such, it recognises
leader that seeks to build partnerships across Water and Material 19
that it has a vital role to play as an advocate
and driver of sustainability in Sri Lanka. The ecosystems, and every attempt is made to Climate smart agriculture 17
Bank was involved in the formulation of a assist customers and suppliers to become
Environmentally friendly
compliant with relevant requirements and
Prudent Growth

Sustainable Banking Initiative (SBI) in the transportation and related

country in partnership with 18 members of regulations.
services 10
the Sri Lanka Banks’ Association, and social The Bank’s Green Financing, some of
Water saving consultancy and
and environmental concerns are integrated which is supported by international lines
related service providers 7
into the Bank’s core business activities. The of credit, contributes towards the fight
Bank has been a member of the UN Global against climate change in alignment with Others 8
Compact since 2002. the UN Sustainable Development Goals
Management Discussion and Analysis

As part of its strategic pillar of prudent 7 (Affordable and Clean Energy) and 12
growth, the Bank is mindful that its funding (Responsible Consumption and Production).
activities can have a major influence on The Bank’s Green Financing Vision prioritises
issues of sustainability both inside and 2 goals:
outside the Bank. The Bank has played a 1. To become the No. 1 Green Financing
pioneering role in Green Financing in institution in Sri Lanka
Sri Lanka over the past decade, financing
the first commercially viable wind power 2. To grow the Green Financing portfolio to
project and the first commercial scale be 3% of the loan book by 2025
solar power project in Sri Lanka. The Green
Financing portfolio support projects that Initiatives taken during the recent past
focus on renewable energy, energy and towards achieving these goals include:
Annual Report 2020

water efficiency, waste management,

z Engaging in multiple capacity building Concessionary Green Loans for Renewable Energy
emission reductions, drip irrigation, and
rain water harvesting. In 2018, the Bank programs.
partnered with the IFC to strengthen its z Over 500 staff members have participated
Green Financing strategy.
During the year under review, the Bank
in internal training programmes.
z Over 60 staff members have participated in
The Bank, in its
capacity as a Domestic
Commercial Bank of Ceylon PLC

issued a Position Statement on Climate training programs conducted by external

Change, affirming its commitment to industry experts.
combating climate change at the highest
level of the Bank. It is against the backdrop
z Guidelines & Circulars have been issued on Systemically Important
Green Financing.
of strong consensus amongst the scientific
community that human influence, z The climate impact of these Green facilities Bank, is a financial
particularly the burning of fossil fuels and
deforestation, has been the dominant cause
has been calculated via the IFC developed
CAFI tool. The Bank’s Green Financing intermediary with a
of observed warming in the global climate
system since the mid-20th century. This
portfolio has resulted in reducing 180,933
tonnes of CO2 equivalent emissions to the wide national reach and
Position Statement of the Bank is, in fact, an
articulation and an unification of a multitude
atmosphere.
z A Green Financing Performance Award for
influence. As such, it
of actions the Bank has been implementing
and committing to over the past decade, and
Personal Banking and Corporate Banking
has been introduced.
recognises that it has a
underscores its added resolve to fight this
challenge in the future.
z Special rates have been offered by the
Bank on Green Leases and Loans to
vital role to play as an
Furthermore, the Bank utilises a Social incentivise growth in the Green Financing
sphere.
advocate and driver of
and Environmental Management System
(SEMS) to assess and manage social and sustainability in
environmental risks in a strategic and
systematic manner. Procedures and work Sri Lanka.
flows within the framework of SEMS ensure
that the Bank’s lending is to environmentally

46
Ethics and Conduct Directors on Anti Money Laundering (AML)/ of corruption. The Bank has developed a
While the Bank’s fundamental business of Combating the Financing of Terrorism (CFT), comprehensive Anti-Bribery and Corruption
financial intermediation requires adherence Compliance and Anti Bribery and Corruption Policy which will be submitted for approval
to government regulations, operating in from time to time. of the Board during the first quarter of 2021.
a community of stakeholders means that The Bank continued to further Once approved, it will be made available at
it also needs a ‘Social Licence’ – in other strengthen the related systems, processes the Bank’s web site.
words, tangible evidence of ethical and and controls during the year. In addition, the Bank has a
conscientious behaviour. The Bank has Whistleblowers Charter and guidelines on
long been renowned for its compliance to Anti-Money Laundering accepting and offering gifts or other illegal
both the letter and spirit of the law. The The Bank conducts its Money Laundering gratification, collection and borrowing
Bank places a premium on the trust and and Terrorist Financing (ML/ TF) Risk of funds/obtaining undue favours from
confidence of its customers and stakeholders assessment as per the established ML/ customers and suppliers, and holding a
– a strength it has carefully cultivated for TF Risk Assessment Policy. Risk reviews Directorship/being a Partner/Shareholder
over a century – and recognises that it has are conducted and reported to the Board in private companies enumerated in the
a responsibility to maintain the highest on a quarterly basis considering the risk Code of Ethics and administrative circulars.
ethical standards and integrity in its business exposures arising from its customers, In implementing the Code of Ethics and

Prudent Growth
activities. The Bank takes a zero-tolerance delivery channels, products and services and affirming its commitment to the 10th
approach for corruption, bribery and geographical locations in which it conducts Principle of the UN Global Compact, the
fraud. The Bank, its Board of Directors and business. Bank expects all employees not only to
all of the employees are dedicated to act fight corruption, but also to demonstrate
professionally, ethically and with integrity in Anti-Bribery and Corruption that they do not abuse the power of their
all business dealings and relationships with position as employees for personal financial
all stakeholders. Bribery and corruption is illegal, dishonest
or non-financial gain, solicit or accept gifts,

Management Discussion and Analysis

and damages the reputation of the Bank.
Through on-site audits and online compromise employees or the Bank. No
Therefore, the Bank is committed to
surveillance, the Inspection Department of employee of the Bank should offer any bribe
countering bribery and corruption in all
the Bank reinforces the provisions of the or other illegal gratification in order to obtain
forms, and promotes a culture of compliance
Code of Ethics. The scope and frequency business for the Bank.
and genuine engagement with anti-bribery
of audits are determined using a risk- and corruption standards. The Bank also The Bank also aims to encourage and
based model and this approach ensures recognises that different jurisdictions, influence all of its non-controlled interests
that customers continue to benefit from sectors, transactions, business opportunities (such as non-controlled joint ventures,
the highest levels of integrity. In addition and business partnerships pose greater partners, contractors, sub-contractors,
to the above, a Whistleblower Charter bribery and corruption risks and seeks to vendors, suppliers, service providers,
is in place to allow employees to report identify and manage these risks. Accordingly, consultants, representatives and others
unethical or any known or suspected frauds the Bank seeks to establish rigorous policies, performing work or services for or on behalf
or misappropriations by staff members procedures and controls to assist it to of the Bank or any other person associated

Annual Report 2020

to the Compliance Officer of the Bank to operate within its risk appetite at all times with the subsidiaries and associate of the
safeguard the interest of the Bank and all and expects all its employees to refrain Bank) to have and implement anti-bribery
its stakeholders. Training is provided to all from giving or accepting bribes, kickbacks and corruption policies and procedures to an
employees and the members of the Board of or commissions or taking part in any form equivalent standard of the proposed Policy
of the Bank.

Commercial Bank of Ceylon PLC

Figure – 10

Values that support Fairness

the Bank’s brand;
We focus on doing the right thing by
all our stakeholders so that their trust in
us continues to deepen, enriching
Honesty invaluable relationships.
We strive to earn and retain the
trust of our stakeholders through Responsible citizenship
transparent actions that inspire them
and align with their values. Continuing our commitment to
the community, we focus on
making lives better and being
Integrity
a force for good.
Maintaining our integrity is of
paramount importance to us in Accountability
ensuring that our brand value keeps
We live by our brand values, ready to take
growing for all stakeholders.
responsibility for our actions towards all
stakeholders.

47
 Customer Centricity
Providing an unparalleled banking experience calls for
a deep understanding of our customers – their needs, their
preferences, their concerns – and responding with products and
services that meet and even exceed their expectations. It also
involves transforming internal mindsets and processes to remain
agile and relevant in a rapidly changing environment. Accordingly,
the Bank carefully segments its diverse customer base and tailors
its services to cater to each group. This targeted approach is about
Management Discussion and Analysis

viewing relationships with customers as more than simply a sum

of transactions, and it allows the Bank to differentiate its value
proposition, build customer loyalty, and enhance its brand. And in
2020, this approach was more vital than ever.
Annual Report 2020

Customer Segmentation Table – 10

Criteria High net-worth Corporate SME Micro customers Mass market

Commercial Bank of Ceylon PLC

Income/Size of Individuals with Annual business Annual business Exposure< Rs. 500,000 Individuals not falling
relationship/Business banking relationships turnover> Rs. 750 Mn./ turnover< Rs. 750 Mn./ into other categories
turnover/Exposure above set thresholds Exposure> Rs. 250 Mn. Exposure< Rs. 250 Mn.
Price sensitivity High High Moderate Low Low
Products of interest Investment Transactional, trade Factoring, leasing and Transactional Transactional
finance, and project project financing
finance
Number of Low High Moderate Low Low
transactions
Level of engagement High High Moderate Low Low
Objective Wealth maximisation Funding and growth Funding and growth Funding and advice Personal financial
needs
Background Business community/ Rated, large to Medium business Self-employed Salaried employees
Professionals medium corporates
Number of banking Many Many Many A few A few
relationships
Level of competition High High Moderate Low Moderate
from banks

The type of segmentation illustrated here enables the Bank to gain greater knowledge and understanding of the customer and better align
with their unique banking requirements.
48
Channel mix and target market on perceived customer preference Table – 11

Customer segment Branches Internet ATMs Call centre Mobile Relationship Business Premier
banking Banking managers promotion banking
officers units

Corporates √ √ √ √ √ √ X X
SMEs √ √ X √ X X √ X
Micro √ X √ X √ X X X
Mass:
Millennials X √ √ √ √ X X X
Others √ √ √ √ √ X √ X
High net-worth √ √ √ √ √ √ √ √

Customer Centricity
Figure – 11 For customers in urgent need of cash,
the Bank deployed its “Bank-on-Wheels”
Mobile Banking Units immediately, and
Automated Banking Commercial Bank increased its existing fleet from 5 to 11 by
Centres Official Facebook outfitting vehicles with mobile POS units.
900+ ATMs (including Page
250 CRMs)
A schedule with details of the routes of
Commercial Bank these units was posted daily on the Bank’s

Management Discussion and Analysis

Self-service Official Viber Public
website and social media pages. Because
Chat Page
card delivery was not possible during the
268 Branches in lockdowns, expired cards were enabled
Sri Lanka Social media
19 Branches in
for use at Bank ATMs for a limited period.
Bangladesh Beginning in early April, the mobile units
processed over 13,000 transactions
to the value of over Rs. 175 Mn. in little
Branch over a month.
[Link]
“To know Customer Contact Center Financial Relief Initiatives
everything about Centricity
the Bank” Launched a Trilingual The Bank consolidated its efforts under
multi-channel Integrated the umbrella of “Arunella”, a Financial
Contact Centre in 2020 Support Scheme that integrated multiple

Annual Report 2020

Web
initiatives to provide sharper and more
efficient relief to customers. These initiatives
ComBank Digital were guided by the CBSL directives, but
Flash went above and beyond them to capture
ComBank Q+ Bank-on-Wheels as many pandemic-affected customers as
WhatsApp Banking Automated Field Cash possible. A crucial element of the Bank’s

Commercial Bank of Ceylon PLC

ComBank SimplePay
Mobile Journeys Collection (AFCC) initiatives was a proactive communication
campaign across all channels and forums
to encourage customers to apply for relief
schemes. The Bank’s goal was not to narrowly
Responding to the Need of the Hour Cash at the Customer’s Doorstep interpret eligibility criteria and strictly
While it is commonplace to speak about During the first wave of COVID-19 infections restrict borrowers but to take a deeper,
the symbiotic relationship between a in late March 2020 and the ensuing holistic view of all customers affected by the
company and its stakeholders, this year lockdowns, nearly 70% of the Bank’s pandemic and come to their aid. Between
provided ample evidence that the Bank and branches in areas under curfew were kept the two waves of the pandemic across the
its customers genuinely depend on each open to provide uninterrupted service to year, nearly 35% of the Bank’s portfolio was
other for their survival and success. There customers in spite of the many challenges classified under moratorium, and by the
was no aspect of the local economy left faced by the staff. Departments such year's end, 16% still remained in this position.
untouched by the COVID-19 pandemic, and as Imports, Exports and Treasury were
financial relief was urgently and desperately operational throughout to ensure continuity
needed by many customer segments and of service for the Bank’s corporate clients.
business sectors. The banking industry itself Online customer registration for Digital
was similarly impacted, but as a Domestic Banking was expedited to enable customers
Systemically Important Bank (D-SIB), it to conduct their transactions without
was crucial that the Bank do everything visiting a branch. Social media played a
within its capacity to ease the burden on critical role as the main channel for urgent
customers and the national economy. The communiqués to the Bank’s customers when
Bank viewed this as an opportunity to affirm print media was not available.
its commitment to its customers and make a
tangible difference in their lives at a moment
of crisis.

49
 and Micros were pummelled by the effects Disbursement of loans under Saubagya
of the pandemic. The veritable backbone Scheme Table – 15
of Sri Lanka’s economy, these sectors also
Registered Disbursed
remain the most vulnerable to economic
shocks, and Bank sought to help bolster Total Value of Loans
businesses at the grass-roots level. under Saubagya Scheme
Between both the CBSL-mandated (Rs. Bn.) 72.07 45.77
schemes and Bank initiated schemes for Value of Loans applied
COVID-19 support loans, the Bank disbursed for by for Commercial
Segment analysis of Moratoriums a total of Rs. 29.6 Bn. to affected businesses Bank’s customers
Granted Under COVID-19 throughout the year. Under the CBSL (Rs. Bn.) 17.18 14.76
– As of December 31, 2020 working capital loan scheme Saubagya % of Loans applied for
(Wave –1 and 2) Table – 12 COVID-19 Renaissance facility, the Bank by for Commercial
Value No of registered 5,637 applications with a total Bank’s customers 23.83 32.25
(Rs. Bn.) Advances value of Rs. 28 Bn. over the three phases of
Total Number of Loans
Customer Centricity

 Corporate  176.315   2,673 the programme and disbursed 5,387 loans under Saubagya Scheme 26,291 18,007
with a value of Rs. 26.6 Bn. at the close of
 SME  136.156     15,045
2020. The Bank lent another Rs. 1.4 Bn. Number of Loans applied
 Retail  127.580   59,431 under the CBSL Liquidity Facility for eligible for by Commercial Bank’s
contractors in the construction sector and customers 3,958 3,557
 Agriculture  3.180  768
other suppliers to the Government. % of loans applied by
 Micro      0.642  3,470 Commercial Bank’s
Concessionary funding programmes customers 15.05 19.75
Management Discussion and Analysis

Total 443.873  81,387

Table – 14

Loan Scheme No. of Value The above figures have been extracted as per
Moratoriums granted under loans (Rs. Bn.) the CBSL press release dated July 23, 2020.
COVID-19 – As of December 31, 2020
(Wave –1 and 2) Table – 13 Saubagya C-19 Beyond the CBSL schemes, the Bank also
Renaissance Facility initiated two major loan programmes for
Value No. of SMEs affected by the pandemic. The first was
(Rs. Bn.) Advances Phase I 708 2.817
a commitment of Rs 10 billion funded via a
Phase II 3,878 17.711
loan of USD 50 million from the International
Personal Banking  311.810  2,716
Phase III 801 6.126 Finance Corporation (IFC), who, throughout
Corporate Banking 132.063 78,671
Subtotal 5,387 26.654 its 50 years of operations in Sri Lanka, has
 Total 443.873  81,387 been a longstanding partner of the Bank. IFC
Liquidity Facility Scheme has supported the Bank through multiple
Annual Report 2020

In addition to debt moratoriums, for Contractors 30 1.467 investments and advisory support, and
concessions included flexible Total 5,417 28.121 currently holds a 14.45% equity stake in
the Bank. This scheme was used to expand
payment options, up to 20% rebates lending to SMEs, with over a third dedicated
on accrued interest during the The Bank facilitated easy access to loans to businesses owned by women. This scheme
moratorium periods, reductions on and swifter processing with simple also focused on those who were not eligible
minimum credit card repayments documentation supplied over e-mail or
Commercial Bank of Ceylon PLC

for the Saubagya Facility. 

WhatsApp. The Bank’s website listed the
and applicable interest rates, The second Bank-funded loan scheme,
names and mobile numbers of two senior
waiving and reduction of fees officers (who frequently received in excess the Dirishakthi COVID-19 Support Loan
charged, and debt consolidation of 200 calls a day). The efficacy of the Bank’s Scheme, targeted micro enterprises. This
plans. The Bank also reduced lending response was reflected in the fact that in scheme was designed to meet the working
capital requirements and revive operations
rates throughout the year (matching a market comprising 26 licensed banks, as
much as 24% of the applications for the of businesses whose annual turnover
the downward trend of interest rates was below Rs. 15 Mn. The scheme was
in Sri Lanka) in an effort to provide Saubagya scheme were submitted by the
Bank and as much as 32% of the value of implemented under the purview of the
customers facing revenue losses Bank’s 19 Agriculture & Micro Finance Units
the total scheme was granted for customers
with affordable access to funds. The of the Bank as of June 2020. By the year’s (AMFUs), which play a key role in helping the
rate cut encompassed all categories end, the Bank remained the leading lender Bank identify specific needs of entrepreneurs
of new loans offered by the Bank, for COVID-19 relief amongst the private who require assistance to develop their
agriculture or micro businesses.
including loans for SMEs and micro sector banks.
enterprises, and even pawning, Bank funded relief Schemes Table – 16
leases and overdrafts. Loan Scheme No. of Value
loans (Rs. Bn.)
Helping SMEs and Micro Enterprises “COVID-19 Support
The Bank, who has been a pioneer in Loan” Scheme 102 1.454
providing financial solutions to SME and “Dirishakthi COVID-19
Micro enterprises, recognised that these Support Loan” Scheme 313 0.034
sectors were in desperate need of relief.
Already under severe pressure after the
diminished economic growth in 2019, SMEs

50
In addition, the Business Rehabilitation Non-Financial Support for SMEs
Unit worked with 15 businesses to keep
Rs. 2.15 Bn. worth of assets from falling into a
and Micros
Beyond direct financial assistance, the Bank
The Bank’s goal was not
non-performing category.
The Bank is supportive of the national
continued to cater to the SME sector in
several other ways. Membership in BizClub,
to narrowly interpret
initiative to build the SME sector for
sustainable growth and developed its own
a Bank forum dedicated to providing a broad
range of support services to SME clients,
eligibility criteria and
SME strategy after a review by McKinsey
Consultants. During 2020, seven new SME
grew to 4,076, representing an increase of
1,613 SMEs during 2020. An SME Dashboard,
strictly restrict borrowers
sales units were established to drive SME
Sales initiatives in the Northern, Eastern and
which monitors the account performance
of Biz Club members, was developed and
but to take a deeper,
North Central Regions. Over 50 Tab devices
were provided to SME Managers and SME
introduced to the Branches in December
2020. The dashboard allows early warning
holistic view of all
Sales units to improve SME acquisition and
expedite credit delivery.
signals to be detected and identifies new
borrowing needs. In addition, two new
customers affected by
the pandemic and come

Customer Centricity
To assist sales units, the Bank introduced AMFUs were established (at Nawalapitiya
the SME Lead Management System (SME and Maravila).
LMS) in July 2020. This system will help
manage the lead cycle in an effective
A major step for the Bank’s SME customer
base was the launch of ComBank Simple
to their aid.
manner while improving the conversion Pay, a new platform to help SMEs digitise
ratio and credit delivery, and will facilitate their business and engage in e-commerce
the collecting of information required for (also see pages 53 to 56). This product, the The Bank, through a variety of channels,

Management Discussion and Analysis

credit evaluation in a structured way in the first of its kind in Sri Lanka, enables SMEs to has conducted awareness, vocational
field itself. With swifter migration to credit create their own online store without a large training, and financial literacy programmes
evaluation, credit delivery times will be outlay on web development and design. The and workshops for SMEs and micros in
reduced. Indeed, the results are already Bank also launched a MasterCard-branded different sectors of business across the
extremely promising. During the year under credit card for entrepreneurs that fall into the country for many years. The Bank organised
review, the average Turnaround Time (TAT) SME category. three Skill Development Programs during
has been reduced through the Centralised Nevertheless, around 70%-80% of the 1st quarter of 2020 covering the
Credit evaluation process from 50 days to 28 the country’s population is rural. Despite Northern, Eastern, South-Western regions
days as of December 2020. In addition, a new the rapid increase in demand for digital of the country, which benefitted more than
Credit Scoring Model was introduced for SME products and services after the onset of 300 SMEs. As in-person gatherings were
facilities below Rs. 10 Mn. to expedite credit the pandemic, rural demographics remain subsequently curtailed, the Bank continued
delivery, and the end-to-end TAT under this reluctant to adopt digital channels for to provide support to the sector through
evaluation was reduced to just 13 days. a variety of reasons. Though the Bank is webinars. The Bank conducted a webinar on

Annual Report 2020

committed to providing and promoting the "Financial Literacy and Banking Solutions
Investing in Customer Relationships benefits of digital to its rural customer base, for Small, Medium and Micro Entrepreneurs"
The total array of moratoriums and it also understands that it needs to meet in collaboration with the Institute of
concessions understandably impacted the current customer expectations. During the Certified Management Accountants (CMA)
Bank’s profitability. As described on pages 20 year under review, the Bank introduced the of Sri Lanka, and a webinar exclusively for
to 26) in “Financial Review”, interest income "Automated Field Cash Collection" (AFCC) women entrepreneurs to help them adapt
to the requisites of the ‘new normal’ after

Commercial Bank of Ceylon PLC

declined by 4.26% from Rs. 127.780 Bn. to process to better serve the micro and small
Rs. 122.330 Bn., due in part to the Bank’s businesses segment, and two AFCC sites the COVID-19 pandemic in collaboration
own decisions for the customers’ benefit. Fee were opened at Chankani and Kodikaman. with the Women’s Chamber of Industry
income dropped by 9.17% from Rs. 12.407 This initiative was launched with the and Commerce (WCIC). The latter built on
Bn. to Rs. 11.269 Bn. as a result of the impact intention of reducing customer transaction the success of an in-person programme
of the COVID-19 pandemic on import and costs and it opportunity costs of visiting a held in January 2020, prior to the wave
export income, the waivers and reductions branch, and is also expected to strengthen of lockdowns and restrictions, titled
of fees and charges by the Bank and a drop the doorstep operation of the AMFUs. "WomEntrepreneur," also in collaboration
in commissions on credit cards. The Bank with the Women’s Chamber of Industry &
The Bank continued its partnership with
does not, however, view this as a mere loss. Commerce (WCIC). This programme was
Hayleys Agriculture Holdings Ltd to provide
The Bank views this decline in profitability aimed at women entrepreneurs engaged in
a series of joint leasing promotions to
as a trade-off – redirecting financial capital SMEs with an emphasis on steering a vision
enable farmers to purchase new agricultural
towards building customer and relationship towards sustainable business. The Bank
machinery at low rentals with special
capital. The Bank believes that to focus on also organised a webinar in collaboration
discounts and flexibility. The Bank also joined
immediate profitability is to compromise the with the National Chamber of Exporters to
hands with Associated Motorways (Private)
long-term mutual success of the Bank and its support SME exporters during the pandemic.
Limited for an "Agri Lease" promotion
customer base. offering farmers an opportunity to enjoy
the lowest monthly lease rentals and other
benefits when purchasing tractors. 

51
 Prioritising Customer Experience z Enabling credit and debit card holders
Despite the trying conditions, the Bank to automate payments to the Ceylon
continued to develop new products and Electricity Board (CEB).
services that catered to different customer z Allowing credit card holders to self-register
segments. A full description of the Bank’s for e-statements, thus reducing the use
digital projects is provided in the next of paper statements (this initiative was
section, but some of the broader customer promoted by entering all registered users
initiatives conducted during 2020 are noted into a prize draw).
here. z Launching a Pre-Paid Travel Card with the
The centrepiece of the Bank’s efforts latest NFC and PIN technology.
was the launch, early in the year, of its one-
stop trilingual Integrated Contact Centre to Other initiatives of note include:
serve its customers and stakeholders 24/7.
z Introducing a "Cash on Fixed Deposits"
The Centre is staffed by customer service
facility that enables depositors to withdraw
representatives to handle both inbound and
Customer Centricity

against their FD value through a debit or

outbound, calls, written communication, and
credit card linked to their accounts. This
requests and feedback routed through social
facility was especially designed to allow
media, and includes a robust leadership and
Women Entrepreneurship Programme customers facing unforeseen financial
training group to provide better supervision
issues to be able to withdraw funds from
and monitoring. The aim of the Centre is
The Bank itself worked on developing its their FD without terminating the entire
to ensure that customers receive a positive
own internal capacities by participating in contract.  
experience in each and every interaction
a United Nations Development Programme z Launching "Vibe", a youth savings account
Management Discussion and Analysis

with the Bank. Despite the many challenges

(UNDP) webinar on supporting the SME of staffing during the lockdowns and that can be opened by any Sri Lankan
sector – and was the only Sri Lankan bank beyond, the Centre was able to provide between the ages of 18-35 years with
to participate in this discussion. The Bank uninterrupted service to customers a range of attractive rates and concessions.  
also participated in the INNEX 2020 SME throughout the year. z Offering free Accident Cover of up to
Exhibition and Workshop in Kandy organised Rs. 500,000 to holders of "Anagi" Women’s
by Central Province Industrial Ministry Card and Cashless Initiatives Savings Accounts, subject to maintaining
in collaboration with Ministries of Youth a minimum account balance.  
The Bank made significant strides in
Affairs, Women’s Affairs, Rural Development,
championing credit and debit card and
Cooperative Development & Industries,
other cashless payments during the year
and in an economic summit in Hambantota
under review. While the move to cashless
organised by the CMA under the theme of
transactions was already an exponentially
"Solutions to meet challenges faced by SMEs
growing practice across the world, this year
Annual Report 2020

in Financial Management, Bank Funding and

it took on additional significance since the
Entrepreneurial Leadership in the Post COVID
use of currency notes was discouraged to
New Economy". At the latter event, the Bank
reduce COVID-19 spread. The Bank, together
set up a Help Desk to provide information
with PAYable (Pvt) Ltd, launched an all-in-
and banking solutions for the more than
one, fully integrated Android POS machine,
400 SMEs who were in attendance. The Bank
one of the first devices to accept contactless
also provided funding for two programmes
Commercial Bank of Ceylon PLC

payment card transactions in Sri Lanka. The

organised by Women in Management (WIM)
NFC-enabled machine supports the highest
together with the Ministry of Women’s
number of card payment options available
Affairs, which provided support for more
in the country as well as the QR-based
than 90 micro-level women entrepreneurs.
payments of LankaQR, VisaQR, Masterpass Vibe Account launch
(MasterCard QR), WechatPay and Alipay. The
Banking on Women Bank also introduced an Android Mini Point-
The Bank has recognised the importance of of-Sale (POS) device, which features similar
having a more gender-specific approach, as functionality, to enable merchants anywhere
evidenced by the number of seminars and in Sri Lanka to accept card payments. This
webinars conducted by the Bank described mini-POS is strategically positioned to cater
above. Women make up the majority to the Micro and SME industry, providing
of Sri Lanka’s population, and the Bank them with a cost-effective mechanism to
realises that meeting their aspirations for access the cashless ecosystem.
empowerment and success also benefits the
Other card-related customer initiatives
economic growth of the country.
include:
During the year under review, the Bank
opened a special Women Vertical and is in z Converting the Bank’s entire debit and
the process of formulating a 360-degree credit card base to NFC Technology.
approach to serve requirements of this z Introducing a "Card Balance by Missed
demographic. This all-inclusive approach will Call" service for credit card holders.
involve all segments from Women SMEs and
micros to housewives and working women.

52
Leading Through Innovation
That we have been living through a digital revolution over the
last few years is self-evident. Conventional business models
and ecosystems are being rapidly transformed, and the rate of
technological change and the rush of new, agile, entrants to
the financial landscape has intensified competition and risk.
The Bank has welcomed these challenges as a trigger for
meaningful innovation, spurring it to emerge as a pioneer in
the digital banking space.

Management Discussion and Analysis

In 2020, one side effect of the COVID-19 facing platforms, digital products, and the opening of new accounts, to
pandemic is that it has acted as a catalyst services, as well as back-end processes and on-boarding customers to digital platforms,
for digitalisation out of necessity, and has infrastructure – provided it with a strong to applications for loans, to authorising
accelerated the pace of digital change and foundation to meet these new challenges. identities, the system is still very reliant on
adoption. During April-May, when the entire The pandemic has also served to expose the brick and mortar model. Existing KYC and
country was on a lockdown and banking limitations and areas of weakness in the AML policies, for example, typically require
was made one of the essential services face-to-face identity verification for customer

Annual Report 2020

current digital banking space. Despite the
in the country, demand for continuity of strides made towards building a digital onboarding, which became challenging
service through digital channels escalated. banking ecosystem, the mass demand for under the circumstances. But the response of
The initiatives and investments the Bank has increased digital services makes it clear that the Bank in its digital initiatives and the CBSL
made over the last five years in building its there is much work to be done both within in relaxing regulations (such as in-person
digital ecosystem – its portfolio of customer the Bank and in the wider landscape. From KYC) are all positive developments that
augur well for the future.

Commercial Bank of Ceylon PLC

Digital Roadmap up to 2023
The Bank has set its sights on three Digital Goals for 2023:

Becoming
a Digital Bank by
2023 Figure – 12
Introducing Digital Technology to Improve User
Experience & Convenience
Goal Creating complete digital banking platforms integrated
1
with all system networks and eco-systems to provide a
one-stop-shop experience for all customers from Retail
to SME to Corporates.
Goal
2 Increasing Digital User Base and Usage
Increasing the proportion of digital usage by facilitating
and encouraging digital transactions and Interactions

Downsize Brick & Mortar Model and Increase

Goal Semi-Digitised Branch Model
3
Digitising conventional banking customer journeys

53
 Accordingly, the Bank will continue to invest in redesigning its conventional banking successful in accommodating income tax
processes as digital processes, integrating with other ecosystems (such as connecting with payments to the Inland Revenue Department
internal workflows for less manual intervention), and upgrading internal systems to be on this platform. This platform places the
ready to adapt to anticipated changes in the regulatory environment (open APIs, digital KYC, Bank at the forefront of the digital banking
etc.) and risk management. The Bank is also placing an emphasis on ‘developing the future space.
bank’, i.e. re-skilling staff and attracting specialised talent, building further partnerships, and Combank Digital has been launched
developing its data analytics capabilities. in the Maldivian market and is expected
to be rolled out in Bangladesh in 2021.
Investments in IT infrastructure Table – 17 Additionally, the Bank plans to make this
app tri-lingual (for Sri Lankan operations),
Indicator/Year 2020 2019 2018 2017 2016
Rs. Mn. Rs. Mn. Rs. Mn. Rs. Mn. Rs. Mn.
and include Bengali (for Bangladesh
customers) and Divehi (for Maldivian
Investments in Hardware customers) options in the near future. The
Leading Through Innovation

(Computer Equipment) 505.742 567.689 1,034.115 791.165 620.541 Bank also introduced an umbrella app that
Investments in Software (Licenses etc.) 409.322 387.432 333.181 449.354 416.816 houses the full suite of the Bank’s mobile
apps on our customers’ phones.

In the year under review, digital onboarding of existing customers grew at 140.17%, a 22.47% Total Financial Transactions Initiated
increase over the general trend over the last two years. The Bank also introduced 100% Through Digital Channels Table – 19
digital onboarding for new customers via its groundbreaking Flash app, adhering to the CBSL Volume Value
guidelines for digital KYC during the lockdowns. 2019 25,741,711 Rs. 1,822.49 Bn.
2020 33,959,505 Rs. 2,411.39 Bn.
Management Discussion and Analysis

Migration to digital channels Table – 18

Growth 31.92% 32.31%
Indicator/year 2020 2019 2018

Digital Adoption 333,941 139,040 66,143 Flash Digital Account

(Existing Customer Onboarding) customers customers customers
In 2020, Flash, the Bank’s ground-breaking,
(140.17% (110.21% (39.92%
trilingual banking app, was upgraded with
YoY growth) average YoY average YoY
growth) growth) several features that are revolutionary in
the local banking context, pushing the Bank
New Customer acquisition/ 9,680 N/A N/A further in its efforts to digitalise the customer
Onboarding (Digital KYC) customers journey. A QR Payment module was added
Percentage of total customer 31.75%* 32.18%* N/A to the app that enables Flash users to scan
transactions conducted digitally a Lanka QR code of any merchant to make
payments direct from either Commercial
Annual Report 2020

*Average Figure obtained Bank accounts or accounts with other banks.

Subsequently, a QR code upgrade, made
ComBank Digital possible by the Bank’s partnership with
Currently, the Bank’s online platform stands PickMe and the integration of the respective
as the most subscribed online platform in the apps of the two organisations, made it
country. During the year under review, the possible for Flash users to pay digitally for
Commercial Bank of Ceylon PLC

Bank integrated online and mobile banking their rides on the PickMe ridesharing service.
channels on a single omni-channel platform A partnership with with Tenaga Car Parks (Pvt
with the launch of “ComBank Digital”, Ltd) enabled users to pay for parking via the
powered by Fiserv, the US-based global app at Tenaga managed on-street and off-
provider of financial services technology. street parking spaces without having to visit
Another industry first, ComBank Digital a payment booth or locate a fee collector.  
brings together all the Bank’s digital banking
channels, including online banking, mobile
banking app, and mobile (WAP), on a new, ComBank Digital launch - Email
highly-secure, user-friendly, responsive
web application catering to both retail Standard services such as checking balances
and corporate users. ComBank Digital is of current, savings, investment, loan,
not only more vibrant and elegant, but and credit card accounts, Fixed Deposits
features a range of built-in options that allow investments, Personal Loans and Housing
users to self-manage their digital banking Loans, investing in Treasury Bills and
preferences, thus offering an unparalleled effecting payments for share trading can all
level of functionally and customisability. This be carried out securely via ComBank Digital.
moves the Bank closer to its digital ethos The platform effects all transactions between
of greater segmentation and granularity, user accounts, third-party Commercial Bank
enabling unique user experiences. accounts, and accounts in other banks on a
real-time basis, and supports bill payments CBSL recognised the Bank as an active supporter
to about 70 entities in nine categories such for LANKAQR initiative
as telephone, electricity, water, credit cards,
insurance, Pay TV, education, school fees and
rates. Additionally, the Bank has also been

54
 Combank Q+ the Bank, ComBank SimplePay, was also
During the year under review, the Bank introduced in 2020. This product is a local
was recognised by the CBSL for its adaptation of the MasterCard product
pioneering efforts in enhancing the digital Simplified Commerce, and provides local
payments landscape of the country. In 2019, entrepreneurs and SMEs the opportunity to
the Bank launched ComBank Q+, the first create their own online store.
Quick Response (QR) based Payment App to
be certified and launched under LANKAQR, IPG usage Table – 21
which allows the entire debit and credit
2020 2019 2018 2017 2016
card base of the Bank to make QR payments.
Annualised
This year, the app was re-launched with new
features to improve user experience. Both IPG Volumes
the Consumer and Merchant applications

Leading Through Innovation

(Rs. Bn.) 17.338 17.288 11.649 6.972 4.058
of ComBank Q+ were upgraded to include
YoY Growth
biometric authentication login and self-
Rate (%) 0.28 48 67 72  
Flash App Screen registration. Customers of the Bank can
now pay a range of bills instantly via the IPG
This year, the Bank also introduced an Merchants 375 229 190 151 129
app following the introduction of an In-App
advanced budgeting module to the Flash
Bill Payments feature. Furthermore, the Bank YoY Growth
app that includes several tools that facilitate Rate (%)
became the first bank in Sri Lanka to enable 63 21 26 17 48
and promote personal financial discipline
its Credit Card holders to settle their Credit
and management. The Flash Spend Tracker
Card outstanding balance by scanning a
Module with a Payment Categorisation
QR code appearing on their monthly Credit Remit Plus

Management Discussion and Analysis

Option enables users to categorise their
Card statements. In yet another initiative, The Bank’s remittance app, ComBank
purchases. A dashboard presents an overall
the Bank partnered with Mobitel to allow RemitPlus, which was launched to
picture of a user’s spending habits and
mCash merchants to accept QR code commemorate International Migrant Day
provides a downloadable history of monthly
based payments from any mobile payment on December 18, 2019, was developed
transactions in the form of an eStatement. 
App registered under LANKAQR, with the and upgraded in its first full year of use
But the truly novel centerpiece of this transaction processed through the Q+ in 2020. Remittances from Sri Lankan
module is the “Save the Environment” engine. expatriates is one of the country’s major
tool, which allows users to calculate the sources of income. The Bank also upgraded
environmental impact of their spending. the Blockchain based remittance channel,
The Bank is the first company in the region which the Bank launched in partnership
and the fifth bank in the world to introduce with RippleNet, and expanded this service to
a tool developed based on the leading South Korea and Middle East through further
climate impact index, approved by United

Annual Report 2020

RippleNet partnerships.
Nations Framework Convention on Climate
Change (UNFCC), the Aland Index 1.0. This Western Union (WU) Cash to Account
tool analyses transactional data to estimate was introduced in 2020 and is yet another
the carbon footprint of each transaction example of how the pandemic acted as a
made through Flash in app payment options catalyst for the technological progress of the
including through the Flash Debit Card and Bank. WU Cash to Account was introduced

Commercial Bank of Ceylon PLC

QR code scanning. This reveals to the user during the lockdown period in the first half
not simply financial costs, but the hidden of the year to permit customers to claim WU
environmental and social costs of the user’s cash remittances without visiting branch
ComBank extends self-registration for online and counters. Since then it has seen significant
consumption pattern. Understanding this digital banking
data can help Flash app users to transform growth.
their habits or make choices to invest in the
Online Payments WhatsApp Banking
environment as a means of offsetting the
impacts of their consumption. Within the burgeoning e-commerce sphere, The Bank launched its WhatsApp banking
the Bank has swiftly established itself as a solution in December 2020, and this
Flash usage Table – 20 market leader with its payment processing product represents perhaps the easiest and
Growth in 2020 services now accounting for approximately fastest form of mobile banking. By sending
% two out of five transactions. This market a simple ‘Hi’ to a designated WhatsApp
share of 40% is a testament to the role the number, the user will receive a simple set
YoY User base growth 92.68
Bank has played in supporting the country’s of instructions on how to access several
YoY Usage growth retail industry and promoting online services including viewing account balance
Value growth 468.52 sales for customers. The Bank currently and account history, requesting a cheque
supports the online payment processing of book, information about fixed deposits,
Volume growth 323.31
over 500 merchants through MasterCard housing loans, and foreign exchange rates,
Investments through Payment Gateway Services (MPGS) and and self-registration with ComBank Digital.
Flash App (eFDs) up by 145.4 Visa Cybersource (launched by the Bank in Another crucial feature of this product is the
Life insurance applications up by 45.3 Sri Lanka during 2020), two of the world’s ability for potential customers to complete
leading payment gateway platforms that registration to open a new account with
Funds transfers up by 354
are fully-compliant with Payment Card
Bill Payments up by 260 Industry Data Security Standard (PCI-DSS)
requirements. The third IPG solution of

55
 the Flash app. This product is positioned z The adoption, in the Card Centre and in The Bank has also maintained the
as a simple pathway to the world of digital Digital Banking, of the industry-leading prestigious Payment Card Industry
banking for customers that can subsequently data-analytics tool Qlick Sense. Both units Data Security Standard (PCI-DSS) V3.2.1
lead to deeper and more sustained forms of used this tool to develop real-time digital certification for three consecutive years.
digital engagement. Within just six weeks of dashboards to support every-day business PCI-DSS is the global data security standard
use, the app has had 8,167 new registrations decisions with a 360-degree view of the adopted by payment card brands for all
and 35,411 total transactions. customer. entities that process, store or transmit
z Building the host-to-host connectivity cardholder data and sensitive authentication
ePassbook and framework for corporate customers. data. It is one of the most technical standards
The Bank upgraded its ePassbook app to The Bank enabled CAMSO (one of its and its maintenance requires significant
include features like self-registration, real- priority business customers) to integrate expertise and resources. This certification,
time transaction notifications, and biometric smoothly with the Bank’s internal banking which also covers the Bangladesh operations,
login, significantly increasing the flexibility of systems, allowing for seamless financial facilitates the Bank’s rapid card growth while
Leading Through Innovation

account management, user-autonomy and transactions. mitigating the risks of security breaches and
convenience. The app, which was introduced data theft.
in 2016, was the first Digital Passbook in the IT Operations and Security In 2019, the Bank completed the Stage
Sri Lankan banking industry and remains the The Bank places the highest priority on I audit of ISO/IEC 20000 – the most globally
only mobile application of its genre to date. maintaining uninterrupted data services for recognised standard for exceptional IT
all stakeholders, managing the increasing Service Management. The Stage II audit was
Process Improvements vulnerability to cyber-crimes and loss of successfully completed in 2020 and the Bank
information, and ensuring preparedness for was awarded the ISO/IEC 20000 Practitioner
While the Bank’s efforts were concentrated
the future. The IT Support unit monitors and Qualification Certificate. The implementation
on responding to the contingent and shifting
of this standard will enable the Bank to
Management Discussion and Analysis

situation brought about by the pandemic, maintains the uptime and SLAs of the entire
Branch network for Sri Lanka, Bangladesh, enhance the efficiency and effectiveness of
it introduced several new automated
Myanmar, and the Maldives, which includes: the IT Services that are being delivered to the
processes focused on building robust
internal and external customers, and allow
back-end digital processes. Noteworthy
the Bank to derive more value from its IT
developments include:
investments.
z Introduction of e-slips for cash and The Bank completed implementation of
cheque deposits improved the customer the Baseline Security Standard in 2020, the
turn-around time and also increased the outcome of which was the development of
accuracy. Risk Treatment Plans for each department.
z Through centralisation of Transfer Cheque The Bank also implemented a cutting-edge
process, the Bank managed to reduce Anti-Money Laundering (AML) solution for
operational cost through staff reduction 10,000+ operations in Sri Lanka, the Maldives, and
Annual Report 2020

at branches and improve the operating IT Equipment Bangladesh. This initiative is more powerful
efficiency by speeding up the process. than the previous AML solution and it
z The automation of Post-Dated Cheque
900+ enables the Bank to identify AML-related
Bank touch points use cases and filters aligned with world
handling process, through which the Bank
managed to increase the efficiency of a standards. In addition, this system is capable
normally cumbersome process. Managing BCP Centers of integrating other peripheral systems, most
importantly the CBSL GOAML application.
Commercial Bank of Ceylon PLC

z Launched the Bank’s first ever Hyper

Automation project to fully automate the
User ID Management of the Bank using
IBM BAW (Business Automation Workflow)
The Network & Communication unit is
and IBM RPA (Robotic Process Automation).
responsible for providing secure and reliable
This has drastically reduced the response
communication channels for all stakeholders,
time for password resets as well as reduced
both internal and external, across the entire
the number of staff required at the User ID
Branch network. In 2020, the uptime of
Management Department.
defined critical systems (Priority 1) of the
z Fully automated the staff e-loan Data centre was 99.97%, and the uptime of
module, which will help minimise human the network was 99.98%.
intervention as the system itself screens
In 2020, the Bank successfully
applicants to identify eligible requests.
maintained the PCI DSS and ISO 27001:2103
z The introduction, in Treasury, of a Foreign certifications and was awarded the ISO
Exchange Rate Request Port, which has 20000 certification. The ISO 27001:2013 is a
been fully integrated with the Treasury key international standard on information
system. Instead of calling Treasury, branch security management, which specifies
personnel can now request rates and requirements for establishing, implementing,
receive confirmation over the portal, which maintaining, and continuously assessing
has reduced the average time of an FX and improving an information security
transaction from approximately 8 minutes management system. The Bank has
to 2 minutes. Plans are underway to create successfully maintained ISO 27001 for nearly
a client interface for this platform and, 10 years.
ultimately, to automate the rate quoting
and confirmation process using AI.
56
Operational Excellence
The COVID-19 pandemic brought with a host of unprecedented
challenges. At the heart of it was balancing the Bank’s wider
societal duty to provide continuity of service to our customers
while, at the same time, fulfilling its responsibility to safeguard
the health and wellbeing of Bank employees. The Bank’s efforts
across the year – as indicated by the number of branches that
remained open during lockdowns, the number of transactions
conducted, the number of moratoriums and other relief

Management Discussion and Analysis

measures processed and disbursed, etc. – led the way in the
banking sector. This stands as a testament to the efficacy of our
emergency response processes and the commitment, attitude,
and energy of our people.

Annual Report 2020

The backbone of the Bank’s success has long Furthermore, while the Bank’s fundamental Highlights:
been its emphasis on operational excellence, business of financial intermediation requires
z Cost to income ratio and Revenue per
and it is a crucial factor in its sustained adherence to government regulations,

Commercial Bank of Ceylon PLC

Employee have improved during 2020.
profitability. In today’s banking landscape, operating in a community of stakeholders
where competition is fierce and an array means that we also need a "Social Licence" z Recorded an average profit per employee
of similar banking products and services – in other words, tangible evidence of of above Rs. 3 Mn. throughout the five
saturate the market, speed, accuracy, and ethical and conscientious behaviour. In this years’ period.
quality of delivery is a key differentiator. context, operational excellence cannot be
Meeting customer expectations while narrowly defined, but requires, among other A Transformed Working Environment
remaining cost efficient requires that the things, investments in the well-being of our At the onset of the first wave of COVID-19
Bank continuously assess and streamline stakeholders and environment. This balance infections and ensuing lockdown in March
processes and make the most productive use of short-term and long-term interests is the 2020, the Government declared banking as
of its resources. very essence of the Bank’s profitability. an Essential Service. The Bank’s response

Productivity and efficiency ratios Table – 22

Indicator 2020 2019 2018 2017 2016 5 Year

average

Cost to Income ratio

(Including taxes on financial services) (%) 39.96 49.41 46.35 49.82 51.06 47.32
Cost to Income ratio
(Excluding taxes on financial services) (%) 33.95 38.51 36.85 40.06 42.67 38.41
Revenue per Employee (Rs. Mn.) 29.605 29.377 27.462 22.954 18.677 25.61
Profit per Branch (Rs. Mn.) 57.050 59.320 61.557 59.219 52.965 58.02
Profit per Employee (Rs. Mn.) 3.238 3.363 3.490 3.328 2.910 3.27

57
 to the pandemic was spearheaded by the Continuing operations while entire Bank staff, to generate awareness,
Business Continuity Management (BCM) limiting exposure convey instructions on logistics on short
Steering Committee, which is comprised of To ensure continuity of operations and notice, and mobilise staff for shift-based
members of the Corporate Management prevent infection exposure and spread, the work.
team and comes under the strategic most urgent task was for business units to Readiness of BCP Sites Table – 23
guidance of the Board. The Corporate split critical teams into smaller units and
Management team members represent establish protocols for Location Seating Capacity
all the different functions of the Bank Mount Lavinia 38
(1) working at alternate sites;
from Personal and Corporate Banking to
Operations, IT, HR, Services and Security. (2) working from remote sites; and Piliyandala 56
The Committee devised a plan providing (3) working from home. Maradana 40
guidance for maintaining essential functions
While the Bank has periodically updated and
and services during the pandemic that The COVID-19 pandemic also necessitated
tested its Business Continuity Plan (BCP),
focused on three key areas: that health and safety measures be
such protocols have not been tested in
Operational Excellence

(1) Infection Prevention and Control; scenarios of the scale and impact as those adopted across all locations of the Bank.
arising out of the pandemic. The proportion These measures included the installation
(2) Operational Support and Logistics; and of sanitisation equipment such as foot-
of staff that was required to work remotely
(3) Pandemic related Case/Incident exceeded what was envisaged while pedalled sanitisers at entry points and
Management. developing these protocols, and this brought other locations of all buildings, mandatory
with it a whole new realm of logistical needs temperature checks, and measures to
The implementation of this plan was (such as the provision of food, lodging, minimise physical contact points and
then tasked to the Business Continuity transport, medical safety equipment, etc). maintain social distancing. Anticipating
Management Unit (BCMU) and a specially- that the pandemic situation would become
Management Discussion and Analysis

However, the Bank managed to promptly

formed seven-member Special Pandemic deploy effective and secure remote working the ‘new normal’, the Bank was among the
Management Committee (SPMC). solutions in order to provide uninterrupted first to install permanent glass partitions/
The robust Pandemic Plan, which is a services to customers. Some key elements screens at branches to safeguard staff who
sub-section of the Bank’s Business Continuity of Bank’s immediate operational response to came into contact with external parties such
Plan (BCP), enabled the Committee to the pandemic included: as customers and suppliers. The Bank also
swiftly identify the Bank’s mission critical devised other creative in-house solutions,
operations that needed to be continued z Providing food, lodging, and transport such as providing toothpicks in elevators
without interruption: Treasury, Digital for all mission critical staff throughout to press buttons, thereby minimising direct
Banking, Card Center, Contact Center, Data the lockdowns to ensure continuity of surface contact.
Centre, and certain designated branches, operations and business.
The Bank was very proactive in the early
along with Trade Services (which was added z Setting up three alternate operational sites, acquisition of Personal Protective Equipment
to the Bank’s BCP list of mission critical with support from IT, Logistics, Premises (PPE) for employee and customer safety,
Annual Report 2020

operations after government directives, and the Business Continuity Management and stocks were continuously replenished
given the country’s requirement for trade Unit (BCMU) to set up infrastructure, to ensure that all staff had ready access to
under lockdown conditions). Banking facilities, IT systems, networks. items such as masks, hand sanitisers, and
functions were also prioritised according z Providing food, lodging, and transport as gloves. Since the second wave, the Bank
to need within this plan to enable the most needed for branch staff to commute during also pays for a regimen of random PCR
efficient allocation of resources (for example, the curfew. testing among head office and branch staff,
enabling cash withdrawals was considered and provides assistance to staff members
Commercial Bank of Ceylon PLC

z Communicating with employees through

essential). infected by COVID-19. Branches and head
an automated Call Tree System, which is
capable of triggering SMS alerts to the office departments that have been exposed
are thoroughly disinfected.

COVID-19 related expenses Figure – 13

Total COVID-19 related expenses

Surgical Gloves
Rs. 85.8 Mn. Rs. 4.8 Mn.

Staff Transport IR Thermometers

Rs. 6.6 Mn. Rs. 3.5 Mn.
Sanitiser Cans
Rs. 20.5 Mn. PCR Tests
Rs. 3.8 Mn.
Surgical Masks
Rs. 27.1 Mn. Assistance packs for
infected staff members
Installation of Rs. 0.5 Mn.
Permanent Screens
Rs. 19.0 Mn.

58
Furthermore, the Bank cancelled all social Retention Rate (Maternity Leave) Table – 24
events that involve large gatherings, and
Number of Employees 2020 2019
encouraged all meetings to be conducted via
virtual forums. The Bank also closed its lunch Availed for leave during the year 69 84
rooms at the Head Office and Union Place
buildings to prevent large groupings of staff Due to return during this year 73 64
in confined spaces. When in-person meetings Returned during the year 73 64
were necessary, they were conducted strictly Returned during prior year 64 48
according to social distancing guidelines.
Still employed after 12 months 61 45

Working securely from home Return ratio (%) 100.00 100.00

To facilitate remote working and working Retained ratio (%) 95.31 93.75
from home, the Bank identified an industry
leading remote access solution, which

Operational Excellence
offers multiple layers of security such as Focusing on Employee Morale
encrypted channels for communication and safety
between Bank and users, multi-factor based
login authentication, restrictions on the
During the year under review, the More than ever in the
transferring of data between user devices
and Bank systems to control data loss and
commitment, resilience, and perseverance
of the Bank’s staff was on full display. While year under review, it
malware propagation, and centralised
management and monitoring of remote
details of the logistical challenges and health
and safety precautions are provided above, was important to ensure
users. Over 100 laptops and IP connectivity
it is worth commenting on the well-being
safe and fair working

Management Discussion and Analysis

and morale of the staff, which the Bank was
were provided to staff members along with
Office 365, and Microsoft Teams was used as
the primary virtual forum for regional and
mindful of during the year. Staff members
were certainly not immune to the sense of conditions and practices,
corporate meetings.
confusion and uncertainty that gripped the
wider society. Work and life rhythms were to prevent burnout and
Our people rising to the occasion
disrupted in unprecedented ways.
Beyond doing the utmost to ensure the
exhaustion and bolster
The engine of the Bank’s successful value
creation has always been its workforce.
safety of all employees, the Bank emphasised
two aspects: clear communication
morale, and provide
Our 5,057-strong team puts the Bank’s
strategy into action, represents the Bank’s
and flexibility. The senior leadership
took a hands-on approach, regularly
employees with an
values and mission, and ensures that the
Bank consistently delivers on its promises
communicating with staff, being personally
environment where they

Annual Report 2020

available, and promoting a culture of
to its stakeholders. In turn, the Bank
seeks to deliver value to and empower its
openness and honesty about the situation.
An important aspect of communication is, of
could flourish and drive
employees. The Bank recognises that how
its people think and feel about their work
course, listening to employees and enabling
them to share their insights to help co-create
the success of the Bank.
directly correlates with how satisfied its
a positive and productive work environment.
customers are. The Bank strives to create an
Every effort was made to accommodate
environment where employees can perform

Commercial Bank of Ceylon PLC

employee preferences in working
exceptionally, fulfill their potential, and feel
environment in both location and hours. The
connected to their purpose, their colleagues,
Bank recognised that in a diverse, multi-
and the organisation. The Bank also works
generational workforce, employees will have
to enable its people to be adaptive to
different family situations, health conditions,
remain relevant in a rapidly evolving
etc. and a flexible approach was needed.
banking landscape by promoting a culture
Even with the pressures of the year and need
of continuous learning. These are the crucial
to remain productive, the Bank believes
elements in the Bank’s strategy to build a
that upholding recognised standards and
strong employee brand and be the preferred
principles for labour practices, human
employer in the sector.
rights and occupational health and safety is
essential. More than ever, it was important to
prevent burnout and exhaustion and bolster
morale, and provide employees with an
environment where they could flourish and
drive the success of the Bank. It is a powerful
testament to the camaraderie and team spirit
of the staff that even during these difficult
circumstances, productivity remained high
and consistent throughout the year.

59
 Employee communication
channels Figure – 14
“Speak out” Whistle blower
web portal charter

Employee Staff TV
surveys Staff notice Managers’
board forum

Chat bot Circulars

Town hall Trade unions
Operational Excellence

meetings

Employee Intranet
suggestion scheme Emails

Remuneration and Job Security Ceylon Bank Employees’ Union (CBEU). The the Bank commenced to make a monthly
Management Discussion and Analysis

The Bank also placed the highest importance Bank and the CBEU were able to arrive at a contribution to this fund. Employees are
on continuing remuneration and ensuring package of increases spread over the span required to remain in employment for over
job security to its employees. This year, of the three-year agreement, which will five years to claim the benefits of the fund
all appraisals were conducted, and all last until December 2023. It must be noted and are guaranteed a return equal or above
increments and bonuses paid. The Bank that the negotiations were conducted in a the existing gratuity scheme. Payment is
believes that passing on any share of its spirit of compromise in light of the financial made through a lump sum at resignation or
burden to its employees can have a corrosive situation brought about by the pandemic. retirement from employment. It is expected
effect on their motivation, which, in turn, can This once again demonstrates the strong and that with the accumulation of interest
impact performance and service standards collaborative partnership that the Bank and over the years, employees will receive a
– and ultimately damage the Bank’s CBEU have built over decades. substantial benefit due to this initiative.
profitability down the line. In a time of crisis,
more than ever, the Bank felt it important to New Pension Fund Diversity
affirm its financial commitments to its staff. A Another crucial initiative was the launch of The Bank believes that a diverse workforce
Annual Report 2020

special bonus was also paid to all employees the Defined Contribution Pension Fund for broadens perspectives, enhances resilience,
to mark the 100th anniversary of the Bank. employees recruited after the year 2000, and drives performance, and it remained
timed to coincide with the Bank’s 100th committed to the principles of equal
Collective Bargaining anniversary celebration event for employees. opportunity irrespective of gender, age,
A major success of the year was the Employees’ outstanding balances in the race or religion in all its HR management
timely negotiation of the Bank’s collective gratuity provision is transferred to the processes.
Commercial Bank of Ceylon PLC

agreement with the Bank branch of the fund of this new scheme and thereafter

Employee by type and gender Table – 25

Sri Lanka Bangladesh  Total 

Count Percentage Count Percentage Count Percentage

Female 1,106 23.19 79 27.43 1,185 23.43

Permanent 1,105 23.17 63 21.88 1,168 23.10
Contract 1 0.02 16 5.55 17 0.33
Male 3,663 76.81 209 72.57 3,872 76.57
Permanent 3,662 76.79 174 60.42 3,836 75.86
Contract 1 0.02 35 12.15 36 0.71
Employees-Bank 4,769 100.00 288 100.00 5,057 100.00
Outsourced Employees
Female 203 37.66 – – 203 37.66
Male 336 62.34 – – 336 62.34
Employees-Outsourced 539 100.00 – – 539 100.00

All employees of the Bank are full time employees.

60
Employee by category and gender Table – 26

Age 18-30 years Age 31-50 years Age over 50 years Total Percentage
Male Female Male Female Male Female

Corporate Management – – 5 – 17 5 27 0.53

Executive Officers 104 53 1,413 335 172 86 2,163 42.78
Junior Executive Assistants &
Allied Grades 942 271 845 282 22 57 2,419 47.83
Banking Trainees 298 95 5 – – – 398 7.87
Office Assistants & Others – – 15 1 34 – 50 0.99
Total 1,344 419 2,283 618 245 148 5,057 100.00

Operational Excellence
Training and Development
DATE: 31 DECEMBER 2020 
The rapidly changing banking environment REFERENCE: VC17339/2020

places new demands on Bank employees. In

an increasingly digital age, our people risk
obsolescence if they are not well-equipped
with up-to-date, relevant skill-sets. Failure to Presented to
keep pace with the necessary competencies
VOLUNTARY Commercial Bank of Ceylon PLC
CANCELLATION

Management Discussion and Analysis

can hamper succession planning and delay Reason for cancellation
expansion into new spheres. This year, with CERTIFICATE To achieve the Carbon neutrality of Commercial Bank  of Ceylon PLC's  entire operations
for year 2019 assessed by Climate Smart Initiatives (Pvt) Ltd and verified by Sri Lanka
all its contingencies and pressures, was not Climate fund ,under Ministry of Environment.

conducive for robust training programmes.

With in-person sessions not possible, several
modules were shifted online. The Bank plans Number of units
to now switch the majority of its training to cancelled
12,240 CERs
Equivalent to 12,240 tonne(s) of CO2
online forums in 2021, which, in addition
to following social distancing guidelines, Start serial number: CN­5­1103813504­2­2­0­8273
End serial number: CN­5­1103825743­2­2­0­8273
The certificate is issued in accordance with the procedure for voluntary
cancellation in the CDM Registry. The reason included in this certificate is
has the added benefit of following a more provided by the cancellor.

"anytime, anywhere" approach of providing

multiple continuous training experiences
for staff.

Annual Report 2020

Attaining Carbon Neutral Status In 2019, the Bank acquired carbon credit of 12,240 tCO2e to become carbon neutral.
In 2017, the Bank took a significant step in its
environmental agenda by commissioning a Emission category [GHG emissions (tCO2e)] the environment. The Bank was the only
study by an external consultant to measure Table – 27
bank to receive this special award in the
its carbon footprint. The study measured banking industry, establishing once again its

Commercial Bank of Ceylon PLC

all three realms (Scope 1, 2 and 3) of Direct 2017 2018 2019 pioneering efforts in this field. 
Fuel use, Purchased Electricity and Indirect Total direct Following the construction of the
Transportation. The calculations covered emissions 1,304.99 1,369.27 1,282.32 Bank’s first Green Building in 2015, the Bank
the Head Office as well as the branches commenced the construction of three more
through a regionally representative sample Total indirect Green Buildings during 2019: the Galle
and the report was concluded for 2018 emissions 12,395.08 10,838.46 10,957.05
Fort Branch, the Jaffna Branch, and the
and 2019. Based on this study, the Bank Total emission 13,700.07 12,207.73 12,239.37 Trincomalee Branch (which was opened in
set out an ambitious goal to become the February 2021), all of which target Platinum
first bank in Sri Lanka with a carbon neutral level certifications from the GBCSL. The
business operation by the end of 2020 and a Green Buildings and initiatives restoration of the Galle Fort Branch was
completely paperless operation by 2030. During the year under review, the Bank completed during the year under review
The Bank is proud to announce that was presented with the "Excellent Green and uses natural material, maximises natural
it met its goal of carbon neutrality on Commitment Award" for the Banking lighting, and has VRV air conditioners
December 31, 2020. Sector for 2019 by the Green Building installed, and was awarded Platinum Status
Council of Sri Lanka (GBCSL), the country’s by the GBCSL.
leading authority on implementing green
concepts and green building practices. The Managing our Footprint
award recognises the Bank’s leadership in The Bank adopts a two-pronged effort to
multifaceted Green initiatives encompassing manage its energy footprint: reducing its
lending to support eco-friendly operations, energy consumption and adopting and
migrating customers to paperless banking, promoting renewable energy sources.
reducing consumption of non-renewable Additionally, the Bank conducts initiatives
energy, water and other resources in its to migrate customers to digital platforms,
own operations, and support to community invests in automated technology that
initiatives that help conserve habitats and minimise the use of paper and encourages

61
 paperless banking, and only contracts with our business activities – they may be routine
waste management companies that follow or ad hoc, small or large-scale, critical or
international standards in the disposal of non-critical to the normal course of business
e-waste and paper. During 2020, the Bank – but all create important links in the supply
Quality Gender Affordable and
expanded its renewable energy programme chain that ultimately delivers value to our
Education Equality Clean Energy
by installing solar panels in 13 new branches, stakeholders. The Bank has been able to
including Head Office. This brings the build strong relationships with them over the
number of branches powered partially or years, which was proven by the Bank being
entirely by solar energy to 64; 28% of our able to sustain its operations without any
branch network is either completely or major disruption during the pandemic.
partially powered by solar energy. As a result, Decent Work and Industry, Innovation During the year, the Bank engaged
the Bank’s energy consumption has reduced Economic Growth and Infrastructure
with an over 1,250 business partners and
by 5,251 gigajoules in 2020. However, delivered Rs. 9.6 Bn. worth of value, with
reduced working hours due to lockdown has over 90% of value being delivered to
also contributed towards this reduction.
Operational Excellence

suppliers of local origin in both Sri Lanka and

Energy consumption Table – 28
Bangladesh.
Responsible Partnership for The Bank always seeks to enhance
Indicator 2020  2019 2018 Consumption and the Goals
(Gigajoules) partnerships of mutual interest for the
Production
greater good of society and the environment,
Energy and takes pride in being an active member of
consumption  45,045 50,296 49,958 the following platforms:
Solar Power Partnership for the Goals
z Sri Lanka Banks’ Association Sustainable
Management Discussion and Analysis

Generated 5,613  6,530 1,767 The Bank’s business partners facilitate

Banking Initiative – Core Group Member
Solar Power
the smooth operations of our business,
since inception
Generated as providing technology platforms, market
access and necessary materials and other z UN Global Compact Sri Lanka – Steering
a % of Energy
services. We engage with a wide range of Committee Member 
Consumption 12.46 12.98 3.54
firms, SMEs and individuals in support of z Biodiversity Sri Lanka – Founder Member 
 
Energy consumption Graph – 13
Gigajoules The Bank’s Business Partners Figure – 15
60,000

48,000
Our business
Annual Report 2020

36,000
partners
24,000

12,000
Critical to Operations Maintenance
2016 2017 2018 2019 2020 Utility services providers Staff welfare
Software suppliers Waste management
Aligning with the UN Sustainable
Commercial Bank of Ceylon PLC

Material suppliers Communication

Development Goals (SDGs)
Travel and Transport Human Resource providers
As a leader in the country’s banking sector,
Asset suppliers
the Board of Directors and Management
of the Bank recognises its position of Debt collection agencies
responsibility as a financial institution in
influencing and shaping the transition to
a more sustainable green, and inclusive
economy. Thus, we have also committed
to the global mandate of achieving the
United Nation’s Sustainable Development
Goals (SDGs) by the year 2030, agreed on
by 193 countries, and have also aligned our
sustainability priorities and operations with
the SDGs. The Bank’s commitment is based
on a process of principled prioritisation. To
Extend our reach Infrequent engagement
that end, it has identified the following SDGs
as most aligned to its sustainability and Correspondence banks Premises providers
responsible banking ethos and operations, Franchise partners Contractors
allowing for a more focused and targeted Exchange houses Professional services
approach yielding a greater impact: providers
FinTech companies

62
 Project Summary
Date of commencement
June 1, 2018
Date of completion
November 2, 2020
Total project period

Operational Excellence
29 months
Total project cost
Rs. 141 Mn. + taxes
Land extent
40.3 perches

Management Discussion and Analysis

Floor area
13,875 sq. ft.

Galle Fort Branch Restoration Project

The Galle Fort Branch was restored to its original grandeur as part of the water. Furthermore, in adherence to the Bank’s Green agenda, the
100th anniversary celebrations of the Bank in 2020. Built in the early mechanically ventilated areas of the building are fitted with energy-
19th century, the Bank came into possession of the Branch in 1973 when efficient air conditioners and the carbon dioxide levels of office area

Annual Report 2020

the Bank acquired three branches of the Mercantile Bank of India (MBI). are continuously measured to maintain a healthy indoor environment
The renovations sought to preserve the building’s unique architectural for its occupants.
and cultural elements, and were carried out in consultation with the The Branch also features a mini-museum with items used since the
Galle Heritage Foundation, the Department of Archeology, the Galle inception of branch, and it has now become a popular tourist attraction
Municipal Council, and the Urban Development Authority. within the Galle Fort. The Bank is seeking to obtain recognition for the
The restoration process used only locally sourced, specified Green- site from the World Heritage Committee.

Commercial Bank of Ceylon PLC

rated raw material in the renovation, and all imperishable material was For the Bank’s efforts, the Branch was awarded a Platinum Rating from
recycled in an environmentally-friendly manner and all debris disposed the Green Building Council of Sri Lanka (GBCSL), the highest achievable
of in compliance with Department of Archeology and the Galle Heritage rating based on a set of performance standards used to certify the
Foundation regulations. The building features a 15kW rooftop solar operations and maintenance of a building. Key aspects taken into
energy generation system, a rain water harvesting system, eco-friendly consideration by the GBCSL to bestow this rating on a commercial or
food recyclers for all meal rooms, a fire protection system, a back- institutional building includes management, sustainable sites, energy
up generator, an energy efficient Variable Flow Refrigerant (VFR) air and atmosphere, materials and resources, indoor environmental quality,
conditioning system, and an LED lighting and electrical system. innovation and design process, and social and cultural awareness.
The building has achieved 45% energy savings compared to the
American Society of Heating, Refrigerating and Air-Conditioning
Engineers (ASHRAE) standard baseline and consumes minimal potable

63
 Governance and Risk Management
Board of Directors and Profiles
Governance and Risk Management
Annual Report 2020
Commercial Bank of Ceylon PLC

Mr S Renganathan
Managing Director/Chief Executive Officer

Mr K Dharmasiri Mr S C U Manatunge Ms N T M S Cooray Mr L D Niyangoda

Director Director and Chief Operating Officer Director Director

64
 Board of Directors and Profiles
Governance and Risk Management
Annual Report 2020
Commercial Bank of Ceylon PLC

Justice K Sripavan Prof A K W Jayawardane

Chairman Deputy Chairman

Mr T L B Hurulle Ms J Lee Mr R Senanayake Mr S Muhseen Mr R A P Rajapaksha

Director Director Director Director Company Secretary
(Appointed on February 15, 2021)
Not in the picture 65
 Justice K Sripavan Prof A K W Jayawardane Mr S Renganathan
Chairman Appointed as the Deputy Chairman of the Appointed as the Managing Director and
Appointed as the Chairman of the Board of Board of Directors w.e.f. December 29, 2020. Chief Executive Officer in July 2018.
Directors w.e.f. December 21, 2020. Appointed as an Independent Appointed as an Executive/
Appointed as an Independent Non-Executive Director in April 2015. Non-Independent Director in July 2014.
Non-Executive Director in April 2017. Chairman of the Board Technology
Skills and experience:
Chairman of the Board Related Party Committee (BTC). Appointed as the
Chairman of the Board Integrated Risk A senior banker counting over 40 years, led
Transactions Review Committee (BRPTRC).
Management Committee (BIRMC) w.e.f. the Bank’s acquisition of the Bangladesh
Appointed as the Chairman of Board
December 31, 2020. operations of Crédit Agricole Indosuez (CAI),
Nomination Committee (BNC), Board Human
Commercial Bank’s first ever acquisition of a
Resources and Remuneration Committee
Skills and experience: banking operation, subsequently building
(BHRRC), Board Credit Committee (BCC) and
up the same as the first Country Manager. He
Board of Directors and Profiles

Board Strategy Development Committee Vice Chancellor of the University of

Moratuwa until November 27, 2017 and has also held several other key positions at
(BSDC) w.e.f. December 31, 2020.
a Senior Professor in Civil Engineering. the Bank including Chief Operating Officer,
Skills and experience: An academic of high repute, he brings Deputy General Manager – Personal Banking
considerable knowledge and experience of and the first Chief Risk Officer of the Bank.
Appointed as the Chief Justice of the
Democratic Socialist Republic of Sri Lanka IT to the Board. Fellow of the Chartered Institute of
on January 30, 2015 and held office until Holds a PhD in Construction Management Accountants, UK (FCMA),
March 01, 2017. Management and a Master of Science Chartered Global Management Accountant
Degree in Construction from the (CGMA), Fellow of the London Institute of
Functioned as the Chairman of the
Loughborough University of Technology, UK Banking & Finance, UK (FLIBF) and a Fellow
Judicial Services Commission of Sri Lanka,
and a BSc Eng. Degree in Civil Engineering of the Institute of Bankers Sri Lanka (FIB).
Governance and Risk Management

Chairman of the Incorporated Council of

with first class honours from the University Member of Sri Lanka Institute of Directors.
Legal Education, Chairman of the Sri Lanka
Judges’ Institute, Chairman of the Superior of Moratuwa. Also a Corporate Member, a
Other current appointments:
Court Complex, Board of Management and Fellow and an International Professional
Engineer of the Institution of Engineers, Managing Director of Commercial
Chairman of the Mahapola Trust Fund.
Sri Lanka (IESL), CEng, FIE(SL), IntPE(SL), Development Company PLC, Deputy
Enrolled as an Attorney-at-Law of Chairman of Commercial Bank of Maldives
Fellow of the National Academy of Sciences
the Supreme Court of Sri Lanka in 1977. Private Limited, Director of Lanka Financial
of Sri Lanka, FNAS(SL), Founder Member
He obtained a Diploma in Industrial Law Services Bureau Limited, Vice Chairman
of the Society of Structural Engineers Sri
from the University of Colombo in 1992 of International Chamber of Commerce
Lanka MSSE(SL), Fellow of the Institute of
and Master of Laws from the University of Sri Lanka, Executive Member of The Ceylon
Project Managers, Sri Lanka, FIPM (SL) and
London in 1994. Chamber of Commerce, Executive Member
a life member of Sri Lanka Association for
Member of Sri Lanka Institute of of The Council for Business with Britain,
Annual Report 2020

Advancement of Science.
Directors since August 2017. Executive Member of Sri Lanka India
Member of Sri Lanka Institute of
Society, Council Member of the Employers’
Previous appointments: Directors since December 2015.
Federation of Ceylon and an All-Island Justice
Having joined the Attorney General’s Graduate Member of the Sri Lanka of the Peace since 2000.
Department in February 1978, he held the Institute of Directors since January 2018,
posts of State Counsel, Senior State Counsel, GSLID. Previous appointments:
Commercial Bank of Ceylon PLC

and Deputy Solicitor General. While being Director of Sri Lanka Banks’ Association
Other current appointments:
the Deputy Solicitor General he functioned (Guarantee) Limited, Member of the
as the Head of the Court of Appeal Unit in Director of Sierra Cables PLC, Chairman of General Council of the Institute of Bankers
the Attorney General’s Department and CBC Tech Solutions Limited (a subsidiary of Bangladesh, Founder President of the
handled a large volume of work both in the of the Bank), Director of Mother Lanka Sri Lanka Bangladesh Chamber of Commerce
Court of Appeal and in the Supreme Court Foundation, a Commission Member of and Industry, Executive Member of the
including Bills and Fundamental Rights the University Grants Commission, Board Foreign Investors Chamber of Commerce and
Applications. Prior to the elevation to the Member of National Science Foundation, Industry in Bangladesh.
Court of Appeal Bench he functioned as a Arthur C Clarke Institute for Modern
legal consultant for the National Savings Technologies and has served as a member of Shareholding of Bank:
Bank for two years. the Board of Management of several other Holds 362,010 voting and 12,457
institutions. non-voting shares.
Appointed as a Judge of the Court of
Appeal in May 2002 and was elevated to the Previous appointments:
post of President of the Court of Appeal in
Dean, Faculty of Engineering for six years,
March 2007 by his Excellency the President.
First NDB Bank Endowed Professor in
Elevated to the Supreme Court Bench in
Entrepreneurship at the University of
March 2008.
Moratuwa, President of the Institution of
Shareholding of Bank: Engineers, Sri Lanka (IESL) and Director
General of National Science Foundation.
Holds 14,000 voting shares.
Shareholding of Bank:
Holds 12,792 voting shares.

66
Mr K Dharmasiri Mr L D Niyangoda Ms N T M S Cooray
Appointed as an Independent Non-Executive Appointed as an Independent Non-Executive Appointed as an Independent Non-Executive
Director in July 2015. Director in August 2016. Director in September 2016.

Skills and experience: Skills and experience: Skills and experience:

A senior banker counting over 37 years at He has a proven track record of over 33 years A senior finance professional with wide
Bank of Ceylon and retiring as its General in the corporate environment and is qualified experience in the private sector.
Manager/Chief Executive Officer, he has in various management fields both locally as Holds a Master of Business
diversified experience both within and well as internationally. Administration from the University of
outside Sri Lanka. Consultant, Business and Administration Colombo, Fellow Member of the Chartered
Holds a [Link]. (Econ) and [Link] with experience for a period of 38 years. Institute of Management Accountants UK
first class honours from the University of Holds a Bachelor’s Degree in Agricultural (FCMA).
Colombo. Also an Associate Member of the

Board of Directors and Profiles

Science from the University of Peradeniya. Member of Sri Lanka Institute of
Institute of Bankers of Sri Lanka. Directors since July 2006.
Former member of numerous
Member of Sri Lanka Institute of professional bodies, including the Council
Directors since December 2015. Other current appointments:
for Agricultural Research Policy of Sri
Lanka, Standing Committee of Agriculture Chairman and Managing Director of Jetwing
Other current appointments: Travels (Pvt) Ltd and Chairman Jetwing
and Veterinary Studies, University Grants
None Commission, Member of Board of Faculty of Hotels Ltd.
Agriculture, University of Peradeniya.
Previous appointments: Previous appointments:
Member of Sri Lanka Institute of
Non-Executive Nominee Director on Directors since March 2000. Former Chairperson of the Sri Lanka
the Boards of Janashakthi Insurance Ltd Institute of Directors. Director – Finance

Governance and Risk Management

PLC, Sabaragamuwa Development Bank, Other current appointments: and Administration on the Board of J Walter
Merchant Bank of Sri Lanka PLC, BOC Travels Thompson, Non-Executive Director on the
Chairman of A Baur & Co. (Pvt) Ltd.
(Pvt) Ltd., BOC Property Development & Boards of Capital Alliance Finance PLC, Trade
Management (Pvt) Ltd., Ceybank Holiday Previous appointments: Finance and Investments PLC and served on
Homes (Pvt) Ltd., Hotels Colombo (1963) the Boards of many other private and public
Managing Director/Chief Executive Officer
Ltd., Ceybank Asset Management Ltd., Lanka companies. A member of the Board of the
of A Baur & Co. (Pvt) Ltd., Chief Operating
Securities (Pvt) Ltd., Institute of Bankers of Management of several other institutions.
Officer, A Baur & Company (Pvt) Ltd., Director
Sri Lanka, Lanka Financial Services Bureau
of Baur Asia (Pte) Ltd., Singapore. Shareholding of Bank:
Ltd., Lanka Clear (Pvt) Ltd., Bank of Ceylon
(UK) Ltd., Credit Information Bureau of Shareholding of Bank: Holds 342,465 voting and 52,875 non-voting
Sri Lanka and Managing Director of Nepal shares.
Bank of Ceylon Limited in 2002. Nil.

Annual Report 2020

Shareholding of Bank:
Nil.

Commercial Bank of Ceylon PLC

67
 Mr T L B Hurulle Mr S C U Manatunge Ms J Lee
Appointed as an Independent Non-Executive Appointed as an Executive/Non-Independent Appointed as an Independent Non-Executive
Director in April 2017. Director and Chief Operating Officer Director in August 2020.
in July 2018. Appointed as the Chairperson of
Skills and experience:
the Board Investment Committee w.e.f.
Holds a Diploma in Refrigeration and Air Skills and experience:
December 31, 2020.
Conditioning from the Southbank University, He was the former Deputy General Manager
London, Engineering Apprentices I & II – Corporate Banking. He counts for 31 years Skills and experience:
Programmes of the University of Moratuwa, of experience at the Bank, having held A pioneer and leading expert in quantitative
Certificate in Science and Technology of corporate management/senior positions risk management and its applications to
Refrigeration, City & Guilds Institute, London such as Chief Risk Officer, Head of Credit Risk, strategy, with over 30 years of experience as
and obtained Membership of the Institute of and Chief Manager – Corporate Banking prior a banker, capital markets expert and partner
Refrigeration, UK in 1977. to being appointed as the Deputy General in management consulting firms serving
Board of Directors and Profiles

Member of Sri Lanka Institute of Manager – Corporate Banking. CEOs and Boards in the USA and Asia.
Directors since August 2017. He is a Fellow of Chartered Institute of Holds an MBA from the Wharton School,
Management Accountants – UK (FCMA) a BSc from NYU Stern School of Business and
Other current appointments: and has obtained a Master of Business has attended the Advanced Management
Independent Non-Executive Director, Kanrich Administration (MBA) Degree from the Program and Women on Boards Program at
Finance Limited. University of Sri Jayewardenepura with a Harvard Business School.
Hony. Secretary of Anuradhapura Jaya Sri Merit Pass. He is also a Fellow Member of
Maha Bodhi Development Fund. the Institute of Bankers – Sri Lanka (FIB) Other current appointments:
and a Fellow of the Institute of Certified Managing Director of Dragonfly LLC which is
Appointed as an All-Island Justice of the Management Accountants of Sri Lanka a New York based consulting firm providing
Governance and Risk Management

Peace in 2002. (FCMA). strategy, risk management, and investment

Previous appointments: He was instrumental in forming advice to Boards, CEOs, and Business heads
the Association of Banking Sector Risk in the USA, Europe, and Asia, covering all
Director-General, Telecommunications
Professionals, Sri Lanka and was the sectors, corporates, financial institutions, and
Regulatory Commission, Designs and
President in the year 2014. He has also served governments.
Applications Engineer, Metropolitan
as a Council Member of the Association of CEO of Dragonfly Capital Ventures which
Refrigeration and Air Conditioning, London,
Professional Bankers (APB) and a member of develops and invests in renewable energy in
Divisional Manager/Chief Engineer, Walker,
the CIMA – “Thought Leadership Committee”. South East Asia.
Sons & Co. Ltd. and Senior Manager/Engineer
at Tudawe Trading Co. (Pvt) Ltd. He was a visiting lecturer for the MBA Serves on the Board of Directors of
Degree programme at the University of Temasek Life Sciences Accelerator and is an
Awarded the INFOTEL ’92 Pioneers
Colombo. Also a resource person at the Entrepreneur-in-Residence. A member of
award at INFOTEL 2017, was a Member of
Annual Report 2020

Training Centre of the Central Bank of the Executive Board of NYU Stern School of
The Public Representations Committee
Sri Lanka and the Institute of Bankers of Business.
on Constitutional Reform 2016/17 and a
Sri Lanka.
Resource Person in the Budget Committee of Co‐author of the books “What Every CEO
Parliament (2017). He was adjudged the “Chief Information Must Know About Risk” and “RAROC and Risk
Security Officer of the Year” at the EC – Management”.
Shareholdings of Bank: Council Global CISO Forum held in Atlanta –
USA in September 2013 in recognition of his Previous appointments:
Commercial Bank of Ceylon PLC

Nil.
outstanding contribution in strengthening
A key member of the pioneering team
and promoting information security
at Bankers Trust in the late 1980s, that
practices and IT Risk Management.
developed the first comprehensive daily risk
Member of Sri Lanka Institute of Directors quantification and risk capital methodology
since August 2017. in the banking industry.
Served as Board Director of Solar Frontier,
Other current appointments: a renewable energy subsidiary of Japan-
Director of the Bank’s Maldivian subsidiary – listed Showa Shell Sekiyu KK.
Commercial Bank of Maldives Private Limited Adjunct Professor at Singapore
Management University, developed and
Previous appointments: taught Enterprise Risk Management
Director of Bank’s IT subsidiary, CBC Tech for 10 years and has also taught Risk
Solutions Limited. Management at Columbia University,
New York.
Shareholding of Bank:
Holds 71,410 voting shares. Shareholding of Bank:
Nil.

68
Mr R Senanayake Mr S Muhseen Mr R A P Rajapaksha
Appointed as an Independent Non-Executive Appointed to the Board as an Independent Appointed as Company Secretary in
Director in September 2020. Non-Executive Director in February 2021. April 2019. 
Appointed as the Chairman of the Board
Skills and experience: Skills and experience:
Audit Committee w.e.f. September 25, 2020.
Senior Investment Banker with extensive An Associate of Chartered Governance
Skills and experience: experience in areas of Mergers and Institute – UK formerly known as Institute
A Fellow Member of CA Sri Lanka with Acquisitions, Corporate Finance and Capital of Chartered Secretaries and Administrators
30 years of post-qualifying experience Markets, who has served in a senior capacity (ICSA – UK) and a Graduate of the Institute
and holds a [Link] (Special) Degree from working with company boards and senior of Chartered Corporate Secretaries (ICCS)
the University of Sri Jayewardenepura leadership teams of financial institutions of Sri Lanka counting over 17 years of
and a Postgraduate Diploma in Business across Asia to help drive their strategic experience in the field of Company
Management from the PIM of the University corporate agenda and roadmap. Secretarial Practice including 10 years of

Board of Directors and Profiles

of Sri Jayewardenepura. In his career spanning over 20 years experience at the Bank.
Possesses extensive domain knowledge in Investment Banking, he has completed He is a member of Sri Lanka Institute of
on the financial services industry, financial landmark mergers and capital raising Directors since September 2017.
management and corporate reporting transactions in excess of USD 100 Bn. The
Asia FIG sectors team at Merrill Lynch and Other current appointments:
in particular, including such aspects as
risk management, capital management, Credit Suisse has won the “FIG Asia House of Vice President of the Chartered Governance
corporate governance, compliance, the Year” award from the Asset magazine for Institute (UK), Sri Lanka Branch. Appointed as
sustainability and integrated reporting. several years under his leadership. Multiple an All-Island Justice of the Peace in 2019.
Has undergone training on banking and transactions he led have been awarded as
finance with Euromoney and on general best country deals and best financial sector Previous appointments:

Governance and Risk Management

management with the National University capital raise transactions. Company Secretary of Bank’s fully owned
of Singapore besides many other local and Holds a Masters in Economics from subsidiary-CBC Finance Ltd. (formerly known
overseas training programmes. the University of Colombo, a Bachelor of as Serendib Finance Ltd.) from November
Business Administration (Hons) from Western 2014 to March 2019. Assistant Company
Other current appointments: Michigan University and has completed the Secretary of the Bank from February 2011 to
An Independent Non-Executive Director of Corporate Finance training program with March 2019.
CBC Finance Ltd. (formerly Serendib Finance JPMorgan in New York.
Ltd.), a fully-owned subsidiary of Commercial Shareholding of Bank:
Bank of Ceylon PLC since October 2014, Other current appointments: Nil.
an Independent Non-Executive Director of Chairman, Platinum Advisors Pte Ltd,
Senkadagala Finance PLC since April 2017 Non-Independent Director H2O One Pte Ltd,
and a Director of Virtual Capital Technologies Director, Canary Wharf Holdings Pte Ltd.

Annual Report 2020

(Pvt) Ltd., a software development company
that specialises in enterprise solutions in Previous appointments:
the real estate, retail and telecom spaces Previously worked in best-in-class global
catering to the New Zealand and the investment banks, Credit Suisse, Bank of
Australian markets since August 2017. Heads America Merrill Lynch and JPMorgan in
the Smart Academy of Smart Media The leading regional coverage roles. His most

Commercial Bank of Ceylon PLC

Annual Report Company. immediate previous role was as Managing
Director, Head of South East Asia Financial
Previous appointments: Institutions Group (FIG) and Head of
Financial Accountant, Singer Industries Asia Insurance at Credit Suisse based in
(Ceylon) PLC, held several positions from Singapore. He was an Associate Director
Senior Manager Finance up to Assistant of Deloitte. He was the Team Leader at the
General Manager (Finance & Planning) at National Council for Economic Development
Commercial Bank of Ceylon PLC and Chief (NCED) under the Ministry of Finance as well
Financial Officer at Nations Trust Bank PLC. as a Director at the TAFREN Presidential Task
Force for rebuilding the economy after the
Shareholding of Bank: 2004 Tsunami.
Nil.
Shareholdings of Bank:
Nil.

69
 Corporate Management and Profiles

S Renganathan Sanath Manatunge Nandika Buddhipala Isuru Thilakawardena

Managing Director/Chief Executive Officer Chief Operating Officer Chief Financial Officer Deputy General Manager –
Human Resource Management
FCMA (UK)/CGMA/FLIBF (Fellow of the FCMA (UK)/CGMA/FCMA (SL)/FIB (SL)/MBA FCA/FCCA (UK)/FCMACMA (Aus)/
London Institute of Banking & Finance) Merit (University of Sri Jayewardenepura) MCISI (UK)/SA Fin (Aus)/IMA (USA)/ LL.B (University of Colombo)/MBA
U.K./FIB (SL) BSc, BAd (Special) (University of (University of Sri Jayewardenepura)/
31 years in Banking Sri Jayewardenepura)/PG Dip MA (University of Colombo)/Diploma
40 years in Banking
in Management (University of in International Affairs (BCIS)/GSLID
Sri Jayewardenepura)/MBA (University (SLID)/Fellow of the Association of HR
of Colombo)/MA in Financial Economics Professionals
(University of Colombo)/MSc in Financial
30 years of experience including 11 years
Mathematics (University of Colombo)
in Banking
Governance and Risk Management

30 years post qualifying experience

including 13 years in Banking
Annual Report 2020

Krishan Gamage Prasanna Indrajith Chinthaka Dharmasena Asela Wijesiriwardane

Assistant General Manager – Assistant General Manager – Finance Assistant General Manager – Services Assistant General Manager – Treasury
Information Technology
Commercial Bank of Ceylon PLC

FCA/FCCA (UK)/FCMA (SL)/AIB (SL)/BSc BAd BSc (Eng) Hons in Mechanical Engineering BSc (University of Colombo)/MA-Econ
BSc (Eng.) in Electronic and (Special) (University of Sri Jayewardenepura)/ (University of Moratuwa)/MBA (University (University of Colombo)/ACMA
Telecommunication (University of Postgraduate Diploma in Business and of Sri Jayewardenepura)/ISO Lead Auditor
24 years in Banking
Moratuwa) Financial Admin. (CA Sri Lanka) Certificate/Visiting Lecturer at University
of Moratuwa
22 years experience in Information 26 years post qualifying experience in
Technology including 14 years in Banking Finance related fields including 24 years 19 years of experience in Manufacturing
in Banking and Supply Chain Management and
9 years in Banking

John Premanath Mrs Mithila Shamini M P Dharmasiri Mrs Dharshanie Perera

Assistant General Manager – Assistant General Manager – Assistant General Manager – Planning Assistant General Manager –
Management Audit Personal Banking II Personal Banking III
FCA/ACMA (SL)/AIB (SL)/MSc Mgt
FCCA (UK)/CISA (USA)/BSc Applied AIB (SL)/Dip. in Business Mgmt.(SLBDC)/ (University of Sri Jayewardenepura)/ AIB (SL)
Accounting (Oxford Brookes – UK)/AIB Postgraduate Dip. in Business and MA Financial Economics (University of
36 years in Banking
(SL)/DISSCA (CA Sri Lanka)/ISO 27001:2013 Financial Admin. (CA Sri Lanka)/MBA Colombo)/BSc BAd (Special) (University of
ISMS Lead Auditor/GSLID (SLID) (Griffith University, Aus) Sri Jayewardenepura)
30 years in Banking 34 years in Banking 31 years in Banking

70
 Corporate Management and Profiles
Hasrath Munasinghe Mrs Sandra Walgama Prins Perera S Prabagar
Deputy General Manager – Marketing Deputy General Manager – Deputy General Manager – Treasury Deputy General Manager –
Personal Banking (promoted to the grade of Senior Deputy Corporate Banking
FIB (Institute of Bankers of Sri Lanka)/FCIM
(Chartered Institute of Marketing, UK)/ (promoted to the grade of Senior Deputy General Manager – Treasury, w.e.f.
FCMA (UK), CGMA, MBA (University of
FSLIM (Sri Lanka Institute of Marketing)/MSc General Manager – Personal Banking, w.e.f. February 01, 2021)
London), AIB (SL), BCom, DISSCA (Diploma
in Information Technology (University of February 01, 2021)
FCMA (UK)/CGMA/CPA (Aus)/Master in System Security and Control Audit –
Moratuwa, SL)/MBA (University of Southern AIB (SL)/Associate (The Institute of of Financial Economics (University of CA Sri Lanka)/CISA (Certified Information
Queensland, Aus)/CIMA (Chartered Administrative Accounting, UK)/Level Colombo)/FIB (SL) Systems Auditor)
Institute of Management Accountants, UK), 3 Certificate in Wealth Management
CMA (Institute of Certified Management (CISI, UK) 31 years in Banking 25 years in Banking
Accountants, Aus)/PGDBFA (CA Sri Lanka)/
CPM (Asia Pacific Marketing Federation, 41 years in Banking

Governance and Risk Management

Sing)/GSLID (SLID)/Advanced Diploma in
Credit Management (Institute of Bankers,
of Sri Lanka)/Certificate in Risk (Chartered
Institute for Securities & Investments, UK)
27 years of experience including 10 years
in Banking

Annual Report 2020

Priyantha De Silva B A H S Preena Delakshan Hettiarachchi Kapila Hettihamu
Assistant General Manager – Assistant General Manager – Assistant General Manager – Chief Risk Officer
Credit Supervision and Recoveries Corporate Banking I Personal Banking I/SME

Commercial Bank of Ceylon PLC

BSc (University of Colombo)/MBA
(Retired w.e.f. January 31, 2021)
MBA (University of Colombo)/AIB (SL) ACIM (Chartered Institute (University of Colombo)/Member
AIB (SL)/CIMA-Finalist of Marketing, UK)/MBA (Cardiff (Association Cambiste Internationale)
33 years in Banking
Metropolitan University)/AIB (SL)
40 years in Banking 25 years in Banking
37 years in Banking

Ms Tamara Bernard Ms Kelum Amarasinghe

Assistant General Manager – Assistant General Manager – Compliance
Corporate Banking II
Intermediate Diploma in Banking
AIB (SL)/Master’s in Development Studies & Finance (Institute of Bankers, SL)
(University of Colombo)/MBA (University Postgraduate Diploma in Strategic
of Sri Jayewardenepura)  Management and Leadership (UK)
31 years in Banking 32 years in Banking

71
 Senior Management
Corporate Banking

Sidath Pananwala Dilrukshi Nanayakkara Feroza Ameen Dr Shanthikumar Fernando

Head of Corporate Banking I Head of Corporate Banking II Head of Islamic Banking Chief Manager –
Research and Development
Governance and Risk Management

Sushara Vidyasagara Prasad Fernando Lawrian Somanader Dharshini Gunatilleke

Chief Manager – Investment Banking Chief Manager – Imports Chief Manager – Exports Chief Manager – Corporate Banking

Personal Banking
Annual Report 2020

Amal Alles S Ganeshan S B Wasala Sanath Perera

Commercial Bank of Ceylon PLC

Head of Centralised Credit Senior Regional Manager – Senior Regional Manager – Senior Regional Manager –
Processing Unit Colombo Inner Colombo Outer Colombo North

Saneth Jayasundara Dharshanee Keerthirathne Janaka Sooriyaarachchi Elmo Sooriyaarachchi

Regional Manager – Central Regional Manager – Colombo South Regional Manager – Colombo Metro Regional Manager – Uva-Sabaragamuwa

Shanthapriya Withanage Sriyan Fernando Michael De Silva Hemantha Sooriyabandara

Regional Manager – Greater Colombo Chief Manager – City Office Regional Manager – North Central Regional Manager – South Western

72
Ramachandren Sivagnanam Chandani Siyambalagastenne
Regional Manager – Nothern Regional Manager – Wayamba

Treasury

Senior Management
Chandrima Leelaratne Tivanka Damunupola Hemal Jayasekera

Governance and Risk Management

Chief Manager – Treasury Processing Chief Dealer Chief Dealer

Support Services

Annual Report 2020

Vajira Thotagammana Thusitha Suraweera Pradeep Banduwansa Namal Gamage
Head of Information Technology Head of Card Centre Head of Retail Products and Head of Legal
(promoted to the grade of Assistant Digital Channels (promoted to the grade of Assistant
General Manager – Operations, w.e.f. General Manager – Legal, w.e.f.
February 01, 2021) February 01, 2021)

Commercial Bank of Ceylon PLC

Nalin Samaranayake Thayalan Gnanapragasam Sampath Weerasuriya Tilak Wakista
Head of Recoveries Chief Manager – Central Chief Manager – Security and Safety Chief Manager – Premises
(promoted to the grade of Assistant Administration and Staff Advances
General Manager – Credit Supervision (Retired w.e.f. February 10, 2021)
and Recoveries, w.e.f. February 01, 2021)

Pushpa Chandrasiri Upulani Gunapala Najith Meewanage Priyantha Perera

Chief Manager – Chief Manager – AML/Compliance Chief Manager – Operations Chief Manager – Logistics
Human Resource Management
73
 Nishantha De Silva Keerthi Mediwake Saman Ratnayake Charika Jayasekera
Chief Manager – Card Centre Chief Manager/Chief Executive Chief Manager – Chief Manager –
Officer – CBC Tech Solutions Limited Super Market Banking Unit Retail Credit Approval Unit
Senior Management

Mohan Fernando Upul Dissanayake

Chief Manager – SME Banking Unit Chief Manager/Chief Executive
Governance and Risk Management

Officer – CBC Finance Limited

Bangladesh Operation
Annual Report 2020

Varuna Kolamunna D Das Gupta Kapila Liyanage A K Nandy

Country Manager Senior General Manager Chief Operations Officer Senior Deputy General Manager –
Chittagong
Commercial Bank of Ceylon PLC

Binoy Gopal Roy Mostafa Anowar Sohel Shakir Khusru Chirantha Caldera
Deputy General Manager – Senior Assistant General Manager – Assistant General Manager – Head of Treasury
Finance and Accounts Human Resources Personal Banking

Maldivian Operation Myanmar Operation

Dilan Rajapakse Chamenda Kalugamage

Managing Director – Managing Director/Country Head –
Commercial Bank of Maldives Private Limited CBC Myanmar Microfinance Company Limited
74
Annual Corporate Governance Report
How we govern Good corporate governance is a z Systems and processes are working well
(Principles D.5 and D.6)1 collective responsibility that goes above and and any issues, incidents and risks are
This report on pages 64 to 113 elaborates the beyond the letter of the legal and regulatory identified, assessed and escalated
objectives, structure, overarching principles requirements. It is the foundation for z Efficient decision making for timely and
and components of the Bank’s corporate financial integrity, sustainable performance effective outcomes and achieving results
governance framework, as required to be and investor confidence. It is a strong and as expected
published as per the Banking Act Direction highly effective risk management tool and
z Business as well as support service
No. 11 of 2007 on Corporate Governance at the same time, paves the way for the Bank
functions are sufficiently resourced with
(Direction). Further, the Bank has complied to exploit opportunities. Accordingly, the
required competencies and maturity
with the principles enumerated in the Code Bank has an unwavering commitment to
good corporate governance and conducts z Remuneration framework is properly
of Best Practice on Corporate Governance –
its affairs with the utmost intellectual aligned to the long-term success of the
2017 (Code) issued by CA Sri Lanka.
honesty, integrity and diligence, being Bank
Messrs Ernst & Young, External Auditors mindful of its obligations to the society z Activities comply with policies, laws,
of the Bank, following a review of the Bank’s and the environment. Tone at the top and regulations, and ethical standards to the
compliance in line with the Direction, a culture that resonate such values prevails letter as well as in spirit
have submitted their Assurance Statement across the Bank.
thereon to the Central Bank of Sri Lanka z Assets have been safeguarded
(CBSL). It is a corporate governance framework z Ensuring the Bank is more stable, resilient
that has withstood the test of time for over and future ready
Extent of compliance in line with the a century. It has been regularly reviewed
Direction and the Code is disclosed in Annex

Governance and Risk Management

z Creating value sustainably for all
and updated to be in line with the evolving
2.1 on pages 310 to 320 and Annex 2.2 on regulations and best practice, to guide the stakeholders over the short, medium and
pages 321 to 325, respectively. Further, the Board, Board Committees, Management long term
Bank has complied with all the disclosure and staff in performing their stewardship
requirements under the prescribed format roles. This framework is underpinned In order to achieve the objectives stated
issued by the CBSL for publication of Annual by governance principles of leadership, above, the Board has ensured the following;
Financial Statements and a comprehensive integrity, effectiveness, accountability,
disclosure statement thereon is given in z Roles and responsibilities are clearly
transparency, sustainability and shareholder
Annex 2.3 on pages 326 to 330. As the Bank distributed among the Board, Management
engagement. These principles guide the
is fully compliant with all the applicable and Committees with approved charters
Bank's Management in all its decisions
requirements of the Direction, the Colombo and Terms of Reference
relating to Board oversight, delegation
Stock Exchange (CSE) has exempted the of authority, division of responsibilities, z Clear reporting lines and frequency of

Annual Report 2020

Bank from disclosure of compliance with resource allocation, risk management, reporting have been established
the regulations stipulated in Section 7.10 compliance, performance appraisal and z Legitimate needs, interests and
of the Continuing Listing Requirements on compensation, related party transactions, expectations of all the stakeholders have
Corporate Governance. and financial reporting. Being a Domestic been taken into consideration
- Systemically Important Bank and many z The highest degree of fairness,
Bank’s approach to governance other awards and accolades that enabled it transparency and accountability has been
Given the fiduciary responsibility of to be the most awarded bank in the country

Commercial Bank of Ceylon PLC

upheld
accepting and deploying vast sums of bear testimony to our commitment to good
z Negative externalities to the society and
uncollateralised public funds, importance corporate governance.
the environment are minimised
of maintaining public trust and confidence
for the long-term success and sustainability z Lives by the claims made and values
Objectives of the Bank’s Corporate
of the Bank cannot be overemphasised. associated with the Bank’s brand
Governance System
Exemplary conduct on the part of everyone reputation
As the largest private sector bank in
representing the Bank from the members
Sri Lanka touching the lives of millions of
of the Board of Directors at the highest Key regulatory requirements and voluntary
Sri Lankans in various capacities who have
governing body to the members of codes relevant to the Bank and its Corporate
high expectations of their interactions with
Corporate Management and from senior Governance Framework are depicted in Figure
the Bank and whose trust is an imperative
management to the office assistants is a sine 16 on page 76.
for its long-term success, the Corporate
qua non in this regard. Hence, Commercial
Governance system has been designed with
Bank has put in place a system of good
a view to ensure the following;
corporate governance - the system of
rules, practices and processes that guides z Adequate oversight on Management to
corporate behaviour – which ensures a ensure due diligence on key decisions and
disciplined approach to making decisions implementation of strategies as intended
and executing them with the interests of z Establishing clear ownership and
all stakeholders at heart. It is in fact the accountability on key and emerging risks
bedrock of over 100 years of existence and
sustainable value creation.

1
Principles referred to here are the principles in the Code of Best Practice on Corporate Governance – 2017 issued by CA Sri Lanka

75
 Key regulatory requirements, voluntary codes, and elements of Corporate Governance Framework Figure – 16

External

z Continuing Listing Requirements of the z Shop and Office Employees Act No.
Colombo Stock Exchange which addresses, 19 of 1954 and amendments thereto
Internal
inter alia, the rights of investors addressing the rights and responsibilities
z Directions and Circulars issued by the Elements of Corporate of employees
Securities and Exchange Commission of Governance Framework z Companies Act No. 07 of 2007 and
Sri Lanka amendments thereto which include
Articles of Association of the Bank
Annual Corporate Governance Report

z Acts, Circulars, Gazettes issued by the Organisational Structure provisions for preserving rights of
Taxation Authorities for banks to act as Terms of Reference and Charters investors
collecting agents of Board and Management z Guidance for Directors of Banks on the
z Code of Best Practice on Corporate Committees Directors’ Statement on Internal Control
Governance issued by CA Sri Lanka Integrated Risk Management issued by CA Sri Lanka
which seeks to address how corporates Framework
z All Directions issued to Licensed
operate while fulfilling the rights of key Corporate Directors’ Hand Book
stakeholder groups Commercial Banks by the Central Bank
Board approved policies on all of Sri Lanka, particularly the Banking Act
z Banking Act No. 30 of 1988 and major operational aspects Direction No. 11 of 2007 on Corporate
amendments thereto which contain Related Party Transactions Policy Governance and other Directions issued
provisions for preserving the rights of Code of Ethics for all employees by the Central Banks of the countries
depositors and rights and responsibilities
within which the Bank operates.
of regulators
Governance and Risk Management

Governance structure have a clear mutual understanding of their law, risk management and international
The Board, Board Committees, Management respective roles, delegations and boundaries. capital markets. Having risen to the highest
and Management Committees with well- Based on trust and respect, the Board and echelons of Government institutions or
defined roles and responsibilities, greater the Management work within a productive commercial organisations, they bring their
accountability and clear reporting lines form and harmonious relationship which is a independent judgement to bear on matters
the bedrock of the governance structure of pre-requisite for good corporate governance reserved for the Board. Bringing together
the Bank. The Board and Board Committees, and organisational effectiveness. This has banking, entrepreneurial, investor and
assisted by consultants where necessary, proved to be one of the key reasons for the regulatory perspectives, our Board is able
are responsible for setting strategy, defining many achievements of the Bank which has to explore matters from diverse points of
Annual Report 2020

risk appetite and exercising oversight while contributed to positioning the Bank to be view to facilitate long-term value creation.
Management and Management Committees the benchmark private sector bank of the The Company Secretary assists the Board in
are responsible for executing strategy and country. discharging its responsibilities.
driving performance. Responsibility and At end of 2020, the Board comprised of The diversity in the Board's composition
accountability for conducting operations ten Directors (eleven as at end 2019) who are has enabled it to bring a unique perspective
and assuming risk under the purview of the all eminent professionals in their respective to the Boardroom, enhancing dynamics and
Commercial Bank of Ceylon PLC

Management lies with the strategic business fields with the skills and expertise necessary effectiveness while promoting healthy and
units and support functions. to constructively challenge the Management constructive exchange of views, leaving no
An overview of the governance structure and enrich deliberations on matters set room for groupthink.
of the Bank is given in Figure 17 on page 77. before the Board. They understand and Profiles of Board members including
appreciate the dynamism and complexity their qualifications, memberships in
Board of Directors of the Bank’s operations, particularly in the Board Committees and other significant
wake of emerging global developments appointments and the profile of the Company
(Principles A.1, A.1.5, A.4 and A.10)
threatening to challenge conventional Secretary are given on pages 64 to 69.
The Board of Directors plays a pivotal business models. Eight of the Directors
role in demonstrating good corporate (nine as at end 2019) are Independent Non-
citizenship, ethical behaviour, transparency Board process
Executive Directors (INEDs), ensuring more
and accountability and in warding against (Principles A.1.6, A.1.7 and A.6)
autonomy. Directors act in the best interest
all forms of corporate malfeasance. The of the shareholders avoiding any conflicts of The Board agrees on a schedule of meetings
Board of Directors, the highest decision- interest. at the beginning of each year and meets at
making authority with responsibility for least once a month. Additional meetings
the sustainability of the Bank, provides are also convened if the circumstances so
Diversity and inclusion
leadership by setting strategic direction, require. The Chairman is responsible for
defining risk appetite, approving Diversity is having a wide array of voices and determining and preparation of the agenda
remuneration policies and appointments people in the conversation and inclusion is for the meetings in consultation with the
to the Board and Management. Under the an environment where all those voices really Managing Director/Chief Executive Officer
due diligence and oversight of the Board, are heard. Accordingly, the Board of Directors and with the assistance of the Company
Corporate Management is responsible for the comprises members with expertise in Secretary. Board members too can request
day-to-day operations and for implementing accounting, banking and finance, economics, items to be included in the agenda for
an effective system of internal control. The agriculture and chemical industry, discussion. The agenda is circulated to the
Board and the Corporate Management engineering, information technology, members of the Board by the Company

76
Secretary together with the accompanying yet another green initiative of the Bank. The Details of attendance at Board meetings
Board papers one week in advance of the Directors regularly attend the meetings and are given in Table 29 on page 79.
meetings, allowing adequate time for actively participate in deliberations. Urgent Minutes of deliberations and decisions
Board members to study, call for additional Board papers are submitted at short notice made at the meetings are maintained in
information if required, and be prepared for or tabled at the meetings on an exceptional sufficient detail. Members of the Corporate
productive deliberations. The agenda and basis. Board members typically spend at Management are invited for meetings on
all Board Papers are circulated electronically least seven days a month on Board-related a need basis. Members of the Board are
to Board members via the BoardPAC which matters. If necessary, in the best interest of allowed to seek independent professional
ensures absolute confidentiality of the the Bank, one-third of the Directors can call advice, if necessary, at the Bank’s expense.
information, cost saving on printing of for a resolution to be presented to the Board. The Bank has obtained a Directors’ and
papers, and delivering same instantaneously, Officers’ Liability Insurance Policy.

Annual Corporate Governance Report

Governance structure Figure – 17

Governance bodies with stewardship role

Board of Directors Management Others

(Setting strategy and risk appetite with (Strategy execution and driving (Conducting operations
oversight responsibility) performance) and assuming risk)

Executive Management Other Management Business and

Main Board Board Committees

Governance and Risk Management

Committees Committees Supporting Functions

Chairman Audit Committee Managing Executive

(BAC) Director/ Integrated Risk Personal Banking
Independent Chief Executive Management
Non-Executive Officer Committee
Integrated Risk (EIRMC)
Directors Management Corporate
Committee Chief Operating Banking
(BIRMC) Officer Assets and
(COO) Liabilities
Committee
Nomination (ALCO) International
Committee Operations
(BNC)

Annual Report 2020

Credit Policy
Shareholders

Committee
Other Members (CPC) Investment
HR and
of the Banking
Remuneration
Corporate
Committee Executive
Management
(BHRRC) Committee on
Monitoring NPAs Dealing and
Executive Treasury
Directors (ECMN)
Related Party

Commercial Bank of Ceylon PLC

Transactions
Review Chief Risk Business Continuity
Management Support
Committee Officer (CRO)
Steering Committee Functions
(BRPTRC)
(BCMSC)

Credit Committee Compliance

Officer Information
(BCC)
Security Council
(ISC)
AGM –
Investment
Management
Committee Executive
Audit
(BIC) Investment
Committee
(EIC)
Technology
Committee
(BTC) Human Resources
Steering Committee
(HRSC)
Strategy
Development
Committee Executive Strategy
(BSDC) Development
Committee (ESDC)

Consultant to BAC

Consultant to BTC

Mandatory Committees Voluntary Committees Appointment Flow Responsibility Flow – Direct Responsibility Flow – Indirect

77
 Conflicts of interest (Principle A.10) Although the outbreak of COVID-19 had
Members of the Board avoid any conflict many challenges, all Meetings of the Board
of interest by declaring such interest and Board Committees were conducted
and withdrawing from taking part in adopting to the new normal conditions by
deliberations on/exercising influence over having such meetings with limited physical
matters where there is conflict of interest or attendance with some of the Directors
the appearance of conflict of interest and connected via virtual platforms in conformity
these actions are appropriately minuted. with the guidelines issued by the health
Affiliations and transactions of Directors authorities.
are regularly reviewed to ensure that there The Board continued to play an active
are no conflicts or relationships that might role in strategy formulation, providing
Annual Corporate Governance Report

impair Directors’ independence. Any banking directions to the Management for the
facilities provided to the Directors, their close preparation of the Bank’s five-year strategic
family members and entities in which the plan 2021-2025. The plan was then reviewed
Directors hold directorships are as permitted and approved at a meeting specifically
by the rules and regulations of the CBSL convened for this purpose, in December
and within the terms and conditions such 2020. At the meeting, members of the
facilities are provided to other customers of Corporate Management made presentations
the Bank. Such facilities, if any, are reviewed on plans for areas coming under their
and recommended by the BCC and are purview and had extensive deliberations
submitted to the Board for approval. Once thereon. The Board explored and evaluated
approved, details of such facilities are tabled alternative strategies prior to approval and
at the immediately following meetings of allocation of resources for execution of
Governance and Risk Management

the BRPTRC for information. The details same. In June 2020, the Board held a special
of transactions carried out in the ordinary meeting to review and approve a revised
course of business on an arm’s length basis budget for the year 2020 taking into account
with entities where the Bank’s Chairman the unprecedented operating environment
or Directors serve as the Chairman or as a following the COVID-19 pandemic outbreak.
Director in another entity are disclosed in The Board continued to give prominence
the disclosure made on “Directors’ Interest in to the capital management strategy in the
Contracts with the Bank” on page 113 while wake of the increasing capital requirements,
Note 63 to the Financial Statements on pages potential for higher credit losses following
255 to 259 carries information on Related moratoriums and difficulties faced by the
Party Disclosures. At the time of joining and borrowers and to support growth. One of
annually, Directors declare their interests and the regular agenda items at the monthly
Annual Report 2020

necessary procedures are also in place to Board meetings is to review performance

ensure that there are no conflicts of interest against the strategic plans with sufficient
that will compromise independence of the attention and time being devoted to
members. The Bank maintains a register of reviewing progress made and identifying
such interests declared which is available areas of concern requiring further attention
for inspection by shareholders or their of the Board. The views of Directors on issues
authorised representatives as required by under consideration are ascertained and
Commercial Bank of Ceylon PLC

Section 119 (1) (d) of the Companies Act No. a record of such deliberations reflected in
07 of 2007 and amendments thereto. minutes. Further, the Board paid heightened
attention to credit quality, closely monitored
Board meetings (Principle A.1.1) exposures to risk elevated industries,
During 2020, the Board held 17 scheduled reviewed reasonableness of the impairment
meetings (fourteen in 2019) of which one methodology, movements in staging
meeting (one meeting in 2019) was devoted of exposures and resolving distressed
exclusively to deliberations on strategy with credit facilities. Proceedings of the Board
all members of Corporate Management Committees were regularly reported to the
being present. Fifteen meetings (Twelve Board and any concerns identified in relation
meetings in 2019) were devoted to matters to specialised areas too were referred to
including large and material transactions, them for their oversight.
review of performance, review and approval
of a revised budget for 2020, review of policy
frameworks, raising new capital, strategy
and risk. Another meeting was held for
reviewing the composition of the Board
committees subsequent to election/re-
election of Directors at the Annual General
Meeting (AGM) in place of those who
retired by rotation. Meetings provided an
effective forum for discharging the oversight
responsibility of the Board.

78
Composition of the Board during and at the end of the year and attendance of members at Board meetings during the year are given below:
Composition of the Board and attendance (Principle A.4 and A.5) Table – 29

DOA Age Membership Meeting Attendance Board Sub Committee Membership Tenor on
the Board
(Years) Status Eligible to attend/ Mode of BAC BIRMC BNC BHRRC BRPTRC BCC BTC BIC BSDC (Years)
Attended Participation

Justice K Sripavan 26.04.2017 68 17/17 17 0 C C C C C 3+

NED ID
Chairman*
Prof A K W Jayawardane 21.04.2015 60 NED ID 17/17 16 1 C M M C M 5+
Deputy Chairman**

Annual Corporate Governance Report

Mr S Renganathan 17 0
17.07.2014 58 ED NID 17/17 BI M BI BI BI M M M M 6+
Managing Director/CEO
Mr K Dharmasiri 13 4
21.07.2015 67 NED ID 17/17 M M M M M M 5+
Director
Mr L D Niyangoda 16 1
26.08.2016 64 NED ID 17/17 M M M 4+
Director
Ms N T M S Cooray NED ID 14 3
19.09.2016 62 17/17 M M M 4+
Director
Mr T L B Hurulle 16 1
05.04.2017 68 NED ID 17/17 M M M 3+
Director
Mr S C U Manatunge 16 1
27.07.2018 50 ED NID 17/17 BI BI BI M M M 2+
Executive Director/COO

Governance and Risk Management

Ms J Lee 0 6
13.08.2020 53 NED ID 6/6 M M M M C M <1
Director
Mr R Senanayake
16.09.2020 59 NED ID 5/5 4 1 C M M M <1
Director
Mr K G D D Dheerasinghe 17 0
20.12.2011 68 NED ID 17/17
Former Chairman#
Mr M P Jayawardena 15 2
28.12.2011 68 NED ID 17/17
Former Deputy Chairman##
Mr S Swarnajothi 12 0
20.08.2012 70 NED ID 12/12
Former Director###

Annual Report 2020

* Appointed as the Chairman with effect from December 21, 2020. # Relinquished office with effect from December 21, 2020.
** Appointed as the Deputy Chairman with effect from December 29, 2020. ## Relinquished office with effect from December 29, 2020.
### Retired with effect from August 20, 2020.

DOA – Date of Appointment, ED – Executive Director, NED – Non-Executive Director, ID – Independent Director, NID – Non-Independent Director

In Person participation Virtual participation C - Chairman M - Member BI - By Invitation

Commercial Bank of Ceylon PLC

Composition of the Board (As at December 31, 2020) Figure – 18

Non-Executive and Executive Directors Board’s gender composition Tenure on the Board (Years)
7
6
5
8 2 4
Executive Directors Male Female
(MD/CEO, COO) - 2 3
Independent 2
Non-Executive Directors - 8 1
0

Board of Directors’ industry/background experience

Banking and Agriculture/ Finance and Law Science, Risk Management and
Management Chemical Accounting 1 Engineering and IT International Capital Markets
5 1 4 2 3

79
 Board Committees Names, qualifications and experience of

The diversity in the (Principles A.7.1, D.3 and D.4)

Nine Board Committees have been
the EMC members are given in the section
on Corporate Management and Profiles on

Board's composition appointed with delegated authority to

strengthen governance and to deal with/
pages 70 and 71.
Names of the members of the Senior
has enabled it to bring decide on certain subject-specific and
specialised matters. The Board, however,
Management of the Bank’s operations in
Sri Lanka, Bangladesh, the Maldives and
a unique perspective retains responsibility for Committee
decisions. Four out of five mandatory
Myanmar are given on pages 72 to 74.

to the Boardroom, Committees have been formed as required

by the Direction, while the Board Related
Management Committees
Annual Corporate Governance Report

In addition to the Board Committees and the

enhancing dynamics Party Transactions Review Committee
has been formed as required by the
EMC, several other Management Committees
have been constituted under delegated
and effectiveness while provisions of the Securities and Exchange
Commission of Sri Lanka (SEC). The other
authority from the Managing Director/Chief
Executive Officer on specific subjects to
promoting healthy and four voluntary Board Committees have
been established considering the business,
facilitate decision-making in relation to the
execution of the Board-approved strategies.
constructive exchange of governance and risk management needs
of the Bank as permitted by the Bank’s
Based on approved Terms of Reference,
these Management Committees operate
views, leaving no room Articles of Association. Constituted with
Board-approved Terms of Reference,
under a structure and process similar to
the Board Committees. Secretaries of each
for groupthink. these Committees hold regular meetings
and report proceedings to the Board for
of the Committees record minutes of the
proceedings in sufficient detail which
Governance and Risk Management

information/approval.
are submitted to the Managing Director/
Board Committees seek guidance and Chief Executive Officer for approval.
advice of external consultants on several These Committees undertake extensive
occasions. Each of the Directors serves in a deliberations, co-operate across departments
minimum of three Committees. and debate on matters considered critical
The composition, areas of oversight for the Bank’s operations as described in the
responsibility, and activities in 2020 and Figure 19 given on page 81.
attendance of members at the Board
Committee meetings are given in the
respective Board Committee reports on
pages 86 to 100.
Annual Report 2020

Executive Management Committee

All members of the Corporate Management
including the Managing Director/Chief
Executive Officer and the Chief Operating
Officer who are the two EDs are members
of the Executive Management Committee
Commercial Bank of Ceylon PLC

(EMC). The primary responsibility of the EMC

is to implement the strategy as approved
by the Board under the leadership of the
Managing Director/Chief Executive Officer
and deliver on the performance objectives
while ensuring that the risks undertaken by
the Bank are within the risk profile approved
by the Board. The EMC lays down policies,
makes operational decisions, monitors and
manages financial performance against
budgets, reviews achievement of strategic
goals set for business divisions, allocates
capital, manages risk and solves operational
and customer issues. It also reviews and
deliberates on information to be submitted
to the Board ensuring that all material
information is shared with the Board in
a timely manner to effectively fulfil their
obligations as Directors. The meetings of the
EMC provide an opportunity for all members
of the Executive Management to gain a 360o
view of the Bank’s operations.

80
Management committees Figure – 19

Executive Integrated Risk Management Assets and Liabilities Credit Policy

Committee (EIRMC) Committee (ALCO) Committee (CPC)

Purpose and tasks Purpose and tasks Purpose and tasks

Monitors and reviews all risk exposures Optimises the Bank’s economic goals whilst Reviews and approves credit policies and
and risk-related policies and procedures maintaining liquidity and market risk within procedures pertaining to the effective
affecting credit, market and operational the Bank’s predetermined risk appetite. management of all credit portfolios within
areas in line with the directives from the the lending strategy of the Bank.
BIRMC. Composition

Annual Corporate Governance Report

Managing Director/Chief Executive Officer, Composition
Composition Chief Operating Officer and key members of Managing Director/Chief Executive Officer,
Managing Director/Chief Executive Officer, Treasury, Corporate Banking, Personal Banking, Chief Operating Officer and key members of
Chief Operating Officer and key members Integrated Risk Management, Marketing and Corporate Banking, Personal Banking, Integrated
of Integrated Risk Management, Personal Finance Divisions. Risk Management, Management Audit,
Banking, Corporate Banking, Treasury, Marketing, Credit Supervision & Recoveries, and
Management Audit, Compliance, and Finance Meeting Frequency: Fortnightly Branch Credit Monitoring Divisions.
Divisions.
Meeting Frequency: Fortnightly and as
Meeting Frequency: Monthly and when required

Business Continuity Management Executive Committee on

Governance and Risk Management

Information Security Council (ISC)
Steering Committee (BCMSC) Monitoring NPAs (ECMN)

Purpose and tasks Purpose and tasks Purpose and tasks

Directs, guides, and oversees the activities Reviews and monitors the Bank’s Non- Focuses continuously on meeting the
of the Business Continuity Plan of the Bank Performing Advances (NPAs) above a information security objectives and
in accordance with the Bank’s strategy. predetermined threshold to initiate timely requirements of the Bank in line with
corrective actions to prevent/reduce credit emerging technology and Bank's Strategy.
Composition losses to the Bank.
Chief Operating Officer and key members of Composition
the Bank’s Corporate Management covering all Composition Managing Director/Chief Executive Officer,
business lines. Managing Director/Chief Executive Officer, Chief Operating Officer and key members of
Chief Operating Officer and key members Human Resources Management, Integrated

Annual Report 2020

Meeting Frequency: Quarterly of the Corporate Banking, Personal Banking, Risk Management, Information Systems Audit,
Credit Supervision & Recoveries, and Services, Operations, and IT Divisions.
Integrated Risk Management Divisions.
Meeting Frequency: Monthly
Meeting Frequency: Monthly

Commercial Bank of Ceylon PLC

Executive Investment Human Resources Steering Executive Strategy Development
Committee (EIC) Committee (HRSC) Committee (ESDC)

Purpose and tasks Purpose and tasks Purpose and tasks

Oversees investment activities by providing Setting guidelines and policies on any Based on overall insights provided by
guidance to the management on significant matter that may affect the Human Resource the BSDC, formulates strategies geared
investment decisions and reviews Management of the Bank and make for the sustainable development of the
performance. recommendations on policy matters to the Bank. Monitors the implementation of the
BHRRC and/or address any issues that may approved strategic plan and the progress
Composition need to be reviewed at Board level. made against strategic milestones and goals.
Managing Director/Chief Executive Officer,
Chief Operating Officer and key members of Composition Composition
Corporate and Personal Banking, Investment Managing Director/Chief Executive Officer, Managing Director/Chief Executive Officer,
Banking, Treasury, and Finance Divisions. Chief Operating Officer, and key members Chief Operating Officer and key members of
of Human Resource Management, Personal Human Resource Management, Marketing,
Meeting Frequency: Quarterly Banking, Corporate Banking, Marketing and Personal Banking, Corporate Banking, Treasury,
Finance Divisions. Finance and Planning Divisions.

Meeting Frequency: Quarterly Meeting Frequency: Monthly

81
 Roles, responsibilities and powers of the z Appointing the Board Secretary in Segregation of roles of Chairman and
Board (Principles A.1.2 and A.1.3) accordance with Section 43 of the Banking Chief Executive Officer (Principle A.2
The role of the Board of Directors and their Act No. 30 of 1988 and A.3)
responsibilities are set out in the Board z Seeking professional advice in appropriate Adhering to the best practice in Corporate
Charter which includes a schedule of powers circumstances at the Bank’s expense Governance, the positions of Chairman
reserved for the Board as detailed below: z Reviewing, amending and approving and Chief Executive Officer are separated,
governance structures and policies facilitating balance of power and
Role of the Board authority. The Chairman is a Non-Executive
Board’s role in risk management Independent Director while the Chief
z To represent and serve interests of
(Principle D.2) Executive Officer is an Executive Director
shareholders by overseeing and appraising
appointed by the Board. Their respective
Annual Corporate Governance Report

the Bank’s strategies, policies and Being the highest decision-making authority
of the Bank, the Board is responsible for roles are clearly set out in an approved Board
performance
implementing an effective risk management paper and in the Board Charter of the Bank.
z To provide leadership and guidance to
function in the Group. In this regard, the Accordingly, as set out in the said
the Management for the execution of
Board with the support of the BIRMC has Board paper and the Board Charter, clear
strategies
devised an effective risk management and effective separation of accountability
z To optimise performance and build framework, which set the risk appetite and and responsibility has made the role of
sustainable value for shareholders in tolerance limits and enables monitoring the the Chairman distinctive. The Chairman
accordance with the regulatory framework risk profile on a regular basis, through risk promotes good corporate governance
and internal policies reports submitted to it. Risk management and the highest standards of integrity and
z To establish an appropriate governance was one of the key and regular agenda items probity throughout the Group by providing
framework of all Board and Committee deliberations. leadership to the Board, preserving order
z To ensure regulators are apprised of Clarifications were sought from the and facilitating the effective discharge of
Governance and Risk Management

the Bank’s performance and any major Management for any deviations from the its duties. The Chairman ensures that the
developments agreed risk profile and necessary guidance Board receives all information necessary
was given for taking mitigatory action. for making informed decisions by the
z To review the performance of the business
Risks related to the business strategies Board in discharging its responsibilities.
against the goals and objectives at regular
were carefully reviewed at a special Board He also ensures the effective participation
intervals;
meeting held to review the Budget for the of all Directors in Board deliberations and
Key responsibilities year 2020 and deliberate on the strategic maintains open lines of communication
plan 2021-2025 (refer Risk Governance and with members of Corporate Management,
z Selecting, appointing, and evaluating the Management on pages 114 to 133 for further acting as a sounding board on strategic and
performance of the Managing Director/ details). operational matters.
Chief Executive Officer
A synopsis of the important matters
z Setting strategic direction and monitoring deliberated and decided upon by the Board
Annual Report 2020

its effective implementation during the year 2020 is given below:

z Establishing systems of risk management,
internal control, and compliance
z Ensuring the integrity of the financial Board highlights – 2020 Figure – 20
reporting process
z Developing a suitable corporate
Commercial Bank of Ceylon PLC

governance structure, policies and Approval of 2nd interim dividend for Appointed two independent non-
framework 2019 of Rs. 3/- per share totalling to executive Directors to strengthen
z Strengthening the safety and soundness of Rs. 3.083 Bn the Board
the Bank
Acquisition of a further 20% stake Appointed new Chairman and Deputy
z Reviewing the performance of the Bank
in Commercial Insurance Brokers Chairman in place of the former
and the Group companies
(Private) Limited (CIB) from Commercial Chairman and Deputy Chairman
z Appointment of members to the Board of
Development Company PLC, increasing who relinquished their office as per
Directors to fill casual vacancies
the Bank’s stake in CIB to 60% the CBSL Directions of Corporate
z Appointment of members of the Corporate
Approval/recommendation of final Governance after serving the Board for
Management of the Bank
dividend for 2019 of Rs. 2.055 Bn in the nine years
z Appointing and overseeing the External
Auditors’ Responsibilities form of a scrip dividend of Rs. 2/- per Reviewed the Composition of all Board
share Committees, respective Committee
z Approving Interim and Annual Financial
Statements for publication Approval to issue new shares through Charters and Terms of Reference
a private placement to International Conducted the first ever virtual AGM
Powers reserved for the Board Finance Corporation (IFC) and related of the Bank in line with the guidelines
z Approving major capital expenditure, funds and obtaining approval of the issued by the regulators
acquisitions and divestitures and shareholders at an Extraordinary Reviewed all major policy documents
monitoring capital management General Meeting
Annual strategy meeting with
Corporate Management team

82
 As set out in the Board Charter, the role z Facilitating best practice of Corporate There were several changes to the
of the Chief Executive Officer is to conduct Governance including assisting the composition of the Board of Directors during
the management functions as directed Directors with respect to their duties and the year, the details of which are given in
by the Board. Corporate objectives for the responsibilities; Table 29 on page 79, Composition of the
Chief Executive Officer and boundaries of z Facilitating access to legal and Board and attendance.
his authority are set by the Board while independent professional advice in
his duties and responsibilities are jointly consultation with the Board, where Re-election/election of Directors
developed. necessary; (Principles A.8)
The Chief Executive Officer leads the z Ensuring that the Bank complies with In terms of the Articles of Association of
Management team in the day-to-day its Articles of Association with required the Bank, the two longest serving NEDs are
operations and ensures implementation amendments being incorporated in it required to offer themselves for re-election

Annual Corporate Governance Report

of strategies, plans, and budgets approved following proper procedure; at each AGM in rotation with the period
by the Board. The Chief Executive Officer of service being considered from the last
z Coordinating the publication and
conducts the affairs of the Group upholding date of re-election or appointment. If there
distribution of the Bank’s Annual Reports
good corporate governance and the highest are more than two Directors who qualify
and Accounts and interim financial
standards of integrity and probity as for re-election, the Directors may decide
statements and preparing the Directors’
established by the Board. amongst themselves after considering the
Report;
The Chairman and the Chief Executive contents of the affidavits and declarations
z Monitoring and ensuring compliance
Officer regularly meet to set the Board submitted by them and all other relevant
with Listing Rules including required issues or draw lots to determine the Directors
agenda, to deliberate on current and future
disclosure on related parties and related who will offer themselves for re-election.
developments and any material issues
party transactions and maintaining cordial Accordingly, Mr K Dharmasiri and Ms N T M
impacting the Bank.
relationships with the Colombo Stock S Cooray, the two longest serving Directors
Exchange, share and debenture holders

Governance and Risk Management

Role of Independent Non-Executive since last re-election will be seeking re-
z Communicating promptly with the election at the forthcoming AGM to be held
Directors
regulators; on March 30, 2021. If a Director has been
The Bank has a strong element of
appointed as a result of a casual vacancy
independence on the Board, with eight of
The appointment and removal of the that has arisen since the previous AGM,
the ten Directors as at December 31, 2020
Company Secretary is a matter for the Board that Director will offer himself/herself for
being independent NEDs. Directorships
as a whole. election at the immediately succeeding AGM.
constitute the only connection of the
Accordingly, Ms J Lee and Mr R Senanayake
independent Directors with the Bank and
Appointments/retirements and who were appointed to the Board during
with other Companies in the Group and
resignations of Directors (Principle A.7) the year 2020 and Mr S Muhseen who was
therefore their judgement is unlikely to be
appointed to the Board on February 15, 2021
influenced by external considerations. The The Bank has in place a formal and to fill casual vacancies will offer themselves
presence of independent NEDs is expected transparent procedure formulated by

Annual Report 2020

for re-election at the forthcoming AGM to be
to complement the skills and experience the BNC for nomination of candidates for held on March 30, 2021.
of the other members of the Board by appointment as Directors. The resumés
conveying an objective and independent of potential candidates are carefully
view on matters, challenging the Board and Induction and training of Directors
evaluated by the BNC before it makes
the Management constructively using their recommendations to the Board for their
(Principle A.1.8)
expertise and assisting in providing guidance consideration as Non-Executive Directors. On appointment, Directors are provided

Commercial Bank of Ceylon PLC

on strategy. Such nominations may include an interview with an induction pack which comprises
with the candidate. The appointment of new the Articles of Association, Banking Act
Role of the Company Secretary Directors is based on an annual assessment Directions, Corporate Directors’ Handbook
(Principle A.1.4) of the combined knowledge, experience and published by the Sri Lanka Institute of
diversity of the Board in relation to the Bank’s Directors, Code of Best Practice on Corporate
The Company Secretary plays a vital role in
strategic plans in order to identify added Governance issued by CA Sri Lanka, the
facilitating good Corporate Governance. His
perspectives to ensure its effectiveness at Bank’s organisational structure, Board
responsibilities encompass activities relating
all times. Charter and the most recent Annual Report
to Board meetings, general meetings,
of the Bank and the access to the electronic
Articles of Association, reports, accounts A similar process is followed when
support system which has archived minutes
and documentation, Corporate Governance appointing Executive Directors except that
of meetings for the past seven years.
and Stock Exchange requirements. Primary candidates are selected within the members
All Directors are encouraged to obtain
responsibilities include: of the Corporate Management of the Bank.
membership of the Sri Lanka Institute of
z Assisting the Chairman in conducting
As required by the Listing Rules, Directors which conducts useful programmes
the Board Meetings, AGMs and EGMs in appointments of new Directors to the Board to support Directors. It is mandatory for
accordance with the Articles of Association, are promptly communicated to the CSE the Directors to attend Director Forums
the Board Charter, and relevant legislation; through announcements subsequent to organised by the CBSL. Members of the
obtaining approval from the CBSL for their Corporate Management and external experts
z Maintaining minutes of meetings and
Fitness and Propriety. The announcements make regular presentations with regard to
statutory registers and filing statutory typically include a brief resumé of new
returns in time; the business environment in relation to the
Directors, relevant expertise, key operations of the Bank which enables newly
z Monitoring all Board Committees to ensure appointments, shareholdings and status appointed directors to get familiarised on
they are properly constituted and have of independence. banking operations.
clearly defined Terms of Reference;

83
 Remuneration and The BHRRC structures the remuneration Board and Board Committee evaluations
packages and benchmarks it with the (Principle A.9)
Benefits Policy market on a regular basis with the assistance As set out in the Direction, Code and the
The Remuneration and Benefits of professionals to ensure that total other applicable regulations, the Board
remuneration levels remain competitive in and Board Committees annually appraise
Policy seeks to provide a order to attract and retain key talent whilst their own performance to ensure that
distinctive value proposition balancing the interests of the shareholders. they are discharging their responsibilities
The total remuneration of EDs and other
to current and prospective members of the Corporate Management
satisfactorily in accordance with the Board
Charter. This process requires each Director
employees that attracts and includes three components – guaranteed to fill a Board Performance Evaluation Form
retains people with capabilities remuneration (the fixed component), annual which incorporates all criteria specified in
Annual Corporate Governance Report

performance bonus (a variable component)

and values in line with the and the ESOP (a variable component).
the Board Performance Evaluation Checklist
of the Governance Code. The responses
business needs of the Bank. Special emphasis is paid to make the are collated by the Company Secretary and
It also provides a framework for basis of granting ESOPs and their features submitted to the BNC for consideration
transparent prior to seeking approval from and are subsequently discussed at a Board
the Bank to design, administer, the shareholders. meeting. Board evaluations for 2019 and
and evaluate effective reward Guaranteed remuneration comprises the 2020 were taken up at the Board Meetings
programmes, inspiring and monthly salary and allowances determined held in February 2020 and February 2021
with due reference to the qualifications, respectively.
motivating desired behaviours, experience, levels of competencies, skills,
enabling proper alignment roles and responsibilities of each employee Appraisal of the Chief Executive Officer
of remuneration with the which are reviewed annually and adjusted (Principle A.11)
Governance and Risk Management

for such factors as promotions, performance

long-term success of the Bank. and inflation. The annual performance
The Board with the assistance of the BHRRC
assesses the performance of the Chief
bonus is determined based on the degree of
Directors’ and Executive remuneration Executive Officer annually, based on criteria
achievement of a multi-layered performance
(Principles A.10, B.1 and B.3) agreed at the beginning of each year which
criteria matrix which is clearly communicated
consist of short, medium and long-term
The BHRRC which consists entirely of NEDs to the employees in relevant categories at
objectives with financial and non-financial
who also meet the criteria for independence the beginning of each year. The Bank’s two
targets, while taking into account the
as set out in the relevant regulations on employee associations – the Association of
changes in the operating environment. The
corporate governance, is responsible for Commercial Bank Executives and the Ceylon
Chairman discusses the evaluation with
making recommendations to the Board Bank Employees’ Union (CBEU) with whom
the Chief Executive Officer and provides
regarding the remuneration of the Directors a regular dialogue is maintained – are also
him with formal feedback. Chief Executive
and executives. consulted when necessary. The Bank after
Officer’s responses to the appraisal are
Annual Report 2020

They consult the Chief Executive extensive deliberations signed the Collective
given due consideration prior to same being
Officer regarding the same and also seek Agreement with the CBEU which covers a
approved. This exercise is finalised within
professional advice whenever it is deemed three year period from 2021 -2023 in early
three months from the financial year end.
necessary. Remuneration for EDs is set out January 2021.
with reference to the Remuneration and With a view to motivate employees to Shareholder engagement and voting
Benefit Policy while the remuneration for commit to long term value creation, improve (Principles C.1, C.2, E and F)
NEDs is set by the Board as a whole. These overall performance and increase staff
Commercial Bank of Ceylon PLC

retention while raising equity funding, the The Bank actively engages with shareholders
processes ensure that no individual Director
Bank has structured many Employee Share and potential investors as a part and
is involved in determining his or her own
Option Plans (ESOPs) since 1997. This entitles parcel of good corporate governance
remuneration. The Board and the BHRRC
the eligible employees to buy a fixed number and has put in place a structured process
engage the services of HR professionals on
of shares at a price to be determined based to facilitate same. The Board approved
a regular basis to assist in the discharge of
on pre-agreed formula over the vesting Shareholder Communication Policy is in
their duties in this regard.
period. The Bank has duly obtained approval place to ensure that there is effective and
Details of the Remuneration paid to timely communication of material matters
Directors is given in Note 21 to the Financial of the shareholders for all these ESOPs at
Extraordinary General Meetings (EGMs). The to shareholders. The Bank maintains a
Statements on page 186. number of communication channels with
EDs, being employees of the Bank, are also
eligible for these ESOPs. the shareholders which includes the Annual
The level and make up of remuneration Report, AGMs and EGMs, Interim Financial
(Principle B.2) Details of the ESOPs and the eligibility Statements, Announcements to the CSE,
criteria are given in Note 53 to the Financial press releases, Bank’s website, shareholder
It is the responsibility of the BHRRC to ensure
Statements on “Share-based Payment” on surveys on need basis as well as the Investor
that the remuneration of both EDs and NEDs
pages 241 to 244. Feedback form in the Annual Report.
is sufficient to attract eminent professionals
to the Board and retain them for driving Employment contracts do not contain During the year shareholders were
the performance of the Bank. The Bank has any commitments for compensation or notified of quarterly results, dividend
remuneration policies that are attractive, early terminations. There were no instances declarations for 2019, annual financial
motivating and capable of retaining high of early termination during the year that statements for 2019, disclosure regarding
performing, qualified and experienced required compensation. impact of COVID-19 on listed companies,
employees at the Bank.

84
disclosure on Fitch Ratings Preview, issue A summary of the details of attendance of the shareholders at AGMs during the past five
of shares by way of a private placement to years is given in the Table below:
IFC, retirement of a Director, appointment of
Attendance at AGMs Table – 30
new directors, relinquishment of the former
Chairman and the Deputy Chairman and the Voting shareholders (including proxies) Non-voting shareholders (including proxies)
appointment of the new Chairman and the AGM of the year Number of Shareholding % of total Number of Shareholding % of total
Deputy Chairman through announcements attendees shareholding Attendees shareholding
made to the CSE and in the media, where 2020 119 672,118,061 69.92 19 3,132,256 4.72
applicable. The Bank’s website also has a
dedicated area – Investor Relations - for 2019 346 703,703,954 73.21 145 12,048,304 18.18
investors which includes Interim Financial 2018 317 713,801,082 75.52 119 14,344,030 22.06

Annual Corporate Governance Report

Statements and Annual Reports with the 2017 387 688,571,770 81.41 126 5,694,130 9.80
most recent Report being offered in both a
PDF format as well as an interactive format, 2016 653 694,342,969 83.40 131 3,430,841 6.00
giving a choice to the reader. The Interactive
Report also has a tab for investor feedback. An EGM was held on August 12, 2020 with
The Board is fully committed to treat all physical participation of the shareholders
shareholders equitably, recognise, protect, to seek shareholder approval to raise new
and facilitate the exercise of their rights equity capital for augmenting Tier I capital
through open communication. The Bank and to support future lending growth of
made arrangements to publish Interim and the Bank, by the issue of shares by way of a
Annual Financial Statements in Newspapers private placement to IFC and two IFC related
in all three mediums within statutory funds. Shareholders granted approval to the
deadlines as per the Directions issued by the

Governance and Risk Management

proposed placement of shares and shares
CBSL and also submitted Interim and Annual were accordingly issued on October 5, 2020
Financial Statements to the CSE within raising Rs. 9.216 Bn. in equity capital.
stipulated timeframes in terms of the Listing
Rule 7.4 of the CSE amidst challenges faced Whistleblowing
due to the pandemic.
The Bank has adopted a Whistleblowers’
The Bank always encourages Charter in order to deter and detect
shareholders to participate at the AGMs malpractices and unethical behaviour and to
and EGMs and exercise their votes. In this ensure any genuine concerns of malpractices
regard, the Bank arranges to circulate clear and unethical behaviour,
instructions on procedures governing
voting along with every notice of AGM/ The Bank’s Compliance Officer has
been appointed to manage the Bank’s

Annual Report 2020

EGM. Shareholders play a key role in the
re-election of Directors and the External Whistleblowing processes.
Auditor and vote on all matters for which Measures are in place to protect
Notice is given including the adoption of Whistleblowers’ who act in good faith in the
the Annual Report and Accounts. Although interest of the Bank. The Bank undertakes to
the Bank could not conduct the AGM with maintain the utmost confidentiality of staff
physical presence of our shareholders due who raise concerns or make serious specific

Commercial Bank of Ceylon PLC

to the outbreak of COVID-19 as per the allegations of malpractices or unethical
Notice of Meeting published in the Annual behaviour.
Report 2019, the Bank after giving due
Notice and publicity successfully conducted Anti-Bribery and Corruption
the Fifty First AGM as a virtual meeting, The Bank has issued guidelines in the form of
fully adhering to the guidelines issued by a booklet - Code of Ethics- to each and every
the Government health authorities and employee of the Bank. These guidelines
the regulators while ensuring maximum encompass a wide range of aspects,
shareholder participation and providing inter-alia, prevention of insider dealing in
every opportunity for shareholders to clarify securities, internal rules on the purchase/sale
matters of interest to them. A total of 32 of the Bank’s shares, Gift Policy, managing
Voting and 13 Non-voting shareholders conflicts of interest, combating financial
participated at the Fifty First AGM held crimes, respecting communities and
virtually on June 25, 2020 while a further environment etc.
87 Voting shareholders and 6 Non-voting
shareholders exercised their right to A detailed discussion is given in the section
vote through proxy. The six Non-Voting of “Prudent Growth” on page 47.
shareholders exercised their right to vote
through proxy strictly in relation to matters
designated for their vote.

85
 Board Committee Reports
Report of the Board Audit Committee
Composition of the Committee
During the year, the Board Audit Committee (the BAC) consisted of the following members. Profiles of the members as at December 31, 2020,
are indicated on pages 64 to 69.

Attendance Attendance

Mr R Senanayake* (Chairman) 02/02 Mr S Renganathan 07/07

(Appointed as a Member/Chairman w.e.f. (Managing Director/Chief Executive Officer)
September 25, 2020) Mr S C U Manatunge (Director/Chief Operating Officer) 07/07

Regular attendees by invitation

Mr S Swarnajothi* (Former Chairman) 05/05 Mr K D N Buddhipala (Chief Financial Officer)
(Retired w.e.f. August 20, 2020)
Board members

Mr S K K Hettihamu (Chief Risk Officer)

Mr K Dharmasiri* (Director) 07/07
Ms A V P K T Amarasinghe (Assistant General Manager –
Ms N T M S Cooray* (Director) 07/06 Compliance) – (Appointed w.e.f. November 25, 2020)
Prof A K W Jayawardane* (Director) 07/07 Mr V S Rajasooriyar (Assistant General Manager –
(Resigned from BAC w.e.f. December 31, 2020) Compliance) – (Retired w.e.f. November 11, 2020)
Justice K Sripavan* (Director) 07/07 Mr J Premanath
(Resigned from BAC w.e.f. December 31, 2020)
Governance and Risk Management

(Assistant General Manager – Management Audit)

Ms J Lee* (Director) 00/00 Mr R Mihular (Senior practicing Chartered Accountant, serves
(Appointed to BAC w.e.f. December 31, 2020) the BAC in the capacity of a Consultant and is invited to attend
meetings) Independent Consultant appointed to the Committee to
*Independent Non-Executive Director
provide necessary assistance and enable the Committee to discharge
its functions properly

Secretary to the Committee

Mr J Premanath (Assistant General Manager – Management Audit)

Charter of the Committee The Committee is empowered by the

Annual Report 2020

The Board approved Charter of the BAC, Board to:

(the Committee) clearly defines the Terms of z Ensure that financial reporting systems
Reference of the Committee. It is annually in place are effective and well managed
reviewed to ensure that new developments in order to provide accurate, appropriate
relating to the Committee’s functions are and timely information to the Board,
addressed. The Charter of the Committee Regulatory Authorities, the Management
Commercial Bank of Ceylon PLC

was last reviewed and approved by the Board and other stakeholders.
in December 2020.
z Review the appropriateness of accounting
The Committee assists the Board in policies and ensure adherence to statutory
discharging its responsibilities and exercises and regulatory compliance requirements
oversight over financial reporting, internal and applicable accounting standards.
R Senanayake controls, internal/external audits.
z Ensure that the Bank adopts and adheres
Chairman – The Committee has full access to to high standards of corporate governance
Board Audit information, cooperation from Management
Committee
practices, conforming to the highest ethical
and discretion to invite any Director or standards and good industry practices in
Executive Officer to attend its meetings. the best interest of all stakeholders.
The Banking Act Direction No. 11 of z Evaluate the adequacy, efficiency,
2007 on “Corporate Governance for Licensed and effectiveness of risk management
“Reviewed the Policy Commercial Banks in Sri Lanka” and its measures, internal controls and
Manual on principles and subsequent amendments (hereinafter governance processes in place to avoid,
referred to as the Direction), “Rules on mitigate, or transfer current and evolving
methodologies including Corporate Governance under Listing Rules risks.
Expected Credit Losses of the Colombo Stock Exchange”, and “Code
z Monitor all aspects of internal and external
of Best Practices on Corporate Governance”,
(ECL) computation under issued by The Institute of Chartered
audit and inspection programmes of the
Bank and review Internal and External
SLFRS 9 – “Financial Accountants of Sri Lanka further regulate
Audit Reports for follow up with the
the composition, role and functions of the
Instruments” adopted by Committee.
Management on their findings and
the Management during recommendations.

the year 2020.”

86
z Review the Interim Financial Statements Internal Capital Adequacy Assessment period and curtailed business operations
and Annual Financial Statements of the Process (ICAAP): during the first and second waves of the
Bank in order to monitor the integrity of The Committee reviewed the effectiveness of COVID-19 pandemic. The scope of work
such Statements prepared for disclosure, internal control mechanism in place to meet was enhanced/realigned to include credit
prior to submission to the Board. the regulatory requirements on ICAAP and audits and remote, work from home business
the mechanism in place to ensure integrity, operations through online and Off-site audit
Activities in 2020 accuracy, and reasonableness in capital procedures.
The Committee held seven (7) meetings assessment process of the Bank for the year The Bank’s Inspection Department
during the financial year ended December 2019, as per the Section 10 (in Pillar II – carried out, online and on-site inspection of
31, 2020. Proceedings of these meetings with Supervisory Review Process) of the Banking business units including four (4) subsidiaries
adequate details of matters discussed are Act Direction No. 01 of 2016 on “Regulatory in Sri Lanka and operations in Bangladesh.
regularly reported to the Board. Framework on Supervisory Review Process”. Overseas subsidiaries namely Commercial
Representatives of the Bank’s External Bank of Maldives Private Limited and CBC
Auditors, Messrs Ernst & Young also Oversight on regulatory compliance: Myanmar Microfinance Co. Ltd. and Commex

Board Committee Reports

participated in seven (07) meetings during The Committee also ensured that the Sri Lanka S. R. L., a subsidiary incorporated
the year by invitation. The Committee also Bank complies with all regulatory and in Italy were monitored through an off-
invited members of the Senior Management legal requirements and closely scrutinised site surveillance. With the concurrence of
of the Bank to participate in the meetings compliance with mandatory banking the Board, the Bank continued to engage
from time to time on need basis. and other statutory requirements and the services of five (5) firms of Chartered
the systems and procedures that are in Accountants approved by the CBSL in
Reporting of financial position and place. The quarterly reports submitted by order to supplement the Bank’s Inspection
performance: the Compliance Officer were used by the Department in carrying out inspection
The Committee assisted the Board in its Committee to monitor compliance with all assignments.

Governance and Risk Management

oversight on the preparation of Financial such legal and statutory requirements. The ISAU conducted on-site/off-site audits
Statements to evidence a true and fair view Bank’s Inspection Department has been (Bank and Group) covering local and
on financial position and performance. This mandated to conduct independent test overseas operations. Audits conducted
process is based on the Bank’s accounting checks covering all regulatory compliance through system-based audit tools, reviews
records and in accordance with the requirements, as a further monitoring of systems change management activities
stipulated requirements of the Sri Lanka measure. under the agile approach and verification of
Accounting Standards. In fulfilling its The Committee monitored the progress compliance with industry standards such as
oversight responsibilities, the Committee on implementation of the recommendations ISO 27001:2013/ PCI-DSS/ Baseline Security
reviewed and discussed the interim made in the Statutory Examination Reports Standards (BSS) to ensure safeguarding IT
and consolidated Financial Statements, of Central Bank of Sri Lanka (CBSL) through assets of the Bank.
including the acceptability of the accounting regular follow-up reports tabled during the The Committee received the attention of
principles, the reasonableness of significant year 2020. significant findings and recommendations

Annual Report 2020

estimates and judgements. related to IT Governance, Cyber Security,
The Committee reviewed the Tax Identification of risks and control Network Security, Physical and Logical Access
Assessments outstanding and action measures: Management, End point Security and IT
initiated for follow up for resolution through The Bank has adopted a risk-based Systems Administration made in the reports
regular reports submitted by the Chief audit approach towards assessing the submitted by ISAU. The Committee also
Financial Officer. effectiveness of the internal control reviewed the reports on findings relating to

Commercial Bank of Ceylon PLC

The prevailing internal controls, systems procedures in place to identify and manage business continuity planning and disaster
and procedures were assessed by the all significant risks and that these are being recovery arrangements during the year 2020.
Committee and it expressed the view that reviewed by the Committee. Five hundred and forty-seven (547)
adequate controls and procedures were in The Committee sought and obtained inspection reports on Business Units
place to provide reasonable assurance to the the required assurances from Business Units including subsidiaries and overseas
effect that the Bank’s assets are safeguarded on the remedial action in respect of the operations received the attention of
and the financial position of the Bank is well identified risks to maintain the effectiveness the Committee which highlighted the
monitored and accurately reported. of internal control procedures. operational deficiencies, risks, and the
recommendations. The Committee evaluated
Progress of implementation of SLFRS 9: Internal audit and inspection: the Bank’s system of internal controls and
The Committee continuously monitored duly reported its findings to the Board.
The Committee ensured that the internal
the progress of implementation of SLFRS audit function is independent of the Major findings of internal investigations
9 as per the requirements of Sri Lanka activities it audited and that it was with recommendations of the Management
Accounting Standard – SLFRS 9 on “Financial performed with impartiality, proficiency, and were considered and appropriate
Instruments” that has been issued effective due professional care. instructions issued. The Committee also
from January 01, 2018. invited representatives from the audit
The Committee approved the
The Committee reviewed the Policy firms assisting in inspections to make
Programme of Inspection/IS Audit for the
Manual on principles and methodologies presentations on their observations and
year 2020 formulated by the Inspection
including Expected Credit Losses (ECL) findings.
Department and the Information Systems
computation under SLFRS 9 – “Financial Audit Unit (ISAU). The progress and scope The Committee reviewed the Inspection/
Instruments” adopted by the Management of Inspections/IS Audits were continuously Information Systems Audit operational
during the year 2020. reviewed to ensure that appropriate manual and evaluated the internal audit
corrective actions have been taken to function covering key areas such as scope,
manage risks identified during the lockdown quality of internal audits, independence,
and resources.
87
 During the year, members of the Mechanism of internal controls: Evaluation of the Committee:
Committee personally visited the branches Sections 3 (8) (ii) (b) and (c) of the Banking An independent evaluation of the
in the South Western and Southern regions Act Direction No. 11 of 2007 stipulate the effectiveness of the Committee was
to gather information in regard to the requirements to be complied with by the carried out by the other members of the
operations, controls implemented and Bank to ensure reliability of the financial Board during the year. Considering the
follow-up action taken for significant audit reporting system in place at the Bank. overall conduct of the Committee and its
findings. contribution to the overall performance of
The Committee is assisted by the External
Auditor and the Inspection Department to the Bank, the Committee has been rated
External audit: closely monitor the procedures designed as effective.
With regard to the external audit function of to maintain an effective internal control
the Bank, the role played by the Committee mechanism to provide reasonable assurance
is as follows: that this requirement is being complied with.
z Assisting the Board in engaging External In addition, the Committee regularly
Auditors for audit services, in compliance monitored all exceptional items charged to
Board Committee Reports

with the provisions of the Direction and the Income Statement, long outstanding
agreeing on their remuneration with the items in the Bank’s chart of accounts, R Senanayake
approval of the shareholders. credit quality, risk management procedures
and adherence to classification of Chairman – Board Audit Committee
z Monitoring and evaluating the
independence, objectivity, and non-performing loans and provisioning February 24, 2021
effectiveness of the External Auditor. requirements specified by the CBSL.
The Committee also reviewed the credit
z Reviewing non-audit services provided
monitoring and follow-up procedures and
by the Auditors, with a view to ensuring the internal control procedures in place
Governance and Risk Management

that such functions do not fall within to ensure that necessary controls and
the restricted services and provision of mitigating measures are available in respect
such services will not impair the External of newly identified risks.
Auditor’s independence and objectivity.
z Discussing the audit plan, scope and the Ethics and good governance:
methodology proposed to be adopted in The Committee continuously emphasised
conducting the audit with the Auditors, on upholding ethical values of the staff
prior to commencement of the annual members. In this regard, the Bank has a
audit. Code of Ethics and Whistle-blower’s Charter
z Discussing all relevant matters arising in place which is followed for educating
from the interim and final audits, and and encouraging all members of staff to
any matters the Auditor may wish to resort to whistle-blowing if they suspect any
Annual Report 2020

discuss, including matters that may need wrongdoings or other improprieties. Highest
to be discussed in the absence of Key standards of corporate governance and
Management Personnel. adherence to the Bank’s Code of Ethics were
z Reviewing the External Auditor’s ensured. All appropriate procedures were in
Management Letter and the Management place to conduct independent investigations
responses thereto. into incidents reported through whistle-
Commercial Bank of Ceylon PLC

blowing or identified through other means.

The Auditors were provided with the The Whistle-blower’s Charter guarantees the
opportunity of meeting Non-Executive maintenance of strict confidentiality of the
Directors separately, without any Executive identity of the whistle-blowers.
Directors being present, to ensure that the
Auditors had the opportunity to discuss and Sri Lanka Accounting Standards:
express their opinions openly on any matter. The Committee reviewed the revised policy
It provided the assurance to the Committee decisions relating to adoption of new and
that the Management has provided all revised Sri Lanka Accounting Standards
information and explanations requested by (SLFRS/LKAS) applicable to the Bank and
the Auditors. made necessary recommendations to the
At the conclusion of the audit, the Board. The Committee would continue
Committee also met the Auditors to review to monitor the compliance with relevant
the Auditor’s Management Letter before it Accounting Standards and keep the Board
was submitted to the Board and the CBSL. informed at regular intervals.
The members of the Committee
evaluated the Bank’s External Auditor, Messrs
Ernst & Young covering key areas such as
scope and delivery of audit, resources and
quality assurance initiatives, during the
year 2020.

88
Report of the Board Integrated Risk Management Committee
Composition of the Committee
During the year, the Board Integrated Risk Management Committee (the BIRMC) consisted of the following members. Profiles of the members
as at December 31, 2020, are indicated on pages 64 to 69.

Attendance Attendance

Prof A K W Jayawardane* (Chairman) 00/00 Mr S C U Manatunge 05/05

(Appointed as a Member/Chairman w.e.f. December 31, 2020) (Director/Chief Operating Officer)
Mr M P Jayawardena* (Former Chairman) 05/05 Ms A V P K T Amarasinghe

Regular attendees
(Relinquished office w.e.f. December 29, 2020) (Assistant General Manager – Compliance)

by invitation
Mr S Renganathan (Managing Director/ 05/05 (Appointed w.e.f. November 25, 2020)

Board Committee Reports

Chief Executive Officer) Mr V S Rajasooriyar (Assistant General
Board members

Mr K Dharmasiri* (Director) 05/05 Manager – Compliance) –

(Retired w.e.f. November 11, 2020)
Mr L D Niyangoda* (Director) 05/05
Mr K S A Gamage
Mr T L B Hurulle* (Director) 05/04 (Assistant General Manager – Information
Mr S Swarnajothi* (Director) 03/03 Technology)
(Retired w.e.f. August 20, 2020)
Secretary to the Committee
Ms J Lee * (Director) 02/02 Mr K D N Buddhipala (Chief Financial Officer)

Governance and Risk Management

(Appointed to BIRMC w.e.f. August 13, 2020)
Mr R Senanayake* (Director) 01/01
(Appointed to BIRMC w.e.f. September 27, 2020)

Mr S K K Hettihamu (Chief Risk Officer)

(Non-Board Member)
*Independent Non-Executive Director

Charter of the Committee All key risks such as credit, operational,

The BIRMC has been established by the market, liquidity, information technology,

Annual Report 2020

Board of Directors, in compliance with strategic, etc. are assessed by the BIRMC
Section 3 (6) of the Direction No. 11 of 2007, regularly through a set of defined risk
on “Corporate Governance for Licensed indicators. The Committee works very closely
Commercial Banks in Sri Lanka”, issued by the with the Key Management Personnel and
Monetary Board of the CBSL under powers the Board in fulfilling its statutory, fiduciary,
vested in the Monetary Board, in terms of the and regulatory responsibilities for risk
management. The risk profile of the Bank

Commercial Bank of Ceylon PLC

Banking Act No. 30 of 1988. The composition
and the scope of work of the Committee is communicated to the Board of Directors
are in line with the same, as set out in periodically through the Risk Assessment
the BIRMC Charter which was reviewed Report submitted to the Board following
Prof A K W each BIRMC meeting.
Jayawardane during December 2020, and clearly sets
Chairman – out the membership, authority, duties and
Board Integrated responsibilities of the BIRMC as described Activities in 2020
Risk Management in the “Risk Governance and Management” In discharging the above duties and
Committee Section of this Annual Report on pages 114 responsibilities vested on the BIRMC, the
to 133. Committee reviewed significant risks
The BIRMC assists the Board of Directors comprising strategic, operational, credit,
in fulfilling its responsibilities for overseeing market, cyber and other emerging risk
“Deliberated on sectors the Bank’s risk management framework and categories during the year. The activities
affected by the pandemic and activities, including the review of major risk carried out by the Committee are include
below;
the factors that are within the exposures and the steps taken to monitor
and control those exposures pertaining
control of the Bank to mitigate to the myriad of risks faced by the Bank
z Main focus area for the year 2020 was
on the deteriorated credit quality level
the risks. These were given in its business operations. Duties of the of the industry amidst socio-economic
BIRMC include determining the adequacy
due cognisance with a view to and effectiveness of such measures, and to
challenges that the country is facing due to
the COVID-19 global pandemic situation.
arresting deterioration of ensure that the actual overall risk profile Deliberations on sectors affected and
of the Bank conforms to the desirable risk
credit quality.” profile of the Bank, as defined by the Board.
the factors that are within the control of
the Bank to mitigate the risks were given
due cognisance with a view to arresting
deterioration of credit quality.

89
 z Excess liquidity arising out of mediocre were recommended to mitigate the effects z Findings from the biannual Risk Control
credit growth, challenges stemming of specific risks, in case such risks exceeded Self-Assessment (RCSA) exercise were
from decreasing interest rates, as well the prudent thresholds defined by the reviewed.
as shift in risk appetite of counterparts Board of Directors.
linked to sovereign rating down grading z An exercise to validate internal ratings During the year under review, the BIRMC
by international credit rating agencies through external consultants concluded held four (04) meetings on quarterly basis
which had exacerbated the operating with a focus on adoption of rating and one (01) additional meeting specifically
environment related risk factors, attracted migration as a way of ascertaining to discuss the impact of COVID-19 pandemic
the attention of the Committee in most of probability of default (PD) at a future date, on risk profile of the Bank. The proceedings
the deliberations leading to formulation of instead of current proxies adopted by all of the Committee meetings were regularly
strategies by the Management. the financial institutions in Sri Lanka. reported to the Board of Directors.
z Another focus area of the Committee z Reviewed and revised the Terms of During the year 2020, the BIRMC
under the prevailing conditions was Reference of all Management Committees supported execution of the overall business
the information and cybersecurity dealing with specific risks or some aspects strategy of the Bank within a set of prudent
Board Committee Reports

ramifications arising out of the rapid shift of risk, such as the Executive Integrated risk parameters that are reinforced by an
to the “Work-From-Home” environment Risk Management Committee, Executive effective risk management framework.
and the enhancements required to ensure Committee on Monitoring NPLs, Credit Proceedings of the Committee meetings
strong security for the remote access Policy Committee, Information Security which also included activities under its
arrangements in terms of management, Council, Asset and Liability Committee, Charter were regularly reported to the Board
technical and physical controls. etc. Actions initiated by the Senior of Directors.
Amid the heightened cyberthreats in the Management were monitored periodically
Pandemic environment, the BIRMC focused to verify the effectiveness of the measures
on the progress of the key information taken by these respective Committees.
Governance and Risk Management

security projects planned for the year 2020 z The annual work plans, related strategies,
as part of the Bank’s information security policies and frameworks of the above
roadmap which included Privilege Access Committees were reviewed to ensure
Management (PAM), Data Loss Prevention that these Committees have a good
(DLP) and Security Operations Centre (SOC) understanding of their mandates and
initiatives. adequate mechanisms to identify, measure, Prof A K W Jayawardane
z Approval of parameters and limits set avoid, mitigate, transfer, or manage the Chairman – Board Integrated Risk
by the Management against various risks within the qualitative and quantitative Management Committee
categories of risk upon ascertaining that parameters set by the BIRMC.
February 24, 2021
they are in accordance with the relevant z Reviewed and approved the Internal
laws and regulations as well as the desired Capital Adequacy Assessment Process
policy levels stipulated by the Board of (ICAAP) results related to Commercial Bank
Annual Report 2020

Directors. Group entities to ensure that the Group

z Reviewed periodic reports from the maintains an appropriate level and quality
Management on the metrics used to of capital in line with the risks inherent
measure, monitor and manage risks, in its activities and projected business
including acceptable and appropriate performance.
levels of risk exposures. The reviews z Monitored the effectiveness and the
Commercial Bank of Ceylon PLC

covered movements from inherent to independence of the risk management

residual risk levels which indicate the function within the Bank and ensured the
progress in implementing controls and adequacy of resources deployed for this
assessing the effectiveness of measures for purpose.
addressing the sources of risk. z Reviewed the effectiveness of the
z Improvements were recommended to the compliance function to assess the Bank’s
Bank’s risk management framework and compliance with laws, regulations,
related policies and procedures as deemed regulatory guidelines, internal controls,
suitable, in consideration of anticipated and approved policies in all areas of
changes in the economic and business business operations.
environment, including consideration for z Initiated appropriate action through the
emerging risks, legislative or regulatory Management against failures of the risk
changes and other factors considered owners in order to improve the overall
relevant to the Group’s risk profile. effectiveness of the Risk Management of
z The Key Risk Indicators (KRIs) designed the Bank.
to monitor the level of specific risks z The risk profiles of the subsidiaries of the
were reviewed regularly, with a view Bank were monitored through periodic
to determining the adequacy of such review of KRIs and comprehensive annual
indicators to serve the intended risk risk reviews.
management objectives and took
z Reviewed the adequacy of the business
proactive measures to control risk
continuity and disaster recovery plans
exposures. The actual results computed
of the Bank, in line with the statutory
monthly were reviewed against each risk
requirements.
indicator and prompt corrective actions

90
Report of the Board Nomination Committee
Composition of the Committee
During the year, the Board Nomination Committee (the BNC) consisted of the following members. Profiles of the members as at December 31,
2020, are given on pages 64 to 69.

Attendance Attendance

Justice K Sripavan* (Chairman) (Appointed to BNC 04/04

Regular attendees
w.e.f. October 27, 2020 and appointed as the Chairman w.e.f.

by invitation
December 31, 2020)
Mr S Renganathan (Managing Director/ 11/11
Mr K G D D Dheerasinghe* (Former Chairman) – 11/11 Chief Executive Officer)
Board members

(Relinquished office w.e.f. December 21, 2020)

Board Committee Reports

Mr M P Jayawardena* (Director) 11/11
(Relinquished office w.e.f. December 29, 2020)
Mr S Swarnajothi* (Director) – 07/07 Secretary to the Committee
(Retired w.e.f. August 20, 2020) Mr R A P Rajapaksha (Company Secretary)
Ms J Lee* (Director) 04/04
(Appointed to BNC w.e.f. August 13, 2020)
Prof A K W Jayawardane* (Director) 04/04
(Appointed to BNC w.e.f. October 27, 2020)

Governance and Risk Management

*Independent Non-Executive Director

Terms of reference of the Committee z implement a procedure for the selection/

The Board Nomination Committee was appointment of Managing Director/Chief
established by the Board of Directors Executive Officer, Chief Operating Officer
in compliance with the Clause 3 (6) (iv) and other Key Management Personnel.
of Banking Act Direction No. 11 of 2007 z set the criteria such as qualifications,
on “Corporate Governance for Licensed competencies, experience, independence,
Commercial Banks in Sri Lanka” issued by conflict of interest and other key attributes

Annual Report 2020

the Monetary Board of the Central Bank of required for the eligibility to be considered
Sri Lanka (CBSL) under powers vested in the for the appointment or promotion to
Monetary Board in terms of Section 46 (1) of the position of Managing Director/Chief
the Banking Act No. 30 of 1988, as amended. Executive Officer, Chief Operating Officer
The Committee was established to ensure and Key Management Personnel.
Board’s oversight and control over selection z prior to any appointment being made by
Justice K Sripavan of Directors, Chief Executive Officer and Key the Board, evaluate the balance of skills,

Commercial Bank of Ceylon PLC

Chairman – Board Management Personnel. knowledge, experience and diversity on
Nomination
The Composition and the scope of work the Board and in light of this evaluation,
Committee
of the Committee are in line with the same as prepare a description of the role and
set out in the Terms of Reference. capabilities required for a particular
appointment.
Charter of the Committee z in respect of the Executive Directors and
“The Committee having The Committee shall; Key Management Personnel consider
identified suitable persons z review the structure, size and composition
proposals for their appointment or
promotion and any proposal for their
to fill the vacancies arising in of the Board and make recommendations dismissal or any substantial change in their
the Board, recommended the to the Board with regard to any change. duties or responsibilities or the terms of
z review the leadership needs of the their appointment.
appointment of three new organisation, both executive and non- z prior to the appointment of a Director
Non Executive/Independent executive with a view to ensure long ensure that the proposed appointee would
Directors to the Board.” term sustainability of the organisation to disclose any other business interests that
compete effectively in the market place. may result in a conflict of interest and
z implement a procedure for the report any future business interests that
appointment and re-appointment could result in a conflict of interest.
of Directors to the Board taking into z consider and recommend from time to
account factors such as fitness, propriety time, the requirements of additional/
including qualifications, competencies, new expertise for Directors and other Key
independence and relevant statutory Management Personnel.
provisions and regulations.

91
 z propose the maximum number of listed Activities in 2020 The Committee continued to work
Company Board representations which Eleven (11) Committee meetings were closely with the Board of Directors on
any Director may hold in accordance held during the year under review. The matters assigned to the Committee and
with relevant statutory provisions and proceedings of the Committee meetings are reported back to the Board of Directors with
regulations. regularly reported to Board of Directors. its recommendations.
z peruse duly completed Affidavits and In consideration of the Terms of
Declarations of all Directors and Key Reference revised in the year 2019, the
Management Personnel and recommend Committee was entrusted to set the criteria
same for approval of the Board. such as qualifications, experience and
z formulate plans for succession for Key key attributes required for eligibility to be
Management Personnel, Executive and considered for the appointment/ promotion
Justice K Sripavan
Non-Executive Directors in the Board and of the Key Management Personnel, which
in particular for the key roles of Chairman task was previously administered by the Chairman – Board Nomination Committee
and Chief Executive Officer and Chief Board Human Resources and Remuneration February 24, 2021
Board Committee Reports

Operating Officer taking into account Committee of the Bank. Accordingly, during
challenges and opportunities facing the the year 2020 the Committee carried out the
Company and skills needed in the future. relevant reviews and interviews pertaining
z make recommendations to the Board to the appointment/promotion of the Key
concerning, suitable candidates for the Management Personnel of the Bank.
role of Senior Independent Director The Committee recommended the
in instances where Chairman is not an election/re-election of Directors, taking into
Independent Director, membership of account the performance and contribution
other Board Committees as appropriate made by them towards the overall
Governance and Risk Management

in consultation with the Chairpersons of discharge of the Board’s responsibilities.

those Committees and the re-election of The Committee identified suitable persons
Directors at the Annual General Meeting to fill the vacancies arising in the Board and
by the Shareholders or the retirement by after carefully evaluating several candidates,
rotation according to the provisions of the recommended the appointment of three (03)
Articles of Association of the Bank. new Non Executive/ Independent Directors
z monitor the progress of any relevant to the Board during the year.
Corporate Governance or Regulatory The Committee was also responsible
Developments, that may impact the for recommending the appointment of
Committee and recommend any actions or Justice K Sripavan as the Chairman of the
changes it considers necessary for Board Bank and Prof A K W Jayawardane as the
approval and ensure compliance with Deputy Chairman of the Bank after careful
Annual Report 2020

existing Laws and regulations. consideration, w.e.f. December 21, 2020

z be authorised to discuss issues under its and December 29, 2020, respectively,
purview and report back to the Board with pursuant to Mr K G D D Dheerasinghe
recommendations, enabling the Board to (Former Chairman of the Bank) and
take a final decision on the matter. Mr M P Jayawardane (Former Deputy
Chairman of the Bank) relinquishing their
z be authorised to express their independent
Commercial Bank of Ceylon PLC

offices w.e.f. December 21, 2020 and

views when making decisions.
December 29, 2020, respectively, upon the
z be authorised by the Board to obtain, at completion of nine years as Non-Executive/
the Bank’s expense, outside legal or other Independent Directors of the Bank, in
professional advice on any matters within terms of Clause 3(2)(ii)A of the Banking
its Terms of Reference. Act Direction No 11 of 2007, Corporate
z make recommendations to the Board Governance for Licensed Commercial Banks
concerning an indemnity and insurance in Sri Lanka.
cover to be taken in respect of all Directors The Committee obtained declarations
and Key Management Personnel in from all the Directors through a prescribed
accordance with the Articles of Association, format confirming their status of
relevant statutory provisions and independence.
regulations.
z invite any member of the Corporate
Management, any member of the Bank
staff or any external advisers to attend
meetings as and when appropriate and
necessary.

92
Report of the Board Human Resources and Remuneration Committee
Composition of the Committee
During the year, the Board Human Resources and Remuneration Committee (the BHRRC) consisted of the following members. Profiles of the
members as at December 31, 2020, are indicated on pages 64 to 69.

Attendance Attendance

Justice K Sripavan* (Chairman) 01/01

Regular attendees
(Appointed to the BHRRC w.e.f. October 27, 2020 and

by invitation
Mr S Renganathan 05/05
Appointed as the Chairman w.e.f. December 31, 2020) (Managing Director/Chief Executive Officer)
Mr K G D D Dheerasinghe* (Former Chairman) 05/05 Participated in all deliberations except
those matters impacting his own terms
Board members

(Relinquished office w.e.f. December 21, 2020)

Board Committee Reports

and conditions of employment.
Mr M P Jayawardena* (Director) 05/05
(Relinquished office w.e.f. December 29, 2020)
Mr S Swarnajothi* (Director) 04/04 Secretary to the Committee
(Retired w.e.f. August 20, 2020) Mr U I S Tillakawardana (Deputy General Manager –
Prof A K W Jayawardena (Director)* 01/01 Human Resource Management)
(Appointed to BHRRC w.e.f. October 27, 2020)
Ms J Lee* (Director) 00/00
(Appointed to BHRRC w.e.f. December 31, 2020)

Governance and Risk Management

*Independent Non-Executive Director

Charter of the Committee z Evaluate, assess and make

Evaluate, assess, decide and recommend recommendations and provide directions
to the Board, matters that may affect the pertaining to the Board of Trustees and the
Human Resource Management of the Bank management of the Private Provident Fund
specifically including: of the Bank.
z Ensure that all regulatory and contractual
z Determine compensation of the Chairman,
commitments relating to employees are
Deputy Chairman, Managing Director and

Annual Report 2020

fulfilled in a timely manner.
other members of the Board of Directors of
the Bank, while ensuring that no Director z Recommend/decide/give directions
is involved in setting his or her own on disciplinary matters resulting in a
remuneration. significant financial loss to the Bank,
caused by KMP of the Bank.
z Determine compensation and benefits
Justice K Sripavan z Formulate formal and transparent
of the KMP and establish performance

Commercial Bank of Ceylon PLC

Chairman – Board parameters in setting their individual goals procedures for developing policy on
Human Resources remuneration for Executives and Directors.
and targets.
and Remuneration
z Formulate guidelines, policies and z Approve annual increments, bonuses,
Committee
parameters for the compensation changes in perquisites and incentives.
structures for all executive staff of the Bank The Chairman of the Committee can convene
and oversee its implementation. a special meeting in the event a requirement
“Reviewed the proposals z Review information related to executive arises provided all members are given
made to the management pay from time to time to ensure same is on sufficient notice of such special meeting. The
par with the market/industry rates or as per quorum for a meeting is two (2) members.
to renew the Collective the strategy of the Bank. Members of the Corporate Management
Agreement with the Ceylon z Evaluate the performance of Managing may be invited to participate at the sittings
Director and KMP against the pre-agreed of the Committee meetings as and when
Bank Employees' Union (CBEU) required by the Chairman, considering the
targets and goals.
for the years 2021, 2022 and z Make recommendations to Board of
topics for deliberation at such meeting. The
proceedings of the Committee meetings are
2023 and recommended the additional/new expertise required by
regularly reported to the Board of Directors.
same for the approval of the the Bank.
z Assess and recommend to the Board,
Board of Directors.” promotions of KMP, address succession
planning and issues relating to
organisational structure.

93
 Guiding Principles The Bank’s variable (bonus) pay plan The Committee reviewed the proposals
The overall focus of the Committee: is determined according to the overall made to the management to renew the
achievements of the Bank and pre-agreed Collective Agreement with the Ceylon Bank
z Setting guidelines and policies to individual targets, which are based on Employees' Union (CBEU) for the years 2021,
formulate compensation packages, which various performance parameters. The level of 2022 and 2023 and recommended the same
are attractive, motivating and capable variable pay is set to ensure that individual for the approval of the Board of Directors.
of retaining qualified and experienced rewards reflect the performance of the Bank
employees in the Bank. In this regard, overall, the particular business unit and
the Committee sets the criteria such as individual performance. The Committee
qualifications, experience and the skills and makes appropriate adjustments to the
competencies required, to be considered bonus pool in the event of over or under
for appointment or promotion to the achievement against predetermined targets.
post of Managing Director and to Key In this regard, the Committee can seek Justice K Sripavan
Management Positions. external independent professional advice on
matters falling within its purview. Chairman – Board Human Resources and
z Setting guidelines and policies to ensure
Board Committee Reports

Remuneration Committee
that the Bank upholds and adheres to Further, the Committee may seek
the provisions of the Laws of the Lands external agencies to carry out salary surveys February 24, 2021
particularly those provisions of the Banking to determine the salaries paid to staff
Act No. 30 of 1988, including the Directions vis-à-vis the market position, enabling the
issued by the Monetary Board/Director of Committee to make informed decisions
Bank Supervision in accordance with the regarding the salaries in the Bank.
provisions of such Act.
z Providing guidance and policy direction Activities in 2020
Governance and Risk Management

for relevant matters connected to general The Committee held five (5) meetings during
areas of Human Resources Management of the year under review and the proceedings
the Bank. of the Committee meetings which also
z Ensuring that the performance related included activities under its Terms of
element of remuneration is designed and Reference were regularly reported to the
tailored to align employee interests with Board of Directors with its comments and
those of the Bank and its main stakeholders observations.
and support sustainable growth. The Committee determined the bonus
z Structuring remuneration packages to payable for 2019 performance according
ensure that a significant portion of the to the Variable Pay Plan (VPP) for Executive
remuneration is linked to performance, to staff and the grant of annual increments to
promote a pay for performance culture. the Executive staff who are not covered by
Annual Report 2020

z Promoting a culture of regular the Collective Agreement. Performance of

performance reviews to enable staff to the members of the Corporate Management
obtain feedback from their superiors in during the financial year 2019 including that
furtherance of achieving their objectives of the Managing Director/Chief Executive
and development goals. Officer, and the Chief Operating Officer were
reviewed. At the conclusion of the review
z Developing a robust pipeline of raising
Commercial Bank of Ceylon PLC

process for 2019, the Key Performance Areas

talent capable and available to fill key
and the respective KPIs of the Corporate
positions in the Bank.
Management members set for 2020 were
Methodology adopted by the committee carefully perused by the Committee and
agreed on, subject to changes.
The Committee recognises rewards as one
of the key drivers influencing employee Requests by the Pensioners for a revision
behaviour, thereby impacting business of pension was considered and granted
results. Therefore, the reward programmes during the year. The Terms of Reference for
are designed to attract, retain and to the BHRRC was reviewed and recommended
motivate employees to perform by linking for final approval by the Board of Directors.
performance to demonstrable performance- The Policy on Outsourcing Services
based criteria. In this regard, the Committee was reviewed and recommended for final
evaluates the performance of the Managing approval by the Board of Directors.
Director and KMP against the pre-agreed The Succession Plan of the Bank was
targets and goals that balance short-term reviewed by the BHRRC and guidance was
and long-term financial and strategic provided to the Managing Director.
objectives of the Bank.

94
Report of the Board Related Party Transactions Review Committee
Composition of the Committee
During the year, the Board Related Party Transactions Review Committee (the BRPTRC) consisted of the following Independent Non-Executive
Directors (in conformity with the requirements of the Code of Best Practice on Corporate Governance issued by CA Sri Lanka). Profiles of the
members as at December 31, 2020, are indicated on pages 64 to 69.

Attendance Attendance

Regular attendees
Justice K Sripavan* (Chairman) 04/04 Mr S Renganathan

by invitation
04/04
(Managing Director/Chief Executive Officer)
Board members

Mr L D Niyangoda* (Director) 04/04

Mr T L B Hurulle* (Director) 04/04 Mr S C U Manatunge
04/04
(Director/Chief Operating Officer)
Mr S Swarnajothi* (Director) 03/03

Board Committee Reports

(Retired w.e.f. August 20, 2020) Secretary to the Committee
Mr R Senanayake* (Director)* 01/01 Mr L W P Indrajith
(Appointed w.e.f. October 27, 2020) (Assistant General Manager – Finance)

*Independent Non-Executive Director

The mandate of the Committee includes z Obtaining independent validation from the

Governance and Risk Management

inter-alia, the following: Bank’s Internal Audit division for information
z Developing, updating and recommending
submitted to the Committee for its review.
for adoption by the Board of Directors of the Activities in 2020
Bank and its listed subsidiaries, a RPT Policy
During 2020, the Committee was
consistent with that proposed by the SEC.
strengthened by the appointment of one
z Updating the Board of Directors on the RPT Independent Non-Executive Director in
of each of the listed companies of the Group view of the retirement of one Independent
on a quarterly basis. Non-Executive Director. Further, as a part
z Advising the Board in making immediate of Bank’s annual review of policies, the RPT
market disclosures on applicable RPT as Policy was further reviewed and updated.
required by Section 9.3.1 of the Listing Rules The amended RPT Policy was approved by
of the CSE. the Board of Directors in November 2020

Annual Report 2020

Justice K Sripavan
z Advising the Board in making appropriate and implemented. Arrangements were also
Chairman – Board
Related Party disclosures on RPT in the Annual Report as made to disseminate the amended RPT Policy
Transactions Review required by Section 9.3.2 of the Listing Rules among all relevant stakeholders and obtain
Committee of the CSE. their acknowledgements that they have read
and understood the applicable regulatory
Methodology Adopted by the requirements relating to identifying, capturing

Commercial Bank of Ceylon PLC

Committee and reporting of RPT. In addition, the Terms
“The Committee was z Reviewing the mechanisms in place to obtain of Reference of the Committee was reviewed
and revised to capture new developments
declarations from all Directors (at the time
strengthened by the of joining the Board and annually thereafter) and was approved by the Board of Directors in
appointment of one informing the Company Secretary, the November 2020.
primary contact point for Directors, of any The Committee held four (4) meetings
Independent Non-Executive existing or potential RPT carried out by them during the year under review as required by
Director in view of the or their Close Family Members (CFM) and on Section 9.2.4 of the Listing Rules of the CSE.
retirement of one Independent obtaining further declarations on a quarterly The Committee reviewed all RPT carried out
during the year at its quarterly meetings and
basis in the event of any change during the
Non-Executive Director.” year to the positions previously disclosed. the proceedings of the Committee meetings
z Reviewing the mechanisms in place to obtain which also included activities under its Terms
confirmations on any new appointments of Reference, were regularly reported to the
accepted by Directors of the Bank in other Board of Directors with its comments and
entities as KMP, informing the Company observations.
Secretary to identify and capture such
Charter of the Committee transactions carried out by the Bank with such
entities which need to be disclosed under
This Committee was formed by the Board
‘Directors Interest in Contracts with the Bank’ as
in 2014 to assist the Board in reviewing all
disclosed on page 113 of this Annual Report.
related party transactions carried out by the Justice K Sripavan
Bank and its listed subsidiaries in the Group by z Reviewing the mechanisms in place to
Chairman – Board Related Party Transactions
early adoption of the Code of Best Practice on capture and feed relevant information on RPT
Review Committee
Related Party Transactions (RPT) as issued by which also includes information on KMP, CFM
and the Bank’s subsidiaries and associate into February 24, 2021
the SEC of Sri Lanka which became mandatory
for all listed entities from January 01, 2016. the data collection system and the accuracy
of such information.
95
 Report of the Board Credit Committee
Composition of the Committee
During the year, the Board Credit Committee (the BCC) consisted of the following members. Profiles of the members as at December 31, 2020,
are indicated on pages 64 to 69.

Attendance

Justice K Sripavan*(Chairman) – (Appointed as the Chairman w.e.f. December 31, 2020) 12/12
Board members

Mr K G D D Dheerasinghe* (Former Chairman) – (Relinquished office w.e.f. December 21, 2020) 12/12
Mr S Renganathan (Managing Director/Chief Executive Officer) 12/12
Mr S C U Manatunge (Director/Chief Operating Officer) 12/12
Board Committee Reports

Prof A K W Jayawardane* – (Resigned from BCC w.e.f. December 31, 2020) 12/12
Mr K Dharmasiri* (Director) – (Appointed to BCC w.e.f. December 31, 2020) 00/00
Secretary to the Committee – Mr R A P Rajapaksha (Company Secretary)
*Independent Non-Executive Director

Charter of the Committee In a challenging environment due to the

COVID-19 pandemic affecting the global and
Governance and Risk Management

The Committee assists the Board of Directors

in effectively fulfilling its responsibilities local business environment, the Committee
relating to the Credit Direction, Credit Policy set the Lending Directions of the Bank for
and Lending Guidelines of the Bank in order prudent management of credit growth,
to inculcate prudent lending standards while aiming at maintaining and improving
and practices while ensuring that relevant asset quality.
regulations are complied with. The Committee approved credit
The Committee is empowered to: proposals above a predetermined limit,
recommended credit proposals and other
z Review and consider changes proposed credit reports intended for approval/perusal
from time to time to the Credit Policy and by the Board of Directors after careful
the Lending Guidelines of the Bank. scrutiny. These tasks were carried out by the
Justice K Sripavan
Annual Report 2020

Chairman – z Review the credit risk controls in lending Committee in line with the Bank’s lending
Board Credit and pricing of lending proposals, ensure policies and credit risk appetite to ensure
Committee alignment with the market context and that the lending portfolios were managed in
the internal policy of the Bank and the line with the stipulated credit risk parameters
prevailing regulatory framework in order set by the Board of Directors while achieving
to ensure continuous maintenance and the Bank’s lending targets.
enhancement of the overall quality of the
Commercial Bank of Ceylon PLC

“Given the challenging Bank’s loan book.

environment due to the z Evaluate, assess, and approve credit

pandemic affecting the proposals which fall within the delegated

authority.
global and local business z Evaluate and recommend sector exposures
environment, the Committee and cross border exposures. Justice K Sripavan

set the Lending Directions z Monitor and evaluate special reports called Chairman – Board Credit Committee
for by the Board of Directors. February 24, 2021
of the Bank for prudent
z Set lending directions based on the current
management of credit growth, economic climate and risk appetite of the
while aiming at maintaining Bank.
and improving asset quality.” Activities in 2020
The Committee held twelve (12) meetings
during the year under review. The
proceedings of the committee meetings
were regularly reported to the Board of
Directors.

96
Report of the Board Investment Committee
Composition of the Committee
During the year, the Board Investment Committee (the BIC) consisted of the following members. Profiles of the members as at December 31,
2020 are indicated on pages 64 to 69.

Attendance
Mr K D N Buddhipala

Regular attendees
Ms J Lee* (Chairperson) (Appointed to the Committee 04/04 (Chief Financial Officer)

by invitation
w.e.f. August 13, 2020 and appointed as the Chairman w.e.f.
Mr K A P Perera
December 31, 2020)
(Deputy General Manager – Treasury)
Board members

Mr K G D D Dheerasinghe* (Former Chairman) 10/10

Mr B A H S Preena (Assistant General Manager –
(Relinquished office w.e.f. December 21, 2020)
Corporate Banking)

Board Committee Reports

Mr S Renganathan 10/10
Mr S K K Hettihamu (Chief Risk Officer)
(Managing Director/Chief Executive Officer)
Mr S C U Manatunge 10/10 Secretary to the Committee
(Director/Chief Operating Officer) Mr A Wijesiriwardane
(Assistant General Manager – Treasury)
Mr K Dharmasiri* (Director) 10/10
Ms N T M S Cooray* (Director) 10/09
*Independent Non-Executive Director

Governance and Risk Management

Charter of the Committee where the interest rate risk, repricing risk,
The Board Investment Committee is currency risk, and other market risks are
responsible for the investment activities discussed.
of the Bank. Investment proposals for The Committee also from time to time
debt, equity, and business ventures are would issue instructions to executive officers
evaluated by the Committee for feasibility, of the Bank on investment related activities.
relevance to core banking objectives, and
contribution to shareholder value. The Activities in 2020
Committee also evaluates the Bank’s overall
z Reviewed the Bank’s foreign currency
liquidity management operations, treasury

Annual Report 2020

investment limit given the growth in
investments and borrowing activities, and
FCY balance sheet and investment
capital adequacy.
opportunities
Ms J Lee Within this framework the Committee
z Evaluated and approved strategic equity
Chairperson – performs the following duties:
investments by the Bank
Board Investment
z Reviews, amends, and approves investment z Approved investments in the Bank’s
Committee

Commercial Bank of Ceylon PLC

policies and operational parameters subsidiaries
relating to investments of the Bank
z Monitors adherence to investment policies, The Committee held ten (10) meetings
investment processes, and decisions of the
"Reviewed the Bank's foreign Investment Committee
during the year under review. The
proceedings of the Committee meetings
currency investment limit z Approves investment proposals, which also included activities under its Terms
given the growth in FCY borrowings, and execution of agreements of Reference were regularly reported to the
z Reviews the performance of the Board of Directors.
balance sheet and investment
investment portfolio
opportunities." z Reviews and recommends significant
investment decisions to be undertaken by
the Bank to the Board of Directors

Methodology adopted by the Committee Ms J Lee

The Committee meets monthly and reviews Chairperson – Board Investment Committee
progress of strategic and significant February 24, 2021
investments, liquidity situation of the Bank,
market developments and the economic
outlook of the markets it operates in, and
new investment strategies. The Committee
also reviews the monthly performance of
Treasury and Investment Banking Division,

97
 Report of the Board Technology Committee
Composition of the Committee
During the year, the Board Technology Committee (the BTC) consisted of the following members. Profiles of the members as at December 31,
2020 are indicated on pages 64 to 69.

Attendance
Mr L H Munasinghe
Prof A K W Jayawardane* (Chairman) 05/05 (Deputy General Manager – Marketing)

Regular attendees
Board members

by invitation
Mr S Renganathan 05/05 Mr D B Saparamadu (Consultant)
(Managing Director/Chief Executive Officer)
Mr U K P Banduwansa (Head of Retail Products and
Mr S C U Manatunge 05/05 Digital Channels)
(Director/Chief Operating Officer)
Board Committee Reports

Mr V Thotagammana (Head of IT)

Mr T L B Hurulle* (Director) 05/05
Mr K Mediwake (Chief Executive Officer – CBC Tech
Mr K Dharmasiri* (Director) 05/05 Solutions Limited)
*Independent Non-Executive Director Secretary to the Committee
Mr K S A Gamage
(Assistant General Manager – Information Technology)
Governance and Risk Management

Charter of the Committee which were particularly useful for customers

The purpose of the BTC is to assist the facing obstacles during the period of the
Board of Directors in fulfilling its oversight COVID-19 pandemic.
responsibilities with respect to the overall z Combank Digital for the online banking
alignment of technology in executing the customer base enabling them to perform
business strategy of the Bank including, all the monetary transactions and day to
but not limited to, major technology day banking.
investment, technology strategy, operational
z ePassbook re-launched with latest mobile
performance and technology trends that
features enabling the customers to view
may affect current and future banking.
their accounts and transactions with
The Committee has been empowered to: greater convenience
Annual Report 2020

z Set the overall technology strategy and z Q+ acts as an e-wallet where customers
Prof A K W
track progress of the activities to meet the can securely manage card related
Jayawardane
Chairman – corporate objectives. transactions via QR. Q+ was the first app to
Board Technology z Analyse emerging technologies and their be launched with Lanka QR in the country
Committee potential use to drive corporate IT strategy. z App Aggregator as one single place for all
z Review significant technology Combank related apps
Commercial Bank of Ceylon PLC

procurements, prior to them being sent to z Flash with enhanced new features and the
the Board of Directors for approval. Combank Digital
“Focused on improving Mobile z RemitPlus for workers to track their
First, Agility, Service-oriented Activities in 2020 remittances
The Committee held five (5) meetings during
Culture and Operational 2020 and the proceedings of the Committee
Agility to cater to the ever growing demand
Excellence, e-waste disposal meetings (which also included activities
and to add value to the existing customer
and IT Governance, bringing under its Terms of Reference) were regularly
needs to delight customer experience and
reported to the Board of Directors with its
key drivers to a digital era.” comments and observations. The Committee
convenience.
focused on improving the following areas, z IT R&D adopted Agile SCRUM way of
which are the key drivers taking the Bank to working with the rest of the stakeholders
a digital era. z Agile way of working supported business
Mobile First to create a next level units to deliver the right products and
banking experience by extending most of features at the right time, faster delivery of
the functionalities to customers’ finger tips services with enhanced quality with high
with evolving technology trends and latest productivity
banking and financial features, such as self- z Post implementation time has been cut
registration, biometric authentication and down by 50% to ensure fast deployment to
real time notification. The Bank successfully be the first to market
launched the following mobile applications

98
Service Oriented Culture and Operational IT Governance to engage the processes that
Excellence to build a sustainable and ensures the effective and efficient use of IT
competitive uninterrupted service through in enabling the Bank to achieve its goals and
operations management to cater to ever- objectives. The IT processes (Development/
increasing customer demands using Operational) were reviewed regularly to cater
emerging technology. to the Bank's dynamic needs with higher
transparency.
z System and service availability has been
greatly improved adhering to ISO 20000 – Implemented and certified with 
framework and managed to certify the ISO 20000:2018 certification in the
Bank in 2020 by collating all the support year 2020 as the first local bank in the
service related stakeholders to adhere to country. ISO 20000, the international
ISO 20000 Framework standard that enables IT organisations to
z High availability architecture and upgraded ensure that their IT service management
monitoring mechanism to increase service (ITSM) processes are aligned both with

Board Committee Reports

uptime for critical systems the needs of the business and with
international best practices. This strategic
z Proper capacity planning to cater to ever
implementation will help Commercial
growing application needs
Bank to improve its service levels,
create a framework for independent
e-waste disposal to suppliers who
assessment and demonstrate an ability
follow environmental-friendly guidelines
to meet customer requirements. It gives
in disposing them as per international
the Bank a competitive advantage, as
standards followed by their principles.
it demonstrates the reliability and high

Governance and Risk Management

z eSlip for cash and cheque deposit  quality of IT service levels. 
– Improved customer convenience by – Adhering to Payment Card Industry Data
introducing eSlip mobile application Security Standards and Certification
for cash and cheque deposits. This will (PCIDSS)
directly support the Banks paperless – Adhering to ISO 27000:2013 Information
concept and will help to reduce the Security Standards and Certification
carbon footprint of each transaction.
– Adhering to Baseline Security Standards
– With this initiative the Bank expects (BSS)
to eliminate and minimise usage of
The Committee also reviewed submissions
paper, Pens, storage and waiting time of
on procurements of significant technology
customers.
related items for the Bank and recommended

Annual Report 2020

– This new initiative extends the such submissions for the consideration by
convenience to the customers by the Board of Directors.
enabling their mobile phones as
depositing instruments which helps to
generate slips "on the go".
z eStatements for Current Savings

Commercial Bank of Ceylon PLC

Accounts and Credit Cards
– The Bank has been aggressively
promoting eStatements for Current
Accounts, Savings Accounts and Credit Prof A K W Jayawardane
Card accounts which is an initiative taken
towards Banks paperless concept. Chairman – Board Technology Committee
– Customers can enrol Digital Banking February 24, 2021
services with the self-registration feature
without the need to visit the Bank.
– This self-registration feature was heavily
used during the periods of lockdown.

99
 Report of the Board Strategy Development Committee
Composition of the Committee
During the year, the Board Strategy Development Committee (the BSDC) consisted of the following members. Profiles of the members as at
December 31, 2020, are indicated on pages 64 to 69.

Attendance Attendance

Justice K Sripavan* (Chairman) – 00/00 Mr M P Jayawardena* (Director) – 11/11

Board members
(Appointed as a Member/Chairman w.e.f. (Relinquished office w.e.f. December 29, 2020)
December 31, 2020) Ms J Lee* (Director) – 05/05
Mr K G D D Dheerasinghe* (Former Chairman) 11/11 (Appointed to BSDC w.e.f. August 13, 2020)
Board members

(Relinquished office w.e.f. December 21, 2020) Mr R Senanayake* (Director) – 00/00

Board Committee Reports

Mr S Renganathan 11/11 (Appointed to BSDC w.e.f. December 31, 2020)

(Managing Director/Chief Executive Officer)
Secretary to the Committee
Prof A K W Jayawardane* (Director) 11/11 Mr R A P Rajapaksha (Company Secretary)
Mr K Dharmasiri* (Director) 11/11
Mr L D Niyangoda* (Director) 11/11
Ms N T M S Cooray* (Director) 11/10
*Independent Non-Executive Director
Governance and Risk Management

Charter of the Committee Activities in 2020

The Committee was established to have an The BSDC assisted the Board by evaluating
overall Bank-wide strategic management the business strategies and strengthening
oversight. core competencies of the Bank.
The Committee is empowered: The BSDC met more frequently than
the minimum of four meetings as per the
z To assist the Board in performing its
Terms of Reference [eleven (11) meetings
oversight responsibilities relating to the held in 2020] and was able to offer greater
Bank’s strategy. responsiveness in the strategic decision-
Annual Report 2020

z To advise and monitor the Management on: making process of the Bank.
– Defining of business strategies geared The BSDC reviewed matters related to
for the sustainable development of the capital planning, acquisition, investment
Bank; and opportunities and strategies to provide
Justice K Sripavan
Chairman – – Establishment of processes for planning, relief measures to borrowers affected by the
Board Strategy implementing, assessing, and adjusting COVID-19 pandemic in addition to actively
engage in the government relief scheme.
Commercial Bank of Ceylon PLC

Development of the business strategy.

Committee Further, the Committee provided guidance
z To oversee the Management’s engagement to ensure that adequate impairment cover is
on the strategic perspective, direction, and made while sustaining reasonable financial
development of the strategy for the Bank performance.
“Reviewed matters related to and its business units. Corporate Plan and strategies planned by
z To oversee the Management’s the Management were reviewed against the
capital planning, acquisition, implementation of the approved strategic achievement and necessary directions were
investment opportunities and plan and the progress against strategic provided to the Management to achieve the
milestones and goals. desired results.
strategies to provide relief
z To oversee the Management’s Important decisions taken at the
measures to borrowers affected implementation of major business Committee meetings which also included
by the pandemic in addition transformation projects and their execution. activities under its Terms of Reference were
regularly reported to the Board of Directors
to actively engaging in the z To engage in detailed discussion and
for information/approval.
provide guidance to the Management on:
government relief scheme.” – Governance, risk appetite, financial and
capital planning, liquidity and fund
management, control environment and
resources required to support the Bank’s
strategic objectives.
– Divestitures, mergers and acquisition Justice K Sripavan
strategies including post transaction Chairman – Board Strategy Development
performance tracking. Committee
– The impact of changes in the February 24, 2021
competitive environment.
100
Statement of Compliance
Further to the Annual Report of the Board of Directors on the Affairs of the Company appearing on page 3, given below is a summary of
the extent of compliance with the requirements of Section 168 of the Companies Act No. 07 of 2007 and amendments thereto and other
relevant statutes.

Statement of Compliance Table – 31

Disclosure requirement Reference to the Page reference for compliance and other necessary disclosures Page/s
relevant statute/
rule

Mandatory disclosures as required by the Companies Act No. 07 of 2007 and amendments there to (CA)
1. The nature of the business of the Group Section 168 Notes to the Financial Statements: Item 1.3: Principal business activities, 155 and 156
and the Bank together with any changes (1) (a) nature of operations of the Group and ownership by the Bank in its
thereof during the accounting period subsidiaries and associate

2. Signed Financial Statements of the Section 168 Financial Statements of the Group and the Bank for the year ended 143 to 290
Group and the Bank for the accounting (1) (b) December 31, 2020
period completed in accordance with
Section 152

3. Auditors’ Report on the Financial Section 168 Independent Auditors’ Report 138 to 140
Statements of the Group and the Bank (1) (c)

Governance and Risk Management

4. Accounting Policies of the Group and the Section 168 Notes to the Financial Statements: Significant Accounting Policies adopted 164 to 177
Bank and any changes therein (1) (d) in the preparation of the Financial Statements of the Group and the Bank

5. Particulars of the entries made in the Section 168 The Bank and all its subsidiaries maintain Interests Registers
Interests Registers of the Bank and its (1) (e)
All Directors have made declarations as required by the Sections 192 (1)
subsidiaries during the accounting
and (2) of the Companies Act aforesaid and all related entries were made in
period
the Interests Registers during the year under review
The Interests Registers are available for inspection by shareholders or their
authorised representatives as required by the Section 119 (1) (d) of the
Companies Act No. 07 of 2007
Refer "Directors' Interest in Contracts with the Bank" disclosed in the 113
Annual Report

Annual Report 2020

6. Remuneration and other benefits paid to Section 168 Note 21 to the Financial Statements: Other operating expenses 186
Directors of the Bank and its subsidiaries (1) (f )
during the accounting period Report of the Board Human Resources and Remuneration Committee 93 and 94

7. Total amount of donations made by Section 168 Note 21 to the Financial Statements: Other operating expenses 186
the Bank and its subsidiaries during the (1) (g)

Commercial Bank of Ceylon PLC

accounting period

8. Information on directorate of the Bank Section 168 Governance and Risk Management 64 to 133
and its subsidiaries during and at the (1) (h) Refer “Board of Directors and Profiles” for details of members of the Board 64 to 69
end of the accounting period of Directors of the Bank
Refer “Group Structure” for details of members of the Board of Directors of 362 and 363
the Group
Recommendations for re-election
(i) In terms of Article 85 of the Articles of Association, two Directors are
required to retire by rotation at each Annual General Meeting (AGM).
Article 86 provides that the Directors to retire by rotation at an AGM
shall be those who (being subject to retirement by rotation) have been
longest in office, since their last re-election or appointment.
(ii) The Board recommended the re-election/election of the following
Directors, after considering the contents of the Affidavits &
Declarations submitted by them and all other related issues:
(a) Re-election of Directors who retire by rotation
z Mr K Dharmasiri
z Ms N T M S Cooray
(b) Election of Directors who were appointed to fill casual vacancies
z Ms J Lee
z Mr R Senanayake
z Mr S Muhseen

101
 Disclosure requirement Reference to the Page reference for compliance and other necessary disclosures Page/s
relevant statute/
rule

(iii) Directors who served on the Board for nine years - None as at end
of 2020.
[In terms of the Banking Act Direction No. 11 of 2007 on “Corporate
Governance for Licensed Commercial Banks in Sri Lanka”, the total
period of service of a Director (other than a Director who holds the
Position of Chief Executive Officer) is limited to nine years. Further,
under the criteria to assess the fitness and propritery of Directors, the
age of a person who serves as director of a bank has been restricted to
a maximum of 70 years].
Mr K G D D Dheerasinghe (former Chairman) and Mr M P Jayawardena
(former Deputy Chairman) whose tenure of service on the Board
Statement of Compliance

reached nine years, relinquished office w.e.f. December 21, 2020,

and December 29, 2020, respectively. Mr S Swarnajothi who reached
seventy years of age during the year under review, retired w.e.f.
August 20, 2020.

9. Separate disclosure on amounts payable Section 168 Note 21 to the Financial Statements: Other operating expenses 186
to the Auditors as audit fees and fees (1) (i)
for other services rendered during the
accounting period by the Bank and its
subsidiaries
Governance and Risk Management

10. Auditors’ relationship or any interest Section 168 Independence confirmation has been provided by Messrs Ernst & Young
with the Bank and its subsidiaries (1) (j) as required by Section 163 (3) of the Companies Act No. 07 of 2007 and
(Lead Auditor’s independence) amendments thereto, in connection with the audit for the year ended
December 31, 2020 confirming that Ernst & Young is not aware of any
relationship with or interest in the Bank or any of its subsidiaries that in
their judgement, may reasonably be thought to have a bearing on their
independence within the meaning of the Code of Professional Conduct
and Ethics issued by CA Sri Lanka, applicable as at the reporting date
No prohibited non-audit services have been provided by Messrs Ernst &
Young as per the Direction issued by the CBSL on “Guidelines for External
Auditors relating to their Statutory Duties”. The Directors are satisfied as
the BAC has assessed each service, having regard to Auditor independence
Annual Report 2020

requirements of applicable laws, rules and regulations, and concluded

in respect of each non-audit service or type of non-audit service that
the provision of that service or type of service would not impair the
independence of Messrs Ernst & Young

11. Acknowledgement of the contents of Section 168 The Board of Directors have acknowledged the contents of this Annual 3
this report/signatures on behalf of the (1) (k) Report as disclosed
Board of Directors
Commercial Bank of Ceylon PLC

Other Disclosures as required by Recommended Best Practices (RBP) or Listing Rules (LR) of the Colombo Stock Exchange
12. Vision, Mission and Corporate Conduct RBP The business activities of the Group and the Bank are conducted Inner Front
maintaining the highest level of ethical standards in achieving our Cover
“Vision and Mission”, which reflect our commitment to high standards of
business conduct and ethics
The Bank issues a copy of its Code of Ethics to each and every staff member
and all employees are required to abide by the provisions contained
therein

13. Review of business operations of RBP “Joint Message from the Chairman and his predecessor” and “Managing 13 to 17
the Group and the Bank and future Director/Chief Executive Officer’s Review”
developments Management Discussion and Analysis 41 to 62
Note 62 to the Financial Statements: Operating segments 253 to 255

14. Gross income RBP Notes 12 and 62 to the Financial Statements: Gross income and 178, and
operating segments 253 to 255

15. Dividends on ordinary shares RBP Notes 25 and 69 to the Financial Statements: Dividends and 190 and 290
Events after the reporting period
Annex I – “Investor Relations” – Item 4 299

102
 Disclosure requirement Reference to the Page reference for compliance and other necessary disclosures Page/s
relevant statute/
rule

16. Reserves and appropriations RBP Statement of Changes in Equity 146 to 153
Notes 54, 55 and 56 to the Financial Statements: Statutory reserves, 244 to 248
Retained earnings and other reserves

17. Corporate Social Responsibility (CSR) RBP CSR Initiatives 2020 18 and 19

18. Extents, locations, valuations and the LR 7.6 (VIII) Note 39 to the Financial Statements: Property, plant and equipment and 214 to 225
number of buildings of the entity’s land right-of-use assets
holdings and investment properties Note 40 to the Financial Statements: Investment property 225 and 226
Note 58.2 to the Financial Statements: Capital commitments 249

19. Market value of properties LR 7.6 (XII) Notes 39.5 (b) to the Financial Statements: Information on valuation of 219 to 223

Statement of Compliance
freehold land and buildings of the Bank

Note 40.1 (b) to the Financial Statements: Information on Investment 226

properties of the Group – valuations

20. Issue of shares and debentures

20.1 Issue of shares by the Bank LR 7.6 (XIII) Notes 52 and 52.1 to the Financial Statements: Stated capital and 241
movements in number of shares

20.2 Issue of debentures by the Bank LR 7.6 (XIII) Note 51 to the Financial Statements: Subordinated liabilities 240

Governance and Risk Management

Annex I – "Investor Relations" – Item 10 302 and 303

20.3 Issue of shares and debentures CA S.168 (1) (e) During the year 2020, CBC Finance Ltd. (formerly known as Serendib
by the subsidiaries and associate Finance Ltd.), issued 70,323,488 shares at Rs. 14.22 per share for a total
consideration of Rupees one Billion (Rs.1 Bn.) in order to raise required
funds to meet the shortfall in statutory minimum core capital requirement
(In 2019, the Company issued 12,491,070 shares at Rs. 14.01 per share for
a total consideration of Rupees one hundred and seventy five million
(Rs. 175 Mn.) for the same purpose).
During the year 2020, the Bank acquired a further 20% stake in
Commercial Insurance Brokers (Pvt) Ltd., (CIBL), from Commercial
Development Company PLC (which had a stake of 20% in CIBL), for a
purchase consideration of Rupees one hundred and twenty five million

Annual Report 2020

(Rs. 125 Mn.). With this acquisition of shares, the Bank's stake in CIBL
increased to 60% as at December 31, 2020.
During the year 2019, the Bank acquired 40% stake in CIBL at a total
purchase consideration of Rupees Two Hundred and Fifty Million
(Rs. 250 Mn.) from Chemanex PLC.

Commercial Bank of Ceylon PLC

Except for the above share issues, the other subsidiaries and associate of
the Bank did not make any debenture or share issues during the year.

21. Share information and substantial

shareholdings

21.1 Distribution Schedule of Shareholdings, LR 7.6 (III) Annex I – "Investor Relations" – Item 5 299 to 302
names and the number of shares LR 7.6 (IV)
held by the 20 largest holders of LK 7.6 (X)
voting & non-voting shares and the LR 7.13.1
percentage of such shares held, float
adjusted market capitalisation, public
holding percentage, number of public
shareholders, and the option under
which the Bank complies with the
minimum public holding requirement.

21.2 Financial ratios and market price LR 7.6 (XI) Financial Highlights 8
information

Information on earnings, dividend, net Annex 7 – Decade at a Glance 354 to 357

assets, and market value per share

Information on listed debt Annex I – "Investor Relations" – Item 10 302 and 303
Annex 3 – Basel III – Disclosures under Pillar II as per Banking Act No. 01 of 334 and 335
2016 - Disclosure 6 – Main features of regulatory capital instruments

21.3 Information on shares traded and the LR 7.6 (IX) Annex I – "Investor Relations" - Item 1 to 3 295 to 299
number of shares represented by the
stated capital

103
 Disclosure requirement Reference to the Page reference for compliance and other necessary disclosures Page/s
relevant statute/
rule

21.4 Own share purchases CA S.64 The Bank does not purchase its own shares

21.5 Equitable treatment to shareholders RBP Statement of Directors’ Responsibility for Financial Reporting – Item (k) 108

22. Information on Directors’ meetings and

Board Committees

22.1 Directors’ meetings RBP Details of the meetings of the Board of Directors 79

22.2 Board committees RBP Board Committee Reports 86 to 100

23. Disclosure of Directors’ dealings in shares

and debentures
Statement of Compliance

23.1 Directors’ interests in ordinary voting LR 7.6 (V) Annex I - "Investor Relations" - Item 5.5 302
and non-voting shares of the Bank
Directors’ shareholdings in ordinary voting shares and ordinary non-voting
shares have not changed subsequent to the date of the Statement of
Financial Position up to February 05, 2021, the date being one month prior
to the date of Notice of the Annual General Meeting

23.2 Directors’ interests in debentures LR 7.6 (V) and Mr S Renganathan, MD/CEO, held 20,000 debentures of the Bank as at
RBP December 31, 2020. Except Mr S Renganathan there were no debentures
registered in the name of any other Director as at the beginning and at the
end of the year
Governance and Risk Management

24. Employee share option plans and profit LR 7.6 (XIV) Note 53 to the Financial Statements: Share-based Payment 241 to 244
sharing plans
The Bank and any of its subsidiaries have not, directly or indirectly, 241 to 244
provided funds for the ESOPs

The Group and the Bank do not have any employee profit sharing plans,
except the variable bonus scheme
Tabulated below are the details of options available/exercised by the
Executive Directors under the ESOPs

Description 2020 2019

Annual Report 2020

Mr S Renganathan Mr S C U Manatunge Mr S Renganathan Mr S C U Manatunge

As at January 1 123,580 76,452 184,633 110,355

Vested during the year 115,353 72,844 – –
Exercised during
the year – – (24,222) (11,119)
Expired during the year (37,933) (23,467) (36,831) (22,784)
Commercial Bank of Ceylon PLC

As at December 31 201,000 125,829 123,580 76,452

25. Directors’ interests in contracts or CA S.192 Directors’ interest in contracts with the Bank 113
proposed contracts and remuneration Note 21 to the Financial Statements: Other operating expenses 186
and other benefits of Directors during
the year under review Note 63 to the Financial Statements: Related party disclosures 255 to 259
RBP As a practice, Directors have refrained from voting on matters in which
they were materially interested. Directors have no direct or indirect interest
in any other contract or proposed contract with the Bank
CA S.168 (1) (e) There are no arrangements that enable the Non-Executive Directors of
LR 7.6 (XIV) the Group and the Bank to acquire shares or debentures of the Bank or its
subsidiaries, other than via the market
CA S.217 (2) (d) There are no restrictions on the approval of loans to Directors in the Bank’s
ordinary course of business, subject to compliance with all applicable
regulations

26. Directors’ and officers’ insurance CA S.218 The Bank has, during the financial year, paid an insurance premium in
respect of an insurance policy for the benefit of the Bank and the Directors,
secretaries, officers and certain employees of the Bank and related
body corporates as defined in the insurance policy. In accordance with
commercial practice, the insurance policy prohibits disclosure of the terms
of the policy, including the nature of the liability insured against and the
amount of the premium

104
 Disclosure requirement Reference to the Page reference for compliance and other necessary disclosures Page/s
relevant statute/
rule

27. Environmental protection RBP The Group and the Bank have not, to the best of their knowledge, engaged
in any activity, which was detrimental to the environment
Specific measures taken to protect the environment are disclosed in the 57 to 63
section on “Operational Excellence”

28. Declaration on statutory payments RBP Statement of Directors’ responsibility – Item (h) 107

29. Events after the reporting period RBP Note 69 to the Financial Statements: Events after the reporting period 290

30. Going concern RBP Statement of Directors’ Responsibility – Item (m) 108

31. Directors’ responsibility for financial CBSL Direction Statement of Directors’ Responsibility – Compliance Report 107 and 108
reporting 3.8. (ii) (a)

Statement of Compliance
32. Appointment of Auditors and their RBP The Board of Directors of the Bank resolved to adopt a policy of rotation
remuneration of Auditors, once in every five years, in keeping with the principles of
good corporate governance, although the mandatory requirement is only
partner rotation once in every five years. Accordingly, the present Auditors,
Messrs Ernst & Young, were reappointed as Auditors of the Bank, at the
last AGM held on June 25, 2020, to carry out the audit for the year ended
December 31, 2020, and will hold the office until the conclusion of the
next AGM of the Bank which is to be held on March 30, 2021. Accordingly,
Messrs Ernst & Young will serve for a maximum period of five years

Governance and Risk Management

consecutively, subject to them being re-elected by shareholders, upon a
recommendation of the Board of Directors, annually
The retiring Auditors, Messrs Ernst & Young have signified their willingness
to continue to function as the Auditor to the Bank
CA S.168 (1) (I) A resolution to appoint Messrs Ernst & Young as Auditors and granting
authority to the Directors to fix their remuneration will be proposed at the
forthcoming AGM to be held on March 30, 2021 for shareholder approval
Expenses incurred in respect of audit fees and fees for other services 186
rendered during the year are given in Note 21 to the Financial Statements:
Other operating expenses

33. Material issues pertaining to employees LR 7.6 (VII) Annex I – "Investor Relations" – Item 8 302

Annual Report 2020

and industrial relations

34. Risk management and system of internal LR 7.6 (VI) Risk Governance and Management 114 to 133
controls
Report of the Board Integrated Risk Management Committee 89 and 90
Note 68 to the Financial Statements: Financial risk review 261 to 290
The Directors’ Statement on Internal Control over Financial Reporting 109 and 110

Commercial Bank of Ceylon PLC

The Independent Auditors’ Report 138 to 140
Independent Assurance Report on the Directors’ Statement on Internal 111
Control over Financial Reporting

35. Corporate governance RBP The Directors declare that –

(a) the Bank has complied with all applicable laws and regulations
in conducting its business and have not engaged in any activity
contravening the relevant laws and regulations. Officers responsible
for ensuring compliance with the provisions in various laws and
regulations, confirm compliance in each quarter to the Board
Integrated Risk Management Committee;
(b) they have declared all material interests in contracts involving the Bank
and refrained from voting on matters in which they were materially
interested;
(c) they have complied with the Code of Best Practices on Corporate
Governance;
(d) they have conducted a review of internal controls covering financial,
operational and compliance controls, risk management and have
obtained a reasonable assurance of their effectiveness and proper
adherence;

105
 Disclosure requirement Reference to the Page reference for compliance and other necessary disclosures Page/s
relevant statute/
rule

(e) the Bank has complied with the Code of Best Practices on related party
transactions and has made the required disclosures in the Financial
Statements and to the market when applicable;
(f) the business is a going concern with supporting assumptions or
qualifications as necessary, and that the Board of Directors has reviewed
the Bank’s corporate/business plans and is satisfied that the Bank has
adequate resources to continue its operations in the foreseeable future.
Accordingly, the Financial Statements of the Bank, its subsidiaries and
associate are prepared based on the going concern assumption

36. Focus on new regulations RBP The Bank complied with the requirements of the Circulars and the Banking
Act Directions issued by the CBSL to support COVID-19 affected businesses
Statement of Compliance

and individuals, and the requirements of the guidence notes on implications

on Financial Reporting issued by CA Sri Lanka

37. Sustainability RBP The Bank is an early champion of adopting sustainability practices and
sustainability reporting. The Bank has considered the sustainability aspects
when formulating its business strategies
Annex 4: GRI Content Index 345 and 346

38. Human resources RBP The Bank continues to invest in human capital development and
implement effective human resource practices and policies to improve
Governance and Risk Management

workforce efficiency, effectiveness and productivity and also to foster

collaborative partnerships that enrich the work and learning environment
for our staff
Specific measures taken in this regard are detailed in the 93 and 94
Report of the Board Human Resources and Remuneration Committee

39. Technology RBP As encapsulated in the Vision and the Mission, our business processes
are underpinned by technology. All of our processes involve information
technology, and we use technology to deliver superior products and
services to our customers. Correspondingly, the business is more heavily
intertwined with technology than ever before
Key achievements in this regard during the year are detailed in the 98 and 99
Report of the Board Technology Committee
Annual Report 2020

40. Operational excellence RBP To increase efficiency and reduce operating cost, the Bank has ongoing
initiatives to drive policy and process standardisation and to optimise the
use of existing technology platforms

41. Outstanding litigation RBP In the opinion of the Directors and in consultation with the Bank’s lawyers,
litigation currently pending against the Bank will not have a material
impact on the reported financial results or future operations.
Commercial Bank of Ceylon PLC

Note 60 to the Financial Statements: Litigation Against the Bank 250 and 251

42. Disclosure on related party transactions LR 9.3.2 (a) and Note 63 to the Financial Statements: Related Party Disclosures 255 to 259
(b)

LR 9.3.2 (c) Report of the Board Related Party Transactions Review Committee 95

LR 9.3.2 (d) Annual Report of the Board of Directors 3

43. Annual General Meeting and CA S.133 and The 52nd AGM of the Bank will be held on Tuesday, March 30, 2021 at 10.30
the Notice of Meeting CA S.135 (a) a.m. at the Auditorium of Commercial Bank of Ceylon PLC, 9th Floor, Union
Place Branch Building, No. 1 Union Place, Colombo 2, as a virtual meeting
using a digital platform.
Notice relating to the 52nd AGM of the Bank is enclosed at the end of the
Annual Report.

106
Statement of Directors’ Responsibility for
Financial Reporting
The Statement sets out the responsibility (b) the Financial Statements for the year (g) they have taken reasonable measures
of the Board of Directors, in relation to the ended December 31, 2020, prepared and to safeguard the assets of the Group
Financial Statements of the Commercial presented in this Annual Report are in and the Bank and to prevent and
Bank of Ceylon PLC (the Bank) and the agreement with the underlying books of detect frauds and other irregularities.
Consolidated Financial Statements of the account and are in conformity with the In this regard, the Board of Directors
Bank and its Subsidiaries (the Group). requirements of the following: has instituted an effective and
The responsibilities of the External comprehensive system of internal
z Sri Lanka Accounting Standards;
Auditors in relation to the Financial controls comprising of internal checks,
z Companies Act No. 07 of 2007 and internal audit and financial and other
Statements are set out in the “Independent
amendments thereto (Companies Act); controls required to carry on the business
Auditors’ Report” given on pages 138 to 140.
z Sri Lanka Accounting and Auditing of banking in an orderly manner and
In terms of Sections 150 (1), 151, 152
Standards Act No. 15 of 1995; safeguard its assets and secure as far as
and 153 (1) and (2) of the Companies Act
z Banking Act No. 30 of 1988 and
practicable, the accuracy and reliability of
No. 07 of 2007 and amendments thereto,
amendments thereto; the records. The “Directors’ Statement on
the Board of Directors of the Bank is
Internal Control over Financial Reporting”
responsible for ensuring that the Group and z Listing Rules of the Colombo Stock
is given on pages 109 and 110;
the Bank keep proper books of account of Exchange (CSE); and
all the transactions and prepare Financial z Code of Best Practice on Corporate
(h) to the best of their knowledge, all taxes,

Governance and Risk Management

Statements that give a true and fair view of Governance issued by The Institute of duties and levies payable by the Bank
the financial position of the Group and the Chartered Accountants of Sri Lanka and its subsidiaries, all contributions,
Bank as at the end of each financial year (CA Sri Lanka); levies and taxes payable on behalf of and
and of the financial performance of the in respect of the employees of the Bank
Group and the Bank for each financial year (c) these Financial Statements comply with and its subsidiaries, and all other known
and place them before a General Meeting. the prescribed format issued by the CBSL statutory dues as were due and payable
The Financial Statements comprise of for the preparation of annual Financial by the Bank and its subsidiaries as at the
the Statement of Financial Position as at Statements of licensed commercial reporting date have been paid or, where
December 31, 2020, the Income Statement banks; relevant, provided for, except as specified
and Statement of Profit or Loss and Other in Note 60 to the Financial Statements
Comprehensive Income, Statement of (d) proper accounting records which on “Litigation against the Bank” on pages
Changes in Equity, Statement of Cash Flows correctly record and explain the Group’s 250 and 251.
and the Bank’s transactions have

Annual Report 2020

for the year then ended and Notes thereto of
been maintained as required by the (i) as required by the Section 56 (2) of the
the Group and the Bank.
Section 148 (1) of the Companies Act Companies Act, they have authorised
Accordingly, the Board of Directors distribution of the dividends paid and
to determine at any point of time the
confirms that the Financial Statements of proposed upon being satisfied that the
Group’s and the Bank’s financial position,
the Group and the Bank give a true and fair Bank and all its subsidiaries, subject
with reasonable accuracy, enabling
view of the: to complying with all the conditions
preparation of the Financial Statements,

Commercial Bank of Ceylon PLC

– financial position of the Group and the in accordance with the Companies Act imposed by the Central Bank of Sri Lanka,
Bank as at December 31, 2020; and to facilitate proper audit of the Financial would satisfy the solvency test after such
Statements; distributions are made in accordance
– financial performance of the Group with the Section 57 of the Companies
and the Bank for the financial year (e) they have taken appropriate steps to Act and have obtained in respect of
then ended ensure that the Group and the Bank dividends paid and proposed, and
maintain proper books of account also for which approval is now sought,
Compliance Report and review the financial reporting necessary certificates of solvency from
The Board of Directors also wishes to system directly by them at their regular the External Auditors;
confirm that: meetings and also through the BAC, the
Report of the said Committee is given on (j) as required by the Sections 166 (1) and
(a) appropriate Accounting Policies have pages 86 to 88. The Board of Directors 167 (1) of the Companies Act, they have
been selected and applied in preparing also approves the Interim Financial prepared this Annual Report in time and
the Financial Statements exhibited on Statements prior to their release, ensured that a copy thereof is sent to
pages 143 to 290 based on the latest following a review and recommendation every shareholder of the Bank, who have
financial reporting framework on a by the BAC; expressed desire to receive a hard copy.
consistent basis, while reasonable and Considering the prevailing situation in
prudent judgements have been made (f ) they accept responsibility for the the Country, we have hosted a soft copy
so that the form and substance of integrity and objectivity of the Financial of this Annual Report in the Investor
transactions are properly reflected and Statements presented in this Annual Relations section of the Bank’s website
material departures, if any, have been Report; ([Link]
disclosed and explained; investors), in addition to the soft copy
thereof available in the CSE website,
for the benefit of other shareholders

107
 within the stipulated period of time as (o) the Bank’s External Auditors, Messrs
required by the Rule No. 7.5 (a) and (b) Ernst & Young who were appointed
of Continuing Listing Requirements of in terms of the Section 158 of the
the Listing Rules of the CSE, instead of Companies Act and in accordance with
Statement of Directors’ Responsibility for Financial Reporting

sending a soft copy in a CD. a resolution passed at the last Annual

General Meeting held on June 25, 2020,
(k) that all shareholders in each category
were provided with every opportunity
have been treated equitably in
to undertake the inspections they
accordance with the original terms
considered appropriate. They carried
of issue;
out reviews and sample checks on
(l) that the Bank and its quoted subsidiary the system of internal controls as they
have met all the requirements under considered appropriate and necessary
the Section 07 of Continuing Listing for expressing their opinion on the
Requirements of the Listing Rules of the Financial Statements and maintaining
CSE, where applicable; accounting records. They have examined
the Financial Statements made available
(m) that after considering the financial to them by the Board of Directors of
position, operating conditions, the Bank together with all the financial
regulatory and other factors and such records, related data and minutes of
matters required to be addressed shareholders’ and Directors’ meetings
in the “Code of Best Practice on and expressed their opinion in the
Corporate Governance” issued by the “Independent Auditors’ Report” which
CA Sri Lanka, the Board of Directors has appears as reported by them on pages
a reasonable expectation that the Bank 138 to 140;
Governance and Risk Management

and its subsidiaries possess adequate

resources to continue in operation
for the foreseeable future. For this Accordingly, the Board of Directors is
reason, we continue to adopt the going of the view that they have discharged their
concern basis in preparing the Financial responsibilities as set out in this Statement.
Statements; By Order of the Board,
(n) the Financial Statements of the Group
and the Bank have been certified by the
Bank’s Chief Financial Officer, the officer
responsible for their preparation, as
required by the Sections 150 (1) (b) and
Annual Report 2020

152 (1) (b) of the Companies Act and

also have been signed by three Directors
R A P Rajapaksha
and the Company Secretary of the Bank
on February 24, 2021 as required by the Company Secretary
Sections 150 (1) (c) and 152 (1) (c) of the Colombo
Companies Act and other regulatory February 24, 2021
requirements; and
Commercial Bank of Ceylon PLC

108
Directors’ Statement on Internal Control
over Financial Reporting
Responsibility Key features of the process adopted in databases was further strengthened
In line with the Section 3 (8) (ii) (b) of the applying and reviewing the design and utilising appropriate tools/techniques
Banking Act Direction No. 11 of 2007, and effectiveness of the internal control and resources. Through this initiative, the
principle D.1.5 of the Code of Best Practice system on financial reporting controls are being tested on a near or real
on Corporate Governance 2017 (Code) time basis. A significant improvement in
The key processes that have been
issued by CA Sri Lanka, the Board of Directors methodology was made by testing the
established in reviewing the adequacy and
presents this Report on Internal Control. entire population of the data rather than
integrity of the system of internal controls
on a sample selected on a random basis.
The Board of Directors (the Board) with respect to financial reporting include
Also Off-site/Online audit were introduced
is responsible for the adequacy and the following:
during 2020 to test and verify internal
effectiveness of the system of internal
z Various appointed committees are controls relating to credit area of branches.
controls in place at Commercial Bank of
established by the Board to assist the The findings were tabled at the meetings
Ceylon PLC (the Bank). However, such a
Board in ensuring the effectiveness of the of the BAC for review. The “Online Auditing”
system is designed to manage the Bank’s key
Bank’s daily operations and that the Bank’s initiative has further strengthened the
areas of risk within an acceptable risk profile,
operations are conducted in line with review of the design and effectiveness of
rather than to eliminate the risk of failure to
the corporate objectives, strategies and the internal control system of the Bank.
achieve the policies and business objectives
the annual budget as well as the policies z The BAC reviews internal control
of the Bank. Accordingly, the system of
and business directions that have been issues identified by the Internal Audit

Governance and Risk Management

internal controls can only provide reasonable
approved. Department, regulatory authorities,
but not absolute assurance against material
misstatements of management and financial z Policies/Charters are developed covering External Auditors and the Management,
information and records or against financial all functional areas of the Bank and these and evaluates the adequacy and
losses or fraud. are recommended by Board appointed effectiveness of the risk management and
committees and are approved by the internal control systems. The BAC also
The Board has established an ongoing
Board. Such policies and charters are carries out an annual evaluation to review
process for identifying, evaluating, and
reviewed and approved periodically. the effectiveness of the internal audit
managing the significant risks faced by the
z The Inspection/Internal Audit Department/ function with particular emphasis on the
Bank and this process has been in place
IS Audit Unit of the Bank checks for scope, quality, independence of internal
for the year under review which includes
compliance with policies and procedures audit, and the resources. The minutes
enhancing the system of internal controls as
and the effectiveness of the internal of the BAC meetings are tabled at the
and when there are changes to the business
meetings of the Board of Directors of the

Annual Report 2020

environment or regulatory guidelines. The control systems/information system
controls on an ongoing basis using Bank on a periodic basis. Details of the
process is regularly reviewed by the Board
samples and rotational procedures and activities undertaken by the BAC
and accords with the “Guidance for Directors
highlights significant findings in respect of are set out in the “Report of the Board
of Banks on the Directors’ Statement on
any non-compliance. On-site, Online and Audit Committee” which appears on
Internal Control” issued by CA Sri Lanka. The
Off-site audits are carried out covering all pages 86 to 88.
Board has assessed the internal controls
taking into account all main principles for departments, branches, subsidiaries and z In assessing the internal control system

Commercial Bank of Ceylon PLC

the assessment of internal control system as overseas operations in accordance with the over financial reporting, identified officers
given in that guidance. annual audit plan reviewed and approved of the Bank continued to review and
by the BAC. The type/frequency of audits of update all procedures and controls that are
The Board is of the view that the
business units are determined by the level connected with significant accounts and
system of internal controls in place over
of risk assessed, to provide an independent disclosures of the Financial Statements of
financial reporting is sound and adequate
and objective report. Findings of the the Bank. The Internal Audit Department
to provide reasonable assurance regarding
internal audits are submitted to the BAC continued to verify the suitability of design
the reliability of financial reporting, and
for review at their periodic meetings. and effectiveness of these procedures
that the preparation of Financial Statements
Initiatives taken by Inspection/Internal and controls on an ongoing basis. The
for external purposes is in accordance
Audit Department to audit certain assessment included both local and
with relevant accounting principles and
selected areas of the business “online” foreign subsidiaries and the Bangladesh
regulatory requirements.
during the year 2016 on a limited scope, operations of the Bank as well.
The Management assists the Board in were expanded to cover all branches in
the implementation of the Board’s policies Sri Lanka and Bangladesh, Corporate Effective from January 01, 2018, the Bank
and procedures on risks and controls by Banking Unit, Digital Banking Unit, Card adopted the Sri Lanka Accounting Standard
identifying and assessing the risks faced, and Centre, Treasury, Finance, and Subsidiaries - SLFRS 9 on “Financial Instruments”,
in the design, operation, and monitoring of – CBC Finance Limited, Commercial Bank of which replaced the “incurred loss” model
suitable internal controls to mitigate and Maldives Private Limited and CBC Myanmar used under LKAS 39 with the forward
control these risks. Microfinance Company Limited during looking “expected credit loss” model to
2020 as well. Scope of online, near time calculate impairment provisions. This new
and real time audits was further enhanced methodology of computing impairment
to cover high risk transactions of the Bank provisions had a significant impact on
during COVID-19 pandemic. In addition, the Bank’s methodology adopted on
monitoring over cybersecurity controls, calculating the impairment losses for
modifications to core banking systems/ loans and advances. The processes that are
109
 required to comply with new requirements Review of the statement by
of recognition, measurement, presentation, external auditors
and disclosures were introduced and The External Auditor, Messrs Ernst &
Directors’ Statement on Internal Control over Financial Reporting

implemented and were continuously Young, has reviewed the above Directors’
strengthened based on the feedback Statement on Internal Control included in
received from the External Auditor, this Annual Report of the Bank for the year
Internal Audit Department, regulators, ended December 31, 2020 and reported to
and the BAC. Continuous monitoring is the Board that nothing has come to their
in progress and steps are being taken attention that causes them to believe that
to make further improvements to the the statement is inconsistent with their
processes where required, to enhance understanding of the process adopted by
effectiveness and efficiency. The Bank the Board in the review of the design and
has documented procedures relating to effectiveness of the internal control system
these new requirements and updates the over financial reporting of the Bank. Their
procedure manuals as and when necessary independent assurance report on the
and also obtained approval of the BAC “Directors’ Statement on Internal Control
and the Board for changes made to the over Financial Reporting” is given on pages
documented procedures. The Bank’s Internal 109 and 110 of this Annual Report.
Audit Department commenced testing
these processes since first quarter of 2013 By Order of the Board,
and continued to do so in 2020 as well.
The outcome of such exercise was tabled
regularly for review by the BAC during the
year 2020. Having recognised the need to
Governance and Risk Management

introduce an automated platform for various

computations required under SLFRSs and
LKASs including loan impairments, the Justice K Sripavan
Bank signed up with a renowned software
Chairman
solutions provider to automate impairment
calculations and this project is expected
to be completed during 2021. With the
implementation of the above software
system, it is expected to eliminate manual
intervention in calculating impairment
provisions to a great extent. Prof A K W Jayawardane
Deputy Chairman
Annual Report 2020

The comments made by the External

Auditor in connection with the internal
control system over financial reporting in
previous years were reviewed during the
year and necessary steps have been taken
to address them where appropriate. The
recommendations made by the External
Commercial Bank of Ceylon PLC

Auditor in 2020 in connection with the

internal control system over financial system R Senanayake
will be dealt with in the future.
Chairman – Board Audit Committee
The Assurance Report of the External
Auditors in connection with internal control
over financial reporting appears on page 111.

Confirmation
Based on the above processes, the Board
of Directors confirms that the financial S Renganathan
reporting system of the Bank has been Managing Director/Chief Executive Officer
designed to provide reasonable assurance
regarding the reliability of financial reporting Colombo
and the preparation of Financial Statements February 24, 2021
for external purposes has been done in
accordance with the Sri Lanka Accounting
Standards and regulatory requirements of
the Central Bank of Sri Lanka.

110
Independent Assurance Report
To the Board of Directors of Commercial Bank of Ceylon PLC

Ernst & Young Tel : +94 11 2463500

Chartered Accountants Fax Gen : +94 11 2697369
201 De Saram Place Tax : +94 11 5578180
P.O. Box 101 eysl@[Link]
Colombo 10 [Link]
Sri Lanka

HMAJ/WDPL

Report on the Director’s Statement on Our responsibilities and compliance SLSAE 3050 (Revised) does not require
Internal Control with SLSAE 3050 (Revised) us to consider whether the Statement covers
We were engaged by the Board of Directors Our responsibility is to assess whether all risks and controls or to form an opinion
of Commercial Bank of Ceylon PLC (“the the Statement is both supported by the on the effectiveness of the Bank’s risk and
control procedures. SLSAE 3050 (Revised)

Governance and Risk Management

Bank”) to provide assurance on the Directors’ documentation prepared by or for directors
Statement on Internal Control over Financial and appropriately reflects the process the also does not require us to consider whether
Reporting (“Statement”) included in the directors have adopted in reviewing the the processes described to deal with material
annual report for the year ended December design and effectiveness of the internal internal control aspects of any significant
31, 2020. control of the Bank. problems disclosed in the annual report will,
in fact, remedy the problems.
We conducted our engagement in
Management’s responsibility accordance with Sri Lanka Standard on The procedures selected depend on
Management is responsible for the Assurance Engagements (SLSAE) 3050 our judgement, having regard to our
preparation and presentation of the (Revised), Assurance Report for Banks understanding of the nature of the Bank, the
Statement in accordance with the “Guidance on Directors’ Statement on Internal event or transaction in respect of which the
for Directors of Banks on the Directors’ Control, issued by The institute of Charted Statement has been prepared.
Statement on Internal Control” issued in Accountants of Sri Lanka. We believe that the evidence we have

Annual Report 2020

compliance with Section 3 (8) (ii) (b) of the This Standard required that we plan obtained is sufficient and appropriate to
Banking Act Direction No. 11 of 2007, by The and perform procedures to obtain limited provide a basis for our conclusion.
Institute of Chartered Accountants of assurance about whether Management
Sri Lanka. has prepared, in all material respects, the Our conclusion
Statement on Internal Control. Based on the procedures performed, nothing
Our Independence and Quality Control For purpose of this engagement, we are has come to our attention that causes us

Commercial Bank of Ceylon PLC

We have complied with the independence not responsible for updating or reissuing any to believe that the Statement included in
and other ethical requirement of the Code reports, nor have we, in the course of this the annual report is inconsistent with our
of Ethics for Professional Accountants issued engagement, performed an audit or review understanding of the process the Board of
by The Institute of Chartered Accountants of of the financial information. Directors has adopted in the review of the
Sri Lanka, which is founded on fundamental design and effectiveness of internal control
principles of integrity, objectivity, Summary of work performed over financial reporting of the Bank.
professional competence and due care,
We conducted our engagement to assess
confidentiality and professional behavior.
whether the Statement is supported by the
The firm applies Sri Lanka Standard on documentation prepared by or for directors;
Quality Control 1 and accordingly maintains and appropriately reflected the process the
a comprehensive system of quality control directors have adopted in reviewing the Chartered Accountants
including documented policies and system of internal control over financial
procedures regarding compliance with Colombo
reporting of the Bank.
ethical requirements, professional standards February 24, 2021
The procedures performed were limited
and applicable legal and regulatory
primarily to inquiries of bank personnel and
requirements.
the existence of documentation on a sample
basis that supported the process adopted by
the Board of Directors.

Partners: W R H Fernando FCA FCMA R N de Saram ACA FCMA Ms. N A De Silva FCA Ms. Y A De Silva FCA W R H De Silva ACA ACMA W K B S P Fernando FCA FCMA
Ms. K R M Fernando FCA ACMA Ms. L K H L Fonseka FCA A P A Gunasekera FCA FCMA A Herath FCA D K Hulangamuwa FCA FCMA LLB (Lond) H M A Jayesinghe FCA FCMA
Ms. A A Ludowyke FCA FCMA Ms. G G S Manatunga FCA A A J R Perera ACA ACMA Ms. P V K N Sajeewani FCA N M Sulaiman ACA ACMA B E Wijesuriya FCA FCMA
Principals: G B Goudian ACMA T P M Ruberu FCMA FCCA
A member firm of Ernst & Young Global Limited

111
 Managing Director’s and Chief Financial Officer’s
Statement of Responsibility
The Financial Statements of the Commercial We are responsible for establishing, be recognised in weighing the assurances
Bank of Ceylon PLC (the Bank) and the implementing, and maintaining Internal provided by any system of internal control
Consolidated Financial Statements of Controls and Procedures within the Bank and accounting.
the Bank and its subsidiaries (the Group) and all of its subsidiaries. We ensure that It is also declared and confirmed that
as at December 31, 2020 are prepared effective Internal Controls and Procedures the Group and the Bank have complied with
and presented in conformity with the are in place, ensuring material information and ensured compliance with the guidelines
requirements of the following: relating to the Group are made known to for the audit of listed companies where
us for safeguarding assets, preventing and mandatory compliance is required.
z Sri Lanka Accounting Standards issued by
detecting fraud and/or error as well as other
The Institute of Chartered Accountants of We confirm that to the best of our
irregularities, which is reviewed, evaluated,
Sri Lanka (CA Sri Lanka); knowledge:
and updated on an ongoing basis. We
z Companies Act No. 07 of 2007 and have evaluated the Internal Controls and z The Bank and the Group have complied
amendments thereto; Procedures of the Group for the financial with all applicable laws and regulations
z Sri Lanka Accounting and Auditing period under review and are satisfied that and guidelines and there is no material
Standards Act No. 15 of 1995; there were no significant deficiencies and litigation against the Group and the Bank
z Banking Act No. 30 of 1988 and
weaknesses in the design or operation of the other than those disclosed in Note 60
amendments thereto and the Directions, Internal Controls and Procedures, to the best on pages 250 and 251 of the Financial
Determinations, and Guidelines issued by of our knowledge. We confirm, based on our Statements.
Governance and Risk Management

the Central Bank of Sri Lanka (CBSL); evaluations that there were no significant z All taxes, duties, levies and all statutory
deficiencies and material weaknesses in payments payable by the Group and the
z Listing Rules of the Colombo Stock
the design or operation of internal controls Bank and all contributions, levies and taxes
Exchange (CSE); and and fraud that involves Management or payable on behalf of and in respect of the
z Code of Best Practice on Corporate other employees. The Bank’s Internal Audit employees of the Group and the Bank as
Governance issued by the CA Sri Lanka Department also conducts periodic reviews at December 31, 2020 have been paid, or
to ensure that the Internal Controls and where relevant provided for.
The formats used in the preparation of Procedures are consistently followed.
the Financial Statements and disclosures The Financial Statements of the Group
made comply with the specified formats were audited by Messrs Ernst & Young,
prescribed by the CBSL. The Group presents Chartered Accountants and their Report is
the financial results to its shareholders on a given on pages 138 to 140. The BAC pre-
Annual Report 2020

quarterly basis. approves the audit and non-audit services

The Significant Accounting Policies have provided by Messrs Ernst & Young, in order
been consistently applied by the Group. to ensure that the provision of such services S Renganathan
Application of Significant Accounting Policies does not contravene with the guidelines Managing Director/Chief Executive Officer
and estimates that involve a high degree of issued by the CBSL on permitted non-
judgement and complexity were discussed audit services or impair Ernst & Young’s
Commercial Bank of Ceylon PLC

with the members of the BAC and Bank’s independence and objectivity.
External Auditors. Comparative information The BAC, inter alia, reviewed all the
has been amended to comply with the Internal and External Audit and Inspection
current presentation, where applicable. Programmes, the efficiency of Internal K D N Buddhipala
There were no changes to the Control Systems and Procedures and Chief Financial Officer
Accounting Policies and methods of also reviewed the quality of Significant
computation since the publication Accounting Policies and their adherence Colombo
of the Annual Report for the year ended to Statutory and Regulatory requirements, February 24, 2021
December 31, 2019. Accordingly, there the details of which are given in the
was no necessity to amend the comparative “Report of the Board Audit Committee”
information to comply with the current appearing on pages 86 to 88. The Bank
presentation. engaged the services of five firms of
We confirm that to the best of our Chartered Accountants approved by the
knowledge, the Financial Statements, CBSL to strengthen the audit and inspection
Significant Accounting Policies and other functions. The continuous inspection and
financial information included in this audit functions, engagement of firms
Annual Report, fairly present in all material of Chartered Accountants and effective
respects the financial position, results of functioning of the BAC, ensure that the
the operations and the cash flows of the Internal Controls and Procedures are
Group during the year under review. We followed consistently. To ensure complete
also confirm that the Group has adequate independence, the External Auditors
resources to continue in operation and have and the Internal Auditors have full and
applied the going concern basis in preparing free access to the members of the BAC to
these Financial Statements. discuss any matter of substance. However,
there are inherent limitations that should

112
Directors’ Interest in Contracts with the Bank
Related party disclosures as per the Sri Lanka Accounting Standard – LKAS 24 on “Related Party Disclosures” is disclosed in Note 63 to the
Financial Statements on pages 255 to 259 of this Annual Report. In addition, the Bank carries out transactions in the ordinary course of
business on an arm’s length basis with entities where the Chairman or a Director of the Bank is the Chairman or a Director of such entities.
Table – 32
Director/Company Accommodation granted/Deposits Current limit Balance/outstanding
as at 31.12.2020 as at 31.12.2020 as at 31.12.2019
Rs ‘000 Rs ‘000 Rs ‘000

(a) Prof A K W Jayawardane

Sierra Cables PLC Loans and advances Combined 1,540,000 799,812 704,897
Off-balance sheet accommodations Limits available 815,450 1,596,587 1,300,728
Deposits 83,581 77,847
Mother Lanka Foundation Loans and advances 1,620 1,620 –
Deposits 2,855 2,247
Arthur C Clarke Institute for Modern
Technologies Deposits 27 –

(b) Mr S Renganathan

Governance and Risk Management

International Chamber of Commerce – Sri Lanka Deposits 24,526 28,626
The Employers’ Federation of Ceylon Deposits 238 –

(c) Ms N T M S Cooray
Ceylon Tea Brokers PLC Deposits 861 29,067
Jetwing Hotels Ltd. Deposits 542 2,666
Negombo Hotels Ltd. Deposits 1,579 2,248
The Lighthouse Hotel PLC Deposits 13,840 5,841
Jetwing Travels (Pvt) Ltd. Loans and advances 58,953 26,370 11,562

Annual Report 2020

Off-balance sheet accommodations 50,000 19,321 46,421
Deposits 1,074,914 410,385
Jetwing Air (Pvt) Ltd. Loans and advances 45,000 25,000 –
Off-balance sheet accommodations 65,000 36,906 36,906
Deposits 33,767 193,697

Commercial Bank of Ceylon PLC

Jetwing Hotel Management Services (Pvt) Ltd. Deposits 26 126
Allianz Insurance Lanka Ltd. Loans and advances 1 1
Deposits 98,986 69,392
Go Vacation Lanka Co. (Pvt) Ltd. Deposits 1,243 4,046
Allianz Life Insurance Lanka Ltd. Deposits 8,287 1,172
Yarl Hotels (Pvt) Ltd. Deposits 21 438
Jetwing Symphony Ltd. Deposits 181 425
Capital Alliance Holdings Ltd. Deposits 1,880 1,147

(d) Mr L D Niyangoda
A Baur & Company (Pvt) Ltd. Loans and advances Combined 3,281,250 281,250 8,570,744
Off-balance sheet accommodations Limits available 5,890,000 4,589,147 3,864,218
Deposits 2,963,406 7,754,799

(e) Mr T L B Hurulle
Kanrich Finance Ltd. Loans and advances 7,725 4,220 9,322
Deposits 11,017 3,612

(f ) Mr R Senanayake
Virtual Capital Technologies (Pvt)Ltd. Deposits 66 –

113
 Risk Governance and Management
Navigating 2020 the Bank was able to utilise its fully-fledged in a “Perfect Storm”, and the proportion of
The COVID-19 pandemic made the year 2020 Digital Bank Account for on-boarding new staff that was required to work remotely
unprecedented in the recent history with customers and allow opening of accounts exceeded what was envisaged while
a vast majority of the individuals, 100% digitally. The Bank also facilitated self developing these plans, the Bank managed
communities and organisations across on-boarding of existing customers to online to promptly deploy effective and secure
the globe being severely affected in terms applications to support the digital drive. remote working solutions and collaboration
of their lives and livelihoods. Besides the From a risk management perspective, tools in order to keep the interruptions to
demand and supply side shocks, it has restrictions on physical movements, strict customer services at a minimum. Within a
shaken the financial markets with bond health and safety regulations, adoption very short time-span, the Bank managed
yields, oil, and equity prices falling sharply of new working arrangements, relaxation to enhance its existing remote access
and trillions of dollars across most of the of certain regulatory requirements to solutions by leveraging globally-renowned,
asset classes seeking safety. Central banks accommodate continuity of banking sophisticated remote access technologies
world over proactively intervened with operations, lacklustre economic growth, fortified with multiple layers of security.
various measures such as interest rate cuts, import restrictions, a deterioration in asset As evident from the results of operations
intervention in the repo market, injecting quality, muted credit growth resulting in and financial position reflected in the
liquidity into the markets, easing regulatory excess local currency liquidity, and a dearth financial statements published in this Annual
capital and liquidity requirements, extending in foreign currency flows due to global Report, the Bank was able to demonstrate
moratoriums and concessionary refinancing business disruptions, etc. posed severe resilience against the tide and successfully
schemes, temporary waiver of rules and challenges to financial institutions. weather the vulnerable, uncertain, complex,
regulations, etc. to calm the markets, and ambiguous operating environment
Governance and Risk Management

minimise the impact, maintain customer Managing the impact of Covid-19 during the year. Further, the Bank has already
confidence and support economic growth. Covid-19 tested the effectiveness and commenced necessary re-building and
Hot on the heels of the Easter Sunday agility of the risk management processes improvements to fortify itself for possible
attack in 2019, the pandemic caused a and practices in place at the Bank. As a crisis situations in the future, in a far more
double whammy on the Sri Lankan economy. result of the Bank having formulated its challenging environment than in the past.
Deteriorating economic activity and less risk management strategy in terms of
favourable economic outlook exerted the underlying risk governance and risk Business model and risk
immense pressure on certain industries, management framework by taking the Being a commercial bank, the Bank’s
affected asset quality, and reduced demand context and outlook into account, the business model is centered around financial
for banking products and services. These Bank was able to take meaningful and intermediation and maturity transformation
developments aggravated the challenges timely measures to minimise the impact (refer Business Model for Sustainable Value
faced by the financial services industry in of Covid-19 on its day-to-day operations, Creation on page 35), which enabled the
Annual Report 2020

terms of growing business and maintaining continue to service the customer with Bank to gear its capital of Rs. 157.2 Bn.
operational excellence besides addressing minimal disruptions and maintain asset 11 times to operate with an on-balance
health and safety concerns of employees quality and viability of its operations. These sheet asset base of Rs. 1,736.2 Bn. as at
and the public in general. These coupled measures included activation of the business December 31, 2020. This exposes the Bank
with the still evolving nature of the continuity and contingency plans, close to a multitude of risks, which conventionally
pandemic and the continuing uncertainty monitoring of stress indicators, regular include credit risk (71%), operational risk
Commercial Bank of Ceylon PLC

surrounding it elevated the risk profiles of communication with the stakeholders, strict (4%) and market risk (3%) in particular,
the financial institutions, requiring them to adherence to health and safety guidelines, based on the amount of capital allocated as
remain extra vigilant. alternative workplace arrangements such as per Basel capital adequacy requirements.
The pandemic also turned out to be a split work sites, Working From Home (WFH), In addition, a host of ancillary risks also
digital banking ‘reality check’ for financial flexible working arrangements by rotating have arisen due to various emerging
institutions, regulators and governments. shifts for employees, self on-boarding on developments, which are threatening to
Despite all the preparations over the digital applications as permitted by the disrupt the business model of the Bank (refer
past several years for a ‘digital banking regulator, strengthening further the outreach pages 32 to 34 for a list of such emerging
ecosystem’ many came to the realisation to customers through existing means such as developments) although many such risks
that basic digital banking deliverables ‘Banking on Wheels’/ mobile ATM etc. A lot are not self-made. These together with the
were falling short of expectations at a time of valuable lessons have also been learned impact of the Covid-19, which materially
when the consumer has a few options. in the process on how to retain operational impacted almost all the main risk categories,
From the opening of a new account, on- resilience, which can be implemented when elevated the risk profile of the Bank,
boarding customers to digital platforms, normalcy returns. Certainly, the pandemic making it imperative that it has a robust
to the application for a loan or authorising has further accelerated migration of financial risk governance framework and a rigorous
identities, the existing digital banking service delivery to digital channels and risk management function to manage the
systems were found to be inadequate to connectivity. associated risks, enabling it to optimise
support banking without branches. Although business continuity and the trade-off between risk and return, and
However, with the swift action by the disaster recovery plans in place had not been continue to create value sustainably into
regulator to temporarily allow opening tested for wide-scale impacting scenarios the future.
of wallet and wallet facilitation accounts such as those arising out of the pandemic
fulfilling the KYC requirements digitally, leading to a real “Black Swan” event resulting

114
Objectives Accordingly, the Bank carried out an z Appointment of the Chief Information
The primary objectives of the Bank’s analysis to identify Risk Elevated Industries Security Officer (CISO)
risk governance framework and the risk under Covid-19 related stressed operating
In consideration of CBSL directions, the Bank
management function are: environment based on the “Availing of
appointed a CISO during the year reporting
Moratoria” by borrowers in the Bank’s loan
z to establish the necessary organisational to the Managing Director / Chief Executive
book. This was done by identifying and
structure for the management and Officer to provide leadership to the Bank’s
classifying the facilities for which moratoria
oversight of risk; overall information security function.
were granted based on the Lending Sectors
z to define the desired risk profile in terms of to which the loan proceeds were utilised and z Continuous process improvements to
risk appetite and risk tolerance levels; making appropriate provisions to withstand further strengthen information and
z to institutionalise a positive risk culture
the forecasted impact. Accordingly, the cyber security
within the Bank embodying values, beliefs, Bank has taken Rs. 2.9 Bn. overlays to reflect

Risk Governance and Management

potential for any further credit deterioration. The Bank implemented several technical
attitudes, and practices that drive highly solutions and process improvements to
effective risk decisions; z Private placement to strengthen the address the ever-evolving cyber security
z to establish functional responsibility capital threat landscape, especially in the wake of
for decisions relating to accepting, the COVID-19 pandemic and the resulting
The Bank secured a private placement of
transferring, mitigating and minimising changes to the working arrangements. These
USD 50 Mn. to further strengthen the capital
risks, and recommending the best ways of included solutions related to Data Leakage
through IFC, the World Bank’s investment
doing so; Prevention, Privileged Access Management,
arm, demonstrating their faith in the future
z to evaluate the risk profile against the Security Information and Event Management,
potential of the Bank.
approved risk appetite on an ongoing etc. The Bank was cognisant of the increased
basis; z Continuous review of the USD liquidity cyber security risk arising from the rapid
position rolling out of at-scale WFH solutions, and
z to estimate potential losses that could arise

Governance and Risk Management

continuous risk assessments were carried out
from risk exposures assumed; The Bank constantly reviewed its USD
on the critical processes to ensure that risk
z to periodically conduct stress testing liquidity position through liquidity gap
levels are maintained at acceptable levels.
to ensure that the Bank holds sufficient reports, liquidity ratios, and forecasts.
buffers of liquidity and capital to honour Reliance on FCY SWAPs used by the Bank z Development of a Climate Position
contractual obligations and meet as a funding tool was reduced towards the Statement
unexpected losses; and 04th quarter of 2020 as the demand for them
The Bank firmly believes that natural
decreased considerably in line with market
z to integrate risk management with strategy resources are finite and need to be used
movements. The Bank initiated negotiations
formulation and execution. sustainably. Moreover, the Bank has duly
with international banks for securing funding
identified its role in providing private
Key developments in 2020 lines towards meeting any gaps in future
sector financial support to customers and
commitments, while taking into account
Major initiatives relating to risk governance subsidiaries in mitigating climate change

Annual Report 2020

growth in FCY deposits secured by having
and risk management during the year effects through “Climate Financing”. It paved
constantly reviewed the rates offered.
included: the way to integrate the Climate Change
z Managing excess Rupee liquidity consideration into the Bank’s governance,
z Carrying out analysis to proactively
strategy, risk management, and external
identify Risk Elevated Industries Muted credit growth and inflow of deposits
reporting requirements under the vast scope
caused the Bank to have excess Rupee
Given that the challenging operating of this subject.
liquidity throughout the year. Having

Commercial Bank of Ceylon PLC

environment may have a significant impact analysed the potential movements of As part of this initiative, the Bank
on the Bank’s lending portfolio based on interest rate forecasts in coming years, the has identified the importance of a well-
concentrations associated with different Bank rebalanced the maturity profile of its articulated approach to climate change
industries to which the Bank has exposures, government securities portfolio in order to applicable to all the Branches and
it became of paramount importance to the enhance returns. Departments regardless of their geographic
Bank to isolate and manage industry risk by location. Accordingly, the Position
understanding its exposures most at risk. z Loan Review Mechanism Statement on Climate Change 2020/2021
This became essential to develop capabilities was developed and published expressing
The Loan Review Mechanism (LRM) was
and strategies to manage such exposures the Bank’s commitment to finance, climate
continuously carried out ensuring adherence
and to make an informed assessment of change mitigation, adaptation, and
to the regulatory Direction even during the
potential for expected credit losses and their environmentally beneficial activities within
pandemic. This was possible due to LRM
impact on the Bank’s capital levels. all main geographic locations where the
which was initially implemented by the Bank
The Bank’s careful analysis revealed that, as a physical activity by visiting the Lending Bank operates in i.e. Sri Lanka, Bangladesh,
as the Government support for the economy Units/Branches being gradually transferred the Maldives, and Myanmar.
tapers off and the Bank’s own relief schemes to a more digitalised platform in order to Other developments and outcomes
to borrowers subside, the delinquencies reduce physical interactions. The WFH service relating to risk management during the year
are likely to increase in the subsequent delivery channel adopted by the Bank during included;
years owing to the prolonged effects of this period also helped the Bank to continue
z Devised tools to carry out in depth analysis
the economic downturn amplified by the LRM as well as its other services to the
COVID-19 pandemic. A more proactive of borrowers affected by the pandemic,
Business Units.
approach therefore was warranted by enabling evaluation of specific aspects in
making provisions to withstand the impact detail to understand the risks stemming
of exposures to Risk Elevated Sectors on the from the exposure to the pandemic.
Bank’s capital base.

115
 z Managed reputational risk through a trend that was witnessed across the time. It is expressed in terms of quantitative
elevated service levels under a constrained industry. With the still evolving nature parameters for important risk indicators
environment which included keeping of the pandemic and the uncertainty under each risk category for ease of
the branches open for the customers, surrounding it, the Bank is also cognisant monitoring. It manifests the desired asset
looking after the hygiene factors of all of the potential for further deterioration quality, maximum market and operational
stakeholders, mobilisation of ATMs, in asset quality and has made additional risk losses and minimum capital and liquidity
facilitation of online on-boarding, and impairment provisions. Lacklustre requirements, taking into account the
ensuring uninterrupted services to economic activities, travel and other regulatory requirements, strategic focus,
customers by promptly introducing restrictions on physical movements and ability to withstand losses and stress with
necessary adjustments to the existing muted credit growth caused the Bank the available capital, funding and liquidity
BCP/DRP arrangements to match the to have excess liquidity throughout the positions and the robustness of the risk
unprecedented operational changes year under review. Relaxation of systems management framework.
Risk Governance and Management

resulting from the pandemic. and procedures, alternative workplace The risk management function
z The progress of the project initiated arrangements and heavy reliance on periodically reports the overall risk profile
for implementing an Early Warning digital channels caused operational risk of the Bank to the Management and the
Signals (EWS) framework with a view too to undergo changes, but there was no Board in terms of Key Risk Indicators and a
to further enhance credit quality of increase in the operational risk profile in Risk Profile Dashboard. With the help of this
the loan book of the Bank was delayed terms of events and losses compared to information, the risk profile is rigourously
during the first half of the year due the previous year. Despite the formidable monitored on an ongoing basis with the due
to prioritisation of pandemic related challenges in the operating environment, consideration it deserves and swift remedial
activities within the Bank. However, the the Bank was able to successfully maintain action is taken for any deviations, to ensure
evaluation of shortlisted products/vendors its stability, resilience and profitability that the actual risk exposures across all
recommenced towards the latter part of during the year as evident from the the risk categories are kept within the
operating results and financial position,
Governance and Risk Management

the year considering the importance of risk appetite.

having this capability within the Bank in as a result of the strategic responses
With strong capital adequacy and
the near future. to these developments and the robust
liquidity positions which define the capacity
risk governance and the rigorous risk
The Overall credit risk of the Bank to assume risk, the Bank’s risk profile is
management function in place.
heightened leading to a deterioration in characterised by a portfolio of high-quality
asset quality as reflected in the gross assets and stable sources of funding fairly
Risk appetite and risk profile diversified in terms of geographies, sectors,
non-performing loans ratios of 5.11%
The Bank has a well-defined Risk Appetite products, currencies, size and tenors. The risk
whilst the net non-performing loans ratio
Statement that articulates the types and profile of the Bank as at December 31, 2020
improved to 2.18% as at 31.12.2020 as
degree of risk and the maximum amount and December 31, 2019 compared to the risk
against 4.95% and 3.00% as at 31.12.2019,
of aggregate risk exposure that the Bank is appetite as defined by the regulatory/Board
prepared to assume at any given point in approved policy parameters is given below.
Annual Report 2020

Risk profile Table – 33

Risk category and Key risk indicator Policy parameter Actual position
parameter
As at December As at December
31, 2020 31, 2019

Credit risk:
Commercial Bank of Ceylon PLC

Quality of lending Gross NPA ratio 3% – 8% 5.11% 4.95%

portfolio Net NPA ratio 2% – 6% 2.18% 3.00%
Impairment percentage over total NPA 40% – 60% 46.95% 44.23%
Weighted average rating score of the overall lending portfolios 35% – 40% 52.93% 53.44%
Concentration Loans and advances by product – Highest exposure to be 30% – 40% 21.72% 19.73%
maintained as a percentage of the total loan portfolio
Advances by economic sub sector 0.015 – 0.025 0.0145 0.0145
(using HHI-Herfindahl-Hirschman-index)
Exposures exceeding 5% of the eligible capital (using HHI) 0.05 – 0.10 0.0057 0.0057
Exposures exceeding 15% of the eligible capital (using HHI) 0.10 – 0.20 0.0055 0.0044
Exposure to any sub sector to be maintained at 4% – 5% 4.33% 3.97%
Aggregate of exposures exceeding 15% of the eligible capital 20% – 30% 12.25% 12.61%
Cross border exposure Rating of the highest exposure of the portfolio on S&P AA AAA AAA
Investment Grade AAA to BBB-

Market risk:
Interest rate risk Interest rate shock: Maximum of Rs. 267.12 Mn. Rs. 932.75 Mn.
(Impact to NII as a result of 100bps parallel rate shock for Rs. 2,250 Mn.
LKR and 25bps for FCY)
Re-pricing gaps (RSA/RSL in each maturity bucket – up to <1.5 Times (other than for 1.11 Times 1.39 Times
one- year period) the 1 month bucket which (1.78 Times for (2.56 times for
is <2.5 Times) 1 month bucket) 1 month bucket)

116
 Risk category and Key risk indicator Policy parameter Actual position
parameter
As at December As at December
31, 2020 31, 2019
Liquidity risk Statutory Liquid Asset Ratio (SLA) for Domestic Banking 20% 44.99% 30.42%
Unit (DBU)
Liquidity Coverage Ratio (LCR) for All Currencies 100% 258.06% 224.74%
Net Stable Funding Ratio (NSFR) 100% 157.49% 137.05%
Foreign Exchange risk Exchange rate shocks on Total FCY exposure Rs. 350 Mn. Rs. 301.20 Mn. Rs. 267.68 Mn.
Operational risk Operational loss tolerance limit (as a percentage of last three 3% – 5% 0.58% 0.78%
years average gross income)

Risk Governance and Management

Strategic risk: Capital adequacy ratios:
CET 1 Over 11% 13.217%  12.298%
Total capital Over 15% 16.819%  16.146%
ROE Over 20% 11.28%  13.54%
Creditworthiness – Fitch Rating AA(lka) AA-(lka) AA(lka)

(RSA – Rate Sensitive Assets, RSL – Rate Sensitive Liabilities)

Credit ratings to prevail in the short to medium term. With z Extension of the Social and Environmental
In January 2020 Fitch Ratings Lanka Limited further acceleration of digital channels, Risk Management Framework to the
remote work arrangements with potential subsidiaries of the Group.

Governance and Risk Management

revised the Bank’s rating outlook of its
National Long-Term Rating to negative disruptions and escalating cyber security z Implementation of a climate risk
from stable reflecting the challenging threats, non-financial risks will become more assessment tool with a view to address
operating environment. However, following pressing. Banking regulations will be further potential climate related risks by reducing
the recalibration of the agency’s Sri Lankan widened and deepened amidst pervasive Carbon footprint of banking operations.
national rating scale to reflect changes in technological advances and macroeconomic
the relative creditworthiness among Sri shocks. Recovery and resolution will require
With large scale vaccination campaigns
Lankan issuers following its downgrade heightened attention.
now underway and it being deemed as
of the sovereign rating to ‘B-’/Negative The context of these circumstances an effective exit strategy from the pandemic,
from ‘B’/Negative in April 2020, the Bank’s necessitates further strengthening of the risk latest predictions are that the pandemic
Rating was revised upward from AA(lka) to governance and risk management function. should be brought under control in the near
AA+(lka) retaining the outlook at negative in Hence, the Bank will continue to make the future, reviving hopes for a better outlook for

Annual Report 2020

June. Consequent to the downgrade of the necessary changes to the mandate, structure, 2021 and beyond.
sovereign rating by the agency in November resourcing, competencies, technologies,
2020 and the recalibration of the agency’s data analytics, and MIS, etc., thereby Risk management framework
Sri Lankan rating scale again, the Bank’s aligning business strategies with sound risk
National Long-Term Rating was downgraded management practices and making risk The Bank has developed an all-encompassing
to AA-(lka)/Stable in January 2021. management function more forward looking, Risk Management Framework (RMF) based
value adding and proactive. on the Three Lines of Defence model, which
The Bank’s Bangladesh operations

Commercial Bank of Ceylon PLC

enables it a structured approach to manage
continued to be rated AAA by Credit Rating Specific initiatives planned for 2021 and all its risk exposures. It is underpinned by
Information and Services Limited (CRISL), the beyond will include: rigorous organisational structures, systems,
highest credit rating given to any financial processes, procedures and industry best
z Developing systems and processes for
institution in Bangladesh by CRISL. These practices and takes into account all plausible
data capturing and using predictive tools
credit ratings coupled with the high capital risks, potential losses, and uncertainties
in preparation for Basel IV proposed to be
and liquidity buffers available in the Bank the Bank is exposed to. The Three Lines of
implemented globally in January 2023.
and the steady and consistent performance Defence model, which is the international
even during the pandemic period depict z Redefining risk assessment functions to
standard, enables the Bank to have specific
the creditworthiness of the Bank and its suit digital platforms and using predictive
skills and framework for managing risk and
conservative risk profile. capabilities for non-performing assets.
guides its day-to-day operations with the
z Monitoring risk of competitor activity, optimum balance of responsibilities.
Outlook and plans for 2021 and beyond entry of Fintechs and telecom giants
The RMF is subject to an annual review
The operating Environment on pages 27 into the banking industry in particular,
or more frequently if the circumstances so
to 34 provides an analysis of the outlook and evaluation of feasibility of possible
warrant, taking into account changes in the
for the Sri Lankan and the Bangladesh partnerships to leapfrog competition.
regulatory and operating environments.
economies and the financial services z Completion of implementation of the Early
sectors for 2021 and beyond. With long- Warning Signals (EWS) framework capable
term implications of Covid-19 for financial of early detection and mitigation of credit
institutions not yet precisely known, risk to further enhance credit quality.
deteriorating credit quality and potential z Completion of implementation of Risk
for increased impairment losses, reduced Adjusted Return on Capital (RAROC)
demand for banking products and services, Framework across the Bank and corporate
a high degree of uncertainty will continue counterparty levels.

117
 Three lines of defence Figure – 21

1st 2nd 3rd

Line of Line of Line of
Defence Defence Defence

Business lines/Corporate functions Risk management and control Assurance

Owns and manages associated risks Independently monitors effective Comprises internal audit, external
Evaluates risk using informed implementation of risk management audit and regulatory reviews
framework providing independent assurance to
Risk Governance and Management

judgment
Facilitates high levels of risk awareness the Board over the First and Second
Ensures that risks accepted are within
throughout the organisation and Lines of Defence
the Bank’s risk appetite and risk
management policies ensures implementation of the Facilitates high standards of
risk management framework governance and control systems
Comprises a robust system of internal
controls and an organisation culture Maintains a sound risk management Carries out timely reporting of
of risk awareness which is nurtured policy framework findings to Management and Board
with regular training Carries out measurement, monitoring Audit Committee
and reporting to the Management
and Board Integrated Risk
Management Committee
Governance and Risk Management

Objectively challenges First Line

of Defence

Line Management/Business Units Risk/Compliance Departments Inspection/Audit

Risk Governance and for ensuring that they are appropriately In view of the potential for financial
Risk governance is the necessary managed (refer pages 66 to 69 for the losses and reputational risk and also as
organisational structure for maintaining profiles of the members of the Board of required by regulatory authorities, the Board
a high standard of governance. It enables Directors). Accordingly, the Board determines of Directors closely monitors the risk profile
decisions relating to risks to be taken and the risk appetite of the Bank with due regard of all the subsidiaries in the Group apart from
Annual Report 2020

implemented for the management and to achieving its strategic goals and delegates that of the Bank (refer page 156 for the list of
oversight of risk within the risk appetite oversight responsibility to Board committees subsidiaries).
and the risk tolerance levels and for (refer pages 82 to 84 for a list thereof ).
institutionalising a strong risk culture. It These Board committees work closely with Board committees
enables the Management to undertake risk the executive functions and executive The Board has set up the following four
taking activities more prudently. level committees to review and assess Board committees to assist it in discharging
the effectiveness of the risk management
Commercial Bank of Ceylon PLC

The Board of Directors has established a its oversight responsibilities for risk
function and report to the Board on a regular management and for ensuring adequacy and
robust governance structure by leveraging
basis. These reports provide a comprehensive effectiveness of internal control systems.
the best practice in corporate governance
perspective of the Bank’s risk profile and risk
to risk management. It comprises Board z Board Audit Committee (BAC)
management efforts and outcomes, enabling
committees, executive functions and
the Board to identify the risk exposures, z Board Integrated Risk Management
executive committees with delegated
any potential gaps and mitigating actions Committee (BIRMC)
authority, facilitating accountability for risk
necessary, on a timely basis. The tone at the
at all levels and across all risk types of the z Board Credit Committee (BCC)
top and the corporate culture reinforced by
Bank and enabling a disciplined approach to z Board Strategy Development Committee
the ethical leadership of the Board plays a
managing risk. The organisation of the Bank’s (BSDC)
key role in managing risk at the Bank.
risk governance is given in Figure 22. Since
it is highly specialised and also to ensure In addition to the Three Lines of Defence
model and the tone at the top, the Bank’s These committees periodically review
an integrated and consistent approach,
commitment to conduct its business in an and make recommendations to the Board
decision-making on risk management is
ethical manner too plays a significant role on risk appetite, risk profile, strategy,
centralised to a greater extent in several risk
in managing risk in the Bank. The Code of risk management and internal controls
management committees.
Ethics has set out the Bank’s unwavering framework, risk policies, limits and delegated
commitment and expectations of all the authority.
Board of Directors
employees to undertaking business in a Details relating to composition, terms
As the apex governance body, the Board responsible, transparent and disciplined of reference, authority, meetings held and
of Directors is responsible for strategy and manner and demands the highest level of attendance, activities undertaken during the
policy formulation, objective setting and for honesty, integrity and accountability from all year, etc., of each of these Board committees
overseeing executive functions and has the employees. are given in the respective committee
overall responsibility for understanding the reports on pages 86 to 100.
risks assumed by the Bank and the Group

118
Executive committees z Executive Committee on Monitoring committees listed above as well as in BIRMC,
Executive Management is responsible for Non-Performing Advances (ECMN) BCC and BAC meetings. It is the responsibility
the execution of the strategies and plans in z Information Security Council (ISC) of the IRMD to independently monitor
accordance with the mandate of the Board compliance of the First Line of Defence
z Business Continuity Management Steering
of Directors while maintaining the risk profile to the laid down policies, procedures and
Committee (BCMSC)
within the approved risk appetite. Executive limits and escalate deviations to the relevant
Integrated Risk Management Committee executive committees. It also provides the
EIRMC coordinates communication with the perspective on all types of risk for the above
(EIRMC) comprises members from units
BIRMC to ensure that risk is managed within committees to carry out independent risk
responsible for credit risk, market risk,
the risk appetite. In addition, the Chief Risk evaluations and share their findings with the
liquidity risk, social and environmental risk,
Officer reports directly to the BIRMC. Details Line Managers and the Senior Management
operational risk and IT risk. Spearheaded by
relating to composition of the executive enabling effective communication of
the EIRMC, the following committees have

Risk Governance and Management

committees are given in the section on material issues and to initiate deliberations
been set up on specific aspects of risk to
“Annual Corporate Governance Report” and necessary action.
facilitate risk management across the First
on pages 80 and 81.
and the Second Lines of Defence.
The Chief Risk Officer, head of the
z Asset and Liability Committee (ALCO) Integrated Risk Management Department
z Credit Policy Committee (CPC) (IRMD) participates in the executive

Risk governance structure Figure – 22

Governance bodies and

Governance and Risk Management

reporting

Board of Directors

BIRMC BAC BCC BSDC

ISC ALCO EIRMC BCMSC ECMN CPC ESDC

Annual Report 2020

IRMD headed by CRO

Credit Risk Market Risk Operational Risk IT Risk

CRMU CRRU SEMS TMO MRMU ORMU ITRU

Commercial Bank of Ceylon PLC

Risk management process

Suite of policies and procedures, segregation of functions (Three Lines of Defence), risk assessment,
risk measurement, risk mitigation, key risk indicators, Management Action Triggers (MATs), risk monitoring,
risk reporting, guidance to business line managers, stress testing

Risk ratings, collateral Limit structure, market behavioural analysis, Information Security
Tolerance
management and valuation, balance sheet analysis, contingency funding, Management
levels
independent verification VaR measurements System

Risk culture

Best practices

BAC – Board Audit Committee, BIRMC – Board Integrated Risk Management Committee, BCC – Board Credit Committee, BSDC – Board Strategy Development Committee,
ISC – Information Security Council, ALCO – Asset and Liability Committee, EIRMC – Executive Integrated Risk Management Committee, BCMSC – Business Continuity Management Steering
Committee, ECMN – Executive Committee on Monitoring NPAs, CPC – Credit Policy Committee, ESDC – Executive Strategy Development Committee, IRMD – Integrated Risk Management
Department, CRMU – Credit Risk Management Unit, CRRU – Credit Risk Review Unit, SEMS – Social and Environmental Management System, TMO – Treasury Middle Office, MRMU – Market Risk
Management Unit, ORMU – Operational Risk Management Unit, ITRU – IT Risk Management Unit

119
 Risk Management to clearly understand the risks the Bank is Board and the Management in managing risk
Risk management is the functional exposed to, IRMD provides ongoing training/ and shape the risk culture of the Bank. The
responsibility for identifying, assessing awareness to the employees, risk owners in Risk Assessment Statement (RAS) sets out the
and mitigating risks, finding risk mitigation particular, disseminating knowledge and risk limits and forms an integral part of the
methods, monitoring early warning signs, enhancing their skills on all aspects related risk management framework. The RAS and
forecasting potential for future losses and to risk, inculcating the desired risk culture. all risk policies are reviewed by the BIRMC
implementing plans to contain losses/risk and the Board of Directors annually or more
transfer. The risk management framework Policies, procedures and limits frequently, depending on the regulatory and
depicted on page 120 enables development The Bank has a suite of comprehensive risk business needs.
and implementation of strategies, policies management policies encompassing all The Bank has taken into account the
and procedures to manage risks, taking into the risks managed by the Bank to provide regulatory requirements of the respective
account the strategic focus as defined in the guidance to the business and support units countries where the Bank conducts its
Risk Governance and Management

Corporate Plan and the risk appetite. for managing risks and for also ensuring operations. The Bank’s overall risk exposure
The Bank has made significant compliance with the regulatory requirements including its overseas operations is
investments to develop and maintain including the Banking Act Direction No. compliant with the regulatory framework
up-to-date infrastructure required in terms 07 of 2011 – Integrated Risk Management of the CBSL.
of both human and physical resources to Framework for Licensed Commercial The Bank has issued comprehensive
strengthen detection and management Banks based on the Basel Framework and operational guidelines to facilitate
of risks, including mandates, policies and subsequent directives issued by the CBSL. implementation of the risk management
procedures, limits, software, databases, While institutionalising the risk knowledge policies and the limits specified in the RAS.
expertise, communication, etc. and to base, this helps to minimise bias and These guidelines detail types of facilities,
adopt international best practices. Since risk subjectivity in risk decisions. These policy processes and terms and conditions
management is a responsibility of each and documents define the objectives, priorities under which the Bank conducts business,
Governance and Risk Management

every employee of the Bank and they need and processes as well as the roles of the providing clarity to the employees in their
day-to-day work.

Risk management framework Figure – 23

Risk Governance Structure Sources of risk from activities relating to financial

z Board of Directors intermediation and maturity transformation
z Board committees
z Executive committees
z IRMD (2nd LOD) Deviations/ Risk owner (1st LOD)
Directions/Risk Policy Reviews

Trends
Annual Report 2020

z Risk management processes

z Risk culture Risk treatment plan
z Best practices
Evaluation

Risk evaluation
of risk

Risk approval
Commercial Bank of Ceylon PLC

Internal Audit and External Assuming risk

Audit (3rd LOD)
Monitor/Review

Assets and liabilities exposed to credit, market and liquidity risks (within the desired risk profile) and sources of
operational and IT risks (with risk mitigated to “as low as reasonably practicable”)

Credit risk Market risk Operational risk IT risk

Key Credit Risk Indicators Key Market Risk Indicators Key Operational Risk Key IT Risk Indicators
– Thresholds/MATs – Thresholds/MATs/ Indicators Thresholds/tolerance
Credit risk review portfolio and income Thresholds/tolerance levels
statement/balance sheet levels
Post disbursement review Check points
analysis
Cross border risk review Check points Information security
Limit monitoring and
Counterparty bank risk Internal/external incidents/loss events
review
review incidents/loss events/ Emerging threats/
Market development/ compliance/scenarios
Social and environmental vulnerabilities
trends and MIS
risk review Control gaps/policy Control gaps/policy
Funds Transfer Pricing exceptions exceptions
based IRR management
Product/process reviews
by Treasury

120
Risk management tools
The Bank employs a combination of qualitative and quantitative tools to identify, measure, manage and report risks. Selection of the
appropriate tool(s) for managing a particular risk depends on the likelihood of occurrence and the impact of the risk as well as the availability
of data. These tools include early warning signals, threat analysis, risk policies, risk registers, risk maps, risk dashboards, RCSA, ICAAP,
diversification, covenants, Social and Environmental Management System, workflow-based operational risk management system, Information
Security Management System, insurance and benchmarking to limits, gap analysis, NPV analysis, swaps, caps and floors, hedging, risk rating,
risk scoring, risk modelling, Duration, scenario analysis, marking to market, stress testing, VaR analysis etc.

Summary of key risks Figure – 24

Risk Governance and Management

External

Economic performance Cyber threats Increased Stability of fiscal and Other

and trade cycles regulations monetary policy emerging risks

Guiding business Specialised teams A dedicated Close monitoring of Offering unparalleled

Mitigation

strategy and within the risk compliance function trends for possible and unprecedented
resource allocation management function and an independent ramifications on the convenience by
communicated to (in addition to the First internal audit function economy and business adopting the latest
business lines Line of Defence) and facilitate compliance strategy which could banking technology
continued investments impact asset quality

Governance and Risk Management

in enhancing cyber and profitability
security
Our objective

Safeguard stable Safeguard information Dynamic approach to comply with regulations To satisfy the rising
funding sources, asset and ensure business expectations of
quality and returns continuity stakeholders and to be
future ready

BANK

Annual Report 2020

Internal

Credit risk People and Market risk Model risk Liquidity risk
operational risk

Commercial Bank of Ceylon PLC

Safeguard the asset Creating an Safeguard against Develop predictive Safeguard against
quality and reduce environment that adverse movement of capability to support funding constraints
Our objective

exposures to high risk enables performance market factors arising the decision making that prevent growth
segments while safeguarding the from price sensitivities process and meet demands of
business of funding sources, depositors/investors
investments, lending
or trading portfolios

Robust and rigorous Succession plans, Monitoring, Assumptions Retention and growth
risk assessment and code of conduct predicting and based models and of a stable deposit
pricing of loans in line and business controlling through behavioural testing base and tapping low
with risk appetite and ethics, competency, stringent limits and through internal/ cost funding sources
Mitigation

collateral support policy frameworks, Management Action external independent locally and overseas,
segregation of duties Triggers validation act as a buffer in
addition to sound
and internal controls
maintenance of the
liquid asset portfolio to
support contingencies

Increasing trend in risk Decreasing trend in risk No significant change

121
 Types of risks z Poor data quality adversely affecting These developments are making the
The Bank is exposed to financial, non- business and operational decisions and operating environment more complex,
financial and strategic risks. Financial z Subsidiaries and associates not performing dynamic and competitive day by day and
and non-financial risks can be broadly upto expectations of the Bank risk management very challenging. The
categorised into credit, market, liquidity, effective management of these risks and
operational, reputational, IT, strategic and uncertainties is nevertheless a sine qua non
These factors, if not properly managed,
legal risks. All these risks taken together to the implementation of the Bank’s strategy
may affect the risk profile of the Bank,
determine the risk profile of the Bank. Having for value creation for all its stakeholders.
reputational risk included, hampering the
a robust risk management framework in Consequently, deliberations on risk
objective of sustainable value creation for all
place enables the Bank to manage these risks management were on top of the agenda in
its stakeholders.
prudently. Various external developments all Board, Board Committee and Executive
Furthermore, the operating environment Committee meetings of the Bank.
and internal factors may affect the risk profile
Risk Governance and Management

has been made much more complex and

on an ongoing basis. A description of the different types of
unpredictable by some potentially disruptive
External developments include; risks managed by the risk management
emerging threats and uncertainties,
function of the Bank and risk mitigation
z The pandemic situation resulting in some of the long-standing
measures adopted are given below.
assumptions about markets, competition
z Movements in macroeconomic variables
and even business fundamentals being less
z Sovereign risk destabilising financial true today. These call for the Bank to better Credit risk
markets understand its stakeholders and meet their Credit risk is the potential for loss arising
z Political instability expectations with excellence in execution in from the failure of a customer/borrower
internal processes. The Bank deals with these or a counterparty to honour its financial
z Demographic changes
developments through appropriate strategic or contractual obligations to the Bank.
z Changes in Government fiscal and The Bank is primarily exposed to credit
responses, believing that these provide
Governance and Risk Management

monetary policies opportunities to differentiate its value risk from direct lending activities as well
z Technological advances proposition for future growth. A summary of as from commitments and contingencies.
z Regulatory developments key risks is given in Figure 24 on page 121. The total credit risk of the Bank constitutes
counterparty risk, concentration risk and
z Mounting stakeholder pressures
settlement risk.
z Competitor activities
z Unsubstantiated information being
Maximum credit risk exposure Table – 34
circulated in social media
z Decline in property market valuations As at December 31, 2020
giving rise to higher losses on defaulting Rs. Mn. %
loans
Net carrying amount of credit exposure:
Annual Report 2020

z Unfounded public perceptions that banks

are exploiting customers Cash and cash equivalents 50,250 2.1

z Supply chain disruptions Placements with central banks and other banks (excluding reserves) 110,344 4.7

z Downgrading of ratings of the Bank and Financial assets at amortised cost – Loans and advances to banks 779 0.0
z Growing sustainability concerns Financial assets at amortised cost – Loans and advances to other
customers 896,845 38.1
Commercial Bank of Ceylon PLC

Besides limited physical movements Financial assets at amortised cost – Debt and other financial
of people and global trade due to the instruments 292,727 12.5
pandemic, the aforesaid developments Financial assets measured at fair value through other
could impact public perceptions, disposable comprehensive income 278,461 11.8
income of people, demand for banking
Total (a) 1,629,406
products and services, funding mix, interest
margins and tax liabilities of the Bank.
Off-balance sheet maximum exposure:
Internal factors include;
Lending commitments 129,571 5.5
z Strategic misalignments
Contingencies 596,004 25.3
z Lapses in implementing the risk
Total (b) 725,575
management framework
Total of maximum credit exposure (a + b) 2,354,981 100.0
z Improper alignment of remuneration to
performance and risk Gross carrying amount of loans and advances to other customers 947,842
z Issues relating to third party products sold Stage 3 (credit impaired) loans and advances to other customers 102,575
in the Bank premises Impaired loans as a % of gross loans and advances to other
z Incorrect advice offered to customers customers 10.8
z Inaccurate predictions of macroeconomic Allowance for impairment – loans and advances to other customers 50,996
variables
Allowance for impairment as a % of gross loans and advances to
z Execution gaps in internal processes other customers 5.4
z Lack of industrial harmony Impairment charge – loans and advances to other customers 17,865
z Critical accounting judgements and
estimates turning to be inaccurate

122
The maximum credit exposure of the Bank policy parameters by the year end (refer risk Risk ratings-wise distribution of loans
of Rs. 2,355.0 Bn. as at December 31, 2020 profile on page 116). Continuous follow up of and advances to other customers Graph – 14
has grown by 28% compared to the previous facilities that were subjected to moratoriums,
year’s figure of Rs. 1,839.5 Bn., largely due to recovery initiatives such as offering
parking of excess liquidity in other financial incentives and elevated levels of attention
assets due to muted credit growth and given to loan approvals and post-sanction
moratoria extended to the borrowers in a monitoring and recovery efforts together
very challenging economic environment that with planned implementation of early 2020
prevailed in the country. identification of stressed borrowers through
According to the SLFRS 9 classification, EWS will assist the Bank to gradually bring
the credit impaired (Stage 3) loans to down these ratios in 2021 and minimise
customers stood at Rs. 102.5 Bn. (Rs. 96.6 Bn. potential credit risk.

Risk Governance and Management

in 2019) which is 10.8% (10.5% in 2019) In addition to the effective credit risk
of the gross loans and advances to other management framework referred above that
customers portfolio of the Bank. guides the Bank when on-boarding new
Further, the increasing trend experienced exposure and monitoring existing exposure
in loans and advances to other customers which makes an enormous contribution
2019
getting classified as impaired has resulted to maintain the quality of the loan book,
in a cumulative impairment allowance of the Bank is vigilant and exercises caution
Rs. 50.9 Bn. (Rs. 35.8 Bn. in 2019) and an when choosing customers, products,
impairment charge of Rs.17.8 Bn. (Rs. 10.0 Bn. segments and the geographies it serves.
in 2019) for the year under review. Continuous monitoring of age analysis and
the underlying movement of past due loans 2020 2019

Governance and Risk Management

Managing credit risk through arrears buckets enabled the Bank Gold 2.3% 2.6%
to swiftly take action, thereby moderating Investment Grade 73.9% 74.3%
The lending portfolio accounts for 52% of default risk during the year. Moderate Risk 19.1% 18.2%
total assets and credit risk accounts for over High Risk 1.7% 1.6%
90% of the risk-weighted assets. Hence, it Extreme Risk 3.0% 3.3%
is needless to overemphasise the critical
Concentration risk
importance of prudently managing the
credit risk to the Bank’s sustainability. In the It is through strategically diversifying the business across industry sectors, products,
circumstances, we endeavour to manage counterparties and geographies that the Bank manages concentration risk. The Bank’s RAS
credit risk going beyond mere regulatory defines the limits for these segments and to ensure compliance, the Board, BIRMC, EIRMC
compliance in order to enhance value. It and the CPC monitor these exposures. They also make suggestions and recommendations on
is managed through the Board approved modifications to defined limits based on the trends and developments shaping the business
credit risk management framework which environment.

Annual Report 2020

comprises a robust risk governance The distribution of stage 3 credit impaired loans and advances to other customers in
structure and a comprehensive suite of risk terms of identified industry sectors as at year end is given in Table 35 on page 124.
management processes, which, among Graph 15 indicates that the tenor-wise breakdown of the portfolio of total loans and
others, include policies and procedures, risk advances to other customers is within the risk appetite of the Bank.
ratings, risk review mechanism, collateral
management and valuation, segregation Loans and advances to other customers by tenor-wise

Commercial Bank of Ceylon PLC

of credit risk management functions, social as at December 31, 2020 (based on residual maturity) Graph – 15
and environmental risk management,
independent verification of risk assessments, K
credit risk monitoring, post disbursement
review, providing direction to business J

line managers, dissemination of credit risk

I
related knowledge and sharing information
with internal audit.
H

Review of credit risk G

The challenging operating environment
following the Easter Sunday attack further F
deteriorated due to the Covid-19 pandemic
related lockdowns, travel restrictions, supply E
chain disruptions, import restrictions and
drop in exports. The consequent drop in D

economic activities and consequent loss

C
of employment and disposable incomes
led to a heightening of credit risk and a
B
drop in asset quality across the financial
services industry during the year, despite
A
the numerous incentives offered by the
Government to support businesses and 0 80 160 240 320 400
individuals affected by the pandemic. The Upto 3 months 37-60 months A – Overdrafts E – Pawning I – Long-term loans Rs. Bn.
Bank too experienced this impact, but NPL 3-12 months Over 60 months B – Trade finance F – Staff loans J – Short-term loans
C – Lease receivables G – Housing loans K – Bills of exchange
ratios remained within the established 13-36 months
D – Credit cards H – Personal loans
123
 Distribution of stage 3 credit impaired loans and advances to other customers as at December 31, 2020 Table – 35

Industry Category Stage 3 Loans Allowance Allowance ECL Allowance Amount

and Advances for Individual for Collective Written-off
Impairment Impairment
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Agriculture, forestry and fishing 11,658,180 925,407 3,154,672 4,080,079 107,728

Arts, entertainment and recreation 282,039 9,962 50,376 60,338 63
Construction 7,052,936 3,206,972 1,373,811 4,580,783 71,041
Consumption and others 11,890,683 926,101 4,492,966 5,419,067 983,946
Education 341,000 367 114,732 115,099 19,037
Risk Governance and Management

Financial services 388,593 221 131,834 132,055 28

Health care, social services and support services 1,172,622 6,319 337,053 343,372 5,884
Information technology and communication services 1,796,746 3,305 287,848 291,153 2,210
Infrastructure development 3,063,165 159,252 288,633 447,885 –
Lending to overseas entities 1,599,311 151,572 241,416 392,988 –
Manufacturing 21,717,503 1,933,890 5,062,633 6,996,523 204,462
Professional, scientific and technical activities 512,312 2,104 189,685 191,789 6,430
Tourism 18,800,368 783,849 1,584,364 2,368,213 7,650
Governance and Risk Management

Transportation and storage 3,393,427 997,745 392,002 1,389,747 5,737

Wholesale and retail trade 18,906,548 1,038,318 4,433,730 5,472,048 63,252
Total 102,575,433 10,145,384 22,135,755 32,281,139 1,477,468

It is due to economic activities being heavily concentrated in the Western province and Product-wise analysis of the lending
the headquarters of most borrowing entities being located there, that a geographical portfolio (Graph 17) too reveals the efficacy
analysis (Graph 16) reflects a high concentration of loans and advances to other customers of the Bank’s credit policies with risk being
in the province. diversified across a range of credit products.

Product-wise analysis of loans and

Annual Report 2020

Geographical analysis of loans and advances to other customers by product-wise advances to other customers
as at 31, December 2020 Graph – 16 as at December 31, 2020 Graph – 17

J
Commercial Bank of Ceylon PLC

Long-term loans 41.9%

F
Short-term loans 14.6%
Bills of exchange 4.0%
E
Overdrafts 10.8%
Trade finance 8.7%
D Lease receivables 3.9%
Credit cards 1.5%
C Pawning 0.5%
Staff loans 1.3%
B Housing loans 7.3%
Personal loans 5.5%
A

0 80 160 240 320 400 The relatively high exposure of 42% to

Rs. Bn. long-term loans is rigorously monitored and
Central province Sabaragamuwa province A– Overdrafts G– Housing loans mitigated with collateral.
Eastern province Southern province B – Trade finance H– Personal loans
C– Lease receivables I – Long-term loans
North central province Uva province
D– Credit cards J – Short-term loans
Northern province Western province E – Pawning K – Bills of exchange
North western province Bangladesh F – Staff loans

124
Counterparty risk Cross-border risk
The Bank manages counterparty risk through
the laid down policies/procedures and limit
It is the risk that the Bank will not be able
to secure payment from its customers
90% – Distribution
structures including single borrower limits
and group exposure limits with sub-limits
or third parties on their contractual
obligations due to certain actions taken by
of exposure country
for products etc. The Bank has set limits far
more stringent than those stipulated by the
foreign governments, mainly relating to
convertibility and transferability of foreign
rating-wise
regulator, providing it a greater leeway in
managing concentration levels with regard
currency. Assets exposed to cross-border
risk comprise loans and advances, interest- Exposure to countries
to the counterparty exposures.
A major component of counterparty
bearing deposits with other banks, trade
and other bills and acceptances and those
which are rated AAA to
predominantly relating to short-term money
BBB- (S&P or equivalent)

Risk Governance and Management

risk is in relation to loans and receivables to
banks, both local and foreign. A specific set market activities.
of policies, procedures and a limit structure Limit structures in place, continuous accounted for 90% of
are in place to monitor it. Whilst market monitoring of macroeconomic and market
information on the financial/economic developments of the countries with the total cross-border
performance of these counterparties is exposure to counterparties and stringent
subject to a rigorous scrutiny throughout the evaluation of counterparties and maintaining exposure of the Bank.
year, the counterparty bank exposures are frequent dialogue with them help minimise
monitored against the established prudent risk arising from over concentration to cross-
limits at frequent intervals and the limits borders. Timely action is taken to suspend/
are revised to reflect the latest information
where deemed necessary.
revise limits to countries with adverse
economic/political developments.
73.9% – Distribution
of exposure borrower

Governance and Risk Management

The analysis uses Fitch Ratings for local Bank’s total cross-border exposure is
banks in Sri Lanka and Credit Ratings Agency only 6% of its total assets (Graph 21). The
in Bangladesh (CRAB) ratings for local banks
in Bangladesh (Equivalent CRISL/Alpha
Bank has cross-border exposures to a spread
of countries which primarily include India,
rating-wise
ratings are used where CRAB ratings are
not available). Exposures for local banks in
the Maldives, Singapore, USA, Denmark,
Bangladesh, etc.
Borrowers with
Sri Lanka rated AAA to A category stood at
96% (Graph 18) whilst 100% of exposure of
Investment Grade Rating
The concentration of cross-border
local banks in Bangladesh consisted of AAA exposure (Sri Lanka and Bangladesh where default risk is
to A rated counterparty banks (Graph 19). Operations) - S&P Rating wise as at
December 31, 2020 Graph – 20 considered to be very low,
The concentration of counterparty bank
comprised 73.9% of the

Annual Report 2020

exposures in Sri Lanka as at December 31, 2020
(Fitch ratings-wise) Graph – 18
total loans and advances
to other customers.

Commercial Bank of Ceylon PLC

AAA to BBB- 90%
Below BBB- and Unrated 10%
Note : Excluding the investment in Bangladesh Operations & Direct
AAA to A 96% Lending in Maldives/Bangladesh.
BBB to B 4%

The concentration of counterparty bank Cross border exposure of the Bank (Sri Lanka and Bangladesh operations) Graph – 21
exposures in Bangladesh as at December 31,
2020 (CRAB ratings-wise*) Graph – 19
India 21.54%
Maldives 18.26%
Singapore 16.36%
USA 8.97%
Denmark 6.81%
Bangladesh 4.71%
Malaysia 3.34%
Malawi 2.43%
Germany 2.04%
UK 1.93%
Indonesia 1.89%
AAA to A 100% Other Assets 94% Kenya 1.87%
BBB to B 0% Cross border Assets 6% Others 9.85%
*Equal CRISL/Alpha ratings are given where CRAB ratings are unavailable.

125
 Market risk
Market risk is the risk of loss arising from movements in market driven variables such as interest rates, exchange rates, commodity prices,
equity and debt prices and their correlations against the expectations the Bank had at the time of making decisions. The Bank’s operations are
exposed to these variables and correlations in varying magnitudes.

Market risk categories Table – 36

Major market risk Risk components Description Tools to monitor Severity Impact Exposure
category

Interest rate Risk of loss arising from movements or

volatility in interest rates
Risk Governance and Management

Re-pricing Differences in amounts of interest earning Re-pricing gap limits and High Medium High
assets and interest-bearing liabilities getting interest rate sensitivity limits
re-priced at the same time or due to timing
differences in the fixed rate maturities and
appropriately re-pricing of floating rate
assets, liabilities and off-balance sheet
instruments
Yield curve Unanticipated changes in shape and Rate shocks and reports High High High
gradient of the yield curve
Basis Differences in the relative movements of Rate shocks and reports High Medium Medium
rate indices which are used for pricing
Governance and Risk Management

instruments with similar characteristics

Foreign Possible impact on earnings or capital Risk tolerance limits for High Medium Medium
exchange arising from movements in exchange rates individual currency exposures
arising out of maturity mismatches in as well as aggregate
foreign currency positions other than those exposures within regulatory
denominated in base currency, Sri Lankan limits for NOP
Rupee (LKR)
Equity Possible loss arising from changes in prices Mark-to-market calculations Low Low Negligible
and volatilities of individual equities are carried out daily for Fair
Value Through Profit and
Loss (FVTPL) and Fair
Value Through Other
Annual Report 2020

Comprehensive Income
(FVOCI) portfolios
Commodity Exposures to changes in prices and Mark to market calculations Low Low Negligible
volatilities of individual commodities
Commercial Bank of Ceylon PLC

Managing market risk The Bank’s exposure to market risk

Market risk is managed through the market analysed by Trading Book and Non-Trading
risk management framework approved by Portfolios (or Banking Book) are set out in the
the Board, which comprises a robust risk Note 68.3.1 on page 285.
governance structure and a comprehensive
suite of risk management processes Market risk portfolio analysis
which include policies, market risk limits, The gap report is prepared by stratifying Rate
Management Action Triggers (MATs), risk Sensitive Assets (RSA) and Rate Sensitive
monitoring and risk assessment. Liabilities (RSL) into various time bands
according to maturity (if they are fixed rates)
Review of market risk or time remaining to their next re-pricing (if
Market risk arises mainly from the Non- they are floating rates). Balances of savings
Trading Portfolio (Banking Book) which deposits are distributed in line with the
accounted for 92.75% of the total assets and findings of a behavioural analysis conducted
93.50% of the total liabilities as at December by the Bank. Vulnerability of the Bank to
31, 2020. Exposure to market risk arises interest rate volatility is indicated by the gap
mainly from IRR and FX risk as the Bank has between RSA and RSL (refer Table 37).
negligible exposure to commodity related
price risk and equity and debt price risk
which was less than 10% of the total risk
weighted exposure for market risk.

126
Interest rate sensitivity gap analysis of assets and liabilities of the Banking Book as at December 31, 2020 – Bank Table – 37

Description Up to 3 Months 3-12 months 1-3 years 3-5 years More than Non-sensitive Total as at
5 years 31/12/2020
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Total financial assets 624,694,736 249,419,975 319,110,455 204,137,823 156,054,359 92,557,459 1,645,974,807

Total financial liabilities 562,661,711 549,185,169 111,889,666 57,145,938 172,692,251 84,083,172 1,537,657,907

Period gap 62,033,025 (299,765,194) 207,220,789 146,991,885 (16,637,892) 8,474,287 108,316,900

Cumulative gap 62,033,025 (237,732,169) (30,511,380) 116,480,505 99,842,613 108,316,900

Risk Governance and Management

RSA/RSL 1.11 0.45 2.85 3.57 0.90

Interest rate risk (IRR) Foreign exchange risk on equity portfolio. Note 68.3.4 on page 289
Extreme movements in interest rates expose Stringent risk tolerance limits for individual summarises the impact of a shock of 10% on
the Bank to fluctuations in Net Interest currency exposures as well as aggregate equity price on profit, other comprehensive
Income (NII) and have the potential to exposures within the regulatory limits income (OCI) and equity.
impact the underlying value of interest- ensure that potential losses arising out of
earning assets and interest-bearing liabilities fluctuations in FX rates are minimised and Commodity price risk
and off-balance sheet items. The main types maintained within the Bank’s risk appetite.
The Bank has a negligible exposure to
of IRR to which the Bank is exposed to are re- USD/LKR exchange rate depreciated by commodity price risk which is limited to the

Governance and Risk Management

pricing risk, yield curve risk and basis risk. 2.84% (Source-CBSL) during the year under extent of the fluctuations in Gold price on
review. the pawning portfolio.
Sensitivity of projected NII
Please refer to Note 68.3.3 – Exposure to
Regular stress tests are carried out on currency risk - non trading portfolio on pages Liquidity risk
Interest Rate Risk in Banking Book (IRRBB) 287 and 288. Liquidity risk is the Bank’s inability to meet
encompassing changing positions and new “on” or “off” balance sheet contractual and
Stress testing is conducted on NOP by
economic variables together with systemic contingent financial obligations as they fall
applying rate shocks ranging from 2% to 15%
and specific stress scenarios. Change in due, without incurring unacceptable losses.
in order to estimate the impact on profitability
value of the Fixed Income Securities (FIS)
and capital adequacy of the Bank (refer Table Banks are vulnerable to liquidity and
portfolio in FVTPL and FVOCI categories due
42 on page 132). The impact of a 1% change solvency problems arising from mismatches
to abnormal market movements is measured
in exchange rate on the foreign currency in maturities of assets and liabilities.
using both Economic Value of Equity (EVE)

Annual Report 2020

position indicated a loss of Rs. 301.20 Mn. on Consequently, the primary objective of
and Earnings At Risk (EAR) perspectives.
the positions as at December 31, 2020 (refer liquidity risk management is to assess and
Results of stress tests on IRR are analysed to
Graph 40 on page 288). ensure availability of funds required to meet
identify the impact of such scenarios on the
Bank’s profitability and capital. obligations at appropriate times, both under
Equity price risk normal and stressed conditions.
Impact on NII due to rate shocks on
Although the Bank’s exposure to equity price
LKR and FCY is continuously monitored to
risk is negligible, mark to market calculations

Commercial Bank of Ceylon PLC

ascertain the Bank’s vulnerability to sudden Liquid asset ratios as at December 31, 2020
are conducted daily on FVTPL and FVOCI
interest rate movements (refer Table 38). are given below:
portfolios. The Bank has also calculated VaR
Liquid asset ratios Table – 39

Sensitivity of NII to rate shocks 2020 2019

Table – 38 % %

2020 2019 Statutory Liquid

Assets Ratio (SLAR)
Parallel increase Parallel decrease Parallel increase Parallel decrease
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 DBU 44.99 30.42

As at December 31, 267,122 (132,005)  932,750 (911,553)

OBC 32.70 25.25

Average for the year 708,924  (648,050)  1,425,767 (1,413,235) Liquidity Coverage
Maximum for the year 1,060,589  (1,040,835)  1,646,844 (1,643,315) Ratio (LCR)

Minimum for the year 249,878  (132,005)   932,750 (911,553) Rupee 330.84 158.79
All Currencies 258.06 224.74
Net Stable Funding
Ratio (NSFR) 157.49 137.05

127
 Managing liquidity risk indicate any adverse situation when due Operational risk
The Bank manages liquidity risk through cognisance is given to the fact that cash Operational risk is the risk of losses stemming
policies and procedures, measurement outflows include savings deposits which can from inadequate or failed internal processes,
approaches, mitigation measures, stress be considered as a quasi-stable source of people and systems, or from external events
testing methodologies and contingency funds based on historical behavioural patterns such as natural disasters, social or political
funding arrangements. As experienced across of such depositors as explained below. events. It is inherent in all banking products
the industry, poor credit growth caused the and processes and the Bank’s objective
Bank to have an excess liquidity situation Behavioural analysis on savings accounts is to control it in a cost-effective manner.
throughout the year, as can be seen by the In the absence of a contractual agreement Operational risk includes legal risk but
ratios given in Table 40. It was a challenge for about maturity, savings deposits are treated excludes strategic and reputational risk.
the Bank to manage such excess liquidity to as a non-maturing demand deposit. There
generate an optimum return. Major portion is no exact re-pricing frequency for the Managing operational risk
Risk Governance and Management

of the excess liquidity had to be invested in product and the Bank resets rate offered The Bank manages operational risk through
Government securities, both denominated in on these deposits based on re-pricing gap,
LKR and USD at optimum yields to minimise policies, risk assessment, risk mitigation
liquidity and profitability etc. Since there including insurance coverage, procedures
adverse effects on profitability. is no exact re-pricing frequency and that relating to outsourcing of business activities,
it is not sensitive to market interest rates, managing technology risk, a comprehensive
Liquidity risk review segregation of savings products among the Business Continuity Plan (BCP) and Disaster
The net loans to deposits ratio is regularly predefined maturity buckets in the maturity Recovery Plan (DRP), creating a culture of risk
monitored by the ALCO to ensure that the gap report is done based on the regular awareness across the Bank, stress testing and
asset and liability portfolios of the Bank simulations carried out by the Bank in line monitoring and reporting.
are geared to maintain a healthy liquidity with a behavioural study.
position. NSFR indicating stability of Policies and procedures relating to
The liquidity position is measured in outsourcing of business activities of the
funding sources compared to loans and
Governance and Risk Management

all major currencies at both individual Bank ensure that all significant risks arising
advances granted was maintained well
and aggregate levels to ensure that from outsourcing arrangements of the Bank
above the policy threshold of 100%, which
potential risks are within specified are identified and effectively managed on a
is considered healthy to support the Bank’s
threshold limits. Additionally, potential continuous basis. Details of all outsourced
business model and growth.
liquidity commitments resulting from loan functions are reported to the CBSL annually.
The key ratios used for measuring disbursements and undrawn overdrafts are Due diligence tests on outsourced vendors
liquidity under the stock approach are given also monitored to ensure sufficient funding are carried out by respective risk owners
in Table 40 below: sources. prior to executing new agreements and
Table – 40 renewal of existing agreements. Further, bi-
Liquidity ratios % As at As at
Funding diversification by product annual review meetings are conducted with
December 31, December 31, The Bank’s primary sources of funding key IT service providers to monitor service
2020 2019 are deposits from customers and other performance levels and to verify adherence
Annual Report 2020

Loans to customer borrowings. The Graph 22 provides a to the agreements.

deposits 0.75 0.87 product-wise analysis of the Bank’s funding
diversification as at end of 2020 and 2019. Business continuity management
Net loans to total
assets 0.52 0.64 Business Continuity Management (BCM)
Funding diversification by product Graph – 22 framework of the Bank encompasses
Liquid assets to
business continuity, disaster recovery,
short-term liabilities
Commercial Bank of Ceylon PLC

0.60 0.48
crisis management, incident management,
Purchased funds to emergency management and contingency
total assets 0.23 0.21 planning activities. These activities ensure
(Large liabilities – that the Bank is committed to serve its
Temporary 2020 customers, employees, shareholders
Investments) to and suppliers with minimum business
(Earning assets – interruptions in the event of an unforeseen
Temporary disruption to its business activities arising
Investments) 0.18 0.18 from man-made, natural or technical
Commitment to disasters.
total loans 0.24 0.19
The scope of the BCM includes
programme initiation and management,
risk evaluation and business impact
Maturity gap analysis
2019 analysis, developing business continuity
Maturity gap analysis of assets and liabilities strategies, emergency preparedness and
of the Bank as at December 31, 2020 is given response, developing and implementing
in Note 68.2.2 (a) to the Financial Statements business continuity plans, awareness
on pages 280 to 281. building and training, business continuity
Maturity analysis of financial assets and plan exercise, audit and maintenance, crisis
liabilities of the Bank indicates sufficient 2020 2019 communications and coordination with
funding for foreseeable adverse situations Term deposits 47% 54% external agencies.
based on prescribed behavioural patterns Other borrowings 12% 9%
observed. Due to Banks 6% 4%
Current account balances 6% 6%
Maturity analysis of financial assets Saving deposits 29% 27%
and financial liabilities of the Bank does not
128
 In 2018, the BCP of the Bank was Review of operational risk reflecting the “tone at the top”, effectiveness
revamped in line with industry best practices The Bank has a low appetite for operational of the governance structures and the rigour
in consultation with an external BCP expert. risks and has established tolerance levels for of processes and procedures in place to
IT Disaster Recovery Plan, which is a key all types of material operational risk losses manage operational risk.
component of BCP was also reviewed and based on historical loss data, budgets and The Graph 23 analyses the operational
approved by the Board of Directors. IT system forecasts, performance of the Bank, existing risk losses incurred by the Bank in 2020
recovery capabilities of core banking and systems and controls governing Bank under each business line/category.
other critical systems of the Bank have been operations etc. Following thresholds have When analysing the losses incurred
further strengthened by way of introducing a been established based on audited financial during 2020 under the Basel II defined
secondary high-availability set-up leading to statements for monitoring purposes: business lines, it is evident that the majority
improved redundancy.
z Alert level – 3% of the average gross (89%) of losses with financial impact falls
Due to the second wave of the pandemic,

Risk Governance and Management

income for the past three years under the business line of “Retail Banking”,
the Bank was compelled to postpone the followed by the losses reported under the
scheduled BCP exercise for 2020 to the z Maximum level – 5% of the average gross
‘‘Payment and Settlement” business line
second quarter of 2021,with the approval of income for the past three years
(11%). Losses relating to other business lines
the CBSL. remain negligible.
Operational losses for the financial year
The Graphs 24 and 25 depict the
2020 were below the internal alert level at
Composition of losses – 2020 comparison of operational losses reported
Graph – 23 0.58% (of average audited gross income for
during 2020 and 2019 under each Basel II
the past three years). The Bank has been
loss event type, both in terms of number of
consistently maintaining operational losses
occurrences and value.
below the alert level for the past ten years,

Governance and Risk Management

Operational loss events by category – % of Operational loss events by category –% of
total losses by number of events Graph – 24 total losses by value Graph – 25

Composition of losses – business line

Payment and Settlement – 11% 2020
2020
Composition of losses - category

Annual Report 2020

2019 2019

Commercial Bank of Ceylon PLC

Composition of losses – business line
Retail Banking – 89%

Composition of losses - category 2020 2019 2020 2019

Execution, delivery and Execution, delivery and
process management 90% 89% process management 75% 67%
Internal frauds 0% 0% Internal frauds 0% 4%
External frauds 1% 2% External frauds 12% 5%
Employment practices and Employment practices and
work place safety 0% 0% work place safety 0% 0%
Clients, products and Clients, products and
business practice 0% 0% business practice 0% 0%
Damage to physical assets 3% 4% Damage to physical assets 1% 1%
Business disruption and Business disruption and
system failures 6% 5% system failures 12% 23%

Retail Banking 89%

Payment and Settlement 11%
Business disruption and system failures 100%
Execution,delivery and process management 84%
External frauds 14%
Damage to physical assets 1%
Business disruption and system failures 1%

129
 As typical with operational risk losses, The IT Risk Unit of the IRMD is Legal risk
majority of the losses encountered responsible for implementing the IT risk Legal risk is an integral part of operational
by the Bank during 2020 consisted of management framework for the Bank, risk and is defined as the exposure to the
high frequency/low financial impact ensuring that the appropriate governance adverse effects arising from inaccurately
events mainly falling under the loss framework, policies, processes and technical drawn up contracts, their execution,
category Execution, Delivery and Process capabilities are in place to manage all the absence of written agreements or
Management. These low value events are significant IT risks. The IT Risk Management inadequate agreements. It includes, but is
mainly related to cash and ATM operations Policy, aligned with the Operational Risk not limited to, exposure to reprimanding,
of the Bank’s service delivery network Management Policy complements the fines, penalties, or punitive damages
consisting of over 1,000 points across Information Security Policy, and the related resulting from supervisory actions, as well as
Sri Lanka and Bangladesh. Individual events processes, objectives and procedures cost of private settlements.
with monetary values less than Rs.100,000 relevant for managing risk and improving
Risk Governance and Management

The Bank manages legal risk by ensuring

accounted for more than 93% of the total information security of the Bank.
that applicable regulations are fully taken
loss events for the year. Also, the number RCSA is used as one of the core into consideration in all relations and
of loss events for the year when compared mechanisms for IT risk identification and contracts with individuals and institutions
to the number of transactions performed assessment, while the IT Risk Unit carries who maintain business relationships with the
during the year stands at a mere 0.0036%. out independent IT risk reviews in line with Bank, supported by required documentation.
When considering the values of the the established structure of the operational Potential risk of any rules and regulations
losses incurred by the Bank during the risk management process. Results of these being breached is managed by the
year, they can mainly be categorised independent IT risk assessments together establishment and operation of an effective
under Execution, Delivery and Process with audit findings, analysis of information system for verifying conformity of operations
Management, Business Disruption and security incidents, internal and external with relevant regulations.
System Failures and External Frauds. The loss data are also employed for IT risk
Governance and Risk Management

losses for the year were primarily driven by identification and assessment purposes. Compliance and regulatory risk
a limited number of events in these three IT risk mitigation involves prioritising,
categories, majority of which the Bank Compliance and regulatory risk refers to
evaluating and implementing the the potential risk to the Bank resulting from
managed to resolve through subsequent appropriate risk-reducing controls or risk
recovery/rectification with minimum non compliance with applicable laws, rules
treatment techniques recommended from and regulations and codes of conduct and
financial impact to the Bank. Further, the risk identification and assessment
necessary process improvements and system could result in regulatory fines, financial
process. The Bank has a multi-layered losses, disruptions to business activities and
changes have been introduced to prevent approach of building controls into each layer
recurrence. Capital allocation pertaining to reputational damage. A compliance function
of technology, including data, applications, reporting directly to the Board of Directors
operational risk for 2020 under Alternative devices, network, etc. This ensures robust
Standardised Approach as per Basel III is is in place to assess the Bank’s compliance
end-to-end protection, while enhancing with external and internal regulations on an
Rs. 6.9 Bn., whereas the net loss after the cyber threat detection, prevention, ongoing basis. A comprehensive compliance
Annual Report 2020

discounting the subsequent recoveries response and recovery controls. The Bank
amounts to a mere 0.83% of this capital policy defines how this risk is identified,
is certified under the globally accepted, monitored and managed by the Bank in a
allocation. This trend of exceptionally low de-facto standard for Information Security
levels of operational risk losses of the Bank structured manner. The Bank’s culture and
Management System (ISMS) – ISO/IEC the Code of Ethics too play a key role in
bears testimony to the effectiveness of 27001:2013 and Payment Card Industry Data
the Bank’s operational risk management managing this risk.
Security Standard (PCI DSS), both focusing
framework and the internal control on ensuring Confidentiality, Integrity and
Commercial Bank of Ceylon PLC

environment. Strategic risk

Availability of data/ information. The ISMS is
independently validated on an annual basis Strategic risk is related to strategic decisions
IT risk by the ISO 27001 ISMS external auditors and may manifest in the Bank not being
IT risk is the business risk associated with use, and Qualified Security Assessors of the able to keep up with the evolving market
ownership, operation, involvement, influence PCI Council. dynamics, resulting in loss of market share
and adoption of IT within an organisation. and failure to achieve strategic goals.
The Bank has continued to invest
It is a major component of operational Corporate planning and budgeting process
in information security, by enhancing
risk comprising IT-related events such as and critical evaluation of their alignment
information security governance in line with
system interruptions/failures, errors, frauds with the Bank’s vision, mission and the risk
the CBSL directions and intensifying focus
through system manipulations, cyberattacks, appetite facilitate management of strategic
on information and cyber security with
obsolescence in applications, falling behind risk. The detailed scorecard-based qualitative
the Baseline Security Standard (BSS) being
competitors concerning the technology, model aligned to ICAAP is used to measure
rolled-out across the branch network and
etc., that could potentially affect the whole and monitor strategic risk of the Bank. This
in the Head Office. Initiatives taken in this
business. Given the uncertainty with regard scorecard-based approach takes a number of
regard are given under Key Developments in
to frequency and magnitude, managing variables into account, including the size and
2020 on pages 115 and 116 of this report.
IT risk poses challenges. Hence, the Bank sophistication of the Bank, the nature and
Given that risk management relies complexity of its operations and highlights
has accorded top priority to addressing IT
heavily on an effective monitoring the areas that require focus to mitigate
risk, giving more focus to cyber security
mechanism, the IT Risk Unit carries out potential strategic risks.
strategies and continually investing on
continuous, independent monitoring of
improving the cyber security capabilities.
the Bank’s IT risk profile using a range of
The Bank’s cyber security strategy is focused
tools and techniques including Key IT Risk
on securely enabling new technology and
Indicators (KIRIs).
business initiatives while maintaining a
persistent focus on protecting the Bank and
its customers from cyber threats.
130
Reputational risk guidelines on accepting and/offering gifts current and potential through measurement
Reputational risk is the risk of adverse impact or other illegal gratification, collection and of vulnerabilities by carrying out stress
on earnings, assets and liabilities or brand borrowing of funds/obtaining undue favours testing and scenario-based analysis. The
value arising from negative stakeholder from customers and suppliers, holding a ICAAP process also identifies gaps in
perception of the Bank’s business practices, Directorship/being a Partner/Shareholder managing qualitative and quantitative
activities and financial position. The Bank in private companies enumerated in the aspects of reputational risk and strategic
recognises that reputational risk is driven by Code of Ethics and administrative circulars. risk which are not covered under Pillar 1 of
a wide range of other business risks relating In implementing the Code of Ethics and Basel III.
to the “conduct” of the Bank that must affirming its commitment to the 10th The Bank is compliant with both
all be actively managed. In addition, the Principle of the UN Global Compact, the regulatory and its own prudential
proliferation of social media has widened the Bank expects all employees not only to requirements of capital adequacy. With a
stakeholder base and expanded the sources fight corruption, but also to demonstrate loyal base of shareholders and profitable

Risk Governance and Management

of reputational risk. Accordingly, reputational that they do not abuse the power of their operations, the Bank is also well positioned
risk is broadly managed through the systems position as employees for personal financial to meet capital requirements in the longer
and controls adopted for all other risk types or non-financial gain, solicit or accept gifts, term to cover its material risks and to
such as credit, market, operational risk, etc., compromise employees or the Bank. No support business expansion, as a Domestic
which are underpinned by Code of Ethics, employee of the Bank should offer any bribe Systemically Important bank (D-SIB).
Communication policy and business ethics or other illegal gratification in order to obtain
that prohibit unethical behaviour and business for the Bank. Basel III minimum capital requirements
promote employees to live by the claims and buffers
made. Further, the detailed scorecard which Capital Adequacy and ICAAP Framework
The Banking Act Direction No. 01 of 2016
was available to measure and monitor In line with the Basel requirements and introduced capital requirements for licensed
reputational risk under ICAAP was formalised as prescribed in the ICAAP framework, the commercial banks under Basel III starting

Governance and Risk Management

as Reputational Risk Management Policy Bank used internal models to assess and from July 1, 2017 with specified timelines
framework during the year. quantify the risk profile, to stress test risk to progressively increase minimum capital
drivers and to assess capital requirements to ratios to be fully implemented by January
Conduct risk support them. Internal limits which are more 1, 2019 which included Higher Loss
As an organisation that thrives on public stringent than the regulatory requirements Absorbency component for D-SIBs. However,
trust and confidence, yet is faced with provide early warnings with regard to capital as an extraordinary regulatory measure
many conflicting interests and trade-offs, adequacy. for licensed banks to support businesses
aligning of the Bank’s interests with those ICAAP supports the regulatory review and individuals affected by the outbreak of
of the customer is imperative for the Bank’s process providing valuable inputs for COVID-19, CBSL permitted D-SIBs to draw
success and sustainability. Unfair business evaluating the required capital in line with down their Capital Conservation Buffers
practices, professional misbehaviour, future business plans. It integrates strategic (CCB) by 100 basis points.
ethical lapses, inefficient operations, focus and risk management plans with A comparison of the Bank's position as at

Annual Report 2020

bribery and corruption, compliance failures, the capital plan in a meaningful manner December 31, 2020 and the minimum capital
governance weaknesses etc. dent customer with inputs from Senior Management, requirement prescribed by the CBSL effective
confidence on the Bank. Proper conduct Management Committees, Board from January 1, 2019 is tabulated below.
with fair outcomes to the customer is closely Committees and the Board, and also takes This demonstrates the capital strength of
associated with the culture, governance into account potential risk of capital being the Bank and bears testimony to its ability to
structure and the tone at the top of the inadequate under stressed conditions. It meet stringent requirements imposed by
Bank. The Bank has a customer centric also supports profit optimisation through

Commercial Bank of Ceylon PLC

the regulator.
approach that encompasses accountability, proactive decisions on exposures both
remuneration structures, compliance with
the laws, rules and regulations in spirit,
learning culture, transparency, public Target and actual capital Table – 41
disclosures, Service Level Agreements and
Capital ratios Regulatory HLA Total Goal (Internal 2020 2019
monitoring thereof, customer complaint minimum requirement)
handling procedure and customer % % % % % %
engagement to maintain high standards
of behaviour and integrity with a view to CET 1 7.0 (2019) 1.5 8.5 (2019) >11 13.217 12.298
minimise conduct risk. 6.0 (2020) 7.5 (2020)
Total 12.5 (2019) 1.5 14.0 (2019)
Bribery and corruption related risks 11.5 (2020) 13.0 (2020) >15 16.819 16.146
Bribery and Corruption is illegal, dishonest
* Even though the CCB applicable to the Bank is 2.5% as per the original direction, with the permission granted by the CBSL to D-SIBs
and damages the reputation of the Bank and to draw down part of the Capital Conservation Buffer as a COVID-19 relief measure, the ratio applicable to the Bank as of
therefore, the Bank expects all its employees December 31, 2020 was 1.5%.
to refrain from giving or accepting bribes,
(Refer pages 331 and 332 in Annex 3 for the detailed capital adequacy computation)
kickbacks or commissions and taking part
in any form of corruption. The Bank has
developed an Anti-Bribery and Corruption
Policy which will be submitted for approval
of the Board in March 2021. It will be made
available at [Link] no sooner it
is approved by the Board. In addition, the
Bank has a Whistleblowers Charter and

131
 The ICAAP helps the Bank to periodically the Bank is continuously finding ways to The Bank’s governance framework for
evaluate the capital requirements for improve judicious allocation of capital to stress testing sets out the responsibilities
the next five years, develop capital requirements associated with its day-to-day and approaches to stress testing activities
augmentation plans based thereon and operations. The challenges associated with undertaken at the Bank, business line and
submit same for review by the CBSL. mobilising capital from external sources are risk type levels. The Bank uses a range of
Consequently, despite the non-conducive also taken into account, but not excluded stress testing techniques, including scenario
operating environment, SLFRS 9 adoption as a sustainable option to boost the capital analysis, sensitivity analysis and reverse
and taxes that impacted internal capital in the long run. The Bank is comfortable stress testing to perform stress testing for
generation capabilities of the Bank in 2019 with the available capital buffer to support different purposes.
and 2020, the Bank has been able to secure its growth plans/withstand stressed market The framework covers all the material
availability of capital to fund its expansion conditions. However, the Bank is never risks such as credit risk, credit concentration
plans and meet Higher Loss Absorbency complacent with current comfort levels and risk, operational risk, liquidity risk, FX risk,
Risk Governance and Management

(HLA) requirements prescribed by the CBSL believes in providing stakeholder confidence IRRBB using EVE and EAR perspectives.
for D-SIBs. In particular, issue of upto USD 50 that the Bank is known for, through sound The Bank evaluates various degrees of
Mn. worth shares to IFC through a private capital buffer levels. stress levels identified in the Stress Testing
placement enabled the Bank to increase its Policy as Minor, Moderate and Severe. The
stated capital during the year. Stress testing resulting impact on the capital is then
“Basel Workgroup” of the Bank consists As an integral part of ICAAP under Pillar carefully evaluated. Where stress tests point
of members from a cross section of business II, the Bank conducted stress testing for to a deterioration of the capital which has
and support units to assess capital adequacy severe but plausible shocks on its major risk no impact on the policy level on capital
in line with strategic direction of the Bank. exposures on a periodic basis to evaluate maintenance, same is described as Minor
While ICAAP acts as a foundation for the sensitivity of the current and forward risk, while a deterioration of up to 1% is
such assessment, the Basel Workgroup is risk profile relative to risk appetite and their considered as Moderate risk. If the impact
Governance and Risk Management

continuously searching for improvements impact on resilience of capital, funding, results in the capital falling below the
amidst changing landscape in different liquidity and earnings. statutory minimum, such a level would
frontiers, to recommend the desired way It also supports strategic planning, be regarded as Severe risk, warranting
forward to the ALCO including indications the ICAAP including capital management, immediate attention of the Management to
on current and future capital requirements, liquidity management, setting of risk rectify the situation.
anticipated capital expenditure-based appetite triggers and risk tolerance limits, Stress testing is an effective
assessments and desirable capital levels, etc. mitigating risks through reviewing and communication tool to Senior Management,
Being in a capital-intensive business, adjusting limits, restricting or reducing risk owners and risk managers as well as
the Bank is cognisant of the importance of exposures and hedging thereof, facilitating supervisors and regulators since it offers
capital. The Bank has access to a loyal base the development of risk mitigation or a broader view of all risks borne by the
of shareholders who takes a long-term view contingency plans across a range of stressed Bank in relation to its risk tolerance and
of the Bank as well as profits retained over conditions supporting communication with strategy in hypothetical stress scenarios. The
Annual Report 2020

the years by adopting prudent dividend internal and external stakeholders. outcomes of stress testing are reported to
policies, etc. Moreover, in order to achieve the EIRMC and BIRMC on a quarterly basis
an optimised level of capital allocation, for appropriate, proactive decision making.
Extracts from the stress testing results are set
out in Table 42.

Impact on CAR at Minor, Moderate and Severe stress levels:

Commercial Bank of Ceylon PLC

Table – 42

Particulars Description 2020 2019

Minor Moderate Severe Minor Moderate Severe
% % % % % %

Credit risk – asset Increasing the direct non- performing facilities

quality downgrade over the direct performing facilities for the entire
portfolio -0.14 -0.37 -0.72 -0.15 -0.38 -0.74

Operational risk Impact of;

1. Top five operational losses during last five years
2. Average of yearly operational risk losses during
last three years whichever is higher -0.09 -0.21 -0.43 -0.05 -0.13 -0.25

Foreign exchange Percentage shock in the exchange rates for the

risk Bank and Maldives operations (gross positions in
each Book without netting) -0.10 -0.19 -0.45 -0.06 -0.13 -0.29

132
Particulars Description 2020 2019
Minor Moderate Severe Minor Moderate Severe
% % % % % %

Liquidity risk (LKR) – 1. Withdrawal of percentage of the clients, banks

and other banking institution deposits from
the Bank within a period of three months
2. Rollover of loans to a period greater than three
months -0.07 -0.19 -0.39 -0.03 -0.11 -0.26

Interest rate risk – To assess the long-term impact of changes in

EAR and EVE (LKR) – interest rates on Bank’s EVE through changes in

Risk Governance and Management

Sri Lanka the economic value of its assets and liabilities
and to assess the immediate impact of changes in
interest rates on Bank’s earnings through changes
in its net interest income -0.12 -0.20 -1.16 -0.15 -0.30 -0.44

Monitoring and reporting Basel III – Market Discipline

Risk management function of the Bank Please refer Annex 3 on pages 331 to 344 for
is responsible for identifying, measuring, the minimum disclosure requirements under
monitoring and reporting risk. To enhance Pillar III as per the Banking Act Direction
the effectiveness of its role, staff attached No. 01 of 2016.

Governance and Risk Management

to it are given regular training, enabling Please refer pages 343 and 344 in
them to develop and refine their skills. Annex 3 for the D-SIB Assessment Exercise
They are well supported by IT systems disclosed as required by the Banking Act
that have made data extraction, analysis Direction No. 10 of 2019.
and modelling possible. Regular and
ad-hoc reports are generated on Key Risk
Indicators and risk matrices of the Bank
as well as the subsidiaries, for review by
the Senior Management, Executive and
Board Committees, and the Board which
rely on such reports for evaluating risk and
providing strategic direction.

Annual Report 2020

The reports provide information on
aggregate measures of risks across products,
portfolios, tenures and geographies relative
to agreed policy parameters, providing a
clear representation of the risk profile and
sensitivities of the risks assumed by the Bank
and the Group.

Commercial Bank of Ceylon PLC

133
 Commercial Bank of Ceylon PLC Annual Report 2020 Governance and Risk Management Risk Governance and Management

134
FINANCIAL STATEMENTS
The Financial Statements,
including Accounting Policies and
accompanying notes, provide a
true and fair view of the Bank’s
performance, financial position,
changes in equity and cash flows
as opined in the Auditors’ Report.
The Financial Statements are in
compliance with all applicable


Accounting Standards and are

- 290 Statements
free from material misstatement.

Financial
Our Auditors have expressed their

2020 135
unqualified opinion on these

Annual Report Pages

Financial Statements as shown
in their “Independent Auditors’
Report” to the shareholders.

Commercial Bank of Ceylon PLC

Financial Calendar – 2020 and 2021 – 137
Independent Auditors’ Report – 138
Financial Statements Highlights – Bank – 141
Financial Statements – Table of Content – 142
Income Statement – 143
Statement of Profit or Loss and – 144
Other Comprehensive Income
Statement of Financial Position – 145
Statement of Changes in Equity – Group – 146
Statement of Changes in Equity – Bank – 150
Statement of Cash Flows – 154
Notes to the Financial Statements – 155

135
Financial Calendar – 2020 and 2021
Dividend Calendar
2020 2021

On April 05, 2021 and

Final dividend for the previous year paid/payable On July 06, 2020 on April 23, 2021
First interim dividend for the year paid/payable Note 01 in the fourth quarter of 2021*
Second interim dividend for the year paid/payable Note 01 in the first quarter of 2022*
Final dividend for the year to be proposed On March 30, 2021 in March 2022
Final dividend for the current year to be paid On April 05, 2021 and
on April 23, 2021** in April 2022***
*Subject to approval by Directors
**Subject to approval by Shareholders
***Subject to recommendation by Directors and approval by Shareholders
Note 01: The Bank did not pay interim dividends for the year 2020 in conformity with the Banking Act Direction No. 3 of 2020 dated May 13, 2020 on " Restrictions on
Discretionary Payments of Licensed Banks" issued by the CBSL.

Annual General Meeting (AGM) Calendar

Financial Statements
Annual Report and Accounts signed/to be signed Annual General Meeting to be held
For the year 2020 – For the year 2021 – For the year 2020 – For the year 2021 –
On February 24, 2021 In February 2022 On March 30, 2021 In March 2022

Annual Report 2020

Commercial Bank of Ceylon PLC
Submission to the Publication in the Newspapers
Colombo Stock Exchange (CSE) (As per the Direction Ref. No. 02/04/003/0401/001 dated January 26, 2006 and
(In terms of Rule 7.4 of the CSE and as per the the Direction Ref. No. 02/04/003/0401/001 dated February 21, 2006 of the Central
requirements of the Central Bank of Sri Lanka) Bank of Sri Lanka)
Interim Financial
Statements Calendar
2020 2021 2020 2021
Submitted on To be submitted Published on/to be published on or before To be published
on or before on or before

English Sinhala Tamil In all three languages

For the three months

ended/ending March 31,
(unaudited) May 14, 2020 May 13, 2021 May 22, 2020 May 29, 2020 May 29, 2020 May 31, 2021
For the six months ended/ending
June 30, (audited) August 17, 2020 August 13, 2021 August 21, 2020 August 28, 2020 August 28, 2020 August 31, 2021
For the nine months ended/
ending September 30,
(unaudited) November 12, 2020 November 15, 2021 November 20, 2020 November 26, 2020 November 27, 2020 November 30, 2021
For the year ended/ending
December 31, (audited) On February 24, 2021 February 28, 2022 March 31, 2021 March 31, 2021 March 31, 2021 March 31, 2022

137
 Independent Auditors’ Report

Ernst & Young Tel : +94 11 2463500

Chartered Accountants Fax Gen : +94 11 2697369
201 De Saram Place Tax : +94 11 5578180
P.O. Box 101 eysl@[Link]
Colombo 10 [Link]
Sri Lanka

HMAJ/WDPL

TO THE SHAREHOLDERS OF COMMERCIAL BANK OF CEYLON PLC

Report on the audit of the financial Basis for opinion We have fulfilled the responsibilities
statements We conducted our audit in accordance described in the Auditor’s responsibilities
with Sri Lanka Auditing Standards (SLAuSs). for the audit of the financial statements
Opinion
Our responsibilities under those standards section of our report, including in relation
We have audited the financial statements of to these matters. Accordingly, our audit
are further described in the Auditor’s
Commercial Bank of Ceylon PLC (“the Bank”) included the performance of procedures
responsibilities for the audit of the financial
Financial Statements

and the consolidated financial statements of designed to respond to our assessment of

statements section of our report. We are
the Bank and its subsidiaries (“the Group”), the risks of material misstatement of the
independent of the Group in accordance
which comprise the statement of financial financial statements. The results of our
with the Code of Ethics issued by CA
position as at December 31, 2020, and the audit procedures, including the procedures
Sri Lanka (Code of Ethics) and we have
income statement, statement of profit or performed to address the matters below,
fulfilled our other ethical responsibilities
loss, other comprehensive income, statement provide the basis for our audit opinion on
in accordance with the Code of Ethics. We
of changes in equity and statement of cash the accompanying financial statements.
believe that the audit evidence we have
flows for the year then ended, and notes
Annual Report 2020

obtained is sufficient and appropriate to

to the financial statements, including a
provide a basis for our opinion.
summary of significant accounting policies.
In our opinion, the accompanying financial Key audit matters
statements of the Bank and the Group gives
Key audit matters are those matters that, in
a true and fair view of the financial position
our professional judgement, were of most
of the Bank and the Group as at December
significance in our audit of the financial
Commercial Bank of Ceylon PLC

31, 2020, and of its financial performance

statements of the current period. These
and cash flows for the year then ended
matters were addressed in the context of
in accordance with Sri Lanka Accounting
the audit of the financial statements as a
Standards.
whole, and in forming our opinion thereon,
and we do not provide a separate opinion
on these matters. For each matter below, our
description of how our audit addressed the
matter is provided in that context.

Partners: W R H Fernando FCA FCMA R N de Saram ACA FCMA Ms. N A De Silva FCA Ms. Y A De Silva FCA W R H De Silva ACA ACMA W K B S P Fernando FCA FCMA
Ms. K R M Fernando FCA ACMA Ms. L K H L Fonseka FCA A P A Gunasekera FCA FCMA A Herath FCA D K Hulangamuwa FCA FCMA LLB (Lond) H M A Jayesinghe FCA FCMA
Ms. A A Ludowyke FCA FCMA Ms. G G S Manatunga FCA A A J R Perera ACA ACMA Ms. P V K N Sajeewani FCA N M Sulaiman ACA ACMA B E Wijesuriya FCA FCMA
Principals: G B Goudian ACMA T P M Ruberu FCMA FCCA
A member firm of Ernst & Young Global Limited

138
Key audit matter How our audit addressed the key audit matter

Impairment allowance for Loans and advances to We assessed the alignment of the Group’s impairment computations and underlying
other customers. methodology with the requirements of SLFRS 9 with consideration of COVID-19 impacts
Loans and advances amounting to Rs. 909,829 Mn. and related industry responses based on the best available information up to the date
of our report. Our audit procedures included amongst others the following:
(Note 34), net of impairment allowance of
Rs. 52,030 Mn. (Note 34) and represents 52% of total z We evaluated the design effectiveness of controls where relevant over estimation
assets of the Group as at December 31, 2020. of impairment of loans and advances, to other customers, which included assessing
As described in Note 7.1.12, impairment allowance
the level of oversight, review and approval of impairment policies by the Board
on such financial assets carried at amortised cost is
Audit Committee and management.
determined in accordance with Sri Lanka Accounting z We checked the completeness and accuracy of the underlying data used in the
Standard – SLFRS 9 Financial Instruments (SLFRS 9). computations by agreeing significant details to source documents and accounting
records.
This was a key audit matter due to:
z We test–checked the underlying calculations.

Independent Auditors’ Report

z materiality of the reported provision for credit z In addition to the above, the following focused procedures were performed:
impairment which involved complex manual
calculations; and For a sample of loans and advances individually assessed for impairment:
z the degree of assumptions, judgements and – Assessing the appropriateness of the criteria used by the management to
estimation uncertainty associated with the determine whether there are any indicators of impairment; and
calculations. – Evaluating the reasonableness of the provisions made with particular focus on the
impact of COVID-19 on elevated risk industries, strategic responsive actions taken,
Key areas of significant judgements, estimates and collateral values, and the value and timing of future cashflows.
assumptions used by management in the assessment
of the impairment allowance included the following:

Financial Statements
For loans and advances collectively assessed for impairment:
z the probable impacts of COVID-19 and related – Assessing the reasonableness of assumptions and estimates used by management
industry responses (e.g. government stimulus including the reasonableness of forward-looking information and scenarios;
packages and debt moratorium relief measures – As relevant, assessing the basis for and data used by management to determine
granted by the Group); overlays in consideration of the probable effects of the COVID-19 pandemic; and
z the determination on whether or not customer
contracts have been substantially modified due For loans and advances affected by government stimulus and debt moratorium

Annual Report 2020

to such COVID–19 related stimulus and relief relief measures granted:
measures granted and related effects on the – Assessing the appropriateness of judgements, reasonableness of calculations
amount of interest income recognised on affected and data used to determine whether customer contracts have been substantially
loans and advances; and modified or not and to determine the resulting accounting implications; and
z forward-looking macroeconomic factors, – Evaluating the reasonableness of the interest income recognised on such affected
including developing and incorporating loans and advances.
macroeconomic scenarios, given the wide range

Commercial Bank of Ceylon PLC

z We assessed the adequacy of the related financial statement disclosures as set out
of potential economic outcomes and probable
in Note 18, 34 and 68.1.3.
impacts from COVID-19 that may impact future
expected credit losses.

Bank’s financial reporting process and related IT Our audit procedures included the following, amongst others:
systems and controls
z Understanding the security monitoring procedures over IT systems relevant to
The Bank uses multiple IT systems in its operations. financial reporting, given the increase in remote access;
The COVID-19 pandemic necessitated the Bank to
z Understanding and evaluating the design and operating effectiveness of key
adapt various operating processes and procedures
automated, IT dependent and manual controls implemented by management over
including modification of relevant controls to
generation of multiple system reports and collation of required information in
mitigate the resulting risks.
calculating the significant information for financial statements disclosures;
IT systems and controls relevant to financial z Checking the source data of the reports used to generate significant disclosures for
reporting was a key audit matter due to: accuracy and completeness;
z A changed working environment of increased z Checking the underlying calculations and the reasonableness of classifications
remote access; made by management; and
z The Bank’s financial reporting process being z Evaluating the management’s general ledger reconciliation procedures which
heavily dependent on information derived from includes cross checking to system reports and source data where relevant.
its IT systems; and
z Key financial statement disclosures involving
the use of multiple system – generated reports,
collation and spreadsheet – based calculations.

139
 Other information included in the be expected to influence the economic We communicate with those charged with
2020 Annual Report decisions of users taken on the basis of these governance regarding, among other matters,
Other information consists of the information financial statements. the planned scope and timing of the audit
included in the Annual Report, other than the As part of an audit in accordance with and significant audit findings, including any
financial statements and our auditor’s report SLAuSs, we exercise professional judgment significant deficiencies in internal control
thereon. Management is responsible for the and maintain professional skepticism that we identify during our audit.
other information. throughout the audit. We also: We also provide those charged with
Our opinion on the financial statements does governance with a statement that we have
z Identify and assess the risks of material
not cover the other information and we do complied with ethical requirements in
misstatement of the financial statements,
not express any form of assurance conclusion accordance with the Code of Ethics regarding
whether due to fraud or error, design and
thereon. independence, and to communicate with
perform audit procedures responsive to
In connection with our audit of the financial them all relationships and other matters that
those risks, and obtain audit evidence
statements, our responsibility is to read the may reasonably be thought to bear on our
that is sufficient and appropriate to
other information and, in doing so, consider independence, and where applicable, related
provide a basis for our opinion. The risk
whether the other information is materially safeguards.
of not detecting a material misstatement
inconsistent with the financial statements resulting from fraud is higher than for one From the matters communicated with those
or our knowledge obtained in the audit or resulting from error, as fraud may involve charged with governance, we determine
Independent Auditors’ Report

otherwise appears to be materially misstated. collusion, forgery, intentional omissions, those matters that were of most significance
If, based on the work we have performed, misrepresentations, or the override of in the audit of the financial statements
we conclude that there is a material internal control. of the current period and are therefore
misstatement of this other information, we the key audit matters. We describe these
z Obtain an understanding of internal
are required to report that fact. We have matters in our auditor’s report unless law
control relevant to the audit in order
nothing to report in this regard. or regulation precludes public disclosure
to design audit procedures that are
about the matter or when, in extremely
appropriate in the circumstances, but not
Responsibilities of management and those rare circumstances, we determine that a
for the purpose of expressing an opinion
charged with governance for the financial matter should not be communicated in our
on the effectiveness of the internal controls
statements report because the adverse consequences of
of the Bank and the Group.
doing so would reasonably be expected to
Financial Statements

Management is responsible for the

z Evaluate the appropriateness of accounting outweigh the public interest benefits of such
preparation of financial statements that give
policies used and the reasonableness communication.
a true and fair view in accordance with Sri
of accounting estimates and related
Lanka Accounting Standards, and for such
disclosures made by management. Report on Other Legal and
internal control as management determines
is necessary to enable the preparation of z Conclude on the appropriateness of Regulatory Requirements
financial statements that are free from management’s use of the going concern As required by section 163 (2) of the
material misstatement, whether due to fraud basis of accounting and, based on the audit Companies Act No. 07 of 2007, we
Annual Report 2020

or error. evidence obtained, whether a material have obtained all the information and
uncertainty exists related to events or explanations that were required for the audit
In preparing the financial statements,
conditions that may cast significant and, as far as appears from our examination,
management is responsible for assessing
doubt on the Group’s ability to continue proper accounting records have been kept
the Group’s ability to continue as a going
as a going concern. If we conclude that by the Bank.
concern, disclosing, as applicable, matters
a material uncertainty exists, we are CA Sri Lanka membership number of the
related to going concern and using the
required to draw attention in our auditor’s
Commercial Bank of Ceylon PLC

going concern basis of accounting unless engagement partner responsible for signing
report to the related disclosures in the this independent auditor’s report is 1884.
management either intends to liquidate
financial statements or, if such disclosures
the Group or to cease operations, or has no
are inadequate, to modify our opinion.
realistic alternative but to do so.
Our conclusions are based on the audit
Those charged with governance are evidence obtained up to the date of our
responsible for overseeing the Bank’s and the auditor’s report. However, future events or
Group’s financial reporting process. conditions may cause the Group to cease
to continue as a going concern. Chartered Accountants
Auditor’s responsibilities for the audit of the
z Evaluate the overall presentation, structure February 24, 2021
financial statements
and content of the financial statements, Colombo
Our objectives are to obtain reasonable
including the disclosures, and whether
assurance about whether the financial
the financial statements represent the
statements as a whole are free from material
underlying transactions and events in a
misstatement, whether due to fraud or
manner that achieves fair presentation.
error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance z Obtain sufficient appropriate audit
is a high level of assurance, but is not a evidence regarding the financial
guarantee that an audit conducted in information of the entities or business
accordance with SLAuSs will always detect activities within the Group to express an
a material misstatement when it exists. opinion on the consolidated financial
Misstatements can arise from fraud or error statements. We are responsible for the
and are considered material if, individually direction, supervision and performance
or in the aggregate, they could reasonably of the group audit. We remain solely
responsible for our audit opinion.

140
Financial Statements Highlights – Bank
Gross income Graph – 26 Net interest income Graph – 27 Net fee and commission income Graph – 28
Rs. Bn. Rs. Bn. Rs. Bn.
150 50 12.5

120 40 10.0

90
0.68% 30
5.01% 7.5
(10.04%)
60 20 5.0

30 10 2.5

0 0 0
2019 2020 2019 2020 2019 2020

Net gains/(losses) from

derecognition of financial assets Graph – 29 Profit before tax Graph – 30 Profit after tax Graph – 31
Rs. Mn. Rs. Bn. Rs. Bn.
7,500 25 20

6,000 20 16

4,500
462.66% 15
5.25% 12
(3.83%)
3,000 10 8

1,500 5 4

Financial Statements
0 0 0
2019 2020 2019 2020 2019 2020

Financial assets at amortised cost – Loans Financial liabilities at amortised cost –

Total assets Graph – 32 and advances to other customers Graph – 33 Due to depositors Graph – 34
Rs. Bn. Rs. Bn. Rs. Bn.

Annual Report 2020

2,000 1,000 1,500

1,600 800 1,200

1,200
25.15% 600
1.38% 900
20.19%
800 400 600

400 200 300

Commercial Bank of Ceylon PLC

0 0 0
2019 2020 2019 2020 2019 2020

Earnings per share – Basic Graph – 35 Interest margin Graph – 36 Financial intermediation margin Graph – 37
Rs. % %
20 4.0 12.0

16 3.2 9.6

12
(6.24%) 2.4
(34bps) 7.2
(146bps)
8 1.6 4.8

4 0.8 2.4

0 0 0
2019 2020 2019 2020 2019 2020

141
 Financial Statements – Table of Content
Page No. Page No.

Primary Financial Statements 33. Financial Assets at Amortised Cost –

Income Statement 143 Loans and Advances to Banks 201

Statement of Profit or Loss and 34. Financial Assets at Amortised Cost –

Other Comprehensive Income 144 Loans and Advances to Other Customers 202

Statement of Financial Position 145 35. Financial Assets at Amortised Cost –

Debt and Other Financial Instruments 206
Statement of Changes in Equity – Group 146
36. Financial Assets measured at Fair Value through
Statement of Changes in Equity – Bank 150
Other Comprehensive Income 207
Statement of Cash Flows 154
37. Investments in Subsidiaries 210

Notes to the Financial Statements – General 38. Investments in Associates 212

1. Reporting Entity 155 39. Property, Plant and Equipment and
Right-of-Use Assets 214
2. Basis of Accounting 156
40. Investment Properties 225
3. Financial Risk Management 160
4. Fair Value Measurement 163 41. Intangible Assets 226

5. Changes in Accounting Policies 163 42. Deferred Tax Assets and Liabilities 228

6. Significant Accounting Policies – General 164 43. Other Assets 230

7. Significant Accounting Policies –
Recognition of Assets and Liabilities 165 Notes to the Financial Statements –
Statement of Financial Position: Liabilities and Equity
8. Significant Accounting Policies –
Recognition of Income and Expense 175 44. Due to Banks 230
Financial Statements

9. Significant Accounting Policies – Tax Expense 176 45. Derivative Financial Liabilities 231
10. Significant Accounting Policies – Statement of Cash Flows 176 46. Financial Liabilities at Amortised Cost – Due to Depositors 231
11. Amendments to Accounting Standards Issued 47. Financial Liabilities at Amortised Cost – Other Borrowings 232
But Not Yet Effective 177 48. Current Tax Liabilities 232
49. Other Liabilities 233
Notes to the Financial Statements – Income Statement
50. Due to Subsidiaries 239
Annual Report 2020

12. Gross Income 178

13. Net Interest Income 178 51. Subordinated Liabilities 240

14. Net Fee and Commission Income 180 52. Stated Capital 241
15. Net Gains/(Losses) from Trading 181 53. Share-based Payment 241
16. Net Gains/(Losses) from derecognition of Financial Assets 181 54. Statutory Reserves 244
17. Net Other Operating Income 182 55. Retained Earnings 245
Commercial Bank of Ceylon PLC

18. Impairment Charges and Other Losses 182 56. Other Reserves 245
19. Personnel Expenses 185 57. Non-Controlling Interest 248
20. Depreciation and Amortisation 185
21. Other Operating Expenses 186 Notes to the Financial Statements – Other Disclosures
22. Taxes on Financial Services 187 58. Contingent Liabilities and Commitments 248
23. Income Tax Expense 187 59. Net Assets Value per Ordinary Share 250
24. Earnings Per Share (EPS) 189 60. Litigation Against the Bank 250
25. Dividends on Ordinary Shares 190 61. Maturity Analysis – Group 251
62. Operating Segments 253
Notes to the Financial Statements –
Statement of Financial Position: Assets 63. Related Party Disclosures 255
26. Classification of Financial Assets and Financial Liabilities 190 64. Non-Cash Items Included in Profit Before Tax 260
27. Fair Value Measurement 192 65. Change in Operating Assets 260
28. Cash and Cash Equivalents 196 66. Change in Operating Liabilities 261
29. Balances with Central Banks 197 67. Operating Leases 261
30. Placements with Banks 197 68. Financial Risk Review 261
31. Derivative Financial Assets 198 69. Events After the Reporting Period 290
32. Financial Assets Recognised through Profit or Loss –
Measured at Fair Value 198

142
Income Statement
GROUP BANK
For the year ended December 31, Note Page 2020 2019 Change 2020 2019 Change
No. Rs. ’000 Rs. ’000 % Rs. ’000 Rs. ’000 %

Gross income 12 178 151,966,413 150,741,129 0.81 149,711,481 148,706,284 0.68

Interest income 13.1 178 124,087,713 129,287,743 (4.02) 122,330,386 127,779,540 (4.26)
Less: Interest expense 13.2 179 73,218,911 80,931,352 (9.53) 72,759,045 80,571,268 (9.70)
Net interest income 13 178 50,868,802 48,356,391 5.20 49,571,341 47,208,272 5.01
Fee and commission income 14.1 180 11,839,689 12,874,966 (8.04) 11,268,543 12,406,584 (9.17)
Less: Fee and commission expense 14.2 181 2,018,014 2,123,128 (4.95) 2,012,138 2,117,072 (4.96)
Net fee and commission income 14 180 9,821,675 10,751,838 (8.65) 9,256,405 10,289,512 (10.04)
Net gains/(losses) from trading 15 181 1,878,060 1,360,833 38.01 1,878,086 1,360,858 38.01
Net gains/(losses) from derecognition of
financial assets 16 181 6,390,197 1,135,711 462.66 6,390,197 1,135,711 462.66
Net other operating income 17 182 7,770,754 6,081,876 27.77 7,844,269 6,023,591 30.23
Total operating income 76,729,488 67,686,649 13.36 74,940,298 66,017,944 13.52
Less: Impairment charges and other losses 18 182 21,419,532 11,331,523 89.03 21,483,698 11,061,466 94.22
Net operating income 55,309,956 56,355,126 (1.85) 53,456,600 54,956,478 (2.73)

Less: Expenses
Personnel expenses

Financial Statements
19 185 14,992,748 14,408,914 4.05 14,563,999 14,082,659 3.42
Depreciation and amortisation 20 185 3,102,695 2,841,264 9.20 2,989,031 2,754,521 8.51
Other operating expenses 21 186 8,167,170 8,875,316 (7.98) 7,886,936 8,588,456 (8.17)
Total operating expenses 26,262,613 26,125,494 0.52 25,439,966 25,425,636 0.06
Operating profit before taxes on financial services 29,047,343 30,229,632 (3.91) 28,016,634 29,530,842 (5.13)
Less: Taxes on financial services 22 187 4,531,381 7,255,728 (37.55) 4,505,322 7,191,737 (37.35)

Annual Report 2020

Operating profit after taxes on financial services 24,515,962 22,973,904 6.71 23,511,312 22,339,105 5.25
Share of profits of associate, net of tax 38.1 213 3,898 9,992 (60.99) – – –
Profit before tax 24,519,860 22,983,896 6.68 23,511,312 22,339,105 5.25
Less: Income tax expense 23 187 7,433,063 5,563,500 33.60 7,137,823 5,314,138 34.32
Profit for the year 17,086,797 17,420,396 (1.91) 16,373,489 17,024,967 (3.83)

Commercial Bank of Ceylon PLC

Profit attributable to:
Equity holders of the Bank 16,939,950 17,263,259 (1.87) 16,373,489 17,024,967 (3.83)
Non-controlling interest 57 248 146,847 157,137 (6.55) – – –
Profit for the year 17,086,797 17,420,396 (1.91) 16,373,489 17,024,967 (3.83)

Earnings per share

Basic earnings per ordinary share (Rs.) 24.1 189 15.70 16.41 (4.33) 15.18 16.19 (6.24)
Diluted earnings per ordinary share (Rs.) 24.1 189 15.70 16.41 (4.33) 15.18 16.19 (6.24)

The Notes appearing on pages 155 to 290 form an integral part of these Financial Statements.

143
 Statement of Profit or Loss
and Other Comprehensive Income
GROUP BANK
For the year ended December 31, 2020 2019 Change 2020 2019 Change
Note Page No. Rs. ’000 Rs. ’000 % Rs. ’000 Rs. ’000 % 

Profit for the year 17,086,797 17,420,396 (1.91) 16,373,489 17,024,967 (3.83)

Other comprehensive income, net of tax

Items that will never be reclassified to profit or loss
Net actuarial gains/(losses) on defined benefit plans (228,745) (57,336) (298.96) (223,039) (56,940) (291.71)
Gains/(losses) on remeasurement of defined
benefit liability/asset (295,594) (65,354) (352.30) (287,668) (64,804) (343.90)
Less: Deferred tax charge/(reversal) on actuarial gains/(losses) (66,849) (8,018) (733.74) (64,629) (7,864) (721.83)

Net change in revaluation surplus 56.1 246 2,674,142 – – 2,574,858 – –

Changes in revaluation surplus/(deficit) 3,684,535 – – 3,585,430 – –
Less: Deferred tax charge/(reversal) on revaluation surplus 1,010,393 – – 1,010,572 – –

Net change in fair value on investments in equity 72,255 (26,547) 372.18 72,255 (26,547) 372.18
Change in fair value on investments in equity at fair value
through other comprehensive income 72,255 (26,547) 372.18 72,255 (26,547) 372.18
Less: Deferred tax charge/(reversal) on change in
fair value on investments in equity – – – – – –
Transfer of fair value gains/(losses) o/a reclassification of debt
Financial Statements

instruments from fair value through other comprehensive income

to amortised cost, net of tax 5,626 – – 5,626 – –
Gain on disposal of investments in equity instruments 1,719 – – 1,719 – –

Share of other comprehensive income of associate 3,436 38,633 (91.11) – – –

Items that are or may be reclassified to profit or loss

Net gains/(losses) arising from translating the
Annual Report 2020

Financial Statements of foreign operations 56.4 247 596,723 (396,201) 250.61 439,883 (399,787) 210.03
Net gains/(losses) on investment in financial assets at fair value
through other comprehensive income (1,400,936) 3,197,347 (143.82) (1,400,991) 3,196,970 (143.82)
Fair value gains/(losses) that arose during the year, net of tax 1,537,097 3,865,752 (60.24) 1,537,042 3,865,375 (60.24)
Fair value gains/(losses) realised to the Income Statement on
disposal, net of tax (4,026,616) (816,182) (393.35) (4,026,616) (816,182) (393.35)
Commercial Bank of Ceylon PLC

Fair value gains/(losses) recycled to the Income Statement as

impairement, net of tax 1,088,583 147,777 636.64 1,088,583 147,777 636.64
Cash flow hedges – effective portion of changes in
fair value, net of tax 56.6 248 (64,139) (62,391) (2.80) (64,139) (62,391) (2.80)

Other comprehensive income for the year, net of tax 1,660,081 2,693,505 (38.37) 1,406,172 2,651,305 (46.96)

Total comprehensive income for the year 18,746,878 20,113,901 (6.80) 17,779,661 19,676,272 (9.64)

Attributable to:
Equity holders of the Bank 18,553,575 19,961,841 (7.05) 17,779,661 19,676,272 (9.64)
Non-controlling interest 193,303 152,060 27.12 – – –
Total comprehensive income for the year 18,746,878 20,113,901 (6.80) 17,779,661 19,676,272 (9.64)

The Notes appearing on pages 155 to 290 form an integral part of these Financial Statements.

144
Statement of Financial Position

GROUP BANK
As at December 31, 2020 2019 Change 2020 2019 Change
Note Page No. Rs. ’000 Rs. ’000 % Rs. ’000 Rs. ’000 % 

Assets
Cash and cash equivalents 28 196 51,255,030 53,681,118 (4.52) 50,250,627 52,534,730 (4.35)
Balances with Central Banks 29 197 115,358,732 46,101,232 150.23 110,971,105 39,461,127 181.22
Placements with banks 30 197 16,421,867 24,903,809 (34.06) 15,938,982 24,527,241 (35.02)
Securities purchased under resale agreements – 13,147,534 – – 13,147,534 –
Derivative financial assets 31 198 2,636,717 1,830,927 44.01 2,636,717 1,830,927 44.01
Financial assets recognised through profit or loss –
measured at fair value 32 198 35,189,471 21,468,033 63.92 35,189,471 21,468,033 63.92
Financial assets at amortised cost – Loans and advances to banks 33 201 779,705 757,787 2.89 779,705 757,787 2.89
Financial assets at amortised cost –
Loans and advances to other customers 34 202 909,829,172 893,919,311 1.78 896,845,453 884,645,744 1.38
Financial assets at amortised cost –
Debt and other financial instruments 35 206 302,059,529 107,059,021 182.14 292,727,566 101,144,819 189.41
Financial assets measured at fair value through other
comprehensive income 36 207 278,716,794 197,825,017 40.89 278,461,369 197,568,330 40.94
Investments in subsidiaries 37 210 – – – 5,808,429 5,011,284 15.91
Investment in associate 38 212 64,155 56,821 12.91 44,331 44,331 –
Property, plant and equipment and right-of-use assets 39 214 25,386,630 22,524,658 12.71 23,212,394 20,507,203 13.19
Investment properties 40 225 67,116 46,350 44.80 – – –
Intangible assets 41 226 1,800,516 1,645,714 9.41 1,232,863 1,080,010 14.15
Deferred tax assets 42 228 2,735,566 530,165 415.98 2,499,860 294,059 750.12

Financial Statements
Other assets 43 230 20,195,153 23,443,869 (13.86) 19,619,149 23,322,247 (15.88)
Total assets 1,762,496,153 1,408,941,366 25.09 1,736,218,021 1,387,345,406 25.15
Liabilities
Due to banks 44 230 88,248,056 53,807,425 64.01 87,451,306 51,505,694 69.79
Derivative financial liabilities 45 231 1,501,262 1,495,317 0.40 1,501,262 1,495,317 0.40
Securities sold under repurchase agreements 91,411,522 51,117,342 78.83 91,437,612 51,220,023 78.52
Financial liabilities at amortised cost – due to depositors 46 231 1,286,616,399 1,068,982,587 20.36 1,265,965,918 1,053,307,660 20.19
Financial liabilities at amortised cost – other borrowings 47 232 54,555,933 23,248,893 134.66 54,555,933 23,248,893 134.66

Annual Report 2020

Current tax liabilities 48 232 6,991,005 5,197,188 34.52 6,777,992 4,967,644 36.44
Deferred tax liabilities 42 228 403,846 416,458 (3.03) – – –
Other liabilities 49 233 33,572,283 30,775,884 9.09 33,037,669 30,496,709 8.33
Due to subsidiaries 50 239 – – – 97,015 54,292 78.69
Subordinated liabilities 51 240 38,247,138 37,886,789 0.95 38,247,138 37,886,789 0.95
Total liabilities 1,601,547,444 1,272,927,883 25.82 1,579,071,845 1,254,183,021 25.90
Equity

Commercial Bank of Ceylon PLC

Stated capital 52 241 52,187,747 40,916,958 27.55 52,187,747 40,916,958 27.55
Statutory reserves 54 244 9,285,233 8,387,701 10.70 9,024,065 8,205,391 9.98
Retained earnings 55 245 8,124,261 5,182,185 56.77 7,596,260 5,144,433 47.66
Other reserves 56 245 89,595,571 79,937,405 12.08 88,338,104 78,895,603 11.97
Total equity attributable to equity holders of the Bank 159,192,812 134,424,249 18.43 157,146,176 133,162,385 18.01
Non-controlling interest 57 248 1,755,897 1,589,234 10.49 – – –
Total equity 160,948,709 136,013,483 18.33 157,146,176 133,162,385 18.01
Total liabilities and equity 1,762,496,153 1,408,941,366 25.09 1,736,218,021 1,387,345,406 25.15
Contingent liabilities and commitments 58 248 730,561,685 580,961,807 25.75 728,711,698 579,999,273 25.64
Net assets value per ordinary share (Rs.) 59 250 136.42 130.83 4.27 134.67 129.60 3.91

Memorandum information
Number of employees 5,057 5,062
Number of customer service centres 287 287

The Notes appearing on pages 155 to 290 form an integral part of these Financial Statements.

Certification The Board of Directors is responsible for the preparation and presentation of these Financial Statements.
These Financial Statements have been prepared in compliance Approved and signed for and on behalf of the Board.
with requirements of the Companies Act No. 07 of 2007.

K D N Buddhipala Justice K Sripavan Prof A K W Jayawardane S Renganathan R A P Rajapaksha
Chief Financial Officer Chairman Deputy Chairman Managing Director/ Company Secretary
Chief Executive Officer
February 24, 2021
Colombo

145
 Statement of Changes in Equity – Group
Stated Statutory Retained
capital reserve earnings
fund

Note Page No. Rs. ’000 Rs. ’000 Rs. ’000

Balance as at December 31, 2018 39,147,882 7,444,178 4,949,955

Impact arising from the adoption of SLFRS 16 – – (57,627)
Reversal of deferred tax asset created on liability o/a straight lining of lease rentals – – (57,627)
Balance as at January 1, 2019 39,147,882 7,444,178 4,892,328

Total comprehensive income for the year 2019

Profit for the year – – 17,263,259
Other comprehensive income, net of tax – – (57,400)
Net actuarial gains/(losses) on defined benefit plans – – (57,400)
Share of other comprehensive income of associate, net of tax – – –
Net fair value gains/(losses) on remeasuring financial assets measured at fair value
through other comprehensive income – – –
Net gains/(losses) arising from translating the Financial Statements of foreign operations – – –
Cash flow hedges – effective portion of changes in fair value, net of tax – – –
Total comprehensive income for the year 2019 – – 17,205,859

Transactions with owners, recognised directly in equity, contributions and

Financial Statements

distributions to owners
Issue of ordinary voting shares under employee share option plans 52 241 30,128 – –
Transfer o/a share-based payment transactions 52 241 – – –
Transfer of cost o/a of expired ESOP shares (net of tax) 55 &
56.5 245 & 247 – – 88,913
Dividends to equity holders 1,738,948 – (6,596,511)
Second interim dividend for 2018 25 190 – – (3,032,869)
Annual Report 2020

Final cash dividend for 2018 – – –

Final dividend for 2018 satisfied in the form of issue and allotment of new shares 52 241 1,738,948 – (2,022,032)
Unclaimed dividend absorbed/(dividend paid) in respect of previous years – – (350)
First interim dividend for 2019 25 190 – – (1,541,260)
Share-based payment transactions 56.5 247 – – –
Commercial Bank of Ceylon PLC

Profit due to change in ownership 17 182 – – 14,498

Movement due to change in ownership – – (9,379)
Acquisition of a subsidiary with non-controlling interest – – –
Transfers during the year 54 to 56 244 to 248 – 943,523 (10,413,523)
Total transactions with equity holders 1,769,076 943,523 (16,916,002)
Balance as at December 31, 2019 40,916,958 8,387,701 5,182,185

146
 Other reserves
Revaluation Fair value Foreign Hedging General Employee share Shareholders’ Non-controlling Total
reserve reserve currency reserve reserve option reserve funds interest equity
translation
reserve
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

7,819,131 (1,386,355) 3,157,052 24,019 57,650,003 591,984 119,397,849 1,198,981 120,596,830

– – – – – – (57,627) – (57,627)
– – – – – – (57,627) – (57,627)
7,819,131 (1,386,355) 3,157,052 24,019 57,650,003 591,984 119,340,222 1,198,981 120,539,203

Statement of Changes in Equity – Group

– – – – – – 17,263,259 157,137 17,420,396
39,575 3,169,858 (391,060) (62,391) – – 2,698,582 (5,077) 2,693,505
– – – – – – (57,400) 64 (57,336)
39,575 (942) – – – – 38,633 – 38,633

– 3,170,800 – – – – 3,170,800 – 3,170,800

– – (391,060) – – – (391,060) (5,141) (396,201)
– – – (62,391) – – (62,391) – (62,391)
39,575 3,169,858 (391,060) (62,391) – – 19,961,841 152,060 20,113,901

Financial Statements
– – – – – – 30,128 – 30,128
– – – – – – – – –

– – – – – (123,490) (34,577) – (34,577)

– – – – – – (4,857,563) (4,988) (4,862,551)
– – – – – – (3,032,869) – (3,032,869)

Annual Report 2020

– – – – – – – (3,188) (3,188)
– – – – – – (283,084) – (283,084)
– – – – – – (350) 22 (328)
– – – – – – (1,541,260) (1,822) (1,543,082)
– – – – – – – – –

Commercial Bank of Ceylon PLC

– – – – – – 14,498 – 14,498
(20,921) – – – – – (30,300) 30,300 –
– – – – – – – 212,881 212,881
– – – – 9,470,000 – – – –
(20,921) – – – 9,470,000 (123,490) (4,877,814) 238,193 (4,639,621)
7,837,785 1,783,503 2,765,992 (38,372) 67,120,003 468,494 134,424,249 1,589,234 136,013,483

147
 Statement of Changes in Equity – Group (Contd.)

Stated Statutory Retained

capital reserve earnings
fund

Note Page No. Rs. ’000 Rs. ’000 Rs. ’000

Total comprehensive income for the year 2020

Profit for the year – – 16,939,950
Other comprehensive income, net of tax – – (225,018)
Net actuarial gains/(losses) on defined benefit plans – – (226,737)
Gain on disposal of investments in equity instruments – 1,719
Statement of Changes in Equity – Group

Share of other comprehensive income of associate, net of tax – – –

Net change in revaluation surplus 56.1 246 – – –
Net fair value gains/(losses) on remeasuring financial assets measured at fair value
through other comprehensive income – – –
Net gains/(losses) arising from translating the Financial Statements of
foreign operations – – –
Cash flow hedges – effective portion of changes in fair value, net of tax – – –
Total comprehensive income for the year 2020 – – 16,714,932

Transactions with owners, recognised directly in equity, contributions and

distributions to owners
Proceeds on issue of ordinary voting shares to IFC parties (Private placement) 52 241 9,215,775 – –
Financial Statements

Issue of ordinary voting shares under employee share option plans 52 241 – – –
Transfer o/a share-based payment transactions 52 241 – – –
Transfer of cost o/a of expired ESOP Shares (net of tax) 55 &
56.5 245 & 247 – – 105,980
Dividends to equity holders 2,055,014 – (5,137,434)
Second interim dividend for 2019 25 190 – – (3,082,520)
Annual Report 2020

Final cash dividend for 2019 – – –

Final dividend for 2019 satisfied in the form of issue and allotment of new shares 52 241 2,055,014 – (2,055,014)
Unclaimed dividend absorbed/(dividend paid) in respect of previous years – – 100
First interim dividend for 2020 – – –
Share-based payment transactions 56.5 247 – – –
Movement due to change in ownership – – 6,130
Commercial Bank of Ceylon PLC

Transfers during the year 54 to 56 244 to 248 – 897,532 (8,747,532)

Total transactions with equity holders 11,270,789 897,532 (13,772,856)
Balance as at December 31, 2020 52,187,747 9,285,233 8,124,261

The Notes appearing on pages 155 to 290 form an integral part of these Financial Statements.

148
 Other reserves
Revaluation Fair value Foreign Hedging General Employee share Shareholders’ Non-controlling Total
reserve reserve currency reserve reserve option reserve funds interest equity
translation
reserve
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

– – – – – – 16,939,950 146,847 17,086,797

2,662,469 (1,319,619) 559,932 (64,139) – – 1,613,625 46,456 1,660,081
– – – – – – (226,737) (2,008) (228,745)
– – – – – – 1,719 – 1,719

Statement of Changes in Equity – Group

– 3,436 – – – – 3,436 – 3,436
2,662,469 – – – – – 2,662,469 11,673 2,674,142

– (1,323,055) – – – – (1,323,055) – (1,323,055)

– – 559,932 – – – 559,932 36,791 596,723

– – – (64,139) – – (64,139) – (64,139)
2,662,469 (1,319,619) 559,932 (64,139) – – 18,553,575 193,303 18,746,878

– – – – – – 9,215,775 – 9,215,775

Financial Statements
– – – – – – – – –
– – – – – – – – –

– – – – – (147,194) (41,214) – (41,214)

– – – – – – (3,082,420) (15,996) (3,098,416)
– – – – – – (3,082,520) – (3,082,520)

Annual Report 2020

– – – – – – – (13,620) (13,620)
– – – – – – – – –
– – – – – – 100 24 124
– – – – – – – (2,400) (2,400)
– – – – – 112,203 112,203 – 112,203
4,514 – – – – – 10,644 (10,644) –

Commercial Bank of Ceylon PLC

– – – – 7,850,000 – – – –
4,514 – – – 7,850,000 (34,991) 6,214,988 (26,640) 6,188,348
10,504,768 463,884 3,325,924 (102,511) 74,970,003 433,503 159,192,812 1,755,897 160,948,709

149
 Statement of Changes in Equity – Bank
Stated Statutory Retained
capital reserve fund earnings

Note Page No. Rs. ’000 Rs. ’000 Rs. ’000

Balance as at December 31, 2018 39,147,882 7,354,143 5,063,076

Impact arising from the adoption of SLFRS 16 – – (57,627)
Reversal of deferred tax asset created on liability o/a straight lining of lease rentals – – (57,627)
Balance as at January 1, 2019 39,147,882 7,354,143 5,005,449

Total comprehensive income for the year 2019

Profit for the year – – 17,024,967
Other comprehensive income, net of tax – – (56,940)
Net actuarial gains/(losses) on defined benefit plans – – (56,940)
Realised gains/(losses) from disposal of investment in equity – – –
Net change in revaluation surplus – – –
Net fair value gains/(losses) on remeasuring financial assets measured at
fair value through other comprehensive income – – –
Net gains/(losses) arising from translating the Financial Statements of
the foreign operations – – –
Financial Statements

Cash flow hedges – effective portion of changes in fair value, net of tax – – –
Total comprehensive income for the year 2019 – – 16,968,027

Transactions with owners, recognised directly in equity, contributions and

distributions to owners
Issue of ordinary voting shares under employee share option plans 52 241 30,128 – –
Transfer o/a share-based payment transactions
Annual Report 2020

52 241 – – –
Transfer of cost o/a of expired ESOP Shares (net of tax) 55 & 56.5 245 & 247 – – 88,913
Dividends to equity holders 1,738,948 – (6,596,708)
Second interim dividend for 2018 25 190 – – (3,032,869)
Final dividend for 2018 satisfied in the form of issue and allotment of new shares 52 241 1,738,948 – (2,022,032)
Commercial Bank of Ceylon PLC

Unclaimed dividend absorbed/(dividend paid) in respect of previous years – – (547)

First interim dividend for 2019 25 190 – – (1,541,260)
Share-based payment transactions 56.5 247 – – –
Transfers during the year 54 to
56 244 to 248 – 851,248 (10,321,248)
Total transactions with equity holders 1,769,076 851,248 (16,829,043)

Balance as at December 31, 2019 40,916,958 8,205,391 5,144,433

150
 Other reserves
Revaluation Fair value Foreign Hedging General Employee Total
reserve reserve currency reserve reserve share option equity
translation reserve
reserve
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. '000 Rs. ’000 Rs. ’000

7,088,054 (1,384,982) 2,871,770 24,019 57,650,003 591,984 118,405,949

– – – – – – (57,627)
– – – – – – (57,627)
7,088,054 (1,384,982) 2,871,770 24,019 57,650,003 591,984 118,348,322

Statement of Changes in Equity – Bank

– – – – – – 17,024,967
– 3,170,423 (399,787) (62,391) – – 2,651,305
– – – – – – (56,940)
– – – – – – –
– – – – – – –

– 3,170,423 – – – – 3,170,423

– – (399,787) – – – (399,787)

Financial Statements
– – – (62,391) – – (62,391)
– 3,170,423 (399,787) (62,391) – – 19,676,272

– – – – – – 30,128

Annual Report 2020

– – – – – – –
– – – – – (123,490) (34,577)
– – – – – – (4,857,760)
– – – – – – (3,032,869)
– – – – – – (283,084)

Commercial Bank of Ceylon PLC

– – – – – – (547)
– – – – – – (1,541,260)
– – – – – – –

– – – – 9,470,000 – –
– – – – 9,470,000 (123,490) (4,862,209)

7,088,054 1,785,441 2,471,983 (38,372) 67,120,003 468,494 133,162,385

151
 Statement of Changes in Equity – Bank (Contd.)

Stated Statutory Retained

capital reserve fund earnings

Note Page No. Rs. ’000 Rs. ’000 Rs. ’000

Total comprehensive income for the year 2020

Profit for the year – – 16,373,489
Other comprehensive income, net of tax – – (221,320)
Net actuarial gains/(losses) on defined benefit plans – – (223,039)
Statement of Changes in Equity – Bank

Gain on disposal of investments in equity instruments – – 1,719

Net change in revaluation surplus 56.1 246 – – –
Net fair value gains/(losses) on remeasuring financial assets measured at
fair value through other comprehensive income – – –
Net gains/(losses) arising from translating the Financial Statements of the
foreign operations – – –
Cash flow hedges – effective portion of changes in fair value, net of tax – – –
Total comprehensive income for the year 2020 – – 16,152,169

Transactions with owners, recognised directly in equity,

contributions and distributions to owners
Financial Statements

Proceeds on issue of ordinary voting shares to IFC parties (Private placement) 52 241 9,215,775 – –
Issue of ordinary voting shares under employee share option plans 52 241 – – –
Transfer o/a share-based payment transactions 52 241 – – –
Transfer of cost o/a of expired ESOP Shares (net of tax) 55 & 56.5 245 & 247 – – 105,980
Dividends to equity holders 2,055,014 – (5,137,648)
Second interim dividend for 2019 25 190 – – (3,082,520)
Annual Report 2020

Final dividend for 2019 satisfied in the form of issue and allotment of new shares 52 241 2,055,014 – (2,055,014)
Unclaimed dividend absorbed/(dividend paid) in respect of previous years – – (114)
Share-based payment transactions 56.5 247 – – –
Transfers during the year 54 to 56 244 to 248 – 818,674 (8,668,674)
Total transactions with equity holders 11,270,789 818,674 (13,700,342)
Commercial Bank of Ceylon PLC

Balance as at December 31, 2020 52,187,747 9,024,065 7,596,260

The Notes appearing on pages 155 to 290 form an integral part of these Financial Statements.

152
 Other reserves
Revaluation Fair value Foreign Hedging General Employee Total
reserve reserve currency reserve reserve share option equity
translation reserve
reserve
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. '000 Rs. ’000 Rs. ’000

– – – – – – 16,373,489
2,574,858 (1,323,110) 439,883 (64,139) – – 1,406,172
– – – – – – (223,039)

Statement of Changes in Equity – Bank

– – – – – – 1,719
2,574,858 – – – – – 2,574,858

– (1,323,110) – – – – (1,323,110)

– – 439,883 – – – 439,883
– – – (64,139) – – (64,139)
2,574,858 (1,323,110) 439,883 (64,139) – – 17,779,661

Financial Statements
– – – – – – 9,215,775
– – – – – – –
– – – – – – –
– – – – – (147,194) (41,214)
– – – – – – (3,082,634)
– – – – – – (3,082,520)

Annual Report 2020

– – – – – – –
– – – – – – (114)
– – – – – 112,203 112,203
– – – – 7,850,000 – –
– – – – 7,850,000 (34,991) 6,204,130

Commercial Bank of Ceylon PLC

9,662,912 462,331 2,911,866 (102,511) 74,970,003 433,503 157,146,176

153
 Statement of Cash Flows
GROUP BANK
For the year ended December 31, Note Page 2020 2019 2020 2019
No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Cash flows from operating activities

Profit before income tax 24,519,860 22,983,896 23,511,312 22,339,105

Adjustments for:
Non-cash items included in profit before tax 64 260 24,764,927 14,014,272 24,705,430 13,702,213
Change in operating assets 65 260 (374,761,711) (84,218,375) (369,030,667) (74,749,286)
Change in operating liabilities 66 261 325,708,382 69,879,669 322,115,757 65,515,273
(Gains)/losses on sale of property, plant and equipment 17 182 (5,820) (19,731) (926) (7,958)
Share of profits in associate, net of tax 38.1 213 (3,898) (9,992) – –
Dividend income from subsidiaries 17 182 – – (98,200) (85,397)
Interest expense on subordinated liabilities 13.2 179 3,756,921 3,848,979 3,756,921 3,848,979
Net unrealised gains/(losses) arising from translating
the Financial Statements of foreign operations 56.4 247 596,723 (396,201) 439,883 (399,787)
Profit due to change in ownership 17 182 – – – (14,498)
Benefits paid on defined benefit plans (673,106) (198,799) (670,487) (194,728)
Income tax paid 48 232 (7,748,870) (8,301,839) (7,428,411) (8,087,930)
Net cash from/(used in) operating activities (3,846,592) 17,581,879 (2,699,388) 21,865,986
Financial Statements

Cash flows from investing activities

Purchase of property, plant and equipment 39.1 to 215 to
39.4 218 (1,159,712) (1,372,832) (1,106,641) (1,307,244)
Purchase of investment properties 40 225 (41) – – –
Proceeds from sale of property, plant and equipment 8,901 24,189 2,829 11,025
Annual Report 2020

Purchase of financial investments (300,000) (95,031) (300,000) (95,031)

Proceeds from sale and maturity of financial investments 2,368,509 3,428,080 2,368,509 3,428,080
Purchase of intangible assets 41.1 & 41.2 227 &
228 (460,053) (415,088) (409,322) (387,432)
Proceeds due to change in ownership – 21,503 – 21,503
Acquisition of a subsidiary, net of cash acquired
Commercial Bank of Ceylon PLC

– (91,716) (1,125,000) (754,657)

Dividends received from investments in subsidiaries 17 182 – – 98,200 85,397
Net cash from/(used in) investing activities 457,604 1,499,105 (471,425) 1,001,641

Cash flows from financing activities

Proceeds from issue of ordinary voting shares under employee
share option plans 52 241 – 30,128 – 30,128
Proceeds from issue of ordinary voting shares to IFC parties
(Private placement) 52 241 9,215,775 – 9,215,775 –
Interest paid on subordinated liabilities (3,802,023) (3,873,107) (3,802,023) (3,873,107)
Payment of lease liabilities/advance payment of right-of-use assets (1,354,902) (1,049,004) (1,446,874) (1,165,340)
Dividend paid to non-controlling interest 57 248 (15,996) (4,988) – –
Dividend paid to shareholders of the Bank (3,082,420) (4,857,563) (3,082,634) (4,857,760)
Net cash from/(used in) financing activities 960,434 (9,754,534) 884,244 (9,866,079)
Net increase/(decrease) in cash and cash equivalents (2,428,554) 9,326,450 (2,286,569) 13,001,548
Cash and cash equivalents as at January 1, 53,686,825 44,360,375 52,540,437 39,538,889
Gross cash and cash equivalents as at December 31, 28 196 51,258,271 53,686,825 50,253,868 52,540,437
Less: Impairment charges 28.1 196 (3,241) (5,707) (3,241) (5,707)
Cash and cash equivalents as per Statement of Financial Position 28 196 51,255,030 53,681,118 50,250,627 52,534,730

The Notes appearing on pages 155 to 290 form an integral part of these Financial Statements.

154
Notes to the Financial Statements
1. Reporting entity The ordinary shares of the Bank (both 1.2 Consolidated Financial Statements
1.1 Corporate information Ordinary Voting and Non-Voting shares) have The Consolidated Financial Statements as at
a primary listing on the CSE. The unsecured and for the year ended December 31, 2020,
Commercial Bank of Ceylon PLC (the “Bank”) is
subordinated debentures of the Bank are comprise the Bank (Parent Company) and
a public limited liability company listed on the
also listed on the CSE. its Subsidiaries (together referred to as the
Colombo Stock Exchange (CSE), incorporated
on June 25, 1969 under the Companies The staff strength of the Group and the “Group” and individually as “Group entities”)
Ordinance No. 51 of 1938, and domiciled in Bank was as follows: and the Group’s interest in its Associate.
Sri Lanka. It is a licensed commercial bank As at December 31, 2020 2019 The Bank does not have an identifiable
regulated under the Banking Act No. 30 of parent of its own. The Bank is the Ultimate
1988 and amendments thereto. The Bank Group 5,693 5,656 Parent of the Group.
was re-registered under the Companies Act
Bank 5,057 5,062
No. 07 of 2007 on January 23, 2008, under
the Company Registration No. PQ 116. The
registered office of the Bank is situated at Corporate information is presented in the
“Commercial House”, No. 21, Sir Razik Fareed inner back cover of this Annual Report.
Mawatha, Colombo 01, Sri Lanka.

1.3 Principal business activities, nature of operations of the Group and ownership by the Bank in its subsidiaries and associate
Figure – 25

Group Structure

CBC Equity

Financial Statements
Commercial CBC Tech Finance Commercial
Development Solutions Ltd. Insurance Investments
Limited Lanka Limited
Company PLC 100% Brokers (Pvt) Ltd.
100% 22.92%
90% 60%
2019 – 100% 2019 – 100%
2019 – 90% 2019 – 58% 2019 – 22.92%

Annual Report 2020

90% 100% 100% 60% 22.92%

Quoted Local subsidiaries Unquoted Unquoted

Commercial Bank of Ceylon PLC

Commercial Bank of Ceylon PLC Local associate

Foreign subsidiaries

Unquoted

100% 55% 100%

CBC
Commex Commercial Myanmar
Sri Lanka Bank of Microfinance
S.R.L. Maldives Private Company Limited
(Italy) Limited (Maldives) (Myanmar)
100% 55% 100%
2019 – 100% 2019 – 55% 2019 – 100%

Direct holdings 1

During 2020, the Bank acquired a further 20% stake in Commercial Insurance Brokers (Private) Limited, from the Bank’s subsidiary,
Commercial Development Company PLC (which had a stake of 20% in Commercial Insurance Brokers (Private) Limited), for a purchase
consideration of Rupees One Hundred and Twenty-Five Million (Rs. 125,000,000/-) after obtaining necessary approvals from the Boards of
both the Bank and Commercial Development Company PLC. The Bank also obtained approval of the Central Bank of Sri Lanka (CBSL) for this
acquisition of shares. With this acquisition, the Bank’s stake in Commercial Insurance Brokers (Private) Limited increased to 60% from 40% held
as at December 31, 2019.
155
 Principal business activities and nature of business operations of the Group Table – 43
Entity Principal business activities

Commercial Bank of Ceylon PLC Banking and related activities such as accepting deposits, personal banking, trade financing,
offshore banking, RFC & NRFC operations, travel-related services, corporate and retail credit,
syndicated financing, project financing, development banking, lease & hire purchase, rural
credit, issuing of local and international debit and credit cards, internet banking, mobile
banking, money remittance facilities, dealing in Government Securities and treasury-related
products, salary remittance package, bullion trading, export and domestic factoring, pawning,
margin trading, digital banking services, bancassurance and Islamic banking products and
services etc.

Local subsidiaries
Commercial Development Company PLC (CDC) Property development, related ancillary services and providing manpower needs for various
support services which are unrelated to providing core banking services to the customers of
the Bank (parent).
Notes to the Financial Statements

CBC Tech Solutions Limited Providing Information & Communication Technology (ICT) related products, services and
solutions to corporate sector.
CBC Finance Limited Granting of lease facilities, hire purchase, mortgage loans and other credit facilities and
accepting deposits.
Commercial Insurance Brokers (Pvt) Limited (CIB) Providing professional service and handling all insurance portfolios of individuals as well as
many leading and reputed organizations in Sri Lanka engaged in diverse business activities.

Foreign subsidiaries
Commex Sri Lanka S.R.L. (Commex) Operating as an agent to the Bank (parent) for opening accounts, providing money transfer
Financial Statements

services, issuance and encashment of foreign currencies and travelers cheques, collecting
applications for credit facilities and handling of ATM cards etc.
Commercial Bank of Maldives Offering of extensive range of banking and related financial services.
Private Limited (CBM)
CBC Myanmar Microfinance Company Limited Providing microfinance services to the people of Myanmar. The company also provides savings,
business/livelihood development services for the clients adopting a credit plus approach.
Annual Report 2020

Local associate
Equity Investments Lanka Limited Providing investment services, risk capital and venture capital management

2. Basis of Accounting Details of the Group’s Significant The Board of Directors acknowledges
2.1 Statement of compliance Accounting Policies followed during the their responsibility for Financial Statements
Commercial Bank of Ceylon PLC

year are given in Notes 6 to 10 on pages as set out in the “Annual Report of the
The Consolidated Financial Statements of the
164 to 176. Board of Directors”, “Statement of Directors’
Group and the separate Financial Statements
The formats used in the preparation and Responsibility” and the certification on the
of the Bank, have been prepared and
presentation of the Financial Statements and Statement of Financial Position on pages 3,
presented in accordance with the Sri Lanka
the disclosures made therein also comply 107 and 145, respectively.
Accounting Standards (SLFRSs and LKASs),
laid down by The Institute of Chartered with the specified formats prescribed by the These Financial Statements include the
Accountants of Sri Lanka (CA Sri Lanka) and CBSL in the Circular No. 02 of 2019 dated following components:
in compliance with the requirements of the January 18, 2019, on “Publication of Annual
and Quarterly Financial Statements and z an Income Statement and a Statement of
Companies Act and the Banking Act and
provide appropriate disclosures as required Other Disclosures by Licensed Banks”. The Profit or Loss and Other Comprehensive
by the Listing Rules of the CSE. These Bank also published annual and quarterly Income providing the information on the
Financial Statements, except for information financial information and other disclosures financial performance of the Group and the
on cash flows have been prepared following in the Annual Report, Press and the Website Bank for the year under review.
the accrual basis of accounting. in compliance with Section 4.2 of the Refer pages 143 and 144;
aforementioned Circular. z a Statement of Financial Position (SOFP)
These SLFRSs and LKASs are
available at the website of CA Sri Lanka – providing the information on the financial
[Link] 2.2 Responsibility for Financial Statements position of the Group and the Bank as at
The Board of Directors of the Bank is the year end. Refer page 145;
1 The Group did not adopt any
2 responsible for the preparation and z a Statement of Changes in Equity depicting
inappropriate accounting treatments, which
presentation of the Financial Statements of all changes in shareholders’ funds during
are not in compliance with the requirements
the Group and the Bank as per the provisions the year under review of the Group and the
of the SLFRSs and LKASs, regulations
of the Companies Act No. 07 of 2007 and Bank. Refer pages 146 to 153;
governing the preparation and presentation
amendments thereto (Companies Act) and
of the Financial Statements.
Sri Lanka Accounting Standards.

156
z a Statement of Cash Flows providing the 2.5 Going concern basis of accounting operations. Further, the Bank has provided
information to the users, on the ability of The Management has made an assessment reliefs for the affected businesses and
the Group and the Bank to generate cash of its ability to continue as a going individuals in line with the directions issued
and cash equivalents and utilisation of concern and is satisfied that it has the by the CBSL. These relief measures include
those cash flows. Refer page 154; resources to continue in business for the deferment of repayment terms of credit
z Notes to the Financial Statements foreseeable future. facilities, offering concessionary rates of
comprising Significant Accounting Policies interest to eligible loan products (debt
Furthermore, the Management is not
and other explanatory information. moratorium) and waiving off certain fees
aware of any material uncertainties that
Refer pages 155 to 290. and charges.
may cast significant doubt upon the Group’s
ability to continue as a going concern. The Management has considered the
2.3 Approval of Financial Statements by the potential downsides that the COVID-19
Therefore, the Financial Statements of the
Board of Directors pandemic could bring to the business
Group continue to be prepared on a going
The Financial Statements of the Group and concern basis. operations of the Group, in making this
the Bank for the year ended December 31, assessment. However, considering a
2020 (including comparatives for 2019), The outbreak of COVID-19 has caused
wide range of factors including history
were approved and authorised for issue by disruption to business and economic
of profitable operations, strong liquidity
the Board of Directors in accordance with activities, and uncertainty to the global and

Notes to the Financial Statements

position and stable external funding sources,
Resolution of the Directors on February local economy. Therefore, in the assessment
diversified lending profile and the initiatives
24, 2021 (The Financial Statements of the of the existence of a material uncertainty,
taken by the Bank for strengthening
Group and the Bank for the year ended the management took into consideration
risk monitoring at borrower level, the
December 31, 2019, were approved and the existing and anticipated effects of the
Management satisfied itself that the going
authorised for issue by the Board of Directors Pandemic on the Group’s activities based on
concern basis is appropriate.
on February 20, 2020). all available information about the future
that was obtained after the reporting date,
up until the date on which the financial 2.6 Functional and presentation currency
2.4 Basis of measurement Items included in these Financial Statements
statements are issued. Subsequent to the
The Financial Statements of the Group have outbreak of COVID-19 in Sri Lanka, the Group are measured using the currency of the
been prepared on the historical cost basis has strictly adhered to the guidelines and primary economic environment in which the
except for the following material items Bank operates (the functional currency).

Financial Statements
directions issued by both the Government
stated in the SOFP. and CBSL when conducting its business Each entity in the Group determines
its own functional currency and items
included in the Financial Statements of these
Basis of measurement Table – 44 entities are measured using that functional
Items Basis of measurement Note No./s Page/s currency. There was no change in the Group’s
presentation and functional currency during
Financial instruments Fair value 31, 32 & 198 & 231 the year under review.

Annual Report 2020

measured at fair value 45 These Financial Statements are presented
through profit or loss in Sri Lankan Rupees, the Group’s functional
including derivative
and presentation currency.
financial instruments
The information presented in US
Financial assets measured Fair value 36 207 Dollars in the Section on “Supplementary
at fair value through Information” on pages 358 and 359 does not

Commercial Bank of Ceylon PLC

other comprehensive form part of the Financial Statements and is
income made available solely for the information of
stakeholders.
Land and buildings Measured at cost at the time of acquisition 39 214
and subsequently at revalued amounts
which are the fair values at the date of 2.7 Presentation of Financial Statements
revaluation The assets and liabilities of the Group
presented in the SOFP are grouped by nature
Investment property Measured at cost at the time of acquisition 40 225
and listed in an order that reflects their
and subsequently at Fair value.
relative liquidity and maturity pattern.
Defined benefit Net liability for defined benefit obligations 49 233 No adjustments have been made for
obligation are recognised as the present value of the inflationary factors affecting the Financial
defined benefit obligation, less net total of Statements.
the plan assets, plus unrecognised actuarial
gains, less unrecognised past service cost, An analysis on recovery or settlement
and unrecognised actuarial losses within 12 months and more than 12 months
from the reporting date is presented in
Equity settled share- Fair value on grant date 53 241 Note 61 on pages 251 to 253.
based payment
arrangements 2

157
 2.8 Rounding 2.12 Use of significant accounting 2.12.3 Classification of investment property
The amounts in the Financial Statements judgements and assumptions and Management uses its judgment to determine
have been rounded-off to the nearest rupees estimates whether a property qualifies as an investment
thousands, except where otherwise indicated In preparing the Financial Statements of the property. A property that is held either to
as permitted by the Sri Lanka Accounting Group in conformity with SLFRSs and LKASs, earn rental income or for capital appreciation
Standard – LKAS 1 on “Presentation of the Management has made judgements, or both and thus generates cash flows largely
Financial Statements” (LKAS 1). estimates and assumptions which affect independently of the other assets held by the
the application of Accounting Policies and Group are classified as investment property.
2.9 Offsetting the reported amounts of assets, liabilities, On the other hand, a property used in
Financial assets and financial liabilities income and expenses. Actual results may production or supply of goods and services or
are offset and the net amount reported differ from these estimates. Estimates and administrative purposes and thus generates
in the SOFP, only when there is a legally underlying assumptions are reviewed on cash flows that are attributable not only to
enforceable right to offset the recognised an ongoing basis. Revisions to accounting property but also to other assets used in the
amounts and there is an intention to settle estimates are recognised prospectively. production or supply process are classified
on a net basis or to realise the assets and The Group considered the impact as property, plant & equipment. The Group
settle the liabilities simultaneously. Income of COVID‑19 in preparing the Financial assesses on an annual basis, the accounting
classification of its investment properties,
Notes to the Financial Statements

and expenses are not offset in the Income Statements in line with the circulars and
Statement, unless required or permitted by guidelines issued by the CBSL and the taking into consideration the current use of
an Accounting Standard or Interpretation CA Sri Lanka. While the specific areas of such properties.
(issued by the IFRS Interpretations judgement may not change, the impact B. Assumptions and estimation
Committee and Standard Interpretations of COVID‑19 resulted in the application of uncertainties
Committee) and as specifically disclosed further judgement within those areas due Information about assumptions and
in the Significant Accounting Policies of to the evolving nature of the pandemic estimation uncertainties that have a
the Bank. and the limited recent experience of the significant risk of resulting in material
economic and financial impacts of such an adjustments are included in Notes 2.12.4 to
2.10 Materiality and aggregation event. Further, changes to estimates were 2.12.13 below:
Each material class of similar items is made in the measurement of Group’ assets
2.12.4 Fair Value of financial instruments
where applicable.
Financial Statements

presented separately in the Financial

The fair values of financial assets and
Statements. Items of dissimilar nature or Significant areas of critical judgements,
financial liabilities recognised on the SOFP,
function are presented separately, unless assumptions and estimation uncertainty, in
for which there is no observable market
they are immaterial as permitted by the applying the Accounting Policies that have
price are determined using a variety of
LKAS 1 and amendments to the LKAS 1 on most significant effects on the amounts
valuation techniques that include the use of
“Disclosure Initiative” which was effective recognised in the Financial Statements of the
mathematical models. The Group measures
from January 1, 2016. Group are as follows:
fair value using the fair value hierarchy that
Notes to the Financial Statements A. Significant accounting judgements
Annual Report 2020

reflects the significance of input used in

are presented in a systematic manner Information about judgements made in making measurements. Methodologies used
which ensures the understandability and applying the Accounting Policies that have for valuation of financial instruments and
comparability of Financial Statements of the most significant effects on the amounts fair value hierarchy are stated in Note 27 on
Group and the Bank. Understandability of recognised in these Financial Statements is pages 192 to 196.
the Financial Statements is not compromised included in Notes 2.12.1 and 2.12.3 below.
by obscuring material information with 2.12.5 Impairment losses on financial assets
Commercial Bank of Ceylon PLC

immaterial information or by aggregating 2.12.1 Determination of control The measurement of impairment losses
material items that have different natures over investees
across the categories of financial assets
or functions. Management applies its judgement to under Sri Lanka Accounting Standard –
determine whether the control indicators set SLFRS 9 on “Financial Instruments” (SLFRS 9)
2.11 Comparative information out in Note 37 on page 210 indicates that the requires judgement, in particular, the
Comparative information including Group controls the investees. estimation of the amount and timing of
quantitative, narrative and descriptive future cash flows and collateral values when
information is disclosed in respect of the 2.12.2 Classification of financial assets determining impairment losses.
previous period in the Financial Statements and liabilities
Accordingly, the Group reviews its
in order to enhance the understanding of the The Significant Accounting Policies of individually significant loans and advances
current period’s Financial Statements and the Group provides scope for financial at each reporting date to assess whether
to enhance the inter period comparability. assets to be classified and subsequently an impairment loss should be provided in
The presentation and classification of the measured into different categories, namely, the Income Statement. In particular, the
Financial Statements of the previous year at Amortised Cost (AC), Fair Value through Management’s judgement is required in
are amended, where relevant for better Other Comprehensive Income (FVOCI) and the estimation of the amount and timing
presentation and to be comparable with Fair Value Through Profit or Loss (FVTPL) of future cash flows when determining the
those of the current year. based on the following criteria; impairment loss. In estimating these cash
2 z The entity’s business model for managing flows, Management makes judgements about
the financial assets as set out in a borrower’s financial situation and the net
Note [Link] on page 166. realisable value of any underlying collateral.
z The contractual cash flow characteristics Each impaired asset is assessed on its merits,
of the financial assets as set out in and the workout strategy and estimate of
Note [Link] on page 166. cash flows considered recoverable. These
estimates are based on assumptions about

158
a number of factors and hence actual results into consideration various relief measures Early observations of payment behaviour
may differ, resulting in future changes to the including concessionary financing and of expiries for this year were considered in
impairment allowance made. payment moratorium. The impact of the the assessment of the changes in the risk
A collective impairment provision is outbreak has been assessed and adjusted of default occurring over the expected life
established for: in these Financial Statements based on of a financial instrument when determining
the available information and assumptions staging and is a key input in determining
z groups of homogeneous loans and made as at reporting date in line with the migration.
advances that are not considered guidelines issued by the CBSL and the Refer Note 18 on page 182 for details.
individually significant; and CA Sri Lanka.
z groups of assets that are individually In response to COVID-19 and the Group’s 2.12.6 Impairment of non-financial assets
significant but that were not found to be expectations of economic impacts, key The Group assesses whether there are
individually impaired. assumptions used in the Group’s calculation any indicators of impairment for an asset
As per SLFRS 9, the Group’s Expected of ECL have been revised. As at the reporting or a Cash Generating Unit (CGU) at each
Credit Loss (ECL) calculations are outputs date, the expected impacts of COVID-19 have reporting date or more frequently, if events
of complex models with a number of been captured via the modelled outcome or changes in circumstances necessitate to
underlying assumptions regarding as well as a separate management overlay do so. This requires the estimation of the

Notes to the Financial Statements

the choice of variable inputs and their reflecting the considerable uncertainty “Value in use” of such individual assets or
interdependencies. Elements of the ECL remaining in the modelled outcome given the CGUs. Estimating “Value in use” requires
models that are considered accounting the unprecedented impacts of COVID-19. the Management to make an estimate
judgements and estimates include: Although the credit model inputs and of the expected future cash flows from
assumptions, including forward-looking the asset or the CGU and also to select a
z The Group’s criteria for qualitatively macroeconomic assumptions, were revised suitable discount rate in order to calculate
assessing whether there has been a in response to the COVID-19 pandemic, the the present value of the relevant cash flows.
significant increase in credit risk (SICR) fundamental credit model mechanics and This valuation requires the Group to make
and if so allowances for financial assets methodology underpinning the Group’s estimates about expected future cash flows
measured on a Life Time Expected Credit calculation of ECL have remained consistent and discount rates and hence, they are
Loss (LTECL) basis. with prior periods. subject to uncertainty.
z The segmentation of financial assets when Accordingly, the Bank took steps to

Financial Statements
Refer Note 7.6 on page 172 for details.
their ECL is assessed on a collective basis. identify the customers showing distress
z Development of ECL models, including the signs in identifying SICR under the individual 2.12.7 Revaluation of property, plant
various statistical formulas and the choice impairment assessment. Under the collective and equipment
of inputs. assessment, customers operating in risk The Group measures land and buildings at
elevated industries including Tourism and revalued amounts with changes in fair value
z Determination of associations between
hospitality which includes resort hotels in being recognised in Equity through Other
macro-economic inputs, such as GDP
the Maldives, importing Palm oil, rice and Comprehensive Income (OCI). The Group
growth, inflation, interest rates, exchange

Annual Report 2020

cement, passenger air transport, supplying engages independent professional valuers
rates and unemployment and the effect
hardware items, non-metallic mineral to assess fair value of land and buildings in
on Probability of Default (PDs), Loss Given
product, film production, fund management, terms of Sri Lanka Accounting Standard –
Default (LGD) and Exposure At Default (EAD).
venture capital, ornamental fish, tobacco SLFRS 13 on “Fair Value Measurement”
z Selection of forward-looking macro- related business, passenger transport and
economic scenarios and their probability (SLFRS 13). The key assumptions used
exporting jewellery were assessed for to determine the fair value of the land
weightings, to derive the economic inputs Lifetime ECL. Exposures outstanding from

Commercial Bank of Ceylon PLC

into the ECL models. and building and sensitivity analyses are
the borrowers operating in these industries provided in Notes 39.5 (b) and 39.5 (c) on
The accuracy of the provision depends have been classified as stage 2 unless such pages 219 to 224.
on the model assumptions and parameters exposures are individually significant and
used in determining the ECL calculations. have specifically been identified as stage 2.12.8 Useful life-time of the property, plant
1 reflecting forward looking view of the and equipment
The Bank has provided reliefs such as
economy in relation to the business.
deferment of repayment terms of credit The Group reviews the residual values,
facilities, for the affected businesses and Further, the Bank decided to increase useful lives and methods of depreciation
individuals due to COVID-19 in line with the the weightages assigned for worst case of property, plant and equipment at
directions issued by the CBSL. Utilization scenario while reducing the weightages each reporting date. Judgement of the
of a payment deferral program does not, assigned for base case scenario and best Management is exercised in the estimation
all else being equal, automatically trigger a case scenario when assessing the probability of these values, rates, methods and hence
SICR. As such, key issue will be to distinguish weighted forward looking macro-economic they are subject to uncertainty.
between cases where the payment holidays indicators along with management overlays
Refer Note 20 on page 185.
provide relief from short-term liquidity to qualitative indicators relating to forward
constraints impacting the borrower that looking macro-economic environment with
2.12.9 Fair valuation of investment property
do not amount to a SICR. Given the high the objective of capturing the impact of
COVID-19 and uncertainties and volatilities Fair valuation of the investment property is
degree of uncertainty and unprecedented
in future outlook on the ECL computation ascertained by independent valuations carried 2
circumstances in the short-term economic
as at the reporting date. In addition, as out by Chartered valuation surveyors, who
outlook, the Management exercised
expert credit judgment, the Bank stressed have recent experience in valuing properties
judgements in the assessment of the
the ECL parameters such as PDs and LGDs of similar location and category. They have
impact of the COVID-19 outbreak on the
to reflect the real economic scenario that made reference to market evidence of
loans and advances portfolio of the Group,
is not reflected due to the deferrals and transaction prices for similar properties, with
relying more on the long-term outlook as
concessions granted due to COVID-19. appropriate adjustments for size and location.
evidenced by past experience and taking

159
 The key assumptions used to determine the 2.12.12 Defined benefit obligation The Group has exposure mainly to
fair value of investment property are provided The costs of the defined benefit plans are the following risks arising out of financial
in detail in Note 40 on page 225. determined using an actuarial valuation. activities that are undertaken in its day to
The actuarial valuation involves making day businesses:
2.12.10 SLFRS 16 – Leases assumptions about discount rates, expected z Credit risk;
[Link] Determination of the lease term for rates of return on assets, future salary z Liquidity risk;
lease contracts with renewal and termination increases, mortality rates, future pension z Market risk; and
options (Group as a lessee) increase, etc. Due to the long-term nature z Operational and Reputational risk.
of these plans, such estimates are subject to
The Group determines the lease term as the
significant uncertainty.
non-cancellable term of the lease, together Types of risk Figure – 26
with any periods covered by an option to Refer Note 49 on pages 233 to 239 for the
extend the lease if it is reasonably certain assumptions used.
to be exercised, or any periods covered Strategic & Business risk
2.12.13 Provisions for liabilities,
by an option to terminate the lease, if it is
commitments and contingencies
reasonably certain not to be exercised. Market Credit Operational
The Group receives legal claims in the normal
The Group has several lease contracts risk risk risk
Notes to the Financial Statements

course of business. Management has made

that include extension and termination
judgements as to the likelihood of any claim
options. The Group applies judgement in Funding & Reputation
succeeding in making provisions. The time
evaluating whether it is reasonably certain Liquidity risk risk
of concluding legal claims is uncertain, as is
whether or not to exercise the option to
the amount of possible outflow of economic
renew or terminate the lease. That is, it
benefits. Timing and cost ultimately depends
considers all relevant factors that create an
on the due processes in respective legal 3.2 Bank’s risk management framework
economic incentive for it to exercise either
jurisdictions.
the renewal or termination option. After the The Board of Directors of the Bank has the
commencement date, the Group reassesses Information about significant areas overall responsibility for the establishment
the lease term if there is a significant event of estimation uncertainty and critical and oversight of the Bank’s Risk Management
or change in circumstances that is within judgements in applying Accounting Framework.
Financial Statements

its control that affects its ability to exercise Policies other than those stated above that
The Risk Management Policy Framework
or not to exercise the option to renew or to have significant effects on the amounts
of the Bank translates overall risk appetite
terminate (e.g., construction of significant recognised in the Consolidated Financial
on business activities in a holistic approach
leasehold improvements or significant Statements are described in Notes 7.10 to
to provide the guidance required
customisation of the leased asset). 7.15 on pages 174 and 175.
for convergence of strategic and risk
perspectives of the Bank.
[Link] Estimating the incremental 2.13 Events after the reporting period
borrowing rate The Group’s risk management policies
Events after the reporting period are those
Annual Report 2020

are established to identify and analyse the

As the Group cannot readily determine the events, favourable and unfavourable, that
risks faced by the Group, to set appropriate
interest rate implicit in the lease, it uses occur between the reporting date and the
risk limits and controls, and to monitor
its incremental borrowing rate (“IBR”) to date when the Financial Statements are
risks and adherence to limits. The Risk
measure the lease liabilities. The IBR is the authorised for issue.
Management Policy Framework constitutes
rate of interest that the Group would have to
In this regard, all material and the Credit Policy, Lending Guidelines, ALM
pay to borrow over a similar term, and with a
important events that occurred after the Policy including Contingency Funding Plan,
Commercial Bank of Ceylon PLC

similar security, the funds necessary to obtain

reporting period have been considered and Foreign Exchange Policy, Operational Risk
an asset of a similar value to the right-of-use
appropriate disclosures are made in Note 69 Policy, IT Risk Policy, Market Risk Policy,
asset in a similar economic environment.
on page 290, where necessary. Stress Testing Policy, Environmental Risk
The IBR therefore reflects what the Group
Management Policy and Reputational Risk
“would have to pay’’, which requires estimation
when no observable rates are available
3. Financial Risk Management Management Policy etc., which have been
3.1 Introduction and overview firmly established to provide control and
(or when they need to be adjusted to reflect
guidance for decision-making throughout
the terms and conditions of the lease).The Risk is inherent in the Bank’s activities, but
the Bank in a uniform manner.
Group estimates the IBR using observable is managed through a process of ongoing
input when available and is required to make identification, measurement and monitoring, The Committee structure embedded to
certain entity-specific adjustments. subject to risk limits and other controls. This the system acts as a fact finding and decision
process of risk management is critical to making authority through deliberations and
2.12.11 Deferred tax assets the Bank’s continuing profitability and each arriving at consensus arising out of multiple
Deferred tax assets are recognised in respect individual within the Bank is accountable points of views. The Risk Management
of tax losses to the extent that it is probable for the risk exposures relating to his or her Committees effectively deliberate on matters
that future taxable profit will be available responsibilities. at hand to provide guidance to the business
and can be utilised against such tax losses. lines with a view to managing risk in
Judgement is required to determine the accordance with the strategic goals and risk
2
amount of deferred tax assets that can be appetite of the Bank.
3
recognised, based upon the likely timing and
level of future taxable profits, together with
future tax-planning strategies.
Refer Note 42 on page 228 for details.

160
 The Board of Directors of the Bank Credit risk Portfolio level credit risk analyses are
has formed the Board Integrated Risk The risk that the Bank will incur a loss taken up at monthly EIRMC meetings as well
Management Committee (BIRMC) as due to its customers or counterparties as quarterly at BIRMC meetings. Individual
a mandatory Board Committee, as per fail to discharge their contractual credit proposals evaluated by the Lending
Banking Act Direction No. 11 of 2007 on obligations, considered generally under Officers are approved by the Authorising
Corporate Governance. The performance the credit risk assessment. Officers within the hierarchy in Delegated
of the Committee and the duties and roles Authority Levels whilst ensuring a minimum
The Bank manages and controls credit
of members are reviewed by the Board of Four Eyes principle when approving them.
risk by setting limits on the amount of
annually. Escalation of approving levels occurs based
risk it is willing to accept for individual
The meetings of the Executive Integrated on Delegated Authority levels attached to
counterparties and for geographies and
Risk Management Committee (EIRMC) are exposure levels, final risk ratings as well as
industry concentrations by monitoring
conducted on a monthly basis to discuss negative deviation of performance levels of
exposures and possible adverse external
Credit, Operational, Market and IT risk previous facilities extended to borrowers.
factors in relation to such limits.
matters of the Bank. Assets and Liabilities The Executive Credit Committee
Committee (ALCO),that convene at least Management of credit risk (ECC) and the Board Credit Committee
once a fortnight, gives priority for liquidity, Lending Guidelines of the Bank formulated (BCC) are entrusted with approval of high

Notes to the Financial Statements

funding and profitability in line with the based on evolving practices of Lending value facilities while the Board will be the
changes taken place in the market. to provide expected granularity of credit ultimate authority for approving facilities
Risk and Control Self-Assessment assessment, risk grading, their acceptability beyond predetermined threshold levels.
(RCSA) framework is adopted to identify of collateral as well as limits on exposures Deliberations take place at BCC level on
risks involved in business activities of and concentration levels to various sectors, facilities taken up for approval beyond the
the Bank and to implement appropriate counterparties, geographies and segments etc. specified threshold and recommendations
risk mitigatory measures after assessing for approval of the Board are made based on
A robust risk grading system quantum of exposures at various levels.
criticality of such risks. The Integrated Risk incorporating Basel guidelines on rating of
Management Department (IRMD) carries facilities and counterparties is adopted by The IRMD provides risk approval for
out semi-annual Bank-wide RCSA function the Bank for evaluation of credit proposals. individual proposals above predetermined
focusing on adherence to laws, regulations, This risk grading framework consists threshold levels, consequent to a rigorous
and regulatory guidelines as well as internal independent risk evaluation guided by

Financial Statements
10 grades of varying degrees of risks as
controls and approved policies. indicators for the Lending Officers to Credit Policy, Lending Guidelines, and
Further, the Internal Audit function of the evaluate and arrive at suitable risk-reward circular instructions within a limit framework
Bank independently monitors and evaluates trade-offs in their propositions. These risk stemming from risk appetite of the Bank.
the risk management function of the Bank grades are reviewed by the IRMD regularly.
and provides their views on the adequacy Market risk
of the Risk Management Framework to the The risk that the fair value or future cash
Board Audit Committee (BAC). flows of financial instruments will fluctuate

Annual Report 2020

due to changes in market variables such as
interest rates, foreign exchange rates and
Bank‘s Financial Risk Management Framework Figure – 27 equity prices. The Bank classifies exposures
to Market Risk into either Trading or Non-
risk straatte Trading portfolios and manages each of
kk’’s egg
aann those portfolios separately.
BB

yy

Commercial Bank of Ceylon PLC

Bank’s Risk assessment,
The Market risk for the Trading portfolio is
Risk management Bank’s
strategy monitored and managed closely having
strategy control and
framework paid attention to the changes on the prices
mitigation
of market.

Management of market risk

Market Risk Policy, ALM Policy and Foreign
Risk policies, Exchange Risk Policy are the three main
Risk appetite and
procedures and policies that constitute the framework
tolerance level
processes governing the Market Risk Management
function of the Bank.
Due to the business model adopted by
Audit the Bank, exposure to equity and commodity
risk was kept at bay throughout the year.
Use of appropriate systems, tools and techniques for monitoring However, Interest Rate Risk arising from
and measurement the Banking Book as well as Trading Book
and Foreign Exchange Risk arising from
dealing in assets and liabilities denominated 3
in currencies other than local currency,
Review, validate and report continued to expose the Bank to associated
risk elements.

161
 Downward interest rate scenarios considered as the most critical risk for any regulatory implications or lead to financial
experienced by the country during the financial institution. loss. The Bank cannot expect to eliminate
period impacted the financial market in The Bank’s Treasury Department is all operational risks, but it endeavours
Sri Lanka and challenged the Net Interest entrusted with managing liquidity of the to manage these risks through a control
Margin. Interest Rates of the Banking Book is Bank on real time basis to ensure smooth framework and by monitoring, escalating,
subjected to varying degrees of rate shocks functioning of business activities of all other reporting and responding to potential risks.
to identify impact on earnings perspective business units of the Bank. The risk that the Bank’s reputation will
in such rate scenarios. The results reflected damage by one or more than one reputation
Having access to a substantial stable
predictions which assisted the Bank in event, as reflected from negative publicity
Current Account and Savings Account (CASA)
formulating strategies to manage the about the Bank’s business practices, conduct
base due to its wide branch network and the
financial position in an effective manner or financial condition. Such negative
top of the mind perception created in the
with the limited choices available in the publicity, whether true or not, may impair
depositors in general, for stability provides
local Market. public confidence in the Bank, result in costly
immense strength to the Bank in managing
Trading Book too was subjected to Value liquidity. litigation, or lead to a decline in its customer
at Risk (VaR) framework internally carried out base, business or revenue.
Having high quality liquid assets at the
by the Bank on a regular basis. The Bank also Controls include effective segregation
disposal of the Bank is another plus factor
Notes to the Financial Statements

carried out sensitivity analysis on a regular of duties, access, authorisation and

for the Bank. The strength of such was amply
basis to ascertain the impact on portfolios reconciliation procedures, staff education
reflected in the Basel III computation the
maintained, mainly in Government Securities and assessment processes, such as the use of
Bank carries out for arriving at Liquidity
and Marking to Market such portfolios to internal audit.
Coverage Ratio (LCR) and Net Stable Funding
reflect fair value for decision-making process.
Ratio (NSFR) as per the CBSL Directions that
Foreign exchange positions were recorded very healthy results as compared to Management of operational risk and
maintained within the regulatory framework regulatory minimum threshold levels. reputational risk
in a market where a high volatility is observed Sound Operational Risk Management
The Bank has experienced accumulation
in the major currency, compared to the practices are embedded into the work
of liquidity above the minimum regulatory
previous year that the Bank deals in, i.e., process through the Bank’s culture, internal
requirements as a result of slowness of
US Dollars. The positions were subjected policy framework and as per regulatory
economic performance of the country
to sensitivity analysis to provide insight to
Financial Statements

in 2020. However, the Bank has adopted requirements.

possible losses/gains arising from currency
many strategies to invest excess liquidity at Circular instructions and Operational
appreciation/depreciation, as the reporting
optimum yields but in staggered maturities Risk Management Policy play a major part
currency of the Bank being Sri Lankan Rupees.
and thereby to minimise the negative in bringing together business practices
impact on the bottom line as well as with accepted benchmarks to ensure
Liquidity risk
Liquidity. The Bank has also adopted many minimum disruption to processes, personnel,
The risk that the Bank will encounter strategies to maintain Foreign Currency technology and infrastructure.
difficulty in meeting obligations associated liquidity having evaluated the commitments
Annual Report 2020

Internal control framework and audit

with financial liabilities that are settled by and contingencies frequently amidst the function with firmly established “three lines
delivering cash or another financial asset is economic conditions prevailed in the of defences” serve the Bank to manage
focussed on this risk domain. Liquidity risk country in 2020. operational risk at current acceptable levels.
arises because of the possibility that the
Contingency funding plans in force, IT Risk of the Bank is managed through
Bank might be unable to meet its payment
constant monitoring of salient liquidity ratios strict monitoring of Key IT Risk Indicators
obligations or not receiving what is due to
and scenario based stress testing being while Vulnerability Assessment and
Commercial Bank of Ceylon PLC

the Bank when they fall due under both

carried out regularly would enable the Penetration Tests are being carried out by
normal and stress circumstances.
Bank to take proactive measures towards both internal and external parties at regular
To limit this risk, Management has overcoming adverse liquidity position that intervals to identify the relevant risks.
arranged diversified funding sources may arise on a future date.
in addition to its core deposit base and Refer Note 68 on pages 261 to 290 for
Recent downgrading of the country “Financial Risk Review”.
adopted a policy of managing assets with
by Rating Agencies could pose challenges
liquidity in mind and monitoring future cash A detailed write-up on how the risk
in managing foreign currency liquidity
flows and liquidity on a daily basis. The Bank management is carried out within the
position of the financial sector amidst Global
has developed internal control processes and Bank’s Risk Management Framework
pandemic situation, a risk is that the Bank is
contingency plans for managing liquidity with due consideration given to factors
closely monitoring and taking measures to
risk. This incorporates an assessment of such as governance, identification,
mitigate at the moment.
expected cash flows and the availability of assessment, monitoring, reporting and
high grade collateral which could be used to mitigation are discussed in the Section
Operational risk and reputational risk
secure additional funding, if required. on “Risk Governance and Management”
The risk that the Bank will incur a loss on pages 114 to 133 The said write-up on
Management of liquidity risk due to failure of systems, human errors, “Managing Risk: An Overview” does not form
frauds or external events is focussed on part of the Financial Statements.
Market Risk Management Policy and the ALM
this risk domain. When controls fail to
Policy of the Bank approved by the Board of
3 operate effectively, operational risks can
Directors set the tone for managing liquidity
cause damage to reputation, have legal or
risk of the Bank. Liquidity risk of the Bank is
given utmost priority when managing a wide
range of other risks due to the fact that it is

162
4. Fair value measurement 5.1 New and amended standards and 5.1.3 Amendments to the conceptual
“Fair value” is the price that would be interpretations framework for financial reporting
received to sell an asset or paid to transfer In these Financial Statements, the Group CA Sri Lanka issued a revised Conceptual
a liability in an orderly transaction between applied for the first time following Framework which included some new
market participants at the measurement date amendments to Accounting Standards, concepts, updated definitions and
in the principal or, in its absence, the most which are effective for annual periods recognition criteria for assets and liabilities
advantageous market to which the Group beginning on or after January 1, 2020. and clarified some important concepts. Key
has access at that date. The fair value of a The Group has not early adopted any changes include:
liability reflects its non-performance risk. other accounting standard, interpretation z increasing the prominence of stewardship
When one is available, the Group or amendment that has been issued but in the objective of financial reporting
measures the fair value of an instrument not effective.
z reinstating prudence as a component of
using the quoted price in an active market neutrality
for that instrument. A market is regarded as 5.1.1 Amendments to SLFRS 3: Definition of
a Business z defining a reporting entity, which may be a
active if transactions for the asset or liability legal entity, or a portion of an entity
take place with sufficient frequency and In November 2018, the CA Sri Lanka issued
volume to provide pricing information on an amendments to the definition of a business z revising the definitions of an asset and a
liability

Notes to the Financial Statements

ongoing basis. in SLFRS 3 on “Business Combinations”
(SLFRS 3) to help entities determine whether z removing the probability threshold for
If there is no quoted pricing in an active
an acquired set of activities and assets recognition and adding guidance on
market, then the Group uses valuation
is a business or not. These amendments derecognition
techniques that maximise the use of relevant
clarified the minimum requirements for z adding guidance on different measurement
observable inputs and minimise the use of
a business, removed the assessment of basis, and
unobservable inputs. The chosen valuation
whether market participants are capable of
technique incorporates all of the factors that z stating that profit or loss is the primary
replacing any missing elements and added
market participants would take into account performance indicator and that, in
guidance to help entities assess whether an
in pricing a transaction. principle, income and expenses in other
acquired process is substantive, narrowed
The fair value of an asset or a liability the definitions of a business and of outputs, comprehensive income should be recycled
is measured using the assumptions that and introduced an optional fair value where this enhances the relevance or

Financial Statements
market participants would use the fair value concentration test. faithful representation of the financial
hierarchy when pricing the asset or liability, statements.
These amendments had no impact on
assuming that market participants act in
the Consolidated Financial Statements of These amendments had no impact on
their economic best interest.
the Group, but may impact future periods the Consolidated financial statements of
The Group recognises transfers between should the Group enter into any business the Group.
levels of the fair value hierarchy as of the end combinations.
of the reporting period during which the Significant accounting policies

Annual Report 2020

change has occurred. 5.1.2 Amendments to LKAS 1 and LKAS 8: The Significant Accounting Policies set
A fair value measurement of a non- Definition of Material out below have been applied consistently
financial asset takes into account a market In November 2018, the CA Sri Lanka to all periods presented in the Financial
participant’s ability to generate economic issued amendments to LKAS 1 and Sri Statements of the Group except as specified
benefits by using the asset in its highest and Lanka Accounting Standard – LKAS 8 on in Note 2.11 on page 158.
best use or by selling it to another market “Accounting Policies, Changes in Accounting These Accounting Policies have been
participant that would use the asset in its

Commercial Bank of Ceylon PLC

Estimates and Errors” to align the definition applied consistently by Group entities.
highest and best use. External professional of ‘material’ across the standards and to
valuers are involved for valuation of Set out below is an index of Significant
clarify certain aspects of the term ‘definition’.
significant assets such as land and building. Accounting Policies, the details of which are
The new definition states that, ’Information is
available on the pages that follow:
An analysis of fair value measurement material if omitting, misstating or obscuring
of financial and non-financial assets and it could reasonably be expected to influence
liabilities is provided in Note 27 on pages 192 decisions that the primary users of general
to 196. purpose Financial Statements make on the
basis of those Financial Statements, which
5. Changes in Accounting Policies provide financial information about a specific
reporting entity.’
The Group has consistently applied the
Accounting Policies as set out in Notes 6 These amendments had no impact on
to 10 on pages 164 to 176 to all periods the Consolidated Financial Statements of,
presented in these Financial Statements, nor is there expected to be any future impact
except for changes arising out of to, the Group.
amendments to Accounting Standards
as set out below:
4
5

163
 Index of significant accounting policies Table – 45 6. Significant Accounting Policies –
General
Note Description Page No. Reference
to the Notes 6.1 Basis of consolidation
in Financial The Group’s Financial Statements comprise,
Statements
Consolidated Financial Statements of the
6. Significant accounting policies – General Bank and its Subsidiaries in terms of the
Sri Lanka Accounting Standard – SLFRS 10
6.1 Basis of consolidation 164
on “Consolidated Financial Statements”
6.2 Foreign currency 165 (SLFRS 10) and the proportionate share
of the profit or loss and net assets of
7. Significant accounting policies – Recognition of assets and its Associates in terms of the Sri Lanka
liabilities
Accounting Standard – LKAS 28 on
7.1 Financial instruments – Initial recognition, classification “Investments in Associates and Joint
and subsequent measurement 165 26 Ventures” (LKAS 28). The Bank’s Financial
7.2 Non-current assets held for sale and disposal groups 172 Statements comprise the amalgamation of
7.3 Property, plant and equipment 172 39 the Financial Statements of the Domestic
Notes to the Financial Statements

Banking Unit, the Offshore Banking Centre

7.4 Investment property 172 40
and the international operations of the Bank.
7.5 Intangible assets 172 41
7.6 Impairment of non-financial assets 172 37 6.1.1 Business combinations
7.7 Dividends payable 172 25 Business combinations are accounted for
using the acquisition method when control
7.8 Employee benefits 172 49.2 to 49.5
is transferred to the Group as per Sri Lanka
7.9 Other liabilities 174 49 Accounting Standard – SLFRS 3 on “Business
7.10 Restructuring 174 Combinations” (SLFRS 3). The consideration
7.11 Onerous contracts 174
transferred in the acquisition and identifiable
net assets acquired are measured at fair
Financial Statements

7.12 Bank levies 174 value. Any goodwill that arises is tested
7.13 Financial guarantees, letters of credit and undrawn loan annually for impairment (Refer Note 7.6 on
commitments 174 58 page 172). Any gain on a bargain purchase
7.14 Commitments 175 58 is recognised in profit or loss immediately.
Transaction costs are expensed as incurred,
7.15 Contingent liabilities and commitments 175 58
except if they are related to the issue of debt
7.16 Stated capital and reserves 175 52, 54, 55 & 56 or equity securities.
7.17 Earnings per Share (EPS) 175 24 The consideration transferred does not
Annual Report 2020

7.18 Operating segments 175 62 include amounts related to the settlement of

7.19 Fiduciary assets 175
pre-existing relationships. Such amounts are
generally recognised in profit or loss.
8. Significant accounting policies – Recognition of income and Any contingent consideration is
expense measured at fair value at the date of
8.1 Interest income and expense 175 13 acquisition. If an obligation to pay
Commercial Bank of Ceylon PLC

8.2 Fee and commission income and expense 175 14 contingent consideration that meets
the definition of a financial instrument
8.3 Net gains/(losses) from trading 175 15
is classified as equity, then it is not re-
8.4 Net gains/ (losses) from derecognition of financial assets 175 16 measured and settlement is accounted
8.5 Dividend income 175 15 & 17 for within equity. Otherwise, subsequent
changes in the fair value of the contingent
8.6 Leases 175 34.3, 39 & 49.1
consideration are recognised in profit or loss.
8.7 Rental income and expense 176 17 & 21
6.1.2 Non-Controlling Interests (NCI)
9. Significant accounting policies – Tax Expense
Details of NCI are given in Note 57 on
9.1 Income tax expense 176 23, 42 & 48 page 248.
9.2 Crop Insurance Levy (CIL) 176
9.3 Withholding tax (WHT) on dividends distributed by the Bank, 6.1.3 Subsidiaries
subsidiaries, and associate 176 25 Details of the Bank’s subsidiaries, how they
9.4 Economic Service Charge (ESC) 176 are accounted in the Financial Statements
of the Bank and their contingencies are set
9.5 Value Added Tax on financial services (VAT FS) 176 22
out in Notes 37 and 58.4 (a) on pages 210 to
6 9.6 Nation Building Tax on financial services (NBT FS) 176 22 212 and 250.
9.7 Debt Repayment Levy on financial services (DRL FS) 176 22

10. Significant accounting policies – Statement of Cash Flows

10.1 Statement of Cash Flows 176

164
6.1.4 Loss of control between amortised cost in the functional unless this average rate is not a reasonable
When the Group loses control over a currency as at the beginning of the year approximation of the rate prevailing at the
subsidiary, it derecognises the assets and adjusted for effective interest and payments transaction date, in which case income and
liabilities of the subsidiary, and any related during the year and the amortised cost in expenses are translated at the exchange
NCI and other components of equity. Any foreign currency translated at the exchange rates ruling at the transaction date.
resulting gain or loss is recognised in profit rate as at the reporting date. z All resulting exchange differences are
or loss. Any interest retained in the former Non-monetary assets and liabilities recognised in the OCI and accumulated in
subsidiary is measured at fair value when denominated in foreign currencies that the Foreign Currency Translation Reserve
control is lost. are measured at fair value are translated (Translation Reserve), which is a separate
Subsequently, it is accounted for as an into the functional currency at the spot component of Equity, except to the extent
Associate or in accordance with the Group’s exchange rate at the date that the fair value that the translation difference is allocated
Accounting Policy for financial instruments was determined. Non-monetary items that to the NCI.
depending on the level of influence retained. are measured in terms of historical cost
When a foreign operation is disposed of
in a foreign currency are translated using
such that the control is lost, the cumulative
6.1.5 Associates the exchange rate as at the date of the
amount in the translation reserve related to
Details of associate, how they are accounted transaction.
that foreign operation is reclassified to profit

Notes to the Financial Statements

in the Financial Statements of the investee, Foreign currency differences arising on or loss as part of the gain or loss on disposal.
together with their fair values and the translation are generally recognised in profit If the Group disposes of only part of its
Group’s share of contingent liabilities of the or loss. However, foreign currency differences interest in a subsidiary that includes a
associate is set out in Notes 38 and 58.4 (b) arising from the translation of the following foreign operation while retaining control,
on pages 212 and 250. items are recognised in OCI: then the relevant proportion of the
z Equity instruments measured at fair value cumulative amount of the translation reserve
6.1.6 Transactions eliminated on through other comprehensive income is re-attributed to NCI.
consolidation
z A financial liability designated as a
Intra-group balances, transactions and any 7. Significant accounting policies –
hedge of the net investment in a foreign
unrealised income and expenses (except for recognition of assets and liabilities
operation to the extent that the hedge is
foreign currency transaction gains or losses)
effective; and 7.1 Financial instruments –

Financial Statements
arising from intra-group transactions are
z Qualifying cash flow hedges to the extent
initial recognition, classification and
eliminated in preparing the Consolidated
that the hedge is effective. subsequent measurement
Financial Statements. Unrealised gains
7.1.1 Date of recognition
arising from transactions with equity
6.2.2 Foreign currency translations The Group initially recognises loans and
accounted investees are eliminated against
the investment to the extent of the Group’s The Group’s Consolidated Financial advances, deposits and subordinated
interest in the investee. Unrealised losses are Statements are presented in Sri Lankan liabilities, etc., on the date on which they are
eliminated in the same way as unrealised Rupees, which is also the Bank’s Functional originated. All other financial instruments

Annual Report 2020

gains, but only to the extent that there is no Currency. The Financial Statements of the (including regular-way purchases and sales
evidence of impairment. Offshore Banking Centre of the Bank and of financial assets) are recognised on the
the Financial Statements of the foreign trade date, which is the date on which the
6.1.7 Material gains or losses, provisional operations of the Bank have been translated Group becomes a party to the contractual
values or error corrections into the Group’s Presentation Currency as provisions of the instrument.
There were no material gains or losses, explained under Notes 6.2.3 and 6.2.4 below.

Commercial Bank of Ceylon PLC

provisional values or error corrections 7.1.2 Initial measurement of
6.2.3 Transactions of the offshore financial instruments
recognised during the year in respect of
banking centre The classification of financial instruments at
business combinations that took place in
previous periods. These are recorded in accordance with Note initial recognition depends on their cash flow
6.2.1 above, except the application of the characteristics and the business model for
6.2 Foreign currency annual weighted average exchange rate for managing the instruments. Refer Notes 7.1.3
translation of the Income Statement and and 7.1.4 for further details on classification
6.2.1 Foreign currency transactions
and balances the Statement of Profit or Loss and Other of financial instruments.
Comprehensive Income. Net gains and losses A financial asset or financial liability
Foreign currency transactions are translated are dealt through the profit or loss.
into the functional currency, which is is measured initially at fair value plus or
Sri Lankan Rupees, using the exchange rates minus transaction costs that are directly
6.2.4 Foreign operations attributable to its acquisition or issue, except
prevailing at the dates of the transactions. In
this regard, the Bank’s practice is to use the The results and financial position of foreign in the case of financial assets and financial
middle rate of exchange ruling at the date of operations that have a functional currency liabilities at fair value through profit or loss
the transaction. different from the Bank’s presentation as per SLFRS 9 and trade receivables that do
currency are translated into the Bank’s not have a significant financing component
Monetary assets and liabilities presentation currency as follows: as defined by SLFRS 15.
denominated in foreign currencies as at
z Assets and liabilities, including goodwill Transaction cost in relation to financial 6
the reporting date are translated into the
functional currency at the middle exchange and fair value adjustments arising on assets and financial liabilities at fair value 7
rate of the functional currency ruling as at acquisition, are translated at the rates of through profit or loss are dealt with through
the reporting date. The foreign currency gain exchange ruling as at the reporting date. the Income Statement.
or loss on monetary items is the difference z Income and expenses are translated at
the average exchange rate for the period,

165
 Trade receivables that do not have The subsequent measurement For the purposes of this assessment,
significant financing component are of financial assets depends on their “principal” is defined as the fair value of the
measured at their transaction price at initial classification. financial asset on initial recognition and may
recognition as defined in SLFRS 15. change over the life of the financial asset (for
When the fair value of financial [Link] Business model assessment example, if there are repayments of principal
instruments (except trade receivables that do The Group makes an assessment of the or amortisation of the premium/discount).
not have significant financing component) objective of a business model in which an “Interest” is defined as consideration for
at initial recognition differs from the asset is held at a portfolio level and not the time value of money and for the credit
transaction price, the Group accounts for the assessed on instrument-by-instrument risk associated with the principal amount
Day 1 profit or loss, as described below. basis because this best reflects the way the outstanding during a particular period of
business is managed and information is time and for other basic lending risks and
[Link] “Day 1” profit or loss provided to management. The information costs, as well as profit margin.
considered includes: In contrast, contractual terms that
When the transaction price of the instrument
differs from the fair value at origination and z the stated policies and objectives for introduce a more than de minimis exposure
fair value is based on a valuation technique the portfolio and the operation of those to risks or volatility in the contractual cash
using only inputs observable in market policies in practice. In particular, whether flows that are unrelated to a basic lending
Notes to the Financial Statements

transactions, the Group recognises the management’s strategy focuses on earning arrangement do not give rise to contractual
difference between the transaction price contractual interest revenue, maintaining cash flows that are solely payments of
and fair value in net gains/(losses) from a particular interest rate profile, matching principal and interest on the principal
trading. In those cases, where the fair value the duration of the financial assets to the amount outstanding. In such cases, the
is based on models for which some inputs duration of the liabilities that are funding financial asset is required to be measured at
are not observable, the difference between those assets or realising cash flows through FVTPL.
the transaction price and the fair value is the sale of the assets; In assessing whether the contractual
deferred and is only recognised in profit or z how the performance of the portfolio cash flows are solely payments of
loss when the inputs become observable, is evaluated and reported to the Bank’s principal and interest on principal amount
or when the instrument is derecognised. management; outstanding, the Group considers the
z the risks that affect the performance of the contractual terms of the instrument. This
The “Day 1 loss” arising in the case of loans
Financial Statements

business model (and the financial assets includes assessing whether the financial
granted to employees at concessionary
held within that business model) and how asset contains a contractual term that could
rates under uniformly applicable schemes
those risks are managed; change the timing or amount of contractual
is deferred and amortised using Effective
cash flows such that it would not meet this
Interest Rates (EIR) in “Interest income” and z how managers of the business are
condition. In making the assessment, the
“Personnel expenses” over the remaining compensated – e.g. whether compensation
Group considers:
service period of the employees or tenure of is based on the fair value of the assets
the loan whichever is shorter. managed or the contractual cash flows z contingent events that would change the
Annual Report 2020

However, as per ‘Guidance Notes on collected; and amount and timing of cash flows;
Accounting Considerations of the COVID z the frequency, volume and timing of sales z leverage features;
19 Outbreak’ issued by CA Sri Lanka, for in prior periods, the reasons for such sales z prepayment and extension terms;
overdrafts and working capital loans and its expectations about future sales
z terms that limit the Group’s claim to cash
offered at a concessionary rate of 4% to activity. However, information about sales
the borrower, which were again funded activity is not considered in isolation, but flows from specified assets; and
to the Bank at 1% interest rate under as part of an overall assessment of how the z features that modify consideration of the
Commercial Bank of Ceylon PLC

the government refinance scheme; the Bank’s stated objective for managing the time value of money.
interest rate of 4% for that special product financial assets is achieved and how cash
was considered as applicable market rate flows are realized. The Group holds a portfolio of long-term
resulting in no fair value adjustments. fixed rate loans for which the Group has the
Accordingly, no day 1 impact arose in case of The business model assessment is option to propose to revise the interest rate
such working capital loans and overdrafts. based on reasonably expected scenarios at periodic reset dates. These reset rights
Refer Notes 13 and 19 on pages 178 without taking “worst case” or “stress case” are limited to the market rate at the time
and 185. scenarios into account. If cash flows after of revision. The borrowers have an option
initial recognition are realised in a way to either accept the revised rate or redeem
7.1.3 Classification and subsequent that is different from the Bank's original the loan at par without penalty. The Group
measurement of financial assets expectations, the Bank does not change has determined that the contractual cash
the classification of the remaining financial flows of these loans are solely payments of
As per SLFRS 9, the Group classifies all of its
assets held in that business model, but principal and interest because the option
financial assets based on the business model
incorporates such information when varies the interest rate in a way that is
for managing the assets and the assets’
assessing newly originated or newly consideration for the time value of money,
contractual terms measured at either;
purchased financial assets going forward. credit risk, other basic lending risks and
z Amortised cost costs associated with the principal amount
7 z Fair value through other comprehensive [Link] Assessment of whether contractual outstanding.
income (FVOCI) cash flows are solely payments of principal and Refer Notes [Link] to [Link] below for
z Fair value through profit or loss (FVTPL) interest (SPPI test) details on different types of financial assets
As a second step of its classification process recognised on the SOFP.
the Group assesses the contractual terms
of financial assets to identify whether they
meet the SPPI test.

166
[Link] Financial assets measured at [Link] Financial assets measured at FVOCI Financial assets designated at FVTPL
amortised cost Financial assets at FVOCI include debt and are recorded in the SOFP at fair value.
A financial asset is measured at amortised equity instruments measured at fair value Changes in fair value are recorded in “Net
cost if it meets both of the following through other comprehensive income. gain or loss on financial assets and liabilities
conditions and is not designated as at FVTPL: For financial assets measured at FVOCI designated at FVTPL”. Interest earned is
z The asset is held within a business model refer Notes [Link].1 and [Link].2. accrued in “Interest Income”, using the EIR,
whose objective is to hold assets to collect while dividend income is recorded in “Other
contractual cash flows; and [Link].1 Debt instruments measured at FVOCI operating income” when the right to receive
the payment has been established.
z The contractual terms of the financial Debt instruments are measured at FVOCI
asset give rise on specified dates to cash if they are held within a business model The Group has not designated any
flows that are solely payments of principal whose objective is to hold for collection of financial assets upon initial recognition as at
and interest on the principal amount contractual cash flows and selling financial FVTPL as at the end of the reporting period.
outstanding. assets, where the asset’s contractual cash
flows represent payments that are solely 7.1.4 Classification and subsequent
Financial assets measured at amortised payments of principal and interest on measurement of financial liabilities
cost are given in Notes [Link].1 to [Link].6 principal outstanding. Details of “Debt The Group classifies financial liabilities,
below:

Notes to the Financial Statements

instruments at FVOCI” are given in Note 36 other than financial guarantees and loan
on page 207. commitments into one of the following
[Link].1 Loans and advances to banks and categories:
other customers
[Link].2 Equity instruments designated at FVOCI z Financial liabilities at FVTPL, and within
Loans and advances to banks and other
Upon initial recognition, the Group elects this category as –
customers include amounts due from banks,
to classify irrevocably some of its equity – Held-for-trading; or
loans and advances and lease receivables of
instruments held for strategic and regulatory
the Group. – Designated at FVTPL;
purposes as equity instruments at FVOCI.
Details of “Loans and advances to banks Details of “Equity instruments at FVOCI” are z Financial liabilities measured at amortised
and other customers” are given in Notes 33 given in Note 36 on page 207. cost.
and Note 34 on pages 201 to 205. The subsequent measurement of

Financial Statements
[Link] Financial assets measured at FVTPL financial liabilities depends on their
[Link].2 Securities purchased under resale All financial assets other than those classified classification.
agreements (reverse repos)
at amortised cost or FVOCI are classified Refer Notes [Link] and [Link] as detailed
When the Group purchases a financial as measured at FVTPL. Financial assets below:
asset and simultaneously enters into an measured at FVTPL include financial assets
agreement to resale the asset (or a similar that are held for trading or managed and [Link] Financial liabilities at FVTPL
asset) at a fixed price on a future date whose performance is evaluated on a fair
(reverse repo), the arrangement is accounted Financial liabilities at FVTPL include financial
value basis are measured at FVTPL because

Annual Report 2020

for as a financial asset in the SOFP reflecting liabilities held for trading and financial
they are neither held to collect contractual liabilities designated upon initial recognition
the transaction’s economic substance as a cash flows nor held both to collect
loan granted by the Group. Subsequent to as at FVTPL. Refer Notes [Link].1 and
contractual cash flows and to sell financial [Link].2 below.
initial recognition, these securities issued assets. Financial assets measured at FVTPL
are measured at amortised cost using the are discussed in Notes [Link].1 and [Link].2
EIR with the corresponding interest income/ [Link].1 Financial liabilities held for trading
below.
receivable being recognised as interest Details of “Derivative financial liabilities”

Commercial Bank of Ceylon PLC

income in profit or loss. classified under financial liabilities held for
[Link].1 Financial assets held for trading
trading are given in Note 45 on page 231.
Details of “Securities purchased under Details of “Financial Assets held for trading”
resale agreements” are given in the SOFP on are given in Note 32 on page 198. [Link].2 Financial liabilities designated at FVTPL
page 145.
Financial liabilities designated at FVTPL are
[Link].1.1 Derivatives recorded at FVTPL
[Link].3 Debt and other financial instruments recorded in the SOFP at fair value when;
Details of “Derivative financial assets”
measured at amortised cost z The designation eliminates, or significantly
recorded at fair value through profit or loss
Details of “Debt and other financial are given in Note 31 on page 198. reduces, the inconsistent treatment that
instruments measured at amortised cost” are would otherwise arise from measuring the
given in Note 35 on page 206. [Link].2 Financial assets designated FVTPL assets or liabilities or recognising gains or
On initial recognition, the Group may losses on them on a different basis, or
[Link].4 Cash and cash equivalents z A group of financial liabilities or financial
irrevocably designate a financial asset that
Details of “Cash and cash equivalents” are otherwise meets the requirements to be assets and financial liabilities is managed
given in Note 28 on page 196. measured at amortised cost or at FVOCI as and its performance is evaluated on
at FVTPL when such designation eliminates a fair value basis, in accordance with
[Link].5 Balances with central banks or significantly reduces an accounting a documented risk management or
Details of “Balances with central banks” are mismatch that would otherwise arise investment strategy, and information
7
given in Note 29 on page 197. from measuring the assets or liabilities or about the group is provided on that basis
recognising gains or losses on them on a to entity’s key management personnel, or
[Link].6 Placements with banks different basis.
Details of “Placements with banks” are given
in Note 30 on page 197.

167
 z The liabilities containing one or more [Link].2 Securities sold under repurchase The Group currently uses cash flow
embedded derivatives, unless they do agreements (repos) hedging relationships for risk management
not significantly modify the cash flows When the Group sells a financial asset and purposes as discussed in Notes [Link] to
that would otherwise be required by simultaneously enters into an agreement [Link] below:
the contract, or it is clear with little or to repurchase the asset (or a similar asset)
no analysis when a similar instrument is at a fixed price on a future date (repos), [Link] Fair value hedges
first considered that separation of the the arrangement is accounted for as a When a derivative is designated as the
embedded derivative(s) is prohibited. financial liability in the SOFP reflecting hedging instrument in a hedge of the
the transaction’s economic substance as a change in fair value of a recognised asset
Changes in fair value are recorded in
deposit. Subsequent to initial recognition, or liability or a firm commitment that could
“Net fair value gains/ (losses) from financial
these securities are measured at amortised affect the profit or loss, changes in the
instruments at FVTPL” with the exception
cost using the EIR with the corresponding fair value of the derivative are recognised
of movements in fair value of liabilities
interest payable being recognised as immediately in profit or loss in the same line
designated at FVTPL due to changes in the
“Interest expense” in profit or loss. item as the hedged item that is attributable
Bank’s own credit risk. Such changes in fair
value are recorded in the own credit reserve Details of “Securities sold under to the hedged risk.
through OCI and do not get recycled to profit repurchase agreements (repos)” are given in If the hedging derivative expires
Notes to the Financial Statements

or loss. Interest paid/payable is accrued in the SOFP on page 145. or is sold, terminated or exercised, or
“Interest expense”, using the EIR. the hedge no longer meets the criteria
[Link].3 Due to depositors for fair value hedge accounting, or the
The Group has not designated any
financial liabilities as at FVTPL as at the end Details of “Due to depositors” are given in hedge designation is revoked, then hedge
of the reporting period. Note 46 on page 231. accounting is discontinued prospectively.
However, if the derivative is novated to
[Link] Financial liabilities at amortised cost [Link].4 Other Borrowings a central counterparty by both parties
Details of “Other borrowings” are given in as a consequence of laws or regulations
Financial liabilities issued by the Group that
Note 47 on page 232. without changes in its terms except for
are not designated at FVTPL are classified
those are necessary for the novation, then
as financial liabilities at amortised cost
[Link].5 Subordinated liabilities the derivative is not considered as expired
under “Due to banks”, “Securities sold under
or terminated.
Financial Statements

repurchase agreements”, “Due to depositors”, Details of “Subordinated liabilities” are given

“Other borrowings” or “Subordinated in Note 51 on page 240. Any adjustment up to the point of
liabilities” as appropriate, where the discontinuation to a hedged item for which
substance of the contractual arrangement 7.1.5 Derivatives held for risk management the effective interest method is used, is
results in the Group having an obligation purposes and hedge accounting amortised to profit or loss as a part of
either to deliver cash or another financial Derivatives held for risk management the recalculated EIR of the item over its
asset to the holder, or to satisfy the purposes include all derivative assets and remaining life.
obligation other than by the exchange liabilities that are not classified as trading
Annual Report 2020

of a fixed amount of cash or another assets and liabilities. Derivatives held for risk [Link] Cash flow hedges
financial asset for a fixed number of own management purposes are measured at fair When a derivative is designated as the
equity shares. value in the SOFP. hedging instrument in a hedge of the
The Group classifies capital instruments The Group designates certain derivatives variability in cash flows attributable to a
as financial liabilities or equity instruments held for risk management as well as certain particular risk associated with a recognised
in accordance with the substance of the non-derivative financial instruments as asset or liability that could affect the profit or
Commercial Bank of Ceylon PLC

contractual terms of the instrument. hedging instruments in qualifying hedging loss, the effective portion of changes in the
relationships. On initial designation of the fair value of the derivative are recognised in
After initial recognition, such financial OCI and presented in the hedging reserve
liabilities are subsequently measured at hedge, the Group formally documents
the relationship between the hedging within equity. Any ineffective portion of
amortised cost using the EIR method. changes in the fair value of the derivative is
Amortised cost is calculated by taking instrument and hedged item, including
risk management objective and strategy recognised immediately in profit or loss.
into account any discount or premium on
acquisition and fee or costs that are an in undertaking the hedge, together with The amount recognised in OCI
integral part of the EIR. the method that will be used to assess the is reclassified to profit or loss as a
effectiveness of the hedging relationship. reclassification adjustment in the same
The EIR amortisation is included in period as the hedged cash flows affect profit
The Group makes an assessment, both at
“Interest expense” in the profit or loss. Gains or loss, and in the same line item in the
inception of the hedge relationship and on
and losses too are recognised in the profit or Statement of Profit or Loss and OCI.
an ongoing basis, of whether the hedging
loss when the liabilities are derecognised as
instrument is expected to be highly effective If the hedging derivative expires
well as through the EIR amortisation process.
in offsetting the changes in fair value or or is sold, terminated or exercised, or
cash flow of the respective hedged item the hedge no longer meets the criteria
[Link].1 Due to banks
during the period for which the hedge is for cash flow hedge accounting, or the
Details of “Due to banks” are given in Note 44 designated, and whether the actual results hedge designation is revoked, then hedge
on page 230. of each hedge are within a range of 80% to
7 accounting is discontinued prospectively.
125%. The Group makes an assessment for However, if the derivative is novated to a
a cash flow hedge of a forecast transaction, central counterparty by both parties as a
of whether the forecast transaction is highly consequence of laws or regulations without
probable to occur and presents an exposure
to variations in cash flows that could
ultimately affect profit or loss.

168
changes in its terms except for those z The terms of the embedded derivative [Link] Measurement of reclassification of
are necessary for the novation, then the would meet the definition of a derivative if financial assets
derivative is not considered as expired or they were contained in a separate contract; [Link].1 Reclassification of Financial
terminated. and Instruments at ‘FVTPL’
Details of “Cash flow hedges” are given in z The economic characteristics and risks of z To Fair Value Through Other
Note 45.1 on page 231. the embedded derivative are not closely Comprehensive Income
related to the economic characteristics and The fair value on reclassification date
[Link] Net investment hedges risks of the host contract. becomes the new gross carrying amount.
When a derivative instrument or a non- The EIR is calculated based on the new
derivative financial liability is designated Separated embedded derivatives are gross carrying amount. Subsequent
as the hedging instrument in a hedge of a measured at fair value, with all changes in changes in the fair value is recognised
net investment in a foreign operation, the fair value recognised in profit or loss unless in OCI.
effective portion of changes in the fair value they form part of a qualifying cash flow
of the hedging instrument is recognised in or net investment hedging relationship. z To Amortised Cost
OCI and presented in the translation reserve Separated embedded derivatives are The fair value on reclassification date
within equity. Any ineffective portion of presented in the SOFP together with the host becomes the new carrying amount. The

Notes to the Financial Statements

changes in the fair value of the derivative is contract. Derivatives embedded in financial EIR is calculated based on the new gross
recognized immediately in profit or loss. The assets are classified based on the business carrying amount.
amount recognised in OCI is reclassified to model and their contractual terms and are
profit or loss as a reclassification adjustment not separated as explained in Notes [Link] [Link].2 Reclassification of Financial
on disposal of the foreign operation. and [Link] on page 166. Instruments at ‘FVOCI’
Separated embedded derivatives are z To Fair Value Through Profit or Loss
[Link] Other non-trading derivatives measured at fair value, with all changes in
The accumulated balance in OCI is
If the derivative is not held for trading, and fair value recognised in profit or loss unless
reclassified to profit or loss on the
is not designated in a qualifying hedging they formed part of a qualifying cash flow
reclassification date.
relationship, then all changes in its fair value or net investment hedging relationship.
are recognised immediately in profit or loss Separated embedded derivatives are z To Amortised Cost
presented in the SOFP together with the

Financial Statements
as a component of net income from other The financial asset is reclassified at fair
financial instruments at FVTPL. host contract. value. The cumulative balance in OCI is
removed and is used to adjust fair value
[Link] Embedded derivatives 7.1.6 Reclassification of financial assets on the reclassification date. The adjusted
An embedded derivative is a component and liabilities amount becomes the amortised cost.
of a hybrid instrument that also includes Financial assets are not reclassified
a non-derivative host contract with the subsequent to their initial recognition, EIR determined at initial recognition and
effect that some of the cash flows of the except and only in those rare circumstances gross carrying amount are not adjusted as

Annual Report 2020

combined instrument vary in a way similar when the Group changes its objective of the a result of reclassification.
to a stand-alone derivative. An embedded business model for managing such financial
derivative causes some or all of the cash assets which may include the acquisition, [Link].3 Reclassification of Financial
disposal or termination of a business line. Instruments at ‘Amortised Cost’
flows that otherwise would be required by
the contract to be modified according to a During the year, the Bank reclassified z To FVOCI
specified interest rate, financial instrument part of its Sri Lanka Sovereign Bond (SLSB) The asset is remeasured to fair value,

Commercial Bank of Ceylon PLC

price, commodity price, foreign exchange Portfolio from Fair Value Through Other with any difference recognised in OCI. EIR
rate, index of prices or rates, credit rating Comprehensive Income (FVOCI) to Amortised determined at initial recognition is not
or credit index, or other variable, provided Cost, as a result of changes to the business adjusted as a result of reclassification.
that, in the case of a non-financial variable, model of managing the assets, in line with
it is not specific to a party to the contract. z To FVTPL
the guidelines issued by the CA Sri Lanka on
A derivative that is attached to a financial Accounting Consideration with the COVID-19 The fair value on the reclassification date
instrument, but is contractually transferable Outbreak. Refer Note 36.1 on page 208 for becomes the new carrying amount. The
independently of that instrument, or has a further details. difference between amortised cost and fair
different counterparty from that instrument, value is recognised in profit and loss.
Financial Liabilities are not reclassified as
is not an embedded derivative, but a
such reclassifications are not permitted by
separate financial instrument. 7.1.7 Derecognition of financial assets and
SLFRS 9.
Derivatives may be embedded in another financial liabilities
contractual arrangement (a host contract). [Link] Timing of reclassification of [Link] Financial assets
The Group treats derivatives embedded in financial assets The Group derecognises a financial asset
financial liabilities and non-financial host Consequent to the change in the business (or where applicable a part of thereof ) when
contracts as separate derivatives, if: model, the Bank reclassifies all affected the contractual rights to the cash flows from
assets prospectively following the change the financial asset expire or it transfers the
z The host contract is not itself carried
in the business model (the reclassification rights to receive the contractual cash flows in
at FVTPL; 7
date). Accordingly, prior periods are a transaction in which substantially all risks
not restated. and rewards of ownership of the financial
asset are transferred or in which the Group
neither transfers nor retains substantially all
risks and rewards of ownership and it does
not retain control of the financial asset.

169
 On derecognition of a financial asset, the If the cash flows of the modified [Link] Modification of Financial Liabilities
difference between the carrying amount of asset carried at amortised cost are not Where an existing financial liability is
the asset (or the carrying amount allocated substantially different, then the modification replaced by another from the same lender
to the portion of the asset derecognised) does not result in derecognition of the on substantially different terms or the terms
and the sum of the consideration received financial asset. In this case, the Group of an existing liability are substantially
(including any new asset obtained less any recalculates the gross carrying amount of the modified, such an exchange or modification
new liability assumed) and any cumulative financial asset and recognises the amount is treated as a derecognition of the original
gain or loss that had been recognised in OCI arising from adjusting the gross carrying liability and the recognition of a new liability.
is recognised in profit or loss. amount as a modification gain or loss in In this case, a new financial liability based
However, cumulative gain/loss profit or loss. If such a modification is carried on the modified terms is recognised at fair
recognised in OCI in respect of equity out because of financial difficulties of the value. The difference between the carrying
investment securities designated as at borrower, then the gain or loss is presented amount of the financial liability extinguished
FVOCI is not recognised in profit or loss on together with impairment losses measured and the new financial liability with modified
derecognition of such securities. using pre modification interest rate. In other terms is recognised in profit or loss.
cases, it is presented as interest income.
Any interest in transferred financial assets
that qualify for derecognition that is created As per the Circular Nos. 4 and 5 of 7.1.9 Offsetting of financial instruments
Notes to the Financial Statements

or retained by the Group is recognised as a 2020 issued by CBSL dated March 24, Financial assets and financial liabilities
separate asset or liability. 2020 and March 27, 2020 respectively, are offset and the net amount reported
the Bank granted payment deferrals to in the SOFP if, and only if, there is a
The Group enters into transactions
eligible customers affected by COVID-19, currently enforceable legal right to offset
whereby it transfers assets recognised on its
modifying the original contract. In this the recognised amounts and there is an
SOFP, but retains either all or substantially
regard, banks were allowed to charge intention to settle on a net basis, or to
all risks and rewards of the transferred assets
upto a maximum of 7% per annum on the realise the assets and settle the liabilities
or a portion of them. In such cases, the
deferred instalments during the moratorium simultaneously.
transferred assets are not derecognised.
period of equated monthly instalments Income and expenses are presented on a
When assets are sold to a third party (EMI) loans. For other loans various types net basis only when permitted under SLFRSs,
with a concurrent total rate of return swap of interest rate concessions were given to or for gains and losses arising from a group
on the transferred assets, the transaction the customers. Further, with the view of
Financial Statements

of similar transactions such as in the Group’s

is accounted for as a secured financing meeting the challenges faced by businesses trading activity.
transaction similar to sale and repurchase and individuals due to the second wave of
transactions because the Group retains COVID-19, CBSL directed banks to extend 7.1.10 Amortised cost and gross carrying
all or substantially all risks and rewards of the debt moratorium to such businesses amount
ownership of such assets. and individuals for a further period of six
The “amortised cost” of a financial asset or
When the Group has transferred its right months commencing from October 01,
financial liability is the amount at which
to receive cash flows from an asset or has 2020. Licensed banks are expected to
the financial asset or financial liability is
Annual Report 2020

entered into a pass-through arrangement convert the capital and interest falling due
measured on initial recognition minus
and has neither transferred nor retained during the moratorium period commencing
the principal repayments, plus or minus
substantially all the risks and rewards of the from October 01, 2020 to March 31, 2021,
the cumulative amortisation using the EIR
asset nor transferred control of the asset, into a term loan. Repayment period of the
method of any difference between that
the asset is recognised to the extent of the new loans shall be minimum of two years,
initial amount and the maturity amount
Group’s continuing involvement in the asset. however may vary based on the terms and
and, for financial assets, adjusted for any ECL
In that case, the Group also recognises an conditions agreed with the borrower. The
Commercial Bank of Ceylon PLC

allowance.
associated liability. The transferred asset and banks were allowed to recover interest at a
the associated liability are measured on the rate not exceeding the latest auction rate for The “gross carrying amount of a financial
basis that reflected the rights and obligations 364-days Treasury Bills, available by April 01, asset” is the amortised cost of a financial
that the Group has retained. 2021, plus 1 per cent per annum. asset before adjusting for any ECL allowance.
Modifications to the original terms
[Link] Financial liabilities 7.1.11 Fair value of financial instruments
and conditions of the loans due to the
The Group derecognises a financial liability above COVID-19 moratoriums, did not Fair value measurement of financial
when its contractual obligations are result in de-recognition of the original instruments including the fair value hierarchy
discharged, cancelled or expired. loans as the Management concluded that is explained in Notes 4 and 27 on pages
the modifications were not substantial. 163 and 192.
7.1.8 Modification of financial assets and Accordingly, a modification loss (Day 1
financial liabilities Modification Loss) has been recognized 7.1.12 Identification and measurement of
[Link] Modification of Financial assets under interest income in Note 13.1, impairment of financial assets
If the terms of a financial asset are modified, representing the difference between [Link] Overview of the ECL principles
the Group evaluates whether the cash the original carrying amount of the loan The Group records an allowance for expected
flows of the modified asset are substantially (before modification) and the discounted credit losses (ECL) for loans & advances from
different. If the cash flows are substantially present value of the revised cash flows (at banks and other customers, debt and other
7 different, then the contractual rights to cash the Original EIR) at the date of the loan financial instruments measured at amortised
flows from the original financial asset are modification. The Group recognizes the cost, debt instruments measured at FVOCI,
deemed to have expired. In this case, the interest income on recalculated gross loan commitments and financial guarantee
original financial asset is derecognised and a carrying amount based on the Original EIR contracts.
new financial asset is recognised at fair value. from the commencement of moratorium to
the end of the lifetime of the instrument.

170
 SLFRS 9 outlines a “three-stage” model z When reasonable and supportable In addition, the Group classifies the
for impairment based on changes in credit forecasts of future economic conditions financial investments under Stage 3 when
quality since initial recognition. directly affect the performance of a the external credit rating assigned to the
customer/group of customers, portfolios or particular investment is “default”.
z Stage 1: A financial asset that is not
instruments. In assessing whether a borrower is
originally credit-impaired on initial
recognition is classified in Stage 1. z When there is a significant change in in default, Group reviews its individually
Financial instruments in Stage 1 have their the geographical locations or natural significant loans and advances above a
ECL measured at an amount equal to the catastrophes that directly impact the predefined threshold at each reporting
proportion of lifetime expected credit performance of a customer/group of date. The Group considers non performing
losses (LTECL) that result from default customers or instruments. credit facilities/customers with one or
events possible within next 12 months z When the value of collateral is significantly more of indicators set out in Note [Link]
(12M ECL). reduced and/or realisibility of collateral is above as credit impaired. Further, as per
doubtful. “CBSL Guidelines to Licensed Banks on the
z Stage 2: If a significant increase in credit
Adoption of Sri Lanka Accounting Standard
risk (SICR) since origination is identified z When a customer is subject to litigation,
– SLFRS 9: Financial Instruments”, all the
financial asset is moved to Stage 2 and that significantly affects the performance
credit facilities/ customers classified as
the Group records an allowance for LTECL. of the credit facility.

Notes to the Financial Statements

non-performing as per CBSL Directions are
Refer Note [Link] for a description on z Frequent changes in the senior assessed as Stage 3 exposure.
how the Group determines when a SICR management of an institutional customer.
has occurred.
z Delay in the commencement of business [Link] Movement between the stages
z Stage 3: If a financial asset is credit- operations/projects by more than two Financial assets can be transferred between
impaired, it is moved to Stage 3 and the years from the originally agreed date. the different categories (other than POCI)
Group recognises an allowance for LTECL, depending on their relative change in
z Modification of terms resulting in
with probability of default at 100%. Refer credit risk since initial recognition. Financial
concessions, including extensions,
Note [Link] for a description on how instruments are transferred out of Stage 2
deferment of payments, waiver of
the Group defines default and credit if their credit risk is no longer considered
covenants
impaired assets to be significantly increased since initial
z When the customer is deceased/insolvent.
recognition based on the assessments

Financial Statements
Purchased or originated credit impaired
z When the Bank is unable to contact or find described in Note [Link]. Financial
(POCI) financial assets: Financial assets which
the customer. instruments are transferred out of Stage 3
are credit impaired on initial recognition are
categorised within Stage 3 with a carrying z A fall of 50% or more in the turnover and/ when they no longer exhibit any evidence of
value already reflecting the LTECL. The or profit before tax of the customer when credit impairment as described above.
Group does not have POCI loans as at the compared to the previous year
reporting date. z Erosion in net-worth by more than 25% [Link] Grouping financial assets measured
when compared to the previous year. on collective basis
The key judgements and assumptions

Annual Report 2020

adopted by the Group in addressing the The Group calculates ECL either on a
Credit facilities/exposures which have collective or an individual basis. Asset classes
requirements of SLFRS 9 are discussed one or more of the above indicators are
below: where the Group calculates ECL on individual
treated as facilities with SICR and assessed basis include;
accordingly in ECL computations. The Group
[Link] Significant increase in credit risk (SICR) z Credit impaired facilities of individually
regularly monitors the effectiveness of the
When determining whether the risk significant customers
criteria used to identify SICR to confirm that

Commercial Bank of Ceylon PLC

of default on a financial instrument the criteria is capable of identifying SICR z The treasury, trading and interbank
has increased significantly since initial before an exposure is in default. relationships (such as due from Banks,
recognition, the Group considers reasonable money at call and short notice, placements
For debt instruments having an
and supportable information that is relevant with Banks, government securities,
external credit rating, which are measured
and available without undue cost or investments in debentures etc.)
at amortised cost or at FVOCI, the Group
effort. This includes both quantitative and
determines SICR based on the generally Those financial assets for which, the
qualitative information analysis, based on
accepted investment/non-investment grade Group determines that no provision is
the Group’s historical experience and expert
definitions published by international rating required under individual impairment are
credit assessment and including forward
agencies. Debt instruments are moved to then collectively assessed for ECL. For the
looking information.
Stage 2 if their credit risk increases to the purpose of ECL calculation on collective
The Group considers an exposure to extent that they are no longer considered basis, financial assets are grouped on the
have significantly increased credit risk when investment grade. basis of similar risk characteristics. Loans and
contractual payments of a customer are advances to other customers are grouped
more than 30 days past due in accordance [Link] Definition of default and credit in to homogeneous portfolios, based on
with the rebuttable presumption in SLFRS 9. impaired assets a combination of product and customer
The Group individually reviews at each The Group considers loans and advances to characteristics.
reporting date, loans and advances above a other customers be defaulted when: Details of the ECL calculation are given in
predefined threshold to identify whether the Note 18 on pages 182 to 185. 7
z The borrower is unlikely to pay its
credit risk has increased significantly since
obligations to the Group in full, without
origination, before an exposure is in default.
recourse by the Group to actions such as
Such indicators include, inter-alia:
realising security (if any is held); or
z The borrower becomes 90 days past due
on its contractual payments.

171
 7.2 Non-current assets held for sale and 7.3.2 Borrowing costs An impairment loss is recognised if the
disposal groups As per the Sri Lanka Accounting Standard carrying amount of an asset or CGU exceeds
The Group intends to recover the value of – LKAS 23 on “Borrowing Costs” (LKAS 23), its recoverable amount.
Non-Current Assets and disposal groups the Group capitalises borrowing costs that The Group’s corporate assets do not
classified as held for sale as at the reporting are directly attributable to the acquisition, generate separate cash inflows and are used
date principally through a sale transaction construction or production of a qualifying by more than one CGU. Corporate assets
rather than through continuing use. This asset as part of the cost of the asset. A are allocated to CGUs on a reasonable and
condition is regarded as met only when qualifying asset is an asset which takes a consistent basis and tested for impairment as
the sale is highly probable and the asset substantial period of time to get ready for its part of the testing of the CGUs to which the
or disposal group is available-for-sale in intended use or sale. Other borrowing costs corporate assets are allocated.
its present condition, Management has are recognised in the profit or loss in the Impairment losses are recognised in
committed to the sale and the sale is period in which they occur. profit or loss. They are allocated first to
expected to have been completed within reduce the carrying amount of any goodwill
one year from the date of classification. 7.4 Investment Property allocated to the CGU, and then to reduce the
As per the Sri Lanka Accounting Investment properties are initially measured carrying amounts of the other assets in the
Standard – SLFRS 5 on “Non-current Assets at cost, including transaction costs. The CGU on a pro rata basis.
Notes to the Financial Statements

Held for Sale and Discontinued Operations”, Group subsequently measures investment An impairment loss in respect of
(SLFRS 5) these assets are measured at properties under fair value model. Any gain goodwill is not reversed. For other assets,
the lower of the carrying amount and fair or loss arising from a change in fair value an impairment loss is reversed only to the
value, less costs to sell. Thereafter, the and the rental income from the investment extent that the asset’s carrying amount does
Group assesses at each reporting date or property is recognised under Net other not exceed the carrying amount that would
more frequently if events or changes in operating income. have been determined, net of depreciation
circumstances indicate that the investment Details of “Investment Property” are or amortisation, if no impairment loss had
or a group of investment is impaired. The given in Note 40 on pages 225 and 226. been recognised.
Group recognises an impairment loss for
any initial or subsequent write down of 7.5 Intangible assets 7.7 Dividends payable
the assets to fair value less costs to sell and
Details of “Intangible assets” are given in Dividends on ordinary shares are recognised
also recognises a gain for any subsequent
Financial Statements

Note 41 on pages 226 to 228. as a liability and deducted from equity when
increase in fair value less costs to sell of an
asset, only to the extent of the cumulative Amortisation recognised during the they are recommended and declared by
impairment losses that have been year in respect of intangible assets is the Board of Directors and approved by the
recognised previously. Impairment loss is included under the item of “Amortisation of shareholders. Interim dividends are deducted
first allocated to goodwill, and then to the intangible assets” under “Depreciation and from Equity when they are declared and no
remaining assets and liabilities on a pro amortisation” in profit or loss. longer at the discretion of the Bank.
rata basis, except that no loss is allocated Refer Note 20 on pages 185 and 186. Dividends for the year, that are approved
Annual Report 2020

to financial assets, deferred tax assets or after the reporting date and not provided for,
employee benefit assets which continue to 7.6 Impairment of non-financial assets are disclosed as an event after the reporting
be measured in accordance with the Group’s period in accordance with the Sri Lanka
At each reporting date, the Group reviews
other accounting policies. As a result, once Accounting Standard – LKAS 10 on “Events
the carrying amounts of its non-financial
classified, the Group neither amortises after the reporting period” (LKAS 10) in Note
assets (other than investment properties and
nor depreciates the assets classified as 69 on page 290.
deferred tax assets) to determine whether
held-for-sale.
Commercial Bank of Ceylon PLC

there is any indication of impairment. If

In the Income Statement of the reporting any such indication exists, then the asset’s 7.8 Employee benefits
period and of the comparable period of recoverable amount is estimated. Goodwill is 7.8.1 Defined Benefit Plans (DBPs)
the previous year, income and expenses tested annually for impairment. A DBP is a post-employment benefit plan
from discontinued operations are reported For impairment testing, assets are other than a Defined Contribution Plan
separately from income and expenses from grouped together into the smallest group (DCP) as defined in the Sri Lanka Accounting
continuing operations, down to the level of assets that generates cash inflows from Standard – LKAS 19 on “Employee Benefits”
of profit after taxes, even when the Group continuing use that is largely independent (LKAS 19).
retains a NCI in a subsidiary after the sale. of the cash inflows of other assets or
The resulting profit or loss (after taxes) is CGUs. Goodwill arising from a business [Link] Defined benefit pension plans
reported separately in the Income Statement. combination is allocated to CGUs or groups [Link].1 Description of the plans and employee
of CGUs that are expected to benefit from groups covered
7.3 Property, plant and equipment the synergies of the combination. The Bank operates three types of Defined
Details of “Property, plant and equipment” The “recoverable amount” of an asset or Benefit Pension Plans for its employees as
are given in Note 39 on pages 214 to 225. CGU is the greater of its value in use and its described below:
fair value less costs to sell. “Value in use” is (a) The Bank has an approved Pension Fund,
7.3.1 Depreciation based on the estimated future cash flows, which was established in 1992. As per
Details of “Depreciation” are given in Note 20 discounted to their present value using a the Deed of Trust, only those employees
7
on pages 185 and 186. pre-tax discount rate that reflects current who were less than 45 years of age as
market assessments of the time value of at January 1, 1992 were covered by
money and the risks specific to the asset or the Pension Fund in order to leave a
CGU. minimum contribution for a period of
10 years before they are eligible to draw

172
 pension from the Pension Fund. Further, in a potential asset for the Group, the Bank. The scheme provides for lump sum
only the employees those who joined recognised asset is limited to the present payments instead of commuted/monthly
the Bank before January 1, 2000, became value of economic benefits available in pensions to the eligible employees at
eligible for this pension scheme. the form of any future refunds from the the point of their separation, in return for
During 2006, the Bank offered a plan or reductions in future contributions surrendering their pension rights. The lump
restructured pension scheme to convert to the plan. To calculate the present value sum offered consisted of a past service
the DBP to a DCP for the pensionable of economic benefits, consideration is package and a future service package. The
employees of the Bank and over 99% given to any applicable minimum funding shortfall on account of the past service
of them accepted it. As a result, the requirements. package in excess of the funds available in
above Pension Fund now covers only Remeasurement of the net defined the Pension Fund was borne by the Bank
those employees who did not opt for benefit liability, which comprises actuarial in 2006.
the restructured pension scheme and gains and losses, the return on plan assets The future service package includes
those employees who were covered by (excluding interest) and the effect of the monthly contributions to be made by the
the Pension Fund previously but retired asset ceiling (if any, excluding interest), Bank for the employees who accepted the
before the restructured pension scheme are recognised immediately in OCI. The offer, to be made during their remaining
came into effect; Group determines the net interest expense/ period of service, at predetermined

Notes to the Financial Statements

(income) on the net defined benefit liability/ contribution rates to be applied on their
(b) Provision for pensions has been made
(asset) for the period by applying the salaries, which are estimated to increase
for those employees who retired before
discount rate used to measure the defined for this purpose at 10% p.a. based on the
January 1, 2000, and on whose behalf
benefit obligation at the beginning of the salary levels that prevailed as at the date of
the Bank could not make contributions
annual period to the then net-defined implementation of this scheme. In addition,
to the Retirement Pension Fund for more
benefit liability/(asset), taking into account interest to be earned on the assets of the
than 10 years. This liability although not
any changes in the net-defined benefit DCP is also allocated to the employees who
funded has been provided for in full in
liability/(asset) during the period as a result opted for the restructured scheme.
the Financial Statements;
of contributions and benefit payments. Net The assets of this Fund are held
The subsidiaries of the Bank do not operate interest expense and other expenses related separately from those of the Bank and are
Pension Funds. to DBPs are recognised in profit or loss. independently administered by the Trustees
When the benefits of a plan are changed as per the provisions of the Trust Deed.

Financial Statements
The Bank’s net obligation in respect of
Defined Benefit Pension Plans is calculated or when a plan is curtailed, the resulting
separately for each plan by estimating the change in benefit that relates to past [Link] Employees’ Provident Fund
amount of future benefit that employees service or the gain or loss on curtailment is The Bank and employees contribute to an
have earned in the current and prior periods, recognised immediately in profit or loss. The approved Private Provident Fund at 12%
discounting that amount and deducting the Group recognises gains and losses on the and 8% respectively, on the salaries of each
fair value of any plan assets, as per LKAS 19 settlement of a DBP when the settlement employee. Other local entities of the Group
as detailed in Note 49 on pages 233 to 239. occurs. and their employees contribute at the same

Annual Report 2020

The past service cost is recognised as Amounts recognised in profit or loss as percentages as above to the Employees’
an expense on a straight-line basis over expenses on DBPs and provisions made on Provident Fund managed by the CBSL.
the period until the benefits become DBPs together with the details of valuation
vested. If the benefits are already vested methods are given in Notes 19 and 49 on [Link] Employees’ Trust Fund
following the introduction of, or changes pages 185 and 233 to 239, respectively. The Bank and other local entities of the
to, a pension plan, past service cost is Group contribute at the rate of 3% of the

Commercial Bank of Ceylon PLC

recognised immediately. 7.8.2 Defined Contribution Plans (DCPs) salaries of each employee to the Employees’
A DCP is a post-employment plan under Trust Fund managed by the CBSL.
[Link].2 Recognition of actuarial gains or losses which an entity pays fixed contributions
Actuarial gains or losses are recognised in into a separate entity and will have no [Link] Defined Contribution Pension Fund
the OCI in the period in which they arise. legal or constructive obligations to pay a (DCPF)
further amount. Obligations to DCPs are A DCPF was established on March 1, 2020,
[Link].3 Recognition of retirement recognised in the profit or loss as the related which is managed by a Board of Trustees
benefit obligation service is provided. Prepaid contributions consisting of representatives of Employee
The defined benefit asset or liability are recognised as an asset to the extent Organizations and the Management.
comprises the present value of the defined that a cash refund or a reduction in future Employees who joined since the year
benefit obligation, less past service cost not payments is available. The Group has three 2000, and who are not covered under the
yet recognised and less the fair value of plan such plans as explained in Notes [Link], Re-Structured Pension Scheme of the Bank
assets out of which the obligations are to [Link] and [Link]. and are in the service of the Bank as at
be settled directly. The value of any asset is Amounts recognised in profit or loss as March 1, 2020 are eligible for the new DCPF.
restricted to the sum of any past service cost expenses on DCPs are given in Note 19 on The initial lump sum, based on Gratuity
not yet recognised and the present value of page 185. entitlement as at February 29, 2020, is being
any economic benefits available in the form transferred to the accounts opened in the
of refunds from the plan or reductions in the [Link] Defined contribution pension plan names of individual eligible employees. The
future contributions to the plan. 7
As explained in Note [Link].1(a), during Bank contributes monthly, a percentage
The calculation of defined benefit 2006, the Bank restructured its pension equivalent of seven decimals five per centum
obligations is performed annually by a scheme which was a DBP to a DCP. This (7.5%) of the monthly salary of each eligible
qualified actuary using the Projected Unit restructured plan was offered on a voluntary employee starting from March 1, 2020 until
Credit Method. When the calculation results basis to the eligible employees of the cessation of employment to the DCPF.

173
 Employees cannot withdraw money from are accounted for as equity-settled share- The Group does not have any provision
the DCPF before cessation of employment. based payment transactions, regardless of for restructuring as at the reporting date.
In the event of early separation prior to how the equity instruments are obtained
retirement (excluding death), eligible by the Bank. Executive Employees of the 7.11 Onerous contracts
employees are entitled to withdraw the Bank receive remuneration in the form of A provision for onerous contracts is
accumulated amounts in their respective share-based payment transactions, whereby recognised when the expected benefits to
DCPF accounts. However, the eligible employees render services as consideration be derived by the Group from a contract
employees are not entitled to receive any for equity instruments (equity-settled are lower than the unavoidable cost of
DCPF payment where the completed service transactions). The Group does not operate meeting its obligations under the contract.
is less than 5 years (similar to the Gratuity any cash-settled share-based payment The provision is measured at the present
payments done in case of a separation as per transactions. value of the lower of the expected cost of
the Gratuity Act at the point of termination The Group applies the requirements of terminating the contract and the expected
and separation). In the event of death of an the Sri Lanka Accounting Standard – SLFRS net cost of continuing with the contract.
employee whilst in service, the accumulated 2 on “Share-based Payment” (SLFRS 2) in Before a provision is established, the Group
funds in the members account will be accounting for equity-settled share-based recognises any impairment loss on the assets
released in full to the nominated parties/ payment transactions, if any, that were associated with that contract.
legal heirs as the case may be, where the
Notes to the Financial Statements

granted after January 1, 2012 and had not The Group does not have any onerous
completed service is more than 5 years. vested at the same date. As per SLFRS 2, on contracts as at the reporting date.
the grant date, fair value of equity-settled
7.8.3 Other long-term employee benefits share-based payment awards (i.e., share 7.12 Bank levies
The Group’s net obligation in respect of long- options) granted to employees is recognised
term employee benefits other than pension A provision for bank levies is recognised
as personnel expense, with a corresponding
plans is the amount of future benefits that when the condition that triggers the
increase in equity, over the period in
employees have earned in return for their payment of the levy is met. If a levy
which the employees unconditionally
service in the current and prior periods. obligation is subject to a minimum activity
become entitled to the awards. The amount
That benefit is discounted to determine threshold so that the obligating event
recognised as an expense is adjusted to
its present value, and the fair value of any is reaching a minimum activity, then a
reflect the number of share awards for
related assets is deducted. The discount rate provision is recognised when that minimum
which the related service and non-market
Financial Statements

used as the yield as at the reporting date activity threshold is reached.

performance vesting conditions are
is the current market rate that has been expected to be met, so that the amount
extrapolated to reflect long-term rate of ultimately recognised as an expense is 7.13 Financial guarantees, letters of credit
discount based on market rates of interest based on the number of share awards that and undrawn loan commitments
on short-term Corporate/Government do meet the related service and non-market “Financial guarantees” are contracts that
Bonds and anticipated long-term rate of performance conditions at the vesting date. require the Group to make specified
inflation. The calculation is performed For share-based payment awards with non- payments to reimburse the holder for
Annual Report 2020

using the Projected Unit Credit Method. vesting conditions, the grant date fair value a loss that it incurs because a specified
Remeasurements are recognised in profit or of the share-based payment is measured to debtor fails to make payment when it is
loss in the period in which they arise. reflect such conditions and there is no true- due in accordance with the terms of a debt
The Group does not have any other long- up for differences between expected and instrument. Undrawn loan commitments and
term employee benefit plans. actual outcomes. letters of credits are commitments under
The Employee Share Option Plans – 2015 which, over the duration of the commitment,
7.8.4 Terminal benefits and 2019, which granted are subjected to the the Bank is required to provide a loan with
Commercial Bank of Ceylon PLC

above accounting treatment. pre-specified terms to the customer.

Termination benefits are expensed at
the earlier of when the Group can no The details of Employee Share Option Financial guarantees are initially
longer withdraw the offer of those Plans are given in Note 53 on page 241. recognised in the Financial Statements
benefits and when the Group recognises (within other liabilities) at fair value, being
The dilutive effect of outstanding options the premium received. Subsequent to initial
costs for a restructuring. If benefits are not is reflected as additional share dilution in the
expected to be wholly settled within 12 recognition, the Bank’s liability under each
computation of diluted Earnings per Share guarantee is measured at the higher of the
months of the reporting date, then they as disclosed in Note 24.1 and Note 24.2 on
are discounted. amount initially recognised less cumulative
page 189. amortisation recognised in the income
7.8.5 Short-term employee benefits statement and ECL provision if appropriate.
7.9 Other liabilities
Short-term employee benefits are expensed The premium received is recognised
Details of “Other liabilities” are given in in profit or loss in Note 14.1 on “Fee and
as the related service is provided. A liability Note 49 on pages 233 to 239.
is recognised for the amount expected to commission income” on a straight line basis
be paid if the Group has a present legal or over the life of the guarantee.
7.10 Restructuring
constructive obligation to pay this amount The nominal contractual value of
as a result of past service provided by Provision for restructuring is recognised financial guarantees, letters of credit and
the employee and the obligation can be when the Group has approved a detailed undrawn loan commitments, where the loan
7 estimated reliably. and formal restructuring plan, and the agreed to be provided is on market terms,
restructuring either has commenced or has are not recorded on in the SOFP. The nominal
7.8.6 Share-based payment arrangements been announced publicly. Future operating values of these instruments together with
losses arising on such restructuring are not the corresponding ECLs are disclosed in Note
Share-based payment arrangements
provided for. 58 on page 248.
in which the Bank receives services as
consideration for its own equity instruments

174
 Loan commitments at below market 8.3 Net gains/(losses) from trading At the commencement date, the Group
interest rates drawdown are initially Details of “Net gains/(losses) from trading” recognises right-of-use of an asset and
measured at fair value and subsequently are given in Note 15 on page 181. a lease liability which is measured at the
measured at the higher of the amount of present value of the lease payments that are
the ECL allowance and the amount initially 8.4 Net gains/ (losses) from derecognition payable on that date. Lease payments are
recognised less, when appropriate, the of financial assets discounted using the IBR.
cumulative amount of income recognised. After initial recognition, the Group
Details of “Net gains/ (losses) from
derecognition of financial assets” are given in applies cost model for the right-of-use of
7.14 Commitments an asset and depreciate the asset from
Note 16 on page 181.
All discernible risks are accounted for in commencement date to the end of the
determining the amount of known liabilities 8.5 Dividend income useful life of the underlying asset. Where
as explained in Note 7.9 above. the right does not transfer the ownership
Dividend income is recognised when the
Details of the Commitments are given in of the asset, the Group depreciates it from
right to receive income is established.
Note 58 on page 248. commencement date to the earlier of the
Usually, this is the ex-dividend date for
end of the useful life of the right-of-use asset
quoted equity securities.
7.15 Contingent liabilities and or end of the lease term. In addition, interest
Dividends are presented in net gains/

Notes to the Financial Statements

commitments expense on the lease liability is recognised in
(losses) from trading, net gains/(losses) from the profit or loss.
A detailed list of “Contingent liabilities and financial investments or other income (net)
commitments” and “Litigation against the Details of “Right-of-use asset” and
based on the underlying classification of the
Bank” are given in Notes 58 and 60 on pages “Lease liability” are given in Notes 39 and 49
equity investment.
248 and 250. respectively on pages 214 and 233.
Details of “Dividend income” are given in
Notes 15 and 17 on pages 181 and 182. 8.6.2 Group as a lessor
7.16 Stated capital and reserves
Details of the “Stated capital and reserves” Similar to above, at the commencement of
8.6 Leases the contract, the Group determines whether
are given in Notes 52, 54, 55 and 56 to the
The Group assesses at the inception of a the contract contains a lease component and
Financial Statements on pages 241 and 244
contract, whether a contract is, or contains, one or more additional lease components
to 248.

Financial Statements
a lease if the contract conveys the right to or non-lease components. When there
control the use of an identified asset for a is one or more additional lease or non-
7.17 Earnings per Share (EPS) period of time in exchange for consideration lease component, the Group allocates
Details of “Basic and Diluted EPS” are given in as per the guidelines of SLFRS 16. This consideration based on the guidelines given
Note 24 on page 189. assessment considers whether, throughout in SLFRS 15.
the period of use, the lessee has both the
7.18 Operating segments right to obtain all of the economic benefits [Link] Finance leases – Group as a lessor
Details of “Operating segments” are given in from the use of the identified asset and the As per SLFRS 16, a lease which transfers

Annual Report 2020

Note 62 on pages 253 to 255. right to direct how and for what purpose the substantially all the risks and rewards
identified asset is used. incidental to ownership of an underlying
7.19 Fiduciary assets After the assessment of whether a asset is classified as a finance lease. At the
The Bank provides trust and other fiduciary contract is, or contains, a lease, the Group commencement date, the Group recognises
services that result in the holding or determines whether it contains additional assets held under finance lease in the SOFP
investing of assets on behalf of its clients. lease or non-lease (service) components and present them as a lease receivable at an

Commercial Bank of Ceylon PLC

Assets held in a fiduciary capacity are not based on the detailed guidance provided amount equal to the net investment in the
reported in these Financial Statements as in SLFRS 16. Accordingly, the right to use lease. Net investment in the lease is arrived
they do not belong to the Bank. of an identifying asset is a separate lease by discounting lease payments receivable
component if the lessee can benefit from at the interest rate implicit in the lease, i.e.
8. Significant accounting policies – the use of underlying asset either on its own the rate which causes present value of lease
Recognition of income and expense or together with other resources readily payments to equal to the fair value of the
available to the lessee and the underlying underlying asset and initial direct costs. The
Details of “Income and expense” are given in
asset is neither highly dependent on, nor Group’s net investment in lease is included
Notes 12 to 21 on pages 178 to 187.
highly interrelated with, the other underlying in Note 33 on “Loans and advances to banks”
assets in the contract. or Note 34 “Loans and advances to other
8.1 Interest income and expense
customers”, as appropriate. The finance
Details of “Interest income and expense” are 8.6.1 Group as a lessee income receivable is recognised in “interest
given in Note 13 on pages 178 to 180. income” over the periods of the leases so as
As per SLFRS 16, when the Group has
determined that a contract contains a lease to achieve a constant rate of return on the
8.2 Fee and commission income component and one or more additional lease net investment in the leases.
and expense components or non-lease components, the
Details of “Fee and commission income and consideration in the contract is allocated [Link] Operating leases – Group as a lessor
expense” are given in Note 14 on pages 180 to each lease component on the basis As per SLFRS 16, a lease is classified as 7
and 181. of relative stand-alone price of the lease an operating lease if it does not transfer 8
component and the aggregate stand-alone substantially all the risks and rewards
price of the non-lease components. incidental to ownership of an underlying
asset. The Group recognises lease payments

175
 from operating leases as income on straight- January 01, 2020, were not considered Department of Inland Revenue to the
line basis. Initial direct costs incurred in in computing the income tax liability accounting profit before income tax and
negotiating operating leases are added to as at December 31, 2020, pending legal emoluments payable. Emoluments payable
the carrying amount of the leased asset and enactment and formal amendments to the include benefits in money and not in money
recognised over the lease term on the same Inland Revenue Act. including contribution or provision relating
basis as rental income. Contingent rents are to terminal benefits.
recognised as revenue in the period in which 9.2 Crop Insurance Levy (CIL)
The amount of VAT FS charged in
they are earned. As per the provisions of the Section 14 of determining the profit or loss for the period
Details of “Operating leases” are given in the Finance Act No. 12 of 2013, the CIL was is given in Note 22 on page 187.
Note 67 on page 261. introduced with effect from April 1, 2013 and
is payable to the National Insurance Trust 9.6 Nation Building Tax on Financial
8.7 Rental income and expenses Fund. Currently, the CIL is payable at 1% of Services (NBT FS)
the profit after tax.
Rental income and expense are recognised in With effect from January 1, 2014, NBT of
profit or loss on an accrual basis. 2% was introduced on supply of financial
9.3 Withholding Tax (WHT) on dividends
services via an amendment to the NBT Act
distributed by the Bank, subsidiaries and
9. Significant Accounting Policies –Tax No. 09 of 2009. Upto November 30, 2019,
associates
Notes to the Financial Statements

Expense NBT was chargeable on the same base used

9.3.1 WHT on dividends distributed by for calculation of VAT on financial services as
9.1 Income tax expense the Bank explained in Note 9.5 above. As per Notice
9.1.1 Current tax Withholding tax that arises from the published by the Department of Inland
Details of “Income tax expense” are given in distribution of dividends by the Bank Revenue dated November 29, 2019, NBT
Note 23 on pages 187 and 188. is recognised at the time the liability to was abolished with effect from
pay the related dividend is recognised December 01, 2019.
9.1.2 Deferred tax up to December 31, 2019. As per Notice
The amount of NBT FS charged in
Details of “Deferred tax assets and liabilities” dated February 18, 2020 published by the
determining the profit or loss in 2019 is given
are given in Note 42 on pages 228 to 230. Department of Inland Revenue, requirement
in Note 22 on page 187.
to deduct WHT on dividends has been
removed effective January 1, 2020.
Financial Statements

9.1.3 Tax exposures 9.7 Debt Repayment Levy on Financial

In determining the amount of current Services (DRL FS)
9.3.2 WHT on dividends distributed by the
and deferred tax, the Group considers As per the Finance Act No. 35 of 2018, with
subsidiaries and associate
the impact of tax exposures, including effect from October 1, 2018, DRL FS of
whether additional taxes and penalties are Dividends received by the Bank from
7% was introduced on the value addition
due. Finalisation of the tax liability with its subsidiaries and associate, have
attributable to the supply of financial
authorities may change the position already attracted a 14% deduction at source upto
services by each financial institution. DRL FS
recorded in the Financial Statements and December 31,2019. Effective from
was chargeable on the same base used for
Annual Report 2020

such changes to tax liabilities could impact January 1, 2020, requirement to deduct WHT
calculation of VAT FS on financial services as
the tax expense in the period in which such had been removed (as mentioned under
explained in Note 9.5 above. As per notice
a determination is made either as an over or Note 9.3.1 above).
published by the Department of Inland
under provision. Revenue dated January 20, 2020, DRL FS was
9.4 Economic Service Charge (ESC)
abolished with effect from January 01, 2020.
9.1.4 Changes proposed to Income Tax from As per the provisions of the Finance Act
The amount of DRL FS charged in
Commercial Bank of Ceylon PLC

Government Tax Proposals No. 11 of 2004, and amendments thereto,

determining the profit or loss in 2019 is given
As per notice dated April 08, 2020 issued the ESC was introduced with effect from
in Note 22 on page 187.
by the Inland Revenue Department on April 1, 2004. ESC was payable at 0.5% of
“Implementation of Proposed Changes to the the total turnover and is deductible from
the income tax payments. Unclaimed ESC, 10. Significant Accounting Policies –
Inland Revenue Act No. 24 of 2017”, effective
from January 01, 2020; if any, could be carried forward and set-off Statement of Cash Flows
against the income tax payable in the three 10.1 Statement of Cash Flows
z Corporate Income Tax rate was revised subsequent years including the current year The Statement of Cash Flows is prepared
from 28% to 24%. However, such revisions of assessment. using the “Indirect Method” of preparing
were not considered in computing the
As per Notice published dated January 1, cash flows in accordance with the Sri Lanka
income tax liabilities, pending legal
2020 by the Department of Inland Revenue, Accounting Standard – LKAS 7 on “Statement
enactment and formal amendments to the
ESC was abolished with effect from of Cash Flows” (LKAS 7). Gross cash and
Inland Revenue Act.
January 01, 2020. cash equivalents comprise of short-term,
z Exemption announced as per the highly liquid investments that are readily
aforementioned notice on interest income 9.5 Value Added Tax on Financial Services convertible to known amounts of cash and
from Sri Lanka Development Bonds, (VAT FS) are subject to an insignificant risk of changes
effective from April 01, 2018 was availed in value. Cash and cash equivalents as
8 by the Bank. However, other exemptions The value addition attributable to the
supply of financial services is calculated referred to in the Statement of Cash Flows
9 eligible to be claimed effective from are comprised of those items as explained in
10
by adjusting the economic depreciation
computed on rates prescribed by the Note 28 on page 196.
The Statement of Cash Flows is given on
page 154.

176
11. Amendments to Accounting
Standards issued but not yet effective
The amended standards and interpretations
that are issued, but not yet effective, up to
the date of issuance of the Bank’s Financial
Statements are disclosed below. The Group/
Bank intends to adopt these standards, if
applicable, when they become effective.
Amendments to SLFRS 9, LKAS 39, SLFRS
7, SLFRS 4 and SLFRS 16 – Interest Rate
Benchmark Reform (Phase 1 & 2) –
(“IBOR reform”)
The amendments to SLFRS 9 & LKAS 39
provide a number of reliefs, which apply to
all hedging relationships that are directly
affected by interest rate benchmark reform.

Notes to the Financial Statements

A hedging relationship is affected if the
reform gives rise to uncertainty about
the timing and/or amount of benchmark-
based cash flows of the hedged item or the
hedging instrument.
IBOR reforms Phase 2 include number
of reliefs and additional disclosures.
Amendments supports companies in
applying SLFRS when changes are made
to contractual cash flows or hedging
relationships because of the reform.

Financial Statements
These amendments to various standards
are effective for the annual reporting periods
beginning on or after January 01, 2021.
The Group/Bank is currently assessing
the potential impact on its Financial
Statements resulting from this amendment.
Amendments to SLFRS 16 - COVID-19

Annual Report 2020

Related Rent Concessions
The amendments provide relief to lessees
from applying SLFRS 16 guidance on lease
modification accounting for rent concessions
arising as a direct consequence of the
COVID-19 Pandemic.

Commercial Bank of Ceylon PLC

As a practical expedient, a lessee may
elect not to assess whether a COVID-19
related rent concession from a lessor is a
lease modification. A lessee that makes this
election accounts for any change in lease
payments resulting from COVID-19 related
rent concession the same way it would
account for the change under SLFRS16, if
the change were not a lease modification.
The amendment applies to annual
reporting periods beginning on or after
June 01, 2020.
This amendment is not expected to
have a material impact on the Financial
Statements of the Group/Bank in the
foreseeable future.

11

177
 12. Gross income
Accounting policy

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured.
GROUP BANK
For the year ended December 31, Page 2020 2019 2020 2019
Note No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Interest income 13.1 178 124,087,713 129,287,743 122,330,386 127,779,540

Fee and commission income 14.1 180 11,839,689 12,874,966 11,268,543 12,406,584
Net gains/(losses) from trading 15 181 1,878,060 1,360,833 1,878,086 1,360,858
Net gains/(losses) from derecognition of financial assets 16 181 6,390,197 1,135,711 6,390,197 1,135,711
Net other operating income 17 182 7,770,754 6,081,876 7,844,269 6,023,591
Total 151,966,413 150,741,129 149,711,481 148,706,284
Notes to the Financial Statements

13. Net interest income

Accounting policy
Interest income and expense are recognised Effective interest rate (EIR) The credit-adjusted EIR is the interest
in the Income Statement using the effective The EIR is the rate that exactly discounts rate that, at original recognition, discounts
interest rate (EIR) method. estimated future cash payments or receipts the estimated future cash flows (including
through the expected life of the financial credit losses) to the amortised cost.
Interest income and expense presented in
the Income Statement include: instrument to: The calculation of the EIR includes
z the gross carrying amount of the financial transaction costs and fees and points paid or
– Interest on financial assets measured at
Financial Statements

asset; or received that are an integral part of the EIR.

amortised cost (AC) calculated using EIR
z the amortised cost of the financial liability.
method; For financial assets that were credit-
– Interest on financial assets measured at When calculating the EIR for financial impaired on initial recognition, interest
fair value through other comprehensive instruments other than credit-impaired income is calculated by applying the credit-
income (FVOCI) calculated using EIR assets, the Bank estimates future cash flows adjusted EIR to the amortised cost of the
method; considering all contractual terms of the asset. The calculation of interest income does
financial instrument, but not expected credit not revert to a gross basis, even if the credit
– Interest on financial assets measured at
Annual Report 2020

losses (ECLs). For credit-impaired financial risk of the asset improves.

fair value through profit or loss (FVTPL)
calculated using EIR method; assets which are classified under Stage 3,
a credit-adjusted EIR is calculated using
– Interest on financial liabilities measured at estimated future cash flows including ECLs.
amortised cost calculated using EIR method.

GROUP BANK
Commercial Bank of Ceylon PLC

For the year ended December 31, 2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Interest income 13.1 178 124,087,713 129,287,743 122,330,386 127,779,540

Less: Interest expense 13.2 179 73,218,911 80,931,352 72,759,045 80,571,268
Net interest income 50,868,802 48,356,391 49,571,341 47,208,272

13.1 Interest income

GROUP BANK
For the year ended December 31, 2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Cash and cash equivalents 1,053,757 1,290,697 1,049,426 1,281,772

Balances with central banks 1,175,509 62,572 1,149,924 34,632
Placements with banks 777,425 931,571 754,313 918,690
12
13 Securities purchased under resale agreements 836,773 1,906,902 836,773 1,906,667
Financial assets recognised through profit or loss 1,831,327 474,478 1,831,327 474,478
Derivative financial instruments 34,902 67,453 34,902 67,453
Other financial instruments 1,796,425 407,025 1,796,425 407,025
Financial assets at amortised cost – Loans and advances to other
customers (*) 84,257,196 100,444,369 82,933,026 99,263,719

178
 GROUP BANK
For the year ended December 31, 2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Financial assets at amortised cost – Debt and other financial

instruments 13,194,851 7,819,563 12,891,769 7,572,183
Financial assets measured at fair value through other
comprehensive income 18,053,545 15,091,368 18,031,388 15,067,335
Interest accrued on impaired loans and advances to 34.2 (a)
other customers &
34.2 (b) 204 2,895,955 1,258,339 2,850,806 1,258,339
Other interest income 11,375 7,884 1,634 1,725
Total 124,087,713 129,287,743 122,330,386 127,779,540

(*) Interest concessions and refunds along with the modification losses relating to COVID-19 relief measures amounting to Rs. 2,640.810 Mn.

Notes to the Financial Statements

(approx) have been netted off in the interest income.

13.2 Interest expense

GROUP BANK
For the year ended December 31, 2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Due to banks 2,845,641 2,484,166 2,657,662 2,201,489

Derivative financial liabilities 65,473 63,161 65,473 63,161
Securities sold under repurchase agreements 3,516,363 3,256,622 3,524,261 3,267,124

Financial Statements
Financial liabilities at amortised cost – due to depositors 61,416,382 69,503,417 61,120,047 69,387,322
Refinance borrowings 578,780 472,813 578,780 472,813
Foreign currency borrowings 603,597 872,931 603,597 872,931
Subordinated liabilities 3,756,921 3,848,979 3,756,921 3,848,979
Interest expense on lease liabilities 49.1 233 435,754 429,263 452,304 457,449
Total

Annual Report 2020

73,218,911 80,931,352 72,759,045 80,571,268

13.3 Net interest income from Government Securities

Interest income and interest expenses on Government Securities given in the Notes 13.3 (a), 13.3 (b) and 13.3 (c) below have been extracted
from interest income and interest expenses given in Notes 13.1 and 13.2 respectively and disclosed separately, as required by the Guidelines
issued by the Central Bank of Sri Lanka.

Commercial Bank of Ceylon PLC

13.3 (a) Net interest income from Sri Lanka Government Securities
GROUP BANK
For the year ended December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Interest income 31,523,186 23,158,214 31,501,029 23,133,946

Securities purchased under resale agreements 618,309 1,629,021 618,309 1,628,786
Financial assets recognised through profit or loss 662,961 277,760 662,961 277,760
Financial assets at amortised cost – Debt and other financial instruments 12,188,371 6,160,065 12,188,371 6,160,065
Financial assets measured at fair value through other comprehensive income 18,053,545 15,091,368 18,031,388 15,067,335

Less: Interest expense 3,499,898 3,252,089 3,507,796 3,262,591

Securities sold under repurchase agreements 3,499,898 3,252,089 3,507,796 3,262,591
Net interest income 28,023,288 19,906,125 27,993,233 19,871,355 13

179
 13.3 (b) Net interest income from Bangladesh Government Securities
GROUP BANK
For the year ended December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Interest income 1,823,578 1,318,173 1,823,578 1,318,173

Securities purchased under resale agreements 218,464 277,881 218,464 277,881
Financial assets recognised through profit or loss 1,133,464 129,265 1,133,464 129,265
Financial assets at amortised cost – Debt and other financial instruments 471,650 911,027 471,650 911,027
Less: Interest expense 16,465 4,533 16,465 4,533
Securities sold under repurchase agreements 16,465 4,533 16,465 4,533
Net interest income 1,807,113 1,313,640 1,807,113 1,313,640

13.3 (c) Net interest income from Maldives Government Securities

Notes to the Financial Statements

GROUP BANK
For the year ended December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Interest income 303,081 247,379 – –

Financial assets at amortised cost – Debt and other financial instruments 303,081 247,379 – –
Net interest income 303,081 247,379 – –

14. Net fee and commission income

Financial Statements

Accounting policy
Fee and commission income and expenses over the commitment period. z The entity can identify each party’s rights
that are integral to the EIR of a financial regarding the goods or services to be
Other fee and commission expenses transferred;
asset or financial liability are capitalised and
relate mainly to transaction and service
included in the measurement of the EIR and z The entity can identify the payment terms
fees, which are expensed as the services are
recognised in the Income Statement over the for the goods or services to be transferred;
received.
expected life of the instrument.
z The contract has the commercial substance;
As per SLFRS 15, the Bank adopts
Annual Report 2020

Other fee and commission income, z It is probable that the entity will collect the
principles based five step model for
including account servicing fees, investment consideration to which it will be entitled in
revenue recognition. Accordingly, revenue
management fees, sales commission, and exchange for the goods or services that will
is recognised only when all of the following
placement fees are recognised as the related be transferred to the customer.
services are performed. If a loan commitment criteria are met:
is not expected to result in the drawdown z The parties to the contract have approved The applicability of SLFRS 15 to the Bank
of a loan, then the related loan commitment the contract/s; is limited for fee and commission income.
Commercial Bank of Ceylon PLC

fees are recognised on a straight-line basis

GROUP BANK
For the year ended December 31, 2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Fee and commission income 14.1 180 11,839,689 12,874,966 11,268,543 12,406,584
Less: Fee and commission expense 14.2 181 2,018,014 2,123,128 2,012,138 2,117,072
Net fee and commission income 9,821,675 10,751,838 9,256,405 10,289,512

14.1 Fee and commission income

GROUP BANK
For the year ended December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Loans and advances related services 861,317 881,213 787,785 813,785

13 Credit and debit cards related services 3,723,129 4,566,923 3,723,129 4,566,923
14 Trade and remittances related services 4,431,425 3,998,926 4,250,211 3,783,596
Deposits related services 1,151,909 1,852,565 1,122,747 1,788,810
Guarantees related services 908,508 942,615 900,485 936,720
Other financial services 763,401 632,724 484,186 516,750
Total 11,839,689 12,874,966 11,268,543 12,406,584

180
14.2 Fee and commission expense
GROUP BANK
For the year ended December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Loans and advances related services 48,591 54,028 47,443 51,637

Credit and debit cards related services 1,811,962 1,877,797 1,811,962 1,877,797
Trade and remittances related services 55,456 62,299 50,728 58,634
Other financial services 102,005 129,004 102,005 129,004
Total 2,018,014 2,123,128 2,012,138 2,117,072

15. Net gains/(losses) from trading

Accounting policy

Notes to the Financial Statements

“Net gains/(losses) from trading” comprises gains less losses related to trading assets and trading liabilities, and also include all realised and
unrealised fair value changes, related capital gains and losses, dividend income from trading assets, and foreign exchange gains/(losses).
GROUP BANK
For the year ended December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Derivative financial instruments 977,206 1,078,749 977,206 1,078,749

Foreign exchange gains/(losses) from banks and other customers 977,206 1,078,749 977,206 1,078,749

Financial assets recognised through profit or loss – measured at fair value

Financial Statements
Government Securities 557,579 67,548 557,579 67,548
Net mark-to-market gains/(losses) 226,036 26,386 226,036 26,386
Net capital gains 331,543 41,162 331,543 41,162

Equities 343,275 214,536 343,301 214,561

Net mark-to-market gains/(losses) 303,612 200,299 303,612 200,327

Annual Report 2020

Net capital gains 20,468 916 20,506 919
Dividend income 19,195 13,321 19,183 13,315
Total 1,878,060 1,360,833 1,878,086 1,360,858

16. Net gains/(losses) from derecognition of financial assets

Commercial Bank of Ceylon PLC

Accounting policy

Net gains/(losses) from derecognition of financial assets comprises all realised gains less losses related to debt instruments measured at FVOCI
and financial assets measured at amortised cost.
GROUP BANK
For the year ended December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Financial assets measured at fair value through other comprehensive income

Government Securities 6,390,197 1,135,711 6,390,197 1,135,711
Net capital gains 6,390,197 1,135,711 6,390,197 1,135,711
Total 6,390,197 1,135,711 6,390,197 1,135,711

14
15
16

181
 17. Net other operating income
Accounting policy

Net other operating income includes foreign exchange gains and losses, dividend income from equity instruments designated at fair value
through other comprehensive income, dividend income from group entities, gains/losses on disposal of property, plant and equipment, and
rental income.
GROUP BANK
For the year ended December 31, 2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Gains/(losses) on sale of property, plant and equipment 17.1 182 5,820 19,731 926 7,958
Gains on revaluation of foreign exchange 7,395,513 5,783,595 7,361,099 5,647,577
Recoveries o/a loans written off 157,103 20,360 157,103 20,360
Dividend income from subsidiaries – – 98,200 85,397
Notes to the Financial Statements

Dividend income from other equity securities 28,739 40,076 28,419 39,796
Profit due to change in ownership – 14,498 – 14,498
Rental and other income 17.2 182 183,579 218,114 198,522 208,005
Less: Profit due to change in ownership – (14,498) – –
Total 7,770,754 6,081,876 7,844,269 6,023,591

17.1 Gains/(losses) on sale of property, plant and equipment 17.2 Rental income
Accounting policy Accounting policy
The gains or losses on disposal of property, proceeds of disposal, net of incremental
Financial Statements

Rental income is recognised in the Income

plant and equipment are determined as the disposal costs. This is recognised as an item in Statement on an accrual basis.
difference between the carrying amount of “other operating income” in the year in which
the assets at the time of disposal and the the Group transfers control of the asset to
the buyer.

18. Impairment charges and other losses

Accounting policy
Annual Report 2020

Impairment charges as per SLFRS 9 Impairment charges on loans and estimates are estimates at a certain date
The Group recognises loss allowances for advances to customers and days past due (DPD) is the primary
expected credit loss (ECL) on the following For loans and advances above a predefined input into the determination of the term
financial instruments that are not measured threshold, the Group individually assesses for structure of PD for exposures. DPD are
at FVTPL: significant increase in credit risk (SICR). If a determined by counting the number
z Cash and cash equivalents; particular loan is credit-impaired, the amount of days since the due date. The Group
employs statistical models to analyse the
Commercial Bank of Ceylon PLC

of the loss is measured as the difference

z Placements with banks; data collected and generates estimates
between the asset’s carrying amount and the
z Loans and advances to banks; present value of estimated future cash flows. of the remaining lifetime PD of exposures
z Loans and advances to other customers; If the Group determines that no provision and how these are expected to change as a
is required under individual impairment, result of the passage of time.
z Financial assets at amortised cost –
Debt and other financial instruments; such financial assets are then collectively z LGD – The loss given default is an estimate
assessed for any impairments along with the of the loss arising in the case where a
z Debt instruments at fair value through
remaining portfolio. default occurs at a given time. It is based
other comprehensive income;
The Group computes ECL using three on the difference between the contractual
z Loan commitments and financial cash flows due and those that the lender
guarantee contracts. main components; a probability of default
(PD), a loss given default (LGD) and the would expect to receive, including
No impairment loss is recognised on exposure at default (EAD) under the from the realisation of any collateral.
equity investments. collective assessment. These parameters are The Group estimates LGD parameters
generally derived from internally developed based on historical recovery rates of claims
The assessment of credit risk and against defaulted counterparties. They are
statistical models and historical data and
the estimation of ECL are required to be calculated on a discounted cash flow basis
then adjusted to reflect forward-looking
unbiased and probability-weighted, and using EIR as the discounting factor. LGD is
information.
should incorporate all available information usually expressed as a percentage of the
17
relevant to the assessment, including z PD – The probability of default represents EAD.
18
information about past events, current the likelihood of a borrower defaulting z EAD – The exposure at default represents
conditions and reasonable and supportable on its financial obligations (as per Note the expected exposure in the event of a
forecasts of economic conditions at the [Link]) either over the next 12 months default. The Group estimates EAD, taking
reporting date. In addition, the estimation of (12m PD) or over the remaining lifetime into account the repayment of principal
ECL should take into account the time value (Lifetime PD) of the obligation. PD and interest from the reporting date to the
of money.

182
 default event together with any expected letters of credit, the allowances for ECLs are ECLs are measured as follows:
drawdowns of committed facilities. recognised within “other liabilities”. z Financial assets that are not credit-
To calculate EAD for a Stage 1 loan, the impaired at the reporting date: as the
Group assesses the possible default events Financial guarantee contracts
present value of all cash shortfalls
within 12 months. For all other loans, the The Bank’s liability under each guarantee (i.e. the difference between the cash flows
EAD is considered for default events over is measured at the higher of the amount due to the entity in accordance with the
the lifetime of the financial instrument. initially recognised less cumulative contract and the cash flows that the Group
amortisation recognised in the Income expects to receive);
Impairment charges on Statement, and the ECL provision. For this
financial investments z Financial assets that are credit-impaired
purpose, the Bank estimates ECLs based on
Impairment charges on financial investments the present value of the expected payments at the reporting date: as the difference
include ECL on debt instruments at FVOCI to reimburse the holder for a credit loss that between the gross carrying amount and
and financial assets at amortised cost. it incurs. The shortfalls are discounted by the present value of expected cash flows;
the risk-adjusted interest rate relevant to the z Undrawn loan commitments: as the
The Group does not have historical loss present value of the difference between
exposure. The allowances for ECLs related to
experience on debt instruments at amortised the contractual cash flows that are due
financial guarantee contracts are recognised
cost and debt instruments at FVOCI. Thus to the Group if the commitment is drawn

Notes to the Financial Statements

within “other liabilities”.
the Group considers PDs published by the down and the cash flows that the Group
external sources (i.e. Bloomberg) Forward-looking information expects to receive;
LGD for debt securities issued by The Group incorporates forward-looking z Financial guarantee contracts: the
the government of Sri Lanka in rupees is information into both its assessment as to expected payments to reimburse the
considered as 0%, LGD for foreign currency whether the credit risk of an instrument holder less any amounts that the Group
denominated securities issued by the has increased significantly since its initial expects to recover.
government (Sri Lanka Development recognition and its measurement of ECL.
Bonds (SLDBs) and Sri Lanka Sovereign The Group also obtained experienced credit Financial assets that are not credit-
Bonds(SLSBs)) is considered as 20% and for judgement from economic experts and impaired at the reporting date
all other instruments LGD is considered as Credit and Risk Management Departments As described above, the Group calculates
45% in accordance with the guideline issued to formulate a base case, a best case and a 12m ECL allowance based on the expectation

Financial Statements
by the Central Bank of Sri Lanka. worst case scenario. The base case represents of a default occurring in the 12 months
a most-likely outcome and is aligned with following the reporting date. These expected
EAD of a debt instrument is its gross information used by the Group for strategic 12-month default probabilities are applied to
carrying amount. planning and budgeting. The Group has EAD and multiplied by the economic factor
identified and documented key drivers of adjustment, expected LGD and discounted
Credit cards and revolving facilities
credit risk both quantitative and qualitative by an approximation to the original EIR.
The Group’s product offering includes a for various portfolio segments. Quantitative When the loan has shown a SICR since
variety of corporate and retail overdraft and economic factors are based on economic origination, the Group records an allowance

Annual Report 2020

credit cards facilities. The Group reviews data and forecasts published by the CBSL for LTECLs based on PDs estimated over the
the sanction limits at least annually and and other reliable sources. lifetime of the instrument.
therefore has the right to cancel and/or
reduce the limits. Therefore, the Group Quantitative drivers of Qualitative drivers of Financial assets that are credit-impaired at
calculates only the 12-month ECL (12m ECL) credit risk credit risk
the reporting date
allowance on these facilities. The EAD is
GDP growth Status of industry Impairment allowance on credit-impaired
arrived by taking the maximum of either

Commercial Bank of Ceylon PLC

business financial assets assessed on individual basis
sanction limit adjusted for Credit Conversion
is computed as the difference between
Factor (CCF) and the gross carrying amount Unemployment rate Regulatory impact
the asset’s gross carrying amount and the
of the loan (utilised amount). EAD of Stage 3 Interest rate (AWPLR) Government policies present value of estimated future cash
contracts are limited to the gross carrying
Rate of inflation flows. The expected future cash flows are
amount which is the utilised amount since it
based on the estimates made by credit risk
is assumed that the Group freeze the limits Exchange rate
officers' as at the reporting date, reflecting
of those contracts up to the utilised amount.
reasonable and supportable assumptions
The expected 12-month default probabilities The calculation of ECLs
and projections of future recoveries and
are applied to EAD and multiplied by The Group measures loss allowance at an expected future receipts of interest. The
the expected LGD and discounted by an amount equal to LTECL, except for following, Group regularly reviews the assumptions for
approximation to the original EIR. which are measured as 12m ECL. projecting future cash flows.
z Loans and advances on which credit risk
Undrawn loan commitments Further, the loans and advances identified
has not increased significantly since the
When estimating Life Time ECL (LTECL) for as credit impaired in Note [Link] will be
initial recognition.
undrawn loan commitments, the Group assessed for impairment with 100% PD.
estimates the expected portion of the loan z Debt instruments that are determined to
commitment that will be drawn down over have low credit risk at the reporting date. Collateral valuation
its expected life. The ECL is then based on The Group considers a debt instrument to The Bank seeks to use collateral, where 18
the present value of the expected shortfalls have a low credit risk when they have an possible, to mitigate its risks on financial
in cash flows if the loan is drawn down. The “investment grade” credit risk rating. assets. The collateral comes in various forms
expected cash shortfalls are discounted such as cash, gold, Government Securities,
at an approximation to the expected EIR Letters of Credit/Guarantees, real estate,
on the loan. For loan commitments and receivables, inventories, other non-financial
assets and credit enhancements such as
netting agreements, etc.

183
 Collateral repossessed be subject to enforcement activities in order Scenario probability weighting (Bank)
The Bank’s policy is to carry collaterals to comply with the Bank’s procedures for As at December 31, 2020 Best Base Worst
repossessed at fair value at the repossession recovery of amounts due. case case case
date and such assets will be disposed at the % % %
As at the reporting date, the Bank has
earliest possible opportunity. These assets captured the impact on ECL due to Scenario probability
are recorded under assets held for sale as per COVID-19 via the modelled outcome as well weighting 15.00 40.00 45.00
the Sri Lanka Accounting Standard – SLFRS 5 as management overlays. Management
on “Non-Current Assets Held for Sale and overlays include additional ECL provisions Further, the Group is of the view that there
Discontinued Operations”. of Rs. 2,899.290 Mn. (approx) on assessing was no significant impact of COVID-19 on
lifetime ECL on the exposures outstanding the value of assets pledged as collateral and
Write-off of financial assets therefore no additional adjustment made to
from the borrowers operating in the risk
Loans and debt securities are written ECL in this regard.
elevated industries, impact on stressing the
off (either partially or in full) when there
PDs and LGDs in the ECL model amounting Refer Note 2.12.5 on page 158 for detailed
is no realistic prospect of recovery. This
to Rs. 1,182.754 Mn. (approx) and impact explanation on significant assumptions
is generally the case when the Bank
on changing the probability weightages and estimates used with the objective of
determines that the borrower does not
assigned for multiple economic scenarios capturing the impact of COVID-19 to ECL
Notes to the Financial Statements

have assets or sources of income that could

and stressing the qualitative factors provisions .
generate sufficient cash flows to repay the
used to assess forward looking macro
amounts subject to the write-off. However,
economic indicators on ECL amounting to
financial assets that are written off could still
Rs. 1,106.486 Mn. (approx).

GROUP BANK
For the year ended December 31, 2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Loans and advances to other customers 34.2 (a) &

Financial Statements

34.2 (b) 204 18,124,673 10,309,857 17,865,214 10,043,643

Individual impairment 3,983,706 1,938,437 3,967,287 1,931,678
Collective impairment 14,140,967 8,371,420 13,897,927 8,111,965
Other financial assets and off-balance sheet credit exposures 3,291,313 1,020,414 3,287,083 1,016,571
Total impairment charges 18.1 & 184 &
18.2 185 21,415,986 11,330,271 21,152,297 11,060,214
Annual Report 2020

Investments in subsidiaries 37.1 211 – – 327,855 –

Direct write-offs 3,546 1,252 3,546 1,252
Total 21,419,532 11,331,523 21,483,698 11,061,466

18.1 Impairment charge to the Income Statement – Group

Commercial Bank of Ceylon PLC

For the year ended December 31, 2020 2019

Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Cash and cash equivalents 28.1 196 (2,526) – – (2,526) 1,350 – – 1,350
Placements with banks 30.1 197 (5,633) – – (5,633) (2,120) – – (2,120)
Financial assets at amortised cost –
Loans and advances to banks 33.1 202 (26) – – (26) 75 – – 75
Financial assets at amortised cost –
Loans and advances to other
customers 34.2 (a) 204 3,863,356 3,901,554 10,359,763 18,124,673 (108,915) 2,511,088 7,907,684 10,309,857
Individual impairment – – 3,983,706 3,983,706 – – 1,938,437 1,938,437
Collective impairment 3,863,356 3,901,554 6,376,057 14,140,967 (108,915) 2,511,088 5,969,247 8,371,420
Financial assets at amortised cost –
Debt and other financial instruments 35.1 (a) 206 1,685,968 – – 1,685,968 8,569 – 152,870 161,439
Financial assets measured at fair
18 value through other comprehensive
income 36.2 208 814,141 – – 814,141 265,999 – – 265,999
Contingent liabilities and
commitments 58.3 (a) 250 767,211 57,245 (25,067) 799,389 239,399 98,060 256,212 593,671
Total 7,122,491 3,958,799 10,334,696 21,415,986 404,357 2,609,148 8,316,766 11,330,271

184
18.2 Impairment charge to the Income Statement – Bank
For the year ended December 31, 2020 2019
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Cash and cash equivalents 28.1 196 (2,526) – – (2,526) 1,350 – – 1,350
Placements with banks 30.1 197 (5,651) – – (5,651) (2,144) – – (2,144)
Financial assets at amortised cost –
Loans and advances to banks 33.1 202 (26) – – (26) 75 – – 75

Financial assets at amortised cost –

Loans and advances to
other customers 34.2 (b) 204 3,856,007 3,925,463 10,083,744 17,865,214 (41,669) 2,447,313 7,637,999 10,043,643
Individual impairment – – 3,967,287 3,967,287 – – 1,931,678 1,931,678
Collective impairment 3,856,007 3,925,463 6,116,457 13,897,927 (41,669) 2,447,313 5,706,321 8,111,965

Notes to the Financial Statements

Financial assets at amortised cost –
Debt and other financial instruments 35.1 (b) 206 1,681,829 – – 1,681,829 7,940 – 152,870 160,810
Financial assets measured at fair value
through other comprehensive income 36.2 208 814,141 – – 814,141 265,999 – – 265,999
Contingent liabilities and
commitments 58.3 (b) 250 767,138 57,245 (25,067) 799,316 236,209 98,060 256,212 590,481
Total 7,110,912 3,982,708 10,058,677 21,152,297 467,760 2,545,373 8,047,081 11,060,214

19. Personnel expenses

Financial Statements
Accounting policy

See Note 7.8 on pages 172 to 174.

GROUP BANK
For the year ended December 31, 2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Salary and bonus 11,522,602 11,174,423

Annual Report 2020

19.1 185 11,141,489 10,865,886
Pension costs 19.1 185 1,937,810 1,882,058 1,884,067 1,843,048
Contributions to defined contribution/benefit plans –
Funded schemes 1,702,824 1,396,492 1,673,272 1,373,102
Contributions to defined benefit plans – Unfunded schemes 49.2 (c) &
49.3 (c) 234 & 235 234,986 485,566 210,795 469,946

Commercial Bank of Ceylon PLC

Equity-settled share-based payment expense 19.2 &
56.5 185 & 247 112,203 – 112,203 –
Other expenses 19.3 185 1,420,133 1,385,367 1,393,306 1,373,725
Total 14,992,748 14,408,914 14,563,999 14,082,659

19.1 Salary, bonus, and pension costs 19.2 Share-based payment 19.3 Other expenses
Salary, bonus, and contributions to defined The Bank has an equity-settled share-based This includes expenses such as overtime
contribution/benefit plans, reported above compensation plan, the details of which are payments, leave encashment benefits,
also include amounts paid to and contributions given in Note 53 on page 241. medical and hospitalisation charges,
made on behalf of Executive Directors. expenses incurred on staff training/
recruitment and staff welfare activities, etc.

20. Depreciation and amortisation

Accounting policy
Depreciation 18
in the Income Statement. Freehold land is ownership by the end of the lease term, the 19
Depreciation is calculated to write-off
the cost of items of property, plant and not depreciated. Right-of-use assets are assets are depreciated over the shorter of the 20
equipment less their estimated residual depreciated over the useful lives of the estimated useful lives and the lease terms.
values using the straight-line method over assets. However, if there is no reasonable
their estimated useful lives and is recognised certainty that the Group will obtain the

185
 The estimated useful lives of the property, plant and equipment of the Bank as at Amortisation of intangible assets
December 31, 2020 are as follows: Intangible assets are amortised using the
straight-line method to write down the cost
Class of asset Depreciation Period
percentage per annum (years)
over its estimated useful economic lives from
the date on which it is available for use, at
Freehold and leasehold buildings 2.5 40 the rates specified below:
Motor vehicles 20 5
Class of asset Amortisation Period
Computer equipment 20 5 percentage (years)
Office equipment, furniture, and fixtures per annum

Office equipment 20 5 Computer software 20 5

Office interior work 20 5
Trademarks 20 5
Furniture and fittings 10 10
The above rates are compatible with the
rates used by all Group entities, and these
The above rates are compatible with the is classified as held for sale or the date that rates have not been changed during the year.
Notes to the Financial Statements

rates used by all Group entities, and these the asset is derecognised.
The unamortised balances of intangible
rates have not been changed during the year.
All classes of property, plant and assets with finite lives are reviewed for
The depreciation rates are determined equipment together with the reconciliation impairment whenever there is an indication
separately for each significant part of an of carrying amounts and accumulated for impairment and recognised in the
item of property, plant and equipment and depreciation at the beginning and at the Income Statement to the extent that they are
depreciation commences when it is available end of the year together with other relevant no longer probable of being recovered from
for use, i.e., when it is in the location and information are given in Note 39 on pages the expected future benefits.
condition necessary for it to be capable 214 to 225.
Amortisation method, useful lives, and
of operating in the manner intended by residual values are reviewed at each reporting
Depreciation methods, useful lives,
the Management. Depreciation of an asset date and adjusted, if required.
and residual values are reassessed at each
ceases at the earlier of the date that the asset
reporting date and adjusted, if required.
Financial Statements

GROUP BANK
For the year ended December 31, 2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Depreciation of property, plant and equipment 39.1 & 39.3 215 & 216 1,592,636 1,541,788 1,459,513 1,415,096
Depreciation of right-of-use assets 39.1 & 39.3 215 & 216 1,199,104 1,047,075 1,271,927 1,126,185
Annual Report 2020

Amortisation of computer software 41.1 227 310,946 252,392 257,591 213,240

Amortisation of trademarks 9 9 – –
Total 3,102,695 2,841,264 2,989,031 2,754,521

21. Other operating expenses

Commercial Bank of Ceylon PLC

Accounting policy

These expenses are recognised in the Income Statement on the basis of a direct association between the cost incurred and the earning of
specific items of income. All expenses incurred in running the business and in maintaining the property, plant and equipment in a state of
efficiency are charged to the Income Statement.
GROUP BANK
For the year ended December 31, 2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Directors’ emoluments 21.1 187 81,117 80,247 53,249 52,448

Auditors’ remuneration 34,298 32,574 23,530 22,530
Audit fees and expenses 20,140 21,188 11,500 11,500
Audit-related fees and expenses 7,725 7,655 7,600 7,600
Non-audit fees and expenses 6,433 3,731 4,430 3,430
Professional and legal expenses 834,415 1,073,590 1,197,049 1,403,364
Deposit insurance premium paid to the Central Banks 977,846 839,685 975,824 839,313
20 Donations including contribution made to the CSR Trust Fund 96,925 94,010 96,855 93,991
21 Establishment expenses 1,644,397 1,878,292 1,482,800 1,748,143
Maintenance of property, plant, and equipment 1,797,222 1,649,310 1,814,939 1,638,747
Loss on fair valuation of investment properties 40 225 12,096 – – –
Loss on revaluation of land & buildings 39.1 215 39,872 – 39,872 –
Office administration expenses 2,648,982 3,227,608 2,202,818 2,789,920
Total 8,167,170 8,875,316 7,886,936 8,588,456

186
21.1 Directors’ emoluments
Directors’ emoluments represent the salaries paid to both Executive and Non-Executive Directors of the Group and the Bank.

22. Taxes on financial services

Accounting policy

Refer Notes 9.5 to 9.7 on page 176.

GROUP BANK
For the year ended December 31, Note Page 2020 2019 2020 2019
No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Value Added Tax 9.5 176 4,531,381 4,233,302 4,505,322 4,191,758

Nation Building Tax (Abolished w.e.f. December 1, 2019) 9.6 176 – 553,802 – 548,708
Debt Repayment Levy (Abolished w.e.f. January 1, 2020) 9.7 176 – 2,468,624 – 2,451,271

Notes to the Financial Statements

Total 4,531,381 7,255,728 4,505,322 7,191,737

23. Income tax expense

Accounting policy

Income tax expense comprises current Provision for taxation on the overseas that it is probable that they will not reverse
and deferred tax. Income tax expense is operations is made on the basis of the in the foreseeable future; and
recognised in the Income Statement, except accounting profit for the year, as adjusted for z taxable temporary differences arising on
to the extent it relates to items recognised taxation purposes, in accordance with the the initial recognition of goodwill.
directly in Equity or in OCI. provisions of the relevant statutes in those
Deferred tax assets are recognised for
countries, using the tax rates enacted or

Financial Statements
Current tax unused tax losses, unused tax credits and
substantively enacted as at the reporting date.
“Current tax” comprises the expected tax deductible temporary differences to the
payable or receivable on the taxable income Additional taxes that arise from the extent that it is probable that future taxable
or loss for the year and any adjustment to distribution of dividends by the Group, are profits will be available, against which they
the tax payable or receivable in respect of recognised at the same time as the liability to can be used. Deferred tax assets are reviewed
previous years. The amount of current tax pay the related dividend is recognised. These at each reporting date and are reduced to
receivable or payable is the best estimate amounts are generally recognised in profit the extent that it is no longer probable that
of the tax amount expected to be paid or or loss as they generally relate to income the related tax benefit will be realised.

Annual Report 2020

received that reflects uncertainty related to arising from transactions that were originally
income taxes, if any. It is measured using tax Unrecognised deferred tax assets are
recognised in profit or loss.
rates enacted or substantively enacted, as at reassessed at each reporting date and
the reporting date. Current tax also includes Deferred tax recognised to the extent that it has become
any tax arising from dividends. Deferred tax is recognised in respect of probable that future taxable profits will be
temporary differences between the carrying available, against which they can be used.
Accordingly, provision for taxation
amounts of assets and liabilities for financial Deferred tax is measured at the tax rates
is made on the basis of the accounting

Commercial Bank of Ceylon PLC

reporting purposes and the amounts used that are expected to be applied to temporary
profit for the year, as adjusted for taxation
for taxation purposes. Deferred tax is not
purposes, in accordance with the provisions differences when they reverse, using tax
recognised for:
of the Inland Revenue Act No. 24 of 2017, rates enacted or substantively enacted as at
z temporary differences on the initial the reporting date.
effective from April 1, 2018. This also includes
the major components of tax expense, recognition of assets or liabilities in
a transaction that is not a business The measurement of deferred tax reflects
the effective tax rates and a reconciliation the tax consequences that would follow the
between the profit before tax and tax combination and that affects neither
accounting nor taxable profit or loss; manner in which the Group expects as at
expense, as required by the Sri Lanka the reporting date to recover or settle the
Accounting Standard – LKAS 12 on “Income z temporary differences related to
carrying amount of its assets and liabilities.
Taxes”. investments in subsidiaries to the extent

Entity-wise breakup of income tax expense in the Income Statement is as follows:

GROUP BANK
For the year ended December 31, Applicable 2020 2019 2020 2019
Income Tax
21
Rate
Note Page No. % Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 22
23
Current year tax expense 10,178,040 8,600,748 9,866,955 8,308,597
Income tax expense of Domestic Banking Unit 28 6,547,171 4,877,077 6,547,171 4,877,077
Income tax expense of Off-shore Banking Centre 28 899,668 882,204 899,668 882,204
Income tax expense of Bangladesh operation 40 2,144,365 2,209,134 2,144,365 2,209,134
Profit remittance tax of Bangladesh operation 20 275,751 325,672 275,751 325,672

187
 GROUP BANK
For the year ended December 31, Applicable 2020 2019 2020 2019
Income Tax
Rate
Note Page No. % Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000
Withholding tax on dividends received 14 – 14,930 – 14,510
Income tax expense of Commercial Development Company PLC 28 56,035 44,289 – –
Income tax expense of CBC Tech Solutions Limited 28 38,155 32,113 – –
Income tax expense of CBC Finance Limited 28 83,977 59,057 – –
Income tax expense of Commercial Bank of Maldives Private Limited 25 109,076 147,259 – –
Income tax expense of Commex Sri Lanka S.R.L. – Italy 24 – – – –
Income tax expense of CBC Myanmar Micro Finance Company Limited 25 6,714 417 – –
Income tax expense of Commercial Insurance Brokers Private Limited 28 17,128 8,596 – –

Prior years
Notes to the Financial Statements

Under/(Over) provision of taxes in respect of prior years 48 232 (121,298) (989,148) (113,565) (991,884)
Deferred tax reversal 42.1 228 (2,623,679) (2,048,100) (2,615,567) (2,002,575)
Total 7,433,063 5,563,500 7,137,823 5,314,138
Effective tax rate (including deferred tax) (%) 30.36 23.79
Effective tax rate (excluding deferred tax) (%) 41.48 32.75

As per Notice dated April 08, 2020 issued If the above proposal was considered, announced as per the aforementioned
by the Inland Revenue Department on the impact to the Income Statement for the Notice on interest income from Sri Lanka
“Implementation of Proposed Changes to the year ended December 31, 2020 would be Development Bonds, effective from April
Inland Revenue Act No. 24 of 2017”, effective an Income Tax reversal of Rs. 306.956 Mn. 01, 2018 was availed by the Bank. However,
Financial Statements

from January 01, 2020, Corporate Income Tax (reversal of Rs. 1,063.834 Mn. from Income other exemptions eligible to be claimed
rate was revised from 28% to 24%. Tax payable and a Deferred Tax expense of effective from January 01, 2020, were not
Rs. 756.878 Mn.). considered in computing the income tax
However, the Bank did not consider the
liability as at December 31, 2020, pending
above revisions in computing the income Further, the impact to the Statement
legal enactment and formal amendments to
tax liabilities, pending legal enactment and of Profit or Loss and Other Comprehensive
the Inland Revenue Act.
formal amendments to the Inland Revenue Income would have been a Deferred Tax
Act. reversal of Rs. 445.812 Mn. Exemption
Annual Report 2020

23.1 Reconciliation of the accounting profit to income tax expense

A reconciliation between taxable income and the accounting profit multiplied by the statutory tax rates is given below:
GROUP BANK
For the year ended December 31, Applicable 2020 2019 2020 2019
Commercial Bank of Ceylon PLC

Income Tax
Rate
Note Page No. % Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Accounting profit before tax from operations 24,519,860 22,983,896 23,511,312 22,339,105
Tax effect at the statutory income tax rate 7,591,619 7,299,517 7,300,199 6,914,931
Domestic banking operation of the Bank 28 4,780,070 3,567,991 4,780,070 3,567,991
Off-shore banking operation of the Bank 28 209,320 1,007,313 209,320 1,007,313
Bangladesh operation of the Bank 40 2,310,809 2,339,627 2,310,809 2,339,627
Subsidiaries 24, 25 & 28 291,420 384,586 – –
Tax effect of exempt income (1,528,341) (1,844,454) (1,528,341) (1,844,454)
Tax effect of non-deductible expenses 10,912,337 10,410,356 10,683,266 10,237,579
Tax effect of deductible expenses (7,070,526) (7,605,273) (6,861,120) (7,339,641)
Qualifying payments (2,800) – (2,800) –
Profit remittance tax of Bangladesh operation 275,751 325,672 275,751 325,672
Under/(over) provision of taxes in respect of prior years 48 232 (121,298) (989,148) (113,565) (991,884)
23
Withholding tax on dividends received – 14,930 – 14,510
Deferred tax reversal 42.1 228 (2,623,679) (2,048,100) (2,615,567) (2,002,575)
Income tax expense reported in the Income Statement
at the effective income tax rate 7,433,063 5,563,500 7,137,823 5,314,138

188
24. Earnings Per Share (EPS)
Accounting policy
The Group computes basic and diluted EPS for its ordinary shares. Basic EPS is calculated by dividing the profit or loss that is attributable
to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is
calculated by dividing the profit or loss that is attributable to ordinary shareholders of the Group by the weighted average number of ordinary
shares outstanding, adjusted for the effects of all potentially dilutive ordinary shares, which comprise share options granted to employees
under Employee Share Option Plans (ESOP).

Details of Basic and Diluted EPS are given below:

24.1 Basic and diluted earnings per ordinary share
GROUP BANK
Note Page No. 2020 2019 2020 2019

Amount used as the numerator:

Notes to the Financial Statements

Profit for the year attributable to equity holders of the Bank (Rs. ’000) 16,939,950 17,263,259 16,373,489 17,024,967

Number of ordinary shares used as the denominator:

Weighted average number of ordinary shares for Basic EPS 24.2 189 1,078,776,643 1,051,681,754 1,078,776,643 1,051,681,754

Weighted average number of ordinary shares for diluted EPS 24.2 189 1,078,776,643 1,051,681,754 1,078,776,643 1,051,681,754

Basic earnings per ordinary share (Rs.) 15.70 16.41 15.18 16.19

Diluted earnings per ordinary share (Rs.) 15.70 16.41 15.18 16.19

24.2 Weighted average number of ordinary shares for basic and diluted earnings per share

Financial Statements
Outstanding number of shares Weighted average number of shares
Note Page No. 2020 2019 2020 2019

Number of shares in issue as at January 1, 1,027,506,586 1,010,722,577 1,027,506,586 1,010,722,577

Add: Number of shares satisfied in the form of issue and
allotment of new shares from final dividend for 2018 52.1 241 – 16,490,624 – 16,490,624
Add: Number of shares satisfied in the form of issue and
allotment of new shares from final dividend for 2019 52.1 241 24,201,866 – 24,201,866 24,201,866

Annual Report 2020

Add: Number of shares issued to IFC parties (Private placement) 52.1 241 115,197,186 – 27,068,191 –
1,166,905,638 1,027,213,201 1,078,776,643 1,051,415,067
Add: Number of shares issued under ESOP-2008 52.1 241 – 293,385 – 266,687
Add: Number of shares issued under ESOP-2015 – – – –
Add: Number of shares issued under ESOP-2019 – – – –

Commercial Bank of Ceylon PLC

Weighted average number of ordinary shares for basic
earnings per ordinary share calculation 1,166,905,638 1,027,506,586 1,078,776,643 1,051,681,754
Add: Bonus element on number of outstanding options under
ESOP 2008 as at the year end – – – –
Add: Bonus element on number of outstanding options under
ESOP 2015 as at the year end – – – –
Add: Bonus element on number of outstanding options under
ESOP 2019 as at the year end – – – –
Weighted average number of ordinary shares for diluted
earnings per ordinary share calculation (*) 1,166,905,638 1,027,506,586 1,078,776,643 1,051,681,754

(*) The weighted average number of ordinary shares for Basic EPS and for diluted EPS are equal, due to the market price of the ordinary voting share being below the offer price of the ESOPs as at
December 31, 2020.

24

189
 25. Dividends on ordinary shares
Accounting policy

Refer Note 7.7 on page 172.

GROUP & BANK

2020 2019 2020 2019

Second interim Second interim First interim
Rs. 3.00 Rs. 3.00 Rs. 1.50
per share for 2019 per share for 2018 per share for 2019
(paid on (paid on (paid on
February 24, 2020) February 15, 2019) November 18, 2019)
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Net dividend paid to the ordinary shareholders out of

normal profits 3,082,520 2,638,304 – 1,334,442
Withholding tax deducted at source – 394,565 – 206,818
Notes to the Financial Statements

Gross ordinary dividend paid 3,082,520 3,032,869 – 1,541,260

Dividends for 2019 (Paid in 2020) Dividends for 2020

The Board of Directors of the Bank declared It is pertinent to mention that although the
a second interim dividend of Rs. 3.00 per Bank has been declaring and paying interim
share on January 31, 2020, for both voting dividends in the form of cash dividends
and non-voting ordinary shareholders of the in the past, the Bank did not declare cash
Bank for the year ended December 31, 2019, dividends during 2020 (for the year ended
and this dividend was paid on February 24, December 31, 2020), in conformity with the
2020. restrictions imposed by the Central Bank
Financial Statements

of Sri Lanka on payment of interim cash

Further, the Board of Directors of
dividends for the financial year 2020, as
the Bank recommended and paid a final
per instructions issued via the Banking Act
dividend of Rs. 2.00 per share which was
Direction No 03 of 2020, dated May 13, 2020,
satisfied in the form of issue and allotment of
on “Restrictions on Discretionary Payments
new shares for both voting and non-voting
of Licensed Banks”.
ordinary shares of the Bank for the year
ended December 31, 2019, and these new
Annual Report 2020

shares were listed on July 06, 2020.

26. Classification of financial assets and financial liabilities

The tables below provide a reconciliation between line items in the Statement of Financial Position and categories of financial assets and
financial liabilities of the Group and the Bank:
Commercial Bank of Ceylon PLC

26.1 Classification of financial assets and financial liabilities – Group

As at December 31, 2020 As at December 31, 2019
Financial Financial Financial Total Financial Financial Financial Total
instruments instruments instruments instruments instruments instruments
recognised at amortised at fair value recognised at amortised at fair value
through profit cost (AC) through other through profit cost (AC) through other
or loss (FVTPL) comprehensive or loss (FVTPL) comprehensive
income (FVOCI) income (FVOCI)
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Financial assets
Cash and cash equivalents 28 196 – 51,255,030 – 51,255,030 – 53,681,118 – 53,681,118
Balances with Central Banks 29 197 – 115,358,732 – 115,358,732 – 46,101,232 – 46,101,232
Placements with banks 30 197 – 16,421,867 – 16,421,867 – 24,903,809 – 24,903,809
Securities purchased under
resale agreements – – – – – 13,147,534 – 13,147,534

25 Derivative financial assets 31 198 2,636,717 – – 2,636,717 1,830,927 – – 1,830,927

26 Financial assets recognised
through profit or loss –
Measured at fair value 32 198 35,189,471 – – 35,189,471 21,468,033 – – 21,468,033

190
 As at December 31, 2020 As at December 31, 2019
Financial Financial Financial Total Financial Financial Financial Total
instruments instruments instruments instruments instruments instruments
recognised at amortised at fair value recognised at amortised at fair value
through profit cost (AC) through other through profit cost (AC) through other
or loss (FVTPL) comprehensive or loss (FVTPL) comprehensive
income (FVOCI) income (FVOCI)
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Financial assets at amortised

cost – Loans and advances to
banks 33 201 – 779,705 – 779,705 – 757,787 – 757,787
Financial assets at amortised
cost – Loans and advances to
other customers 34 202 – 909,829,172 – 909,829,172 – 893,919,311 – 893,919,311
Financial assets at amortised
cost – Debt and other financial
instruments 35 206 – 302,059,529 – 302,059,529 – 107,059,021 – 107,059,021

Notes to the Financial Statements

Financial assets measured
at fair value through other
comprehensive income 36 207 – – 278,716,794 278,716,794 – – 197,825,017 197,825,017
Total financial assets 37,826,188 1,395,704,035 278,716,794 1,712,247,017 23,298,960 1,139,569,812 197,825,017 1,360,693,789

Financial liabilities
Due to banks 44 230 – 88,248,056 – 88,248,056 – 53,807,425 – 53,807,425
Derivative financial liabilities 45 231 1,501,262 – – 1,501,262 1,495,317 – – 1,495,317
Securities sold under
repurchase agreements – 91,411,522 – 91,411,522 – 51,117,342 – 51,117,342
Financial liabilities at

Financial Statements
amortised cost – Due to
depositors 46 231 – 1,286,616,399 – 1,286,616,399 – 1,068,982,587 – 1,068,982,587
Financial liabilities at amortised
cost – Other borrowings 47 232 – 54,555,933 – 54,555,933 – 23,248,893 – 23,248,893
Subordinated liabilities 51 240 – 38,247,138 – 38,247,138 – 37,886,789 – 37,886,789
Total financial liabilities 1,501,262 1,559,079,048 – 1,560,580,310 1,495,317 1,235,043,036 – 1,236,538,353

Annual Report 2020

26.2 Classification of financial assets and financial liabilities – Bank
As at December 31, 2020 As at December 31, 2019
Financial Financial Financial Total Financial Financial Financial Total
instruments instruments instruments instruments instruments instruments
recognised at amortised at fair value recognised at amortised at fair value
through profit cost (AC) through other through profit cost (AC) through other

Commercial Bank of Ceylon PLC

or loss (FVTPL) comprehensive or loss (FVTPL) comprehensive
income (FVOCI) income (FVOCI)
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Financial assets
Cash and cash equivalents 28 196 – 50,250,627 – 50,250,627 – 52,534,730 – 52,534,730
Balances with Central Banks 29 197 – 110,971,105 – 110,971,105 – 39,461,127 – 39,461,127
Placements with banks 30 197 – 15,938,982 – 15,938,982 – 24,527,241 – 24,527,241
Securities purchased under
resale agreements – – – – – 13,147,534 – 13,147,534
Derivative financial assets 31 198 2,636,717 – – 2,636,717 1,830,927 – – 1,830,927
Financial assets recognised
through profit or loss –
Measured at fair value 32 198 35,189,471 – – 35,189,471 21,468,033 – – 21,468,033
Financial assets at amortised
cost – Loans and advances to
banks 33 201 – 779,705 – 779,705 – 757,787 – 757,787
Financial assets at amortised
cost – Loans and advances to 26
other customers 34 202 – 896,845,453 – 896,845,453 – 884,645,744 – 884,645,744
Financial assets at amortised
cost – Debt and other financial
instruments 35 206 – 292,727,566 – 292,727,566 – 101,144,819 – 101,144,819

191
 As at December 31, 2020 As at December 31, 2019
Financial Financial Financial Total Financial Financial Financial Total
instruments instruments instruments instruments instruments instruments
recognised at amortised at fair value recognised at amortised at fair value
through profit cost (AC) through other through profit cost (AC) through other
or loss (FVTPL) comprehensive or loss (FVTPL) comprehensive
income (FVOCI) income (FVOCI)
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Financial assets measured

at fair value through other
comprehensive income 36 207 – – 278,461,369 278,461,369 – – 197,568,330 197,568,330
Total financial assets 37,826,188 1,367,513,438 278,461,369 1,683,800,995 23,298,960 1,116,218,982 197,568,330 1,337,086,272

Financial liabilities
Due to banks 44 230 – 87,451,306 – 87,451,306 – 51,505,694 – 51,505,694
Derivative financial liabilities 45 231 1,501,262 – – 1,501,262 1,495,317 – – 1,495,317
Securities sold under
Notes to the Financial Statements

repurchase agreements – 91,437,612 – 91,437,612 – 51,220,023 – 51,220,023

Financial liabilities at
amortised cost – Due to
depositors 46 231 – 1,265,965,918 – 1,265,965,918 – 1,053,307,660 – 1,053,307,660
Financial liabilities at
amortised cost – Other
borrowings 47 232 – 54,555,933 – 54,555,933 – 23,248,893 – 23,248,893
Subordinated liabilities 51 240 – 38,247,138 – 38,247,138 – 37,886,789 – 37,886,789
Total financial liabilities 1,501,262 1,537,657,907 – 1,539,159,169 1,495,317 1,217,169,059 – 1,218,664,376

27. Fair value measurement

Financial Statements

Accounting policy

The Group measures the fair value using the (i.e., derived from prices). This category Valuation techniques include net present
following fair value hierarchy, which reflects includes instruments valued using; value and discounted cash flow models,
the significance of the inputs used in making (a) quoted prices in active markets for comparison with similar instruments for
the measurement. An analysis of fair value similar instruments, which observable market prices exist.
measurement of financial and non-financial Assumptions and inputs used in valuation
(b) quoted prices for identical or similar
assets and liabilities is provided below: techniques include risk-free and benchmark
Annual Report 2020

instruments in markets that are

interest rates, risk premiums in estimating
Level 1 considered to be less active, or
discount rates, bond and equity prices,
Inputs that are quoted market prices (c) other valuation techniques in which foreign exchange rates, expected price
(unadjusted) in an active market for identical almost all significant inputs are directly or volatilities and corrections.
instruments. indirectly observable from market data.
Observable prices or model inputs such
When available, the Group measures Level 3 as market interest rates are usually available
Commercial Bank of Ceylon PLC

the fair value of an instrument using active Inputs that are unobservable. in the market for listed equity securities and
quoted prices or dealer price quotations Government Securities such as Treasury
(assets and long positions are measured at This category includes all instruments Bills and Treasury Bonds. Availability of
a bid price; liabilities and short positions for which the valuation technique includes observable prices and model inputs reduces
are measured at an ask price), without any inputs not based on observable data and the the need for Management judgement and
deduction for transaction costs. A market is unobservable inputs have a significant effect estimation while reducing uncertainty
regarded as active if transactions for asset or on the instrument’s valuation. associated in determining the fair values.
liability take place with sufficient frequency This category includes instruments
and volume to provide pricing information Models are adjusted to reflect the spread
that are valued based on quoted prices of for bid and ask prices to reflect costs to close
on an ongoing basis. similar instruments for which significant out positions, credit and debit valuation
unobservable adjustments or assumptions adjustments, liquidity spread and limitations
Level 2
are required to reflect difference between in the models. Also, profit or loss calculated
Inputs other than quoted prices included the instruments.
within Level 1 that are observable either when such financial instruments are first
directly (i.e., as prices) or indirectly recorded (“Day 1” profit or loss) is deferred
and recognised only when the inputs
become observable or on derecognition of
26 the instrument.
27

192
27.1 Assets and liabilities measured at fair value and fair value hierarchy
The following table provides an analysis of assets and liabilities measured at fair value as at the reporting date, by the level in the fair value
hierarchy into which the fair value measurement is categorised. These amounts were based on the values recognised in the Statement of
Financial Position:
GROUP BANK
As at December 31, 2020 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Non-financial assets
Property, plant and equipment
Land and buildings 39 214 – – 15,417,319 15,417,319 – – 14,616,368 14,616,368
Investment properties 40 225 – – 67,116 67,116 – – – –
Total non-financial assets at fair value – – 15,484,435 15,484,435 – – 14,616,368 14,616,368

Financial assets

Notes to the Financial Statements

Derivative financial assets 31 198
Currency swaps – 1,880,510 – 1,880,510 – 1,880,510 – 1,880,510
Forward contracts – 741,521 – 741,521 – 741,521 – 741,521
Spot contracts – 9,872 – 9,872 – 9,872 – 9,872
Currency options – 4,814 – 4,814 – 4,814 – 4,814
Financial assets recognised through
profit or loss – measured at fair value 32 198
Government Securities 33,867,593 – – 33,867,593 33,867,593 – – 33,867,593
Equity shares 1,321,878 – – 1,321,878 1,321,878 – – 1,321,878

Financial Statements
Financial assets measured at fair value
through other comprehensive income 36 207
Government Securities 223,589,375 56,511,184 – 280,100,559 223,334,074 56,511,184 – 279,845,258
Equity securities 239,773 – 52,296 292,069 239,773 – 52,172 291,945

Total financial assets at fair value 259,018,619 59,147,901 52,296 318,218,816 258,763,318 59,147,901 52,172 317,963,391
Total assets at fair value 259,018,619 59,147,901 15,536,731 333,703,251 258,763,318 59,147,901 14,668,540 332,579,759

Annual Report 2020

Financial liabilities
Derivative financial liabilities 45 231
Currency swaps – 1,132,513 – 1,132,513 – 1,132,513 – 1,132,513
Interest rate swaps – 142,376 – 142,376 – 142,376 – 142,376
Forward contracts – 216,709 – 216,709 – 216,709 – 216,709

Commercial Bank of Ceylon PLC

Spot contracts – 5,016 – 5,016 – 5,016 – 5,016
Currency options – 4,648 – 4,648 – 4,648 – 4,648
Total liabilities at fair value – 1,501,262 – 1,501,262 – 1,501,262 – 1,501,262

GROUP BANK
As at December 31, 2019 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Non-financial assets
Property, plant and equipment
Land and buildings 39 214 – – 11,810,606 11,810,606 – – 11,078,500 11,078,500
Investment properties 40 225 – – 46,350 46,350 – – – –
Total non-financial assets at fair value – – 11,856,956 11,856,956 – – 11,078,500 11,078,500

Financial assets
Derivative financial assets 31 198
Currency swaps – 1,410,476 – 1,410,476 – 1,410,476 – 1,410,476 27
Forward contracts – 411,958 – 411,958 – 411,958 – 411,958
Spot contracts – 8,493 – 8,493 – 8,493 – 8,493

193
 GROUP BANK
As at December 31, 2019 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Financial assets recognised through

profit or loss – measured at fair value 32 198
Government Securities 20,484,895 – – 20,484,895 20,484,895 – – 20,484,895
Equity shares 983,138 – – 983,138 983,138 – – 983,138
Financial assets measured at fair value
through other comprehensive income 36 207
Government Securities 141,456,023 57,009,964 – 198,465,987 141,199,460 57,009,964 – 198,209,424
Equity securities 169,013 – 51,710 220,723 169,013 – 51,586 220,599

Total financial assets at fair value 163,093,069 58,840,891 51,710 221,985,670 162,836,506 58,840,891 51,586 221,728,983
Total assets at fair value 163,093,069 58,840,891 11,908,666 233,842,626 162,836,506 58,840,891 11,130,086 232,807,483

Financial liabilities
Notes to the Financial Statements

Derivative financial liabilities 45 231

Currency swaps – 1,140,261 – 1,140,261 – 1,140,261 – 1,140,261
Interest rate swaps – 53,295 – 53,295 – 53,295 – 53,295
Forward contracts – 295,838 – 295,838 – 295,838 – 295,838
Spot contracts – 5,923 – 5,923 – 5,923 – 5,923
Total liabilities at fair value – 1,495,317 – 1,495,317 – 1,495,317 – 1,495,317

27.2 Level 3 fair value measurement Note 40.1 (c) on page 226 provides Assets for which fair value approximates
details of valuation techniques used and carrying value
Property, plant and equipment (PPE)
the sensitivity of fair value measurement to For financial assets and liabilities with
Financial Statements

Reconciliation from the beginning balance to changes in significant unobservable inputs. short-term maturities or with short-term
the ending balance for the land and buildings re-pricing intervals, it is assumed that the
in the Level 3 of the fair value hierarchy is given carrying amounts approximate to their fair
in Notes 39.1 to 39.4 on pages 215 to 218. 27.3 Financial instruments not measured
at fair value and fair value hierarchy value. This assumption is also applied to
Reconciliation of Revaluation Reserve demand deposits and savings deposits which
Methodologies and assumptions used to
pertaining to land and buildings categorised do not have a specific maturity.
determine fair value of financial instruments
as Level 3 in the fair value hierarchy is given which are not already recorded at fair value
in the Statement of Changes in Equity on in the Statement of Financial Position are as
Annual Report 2020

pages 146 to 153. follows:

Note 39.5 (b) on page 219 provides Fixed rate financial instruments
information on significant unobservable
The fair value of fixed rate financial assets
inputs used as at December 31, 2020 in
and liabilities carried at amortised cost
measuring fair value of land and buildings
(e.g. fixed rate loans and advances, due
categorised as Level 3 in the fair value
Commercial Bank of Ceylon PLC

to depositors, subordinated liabilities) are

hierarchy.
estimated based on the Discounted Cash
Note 39.5 (c) on page 224 provides Flow approach. This approach employs
details of valuation techniques used and the current market interest rates of similar
sensitivity of fair value measurement to financial instruments as a significant
changes in significant unobservable inputs. unobservable input in measuring the fair
value and hence it is categorised under Level
Investment properties 3 in the fair value hierarchy.
Reconciliation from the beginning balance
to the ending balance for the investment Sensitivity of significant unobservable inputs
properties in the Level 3 of the fair value used to measure fair value of fixed rate
hierarchy is available in Note 40 on page 225. financial instruments
Note 40.1 (b) on page 226 provides A significant increase/(decrease) in the
information on significant unobservable market interest rate would result in
inputs used as at December 31, 2020 in lower/(higher) fair value being disclosed.
measuring fair value of investment properties
categorised as level 3 in the fair value
27 hierarchy.

194
The following table sets out the fair values of financial assets and liabilities not measured at fair value and related fair value hierarchy used:
GROUP BANK
As at December 31, 2020 Level 1 Level 2 Level 3 Total fair Total carrying Level 1 Level 2 Level 3 Total fair Total carrying
values amount values amount
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Financial assets
Cash and cash equivalents 28 196 – 51,255,030 – 51,255,030 51,255,030 – 50,250,627 – 50,250,627 50,250,627
Balances with Central Banks 29 197 – 115,358,732 – 115,358,732 115,358,732 – 110,971,105 – 110,971,105 110,971,105
Placements with banks 30 197 – 16,421,867 – 16,421,867 16,421,867 – 15,938,982 – 15,938,982 15,938,982
Securities purchased
under resale agreements – – – – – – – – – –
Financial assets at
amortised cost – Loans and
advances to banks 33 201 – 779,705 – 779,705 779,705 – 779,705 – 779,705 779,705
Financial assets at
amortised cost – Loans and
advances to other customers

Notes to the Financial Statements

34 202 – – 913,411,806 913,411,806 909,829,172 – – 900,428,087 900,428,087 896,845,453
Financial assets at amortised
cost – Debt and other financial
instruments 35 206 258,101,089 10,530,450 – 268,631,539 302,059,529 248,769,126 10,530,450 – 259,299,576 292,727,566
Total financial assets 258,101,089 194,345,784 913,411,806 1,365,858,679 1,395,704,035 248,769,126 188,470,869 900,428,087 1,337,668,082 1,367,513,438

Financial liabilities
Due to banks 44 230 – – 88,248,056 88,248,056 88,248,056 – – 87,451,306 87,451,306 87,451,306
Securities sold under
repurchase agreements – 91,411,522 – 91,411,522 91,411,522 – 91,437,612 – 91,437,612 91,437,612
Financial liabilities at amortised
cost – Due to depositors 46 231 – – 1,290,852,077 1,290,852,077 1,286,616,399 – – 1,270,201,596 1,270,201,596 1,265,965,918
Financial liabilities at amortised
cost – Other borrowings

Financial Statements
47 232 – – 54,555,933 54,555,933 54,555,933 – – 54,555,933 54,555,933 54,555,933
Subordinated liabilities 51 240 – – 39,803,997 39,803,997 38,247,138 – – 39,803,997 39,803,997 38,247,138
Total financial liabilities – 91,411,522 1,473,460,063 1,564,871,585 1,559,079,048 – 91,437,612 1,452,012,832 1,543,450,444 1,537,657,907

GROUP BANK
As at December 31, 2019 Level 1 Level 2 Level 3 Total fair Total carrying Level 1 Level 2 Level 3 Total fair Total carrying
values amount values amount
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Annual Report 2020

Financial assets
Cash and cash equivalents 28 196 – 53,681,118 – 53,681,118 53,681,118 – 52,534,730 – 52,534,730 52,534,730
Balances with Central Banks 29 197 – 46,101,232 – 46,101,232 46,101,232 – 39,461,127 – 39,461,127 39,461,127
Placements with banks 30 197 – 24,903,809 – 24,903,809 24,903,809 – 24,527,241 – 24,527,241 24,527,241
Securities purchased
under resale agreements – 13,147,534 – 13,147,534 13,147,534 – 13,147,534 – 13,147,534 13,147,534

Commercial Bank of Ceylon PLC

Financial assets at
amortised cost – Loans and
advances to banks 33 201 – 757,787 – 757,787 757,787 – 757,787 – 757,787 757,787
Financial assets at
amortised cost – Loans and
advances to other customers 34 202 – – 896,280,708 896,280,708 893,919,311 – – 887,007,141 887,007,141 884,645,744
Financial assets at
amortised cost –
Debt and other
financial instruments 35 206 105,056,577 – – 105,056,577 107,059,021 99,142,375 – – 99,142,375 101,144,819
Total financial assets 105,056,577 138,591,480 896,280,708 1,139,928,765 1,139,569,812 99,142,375 130,428,419 887,007,141 1,116,577,935 1,116,218,982

Financial liabilities
Due to banks 44 230 – – 53,807,425 53,807,425 53,807,425 – – 51,505,694 51,505,694 51,505,694
Securities sold under
repurchase agreements – 51,117,342 – 51,117,342 51,117,342 – 51,220,023 – 51,220,023 51,220,023
Financial liabilities at
amortised cost –
Due to depositors 46 231 – – 1,067,138,675 1,067,138,675 1,068,982,587 – – 1,051,463,748 1,051,463,748 1,053,307,660
Financial liabilities at
amortised cost –
Other borrowings 47 232 – – 23,248,893 23,248,893 23,248,893 – – 23,248,893 23,248,893 23,248,893
27
Subordinated liabilities 51 240 – – 39,479,119 39,479,119 37,886,789 – – 39,479,119 39,479,119 37,886,789
Total financial liabilities – 51,117,342 1,183,674,112 1,234,791,454 1,235,043,036 – 51,220,023 1,165,697,454 1,216,917,477 1,217,169,059

195
 27.4 Valuation techniques and inputs in measuring fair values
The table below provides information on the valuation techniques and inputs used in measuring the fair values of derivative financial assets
and liabilities in the Level 2 of the fair value hierarchy, as given in Note 27.1 on page 193.

Type of financial instruments Fair value as at Valuation technique Significant valuation inputs
December 31, 2020
(Rs. ’000)

Derivative financial assets 2,636,717 Adjusted forward rate approach z Spot exchange rate
This approach considers the present value of projected
Derivative financial liabilities 1,501,262 forward exchange rate as at the reporting date as the fair z Interest rate differentials
value. The said forward rate is projected, based on the spot between currencies under
exchange rate and the forward premium/discount calculated consideration
using extrapolated interest rates of the currency pairs under
consideration. In computing the present value, interest rate
differential between two currencies under consideration is
used as the discount rate.
Notes to the Financial Statements

28. Cash and cash equivalents

Accounting policy

Cash and cash equivalents include cash in hand, demand placements with banks and loans at call/short notice and highly liquid financial
assets with original maturities within three months or less from the date of acquisition. These are subject to an insignificant risk of changes
in fair value and are used by the Group in the management of its short-term commitments. These items are brought to Financial Statements
at face values or the gross values, where appropriate. There were no cash and cash equivalents held by the Group companies that were not
available for use by the Group.
Cash and cash equivalents are carried at amortised cost in the Statement of Financial Position.
Financial Statements

GROUP BANK
As at December 31, 2020 2019 2020 2019
Note Page No. Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Cash in hand 26,681,454 26,592,518 26,152,779 26,094,112

Coins and notes held in local currency 24,502,554 22,633,898 24,502,675 22,636,242
Annual Report 2020

Coins and notes held in foreign currency 2,178,900 3,958,620 1,650,104 3,457,870
Balances with banks 22,759,243 9,420,183 22,283,515 8,857,498
Local banks 173,152 172,295 – –
Foreign banks 22,586,091 9,247,888 22,283,515 8,857,498
Money at call and at short notice 1,817,574 17,674,124 1,817,574 17,588,827
Commercial Bank of Ceylon PLC

Gross cash and cash equivalents (*) 51,258,271 53,686,825 50,253,868 52,540,437

Less: Provision for impairment 28.1 196 3,241 5,707 3,241 5,707
Net cash and cash equivalents 51,255,030 53,681,118 50,250,627 52,534,730

(*) Gross cash and cash equivalents are reported in the Statement of Cash Flows.

28.1 Movement in provision for impairment during the year

GROUP BANK
2020 2019 2020 2019
Note Page No. Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Movement in Stage 1 Impairment

Balance as at January 1, 5,707 4,413 5,707 4,413
18.1 & 184 &
27 Charge/(write back) to the Income Statement 18.2 185 (2,526) 1,350 (2,526) 1,350
28 Exchange rate variance on foreign currency provisions 60 (56) 60 (56)
Balance as at December 31, 3,241 5,707 3,241 5,707

The maturity analysis of cash and cash equivalents is given in Note 61 on pages 251 to 253.

196
29. Balances with Central Banks
Accounting policy

Balances with Central Banks consist of Statutory/Non-statutory balances with central banks and are carried at amortised cost in the Statement of
Financial Position.
GROUP BANK
As at December 31, 2020 2019 2020 2019
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Statutory balances with Central Banks

Balances with Central Bank of Sri Lanka 11,241,860 31,213,972 11,241,860 31,213,972
Balances with Bangladesh Bank 5,323,929 8,247,155 5,323,929 8,247,155
Balances with Maldives Monetary Authority 1,275,457 1,481,327 – –

Non-statutory balances with Central Banks

Balances with Central Bank of Sri Lanka 94,405,316 – 94,405,316 –

Notes to the Financial Statements

Balances with Bangladesh Bank – – – –
Balances with Maldives Monetary Authority 3,112,170 5,158,778 – –
Total 115,358,732 46,101,232 110,971,105 39,461,127

The maturity analysis of balances with Central Banks is given in Note 61 on pages 251 to 253.
Balances with Central Bank of Sri Lanka Balances with Bangladesh Bank Balances with Maldives Monetary Authority
The Monetary Law Act requires that all The Bank’s Bangladesh operation is The Maldives Banking Act No. 24 of 2010
commercial banks operating in Sri Lanka to required to maintain the statutory liquidity Section 25 requires the Bank to maintain a
maintain a statutory reserve on all deposit requirement on time and demand liabilities statutory reserve on all deposits liabilities
liabilities denominated in Sri Lankan Rupees. (both local and foreign currencies), partly in denominated in both foreign currency and
As required by the provisions of Section 93 the form of a Cash Reserve Requirement and local currency deposits excluding interbank

Financial Statements
of the Monetary Law Act, a cash balance is the balance by way of foreign currency and/ deposits of other banks in Maldives and
maintained with the Central Bank of Sri Lanka. or in the form of unencumbered securities Letter of Credit margin deposits. According
As at December 31, 2020, the minimum cash held with the Bangladesh Bank. As per the to the Bank regulations of Maldives Monetary
reserve requirement was 2.00% of the rupee Bangladesh Bank regulations, the Statutory Authority, the Minimum Reserve Requirement
deposit liabilities and this rate was applicable Liquidity Requirement as at December 31, (MRR) as at December 31, 2020 was 5.00%
from June 16, 2020. The minimum cash reserve 2020 was 17.00% (18.50% in 2019) on time for Rufiyaa deposits while it was 7.50% for US
requirement during the period from March and demand liabilities (both local and foreign Dollar deposits. (10.00% in 2019). The reserve
16, 2020 to June 15, 2020 was 4.00%.(5.00% in currencies), which includes a 4.00% (5.50% requirement for local currency is to be met
2019 and this rate was applicable upto March in 2019) cash reserve requirement and the in the form of Rufiyaa deposits, while reserve

Annual Report 2020

15, 2020). There is no reserve requirement balance 13.00% (13.00% in 2019) is permitted requirement for foreign currency is to be met
for foreign currency deposits liabilities of the to be maintained in foreign currency and/or in the form of US dollar deposits.
Domestic Banking Unit (DBU) and the deposit also in unencumbered securities held with the
liabilities of the Offshore Banking Centre (OBC) Bangladesh Bank.
in Sri Lanka.

30. Placements with banks

Commercial Bank of Ceylon PLC

GROUP BANK
As at December 31, 2020 2019 2020 2019
Note Page No. Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Placements – Within Sri Lanka 10,759,821 14,395,454 10,370,393 14,018,861

Placements – Outside Sri Lanka 5,665,092 10,516,976 5,571,592 10,516,976
Gross placements with banks 16,424,913 24,912,430 15,941,985 24,535,837

Less: Provision for impairment 30.1 197 3,046 8,621 3,003 8,596
Net placements with banks 16,421,867 24,903,809 15,938,982 24,527,241

30.1 Movement in provision for impairment during the year

GROUP BANK
2020 2019 2020 2019
Note Page No. Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Movement in Stage 1 impairment 29

30
Balance as at January 1, 8,621 10,784 8,596 10,784
Charge/(write back) to the Income Statement 18.1 & 18.2 184 &
185 (5,633) (2,120) (5,651) (2,144)
Exchange rate variance on foreign currency provisions 58 (43) 58 (44)
Balance as at December 31, 3,046 8,621 3,003 8,596

The maturity analysis of placements with banks is given in Note 61 on pages 251 to 253.
197
 31. Derivative financial assets
Accounting policy

The Bank uses derivatives such as interest rate swaps, foreign currency swaps forward foreign exchange contracts, currency options, etc.
Derivative financial assets are recorded at fair value. Changes in the fair value of derivatives are included in “Net Gains/(Losses) from Trading” in
the Income Statement.
Under SLFRS 9, embedded derivatives are not separated from a host financial asset and are classified entirely based on the business model
and their contractual terms.
Derivatives embedded in non-financial host contracts are treated separately and recorded at fair value if their economic characteristics and
risks are not closely related to those of the host contract, a separate instrument with the same terms as embedded derivative would meet the
definition of derivative and the host contract is not itself held for trading or designated at fair value through profit or loss. The embedded derivatives
separated from the host are carried at fair value in the trading portfolio with changes in fair value recognised in the Income Statement.
GROUP BANK
As at December 31, 2020 2019 2020 2019
Notes to the Financial Statements

Note Page No. Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Derivative financial assets – Held for trading

Foreign currency derivatives 2,636,717 1,830,927 2,636,717 1,830,927
Currency swaps 1,880,510 1,410,476 1,880,510 1,410,476
Forward contracts 741,521 411,958 741,521 411,958
Spot contracts 9,872 8,493 9,872 8,493
Currency options 4,814 – 4,814 –
Total 2,636,717 1,830,927 2,636,717 1,830,927
Financial Statements

The maturity analysis of derivative financial assets is given in Note 61 on pages 251 to 253.

32. Financial assets recognised through profit or loss – Measured at fair value
Accounting policy

This includes financial assets that are held for trading purposes. The financial assets are classified as held for trading if:
z They are acquired principally for the purpose of selling or repurchasing in the near term; or
Annual Report 2020

z They are held as part of portfolio that is managed together for short-term profit or position taking; or
z They form part of derivative financial instruments entered into by the Group that are not financial guaranteed contracts or designated as
hedging instruments in effective hedging relationships.
Financial assets held for trading are measured at fair value through profit or loss in the SOFP. Interest and dividend income are recorded in
“Interest Income” and “Net Gains/(Losses) from Trading” respectively in the Income Statement, according to the terms of the contract, or when
Commercial Bank of Ceylon PLC

the right to receive the payment has been established.

Financial assets held for trading include instruments such as Government and other debt securities and equity instruments that have been
acquired principally for the purpose of selling or repurchasing in the near term.
Further as per SLFRS 9, financial assets recognised through profit or loss includes all financial assets other than those classified under FVOCI
and amortised cost.
GROUP BANK
As at December 31, 2020 2019 2020 2019
Note Page No. Rs. ‘000 Rs. ’000 Rs. ’000 Rs. ’000

Government Securities 32.1 199 33,867,593 20,484,895 33,867,593 20,484,895

Equity securities 32.2 199 1,321,878 983,138 1,321,878 983,138
Total 35,189,471 21,468,033 35,189,471 21,468,033

31
32

198
32.1 Government securities
GROUP BANK
As at December 31, 2020 2019 2020 2019
Rs. 000 Rs.’000 Rs.’000 Rs.’000

Treasury Bills 7,641,631 15,715,187 7,641,631 15,715,187

Treasury Bonds 26,225,962 4,769,708 26,225,962 4,769,708
Total 33,867,593 20,484,895 33,867,593 20,484,895

The maturity analysis of financial assets recognised through profit or loss is given in Note 61 on pages 251 to 253.

32.2 Equity securities – Group and Bank

As at December 31, 2020 As at December 31, 2019
Sector/Name of the Company Number of Market Market Cost of the Number of Market price Market Cost of the

Notes to the Financial Statements

shares price value investment shares value investment
Rs. Rs. ’000 Rs. ’000 Rs. Rs. ’000 Rs. ’000

Automobiles and Components

Kelani Tyres PLC 71,000 86.50 6,142 5,836 – – – –
Subtotal 6,142 5,836 – –

Banks
DFCC Bank PLC 3,516 65.30 230 234 – – – –
Hatton National Bank PLC 152,745 126.50 19,322 17,546 85 172.20 15 12

Financial Statements
Hatton National Bank PLC (Non-voting) 48,000 100.60 4,829 5,000 – – – –
National Development Bank PLC 244,110 78.10 19,065 36,021 226,595 100.00 22,660 34,381
Nations Trust Bank PLC 1,396 60.00 84 85 – – – –
Sampath Bank PLC 206,437 135.60 27,993 28,331 59,973 162.40 9,740 9,756
Seylan Bank PLC 1,107 46.00 51 51 – – – –
Subtotal 71,574 87,268 32,415 44,149

Annual Report 2020

Capital Goods
ACL Cables PLC 100,000 76.60 7,660 3,676 100,000 57.50 5,750 3,676
Aitken Spence PLC 239,409 57.80 13,838 9,684 350,000 46.50 16,275 14,157
Colombo Dockyard PLC 75,000 85.30 6,398 16,685 75,000 62.00 4,650 16,685
Hayleys PLC 68,313 414.50 28,316 19,269 68,313 174.90 11,948 19,269

Commercial Bank of Ceylon PLC

Hemas Holdings PLC – – – – 62 80.00 5 2
John Keells Holdings PLC 165,000 149.60 24,684 25,728 130,611 167.60 21,890 20,527
Lanka Walltiles PLC – – – – 60 72.50 4 5
Renuka Holdings PLC 117,158 15.00 1,757 3,180 117,158 19.30 2,261 3,180
Renuka Holdings PLC (Non-voting) 265,368 11.00 2,919 4,958 265,368 13.50 3,582 4,958
Royal Ceramics Lanka PLC 155,927 177.10 27,615 17,337 155,927 88.50 13,800 18,057
Subtotal 113,187 100,517 80,165 100,516

Consumer Durables and Apparel

Teejay Lanka PLC 40,000 38.00 1,520 1,213 – – – –
Subtotal 1,520 1,213 – –

Consumer Services
John Keells Hotels PLC 267,608 11.00 2,944 3,473 267,608 11.60 3,104 3,473
Tal Lanka Hotels PLC 212,390 16.90 3,589 6,625 212,390 14.40 3,058 6,625 32

Subtotal 6,533 10,098 6,162 10,098

199
 As at December 31, 2020 As at December 31, 2019
Sector/Name of the Company Number of Market Market Cost of the Number of Market price Market Cost of the
shares price value investment shares value investment
Rs. Rs. ’000 Rs. ’000 Rs. Rs. ’000 Rs. ’000

Diversified Financials
Central Finance Company PLC 202,767 83.00 16,830 19,177 199,734 104.00 20,772 18,937
Citizen Development Business Finance PLC
(Non-voting) 105,390 65.00 6,850 3,398 105,390 67.50 7,114 3,398
Lanka Ventures PLC 100,000 54.50 5,450 3,033 100,000 40.00 4,000 3,033
VISA Inc. 19,424 USD 218.73 794,490 – 19,424 USD 187.90 663,346 –
Subtotal 823,620 25,608 695,232 25,368

Energy
Notes to the Financial Statements

Lanka IOC PLC 685,975 22.40 15,366 15,013 685,984 19.00 13,034 15,013
Subtotal 15,366 15,013 13,034 15,013

Food, Beverage and Tobacco

Ceylon Grain Elevators PLC 250,000 111.00 27,750 18,156 250,000 68.50 17,125 18,156
Kotagala Plantations PLC 302,625 9.00 2,724 9,172 302,625 7.20 2,179 9,172
Lanka Milk Foods (CWE) PLC 250,000 148.90 37,225 27,866 250,000 100.10 25,025 27,866
Lion Brewery Ceylon PLC 10,000 585.00 5,850 5,560 – – – –
Melstacorp PLC 245,960 52.00 12,790 9,814 245,960 43.50 10,699 9,814
Financial Statements

Pelwatte Sugar Industries PLC 12,300 0.10 1 351 12,300 0.10 1 351
Renuka Foods (Non-voting) 1,000 13.90 14 15 1,000 12.30 12 15
Subtotal 86,354 70,934 55,041 65,374

Health Care Equipment and Services

Ceylon Hospitals PLC 121,900 103.20 12,580 12,868 121,900 78.00 9,508 12,868
Ceylon Hospitals PLC (Non-voting)
Annual Report 2020

61,100 90.00 5,499 4,423 61,100 67.40 4,118 4,423

Subtotal 18,079 17,291 13,626 17,291

Insurance
People's Insurance PLC 126,500 28.20 3,567 1,898 126,500 21.70 2,745 1,898
Softlogic Life Insurance PLC 120,000 34.80 4,176 3,739 – – – –
Commercial Bank of Ceylon PLC

Subtotal 7,743 5,637 2,745 1,898

Materials
Chemical Industries Colombo Holding PLC
(Non-voting) 161,400 151.60 24,468 11,692 161,400 47.60 7,683 11,692
Dipped Products PLC 200,000 347.30 69,460 24,239 200,000 84.00 16,800 24,239
Haycarb PLC 90,100 568.60 51,231 13,388 107,100 190.00 20,349 15,914
Subtotal 145,159 49,319 44,832 51,845

Real Estate
Overseas Reality Ceylon PLC 183,320 14.40 2,640 2,717 183,320 16.00 2,933 2,717
CT Land Development PLC – – – – 25,000 30.00 750 531
Subtotal 2,640 2,717 3,683 3,248

Retailing
32 RIL Property PLC – – – – 3,333,333 5.90 19,667 26,667
Subtotal – – 19,667 26,667

Telecommunication Services
Dialog Axiata PLC 1,399,172 12.40 17,350 11,442 949,172 12.30 11,675 6,300
Subtotal 17,350 11,442 11,675 6,300

200
 As at December 31, 2020 As at December 31, 2019
Sector/Name of the Company Number of Market Market Cost of the Number of Market price Market Cost of the
shares price value investment shares value investment
Rs. Rs. ’000 Rs. ’000 Rs. Rs. ’000 Rs. ’000

Utilities
LVL Energy Fund PLC 648,100 10.20 6,611 6,481 648,100 7.50 4,861 6,481
Subtotal 6,611 6,481 4,861 6,481

Total 1,321,878 409,374 983,138 374,248

Mark to market gains/(losses) 912,504 608,890

Market value of equity securities 1,321,878 983,138

32.3 Industry/Sector composition of equity securities – Group and Bank

Notes to the Financial Statements

As at December 31, 2020 As at December 31, 2019
Industry/Sector Market Cost of the Market value Cost of the
value investment investment
Rs. ’000 Rs. ’000 % Rs. ’000 Rs. ’000 %

Automobiles and Components 6,142 5,836 0.46 – – –

Banks 71,574 87,268 5.41 32,415 44,149 3.30
Capital Goods 113,187 100,517 8.56 80,165 100,516 8.15
Consumer Durables and Apparel 1,520 1,213 0.11 – – –
Consumer Services 6,533 10,098 0.49 6,162 10,098 0.63

Financial Statements
Diversified Financials 823,620 25,608 62.33 695,232 25,368 70.71
Energy 15,366 15,013 1.16 13,034 15,013 1.33
Food, Beverage and Tobacco 86,354 70,934 6.53 55,041 65,374 5.60
Health Care Equipment and Services 18,079 17,291 1.37 13,626 17,291 1.39
Insurance 7,743 5,637 0.59 2,745 1,898 0.28
Materials 145,159 49,319 10.98 44,832 51,845 4.56

Annual Report 2020

Real Estate 2,640 2,717 0.20 3,683 3,248 0.37
Retailing – – – 19,667 26,667 2.00
Telecommunication Services 17,350 11,442 1.31 11,675 6,300 1.19
Utilities 6,611 6,481 0.50 4,861 6,481 0.49
Subtotal 1,321,878 409,374 100.00 983,138 374,248 100.00
Mark to market gains/(losses)

Commercial Bank of Ceylon PLC

912,504 608,890
Market value of equity securities 1,321,878 1,321,878 100.00 983,138 983,138 100.00

33. Financial assets at amortised cost – Loans and advances to banks

Accounting policy
“Financial assets at amortised cost – Loans payment of principal and interest on the any discount or premium on acquisition
and advances to banks” includes amounts principal outstanding. and fees and costs. The amortisation is
due from banks. included in “Interest Income” while the losses
After initial measurement, loans and arising from impairment are recognised in
As per SLFRS 9, Loans and advances to banks advances to banks are subsequently “Impairment charges and other losses” in the
are assets that are held within a business measured at gross carrying amount using Income Statement.
model whose objective is to hold the assets the EIR, less provision for impairment,
in order to collect contractual cash flows and except when the Group designates these
the contractual terms of the assets give rise assets at fair value through profit or loss.
on specific dates to cash flows that are solely EIR is calculated by taking into account
GROUP BANK
As at December 31, Note Page No. 2020 2019 2020 2019
32
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 33

Gross loans and advances (Currency – United States Dollar) 779,790 757,898 779,790 757,898
Less: Provision for impairment 33.1 202 85 111 85 111
Net loans and advances 779,705 757,787 779,705 757,787

201
 33.1 Movement in provision for impairment during the year
GROUP BANK
2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Movement in Stage 1 impairment

Balance as at January 1, 111 36 111 36
Charge/(write back) to the income statement 18.1 & 18.2 184 & 185 (26) 75 (26) 75
Balance as at December 31, 85 111 85 111

The maturity analysis of loans and advances in response to a Directive received from has been contested by the Bank. In view of
to banks is given in Note 61 on pages 251 the Exchange Controller of the Central the stance taken by the Bank in this regard,
to 253. Bank of Sri Lanka. Consequently, one of both the deposit (made by the Bank) and the
the counterparty banks appropriated amount due to the said counterparty bank,
The Bank did not make any payments
USD 4.170 Mn. (Rs. 779.790 Mn.) which has have been recorded in the Statement of
Notes to the Financial Statements

to counterparty banks for the oil hedging

been kept as a deposit with them. This action Financial Position.
transactions with effect from June 2, 2009

34. Financial assets at amortised cost – Loans and advances to other customers
Accounting policy
Financial assets at amortised cost – Loans When the Group is the lessor in a lease After initial measurement, “Loans
and advances to other customers includes, agreement that transfers substantially all and advances to other customers” are
loans and advances and lease receivables risks and rewards incidental to ownership subsequently measured at gross carrying
of the Group. of the asset to the lessee, the arrangement amount using the EIR, less provision for
is classified as a finance lease. Amounts impairment, except when the Group
As per SLFRS 9, “Loans and advances to
Financial Statements

receivable under finance leases, net of initial designates loans and advances at fair value
other customers” are assets that are held
rentals received, unearned lease income and through profit or loss. EIR is calculated by
within a business model whose objective is to
provision for impairment, are classified as taking into account any discount or premium
hold the assets in order to collect contractual
lease receivable and are presented within on acquisition and fees and costs. The
cash flows and the contractual terms of the
“Loans and advances to other customers” in amortisation is included in “Interest Income”,
assets give rise on specific dates to cash flows
the Statement of Financial Position. while the losses arising from impairment are
that are solely payment of principal and
recognised in “Impairment charges and other
interest on the principal outstanding.
losses” in the Income Statement.
Annual Report 2020

GROUP BANK
As at December 31, 2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Gross loans and advances 961,859,118 930,737,391 947,841,905 920,457,235

Commercial Bank of Ceylon PLC

Stage 1 750,494,287 726,626,174 740,254,706 720,005,896

Stage 2 106,934,723 105,913,673 105,011,766 103,788,356
Stage 3* 104,430,108 98,197,544 102,575,433 96,662,983
Less: Provision for impairment 34.2 (a) &
34.2 (b) 204 52,029,946 36,818,080 50,996,452 35,811,491
Stage 1 6,567,755 2,702,070 6,470,880 2,613,480
Stage 2 12,396,301 8,494,001 12,244,433 8,318,831
Stage 3 33,065,890 25,622,009 32,281,139 24,879,180
Net loans and advances 909,829,172 893,919,311 896,845,453 884,645,744

* As at December 31, 2020, gross loans and advances in stage 3 include Rs. 879.849 Mn. (2019 - Rs. 940.059 Mn.) granted against guarantees issued by the Government of Sri Lanka.

The maturity analysis of Loans and advances to other customers is given in Note 61 on pages 251 to 253.

33
34

202
34.1 Analysis of financial assets at amortised cost – Loans and advances to other customers
34.1 (a) By product
GROUP BANK
As at December 31, 2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Loans and advances

Overdrafts 104,436,468 137,643,817 102,957,967 135,717,795
Trade finance 80,580,434 72,194,299 80,063,332 71,729,612
Lease/hire purchase receivable 34.3 204 37,237,050 36,147,829 35,815,635 34,169,283
Credit cards 14,994,861 14,975,902 14,994,861 14,975,902
Pawning 4,615,697 2,973,662 4,615,697 2,973,662
Staff loans 11,941,045 10,624,199 11,919,726 10,602,640

Notes to the Financial Statements

Housing loans 67,147,827 63,569,094 67,147,827 63,569,094
Personal loans 51,145,421 39,742,048 50,632,378 39,395,743
Term loans
Short term 135,165,669 150,536,419 132,098,509 150,257,462
Long term 418,650,469 370,852,399 411,651,796 365,588,319
Bills of exchange 35,944,177 31,477,723 35,944,177 31,477,723
Total 961,859,118 930,737,391 947,841,905 920,457,235

34.1 (b) By currency

Financial Statements
GROUP BANK
As at December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Sri Lankan Rupee 714,427,226 694,387,671 707,118,270 689,748,758

United States Dollar 146,750,563 152,785,345 144,098,079 150,573,125
Great Britain Pound 1,512,981 1,297,284 1,512,981 1,297,284

Annual Report 2020

Euro 9,548,883 6,671,660 9,548,883 6,671,660
Australian Dollar 708,584 609,115 708,584 609,115
Japanese Yen 187,489 286,695 187,489 286,695
Singapore Dollar – 2,512 – 2,512
Bangladesh Taka 84,659,542 71,252,778 84,659,542 71,252,778

Commercial Bank of Ceylon PLC

Maldivian Rufiyaa 3,611,052 3,141,714 – –
Others 452,798 302,617 8,077 15,308
Total 961,859,118 930,737,391 947,841,905 920,457,235

34.1 (c) By industry

GROUP BANK
As at December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Agriculture and fishing 78,617,259 68,775,119 78,331,232 68,549,963

Arts, entertainment and recreation 1,288,474 1,118,938 1,288,474 1,118,243
Construction 46,454,293 45,439,269 45,374,182 45,032,791
Consumption and other 216,286,919 201,412,039 216,240,633 200,919,556
Education 3,470,636 3,225,133 3,241,612 2,964,160
Financial services 36,023,186 35,777,329 36,381,176 37,831,333
34
Healthcare, social services and support services 18,480,398 18,605,625 18,410,556 18,525,490
Information technology and communication services 11,633,615 11,403,418 11,633,615 11,403,418
Infrastructure development 17,421,563 17,083,131 17,421,563 17,083,131
Lending to overseas entities 129,398,136 108,985,813 122,689,880 103,344,570
Manufacturing 122,921,837 123,625,669 122,464,825 120,321,445

203
 GROUP BANK
As at December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000
Professional, scientific, and technical activities 26,000,516 23,782,598 24,789,072 23,486,651
Tourism 66,751,110 62,811,790 66,318,745 62,198,466
Transport and storage 13,055,953 12,906,113 12,954,106 12,758,129
Wholesale and retail trade 174,055,223 195,785,407 170,302,234 194,919,889
Total 961,859,118 930,737,391 947,841,905 920,457,235

34.2 Movement in provision for impairment during the year

34.2 (a) Group

Stage 1 Stage 2 Stage 3 Total

2020 2019 2020 2019 2020 2019 2020 2019
Notes to the Financial Statements

Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Balance as at January 1, 2,702,070 2,814,943 8,494,001 5,984,306 25,622,009 21,544,571 36,818,080 30,343,820
Charge/(write back) to the
Income Statement 18.1 184 3,863,356 (108,915) 3,901,554 2,511,088 10,359,763 7,907,684 18,124,673 10,309,857
Net write-off during the year (166) (2,396) (982) (1,150) (365,444) (2,596,520) (366,592) (2,600,066)
Exchange rate variance on
foreign currency provisions 2,495 (1,562) 1,728 (243) 39,600 6,035 43,823 4,230
Interest accrued/(reversals) on
impaired loans and advances 13.1 178 – – – – (2,895,955) (1,258,339) (2,895,955) (1,258,339)
Other movements – – – – 305,917 18,578 305,917 18,578
Financial Statements

Balance as at December 31, 6,567,755 2,702,070 12,396,301 8,494,001 33,065,890 25,622,009 52,029,946 36,818,080

34.2 (b) Bank

Stage 1 Stage 2 Stage 3 Total

2020 2019 2020 2019 2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000
Annual Report 2020

Balance as at January 1, 2,613,480 2,659,185 8,318,831 5,873,226 24,879,180 20,596,642 35,811,491 29,129,053
Charge/(write back) to the
income statement 18.2 185 3,856,007 (41,669) 3,925,463 2,447,313 10,083,744 7,637,999 17,865,214 10,043,643
Net write-off during the year (166) (2,396) (906) (1,118) (110,886) (2,121,615) (111,958) (2,125,129)
Exchange rate variance on
Commercial Bank of Ceylon PLC

foreign currency provisions 1,559 (1,640) 1,045 (590) 39,274 5,915 41,878 3,685
Interest accrued/(reversals) on
impaired loans and advances 13.1 178 – – – – (2,850,806) (1,258,339) (2,850,806) (1,258,339)
Other movements – – – – 240,633 18,578 240,633 18,578
Balance as at December 31, 6,470,880 2,613,480 12,244,433 8,318,831 32,281,139 24,879,180 50,996,452 35,811,491

34.3 Lease/Hire purchase receivable

GROUP BANK
As at December 31, 2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Gross lease/hire purchase receivable 37,237,050 36,147,829 35,815,635 34,169,283

Within one year 34.3 (a) & 34.3 (b) 205 14,897,348 15,538,778 14,144,117 14,604,341
From one to five years 34.3 (a) & 34.3 (b) 205 22,205,874 20,526,109 21,541,276 19,483,941
After five years 34.3 (a) & 34.3 (b) 205 133,828 82,942 130,242 81,001
34
Less: Provision for impairment 34.3 (c) (i) & 34.3 (c) (ii) 205 1,161,222 1,153,134 1,004,123 942,382
Stage 1 95,265 81,639 91,742 74,991
Stage 2 258,301 270,610 229,125 200,721
Stage 3 807,656 800,885 683,256 666,670
Net lease receivable 36,075,828 34,994,695 34,811,512 33,226,901

204
34.3 (a) Lease/Hire purchase receivable – Group

Within one year One to five years After five years Total
As at December 31, 2020 2019 2020 2019 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Total lease/hire purchase receivable 19,329,556 19,887,838 25,702,437 23,713,231 137,042 91,506 45,169,035 43,692,575
Less: Unearned lease/hire purchase income 4,432,208 4,349,060 3,496,563 3,187,122 3,214 8,564 7,931,985 7,544,746
Gross lease/hire purchase receivable 14,897,348 15,538,778 22,205,874 20,526,109 133,828 82,942 37,237,050 36,147,829
Less: Provision for impairment 708,728 667,590 451,251 484,595 1,243 949 1,161,222 1,153,134
Stage 1 39,602 35,766 55,393 45,714 270 159 95,265 81,639
Stage 2 98,480 104,052 159,161 165,899 660 659 258,301 270,610
Stage 3 570,646 527,772 236,697 272,982 313 131 807,656 800,885
Subtotal 14,188,620 14,871,188 21,754,623 20,041,514 132,585 81,993 36,075,828 34,994,695

Notes to the Financial Statements

34.3 (b) Lease/Hire purchase receivable – Bank

Within one year One to five years After five years Total
As at December 31, 2020 2019 2020 2019 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Total lease/hire purchase receivable 18,417,920 18,698,793 24,891,164 22,424,947 133,107 89,478 43,442,191 41,213,218
Less: Unearned lease/hire purchase income 4,273,803 4,094,452 3,349,888 2,941,006 2,865 8,477 7,626,556 7,043,935
Gross lease/hire purchase receivable 14,144,117 14,604,341 21,541,276 19,483,941 130,242 81,001 35,815,635 34,169,283
Less: Provision for impairment 629,680 578,412 373,618 363,442 825 528 1,004,123 942,382

Financial Statements
Stage 1 37,736 32,629 53,745 42,209 261 153 91,742 74,991
Stage 2 87,187 81,346 141,374 119,000 564 375 229,125 200,721
Stage 3 504,757 464,437 178,499 202,233 – – 683,256 666,670
Subtotal 13,514,437 14,025,929 21,167,658 19,120,499 129,417 80,473 34,811,512 33,226,901

34.3 (c) Movement in provision for impairment during the year

Annual Report 2020

34.3 (c) (i) Group

Stage 1 Stage 2 Stage 3 Total

2020 2019 2020 2019 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Balance as at January 1, 81,639 108,543 270,610 191,150 800,885 825,383 1,153,134 1,125,076

Commercial Bank of Ceylon PLC

Charge/(write back) to the Income Statement 13,626 (24,813) (12,233) 80,190 154,813 299,132 156,206 354,509
Net write-off during the year – (2,091) (76) (730) (125,223) (307,099) (125,299) (309,920)
Interest accrued/(reversals) on impaired
loans and advances – – – – (21,673) (16,395) (21,673) (16,395)
Other movements – – – – (1,146) (136) (1,146) (136)
Balance as at December 31, 95,265 81,639 258,301 270,610 807,656 800,885 1,161,222 1,153,134

34.3 (c) (ii) Bank

Stage 1 Stage 2 Stage 3 Total

2020 2019 2020 2019 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Balance as at January 1, 74,991 79,063 200,721 108,098 666,670 631,736 942,382 818,897
Charge/(write back) to the Income Statement 16,751 (1,981) 28,404 93,321 101,115 203,844 146,270 295,184
Net write-off during the year – (2,091) – (698) (61,710) (152,379) (61,710) (155,168)
34
Interest accrued/(reversals) on impaired loans and
advances – – – – (21,673) (16,395) (21,673) (16,395)
Other movements – – – – (1,146) (136) (1,146) (136)
Balance as at December 31, 91,742 74,991 229,125 200,721 683,256 666,670 1,004,123 942,382

205
 35. Financial assets at amortised cost – Debt and other financial instruments
Accounting policy
As per SLFRS 9, Financial assets are measured flows that are solely payments of principal fees and costs that are an integral part of the
at amortised cost if it meets both of the and interest on the principal amount EIR. The amortisation is included in “Interest
following conditions and is not designated outstanding. Income” while the losses arising from
at FVTPL: impairment are recognised in “impairment
After initial measurement, these assets
z The asset is held within a business model charges for loans and other losses” in the
are subsequently measured at amortised
whose objective is to hold assets to collect Income Statement.
cost (gross carrying amount using the EIR,
contractual cash flows; and less provision for impairment). Amortised
z The contractual terms of the financial cost is calculated by taking into account any
asset give rise on specified dates to cash discount or premium on acquisition and

GROUP BANK
As at December 31, 2020 2019 2020 2019
Notes to the Financial Statements

Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Government Securities – Sri Lanka 282,664,666 83,350,413 282,294,843 82,986,575

Treasury Bonds 186,530,856 47,278,715 186,530,856 47,278,715
Sri Lanka Sovereign Bonds (*) 96,133,810 36,071,698 95,763,987 35,707,860
Government Securities – Bangladesh 11,254,899 15,284,770 11,254,899 15,284,770
Treasury Bills – 4,080,152 – 4,080,152
Treasury Bonds 11,254,899 11,204,618 11,254,899 11,204,618
Government Securities – Maldives 8,969,091 5,553,077 – –
Financial Statements

Treasury Bills 8,969,091 5,553,077 – –

Other instruments 1,286,715 3,300,536 1,286,715 3,300,536
Debentures 35.2 207 561,716 2,520,350 561,716 2,520,350
Trust certificates 35.3 207 724,589 777,994 724,589 777,994
Corporate investments in Bangladesh 35.4 207 410 2,192 410 2,192
Less: Provision for impairment 35.1(a) &
2,115,842 2,108,891
Annual Report 2020

35.1(b) 206 429,775 427,062

Total 302,059,529 107,059,021 292,727,566 101,144,819

(*) Please refer Note 36.1 on page 208 for the details of reclassification of part of the Bank's Sri Lanka Sovereign Bond (SLSB) portfolio to amortised cost from Fair Value Through Other Comprehensive
Income (FVOCI) category effected during the year.

35.1 Movement in provision for impairment during the year

Commercial Bank of Ceylon PLC

35.1 (a) Group

Stage 1 Stage 2 Stage 3 Total

2020 2019 2020 2019 2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Balance as at January 1, 276,905 268,340 – – 152,870 – 429,775 268,340

Charge/(write back) to the Income Statement 18.1 184 1,685,968 8,569 – – – 152,870 1,685,968 161,439

Exchange rate variance on foreign currency

provisions 99 (4) – – – – 99 (4)

Balance as at December 31, 1,962,972 276,905 – – 152,870 152,870 2,115,842 429,775

35.1 (b) Bank

Stage 1 Stage 2 Stage 3 Total

2020 2019 2020 2019 2020 2019 2020 2019
35 Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Balance as at January 1, 274,192 266,252 – – 152,870 – 427,062 266,252

Charge/(write back) to the Income Statement 18.2 185 1,681,829 7,940 – – - 152,870 1,681,829 160,810

Balance as at December 31, 1,956,021 274,192 – – 152,870 152,870 2,108,891 427,062

The maturity analysis of financial assets at amortised cost – Debt and other financial instruments is given in Note 61 on pages 251 to 253.

206
35.2 Debentures
GROUP BANK
As at December 31, 2020 2019 2020 2019
Number of Carrying Number of Carrying Number of Carrying Number of Carrying
debentures value debentures value debentures value debentures value
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Bogawantalawa Tea Estate PLC 919,100 80,317 919,100 80,317 919,100 80,317 919,100 80,317
MTD Walkers PLC 1,528,701 152,870 1,528,701 152,870 1,528,701 152,870 1,528,701 152,870
Singer Finance (Lanka) PLC 3,000,000 328,529 2,902,500 319,130 3,000,000 328,529 2,902,500 319,130
Commercial Leasing and Finance PLC – – 10,000,000 1,097,500 – – 10,000,000 1,097,500
Dunamis Capital PLC – – 500,000 50,403 – – 500,000 50,403
Hayleys PLC – – 8,000,000 820,130 – – 8,000,000 820,130
Subtotal 561,716 2,520,350 561,716 2,520,350

Notes to the Financial Statements

35.3 Trust certificates
GROUP BANK
As at December 31, 2020 2019 2020 2019
Carrying Carrying Carrying Carrying
value value value value
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Richard Pieris Arpico Finance Ltd. 724,589 777,994 724,589 777,994

Subtotal 724,589 777,994 724,589 777,994

Financial Statements
35.4 Corporate investments in Bangladesh
GROUP BANK
As at December 31, 2020 2019 2020 2019
Carrying Carrying Carrying Carrying
value value value value

Annual Report 2020

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Prize bonds 410 2,192 410 2,192

Subtotal 410 2,192 410 2,192

Commercial Bank of Ceylon PLC

36. Financial assets measured at fair value through other comprehensive income
Accounting policy

As per SLFRS 9, this comprises debt instruments measured at FVOCI and equity instruments designated at FVOCI.

Debt instruments at FVOCI

A debt instrument is measured at FVOCI only if it meets both of the following conditions and is not designated at FVTPL:
z The asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets;
and
z The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the
principal amount outstanding.
Debt instruments at FVOCI are subsequently measured at fair value with gains and losses arising due to changes in fair value recognised in
OCI. Interest income, foreign exchange gains and losses, ECL and reversals are recognised in profit or loss. On derecognition, cumulative gains
or losses previously recognised in OCI are reclassified from OCI to profit or loss.

Equity instruments at FVOCI

Upon initial recognition, the Bank occasionally elects to classify irrevocably some of its equity investments held for strategic purpose, as equity
instruments at FVOCI when they meet the definition of Equity under LKAS 32 “Financial Instruments: Presentation” and are not held for trading. 35
Such classification is determined on an instrument-by-instrument basis. 36

Gains and losses on these equity instruments are never recycled to profit or loss instead directly transferred to retained earnings at the
time of derecognition. Dividends are recognised in profit or loss in “Net other operating income” when the right of the payment has been
established. Equity instruments at FVOCI are not subject to an impairment assessment.

207
 GROUP BANK
As at December 31, 2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Government securities
Government Securities – Sri Lanka 36.1 208 280,100,559 198,465,987 279,845,258 198,209,424
Less: Provision for impairment 36.2 208 1,675,834 861,693 1,675,834 861,693
278,424,725 197,604,294 278,169,424 197,347,731

Equity securities 36.3 (a) &

36.3 (b) 208 & 209 292,069 220,723 291,945 220,599
Quoted shares 239,773 169,013 239,773 169,013
Unquoted shares 52,296 51,710 52,172 51,586
Total 278,716,794 197,825,017 278,461,369 197,568,330
Notes to the Financial Statements

The maturity analysis of financial assets measured at fair value through other comprehensive income is given in Note 61 on pages 251 to 253.

36.1 Government Securities

GROUP BANK
As at December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Treasury Bills 26,934,822 9,472,297 26,679,521 9,215,734

Treasury Bonds 174,357,979 74,818,967 174,357,979 74,818,967
Sri Lanka Sovereign Bonds (*)
Financial Statements

22,296,574 57,164,759 22,296,574 57,164,759

Sri Lanka Development Bonds 56,511,184 57,009,964 56,511,184 57,009,964
Subtotal 280,100,559 198,465,987 279,845,258 198,209,424

(*) The Bank reclassified part of its SLSB Portfolio with the face value of Rs. 28,050.000 Mn. (USD 150 Mn.) and Rs. 32,117.250 Mn. (USD 171.750 Mn.) from FVOCI to Amortised Cost, as a result of changes
to the business model of managing the assets with effect from June 30, 2020 and July 1, 2020 respectively in line with the guidelines issued by the CA Sri Lanka on Accounting Consideration with the
COVID-19 outbreak. There was no change to the effective interest rate used and interest income recognised o/a reclassified SLSB Portfolio for the period under review. The fair value of the reclassified
portfolio as at December 31, 2020 was Rs. 36,943.692 Mn. The fair value loss of Rs. 16,900.049 Mn. (net of tax) would have been recognised in OCI during the reporting period if the financial assets had
not been reclassified.
Annual Report 2020

36.2 Movement in provision for impairment during the year

GROUP BANK
2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000
Commercial Bank of Ceylon PLC

Movement in Stage 1 Impairment

Balance as at January 1, 861,693 595,694 861,693 595,694
Charge/(write back) to the income statement 18.1 & 18.2 184 & 185 814,141 265,999 814,141 265,999
Balance as at December 31, 1,675,834 861,693 1,675,834 861,693

36.3 Equity securities

36.3 (a) Equity securities – As at December 31, 2020
GROUP BANK
Number of Market price Market value Cost of Number of Market price Market value Cost of
Sector/Name of the Company
shares investment shares investment
Rs. Rs. ’000 Rs. ’000 Rs. Rs. ’000 Rs. ’000

Quoted shares:
Materials
36 Alumex PLC 714,200 21.10 15,070 9,999 714,200 21.10 15,070 9,999
Subtotal 15,070 9,999 15,070 9,999

Retailing
RIL Property PLC 26,128,266 8.60 224,703 209,026 26,128,266 8.60 224,703 209,026
Subtotal 224,703 209,026 224,703 209,026
Total – quoted shares 239,773 219,025 239,773 219,025

208
 GROUP BANK
Number of Market price Market value Cost of Number of Market price Market value Cost of
Sector/Name of the Company
shares investment shares investment
Rs. Rs. ’000 Rs. ’000 Rs. Rs. ’000 Rs. ’000

Unquoted shares:
Other financial services
Central Depository of Bangladesh Ltd. 3,427,083 BDT 2.75 20,853 20,853 3,427,083 BDT 2.75 20,853 20,853
Credit Information Bureau of Sri Lanka 5,637 100.00 564 564 4,400 100.00 440 440
LankaClear (Pvt) Limited 1,000,000 10.00 10,000 10,000 1,000,000 10.00 10,000 10,000
Lanka Financial Services Bureau Limited 500,000 10.00 5,000 5,000 500,000 10.00 5,000 5,000
Lanka Ratings Agency Limited 689,590 12.50 8,620 8,620 689,590 12.50 8,620 8,620
Society for Worldwide Interbank Financial
Telecommunication (SWIFT) 47 EUR 841.90 7,259 7,259 47 EUR 841.90 7,259 7,259
Total – unquoted shares 52,296 52,296 52,172 52,172

Notes to the Financial Statements

Total equity securities 292,069 271,321 291,945 271,197

36.3 (b) Equity securities – As at December 31, 2019

GROUP BANK
Number of Market price Market value Cost of Number of Market price Market value Cost of
Sector/Name of the Company
shares investment shares investment
Rs. Rs. ’000 Rs. ’000 Rs. Rs. ’000 Rs. ’000

Quoted shares:
Bank, Finance and Insurance

Financial Statements
DFCC Bank PLC 3,496 91.90 321 155 3,496 91.90 321 155
Hatton National Bank PLC 12,383 172.20 2,132 373 12,383 172.20 2,132 373
Nations Trust Bank PLC 1,396 80.00 112 27 1,396 80.00 112 27
National Development Bank PLC 6,144 100.00 614 249 6,144 100.00 614 249
Sampath Bank PLC 6,464 162.40 1,050 664 6,464 162.40 1,050 664
Seylan Bank PLC 1,085 52.50 57 26 1,085 52.50 57 26
Subtotal 4,286 1,494 4,286 1,494

Annual Report 2020

Materials
Alumex PLC 714,200 14.80 10,570 9,999 714,200 14.80 10,570 9,999
Subtotal 10,570 9,999 10,570 9,999

Retailing
RIL Property PLC

Commercial Bank of Ceylon PLC

26,128,266 5.90 154,157 209,026 26,128,266 5.90 154,157 209,026
Subtotal 154,157 209,026 154,157 209,026
Total – quoted shares 169,013 220,519 169,013 220,519

Unquoted shares:
Other financial services
Central Depository of Bangladesh Ltd. 3,427,083 BDT 2.75 20,267 20,267 3,427,083 BDT 2.75 20,267 20,267
Credit Information Bureau of Sri Lanka 5,637 100.00 564 564 4,400 100.00 440 440
LankaClear (Pvt) Limited 1,000,000 10.00 10,000 10,000 1,000,000 10.00 10,000 10,000
Lanka Financial Services Bureau Limited 500,000 10.00 5,000 5,000 500,000 10.00 5,000 5,000
Lanka Ratings Agency Limited 689,590 12.50 8,620 8,620 689,590 12.50 8,620 8,620
Society for Worldwide Interbank Financial
Telecommunication (SWIFT) 47 EUR 841.90 7,259 7,259 47 EUR 841.90 7,259 7,259
Total – unquoted shares 51,710 51,710 51,586 51,586
Total equity securities 220,723 272,229 220,599 272,105

36

209
 37. Investments in subsidiaries
Accounting policy
Subsidiaries are investees controlled by the The Financial Statements of subsidiaries Director of the Department of Supervision
Group. The Group “controls” an investee if it is are included in the Consolidated Financial of Non-Bank Financial Institutions of the
exposed to, or has rights to, variable returns Statements from the date on which Central Bank of Sri Lanka. Similarly, the
from its involvement with the investee and control commences until the date when financial year of CBC Myanmar Microfinance
has the ability to affect those returns through control ceases. Company Limited ends on March 31, due
its power over the investee. The Group to requirements imposed by the Financial
The Financial Statements of all
reassesses whether it has control if there are Regulatory Department of Myanmar.
subsidiaries in the Group have a common
changes to one or more of the elements of
financial year which ends on December 31, All intra-group balances, transactions,
control. This includes circumstances in which
except for the CBC Finance Ltd., and CBC unrealised gains and losses resulting from
protective rights held (e.g. those resulting
Myanmar Microfinance Company Limited, intra-group transactions, income and
from a lending relationship) become
whose financial year ends on March 31. expenses are eliminated in full.
substantive and lead to the Group having
The Financial Statements of the Bank’s
power over an investee. There are no significant restrictions on
subsidiaries are prepared using consistent
Notes to the Financial Statements

the ability of subsidiaries to transfer funds

The cost of an acquisition is measured accounting policies.
to the Parent (the Bank) in the form of
at fair value of the consideration, including
The reason for using a different reporting cash dividend or repayment of loans and
contingent consideration. The acquired
date by the CBC Finance Ltd., is due to the advances.
identifiable assets, liabilities and contingent
requirement imposed by the Central Bank
liabilities are measured at their fair values at All subsidiaries of the Bank have been
of Sri Lanka for licensed finance companies
the date of acquisition. Subsequent to the incorporated in Sri Lanka except Commex
to publish their key financial data and key
initial measurement the Bank continues to Sri Lanka S.R.L., Commercial Bank of
performance indicators for a 12-month
recognise the investments in subsidiaries at Maldives Private Limited and CBC Myanmar
period ending March 31 and 6-month
cost. Microfinance Company Limited which were
period ending September 30, every year, in
incorporated in Italy, Republic of Maldives
accordance with the format prescribed by the
and Myanmar respectively.
Financial Statements

GROUP BANK
As at December 31, 2020 2019 2020 2019
Holding Cost Market value/ Cost Market value/ Cost Market value/ Cost Market value/
(****) Directors’ Directors’ Directors’ Directors’
valuation valuation valuation valuation
Note Page No. % Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Local subsidiaries:
Annual Report 2020

Quoted:
Commercial Development
Company PLC (*) 90 – – – – 261,198 1,263,600 261,198 854,280
(10,800,000 Ordinary shares) (@ Rs. 117.00) (@ Rs. 79.10)
(10,800,000 Ordinary shares
as at December 31, 2019)
Commercial Bank of Ceylon PLC

Unquoted:
CBC Tech Solutions Limited (formerly
known as ONEzero Company
Limited) 100 – – – – 5,000 5,000 5,000 5,000
(500,001 Ordinary shares)
(500,001 Ordinary shares
as at December 31, 2019)
Commercial Insurance Brokers
(Pvt) Ltd. (**) 60 – – – – 375,000 375,000 250,000 250,000
(359,999 Ordinary Shares )
(239,999 Ordinary Shares ( 58 in
as at December 31, 2019 ) 2019 )

Unquoted:
CBC Finance Ltd. (Formally known as
Serendib Finance Ltd.) 100 – – – – 3,791,046 3,791,046 2,791,046 2,791,046
(221,793,474 Ordinary Shares )
(151,469,986 Ordinary shares
as at December 31, 2019)
37 Foreign subsidiaries:
Unquoted:
Commex Sri Lanka
S.R.L.(incorporated in Italy) (***) 100 – – – – 370,633 327,855 370,633 327,855
(300,000 Ordinary shares)
(300,000 Ordinary shares
as at December 31, 2019)

210
 GROUP BANK
As at December 31, 2020 2019 2020 2019
Holding Cost Market value/ Cost Market value/ Cost Market value/ Cost Market value/
(****) Directors’ Directors’ Directors’ Directors’
valuation valuation valuation valuation
Note Page No. % Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Commercial Bank of Maldives

Private Limited 55 – – – – 984,707 984,707 984,707 984,707
(104,500 Ordinary shares)

(104,500 Ordinary shares

as at December 31, 2019)
CBC Myanmar Microfinance
Co. Limited 100 – – – – 391,478 391,478 391,478 391,478
(2,420,000 Ordinary shares)
(2,420,000 Ordinary shares
as at December 31, 2019)

Notes to the Financial Statements

Gross Total – – – – 6,179,062 7,138,686 5,054,062 5,604,366
Provision for impairment 37.1 211 (370,633) – (42,778) –
Net total – – – – 5,808,429 7,138,686 5,011,284 5,604,366

(*) During 2015 the Board of Directors of the Bank resolved to on “Consolidated Financial Statements”, changes in a parent’s 60% from 40%. Prior to the above acquisition, the Bank had an
reduce the shareholding of Commercial Development Company ownership interest in a subsidiary that do not result in the effective holding of 58% (40% direct and 18% indirect) in CIBL.
PLC, (in which the Bank originally had a stake of 94.55%) to parent losing control are equity transactions and hence, the (***)The investment made in Commex Sri Lanka S.R.L. Italy
comply with the requirements of the Listing Rule No. 7.13 of resulting gain/loss was recognised in equity in 2019. has been fully impaired during the year.
the Colombo Stock Exchange on Minimum Public Holding. (**) The Bank acquired a further 20% stake (120,000
Accordingly, the Bank disposed 545,705 shares since (****) Unless otherwise indicated, holding percentage
shares) in Commercial Insurance Brokers (Private) Limited remains unchanged from 2019 to 2020.
November 2015 through the Colombo Stock Exchange and (CIBL) for a purchase consideration of Rupees One Hundred and
reduced the shareholding in the above Company to 90.00% by Twenty Five Million (Rs. 125,000,000/-) from its own subsidiary,
December 31, 2019. The maturity analysis of investment in subsidiaries
Commercial Development Co. PLC on December 30, 2020.

Financial Statements
Consequent to the above disposal, ownership interests of is given in Note 61 on pages 251 to 253.
Accordingly, the Bank’s direct stake in CIBL increased to
the Bank has changed while retaining control. As per SLFRS 10

37.1 Movement in provision for impairment o/a subsidiaries during the year
GROUP BANK
2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Annual Report 2020

Balance as at January 1, – – 42,778 42,778
Charge/(write back) to the Income Statement 18 182 – – 327,855 –
Balance as at December 31, – – 370,633 42,778

37.2 Acquisition of subsidiary

Commercial Bank of Ceylon PLC

Bank acquired 40% stake in Commercial Insurance Brokers (Private) Limited, from Chemanex PLC, for a purchase consideration of Rupees Two
Hundred and Fifty Million (Rs. 250 Mn) on August 05, 2019.
As the Bank’s subsidiary, Commercial Development Co. PLC too has a stake of 20% in Commercial Insurance Brokers (Private) Limited,
it makes the group’s stake in Commercial Insurance Brokers (Private) Limited to be 58.00% as at December 31,2019 and total purchase
consideration of Rs. 343.955 Mn. The Bank obtained all relevant regulatory approvals prior to the acqusition of this Company.

37.2.1 Consideration transferred

Total purchase consideration stated above was satisfied in the form of cash & fair value of investments in associate in Group books.

37.2.2 Identifiable assets acquired and liabilities assumed

The recognised amounts of assets acquired and liabilities assumed of Commercial Insurance Brokers (Private) Limited as at the date of
acquisition were as follows.
Fair value recognised
on acquisition
Note Page No. Rs. ’000

Assets
37
Cash and cash equivalents 158,284
Loans and receivables to other customers 4,960
Property, plant and equipment (Net) 39.1 215 435,428
Investment properties 40 225 46,350

211
 Fair value recognised
on acquisition
Note Page No. Rs. ’000
Intangible assets (Net) 41.1 227 5,802
Other assets 28,218
Total assets 679,042

Liabilities
Current tax liabilities 48 232 (13,660)
Deferred tax liabilities 42.1 228 (88,884)
Provision for gratuity payable 49.2 (b) 234 (30,253)
Other liabilities (34,511)
Total liabilities (167,308)
Fair value of identifiable net assets at the date of acquisition 511,734
Notes to the Financial Statements

Fair value of identifiable net assets at the date of acquisition attributable to Bank 298,853

Fair value of the land and buildings and investment properties acquired was obtained using the valuations carried out by an independent
professional valuer.

37.2.3 Goodwill
Goodwill arising from the acquisition has been recognised as the excess of the consideration transferred over the net identifiable assets
acquired and liabilities assumed.
Note Page No. Rs. ’000

Consideration transferred 37.2.4 212 343,955

Financial Statements

Fair value of identifiable net assets at the date of acquisition attributable to Bank 37.2.2 211 (298,853)
Goodwill 45,102

37.2.4 Cost of the acquisition of a subsidiary, net of cash acquired

GROUP BANK
Rs. ’000 Rs. ’000
Annual Report 2020

Total purchase consideration transferred 343,955 250,000

Fair value of investments in associates in Group books 93,955 –
Cash consideration 250,000 250,000
Cash and cash equivalents acquired on business combination (158,284) –
Cost of the acquisition of a subsidiary, net of cash acquired 91,716 250,000
Commercial Bank of Ceylon PLC

The maturity analysis of investment in subsidiaries is given in Note 61 on pages 251 to 253.

38. Investment in associate

Accounting Policy
Associates are those entities in which the from the date that significant influence When the Group’s share of losses exceeds
Group has significant influence, but not commences until the date that significant its interest in an equity-accounted investee,
control, over the variable returns through its influence ceases. Accordingly, under the the carrying amount of that interest,
power over the investee. Significant influence Equity Method, investments in associates including any long-term investments, is
is presumed to exist when the Group holds
are carried at cost plus post-acquisition reduced to nil and the recognition of further
20% or more of the voting power of another
entity. changes in the Group’s share of net assets of losses is discontinued except to the extent
the associates and are reported as a separate that the Group has an obligation or has made
Investments in associates are accounted line item in the Statement of Financial payments on behalf of the investee. If the
for using the equity method and are Position. The Income Statement reflects the associate subsequently reports profits, the
recognised initially at cost, in terms of Sri Group’s share of the results of operations of Group resumes recognising its share of those
Lanka Accounting Standards – LKAS 28 the associates. Any change in OCI of those profits only after its share of the profits equal
on “Investments in Associates and Joint investees is presented as part of the Group’s the share of losses not recognised previously.
37
Ventures”. The Group’s investment includes OCI. In addition, when there has been a
38
goodwill identified on acquisition, net of The Group discontinues the use of
change recognised directly in the equity of
any accumulated impairment losses. The the Equity Method from the date that
the associate, the Group recognises its share
Consolidated Financial Statements include it ceases to have significant influence
of any changes, when applicable, in Equity
the Group’s share of the income and expenses over an associate and accounts for such
through OCI. Unrealised gains and losses
and equity movements of equity-accounted investments in accordance with the Sri Lanka
resulting from transactions between the
investees, after adjustments to align the Accounting Standard – SLFRS 9 on “Financial
Group and the associate are eliminated to the
Accounting Policies with those of the Group, Instruments”.
extent of the interest in associate.
212
 Upon loss of significant influence over After application of the Equity Method, the amount of impairment as the difference
the associate, the Group measures and the Group determines whether it is necessary between the recoverable amount of
recognises any retained investment at to recognise an impairment loss on its the associate and its carrying value, and
its fair value. Any difference between the investment in its associate. At each reporting recognises the loss as “Share of Profit of
carrying amount of the associate upon loss date, the Group determines whether Associate” in the Income Statement.
of significant influence and the fair value of there is objective evidence that the
In the separate Financial Statements,
the retained investment and proceeds from investment in the associate is impaired. If
Investments in associates are accounted
disposal is recognised in profit or loss. there is such evidence, the Group calculates
at cost.

As at December 31, 2020 2019

Incorporation Ownership No. of Cost Carrying Cost Carrying
and operation interest shares value value
% Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Equity Investments Lanka Ltd. Sri Lanka 22.92 4,110,938 44,331 64,155 44,331 56,821
44,331 64,155 44,331 56,821

Notes to the Financial Statements

38.1 Reconciliation of summarised financial information
Reconciliation of the summarised financial information to the carrying amount of the interest in associates recognised in the Consolidated
Financial Statements is as follows:
2020 2019
Equity Commercial Total Equity Commercial Total
Investments Insurance Investments Insurance
Lanka Ltd. Brokers Lanka Ltd. Brokers
(Pvt) Ltd. (Pvt) Ltd.
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Financial Statements
Cost of investments 44,331 – 44,331 44,331 100 44,431
Add: Share of profit applicable to the Group
Investment in associate – As at January 1, 12,490 – 12,490 13,771 47,118 60,889
Total comprehensive income 38.2 (a) 213 7,334 – 7,334 (1,281) 49,906 48,625
Profit/(loss) for the period recognised in
income statement, net of tax 3,898 – 3,898 (339) 10,331 9,992
Profit or loss and other comprehensive

Annual Report 2020

income, net of tax 3,436 – 3,436 (942) 39,575 38,633
Movement due to change in equity – – – – (409) (409)
Dividend received – – – – (2,760) (2,760)
Acquisition of the control of the associate 37.2.4 212 – – – – (93,955) (93,955)
Balance as at December 31, 64,155 – 64,155 56,821 – 56,821

Commercial Bank of Ceylon PLC

38.2 Summarised financial information in respect of associates is set out below:
38.2 (a) Summarised Income Statement
For the year ended December 31, 2020 2019
Equity Commercial Total Equity Commercial Total
Investments Insurance Brokers Investments Insurance Brokers
Lanka Ltd. (Pvt) Ltd. Lanka Ltd. (Pvt) Ltd.
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Revenue 49,129 – 49,129 22,672 213,059 235,731

Expenses (32,123) – (32,123) (24,051) (140,126) (164,177)
Income tax – – – (101) (16,786) (16,887)
Profit from continuing operations, net of tax 17,006 – 17,006 (1,480) 56,147 54,667

Group’s share of profit from

continuing operations, net of tax 3,898 – 3,898 (339) 10,331 9,992
Other comprehensive income, net of tax 14,989 – 14,989 (4,109) 215,080 210,971 38
Group’s share of other comprehensive income
from continuing operations, net of tax 3,436 – 3,436 (942) 39,575 38,633
Share of results of equity accounted investee
recognised in Income Statement and
Statement of Profit or Loss and Other
Comprehensive Income 7,334 – 7,334 (1,281) 49,906 48,625

213
 38.2 (b) Summarised Statement of Financial Position
As at December 31, 2020 2019
Equity Commercial Equity Commercial
Investments Insurance Brokers Investments Insurance Brokers
Lanka Ltd. (Pvt) Ltd. Lanka Ltd. (Pvt) Ltd.
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Non-current assets 338,604 – 156,161 486,820

Current assets 167,505 – 97,190 191,035
Non-current liabilities (216,598) – (1,472) (119,058)
Current liabilities (9,601) – (3,967) (48,172)
Net assets 279,910 – 247,912 510,625
Group’s share of net assets 64,155 – 56,821 93,955
Acquisition of the control of the associate – – – (93,955)
Notes to the Financial Statements

Carrying amount of interest in associates 64,155 – 56,821 –

The Group recognises the share of net assets of the associates under the Equity Method to arrive at the Directors’ valuation.

The maturity analysis of Investments in associates is given in Note 61 on pages 251 to 253.

39. Property, plant and equipment and right-of-use assets

Accounting policy

The Group applies the requirements of z Cost model statement or charged to Revaluation
the Sri Lanka Accounting Standard – The Group applies the Cost Model to all Reserve in Equity through OCI, only to
Financial Statements

LKAS 16 on “Property, Plant and Equipment” property, plant and equipment except the extent of any credit balance existing
in accounting for its owned assets which are freehold land and freehold and leasehold in the Revaluation Reserve in respect of
held for and used in the provision of services, buildings. These are recorded at cost of that asset. Any balance remaining in the
for rental to others or for administrative purchase together with any incidental Revaluation Reserve in respect of an asset,
purposes and are expected to be used for expenses thereon, less accumulated is transferred directly to Retained Earnings
more than one year. depreciation and any accumulated on retirement or disposal of the asset.
impairment losses.
Basis of recognition The Group revalued its freehold land,
Annual Report 2020

Property, plant and equipment is recognised z Revaluation model freehold and leasehold buildings as
if it is probable that future economic The Group applies the revaluation at December 31, 2020. Methods and
benefits associated with the asset will flow model for the entire class of freehold significant assumptions including
to the Group and cost of the asset can be land, freehold and leasehold buildings unobservable market inputs employed
reliably measured. for measurement after initial recognition. in estimating the fair value are given in
Such properties are carried at revalued Note 39.5 (b) and Note 39.5 (c).
Basis of measurement amounts, being their fair value at
Commercial Bank of Ceylon PLC

The Bank carried out a revaluation of

An item of property, plant and equipment the date of revaluation, less any its freehold land, freehold and leasehold
that qualifies for recognition as an asset is subsequent accumulated depreciation buildings as at December 31, 2020
initially measured at its cost. Cost includes on buildings and any accumulated as required by Section 7.1 (b) of the
expenditure that is directly attributable to impairment losses charged subsequent Direction No. 01 of 2014 on “Valuation
the acquisition of the asset and subsequent to the date of valuation. Freehold land, of Immovable Property of Licensed
costs (excluding the costs of day-to-day freehold and leasehold buildings of the Commercial Banks” issued by the CBSL
servicing) as explained below. Group are revalued by independent and recognised the revaluation gains/
The cost of self-constructed assets includes professional valuers every three years (losses) in the Financial Statements.
the cost of materials and direct labour, any or more frequently if the fair values are
other costs directly attributable to bringing substantially different from carrying The next revaluation exercise on the
the asset to a working condition for its amounts, to ensure that the carrying freehold land, freehold and leasehold
intended use and the costs of dismantling amounts do not differ from the fair values buildings will be carried out on or before
and removing the items and restoring as at the reporting date. December 31, 2023. 
the site on which they are located and
On revaluation of an asset, any increase Subsequent expenditure
capitalised borrowing costs. Purchased
in the carrying amount is recognised in Subsequent expenditure is capitalised only
software which is integral to the functionality
Revaluation Reserve in Equity through when it is probable that the future economic
of the related equipment is capitalised as
38 OCI or used to reverse a previous loss benefits of the expenditure will flow to the
part of Computer Equipment.
39 on revaluation of the same asset, which Group. Ongoing repairs and maintenance are
When parts of an item of property, plant was charged to the Income Statement. expensed as incurred.
and equipment have different useful lives, In this circumstance, the increase is
they are accounted for as separate items recognised as income only to the extent Derecognition
(major components) of property, plant of the amounts written down previously. An item of property, plant and equipment
and equipment. Any decrease in the carrying amount is is derecognised upon disposal or when
recognised as an expense in the income no future economic benefits are expected

214
from its use. Any gain or loss arising on part is derecognised as required by Sri Lanka is transferred to the relevant asset when it
derecognition of the asset (calculated as Accounting Standard – LKAS 16 on “Property, is in the location and condition necessary
the difference between the net disposal plant and Equipment”. for it to be capable of operating in the
proceeds and the carrying amount of the manner intended by Management (i.e.,
asset), is recognised in “Net other operating Capital work-in-progress available for use).
income” in profit or loss in the year the asset These are expenses of capital nature directly
is derecognised. incurred in the construction of buildings, Right-of-use assets
major plant and machinery and system Right-of-use assets are presented together
When replacement costs are recognised development, awaiting capitalisation. with property, plant and equipment in the
in the carrying amount of an item of These are stated in the Statement of Financial Statement of Financial Position.
property, plant and equipment, the Position at cost less any accumulated
remaining carrying amount of the replaced impairment losses. Capital work-in-progress

39.1 Group – 2020

Notes to the Financial Statements

Freehold Freehold Leasehold Computer Motor Office Capital Right-of Total Total
land buildings buildings equipment vehicles equipment, work-in- use assets 2020 2019
furniture and progress
fixtures
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs.’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000  Rs. ’000 

Cost/valuation
Balance as at January 1, 7,792,197 4,394,940 1,240,759 6,523,758 549,127 6,791,871 513,803 6,326,264 34,132,719 26,133,242
Effect of adoption of SLFRS 16 – – – – – – – – – 5,076,844
Property, plant and equipment
acquired on business
combination 37.2.2 211 – – – – – – – – – 525,137
Additions/transfers during

Financial Statements
the year – 3,787 10,725 516,359 11,936 414,301 202,604 789,216 1,948,928 2,673,746
Transfer of accumulated
depreciation on assets revalued – (531,311) (97,991) – – – – – (629,302) –
Surplus on revaluation of
property 1,611,745 2,046,597 26,193 – – – – – 3,684,535 –
Revaluation loss in excess of
cumulative reserve 21 186 (17,508) (22,364) – – – – – – (39,872) –

Annual Report 2020

Disposals during the year – – – (116,352) (12,894) (57,631) – – (186,877) (142,690)
Exchange rate variance – – – 8,023 3,119 20,038 – 53,546 84,726 (60,358)
Transfers/adjustments – 141,202 – – – (900) (141,202) – (900) (73,202)
Balance as at December 31, 9,386,434 6,032,851 1,179,686 6,931,788 551,288 7,167,679 575,205 7,169,026 38,993,957 34,132,719

Accumulated depreciation
and impairment losses

Commercial Bank of Ceylon PLC

Balance as at January 1, – 376,531 83,564 4,634,391 340,958 5,099,906 – 1,072,711 11,608,061 9,118,006
Effect of adoption of SLFRS 16 – – – – – – – – – 25,636
Accumulated depreciation
assumed on business
combination 37.2.2 211 – – – – – – – – – 89,709
Charge for the year 20 185 – 156,746 36,590 699,928 64,784 634,588 – 1,199,104 2,791,740 2,588,863
Impairment loss – – – – – – – – – –
Transfer of accumulated
depreciation on assets revalued – (531,311) (97,991) – – – – – (629,302) –
Disposals during the year – – – (116,202) (12,894) (54,700) – – (183,796) (138,232)
Exchange rate variance – – – 4,947 2,200 13,477 – – 20,624 (9,441)
Transfers/adjustments – – – – – – – – – (66,480)
Balance as at December 31, – 1,966 22,163 5,223,064 395,048 5,693,271 – 2,271,815 13,607,327 11,608,061

Net book value as at

December 31, 2020 9,386,434 6,030,885 1,157,523 1,708,724 156,240 1,474,408 575,205 4,897,211 25,386,630 –

Net book value as at 39

December 31, 2019 7,792,197 4,018,409 1,157,195 1,889,367 208,169 1,691,965 513,803 5,253,553 – 22,524,658

215
 39.2 Group – 2019
Freehold Freehold Leasehold Computer Motor Office Capital Right of Total Total
land buildings buildings equipment vehicles equipment, work-in- use assets 2019 2018
furniture and progress
fixtures
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs.’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000  Rs. ’000 

Cost/valuation
Balance as at January 1, 7,465,645 4,294,255 1,240,759 5,957,479 480,508 6,363,950 330,646 – 26,133,242 24,218,194
Effect of adoption of SLFRS 16 – – – – – – – 5,076,844 5,076,844 –
Property, plant and equipment
acquired on business
combination 37.2.2 211 337,000 83,712 – 19,459 54,506 30,460 – – 525,137 –
Additions/transfers during
the year – 6,525 – 589,097 39,990 560,785 183,157 1,294,192 2,673,746 2,081,002
Disposals during the year – – – (36,097) (23,832) (82,761) – – (142,690) (296,116)
Exchange rate variance – – – (4,643) (2,045) (8,898) – (44,772) (60,358) 131,362
Notes to the Financial Statements

Transfers/adjustments (10,448) 10,448 – (1,537) – (71,665) – – (73,202) (1,200)

Balance as at December 31, 7,792,197 4,394,940 1,240,759 6,523,758 549,127 6,791,871 513,803 6,326,264 34,132,719 26,133,242

Accumulated depreciation
and impairment losses
Balance as at January 1, – 193,632 47,983 3,992,128 273,940 4,610,323 – – 9,118,006 7,901,150
Effect of adoption of SLFRS 16 – – – – – – – 25,636 25,636 –
Accumulated depreciation
assumed on business
combination 37.2.2 211 – 26,925 – 12,313 22,623 27,848 – – 89,709 –
Charge for the year 20 185 – 155,974 35,581 669,307 68,141 612,785 – 1,047,075 2,588,863 1,383,581
Financial Statements

Impairment loss – – – – – – – – – –
Disposals during the year – – – (35,612) (22,621) (79,999) – – (138,232) (265,704)
Exchange rate variance – – – (2,390) (1,125) (5,926) – – (9,441) 99,052
Transfers/adjustments – – – (1,355) – (65,125) – – (66,480) (73)
Balance as at December 31, – 376,531 83,564 4,634,391 340,958 5,099,906 – 1,072,711 11,608,061 9,118,006

Net book value as at

December 31, 2019 7,792,197 4,018,409 1,157,195 1,889,367 208,169 1,691,965 513,803 5,253,553 22,524,658 –
Annual Report 2020

Net book value as at

December 31, 2018 7,465,645 4,100,623 1,192,776 1,965,351 206,568 1,753,627 330,646 – – 17,015,236

The carrying amount of Group’s revalued assets that would have been included in the Financial Statements had the assets been carried at cost
less depreciation/amortisation is as follows:

As at December 31, 2020 2019

Commercial Bank of Ceylon PLC

Cost Accumulated Net book Cost Accumulated Net book

Depreciation value Depreciation value
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Class of asset
Freehold land 1,121,538 – 1,121,538 1,121,538 – 1,121,538
Freehold buildings 1,855,883 539,333 1,316,550 1,710,894 492,927 1,217,967
Leasehold buildings 341,196 312,540 28,656 330,470 297,059 33,411
Total 3,318,617 851,873 2,466,744 3,162,902 789,986 2,372,916

39.3 Bank – 2020

Freehold Freehold Leasehold Computer Motor Office Capital Right-of-use Total Total
land buildings buildings equipment vehicles equipment, work-in- assets 2020 2019
furniture and progress
fixtures
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000  Rs. ’000 

39 Cost/valuation
Balance as at January 1, 7,232,962 4,187,178 100,037 6,429,055 201,750 6,591,931 509,517 6,461,845 31,714,275 24,149,652
Effect of adoption of SLFRS 16 – – – – – – – – – 5,209,465
Additions/transfers during the year – 3,787 – 505,742 300 394,743 202,069 734,837 1,841,478 2,608,158
Transfer of accumulated depreciation
on assets revalued – (494,319) – – – – – – (494,319) –

216
 Freehold Freehold Leasehold Computer Motor Office Capital Right-of-use Total Total
land buildings buildings equipment vehicles equipment, work-in- assets 2020 2019
furniture and progress
fixtures
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000  Rs. ’000 

Surplus on revaluation of property 1,559,250 2,026,180 – – – – – – 3,585,430 –

Revaluation loss in excess of
cumulative reserve 21 186 (17,508) (22,364) – – – – – – (39,872) –
Disposals during the year – – – (114,171) – (50,785) – – (164,956) (122,718)
Exchange rate variance – – – 6,767 3,119 13,476 – 46,129 69,491 (57,080)
Transfers/adjustments – 141,202 – – – (900) (141,202) – (900) (73,202)
Balance as at December 31, 8,774,704 5,841,664 100,037 6,827,393 205,169 6,948,465 570,384 7,242,811 36,510,627 31,714,275

Accumulated Depreciation
and Impairment Losses
Balance as at January 1, – 341,640 19,229 4,582,679 145,161 4,978,990 – 1,139,373 11,207,072 8,848,406

Notes to the Financial Statements

Effect of adoption of SLFRS 16 – – – – – – – – – 13,188
Charge for the year 20 185 – 152,679 2,934 686,409 17,520 599,971 – 1,271,927 2,731,440 2,541,281
Impairment loss – – – – – – – – – –
Transfer of accumulated depreciation
on assets revalued – (494,319) – – – – – – (494,319) –
Disposals during the year – – – (114,051) – (49,002) – – (163,053) (119,651)
Exchange rate variance – – – 4,302 2,200 10,591 – – 17,093 (9,672)
Transfers/adjustments – – – – – – – – – (66,480)
Balance as at December 31, – – 22,163 5,159,339 164,881 5,540,550 – 2,411,300 13,298,233 11,207,072

Net book value as at

Financial Statements
December 31, 2020 8,774,704 5,841,664 77,874 1,668,054 40,288 1,407,915 570,384 4,831,511 23,212,394 –

Net book value as at

December 31, 2019 7,232,962 3,845,538 80,808 1,846,376 56,589 1,612,941 509,517 5,322,472 – 20,507,203

39.4 Bank – 2019

Freehold Freehold Leasehold Computer Motor Office Capital Right-of-use Total Total

Annual Report 2020

land buildings buildings equipment vehicles equipment, work-in- assets 2019 2018
furniture and progress
fixtures
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000  Rs. ’000 

Cost/valuation
Balance as at January 1, 7,243,410 4,170,205 100,037 5,902,923 201,175 6,205,242 326,660 – 24,149,652 22,338,222
Effect of adoption of SLFRS 16 – – – – – – – 5,209,465 5,209,465 –

Commercial Bank of Ceylon PLC

Additions/transfers during the year – 6,525 – 567,689 7,890 549,005 182,857 1,294,192 2,608,158 1,937,332
Disposals during the year – – – (35,508) (5,270) (81,940) – – (122,718) (235,151)
Exchange rate variance – – – (4,512) (2,045) (8,711) – (41,812) (57,080) 110,449
Transfers/adjustments (10,448) 10,448 – (1,537) – (71,665) – – (73,202) (1,200)
Balance as at December 31, 7,232,962 4,187,178 100,037 6,429,055 201,750 6,591,931 509,517 6,461,845 31,714,275 24,149,652

Accumulated Depreciation
and Impairment Losses
Balance as at January 1, – 189,127 16,295 3,963,596 134,197 4,545,191 – – 8,848,406 7,703,512
Effect of adoption of SLFRS 16 – – – – – – – 13,188 13,188 –
Charge for the year 20 185 – 152,513 2,934 657,936 17,359 584,354 – 1,126,185 2,541,281 1,279,378
Disposals during the year – – – (35,071) (5,270) (79,310) – – (119,651) (226,155)
Exchange rate variance – – – (2,427) (1,125) (6,120) – – (9,672) 91,744
Transfers/adjustments – – – (1,355) – (65,125) – – (66,480) (73)
Balance as at December 31, – 341,640 19,229 4,582,679 145,161 4,978,990 – 1,139,373 11,207,072 8,848,406
39
Net book value as at
December 31, 2019 7,232,962 3,845,538 80,808 1,846,376 56,589 1,612,941 509,517 5,322,472 20,507,203 –

Net book value as at

December 31, 2018 7,243,410 3,981,078 83,742 1,939,327 66,978 1,660,051 326,660 – – 15,301,246

217
 The carrying amount of Bank’s revalued assets that would have been included in the Financial Statements had the assets been carried at cost
less depreciation/amortisation is as follows:

As at December 31, 2020 2019

Cost Accumulated Net book Cost Accumulated Net book
depreciation value depreciation value
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Class of asset
Freehold land 958,572 – 958,572 958,572 – 958,572
Freehold buildings 1,800,362 527,085 1,273,277 1,655,373 481,833 1,173,540
Leasehold buildings 98,138 69,482 28,656 98,138 64,727 33,411
Total 2,857,072 596,567 2,260,505 2,712,083 546,560 2,165,523

The maturity analysis of Property, plant and equipment is given in Note 61 on pages 251 to 253.
Notes to the Financial Statements

39.5 (a) Information on freehold land and buildings of the Bank and the Group – Extents and locations
[As required by the Rule No. 7.6 (viii) of the “Continuing Listing Requirements” of the Colombo Stock Exchange]
Location Number of Extent Buildings Revalued Revalued Net book Net book
buildings (perches) (square amounts amounts value/ value before
feet) land buildings revalued revaluation
amount
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

CEO’s Bungalow – No. 27, Queens Road, Colombo 03 1 64 5,616 1,150,000 50,000 1,200,000 988,300
Holiday Bungalow – Bandarawela, Ambatenne Estate, Bandarawela 1 423 5,649 90,800 18,600 109,400 87,060
Holiday Bungalow – Haputale, No. 23, Lilly Avenue, Welimada Road,
Financial Statements

Haputale 1 258 5,662 51,400 24,400 75,800 59,305

Branch Buildings
Battaramulla – No. 213, Kaduwela Road, Battaramulla 1 14 11,216 52,500 87,375 139,875 136,650
Battaramulla – No. 213, Kaduwela Road, Battaramulla – 13 Bare Land 50,000 – 50,000 50,000
Borella – No. 92, D S Senanayake Mawatha, Borella, Colombo 08 1 16 16,880 246,000 254,000 500,000 386,080
Chilaw – No. 44, Colombo Road, Chilaw 1 35 9,420 114,693 37,708 152,401 130,965
Annual Report 2020

City Office – No. 98, York Street, Colombo 01 1 – 24,599 – 600,000 600,000 38,687
Duplication Road – Nos. 405, 407, R A De Mel Mawatha, Colombo 03 1 20 4,194 370,000 30,000 400,000 227,332
Galewela – No. 49/57, Matale Road, Galewela 1 99 5,632 39,600 16,900 56,500 46,337
Galle Main Street – No. 130, Main Street, Galle 1 7 3,675 60,750 9,600 70,350 62,006
Galle Fort – No. 22, Church Street, Fort, Galle 1 100 11,625 262,015 98,185 360,200 438,477
Commercial Bank of Ceylon PLC

Gampaha – No. 51, Queen Mary’s Road, Gampaha 1 33 4,775 105,280 10,720 116,000 83,866
Hikkaduwa – No. 217, Galle Road, Hikkaduwa 1 37 7,518 43,470 29,680 73,150 60,999
Ja-Ela – No. 140, Negombo Road, Ja-Ela 1 13 7,468 43,000 30,000 73,000 56,771
Jaffna – No. 474, Hospital Road, Jaffna – 78 Bare Land 429,825 – 429,825 1,000,000
Kandy – No. 120, Kotugodella Veediya, Kandy 1 45 44,500 521,000 272,000 793,000 625,107
Karapitiya – No. 89, Hirimbura Cross Road, Karapitiya 1 38 3,627 73,720 19,180 92,900 103,454
Kegalle – No. 186, Main Street, Kegalle 1 85 2,650 172,500 7,200 179,700 163,036
Keyzer Street – No. 32, Keyzer Street, Colombo 11 1 7 6,100 109,000 23,000 132,000 104,054
Kollupitiya – No. 285, Galle Road, Colombo 03 1 17 16,254 299,000 65,500 364,500 284,840
Kotahena – No. 198, George R De Silva Mawatha, Kotahena, Colombo 13 1 28 26,722 279,000 190,000 469,000 391,250
Kurunegala – No. 4, Suratissa Mawatha, Kurunegala 1 50 10,096 257,390 42,610 300,000 276,760
Maharagama – No. 154, High Level Road, Maharagama 1 18 8,440 133,000 67,000 200,000 134,360
Matale – No. 70, King Street, Matale 1 51 8,596 201,000 65,000 266,000 180,771
Matara – No. 18, Station Road, Matara 1 38 8,137 69,465 30,835 100,300 86,384
Minuwangoda – No. 9, Siriwardena Mawatha, Minuwangoda 1 25 5,550 71,250 14,985 86,235 71,984
39
Narahenpita – No. 201, Kirula Road, Narahenpita, Colombo 05 1 22 11,193 263,000 137,000 400,000 268,857
Narammala – No. 55, Negombo Road, Narammala 1 41 5,353 71,871 20,624 92,495 80,021
Negombo – Nos. 24, 26, Fernando Avenue, Negombo 1 37 11,360 167,000 39,000 206,000 167,680
Nugegoda – No. 100, Stanley Thilakaratne Mawatha, Nugegoda 1 39 11,150 485,000 115,000 600,000 202,800
Nuwara Eliya – No. 36/3, Buddha Jayanthi Mawatha, Nuwara Eliya 1 42 10,184 187,000 76,800 263,800 192,823

218
Location Number of Extent Buildings Revalued Revalued Net book Net book
buildings (perches) (square amounts amounts value/ value before
feet) land buildings revalued revaluation
amount
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Panadura – No. 375, Galle Road, Panadura 1 12 6,168 30,750 40,092 70,842 72,940
Peliyagoda Stores – No. 37, New Nuge Road, Peliyagoda 1 – 14,676 – 116,000 116,000 7,737
Pettah – People’s Park Shopping Complex, Colombo 11 1 – 3,147 – 80,000 80,000 58,960
Pettah-Stores – People’s Park Shopping Complex, Colombo 11 1 – 225 – 6,670 6,670 4,750
Pettah – Main Street – No. 280, Main Street, Pettah, Colombo 11 1 20 22,760 530,000 320,000 850,000 531,132
Trincomalee – No. 474, Power House Road, Trincomalee – 100 Bare Land 125,425 – 125,425 100,000
Union Place – No. 1, Union Place, Colombo 02 1 30 63,385 720,000 1,480,000 2,200,000 1,383,072
Wellawatte – No. 343, Galle Road, Colombo 06 1 45 51,225 818,000 1,282,000 2,100,000 1,643,410
Wennappuwa – Nos. 262, 264, Colombo Road, Wennappuwa 1 36 9,226 81,000 34,000 115,000 81,793
Total – Bank

Notes to the Financial Statements

38 8,774,704 5,841,664 14,616,368 11,070,810

Subsidiaries
Commercial Development Company PLC
Tangalle – No. 148, Matara Road,Tangalle 1 49 4,257 80,000 27,000 107,000 85,283
Negombo – No 18, Fernando Avenue, Negombo 1 19 9,226 93,000 – 93,000 79,386

Commercial Insurance Brokers (Private) Limited

Colombo – No. 347, Dr. Colvin R De Silva Mawatha, Colombo 02 1 19 9,532 355,000 51,967 406,967 392,251

CBC Finance Limited.

Kandy – No. 182, Katugastota Road, Kandy 1 4 3,714 18,100 26,900 45,000 39,768

Financial Statements
Kandy – No. 187, Katugastota Road, Kandy 1 13 9,480 65,630 85,320 150,950 133,317
Total – Group 43 9,386,434 6,032,851 15,419,285 11,800,815

39.5 (b) Information on freehold land and buildings of the Bank and Group – Valuations
[As required by the Rule No. 7.6 (viii) of the “Continuing Listing Requirements” of the Colombo Stock Exchange]
Date of valuation: December 31, 2020

Annual Report 2020

Name of professional valuer/location Method of valuation and Range of estimates Net book value before Revalued amount of Revaluation gain/(loss)
and address significant unobservable inputs for unobservable revaluation of recognised on
inputs Land Buildings Land Buildings Land Buildings
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

H M N Herath

Commercial Bank of Ceylon PLC

Chilaw Market comparable method 91,754 39,211 114,693 37,708 22,939 18,224
No. 44, Colombo Road,
z Price per perch for land Rs. 3,250,000 p.p.
Chilaw
z Price per square foot for building Rs. 5,000 [Link].
z Depreciation rate 20%
Gampaha Market comparable method 74,025 9,841 105,280 10,720 31,255 879
No. 51,
z Price per perch for land Rs. 3,200,000 p.p.
Queen Mary’s Road,
Gampaha z Price per square foot for building Rs. 4,500 [Link].
z Depreciation rate 50%
Minuwangoda Market comparable method 56,250 15,734 71,250 14,985 15,000 (749)
No. 9,
z Price per perch for land Rs. 2,850,000 p.p.
Siriwardena Mawatha,
Minuwangoda z Price per square foot for building Rs. 4,500 [Link].
z Depreciation rate 40%

P B Kalugalagedara
Keyzer Street Market comparable method 82,000 22,054 109,000 23,000 27,000 946 39
No. 32, Keyzer Street,
z Price per perch for land Rs. 14,000,000 p.p.
Colombo 11
z Price per square foot for building Rs. 500 to
Rs. 5,225 [Link].

219
 Name of professional valuer/location Method of valuation and Range of estimates Net book value before Revalued amount of Revaluation gain/(loss)
and address significant unobservable inputs for unobservable revaluation of recognised on
inputs Land Buildings Land Buildings Land Buildings
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Kollupitiya Market comparable method 225,000 59,840 299,000 65,500 74,000 5,660
No. 285,
z Price per perch for land Rs. 19,500,000 p.p.
Galle Road,
Colombo 03 z Price per square foot for building Rs. 1,185 to
Rs. 5,225 [Link].

Kotahena Investment method 197,000 194,250 279,000 190,000 82,000 (4,250)

No. 198,
z Gross monthly rental Rs. 3,306,000 p.m.
George R De Silva Mawatha,
Kotahena, z Years purchase (present value of one
Colombo 13 unit per period) 18.18

Mr R S Wijesuriya
Notes to the Financial Statements

Battaramulla Market comparable method 52,500 84,150 52,500 87,375 – 3,225

No. 213, Kaduwela Road,
z Price per perch for land Rs. 3,750,000 p.p.
Battaramula
z Price per square foot for building Rs. 7,500 [Link].
Battaramulla Market comparable method 50,000 – 50,000 – 2,399 –
No. 213, Kaduwela Road,
z Price per perch for land Rs. 3,750,000 p.p.
Battaramulla
Panadura Market comparable method 36,900 36,040 30,750 40,092 (6,150) 4,052
No. 375, Galle Road, Panadura
z Price per perch for land Rs. 2,500,000 p.p.
z Price per square foot for building Rs. 6,500 [Link].
Financial Statements

Sarath G Fernando
Holiday Bungalow – Market comparable method 72,100 14,960 90,800 18,600 18,700 3,640
Bandarawela
z Price per perch for land Rs. 100,000 to
Ambatenne Estate,
Rs. 250,000 p.p.
Bandarawela
z Price per square foot for building Rs. 5,250 to
Rs. 5,750 [Link].
Annual Report 2020

z Depreciation rate 40%

Holiday Bungalow – Haputale Market comparable method 41,200 18,105 51,400 24,400 10,200 6,295
No. 23, Lilly Avenue,
z Price per perch for land Rs. 250,000 p.p.
Welimada Road,
Haputale z Price per square foot for building Rs. 3,750 to
Rs. 7,500 [Link].
Commercial Bank of Ceylon PLC

z Depreciation rate 55%

Kandy Market comparable method 396,000 229,107 521,000 272,000 125,000 42,893
No. 120,
z Price per perch for land Rs. 12,500,000 p.p.
Kotugodella Veediya,
Kandy z Price per square foot for building Rs. 7,000 to
Rs. 10,500 [Link].
z Depreciation rate 65% and 70%
Kegalle Market comparable method 156,700 6,336 172,500 7,200 15,800 864
No. 186, Main Street,
z Price per perch for land Rs. 1,250,000 to
Kegalle
Rs. 3,500,000 p.p.
z Price per square foot for building Rs. 6,000 [Link].
z Depreciation rate 55%
Matale Market comparable method 125,000 55,771 201,000 65,000 76,000 9,229
No. 70, Kings Street,
z Price per perch for land Rs. 1,750,000 to
Matale
Rs. 4,000,000 p.p.
39 z Price per square foot for building Rs. 10,750 [Link].
z Depreciation rate 20% and 40%

220
Name of professional valuer/location Method of valuation and Range of estimates Net book value before Revalued amount of Revaluation gain/(loss)
and address significant unobservable inputs for unobservable revaluation of recognised on
inputs Land Buildings Land Buildings Land Buildings
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Nuwara Eliya Market comparable method 124,800 68,023 187,000 76,800 62,200 8,777
No. 36/3,
z Price per perch for land Rs. 3,000,000 to
Buddha Jayanthi Mawatha,
Rs. 4,500,000 p.p.
Nuwara Eliya
z Price per square foot for building Rs. 10,750 [Link].
z Depreciation rate 30%

Sunil Fernando Associates Pvt Ltd.

Galle Main Street Market comparable method 54,000 8,006 60,750 9,600 6,750 1,594
No.130, Main Street, Galle
z Price per perch for land Rs. 9,000,000 p.p.
z Price per square foot for building Rs. 2,000 to

Notes to the Financial Statements

Rs. 3,250 [Link].
Galle Fort Market comparable method 255,650 182,827 262,015 98,185 6,365 (82,005)
No. 22, Church Street, Fort,
z Price per perch for land Rs. 6,500,000 p.p.
Galle
z Price per square foot for building Rs. 6,500 [Link].
Hikkaduwa Market comparable method 35,670 25,329 43,470 29,680 7,800 4,351
No. 217, Galle Road,
z Price per perch for land Rs. 900,000 to
Hikkaduwa
Rs. 1,350,000 p.p.
z Price per square foot for building Rs. 3,250 to
Rs. 4,250 [Link].

Financial Statements
Karapitiya Market comparable method 88,829 14,625 73,720 19,180 – 4,555
No. 89, Hirimbura Cross Road ,
z Price per perch for land Rs. 2,000,000 p.p.
Karapitiya
z Price per square foot for building Rs. 4,500 [Link].
Matara Market comparable method 60,080 26,304 69,465 30,835 9,385 4,531
No. 18, Station Road, Matara
z Price per perch for land Rs. 1,250,000 to
Rs. 2,250,000 p.p.

Annual Report 2020

z Price per square foot for building Rs. 3,250 to
Rs. 4,000 [Link].
Trincomalee Market comparable method 100,000 – 125,425 – 25,425 –
No. 474, Power House Road,
z Price per perch for land Rs. 1,250,000 p.p.
Trincomalee

Commercial Bank of Ceylon PLC

S Suresh
Jaffna Market comparable method 1,000,000 – 429,825 – (570,175) –
No. 474, Hospital Road, Jaffna
z Price per perch for land Rs. 5,500,000 to
Rs.7,000,000 p.p.

Siri Nissanka
Borella Market comparable method 196,000 190,080 246,000 254,000 50,000 63,920
No. 92,
z Price per perch for land Rs. 15,750,000 p.p.
D S Senanayake Mawatha,
Colombo 08 z Price per square foot for building Rs. 15,000 [Link].
City Office Market comparable method – 38,687 – 600,000 – 561,313
No. 98, York Street, z Price per perch for land Rs. 24,000,000 p.p.
Colombo 01
z Price per square foot for building Rs. 20,000 [Link].
CEO’s Bungalow Market comparable method 961,000 27,300 1,150,000 50,000 189,000 22,700
No. 27, Queens Road, z Price per perch for land Rs. 18,000,000 p.p.
Colombo 03
z Price per square foot for building Rs. 10,000 [Link]. 39
Narahenpita Market comparable method 176,000 92,857 263,000 137,000 87,000 44,143
No. 201, Kirula Road, z Price per perch for land Rs.12,000,000 p.p.
Narahenpita,
Colombo 05 z Price per square foot for building Rs.12,500 [Link].

221
 Name of professional valuer/location Method of valuation and Range of estimates Net book value before Revalued amount of Revaluation gain/(loss)
and address significant unobservable inputs for unobservable revaluation of recognised on
inputs Land Buildings Land Buildings Land Buildings
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Peliyagoda Warehouse Market comparable method – 7,737 – 116,000 – 108,263

No. 37, New Nuge Road, z Price per perch for land Rs. 5,000,000 p.p.
Peliyagoda
z Price per square foot for building Rs. 2,500 [Link] to
Rs. 8,500 [Link].
Pettah – Main Street Market comparable method 360,000 171,132 530,000 320,000 170,000 148,868
No. 280, Main Street, z Price per perch for land Rs. 26,500,000 p.p.
Pettah,
Colombo 11 z Price per square foot for building Rs. 16,250 [Link].
Union Place Market comparable method 500,000 883,072 720,000 1,480,000 220,000 596,928
No. 1, Union Place, z Price per perch for land Rs. 24,000,000 p.p.
Colombo 02
Notes to the Financial Statements

z Price per square foot for building Rs. 23,000 [Link].

Duplication Road Market comparable method 220,400 6,932 370,000 30,000 149,600 23,068
Nos. 405, 407, z Price per perch for land Rs. 18,500,000 p.p.
R A De Mel Mawatha,
Colombo 03 z Price per square foot for building Rs. 5,500 [Link].
Maharagama Market comparable method 93,000 41,360 133,000 67,000 40,000 25,640
No. 154, Highlevel Road, z Price per perch for land Rs. 7,500,000 p.p.
Maharagama
z Price per square foot for building Rs. 8,000 [Link].
Nugegoda Market comparable method 150,000 52,800 485,000 115,000 335,000 62,200
No. 100, Stanley Thilakaratne z Price per perch for land Rs. 12,500,000 p.p.
Financial Statements

Mawatha, Nugegoda
z Price per square foot for building Rs. 10,650 [Link].
Wellawatte Market comparable method 650,000 993,410 818,000 1,282,000 168,000 288,590
No. 343, Galle Road, z Price per perch for land Rs. 18,000,000 p.p.
Colombo 06
z Price per square foot for building Rs. 25,000 [Link].

W D P Rupananda
Annual Report 2020

Ja-Ela Market comparable method 33,000 23,771 43,000 30,000 10,000 6,229
No. 140, Negombo Road, z Price per perch for land Rs. 3,250,000 p.p.
Ja-Ela
z Price per square foot for building Rs. 6,000 [Link].
z Depreciation rate 30%
Negombo Market comparable method 136,000 31,680 167,000 39,000 31,000 7,320
Nos. 24, 26,
Commercial Bank of Ceylon PLC

z Price per perch for land Rs. 3,500,000 to

Fernando Avenue,
Rs. 5,000,000 p.p.
Negombo
z Price per square foot for building Rs. 5,000 to
Rs. 6,250 [Link].
z Depreciation rate 48% and 35%
Pettah Investment method – 58,960 – 80,000 – 21,040
People’s Park Shopping z Gross monthly rental Rs. 550,000 p.m.
Complex,
Colombo 11 z Years purchase
(Present value of 1 unit per period) 18.18
z Void period 4 months p.a.
Pettah – stores Investment method – 4,750 – 6,670 – 1,920
People’s Park Shopping z Gross monthly rental Rs. 50,000 p.m.
Complex,
Colombo 11 z Years purchase
(Present value of 1 unit per period) 16.67
z Void period 4 months p.a.
39 Wennappuwa Market comparable method 54,000 27,793 81,000 34,000 27,000 6,207
Nos. 262, 264, Colombo Road,
z Price per perch for land Rs. 2,250,000 p.p.
Wennappuwa
z Price per square foot for building Rs. 4,600 to
Rs. 6,200 [Link].
z Depreciation rate 35%

222
 Name of professional valuer/location Method of valuation and Range of estimates Net book value before Revalued amount of Revaluation gain/(loss)
and address significant unobservable inputs for unobservable revaluation of recognised on
inputs Land Buildings Land Buildings Land Buildings
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

W S Pemaratne
Galewela Market comparable method 29,700 16,637 39,600 16,900 9,900 263
No. 49/57, Matale Road,
z Price per perch for land Rs. 400,000 p.p.
Galewela
z Price per square foot for building Rs. 2,000 to
Rs. 4,000 [Link].
z Depreciation rate 19% and 27%
Kurunegala Market comparable method 236,800 39,960 257,390 42,610 20,590 2,650
No. 4,
z Price per perch for land Rs. 4,200,000 p.p to
Suratissa Mawatha,
Rs. 5,500,000 p.p.
Kurunegala

Notes to the Financial Statements

z Price per square foot for building Rs. 3,500 to
Rs. 4,750 [Link].
z Depreciation rate 15%
Narammala Market comparable method 61,604 18,417 71,871 20,624 10,267 2,207
No. 55, Negombo Road,
z Price per perch for land Rs. 1,750,000 p.p.
Narammala
z Price per square foot for building Rs. 4,000 [Link].
z Depreciation rate 8%
Total – Bank 7,232,962 3,837,848 8,774,704 5,841,664 1,559,250 2,026,180

Financial Statements
Subsidiaries
Commercial Development Company PLC
G M Gamage Investment method 66,787 18,496 80,000 27,000 13,213 8,504
Tangalle z Gross monthly rental Rs. 320,000 p.m.
No. 48, Matara Road,
Tangalle z Years purchase
(Present value of 1 unit per period) 18.18
z Void period N/A

Annual Report 2020

G H A P K Fernando Market comparable method 79,386 – 93,000 – 13,614 –
Negombo z Price per perch for land Rs. 5,000,000 p.p.
No. 18, Fernando Avenue,
Negombo

Commercial Insurance Brokers (Private) Limited

Commercial Bank of Ceylon PLC

G J Sumanasena Market comparable method 337,000 55,251 355,000 51,967 18,000 (3,284)
Colombo
z Price per perch for land Rs. 18,500,000 p.p.
No. 347, Dr. Colvin R De Silva
Mawatha z Price per square foot for building Rs. 7,500 [Link].
Colombo 02 z Depreciation rate 30%

CBC Finance Limited. (*)

Kandy Market comparable method 16,400 23,368 18,100 26,900 1,700 3,532
No. 182, Katugastota Road,
z Price per perch for land Rs. 5,500,000 p.p.
Kandy
z Price per square foot for building Rs. 7,250 [Link].
Kandy Market comparable method 59,662 73,655 65,630 85,320 5,968 11,665
No. 187, Katugastota Road,
z Price per perch for land Rs. 5,500,000 p.p.
Kandy
z Price per square foot for building Rs. 9,000 [Link].
Total – Group 7,792,197 4,008,618 9,386,434 6,032,851 1,611,745 2,046,597

p.p. – per perch [Link]. – per square foot p.m. – per month p.a. – per annum
39
(*) The valuation was carried out as at the financial year ended March 31, 2020.

223
 39.5 (c) Valuation techniques and sensitivity of the fair value measurement of the freehold land and buildings of the Bank and Group
Description of the above valuation techniques together with narrative descriptions on sensitivity of the fair value measurement to changes
in significant unobservable inputs are tabulated below:

Valuation technique Significant unobservable valuation inputs Sensitivity of the fair value measurement
(ranges of each property are given in the table to inputs
above)

Market comparable method Estimated fair value would increase/

This method considers the selling price of a similar property (decrease) if;
within a reasonably recent period of time in determining Price per perch for land Price per perch for land would increase/
the fair value of the property being revalued. This involves (decrease)
evaluation of recent active market prices of similar assets, Price per square foot for building would
Price per square foot for building
making appropriate adjustments for differences in size, nature, increase/(decrease)
location and condition of specific property. In this process,
Depreciation rate for building Depreciation rate for building would
outlier transactions, indicative of particularly motivated buyers
decrease/(increase)
or sellers are too compensated for since the price may not
Notes to the Financial Statements

adequately reflect the fair market value.

Investment method Estimated fair value would increase/
This method involves the capitalisation of the expected rental (decrease) if;
income at an appropriate rate of years purchased currently Gross Annual Rentals Gross Annual Rentals would increase/
charactorised by the real estate market. (decrease)
Years purchase Years purchase would increase/(decrease)
(Present value of 1 unit per period)
Void period Void period would decrease/(increase)

39.6 Title restriction on property, plant and equipment

Financial Statements

There were no restrictions existed on the title of the property, plant and equipment of the Group/Bank as at the reporting date.

39.7 Property, plant and equipment pledged as security for liabilities – Bank
There were no items of property, plant and equipment pledged as securities for liabilities as at the reporting date.

39.8 Compensation from third parties for items of property, plant and equipment – Bank
Annual Report 2020

The compensation received/receivable from third parties for items of property, plant and equipment that were impaired, lost or given up at
the reporting date of the Bank is as follows:

As at December 31, 2020 2019

Rs. ’000 Rs. ’000

Total claims lodged

Commercial Bank of Ceylon PLC

9,510 6,654
Total claims received (4,775) (3,619)
Total claims rejected – –
Total claims receivable 4,735 3,035

39.9 Fully-depreciated property, plant and equipment – Bank

The cost of fully-depreciated property, plant and equipment of the Bank which are still in use is as follows:

As at December 31, 2020 2019

Rs. ’000 Rs. ’000

Computer equipment 2,348,509 1,982,684

Office equipment, furniture and fixtures 2,983,424 2,652,359
Motor vehicles 58,828 54,870

39.10 Temporarily idle property, plant and equipment – Bank

39
Following property, plant and equipment of the Bank were temporarily idle (until the assets are issued to the business units):

As at December 31, 2020 2019

Rs. ’000 Rs. ’000

Computer equipment 160,704 214,063

Office equipment, furniture and fixtures 116,135 92,110

224
39.11 Property, plant and equipment retired from active use – Bank
Following property, plant and equipment of the Bank were retired from active use:

As at December 31, 2020 2019

Rs. ’000 Rs. ’000

Computer equipment Cost 417,123 343,177

Depreciation 400,671 329,144
NBV 16,452 14,033

Office equipment, furniture and fixtures Cost 182,898 113,758

Depreciation 173,354 109,372
NBV 9,544 4,386

39.12 Borrowing costs

There were no capitalised borrowing costs related to the acquisition of property, plant and equipment during the year 2020 (2019 – Nil).

Notes to the Financial Statements

40. Investment properties
Accounting policy
Investment Properties are those which are When a portion of the property is held Investment properties are derecognised
held either to earn rental income or for to earn rentals or for capital appreciation when either they have been disposed
capital appreciation or for both. and another portion is held for use in the of or when the investment property is
production or supply of goods or services permanently withdrawn from use and no
An investment property is recognised, if
or for administrative purposes, the Group future economic benefit is expected from
it is probable that future economic benefits
accounts for the portions separately if these its disposal. The difference between the net
that are associated with the investment
portions could be sold separately (or leased disposal proceeds and the carrying amount
property will flow to the Group and cost

Financial Statements
out separately under a finance lease). If the of the asset is recognised in the net other
of the investment property can be reliably
portions could not be sold separately, the operating income.
measured.
property is treated as investment property,
The Group states the Investment only if an insignificant portion is held for
properties at its fair value. use in the production or supply of goods or
services or for administrative purposes.

GROUP BANK

Annual Report 2020

2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Cost/Valuation
Balance as at January 1, 46,350 – – –
Investment properties acquired on business combination 37.2.2 211 – 46,350 – –

Commercial Bank of Ceylon PLC

Additions resulting from acquisitions 32,821 – – –
Subsequent additions during the year 41 – –
Fair value gains/(losses) 21 186 (12,096) – – –
Balance as at December 31, 67,116 46,350 – –

The maturity analysis of investment properties is given in Note 61 on pages 251 to 253.
There were no capitalised borrowing cost related to the acquisition of Investment properties during the year 2020 (2019 – Nil).

40.1 (a) Information on investment properties of the Group – Extents and Locations
[As required by the Rule No. 7.6 (viii) of the “Continuing Listing Requirements” of the Colombo Stock Exchange]
Location Number of Extent Buildings Fair value of the Fair value of Carrying value of Carrying value of
buildings (Perches) (Square feet) investment the investment the investment the investment
property – property – property before property before
Land Building fair valuation – fair valuation -
Land Building
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000
39
Commercial Insurance Brokers Private Ltd. 40
No. 347, Dr Colvin R De Silva Mawatha, Colombo 2, Sri Lanka 1 – 8,616 – 42,750 – 46,350

C B C Finance Ltd
Lot – 04, Plan No. 1652, Bulumulla, Kiribathkumbura – 19 Bare Land 5,612 – 3,866 –
Lot – 01 , Land No. 1366, Boyagama, Pilimathalawa – 312 Bare Land 18,754 – 28,996 –
Total 1 24,366 42,750 32,862 46,350

225
 40.1 (b) Information on investment properties of the Group – Valuations
[As required by the Rule No. 7.6 (viii) of the “Continuing Listing Requirements” of the Colombo Stock Exchange]
Date of valuation: December 31, 2020
Name of professional valuer/ Method of valuation and significant Range of estimates for Carrying value of the Fair value of the Fair value gains/(losses)
location and address unobservable inputs unobservable inputs investment property investment property recognised in Income
before fair valuation Statement
Land Building Land Building Land Building
(Rs. '000) (Rs. '000) (Rs. '000) (Rs. '000) (Rs. '000) (Rs. '000)

Commercial Insurance Brokers Private Ltd.

G J Sumanasena Market comparable method
No. 347, Dr Colvin R De Silva z Price per square foot Rs. 7,500 [Link]. – 46,350 – 42,750 – (3,600)
Mawatha, Colombo 02, Sri Lanka z Depreciation rate 30%

C B C Finance Ltd
K M U Dissanayake, Market comparable method
Notes to the Financial Statements

Lot – 04, Plan No. 1652, z Price per perch Rs. 300,000 p.p. 3,866 – 5,612 – 1,746 –
Bulumulla, Kiribathkumbura
Lot – 01, Land No. 1366, Market comparable method
Boyagama, Pilimathalawa z Price per perch Rs. 60,000 p.p. 28,996 – 18,754 – (10,242) –
Total 32,862 46,350 24,366 42,750 (8,496) (3,600)

40.1 (c) Valuation techniques and sensitivity of the fair value measurement of the Investment properties of the Group
Description of the above valuation techniques together with narrative descriptions on sensitivity of the fair value measurement to changes in
significant unobservable inputs are tabulated below:
Financial Statements

Valuation Technique Significant unobservable valuation inputs Sensitivity of the fair value measurement to inputs
(ranges of each property are
given in the table above)

Market comparable method

This method considers the selling price of a similar property within Estimated fair value would increase/(decrease) if;
a reasonably recent period of time in determining the fair value of Price per perch for land Price per perch of land would increase/(decrease)
the property being revalued. This involves evaluation of recent active
Price per square foot for building Price per square foot for building would
Annual Report 2020

market prices of similar assets, making appropriate adjustments for

increase/(decrease)
differences in size, nature, location and condition of specific property.
In this process, outlier transactions, indicative of particularly motivated Depreciation rate for building Depreciation rate for building would increase/
buyers or sellers are too compensated for since the price may not (decrease)
adequately reflect the fair market value.
Commercial Bank of Ceylon PLC

41. Intangible assets

Accounting policy

The Group’s intangible assets include the Subsequent expenditure expected useful life or the expected pattern
value of acquired goodwill, trademarks and Subsequent expenditure on intangible assets of consumption of future economic benefits
computer software. is capitalised only when it increases the embodied in the asset are accounted for
future economic benefits embodied in the by changing the amortisation period or
Basis of recognition specific asset to which it relates. All other method, as appropriate, and are treated as
An intangible asset is recognised if it is expenditure is expensed as incurred. changes in accounting estimates, which
probable that future economic benefits require prospective application.
associated with the asset will flow to the Useful economic lives, amortisation and
entity and the cost of the asset can be impairment The amortisation expense on intangible
measured reliably in accordance with the assets with finite lives is expensed as
The useful economic lives of intangible assets
Sri Lanka Accounting Standard – LKAS 38 on incurred.
are assessed to be either finite or indefinite.
“Intangible Assets”. Useful economic lives, amortisation and z Goodwill
Intangible assets acquired separately impairment of finite and indefinite intangible Goodwill that arises on the acquisition of
are measured on initial recognition at cost. assets are described below: subsidiaries is presented with intangible assets.
40 The cost of intangible assets acquired in a z Intangible assets with finite lives and Goodwill is initially measured at cost, being the
41 business combination is their fair value as amortisation excess of the aggregate of the consideration
at the date of acquisition. Following initial Intangible assets with finite lives are transferred and the amount recognised for
recognition, these assets are stated in the amortised over the useful economic non-controlling interests, and any previous
Statement of Financial Position at cost, less lives. The amortisation period and the interest held, over the net identifiable assets
accumulated amortisation and accumulated amortisation method for an intangible acquired and liabilities assumed.
impairment losses, if any. asset with a finite useful life are reviewed at Subsequent to initial recognition,
least at each reporting date. Changes in the goodwill is measured at cost less
226
accumulated impairment losses. For the The capitalised costs of internally- – Its intention to complete and its ability to
purpose of impairment testing, goodwill developed software include all costs directly use or sell the asset.
acquired in a business combination is, from attributable to developing the software – The asset will generate future economic
the acquisition date, allocated to each of and capitalised borrowing costs, and are benefits.
the Group’s cash-generating units that are amortised over its useful life. Internally-
– The availability of resources to complete
expected to benefit from the combination, developed software is stated at capitalised
the asset.
irrespective of whether other assets or cost less accumulated amortisation and any
liabilities of the acquiree are assigned to accumulated impairment losses. – The ability to measure reliably the
those units. expenditure during development.
Subsequent expenditure on software
– The ability to use the intangible asset
z Computer software assets is capitalised only when it increases
generated.
Software acquired by the Group is measured the future economic benefits embodied in
the specific asset to which it relates. All other Following initial recognition of the
at cost less accumulated amortisation and
expenditure is expensed as incurred. development expenditure as an asset,
any accumulated impairment losses.
the asset is carried at cost less any
Expenditure on internally developed z Research and development costs accumulated amortisation and accumulated
software is recognised as an asset when the Research costs are expensed as incurred. impairment losses.

Notes to the Financial Statements

Group is able to demonstrate its intention Development expenditures on an individual
As at the reporting date, the Group does
and ability to complete the development project are recognised as an intangible asset
not have development costs capitalised as an
and use the software in a manner that will when the Group can demonstrate:
internally-generated intangible asset.
generate future economic benefits, and can – The technical feasibility of completing the
reliably measure the costs to complete the intangible asset so that the asset will be
development. available for use or sale.

GROUP BANK
As at December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Financial Statements
Note Page No.

Computer software 41.1 227 773,768 824,816 659,590 712,596

Software under development 41.2 228 581,601 375,742 573,273 367,414
Goodwill arising on business combination 445,147 445,147 – –
Trademarks – 9 – –
Total 1,800,516 1,645,714 1,232,863 1,080,010

Annual Report 2020

41.1 Computer software
GROUP BANK
2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Commercial Bank of Ceylon PLC

Cost/valuation
Balance as at January 1, 2,522,952 2,134,021 2,293,819 1,948,436
Computer software acquired on business combination 37.2.2 211 – 17,328 – –
Additions during the year 229,494 339,200 178,763 311,544
Disposals/write-off during the year (280) – – –
Exchange rate variance 13,062 (2,697) 2,979 (1,261)
Transfers/adjustments 24,700 35,100 24,700 35,100
Balance as at December 31, 2,789,928 2,522,952 2,500,261 2,293,819

Accumulated amortisation and impairment losses

Balance as at January 1, 1,698,136 1,435,108 1,581,223 1,368,950
Accumulated amortisation assumed on business combination 37.2.2 211 – 11,526 – –
Amortisation for the year 20 185 310,946 252,392 257,591 213,240
Impairment loss – – – –
41
Disposals/write-off during the year (280) – – –
Exchange rate variance 7,358 (890) 1,857 (967)
Transfers/adjustments – – – –
Balance as at December 31, 2,016,160 1,698,136 1,840,671 1,581,223

Net book value as at December 31, 773,768 824,816 659,590 712,596

227
 41.2 Software under development
GROUP BANK
2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Cost/valuation
Balance as at January 1, 375,742 334,954 367,414 326,626
Additions during the year 230,559 75,888 230,559 75,888
Disposals during the year – – – –
Transfers/adjustments (24,700) (35,100) (24,700) (35,100)
Balance as at December 31, 581,601 375,742 573,273 367,414

There were no restrictions on the title of the intangible assets of the Group as at the reporting date. Further, there were no items pledged
as securities for liabilities. There were no capitalised borrowing costs related to the acquisition of intangible assets during the year 2020 (2019 – Nil).
Notes to the Financial Statements

The maturity analysis of intangible assets is given in Note 61 on pages 251 to 253.

42. Deferred tax assets and liabilities

Accounting policy

Net deferred tax assets/liabilities of an entity cannot be set-off against another entity’s deferred tax assets/liabilities as there is no legally
enforceable right to set-off.
GROUP BANK
2020 2019 2020 2019
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000
Financial Statements

Recognised under deferred tax assets 2,735,566 530,165 2,499,860 294,059

Recognised under deferred tax liabilities 403,846 416,458 – –
Summary of net deferred tax assets 2,331,720 113,707 2,499,860 294,059

42.1 Summary of net deferred tax assets

Annual Report 2020

GROUP BANK
2020 2019 2020 2019
Temporary Tax effect Temporary Tax effect Temporary Tax effect Temporary Tax effect
difference difference difference difference
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Balance as at January 1,
Commercial Bank of Ceylon PLC

72,398 113,707 (2,965,274) (782,937) 689,757 294,059 (2,490,485) (646,248)

Deferred tax liabilities assumed on
business combination 37.2.2 211 – – (317,443) (88,884) – – – –
Amount (originating)/reversing to
income statement 23 187 9,367,632 2,623,679 7,144,426 2,048,100 9,347,208 2,615,567 6,969,438 2,002,575
Amount (originating)/reversing to
statement of profit or loss and
other comprehensive income (1,344,489) (376,457) (3,460,011) (968,803) (1,351,271) (378,356) (3,459,896) (968,771)

Amount (originating)/reversing to
retained earnings (Deferred tax on
SLFRS 16 Transitional adjustment) – – (205,811) (57,627) – – (205,811) (57,627)
Amount (originating)/reversing to
retained earnings on expired ESOP (147,193) (41,214) (123,489) (34,577) (147,193) (41,214) (123,489) (34,577)
Exchange rate variance – 12,005 – (1,565) – 9,804 – (1,293)
Balance as at December 31, 7,948,348 2,331,720 72,398 113,707 8,538,501 2,499,860 689,757 294,059

41
42

228
42.2 Reconciliation of net deferred tax assets – Group
Statement of Profit or Other comprehensive
financial position loss income
For the year ended/as at December 31, 2020 2019 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Deferred tax assets on:

Defined benefit plans 630,597 640,669 (10,072) 100,858 – –
Tax effect on actuarial losses on defined benefit plans 101,333 87,511 – – 13,822 9,108
Unrealised gain/(loss) on financial assets measured at fair value
through other comprehensive income 366,456 (175,938) – – 542,394 (1,001,084)
Leave encashment 119,304 134,209 (14,905) 3,385 – –
Tax effect on actuarial losses on leave encashment 140,168 84,571 – – 55,597 16,736
Equity-settled share-based payments 121,381 131,178 31,417 – – –

Notes to the Financial Statements

Impairment provision 6,461,234 4,049,843 2,411,391 1,222,829 – –
Hedging reserve 39,865 14,923 – – 24,942 24,264
Deferred tax on previous losses – 28,089 (28,089) (45,433) – –
Performance bonus 8,533 5,795 2,738 993 – –
Deferred tax on specific provision 148,923 157,428 (8,505) 157,428 – –
Operating leases 90,735 50,635 40,100 50,635 – –
8,228,529 5,208,913 2,424,075 1,490,695 636,755 (950,976)
Deferred tax liabilities on:
Accelerated depreciation for tax purposes – Own assets 556,292 600,169 43,877 8,684 – –

Financial Statements
Accelerated depreciation for tax purposes – Leased assets 1,378,413 1,539,687 161,274 508,689 – –
Revaluation surplus on freehold buildings 1,686,611 1,162,121 37,963 38,230 (562,453) –
Revaluation surplus on freehold land (*) 2,220,359 1,772,750 – – (447,609) –
Tax effect on actuarial gains on defined benefit plans 55,134 20,479 (31,082) – (3,573) (17,590)
Effect of exchange rate variance – – (12,428) 1,802 423 (237)
5,896,809 5,095,206 199,604 557,405 (1,013,212) (17,827)

Annual Report 2020

Deferred tax effect on profit or loss and other comprehensive
income for the year 2,623,679 2,048,100 (376,457) (968,803)
Net deferred tax asset as at December 31, 2,331,720 113,707

(*) As per the Inland Revenue Act No. 24 of 2017, which became effective from April 1, 2018, capital assets/business assets will attract tax at applicable corporate tax rate on the gains at the time of
disposal. Accordingly, deferred tax liability has been recognised at 28% on the revaluation surplus relating to freehold land in these Financial Statements.

Commercial Bank of Ceylon PLC

42.3 Reconciliation of net deferred tax assets – Bank
Statement of Profit or Other comprehensive
financial position loss income
For the year ended/as at December 31, 2020 2019 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Deferred tax assets on:

Defined benefit plans 598,277 614,716 (16,439) 96,795 – –
Tax effect on actuarial losses on defined benefit plans 100,911 87,167 – – 13,744 9,108
Unrealised gain/(loss) on financial assets measured at fair value
through other comprehensive income 366,288 (176,355) – – 542,643 (1,000,898)
Leave encashment 119,304 134,209 (14,905) 3,385 – –
Tax effect on actuarial losses on leave encashment 140,168 84,571 – – 55,597 16,736
Equity-settled share-based payments 121,381 131,178 31,417 – – –
Impairment provision 6,123,597 3,720,404 2,403,193 1,175,454 – –
42
Hedging reserve 39,865 14,923 – – 24,942 24,264
Deferred tax on specific provision 148,923 157,428 (8,505) 157,428 – –
Operating leases 89,134 46,696 42,438 46,696 – –
7,847,848 4,814,937 2,437,199 1,479,758 636,926 (950,790)

229
 Statement of Profit or Other comprehensive
financial position loss income
For the year ended/as at December 31, 2020 2019 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Deferred tax liabilities on:

Accelerated depreciation for tax purposes – Own assets 474,636 526,086 51,450 5,037 – –
Accelerated depreciation for tax purposes – Leased assets 1,305,075 1,435,404 130,329 478,351 – –
Revaluation surplus on freehold buildings 1,317,355 782,631 37,898 37,899 (572,622) –
Revaluation surplus on freehold land (*) 2,194,104 1,756,155 – – (437,949) –
Tax effect on actuarial gains on defined benefit plans 56,818 20,602 (31,082) – (5,134) (17,744)
Effect of exchange rate variance – – (10,227) 1,530 423 (237)
5,347,988 4,520,878 178,368 522,817 (1,015,282) (17,981)
Notes to the Financial Statements

Deferred tax effect on profit or loss and

other comprehensive income for the year 2,615,567 2,002,575 (378,356) (968,771)

Net deferred tax asset as at December 31, 2,499,860 294,059

(*) As per the Inland Revenue Act No. 24 of 2017 capital assets/business assets will attract tax at applicable corporate tax rate on the gains at the time of disposal. Accordingly, deferred tax liability has
been recognised at 28% on the revaluation surplus relating to freehold land in these Financial Statements.

The maturity analysis of deferred tax assets given in Note 61 on pages 251 to 253.

43. Other assets

GROUP BANK
Financial Statements

As at December 31, 2020 2019 2020 2019

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Receivables 63,195 101,395 63,195 101,395

Deposits and prepayments 1,298,651 1,540,458 1,275,498 1,540,811
Clearing account balance 5,001,397 5,005,006 5,001,397 5,005,006
Annual Report 2020

Unamortised cost on staff loans (Day 1 difference) 4,965,361 4,886,941 4,965,361 4,886,941
Other accounts 8,866,549 11,910,069 8,313,698 11,788,094
Total 20,195,153 23,443,869 19,619,149 23,322,247

The maturity analysis of other assets is given in Note 61 on pages 251 to 253.
Commercial Bank of Ceylon PLC

44. Due to banks

Accounting policy

These represent call money borrowings, credit balances in Nostro Accounts and borrowings from banks. Subsequent to initial recognition,
these are measured at amortised cost using the EIR method. Interest paid/payable on these borrowings is recognised in profit or loss.
GROUP BANK
As at December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Borrowings 85,263,031 50,717,387 84,466,281 48,415,656

Local currency borrowings 913,719 2,806,443 – 504,712
Foreign currency borrowings 84,349,312 47,910,944 84,466,281 47,910,944
Securities sold under repurchase (Repo) agreements (*) 2,985,025 3,090,038 2,985,025 3,090,038
Total 88,248,056 53,807,425 87,451,306 51,505,694
42
43 (*) Securities sold under repurchase (Repo) agreements are shown on the face of the Statement of Financial Position except for the Repos with banks.
44
The maturity analysis of due to banks is given in Note 61 on pages 251 to 253.

230
45. Derivative financial liabilities
Accounting policy
Derivative financial liabilities – Derivatives embedded in financial liabilities from the host are carried at fair value in the
Held for trading are treated separately and recorded at fair trading portfolio with changes in fair value
Derivative financial liabilities are value if their economic characteristics and recognised in the profit or loss.
classified as held for trading. This category risks are not closely related to those of the
Derivatives are recorded at fair value
includes derivative financial instruments host contract, a separate instrument with the
with corresponding gains or losses are
entered into by the Group that are not same terms as embedded derivative would
recognised in net gains/(losses) on trading
designated as hedging instruments in hedge meet the definition of derivative and the
in the Income Statement.
relationships. host contract is not itself held for trading or
designated at fair value through profit or
loss. The embedded derivatives separated
GROUP BANK
As at December 31, 2020 2019 2020 2019

Notes to the Financial Statements

Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Derivative financial liabilities – Held for trading

Foreign currency derivatives 1,358,886 1,442,022 1,358,886 1,442,022
Currency swaps 1,132,513 1,140,261 1,132,513 1,140,261
Forward contracts 216,709 295,838 216,709 295,838
Spot contracts 5,016 5,923 5,016 5,923
Currency options 4,648 – 4,648 –

Derivative financial liabilities – Cash flow hedges

held for risk management

Financial Statements
Interest rate swaps 45.1 231 142,376 53,295 142,376 53,295
Total 1,501,262 1,495,317 1,501,262 1,495,317

45.1 Derivative financial liabilities – Cash flow hedges held for risk management
The Group uses interest rate swaps to hedge the interest rate risk arising from a floating rate borrowing denominated in foreign currencies.

Annual Report 2020

During the year, loss (net of tax) of Rs. 64.139 Mn., (2019 – loss (net of tax) of Rs. 62.391 Mn.) relating to the effective portion of cash flow
hedges were recognised in OCI.
The maturity analysis of derivative financial liabilities is given in Note 61 on pages 251 to 253.

46. Financial liabilities at amortised cost – Due to depositors

Commercial Bank of Ceylon PLC

Accounting policy

These include non-interest-bearing deposits, savings deposits, term deposits, deposits payable at call, and certificates of deposit. Subsequent
to initial recognition deposits are measured at amortised cost using the EIR method, except where the Group designates liabilities at fair value
through profit or loss. Interest paid/payable on these deposits is recognised in “Interest expense” in the Income Statement.
GROUP BANK
As at December 31, 2020 2019 2020 2019
Rs. ‘000 Rs. ’000 Rs. ’000 Rs. ’000

Local currency deposits 967,297,104 800,224,277 964,759,360 800,688,240

Current account balances 61,440,763 43,981,795 61,441,113 44,009,507
Savings deposits 345,520,769 248,903,630 345,795,367 249,181,306
Time deposits 560,306,283 507,284,805 557,493,591 507,443,380
Certificates of deposit 29,289 54,047 29,289 54,047

Foreign currency deposits 319,319,295 268,758,310 301,206,558 252,619,420 45

Current account balances 47,108,754 31,851,740 39,808,968 23,694,078 46
Savings deposits 97,540,150 77,548,427 93,773,096 73,941,830
Time deposits 174,670,391 159,358,143 167,624,494 154,983,512
Total 1,286,616,399 1,068,982,587 1,265,965,918 1,053,307,660

231
 46.1 Analysis of due to customers/deposits from customers
GROUP BANK
As at December 31, 2020 2019 2020 2019
Rs. ‘000 Rs. ’000 Rs. ’000 Rs. ’000

(a) By product
Current account balances 108,549,517 75,833,535 101,250,081 67,703,585
Savings deposits 443,060,919 326,452,057 439,568,463 323,123,136
Time deposits 734,976,674 666,642,948 725,118,085 662,426,892
Certificates of deposit 29,289 54,047 29,289 54,047
Total 1,286,616,399 1,068,982,587 1,265,965,918 1,053,307,660

(b) By currency
Sri Lankan Rupee 967,296,908 800,224,277 964,759,164 800,688,240
Notes to the Financial Statements

United States Dollar 188,476,649 150,545,610 177,515,480 138,953,807

Great Britain Pound 11,506,592 10,844,928 11,503,421 10,842,070
Euro 10,354,089 11,276,248 10,270,310 11,163,481
Australian Dollar 6,719,107 6,990,874 6,719,107 6,990,874
Bangladesh Taka 93,574,613 83,280,562 93,574,613 83,280,562
Maldivian Rufiyaa 7,037,885 4,476,756 – –
Other currencies 1,650,556 1,343,332 1,623,823 1,388,626
Total 1,286,616,399 1,068,982,587 1,265,965,918 1,053,307,660

(c) By institution/customers
Financial Statements

Deposits from banks 2,740,854 2,731,885 2,837,563 2,731,885

Deposits from finance companies 7,924,439 5,632,555 7,664,420 5,448,671
Deposits from other customers 1,275,951,106 1,060,618,147 1,255,463,935 1,045,127,104
Total 1,286,616,399 1,068,982,587 1,265,965,918 1,053,307,660

The maturity analysis of financial liabilities at amortised cost – Due to depositors is given in Note 61 on pages 251 to 253.
Annual Report 2020

47. Financial liabilities at amortised cost – Other borrowings

GROUP BANK
As at December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000
Commercial Bank of Ceylon PLC

Refinance borrowings 33,159,015 7,917,888 33,159,015 7,917,888

Borrowings from International Finance Corporation (IFC) 21,396,918 15,331,005 21,396,918 15,331,005
Total 54,555,933 23,248,893 54,555,933 23,248,893

The maturity analysis of financial liabilities at amortised cost – Other borrowings is given in Note 61 on pages 251 to 253.

48. Current tax liabilities

GROUP BANK
2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Balance as at January 1, 5,197,188 6,735,997 4,967,644 6,566,358

Tax payable assumed on business combination 37.2.2 211 – 13,660 – –
Provision for the year 10,178,040 8,600,747 9,866,955 8,308,597
46
47 Reversal of (over)/under provision 23 187 (121,298) (989,148) (113,565) (991,884)
48 Self-assessment payments (7,748,870) (8,301,839) (7,428,411) (8,087,930)
Withholding tax/other credits (585,419) (841,251) (580,871) (805,060)
Exchange rate variance 71,364 (20,978) 66,240 (22,437)
Balance as at December 31, 6,991,005 5,197,188 6,777,992 4,967,644

The maturity analysis of current tax liabilities is given in Note 61 on pages 251 to 253.
232
49. Other liabilities
Accounting policy

Other liabilities include provisions made on fees and expenses, gratuity/pensions, leave encashment and other provisions. These liabilities are
recorded at amounts expected to be payable as at the reporting date.
GROUP BANK
As at December 31, 2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Accrued expenditure 3,076,619 2,112,034 3,003,243 2,016,803

Cheques sent on clearing 5,001,397 5,005,006 5,001,397 5,005,006
Lease liability 49.1 233 4,987,197 5,055,939 4,939,273 5,146,689
Provision for gratuity payable 49.2 (b) 234 1,842,918 2,114,432 1,719,971 2,020,984
Provision for unfunded pension scheme 49.3 (b) 235 280,530 257,031 280,530 257,031
Provision for leave encashment 49.4 (b) 236 926,686 781,362 926,686 781,362

Notes to the Financial Statements

Payable on oil hedging transactions 1,160,141 1,127,571 1,160,141 1,127,571
Impairment provision in respect of off-balance sheet credit exposures 58.3 (a) &
58.3 (b) 250 2,120,258 1,320,080 2,116,849 1,316,837
Other payables 14,176,537 13,002,429 13,889,579 12,824,426
Total 33,572,283 30,775,884 33,037,669 30,496,709

The maturity analysis of other liabilities is given in Note 61 on pages 251 to 253.

49.1 Lease liability

GROUP BANK

Financial Statements
Note Page No. 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Operating lease commitments as at December 31, 2018 – 6,455,090 – 6,432,570

Weighted average incremental borrowing rate as at January 1, 2019 (%) – 9.06 – 9.39
Discounted operating lease commitments balance as at January 1,
effect of adoption of SLFRS 16 5,055,939 4,418,459 5,146,689 4,594,604

Annual Report 2020

Additions 551,253 1,294,192 496,145 1,294,192
Exchange rate variance 60,460 (36,971) 52,316 (34,216)
Accretion of interest 13.2 179 435,754 429,263 452,304 457,449
Payments (1,116,209) (1,049,004) (1,208,181) (1,165,340)
Balance as at December 31, 4,987,197 5,055,939 4,939,273 5,146,689

Commercial Bank of Ceylon PLC

The maturity analysis of lease liability is given in Note 61 on pages 251 to 253.

49.1 (a) Sensitivity analysis on lease liability

The following table illustrates the impact arising from the possible changes in the incremental borrowing rate on the lease liability of the Bank
as at December 31, 2020.
GROUP BANK
Variable Sensitivity effect on Sensitivity effect on Sensitivity effect on Sensitivity effect on
Statement of Financial Position Income Statement Statement of Financial Position Income Statement
(Lease liability) (Lease liability)
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

1% increase in incremental borrowing rate (154,808) 35,945 (148,164) 31,211

1% decrease in incremental borrowing rate 164,089 (38,757) 157,154 (33,665)

49.1 (b) Undiscounted cash flow

The followng table illustrates the maturity analysis of the lease liability on the basis of undiscounted cash flows.
BANK 49
As at December 31, 2020 2019
Rs. ’000 Rs. ’000

Less than one year 1,191,223 1,210,108

Between one to five years 3,968,076 4,133,391
Over five years 1,588,791 1,745,260
Total 6,748,090 7,088,759

233
 49.2 Provision for gratuity payable
An actuarial valuation of the retirement gratuity payable was carried out as at December 31, 2020 by Mr M Poopalanathan, AIA, of Messrs Actuarial
& Management Consultants (Pvt) Ltd., a firm of professional actuaries. The valuation method used by the actuaries to value the liability is the
“Projected Unit Credit Method (PUC)”, the method recommended by the Sri Lanka Accounting Standard – LKAS 19 on “Employee Benefits”.

49.2 (a) Actuarial assumptions

Type of assumption Criteria Description

Demographic Mortality – in service A 1967-70 Mortality table issued by the Institute of Actuaries, London
Staff turnover The staff turnover rate at an age represents the probability of an employee leaving within one year of that age due
to reasons other than death, ill health, and normal retirement. The same withdrawal rates which were used in the last
valuation (as at December 31, 2019) to determine the liabilities of the active employees in the gratuity, were used in the
actuarial valuation carried out as at December 31, 2020.
Normal retirement age The employees who are aged over the specified retirement age have been assumed to retire on their respective next
birthdays.
Weighted average duration of 19 Years
Notes to the Financial Statements

defined benefit obligation

Financial Rate of discount Sri Lankan operation
In the absence of a deep market in long-term bonds in Sri Lanka, a long-term interest rate of 8.00% p.a. (2019 – 10.50%
p.a.) has been used to discount future liabilities considering anticipated long term rate of inflation.
Bangladesh operation
In the absence of long-term high quality corporate bonds or government bonds with the term that matches liabilities
a long-term interest rate of 7.00% p.a. (2019 - 8.00% p.a.) has been used to discount future liabilities considering
anticipated long-term rate of inflation.
Salary increases Sri Lankan operation
A salary increment of 8.00% p.a. (2019 – 10.00% p.a.) has been used in respect of the active employees.
Bangladesh operation
Financial Statements

A salary increment of 9.00% p.a. (2019 – 10.00% p.a.) has been used in respect of the active employees.

49.2 (b) Movement in the provision for gratuity payable

GROUP BANK
2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Balance as at January 1, 2,114,432 1,778,016 2,020,984 1,726,920

Annual Report 2020

Gratuity payable assumed on business combination 37.2.2 211 – 30,253 – –

Expense recognised in the Income Statement 49.2 (c) 234 207,998 457,642 183,807 442,022
Exchange rate variance 10,758 (5,750) 10,758 (5,750)
Amount paid during the year (489,137) (80,511) (486,518) (76,440)
Actuarial (gains)/losses recognised in other comprehensive income (1,133) (65,218) (9,060) (65,768)
Commercial Bank of Ceylon PLC

Balance as at December 31, 1,842,918 2,114,432 1,719,971 2,020,984

49.2 (c) Expense recognised in the Income Statement – Gratuity

GROUP BANK
For the year ended December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Interest cost 153,018 192,671 143,141 185,649

Current service cost 54,980 264,971 40,666 256,373
Total 207,998 457,642 183,807 442,022

49.2 (d) Sensitivity analysis on actuarial valuation

The following table illustrates the impact arising from the possible changes in the discount rate and salary escalation rates on the gratuity
valuation of the Group and the Bank as at December 31, 2020.
GROUP BANK

49 Variable Sensitivity effect on Statement of Sensitivity effect on Statement of

Financial Position (Benefit obligation) Financial Position (Benefit obligation)
Rs. ’000 Rs. ’000

1% increase in discount rate (43,044) (35,152)

1% decrease in discount rate 49,669 40,765
1% increase in salary 50,552 41,426
1% decrease in salary (44,651) (36,421)

234
49.3 Provision for unfunded pension scheme
An actuarial valuation of the unfunded pension liability was carried out as at December 31, 2020 by Mr M Poopalanathan, AIA, of Messrs Actuarial &
Management Consultants (Pvt) Ltd., a firm of professional actuaries. The valuation method used by the actuary to value the liability is the “Projected
Unit Credit Method (PUC)”, the method recommended by the Sri Lanka Accounting Standard, LKAS 19 on “Employee Benefits”.

49.3 (a) Actuarial assumptions

Type of assumption Criteria Description

Demographic Mortality – in service A 1967-70 Mortality table issued by the Institute of Actuaries, London
After retirement A (90) Annuities table (Males and Females) issued by the Institute of Actuaries, London
Staff turnover The withdrawal rate at an age represents the probability of an active employee leaving within one year of that age
due to reasons other than death, ill health, and normal retirement. The same withdrawal rates which were used
in the last valuation (as at December 31, 2019) to determine the liabilities of the active employees in the funded
scheme, were used in the actuarial valuation carried out as at December 31, 2020.
Disability Assumptions similar to those used in other comparable schemes for disability were used as the data required to do a

Notes to the Financial Statements

“scheme specific” study was not available.
Normal retirement age 55 or 60 years as opted by the employees.
Financial Rate of discount In the absence of a deep market in long-term bonds in Sri Lanka, a long-term interest rate of 8.00% p.a.
(2019 – 10.50% p.a.) has been used to discount future liabilities considering anticipated long-term rate of inflation.
Salary increases A salary increment of 8.00% p.a. (2019 – 10.00% p.a.) has been used in respect of the active employees.
Post retirement There is no agreed rate of increase even though the pension payments are subject to periodic increases, and
pension increase rate increases are granted solely at the discretion of the Bank. Therefore, no specific rate was assumed for this valuation.

49.3 (b) Movement in the provision for unfunded pension scheme

GROUP BANK

Financial Statements
2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Balance as at January 1, 257,031 242,819 257,031 242,819

Expense recognised in the Income Statement 49.3 (c) 235 26,988 27,924 26,988 27,924
Amount paid during the year (48,692) (48,789) (48,692) (48,789)

Annual Report 2020

Transfers – – – –
Actuarial (gains)/losses recognised in other comprehensive income 45,203 35,077 45,203 35,077
Balance as at December 31, 280,530 257,031 280,530 257,031

49.3 (c) Expense recognised in the Income Statement – Unfunded pension scheme

Commercial Bank of Ceylon PLC

GROUP BANK
For the year ended December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Interest cost 26,988 27,924 26,988 27,924

Total 26,988 27,924 26,988 27,924

49.3 (d) Sensitivity analysis on actuarial valuation – Unfunded pension scheme

The following table illustrates the impact arising from the possible changes in the discount rate and salary escalation rates on the unfunded
pension scheme of the Bank as at December 31, 2020.
GROUP BANK
Variable Sensitivity effect on Sensitivity effect on
Statement of Financial Position Statement of Financial Position
(Benefit obligation) (Benefit obligation)
Rs. ’000 Rs. ’000

1% increase in discount rate (12,842) (12,842) 49

1% decrease in discount rate 14,129 14,129

1% increase in salary – –
1% decrease in salary – –

235
 49.4 Provision for leave encashment
An actuarial valuation of the leave encashment liability was carried out as at December 31, 2020 by Mr M Poopalanathan, AIA, of Messrs
Actuarial & Management Consultants (Pvt) Ltd., a firm of professional actuaries. The valuation method used by the actuaries to value
the liability is the “Projected Unit Credit Method (PUC)”, the method recommended by the Sri Lanka Accounting Standard – LKAS 19 on
“Employee Benefits”.

49.4 (a) Actuarial assumptions

Type of assumption Criteria Description

Demographic Mortality – in service A 1967-70 Mortality table issued by the Institute of Actuaries, London
Staff turnover The probability of a member withdrawing from the scheme within a year of ages between 20 to 55 years.
Disability The probability of a member becoming disable within a year of ages between 20 to 55 years.
Financial Rate of discount In the absence of a deep market in long-term bonds in Sri Lanka, a long-term interest rate of 8.00% p.a.
(2019 – 10.50% p.a.) has been used to discount future liabilities considering anticipated long-term rate of
Notes to the Financial Statements

inflation.
Salary increases A salary increment of 8.00% p.a. (2019 – 10.00% p.a.) has been used in respect of the active employees.

49.4 (b) Movement in the provision for leave encashment

GROUP BANK
2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Balance as at January 1, 781,362 709,495 781,362 709,495

Expense recognised in the Income Statement 49.4 (c) 236 82,043 81,592 82,043 81,592
Financial Statements

Amount paid during the year (135,277) (69,499) (135,277) (69,499)

Actuarial (gains)/losses recognised in other comprehensive income 198,558 59,774 198,558 59,774
Balance as at December 31, 926,686 781,362 926,686 781,362

49.4 (c) Expense recognised in the Income Statement – Leave encashment

Annual Report 2020

GROUP BANK
For the year ended December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Interest cost 82,043 81,592 82,043 81,592

Current service cost – – – –
Commercial Bank of Ceylon PLC

Total 82,043 81,592 82,043 81,592

49.4 (d) Sensitivity analysis on actuarial valuation – Leave encashment

The following table illustrates the impact arising from the possible changes in the discount rate and salary escalation rates on the leave
encashment liability valuation of the Bank as at December 31, 2020.
GROUP BANK
Variable Sensitivity effect on Sensitivity effect on
Statement of Financial Position Statement of Financial Position
(Benefit obligation) (Benefit obligation)
Rs. ’000 Rs. ’000

1% increase in discount rate (113,523) (113,523)

1% decrease in discount rate 138,846 138,846
1% increase in salary 141,729 141,729
1% decrease in salary (117,760) (117,760)
49

236
49.5 Employee retirement benefit
49.5.1 Pension fund – Defined benefit plan
An actuarial valuation of the Retirement Pension Fund was carried out as at December 31, 2020 by Mr M Poopalanathan, AIA, of Messrs
Actuarial and Management Consultants (Pvt) Ltd., a firm of professional actuaries. The valuation method used by the actuaries to value
the fund is the “Projected Unit Credit Method (PUC)”, the method recommended by the Sri Lanka Accounting Standard – LKAS 19 on
“Employee Benefits”.
The assets of the fund, which are independently administered by the Trustees as per the provisions of the Trust Deed are held separately from
those of the Bank.

49.5.1 (a) Actuarial assumptions

Type of assumption Criteria Description

Demographic Mortality – in service A 1967-70 Mortality table issued by the Institute of Actuaries, London
After retirement A (90) Annuities table (Males and Females) issued by the Institute of Actuaries, London

Notes to the Financial Statements

Staff turnover The withdrawal rate at an age represents the probability of an active employee leaving within one year of that age
due to reasons other than death, ill health and normal retirement. The same withdrawal rates which were used in
the last valuation (as at December 31, 2019) to determine the liability on account of the active employees in the
funded scheme, were used in the actuarial valuation carried out as at December 31, 2020.
Disability Assumptions similar to those used in other comparable schemes for disability were used as the data required to do
a “scheme specific” study was not available.
Normal retirement age 55 or 60 years as opted by the employees.
Financial Rate of discount In the absence of a deep market in long-term bonds in Sri Lanka, a long-term interest rate of 8.00% p.a.
(2019 – 10.50% p.a.) has been used to discount future liabilities considering anticipated long-term rate of inflation.
Salary increases A salary increment of 8.00% p.a. (2019 – 10.00% p.a.) has been used in respect of the active employees.

Financial Statements
Post-retirement There is no agreed rate of increase even though the pension payments are subject to periodic increases and increases
pension increase rate are granted solely at the discretion of the Bank. Therefore, no specific rate was assumed for this valuation.

49.5.1 (b) Movement in the present value of defined benefit obligation – Bank

2020 2019
Rs. ’000 Rs. ’000

Annual Report 2020

Balance as at January 1, 247,761 217,829
Interest cost 26,015 25,050
Current service cost 3,913 4,400
Benefits paid during the year (19,405) (19,101)
Actuarial (gains)/losses 36,401 19,583

Commercial Bank of Ceylon PLC

Balance as at December 31, 294,685 247,761

49.5.1 (c) Movement in the fair value of plan assets

2020 2019
Rs. ’000 Rs. ’000

Fair value as at January 1, 214,198 204,860

Expected return on plan assets 22,491 23,559
Contribution paid into plan 33,563 2,145
Benefits paid by the plan (19,405) (19,101)
Actuarial gains/(losses) on plan assets 4,770 2,735
Fair value as at December 31, 255,617 214,198

49.5.1 (d) Liability recognised in the Statement of Financial Position

2020 2019 49
Note Page No. Rs. ’000 Rs. ’000

Present value of defined benefit obligations as at December 31, 49.5.1 (b) 237 294,685 247,761
Fair value of plan assets 49.5.1 (c) 237 (255,617) (214,198)
Net liability recognised under other liabilities 39,068 33,563

237
 49.5.1 (e) Plan assets consist of the following:

2020 2019
Rs. ’000 Rs. ’000

Deposits held with the Bank 255,617 214,198

Total 255,617 214,198

49.5.2 W&OP Fund – Defined benefit plan

An actuarial valuation of the Retirement Pension W&OP Fund was carried out as at December 31, 2020 by Mr M Poopalanathan, AIA,
of Messrs Actuarial & Management Consultants (Pvt) Ltd., a firm of professional actuaries. The valuation method used by the actuaries to value
the fund is the “Projected Unit Credit Method (PUC)”, the method recommended by the Sri Lanka Accounting Standard – LKAS 19 on “Employee
Benefits”.
The assets of the fund, which are independently administered by the Trustees as per the provisions of the Trust Deed are held separately from
those of the Bank.
Notes to the Financial Statements

49.5.2 (a) Actuarial assumptions

Type of assumption Criteria Description

Demographic Mortality – In service A 1967-70 Mortality table issued by the Institute of Actuaries, London
After retirement A (90) Annuities table (Males and Females) issued by the Institute of Actuaries, London
Staff turnover The withdrawal rate at an age represents the probability of an active employee leaving within one year of that age
due to reasons other than death, ill health and normal retirement. The same withdrawal rates which were used in the
last valuation (as at December 31, 2019) to determine the liability on account of the active employees in the funded
scheme, were used in the actuarial valuation carried out as at December 31, 2020.
Financial Statements

Disability Assumptions similar to those used in other comparable schemes for disability were used as the data required to do a
“scheme specific” study was not available.
Normal retirement age 55 or 60 years as opted by the employees.

Financial Rate of discount In the absence of a deep market in long-term bonds in Sri Lanka, a long-term interest rate of 8.00% p.a.
(2019 – 10.50% p.a.) has been used to discount future liabilities considering anticipated long-term rate of inflation.
Salary increases A salary increment of 8.00% p.a. (2019 – 10.00% p.a.) has been used in respect of the active employees.
Post-retirement pension There is no agreed rate of increase even though the pension payments are subject to periodic increases and increases
Annual Report 2020

increase rate are granted solely at the discretion of the Bank. Therefore, no specific rate was assumed for this valuation.

49.5.2 (b) Movement in the present value of defined benefit obligation – Bank

2020 2019
Rs. ’000 Rs. ’000
Commercial Bank of Ceylon PLC

Balance as at January 1, 68,860 61,287

Interest cost 7,230 7,048
Current service cost 450 415
Transfers – –
Benefits paid during the year (5,938) (5,786)
Actuarial (gains)/losses 27,614 5,896
Balance as at December 31, 98,216 68,860

49.5.2 (c) Movement in the fair value of plan assets

2020 2019
Rs. ’000 Rs. ’000

Fair value as at January 1, 56,053 66,848

49 Expected return on plan assets 5,886 7,687

Contribution paid into plan 12,805 280
Benefits paid by the plan (5,938) (5,786)
Actuarial gains/(losses) on plan assets 6,278 (12,976)
Fair value as at December 31, 75,084 56,053

238
49.5.2 (d) Liability recognised in the Statement of Financial Position

2020 2019
Note Page No. Rs. ’000 Rs. ’000

Present value of defined benefit obligations as at December 31, 49.5.2 (b) 238 98,216 68,860
Fair value of plan assets 49.5.2 (c) 238 (75,084) (56,053)
Net liability recognised under other liabilities 23,132 12,807

49.5.2 (e) Plan assets consist of the following:

2020 2019
Rs. ’000 Rs. ’000

Deposits held with the Bank 75,084 56,053

Total 75,084 56,053

Notes to the Financial Statements

49.5.3 Pension fund – Defined contribution plan
During 2006, the Bank restructured its pension their pension rights. The lump sum offered Bank for the employees who accepted the
scheme which was a Defined Benefit Plan consisted of a past service package and future offer, to be made during their remaining
(DBP) to a Defined Contribution Plan (DCP). service package. The cost to be incurred on period of service, at predetermined
This restructured plan was offered on a account of the past service package in excess contribution rates to be applied on their
voluntary basis to the eligible employees of of the funds available in the pension fund was salaries, estimated to increase for this
the Bank. The scheme provided for lump sum borne by the Bank in 2006. purpose at 10.00% p.a. In addition, interest
payments instead of commuted/monthly to be earned on the assets of the DCP is also
The future service package includes
pension to the eligible employees at the point allocated to the employees who joined the
monthly contributions to be made by the

Financial Statements
of their separation, in return for surrendering restructured scheme.

49.5.3 (a) Pension fund – Defined contribution plan - 2020

The Bank converted its gratuity scheme of Sri Lankan operations, which was a Defined Benefit Plan (DBP), to a Defined Contribution Plan (DCP)
during the year. Refer Note [Link] on page 173 for further details.

50. Due to subsidiaries

Annual Report 2020

GROUP BANK
As at December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Local subsidiaries
Commercial Development Company PLC – – 31,079 19,724

Commercial Bank of Ceylon PLC

CBC Tech Solutions Limited – – 65,936 34,568
CBC Finance Limited – – – –
Commercial Insurance Brokers (Private) Limited – –
Subtotal – – 97,015 54,292

Foreign subsidiaries
Commex Sri Lanka S.R.L. – Italy – – – –
Commercial Bank of Maldives Private Limited – – – –
CBC Myanmar Microfinance Company Limited – – – –
Subtotal – – – –

Total – – 97,015 54,292

The maturity analysis of Due to subsidiaries is given in Note 61 on pages 251 to 253.

49
50

239
 51. Subordinated liabilities
Accounting policy

These represent the funds borrowed by the Group for long-term funding requirements. Subsequent to initial recognition these are
measured at their amortised cost using the EIR method, except where the Group designates them at fair value through profit or loss.
Interest paid/payable is recognised in profit or loss.
GROUP BANK
2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Balance as at January 1, 36,810,680 36,904,430 36,810,680 36,904,430

Amount borrowed during the year – – – –
Repayments/redemptions during the year – – – –
Subtotal 36,810,680 36,904,430 36,810,680 36,904,430
Notes to the Financial Statements

Exchange rate variance 393,750 (93,750) 393,750 (93,750)

Balance as at December 31,

(before adjusting for amortised interest and transaction cost) 51.1 240 37,204,430 36,810,680 37,204,430 36,810,680
Unamortised transaction cost (27,473) (39,174) (27,473) (39,174)
Net effect of amortised interest payable 1,070,181 1,115,283 1,070,181 1,115,283
Adjusted balance as at December 31, 38,247,138 37,886,789 38,247,138 37,886,789

51.1 Categories of subordinated liabilities

GROUP BANK
Financial Statements

Categories Colombo Interest Allotment Maturity Effective

Stock payable date date annual yield
Exchange frequency
2020 2019 2020 2019 2020 2019
Listing
% % Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Fixed Rate Debentures

2016/2021 – 10.75% p.a. Listed Biannually 09.03.2016 08.03.2021 11.04 11.04 4,430,340 4,430,340 4,430,340 4,430,340
Annual Report 2020

2016/2021 – 12.00% p.a. Listed Biannually 28.10.2016 27.10.2021 12.36 12.36 5,071,800 5,071,800 5,071,800 5,071,800
2016/2026 – 11.25% p.a. Listed Biannually 09.03.2016 08.03.2026 11.57 11.57 1,749,090 1,749,090 1,749,090 1,749,090
2016/2026 – 12.25% p.a. Listed Biannually 28.10.2016 27.10.2026 12.63 12.63 1,928,200 1,928,200 1,928,200 1,928,200
2018/2023 – 12.00% p.a. Listed Biannually 23.07.2018 22.07.2023 12.36 12.36 8,393,840 8,393,840 8,393,840 8,393,840
2018/2028 – 12.50% p.a. Listed Biannually 23.07.2018 22.07.2028
Commercial Bank of Ceylon PLC

12.89 12.89 1,606,160 1,606,160 1,606,160 1,606,160

Floating rate subordinated

loans
IFC Borrowings – 6 M LIBOR +
5.75% Biannually 13.03.2013 14.03.2023 6.005 8.388 14,025,000 13,631,250 14,025,000 13,631,250
Total 37,204,430 36,810,680 37,204,430 36,810,680

51.2 Subordinated liabilities by maturity

GROUP BANK
As at December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Payable within one year 9,502,140 – 9,502,140 –

Payable after one year 27,702,290 36,810,680 27,702,290 36,810,680
Total 37,204,430 36,810,680 37,204,430 36,810,680
51
In the event of the winding-up of the issuer, the above liabilities would be subordinated to the claims of depositors and all other creditors of
the issuer. The Bank has not had any defaults of principal, interest, or other breaches with respect to its subordinated liabilities during the year
ended December 31, 2020.
The maturity analysis of subordinated liabilities is given in Note 61 on pages 251 to 253.

240
52. Stated capital
Accounting policy

Ordinary shares in the Bank are recognised at the amount paid per ordinary share net of directly attributable issue cost.
GROUP BANK
2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Balance as at January 1, 40,916,958 39,147,882 40,916,958 39,147,882

Proceeds on issue of ordinary voting shares to IFC parties
(Private placement) 9,215,775 – 9,215,775 –
Issue of ordinary voting shares under the employee share option plan – 30,128 – 30,128
Transfer from employee share option reserve 56.5 247 – – – –
Issue of ordinary shares as part of the final dividend satisfied in the

Notes to the Financial Statements

form of issue and allotment of new shares 2,055,014 1,738,948 2,055,014 1,738,948
Ordinary voting shares 1,922,505 1,627,125 1,922,505 1,627,125
Ordinary non-voting shares 132,509 111,823 132,509 111,823
Balance as at December 31, 52,187,747 40,916,958 52,187,747 40,916,958

52.1 Movement in number of shares

Number of ordinary Number of ordinary
voting shares non-voting shares

2020 2019 2020 2019

Financial Statements
Balance as at January 1, 961,252,317 945,709,403 66,254,269 65,013,174
Issue of ordinary voting shares to IFC parties (Private placement) 115,197,186 – – –
Issue of ordinary voting shares under the employee share option plan – 293,385 – –
Issue of ordinary shares as part of the final dividend satisfied
in the form of issue and allotment of new shares 22,485,434 15,249,529 1,716,432 1,241,095
Balance as at December 31, 1,098,934,937 961,252,317 67,970,701 66,254,269

Annual Report 2020

The shares of Commercial Bank of Ceylon PLC The holders of ordinary shares are entitled At present there are two employee share
are quoted on the Colombo Stock Exchange. to receive dividends declared from time to option plans. Please refer Note 53 for details.
The non-voting ordinary shares of the Bank, time and are entitled to one vote per share at
rank pari passu in respect of all rights with General Meetings of the Bank.

Commercial Bank of Ceylon PLC

the ordinary voting shares of the Bank except
voting rights on Resolutions passed at
General Meetings.

53. Share-based payment

53.1 Description of the share-based payment arrangement
As at the reporting date, the Group had the following equity settled share-based payment arrangement which was granted after
January 1, 2012, the effective date of the Accounting Standard SLFRS 2 on “Share-based Payment”.

Employee Share Option Plan – 2015

The Bank obtained the approval of the shareholders at an Extraordinary General Meeting held on March 31, 2015, to introduce an Employee
Share Option Plan for the benefit of all Executive Officers in Grade 1A and above by creating up to 2% of the ordinary voting shares at the
rate of 0.5% shares in the first two years and 1% share in the last year over a period of three to five years, upon the Bank achieving specified
performance targets. The performance conditions include minimum performance targets over the budget and over the industry peers and
the service conditions include the fulfilment of the minimum service period at vesting dates of each tranche.
52
53

241
 Key terms and conditions related to the offer are detailed below:

Tranches
Tranche I Tranche II Tranche III

Percentage of issue of new voting shares

(Maximum) 0.50% 0.50% 1.00%
Date granted April 1, 2015 April 1, 2015 April 1, 2015
Exercise price (Rs.) 120.46 134.74 136.35
Exercisable between October 1, 2016 to October 1, 2017 to October 1, 2018 to
September 30, 2019 September 30, 2020 September 30, 2021
Date of vesting September 30, 2016 September 30, 2017 September 30, 2018
Vesting conditions 1 ½ years of service from 2 ½ years of service from 3 ½ years of service from
the grant date and the the grant date and the the grant date and the
fulfilment of performance fulfilment of performance fulfilment of performance
Notes to the Financial Statements

conditions stated above conditions stated above conditions stated above

for the financial year 2015 for the financial year 2016 for the financial year 2017
Number of options vested on the date of vesting
Options granted to key management personnel 59,615 61,400 138,632
Options granted to other executive officers 4,161,150 4,167,461 9,312,978
Total options vested on the date of vesting 4,220,765 4,228,861 9,451,610

Options cancelled due to non-acceptance (3,228,021) (4,048,728) –

Number of options exercised up to December 31, 2020 (992,744) (180,133) –
Number of options to be exercised as at December
Financial Statements

31, 2020 – – 9,451,610

All options are to be settled by physical delivery of ordinary voting shares of the Bank. There are neither cash settlement alternatives nor
the Bank has a past practise of cash settlement for these types of options.
The exercise price of each tranche is computed based on a volume-weighted average market price of the Bank’s ordinary (voting) shares,
during the period of thirty (30) market days, six months prior to the date of vesting.
Annual Report 2020

53.2 Measurement of fair value

As required by SLFRS 2 on “Share-based Payment”, the fair value of the ESOP 2015 was estimated at the grant date using the Binomial Valuation
Model taking into consideration various terms and conditions upon which the share options are granted.
The inputs used in measurement of fair value at the grant date of ESOP 2015 were as follows:
Tranches
Commercial Bank of Ceylon PLC

Description of the valuation input Tranche I Tranche II Tranche III

Expected dividend rate (%) 3.50 3.50 3.50

Risk free rate (%) 8.00 8.00 8.00
Probability of share price increase (%) 80.00 80.00 80.00
Probability of share price decrease (%) 20.00 20.00 20.00
Size of annual increase of share price (%) 20.00 20.00 20.00
Size of annual reduction in share price (%) 10.00 10.00 10.00
Original expected exercise price (Rs.) 206.90 227.54 250.24

Growths in share prices stated above have been based on evaluation of the historical volatility of the Bank’s share price over past 10 years,
adjusted for post-war growth in All Share Price Index published by the Colombo Stock Exchange.

53

242
53.3 Reconciliation of outstanding share options
The number and weighted-average exercise prices of share options are as follows:

Tranche Tranche I Tranche II Tranche III

Exercise price 120.46 134.74 136.35

Year 2020 2019 2020 2019 2020 2019

No. of voting shares vested and to be vested as at January 1, – 3,228,021 4,048,728 4,048,728 9,451,610 9,451,610
Exercised during the year – – – – – –
Number of options expired – (3,228,021) (4,048,728) – – –
No. of voting shares vested and to be vested as at
December 31, – – – 4,048,728 9,451,610 9,451,610

Notes to the Financial Statements

53.4 Expense recognised in Income Statement
The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date, reflects the extent to which
the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. Accordingly, the
expense in the Income Statement represents the movement in cumulative expense recognised as at the beginning and end of that period and
is recognised in employee benefits expense [Refer Note 19].

Employee Share Option Plan – 2019

The Bank obtained the approval of the shareholders at an Extraordinary General Meeting held on January 30, 2020, to introduce an Employee
Share Option Plan for the benefit of all Executive Officers in Grade 1A and above by creating up to 2% of the ordinary voting shares at the
rate of 0.5% shares in the first two years and 1% shares in the last year over a period of three to five years, upon the Bank achieving specified
performance targets. The performance conditions include minimum performance targets over the budget and over the industry peers and the

Financial Statements
service conditions include the fulfilment of the minimum service period at vesting dates of each tranche.
Key terms and conditions related to the offer are detailed below:

Tranches
Tranche I Tranche II Tranche III

Percentage of issue of new voting shares

Annual Report 2020

(Maximum) 0.50% 0.50% 1.00%
Date granted January 30, 2020 January 30, 2020 January 30, 2020
Exercise price (Rs.) 91.65 85.13 To be decided
Exercisable between July 01, 2020 to October 01, 2020 to October 01, 2021 to
June 30, 2023 September 30, 2023 September 30, 2024

Commercial Bank of Ceylon PLC

Date of vesting June 30, 2020 September 30, 2020 September 30, 2021
Vesting conditions 6 Months of service from 6 Months of service from 6 Months of service from
the grant date and the the grant date and the the grant date and the
fulfilment of performance fulfilment of performance fulfilment of performance
conditions stated above for conditions stated above for conditions stated above for
the Financial Year 2018 the Financial Year 2019 the Financial Year 2020
Number of options vested on the date of vesting
Options granted to key management personnel 89,187 99,010 –
Option granted to other executive officers 4,716,598 4,706,872 –
Total options vested on the date of vesting 4,805,785 4,805,882 –

Options cancelled due to non-acceptance – – –

Number of options exercised up to December 31, 2020 – – –
Number of options to be exercised as at December
31, 2020 4,805,785 4,805,882 –

All options are to be settled by physical delivery of ordinary voting shares of the Bank. There are neither cash settlement alternatives nor the 53
Bank has a past practise of cash settlement for these types of options.
The exercise price of each tranche is computed based on a volume-weighted average market price of the Bank’s ordinary (voting) shares,
during the period of thirty (30) market days, six months prior to the date of vesting.

243
 53.5 Measurement of fair value
As required by SLFRS 2 on “Share-based Payment”, the fair value of the ESOP 2019 was estimated at the grant date using the Binomial Valuation
Model taking into consideration various terms and conditions upon which the share options are granted.
The inputs used in measurement of fair value at the grant date of ESOP 2019 were as follows:

Tranches
Description of the valuation input Tranche I Tranche II Tranche III

Expected dividend rate (%) 4.31 4.31 4.31

Risk free rate (%) 8.22 8.22 8.22
Probability of share price increase (%) 55.00 55.00 55.00
Probability of share price decrease (%) 45.00 45.00 45.00
Size of annual increase of share price (%) 19.00 19.00 19.00
Size of annual reduction in share price (%) (12.00) (12.00) (12.00)
Notes to the Financial Statements

Original expected exercise price (Rs.) 100.22 100.74 101.45

Growths in share prices stated above have been based on evaluation of the historical volatility of the Bank’s share price over past 10 years,
adjusted for post-war growth in All Share Price Index published by the Colombo Stock Exchange.

53.6 Reconciliation of outstanding share options

The number and weighted-average exercise prices of share options are as follows:

Tranche Tranche I Tranche II Tranche III

Exercise price 91.65 85.13 To be decided

Financial Statements

Year 2020 2019 2020 2019 2020 2019

No. of voting shares vested and to be vested as at January 1, – – – – – –

Granted during the year 4,805,785 4,805,882 – – –
Exercised during the year – – – – – –
Number of options expired – – – – – –
Annual Report 2020

No. of voting shares vested and to be vested as at

December 31, 4,805,785 – 4,805,882 – – –

53.7 Expense recognised in Income Statement

The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date, reflects the extent to which
Commercial Bank of Ceylon PLC

the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. Accordingly, the
expense in the Income Statement represents the movement in cumulative expense recognised as at the beginning and end of that period and
is recognised in employee benefits expense [Refer Note 19 on page 185].

54. Statutory reserves

Accounting policy

Several statutory and voluntary reserves are maintained by the Group in order to meet various legal and operational requirements. The details of
these reserves including the nature and purpose of maintaining them are given in Notes 54, 55 and 56 on pages 244 to 248.

GROUP BANK
2020 2019 2020 2019
As at December 31,
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Statutory reserve fund 54.1 245 9,285,233 8,387,701 9,024,065 8,205,391

Total 9,285,233 8,387,701 9,024,065 8,205,391
53
54

244
54.1 Statutory reserve fund
GROUP BANK
As at December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Balance as at January 1, 8,387,701 7,444,178 8,205,391 7,354,143

Transfers made during the year 959,230 1,017,536 818,674 851,248
Statutory reserve attributable to non-controlling interest (61,698) (74,013) – –
Balance as at December 31, 9,285,233 8,387,701 9,024,065 8,205,391

The statutory reserve fund is maintained as per the requirements under Section 20 (1) of the Banking Act No. 30 of 1988. Accordingly,
the fund is built up by allocating a sum equivalent to not less than 5% of the profit after tax, but before declaring any dividend or any profits
that are transferred elsewhere until the reserve is equal to 50% of the Bank’s stated capital and thereafter a further sum equivalent to 2% of
such profit until the amount of the said reserve fund is equal to the stated capital of the Bank.

Notes to the Financial Statements

The balance in the statutory reserve fund will be used only for the purposes specified in the Section 20 (2) of the Banking Act No. 30 of 1988.

55. Retained earnings

GROUP BANK
2020 2019 2020 2019
Note Page No. Rs. ‘000 Rs. ’000 Rs. ’000 Rs. ’000

Balance as at January 1, 5,182,185 4,949,955 5,144,433 5,063,076

Impact of adopting SLFRS 16 – (57,627) – (57,627)

Financial Statements
Balance as at January 1, – Adjusted 5,182,185 4,892,328 5,144,433 5,005,449
Total comprehensive income 16,714,932 17,205,859 16,152,169 16,968,027
Profit for the year 16,939,950 17,263,259 16,373,489 17,024,967
Other comprehensive income, net of tax (225,018) (57,400) (221,320) (56,940)
Dividends paid (5,137,534) (6,596,161) (5,137,534) (6,596,161)
Unclaimed dividend absorbed/(dividend paid) in respect of

Annual Report 2020

previous years 100 (350) (114) (547)
Transfer of cost o/a of expired ESOP Shares (net of tax) 105,980 88,913 105,980 88,913
Transfers to other reserves (8,747,532) (10,413,523) (8,668,674) (10,321,248)
Profit on sale of partial disposal of a subsidiary – 14,498 – –
Reinstatement of non-controlling interest due to partial disposal
of a subsidiary

Commercial Bank of Ceylon PLC

– (9,379) – –

Movement due to change in ownership 6,130 – – –

Balance as at December 31, 8,124,261 5,182,185 7,596,260 5,144,433

56. Other reserves

56. (a) Current year – 2020
GROUP BANK
Balance as at Movement/ Balance as at Balance as at Movement/ Balance as at
January 1, transfers December 31, January 1, transfers December 31,
Note Page No. Rs. ‘000 Rs. ’000 Rs. ’000 Rs. ‘000 Rs. ’000 Rs. ’000

Revaluation reserve 56.1 246 7,837,785 2,666,983 10,504,768 7,088,054 2,574,858 9,662,912
General reserve 56.2 246 67,120,003 7,850,000 74,970,003 67,120,003 7,850,000 74,970,003
Fair value reserve 56.3 247 1,783,503 (1,319,619) 463,884 1,785,441 (1,323,110) 462,331 54
Foreign currency translation reserve 56.4 247 2,765,992 559,932 3,325,924 2,471,983 439,883 2,911,866 55
Employee share option reserve 56.5 247 468,494 (34,991) 433,503 468,494 (34,991) 433,503 56

Hedging reserve 56.6 248 (38,372) (64,139) (102,511) (38,372) (64,139) (102,511)
Total 79,937,405 9,658,166 89,595,571 78,895,603 9,442,501 88,338,104

245
 56. (b) Previous year – 2019

GROUP BANK
Balance as at Movement/ Balance as at Balance as at Movement/ Balance as at
January 1, transfers December 31, January 1, transfers December 31,
Note Page No. Rs. ‘000 Rs. ’000 Rs. ’000 Rs. ‘000 Rs. ’000 Rs. ’000

Revaluation reserve 56.1 246 7,819,131 18,654 7,837,785 7,088,054 – 7,088,054

General reserve 56.2 246 57,650,003 9,470,000 67,120,003 57,650,003 9,470,000 67,120,003
Fair value reserve 56.3 247 (1,386,355) 3,169,858 1,783,503 (1,384,982) 3,170,423 1,785,441
Foreign currency translation reserve 56.4 247 3,157,052 (391,060) 2,765,992 2,871,770 (399,787) 2,471,983
Employee share option reserve 56.5 247 591,984 (123,490) 468,494 591,984 (123,490) 468,494
Hedging reserve 56.6 248 24,019 (62,391) (38,372) 24,019 (62,391) (38,372)
Total 67,855,834 12,081,571 79,937,405 66,840,848 12,054,755 78,895,603
Notes to the Financial Statements

56.1 Revaluation reserve

Accounting policy

The revaluation reserve relates to revaluation of freehold land and buildings and represents the fair value changes of the land and buildings as
at the date of revaluation.
GROUP BANK
2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000
Financial Statements

Balance as at January 1, 7,837,785 7,819,131 7,088,054 7,088,054

Surplus on revaluation of freehold land and buildings 3,672,202 – 3,585,430 –
Deferred tax effect on revaluation surplus on freehold land and buildings (1,009,733) – (1,010,572) –
Revaluation gain on disposal of freehold land and buildings – – – –
Share of other comprehensive income of associate – 39,575 – –
Movement due to change in ownership 4,514 (20,921) – –
Annual Report 2020

Balance as at December 31, 10,504,768 7,837,785 9,662,912 7,088,054

56.2 General reserve

Accounting policy

The Bank transfers the surplus profit, after payment of interim dividend and after retaining sufficient profits to pay final dividends proposed,
Commercial Bank of Ceylon PLC

from the retained earnings account to the General Reserve account. The purpose of setting up the General Reserve is to meet potential future
unknown liabilities.
GROUP BANK
2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Balance as at January 1, 67,120,003 57,650,003 67,120,003 57,650,003

Transfers during the year 7,850,000 9,470,000 7,850,000 9,470,000
Balance as at December 31, 74,970,003 67,120,003 74,970,003 67,120,003

56

246
56.3 Fair value reserve
Accounting policy

The fair value reserve comprises the cumulative net change in fair value of financial assets measured at fair value through other comprehensive
income until such investments are derecognised or impaired.
GROUP BANK
2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Balance as at January 1, 1,783,503 (1,386,355) 1,785,441 (1,384,982)

Net fair value gains/(losses) on remeasuring financial assets at fair value through
other comprehensive income (1,323,055) 3,170,800 (1,323,110) 3,170,423
Share of other comprehensive income of associate 3,436 (942) – –
Balance as at December 31, 463,884 1,783,503 462,331 1,785,441

Notes to the Financial Statements

56.4 Foreign currency translation reserve
Accounting Policy

The foreign currency translation reserve comprises all foreign currency differences arising from the translation of the Financial Statements of
foreign operations.
As at the reporting date, the assets and liabilities of the Bank’s Bangladesh Operation and the foreign subsidiaries of the Bank were
translated into the presentation currency (Sri Lankan Rupee) at the exchange rate ruling at the reporting date and the Statement of Profit or
Loss and Other Comprehensive Income was translated at the average exchange rate for the period. The exchange differences arising on the
translation of these Financial Statements are taken to foreign currency translation reserve through other comprehensive income.

Financial Statements
GROUP BANK
2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Balance as at January 1, 2,765,992 3,157,052 2,471,983 2,871,770

Net gains/(losses) arising from translating the Financial Statements
of foreign operations 596,723 (396,201) 439,883 (399,787)

Annual Report 2020

Foreign Currency Translation Reserve attributable to non-controlling Interest (36,791) 5,141 – –
Balance as at December 31, 3,325,924 2,765,992 2,911,866 2,471,983

56.5 Employee share option reserve

Accounting policy

Commercial Bank of Ceylon PLC

The employee share option reserve is used to recognise the value of equity-settled share-based payments to be provided to employees,
including Key Management Personnel, as part of their remuneration.
GROUP BANK
2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Balance as at January 1, 468,494 591,984 468,494 591,984

Transfers during the year 19 185 112,203 – 112,203 –
Transfers to stated capital 52 241 – – – –
Transfer to retained earnings on expired ESOP (147,194) (123,490) (147,194) (123,490)
Balance as at December 31, 433,503 468,494 433,503 468,494

56

247
 56.6 Hedging reserve
Accounting policy

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of hedging instruments used in cash flow
hedges pending subsequent recognition in profit or loss as the hedge cash flows affect profit or loss.
GROUP BANK
2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Balance as at January 1, (38,372) 24,019 (38,372) 24,019

Transfers during the year (64,139) (62,391) (64,139) (62,391)
Balance as at December 31, (102,511) (38,372) (102,511) (38,372)

57. Non-controlling interest

Notes to the Financial Statements

Accounting policy

Non-Controlling Interest (NCI) are measured at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition.
Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Accordingly, the
Bank has non-controlling interest in three subsidiaries namely, Commercial Development Company PLC (NCI of 10%), Commercial Insurance
Brokers (Pvt) Limited (NCI of 40%) and Commercial Bank of Maldives Private Limited (NCI of 45%) as at the reporting date as follows:

2020 2019
Rs. ’000 Rs. ’000

Balance as at January 1, 1,589,234 1,198,981

Financial Statements

Profit for the year 146,847 157,137

Other comprehensive income, net of tax 46,456 (5,077)
Dividends paid for the year (16,020) (5,010)
Unclaimed dividend absorbed/(dividend paid) in respect of previous years 24 22
Reinstatement of non-controlling interest due to partial disposal of a subsidiary (10,644) 30,300
Acquisition of subsidiary with non-controlling interest – 212,881
Annual Report 2020

Balance as at December 31, 1,755,897 1,589,234

58. Contingent liabilities and commitments

Accounting policy
Commercial Bank of Ceylon PLC

Contingent liabilities are possible These consist of financial guarantees, Contingent liabilities are not recognised
obligations whose existence will be letters of credit and other undrawn in the Statement of Financial Position but are
confirmed only by uncertain future events commitments to lend. Letters of credit disclosed unless its occurrence is remote.
or present obligations where the transfer and guarantees commit the Bank to make
Even though these obligations may not
of economic benefit is not probable or payments on behalf of customers in the
be recognised on the Statement of Financial
cannot be readily measured as defined in event of a specific act, generally related to
Position, they do contain credit risk and are
the Sri Lanka Accounting Standard – LKAS the import or export of goods. Guarantees
therefore part of the overall risk of the Bank
37 on “Provisions, Contingent Liabilities and and standby letters of credit carry a similar
as disclosed in Note 58.1 on page 249.
Contingent Assets”. credit risk to loans.
To meet the financial needs of customers, In the normal course of business,
the Bank enters into various irrevocable the Bank makes various irrevocable
commitments and contingent liabilities. commitments and incurs certain contingent
liabilities with legal recourse to its customers.

56
57
58

248
 GROUP BANK
As at December 31, 2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Contingencies 599,110,072 470,935,864 598,121,484 470,624,684

Guarantees 65,796,764 58,619,708 65,581,771 58,463,720
Performance bonds 38,047,779 38,704,636 37,957,159 38,606,887
Documentary credits 75,498,646 52,361,670 74,875,507 52,317,807
Other contingencies 58.1 249 419,766,883 321,249,850 419,707,047 321,236,270
Commitments 131,451,613 110,025,943 130,590,214 109,374,589
Undrawn commitments on direct advances 130,418,187 109,676,108 129,571,427 109,046,521
Capital commitments 58.2 249 1,033,426 349,835 1,018,787 328,068
Total 730,561,685 580,961,807 728,711,698 579,999,273

Notes to the Financial Statements

58.1 Other contingencies
GROUP BANK
As at December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Forward exchange contracts: 86,003,856 57,627,084 86,003,856 57,627,084

Forward exchange sales 63,965,641 30,265,726 63,965,641 30,265,726
Forward exchange purchases 22,038,215 27,361,358 22,038,215 27,361,358

Financial Statements
Currency swaps/currency options: 221,408,936 188,772,874 221,408,936 188,772,874
Currency swaps 220,259,925 188,772,874 220,259,925 188,772,874
Currency options 1,149,011 – 1,149,011 –

Others: 112,354,091 74,849,892 112,294,255 74,836,312

Acceptances 64,371,311 44,018,170 64,369,512 44,007,816

Annual Report 2020

Bills for collection 46,389,435 29,272,988 46,331,398 29,269,762
Bullion on consignment 14,545 11,344 14,545 11,344
Other contingencies 1,578,800 1,547,390 1,578,800 1,547,390
Subtotal 419,766,883 321,249,850 419,707,047 321,236,270

Commercial Bank of Ceylon PLC

58.2 Capital commitments
The Group has commitments for acquisition of property, plant and equipment and intangible assets incidental to the ordinary course of
business which have been approved by the Board of Directors, the details of which are as follows:
GROUP BANK
As at December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Commitments in relation to property, plant and equipment 548,170 134,473 533,531 112,706
Approved and contracted for 382,670 97,273 368,031 75,506
Approved but not contracted for 165,500 37,200 165,500 37,200

Commitments in relation to intangible assets 485,256 215,362 485,256 215,362

Approved and contracted for 485,256 215,362 485,256 215,362
Approved but not contracted for – – – –
Subtotal 1,033,426 349,835 1,018,787 328,068
58

249
 58.3 Movement in provision for impairment during the year
58.3 (a) Group

Stage 1 Stage 2 Stage 3 Total

2020 2019 2020 2019 2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Balance as at January 1, 768,100 528,932 187,237 89,177 364,743 108,531 1,320,080 726,640

Charge/(write back) to the Income Statement 18.1 184 767,211 239,399 57,245 98,060 (25,067) 256,212 799,389 593,671

Exchange rate variance on

foreign currency provisions 789 (231) – – – – 789 (231)

Balance as at December 31, 1,536,100 768,100 244,482 187,237 339,676 364,743 2,120,258 1,320,080

58.3 (b) Bank

Notes to the Financial Statements

Stage 1 Stage 2 Stage 3 Total

2020 2019 2020 2019 2020 2019 2020 2019
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Balance as at January 1, 764,857 528,932 187,237 89,177 364,743 108,531 1,316,837 726,640

Charge/(write back) to the Income Statement 18.2 185 767,138 236,209 57,245 98,060 (25,067) 256,212 799,316 590,481

Exchange rate variance on

foreign currency provisions 696 (284) – – – – 696 (284)

Balance as at December 31, 1,532,691 764,857 244,482 187,237 339,676 364,743 2,116,849 1,316,837
Financial Statements

58.4 Contingent liabilities and commitments of subsidiaries and associates

58.4 (a) Contingent liabilities and commitments of subsidiaries
Contingent liabilities and commitments of the subsidiary, Commercial Bank of Maldives Private Limited have been included in the
Consolidated Financial Statements of the Group while other subsidiaries of the Group do not have any contingencies or commitments as at the
reporting date.

58.4 (b) Contingent liabilities and commitments of associates

Annual Report 2020

The Associate of the Group, namely, Equity Investments Lanka (Private) Limited does not have any contingencies as at the reporting date.
(As at December 31, 2019 – Nil)

59. Net assets value per ordinary share

GROUP BANK
Commercial Bank of Ceylon PLC

As at December 31, 2020 2019 2020 2019

Amounts used as the numerator:

Total equity attributable to equity holders of the Bank (Rs. ’000) 159,192,812 134,424,249 157,146,176 133,162,385

Number of ordinary shares used as the denominator:

Total number of shares 1,166,905,638 1,027,506,586 1,166,905,638 1,027,506,586
Net assets value per share (Rs.) 136.42 130.83 134.67 129.60

60. Litigation against the Bank

Litigation is a common occurrence in the banking industry due to the nature of the business. The Bank has an established protocol for dealing
with such legal claims. In respect of pending legal claims where the Bank had already made provisions for possible losses in its Financial
Statements or has a realisable security to cover the damages are not included below as the Bank does not expect cash outflows from such
claims. However, further adjustments are made to the Financial Statements if necessary on the adverse effects of legal claims based on the
58 professional advice obtained on the certainty of the outcome and also based on a reasonable estimate.
59
60 All legal cases against the Bank have been tabled at the Board Integrated Risk Management Committee and the progress has been
discussed. Accordingly, set out below are the unresolved legal claims against the Bank as at December 31, 2020 for which, adjustments to the
Financial Statements have not been made due to the uncertainty of its outcome. In addition, there are cases filed against the Bank that has not
been listed here on the basis of non-materiality to operations.

250
Plaintiff Nature of Courts and case No. Value of the Description of the case Present status
the case action
(Rs. ’000)

A Bank Hedging Commercial 1,500,000 Court action has been initiated by the Plaintiff Plaintiff has preferred an appeal
Transaction High Court to prevent the Bank from exercising the to the Supreme Court against
571/2008 MR inherent rights of the Bank to set off a deposit the judgment.
of the plaintiff amounting to USD 15 Mn.
against a sum due from the plaintiff in terms of
a hedging agreement.

Customer Recovery of District Court 27,000 The Plaintiff has filed action to recover a sum Trial was concluded. Written
money Colombo together with interest being the amount held by submissions are due on
DMR 974/2016 the Bank and failing to pay to the Plaintiff due to January 18, 2021.
attaching incorrect documents for a Telegraphic
Transfer.

Customer Recovery of Commercial 60,000 The Plaintiff has filed this case seeking an order Written submissions with

Notes to the Financial Statements

money High Court to prevent the Bank who is the first Defendant regard to the interim reliefs on
771/19/MR from paying and/or disbursing funds on the five January 29, 2021.
Bank Guarantees favouring Director General of
Customs who is the second Defendant.

Customer Special Commercial High 463,918 Plaintiffs have filed action seeking an order to The case has been transferred
Court prevent the payment of Guarantees issued by to the Commercial High Court.
193/2020 the Bank in favour of RDA who is the Beneficiary
and the first Defendant.

Customer Special District Court 458,895 Plaintiffs have filed action seeking an order Call on February 08, 2021.
Kaduwela to prevent the payment of Guarantees issued

Financial Statements
515/SPL by the Bank in favour of RDA who is the
Beneficiary and the first Defendant.

Customer Recovery of Commercial High 55,000 Court action has been initiated by the Plaintiff Pre-trial is fixed for March 15,
Money Court to claim 10% of the sale price deposited at a 2021.
52/2020 property auction held by the Bank, since the
(Formerly District balance 90% was not deposited within 30 days
Court of Colombo of the auction.

Annual Report 2020

DMR 2855/18)

Customer Claim on Commercial High 183,050 Court action has been initiated by a customer Next hearing is fixed for
Forward Court regarding a forward exchange contract. May 28, 2021.
Exchange 36/96(1) Judgment was delivered in favour of the Bank
Contract dismissing the plaintiff’s action, but the plaintiff
has appealed against the judgment in the

Commercial Bank of Ceylon PLC

Supreme Court.

61. Maturity analysis

Group

(i) Remaining contractual period to maturity as at the date of Statement of Financial Position of the assets employed by the Group is
detailed below:
Up to 3 3 to 12 1 to 3 3 to 5 More than Total as at Total as at
months months years years 5 years 31.12.2020 31.12.2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Interest earning assets

Financial assets
Cash and cash equivalents 1,814,333 – – – – 1,814,333 17,668,417
Balances with central banks 96,288,395 – – – – 96,288,395 9,405,251
Placements with banks 8,757,549 7,664,318 – – – 16,421,867 24,903,809
60
Securities purchased under resale agreements – – – – – – 13,147,534
61
Derivative financial assets – – – – – – –
Financial assets recognised through profit or loss –
Measured at fair value 33,867,593 – – – – 33,867,593 20,484,892
Financial assets at amortised cost –
Loans and advances to banks – – – – – – –

251
 Up to 3 3 to 12 1 to 3 3 to 5 More than Total as at Total as at
months months years years 5 years 31.12.2020 31.12.2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Financial assets at amortised cost –

Loans and advances to other customers 282,907,569 238,759,344 226,898,580 108,515,111 52,748,568 909,829,172 893,919,311
Financial assets at amortised cost –
Debt and other financial instruments 14,342,815 34,304,029 81,163,942 95,163,248 77,085,495 302,059,529 107,059,021
Financial assets measured at fair value through
other comprehensive income 6,725,763 29,736,793 173,012,091 46,121,868 22,828,210 278,424,725 197,604,418
Total interest earning assets as at 31.12.2020 444,704,017 310,464,484 481,074,613 249,800,227 152,662,273 1,638,705,614
Total interest earning assets as at 31.12.2019 416,937,199 260,509,819 349,467,152 185,001,975 72,276,508 1,284,192,653

Non-interest earning assets

Financial assets
Cash and cash equivalents 49,440,697 – – – – 49,440,697 36,012,701
Notes to the Financial Statements

Balances with Central Banks 12,376,032 5,826,956 467,141 195,411 204,797 19,070,337 36,695,981
Placements with banks – – – – – – –
Securities purchased under resale agreements – – – – – – –
Derivative financial assets 1,091,085 1,244,302 296,958 4,372 – 2,636,717 1,830,927
Financial assets recognised through profit or loss –
measured at fair value 1,321,878 – – – – 1,321,878 983,141
Financial assets at amortised cost –
Loans and advances to banks – – – – 779,705 779,705 757,787
Financial assets at amortised cost –
Loans and advances to other customers – – – – – – –
Financial assets at amortised cost –
Financial Statements

Debt and other financial instruments – – – – – – –

Financial assets measured at fair value through
other comprehensive income – – – 20,267 271,802 292,069 220,599
Non-Financial Assets
Investments in associates – – – – 64,155 64,155 56,821
Property, plant and equipment and right-of-use assets – – – – 25,386,630 25,386,630 22,524,658
Investment properties – – – – 67,116 67,116 46,350
Annual Report 2020

Intangible assets – – – – 1,800,516 1,800,516 1,645,714

Deferred tax assets – – 2,735,566 – – 2,735,566 530,165
Other assets 12,628,329 1,709,265 1,576,495 498,471 3,782,593 20,195,153 23,443,869
Total non-interest earning assets as at 31.12.2020 76,858,021 8,780,523 5,076,160 718,521 32,357,314 123,790,539
Total non-interest earning assets as at 31.12.2019 77,059,697 13,459,904 3,523,049 1,105,344 29,600,719 124,748,713
Total assets – as at 31.12.2020 521,562,038 319,245,007 486,150,773 250,518,748 185,019,587 1,762,496,153
Commercial Bank of Ceylon PLC

Total assets – as at 31.12.2019 493,996,896 273,969,723 352,990,201 186,107,319 101,877,227 1,408,941,366

Percentage – as at 31.12.2020 (*) 29.60 18.11 27.58 14.21 10.50 100.00
Percentage – as at 31.12.2019(*) 35.06 19.45 25.05 13.21 7.23 100.00

(*) Total assets of each maturity bucket as a percentage of total assets employed by the Group.

(ii) Remaining contractual period to maturity as at the date of Statement of Financial Position of the liabilities and shareholders’ funds
employed by the Group is detailed below:
Up to 3 3 to 12 1 to 3 3 to 5 More than Total as at Total as at
months months years years 5 years 31.12.2020 31.12.2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Interest-bearing liabilities
Financial liabilities
Due to banks 38,728,605 33,003,230 476,667 4,675,000 – 76,883,502 52,097,565
Derivative financial liabilities – – – – – – –

61 Securities sold under repurchase agreements 76,522,217 14,889,305 – – – 91,411,522 51,117,342

Financial liabilities at amortised cost –
due to depositors 680,635,849 432,568,744 36,242,319 12,481,684 16,138,286 1,178,066,882 993,121,340

252
 Up to 3 3 to 12 1 to 3 3 to 5 More than Total as at Total as at
months months years years 5 years 31.12.2020 31.12.2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Financial liabilities at amortised cost –

Other borrowings 2,320,272 26,663,596 19,389,523 1,660,695 4,521,847 54,555,933 23,248,893
Subordinated liabilities 5,166,884 5,393,227 22,403,577 – 5,283,450 38,247,138 37,886,789
Total interest – bearing liablities as at 31.12.2020 803,373,827 512,518,102 78,512,086 18,817,379 25,943,583 1,439,164,977
Total Interest – bearing liabilities as at 31.12.2019 623,254,126 411,010,792 51,551,133 45,049,047 26,606,831 1,157,471,929

Non-interest bearing liabilities

Financial liabilities
Due to banks 11,364,554 – – – – 11,364,554 1,709,860
Derivative financial liabilities 461,543 897,343 142,376 – – 1,501,262 1,495,317
Securities sold under repurchase agreements – – – – – – –

Notes to the Financial Statements

Financial liabilities at amortised cost –
Due to depositors 108,549,517 – – – – 108,549,517 75,861,247
Financial liabilities at amortised cost –
Other borrowings – – – – – – –
Subordinated liabilities – – – – – – –

Non-financial liabilities
Current tax liabilities 1,747,751 5,243,254 – – – 6,991,005 5,197,188
Deferred tax liabilities – – 403,846 – – 403,846 416,458
Other liabilities 13,877,801 12,381,908 1,454,663 2,454,245 3,403,666 33,572,283 30,775,884

Financial Statements
Equity

Stated capital – – – – 52,187,747 52,187,747 40,916,958

Statutory reserves – – – – 9,285,233 9,285,233 8,387,701
Retained earnings – – – – 8,124,261 8,124,261 5,182,185
Other reserves – – – – 89,595,571 89,595,571 79,937,405
Non-controlling Interest – – – – 1,755,897 1,755,897 1,589,234

Annual Report 2020

Total non-interest-bearing liabilities and equity
as at 31.12.2020 136,001,166 18,522,505 2,000,885 2,454,245 164,352,375 323,331,176
Total non-interest-bearing liabilities and equity
as at 31.12.2019 101,020,660 6,451,708 3,996,276 1,500,250 138,500,543 251,469,437
Total liabilities and equity – as at 31.12.2020 939,374,993 531,040,607 80,512,971 21,271,624 190,295,958 1,762,496,153

Total liabilities and equity – as at 31.12.2019 724,274,786 417,462,500 55,547,409 46,549,297 165,107,374 1,408,941,366

Commercial Bank of Ceylon PLC

Percentage – as at 31.12.2020 (*) 53.29 30.13 4.57 1.21 10.80 100.00

Percentage – as at 31.12.2019 (*) 51.41 29.63 3.94 3.30 11.72 100.00

(*) Total liabilities and shareholders’ funds of each maturity bucket as a percentage of total liabilities and shareholders’ funds employed by the Group.

62. Operating segments

Accounting policy
An operating segment is a component of the The Group has five strategic divisions from operating profits or losses in the
Group that engages in business activities (operating segments) which are reportable Consolidated Financial Statements. Income
from which it may earn revenue and incur segments, namely: taxes are managed on a group basis and are
expenses, including revenue and expenses not allocated to operating segments.
that relate to transactions with any of the z Personal banking
The following table presents the income,
Group’s other components, whose operating z Corporate banking
profit and asset and liability information
results are reviewed regularly by the z International operations on the Group’s strategic business divisions
Corporate Management Team headed by the
z Dealing/Treasury for the year ended December 31, 2020 and
Managing Director/Chief Executive Officer 61
z NBFI, Real Estate & Services
comparative figures for the year ended
(being the chief operating decision-maker) 62
December 31, 2019.
to make decisions about resources allocated
Segment performance is evaluated
to each segment and assess its performance,
based on operating profits or losses which,
and for which discrete financial information
in certain respects, are measured differently
is available.

253
 Personal banking Corporate banking
For the year ended December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

External operating income:

Net interest income 26,764,757 27,988,262 8,996,447 10,555,019
Foreign exchange profit 96,113 293,571 141,319 (197,352)
Net fee and commission income 5,590,664 6,298,366 2,269,088 2,357,802
Other income 451,804 44,930 5,079 4,011
Total operating income 32,903,338 34,625,129 11,411,933 12,719,480
Impairment charges and other losses (12,548,294) (8,185,606) (6,165,407) (2,657,152)
Net operating income 20,355,044 26,439,523 5,246,526 10,062,328
Segment result 6,427,440 9,837,267 3,058,224 6,822,088
Notes to the Financial Statements

Profit from operations

Share of profit of associates (net of tax)
Income tax expense
Non-controlling interest
Net profit for the year, attributable to equity holders of the parent

Personal banking Corporate banking

As at December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000
Financial Statements

Other information
Segment assets 628,115,371 544,782,281 323,883,043 337,929,901
Investment in associates – – – –
Total assets 628,115,371 544,782,281 323,883,043 337,929,901
Segment liabilities 1,022,841,375 853,921,966 237,889,091 206,696,789
Total liabilities 1,022,841,375 853,921,966 237,889,091 206,696,789
Annual Report 2020

Personal banking Corporate banking

For the year ended December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Information on cash flows

Cash flows from operating activities
Commercial Bank of Ceylon PLC

Cash flows from investing activities

Cash flows from financing activities
Capital expenditure –
Property, plant and equipment
Investment properties
Intangible assets
Net cash flow generated during the year

62

254
 International operations Dealing/treasury NBFI, Real Estate & Services Unallocated/eliminations Total/consolidated
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000  Rs. ’000 Rs. ’000 

5,439,904 5,658,240 3,707,529 (381,397) 496,073 548,801 5,464,092 3,987,466 50,868,802 48,356,391
1,391,472 1,777,036 5,652,485 4,705,294 70 (8) 1,091,259 283,803 8,372,718 6,862,344
1,273,871 1,238,145 8,005 4,006 314,503 152,713 365,544 700,806 9,821,675 10,751,838
796,000 10,310 6,167,497 1,214,550 838,796 840,539 (592,883) (398,264) 7,666,293 1,716,076
8,901,247 8,683,731 15,535,516 5,542,453 1,649,442 1,542,045 6,328,012 4,573,811 76,729,488 67,686,649
(206,221) 22,271 (2,289,624) (278,068) (210,012) (232,893) 26 (75) (21,419,532) (11,331,523)
8,695,026 8,706,002 13,245,892 5,264,385 1,439,430 1,309,152 6,328,038 4,573,736 55,309,956 56,355,126
5,237,040 5,514,956 10,440,327 3,908,482 437,531 376,357 (1,084,600) (3,485,246) 24,515,962 22,973,904

Notes to the Financial Statements

24,515,962 22,973,904
3,898 9,992
(7,433,063) (5,563,500)
(146,847) (157,137)
16,939,950 17,263,259

International operations Dealing/treasury NBFI, Real Estate & Services Unallocated/eliminations Total/consolidated
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000  Rs. ’000 Rs. ’000 

Financial Statements
209,243,351 173,080,105 602,609,010 369,624,769 11,306,239 10,014,567 (12,725,016) (26,547,078) 1,762,431,998 1,408,884,545
– – – – – – 64,155 56,821 64,155 56,821
209,243,351 173,080,105 602,609,010 369,624,769 11,306,239 10,014,567 (12,660,861) (26,490,257) 1,762,496,153 1,408,941,366
174,499,274 141,365,900 152,504,141 73,342,100 6,016,087 5,997,042 7,797,476 (8,395,914) 1,601,547,444 1,272,927,883
174,499,274 141,365,900 152,504,141 73,342,100 6,016,087 5,997,042 7,797,476 (8,395,914) 1,601,547,444 1,272,927,883

Annual Report 2020

International operations Dealing/treasury NBFI, Real Estate & Services Unallocated/eliminations Total/consolidated
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000  Rs. ’000 Rs. ’000 

(3,846,592) 17,581,879

Commercial Bank of Ceylon PLC

2,068,509 3,262,836
960,434 (9,754,534)

(1,150,811) (1,348,643)
(41) –
(460,053) (415,088)
(2,428,554) 9,326,450

63. Related party disclosures

Accounting policy
The Bank carried out transactions in the the Sri Lanka Accounting Standard – LKAS schemes uniformly applicable to all staff at
ordinary course of business on an arm's 24 “Related Party Disclosures”, other than, concessionary rates.
length basis at commercial rates with parties transactions that the Key Management 62
who are defined as Related Parties as per Personnel (KMP) have availed under 63

63.1 Parent and ultimate controlling party

The Bank does not have an identifiable parent of its own.

255
 63.2 Transactions with Key Management Personnel (KMP)
According to Sri Lanka Accounting Standard – LKAS 24 on “Related Party Disclosures”, KMP are those persons having authority and
responsibility for planning, directing and controlling the activities of the entity directly or indirectly.

KMP of the Bank

The Board of Directors of the Bank (including Executive and Non-Executive Directors) has been identified as KMP of the Bank.

KMP of the Group

As the Bank is the ultimate parent of the subsidiaries listed out in Note 1.3 on page 155, the Board of Directors of the Bank has the authority
and responsibility for planning, directing and controlling the activities of the Group directly or indirectly. Accordingly, the Board of Directors of
the Bank is also KMP of the Group. Therefore, officers who are only Directors of the subsidiaries and not of the Bank have been classified as KMP
only for that respective subsidiary.

63.2.1 Compensation to KMP

GROUP BANK
Notes to the Financial Statements

For the year ended December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Short-term employment benefits 208,366 200,452 203,080 195,959

Post-employment benefits 8,988 8,342 8,988 8,342
Total 217,354 208,794 212,068 204,301

63.2.2 Transactions, arrangements and agreements involving KMP and their Close Family Members (CFM)
CFM of a KMP are those family members who may be expected to influence, or be influenced by, that KMP in their dealings with the Bank. They
may include KMP's domestic partner and children, children of the KMP's domestic partner and dependents of the KMP or the KMP's domestic
Financial Statements

partner. CFM too have been identified as Related Parties of the Group/Bank.

[Link] Statement of Financial Position – Bank

Year-end balance Annual average balance

2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000
Annual Report 2020

Assets
Financial assets at amortised cost – Loans and advances 38,620 54,026 49,472 56,942
Total 38,620 54,026 49,472 56,942

Liabilities
Financial liabilities at amortised cost – Due to depositors 320,489 351,104 368,470 307,150
Commercial Bank of Ceylon PLC

Subordinated liabilities 2,000 2,000 2,000 2,000

Total 322,489 353,104 370,470 309,150

[Link] Commitments and contingencies – Bank

Year-end balance Annual average balance

2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Undrawn facilities 29,544 13,740 19,485 14,581

Total 29,544 13,740 19,485 14,581

[Link] Direct and indirect accommodation – Bank

Year-end balance
2020 2019
63
Direct and indirect accommodation as a percentage of the Bank’s regulatory capital 0.04 0.04

No impairment losses have been recorded against balances outstanding with KMP and CFM.

256
[Link] Income Statement – Bank
For the year ended December 31, 2020 2019
Note Page No. Rs. ’000 Rs. ’000

Interest income 4,315 5,937

Interest expense 27,337 25,212
Compensation to KMP 63.2.1 256 212,068 204,301

[Link] Share-based transactions of KMP and CFM

Year-end balance
2020 2019

Number of ordinary shares held by KMP and CFM 868,595 932,543

Dividends paid (in Rs. ’000) 1,670 5,900

Notes to the Financial Statements

ESOP 2015 ESOP 2019
As at the year end 2020 2019 2020 2019

Number of cumulative exercisable options under the Employee Share Option Plan
(ESOP)
Tranche I – – 89,187 –
Tranche II – 61,400 99,010 –
Tranche III 138,632 138,632 – –

Financial Statements
63.2.3 Transactions, arrangements and agreements involving entities which are controlled, and/or jointly controlled by the KMP or
their CFM
No significant transactions during the year.

63.3 Transactions with Group entities

The Group entities include the subsidiaries and the associate of the Bank.

Annual Report 2020

63.3.1 Transactions with subsidiaries
[Link] Statement of Financial Position

Year-end balance Annual average balance

2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Commercial Bank of Ceylon PLC

Assets
Financial assets at amortised cost – Loans and advances 1,396,450 2,839,838 2,398,934 2,095,752
Other assets 150,759 101,197 108,539 66,318
Total 1,547,209 2,941,035 2,507,473 2,162,070

Liabilities
Securities sold under repurchase agreements 26,000 102,680 97,948 116,167
Financial liabilities at amortised cost – Due to depositors 748,353 538,099 483,366 306,010
Other liabilities 56,183 72,409 62,730 69,277
Total 830,536 713,188 644,044 491,454

[Link] Commitments and contingencies

Year-end balance Annual average balance

2020 2019 2020 2019
63
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Undrawn facilities 101,300 101,232 92,540 98,388

Total 101,300 101,232 92,540 98,388

257
 [Link] Direct and indirect accommodation

Year-end balance
2020 2019

Direct and indirect accommodation as a percentage of the Bank’s Regulatory Capital 0.96 1.94

[Link] Income Statement

For the year ended December 31, 2020 2019
Rs. ’000 Rs. ’000

Interest income 207,530 270,867

Interest expense 33,700 36,458
Other income 126,742 106,972
Other expenses 738,331 730,982
Notes to the Financial Statements

Dividend income 98,200 85,397

[Link] Other transactions

For the year ended December 31, 2020 2019

Payments made to CBC Tech Solutions Limited in relation to purchase of computer hardware and software (Rs. ’000) 68,083 93,007
Number of ordinary shares (non-voting) of the Bank held by the subsidiaries as at the year-end – 2,439
Dividend paid (Rs. ’000) 5 23
Financial Statements

[Link] Inter-company transactions carried out by other entities in the Group

Details of transactions of CBC Finance Limited with Commercial Development Company PLC (CDC) and CBC Tech Solutions Limited.

Year-end balance Annual average balance

2020 2019 2020 2019
Subsidiary Company Nature of the transaction Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000
Annual Report 2020

CBC Finance Limited Transactions with CDC PLC

As at December 31,
Term deposits 200,000 – 73,973 –
For the year ended December 31,
Interest expense 6,288 –
Commercial Bank of Ceylon PLC

Transactions with CBC Tech Solutions Limited

As at December 31,
Term deposits 70,000 – 20,986 –
For the year ended December 31,
Interest expense 1,638 –

63.3.2 Transactions with the associate

[Link] Statement of Financial Position

Year-end balance Annual average balance

2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Assets
Financial assets at amortised cost – Loans and advances – – – –
63 Total – – – –

Liabilities
Financial liabilities at amortised cost – Due to depositors 1,679 5,695 2,526 2,843
Total 1,679 5,695 2,526 2,843

258
[Link] Commitments and contingencies

Year-end balance Annual average balance

2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Undrawn facilities – – – –
Total – – – –

[Link] Income Statement

For the year ended December 31, 2020 2019
Rs. ’000 Rs. ’000

Interest income – –
Interest expense 122 1,052

Notes to the Financial Statements

Other income – 5,730
Other expenses – 420

[Link] Other transactions

2020 2019

Number of ordinary shares (voting) of the Bank held by the associates as at the year-end 5,000 –
Dividend paid (Rs. ’000) – –

Financial Statements
63.4 Transactions with other related entities
Other related entities include significant investors (either entities or individuals) that have control, joint control or significant influence,
post-employment benefit plans for the Bank’s employees.

63.4.1 Transactions with post-employment benefit plans for the employees of the Bank
[Link] Statement of Financial Position

Annual Report 2020

Year-end balance Annual average balance
2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Assets
Financial assets at amortised cost – Loans and advances – – 148 39

Commercial Bank of Ceylon PLC

Total – – 148 39

Liabilities
Financial liabilities at amortised cost – Due to depositors 9,992,934 5,316,692 6,602,249 8,644,796
Total 9,992,934 5,316,692 6,602,249 8,644,796

[Link] Income Statement

For the year ended December 31, 2020 2019
Rs. ’000 Rs. ’000

Interest income 45 11
Interest expense 525,861 991,990
Contribution made/taxes paid by the Bank 1,820,430 1,108,193

63.5 Recurrent related party transactions

There are no recurrent related party transactions which in aggregate exceeds more than 10% of the gross revenue of the Bank. 63

63.6 Non-recurrent related party transactions

There are no non-recurrent related party transactions which exceeds 10% of equity or 5% of total assets, whichever is lower.

259
 64. Non-cash items included in profit before tax
GROUP BANK
For the year ended December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Depreciation of property, plant and equipment 2,791,740 2,588,863 2,731,440 2,541,281

Amortisation of intangible assets 310,946 252,392 257,591 213,240
Impairment charges and other losses 21,415,986 11,330,271 21,152,297 11,060,214
Impairment charges subsidiaries – – 327,855 –
Fair value losses on investment properties 12,096 – – –
Loss on revaluation of land and buildings 39,872 – 39,872 –
Accretion of interest on lease liability 435,754 429,263 452,304 457,449
Contributions to defined benefit plans – Unfunded schemes 234,986 485,566 210,795 469,946
Notes to the Financial Statements

Provision made o/a of leave encashment 82,043 81,592 82,043 81,592

Equity-settled Share-based payments 112,203 – 112,203 –
Unamortised interest payable o/a subordinated liabilities 11,701 12,210 11,701 12,210
Mark to market on other financial instruments at fair value through profit or loss (529,648) (226,686) (529,648) (226,713)
Effect of exchange rate variances on loans and receivables to banks (21,892) 5,212 (21,892) 5,212
Effect of exchange rate variances on property, plant and equipment and
right-of-use assets (64,102) 50,917 (52,398) 47,408
Effect of exchange rate variances on intangible assets (5,666) 1,807 (1,122) 294
Effect of exchange rate variances on defined benefit plans 10,758 (5,750) 10,758 (5,750)
Financial Statements

Effect of exchange rate variances on subordinated liabilities 393,750 (93,750) 393,750 (93,750)
Net effect of exchange rate variances on net deferred tax assets (12,005) 1,565 (9,804) 1,293
Net effect of exchange rate variances on income tax liability 71,364 (20,978) 66,240 (22,437)
Net effect of exchange rate variance on lease liability 60,460 (36,971) 52,316 (34,216)
Grossed up notional tax and withholding tax credits (585,419) (841,251) (580,871) (805,060)
Total 24,764,927 14,014,272 24,705,430 13,702,213
Annual Report 2020

65. Change in operating assets

GROUP BANK
For the year ended December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000
Commercial Bank of Ceylon PLC

Net (increase)/decrease in derivative financial instruments (805,790) 6,045,676 (805,790) 6,045,676

Net (increase)/decrease in balances with central banks (69,257,500) 9,305,303 (71,509,978) 14,923,463
Net (increase)/decrease in placements with banks 8,487,575 (5,003,174) 8,593,910 (4,626,582)
Net (increase)/decrease in securities purchased under resale agreements 13,147,534 (3,634,022) 13,147,534 (3,634,022)
Net (increase)/decrease in other financial assets recognised through profit or loss (13,191,790) (15,707,023) (13,191,790) (15,706,996)
Net (increase)/decrease in loans and receivables to customers (34,067,357) (36,612,232) (30,064,923) (33,589,071)
Net (increase)/decrease in financial assets measured at fair value through other
comprehensive income (83,571,404) (17,155,771) (83,572,933) (17,153,529)
Net (increase)/decrease in financial assets at amortised cost –
Debt and other financial instruments (198,751,695) (21,296,002) (195,329,795) (20,800,149)
Net (increase)/decrease in other assets 3,248,716 (161,130) 3,703,098 (208,076)
Total (374,761,711) (84,218,375) (369,030,667) (74,749,286)

64
65

260
66. Change in operating liabilities
GROUP BANK
For the year ended December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Net increase/(decrease) in due to banks 34,440,631 1,445,373 35,945,612 1,404,613

Net increase/(decrease) in derivative financial instruments (83,136) (6,579,761) (83,136) (6,579,761)
Net increase/(decrease) in securities sold under repurchase agreements 40,294,180 2,165,948 40,217,589 2,115,561
Net increase/(decrease) in deposits from banks, customers and debt securities issued 217,633,812 74,611,712 212,658,258 70,270,346
Net increase/(decrease) in other borrowings 31,307,040 (2,113,019) 31,307,040 (2,113,019)
Net increase/(decrease) in other liabilities 2,115,855 349,416 2,027,671 404,196
Net increase/(decrease) in due to subsidiaries – – 42,723 13,337
Total 325,708,382 69,879,669 322,115,757 65,515,273

Notes to the Financial Statements

67. Operating leases
67.1 Operating lease commitments (Receivables)
Accounting policy

The Group has entered into operating leases to rent its own properties, (mainly consisting of areas not currently occupied by the branches).
Lease agreements include clauses to enable upward revision of the rental income on a periodic basis to reflect market conditions. These leases
have an average life of between five to ten years. There are no restrictions placed upon the Group by entering into these leases.
Future minimum rentals receivable under non-cancellable operating leases are as follows:

Financial Statements
GROUP BANK
As at December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Less than one year 5,853 6,783 3,743 4,793

Between one to five years 20,059 25,140 13,371 14,168
Over five years 8,314 11,872 8,314 11,261

Annual Report 2020

Total 34,226 43,795 25,428 30,222

68. Financial risk review

This note presents information about the Bank’s exposure to financial risks and the Bank’s management of capital.

Commercial Bank of Ceylon PLC

For information on the Bank’s financial risk management framework Page No.

Introduction
68.1 Credit risk 262
68.1.1 Credit quality analysis 263
68.1.2 Credit-impaired financial assets 274
68.1.3 Sensitivity analysis of impairment provision on loans and advances to other customers 275
68.1.4 Collaterals held 275
68.1.5 Concentration of credit risk 275

68.2 Liquidity risk 278

68.2.1 Exposure to liquidity risk 279
68.2.2 Maturity analysis of financial assets and financial liabilities 280
68.2.3 Liquidity reserves 283
66
68.2.4 Financial assets available to support future funding 284 67
68

261
 For information on the Bank’s financial risk management framework Page No.

68.3 Market risk 284

68.3.1 Exposure to market risk – Trading and non-trading portfolio 285
68.3.2 Exposure to interest rate risk – Sensitivity analysis 286
68.3.3 Exposure to currency risk – Non-trading portfolio 287
68.3.4 Exposure to equity price risk 289

68.4 Operational risk 289

68.5 Capital management and pillar III disclosures as per Basel III 289
68.5.1 Regulatory capital 289
68.5.2 Capital allocation 290
68.5.3 Pillar III disclosures as per Basel III 290
Notes to the Financial Statements

Introduction Integrated Risk Management Department 68.1 Credit risk

As a financial intermediary, the Bank is (IRMD) The financial loss resulting from a borrower
exposed to various types of risks including Business Units are the risk owners and or counterparty to a financial instrument
credit, market, liquidity and operational have the primary responsibility for risk failing or delaying to meet its contractual
risks which are inherent in the Bank’s management. The IRMD acts as the second obligations is referred to as credit risk.
activities. Managing these risks is critical for line of defence in managing the risk. The It arises principally from the loans and
the sustainability of the Bank and plays a IRMD through Chief Risk Officer reports to advances to banks and other customers,
pivotal role in all activities of the Bank. Risk the BIRMC thus ensuring its independence. investments in debt securities and other
management function strives to identify financial instruments. In addition to the
potential risks in advance, analyse them and Risk measurement and reporting
credit risk from direct funding exposure
Financial Statements

take precautionary steps to mitigate the The Bank uses robust risk measurement
(i.e. on-balance sheet exposure), indirect
impact of risk whilst optimising through risk techniques based on the type of risk and
liabilities such as Letters of Credit,
adjusted returns within the risk appetite of industry best practices. The Bank also carries
Guarantees etc. also would expose the Bank
the Bank. out stress testing which is a key aspect of
to credit risk.
the Internal Capital Adequacy Assessment
Risk management framework Process (ICAAP). The risk management The Bank ensures stringent credit risk
The overall responsibility and oversight of framework of the Bank provides an insight management practices to manage overall
the risk management framework of the Bank on the impact of extreme, but plausible elements of credit risk exposures (such as
Annual Report 2020

is vested with the Board of Directors (BOD). scenarios on the Bank’s risk profile. The individual obligor default risk, country and
The Board Integrated Risk Management results are first reported to the EIRMC and sector concentration risks etc.).
Committee (BIRMC), a mandatory then to the BIRMC on a periodic basis.
subcommittee set up by the Board, in
turn is entrusted with the development of The Bank establishes policies, limits
the Bank’s Risk Management Policies and and thresholds within the risk appetite of
the Bank. These limits reflect the business
Commercial Bank of Ceylon PLC

monitoring of due compliance of same

through the Executive Integrated Risk strategy and market environment of the
Management Committee (EIRMC). Bank as well as the level of risk that the
Bank is willing to accept (risk appetite).
The Risk Management Policies spell The monitoring and control mechanism
out the risk appetite of the Bank and has therefore, is based on risk appetite of
incorporated risk exposure limits and the Bank.
controls to monitor adherence to the limits
in force. These Policies and Systems are
reviewed regularly to reflect the changing
market conditions and the products and
services offered.
The Bank strives to inculcate a risk
management culture through continuous
training, work ethics and standards.
Refer Note 3.2 on page 160 for more
information on the risk management
68
framework of the Bank.

262
68.1.1 Credit quality analysis
68.1.1 (a) Maximum exposure to credit risk by risk rating
The following tables set out information about the credit quality of financial assets measured at amortised cost, debt instruments measured at
FVOCI and contingent liabilities and commitments.
Carrying Not subject Subject to
amount to ECL
As at December 31, 2020 12-month Lifetime Lifetime ECL –
ECL ECL – not credit impaired
credit impaired
(Stage 1) (Stage 2) (Stage 3)
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Cash and cash equivalents

Risk free Investments 26,152,779 26,152,779 – – –
Rating 0-4: Investment grade 23,220,892 – 23,220,892 – –
Rating 5-6: Moderate risk 880,197 – 880,197 – –

Notes to the Financial Statements

Rating 7-8: High risk – – – – –
Rating 9: Extreme risk – – – – –
Gross carrying amount 50,253,868 26,152,779 24,101,089 – –
Less: Provision for impairment 3,241 – 3,241 – –
Net carrying amount 28 196 50,250,627 26,152,779 24,097,848 – –

Placements with Central Banks and Other Banks

Risk free investments (Excluding Statutory Reserve) 94,405,316 94,405,316 – – –
Rating 0-4: Investment grade 13,909,368 – 13,909,368 – –

Financial Statements
Rating 5-6: Moderate risk 2,032,617 – 2,032,617 – –
Rating 7-8: High risk – – – – –
Rating 9: Extreme risk – – – – –
Gross carrying amount 110,347,301 94,405,316 15,941,985 – –
Less: Provision for impairment 3,003 3,003 – –
Net carrying amount 29 & 30 197 110,344,298 94,405,316 15,938,982 – –

Annual Report 2020

Financial assets at amortised cost – Loans and advances
to banks
Government Securities (Risk free investments) – – – – –
Rating 0-4: Investment grade – – – – –
Rating 5-6: Moderate risk 779,790 – 779,790 – –

Commercial Bank of Ceylon PLC

Rating 7-8: High risk – – – – –
Rating 9: Extreme risk – – – – –
Gross carrying amount 779,790 – 779,790 – –
Less: Provision for impairment 85 85 – –
Net carrying amount 33 201 779,705 – 779,705 – –

Financial assets at amortised cost –

Loans and advances to other customers
Government Securities (Risk free investments) – – – – –
Rating 0-4: Investment grade (*) 696,936,656 – 607,201,349 67,878,811 21,856,496
Rating 5-6: Moderate risk 182,357,089 – 129,540,673 32,094,931 20,721,485
Rating 7-8: High risk 17,276,070 – 3,404,791 5,000,618 8,870,661
Rating 9: Extreme risk 51,272,090 – 107,893 37,406 51,126,791
Gross carrying amount 947,841,905 740,254,706 105,011,766 102,575,433
Less: Provision for impairment 50,996,452 6,470,880 12,244,433 32,281,139
68
Net carrying amount 34 202 896,845,453 – 733,783,826 92,767,333 70,294,294

263
 Carrying Not subject Subject to
amount to ECL
As at December 31, 2020 12-month Lifetime Lifetime ECL –
ECL ECL – not credit impaired
credit impaired
(Stage 1) (Stage 2) (Stage 3)
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Financial assets at amortised cost –

Debt and other financial instruments
Government Securities (Risk free investments) 197,785,755 197,785,755 – – –
Rating 0-4: Investment grade 96,897,422 – 96,897,422 – –
Rating 5-6: Moderate risk 410 – 410 – –
Rating 7-8: High risk – – – – –
Rating 9: Extreme risk 152,870 – – – 152,870
Gross carrying amount 294,836,457 197,785,755 96,897,832 – 152,870
Notes to the Financial Statements

Less: Provision for impairment 2,108,891 – 1,956,021 – 152,870

Net carrying amount 35 206 292,727,566 197,785,755 94,941,811 – –

Financial assets measured at fair value through

other comprehensive income
Government Securities (Risk free investments) 201,037,500 201,037,500 – – –
Rating 0-4: Investment grade 78,807,758 – 78,807,758 – –
Rating 5-6: Moderate risk 291,945 291,945 – – –
Rating 7-8: High risk – – – – –
Rating 9: Extreme risk – – – – –
Financial Statements

Gross carrying amount 280,137,203 201,329,445 78,807,758 – –

Less: Provision for impairment 1,675,834 – 1,675,834 – –
Net carrying amount 36 207 278,461,369 201,329,445 77,131,924 – –

Off-balance sheet (**)

Contingent liabilities and commitments
Annual Report 2020

(i) Lending commitments

Grade 0-6: Investment grade to moderate risk 129,571,427 – 127,131,083 1,655,472 784,872
Grade 7-9: High risk to extreme risk – – – – –
Gross carrying amount 129,571,427 – 127,131,083 1,655,472 784,872

(ii) Contingencies
Commercial Bank of Ceylon PLC

Grade 0-6: Investment grade to moderate risk 598,121,484 355,337,535 241,564,914 1,204,386 14,649
Grade 7-9: High risk to extreme risk – – – – –
Gross carrying amount 598,121,484 355,337,535 241,564,914 1,204,386 14,649
Total contingent liabilities and commitments 58 248 727,692,911 355,337,535 368,695,997 2,859,858 799,521

Provision for impairment 58.3 (b) 250 2,116,849 – 1,532,691 244,482 339,676

Carrying Not subject Subject to

amount to ECL
As at December 31, 2019 12-month Lifetime Lifetime ECL –
ECL ECL – not credit impaired
credit impaired
(Stage 1) (Stage 2) (Stage 3)
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Cash and cash equivalents

Risk free Investments 26,094,112 26,094,112 – – –
Rating 0-4: Investment grade 22,822,901 – 22,822,901 – –
68
Rating 5-6: Moderate risk 3,623,424 – 3,623,424 – –
Rating 7-8: High risk – – – – –
Rating 9: Extreme risk – – – – –
Gross carrying amount 52,540,437 26,094,112 26,446,325 – –

264
 Carrying Not subject Subject to
amount to ECL
As at December 31, 2019 12-month Lifetime Lifetime ECL –
ECL ECL – not credit impaired
credit impaired
(Stage 1) (Stage 2) (Stage 3)
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Less: Provision for impairment 5,707 – 5,707 – –

Net carrying amount 28 196 52,534,730 26,094,112 26,440,618 – –

Placements with Central Bank and Other Banks

Risk free investments (Excluding Statutory Reserve)
Rating 0-4: Investment grade 21,583,795 – 21,583,795 – –
Rating 5-6: Moderate risk 2,952,042 – 2,952,042 – –
Rating 7-8: High risk – – – – –
Rating 9: Extreme risk – – – – –

Notes to the Financial Statements

Gross carrying amount 24,535,837 – 24,535,837 – –
Less: Provision for impairment 8,596 – 8,596 – –
Net carrying amount 29 & 30 197 24,527,241 – 24,527,241 – –

Financial assets at amortised cost – Loans and advances

to banks
Government Securities (Risk free investments) – – – – –
Rating 0-4: Investment grade – – – – –
Rating 5-6: Moderate risk 757,898 – 757,898 – –

Financial Statements
Rating 7-8: High risk – – – – –
Rating 9: Extreme risk – – – – –
Gross carrying amount 757,898 – 757,898 – –
Less: Provision for impairment 111 – 111 – –
Net carrying amount 33 201 757,787 – 757,787 – –

Financial assets at amortised cost –

Annual Report 2020

Loans and advances to other customers
Government Securities (Risk free investments) – – – – –
Rating 0-4: Investment grade (*) 688,520,415 – 597,141,302 68,922,076 22,457,037
Rating 5-6: Moderate risk 165,599,864 – 119,783,738 30,295,524 15,520,602
Rating 7-8: High risk 15,647,140 – 2,974,898 4,354,799 8,317,443

Commercial Bank of Ceylon PLC

Rating 9: Extreme risk 50,689,816 – 105,958 215,957 50,367,901
Gross carrying amount 920,457,235 – 720,005,896 103,788,356 96,662,983
Less: Provision for impairment 35,811,491 – 2,613,480 8,318,831 24,879,180
Net carrying amount 34 202 884,645,744 – 717,392,416 95,469,525 71,783,803

Financial assets at amortised cost –

Debt and other financial instruments
Government Securities (Risk free investments) 62,563,485 62,563,485 – – –
Rating 0-4: Investment grade (*) 38,853,334 – 38,853,334 – –
Rating 5-6: Moderate risk 2,192 – 2,192 – –
Rating 7-8: High risk – – – – –
Rating 9: Extreme risk 152,870 – – – 152,870
Gross carrying amount 101,571,881 62,563,485 38,855,526 – 152,870
Less: Provision for impairment 427,062 – 274,192 – 152,870
Net carrying amount 35 206 101,144,819 62,563,485 38,581,334 – –
68
Financial assets measured at fair value through
other comprehensive income
Government Securities (Risk free investments) 84,034,701 84,034,701 – – –
Rating 0-4: Investment grade 114,179,009 4,286 114,174,723 – –

265
 Carrying Not subject Subject to
amount to ECL
As at December 31, 2019 12-month Lifetime Lifetime ECL –
ECL ECL – not credit impaired
credit impaired
(Stage 1) (Stage 2) (Stage 3)
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Rating 5-6: Moderate risk 216,313 216,313 – – –

Rating 7-8: High risk – – – – –
Rating 9: Extreme risk – – – – –
Gross carrying amount 198,430,023 84,255,300 114,174,723 – –
Less: Provision for impairment 861,693 – 861,693 – –
Net carrying amount 36 207 197,568,330 84,255,300 113,313,030 – –

Off-balance sheet (**)

Contingent liabilities and commitments
Notes to the Financial Statements

(i) Lending commitments

Grade 0-6: Investment grade to moderate risk 109,046,521 – 107,481,309 816,932 748,280
Grade 7-9: High risk to extreme risk – – – – –
Gross carrying amount 109,046,521 – 107,481,309 816,932 748,280

(ii) Contingencies
Grade 0-6: Investment grade to moderate risk 470,624,684 277,228,454 191,275,266 2,111,794 9,170
Grade 7-9: High risk to extreme risk – – – – –
Gross carrying amount 470,624,684 277,228,454 191,275,266 2,111,794 9,170
Financial Statements

Total contingent liabilities and commitments 58 248 579,671,205 277,228,454 298,756,575 2,928,726 757,450

Provision for impairment 58.3 (b) 250 1,316,837 – 764,857 187,237 364,743

(*) Investment grade also include Cash and Gold.

(**) Amounts reported above does not include capital commitments by the Bank disclosed in the Note 58 on "Contingent Liabilities and Commitments" on page 248 to 250.

Financial assets at amortised cost – Loans and advances to other customers and contingent liabilities and commitments categorised based on
Bank’s internal risk rating and other financial assets are categorised based on external credit rating of respective counterparties.
Annual Report 2020

68.1.1 (b) Credit exposure movement – ECL stage-wise

The following tables show reconciliations from the opening to closing balance of the gross carrying amounts by class of financial instrument.

As at December 31, 2020 Carrying Not subject 12-month Lifetime ECL not Lifetime ECL
amount to ECL ECL credit impaired credit impaired
(Stage 1) (Stage 2) (Stage 3)
Commercial Bank of Ceylon PLC

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Cash and cash equivalents

Gross carrying amount as at January 1, 2020 52,540,437 26,094,112 26,446,325 – –
Transfer to Stage 1 – – – – –
Transfer to Stage 2 – – – – –
Transfer to Stage 3 – – – – –
New assets originated or purchased 15,302,258 58,667 15,243,591 – –
Financial assets derecognised or repaid (excluding write-offs) (17,588,827) – (17,588,827) – –
As at December 31, 2020 50,253,868 26,152,779 24,101,089 – –

Placements with Central Bank and Other Banks

Gross carrying amount as at January 1, 2020 24,535,837 – 24,535,837 – –
Transfer to Stage 1 – – – – –
Transfer to Stage 2 – – – – –
68
Transfer to Stage 3 – – – – –
New assets originated or purchased 110,347,301 – 110,347,301 – –
Financial assets derecognised or repaid (excluding write-offs) (24,535,837) – (24,535,837) – –
As at December 31, 2020 110,347,301 – 110,347,301 – –

266
As at December 31, 2020 Carrying Not subject 12-month Lifetime ECL not Lifetime ECL
amount to ECL ECL credit impaired credit impaired
(Stage 1) (Stage 2) (Stage 3)
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Financial assets at amortised cost – Loans and advances to banks

Gross carrying amount as at January 1, 2020 757,898 – 757,898 – –
Transfer to Stage 1 – – – – –
Transfer to Stage 2 – – – – –
Transfer to Stage 3 – – – – –
Foreign exchange adjustments 21,892 – 21,892 – –
As at December 31, 2020 779,790 – 779,790 – –

Financial assets at amortised cost – Loans and advances to

other customers

Notes to the Financial Statements

Gross carrying amount as at January 1, 2020 920,457,235 – 720,005,896 103,788,356 96,662,983
Transfer to Stage 1 – – 20,487,691 (18,999,879) (1,487,812)
Transfer to Stage 2 – – (31,801,869) 38,440,195 (6,638,326)
Transfer to Stage 3 – – (5,993,488) (12,040,494) 18,033,982
New assets originated or purchased 443,948,164 – 415,360,708 21,045,241 7,542,215
Financial assets derecognised or repaid (excluding write-offs) (426,887,802) – (377,804,008) (33,030,153) (16,053,641)
Write-offs (2,467,810) – (224) (1,512) (2,466,074)
Changes to contractual cash flows due to modifications not resulting
in derecognition 12,792,118 – – 5,810,012 6,982,106

Financial Statements
As at December 31, 2020 947,841,905 – 740,254,706 105,011,766 102,575,433

Financial assets at amortised cost – Debt and other financial

instruments
Gross carrying amount as at January 1, 2020 101,571,881 62,563,485 38,855,526 – 152,870
Transfer to Stage 1 – – – – –
Transfer to Stage 2 – – – – –

Annual Report 2020

Transfer to Stage 3 – – – – –
New assets originated or purchased 145,802,188 139,641,765 6,160,423 – –
Financial assets derecognised or repaid (excluding write-offs) (14,670,492) (5,125,601) (9,544,891) – –
Reclassification adjustment 60,395,321 – 60,395,321 – –
Foreign exchange adjustments 1,737,559 706,107 1,031,452 – –

Commercial Bank of Ceylon PLC

As at December 31, 2020 294,836,457 197,785,756 96,897,831 – 152,870

Financial assets measured at fair value through other comprehensive

income
Gross carrying amount as at January 1, 2020 198,430,022 84,255,299 114,174,723
Transfer to Stage 1 – – – – –
Transfer to Stage 2 – – – – –
Transfer to Stage 3 – – – – –
New assets originated or purchased 214,537,999 180,922,180 33,615,819 – –
Financial assets derecognised or repaid (excluding write-offs) (73,534,874) (66,188,953) (7,345,921) – –
Reclassification adjustment (60,395,321) – (60,395,321) – –
Foreign exchange adjustments 3,038,243 – 3,038,243 – –
Change in fair value due to remeasurement (1,938,867) 2,340,917 (4,279,784) – –
As at December 31, 2020 280,137,202 201,329,443 78,807,759 – –
68
Contingent liabilities and commitments
Gross carrying amount as at January 1, 2020 579,671,205 277,228,454 298,756,575 2,928,726 757,450
Transfer to Stage 1 – – 1,751,702 (1,727,374) (24,328)
Transfer to Stage 2 – – (1,417,620) 1,420,288 (2,668)
Transfer to Stage 3 – – (1,006,801) (195,687) 1,202,488

267
 As at December 31, 2020 Carrying Not subject 12-month Lifetime ECL not Lifetime ECL
amount to ECL ECL credit impaired credit impaired
(Stage 1) (Stage 2) (Stage 3)
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Net change due to new exposures originated or exposures

derecognised or repaid (excluding write-offs) 148,021,706 78,109,081 70,612,141 433,905 (1,133,421)
As at December 31, 2020 727,692,911 355,337,535 368,695,997 2,859,858 799,521

As at December 31, 2019 Carrying Not subject 12-month Lifetime ECL not Lifetime ECL
amount to ECL ECL credit impaired credit impaired
(Stage 1) (Stage 2) (Stage 3)
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Cash and cash equivalents

Gross carrying amount as at January 1, 2019 39,534,476 24,272,784 15,261,692 – –
Notes to the Financial Statements

Transfer to Stage 1 – – – – –
Transfer to Stage 2 – – – – –
Transfer to Stage 3 – – – – –
New assets originated or purchased 17,879,445 1,821,328 16,058,117 – –
Financial assets derecognised or repaid (excluding write-offs) (4,873,484) – (4,873,484) – –
As at December 31, 2019 52,540,437 26,094,112 26,446,325 – –

Placements with Central Bank and Other Banks

Gross carrying amount as at January 1, 2019 19,909,299 – 19,909,299 – –
Financial Statements

Transfer to Stage 1 – – – – –
Transfer to Stage 2 – – – – –
Transfer to Stage 3 – – – – –
New assets originated or purchased 24,535,837 – 24,535,837 – –
Financial assets derecognised or repaid (excluding write-offs) (19,909,299) – (19,909,299) – –
As at December 31, 2019 24,535,837 – 24,535,837 – –
Annual Report 2020

Financial assets at amortised cost – Loans and advances to banks

Gross carrying amount as at January 1, 2019 763,074 – 763,074 – –
Transfer to Stage 1 – – – – –
Transfer to Stage 2 – – – – –
Transfer to Stage 3 – – – – –
Commercial Bank of Ceylon PLC

Foreign exchange adjustments (5,176) – (5,176) – –

As at December 31, 2019 757,898 – 757,898 – –

Financial assets at amortised cost – Loans and advances to

other customers
Gross carrying amount as at January 1, 2019 890,229,368 – 745,651,617 91,600,192 52,977,559
Transfer to Stage 1 – – 15,468,853 (15,127,558) (341,295)
Transfer to Stage 2 – – (40,641,620) 43,510,087 (2,868,467)
Transfer to Stage 3 – – (22,437,790) (22,065,001) 44,502,791
New assets originated or purchased 400,415,183 – 370,525,403 20,535,833 9,353,947
Financial assets derecognised or repaid (excluding write-offs) (399,373,750) – (348,543,034) (36,985,925) (13,844,791)
Write-offs (3,932,317) – (17,533) (28,672) (3,886,112)
Changes to contractual cash flows due to modifications not resulting
in derecognition 33,118,751 – – 22,349,400 10,769,351

68 As at December 31, 2019 920,457,235 – 720,005,896 103,788,356 96,662,983

Financial assets at amortised cost – Debt and other financial

instruments
Gross carrying amount as at January 1, 2019 84,121,688 42,521,906 41,443,155 156,627 –
Transfer to Stage 1 – – – – –
Transfer to Stage 2 – – – – –

268
As at December 31, 2019 Carrying Not subject 12-month Lifetime ECL not Lifetime ECL
amount to ECL ECL credit impaired credit impaired
(Stage 1) (Stage 2) (Stage 3)
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Transfer to Stage 3 – – – (152,870) 152,870

New assets originated or purchased 52,520,358 35,054,020 17,466,338 – –
Financial assets derecognised or repaid (excluding write-offs) (35,062,340) (15,130,626) (19,927,957) (3,757) –
Foreign exchange adjustments (7,825) 118,185 (126,010) – –
As at December 31, 2019 101,571,881 62,563,485 38,855,526 – 152,870

Financial assets measured at fair value through other comprehensive

income
Gross carrying amount as at January 1, 2019 177,102,423 95,702,465 81,399,958 – –
Transfer to Stage 1 – – – – –

Notes to the Financial Statements

Transfer to Stage 2 – – – – –
Transfer to Stage 3 – – – – –
New assets originated or purchased 113,896,437 63,846,493 50,049,944 – –
Financial assets derecognised or repaid (excluding write-offs) (96,337,023) (77,666,054) (18,670,969) – –
Foreign exchange adjustments (430,569) – (430,569) – –
Change in fair value due to remeasurement 4,198,755 2,372,396 1,826,359 – –
As at December 31, 2019 198,430,023 84,255,300 114,174,723 – –

Contingent liabilities and commitments

Financial Statements
Gross carrying amount as at January 1, 2019 603,424,699 312,347,333 287,727,054 2,786,052 564,260
Transfer to Stage 1 – – 1,496,348 (1,495,102) (1,246)
Transfer to Stage 2 – – (2,553,974) 2,558,608 (4,634)
Transfer to Stage 3 – – (444,019) (130,489) 574,508
Net change due to new exposures originated or exposures
derecognised or repaid (excluding write-offs) (23,753,494) (35,118,879) 12,531,166 (790,343) (375,438)
As at December 31, 2019 579,671,205 277,228,454 298,756,575 2,928,726 757,450

Annual Report 2020

68.1.1 (c) Provision for impairment (ECL) movement
The following tables show reconciliations from the opening to closing balance of the provision for impairment by class of financial instrument.
As at December 31, 2020 12-month Lifetime Lifetime Total
ECL ECL – not credit ECL – credit

Commercial Bank of Ceylon PLC

impaired impaired
(Stage 1) (Stage 2) (Stage 3)
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Cash and cash equivalents

Provision for impairment (ECL) as at January 1, 2020 5,707 – – 5,707
Transfer to Stage 1 – – – –
Transfer to Stage 2 – – – –
Transfer to Stage 3 – – – –
Net remeasurement of impairment 1,844 – – 1,844
New assets originated or purchased 836 – – 836
Financial assets derecognised or repaid (excluding write-offs) (5,205) – – (5,205)
Foreign exchange adjustments 59 – – 59
As at December 31, 2020 28.1 196 3,241 – – 3,241

Placements with Central Banks and Other Banks 68

Provision for impairment (ECL) as at January 1, 2020 8,597 – – 8,597
Transfer to Stage 1 – – – –
Transfer to Stage 2 – – – –
Transfer to Stage 3 – – – –
New remeasurement of impairment – – – –

269
 As at December 31, 2020 12-month Lifetime Lifetime Total
ECL ECL – not credit ECL – credit
impaired impaired
(Stage 1) (Stage 2) (Stage 3)
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

New assets originated or purchased 2,946 – – 2,946

Financial assets derecognised or repaid (excluding write-offs) (8,597) – – (8,597)
Foreign exchange adjustments 57 – – 57
As at December 31, 2020 30.1 197 3,003 – – 3,003

Financial assets at amortised cost – Loans and advances to banks

Provision for impairment (ECL) as at January 1, 2020 111 – – 111
Transfer to Stage 1 – – – –
Transfer to Stage 2 – – – –
Notes to the Financial Statements

Transfer to Stage 3 – – – –
Net remeasurement of impairment (26) – – (26)
As at December 31, 2020 33.1 202 85 – – 85

Financial assets at amortised cost – Loans and advances to other customers

Provision for impairment (ECL) as at January 1, 2020 2,613,480 8,318,831 24,879,180 35,811,491
Transfer to Stage 1 824,628 (601,636) (222,992) –
Transfer to Stage 2 (218,566) 425,851 (207,285) –
Transfer to Stage 3 (46,261) (1,015,454) 1,061,715 –
1,358,343 3,333,664 7,187,518 11,879,525
Financial Statements

Net remeasurement of impairment

New assets originated or purchased 2,545,958 1,919,933 742,084 5,207,975
Financial assets derecognised or repaid (excluding write-offs) (608,095) (1,359,582) (984,340) (2,952,017)
Write-offs and recoveries (166) (860) (110,932) (111,958)
Foreign exchange adjustments 1,559 1,045 39,274 41,878
Interest accrued on impaired loans and advances – – (2,850,806) (2,850,806)
Other movements – – 240,633 240,633
Annual Report 2020

Changes to contractual cash flows due to modifications

not resulting in derecognition – 1,222,641 2,507,090 3,729,731
As at December 31, 2020 34.2 (b) 204 6,470,880 12,244,433 32,281,139 50,996,452

Financial assets at amortised cost – Debt and other financial instruments

Provision for impairment (ECL) as at January 1, 2020 274,192 – 152,870 427,062
Commercial Bank of Ceylon PLC

Transfer to Stage 1 – – – –
Transfer to Stage 2 – – – –
Transfer to Stage 3 – – – –
Net remeasurement of impairment 324,126 – – 324,126
New assets originated or purchased 659,955 – – 659,955
Financial assets derecognised or repaid (excluding write-offs) (32) – – (32)
Reclassification adjustment 697,780 – – 697,780
As at December 31, 2020 35.1 (b) 206 1,956,021 – 152,870 2,108,891

Financial assets measured at fair value through other comprehensive

income
Provision for impairment (ECL) as at January 1, 2020 861,693 – – 861,693
Transfer to Stage 1 – – – –
Transfer to Stage 2 – – – –
Transfer to Stage 3 – – – –
68
Net remeasurement of impairment – – – –
New assets originated or purchased 2,373,614 – – 2,373,614
Financial assets derecognised or repaid (excluding write-offs) (861,693) – – (861,693)
Reclassification adjustment (697,780) – – (697,780)
As at December 31, 2020 36.2 208 1,675,834 – – 1,675,834

270
As at December 31, 2020 12-month Lifetime Lifetime Total
ECL ECL – not credit ECL – credit
impaired impaired
(Stage 1) (Stage 2) (Stage 3)
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Contingent liabilities and commitments

Provision for impairment (ECL) as at January 1, 2020 764,857 187,237 364,743 1,316,837
Transfer to Stage 1 65,448 (52,794) (12,654) –
Transfer to Stage 2 (12,406) 13,229 (823) –
Transfer to Stage 3 (433) (7,632) 8,065 –
Net remeasurement of impairment (47,496) 34,590 12,196 (710)
New exposures originated or purchased 1,026,152 197,553 222,974 1,446,679
Exposures derecognised or repaid (excluding write offs) (264,126) (127,701) (254,825) (646,652)
Foreign exchange adjustments 695 – – 695

Notes to the Financial Statements

As at December 31, 2020 58.3 (b) 250 1,532,691 244,482 339,676 2,116,849

As at December 31, 2019 12-month Lifetime Lifetime Total

ECL ECL – not credit ECL – credit
impaired impaired
(Stage 1) (Stage 2) (Stage 3)
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Cash and cash equivalents

Provision for impairment (ECL) as at January 1, 2019 4,413 – – 4,413

Financial Statements
Transfer to Stage 1 – – – –
Transfer to Stage 2 – – – –
Transfer to Stage 3 – – – –
Net remeasurement of impairment (252) – – (252)
New assets originated or purchased 5,261 – – 5,261
Financial assets derecognised or repaid (excluding write-offs) (3,659) – – (3,659)
Foreign exchange adjustments (56) – – (56)

Annual Report 2020

As at December 31, 2019 28.1 196 5,707 – – 5,707

Placements with Central Bank and Other Banks

Provision for impairment (ECL) as at January 1, 2019 10,784 – – 10,784
Transfer to Stage 1 – – – –

Commercial Bank of Ceylon PLC

Transfer to Stage 2 – – – –
Transfer to Stage 3 – – – –
New remeasurement of impairment – – – –
New assets originated or purchased 8,640 – – 8,640
Financial assets derecognised or repaid (excluding write-offs) (10,784) – – (10,784)
Foreign exchange adjustments (44) – – (44)
As at December 31, 2019 30.1 197 8,596 – – 8,596

Financial assets at amortised cost – Loans and advances to banks

Provision for impairment (ECL) as at January 1, 2019 36 – – 36
Transfer to Stage 1 – – – –
Transfer to Stage 2 – – – –
Transfer to Stage 3 – – – –
Net remeasurement of impairment 75 – – 75
As at December 31, 2019 33.1 202 111 – – 111
68
Financial assets at amortised cost – Loans and advances to other
customers
Provision for impairment (ECL) as at January 1, 2019 2,659,185 5,873,226 20,596,642 29,129,053
Transfer to Stage 1 484,038 (390,805) (93,233) –
Transfer to Stage 2 (347,364) 571,627 (224,263) –

271
 As at December 31, 2019 12-month Lifetime Lifetime Total
ECL ECL – not credit ECL – credit
impaired impaired
(Stage 1) (Stage 2) (Stage 3)
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Transfer to Stage 3 (158,257) (1,937,954) 2,096,211 –

Net remeasurement of impairment (812,498) 1,928,580 4,084,352 5,200,434
New assets originated or purchased 1,133,490 657,598 901,476 2,692,564
Financial assets derecognised or repaid (excluding write-offs) (341,078) (1,077,825) (1,109,306) (2,528,209)
Write-offs and recoveries (2,396) (1,118) (2,121,615) (2,125,129)
Foreign exchange adjustments (1,640) (590) 5,915 3,685
Interest accrued on impaired loans and advances – – (1,258,339) (1,258,339)
Other movements – – 18,578 18,578
Notes to the Financial Statements

Changes to contractual cash flows due to modifications

not resulting in derecognition – 2,696,092 1,982,762 4,678,854
As at December 31, 2019 34.2 (b) 204 2,613,480 8,318,831 24,879,180 35,811,491

Financial assets at amortised cost – Debt and other financial instruments

Provision for impairment (ECL) as at January 1, 2019 262,381 3,871 – 266,252
Transfer to Stage 1 – – – –
Transfer to Stage 2 – – – –
Transfer to Stage 3 – (3,871) 3,871 –
Net remeasurement of impairment 3,020 – 148,999 152,019
Financial Statements

New assets originated or purchased 10,064 – – 10,064

Financial assets derecognised or repaid (excluding write-offs) (1,273) – – (1,273)
As at December 31, 2019 35.1 (b) 206 274,192 – 152,870 427,062

Financial assets measured at fair value through other comprehensive

income
Provision for impairment (ECL) as at January 1, 2019 595,694 – – 595,694
Annual Report 2020

Transfer to Stage 1 – – – –
Transfer to Stage 2 – – – –
Transfer to Stage 3 – – – –
Net remeasurement of impairment 18,066 – – 18,066
New assets originated or purchased 383,005 – – 383,005
Commercial Bank of Ceylon PLC

Financial assets derecognised or repaid (excluding write-offs) (135,072) – – (135,072)

As at December 31, 2019 36.2 208 861,693 – – 861,693

Contingent liabilities and commitments

Provision for impairment (ECL) as at January 1, 2019 528,932 89,177 108,531 726,640
Transfer to Stage 1 15,568 (15,167) (401) –
Transfer to Stage 2 (9,055) 10,952 (1,897) –
Transfer to Stage 3 (7,807) (8,846) 16,653 –
Net remeasurement of impairment (10,100) 8,776 1,607 283
Net change in new exposures originated or purchased/exposures
derecognised or repaid (excluding write-offs) 247,603 102,345 240,250 590,198
Foreign exchange adjustments (284) – – (284)
As at December 31, 2019 58.3 (b) 250 764,857 187,237 364,743 1,316,837

68

272
68.1.1 (d) Financial assets recognised through profit or loss measured at fair value
Fair Value Through Profit or Loss investments in debt and equity Securities
The table below sets out the credit quality of debt and equity securities classified through profit or loss measured at fair value. Debt securities
include investments made by the Bank in Government Securities of Sri Lanka and Bangladesh. The analysis of equity securities is based on Fitch
Rating Nomenclature or Equivalent Ratings, where applicable.

2020 2019
Note Page No. Rs. ’000 Rs. ’000

Debt instruments at FVTPL

Government Securities – Sri Lanka
Treasury bills 883,328 2,875,977
Treasury bonds 7,547,800 3,318,057

Government Securities – Bangladesh

Treasury bills 6,758,303 12,839,210

Notes to the Financial Statements

Treasury bonds 18,678,162 1,451,651
Subtotal – Debt instruments at FVTPL 32.1 199 33,867,593 20,484,895

Equity instruments at FVTPL

Rated AAA 35,990 22,374
Rated AA+ to AA- 52,373 20
Rated A+ to A 881,092 736,960
Rated BBB+ – 7,114
Unrated 352,423 216,670

Financial Statements
Subtotal – Equity instruments at FVTPL 32.2 199 1,321,878 983,138

Total 32 198 35,189,471 21,468,033

Credit exposure arising from derivative transactions

Credit risk arising from derivative financial instruments at any time is limited to those with positive fair values, as reported in the Statement of
Financial Position. With gross settled derivatives, the Bank is also exposed to a settlement risk, being the risk that the counterparty failing to

Annual Report 2020

deliver the counter value.
The tables below show analysis of credit exposures arising from derivative financial assets and liabilities:

As at December 31, 2020 Derivative type

Forward SWAPS Spot Options Total
Notional Fair Notional Fair Notional Fair Notional Fair Notional Fair

Commercial Bank of Ceylon PLC

amount value amount value amount value amount value amount value
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Derivative financial assets

(Note 1) 52,017,069 741,521 126,823,915 1,880,510 5,972,167 9,872 1,345,361 4,814 186,158,512 2,636,717

Derivative financial
liabilities (Note 2) 25,011,339 (216,709) 93,436,010 (1,274,889) 3,003,280 (5,016) 883,068 (4,648) 122,333,697 (1,501,262)

Note 1
Derivative financial assets
by counterparty type
With banks 20,576,671 342,658 124,788,233 1,792,619 421,376 50 1,023,064 3,324 146,809,344 2,138,651

Other customers 31,440,398 398,863 2,035,682 87,891 5,550,791 9,822 322,297 1,490 39,349,168 498,066

Total 52,017,069 741,521 126,823,915 1,880,510 5,972,167 9,872 1,345,361 4,814 186,158,512 2,636,717

Note 2
Derivative financial 68
liabilities by counterparty
type
With banks 14,434,924 (84,419) 93,436,010 (1,274,868) 172,648 (1,078) 771,529 (1,461) 108,815,111 (1,361,826)

Other customers 10,576,415 (132,290) – (21) 2,830,632 (3,938) 111,539 (3,187) 13,518,586 (139,436)

Total 25,011,339 (216,709) 93,436,010 (1,274,889) 3,003,280 (5,016) 883,068 (4,648) 122,333,697 (1,501,262)

273
 As at December 31, 2019 Derivative type
Forward SWAPS Spot Total
Notional Fair Notional Fair Notional Fair Notional Fair
amount value amount value amount value amount value
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Derivative financial assets (Note 1) 32,709,682 411,958 115,126,783 1,410,476 4,882,897 8,493 152,719,362 1,830,927
Derivative financial liabilities (Note 2) 15,832,082 (295,838) 73,646,091 (1,193,556) 4,202,423 (5,923) 93,680,596 (1,495,317)

Note 1
Derivative financial assets by
counterparty type
With banks 18,185,745 231,682 110,022,152 1,194,014 2,713,575 1,631 130,921,472 1,427,327
Other customers 14,523,937 180,276 5,104,631 216,462 2,169,322 6,862 21,797,890 403,600
Total
Notes to the Financial Statements

32,709,682 411,958 115,126,783 1,410,476 4,882,897 8,493 152,719,362 1,830,927

Note 2
Derivative financial liabilities by
counterparty type
With banks 10,359,497 (57,569) 72,964,528 (1,144,838) 2,246,011 (2,139) 85,570,036 (1,204,546)
Other customers 5,472,585 (238,269) 681,563 (48,718) 1,956,412 (3,784) 8,110,560 (290,771)
Total 15,832,082 (295,838) 73,646,091 (1,193,556) 4,202,423 (5,923) 93,680,596 (1,495,317)

68.1.2 Credit-impaired financial assets

Financial Statements

Reconciliation of changes in the net carrying amount of lifetime ECL credit impaired (Stage 3) loans and advances as detailed below:

As at December 31, 2020 2019

Rs. ’000 Rs. ’000

Stage 3 loans and advances to other customers as at January 1, 71,783,803 32,380,918

Newly classified as impaired loans and advances during the year 23,934,129 51,874,936
Annual Report 2020

Net change in already impaired loans and advances during the year (5,458,157) (3,535,574)
Net payment, write-off and recoveries and other movements during the year (19,965,481) (8,936,477)
Impaired loans and advances to customers as at December 31, 70,294,294 71,783,803

Refer Note 18 for methodology of impairment assessment, on “Impairment losses on loans and advances to other customers” on
pages 182 to 185.
Commercial Bank of Ceylon PLC

Details of provision for impairment for loans and advances to other customers, are detailed in Note 34 on pages 202 to 205.
Set out below is an analysis of the gross and net carrying amounts of life time ECL credit impaired (Stage 3) loans and advances to other
customers by risk rating:

As at December 31, 2020 2019

Gross carrying Net carrying Gross carrying Net carrying
amount amount amount amount
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Rating 0-4: Investment grade 21,856,496 19,338,054 22,457,037 21,337,995

Rating 5-6: Moderate risk 20,721,485 16,643,993 15,520,602 14,105,391
Rating 7-8: High risk 8,870,661 7,645,813 8,317,443 7,549,750
Rating 9: Extreme risk 51,126,791 26,666,434 50,367,901 28,790,667
Total 102,575,433 70,294,294 96,662,983 71,783,803

68

274
68.1.3 Sensitivity of impairment provision on loans and advances to other customers
The Bank has estimated the impairment provision on loans and advances to other customers as at December 31, 2020, subject to various
assumptions. The changes to such assumptions may lead to changes in the impairment provision recorded in the Statement of Financial Position.
The following table demonstrates the sensitivity of the impairment provision of the Bank as at December 31, 2020 to a feasible change in
PDs, LGDs and forward looking macro economic information.

PD/LGD Sensitivity effect on Statement of Financial Position Sensitivity

[Increase/(Decrease) in impairment provision] effect
on Income
Stage 1 Stage 2 Stage 3 Total
Statement
(Rs. ’000) (Rs. ’000) (Rs. ’000) (Rs. ’000) (Rs. ’000)

PD 1% increase across all age buckets 2,630,708 436,791 – 3,067,499 (3,067,499)

PD 1% decrease across all age buckets (*) (2,086,299) (436,792) – (2,523,091) 2,523,091
LGD 5% increase 754,510 1,721,960 2,206,720 4,683,190 (4,683,190)

Notes to the Financial Statements

LGD 5% decrease (*) (754,510) (1,721,961) (2,206,719) (4,683,190) 4,683,190
Probability weighted forward looking Macro Economic Indicators (**)
– Base case 10% increase, worst case 5% decrease and best case 5% decrease (45,201) (81,519) – (126,720) 126,720
– Base case 10% decrease, worst case 5% increase and best case 5% increase 45,048 81,351 – 126,399 (126,399)
(*) The PD/LGD decrease is capped at 0%, if applicable.
(**) Please refer Note 18 for explanation on forward looking Macro Economic Indicators.

68.1.4 Collateral held

Loan-to-value ratio of residential mortgage lending
The table below stratifies eligible credit exposures by ranges of loan-to-value (LTV) ratio. LTV is calculated as the ratio of the gross amount of

Financial Statements
the loan to the value of the collateral, which is used for the computation of Capital Adequecy Ratios. The value of the collateral for residential
mortgage loan is based on the forced sale value determined by professional valuers.

As at December 31, 2020 2019

Composition Composition
Rs. ’000 (%) Rs. ’000 (%)

LTV ratio

Annual Report 2020

Less than 50% 16,110,557 29.77 15,557,191 30.28
51% – 70% 12,167,172 22.49 11,349,831 22.09
71% – 90% 13,947,060 25.78 13,776,666 26.81
91% – 100% 1,792,030 3.31 1,906,063 3.71
More than 100% * 10,092,060 18.65 8,792,924 17.11

Commercial Bank of Ceylon PLC

Total 54,108,879 100.00 51,382,675 100.00
* LTV ratio of more than 100% has been arisen due to subsequent disbursements made to the borrower after the initial valuation of the property (the denominator).

The total amount mentioned above does not tally to the total of residential mortgage lending by the Bank, as some of the residential
mortgage lending are not eligible to apply preferential risk weight used in the calculation of Capital Adequacy Ratio.

Assets obtained by taking the possession of collaterals

Repossession of collaterals is resorted to in extreme situations where action is necessitated to recover the dues. The repossessed assets are
disposed, in an orderly and transparent manner and the proceeds are used to reduce or recover the outstanding claims and the amounts
recovered in excess of the dues are refunded to the customers.

68.1.5 Concentration of credit risk

By setting various concentration limits under different criteria within the established risk appetite framework (i.e. single borrower/group, industry
sectors, product, counterparty and country etc.), the Bank ensures that an acceptable level of risk diversification is maintained on an ongoing
basis. These limits are continuously monitored and periodically reviewed by the Credit Policy Committee (CPC), EIRMC and BIRMC to capture the
developments in the market, political and economic environment both locally and globally to strengthen the dynamic portfolio management
68
practices and to provide an early warning on possible credit concentrations.
The maximum exposure to credit risk in respect of each item of financial assets in the Statement of Financial Position as at the reporting
date as per the industry sector and by geographical region of financial assets is given below:

275
 68.1.5 (a) Industry wise distribution
As at December 31, 2020 Agriculture, Manufacturing Tourism Transportation Construction
Forestry and and storage
Fishing

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Financial assets
Cash and cash equivalents – – – – –
Balances with central banks – – – – –
Placements with banks – – – – –
Securities purchased under resale agreements – – – – –
Derivative financial assets 11,472 196,894 – 102 78
Financial assets measured at FVTPL 2,724 281,603 20,371 – 9,037
Notes to the Financial Statements

Government securities – – – – –
Quoted equity securities 2,724 281,603 20,371 – 9,037

Financial assets at AC – Loans and advances to banks – – – – –

Financial assets at AC – Loans and advances to other customers (*) 72,914,184 113,395,694 59,345,854 11,222,946 39,600,579
Financial assets at AC – Debt and other financial instruments – – – – –
Government securities – – – – –
Other investments – – – – –
Financial assets measured at FVOCI – 15,070 – – 224,703
Financial Statements

Government securities – – – – –
Equity securities – 15,070 – – 224,703
Total 72,928,380 113,889,261 59,366,225 11,223,048 39,834,397

As at December 31, 2019 Agriculture, Manufacturing Tourism Transportation Construction

Forestry and and storage
Annual Report 2020

Fishing

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Financial assets
Cash and cash equivalents – – – – –
Commercial Bank of Ceylon PLC

Balances with central banks – – – – –

Placements with banks – – – – –
Securities purchased under resale agreements – – – – –
Derivative financial assets 7,615 25,238 – 34 101
Financial assets measured at FVTPL 2,179 53,480 6,163 – 28,000
Government securities – – – – –
Quoted equity securities 2,179 53,480 6,163 – 28,000

Financial assets at AC – Loans and advances to banks – – – – –

Financial assets at AC – Loans and advances to other customers (*) 64,700,883 114,177,649 59,561,360 11,299,849 39,599,580
Financial assets at AC – Debt and other financial instruments – – – – –
Government securities – – – – –
Other investments – – – – –
Financial assets measured at FVOCI – 10,570 – – 154,157
68
Government securities – – – – –
Equity securities – 10,570 – – 154,157
Total 64,710,677 114,266,937 59,567,523 11,299,883 39,781,838
(*) Loans and advances to other customers referred above do not agree with the Note 34.1 (c) on page 203 due to impairment provisions.

276
Infrastructure Wholesale Information Financial Professional, Arts, Education Healthcare, Consumption Lending to Total
development and technology and services scientific and entertainment social overseas
retail trade communication technical and recreation services and entities
services activities support
services
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

– – – 50,250,627 – – – – – – 50,250,627
– – – 110,971,105 – – – – – – 110,971,105
– – – 15,938,982 – – – – – – 15,938,982
– – – – – – – – – – –
– 49,857 40,902 2,307,624 189 – 1,372 667 27,560 – 2,636,717
– 40,630 17,350 34,775,209 – – – 42,547 – – 35,189,471

Notes to the Financial Statements

– – – 33,867,593 – – – – – – 33,867,593
– 40,630 17,350 907,616 – – – 42,547 – – 1,321,878

– – – 779,705 – – – – – – 779,705
16,615,070 160,482,231 11,139,421 35,981,563 24,305,699 1,182,316 3,071,894 17,671,204 207,716,106 122,200,692 896,845,453
– 80,283 – 292,647,283 – – – – – – 292,727,566
– – – 291,593,947 – – – – – – 291,593,947
– 80,283 – 1,053,336 – – – – – – 1,133,619
– – – 278,212,976 8,620 – – – – – 278,461,369

Financial Statements
– – – 278,169,424 – – – – – – 278,169,424
– – – 43,552 8,620 – – – – – 291,945
16,615,070 160,653,001 11,197,673 821,865,074 24,314,508 1,182,316 3,073,266 17,714,418 207,743,666 122,200,692 1,683,800,995

Infrastructure Wholesale Information Financial Professional, Arts, Education Healthcare, Consumption Lending to Total
development and technology and services scientific and entertainment social overseas

Annual Report 2020

retail trade communication technical and recreation services and entities
services activities support
services
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

– – – 52,534,730 – – – – – – 52,534,730

Commercial Bank of Ceylon PLC

– – 39,461,127 – – – – – – 39,461,127
– – – 24,527,241 – – – – – – 24,527,241
– – – 13,147,534 – – – – – – 13,147,534
956 22,375 3,492 1,764,089 – – – 3,509 3,518 – 1,830,927
– 103,749 11,675 21,221,129 – – – 41,658 – – 21,468,033
– – – 20,484,895 – – – – – – 20,484,895
– 103,749 11,675 736,234 – – – 41,658 – – 983,138

– – – 757,787 – – – – – – 757,787
16,573,720 187,378,381 10,962,266 37,625,681 23,098,483 1,055,882 2,838,314 17,915,228 194,885,712 102,972,756 884,645,744
– 900,363 – 100,244,456 – – – – – – 101,144,819
– – – 97,997,976 – – – – – – 97,997,976
– 900,363 – 2,246,480 – – – – – – 3,146,843
– – – 197,394,983 8,620 – – – – – 197,568,330
68
– – – 197,347,730 – – – – – – 197,347,730
– – – 47,253 8,620 – – – – – 220,600
16,574,676 188,404,868 10,977,433 488,678,757 23,107,103 1,055,882 2,838,314 17,960,395 194,889,230 102,972,756 1,337,086,272

277
 68.1.5 (b) Geographical distribution of loans and advances
The Western Province has recorded a as at December 31, 2020. Although, Western corporates which have island-wide
higher percentage of lending based on Province is attracted with highest credit operations are being accommodated by
geographical distribution of the Bank’s concentration, we believe that a sizable the Bank's branches and corporate banking
lending portfolio. It has accounted for 75% portion of these lending has been utilised division located in the Western Province and
(approximately) of total advances portfolio of to facilitate industries scattered around thereby reflecting a diversified geographical
the Bank (excluding Bangladesh operations) the country. For example, most of the large concentration as given below:
As at December 31, 2020
Country/province Loans and advances by product
Overdrafts Trade Lease Credit Pawning Staff Housing Personal Long–term Short–term Bills of Total
finance receivables cards loans loans loans loans loans exchange
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Sri Lanka
Central 8,600,436 128,231 1,618,853 691,703 206,192 3,582 3,803,913 2,843,198 22,071,403 1,220,474 86,551 41,274,536

Eastern 505,531 109,519 769,849 185,663 105,736 383 632,225 1,412,448 3,614,435 73,759 – 7,409,548
Notes to the Financial Statements

North Central 427,161 22,135 1,353,033 176,722 67,793 99 715,193 2,192,394 7,339,441 83,522 – 12,377,493

Northern 4,980,537 583,170 2,790,462 645,406 336,722 124 3,935,969 3,804,319 14,819,845 1,754,095 6,306 33,656,955

North Western 2,597,452 42,481 2,136,066 233,968 1,615,095 311 998,843 1,855,940 6,998,248 225,859 – 16,704,263

Sabaragamuwa 4,815,849 500,383 2,376,315 426,507 159,432 2,815 2,981,031 1,983,939 12,659,733 736,412 13,145 26,655,561

Southern 4,728,373 1,649,624 3,337,331 698,485 392,801 2,519 5,776,005 4,293,629 18,864,338 670,728 1,624 40,415,457

Uva 956,557 – 983,195 199,365 57,961 126 1,903,235 1,229,431 5,841,880 458,119 – 11,629,869

Western 61,761,978 70,729,220 18,786,293 10,208,762 1,644,475 11,730,646 43,739,922 28,854,974 264,620,832 67,825,928 4,690,640 584,593,670

Bangladesh 7,612,477 4,499,945 660,115 137,943 – 176,824 990,543 518,483 18,973,264 57,485,172 31,073,335 122,128,101

Net Loans and

advances 96,986,351 78,264,708 34,811,512 13,604,524 4,586,207 11,917,429 65,476,879 48,988,755 375,803,419 130,534,068 35,871,601 896,845,453
Financial Statements

As at December 31, 2019

Country/province Loans and advances by product
Overdrafts Trade Lease Credit Pawning Staff Housing Personal Long–term Short–term Bills of Total
finance receivables cards loans loans loans loans loans exchange
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Sri Lanka
Annual Report 2020

Central 10,049,902 284,646 1,616,704 766,640 144,333 – 3,617,224 2,049,482 20,126,857 3,839,193 202,364 42,697,345

Eastern 748,261 204,269 685,050 206,609 77,540 – 532,202 912,380 2,917,815 98,277 – 6,382,403

North Central 630,769 26,535 1,348,528 207,722 37,215 – 618,886 1,533,266 6,948,927 305,832 – 11,657,680

Northern 6,910,590 700,407 2,595,462 721,724 203,929 – 3,837,414 2,853,801 13,038,530 2,010,925 34,031 32,906,813

North Western 3,308,388 100,211 1,765,571 254,640 1,017,355 – 1,003,830 1,248,949 5,804,502 302,681 – 14,806,127

Sabaragamuwa 5,709,310 466,018 2,205,118 471,712 110,154 – 2,982,905 1,399,948 10,479,333 662,420 18,904 24,505,822
Commercial Bank of Ceylon PLC

Southern 5,749,944 1,490,619 3,162,717 783,286 217,087 – 5,391,117 2,840,717 15,300,888 709,959 11,288 35,657,622

Uva 1,392,727 – 921,024 232,828 51,521 – 1,917,260 909,923 5,056,787 402,788 834 10,885,692

Western 87,970,695 61,370,750 18,370,920 10,264,794 1,082,599 10,427,419 41,414,923 23,701,281 246,676,120 95,927,470 5,026,119 602,233,090

Bangladesh 8,745,766 5,858,158 555,807 140,684 – 172,903 855,800 592,775 15,449,817 44,423,486 26,117,954 102,913,150

Net Loans and

advances 131,216,352 70,501,613 33,226,901 14,050,639 2,941,733 10,600,322 62,171,561 38,042,522 341,799,576 148,683,031 31,411,494 884,645,744

Please refer Note 34 on page 202 for the gross carrying amount of the loans and advances to other customers.

68.2 Liquidity risk

Liquidity risk arises because of the possibility Therefore, the Bank continuously Assets and Liability Management
that the Bank might not be able to meet On analyses and monitors its liquidity profile, Committee (ALCO)
or Off-balance sheet contractual financial maintains adequate levels of high quality
ALCO chaired by the Managing Director, has
obligations on its payments or not receiving liquid assets, ensures access to diverse
representatives from Treasury, Corporate
what is due to the Bank when they fall funding sources and has contingency
Banking, Personal Banking, Risk and Finance
due, without incurring unacceptable loses. funding agreements with peer banks to
Departments. The Committee meets
The principal objective in liquidity risk meet any unforeseen liquidity requirements.
68 fortnightly or more frequently to monitor
management is to assess the need for funds Exposures and ratios against tolerance limits
and manage the assets and liabilities of the
to meet such obligations ,make sure receipt as well as stressed scenarios are regularly
Bank and also the overall liquidity position
of funds when they are due and to ensure monitored in order to identify the Bank’s
to keep the Bank's liquidity at healthy levels,
the availability of adequate funding to fulfill liquidity position and potential funding
whilst satisfying the regulatory requirements.
those needs at the appropriate time, requirements.
under both normal and stressed conditions.

278
68.2.1 Exposure to liquidity risk
The Bank uses the key ratios given below for managing liquidity risk:

2020
%

Liquid Assets ratio (LAR)

LAR calculates the percentage of liquid assets to total liabilities excluding shareholders' funds. Domestic Banking Unit 44.99
For this purpose, ‘liquid assets’ include cash and cash equivalents, Placements with banks and
Government Securities (net). Off shore Banking Centre 32.70

Liquidity Coverage Ratio (LCR)*

This ratio determines the ability of the Bank to withstand adverse shocks (i.e. sudden Rupee Liquidity Requirement 330.84
withdrawal of a significant portion of deposits) by holding high quality liquid assets in a 30
day time span. All-Currency Liquidity Requirement 258.06

Notes to the Financial Statements

Net Stable Funding Ratio (NSFR)*
This ratio measures the availability of stable Funds against the Required Funds of the Bank. 157.66
NSFR, requires banks to maintain a stable funding profile by creating additional incentives to
fund their activities with more stable sources of funding on an ongoing basis, over a longer
time horizon.

*Details of LCR and NSFR are given in Disclosure 04 and 05 as per Basel III disclosures under Pillar 3 on page 333 and 334.

Details of the reported LAR (ratio) of liquid assets to external liabilities of the Domestic Banking Unit (DBU) and the Off-shore Banking Centre
(OBC) as at reporting dates are as follows:

Domestic Banking Unit Off shore Banking Centre

Financial Statements
2020 2019 2020 2019
% % % %

As at December 31, 44.99 30.42 32.70 25.25

Average for the period 38.77 29.27 28.09 28.28
Maximum for the period 44.99 31.10 32.70 34.27
Minimum for the period 31.04 25.01 25.09 25.25

Annual Report 2020

Statutory minimum requirement 20.00 20.00 20.00 20.00

The graph below depicts the trends in liquidity ratios of the Bank calculated on a quarterly basis during the period from December 2017 to
December 2020:
Liquidity ratios Graph – 38
%

Commercial Bank of Ceylon PLC

100

80

60

40

20

0
2017 2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 2020 2020
Dec. Mar. Jun. Sep. Dec. Mar. Jun. Sep. Dec. Mar. Jun. Sep. Dec.

Net loans to Loans to Liquid assets to (Large liabilities – Temporary investments) to Purchased funds to Commitments to
total assets customer deposits short-term liabilities (Earning assets – Temporary investments) total assets total loans

68

279
 68.2.2 Maturity analysis of financial assets and financial liabilities
68.2.2 (a) Remaining contractual period to maturity – Bank
(i) Remaining contractual period to maturity of the assets employed by the Bank as at the date of Statement of Financial Position is
detailed below:

As at December 31, Up to 3 3 to 12 1 to 3 3 to 5 More than Total as at Total as at

months months years years 5 years December 31, December 31,
2020 2019
Rs. ’000 Rs.’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Interest earning financial assets:

Cash and cash equivalents 1,814,333 – – – – 1,814,333 21,770,015
Balances with central banks 94,905,791 – – – – 94,905,791 2,765,146
Placements with banks 8,274,664 7,664,318 – – – 15,938,982 24,527,241
Securities purchased under resale agreements – – – – – – 13,147,534
Notes to the Financial Statements

Financial assets recognised – Measured at FVTPL 33,867,593 – – – – 33,867,593 20,484,892

Financial assets at amortised cost –
Loans and advances to other customers 279,586,048 236,065,219 223,200,191 106,916,088 51,077,907 896,845,453 884,645,744
Financial assets at amortised cost – Debt and other
financial instruments 7,457,964 32,209,210 81,163,942 94,810,955 77,085,495 292,727,566 101,144,819
Financial assets measured at FVOCI 6,517,087 29,690,168 173,012,091 46,121,868 22,828,210 278,169,424 197,347,731
Total interest earning assets as at December 31, 2020 432,423,480 305,628,915 477,376,224 247,848,911 150,991,612 1,614,269,142
Total Interest earning assets as at December 31, 2019 407,810,629 257,146,540 346,518,919 183,280,139 71,076,896 1,265,833,122

Non-interest earning financial assets:

Financial Statements

Cash and cash equivalents 48,436,294 – – – – 48,436,294 30,764,715

Balances with central banks 9,819,105 5,429,114 457,100 155,198 204,797 16,065,314 36,695,981
Derivative financial assets 1,091,085 1,244,302 296,958 4,372 – 2,636,717 1,830,927
Financial assets measured at FVTPL 1,321,878 – – – – 1,321,878 983,141
Financial assets at amortised cost –
Loans and advances to banks – – – – 779,705 779,705 757,787
Financial assets measured at FVOCI – – – 20,267 271,678 291,945 220,599
Annual Report 2020

Non-financial assets
Investments in subsidiaries – – – – 5,808,429 5,808,429 5,011,284
Investments in associates – – – – 44,331 44,331 44,331
Property, plant and equipment and right-of-use assets – – – – 23,212,394 23,212,394 20,507,203
Commercial Bank of Ceylon PLC

Intangible assets – – – – 1,232,863 1,232,863 1,080,010

Deferred tax assets – – 2,499,860 – – 2,499,860 294,059
Other assets 12,094,100 1,642,692 1,576,321 498,471 3,807,565 19,619,149 23,322,247
Total Non-interest earning assets
as at December 31, 2020 72,762,462 8,316,108 4,830,239 678,308 35,361,762 121,948,879
Total Non-interest earning assets
as at December 31, 2019 71,690,088 13,459,904 3,286,943 1,105,344 31,970,005 121,512,284

Total assets – As at December 31, 2020 505,185,942 313,945,023 482,206,463 248,527,219 186,353,374 1,736,218,021

Total assets – As at December 31, 2019 479,500,717 270,606,444 349,805,862 184,385,483 103,046,901 1,387,345,406

Percentage – As at December 31, 2020 (*) 29.11 18.08 27.77 14.31 10.73 100.00

Percentage – As at December 31, 2019 (*) 34.56 19.51 25.21 13.29 7.43 100.00

(*) Total assets of each maturity bucket as a percentage of total assets employed by the Bank.

68

280
(ii) Remaining contractual period to maturity of the liabilities and shareholders’ funds employed by the Bank as at the date of Statement of
Financial Position is detailed below:

As at December 31, Up to 3 3 to 12 1 to 3 3 to 5 More than Total as at Total as at

months months years years 5 years December 31, December 31,
2020 2019
Rs. ’000 Rs.’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Interest-bearing financial liabilities:

Due to banks 38,624,195 32,670,589 – 4,675,000 – 75,969,784 49,795,834
Securities sold under repurchase
agreements 76,548,307 14,889,305 – – – 91,437,612 51,220,023
Financial liabilities at amortised cost –
Due to depositors 672,507,111 427,820,673 36,019,999 12,229,768 16,138,286 1,164,715,837 985,604,075
Financial liabilities at amortised cost –
Other borrowings 2,320,272 26,663,596 19,389,523 1,660,695 4,521,847 54,555,933 23,248,893

Notes to the Financial Statements

Subordinated liabilities 5,166,884 5,393,227 22,403,577 – 5,283,450 38,247,138 37,886,789
Total interest-bearing liabilities
as at December 31, 2020 795,166,769 507,437,390 77,813,099 18,565,463 25,943,583 1,424,926,304
Total Interest-bearing liabilities
as at December 31, 2019 618,118,410 407,488,861 50,689,917 44,851,599 26,606,827 1,147,755,614

Non-interest bearing financial liabilities:

Due to banks 11,481,522 – – – – 11,481,522 1,709,860
Derivative financial liabilities 461,543 897,343 142,376 – – 1,501,262 1,495,317
Financial liabilities at amortised cost –

Financial Statements
Due to depositors 101,250,081 – – – – 101,250,081 67,703,585

Non-financial liabilities
Current tax liabilities 1,694,498 5,083,494 – – – 6,777,992 4,967,644
Other liabilities 13,343,187 12,381,908 1,454,663 2,454,245 3,403,666 33,037,669 30,496,709
Due to subsidiaries 97,015 – – – – 97,015 54,292

Equity

Annual Report 2020

Stated capital – – – – 52,187,747 52,187,747 40,916,958
Statutory reserves – – – – 9,024,065 9,024,065 8,205,391
Retained earnings – – – – 7,596,260 7,596,260 5,144,433
Other reserves – – – – 88,338,104 88,338,104 78,895,603
Total non-interest bearing liabilities and

Commercial Bank of Ceylon PLC

equity as at December 31, 2020 128,327,846 18,362,745 1,597,039 2,454,245 160,549,842 311,291,717
Total non-Interest bearing liabilities and
equity as at December 31, 2019 92,767,307 6,092,972 3,579,818 1,500,250 135,649,445 239,589,792
Total liabilities and equity –
as at December 31, 2020 923,494,615 525,800,135 79,410,138 21,019,708 186,493,425 1,736,218,021

Total liabilities and equity –

as at December 31, 2019 710,885,717 413,581,833 54,269,735 46,351,849 162,256,272 1,387,345,406

Percentage – as at December 31, 2020 (*) 53.19 30.29 4.57 1.21 10.74 100.00

Percentage – as at December 31, 2019 (*) 51.24 29.81 3.91 3.34 11.70 100.00

(*) Total liabilities and shareholders’ funds of each maturity bucket as a percentage of total liabilities and shareholders’ funds employed by the Bank.

68

281
 68.2.2 (b) Non-derivative financial assets and financial liabilities expected to be recovered or settled after 12 months from the reporting date
The table below sets out the carrying amounts of non-derivative financial assets and financial liabilities expected to be recovered or settled
after 12 months from the reporting date:

As at December 31, 2020 2019

Rs. ’000 Rs. ’000

Financial assets
Non-derivative financial assets
Balances with central banks 817,095 1,894,529
Financial assets at amortised cost – Loans and advances to banks 779,705 757,787
Financial assets at amortised cost – Loans and advances to other customers 381,194,186 340,843,192
Financial assets at amortised cost – Debt and other financial instruments 253,060,392 84,259,620
Financial assets measured at fair value through other comprehensive income 242,254,114 175,984,916
Notes to the Financial Statements

Total 878,105,492 603,740,044

Financial liabilities
Non-derivative financial liabilities
Securities sold under repurchase agreements – 5,709
Financial liabilities at amortised cost – Due to depositors 64,388,053 53,307,759
Financial liabilities at amortised cost – Other borrowings 25,572,065 18,419,908
Subordinated liabilities 27,687,027 36,783,718
Total 117,647,145 108,517,094
Financial Statements

68.2.2 (c) Undiscounted Cash Flow of financial assets and financial liabilities – Bank
The following table shows the expected undiscounted cash flows for financial assets and financial liabilities at December 31, 2020:

As at December 31, 2020 Up to 3 3 to 12 1 to 3 3 to 5 More than Total

months months years years 5 years
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000
Annual Report 2020

Financial assets
Cash and cash equivalents 50,352,515 – – – – 50,352,515

Balances with central banks 104,724,896 5,429,114 457,100 155,198 204,797 110,971,105

Placements with banks 8,361,272 7,995,123 – – – 16,356,395

Securities purchased under resale agreements – – – – – –

Commercial Bank of Ceylon PLC

Derivative financial assets 1,091,085 1,244,302 296,958 4,372 – 2,636,717

Financial assets recognised through profit or loss – measured at

fair value 7,059,541 25,155,539 3,237,450 1,006,850 – 36,459,380

Financial assets at amortised cost – Loans and advances to banks – – – – 779,705 779,705

Financial assets at amortised cost – Loans and advances to other

customers 304,898,444 269,185,296 271,487,179 124,727,852 63,829,557 1,034,128,328

Financial assets at amortised cost – Debt and other financial

instruments 9,065,537 45,763,608 115,234,931 113,943,216 91,483,840 375,491,132

Financial assets measured at fair value through other

comprehensive income 7,901,628 42,957,694 199,454,333 53,745,363 30,168,922 334,227,940

Total financial assets 493,454,918 397,730,676 590,167,951 293,582,851 186,466,821 1,961,403,217

Financial liabilities
Due to banks 50,419,432 33,398,999 292,888 4,967,888 – 89,079,207

Derivative financial liabilities 461,543 897,343 142,376 – – 1,501,262

68
Securities sold under repurchase agreements 76,903,210 15,352,687 – – – 92,255,897

Financial liabilities at amortised cost – due to depositors 776,924,393 441,364,876 39,574,667 13,863,671 16,142,210 1,287,869,817

Financial liabilities at amortised cost – other borrowings 2,379,829 26,967,744 19,689,705 2,500,471 5,167,137 56,704,886

Subordinated liabilities 5,363,239 7,453,907 26,964,224 1,266,266 6,223,846 47,271,482

Total financial liabilities 912,451,646 525,435,556 86,663,860 22,598,296 27,533,193 1,574,682,551

282
As at December 31, 2019 Up to 3 3 to 12 1 to 3 3 to 5 More than Total
months months years years 5 years
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Financial assets
Cash and cash equivalents 52,624,227 815,171 – – – 53,439,398

Balances with central banks 24,384,571 13,182,027 829,839 511,274 553,416 39,461,127

Placements with banks 12,075,141 12,894,307 – – – 24,969,448

Securities purchased under resale agreements 8,261,404 5,258,418 – – – 13,519,822

Derivative financial assets 1,128,833 553,047 149,047 – – 1,830,927

Financial assets recognised through profit or loss – measured at

fair value 5,935,661 11,386,998 3,551,063 1,451,651 – 22,325,373

Financial assets at amortised cost – Loans and advances to banks – – – – 757,787 757,787

Financial assets at amortised cost – Loans and advances to other

Notes to the Financial Statements

customers 343,321,838 255,040,307 254,215,463 116,103,881 55,563,985 1,024,245,474

Financial assets at amortised cost – Debt and other financial

instruments 7,491,859 16,317,604 72,398,060 28,155,494 4,278,914 128,641,931

Financial assets measured at fair value through other

comprehensive income 13,276,752 17,468,434 107,109,892 70,238,282 31,950,951 240,044,311

Total financial assets 468,500,286 332,916,313 438,253,364 216,460,582 93,105,053 1,549,235,598

Financial liabilities
Due to banks 19,588,815 19,209,035 9,087,500 4,543,749 – 52,429,099

Financial Statements
Derivative financial liabilities 1,106,950 330,515 4,557 – 53,295 1,495,317

Securities sold under repurchase agreements 42,340,164 9,738,378 6,167 – – 52,084,709

Financial liabilities at amortised cost – due to depositors 628,723,170 393,592,105 27,124,906 15,633,578 16,714,612 1,081,788,371

Financial liabilities at amortised cost – other borrowings 1,422,187 4,112,341 9,509,792 6,283,822 5,286,820 26,614,962

Subordinated liabilities 937,530 2,833,031 15,734,213 24,835,758 6,861,185 51,201,717

Total financial liabilities 694,118,816 429,815,405 61,467,135 51,296,907 28,915,912 1,265,614,175

Annual Report 2020

68.2.3 Liquidity reserves
The table below sets out the components of the Bank’s liquidity reserves:

As at December 31, 2020 2019

Carrying amount Fair value Carrying amount Fair value

Commercial Bank of Ceylon PLC

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Balances with central banks 110,971,105 110,971,105 39,461,127 39,461,127

Balances with other banks 24,101,089 24,101,089 26,446,325 26,446,325
Coins and notes held 26,152,779 26,152,779 26,094,112 26,094,112
Unencumbered debt securities issued by sovereigns 512,839,927 463,364,173 275,803,138 267,118,926
Total 674,064,900 624,589,146 367,804,702 359,120,490

68

283
 68.2.4 Financial assets available to support future funding
The table below sets out the availability of the Bank’s financial assets to support future funding.

As at December 31, 2020 Encumbered Unencumbered

Pledged as Other Available as Other Total
collateral collateral
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Cash and cash equivalents 28 196 – – 50,250,627 – 50,250,627

Balances with central banks 29 197 – 10,665,765 100,305,340 – 110,971,105
Placements with banks 30 197 – – 15,938,982 – 15,938,982
Derivative financial assets 31 198 – – 2,636,717 – 2,636,717
Financial assets recognized through profit or loss –
measured at fair value 32 198 – – 35,189,471 – 35,189,471
Financial assets at amortised cost –
Notes to the Financial Statements

Loans and advances to banks 33 201 – 779,705 – – 779,705

Financial assets at amortised cost –
Loans and advances to other customers 34 202 – – 896,845,453 – 896,845,453
Financial assets at amortised cost –
Debt and other financial instruments 35 206 – – 292,727,566 – 292,727,566
Financial assets measured at fair value through other
comprehensive income (**) 36 207 104,906,825 – 173,554,544 – 278,461,369
Total 104,906,825 11,445,470 1,567,448,700 – 1,683,800,995

Encumbered Unencumbered
Financial Statements

As at December 31, 2019

Pledged as Other Available as Other Total
collateral collateral
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Cash and cash equivalents 28 196 – – 52,534,730 – 52,534,730

Balances with central banks 29 197 – 29,240,407 10,220,720 – 39,461,127
Placements with banks 30 197 – – 24,527,241 – 24,527,241
Annual Report 2020

Securities purchased under resale agreements – – 13,147,534 – 13,147,534

Derivative financial assets 31 198 – – 1,830,927 – 1,830,927
Financial assets recognised through profit or loss –
measured at fair value 32 198 – – 21,468,033 – 21,468,033
Financial assets at amortised cost –
Commercial Bank of Ceylon PLC

Loans and advances to banks (*) 33 201 – 757,787 – – 757,787

Financial assets at amortised cost –
Loans and advances to other customers 34 202 – – 884,645,744 – 884,645,744
Financial assets at amortised cost – Debt and other
financial instruments 35 206 – – 101,144,819 – 101,144,819
Financial assets measured at fair value through other
comprehensive income (**) 36 207 57,104,657 – 140,463,673 – 197,568,330
Total 57,104,657 29,998,194 1,249,983,421 – 1,337,086,272

(*) Represents an amount where the Bank is prevented from exercising the right of lien against the claim made by the Bank due to a Court action.
(**) Market value of securities pledged as collateral is considered as encumbered.

68.3 Market risk

Market risk is the risk of losses on or off-balance sheet positions arising out of movements in prices affecting foreign exchange exposures,
interest rate instruments, equity/debt instruments and commodity exposures. The Bank monitors market risk in both trading and
non-trading portfolios on an ongoing basis.
68

284
68.3.1 Exposure to market risk - Trading and non-trading portfolio
The table below sets out the allocation of assets and liabilities subject to market risk between trading and non-trading portfolios:

As at December 31, 2020 Market risk measurement

Carrying Trading Non-trading
amount portfolios portfolios
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000

Assets subject to market risk

Cash and cash equivalents 28 196 25,751,193 – 25,751,193
Balances with central banks 29 197 99,729,245 – 99,729,245
Placements with banks 30 197 15,938,982 – 15,938,982
Derivative financial assets 31 198 2,636,717 2,636,717 –
Financial assets recognised through profit or loss – Measured at fair value 32 198 35,189,471 35,189,471 –

Notes to the Financial Statements

Financial assets at amortised cost – Loans and advances to banks 33 201 779,705 – 779,705
Financial assets at amortised cost – Loans and advances to other customers 34 202 896,845,453 – 896,845,453
Financial assets at amortised cost – Debt and other financial instruments 35 206 292,727,566 – 292,727,566
Financial assets measured at fair value through other comprehensive income 36 207 278,461,369 – 278,461,369
Total 1,648,059,701 37,826,188 1,610,233,513

Liabilities subject to market risk

Due to banks 44 230 87,451,306 – 87,451,306
Derivative financial liabilities 45 231 1,501,262 1,501,262 –

Financial Statements
Securities sold under repurchase agreements 91,437,612 – 91,437,612
Financial liabilities at amortised cost – Due to depositors 46 231 1,204,524,805 – 1,204,524,805
Financial liabilities at amortised cost – Other borrowings 47 232 54,555,933 – 54,555,933
Subordinated liabilities 51 240 38,247,138 – 38,247,138
Total 1,477,718,056 1,501,262 1,476,216,794

Annual Report 2020

As at December 31, 2019 Market risk measurement
Carrying Trading Non-trading
amount portfolios portfolios
Note Page No. Rs. ’000 Rs. ’000 Rs. ’000

Assets subject to market risk

Cash and cash equivalents 28 196 29,904,195 – 29,904,195

Commercial Bank of Ceylon PLC

Balances with central banks 29 197 8,247,155 – 8,247,155
Placements with banks 30 197 24,527,241 – 24,527,241
Securities purchased under resale agreements 13,147,534 – 13,147,534
Derivative financial assets 31 198 1,830,927 1,830,927 –
Financial assets recognised through profit or loss – Measured at fair value 32 198 21,468,033 21,468,033 –
Financial assets at amortised cost – Loans and advances to banks 33 201 757,787 – 757,787
Financial assets at amortised cost – Loans and advances to other customers 34 202 884,645,744 – 884,645,744
Financial assets at amortised cost – Debt and other financial instruments 35 206 101,144,819 – 101,144,819
Financial assets measured at fair value through other comprehensive income 36 207 197,568,330 – 197,568,330
Total 1,283,241,765 23,298,960 1,259,942,805

Liabilities subject to market risk

Due to banks 44 230 51,505,694 – 51,505,694
Derivative financial liabilities 45 231 1,495,317 1,495,317 –
68
Securities sold under repurchase agreements 51,220,023 – 51,220,023
Financial liabilities at amortised cost – Due to depositors 46 231 1,009,298,153 – 1,009,298,153
Financial liabilities at amortised cost – Other borrowings 47 232 23,248,893 – 23,248,893
Subordinated liabilities 51 240 37,886,789 – 37,886,789
Total 1,174,654,869 1,495,317 1,173,159,552

285
 68.3.2 Exposure to interest rate risk – Sensitivity analysis
68.3.2 (a) Exposure to interest rate risk – Non-trading portfolio
The possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments and hence expose the Bank
to fluctuations of Net interest income (NII) give rise to interest rate risk. The Bank’s policy is to continuously monitor portfolios and adopt
hedging strategies to ensure that interest rate risk is maintained within prudent levels.
The tables below analyse the Bank’s interest rate risk exposure on financial assets and financial liabilities. The Bank’s assets and liabilities are
included at carrying amounts and categorised by the earlier of contractual re-pricing or maturity dates.

As at December 31, 2020 Up to 3 3 to 12 1 to 3 3 to 5 More than Non-sensitive Total

months months years years 5 years
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Financial assets
Cash and cash equivalents 1,814,566 – – – – 48,436,061 50,250,627
Balances with central banks 94,905,790 – – – – 16,065,315 110,971,105
Notes to the Financial Statements

Placements with banks 8,274,664 7,664,318 – – – – 15,938,982

Financial assets at amortised cost –
Loans and advances to Banks – – – – – 779,705 779,705
Financial assets at amortised cost –
Loans and advances to other customers 461,439,733 186,012,782 114,046,066 58,437,338 49,925,102 26,984,432 896,845,453
Financial assets at amortised cost –
Debt and other financial instruments 1,388,935 29,601,237 82,077,015 98,438,382 81,221,997 – 292,727,566
Financial assets measured at fair value through
other comprehensive income 56,871,048 26,141,638 122,987,374 47,262,103 24,907,260 291,946 278,461,369

Total financial assets 624,694,736 249,419,975 319,110,455 204,137,823 156,054,359 92,557,459 1,645,974,807
Financial Statements

Financial liabilities
Due to banks 38,624,195 32,670,589 – 4,675,000 – 11,481,522 87,451,306

Securities sold under repurchased agreements 76,548,308 14,889,304 – – – – 91,437,612

Financial liabilities at amortised cost –

Due to depositors 707,609,353 427,471,847 33,375,136 10,984,671 13,923,261 72,601,650 1,265,965,918

Financial liabilities at amortised cost –

Annual Report 2020

Other borrowings 13,286,304 33,255,851 2,674,299 857,641 4,481,838 – 54,555,933

Subordinated liabilities 5,500,521 19,069,327 8,393,840 – 5,283,450 – 38,247,138

Total financial liabilities 841,568,681 527,356,918 44,443,275 16,517,312 23,688,549 84,083,172 1,537,657,907

Interest rate sensitivity gap (216,873,945) (277,936,943) 274,667,180 187,620,511 132,365,810 8,474,287 108,316,900

Cumulative gap (216,873,945) (494,810,888) (220,143,708) (32,523,197) 99,842,613 108,316,900

Commercial Bank of Ceylon PLC

As at December 31, 2019 Up to 3 3 to 12 1 to 3 3 to 5 More than Non-sensitive Total

months months years years 5 years
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Financial assets
Cash and cash equivalents 9,215,666 12,554,349 – – – 30,764,715 52,534,730
Balances with central banks 2,765,146 – – – – 36,695,981 39,461,127
Placements with banks 3,261,491 21,265,750 – – – – 24,527,241
Securities purchased under resale agreements 8,125,007 5,022,527 – – – – 13,147,534
Financial assets at amortised cost –
Loans and advances to Banks – – – – – 757,787 757,787
Financial assets at amortised cost –
Loans and advances to other customers 527,618,048 158,915,759 93,319,369 48,269,822 43,013,693 13,509,053 884,645,744
68 Financial assets at amortised cost –
Debt and other financial instruments 5,291,577 9,518,320 59,585,280 25,605,926 1,143,716 – 101,144,819
Financial assets measured at fair value through
other comprehensive income 66,890,389 8,088,259 48,416,303 46,581,213 27,371,567 220,599 197,568,330

Total financial assets 623,167,324 215,364,964 201,320,952 120,456,961 71,528,976 81,948,135 1,313,787,312

286
 As at December 31, 2019 Up to 3 3 to 12 1 to 3 3 to 5 More than Non-sensitive Total
months months years years 5 years
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Financial liabilities
Due to banks 11,128,331 38,667,503 – – – 1,709,860 51,505,694
Securities sold under repurchased agreements 42,163,827 9,056,196 – – – – 51,220,023
Financial liabilities at amortised cost –
Due to depositors 562,780,000 374,502,486 22,665,149 11,978,066 13,648,530 67,733,429 1,053,307,660
Financial liabilities at amortised cost –
Other borrowings 16,503,973 618,815 1,101,040 797,397 4,227,668 – 23,248,893
Subordinated liabilities 14,707,359 – 9,502,140 8,393,840 5,283,450 – 37,886,789
Total financial liabilities 647,283,490 422,845,000 33,268,329 21,169,303 23,159,648 69,443,289 1,217,169,059
Interest rate sensitivity gap (24,116,166) (207,480,036) 168,052,623 99,287,658 48,369,328 12,504,846 96,618,253

Notes to the Financial Statements

Cumulative gap (24,116,166) (231,596,202) (63,543,579) 35,744,079 84,113,407 96,618,253

68.3.2 (b) Exposure to interest rate risk – Non-trading portfolio (rate shocks)
The management of interest rate risk against interest rate gap limits is supplemented by monitoring the sensitivity of the Bank’s financial assets
and financial liabilities to various interest rate scenarios.
The following table demonstrates the sensitivity of the Bank’s Income Statement (net impact) due to change in interest rates by 100 bps on
rupee denominated assets and liabilities and 25bps on FCY denominated assets and liabilities with all other variables held constant as at the
reporting date.
Sensitivity of projected net interest income

Financial Statements
2020 2019
Net Interest Income (NII) Parallel Parallel Parallel Parallel
increase decrease increase decrease
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

At at December 31, 267,122 (132,005) 932,750 (911,553)

Average for the period 708,925 (648,050) 1,425,767 (1,413,235)

Annual Report 2020

Maximum for the period 1,060,589 (1,040,836) 1,646,844 (1,643,315)
Minimum for the period 249,879 (132,005) 932,750 (911,553)

The impact of changes in interest rates on NII is measured applying interest rate shocks on static balance sheet. In line with the industry
practices, interest rate shocks of 100 bps is applied on LKR denominated assets and liabilities and 25 bps is applied on FCY denominated assets
and liabilities. The potential impact on the Bank’s profitability due to changes in rupee and foreign currency interest rates is evaluated to

Commercial Bank of Ceylon PLC

ensure that the volatilities are prudently managed within the internal tolerance limits.
Impact of a rate shock on the net interest income Graph – 39
Rs. Mn.
2,250

1,500

750

-750

-1,500

-2,250
2019 2019 2019 2019 2020 2020 2020 2020
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

UP 100bps DN 100bps

68.3.3 Exposure to currency risk – Non-trading portfolio 68

Currency risk arises as a result of fluctuations in the value of a financial instrument due to changes in foreign exchange rates. The Bank has
established limits on position by currency and these positions are monitored on a daily basis.
The table below indicates the currencies to which the Bank had significant exposures as at December 31, 2020 and December 31, 2019 and
the exposure as a percentage of the total capital funds:

287
 Foreign exchange position as at December 31, 2020
Currency Spot Forward Net open Net position Overall exposure Overall
position in other in respective exposure in
exchange foreign
Assets Liabilities Net Assets Liabilities Net contracts currency Rs.

2 3 4=2-3 5 6 7=5-6 8 9 10=4+7+8 11

’000 ’000 ’000 ’000 ’000 ’000 ’000 ’000 ’000 ’000

United States Dollar 15,413 19,961 (4,548) 10,966 8,609 2,357 323 – (1,868) (349,329)

Great Britain Pound 78 89 (11) – – – 32 – 21 5,501

Euro 2,751 2,474 277 12 250 (238) (56) – (17) (3,967)

Japanese Yen 7,469 3,376 4,093 – – – 5,289 – 9,382 17,012

Australian Dollar 621 14 607 – 650 (650) 4 – (39) (5,738)

Canadian Dollar 14 30 (16) – 10 (10) (67) – (93) (13,664)

Notes to the Financial Statements

Other currencies in USD 130 185 (55) – 58 (58) 257 – 144 26,939

Total exposure USD 555 USD (1,729) (323,246)

Total capital funds (capital base) as per the audited Basel III computation – Bank 171,396,831

Total exposure as a percentage of total capital funds (%) -0.19

Foreign exchange position as at December 31, 2019

Currency Spot Forward Net open Net position Overall exposure Overall
position in other in respective exposure in
exchange foreign
Assets Liabilities Net Assets Liabilities Net contracts currency Rs.
Financial Statements

2 3 4=2-3 5 6 7=5-6 8 9 10=4+7+8 11

’000 ’000 ’000 ’000 ’000 ’000 ’000 ’000 ’000 ’000

United States Dollar 42,226 16,831 25,395 5,161 30,147 (24,986) 4,076 – 4,485 815,099
Great Britain Pound 280 139 141 – 100 (100) 62 – 103 24,242
Euro 1,344 1,194 150 1,100 1,109 (9) 6 – 147 29,926
Japanese Yen 27,545 516,294 (488,749) 494,703 – 494,703 (2,657) – 3,297 5,515
Annual Report 2020

Australian Dollar 235 159 76 – 125 (125) 72 – 23 2,883

Canadian Dollar 109 147 (38) – – – 82 – 44 6,169
Other currencies in USD 429 149 280 100 21 79 267 – 626 113,826
Total exposure USD 4,519 USD 5,489 997,660
Total capital funds (capital base) as per the audited Basel III computation – Bank 157,045,547
Commercial Bank of Ceylon PLC

Total exposure as a percentage of total capital funds (%) 0.64

The Bank regularly carries out sensitivity analysis on Net Open Position (NOP), to assess the exposure to Foreign Exchange (FX) Risk due to
possible changes in the USD/LKR exchange rate. An appropriate shock based on historical USD/LKR exchange rate is applied on the NOP which
is measured against the Board-approved threshold limits.
Sensitivity of Fx Position – Impact of 1% change in Exchange Rate (Sri Lankan Operation) Graph – 40
+/- Rs. Mn.
315

300

285

270

255

240
Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.

2020 2019
68

288
68.3.4 Exposure to equity price risk
Equity price risk arises as a result of any change in market prices and volatilities of individual equities. The Bank conducts mark-to-market
calculations on a daily, quarterly and on a need basis to identify the impact due to changes in equity prices.
The table below summarises the impact (both to Income Statement and to equity) due to a change of 10% on equity prices.

2020 2019

Financial assets Financial assets Total Financial assets Financial assets Total
recognised at fair value recognised at fair value
through profit through other through profit through other
or loss comprehensive or loss comprehensive
income income
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Market value of equity securities as at December 31, 1,321,878 239,773 1,561,651 983,138 169,013 1,152,151

Stress Level Impact on Impact on Impact on Impact on Impact on Impact on

Income OCI equity Income OCI equity

Notes to the Financial Statements

Statement Statement

Shock of 10% on equity prices (upward) 132,188 23,977 156,165 98,314 16,901 115,215
Shock of 10% on equity prices (downward) (132,188) (23,977) (156,165) (98,314) (16,901) (115,215)

68.4 Operational risk

Operational risk arises due to inadequate or failed internal processes, people and systems or from external events. Operational risk events
which include legal and regulatory implications could lead to financial and reputational losses to the Bank.
The operational risk management framework of the Bank has been defined under the Board-approved operational risk management
policy. Operational risk is managed by establishing an appropriate internal control system that requires a mechanism for segregation of related
responsibilities within the Bank, and a detailed testing and verification of the Bank’s overall operational systems, and achieving a full harmony

Financial Statements
between internal and external systems and establishing a fully independent backup facility for business continuity planning.

68.5 Capital management and Pillar III disclosures as per Basel III
Objective
The Bank is required to manage its capital taking into account the need to meet the regulatory requirements as well as the current and future
business needs, stakeholder expectations and available options for raising capital.

Annual Report 2020

68.5.1 Regulatory capital
Capital adequacy ratio (CAR) is calculated based on the CBSL directions stemming from Basel III accord. These guidelines require the Bank to
maintain a CAR not less than 9.00% with minimum Tier 1 capital with buffers in relation to total risk weighted assets and a minimum total CAR
with buffers of 13.00% in relation to total risk weighted assets.

Commercial Bank of Ceylon PLC

As at December 31, 2020 2019
Rs. ’000 Rs. ’000

Common equity Tier 1 (CET1) capital after adjustments 134,689,261 119,622,141

Total common equity Tier 1 (CET1) capital 142,208,308 123,941,618
Equity capital (stated capital)/assigned capital 52,187,747 40,916,957
Reserve fund 9,024,067 8,205,391
Published retained earnings/(accumulated retained losses) 3,670,981 4,714,691
Published accumulated other comprehensive income (OCI) 1,922,007 2,516,082
General and other disclosed reserves 75,403,506 67,588,497
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 – –
Total adjustments to CET1 capital 7,519,047 4,319,477
Goodwill (net) – –
Other intangible assets (net) 1,232,863 1,080,011
Revaluation losses of property, plant and equipment 3,813 3,813 68
Significant investments in the capital of financial institutions where the Bank owns more than 10%
of the issued ordinary share capital of the entity 3,782,513 2,941,594
Deferred tax assets (net) 2,499,858 294,059
Additional Tier 1 (AT1) capital after adjustments – –
Total additional Tier 1 (ATI) capital – –

289
 As at December 31, 2020 2019
Rs. ’000 Rs. ’000

Qualifying additional Tier 1 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 – –
Others (Specify) – –
Tier 2 Capital after adjustments 36,707,570 37,423,406
Total Tier 2 Capital 36,707,570 37,423,406
Qualifying Tier 2 capital instruments 22,235,336 26,704,378
Revaluation gains 2,848,860 3,087,658
General provisions/Eligible impairment 11,623,374 7,631,370
Instruments issued by consolidated banking and financial subsidiaries of the Bank and held by third parties – –
Notes to the Financial Statements

Total adjustments to Tier 2 capital – –

Investment in own shares – –
Others (specify) – –
CET1 capital 134,689,261 119,622,141
Total Tier 1 capital 134,689,261 119,622,141
Total capital 171,396,831 157,045,547

68.5.2 Capital allocation 69. Events After the Reporting Period

Management monitors the capital adequacy No circumstances have arisen since the
ratio on a regular basis to ensure that it reporting date which would require
Financial Statements

operates well above the internal limit adjustments or disclosure in the Financial
set by the Bank. The allocation of capital Statements other than disclosed below.
between specific operations and activities,
to a large extent, driven by optimisation
First and Final Dividend for 2020
of return on capital allocated. The amount
of capital allocated to each operation or The Bank did not pay interim dividends for
activity is based primarily on regulatory 2020 for the reasons mentioned in Note 25
capital requirements, but in some cases, on page 190.
Annual Report 2020

the regulatory requirements do not fully

The Board of Directors of the Bank has
reflect the varying degree of risks associated
now recommended the payment of a first
with different activities. In such cases, the
and final dividend of Rs. 6.50 per share be
capital requirements may be flexed to
paid and satisfied in the form of Rs. 4.50 in
reflect differing risk profiles, subject to the
cash and Rs 2.00 per share in the form of
overall level of capital to support a particular
issue and allotment of new shares for both
Commercial Bank of Ceylon PLC

operation or activity not falling below the

voting and non-voting ordinary shares of the
minimum required level by the regulator.
Bank for the year ended December 31, 2020.

68.5.3 Pillar III disclosures as per Basel III The above first and final dividend
recommended by the Board is to be
Disclosures under these requirements mainly approved at the forthcoming Annual General
include the regulatory capital requirements Meeting to be held on March 30, 2021. In
and liquidity, risk weighted assets, discussion accordance with provisions of the Sri Lanka
on adequacy to meet current and future Accounting Standard – LKAS 10 on “Events
capital requirements of banks and linkages after the Reporting Period”, the first and
between financial statements and regulatory final dividend referred to above has not
exposures. It is required to disclose the been recognised as a liability as at the year
templates specified by the Central Bank of end. This proposed first and final dividend
Sri Lanka as per Basel III – Minimum payable for the year 2020 has been estimated
disclosure requirements with effective at Rs. 7,585.744 Mn. (Total dividend (both
from July 1, 2017. Refer annex 3 on pages cash and scrip dividends) paid for the year
331 to 344. 2019 amounted to Rs. 6,678.793 Mn.).
68
Accordingly, the dividend per ordinary share
(for both voting and non-voting ) for the year
69
2020 would be Rs. 6.50 (2019 – Rs. 6.50).

290
SUPPLEMENTARY INFORMATION
This section of the
Annual Report covers
information that while
not immediately crucial to
the Integrated Report and
the Financial Statements,
provides the reader
with further details and


reference material about

Supplementary Information
the Bank’s performance
in 2020.

Pages 292-371
Annual Report 2020
Commercial Bank of Ceylon PLC
Annex 1: Investor Relations – 292
Annex 2: Compliance with Governance Directions and Codes – 310
Annex 3: Basel III – Disclosures under Pillar 3 as per the Banking – 331
Act Direction No. 01 of 2016
Annex 4: GRI Content Index – 345
Annex 5: Independent Assurance Reports – 347
Annex 6: Our Sustainability Footprint – 352
Annex 7: Decade at a Glance – 354
Annex 8: Financial Statements (US Dollars) – 358
Annex 9: Correspondent Banks and Agent Network – 360
Annex 10: Group Structure – 362
Annex 11: Network of delivery points in Sri Lanka and Bangladesh – 364
Annex 12: Glossary of Financial and Banking Terms – 366
Annex 13: Acronyms and Abbreviations – 370
Annex 14: Alphabetical Index – 371

291
 Annex 1: Investor Relations
Dear Stakeholder, improvements. Your comments and opinions are of great value to us. Many are taken on
We take this opportunity to convey our board and incorporated into our strategies for long-term value creation. The investor relations
sincere gratitude to our loyal investors for section of our website is another popular channel available for stakeholders and the Bank
electing to invest in the Bank’s capital, both continues to ensure that its pages are updated in a timely manner along with the rest of the
equity and debt, and wish to assure that we site.
are taking every possible step to optimise Investor relations tools Figure – 28
returns for your investments through
prudent and sustained growth. As one of
the few Domestic Systemically Important
Banks and the largest private sector Bank
in the country, we are fully aware of our
responsibility to present you with timely,
relevant, and balanced view of the Bank’s
fundamentals in terms of operational results, Annual Reports and Extraordinary General Announcements
financial position, and cash flows enabling Annual General Meetings Meetings to CSE
you to make informed decisions. We trust
that the information presented in this Annual
Report helps investors to comprehend the
Bank’s underlying strengths and it also
Interim financial Press conferences Corporate website
bolsters confidence and loyalty, bringing
statements and releases
together a loyal group of investors with a
long-term view of their investment.
Supplementary Information

The Bank always strives to encourage

effective two-way communication with
our valued investors promoting mutual Investor presentations One-to-one discussions Feedback surveys
trust and confidence besides ensuring
the rights conferred on the investors by
various statutes. We believe that these
initiatives have enabled the Bank to actively
engage with our investors in a consistent,
comprehensive and accurate manner, often We firmly believe that the Bank’s efforts to the year of Rs. 397 Bn. which was also the
going beyond the minimum regulations
Annual Report 2020

have an effective communication and active highest since 2011. The ASPI closed 2020
and in the underlying spirit, promoting its engagement with important stakeholder on 6,774 points recording a growth of
reputation. The Bank follows a multi-faceted groups have made the Bank’s shares a 10.52%, the highest annual increase the
approach to engage with its stakeholders, creditable investment proposition, despite index has seen since 2014 and only the
including the Annual Report, which is the a very challenging economic and operating 12th occasion the index has seen a double-
Bank’s main investor communications tool, environment prevailed throughout the year digit percentage growth in CSE’s 35-year
and the Annual General Meeting which is primarily due to the outbreak of COVID-19 history. The ASPI on May 12, 2020 recorded
Commercial Bank of Ceylon PLC

an opportunity available for the investor in the first quarter of the year. As you are its lowest point in over a decade but
community to engage with the Bank. We aware, the stock market witnessed an recovered from this to post a 59% gain by
firmly believe that these engagements will unprecedented setback in its activities after the end of the year. Although the S&P SL20
certainly help our investors to gain insight being closed for almost two months and index, which features the CSE’s 20 largest and
into the Bank’s performance, strategic due to limiting trading of shares for just one most liquid stocks has declined by 10.18% in
direction, and approach to governance and hour a day initially by the regulators which 2020, the index has recovered substantially
risk management strategies adopted. was later relaxed by increasing the trading indicating a trend similar to the ASPI with
This year too, the Bank took several time to three and half hours compared to six 57% growth since 12th May, closing the year
initiatives to produce a concise integrated hours of trading during the pre-pandemic at 2,638 points.
Annual Report which can be seen period. However, this situation is in no
throughout each section of this Report, manner extra-ordinary when compared with
with due consideration being given to the all other stock markets around the globe.
valuable feedback given by our shareholders Although the pandemic had an early shock
in response to the results of the surveys resulting in both the ASPI and S&P SL20
conducted and feedback provided in the declining by over 30% and 40%, respectively,
past. Continuing this journey, this year too both indices recovered remarkably and
we have made arrangements to enclose a ended the year demonstrating its resilience
stakeholder feedback form in this Annual by attracting record-breaking levels of
Report in order to seek your valuable trading activity, with a total turnover for
suggestions and opinion for further

292
Performance of Shares of the Banking Sector in 2020 Graph – 41 sharing relevant information about our
Index Rs. future prospects in addition to our current
75,000 150 performance.
6,000 120 The Bank’s public holding (free float)
as at December 31, 2020 was 99.80% in
4,500 90
voting shares (99.76% in 2019) and 99.84%
3,000 60 in non-voting shares (86.62% in 2019)
1,500 30 while float-adjusted market capitalisation
(compliant under option-1 of the Rules
0 0
2 16 30 13 27 12 26 9 23 7 21 4 18 2 16 30 13 27 10 24 8 22 5 19 3 17 31 on minimum public holding requirement
Jan. Jan. Jan. Feb. Feb. Mar. Mar. Apr. Apr. May May Jun. Jun. Jul. Jul. Jul. Aug. Aug. Sep. Sep. Oct. Oct. Nov. Nov. Dec. Dec. Dec.
of the Colombo Stock Exchange (CSE))
All share price S&P SL Bank amounted to Rs. 93 Bn. (Rs. 96 Bn. in 2019).
index (ASPI) 20 index index As shown in Table 58 on page 300, with its

Annex 1: Investor Relations

shares actively traded in the CSE, investors
are provided with a convenient “enter and
Despite, both the ASPI and S&P SL20 the regulators. These factors contributed to exit” mechanism. It is pertinent to mention
recovering as seen in the above graph, the decline in the Bank’s share price which that the Bank witnessed a sharp increase in
the banking sector shares did not follow traded at a discount to its book value at the number of shareholders holding both
the same trend, mainly due to the 0.60 times at the end of December 2020 voting and non-voting shares of the Bank
perceived uncertainties associated with the (0.73 times in 2019). However, it continued during the year, which amply demonstrates
performance of banks owing to many relief to remain the highest among the peers the confidence placed by investors in the
programs offered to affected customers in the Banking sector, and is a testament Bank’s shares despite the trying conditions

Supplementary Information
including moratoriums as mandated by to our strong fundamentals and policy of experienced during the year 2020.

Compliance report on the contents of Annual Report in terms of the Listing Rules of the CSE
This year too we are happy to inform you that the Bank has fully complied with all applicable requirements of Section 7.6 of the Listing Rules of
the CSE on the contents of the Annual Report and Accounts of a listed entity.
Please refer Table 46 on pages 293 and 294 for a complete list of disclosure requirements and references to the relevant sections of this
Annual Report where the Bank’s compliance is disclosed together with the relevant page numbers.
The pages that follow contain information on the performance of the Bank’s listed securities.

Annual Report 2020

Compliance with requirements of the Section 7.6 of the Listing Rules of the CSE Table – 46
Rule No. Disclosure requirement Section/reference Page/s

7.6 (i) Names of persons who during the financial year were Directors of the Bank Corporate Governance Report 79
7.6 (ii) Principal activities of the Bank and its subsidiaries during the year and any Note 1.3 of the Accounting Policies 155 and 156
changes therein

Commercial Bank of Ceylon PLC

Group Structure 362
7.6 (iii) The names and the number of shares held by the 20 largest holders of Item 5.4 of the “Investor Relations” 301
voting and non-voting shares and the percentage of such shares held
7.6 (iv) The float adjusted market capitalisation, public holding percentage (%), Item 5.3 of the “Investor Relations” 300
number of public shareholders and under which option the listed entity
complies with the minimum public holding requirement
7.6 (v) A statement of each Directors’ holding and Chief Executive Officer’s holding Item 5.5 of the “Investor Relations” 302
in shares of the entity at the beginning and end of each financial year
7.6 (vi) Information pertaining to material foreseeable risk factors of the Bank Item 7 of the “Investor Relations” 302
7.6 (vii) Details of material issues pertaining to employees and industrial relations Item 8 of the “Investor Relations” 302
of the Bank
7.6 (viii) Extents, locations, valuations and the number of buildings of the entity’s Note 39.5 (a) and (b) to the Financial 218 to 223
land holdings and investment properties Statements on “Property, Plant and
Equipment”
7.6 (ix) Number of shares representing the Bank’s stated capital Note 52 to the Financial Statements on 241
“Stated Capital”
Item 3 of the “Investor Relations” 297 to 299

7.6 (x) A distribution schedule of the number of holders in each class of equity Item 5.2 of the “Investor Relations” 300
securities, and the percentage of their total holdings as at the end of the
year

293
 Rule No. Disclosure requirement Section/reference Page/s

7.6 (xi) Ratios and market price information:

Equity – Dividend per share, dividend payout ratio, net asset value per Items 2, 4 and 10.2 of the “Investor 295 to 297,
share, market value per share Relations” 299 and 303
Debt – Interest rate of comparable Government Securities, debt/equity
ratio, interest cover and quick asset ratio, market prices and yield during the Items 10.1 and 10.2 of the “Investor
year 302 and 303
Relations”
Any changes in credit rating
Item 11 “Investor Relations” 303

7.6 (xii) Significant changes in the Bank’s or its subsidiaries’ fixed assets and the Note 39.5 (b) to the Financial 219 to 223
market value of land, if the value differs substantially from the book value Statements on “Property, plant and
equipment”
7.6 (xiii) Details of funds raised through Public Issues, Rights Issues, and Private Note 52 to the Financial Statements on 241
Placements during the year “Stated Capital”
Annex 1: Investor Relations

7.6 (xiv) a. Information in respect of Employee Share Option Schemes (ESOS)

The number of options granted to each category of employees during the
financial year.
Total number of options vested but not exercised by each category of
employees during the financial year.
Total number of options exercised by each category of employees and
Note 53 to the Financial Statements on 241 to 244
the total number of shares arising therefrom during the financial year.
“Employee Share Option Plans”
Options cancelled during the financial year and the reasons for such
cancellation.
Supplementary Information

The exercise price.

A declaration by the directors of the entity confirming that the Entity or
any of its subsidiaries has not, directly or indirectly, provided funds for the
ESOS.
b. Information in respect of Employee Share Purchase Schemes (ESPS)
The total number of shares issued under the ESPS during the financial
year
The number of shares issued to each category of employees during the Not applicable as the Bank does
Annual Report 2020

financial year not have Employee Share Purchase

The price at which the shares were issued to the employees Schemes
A declaration by the Directors of the entity confirming that the entity or
any of its subsidiaries has not, directly or indirectly, provided funds for the
ESPS
7.6 (xv) Disclosures pertaining to Corporate Governance practices in terms of Rules Not applicable since the Bank received –
Commercial Bank of Ceylon PLC

7.10.3, 7.10.5 (c) and 7.10.6 (c) of Section 7 of the Rules. an exemption in terms of Section 7.10
(c) of
the Listing Rules
7.6 (xvi) Related party transactions exceeding 10% of the equity or 5% of the total The Bank did not have any related 259
assets of the entity as per Audited Financial Statements, whichever is lower party transactions exceeding this
threshold as at end 2020
Details of investments in a related party and/or amounts due from a related
party to be set out separately
The details shall include, as a minimum:
i. The date of the transaction; Item 20.3 of Annual Report of Board of 103
ii. The name of the related party; Directors
iii. The relationship between the entity and the related party;
iv. The amount of the transaction and terms of the transaction;
v. The rationale for entering into the transaction

294
1. Our Listed Securities
The Bank’s ordinary shares (both voting and non-voting) are listed on the Main Board of the CSE under the ticker symbol “COMB”.
All debentures issued are also listed on the CSE. (Refer Table 47 for a summary of listed securities of the Bank).
Most daily newspapers, including the Daily News, Daily FT, The Island and Daily Mirror carry a summary of trading activity and daily prices
of shares and debentures using the abbreviation of Commercial Bank or COMB.

Summary of listed securities of the Bank Table – 47

Number in issue as at Stock symbol
December December
31, 2020 31, 2019

Equity
Ordinary shares – Voting 1,098,934,937 961,252,317 COMB-N0000
Ordinary shares – Non-voting 67,970,701 66,254,269 COMB-X0000

Annex 1: Investor Relations

Debt
Fixed rate debentures March 2016/21 44,303,400 44,303,400 COMB/BD/08/03/21-C2341-10.75%
Fixed rate debentures March 2016/26 17,490,900 17,490,900 COMB/BD/08/03/26-C2342-11.25%
Fixed rate debentures March 2016/21 50,718,000 50,718,000 COMB/BD/27/10/21-C2360-12.00%
Fixed rate debentures March 2016/26 19,282,000 19,282,000 COMB/BD/27/10/26-C2359-12.25%
Fixed rate debentures March 2018/23 83,938,400 83,938,400 COMB/BD/22/07/23-C2404-12.00%
Fixed rate debentures March 2018/28 16,061,600 16,061,600 COMB/BD/22/07/28-C2405-12.50%

Supplementary Information
2. Performance of Securities and Returns The Bank index reflected a drop of 16.11% capitalisation for both voting and non-voting
to Shareholders during the year 2020 compared to a marginal shares in turn decreased from Rs. 97 Bn.
Despite the continuous lacklustre drop in 2019. (USD 532.699 Mn.) in 2019 to Rs. 94 Bn.
performance of the bourse, there was The market price of an ordinary voting (USD 500.902 Mn.) in 2020, accounting for
continued investor interest in the shares of share of the Bank decreased by 19.10% 3.16 % (3.40% in 2019) of the total market
the Bank during the year, as depicted in the (a drop of 17.39% in 2019) from Rs. 95 at the capitalisation. The Bank’s shares ranked fifth
increased number of transactions (Ordinary end of 2019 to Rs. 80.90 at the end of 2020 among all listed entities and first among the
shares - Voting 300% and Ordinary shares – (Table 48). The Bank maintained its policy of listed corporates in the Bank, Finance and

Annual Report 2020

Non-Voting 293%) compared to 2019 (Refer issuing scrip dividends and continued with Insurance sector. During most of 2020, the
Table 51 and on page 297). Despite the early its Employee Share Option Plans. Market movement of the non-voting share price
drop due to the outbreak of the Pandemic, followed the trend of the voting shares.
the CSE concluded 2020 on a mixed note, the
ASPI gaining by 10.52% from 6,129 in 2019 to Performance of the Commercial Bank's ordinary voting share in 2020 Graph – 42
6,774 by the end of 2020, while the S&P SL20 Index Rs.

Commercial Bank of Ceylon PLC

closing 2020 on a negative note, decreasing
75,000 150
by 10.18% from 2,937 in 2019 to 2,638 by the
end of 2020. 6,000 120

The total market capitalisation of 4,500 90

the CSE was at Rs. 2,960.65 Bn. and 3,000 60

was above the level at the end of 2019
1,500 30
(Rs. 2,851.31 Bn). Local investors have
contributed to approximately 79% of the 0
2 16 30 13 27 13 27 10 24 8 22 5 19 3 17 31 14 28 11 25 9 23 6 20 4 18 25
0
total market turnover in 2020 which is higher Jan. Jan. Jan. Feb. Feb. Mar. Mar. Apr. Apr. May May Jun. Jun. Jul. Jul. Jul. Aug. Aug. Sep. Sep. Oct. Oct. Nov. Nov. Dec. Dec. Dec.

when compared to approximately. 63% in All share price S&P SL Bank index CBC Ordinary
2019 and 55% the year prior to that. On the index (ASPI) 20 index voting share price (Rs.)
foreign investment front, 2020 has recorded
a net foreign outflow of Rs. 51 Bn., largely
in line with the foreign fund outflow trend
recorded in emerging and frontier markets.
However, it is noteworthy that Sri Lankan
equities attracted purchases worth Rs. 53
Bn. during 2020 by foreign investors, ending
close to the Rs. 56 Bn. recorded in 2019.

295
 Share price of last five years Table – 48
2020 2019 2018 2017 2016
Rs. Rs. Rs. Rs. Rs.

Ordinary shares – Voting

Highest price during the year 96.00 115.90 142.50 150.00 151.90
Lowest price during the year 50.00 88.60 107.50 128.50 115.00
Last traded price 80.90 95.00 115.00 135.80 145.00

Ordinary shares – Non-voting

Highest price during the year 87.20 99.40 110.00 118.50 123.00
Lowest price during the year 48.00 74.00 88.00 102.30 101.50
Last traded price 70.10 83.00 95.00 105.00 115.00
Annex 1: Investor Relations

Share price trend – Voting Graph – 43 Share price trend – Non-Voting Graph – 44
Rs. Rs.
175 150

140 120

105 90

70 60

35 30
Supplementary Information

0 0
2016 2017 2018 2019 2020 2016 2017 2018 2019 2020

Highest price Lowest price Last traded Highest price Lowest price Last traded

Sustainable value for investors Table – 49

Ordinary shares – Voting Ordinary shares – Non-voting
Trade date 2020 2019 Trade date 2020 2019
Annual Report 2020

Rs. Rs. Rs. Rs.

Highest price 02.01.2020 96.00 02.01.2020 87.20

02.01.2019 115.90 23.01.2019 99.40
Lowest price 14.05.2020 50.00 15.05.2020 48.00
17.05.2019 88.60 16.05.2019 74.00
Commercial Bank of Ceylon PLC

Year end price 80.90 95.00 70.10 83.00

Information on shareholders’ funds and Bank’s market capitalisation Table – 50

As at December 31, Shareholders’ funds Commercial Total market Commercial Bank’s Commercial Commercial
Bank’s market capitalisation market capitalisation Bank’s market Bank’s market
capitalisation (*) of the CSE as a % of CSE market capitalisation capitalisation (*)
capitalisation ranking
Rs. Bn. Rs. Bn. Rs. Bn. % Rank USD Mn.

2020 157 94 2,961 3.16 5 500.902

2019 133 97 2,851 3.40 4 532.699
2018 118 115 2,839 4.05 3 628.415
2017 107 133 2,899 4.60 4 867.670
2016 78 127 2,745 4.64 3 851.019

(*) Market capitalisation as at December 31, 2020, 2019, 2018 and 2017 includes both voting and non-voting shares.

296
Number of transactions (No.) Table – 51
2020 2019 2018 2017 2016

Ordinary shares – Voting 85,914 21,481 13,364 11,811 15,189

Ordinary shares – Non-voting 21,407 5,452 4,553 4,432 3,721

Number of shares traded (No. ’000) Table – 52

2020 2019 2018 2017 2016

Ordinary shares – Voting 385,017 89,289 95,286 144,205 96,146

Ordinary shares – Non-voting 26,614 5,893 10,637 6,717 5,396

Shareholders’ funds and Bank’s Number of transactions Graph – 46 Number of shares traded Graph – 47
market capitalisation Graph – 45 No. ’000 No. Mn.

Annex 1: Investor Relations

Rs. Bn.
100 400
175
80 320
140
60 240
105
40 160
70
20 80
35
0 0
2016 2017 2018 2019 2020 2016 2017 2018 2019 2020
0
2016 2017 2018 2019 2020

Supplementary Information
Shares Voting Shares Non-voting Shares Voting Shares Non-voting
Bank’s market Shareholders’
capitalisation funds

3. Information on movement in number of shares represented by the stated capital

(As per rule No. 7.6 (ix) of the Listing Rules of CSE) Table – 53
Number of shares
Year Basis Number of Ordinary shares Ordinary shares Cumulative
shares issued/ voting non-voting redeemable
(redeemed) preference shares

Annual Report 2020

1987 As at December 31, 1987 3,000,000 – –

1988 Bonus issue Voting 2 for 3 2,000,000 5,000,000 – –

1990 Bonus issue Voting 1 for 1 5,000,000 10,000,000 – –

1993 Rights issue Voting 1 for 4 2,500,000 12,500,000 – –

Commercial Bank of Ceylon PLC

1996 Bonus issue Voting 3 for 5 7,500,000 20,000,000 – –
Rights issue Voting 1 for 4 5,000,000 25,000,000 – –
Share swap Non-voting 894,275 25,000,000 894,275 –
Bonus issue Non-voting 3 for 5 536,565 25,000,000 1,430,840 –
Rights issue Non-voting 1 for 4 357,710 25,000,000 1,788,550 –

1998 Bonus issue Voting 3 for 10 7,500,000 32,500,000 1,788,550 –

Bonus issue Non-voting 3 for 10 536,565 32,500,000 2,325,115 –

2001 Bonus issue Voting 1 for 5 6,500,000 39,000,000 2,325,115 –

Bonus issue Non-voting 1 for 5 465,023 39,000,000 2,790,138 –
Issue of cumulative redeemable preference
shares 90,655,500 39,000,000 2,790,138 90,655,500

2003 Bonus issue Voting 1 for 3 13,000,000 52,000,000 2,790,138 90,655,500

Rights issue Voting 1 for 4 13,000,000 65,000,000 2,790,138 90,655,500
Bonus issue Non-voting 1 for 3 930,046 65,000,000 3,720,184 90,655,500
Rights issue Non voting 1 for 4 930,046 65,000,000 4,650,230 90,655,500
Issue of cumulative redeemable preference
shares 100,000,000 65,000,000 4,650,230 190,655,500

2004 ESOP Voting 29,769 65,029,769 4,650,230 190,655,500

297
 Number of shares
Year Basis Number of Ordinary shares Ordinary shares Cumulative
shares issued/ voting non-voting redeemable
(redeemed) preference shares

2005 ESOP Voting 1,361,591 66,391,360 4,650,230 190,655,500

Bonus issue Voting 1 for 1 66,389,162 132,780,522 4,650,230 190,655,500
Bonus issue Non-voting 1 for 1 4,650,230 132,780,522 9,300,460 190,655,500

2006 ESOP Voting 737,742 133,518,264 9,300,460 190,655,500

Redemption of cumulative redeemable
preference shares (90,655,500) 133,518,264 9,300,460 100,000,000

2007 Rights issue Voting 3 for 10 40,288,996 173,807,260 9,300,460 100,000,000

Bonus issue Voting 1 for 3 58,204,268 232,011,528 9,300,460 100,000,000
ESOP Voting 919,649 232,931,177 9,300,460 100,000,000
Annex 1: Investor Relations

Rights issue Non-voting 3 for 10 2,790,138 232,931,177 12,090,598 100,000,000

Bonus issue Non-voting 1 for 3 4,030,199 232,931,177 16,120,797 100,000,000

2008 Redemption of cumulative redeemable

preference shares (100,000,000) 232,931,177 16,120,797 –
ESOP Voting 350,049 233,281,226 16,120,797 –

2009 ESOP Voting 540,045 233,821,271 16,120,797 –

2010 Share split Voting 1 for 2 117,402,608 351,223,879 16,120,797 –

Supplementary Information

Share split Non-voting 1 for 2 8,060,398 351,223,879 24,181,195 –

ESOP Voting 2,081,508 353,305,387 24,181,195 –
2011 Scrip issue for final dividend 2010 Voting Rs. 2.00 per 2,277,195 355,582,582 24,181,195 –
Scrip issue for final dividend 2010 Non-voting share 255,734 355,582,582 24,436,929 –
ESOP Voting 1,457,645 357,040,227 24,436,929 –
Rights issue Voting 1 for 14 25,502,433 382,542,660 24,436,929 –
Rights issue Non-voting 1 for 14 1,745,494 382,542,660 26,182,423 –
Share split Voting 1 for 1 382,542,660 765,085,320 26,182,423 –
Annual Report 2020

Share split Non-voting 1 for 1 26,182,423 765,085,320 52,364,846 –

2012 Scrip issue for final dividend 2011 Voting Rs. 2.00 per 13,587,144 778,672,464 52,364,846 –
Scrip issue for final dividend 2011 Non-voting share 1,108,902 778,672,464 53,473,748 –
ESOP Voting 1,341,768 780,014,232 53,473,748 –
Commercial Bank of Ceylon PLC

2013 Scrip issue for final dividend 2012 Voting Rs. 2.00 per 13,076,189 793,090,421 53,473,748 –
Scrip issue for final dividend 2012 Non-voting share 1,069,474 793,090,421 54,543,222 –
ESOP Voting 1,445,398 794,535,819 54,543,222 –

2014 Scrip issue for final dividend 2013 Voting Rs. 2.00 per 12,504,344 807,040,163 54,543,222 –
Scrip issue for final dividend 2013 Non-voting share 1,036,724 807,040,163 55,579,946 –
ESOP Voting 3,237,566 810,277,729 55,579,946 –

2015 Scrip issue for final dividend 2014 Voting Rs. 2.00 per 8,118,773 818,396,502 55,579,946 –
Scrip issue for final dividend 2014 Non-voting share 719,740 818,396,502 56,299,686 –
ESOP Voting 2,170,613 820,567,115 56,299,686 –

2016 Scrip issue for final dividend 2015 Voting Rs. 2.00 per 11,818,040 832,385,155 56,299,686 –
Scrip issue for final dividend 2015 Non-voting share 912,967 832,385,155 57,212,653 –
ESOP Voting 1,136,732 833,521,887 57,212,653 –

2017 Scrip issue for final dividend 2016 Voting Rs. 2.00 per 10,521,802 844,043,689 57,212,653 –
Scrip issue for final dividend 2016 Non-voting share 903,357 844,043,689 58,116,010 –
Rights issue Voting 1 for 10 84,649,465 928,693,154 58,116,010 –
Rights issue Non-voting 1 for 10 5,811,601 928,693,154 63,927,611 –
ESOP Voting 3,278,537 931,971,691 63,927,611 –

2018 Scrip issue for final dividend 2017 Voting Rs. 2.00 per 11,998,388 943,970,079 63,927,611 –
Scrip issue for final dividend 2017 Non-voting share 1,085,563 943,970,079 65,013,174 –

298
 Number of shares
Year Basis Number of Ordinary shares Ordinary shares Cumulative
shares issued/ voting non-voting redeemable
(redeemed) preference shares

ESOP Voting 1,739,324 945,709,403 65,013,174 –

2019 Scrip issue for final dividend 2018 Voting Rs. 2.00 per 15,249,529 960,958,932 65,013,174 –
Scrip issue for final dividend 2018 Non-voting share 1,241,095 960,958,932 66,254,269 –
ESOP Voting 293,385 961,252,317 66,254,269 –
2020 Scrip issue for final dividend 2019 Voting Rs. 2.00 per 22,485,434 983,737,751 66,254,269 –
Scrip issue for final dividend 2019 Non Voting share 1,716,432 983,737,751 67,970,701 –
Issue of shares via a Private Placement Voting 115,157,186 1,098,934,937 67,970,701 –

4. Dividends Dividends information Table – 54

Annex 1: Investor Relations

The declaration of a dividend should Dividends 2020 2019 2018 2017 2016
always ensure that a balance between the
shareholders’ needs and the business needs Cash – Rs. Per share
of the Bank is maintained. Although the Bank
First interim paid – 1.50 1.50 1.50 1.50
has been paying interim dividends in the
past, for the year under review, the Bank did Second interim paid – 3.00 3.00 3.00 3.00
not pay any interim dividends. This was in Final proposed 4.50 – – – –
compliance with the Banking Act Direction
Total 4.50 4.50 4.50 4.50 4.50
No. 03 of 2020, dated May 13, 2020, issued
by the CBSL on “Restrictions on Discretionary

Supplementary Information
Scrip – Rs. Per share
Payments of Licenced Banks”, wherein
licenced banks were requested to refrain Final proposed/allotted 2.00 2.00 2.00 2.00 2.00
from declaring cash dividends not already Total 6.50 6.50 6.50 6.50 6.50
declared for financial year 2019, and any
interim cash dividends for the financial year Dividend payout ratio (%)
2020 in view of the possible adverse impact
Cash 32.07 27.16 25.92 26.42 27.64
on liquidity and other key performance
indicators of banks. However, as per the Total (cash and shares) 46.33 39.23 37.44 38.17 39.94
Banking Act Direction No. 01 of 2021, dated

Annual Report 2020

January 19, 2021, issued by the CBSL on the
Dividend per share Graph – 48
same subject, licenced banks incorporated
Rs.
or established in Sri Lanka were instructed
to defer payment of cash dividends until 7.00

the financial statements for the year 2020 6.50

are finalised and audited by the external
6.00
auditors. Accordingly, the Board of Directors

Commercial Bank of Ceylon PLC

of the Bank has now recommended a final 5.50

dividend of Rs. 6.50 per ordinary share for 5.00

both ordinary voting and non-voting shares
4.50
of the Bank. This will be paid in the form of 2016 2017 2018 2019 2020
a cash dividend of Rs. 4.50 per share and Rs.
2.00 per share by the issue and allotment of 5. Shareholders
new shares for both voting and non-voting
shareholders of the Bank for the year ended The Bank had 16,820 ordinary voting shareholders and 5,786 ordinary non-voting
December 31, 2020. It will be submitted for shareholders as at December 31, 2020 compared to 12,268 and 4,673 voting and non-voting
the approval of the shareholders at the 52nd shareholders as at December 31, 2019 (Tables 56 and 57 on page 300). With five new investors
AGM, to be held on March 30, 2021. joining ranks, the percentage of ordinary voting shares held by the 20 largest shareholders
increased to 71.96 % from 53.98% in 2019. A rise was also recorded in the non-voting ordinary
(A dividend of Rs. 6.50 per share was shares held by the 20 largest shareholders to 38.22.% in 2020 from 32.24% in 2019.
declared and paid by the Bank for the year
ended December 31, 2019. It too consisted
of a cash dividend of Rs. 4.50 per share and Number of ordinary shareholders Table – 55
balance entitlement of Rs. 2.00 per share As at December 31, 2020 2019
satisfied in the form of issue and allotment
of new shares). Ordinary shareholders – Voting 16,820 12,268
Ordinary shareholders – Non-voting 5,786 4,673
Total 22,606 16,941

299
 5.1 Composition of shareholders Table – 56
As at December 31, 2020 As at December 31, 2019
No. of % No. of shares % No. of % No. of shares %
shareholders shareholders

Ordinary shares – Voting

Resident 16,534 98.30 838,880,863 76.34 11,979 97.64 680,500,179 70.79
Non-resident 286 1.70 260,054,074 23.66 289 2.36 280,752,138 29.21
Total 16,820 100.00 1,098,934,937 100.00 12,268 100.00 961,252,317 100.00

Individuals 16,096 95.70 301,468,333 27.43 11,599 94.55 217,888,250 22.67

Institutions 724 4.30 797,466,604 72.57 669 5.45 743,364,067 77.33
Total 16,820 100.00 1,098,934,937 100.00 12,268 100.00 961,252,317 100.00

Ordinary shares – Non-voting

Annex 1: Investor Relations

Resident 5,707 98.63 63,316,978 93.15 4,600 98.44 52,731,695 79.59

Non-resident 79 1.37 4,653,723 6.85 73 1.56 13,522,574 20.41
Total 5,786 100.00 67,970,701 100.00 4,673 100.00 66,254,269 100.00

Individuals 5,537 95.70 45,572,024 67.05 4,448 95.19 37,265,740 56.25

Institutions 249 4.30 22,398,677 32.95 225 4.81 28,988,529 43.75
Total 5,786 100.00 67,970,701 100.00 4,673 100.00 66,254,269 100.00
Supplementary Information

5.2 Distribution schedule of number of shareholders and percentage of holding in each class of equity securities
(As per Rule No. 7.6 (x) of the Listing Rules of CSE) Table – 57
As at December 31, 2020 As at December 31, 2019
Number of % Number of % Number of % Number of %
shareholders shares shareholders shares

Ordinary shares – Voting

1 – 1,000 8,801 52.32 2,308,178 0.21 6,587 53.69 1,561,344 0.16
1,001 – 10,000 5,441 32.35 19,304,413 1.76 3,687 30.05 13,254,119 1.38
Annual Report 2020

10,001 – 100,000 2,139 12.72 60,718,288 5.53 1,628 13.27 45,723,643 4.76
100,001 – 1,000,000 364 2.16 95,838,529 8.72 282 2.30 74,521,795 7.75
Over 1,000,000 75 0.45 920,765,529 83.78 84 0.69 826,191,416 85.95
Total 16,820 100.00 1,098,934,937 100.00 12,268 100.00 961,252,317 100.00
Commercial Bank of Ceylon PLC

Ordinary shares – Non-voting

1 – 1,000 3,161 54.63 810,631 1.19 2,561 54.80 608,395 0.92
1,001 – 10,000 1,863 32.20 6,341,366 9.33 1,480 31.67 5,037,000 7.60
10,001 – 100,000 654 11.30 18,176,361 26.74 532 11.38 15,054,584 22.72
100,001 – 1,000,000 99 1.71 24,419,830 35.93 93 1.99 23,501,033 35.47
Over 1,000,000 9 0.16 18,222,513 26.81 7 0.16 22,053,257 33.29
Total 5,786 100.00 67,970,701 100.00 4,673 100.00 66,254,269 100.00

5.3 Public Shareholding

(As per 7.6 (iv) and 7.13.1 of the Listing Rules) Table – 58
2020 2019
Number % Number %

Number of Shareholders representing the public holding (Voting) 16,785 99.80 12,234 99.76
Number of Shareholders representing the public holding (Non Voting) 5,781 99.84 4,663 86.62
Float Adjusted Market Capitalization [Link] - (Compliant under Option 1) 93 96

300
5.4 The names, number and percentage of shares held by the twenty largest shareholders (As per Rule No. 7.6 (iii) of the Listing Rules of CSE)
Voting shareholders Table – 59
As at December 31, 2020 2019*
Ordinary shares – Voting Number of % Number of %
shares shares

1. DFCC Bank PLC A/C 1 132,119,619 12.02 82,560,377 8.59

2. Mr Y S H I Silva 97,441,255 8.87 77,604,815 8.07
3. Employees Provident Fund 94,723,763 8.62 92,558,649 9.63
4. CB NY S/A International Finance Corporation 78,208,480 7.12 42,651,626 4.44
5. Sri Lanka Insurance Corporation Ltd. – Life Fund 61,403,691 5.59 47,345,380 4.93
6. Citibank Newyork S/A Norges Bank Account 2 45,759,984 4.16 21,973,486 2.29
7. Melstacorp PLC 45,483,957 4.14 44,444,324 4.62
8. CB NY S/A IFC Emerging Asia Fund. LP 40,319,015 3.67 – –
9. CB NY S/A IFC Financial Intitutions Growth Fund LP 40,319,015 3.67 – –

Annex 1: Investor Relations

10. Sri Lanka Insurance Corporation Ltd. – General Fund 38,906,463 3.54 37,506,430 3.89
11. Mr D P Pieris 21,003,054 1.91 228,626 0.02
12. Employees Trust Fund Board 19,159,319 1.74 18,020,355 1.87
13. Mrs L E M Yaseen 17,077,784 1.55 16,538,000 1.72
14. Renuka Hotels PLC 9,893,069 0.90 9,666,942 1.01
15. Mr M J Fernando 9,882,761 0.90 9,181,964 0.96
16. BP2S London-Asia Dragon Trust PLC 9,093,567 0.83 – –
17. Renuka Consultants & Services Limited 8,631,578 0.79 8,414,742 0.88
18. Hallsville Trading Group INC.

Supplementary Information
7,564,706 0.69 3,170,942 0.33
19. BNYMSANV RE – LF Ruffer Investment Funds: LF Ruffer Pacific and Emerging Market Fund 7,219,310 0.66 7,054,298 0.73
20. Seylan Bank PLC/Andaradeniya Estate (PVT) LTD 6,586,740 0.60 – –
Sub total 790,797,130 71.96 518,920,956 53.98
Other shareholders 308,137,807 28.04 442,331,361 46.02
Total 1,098,934,937 100.00 961,252,317 100.00
* Comparative shareholdings as at December 31, 2019 of the twenty largest shareholders as at December 31, 2020.

Non-voting shareholders Table – 60

Annual Report 2020

As at December 31, 2020 2019*
Ordinary shares – Non-voting Number of % Number of %
shares shares

1. Employees Trust Fund Board 5,287,676 7.78 5,154,149 7.78

2. Akbar Brothers (Pvt) Ltd. A/C No. 01 3,117,457 4.59 2,756,839 4.16
3. Deutsche Bank AG As Trustee To Assetline Income Plus Growth Fund 1,770,354 2.60 – –

Commercial Bank of Ceylon PLC

4. GF Capital Global Limited 1,757,304 2.59 1,712,928 2.59
5. Mr A H Munasinghe 1,651,143 2.43 309,448 0.47
6. Mr M F Hashim 1,282,270 1.89 1,087,247 1.64
7. Serendip Investments Limited 1,167,646 1.72 1,494,489 2.26
8. M.J.F. Exports (Pvt) Ltd 1,162,757 1.71 1,133,395 1.71
9. Mrs L V C Samarasinha 1,025,906 1.51 891,208 1.35
10. Saboor Chatoor (Pvt) Ltd 947,600 1.39 909,646 1.37
11. Mr E Chatoor 805,000 1.18 434,381 0.66
12. Mr M J Fernando 801,511 1.18 730,734 1.10
13. Mr T W A Wickramasinghe 780,000 1.15 740,000 1.12
14. Mr J D Bandaranayake , Ms N Bandaranayake and Dr V Bandaranayake (Joint) 723,540 1.06 648,153 0.98
15. Mr R Gautam 708,999 1.04 623,919 0.94
16. Mr J D Bandaranayake, Dr V Bandaranayake and Ms I Bandaranayake (Joint) 702,474 1.03 627,619 0.95
17. Mr K S M De Silva 626,249 0.92 567,298 0.86
18. Mr J G De Mel 590,000 0.87 523,547 0.79
19. Mr G R Mallawaaratchy and Mrs B G P Mallawaaratchy (Joint) 569,975 0.84 555,582 0.84
20. Mr A L Gooneratne 500,628 0.74 446,072 0.67
Sub total 25,978,489 38.22 21,346,654 32.24
Other shareholders 41,992,212 61.78 44,907,615 67.76
Total 67,970,701 100.00 66,254,269 100.00
* Comparative shareholdings as at December 31, 2019 of the twenty largest shareholders as at December 31, 2020.

301
 5.5 Directors’ shareholding including the Chief Executive Officer’s shareholding (As per Rule No. 7.6 (v) of the Listing Rules of CSE)
Table – 61

Ordinary shares – Voting Ordinary shares – Non-voting

2020 2019 2020 2019

Justice K. Sripavan – Chairman 14,000 Nil Nil Nil

Prof A K W Jayawardane – Deputy Chairman 12,792 Nil Nil Nil
Mr S Renganathan – Managing Director/Chief Executive Officer 362,010 353,736 12,457 12,143
Mr S C U Manatunge 71,410 69,778 Nil Nil
Mr K Dharmasiri Nil Nil Nil Nil
Mr L D Niyangoda Nil Nil Nil Nil
Ms N T M S Cooray 342,465 193,062 52,875 51,540
Mr T L B Hurulle Nil Nil Nil Nil
Ms J Lee Nil Nil Nil Nil
Mr R Senanayake Nil Nil Nil Nil
Annex 1: Investor Relations

Mr K G D D Dheerasinghe * 24,821 24,254 Nil Nil

Mr M P Jayawardena** Nil Nil Nil Nil
Mr S Swarnajothi *** Nil Nil Nil 11,152
* Relinquished office w.e.f. December 21, 2020, ** Relinquished office w.e.f. December29, 2020, *** Retired w.e.f. August 20, 2020
Appointed as Chairman w.e.f. December 21, 2020, Appointed as Deputy Chairman w.e.f. December 29, 2020
Appointed as a Director w.e.f. August 13, 2020, Appointed as a Director w.e.f. September 16, 2020

6. Engaging with shareholders 7. Material foreseeable risk factors 8. Material issues pertaining to
employees and industrial relations
Supplementary Information

During the year, the Bank complied with (As per Rule No. 7.6 (vi) of the Listing Rules
its shareholder communication policy. This of the CSE) pertaining to the Bank
policy outlines the various formal channels Information pertaining to the material (As per Rule No. 7.6 (vii) of the Listing
through which it engages with shareholders. foreseeable risk factors, that require Rules of the CSE)
It covers the timely communication of disclosures as per the Rule No. 7.6 (vi) of During the year under review there were no
quarterly performance as set out on pages the Listing Rules of the CSE is discussed material issues relating to employees and
304 to 309 It also records significant events in the Section on “Risk Governance and industrial relations pertaining to the Bank
that may reasonably be expected to impact Management” on pages 114 to 133. which warrant disclosure.
the share price. (More details are given in
Financial Calendar on page 137)
Annual Report 2020

10. Debt securities

Details of debentures issued by the Bank is as shown below:

10.1 Debenture Composition Table – 62

Commercial Bank of Ceylon PLC

Fixed Interest Rate Fixed Interest Rate

2020 2019

Type of Issue Public Public Public Public Public Public Public Public Public
Debenture Type Type “A” Type “B” Type “A” Type “B” Type “A” Type “B” Type “A” Type “B” Type “A”
CSE Listing Listed Listed Listed Listed Listed Listed Listed Listed Listed
Issue Date 9-Mar-16 9-Mar-16 28-Oct-16 28-Oct-16 23-Jul-18 23-Jul-18 9-Mar-16 9-Mar-16 28-Oct-16
Maturity Date 8-Mar-21 8-Mar-26 27-Oct-21 27-Oct-26 22-Jul-23 22-Jul-28 8-Mar-21 8-Mar-26 27-Oct-21
Interest Payable Frequency Bi-Annually Bi-Annually Bi-Annually Bi-Annually Bi-Annually Bi-Annually Bi-Annually Bi-Annually Bi-Annually
Offered Interest Rate 10.75% p.a. 11.25% p.a. 12.00% p.a. 12.25% p.a. 12.00% p.a. 12.50% p.a. 10.75% p.a. 11.25% p.a. 12.00% p.a.
Amount (Rs. Mn.) 4,430.34 1,749.09 5,071.80 1,928.20 8,393.84 1,606.16 4,430.34 1,749.09 5,071.80

Market Values
– Highest (Rs.) 100.49 100.00 Not traded Not traded Not traded 100.00 90.00 100.00 90.00
– Lowest (Rs.) 100.00 95.00 during the during the during the 100.00 90.00 100.00 90.00
year year year
– Year-end (Rs.) 100.49 95.00 100.00 90.00 100.00 90.00

Interest Rates
– Coupon Rate (%) 10.75 11.25 12.00 12.25 12.00 12.50 10.75 11.25 12.00
– Effective Annual Yield (%) 11.04 11.57 12.36 12.63 12.36 12.89 11.04 11.57 12.36
Interest rate of comparable
Government Security (%) 4.70 6.75 5.00 6.80 5.95 7.15 8.55 9.90 8.70

Other Ratios as at date of last trade

– Interest Yield (%) 9.80 12.43 N/A N/A N/A 12.49 16.57 11.24 16.86
– Yield to Maturity (%) 9.86 12.37 N/A N/A N/A 12.50 16.32 11.25 16.64

302
9. Quarterly performance in 2020 10.2 Other ratios Table – 63
compared to 2019
2020 2019
(As per Rule No. 7.4 (a) (i) of the Listing
Rules of the CSE) Debt equity ratio (%) 35.51 38.97
The Bank duly submitted the Interim Net assets value per share (Rs.) 134.67 129.60
Financial Statements for the year 2020
to the CSE within applicable statutory Interest cover (Times) 10.37 8.54
deadlines. (The Bank duly complied with this Liquid assets ratio (%) (Minimum 20%)
requirement for 2019). Please refer “Financial Domestic Banking Unit (DBU) 44.99 30.42
Calendar” on page 137 for further details. A
Summary of the Income Statement and the Off-shore Banking Unit (OBU) 32.70 25.25
Statement of Financial Position depicting
quarterly performance during 2020 together
with comparatives for 2019 is given on 11. Credit ratings
pages 304 and 309 for the information of 11.1 National long-term ratings
stakeholders.
Fitch Ratings Lanka Ltd., has revised

Annex 1: Investor Relations

The Audited Income Statement for the the National Long-term Rating of the
year ended December 31, 2020 and the Sri Lankan financial institutions following
Audited Statement of Financial Position as at the recalibration of its Sri Lankan national
December 31, 2020 will be submitted to the rating scale. As a result, Fitch Ratings revised
CSE within three months from the year end, the National Long-term rating of the Bank to
which is well within the required deadline AA-(lka) from AA+(lka) and its outlook from
as required by Rule No. 7.5 (a) of the Listing negative to stable in January 2021.
Rules of the CSE. (The Bank duly complied
The Bank’s Bangladesh Operation’s credit
with this requirement for 2019).
rating was reaffirmed at AAA by Credit Rating

Supplementary Information
This Annual Report in its entirety is Information Services Ltd in May 2020 for the
available on the Bank’s website ([Link] 10th consecutive year.
[Link]/newweb/en/investors).
Shareholders may also elect to receive a 11.2 Credit ratings – Debentures
hard copy of the Annual Report on request.
The Company Secretary of the Bank will The credit rating of the Bank’s Subordinated
respond to individual letters received from Debentures was also revised to A(lka) from
shareholders. AA-(lka) by Fitch Ratings Lanka Ltd.

Annual Report 2020

Commercial Bank of Ceylon PLC
Fixed Interest Rate Fixed Interest Rate Fixed Interest Rate
2019 2018 2017

Public Public Public Public Public Public Public Public Public Public Public Public Public
Type “B” Type “A” Type “B” Type “A” Type “B” Type “A” Type “B” Type “A” Type “B” Type “A” Type “B” Type “A” Type “B”
Listed Listed Listed Listed Listed Listed Listed Listed Listed Listed Listed Listed Listed
28-Oct-16 23-Jul-18 23-Jul-18 9-Mar-16 9-Mar-16 28-Oct-16 28-Oct-16 23-Jul-18 23-Jul-18 9-Mar-16 9-Mar-16 28-Oct-16 28-Oct-16
27-Oct-26 22-Jul-23 22-Jul-28 8-Mar-21 8-Mar-26 27-Oct-21 27-Oct-26 22-Jul-23 22-Jul-28 8-Mar-21 8-Mar-26 27-Oct-21 27-Oct-26
Bi-Annually Bi-Annually Bi-Annually Bi-Annually Bi-Annually Bi-Annually Bi-Annually Bi-Annually Bi-Annually Bi-Annually Bi-Annually Bi-Annually Bi-Annually
12.25% p.a. 12.00% p.a. 12.50% p.a. 10.75% p.a. 11.25% p.a. 12.00% p.a. 12.25% p.a. 12.00% p.a. 12.50% p.a. 10.75% p.a. 11.25% p.a. 12.00% p.a. 12.25% p.a.
1,928.20 8,393.84 1,606.16 4,430.34 1,749.09 5,071.80 1,928.20 8,393.84 1,606.16 4,430.34 1,749.09 5,071.80 1,928.20

Not traded Not traded Not traded Not traded 100.00 102.66 Not traded Not traded Not traded 85.33 Not traded 96.00 Not traded
during the during the during the during the 90.00 99.96 during the during the during the 81.40 during the 87.17 during the
year year year year 90.00 102.66 year year year 81.40 year 87.17 year

12.25 12.00 12.50 10.75 11.25 12.00 12.25 12.00 12.50 10.75 11.25 12.00 12.25
12.63 12.36 12.89 11.04 11.57 12.36 12.63 12.36 12.89 11.04 11.57 12.36 12.63

9.90 9.40 10.10 11.30 11.65 11.50 11.80 11.65 11.85 9.70 10.10 9.80 10.10

N/A N/A N/A N/A 13.45 11.02 N/A N/A N/A 17.96 N/A 15.98 N/A
N/A N/A N/A N/A 13.30 11.06 N/A N/A N/A 17.52 N/A 15.74 N/A

303
 Summary of the Income Statements – Group and Bank – 2019 and 2020 Table – 64
1st Quarter ended March 31 2nd Quarter ended June 30
2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Group
Net interest income 12,782,660 12,119,820 9,984,100 12,025,716
Net fee and commission income 2,447,061 2,447,840 1,640,638 2,390,610
Other operating income (net) 4,618,052 550,539 3,964,571 2,583,027
Less: Impairment charges and other losses 6,653,253 1,896,313 2,607,571 3,630,501
Net operating income 13,194,520 13,221,886 12,981,738 13,368,852
Less: Expenses 7,755,912 8,204,593 7,303,047 8,041,586
Operating profit 5,438,608 5,017,293 5,678,691 5,327,266
Add: Share of profits/(losses) of associate companies
Annex 1: Investor Relations

(914) 1,343 177 4,529

Profit before income tax 5,437,694 5,018,636 5,678,868 5,331,795
Less: Income tax expense 1,623,311 1,827,824 2,045,674 1,850,007
Profit for the period 3,814,383 3,190,812 3,633,194 3,481,788

Quarterly profit as a percentage of the profit after tax 22.3 18.3 21.3 20.0

Cumulative quarterly profit as a percentage of the profit after tax 22.3 18.3 43.6 38.3
Supplementary Information

1st Quarter ended March 31 2nd Quarter ended June 30

2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Bank
Net interest income 12,425,953 11,881,071 9,701,778 11,758,079
Net fee and commission income 2,293,173 2,335,343 1,527,747 2,337,977
Annual Report 2020

Other operating income (net) 4,600,441 460,042 4,039,888 2,573,614

Less: Impairment charges and other losses 6,544,696 1,852,370 2,895,956 3,515,041
Net operating income 12,774,871 12,824,086 12,373,457 13,154,629
Less: Expenses 7,546,314 8,049,713 7,155,931 7,882,695
Profit before income tax 5,228,557 4,774,373 5,217,526 5,271,934
Commercial Bank of Ceylon PLC

Less: Income tax expense 1,521,991 1,751,497 1,962,981 1,828,428

Profit for the period 3,706,566 3,022,876 3,254,545 3,443,506

Quarterly profit as a percentage of the profit after tax 22.6 17.8 19.9 20.2

Cumulative quarterly profit as a percentage of the profit after tax 22.6 17.8 42.5 38.0

304
3rd Quarter ended September 30 4th Quarter ended December 31 Total
2020 2019 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Group
14,029,002 12,277,968 14,073,040 11,932,887 50,868,802 48,356,391 Net interest income
2,672,054 2,840,646 3,061,922 3,072,742 9,821,675 10,751,838 Net fee and commission income
3,679,491 2,670,120 3,776,897 2,774,733 16,039,011 8,578,419 Other operating income (net)
7,471,776 3,017,776 4,686,932 2,786,933 21,419,532 11,331,523 Less: Impairment charges and other losses
12,908,771 14,770,958 16,224,927 14,993,429 55,309,956 56,355,125 Net operating income
7,634,075 8,380,022 8,100,960 8,755,020 30,793,994 33,381,221 Less: Expenses
5,274,696 6,390,936 8,123,967 6,238,409 24,515,962 22,973,904 Operating profit
Add: Share of profits/(losses) of associate companies

Annex 1: Investor Relations

2,665 3,636 1,970 484 3,898 9,992
5,277,361 6,394,572 8,125,937 6,238,893 24,519,860 22,983,896 Profit before income tax
1,549,657 1,548,871 2,214,421 336,798 7,433,063 5,563,500 Less: Income tax expense
3,727,704 4,845,701 5,911,516 5,902,095 17,086,797 17,420,396 Profit for the period
Quarterly profit as a percentage of the profit
21.8 27.8 34.6 33.9 100.0 100.0 after tax
Cumulative quarterly profit as a percentage of the
65.4 66.1 100.0 100.0 – – profit after tax

Supplementary Information
3rd Quarter ended September 30 4th Quarter ended December 31 Total
2020 2019 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Bank
13,762,118 11,991,650 13,681,492 11,577,472 49,571,341 47,208,272 Net interest income
2,540,162 2,741,978 2,895,323 2,874,214 9,256,405 10,289,512 Net fee and commission income

Annual Report 2020

3,686,508 2,641,059 3,785,715 2,845,445 16,112,552 8,520,160 Other operating income (net)
7,441,088 2,955,795 4,601,958 2,738,260 21,483,698 11,061,466 Less: Impairment charges and other losses
12,547,700 14,418,892 15,760,572 14,558,871 53,456,600 54,956,478 Net operating income
7,427,613 8,177,767 7,815,430 8,507,198 29,945,288 32,617,373 Less: Expenses
5,120,087 6,241,125 7,945,142 6,051,673 23,511,312 22,339,105 Profit before income tax

Commercial Bank of Ceylon PLC

1,486,601 1,484,148 2,166,250 250,065 7,137,823 5,314,138 Less: Income tax expense
3,633,486 4,756,977 5,778,892 5,801,608 16,373,489 17,024,967 Profit for the period
Quarterly profit as a percentage of the profit
22.2 27.9 35.3 34.1 100.0 100.0 after tax
Cumulative quarterly profit as a percentage of the
64.7 65.9 100.0 100.0 – – profit after tax

305
 Statement of Financial Position – Group – 2019 and 2020 Table – 65
1st Quarter ended 2nd Quarter ended
As at March 31, March 31, June 30, June 30,
2020 2019 2020 2019

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Assets
Cash and cash equivalents 69,291,420 51,197,799 52,425,162 53,188,327
Balances with Central Banks 38,459,820 51,599,785 57,547,194 45,126,978
Placements with banks 28,862,006 28,158,636 26,860,049 24,883,478
Securities purchased under re-sale agreements 10,448,494 23,988,458 7,209,397 18,497,618
Derivative financial assets 2,140,505 4,510,499 1,898,100 3,253,835
Financial assets recognised through profit or loss – measured at fair value 25,660,517 10,668,315 32,898,907 12,252,492
Financial assets at amortised cost – Loans and advances to banks 792,189 731,801 776,550 736,299
Annex 1: Investor Relations

Financial assets at amortised cost – Loans and advances to other customers 917,442,418 861,142,772 897,297,570 854,238,500
Financial assets at amortised cost – Debt and other financial instruments 116,242,352 85,428,291 195,822,341 98,761,011
Financial assets measured at fair value through other comprehensive income 212,994,354 176,527,583 245,777,765 208,698,513
Investments in subsidiaries – – – –
Investments in associates 55,907 101,888 53,190 105,388
Property, plant and equipment and right-of-use assets 22,051,532 16,980,540 21,993,257 16,882,420
Investment properties 46,350 – 46,350 –
Intangible assets 1,641,425 1,473,609 1,698,360 1,505,196
Supplementary Information

Leasehold property 101,251 102,705 100,889 102,343

Deferred tax assets 1,291,100 132,577 159,921 180,225
Other assets 25,749,941 30,631,819 24,090,018 27,674,083
Total assets 1,473,271,581 1,343,377,077 1,566,655,020 1,366,086,706

Liabilities
Due to banks 76,515,510 42,694,636 73,955,005 62,009,934
Derivative financial liabilities 2,987,717 3,961,272 1,915,067 2,411,810
Annual Report 2020

Securities sold under repurchase agreements 42,014,953 41,381,747 64,224,587 40,649,376

Financial liabilities at amortised cost – due to depositors 1,120,368,799 1,025,585,219 1,155,219,967 1,037,150,823
Financial liabilities at amortised cost – other borrowings 23,473,191 25,312,923 31,578,599 24,188,447
Current tax liabilities 5,324,474 7,009,677 5,221,850 7,480,547
Deferred tax liabilities 417,779 1,043,580 825,722 1,031,229
Other liabilities 26,541,214 37,467,290 50,978,826 27,250,407
Commercial Bank of Ceylon PLC

Due to subsidiaries – – – –
Subordinated liabilities 38,562,279 37,444,838 38,199,628 37,494,509
Total liabilities 1,336,205,916 1,221,901,182 1,422,119,251 1,239,667,082

Equity
Stated capital 40,916,958 40,916,957 42,971,971 40,916,957
Statutory reserves 8,387,701 7,444,178 8,391,150 7,445,163
Retained earnings 5,864,374 2,965,210 7,414,964 6,416,457
Other reserves 80,208,291 68,936,039 84,077,287 70,392,367
Total equity attributable to equity holders of the Group/Bank 135,377,324 120,262,384 142,855,372 125,170,944
Non-controlling interest 1,688,341 1,213,511 1,680,397 1,248,680
Total equity 137,065,665 121,475,895 144,535,769 126,419,624
Total liabilities and equity 1,473,271,581 1,343,377,077 1,566,655,020 1,366,086,706
Contingent liabilities and commitments 622,815,977 623,050,857 602,842,021 585,207,963
Net assets value per ordinary share (Rs.) 131.75 117.04 135.83 121.82

Quarterly growth (%)

Financial assets at amortised cost – loans and advances to banks & loans and
advances to other customers 2.63 -0.75 -2.20 -0.80
Financial liabilities at amortised cost – due to depositors 4.81 3.14 3.11 1.13
Total assets 4.57 1.78 6.34 1.69

306
 3rd Quarter ended 4th Quarter ended
September 30, September 30, December 31, December 31, As at
2020 2019 2020 2019
(Audited) (Audited)
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Assets
44,382,431 49,275,010 51,255,030 53,681,118 Cash and cash equivalents
83,313,147 42,467,189 115,358,732 46,101,232 Balances with Central Banks
17,645,097 24,213,930 16,421,867 24,903,809 Placements with banks
445,577 16,020,541 – 13,147,534 Securities purchased under resale agreements
2,011,946 2,055,696 2,636,717 1,830,927 Derivative financial assets
43,470,925 16,413,151 35,189,471 21,468,033 Financial assets recognised through profit or loss – measured at fair value
773,422 758,397 779,705 757,787 Financial assets at amortised cost – Loans and advances to banks

Annex 1: Investor Relations

899,988,223 865,095,075 909,829,172 893,919,311 Financial assets at amortised cost – Loans and advances to other customers
269,243,315 98,104,929 302,059,529 107,059,021 Financial assets at amortised cost – Debt and other financial instruments
252,685,502 205,397,219 278,716,794 197,825,017 Financial assets measured at fair value through other comprehensive income
– – – – Investments in subsidiaries
62,361 55,632 64,155 56,821 Investments in associates
21,705,618 17,289,059 25,386,630 22,423,046 Property, plant and equipment and right-of-use assets
46,350 46,350 67,116 46,350 Investment properties
1,827,427 1,573,573 1,800,516 1,645,714 Intangible assets

Supplementary Information
100,525 101,977 101,612 Leasehold property
2,503,276 196,965 2,735,566 530,165 Deferred tax assets
22,879,328 31,289,510 20,195,153 23,443,869 Other assets
1,663,084,470 1,370,354,203 1,762,496,153 1,408,941,366 Total assets

Liabilities
82,499,159 49,473,621 88,248,056 53,807,425 Due to banks
1,533,809 2,314,173 1,501,262 1,495,317 Derivative financial liabilities

Annual Report 2020

81,100,405 38,023,739 91,411,522 51,117,342 Securities sold under repurchase agreements
1,221,756,923 1,047,138,415 1,286,616,399 1,068,982,587 Financial liabilities at amortised cost – due to depositors
48,116,673 24,414,671 54,555,933 23,248,893 Financial liabilities at amortised cost – other borrowings
6,444,772 5,861,745 6,991,005 5,197,188 Current tax liabilities
421,972 646,670 403,846 416,458 Deferred tax liabilities
37,249,718 32,521,860 33,572,283 30,775,884 Other liabilities

Commercial Bank of Ceylon PLC

– – – – Due to subsidiaries
38,136,630 37,960,312 38,247,138 37,886,789 Subordinated liabilities
1,517,260,061 1,238,355,206 1,601,547,444 1,272,927,883 Total Liabilities

Equity
42,971,971 40,916,957 52,187,747 40,916,958 Stated capital
8,391,150 7,445,163 9,285,233 8,387,701 Statutory reserves
11,213,907 11,357,570 8,124,261 5,182,185 Retained earnings
81,537,813 70,754,689 89,595,571 79,937,405 Other reserves
144,114,841 130,474,379 159,192,812 134,424,249 Total equity attributable to equity holders of the Group/Bank
1,709,568 1,524,618 1,755,897 1,589,234 Non-controlling interest
145,824,409 131,998,997 160,948,709 136,013,483 Total Equity
1,663,084,470 1,370,354,203 1,762,496,153 1,408,941,366 Total liabilities and equity
680,543,307 628,720,426 730,561,685 580,961,807 Contingent liabilities and commitments
137.03 126.98 136.42 130.83 Net assets value per ordinary share (Rs.)

Quarterly growth (%)

Financial assets at amortised cost – Loans and advances to banks & loans
0.30 1.27 1.09 3.33 and advances to other customers
5.76 0.96 5.31 2.09 Financial liabilities at amortised cost – due to depositors
6.16 0.31 5.98 2.82 Total assets

307
 Statement of Financial Position – Bank – 2019 and 2020 Table – 66
1st Quarter ended 2nd Quarter ended
As at March 31, March 31, June 30, June 30,
2020 2019 2020 2019
(Audited) (Audited)
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Assets
Cash and cash equivalents 67,909,585 40,490,801 50,830,153 44,719,754
Balances with Central Banks 32,656,696 49,591,644 53,453,467 43,450,379
Placements with banks 28,287,644 27,972,963 26,427,430 24,386,003
Securities purchased under re-sale agreements 10,448,494 23,988,458 7,209,397 18,497,618
Derivative financial assets 2,140,505 4,510,499 1,898,100 3,253,835
Financial assets recognised through profit or loss – measured at fair value 25,660,517 10,668,315 32,898,907 12,252,492
Financial assets at amortised cost – Loans and advances to banks 792,189 731,801 776,550 736,299
Annex 1: Investor Relations

Financial assets at amortised cost – Loans and advances to other customers 907,415,058 853,891,574 887,251,878 847,364,012
Financial assets at amortised cost – Debt and other financial instruments 110,201,662 79,286,240 187,528,301 93,363,847
Financial assets measured at fair value through other comprehensive income 212,748,101 176,288,466 245,533,383 208,459,018
Investments in subsidiaries 5,011,284 4,304,032 4,683,429 4,303,814
Investments in associates 44,331 44,331 44,331 44,331
Property, plant and equipment 20,053,178 15,271,969 19,964,308 15,185,135
Investment properties – – – –
Intangible assets 1,076,363 959,417 1,137,090 999,066
Supplementary Information

Leasehold property 70,477 71,421 70,242 71,186

Deferred tax assets 1,100,255 – – –
Other assets 25,647,724 30,526,679 23,893,406 27,545,229
Total assets 1,451,264,063 1,318,598,610 1,543,600,372 1,344,632,018

Liabilities
Due to banks 74,075,132 40,274,885 72,163,605 59,867,706
Derivative financial liabilities 2,987,717 3,961,272 1,915,067 2,411,810
Annual Report 2020

Securities sold under repurchase agreements 42,159,141 41,531,673 64,448,218 40,747,726

Financial liabilities at amortised cost – due to depositors 1,104,634,005 1,006,076,868 1,138,170,145 1,020,918,723
Financial liabilities at amortised cost – other borrowings 23,473,191 25,312,923 31,578,599 24,188,447
Current tax liabilities 5,053,931 6,777,712 4,938,966 7,232,866
Deferred tax liabilities – 716,986 410,559 702,188
Other liabilities 26,300,217 37,229,335 50,610,310 26,895,743
Commercial Bank of Ceylon PLC

Due to subsidiaries 80,711 41,719 65,786 50,544

Subordinated liabilities 38,562,279 37,444,838 38,199,628 37,494,509
Total liabilities 1,317,326,324 1,199,368,211 1,402,500,883 1,220,510,262

Equity
Stated capital 40,916,958 40,916,957 42,971,971 40,916,957
Statutory reserves 8,205,391 7,354,143 8,205,391 7,354,143
Retained earnings 5,768,479 2,973,293 6,968,011 6,416,384
Other reserves 79,046,911 67,986,006 82,954,116 69,434,272
Total equity attributable to equity holders of the Group/Bank 133,937,739 119,230,399 141,099,489 124,121,756
Non-controlling Interest – – – –
Total equity 133,937,739 119,230,399 141,099,489 124,121,756
Total liabilities and equity 1,451,264,063 1,318,598,610 1,543,600,372 1,344,632,018
Contingent liabilities and commitments 620,610,185 622,647,488 600,818,662 584,832,875
Net assets value per ordinary share (Rs.) 130.35 116.04 134.16 120.80

Quarterly growth (%)

Financial assets at amortised cost – loans and advances to banks & loans and
advances to other customers 2.57 -0.84 -2.22 -0.76
Financial liabilities at amortised cost – due to depositors 4.87 2.34 3.04 1.48
Total assets 4.61 1.16 6.36 1.97

308
 3rd Quarter ended 4th Quarter ended
September 30, September 30, December 31, December 31, As at
2020 2019 2020 2019
(Audited) (Audited)
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Assets
43,339,446 43,628,405 50,250,627 52,534,730 Cash and cash equivalents
79,611,753 40,888,289 110,971,105 39,461,127 Balances with Central Banks
17,235,679 23,774,064 15,938,982 24,527,241 Placements with banks
445,577 16,020,541 – 13,147,534 Securities purchased under re-sale agreements
2,011,946 2,055,696 2,636,717 1,830,927 Derivative financial assets
43,470,925 16,413,151 35,189,471 21,468,033 Financial assets recognised through profit or loss – measured at fair value
773,422 758,397 779,705 757,787 Financial assets at amortised cost – Loans and advances to banks

Annex 1: Investor Relations

888,862,548 857,595,286 896,845,453 884,645,744 Financial assets at amortised cost – Loans and advances to other customers
260,169,367 91,286,998 292,727,566 101,144,819 Financial assets at amortised cost – Debt and other financial instruments
252,327,507 205,157,059 278,461,369 197,568,330 Financial assets measured at fair value through other comprehensive income
4,683,429 4,619,287 5,808,429 5,011,284 Investments in subsidiaries
44,331 44,331 44,331 44,331 Investments in associates
19,672,332 15,176,692 23,212,394 20,436,493 Property, plant and equipment
– – – – Investment properties
1,260,024 1,016,676 1,232,863 1,080,010 Intangible assets

Supplementary Information
70,006 70,948 – 70,710 Leasehold property
2,321,548 – 2,499,860 294,059 Deferred tax assets
22,751,766 31,117,533 19,619,149 23,322,247 Other assets
1,639,051,606 1,349,623,353 1,736,218,021 1,387,345,406 Total assets

Liabilities
81,003,276 47,631,147 87,451,306 51,505,694 Due to banks
1,533,809 2,314,173 1,501,262 1,495,317 Derivative financial liabilities

Annual Report 2020

81,145,001 38,133,178 91,437,612 51,220,023 Securities sold under repurchase agreements
1,203,658,867 1,031,733,089 1,265,965,918 1,053,307,660 Financial liabilities at amortised cost – due to depositors
48,116,673 24,414,671 54,555,933 23,248,893 Financial liabilities at amortised cost – other borrowings
6,328,897 5,696,943 6,777,992 4,967,644 Current tax liabilities
– 226,978 – – Deferred tax liabilities
36,733,042 32,098,371 33,037,669 30,496,709 Other liabilities

Commercial Bank of Ceylon PLC

121,071 138,081 97,015 54,292 Due to subsidiaries
38,136,630 37,960,312 38,247,138 37,886,789 Subordinated liabilities
1,496,777,266 1,220,346,943 1,579,071,845 1,254,183,021 Total liabilities

Equity
42,971,971 40,916,957 52,187,747 40,916,958 Stated capital
8,205,391 7,354,143 9,024,065 8,205,391 Statutory reserves
10,707,378 11,296,851 7,596,260 5,144,433 Retained earnings
80,389,600 69,708,459 88,338,104 78,895,603 Other reserves
142,274,340 129,276,410 157,146,176 133,162,385 Total equity attributable to equity holders of the Group/Bank
– – – – Non-controlling Interest
142,274,340 129,276,410 157,146,176 133,162,385 Total equity
1,639,051,606 1,349,623,353 1,736,218,021 1,387,345,406 Total liabilities and equity
678,379,768 628,260,614 728,711,698 579,999,273 Contingent liabilities and commitments
135.28 125.82 134.67 129.60 Net assets value per ordinary share (Rs.)

Quarterly growth (%)

Financial assets at amortised cost – Loans and advances to banks & Loans
0.18 1.21 0.90 3.15 and advances to other customers
5.75 1.06 5.18 2.09 Financial Liabilities at amortised cost – Due to depositors
6.18 0.37 5.93 2.80 Total assets

309
 Annex 2: Compliance with Governance Directions
and Codes
Annex 2.1: Compliance with Banking Act Direction
The Banking Act Direction No. 11 of 2007 and subsequent amendments thereto on Corporate Governance for Licensed
Commercial Banks in Sri Lanka issued by the Central Bank of Sri Lanka
Section Principle, compliance, and implementation Complied

3 (1) Responsibilities of the Board

3 (1) (i) The Board has strengthened the security and the soundness of the Bank in the following manner:

a. Setting strategic objectives and corporate values

The Bank’s strategic objectives and corporate values are determined by the Board as set out on pages 41 to 47 and pages 75 to
85. These are communicated to all levels of employees through structured meetings and reinforced monthly at team meetings
which review performance vis-à-vis strategic goals. The corporate values are included in the Code of Conduct and Business Ethics
which is communicated to all employees via hard copy, via the Bank’s intranet, through orientation programmes and reinforced at
meetings.

b. Approving overall business strategy including risk policy and management

The Board provides direction and guidance for preparation of the five year Corporate Strategic Plan from 2020-2024 which was
approved by the Board after discussing related issues in detail with the Corporate Management. It is aligned to the overall Risk
Strategy of the Bank through involvement of the Independent Risk Management Committee. The risk appetite of the Bank is
Supplementary Information

embedded throughout the corporate plan in allocation of capital, adoption of risk matrix to measure the risk levels and in defining
key performance indicators which include both quantitative and qualitative criteria. Additionally, governance and compliance are
embedded into the Bank’s Risk Management Policy Framework and included in the strategic goals.
The Bank’s Strategic Plan for 2021-2025 was approved on December 17, 2020 by the Board at a special Board meeting with the
presence of all the members of Corporate Management.

c. Risk management
The BIRMC is tasked with approving the Bank’s Risk Policy, defining the risk appetite, identifying principal risks, setting governance
structures and implementing systems to measure, monitor and manage the principal risks. “Risk Governance and Management”
Annual Report 2020

on pages 114 to 133 and the “Report of the BIRMC” on pages 89 to 90 provide further insights on risk management policies and
processes of the Bank.

d. Communication with all stakeholders

The Board has approved and implemented the following communication policies with stakeholders:
z Shareholders – The Shareholder Communication Policy of the Bank explicitly provides for effective and timely communication
Commercial Bank of Ceylon PLC

to shareholders of material matters and performance. Interim Financial Statements are made available to shareholders within 45
days for the first three quarters and within 60 days for the last quarter from the end of the relevant quarter and a press release
is issued providing a review of the Bank’s performance on a quarterly basis. Performance of the Bank is set out in the Annual
Report of the Bank which is circulated to shareholders 15 working days prior to the Annual General Meeting (AGM).
The AGM is the key forum for contact with shareholders and the Bank has a history of well attended AGMs where shareholders
take an active role in exercising their rights. Details of attendance of the shareholders at AGMs during the past five years is given
in the Table 30 on page 85.
Additionally, the Investor Relations page on the Bank’s website contains the Interim Financial Statements and Annual Reports
together with key disclosures on risk management.
The Bank also provides information to equity analysts to facilitate high quality information in research reports which are made
available to investors by stockbrokers.
z Customers – Customers include inter alia depositors and borrowers. The Bank’s Customer Complaint Handling Policy has
been printed in all three languages and disseminated to all customer contact points of the Bank. This document outlines the
policy set out by the Bank to handle customer complaints, provides contact numbers to reach the Bank as well as the Financial
Ombudsman. There is a 24-hour trilingual customer hotline set up for this purpose and reports are reviewed by both the EIRMC
and BIRMC.
z Staff – Employees and representatives of the trade unions are given unrestricted access to the Management to discuss their
concerns. The Deputy General Manager – Human Resource Management coordinates communication between the Board and
the employees.
e. Internal control system and management information systems
The Board is assisted in this regard by the BAC who reviews the adequacy and the integrity of the Bank’s internal control system
and management information system. The BAC has reviewed reports from the Internal Audit Department and the External
Auditors in carrying out this function and also reviewed management responses on same, during the year.

310
Section Principle, compliance, and implementation Complied

f. Key Management Personnel (KMP)

KMP are defined in the Sri Lanka Accounting Standard – LKAS 24 on “Related Party Disclosures”, as the persons who significantly
influence policy, direct activities and exercise control over business activities, operations and risk management. All appointments
of designated KMP are recommended by the BNC and approved by the Board.

Annex 2: Compliance with Governance Directions and Codes

For financial reporting purpose, the Board of Directors of the Bank (including Executive and Non-Executive Directors) is considered
as KMP of the Bank.
Further, for corporate governance reporting and monitoring purposes, the Bank has included all members of the Corporate
Management into the category of KMP.

g. Define areas of authority and key responsibilities for Directors and KMP
The Board Charter sets out the matters specifically reserved for Board, defining the areas of authority and key responsibilities of
the Board of Directors. Areas of authority and key responsibilities for members of the Corporate Management are stated in the job
descriptions of each member.

h. Oversight of affairs of the Bank by KMP

The Board reviews the performance of the Bank vis-à-vis the strategic plan and receives reports from its Committees on financial
reporting, internal control, risk management, changes in KMP and other relevant matters delegated to the Committees.
Additionally, KMP make regular presentations to the Board on matters under their purview and are also called in by the Board to
explain matters relating to their areas.

i. Assess effectiveness of own governance practices

Completed Board evaluation forms were received from all Board members for 2020 for review and the responses were discussed at
a BNC meeting and at a subsequent Board meeting. Matters of concern noted are followed-up and improved upon during the year

Supplementary Information
to continuously improve the governance practices of the Bank.

j. Succession plan for KMP

There is a formal succession plan in place with named successors for KMP together with development plans to ensure their readiness.

k. Regular meetings with KMP

Progress towards corporate objectives is a regular agenda item for the Board and members of the Corporate Management are
regularly involved in the Board level discussions on the same. Additionally, they make key agenda items or are called in for
discussions at the meetings of the Board and presentations on its Committees on policy and other matters relating to their areas

Annual Report 2020

on a regular basis.

l. Regulatory environment and maintaining an effective relationship with regulator

Directors are briefed about regulatory developments at Board meetings by the KMP to facilitate effective discharge of their
responsibilities. Members of the BAC and the BIRMC are also briefed on regulatory developments at their meetings by the Heads of
Internal Audit, Risk, and Compliance. Board members attend the Director Forums arranged by the CBSL as well.

Commercial Bank of Ceylon PLC

m. Hiring External Auditors
The Board has adopted a policy of rotation of auditors, once in every five years, in keeping with the principles of good corporate
governance. At the end of the five-year period, quotations are called from suitable audit firms, prior to the recommendation of
new auditors as per the rotation policy. In addition, External Auditors submit a statement annually confirming their independence
as required by Section 163 (3) of the Companies Act No. 07 of 2007 (as amended) in connection with external audit.

3 (1) (ii) Appointment of Chairman and CEO and defining and approving their functions and responsibilities
Positions of the Chairman and the Managing Director/Chief Executive Officer are separated in the Board Charter to maintain a
balance of power. Further, functions and responsibilities of the Chairman and the CEO are defined and approved in line with
Section 3 (5) of this Direction as given on pages 82 and 83.

3 (1) (iii) Regular Board meetings

Board meetings are held each month on a regular basis and special meetings are scheduled as and when the need arises at which
Directors present at the meeting actively participate in deliberating matters set before the Board. Attendance at Board meetings is
given on pages 78 and 79 together with the number of meetings of the Board. The Bank has minimised obtaining approval via circular
resolutions and it is carried out only on an exceptional basis and such resolutions are ratified by the Board at the next meeting.

3 (1) (iv) Arrangements for Directors to include proposals in the agenda

Notice of Meeting is circulated two weeks prior to the meeting and Directors may submit proposals for inclusion in the agenda
on discussion with the Chairman on matters relating to the business of the Bank.

3 (1) (v) Notice of Meetings

Notice of Meetings, together with the agenda and Board papers for the Board meetings are circulated to the Directors seven
days prior to the meeting providing Directors adequate time to attend and submit any urgent proposals.

311
 Section Principle, compliance, and implementation Complied

3 (1) (vi) Directors’ attendance

The Directors are apprised of their attendance in accordance with the Banking Act Direction No. 11 of 2007 (the Direction). Details
of the Directors’ attendance are set out on page 79. No Director has been absent from three consecutive meetings.
Annex 2: Compliance with Governance Directions and Codes

3 (1) (vii) Appointment and setting responsibilities of the Company Secretary

The Board appoints and sets responsibilities of the Company Secretary in accordance with the Companies Act, Banking
Act Directions, and the Articles of Association of the Bank under advisement of the BNC. Refer “Role of the Company Secretary” on
page 83 for further details on role of the Company Secretary.

3 (1) (viii) Directors’ access to advice and services of Company Secretary

All Board members have full access, to the advice and services of the Company Secretary to ensure that proper
Board procedures are followed and all applicable rules and regulations are complied with.

3 (1) (ix) Maintenance of Board minutes

Company Secretary maintains the minutes of the Board meetings and circulates same to all Board members after review
by the CEO and the Chairman. The minutes are reviewed and approved at the next Board meeting after incorporating any
amendments/inclusions proposed by other Directors. Additionally, the Directors have access to past Board papers and minutes
through a secure electronic link.

3 (1) (x) Maintaining minutes with sufficient details to serve as a reference for regulators and supervisory authorities

The minutes of the meetings include:

(a) a summary of data and information used by the Board in its deliberations;
Supplementary Information

(b) the matters considered by the Board;

(c) the fact-finding discussions and the issues of contention or dissent;
(d) the testimonies and confirmations of relevant executives with regard to the Board’s strategies and policies and adherence to
relevant laws and regulations;
(e) matters regarding the risks to which the Bank is exposed and an overview of the risk management measures including reports
of the BIRMC;
(f ) the decisions and Board resolutions including reports and minutes of all Board Committees; and
(g) the actions to be taken by the KMP.

3 (1) (xi) Directors’ ability to seek independent professional advice

Annual Report 2020

Directors can obtain independent professional advice, as and when necessary, in discharging their responsibilities according
to a procedure approved by the Board. This function is coordinated by the Company Secretary.

3 (1) (xii) Dealing with conflicts of interest

The Directors make declarations of their interests at appointment, annually and whenever there is a change in the same.
A quarterly report is sent to the Board on possible areas of conflict (if any). Directors withdraw from the meeting, abstain from
Commercial Bank of Ceylon PLC

participating in the discussions, voicing their opinion or approving in situations where there is a conflict of interest.
Additionally, such Director’s presence is disregarded in counting the quorum in such instances. Key appointments of the Directors
in other entities are indicated in their profiles appearing on pages 66 to 69 and “Directors’ Interest in Contracts with the Bank”
as disclosed on page 113.

3 (1) (xiii) Formal schedule of matters reserved for Board decision

The Board has put in place systems and controls to facilitate the effective discharge of Board functions.
Pre set agenda of meetings ensures the direction and control of the Bank are firmly under Board’s control and authority in
line with regulatory codes, guidelines and international best practice.

3 (1) (xiv) Inform Central Bank on probable solvency issues

The Bank is solvent and no situations have arisen to challenge its solvency. A Board approved procedure is in place to inform the
Director of Bank Supervision prior to taking any decision or action if the Bank is about to become insolvent or about to suspend
payments to its depositors and other creditors.

3 (1) (xv) Capital adequacy

The Board monitors capital adequacy and other prudential measures to ensure compliance with regulatory requirements, and the
Bank’s defined risk appetite. The Bank is in compliance with the minimum capital adequacy requirements.
Please refer Annex: 3 Basel III- Disclosures under Pillar 3 as per Banking Act Direction No. 01 of 2016.

3 (1) (xvi) Publish Corporate Governance Report in this Annual Report

This Report forms part of the Annual Corporate Governance Report of the Bank which is set out on pages 75 to 85.

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Section Principle, compliance, and implementation Complied

3 (1) (xvii) Self-assessment of Directors

The Bank has adopted a system of self-assessment, to be undertaken by each Director, annually. Each member of the Board carried
out a self-assessment of his/her own effectiveness as an individual as well as the effectiveness of the Board as a whole. Further,
each Director carries out an assessment of “fitness and propriety” to serve as a Director.

Annex 2: Compliance with Governance Directions and Codes

3 (2) Board Composition

3 (2) (i) Number of Directors

As per CBSL Governance Direction and Articles of Association of the Bank the number of Directors should not be less than seven
(7) and not more than thirteen (13). The Bank’s Board comprised ten (10) Directors as at December 31, 2020.

3 (2) (ii) Period of service of a Director

The period of service of a Director is limited to nine (9) years excluding the Executive Directors as per the Direction issued to
Licensed Commercial Banks. Details of their tenures of service are given on page 79.

3 (2) (iii) Board balance

There are two (2) Executive Directors and eight (8) NEDs which is compliant with the requirement to limit the number of Executive
Directors to one-third of the total.

3 (2) (iv) Independent NEDs

The Board has eight (8) Independent Directors which is well above the regulatory requirement to satisfy the criteria for
determining independence.

3 (2) (v) Alternate Independent Directors

Supplementary Information
There are no alternate Directors.

3 (2) (vi) Criteria for Non-Executive Directors

NEDs are persons with proven track records and necessary skills and experience to bring independent judgement to bear on,
issues of strategy, performance and resources.
Directors nominate names of eminent professionals or academics from various disciplines to the BNC who peruse the profiles and
recommend suitable candidates to the Board.

3 (2) (vii) More than half the quorum to comprise Non-Executive Directors

Annual Report 2020

This requirement is strictly observed and it is noteworthy that the majority of the Board are NEDs.

3 (2) (viii) Identify Independent Non-Executive Directors in communications and disclose categories of Directors in this Annual Report
The Independent NEDs are expressly identified as such in all corporate communications that disclose the names of Directors of the
Bank. The composition of the Board, by category of Directors, including the names of the Chairman, Executive and Non-Executive
Directors and Independent and Non-Independent Directors are given on page 79.

Commercial Bank of Ceylon PLC

3 (2) (ix) Formal and transparent procedure for appointments to the Board
The Board has established a BNC, Terms of Reference of which comply with the specimen given in the Code of Best Practice on
Corporate Governance. The Board has also developed a succession plan together with the BNC to ensure the orderly succession of
appointments to the Board.

3 (2) (x) Election of Directors filling casual vacancies

All Directors appointed to the Board are subject to election by shareholders at the first AGM after their appointment.

3 (2) (xi) Communication of reasons for removal or resignation of Director

Resignations of Directors and the reasons are promptly informed to the regulatory authorities and shareholders as per CSE’s
Continuing Listing Requirements together with a statement confirming whether or not there are any matters that need to be
brought to the attention of shareholders.

3 (2) (xii) Prohibition of Directors or employees of a Bank becoming a Director of another bank
The Board and the BNC take into account this requirement in their deliberations when considering appointments of Directors.
None of the Directors are directors or employees of any other bank.
3 (3) Criteria to assess fitness and propriety of Directors
3 (3) (i) Age of Director should not exceed 70
There are no Directors who are over 70 years of age.

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 Section Principle, compliance, and implementation Complied

3 (3) (ii) Directors should not be Directors of more than 20 companies/entities/institutions inclusive of subsidiaries or associate
companies of the Bank.
No Director holds directorships in excess of 20 companies/entities/institutions inclusive of subsidiaries or associates of the Bank.
3 (4) Management functions delegated by the Board
Annex 2: Compliance with Governance Directions and Codes

3 (4) (i) Understand and study delegation arrangements

3 (4) (ii) Extent of delegation should not hinder the Board’s ability to discharge its functions

3 (4) (iii) Review delegation arrangements periodically to ensure relevance to operations of the Bank
The Board reviews and approves the delegation arrangements of the Bank annually and ensures that the extent of delegation
addresses the business needs of the Bank whilst enabling the Board to discharge their functions effectively. Consequently,
the Board takes time to study and understand the delegation arrangements as referred to in the Section 3 (4) (i) and (ii) above.
3 (5) The Chairman and Chief Executive Officer
3 (5) (i) Separation of roles
There is a clear separation of duties between the roles of the Chairman and the CEO, thereby preventing unfettered powers for
decision-making being vested with one person.
3 (5) (ii) A Non-Executive Independent Director as the Chairman or if not independent, designation of an Independent Director
as the Senior Director
The Chairman is an Independent Non-Executive Director.
Supplementary Information

3 (5) (iii) Disclosure of identity of Chairman and CEO and any relationships with the Board members
The identity of the Chairman and the CEO are disclosed in the Annual Report on page 66 Board of Directors and Profiles.
The Board is aware that there are no relationships whatsoever, including financial, business, family, any other material/relevant
relationship between the Chairman and the CEO. Similarly, no relationships prevail among the other members of the Board.
3 (5) (iv) Chairman to provide leadership to the Board
Board approved list of functions and responsibilities of the Chairman includes, “Providing leadership to the Board” as a
responsibility of the Chairman. The Board’s Annual Assessment Form includes an area to measure the “Effectiveness of the
Chairman in facilitating the effective discharge of Board functions”.
Annual Report 2020

All key and appropriate issues are discussed by the Board on a timely basis.
3 (5) (v) Responsibility for agenda lies with the Chairman but may be delegated to the Company Secretary
The Company Secretary draws up the agenda for the meetings in consultation with the Chairman.
3 (5) (vi) Ensure that Directors are properly briefed and provided adequate information
Commercial Bank of Ceylon PLC

The Chairman ensures that the Board is sufficiently briefed and informed regarding the matters arising at Board meetings.
The following procedures ensure that:
(a) Circulation of Board papers including minutes of the previous meeting seven days prior to meeting
(b) Clarification of matters by KMP when required
3 (5) (vii) Encourage active participation by all Directors and lead in acting in the interests of the Bank
This requirement is addressed in the list of functions and responsibilities of the Chairman approved by the Board.
3 (5) (viii) Encourage participation of Non-Executive Directors and relationships between Non-Executive and Executive Directors
Eight (8) members of the Board are NEDs which creates a conducive environment for active participation by the NEDs.
Additionally, NEDs chair the Committees of the Board providing further opportunity for active participation.
3 (5) (ix) Refrain from direct supervision of KMP and executive duties
The Chairman does not get involved in the supervision of KMP or any other executive duties.

3 (5) (x) Ensure effective communication with shareholders

The Bank historically has active shareholder participation at the AGM. At the AGM the shareholders are given the opportunity to take up
matters for which clarification is needed. These matters are adequately clarified by the Chairman and/or CEO and/or any other officer.
The shareholder participation at AGMs is given on pages 84 and 85 of the Annual Corporate Governance Report.

3 (5) (xi) CEO functions as the apex executive in charge of the day-to-day operations
The day-to-day operations of the Bank have been delegated to the CEO by the Board of Directors.

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Section Principle, compliance, and implementation Complied

3 (6) Board appointed committees

3 (6) (i) Establishing Board Committees, their functions and reporting
The Board has established nine (9) committees with written Terms of Reference for each of which five (5) are mandatory with
the remainder appointed to meet the business needs of the Bank. Each committee has a Secretary to arrange the meetings and

Annex 2: Compliance with Governance Directions and Codes

maintain minutes, records, etc., under the supervision of the Chairman of the Committee. The Reports of the Board Committees
are given on pages 86 to 100.
The Chairpersons of the Committees are available at the AGM to clarify any matters that may be referred to them by the Chairman.

3 (6) (ii) Board Audit Committee (BAC)

a. Chairman of the committee shall be an Independent Non-Executive Director who possesses qualifications and experience in
accountancy and/or audit
Chairman of the Committee, Mr R Senanayake is an Independent Non-Executive Director with qualifications and experience in
accountancy. Mr R Senanayake’s profile is given on page 69.

b. Committee to comprise solely of Non-Executive Directors

All members of the BAC are Independent Non-Executive Directors.

c. Board Audit Committee functions

In accordance with the Terms of Reference, the BAC has made the following recommendations:
(i) the appointment of the External Auditor for audit services to be provided in compliance with the relevant statutes;
(ii) the implementation of the Central Bank Guidelines issued to Auditors from time to time;
(iii) the application of the relevant Accounting Standards; and

Supplementary Information
(iv) the service period, audit fee and any resignation or dismissal of the Auditor.
The BAC ensures that the service period of the engagement of the external audit partner shall not exceed five (5) years, and that
the particular audit partner is not re-engaged for the audit before the expiry of three (3) years from the date of the completion of
the previous term.

d. Review and monitor External Auditor’s independence and objectivity and the effectiveness of the audit processes
The Board has adopted a policy of rotation of Auditors, once in every five (5) years, in keeping with the principles of good
corporate governance.

e. Provision of non-audit services by External Auditor

Annual Report 2020

Following action is taken prior to the assignment of non-audit services to External Auditors by the Bank:
(i) Considered whether the skills and experience of the audit firm make it a suitable provider of non-audit services
(ii) If the Management is of the view that the independence is likely to be impaired with the assignment of any non-audit services
to External Auditors, no assignment will be made to obtain such services.
(iii) Further, relevant information is obtained from External Auditors to ensure that their independence is not impaired,

Commercial Bank of Ceylon PLC

as a result of providing any non-audit services.
Assigning such non-audit services to External Auditors is discussed at BAC meetings and required approval is obtained to that effect.

f. Determines scope of audit

The Committee discussed the Audit Plan, nature and scope of the audit with External Auditors to ensure that it includes:
(i) an assessment of the Bank’s compliance with the relevant Directions in relation to corporate governance and the
management’s internal controls over financial reporting; and
(ii) the preparation of Financial Statements for external purposes in accordance with relevant accounting principles and reporting
obligations.
(iii) the co-ordination between the audit firms, when more than one audit firm is involved within the Group.

g. Review financial information of the Bank

The BAC reviews the financial information of the Bank, in order to monitor the integrity of the Financial Statements of the Bank,
its Annual Report, accounts and quarterly reports prepared for disclosure, and the significant financial reporting judgements
contained therein. The review focuses on the following:
(i) major judgemental areas;
(ii) any changes in accounting policies and practices;
(iii) significant adjustments arising from the audit;
(iv) the going concern assumption; and
(v) compliance with relevant Accounting Standards and other legal requirements.
The BAC makes their recommendations to the Board on the above on a quarterly basis.

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 Section Principle, compliance, and implementation Complied

h. Discussions with External Auditor on interim and final audits

The BAC discusses issues, problems and reservations arising from the interim and final audits with the External Auditor.
The Committee met on two (2) occasions with the External Auditor in the absence of executive staff of the Bank.
Annex 2: Compliance with Governance Directions and Codes

i. Review of management letter and Bank’s response

The BAC has reviewed the External Auditor’s Management Letter and the Management’s response thereto.

j. Review of internal audit function

The Annual Audit Plan prepared by the Internal Audit Department is submitted to the BAC for approval. This Plan covers the scope,
functions and resource requirements relating to the Audit Plan and has the necessary authority to carry out its work.
The services of five audit firms have been obtained to assist the Internal Audit Department to carry out the audit function. Prior
approval of the BAC has been obtained in this regard.
The Committee reviewed the reports submitted by Internal Audit Department and ensures that appropriate action is taken on the
recommendations.
The Assistant General Manager – Management Audit, who leads the Internal Audit Department, reports directly to the BAC and his
performance appraisal is reviewed by the BAC.
The BAC is to recommend any appointment, terminations/resignations of the head, senior internal audit staff members and
outsourced service providers to the internal audit function.
The above processes ensure that audit function is independent of the activities it audits and that it is performed with impartiality,
proficiency and due professional care.
Supplementary Information

Ensure that the committee is appraised of resignations of senior staff members of the internal audit department including the
chief internal auditor and any outsourced service providers, and to provide an opportunity to the resigning senior staff members
and outsourced service providers to submit reasons for resigning.

k. Internal investigations
The committee shall consider the major findings of internal investigations and management’s responses thereto.

l. Attendees at Board Audit Committee meetings

The Managing Director/CEO, Chief Financial Officer, Assistant General Manager – Management Audit and a representative of
the External Auditors normally attend meetings. Other Board members may also attend meetings upon the invitation of the
Annual Report 2020

Committee. The Committee met with the External Auditors without the Executive Directors being present on two (2) occasions
during the year. Refer the “Report of the BAC” given on pages 86 to 88.

m. Explicit authority, resources and access to information

The Terms of Reference for the BAC includes:
(i) explicit authority to investigate into any matter within its Terms of Reference;
Commercial Bank of Ceylon PLC

(ii) the resources which it needs to do so;

(iii) full access to information; and
(iv) authority to obtain external professional advice and to invite outsiders with relevant experience to attend, if necessary.
Refer the “Report of the BAC” on pages 86 to 88.

n. Regular meetings
The BAC has scheduled regular quarterly meetings and additional meetings are scheduled when required. Accordingly, the
Committee met seven (7) times during the year. Members of the BAC are served with due notice of issues to be discussed and the
conclusions in discharging its duties and responsibilities are recorded in the minutes of the meetings maintained by the Secretary
of the BAC.

o. Disclosure in Annual Report

The “Report of the BAC” on pages 86 to 88 includes the following:

(i) details of the activities of the Audit Committee;
(ii) the number of BAC meetings held in the year; and
(iii) details of attendance of each individual Director at such meetings.

p. Maintain minutes of meetings

Assistant General Manager – Management Audit serves as the Secretary for the BAC and maintains minutes of
the Committee meetings.

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Section Principle, compliance, and implementation Complied

q. Whistle-blowing policy and relationship with External Auditor

The Bank has a whistle-blowing policy which has been reviewed and approved by the BAC and the Board of Directors.
Board’s responsibility towards encouraging communication on any non-compliance and unethical practices are addressed
in the Board Charter.

Annex 2: Compliance with Governance Directions and Codes

A process is in place and proper arrangements are in effect to conduct a fair and independent investigation and appropriate
follow-up action regarding any concerns raised by the employees of the Bank, in relation to possible improprieties in financial
reporting, internal controls or other matters.
The BAC is the key representative body for overseeing the Bank’s relations with the External Auditor and meets the External
Auditor on a regular basis to discharge this function.

3 (6) (iii) Board Human Resources and Remuneration Committee (BHRRC)

Charter of the Committee

The BHRRC is responsible for:
(a) determining the remuneration policy relating to Directors, CEO and KMP;
(b) setting goals and targets for the Directors, CEO and KMP; and
(c) evaluating performance of the CEO and KMP against agreed targets and goals and determining the basis for revising
remuneration, benefits and other payments of performance-based incentives.
(d) The CEO attends all meetings of the Committee, except when matters relating to the CEO are being discussed.
Refer the “Report of the BHRRC” on pages 93 and 94.

3 (6) (iv) Board Nomination Committee (BNC)

Supplementary Information
a. Appointment of Directors, CEO and KMP

Appointment of Directors, CEO and Members of the Corporate Management

The Committee has developed and implemented a procedure to appoint new Directors, CEO and the members of the Corporate
Management.
The Committee is chaired by the Chairman of the Bank and comprises two other NEDs, whom are independent. The CEO may be
present at meetings by invitation. Refer the “Report of the BNC” on page 91 and 92.

b. Re-election of Directors

Annual Report 2020

The Committee makes recommendations regarding the re-election of current Directors, considering the performance and
contribution made by the Director concerned towards the overall discharge of the Board’s responsibilities also considering
the requirements of the Articles of Association. Refer the “Statement of Compliance” given on pages 101 to 106.

c. Eligibility criteria for appointments to key managerial positions including CEO

The Committee sets the eligibility criteria to be considered, including qualifications, experience and key attributes, for

Commercial Bank of Ceylon PLC

appointment or promotion to key managerial positions including the position of the CEO. The Committee considers the applicable
statutes and guidelines in setting the criteria.

d. Fit and proper persons

The Committee obtains annual declarations from Directors, CEO and COO to ensure that they are fit and proper persons to hold
office as specified in the criteria given in the Section 3 (3) of this Direction and as set out in the statutes.
Further, the BHRRC obtains declaration from KMP to ensure that they too are fit and proper persons to hold office as specified
in the said Direction.

e. Succession plan and new expertise

The Committee has developed a succession plan for the Directors and KMP. The need for new expertise may be identified by the
Board or its Committees and brought to the attention of the BNC who will take appropriate action.

f. Committee to be chaired by an independent Director

The Committee was chaired by an Independent Non-Executive Director and the CEO was attended at the meetings by invitation.
3 (6) (v) Board Integrated Risk Management Committee (BIRMC)
a. Composition of BIRMC
The Committee comprises NEDs, the Managing Director/CEO and the Chief Risk Officer (CRO) who serves as a non-board member.
Other KMP supervising credit, market, liquidity, operational, and strategic risks are invited to attend the meetings on a regular basis.

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 Section Principle, compliance, and implementation Complied

b. Risk assessment
The Committee has approved the policies on Credit Risk Management, Market Risk Management and Operational Risk
Management, which provide a framework for management and assessment of risks. Accordingly, monthly information on
pre-established risk indicators is reviewed by the Committee in discharging its responsibilities as per the Terms of Reference.
Annex 2: Compliance with Governance Directions and Codes

c. Review of management level committees on risk

The Committee shall review the adequacy and effectiveness of all management level Committees such as Credit Policy
Committee, Asset and Liability Management Committee (ALCO), Executive Integrated Risk Management Committee (EIRMC) etc.,
to assess their adequacy and effectiveness in addressing specific risks and managing them within the quantitative and qualitative
risk limits specified by the Board of Directors. These limits are set out in the Risk Appetite Statement of the Bank and are reviewed
by the Board on a regular basis.
d. Corrective action to mitigate risks exceeding prudential levels
Actual exposure levels under each risk category are monitored against the tolerance levels when preparation of “Risk Profile
Dashboard” of the Bank, which is circulated among members of the BIRMC monthly and discussed in detail at quarterly meetings.
The Committee takes prompt corrective action to mitigate the effects of specific risks in the case, such risks are at levels beyond
the prudent levels decided by the Committee on the basis of the Bank’s policies and regulatory and supervisory requirements.
e. Frequency of meetings
The Committee meets quarterly and schedules additional meetings when required. The agenda covers matters assessing all
aspects of risk management including updated business continuity plans. The Committee met five times during 2020.
f. Actions against officers responsible for failure to identify specific risks or implement corrective action
Supplementary Information

The Committee refers such matters, if any, to the Human Resources Department for necessary action with observations and
suggestions.
g. Risk Assessment Report to the Board
A comprehensive report of the meeting is submitted to the Board after each Committee meeting, by the Secretary of the
Committee for their information, views, concurrence or specific directions.
h. Compliance function
A compliance function has been established to assess the Bank’s compliance with laws, regulations, regulatory guidelines, internal
Annual Report 2020

controls and approved policies on all areas of business operations. This function is headed by a dedicated Compliance Officer who
reports to the BAC and the BIRMC. The Compliance Officer submits a Positive Assurance Certificate on Compliance with mandatory
banking and other statutory requirements on a quarterly basis to BAC and BIRMC.
3 (7) Board Related Party Transactions Review Committee (BRPTRC)
3 (7) (i) Avoid conflict of interest
Commercial Bank of Ceylon PLC

The BRPTRC oversees the processes relating to this subject and their Report is on page 95.
All members of the Board are required to make declarations of the positions held with related parties at the time of appointment
and annually thereafter. This information is provided to the Finance Department, to capture relevant transactions. In the event of
any change (during the year), the Directors are required to make a further declaration to the Company Secretary.
Directors refrain from participating at relevant sessions, in which lending to related entities are discussed to avoid any kind of
an influence and conflict of interest.
Transactions carried out with related parties as defined by the Sri Lanka Accounting Standard – LKAS 24 on “Related Party
Disclosures”, in the normal course of business, are disclosed in Note 63 to the Financial Statements on “Related Party Disclosures”
on pages 255 to 259.
Directors’ interest in contracts, which do not fall into the definition of related party transactions as per LKAS 24, are reported
separately in the Annual Report, outside the Financial Statements. Refer page 113 for more details.
3 (7) (ii) Related party transactions covered by direction

The Related Party Transactions Policy approved by the Board, covers the following transactions:
(a) The grant of any type of accommodation, as defined in the Monetary Board’s Directions on maximum amount of
accommodation;
(b) The creation of any liabilities of the Bank in the form of deposits, borrowings and investments;
(c) The provision of any services of a financial or non-financial nature to the Bank or received from the Bank;
(d) The creation or maintenance of reporting lines and information flows between the Bank and any related parties, which
may lead to sharing of potentially proprietary, confidential or otherwise sensitive information that may give benefits to
such related parties.

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Section Principle, compliance, and implementation Complied

3 (7) (iii) Prohibited transactions

The Bank’s Related Party Transactions Policy prohibits transactions, which would grant related parties more favourable treatment
than that accorded to other customers. These include the following:
(a) Granting of “total net accommodation” to related parties, exceeding a prescribed percentage of the Bank’s regulatory capital;

Annex 2: Compliance with Governance Directions and Codes

(b) Charging of a lower rate of interest than the Bank’s best lending rate or paying more than the Bank’s deposit rate for a
comparable transaction with an unrelated comparable counterparty;
(c) Providing of preferential treatment, such as favourable terms, covering trade losses and/or waiving fees/commissions,
that extend beyond the terms granted in the normal course of business undertaken with unrelated parties;
(d) Providing services to or receiving services from a related party without an evaluation procedure;
(e) Maintaining reporting lines and information flows that may lead to sharing potentially proprietary, confidential or otherwise
sensitive information with related parties, except as required for the performance of legitimate duties and functions.

3 (7) (iv) Granting accommodation to a Director or close relation of a Director

A procedure is in place for granting accommodation to Directors or to a close relation/Close Family Member (CFM) of Directors.
Such accommodation requires approval at a meeting of the Board of Directors, by not less than two-third of the number of
Directors, other than the Director concerned, voting in favour of such accommodation or through circulation of papers, which
require approval by all. The terms and conditions of the facility include a proviso that it will be secured by such security, as may
from time to time be determined by the Monetary Board as well. Refer section on “Conflicts of Interest” on page 78 for more details.

3 (7) (v) Accommodations granted to persons, concerns of persons, or close relations of persons, who subsequently are appointed as
Directors of the Bank
The Company Secretary obtains declarations/affidavits from all Directors prior to their appointment and they are requested to

Supplementary Information
declare any further transactions.
Employees of the Bank are aware of the requirement to obtain necessary security, as defined by the Monetary Board, if the
need arises.
Processes for compliance with this regulation is also monitored by the Compliance Unit.

3 (7) (vi) Favourable treatment or accommodation to bank employees or their close relations
No favourable treatment/accommodation is provided to Bank employees, other than staff benefits. Employees of the Bank are
informed through operational circulars, to refrain from granting favourable treatment to other employees or their close relations
or to any concern in which an employee or close relation has a substantial interest.

Annual Report 2020

3 (7) (vii) Remittance of accommodation subject to Monetary Board approval
No such situation has arisen during the year.

3 (8) Disclosures

3 (8) (i) Publish annual and quarterly financial statements

Commercial Bank of Ceylon PLC

Annual Audited Financial Statements and Interim Financial Statements of the Bank were prepared and published during 2020
in the newspapers (in Sinhala, Tamil and English), in accordance with the formats prescribed by the Supervisory and Regulatory
Authorities and applicable accounting standards.

3 (8) (ii) Disclosures in Annual Report

a. A statement to the effect that the Annual Audited Financial Statements have been prepared in line with applicable
accounting standards and regulatory requirements, inclusive of specific disclosures
Disclosures on the compliance with the applicable accounting standards and regulatory requirements in preparation of the
Annual Audited Financial Statements, have been made in the “Statement of Directors’ Responsibility for Financial Reporting” and
“Managing Director’s and Chief Financial Officer’s Statement of Responsibility”. Refer pages 107 and 108, 112 respectively.

b. Report by the Board on the Bank’s internal control mechanism

The Annual Report includes the reports where the Board confirms that the financial reporting system has been designed to
provide reasonable assurance regarding the reliability of financial reporting and that the preparation of Financial Statements for
external purposes has been done in accordance with relevant accounting principles and regulatory requirements. Please refer the
following statements for more details.
Annual Report of the Board of Directors on page 3.
Statement of Compliance on pages 101 to 106.
Statement of Directors’ Responsibility for Financial Reporting on pages 107 and 108.
Directors’ Statement on Internal Control over Financial Reporting on pages 109 and 110.

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 Section Principle, compliance, and implementation Complied

c. External Auditors Certification on the Effectiveness of the Internal Control Mechanism

The Bank has obtained a certificate on the Effectiveness of Internal Controls over financial reporting, which is published
on page 111.
Annex 2: Compliance with Governance Directions and Codes

d. Details of Directors, including names, fitness and propriety, transactions with the Bank and the total of fees/remuneration
paid by the Bank

z Profiles of Board members are given on pages 66 to 69.

z Directors’ Interests in Contracts with the Bank on page 113.
z Details of remuneration paid by the Bank are given in Note 21 to the Financial Statements on page 186.

e. Total accommodation granted to each category of related party and as a percentage of the Bank’s regulatory capital
The net accommodation granted to each category of related party as a percentage of the Bank’s Regulatory Capital are
given below:
Direct and indirect accommodation to related parties as at December 31, 2020.
Category of related party Rs. Mn. %

a Subsidiary companies of the Bank 1,498 0.87

b Associate of the Bank – –
c Directors of the Bank* 34 0.02
D Members of the Corporate Management of the Bank 244 0.14
Supplementary Information

e Close relations of the Bank’s directors or members of the Corporate Management 47 0.03
f Shareholder owning a material interest in the Bank – –
g Entities in which Directors/KMP or their close relations have a substantial interest 3,826 2.23
* Include both NEDs and EDs

f. Aggregate values of remuneration to and transactions with Directors and members of the Corporate Management

Remuneration paid and transactions with KMP Rs. Mn.

Annual Report 2020

Remuneration paid for the year ended December 31, 2020 437
Accommodation granted – as at December 31, 2020 291
Deposits – as at December 31, 2020 487
Investments – as at December 31, 2020 23
Commercial Bank of Ceylon PLC

g. External Auditors Certification of Compliance

The factual findings report has been issued by the External Auditors on the level of compliance with the requirements of
these regulations.
The findings presented in their report addressed to the Board did not identify any inconsistencies to those reported above.

h. Report confirming compliance with prudential requirements, regulations, laws, and internal controls
The Statement of Directors’ Responsibility for Financial Reporting on pages 107 and 108 clearly sets out details regarding
compliance with prudential requirements, regulations, laws, and internal controls. There were no instances of non-compliance
during the year.

i. Non-compliance Report
There were no supervisory concerns on lapses in the Bank’s Risk Management Systems or non-compliance with the Direction
that have been pointed out by the Director of the Bank Supervision Department of the CBSL and therefore, there is no disclosure
in this regard.

3 (9) Transitional and other general provisions

The Bank has complied with the transitional provisions, where applicable.

320
Annex 2.2: Compliance with Code of Best Practice on Corporate Governance

Compliance with the Code of Best Practice on Corporate Governance 2017 (the Code) issued by The Institute of Chartered Accountants of
Sri Lanka (CA Sri Lanka)
Code ref. Compliance and implementation Complied

Annex 2: Compliance with Governance Directions and Codes

A. Directors
A.1 The Board
The Board of Commercial Bank comprises ten (10) eminent professionals drawn from multiple fields and eight (08) out of them
are NEDs. They bring diverse perspectives and independent judgement to deliberate of matters set before the Board.
Directors are elected by shareholders at the AGMs with the exception of the Chief Executive Officer (CEO) and the Chief
Operating Officer (COO) who are appointed by the Board and remain as Executive Directors until retirement, resignation or
termination of such appointment. Casual vacancies are filled by the Board based on the recommendations of the BNC as
provided for in the Articles of Association. The Board is assisted by the Company Secretary.
A.1.1 Regular meetings
The Board meets on a monthly basis and each Board Committee also has its own schedule of meetings as set out in the
respective Committee reports. The regularity of Board meetings and the structure and process of submitting information have
been agreed to and documented by the Board. Attendance at meetings is summarised in Table 29 on page 79.
Information required to be reported under this Section is reported on a regular basis.
A.1.2 Role and responsibilities of the Board
The roles and responsibilities of the Board are set out in the Board Charter as summarised on page 82.

Supplementary Information
A.1.3 Act in accordance with laws
The Board has an approved working procedure in place to facilitate compliance with the relevant laws, CBSL Directions
and guidelines and international best practice with regard to the operations of the Bank. This includes provision to obtain
independent professional advice as and when necessary by any Director coordinated through the Company Secretary.
A.1.4 Access to advice and services of Company Secretary
All Directors are able to obtain the advice and services of the Company Secretary. The appointment and removal of the
Company Secretary is a matter involving the whole Board under advisement of the BNC as it is a Key Management Position.

Annual Report 2020

The Bank has obtained appropriate insurance cover as recommended by the BNC for the Board, Directors and the Members of
the Corporate Management.
Please refer page 83 on “Role of the Company Secretary” for further details on role of the Company Secretary.
A.1.5 Independent judgement
The Board comprises of senior professionals who are luminaries in their respective fields and use their independent judgement
in discharging their duties and responsibilities on matters of strategy, performance, resource allocation, risk management,

Commercial Bank of Ceylon PLC

compliance, and standards of business conduct. The composition of the Board ensures that there is a sufficient balance of
power and contribution by all Directors which minimises the tendency for one or a few members of the Board to dominate the
Board processes or decision-making.
A.1.6 Dedicate adequate time and effort to matters of the Board and the Company
Board meetings and Board Committee meetings are scheduled well in advance and the relevant papers are circulated a
week prior to the meeting using electronic means to ensure that Directors have sufficient time to review the same and call
for additional information or clarifications, if required. While there is provision to circulate papers closer to the meeting in
exceptional circumstances, this is generally discouraged. Members of the Corporate Management Team and external experts
make presentations to the Board on the business environment, regulatory changes, operations, and other developments on a
regular basis to facilitate enhancing the knowledge of the Board on matters relevant to the Bank’s operations.
The NEDs dedicate approximately eighty-four (84) days per annum for the affairs of the Bank and those Directors who are also
on the BAC and the BIRMC dedicate at least further ten (10) days each for the affairs of the Bank.
A.1.7 If necessary in the best interest of the Bank, one-third of the Directors can call for a resolution to be presented to the Board.

A.1.8 Board induction and training

Refer the Section on “Induction and Training of Directors” on page 83.
A.2 Separating the business of the Board from the executive responsibilities for management of the Company
The positions of the Chairman and the CEO have been separated in line with best practice in order to maintain a balance
of power and authority. The Chairman is an Independent Non-Executive Director whilst the CEO is an Executive Director
appointed by the Board. The roles of the Chairman and the CEO are clearly defined in the approved Board paper and the
Board Charter.

321
 Code ref. Compliance and implementation Complied

A.3 Chairman’s role in preserving good corporate governance

The Chairman provides leadership to the Board, preserving order and facilitating the effective discharge of duties of the
Board and is responsible for ensuring the effective participation of all Directors and maintaining open lines of communication
with KMP, acting as a sound Board on strategic and operational matters. The agenda for Board meetings is developed by the
Annex 2: Compliance with Governance Directions and Codes

Chairman in consultation with the Directors, the CEO, and the Company Secretary, taking into consideration matters relating
to strategy, performance, resource allocation, risk management, and compliance. Sufficiently detailed information on matters
included in the agenda is provided to the Directors on time. Both Executive and NEDs ensure the balance of power on the
Board, for the benefit of the Bank, by effectively participating in decision making. All Directors have been made aware of
their duties and responsibilities and the Board and Committee structures. All Directors are encouraged to seek information
necessary to discuss matters on the agenda. Views expressed by Directors on issues under consideration are recorded in the
minutes.
A.4 Availability of financial acumen and knowledge to offer guidance on matters of finance
The Chairman of the BAC who is a NED is a Fellow Member of the CA Sri Lanka ensuring a sufficiency of financial acumen
within the Board on matters of finance. Additionally, the Executive Directors and two NEDs are professional bankers with vast
experience on matters of finance.
A.5 Board balance
The Chairman is an Independent Non-Executive Director. The Board comprises eight (8) NEDs and two (2) Executive Directors
facilitating an appropriate balance within the Board. NEDs are independent of management and free of business dealings
that may be perceived to interfere with the exercise of their unfettered and independent judgement. They submit annual
declarations to this effect which are evaluated to ensure compliance with the criteria for determining independence in line
with the requirements of the applicable regulations and this Code. There are no alternate Directors appointed to represent the
Directors of the Bank.
Supplementary Information

A.6 Provision of appropriate and timely information

Board members receive information regarding matters set before the Board seven days prior to the meetings. The Chairman
ensures that all Directors are properly briefed on same by requiring the presence of members of the Corporate Management
when deemed necessary. Management also makes presentations on regular agenda items to the Board and its Committees.
Additionally, the Directors have access to members of the Corporate Management to seek clarifications or additional
information on matters presented to the Board. Directors who are unable to attend a meeting is updated on proceedings
through formally documented minutes, which are also discussed at the next meeting to ensure follow-up and proper
recording. Minutes of a meeting is ordinarily provided to Directors at least within two (2) weeks after the meeting date.
A.7 Appointments to the Board and re-election
Annual Report 2020

Refer Sections on “Appointments/retirements and resignations of Directors” given on page 83 and Report of the BNC on
pages 91 and 92.
A.8 All Directors should submit themselves for re-election at regular intervals
Refer Sections on “Re-election/election of Directors” on page 83.
In the event of resignation of a Director prior to completion of his/her appointed term, such resignation including reasons for
Commercial Bank of Ceylon PLC

decision shall be communicated in writing.

A.9 Appraisal of Board and Board Committee performance
Refer Section on “Board and Board Committee Evaluations” on page 84.
A.10 Annual Report to disclose specified information regarding Directors
Information specified in the Code with regard to Directors is disclosed within this Annual Report as follows:
z Profiles including qualifications, expertise, material business interests and key appointments on pages 64 to 69.
z Directors’ Interest in contracts with the Bank on page 113.
z Remuneration paid to Directors in Note 21 to the Financial Statements on page 186.
z Related Party Disclosures in Note 63 to the Financial Statements on pages 255 to 259.
z Membership of committees and attendance at Board meetings and Committee meetings on page 79 and pages 86 to 100.

A.11 Appraisal of the CEO

Refer section on “Appraisal of the CEO” on page 84.

B. Directors’ remuneration
B.1 Remuneration procedure
Refer section on “Directors’ and Executive remuneration” on page 84 and Report of the BHRRC on pages 93 and 94.
B.2 Level and make-up of remuneration
Refer section on “Level and make up of remuneration” on page 84.

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Code ref. Compliance and implementation Complied

B.3 Disclosures related to remuneration in Annual Report

(i) Directors’ and Executive remuneration – Refer page 84.
(ii) Details of remuneration of the Board as a whole – Refer Note 21 to the Financial Statements on page 186.
(iii) Report of the BHRRC – Refer pages 93 and 94.

Annex 2: Compliance with Governance Directions and Codes

C. Relations with shareholders
C.1 Constructive use of the AGM and conduct of other General Meetings
The AGM provides a forum for all shareholders to participate in decision-making matters reserved for the shareholders which
typically include proposals to adopt the Annual Report and Accounts, appointment of Directors and Auditors and other matters
requiring special resolutions as defined in the Articles of Association or the Companies Act No. 07 of 2007 (as amended).
Separate resolutions are proposed for each substantially separate issue. The Chairman ensures the presence of the Chairmen
of the BAC, BHRRC, BNC and BRPTRC to respond to any questions that may be directed to them. Notice of the AGM is circulated
together with the Annual Report and Accounts which includes information relating to any other resolutions that may be set
before the shareholders at the AGM fifteen (15) working days in advance. The Bank ensures that all valid proxy appointments
received for the AGM are counted and properly recorded.
A summary of the procedures governing voting at General Meetings is included under “Shareholder engagement and voting”
section on page 84 and 85 of this Annual Report.
Where a vote is required on a show of hands, the Bank will ensure that information required under the Code will be made
available at the meeting and be published in the website within a month from the date of the AGM.
C.2 Communication with shareholders
The Shareholder Communication Policy sets out multiple channels of communication for engaging with shareholders.

Supplementary Information
Channels include investor relations section of the website at [Link] press releases and
notices in English, Sinhala and Tamil newspapers and required disclosures to the CSE which are published on the CSE website.
The Bank’s website provides information on risk management, economy and financial markets in addition to the financial
information. The Interim Financial Statements are published in English, Sinhala and Tamil newspapers within stipulated
deadlines. Every effort is made to ensure that the Annual Report provides a balanced review of the Bank’s performance.
The principal forum for shareholders is the AGM, while matters can also be raised through the Company Secretary. The Company
Secretary keeps the Board apprised of issues raised by the shareholders to ensure that they are addressed in an appropriate
manner in keeping with the corporate values of the Bank. Matters raised in writing are responded to in writing by the Company
Secretary.

Annual Report 2020

C.3 Disclosure of major and material transactions
The Shareholders Communication Policy addresses the need to disclose major and material transactions to shareholders as
required by the rules and regulations of the SEC and the CSE and the Bank has in place a defined process to comply with the
requirements. There were no transactions which would materially alter the Company’s or Group’s net assets nor any major
related party transactions apart from those disclosed as follows:
z Shareholder engagement and voting on page 84 and 85.

Commercial Bank of Ceylon PLC

z Statement of Compliance pages 101 to 106.
z Related Party Disclosures as disclosed in Note 63 to the Financial Statements on page 255 to 259.

D. Accountability and audit

D.1 Present a balanced and understandable assessment of the Company’s financial position, performance, business model,
governance, structure, risk management, internal controls, and challenges, opportunities and prospects
All efforts are taken to ensure that the Annual Report presents a balanced review of the Bank’s financial position, performance,
Business Model, Governance, Structure, Risk Management, Internal Controls, and Challenges, Opportunities and Prospects
combining narrative and visual elements to facilitate readability and comprehension. Due care has been exercised to ensure
that all statutory requirements are compiled within the Annual Report and the issue of interim communications on financial
performance which are reviewed by the BAC and recommended prior to publication. The following disclosures as required by
the Code are included in this Report:
z Management Discussion and Analysis – Refer pages 41 to 62.
z Annual Report of the Board of Directors – Refer page 3.
z Statement of Compliance – Refer pages 101 to 106.
z Statement of Directors’ Responsibility for Financial Reporting – Refer pages 107 and 108.
z Statement of Going Concern of the Company is set out in the Statement of Directors’ Responsibility for Financial Reporting –
Refer pages 107 and 108.
z Directors’ Statement on Internal Control over Financial Reporting – Refer pages 109 and 110.

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 Code ref. Compliance and implementation Complied

z Managing Director’s and Chief Financial Officer’s Statement of Responsibility on page 112.
z Independent Auditors’ Report on page 138 to 140.
z Related Party Transactions disclosed in Note 63 to the Financial Statements on pages 255 to 259 and the process in place is
described in the Report of the BRPTRC page 95.
Annex 2: Compliance with Governance Directions and Codes

In the unlikely event of the net assets of the Company falling below 50% of Shareholders’ Funds, the Board will summon an
Extraordinary General Meeting (EGM) to notify the shareholders of the position and to explain the remedial action being taken.
The Annual Report clearly explains how net assets have increased during the year in the Financial Review on pages 20 to 26.
D.2 Process of risk management and a sound system of internal control to safeguard shareholders’ investments and the
Company’s assets
The Board is responsible for determining the risk appetite for achieving the strategic objectives and formulates and
implements appropriate processes for risk management and internal control systems to safeguard shareholder investments
and assets of the Bank. The BIRMC assists the Board in discharge of its duties with regard to risk management and the BAC
assists the Board in the discharge of its duties in relation to internal control which in turn is supported by the Inspection
Department. Their responsibilities are summarised in the respective Committee Reports and have been formulated with
reference to the requirements of the Code, the Banking Act Direction No. 11 of 2007 on Corporate Governance and the Bank’s
business needs. The BIRMC is supported by the Integrated Risk Management function of the Bank and a comprehensive report
of how the Bank manages risk is included on pages 114 to 133 and the Report of the BIRMC on pages 89 and 90.
D.3 Board Audit Committee
The BAC of the Board comprises four (04) independent NEDs and a summary of its responsibilities and activities are given in
the Report of the BAC as appearing on pages 86 to 88 It is supported by the Internal Audit function of the Bank who reports
directly to the BAC. The Chairman of the Committee is Mr R Senanayake, a Fellow member of CA Sri Lanka. The Committee
has also appointed Mr Reyaz Mihular FCA, FCMA, Managing Partner of Messrs KPMG as a Consultant to the Committee who is
Supplementary Information

invited to the meetings. Refer Report of the BAC given on pages 86 to 88.
The Board also obtains assurance from its External Auditors on the effectiveness of internal controls on financial reporting
which is given on page 111.
D.4 Board Related Party Transactions Review Committee (BRPTRC)
The Bank formed a BRPTRC in December 2014 by early adopting the Code of Best Practice on Related Party Transactions as
issued by the SEC which requirement became mandatory from January 1, 2016. The Committee comprises four (4) Independent
Non-Executive Directors. The two Executive Directors also attend the meetings by invitation. A summary of responsibilities and
activities of the BRPTRC are given in the report of the BRPTRC on page 95.
Annual Report 2020

The Bank has a Board-approved Related Party Transactions Policy in place which addresses requirements under this section.
D.5 Code of Ethics

The Bank has an internally-developed Code of Business Conduct and Ethics which is applicable to Directors, other KMP, and all
other employees. The Bank also has Board approved policy applicable to dealing in shares of the Bank which are fully compliant
with the Listing Rules of the CSE.
Commercial Bank of Ceylon PLC

The Code of Conduct is in compliance with the requirements of the Schedule J of the Code on “Code of Business Conduct
and Ethics” which encompasses conflict of interest, bribery and corruption, entertainment and gifts, accurate accounting
and record-keeping, corporate opportunities, confidentiality, fair dealing, protection and proper use of Company assets
including information assets, compliance with laws, rules and regulations (including insider trading laws), fair and transparent
procurement practices, and encouraging the reporting of any illegal, fraudulent, or unethical behaviour. The Code also requires
any incidents involving any non-compliance be brought to the attention of those charged with governance. The BHRRC of the
Bank reviews the Code on an annual basis to ensure that it is sufficient and relevant with reference to the current operations
of the Bank. “Joint Message from the Chairman and his Predecessor” on pages 13 and 14 provides confirmation of the Bank’s
adherence to the code of Business Conduct and Ethics.
The Bank has a process in place to ensure that material and price sensitive information is promptly identified and reported
in accordance with the relevant regulations. All Executive Offices and members of the Corporate Management of the Bank
are required to declare details of their dealings in shares of the Bank in a prescribed format to the Company Secretary of the
Bank immediately. In addition, the Directors of the Bank too are required to disclose their dealings in shares of the Bank to the
Company Secretary, enabling him to make required disclosures on details of such transactions to the CSE. The Bank’s Chief
Financial Officer too monitors daily share transactions list to identify whether Directors, other KMP or employees involved in
financial reporting are dealing in shares.
D.6 Corporate governance disclosures
The Annual Corporate Governance Report from pages 75 to 85 comply with the disclosure requirements of Code of Best
Practice on Corporate Governance as specified in Principle D6.

324
Code ref. Compliance and implementation Complied

E. & F. Encourage voting at AGM

The Bank has 16,820 ordinary voting shareholders of which 724 are institutional shareholders. The Bank has regular dialogue
with the large institutional shareholders and any concerns of these institutional shareholders expressed at the meetings
is communicated to the Board as a whole. All shareholders are encouraged to exercise their voting powers at the AGM.

Annex 2: Compliance with Governance Directions and Codes

The Bank facilitates the analysis of its securities by encouraging both foreign and local analysts covering the Bank with
structured meetings where they are able to obtain information and explanations required for evaluating the current and
future performance of the Bank, sector and country. Additionally, the investor relations section on the Bank’s website has key
information required by shareholders and analysts. The Interactive Annual Report also has a tab where investors can provide
feedback and request for specified information.
All prospectuses include a clause which require all prospective investors in shares and debentures of the Bank to seek
independent professional advice before investing.

G. Internet of things and cyber security

The Bank is certified under the globally accepted, de-facto standard for Information Security Management System (ISMS) – ISO/
IEC 27001:2013 and Payment Card Industry Data Security Standard (PCI DSS), both focusing on ensuring confidentiality, integrity
and availability of data/ information. Accordingly, the Bank’s ISMS is established adhering to the rigorous management, physical
and technical controls pertaining to information security as required by the two security standards, as well as the requirements
stipulated in the Baseline Security Standard mandated by the CBSL, for protecting information systems from cyber threats.
The Bank has appointed a Chief Information Security Officer (CISO) reporting to the MD/CEO to provide leadership to the
Bank’s overall information security function. The Information Security Council (ISC) which is the apex Management-level body
responsible for the information security of the Bank is chaired by the CEO, and reports to the Board of Directors through the BIRMC
charged with oversight responsibilities for information and cyber risk management.
The Bank has in place a comprehensive, Board approved Information Security Policy (ISP) which defines all the security

Supplementary Information
requirements to be fulfilled by employees, partners and other external parties as per the ISMS Framework.
In line with the ISP, the Bank has established an Information Security Risk Assessment Policy, and as per the said Policy,
information/ cyber security risk assessments are carried out periodically. Risk levels associated with processes/ systems are
evaluated during the review. Where residual risk levels are above the defined acceptable thresholds, risk treatment plans are
defined for mitigation of these systems/ processes and the remediation is prioritized based on the risk level. Further, Bank
conducts technical security assessments such as vulnerability assessments, penetration tests, application security assessments,
configuration assessments, etc periodically (monthly, quarterly, bi-annually and annually) as per the Bank’s policies and
compliance requirements (e.g.: PCI DSS, CBSL), in order to gauge the cyber risk profile of the Bank. The ISMS is independently
validated on an annual basis by the ISO 27001 ISMS external auditors and Qualified Security Assessors of the PCI Council.

Annual Report 2020

Performance of the ISMS and any deviations, information security road-map/ progress of cyber security projects as well as the
information security risk profile of the Bank is regularly reported to the ISC, and the BIRMC is kept updated periodically through
risk indicators and other reports. Further, sufficient time is allocated in the agenda of the BTC for discussion on cyber risk
management.
Minutes of both the BIRMC and the BTC meetings are submitted to the Board for information. Refer reports of the BIRMC and BTC
on pages 89 and 90 and 98 and 99 for further information.

Commercial Bank of Ceylon PLC

H. Environment, Society and Governance (ESG)
H.1 ESG reporting
The Bank is an early champion of ESG and ESG reporting. ESG principles are embedded in our business operations and
considered in formulating our business strategy as described in this Annual Report. Information required by the Code is given
in the following sections of the Annual Report:
z Management Discussion and Analysis on pages 41 to 62.
z Governance and Risk Management on pages 64 to 133.
z Connecting with Stakeholders and Materiality Matters on pages 27 to 31.
This Annual Report has been prepared in accordance with the IIRC Framework, the GRI Guidelines and “A Preparer’s Guide to
Integrated Corporate Reporting” published by CA Sri Lanka.
Refer “Introducing our 52nd Annual Report” on page 4.

325
 Annex 2.3: Disclosure Requirements in Annual Financial Statements as required
by the CBSL
Disclosure requirements under the prescribed format issued by the Central Bank of Sri Lanka for preparation, presentation and publication
of Annual Audited Financial Statements of Licensed Commercial Banks via the Circular No. 02 of 2019 dated January18, 2019 (effective from
Annex 2: Compliance with Governance Directions and Codes

January 01, 2018)

Disclosure requirements Description Page No/s.

1. Information about the significance of financial instruments for financial position and performance
1.1 Statement of Financial Position
1.1.1 Disclosures on categories of financial assets and financial liabilities. Notes to the Financial Statements:
Note 26 – Classification of financial assets and financial liabilities 190 to 192
1.1.2 Other disclosures
(i) Special disclosures about financial assets and financial Significant Accounting Policies:
liabilities designated to be measured at fair value through The Bank has not designated any financial asset/liability at fair
profit or loss, including disclosures about credit risk and market value through profit or loss. –
risk, changes in fair values attributable to these risks and the
methods of measurement.
(ii) Reclassifications of financial instruments from one category Significant Accounting Policies:
to another. Note 7.1.6 – Reclassification of financial assets and liabilities 169
(iii) Information about financial assets pledged as collateral and Notes to the Financial Statements:
about financial or non-financial assets held as collateral. Note 68.1.4 – Collateral Held 275
(iv) Reconciliation of the impairment allowance account for credit Notes to the Financial Statements:
losses by class of financial assets. Movement in provision for impairment during the year for
Supplementary Information

each classes of assets are given in Notes 28.1 – Cash and cash 196
equivalents, 30.1 – Placements with banks, 33.1 – Financial assets at 197 & 202
amortised cost – Loans and advances to banks, 34.2 and 204
34.3 (c) – Financial assets at amortised cost – Loans and advances 205
to other customers and Lease/hire purchase receivable,
35.1 – Financial assets at amortised cost – Debt and other financial 206
instruments, 36.2 – Financial assets measured at fair value through 208
other comprehensive income
(v) Information about compound financial instruments with The Bank does not have compound financial instruments with –
multiple embedded derivatives. multiple embedded derivatives.
(vi) Breaches of terms of loan agreements. None –
Annual Report 2020

1.2 Statement of Comprehensive Income

1.2.1 Disclosures on items of income, expense, gains, and losses. Notes to the Financial Statements:
Notes 12 to 23 to the Financial Statements 178 to 188
1.2.2 Other disclosures
(i) Total interest income and total interest expense for those Notes to the Financial Statements:
Commercial Bank of Ceylon PLC

financial instruments that are not measured at fair value Note 13 – Net interest income 178 to 180
through profit and loss.
(ii) Fee income and expense. Notes to the Financial Statements:
Note 14 – Net fee and commission income 180 to 181
(iii) Amount of impairment losses by class of financial assets. Notes to the Financial Statements:
Note 18 – Impairment charges and other losses 182 to 185
(iv) Interest income on impaired financial assets. Notes to the Financial Statements:
Note 13.1 – Interest income 178
1.3 Other disclosures
1.3.1 Accounting policies for financial instruments. Significant Accounting Policies:
Note 7.1 – Financial instruments – Initial recognition,
classification and subsequent measurement 165
1.3.2 Information on financial liabilities designated at FVTPL. The Group/Bank has not designated any financial liability at FVTPL –
1.3.3 Investments in equity instruments designated at FVOCI Notes to the Financial Statements:
(i) Details of equity instruments that have been designated Note 36 – Financial assets measured at fair value through other 207 to 209
at FVOCI and the reasons for the designation. comprehensive income
(ii) Fair value of each investment at the reporting date. Notes to the Financial Statements:
Note 36.3 (a) and 36.3 (b) – Equity securities 208 & 209
(iii) Dividends recognised during the period, separately for Notes to the Financial Statements:
investments derecognised during the reporting period and Note 17 – Net other operating income 182
those held at the reporting date.
(iv) Transfer of cumulative gain or loss within equity during the Statement of Profit or Loss and Other Comprehensive Income and 144 and
period and the reasons for those transfers. Statement of Changes in Equity. 146 to 153

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Disclosure requirements Description Page No/s.

(v) If investments in equity instruments measured at FVOCI Statement of Profit or Loss and Other Comprehensive Income 144 and
are derecognised during the reporting period, and Statement of Changes in Equity. 146 to 153
– reasons for disposing of the investments
– fair value of the investments at the date of derecognition
– the cumulative gain or loss on disposal.

Annex 2: Compliance with Governance Directions and Codes

1.3.4 Reclassification of financial assets
(i) For all reclassifications of financial assets in the current or During the year 2020, the Bank reclassified financial assets as 169
previous reporting period disclosed under Note 7.1.6 Reclassification of financial assets and
– date of reclassification liabilities.
– detailed explanation of the change in the business model
and a qualitative description of its effect on the However, during the year 2019, the Bank did not reclassify financial
financial statements assets.
– the amount reclassified into and out of each category
(ii) For reclassifications from FVTPL to amortised cost or FVOCI During the current or previous year, the Bank did not reclassify –
– the effective interest rate (EIR) determined on the date financial instruments from FVTPL to amortised cost or FVOCI.
of reclassification
– the interest revenue recognised
(iii) For reclassifications from FVOCI to amortised cost, During the year 2020, the Bank reclassified financial assets as
or from FVTPL to amortised cost or FVOCI disclosed under Note 7.1.6 Reclassification of financial assets 169
– the fair value of the financial assets at the reporting date and liabilities
– the fair value gain or loss that would have been recognised During the year 2019, the Bank did not reclassify financial
in profit or loss or OCI during the reporting period if the instruments from FVOCI to amortised cost or from FVTPL to
financial assets had not been reclassified amortised cost or FVOCI.
1.3.5 Information on hedge accounting Significant Accounting Policies:

Supplementary Information
Note 7.1.5 – Derivatives held for risk management purposes and 168
hedge accounting
Notes to the Financial Statements:
Note 45.1 – Derivative financial assets – cash flow hedges for 231
risk management.
1.3.6 Information about the fair values of each class of financial
asset and financial liability, along with:
(i) Comparable carrying amounts. Notes to the Financial Statements:
Note 27.1 – Assets and liabilities measured at fair value and fair 193
value hierarchy, Note 27.3 – Financial instruments not measured 194

Annual Report 2020

at fair value and fair value hierarchy
(ii) Description of how fair value was determined. Significant Accounting Policies:
Note 4 – Fair value measurement 163
(iii) The level of inputs used in determining fair value. Notes to the Financial Statements:
Note 27.3 – Financial instruments not measured at fair value and 194
fair value hierarchy, Note 27.4 – Valuation techniques and inputs in 196

Commercial Bank of Ceylon PLC

measuring fair values, Note 39.5 (b) and 39.5 (c) – Information on 219 to 224
valuations of freehold land and buildings of the Bank
(iv) a. Reconciliations of movements between levels of fair value There were no movements between levels of fair value hierarchy –
measurement hierarchy. during the year under review.
b. Additional disclosures for financial instruments that fair Notes to the Financial Statements:
value is determined using level 3 inputs. 194
Note 27.2 – Level 3 Fair value measurement
(v) Information if fair value cannot be reliably measured. None –

2. Information about the nature and extent of risks arising from financial instruments
2.1 Qualitative disclosures
2.1.1 Risk exposures for each type of financial instrument Significant Accounting Policies:
Note 3 – Financial Risk Management 160 to 162
Notes to the Financial Statements:
Note 68 – Financial Risk Review 261 to 290
2.1.2 Management’s objectives, policies and processes Significant Accounting Policies:
for managing those risks. Note 3 – Financial Risk Management 160 to 162
Refer the Section on “Risk Governance and Management” for
comprehensive disclosure of Management’s objectives,
policies and processes. 114 to 133
2.1.3 Changes from the prior period. There were no major policy changes during the year –
under review.
2.2 Quantitative disclosures
2.2.1 Summary of quantitative data about exposure to each risk at the Notes to the Financial Statements:
reporting date. Note 68 – Financial Risk Review 261 to 290

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 Disclosure requirements Description Page No/s.

2.2.2 Disclosures about credit risk, liquidity risk, market risk, operational
risk, interest rate risk and how these risks are managed.
(i) Credit risk
(a) Maximum amount of exposure (before deducting the value Notes to the Financial Statements:
Annex 2: Compliance with Governance Directions and Codes

of collateral), description of collateral, information about Note 68.1.1 – Credit Quality Analysis 263 to 274
credit quality of financial assets that are neither past due nor
impaired and information about credit quality of financial Note 68.1.4 – Collateral Held 275
assets.
(b) For financial assets that are past due or impaired, disclosures Notes to the Financial Statements:
on age, factors considered in determining as impaired and the Note 68.1.1 – Credit Quality Analysis 263 to 274
description of collateral on each class of financial asset. Note 18 – Impairment charges and other losses – collateral valuation 182 to 185
for description on collaterals
Note 68.1.4 – Collateral Held 275
Significant Accounting Policies:
Note 7.1.12 – Identification and measurement of impairment of 170 & 171
financial assets for factors considered in determining the financial
assets as impaired
(c) Information about collateral or other credit enhancements Notes to the Financial Statements:
obtained or called. Note 68.1.4 – Collateral held 275
(d) Credit risk management (CRM) practices
– Information about CRM practices and how they relate to the Significant Accounting Policies:
recognition and measurement Expected Credit Losses (ECL), Note [Link] – Overview of ECL principles 170 & 171
including the methods, assumptions and information used to
Notes to the Financial Statements:
measure ECL 182 to 185
Note 18 – Impairment charges and other losses
Supplementary Information

– Quantitative and qualitative information to evaluate the Notes to the Financial Statements:
amounts in the Financial Statements arising from ECL, Note 18 – Impairment charges and other losses 182 to 185
including changes and the reasons for those changes
– How the Bank determines whether the credit risk of Significant Accounting Policies: 171
financial instruments has increased significantly since initial Note [Link] – Significant increase in credit risk
recognition, including whether and how financial instruments
are considered to have low credit risk, including the classes of
financial instruments to which the low credit risk exception has
been applied; and the presumption that financial assets with
contractual payments more than 30 days past due (DPD) have
a significant increase in credit risk (SICR) has been rebutted
Annual Report 2020

– The Bank’s definitions of default for different financial Significant Accounting Policies:
instruments, including the reasons for selecting those Note [Link] – Definition of default and credit impaired assets 171
definitions
– How instruments are grouped if ECL are measured on a Notes to the Financial Statements:
collective basis Note 18 – Impairment charges and other losses 182 to 185
– How the Bank determines that financial assets are Significant Accounting Policies:
credit-impaired Note 7.1.12 – Identification and measurement of impairment 170 & 171
Commercial Bank of Ceylon PLC

of financial assets
– The Bank’s write-off policy, including the indicators that Notes to the Financial Statements:
there is no reasonable expectation of recovery Note 18 – Impairment charges and other losses - “Write off of 182 to 185
financial assets”
– How the modification requirements have been applied, Significant Accounting Policies: 170
including how the bank determines whether the credit risk of Note 7.1.8 – Modification of financial assets and financial liabilities
a financial asset that has been modified subject to a lifetime
ECL allowance has been improved to the extent that the loss
allowance reverts to being measured at an amount equal
to 12-month ECL and monitors the extent to which the loss
allowance on those assets subsequently reverts to being
measured at an amount equal to lifetime ECL
(e) ECL calculations
– Basis of the inputs, assumptions and the estimation Notes to the Financial Statements: 182 to 185
techniques used when Note 18 – Impairment charges and other losses – “Forward looking
– estimating 12 month and lifetime ECL information”
– determining whether the credit risk of financial instruments
has increased significantly since initial recognition; and
– determining whether the financial assets are credit-
impaired
– How forward-looking information has been incorporated Notes to the Financial Statements:
into the determination of ECL, including the use of macro- Note 18 – Impairment charges and other losses – “Forward looking
economic information; and information” 182 to 185
– Changes in estimation techniques or significant assumptions Significant Accounting Policies:
made during the reporting period and the reasons for those Note 5 – Changes in Accounting Policies 163
changes Note 7.1.12 – Identification and measurement of impairment of 170 & 171
financial assets

328
Disclosure requirements Description Page No/s.

(f ) Amounts arising from ECL

– Reconciliation for each class of financial instrument of the Notes to the Financial Statements:
opening balance to the closing balance of the impairment Movement in provision for impairment during the year for
loss allowance. each classes of assets are given in Notes 28.1 – Cash and cash 196
– Explain the reasons for changes in the loss allowances equivalents, 30.1 – Placements with banks, 33.1 – Financial assets 194 & 202

Annex 2: Compliance with Governance Directions and Codes

in the reconciliation. at amortised cost – Loans and advances to banks, 34.2 and 204
34.3 (c) – Financial assets at amortised cost – Loans and advances 205
to other customers and Lease/hire purchase receivables,
35.1 – Financial assets at amortised cost – Debt and other financial 206
instruments, 36.2 – Financial assets measured at fair value through 208
other comprehensive income.
(g) Collateral
– Amount that best represents the bank’s maximum exposure Notes to the Financial Statements:
to credit risk at the reporting date, without taking into Note 68.1 – Credit risk 262 to 278
account of any collateral held or other credit enhancements;
– Narrative description of collateral held as security and
other credit enhancements, (except for lease receivables),
including;
– discussion on the nature and quality of the collaterals held;
– explanation on any significant changes in quality as a result
of a deterioration of changes in the bank’s collaterals policies
during the reporting period;
– information about the financial instruments for which the
bank has not recognized a loss allowance because of the
collateral;
– quantitative information about the collateral held as security
and other credit enhancements;

Supplementary Information
– information about the fair value of the collateral and other
credit enhancements, or to quantify the exact value of the
collateral that was included in the calculation of ECL
(h) Written-off assets Notes to the Financial Statements:
– contractual amount outstanding of financial assets written Note 34.2 – Movement in provision for impairment during the year 204
off during the reporting period that are still subject to Note 17 – Net other operating income 182
enforcement activity
(i) Pillar III disclosures of the Banking Act Directions No. 1 of 2016 Notes to the Financial Statements:
on Capital requirements under Basel III for Licensed Banks Note 68.5 – Capital management and Pillar III disclosures as per 289 & 290
Basel III

Annual Report 2020

(ii) Liquidity risk
(a) A maturity analysis of financial liabilities. Notes to the Financial Statements:
Note 61 – Maturity Analysis – Group 251 to 253
Note 68.2.2 – Maturity analysis of financial assets and financial 280 to 283
liabilities – Bank
(b) Description of approach to risk management. Significant Accounting Policies:

Commercial Bank of Ceylon PLC

Note 3 – Financial Risk Management 160 to 162
Refer the Section on “Risk Governance and Management” 114 to 133
(c) Pillar III disclosures of the Banking Act Directions No. 1 of 2016 Annex 3 – Basel III – Disclosures under pillar 3 as per Banking 331 to 344
on Capital requirements under Basel III for Licensed Banks Act Direction No. 01 of 2016
(iii) Market risk
(a) A sensitivity analysis of each type of market risk to which Notes to the Financial Statements:
the Bank is exposed. Note 68.3.2 – Exposure to interest rate risk – sensitivity analysis 286 & 287
(b) Additional information, if the sensitivity analysis is not Notes to the Financial Statements:
representative of the Bank’s risk exposure. Note 68.3.3 – Exposure to currency risk – Non-trading portfolio 287 & 288
(c) Pillar III disclosures of the Banking Act Directions No. 1 of 2016 Annex 3 – Basel III – Disclosures under pillar 3 as per Banking 331 to 344
on Capital requirements under Basel III for Licensed Banks Act Direction No. 01 of 2016
(iv) Operational risk
Pillar III disclosures of the Banking Act Directions No. 1 of 2016 Annex 3 – Basel III – Disclosures under pillar 3 as per Banking 331 to 344
on Capital requirements under Basel III for Licensed Banks Act Direction No. 01 of 2016
(v) Equity risk in the banking book
(a) Qualitative Disclosures
z Differentiation between holdings on which capital gains are Notes to the Financial Statements:
expected and those taken under other objectives including Note 32 – Financial assets recognised through profit or loss – 198 to 201
for relationship and strategic reasons. measured at fair value
207 to 209
Note 36 – Financial assets measured at fair value through other
comprehensive income
z Discussion of important policies covering the valuation and Note 68.3.4 – Exposure to equity price risk 289
accounting of equity holdings in the banking book.

329
 Disclosure requirements Description Page No/s.

(b) Quantitative Disclosures

z Value disclosed in the Statement of Financial Position of Notes to the Financial Statements:
investments, as well as the fair value of those investments; Note 32 – Financial assets recognised through profit or loss – 198 to 201
for quoted securities, a comparison to publicly quoted share measured at fair value
values where the share price is materially different from fair
Annex 2: Compliance with Governance Directions and Codes

value. Note 36 – Financial assets measured at fair value through 207 to 209
other comprehensive income
z The types and nature of investments Significant Accounting Policies:
Note [Link] – Financial assets measured at FVOCI 167
167
Note [Link] – Financial assets measured at FVTPL
Notes to the Financial Statements:
Note 32 – Financial assets recognised through profit or loss – 198 to 201
measured at fair value
Note 36 – Financial assets measured at fair value through other 207 to 209
comprehensive income
z The cumulative realised gains/(losses) arising from sales and Notes to the Financial Statements:
liquidations in the reporting period Note 15 – Net gains/(losses) from trading 181
Note 16 – Net gains/(losses) from derecognition of financial assets 181
(vi) Interest rate risk in the banking book
(a) Qualitative Disclosures Notes to the Financial Statements:
z Nature of interest rate risk in the banking book Note 68.3.2 – Exposure to Interest Rate Risk – Sensitivity analysis 286 & 287
(IRRBB) and key assumptions. Refer the Section on “Risk Governance and Management” 114 to 133

(b) Quantitative disclosures

Supplementary Information

z The increase/(decline) in earnings or economic value Notes to the Financial Statements:

(or relevant measure used by management) for upward and Note 68.3.2 – Exposure to Interest Rate Risk – Sensitivity analysis 286 & 287
downward rate shocks according to the management’s method
Refer the Section on “Risk Governance and Management” 114 to 133
for measuring IRRBB, broken down by currency (as relevant).
2.2.3 Information on concentrations of risk. Notes to the Financial Statements:
Note 68.1.5 – Concentration of credit risk 275 to 278

3. Other disclosures
3.1 Capital
Annual Report 2020

3.1.1 Capital structure

(i) Qualitative disclosures
Summary information on the terms and conditions of the main Notes to the Financial Statements:
features of all capital instruments, especially in the case of Note 68.5 – Capital Management and Pillar III disclosures as per 289 & 290
innovative, complex, or hybrid capital instruments. Basel III
(ii) Quantitative disclosure
Commercial Bank of Ceylon PLC

(a) The amount of Tier 1 capital, with separate disclosure of: Notes to the Financial Statements:
z Paid-up share capital/common stock Note 68.5 – Capital Management and Pillar III disclosures as per 289 & 290
Basel III
z Reserves
Refer the Section on “Risk Governance and Management” 114 to 133
z Non-controlling interests in the equity of subsidiaries
z Innovative instruments
z Other capital instruments
z Deductions from Tier 1 capital

(b) The total amount of Tier 2 and Tier 3 capital

(c) Other deductions from capital
(d) Total eligible capital

3.1.2 Capital adequacy

(i) Qualitative disclosures
A summary discussion of the Bank’s approach to assessing the Notes to the Financial Statements:
adequacy of its capital to support current and future activities. Note 68.5 – Capital Management and Pillar III disclosures 289 & 290
as per Basel III
Refer the Section on “Risk Governance and Management” 114 to 133
(ii) Quantitative disclosures
(a) Capital requirements for credit risk, market risk, and Refer the Section on “Risk Governance and Management” 114 to 133
operational risk
(b) Total and Tier 1 capital ratio

330
Annex 3: Basel III – Disclosures under Pillar 3 as per
the Banking Act Direction No. 01 of 2016
Disclosure 1
Key regulatory ratios – Capital and liquidity
GROUP BANK
As at December 31, 2020 2019 2020 2019

Regulatory capital
Common equity (Rs. ’000) 139,730,833 123,239,984 134,689,261 119,622,141
Tier 1 capital (Rs. ’000) 139,730,833 123,239,984 134,689,261 119,622,141
Total capital (Rs. ’000) 176,611,213 160,842,808 171,396,831 157,045,547

Regulatory capital ratios

Common equity Tier 1 capital ratio (minimum requirement – 6.00%+HLA*=7.50%)
(w.e.f. March 27, 2020) (%) 13.356 12.399 13.217 12.298
Tier 1 capital ratio (minimum requirement – 7.50%+HLA=9.00%)
(w.e.f. March 27, 2020) (%) 13.356 12.399 13.217 12.298
Total capital ratio (minimum requirement – 11.50%+HLA=13.00%)
(w.e.f. March 27, 2020) (%) 16.882 16.182 16.819 16.146

Supplementary Information
Regulatory liquidity
Statutory liquid assets (Rs. ’000) 587,268,299 330,684,193
Statutory liquid assets ratio (minimum requirement – 20% )
Domestic Banking Unit (%) 44.99 30.42
Off-shore Banking Unit (%) 32.70 25.25
Liquidity coverage ratio (%) – Rupee
(minimum requirement – 90%) (w.e.f. May 5, 2020) 330.84 158.79
Liquidity coverage ratio (%) – All currency

Annual Report 2020

(minimum requirement – 90%) (w.e.f. May 5, 2020) 258.06 224.74

*HLA – Higher Loss Absorbency (Requirement applicable to the Bank is 1.500%.)

Disclosure 2
Basel III computation of capital ratios

Commercial Bank of Ceylon PLC

GROUP BANK
As at December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Common equity Tier 1 (CET1) capital after adjustments 139,730,833 123,239,984 134,689,261 119,622,141
Total common equity Tier 1 (CET1) capital 143,866,880 125,003,216 142,208,308 123,941,618
Equity capital (stated capital)/Assigned Capital 52,187,747 40,916,957 52,187,747 40,916,957
Reserve fund 9,285,232 8,387,701 9,024,067 8,205,391
Published retained earnings/(Accumulated retained losses) 4,124,307 4,688,718 3,670,981 4,714,691
Published accumulated other comprehensive Income (OCI) 2,171,371 2,691,325 1,922,007 2,516,082
General and other disclosed reserves 75,403,506 67,588,497 75,403,506 67,588,497
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 694,717 730,018 – –

331
 GROUP BANK
As at December 31, 2020 2019 2020 2019
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Total adjustment to CET1 capital 4,136,047 1,763,232 7,519,047 4,319,477

Goodwill (net) 445,147 445,147 – –
Intangible assets (net) 1,355,368 1,200,565 1,232,863 1,080,011
Revaluation losses of property, plant and equipment 3,813 3,813 3,813 3,813
Significant investments in the capital of financial institutions where the Bank owns
more than 10% of the issued ordinary share capital of the entity – – 3,782,513 2,941,594
Deferred tax assets (net) 2,331,719 113,707 2,499,858 294,059
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
Supplementary Information

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 36,880,380 37,602,824 36,707,570 37,423,406
Total Tier 2 capital 36,880,380 37,602,824 36,707,570 37,423,406
Qualifying Tier 2 capital instruments 22,235,336 26,704,378 22,235,336 26,704,378
Revaluation gains 2,848,860 3,087,658 2,848,860 3,087,658
General provision/eligible impairment 11,796,184 7,810,788 11,623,374 7,631,370
Annual Report 2020

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 139,730,833 123,239,984 134,689,261 119,622,141
Commercial Bank of Ceylon PLC

Total Tier 1 capital 139,730,833 123,239,984 134,689,261 119,622,141

Total capital 176,611,213 160,842,808 171,396,831 157,045,547
Total risk weighted amount (RWA) 1,046,175,415 993,941,563 1,019,068,225 972,679,405
Risk weighted amount for credit risk 955,864,361 925,876,884 929,869,882 905,525,098
Risk weighted amount for market risk 35,942,531 26,506,850 35,628,469 26,032,471
Risk weighted amount for operational risk 54,368,523 41,557,829 53,569,874 41,121,836
CET1 capital ratio (including capital conservation buffer, countercyclical capital buffer
and surcharge on D-SIBs) (%) 13.356 12.399 13.217 12.298
Of which: capital conservation buffer (%) 1.500 2.500 1.500 2.500
Of which: countercyclical buffer (%)
Of which: capital surcharge on D-SIBs (%) 1.500 1.500 1.500 1.500
Total Tier 1 capital ratio (%) 13.356 12.399 13.217 12.298
Total capital ratio (including capital conservation buffer,countercyclical capital
buffer and surcharge on D-SIBs) (%) 16.882 16.182 16.819 16.146
Of which: capital conservation buffer (%) 1.500 2.500 1.500 2.500
Of which: countercyclical buffer (%) – –
Of which: capital surcharge on D-SIBs (%) 1.500 1.500 1.500 1.500

332
Disclosure 3
Leverage ratio
GROUP BANK
As at December 31, 2020 2019 2020 2019
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Tier 1 capital 139,730,833 123,239,984 134,689,261 119,622,141

Total exposures 2,375,340,709 1,880,168,663 2,345,864,995 1,855,954,448
On-balance sheet items
(excluding derivatives and securities financing transactions, but including collateral) 1,751,851,828 1,390,884,732 1,722,426,381 1,366,732,527
Derivative exposures 424,368,169 349,780,784 424,368,169 349,780,784
Securities financing transaction exposures 103,367,009 49,182,189 103,367,009 49,182,189
Other off-balance sheet exposures 95,753,703 90,320,958 95,703,436 90,258,948
Basel III leverage ratio (%) (minimum requirement – 3%) (w.e.f. January 1, 2019) 5.88 6.55 5.74 6.45

Disclosure 4
Liquidity coverage ratio (LCR)
As at December 31, 2020 2019
Total Total Total Total
unweighted value weighted value unweighted value weighted value

Supplementary Information
Rs. '000 Rs. '000 Rs. '000 Rs. '000

Total stock of High Quality Liquid Assets (HQLA) 464,478,366 452,407,112 199,777,341 193,108,535
Total adjusted level 1 assets 385,571,117 385,571,117 119,969,825 119,969,825
Level 1 assets 385,571,117 385,571,117 119,797,458 119,797,458
Total adjusted level 2A assets 78,235,345 66,500,043 86,000,609 73,100,518
Level 2A assets 78,235,345 66,500,043 86,000,609 73,100,518
Total adjusted level 2B assets 671,904 335,952 421,118 210,559

Annual Report 2020

Level 2B assets 671,904 335,952 421,118 210,559
Total cash outflows 1,600,940,269 288,637,363 1,359,817,438 221,042,723
Deposits 984,455,378 98,445,538 829,166,765 82,916,676
Unsecured wholesale funding 321,215,910 153,023,623 235,893,678 100,802,482
Secured funding transaction – – – –

Commercial Bank of Ceylon PLC

Undrawn portion of committed (irrevocable) facilities and other contingent
funding obligations 285,249,491 27,148,712 294,756,995 37,323,565
Additional requirements 10,019,490 10,019,490 – –
Total cash inflows 207,147,923 113,326,008 228,350,709 135,116,096
Maturing secured lending transactions backed by collateral 63,387,344 52,844,324 66,627,280 55,004,733
Committed facilities – – – –
Other inflows by counterparty which are maturing within 30 calender days 87,580,157 45,704,057 102,126,336 57,827,782
Operational deposits 26,625,169 – 17,102,782 –
Other cash inflows 29,555,253 14,777,627 42,494,311 22,283,581
Liquidity coverage ratio (%) (stock of high quality liquid assets/
total net cash outflows over the next 30 calendar days) *100 258.06 224.74

333
 Disclosure 5
Net stable funding ratio (NSFR)
BANK
As at December 31, 2020 2019
Rs. ‘000 Rs. ‘000

Total available stable funding (ASF) 1,288,573,931 1,088,884,310

Total required stable funding (RSF) 818,207,892 794,536,521
Required stable funding – On balance sheet assets 809,526,504 788,401,681
Required stable funding – Off balance sheet items 8,681,388 6,134,840
NSFR (%) (minimum requirement – 90%) (w.e.f. May 5, 2020) 157.49 137.05

Disclosure 6
Main features of regulatory capital instruments
Description of the capital Instrument Stated capital 2016-2021 listed rated 2016-2026 listed rated 2016-2021 listed rated
unsecured subordinated unsecured subordinated unsecured subordinated
redeemable debentures redeemable debentures redeemable debentures

Issuer Commercial Bank Commercial Bank Commercial Bank Commercial Bank

Unique Identifier
Supplementary Information

Governing law(s) of the instrument Sri Lanka Sri Lanka Sri Lanka Sri Lanka
Original date of issuance Not Applicable March 9, 2016 March 9, 2016 October 28, 2016
Par value of instrument Rs. 100/- Rs. 100/- Rs. 100/-
Perpetual or dated Perpetual Dated Dated Dated
Original maturity date, if applicable Not Applicable March 8, 2021 March 8, 2026 October 27, 2021
Amount recognised in regulatory capital (in Rs. ‘000 as at the reporting date) 52,187,747 886,068 1,749,090 1,775,130
Accounting classification (equity/liability) Equity Liability Liability Liability

Issuer call subject to prior supervisory approval

Optional call date, contingent call dates and redemption amount (Rs. ‘000) Not Applicable Not Applicable Not Applicable Not Applicable
Annual Report 2020

Subsequent call dates, if applicable Not Applicable Not Applicable Not Applicable Not Applicable

Coupons/dividends:
Fixed or floating dividend/coupon Not Applicable Fixed Fixed Fixed
Coupon rate and any related index 10.75% p.a. 11.25% p.a. 12.00% p.a.
Non-cumulative or cumulative Non-cumulative Cumulative Cumulative Cumulative
Commercial Bank of Ceylon PLC

Convertible or non-convertible
If convertible, conversion trigger (s) Not Applicable Not Convertible Not Convertible Not Convertible

If convertible, fully or partially Not Applicable Not Applicable Not Applicable Not Applicable
If convertible, mandatory or optional Not Applicable Not Applicable Not Applicable Not Applicable

If convertible, conversion rate Not Applicable Not Applicable Not Applicable Not Applicable

334
2016-2026 Listed rated 2018-2023 Basel III compliant – Tier 2 listed rated unsecured 2018-2028 Basel III Compliant – Tier 2 listed rated unsecured 2013-2023 Floating rate
unsecured subordinated subordinated redeemable debentures with a non-viability conversion subordinated redeemable debentures with a non-viability Conversion subordinated loans –
redeemable debentures Tier 2 IFC borrowing

Commercial Bank Commercial Bank Commercial Bank International Finance

Corporation

Supplementary Information
Sri Lanka Sri Lanka Sri Lanka United States
October 28, 2016 July 23, 2018 July 23, 2018 March 13, 2013
Rs. 100/- Rs. 100/- Rs. 100/-
Dated Dated Dated Dated
October 27, 2026 July 22, 2023 July 22, 2028 March 14, 2023
1,928,200 5,875,688 1,606,160 8,415,000
Liability Liability Liability Liability

Not Applicable Not Applicable Not Applicable Not Applicable

Annual Report 2020

Not Applicable Not Applicable Not Applicable Not Applicable

Fixed Fixed Fixed Floating

12.25% p.a. 12.00% p.a. 12.50% p.a. 6 Months LIBOR + 5.75%
Cumulative Cumulative Cumulative Cumulative

Commercial Bank of Ceylon PLC

Not Convertible A “Trigger Event” is determined by and at the sole discretion A “Trigger Event” is determined by and at the sole discretion Not Convertible
of the Monetary Board of the Central Bank of Sri Lanka (i.e., of the Monetary Board of the Central Bank of Sri Lanka (i.e.,
conversion of the said Debentures upon occurrence of the conversion of the said Debentures upon occurrence of the
Trigger Event will be affected by the Bank solely upon being Trigger Event will be effected by the Bank solely upon being
instructed by the Monetary Board of the Central Bank of instructed by the Monetary Board of the Central Bank of
Sri Lanka), and is defined in the Banking Act Direction No. 1 Sri Lanka), and is defined in the Banking Act Directions No. 1
of 2016 of Web-Based Return Code [Link].1.1.(10) (iii) (a&b) of 2016 of Web Based Return Code [Link].1.1.(10) (iii) (a&b)
as a point/event being the earlier of – as a point/event being the earlier of –
(a) “A decision that a write-down, without which the Bank (a) “A decision that a write-down, without which the Bank
would become non-viable, is necessary, as determined would become non-viable, is necessary, as determined
by the Monetary Board, OR by the Monetary Board, OR

(b) The decision to make a public sector injection of (b) The decision to make a public sector injection of
capital, or equivalent support,without which the Bank capital, or equivalent support, without which the Bank
would have become non-viable, as determined by the would have become non-viable, as determined by the
Monetary Board.” Monetary Board.”
Not Applicable Fully Fully Not Applicable
Not Applicable Optional. At the discretion of the monetary board of the Optional. At the discretion of the monetary board of the Not Applicable
Central Bank of Sri Lanka upon occurance of trigger points Central Bank of Sri Lanka upon occurance of trigger points
as detailed above. as detailed above.
Not Applicable The price based on the simple average of the daily volume The price based on the simple average of the daily volume Not Applicable
of weighted average price (VWAP) of an ordinary voting of weighted average price (VWAP) of an ordinary voting
share of the Bank during the three (03) months period, share of the Bank during the three (03) months period,
immediately preceding the date of the Trigger Event. immediately preceding the date of the Trigger Event.

335
 Disclosure 7 periodically ensure the level of achievement risk weighted assets. Prior to taking such
against the pre-determined targets and decisions, the Bank will assess the impact
Summary discussion on adequacy/meeting
corrective action is taken for any deviations. on the internally developed thresholds of
current and future capital requirements
Additionally, the Bank has a dynamic minimum CARs resulting from the short-
The Bank prepares the Corporate Plan and term asset expansion plans. The Bank is
ICAAP process with rigorous stress testing
Budget for a period of 5 years which is rolled committed to maintaining the internal CAR
embodied in addition to taking into
over every year and contains the forecast thresholds despite any leniency provided
consideration the qualitative aspects such as
for certain ratios mentioned under Basel III by Central Bank of Sri Lanka (CBSL) during
reputational and strategic risks. The ICAAP
accord including the Capital Adequacy adverse times.
process also computes the concentration risk
ratios (CARs).
ensuring that the Bank has a well-diversified The dividend policy of the Bank is
As part of the budgeting proces the CARs assets portfolio which is not overly exposed formulated to achieve the twin objectives of
are computed based on the movements to any counterparty or any individual sector. satisfying the shareholder expectation of a
in risk-weighted assets underlying the In addition ICAAP process also captures the stable dividend payout while retaining part
budgeted expansion of assets including residual risk to assess the amount of risk that of the profit for future business expansion.
business volumes. The Bank has set up remains after controls are accounted for. Capital generated through retained profits
an internal threshhold on minimum CARs This process also proactively identifies the over the years is one of the primary sources
and ensures that appropriate measures possible gaps in CARs in advance, allowing of internal capital to the Bank, which is also
are employed to maintain the CARs above the Bank to take calculated decisions to strengthened by the scrip dividend paid to
the said threshhold when preparing the optimise utilisation of capital. shareholders.
budget. The budget also captures the capital
Methods of improving the CARs are A comprehensive analysis of “Managing
augmentation plan covering both internal
being evaluated on an ongoing basis and in Financial Capital” given on pages 43 and 44.
and external capital sources. The Bank has a
extreme situations, the Bank will deliberate
well established monitoring mechanism to
on strategically curtailing the expansion of
Supplementary Information

Disclosure 8
Credit risk under standardised approach
Credit risk exposures and credit risk mitigation (CRM) effects
GROUP

As at December 31, 2020 Exposures before credit conversion Exposures post CCF and CRM RWA and RWA density (%)
factor (CCF) and CRM
On-balance sheet Off-balance sheet On-balance sheet Off-balance sheet RWA RWA density
amount (a) amount (b) amount (c) amount (d) (e) {e/(c+d)}
Annual Report 2020

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 (%)

Claims on Central Government and

Central Bank of Sri Lanka 666,774,092 81,345,000 666,774,092 1,626,900 34,714,439 5.19
Claims on foreign sovereigns and their
central banks 29,548,645 – 29,548,645 – 29,548,645 100.00
Commercial Bank of Ceylon PLC

Claims on public sector entities (PSEs) 3,881 – 3,881 – 3,881 100.00

Claims on Official Entities and Multilateral
Development Banks (MDBs) 1,107,134 – 1,107,134 – – –
Claims on Banks exposures 41,433,076 195,835,937 41,433,076 12,866,056 22,166,435 40.82
Claims on financial institutions 11,822,274 – 11,822,274 – 6,344,933 53.67
Claims on corporates 416,389,935 400,133,984 379,047,067 64,695,323 421,909,252 95.08
Retail claims 410,211,978 37,821,739 370,081,929 14,970,460 325,346,663 84.49
Claims secured by residential property 73,986,674 – 73,986,674 – 53,479,150 72.28
Non-performing assets (NPAs) 28,881,133 – 28,881,133 – 31,206,288 108.05
Cash items and other assets 61,827,647 – 61,827,647 – 31,144,675 50.37
Total 1,741,986,469 715,136,660 1,664,513,552 94,158,739 955,864,361 54.35

336
Credit risk exposures and credit risk mitigation (CRM) effects (Contd.)
BANK

As at December 31, 2020 Exposures before credit conversion Exposures post CCF and CRM RWA and RWA density (%)
factor (CCF) and CRM
On-balance sheet Off-balance sheet On-balance sheet Off-balance sheet RWA RWA density
amount (a) amount (b) amount (c) amount (d) (e) {e/(c+d)}
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 (%)

Claims on Central Government and

Central Bank of Sri Lanka 666,518,791 81,345,000 666,518,791 1,626,900 34,714,439 5.20
Claims on foreign sovereigns and their
central banks 15,829,054 – 15,829,054 – 15,829,054 100.00
Claims on public sector entities (PSEs) 3,881 – 3,881 – 3,881 100.00
Claims on Official Entities and Multilateral
Development Banks (MDBs) 1,107,134 – 1,107,134 – – –
Claims on Banks exposures 40,474,463 195,835,937 40,474,463 12,866,056 21,207,822 39.76
Claims on financial institutions 11,822,274 – 11,822,274 – 6,344,933 53.67
Claims on corporates 404,470,302 400,073,833 367,802,291 64,645,056 410,614,209 94.95
Retail claims 410,211,978 37,821,739 370,081,929 14,970,460 325,346,663 84.49
Claims secured by residential property 73,986,674 – 73,986,674 – 53,479,150 72.28
Non-performing assets (NPAs) 28,209,380 – 28,209,380 – 30,540,647 108.26
Higher-risk Categories 1,384,718 – 1,384,718 – 3,461,795 250.00

Supplementary Information
Cash items and other assets 58,481,586 – 58,481,586 – 28,327,289 48.44
Total 1,712,500,235 715,076,509 1,635,702,175 94,108,472 929,869,882 53.76

Disclosure 9
Credit risk under standardised approach
Exposures by asset classes and risk weights (Post CCF and CRM)
GROUP

Annual Report 2020

As at December 31, 2020 0% 20% 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

Claims on Central Government

and Central Bank of Sri Lanka 494,828,798 173,572,194 – – – – – – 668,400,992

Commercial Bank of Ceylon PLC

Claims on foreign sovereigns
and their central banks – – – – – 29,548,645 – – 29,548,645
Claims on public sector entities
(PSEs) – – – – – 3,881 – – 3,881
Claims on official entities and
multilateral development banks
(MDBs) 1,107,134 – – – – – – – 1,107,134
Claims on Banks exposures – 33,285,576 11,008,473 – – 10,005,083 – – 54,299,132
Claims on financial institutions – 930,514 9,465,861 – – 1,425,899 – – 11,822,274
Claims on corporates – 18,720,711 13,713,139 – – 411,308,540 – – 443,742,390
Retail claims 3,854,355 538,189 – 21,943,453 186,573,758 172,142,634 – – 385,052,389
Claims secured by residential
property – – 41,015,048 – – 32,971,626 – – 73,986,674
Non-performing assets (NPAs) – – 476,869 – – 23,277,087 5,127,177 – 28,881,133
Cash items and other assets 26,681,454 5,001,898 – – – 30,144,295 – – 61,827,647
Total 526,471,741 232,049,082 75,679,390 21,943,453 186,573,758 710,827,690 5,127,177 – 1,758,672,291

337
 Exposures by asset classes and risk weights (post CCF and CRM) (Contd.)
BANK
As at December 31, 2020 0% 20% 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

Claims on Central Government

and Central Bank of Sri Lanka 494,573,497 173,572,194 – – – – – – 668,145,691
Claims on foreign sovereigns
and their central banks – – – – – 15,829,054 – – 15,829,054
Claims on Public Sector Entities
(PSEs) – – – – – 3,881 – – 3,881
Claims on official entities and
Multilateral Development Banks
(MDBs) 1,107,134 – – – – – – – 1,107,134
Claims on Banks exposures – 33,285,576 11,008,473 – – 9,046,470 – – 53,340,519
Claims on financial institutions – 930,514 9,465,861 – – 1,425,899 – – 11,822,274
Claims on corporates – 18,720,711 13,713,139 – – 400,013,497 – – 432,447,347
Retail claims 3,854,355 538,189 – 21,943,453 186,573,758 172,142,634 – – 385,052,389
Claims secured by residential
property – – 41,015,048 – – 32,971,626 – – 73,986,674
Non-performing assets (NPAs) – – 464,645 – – 22,617,558 5,127,177 – 28,209,380
Supplementary Information

Higher-risk categories – – – – – – – 1,384,718 1,384,718

Cash items and other assets 26,152,779 5,001,898 – – – 27,326,909 – – 58,481,586
Total 525,687,765 232,049,082 75,667,166 21,943,453 186,573,758 681,377,528 5,127,177 1,384,718 1,729,810,647

Disclosure 10
Market risk under standardised measurement method
GROUP BANK
As at December 31, 2020 2019 2020 2019
Annual Report 2020

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

(a) Capital charge for interest rate risk 4,225,720 2,461,836 4,225,720 2,461,836
General interest rate risk 918,969 460,969 918,969 460,969
(i) Net long or short position 918,969 460,969 918,969 460,969
Commercial Bank of Ceylon PLC

(ii) Horizontal disallowance – – – –

(iii) Vertical disallowance – – – –
(iv) Options – – – –
Specific interest rate risk 3,306,751 2,000,867 3,306,751 2,000,867
(b) Capital charge for equity 334,665 271,988 334,665 271,988
(i) General equity risk 171,844 137,639 171,844 137,639
(ii) Specific equity risk 162,821 134,349 162,821 134,349
(c) Capital charge for foreign exchange and gold 112,144 977,135 71,316 910,722
(d) Capital charge for market risk [(a) + (b) + (c)] 4,672,529 3,710,959 4,631,701 3,644,546
RWA for market risk [ ( d ) * 100/CAR ] 35,942,531 26,506,850 35,628,469 26,032,471

338
Disclosure 11
Operational risk under the Alternative Standardised Approach (ASA) – Group
As at December 31, 2020 2019

Gross income Gross income

Capital charge Fixed factor 1st year 2nd year 3rd year 1st year 2nd year 3rd year
factor
% Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Corporate finance 18 210,049 167,464 157,810 273,038 210,049 167,464

Trading and sales 18 3,956,306 3,852,135 7,747,013 844,325 3,956,306 3,852,135
Payment and settlement 18 651,440 690,845 730,737 591,811 651,440 690,845
Agency services 15 – – – – – –
Asset management 12 – – – – – –
Retail brokerage 12 – – – – – –
Sub total (a) 4,817,795 4,710,444 8,635,560 1,709,174 4,817,795 4,710,444
Retail banking (Loans and advances) 12 0.035 452,610,049 487,202,436 513,177,931 382,107,206 452,610,049 487,202,436
Commercial banking (Loans and advances) 15 0.035 606,642,106 719,146,950 927,864,854 556,018,749 606,642,106 719,146,950
Sub total (b) 1,059,252,155 1,206,349,386 1,441,042,785 938,125,955 1,059,252,155 1,206,349,386
Total (a) + (b) 1,064,069,950 1,211,059,830 1,449,678,345 939,835,129 1,064,069,950 1,211,059,830

Capital charge for operational risk 5,953,036 6,669,652 8,581,039 4,831,600 5,953,036 6,669,652
Average capital charge (c) 7,067,909 5,818,096

Supplementary Information
RWA for operational risk [(c)*100/ CAR] 54,368,523 41,557,829

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

As at December 31, 2020 2019

Gross income Gross income

Capital charge Fixed factor 1st year 2nd year 3rd year 1st year 2nd year 3rd year
factor
% Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Annual Report 2020

Corporate finance 18 210,049 167,464 157,810 273,038 210,049 167,464
Trading and sales 18 3,911,019 3,661,995 7,414,971 766,079 3,911,019 3,661,995
Payment and settlement 18 651,440 690,845 730,737 591,811 651,440 690,845
Agency services 15 – – – – – –

Commercial Bank of Ceylon PLC

Asset management 12 – – – – – –
Retail brokerage 12 – – – – – –
Sub total (a) 4,772,508 4,520,304 8,303,518 1,630,928 4,772,508 4,520,304
Retail banking (Loans and advances) 12 0.035 448,200,815 481,442,015 506,645,437 378,807,792 448,200,815 481,442,015
Commercial banking (Loans and advances) 15 0.035 604,168,024 708,987,024 913,988,024 555,303,148 604,168,024 708,987,024
Sub total (a) 1,052,368,839 1,190,429,039 1,420,633,461 934,110,940 1,052,368,839 1,190,429,039
Total (a) + (b) 1,057,141,347 1,194,949,343 1,428,936,979 935,741,868 1,057,141,347 1,194,949,343

Capital charge for operational risk 5,913,377 6,557,893 8,420,981 4,799,901 5,913,377 6,557,893
Average capital charge (c) 6,964,084 5,757,057
RWA for operational risk [(c)*100/ CAR] 53,569,874 41,121,836

339
 Disclosure 12
Differences between accounting and regulatory scopes and mapping of financial statement categories with regulatory risk
categories – Bank
As at December 31, 2020 a b c d e
Carrying values Carrying values Subject to Subject to Not subject
as reported under scope credit risk market risk to capital
in published of regulatory framework framework requirements
financial reporting or subject to
statements deduction from
capital
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Assets 1,736,218,021 1,744,614,668 1,712,500,235 35,189,471 7,515,236

Cash and cash equivalents 50,250,627 50,166,833 50,166,833 – –
Balances with Central Banks 110,971,105 110,965,790 110,965,790 – –
Placements with banks 15,938,982 15,680,619 15,680,619 – –
Derivative financial assets 2,636,717 – – – –
Financial assets recognised through profit or loss – Measured at fair value 35,189,471 35,189,471 – 35,189,471 –
Financial assets at amortised cost – Loans and advances to banks 779,705 779,790 779,790 – –
Financial assets at amortised cost – Loans and advances to other customers 896,845,453 903,803,764 911,894,178 – –
Financial assets at amortised cost – Debt and other financial instruments 292,727,566 293,702,064 293,702,064 – –
Financial assets measured at fair value through
other comprehensive income 278,461,369 279,502,179 279,502,179 – –
Supplementary Information

Investments in subsidiaries 5,808,429 5,808,429 2,025,916 – 3,782,513

Investments in associates 44,331 44,331 44,331 – –
Property, plant and equipment and right-of-use assets 23,212,394 18,450,657 18,450,657 – –
Intangible assets 1,232,863 1,232,863 – – 1,232,863
Deferred tax assets 2,499,860 – – – 2,499,860
Other assets 19,619,149 29,287,878 29,287,878 – –

Liabilities 1,579,071,845 1,576,714,897 – – –

Annual Report 2020

Due to banks 87,451,306 86,951,076 – – –

Derivative financial liabilities 1,501,262 – – – –
Securities sold under repurchase agreements 91,437,612 91,439,767 – – –
Financial liabilities at amortised cost – Due to depositors 1,265,965,918 1,245,260,164 – – –
Financial liabilities at amortised cost – Other borrowings 54,555,933 54,434,407 – – –
Commercial Bank of Ceylon PLC

Current tax liabilities 6,777,992 7,036,901 – – –

Deferred tax liabilities – 3,604,138 – – –
Other liabilities 33,037,669 50,714,472 – – –
Due to subsidiaries 97,015 97,015 – – –
Subordinated liabilities 38,247,138 37,176,957 – – –

Off-balance sheet liabilities 728,711,698 728,711,698 715,076,504 – –

Guarantees 65,581,771 65,581,771 54,558,709 – –

Performance bonds 37,957,159 37,957,159 37,957,159 – –
Letter of credit 74,875,507 74,875,507 74,875,507 – –
Other contingent items 419,707,047 419,707,047 418,113,702 – –
Undrawn loan commitments 129,571,427 129,571,427 129,571,427 – –
Other commitments 1,018,787 1,018,787 – – –

340
Differences between accounting and regulatory scopes and mapping of financial statements categories with regulatory
risk categories – Bank (Contd.)
As at December 31, 2020 a b c d e
Carrying values Carrying values Subject to Subject to Not subject
as reported under scope credit risk market risk to capital
in published of regulatory framework framework requirements
financial reporting or subject to
statements deduction from
capital
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Shareholders’ equity 157,146,176 167,899,771 – – –

Equity capital (stated capital)/assigned capital:

Of which amount eligible for CET1 52,187,747 52,187,747 – – –
Of which amount eligible for AT1 – – – – –
Retained earnings 7,596,260 18,812,185 – – –
Accumulated other comprehensive income 359,819 (102,511) – – –
Other reserves 97,002,350 97,002,350 – – –

Disclosure 13
Explanations of Differences between Accounting and Regulatory Exposure Amounts

Supplementary Information
Reasons for differences
As at December 31, 2020 Differences Net impact Fair Value Effective Re-classification Unamortised Other SLFRS Tax Impact
observed arising from Adjustment Interest of Interest cost on staff Adjustments on SLFRS
between Impairment Rate (EIR) Receivable/ loans (Day 1 Adjustments
accounting (Stage 1,2 Adjustment Payable and difference)
carrying value and 3) others
and amounts
considered
for regulatory
purposes

Annual Report 2020

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Assets
Cash and cash equivalents 83,794 (3,240) – – 87,034 – – –
Balances with Central Banks 5,315 – – – 5,315 – – –
Placements with banks 258,363 (3,003) – – 261,366 – – –

Commercial Bank of Ceylon PLC

Derivative financial assets 2,636,717 – – – 2,636,717 – – –
Financial assets at amortised cost –
Loans and advances to banks (85) (85) – – – – – –
Financial assets at amortised cost –
Loans and advances to other
customers (6,958,311) (13,313,309) – – 11,320,359 (4,965,361) – –
Financial assets at amortised cost –
Debt and other financial instruments (974,498) (1,956,020) – – 981,522 – – –
Financial assets measured at fair value
through other comprehensive income (1,040,810) (1,041,777) – – 967 – – –
Property, plant and equipment and
right-of-use of assets 4,761,737 – – – – – 4,761,737 –
Deferred tax assets 2,499,860 – – – – – – 2,499,860
Other assets (9,668,729) – – – (13,935,422) – 4,266,693 –

341
 Explanation of Differences between Accounting and Regulatory Exposure Amounts (Contd.)

Reasons for differences

As at December 31, 2020 Differences Net impact Fair Value Effective Re-classification Unamortised Other SLFRS Tax Impact
observed arising from Adjustment Interest of Interest cost on staff Adjustments on SLFRS
between Impairment Rate (EIR) Receivable/ loans (Day 1 Adjustments
accounting (Stage 1,2 Adjustment Payable and difference)
carrying value and 3) others
and amounts
considered
for regulatory
purposes
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Liabilities
Due to banks 500,230 – – (29) 500,259 – – –
Derivative financial liabilities 1,501,262 – – – 1,501,262 – – –
Securities sold under repurchase
agreements (2,155) – – (2,155) – – – –
Financial liabilities at amortised cost –
due to depositors 20,705,754 – – (515,612) 21,221,366 – – –
Financial liabilities at amortised cost –
other borrowings 121,526 – – – 121,526 – – –
Current tax liabilities (258,909) – – – – – – (258,909)
Deferred tax liabilities (3,604,138) – – – – – – (3,604,138)
Supplementary Information

Other liabilities (17,676,803) 5,386,720 – – (23,063,523) – – –

Subordinated liabilities 1,070,181 – – (6,779) 1,076,960 – – –

Shareholders‘ equity
Retained earnings (11,215,925) (17,646,073) – 524,575 – – (1,980,268) 7,885,841
Accumulated other comprehensive
income 462,330 – 462,330 – – – – –
Annual Report 2020

Explanations of Differences between Financial investments and financial under SLFRS 9 is different to the carrying
Accounting and Regulatory Exposure liabilities (other than FVTPL) are carried at value for regulatory reporting which is
Amounts “cost” for regulatory reporting purposes the “cost”.
Under SLFRS 9: “Financial Instruments: while they are classified as “Financial assets As per SLFRS 9, a “Day 1 difference” is
Recognition & Measurement”, the Bank measured at fair value through other recognised, when the transaction price
Commercial Bank of Ceylon PLC

assess the impairment of loans and advances comprehensive income” carried at fair value differs from the fair value of other observable
individually or collectively based on the or Financial assets/liabilities at amortised current market transactions in the same
principles of “expected credit loss” (Refer cost under SLFRS 9. The “Fair value” is instrument. Eg: Employee below market
Note 18 on page 182 for details) model defined as the best estimate of the price loans. Refer Note [Link] on page 166 for
which is expected to capture future trends that would be received to sell an asset or details. However, the carrying value
in the economy. However, the regulatory be paid to transfer a liability in an orderly of such transactions for regulatory reporting
provisions are made on loans and advances transaction between market participants at purposes is equal to cost/transaction price.
under the Direction No. 03 of 2008 on the measurement date. A variety of valuation
As per SLFRS 16, the Bank recognises
“Classification of loans and advances, techniques combined with the range of
a lease liability for leases previously
Income Recognition and Provisioning” (and plausible market parameters as at a given
classified as operating leases. Accordingly,
subsequent amendments thereof ) issued point in time may still generate unexpected
the Bank measures the lease liability at
by the CBSL are “time/delinquency base”. uncertainty beyond fair value. An “amortised
the present value of the remaining lease
Further, under SLFRS 9, other debt financial cost” of a financial asset or financial liability
payments, discounted using the Incremental
assets not held at FVTPL, together with loan is the amount at which the financial asset
Borrowing Rate (IBR). In addition, the Bank
commitments and other off balance sheet or liability is measured at initial recognition,
recognises right-of-use asset at an amount
exposures such as financial guarantees and minus principal repayments, plus or minus
equal to the lease liability, on a lease-by-
letter of credits, are subjected to impairment the cumulative amortisation using the EIR
lease basis, adjusted by the amount of any
provision, whereas no such regulatory method of any difference between the
prepaid or accrued lease payments relating
provision is required for those financial initial amount recognised and the
to that lease. However as per regulatory
assets as per the CBSL Direction. As a result, maturity amount, minus any reduction for
reporting, the Bank charges the operating
SLFRS 9 recognises higher impairment impairment. Hence, the amortised cost of
lease rentals as expense to profit or loss on
provisions compared to CBSL guidelines. financial investments and financial liabilities
an accrual basis.

342
Disclosure 14 objectives are to ensure that risks accepted Disclosure 15
are in line with the Bank’s risk appetite and Risk management related to key risk
Bank Risk Management Approach strategic priorities and that there is an exposures
appropriate trade-off between risk and
Effective risk management is at the core reward enabling delivery of value to The quantitative disclosures relating to key
of the Bank’s value creation model as we key stakeholders.“ The risk governance risk areas such as credit, market, liquidity,
accept risk in the normal course of business. structure,responsibilities attributed operational, and interest rate risk in the
Significant resources are devoted to this throughout the bank, risk management banking book are presented and discussed in
critical function to ensure that it is well framework, objectives, strategies, policy the “Risk Governance and Management” on
articulated, communicated and understood framework, risk appetite and tolerance pages 114 to 133 and in the “Financial Risk
by all employees of the Bank as it is a shared limits for key risk types, and the overall risk Review” on pages 261 to 290.
responsibility. It is a dynamic and disciplined management approach of the Bank are
function increasing in sophistication and discussed in the section on “Risk Governance
subject to stringent oversight by regulators and Management” on pages 114 to 133.
and other stakeholders. The overarching

D-SIB Assessment Exercise

(As per the CBSL Direction No. 10 of 2019)
GROUP
2020 2019
Rs. ’000 Rs. ’000

Size Indicator
Section 1 – Total Exposures

Supplementary Information
Total exposures measure 2,375,340,709 1,880,168,663

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 ) 52,431,787 75,054,977

(i) Funds deposited 41,433,076 54,228,026

Annual Report 2020

(ii) Lending 10,998,711 20,826,951

b. Holdings of securities issued by other financial institutions 823,563 1,985,584

c. Net positive current exposure of securities financing transactions (SFTs) with other financial institutions 2,798,298 1,126,958

d. Over-the-counter (OTC) derivatives with other financial institutions that have a net positive mark to market value 148,283,105 132,348,801

Intra-financial system assets (a + b + c + d)

Commercial Bank of Ceylon PLC

204,336,753 210,516,320

Section 3 – Intra-Financial System Liabilities

a. Funds deposited by or borrowed from other financial institutions (including unused portion of committed lines
obtained) 127,918,135 82,321,479

(i) Funds deposited 15,482,943 8,626,228

(ii) Borrowings 112,435,192 73,695,251

b. Net negative current exposure of securities financing transactions with other financial institutions 5 1,917,412

c. Over-the-counter derivatives with other financial institutions that have a net negative mark to market value 106,983,706 84,365,490

Intra-financial system liabilities (a + b + c) 234,901,846 168,604,381

Section 4 – Securities Outstanding

Securities outstanding 23,179,430 23,179,430

Substitutability/Financial Institution Infrastructure Indicators

Section 5 – Payments made in the reporting year (excluding intragroup payments)
Payments activity 7,663,939,028 8,629,722,562

343
 GROUP
2020 2019
Rs. ’000 Rs. ’000

Section 6 – Assets Under Custody

Assets under custody 5,446,768 5,231,877

Section 7 – Underwritten Transactions in Debt and Equity Markets

Underwriting activity – –

Section 8 – Trading Volume

a. number of shares or securities 5,531 470

b. value of the transactions 171,971 19,031

Trading Volume (a+b) 177,502 19,501

Complexity indicators
Section 9 – Notional Amount of Over-the-Counter (OTC) Derivatives
OTC derivatives 307,412,791 246,399,959

Section 10 – Level 2 Assets

Supplementary Information

Level 2 assets 78,907,249 86,421,727

Section 11 – Trading and available for sale (AFS) securities

a. debt instruments 315,290,030 198,465,987

b. equity instruments 292,069 220,723

c. derivatives 2,636,717 1,830,927

Trading and available for sale (AFS) securities (a+b+c) 318,218,816 200,517,637
Annual Report 2020

Section 12 – Cross-Jurisdictional Liabilities

Cross-jurisdictional liabilities (excluding derivatives and intragroup liabilities) 174,819,921 150,058,988

Section 13 – Cross-Jurisdictional Claims

Cross-jurisdictional claims (excluding derivatives and intragroup claims) 58,931,898 58,471,275
Commercial Bank of Ceylon PLC

344
Annex 4: GRI Content Index
GRI Standard/Disclosure Page No. Report commentary title

GRI 102: General Disclosures 2016

Organisational profile
102-1 Name of the organisation Inner Back Cover Corporate information
102-2 Activities, brands, products and services 156 Note 1.3
102-3 Location of headquarters Inner Back Cover Corporate information
102-4 Location of Operations 6 About the Bank
102-5 Ownership and legal form 6 and Inner About the Bank/ Corporate information
Back Cover
102-6 Markets served 6 About the Bank
102-7 Scale of the organisation 7 A snapshot of the Bank’s profile
102-8 Information on employees and other workers 60 Employees by type and gender
102-9 Supply chain 62 Partnership for the goals
102-10 Significant changes to the organisation and its supply chain 4 Report boundary
102-11 Precautionery priciple or approach 4 Precautionary principle
102-12 External initiatives 4 and 62 Basis for preperation/Partnership for the goals
102-13 Membership of associations 62 Partnership for the goals
Strategy

Supplementary Information
102-14 Statement from senior decision-maker 13 and 14 Joint message from the Chairman and his Predecessor
Ethics and integrity
102-16 Values, principles, standards, and norms of behaviour 47 and 102 Ethics and conduct
Governance
102-18 Governance structure 77 Governance Structure
102-19 Delegating authority 75 and 77 Bank’s approach to governance
102-22 Composition of the highest governance body and 64 to 69 and Board of Directors and profiles, Composition of

Annual Report 2020

its committees 79 to 81 the Board
102-23 Chair of the highest governance body 82 and 83 Segregation of roles
102-24 Nominating and selecting the highest governance body 83 and 91 to 92 Appointment of Directors, Report of the BNC
102-25 Confilcts of interest 78 and 95 and Conflicts of interests, Report of the BRPTRC
255 to 259
102-35 Remuneration policies 84 and 93 to 94 Remuneration and benefits policy

Commercial Bank of Ceylon PLC

102-36 Process for determining remuneration 84 and 93 to 94 Directors’ and Executive remuneration,
Report of the BHRRC
Stakeholder engagement
102-40 List of stakeholder groups 27 Connecting with stakeholders
102-41 Collective bargaining agreements 60 Collective bargaining
102-42 Identifying and selecting stakeholders 27 Connecting with stakeholders
102-43 Approach to stakeholder engagement 27 and 28 Connecting with stakeholders
102-44 Key topics and concerns raised 28 How we connect with our stakeholders
Reporting practice
102-45 Entities included in the consolidated financial statements 4 Report boundary
102-46 Defining report content and topic bounderies 4 and 29 to 31 Report boundary/ Materiality matters
102-47 List of material topics 31 Materiality matters
102-48 Restatement of information 4 Report boundary
102-49 Changes in reporting 4 Report boundary
102-50 Reporting period 4 Introducing our 52nd Annual Report
102-51 Date of most recent report 4 Introducing our 52nd Annual Report
102-52 Reporting cycle 4 Introducing our 52nd Annual Report
102-53 Contact point for questions regarding the report 4 Introducing our 52nd Annual Report
102-54 Claims of reportng in accordance with the GRI Standards This report has been prepared in accordance
with the GRI Standards: Core option

345
 GRI Standard/Disclosure Page No. Report commentary title

102-55 GRI content index 345 and 346

102-56 External assurance 4 and 347 to 351 Responsibility for sustainability practices and
external assurance
GRI 103: Management Approach 2016
103-1 Explanation of the material topic and its boundary 29 to 31, 35 to 39 Material matters/Business model
103-2 The management approach and its components 29 to 31, 35 to 39 Material matters/Business model
103-3 Evaluation of the management approach 29 to 31, 35 to 39 Material matters/Business model
GRI 200: Economic
GRI 201: Economc performance 2016 20 to 26 and Financial review 2020, Prudent growth
42 to 47
201-1 Direct economic value generated and distributed 352 Our sustainability footprint
GRI 203: Indirect economic impact 2016 49 to 52 Responding to the need of the hour
Annex 4: GRI Content Index

203-1 Infrastructure investments and services supported 49 Cash at the customers doorstep
203-2 Significant indirect economic impacts 50 to 52 Helping SMEs and Micro
GRI 207: Tax 2019 187 and 188 Income tax expenses
207-1 Approach to tax 187 and 188 Income tax expenses
207-2 Tax governance, control and risk management 187 and 188 Income tax expenses
207-3 Stakeholder engagement 187 and 188 Income tax expenses
207-4 Country-by-country reporting 187 and 188 Income tax expenses
GRI 300: Environmental
Supplementary Information

GRI 302: Energy 2016 61 Managing our footprint

302-1 Energy consumption within the organisation 352 Our sustainablility footprint
302-4 Reduction of energy consumption 352 Our sustainablility footprint
GRI 305: Emissions 2016 61 Attaining carbon neutral status
305-1 Direct (Scope 1) GHG emissions 352 Our sustainablility footprint
305-2 Energy indirect (Scope 2) GHG emissions 352 Our sustainablility footprint
GRI 400: Social
Annual Report 2020

GRI 401: Empolyement 2016 59 Our people rising to the occasion

401-1 New employee hires and employee turnover 352 Our sustainablility footprint
401-3 Parental leave 353 Our sustainablility footprint
GRI 403: Occupational health and safety 2018 57 to 59 A transformed working environment
403-1 to Occupational health and safety management system 57 to 59 A transformed working environment
Commercial Bank of Ceylon PLC

403-7
403-9 Work related injuries There has been no injuries during the year
GRI 404: Training and education 2016 61 Training and development
404-1 Average hours of training per year per employee 353 Our sustainablility footprint
404-3 Percentage of employees receiving regular performance 353 Our sustainablility footprint
and career development reviews
GRI 405: Diversity and equal opportunity 2016 60 and 61 Diversity
405-1 Diversity of governance bodies and employees 353 Our sustainablility footprint
405-2 Ratio of basic salary and remueration of women to men 353 Our sustainablility footprint
GRI 418: Customer privacy 2016 56 IT operations and security
418-1 Substantiated complaints concerning breaches of customer 353 The Bank did not come across any compaint that
privacy and losses of customer data had resulted in a reputational damage or significant
financial loss
Non GRI disclosures
Instability and lack of policy consistency 32 to 34 Operating context and outlook
Economic slowdown 32 to 34 Operating context and outlook
Directed lending 49 to 50 Financial relief initiatives
Higher regulatory capital 22
Envisaged upturn in private sector credit and improvement 32 to 34
in asset quality
Changing customer expectations 48 to 52 Customer centricity

346
Annex 5: Independent Assurance Reports
Annex 5.1: Independent Assurance Report to Commercial Bank of Ceylon PLC
on the Sustainability Reporting Criteria Presented in the Integrated
Annual Report- 2020

Ernst & Young Tel : +94 11 2463500

Chartered Accountants Fax Gen : +94 11 2697369
201 De Saram Place Tax : +94 11 5578180
P.O. Box 101 eysl@[Link]
Colombo 10 [Link]
Sri Lanka

Introduction and scope of the Our engagement provides limited assurance purpose other than that for which it was
engagement as well as reasonable assurance. A limited prepared. In conducting our engagement,
assurance engagement is substantially we have complied with the independence
The management of Commercial Bank of

Supplementary Information
less in scope than a reasonable assurance requirements of the Code for Ethics for
Ceylon PLC (“the Bank”) engaged us to
engagement conducted in accordance with Professional Accountants issued by the CASL.
provide an independent assurance on the
SLSAE-3000 and consequently does not
following elements of the sustainability
enable to obtain assurance that we would Key assurance procedures
reporting criteria presented in the annual
become aware of all significant matters
report- 2020 (“the Report”). We planned and performed our procedures
that might be identified in a reasonable
to obtain the information and explanations
z Reasonable assurance on the information assurance engagement. Accordingly, we do
considered necessary to provide sufficient
on financial performance as specified on not express an opinion providing reasonable
evidence to support our limited assurance
page 354 of the Report. assurance.
conclusions. Key assurance procedures

Annual Report 2020

z Limited assurance on other information included:
presented in the Report, prepared in Management of the Bank’s
accordance with the requirements of the responsibility for the Report z Interviewing relevant the Bank’s personnel
Global Reporting Initiative GRI Standards: to understand the process for collection,
The management of the Bank is responsible
‘In accordance’ – Core guidelines. analysis, aggregation and presentation of
for the preparation of the self-declaration,
data.
the information and statements contained
Basis of our work and level of assurance within the Report, and for maintaining z Reviewing and validation of the

Commercial Bank of Ceylon PLC

We performed our procedures to provide adequate records and internal controls that information contained in the Report.
limited assurance in accordance with Sri are designed to support the sustainability z Checking the calculations performed
Lanka Standard on Assurance Engagements reporting process in line with the GRI by the Bank on a sample basis through
(SLSAE 3000): ‘Assurance Engagements Other Sustainability Reporting Guidelines. recalculation.
than Audits or Reviews of Historical Financial z Reconciling and agreeing the data on
Information’, issued by the Institute of Ernst & Young’s responsibility financial performance are properly
Chartered Accountants of Sri Lanka (“CASL”). derived from the Bank’s audited financial
Our responsibility is to express a conclusion
The evaluation criteria used for this limited as to whether we have become aware of statements for the year ended
assurance engagement are based on the any matter that causes us to believe that December 31, 2020.
Sustainability Reporting Guidelines (“GRI the Report is not prepared in accordance z Comparison of the content of the Report
Guidelines”) and related information in with the requirements of the Global against the criteria for a Global Reporting
particular, the requirements to achieve GRI Reporting Initiative, GRI Standards: ‘In Initiative, GRI Standards: ‘In accordance’ –
Standards ‘In accordance’ - Core guideline accordance’ - Core guidelines. This report is Core guidelines.
publication, publicly available at GRI’s global made solely to the Bank in accordance with
website at “[Link]”. our engagement letter dated 08 February Our procedures did not include testing
2021. We disclaim any assumption of electronic systems used to collect and
responsibility for any reliance on this report aggregate the information.
to any person other than the Bank or for any

Partners: W R H Fernando FCA FCMA R N de Saram ACA FCMA Ms. N A De Silva FCA Ms. Y A De Silva FCA W R H De Silva ACA ACMA W K B S P Fernando FCA FCMA
Ms. K R M Fernando FCA ACMA Ms. L K H L Fonseka FCA A P A Gunasekera FCA FCMA A Herath FCA D K Hulangamuwa FCA FCMA LLB (Lond) H M A Jayesinghe FCA FCMA
Ms. A A Ludowyke FCA FCMA Ms. G G S Manatunga FCA A A J R Perera ACA ACMA Ms. P V K N Sajeewani FCA N M Sulaiman ACA ACMA B E Wijesuriya FCA FCMA
Principals: G B Goudian ACMA T P M Ruberu FCMA FCCA
A member firm of Ernst & Young Global Limited

347
 Limitations and considerations
Environmental and social performance data
are subject to inherent limitations given
their nature and the methods used for
determining, calculating and estimating
such data.

Conclusion
Based on the procedures performed, as
described above, we conclude that;
z The information on financial performance
Annex 5: Independent Assurance Reports

as specified on page 354 of the Report

are properly derived from the audited
financial statements of the Bank for the
year ended December 31, 2020.
z Nothing has come to our attention
that causes us to believe that other
information presented in the Report
are not fairly presented, in all material
respects, in accordance with the Bank’s
sustainability practices and policies some
of which are derived from Sustainability
Reporting Guideline, GRI Standards- ‘In
accordance’ Core.
Supplementary Information

Ernst & Young

Chartered Accountants

February 24, 2021

Annual Report 2020

Colombo
Commercial Bank of Ceylon PLC

348
ANNEX 5.2: Independent Assurance Statement
on Non-Financial Reporting – DNV GL

Annex 5: Independent Assurance Reports

Independent Assurance Statement We planned and performed our work to the Bank; however, this statement represents
Scope and Approach obtain the evidence we considered necessary our independent opinion and is intended to
to provide a basis for our assurance opinion, inform the outcome of our assurance to the
DNV GL represented by DNV GL Business and our process did not involve engagement stakeholders of the Bank.
Assurance Lanka (Private) Limited with external stakeholders. In doing so, we DNV GL’s assurance engagements are
(‘DNV GL’) was engaged by management evaluated the qualitative and quantitative based on the assumption that the data and
of Commercial Bank of Ceylon PLC disclosures presented in the Report using the information provided by the client to us as
(‘Commercial Bank’ or ‘the Bank’, Company Guiding Principles of the <IR> Framework, part of our review have been provided in
Registration Number PQ116) to undertake together with the Bank’s procedures good faith and free from any misstatements.
an independent assurance of the qualitative and protocols for how the non-financial DNV GL expressly disclaims any liability or
and quantitative non-financial information performance was measured, recorded and co-responsibility for any decision a person or
(sustainability performance) presented in the reported. an entity may make based on this Assurance
Bank’s Annual Report 2020 (‘the Report’) in

Supplementary Information
The reporting topic boundary of Statement. Our scope of work focussed on
its printed format.
sustainability/non-financial performance is verification of non-financial disclosures only
This Report is prepared based on the as set out in the Report in the section ‘Basis and excluded verification of the reported
Guiding Principles and Content Elements of Preparation’ and is based on internal and data on financial performance of the Bank,
of the International <IR> Framework external materiality assessment covering as financial disclosures and data has been
(December 2013, the ‘<IR> Framework’) Commercial Bank’s banking and associated subject to a separate independent statutory
of the International Integrated Reporting operations in Sri Lanka. The Report excludes audit process.
Council (‘IIRC’) and the Global Reporting performance data and information related
Initiative’s (GRI’s) Sustainability Reporting to the activities of Commercial Bank’s seven Basis of our Opinion
Standards (‘GRI Standards’)to bring out subsidiaries – Commercial Development

Annual Report 2020

the various Content Elements of the <IR> We planned and performed our work to
Co. PLC, CBC Tech Solutions Ltd., CBC
Framework and performance trends related obtain the evidence considered necessary
Finance Ltd., Commercial Insurance Brokers
to identified material topics. The intended to provide a basis for our assurance opinion
(Pvt.) Ltd., Commex SriLanka S.R.L Italy,
user of this Assurance Statement is the as part of the assurance engagement. We
Commercial Bank of Maldives (Private)
management of the Bank. adopted a risk-based approach, i.e. we
Limited, CBC Myanmar Microfinance
concentrated our verification efforts on
We performed a Type 2 Moderate Level of Company Limited and the operations of its
the issues of high material relevance to

Commercial Bank of Ceylon PLC

assurance using Account Ability’s AA1000 associate, Equity Investments Lanka Ltd.
Bank and its key stakeholders., As part of
Assurance Standard v3 (August 2020, as the results of their operations are not
the engagement, a multi-disciplinary team
‘AA1000AS v3’) and DNV GL’s assurance significant (<1 % revenue) compared to the
of sustainability and assurance specialists
methodology VeriSustainTM1, which is overall results of the Bank.
reviewed sustainability disclosures related
based on our professional experience,
to Commercial Bank’s operations. Due to
international assurance best practices Responsibilities of the Management of the outbreak of the COVID-19 pandemic
including International Standard on Commercial Bank and of the Assurance and associated travel restrictions, we carried
Assurance Engagements 3000 (ISAE 3000) Provider out remote assessments as one-to-one
Revised* and the GRI’s Principles for Defining
The Management team of the Bank have discussions and onsite location assessments
Report Content and Quality. Our assurance
the sole accountability for the preparation were not feasible. We undertook the
engagement was planned and carried out
of the Report and are responsible for the following activities:
during February 2021 for the reported
performance indicators during the reporting information disclosed in the Report as well z Review of Commercial Bank’s approach
period 1st January 2020 to 31st December as the processes for collecting, analysing and to non-financial reporting based on the
2020. reporting the information presented in the <IR> Framework including stakeholder
Report. In performing the assurance work, relationships and materiality determination
our responsibility is to the management of process and its outcomes as reported in
this Report. We did not have any direct
engagement with external stakeholders.

1 The VeriSustain protocol is available on request from [Link]

* Assurance Engagements other than Audits or Reviews of Historical Financial Information.
Project No.: PRJN-224950-2021-AST-LKA

349
 z Verified the value creation disclosures AA1000 AccountAbility Principles Responsiveness
related to the six (6) capitals identified Standard (2018) Organisations should act transparently on
by the Bank as well as claims made in the
Inclusivity material sustainability topics and their related
Annex 5: Independent Assurance Reports

Report.
People should have a say in the decisions that impacts
z Interviews with selected senior
impact them. The key stakeholder concerns and the
management team responsible for
We reviewed the application of the Bank’s responses to these concerns are fairly
management of sustainability issues and
principle of Inclusivity i.e. the process of responded to within the Report through
review of selected evidence to support
stakeholder identification and engagement disclosures such as Bank’s business model,
issues discussed. We were free to choose
including effectiveness of the review process policies, management systems, governance
interviewees and interviewed those
in identifying, engaging and responding mechanisms, disclosures on management
with overall responsibility to deliver the
to key sustainability concerns of significant approach. However, the bank can focus more
Company’s sustainability objectives.
stakeholders such as employees, customers, disclosing the Bank’s short, medium, and
z Review of supporting evidence related long-term goals with respect to identified
investors, regulators and society. The Bank
to qualitative & quantitative disclosures material topics in future reporting periods.
has ongoing processes for stakeholder
within the Report against identified
engagement to identify critical and emerging Nothing has come to our attention to
material aspect.
issues based on the changes in external suggest that the Report does not meet the
Supplementary Information

z Assessed the robustness of the data environment through its documented requirements related to the Principle of
management system, data accuracy, stakeholder engagement process, however Responsiveness.
information flow and controls for the the stakeholder engagement process could
reported disclosures. be further strengthened to collect inputs, Impact
z Review of the processes for gathering and ideas and suggestions through structured
Organisations should monitor, measure, and
consolidating the specified performance customer feedback mechanisms on a
be accountable for how their actions affect
data and, for a sample, checking the data proactive basis.
their broader ecosystems
consolidation. Nothing has come to our attention to
The Report brings out the Bank’s metrics
suggest that the Report does not meet the
During the assurance process, we did not such as customer centricity, prudent growth,
Annual Report 2020

requirements related to the Principle of

come across limitations to the scope of the operational excellence, innovation etc. and
Inclusivity.
agreed assurance engagement. management processes established for
monitoring, measurement, and evaluation
Opinion and Observations Materiality of key non-financial impacts on its internal
Decision makers should identify and be clear and external stakeholders. The Report
On the basis of the assurance work
about the sustainability topics that matter also describes both positive and negative
undertaken, nothing has come to our
Commercial Bank of Ceylon PLC

The Report brings out the application impacts during the reporting period and
attention that causes us to believe that
of the Materiality principle of the <IR> related approaches to mitigate risks if any, to
the Report does not properly describe
Framework to arrive at material topics constantly create and change value for the
Commercial Bank’s adherence to the
for the organization considering its Bank and its key stakeholders.
criteria of reporting (Guiding Principles
and Content Elements) related to the <IR> nature of business, stakeholder concerns, Nothing has come to our attention to
Framework, representation of the material frameworks and charters to which bank suggest that the Report does not meet the
topics, business model, disclosures on subscribes. Further, Bank has reviewed requirements related to the Principle of Impact.
value creation through six(6) identified the process of materiality assessment and
capitals, related strategies and management revalidation of materiality based on the Specific Evaluation of the Information
approach, and chosen topic specific GRI external environment and key stakeholders on Sustainability Performance
Standards related to identified material expectations.
We consider the methodology and process
topics. Without affecting our assurance Nothing has come to our attention to for gathering information developed by
opinion, we also provide the following suggest that the Report does not meet the Commercial Bank for its non-financial/
observations. requirements related to the Principle of sustainability performance reporting to
Materiality. be appropriate, and the qualitative and
quantitative data included in the Report

Project No.: PRJN-224950-2021-AST-LKA

350
was found to be identifiable and traceable; Neutrality For and on behalf of DNV GL AS
the personnel responsible were able to
The extent to which a report provides a
demonstrate the origin and interpretation of
balanced account of an organization’s

Annex 5: Independent Assurance Reports

the data and its reliability. We observed that
performance, delivered in a neutral tone
the Report presents a faithful description
of the reported sustainability activities and The Report brings out the Bank’s
challenges, concerns related to key Bhargav Lankalapalli
goals achieved for the reporting period.
stakeholders such as employees, customers, Lead Verifier
investors, regulators and society and DNV GL Business Assurance India Private
Reliability
responses to challenges during the reporting Limited, India
The accuracy and comparability of information period in a neutral tone in terms of content
presented in the report, as well as the quality of and presentation.
underlying data management systems
Nothing has come to our attention to
The Report brings out Commercial Bank’s suggest that the Report does not meet the
non-financial performance for identified requirements related to the Principle of
material matters through chosen GRI Topic Rohita Wickramasinghe
Neutrality.
Specific Standards based on the protocols Operations Manager – Sri Lanka

Supplementary Information
established from reliability and accuracy Statement of Competence and DNV GL Business Assurance Lanka (Private)
perspective. The robustness of the data Independence Limited, Sri Lanka
management and aggregation systems was DNV GL applies its own management
evaluated and verified through our remote standards and compliance policies for
assessments and were found to be fairly quality control, in accordance with ISO
accurate and reliable. Some of the data IEC 17021:2015 - Conformity Assessment
inaccuracies identified during the verification Requirements for bodies providing
process were found to be attributable to Nandkumar Vadakepatth
audit and certification of management
transcription, interpretation and aggregation systems, and accordingly maintains a Assurance Reviewer
errors and these errors have been corrected. DNV GL Business Assurance India Private

Annual Report 2020

comprehensive system of quality control
Nothing has come to our attention to including documented policies and Limited, India
suggest that the Report does not meet the procedures regarding compliance with March 1, 2021
requirements related to the Principle of ethical requirements, professional standards
Colombo,
Reliability. and applicable legal and regulatory
requirements. Sri Lanka.
Additional Principles as per DNV GL We have complied with the DNV GL

Commercial Bank of Ceylon PLC

VeriSustain Code of Conduct2 during the assurance
Completeness engagement and maintain independence
where required by relevant ethical
How much of all the information that has been
requirements including the AA1000AS v3
identified as material to the organisation and
Code of Practice. This engagement work DNV GL Business Assurance Lanka (Private) Limited is part of
its stakeholders is reported
was carried out by an independent team DNV GL – Business Assurance, a global provider of certification,
The Report has brought out the verification, assessment and training services, helping
of sustainability assurance professionals.
Content Elements, Guiding Principles and customers to build sustainable business performance.
DNV GL was not involved in the preparation [Link]
value creation through its six(6) identified
of any statements or data included in the
capitals, its business model, strategies
Report except for this Assurance Statement
and management approach disclosures
and Management Report. DNV GL maintains
in line with the <IR> Framework and its
complete impartiality toward stakeholders
key requirements as well as non-financial
interviewed during the assurance process.
performance related to material topics
DNV GL did not provide any services to
through chosen GRI Standards of entities
Commercial Bank and its subsidiaries in
within the chosen reporting boundary
the scope of assurance during 2020-21 that
considering the Bank’s sphere of control and
could compromise the independence or
influence.
impartiality of our work.
Nothing has come to our attention to
suggest that the Report does not meet the
requirements related to the Principle of
Completeness.

2
The DNV GL Code of Conduct is available on request from [Link]
Project No.: PRJN-224950-2021-AST-LKA

351
 Annex 6: Our Sustainability Footprint
GRI Disclosures – 5 Year Summary
Disclosure Unit of Measure 2020 2019 2018 2017 2016

201–1 Direct economic value:

– Generated Rs. Mn. 149,711 148,706 138,049 114,357 93,143
– Distributed to 116,450 124,544 117,032 102,268 81,712
– Depositors 72,759 80,571 72,524 64,011 47,915
– Employees 14,564 14,083 13,071 11,268 10,794
– Business partners 9,636 10,426 10,497 8,819 7,773
– Government 11,808 12,691 14,286 11,609 9,368
– Shareholders 7,586 6,679 6,571 6,478 5,800
– Community 97 94 83 83 62
– Retained 33,261 24,162 21,017 12,089 11,431
302–1 Energy consumption within the organisation Gigajoules 45,045 50,296 49,958 54,820 56,359
302–4 Reduction of energy consumption Gigajoules 5,251 (338) 4,862 1,539 (482)
305–1 Direct (Scope 1) GHG emissions CO2 Tonnes. Pending 1,282 1,369 1,305 Not measured
305–2 Energy indirect (Scope 2) GHG emissions CO2 Tonnes. Pending 10,957 10,838 12,395 Not measured
Supplementary Information

401–1 New employee hires Nos. % Nos. % Nos. % Nos. % Nos. %

Female 41 0.81 57 1.13 70 1.41 46 0.92 46 0.93
– 18–30 Years 41 0.81 52 1.03 67 1.34 43 0.86 42 0.85
– 31–50 Years – – 5 0.10 3 0.06 3 0.06 4 0.08
– Above 50 Years – – – – – – – – – –
Male 117 2.31 207 4.12 242 4.86 214 4.29 225 4.54
– 18–30 Years 106 2.09 197 3.92 233 4.68 211 4.23 210 4.24
Annual Report 2020

– 31–50 Years 11 0.22 9 0.18 8 0.16 2 0.04 14 0.28

– Above 50 Years – – 1 0.02 1 0.02 1 0.02 1 0.02
Total 158 3.12 264 5.25 312 6.26 260 5.21 271 5.47
Attrition
Commercial Bank of Ceylon PLC

Female 52 1.03 73 1.45 72 1.44 55 1.10 54 1.09

– 18–30 Years 12 0.24 31 0.61 10 0.20 24 0.48 16 0.32
– 31–50 Years 9 0.18 18 0.36 41 0.82 21 0.42 16 0.32
– Above 50 Years 31 0.61 24 0.48 21 0.42 10 0.20 22 0.44
Male 111 2.19 154 3.05 191 3.82 187 3.75 175 3.52
– 18–30 Years 51 1.01 91 1.80 107 2.14 94 1.89 91 1.83
– 31–50 Years 32 0.63 43 0.85 51 1.02 46 0.92 43 0.87
– Above 50 Years 28 0.55 20 0.40 33 0.66 47 0.94 41 0.83
Total 163 3.22 227 4.50 263 5.26 242 4.86 229 4.61

352
 Annex 6: Our Sustainability Footprint GRI Disclosures – 5 Year Summary
Disclosure Unit of Measure 2020 2019 2018 2017 2016

401–3 Parental leave

– Entitled to leave Nos. 1,185 1,196 1,189 1,213 1,227
– Availed for leave Nos. 69 84 58 52 65
– Due to return Nos. 73 64 48 57 65
– Return to work Nos. 73 64 48 53 62
– Still employed Nos. 61 45 51 57 53
– Return ratio % 100.00 100.00 100.00 92.98 95.38
– Retained ratio % 95.31 93.75 96.23 91.94 100.00

404–1 Average training hours Hours

Female 2 19 20 17 20
– Corporate management 1 32 29 2 4
– Executive officers 2 23 22 19 20
– Junior executive assistants & allied grades 1 10 10 10 11
– Banking & graduate trainees 8 64 86 98 85

Supplementary Information
Male 7 27 26 25 25
– Corporate management 6 34 35 32 30
– Executive officers 6 28 25 24 19
– Junior executive assistants & allied grades 5 16 16 15 18
– Banking and graduate trainees 28 83 79 78 71

404–3 Percentage of employees receiving performance and %

Annual Report 2020

career development reviews
– Female 100.00 100.00 100.00 100.00 100.00
– Male 100.00 100.00 100.00 100.00 100.00

405–1 Diversity and equal opportunity %

Gender

Commercial Bank of Ceylon PLC

– Female 23.43 23.63 24.08 24.35 24.60
– Male 76.57 76.37 75.92 75.65 75.40
Age group
– 18–30 Years 34.86 37.34 39.94 41.17 43.62
– 31–50 Years 57.37 55.15 52.93 52.27 50.07
– Above 50 Years 7.77 7.51 7.13 6.56 6.31

405–2 Remuneration ratio women to men Male:Female

– Corporate management 1 : 0.75 1 : 0.97 1:0.75 1:0.75 1:0.95
– Executive officers 1 : 1.05 1 : 1.09 1:1.11 1:0.90 1:1.10
– Junior executive assistants and allied grades 1 : 1.10 1 : 1.10 1:1.09 1:0.92 1:1.08
– Banking and graduate trainees 1 : 1.00 1 : 1.01 1:1.02 1:0.97 1:1.01
– Office assistants and other 1 : 0.79 1 : 0.79 1:0.82 1:1.05 1:1.01

418–1 Substantiated complaints The Bank did not come across any complaint that had resulted in a reputational
damage or significant financial loss.

353
 Annex 7: Decade at a Glance
As at December 31, CAGR 2020 2019 2018
Rs. Mn. %

Assets
Cash and cash equivalents 50,251 52,535 39,534
Balances with Central Banks 110,971 39,461 54,385
Placements with banks 15,939 24,527 19,899
Securities purchased under resale agreements – 13,148 9,514
Derivative financial assets 2,637 1,831 7,910
Other financial instruments – Held for trading – – –
Financial assets recognised through profit or loss – Measured at fair value 35,189 21,468 5,520
Loans and receivables to banks – – –
Financial assets at amortised cost – Loans and advances to banks 780 758 763
13.51
Loans and receivables to other customers – – –
Financial assets at amortised cost – Loans and advances to other customers 896,845 884,646 861,100
Financial investments – Held to maturity – – –
Financial investments – Loans and receivables – – –
Financial assets at amortised cost – Debt and other financial instruments 292,728 101,145 83,855
Financial investments – Available for sale – – –
Financial assets measured at fair value through other comprehensive income 278,461 197,568 176,507
Supplementary Information

Total financial assets 1,683,801 1,337,087 1,258,987

Investments in subsidiaries 5,808 5,011 4,264

Investment in associate 44 44 44
Property, plant & equipment and right-of-use assets 23,212 20,507 15,301
Intangible assets 1,233 1,080 906
Leasehold property – – 72
Deferred tax assets 2,500 294 –
Other assets 19,620 23,323 23,911
Annual Report 2020

Total assets 16.44 1,736,218 1,387,346 1,303,485

Liabilities
Due to banks 87,451 51,506 50,101
Derivative financial liabilities 1,501 1,495 8,022
Securities sold under repurchase agreements 91,438 51,220 49,104
Due to other customers/deposits from customers – – –
Commercial Bank of Ceylon PLC

16.36
Financial liabilities at amortised cost – due to depositors 1,265,966 1,053,308 983,037
Other borrowings – – –
Financial liabilities at amortised cost – other borrowings 54,556 23,249 25,362
Current tax liabilities 6,778 4,968 6,566
Deferred tax liabilities – – 646
Other provisions – – –
Other liabilities 33,038 30,497 24,208
Due to subsidiaries 97 54 41
Subordinated liabilities 38,247 37,887 37,992
Total liabilities 1,579,072 1,254,184 1,185,079

Equity
Stated capital 52,188 40,917 39,148
Statutory reserves 9,024 8,205 7,354
Retained earnings 7,596 5,144 5,063
Other reserves 88,338 78,896 66,841
Total liabilities and equity 16.44 1,736,218 1,387,346 1,303,485
Contingent liabilities and commitments 728,712 579,999 658,722

CAGR – Compounded Annual Growth Rate

354
 LKASs and SLFRSs
2017 2016 2015 2014 2013 2012 2011

33,225 30,194 20,044 20,592 14,262 19,733 12,911

44,801 43,873 28,221 19,634 18,432 18,168 17,343
17,633 11,718 17,194 14,508 4,132 16,163 11,674
– – 8,002 41,198 8,946 3,697 1,542
2,335 1,053 4,118 460 838 1,351 40
4,411 4,988 7,656 6,327 6,379 6,041 6,418
– – – – – – –

Annex 7: Decade at a Glance

641 624 601 551 546 629 580
– – – – – – –
737,447 616,018 508,115 405,431 353,062 337,247 286,314
– – – – – – –
63,563 60,981 – – – – –
48,712 51,824 57,724 50,436 48,943 31,971 26,630
– – – – – – –
154,714 160,023 204,244 214,208 131,757 57,963 61,415
– – – – – – –

Supplementary Information
1,107,482 981,296 855,919 773,345 587,297 492,963 424,867

3,066 2,435 1,237 1,211 289 303 315

44 44 44 44 44 44 44
14,635 10,308 9,969 9,953 8,387 8,221 7,907
777 641 466 439 468 497 467
73 74 74 75 76 77 78
– 964 – – – 449 360
17,297 16,439 12,096 10,543 9,426 9,189 7,291

Annual Report 2020

1,143,374 1,012,201 879,805 795,610 605,987 511,743 441,329

57,121 67,609 30,319 25,261 14,194 4,894 11,574

3,678 1,515 1,891 1,193 1,412 84 435
49,677 69,867 112,385 124,564 45,519 31,760 41,235
850,128 739,563 624,102 529,361 451,153 390,612 323,755

Commercial Bank of Ceylon PLC

– – – – – – –
23,786 9,270 9,986 11,637 8,654 15,823 8,368
– – – – – – –
4,144 3,441 3,002 1,998 1,759 2,802 1,305
3,275 – 231 2,574 1,563 1,698 1,594
– 2 2 2 2 2 1
19,225 17,710 15,547 17,444 9,827 10,363 8,162
75 20 26 19 16 22 30
25,166 24,850 11,973 11,045 10,944 1,106 1,106
1,036,275 933,847 809,464 725,098 545,043 459,166 397,565

37,144 24,978 23,255 21,458 19,587 18,009 16,474

6,477 5,648 4,922 4,327 4,035 3,433 2,890
4,987 4,464 4,389 4,258 4,233 4,178 2,547
58,491 43,264 37,775 40,469 33,089 26,957 21,853
1,143,374 1,012,201 879,805 795,610 605,987 511,743 441,329
564,795 498,305 521,232 352,453 295,452 279,593 234,551

355
 For the year ended December 31, CAGR 2020 2019 2018
Rs. Mn. %

Operating results
Gross income 14.05 149,711 148,706 138,049
Interest income 122,330 127,780 117,466
Interest expense (72,759) (80,571) (72,524)
Foreign exchange profit 8,338 6,726 7,900
Commission and other income 17,031 12,082 12,683
Operating expenses and impairment (51,429) (43,678) (39,934)
Profit before tax 8.92 23,511 22,339 25,591
Annex 7: Decade at a Glance

Income tax expense (7,138) (5,314) (8,047)

Profit for the year 8.46 16,373 17,025 17,544

Ratios
Return on average-shareholders’ funds (%) 11.28 13.54 15.56
Income growth (%) 0.68 7.72 20.72
Return on average assets (%) 1.05 1.27 1.43
Ordinary share dividend cover (times) 2.34 2.55 2.67
Advances to deposits and refinance (%) 72.96 86.74 86.96
Supplementary Information

Property, plant and equipment to shareholders’ funds (%) 15.56 16.21 13.75
Total assets to shareholders’ funds (times) 11.05 10.42 11.01
Capital funds to liabilities including contingent liabilities (%) 6.81 7.26 6.42
Cost/income ratio (%) 39.96 49.41 46.35
Liquid assets ratio – Domestic Banking Unit (DBU) (%) 44.99 30.42 24.47
Liquid assets ratio – Offshore Banking Centre (OBC) (%) 32.70 25.25 30.20
(As specified in the Banking Act No. 30 of 1988)
Group capital adequacy (%) Tier I N/A N/A N/A
Annual Report 2020

Tier I & II N/A N/A N/A

Group capital adequacy (%) (under Basel III)
Common equity Tier I capital ratio 13.36 12.40 11.43
Tier I capital ratio 13.36 12.40 11.43
Total capital ratio 16.88 16.18 15.62
Commercial Bank of Ceylon PLC

Share information
Market value of a voting ordinary share (Rs.) 80.90 95.00 115.00
Earnings per share (Rs.) 15 17 17
Dividend per share (Rs.) 6.50 6.50 6.50
Price earnings ratio (times) 5 5 7
Net assets value per share (Rs.) 135 130 117
Earnings yield (%) 19 17 15
Gross Dividends (Rs. Bn.) to ordinary shareholders 7.59 6.68 6.57
Dividend payout ratio (%) – Cash 32 27 26
Total dividend payout ratio (%) 46 39 37

Other information
Number of employees 5,057 5,062 5,027
Number of delivery points – Sri Lanka 268 268 266
2.49
Number of delivery points – Bangladesh 19 19 19
Number of automated teller machines 6.50 906 885 850

CAGR – Compounded Annual Growth Rate

356
 LKASs and SLFRSs
2017 2016 2015 2014 2013 2012 2011

114,357 93,143 77,868 72,753 73,736 63,395 45,860

103,034 80,738 66,030 61,832 62,764 52,685 38,356
(64,011) (47,915) (35,685) (34,610) (36,879) (29,830) (19,650)
588 2,326 2,877 1,481 1,996 4,687 2,322
10,735 10,079 8,961 9,440 8,976 6,023 5,182
(28,400) (25,177) (25,040) (22,407) (22,347) (19,270) (15,313)
23,183 20,051 17,143 15,736 14,510 14,295 10,897

Annex 7: Decade at a Glance

(6,602) (5,539) (5,240) (4,556) (4,065) (4,197) (3,014)
16,581 14,512 11,903 11,180 10,445 10,098 7,883

17.88 19.52 16.90 17.01 18.40 20.96 20.28

24.10 19.62 7.03 0.96 16.31 38.24 10.45
1.54 1.53 1.42 1.60 1.87 2.12 1.94
2.62 2.25 2.09 1.99 1.89 1.86 1.61
86.07 82.69 80.84 75.89 77.48 82.01 83.30

Supplementary Information
14.46 14.07 14.94 14.85 14.65 16.73 19.31
10.68 12.92 12.51 11.28 9.94 9.73 9.92
6.69 5.47 5.29 6.54 7.25 7.12 6.92
51.08 51.06 48.92 49.26 45.59 47.02 50.70
27.28 27.19 26.24 33.15 33.66 25.40 25.70
30.95 30.19 49.13 31.43 29.38 34.16 27.77

N/A 11.59 11.55 13.07 13.30 12.63 12.11

Annual Report 2020

N/A 16.01 14.28 16.22 16.93 13.84 13.01

12.12 – – – – – –
12.12 – – – – – –
15.70 – – – – – –

Commercial Bank of Ceylon PLC

135.80 145.00 140.20 171.00 120.40 103.00 100.00
17 16 13 13 12 12 9
6.50 6.50 6.50 6.50 6.50 6.50 6.00
8 9 10 13 10 9 11
108 88 80 81 72 63 54
13 11 10 8 10 12 9
6.48 5.77 5.70 5.70 5.52 5.42 4.90
26 28 33 35 37 37 42
38 40 48 50 53 54 62

4,982 4,987 4,951 4,852 4,730 4,602 4,524

261 255 246 239 235 227 213
19 19 18 18 18 17 17
775 677 640 625 604 572 514

357
 Annex 8: Financial Statements (US Dollars)
Income Statement
GROUP  BANK 
For the year ended December 31, 2020 2019 Change 2020 2019 Change
USD ’000 USD ’000 % USD ’000 USD ’000 % 

Gross income 812,655 806,102 0.81 800,596 795,221 0.68

Interest income 663,571 691,378 (4.02) 654,173 683,313 (4.26)
Less: Interest expense 391,545 432,788 (9.53) 389,086 430,862 (9.70)
Net interest income 272,026 258,590 5.20 265,087 252,451 5.01
Fee and commission income 63,314 68,850 (8.04) 60,260 66,345 (9.17)
Less: Fee and commission expense 10,792 11,354 (4.95) 10,760 11,321 (4.96)
Net fee and commission income 52,522 57,496 (8.65) 49,500 55,024 (10.04)
Net gains/(losses) from trading 10,043 7,277 38.01 10,043 7,277 38.01
Net gains/(losses) from derecognition of financial assets 34,172 6,073 462.69 34,172 6,073 462.69
Net other operating income 41,555 32,523 27.77 41,948 32,212 30.22
Total operating income 410,318 361,959 13.36 400,750 353,037 13.52
Less: Impairment charges and other losses 114,543 60,596 89.03 114,886 59,152 94.22
Net operating income 295,775 301,363 (1.85) 285,864 293,885 (2.73)

Less: Expenses
Supplementary Information

Personnel expenses 80,175 77,053 4.05 77,882 75,308 3.42

Depreciation and amortisation 16,592 15,194 9.20 15,984 14,730 8.51
Other operating expenses 43,675 47,462 (7.98) 42,176 45,928 (8.17)
Total operating expenses 140,442 139,709 0.52 136,043 135,966 0.06
Operating profit before taxes on financial services 155,333 161,654 (3.91) 149,822 157,919 (5.13)
Less: Taxes on financial services 24,232 38,801 (37.55) 24,093 38,458 (37.35)
Operating profit after taxes on financial services 131,101 122,853 6.71 125,729 119,461 5.25
Annual Report 2020

Share of profits of associate, net of tax 21 53 (60.38) – – –

Profit before tax 131,122 122,906 6.68 125,729 119,461 5.25
Less: Income tax expense 39,749 29,751 33.61 38,170 28,418 34.32

Profit for the year 91,373 93,155 (1.91) 87,559 91,043 (3.83)

Profit attributable to:

Commercial Bank of Ceylon PLC

Equity holders of the Bank 90,588 92,315 (1.87) 87,559 91,043 (3.83)
Non-controlling interest 785 840 (6.55) – – –
Profit for the year 91,373 93,155 (1.91) 87,559 91,043 (3.83)

Earnings per share

Basic earnings per ordinary share (USD) 0.08 0.09 (4.33) 0.08 0.09 (6.24)
Diluted earnings per ordinary share (USD) 0.08 0.09 (4.33) 0.08 0.09 (6.24)

US Dollar Accounts
The Income Statement and the Statement of Financial Position given on pages 358 and 359 are solely for the convenience of stakeholders and
do not form part of the Financial Statements.

358
Statement of Financial Position
GROUP  BANK 

Annex 8: Financial Statements (US Dollars) Income Statement

As at December 31, 2020 2019 Change 2020 2019 Change
USD ’000 USD ’000 % USD ’000 USD ’000 % 

Assets
Cash and cash equivalents 274,091 287,065 (4.52) 268,720 280,934 (4.35)
Balances with Central Banks 616,892 246,531 150.23 593,428 211,022 181.22
Placements with banks 87,817 133,175 (34.06) 85,235 131,162 (35.02)
Securities purchased under resale agreements – 70,308 – – 70,308 –
Derivative financial assets 14,100 9,791 44.01 14,100 9,791 44.01
Financial assets recognised through profit or loss – Measured at fair value 188,179 114,802 63.92 188,179 114,802 63.92
Financial assets at amortised cost – Loans and advances to banks 4,170 4,052 2.91 4,170 4,052 2.91
Financial assets at amortised cost – Loans and advances to other
customers 4,865,397 4,780,317 1.78 4,795,965 4,730,726 1.38
Financial assets at amortised cost – Debt and other financial instruments 1,615,292 572,508 182.14 1,565,388 540,881 189.41
Financial assets measured at fair value through other comprehensive
income 1,490,464 1,057,888 40.89 1,489,098 1,056,515 40.94
Investments in subsidiaries – – – 31,061 26,798 15.91
Investment in associate 343 304 12.83 237 237 –

Supplementary Information
Property, plant and equipment and right–of–use assets 135,757 120,453 12.71 124,130 109,664 13.19
Investment properties 359 248 44.76 – – –
Intangible assets 9,628 8,801 9.40 6,593 5,775 14.16
Deferred tax assets 14,629 2,835 416.01 13,368 1,573 749.84
Other assets 107,995 125,368 (13.86) 104,916 124,719 (15.88)
Total assets 9,425,113 7,534,446 25.09 9,284,588 7,418,959 25.15

Liabilities
Due to banks 471,915 287,740 64.01 467,654 275,432 69.79

Annual Report 2020

Derivative financial liabilities 8,028 7,996 0.40 8,028 7,996 0.40
Securities sold under repurchase agreements 488,832 273,355 78.83 488,971 273,904 78.52
Financial liabilities at amortised cost – Due to depositors 6,880,302 5,716,484 20.36 6,769,871 5,632,661 20.19
Financial liabilities at amortised cost – Other borrowings 291,743 124,326 134.66 291,743 124,326 134.66
Current tax liabilities 37,385 27,792 34.52 36,246 26,565 36.44

Commercial Bank of Ceylon PLC

Deferred tax liabilities 2,160 2,227 (3.01) – – –
Other liabilities 179,531 164,577 9.09 176,670 163,083 8.33
Due to subsidiaries – – – 519 290 78.97
Subordinated liabilities 204,528 202,603 0.95 204,532 202,604 0.95
Total liabilities 8,564,424 6,807,100 25.82 8,444,234 6,706,861 25.90

Equity
Stated capital 279,079 218,807 27.55 279,079 218,807 27.55
Statutory reserves 49,654 44,854 10.70 48,257 43,879 9.98
Retained earnings 43,445 27,712 56.77 40,622 27,510 47.66
Other reserves 479,121 427,473 12.08 472,396 421,902 11.97
Total equity attributable to equity holders of the Bank 851,299 718,846 18.43 840,354 712,098 18.01
Non–controlling interest 9,390 8,499 10.48 – – –
Total equity 860,689 727,345 18.33 840,354 712,098 18.01
Total liabilities and equity 9,425,113 7,534,446 25.09 9,284,588 7,418,959 25.15
Contingent liabilities and commitments 3,906,747 3,106,748 25.75 3,896,854 3,101,600 25.64
Net assets value per share (USD) 0.73 0.70 4.27 0.72 0.69 3.91

An exchange rate of 1 USD equals 187 LKR for both the years, has been used to facilitate comparison.

359
 Annex 9: Correspondent Banks and Agent Network
01. Canada 08. Germany 12. Pakistan 16. Sri Lanka
Bank of Montreal (CAD) Commerz Bank AG (EUR) Standard Chartered Bank (ACU$) Commercial Bank of Ceylon PLC (ACU$)
Toronto Frankfurt Karachchi Colombo
BIC: BOFMCAM2 BIC: COBADEFF BIC: SCBLPKK BIC: CCEYLKLX
A/C: 31441044203 and 31441044190* A/C: 400872103701 and 400871436200* A/C: 15000297601USD and A/C: 1420825031*
Landesbank Baden – 15000288701USD*
Wuerttemberg (EUR)
02. United States of America Stuttgart
17. Singapore
BIC: SOLADEST 13. Maldives
Bank of America NT and SA (USD) Citibank NA
A/C: 2808451
San Francisco BIC: CITISGSG
BIC: BOFAUS6S Standard Chartered Bank (EUR) Commercial Bank of Maldives Private A/C: (USD) 851122001,
A/C: 6290890098 Frankfurt Limited (ACU$) (EUR) 851122028 and (GBP) 851122036
BIC: SCBLDEF Malé
Citi Bank (USD) BIC: CBMVMVMV Oversea – Chinese Banking Corp Ltd.
A/C: 18109406,18149205 and
New York A/C: 1600100051 BIC: OCBCSGSG
018112204*
BIC: CITIUS33 A/C: (USD) 503212862301,
A/C: 36141446 and 36241316* Unicredit Bank AG (SGD) 695703165001
(Hypo Vereins Bank)(EUR)
Deutsche Bank Trust Company Standard Chartered Bank (SGD)
Munich
Americas (USD) BIC: SCBLSGSG
BIC: HYVEDEMM
New York A/C: 109344561 and 102318735*
A/C: 69101429
BIC: BKTRUS33
A/C: 4034566
JP Morgan Chase Bank (USD) 09. Switzerland
New York
BIC: CHASUS33 UBS AG (CHF)
A/C: 400808625 Zurich
BIC: UBSWCHZH
Standard Chartered Bank (USD)
Supplementary Information

A/C: 02300000085408050000W
New York
BIC: SCBLUS33
A/C: 3582052360001, 3582052360002
and 3582052637001*
Wells Fargo Bank N.A. (USD)
1
New York
BIC: PNBPUS3NNYC
A/C: 2000191002407 and
2000193003365* 2

Europe Middle East

03. France
Annual Report 2020

5
Crédit Agricole SA (EUR) 6 G
Paris C
7
BIC: AGRIFRPP E
A/C: 20533624000* 4/P
F
8
M B
3 11/O
K
04. United Kingdom
Commercial Bank of Ceylon PLC

9
Standard Chartered Bank (GBP)
London J
BIC: SCBLGB2L 10/D
A/C: 1804813401, 01270435801* and
01271474401*

05. Norway 10. Italy

14. India
18. China
Den Norske Bank (NOK) Banca Intesa BCI (EUR)
Milan Axis Bank Ltd. (ACU$)
Oslo
Mumbai Standard Chartered Bank (CNY)
BIC: DNBANOKK BIC: BCITITMM
BIC: AXISINBB Shanghai
A/C: 7002.02.04808 A/C: 100100003820
A/C: 920020002237636 BIC: SCBLCNSX
Banco Popolare Society Coperation A/C: 910020049396568* A/C: 501510533540
(EUR)
ICICI Bank Ltd. (ACU$)
06. Sweden Verona
Mumbai
BIC: BAPPIT22 19. Korea
A/C: 400000082 BIC: ICICINBB
Skandinaviska Enskilda A/C: 406000181 and 406000220*
Banken (SEK) Unicredito Italiano SPA (EUR) Kookmin Bank (USD)
Stockholm Rome Standard Chartered Bank (ACU$) Seoul
BIC: ESSESESS BIC: UNCRITMM Mumbai BIC: CZNBKRSE
A/C: 52018529803 A/C: 0995 4268 BIC: SCBLINBB A/C: 7598USD010 and 7618USD013*
A/C: 22205031885
KEB Hana Bank
Seoul
07. Denmark 11. United Arab Emirates 15. Bangladesh BIC: KOEXKRSE
A/C: 0963THR051080010
Nordea Bank Denmark A/S (DKK) Mashreq Bank (AED) Commercial Bank of Ceylon PLC (ACU$) Woori Bank (USD)
Copenhagen Dubai Dhaka Seoul
BIC: NDEADKKK BIC: BOMLAEAD BIC: CCEYBDDH BIC: HVBKKRSE
A/C: 5000408909 A/C: AE270330000010195511268 A/C: 2802000017 A/C: W1027001US

360
 20. Japan A. Australia F. Kuwait L. South Korea
Mufg Bank (JPY) Cash Express Pty Ltd Al Muzaini Exchange Company Coinone Transfer Inc
Tokyo Ceylon Exchange Pty Ltd Al Muzaini Exchange Company Global Money Express Co Ltd
BIC: BOTKJPJT Colombo Money Transfer Services (Pvt) Ltd Al Sultan Exchange Company WLL Gmoney Trans Co Ltd
A/C: 653-0461318* Direct Forex Almulla International Exchange [Link]
Standard Chartered Bank (JPY) Foreign Exchange Central Pty Ltd Aman Exchange Company WLL
Harbour and Hills Financial Services Pty Bahrain Exchange [Link] M. Saudi Arabia

Annex 9: Correspondent Banks and Agent Network

Tokyo
BIC: SCBLJPJT Lanka Currency Converter Pty Ltd City International Exchange [Link]
Remittanceplus Pty Ltd Dollarco Exchange Co. Alrajhi Banking & Investment Corporation
A/C: 2168531110
TSS Worldwide Money Transfer Etemadco Co Ltd Arab National Bank
Sumitomo Mitsui Banking Corporation Joy Alukkas Exchange [Link] Bank Albilad
(JPY) Kuwait Bahrain Int'L Ex Co. The National Commercial Bank
Tokyo B. Bahrain Lulu Exchange Company WLL The Saudi British Bank
BIC: SMBCJPJT National Exchange Company WLL
A/C: 4395 Modern Exchange Co .BSCC National Money Exchange WLL
National Finance & Exchange Co. WLL Oman Exchange [Link] N. Singapore
NEC BSC UAE Exchange Centre Kuwait
21. Hong Kong Zenj Exchange [Link] Unimoni Exchange Company Ameertech Remittance & Exc. Ser. Pte Ltd

Standard Chartered Bank

BIC: SCBLHKHH C. Israel G. Lebanon O. United Arab Emirates
A/C: (HKD) 41109468048,
(HKD) 44709419107* and AMT Financial Services Ltd Cashunited SAL Al Ahalia Money Exchange Bureau
(CNY) 44709448344 S T B Union Ltd Crystal Exchange Company SAL Al Ansari Exchange LLC
Unigiros Ltd Al Dahab Exchange
Al Fardan Exchange LLC
H. Malaysia Al Fuad Exchange
Al Ghurair Exchange LLP
Al Ghurair International Exchange

Supplementary Information
Tranglo SDN BHD
Al Rostamani International Exchange
Arab Link Money Transfer PSC
I. Maldives Delma Exchange
Deniba International Exchange
Commercial Bank of Maldives Pvt Ltd Emirates India Int'L Ex Co.
20 Federal Exchange
19/L G C C Exchange
18 Index Exchange
Joyalukkas Exchange
Lari Exchange
LM Exchange LLC
Asia Lulu International Exchange LLC

Annual Report 2020

Multinet Trust Exchange LLC
12 Orient Exchange Company LLC
SAAD Exchange
U A E Exchange Centre LLC
15 21 Universal Exchange Centre
22/A 14 Wall Street Exchange Centre

23 P. United Kindom

Commercial Bank of Ceylon PLC

H
Brac Saajan Exchange Ltd
16
Currency Exchange Corporation Ltd
13/I 17/N
GCC Exchange UK Ltd
J. Oman Global Exchange Ltd
LCC Trans-Sending Ltd
Al Jadeed Exchange LLC Visa Payments Ltd
Bank Muscat S.A.O.G
Global Money Exchang Co. LLC
Joyalukkas Exchange LLC
Global
Laxmidas Tharia Ved & Company BFC Bank Ltd
Lulu Exchange Co LLC Continental Exchange Solutions Inc
Modern Exchange Company LLC Moneygram
Purshottam Kenji Exchange Co. LLC Payoneer Inc
Unimoni Exchange LLC Placid NK Corporation DBA Placid Express
Prabhu Group Inc
Royal Exchange (USA) Inc
K. Qatar Transfast Remittance LLC
22. Australia U A E Exchange Centre LLC
Al Sadd Exchange Co. WLL Wall Street Exchange Centre
National Australia Bank (AUD) D. Italy Al Dar For Exchange Works Worldwide Cash Express Limited
Melbourne Al Mana Exchange WLL
BIC: NATAAU33 Commex Srilanka SRL Al Mirqab Exchange Co. WLL
A/C: 1803020052500 and National Exchange Company SRL Al Zaman Exchange WLL
1803152323500* Alfardan Exchange Company e-Exchange Agent Network
Arabian Exchange Company WLL * Accounts of Bangladesh Operations.
E. Jordan City Exchange Company WLL
23. New Zealand Doha Bank
Al Alami Exchange Company Doha Exchange
Bank of New Zealand (NZD) Al Nasir Establishment for Exchange Eastern Exchange Establishment
Wellington Alawneh Exchange Co. Gulf Exchange Co.
BIC: BKNZNZ22985 Hekmat Nawras And Partners Exchange Co. Habib Qatar International
A/C: 2659680000 and 2690700000* Kalil Al Rahman Exchange Co. Islamic Exchange [Link]

361
 Annex 10: Group Structure
Local Subsidiaries

Commercial Commercial Insurance

CBC Tech Solutions Ltd. CBC Finance Limited
Development Company PLC Brokers (Pvt) Ltd.

CBC FINANCE
A Fully Owned Subsidiary of Commercial Bank of Ceylon PLC

Incorporated on March 14, 1980 February 17, 2003 February 18, 1987 August 17, 1987
in Sri Lanka in Sri Lanka in Sri Lanka in Sri Lanka

Bank’s Holding
90.00% 100% 100% 60.00%
(58.00% as at
December 31, 2019)

Principal Business Property development Providing Information Granting of leasing & Insurance Brokering
Activities and provision of other & Communication hire purchase facilities,
utility services Technology (ICT) related mortgage loans and other
products, services and loan facilities. Accepting
solutions to corporate public deposits.
sector

Business Address 4th Floor, “Commercial House”, No. 187, No. 347,
Supplementary Information

No. 8-4/2, No. 21, Katugastota Road, Dr Colvin R De Silva

York Arcade Building, Sir Razik Fareed Mawatha, Kandy. Mawatha,
Leyden Bastian Road, Colombo 01. Colombo 02.
Colombo 01.

Contact Numbers +94 11 244 7300 +94 11 257 4417 +94 81 221 3498 +94 11 760 0600
+94 11 257 4407 +94 81 220 0272
Annual Report 2020

Board of Directors
Chairman B R L Fernando Prof A K W Jayawardane K G D D Dheerasinghe M P Jayawardena
Managing Director/CEO S Renganathan Keerthi Mediwake D M U N Dissanayaka R A M Seneviratne
Director A L Gooneratne K D N Buddhipala R Senanayake D M D K Thilakaratne
Director A T P Edirisinghe Mrs S A Walgama Dr (Ms) J P Kuruppu U I S Tillakawardana
Commercial Bank of Ceylon PLC

Director L D A Jayasinghe K S A Gamage S M S C Jayasuriya W M N S K Weerapana

Director U I S Tillakawardana S Prabagar D S Bandara D J D P Hettiarachchi
Director L H Munasinghe L W P Indrajith
Director A N P Sooriyaarachchi
Company Secretary L W P Indrajith M P Dharmasiri Ms H D U O Gurnasekara Ms F Rikza Nawaz

Summary of Financial Information

2020 2019 2020 2019 2020 2019 2020 2019
Rs. Mn. Rs. Mn. Rs. Mn. Rs. Mn. Rs. Mn. Rs. Mn. Rs. Mn. Rs. Mn.

Total assets 3,449.510 3,343.931 354.779 250.715 8,482.598 7,431.856 711.027 701.205
Total liabilities 454.405 443.223 107.764 73.151 5,284.046 5,308.109 177.405 184.646
Net assets 2,995.105 2,900.708 247.015 177.564 3,198.552 2,123.748 533.622 516.559
Total revenue 454.906 453.849 348.301 350.985 1,049.982 1,150.666 255.268 255.178
Profit before tax 171.273 412.990 131.533 110.861 110.037 116.687 42.167 89.195
Profit after tax 122.582 363.217 94.648 79.699 58.477 79.129 32.078 60.903
Dividend per share (Rs.) 5.50 6.00 50.00 50.00 – – 33.33 35

362
 Local Associate Foreign Subsidiaries

Equity Investments Commex Sri Lanka Commercial Bank of Maldives CBC Myanmar Microfinance
Lanka Ltd. S.R.L. – Italy Private Limited Company Limited

August 8, 1990 December 2, 2008 in Italy March 24, 2015 April 4, 2017 Incorporated on
in Sri Lanka in Maldives in Myanmar

Bank’s Holding
22.92% 100% 55% 100%

Annex 10: Group Structure

Venture Capital Financing Money Transfer and Money Banking Microfinancing Principal Business Activities
Exchange

No. 108 A, 2/1, No. 34, H Filigasdhoshuge, No. 15, Business Address

Supplementary Information
Maya Avenue, Via Giacomo Leopardi, Ameer Ahmed Magu, Office Street,
Colombo 06. Rome, K. Male 20066, Ward 4, Lewe Township,
Italy. Maldives. Naypyitaw,
Myanmar.

+94 11 537 3746 +39 06 4885838 +96 03332668 +95 6730566 Contact Numbers
+94 11 250 7605 +39 06 48986390
+94 11 250 7606

Annual Report 2020

Board of Directors
M J C Amarasuriya K D N Buddhipala Ahmed Nazeer K G D D Dheerasinghe Chairman
A H M Riyaz Ronnie Daniel Dilan Rajapakse R C P Kalugamage Managing Director/CEO
Deshamanya S E Captain J Premanath S Renganathan Mrs S A Walgama Director
J D Peiris U K P Banduwansa S C U Manatunge D J D P Hettiarachchi Director

Commercial Bank of Ceylon PLC

J B Abu Baker Giancarlo Dolente U I S Tillakawardana Director
W I Arambage Dr (Ms) Antonia Coppola Dr Ibrahim Vishan Director
K C Vignarajah Adam Saleem Director
M H Wijewaradene Director
Mrs R R Dunuwille Mrs N Gamage Ms Fathmath Muaza R C P Kalugamage Company Secretary

2020 2019 2020 2019 2020 2019 2020 2019

Rs. Mn. Rs. Mn. Rs. Mn. Rs. Mn. Rs. Mn. Rs. Mn. Rs. Mn. Rs. Mn.

496.708 253.351 588.994 240.854 21,712.188 19,464.317 524.172 432.050 Total assets
226.199 5.439 503.450 65.411 18,572.641 16,680.741 38.429 19.256 Total liabilities
270.509 247.912 85.544 175.443 3,139.547 2,783.575 485.743 412.794 Net assets
49.129 22.672 35.342 16.230 1,167.493 657.374 102.180 40.013 Total revenue
17.006 (1.379) (75.019) (100.829) 382.717 450.343 17.181 (13.122) Profit before tax
17.006 (1.480) (104.460) (100.829) 274.214 328.948 12.428 (12.594) Profit after tax
– – – – – Dividend per share (Rs.)

363
 Annex 11: Network of delivery points in Sri Lanka
and Bangladesh
Network of delivery points
in Sri Lanka

Branches ATMs CRMs Branches ATMs CRMs

Northern Province 18 34 19 Central Province 22 47 21
1. Jaffna District 12 22 13 16. Kandy District 15 30 13
2. Kilinochchi District 2 3 3 17. Matale District 3 10 4

3. Mannar District 1 1 1 18. Nuwara Eliya District 4 7 4

4. Mullaitivu District 1 2 – 1

5. Vavuniya District 2 6 2 Branches ATMs CRMs

2 Eastern Province 10 19 12

4 19. Ampara District 4 7 5

Branches ATMs CRMs
20. Batticaloa District 5 10 6
North-Central Province 8 19 7
21. Trincomalee District 1 2 1
6. Anuradhapura District 6 12 5 5
Supplementary Information

3
7. Polonnaruwa District 2 7 2

21 Branches ATMs CRMs

Uva Province 9 18 8
Branches ATMs CRMs
6 22. Badulla District 6 12 6
North-Western Province 23 60 26
23. Monaragala District 3 6 2
8. Kurunegala District 14 44 17
9. Puttalam District 9 16 9 7
9
Annual Report 2020

20

Branches ATMs CRMs 8 17

Western Province 133 349 119

10. Colombo District 78 195 72
16
19
11. Gampaha District 42 127 36 10
24
12. Kalutara District 13 27 11
Commercial Bank of Ceylon PLC

22
18
11
23
Branches ATMs CRMs 25
Southern Province 29 62 24 12

13. Galle District 13 34 10

14. Matara District 10 18 8 15
13 Branches ATMs CRMs
15. Hambantota District 6 10 6 14
Sabaragamuwa Province 16 27 14
24. Kegalle District 6 10 5
25. Ratnapura District 10 17 9

Number of Branches 268 Cash Deposit Machines CDMs 38

Automated Teller Machines (Off-site = 207) ATMs 635 Envelop Deposit Machines (for cheques) EDMs 30
Cash Recycler Machines (Off-site = 10) CRMs 250 Automated Cheque Deposit Units ACDs 20

Banking hours is given online.

[Link]

364
 Annex 11: Network of delivery points in Sri Lanka and Bangladesh
Network of delivery points
in Bangladesh

Narayanganj District Sylhet District Dhaka District

Narayanganj Branch Sylhet Branch Corporate Branch
Dhanmondi Branch
Gulshan Branch
Mirpur Branch
Motijheel Branch
Panthapath Branch
Rangpur Tejgoan Branch
Uttara Branch
Old Dhaka – SME Centre
Progati Sharani – SME Centre
Rajshahi Sylhet Shanthinagar – SME Centre

Supplementary Information
Gulshan – OBU
Dhaka

Khulna Chittagong

Barisal

Annual Report 2020

Gazipur District Chittagong District

Commercial Bank of Ceylon PLC

Tongi SME Centre Chittagong Branch
CDA Avenue – SME Centre
Jublee Road – SME Centre
SME: Small and Medium Enterprise CEPZ – OBU
OBU: Off-Shore Banking Unit

365
 Annex 12: Glossary of Financial and Banking Terms
A
Basis Point (BP) Cash Generating Unit (CGU)
Acceptances
One hundredth of a percentage point The smallest group of assets that
Promise to pay created when the drawee
(0.01 per cent); 100 basis points is 1 independently generates cash flow and the
of a time draft stamps or writes the word
percentage point. Used in quoting movements cash flow is largely independent of the cash
‘accepted’ above his signature and a
in interest rates or yields on securities. flows generated by other assets.
designated payment date.
Bills Sent for Collection Collectively Assessed Loan
Accounting Policies
A bill of exchange drawn by an exporter Impairment Provisions
The specific principles, bases, conventions,
usually at a term, on an importer overseas Also known as portfolio impairment
rules and practices adopted by an entity
and brought by the exporter to his bank with provisions. Impairment assessment on a
in preparing and presenting Financial
a request to collect the proceeds. collective basis for homogeneous groups of
Statements.
loans that are not considered individually
Business Model Assessment
Accrual Basis significant and to cover losses that have been
Business model assessment is carried out incurred but have not yet been identified at
Recognition of the effects of transactions
as the first step of the financial assets the reporting date.
and other events when they occur without
classification process. Business model refers
waiting for receipt or payment of cash or cash Commitments
to how an entity manages its financial
equivalent.
assets in order to generate cash flows. It Credit facilities approved but not yet utilised
Actuarial Gain/Loss is determined at a level that reflects how by the clients as at the reporting date.
Gain or loss arising from the difference groups of financial assets are managed rather
than at an instrument level. SLFRS 9 identifies Contingencies
between estimates and actual experience in
three types of business models: “hold to A condition or situation, the ultimate
an entity’s pension plan.
collect”, “hold to collect and sell” and “other”. outcome of which will be confirmed only on
Supplementary Information

Amortisation In order to determine the business model, it the occurrence or non-occurrence of one or
The systematic allocation of the depreciable is necessary to understand the objectives of more uncertain future events.
amount of an intangible asset over its useful each business model. An entity would need Corporate Governance
life. to consider all relevant information including,
The process by which corporate entities
for example, how business performance is
Amortised Cost are governed. It is concerned with the
reported to the entity’s key management
Amount at which the financial asset or way in which power is exercised over
personnel and how managers of the business
financial liability is measured at initial the management and direction of entity,
are compensated.
recognition, minus principal repayments, the supervision of executive actions and
plus or minus the cumulative amortisation Business Continuity Plan accountability to owners and others.
Annual Report 2020

using the effective interest method of any A document that consists of the critical Correspondent Bank
difference between that initial amount information an organization needs to continue
A bank in a foreign country that offers
and the maturity amount and minus any operating during an unplanned event.
banking facilities to the customers of a bank
reduction for impairment or uncollectability. The BCP should state the essential functions in another country.
Associate of the business, identify which systems and
processes must be sustained, and detail how Cost/Income Ratio
An entity over which the investor has
to maintain them. It should take into account Operating expenses excluding impairment
Commercial Bank of Ceylon PLC

significant influence.
any possible business disruption. charge for loans and other losses as a
Average Weighted Deposit Rate (AWDR) percentage of total operating income.
AWDR is calculated by the Central Bank Credit Rating
monthly based on the weighted average of
C
An evaluation of a corporate’s ability to
all outstanding intetest bearing deposits of Capital Adequacy Ratio
repay its obligations or the likelihood of not
commercial banks and the corresponding The percentage of risk-adjusted assets defaulting, carried out by an independent
interest rates. supported by capital as defined under the rating agency.
framework of risk-based capital standards
Average Weighted Prime Lending Rate
developed by the Bank for International Credit Risk
(AWPLR) Settlements (BIS) and as modified by the Risk of financial loss to the Bank, if a customer
AWPLR is calculated by the Central Bank CBSL to suit local requirements. or counterparty to a financial instrument fails
weekly based on commercial banks' lending to meet its contractual obligations, and arises
rates offeres to their prime customers during Capital Conservation Buffer
principally from the loans and advances to
the week. Designed to ensure that banks build up customers and other banks and investment in
buffers of capital outside any periods of stress debt securities.
and to avoid breaches of minimum capital
B requirements. Credit Risk Mitigation
Basel III A technique to reduce the credit risk
Cash Equivalents
The Basel Committee on Banking Supervision associated with an exposure by application
Short-term, highly liquid investments that are of credit risk mitigants such as collateral,
(BCBS) issued the Basel III rules text, which
readily convertible to known amounts of cash guarantee and credit protection.
presents the details of strengthened global
and which are subject to an insignificant risk
regulatory standards on bank capital
of changes in value. Currency SWAPs
adequacy and liquidity.
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.
366
 D
Deferred Taxation Equity Instrument Financial Assets Measured at Fair Value
Sum set aside in the Financial Statements for An equity instrument is any contract that through Other Comprehensive Income
taxation that may become payable/receivable evidences a residual interest in the assets of (FVOCI)
in a financial year other than the current an entity after deducting all its liabilities. FVOCI include debt and equity instruments
financial year. It arises because of temporary measured at fair value through other
differences between tax rules and accounting
Equity Method
comprehensive income. A debt instrument
conventions. This is a method of accounting whereby the is measured at FVOCI, if it is held within a
investment is initially recognised at cost and business model whose objective is achieved
Delinquency adjusted thereafter for the post-acquisition by both collecting contractual cash flows and
A debt or other financial obligation is changes in the investor’s share of net assets

Annex 12: Glossary of Financial and Banking Terms

selling financial assets and the contractual
considered to be in a state of delinquency of the investee. The profit or loss and other terms of the financial asset give rise on
when payments are overdue. Loans and comprehensive income of the investor specified dates to cash flows that are solely
advances are considered to be delinquent include the investor’s share of the profit payments of principal and interest on
when consecutive payments are missed. or loss and other comprehensive income of the principal amount outstanding. Equity
Also known as “Arrears”. the investee. investments may be irrevocably classified
Deminimis ESOP (Employee Share Ownership Plan) as FVOCI when they meet the definition of
Equity under LKAS 32 Financial Instruments:
Features that could impact the cash flows of a A method of giving employees shares in the
Presentation, and are not held for trading.
financial asset by a de minimis amount both business for which they work.
on a period by period basis and cumulatively Financial Assets Measured at Fair Value
Exposure at Default (EAD)
through Profit or Loss (FVTPL)
Derecognition EAD is an estimate of the exposure at a future
default date, taking into account expected All financial assets other than those classified
Removal of a previously recognised financial
changes in the exposure after the reporting at Amortised Cost or FVOCI are classified
asset or financial liability from an entity’s
date, including repayments of principal as measured at FVTPL. These are held for
statement of financial position.
& interest and expected drawdowns of trading or managed and their performance
Derivatives committed facilities. is evaluated on a fair value basis as they are
neither held to collect contractual cash flows

Supplementary Information
A derivative is a financial instrument or
other contract, the value of which changes Expected Credit Losses (ECLs) nor held both to collect contractual cash
in response to some underlying variable ECL approach is the loan loss impairment flows and to sell financial assets.
(e.g. interest rate) that has an initial net method under SLFRS 9 on “Financial
Financial Intermediation Margin
investment smaller than would be required Instruments”. ECLs are the discounted
product of the Probability of Default (PD), Used to measure the robustness of financial
for other instruments that have a similar
Exposure at Default (EAD) and Loss Given intermediation process, it is gross income
response to the variable, and that will be
Default (LGD). ECL measurements are expressed as a percentage of average
settled at a future date.
unbiased and are determined by evaluating a total assets.
Domestic Systemically Important Banks range of possible outcomes. Forward Exchange Contract
(D-SIBs)

Annual Report 2020

Agreement between two parties to exchange
Systemically Important Banks (SIBs) are one currency for another at a future date at a
perceived as banks that are “Too Big To Fail”. F rate agreed upon today.
D-SIBs are critical for the uninterrupted
availability of essential banking services to the Fair Value
country’s real economy even during crisis. The The price that would be received to sell G
CBSL has designated LCBs with total assets an asset or paid to transfer a liability in
Global Reporting Initiatives (GRI)
equal to or greater than Rs. 500 Bn. as D-SIBs. an orderly transaction between market

Commercial Bank of Ceylon PLC

participants at the measurement date. The GRI is an international independent
Documentary Letters of Credit standards organisation that helps businesses,
Written undertakings by a Bank on behalf of Finance Lease governments and other organisations
its customers, authorising a third party to draw A lease in which the lessee acquires all to understand and communicate their
on the Bank up to a stipulated amount under financial benefits and risks attaching to impacts on issues such as climate change,
specific terms and conditions. ownership of the asset under lease. human rights and corruption. GRI promotes
sustainability reporting as a way for
Financial Instrument organisations to become more sustainable
E A financial instrument is any contract that and contribute to sustainable development.
gives rise to both a financial asset in one
Earnings per Ordinary Share (EPS) Gross Dividend
entity and a financial liability or equity
The profit attributable to ordinary The portion of profits distributed to the
instrument in another entity.
shareholders divided by the number of shareholders including the tax withheld.
ordinary shares in issue. Financial Assets Measured at
Amortised Cost Group
Effective Interest Rate (EIR)
A financial asset is measured at amortised A parent and all its subsidiaries.
Rate that exactly discounts estimated future
cost if the asset is held within a business
cash payments or receipts through the Guarantees
model whose objective is to hold assets
expected life of the financial instruments or Three party agreement involving a promise
to collect contractual cash flows and the
when appropriate, a shorter period to the by one party (the guarantor) to fulfil the
contractual terms of the financial asset give
net carrying amount of the financial asset or obligations of a person owing a debt if that
rise on specified dates to cash flows that are
financial liability. person fails to perform.
solely payments of principal and interest on
Effective Tax Rate (ETR) the principal amount outstanding.
Provision for taxation excluding deferred tax
expressed as a percentage of the profit before
taxation.

367
 H K M
Hedging Key Management Personnel (KMP) Market Capitalisation
A strategy under which transactions are Key management personnel are those The value of an entity obtained by
effected with the aim of providing cover persons having authority and responsibility multiplying the number of ordinary shares in
against the risk of unfavourable price for planning, directing and controlling the issue by its market value as at a date.
movements (interest rate, foreign exchange activities of the entity, directly or indirectly,
rate, commodity prices, etc.). including any Director (whether Executive or
Market Risk
otherwise) of that entity. This refers to the possibility of loss arising
High Quality Liquid Assets (HQLA) from changes in the value of a financial
Annex 12: Glossary of Financial and Banking Terms

Assets that are unencumbered, liquid in Knowledge Capital instrument as a result of changes in market
markets during a time of stress and, ideally, Knowledge capital is the intangible value of variables such as interest rates, exchange
be central bank eligible. These include, an organization made up of its knowledge, rates, credit spreads and other asset prices.
for example, cash and claims on central relationships, learned techniques, procedures,
governments and central banks. and innovations. In other words, knowledge
Market Risk Premium
capital is the full body of knowledge an The market risk premium is the difference
organization possesses. between the expected return on a market
I portfolio and the risk-free rate. The market
Impaired Loans risk premium is equal to the slope of the
L security market line (SML), a graphical
Loans where the Group does not expect
Liquid Assets representation of the capital asset pricing
to collect all the contractual cash flows or
Assets that are held in cash or in a form that model (CAPM).
expects to collect them later than they are
contractually due. can be converted to cash readily, such as
Materiality
deposits with other banks, Bills of Exchange
Impairment and Treasury Bills and Bonds. The relative significance of a transaction or an
event, the omission or misstatement of which
This occurs when recoverable amount of an
Lessee’s incremental borrowing rate (IBR) could influence the economic decisions of
asset is less than its carrying amount.
The rate of interest that a lessee would have users of Financial Statements.
Supplementary Information

Impairment Allowances to pay to borrow over a similar term, and

Impairment allowances are provisions held with a similar security, the funds necessary
on the Statement of Financial Position as to obtain an asset of a similar value to the
N
a result of the raising of a charge against right-of-use asset in a similar economic Net Interest Income (NII)
profit for the incurred loss. An impairment environment. The difference between the amount a
allowance may either be identified or bank earns on assets such as loans and
Leverage Ratio
unidentified and individual (specific) or securities and the amount it pays on liabilities
collective (portfolio). A leverage ratio is any one of several financial
such as deposits, refinance funds and inter-
measurements that look at how much capital
bank borrowings.
Intangible Asset comes in the form of debt (loans) or assesses
Annual Report 2020

An intangible asset is an identifiable non- the ability of a company to meet its financial Net Interest Margin (NIM)
monetary asset without physical substance. obligations. The margin is expressed as net interest
income divided by average interest
Interest Rate SWAP Lifetime Expected Credit Losses (LTECL)
earning assets.
An agreement between two parties (known Lifetime ECL are the expected credit
as counterparties) where one stream of future losses that result from all possible default Non-Controlling Interest (NCI)
interest payments is exchanged for another events over the expected life of the financial Equity in a Subsidiary not attributable,
Commercial Bank of Ceylon PLC

stream of future interest payments based on instrument.  According to SLFRS 9 on directly or indirectly, to a parent.
a specified principal amount. “Financial instruments”, the ECL allowance
should be based on LTECL unless there has Nostro Account
Interest Spread been no significant increase in credit risk A bank account held in a foreign country by a
Represents the difference between the since origination. domestic bank, denominated in the currency
average interest rate earned on interest of that country. Nostro accounts are used to
earning assets and the average interest rate Liquidity Coverage Ratio – LCR facilitate the settlement of foreign exchange
paid on interest-bearing liabilities. Refers to highly liquid assets held by Banks trade transactions.
Investment Properties to meet short-term obligations. The ratio
Net Stable Funding Ratio (NSFR)
represents a generic stress scenario that aims
Property (land or a building – or part of a Measures the amount of longer-term, stable
to anticipate market-wide shocks.
building – or both) held (by the owner or sources of funding employed by a bank
by the lessee under a finance lease) to earn Loan-to-value ratio (LTV) relative to the liquidity profiles of the assets
rentals or capital appreciation or both, rather The LTV ratio is a mathematical expression funded and the potential for contingent calls
than for use in the production or supply which expresses the amount of a first on funding liquidity arising from off-balance
of goods or services or for administrative mortgage lien as a percentage of the total sheet commitments and obligations.
services; or sale in the ordinary course of appraised value of real property. The LTV ratio
business. is used in determining the appropriate level
of risk for the loan and therefore the correct
O
price of the loan to the borrower. Open Credit Exposure Ratio
Total net non-performing loans and advances
Loss given default (LGD)
expressed as a percentage of regulatory
LGD is the percentage of an exposure that a capital base.
lender expects to lose in the event of obligor
default. Operational Risk
This refers to the risk of loss resulting from
inadequate or failed internal processes,
people and systems or from external events.
368
 P S
Parent Segment Reporting Tier II Capital
An entity that controls one or more entities. Disclosure of the Bank’s assets, income and Capital representing revaluation reserves,
other information, broken down by activity general provisions and other capital
Price Earnings Ratio (P/E Ratio) and geographical area. instruments, which combine certain
Market price of a share divided by the characteristics of equity and debt such as
earnings per share. Significant Increase in Credit Risk (SICR) hybrid capital instruments and subordinated
Price to Book Value According to SLFRS 9, an entity should assess term debts.
whether the risk of default on a financial
Market price of a share divided by the net

Annex 12: Glossary of Financial and Banking Terms

Twelve Month Expected Credit Losses
instrument has increased significantly since
assets value of a share. (12 Month ECL)
initial recognition. The assessment should
Probability of Default (PD) consider reasonable and supportable The portion of lifetime expected credit losses
information that is relevant and available that represent the expected credit losses
PD is an internal estimate for each borrower
without undue cost or effort. There is a that result from default events on a financial
grade of the likelihood that an obligor will
rebuttable presumption in the Standard instrument that are possible within the
default on an obligation.
that the credit risk on a financial asset 12 months after the reporting date.
Provision Cover has increased significantly since initial
Total provisions for loan losses expressed as a recognition when contractual payments are U
percentage of net non-performing loans and more than 30 days past due.
advances before discounting for provisions Unit Trust
on non-performing loans and advances. SPPI Test An undertaking formed to invest in securities
Solely payments of Principal and Interest under the terms of a trust deed.
Test (SPPI ) is carried out as the second step
R of the classification process. “Principal” is Unsystematic Risk
Related Parties defined as the fair value of the financial asset Unsystematic risk is unique to a specific
at initial recognition and may change due to company or industry. Also known as
One party has the ability to control the

Supplementary Information
repayments of principal or amortisation of the “nonsystematic risk,” "specific risk,"
other party or exercise significant influence
premium or discount. “Interest” is defined as "diversifiable risk" or "residual risk," in
over the other party in making financial and
consideration for the time value of money and the context of an investment portfolio,
operating decisions, directly or indirectly.
for the credit risk associated with the principal unsystematic risk can be reduced through
Related Party Transaction (RPT) amount outstanding. If a financial asset passes diversification.
RPT is a transfer of resources, services or the SPPI test, then it will either be classified at
obligations between a reporting entity amortised cost if the “hold to collect” business
model test is met, or at Fair Value Through
Y
and a related party, regardless whether a
price is charged. Other Comprehensive Income (FVOCI) if the Yield Curve
“hold to collect and sell” business model test A yield curve is a line that plots yields
Repurchase Agreement

Annual Report 2020

is met. If a financial asset fails the SPPI test it (interest rates) of bonds having equal credit
Contract to sell and subsequently repurchase must be classified at Fair Value Through Profit quality but differing maturity dates. The
securities at a specified date and price. or Loss (FVTPL) in its entirety. slope of the yield curve gives an idea of
Return on Average Assets (ROA) future interest rate changes and economic
Subsidiary
activity. There are three main types of yield
Profit after tax expressed as a percentage of An entity that is controlled by another entity. curve shapes: normal (upward sloping curve),
the average assets.
Substance over Form inverted (downward sloping curve) and flat.

Commercial Bank of Ceylon PLC

Right-of-Use Asset (RUA) The consideration that the accounting Yield to Maturity (YTM)
An asset that represents a lessee’s right to use treatment and presentation of Financial
an underlying asset for the lease term. Discount rate at which the present value of
Statements of transactions and events should
future cash flows would equal the security’s
Return on Average Equity (ROE) be governed by their substance and financial
current price.
reality and not merely by legal form.
Net profit attributable to owners expressed
as a percentage of average ordinary
shareholders’ equity. T
Reverse Repurchase Agreement Tier I Capital
Transaction involving the purchase of (Common Equity Tier 1 – CET 1)
securities by a bank or a dealer and resale Common Equity Tier 1 (CET1) is a component
back to the seller at a future date at a of Tier 1 capital that consists mostly of Stated
specified price. Capital. It is a capital measure that was
Risk-Weighted Assets introduced as a precautionary measure to
protect the economy from a financial crisis.
The sum total of assets as per the Statement
of Financial Position and the credit equivalent Tier I Capital
of assets that are not on the Statement of (Additional Tier 1 Capital – AT 1)
Financial Position multiplied by the relevant Additional Tier 1 Capital (AT1) is a component
risk-weighting factors. of Tier 1 capital that comprises securities that
are subordinated to most subordinated debt,
which have no maturity, and their dividend
can be cancelled at any time.

369
 Annex 13: Acronyms and Abbreviations
AC Amortised Cost IBR Incremental Borrowing Rate
AGM Annual General Meeting ICAAP Internal Capital Adequacy Assessment Process
ALCO Assets and Liabilities Committee ICASL Institute of Chartered Accountants of Sri Lanka
AMA Advanced Measurement Approaches IMF International Monetary Fund
AML Anti-Money Laundering IRMD Integrated Risk Management Department
ASPI All Share Price Index IRR Interest Rate Risk
BAC Board Audit Committee IRRBB Interest Rate Risk in Banking Books
BCBS Basel Committee on Banking Supervision ISC Information Security Council
BCC Board Credit Committee ISMS Information Security Management System
BCMSC Business Continuity Management Steering Committee KCRI Key Risk Indicators
BCP Business Continuity Plan KIRI Key IT Risk Indicators
BHRRC Board Human Resources and Remuneration Committee KMP Key Management Personnel
BIA Basic Indicator Approach KORI Key Operational Risk Indicators
BIC Board Investment Committee LCB Licensed Commercial Bank
BIRMC Board Integrated Risk Management Committee LCR Liquidity Coverage Ratio
BIS Bank for International Settlements LGD Loss Given Default
BNC Board Nomination Committee LSB Licensed Specialised Bank
BRPTRC Board Related Party Transactions Review Committee LTECL Life Time Expected Credit Loss
BSDC Board Strategy Development Committee LTV Loan to Value Ratio
BTC Board Technology Committee MATs Management Action Triggers
CAR Capital Adequacy Ratio MRMU Market Risk Management Unit
Supplementary Information

CASA Current Accounts and Savings Accounts NBT Nation Building Tax
CBSL Central Bank of Sri Lanka NCI Non-Controlling Interest
CCB Capital Conservation Buffer NII Net Interest Income
CCR Counterparty Credit Risk NIM Net Interest Margin
CEO Chief Executive Officer NOP Net Open Position
CET 1 Common Equity Tier 1 NPA Non-Performing Assets
CFM Close Family Members NPL Non-Performing Loans
CFO Chief Financial Officer NSFR Net Stable Funding Ratio
COO Chief Operating Officer OCI Other Comprehensive Income
Annual Report 2020

CPC Credit Policy Committee ORMS Operational Risk Management System

CRAB Credit Rating Agency of Bangladesh ORMU Operational Risk Management Unit
CRM Credit Risk Mitigation PAT Profit After Tax
CRO Chief Risk Officer PBT Profit Before Tax
CSE Colombo Stock Exchange PD Probability of Default
DBU Domestic Banking Unit POCI Purchased or Originated Credit Impaired (Financial Assets)
DPD Days Past Due RAS Risk Appetite Statement
Commercial Bank of Ceylon PLC

DRL Debt Repayment Levy RCSA Risk Control Self Assessment

DRP Disaster Recovery Plan ROA Return on Assets
EAD Exposure at Default ROE Return on Equity
EAR Earnings at Risk RPT Related Party Transactions
ECL Expected Credit Loss RSA Rate Sensitive Assets
ECMN Executive Committee on Monitoring NPA RSL Rate Sensitive Liabilities
EGM Extraordinary General Meeting RWA Risk Weighted Assets
EIR Effective Interest Rate SA Standardised Approach
EIRMC Executive Integrated Risk Management Committee SEC Securities and Exchange Commission of Sri Lanka
ESOP Employee Share Option Plan SEMS Social and Environment Management System
EVE Economic Value of Equity SICR Significant Increase in Credit Risk
FIS Fixed Income Securities SLAR Statutory Liquid Assets Ratio
FVOCI Financial assets measured at Fair Value through Other SLDB Sri Lanka Development Bond
Comprehensive Income SLFRS Sri Lanka Financial Reporting Standards
FVTPL Financial assets measured at Fair Value through Profit or Loss SME Small and Medium Enterprise
FX Foreign Exchange SOFP Statement of Financial Position
FY Financial Year SPPI Solely Payment of Principal and Interest
GDP Gross Domestic Product TMO Treasury Middle Office
GOSL Government of Sri Lanka UNGC United Nations Global Compact
GRI Global Reporting Initiatives VaR Value at Risk
HFT Held-for-trading YoY Year-on-Year
HR Human Resources 12mECL 12 months Expected Credit Loss

370
Annex 14: Alphabetical Index
Page Page Page

Abbreviations 370 Dividend Cover 8 Managing Director/Chief Executive 15

About the Bank 6 Dividend Per Share 8 Officer’s Review

Accounting Policies 164 Dividends on ordinary share 189 Management Discussion and Analysis 41

Annual Report of the Board of 3 Donations 186 Market Capitalisation 7

Directors D – SIB Assessment exercise 343 Market Prices of Shares 296
Assurance Report on Internal Control 111 Earnings Per Share 8 Material Matters 29
Awards and Accolades 12 Effective Tax Rate 188 Maturity Gap Analysis 251
Board Audit Committee Report 86 Employee Share Option Plan 241 Net Assets Value Per Ordinary Share 8
Board Credit Committee Report 96 Events After the Reporting Period 290 Network of Delivery Points – 364
Board of Directors and Profiles 64 Sri Lanka
Financial Capital 36
Board Related Party Transactions 95 Notes to the Financial Statements 155
Financial Calendar – 2020 and 2021 137
Review Committee Report Notice of Meeting – Annual General 372
Financial Goals and Achievements 8 Meeting
Board Human Resources and 93
Remuneration Committee Report Financial Highlights 8 Operating Segments 253
Board Integrated Risk Management 89 Financial Statements 143 Our Centennial Journey 10
Committee Report Financial Risk Review 261 Pillar III Disclosures 331
Board Investment Committee Report 97 GRI Content Index: “In Accordance” 345

Supplementary Information
Price Earnings Ratio 8
Board Nomination Committee Report 91 – Core
Principal Activities and Nature of 155
Board Strategy Development 100 GRI Disclosures – 5 Year Summary 352 Operations
Committee Report Group Structure 362 Related Party Disclosures 255
Board Technology Committee Report 98 Governance and Risk Management 64 Risk Governance and Management 114
Branch and ATM Network – 365 Income Statement 143 Senior Management 72
Bangladesh
Income Statement (US Dollars) 358 Share-based Payment 241
Business Model 36
Independent Assurance Report on 347 Statement of Cash Flows 154
Capital Commitments 249

Annual Report 2020

Sustainability Reporting
Statement of Changes in Equity 146
Composition of Shareholders 300 “Independent Assurance Statement 349
Statement of Compliance 101
Connecting with Stakeholder 27 on Non-Financial Reporting – DNV
GL” Statement of Directors’ Responsibility 107
Contingent Liabilities and 248
Commitments Independent Auditors’ Report 138 Statement of Financial Position 145
Inner Interest Cover 303 Statement of Financial Position 359

Commercial Bank of Ceylon PLC

Back (US Dollars)
Investor Relations 292
Corporate Information Cover Statement of Profit or Loss and 144
Joint Message form the Chairman 13
Corporate Management and Profiles 70 Other Comprehensive Income
and his Predecessor
Correspondent Banks 360 Subsidiaries and Associates of 155
Liquid Assets Ratio 7
the Group
Cost-Income Ratio 356 Litigation Against the Bank 250
Twenty Largest Shareholders 301
Decade at a Glance 354 Management Committees 77
Directors’ Interests in Contracts with 113 Managing Director’s and Chief 112
the Bank Financial Officer’s Responsibility
Directors’ Statement on Internal 109 Statement
Control over Financial Reporting

371
 Notice of Meeting – Annual General Meeting
Notice is hereby given that the Fifty-Second THAT subject to the shareholders (a) waiving – Rs.135,941,402.00, to which the ordinary
(52nd) Annual General Meeting (AGM) of their pre-emptive rights to new share issues; (non-voting) shareholders are entitled
the Commercial Bank of Ceylon PLC (the and (b) approving the proposed allotment (subject to applicable government taxes),
‘Company’) will be held on Tuesday, March and issue of new ordinary (voting) and (non-
30, 2021 at 10.30 a.m. at the Auditorium of voting) shares by passing the resolutions shall be satisfied by the allotment and issue
Commercial Bank of Ceylon PLC, set out in Items 2(ii) and 2(iii) below, the of new ordinary (voting) and (non-voting)
9th Floor, Union Place Branch Building, No. declared first and final dividend of Rs. 6.50 shares to the entitled shareholders of the
01 Union Place, Colombo 02, as a virtual per issued and fully paid ordinary (voting) ordinary (voting) and (non-voting) shares
meeting using a digital platform for the and (non-voting) share be distributed and respectively, on the basis of the following
following purposes: satisfied partly by the payment of cash and ratios:
partly by the allotment and issue of new
1. To receive and consider the Annual z 01 new fully paid ordinary (voting) share
ordinary (voting) and (non-voting) shares
Report of the Board of Directors on the for every 43.8500004209 existing issued
(the ‘distribution scheme’) based on the
affairs of the Company, the Statement of and fully paid ordinary (voting) shares
share prices of ordinary (voting) and (non-
Compliance and the Financial Statements calculated on the basis of the market
voting) shares as at February 16, 2021 in the
for the year ended December 31, 2020 value of the ordinary (voting) shares as at
manner following, the date of entitlement in
together with the Report of the Auditors end of trading on February 16, 2021; and
respect of which shall be the date on which
thereon. z 01 new fully paid ordinary (non-voting)
the shareholders’ resolution pertaining to the
2. To declare a dividend as recommended said first and final dividend is passed: share for every 38.4000073443 existing
by the Board of Directors and to consider issued and fully paid ordinary (non-
z The payment in cash of Rs. 4.50 per issued voting) shares calculated on the basis of
and if thought fit, to pass the following
and fully paid ordinary (voting) and the market value of the ordinary (non-
resolutions:
(non-voting) share (subject to applicable voting) shares as at end of trading on
(i) Declaration of a first and final government taxes); and February 16, 2021.
dividend and approval of its
z The allotment and issue of new ordinary THAT the ordinary (voting) and (non-voting)
method of satisfaction [Dividend
(voting) and (non-voting) shares in residual share fractions, respectively,
Resolution No. 1]: To consider and
satisfaction of the balance of Rs. 2.00 per arising in pursuance of the aforementioned
if thought fit to pass the following
share dividend entitlement (subject to allotment and issue of new ordinary (voting)
resolution by way of an Ordinary
applicable government taxes). and (non-voting) shares after applying the
Resolution. [To be passed only by
the ordinary (voting) shareholders]. THAT accordingly and subject to the formulas referred to in the sub heading
approval of the shareholders being “Residual fractions of shares” in the “Circular
THAT a first and final dividend of Rs. 6.50 per
Annual Report 2020

obtained in the manner aforementioned to the shareholders on the first and final
issued and fully paid ordinary (voting) and dividend for 2020” dated March 5, 2021 be
the implementation of the said distribution
(non-voting) share constituting a total sum aggregated and the ordinary (voting) and
scheme shall be as follows:
of Rs. 7,585,743,776.00 based on the issued (non-voting) shares, respectively, arising
ordinary (voting) and (non-voting) shares (a) By way of a cash distribution:
consequent to such aggregation be allotted
as at February 16, 2021 [subject however to A cash distribution of a sum of to Trustees to be nominated by the Board
necessary amendments being made to such Rs. 4,945,800,613.50, (subject however of Directors of the Company, and that the
Commercial Bank of Ceylon PLC

amount to include the dividends pertaining to necessary amendments being made to Trustees so nominated and appointed be
to the options that may be exercised by such amount to include the dividend payable permitted to hold the said shares in trust
employees under the Commercial Bank of on the options that may be exercised by until such shares are sold by the Trustees
Ceylon PLC (the ‘Company’) Employee Share the employees under the Company’s on the trading floor of the Colombo Stock
Option Plan (ESOP) schemes] be and is ESOP schemes) shall be made to the entitled Exchange, and that the net sale proceeds
hereby declared for the financial year ended shareholders of ordinary (voting) shares; thereof be donated to a charity or charities
December 31, 2020 on the issued and fully and a sum of Rs. 305,868,154.50 shall be approved by the Board of Directors of the
paid ordinary (voting) and (non-voting) made to the entitled shareholders of the Company;
shares of the Company; ordinary (non-voting) shares, on the basis as
aforesaid of Rs. 4.50 per ordinary (voting) and THAT the new shares to be issued in
THAT the shareholders entitled to such pursuance of the said distribution scheme
dividend would be those shareholders (non-voting) share respectively (subject to
applicable government taxes); constituting a total issue of 25,064,237 new
[both ordinary (voting) and (non-voting)], ordinary (voting) shares, based on the issued
whose names have been duly registered AND and fully paid ordinary (voting) shares as
in the Shareholders’ Register maintained (b) By way of the allotment and issue of at February 16, 2021, (subject however to
by the Registrars of the Company [i.e. SSP new shares: the necessary amendments being made
Corporate Services (Pvt) Ltd., No. 101, Inner to such number to include the dividend
The balance sum of:
Flower Road, Colombo 03] and also those on the options that may be exercised by
shareholders whose names appear on the – Rs. 2,198,133,606.00, (subject however
the employees under the Company’s ESOP
Central Depository Systems (Pvt) Ltd. (‘CDS’) to necessary amendments being made
schemes) and 1,770,070 new ordinary
as at end of trading on the date on which to such amount to include the dividend
(non-voting) shares based on the issued
the requisite resolution of the shareholders payable on the options that may be
and fully paid ordinary (non-voting) shares
in regard to the first and final dividend is exercised by employees under the
as at February 16, 2021 shall, immediately
passed (‘entitled shareholders’); Company’s ESOP schemes) to which
consequent to due allotment thereof to
the ordinary (voting) shareholders
the entitled shareholders rank equal and
are entitled (subject to applicable
pari passu in all respects with the existing
government taxes); and
372
issued and fully paid ordinary (voting) (iii) Approval of an issue of ordinary (v) To elect Mr S Muhseen who was
shares and the existing issued and fully paid (voting) and (non-voting) shares appointed to the Board in terms
ordinary (non-voting) shares of the Company (Dividend Resolution No. 3): of Article 92 of the Articles of
respectively including the entitlement to Subject to the passing of the Ordinary Association
participate in any dividend that may be Resolution set out in Dividend 4. (a) To reappoint Messrs Ernst & Young,
declared after the date of allotment thereof Resolution No. 1 above, to consider Chartered Accountants, as recommended
and shall be listed on the Colombo Stock and if thought fit to pass the following by the Board of Directors as the
Exchange; and resolution by way of a Special Resolution Company’s Auditors for the financial year
THAT the new ordinary (voting) and (non- [To be passed by a separate vote of the ending December 31, 2021; and
voting) shares to be so allotted and issued ordinary (voting) shareholders and of
shall not be eligible for the payment of the ordinary (non-voting) shareholders (b) To authorize the Board of Directors
the dividend declared hereby and which respectively]: to determine the remuneration of the
dividend shall accordingly be payable only Auditors for the financial year ending
THAT the proposed allotment and issue
on the 1,099,066,803 existing issued and fully December 31, 2021
of 25,064,237 new ordinary (voting)
paid ordinary (voting) shares as at shares [subject however to the necessary 5. To authorize the Board of Directors to
February 16, 2021 (subject to amendments amendments being made to such number determine donations for the year 2021.
thereto to include the shares arising on to include the dividend on the options that
the options that may be exercised by the may be exercised by the employees under 6. Any Other Business
employees under the Company’s ESOP the Commercial Bank of Ceylon PLC (the In accordance with the policy of the
schemes) and 67,970,701 existing issued ‘Company’) ESOP schemes], and 1,770,070 Company as approved by the Board,
and fully paid ordinary (non-voting) shares as new ordinary (non-voting) shares credited shareholders are requested to consider
at February 16, 2021. as fully paid to shareholders registered in and approve the sale of the vehicle used
(ii) Waiver of Pre-emption Rights (Dividend the Share Register of the Company and on by Mr K G D D Dheerasinghe, former
Resolution No. 2): the Central Depository Systems (Pvt) Ltd. Chairman of the Company, to him, at
Subject to the passing of the Ordinary (‘CDS’) as at the end of trading on the day 37.5% of the original cost (excluding
Resolution set out in Dividend Resolution when the relevant resolutions to be passed VAT) or at market value, whichever
No. 1 above, to consider and if thought fit by shareholders in relation to the first and shall be lower.
to pass the following Resolution by way final dividend are, in fact, duly passed by By Order of the Board of Commercial Bank
of an Ordinary Resolution (To be passed shareholders (‘entitled shareholders’) and of Ceylon PLC,
by a separate vote of the ordinary (voting) which new shares shall rank equal and pari
shareholders and of the ordinary (non- passu with the existing issued and fully
paid ordinary (voting) and (non-voting)

Annual Report 2020

voting) shareholders respectively):
shares of the Company including the right
THAT the pre-emptive right to a new issue
to participate in any dividend which may
of shares provided for by Article 9 A of the R A P Rajapaksha
be declared after the date of allotment of
Articles of Association of Commercial Bank of Company Secretary
such shares be and is hereby approved in
Ceylon PLC (the ‘Company’), be and is hereby
pursuance of Section 99 of the Companies March 5, 2021
waived in respect of the following proposed
Act No. 07 of 2007 (as amended) and Article Colombo
issue of new shares to be effected by the

Commercial Bank of Ceylon PLC

10 of the Articles of Association of the
Company for purposes of satisfying in part
Company; and Notes
the first and final dividend for the year ended
December 31, 2020: THAT accordingly the Company’s (i) A duly registered and entitled holder of the
management be and is hereby authorized Company’s ordinary (voting) shares is entitled
“The allotment and issue of 25,064,237 new to participate at the meeting by virtual means,
to take all necessary steps to give effect to speak and vote at the AGM and is entitled to
ordinary (voting) shares (subject however
the aforesaid proposed issue of new appoint a proxy holder to participate by virtual
to the necessary amendments being made
ordinary (voting) and (non-voting) shares of means, speak, and vote in his/her stead.
to such number to include the dividend
the Company. (ii) A duly registered and entitled holder of the
on the options that may be exercised by Company’s ordinary (non-voting) shares is
the employees under the Company’s ESOP 3. To re-elect/elect the following Directors entitled only to participate at the meeting by
schemes), and 1,770,070 new ordinary who, in terms of the Company’s Articles virtual means and speak at the AGM and to vote
(non-voting) shares credited as fully paid to of Association, retire by rotation or only on the resolutions set out in items 2 (ii) and
2 (iii) of the Notice of Meeting. Such a shareholder
shareholders registered in the Company’s otherwise as given below: is entitled to appoint a proxy holder to participate
Share Register and on the Central Depository (i) To re-elect Mr K Dharmasiri who at the meeting by virtual means, and speak
Systems (Pvt) Ltd. (‘CDS’) as at end of trading retires by rotation in terms of Article on his/her behalf and to vote only on the
on the day when the relevant resolutions resolutions set out in items 2 (ii) and 2 (iii) of
86 of the Articles of Association the Notice of Meeting.
to be passed by shareholders are, in fact,
(ii) To re-elect Ms N T M S Cooray who (iii) A proxy holder need not be a shareholder
duly passed by shareholders (‘entitled
retires by rotation in terms of Article of the Company.
shareholders’) and which new shares shall
86 of the Articles of Association (iv) A Form of Proxy is sent along with this Report.
rank equal and pari passu with the existing The Form of Proxy should be completed legibly
issued and fully paid ordinary (voting) (iii) To elect Ms J Lee who was appointed and forwarded to the Company, by facsimile on
and (non-voting) shares of the Company to the Board in terms of Article 92 of 011 233 2317 or email to companysecretary@
including the right to participate in any the Articles of Association [Link] or by post to “Commercial House”,
No. 21, Sir Razik Fareed Mawatha, Colombo 01,
dividend which may be declared after the (iv) To elect Mr R Senanayake who not later than forty eight (48) hours before the
date of allotment of such shares”. was appointed to the Board in time appointed for the holding of the AGM.
terms of Article 92 of the Articles
of Association
373
 Circular to the Shareholders on
the First and Final Dividend for 2020

Dear Shareholder/s, Subject to obtaining the approval of the (b) 1,770,070 number of new ordinary
First and Final Dividend for the year ended Shareholders, the said dividend will be (non-voting) shares calculated based on
December 31, 2020 to be Satisfied Partly by satisfied in accordance with a distribution the issued and fully paid ordinary (non-
the Distribution of Cash and Partly by the scheme whereby: voting) shares as at February 16, 2021
Allotment and Issue of New Shares. and on the basis of their market value
(i) A cash distribution of Rs.
(closing price) as at end of trading on
COVID-19 had an impact on Commercial 4,945,800,613.50 (subject however to
February 16, 2021.
Bank of Ceylon PLC (the ‘Company’) necessary amendments being made to
during the year in terms of disruptions to such amount to include the dividend An announcement will be made by the
its operations, customer service and its payable on the options that may be Company three market days prior to the date
profitability and is likely to have potential exercised by the employees under the of the AGM on the final number of ordinary
impacts in the future as well. The Company Company’s Employee Share Option (voting) and (non-voting) shares to be issued
strictly adhered to the guidelines given by Plan (ESOP) schemes) shall be made in satisfaction of the said dividend.
the health authorities when conducting its to the entitled shareholders of the
The said shares shall be issued in the
operations. Also, the Company complied ordinary (voting) shares and a sum of
following ratios to the entitled Shareholders
with the Directions and guidelines issued Rs. 305,868,154.50 shall be made to the
of the Company:
by the regulator, Central Bank of Sri Lanka entitled shareholders of the ordinary
and granted concessions to the affected (non-voting) shares of the Company (a) 01 new fully-paid ordinary (voting) share
customers. In addition, the Company as at February 16, 2021 totaling to for every 43.8500004209 existing issued
extended further concessions to the affected Rs. 5,251,668,768.00 in part satisfaction and fully-paid ordinary (voting) shares
customers at the discretion of the Company of such dividend; and calculated on the basis of the market
in terms of interest rebates, extended value of the ordinary (voting) shares as at
(ii) New ordinary (voting) and (non-voting)
repayment periods and working capital end of trading on February 16, 2021; and
shares will be allotted and issued, in
funding via the Company’s own schemes. satisfaction of the remaining dividend (b) 01 new fully-paid ordinary (non-voting)
Annual Report 2020

The impact of COVID-19 has been extensively entitlement, constituting a total sum of
discussed and appropriate disclosures have share for every 38.4000073443 existing
Rs. 2,334,075,008.00 based on the issued issued and fully-paid ordinary (non-
been made in the Annual Report 2020. and fully paid ordinary (voting) and voting) shares calculated on the basis of
Nevertheless, the Board of Directors of (non-voting) shares of the Company as the market value of the ordinary (non-
the Company, is pleased to inform its at February 16, 2021 [subject however to voting) shares as at end of trading on
Shareholders that, a first and final dividend necessary amendments being made to February 16, 2021.
such sum to accommodate the dividend
Commercial Bank of Ceylon PLC

distribution of Rs. 6.50 per each existing

issued and fully paid ordinary (voting) and payable on the options that may be The above share ratio is based on a value of
(non-voting) share has been recommended exercised by employees under the Rs. 87.70 per ordinary (voting) share and
for the financial year ended December Company’s ESOP schemes]. Rs. 76.80 per ordinary (non-voting) share
31, 2020, for due declaration by the (subject to applicable government taxes) as
Accordingly, and in pursuance of the at the end of trading on February 16, 2021.
Shareholders at the Annual General Meeting aforesaid distribution scheme, the Company
(‘AGM’) to be held on March 30, 2021 The Board of Directors is satisfied that the
proposes to issue: aforementioned values which constitute
(the date of the AGM) at 10.30 a.m. at the
(a) 25,064,237 number of new ordinary the consideration for which the new shares
Auditorium of Commercial Bank of Ceylon
(voting) shares, calculated based on the are to be allotted and issued is fair and
PLC, 9th Floor, Union Place Branch Building,
issued and fully paid ordinary (voting) reasonable to the Company and to all its
No. 01 Union Place, Colombo 02, virtually, by
shares as at February 16, 2021 [subject existing Shareholders.
using a digital platform and such dividend
however to necessary amendments
so declared be paid out of the profits of
being made to such number to include Entitled Shareholders
the Company for the financial year ended
the dividend on the options that may Shareholders entitled to participate in the
December 31, 2020, which would be subject
be exercised by employees under said dividend (the ‘entitled shareholders’)
to applicable government taxes.
the Company’s ESOP schemes], and on are those who are duly registered in the
The Board of Directors is confident that, the the basis of their market value (closing Company’s Share Register and also those
Company will be able to satisfy the solvency price) as at end of trading on February shareholders whose names appear
test set out in Section 57 of the Companies 16, 2021; and on the Central Depository Systems (Pvt)
Act No. 07 of 2007 (as amended) [‘CA 2007’] Ltd (‘CDS’) as at end of trading on the date
immediately post-payment of such dividend. on which the requisite resolution of the
A Certificate of Solvency has been provided shareholders in this regard is duly passed.
by the Company’s Auditors, Messrs Ernst &
Young, Chartered Accountants.

374
In calculating the number of shares held by For voting shareholders – particular of paid up shares. In pursuance of
a shareholder as at the relevant date for the principles of transparency, the Board seeks
proposed allotment and issue of new shares, Number of shares held by a shareholder the authorization of Shareholders for the
the shareholding of the shareholder as as at end of trading on the AGM date X 1 satisfaction of the first and final dividend
appearing in the CDS and the Shareholders’ 43.8500004209 by the issue of new ordinary (voting) and
Register maintained by the Registrars of the (non-voting) shares in the manner set out
Company [SSP Corporate Services (Pvt) Ltd, above. The relevant ordinary resolution
No. 101, Inner Flower Road, Colombo 03] will For non-voting shareholders – to be passed by the Shareholders in this
not be aggregated. However, if a shareholder Number of shares held by a shareholder regard is set out in item 2(i) of the attached
holds shares with multiple stockbrokers, the as at end of trading on the AGM date X 1 Notice of Meeting.
shares held with multiple stockbrokers will
38.4000073443 z Waiver of pre-emption rights to new share
be aggregated for calculation purposes, and
the shares arising as a result of the proposed issues [Article 9 A]:
issue and allotment of new shares will be Status of the New Shares In terms of Article 9 A of the Company’s
uploaded proportionately to the respective The new ordinary (voting) and (non- Articles of Association, any issue of shares
CDS accounts held with each broker. The voting) shares to be so issued, immediately beyond 500,000 shares must be first
Company has obtained the approval in consequent to due allotment thereof to the offered to the Shareholders in proportion
principle of the Colombo Stock Exchange entitled Shareholders, shall rank equal to their holding at the time of the offer,
(‘CSE’) for the proposed allotment and issue and pari passu in all respects with the unless otherwise authorized by an ordinary
of new shares. existing issued and fully paid ordinary resolution of the Company.
(voting) and (non-voting) shares,
Residual Fractions of Shares As mentioned previously, the first and final
respectively, of the Company.
dividend is proposed to be satisfied, by the
The residual fractions arising from the allotment and issue of new ordinary (voting)
aforementioned allotment and issue of Listing/Central Bank approval and (non-voting) shares in the manner set

Annual Report 2020

new ordinary (voting) and (non-voting) An application has been made to the CSE out above and on the above-mentioned
shares respectively, will be aggregated and for listing the new ordinary (voting) and application of the above-mentioned share
the shares arising consequent thereto will, (non-voting) shares on the official list of the proportion. The said allotment and issue of
subject to receiving the approval of the CSE. This application has been approved new shares would accordingly be in excess
Shareholders therefor, be allotted to Trustees ‘in principle’ by the CSE. The Company of 500,000 shares. As such, the authorization
to be nominated by the Board of Directors. will obtain approval of the Department of Shareholders is sought under and in terms

Commercial Bank of Ceylon PLC

The Trustees so nominated, will hold the of Foreign Exchange of the Central Bank of the above-mentioned Article 9 A for the
said shares in trust until such shares are sold of Sri Lanka in principle for the allotment waiver by Shareholders of their pre-emption
by the Trustees on the trading floor of the and issue of the new ordinary (voting) and rights to the new shares to be issued
CSE. The net sale proceeds arising therefrom (non-voting) shares to the Company’s non- exceeding 500,000 ordinary (voting) and
shall, subject to receiving the approval of resident Shareholders, where applicable. (non-voting) shares. The relevant ordinary
the Shareholders therefor, be distributed to resolution to be passed by the Shareholders
a charity/charities approved by the Board in this regard is set out in item 2(ii) of the
Shareholder Approvals
of Directors. The sale of such shares will be attached Notice of Meeting.
effected by the Company within a reasonable The proposed method of satisfying the
period of time, following the date on which abovementioned first and final dividend is Alteration of Shareholder Rights [Section 99
the approval of the Shareholders has been subject to Shareholders granting approval of the CA 2007 and Article 10 of the Articles
obtained in this regard. therefor by passing the resolutions set out in of Association]:
the attached Notice of Meeting pertaining to
Residual fractions of ordinary (voting) and The Company is required, in compliance with
the following matters:
(non-voting) shares above-mentioned the above provisions, to seek Shareholder
shall mean the above-mentioned fractions z Authorization to satisfy the first and final approval by a special resolution for the
arising after applying the following formulas dividend partly by an allotment and issue proposed method of satisfaction of the first
respectively: of new shares: and final dividend by an allotment and issue
Article 124 of the Company’s Articles of of new ordinary (voting) and (non-voting)
Association provides, in effect, that, subject shares in the manner set out above. The
to the provisions of CA 2007, the Board is relevant special resolution to be passed by
empowered to pay a dividend or otherwise the Shareholders in this regard is set out in
make a distribution in whole or in part by item 2(iii) of the attached Notice of Meeting.
the distribution of specific assets and in

375
 Confirmation of Compliance by a Shareholder as aforementioned, the
new ordinary (voting) and (non-voting)
The Board of Directors hereby confirms that
shares that are allotted in his/her favour
the allotment and issue of new shares is in
will be registered in such shareholder’s
compliance with the Articles of Association
account in the Share Register maintained
of the Company, the Listing Rules of the CSE
by the Registrars of the Company (subject
and the provisions of the CA 2007.
to compliance with the requirements
Allotment of the New Shares of the Department of Foreign Exchange
of the Central Bank of Sri Lanka as may
The Board of Directors emphasizes that the be applicable in respect of non-resident
aforementioned allotment and issue of new shareholders). Consequent to the opening
shares is in part satisfaction of the first and of the CDS account by such Shareholder,
final dividend for the year ended December the new shares will be credited to such CDS
31, 2020 and shall be dependent on and account. Direct uploads pertaining to written
subject to the Shareholders passing the requests received from Shareholders to
requisite resolutions. deposit such shares will be done on a
weekly basis.
Uploading of Shares in to CDS Accounts
In the event that the requisite resolution Annual General Meeting (AGM)
declaring the dividend [including its manner Attached hereto is the Annual Report
of satisfaction thereof ] by way of the issue comprising the Notice convening the AGM
and allotment of new shares is passed for March 30, 2021 and setting out in item 2
by the Shareholders, the accounts of the thereof, the relevant resolution to be passed
Shareholders whose shares are deposited by the Shareholders in the above regard.
in the CDS would be directly uploaded
with the new shares to the extent that such Form of Proxy
Shareholder has become entitled thereto. Shareholders who are unable to participate at the
The shares would be uploaded within seven meeting by virtual means are entitled to appoint
a proxy to participate at the said meeting by
(07) market days from and excluding the virtual means and speak and also vote on their
date on which the requisite resolutions behalf, depending on their voting rights. If you
are passed. If a Shareholder holds multiple wish to appoint such a proxy, kindly complete and
CDS accounts the total entitlement will return the enclosed Form of Proxy (in accordance
Annual Report 2020

with instructions specified therein) to the

be directly deposited to the respective
Company by facsimile on 0112332317 or email to
CDS accounts proportionately. Pursuant companysecretary@[Link] or by post to
to a Direction issued by the Securities and Company Secretary, Commercial Bank of Ceylon
Exchange Commission of Sri Lanka (‘SEC’) PLC, “Commercial House”, No. 21, Sir Razik Fareed
pertaining to the de-materialisation of Mawatha, Colombo 01, not later than forty eight
(48) hours before the time appointed for the holding
listed securities, the Shareholders who hold
of the AGM.
Commercial Bank of Ceylon PLC

shares in scrip form (i.e. Share Certificates)

as per the Share Register maintained by the
Yours faithfully,
Registrars of the Company, will not be issued
Share Certificates for the new shares allotted
and issued in their favour. Such Shareholders By Order of the Board of Commercial Bank
are accordingly requested to open an of Ceylon PLC
account with the CDS and to deposit their
Share Certificates in the CDS prior to the date
of the AGM of the Company. This will enable
the Company to deposit the new shares
directly into the Shareholder’s CDS Account.
R A P Rajapaksha
If a Shareholder fails to deposit his/her Company Secretary
existing ordinary (voting) and/or (non-
March 5, 2021
voting) shares in the CDS prior to the date of
the AGM, such Shareholder’s entitlement of
new ordinary (voting) and/or (non-voting)
shares will be deposited by the Company
after such Shareholder has opened a CDS
Account and has informed the Company’s
Registrars in writing of his/her CDS account
number. Until such CDS account is opened

376
Form of Proxy (Voting Shareholders)
I/We ……………………………………………………………………… of .……………………………………………………………………………
…………………………………………………………………………… being a shareholder/s of Commercial Bank of Ceylon PLC hereby appoint
………………………………………… (NIC No. …………………………….) of ………………………………………………………………………
……………………………………………………………… whom failing:

Justice Kanagasabapathy Sripavan whom failing

Prof Ananda Kithsiri Wijenayaka Jayawardane whom failing
Mr Sivakrishnarajah Renganathan whom failing
Mr Kumbukage Dharmasiri whom failing
Mr Lakshman Dushyantha Niyangoda whom failing
Ms Nawalage Therese Manouri Shiromal Cooray whom failing
Mr Themiya Loku Bandara Hurulle whom failing
Mr Sanath Chandima Udayakumara Manatunge whom failing
Ms Judy Lee whom failing
Mr Raja Senanayake whom failing
Mr Sharhan Muhseen
as my/our Proxy holder to represent me/us and to speak at the Meeting and to vote on a show of hands or on a poll on my/our behalf as
indicated below (and strictly in relation to the matters set out hereunder) at the Fifty Second (52nd) Annual General Meeting (AGM) of
Commercial Bank of Ceylon PLC which is scheduled to be held on Tuesday, March 30, 2021 at 10.30 a.m. virtually by using a digital platform,
and at any adjournment thereof and at every poll which may be taken in consequence thereof. (Please indicate your preference with a “” in
the relevant box.)
For Against
1. To receive and consider the Annual Report of the Board of Directors on the affairs of the Company, the Statement of
Compliance and the Financial Statements for the year ended December 31, 2020 together with the Report of the
Auditors thereon.
2. To declare a dividend as recommended by the Directors and to consider and if thought fit, to pass the following resolutions
set out in the attached Notice of Meeting:
i. Declaration of a first and final dividend and approval of its method of satisfaction (Dividend Resolution No. 1)

Annual Report 2020

ii. Waiver of pre-emption rights (Dividend Resolution No. 2)
iii. Approval of an issue of ordinary (voting) and (non-voting) shares (Dividend Resolution No. 3)

3. To re-elect/ elect the following Directors who, in terms of the Company’s Articles of Association,
are retiring by rotation or otherwise as given below:
i. To re-elect Mr K Dharmasiri who retires by rotation in terms of Article 86 of the Articles of Association

Commercial Bank of Ceylon PLC

ii. To re-elect Ms N T M S Cooray who retires by rotation in terms of Article 86 of the Articles of Association
iii. To elect Ms J Lee who was appointed to the Board in terms of Article 92 of the Articles of Association
iv. To elect Mr R Senanayake who was appointed to the Board in terms of Article 92 of the Articles of Association
v. To elect Mr S Muhseen who was appointed to the Board in terms of Article 92 of the Articles of Association

4. (a) To reappoint Messrs Ernst & Young, Chartered Accountants as recommended by the Board of Directors, as Auditors to
the Company for the Financial Year ending December 31, 2021.
(b) To authorize the Board of Directors to determine the remuneration of the Auditors for the Financial Year ending
December 31, 2021.
5. To authorize the Board of Directors to determine donations for the year 2021.

6. Any other business:

To consider and approve the sale of the vehicle used by Mr K G D D Dheerasinghe, former Chairman of the Company, to
him, at 37.5% of the original cost (excluding VAT) or at market value, whichever shall be lower, in accordance with the
policy of the Company as approved by the Board.

Signed on this ………………………………… day of ………………………………… Two Thousand and Twenty One.

…………………… ……………………………… …………………………………….….

Folio Number Signature/s of shareholder/s NIC/PP/Co. Reg. No. of shareholder/s
 Notes
(i) Instructions as to completion of this Form of Proxy are given below.
(ii) As regards voting on the Resolutions indicated in the Form of Proxy, if no words are struck out or there is in the view of the proxy holder doubt (by reason of the way in
which the instructions in the Form of Proxy have been stated by the shareholder) as to the way in which the proxy holder should vote, the proxy holder will vote
as he/she thinks fit.
(iii) If the Form of Proxy is signed by an attorney, the relative Power of Attorney (POA) should accompany the completed Form of Proxy for registration in the event such POA
has not already been registered with the Company.
(iv) If the shareholder is a company or a corporate body, the Form of Proxy should be executed under its common seal or in such other manner as provided for in
its Constitutional documents, if any, or be signed by its attorney or by an officer on behalf of the company/corporate body, in accordance with its Articles of
Association/Statute.
(v) Every alteration or addition to the Form of Proxy must be duly authenticated by the full signature of the shareholder signing the Form of Proxy. Such signature should
as far as possible be placed in proximity to the alteration or addition intended to be authenticated.
(vi) The use of the word “Member/s” herein is a reference to “Shareholder/s”.

Instructions as to completion of Form of Proxy

(a) Article 68 of the Articles of Association of the Company provides that: “An instrument appointing a proxy shall be in writing, and
(i) In the case of an individual shall be signed by the appointor or by his attorney; or in the case of a corporation shall be either under the
common seal or signed by its attorney or by an officer authorized to do so on behalf of the corporation. The Company may, but shall
not be bound to require evidence of the authority of any such attorney or officer.
(ii) A proxy need not be a member of the Company”.
(b) In terms of Article 63 of the Articles of Association of the Company:
“In the case of joint holders of a share, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the
exclusion of the votes of the other joint holders, and for this purpose, seniority shall be determined by the order in which the name stands
in the Register of Members in respect of the joint holding”.
(c) The full name and address of the proxy holder and of the shareholder appointing the proxy holder should be entered legibly in the
Form of Proxy.
(d) The completed Form of Proxy should be deposited at the Registered Office of Commercial Bank of Ceylon PLC ‘Commercial House’,
No. 21, Sir Razik Fareed Mawatha, Colombo 01, Sri Lanka or by facsimile on 011 233 2317 or email to companysecretary@[Link],
not later than forty eight (48) hours before the time appointed for the holding of the meeting.
(e) Articles 57 to 60 of the Articles of Association of the Company, dealing with voting are quoted below, for information of Shareholders:
“57. Method of voting
At any General Meeting, a resolution put to the vote of the Meeting shall be decided on a show of hands unless a poll is (before or on
Annual Report 2020

the declaration of the result of the show of hands) demanded by:

(i) The Chairman of the meeting; or
(ii) Not less than five persons present in person or by attorney or representative or by proxy and entitled to vote; or
(iii) A member or members present in person or by attorney or representative or by proxy and representing not less than
one-tenth of the total voting rights of all the members having the right to vote at the Meeting.
Commercial Bank of Ceylon PLC

A demand for a poll may be withdrawn. Unless a poll be demanded (and the demand be not withdrawn), a declaration by the
Chairman of the meeting that a resolution has been carried or carried unanimously, or by a particular majority, or lost and an entry
to that effect in the minute book, shall be conclusive evidence of the fact without proof of the number or proportion of the votes
recorded for or against such resolution.
58. How a poll is to be taken
If a poll is duly demanded (and the demand be not withdrawn), it shall be taken in such manner (including the use of ballot or voting
papers or tickets) as the Chairman of the Meeting may direct, and the result of the poll shall be deemed to be the resolution of the
Meeting at which the poll was demanded. The Chairman may (and if so requested shall), appoint scrutineers and may adjourn the
Meeting to some place and time fixed by him for the purpose of taking and declaring the result of the poll.
59. Chairman’s casting vote
In the case of an equality of votes, whether on a show of hands or poll, the Chairman of the Meeting at which the show of hands takes
place or at which the poll is demanded shall be entitled to a second or casting vote.
60. Time for taking a poll
A poll demanded on the election of a Chairman of the Meeting or on a question of adjournment shall be taken forthwith. A poll
demanded on any other question shall be taken either immediately or at such subsequent time (not being more than thirty days from
the date of the Meeting) and place as the Chairman may direct. No notice need be given of a poll not taken immediately.”

REQUEST TO SHAREHOLDERS
SHAREHOLDERS ARE KINDLY REQUESTED TO INDICATE THE “FOLIO NUMBER” APPEARING IN THE ADDRESS LABEL (PASTED ON THE ENVELOPE)
IN THE SPACE PROVIDED FOR “FOLIO NUMBER” IN THE FORM OF PROXY. THIS IS FOR THE CONVENIENCE OF THE REGISTRARS. PLEASE NOTE THAT
NON-INDICATION OF THE “FOLIO NUMBER” WILL NOT INVALIDATE THE FORM OF PROXY, UNDER ANY CIRCUMSTANCES.
Form of Proxy (Non-Voting Shareholders)
I/We ……………………………………………………………………… of .……………………………………………………………………………
…………………………………………………………………………… being a shareholder/s of Commercial Bank of Ceylon PLC hereby appoint
………………………………………… (NIC No. …………………………….) of ………………………………………………………………………
……………………………………………………………… whom failing:

Justice Kanagasabapathy Sripavan whom failing

Prof Ananda Kithsiri Wijenayaka Jayawardane whom failing
Mr Sivakrishnarajah Renganathan whom failing
Mr Kumbukage Dharmasiri whom failing
Mr Lakshman Dushyantha Niyangoda whom failing
Ms Nawalage Therese Manouri Shiromal Cooray whom failing
Mr Themiya Loku Bandara Hurulle whom failing
Mr Sanath Chandima Udayakumara Manatunge whom failing
Ms Judy Lee whom failing
Mr Raja Senanayake whom failing
Mr Sharhan Muhseen

as my/our Proxy holder to represent me/us and to speak at the meeting and to vote on a show of hands or on a poll on my/our behalf as
indicated below (and strictly in relation to the matters set out hereunder) at the Fifty Second (52nd) Annual General Meeting (AGM) of
Commercial Bank of Ceylon PLC which is scheduled to be held on Tuesday, March 30, 2021 at 10.30 a.m. virtually by using a digital platform,
and at any adjournment thereof and at every poll which may be taken in consequence thereof. (Please indicate your preference with a “” in
the relevant box.)

Item in the Notice of Meeting For Against

2 To declare a dividend as recommended by the Directors and to consider and if thought fit, to pass the following
resolutions set out in the attached Notice of Meeting:

Annual Report 2020

(ii) Waiver of pre-emption rights (Dividend Resolution No. 2)

(iii) Approval of an issue of ordinary (voting) and (non-voting) shares (Dividend Resolution No. 3)

Signed on this ………………………………… day of ……………………………………… Two Thousand and Twenty One.

Commercial Bank of Ceylon PLC

…………………… ……………………………… ……………………………
Folio Number Signature/s of shareholder/s NIC/PP/Co. Reg. No. of shareholder/s

Notes
(i) Instructions as to completion of this Form of Proxy are given overleaf.
(ii) Shareholders of non-voting shares are entitled only to participate at the meeting by virtual means and speak at the Meeting and to vote only in respect of the
Resolutions set out in items 2 (ii) and 2 (iii) of the Notice of Meeting.
(iii) If the Form of Proxy is signed by an attorney, the relative Power of Attorney (POA) should accompany the completed Form of Proxy for registration in the event such POA
has not already been registered with the Company.
(iv) If the shareholder is a company or a corporate body, the Form of Proxy should be executed under its common seal or in such other manner as provided for in its
Constitutional Documents, if any, or be, signed by its attorney or by an officer on behalf of the company/corporate body in accordance with its Articles of
Association/Statute.
(v) Every alteration or addition to the Form of Proxy must be duly authenticated by the full signature of the Shareholder signing the Form of Proxy. Such signature should as
far as possible be placed in proximity to the alteration or addition intended to be authenticated.
(vi) The use of the word “Member/s” herein is a reference to “Shareholder/s”.
 Instructions as to completion of Form of Proxy
(a) Article 68 of the Articles of Association of the Company provides that: “An instrument appointing a proxy shall be in writing, and
i. In the case of an individual shall be signed by the appointor or by his attorney; or in the case of a corporation shall be either under the
common seal or signed by its attorney or by an officer authorized to do so on behalf of the corporation. The Company may, but shall
not be bound to require evidence of the authority of any such attorney or officer.
ii. A proxy need not be a member of the Company”.
(b) In terms of Article 63 of the Articles of Association of the Company:
“In the case of joint holders of a share, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the
exclusion of the votes of the other joint holders, and for this purpose, seniority shall be determined by the order in which the name stands
in the Register of Members inrespect of the joint holding”.
(c) The full name and address of the proxy holder and of the shareholder appointing the proxyholder should be entered legibly in the
Form of Proxy.
(d) The completed Form of Proxy should be deposited at the Registered Office of Commercial Bank of Ceylon PLC, ‘Commercial House’, No. 21,
Sir Razik Fareed Mawatha, Colombo 01, Sri Lanka or by facsimile on 011 233 2317 or email to companysecretary@[Link], not later
than forty eight (48) hours before the time appointed for the holding of the AGM.
(e) Articles 57 to 60 of the Articles of Association of the Company, dealing with voting are quoted below, for information of shareholders.
“57. Method of Voting
At any General Meeting, a resolution put to the vote of the Meeting shall be decided on a show of hands unless a poll is (before or on
the declaration of the result of the show of hands) demanded by:
i. The Chairman of the Meeting; or
ii. Not less than five persons present in person or by attorney or representative or by proxy and entitled to vote; or
iii. A member or members present in person or by attorney or representative or by proxy and representing not less than one-tenth of the
total voting rights of all the members having the right to vote at the Meeting.
A demand for a poll may be withdrawn. Unless a poll be demanded (and the demand be not withdrawn), a declaration by the Chairman
of the Meeting that a resolution has been carried or carried unanimously, or by a particular majority, or lost and an entry to that effect
in the minute book, shall be conclusive evidence of the fact without proof of the number of proportion of the votes recorded for or
against such resolution.

58. How a Poll is to be Taken

If a poll is duly demanded (and the demand be not withdrawn), it shall be taken in such manner (including the use of ballot or voting
Annual Report 2020

papers or tickets) as the Chairman of the Meeting may direct, and the result of the poll shall be deemed to be the resolution of the
Meeting at which the poll was demanded. The Chairman may (and if so requested shall), appoint scrutineers and may adjourn the
Meeting to some place and time fixed by him for the purpose of taking and declaring the result of the poll.
59. Chairman’s Casting Vote
In the case of an equality of votes, whether on a show of hands or poll, the Chairman of the Meeting at which the show of hands takes
place or at which the poll is demanded shall be entitled to a second or casting vote.
Commercial Bank of Ceylon PLC

60. Time for Taking a Poll

A poll demanded on the election of a Chairman of the Meeting or on a question of adjournment shall be taken forthwith. A poll
demanded on any other question shall be taken either immediately or at such subsequent time (not being more than thirty days from
the date of the Meeting) and place as the Chairman may direct. No notice need be given of a poll not taken immediately.”

REQUEST TO SHAREHOLDERS
SHAREHOLDERS ARE KINDLY REQUESTED TO INDICATE THE “FOLIO NUMBER” APPEARING IN THE ADDRESS LABEL (PASTED ON THE ENVELOPE)
IN THE SPACE PROVIDED FOR “FOLIO NUMBER” IN THE FORM OF PROXY. THIS IS FOR THE CONVENIENCE OF THE REGISTRARS. PLEASE NOTE THAT
NON-INDICATION OF THE “FOLIO NUMBER” WILL NOT INVALIDATE THE FORM OF PROXY, UNDER ANY CIRCUMSTANCES.
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Annual Report 2020

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Commercial Bank of Ceylon PLC

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 To request information or submit a comment/query to the Bank, please provide the following details and return this page to –
The Company Secretary
Commercial Bank of Ceylon PLC
“Commercial House”
21, Sir Razik Fareed Mawatha
P.O. Box 856
Colombo 01
Sri Lanka

Name :

Permanent Mailing Address :

Contact Number/s

- Phone :

- Fax :

- Email :

Name of Company (If applicable) :

Designation (If applicable) :

Company address (If applicable) :

Annual Report 2020

Please tick ( ) the appropriate box

Yes No

Would you like to receive soft copies of the Commercial Bank’s Interim Financial Reports via email?
Commercial Bank of Ceylon PLC

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Would you like to receive any news on our products/services?

Registration form for On-line participation
at the AGM 2021
To:
Company Secretary Fax No: 011 233 2317
Commercial Bank of Ceylon PLC Tel: 011 248 6071 - 4
“Commercial House”
No. 21, Sir Razik Fareed Mawatha
Colombo 01
Sri Lanka

Details of Shareholder

Full Name of the Shareholder (or Principal Shareholder,

in the case of joint shareholding)

Joint Shareholder (if applicable)

Address

Shareholder/s NIC No./ Passport No./ Company Registration No. Principal Shareholder: Joint Shareholder/s
(if applicable):

Shareholder/s CDS Account No.

Contact Number (mandatory) Mobile: Landline:

E-mail address (it is mandatory for the shareholder to provide

this information in order to forward the log in information for the
on-line meeting link)

Annual Report 2020

In the event a proxy holder is appointed by the Shareholder, the following details of his/ her proxy will also be required:

Full Name of the proxy holder

Proxy holder’s NIC No.

Contact Number (mandatory) Mobile: Landline:

Commercial Bank of Ceylon PLC

E-mail address (it is mandatory for the shareholder to provide
this information in order to forward the log in information for the
on-line meeting link)

[To confirm Participation at the virtual AGM – Please tick the cage below]
I/My Proxy Holder am/is willing to participate at the AGM via the on-line platform:

Signature(s)

………………………….
Principal Shareholder

Date …………………… Date ……………………

Notes:
Duly completed Form should be sent to the Company by facsimile on 011 233 2317 or by email to companysecretary@[Link] or by post to Company Secretary,
Commercial Bank of Ceylon PLC “Commercial House”, No. 21, Sir Razik Fareed Mawatha, Colombo 01, Sri Lanka, not later than forty eight (48) hours before the time
appointed for the holding of the AGM.
Corporate Information
General Compliance Officer Foreign Subsidiaries Board Nomination Committee
Name of Company Ms A V P K T Amarasinghe Commex Sri Lanka S.R.L – Italy Justice K Sripavan – Chairman
Commercial Bank of Maldives Prof A K W Jayawardane
Commercial Bank of Ceylon PLC Ms J Lee
Information Centre Private Limited
CBC Myanmar Microfinance Mr S Renganathan (By invitation)
Company registration number Telephone: +94 11 235 3333, 735 3333
Company Limited
PQ 116 Board Human Resources and Remuneration
Credit Ratings
Associates Committee
Legal form Sri Lanka Operation Justice K Sripavan – Chairman
 National Long-term rating: ‘AA-(lka)’ Equity Investments Lanka Limited
A public limited liability company Prof A K W Jayawardane
Outlook Stable Ms J Lee
incorporated in Sri Lanka on June 25, 1969
 Subordinated debentures: ‘A(lka)’
Board of Directors and Committees Mr S Renganathan (By invitation)
under the Companies Ordinance No. 51
of 1938 and quoted in the Colombo Stock Board of Directors
by Fitch Ratings Lanka Limited in
Exchange in March 1970. Justice K Sripavan – Chairman Board Related Party Transactions Review
January 2021.
Prof A K W Jayawardane – Deputy Chairman Committee
The Company was re-registered under the Bangladesh Operation Justice K Sripavan – Chairman
Mr S Renganathan –
Companies Act No. 07 of 2007. Commercial  AAA was re-affirmed by Credit Rating Mr L D Niyangoda
Managing Director/Chief Executive Officer
Bank of Ceylon PLC is a Licensed Commercial Information & Services Limited in Mr T L B Hurulle
Mr S C U Manatunge –
Bank under the Banking Act No. 30 of 1988. June 2020. Mr R Senanayake
Director/Chief Operating Officer
Mr K Dharmasiri Mr S Renganathan (By invitation)
Accounting year end Professional Expertise Mr S C U Manatunge (By invitation)
Mr L D Niyangoda
December 31 Lawyers Ms N T M S Cooray
Mr T L B Hurulle Voluntary Board Committees
Tax Payer Identification Number (TIN) Messrs Julius & Creasy
No. 371, R A de Mel Mawatha Ms J Lee Board Credit Committee
124006007 Colombo 03, Sri Lanka Mr R Senanayake Justice K Sripavan – Chairman
Mr S Muhseen Mr K Dharmasiri
Registered office Auditors (appointed w.e.f. February 15, 2021) Mr S Renganathan
“Commercial House” Mr S C U Manatunge
Messrs Ernst & Young Company Secretary
No. 21, Sir Razik Fareed Mawatha Chartered Accountants
P.O. Box 856 Mr R A P Rajapaksha Board Investment Committee
No. 201, De Saram Place
Colombo 01, Sri Lanka Ms J Lee – Chairman
Colombo 10, Sri Lanka
Telephone (General): Mandatory Board Committees Mr S Renganathan
+94 11 248 6000-3 (4 lines), 448 6000, Mr K Dharmasiri
Registrars Board Audit Committee
748 6000, 548 6000, 243 0420, Mr S C U Manatunge
Mr R Senanayake – Chairman
Messrs S S P Corporate Services (Pvt) Ltd. Ms N T M S Cooray
233 6700, 244 5010-15 (6 lines) Mr K Dharmasiri
No. 101, Inner Flower Road
Facsimile: +94 11 244 9889 Ms N T M S Cooray
Colombo 03, Sri Lanka Board Technology Committee
SWIFT Code – Sri Lanka: CCEYLKLX Ms J Lee
Telephone: +94 11 257 3894, 257 6871 Prof A K W Jayawardane – Chairman
SWIFT Code – Bangladesh: CCEYBDDH Mr S Renganathan (By invitation)
Facsimile: +94 11 257 3609 Mr S Renganathan
Email: email@[Link] Mr S C U Manatunge (By invitation)
Email: sspsec@[Link] Mr T L B Hurulle
Web: [Link],
(Kindly direct any queries about the Mr K Dharmasiri
[Link] Board Integrated Risk Management Committee
administration of the shareholding to the Mr S C U Manatunge
Prof A K W Jayawardane – Chairman
Head Office above Company)
Mr K Dharmasiri
Mr S Renganathan Board Strategy Development Committee
“Commercial House”
Subsidiaries and Associates Mr L D Niyangoda Justice K Sripavan – Chairman
No. 21, Sir Razik Fareed Mawatha
Local Subsidiaries Mr T L B Hurulle Prof A K W Jayawardane
P.O. Box 856, Colombo 01
Ms J Lee Mr S Renganathan
Sri Lanka Commercial Development Company PLC
Mr R Senanayake Mr K Dharmasiri
CBC Tech Solutions Limited
Mr S C U Manatunge (By invitation) Mr L D Niyangoda
Stock exchange listing CBC Finance Limited (formerly known as
Ms N T M S Cooray
The Ordinary Shares and the Unsecured Serendib Finance Limited)
Ms J Lee
Subordinated Redeemable Debentures of Commercial Insurance Brokers (Pvt) Limited
Mr R Senanayake
the Bank are listed on the Colombo Stock
Exchange.

For Investor Relations and clarification on this Report please write to:
The Chief Financial Officer
Commercial Bank of Ceylon PLC,
“Commercial House”,
No. 21, Sir Razik Fareed Mawatha,
P.O. Box: 856, Colombo 01, Sri Lanka.
Telephone: +94 11 248 6550
Email: email@[Link]
Minimise waste by informing the Commercial Bank Company Secretary
to update the mailing list if you are receiving more than one copy of
the Annual Report of the Bank.