Commercial Bank of Ceylon: Annual Report 2020 (2023)

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2. Our Vision To be the most technologically advanced, an innovative and customer-friendly financial services company in Sri Lanka poised for further expansion in South Asia. Our Mission To provide reliable, innovative, and customer-friendly financial services using the latest technologies and a continued focus on increasing productivity while developing our people and gaining the experience necessary to expand locally and regionally.
3. A century of experience. A year of reinvention.
4. Table of Contents Annual Report of the Board of Directors Introducing our 52nd annual report as part of the recovery process from the COVID-19 pandemic, the Bank has played an important role in leading private sector banks in supporting affected sectors. 3 4 Commercial Bank of Ceylon PLC Annual Report 2020 Integrated Report 05-134 Organization Overview 6 About the Bank A Snapshot of the Bank's Profile Financial Highlights Strategic Highlights Our Centenary Journey 6 7 8 9 10 Performance Review 13 Joint message from the Chairman and his predecessor Report from the Managing Director/CEO Financial Report 13 15 20 Operating Environment 27 Relations with Stakeholders Material Issues Operational Context and Outlook 27 29 32 Business Model for the Sustainable Creation of Value 35 Discussion and Analysis of Management 41 Strategic Imperatives Prudent Growth Customer Focus Leading through Innovation Operational Excellence 41 42 48 53 57 Governance and Risk Management 64 Board of Directors and Profiles Corporate Governance and Senior Management Profiles Annual Corporate Governance Report Committee Reports of the Council Statement of Responsibility of the Board for Financial Information Reimbursement Statement of the Board of Directors on internal control Financial information Independent verification report Declaration of responsibility of the General Director and the Chief Financial Officer Interest of directors in contracts with the Bank Governance and risk management 64 70 72 75 86 101 107 109 111 112 113 114 This Annual Report will be published within the three months following the balance sheet date. The complete and comprehensive online HTML version will also be published online at http://combank2020.annualreports.lk/ on the same date of publication of this annual report. Scan to view online version 2 Judge K Sripavan Chairman K G D D Dheerasinghe Former Chairman 13 The question that has constantly plagued us and fueled every decision made has been: when the pandemic finally subsides, how will our shareholders view the Bank's behavior during the most difficult moments? all the time to judge? 15 S Renganathan Managing Director/CEO Financial Statements 135-290 137 138 141 142 143 144 145 146 150 154 155 Financial Calendar - 2020 and 2021 Independent Auditor's Report Financial Statement Highlights - Bank Accounts - Index Profit and Loss Statement Profit and Loss Account and Other Comprehensive Income Statement Statement of Changes in Equity - Consolidated Statement of Changes in Equity - Statement of Bank Cash Flows Notes to the Financial Statements Supplementary Information 291-371 Notice of Meeting - Annual General Meeting Circulars to Shareholders First and Last Dividends for 2020 Proxy Form (Voting Shareholders) Proxy Form (Non-Voting Shareholders) Stakeholder Comment Form Company Information - Inside Back Cover All References The banking industry figures in this Annual Report are based on CBSL publications, which are based on statutory reporting requirements n and may differ from published figures d in accordance with the Sri Lanka Accounting Standards.
5. Annual Report of Directors Signed by agreement of the Board of Directors. Judge K Sripavan President Prof A K W Jayawardane Vice President S Renganathan Managing Director/CEO K Dharmasiri Director L D Niyangoda Director Ms N T M S Cooray Director T L B Hurulle Director S C U Manatunge Director/COO Ms J Lee Director Annual Report 2020 Mid-Long Term through its business model (pages 36 and 37). Consequently, the bank has identified emerging developments and trends that are likely to impact its business model and value creation process. These trends were then categorized into risks and opportunities based on their importance to the bank and its stakeholders, along with the stakeholders that could be most affected. The bank identified its strategic imperatives through its annual strategic planning and continued to implement the necessary strategies to mitigate risk and seize opportunities. The management discussion and analysis contained in this report (pages 41-62) provide a detailed description of these needs and strategies. The underlying governance structure and risk management framework are set out on pages 77 and 120. The Bank's external auditors, Messrs. Ernst & Young, who, pursuant to a resolution of the 51st Annual General Meeting on June 25 2020 (which was postponed to earlier than its originally scheduled date), the 30th annual report. Details of the remuneration of the external auditors are set out in note 21 to the financial statements on page 186. To the best of the Directors' knowledge, the auditors have no other relationship with the Bank or any of its subsidiaries and affiliates. The external auditors have no interest in entering into any contract with the Bank or any of its subsidiaries and affiliates The Directors are satisfied to the best of their knowledge that all payments to the government, other regulators and employees required by law are made in a timely manner has been. The Board of Directors has reviewed the business plans of the Bank and its subsidiaries and is satisfied that the Bank and its subsidiaries have adequate resources to continue in business for the foreseeable future. Consequently, the financial statements of the Group and the Bank are prepared on a going concern basis. The Directors have given due consideration to matters of material importance to the Bank and its stakeholders in the preparation of this report and acknowledge that reasonable care has been taken in the preparation and presentation of this integrated annual report, preserving its integrity. The degree of compliance with the requirements of Section 168 of the Companies Act No. 7 of 2007 and its amendments and other relevant legislation is disclosed in detail on pages 101 to 106. Commercial Bank of Ceylon PLC The Board of Directors is pleased to present to the Shareholders the 52nd Annual Report of the Bank with Integrated Report, the Audited Financial Statements of the Group and the Bank for the year ended December 31, 2020 and the Independent Auditor's Report on the Financial Statements, which complies with all the applicable legal requirements. Where applicable, this report is presented in accordance with the guiding principles and content elements set out in the International <IR> Framework issued by the International Integrated Reporting Council (IIRC). Sections 150(1), 151, 152 and 153(1) and (2) of the Companies Act No. 07 of 2007 and its amendments make it the responsibility of the Board of Directors of the Bank to prepare the financial statements of the Group and the Bank that give a true image of the financial situation and the performance of the Group and the Bank. In this sense, the Board wishes to confirm that the Statement of Income, Statement of Comprehensive Income, Balance Sheet, Statement of Changes in Equity, Statement of Cash Flows and Significant Accounting Policies and its Notes that appear on pages 143 to 290 have been prepared in accordance with the requirements of the Sri Lanka Financial Reporting Regulations, the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995 and the Companies Act No. 07 of 2007 and its amendments. This report also contains the information and disclosures required by the Corporations Law No. 07 of 2007 and its amendments, the Banking Law No. 30 of 1988 and its amendments, the instructions issued under the same, including the Law Instructions No. 11 of 2007 and its subsequent amendments in compliance with the Listing Rules of the Colombo Stock Exchange (CSE), including the Rules for Related Party Transactions, as provided in Section 9.3.2 (c) and (d) thereof and recommended best practices. The financial statements of the Group and the Bank for the year ended December 31, 2020, including the comparative figures for 2019, have been approved by the Board of Directors in accordance with the Board resolution of February 24, 2021 and authorized to its broadcast. Appropriate copies of the Annual Report will be sent to the CSE and the Sri Lanka Accounting and Auditing Standards Supervisory Board (SLAASMB) within the time limits required by law and copies thereof will be stored on the Bank's website, www. combank. The net. This report has been structured to effectively communicate the Bank's efforts to create value for all its stakeholders Briefly, R Senanayake Director S Muhseen Director R A P Rajapaksha Company Secretary February 24, 2021 3
6. Introducing our 52nd Annual Report Commercial Bank of Ceylon PLC's 52nd Annual Report covers the 12-month period from January 1 to December 31, 2020. Having started reporting under the International <IR> Framework in 2013, this integrated report is consistent with our usual annual reporting cycle for financial and sustainability reporting and follows our most recent report for the year ended December 31. 2019 with comparative figures, if any, are included in this report. Going beyond the medium To meet the communication needs of the Bank's different interest groups, this report is available in multiple media and formats. This approach also seeks to balance the differing requirements for conciseness, completeness, and accessibility in our disclosure practices. Strategic direction In addition to focusing on annual performance, this Annual Report also provides stakeholders with information on the Bank's current and future growth strategies. Commercial Bank of Ceylon PLC Annual Report 2020 Non-Financial Information Recent trends make it clear that stakeholders in general and lenders in particular want access to non-financial information in addition to traditional forms of financial information when assessing the future potential of companies. Accordingly, this Annual Report attempts to provide a holistic and integrated discussion of the Bank's performance, operations and strategic imperatives. Basis of preparation This report has been prepared in accordance with the international <IR> framework; and the bank's social and environmental impacts are presented in accordance with the GRI Standards: Essential option. He also comments on the Bank's contribution to the UNDP Sustainable Development Goals. The concepts, principles and guidelines used in the preparation of this report come from the following sources: z The International Integrated Reporting Framework (www.theiirc.org) z The Global Reporting Initiative Sustainability Reporting Guidelines – GRI Standards (www.globalreporting.org) z "Guide for Preparers of Integrated Corporate Reports" published by the Sri Lanka Institute of Chartered Accountants (CA Sri Lanka) 4 z "Handbook on Integrated Corporate Reporting" published by CA Sri Lanka in cooperation with the Sri Lanka Integrated Reporting Council Boundary of reporting The financial performance of the Group includes the Bank together with seven subsidiaries: Commercial Development Company PLC, CBC Tech Solutions Limited, CBC Finance Limited (formerly Serendib Finance Ltd.), Commercial Insurance Brokers (Pvt) Ltd., Commex Sri Lanka S.R.L. Italy, Commercial Bank of Maldives Private Limited and CBC Myanmar Microfinance Company Limited - and an associate - Equity Investments Lanka Ltd. (presented in the consolidated financial statements on pages 143 and 290). The Bank's social and environmental impacts, as discussed in management's discussion and analysis, focus on the activities of Commercial Bank of Ceylon PLC. in Sri Lanka, as well as in Bangladesh, the group's parent company, accounting for more than 98% of revenues and assets, and bonds unless otherwise stated. In the year under review, there were no significant changes to the type of organization, structure, ownership, supply chain, or topic boundaries. Apart from the inclusion of the contents of GRI GRI 207: Taxation (2019) and GRI 403: Health and safety at work (2018), no material changes were made in the report or restatement of previously reported financial, social or environmental information. . Accountability for Sustainability Practices and External Assurance The CEO/CEO, COO, and other members of the senior management team are accountable for sustainability practices and disclosures in this report. They have actively collaborated with external audit providers on the content of the report. The Bank's external auditors, Messrs. Ernst & Young, have audited the Group's financial statements and non-financial information, while Messrs. DNV GL Business Assurance Lanka (Pvt) Ltd., on behalf of DNV GL, have audited the Bank's social and environmental processes to have. The Board of Directors and Management have no other relationship with Messrs. Ernst & Young, DNV GL Business Assurance Lanka (Pvt) Ltd. or DNV GL, other than acting as independent assurance service providers to the Group. Quality Assurance Six qualitative criteria were taken into account in the preparation of the text and visual elements (figures, graphs, tables): z Integrity: This annual report covers material impacts within and under the direct control of the bank, external impacts that are influenced indirectly by our engagement with stakeholders and broader sustainability initiatives delivered through the bank's own CSR Trust. z Comparability: This report includes current and prior period performance along with industry benchmarks where relevant and available. z Accuracy and Consistency: The content of this report is supported by built-in internal controls to facilitate traceability and auditability of the information. z Clarity: This report contains text and visuals to improve readability, make it easier to understand, and keep it concise. z Balance: This report makes every effort to present a balanced overview of relevant key information. z Credibility and reliability: The financial and sustainability information in this report has been audited by reputable third-party assurance providers. Precautionary principle Aware of the direct and indirect social and environmental impacts of our actions and of the indirect consequences derived from the commercial activities of our clients, to whom we grant credit in particular, the bank avoids or reduces said negative impacts through policy credit, SME assessment, post-payment monitoring, special green products and risk management processes. While the bank's business model and operations do not have a direct significant negative impact on the environment, every effort is made to reduce its own carbon footprint through initiatives such as offering digital products/channels, using solar energy, low consumption air conditioning and minimizing reduce the consumption of paper in their processes. Contact Us Your comments or questions about this report are welcome and we invite you to direct them to: Chief Financial Officer Commercial Bank of Ceylon PLC "Commercial House" 21, Sir Razik Fareed Mawatha Colombo 1 Sri Lanka
7. General description of the organization Performance review Operating environment Business model for the creation of sustainable value Management discussion and analysis– – – – – Annual Report 2020 INTEGRATED REPORT pages 05 - 134 Commercial Bank of Ceylon PLC This Integrated Report has been prepared in accordance with the guiding principles and content elements of the International <IR> Framework. It forms a distinct section within the Bank's Annual Report and is given a special place as it provides a multidimensional overview of the Bank's performance in 2020. The Directors acknowledge that due care has been taken in the preparation and presentation of this Integrated Report while maintaining its integrity. We present our 52nd annual report INTEGRATED REPORT 6 13 27 35 41 Governance and risk management – ​​64 5
8. Organizational Panorama About the Bank Our Regional Presence and Global Connectivity Number– 01 Correspondent Banks 16 Italy Subsidiaries Trade Promotion Officer Correspondent Banks Trade Promotion Officers Organization Overview Annual Report 2020 Commercial Bank of Ceylon PLC Commercial Bank of Ceylon PLC is the largest private sector commercial bank, and the third most large overall, in Sri Lanka by total assets which stood at Rs. 1.736 trillion (USD 9.285bn) at the end of 2020. It is the only private sector bank designated as a National Systemically Important Bank (D-SIB) parent by the Central Bank of Sri Lanka. The bank represents around 10.7%, 11.2% and 11.8% of the sector's loans and advances, deposits and assets, respectively. More than a century-old legacy The Bank's origins date back to 1920 and, as of 2020, it has been operating under its current name for just over half a century. The Bank's total staff at the end of 2020 was 5,057 and it serves more than 3.5 million customers through an extensive local and international network of branches, subsidiaries, agency agreements, trade promotion officers and correspondent banking relationships. . Growing international presence With the acquisition of Crédit Agricole Indosuez in Bangladesh in 2003, the bank began its expansion beyond the shores of Sri Lanka and became the first private sector bank to establish a branch outside the country. Since then, three subsidiaries have been established in Italy, Maldives and Myanmar. Risk Profile Fitch Ratings Lanka Ltd., (Fitch) has reviewed the long-term national rating of Sri Lanka's financial institutions following the recalibration of its national rating scale for Sri Lanka. As a result, Fitch changed the national bank 6 Bangladesh branches Myanmar subsidiary and a representative office Sri Lanka 14 The largest and systemically important bank 25 1 11 The Maldives subsidiary Correspondent banks Branches Subsidiaries Associate 268 4 1 Bank long-term to AA-(lka ) from AA+(lka) and its outlook from negative to stable in January 2021 and corresponds to the highest rating of all local private banks. The bank's credit rating in Bangladesh was reaffirmed at AAA for the 10th consecutive year by Credit Rating Information Services Ltd in June 2020. The bank's risk profile reflects cautious risk appetite, strong funding base, secure liquidity levels, strong domestic operations and stable and consistent performance. Diversification The Bank's business is well diversified into four main business segments: Personal Banking, Corporate Banking, Treasury and International Operations. The bank's international operations include operations in Bangladesh, Maldives, Italy and Myanmar, which now account for 11.79% of consolidated assets and 20.46% of consolidated earnings before tax. In addition to geographic diversification, the bank has successfully achieved a high level of diversification of its operations in many other parameters, such as customer profile, currency, product and service portfolio, financing profile, maturity profile , economic sectors and income streams. Dynamic financial intermediation Being the first bank in the private sector to exceed Rs. With a mark of Rs 1 trillion in assets and deposits in 2016 and 2019 respectively, the bank surpassed the Rs 1.5 trillion mark in total assets reaching Rs in the first half of 2020 as the number one private bank in Sri Lanka. 1.736bn at the end of 2020. Customer deposits finance 72.92% of total assets, underscoring the bank's strong role as a financial intermediary. Over the past five years, the bank's loan-to-deposit ratio has averaged more than 80%, reflecting growth in lending 19 correspondent banks 4 that has matched growth in deposits. The bank's asset quality is among the best in the industry, while its checking and savings accounts (CASA) represent 42.72% of total deposits, the highest among peer banks. Strong Capitalization The Bank's Tier 1 capital ratio and total capital ratio as of December 31, 2020 were 13.217% and 16.819%, respectively, compared to the statutory minimum ratios of 9% and 13% for the Bank. year. The bank's growth has been cautious, with balance sheet asset leverage and risk-weighted assets remaining at 11.05x and 5.94x at the end of 2020, respectively. The bank's reported actions highlighted the strength of the franchise with the highest book value price of 0.60 and the highest market capitalization of Rs 94 billion (US$500 million) among banks, financial institutions and insurance company on the Colombo Stock Exchange at the end of the year (the bank is the fifth largest institution overall to be listed on the CSE). Bank Ownership Of the bank's 16,820 ordinary voting shareholders at the end of 2020, DFCC Bank PLC owned 12.02% and related state-owned enterprises, including the Employees Provident Fund, Employees Trust Fund Board employees and the Sri Lanka Insurance Corporation, jointly owned 19.49% of the bank's shares. share. While Mr. Y S H I Silva (8.87%), International Finance Corporation (7.12%), Citibank New York S/A Norges Bank Account 2 (4.16%), Melstacorp PLC (4.14%), CB NY S/A IFC Emerging Asia Fund LP (3.67%) and CB NY S/A IFC Financial Institutions Growth Fund LP (3.67%) are the other major shareholders with a combined stake of 31.63%. In particular, the bank has significant foreign participation, with foreign shareholders collectively owning 23.66% of the bank's shares.
9. A snapshot of the bank.Rs 15.18 2019 - Rs 16.19 Return on Total Assets 2020 - 1.05% 2019 - 1.27% Gross NPL Ratio Tier 1 Capital Ratio 2020 - Rs 5.11 Rs 2019 - Rs 4.95 2020 - 13.217% 2019 - 12.298% Net delinquency ratio Total capital ratio 2020 - 2.18% 2019 - 3.00% 2020 - 16.819% 2019 - 16.146% Provision Coverage Ratio Net Stable Financing Ratio 2020 - 57.42% 2019 - 39.39% Return on Equity 2020 - 11.28% 2019 - 13.54% 207.49% 207.49 - 5% Open Loan Exposure Leverage Ratio 2020 - 11.88% 2019 - 17, 37% Rs 1,266 crore Customer deposits (2019 - Rs 1,053 crore) 2020 - 5.74% 2019 - 6.45% Rs 948 crore Financial intermediation Gross loans and credits (2019 - Rs 1,053 crore) 920 million rupees) Maturity transformation Over 3.5 million 5,057 employees Customers 287 Branches 1,736 trillion rupees 56 Total assets Correspondent banks 90 6 8 ATM Subsidiaries and Affiliates AA-(lka) Top 1000 Banks First in Market Capitalization Fitch Rat Ings Lanka Ltd. [2019 – AA(lka)] Only Sri Lankan bank is ranked No. 1 in the banking sector in CSE for the 10th consecutive year Liquidity Legal Liquidity Ratio: DBU 2020: 44.99% 2019: 30.42% Liquidity Coverage Ratio (all currencies) 2020: 258.06% 2019: 224.74% Overview of Organization 2020: Rs 16,373 crore 2019: Rs 134.67 2019: Rs 129.60 Dividends per share 2020: Rs 6.50 2019: Rs 6.50 Market Cap 2020: Rs 60 times 2019: 0.73 times 7
10. GROUP table of financial highlights- 01 2020 margin ’000 151,966 29,047 24,520 7,433 7,586 150,741 30,256 22,564 17,420 6,679 1,286,616 961,859,7679. Before Tax (PBT) Income Tax Expense Profit After Tax (PAT) Gross Dividends Commercial Bank of Ceylon PLC Annual Report 2020 Organization Overview Position at Year End: (Rs. billion) Shareholder Funds (Said capital and reserves) Financial liabilities at amortized cost - Gross loans and deposits attributable to depositors - Advances Information on total assets per common share (Rs.) Earnings (basic) Earnings (diluted) Dividends - Cash dividends - Net asset value of shares Year-End Market Value - Year-End Voting Market Value - Voting Shares Return on Average Shareholder Funds - (ROE) (%) Return on Average Assets - ( ROA) (%) Margin financial intermediation (%) Total Reserve as % of g Loans and Loans (%) Loan and Loan Cost of Risk () %) Loan Loss Ratio - Gross (%) Ratio Loan Loss - Net (%) Price Return - Voting Common Stock - (times) Dividend Yield - Voting Eligible Common Stock (%) Dividend Coverage on Common Stock (times) Statutory Ratios % Liquidity Ratio - Unit Domestic Banking (DBU) Liquidity Ratio - Off Shore Banking Unit (OBC) Capital Adequacy Ratios (under Basel III) (%) Usual Equity Level (CET) I Capital Ratio (Minimum Requirement - 2020 - 7.500%, 2019 - 8,500%) Tier I Capital Ratio (Minimum Requirement - 2020 - 9,000%, 2019 - 10,000%)%, 2019 - 14,000%) Liquidity Coverage Ratio (% ) Rupee - (minimum requirement - 2019 - 100%, 2018 - 90%) All currencies - (minimum requirement - 2019 - 100%, 2018 - 90%) 2020 Rs. '000 2019 Rs 7.138 16.373 7.586 148.706 29.531 7.192 22.339 5.314 17.02555555555555555555555586 148.706 29.531 7.192 22.339 5.314 17.02555555555555555555555555555586 148.706 29.531 7.192 22.339 5.314 17.02555555555555555555 6.679 0.68 (5.13) (37.36) 5.25 34.32 (3.83) 13.58 134.424 1,068.983 930.737 1,408.941 18.43 20.36 3.34 25.09 157.146 1,265.966 947.842 1,736.218 133.162 1,053.308 920.457 1,345 18.01 20.19 2.98 25.15 15.70 15.70 - - 136.42 N/A N/A 16.41 16.41 - - 130.83 N/A N/A (4.33) (4.33) - - 4.27 2.00 129.60 95.00 83.00 (6.24) (6.24) - - 3.91 (14.84) ​​(15.54) 11.64 1.08 N.A. 5.41 1.88 – – N/A N / A /A n/a n/a (2.09) (0.20) - 1.45 0.77 - - - - - 11.28 1.05 9.59 5.38 1.88 5.11 2.18 5.33 8.03 2.34 13.54 1.27 5 11.05 1.90 3. 3.00 5.87 6.84 2.49 (2.26) (0.22) (0.22) (1.47). 0.79 0.16 (0.82) (0.54) 1.19 (0.16) N/A N/A N/A N/A – – 44.99 32.70 30.42 25.25 14.57 7.45 13.356 13.356 16.882 12.399 12.399 16.182 0.957 0.957 0.700 13.217 13.217 16.819 12.298 12.298 16.146 0,919 0,919 0,673 n. z. N/A N/A N/A Fund (After Tax) (%) Revenue Growth (%) Net Income Growth (%) Total Assets Growth (%) Dividend Per Share (DPS) (Rs.) Capital Adequacy Ratios capital CET I capital ratio (%) (Basel III minimum requirement – ​​2020 – 7,500%, 2019 – 8,500%) Tier 1 capital ratio (%) (Basel III minimum requirement – ​​2020 – 9,000%, 2019 – 10,000 %) Target Above 2% Above 20% Above 20% Above 20% Above 20% Above Rs 5.00 2% buffer above regulatory minimum Tier 1 Capital Ratio (%) Minimum Requirement Basel II: 5% n.d. Total Capital Ratio (%) (Basel III minimum requirement – ​​2020 – 13,000%, 2019 – 14,000%) 2% buffer on regulatory minimum requirement Total Capital Ratio (%) Basel II minimum requirement – ​​10% n.s. A. 8 Bank Achieving in 2020 2019 1.05 11.28 0.68 (3.83) 25.15 6.50 1.27 13.54 7.72 (2.96) 6.43 6.50 1.43 15.56 20.72 5.81 14.00 6.50 1.54 17.88 24.10 14.25 12.5.50 1.53 12.291291291291291291291291292929129292912122912912912912912912912912912912912912129121 /A 11.338 NA 12.111 NA NA 11.56 16.819 NA 16.146 NA 15.603 NA 15.746 NA NA 15.89
11. Strategic aspects The strategic aspects for 2020 are organized around the bankfour strategic imperatives (see page 41 for more details). While the Financial Highlights capture the key details of the Bank's financial performance, the Strategic Highlights summarize how that 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 report (pages 20-26) and the Strategic Highlights is a summary of management discussion and analysis (pages 41-62) similarly structured around to the four Strategic Assumptions. Prudent Growth Customer Focus USD 50 million (Rs. 9,215 crore) private placement of IFC shares, the Bank's first overseas equity placement. Introduced "Arunella", a financial assistance program that included various service initiatives guided by CBSL guidelines but went above and beyond to cover as many struggling clients as possible. Increase in the market share for the use of credit cards by 11.55% and in the market share for the use of debit cards by 32%. Increased point-of-sale (POS) volume by 20% and became the fastest growing POS network in the country. The scope of loans on default during the first wave of the pandemic was about Rs 290 crore and loans on default amounted to about Rs 132 crore by the end of 2020: Rs 10 crore program financed by a loan of 50 crores from International Finance Corporation (IFC) and Working Capital Scheme, Dirishakthi, for micro-enterprises. Increase the import and export market share to 10.17% and 19.0% respectively. Provide “bank on wheels” mobile banking units and increase the existing fleet from 5 to 11 by equipping vehicles with mobile POS units. Issued a statement on climate change, reaffirming its commitment to address climate change at the highest level of the Bank. Established seven new SME sales units and launched the SME Lead Management System (SME LMS) to drive SME initiatives in the North, East and North Central regions. BizClub membership increased from 1,613 to 4,076. Operational Excellence Launch of a single-source, trilingual integrated contact center to serve customers and other stakeholders 24/7. Online and mobile banking channels integrated into a single omnichannel platform with the launch of ComBank Digital. Enhanced Flash, the bank's innovative trilingual digital wallet, with several features, including a module (integrated with the UN-approved Environmental Impact Index for financial transactions) that allows customers to track the carbon footprint of their habits of expense. Initiate a digital roadmap for 2023 that includes the transformation of traditional banking processes to digital, integration with other ecosystems, modernization of internal systems to be prepared to take advantage of changes in the regulatory environment and the development of talent and the creation of priority alliances. Leading through innovation Implemented a series of operational measures including: dividing teams and establishing protocols for working remotely and from home; provide meals, lodging, transportation, and personal protective equipment to ensure the safety of all employees; and equip stores with partitions, sanitizer, and implement other social distancing and hygiene best practices to protect customers. Increased digital onboarding of existing customers by 140%. Introducing an industry-leading remote access solution that offers multiple layers of security to make working remotely and from home easy. Introducing ComBank Simple Pay, a new platform that helps SMEs digitize their business and engage in e-commerce. Full payment of all planned salary increases and bonuses, confirmation of financial obligations to employees. Organizational Overview The Bank's ethics and conduct-related systems, processes, and controls were further strengthened throughout the year. It remains the leading lender among private banks under the Saubagya lending scheme. Annual Report 2020 The provision for impairment increased to Rs 21,484 crore for 2020, the highest annual provision in the bank's history. Commercial Bank of Ceylon PLC Bank's overseas operations now contribute more than 11% of assets and 20% of pre-tax profits. Successful negotiation of the bank's collective agreement with the bank branch of the Ceylon Bank Employees' Union (CBEU). Introduction of a pension fund for contract employees after 2000. Became the first bank in Sri Lanka to achieve carbon neutral status. 9
12. Our Centennial Journey 1920 - 1979 1920 Eastern Bank Ltd. (EBL) opens Chatham Street branch 1980 - 1998 1998 First 365-day branch opens in Colombo 07 All ICBS affiliated branches except Jaffna 1997 1957 Standard Chartered Bank acquires EBL and sells its 40% stake 2000 - 2009 2000 Internet banking established 2001 Opening of 100th branch in Kaduruwela 2003 Acquisition of Credit Agricole Indosuez operations in Bangladesh Chartered Bank Commercial Bank of Ceylon PLC Annual Report 2020 Organization overview 1996 1969 Commercial Bank of Ceylon Ltd. ( CBC), incorporated in EBL with a 40% stake CDC stake increased to 94.5% through stock exchange 1993 1971 EBL business fully integrated into Chartered Bank 1972 First two branches opened in Galewela and Matale Introduction of central banking software International Comprehensive Banking System (ICBS) CBC acquired branches in Galle, Jaffna and Kandy Mercantile Bank Ltd. 1979 Offshore Banking Center established 2006 1990 Launch of customer ATMs EBL changed its name to Standard Chartered (UK) Holdings Ltd. 2008 First Sri Lankan bank ranked in the world's top 1000 banks. 2009 1984 Head office moved to new premises at No. 21, Sir Razik Fareed Mawatha, (formerly Bristol Street), Colombo 01 1980 Commercial Development Company (CDC) was formed to construct the head office building for CBC with a 40% stake 10 USD raised 65 million syndicated loan becoming the first NGO in Sri Lanka to obtain external financing. He spent $10 million. bonds, becoming the first indigenous bank to do so. 1987 1973 2005 First Sri Lankan bank to receive CMMi certification
13. In 2014, the bank acquired the 100.% stake in Indra Finance Ltd. Became the first bank in Sri Lanka to obtain a license from the Central Bank of Myanmar to operate a representative office. Commex Sri Lanka S.R.L. Italy, our wholly owned subsidiary, opened Commercial Bank of Maldives Private Limited, the second foreign subsidiary with a 55% interest. The bank became a Rs 1 trillion investment company. Issuance of a 10-year subordinated debenture Opening of the second branch in Hulhumale Constitution 100% CBC Myanmar Microfinance Company Limited, third subsidiary abroad with a volume of USD 75 million. raised $65 million from the International Finance Corporation (IFC) on behalf of the IFC in 2012. Launched a women-only savings account called "Anagi." 2011 'Sharia' compliant Islamic banking introduced 07 for wealthy customers Reached 500 milestone ATM at Maradana railway station Celebrated 100 years of banking in Sri Lanka with a series of events including a staff meeting of unprecedented scale. $50 million private placement of shares with IFC Launch of "ComBank Digital" powered by Fiserv, US-based global provider of financial services technology Started project to donate smart STEM classes 2017 Commercial Bank of Maldives 2013 2020 to 100 schools to celebrate the centenary of the bank. It has climbed 51 places in the ranking of the World's 1000 Best Banks and is the only Sri Lankan bank to have been on this prestigious list for 10 consecutive years. Brand Finance declared ComBank the "Strongest Bank Brand" in Sri Lanka. Our CBC Centennial Journey subsidiary, renamed Serendib Finance Ltd. 2016 2018 CBC's second wholly owned subsidiary outside of Sri Lanka, CBC Myanmar Microfinance Company Limited, opened in Nay Pyi Taw. Launch of the country's first fully automated check depository machine at the City Office branch in York Street Colombo Launch of UnionPay cards by a bank in Sri Lanka for the first time, making Sri Lanka the 51st country World to issue UnionPay cards Launch of digital card flash bank accounts 2019 One of the leading mobile payment solutions in China, acceptance of 'WeChat Pay' in Sri Lanka for the first time by CBC with a partnership between Tenpay Payment Technology Ltd. introduced. CBC is PCI-DSS (Payment Card Industry Data Security Standard) certified. CBC 'Flash' becomes Sri Lanka's first multilingual digital banking app Q+ Sri Lanka Annual Report 2020 Indra Finance, a commercial bank wholly owned by Ceylon PLC 2015 2016 - 2020 Organization Overview 2011 - 2015 f first QR-based payment app under LANKAQR "Yasasa" Savings account introduced exclusively for retirees CBC enables dynamic ATM currency conversion for foreign Visa cards 11
14. Our Centenary Journey Organization Overview Annual Report 2020 Commercial Bank of Ceylon PLC 12 Celebrating a Centenary of Operations in 2020, the Bank celebrated a century of banking in Sri Lanka, a century in which the Bank has become an integral part of the country's economic and social fabric. The centerpiece of the celebrations was a large staff meeting held in early January before the surge in COVID-19 infections in the country. Dreams of the future and history of the past were intertwined as more than 4,000 employees from across Sri Lanka came together in Colombo. A bank hymn was composed for this occasion, which should serve as motivation and appeal in the coming years. however, the bank marked moments of remembrance, celebration and greater commitment for its stakeholders. Highlights included a series of religious ceremonies representing the country's four main denominations, events to congratulate stakeholders, a nationwide community initiative that will benefit 100 schools, and a large-scale reforestation project. An illustrated book detailing the history of the bank, Seasons of Change: Commercial Bank of Ceylon PLC 1920-2020, was published towards the end of the year.
15. Performance evaluation Joint message from the President and his predecessor KGDD Dheerasinghe Dear friends, In 2020, the Bank has demonstrated remarkable performance in key areas of its operations amid extremely challenging conditions that have negatively impacted the business environment locally and globally. Needless to say, the negative impact of COVID-19 affected all of the bank's operations and severely hampered the bank's growth in recent years. The Board has devoted its time and energy to providing management with the necessary guidance and direction to ensure uninterrupted service to our customers while fully complying with guidance from regulators and other authorities. Measures have also been taken to guarantee maximum safety for personnel who have been constantly exposed to the elements in the performance of their duties. Despite these highly onerous and adverse conditions hampering operations, revenue growth and profitability, Commercial Bank Group successfully ended 2020 on a strong footing with significant deposit growth, improved liquidity and increased coverage of pensions compared to most of their peers. This will undoubtedly position the bank to benefit from any expected increase in credit demand in the coming years. However, the multidimensional impact of the pandemic on the performance of the Bank, its subsidiaries and associates may also be reflected in most business areas for the foreseeable future. However, the Bank has been strengthened to ensure its growth while supporting the needs and aspirations of our clients and is a responsible company that plays a role in the achievement of national economic goals. All matters affecting the Bank's policies and procedures are properly discussed at the Board and in the Board's subcommittees, and our discussions and decisions have been unanimous. The decision to register the highest impairment to date in the year under review was aimed at ensuring that the Bank has a cushion against the continuing effects of the COVID-19 pandemic in most of its business areas. We consider it our responsibility to take appropriate measures to mitigate the negative effects of the pandemic situation in the future, in particular, the increasing and above-average NPL portfolio. The high level of liquidity we maintain will also strengthen efforts to address any liquidity shortfalls resulting from deferred collections due to moratoria and other concessions granted to debtors. Annual Report 2020 Judge K Sripavan Commercial Bank of Ceylon PLC would like to express our sincere appreciation for the efforts of the authorities to contain the outbreak of the pandemic and we look forward to doing our part to boost the country's economic recovery next year. This includes, in particular, the commitment to support small and medium-sized enterprises and empower women entrepreneurs. Performance Review The Bank has played an important role in the recovery process from the COVID-19 pandemic, leading private sector banks in supporting affected sectors. In our effort to strengthen the bank's capital base, we were able to inject USD 50 million. Tier 1 capital through an interest from the International Finance Corporation 13
16. Commercial Bank of Ceylon PLC Annual Report 2020 Performance Summary Joint message from the Chairman and his predecessor group throughout the year. The bank's Tier 1 capital adequacy ratio is 13.217%, much higher than the revised minimum level of 9% imposed by the regulator as a result of the COVID-19 pandemic, while both Tier 1 and Tier 2 combined is 16.819% and the regulatory minimum capital requirement of 13% is therefore well above the revised value. The bank reported an after-tax profit of Rs 16,373 crore for the year, compared with Rs 17,025 crore in 2019, a marginal decrease of 3.83% when viewed in the context of the higher impairment provision of a year of Rs 21,484 crore. the highest single-year growth to date of Rs.212,658 crore to end the year at Rs. Rs. Taking into account shareholder expectations, the Bank's dividend policy and the potentially difficult times ahead, the Board of Directors has decided to maintain the dividend per share at the same level as in the recent past. Accordingly, a dividend per share of Rs 6.50 was recommended for shareholder approval at the AGM on 30 March 2021. The history of Commercial Bank dates back to 1920 when its predecessor Eastern Bank established a branch and began operating in Sri Lanka (then Ceylon). Established locally in 1969, Commercial Bank has grown over the decades to its current position as the country's largest private bank and the most recognized and awarded bank, even becoming the first Sri Lankan bank to be named among the 1000 best banks in the world classified world. As a national systemically important bank, Commercial Bank has been a driving force in partnering and collaborating with national economic development efforts. In the recovery process from the COVID-19 pandemic, the Bank has played an important role by leading private sector banks in issuing working capital loans and granting concessions to affected sectors. The Bank has implemented programs in 11 different categories for affected sectors and individuals under the "Arunella" financial assistance program, extending these assistance operations beyond the mandatory debt moratorium. These concessions included flexible payment options, up to a 20% discount on interest earned during the moratorium period, and extensions of mandatory moratorium periods for an additional six months. However, crises can sometimes present an opportunity for reinvention. It is clear that we are experiencing a digital revolution in which traditional business models and ecosystems are changing rapidly and newcomers to the financial landscape have increased competition and risk. The COVID-19 pandemic has accelerated customer demand for digital products and services, driving the rapid development of our own digital strategy. The initiatives and investments made in the last five years to develop its digital capabilities (its portfolio of customer-centric platforms, digital products and services, and back-end processes and infrastructure) have given the bank a solid foundation to face these new challenges. However, the Bank recognizes that there are more opportunities to seize, both within the Bank and in the sector as a whole. The bank has implemented a digital strategy that will move it closer to its goal of becoming a fully-fledged "digital bank" by 2025, meaning innovative and integrated thinking, guided by the board, will be the order of the day. The COVID-19 pandemic has revealed a new type of risk, what has recently been called behavioral risk, a form of reputational risk. While the bank's core business of financial intermediation requires compliance with government regulations, operating in a community of stakeholders requires that it also require a "social license." The latter must be earned by the public through sustained ethical and conscious behavior. And at a time when so many are struggling under the effects of the pandemic, anything short of doing business with integrity can result in the revocation of this Social License. To complement the Bank's strong efforts in this area, as we write this message, the Bank is developing a formal anti-bribery and anti-corruption policy, which will be submitted to the Board for approval in the first quarter of 2021, according to popular belief. Failure to comply not only with the letter but also with the spirit of the law is one of our most important intangible assets, which the Board is committed to protecting and caring for. Acknowledgments from Mr. Dharma Dheerasinghe As I conclude my six and a half year term as President of the Bank and my total nine years on the Board, I would like to express my sincere thanks and gratitude to several important individuals whose support has been invaluable. Over the past two years, as Sri Lanka faced unprecedented economic challenges, I have worked closely with the outgoing Vice President, Mr. M.P. Jayawardena, the current Managing Director/Executive Director, Mr. S. Renganathan, and the current Director of Operations. , Mr. S. Manatunge. His dedication and insight helped guide the bank through difficult times and positioned it for even greater success in the future. The Board has demonstrated an admirable spirit of unanimity, working creatively and productively to make decisions by consensus and providing strong, unified leadership at the helm of the Bank during these challenging times, and I thank you for your service. I would also like to acknowledge the past Vice Presidents, CEOs and COOs with whom I have enjoyed working during my tenure as President and Board Member, as well as past Board Members who have greatly contributed to the Bank's success and left their mark. in the bank. My experience at the bank has strengthened me that shared success always depends on shared success when dedicated, passionate and talented people work together. As I welcome the new President, Vice President and Board members, I am fully confident that the Bank is in good hands and I look forward to their continued rise. Vote of Acceptance by Judge K. Sripavan As I begin my tenure as President of the Bank, I would like to express my sincere gratitude to Mr. Dharma Dheerasinghe and Mr. M.P. Jayawardena, former president and vice president respectively. Under his visionary leadership, the bank has weathered difficult times and risen to new heights. They leave great marks and the current board looks forward to building on their important achievements. I am pleased that Mr. S. Renganathan, CEO/CEO, and Mr. S. Manatunge, CEO/COO, are leading the management team. Your tireless efforts and agile and resourceful management during an unprecedented year have been extraordinary. I also want to thank our shareholders, valued customers, tireless employees and other stakeholders for their continued support in what has been an extremely challenging 2020 environment. Given the context, the Bank's performance was commendable and I recognize that we have an important role to play in the country's recovery from the COVID-19 pandemic. At times like these, the Bank trusts the solidity of the relationships it has built with its stakeholders over the years and, based on this mutual trust, the Board of Directors and senior management look forward to next year with determination and confidence. K G D D Dheerasinghe Judge K Sripavan Former President President Colombo 24 Feb 2021
17. Director general/ Report of the Director General However, unlike the global financial crisis of 2007-2008, the shocks to the financial sector caused by the pandemic are exogenous. The hard-earned lessons of the past decade have shown that a tighter regulatory regime is needed and that the financial sector, both internationally and in Sri Lanka, was in a much better position in terms of capital and liquidity at the start of the current crisis. This time, the financial sector has a crucial role to play in the recovery process, both through its own efforts and as a conduit for government support to affected households and businesses. Moments of crisis show true character, true identity. The question that stayed on our minds and drove every decision was: when the pandemic finally subsides, how will you guide the bank's behavior in this most challenging situation of time? As a systemically important bank in Germany, we take our global responsibility very seriously, and this responsibility fully corresponds to the bank's raison d'être as a short, medium and long-term value creator. A myopic focus on immediate returns would jeopardize the bank's future profitability and sustainability. A long-term perspective, driven by trust in our relationships with our stakeholders and a commitment to our identity as a bank of integrity, was the need of the hour. the safety of all our employees; and equip our stores with dividers, sanitizer, and implement other social distancing and hygiene best practices to protect our customers. These actions allowed the bank to provide much-needed services to its customers, from opening most of our branches during the lockdown to using our fleet of “bank on wheels” mobile banking units to access cash and store our Always-on Import and Export department. available. Standby to do our part to facilitate the country's trade to quickly track digital products and services to enable customers to transact remotely. While we pride ourselves on our BCM readiness and processes, the full scope of logistics operations required by the pandemic could not have been anticipated or tested. In late March 2020, as the first wave of COVID-19 infections increased and lockdowns were imposed, the bank moved quickly and implemented a series of operational measures, including: dividing up teams and establishing protocols for working in and out from other places of origin of; Provide food, shelter, transportation, and personal protective equipment to ensure this. As the urgency of the first wave subsided, the focus of the financial sector shifted from providing access to banking to offering help and support for the recovery. Many of our clients needed urgent and desperate financial assistance and the bank knew it had to do everything possible to help them. The bank consolidated its efforts under the umbrella of "Arunella", a financial support program that included various initiatives including debt moratoria, flexible payment options and discounts of up to 20% on interest earned during the 2020 annual S Renganathan Commercial Bank of Ceylon PLC The Bank started 2020 in a spirit of euphoria with Sri Lanka's centenary celebrations, a time when the bank has become an integral part of the country's economic and social landscape. Renewed optimism about recovery from last year's difficulties began to take hold, but soon we were faced with a momentous event the likes of which we had never seen before. As we live through a year globally and locally with the COVID-19 pandemic, it is clear that we find ourselves in a changing world. Performance evaluation The question that constantly plagued us and that encouraged every decision made was: when the pandemic finally subsides, how will our stakeholders evaluate the behavior of the bank in this very difficult moment? fifteen
18. Director general/ CEO's Review Performance Review Annual Report 2020 Commercial Bank of Ceylon PLC Rather than focus solely on profitability targets, we as a team wanted to stand shoulder to shoulder with and support our distinguished clients during these unprecedented times. moratorium periods, discounts on credit card payments and prevailing interest rates, and debt consolidation plans. These initiatives were guided by CBSL guidelines, but went above and beyond to put as many customers in trouble as possible. Our goal was not to exclude, but to include, not to narrow the selection criteria to limit applications, but to find ways to bring people into the circle. As a team, rather than focus solely on profitability goals, we wanted to stand shoulder to shoulder with and support our respected clients during these unprecedented times. In addition, the Bank prioritized efforts to offer support to the SME and microenterprise sector, the engine of the national economy. This is reflected in the fact that, as of June 2020, the bank has submitted up to 24% of the applications for the Saubagya program and 32% of the overall program value has been awarded to bank clients. As of the end of the year, the bank was still the leading lender for COVID-19 relief among private sector banks. Beyond the CBSL programmes, the Bank initiated two major loan programs for SMEs affected by the pandemic: a Rs 10 crore program financed by a USD 50 million loan from the International Finance Corporation (IFC) and a working capital program for microenterprises. This year, the Bank also focused on SME acquisitions and will look to play an even greater role in supporting this sector in the years to come. The bank's growth and profitability for the year must be seen in this context. We see our efforts in customer service as an investment in relational capital, from which the bank will continue to benefit in the future. The group's annual profit was Rs 17,087 crore, down 1.91% from Rs 17,420 crore in 2019. The group profit is notable due to two important factors. First, the interest rebates, first-day losses and special interest charged to EMI entities as directed by the regulator, together with the bank's own voluntary rebates scheme, amounted to a loss of interest income of around Rs 3.0 crores. the highest ever one-year impairment provision of Rs 21,484 crore which included COVID-19 overlays of Rs. 5,189 million as a precaution, taking into account the potential for credit losses that existing impairment models may not be able to capture. Deposits grew by 20.36% over the year to Rs 1,286.616 crore as of December 31, 2020, recording the highest annual growth ever. However, the credit portfolio only experienced a nominal growth of 1.78%, which caused excess liquidity to be diverted to the Public Treasury for productive use. The total assets 16 reached Rs 1,762,496 crore as of December 2020 with a growth of 25.09% from Rs 1,408,941 crore a year ago. It is also worth emphasizing that our overseas operations and subsidiaries, particularly in Bangladesh and the Maldives, made significant contributions to bank and group results. A detailed analysis of our performance can be found in the Financial Report on page 20. Continuing the trend in 2019, it should also be noted that Treasury continued to contribute significantly to the Bank's results in 2020. Treasury represented 33.95 % of the Group's total assets as of December 31, 2020 and was financed both with excess liquidity channeled to it from the Corporate Banking and Retail Banking business units and with own debt. This performance was a key reason the bank was able to maintain its reported level of performance despite higher loan loss provisions, slower loan growth and lower net interest margins. Despite the challenges of the year, the bank received an unconditional vote of confidence: a private placement of shares with IFC worth USD 50 million (Rs. 9,216 crore). This investment is the Bank's first foreign equity investment and makes IFC, IFC Financial Institutions Growth Fund LP (FIG Fund) and IFC Emerging Asia Fund LP (EA Fund) the largest combined shareholder in the Bank (and increases the composition of the foreign shareholders). at 23.66%). Importantly, this is IFC's first post-pandemic share placement and one of the largest foreign investments in Sri Lanka since the pandemic began, a clear sign of positive sentiment for the bank's future. And indeed, there are promising signs for the future. The demand for digital products and services during the pandemic has acted as a catalyst and fueled our digital transformation. In the year under review, the bank integrated online and mobile banking channels into a single omnichannel platform with the launch of “ComBank Digital” and positioned the bank as a market leader in the digital sector. Highly functional and customizable, the app brings the bank closer to its digital vision of creating personalized and personal user experiences. In addition, we upgraded Flash, the bank's innovative trilingual digital wallet, with several features that are revolutionary in the local context, introduced a new WhatsApp banking tool positioned as a low-barrier-to-entry digital solution, and made great strides in our QR and other cashless offers. But the pandemic has also revealed limitations and opportunities for improvement in the digital space, both within the bank and across the industry. It is important to always be aware of this innovation.
19. Our Galle Fort branch also deserves a special mention, which was restored as part of the bank's centenary celebrations. The building was built in the 19th century and the restoration was aimed at preserving the unique architectural and cultural elements of the space and was carried out in consultation with the relevant authorities. In the restoration, only local and environmentally friendly construction materials and specifications have been used, and the branch has been designed to be highly energy efficient, using renewable energy sources. The branch received a platinum award. I would also like to thank IFC Country Director for Sri Lanka and Maldives, Ms. Amena Arif, for her spontaneous and unwavering support of our call for help as we face the challenges of the pandemic and for the historic capital injection events. through a private placement. I would like to give my last words of thanks to our employees, both in Sri Lanka and in Bangladesh, Italy, the Maldives, Myanmar and other places abroad. Our success in the year under review is a testament to your resilience, dedication and tirelessness. Our employees are not working in a vacuum: they, too, have been gripped by the sense of fear and insecurity sweeping the country and the world due to waves of COVID-19 infections, and their work and life rhythms have seen disrupted in unprecedented ways. Nonetheless, they continued to represent the bank with care and integrity. Despite the financial challenges, the bank paid all expected salary increases and bonuses, reaffirming its commitment to its employees in times of crisis. Also of note is the bank's successful negotiation of the collective agreement with the Ceylon Bank Employees Union (CBEU) bank branch and the launch of a new pension fund, all signs that the bank's relationship with its internal customers has never been stronger. S Renganathan CEO/CEO Colombo 24 February 2021 CEO/CEO Review But if the pandemic has taught us anything, it is that we are all interconnected - our stakeholders, our country, our planet - and our destinies are intertwined . Increasing the bank's profitability will always be our main concern, but success or value creation can no longer be defined in a narrow, short-term framework. The post-COVID-19 world will be different in many ways, some of which we cannot fully predict, and it presents both risks and opportunities. Regardless of the challenges ahead, however, the bank is confident that it has the experience, agility and resourcefulness to rise to the occasion, as has always been the case throughout its 101-year history. Performance Evaluation The Board has been a source of support throughout the audit year. The outgoing Chairman, Mr. Dharma Dheerasinghe, has provided strong leadership and leadership over the past 9 years, a period in which the Bank has weathered major storms and grown from smooth sailing. I thank him and the Vice President, Mr. Preethi Jayawardena, and Mr. S. Swarnajothi, Director, who also retired from the Board during the year, for their invaluable services to the Bank. I would like to welcome our new President, Judge K. Sripavan, and Vice-President, Professor Ananda Jayawardane, along with our new board members, Ms. Judy Lee and Mr. Raja Senanayake. His leadership will be much needed as the country recovers from the pandemic. Viewed honestly and clearly, the coming year will be challenging for both the bank and the country. Continued interest rate cuts, the introduction of special loan programs and increased investor confidence are expected to boost credit growth in all sectors of the economy in 2021. However, for the financial services, NPL's true position will only be in full force in 2021. A sustained low interest rate environment will result in anemic NIMs and business models will need to change to maintain profitability. Annual Report 2020 The promise of digitization also opens new avenues for our sustainability initiatives. During the year, the Bank published a Climate Change Statement, reaffirming its commitment to address climate change at the highest level within the Bank. The bank is also proud to announce that it has achieved its goal of becoming carbon neutral by the end of 2020. While the bank leaves a relatively small environmental footprint, as a major corporate and financial intermediary it can act as such an influencer. In addition to implementing a Social and Environmental Management System (SEMS) to assess and manage social and environmental risks and building a strong Green Financing portfolio, the bank also wants to provide its clients with the tools to help combat Afford climate change. In 2020, the bank's Flash app was updated with a new module that analyzes user data to estimate the carbon footprint of every transaction made through card payments, QR code scanning, the Flash app, and other sources, and the hidden environmental and social costs that reveal the user's consumption habits. The bank is the first company in the region and the fourth bank globally to launch a customer-centric tool integrated with the UN-recognized Environmental Sustainability Index (Aland Index) for financial transactions, and is the first step in our journey of raising collective consciousness. for climate change. the highest achievable rating from the Green Building Council of Sri Lanka (GBCSL) and is now a popular tourist attraction as an eco-heritage site. In a way, the branch stands as a symbol of the bank itself; an institution that combines a rich history and tradition with the ability to adapt to the demands of a new era. Ironically, Commercial Bank of Ceylon PLC and digitization is not so much about technology as it is about people. The goal of digitization is to create superior customer experiences and deliver digital services that are faster, more agile, more profitable, more personalized, and more secure. However, digital front-end solutions are not enough. More than ever, the pandemic has highlighted the need for end-to-end digital processes, where the entire chain of events that occur in a transaction or service is increasingly digitized and integrated. To this end, the bank has adopted a digital strategy for 2025, which includes the transformation of traditional banking processes into digital processes, integration with other ecosystems, modernization of internal systems to be prepared to take advantage of changes in the regulatory environment, as well as the development of Prioritize talent and the construction of alliances. 17
20. CSR Initiatives 2020 The Bank implemented a series of special projects, largely focused on education, health care and environmental protection throughout the year. Driven by a broader vision of creating a prosperous society and caring for the environment, these initiatives were channeled primarily through the Bank's Corporate Social Responsibility (CSR) Trust, established through a Trust Agreement in 2004. Support for education and Employability Commercial Bank of Ceylon PLC Annual Report 2020 Performance Summary Bank donates laptops to visually impaired students (CSR) 18 Bank launches project to donate smart STEM classes to 100 schools as part of anniversary project Bank donated 21 laptop computers to visually impaired university students in response to a request from the 'Centre for Vision' of the Department of Ophthalmology at Kandy Teaching Hospital, the facility that treats eye diseases and helps visually impaired students gain admission to universities in Sri Lanka. The latest submission brings to 62 the number of students in this category who received laptops from the bank. The bank previously donated laptops to two groups of visually impaired students attending universities across the country in 2014 and 2015. Bank-backed STEMup project helps establish software coding clubs in 50 schools Software coding clubs have been established software coding in 50 schools as part of a Bank-supported STEMup Education Foundation project. The project aims to create 100 such clubs to increase computer programming knowledge among schoolchildren and inspire students to pursue degrees and careers in Science, Technology, Engineering and Mathematics (STEM). Welioya school receives IT lab through Bank and Sri Lanka Army Initiative Commercial Bank of Ceylon has funded construction of IT lab at Paranagamawewa Vidyalaya, Welioya, in cooperation with Security Forces Headquarters , Wanni. The bank's contribution includes financial support for the purchase of construction materials to build a building for the laboratory, as well as donations of furniture, solar panels to power the school, and computers. The technical services and manpower required for this operation were provided by the Sri Lankan Army free of charge. Bank donates 200th IT lab to Janadhipathi Vidyalaya, Matara Smart classrooms focused on science, technology, engineering and mathematics (STEM) have been installed in 100 schools across Sri Lanka, supported by the bank to celebrate banking's 100th anniversary private benchmark in the country. This project leverages the synergy of several ongoing Bank-supported education-focused initiatives and aims to transform orthodox educational institutions into STEM hubs through the use of digital learning content created for the 'Sipnena' online education website. , also financed by the Bank. its value Name: the 100 Sipnena Smart STEM Schools initiative. The Bank's national community initiative to increase computer literacy in Sri Lanka reached a major milestone with the opening of the 200th Bank-donated IT lab, a milestone in the year the Bank celebrated its centenary. The recipient of the fully equipped and furnished IT lab was Janadhipathi Vidyalaya, Matara, who also received a STEM (Science, Technology, Engineering and Mathematics) classroom from the bank.
21. The bank participated in a tree planting project in the capital of the mountains as part of its centenary celebrations. Bank supports Panama sea turtle conservation program Ceylon Commercial Bank has committed to supporting a sea turtle conservation project in Panama, a town on the east coast of Sri Lanka, to allow for expansion of the project's outreach from the town from Kumana to the Panakala lagoon. The immediate goal of the program is to protect the nests and eggs of four endangered species of sea turtles from predators such as pigs, foxes, mongooses, spotted iguanas, and dogs. CSR Initiatives 2020 The Bank's CSR Trust donated a range of essential equipment to hospitals to support doctors and medical staff fighting to treat victims and stop the spread of COVID-19. The bank joins the Sri Lanka Army's “Thuru Mithuru” project to move Sri Lanka towards food self-sufficiency. The bank donated personal protective equipment (PPE) kits, N95 protective masks, surgical masks, surgical gowns, and hand sanitizer in bulk and in donor form to hospitals based on identified needs. The bank also made a cash donation to the COVID-19 fund set up by the government. The bank donated life-saving equipment and essential nutrition to the LRH Children's Heart Center. The bank provides water and sanitation facilities to the Sri Nagarukkarama Temple. The bank donated an Activated Clotting Time (ACT) machine and 20 syringe pumps to the Children's Heart Center at Lady Ridgeway Hospital in Colombo, which is used in three cardiac hospitals and two intensive care units. The bank provided water and sanitation to the 135-year-old Sri Nagarukkarama Temple in Kotikawatte, Angoda. At the request of the temple guardian, the bank built a 50-foot water tank storage tower with a capacity of 20,000 liters of water and space for four toilets. Performance Summary The Bank supports the fight against COVID-19 Other Annual Report 2020 The Bank plants trees in Kandy City Healthcare Commercial Bank of Ceylon PLC Promoting environmental protection 19
22. Financial Report 2020 This financial report contains details of the Bankfinancial performance during the year. It should be read in conjunction with the Operating Environment (pages 27-34), which explains the broader global, local and sector trends that contextualize the Bank's performance, and the Management Discussion and Analysis (pages 41-62), which looks at how the The bank has increased its financial and other capital relative to its strategic imperatives. Commercial Bank of Ceylon PLC Annual Report 2020 Performance Overview Overview Deposits of Rs 212,658 crore or 20.19% (2019: 7.15%) which reached Rs. 1,265,966 million at the end of the year. However, as seen across the industry, the net loan portfolio grew only marginally over the year to 1.38% (2019: 2.73%). The bank's after-tax profit fell by 3.83% (2019: -2.96%) to Rs 16,373 crore from Rs 17,025 crore reported in 2019. However, this can be considered a significant achievement given the magnitude of the challenges presented by the operating environment and the significant increase in provisions. Total operating profit growth of 13.52% was not enough to offset increases in provisions, resulting in a 5.13% decline in pre-tax operating profit (2019: -6.68%). Profit Growth Chart: Rs 01 BN % 32 32 24 24 16 16 8 8 0 0 -8 2016 PAT (Rs BN) 2017 Financial Services Tax (Rs BN) 2018 2019 Income Tax (Rs BN) 2020 -8 PAT YoY Growth (%) Along with the lackluster performance of equity markets for most of the year, the bank's share prices also fell. However, the bank's price-to-book ratio and market capitalization remained the highest among its peers in the banking sector. The bank's market capitalization ranked fifth among all companies listed on the Colombo Stock Exchange as of December 31, 2020. The first and last dividend was Rs 6.50 per share, which is the same dividend as the bank has paid for the past eight years. Given that the Bank represented 98.51% of the Group's total assets and 95.83% of its profits, the analysis below provides a detailed description of the Bank's financial performance, followed by a brief comment on the performance of the operations and subsidiaries of the Bank abroad and the associate. as described on pages 24-26. Profit and loss account Financial intermediation Gross income increased by just 0.68% (2019: 7.72%) to Rs 149,711 crore for the year from Rs 148,706 crore in 2019. Both interest income and fee income posted negative growth, more than offset by other cash flow, primarily due to exceptional Treasury performance. Average assets for the year increased by 16.08% (2019: 9.97%) to Rs 1,561,782 crore from Rs 1,345,415 crore in 2019. As a result, net interest income (gross income/assets average totals) decreased to 9.59% (2019: 11.05%), 146 basis points less. Net interest income for the banking sector for the year was 9.57% compared to 11.03% in 2019. Rs 149,711 crore, reduced to Rs 122,330 crore for the year from growth of 4 .26% (2019: 8.78%). This was mainly due to a 1.98% drop in the average rate of interest-bearing assets, partially offset by a growth in average interest-bearing assets of Rs 220,975 crore in accordance with IFRS 09 on Financial Instruments as a result of concessions granted to borrowers affected by COVID-19 (including concessions ordered by the regulator, as well as concessions and interest subsidies granted at the discretion of the Bank) to put pressure on the average interest rate. The combined effect of modification loss and interest repayments amounted to Rs 2,641 crore Gradual deterioration in asset quality leading to an increase in non-performing loans and excess liquidity due to slower growth of loans, which were diverted to underperforming assets. , had an impact also affect interest income. Interest expense, which accounted for 59.48% of interest income (63.05% in 2019), fell to Rs 72,759 crore over the year from Rs 80,571 crore in 2019 with negative growth of 9 .70% (2019: 11.10%). This was mainly due to the timely review of liability prices to reflect the declining interest rate regime and a significant 562 basis point improvement in the CASA index. Consequently, the decrease in the average interest rate of interest-bearing debt by 1.66% was partially offset by an increase in average interest-bearing debt of Rs 186,405 crore 49,571 crore from Rs 47,208 crore rupees in 2019, representing 66.15% of the total operating result (2019: 71.51%). Net interest margin decreased 34 basis points to 3.17% from 3.51% in 2019. Fee-based business Fee income registered negative growth of 9.17% (2019: 3.49%) to 11,269 crore from Rs 12,407 crore for the year due to fee waivers and relatively lower card spend during blackout periods. However, the impact was partially offset by an increase in the bank's market share in the trade finance and remittance businesses during the year. Fee and commission expenses, mainly related to credit and debit card related services, fell by 4.96% (2019: 15.19%) to Rs 2,012 crore from Rs 2,117 crore for the year. Consequently, net fee and commission income decreased by 10.04% (2019: 1.37%) to Rs 9,256 crore from Rs 10,290 crore, representing 12.35% of total operating income (2019 : 15.59%). Other income The bank recorded a significant increase in other income for the year of 89.11% (2019: -0.88%) to Rs 16,113 crore, from Rs 8,520 crore in 2019. This was offset by profit permissive rupee net. Rs 6,390 crore derecognised in financial asset accounts, up 462.66% (2019: 317.53%), net trading gains up 38.01% (2019: 144.86%) to 1,878 crore and Other Net Operating Income increased by 30.23% (2019: -46.96%) to Rs 7,844 crore from Rs 6,024 crore as a result of foreign exchange gains which increased by 30.34% to Rs 6,024 crores. Rs 7,361 crore due to a 2.81% depreciation of the Sri Lankan rupee against the US dollar in 2020. Rs 74,940 crore from Rs 66,018 crore in 2019. This was due to the increase in other income and net income from interest was partially offset by a decrease in income from fees and commissions.
23. 45 30 15 0 2016 NII 2017 2018 2019 Net rate and commission 2020 Other income Impairment expense Impairment expense and other losses for the year increased by Rs. Rs 10,422 crore or 94.22% (2019: 28.99%) to Rs 21,484 crore This is the highest impairment provision the Bank has ever made in a single year in its history. This includes an additional provision for expected credit losses as a management overlay of Rs 5,189 crore to account for potential losses that existing impairment models may not capture due to the high level of uncertainty and volatility caused by the COVID-19 pandemic. 19. The total impairment charge for the year includes Rs 17,865 crore for individual and collective impairment of receivables and Rs 3,287 crore for other financial assets and off-balance sheet exposures. The provision for other financial assets includes a provision of Rs 2,497 crore due to FCY ​​denominated securities issued by the Government of Sri Lanka as a result of the sovereign downgrade. Impairment charge chart: Rs 03 billion 20 15 10 Profit before and after tax Negative net operating income growth of 2.73% combined with a marginal increase in total operating expenses of 0.06% reduced income before tax on financial services by 5.13% (2019: -6.68%). However, the decrease in taxes on financial services due to the timely abolition of the debt payment levy (as of January 1, 2020) and the Nation Building Tax (as of December 1 2019) allowed the bank to record an increase in operating profit after taxes. in financial services (profit before tax) by 5.25% (2019: -12.71%) to Rs 23,511 crore compared to Rs 22,339 crore in 2019. The bank's cost-income ratio for 2020 , including taxes on financial services, also improved to 39.96% (2019: 49.41%). Income tax expense for the year increased by 34.32% (2019: -33.96%) to Rs 7,138 crore from Rs 5,314 crore in 2019. This is due to 2019 tax expense due to the impact of the interest income exemption from Sri Lanka Development Bond Investment (SLDB) applied retrospectively to April 1, 2018 for the entire banking industry was significantly lower in 2018. As a result, the after-tax profit of the year registered negative growth of 3.83% (2019: -2.96%). and stood at Rs 16,373 crore as compared to Rs 17,025 crore reported for 2019. Profit before and after tax 5 crore Rs 0 30 -5 Chart: 04 24 2016 2017 Individual allowance 2018 2019 2020 Collective allowance 18 12 6 Strong increase in allocations and slower growth in total operating income led to negative growth in net operating income of 2.73% (2019: -0.28%) to Rs 53,457 crore from Rs 54,956 crore rupees in 2019.be 14,330 crore or 0.06% (2019: 8.34%) to 25,440 crore for the year from 0 2016 2017 Pre-tax profit 2018 2019 2020 After-tax profit Profitability due to declining after-tax earnings and significant increases in assets and equity during reduced one-year return on assets (ROA) and return on equity (ROE). at 1.05% (2019: 1.27%) and 11.28% (2019: 13.54%), ROA and ROE Chart – 05% 20 16 12 8 4 0 2016 ROA 2017 2018 2019 2020 ROE Balance Assets Tue The bank's total assets have grown significantly by 25.15% (2019: 6.43%) over the year to reach Rs. 1,736 t from Rs 1,387 t at the end of last year. This growth is well above the industry growth of 17.12%. With net client assets registering only marginal growth of 1.38%, deposits mobilized during the year had to be invested in government securities, which accounted for most of the asset growth. Total Assets Composition Chart - 06 Rs.bln % 2000 1.9 1600 1.7 1200 1.5 800 1.3 400 1.1 0 Financial Report 2020 60 However, these ratios are good with industry averages of 0.99% (2019: 0.93%) and 11.34% (2019: 10.26%) comparable. Performance appraisal Rs 75 Rs 25,426 crore in 2019. This is because the increase in staff costs and depreciation is more than offset by a decrease in other operating expenses. As a result of the significant increase in total operating profit and efforts to limit the increase in operating expenses, the Bank's cost/income ratio excluding financial services taxes improved to 33.95% for 2020 (2019: 38.51% ). 2016 Loans and advances (Rs crore) 2017 2018 Other interest-bearing assets (Rs crore) 2019 Other assets (Rs crore) 2020 0.9 ROA (%) Loans and advances to clients Private sector and the significant increase in the growth of Provisions in net accounts receivable from customers was limited to 1.38% (2019: 2.73%) for the year. Consequently, as of December 31, 2020, net loans and advances amounted to Rs 896,845 crore compared to Rs 884,646 crore a year ago. Net loans and advances represented 51.66% (2019: 63.77%) of total assets as of December 31, 2020. The Bank's efforts during the year were mainly focused on granting concessions and complying with moratorium requests of borrowers affected by the Easter Sunday attacks and the COVID-19 pandemic, following the regulator's relief packages and the bank's own initiatives. Annual Report 2020 Chart - Rs.02 Billion Commercial Bank of Ceylon PLC Total Operating Income 21
24. 2020 Annual Report Performance Review 2020 Financial Report Asset Quality The quality of the loan and credit portfolio is a key factor in the Bank's sustainabilityoperations of . The deterioration in asset quality seen in the industry for much of the year meant that the bank also saw a further increase in non-performing loans. The bank's conservative risk profile, with moderate risk appetite and a strong risk management framework, helped the bank end the year with gross and net NPL ratios of 5.11% (2019: 4.95% ) and 2.18% (2019: 3.00%) until the end. , compared to industry averages of 4.93% and 2.44%, respectively. Accumulated loan loss provisions as a percentage of the total loan portfolio amounted to 5.38% at year-end (2019: 3.89%). Likewise, the total regulatory provisions on the gross loan portfolio at the end of the year were 3.32% (2019: 2.37%). The specific provision coverage ratio (based on regulatory requirements) increased to 57.42% in 2020 (2019: 39.39%) compared to 51.72% for the industry. This, together with the increase in the bank's capital, improved the open loan exposure ratio (representing the net exposure to non-performing loans as a percentage of regulatory capital) to 11.88% (2019: 17.37%) a end of 2020. The Bank's customer loan portfolio is fairly well diversified across a wide range of industry sectors, without significant exposure to any particular sector. Deposits and advances chart – 07 Rs 1500 billion Commercial Bank of Ceylon PLC 1200 900 600 300 0 2016 2017 2018 Financial assets at amortized cost – Loans and receivables from other customers 2019 2020 Financial liabilities at amortized cost – from depositors Deposits With strong operations in Sri Lanka, customer deposits continued to be the Bank's largest source of funding, representing 72.92% (2019: 75.92%) of total assets as of December 31, 2020. Deposits increased 20.19% (2019: 7.15%) to Rs 1,265,966 crore as of December 31, 2020. Deposit growth for the year was Rs 212,658 crore, which was the highest growth in a year. fiscal year in the history of the Bank. The CASA index also improved significantly to 42.72% (2019: 37.10%) as of December 31, 2020 compared to the industry average of 34.77%. 22 Other Liabilities The significant increase in deposit liabilities in contrast to the slow growth in accounts receivable meant that the bank had surplus liquidity for much of the year. As a result, external borrowing during the year was mainly limited to refinancing loans of around Rs 20 crore from the Central Bank of Sri Lanka under the Saubgaya - COVID-19 Renaissance Facility to support COVID-affected businesses. -19 19 affected and $50 million in loans. by the IFC to support small and medium-sized businesses, with a third aimed at helping women entrepreneurs deal with the negative impact of COVID-19. This, together with repo and short-term loans from banks, brought the total other liabilities to Rs 313,106 crore at the end of the current year from Rs 200,875 crore in 2019 Dividend policy approved by the Board of Directors for Maintain capital in line with your current and forecast turnover. Consequently, a capital injection of Rs. Rs 9,216 crore Through the historic private equity placement in IFC, which was a first for the bank, the bank's profitability and prudent dividend policy helped the bank increase its capital by 18.01% (2019: 12 1 Rs 33,162 crore as of Dec 31, 2019 to Rs 157,146 crore as of Dec 31, 2020. With balance sheet leverage ratio of 11.05 times compared to industry average of 11.69 - As of the end of the current year, 9.05% (2019: 9.60%) of assets were funded by equity The bank has reinvested Rs 12.4 trillion from 2019 profit after paying cash dividends and it is expected to recover Rs 11,122 million after paying the cash dividend in 2020. Earnings paid include stock dividends, however, the bank's risk-weighted assets increased by only 4.77% (2019: 2.96% ) to Rs. 2019: 12,298%) (minimum requirement: 9,000% for 2020 and 10,000% for 2019) and 16.819% (2019: 16.146%) (minimum requirement 13,000% for 2020 and 14,000% for 2019 respectively) as of December 31, 2020, which above the highest Capital requirements are those of the bank in accordance with the requirements of Basel III as a bank of national systemic importance (D-BROTHER). The multiple of equity of risk-weighted assets as a percentage of total regulatory capital decreased slightly to 5.95 times from 6.19 in the prior year. Under CBSL Basel III regulations, the bank is D-SIB, the highest rating currently assigned to a bank along with any other government bank, reflecting the bank's importance to the Sri Lankan economy. Shareholder Fund Chart: 08 Rs. 175 140 105 70 35 0 2016 Share capital 2017 Legal reserves 2018 2019 Retained earnings 2020 Other reserves Liquidity Excess liquidity resulting from significant deposit growth coupled with limited lending opportunities posed significant challenges for optimal liquidity management and, in Ultimately, it caused the bank to invest excess liquidity in government bonds. However, in a period of unprecedented uncertainty such as the one we are experiencing, excess liquidity offers the bank great peace of mind and also allows it to benefit from the expected upturn in demand for credit in the coming years. Due to its importance, the liquidity review is a permanent item on the agenda of the fortnightly meetings of the Bank's ALCO. The liquidity ratios of the National Banking Unit (DBU) and the Offshore Banking Center (OBC) at the end of 2020 were 44.99% (2019: 30.42%) and 32.70% (2019: 25.25%). respectively compared to the legal minimum requirement of 20%. The ratio of gross loans to deposits was 74.87% (2019: 87.39%). The stable funding available based on the definitions prescribed by CBSL was Rs. ) and is therefore well above the legal minimum of 90% (2019: 100%). The Liquidity Coverage Ratio (all currencies), which reflects the availability of high-quality liquid assets free of encumbrances at the Bank's disposal, stands at 258.06% as of December 31, 2020 (2019: 224.74 %) compared to the legal minimum of 90% (2019: 100%). Segment evolution The contributions of the Corporate Banking and Personal Banking divisions to the Group's pre-tax profit decreased significantly to 11.95% (2019: 25.78%) and 25.11% (2019: 37, 18%), respectively, mainly due to higher Impairments and other losses and a reduction in total operating income. However, the bank's treasury function made a significant contribution to the group's pre-tax profit of 40.78% (2019: 14.77%) through capital gains on the sale of government bonds, trading activities and exchange gains. For its part, the bank's International Operations managed to maintain its contribution at the 20% level.
25. mainly due to a higher contribution from operations in Bangladesh and Maldives. The contribution from International Operations represented 11.79% (2019: 12.06%) of the Group's total assets and 20.46% (2019: 20.84%) of its pre-tax profit. (All industry related figures above are extracted/calculated based on information published by the CBSL as of December 31, 2020) Core Financial Health Indicators (FSI) The financial health indicators that are provided below provide more information on the bank's financial health and stability. Table – 02 2019 2018 2017 2016 13.22 12.30 11.34 12.11 N/A core capital ratio (according to Basel III) 13.22 12.30 11.34 12.11 10.37 Variable interest and provisions special] to equity 12.96 20.48 12.71 5.6 PL.3 Asset quality 4.95 3.24 1.88 2.18 NET NPL Ratio 2.18 3.00 1.71 0.92 1.09 Total regulatory provision ratio on gross loans and receivables (based on requirements Regulatory) 3.32 2.37 1.97 1.40 1.53 57.42 39.39 47.21 51.05 50, 11 5.38 3.89 3.27 2.29 2.29 2.74 Metro ratio for the fact that the ratio (based on regulatory provisions) anchorage ratio for provisions (based on IFRS provisions) 0.25 0.25 0.24 11.88 11.88 11.88 11.88 11.88 11.88 11.88 11.88 11.88 17.37 10, 21 5.59 6.55 Interest margin at total operation utility 66.15 71.51 70.56 80.00 74.43 Net income of commissions at total operation utility 12.35 15.59 15.95 17 0.914 Other utility to total operational utility 21, 50 12.91 13.50 2.37 9.66 9.59 11.05 11.28 10.61 9.85 Financial intermediation m arge (gross income to average assets) interest margin (net interest income to average assets) 3.17 3.51 3.67 3.62 3.47 operating expenses to gross income 9.1 17.10 17.00 17.33 20.20 impairment losses to comprehensive income 28.67 16.76 13.46 1.39 3.47 1.51 1.62 15 2.09 Total Assets (ROA) - before income taxes Return on Total Assets (ROA) - after income taxes 1.05 1.27 1.43 1.54 ) 11.28 13.54 15.56 17.88 19.52 Ratio Cost-to-income (including taxes on financial services) 39.96 49.41 46.35 51.08 51.06 Ratio of cost to income (excluding taxes on financial services) 33.95 38.51 36.85 41.08 42.67 30.42 24.47 27.28 27.19 Liquidity: Ratio of Statutory Liquid Assets (National Banking Unit) Statutory Liquidity Ratio (Offshore Banking Unit) 44.99 32.70 25.25 30.20 CR Coverage Ratio (CR Liquidity Ratio 30.10 30.95 ) – Rupee 330.84 158.79 236 .20 272 .15 196.34 Liquidity Coverage Ratio (LCR) - All currencies 258 .06 224.74 238.69 209.17 150.45 Net Stabilization Funding Ratio (NSFR) 157.49 137.05 139.18 127.87 N/A CASA Ratio (current and redemption deposits 41.2. Gross loans and receipts to the deposit ratio 74.87 87.39 90.56 88.78 85.64 Assets and financing structure: deposits to gross loans and recipients 133.56 114.43 110.43 112.64 116.76 72.92 75.92 75.42 74.35 74.35 73.06 4.06 .0 7.74 Deposits as a Percentage of Total Assets Financial Summary Common Equity Tier 1 Ratio 2020 (under Basel III) Performance Summary Capital Adequacy (under Basel II and Basel III) Annual Report 2020 Financial Strength Indicator (%) Commercial Bank of Ceylon PLC Financial strength indicators * Calculated according to Basel-II guidelines. 23
26. Subsidiary performance, Associates and Overseas Operations Bank's Performance in Bangladesh The performance of the Bank's operations in Bangladesh should be reviewed in the context of the operating environment described on page 34 of this report. Commercial Bank of Ceylon PLC Annual Report 2020 Performance Overview Financial Report 2020 Commercial Bank of Ceylon PLC (CBC) began operations in Bangladesh (CBC Bangladesh) by acquiring the banking operations of Crédit Agricole Indosuez, a French multinational bank in November 2003 In den Over the past 17 years of operation, CBC Bangladesh has established itself well above other regional banks in the country with 11 branches, 6 SME centers and 2 offshore banking units. Currently, CBC Bangladesh has a presence in five major districts of the country, namely Dhaka, Chittagong, Sylhet, Narayanganj and Gazipur. Despite the fierce competition between international banks and large local banks, CBC Bangladesh has seen steady business growth, particularly by catering to large multinational and local corporations by offering better services and commitments. With the expansion of the branch network, CBC Bangladesh has managed to attract more retail and SME customers to the bank, which has enabled it to improve its low-cost deposit base, which translates into lower funding costs and higher cost effectiveness. Twenty ATMs were installed in Bangladesh (including three in remote locations). In addition, an Automated Banking Center (ABC) including a real-time cash deposit machine, check deposit machine, KIOSK machine and digital signage at its Motijheel branch. In 2020, the Bank's operations in Bangladesh were named Best Foreign Bank in Bangladesh 2019 by The Global Economics Ltd., a UK-based financial publication. Comparison of the performance of regional banks operating in the country shows that the performance of our operations in Bangladesh is ahead of its peers in many respects, including deposits, advances, asset quality and profitability, which reflects our excellence in service and dedication. Credit Rating Information and Services Ltd (CRISL) has rated CBC Bangladesh's operations AAA for the 10th consecutive year based on 2019 financial performance. The progress of the Bank's operations in Bangladesh in core banking areas over the past five years is summarized below. . 24 Key Performance Indicators - Bangladesh Operations Table - 03 2020 BDT Mn. 2019 BDT Mn. 2018 BDT Mn. 2017 BDT Mn. 2016 BDT Mn. 5-year CAGR % Total Deposits 50,997.50 45,362.98 35,221.65 28,808.18 23,124.88 18.38 Gross Advances 55,039.33 47,449.60 38,448.10 32,113.53 24,456.51 19.46 Profit Before Tax 2,898.24 2,744.68 2,440.56 1,758.56 1,381.93 12.72 Profit After Tax 1,709.47 1,697.40 1,407.23 988.40 785.13 13.58 Indicator Key Financial Ratios – Bangladesh Operations Table – 04 2020 2019 2018 2016 Cost / revenue ratio (%) 24.74 25.27 28.62 32.76 Net interest margin (%) 4.01 4.53 4.46 5.11 NPL Ratio (%) 1.04 0.70 0.96 1.22 2.03 ROA indicator (%) 3.46 3.81 13.83 13.83 (%) 13.83 11.18 9.9.90 9.90 All information in Tables 03 and 04 above is based on Administrative Accounts of Bangladesh Holdings. non-core staff and provision of other benefits to the bank. CDC posted an after-tax profit of Rs 122,582 crore for 2020, down 66.25% from the Rs 363,217 crore reported in 2019. The decrease in profit was mainly due to the loss of fair value recorded in the revaluation of investment properties in 2020. CBC Bangladesh has planned treasury automation, central bank reporting automation, card personalization, implementation of call center solution, Fiserv Digital Access, E-Leave and E -Attendance in 2021 Bank. Local subsidiaries Commercial Development Company PLC (CDC) Established in 1980 as the Bank's first subsidiary, CDC owns Commercial Bank's main administrative building, Commercial House, and owns two other properties in Negombo and Tangalle. The bank has a 90% stake in CDC. CDC is the only listed subsidiary of the group with a market capitalization of Rs 1,404 crore at the end of 2020. CDC's main business activities include premises leasing, vehicle leasing and outsourcing. CBC Tech Solutions Limited is a wholly owned subsidiary of the Bank and provides IT services and solutions to the Bank, its subsidiaries and a few selected companies. The main business areas of CBC Tech Solutions are the provision of IT support, hardware supply, licensed software, hardware maintenance, point of sale (POS) maintenance, software development and outsourcing of professional and qualified personnel for the bank. The company currently operates from four regional support centers located in Colombo, Galle, Kandy and Jaffna to ensure fast service. The company mainly focuses on modern technologies such as mobile apps, data analytics, dynamic websites, IOT, and cloud computing to further strengthen its business in the future. CBC Tech Solutions posted an after-tax profit of Rs 94,648 crore for 2020 with a growth of 18.76% from Rs 79,699 crore reported in 2019. CBC Finance Limited (CBCF) (formerly Serendib Finance Ltd.) CBC Finance Limited is a wholly owned subsidiary of the Bank and a Licensed Finance Company (LFC) under Finance
27. In association with Tree Top Investments(TTI), CBM was incorporated in the Republic of Maldives as the bank's second overseas subsidiary. TTI brings significant knowledge of the local market to the company and has a 45% stake, while the bank has a 55% stake in the company. Established at the end of 2016, CBM opened its main office and its first branch in the capital Malé. At the end of 2020, CBM had two branches. Another notable achievement for the company during the year was its AA-(lka) rating from Fitch Ratings Lanka Limited. This rating will allow CBCF to be one of the best rated financial companies in the country due to the strength of the parent company. 2020 was one of the most challenging years in recent memory for the company due to business disruptions related to COVID-19 and the negative impact on its customer base. As a responsible company, the company has recognized the importance of supporting its clients who have been affected by the pandemic and has complied with a significant number of principal and interest moratorium requests. As a result, the company recorded an after-tax profit of Rs 58,477 crore compared to Rs 79,129 crore. registered last year. However, the company managed to lessen the impact on the bottom line by significantly increasing its turnover. Since it started accepting government deposits at the end of 2019, the company has managed to increase its deposit book to Rs 3,357 crore as of December 31, 2020, thus shifting the company's main source of funding from bank loans to customer deposits. and allowing the company to reduce its financing costs over the course of the year under review to be phased down. Continuing the company's growth strategy, the focus this year has been on becoming a bigger player despite unprecedented challenges in the business and macroeconomic environment. Total assets increased by Rs 1,051 crore, a remarkable growth of 14.14% over 2019. Company net lending increased by 15.27%, although growth in our core product, leasing, was constrained due to regulatory limitations on the loan-value ratio. However, the timely switch to other products, such as mortgages and commercial loans, paved the way to overcome potential adverse effects. In addition, the company's gross delinquency ratio improved significantly from 22.56% in 2019 to 16.52% as of December 31, 2020. Commercial Bank launches CBC Finance as a successor to Serendib Finance. commercial insurance brokers (pvt) ltd. (CIBL) The Bank acquired in 2020 the 20% interest in CIBL held by the Bank's subsidiary, CDC, which together with the 40% interest already held by the Bank increased the Bank's total interest in CIBL by 60% . CIBL's core business is insurance brokerage for all types of insurance through accredited life and general insurance companies in Sri Lanka. CIBL posted an after-tax profit of Rs 32,078 crore for the year ended December 31, 2020, a negative growth of 47.33% from Rs 60,903 crore. in 2019. CIBL's total assets were Rs 711,027 crore. As of December 31, 2020. Local partner Equity Investments Lanka Ltd. (EQUILL) The Bank holds a 22.92% interest in EQUILL, a 30-year-old venture capital firm. EQUILL invests in equities and equity-related debt securities. The company posted an after-tax profit of Rs 17,006 crore in 2020 against a loss of Rs 1,480 crore as reported in the previous financial year. CBM offers a wide range of financial services and aspires to be the most technologically advanced, innovative, customer friendly and desirable financial services organization in the Republic of Maldives. As a tourism-based economy, the Maldives has been hit hard by the COVID-19 pandemic. The Maldives government has instituted a nationwide lockdown for two months from April 2020. The Maldives Monetary Authority (MMA) has announced several measures to ease pressure on its financial system, including improving system liquidity, imposition of a six-month moratorium on loan repayments for certain segments of borrowers, freezing the asset classification of overdue accounts that have been granted moratoriums, and easing the liquidity coverage requirement. The impact of the COVID-19 pandemic on the Bank's performance, including credit quality and provisions, remains uncertain and depends on the spread of COVID-19 and the eventual economic recovery once the pandemic subsides. The Bank's capital and liquidity position remains strong and will continue to be a focus area for the Bank during this period. Financial Report 2020 Commercial Bank of Maldives Private Limited (CBM) Performance Review The change of corporate name and logo from Serendib Finance Limited to CBC Finance Limited was one of the strategically important milestones during the year and will allow the company to gain more visibility as a wholly owned subsidiary of the bank. Annual Report 2020 In 2020, Commex posted a loss of Rs 104,460 crore and is taking steps to improve its performance once normalcy returns after COVID-19 related disruptions subside. Commercial Bank of Ceylon PLC Business Act No. 42 of 2011. Since the bank's acquisition of the company in 2014, the company's business plans and strategies have been aligned with the company's strategies, corporate governance and policies and practices. Bank risk management. Foreign subsidiaries Commex Sri Lanka S.R.L. (Commex) Commex, a wholly owned subsidiary of the Bank, began operating under the Authorized Payments Institute (API) license issued by the Bank of Italy in 2016. As a result, Commercial Bank became the first bank in Sri Lanka authorized by the Bank of Italy to act as a money transfer company. The license allows Commex to expand throughout the European Union using passport rights. Commercial Bank Maldives recognized for its financial excellence at the Maldives Business Awards. 25
28. Commercial Bank of Ceylon PLC Annual Report 2020 Performance Overview Financial Report 2020 Throughout 2020CBM saw its deposits and loans grow by 9.19% and 12.97%, respectively. CBM's total assets registered a growth of 8.42% in 2020 and stood at MVR1,790 million as of December 31, 2020. In 2020, CBM recorded a profit after tax of MVR22,723 million compared to a profit after taxes of MVR28,368 million. reported in 2019. Given the extremely challenging operating environment, the performance can be considered remarkable compared to other comparable banks in the country. Bank Italy CBC Myanmar's international business now operates with a total of four branches, including a recently opened branch. The microfinance industry has been hit hard due to the COVID-19 pandemic and the month-long suspension of recovery activities by regulators. The company has been able to cope resiliently with the impact of the pandemic thanks to the tireless efforts of our recovering people and through the provision of special COVID-19 recovery agreements. The company opened the Pyinmana branch in July 2020 and was able to break even in November 2020. The loan book grew $784,920 in 2020, a year-on-year growth of 49.91%. CBC Myanmar has grown its customer base to over 19,000 as of December 2020, up from 10,000 customers a year ago. CBC Myanmar was established in July 2018 with the opening of its headquarters and branch in Lewe Township, Naypyitaw as a wholly owned subsidiary of the bank with a focus on capitalizing on opportunities in the microfinance sector. First, a temporary microfinance license was obtained from Myanmar's Financial Regulation Department (FRD). The company was then able to obtain a permanent microfinance license from the Myanmar government on the recommendation of the Financial Regulation Department (FRD). Figure - 03 Maldives Myanmar Bangladesh Commex Sri Lanka S.R.L. - Italy Commercial Bank of Maldives Private Limited (CBM) Commercial Bank's Bangladesh Operation CBC Myanmar Microfinance Company Limited Established in 2016 - Business started under the Authorized Payments Institute (API) license issued by the bank. of Italy in Rome Established in 2015 Established in 2003 – Banking business of Crédit Agricole Indosuez was acquired Established in 2015 – Microfinance License and Representative Office 2017 – Myanmar Microfinance Company Limited 2018 – Start of operations Part of bank Whole subsidiary Type of business Operations Serves the money transfer needs of Sri Lankan expatriates in Italy Twelve agents cover all major cities in Italy Legend This license allows the bank to expand further across Europe and plans to do so are currently being developed. One of the first Sri Lankan banks to launch money transfer services in Italy Contributed to group assets of Rs 588,994 crore and a loss of Rs 75,019 crore in 2020. 26 CBC Myanmar Microfinance Company (CBC Myanmar) 55% Stake in Bank Tree Top Investments is the bank's Maldivian partner, established in 2013 and owns the remaining 45% stake in CBM. Provides the bank with important knowledge of the local market. type of commercial activity. Full Tier 1 bank licensed by the Maldives Monetary Authority offering a full range of financial services using advanced technology and the regional expertise of our Treasury department. Legend Two branches: in Malé and Hulhumale Contribution to Group assets of Rs 21,713 crore Pre-tax profit of Rs 382,717 crore in 2020 Bank share Operation of branch Nature of business Full business banking license [approved at AAA] in May 2019 by Credit Rating Information and Services Limited Legend The bank's first overseas entity First among regional banks and third among 9 foreign banks in Bangladesh in terms of profitability Includes 11 branches, 6 service centers SMEs, 2 offshore banking units and 20 ATMs (including 3 external) Contribution to the group Accounted for 11.73% of our assets and 20.46% of our profit before tax in 2020 100% subsidiary bank participation Nature of business Offer microfinance services. The Company also provides savings business development services. Legend Started business operations in 2018 Contributed to group assets of Rs 524,172 crore and pre-tax profit of Rs 17,181 crore in 2020
29. Operating environment Connection with stakeholders When an individual or group may be significantly affected by our actions, products and services, we consider this party as an interested party. At the same time, we are very aware that the perceptions and behavior of our stakeholders can strongly influence our ability to continue our activities and achieve our strategic objectives. z Investors z Customers z Employees z Society and environment z Business partners z Government and regulatory institutions The above grouping helps the bank to effectively manage interactions with stakeholders in terms of priority and relevance. We strongly believe that by collaborating with our stakeholders, we can better adapt to today's challenges and maintain and improve our business model, drive innovation, and generate invaluable insights for our strategic planning process. While there are formal mechanisms for engaging with our stakeholder groups, the responsibility for such engagement is shared across the Bank and at each stakeholder touchpoint. Changes brought about by the pandemic have also affected the type, level and frequency with which we engage with our stakeholders. As large gatherings were restricted throughout the year, we turned to digital media to engage with our stakeholders. Understanding their aspirations and keeping communication channels open, particularly in the context of the pandemic, was critical to developing mutually beneficial solutions throughout the year. Consequently, our stakeholders are: Figure – 04 Feedback Annual Report 2020 Feedback on negative/positive performance Monitor Measure effectiveness, monitor errors/deficiencies Report Identify Report to stakeholders Identify and prioritize Identify problems Identify stakeholder group Identify stakeholder group Stakeholder engagement process Implementation planning Communicate policies, procedures, and implementation schedules Implementation Establish goals, scope, and timelines Identify specific stakeholders Prioritize stakeholders Determine type of engagement Allocate necessary resources Identify methods/ design ways to address the problem Formulate necessary policies and procedures Test before implementation, prioritize results to obtain more information if necessary Prioritize actions Commit Commit Commit ignored Commercial Bank of Ceylon PLC In a rapidly changing environment, maintaining an ongoing dialogue helps gs with all our stakeholders in shaping our strategy. Emerging trends, some of which are unprecedented in scale and impact, are impacting our ability to deliver and, in turn, create value from our stakeholders on a sustainable basis. Re-engage Repeat engagement if necessary Evaluation Assess results Assess effectiveness of process Determine need for further involvement 27
30. How we engage with our stakeholders Investors Customers Employees Stakeholder ambitions Stakeholder ambitions Stakeholder ambitions Financial performance Governance Transparency and disclosure Business expansion plans Risk management Sustainable growth Resilience to the impact of the pandemic Increased NPA and Impairment Charges Dividend Payment Type and Frequency Prompt Service Customer Security and Privacy Quality of Service Affordability of Services and Convenience Complaints Handling Mechanism Financial Education Financial Support for Business Revitalization Access to Financial Services Registration in digital platforms Operationalization of CBSL policies Performance and compensation management Training and development Opportunities for advancement Balance between work and personal life Retirement plans Diversity and Inclusion Stable Job Security Bank mode Performance and frequency commitment mechanism Frequency ManagerConference Annual Frequency Community meeting Annual Customer visits as needed Regional meetings Quarterly Quarterly Complaints received as needed Branch marketing meeting Monthly Investor presentations As needed As needed Training programs As needed Press conferences and press releases As Needed Grievance Officer, Account Manager Intranet Ongoing CSE Announcements As Needed ComBank Biz Club Ongoing Special Employee Events Annual As Needed Branch Network and Call Center Ongoing Union Talks As Needed Company Website Ongoing Media Announcements As Required Employee Satisfaction Survey As Required Feedback Surveys As Required Company Website Ongoing Customer Workshops As Required Modality and Frequency Frequency Annual Reports and General Assemblies Annually Engagement Mechanism Extraordinary General Assemblies As Needed Interim Financial Statements Individual Assemblies p Stakeholder Complaints Stakeholder Complaints Stakeholder Aspirations Commercial Bank of Ceylon PLC Operating Environment Participation Mechanism Annual Report 2020 Liaison with stakeholders Figure – 05 28 Society and environment Responsible finance Community participation Financial inclusion, contracting Microfinance and SMEs Ethics and business conduct Environmental performance Employment opportunities Business partners Contractual compliance Business continuity Opportunities Maintain healthy relationships Timely payment of contributions Collaborate for new advances technological advances in the financial sector Opportunities in the new normality Nature and frequency Nature and frequency Government and regulatory institutions Compliance with guidelines and codes Microfinance and SME development Stability of the financial system Transition to cashless payments Platforms Support for recovery and economic growth Type and frequency of participation-M Mechanism Frequency Annual As necessary Supplier relationship management Policies and circulars As necessary As necessary Meetings and consultations As needed Press releases As needed Regular feedback As needed As needed Presentations to policymakers As needed Ongoing responses to policy and other regulatory consultation documents As needed Engagement mechanism Frequency Engagement mechanism Frequency Delivery channels Ongoing Press releases, conferences and media briefings As needed Supplier relationship management On-site visits and meetings Briefings and communication Informal meetings As needed Public events Company website
31. Material issues Political Investors Economic Social Technical 4 Heterodox competition and financial disintermediation 2 Economic slowdown due to the pandemic 3 Growing influence of social networks 6 Lack of the desired level of transparency and accountability 7 Currency depreciation against the US dollar 8 Demand for non-financial information and -thermism 9 Compliance with the new Basel requirements 10 Downgrade of the sovereign rating and its cascading effect on the banking industry 11 Call for greater transparency and accountability 12 Increased regulatory capital 15 Private sector credit recovery and improvement of the quality of assets 21 Need to improve productivity 24 Health and safety 5 Guidance and orientation regarding the effects of the pandemic 14 New Banking Law 16 Change in customer expectations 19 Import restrictions Employees Law/Regulatory 1 Lack of desired level of policy consistency 13 High CAPEX requirements Customers Environmental 17 Migration to digital platforms was driven by the pandemic and emerging trends relevant to key stakeholders as follows: Commercial Bank of Ceylon PLC Figure – 06 Operating Environment Global COVID The 919 pandemic has changed many aspects of the business environment, forcing companies to transform to remain profitable and relevant. Sustained success in turbulent times requires fresh analysis, rapid adjustment of strategies and business models, and creativity in overcoming challenges and taking advantage of new opportunities presented by the changing environment. 18 compliance requirements and regulations such as FATCA1, GDPR2 and BEPS3. 20 Cybersecurity threats 22 Recruitment and retention are becoming more difficult 23 Technology is driving change in professional skills 25 New work cultures 29
32. Society and environment Political Economic Social 26 Geopolitical conflicts 27 Decrease in workers' remittances 28 Need for commitment to the Sustainable Development Goals(SDGs) 29 Increased frequency and scale of natural disasters and poor disaster preparedness 30 Corruption 31 Decline in Sri Lanka's global competitiveness 32 Increase in conflict 33 Increase in demand for green banking and green loans 34 Increase of drug trips and drug and alcohol addiction 35 Pandemics hamper global trade and economy business partners environment Law/Regulation 1-FATCA: Foreign Account Tax Compliance Act, 2-GDPR: General Regulation for Protection of Data, 3-BEPS: Base Erosion and Profit Shifting These trends pose risks, opportunities, or both, and their impact is felt by stakeholders and the bank alike to varying degrees. The risks posed by the pandemic outweighed the risks posed by other emerging trends, and its impact has been felt to varying degrees by all of our stakeholders. The issues arising from these trends that are material to the bank based on their impact on stakeholders and the bank itself are presented in the matrices below. The Bank defines material issues as those that materially affect the Bank's ability to create value in the short, medium, and long term. The materiality of each topic is determined by its relevance, the scope of its impact and the probability of occurrence. The pandemic is primarily responsible for repositioning problems by moving them up or down on the axes of the materiality matrix. Moderate High Low Importance of the bank 30 Moderate 33, 37 Importance of stakeholders 3, 4, 7, 11, 23, 36 14, 18, 26 21, 23, 34 1, 2, 5, 6, 12, 15, 16 , 19, 20 , 24, 35 7, 8, 9, 22, 25, 27, 29, 30, 31, 32 4, 10, 17, 37 Moderate High Low High 15, 16 Moderate Importance for stakeholders 6, 21, 28 High Risks to mitigate Opportunities to take advantage of Low Commercial Bank of Ceylon PLC Annual Report 2020 Material issues 37 New technological advances such as AI, robotics, blockchain Operating environment 36 A more collaborative approach Technological Low relevance to the bank
33. There are many policies that guide employees to conduct activities responsibly., transparent and ethical in the treatment of material issues. These policies are duly adopted by the Board and are reviewed at specified intervals to keep up with the changing environment. The timely review of these policies is monitored by the Comprehensive Risk Management Unit and reported to the BIRMC. When there are relevant complaint mechanisms, assigned to the corresponding department heads, to manage, address and resolve complaints. The bank's loans to its customers and its dealings with its business partners are checked with respect to social and ecological aspects. Internal and external audits and reviews are carried out to ensure compliance with internal controls, policies and procedures established to achieve the objectives of material issues. Findings are regularly reported to the Board of Directors and/or the relevant Management Committees for feedback and corrective action as necessary. Material issue 1 Lack of the desired level of policy coherence 2 Economic slowdown due to a pandemic 4 Unorthodox competition and financial disintermediation 5 Directions and policies to counter the impact of the pandemic 6 Lack of the desired level of transparency and accountability GRI Content GRI 201 : Economic performance GRI 203: Indirect economic impacts GRI 207: Taxation 10 Sovereign rating downgrade and its cascading impact on the banking industry Pages 20 to 26, 42 to 47 49 to 52 187 to 188 15 Projected recovery in private sector credit and improvement of asset quality 16 Changing customer expectations 48 to 52 17 Migration to digital platforms 53 to 56 19 Import restrictions GRI 201: Economic performance 20 Cybersecurity threats GRI 418: Customer privacy 56 21 Need for improvement productivity GRI 404: Education and training 61 GRI 405: Diversity and equality opportunities 60 GRI 404: Training and education 61 GRI 405: Diversity and equal opportunities 60 23 Technology as a driver of change in professional skills 24 Health and safety GRI 403: Health and safety at work 28 need to commit to the Sustainable Development Goals (SDG) 29 Increase of the frequency and scale of natural disasters and poor preparedness for disasters 20 to 26 57 to 59 62 GRI 302: Energy 62 GRI 305: Emissions 61 33 Increased demand for green banking and green loans 61 35 Pandemics hamper the global trade and economy 32 37 New technological advances such as AI, robotics, blockchain 53 to 56 Material topics 12 Increased regulatory capital Operating environment The bank manages its material topics through its strategic planning process, assigning responsibilities to heads of departments of the bank and allocating the required resources based on the importance of each public issue to achieve the imperatives aforementioned strategies. The objectives and targets are integrated into the KPIs of key management personnel, where relevant, to ensure that the organization is achieving its objectives related to its material issues and are regularly reviewed. Table – 05 Annual Report 2020 Management approach Material issues Commercial Bank of Ceylon PLC Following this study, the bank redesigned its strategies to adapt to the times and then incorporated them into the business plan for execution by management along with KPIs underlying factors for successful integrated measurement implementation. The Bank's success in the value creation journey within the four strategic imperatives is described in the Management Discussion and Analysis section on pages 41-62. The effectiveness of the management approach is evidenced by the awards and recognitions that the bank has received over the years. 31
34. Business Context and Outlook Commercial Bank of Ceylon PLC Annual Report 2020 Business Environment Global Economy 32 The global COVID-19 pandemic was nothing short of a historic event. It has triggered a global recession that can only be compared to the two world wars and the Great Depression of the 20th century. At the time of writing this article, the virus had claimed more than 2.4 million lives and infected more than 110 million people worldwide. Although there is no segment of the population that is not economically affected, the most vulnerable – women, youth, the poor, informal workers, those who work in high-touch sectors – are the most affected. Estimates fear that nearly 90 million people will face extreme hardship in the coming years, undoing the poverty reduction gains of recent decades, deepening economic equality and leaving lasting scars on society. While there were some signs of recovery in the middle of the year, as a result of the partial easing of the lockdown, the resurgence of infections has complicated the forecast. The introduction of vaccines offers some hope, but the global recovery will be uneven due to new virus variants in many parts of the world and countries' access to medical interventions, as well as broader structural factors. Supported by stronger-than-expected momentum in the second half of 2020, current IMF estimates point to a -3.5% contraction in global growth, an upward revision of 0.9% compared to forecasts by the third quarter of 2020. The global economy is forecast to rebound to 5.5% growth in 2021 (an upward revision of 0.3%) and then slow to 4.2% in 2022. The volume of world trade is projected to grow by 8.1% in 2021, although services are expected to lag behind. a pattern consistent with restricted cross-border travel until transmission of the virus abates worldwide. It should also be noted that some industries, such as airlines and tourism, will continue to face challenges, while others, such as telecommunications and pharmaceuticals, are expected to grow even more. Inflation is expected to be subdued in 2021-22, with advanced economies expected to remain below 1.5% and emerging and developing markets just above 4.0%, below the historical average of the group. Oil prices in 2021 are expected to rise to just over 20% of their 2020 low base, but still remain well below their 2019 average. Non-oil commodity prices are also expected to rise , reflecting the projected global recovery. Major central banks are expected to maintain their current policy rate positions for the foreseeable future to promote financial stability for advanced economies and improvements for emerging and developing economies. World Economic Growth Chart - 09% 9 6 3 0 -3 -6 World 2019 2020 Advanced Economies 2021 (Forecast) EMDE 2022 (Forecast) Source: World Economic Outlook Update: January 2021, International Monetary Fund Sri Economy Lanka as Um Started Showing signs of recovery from the impacts of the 2019 Easter Sunday attacks, the Sri Lankan economy was hit by the COVID-19 pandemic, contracting by 1.7% and 16.3% in the first and second quarters of 2020, respectively. Downward trends in the world economy had quick local repercussions. Shutdowns from April to May hampered economic activity, the closure of airports to tourists from March 2020 to January 2021 shut down the industry, and global demand remained weak throughout. As a result, the country experienced lower tourism and export receipts, capital outflows and increased pressure on public finances, with the rupiah depreciating 2.6% against the US dollar in 2020. The economy rebounded in the third quarter 2020 with GDP growth of 1.5% thanks to monetary easing, government stimulus measures, lower global oil prices and larger-than-expected remittances from migrant workers. The trade deficit narrowed significantly during the year as imports of goods (particularly fuel imports) fell, helping to strengthen the current account balance. Despite some acceleration in food inflation, headline inflation remained subdued in 2020. Under the current flexible inflation targeting framework, Colombo Consumer Price Index (CCPI)-based headline inflation remained between 4% and 6% throughout the year and low demand is driving inflationary pressures as core inflation remained subdued. This allowed the CBSL to ease monetary policy to historic levels to prop up the ailing economy. The Standing Deposit Facility Interest Rate (SDFR) and the Standing Loan Facility Rate (SLFR) increased five times during the year by a total of 250 basis points (4.5% and 5.5% respectively at the end of the year) and the legal reserve ratio (SRR) was reduced twice by a total of 300 basis points (2% at the end of the year). In addition, the CBSL introduced credit moratoriums, special prime rate lending programs, and interest rate caps on selected credit products to speed up the transmission of monetary policy. According to the Central Bank of Sri Lanka (CBSL), the economy is expected to have contracted by around 3.9% in 2020, although other sources forecast a more severe impact ranging from 4.6% (IMF) to 6.7% (World Bank) expected. While the second wave of COVID-19 infections slowed the momentum from October, the CBSL expects strong growth of 6% in 2021. The CBSL intends to continue its accommodative monetary policy to boost the country's economic recovery. . In this environment of low inflation and low interest rates, credit to the private sector is projected to grow around 14.0% per year in 2021 and around 12.0-12.5% ​​per year in the medium term. Special attention is paid to the micro, small and medium-sized enterprise (MIPYME) sector, which is the backbone of the country's economy. The global economy is forecast to rebound to 5.5% growth in 2021 (an upward revision of 0.3%) and then slow to 4.2% in 2022.
35. 60.0 4.0 2.0 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Sep Oct Nov Dec . 4 0 Jan 2017 T-Bill 3M Jan 2018 T-Bill 6M T-Bill 12M Jan 2019 AWFDR AWPLR However, there are concerns that Fitch, Moody's and S&P downgraded Sri Lanka's sovereign rating in 2020, that external factors are increasingly Sri Lanka's increasingly challenging stress debt service position. The government's external debt obligations between 2021 and 2025 amount to USD 23.2 billion (about USD 4 billion per year). Fitch believes that Sri Lanka's debt financing and servicing challenges for Sri Lanka's sovereign ratings Jan 2020 Jan 2021 AWLR are exacerbated by its existing funding model, which has resulted in a high interest-to-income ratio of government. The average interest to income ratio from 2016 to 2020 is approximately 50%. The downgrade of Sri Lanka's credit rating will increase the country's external borrowing costs, although it should be noted that the government has disputed these downgrades. Table - 06 Rating agency Reassigned rating Previous rating Fitch CCC in November 2020 B (-) (Negative) – April 20 S&P CCC+ (Stable) in December 2020 B (-) (Stable) – May 20 Moody's Caa1 (Stable ) in September 2020 B2 (Negative) - November 18 The overall NPL ratio of the banking sector reached 5.3% in September 2020, with the manufacturing sector registering the highest NPL ratio at 9.0%, followed by agriculture (7.3%), trade (7.3%), tourism (7.1%). %), construction (6.7%) and consumption (5.2%). The specific provision coverage ratio increased from 38.2% at the end of September 2019 to 45.9% at the end of September 2020. Operating environment 8.0 As a result of the implementation of prudent regulatory requirements, the banking sector was well positioned with cushioning capital and liquidity at the start of the year. The sector experienced a credit expansion overall, although much of this was due to increases in loans and advances to the government and state-owned enterprises (SOEs). Loans were concentrated in six sectors, which accounted for 73.1% of loans (as of end-September 2020): consumption, construction, commerce, manufacturing, infrastructure, and agriculture. Rupee loans and foreign currency loans (FC loans) (USD basis) grew by 13.5% and 15.1% year-on-year respectively at the end of September 2020, compared to 6.9% and end of September 2019. Annual Report 2020 10.0 Business Context and Outlook Banking Sector in Sri Lanka Chart: 10% Inflation Commercial Bank of Ceylon PLC: CCPI and NCPI 33
36. Diagram „Loans in arrears to total loans and advances“.– 12% 7.5 6.0 4.5 3.0 1.5 0 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Bank of PLC 4 Commercial Bank of Ceylon of Sri Lanka rupee deposits have been the main source of financing for the banking sector and have experienced a significant increase during the year. This increase was due to the decrease in discretionary spending due to the pandemic and the shift of deposits from the non-bank financial institutions (NFBI) sector to the banking sector. The year-on-year growth of rupee deposits increased from 7.9% in 2019 to 19.3% in September 2020 (foreign currency deposits grew from 14.0% to 14.3% over the same period). This increase in deposits caused the ratio of loans to deposits to decrease from 88.2% in December 2019 to 84.8% in September 2020. The general profitability of the banking sector decreased due to the decrease in the net interest margin as a result of the measures of monetary policy taken by the Board, although this was offset by an increase in non-financial income and a decrease in non-financial expenses and taxes during the ninth. month period ending in September 2020 (compared to the same period of the previous year) somewhat balanced. Despite the difficult macroeconomic climate, the sector maintained healthy capital adequacy ratios (CARs) and posted a Tier 1 CAR of 13.0% and an overall CAR of 16.5% as of end-September 2020, a marginal increase from 0.93% in September 2020 to 0.97%. year-over-year, while return on equity (ROE) increased to 10.9% year-over-year from 10.5% during the same period. The continued decline in lending interest rates, the launch of targeted loan programs, and improved investor confidence are expected to boost credit growth in all sectors of the economy in 2021. Economy and banking Bangladesh The Bangladeshi economy faced challenges in 2020, especially starting in the second quarter. Before the pandemic hit the country, the Bangladeshi economy maintained a steady growth rate of over 6% in FY10-FY15, 7.0% plus growth rate in FY16-FY18 and 8.15% in FY19. However, the COVID-19 pandemic has severely affected mobility across the country since the beginning of March, reducing the GDP growth rate to 5.24%. Despite the government's optimistic projections of 8.2% GDP growth for FY21, experts expect Bangladesh's annual GDP growth rate to be around 7% between 2021 and 2025. The Dhaka Stock Exchange (DSEX) returned 21.3% in 2020 (2018: -13.8%, 2019: -17.3%) after two years of decline, which is the second highest return in the world (after of the US NASDAQ 43.4%). The United Kingdom's Center for Economic and Business Research (CEBR) recently predicted that the Bangladeshi economy will be the 28th largest in the world by 2030 and the 25th largest by 2035. Furthermore, Goldman Sachs forecasts that Bangladesh will be one of the countries in the “N11”. to the BRICS, who will dominate the future world economy. The public debt to GDP ratio increased to 39.6% in 2020, equivalent to 35.80% of GDP in 2019. The Bangladesh Bank introduced BDT 540 billion. to the market through purchases for approximately USD 6,370 million. by banks in 2020. Foreign exchange reserves amounted to $43 billion. in December 2020 vs. $32.68 billion. A year ago. The USD/BDT exchange rate has been fairly stable at 84.95 throughout 2020. The country's current account posted a surplus for the fifth consecutive month, reaching US$4.1 billion. in November 2020. In December 2020, Bangladesh issued the Islamic Sharia compliant Sukuk Bond instrument for the first time. The COVID-19 pandemic that has gripped the Bangladeshi economy and society will be brought under control by 2021. Market experts estimate the country's exports along with an increase in credit growth to the private sector, which has ranged from 8, 37% at the end of 2020 against the fiscal goal of 14.80%. The confidence factor returns to the capital market with a series of firm and targeted regulatory measures and is expected to reach the 6,500 point mark. The self-financed multi-use Padma Bridge is expected to open in 2022 and contribute about 2.00% to annual GDP growth. Liquidity in the market is expected to remain in excess, allowing interest rates to be in the low single digits. The foreign exchange market is also expected to remain stable in 2021. Bangladesh Bank has approved two new privately owned commercial banks, bringing the total number of banks to 61. Agent banks, which provide limited banking and financial services to most underserved populations are on the rise in Bangladesh. Banks in the country are now focusing on agent banking as it is popular with the people, especially in remote areas. Bangladesh also receives a significant portion of remittances through agent banks. Climate change is a priority for Bangladesh's development goals as it is one of the countries most prone to extreme weather events. Increased investment in adaptation has made the country more resilient to natural disasters.
37. Business model for sustainable value creation Financial intermediation and maturity transformation The bank's business model is based on the two main value-generating activities of financial intermediation and maturity transformation. Financial intermediation refers to the role played by the bank as an intermediary between depositors and borrowers, allowing savings (liabilities) to be redirected towards investments and assets. Maturity transformation is the process of converting short-term funds into long-term loans and investments. By ensuring the efficient allocation of financial resources, these two activities are essential for the economic development of the company as a whole. In addition to the derived value reflected in enhanced other capital positions, the two broadest income categories (net interest income from fund-based business and commission and commission income from fee-based business) allow the bank to enhance its financial capital. Fund-based operations involve the process of mobilizing funds from depositors and borrowing from other sources to lend and invest; This process generates interest income and incurs interest expense. The interest margin, that is, the difference between the debit interest and the debit interest, compensates the bank for credit risk, refinancing risk and interest rate risk. All other Bank services other than funds are fee-based transactions. Reflecting efficient financial intermediation, the bank generated 66.15% of its total operating income from net interest income (2019: 71.51%). Gearing Financial intermediation and the transformation of maturities mean that the business model of banks differs significantly from that of other companies. The key difference is the much lower return on assets (ROA), which is typically less than 2%, in stark contrast to the 10-20% that companies in other industries get. This leads banks to resort to the leverage process to make the return attractive to investors in terms of return on equity (ROE). Gearing is business volume expansion by mobilizing increasing amounts of funds from depositors and other lenders to banks and lending or investing those funds to grow the loan book and investment portfolios based on a given amount of capital. Certain global developments now threaten to upset this traditional business model. As discussed later in this report, the Bank has established a robust risk management framework with the necessary oversight by the Board of Directors and has therefore been able to successfully manage such risks. Stakeholder Returns As shown in Table 07 on pages 38 and 39, Commercial Bank has improved its profitability over the years while cautiously keeping leverage at acceptable levels. This improvement in profitability reflects the net impact of the value we have been able to create by delivering and obtaining value from our stakeholders. From the investor's perspective, this value creation is reflected in the returns that the bank has been able to generate for him in the form of income, dividends, and appreciation of the market price of the shares. The market capitalization of the bank's shares remained the highest among banks, financial and insurance institutions at the end of 2020, while its shares ranked fifth among all companies listed on the Colombo Stock Exchange. at the end of 2020. For more details on the performance of the Bank's shares, see the Investor Relations section on pages 291 to 309. Although the Bank is growing organically in the domestic market, it has taken steps to capitalize on the inorganic and regional growth opportunities, particularly around its geographic diversification. exposures and revenue streams Improve operational sustainability and long-term value creation. These efforts have now made the bank an established regional bank. Business model for sustainable value creation The Bank's activities to promote financial intermediation and maturity transformation and the resulting interactions and compensations between capitals in this dynamic process serve to generate capital and reflect the value created during the year. The Bank's statement of capital position as of January 1, 2020 and December 31, 2020 is set out on pages 38 and 39, in other words, the capitals from which an organization derives value. This working capital includes not only financial capital, which is reflected on the balance sheet, but also so-called "off-balance sheet" or "hidden" capital, such as the tacit knowledge of an organization, the brand and reputation it has built. built an organization. over the years, or the strength of its Relations with Stakeholders. These inputs are then used, literally activated, in the organization's business activities to produce outputs (the organization's major products and services) and outcomes (the value created by the organization for itself and its stakeholders as a result of the products). . As the bank's business model shows, this is a dynamic process in which capital is constantly circulating and value is constantly being created and transformed. An integrated report is nothing more than a single year's history of this dynamic process and a snapshot of an organization's capital position at the end of the year (see page 38). Statement of Capital Position Commercial Bank of Ceylon PLC The specification of an organization's business model is a critical aspect of the integrated reporting process. An organization's business model is its system for creating value, i. h Your system for converting inputs through your significant business activities into outputs and outcomes that achieve the organization's strategic goals. It will be helpful for the reader of this report to briefly explain each of these four terms to provide guidance for the visual description of the bank's business model on page 36. Leverage remains primarily the foundation of the bank's business model, which which allows us to operate with around 10 times the turnover compared to the capital. It is our license to mobilize funds from the public that has made this possible. However, we are aware that leverage exposes the bank to a variety of internal and external risks. also 35
38. Management system(SEMS) z Data analysis z Skills z Competencies z Creativity z Commitment z Services and deliveries z Relationships z Assurance services z Cooperations and alliances st Financial intermediation service na z Institutionalized knowledge z Best practices z Social and environmental (Reference S r pa tru ge 77 ) k ture improvements Government Capital generated Intellectual capital Technology z Public goods z Ongoing investments Deposits Solar/digital projects z Contribution to Bank CSR Trust BANK Depositors Borrowers Loan withdrawals Loan repayments Interest expense Interest earnings Maturity Transformation d Se rv sse oce r p al Intern ices Ku st me z Public services z Refinancing financing for loans to natural capital z Real estate, plant and equipment z Information and communication Financing management Liqu ent m t (ref idit e er p nage 43) alter y a g D r i e v e u M pal r a 43 ) A V l c t r i r v a o i p t e ties pi ( ref Sup a C Delivery C ha s D r i e v ued l r a A r V n n c t y a i vi t ar d elim n e i s a Pr c ts Social and Network Capital Human Capital 1. INPUTS Vision du Pro Annual Report 2020 2. VALUE DRIVER ACTIVITIES h wt gro ent Prud Commercial Bank of Ceylon PLC z Shareholder funds z Debt Equity z Financial agreements z Customer deposits s Business model for sustainable value creation Financial capital The bank's business model that delivers value to stakeholders and obtains value from them, resulting in sustainable value creation Figure – 07 r ce (Detailed account of activities carried out during the year a Value creation for stakeholders, enhanced capitals can be found in the MD&A at pages 41 to 62) ntric ity hip ers d a l le Digita Strategische i erative mp WORK ENVIRONMENT THAT PROVIDES THE CONTEXT FOR VALUE CREATION 36 s 1. INPUTS 2. VALUE-CREATING ACTIVITIES L he "raw materials" for value-generating activities can be found on page 38 of the award. Present the capital position for the opening capital position as of January 1, 2020 for various capital accumulated by the bank during the last 100 years. Include the top value drivers that drove growth, supporting value drivers that promoted positive stakeholder interactions, and other value drivers that minimized risk. It is the inputs of the capitals, together with the relationships, interactions, interdependencies and compensations between the capitals, which have produced products, which has resulted in the creation of value reflected in the capitals.
39. z Green processes and plants, z Generation of solar energy, z Savings from non-renewable energy sources, z Protection of the environment, z Improvement of the quality of life. Business model for sustainable value creation z Customer focus z Customer base growth z Customer satisfaction z Customer convenience z Strong relationships with suppliers z CSR activities Annual report 2020 z Operational excellence z Empowerment and commitment z Trainingand Development z Motivation and Productivity z Warm Work Relations Commercial Bank of Ceylon PLC Financial Capital Artisan Capital Intellectual Capital Human Capital Era tio na l Excellence Experience) z Innovation Capacity z Creativity z New Products z Simplicity z Compliance Social and Network Capital no ch 3 RESULTS g om Op funded and liquid z Optimal risk/reward ratio z Market capitalization z Digital leadership z Omnichannel presence z Capacity growth z Safe work environment z Increased productivity Natural capital Ris gem a annel e 4. RESULTS Merin (of Loans and Advances, Investments, Deposits, Foreign Exchange Products, Remittance Services, Fee-Based Services, International Trade Related Products and Services, Unfunded Facilities, REPO Transactions, Advisory Services Mission z Prudent Growth z Profits, Taxes and Dividends z Well Capitalized (KPIs that represent and l value derived as a result, f see Highlights on page 39) 3. RESULTS 4. RESULTS Products and services and negative externalities generated by value-added activities. See page 39 for the consequences of our activities and results expressed in capital as added value. Explain the capital position for the closing capital position as of December 31, 2020 for various capitals. 37
40. Statement of capital position Customer deposits 1570.00 17.87% 37.90 38.20 0.79% 1,265.90 20.18% 87.50 69.90% 1,053.30 Market share of total assets (%) 11.10 Market capitalization (Rs. bn) 96.80 Derivative value indicator Maturity transformation thus strengthening leadership Branch network (number) 287 Number of ATM 685 Number of CRM 200 Bank on wheels (number) 3 Capital expenditure investments (Rs. bln) 15.20 -3.24% 5 activities Capital created to create * z Maintain a profitable mix of owned and leased buildings z Delivery channels z Execute profitable transportation arrangements Derived value as of December 31, 2020 Growth in value added 287 0 656 -4.23% 250 0.25 11 266.67% 18, 40 21.05% z Enhanced Procurement Services Derivative Value Indicator Brand Value (Rs. bln) Intangible Asset Value (Rs. bln) Derived value as of January 1, 2020 37.30 1.10 Intellectual capital creation activities * z In Centralization invests to improve ed pr processes and procedures Inferred value as of December 31, 2020 Value-added growth 44.01 17.99% 1.20 9.09% Receipt of awards and recognitions Bank with the most awards in Sri Lanka z Development of new products Inclusion in the 1000 leading banks in the world in 2019 z Expanded network, including in 2020 AA(lka) carried out research and development AA-(lka) Fitch rating Employees in service > 20 years 791 and services z Deeper technological knowledge z Support for exchange initiatives of knowledge undertaken. ** Reflects the general market trend *** More than 500,000 inactive clients were deactivated in 2020. 38 7.21% 93.66 The highest in the banking sector The highest in the banking sector Value derived as of January 1 2020 11.90 Most awarded bank in Sri Lanka 809 2.28% Intellectual capital Sustainable value creation business model 133.20 51.50 Price - Book value Annual report 2020 Growth in value created Bank loans/other loans ( Rs. bn) CSE Ranking in Market Capitalization (#) Commercial Bank of Ceylon PLC Derivative Value as of December 31, 2020 Interactions Subordinated Debt (Rs. bn) Financial Capital Building Activities * Shareholder Financial Capital Fund ( Rs. .Bn) Derivative Value as of Jan 1, 2020 Table of Derivative Value Indicators of Capital Created – 07
41. Derived value indicator Human capital Number of employees Number of new hires Derived value as of January 1, 2020 5,062 264 Employee retention rate (%) 95.50 Return to work after maternity leave (%) 100.0 Earnings per employee (Rs. Mn.) Average duration 3.4 12 years and 2 months Creation activities of human capital * p. eg Improved quality of new hires z Conducted employee surveys z Invest in education and training z Enriched career development z Improved performance Derived value as of December 31, 2020 Value added growth 5,057 -0.10% 158 -40.15% 96.78 128 basis points 100.0 – 3.2 -5.88% 14 years and 5 months 27 months Value derived as of December 31, 2020 Value added growth 45,045 -10.44% 60 22.45% 9,807 -2.65% 418,992 49.30% 517,378 - 22.97% Solar panel installation sites (Number) Number of facilities subject to SEMS Screening Online banking users Mobile banking users Value indicator derived from social and network capital Number of customers 50,296 49 10,074 280,634 671.6 99 Value derived as of January 1, 2020 More than 3.5 million 11.00 Export market share (%) 18.30 CASA rate (%) z Credits evaluated by SEMS Import market share (%) Number of suppliers Activities to create natural capital * 37.10 Over 1,200 Number of Correspondent Banks 55 CSR Fiduciary Investments in Society (Rs. Mn.) 549.2 z Promote paper reduction and recycling z Increase the use of renewable energy z Switch to energy efficient appliances Activities to build social and network capital * z Promote financial inclusion z Co-create products and services z Collaboration with business partners z Enhanced SME capacity z Expanded bank presence z Community support Value derived as of December 31, 2020 More than 3.5 million value added growth – 11.34 34 basis points 18.77 47 basis points 42.72 562 basis points Above 1,250 – 56 1.82% 633.6 15.37% Annual Report 2020 Energy Consumption (GJ) Value derived as of January 1, 2020 Commercial Bank of Ceylon PLC Capital natural Derived value indicator Business model for the management and assessment of sustainable value creation 39
42. Most awarded bank for Prudential Growth 1. Best Bank in Sri Lanka 2020 - Global Finance Magazine, USA 2nd Best Commercial Bank - Sri Lanka 2020, Global Business Outlook Magazine, UK 3rd Best Overseas Bank - Bangladesh 2020, Global Business Outlook Magazine, UK Business Bank of Ceylon PLC Annual Report 2020 Model for Sustainable Value Creation 4. Best National Bank - Sri Lanka, 2020 - Global Economics Magazine, UK 5. Best Commercial Bank - Sri Lanka, 2020 - Global Economics Magazine , United Kingdom 6. Best Bank in Sri Lanka 2020 - Euromoney, Hong Kong 7. 10th Listed in the World's 1000 Best Banks - The Banker Magazine, United Kingdom 8. Best Commercial Bank - Sri Lanka - 2020 - International Finance Magazine, UK 9. Best Commercial Bank - Sri Lanka 2020, Cosmopolitan The Daily Magazine, UK 10.1. in Financial Performance – LMD Most Respected Entities Customer Centricity 1. Decade of Excellence in Retail Banking Sri Lanka 2020 – Global Banking and Finance Review, UK 2. Best Corporate Bank Sri Lanka 2020 – International Business Magazine, United Arab Emirates 3 Best Business Finance Bank Sri Lanka 2020 - International Business Magazine, United Arab Emirates 4th Best Bank for SMEs - AsiaMoney, Hong Kong 5th Best Banking Partner for SMEs 2020 - The European, UK 6th Bank of the Year for SMEs - Asia Banking and Finance (ABF) Investment Banking Awards, Singapore Leading by Innovation 1. Best Digital Bank Sri Lanka 2020 - Financial Derivative, Netherlands 2. Most Innovative Banking Services - Sri Lanka 2020 - Business Tabloid Magazine, UK 3. Bank Most Innovative - Sri Lanka, 2020 - Global Economics Magazine, UK 4. Innovative Digital Bank of the Year 2020: 5th European and UK Winner in the "Banking Services" category ios & Financiers" from SLASSCOM Awards - Sri Lanka Association of Software Services Companies (SLASSCOM) 7th Best Corporate Bank - Sri Lanka - 2020 - International Finance Magazine, UK 8th Best Trade Finance Bank in Sri Lanka - Transaction Awards Finance by Country, The Asian Banker, Singapore Operational Excellence 1st Best Bank for CSR - AsiaMoney, Hong Kong 2. Best Brand - Sri Lanka Leadership Awards 3. Sri Lanka's Most Admired Companies 2020 - ICCSL/CIMA 4. 1st Place in Honesty - LMD 5 Most Respected Entities. No. 1 in Business Today's Top 30 Companies and Conglomerates in Sri Lanka 6. Voted Most Respected Bank for 16 Consecutive Years - LMD 7 Most Respected Entities. of fame of the most awarded 2019/20 - LMD 40 Magazine
43. Management discussion and analysis Strategic imperatives Grow the business wisely with a long-term perspective Provide the expertise, simplicity and comfort that customers value most today. Create long-term value safeguarding the interests of all. Grow corporate customer base by being a trusted founding partner and providing better business solutions Original ideals of being a banker, first and foremost, deliver a seamlessly integrated omnichannel banking experience Prudent risk management by strengthening risk Enhance value proposition of SMB clients through governance and management to improve asset quality and minimize operating losses Provide further growth opportunities through networking and education Stay well-capitalized and liquid by strengthening relationships with micro-clients fostering solid capital and optimal liquidity in terms of your needs, sector or currency that fosters stronger relationships and greater commitment. Responsible investment through green finance. Support the community by investing in innovative projects and using a social and environmental management system to assess sustainability in all lending activities, solutions for the well-being of existing and potential clients Prudent growth Client-focused Lead through innovation Innovate to improve the quality of stakeholder interactions and experience Operational Excellence Improve operational efficiencies to improve productivity and customer service Strengthen digital leadership through leveraging platforms Centralize work processes to support branches Build digital banking platforms Reengineering the business Deploy processes and technology to adapt to changing customer needs, emerging across all networks and system ecosystems are integrated to provide customers in all segments with a one-stop experience ca Part of digital usage through enabling and promoting digital transactions and interactions Segmenting customers through data analysis to identify and meet unique banking needs and offer personalized user experiences Redesign traditional banking processes as a Digital Commercial Bank of Ceylon PLC Annual Report 2020 Strategic Imperatives Discussion and analysis of responsible lending and finance management inclusion through closer interaction Good diversification by minimizing focus on increased focus on business development and customer relationship management Technological advancements to meet changing business needs and service standards Optimizing resources by maintaining an optimal mix of CAPEX and OPEX models Investing in people to better adapt to changing needs and improve productivity Protecting the environment through of the continuous reduction of CO2 Footprint contribution to the fight against climate change Processes to create comprehensive solutions Dig Italian 41
44. Annual Report 2020 Management Analysis and Discussion Prudent Growth The strategic imperative of Prudential Growth represents the bankRecognizing that the creation of value for all its stakeholders must be seen in different time frames: short, medium and long term. Prudent Growth provides guidance for the bank's other three strategic imperatives addressed in this discussion, and in turn brings them up-to-date and up-to-date: customer centricity, leading through innovation, and operational excellence. As such, prudent growth is essentially about balance: maximizing current profitability without hindering the bank's ability to be sustainable in the future. In contemporary integrated reporting language, Prudent Growth is about balancing the trade-offs between capital cities. A disproportionate focus on immediate financial capital gains without strong investment in institutional or human capital will affect the bank's ability to adapt to a changing financial landscape. Investments made without regard to social and environmental justice can have spillover effects, negatively affecting the wider society in which the bank operates and representing a risk to the bank's reputation. Therefore, prudent growth means growth, which means: healthy, sustainable, resilient, responsible and ethical. Elements of such an approach include an emphasis on pure banking; a well-diversified asset and customer base; sound capital, liquidity and risk management; smart corporate governance; socially and environmentally responsible lending and operating practices; and conduct business with transparency, honesty and integrity. Commercial Bank of Ceylon PLC Figure - 08 Our commitment to prudent growth First private sector bank to go abroad Highest market capitalization in the banking, financial and insurance sectors on the Colombo Stock Exchange First private sector bank to reaching Rs 1 trillion in assets and deposits includes Transparency in reporting and disclosure among top 1000 banks for ten consecutive years Conservative risk profile 42 Comfortable capitalization Optimal liquidity Social and environmental management system Robust risk management framework Compliance with the letter and the spirit of the law Solid corporate governance framework
45. Gross loans and advances increased a modest 20.98% given the low demand for credit throughout the year. The continued redirection of excess liquidity to the Treasury increased the emphasis on investments in Treasury bills and bonds, causing net loans and advances as a percentage of total assets to decline to 51.66% as of December 31, 2020, from 63.77% the previous year. The bank's non-performing loan ratio (NPL) rose to 5.11% at the end of the year. Still, the bank has the highest one-year impairment provision of Rs 21,484 crore including COVID-19 management overlays of Rs 5,189 crore. This calculation was due to the bank's prudent approach that anticipated the potential for credit losses that may not be existing impairment models. Deposit Base and Loan Portfolio Growth Table - 08 Deposit Base Gross Loans 2020 (Rs. Mill.) 2010 (Rs. Mill.) 10-Year CAGR 1,265,966 259,779 17.16% 947,842 224,021 15.52% Exchange (CSE) ended the year on mixed notes. The ASPI gained 10.52% to close the year at 6,774 points (6,129 in 2019) and the S&P SL20 fell 10.18% to 2,638 points (2,937 in 2019). The banking index followed a similar trend, losing 16.11%. Consequently, the bank's shares traded at a discount to book value throughout the year. However, the price-to-book ratio of 0.60x as of December 31, 2020 (0.73x at year-end 2019) was the highest among CSE-listed peer banks. Stay well capitalized A strong capital base is critical to a bank's sustainability. Helps a bank acquire property and equipment to build, maintain and expand a business and provides protection against uninsured depositors; and, perhaps most importantly, it acts as a buffer to absorb unforeseen losses and serves as a regulatory constraint on unwarranted wealth accumulation. Tighter regulatory requirements and tighter reporting standards, while necessary and justified, have created new obstacles to the growth of the banking industry. As a result of more restrictive capital definitions, difficulties in raising fresh capital due to lackluster market conditions, comparatively higher risk-weighted assets, additional capital buffers, and higher capital adequacy ratios (CARs) under Basel III regulations, higher IFRS 9 impairment provisions, and higher taxes, banks are more conservative and therefore bear the brunt of higher costs and lower returns. In order to remain solvent in this environment, the bank considers it a priority to proactively manage the capital at its disposal. The objectives of the bank's capital management The objectives of the bank's capital management are: z Comply with regulatory requirements by achieving internal capital targets that are more stringent than the requirements z Optimal use of capital for maximum profitability z Support the future expansion of the business z Support the desired credit rating The bank received a strong Confirmed by the completion of a private placement of shares of USD 50 million (Rs. 9,216 crore) with IFC. This investment is the Bank's first foreign equity placement and makes IFC, IFC Financial Institutions Growth Fund, LP (FIG Fund) and IFC Emerging Asia Fund, LP (EA Fund) joint owners of 14.45% of Mission. It is also important to note that this is the first post-pandemic equity placement by IFC and one of the largest foreign investments in Sri Lanka since the pandemic began. This is a clear sign of optimism for the future of the bank. For more details on our capital management, see Note 68.5 on pages 289 to 290 and on page 336 for Disclosure 7: Summary Discussion of Adequacy/Compliance with Current and Future Capital Requirements. Prudent Growth The Bank's prudent approach also applies to its dividend policy, which aims to strike a balance between generating significant returns for shareholders and supporting long-term business expansion. Keeping a consistent track record, the bank declared a first and last dividend of Rs 6.50 per share for the year, distributed as a cash dividend of Rs 4.50 and a stock dividend of Rs 2.00 per share, which resulted in a pay rate of Rs 4.50 per share. 46.33% drive. assesses its capital requirements through the Internal Capital Adequacy Assessment Process (ICAAP) and annual strategic and budget planning. Tools employed include: risk-adjusted return on capital (RAROC), prudent capital allocation, controlled risk-weighted asset growth, fee-based service expansion, timely pricing/repricing, prudent dividend policy, product portfolio and services and capital instruments. The Bank also recognizes that a critical aspect of its success is the secure shareholder base that the Bank can rely on to raise capital whenever the need for a capital injection arises. The Bank consistently maintains capital adequacy ratios well above the minimum requirements (see pages 131-133 for more details). Management Discussion and Analysis As a lender, the Bank is able to serve the largest corporations (with one of the highest single borrower limits in the banking industry), SMEs, and microenterprises (with a variety of customized financial solutions and development programs capabilities), and for the common man (through a wide range of clean and uncomplicated banking products for all demographics, from young children to seniors). During the year under review, the bank's total assets grew by 25.15% from Rs 1,387 at the end of 2019 to Rs 1,736 as of December 31, 2020. Our market share in total assets, which stood at 11, 08% at the end of 2019, improved to 11.84% of the Group's total assets and 20.46% of the profit before taxes at the end of 2020 (see pages 20 to 26 of the "Financial Report" for more details). . Annual Report 2020 Prudent growth is the foundation of the bank's success and has allowed it to build a strong deposit and loan business with a broad national and regional presence. These economies of scale give the bank the ability to access resources that are not available to its competitors to provide a unique value proposition to its shareholders. As a deposit acceptor, the bank's moderate risk-taking has created a reputation for stability and earned public trust. This year, the bank's deposits increased to Rs 1,266, a growth of 20.19% over 2019. As a result, the bank's CASA index increased from 37.10% in 2019 to 42.72% in 2020. This The increase in deposits was due to the decrease in discretionary spending due to the pandemic, the current low interest rate environment, and the shift of deposits from the non-bank financial institution (NBFI) sector to the banking sector. Deposits were the Bank's largest source of funding, financing 72.92% of total assets (vs. 75.92% in 2019), which indicates the strength of its role as a financial intermediary. Commercial Bank of Ceylon PLC Long-term value creation Funding and liquidity management The circumstances leading up to the 2007 financial crisis and subsequent events underscored the fact that funding and liquidity are just as important, if not more so, than than capital for the financial services industry. Unlike capital, however, there were no internationally agreed standards for financing and liquidity. As a result, the Basel III rules introduced measures to strengthen financing and 43
46. Commercial Bank of Ceylon PLC Annual Report 2020 Management Discussion and Analysis Prudent Growth Bank Liquidity Risk Management. The objective was to promote the resilience of a bank's short-term and long-term liquidity risk profile by introducing the Liquidity Coverage Ratio (LCR, 2015) and the Net Stable Funding Ratio (NSFR, 2019), respectively. In addition to the traditional statutory liquidity ratio, these measures are intended to prevent banks from becoming overly reliant on large-scale, short-term funding to support long-term assets. The Bank gives the same importance to funding and liquidity as to capital and ensures that it has sustainable funding sources and maintains adequate liquidity at all times. The Bank does not compromise liquidity in order to generate returns for investors and this policy has been instrumental in increasing public confidence in the Bank. The Bank's Assets and Liabilities Committee (ALCO) meets biweekly to actively monitor funding, liquidity needs, and asset and liability pricing. Comprehensively covers developments such as market liquidity, current and perceived interest and exchange rates, changes in policy rates, credit growth and pipeline facilities, capital market developments, anticipated capital expenditures, and alternative financing options. , etc. that affect financing and liquidity. In recent years, the bank has continued to strengthen its funding and liquidity, encourage the use of cards and electronic cash to reduce cash holdings, and establish credit lines with strong foreign counterparties (giving it access to foreign currency funds at attractive rates). The Bank's sources of financing for on-lending loans include, in the order of their estimated stability: z retail deposits, mobilized through the branch network, z low-cost foreign currency loans (as long as interest costs and associated with said loan are less than the cost of wholesale deposits) z Selected long-term wholesale deposits z Repurchase agreements Funding objectives and liquidity management The objectives of the Bank's funding and liquidity management efforts are: z Compliance efficient maturities/withdrawals of customer deposits and other obligations and normal conditions, as well as difficult operating conditions, e.g. Profitability z Finance future business expansion in operating segments at optimal costs z Support desired credit quality z Ensure compliance with Basel III Contribution to operating result Funding and liquidity requirements The bank manages its funding and liquidity ratios on a daily basis and monitors the liquidity ratio to ensure adequate secure funding to maintain liquidity at the desired level. Being a truly diversified bank Another important dimension of the bank's prudent growth is its commitment to diversification. In addition to being a risk management tool to avoid excessive concentrations, diversification has helped the bank remain more flexible in resisting and responding to changing market conditions, thereby reducing performance volatility and ensuring stable and sustainable value creation. . The Bank has successfully achieved a high level of diversification of its operations through many parameters including: IFNB, Real Estate and Services - 2.34% Trading/Treasury - 22.07% Personal Banking - 46.74% International Operations - 12.64% Corporate Banking - 16.21% Contribution to Total Assets IFNB, Real Estate and Services - 0.63% Trading/Treasury - 33.95% Personal Banking - 35.38% z Geographic (Sri Lanka, Bangladesh, Maldives, Myanmar, Italy and BPO in several other countries) z Customer profile (See International Business Customer – 11.79% Corporate Banking – 18.25% Segmentation – Table 10 on page 48) z Banking channels (see Channel mix – Table 11 on page 49) z Mix of currency-related products (see Note 34.1 (b) on page 203 and Note 46.1 (b) ) on page 232) z Portfolio of products and services (A complete package that meets the needs of all customer segments, from infants to seniors). z Funding profile (See Figure 09 on page 44 for more details) z Maturity profile (There are no major mismatches in the maturity profile, particularly given the growing core component of CASA balances; see Note 61 of the financial statements financial statements on pages 251 to 253). Employee Age Analysis No. 2,500 2,000 1,500 1,000 500 0 Under 30 Men 30 to 50 Over 50 Women z Business Sector (A broad sectoral diversification of assets by business sector without undue concentration in any particular sector: see Note 34.1 (c) of the Financial Statements on page 203). Analysis of service over 20 years - 16% z Revenue sources (an acceptable mix of revenue based on funds and tariffs with a significant market share of the country's imports and exports and a market maker in the financial sector - see Notes 13.1 and 14.1 of the financial report). statements on pages 178 and 180). Less than 5 years - 26% 16 - 20 years - 11% 11 - 15 years - 26% 5 - 10 years - 21%
47. Deposits and refinancing Loans and advances Loans and advances from clients CASA 420.72% (2020) SMEs - 21% 2019 - 37.10% 23% Other - 12% Personal loans - 5% Savings - Rs 440 crore 78% 22% Home loans - 7% Current accounts - 101 million Rupees 40% Long-term Local currency loans - 43% Trade finance - 8% Foreign currency overdrafts - 11% Short-term loans - 14% Deposits by currency Loans and advances by industry US dollar - 14% Bangladeshi Taka - 7% Sri Lanka Rupee - 76% 73% 16% Loans to Total Assets 23% Wholesale and Retail 18% Loans to Foreign Companies 13% Manufacturing 13% Other – 3% Financing Structure Deposits to Total Assets Consumer and Other Capital to Total Assets 9 % 2% Agriculture and Fisheries 8% Tourism 7% Construction Financial Services 5% 4% Other 9% Management Discussion and Analysis 77% Annual Report 2020 Loans and Loans by Product Time Deposits - Rs 725 crore Commercial Bank of Ceylon PLC Pri VAT customers : 27% Deposit mix 60% Prudent growth Corporate clients: 52% Other liabilities over total assets Professional, scientific and technical activities Health, social and support services Infrastructure development Transportation and storage Information and communication technology services Education Arts, entertainment and recreation 45
48. Commercial Bank of Ceylon PLC Annual Report 2020 Management Discussion and Analysis Prudent Growth Socially and Environmentally Responsible Lendingit has a small ecological footprint of its own compared to many other industries. It consumes few natural resources and generates minimal emissions and waste, as evidenced by the fact that there are no mandatory environmental certification requirements for banks to obtain. But the Bank, as a national systemically important bank, is a financial intermediary with broad national reach and influence. As such, she recognizes that she has an important role to play as an advocate and promoter of sustainability in Sri Lanka. The bank helped formulate a Sustainable Banking Initiative (SBI) in the country in partnership with 18 members of the Sri Lanka Association of Banks and social and environmental concerns are being mainstreamed into the bank's core business activities. The bank has been a member of the United Nations Global Compact since 2002. As part of its prudent growth strategic pillar, the bank recognizes that its financing activities can have a major impact on sustainability issues both inside and outside the bank. The Bank has been at the forefront of green finance in Sri Lanka for the past decade, financing the first commercially viable wind power project and the first commercial solar power project in Sri Lanka. The Green Financing portfolio supports projects focused on renewable energy, energy and water efficiency, waste management, emissions reduction, drip irrigation and rainwater harvesting. In 2018, the bank partnered with IFC to strengthen its green financing strategy. During the year, the Bank published a Climate Change Statement, reaffirming its commitment to address climate change at the highest level within the Bank. In a context of strong consensus in the scientific community, human influence, particularly the burning of fossil fuels and deforestation, has been the main cause of the observed warming in the global climate system since the mid-20th century. This Bank Position Statement is in fact an articulation and unification of a variety of actions that the Bank has implemented and committed to over the past decade and underscores its further determination to meet this challenge in the future. In addition, the bank uses a social and environmental management system (SEMS) to strategically and systematically assess and control social and ecological risks. SEMS procedures and workflows ensure that Bank loans benefit environmentally, socially, and economically viable projects. The Bank's SEMS is complemented by the launch of an IFC-developed tool, the Climate Assessment for Financial Institutions (CAFI) tool, to help monitor and report climate impact data. In implementing SEMS, the Bank takes a partnership approach with its stakeholders with the goal of promoting positive change rather than simply rejecting proposals that do not meet the Bank's social and environmental standards. The Bank's goal is to be a leader that seeks to build partnerships across all ecosystems and does everything possible to help customers and providers comply with relevant requirements and regulations. The bank's green financing, supported in part by international credit lines, contributes to the fight against climate change in line with the UN's Sustainable Development Goals 7 (clean and affordable energy) and 12 (responsible consumption and production). The Bank's Green Financing Vision prioritizes two objectives: During the year, the Bank made notable progress in the composition of its Green Loan portfolio, including a broader range of projects. Table: 09 Green purpose (end of 2020) % Renewable energy projects (solar, hydraulic, wind, biomass) 38 Efficiency projects and recycling of resources: energy, water and materials 19 Climate-smart agriculture 17 Green transport and related services 10 Councils and Related Service Providers 7 Other 8 1. Become the number 1 green finance institution in Sri Lanka 2. Expand the green finance portfolio to 3% of the loan book by 2025 Among the initiatives taken in the recent past to achieve these Objectives include: z Participation in various capacity building programs on concessional green loans for renewable energy. z More than 500 employees have participated in internal training programs. z More than 60 employees have participated in training programs conducted by outside industry experts. z Guidelines and circulars on Green Financing have been issued. z The climate impact of these green facilities was calculated using the CAFI tool developed by IFC. The bank's Green Financing portfolio has led to the reduction of 180,933 tons of CO2 emissions equivalent to the atmosphere. z A Green Financing Performance Award was introduced for Retail Banking and Corporate Banking. z The Green Leasing and Loan Bank offered special conditions to encourage the growth of green finance. As a national systemically important bank, the Bank is a financial intermediary with broad national reach and influence. As such, she recognizes that she has an important role to play as an advocate and promoter of sustainability in Sri Lanka.
49. Money Laundering Prevention The Bank carries out its money laundering and terrorist financing activities(LA/FT) risk assessment in accordance with the established ML/TF risk assessment guideline. Risk reviews are conducted quarterly and reported to the Board of Directors, taking into account the risks inherent to its customers, delivery channels, products and services, and geographic locations in which it operates. Fight bribery and corruption Bribery and corruption are illegal, dishonest, and damage the Bank's reputation. As such, the Bank is committed to fighting bribery and corruption in all its forms and fosters a culture of compliance and a genuine commitment to anti-bribery and anti-corruption standards. The Bank also recognizes that different jurisdictions, sectors, transactions, business opportunities and trade associations present higher risks of bribery and corruption and seeks to identify and manage these risks. Accordingly, the Bank seeks to implement strict policies, procedures and controls to help it act within its risk tolerance at all times and expects all of its employees not to give, accept or accept any form of bribe, kickback or kickback. The bank has a whistleblower statute and policies on accepting and offering illegal gifts or other benefits, collecting and lending funds/obtaining improper favors from customers and vendors, and holding a directorship/as partner/shareholder in private companies that operate in the Code of Ethics and administrative circulars are listed. By implementing the Code of Ethics and reaffirming its commitment to the tenth principle of the United Nations Global Compact, the bank expects all employees to not only fight corruption, but also demonstrate that they will not abuse the power of their position as employees for personal financial purposes. gain or non-financial gain, requesting or accepting gifts, endangering employees or the Bank. No Bank employee may offer bribes or other illegal rewards to obtain business for the Bank. The Bank also seeks to promote and influence all of its non-controlled interests (such as non-controlled joint ventures, partners, contractors, subcontractors, vendors, suppliers, service providers, consultants, agents, and others who perform work or services for or on behalf of of the Bank or any other person associated with the Bank's subsidiaries and affiliates) to have and implement anti-bribery and anti-corruption policies and procedures that are equivalent to the policy proposed by the Bank. Figure – 10 values ​​that support the bank's brand; Honesty We strive to earn and maintain the trust of our stakeholders through transparent actions that inspire them and align with their values. Integrity Maintaining our integrity is paramount to us in order to ensure that our brand value continues to grow for all stakeholders. Equity We are focused on doing the right thing by all our stakeholders to further deepen their trust in us and enrich invaluable relationships. Prudent Growth The Bank continued to strengthen related systems, processes, and controls during the year. Policy The Bank has developed a comprehensive anti-bribery and anti-corruption policy that will be submitted to the Board of Directors for approval in the first quarter of 2021. Once approved, it will be available on the bank's website. Management Analysis and Discussion Through on-site audits and online monitoring, the Bank's Inspection Department reinforces the provisions of the Code of Ethics. The scope and frequency of audits are determined using a risk-based model, and this approach ensures that clients continue to benefit from the highest level of integrity. In addition, there is a whistleblowing statute that allows employees to report known or suspected unethical fraud or misappropriation by employees to the Bank's Compliance Officer in order to safeguard the interests of the Bank and all its stakeholders. From time to time, Anti-Money Laundering (AML)/Counter Financing of Terrorism (CFT), Compliance, and Anti-Bribery and Anti-Corruption training is offered to all employees and members of the Board of Directors. Annual Report 2020 While the bank's core financial intermediation business requires compliance with government regulations, operating in a community of stakeholders also requires a "social license"—in other words, tangible evidence of conscientious, ethical behavior. The bank has long had a reputation for complying with both the letter and the spirit of the law. The bank places great value on the trust of its customers and stakeholders, a strength it has carefully nurtured for more than a century, and recognizes its responsibility to uphold the highest standards of ethics and integrity in its business activities. The Bank has a zero tolerance approach towards corruption, bribery and fraud. The Bank, its Board of Directors and all employees are committed to acting professionally, ethically and with integrity in all business relationships and with all stakeholders. Commercial Bank of Ceylon PLC Ethics and Conduct Responsible Citizenship We continue our commitment to the community and focus on improving lives and being a force for good. Responsibility We live our brand values ​​and are willing to take responsibility for our actions towards all stakeholders. 47
50. Commercial Bank of Ceylon PLC Annual Report 2020 Management Discussion and Analysis Customer Focus Delivering an unrivaled banking experience requires a deep understanding of our customers– your needs, your preferences, your concerns – and respond with products and services that meet and even exceed your expectations. It also means transforming mindsets and internal processes to remain agile and relevant in a rapidly changing environment. Consequently, the bank carefully segments its diverse customer base and tailors its services to each group. This focused approach consists of considering customer relationships as more than just the sum of transactions, and allows the bank to differentiate its value proposition, build customer loyalty and strengthen its brand. And in 2020, that focus was more important than ever. Customer Segmentation Table - 10 Criteria High Net Worth Company SME Micro Clients Mass Market Revenue/Relationship Size/Business Turnover/Exposure People with Banking Above Set Thresholds Exposure< Rs 500,000 People Outside of the Annual Business Annual Business Other Categories Revenue > Rs 750 crore / Revenue < Rs 750 crore / Exposure > Rs 250 crore Exposure < Rs 250 crore Price Sensitivity High High Moderate Low Low Interesting Products Transactional Investing, Trading and Project Finance Factoring, leasing and project financing Transaction Transactional Number of transactions Low High Moderate Low Low Commitment Level High High Moderate Low Low Objective Wealth maximization Financing and growth Financing and growth Financing and advice Personal financial needs History Company / Freelance Qualification Large and Midsize Businesses Midsize Businesses Self-Employed No. of r Banking Relationships Many Many Many Few Few Bank Competition High High Medium Low Medium The type of segmentation presented here allows the bank to gain greater knowledge and understanding of the customer and to align itself better with your unique banking needs. 48
51. Channel mix and target market in the Perceived Customer Preferences table– 11 branches Internet banking ATMs Call centers Mobile banking Account managers Business development officers Premier Corporate Banking Units √ √ √ √ √ √ X X SMEs √ √ X √ X X √ X Micro √ X √ X √ X X X Millennials X √ √ √ √ X X X Other √ √ √ √ X √ X √ √ √ √ √ √ √ √ Customer segment Self-service Commercial bank Official Facebook page Commercial bank Official Viber public chat Page 268 branches in Sri Lanka 19 branches in Bangladesh Network branch social www.combank.lk “ For everything about the bank to know” Customer Centricity Web ComBank Digital Flash ComBank Q+ WhatsApp Banking ComBank SimplePay Mobile Journeys Contact Center launched an integrated, multi-channel, trilingual contact center in 2020 Bank-on-Wheels Automated Field Cash Collection (AFCC) in response to the Need for Hourly Cash at the Customer's Door Although it is commonplace to speak of the symbiotic relationship between a company and its stakeholders, it would be widely ev idence this year that the bank and its customers are not dependent on each other for their survival and success. No aspect of the local economy has been left untouched by the COVID-19 pandemic, and many customer segments and business units are in dire need of financial relief. The banking industry itself was similarly affected, but as a national systemically important bank (D-SIB), it was crucial that the bank do everything possible to bring relief to customers and the economy. The bank saw this as an opportunity to reaffirm its commitment to its customers and make a tangible difference to their lives at a time of crisis. During the first wave of COVID-19 infections at the end of March 2020 and subsequent closures, almost 70% of the bank's branches in the closure areas remained open to provide uninterrupted service to customers despite the many challenges facing staff. Departments such as imports, exports and treasury were in continuous operation to ensure the continuity of services to the bank's corporate clients. Online customer registration for Digital Banking has been accelerated to allow customers to complete their transactions without having to visit a branch. Social networks played a crucial role as the main channel for urgent communications with bank clients when print media was not available. Financial Relief Initiatives The Bank has consolidated its efforts under the umbrella of “Arunella”, a financial assistance program that integrates multiple initiatives to provide more acute and efficient relief to clients. These initiatives were guided by the CBSL guidelines, but went above and beyond to capture as many customers as possible affected by the pandemic. A key element of the bank's initiatives has been a proactive communication campaign across all channels and forums to encourage customers to apply for relief. The bank's goal was not to interpret the eligibility criteria narrowly and strictly restrict borrowers, but to take a holistic view of all clients affected by the pandemic and come to their aid. Between the two waves of the pandemic during the year, almost 35% of the bank's portfolio was in default and 16% was still in that position at the end of the year. Management Discussion and Analysis Automated Banking Center Over 900 ATMs (including 250 CRMs) For customers who urgently need cash, the bank immediately rolled out its "Bank-on-Wheels" mobile banking units and increased its existing fleet by equip 5 11 vehicles with mobile Point of Sale Units. A schedule detailing the routes of these units was posted daily on the bank's website and social media pages. As card delivery was not possible during lockdown, expired cards have been unlocked for use at ATMs for a limited period. In early April, the mobile units processed more than 13,000 transactions worth more than Rs 175 crore in just over a month. Annual Report 2020 Figure - 11 Commercial Bank of Ceylon PLC High Net Worth Crowd Customer Focus: 49
52. and Micros have been hit by the effects of the pandemic. These sectors are the true backbone of the Sri Lankan economy and also remain the most vulnerable to economic shocks and the Bank has tried to strengthen the core businesses. Commercial Bank of Ceylon PLC Annual Report 2020 Management Discussion and Analysis Customer Focus Segmental Analysis of Moratorium Granted Under COVID-19 - As of December 31, 2020 (Wave -1 & 2) Table - 12 Value (Rs. Bn) Number of advances Company 176,315 2,673 SMEs 136,156 15,045 retail 127,580 59,180 768 Agriculture Mikro 0.642 3,473 81,387 MS Moratoriums granted for moratoriums as of December 31, 2020 (Welle -1 and 2) Table-13 HR1 Banks.81 31 Verification of presentation of the presentation 78,671 Total 443,873 81,31,31,381,31 years. , the concessions included flexible payment options, up to a 20% discount on interest earned during moratorium periods, reductions in credit card minimum payments and applicable interest rates, waivers and reductions in fees charged, and payment plans. debt consolidation. The bank also reduced interest rates on loans during the year (in line with the downward trend in interest rates in Sri Lanka) to provide affordable access to finance for customers with low sales. The rate cut included all categories of new credit offered by the bank, including loans for SMEs and microenterprises, and even pledges, leasing and overdrafts. Support for SMEs and microenterprises Having pioneered the provision of financial solutions for SMEs and microenterprises, the bank recognized that these sectors urgently needed help. 50 Between CBSL-mandated programs and Bank-initiated programs for COVID-19 support loans, the Bank paid a total of Rs 29.6 crore to affected businesses throughout the year. Under the CBSL Saubagya COVID-19 Renaissance Facility working capital loan scheme, the bank registered 5,637 applications totaling Rs 28 crore across the three phases of the scheme and disbursed 5,387 loans totaling Rs 26.6 crore. rupees at the end of 2020. The bank lent further rupees 1.4 crore under the CBSL liquidity facility for eligible construction contractors and other government providers. Concessionary financing programs Table - 14 Loan program Number of loans Value (Rs. bn) Saubagya C-19 Renaissance Phase I 708 2,817 Phase II 3,878 17,711 Phase III 801 6,126 5,387 26,654 Subtotal Contractor Liquidity Facility Total Program 30 1,467 5,417 28,127 Facilitated by the bank a Simple access to credit and faster processing with simple documentation provided by email or WhatsApp. The bank's website listed the names and cell phone numbers of two executives (who often received more than 200 calls per day). The effectiveness of the bank's response was reflected in the fact that in a market of 26 licensed banks, the bank submitted up to 24% of the applications for the Saubagya program and up to 32% of the value of the entire program was ab June 2020 awarded to bank customers. As of the end of the year, the bank was still the leading lender for COVID-19 relief among private sector banks. Disbursement of loans under the Saubagya program Table - 15 Total recorded value of loans disbursed under the Saubagya program (Rs. bln) 72.07 45.77 Value of loans requested by for commercial bank clients (Rs. billion) 17, 18 14.76% of loans requested by commercial bank customers 23.83 32.25 Total number of loans under the Saubagya program 26,291 18,007 Number of loans requested by Commercial Bank customers 3,958 3,557% of loans requested by Commercial customers Bank 15.05 19.75 Dec 2020. Beyond the CBSL programs, the bank also started two major loan programs for SMEs affected by the pandemic. The first was a pledge of Rs 10 billion financed through a loan from US$50 million from the International Finance Corporation (IFC), which has been a longtime partner of the Bank during its 50 years of operations in Sri Lanka. IFC has supported the bank through various investments and advisory services and currently owns a 14.45% equity interest in the bank. This program has been used to expand lending to SMEs, with more than a third going to women-owned businesses. This program also targeted those who were not eligible for Saubagya facilities. The second Bank-financed loan scheme, the Dirishakthi COVID-19 Support Loan Scheme, targeted micro-enterprises. This scheme was designed to meet the working capital needs and revitalize the operations of companies whose annual turnover was below Rs. The program was implemented under the supervision of the Bank's 19 Agriculture and Microfinance Units (AMFU), which play a key role in helping the Bank identify the specific needs of entrepreneurs who need support to grow their agriculture or microenterprises in developing. Bank Funded Assistance Programs Loan Program Table - 16 Number of Loans Value (Rs. bn) COVID-19 Support Loan Scheme 102 1,454 Dirishakthi COVID-19 Support Loan Scheme 313 0.034
53. Investing in customer relationships It is understandable that the bank has been affected by the variety of moratoriums and concessionsProfitability As described on pages 20-26) of 'Financial Report', interest income fell by 4.26% from Rs 127,780 crore to Rs. Fee income fell 9.17% from Rs 12,407 crore to Rs 11,269 crore due to the impact of the COVID-19 pandemic on import and export revenues, fee waivers and reductions by the bank and a decrease in credit card fees. However, the bank does not consider this as a mere loss. The bank sees this decline in profitability as a trade-off: the diversion of financial capital to build capital from customers and relationships. The bank believes that focusing on immediate profitability would jeopardize the long-term collective success of the bank and its customer base. However, about 70-80% of the country's population lives in rural areas. Despite the rapid increase in demand for digital products and services following the outbreak of the pandemic, rural demographics are reluctant to adopt digital channels for various reasons. While the Bank strives to provide and encourage the benefits of digitization to its rural client base, it also recognizes that it must meet current client expectations. During the year, the bank introduced the Automated Field Cash Collection (AFCC) process to better serve the micro and small business segment, and two AFCC locations were opened in Chankani and Kodikaman. This initiative was launched with the intention of reducing customer transaction costs and the opportunity cost of visiting a branch, and also aims to strengthen door-to-door operations of AMFUs. The bank continued its partnership with Hayleys Agriculture Holdings Ltd to offer a range of co-leasing promotions, allowing farmers to purchase new farm equipment at low cost with special discounts and flexibility. The bank has also partnered with Associated Motorways (Private) Limited for an "Agri Lease" promotion, which offers farmers the chance to enjoy the lowest monthly lease fees and other benefits when buying tractors. The bank runs national awareness, professional training, and financial education programs and workshops for SMEs and microenterprises from various economic sectors through various channels. The bank organized three skills development programs in the north, east and southwestern regions of the country in the first quarter of 2020, benefiting more than 300 SMEs. Since face-to-face meetings were subsequently restricted, the Bank continued to support the sector through webinars. The bank, in collaboration with the Sri Lanka Institute of Certified Management Accountants (CMA), held a webinar on “Financial Literacy and Banking Solutions for Small, Medium and Micro Entrepreneurs” and an exclusive webinar for women entrepreneurs to help them adapt to the requirements to help the "new normal" after the COVID-19 pandemic in cooperation with the Women's Chamber of Industry and Commerce (WCIC). The latter built on the success of a face-to-face program held in January 2020 before the wave of lockdowns and restrictions called "WomEntrepreneur", also in partnership with the Women's Chamber of Industry and Commerce (WCIC). This program was aimed at women entrepreneurs who work in SMEs, with a focus on guiding a vision towards sustainable businesses. The Bank also organized a webinar in collaboration with the National Chamber of Exporters to support exporting SMEs during the pandemic. Customer focus An important step for the Bank's SME customer base was the launch of ComBank Simple Pay, a new platform designed to help SMEs digitize their businesses and engage in e-commerce (see also pages 53-56 ). This product, the first of its kind in Sri Lanka, enables SMEs to create their own online store without much web design and development effort. The bank has also launched a MasterCard-branded credit card for entrepreneurs in the SME category. The bank's goal was not to interpret the eligibility criteria narrowly and strictly restrict borrowers, but to take a holistic view of all clients affected by the pandemic and come to their aid. Management discussion and analysis To support sales units, the bank introduced the SME Lead Management System (SME LMS) in July 2020. This system will help manage the lead cycle effectively while improving the conversion rate and delivery of credit, and facilitates the collection of the information required for credit verification in a structured way in the field. Shorter loan delivery times. In fact, the results are already extremely promising. During the reporting year, the average processing time (TAT) was reduced from 50 days to 28 days as of December 2020 through the centralized credit assessment process. In addition, a new loan assessment model for SMEs under Rs 10 crore was launched to speed up loan delivery and the end-to-end TAT was reduced to just 13 days in this assessment. In addition to direct financial assistance, the Bank continued to support the SME sector in various ways. Membership in the BizClub, a banking forum dedicated to providing a wide range of support services to SMB customers, increased to 4,076, up from 1,613 SMBs in 2020. In December 2020, it was developed and implemented in branches an SMB dashboard that monitors the account performance of Biz Club members. The dashboard allows you to recognize early warning signs and identify new credit needs. Two new AMFUs (at Nawalapitiya and Maravila) were also established. Annual Report 2020 The bank supports the national initiative to build the SME sector for sustainable growth and has developed its own SME strategy following an audit by McKinsey Consultants. During 2020, seven new SME sales units were formed to drive SME sales initiatives in the North, East and North-Central regions. More than 50 Tab devices have been provided to SME managers and SME sales units to improve SME acquisition and speed up lending. Non-financial support for SMEs and micro-enterprises Commercial Bank of Ceylon PLC In addition, the Business Rehabilitation Unit worked with 15 companies to prevent Rs 2.15 crores of assets from falling into a distressed category. 51
54. Prioritizing Customer Experience Commercial Bank of Ceylon PLC Annual Report 2020 Management Discussion and Analysis Customer Focus Despite Difficult Conditionsthe bank continued to develop new products and services for different customer segments. A full description of the Bank's digital projects can be found in the section below, but here are some of the broader client initiatives undertaken in 2020. Women's Entrepreneurship Program The bank itself worked on developing its own internal capacity attending a United Nations Development Program (UNDP) webinar in support of the SME sector, and was the only Sri Lankan bank to participate in this discussion. The bank also participated in the INNEX 2020 SME exhibition and workshop in Kandy, organized by the Central Province Ministry of Industry in cooperation with the Ministries of Youth Affairs, Women's Affairs, Rural Development, Cooperative Development and Industry. , as well as a summit company in Hambantota, organized by the CMA under the theme "Solutions to meet the challenges of SMEs in financial management, bank financing and business leadership in the New Post-COVID Economy". At this last event, the bank set up a help desk to provide information and banking solutions to the more than 400 SMEs present. The Bank also financed two programs organized by Women in Management (WIM) in conjunction with the Department of Women's Affairs, supporting more than 90 microentrepreneurs. Banking for Women The Bank has recognized the importance of a more gender-sensitive approach, as evidenced by the number of seminars and webinars conducted by the Bank described above. Women make up the majority of the Sri Lankan population and the Bank recognizes that fulfilling their aspirations for empowerment and success also benefits the country's economic growth. During the year under review, the bank launched a vertical dedicated to women and is in the process of formulating a 360-degree approach to meet the needs of this demographic. This comprehensive approach will involve all segments, from female SMEs and micro-enterprises to housewives and working women. At the center of the bank's efforts earlier this year was the launch of its integrated, trilingual, one-stop contact center to serve its customers and stakeholders 24 hours a day. The center is staffed with customer service representatives who handle inbound and outbound calls, written communications, and inquiries and comments submitted via social media, and includes a strong training and leadership group to ensure better follow-up and supervision. The center aims to ensure that customers have a positive experience every time they interact with the bank. Despite many staffing challenges during the lockdown and beyond, the center has been able to provide seamless service to clients throughout the year. Card and Cashless Initiatives The Bank made significant progress in promoting credit and debit cards and other cashless payments during the year. While the switch to cashless transactions was already a practice growing exponentially around the world, it gained more prominence this year as the use of banknotes was discouraged to reduce the spread of COVID-19. The bank, together with PAYable (Pvt) Ltd. launched a fully integrated all-in-one Android POS device, one of the first devices to accept contactless payment card transactions in Sri Lanka. The NFC-enabled machine supports most card payment options available in the country, as well as QR-based payments from LankaQR, VisaQR, Masterpass (MasterCard QR), WechatPay and Alipay. The bank has also launched an Android Mini Point of Sale (POS) device that offers similar functionality to allow merchants to accept card payments anywhere in Sri Lanka. This mini POS is strategically positioned to serve the micro and SME industry, providing them with a cost-effective mechanism to access the cashless ecosystem. Other card-related customer initiatives include: z Migration of the bank's entire debit and credit card base to NFC technology. z Launch of a missed call credit card service for credit card holders. z Allow credit and debit card holders to automate payments to the Ceylon Electricity Board (CEB). z Allow credit card holders to automatically sign up for electronic statements, reducing the use of paper statements (this initiative was driven by all registered users who entered a raffle). z Introduction of a prepaid travel card with the latest NFC and PIN technology. Other notable initiatives include: z Launch of a "Cash on Fixed Deposits" feature, which allows depositors to withdraw against their FD value using a debit or credit card linked to their account. This facility has been specifically designed to allow clients facing unforeseen financial problems to withdraw funds from their FD without terminating the entire contract. z Launch of 'Vibe', a youth savings account open to any Sri Lankan aged 18-35 with a range of attractive interest rates and benefits. z Offering up to Rs 500,000 of free accident cover to 'Anagi Women's Savings Account holders', subject to maintaining a minimum account balance. Vibe account launch
55. opposite platforms, digital products and services, and back-end infrastructure and processes, provided it with a solid foundation to master these new challenges. The pandemic has also helped expose limitations and vulnerabilities in today's digital banking space. Despite progress in building a digital banking ecosystem, the massive demand for more digital services makes it clear that there is still work to be done both within the bank and more generally. From opening new accounts and onboarding customers on digital platforms to loan applications and identity authorization, the system is still heavily reliant on the physical model. For example, existing KYC and AML policies typically require personal identity verification for customer onboarding, which became challenging under the circumstances. But the bank's response in its digital initiatives and the CBSL in relaxed regulations (like KYC in person) are all positive developments that bode well for the future. Digital roadmap for 2023 The bank has set three digital goals for 2023: Become a digital bank by 2023 Figure – 12 Embrace digital technology to improve user experience and convenience Goal 1 Annual report 2020 In 2020 it is a side effect of the COVID-19 pandemic that has inevitably acted as a catalyst for digitization, accelerating the pace of digital transformation and adoption. From April to May, when the entire country was on lockdown and banking became one of the most important services in the country, the demand for continuous service through digital channels escalated. The initiatives and investments that the bank has made in the last five years to build its digital ecosystem: its client base Commercial Bank of Ceylon PLC. It is obvious that we have experienced a digital revolution in recent years. Traditional business models and ecosystems are changing rapidly, and the pace of technological change and the rush of agile new entrants into the financial landscape have increased competition and risk. The bank has accepted these challenges as catalysts for significant innovation and encouraged them to establish themselves as pioneers in the digital banking space. Management discussion and analysis Leading through innovation Building complete digital banking platforms integrated with all system networks and ecosystems to provide a one-stop-shop experience for all customers, from retailers to SMEs and enterprises. Goal 2 Increase digital usage and user base Increase the proportion of digital usage by enabling and promoting digital transactions and interactions Goal 3 Downsize the traditional model and grow the semi-digital branch model Digitize banking customer journeys traditional 53
56. Correspondent, the bank will continue to invest in transforming its traditional banking processes into digital processes, integrating with other ecosystems (for example, connecting with internal workflows for less manual intervention) and modernizing internal systems to adapt to anticipated changes in the regulatory environment (open APIs, digital KYC, etc.) and risk management. The bank also places emphasis on “building the bank of the future”, i. h retrain employees and attract specialized talent, build more partnerships and develop their data analysis skills. IT infrastructure investment table – 17 2020 Rs.Mn. Commercial Bank of Ceylon PLC Annual Report 2020 Management Discussion and Analysis Leading Through Innovation Indicator/Year 54 2019 Rs. Mn. 2018 crore 2017 crore 2016 crore Investments in hardware (IT equipment) 505,742 567,689 1,034,115 791,165 620,541 Investments in software (licences, etc.) 409,322 387,432 449,354 433,16 433,818 In the report year digital of existing customers grew 140.27% in the last two years above the general trend. The bank has also implemented 100% digital onboarding for new clients through its innovative Flash application and adhered to CBSL's digital KYC guidelines during lockdowns. Digital Channels Migration Table - 18 Indicator/Year Digital Adoption (Existing Customer Onboarding) New Customer Acquisition/Onboarding (Digital KYC) Percentage of Total Customer Transactions Completed Digitally Combank Digital launched in the Maldives market and is on schedule to launch in Bangladesh in 2021. Beyond The Bank plans to make this app trilingual (for Sri Lankan businesses) and add Bengali (for Bangladeshi customers) and Divehi (for Maldivian customers) options in the near future. The bank has also launched a general application that includes the complete set of mobile applications of the bank on the phones of our customers. Total Financial Transactions Initiated Through Digital Channels Table - 19 Volume 333,941 Customers (140.17% YoY Growth) Value in 2019 2019 25,741,711 crore 2020 2,411.39 crore 31.92% Growth 32.31 % 2020 2018 139,040 average customers (110.2% year-on-year growth)3 %6,110.21 customers 39.92% average growth YoY) 9,680 customers n. Alaska. N/A 31.75%* 32.18%* n/a R The bank's online platform ranks as the online platform with the most subscribers in the country. During the year under review, the bank integrated online and mobile banking channels into a single omnichannel platform with the launch of ComBank Digital, powered by US-based global financial services technology provider Fiserv. Another industry first, ComBank Digital brings together all of the bank's digital banking channels, including online banking, mobile and mobile banking application (WAP), into a new highly secure, easy-to-use, web-capable application. responsive, designed for both retail and enterprise customers right is the user. ComBank Digital is not only more vibrant and stylish, but also comes with a range of built-in options that allow users to self-manage their digital banking preferences, offering an unprecedented level of functionality and customization. This brings the bank closer to its digital ethos of greater segmentation and granularity, which allows for unique user experiences. success in processing income tax payments to the Department of Internal Revenue on this platform. This platform places the bank at the forefront of digital banking. Digital Flash Account In 2020, Flash, the bank's innovative trilingual banking application, was updated with several features that are revolutionary in the local banking context and further drive the bank in its efforts to digitize the customer journey. A QR payment module has been added to the app, allowing Flash users to scan a Lankan QR code from any merchant to make payments directly from business bank accounts or accounts at other banks. Subsequently, a QR code update enabled by the bank's partnership with PickMe and integration of the two organizations' respective apps enabled Flash users to digitally pay for their rides on PickMe's ride-sharing service. A partnership with Tenaga Car Parks (Pvt Ltd) enabled users to pay for parking in Tenaga-managed on-street and off-street lots through the app without having to visit a registry or find a toll collector. Introducing ComBank Digital: Standard email services like checking, savings, investments, loan and credit card account balances, time deposits, personal and home loans, Treasury bill investments, and stock transaction payments can be made securely through ComBank Digital. The platform performs all transactions between user accounts, third-party commercial bank accounts, and accounts at other banks in real time, and supports bill payments for about 70 companies in nine categories, such as telephone, electricity, water, credit cards, insurance, pay TV. , education, rates and school fees. In addition, the bank has also been recognized by CBSL as an active supporter of the LANKAQR initiative.
57. But the really new heart of this module is the"Save the Environment" tool that allows users to calculate the environmental impact of their spending. The bank is the first company in the region and the fifth bank worldwide to launch an instrument developed on the basis of the leading climate impact index approved by the United Nations Framework Convention on Climate Change (UNFCCC), the Aland Index. 1.0. This tool analyzes transaction data to estimate the carbon footprint of each transaction made through the Flash payment options in the app, including Flash debit card scanning and QR codes. This reveals to the user not only the financial costs, but also the hidden environmental and social costs of the user's consumption behavior. Understanding this data can help Flash app users change their habits or make decisions to invest in the environment to offset the impact of their consumption. Flash Usage Chart - 20 2020 Growth % User Base Growth 92.68 YoY Usage Growth Value Growth 468.52 Volume Growth 323.31 Flash App Investment (eFD) Up to 145.4 Insurance Apps Lifetime Up to 45.3 Money Transfers Up to 354 Bill Payments up to 260 Table - 21 2020 Annualized IPG Volume (Rs.Bn) 2019 2018 2017 2016 17,338 17,288 11,649 6,972 4,058 YoY Growth Rate (%) 0.28 48 67 72 IPG Merchants 375 229 190 190 190 915 The Plus Referrals The bank's app, ComBank International ComBank RemitPlus Launched in December, ComBank International Migrants Day 18, 2019, developed and updated in 2020 in its first full year of use. Remittances from Sri Lankan expatriates are one of the country's main sources of income. The bank also enhanced the blockchain-based remittance channel that the bank launched in partnership with RippleNet and expanded this service to South Korea and the Middle East through other RippleNet partnerships. ComBank expands self-registration for Western Union (WU) Cash to Account online and digital banking launched in 2020 and is another example of how the pandemic acted as a catalyst for the bank's technological advances. WU Cash to Account was launched during the lockdown period in the first half of the year to allow customers to request WU cash transfers without having to visit branch counters. Since then there has been significant growth. Online Payments WhatsApp Banking Within the burgeoning e-commerce space, the bank has quickly established itself as a market leader, with its payment processing services now accounting for around two in five transactions. This 40% market share is a testament to the role the bank has played in supporting the country's retail industry and encouraging online sales for customers. The bank currently supports online payment processing for more than 500 merchants through MasterCard Payment Gateway Services (MPGS) and Visa Cybersource (launched by the bank in Sri Lanka in 2020), two of the leading payment gateway platforms. fully integrated with Payment compliant are the requirements of the Card Industry Data Security Standard (PCI-DSS). The bank's third solution IPG launched its WhatsApp banking solution in December 2020 and this product represents perhaps the simplest and fastest form of mobile banking. By sending a simple "hello" to a specific WhatsApp number, the user is given simple guidance on how to access various services including account balance and history viewing, checkbook request, information on time deposits, home loans, etc. Exchange rates and self-registration in ComBank Digital. Another key feature of this product is the ability for prospective clients to complete registration to open a new account with Leading Through Innovation, which facilitates and promotes discipline and personal financial management. Flash Spend Tracker module with payment categorization option allows users to categorize their purchases. A dashboard provides an overview of a user's spending habits and provides a downloadable history of monthly transactions in the form of an electronic statement. ComBank SimplePay also launched in 2020. This product is a local adaptation of MasterCard's Simplified Commerce product and offers local entrepreneurs and SMEs the opportunity to create their own online store. Annual Report 2020 Flash App Screen During the year, the bank was recognized by the CBSL for its pioneering work in improving the country's digital payments landscape. In 2019, ComBank bank launched Q+, the first Quick Response (QR) based payment app certified and released under LANKAQR, which enables the bank's entire debit and credit card base to make QR payments. This year the app was relaunched with new features to improve the user experience. Both the ComBank Q+ consumer and merchant applications have been updated to include biometric authentication, login and self-registration. Bank customers can now pay a variety of bills instantly through the app, following the launch of an in-app bill payment feature. In addition, the bank was the first in Sri Lanka to allow credit card holders to settle their outstanding credit card balance by scanning a QR code that appears on their monthly credit card statements. In another initiative, the bank has partnered with Mobitel to enable mCash merchants to accept QR code-based payments from any LANKAQR-registered mobile payment app, with the transaction being processed through the Q+ engine. Merchant Bank of Ceylon PLC Combank Q+ 55
58. die Flash-Application. This product is positioned as an easy path for clients into the world of digital banking, which can subsequently lead to deeper and more sustainable forms of digital engagement. In just six weeks of use, the app has seen 8,167 new registrations and a total of 35,411 transactions. Commercial Bank of Ceylon PLC Annual Report 2020 Management Discussion and Analysis Leading through innovation ePassbook The bank has enhanced its ePassbook app with features such as self-registration, real-time transaction notifications and biometric login, increasing the flexibility of account management, user autonomy and convenience. Launched in 2016, the app was the first digital passbook in the Sri Lankan banking industry and remains the only mobile app of its kind to date. Process Improvements While the bank's efforts focused on responding to the conditional and changing situation caused by the pandemic, it introduced several new automated processes focused on creating robust digital back-end processes. Notable developments include: Digital banking from the industry leading data analytics tool Qlick Sense. Both entities used this tool to develop real-time digital dashboards to support day-to-day business decisions with a 360-degree view of the customer. z Create host-to-host framework and connectivity for enterprise customers. The bank allowed CAMSO (one of its main business clients) to seamlessly integrate with the bank's internal banking systems, allowing for seamless financial transactions. IT Operations and Security The bank prioritizes maintaining uninterrupted data services for all stakeholders, managing growing vulnerabilities to cybercrime and information loss, and preparing for the future. The IT support unit monitors and maintains uptime and SLAs for the entire branch network in Sri Lanka, Bangladesh, Myanmar and the Maldives, including: z The introduction of electronic slips for cash and check deposits has improved the processing time for customers and also increased the Accuracy. z By centralizing the remittance verification process, the bank was able to reduce operating costs through staff reductions at branches and improve operational efficiency by speeding up the process. z Automation of the post-dated check processing process, which allowed the bank to increase the efficiency of a normally cumbersome process. 10,000+ IT teams 900+ banking touchpoints BCP Center Management z Launched the bank's first hyper-automation project to fully automate bank user ID management using IBM BAW (Business Automation Workflow) and IBM RPA ( Automation of robotic processes). This dramatically reduced the response time for password resets and reduced staffing requirements in the user ID administration department. z Fully automated electronic loan module for employees that helps minimize human intervention as the system itself screens applicants to identify eligible applications. z The introduction of a Foreign Exchange Rate Request Port at the Treasury, which has been fully integrated into the Treasury system. Instead of calling the Treasury, branch employees can now request quotes and receive confirmation through the portal, reducing the average time it takes to complete a FX transaction from around 8 minutes to 2 minutes. The plan is to create a customer interface for this platform and ultimately automate the quoting and price confirmation process using AI. 56 z Adoption in the Card Center and in the Network and Communications unit is responsible for providing secure and reliable communication channels for all interested parties, both internal and external, throughout the branch network. In 2020, the data center uptime of defined critical systems (Priority 1) was 99.97% and the network uptime was 99.98%. In 2020, the bank successfully maintained PCI DSS and ISO 27001:2103 certifications and obtained ISO 20000 certification. ISO 27001:2013 is a major international information security management standard that specifies the requirements for the establishment, implementation , maintenance and continuous evaluation and improvement of an information security management system. The bank has successfully maintained the ISO 27001 standard for almost 10 years. The bank has also maintained the prestigious Payment Card Industry Data Security Standard (PCI-DSS) V3.2.1 certification for three consecutive years. PCI-DSS is the global data security standard adopted by payment card brands for all companies that process, store or transmit cardholder data and sensitive authentication data. It is one of the more technical standards and maintaining it requires significant expertise and resources. This certification, which also covers operations in Bangladesh, facilitates the rapid growth of the bank's cards while mitigating the risk of security breaches and data theft. In 2019, the bank completed the ISO/IEC 20000 Level I audit, the world's most recognized standard of excellence in IT service management. The stage II audit was successfully completed in 2020 and the bank received the ISO/IEC 20000 Professional Qualification Certificate. The implementation of this standard will enable the bank to improve the efficiency and effectiveness of IT services provided to internal customers and external and will allow the bank to get more value from its IT investments. The bank completed the implementation of the Baseline Security Standard in 2020, the result of which was the development of risk treatment plans for each department. The bank has also implemented a state-of-the-art anti-money laundering (AML) solution for operations in Sri Lanka, the Maldives and Bangladesh. This initiative is more powerful than the previous AML solution and allows the bank to identify AML-related use cases and filters that align with global standards. In addition, this system is capable of integrating other peripheral systems, especially the CBSL-GOAML application.
59. Productivity and efficiency indicators Beyond thatWhile the bank's core business of financial intermediation requires compliance with government regulations, working within a community of stakeholders means we also need a "social license"—in other words, tangible evidence of conscientious, ethical behavior. Operational excellence cannot be narrowly defined, but requires, among other things, investments in the well-being of our stakeholders and the environment. This balance between short and long term interests is the essence of the Bank's profitability. Highlights: z Cost-to-income ratio and revenue per employee improved over the course of 2020. z An average profit per employee of more than Rs 3 crore over the full five-year period. A different work environment At the start of the first wave of COVID-19 infections and subsequent lockdown in March 2020, the government declared banking an essential service. Bank Response Table – 22 Indicator Cost Income (Including Taxes on Financial Services) (%) Cost Income (Excluding Taxes on Financial Services) (%) 2020 2019 2018 2017 2016 5 Annual Average 39.96 49.41 46 , 35 49.82 51.32 33.95 36.865 40 42.67 38.41 income per employee (par.) 29.605 29.37.462 22.954 18.677 25.61 profit per branch (performance) 57.050 59.557 59590 3.490 3,490.2952,965 57.050232333. Annual Report 2020 The backbone of the bank's success has long been its emphasis on operational excellence and a critical factor in its sustained profitability. In today's banking landscape, where competition is fierce and a variety of similar banking products and services are saturating the market, speed, accuracy and quality of delivery are key differentiators. Meeting customer expectations while remaining profitable requires the bank to continually evaluate and simplify processes and use its resources in the most productive way possible. Commercial Bank of Ceylon PLC The COVID-19 pandemic has presented a multitude of unprecedented challenges. The focus was on balancing the bank's broader societal duty to provide continuous service to our customers while meeting its responsibility to protect the health and well-being of bank employees. The bank's effort throughout the year -as evidenced by the number of branches that remained open during the lockdown, the number of transactions processed, the number of moratoriums and other relief measures processed and paid, etc.- was pioneering in the sector banking. This is a testament to the effectiveness of our emergency response and the dedication, attitude and energy of our people. Discussion and analysis of operational excellence management 57
60. Commercial Bank of Ceylon PLC Annual Report 2020 Management Discussion and Analysis Operational excellence for the pandemic was led by Business Continuity Management(BCM) Steering Committee made up of members of the Corporate Management Team and under the strategic direction of the Board of Directors. Members of the corporate management team represent all the different functions of the bank, from personal and corporate banking to operations, IT, human resources, services and security. The committee has developed a plan that provides guidance for maintaining essential functions and services during the pandemic, focusing on three key areas: (1) infection prevention and control; (2) operational support and logistics; and (3) case/incident management related to the pandemic. The implementation of this plan was then assigned to the Business Continuity Management Unit (BCMU) and a specially formed Special Pandemic Management Committee (SPMC) of seven members. The robust pandemic plan, which is a subsection of the bank's Business Continuity Plan (BCP), enabled the committee to quickly identify the bank's mission-critical operations that needed to continue without interruption: Treasury, Digital Banking, Central Card, Contact Center, Data Center and certain designated branches and Trade Services (which have been added to the bank's BCP list of mission-critical operations following government instructions as the country mandates trade under lockdown conditions). Within this plan, banking functions were also prioritized as necessary to allow for the most efficient allocation of resources possible (for example, allowing cash withdrawals was deemed essential). all bank employees, to raise awareness, short-term logistical instructions and to mobilize employees for shift work. BCP Site Preparation Table - 23 Sitting on site (1) Working at alternate sites; Mount Lavinia 38 (2) operates from remote locations; and Piliyandal 56 (3) work from home. Maradana 40 Although the bank has periodically updated and tested its Business Continuity Plan (BCP), these protocols have not been tested in scenarios of the scale and impact derived from the pandemic. The proportion of staff having to work remotely was higher than anticipated when these protocols were developed, bringing with it a new realm of logistical requirements (such as providing food, accommodation, transportation, medical safety equipment, etc.). However, the bank was able to immediately implement effective and secure remote work solutions to provide uninterrupted services to clients. Some key elements of the Bank's immediate operational response to the pandemic were: z Providing meals, lodging and transportation for all mission-critical employees during the lockdown to ensure operational and business continuity. z Establishment of three alternative operating sites with support from IT, logistics, facilities and the Business Continuity Management Unit (BCMU) to establish infrastructure, facilities, IT systems and networks. z Provide branch workers with food, lodging and transportation as needed to enable them to travel during the lockdown. Communicate with employees through an automated call tree system that can trigger SMS alerts for employees. The COVID-19 pandemic also required the implementation of health and safety measures at all Bank locations. These measures included the installation of sanitizing equipment such as foot-pedal sanitizers at entry points and other locations throughout all buildings, mandatory temperature checks, and measures to minimize points of physical contact and maintain social distancing. In anticipation of the pandemic situation becoming the "new normal," the bank was one of the first to install permanent glass partitions/screens in branches to protect employees who came into contact with external parties, such as customers. and providers. The bank also developed other creative internal solutions, such as placing chopsticks in the elevators to press buttons, which minimizes direct contact with the surface. The bank has been very proactive in procuring personal protective equipment (PPE) early for the safety of employees and customers, and stocks have been continually replenished to ensure all employees have easy access to items such as masks, hand sanitizer, hands and gloves. Since the second wave, the bank has also paid for a random PCR testing program for head office and branch employees and provided support for employees infected with COVID-19. Exposed branches and head office departments are thoroughly disinfected. COVID-19 related expenses Figure 13 Total COVID-19 related expenses Rs 85.8 crore Personnel transportation Rs 6.6 crore Disinfectant cans Rs 20.5 crore Surgical masks Rs 27.1 crore Installation of screens permanent Rs 19.0 crore 58 Continued operations while limiting exposure To ensure continuity of operations and prevent exposure and spread of infection, the most urgent task for business units was to divide critical equipment into smaller units and protocols for surgical gloves Rs 4.8 crore IR thermometers Rs 3.5 crore PCR tests Rs 3.8 crore Aid kits for infected staff Rs 0.5 crore
61. The bank engineThe successful creation of value has always been the workforce. Our team of 5,057 people translates the bank's strategy into action, represents the bank's values ​​and mission, and ensures that the bank consistently delivers on its promises to stakeholders. In return, the bank seeks to add value and empower its employees. The bank is aware that the way its employees think and feel about their work is directly related to customer satisfaction. The bank strives to create an environment in which employees can achieve exceptional performance, fulfill their potential and feel connected to their purpose, their colleagues and the organization. The bank also works to empower its employees to be adaptable and remain relevant in a rapidly changing banking landscape by fostering a culture of continuous learning. These are key elements in the bank's strategy to build a strong brand for employees and be the employer of choice in the industry. 2019 Taken on leave during the year 69 84 Must return this year 73 64 Returned during the year 73 64 Returned last year 64 48 Still employed at 12 months Rate of return (%) Rate retained (%) Focus on morale and safety of employees The year under review showed the commitment, resilience and perseverance of the Bank's employees. While details of the logistical challenges and health and safety precautions are provided above, it is worth commenting on the well-being and morale of the staff the Bank has been attentive to over the year. Certainly, the employees were not immune to the sense of confusion and uncertainty sweeping through the community at large. The rhythms of work and life were disrupted in unprecedented ways. In addition to the greatest possible commitment to the safety of all employees, the bank emphasized two aspects: clear communication and flexibility. Management took a hands-on approach, communicating regularly with employees, making themselves personally available, and promoting a culture of openness and honesty about the situation. An important aspect of communication is, of course, listening to employees and allowing them to share their views in order to create a positive and productive work environment together. Every effort has been made to accommodate employees' work environment preferences, both in terms of location and working hours. The bank recognized that in a diverse, multi-generational workforce, employees have different family situations, health issues, etc. and a flexible approach was needed. Despite the pressures of the year and the need to remain productive, the bank believes it is vital to adhere to recognized standards and principles on labor practices, human rights, and occupational health and safety. More than ever, it was important to prevent burnout and burnout, boost morale, and provide employees with an environment in which they can thrive and fuel the bank's success. It is an amazing testament to the camaraderie and team spirit of the workforce that, even under these difficult circumstances, productivity remained high and consistent throughout the year. 61 45 100.00 100.00 95.31 93.75 More than ever in the year under review, it was important to ensure safe and fair working conditions and practices, prevent burnout and burnout, raise morale, and provide employees an environment in which they can develop and drive the success of the bank. Operational Excellence 2020 Number of Employees Management Discussion and Analysis Our employees measure up Table - 24 Annual Report 2020 Secure Work from Home To facilitate remote work and work from home, the Bank has identified a leading remote access solution in the industry, providing multiple layers of security, such as encrypted channels for bank user communication, multi-factor based login authentication, restrictions on data transfer between user devices and banking systems to control loss of data and malware proliferation, and centralized management and monitoring of remote users. More than 100 laptops and IP connectivity were made available to employees along with Office 365 and Microsoft Teams was used as the main virtual forum for company and regional meetings. Employee retention rate (maternity leave) Commercial Bank of Ceylon PLC In addition, the bank has canceled all social events involving large gatherings and has encouraged all meetings to be held via virtual forums. The bank also closed its canteens at its main office and Union Place buildings to prevent large gatherings of employees in tight spaces. When face-to-face meetings were required, these were held strictly in accordance with social distancing guidelines. 59
62. Commercial Bank of Ceylon PLC Annual Report 2020 Management Discussion and Analysis Operational Excellence Employee Communication Channels Illustration– 14 employee surveys Employee TV Chatbot Circular Intranet Scheme of suggestions from the company Collective bargaining A great success of the year was the timely negotiation of the bank's collective agreement with the bank branch of the employee bulletin board Forum of managers Town Hall Meetings Unions Ceylon Bank Employees' Union (CBEU). The bank and CBEU have been able to secure a package of increases that last for the duration of the three-year agreement, which will last until December 2023. It should be noted that the negotiations were compromised by the financial situation caused by the pandemic. This once again demonstrates the strong and collaborative partnership that the Bank and the CBEU have built over decades. the bank began to make a monthly contribution to this fund. Employees must have been employed for more than five years to be eligible for the fund and are guaranteed a return equal to or better than the existing bonus system. Payment is made in the form of a lump sum upon termination or termination of employment. Employees are expected to derive significant benefit from this initiative through the accrual of interest over the years. New pension fund Another important initiative was the start-up of the defined contribution pension fund for employees who joined from the year 2000, coinciding with the Bank's centenary celebrations for employees. Employees' outstanding balances in the bonus reserve will be transferred to the fund of this new plan and thereafter. Diversity The Bank believes that a diverse workforce broadens perspectives, builds resilience and improves performance, and remains committed to equal opportunity principles regardless of gender, age, race or religion in all resource management processes humans. Table – 25 Sri Lanka Bangladesh Total Count Percentage Count Percentage Count Percentage 1,106 23.19 79 27.43 1,185 23.43 1,105 23.17 63 21.88 1,168 23.10 1 0.02 16 5.55 17 0.33 3,663 76.81 209 72.57 3,872 76.57 3,662 76.79 174 60.42 3,836 75.86 1 0.02 35 12.15 36 0.71 4,769 100.00 288 100.00 5,057 100.00 Women 203 37.66 - - 203 37.66 Men 336 62.34 - - 336 62.34 539 100.00 - - 539 100.00 Women permanent contract Men permanent contract 60 Letter from whistleblowers Emails Compensation and job security job security for your employees. This year all appraisals have been completed and all salary increases and bonuses have been paid. The bank believes that offloading some of its burden onto its employees can reduce their motivation, which in turn can affect performance and service standards, and ultimately hurt the bank's profitability across the board. In times of crisis, the bank considered it more important than ever to reaffirm its financial commitments to its employees. On the occasion of the bank's centenary, all employees also received a special bonus. Employees by type and gender Speak out web portal
63. Tisch– 26 Men Age 50+ Women Men Total Percentage Women Management – ​​– – 17 5 27 0.53 Executives 104 53 1,413 335 172 86 2,163 42.78 Junior Executive Assistants & Related Degrees 942 271 845 282 22 57 2,419 47.83 95 trainees apprentices office and other – – 1,344 419 Total education and training The rapidly changing banking environment places new demands on bank employees. In an increasingly digital age, our employees risk becoming obsolete if they are not equipped with relevant and up-to-date skills. Those who don't keep up with the necessary skills can complicate succession planning and delay expansion into new spheres. This year, with all its eventualities and stresses, has not been conducive to strong training programs. Since face-to-face events were not possible, several modules were postponed online. The bank now plans to move most of its training to online forums in 2021, which, in addition to meeting social distancing guidelines, has the added benefit of taking an "anytime, anywhere" approach and providing multiple experiences of continuous training to the employees. Achieving Carbon Neutral Status In 2017, the bank took a significant step in its environmental agenda by commissioning a study by an external consultant to measure its carbon footprint. The study measured the three areas (Scope 1, 2, and 3) of direct fuel consumption, purchased electricity, and indirect transportation. The calculations included the head office and branches through a regional representative sample and the report was finalized for 2018 and 2019. Based on this study, the bank has set itself the ambitious goal of becoming the number one bank in Sri Lanka. with a carbon neutral banking operation by the end of 2020 and fully paperless operations by 2030. The bank is proud to announce that it has achieved its goal. of carbon neutrality on December 31, 2020. 5 - - 398 7.87 15 5 1 34 - 50 0.99 2,283 618 245 148 5.057 100.00 DATE: 31DECEMBER2020 REFERENCE: VC17339/2020 VOLUNTY CANCELLATION CERTIFICATE PRESENT 'sentireoperations foryear2019assessedbyClimateSmartInitiatives(Pvt)LtdandverifiedbySriLanka Climatefund,underMinistryofEnvironment. Number of units canceled 12,240 CERs Initial serial number:CN511038135042208273 Final serial number:CN511038257432208273 The certificate is issued according to the voluntary cancellation procedure in the MDL registry. Equivalent to 12,240 tons of CO2 In 2019, the bank purchased 12,240 tCO2e of carbon credits to become carbon neutral. Issue category [GHG emissions (TCO2E)] Table - 27 2017 2018 2019 Direct emissions 1,304,99 1,369.27 1,282.32 Total indirect emissions 12,395.08 10,838.46 10,957.05 Total amount 13,700.07 12/07/37, 12/20/73 of the Green Building Council of Sri Lanka (GBCSL), the country's leading authority on the implementation of green building policies and practices. The award recognizes the Bank's leadership in a variety of green initiatives, including lending to support green operations, transitioning clients to paperless banking, reducing the use of non-renewable energy, water and other resources in their own operations, and support community initiatives that help protect habitats and the environment. The bank was the only bank to receive this special award from the banking industry, once again demonstrating its pioneering work in this field. Following the construction of the bank's first green building in 2015, the bank began construction of three more green buildings in 2019: the Galle Fort branch, the Jaffna branch and the Trincomalee Branch (which opened in February 2021). aim for platinum certifications from the GBCSL. The restoration of the Galle Fort branch was completed during the year under review and uses natural materials, maximizes natural lighting and has installed VRV air conditioning and received Platinum status from the GBCSL. Operational excellence 31 to 50 years old Women Management discussion and analysis Men Annual report 2020 18 to 30 years old Commercial Bank of Ceylon PLC Employees by category and gender Managing our footprint The Bank undertakes two efforts to manage its energy use: reduce its use and adoption of energy and promotion of renewable energy sources. In addition, the bank implements initiatives to migrate clients to digital platforms, invests in automated technologies that minimize paper consumption, and promotes 61
64. Operational Excellence Management Discussion and analysis of paperless banking, and only hire waste disposal companies that follow international standards for the disposal of e-waste and paper. In 2020, the bank expanded its renewable energy program by installing solar panels at 13 new branches, including the main branch. This increases to 64 the number of branches that are fully or partially supplied with solar energy; 28% of our store network is partially or totally powered by solar energy. This reduced the bank's energy consumption by 5,251 gigajoules in 2020. However, the reduction in working hours due to confinement also contributed to this reduction. Energy Consumption Indicator (Gigajoules) Energy Consumption Solar Energy Produced Solar Energy Produced % of Energy Consumption Annual Report 2020 Commercial Bank of Ceylon PLC Quality Education Gender Equality Decent Work and Economic Growth Industry, Innovation and Infrastructure During the year, the Bank engaged with more than 1,250 partner companies and delivered Rs 9.6 billion in value, with more than 90% of the value delivered to local suppliers in Sri Lanka and Bangladesh. Responsible Consumption and Production Alliance for Objectives Always seeking to promote alliances of mutual interest for the benefit of society and the environment, the bank is proud to be an active member of the following platforms: Cuadro – 28 2020 2019 2018 45,045 50,296 49,958 5,613 6,530 1,767 12.46 12.98 3.54 Alliance for Objectives The Bank's business partners facilitate the proper functioning of our business by providing technology platforms, market access and necessary materials and other services. We work with a wide range of companies, SMEs and individuals to z Association of Banks of Sri Lanka Sustainable Banking Initiative: member of the core group since its inception z UN Global Compact Sri Lanka: member of the steering committee z Biodiversity Sri Lanka: Founding Member Energy Consumption Table: 13 Gigajoules The Business Partners Bank Number – 15 60,000 48,000 62 Clean and Affordable Energy Our business activities can be routine or ad hoc, small or large, critical or non-critical to the normal course of business. businesses, but all create important links in the supply chain that ultimately add value to our delivery to stakeholders. The bank has been able to build strong relationships with them over the years, as evidenced by the bank's ability to maintain operations during the pandemic without major disruptions. Our Business Partners 36,000 24,000 12,000 Business Critical 2016 2017 2018 2019 2020 Alignment with the UN Sustainable Development Goals (SDGs) As a leader in the country's banking sector, the Bank's Board of Directors and Management recognize its responsibility as a financial institution to influence and shape the transition towards a more sustainable, green and inclusive economy. In doing so, we have also committed to the global mandate to achieve the United Nations Sustainable Development Goals (SDGs) by 2030, agreed to by 193 countries, and have also aligned our sustainability priorities and activities with the aligned SDGs. The Bank's commitment is based on a fundamental prioritization process. To that end, it has identified the following SDGs that most align with its sustainability and responsible banking ethics and operations, allowing for a more focused and targeted approach with greater impact: Maintenance Utility providers Employee well-being Software vendors Waste Management Material Suppliers Communications Travel & Transportation Human Resources Wealth Providers Collection Agencies Broaden Our Reach Rare Engagement Correspondent Banks Vendors Franchise Partners Contractors Stock Exchange Homes Professional Services FinTech Company Suppliers
65. Project Summary Start Date June 1, 2018 Completion date Overall project period 29 months Total project cost Rs. Rs 141 crore + Taxes Land Extension Operational Excellence 2 Nov 2020 The Galle Fort branch has been restored to its original splendor as part of the Bank's centenary celebrations in 2020. The bank was built in the early 19th century and it became branch ownership in 1973 when the bank acquired three branches of the Mercantile Bank of India (MBI). The renovation work aimed to preserve the unique architectural and cultural elements of the building and was carried out in consultation with the Galle Heritage Foundation, the Department of Archaeology, the Galle City Council and the Urban Development Authority. During the restoration, only specific locally sourced ecological raw materials were used in the renovation and all non-perishable materials were recycled in an environmentally friendly manner and all debris was disposed of in accordance with the Department of Archeology and Foundation regulations. Galle Heritage. The building has a 15kW rooftop solar power generation system, rainwater harvesting system, eco-friendly food recyclers for all dining rooms, fire protection system, backup generator, variable flow air conditioning ( VFR) with low consumption, LED lighting and electrical system. The building has achieved 45% energy savings compared to the American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE) standard and uses minimal potable water. In addition, in keeping with the bank's green agenda, the mechanically ventilated areas of the building are equipped with energy-efficient air conditioning and carbon dioxide levels in office areas are continuously measured to maintain a healthy indoor climate for occupants. The branch also has a mini-museum with items that have been used since the branch was established and has now become a popular tourist attraction in Galle Fort. The bank is seeking recognition of the site by the World Heritage Committee. Through the bank's efforts, the branch received a Platinum rating from the Green Building Council of Sri Lanka (GBCSL), the highest rating that can be achieved under a set of performance standards used to certify a building's operations and maintenance. The key aspects that the GBCSL considers when giving this rating to a commercial or institutional building include management, sustainable sites, energy and atmosphere, materials and resources, indoor climate quality, innovation and design process, and social and cultural awareness. Galle Fort Commercial Bank of Ceylon PLC Branch Restoration Project 2020 Annual Report Floor Area 13,875 Sq Ft Management Discussion & Analysis 40.3 Seats 63
66. Commercial Bank of Ceylon PLC Annual Report 2020 Corporate Governance and Risk Management Corporate Governance and Risk Management Board of Directors and Profiles Mr. S. Renganathan Managing Director/Director General Sr. K Dharmasiri Director 64 Mr. K Dharmasiri. S C U Manatunge Director and Director of Operations Ms. NTM S Cooray Director Sr. L D Niyangoda Director
67. Board of Directors and Profile Governance and Risk Management Annual Report 2020 Commercial Bank of Ceylon PLC Judge K. Sripavan Chairman Mr. T.L.B. Hurulle Director Mrs. J. Lee Director Prof. A.K.W. Jayawardane Vice President Mr. R. Senanayake Director Mr. S. Muhseen Director Mr. R.A.P. Rajapaksha Company Secretary(Posted on February 15, 2021) No photo 65
68. Board of Directors and Profile Governance and Risk Management Annual Report 2020 Commercial Bank of Ceylon PLC Judge K. Sripavan Chairman Appointed Chairman of the Board w.e.f. December 21, 2020. Appointed independent Non-executive Director in April 2017. Chairman of the Board Related Party Transactions Review Committee (BRPTRC). Appointed Chair of the Board Nominating Committee (BNC), Board Human Resources and Compensation Committee (BHRRC), Board Credit Committee (BCC) and Board Strategy Development Committee (BSDC) w.e.f. December 31, 2020. Skills and Experience: Appointed Chief Justice of the Democratic Socialist Republic of Sri Lanka on January 30, 2015 and in office until March 1, 2017. Served as Chairman of the Services Commission of Justice of Sri Lanka, Chairman of the Incorporated Council for Legal Affairs Education, Chairman of the Institute of Judges of Sri Lanka, Chairman of the High Court Complex, Board of Directors and Chairman of the Mahapola Trust Fund. Registered as a barrister with the Supreme Court of Sri Lanka in 1977. Received a Diploma in Labor Law from the University of Colombo in 1992 and an LL.M. from the University of London in 1994. Member of the Sri Lanka Institute of Directors since August 2017. Previous Appointments: Having joined the Office of the Attorney General in February 1978, he has held the positions of Prosecutor, Chief Prosecutor and Deputy Attorney General. During his tenure as Deputy Attorney General, he served as the Chief of the Appeals Court Division in the Attorney General's Department and handled a large amount of work in both the Court of Appeals and the Supreme Court, including bills and motions. of fundamental rights. Prior to his appointment to the Court of Appeal, he worked for two years as legal adviser to the Landessparkasse. Appointed Judge of the Court of Appeals in May 2002 and appointed President of the Court of Appeals by His Excellency the President in March 2007. Appointed a member of the Judicial Chamber of the Supreme Court in March 2008. Bank shareholding: Owns 14,000 shares with voting rights. Prof. AKW Jayawardane Appointed Vice President of the Board of Directors w.e.f. December 29, 2020. Appointed as an independent Non-executive Director in April 2015. Chairman of the Board Technology Committee (BTC). Appointed Chairman of the Board's Integrated Risk Management Committee (BIRMC) w.e.f. December 31, 2020. Skills and Experience: Vice Chancellor of the University of Moratuwa until November 27, 2017 and Full Professor of Civil Engineering. A distinguished scholar, he brings considerable IT knowledge and experience to the Board. He has a PhD in Construction Management and a Master of Science in Civil Engineering from Loughborough University of Technology, UK and a BSc Eng. Graduated with First Class Honors in Civil Engineering from Moratuwa University. Also Corporate Member, Member and International Professional Engineer of the Institution of Engineers, Sri Lanka (IESL), CEng, FIE(SL), IntPE(SL), Member of the Sri Lanka National Academy of Sciences, FNAS(SL), founder Member of the Sri Lanka Society of Structural Engineers MSSE (SL), Member of the Institute of Project Managers, Sri Lanka, FIPM (SL) and Life Member of the Sri Lanka Association for the Advancement of Science. Member of the Sri Lanka Institute of Directors since December 2015. Graduate Member of the Sri Lanka Institute of Directors since January 2018, GSLID. Other recent appointments include: Director of Sierra Cables PLC, Chairman of CBC Tech Solutions Limited (a subsidiary of the Bank), Director of the Mother Lanka Foundation, Commissioner of the University Grants Commission, Member of the Board of the National Science Foundation, Arthur C Clarke Institute of Modern Technologies and served on the Board of several other institutions. Previous Appointments: Dean of the College of Engineering for six years, First NDB Bank Endowed Professor of Entrepreneurship at Moratuwa University, President of the Institution of Engineers, Sri Lanka (IESL) and Director General of the National Science Foundation. Bank Shareholders: He owns 12,792 shares with voting rights. 66 Mr. S. Renganathan Appointed Managing Director and Chief Executive Officer in July 2018. Appointed Executive/Non-Independent Director in July 2014. Skills and Experience: An experienced banker with over 40 years of experience leading the acquisition of Bangladeshi operations that the bank led from Crédit Agricole Indosuez (CAI), Commercial Bank's first acquisition of a banking business, and subsequently built it up as its first country manager. He also held several other key positions at the bank, including chief operating officer, assistant general manager of personal banking and the bank's first chief risk officer. Member of the Chartered Institute of Management Accountants, United Kingdom (FCMA), Chartered Global Management Accountant (CGMA), Member of the London Institute of Banking & Finance, United Kingdom (FLIBF) and Member of the Institute of Bankers Sri Lanka (FIB). Member of the Sri Lanka Institute of Directors. Other recent appointments: Managing Director of Commercial Development Company PLC, Vice President of Commercial Bank of Maldives Private Limited, Director of Lanka Financial Services Bureau Limited, Vice President of Sri Lanka International Chamber of Commerce, Executive Member of Ceylon Chamber of Commerce, Member of the Executive Board of the Council for Business with Great Britain, Executive Member of the Sri Lanka Indian Society, Member of the Council of the Ceylon Employers' Federation and Justice of the Peace for all islands since 2000. Previous positions: Director of the Sri Lanka Association of Banks (Guarantee) Limited, General Council Member of Bangladesh Institute of Bankers, Founding Chairman of Sri Lanka Bangladesh Chamber of Commerce and Industry, Executive Member of Foreign Investor Chamber of Commerce and Industry in Bangladesh . Bank Shareholders: It owns 362,010 shares with voting rights and 12,457 shares without voting rights.
69. Mr. K Dharmasiri was appointed as an Independent Non-Executive Director in July 2015. Mr L D Niyangoda was appointed as an Independent Non-Executive Director in August 2016. Ms N T M S Cooray Appointed as an Independent Non-Executive Director in September 2016. Skills and Experience: Skills and Experience: Skills and Experience: An experienced banker with over 37 years at Bank of Ceylon and retiring as General Manager/CEO. He has a wide range of experience both within and outside of Sri Lanka. He has a proven track record of over 33 years in the corporate environment and is qualified in various management fields both locally and internationally. Finance professional with extensive experience in the private sector. Previous Appointments: Non-Executive Director Nominee on the Boards of Janashakthi Insurance Ltd PLC, Sabaragamuwa Development Bank, Merchant Bank of Sri Lanka PLC, BOC Travels (Pvt) Ltd., BOC Property Development & Management (Pvt) Ltd., Ceybank Holiday Homes ( Pvt) Ltd., Hotels Colombo (1963) Ltd., Ceybank Asset Management Ltd., Lanka Securities (Pvt) Ltd., Sri Lanka Bankers Institute, Lanka Financial Services Bureau Ltd., Lanka Clear (Pvt) Ltd., Bank of Ceylon (UK) Ltd., Sri Lanka Credit Bureau and Managing Director of Nepal Bank of Ceylon Limited in 2002. Bank share: nil. Member of the Sri Lanka Institute of Directors since March 2000. Other recent appointments: Chairman of A Baur & Co. (Pvt) Ltd. Previous appointments: Managing Director/CEO of A Baur & Co. (Pvt) Ltd., Director of Operations, A Baur & Company (Pvt) Ltd., Director of Baur Asia (Pte) Ltd., Singapore. Bank holdings: Zero. Member of the Sri Lanka Institute of Directors since July 2006. Other recent appointments: Chairman and CEO of Jetwing Travels (Pvt) Ltd and Chairman of Jetwing Hotels Ltd. Previous appointments: Former Chairman of the Sri Lanka Institute of Directors. Director – Finance and Administration on the Board of J. Walter Thompson, Non-executive Director on the Board of Capital Alliance Finance PLC, Trade Finance and Investments PLC and is a member of the Board of many other public and private companies. Board member of several other institutions. Bank Shareholders: It owns 342,465 shares with voting rights and 52,875 shares without voting rights. Board and profiles None Former member of numerous professional bodies including Sri Lanka Council for Agricultural Research Policy, Standing Committee on Agricultural and Veterinary Studies, University Scholarship Commission, member of the Board of Trustees, College of Agriculture, University of Peradeniya. Governance and Risk Management Other recent appointments: Holds a BA in Agricultural Sciences from Peradeniya University. Annual Report 2020 Member of the Sri Lanka Institute of Directors since December 2015. Consultant, business and managerial experience for a period of 38 years. Commercial Bank of Ceylon PLC has a B.Phil. (Econ) and B.Com with first class honors from the University of Colombo. Also Associate Member of the Sri Lanka Institute of Bankers. He has an MBA from the University of Colombo, Member of the Chartered Institute of Management Accountants UK (FCMA). 67
70. Mr T L B Hurulle was appointed as an Independent Non-Executive Director in April 2017. Commercial Bank of Ceylon PLC Annual Report 2020 Governance and Risk Management Board of Directors and Profiles Skills and Experience: Has a Diploma in Air-Conditioning and Refrigeration Engineering from the University of Southbank, London, University Engineering I and II Trainee Programs de Moratuwa, Certificate in Science and Technology of Refrigeration, City & Guilds Institute, London, and became a Fellow of the Institute of Refrigeration, UK in 1977. Member of the Sri Lanka Institute of Directors since August 2017. Other recent appointments: Independent Non-Executive Director, Kanrich Finance Limited. Treasure. Secretary of the Anuradhapura Jaya Sri Maha Bodhi Development Fund. Appointed All-Island Peace Justice in 2002. Previous appointments: Director General, Telecommunications Regulatory Commission, Design and Applications Engineer, Metropolitan Refrigeration and Air-Conditioning, London, Division Manager/Chief Engineer, Walker, Sons & Co. Ltd and Manager Senior/Engineer at Tudawe Trading Co. (Pvt) Ltd. Recipient of the INFOTEL '92 Pioneer Award at INFOTEL 2017, was a member of the Public Representations Committee on Constitutional Reform 2016/17 and an Expert on the Parliamentary Budget Committee (2017). Bank holdings: Zero. Mr. S C U Manatunge was appointed Executive Director / Non-Independent and Director of Operations in July 2018. Skills and Experience: He was the former Deputy General Manager-Corporate Banking. He has 31 years of experience with the bank and prior to his appointment as Deputy General Manager-Corporate Banking, he held corporate/senior leadership positions as Chief Risk Officer, Head of Credit Risk and Chief Manager-Corporate Banking. He is a Fellow of the Chartered Institute of Management Accountants – UK (FCMA) and holds an MBA Merit Pass from the University of Sri Jayewardenepura. He is also a Fellow of the Sri Lanka Institute of Bankers (FIB) and a Fellow of the Sri Lanka Institute of Certified Management Accountants (FCMA). He was instrumental in establishing the Association of Banking Sector Risk Professionals, Sri Lanka and served as its President in 2014. He was also a Board Member of the Association of Professional Bankers (APB) and a member of the CIMA - Steering Committee thinking. He was a visiting professor of the MBA program at the University of Colombo. He is also a reference person at the Training Center of the Central Bank of Sri Lanka and the Bankers Institute of Sri Lanka. He was named Information Security Director of the Year at the EC Council CISO Global Forum held in Atlanta, USA in September 2013, in recognition of his outstanding contribution to strengthening and advancing information security practices. information and IT risk management. Member of the Sri Lanka Institute of Directors since August 2017. Other recent appointments: Director of the Bank's Maldives branch - Commercial Bank of Maldives Private Limited Previous appointments: Director of the Bank's IT branch, CBC Tech Solutions Limited. Bank Shareholders: He owns 71,410 voting shares. Ms J Lee appointed as an independent non-executive director in August 2020. w.e.f. Appointed Chairman of the Investment Committee of the Board. December 31, 2020. Skills and Experience: Pioneer and leading expert in quantitative risk management and its applications to strategy, with more than 30 years of experience as a banker, capital markets professional, and partner in corporate advisory firms that provide Serving CEOs and Boards in the US and Asia She has an MBA from the Wharton School, a BSc from NYU Stern School of Business, and has attended Harvard Business School's Advanced Management Program and the Women on Boards Program. Other Recent Appointments: CEO of Dragonfly LLC, a New York-based consulting firm that provides strategy, risk management and investment advice to boards of directors, CEOs and executives in the US, Europe and Asia, covering all sectors, companies, financial institutions and governments CEO of Dragonfly Capital Ventures, which develops and invests in renewable energy in Southeast Asia. Member of the Board of Directors of Temasek Life Sciences Accelerator and Entrepreneur-in-Residence. Member of the Board of Directors of the Stern School of Business of the University of New York. Co-author of the books What Every CEO Must Know About Risk and RAROC and Risk Management. Previous Designations: Key member of Bankers Trust's pioneering team in the late 1980s that developed the banking industry's first comprehensive daily risk quantification and venture capital methodology. He served as a director on the board of Solar Frontier, a renewable energy subsidiary of Japan-listed Showa Shell Sekiyu KK. Adjunct Professor at Singapore Management University, he developed and taught Enterprise Risk Management for 10 years and also taught Risk Management at Columbia University, New York. Bank holdings: Zero. 68
71. Other current dates: Independent Non-Executive Director of CBC Finance Ltd. (formerly Serendib Finance Ltd.), a wholly owned subsidiary of Commercial Bank of Ceylon PLC since October 2014, Independent Non-Executive Director of Senkadagala Finance PLC since April 2017, and Director of Virtual Capital Technologies (Pvt) Ltd., a software development company that has specialized in real estate, retail and telecom business solutions for the New Zealand and Australian markets since August 2017. It runs the Smart Academy of Smart Media The Annual Reports Company. Previous Positions: Financial Accountant, Singer Industries (Ceylon) PLC, he held various positions from Senior Finance Manager to Assistant General Manager (Finance and Planning) at Commercial Bank of Ceylon PLC and Chief Financial Officer at Nations Trust Bank PLC. Bank holdings: Zero. Skills and experience: Senior investment banker with extensive experience in M&A, corporate finance and capital markets who has worked in senior roles with corporate boards and senior leadership teams of financial institutions across Asia to drive their agenda and roadmap strategic corporate. Member of the Chartered Governance Institute – UK formerly known as the Institute of Chartered Secretaries and Administrators (ICSA – UK) and graduate of the Institute of Chartered Corporate Secretary (ICCS) of Sri Lanka with over 17 years of practice as a company secretary, including 10 years of bank experience. In an investment banking career that spans more than 20 years, he has executed landmark mergers and capital raise transactions valued at more than $100 billion. Under his leadership, the Merrill Lynch and Credit Suisse FIG Asia sector team has won Asset Magazine's FIG Asia House of the Year award for several years. Several transactions he has led have won awards for Best Country Deals and Best Capital Increase Deals in the Financial Sector. He has a Master's in Economics from the University of Colombo, a Bachelor of Business Administration (Hons) from Western Michigan University and completed the corporate finance training program at JPMorgan in New York. Other recent appointments: Chairman, Platinum Advisors Pte Ltd, Non-Independent Director H2O One Pte Ltd, Director, Canary Wharf Holdings Pte Ltd Lynch and JPMorgan in senior regional reporting roles. His most immediate previous role was Managing Director, Head of the Southeast Asia Financial Institutions Group (FIG) and Head of Asia Insurance at Singapore-based Credit Suisse. He was an associate director at Deloitte. He was a team leader at the Ministry of Finance's National Council for Economic Development (NCED) and Director of the TAFREN Presidential Task Force for post-tsunami economic reconstruction. He has been a member of the Sri Lanka Institute of Directors since September 2017. Other recent appointments: Vice President, Chartered Governance Institute (UK), Sri Lanka Branch. Appointed Islandwide Justice of the Peace in 2019. Previous Appointments: Corporate Secretary of the Bank's wholly owned subsidiary, CBC Finance Ltd. (formerly known as Serendib Finance Ltd.) from November 2014 to March 2019. Deputy Secretary of the Bank from February 2011 to March 2019. Bank shareholding: Nil. Board of Directors and Profiles he has extensive experience in the financial services industry, financial management and, in particular, corporate reporting, including aspects such as risk management, capital management, corporate governance, compliance, sustainability and integrated reporting. He has trained in banking and finance at Euromoney and in general management at the National University of Singapore, among many other training programs locally and abroad. Skills and experience: Governance and Risk Management CA Sri Lanka member with 30 years post-qualification experience and a B.Com (special) degree from the University of Sri Jayewardenepura and a Post Graduate Diploma in Business Administration from PIM of the University of Sri Jayewardenepura. Mr. R.A.P. Rajapaksha was appointed Company Secretary in April 2019. Annual Report 2020 Skills and Experience: Mr. S. Muhseen was appointed to the Board in February 2021 as an independent non-executive director. Commercial Bank of Ceylon PLC Mr R. Senanayake was appointed as an independent non-executive Executive Director in September 2020. Appointed Chairman of the Audit Committee of the Board w.e.f. September 25, 2020. Bank participations: Zero. 69
72. Gobierno Corporativo y Perfiles S Renganathan Sanath Manatunge Nandika Buddhipala Isuru Thilakawardena Director General/CEO Chief Operating Officer CFO FCMA (UK)/CGMA/FLIBF (Fellow of the London Institute of Banking & Finance) UK/FIB (SL) FCMA (UK)/CGMA/FCMA (SL)/FIB ( SL )/MBA Merit (Sri Jayewardenepura University) FCA/FCCA (UK)/FCMACMA (Aus)/ MCISI (UK)/SA Fin (Aus)/IMA (USA)/ BSc, BAd (Special) (Sri Jayewardenepura University) /PG Dip in Management (Sri Jayewardenepura University)/MBA (Colombo University)/MA in Financial Economics (Colombo University)/MS in Financial Mathematics (Colombo University) Deputy General Manager - Resource Management Humans 31 years in Retail Banking Bank of Ceylon PLC Annual Report 2020 Governance and Risk Management 40 years in banking 70 30 years post qualification experience including 13 years in banking LL.B (University of Colombo)/ MBA (Sri Jayewardenepura University) / MA (Colombo University) / Diploma in International Affairs (BCIS) )/GSLID (SLID)/Fellow of the Association of HR Professionals 30 Years of Experience, including 11 years in Banking Krishan Gamage Prasanna Indrajith Chinthaka Dharmasena Asela Wijesiriwardane Assistant General Manager: Information Technology Assistant General Manager: Finance Assistant General Manager: Services Assistant General Manager: Treasury FCA/FCCA (UK)/FCMA (SL)/AIB (SL )/BSc BAd (Special) (University of Sri Jayewardenepura)/ Postgraduate Diploma in Business and Financial Management (CA Sri Lanka) BSc (Eng) Hons in Mechanical Engineering (Moratuwa University) / MBA (Sri Jayewardenepura University) / ISO Lead Auditor Certificate / Visiting Professor at Moratuwa University BSc (Colombo University) / MA-Econ (Colombo University) / ACMA BSc (Eng.) in Electronics and Telecommunications (Moratuwa University) 24 years in banking 22 years of experience in Information Technology, of which 14 years in banking 26 years of post-qualification experience in related fields oned with finance including 24 years in banking John Premanath Ms. Mithila Shamini M P Dharmasiri Ms. Dharshanie Perera Assistant General Manager: Management Audit Assistant General Manager: Personal Banking II Assistant General Manager: Planning Assistant General Manager: Personal Banking III FCCA (UK Kingdom)/CISA (USA). USA)/BSc Applied Accounting (Oxford Brookes, UK)/AIB (SL)/DISSCA (CA Sri Lanka)/ISO 27001:2013 ISMS Lead Auditor/GSLID (SLID) AIB (SL)/Dep. in Business Administration (SLBDC) / Postgraduate Diploma. in operational and financial management. (CA Sri Lanka)/MBA (Griffith University, Aus) FCA/ACMA (SL)/AIB (SL)/MSc Mgt (University of Sri Jayewardenepura)/ MA Financial Economics (Colombo University)/BSc BAd (Special) (University by Sri Jayewardenepura) 30 years in banking 34 years in banking 31 years in banking 19 years of experience in manufacturing and supply chain management and 9 years in banking AIB (SL) 36 years in banking
73. S Prabagar Deputy General Manager– Treasury (promoted to Senior Deputy General Manager – Treasury, w.e.f. 1 Feb 2021) Deputy General Manager – Corporate Banking FCMA (UK)/CGMA/CPA (Aus)/Master of Financial Economics (University of Colombo)/FIB (SL ) FCMA (UK), CGMA, MBA (University of London), AIB (SL), BCom, DISSCA (Diploma in Systems Security and Control Audit – CA Sri Lanka)/CISA (Certified Information Systems Auditor) 31 years in banking 25 years in banking 27 years experience including 10 years in banking Banking I/SME Chief Risk Officer MBA (University of Colombo)/AIB (SL) ACIM (Chartered Institute of Marketing, UK)/MBA (Metropolitan University Cardiff)/AIB (SL) AIB (SL) )/CIMA Finalist 40 years in banking 33 years in banking 37 years in banking g Ms Tamara Bernard Ms Kelum Amarasinghe Assistant General Manager – Corporate Banking II Assistant General Manager – Compliance AIB (SL) )/Master of Development Studies (University of Colombo )/MBA (Sri Jayewardene University pura) Intermediate Diploma in Banking & Finance (Institute of Bankers, SL) Postgraduate in Strategic Management and Leadership (UK) 31 years in banking 32 years in banking Corporate governance and profiles Prins Perera Deputy General Manager of Governance and Risk Management – ​​Personal Banking FIB (Sri Lanka Institute of Bankers)/FCIM (Promotion to Senior Associate (Chartered Institute of Marketing, UK)/FSLIM (SriLanka Institute of Marketing)/MSc General Manager – Personal Banking, w.e.f. February 1, 2021) in Information Technology (University of Moratuwa, SL)/MBA (University of Southern AIB (SL)/Associate (The Institute of Queensland,Aus)/CIMA (Chartered Administration Accounting, UK)/Level Institute of Management Accountants, United Kingdom), 3 Certificate in Wealth Management CMA (Institute of Certified Management (CISI, UK) Accountants, Aus)/PGDBFA (CA Sri Lanka)/ 41 years in banking CPM (Asia Pacific Marketing Federation, Sing)/ GSLID(SLID) / Advanced Diploma in Credit Management (Institute of Bankers, Sri Lanka)/Certificate in Risk (Chartered Institute of Securities and Investments, UK) BSc (University of Colombo)/MBA (University of Colombo)/Member ( Association Cambiste Internationale) 25 years in Banking Annual Report 2020 Ms. Sandra Walgama Deputy General Manager – Marketing Commercial Bank of Ceylon PLC Hasrath Munasinghe 71
74. Management Sidath Pananwala Head of Corporate Banking I Dilrukshi Nanayakkara Head of Corporate Banking II Feroza Ameen Head of Islamic Banking Dr. Shanthikumar Fernando General Manager– Forschung und Entwicklung Sushara Vidyasagara Senior Manager – Investment Banking Prasad Fernando Senior Manager – Import Lawrian Somanader Senior Manager – Export Dharshini Gunatilleke Senior Manager – Corporate Banking Amal Alles Head of Centralized Credit Processing Unit S Ganeshan Regional Manager senior – Colombo Inner S B Wasala Senior Regional Manager: Colombo Outer Sanath Perera Senior Regional Manager: Colombo North Saneth Jayasundara Regional Manager: Central Dharshanee Keerthirathne Regional Manager: Colombo South Janaka Sooriyaarachchi Regional Manager: Colombo Metro Elmo Sooriyaarachchi Regional Manager: Uva-Sabaragamuwa Michael De Silva Regional Manager: North Central Hemantha Sooriyabandara Regional Manager: South Western Personal Banking Commercial Bank of Ceylon PLC Jahresbericht 2020 Governance und Risikomanagement Corporate Banking Shanthapriya Withanage Sriyan Fernando Regional Manager: Greater Colombo Chief Manager: City Office 72
75. Ramachandren Sivagnanam Regional Manager– Northern Chandani Siyambalagastenne Regional Manager – Wayamba Senior Management Treasury Hemal Jayasekera Chief Distributor Vajira Thotagammana Head of Information Technology Alongitha Suraweera Pradeep Banduwansa Head of Retail Products and Digital Channels Namal Gamage Nalin Samaranayake Thayalan Gnanapragasam Sampath Weerasuriya Chief Manager – Security Tilak Wakista Manager Chief – Stores Najith Meewanage Chief Manager - Operations Priyantha Perera Chief Manager - Logistics Support Services Card Center Chief (promoted to Assistant General Manager - Operations, effective February 1, 2021) Head of Recovery Chief Manager - Central (promoted to Assistant Administration and Personnel Advancement General Manager - Credit Supervision (retired February 10, 2021) and Recoveries, effective February 1, 2021) Pushpa Chandrasiri Chief Manager - Human Resources Management Upulani Gunapala Chief Manager - AML/Compliance Chief of Legal Affairs (promoted to Ass ger General Director – Legal, w.e.f. February 1, 2021) Annual Report 2020 Governance and Risk Management Tivanka Damunupola Chief Dealer Commercial Bank of Ceylon PLC Chandrima Leelaratne Chief Manager - Treasury Processing 73
76. Keerthi Mediwake Head Chef/Chief Executive Officer: CBC Tech Solutions Limited Mohan Fernando Chief Manager: SME Banking Unit Upul Dissanayake Chief Manager/CEO: CBC Finance Limited Saman Ratnayake Chief Manager: Supermarket Banking Unit Charika Jayasekera Chief Manager: Supermarket Banking Unit retail credit approval Commercial Bank of Ceylon PLC Jahresbericht 2020 Governance und Risikomanagement Senior Management Nishantha De Silva Chief Manager – Card Center 74 Betrieb in Bangladesh Varuna Kolamunna Country Manager D Das Gupta Senior General Manager Kapila Liyanage Director of Operations A K Nandy Deputy General Manager senior – Chittagong Binoy Gopal Roy Deputy General Manager – Finanzen und Buchhaltung Mostafa Anowar Sohel Senior Deputy General Manager – Human Resources Shakir Khusru Deputy General Manager – Personal Banking Chirantha Caldera Head of Treasury Maldive Operation Myanmar Operation Dilan Rajapakse Managing Director – Commercial Bank of Maldives Private Li mited Chamenda Kalugam age Man Alternder Direktor/Landesleiter – CBC Myanmar Microfinance Company Limited
77. Annual Corporate Governance Report The degree of compliance with the directive and the Code is disclosed in Annex 2.1 on pages 310 to 320 and Appendix 2.2 on pages 321 to 325 respectively In addition, the Bank has complied with all disclosure requirements in accordance with the prescribed format issued by the CBSL for the publication of financial statements and is a full disclosure statement in this regard contained in Exhibit 2.3 on pages 326 to 330. As the Bank is in full compliance with all requirements In accordance with the applicable requirements of the Directive, the Colombo Stock Exchange (CSE) has exempted the Bank to disclose compliance with the standards established in Section 7.10 of the Continuous Listing Requirements on Corporate Governance. The Bank's Governance Approach Given the fiduciary responsibility for the receipt and use of large amounts of unsecured public funds, the importance of maintaining public trust to the long-term success and sustainability of the Bank cannot be underestimated. The exemplary behavior of all representatives of the bank, from members of the board of directors to members of the board of directors, from the board of directors to the secretarial staff, is an indispensable prerequisite. For this reason, Commercial Bank has implemented a system of good corporate governance - the system of rules, practices and processes that guide corporate behavior - which ensures a disciplined approach to decision-making and execution, taking into account the interests of all interest groups. Rather, it is the foundation of more than 100 years of existence and sustainable value creation. 1 It is a corporate governance framework that has stood the test of time for more than a century. It has been regularly reviewed and updated to reflect evolving standards and best practices to assist the board, board committees, management and employees in the exercise of their leadership responsibilities. This framework is underpinned by governance principles such as leadership, integrity, effectiveness, accountability, transparency, sustainability, and shareholder engagement. These Principles guide the management of the Bank in all its decisions related to the supervision of the Board of Directors, the delegation of authority, the division of responsibilities, the allocation of resources, risk management, compliance, performance evaluation and compensation, the transactions with related parties and financial information. The fact that we are a systemically important bank at the national level and the many other recognitions and distinctions that have allowed it to be the most distinguished bank in the country are proof of our commitment to good corporate governance. Objectives of the Bank's Corporate Governance System As the largest private sector bank in Sri Lanka, touching the lives of millions of Sri Lankans in various capacities who have high expectations of their interactions with the Bank and whose trust is essential to their long-term success. the corporate governance system is designed to ensure that; and all problems, incidents and risks are identified, assessed and escalated. z Efficient decision making for timely and effective results and the achievement of expected results. the long-term success of the bank z Activities comply in word and spirit with policies, laws, regulations, and ethical standards z Assets have been protected z Ensuring the bank is more stable, resilient, and future-proof z Creation of sustainable value for all interested parties in the short, medium and long term To the above In order to achieve the objectives set, the Board of Directors has ensured the following; z Roles and responsibilities are clearly assigned to the board, management and committees, with approved bylaws and terms of reference. Clear reporting lines and reporting frequency have been established. The legitimate needs, interests and expectations of all interested parties have been taken into account. z The highest level of fairness, transparency and accountability has been maintained z Negative externalities to society and the environment are minimized z The aspirations and values ​​associated with the reputation of the bank's brand are lived on Key regulatory requirements and voluntary codes applicable to the bank and its Corporate framework conditions relevant to governance are shown in Figure 16 on page 76. Corporate Governance and Risk Management Messrs. Ernst & Young, the Bank's external auditors, have submitted their Statement of Reliance to the Central Bank of Sri Lanka (CBSL) following a Bank compliance review. z Systems and processes work well Annual Report 2020 This report on pages 64 to 113 explains the objectives, structure, general principles and components of the Bank's corporate governance framework as required by Decree Law No. 11 of 2007 Publish is Corporate Governance (Administration). In addition, the Bank has complied with the principles set out in the Code of Good Corporate Governance Practices – 2017 (Code) issued by CA Sri Lanka. Good corporate governance is a collective responsibility that goes beyond the letter of legal and regulatory requirements. It is the foundation of financial integrity, sustainable performance and investor confidence. It is a powerful and highly effective risk management tool that paves the way for the bank to take advantage of opportunities. For this reason, the Bank has an unwavering commitment to good corporate governance and carries out its activity with the utmost intellectual honesty, integrity and diligence, bearing in mind its obligations to society and the environment. The tone at the top and a culture that reflects those values ​​prevails throughout the bank. Commercial Bank of Ceylon PLC How We Govern (Principles D.5 & D.6)1 z Provide appropriate oversight to management to ensure due diligence is taken on major decisions and strategies are implemented as intended z Establish ownership and accountability with respect to the y Emerging Risk Principles referenced These are the principles of the Code of Best Practices for Corporate Governance – 2017 issued by CA Sri Lanka 75
78. Important regulatory requirements, voluntary codes and elements of the corporate governance framework Figure – 16 External z Continuous listing requirements of the Colombo Stock Exchange dealing, inter alia, with investor rights z Instructions and circulars issued by Commercial Bank of Ceylon PLC Annual Report 2020 Governance and Risk Management Annual Corporate Governance Report Sri Lanka Securities and Exchange Commission 76 z Laws, Circulars, Bulletins issued by Revenue Authorities to enable banks to act as collection agencies Companies operate respecting the rights of important stakeholders z Banking Law No. 30 of 1988 and amendments thereto, which include provisions to protect the rights of depositors and the rights and duties of regulators Governance structure The Board of Directors, Board Committees, Management and Management Committees with clearly defined functions and responsibilities, greater accountability The res Accountability and clear reporting lines form the basis of the bank's governance structure. The board and board committees, assisted by advisers where necessary, are responsible for setting strategy, defining risk appetite and exercising oversight, while management and board committees are responsible for executing strategy and drive performance. Responsibility and accountability for conducting business and assuming risk within management's sphere of responsibility rests with strategic business units and supporting functions. Figure 17 on page 77 provides an overview of the Bank's governance structure. accountability and prevention of all forms of corporate misconduct. The Board of Directors, the highest decision-making body responsible for the bank's sustainability, provides leadership by setting strategic direction, defining risk appetite, approving compensation policies, and appointing the Board and management. Under the due diligence and supervision of the Board of Directors, senior management is responsible for the daily operations and the implementation of an effective internal control system. The Board of Directors and senior management z Business and Employees Law No. Internal Elements of the Corporate Governance Framework Bank Bylaws Organizational Structure Responsibilities and Bylaws of the Board of Directors and Administration Committees Integrated Risk Management Framework Manual of the Corporate Director Policies approved by the Board of Directors in all major aspects of operations Related Party Transaction Policy Code of Ethics for All Employees 19 of 1954 and amendments thereto dealing with the rights and duties of employees z Company Law No. of Bank Directors on the director's statement on internal control issued by CA Sri Lanka z All instructions, issued by the Central Bank of Sri Lanka to licensed commercial banks, specifically Banking Act Directive No. 11 of 2007 on corporate governance and other directives issued by the central banks of the countries in which the bank operates eg. have a clear mutual understanding of their respective roles, delegations and boundaries. Based on trust and respect, the board of directors and management work together in a productive and harmonious relationship, which is a prerequisite for good corporate governance and organizational effectiveness. This has turned out to be one of the main reasons behind the bank's many achievements, which have helped position the bank as the benchmark bank for the country's private sector. Law, risk management and international capital markets. They have risen to the highest levels of government institutions or commercial organizations and exercise their independent judgment in matters reserved for the board of directors. By bringing together banking, corporate, investor and regulatory perspectives, our Board is able to examine issues from multiple angles to enable long-term value creation. The Secretary of the Company supports the Board of Directors in the fulfillment of its functions. At the end of 2020, the Board consisted of ten directors (eleven at the end of 2019), all of whom are leading professionals in their respective fields and have the requisite skills and experience to constructively challenge management and provide advice on matters that affect the Board. They show up to enrich. They understand and appreciate the dynamism and complexity of the bank's business, particularly in light of emerging global developments that threaten to challenge traditional business models. Eight of the Directors (nine at the end of 2019) are Independent Non-Executive Directors (INED), which allows for greater autonomy. Directors act in the best interest of shareholders and avoid conflicts of interest. The diversity in the composition of the Board has allowed it to bring a unique perspective to the Boardroom, enhancing dynamism and effectiveness while fostering a healthy and constructive exchange of views and leaving no room for groupthink. Diversity and Inclusion Diversity means there are many voices and people in the conversation, and inclusion is an environment where all those voices are truly heard. Consequently, the Board is composed of members with experience in the areas of accounting, banking and finance, economics, agriculture and chemical industry, engineering, information technology, profiles of Board members, including their qualifications, memberships in the Board committees and other important appointments and the profile of the Company Secretary can be found See pages 64 to 69. Board Procedures (Principles A.1.6, A.1.7 and A.6) The Board agrees on a schedule of meetings at the beginning of each year and meets at least once a month. Additional meetings are also called as circumstances require. The President is responsible for establishing and preparing the meeting agenda in consultation with the Chief Executive Officer and with the assistance of the Company Secretary. Board members may also submit motions to be placed on the agenda for discussion. The agenda is sent to the members of the Board of Directors by the company
79. Figure– 17 governing bodies with stewardship function Board of Directors Management Others (establishment of strategies and risk appetite with supervision responsibility) (execution of strategies and performance improvement) (business conduction and risk assumption) Executive Board Committees of the Board of Directors Committee of Audit (BAC) Chairman Non-Executive Independent Directors Integrated Risk Management Committee (BIRMC) Executive Management Committees Other Management Committees Managing Director/CEO Executive Integrated Risk Management Committee (EIRMC) Chief Operating Officer (COO) Nominating Committee Committee (BNC) Human Resources and Remuneration Committee (BHRRC) Executive Directors Related Party Transactions Review Committee (BRPTRC) Credit Committee (BCC) Investment Committee (BIC) Other Directors Chief Risk Officer (CRO) AGM Compliance Officer – Management Audit Technology Committee (BTC) Businesses and Support Functions Assets and Co Liabilities (ALCO) Credit Policy Committee (CPC) NPA Supervisory Executive Committee (ECMN) Business Continuity Management Steering Committee (BCMSC) Information Security Council (ISC) Executive Investment Committee (EIC) Personal Banking Banking Corporate International Operations Investment Banking Negotiations and Treasury Support Governance and Risk Management Functions Minutes of the deliberations and decisions made in the meetings are recorded with sufficient detail. Members of the Executive Committee are invited to meetings as needed. The Directors may, if necessary, request independent professional advice from the Bank. The Bank has taken out civil liability insurance for administrators and executives. Annual Corporate Governance Report Details of attendance at Board of Directors meetings can be found in Table 29 on page 79. Directors regularly attend meetings and take an active part in the deliberations. Urgent Board of Directors documents are presented at short notice or, exceptionally, are raised at meetings. Board members typically spend at least seven days a month on board business. If the best interests of the Bank so require, one third of the Directors may request that a resolution be submitted to the Board of Directors. Secretary of the Commercial Bank of Ceylon PLC, together with any accompanying Board documents, one week prior to meetings to allow Board members sufficient time to study, request additional information as necessary, and prepare for productive deliberations. The agenda and all board documents are distributed electronically to board members via BoardPAC, ensuring absolute confidentiality of information, cost savings on document printing and prompt delivery, Board Steering Committee Human Resources (HRSC) Strategy Development Committee (BSDC) Executive Strategy Development Committee (ESDC) BAC Advisor BTC Advisor Mandatory Committees Voluntary Committees Appointment Flow Flow of Responsibility - Direct Flow of Responsibility - Indirect 77
80. Commercial Bank of Ceylon PLC Annual Report 2020 Corporate Governance and Risk Management Annual Corporate Governance Report Conflicts of Interest(Principle A.10) 78 Directors shall avoid conflicts of interest by declaring such interests and refraining from participating in the deliberations or exerting influence on matters where a conflict of interest exists or appears to exist and such actions are properly recorded. The affiliations and transactions of the Directors are reviewed periodically to ensure that there are no conflicts or relationships that could affect the independence of the Directors. All banking facilities made available to the Directors, their close relatives and the entities in which the Directors hold positions are permitted under the Rules and Regulations of the CBSL and within the Terms and Conditions said facilities are available to other clients of the Bank. . Such facilities, if any, are reviewed and recommended by the BCC and submitted to the Board for approval. Once approved, details of such facilities will be presented for information at the immediately following BRPTRC meetings. Details of transactions carried out in the ordinary course of business on arm's length with companies in which the Bank's president or directors act as president or director in another company are set out in the disclosure under "Interests of directors in contracts with" disclosed to the bank” on page 113, while note 63 to the financial statements on pages 255 to 259 contains information on related party disclosures. At the time of their incorporation and annually, the Directors declare their interests and the necessary procedures are also established to ensure that there are no conflicts of interest that could jeopardize the independence of the members. The Bank maintains a register of such declared interests that is available to shareholders or their authorized representatives in accordance with Section 119(1)(d) of the Companies Act No. 07, 2007 and its amendments. Board Meetings (Principle A.1.1) In 2020, the Board held 17 scheduled meetings (fourteen in 2019), of which one meeting (one meeting in 2019) was devoted exclusively to strategic deliberations, with all senior management in attendance . Fifteen sessions (twelve sessions in 2019) were devoted to topics including major and material transactions, performance review, review and approval of a revised 2020 budget, policy framework review, new capital raising, strategy, and risk. A new meeting was held to review the composition of the Board Committees after the election/re-election of Directors at the AGM in lieu of rotating Directors. The meetings provided an effective forum to carry out the Board's oversight responsibilities. While the COVID-19 outbreak has brought many challenges, all Board and Board Committee meetings have been conducted adapting to the new normal conditions by holding such meetings with limited physical attendance, with some of the directors speaking through the virtual ones in accordance with the Guidelines issued The platforms were connected by the health authorities. The Board continued to play an active role in formulating the strategy and provided guidance to senior management for the preparation of the bank's five-year strategic plan 2021-2025. The plan was then reviewed and approved at a specially convened meeting in December 2020. At the meeting, senior management presented the plans for the areas within their area of ​​responsibility and had extensive discussions about them. The Board reviewed and evaluated alternative strategies before approving them and allocating resources to implement them. In June 2020, the Board held a special meeting to review and approve a revised 2020 budget, taking into account the unprecedented operating environment following the outbreak of the COVID-19 pandemic. The Board continued to pay close attention to the capital management strategy as capital requirements increased, the potential for further credit losses following moratoriums and borrower difficulties, and to support growth. One of the regular items on the agenda at monthly board meetings is the review of performance against strategic plans, with sufficient attention and time devoted to reviewing progress made and identifying problem areas that require further board attention. The views of the directors on the issues under consideration are sought and the minutes record a record of those deliberations. In addition, the Board paid increased attention to credit quality, closely monitoring exposures in high-risk industries, reviewing the adequacy of the impairment methodology, changes in exposure classifications, and the management of delinquent credit lines. The work of the Board Committees was regularly reported to the Board and any identified concerns related to the subject areas were also referred to them for oversight.
81. The composition of the Board during and at the end of the year and the attendance of members at Board meetings during the year are detailed below.: Attendance at the session Eligible to attend/mode of attended attendance Justice K Sripavan 26.04.2017 68 NED ID 17/17 17 0 Prof. Smt. A K W Jayawardane 21.04.2015 60 NED ID 17/17 16 1 17.07.2014 58 NED ID 17/17 17 0 21.07.2015 67 NED ID 17/17 13 4 26.08.2016 64 NED ID 17/1 NED ID 17/17 14 3 05.04.2017 68 NED ID 17/17 16 1 27.05.2018 27.07.2018 ED NID.50 17/17 16 1 13/08/2020 53 NED ID 6/6 0 16/09/2 59 NED ID 5/5 12/20/2011 68 NED ID 28/12/2011 68 NED 20/08 /2012 70 NED President* Vice President** Sr. S. Renganathan Director General/CEO Sr. K Dharmasiri Director Sr. L D Niyangoda Director Ms. N T M S Cooray Director Sr. T L B Hurulle Director Sr. S C U Manatunge Executive Director/COO Ms. J Lee Director Sr. R Senanayake Director Sr. K G D D Dheerasinghe Ex-President# Sr. M P Jayawardena Former Vice President## Mr. S Swarnajothi Ex-Director### BSDC Period on the board (years) C 3+ M 5+ Membership in Unterau Board BAC BIRMC BNC BHRRC BRPTRC C C C M ​​M BI M BI BI M M M C BCC BTC BIC C C BI M M M M 6+ M M M M 5+ M 4+ M 4+ M M M M M BI 6 M M 4 1 C M 17/17 17 0 ID 17/ 17 15 2 ID 12/12 12 0 M M M M M 3+ M C M 2+ M <1 M < 1 # Resigned effective December 21, 2020. ## Resigned effective December 29, 2020. ### Resigned effective December 29, 2020. ### Resigned effective December of August 2020. * President designated effective December 21, 2020. ** Vice President designated effective December 29, 2020. DOA - Date of Appointment, ED - Executive Director, NED - Non-Executive Director, ID - Director Independent, NID - Non-Independent Director In-person attendance C - Chairman M - Vocal BI - By invitation Virtual attendance Board Composition (as at 31 December 2018) December 2020) Direct non-executive res and Executive Directors Number - 18 Gender Board composition Period on the board (years) 7 6 8 Executive directors (MD/CEO, COO) - 2 Men 5 2 Annual corporate governance report Membership status Governance and Risk management Age (years) Annual Report 2020 DOA Table - 29 Commercial Bank of Ceylon PLC Directory composition and attendance (Principles A.4 and A.5) 4 Women 3 Independent non-executive directors - 8 2 1 0 Directory Industry/Background Experience Banking and Management 5 Agriculture / Chemistry 1 Finance and Accountancy 4 Law 1 Science, Engineering and IT 2 Risk Management and International Capital Markets 3 79
82. Annual Corporate Governance Report Annual Governance and Risk Management Report 2020 Commercial Bank of Ceylon PLC 80 Diversity in the Board of DirectorsComposition has made it possible to bring a unique perspective to the boardroom, enhancing dynamism and effectiveness while fostering a healthy and constructive exchange of views without leaving room for groupthink. Board Committees (Principles A.7.1, D.3 and D.4) Nine Board Committees have been appointed with delegated authority to strengthen governance and consider/decide on certain specific and specialized matters. However, the board retains responsibility for the committee's decisions. Four of the five mandatory committees were formed as required by the Board of Directors, while the Board's Related Party Transaction Review Committee was formed as per the regulations of the Sri Lanka Securities and Exchange Commission (SEC). The other four voluntary board committees were established taking into account the Bank's business, corporate governance and risk management requirements in accordance with the Bank's articles of association. These committees, made up of Board-approved rules of procedure, meet regularly and report operations to the Board for information/approval. Board committees seek guidance and advice from outside consultants on a number of occasions. Each of the directors serves on at least three committees. The composition, areas of supervision responsibility and activities during 2020, as well as the attendance of members at Board Committee meetings, are detailed in the respective Board Committee Reports on pages 86 to 100. Management Committee Executive All directors, including the CEO/CEO and the COO, which are both EDs, are members of the Executive Management Committee (EMC). The primary responsibility of the EMC is to implement the Board-approved strategy, under the direction of the Managing Director/Executive Director, and meet performance targets while ensuring that the risks assumed by the bank are within the approved risk profile. by the Board. . The EMC sets policies, makes operational decisions, monitors and manages financial performance against budgets, reviews the achievement of established strategic objectives for business units, allocates capital, manages risk, and resolves operational and customer issues. He also reviews and advises on the information that must be submitted to the Board of Directors and ensures that all material information is provided to the Board of Directors in a timely manner to fulfill his duties as a member of the Board of Directors. EMC meetings provide an opportunity for all senior management to get a 360-degree view of the bank's operations. The names, qualifications, and experience of EMC members are listed in the Profiles and Corporate Governance section on pages 70-71. The names of members of senior management from the Bank's operations in Sri Lanka, Bangladesh, Maldives, and Myanmar found on pages 72 to 74. Management Committees In addition to the board committees and the EMC, several other management committees have been established under the delegated authority of the CEO/CEO formed on specific issues to ensure decision-making related to the execution of the strategies approved by the Board of Directors. Based on the approved procedural charters, these Management Committees operate under a similar structure and process as the Board Committees. The secretaries of each committee keep minutes of the proceedings in sufficient detail to present to the Managing Director/Executive Director for approval. These committees consult extensively, work together across departments, and discuss issues considered critical to Bank operations, as described in Figure 19 on page 81.
83. Figure– 19 Purpose and Responsibilities Purpose and Responsibilities Purpose and Responsibilities Monitors and reviews all exposures and policies and procedures related to credit, market and operational risk, in accordance with BIRMC policies. Optimizes the bank's economic objectives by keeping liquidity and market risk within the bank's predetermined risk appetite. Reviews and approves credit policies and procedures related to the effective management of all credit portfolios as part of the bank's credit strategy. Composition General Director/General Director, General Director of Operations and key members of the areas of Comprehensive Risk Management, Personal Banking, Corporate Banking, Treasury, Management Audit, Compliance and Finance. Composition General Director/General Director, General Director of Operations and key members of Treasury, Corporate Banking, Personal Banking, Comprehensive Risk Management, Marketing and Finance. Meeting frequency: Biweekly Chief Executive Officer/CEO, Chief Operating Officer and key members of the Corporate Banking, Personal Banking, Integrated Risk Management, Management Audit, Marketing, Credit Supervision and Recovery and Branch Credit Supervision Divisions . Meeting Frequency: Biweekly and as Meeting Frequency: Monthly Business Continuity Management Steering Committee (BCMSC) NPA Composition and Executive Oversight Committee (ECMN) as needed Information Security Council (ISC) Purpose and tasks Purpose and tasks Purpose and tasks Leads, directs and supervises the activities of the bank's business continuity plan in line with the bank's strategy. Reviews and monitors bank NPAs above a predetermined threshold to take timely corrective action to prevent/reduce bank credit losses. Continuously focused on meeting the bank's information security objectives and requirements in line with new technologies and the bank's strategy. Composition Director of Operations and key members of the bank's senior management covering all business areas. Meeting frequency: Quarterly Composition Chief Executive Officer/CEO, Director of Operations and key members of the Corporate Banking, Personal Banking, Credit Supervision and Recovery and Comprehensive Risk Management departments. Meeting Frequency: Monthly Executive Investment Committee (EIC) Human Resources Steering Committee (HRSC) Composition CEO/CEO, COO and key members of Human Resource Management, Integrated Risk Management, Audit Information Systems, Services, Operations and IT. Meeting Frequency: Monthly Executive Strategy Development Committee (ESDC) Purpose and Responsibilities Purpose and Responsibilities Purpose and Responsibilities Oversees investment activities by guiding management on key investment decisions and reviewing performance. Establish policies and guidelines on all matters that may affect the management of the Bank's human resources and make recommendations to the BHRRC on policy matters and/or address issues that may require review at the board level. Based on the general knowledge provided by the BSDC, formulates strategies aimed at the sustainable development of the bank. Oversees implementation of the approved strategic plan and progress toward strategic milestones and objectives. Composition Composition Chief Executive Officer/CEO, Chief Operating Officer and key members of Human Resource Management, Personal Banking, Corporate Banking, Marketing and Finance. Managing Director/CEO, Director of Operations and key members of Human Resource Management, Marketing, Personal Banking, Corporate Banking, Treasury, Finance and Planning. Meeting Frequency: Quarterly Meeting Frequency: Monthly Composition Chief Executive Officer/CEO, Director of Operations and key members of the Corporate and Personal Banking, Investment Banking, Treasury and Finance departments. Meeting Frequency: Quarterly Corporate Governance Report Credit Policy Committee (CPC) Asset Liability Governance and Risk Management Committee (ALCO) Annual Report 2020 Executive Integrated Risk Management Committee (EIRMC) Commercial Bank of Ceylon PLC Committees administrative 81
84. rotate, Responsibilities and Powers of the Board (Principles A.1.2 and A.1.3) The role of the Board and its responsibilities are established in the Bylaws of the Board, which contains a list of the powers reserved for the Board as set out below : Role of the Board of Directors Annual Corporate Governance Report z Represent and safeguard the interests of shareholders by monitoring and evaluating the Bank's strategies, policies and performance z Guiding and guiding management in the implementation of strategies z Optimizing performance and creating sustainable shareholder value in accordance with the regulatory framework and internal policies to establish appropriate governance, bank performance and any significant developments to regularly benchmark company performance against goals and objectives; Key Responsibilities z Select, appoint and assess the performance of the General Manager/Managing Director in the 2020 Annual Report z Set the strategic direction and oversee the governance and risk management framework of Commercial Bank of Ceylon PLC z Ensure regulators are informed of z the development of a proper business and its cash Implemented in accordance with Section 43 of the Banking Law No. 30 of 1988 z seek professional advice in appropriate circumstances at the expense of the bank z review, modify and approve governance structures and policies The role of the Board in risk management (Principle D.2) Being the Als As the Bank's highest decision-making authority, the Board of Directors is responsible for the implementation of an effective risk management function within the Group. In this sense, the Board, with the support of BIRMC, has developed an effective risk management framework that establishes tolerance limits and risk appetite and allows regular monitoring of the risk profile through the risk reports provided to it. present. Risk management was one of the most important and regular items on the agenda of all Board and committee meetings. When there were deviations from the agreed risk profile, clarification was requested from management and the necessary guidance was provided to take mitigation actions. Risks related to business strategies were carefully considered at a special Board meeting to review the 2020 budget and deliberate on the 2021-2025 strategic plan (see Risk Control and Management on pages 114-133 for more details). . Separation of the functions of Chairman and Chief Executive Officer (Principles A.2 and A.3) In accordance with best corporate governance practices, the positions of Chairman and Chief Executive Officer are separated to facilitate the balance of power and authority. The Chairman is an Independent Non-Executive Director, while the Chief Executive Officer is an Executive Director appointed by the Board. Their respective roles are clearly defined in a board-approved document and in the charter of the bank's board of directors. Consequently, the clear and effective separation of accountability and responsibility, as set out in the aforementioned Board Document and Board Bylaws, has made the role of the Chairman distinctive. The Chairman promotes good corporate governance and the highest standards of integrity and probity throughout the Group, guiding the Board, maintaining order and facilitating the effective performance of its duties. The President ensures that the Board of Directors receives all the necessary information so that the Board of Directors can make informed decisions in the performance of its duties. He also ensures the effective participation of all directors in Board deliberations and keeps lines of communication open with senior management, acting as a sounding board on strategic and operational matters. The following is a summary of the important matters discussed and resolved by the Board in 2020: z Establishing systems for risk management, internal control and compliance z Ensuring financial integrity Board Highlights - Figure 2020 - 20 Process governance structure, policies and frameworks z reinforce the safety and soundness of the bank z review the performance of the bank and group companies z appoint directors to fill temporary vacancies z appoint members of the bank's senior management z appoint and supervise the functions of the external auditors z approve the interim and annual financial statements to issue Powers reserved by the board of directors z Approve important investments, acquisitions and divestments and supervise the administration of the capital 82 z Appoint the secretary of the board of directors prior approval of the 2nd. Interim dividend of 3/- per share for 2019 totaling Rs.3,083 crore Appointment of two independent non-executive directors to strengthen the Board. Acquisition of an additional 20% interest in Commercial Insurance Brokers (Private) Limited (CIB) from Commercial Development Company PLC, bringing the Bank's interest in CIB to 60%. Appointment of a new Chairman and Vice Chairman in place of the previous Chairman and Vice Chairman who resigned in accordance with the CBSL Corporate Governance Guidelines after serving on the Board for nine years. Rs 2,055 crore in the form of a stock dividend of Rs.2/- per share Approve the issuance of new shares through a private placement to the International Finance Corporation (IFC) and related funds and obtain shareholder approval at a Extraordinary General Meeting Conduct the first virtual annual general meeting of the Bank in accordance with the guidelines issued by regulators Review of all key policy documents Annual strategic meeting with the corporate management team
85. The Chairman and the CEO meet periodically to set the Board's agendaadvise on current and future developments and all material matters affecting the Bank. Role of independent non-executive directors The Bank has a strong element of independence on the Board, with eight of the ten directors being independent NEDs as of December 31, 2020. The position of Director represents the sole relationship of independent Directors to the Bank and other Group companies and, therefore, it is unlikely that your judgment will be influenced by external considerations. The presence of independent NEDs is expected to complement the skills and experience of the other directors in providing an independent and objective view of matters, challenging the Board and management to use their experience constructively, and providing guidance for strategy. Role of the Company Secretary (Principle A.1.4) The Company Secretary plays an important role in promoting good corporate governance. His responsibilities include activities related to board meetings, general meetings, bylaws, reports, accounts and documentation, corporate governance and stock market requirements. Principal responsibilities include: z assisting the President in conducting board meetings, annual general meetings and extraordinary general meetings in accordance with the Bylaws, the Bylaws of the Board and relevant laws; z Keep minutes of assemblies and legal records and present legal declarations in a timely manner; z Oversight of all board committees to ensure they are properly constituted and have clearly defined responsibilities; independent professional advice in consultation with the Board, if required; its bylaws with the necessary modifications, incorporating them in accordance with due process; z Coordinate the publication and distribution of the Bank's annual and interim reports and accounts and the preparation of the Management Report; z Monitor and ensure compliance with listing requirements, including required related party disclosures and related party transactions and maintain cordial relations with the Colombo Stock Exchange, shareholders and bondholders z Communicate promptly with the regulators; The appointment and dismissal of the Secretary of the Company is the responsibility of the entire Board of Directors. Appointment/Retirement and Resignation of Directors (Principle A.7) The Bank has a formal and transparent process, established by the BNC, for the nomination of candidates for Directors. The BNC carefully evaluates the resumes of potential candidates before making recommendations to the Board for their consideration as Non-Executive Directors. Such nominations may include an interview with the candidate. The appointment of new Directors is based on an annual assessment of the Board's pool of knowledge, experience and diversity in relation to the Bank's strategic plans to identify additional perspectives and ensure their effectiveness at all times. A similar process is followed for the appointment of Executive Directors, with the exception that the candidates are selected from within the Bank's corporate management team. As required by the Listing Rules, appointments of new directors to the CSE Board will be communicated by notice immediately after they have been approved by the CBSL as to their suitability and expediency. Announcements typically include a brief resume of the new directors, relevant experience, significant appointments, holdings, and status of independence. Re-election/Election of Directors (Policy A.8) The Bank's Bylaws require that the two most senior NEDs stand for re-election at each general meeting, taking into account the length of service since the last day of re-election. election or appointment. If more than two Directors qualify for re-election, the Directors may decide among themselves, after considering the content of the affidavits they have submitted and any other relevant matter, or choose by lot which Directors will stand for re-election. Accordingly, Mr. K. Dharmasiri and Ms. NTMS Cooray, the two longest-serving directors since their last re-election, will seek re-election at the next annual general meeting to be held on March 30, 2021 Director for election immediately after the general meeting. Accordingly, Ms. J. Lee and Mr. R. Senanayake, who were appointed to the Board for 2020, and Mr. S. Muhseen, who was appointed to the Board on February 15, 2021 to cover temporary vacancies, will join the board. Election at the next Annual General Meeting will take place on March 30, 2021. Directors Induction and Training (Principle A.1.8) Upon appointment, Directors will receive an induction package comprising the Articles of Incorporation, Instructions of Banking Law and Corporate Directors' Handbook, Best Practices, published by the Sri Lanka Institute. Corporate Governance issued by CA Sri Lanka, the Bank's organizational structure, the Articles of Association of the Board of Directors and the most recent annual report of the Bank, as well as access to the electronic support system that has archived the minutes of the meetings of the last seven years. All principals are encouraged to join the Sri Lanka Institute of Principals, which runs beneficial principal support programmes. Attendance at the Directors' Forums organized by the CBSL is mandatory for Directors. Management and outside experts make regular presentations on the business environment related to the Bank's operations, allowing newly appointed directors to become familiar with banking. Annual Corporate Governance Report z Ensure that the bank z Facilitate access to legal information y During the year there were several changes in the composition of the Board of Directors, the details of which are found in Table 29 on page 79, Composition of the Board Directive and presence. Governance and risk management The CEO leads the day-to-day activities of the management team and oversees the implementation of the strategies, plans and budgets approved by the Board of Directors. The General Director conducts the affairs of the Group in accordance with good corporate governance and the highest standards of integrity and probity as determined by the Board of Directors. governance, including assisting directors in their duties and responsibilities; Annual Report 2020 z Promoting Best Practices of Corporate Commercial Bank of Ceylon PLC As set out in the charter of the board, the role of the chief executive officer is to carry out management functions as directed by the board. The CEO's social objectives and the limits of his authority are determined by the board, while his duties and responsibilities are developed jointly. 83
86. Commercial Bank of Ceylon PLC Annual Report 2020 Governance and Risk Management Annual Corporate Governance Report Compensation and Benefits Policy The Compensation and Benefits Policy aims to provide current and potential employees with a distinctive value proposition that attracts and retains people with skills and values ​​that match the business requirements of the bank. It also provides the bank with a framework for designing, managing, and evaluating effective compensation programs that inspire and motivate desired behaviors and allow compensation to be properly aligned with the bank's long-term success. Remuneration of directors and officers (Principles A.10, B.1 and B.3) The BHRRC, which consists solely of NEDs that also meet the independence criteria set out in the relevant corporate governance standards, is responsible for making recommendations to the Board of Directors in relation to the remuneration of directors and executives. He will consult the Director General in this regard and will also seek professional advice where he deems it necessary. Compensation for EDs is determined by reference to the Compensation and Performance Policy, while compensation for NEDs is determined by the Board as a whole. These processes ensure that no individual director is involved in determining his own compensation. The Board and BHRRC regularly engage the services of human resource professionals to help them carry out their duties in this regard. Details of directors' compensation are set out in note 21 to the financial statements on page 186. Amount and Composition of Compensation (Principle B.2) It is the responsibility of BHRRC to ensure that compensation of both EDs and NED is sufficient to attract and retain outstanding professionals on the Board in order to drive the Bank's performance moving forward The bank has an attractive and motivating remuneration policy, adequate to retain high performing, qualified and experienced employees in the bank . 84 The BHRRC structures compensation packages and benchmarks them regularly with the support of professionals to ensure that overall compensation levels remain competitive to attract and retain key talent while balancing shareholder interests. Total compensation for EDs and other ExCo members consists of three components: guaranteed compensation (the fixed component), the annual performance bonus (a variable component), and the ESOP (a variable component). Special emphasis is placed on making the basis for granting ESOPs and their characteristics transparent before seeking shareholder approval. Guaranteed compensation includes monthly salary and allowances determined taking into account each employee's qualifications, experience, proficiency levels, skills, roles and responsibilities, reviewed annually and adjusted for factors such as promotions, performance and inflation. The annual performance bonus is determined based on the degree of compliance with a complex performance criteria matrix, which is clearly communicated to employees in the respective categories at the beginning of each year. The Bank's two employee organisations, the Commercial Bank Executives Association and the Ceylon Bank Employees Union (CBEU), with whom there is regular dialogue, are also consulted as necessary. After extensive consultation, the bank signed the collective agreement with the CBEU in early January 2021, which covers a three-year period from 2021 to 2023. With the aim of motivating employees to participate in value creation long-term, improve overall performance and increase employee retention while increasing In addition to equity financing, the bank has structured many employee stock option plans (ESOPs) since 1997. These entitle eligible employees to purchase a fixed number of shares at a price determined based on a previously agreed formula during the vesting period. The Bank has duly obtained shareholder approval for all of these ESOPs at Extraordinary General Meetings (AGMs). EDs, as bank employees, are also eligible for these ESOPs. For details on ESOPs and eligibility requirements, see Note 53 to the financial statements “Stock-Based Compensation” on pages 241-244. Employment contracts do not contain early termination or severance obligations. During the year there have been no premature dismissals that require compensation. Reviews of the Board of Directors and Board committees (Principle A.9) As established by Management, the Code and other applicable regulations, the Board of Directors and Board committees annually evaluate their own performance to ensure that they are performing their duties satisfactorily in accordance with with the Statutes. of Association meet . This process requires each director to complete a board performance evaluation form that includes all of the criteria set forth in the Governance Code's Board Performance Evaluation Checklist. The responses are compiled by the Company Secretary and submitted to the BNC for consideration and then discussed at a board meeting. The Board reviews for 2019 and 2020 were addressed at the Board meetings in February 2020 and February 2021, respectively. Evaluation of the Director General (Principle A.11) The Board of Directors, assisted by the CBHRRC, annually evaluates the performance of the Director General based on short, medium and long-term criteria agreed at the beginning of each year with financial and non-financial entities. -Financial targets taking into account changes in the operating environment. The President discusses the evaluation with the Executive Director and provides formal feedback. The Executive Director's responses to the evaluation will be duly considered prior to approval. This review will be completed within three months of the end of the fiscal year. Shareholder participation and voting (Principles C.1, C.2, E and F) The Bank actively interacts with shareholders and potential investors as part of good corporate governance and has put in place a structured process to facilitate it. The Shareholder Communication Policy, approved by the Board of Directors, is intended to ensure that material matters are communicated to shareholders in an effective and timely manner. The bank maintains a number of communication channels with shareholders, including the annual report, general meetings and extraordinary general meetings, interim financial statements, announcements to the CSE, press releases, the bank's website, surveys to shareholders upon request and the investor comment form. in the annual report. During the year, shareholders received updates on quarterly results, 2019 dividend declarations, 2019 financial statements, disclosures about the impact of COVID-19 on publicly traded companies,
87. Tisch– 30 Number of attendees Shareholding % of total shareholding Non-voting shareholders (including proxies) Number of Attendees Shareholding % of total shareholding 2020 119 672,118,061 69.92 19 3,132,256 4.72 2019 346 703,703,954 73.21 145 12,048,304 18.18 2018 317 713,801,082 75.52 119 14,344,030 22.06 2017 387 688,571,770 81.41 126 5,694,130 9.80 2016 653 694,342,969 83.40 131 3,430,841 6.00 On August 12, 2020, an Extraordinary General Meeting was held with the physical participation of shareholders to obtain the approval of the shareholders for the acquisition of new capital increase to increase Tier 1 capital and support the bank's future credit growth. by issuing shares through a private placement for IFC and two IFC-affiliated funds. Shareholders who approved the proposed share placement and consequently shares were issued on 5 October 2020, raising Rs 9,216 crore in capital. Whistleblowing The Bank has adopted a Whistleblower Charter to deter and detect misconduct and unethical conduct and to ensure that there are genuine concerns about misconduct and unethical conduct. The Bank's Compliance Officer has been designated to manage the Bank's whistleblowing processes. Measures are in place to protect whistleblowers who act in good faith on behalf of the Bank. The Bank is committed to maintaining the utmost confidentiality with respect to employees who raise specific concerns or allegations of serious misconduct or unethical conduct. Anti-Bribery and Anti-Corruption The Bank has issued guidelines in the form of a brochure - Code of Ethics - for each and every one of the Bank's employees. These policies cover a wide range of aspects, including the prevention of the use of privileged information in securities, internal rules for the purchase/sale of bank shares, gift policy, conflict of interest management, fight against financial crime, respect for communities and the environment, etc. Annual corporate governance report Voting shareholders (including proxies) General meeting of the year Governance and risk management Attendance at general meetings Annual report 2020 The Bank always encourages shareholders to attend general meetings and extraordinary general meetings and to exercise their right to vote In this context, the Bank will ensure that clear instructions on the voting procedure are sent with each invitation to the general meeting/extraordinary general meeting. Shareholders play a key role in the re-election of directors and the external auditor and vote on all matters reported to them, including approval of the annual report and accounts. Although the Bank was unable to hold the Ordinary General Meeting with the physical presence of our shareholders due to the COVID-19 outbreak in accordance with the invitation to the meeting published in the 2019 Annual Report, the Bank, after due notice and publicity , successfully conducted the fifty-first Annual General Meeting, a virtual meeting, fully compliant with the guidelines issued by government health and regulatory agencies while ensuring maximum shareholder participation and providing shareholders with every opportunity to resolve issues of interest. A total of 32 voting and 13 non-voting shareholders attended the 50th Annual General Meeting held virtually on June 25, 2020, while another 87 voting shareholders and 6 non-voting shareholders exercised their rights. proxy vote. The six non-voting shareholders exercised their proxy voting rights only on matters designated for voting. A summary of shareholder attendance information at general meetings over the past five years is presented in the table below: Commercial Bank of Ceylon PLC Disclosure in Fitch Rating Preview, Private Placement Share Issue to IFC , Resignation of a director, Appointment of new Directors, removal of the previous President and Vice President and appointment of the new President and Vice President through communications to the CSE and, where appropriate, to the media. The bank's website also has a special section, Investor Relations, for investors, containing interim financial statements and annual reports, with the most recent report being offered in both PDF and interactive formats for the reader to choose from. The Interactive Report also includes an investor feedback tab. The Board of Directors is fully committed to treating all shareholders equally and recognizing, protecting and facilitating the exercise of their rights through open communication. The Bank arranged for the publication of daily interim and annual financial statements in all three media within the legal deadlines in accordance with the instructions issued by the CBSL and also submitted interim and annual financial statements to the CSE within the specified deadlines within the meaning of Rule Listing 7.4 of the CSE intermediaries the challenges of the pandemic. See the Prudent Growth section on page 47 for a detailed discussion.85
88. Reports of the Directors' Committee Report of the Audit Committee of Directors Composition of the Committee During the yearThe Audit Committee of the Board of Directors (BAC) was made up of the following members. Member profiles as of December 31, 2020 are provided on pages 64 to 69. Attendance Mr. R. Senanayake* (Chairman) Attendance 02/02 Board Members Mr. S K Dharmasiri* (Director) 07/07 Ms N T M S Cooray* (Director) 07/06 Prof. A K W Jayawardane* (Director) 07/07 (Resigned from BAC effective December 31, 2020) Commercial Bank of Ceylon PLC 07/07 (Resigned from BAC effective December 31, 2020 December 31, 2020) Ms. J. Lee* (Director) (Appointed to BAC effective December 31, 2020) *Independent Non-CEO 00/00 Mr. S Renganathan (CEO/CEO) 07/07 Mr S C U Manatunge (Director/COO) 07/07 Mr K D N Buddhipala (CFO) Mr S K K Hettihamu (Chief Risk Officer) Ms A V P K T Amarasinghe (Deputy CEO - Compliance) - (appointed effective 25th November 2020) Mr. V S Rajasooriyar (Deputy Director General - Compliance) - (Retired as of November 11, 2020) Mr. J. Premanath (Deputy Permanent Managing Director - Performance Audit) Mr. R. Mihular (PR Senior Acting Chartered Accountant, serves the BAC in a consultant capacity and is invited to meetings) Independent Consultant appointed to the Committee to provide the necessary assistance so that the Committee can carry out its functions properly Secretary of the Committee Mr. J Premanath (Assistant General Manager – Performance Audit) Constitution of the Committee Annual Report 2020 Governance and Risk Management Judge K Sripavan* (Director ) The Board has clearly defined the Constitution of the BAC (the Committee) which is the reference of the Committee. It is reviewed annually to ensure that new developments related to the work of the Committee are taken into account. The Committee charter was last reviewed and approved by the Board of Directors in December 2020. R Senanayake Chair – Board Audit Committee “Reviewed the policy manual on policies and methods, including calculation of expected credit losses ( ECL) under IFRS 9 – “Financial Instruments”, adopted by the Board in 2020.” 86 05/05 Regular participants by invitation (Appointment as member/chair as of September 25, 2020) The Committee assists the Board in the performance of its duties and exercises oversight of financial reporting, internal controls, and audits internal/external. The Committee has full access to information, cooperation with management and may, at its sole discretion, invite any director or officer to attend its meetings. Banking Act Order No. 11 of 2007 on “Corporate Governance for Licensed Commercial Banks in Sri Lanka” and its subsequent amendments (hereinafter referred to as the Directive), “Rules on Corporate Governance under the Listing Rules of the Colombo Values” and “Code of Best Corporate Governance Practices”, issued by the Sri Lanka Institute of Chartered Accountants, further regulate the composition, role and functions of the Committee. The Committee has the authority of the Board of Directors to: z Ensure that established financial reporting systems are effective and well managed to provide accurate, adequate and timely information to the Board of Directors, regulators, management and other interested parties. z Review the adequacy of accounting policies and ensure compliance with legal and regulatory requirements and applicable accounting standards. z Ensure that the bank adopts and adheres to high standards of corporate governance practices, while adhering to the highest ethical standards and industry best practices in the best interest of all stakeholders. z Evaluate the adequacy, efficiency and effectiveness of risk management measures, internal controls and governance processes to prevent, mitigate or transfer current and future risks. z Oversee all aspects of the Bank's internal and external audit and inspection programs and review internal and external audit reports to follow up on their findings and recommendations with management.
89. bank representativeThe external auditors of , Messrs. Ernst & Young, also attended seven (07) meetings during the year by invitation. The Committee also invited members of the Bank's senior management to attend the meetings from time to time as needed. Information on Financial Condition and Performance: The Committee assisted the Board in its oversight of the preparation of the financial statements to provide a true and fair view of financial condition and performance. This process is based on the Bank's accounting records and in accordance with the requirements specified in the Sri Lanka Accounting Standards. In carrying out its supervisory responsibilities, the Committee reviewed and discussed the interim and consolidated financial statements, including the adequacy of accounting policies, the reasonableness of estimates and significant judgments. The Committee reviewed pending tax assessments and initiated follow-up action to resolve them through regular reports submitted by the Chief Financial Officer. The Committee assessed the internal controls, systems and procedures in place and expressed the opinion that adequate controls and procedures were in place to provide reasonable assurance that the Bank's assets are protected and that the Bank's financial condition is well supervised and accurately reported. . IFRS 9 Implementation Progress: The Committee continuously monitored the progress of IFRS 9 implementation in accordance with the requirements of the Sri Lanka Accounting Standard - IFRS 9 on “Financial Instruments” issued from 1 January of 2018 Policy Manual on Principles and Methods, including the calculation of expected credit losses (ECL) in accordance with IFRS 9 - "Financial Instruments" adopted by senior management in 2020. Oversight of regulatory compliance: the Committee also ensured that the bank complied with all regulatory and statutory requirements and carried out careful scrutiny of Compliance with mandatory banking and other legal requirements and existing systems and procedures. The Committee used the quarterly reports provided by the Compliance Officer to monitor compliance with all these legal and regulatory requirements. As an additional monitoring measure, the bank's inspection department has been commissioned to carry out independent mock audits covering all regulatory compliance requirements. The Committee monitored progress in the implementation of the recommendations made in the Central Bank of Sri Lanka (CBSL) Statutory Audit Reports through regular follow-up reports submitted in 2020. Risk Identification and Controls: The Bank has adopted an approach risk-based audit process to assess the effectiveness of internal controls established to identify and manage all material risks and have these reviewed by the Committee. The Committee sought and obtained the necessary guarantees from the business units regarding the corrective actions related to the identified risks to maintain the effectiveness of the internal control processes. Internal Audit and Inspection: The Committee ensured that the internal audit function was independent of the activities it audited and that it was performed with impartiality, competence, and due professional care. The Committee approved the 2020 IS Inspection/Audit Program formulated by the Inspection Department and the Information System Audit Unit (ISAU). The progress and scope of the IS inspections/audits were continually reviewed to ensure that appropriate corrective actions were taken to address the risks identified during the lockdown. The Bank's Inspection Department conducted online and on-site inspections of business entities, including four (4) subsidiaries in Sri Lanka and operations in Bangladesh. Overseas affiliates, namely Commercial Bank of Maldives Private Limited and CBC Myanmar Microfinance Co. Ltd. and Commex Sri Lanka S.R.L., a subsidiary incorporated in Italy, were monitored by an external monitor. With the approval of the Board of Directors, the Bank has also contracted the services of five (5) accounting firms accredited by CBSL to complement the Bank's Inspections Department in the performance of inspection functions. ISAU carried out on-site and off-site (bank and group) audits covering local and foreign activities. Audits conducted through systems-based audit tools, reviews of system change management activities as part of the agile approach, and verification of compliance with industry standards such as ISO 27001:2013/PCI-DSS/Baseline Security Standards (BSS) to ensure protection. of the bank's IT assets to be insured. The committee received attention on important findings and recommendations related to IT governance, cybersecurity, network security, physical and logical access management, endpoint security, and IT systems management in the reports submitted by ISAU. The Committee also reviewed reports of findings related to business continuity planning and disaster recovery preparedness in 2020. Five hundred forty-seven (547) inspection reports in business areas, including subsidiaries and foreign operations, received the attention of the Committee, which highlighted the operational deficiencies, Risks and Recommendations. The Committee evaluated the Bank's internal control system and timely reported its findings to the Board of Directors. Directors' Committee Reports The Committee held seven (7) meetings during the year ended December 31, 2020. The results of these meetings, with due detail of the matters discussed, are periodically reported to the Board of Directors. Period and restricted business operations during the first and second wave of the COVID-19 pandemic. The scope of work has been expanded/refocused to include credit checks and remote work from home through online and off-site review processes. Governance and risk management activities as part of the 2020 Internal Capital Adequacy Assessment Process (ICAAP): The Committee reviewed the effectiveness of the existing internal control mechanism to meet the ICAAP regulatory requirements and the existing mechanism to ensure the integrity, accuracy and adequacy of the bank's capital valuation processes for the year 2019 in accordance with Article 10 (in Pillar II - Supervisory Review Process) of Banking Law Decree No. 01 of 2016 "Regulatory Framework for the Process of Supervisory Review”. Annual Report 2020 and Financial Statements of the Bank to monitor the integrity of these statements prepared for disclosure prior to their presentation to the Board. Commercial Bank of Ceylon PLC z Review of interim financial statements Significant results of internal investigations were taken into account with management recommendations and appropriate instructions were issued. The Committee also invited representatives of the audit firms that collaborated with the audits to make presentations on their observations and findings. The committee reviewed the operations manual for information systems inspections/audits and evaluated the internal audit function, covering key areas such as scope, internal audit quality, independence, and resources. 87
90. During the year, committee members personally visited offices in the Southwest and South regions to gather information on operations, controls implemented, and follow-up actions taken on key audit findings. External Assurance: In relation to the Bank's external audit function, the role of the Committee is: Commercial Bank of Ceylon PLC Annual Report 2020 Governance and Risk Management Board Committee Reports z Assist the Board in engaging external auditors for audit services, in accordance with the provisions of Management and their agreement. Compensation subject to shareholder approval. z Supervise and evaluate the independence, objectivity and effectiveness of the external auditor. z Review non-audit services provided by auditors to ensure that these functions are not covered by restricted services and that the provision of such services does not compromise the independence and objectivity of the external auditor. z Discuss the audit plan, scope and proposed methodology for conducting the audit with the auditors before the start of the annual audit. z Discussion of all relevant matters arising from the interim and final audits and any matters the auditor wishes to discuss, including matters that may need to be discussed in the absence of key management personnel. z Review of the external auditor's management letter and management's responses to it. The auditors had the opportunity to meet with the non-executive directors separately, without the presence of the executive directors, to ensure that the auditors had an opportunity to discuss openly and express their views on all matters. He assured the committee that management had provided all the information and explanations requested by the auditor. Following the completion of the audit, the Committee also met with the auditors to review the auditor's management letter before presenting it to the Board and CBSL. Committee members evaluated the Bank's external auditor, Messrs. Ernst & Young, during 2020 in key areas such as audit scope and performance, resources, and quality assurance initiatives. 88 Internal Control Mechanism: Sections 3 (8) (ii) (b) and (c) of Decree Law on Banks No. 11 of 2007 establish the requirements that the bank must meet to guarantee the reliability of the financial information in the current system. in the bank guarantee. The Committee is assisted by the External Auditor and the Inspections Department to closely monitor procedures to maintain an effective internal control mechanism to provide reasonable assurance that this requirement is being met. In addition, the Committee regularly monitored all exceptional items charged to the Profit and Loss Account, long-term items in the Bank's Chart of Accounts, credit quality, risk management processes and compliance with the CBSL classification of delinquencies and provisions. The Committee also reviewed credit monitoring and follow-up procedures, as well as established internal control procedures, to ensure that the necessary controls and mitigation actions are implemented in relation to newly identified risks. Ethics and good governance: The committee constantly emphasized the need for employees to respect ethical values. In this regard, the Bank has a Code of Ethics and a Whistleblower Charter that are followed to educate and encourage all employees to resort to whistleblowing if they suspect misconduct or other irregularities. The highest standards of corporate governance and compliance with the bank's code of ethics were ensured. All reasonable procedures have been implemented to conduct independent investigations into incidents reported by whistleblowers or otherwise identified. The Whistleblower Charter strictly guarantees non-disclosure of the whistleblower's identity. Sri Lanka Accounting Standards: The Committee reviewed the revised policy decisions related to the adoption of the new and revised Sri Lanka Accounting Standards (SLFRS/LKAS) applicable to the Bank and made any necessary recommendations to the Board. The Committee will continue to monitor compliance with relevant accounting standards and will update the Board regularly. Committee Evaluation: During the year, the other members of the Board conducted an independent evaluation of the effectiveness of the Committee. In view of the overall conduct of the Committee and its contribution to the overall performance of the Bank, the Committee was rated as effective. R Senanayake Chair - Audit Committee of the Board February 24, 2021
91. Report of the Board of Directors Comprehensive Risk Management Committee Composition of the Committee During the yearThe Board's Integrated Risk Management Committee (BIRMC) consisted of the following members. Member profiles as of December 31, 2020 are provided on pages 64-69. 05/05 Ms A V P K T Amarasinghe (Deputy General Manager - Compliance) Board Members Regular Attendees by Invitation Mr M P Jayawardena* (Former Chairman ) (Resigned on December 29, 2020) (Appointed from November 25, 2020) Mr. S Renganathan (Managing Director/General Director) 05/05 Mr. K Dharmasiri* (Director) 05/05 Mr. L D Niyangoda* (Director) 05/05 Mr T L B Hurulle* (Director) 05/04 Mr S Swarnajothi* (Director) 03/03 Mr K S A Gamage (Deputy Director General - Information Technology) 02/02 Secretary to the Committee Mr. K D N Buddhipala (Financial Director) (Retired 20 Aug 2020) Ms J. Lee* (Director) (Appointed to BIRMC effective 13 Aug 2020) 05/05 Mr V S Rajasooriyar (Managing Director) Attachment - Compliance) - (Retired November 11, 2020) 01/01 Mr. R. Senanayake* (Director) (Appointed to BIRMC by Peer September 27, 2020) Mr. S K K Hettihamu (Chief Risk Officer) (non-board member) *A Charter of the Dependent Non-Executive Directors Committee Prof. AKW Jayawardane Chairman - Board Integrated Risk Management Committee “Discussed the sectors affected by the pandemic and the factors under the control of the bank to mitigate the risks. These have been duly noted to stop deterioration of credit quality." The BIRMC was prepared by the Board pursuant to Section 3(6) of Instruction No. 11 of 2007 on "Corporate Governance for Chartered Commercial Banks in Sri Lanka ", issued by the CBSL Monetary Board, established powers conferred on the Monetary Board by virtue of Banking Law No. 30 of 1988. The composition and scope of the work of the Committee are consistent with those established in the BIRMC Statute, which was revised in December 2020, and clearly sets out the membership, powers, duties and responsibilities of BIRMC, as set out in the “Risk Governance and Management” section of this Annual Report on pages 114 to 133 describes the Bank's risk management framework and activities, including the review of the main risks and the measures taken to monitor and control those risks in relation to the large number of risks to which the Bank is exposed. in the course of your business. BIRMC's duties include determining the adequacy and effectiveness of such measures and ensuring that the bank's actual overall risk profile matches the bank's desirable risk profile as defined by the Board. BIRMC regularly assesses all key risks, such as credit, operational, market, liquidity, IT, strategic, etc., against a set of defined risk indicators. The Committee works closely with key management personnel and the Board in discharging its legal, fiduciary and regulatory risk management responsibilities. The Bank's risk profile is regularly communicated to the Board through the Risk Assessment Report, which is presented to the Board after each BIRMC meeting. 2020 Activities Pursuant to previous duties and responsibilities delegated to BIRMC, the Committee reviewed material risks throughout the year, spanning categories of strategic, operational, credit, market, cyber, and other emerging risks. The activities carried out by the Committee are listed below: Board Committee Reports Mr. S C U Manatunge (Director/Director of Operations) Governance and Risk Management 00/00 (Appointed Member/Chairman as of December 31, 2020) Annual Report 2020 Prof. A K W Jayawardane* ( President ) Assistance Commercial Bank of Ceylon PLC Assistance z The main focus for 2020 was the deterioration of the credit quality of the industry amid the socio-economic challenges facing the country due to the situation of the global pandemic of COVID-19. The affected sectors and factors under the Bank's control have been considered to mitigate risk in order to stop any deterioration in credit quality. 89
92. z Excess liquidity resulting from lackluster credit growth, challenges stemming from falling interest rates, as well as a change in counterparty risk appetite related to sovereign downgrades by international rating agencies, which had exacerbated risk factors related to operating environment, drew the Committee's attention in most major deliberations Strategy formulation by management Commercial Bank of Ceylon PLC Annual report 2020 Governance and risk management Management committee reports z Another area of ​​focus for the committee in The prevailing conditions were the information and cyber security implications resulting from the rapid shift to the work-from-home environment and the improvements required to provide strong security to remote access arrangements in terms of management, technical and physical controls. Amid heightened cyber threats surrounding the pandemic, BIRMC focused on progressing key information security projects planned for 2020 as part of the bank's information security roadmap, including access management Privileged Protection (PAM), Data Loss Prevention (DLP) and Security Operations Center (SOC) initiatives. z Approval of parameters and limits established by management for various risk categories after determining that they are consistent with the relevant laws and regulations and the desired policy levels as determined by the Board of Directors. z Review periodic management reports on the metrics used to measure, control and manage risk, including acceptable and appropriate risk levels. The reviews included movements from inherent risk levels to residuals, indicating progress in implementing controls, and evaluating the effectiveness of controls in addressing sources of risk. z Recommended improvements to the Bank's risk management framework and related policies and procedures, which were deemed appropriate given anticipated changes in the economic and business environment, including consideration of emerging risks, legislative or regulatory changes, and other factors that were deemed necessary. considered relevant to the risk profile of the group. The Key Risk Indicators (KRIs), developed to monitor the level of specific risks, have been regularly reviewed to determine whether these indicators are appropriate to meet the intended risk management objectives and proactive risk control measures have been taken. The actual results calculated monthly were compared with each risk indicator and corrective actions 90 were recommended in a timely manner to mitigate the impact of certain risks in the event that they exceed the prudent thresholds established by the Board of Directors. z Completed an internal ratings validation exercise by external consultants, focused on the introduction of rating migration as a way of determining probability of default (PD) at a future date, replacing the current proxies adopted by all financial institutions in Sri Lanka. z Review and revise the rules of procedure of all management committees dealing with specific risks or certain aspects of risk, e.g. B. Executive Committee for Integrated Risk Management, Executive Committee for Monitoring Delinquency, Credit Policy Committee, Information Security Council, Assets and Liabilities Committee, etc. The actions initiated by senior management were periodically monitored to verify the effectiveness of the actions carried out by these respective committees. z The results of the biannual Risk Control Self-Assessment (RCSA) exercise were reviewed. During the year under review, the BIRMC held four (04) quarterly meetings and one (01) additional meeting to specifically discuss the impact of the COVID-19 pandemic on the Bank's risk profile. The Board of Directors received regular reports on the progress of the committee meetings. In 2020, BIRMC supported the execution of the Bank's overall business strategy within a prudent set of risk parameters, reinforced by an effective risk management framework. The Board of Executive Directors was regularly informed of the results of committee meetings, which also included activities within the scope of its statutes. z The annual work plans, associated strategies, policies and frameworks of previous committees have been reviewed to ensure that these committees have a good understanding of their mandates and have adequate mechanisms in place to identify, measure, prevent, mitigate, transfer or manage the risks within the qualitative and quantitative parameters of the committee defined by the BIRMC. z Review and approve the results of the Internal Capital Adequacy Assessment Process (ICAAP) in relation to the entities of the Commercial Banking Group to ensure that the Group has an adequate and consistent level and quality of capital with those associated with its activities and the projected business development risks maintained. z Supervised the effectiveness and independence of the risk management function within the bank and ensured the sufficiency of the resources used for this purpose. z Review the effectiveness of the compliance function to assess the bank's compliance with laws, regulations, regulatory policies, internal controls and approved policies in all areas of its operations. z Initiation of appropriate actions by management against failures by risk owners to improve the overall effectiveness of the bank's risk management. z The risk profiles of the Bank's subsidiaries were monitored through periodic reviews of KRI and comprehensive annual risk reviews. z Review the adequacy of the bank's business continuity and disaster recovery plans in accordance with legal requirements. Prof. AKW Jayawardane Chairman - Board Integrated Risk Management Committee February 24, 2021
93. Report of the Nominating Committee of the Directors' Committee Composition During the yearThe Board Nominating Committee (of the BNC) was made up of the following members. Member profiles as of December 31, 2020 can be found on pages 64 to 69. 04.04. Mr. K G D D Dheerasinghe* (Former Chairman) – 11.11. (resigned from the position on December 21, 2020) 11.11. 07/07/04/04 (appointed BNC effective August 13, 2020) Prof. AKW Jayawardane* (Director) 04/04 (appointed BNC effective October 27, 2020) *Independent Non-Executive Director Committee Responsibilities Judge K. Sripavan Chair – Board Nominating Committee “Having identified the right individuals to fill vacancies on the Board, the Committee recommended the appointment of three new non-executive/independent directors to the Board.” The Board Nominating Committee was appointed by the Board of Directors pursuant to paragraph 3(6)(iv) of the Banking Act Instruction No. 11 of 2007 on "Corporate Governance for Commercial Banks Licensed in Sri Lanka" issued by the Monetary Board established the Central Bank of Sri Lanka (CBSL) under the powers of the Monetary Board under Section 46(1) of the Banking Act No. 30 of 1988 as amended. The Committee was established to ensure the supervision and control of the Board of Directors over the selection of directors, the CEO and key personnel. The composition and mandate of the Committee are those established in the Regulations. Committee Rules The Committee shall; z Review the structure, size and composition of the Board and make recommendations to the Board regarding any changes. z Review of the organization's leadership needs, both executive and non-executive, to ensure the long-term sustainability of the organization to compete effectively in the marketplace. z Adopt a process for the appointment and re-election of Board directors that takes into account factors such as suitability, propriety, including qualifications, competence, independence, and relevant laws and regulations. z implement a process for the selection/appointment of the managing director/executive director, director of operations and other key personnel. z Establish criteria, such as qualifications, competencies, experience, independence, conflicts of interest and other important characteristics, necessary for eligibility for appointment or promotion to the position of Chief Executive Officer/Managing Director, Chief Operating Officer and Key Management Personnel. z Prior to any Board appointment, assess the balance of skills, knowledge, experience and diversity on the Board and, in light of that assessment, develop a description of the role and skills required for a particular appointment. z With respect to Executive Directors and key personnel, consider proposals for their appointment or promotion and any proposals for their removal or any material change in their roles or responsibilities or in the terms of their appointment. Governance and Risk Management Ms. J. Lee* (Director) Committee Secretary Mr. R.A.P. Rajapaksha (Company Secretary) Annual Report 2020 Mr. S. Swarnajothi* (Director) – (retired 20 Aug 2020) 11.11. Commercial Bank of Ceylon PLC Mr. M. P. Jayawardena* (Director) (Resigned as of December 29, 2020) Mr. S. Renganathan (Managing Director/Executive Director) Board Committee Reports Judge K. Sripavan* ( President) (Effective Appointed to the BNC on October 27, 2020 and appointed President as of December 31, 2020) Attendance Regular attendees by invitation Presence of directors z ensure prior to the appointment of a director that the proposed appointee discloses any other interest that may give rise to a conflict of interest and would disclose any future business interest that might arise as a result of a conflict of interest. z Consider and, from time to time, recommend additional or new experience requirements for managers and other key personnel. 91
94. z propose the maximum number of representations on the board of directors of the listed company that a director may have under applicable laws and regulations. z Review the affidavits and properly completed statements of all directors and key employees and present them to the Board of Directors for approval. Commercial Bank of Ceylon PLC Annual Report 2020 Governance and Risk Management Management Committee Reports z Formulation of succession plans for key management personnel, executive and non-executive directors on the Board of Directors and in particular for the key roles of Chairman and Chief Executive Officer and Chief Operating Officer considering the challenges and opportunities facing the company and the skills that will be needed in the future. z make recommendations to the Board on suitable candidates for the position of Senior Independent Director when the Chairman is not an Independent Director, membership of other Board committees when appropriate in consultation with the Chairs of those committees, and re-election of General Assembly Directors by the shareholders or by rotation in accordance with the provisions of the Bank's Bylaws. z Monitor the progress of relevant regulatory or corporate governance developments that may affect the Committee and recommend any action or change it deems necessary to obtain Board approval and ensure compliance with existing laws and regulations. z has the authority to discuss matters within his area of ​​responsibility and to make recommendations to the Board of Directors to allow the Board to make a final decision on the matter. z have the right to express their independent opinions when making decisions. z Be authorized by the Board of Directors to seek external legal or other professional advice on matters covered by its rules of procedure at the Bank's expense. z Recommend to the Board of Directors that all Directors and key management personnel be exempt and insured in accordance with the Articles of Association, applicable laws and regulations. z Invite any director, Bank staff member or external consultant to attend meetings when appropriate and necessary. 92 Activities in 2020 Eleven (11) committee meetings were held in the year under review. The Board of Directors is periodically informed about the results of the committee meetings. Taking into account the revised Rules of Procedure in 2019, the Committee was mandated to establish criteria such as qualifications, experience, and key attributes required to be considered eligible for appointment/promotion of key personnel, a task that was previously administered by the Committee of Human Resources and Compensations of the Bank's Board of Directors. Consequently, in 2020 the Committee conducted the pertinent reviews and interviews related to the appointment/promotion of key Bank management personnel. The Committee recommended the election/re-election of the Directors taking into account their performance and the contribution they have made to the comprehensive performance of the Board's functions. The Committee identified the suitable people to fill the vacancies on the Board of Directors and, after carefully reviewing various candidates, recommended the appointment of three (03) new non-executive/independent directors to the Board during the year. The Committee was also responsible for recommending the appointment of Judge K. Sripavan as President of the Bank and Prof. AKW Jayawardane as Vice President of the Bank after due consideration, w.e.f. December 21, 2020 and December 29, 2020, according to Mr. K G D D Dheerasinghe (Former Bank President) and Mr. M P Jayawardane (Former Bank Vice President) who resigned from the w.e.f. December 21, 2020 and December 29, 2020, respectively, after nine years as non-executive/independent Directors of the Bank within the meaning of Clause 3(2)(ii)A of the Banking Law No. 11 Directorate of 2007, Corporate Governance for Chartered Commercial Banks in Sri Lanka. The Committee obtained statements from all directors, through a prescribed format, confirming their independent status. The Committee continued to work closely with the Board of Directors on matters delegated to it and reported its recommendations to the Board of Directors. Judge K. Sripavan Chair – Board Nominating Committee February 24, 2021
95. Report of the Personnel and Compensation Committee of the Board of Directors Composition of the Committee During the yearThe Board of Directors Compensation and Personnel Committee (BHRRC) consisted of the following members. Member profiles as of December 31, 2020 are provided on pages 64 to 69. Director) (Resigned as of December 29, 2020) 04/04 Mr. S Swarnajothi* (Director) (Retired since August 20 of 2020) 01/01 Prof. A.K.W. Jayawardena (Director)* Mr. S. Renganathan (Managing Director/Chief Executive Officer) Participated in all deliberations except those matters affecting his own terms and conditions of employment. 05/05 Committee Secretary Mr. U I S Tillakawardana (Deputy Director General - Human Resources Management) (appointed to BHRRC on 27 Oct 2020) Committee Charter Assess, evaluate, decide and recommend to the Board of Directors matters that may affect the management of human resources of the Bank, including in particular: z Determining the remuneration of the Chairman, Vice-Chairman, Chief Executive Officer and other members of the Bank's Board of Directors, ensuring that no Director intervenes in determining their own remuneration. Judge K. Sripavan Chairman - Board Remuneration and Human Resources Committee "Reviewed the proposals submitted to management for the renewal of the Collective Bargaining Agreement with the Ceylon Bank Employees Union (CBEU) for the years 2021, 2022 and 2023 and recommended its approval by the Board of Directors.” z Determine compensation and benefits for KMPs and establish performance benchmarks by setting their individual goals and objectives z Formulation of policies, guidelines and benchmarks for compensation structures for all bank executives and monitor their implementation z Review from time to time from time to time executive compensation information to ensure it is in line with market/industry rates or bank strategy Evaluate CEO and KMP performance against previously agreed objectives and targets is required z Evaluate, evaluate and issue recommendations and guidelines in relation to the Board of Trustees and the administration of the bank's private provident fund z Ensure that all regulatory and contractual obligations related to employees are fulfilled in a timely manner z Recommend/decide/instruct disciplinary measures that result in significant financial losses for the Bank caused by the KMP of the Bank. z Establish formal and transparent processes for the development of remuneration policies for executives and directors. z Approve annual salary increases, bonuses, changes in benefits and incentives. The Chairman of the Committee may call a special meeting if necessary, provided that all members receive timely notice of such special meeting. The quorum for a meeting is two (2) members. Directors may be invited to attend committee meetings when so requested by the Chairman, discussing the matters to be discussed at said meeting. The Board of Directors receives regular reports on the development of committee meetings. Annual Report 2020 *Independent Non-Executive Director Governance and Risk Management 00/00 Ms J Lee* (Director) (appointed to BHRRC on 31 December 2020) Board Members of Commercial Bank of Ceylon PLC (appointed to BHRRC on October 27, 2020 and Chairman Appointment effective December 31, 2020) Board Committee Reports Judge K. Sripavan* (Chairman) Attendance Regular attendees, by invitation Attendance for evaluation and recommendation to the Board, KMP promotions , consideration of succession planning issues and organizational structure. 93
96. Guiding principles The general approach of the Committee: z Setting Policies and Guidelines for Commercial Bank of Ceylon PLC Annual Report 2020 Governance and Risk Management The board committee reports formulate compensation packages that are attractive, motivating and capable of retaining qualified and experienced staff at the bank. In this sense, the Committee determines the criteria such as qualifications, experience and the skills and competencies required to be considered for the appointment or promotion to the position of General Director and key positions. 94 z Establish policies and policies to ensure that the Bank complies and complies with the provisions of the laws of the countries, in particular the provisions of the Banking Law No. 30 of 1988, including the instructions issued by the Monetary Board/Director of Supervision Banking in accordance with the Regulations of this law. z Provide guidelines and directives on relevant issues related to the general areas of the Bank's human resources management. z Ensure that the performance-related compensation element is designed and tailored to align the interests of employees with those of the bank and its key stakeholders and support sustainable growth. z Structuring compensation packages to ensure that a significant portion of compensation is performance related to promote a culture of pay for performance. z Foster a culture of regular performance reviews so that employees can receive feedback from their managers to help them achieve their development goals and objectives. z Develop a strong pipeline to attract talent that is able and available to fill key positions in the bank. Methodology Adopted by the Committee The Committee recognizes rewards as one of the most important factors influencing employee behavior and, in turn, business results. As such, reward programs are designed to attract, retain, and motivate employees to perform by tying performance to demonstrable performance-based criteria. In this sense, the Committee evaluates the performance of the General Manager and KMP against previously agreed goals and objectives that balance the short and long-term financial and strategic objectives of the Bank. The Bank's variable compensation (bonus) plan is based on overall Bank performance and pre-agreed individual targets based on various performance parameters. The amount of variable remuneration is determined in such a way that individual remuneration reflects the performance of the bank as a whole, the respective business area and individual performance. In the case of over- or under-achievement of specified goals, the committee makes appropriate adjustments to the bonus fund. In this sense, the Commission may seek the advice of external independent professionals in matters within its competence. In addition, the Committee may contract with outside agencies to conduct salary surveys to determine the salaries paid to employees in relation to market position, which enables the Committee to make informed decisions about salaries at the Bank. Activities in 2020 The Committee held five (5) meetings during the year and the results of the Committee meetings, which also included activities under its Regulations, were periodically reported to the Board of Directors with its comments and observations. The committee determined the bonus to be paid for performance in 2019 under the Variable Compensation Plan (VPP) for executives and the granting of annual bonuses for non-tariff executives. Reviewed the performance of the directors during fiscal year 2019, including the Director General and the Director of Operations. At the end of the 2019 review process, the committee carefully reviewed the identified key performance areas for 2020 and the respective principal KPIs and agreed subject to change. During the year, pension adjustment requests from retirees were considered and approved. The Rules of Procedure for the BHRRC have been reviewed and recommended to the Board for final approval. The service outsourcing policy has been reviewed and recommended to the Board of Directors for final approval. The BHRRC reviewed the bank's succession plan and guidance was provided to the Managing Director. The Committee reviewed proposals to management to extend the Ceylon Bank Employees Union (CBEU) Collective Agreement for 2021, 2022 and 2023 and recommended it to the Board of Directors for approval. Judge K. Sripavan Chairman of the Board Compensation and Human Resources Committee February 24, 2021
97. Report of the Audit Committee on Transactions with Related Parties of the Board Composition of the Committee D. T L B Hurulle* (Director) 04/04 Mr. S Swarnajothi* (Director) 03/03 (Retired effective August 20, 2020) Mr. R. Senanayake* (Director)* 01/01 (Appointed effective October 27 2020) 04/04 Mr. S C U Manatunge (Director/COO) 04/04 Committee Secretary Mr. L.W.P. Indrajith (Deputy General Manager – Finance) *Independent Non-Executive Director The Committee's mandate includes, but is not limited to : z Develop, update, and recommend approval by the board of directors of the bank and its publicly traded subsidiaries of an RPT policy consistent with that proposed by the SEC. z Quarterly update of the Board of Directors on the RPT of all listed companies in the group. z Advise the Board on immediate justice K Sripavan Chairman - Board Related Party Transactions Review Committee "The Committee has been strengthened with the appointment of an Independent Non-Executive Director in light of the departure of an Independent Non-Executive Director." RPT applicable pursuant to Section 9.3.1 of the CSE Listing Rules. z Advise the Board on the disclosure of appropriate information on RPT in the annual report in accordance with Section 9.3.2 of the CSE Listing Rules. Methodology Adopted by the Committee z Review the mechanisms established to obtain representations from all Directors (upon joining the Board and annually thereafter) informing the Company Secretary, the main point of contact for Directors, of any RPT realized or potential. by them or their immediate family (CFM) and obtaining additional explanations on a quarterly basis in the event of a change during the year to previously disclosed positions. z Review of the existing mechanisms to obtain the Bylaws of the Committee This Committee was formed by the Board of Directors in 2014 to assist the Board of Directors in the review of all transactions with related parties entered into by the Bank and its subsidiaries listed in the Group through the Early adoption of The Code was brought about by the Related Party Transactions (RPT) Best Practices issued by the Sri Lanka SEC, which became mandatory for all listed companies from 1 January 2016. The Secretary must identify and record the transactions carried out by the bank with the required commitments. to be disclosed in “Participation of directors in contracts with the Bank” as established on page 113 of this Annual Report. z Review the mechanisms established to collect and enter relevant information on RPT, including information on KMP, CFM and the Bank's subsidiaries and partners in the data collection system, and the accuracy of that information. z Obtain independent validation from the Bank's Internal Audit department for the information presented to the Committee for its review. Activities in 2020 In 2020, the Committee was reinforced with the appointment of an Independent Non-executive Director upon the retirement of an Independent Non-executive Director. In addition, the RPT policy has been reviewed and updated as part of the Bank's annual policy review. The amended RPT Policy was approved and implemented by the Board of Directors in November 2020. Arrangements have also been made to disseminate the amended RPT Policy to all relevant stakeholders and to seek their confirmation that they have read and understood the related applicable regulatory requirements. with the identification, collection and notification of RPT. Additionally, the Committee Rules of Procedure were reviewed and revised to reflect new developments and approved by the Board in November 2020. The Committee held four (4) meetings during the year as required by Section 9.2.4 of the Rules of Procedure. CSE quote. The Committee reviewed all the RPTs carried out during the year at its quarterly meetings and the results of the Committee meetings, which included activities in accordance with its terms of reference, were periodically presented to the Board of Directors with their comments and observations. Reports of the Executive Committee 04.04. Governance and Risk Management Mr. L. D. Niyangoda* (Director) Presence Mr. S. Renganathan (Managing Director/Executive Director) Annual Report 2020 04.04. Commercial Bank of Ceylon PLC Members of the Board Presence Judge K. Sripavan* (Chairman) Regular attendees by invitation During the year, the Board Related Party Transaction Review Committee (BRPTRC) consisted of the following independent non-executive directors (in accordance with the requirements of the Code of Good Practice of Corporate Governance issued by CA Sri Lanka). Member profiles as of December 31, 2020 are provided on pages 64-69. Judge K. Sripavan Chair – Board Related Party Transaction Review Committee February 24, 2021 95
98. Report of the Board of Directors Credit Committee Composition of the Committee During the yearThe Board Credit Committee (BCC) was made up of the following members. Member profiles as of December 31, 2020 are provided on pages 64-69. Board Members Committee Reports Attendance Judge K Sripavan* (Chairperson) – (Chairperson appointed as of December 31, 2020) 12/12 Mr. K G D D Dheerasinghe * (Former Chairman) – (Resigned from his position on December 21, 2020) 12.12. Mr. S. Renganathan (Managing Director/Managing Director) 12.12. Mr. S C U Manatunge (Director/Director of Operations) 12.12. Prof. A.K.W. Jayawardane* - (Resigned from BCC effective December 31, 2020) 12/12 Mr. K Dharmasiri* (Director) - (Appointed to BCC effective December 31, 2020) 00/00 Committee Secretary - Mr. R A P Rajapaksha (Corporate Secretary) *Independent Non-Executive Director Commercial Bank of Ceylon PLC Annual Report 2020 Committee Governance and Risk Management Charter Set credit standards and practices while ensuring compliance with relevant regulations. The Committee has the authority to: z Review and consider the proposed changes Judge K. Sripavan Chairman of the Board Credit Committee “Given the challenging environment due to the pandemic affecting the global and local business environment, the Committee reviewed the credit policies of the bank for prudent management of stipulates credit growth while maintaining and improving asset quality.” from time to time to the Bank's credit policy and lending guidelines. z Review credit risk controls on loans and loan offer pricing, ensure they are aligned with the market context and the bank's internal policies and applicable regulatory framework to ensure continuous maintenance and improvement of the overall quality of the bank's loan book. The Committee approved credit proposals in excess of a predetermined limit, recommended credit proposals and other credit reports which, after due consideration, are awaiting approval/review by the Board of Directors. These functions were performed by the Committee in accordance with the Bank's credit policies and appetite for credit risk to ensure that loan portfolios were managed in accordance with the credit risk parameters established by the Board of Directors, while complying with the Bank's credit objectives. z Evaluate, qualify and approve credit proposals that are within the delegated authority. z Evaluate and recommend sectoral and cross-border exposures. z Supervise and evaluate the special reports requested by the Board of Directors. z Determine the direction of lending based on the current economic climate and the bank's risk appetite. Activities in 2020 The Committee held twelve (12) meetings in the reporting year. The Board of Directors received regular reports on the progress of the committee meetings. 96 In a challenging environment due to the COVID-19 pandemic affecting the global and local business environment, the Committee established the Bank's credit policies to prudently manage credit growth while seeking to preserve asset quality and to improve. Judge K. Sripavan Chairman - Credit Committee of the Board February 24, 2021
99. Management Report Investment Committee Composition of the Committee During the yearThe Board Investment Committee (BIC) consisted of the following members. Member profiles as of December 31, 2020 are provided on pages 64 to 69. 10/10 Mr. S Renganathan (CEO/CEO) 10/10 Mr. S C U Manatunge (Director/COO) 10/ 10 Mr K Dharmasiri* (Director) 10/10 Ms N T M S Cooray* (Director) 10/09 Mr B A H S Preena (Deputy Managing Director – Corporate Banking) Mr S K K Hettihamu (Chief Risk Officer) Committee Secretary Mr A Wijesiriwardane (Deputy Managing Director – Treasury) *Independent Non-Executive Director Committee Charter The Investment Committee of the The board is responsible for the investment activities of the responsible bank. Investment proposals for debt, equity and business projects are evaluated by the committee for feasibility, relevance to the bank's core objectives and contribution to shareholder value. The Committee also assesses the Bank's overall liquidity management, Treasury investments and loans, and capital adequacy. Ms. J. Lee, Chair, Investment Committee of the Board of Directors The Committee also provided guidance from time to time to Bank officers on investment-related activities. Activities in 2020 z Review of the Bank's foreign currency investment limit given the growth of FCY's balance sheet and investment opportunities. Within this framework, the Committee performs the following tasks: z evaluates and approves strategic capital, z reviews, changes and approves investments, z approves investments in bank policies and operating parameters related to banking investments, z supervises compliance with investment policies. where interest rate risk, revaluation risk, currency risk and other market risks are analyzed. Investment processes and decisions of the Investment Committee z Approves investment proposals, indebtedness and contract execution z Reviews the development of the investments of the Bank's subsidiaries The Committee held ten (10) meetings during the year under analysis. The Board of Directors was periodically informed about the committee meetings, which also included activities within the framework of its internal regulations. Investment Portfolio Board Committee Reports Mr. K G D D Dheerasinghe* (Former Chairman) (Resigned December 21, 2020) Mr. K A P Perera (Deputy General Manager - Treasury) Governance and Risk Management Board Members w.e.f. August 13, 2020 and to the President w.e.f. December 31, 2020) Mr K D N Buddhipala (Financial Director) Annual Report 2020 04/04 Commercial Bank of Ceylon PLC Ms J Lee* (Chairperson) (Appointed to the Committee by invitation Regular Participants Attendance z Reviews and recommends investment decisions important to be from the Bank to the Board of Directors Methodology adopted by the Committee The Committee meets monthly and reviews the progress of strategic and significant investments, the Bank's liquidity position, market developments and the economic prospects of the markets in which it operates, and new investments The Committee also reviews the monthly performance of the Treasury and Investment Banking Department, Ms. J. Lee, Chair - Investment Committee of the Board, February 24, 2021 97
100. Report of the Board of Directors Technology Committee Composition of the Committee During the yearthe Board Technology Committee (BTC) consisted of the following members. Member profiles as of December 31, 2020 are provided on pages 64 to 69. 05/05 Mr. S Renganathan (Managing Director/Managing Director) 5/05 Mr. S C U Manatunge (Director/Operating Director) 5/ 05 Mr. T L B Hurulle* (Director) 05.05. Mr. K. Dharmasiri* (Director) 05.05. Annual Report 2020 Commercial Bank of Ceylon PLC Regular Attendees by Invitation Board Members Prof. A.K.W. Jayawardane* (Chairman) *Independent Non-Executive Director Board Committee on Governance and Risk Management reports attendance Mr. L H Munasinghe (Deputy General Manager - Marketing) Mr. D.B. Saparamadu (Advisor) Mr. U.K.P. Banduwansa (Head of Retail Products and Digital Channels) Mr. V Thotagammana (Head of IT) Mr. K. Mediwake (Managing Director - CBC Tech Solutions Limited) Secretary of the Committee Mr. K.S.A. Gamage (Assistant General Manager - Information Technology) Committee Charter The purpose of the BTC is to assist the Board in fulfilling its oversight responsibilities related to the general direction of technology in the implementation of the Bank's business strategy, including, among others, significant investments in technology, technology strategy, operational performance and technology trends that may affect current and future banking. Prof. A. K. W. Jayawardane Chairman of the Board Technology Committee customer base which enables them to do all daily banking and monetary transactions. z Relaunch of ePassbook with Latest Mobile The committee was empowered to: z define the overall technology strategy and z Q+ acts as an electronic wallet where customers track the progress of activities to achieve business goals. z Analyze emerging technologies and their potential use to drive the organization's IT strategy. Acquisitions before they are presented to the Board for approval. Activities in 2020 The Committee held five (5) meetings in 2020 and the results of the Committee meetings (which included activities related to its mandate) were periodically reported to the Board with its comments and observations. The committee focused on improving the following areas, which are the key drivers leading the bank into the digital age. Mobile First to create a next-level banking experience by extending the most functionality at the customer's fingertips with evolving technology trends and the latest banking and financial features, such as self-registration, biometric authentication, and notifications in real time. The bank successfully implemented the following mobile applications: 98 z Combank Digital for online banking capabilities, allowing customers to view their accounts and transactions more conveniently. E-Waste Disposal and IT Governance Are Key Factors for a Digital Age,” which were particularly helpful for clients who faced obstacles during the time of the COVID-19 pandemic. you can securely manage card related transactions via QR. Q+ was the first app to be launched in the country with Lanka QR, z App Aggregator as a single place for all Combank related apps, z Flash with extended new features and Combank Digital, z RemitPlus to allow workers to track of their remittances as demand grows and to add value to existing customer needs to delight customer experience and convenience. z IT research and development embraced the agile SCRUM way of working with other stakeholders. z The agile way of working supported business units to deliver the right products and features at the right time, faster delivery of services with improved quality and high productivity. z Reduced post-deployment time by 50% to ensure rapid deployment and first-to-market
101. Monitoring mechanism to increase uptime of critical systems Proper capacity planning to meet increasing application demands. z eSlip for Cash and Check Deposits: Increased customer convenience by introducing the eSlip for Cash and Check Deposit mobile app. This will directly support the bank's paperless approach and help reduce the carbon footprint of each transaction. – With this initiative, the bank hopes to eliminate and minimize the consumption of paper, pens, storage, and customer waiting times. – This new initiative improves the convenience of customers by enabling their mobile phones as deposit tools, helping to generate receipts “on the fly”. - Payment Card Industry Data Security Standards (PCIDSS) Certification and Compliance - ISO 27000:2013 Information Security Certification and Standards Compliance - Basic Security Standards (BSS) Compliance Exam by the board of directors z Electronic Statements for Checking and Credit Cards: The bank has aggressively promoted statements for checking, savings and credit card accounts, an initiative for the bank's paperless approach. – Customers can register for digital banking services with the self-registration function without having to visit the bank. Prof. AKW Jayawardane Chairman – Technology Committee of the Board February 24, 2021 Board Committee Reports z High Availability and Updated Architecture – Implemented in 2020 as the first local bank in the country and certified with ISO 20000:2018 certification. ISO 20000, the international standard that enables IT organizations to ensure that their IT Service Management (ITSM) processes are aligned with both business needs and international best practices. This strategic implementation will help Commercial Bank improve its service levels, provide a framework for independent evaluation, and demonstrate the ability to meet customer needs. It gives the bank a competitive advantage as it demonstrates the reliability and high quality of IT service levels. Governance and risk management have significantly improved compliance with the ISO 20000 framework and managed to certify the bank in 2020 by bringing together all stakeholders related to support services to comply with the ISO 20000 framework represents the effective and efficient use of Secure IT so that the bank can achieve its objectives. IT processes (develop/operate) were regularly reviewed to meet the bank's dynamic requirements with greater transparency. Commercial Bank of Ceylon PLC Service-oriented culture and operational excellence to create a sustainable and competitive 24x7 service through operations management to meet ever-increasing customer demands with new technologies. – This self-registration feature was used a lot during lockdown periods. 99
102. Report of the Board of Directors Strategy Development Committee Composition of the Committee During the yearthe Board Strategy Development Committee (BSDC) consisted of the following members. Member profiles as at 31 December 2020 are provided on pages 64 to 69. Commercial Bank of Ceylon PLC Annual Report 2020 Corporate Governance and Risk Management 100 Justice K , 2020) 00/00 Mr K G D D Dheerasinghe* (Former Chairman) (Resigned December 21, 2020) 11/11 Mr. S. Renganathan (Managing Director/Chief Executive Officer) 11/11 Prof. A.K.W. Jayawardane* (Director) 11.11 Mr. K. Dharmasiri* (Director) 11.11. Mr. L.D. Niyangoda* (Director) 11.11. Ms. N. T. M. S. Cooray* (Director) 10/11 to December 29, 2020) 11/11 Ms. J Lee* (Director) – (appointed to BSDC effective August 13, 2020) 05/05 Mr. R. Senanayake* ( Director) - (as of December 31, 2020) Appointed BSDC in December 2020) 00 Committee Secretary Mr. R.A.P. Rajapaksha (Company Secretary) *Independent Non-Executive Director Committee Charter The Committee was established to have overall oversight of the Bank's management strategy. The Committee has the authority to: z Assist the Board of Directors in fulfilling its supervisory responsibilities in relation to the Bank's strategy. z Advised and supervised the management of: Judge K. Sripavan Chairman of the Board's Strategy Development Committee “Reviewed matters related to capital planning, acquisition, investment opportunities and strategies to provide relief to borrowers affected by the pandemic, in addition to active participation in the government aid scheme.” – Establishment of commercial strategies oriented to the sustainable development of the bank; and – establish processes to plan, implement, evaluate and adjust the business strategy. z Supervise management's commitment to the strategic perspective, direction and development of the bank's strategy and its business units. z Oversee management's implementation of the approved strategic plan and progress toward strategic goals and milestones. z Supervision of the management of the implementation and execution of the main business transformation projects. z Engage in detailed discussions and provide guidance to management on: – Governance, risk appetite, financial and capital planning, liquidity and fund management, the control environment, and the resources needed to support the bank's strategic objectives . Activities in 2020 The BSDC supported the Board in evaluating business strategies and strengthening the bank's core competencies. The BSDC met more frequently than the minimum four meetings established in the terms of reference [eleven (11) meetings in 2020] and was able to provide greater responsiveness in the Bank's strategic decision-making process. BSDC reviewed matters related to capital planning, acquisition, investment opportunities and strategies to provide relief to borrowers affected by the COVID-19 pandemic, as well as actively participating in the government's relief program. In addition, the Committee provided guidance to ensure that adequate impairment coverage is provided while maintaining adequate financial performance. The business plan and the strategies planned by the management were reviewed against the results achieved and the necessary direction given to the management to achieve the desired results. Important decisions made at Committee meetings, which also included activities under its Regulations, were periodically submitted to the Board for its information/approval. – Divestment, merger and acquisition strategies, including post-transaction performance monitoring. Judge K Sripavan - The impact of changes in the competitive environment. February 24, 2021 Chair - Board Strategy Development Committee
103. Declaration of Conformity attached to the Annual Report of Directors on the affairs of the Company on page 3, which is presented below, is a summary of the scope of compliance with the requirements of article 168 of the Law on Public Limited Companies No. 07 of 2007 and its amendments and other relevant legislation. Statement of Compliance Table - 31 Disclosure requirements Reference to relevant law/regulation Reference page for compliance and other required disclosures Page/s Notes to the financial statements: Item 1.3: Principal businesses, nature of the Group's business and ownership of the Bank in its subsidiaries and associates 155 and 156 2 Signed group and bank financial statements for the accounting period ended pursuant to Section 152 Section 168(1)(b) Group and bank financial statements for the year ended 31 December 2020 143 to 290 3. Auditor's report Report on the financial statements of the Group and the Bank Section 168 (1) (c) Independent Auditor's report 138 to 140 4. Accounting policies of the Group and the Bank Section 168 and any changes in the same (1) (d) Notes to the financial statements: significant accounting policies used in the preparation of the annual accounts ows of the Group Bank and Bank 164 to 177 5. Entries made in the interest registers of the Bank and its subsidiaries during the accounting period The Bank and all its subsidiaries maintain interest registers Section 168(1)(e) All directors have made declarations of in accordance with Sections 192 (1) and (2) of the Companies Act and all related entries in the share register were made during the year. Shareholder records are available for inspection by shareholders or their authorized representatives pursuant to Section 119(1)(d) of the Companies Act No. 07 of 2007 See “Interests of Directors in Contracts with the Bank” published in the Annual Report 113 Financial Statements: Other Operating Expenses 186 Report of the Personnel and Compensation Committee of the Board of Directors 93 and 94 7. Total amount paid by the Bank and its subsidiaries during the accounting period t § 168(1) (g) Note 21 to the Financial Statements: Other Operating Expenses 186 8. Information on the management of the Bank and its subsidiaries during and at the end of the accounting period § 168(1)(h) 6. Governance and risk management 64 to 133 See “Directory and Profiles” for more details of the members of the Bank's Board of Directors 64 to 69 See “Group Structure” for details of the members of the Board of Directors of Group 362 and 363 Recommendations for the reel Section (i) Pursuant to Article Article 85 of the Bylaws requires two directors to retire on a rotating basis at each Annual General Meeting (AGM). Article 86 establishes that the directors who have served for more years since their last re-election or appointment will resign at the general meeting (by virtue of which they will do so by rotation). Annual Report 2020 The nature of the business of the Group Section 168 and the Bank together with any changes (1) (a) thereto during the accounting period Commercial Bank of Ceylon PLC 1. Corporate Governance and Risk Management Disclosures required by the Bank Act Companies No. 07 of 2007 and its Amendments to (CA) (ii) The Board of Directors recommended the reelection/election of the following Directors, having considered the content of the affidavits and other related matters: (a) Reelection of Directors rotating retiring z D. K. Dharmasiri z Ms. N T M S Cooray (b) Election of appointed directors to fill temporary vacancies z Ms. J Lee z D. R Senanayake z D. S Muhseen 101
104. Disclosure requirement Reference to relevant law/ Rule Page Reference for Compliance and Other Required Disclosures Page/s Commercial Bank of Ceylon PLC Annual Report 2020 Governance and Risk Management Statement of Compliance (iii) Directors who have served on the Board for nine years: none at the end of 2020. 9. Separate disclosure of amounts payable to auditors as audit fees and charges (1) (i) for other services rendered during the accounting period by the Bank and its subsidiaries pursuant to Section 168 10. List of auditors or interest in the Bank and its Subsidiaries (Chief Auditor Independence) [Within the meaning of Banking Act Instruction No. 11 of 2007 on “Corporate Governance for Chartered Commercial Banks in Sri Lanka”, full tenure of any director ( other than a director holding the office of chief executive officer) is limited to nine years. In addition, by virtue of the evaluation criteria of the suitability and suitability of directors, the age of the person who holds the position of director of a bank has been limited to a maximum of 70 years]. Mr. K G D D Dheerasinghe (former Chairman) and Mr. M P Jayawardena (former Vice President), whose tenure on the Board was nine years, resigned from the w.e.f. December 21, 2020 and December 29, 2020 respectively Mr. S. Swarnajothi, who turned 70 in the year under review, joined w.e.f. August 20, 2020. Note 21 to the financial statements: Other operating expenses 186 The certification of independence was provided by Messrs. Ernst & Young pursuant to Section 163 (3) of the Companies Act No. 07 of 2007 and its amendments in connection with the audit for the year ended August 31, 2020 December 2020, which confirms that Ernst & Young is not aware of any relationship or interest in the Bank or any of its subsidiaries that it considers reasonably likely to have a impact on your independence within the Bank of the Code of Professional Conduct and Ethics issued by CA Sri Lanka, effective from the balance sheet date. Messrs. Ernst & Young have not provided prohibited non-audit services in accordance with guidance issued by CBSL on “Policies for External Auditors Regarding Their Legal Responsibilities”. The Directors are satisfied that the BAC has assessed each service against account the independence requirements of auditors in accordance with applicable laws, rules and regulations and has determined in relation to each non-audit service or type of non-audit service that the provision of such service or type of service would not affect the independence of Messrs. Ernst & Young 11. Acknowledgment of the content of this report/signatures on behalf of the Board of Directors § 168(1)(k) The Board of Directors has acknowledged the content of this annual report Such report as disclosed 3 Other disclosures in accordance with the Recommended Best Practices (RBP) or Listing Rules (LR) of the Colombo Stock Exchange 12. Vision, RBP corporate mission and conduct The business activities of the Group and the Bank are carried out at the highest level of ethical standards in pursuit of our "Vision and Mission", which reflects our commitment to high standards of business conduct and ethics is reflected in inside cover The Bank issues a copy of its Code of Ethics to all employees and all employees are required to comply with the provisions contained therein by the President and his predecessor” and “Report of the Chief Executive Officer/President” 13 to 17 Management Discussion and Analysis 41 to 62 Note 62 to the financial statements: Business segments 253 to 255 14. Gross income RBP Financial Statements notes 12 and 62: Gross income and operating segments 178 and 253 to 255 15. Stock dividends ordinary Financial statements RBP notes 25 and 69: Dividends and events after the period 190 and 290 Appendix I – “Investor Relations” – Item 4 299
105. page of book/s Reserves and funds RBP Statement of changes in equity 146 to 153 Notes 54, 55 and 56 to the financial statements: Legal reserves, retained earnings and other reserves 244 to 248 17. Corporate Social Responsibility (CSR) RBP CSR Initiatives 2020 18 and 19 18. Scope, locations, Valuations and number of buildings on the land and investment property of the entity LR 7.6 (VIII) Note 39 to the financial statements: Property, plant and equipment and right-of-use assets 214 to 225 Note 40 to the financial statements: Investment property 225 and 226 Note 58.2 to the financial statements: Capital commitments 249 Note 39.5 (b) to the financial statements: Disclosure of appraisals of land and buildings owned by the Bank 219 to 223 Note 40.1 (b) bis to the financial statements: Disclosures of the Group's investment properties - valuations 226 19. Market value of the property LR 7,6 (XII) 20. Issuance of Shares and Schu Securities 20.1 Issuance of shares by the bank LR 7.6 ( eleventh II) Notes 52 and 52.1 to the financial statements: Capital stock and changes in the number of shares 241 20.2 Issuance of debt securities by the bank LR 7.6 (XIII) Note 51 to the financial statements Financial statements: Subordinated liabilities 240 Annex I - "Investor Relations" - Item 10 302 and 303 20.3 Issuance of shares and debentures by Subsidiaries and Associates CA p. (formerly known as Serendib Finance Ltd.) 70,323,488 shares at Rs 302 and Rs 303 respectively. Rs 14.22 per share for a total consideration of Rs 175 crore (Rs 175 crore) for the same purpose). Annual Report 2020 During 2020, the Bank acquired an additional 20% interest in Commercial Insurance Brokers (Pvt) Ltd., (CIBL) from Commercial Development Company PLC (which had a 20% interest in CIBL) for consideration of the purchase of one hundred and twenty five crores (Rs. 125 million). This share purchase increased the Bank's interest in CIBL to 60% as of December 31, 2020. During 2019, the bank acquired a 40% interest in CIBL from Chemanex PLC for a total purchase price of Rs 250 million (250 crores). Other than the share issues mentioned above, the Bank's other subsidiaries and affiliates did not issue debentures or shares during the year. 21. Information on significant shares and interests 21.1 Distribution list of shares, names and number of shares held by the top 20 holders of voting and non-voting shares and the percentage of those shares held, market capitalization adjusted for float, percentage of public ownership, Number of public shareholders, and the option under which the bank meets the minimum public share requirements. LR 7.6 (III) LR 7.6 (IV) LK 7.6 (X) LR 7.13.1 Appendix I - "Investor Relations" - paragraph 5 299 to 302 21.2 Financial figures and information on market prices LR 7.6 (XI) Financial highlights 8 Information to be disclosed about earnings, dividend, net assets and market value per share Appendix 7: Review of the decade 354 to 357 Information on listed debt securities Appendix I: "Investor Relations": item 10 302 and 303 Appendix 3: Basel III: Pillar II Disclosures under Banking Law No. 01 of 2016 – Content 6 – Main characteristics of regulatory capital instruments 334 and 335 Annex I – “Investor Relations” – items 1 to 3 295 to 299 21.3 Information to disclose shares traded and number of shares represented by share capital LR 7.6 (IX) Statement of Compliance Reference page for Compliance and other required disclosures Corporate governance and risk management Reference to articles Commercial Bank of Ceylon PLC 16. Disclosure Requirements 103
106. Declaration of compliance Governance and risk management Disclosure requirements Reference to the respective law/ Rule Reference page for compliance and other required disclosures 21.4 Acquisition of own shares CA p.64 The bank does not acquire own shares 21.5 Equal treatment of shareholders RBP statement on the responsibility of directors for financial information - item ( k) 108 22. Information on board meetings and committees of the board of directors 22.1 Meetings of the Board of Directors RBP Details of meetings of the Board of Directors 79 22.2 Committees of the Board of Directors RBP Reports of committees of the Board of Directors 86 to 100 23. Disclosure of transactions of Directors with shares and bonds 23.1 Directors' participation in ordinary votes and non-voting shares of the Bank LR 7.6(V) Annex I – “Investor Relations” – Item 5.5 302 23.2 Directors' interests in the LR 7.6 (V) and RBP Bonds Mr. S. Renganathan, MD/CEO, owned 20,000 Bank Bonds as of December 31, 2020. With the exception of Mr. S. Rengan a no debt securities were recorded other than Name of no other director at the beginning or end of the year 24 Ring plans LR 7.6 (XIV) Note 53 to the financial statements: Share-based payments 241 to 244 The Bank and its subsidiaries do not have or indirect financing for ESOPs 241 Provided to 244 Directors' interests in voting and non-voting common shares have not changed from the balance sheet date to February 5, 2021, which date is one month prior to the date of the call for annual general meeting. The Group and the Bank have not changed any employee profit sharing plan, with the exception of the variable bonus plan. S Renganathan Sr. S C U Manatunge Sr. S Renganathan Sr. S C U Manatunge A January 1 123,580 76,452 Awarded during the year 115,353 72,844 Awarded during the year 25 26 104 Page/s Shares of Directors in contracts or proposals for contracts and remuneration and others Directors' benefits during the Insurance Year of Directors and Officers CA S.192 - - 184,633 - 110,355 - (24,222) (11,119) Expired during the year (37,933) (23,467) (36,831) (22,784) As of December 31 201,000 125,829 123,582 76,464 Shares of Directors in contracts with the Bank 113 Note 21 to the financial statements: Other re operating expenses 186 Note 63 to the Financial Statements: Information to be disclosed about related parties 255 to 259 RBP directors have traditionally abstained from voting on matters in which they have a material interest. The directors have no interest, direct or indirect, in any other contract or contract proposal with the Bank CA P.168(1)(e) LR 7.6(XIV) There are no arrangements that allow the non-executive directors of the Group and the Bank to own shares or purchase debt securities of the Bank or its subsidiaries other than through the market CA S.217(2) (d) There are no restrictions on the approval of loans to directors in the normal course of the Bank's business, subject to compliance with any Applicable Regulations CA S .218 The Bank paid an insurance premium during the year under an insurance policy in favor of the Bank and the directors, secretaries, officers and certain employees of the Bank and related entities as defined in the insurance policy. In accordance with business practice, the insurance policy prohibits the disclosure of the terms of the policy, including the type of liability covered and the amount of the premium.
107. Environmental Protection RBP The concern and the bank did notwho, to the best of their knowledge, have been involved in activities harmful to the environment Legal Payment Statement page(s) RBP Specific measures taken to protect the environment are described in Operational Excellence Section 57 to 63 Statement of Responsibility of Directors: Item (h) 107 Subsequent Events RBP Note 69 to the Financial Statements: Events Subsequent to the Period 290 Going Concern RBP Directors' Liability Statement - Item (m) 108 31. Directors' Responsibility for Financial Information CBSL Address 3.8. (ii) (a) Statement of Directors' Responsibility – Compliance Report 107 and 108 32. Appointment of auditors and their remuneration RBP The Bank's Board of Directors has decided to introduce a policy of auditor rotation every five years, in compliance with the principles of good corporate governance, making it mandatory that partner rotation only take place every five years. Consequently, the current auditors, Messrs. Ernst & Young, were re-elected as auditors of the Bank at the last Annual General Meeting on June 25, 2020 to audit the year ended December 31, 2020 and will continue in their positions. see you later, at the conclusion of the next general meeting of the bank, which is scheduled for March 30, 2021. Consequently, Messrs. Ernst & Young will serve for a maximum period of five consecutive years, subject to their re-election by the shareholders on the recommendation of the Board of Directors, Annual Declaration of Compliance 29. 30. The outgoing auditors, Messrs. Ernst & Young, have expressed their willingness to continue acting as auditor of the Bank CA S.168 (1) (I) 33. Related Relevant Matters with Employees and Labor Relations 34. Risk Management and Internal Control System LR 7.6 (VI) 35. Corporate Governance LR 7.6 (VII) RBP Resolution appointing Messrs. Ernst & Young com or auditors and empowering the Directors to determine their compensation will be rejected for shareholder approval at the next Annual General Meeting on March 30, 2021. Expenses for audit fees and fees for other services rendered during the year will be set out in note 21 to the financial statements: Other operating expenses 186 Annex I – “Investor Relations” – Item 8 302 Governance and Risk Management 114 to 133 Report of the Integrated Board of Directors Risk Management Committee 89 and 90 Note 68 to the Financial Statements: Financial Risk Review 261 to 290 Directors' Statement on Internal Control of Financial Information 109 and 110 Independent Auditor's Report 138 to 140 Independent Auditor's Report on the Directors' Statement on Internal Control over Financial Information 111 The Directors declare that: (a) the Bank has complied with all applicable laws and regulations in the conduct of of its business and has not engaged in any activity contrary to relevant laws and regulations. The officials responsible for ensuring compliance with the provisions of the different laws and regulations certify their compliance on a quarterly basis before the Board of Directors' Comprehensive Risk Management Committee; Governance and Risk Management Reference Page for Compliance and Other Required Disclosures Annual Report 2020 28. Reference to Relevant Articles of Incorporation/Regulation Commercial Bank of Ceylon PLC 27. Disclosure Requirements (b) declares and disclaims any material interest in contracts where the bank is a party they have taken votes on matters in which they had a material interest; (c) have complied with the Code of Good Corporate Governance Practices; (d) have conducted a review of internal controls covering financial, operational and compliance controls and risk management and have obtained reasonable assurance of their effectiveness and proper enforcement; 105
108. Disclosure requirement Reference to relevant law/ Rule Reference page for compliance and other required disclosures Page/s (e) the Bank has complied with the Code of Conduct for Transactions with Related Parties and has made the required disclosures in the financial statements and to the market, as appropriate; Commercial Bank of Ceylon PLC Annual Report 2020 Corporate Governance and Risk Management Compliance Statement (f) the business will continue as a going concern, supporting assumptions or qualifications as appropriate, and that the Board of Directors has reviewed and is satisfied with the corporate /business bank plans The bank has adequate resources to continue its operations for the foreseeable future. Consequently, the financial statements of the Bank, its subsidiaries and associates are prepared on the going concern basis. 36. Focus on the new RBP 19 regulations affected companies and individuals and the requirements of the Financial Reporting Impact Guide issued by CA Sri Lanka 37. RBP Sustainability The Bank is one of the first to propose the adoption of sustainability practices and sustainability reports. The bank has taken sustainability aspects into account when formulating its business strategies. Appendix 4: GRI Content Index 38. Human Resources RBP The Bank continues to invest in the development of human capital and implement effective people practices and policies to improve the efficiency, effectiveness, and productivity of the workforce. Foster collaborative alliances that improve the work and learning environment of our employees Enrich Specific measures in this regard are established in the report of the Personnel and Remuneration Committee of the Board of Directors. 39. RBP Technology 40. RBP Operational Excellence To increase efficiency and reduce operating costs, the Bank has ongoing initiatives to drive standardization of policies and processes and optimize the use of existing technology platforms to impact reported financial results or future operations. 43. Information to be disclosed about related parties Annual general meeting and notice of meeting 98 and 99 Note 60 to the financial statements: Lawsuits against the Bank 250 and 251 LR 9.3.2 (a) and (b) Note 63 to the financial statements: Information to be disclosed about related parties Entities and individuals 255 to 259 LR 9.3.2 (c) Report of the Directors' Committee on the Review of Transactions with Related Parties 95 LR 9.3.2 (d) Annual Report of Directors 3 CA p.133 and CA p.135 (a) The Bank's 52nd Annual General Meeting will be held on Tuesday, March 30, 2021 at 10:30 am. m. at the Commercial Bank of Ceylon PLC Auditorium, 9th Floor, Union Place Branch Building, No. 1 Union Place, Colombo 2, as a virtual meeting rather than using a digital platform. The invitation to the bank's 52nd Annual General Meeting is attached at the end of the annual report. 106 93 and 94 As established in the Vision and Mission, our business processes are based on technology. All our processes involve information technology and we use it to offer superior products and services to our customers. Consequently, business is more intertwined with technology than ever before. Significant achievements in this regard during the year are detailed in Report 42 of the Board's Technology Committee. 345 and 346
109. Directors Statement’ Responsibility for financial information Consequently, the Directors confirm that the financial statements of the Group and the Bank give a true and fair view of: – the financial situation of the Group and the Bank as of December 31, 2020; and – financial performance of the Group and the Bank for the year ended on that date Compliance Report The Directors also wish to confirm that: (a) appropriate accounting policies have been selected and applied in the preparation of the financial statements presented on pages 143 to 290 on Most consistent basis based on the most recent accounting framework, having used reasonable and prudent judgment to ensure that the form and content of transactions are fairly reflected and, if any, material differences are disclosed and explained ; z Corporations Law No. 07 of 2007 and its reforms (Corporation Corporations Law); z Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995; z Banking Law No. 30 of 1988 and amendments to it; z Colombo Stock Exchange (CSE) Listing Rules; and z Code of Good Corporate Governance Practice issued by the Sri Lanka Institute of Chartered Accountants (CA Sri Lanka); (c) such financial reports conform to the prescribed format issued by the CBSL for the preparation of financial statements of licensed commercial banks; (d) adequate accounting records, which accurately record and explain the transactions of the group and the bank, have been kept in accordance with Section 148(1) of the Companies Act to determine the financial position of the group and the bank throughout time, with a reasonable degree of accuracy, than the preparation of the annual accounts in accordance with the Companies Act to facilitate a proper audit of the annual accounts; (e) they have taken the appropriate measures to ensure that the Group and the Bank keep adequate accounting books and review the financial information system directly by them in their ordinary meetings and also through the BAC, the report of said Committee can be found in the pages 86 to 88 The Board of Directors also approves interim financial statements prior to their issuance upon review and recommendation by the BAC; (f) accept responsibility for the integrity and objectivity of the financial statements presented in this annual report; (h) to the best of our knowledge and belief, all taxes, duties and levies payable by the Bank and its subsidiaries, all contributions, duties and taxes payable on behalf of and in relation to employees of the Bank and its subsidiaries, and all Other legal charges owed and payable by the Bank and its subsidiaries at the balance sheet date have been paid or accrued, as the case may be, except as disclosed in Note 60 to the financial statements on "Litigation against the Bank" on page 250 and 251 (i) pursuant to Section 56 (2) of the Companies Act, have approved and proposed the distribution of dividends paid, having been satisfied that the Bank and all its subsidiaries, subject to compliance with the conditions imposed by the Central Bank of Sri Lanka, have passed the solvency test which would exist after such distributions are made under Section 57 of the Companies Act for which and in relation to the div paid and proposed iendos have been received and for which approval has now been obtained, the required solvency certificates are now requested from the external auditors; Governance and risk management For the purposes of Sections 150(1), 151, 152 and 153(1) and (2) of the Companies Act No. 07 of 2007 and its amendments, the Board of Directors of the Bank is responsible for ensure that the Group and the Bank keep appropriate books of account for all transactions and prepare financial statements that give a true and fair view of the financial condition of the Group and the Bank at the end of each financial year and of the financial performance of the Group and the Bank for each exercise and present them to a general assembly. The financial statements comprise the balance sheet as of December 31, 2020, the statement of income and the statement of income and other comprehensive income, the statement of changes in equity, the statement of cash flows for the year ended on that date and the notes to the Group and the Bank. . Sri Lanka Accounting Standards; (g) have taken reasonable measures to protect the assets of the Group and the Bank and to prevent and detect fraud and other irregularities. In this regard, the Board of Directors has established an effective and comprehensive system of internal controls, consisting of internal controls, internal auditing, financial and other controls necessary to properly carry out the banking business and to protect and secure its assets in as far as possible. , the accuracy and reliability of the records. The “Directors' Statement on Internal Control Over Financial Reporting” is included on pages 109 and 110; Annual Report 2020 The responsibilities of the external auditors in relation to the financial statements are established in the Independent Auditors' Report on pages 138 to 140. (b) the financial statements for the year ended December 31, 2020, prepared and The Information presented in this annual report is in accordance with the underlying books of account and meets the requirements of: Commercial Bank of Ceylon PLC The statement sets out the responsibilities of the Directors in relation to the financial statements of Commercial Bank of Ceylon PLC (the Bank) and the consolidated financial statements of the Bank and its subsidiaries (the Group). (j) as required by Sections 166(1) and 167(1) of the Companies Act, have prepared this annual report in a timely manner and have ensured that a copy thereof is sent to any shareholder of the Bank who wishes to receive a hard copy. In view of the situation prevailing in the country, in addition to the electronic copy, we have made an electronic copy of this Annual Report available in the Investor Relations section of the Bank's website (https://www.combank.net /newweb/ es/investors) A copy of which is available on the CSE website for the benefit of other shareholders 107
110. Directors Statement' Responsibility for financial reporting, governance and risk management Annual Report 2020 Commercial Bank of Ceylon PLC 108 within the specified period as prescribed in Rule No. 7.5 (a) and (b) of the Continuous Listing Requirements of the CSE Quotation Rules, instead of an electronic copy on a CD to send. (k) that all Shareholders of each Class were treated equally under the original terms of issue; (l) that the Bank and its listed subsidiary, if any, have complied with all the requirements set forth in Section 07 of the Listing Continuity Requirements of the CSE Listing Rules; (m) that the Directors, having considered the financial condition, operating conditions, regulatory and other factors and matters to be addressed in the Code of Good Corporate Governance Practice issued by CA Sri Lanka, reasonably believe that the Bank and its subsidiaries have sufficient resources to continue in business for the foreseeable future. For this reason, we continue to assume that the company will continue as a going concern when preparing the annual financial statements; (n) the financial statements of the Group and of the Bank have been certified by the Bank's Chief Financial Officer, who is responsible for their preparation, as required by Sections 150(1)(b) and 152(1)(b) of the Corporations Act and were also signed on February 24, 2021 by three Directors and the Corporations Secretary of the Bank pursuant to Sections 150(1)(c) and 152(1)(c) of the Corporations Act and others regulations; and (o) the external auditors of the Bank, Messrs. Ernst & Young, appointed pursuant to Section 158 of the Companies Act and pursuant to a resolution of the last Annual General Meeting held on June 25, 2020, have placed available all the facilities that carry out the inspections they deem appropriate. They carried out the reviews and sample controls of the system of internal controls that they considered appropriate and necessary to express their audit opinion on the financial statements and to keep the accounting records. They have reviewed the financial statements made available to them by the Bank's Board of Directors, including all financial records, the related dates and the minutes of the meetings of shareholders and directors, and have expressed their opinion in the next "Report of the Independent Auditors ". as reported by them on pages 138 to 140; Accordingly, the Directors consider that they have fulfilled their duties as set forth in this statement. On behalf of the Board of Directors, R.A.P. Rajapaksha Company Secretary, Colombo, February 24, 2021
111. directorsStatement of Internal Controls over Financial Information The Board of Directors has established a continuous process to identify, evaluate and manage the significant risks to which the Bank is exposed and this process was in force during the year reporting the improvement of the internal control system as covered and when the business environment or regulatory guidelines change. The process is regularly reviewed by the Board and is in line with the "Guide for Bank Directors on the Directors' Statement on Internal Control" issued by CA Sri Lanka. The Board of Directors has evaluated internal controls taking into account all the key principles for evaluating the system of internal control as specified in these guidelines. The Board believes that internal control over financial reporting in place is strong and adequate to provide reasonable assurance as to the reliability of financial reporting and that the preparation of financial statements for external purposes is in accordance with accounting standards and relevant regulatory requirements. Management assists the Board in implementing the Board's risk and control policies and procedures by identifying and assessing the risks to which it is exposed and by designing, operating and monitoring appropriate internal controls to mitigate and control those risks. The Board of Directors establishes various designated committees to assist the Board in ensuring the efficiency of the Bank's daily operations and that the Bank's operations are conducted in accordance with corporate objectives, annual strategy and budget, policies and operating instructions. . Passed. Policies/bylaws covering all functional areas of the bank are developed and recommended by board-appointed and board-approved committees. Such policies and bylaws are regularly reviewed and approved. z The Bank's Inspection/Internal Audit/IS Audit department continually reviews compliance with policies and procedures and the effectiveness of internal controls/information systems controls, through random checks and rotation, and highlights any findings significant non-compliance. On-site, online and off-site audits are conducted in all departments, branches, subsidiaries and foreign operations in accordance with the annual audit plan reviewed and approved by the BAC. The nature/frequency of business unit audits is determined by the level of risk assessed to provide an independent and objective report. The results of the internal audits are presented to the BAC for review at its periodic meetings. Initiatives taken by the Department of Inspections/Internal Audit to audit certain selected areas of online business on a limited basis in 2016 have been extended to cover all branches in Sri Lanka and Bangladesh, Corporate Banking Unit, Digital Banking Unit, Center of Cards, Finance, Treasury and subsidiaries: CBC Finance Limited, Commercial Bank of Maldives Private Limited and CBC Myanmar Microfinance Company Limited also in 2020. The scope of online, near real-time and real-time verifications has been further expanded to detect high-risk transactions from the hedge bank during the COVID-19 pandemic. In addition, monitoring of cybersecurity controls, changes to core banking systems/ z The BAC reviews internal control issues identified by internal audit, regulators, external auditors, and management, and assesses the adequacy and effectiveness of the risk management systems and internal control. The BAC also conducts an annual assessment to review the effectiveness of the internal audit function, with particular attention to scope, quality, internal audit independence, and resources. The minutes of the BAC meetings are presented periodically at the meetings of the Bank's Board of Directors. Details of the activities carried out by the BAC are set out in the “Report of the Audit Committee of the Board” on pages 86-88. z In evaluating the Bank's internal control over financial reporting, certain Bank officials continued to review and update all procedures and controls associated with the Bank's material accounts and financial statement disclosures. Internal Audit continued to review the adequacy of the design and the effectiveness of these procedures and controls on an ongoing basis. The assessment included local and foreign subsidiaries and the bank's activities in Bangladesh. Corporate Governance and Risk Management The Board of Directors (the Board) is responsible for the adequacy and effectiveness of the internal control system of Commercial Bank of Ceylon PLC (the Bank). However, such a system is designed to manage the bank's key risk areas within an acceptable risk profile, rather than to eliminate the risk of not achieving the bank's business policies and objectives. Accordingly, the system of internal controls can only provide reasonable, but not absolute, assurance against material errors in administrative and financial information and records, or against financial loss or fraud. Key processes in place to review the adequacy and completeness of the system of internal controls related to financial reporting include the following: Databases have been further strengthened through the use of appropriate tools/techniques and resources. Through this initiative, controls are tested in near or real time. A significant improvement in methodology was achieved by testing the entire population of data instead of a random sample. In addition, external/online audits were introduced in 2020 to test and verify the credit-related internal controls of the branches. The results were presented at BAC meetings for review. The “Online Audit” initiative further intensified the review of the design and effectiveness of the bank's internal control system. Annual Report 2020 Pursuant to Section 3 (8) (ii) (b) of Banking Law Decree No. 11 of 2007 and Principle D.1.5 of the Code of Good Corporate Governance Practices 2017 (Code) issued by CA Sri Lanka , the Board of Directors prepares this Internal Control Report. Key features of the process used to apply and review the design and effectiveness of the internal control system for financial reporting Commercial Bank of Ceylon PLC Responsibility As of 1 January 2018, the Bank has adopted the Sri Lanka Accounting Standard – IFRS 9 on “Financial Instruments”, which replaced the incurred loss model used under IAS 39 with the prospective expected credit loss model to calculate impairment provisions. This new methodology for calculating provisions had a significant impact on the Bank's methodology for calculating impairment losses on loans and advances. The processes that are 109
112. directors' Statement on Internal Control Over Financial Governance and Risk Management Annual Report 2020 of Commercial Bank of Ceylon PLC that new recognition, measurement, presentation and disclosure requirements have been introduced and implemented and is based on feedback from the external auditor, internal audit, regulators and BAC. Continuous monitoring is carried out and steps are taken to further improve processes where necessary to increase effectiveness and efficiency. The Bank has documented procedures related to these new requirements and updates the procedure manuals as necessary and has also obtained BAC and Board approval for changes to the documented procedures. The Bank's Internal Audit began testing these processes in the first quarter of 2013 and continued to do so in 2020. The result of said exercise was submitted to the BAC for review periodically throughout 2020. Having recognized the need to introduce an automated platform For various calculations required by IFRS and IPSAS, including loan impairments, the bank signed a contract with a reputable provider of software solutions for the automation of impairment calculations and this project is expected to be completed in Completed during 2021. With the implementation of the above software system, manual intervention in calculating impairment provisions is expected to be largely eliminated. External Auditor's Review of Statement Comments provided by the external auditor regarding internal control over financial reporting in prior years were reviewed during the year and necessary steps were taken to address them. The recommendations of the external auditor in 2020 related to the internal controls of the financial system will be addressed in the future. Vice Chairman The external auditor's report relating to internal control over financial reporting is on page 111. On Behalf of the Board, Judge K. Sripavan Chairman Prof. A.K.W. Jayawardane R. Senanayake Chairman – Board Audit Committee Certification Based on the above processes, the Board certifies that the Bank's financial information system has been designed to provide reasonable assurance regarding the reliability of financial information and that the preparation of financial statements for external purposes is in accordance with the Sri Lanka Accounting Standards and the regulatory requirements of the Central Bank of Sri Lanka. 110 The external auditors, Messrs. Ernst & Young, have reviewed the above statement of directors on internal control contained in this Annual Report of the Bank for the year ended December 31, 2020 and advised the directors that they had nothing known, leading them to believe that the statement is inconsistent with their understanding of the process adopted by the Board of Directors in reviewing the design and effectiveness of the Bank's internal control over financial reporting. Its independent assurance report on the Directors' Statement of Internal Control Over Financial Reporting is included on pages 109 and 110 of this Annual Report. S Renganathan Managing Director/CEO Colombo Feb 24, 2021
113. Independent audit report for the board of directors of Commercial Bank of Ceylon PLC Ernst& Young Chartered Accountants 201 De Saram Place P.O. Box 101 Colombo 10 Sri Lanka Tel : +94 11 2463500 Fax Gen : +94 11 2697369 Tax : +94 11 5578180 eysl@lk.ey.com ey.com We have been appointed by the Board of Directors of Commercial Bank of Ceylon PLC (“ the Bank”) to reaffirm the Directors' statement on internal control over financial reporting (“Statement”) contained in the annual report for the year ended December 31, 2020. Our responsibility is to assess whether the statement is supported by documentation prepared by or for directors and reflects the process adopted by directors in reviewing the design and effectiveness of the bank's internal controls. Management Responsibility Management is responsible for the preparation and presentation of the statement in accordance with the “Guidelines for Directors of Banks on the Director's Statement on Internal Control” issued pursuant to Section 3 (8) (ii) ( b) of the Banking Regulations. issued Statutory Order No. 11 of 2007, by the Institute of Chartered Accountants of Sri Lanka. Our Independence and Quality Control We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the Sri Lanka Institute of Chartered Accountants, which is based on the basic principles of integrity, objectivity, professional skill, diligence, confidentiality and professional conduct. The Company applies the Sri Lanka Quality Assurance Standard 1 and accordingly maintains a comprehensive quality assurance system that includes documented policies and procedures to comply with ethical requirements, professional standards, and applicable legal and regulatory requirements. We carry out our engagement in accordance with the Sri Lanka Standard on Assurance Engagements (SLSAE) 3050 (Revised), Assurance Report for Banks on Directors' Statement on Internal Control issued by the Sri Lanka Institute of Chartered Accountants . This standard requires that we plan and implement procedures to obtain limited assurance about whether management has prepared, in all material respects, the statement of internal control. For purposes of this commitment, we are not responsible for updating or republishing any report, nor have we audited or verified financial information in accordance with this commitment. Summary of Work Done We have made our commitment to assess whether the Statement is supported by documentation prepared by or for the Directors; and adequately reflect the process adopted by the Directors in the review of the internal control system over the Bank's financial information. The procedures carried out were mainly limited to interviews with bank employees and the existence of documents based on samples that support the procedure decided by the Board of Directors. SLSAE 3050 (Revised) does not require us to consider whether the statement covers all risks and controls or to form an opinion on the effectiveness of the bank's risk and control processes. SLSAE 3050 (Revised) also does not require us to evaluate whether the processes described for addressing significant internal control aspects of significant issues disclosed in the annual report will actually resolve the issues. The procedures selected are at our discretion, taking into account our understanding of the nature of the bank, event or transaction in connection with which the statement is being prepared. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion. Our Conclusion Based on the procedures performed, nothing has come to our attention that causes us to believe that the statement contained in the annual report is not consistent with our understanding of the process adopted by the Board of Directors in reviewing the design and effectiveness of policies. internal. control over the financial reports of the bank. Annual Report 2020 Our Responsibilities and Compliance with SLSAE 3050 (Revised) Commercial Bank of Ceylon PLC Report on the Statement of the Director on Internal Control, Governance and Risk Management HMAJ/WDPL Chartered Accountants Colombo 24 February 2021 Partner: 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 (London) 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 Client: G B Goudian ACMA T P M Ruberu FCMA FCCA A member firm of Ernst & Young Global Limited 111
114. Director generalDeclaration of legal representatives and financial director The financial statements of Commercial Bank of Ceylon PLC (the Bank) and the consolidated financial statements of the Bank and its subsidiaries (the Group) as of December 31, 2020 have been prepared and presented in accordance with the following requirements: Sri Lanka Accounting Standards issued by the Sri Lanka Institute of Chartered Accountants (CA Sri Lanka); z Corporations Law No. 07 of 2007 and its amendments; z Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995; Commercial Bank of Ceylon PLC Annual Report 2020 Governance and Risk Management z Banking Act No. 30 of 1988 and its amendments and the instructions, regulations and guidelines issued by the Central Bank of Sri Lanka (CBSL); z Colombo Stock Exchange (CSE) Listing Rules; and z Code of Good Corporate Governance Practices issued by CA Sri Lanka. The formats used in the preparation of the financial statements and breakdowns are those required by the CBSL. The Group reports financial results to its shareholders on a quarterly basis. The Group consistently applied the Significant Accounting Policies. The application of important accounting principles and estimates that require a high degree of judgment and complexity was discussed with the members of the BAC and the Bank's external auditors. Comparative information has been modified to conform to current presentation where applicable. There have been no changes in the accounting principles and calculation methods since the publication of the annual report as of December 31, 2019. Consequently, there was no need to adapt the comparative information to the current presentation. We certify that, to the best of our knowledge, the financial statements, significant accounting policies and other financial information included in this annual report reflect, in all material respects, the financial position, results of operations and cash flows of the Group during the year under review. We also confirm that the Group has sufficient resources to continue as a going concern and have used a going concern basis in preparing these financial statements. 112 We are responsible for the establishment, implementation and maintenance of internal controls and procedures within the Bank and all its subsidiaries. We ensure that effective internal controls and procedures are in place and ensure that important group-related information is disclosed to us to protect assets, prevent and detect fraud and/or errors and other irregularities, which is constantly checked, evaluated and updated. We assessed the Group's internal controls and procedures for the period and are satisfied that, to the best of our knowledge, there were no material deficiencies or weaknesses in the design or operation of internal controls and procedures. We confirm, based on our assessments, that there were no material deficiencies or weaknesses in the design or operation of internal controls and fraud involving management or other employees. The Bank's Internal Audit also performs periodic reviews to ensure that internal controls and procedures are consistently followed. The Group's financial statements have been audited by the auditors Ernst & Young and their report is reproduced on pages 138-140. The BAC preauthorizes audit and non-audit services provided by Messrs. Ernst & Young to ensure that the provision of such services does not violate CBSL's guidelines for acceptable non-audit services or compromise Ernst & Young's independence and objectivity. The BAC reviewed, among other things, all internal and external audit and inspection programs, the efficiency of internal control systems and procedures, and also reviewed the quality of significant accounting principles and their compliance with legal and regulatory requirements, whose details are below. in the “Report of the Audit Committee of the Board of Directors” on pages 86 to 88. The Bank retained the services of five account auditors accredited by CBSL to strengthen the audit and inspection functions. The BAC's ongoing inspection and audit capabilities, engagement with audit firms, and effective operation ensure that internal controls and procedures are consistently followed. To ensure full independence, the external and internal auditors have free and open access to BAC members to discuss any relevant matter. However, there are inherent limitations that must be taken into account when considering the assurances provided by any accounting and internal control system. Likewise, it declares and confirms that the Group and the Bank have complied and comply with the guidelines for the audit of listed companies, in those cases in which they are mandatory. To the best of our knowledge and belief, we confirm that: z The Bank and the Group have complied with all applicable laws, regulations and guidelines and there are no material legal disputes against the Group and the Bank other than those described in Note 60 in pages 250 and 251 of the Financial Statements. z All taxes, duties, levies and all legal payments payable by the Group and the Bank and all contributions, duties and taxes payable on behalf of and in relation to employees of the Group and the Bank as of December 31, 2020 must be paid , have been paid or, where appropriate, anticipated. S Renganathan Managing Director/CEO K D N Buddhipala CFO Colombo 24 Feb 2021
115. directorsParticipation of contracts with the Bank Related Party Information in accordance with Sri Lanka Accounting Standard - IAS 24 on “Related Party Information” is disclosed in Note 63 to the Financial Statements on pages 255 to 259 of this Annual report. In addition, the Bank carries out arm's length transactions in the ordinary course of its business with companies in which the president or a director of the Bank is the president or a director of such companies. Table - 32 Director/Company Lodging Granted/Deposits Current Limit Balance/Balance as of 12.31.2020 AS OF 12.31.2019 RS '000 1,540,812 704,897 815,450 1,300,7281 77,847 ( Prof. A.K.W. Jayawardane Out of Balance Loans Available Loans Limits from Mother Lanka Foundation 1,620 – Deposits 2,855 2,247 Deposits 27 International Chamber of Commerce – Sri Lanka Deposits 24,526 Arthur C. Clarke Institute of Modern Technologies 1,620 – (b) Mr. S. Renganathan The Employers Ceylon Federation of Ceylon 28,626 Deposits 238 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 Jetwing Travels (Pvt) Ltd – (c) Ms N T M S Cooray Deposits Jetwing Air (Pvt) Ltd. Jetwing Hotel Management Services (Pvt) Ltd. Deposits 26 126 Allianz Insurance Lanka Ltd. Deposits Allianz Life Insurance Lanka Ltd. 8,287 1,172 Deposits Yarl Hotels (Pvt) Ltd. 21 438 Deposits tos Jetwing Symphony Ltd. 181 425 Deposits Capital Alliance Holdings Ltd Sierra Cables PLC (d) D. L D Niyangoda A Baur & Company (Pvt) Ltd Advances 4,220 9,322 Deposits 7,725 11,017 3,612 Deposits 66 (f ) D. R. Senanayake Virtual Capital Technologies (Pvt) Ltd. – 113
116. Governance and Risk Management Commercial Bank of Ceylon PLC Annual Report 2020 Governance and Risk Management Navigating 2020 The COVID-19 pandemic made 2020 an unprecedented year in recent history for a vast majority of people, communities and organizations around the world are severely affected in terms of their lives and livelihoods. Aside from shocks on the demand and supply side, it has rocked financial markets as yields on bonds, oil and stock prices have fallen sharply and trillions of dollars have sought safety in most markets. asset classes. Central banks around the world intervened proactively with various measures, such as interest rate cuts, interventions in the repo market, injections of liquidity into the markets, relaxation of regulatory capital and liquidity requirements, extension of moratoria and concessional refinancing programs, temporary exemptions from rules and regulations, etc. calm markets to minimize impact, maintain customer confidence and support economic growth. Shortly after the Easter Sunday attack in 2019, the pandemic dealt a double whammy to the Sri Lankan economy. Deteriorating economic activity and a less favorable economic outlook are putting enormous pressure on certain industries, affecting asset quality and reducing demand for banking products and services. These developments exacerbated the challenges facing the financial services industry in growing the business and maintaining operational excellence, as well as addressing the health and safety concerns of employees and the general public. This, coupled with the still-evolving nature of the pandemic and the ongoing uncertainty associated with it, raised the risk profiles of financial institutions and forced them to remain particularly vigilant. The pandemic also proved to be a "reality check" for financial institutions, regulators and governments in digital banking. Despite all the preparations in recent years for a "digital banking ecosystem", many have realized that the fundamental benefits of digital banking have not lived up to expectations at a time when the consumer has few options. From opening a new account and onboarding customers on digital platforms to applying for a loan or authorizing identities, existing digital banking systems have proven inadequate to support branchless banking. With swift action by the regulator to temporarily allow the opening of KYC-compliant digitally compliant wallets and wallet facilitation accounts,114 the bank was able to use its entire digital bank account to onboard new customers and enable 100% account openings. digital. The bank also made it easy to automatically onboard existing customers to online applications to support the digital evolution. From a risk management perspective, restrictions on physical movement, strict health and safety regulations, the introduction of new labor regulations, the relaxation of certain regulatory requirements to allow the continuity of banking operations, weak economic growth, restrictions on importation, deteriorating asset quality, subdued credit growth leading to excess local currency liquidity, and lack of foreign currency flows due to global trade disruptions, etc. posed great challenges for financial institutions. Dealing with the impact of Covid-19 Covid-19 has tested the effectiveness and agility of the risk management processes and practices implemented in the bank. Because the Bank had formulated its risk management strategy in terms of the underlying governance and risk management framework, taking into account the context and outlook, the Bank was able to take significant and timely steps to mitigate the impact of Covid-19. . current operations, continue to serve customers with minimal disruption, and maintain asset quality and operating profitability. These measures included activation of emergency and business continuity plans, close monitoring of stress indicators, regular communication with stakeholders, strict adherence to health and safety guidelines, alternative workplace arrangements such as sites work from home (WFH), flexible work precautions through employee rotating shifts, self-onboarding to digital applications as permitted by the regulator, further strengthening customer reach through existing means such as bank-on-wheels / mobile ATMs, etc. Many valuable lessons were also learned in the process of maintaining operational resilience that can be put in place when normality returns. Certainly, the pandemic has further accelerated the migration of financial service delivery to digital channels and connectivity. Although existing business continuity and disaster recovery plans have not been tested for far-reaching impact scenarios, such as those arising from the pandemic leading to a true "Black Swan" event leading to a "Perfect Storm" , and the proportion of employees who make a difference during the development of these plans, required more than anticipated to work remotely, the bank was able to quickly implement effective and secure remote collaboration solutions and tools to meet the needs of Minimize the interruption of customer services. In a very short time, the bank was able to enhance its existing remote access solutions by using sophisticated and globally recognized remote access technologies, reinforced with multiple layers of security. As can be seen from the results of operations and financial condition reflected in the financial statements published in this annual report, throughout the year the Bank has demonstrated its resilience against the tide and successfully weathered the vulnerable, uncertain, complex operating environment and ambiguous. In addition, the bank has already begun the necessary conversions and improvements to be prepared for possible future crisis situations in a much more challenging environment than in the past. Business model and risk As a commercial bank, the bank's business model focuses on financial intermediation and maturity transformation (see Sustainable value creation business model on page 35), which has enabled it to raise its capital from Rs to operate from Rs. 1,736.2 billion as of 12/31/2020. Therefore, the bank is exposed to a large number of risks, which generally include credit risk (71%), operational risk (4%), and market risk (3%), depending on the amount of capital allocated according to with the Basel capital adequacy. In addition, a number of additional risks have also arisen due to various emerging developments that threaten to disrupt the Bank's business model (see pages 32-34 for a list of such emerging developments), although many of those risks are not obvious. made. This, coupled with the impact of COVID-19, which significantly affected almost all key risk categories, increased the bank's risk profile, making it imperative to have a robust risk governance framework and audit function in place. rigorous risk management to manage associated risks. manage risks in order to optimize the relationship between risk and return and continue to create sustainable value in the future.
117. z Defining the desired risk profile in terms of risk tolerance and risk tolerance; z Institutionalize a positive risk culture within the bank that incorporates values, beliefs, attitudes and practices that drive highly effective risk decisions; z Identify functional responsibility for decisions related to risk acceptance, transfer, mitigation and minimization and recommend best practices for doing so; z continually assess the risk profile against the approved risk appetite; z assess potential losses that may arise from risk exposures made; z carry out regular stress tests to ensure that the bank has sufficient liquidity and capital reserves to meet contractual obligations and absorb unexpected losses; and z Integrate risk management into strategy formulation and execution. Key events in 2020 Key risk governance and risk management initiatives during the year included: Conducting analysis to proactively identify the highest risk industries Given the difficult operating environment due to concentrations associated with different risks that may have a significant impact on the bank's loan portfolio. For industries to which the bank has exposures, it has become paramount for the bank to isolate and manage industry risks by understanding its most vulnerable exposures. This became essential to develop skills and strategies to manage such risks and to make an informed assessment of the potential for expected credit losses and their impact on the bank's capital position. The bank's careful analysis revealed that arrears in subsequent years would increase due to the continued impact of the COVID-19 pandemic. Therefore, a more proactive approach was warranted, with provisions in place to withstand the impact of exposure to riskier sectors on the Bank's capital base. z Private placement to strengthen capital The Bank secured a US$50 million private placement to further strengthen capital through IFC, the investment arm of the World Bank, demonstrating its confidence in the Bank's future potential. z Ongoing review of USD liquidity position The Bank continually reviews its USD liquidity position using liquidity gap reports, liquidity ratios and forecasts. The reliance on FCY SWAPs, used by the Bank as a financing vehicle, decreased towards the fourth quarter of 2020, as demand decreased significantly in line with market movements. The bank began negotiations with international banks to secure funding lines to fill the gaps in future commitments, taking into account the growth of FCY's deposits, guaranteed by the constant revision of the interest rates on offer. z Managing excess rupee liquidity Subdued loan growth and deposit inflows left the bank with excess rupee liquidity throughout the year. After analyzing possible changes in interest rate forecasts for the coming years, the bank has rebalanced the maturity profile of its public debt portfolio to improve profitability. z Loan Review Mechanism The Loan Review Mechanism (LRM) has been continuously implemented to ensure compliance with regulatory guidelines even during the pandemic. This was possible because LRM, which was initially implemented by the bank as a physical activity by visiting circulatory/branch counters, was progressively migrated to a more digitized platform to reduce physical interactions. The WFH service channel launched by the bank during this period also helped the bank to continue with LRM, as well as the other services of its business unit. Security Officer (CISO) Subject to guidance from CBSL, the Bank has appointed a CISO, who reports to the Managing Director/Executive Director, during the year to oversee the overall information security function of the Bank. z Ongoing process improvements to further strengthen information and cybersecurity The Bank implemented several technical fixes and process improvements to address the ever-evolving cybersecurity threat landscape, particularly in the wake of the COVID-19 pandemic and changing resulting in work arrangements. These included solutions related to data leak prevention, privileged access management, security information and event management, etc. evaluations carried out in critical processes to ensure that risk levels remain at acceptable levels. z Development of a climate position statement The bank strongly believes that natural resources are finite and must be used sustainably. Furthermore, the Bank has duly identified its role in providing financial support from the private sector to clients and affiliates in mitigating the impacts of climate change through “climate finance”. It paved the way for the integration of climate change considerations into the Bank's external governance, strategy, risk management and reporting requirements within the broad scope of this theme. As part of this initiative, the bank has identified the importance of a well-articulated approach to climate change applicable to all branches and departments, regardless of their geographic location. Accordingly, the 2020/2021 Climate Change Position Statement was developed and published, expressing the Bank's commitment to green financing, mitigation, adaptation and activities in all major geographic locations where the Bank operates, is say, h Sri Lanka, Bangladesh and the Maldives and Myanmar. Governance and Risk Management Structure for risk management and monitoring; z Appointment of the Head of Governance of Information and Risk Management z to establish the necessary organization Accordingly, the bank conducted an analysis to manage risky industries in a stressful operating environment caused by Covid-19 based on the "demand for moratoriums" by the borrowers in the Bank Identification Rental Book. This was done by identifying and classifying the facilities in which moratoriums were granted based on the credit sectors for which the loan proceeds were used and adequate provisions were made to withstand the projected impact. Consequently, the bank has taken Rs. 2.9 billion overlays to reflect the potential for further credit deterioration. Annual Report 2020 The main objectives of the risk management framework and the risk management function of the Bank are: Objectives of Commercial Bank of Ceylon PLC Other developments and results related to risk management during the included year; z Development of tools to carry out an in-depth analysis of the borrowers affected by the pandemic, which allow a detailed evaluation of certain aspects to understand the risks derived from exposure to the pandemic. 115
118. Commercial Bank of Ceylon PLC Annual Report 2020 Governance and Risk Management Governance and Risk Management z Managing reputational risk through increased levels of service in a constrained environment, which included keeping branches open to customersaddressing hygiene factors of all stakeholders, mobilizing ATMs, facilitating online onboarding, and ensuring seamless services for customers by rapidly implementing necessary adjustments to existing BCP/DRP agreements to accommodate the unprecedented operational changes that they result from the pandemic to be fair. z Progress on the project initiated to implement an Early Warning Signs (EWS) framework to further improve the credit quality of the bank's loan book was delayed in the first half of the year due to prioritization of pandemic-related activities. However, the evaluation of the shortlisted products/suppliers resumed towards the end of the year, as it is important to have this capability within the bank in the near future. The Bank's overall credit risk increased, causing a deterioration in asset quality, reflected in the gross delinquency ratio of 5.11%, while the net delinquency ratio improved from 4.95% to 2 18% as of 12/31/2020. 3.00% as of 12/31/2019, risk profile a trend seen across the industry. Given the still-evolving nature of the pandemic and associated uncertainty, the Bank is also aware of the potential for further deterioration in asset quality and has established additional impairment provisions. Weak economic activity, travel and other restrictions on physical movement, and moderate credit growth meant that the bank had excess liquidity during the review year. Relaxation of systems and procedures, alternative workplace arrangements, and heavy reliance on digital channels have also led to changes in operational risk, but the operational risk profile in terms of events and losses has not increased compared to the last year. Despite the formidable challenges in the operating environment, the Bank has successfully maintained its stability, resilience and profitability throughout the year, as reflected in its operating results and financial condition, as a result of strategic responses to these developments and the robust risk governance and rigorous risk management function that is available. Risk appetite and risk profile The bank has a clearly defined risk appetite statement that sets out the types and levels of risk and the maximum amount of aggregate risk that the bank is willing to accept at any given time in Table – 33 Category of risk and Key parameters Time of risk indicator policy parameter. It is expressed in terms of quantitative parameters for key risk indicators in each risk category to facilitate monitoring. It states the desired asset quality, maximum losses from operational and market risk, and minimum capital and liquidity requirements taking into account regulatory requirements, strategic focus, ability to withstand losses and stress with capital positions, financing and liquidity available and a solid risk management -Frame. The risk management function regularly reports to management and the Board of Directors on the Bank's overall risk profile in the form of key risk indicators and a risk profile dashboard. With the help of this information, the risk profile is constantly and, with due consideration, constantly monitored and corrective measures are taken in a timely manner in case of deviations to ensure that actual risk positions remain within the risk appetite. all over the world. all risk categories. With a strong capitalization and liquidity positions that define the capacity to assume risks, the Bank's risk profile is characterized by a portfolio of high-quality assets and stable funding sources, quite diversified in terms of geography, sector, product, currency , size and term. are . The Bank's risk profile as of December 31, 2020 and December 31, 2019 compared to the risk appetite defined by the regulatory/policy parameters approved by the board is set forth below. As of December 31, 2020 As of December 31, 2019 Credit risk: Quality of the credit portfolio Concentration Gross default ratio 3% - 8% 5.11% 4.95% Net default ratio 2% - 6% 2 .18% 3.00% Impairment Percentage Total Delinquencies 40% - 60% 46.95% 44.23% Weighted Average Rating Score of Entire Loan Portfolio 35% - 40% 52.93% 53.44% Accounts Product Receivables: Highest Exposure Required as a Percentage of Total Loan Portfolio 30% - 40% 21.72% 19.73% Advances by Industry (using HHI-Herfindahl-Hirschman Index) 0.015 - 0.025 0.0145 0.0145 Capital (using HHI) 0, 10 – 0.20 0.0055 0.0044 Subsector exposure must be maintained at 4% – 5% 4.33% 3.97% Total exposures exceeding 15% of eligible capital 20% – 30% 12, 25% 12.61% AAA AAA cross-border exposure rating of the highest portfolio exposure from S&P Investment Grade AAA to BBB- AA Market risk: interest rate risk ko 116 Shock of the interest rate: (Impact on NII as a result of parallel interest rate shock of 100bp for LKR and 25bp for FCY) Rs 2,250k high 267.12k rupees 932.75k Rs Revaluation gaps (RSA/ RSL in each maturity band – up to 1 year) < 1.5 times (except 1.11 times for the 1-month segment which (1.78 times for <2.5 times) the 1-month segment) 1.39 times (2.56 times for the 1-month segment)
119. Legal Liquidity Ratio(SLA) for the National Banking Unit (DBU) As of December 31, 2019 20% 44.99% 30.42% Liquidity Coverage Ratio (LCR) for all currencies 100% 258.06% 224.74% Net Stable Funding (NSFR) 100% Foreign Exchange Risk Foreign Exchange Shocks on Total FCY Exposure Rs 350 crore Operational Risk Operating Loss Tolerance Limit (as a percentage of average gross income over the last three years) 3% – 5% Strategic Risk: Capital Adequacy Ratios: 157.49% 137.05% Rs 301.20 crore Rs. 267.68M 0.58% 0.78% CET 1 More than 11% 13.217% 12.298% Total capital More than 15% 16.819% 16.146% ROE More than 20% 11.28% 13.54% Credit quality – Fitch Rating AA (lka) AA-(lka) AA(lka) ( RSA: Rate Sensitive Assets, RSL: Rate Sensitive Liabilities) Credit Ratings In January 2020, Fitch Ratings Lanka Limited changed the rating outlook of the Bank for its rating long-term national from stable to negative, reflecting the difficult operating environment. However, following the recalibration of the agency's national rating scale for Sri Lanka to reflect changes in the relative creditworthiness of Sri Lankan issuers following the downgrade of the country's rating from “B”/Negative to “ B-”/Negative in April 2020, the Bank changed rating The rating was revised up to AA+(lka) from AA(lka), while the outlook remained negative in June. As a result of the Agency's sovereign rating downgrade in November 2020 and the recent recalibration of the Agency's Sri Lanka rating scale, the Bank's long-term national rating was downgraded to AA-(lka)/stable in January 2021. The Bank's operations in Bangladesh have continued to be rated AAA by Credit Rating Information and Services Limited (CRISL), the highest credit rating CRISL assigns to a financial institution in Bangladesh. These credit ratings, together with the bank's high capital and liquidity buffers and stable and consistent performance even during the pandemic, demonstrate the bank's solvency and conservative risk profile. Outlook and Plans for 2021 and Beyond The Operating Environment on pages 27-34 provides an analysis of the outlook for the Sri Lankan and Bangladeshi economies and the financial services sector in 2021 and beyond. Given the still uncertain long-term impact of Covid-19 on financial institutions, deteriorating credit quality and the potential for further impairments, as well as reduced demand for banking products and services, a high level of uncertainty will remain short and medium term. finished. As digital channels continue to accelerate, remote work arrangements with potential disruptions, and growing cybersecurity threats, non-financial risks become more pressing. Bank regulation continues to expand and deepen amid widespread technological advances and macroeconomic shocks. Recovery and resolution require further attention. The context of these circumstances requires further strengthening of the governance and risk management function. Therefore, the Bank will continue to make necessary changes to the mandate, structure, resources, competencies, technologies, data analytics and MIS, etc., to align business strategies with sound risk management practices and make the risk management function more advanced. searching. proactive and adds value. Specific initiatives planned for 2021 and beyond include: Development of systems and processes for data collection and the use of forecasting tools in preparation for Basel IV, which is expected to be rolled out globally in January 2023 on assets in difficulties. z Monitor the risk of competitive activity, particularly the entry of fintechs and telecom giants into the banking industry, and assess the feasibility of potential partnerships to outpace the competition. z Complete the implementation of the z Early Extension of the Social and Environmental Risk Management Framework to the Group's subsidiaries. z Implementation of a climate risk assessment tool to address potential climate-related risks by reducing the carbon footprint of banking operations. With large-scale vaccination campaigns currently underway and seen as an effective pandemic exit strategy, the latest predictions suggest that the pandemic should be brought under control in the near future, reviving hope for a brighter outlook for 2021 and beyond. Risk Management Framework The Bank has developed a general risk management framework (RMF) based on the Three Lines of Defense model, which enables it to take a structured approach to managing all of its risk exposures. It is based on rigorous organizational structures, systems, processes, procedures and industry best practices and takes into account all plausible risks, potential losses and uncertainties to which the bank is exposed. The Three Lines of Defense model, which is the international standard, enables the bank to have specific risk management skills and frameworks and conducts its daily operations with an optimal balance of responsibilities. Governance and risk management Liquidity risk Actual position as at December 31, 2020 Governance and risk management policy parameters Annual report 2020 Key risk indicator Commercial Bank of Ceylon PLC Risk category and parameters RMF is reviewed annually or may be more frequent Warranty, taking into account changes in regulatory and operating conditions. Warning Signs Framework (EWS) that can identify and mitigate credit risk early to further improve credit quality. z Complete the implementation of the RAROC (Risk Adjusted Return on Capital) framework at the banking and corporate counterparty level. 117
120. Illustration of three lines of defense– 21 1st Ceylon Commercial Bank PLC Annual Report 2020 Governance and risk management Governance and risk management Line of defense Line of defense 3rd line of defense Business units/corporate functions Risk management and control Audit Owns and manages associated risks Supervises independently the effective implementation of the risk management framework Includes internal audits, external audits and regulatory reviews that provide independent assurance to the board's first and second line of defense Assess risks using informed judgment Ensures that accepted risks are within the risk appetite and risk management policies of the bank Provides a strong internal system of controls and organizational culture of the bank Risk awareness promoted through regular training Facilitates a high level of risk awareness throughout the organization and provides the implementation of the framework risk management system in insurance Maintains a solid framework of risk management policies Measures, monitors and reports to management and the board Integrated risk management committee Facilitates high standards of governance and control systems Makes timely reports of findings to the management and the board of directors Audit committee Provides the first line of defense objectively questionable Line management/business units Risk governance Risk governance is the organizational structure necessary to maintain a high level of governance. It allows risk-related decisions to be made and implemented for risk management and monitoring within the framework of risk appetite and tolerance, and for the institutionalization of a strong risk culture. Allows management to take risks more cautiously. The Board of Directors has established a solid governance structure using the best corporate governance practices to manage risk. Composed of board committees, senior management functions, and board committees with delegated powers, it facilitates risk accountability at all levels and across all types of bank risk and enables a disciplined approach to risk management . The bank's risk governance organization is shown in Figure 22. Due to its high specialization and also to ensure an integrated and consistent approach, risk management decision-making is more centralized in various risk management committees. Board of Directors As the highest governance body, the Board of Directors is responsible for formulating strategy and policies, establishing objectives and supervising executive functions, and has overall responsibility for understanding the risks identified by the Bank and the 2nd Risk/Compliance departments Group 118 inspection/audit and ensure its proper management (see pages 66 to 69 for Director profiles). Accordingly, the Board of Directors determines the Bank's risk appetite, with due regard to the achievement of its strategic objectives, and delegates oversight responsibility to Board Committees (see pages 82 to 84 for a list of these). These board committees work closely with the executive functions and executive level committees to review and evaluate the effectiveness of the risk management function and to report regularly to the board. These reports provide a comprehensive overview of the Bank's risk profile, risk management efforts and results, enabling the Board to identify risks, potential gaps and required mitigation actions in a timely manner. The tone at the top and the corporate culture, reinforced by the ethical leadership of the board, play a key role in the bank's risk management. In the event of possible financial losses and reputational risks, and in accordance with the requirements of the regulatory authorities, the Board of Directors monitors the risk profile of all the group's subsidiaries except the Bank's (see list of subsidiaries on page 156). ). In addition to the "Three Lines of Defense" model and the "Tone from the Top", the Bank's commitment to conducting business ethically also plays an important role in the Bank's risk management. The Code of Ethics has established the unwavering commitment and expectations of all Bank employees to conduct business in a responsible, transparent and disciplined manner and demands the highest standards of honesty, integrity and responsibility from all employees. Board Committees The Board has established the following four Board Committees to assist in the exercise of its risk management oversight responsibilities and to ensure the adequacy and effectiveness of internal control systems. z Board Audit Committee (BAC) z Board Integrated Risk Management Committee (BIRMC) z Board Credit Committee (BCC) z Board Strategy Development Committee (BSDC) These committees regularly review and make recommendations to the Board on risk appetite, risk profile, strategy, risk management framework and internal controls, risk policies, limits and delegated authority. The details of the composition, mandate, authorities, meetings held and present, activities carried out during the year, etc. of each of these Directors' Committees are established in the corresponding Committee Reports on pages 86 to 100.
121. Risk Governance Structure z Business Continuity Management Steering Committee(BCMSC) EIRMC coordinates communication with BIRMC to ensure risk is managed within risk appetite. Additionally, the Chief Risk Officer reports directly to BIRMC. Details of the composition of the governing bodies are included in the Annual Corporate Governance Report section on pages 80 and 81. The Risk Director, responsible for the Comprehensive Risk Management Department (IRMD), participates in the board of directors governance and reporting BIRMC ISC BAC ALCO EIRMC BCMSC ECMN BCC BSDC CPC ESDC Operational risk IT risk ORMU ITRU IRMD led by CRO Credit risk CRMU CRRU Market risk SEMS TMO MRMU Risk management process set of policies and procedures, separation of duties (Three Lines of Defense), Risk Assessment, Risk Measurement, Risk Mitigation, Key Risk Indicators, Management Action Triggers (MAT), Risk Monitoring, Risk Reporting, Line of Business Manager Guidance, Testing risk ratings, administration and valuation of guarantees, independent verification, structure of limits, analysis of behavior of the Market, Balance Analysis, Contingency Financing, VaR Measurements Tolerance Levels Risk Governance and Man p. Credit Policy Committee (CPC) z The Information Security Council (ISC) committees mentioned above and at BIRMC, BCC and BAC meetings. It is the responsibility of the IRMD to independently monitor the compliance of the First Line of Defense with the established policies, procedures and limits and to escalate deviations to the corresponding Executive Committees. It also provides a perspective on all types of risk to the above committees to conduct independent risk assessments and share their findings with line managers and senior management to enable effective communication of material issues and initiate necessary reflection and action. . Governance and Risk Management z Assets and Liabilities Committee (ALCO) Non-Performing Advances (ECMN) 2020 Annual Report z Executive Monitoring Committee Senior management is responsible for the implementation of strategies and plans as provided by the Board of Directors to maintain the risk profile within the approved risk appetite. The Executive Committee for Integrated Risk Management (EIRMC) is made up of members of the units responsible for credit risk, market risk, liquidity risk, social and environmental risk, operational risk and IT risk. Under the direction of the EIRMC, the following committees on specific aspects of risk have been established to facilitate risk management in the first and second lines of defence. Commercial Bank of Ceylon PLC Executive Committees Information Security Management 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: Assets and Liabilities Committee, EIRMC: Integrated Risk Management Executive Committee, BCMSC: Business Continuity Management Steering Committee, ECMN: NPA Supervisory Executive Committee, CPC: Credit Policy Committee, ESDC: Strategy Development Executive Committee, IRMD: Integrated Risk Management Department, CRMU - Credit Risk Management Unit, CRRU - Credit Risk Review Unit Credit, SEMS - Social and Environmental Management System, TMO - Treasury Middle Office, MRMU - Market Risk Management Unit, ORMU - Operational Risk Management Unit, ITRU - Management Unit IT Risk ion 119
122. guidelines, Procedures and Limits The Bank has a complete set of risk management policies that cover all risks managed by the Bank to provide risk management guidance to the business and support units and also to ensure compliance with the regulatory requirements, including Policy No. 07 of 2011 – Integrated Risk Management Framework for Licensed Commercial Banks based on the Basel Framework and subsequent guidelines issued by the CBSL. By institutionalizing the risk knowledge base, this helps to minimize bias and subjectivity in risk decisions. These policy documents define the objectives, priorities and processes, as well as the functions of the Bank. It has made significant investments to develop and maintain a necessary up-to-date infrastructure, both in terms of human and physical resources, to support detection and Strengthen risk management. , including mandates, policies and procedures, limits, software, databases, expertise, communication, etc. and adopt international best practices. Since risk management is the responsibility of each individual in the bank and they need the risk management framework, the board and management must manage risk and shape the risk culture of the bank. The Risk Assessment Statement (SAR) sets out the risk limits and forms an integral part of the risk management framework. The SAR and all risk policies are reviewed by BIRMC and the Board on an annual basis or more frequently based on regulatory and business needs. The bank has taken into account the regulatory requirements of the respective countries in which it operates. The Bank's global exposure, including its foreign operations, conforms to the CBSL regulatory framework. The Bank has issued comprehensive operating guidelines to facilitate the implementation of the risk management principles and limits established in the RAS. This policy explains the types of facilities, procedures, and terms and conditions under which the bank conducts business and provides clarity for employees in their daily work. Figure – 23 Risk governance structure Risk sources of activities related to financial intermediation and maturity transformation z Board of Directors z Board Committees z Senior Management z IRMD (2nd LOD) Deviations/Trends z Risk Management Processes Risk Owner (1st LOD) Risk Treatment Plan z Risk Culture Risk Assessment z Best Practices Internal and External Audit (3rd LOD) Risk Assessment Risk Approval Commitment Monitoring/Review Assets and liabilities exposed to credit, market risk and liquidity (within the desired risk profile) and sources of operational and IT risk (with risk mitigation “as low as reasonably achievable”) Credit risk Key credit risk indicators: thresholds/MAT Credit risk assessment Post-assessment upon payment Cross-border risk assessment Counterparty bank risk assessment Partner risk assessment l and environmental 120 to which the bank is exposed IRMD provides continuous training/awareness of employees, especially risk owners, dissemination of knowledge and improvement of their skills in all aspects related to risk, inculcation of the desired risk culture . Risk management is the functional responsibility of identifying, assessing, and mitigating risks, finding risk mitigation methods, monitoring early warning signs, forecasting possible future losses, and implementing loss mitigation/risk transfer plans. The risk management framework presented on page 120 enables the development and implementation of risk management strategies, policies and procedures, taking into account the strategic direction and risk appetite defined in the business plan. Risk Policy Instructions/Revisions Commercial Bank of Ceylon PLC Annual Report 2020 Corporate Governance and Risk Management Risk Control and Management Risk Management Market Risk Key Market Risk Indicators: Thresholds/MAT/Portfolio Profit and Loss Statement /balance sheet analysis Monitoring and review of limits Market development/Trends and MIS funds Transfer prices based on IRR management by treasury Operational risk Key indicators of operational risk Thresholds/Tolerance levels Control points Internal/External Incidents/Claims /Compliance/Scenarios Control Gaps/Policy Exceptions Product/Process Reviews IT Risk Key IT Risk Indicators Thresholds/Tolerance Levels Checkpoints Information Security Incidents/Loss Events Emerging Threats/Vulnerabilities Control Gaps /Policy exceptions
123. Risk management tools The Bank uses a combination of qualitative and quantitative tools to identify, measure, manage and report risks. The selection of the appropriate tool or tools to manage a particular risk depends on the probability and impact of the risk and the availability of data. These tools include early warning signs, threat analysis, risk policies, risk registers, risk maps, risk dashboards, RCSA, ICAAP, diversification, agreements, social and environmental management system, operational risk management system based on in workflow, information security management system, insurance. and benchmarking to limits, gap analysis, NPV Analysis, Swaps, Caps and Floors, Hedging, Risk Assessment, Risk Assessment, Risk Modeling, Duration, Scenario Analysis, Mark-to-Market, Stress Testing, VaR Analysis, etc. Threats Strengthening regulation Stability of fiscal and monetary policy Close monitoring of trends in potential economic implications and business strategy that could affect asset quality and profitability Guidance on business strategy and resource allocation communicated to business units Specialized teams within the risk management function (in addition to the first line of defense) and d continuous investment in improving cybersecurity. A dedicated compliance function and an independent internal audit function facilitate compliance Assurance of stable funding sources, asset quality and returns Protection of information and assurance of business continuity Proactive approach to compliance Other emerging risks Provides unparalleled convenience and without precedent through the adoption of the latest banking technology To meet the growing expectations of stakeholders and be prepared for the future BANK internal mitigation Our objective Credit risk Personal and operational risk Market risk Ensure asset quality and reduce the exposure to high-risk segments Create an environment that enables performance while protecting the business Protect against adverse movements in market factors due to price sensitivities of financing sources, investments, credit portfolios or trading Development of pro skills r Forecast Support the decision-making process Protect against funding constraints that impede growth and meet the needs of depositors/investors Robust and rigorous risk assessment Assessment and pricing of loans according to risk appetite and supported by guarantees Succession planning, code of conduct and business ethics, competition, policy framework, segregation of duties and internal controls Monitoring, forecasting and control through strict limits and management action triggers models based on assumptions and evidence of behavior through independent internal/external validation Maintain and grow a stable deposit base and obtain low-cost sources of financing both nationally and internationally act as a buffer in addition to maintaining solid Portfolios of liquid assets to withstand contingencies Upward trend of risk Downward trend in risk risk model Liquidity risk governance and risk management nt Our objective Mitigation Economic performance and business cycles Annual report 2020 Control and management of external risks Figure: 24 Commercial Bank of Ceylon PLC Summary of key risks No material change 121
124. Commercial Bank of Ceylon PLC Annual Report 2020 Corporate Governance and Risk Management Risk Control and Management Types of Risk The Bank is exposed to financial risks, non-financial and strategic risks. Financial and non-financial risks can be broadly classified into credit, market, liquidity, operational, reputational, IT, strategic, and legal risks. All these risks taken together determine the bank's risk profile. A robust risk management framework enables the Bank to manage these risks prudently. Various external developments and internal factors can continuously influence the risk profile. External developments include; z The pandemic situation, z Movements in macroeconomic variables, z Sovereign risks that destabilize financial markets, z Political instability, z Demographic changes, z Changes in government fiscal and monetary policies, z Technological advances, z Regulatory developments, business and operating decisions, and z Subsidiaries and affiliates that do not meet Bank expectations These factors, if not properly managed, may affect the Bank's risk profile, including reputational risk, and negatively affect the Bank's objective of creating sustainable value for all its stakeholders. In addition, some potentially disruptive new threats and uncertainties have made the operating environment much more complex and unpredictable, making some of the long-held assumptions about markets, competition, and even business fundamentals less accurate in the future. present. These challenge the bank to better understand its stakeholders and meet their expectations through excellent execution of internal processes. The Bank approaches these developments through appropriate strategic responses, as it believes they present opportunities to differentiate its value proposition for future growth. For a summary of the main risks, see Figure 24 on page 121. z Increased pressure from interested parties z Competitor activities z Dissemination of unsubstantiated information on social networks Maximum credit risk These developments make the environment business is becoming more complex, dynamic and competitive every day, which makes risk management very demanding. However, the effective management of these risks and uncertainties is a sine qua non condition for the implementation of the Bank's strategy of creating value for all its stakeholders. As a result, risk management discussions were high on the agenda of all meetings of the Board, Board Committees and the Bank's Executive Committee. Below is a description of the different types of risk managed by the Bank's risk management function and the risk mitigation measures adopted. Credit risk Credit risk is the potential for loss resulting from a customer/borrower's or counterparty's default on its financial or contractual obligations to the bank. The bank is mainly exposed to credit risks due to direct loan operations, as well as commitments and contingent liabilities. The Bank's global credit risk consists of counterparty risk, concentration risk and settlement risk. Table – 34 As of December 31, 2020 z Decline in real estate market valuations leading to higher losses on non-performing loans z Unfounded public perception that banks are exploiting customers Mn. % Net book value of credit exposures: Cash and cash equivalents 50,250 2.1 110,344 4.7 z Interruptions in the supply chain Loans at central banks and other banks (excluding reserves) z Bank rating downgrade y Financial assets a amortized cost – Loans and receivables with banks 779 0 . 0 z Growing concerns about sustainability Financial assets at amortized cost – Loans and receivables from other customers 896,845 38.1 In addition to the limited physical movement of people and global trade due to the pandemic, the above developments could alter the public perception that the Individual disposable income and demand for banking services affect bank products and services, fund mix, interest margins, and tax liabilities. Financial assets at amortized cost - debt securities and other financial instruments 292,727 12.5 278,461 11.8 include internal factors; z Strategic mismatches z Errors in the implementation of the risk management framework z Inadequate alignment of compensation with performance and risk z Problems related to third-party products sold at the bank's facilities Financial assets at fair value through other comprehensive income Total (a) Loan commitments 129,571 5.5 Contingent liabilities 596,004 25.3 Total (b) Total maximum credit exposure (a + b) 947,842 Stage 3 (credit deterioration) Loans to other customers 102,575 Internal processes Provision as % of loans and advances to other clients z Lack of industrial harmony Provision: estimates for loans and advances to other clients are inaccurate 725,575 2,354,981 Gross book value of loans and advances to other clients z Incorrect advice given to clients z Critical accounting judgments y 1,629,406 Maximum exposure outside balance sheet: Impaired loans as % of gross loans and and requirements for other customer variables 122 z Poor data quality with negative impact on 100.0 10.8 50,996 5.4 17,865
125. Credit risk management The credit portfolio is made up of 52% of total assets and credit risk represents more than 90% of risk-weighted assets. Therefore, there is no need to overstate the critical importance of prudent credit risk management for the Bank's sustainability. In these circumstances, we seek to manage credit risk beyond mere regulatory compliance to increase value. It is managed through the Board-approved credit risk management framework, which includes a robust risk management framework and a comprehensive set of risk management processes including, but not limited to, policies and procedures, risk ratings, mechanisms risk review, administration and evaluation of guarantees. , and separation of credit risk management functions, social and environmental risk management, independent verification of risk assessments, credit risk monitoring, post-disbursement verification, guidance to business line managers, knowledge dissemination related to credit risk and exchange of information with internal audit. Credit Risk Review The challenging operating environment that followed the Easter Sunday attack was further worsened by lockdowns related to the Covid-19 pandemic, travel restrictions, supply chain disruptions, import restrictions and the decline in exports. The resulting decline in economic activity and the consequent loss of jobs and disposable income led to increased credit risk and decreased asset quality in the financial services industry during the year, despite numerous stimuli offered by the government to support affected businesses and individuals through the pandemic. The bank was also affected by this impact, but delinquency ratios remained within established governance and risk management. In addition to the effective credit risk management framework mentioned above, which guides the bank in taking new exposures and monitoring existing exposures, which greatly contributes to maintaining the quality of the loan portfolio, the bank is vigilant and cautious in the selection of customers, products, segments and regions it serves. Continuous monitoring of aging analysis and the underlying movement of non-performing loans through the delinquent pools enabled the bank to take prompt action to mitigate default risk throughout the year. 2020 2019 Gold Investment Grade Medium Risk High Risk Extreme Risk 2020 2019 2.3% 73.9% 19.1% 1.7% 3.0% 2.6% 74.3% 18.2% 1.6% 3rd 0.3% Concentration risk By strategically diversifying the business across industries, products, counterparties and geographies where the bank manages concentration risk. The Bank's RAS defines the limits for these segments and, to ensure compliance, the Board of Directors, BIRMC, EIRMC and CPC monitor these risks. They also make suggestions and recommendations for changes to the defined boundaries based on trends and developments that shape the business environment. The year-end distribution of Stage 3 credit-impaired loans and receivables to other customers by identified industry is shown in Table 35 on page 124. Other customers are within the Bank's risk appetite. Accounts receivable from other customers due as of December 31, 2020 (based on residual maturity) Governance and risk management In addition, the increasing trend of accounts receivable from other customers being classified as impaired has resulted in an accumulated provision of Rs 50.9 crore. (Rs 35.8 crore in 2019) and an impairment of Rs 17.8 crore (Rs 10.0 crore in 2019) for the year under review. Distribution of loans and accounts receivable from other customers by risk rating Graph - 14 2020 Annual Report According to the IFRS 9 classification, loans with impaired credit quality (Level 3) to customers amounted to 102.5 million rupees (96.6 million rupees in 2019), representing 10.8% (10.5% in 2019) of the Bank's gross loan and loan portfolio. Policy parameters until the end of the year (see Risk Profile on page 116). Ongoing monitoring of credit lines subject to moratoriums, recovery initiatives such as offering incentives and increased focus on loan approvals and post-sanction monitoring and recovery efforts, along with planned implementation of early identification of stressed borrowers by EWS, will support the Bank progressively. to these ratios in 2021 and minimize potential credit risks. Commercial Bank of Ceylon PLC The bank's maximum loan exposure of Rs. 1,839.5 billion, mainly due to excess liquidity parking in other financial assets due to moderate credit growth and moratoriums granted to debtors in a very difficult economic environment that prevails in the country. Graph - 15 K J I H G F E D C B A 0 80 to 3 months 3-12 months 13-36 months 37-60 months more than 60 months 160 A - Bank overdrafts B - Commercial financing C - Leases receivable D - Credit cards 240 E - Pledge F - Personal Loans G - Home Loan H - Personal Loan 320 I - Long Term Loan J - Short Term Loan K - Bill of Exchange Rs 400 Billion 123
126. Assignment of Stage 3 non-credit-impaired loans and receivables to other customers as of December 31, 2020 Landwirtschaft, Forstwirtschaft und Fischfang Kunst, Unterhaltung und Erholung Baurisiko Governance und Management Konsum und andere Governance und Risikomanagement Jahresbericht 2020 Abgeschriebener Betrag Rs. '000 Rs. '000 11,658,180 925,407 3,154,672 4,080,079 107,728 282,039 9,962 50,376 60,338 63 7,052,936 3,206,972 1,373,811 4,580,783 71,041 11,890,683 926,101 4,492,966 5,419,067 983,946 Education 341,000 367 114,732 115,099 19,037 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 und Kommunikationsdienste 1.796.746 3.305 287.848 291.153 2.210 Infrastrukturentwicklung 3.063.165 159.252 288.633 447.885 – Kreditvergabe a Instituciones en el Extranjero Manufactura Actividades Profesionales, Científicas y Técnicas Turismo Commercial Bank of Ceylon PLC Asignación por Deficiencia Colectiva Rs.'000 ECL Subsidio Rs.'000 Asignación por Deficiencia Individual ng Rs. '000 St age 3 Loans and Advances Industry Category Table – 35 1,599,311 151,572 241,416 392,988 21,717,503 1,933,890 5,062,633 6,996,523 – 204,462 512,312 2,104 189,685 191,789 6,430 18,800,368 783,849 1,584,364 2,368,213 7,650 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 63,252 102,575,433 10,145,384 22,135,755 32,281,139 1,477,468 Total Debido a la fuerte concentración de la actividad económica en la Provincia Occidental y la ubicación de la sede de la mayoría de los prestatarios allí, un análisis geográfico (Gráfico 16) indica una alta concentración de préstamos y créditos a la otros clientes provincia provincia reflejada. El análisis de la cartera de préstamos relacionado con el producto (Grafico 17) also muestra la eficacia de la politica crediticia del banco, con el riesgo distribuido entre una gama de productos crediticios. Análisis Geográfico de Adeudos de Otros Clientes por Producto al 31 de dicembre de 2020 Gráfico - 16 Análisis de Producto de Adeudos de Otros Clientes al 31 de dicembre de 2020 Gráfico - 17 K J I H G Préstamos a Largo Plazo Préstamos a Corto Plazo Letras de Cambio Sobregiros Comeranciamientoros Comeranciamienciencial Arrendamientos Cuentas por Cobrar Crédito Tarjetas Prenda Préstamos personales Préstamos hipotecarios Préstamos personales F E D C B 41.9% 14.6% 4.0% 10.8% 8.7% 3.9% 1.5% 0.5% 1.3% 7.3% 5.5% A 0 80 Provincia central Provincia del este Provincia central del norte Provincia del norte Provincia del noroeste 124 160 Provincia de Sabaragamuwa Provincia del sur Provincia Uva Provincia Provincia Occidental Bangladesh 240 A – B – C – D – E – F – Sobregiros Comercio Financiación Arrendamientos Cuentas por Cobrar Tarjetas de Crédito Pignoración Préstamos Personales 320 G – H – I – J – K – Préstamos para Vivienda Préstamos Personales Préstamos a Largo Plazo Préstamos a Corto Plazo Letras de cambio 400 mil millones de rupias La exposure relative alta del 42% al crédito a largo plazo se supervised de cerca y se garantiza que.
127. Analysis uses Fitch ratings for local banks in Sri Lanka and rating agencies in Bangladesh(CRAB) for local banks in Bangladesh (CRISL/Alpha equivalent ratings are used when CRAB ratings are not available). Exposures of local banks in Sri Lanka rated AAA to A accounted for 96% (Chart 18), while 100% of the exposure of local banks in Bangladesh consisted of counterparty banks rated AAA to A (Chart 19). Existing limit structures, continuous monitoring of macroeconomic and market developments in countries with exposures to counterparties, and rigorous assessment of and frequent dialogue with counterparties help to minimize the risk of excessive cross-border concentration. Timely measures will be taken to suspend/revise the limits for countries with unfavorable economic/political developments. The bank's overall cross-border exposure is only 6% of its total assets (Chart 21). The Bank has cross-border exposures in several countries, notably India, Maldives, Singapore, USA, Denmark, Bangladesh, etc. December 31, 2020 Chart - 20 Concentration of Counterparty Bank Exposures in Sri Lanka as of December 31, 2020 ( Fitch Ratings) Chart - 18 AAA to BBBBelow BBB- and AAA unrated to A BBB to B 96% 4 % Concentration of Counterparty Bank Exposures in Bangladesh as of December 31, 2020 (CRAB Ratings*) Chart - 19 AAA to A BBB to B 100% 0% Exposure to countries rated AAA to BBB- (S&P or equivalent) accounted for 90 % of the bank's total cross-border exposure. 73.9% - Distribution of exposure by borrower ratings Investment grade borrowers, which are considered to have very low default risk, accounted for 73.9% of total exposures to other clients. 90% 10% Note: Does not include investment in Bangladeshi operations and direct lending in Maldives/Bangladesh. Bank's cross-border exposure (Sri Lanka and Bangladesh operations) Other assets Cross-border assets 94% 6% Risk control and management A significant component of counterparty risk relates to loans and receivables with banks, both domestic and international. There are a number of specific policies, procedures, and a boundary structure for tracking. While market information on the financial/economic performance of these counterparties is subject to rigorous scrutiny throughout the year, the counterparties' bank exposures are regularly monitored against established prudent limits and the limits are revised to reflect the information most recent when deemed necessary. 90% – Distribution of exposure by country rating Government and risk management There is a risk that the Bank may be exposed to certain policies by foreign governments, mainly related to the convertibility and transferability of foreign currency. Assets exposed to cross-border risk include loans and receivables, interest-bearing deposits with other banks, bills of exchange and trade and other acceptances, and those primarily related to short-term money market activities. Annual Report 2020 Cross-border risk The Bank manages counterparty risk through established policies/procedures and limit structures, including individual borrower limits and group exposure limits with sub-limits for products, etc. The Bank has established limits that are much stricter than those established by the regulator, giving it greater flexibility in managing concentration levels related to counterparty risk. Commercial Bank of Ceylon PLC Counterparty Risk Chart – 21 India Maldives Singapore US Denmark Bangladesh Malaysia Malawi Germany UK Indonesia Kenya Other 21.54% 18.26% 16.36% 8.97% 6.81% 4.71% 3.34% 2.43% 2.04% 1.93% 1.89% 1.87% 9.85% *Equal CRISL/Alpha ratings are given when CRAB ratings are not available. 125
128. Market Risk Market risk is the risk of loss resulting from movements in market-driven variables, such as interest rates., exchange rates, commodity prices, equity and debt prices and their correlations with the Bank's expectations at the time the decision was made. The Bank's operations are exposed to varying degrees of exposure to these variables and correlations. Market Risk Categories Main Table of Market Risk Categories – 36 Risk Components Commercial Bank of Ceylon PLC Annual Report 2020 Governance and Risk Management Governance and Risk Management Interest Rate Description Severity Impact Risk Risk of loss due to movements or volatility in interest rates Restatement Restatement Price difference limits and differences in the amounts of interest-bearing assets and interest-bearing liabilities when interest rate sensitivity limits are reassessed at the same time or due to temporary differences at fixed rate maturities and appropriate review of floating rate assets and liabilities off-balance sheet instruments yield high medium high curve unforeseen changes in the shape and slope of the yield curve interest rate shocks and reports high high high basis differences in the relative movements of the interest rate index used to price instruments with similar characteristics interest rate shocks and reports High Medium Medium Exchange rate Potential impact on earnings or principal of exchange rate fluctuations due to maturity mismatches in non-base currency positions Rupee of Sri Lanka (LKR) High levels of risk tolerance for individual currency exposures as well as general exposures within the Regulatory limits for NOP Median Median Shares Potential loss due to price changes and volatility of individual shares Market value calculations are performed daily for Fair Value Through Profit and Loss (FVTPL) and Fair Value Through Other Comprehensive Income (FVOCI) portfolios Small Small Negligible Commodity exposures to individual commodity price changes and volatilities Market value calculations Minor Minor Insignificant Risk management Market risk Market risk is managed through the Board-approved market risk management framework, which provides The risk governance framework and full set of risk management processes include policies, market risk limits, management action triggers (MAT), risk monitoring and risk assessment. Summary of market risk Market risk arises mainly from the non-trading portfolio (bank portfolio), which represented 92.75% of total assets and 93.50% of total liabilities as of December 31, 2020. Market risk arises mainly from IRR and exchange rate risk, since the Bank has minimal exposure to the price risk of raw materials, the price risk of shares and debt, which represent less than 10%. of total risk weighted by market risk. 126 Monitoring Tools The Bank's market risk analyzed by trading portfolio and non-trading portfolio (or banking book) is detailed in Note 68.3.1 on page 285 Interest Rate Sensitive Assets (RSA) and Liabilities ( RSL) in different time bands according to maturity (in the case of fixed interest rates) or the remaining time until the next revaluation (for variable interest rates). Savings deposits are distributed according to the results of a behavior analysis carried out by the bank. The bank's sensitivity to interest rate fluctuations is indicated by the gap between the RSA and the RSL (see Table 37).
129. 1-3 years 3-5 years More than 5 years Not sensitive Total at 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 3.57 0.90 RSA/ RSL 1.11 0.45 2.85 Wechselkursrisiko Strenge Risikotoleranzgrenzen für einzelne Währungsengagements sowie Gesamtengagements innerhalb der Regulatory limits ensure that potential losses from exchange rate fluctuations are minimized and kept within the bank's risk appetite. Interest Rate Risk (IRR) Extreme fluctuations in interest rates expose the Bank to fluctuations in net interest income (NII) and have the potential to affect the underlying value of interest-bearing assets and interest-bearing liabilities interest and off-balance sheet items. The main types of IRR to which the Bank is exposed are interest rate risk, yield curve risk and basis risk. The USD/LKR exchange rate lost 2.84% in the year under review (source: CBSL). Sensitivity of the projected INI Periodic stress tests are carried out on the interest rate risk of the banking book (IRRBB) that include changing positions and new economic variables together with systemic and specific stress scenarios. The change in the value of the portfolio of fixed income securities (FIS) in the FVTPL and FVOCI categories due to abnormal market movements is measured using the economic value of equity (EVE) and earnings at risk (EAR) perspectives. The results of the IRR stress tests are analyzed to determine the impact of such scenarios on the Bank's profitability and capital. See Note 68.3.3 – Currency Risk – Non-Commercial Portfolio on pages 287 and 288. The NOPs are subjected to stress tests applying interest rate shocks between 2% and 15% to assess the impact on profitability and adequacy of Bank's capital (see Table 42 on page 132). The impact of a 1% exchange rate change on the foreign currency position indicated a loss of Rs 301.20 crore on the positions as of December 31, 2020 (see Chart 40 on page 288). Share Price Risk Although the Bank's share price risk is negligible, market value calculations are performed daily for the FVTPL and FVOCI portfolios. The Bank also calculated the VaR impact on NII due to interest rate shocks on LKR and FCY and is continuously monitored to assess the Bank's vulnerability to sudden interest rate movements (see Table 38). 108,316,900 in stock portfolio. Note 68.3.4 on page 289 summarizes the impact of a 10% stock price shock on earnings, other comprehensive income (OCI) and equity. Commodity price risk The Bank is exposed to negligible commodity price risk, which is limited to the magnitude of fluctuations in the price of gold in the pledged portfolio. Liquidity risk Liquidity risk is the Bank's inability to meet contractual and contingent financial obligations, on or off the balance sheet, when due without incurring unacceptable losses. Banks are vulnerable to liquidity and solvency problems derived from mismatches in the maturities of assets and liabilities. Consequently, the main objective of liquidity risk management is to assess and guarantee the availability of the funds necessary to meet obligations in reasonable times, both under normal and stress conditions. Liquidity ratios as of December 31, 2020 are provided below: NII Liquidity Ratios Sensitivity to Interest Rate Shocks 2020% 2019% DBU 44.99 30.42 OBC 32.70 25.25 Rupee 330.84 158 .79 All currencies 258.06 224.74 Net stable funding ratio (NSFR) 137.48 105 Table -05 Parallel increase Parallel decrease Rs 000 000 Parallel increase Parallel decrease Rs 000 000 As of December 31 267 122 (132 005) 932 750 (911 553) Average of the year 708 924 (648 050) 1 425 4137 (1 425 4167) Maximum for the year 1,060,589 (1,040,835) 1,646,844 (1,643,315) minimum for the year 249,878 (132,005) 932,750 – 39 Statutory Liquid Assets Ratio (SLAR) Governance and Risk Management 3-12 Months 2020 Annual Report Up to 3 Months Description Risk Governance and Management Table – 37 Commercial Bank of Ceylon PLC Interest Rate Sensitivity Gap Analysis of the assets and liabilities of the banking portfolio as of December 31 December 2020 – Bank Liquidity Coverage Ratio (LCR) 127
130. Risk governance and management Risk governance and management Annual report 2020 Commercial Bank of Ceylon PLC Liquidity risk management The Bank manages liquidity risk through policies and procedures, measurement approaches, mitigation measures, stress testing methodologies and arrangements for financing emergencies. As seen across the industry, weak credit growth resulted in the bank having excess liquidity throughout the year, as reflected in the metrics presented in Table 40. It has been challenging for the bank to manage this excess liquidity to achieve optimum profitability. Much of the excess liquidity had to be invested in government bonds, both LKR and USD denominated, with optimal yields to minimize the negative impact on returns. Liquidity risk review The ALCO regularly monitors the ratio of net loans to deposits to ensure that the Bank's asset and liability portfolios are aligned to maintain a healthy liquidity position. The NSFR, which indicates the stability of funding sources in relation to loans and advances granted, remained well above the 100% policy threshold, considered healthy to support the bank's business model and growth. The indices used to measure liquidity based on the participation approach are listed in Table 40 below: Analysis of the behavior of savings accounts In the absence of a contractual agreement on the term, savings deposits are treated as deposits to the view that does not expire. There is no precise re-rating frequency for the product and the bank re-evaluates the interest rate it offers on these deposits based on the re-rating gap, liquidity and profitability, etc. as there is no precise re-rating frequency and it is not sensitive to market interest The allocation of savings products to The pre-defined maturity bands in the maturity gap report are based on periodic simulations performed by the bank as part of a behavioral study. The liquidity position is measured in all major currencies both individually and in the aggregate to ensure that potential exposures are within established thresholds. In addition, potential liquidity obligations from unused loan disbursements and overdrafts are also monitored to ensure adequate sources of funding. Table - 40 Liquidity Ratios % As of December 31 December 31, 2019 2020 Loans to Customer Deposits 0.75 0.87 Net Loans to Total Assets 0.52 0.64 Cash to Current Liabilities 0.60 0.48 Funds Purchased at Total 0, 23 0.21 (Large Liabilities - Investments Temporary Investments) to (Investment Income - Temporary Investments) 0.18 0.18 Total Credit Commitment 0.24 0.19 Diversification of Financing by Product The Bank's main sources of financing are customer deposits and other Debt. Chart 22 provides a product-by-product analysis of the Bank's lending diversification at the end of 2020 and 2019. Lending diversification by product chart: 22 2020 Maturity Gap Analysis The asset maturity gap analysis and liabilities of the Bank as of December 31, 2020 is to see Note 68.2.2(a) to the financial statements on pages 280 to 281. The maturity analysis of the Bank's financial assets and financial liabilities demonstrates adequate financing for adverse situations predictable based on observed prescribed behavior patterns. The Bank's analysis of maturities of financial assets and financial liabilities does not indicate an adverse situation, duly considering that cash outflows include savings deposits that, based on historical behavior patterns, can be considered a quasi-stable source of financing for such depositors as mentioned below. 2019 Time deposits Other liabilities Liabilities with banks Current account balances Savings deposits 2020 2019 47% 12% 6% 6% 29% 54% 9% 4% 6% 27% Operational risk Operational risk is the risk of losses due to insufficiency or internal failure processes, people and systems or external events such as natural disasters, social or political events. It is inherent in all banking products and processes, and the bank's goal is to manage them profitably. Operational risk includes legal risk but excludes strategic and reputational risk. Operational Risk Management The Bank manages operational risk through policies, risk assessment, risk mitigation including insurance coverage, procedures related to business outsourcing, technological risk management, a Comprehensive Business Continuity Plan (BCP) and a Disaster Recovery Plan (DRP). Bank-wide culture of risk awareness, stress testing, and monitoring and reporting. The policies and procedures related to the outsourcing of the Bank's business activities ensure that all material risks arising from the Bank's outsourcing arrangements are continually identified and effectively managed. Details of all outsourced functions are reported annually to the CBSL. Due diligence tests on outsourced providers are performed by the respective risk owners prior to signing of new agreements and renewal of existing agreements. Additionally, bi-annual review meetings are held with major IT service providers to monitor service performance levels and verify compliance with agreements. Business Continuity Management The Bank's Business Continuity Management (BCM) framework includes business continuity, disaster recovery, crisis management, incident management, emergency management and contingency planning activities. These activities ensure that the Bank is committed to serving its customers, employees, shareholders and suppliers with minimal business interruption in the event of an unforeseen interruption to its operations due to man-made, natural or technical disasters. BCM's scope includes program initiation and management, risk assessment and business impact analysis, development of business continuity strategies, emergency preparedness and response, development and implementation of business continuity plans, awareness and training, the exercise of the business continuity plan, auditing and maintenance, crisis communication and coordination with external organizations.
131. loss composition– 2020 z Warning level: 3% of the average gross income of the last three years z Maximum level: 5% of the average gross income of the last three years Operating losses for fiscal year 2020 were below the internal warning threshold of 0.58% (of the average verified gross income of the last three years). The Bank has consistently kept operating losses below the alert level over the last decade, Graph – 23 Graph 23 analyzes the operational risk losses incurred by the Bank in 2020 in each business line/category. Analyzing the losses suffered in 2020 in the business lines defined by Basel II, it can be seen that the majority (89%) of the losses with financial impact correspond to the "Retail Banking" business line, followed by ""Payments and Liquidation” (11%). Losses in other business areas remain negligible. Charts 24 and 25 show the comparison of reported operating losses in 2020 and 2019 for each type of Basel II damaging event, both in terms of number of events and value. Operational Losses by Category – % of Total Losses by Graphic Value – 25 Events of Operational Losses by Category – % of Total Losses by Number of Top Events”, Effectiveness of governance structures and rigor of operational risk management processes and procedures . 2020 2020 Governance and risk management Due to the second wave of the pandemic, the bank has been forced to postpone the BCP 2020 exercise scheduled for the second quarter of 2021 with the approval of the CBSL. Operational Risk Review The bank has a low appetite for operational risk and has established tolerance levels for all types of material losses from operational risk based on historical loss data, budgets and forecasts, bank performance, systems and controls implemented for banking operations, etc. established. The following thresholds have been established for monitoring purposes based on audited financial statements: Governance and risk management In 2018, the Bank's BCP was reviewed in accordance with industry best practices in consultation with an external BCP expert. The IT disaster recovery plan, which is a key component of BCP, was also reviewed and approved by the Board of Directors. The recovery capabilities of the bank's central banking IT system and other critical systems have been further strengthened with the introduction of a secondary high-availability facility resulting in increased redundancy. 2019 2019 Loss Composition - Retail Banking Division - 89% Loss Composition - 2020 Category Execution, Delivery and Process Management Internal Fraud External Fraud Labor Practices and Safety at Work Customers, Products and Commercial Practices Property Damage Business Interruption and System Failures Retail Banking Payment and Settlement Business interruption and system failures Execution, delivery and process management External fraud Property damage Business interruption and system failures 2019 90% 0% 1% 89% 0% 2% 0% 0% 0% 3% 0% 4% 6% 5% Process execution, delivery and management Internal fraud External fraud Labor practices and workplace safety Customers, products and business practices Property damage Business interruption and system failures 2020 2019 75% 0% 12% 67% 4% 5% 0% 0% 0% 1% 0% 1% 12% 23% Commercial Bank of Ceylon PLC Annual Report 2020 Loss Composition – Category 89% 11% 100% 84% 14 % 1% 1% 129
132. Risk management and management Governance and risk management Annual report 2020 Commercial Bank of Ceylon PLC 130 As typical for operational risk losses, most of the losses the Bank faced in 2020 consisted of high frequency/low financial impact events, which fell primarily into the category of execution, delivery and process management losses. These low-value events are primarily related to cash and ATM operations in the bank's service delivery network, which consists of more than 1,000 locations in Sri Lanka and Bangladesh. Individual events with a monetary value of less than Rs 100,000 accounted for more than 93% of total loss events for the year. Likewise, the number of claims for the year compared to the number of transactions made during the year is only 0.0036%. Looking at the values ​​of the losses incurred by the bank during the year, they can be assigned mainly to the categories of execution, delivery and process management, business interruption and system failures and external fraud. Losses for the year were primarily caused by a limited number of events in these three categories, most of which the Bank was able to resolve through subsequent recovery/restore with minimal financial impact to the Bank. In addition, the necessary process improvements and system changes were introduced to prevent it from happening again. The capital allocation in terms of operational risk for 2020 under the Basel III alternative standardized approach is Rs 6.9 crore while the net loss after discounting subsequent recoveries is only 0.83% of this allocation capital. This trend towards the Bank's exceptionally low operational risk losses reflects the effectiveness of the Bank's operational risk management framework and internal control environment. IT Risk IT risk is the business risk associated with the use, possession, operation, participation, influence and implementation of IT within an organization. It is an integral part of operational risk and includes IT-related events such as system outages/failures, errors, fraud through system manipulation, cyber-attacks, application obsolescence, technological lag compared to the competition, etc. that can potentially affect the entire business. Managing IT risk is challenging given the uncertainty surrounding its frequency and magnitude. As a result, the bank has made IT risk management a top priority, focusing more on cybersecurity strategies and continually investing in cybersecurity capability enhancements. The bank's cybersecurity strategy focuses on safely enabling new technologies and business initiatives, while maintaining a focus on protecting the bank and its customers from cyberthreats. IRMD's IT Risk Unit is responsible for implementing the IT risk management framework for the bank, ensuring that the appropriate governance framework, policies, processes and technical capabilities are in place to manage all IT risks. important. The IT risk management policy, aligned with the operational risk management policy, complements the information security policy and the associated processes, objectives and procedures relevant to the bank's risk management and the improvement of the security of information. RCSA is used as one of the central mechanisms for IT risk identification and assessment, while the IT risk unit performs independent IT risk reviews in accordance with the established operational risk management process framework. The results of these independent IT risk assessments, along with audit findings, information security incident analysis, internal and external loss data, are also used to identify and assess IT risk. IT risk mitigation involves prioritizing, evaluating, and implementing appropriate risk mitigation controls or risk treatment techniques recommended in the risk identification and assessment process. The bank takes a multi-layered approach to embed controls into every layer of technology, including data, applications, devices, networks, etc. This ensures robust end-to-end protection while improving cyber threat detection, prevention, response and recovery controls. The bank is certified against the globally recognized de facto standard for Information Security Management Systems (ISMS): ISO/IEC 27001:2013 and the Payment Card Industry Data Security Standard (PCI DSS), the which focus on guaranteeing the confidentiality, integrity and availability of data focus data information. The ISMS is independently validated annually by external ISO 27001 ISMS auditors and PCI Council qualified security assessors. The bank continued to invest in information security by improving information security governance in line with CBSL guidance and increasing the focus on information and cyber security by implementing the Benchmark Security Standard (BSS) in throughout the branch network and at the headquarters. Initiatives taken in this regard are listed under Key Developments in 2020 on pages 115 and 116 of this report. Since risk management is highly dependent on an effective monitoring mechanism, the IT risk unit carries out continuous and independent monitoring of the bank's IT risk profile using a variety of tools and techniques, including indicators IT risk key (KIRI). Legal risk Legal risk is an integral part of operational risk and is defined as exposure to adverse effects resulting from incorrect contractual design, poor performance, lack of written agreements, or inadequate agreements. This includes, but is not limited to, the risk of reprimands, fines, penalties, or punitive damages resulting from regulatory actions and the costs of private settlements. The bank manages legal risks by ensuring that applicable regulations are fully taken into account in all relationships and contracts with individuals and institutions that do business with the bank, supported by the necessary documentation. The potential risk of non-compliance with rules and regulations is managed by establishing and operating an effective system to verify compliance of operations with relevant regulations. Compliance and Regulatory Risk Compliance and Regulatory Risk is the potential risk to the Bank resulting from non-compliance with applicable laws, rules and regulations and codes of conduct, which may result in regulatory fines, financial losses, business interruption and damage. to reputation. A compliance function that reports directly to the Board of Directors continually monitors the Bank's compliance with external and internal regulations. A comprehensive compliance policy defines how this risk is identified, monitored, and controlled by the bank in a structured manner. The bank's culture and code of ethics also play a key role in managing this risk. Strategic risk Strategic risk is related to strategic decisions and can manifest itself as the bank's inability to keep pace with changing market dynamics, resulting in loss of market share and failure to meet strategic objectives. The company's planning and budgeting process and critical assessment of its alignment with the bank's vision, mission, and risk appetite facilitate strategic risk management. The detailed qualitative ICAAP-based scorecard model is used to measure and monitor the bank's strategic risk. This scorecard-based approach takes into account a number of variables, including the size and evolution of the bank, the nature and complexity of its operations, and highlights areas that require attention to mitigate potential strategic risks.
133. As an organization that thrives on public trust, but faces many conflicting interests and conflicting objectives, aligning the bank's interests with those of the client is imperative to the bank's success and future viability. Unfair business practices, professional misconduct, ethical errors, inefficient business processes, bribery and corruption, non-compliance, governance weaknesses, etc. affect the trust of customers in the bank. Correct behavior with fair results for the client is closely linked to the culture, management structure and tone at the top of the bank. The bank adopts a customer-centric approach that includes accountability, compensation structures, compliance with laws, rules and regulations in spirit, culture of learning, transparency, disclosure, level agreements procedures and their follow-up, procedures for handling customer complaints and customer retention to maintain high standards of conduct and integrity to minimize conduct risk. Risks Related to Bribery and Corruption Bribery and corruption are illegal, dishonest, and damage a bank's reputation. Therefore, the Bank expects all of its employees not to give or accept bribes, kickbacks or kickbacks and not to engage in any form of corruption. The Bank has developed an Anti-Bribery and Anti-Corruption Policy that will be submitted to the Board for approval in March 2021. It will be available at www.combank.lk once approved by the Board. In addition, the bank has a whistleblower status and the ICAAP supports the regulatory review process and provides valuable information for assessing required capital under future business plans. Significantly integrates strategic alignment and risk management plans with the capital plan, with input from senior management, management committees, board committees and the board, and also takes into account the potential risk of insufficient capital under stress conditions. It also supports profit optimization through proactive decisions on exposures to both target and actual capital. Capital ratios The bank complies with its own and regulatory capital adequacy requirements. With a loyal shareholder base and profitable operations, the bank is also well positioned to meet longer-term capital needs to hedge its material risks and support business expansion as a National Systemically Important Bank (D-SIB). Basel III minimum capital requirements and buffers The Banking Law Decree No. 01 of 2016 introduced capital requirements for commercial banks licensed under Basel III from July 1, 2017 with specific deadlines to gradually increase the minimum capital ratios. capital to be fully implemented on January 1, 2019 that included a higher loss absorbency component for D-SIBs. However, as an extraordinary regulatory measure for licensed banks to support businesses and individuals affected by the COVID-19 outbreak, the CBSL allowed D-SIBs to reduce their capital conservation buffers (CCBs) by 100 basis points. . Below is a comparison of the Bank's position as of December 31, 2020 and the minimum capital requirement required by the CBSL as of January 1, 2019. This demonstrates the strength of the bank's capital and its ability to meet the stringent regulatory requirements. Table - 41 Regulatory minimum % HLA Total % % CET 1 7.0 (2019) 6.0 (2020) 1.5 8.5 (2019) 7.5 (2020) Total 12.5 (2019) 11.5 (2020) 1.5 14.0 (2019) 13.0 (2020) Target (Internal Requirement) % 2020 2019 % % >11 13,217 12,298 >15 16,819 16,146 Governance and Risk Management Capital Adequacy Framework and ICAAP In accordance with the Basel requirements and as required by the ICAAP framework, the Bank has used internal models of risk profile assessment and quantification to stress test risk factors and assess capital requirements to support them. Internal limits that are more stringent than regulatory requirements provide an early warning about capital adequacy. current and potential potential by measuring vulnerabilities by performing stress tests and scenario-based analysis. The ICAAP process also identifies gaps in the management of qualitative and quantitative aspects of reputational risk and strategic risk that are not covered by Pillar 1 of Basel III. Corporate Governance and Risk Management Carry out risk policies for accepting and/or offering gifts or other illegal rewards, collecting and borrowing funds/obtaining improper favors from customers and suppliers, holding a position as a director/as a partner/shareholder in companies private companies listed in the Code of Ethics and administrative circulars. By implementing the Code of Ethics and reaffirming its commitment to the tenth principle of the United Nations Global Compact, the bank expects all employees to not only fight corruption, but also demonstrate that they will not abuse the power of their position as employees for personal financial purposes. gain or non-financial gain, requesting or accepting gifts, endangering employees or the Bank. No Bank employee may offer bribes or other illegal rewards to obtain business for the Bank. Annual Report 2020 Reputational risk is the risk of an adverse impact on earnings, assets and liabilities, or brand value, as a result of adverse stakeholder perceptions of business practices, activities, and financial condition. from the bank. The bank recognizes that reputational risk is driven by a variety of other business risks related to the 'conduct' of the bank, all of which need to be actively managed. Additionally, the proliferation of social media has broadened the stakeholder base and expanded the sources of reputational risk. In this sense, reputational risk is largely managed through the systems and controls implemented for other types of risk such as credit, market, operational, etc. that are based on the Code of Ethics, Communication Policy and Business Ethics that prohibit unethical behavior. and encourage employees to live off the demands made. Likewise, during the year the detailed control panel available for the measurement and monitoring of reputational risk of the ICAAP was formalized as a policy framework for reputational risk management. Commercial Bank of Ceylon PLC Reputational risk * Although the CCB applicable to the bank is 2.5% as originally stated, with CBSL approval for D-SIBs to use part of the capital conservation buffer as a COVID relief measure -19, the rate applicable to the Bank as of December 31, 2020 was 1.5%. (See pages 331 and 332 in Appendix 3 for the detailed calculation of capital adequacy) 131
134. Governance and Risk Management Annual Governance and Risk Management Report 2020 Commercial Bank of Ceylon PLC The ICAAP helps the bank to regularly assess capital requirements for the next five years, develop capital increase plans based on this and submit them to the CBSL for review. As a result, despite the adverse operating environment, the implementation of IFRS 9 and the taxes that affected the Bank's internal capital generation capacity in 2019 and 2020, the Bank was able to ensure the availability of capital to finance its expansion plans and achieve greater loss absorption (HLA) Requirements demanded by the CBSL for D-SIBs. In particular, the issuance of up to $50 million in value shares to IFC through a private placement enabled the bank to increase its capital stock during the year. The Bank's “Basel Task Group” is comprised of members from a representative sample of business and support units to assess the adequacy of capital in accordance with the Bank's strategic direction. While the ICAAP serves as the basis for such an assessment, the Basel Task Force continually seeks improvements amidst a changing landscape at various borders to advise ALCO on the desired path forward, including disclosure of current capital requirements and futures, expected investment-based assessments and desirable capital levels, etc. As the Bank operates in a capital intensive business, it understands the importance of capital. The bank has access to a loyal base of shareholders who take the bank for the long term, as well as sustained profits over the years through a prudent dividend policy, etc. to improve your business day by day. The challenges associated with mobilizing capital from external sources are also considered, but not ruled out, as a sustainable option to strengthen capital in the long term. The bank is satisfied with the capital cushion available to support its growth plans/resist stressed market conditions. However, the bank never settles for today's comfort levels and believes in building the shareholder confidence the bank is known for through strong levels of capital buffers. Credit risk: Operational risk of asset quality downside The framework covers all major risks such as credit risk, credit concentration risk, operational risk, liquidity risk, interest rate risk Instead, the IRRBB using the EVE and EAR perspectives. The Bank assesses various degrees of stress levels, identified as low, moderate and severe in the stress testing policy. The resulting impact on capital is then carefully assessed. When stress tests indicate a deterioration of capital that has no impact on capital conservation policies, it is considered low risk, while a deterioration of up to 1% is considered medium risk. If the impact causes capital to fall below the legal minimum, that level would be considered a serious risk that would require immediate management attention to rectify the situation. Stress tests As an integral part of the ICAAP under Pillar II, the Bank regularly carried out stress tests for severe but plausible shocks on its main exposures to assess the sensitivity of the current and future risk profile in relation to risk appetite and its impact on the resilience of capital, funding, liquidity and earnings. It also supports strategic planning, the ICAAP, including capital management, liquidity management, setting risk appetite triggers and risk tolerance limits, risk mitigation through review and adjustment of limits, the limitation or reduction of exposures and their coverage, which facilitates the development of contingency plans or risk mitigation throughout the world. a variety of stress conditions that support communication with internal and external stakeholders. Impact on CAR at Mild, Moderate, and Severe Stress Levels: Details The Bank's Stress Testing Governance Framework establishes the responsibilities and approaches for stress testing activities conducted at the Bank, business division, and risk type level. The Bank uses a variety of stress testing techniques including scenario analysis, sensitivity analysis, and reverse stress testing to perform stress tests for various purposes. Stress testing is an effective communication tool for senior management, risk officers and managers, as well as supervisors and regulators, as it provides a broader view of all the risks the bank is taking in relation to its risk tolerance and strategy in hypothetical stress scenarios. . Stress test results are reported quarterly to EIRMC and BIRMC to enable appropriate and proactive decision making. Extracts of the stress test results are shown in Table 42. Table - 42 2020 Description 2019 Mild Moderate Severe Mild Moderate Severe % % % % % % % % % % % -0.14 -0.37 -0.72 -0.15 -0.38 -0.74 2. Annual average operating risk Losses in the last three years, whatever it is higher -0.09 -0.21 -0.43 -0.05 -0.13 -0.25 Percentage of FX shock on Bank and Maldives operations (gross positions on each book without clearing) - 0.10 -0.19 -0.45 -0.06 -0.13 -0.29 earning facilities over non-earning direct facilities for the entire portfolio Impact of ; 1. The top five operating losses in the last five years Foreign exchange risk 132
135. Moderately Difficult Mild Moderately Difficult% % % % % % 2. Renewal of loans beyond three months -0.07 -0.19 -0.39 -0.03 -0.11 -0.26 Evaluate the long-term impact of changes in the interest rate on the EVE of the Bank through changes in the economic conditions value of its assets and liabilities and evaluate the immediate impact of changes in interest rates on the 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 The Bank's risk management function is responsible for identifying, measuring, monitoring and reporting risks. To enhance the effectiveness of their role, the staff assigned to them receive periodic training, allowing them to develop and hone their skills. They are well supported by IT systems that have enabled data mining, analysis and modeling. Periodic and ad hoc reports on key risk indicators and risk matrices of the Bank and subsidiaries are prepared and reviewed by senior management, senior management and board committees and the Board of Directors, who are based on such reports. reports to assess risk and provide strategic guidance. . The reports provide information on aggregated risk measures across products, portfolios, property and regions in relation to agreed policy parameters and provide a clear representation of the risk profile and sensitivities of the risks assumed by the Bank and the Group. Basel III – Market discipline See Appendix 3 on pages 331 to 344 for the minimum disclosure requirements under Pillar III of Directive No. 01 of the Banking Law of 2016. See pages 343 and 344 in Appendix 3 to know the Disclosure of the D-SIB evaluation exercise in accordance with Banking Law Decree No. 10 of 2019. Risk Control and Management 1. Withdrawal of a percentage of the deposits of clients, banks and other banking institutions of the Bank in three month term Governance and Risk Management Interest Rate Risk – EAR and EVE (LKR) – Sri Lanka 2019 Minor Annual Report 2020 Liquidity Risk (LKR) – 2020 Description Commercial Bank of Ceylon PLC Details 133
136. 134 Commercial Bank of Ceylon PLC Annual Report 2020 Risk Governance and Management Risk Governance and Management
137. financial calendar– Independent Auditors Report 2020 and 2021 Financial Statement Highlights – Bank Accounts – Index Profit and Loss Account – 137 – 138 – 141 – 142 – 143 Annual Report 2020 Pages 135 Financials - 290 Reports Commercial Bank of Ceylon PLC The Financial Statements, including the Accounting Policies and accompanying notes, give a true and fair view of the Bank's performance, financial position, changes in equity and cash flows, as disclosed in the auditors' report . The financial statements comply with all applicable accounting standards and are free from material misstatement. Our auditors have issued their unqualified opinion on these financial statements as set forth in their "Independent Auditor's Report" to shareholders. of Changes in Equity – Bank – 150 Statement of Cash Flows – 154 Annex – 155 135
139. financial calendar– Dividend schedule 2020 and 2021 Final dividend of the previous year paid/payable 2020 2021 On July 06, 2020 On April 05, 2021 and April 23, 2021 First interim dividend of the year paid/payable in the fourth quarter of 2021 Note 01 * Second interim dividend of the year Paid/Payable Note 01 during the first quarter of 2022* March 30, 2021 Complementary dividend of the year to be proposed March 2022 April 5, 2021 and April 23, 2021** Dividend current year payable in April 2022* ** *Subject to Board Approval **Subject to Shareholder approval ***Subject to Board recommendation and Shareholder approval Note 01: The Bank did not pay any interim dividend for the year 2020 in accordance with Banking Law Directive No. 3 of 2020 dated May 13, 2020, the "Restrictions on Discretionary Payments by Authorized Banks" issued by the CBSL. Annual report and financial statements signed/to be signed For the year 2020 - Annual general meeting to be held For the year 2021 - For the year 2020 - For the year 2021 - On March 30, 2021 In February 2022 In March 2022 Presentation in Colombo Stock Exchange (CSE) (In reference to CSE Rule 7.4 and in accordance with the requirements of the Central Bank of Sri Lanka) Publication in newspapers (in accordance with Instruction Ref. No. 02/04/ 003/0401/001 of January 26, 2006 and Address Ref. No. 02 /04/003/0401/001 of February 21, 2006 of the Central Bank of Sri Lanka) Interim Financial Statements Schedule 2020 Filed in 2020 Published in /to be published on or before 2021 To be presented in or before English For the three months ended March 31 (unaudited) For the six months ended June 30 (audited) For the nine months ended September 30 (unaudited) For the year ended/ended December 31 (audited) Cing German 2021 Published in or before Tamil In all three languages ​​on May 14, 2020 May 13, 2021 May 22, 2020 May 29, 2020 May 29, 2020 May 31, 2021 August 17, 2020 August 21, 2021 August 21, 2020 August 28, 2020 August 28, 2020 August 31, 2021 November 12, 2020 February 24, 2021 Commercial Bank of Ceylon PLC Annual Report 2020 February 24, 2021 Financial Statements Annual General Meeting (AGM) Schedule November 15, 2021 November 20, 2020 November 26, 2020 November 27, 2020 November 30, 2021 February 28, 2022 March 31, 2021 March 31, 2021 March 31 2021 March 31, 2022 137
140. independent auditorsReport Ernst & Young Chartered Accountants 201 De Saram Place P.O. Box 101 Colombo 10 Sri Lanka Tel: +94 11 2463500 Fax Gen: +94 11 2697369 Tax: +94 11 5578180 eysl@lk.ey.com ey.com HMAJ/WDPL TO SHAREHOLDERS OF COMMERCIAL BANK OF CEYLON PLC Commercial Bank of Ceylon PLC Annual Report Financial Statements 2020 Report on Financial Statements Audit Opinion We have audited the financial statements of Commercial Bank of Ceylon PLC ("the Bank") and the consolidated financial statements of the Bank and its subsidiaries ("the Group") , which comprise the Balance Sheet as of December 31, 2020, the statement of income, the statement of income, other comprehensive income, the statement of changes in equity and the statement of cash flows for the year ended on that date and the notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statements of the Bank and the Group give a true and fair view of the financial position of the Bank and the Group as of December 31, 2020 and their financial performance and cash flows for the year then ended in accordance with the Sri Lankan accounting standards. Basis for opinion We conducted our audit in accordance with the Sri Lanka Auditing Standards (SLAuS). Our responsibilities under those standards are further described in the “Auditor's Responsibilities for the Audit of the Financial Statements” section of our audit report. We are independent of the Group in accordance with the Code of Ethics (Code of Ethics) issued by CA Sri Lanka and have complied with our other ethical obligations in accordance with the Code of Ethics. We believe that the audit evidence we have obtained provides a sufficient and appropriate basis for our audit opinion. We have fulfilled the responsibilities described in the “Auditor's Responsibilities in the Audit of the Financial Statements” section of our auditor's report, including with respect to these matters. Accordingly, our audit included performing procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the audit procedures performed to address the following matters, form the basis of our audit opinion on the accompanying financial statements. Key audit matters Key audit matters are those matters that, in our professional judgment, were most significant in our audit of the financial statements for the current period. These matters were addressed in the context of our audit of the annual financial statements as a whole, and in forming our opinion thereon, and we do not express 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 Client: G B Goudian ACMA T P M Ruberu FCMA FCCA A Ernst member firm and global youth limited 138
141. Key audit matter How our audit addressed the key audit matter, provision for accounts receivable from other customers. We have assessed the alignment of the Group's impairment calculations and underlying methodology with the requirements of IFRS 9, taking into account the impact of COVID-19 and related industry responses, based on the best information available to date. of our report. Our audit procedures included, among other things, the following: We evaluated the effectiveness of the design of controls, where relevant, using the estimation uncertainty associated with the calculations. Key areas of judgment, estimates, and significant assumptions used by management in assessing impairment included the following: the likely impact of COVID-19 and related industry responses (for example, government stimulus and coronavirus relief packages, debt moratorium granted to the group); z determine whether or not customer contracts have been materially modified as a result of the granting of such COVID-19 related stimulus and relief measures and the related impact on the amount of interest income recognized for loans and advances affected; and z forward-looking macroeconomic factors, including the development and inclusion of macroeconomic scenarios given the wide range of potential economic outcomes and the likely impacts of COVID-19, which may affect expected credit losses in the future. Bank's financial reporting process and related IT systems and controls The Bank uses various IT systems in its operations. The COVID-19 pandemic required the bank to adapt various operating processes and procedures, including changing relevant controls, to mitigate the resulting risks. – Evaluate the adequacy of the criteria used by management to determine if there is an indication of impairment; and – Evaluate the adequacy of the provisions made, paying special attention to the impact of COVID-19 on the highest risk industries, the strategic response measures taken, the values ​​of the guarantees and the value and timing of future cash flows. . For loans and loans that are collectively tested for impairment: – Evaluate the reasonableness of the assumptions and estimates used by management, including the reasonableness of the information and forward-looking scenarios; – Assessment, if applicable, of the database and data used by management to determine overlaps, taking into account the likely impact of the COVID-19 pandemic; and For loans and advances affected by government stimulus programs and debt moratorium measures granted: – Assess the reasonableness of the judgments, the reasonableness of the calculations, and the data used to determine whether or not customer contracts have been materially modified and the result thereof determine the accounting implications; and – assess the adequacy of interest income recognized for such affected loans and advances. z We have evaluated the adequacy of the disclosures in the related financial statements as set out in Notes 18, 34 and 68.1.3. Our procedures included, but were not limited to: z Understanding security monitoring procedures of IT systems relevant to financial reporting in light of increased remote access; z Understand and evaluate the design and operating effectiveness of key automated, IT-dependent and manual controls implemented by management over the generation of multiple system reports and the compilation of information required in the calculation of key information for disclosure of the financial statements; Accounting-related IT systems and controls were a key audit matter due to: z review of the source data of the reports used to generate key disclosures for z a changed work environment with further review of the underlying calculations and the adequacy of remote access classifications; z The Bank's financial information process depends to a large extent on the information coming from its IT systems; y Financial Statements z Scope of Assumptions, Judgments and 2020 Annual Report As described in Note 7.1.12, the provision for such financial assets measured at amortized cost is determined in accordance with Sri Lankan accounting standards z We have verified completeness and accuracy of the underlying data used in the calculations by agreeing the essential details of the source documents and the Accounting Standard - IFRS 9 Financial Instruments (IFRS 9). records. This was a key audit matter for the following reasons: We tested the underlying calculations. z Materiality of the provision recognized for loans 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 loans individually assessed for impairment: Independent auditor's report on the impairment of loans and loans to other clients, assessing the scope of supervision, review, and approval of the impairment policies by the Audit Committee of the Board of Directors and included management. Commercial Bank of Ceylon PLC Loans and advances of Rs 909,829 million (Note 34), net of impairment of Rs 52,030 million (Note 34) and represent 52% of the Group's total assets as of December 31, 2020. Accuracy and completeness; made by management; and z Evaluate management's general ledger reconciliation procedures, including cross-checking system reports and source data, where applicable. z Key information about the financial statements, which involves the use of a series of calculations based on the system: generated reports, comparisons and spreadsheets. 139
142. Other information contained in the 2020 Annual Report Other information consists of the information contained in the Annual Report, except for the financial statements and our opinion thereon. Management is responsible for the other information. Commercial Bank of Ceylon PLC Annual Report 2020 Financial Statements Independent Auditor's Report Our opinion on the financial statements does not cover the other information and we do not express any assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially Misstatement If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we have a duty to report that fact. We have nothing to report on this. Responsibilities of management and those charged with oversight of financial statements Management is responsible for the preparation of fair and fair financial statements in accordance with Sri Lankan accounting standards and for such internal controls as management deems necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as appropriate, matters relating to going concern and using the going concern basis of accounting, unless that the executive directors intend to liquidate the Group. or cease operations, or have no realistic alternative to doing so. Those responsible for corporate governance are in charge of supervising the accounting process of the bank and the group. Auditor's Responsibilities in the Audit of the Financial Statements Our objectives are to obtain reasonable assurance that the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an audit report containing our audit opinion. . Reasonable assurance is a high level of assurance, but it does not guarantee that an audit conducted in accordance with the SLAuS will always detect a material misstatement, if any. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users in preparing the basis for these financial statements. As part of an SLAuS compliance audit, we exercise professional judgment and maintain a critical attitude throughout the audit. We: z Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, plan and perform audit procedures in response to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for for our audit opinion. . The risk of not detecting a material misstatement resulting from fraud is greater than that of one, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. z Obtain an understanding of the internal control system relevant to the audit in order to plan audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the bank's internal control system and of the group. . z Evaluate the adequacy of the accounting policies used and the adequacy of management's accounting estimates and related disclosures. z Conclude on the adequacy of management's use of the going concern accounting principle and, based on the audit evidence obtained, whether there is a material uncertainty related to events or conditions that could cast significant doubt on the Group's ability to to continue as a going concern. If we conclude that a material uncertainty exists, we are required to comment in our audit report on the related disclosures in the financial statements or, if that disclosure is inappropriate, modify our audit opinion. We base our conclusions on the audit evidence obtained up to the date of our audit report. However, future events or conditions may cause the group of companies to cease to continue as a going concern. z Evaluate the overall presentation, structure and content of the financial statements, including disclosures, and whether the financial statements give a true and fair view of the underlying transactions and events. z We obtain sufficient and appropriate audit evidence on the accounting information of the companies or business activities of the group to express an opinion on the consolidated financial statements. We are responsible for directing, supervising and conducting the group audit. We are solely responsible for our audit opinion. We communicate with those charged with governance, among other things, about the planned scope and timing of the audit and significant audit findings, including significant internal control deficiencies that we identified during our audit. We also provide those charged with governance with a statement that we have complied with the ethical requirements set out in the Code of Ethics in relation to independence, and that we disclose to them all relationships and other matters that are reasonably believed to affect our independence. and, where appropriate, the corresponding guarantees. From the matters communicated to those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and, therefore, are the key audit matters. We describe these matters in our audit report unless legal or regulatory provisions prohibit public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be disclosed in our audit report because doing so is reasonably associated with serious consequences. calculated adverse effects would outweigh the public interest benefits of such communication. Report on other legal and regulatory requirements Pursuant to Section 163 (2) of the Companies Act No. 07 of 2007 we have obtained all the information and explanations necessary for the audit and, to the best of our knowledge and belief, the bank maintained the proper accounting records. The CA Sri Lanka membership number of the engagement partner responsible for signing this report is 1884. Chartered Accountants 24 Feb 2021 Colombo
143. Financial Statement Highlights– Net Bank Fee and Commission Income Chart – Rs 27 Billion Rs 1 Billion 150 50 12.5 120 40 10.0 0.68% 90 5.01% 30 20 5.0 30 10 2.5 0 0 2019 Net profit/(loss) from derecognition of financial assets 2020 chart - 29 2019 pre-tax earnings (10.04%) 7.5 60 0 2020 after-tax earnings chart - 30 Mn. Rs. RS BN RS BN 7,500 25 20 6,000 20 16 4,500 462.66% 5.25% 15 10 8 1,500 5 4 0 2019 2020 0 2019 2020 2019 2020 2019 2020 Graph - 31 (3.83.8% 3.83.8) 3 Amortized Financial Liabilities AMORTIZED Cost: Rs 34,000 crores Rs 0,000 Equities: Basic 0 2020 Chart: 35 2019 Interest Rate Margin % 20 4.0 12.0 16 3.2 9.6 (6.24%) 2, 4 2.4 2.4 (34 basis points) 7.2 8 1.6 4.8 4 0.8 2.4 0 0 2019 2020 2019 Financial intermediation margin Chart - Rs.36 12 20.19% 0 Report Annual 2020 2020 Financial Assets at Amortized Cost - Loans to Other Clients Chart - 33 Total Assets 2019 2020 0 Financial Statements Net Interest Income Chart - Rs.26 billion Chart 2020 - 37 Commercial Bank of Ceylon PLC Gross Income (146 basis points ) 2019 2020 141
144. annual accounts– Index Page No. Main Financial Statements Statement of Income 143 Statement of Income and Other Comprehensive Income 144 Balance Sheet 145 Statement of Changes in Equity – Group 146 Statement of Changes in Equity – Bank 150 Statement of Cash Flows 154 Financial Statements Notes to the Financial Statements Financial statements - General 1. Reporting entity 155 2. Basis of preparation 156 3 Financial risk management 160 4. Fair value measurement 163 5. Changes in accounting policies 6. Significant accounting policies - General 7. Policies Significant accounting policies - Recognition of assets and liabilities 8 Significant accounting policies: recognition of income and expenses Annual report 2020 Commercial Bank of Ceylon PLC 33 Financial assets at amortized cost: loans and advances to banks 201 34. Financial assets at amortized cost: loans and advances Flows to other customers 202 35. Financial assets at amortized cost – liabilities and other Financial instruments 206 36. Financial assets at fair value through other comprehensive income 207 37. Investments in subsidiaries 210 38. Investments in associates 212 39. Property, plant and equipment and right-of-use assets 214 40. Investment properties 225 41. Intangible assets 226 163 42. Deferred tax assets and liabilities 228 164 43. Other assets 230 165 Notes to the financial statements – Balance: Liabilities and equity 175 44. Liabilities to banks 9. Significant accounting and valuation methods – Expenses due to taxes 176 45. Derivative financial liabilities 231 10. Significant accounting policies – Cash flow statement 176 46. Financial liabilities at amortized cost – to depositors 231 11. Changes in accounting standards issued but not yet effective 47. Financial liabilities at amortized cost - Other loans 232 177 48. Current tax liabilities 232 49. Other liabilities 233 50. Liabilities with associated companies 239 Notes to Financial statements - Profit and loss account 230 12. Gross income 178 13. Interest margin 178 51. Subordinated debt 240 180 52. Capital stock 241 181 53. Share-based payment 241 14. Net commissions 15. Profit/(loss ) net from trading activities 16. Net gain/(loss) on derecognition of financial assets 181 54. Legal reserves 244 17. Other operating income 182 55. Retained earnings 245 18. Impairments and other losses 182 56. Other reserves 245 19. Personnel expenses 185 57. Minority partners 248 20. Amortization and amortization 185 21. Other operating expenses 186 Notes to the financial statements – Other information 22. Taxes on financial services 187 58. Liabilities and contingent commitments 248 23. Expense for income tax 187 59. Net asset value per common share 250 24. Earnings per share (EPS) 189 60. Lawsuits against the bank 250 25. Dividends on common shares 190 61. Maturity analysis – Group 251 Notes to the financial statements – Balance sheet: Assets 62. Business segments 253 63. Related party disclosures 255 26. Classification of financial assets and financial liabilities 190 64. Non-cash items included in income before taxes 260 27 Measurement of fair value 192 65. Change in operating assets 260 28. Cash and cash equivalents 196 66. Changes in operating liabilities 261 261 197 67. Operating leases 30. Bank loans 197 68. Review of financial risks 261 31. Derivative financial assets 198 69 Events after the balance sheet date 290 32. Affecting profit or loss Grouped Financial Assets - Measured at Fair Value 198 29. Balances with Central Banks 142 Page No.
145. GROUP BANK Profit and Loss Account 2020 Rs. '000 2019 Rs. '000 Veränderung % 2020 Rs. '000 2019 Rs. '000 Change % 178 151,966,413 150,741,129 0.81 149,711,481 148,706,284 0.68 13.1 178 124,087,713 129,287,743 (4.02) 122,330,386 127,779,540 (4.26) 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 76,729,488 67,686,649 13.36 74,940,298 66,017,944 13.52 18 182 21.419.532 11.331.523 89,03 21.483.698 11.061.466 94,22 55.309 , 956 56.355.126 (1,85) 53.456.600 54.956.478 (2,73) 4,05 14.563.999 14.082.659 3,42 depreciación y amortización 20 185 3,102,695 2,841,264 9.20 2,989,031 2,75,54 86,51 8,51 8,51 8,51 8,51 8,51 8,51 8,51,51 8,51 8,51 años. 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) 4,531,381 7,255,728 (37.55) 4,505,322 7,191,737 (37.35) 24,515,962 22,973,904 6.71 23,511,312 22,339,105 5,25 3.898 9.992 (60,99) 24.519.860 22.983.896 6,68 Menos: Impuestos sobre servicios financieros 22 187 Beneficio de explotación después de impuestos sobre servicios financieros Participación en los beneficios de la asociada, neto de impuestos 38,1 213 Gewinn vor Steuern Abzüglich: Ertragsteueraufwand 23 187 Beneficio del ejercicio 23,511,312 - - 22,339,105 5.25 7,433,063 5,563,500 33.60 7,137,823 5,314,138 34.32 17,086,797 17,420,396 (1.91) 16,373,489 17,024,967 (3.83). 373,489 17,024,967 (3.83) 146,847 157,137 (6.55) 17,086,797 17,420,396 (1.91) 16,373,489 17,024,967 (3,83) Zuzurechnender Gewinn: Anteilseignern der Bank Nicht beherrschende Anteile 57 248 Jahresgewinn – – – Ergebnis je Aktie Unverwässertes Ergebnis je Stammaktie (Rs.) 24, 1 189 15,70 16,41 (4,33) 15,18 16,19 (6,24) Verwässert Ergebnis je Stammaktie (Rs.) 24,1 189 15,70 16,41 (4,33) 15,18 16,19 (6,24) Geschäftsbericht 2020 19 Commercial Bank of Ceylon PLC Personalaufwand Jahresabschluss Abzüglich: Aufwendungen Die Erläuterungen auf den Seiten 155 bis 290 sind ein integraler Bestandteil davon Jahresabschluss. 143
146. CONSOLIDATED Statement of Income and Other Comprehensive Income For the year ended December 31, Note No. Profit for the year Bank 2020 '000 rupees 2020 rupees' 000 Change %17,086,797 17,420,396 (1.91) 16,373,489 17,024,967 (228.745) (57,336) (298.96) ) ( 223.034) (7) (2.910) (5) (6.990) 295.594) (65.354) (66.849) (8.018) (352.30) (287.668) (64.804) (343.90) (733.74) (64.629) (7.864) (721, 83 ) Change % Other comprehensive income after tax Items that will never be reclassified to income Net actuarial gains/(losses) on defined benefit plans Gains/(losses) on remeasurement of defined benefit liabilities/assets Less: Charge/(reversal) for deferred taxes on actuarial gains/(losses) 2,674,142 - - 2,574,858 - - Change in revaluation surplus/(deficit) 3,684,535 - - 3,585,430 - - Less: Deferred tax charge/(reversal) of revaluation surplus 1,010,393 - - 1,010,572 – – Net change in revaluation reserve 56.1 24 6 Net change in fair value of equity investments Change in Fair value of equity investments at fair value through other comprehensive income Commercial Bank of Ceylon PLC Annual Report 2020 Annual Financial Statements Less: Deferred tax charge/(rev 72,255 (26,547) 372.18 72,255 ( 26 547) ) 372.18 72,255 (26,547) 372.18 72,255 (26,547) 372.18 - - - - - 5,626 - - 5,626 - - Gain on sale of equity instruments 1,719 - - 1,719 - - Participation in other comprehensive income of associate 3,436 38,633 (92,116 ) –7 – (396,201) 250.61 439,883 – Items that are or may be reclassified to results Net gains/(losses) from translation of financial statements of foreign operations 56.4 247 (399,787) 210.03 (1,400,991) 3,196,970 (143.82) 1,537,042, 345) (65) 393.35) (4,026,616) (816,182) (393.35) 147,777 636.64 1,088,583 147,777 636.64 (62,391) (62.80) (62.80) (2.80) 1,660,081 2,693,505 (38.37) 1,406,172 2,651,305 (46.96) 18,746,878 20,113,901 (6,80) 17.779,661 19,676,272 (9,64) , 961,841 (7.05) 17,779,661 19,676,272 (9.64) 193,303 152,060 27.12 18,746,878 20,113,901 (6.80) NET GAINS/(LOSSES) ON INVESTMENT IN FINANCIAL ASSETS A RAIM VALUE WITH GLOF CHANGES IN GH OTHER OTHER GLOG. 82) Gains/(losses) at fair value incurred in the year, after taxes 1,537,097 3,865,752 (60.24 ) Gains/(losses) at fair value recognized in the profit and loss account Disposal account, after (4,026,616) (816,182) Fair value gains/(losses) recognized as impairment in the profit and loss account and in the profit and loss account, after tax 1,088,583 Cash flow hedges – part Effective changes in fair value, after taxes Other comprehensive income for the year, after taxes Total comprehensive income for the year 56.6 248 (64,139) (64,139) Attributable to: Bank shareholders Non-controlling interests Net income total for the year The notes on pages 155 to 290 are an integral part of these financial statements. 144 - Transfer of fair value gains/(losses) or/to Reclassification of fair value debt instruments to other comprehensive income at amortized cost, net of taxes - 17,779,661 - 19,676,272 - (9.64)
147. Balance Sheet Equity Share capital Legal reserves Retained earnings Other reserves Equity attributable to bank shareholders Non-controlling interests Total equity Total liabilities and equity Contingent liabilities and commitments Net asset value per common share(Rs.) 53.681.118 46.101.232 24.903.809 13.147.534 1.830.927 BANCO 2020 Rs. '000 2019 Rs. '000 Change %  (4.52) 150.23 (34.06) – 44.01 50,250,627 110,971,105 15,938,982 – 2,636,717 52,534,730 39,461,127 24,527,241 13,147,534 1,830,927 (4.35) 181.22 (35.02) – 44.01 Change % 28 29 30 196 197 197 31 198 51,255,030 115,358,732 16,421,867 – 2,636,717 32 33 198 201 35,189,471 779,705 21,468,033 757,787 63.92 2.89 35,189,471 779,705 21,468,033 757,787 63.92 2.89 34 202 909,829,172 893,919,311 1.78 896,845,453 884,645,744 1.38 35 206 302,059,529 107,059,021 182.14 292,727,566 101,144,819 189.41 36 37 38 39 40 41 42 43 207 210 212 214 225 226 228 230 278,716,794 197,825,017 – – 64,155 56,821 25,386,630 22,524,658 67,116 46,350 1,800,516 1,645,714 2,735,566 530,165 20,195,153 23,443,869 1,762,496,153 1,408,941,366 40.89 – 12.91 12.71 44.80 9.41 415.98 (13.86) 25.09 278,461,369 197,568,330 5,808,429 5,011,284 44,331 44,331 23,212,394 20,507,203 – – 1,232,863 1,080,010 2,499,860 294,059 19,619,149 23,322,247 1,736,218,021 1,387,345,406 40.94 15.91 – 13.19 – 14.15 750.12 ( 15.88) 25.15 4 4 45 230 231 46 47 48 42 49 50 51 231 232 232 228 233 239 240 88,248,056 53,807,425 1,501,262 1,495,317 91,411,522 51,117,342 1,286,616,399 1,068,982,587 54,555,933 23,248,893 6,991,005 5,197,188 403,846 416,458 33,572,283 30,775,884 – – 38,247,138 37,886,789 1,601,547,444 1,272,927,883 64.01 0.40 78.83 20.36 134.66 34.52 (3.03) 9.09 – 0.95 25.82 87,451,306 51,505,694 1,501,262 1,495,317 91,437,612 51,220,023 1,265,965,918 1,053,307,660 54,555,933 23,248,893 6,777,992 4,967,644 – – 33,037,669 30,496,709 97,015 54,292 38,247,138 37,886,789 1,579,071,845 1,254,183,021 69.79 0.40 78.52 20.19 134.66 36.44 – 8.33 78.69 0.95 25.90 52 54 55 56 241 244 245 245 57 248 52,187,747 40,916,958 9,285,233 8,387,701 8,124,261 5,182,185 89,595,571 79,937,405 159,192,812 134,424,249 1,755,897 1,589,234 160,948,709 136,013,483 1,762,496,153 1,408,941,366 27.55 10.70 56.77 12.08 18.43 10.49 18.33 25.09 52,187,747 40,916,958 9,024,065 8,205,391 7,596,260 5,144,433 88,338,104 78,895,603 157,146,176 133,16 2, 385 – – 157,146,176 133,162,385 1,736,218,021 1,387,345,406 27.55 9.98 47.66 11.97 18.01 – 18.01 25.15 58 59 248 250 730,561,685 136.42 580,961,807 130.83 Memorandum information Number of employees Number of customer service centres 25.75 4.27 728,711,698 134.67 579,999,273 129.60 5,057 5,062 287 287 25.64 3.91 Financial Statements Liabilities Due to Banken Derivative finanzielle Verbindlichkeiten In Pension gegebene Wertpapiere Finanzielle Verbindlichkeiten zu fortgeführten Anschaffungskosten – von Einlegern Finanzielle Verbindlichkeiten zu fortgeführten Anschaffungskosten – sonstige Kredite Laufende Steuerverbindlichkeiten Latente Steuerverbindlichkeiten Sonstige Verbindlichkeiten Aufgrund von Tochtergesellschaften Nachrangige Verbindlichkeiten Gesamtverbindlichkeiten Seite Nr. 2019 rupias '000 Geschäftsbericht 2020 Aktiva Zahlungsmittel und Zahlungsmitteläquivalente Guthaben bei Zentralbanken Platzierungen bei Banken Im Rahmen von Wiederverkaufsvereinbarungen erworbene Wertpapiere Derivative finanzielle Vermögenswerte Erfolgswirksam erfasste finanzielle Vermögenswerte – bewertet zum beizulegenden Zeitwert Finanzielle Vermögenswerte zu fortgeführten Anschaffungskosten – Forderungen an Kreditinstitute Finanzielle Vermögenswerte zu fortgeführten Anschaffungskosten – Kredite und Forderungen an andere Kunden Finanzielle Vermögenswerte zu fortgeführten Anschaffungskosten – Schulden und andere Finanzinstrumente Finanzielle Vermögenswerte, die erfolgsneutral zum beizulegenden Zeitwert bewertet werden Beteiligungen an Tochterunternehmen Beteiligungen an assoziierten Sachanlagen und Nutzungsrechten Beteiligung Immobilien Immaterielle Vermögenswerte Latente Steueransprüche Sonstige Vermögenswerte Gesamtvermögen Anmerkung 2020 Rs. '000 Commercial Bank of Ceylon PLC GROUP Zum 31. Dezember bilden die auf den Seiten 155 bis 290 erscheinenden Erläuterungen einen integralen Bestandteil dieses Jahresabschlusses. Bestätigung Dieser Jahresabschluss wurde in Übereinstimmung mit den Anforderungen des Companies Act Nr. 07 de enero de 2007 K D N Buddhipala Director financiero Der Vorstand ist für die Erstellung und Vorlage dieses Jahresabschlusses verantwortlich. Genehmigt und unterzeichnet für und im Namen des Vorstands. Richter K. Sripavan Prof. A. K. W. Jayawardane Vorsitzender Stellvertretender Vorsitzender S. Renganathan Geschäftsführer/ Director ejecutivo R. A. P. Rajapaksha Secretario de la empresa 24 de febrero de 2021 Colombo 145
148. Statement of Changes in Equity– Group Note Page number Balance as of December 31, 2018 Impact of the application of IFRS 16 Reversal of a deferred tax asset that has arisen in the compensation of straight-line lease liabilities Balance as of January 1, 2019 Financial statements Annual Report 2020 Commercial Bank of Ceylon PLC 146 Dividends to shareholders Second interim dividend 2018 2018 final cash dividend 2018 final dividend fulfilled in the form of issue and allotment of new shares Unclaimed dividend received/(dividend paid) in relation with prior years First interim dividend of 2019 Participation- based payment transactions Gain due to change of ownership Movement due to change of ownership Acquisition of subsidiary with non-controlling interest Reclassifications during the year Total transactions with shareholders Balance as of December 31, 2019 Legal Reserve Fund Retained Earnings Rs. Rs. '000. Rs. '000. Thousands 39,147,882 7,444,178 4,949,955 – – – – 39,147,882 Comprehensive income 2019 Net income Other comprehensive income, after tax Net actuarial gain/(loss) on defined benefit plans Share of other comprehensive income of associate, after tax Net gains/(losses) from fair value on revaluation of financial assets to fair value through other comprehensive income Net gains/(losses) on translation of financial statements of foreign operations Cash flow hedges: effective portion of changes in fair value, after tax Total comprehensive income for 2019 Transactions with owners recognized directly in equity, contributions and distributions to owners Issuance of voting common shares under stock option plans for employees Transfer of transactions with share-based payments Transfer of ac expenses Expired ESOP (after taxes) Share capital 52,241 52,241 55 and 56.5 245 and 247 190 (57,627) 4,892,328 – – 17,263,259 – – (57,400) – – (57,400) – – – – – – – – – – – – – – 30,128 – 17,205,859 - - - - - - - 88,913 - (6,596,511) - - (3,032,869) - - - 1,738,948 25 7,444,178 (57,627) 1,738,948 - - (2,022,031) 52 521,031 (71,624) - 17 182 182). to 248 - - - 943,523 (10,413,523) 1,769,076 943,523 (16,916,002) 40,916,958 8,387,720
149. Other reserves 7.819,131 (1,386,355) Reserve of shares for employees in general Reserve of non-controlling capital participation option of shareholders 000 rs. – (391,060) 24,019 – (62,391) 57,650,003 591,984 (57,627) (57,627) 119,340,222 1,198,981 120,539,203 – – 17,263,259 157,137 17,420,396 - - 2,698,582 (5,077) 2,693,505 - - - - - (57,400) 64 (57,336) (942) - - - - 38,633 - 38,633 - - - - 3,170,800 - 3,170,800 (616.04)1, - - (391) (616.04)1, - - (391) - - - (391) - - (62,391) - (62,391) - - 19,961,841 30,128 3,170,800 - - - - 39,575 3,157,052 Total equity 3,169,858 (391,060) - (391,060) 152,060 (62,391) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (4,857,563) - - - - - - (3,032,869) - - - - - - - - - - - - - - - - - - (350) 22 (328) - - - - - - (1,541,260) (1,822) (1,543,082) - - - - - - - - - - - - 1 4,498 (30,300) (20,921) ( 123,490) – (34,577) – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 9,470,000 – - - 9,470,000 (123,490) (4,877,814) 238,193 (4,639,621) 67,120,003 468,494 134,424,249 1,589,234 136,013,483 (20,921) 7,837,785 1,783,503 2,765,992 (38,37) 3,188) (283,084) 212,881 – Statement of Changes in Equity – Group Rs. '000 Hedge reserve Financial statements Rs. '000 Currency Conversion Reserve Rs. 1000 Annual report 2020 Fair value reserve – 212,881 – Commercial Bank of Ceylon PLC Revaluation reserve 147
150. Statement of Changes in Equity– Group (cont.) Commercial Bank of Ceylon PLC Annual report 2020 Financial statements Statement of changes in equity – Group Note 148 Comprehensive income for 2020 Net income Other comprehensive income after tax Net actuarial gains/(losses) on defined benefit plans Gain on disposal of investments in equity instruments Share of other comprehensive income of the associate, after tax Net change in revaluation surplus Net fair value gains/(losses) on revaluation of financial assets at fair value through other Comprehensive income Net gains/(losses) on translation of financial statements of foreign operations Cash flow hedges – Effective portion of changes in fair value, after tax Total income for the year 2020 Page No. Capital reported Reserve legal Retained earnings Rs. '000 Rs. '000 Rs. (226,737) – 56.1 246 1,719 – – – – – – – – – – – – – – – – – – 16,714,932 Transactions of owners recognized directly in capital, contributions and distributions to owners Product of issuance of voting common shares IFC Parties (private placement) 52,241 – – Issuance of voting common shares under employee stock option plans Transfer of stock-based compensation transactions Transfer of cost of shares ESOP confiscated (net taxes) 52,241 – – – 52,241 – – – 55 and 56.5 245 & 247 - - 105,980 - (5,137,434) - - (3,082,520) - - Dividends to shareholders Second interim dividend of 2019 Complementary dividend in dividend of 2019 Complementary dividend of 2019 paid in the form of issuance and allocation of new shares Unclaimed dividend received / (dividend paid) with respect to previous years First interim dividend of the year 2020 Transactions co n share-based payments Movement due to change of owner Transfers during the year Tr Total shares of shareholders Balance as of December 31 2,020 9,215,775 2,055,014 25 52 56.5 190 241 247 54 to 56 244 to 248 The notes from pages 155 to 290 are an integral part of these financial statements. 2,055,014 - - (2,055,014) - - 100 - - - - - - - - - 6,130 897,532 (8,747,532) 11,270,789 897,532 (13,772,856) 52,187,747 9,285,233 8,124,261
151. Other reserves- 2,662,469 - (1,319,619) - Rs. 559,932 - (64,139) Employee General Reserve Option Reserve Rs. '000 Rs. 16,939,950 146,847 17,086,797 - - - 1,613,625 46,456 1,660,081 (2.28) (224) (224) (224) (224) (228) (228) (228) (228) (228) (228) (228) - - - - - 1,719 - - -9 -2, -4 (1,323,055) – – 2,662,469 – 3,436 – (1,323,055) – – – – 2,662,469 (1,319,619) 559,932 – 559,932 Total equity – – 559,932 (64,639) –3 (1,319) ) (64,139) – – 18,553,575 9,215,775 11,673 – 36,791 – 193,303 3,436 2,674,142 (1,323,055) 596,723 (64,139) – – –7,746.8 – –7,746.8 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – (3,082,420) - - - - - - (3,082,520) - - - - - - - - - - - - - - - - - - - 100 - - - - - - - - - - 4,514 - - – – – – – 7.850.000 4.514 – – – 7.850.000 (34,991) 6,214,988 (26,640) 6,188,348 74,970,003 433,503 159,192,812 1,755,897 160,948,709 10,504,768 463,884 3,325,924 (102,511) – (147,194) – 112,203 – – (41.214 ) - 112,203 10,644 - - 1,719 - (15,996) - (13,620) - 24 (2,400) - (10,644) - 9,215,775 (41,214) (3,098,416) (3,082,520) (13.6 20) - 124 (2,400, 20 -1 Statement of Changes in Equity and – Group Rs. '000 Hedge reserve Financial statements Rs. '000 Conversion reserve of Rs. '000 Annual Report 2020 Market Value Reserve Commercial Bank of Ceylon PLC Revaluation Reserve 149
152. Statement of Changes in Equity– Note page number Balance as of December 31, 2018 Impact due to implementation of IFRS 16 State Capital Statutory Reserve Fund Retained earnings Rs 000 Rs 000 incurred in lease settlement liabilities - as of January 1, 2019 39 147 882 - - 7 354 143 ( 57,627) (57,627) 5,005,449 Total19 Net Profit 2 for the Year - Commercial Bank of Ceylon PLC Annual Report 2020 Financial Statements Other Result, after tax 150 – 17,024,967 – – (56,940) Gains/(loss) Net actuarial changes in defined benefit plans – – (56,940) Realized gains/(losses) on sale of equity interests – – – Net change in revaluation surplus – – – Net fair value gains/(losses) on revaluation of assets financial statements at fair value through other comprehensive income – – – Net to gains/(losses) from translation of financial statements of foreign operations – – – Cash flow hedges effective – effective portion of changes in fair value, after taxes – – – – – Total comprehensive income for 2019 16,968,027 Transactions with owners, Recognizes ect in equity, contributions and distributions to owners Issuance of common shares with voting rights under of employee stock option plans 52,241 Transfer of share-based payment transactions 52,241 Transfer of the cost of expired ESOP shares (after tax) 55 and 56.5 245 and 247 Dividends to shareholders 30,128 - - - - - - - 88,913 - (6,596,708) - (3,032,869) - (2,022,032) 1,738,948 Second interim dividend for the year 2018 25 190 Complementary dividend for the year 2018 in the form of issue and allocation of new shares 52,241 - - (547 ) 25,190 - - (1,541,260) Share-based payment transactions 56.5 247 - - Transfers during the year 54 to 56 244 to 248 Related unclaimed dividend/(dividend paid) related to previous years First interim dividend of 2019 Total transactions with shareholders as of December 31, 2019 - 1,738,948 - - 851,248 (10,321,248) 1,769,076 851,248 (16,829,043) 40,916,958 8,205 ,1441.43 5, 3
153. Other reserves 70.088 054 - - 7 088 054 - - (1 384 982) - - (1 384 982) - Reserva de opción de compra de acciones para empleados Patrimonio total Rs. '000 Rs. '000 rupias. - - - - - - - 3,170,423 - - - - - - 3,170,423 (399,787) - (399,787) (62,391) - - 3,170,423 (399,787) - - - 3,170,423 Reserva general - - ( 399,787) (62,391) - - (62,391) (62,391) - - 19,676,272 30,128 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (4,857,760) - - - - - - (3,032,869) - - - - - - (283,084 ) - - - - - - (547) - - - - - - (1,541,260) - - - - - - - - - - 9,470,000 - - - - 9.470,000 (123.490) (4.862.209) 67.120.003 468.494 133.162.385 7.088.054 1. 123.490) - - (34,577) - - Equalal change calculation - Bank RS. '000 Reserva de Cobertura Ann.' reserva de revalorización 151
154. Statement of Changes in Equity– Bank (cont.) Note Page No. Share Capital Legal Reserve Fund Retained Earnings Rs. '000 Rs. Rs '000 ) 1,719 Commercial Bank of Ceylon PLC Annual report 2020 Financial statements Statement of changes in equity – Bank Actuarial gains/(losses) ) on defined benefit plans, net 152 Gain on disposal of investments in equity instruments – – – – – Net fair value gains/(losses) from revaluation of financial assets at fair value through other comprehensive income – – – Net gains/(losses) from translation of financial statements of foreign operations – – – Flow hedges of cash – effective portion of changes in fair value, after taxes – – – – Net change in revaluation reserve 56.1 246 Total result for the year 2020 – 16,152,169 Mar Transactions with owners recognized directly in equity, contributions and distributions to owners Proceeds from issuance of voting common shares to IFC parties (private placement) 52,241 Issuance of Voting common shares under employee stock option plans 52,241 Transfer of share-based payment transactions 52,241 Transfer of cost of forfeited ESOP shares (after tax) 55 and 56.5,245 and 247 Dividends to shareholders 9,215,775 - - - - - - - - - 105,980 - (5,137,648) - (3,082,520 ) - (2,055,014) - - (114) - - - 2,055,014 Second interim dividend of the year 2019 25,190 Complementary dividend for the year 2019 in the form of issuance and allocation of new shares 52,241 Transactions with share-based payments 56.5,247 Extension of the year 54 to 56,244 to 248 Unclaimed dividend recovery/(dividend paid) in relation to years – 2,055,014 818,674 (8,668,674) Total operations with shareholders 11,270,789 818,674 (13.7 00,342) Balance as of December 31, 2020 52,187,747 9,024,065 7,596,260 The notes on pages 155 to 290 form an integral part of these states financial. –
155. – 2,574,858 – (1,323,110) – 439,883 General Reserve Employee Stock Option Reserve Total Equity Rs. '000 Rs. '000 Rs. thousands of thousands - (64,139) - - 16,373,489 - - 1,406,172 (223,039) - - - - - - - - - - - - - 1,719 - - - - - 2,574,858 - - - - (1,323,110 ) – – – 439,883 (64,139) ) – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – (3082634) – – – – – – (3082520) – – – – – – – – – – - - - - - - - - - - - 7,850,000 - - - - 7,850,000 (34,991) 6,204,130 74,970,003 433,503 157,146,176 9,662,912 462.331 2,911,866 (102,511) (42,192) -311 (147,192) '000 Annual Report of the Reserve 2020 RES reserve. Equity - Bank Other Reserves Revaluation Reserve 153
156. CONSOLIDATED Statement of Cash Flows For the year ended December 31'000 2019 Rs.' 000 2020 Rs. '000 2019 Rs.' 000 24,519,860 22,983,896 23,511,312 22,339,105 Cash flows from operating activities earnings before income tax adjustments: non-cash items included before tax 64 260 24,764,927 14,014,272 Income tax adjustments: 45,450 years in earnings before tax 64 260 24,764,927 14,014,272 Ajustes de impuestos sobre la renta: 45,450 años en las ganancias antes del impuesto Activos operativos 65 260 (374,761,711) (84,218,375) (369,030,667) (74,749,286) Veränderung der BetriBlichen Verbindlichkeiten 66 261 325.708.382 69.879.669 322.115.757 65.515.23315.2733315.27315.2515.2515. (5,820) (19,731) Share of associate's profits, after tax 38.1 213 (3,892) (nd9.9) Income from subsidiaries 17 182 Interest expense on subordinated debt 13.2 179 3,756,921 3,848,979 3,756,921 3,848 .979 Net unrealized gain/(loss) on translation of financial statements of foreign operations 56.4 247 596 723 (396 201) 439 873 (39) due to change of ownership 18.12 48 232 Gezah Current benefit plans defined Financial statements Income taxes paid Net cash from/(in) operating activities - - - - - (98,200) - (7,958) - (85,397) (14,498) (673,106) (198,799) (670,487) (194,728) ( 7,748,870) (8,301,839) (7,428,411) (8,087,930) (3,846,592) 17,581,879 (2,699,388) 21,865,986 (1,159,712 ) (1,372,832) (1,106,641) (1,307,241 purchase) (1,372,832) to 352 to 352 218 Purchase of investment property 40 225 Proceeds from sale of property, plant and equipment (41) - Annual Report 2020 24,189 Proceeds for change of ownership ity - 21,503 Commercial Bank of Ceylon PLC 8,901 Purchase of financial assets Acquisition of subsidiary, net of cash acquired - (91,716) (300,000) Proceeds from sale and maturity of financial assets Purchase of intangible assets Dividends received from investments in subsidiaries 2,368,509 41.1 & 41.2 227 & 228 17 (460,053) - 182 Net cash of/(used in) INVESTMENT ACTIVITIES ATIES 457,604 (95,031) 3,428,080 (415,088) - 1,499,105 - 2,829 (300,000) 2,368,509 (409,322) - (1,125,000) 98,200) .0 25 (95,031) 3,428). Cash flow from financing activities Proceeds from issuance of voting common shares under employee stock option plans 52,241 Proceeds from issuance of voting common shares to IFC parties (private placement) 52,241 – 9,215,775 30,128 – – 9,215,775 30,128 – Interest paid on subordinated accounts payable (3,802,023) (3,873,107) (3,802,023) (3,873,107) Payment Lease Passive/Prepayment Right of Use (1,354,902) (1,049,446) (1,049,446) Dividends paid to minority interests 57 248 An Dividends paid to Bank shareholders Net cash from/(in) financing activities (15,996) (4,988) (3,082,420 ) (4,857,563) 960,434 Net increase/(decrease) in cash and cash equivalents (2,428,554) Cash and cash Cash and cash equivalents as of January 1, Gross cash and cash equivalents as of December 31 28,196 Less : impairment loss 28.1 196 Cash and cash equivalents It is cash according to Balance 28 196 (9,754,534) 9,326, 450 - (3,082,634) 884,244 (2,286,569) - (4,857,70,707,70) (9,866,079) 13.001.548 53.6825 44,360,375 52,538,538,889 51,689 53,682 51,68. 50.2540.437 (3.241) 51.255.030 Notes 155 ON PAGE. 154 (926) (5,707) 53,681,118 (3,241) 50,250,627 (5,707) 52,534,730
157. Notes to the financial statements 1. Reporting Entity The Bank's common shares (both voting and non-voting common shares) have a primary listing on the CSE. The Bank's unsecured subordinated debt is also listed on the CSE. 1.1 Company Information Commercial Bank of Ceylon PLC (the "Bank") is a public company listed on the Colombo Stock Exchange (CSE), incorporated on June 25, 1969 under Companies Ordinance No. 51 of 1938 and domiciled in Sri Lanka. It is an authorized commercial bank regulated by Banking Law No. 30 of 1988 and its amendments. The bank was re-registered on 23 January 2008 under the Companies Act No 07 of 2007 under company registration number PQ 116. The registered office of the Bank is at No. 21, Commercial House, Sir Razik Fareed Mawatha , Colombo 01, Sri Lanka. The workforce of the Group and the Bank is as follows: 2020 2019 Group 5,693 5,656 Bank 5,057 5,062 As of December 31 1.2 Consolidated financial statements The consolidated financial statements for the year ended December 31, 2020 include the Bank (parent company) and its subsidiaries (referred to collectively as the “Group” and individually as a “Group Company”) and the Group's interest in its associate. The bank does not have an identifiable parent company. The bank is the ultimate parent company of the group. Information about the company can be found on the inside back cover of this annual report. 1.3 Main Business, Nature of the Group's Business and Bank Ownership of its Subsidiaries and Associates Figure – 25 100% 100% 2019 – 100% 2019 – 90% 90% 2019 – 100% 100% Listed Local Subsidiaries 100% Commercial Insurance Brokers ( Pvt) Limited. 60% 2019 – 58% 60% Equity Investments Lanka Limited 22.92% 2019 – 22.92% 22.92% Unlisted Unlisted Commercial Bank of Ceylon PLC Local Associate Overseas Subsidiaries Unlisted 100% Commex Sri Lanka S.R.L. (Italy) 55% Commercial Bank of Maldives Private Limited (Maldives) 100% Annual Report 2020 90% CBC Finance Limited CBC Tech Solutions Ltd. Commercial Bank of Ceylon PLC Commercial Development Company PLC Financial Statements Group Structure CBC Myanmar Microfinance Company Limited (Myanmar ) 100% 55% 100% 2019 – 100% 2019 – 55% 2019 – 100% 1 Direct investments In 2020, the bank acquired a 20% share in Commercial Insurance Brokers (Private) Limited from the Bank's subsidiary, Commercial Development Company PLC (which had a 20% interest in Commercial Insurance Brokers (Private) Limited) for a purchase price of Rs. -) after obtaining the necessary approvals from the Boards of Directors of the Bank and Corporación de Fomento Comercial PLC. The Bank has also received approval from the Central Bank of Sri Lanka (CBSL) for this share purchase. This acquisition increased the Bank's interest in Commercial Insurance Brokers (Private) Limited from 40% as of December 31, 2019 to 60%. 155
158. Main business activities and type of business of the group Table– 43 Principal business activities of the company Commercial Bank of Ceylon PLC Banking and related activities, such as deposit taking, retail banking, trade financing, offshore banking, RFC and NRFC operations, travel-related services, corporate and personal lending, syndicated financing, project financing, bank development, leasing and installment sales, rural loans, issuance of local and international credit and debit cards, Internet banking, mobile banking, money transfer services, government securities trading and treasury related products , payroll transfer package, precious metals trading, export and domestic factoring, pledging, margin operations, digital banking services, Bancassurance and Islamic Banking products and services, etc. Commercial Bank of Ceylon PLC Annual Report 2020 Financial Statements Notes to Financial Statements Local Subsidiaries Commercial Development Company PLC (CDC) Real Estate Dev Underwriting, Related Ancillary Services and Provision of Labor for Various Support Services Non-Business Related Transactions provision of basic banking services to clients of the Bank (parent company). CBC Tech Solutions Limited Provide information and communication technology (ICT) related products, services and solutions to the business sector. CBC Finance Limited Organization of leasing, hire purchase, mortgage and other credit facilities and acceptance of deposits. Commercial Insurance Brokers (Pvt) Limited (CIB) Provides professional services and manages all insurance portfolios of individuals as well as many leading and reputable organizations in Sri Lanka engaged in various business activities. Foreign subsidiaries Commex Sri Lanka S.R.L. (Commex) Act as agent of the bank (parent company) to open accounts, provide money transfer services, issue and collect foreign currency and traveler's checks, obtain applications for credit facilities and process ATM cards, etc. Commercial Bank of Maldives Private Limited (CBM) Offering a full range of banking and related financial services. CBC Myanmar Microfinance Company Limited Provides microfinance services to the people of Myanmar. The company also offers savings, business and life development services to clients who take a credit-plus approach. Local Associate Equity Investments Lanka Limited 2. Basis of Accounting 2.1 Declaration of Conformity The consolidated financial statements of the Group and the individual financial statements of the Bank have been prepared and presented in accordance with the Sri Lanka Financial Reporting Standards (SLFRS and LKAS). established by the Sri Lanka Institute of Chartered Accountants (CA Sri Lanka) and in accordance with the requirements of the Companies Act and the Banking Act and provide appropriate disclosures under the CSE Listing Rules. With the exception of the information on cash flows, these financial statements have been prepared using accrual accounting. These SLFRS and LKAS are available on the CA Sri Lanka website: www.casrilanka.com Presentation of Financial Statements. 156 Provision of Investment Services, Venture Capital and Venture Capital Management The detail of the Group's significant accounting policies used during the year are detailed in notes 6 to 10 on pages 164 to 176. The formats used in the preparation and presentation of the financial statements and breakdowns The information contained therein is also consistent with that required by the CBSL in Circular no. 02 of 2019 dated January 18, 2019 on "Publication of Annual and Quarterly Financial Statements and Other Disclosures by Authorized Banks". The Bank also publishes annual and quarterly financial information and other disclosures in the annual report, in the press and on the website in accordance with section 4.2 of the aforementioned Circular. 2.2 Responsibility for the Financial Statements The Board of Directors of the Bank is responsible for the preparation and presentation of the financial statements of the Group and the Bank in accordance with the provisions of the Companies Law No. 07 of 2007 and its amendments (Companies Law). and Sri Lanka Accounting Standards. The Directors acknowledge their responsibility for the financial statements as established in the "Annual Report of the Directors", the "Declaration of Responsibility of the Directors" and the Statement of Accounts on pages 3, 107 and 145 respectively. These financial statements comprise the following components: z an income statement and an income statement and other comprehensive income statement, which provide information on the financial performance of the Group and the Bank for the year under review. See pages 143 and 144; z A Statement of Financial Position (SOFP) with information on the financial situation of the Group and the Bank, see page 145; the end of the year. z a statement of changes in equity showing all changes in the Group's equity during the year and pages 146 to 153; Bank.
159. 2.3 Approval of the Board of Directors of the Financial Statements The financial statements of the Group and the Bank for the year ended December 31, 2020 (including comparative figures for 2019) have been approved by the Board of Directors in accordance with the resolution of the Board of Directors and authorized for issuance on February 24, 2021 (The financial statements of the Group and the Bank for the year ended December 31, 2019 were approved by the Board of Directors on February 20, 2020 and authorized for issuance). 2.4 Basis of Valuation The Group's financial statements have been prepared on the historical cost basis, except for the following material items, which are disclosed in the SOFP. In addition, management is not aware of any significant uncertainties that could cast significant doubt on the Group's ability to continue as a going concern. Therefore, the Group's financial statements continue to be prepared on a going concern basis. The COVID-19 outbreak has caused disruptions to business and economic activity and uncertainty in the global and local economy. Therefore, in assessing the existence of a material uncertainty, management has considered the existing and expected impact of the pandemic on the Group's activities based on all available information about the future obtained after the balance sheet date until the Date the financial statements are issued. prepared becomes. Following the outbreak of COVID-19 in Sri Lanka, the Group has strictly followed CBSL and government guidelines and instructions in conducting its business activities. Measurement Base Table – 44 Measurement Base Points Note N°/s Page/s Financial instruments at fair value through profit or loss including derivative financial instruments Fair Value 31, 32 and 45 198 and 231 Financial assets at fair value through other comprehensive income Fair Value 36 207 Land and buildings At the acquisition date at cost and subsequently at revalued amounts that reflect fair values ​​at the revaluation date. 39 214 Investment properties Measured at cost at the time of acquisition and at fair value thereafter. 40 225 Defined benefit obligation The net liability for defined benefit obligations is recognized as the present value of the defined benefit obligation, less total net plan assets, plus unrecognized actuarial gains, less service cost unrecognized past and unrecognized actuarial losses. 49,233 Grant date fair value 53 Equity-settled share-based payment arrangements In making this assessment, management has considered the potential adverse impact that the COVID-19 pandemic could have on operations of the group. However, considering a variety of factors, including a history of profitable operations, a strong liquidity position and stable external funding sources, a diversified credit profile, and initiatives taken by the Bank to strengthen risk supervision at the borrower level , management is satisfied that the going concern basis is adequate. 2.6 Functional and presentation currency The items included in these financial statements are valued using the currency of the main economic environment in which the Bank operates (functional currency). Each group company determines its own functional currency and the items included in the financial statements of these companies are valued using said functional currency. There were no changes in the Group's functional or presentation currency in the reporting year. These financial statements are presented in Sri Lankan rupees, which is the functional and presentation currency of the Group. 241 The information presented in US dollars in the “Supplementary Information” section on pages 358 and 359 is not part of the financial statements and is provided solely for the information of stakeholders. 2.7 Presentation of Financial Statements The Group's assets and liabilities presented in the SOFP are grouped by nature and presented in an order that reflects their relative pattern of liquidity and maturity. Notes to the financial statements showing significant accounting policies and other explanatory information. See pages 155 to 290. Operation. In addition, the Bank has granted aid to affected companies and individuals in accordance with the instructions of the CBSL. These relief measures include deferring payment terms for lines of credit, offering preferential interest rates on eligible credit products (debt moratorium), and waiving certain fees and charges. Financial Statements z Notes to Financial Statements 2.5 Basis of going concern Management has assessed its ability to continue as a going concern and is satisfied that it has the resources to continue in business for the foreseeable future. Annual Report 2020 Information to users on the ability of the Group and the Bank to generate cash and cash equivalents and the use of See page 154; these cash flows. Commercial Bank of Ceylon PLC z a statement of cash flows provided no adjustments have been made for inflationary factors affecting the financial statements. An analysis of recovery or liquidation within 12 months and more than 12 months from the reporting date is presented in note 61 on pages 251-253. 2 157
160. Commercial Bank of Ceylon PLC Annual Report 2020 Financial Statements Notes to the Financial Statements 2.8 Rounding Amounts in the financial statements have been rounded to the nearest thousand rupees unless otherwise indicated as permitted by the Sri Lanka Accounting Standard – IAS 1 “Presentation of Financial Statements” (IAS 1). 2.9 Offsetting Financial assets and financial liabilities are offset and the net amount is reported in the SOFP only when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle them net or to realize the assets and settle the liabilities . simultaneously. Income and expenses are not offset in the Profit and Loss Account unless required or permitted by an accounting standard or interpretation (issued by the IFRS Interpretations Committee and the Standards Interpretations Committee) and specifically disclosed in the IFRS Interpretations Committee. Significant Accounting Policies of the Bank. 2.10 Materiality and aggregation Each material class of similar items is presented separately in the financial statements. Items of a different nature or function are presented separately unless they are immaterial under IAS 1 and the amendments to IAS 1 on the "Disclosure Initiative" effective January 1, 2016. The notes to the financial statements they are presented in a systematic manner that ensures the comprehensibility and comparability of the financial statements of the Group and the Bank. The understandability of the annual financial statements is not affected by the fact that essential information is obscured by immaterial information or that essential elements of different types or functions are combined. 2.11 Comparative Information Comparative information, including quantitative, illustrative and descriptive information, is disclosed in relation to the prior period in the financial statements to enhance understanding of the current period financial statements and improve comparability between periods. Where appropriate, the presentation and structure of the annual financial statements for the previous year have been adjusted to improve presentation and comparability with those of the current year. 2.12 Use of significant accounting judgments, assumptions and estimates In preparing the Group's financial statements in accordance with IFRS and IAS, management has made judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities , profits and expenses . Actual results could differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Changes in accounting estimates are recognized prospectively. The Group has considered the impact of COVID-19 in the preparation of the financial statements in accordance with the circulars and guidelines issued by CBSL and CA Sri Lanka. While the specific areas of assessment may not change, due to the evolving nature of the pandemic and limited recent experience of the economic and financial impact of such an event, the impact of COVID-19 has prompted more assessments in these areas. . Additionally, changes were made to the estimates in the measurement of the Group's assets. The significant areas of judgment, assumptions and estimation uncertainty in the application of accounting policies that have the greatest impact on the amounts reported in the Group's financial statements are the following: A. Significant accounting judgments Information about judgments in the application of policies Accounting factors that have the greatest impact The changes that affect the amounts recognized in these financial statements are included in Notes 2.12.1 and 2.12.3 below. 2.12.1 Determination of control of the investments Management uses its judgment to determine whether the control indicators established in Note 37 on page 200 indicate that the Group controls the investments. 2.12.2 Classification of financial assets and liabilities The Group's main accounting policies allow the classification and subsequent measurement of financial assets in different categories, namely, at amortized cost (AC), fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL) based on the following criteria; z The entity's business model for managing 2 financial assets, as described in Note 7.1.3.1 on page 166. z The characteristics of the contractual cash flows of financial assets, as described in Note 7.1.3.2 on page 166. 158 2.12.3 Classification of investment properties Management uses its discretion to determine if a property qualifies as an investment property. Investment properties are classified as investment properties that are held to earn rentals or for capital gains or both, and therefore generate cash flows that are largely independent of the Group's other assets. On the other hand, real estate used for the production or supply of goods and services or for administrative purposes, thus generating cash flows attributable not only to the real estate but also to other assets used in the production or supply process, are classified as real estate. . , Plant and equipment. The Group annually evaluates the accounting classification of its real estate investments, taking into account the current use of said property. B. Assumptions and estimation uncertainties The disclosures about assumptions and estimation uncertainties that have a significant risk of causing material adjustments are included in Notes 2.12.4 to 2.12.13 below: 2.12.4 Fair value of financial instruments The values Reasonable prices for financial assets and financial liabilities recognized in the SOFP for which there is no observable market price are determined using various valuation techniques, including the use of mathematical models. The Group measures fair value using the fair value hierarchy, which reflects the importance of the data used to make the valuations. The methods used to value financial instruments and the fair value hierarchy are disclosed in Note 27 on pages 192 to 196. 2.12.5 Impairment losses on financial assets The measurement of impairment losses in financial asset categories of According to the Sri Lanka Accounting Standard - IFRS 9 and following "Financial Instruments" (IFRS 9) requires judgment, in particular the estimation of the amount and timing of future cash flows and collateral values ​​in the Determination of Impairment. Consequently, the Group reviews its individually significant loans and advances at each balance sheet date to assess whether an impairment loss should be recognized in the income statement. In particular, the determination of the impairment loss requires management judgment in estimating the amount and timing of future cash flows. In estimating these cash flows, management makes judgments about the financial condition of the borrower and the net realizable value of any underlying collateral. Each impaired asset is evaluated on its merits and the liquidation strategy and cash flow estimate are considered recoverable. These estimates are based on assumptions about
161. z Groups of assets that are individually significant but for which individual impairment has not been identified. In accordance with IFRS 9, the Group's expected credit loss (ECL) calculations are the result of complex models with a number of underlying assumptions regarding the selection of variable inputs and their interdependencies. The elements of the ECL models that are considered accounting judgments and estimates include: z The Group's criteria to qualitatively assess whether there is a significant increase in credit risk (SICR) and, if so, provisions for financial assets measured for a loss credit expected lifetime basis (LTECL). z The segmentation of financial assets when their ECL is assessed collectively. z Development of ECL models, including the various statistical formulas and the choice of inputs. z Determine the relationships between macroeconomic data, such as GDP growth, inflation, interest rates, exchange rates, and unemployment, and the impact on the probability of default (PD), the loss given default ( LGD) and the risk in case of default (EAD). z Selection of prospective macroeconomic scenarios and their probability weighting to derive the economic data from the ECL models. The accuracy of the provision depends on the assumptions and model parameters used to determine the ECL calculations. The Bank has granted aid to companies and individuals affected by COVID-19, in accordance with the guidelines of the CBSL, such as: B. a postponement of the payment terms of credit lines. Using a deferred payment program will not automatically trigger a SICR, all other things being equal. Therefore, the key question will be to distinguish between cases where default provides relief from short-term liquidity constraints affecting the borrower and those which do not trigger a SICR. Given the high level of uncertainty and unprecedented circumstances in the near-term economic outlook, management has exercised its judgment in assessing the impact of the COVID-19 outbreak on the Group's credit and loan book, placing more confidence in the outlook ahead. long-term based on past experience and assumptions Past In response to COVID-19 and the Group's expectations of the economic impact, the key assumptions used in the Group's ECL calculation have been revised. As of the balance sheet date, the expected impact of COVID-19 was captured through the modeled result, as well as a separate management overlay that reflects the significant uncertainty that remains in the modeled result given the unprecedented impact of COVID-19. While the credit model inputs and assumptions, including forward-looking macroeconomic assumptions, have been revised in response to the COVID-19 pandemic, the basic mechanics and methodology of the credit model underlying the Group's ECL calculation have been have remained consistent with prior periods. 2.12.6 Impairment of non-financial assets Consequently, the Bank has taken measures to identify those clients that show signs of difficulty in identifying SICR as part of the individual impairment test. According to the collective assessment, there are clients involved in high-risk industries, including tourism and hospitality, including tourist hotels in the Maldives, import of palm oil, rice and cement, passenger air transport, supply of hardware, products non-metallic minerals, film production, management funds, venture capital, ornamental fish, tobacco-related businesses, passenger transport and jewelry exports were rated for Lifetime ECL. Outstanding accounts receivable from borrowers operating in these industries have been classified as Level 2 unless those receivables are individually significant and have been specifically identified as Level 1, reflecting the forward-looking view of business economics. See note 7.6 on page 172 for more information. In addition, the Bank decided to increase the weights assigned to the worst-case scenario and decrease the weights assigned to the base-case scenario and the best-case scenario when probability-weighted forward-looking macroeconomic indicators, along with management overlays for the indicators Qualitatives are assessed relative to the forward-looking macroeconomic environment in order to capture the impact of COVID-19, as well as uncertainties and volatilities in the future outlook in the ECL calculation at the balance sheet date. Furthermore, the bank, as a credit expert, emphasized ECL parameters such as PD and LGD to reflect the actual economic scenario which is not reflected due to the forbearances and concessions granted due to COVID-19. See note 18 on page 182 for more information. On each balance sheet date, or more frequently if events or changed circumstances so require, the Group assesses whether there are signs of impairment of an asset or a cash-generating unit (CGU). This requires estimating the “value in use” of said individual assets or CGUs. Estimating “value in use” requires management to estimate the expected future cash flows of the asset or CGU and also choose an appropriate discount rate to calculate the present value of the relevant cash flows. This assessment requires the Group to make estimates of expected future cash flows and discount rates and is therefore subject to uncertainties. 2.12.7 Revaluation of property, plant and equipment The Group revalues ​​land and buildings at revaluation amounts, with changes in fair value recognized in other comprehensive income (ORI) without effect on results. The Group engages independent professional valuers to carry out fair value measurements of land and buildings in accordance with the Sri Lanka Accounting Standard – IFRS 13 on “Fair Value Measurement” (NISL 13). The main assumptions used to determine the fair value of land and buildings and the sensitivity analyzes are detailed in Notes 39.5 (b) and 39.5 (c) on pages 219 to 224. 2.12.8 Useful lives of properties, plant and equipment The Group reviews the residual values, useful lives and depreciation methods of property, plant and equipment at each balance sheet date. Estimates of these values, prices and methods involve management judgment and are therefore subject to uncertainties. Notes to the Financial Statements Advances that individually are considered immaterial; y Financial statements z Homogeneous groups of loans y Advance observations of the payment history of maturities for that year were taken into account when evaluating the changes in credit risk that occur during the expected life of a financial instrument to determine the rating and are an input key to determine migration. Annual Report 2020 It is generally foreseen: Take into account various relief measures, including preferential financing and payment moratorium. The impact of the outbreak has been assessed and adjusted in these financial statements based on information and assumptions available at the balance sheet date in accordance with guidance issued by CBSL and CA Sri Lanka. Commercial Bank of Ceylon PLC a number of factors and therefore actual results may differ, which may lead to future changes in value adjustments made. See Note 20 on page 185. 2.12.9 Fair Valuation of Investment Property The fair valuation of investment property is determined by independent valuations by licensed appraisers who have recent experience in valuing properties of a similar category and location. You have referenced market evidence for transaction prices of similar properties, with appropriate adjustments for size and location. 2 159
162. The key assumptions used to determine the fair value of investment properties are detailed in Note 40 on page 225. 2.12.10 IFRS 16 – Leases 2.12.10.1 Determination of the lease term for leases with renewal and termination options (Group as lessee) Commercial Bank of Ceylon PLC Annual Report 2020 Financial statements Notes to the financial statements The Group determines the lease term as the non-cancellable term of the lease, together with any Period for which there is an option to extend the lease when exercise is reasonably certain, or periods for which an option to terminate the lease applies when exercise is reasonably certain. The Group has various leases that include renewal and termination options. The Group uses its judgment to assess whether it is reasonably certain whether or not it will exercise the option to extend or terminate the lease. That is, it takes into account all relevant factors that create an economic incentive to exercise the renewal or termination option. After the start date, the Group reassesses the lease term if a significant event or change in circumstances within its control occurs that affects its ability to exercise or not exercise the option to extend or terminate (for example, improvements or material adjustments to the leased item). . 2.12.10.2 Estimation of the incremental interest rate Because the Group cannot easily determine the implicit interest rate of the lease, it uses its incremental interest rate (“IBR”) to measure the lease liability. The IBR is the interest rate that the Group would have to pay to borrow for a similar period and, with similar security, the funds required to obtain an asset of similar value to the right-of-use asset in a similar economic environment. Therefore, the IBR reflects what the Group “would have to pay”, which requires estimation when observable interest rates are not available (or when they must be adjusted to reflect the terms of the lease). The Group estimates IBR using observable data when available and must make certain company-specific adjustments. 2.12.11 Deferred tax assets Deferred tax assets are recognized in respect of tax losses to the extent that it is probable that future taxable income will be available that can be used against such tax losses. Judgment is required to determine the amount of deferred tax assets that can be recognized based on the timing and amount of likely future taxable profits and future tax planning strategies. 2 3 See note 42 on page 228 for more information. 160 2.12.12 Defined benefit obligation The costs of defined benefit plans are determined using an actuarial valuation. Actuarial valuation involves making assumptions about discount rates, expected returns on assets, future salary increases, mortality rates, future pension increases, etc. Due to the long-term nature of these plans, such estimates are subject to considerable uncertainty. See Note 49 on pages 233 to 239 for the assumptions used. 2.12.13 Provisions for accounts payable, commitments and contingencies The Group receives lawsuits in the ordinary course of its business. Management has made judgments about the probability that claims will accrue. The timing of when the legal claims will be completed is uncertain, as is the amount of any potential outflow of economic benefits. The time and cost will ultimately depend on due process in each jurisdiction. Notes 7.10 to 7.15 on pages 174 and 175 describe information on significant areas of estimation uncertainty and critical judgments in the application of accounting policies other than the above that have a material effect on the amounts recognized in the consolidated financial statements. . 2.13 Subsequent events Reporting period Subsequent events are those favorable and unfavorable events that occur between the reporting date and the date the financial statements are authorized for issuance. In this context, all material and important events that occurred after the balance sheet date were taken into account and, where appropriate, the corresponding disclosures were made in Note 69 on page 290. 3. Financial risk management 3.1 Introduction and general description Risk is inherent to the Bank's activities, but it is managed through a process of identification, measurement and continuous monitoring, subject to risk limits and other controls. This risk management process is critical to the Bank's continued profitability and each individual within the Bank is responsible for the risks they face. The Group is mainly exposed to the following risks, which arise from the financial activities carried out in its daily business: z credit risk; liquidity risk; market risk; and z operational and reputational risk. Types of Risk Figure – 26 Strategic and Commercial Risk Market Risk Credit Risk Financing and Liquidity Risk Operational Risk Reputational Risk 3.2 Bank Risk Management Framework The Bank's Board of Directors has overall responsibility for establishing and supervising the management framework of Bank risks. The Bank's risk management framework translates the overall risk appetite of its business activities into a holistic approach to provide the guidance necessary for the convergence of the Bank's strategic and risk perspectives. The Group's risk management policy is designed to identify and analyze the risks to which the Group is exposed, to establish appropriate risk limits and controls, and to monitor risks and compliance with limits. The risk management policy framework consists of credit policy, lending policy, ALM policy including emergency financing plan, foreign exchange policy, operational risk policy, IT risk policy, market risk policy, the stress test policy, the environmental risk management policy and the reputational risk management policy. , etc ., which are firmly established to provide consistent control and guidance for decision-making across the Bank. The committee structure built into the system acts as a research and decision-making body through deliberation and consensus building resulting from multiple viewpoints. Risk Management Committees effectively discuss outstanding issues to provide guidance to business lines on how to manage risk in accordance with the Bank's strategic objectives and risk appetite.
163. Further away, the Bank's Internal Audit independently monitors and evaluates the Bank's risk management function and reports its views on the adequacy of the risk management framework to the Board's Audit Committee (BAC). Bank lending policies formulated on the basis of evolving credit practices to provide the expected granularity of credit rating, risk rating, collateral acceptance, and limits on exposures and concentration levels between sectors, counterparties, regions and segments, etc. A solid risk The bank adopts a rating system that incorporates the Basel guidelines for rating institutions and counterparties to rate loan proposals. This risk scoring framework consists of 10 risk classes with varying degrees of risk as indicators for loan officers to assess and achieve the appropriate risk-return tradeoffs in their proposals. These risk classes are periodically reviewed by the IRMD. yy BB risk straatte kk's egg aann Bank's Bank's Strategy Strategy The IRMD issues risk approvals for individual proposals above pre-determined thresholds, as a result of a rigorous independent risk assessment guided by credit standards, lending guidelines and circular instructions within a framework limits derived from the bank's risk appetite. Market Risk The risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables, such as interest rates, foreign exchange rates, and share prices. The Bank classifies market risk into trading or non-trading portfolios and manages each of these portfolios separately. Bank Financial Risk Management Framework Figure – 27 Risk Management Framework The Executive Credit Committee (ECC) and the Board Credit Committee (BCC) are tasked with approving high-quality credit lines, while the Board is the highest authority to approve lines of credit for a specific period Threshold beyond is levels. At the BCC level, deliberations are held on mined facilities above the set threshold for approval and recommendations are made for Board approval based on the level of commitments at different levels. Risk Assessment, Control and Mitigation Market risk for the trading book is closely monitored and managed, taking into account changes in market prices. Market Risk Management Risk Policies, Procedures, and Processes Review of Risk Appetite and Tolerance Levels Use of appropriate monitoring and measurement systems, tools, and techniques Review, Validation, and Reporting of the Market Risk Policy, ALM Policy, and FX Risk Policy are the three main policies that form the framework for the bank's market risk management function. Notes to the Financial Statements The Risk and Control Self-Assessment (RCSA) framework is implemented to identify risks associated with the Bank's business activities and to implement appropriate risk mitigation measures after assessing the criticality of such risks. The Integrated Risk Management department (IRMD) conducts semi-annual RCSA tasks across the bank that focus on compliance with laws, regulations and regulatory policies, as well as internal controls and approved policies. Credit Risk Management Financial Reports The Executive Integrated Risk Management Committee (EIRMC) meets monthly to discuss the bank's credit, operational, market and IT risk issues. The Assets and Liabilities Committee (ALCO), which meets at least every two weeks, prioritizes liquidity, funding and profitability in accordance with market changes. The Bank manages and controls credit risk by setting limits on the level of risk it is willing to accept for individual counterparties and for geographic and industry concentrations by monitoring risks and possible adverse external factors in relation to these limits. Portfolio-level credit risk analysis is addressed at EIRMC monthly meetings and BIRMC quarterly meetings. Individual loan proposals, assessed by loan officers, are approved by Authorizing Officers within the hierarchy at delegated authority levels, with at least double approval checks. Approval levels are scaled based on delegated authority levels associated with risk levels, final risk ratings, and negative performance levels of prior facilities granted to borrowers. Annual Report 2020 The risk that the bank incurs a loss due to its customers or counterparties failing to meet their contractual obligations, which is generally taken into account as part of the credit risk assessment. Commercial Bank of Ceylon PLC Credit Risk The Board of Directors of the Bank has established the Board Integrated Risk Management Committee (BIRMC) as a Mandatory Committee of the Board under the Direction of Banking Act No. 11 of 2007 on Corporate Governance . The performance of the Committee and the duties and responsibilities of the members are reviewed annually by the Board of Directors. Due to the business model chosen by the bank, equity and commodity risk was kept under control throughout the year. However, the Bank continued to be exposed to risk elements related to the interest rate risk of the banking portfolio and the trading portfolio and the exchange rate risk of trading assets and liabilities denominated in non-local currencies. 3 161
164. Commercial Bank of Ceylon PLC Annual Report 2020 Financial Statements Notes to Financial Statements The declining interest rate scenarios experienced by the country during the period affected the financial market in Sri Lanka, casting doubt on the net interest margin. Bank portfolio interest rates are subject to varying degrees of interest rate shocks to determine the impact on earnings prospects in such interest rate scenarios. The results reflect predictions that have helped the bank formulate strategies to effectively manage its financial position with limited local market options. The trading book was also regularly subject to an internal value-at-risk (VaR) framework. The Bank also periodically carried out sensitivity analyzes to determine the impact on the portfolios under management, mainly government bonds, and the valuation of such portfolios to reflect fair value for decision making. Foreign exchange positions have been maintained within the regulatory framework in a market where there is high volatility in the main currency compared to the previous year in which the Bank operates, that is, h in US dollars. The positions have been subjected to a sensitivity analysis to provide information on potential gains/losses from currency appreciation/depreciation, as the Bank's reference currency is the Sri Lankan rupee. Liquidity risk This risk area focuses on the risk that the Bank encounters difficulties in complying with the obligations related to financial liabilities that are settled by delivering cash or other financial assets. Liquidity risk arises from the possibility that the Bank may not be able to meet its payment obligations or not receive what corresponds to it, both under normal and stress conditions. To limit this risk, management has arranged diversified funding sources in addition to its core deposit base and implemented a policy of asset liquidity management and daily monitoring of future cash flows and liquidity. The Bank has developed internal control procedures and contingency plans to manage liquidity risk. This includes an assessment of expected cash flows and the availability of good quality collateral that could be used to secure additional financing if necessary. Liquidity risk management The Bank's Market Risk Management Policy and the ALM Policy approved by the Board of Directors set the standard for the Bank's liquidity risk management. Bank liquidity risk has the highest priority in managing a variety of other risks, as it is considered the most critical risk for any financial institution. The Bank's Treasury department is in charge of managing the Bank's liquidity in real time to ensure the proper functioning of the commercial activities of all other commercial units of the Bank. Access to a considerable and stable base of Checking and Savings Accounts (CASA) due to its extensive network of branches and the superior perception of stability created in depositors generally gives the bank immense strength in liquidity management. The availability of high-quality liquid funds is another asset for the bank. Its strength was clearly reflected in the Basel III calculation carried out by the bank to achieve the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR) under the instructions of the CBSL, which compared to the minimum regulatory thresholds achieve very good results. regulatory impact or financial loss. The Bank cannot expect to eliminate all operational risks, but instead seeks to manage those risks through a control framework and by monitoring, escalating, reporting and responding to potential risks. The risk that the bank's reputation will be damaged by one or more reputational events, as reflected by negative publicity about the bank's business practices, conduct, or financial condition. Such negative publicity, whether true or not, can affect public confidence in the bank, lead to costly litigation, or cause a decline in its customer base, business, or revenue. Controls include effective segregation of duties, access, authorization and reconciliation procedures, staff training and evaluation procedures, such as: B. the use of internal audits. Operational and Reputational Risk Management The Bank has experienced an accumulation of liquidity higher than the minimum regulatory requirements in 2020 due to the slow economic development of the country. However, the Bank has implemented many strategies to invest excess liquidity with optimal returns in staggered maturities, thus minimizing the negative impact on the bottom line and liquidity. The bank has also implemented multiple strategies to maintain liquidity in foreign currency, having frequently evaluated obligations and contingencies amid the economic conditions prevailing in the country in 2020, in accordance with regulatory requirements. The contingency financing plans in place, constant monitoring of key liquidity metrics, and regularly conducted scenario-based stress tests would allow the bank to take proactive steps to overcome an adverse liquidity position that might arise at a later date. The bank's IT risk is managed through strict monitoring of key IT risk indicators, while vulnerability assessments and penetration tests are performed regularly by internal and external parties to identify relevant risks. The recent downgrade of the country by rating agencies could pose challenges for managing the financial sector's foreign currency liquidity position amid the global pandemic situation. One risk is that the Bank is currently monitoring this closely and taking mitigation measures. Operational risk and reputational risk This risk area focuses on the risk that the bank incurs losses due to system failures, human error, fraud or external events. When controls are not working effectively, operational risk can damage reputation, legal or circular guidance and Operational Risk Management Policy play an important role in aligning business practices with recognized benchmarks to ensure disruption. minimal use of processes, people, technology and infrastructure. The Bank's internal control framework and audit function, with well established “three lines of defence”, serve to manage operational risk to a currently acceptable level. See Note 68 on pages 261 to 290 for “Financial Risk Review”. A detailed description of how risk management is carried out as part of the Bank's risk management, with due attention to factors such as governance, identification, evaluation, monitoring, reporting and mitigation, is discussed in the Management and mitigation section. Risk management. on pages 114 to 133 The above description of “Risk Management: An Overview” is not part of the financial statements.
165. The fair value of an asset or liability is determined using the assumptions that market participants would use the fair value hierarchy when pricing the asset or liability., assuming that market participants act in their economic interest. The Group recognizes transfers between levels of the fair value hierarchy at the end of the reporting period in which the change occurred. A fair value measurement of a non-financial asset considers the ability of a market participant to generate economic benefits by using the asset to its highest and best use or by selling it to another market participant that will use the asset to its highest and best use. . External professional appraisers are consulted for the valuation of significant assets such as land and buildings. An analysis of the fair value measurements of financial and non-financial assets and liabilities is included in Note 27 on pages 192 to 196. 5. Changes in accounting policies The Group has consistently applied the accounting policies described in Notes 6 to 10 on pages 164 to 176 for all periods presented in these financial statements except for changes resulting from changes in accounting standards as follows: In November 2018, CA Sri Lanka published amendments to the definition of company in IFRS 3 on "Business Combinations". (IFRS 3) to help entities determine whether or not an acquired group of activities and assets is a business. These changes clarified the minimum requirements for an entity, removed the assessment of whether market participants can substitute missing items, and added guidance to help entities assess whether an acquired process is substantive, narrowing the definitions of an entity and outcomes and they introduced an optional option. fair value concentration test. These changes did not affect the Group's consolidated financial statements, but may affect future periods if the Group carries out business combinations. 5.1.2 Amendments to IAS 1 and IAS 8: Definition of “Relevant” In November 2018, CA Sri Lanka issued Amendments to IAS 1 and Sri Lanka Accounting Standard – IAS 8 on “Accounting Policies, Changes in Accounting Estimates and Errors” to provide the definition of “material” in all Standards and to clarify certain aspects of the term “definition”. The new definition states: "Information is material if its omission, misstatement or concealment could reasonably be expected to influence decisions made by primary users of general purpose financial statements on the basis of those financial statements that contain financial information about a particular reporting entity". ." CA Sri Lanka has published a revised conceptual framework that includes some new concepts, updated definitions and recognition criteria for assets and liabilities, and clarifies some key concepts. Key changes include: z increasing the importance of management in the objective of financial reporting z reintroduce prudence as part of neutrality z define a reporting entity, which may be a legal entity or part of an entity z revise the definitions of an asset and a liability z remove the probability threshold for recognition and the addition of guidance on derecognition z the addition of guidance on different measurement bases fidelity of the financial statements These changes had no impact on the Group's consolidated financial statements Significant accounting policies The significant accounting policies detailed below have been consistently applied to all periods presented in the statements. Group companies, except as disclosed in note 2.11 on page 158. These accounting policies have been consistently applied by Group companies. An index of significant accounting policies is included below, the details of which are available on the following pages: Notes to the financial statements When there are no quoted prices in an active market, the Group uses valuation techniques that maximize the use of relevant observable inputs and minimize the use of unobservable inputs. The chosen valuation technique takes into account all the factors that market participants would consider when pricing a transaction. 5.1.1 Amendments to IFRS 3: Definition of business 5.1.3 Amendments to the conceptual framework for financial information Financial statements When one is available, the Group determines the fair value of an instrument using the quoted price in an active market for that instrument . A market is considered active when the transactions of the asset or liability occur with sufficient frequency and volume to provide continuous price information. 5.1 New and modified standards and interpretations In these financial statements, the Group applies for the first time the following amendments to current accounting standards for years beginning on or after January 1, 2020. The Group has not early adopted any other accounting standard, interpretation or modification that has been issued but is not effective. Annual Report 2020 "Fair value" is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the main market or, failing that, in the most advantageous market the Group has access to at this time. The fair value of a liability reflects the risk of default. Commercial Bank of Ceylon PLC 4. Fair value measurement These amendments had no impact on the consolidated financial statements and are not expected to have any future impact on the Group. 4 5 163
166. Index Table of Significant Accounting Policies– 45 Commercial Bank of Ceylon PLC Annual Report 2020 Financial Statements Notes to Financial Statements Note 6 164 Description Page No. Reference to Notes to Financial Statements 6. Significant Accounting Policies – General 6.1 Basis of Consolidation 164 6.2 Foreign Currency 165 7. Important Accounting Policies – Recognition of Assets and Liabilities 7.1 Financial instruments – initial recognition, classification and subsequent measurement 165 7.2 Non-current assets and alienable groups of items held for sale 172 7.3 Property, plant and equipment 172 39 7.4 Investment property 172 40 7.5 Intangible assets 172 41 7.6 Impairment of non-financial assets 172 37 7.7 Dividends payable 172 25 7.8 Employee benefits 172 49.2 to 49.5 7.9 Other liabilities 174 49 26 7.10 Restructurings 174 7.11 Onerous contracts 174 7.12 Bank collections 174 7.13 undrawn letters of credit and lines of credit Usagen 58 7.14 Commitment sos 175 58 7.15 Contingent liabilities and commitments 175 58 7.16 S Equity and reserves 175 52, 54, 55 and 56 7.17 Earnings per share (EPS) 175 24 7.18 Business segments 175 62 7, 19 Trust funds 175 8. Significant accounting Policies – Recognition of Income and Expenses 8.1 Interest Income and Expenses 175 13 8.2 Income and Expenses from Fees and Commissions 175 14 8.3 Net Gains/(Losses) on Commercial Transactions 175 15 8.4 Net Gains/(Losses) on Derecognition of Financial Assets Accounts 175 16 8.5 Dividend income 175 15 and 17 8.6 Leases 175 34.3, 39 and 49.1 8.7 Rental income and expenses 176 17 and 21 9. Significant accounting policies: tax expenses 9.1 Income tax expenses income 176 9.2 Tax on crop insurance (CIL) 176 9.3 Withholding tax (WHT) on dividends paid by the Bank, subsidiaries and associates 176 9.4 Charge for Economic Services (CES) 176 9.5 Value Added Tax on D Services (VAT FS) 176 22 9.6 Nation Building Tax on Financial Services (NBT FS) 176 22 9.7 Debt Repayment Tax on Financial Services (DRL FS) 176 22 10. Significant Accounting Policies: Statement Statement of Cash Flows 10.1 Statement of Cash Flows 6. Significant Accounting Policies – General 6.1 Basis of Consolidation IFRS 10) and Proportional Share of Profit or Loss and Net Assets of its Associated Companies in Accordance with Sri Accounting Standard Lanka – IAS 28 on “Investments in Associates and Joint Ventures” (IAS 28) . The Bank's financial statements comprise a compilation of the financial statements of the National Banking Unit, the Offshore Banking Center and the Bank's international operations. 6.1.1 Business combinations Business combinations are accounted for using the purchase method when control is transferred to the Group in accordance with the Sri Lanka Accounting Standard – IFRS 3 on Business Combinations (IFRS 3). The consideration transferred at the time of acquisition and the identifiable net assets acquired are measured at fair value. Any goodwill that arises is subjected to an impairment test annually (see note 7.6 on page 172). Any gain from a sale purchase is recognized immediately in profit or loss. Transaction costs are recorded as expenses when incurred, unless they are related to the issuance of debt or equity. The consideration transferred does not include amounts related to the liquidation of pre-existing relationships. Such amounts are generally recognized in profit or loss. Any contingent consideration is measured at its fair value on the acquisition date. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, it is not remeasured and the settlement is recognized in equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognized in income. 6.1.2 Non-controlling interests (NCI) 176 23, 42 and 48 25 The details of NCI are given in note 57 on page 248. 6.1.3 Subsidiaries The detail of the Bank's subsidiaries accounted for in the Bank's financial statements and its contingent liabilities are found in Notes 37 and 58.4(a) on pages 210 to 212 and 250.
167. Information about the employee, as they are accounted for in the financial statements of the investee, together with their fair values ​​and the Group's participation in the associate's contingent liabilities, are disclosed in notes 38 and 58.4 (b) on pages 212 and 250. 6.1 .6 Transactions Eliminated on Consolidation Intercompany balances, transactions, and unrealized income and expenses (other than foreign exchange gains or losses) arising from intercompany transactions are eliminated in preparing the consolidated financial statements. Unrealized gains on transactions with investees accounted for using the equity method are offset against the investment to the extent of the Group's interest in the investee. Unrealized losses are eliminated as unrealized gains, but only to the extent that there is no evidence of impairment. 6.1.7 Significant gains or losses, provisional values ​​or error corrections During the year there were no significant gains or losses, provisional values ​​or error corrections related to business combinations that occurred in prior periods. 6.2 Foreign currencies 6.2.1 Foreign currency transactions and balances Foreign currency transactions are translated into the functional currency, Sri Lankan rupees, using the exchange rates prevailing at the time of the transaction. In this sense, it is the Bank's practice to use the average exchange rate in force on the date of the transaction. Monetary assets and liabilities denominated in foreign currency at the balance sheet date are translated into the functional currency at the average exchange rate of the functional currency at the balance sheet date. Foreign currency gain or loss on monetary items is the difference Foreign currency differences resulting from translation are generally recognized in profit or loss. However, foreign currency differences arising from the translation of the following items are recognized in other comprehensive income: z equity instruments at fair value through other comprehensive income z a financial liability designated as a hedge of a net investment in a business abroad, as long as the coverage is effective; and z Qualifying cash flow hedges, provided the hedge is effective. 6.2.2 Foreign currency translation The Group's consolidated financial statements are presented in Sri Lankan Rupees, which is also the Bank's functional currency. The financial statements of the Bank's Offshore Banking Center and the financial statements of the Bank's operations abroad have been translated into the Group's presentation currency as explained in Notes 6.2.3 and 6.2.4 below. 6.2.3 Operations of offshore banking centers They are recorded in accordance with note 6.2.1 above, except for the use of the weighted annual average exchange rate for the conversion of the Profit and Loss Account and the Profit and Loss Account and Other Integral result. Net gains and losses are treated as gains or losses. 6.2.4 Foreign operations The results and financial situation of foreign operations whose functional currency differs from the Bank's presentation currency are translated into the Bank's presentation currency as follows: z Assets and liabilities, including goodwill and fair value adjustments, which arise at the time of acquisition are translated at the exchange rates applicable at the balance sheet date. z All resulting translation differences are recorded in OCI and accumulated in the foreign currency translation reserve (translation reserve), which is a separate component of equity except to the extent that the translation difference is allocated to NCI . When a foreign operation is disposed of so that control is lost, the amount accumulated in the translation reserve in respect of that foreign operation is reclassified to the Profit and Loss Account as part of the gain or loss on disposal. . If the Group disposes of only a part of its interest in a subsidiary that includes a foreign operation while it retains control, the relevant part of the accumulated amount is reallocated to the NCI translation reserve. 7. Significant Accounting Policies - Recognition of Assets and Liabilities 7.1 Financial Instruments - Initial Recognition, Classification and Subsequent Measurement 7.1.1 Recognition Date The Group initially recognizes accounts receivable, deposits and subordinated liabilities, etc. on the date they arise. All other financial instruments (including regular purchases and sales of financial assets) are recognized on the trade date, which is the date the Group becomes party to the instrument. 7.1.2 Initial measurement of financial instruments The classification of financial instruments at the time of initial recognition depends on their cash flow characteristics and the business model for managing the instruments. See Notes 7.1.3 and 7.1.4 for more details on the classification of financial instruments. A financial asset or financial liability is initially measured at fair value plus or minus the transaction costs directly attributable to its acquisition or issue, except in the case of financial assets and financial liabilities designated at fair value through profit or loss in accordance with IFRS 9, and Trade exposures that do not have a significant financing component within the meaning of IFRS 15. Notes to the financial statements 6.1.5 Associated companies Non-monetary foreign currency assets and liabilities that are measured at fair value are translated at fair value. functional currency at the spot exchange rate at the time the fair value is determined. Non-monetary items that are measured at historical cost in foreign currency are converted at the exchange rate prevailing at the time of the transaction. unless this average rate is not a reasonable approximation of the rate in effect on the date of the transaction. In this case, income and expenses will be converted at the exchange rates prevailing on the date of the transaction. Subsequently, it is accounted for as an associate or in accordance with the Group's accounting policy for financial instruments, depending on the degree of influence retained. between the amortized cost in functional currency at the beginning of the year, adjusted for effective interest and payments made during the year, and the amortized cost in foreign currency, converted at the closing rate. Annual Report 2020 When the Group loses control of a subsidiary, it derecognizes the assets and liabilities of the subsidiary and all related NCI and other components of equity. The resulting gains or losses are recognized in results. A retained interest in the former subsidiary is measured at fair value when control is lost. Commercial Bank of Ceylon PLC 6.1.4 Loss of control 6 7 Transaction costs related to financial assets and financial liabilities designated at fair value through profit or loss are recognized in the profit and loss account. z Income and expenses are converted at the average annual exchange rate 165
168. Trade accounts receivable without a significant financing component are initially recognized at their transaction price, as defined in IFRS 15.. The subsequent measurement of financial assets depends on their classification. If the fair value of financial instruments (other than trade receivables that do not have a significant financing component) at initial recognition differs from the transaction price, the Group accounts for day 1 profit or loss as described below. continuation. 7.1.3.1 Valuation of the business model Commercial Bank of Ceylon PLC Annual report 2020 Financial statements Notes to the financial statements 7.1.2.1 “Day 1” gain or loss When the transaction price of the instrument differs from the fair value at the beginning and the value Reasonable is used In a valuation technique that only when observable inputs are used in market transactions, the Group recognizes the difference between the transaction price and fair value in net gain/(loss) on trading. In cases where fair value is based on models for which some inputs are unobservable, the difference between the transaction price and fair value is deferred and recognized in profit or loss only when the inputs become observable or when the instrument is available registered. The "1-day loss" incurred on loans discounted to employees under uniformly applicable regulations is accumulated and amortized using effective interest rates (TIE) in "Interest income" and "Employee expenses" during the remaining useful life of the employee or the life of the loan, whichever is the shorter period. However, according to the "COVID 19 Outbreak Accounting Considerations Guidance Notes" issued by CA Sri Lanka, it applies to overdrafts and working capital loans that were offered to the borrower at a discounted interest rate of 4% and refunded to the bank. at 1%. interest rate under the state refinancing system; the interest rate of 4% for this particular product was considered the applicable market rate, which resulted in a fair value adjustment. Consequently, there were no Day 1 impacts for such working capital loans and overdrafts. See Notes 13 and 19 on pages 178 and 185. 7.1.3 Classification and subsequent measurement of financial assets In accordance with IFRS 9, the Group classifies all its financial assets based on the business model for asset management and the measured contractual terms of the goods as a good; z Amortized cost z Fair value through other comprehensive income (FVOCI) z Fair value through profit or loss (FVTPL) 166 The Group assesses the objective of a business model in which an asset is maintained at the portfolio level and is not measures an instrument-by-instrument basis, as it better reflects how the business is managed and how information is provided to management. The information considered includes: z The strategies and objectives established for the portfolio and the application of those strategies in practice. Specifically, if management's strategy focuses on earning contractual interest, maintaining a specific interest rate profile, matching the duration of financial assets with the duration of the liabilities that finance those assets, or realizing cash flows through from the sale of assets; z how portfolio performance is assessed and reported to the bank's senior management; z the risks that affect the performance of the business model (and the financial assets held as part of that business model) and how those risks are managed; z how company managers are paid, e.g. whether the compensation is based on the fair value of assets under management or contractual cash flows; and z the frequency, volume, and timing of sales in prior periods, the reasons for those sales, and your expectations of future sales activity. However, information on sales activities is not considered in isolation, but rather as part of an overall assessment of how the Bank's stated objective to manage financial assets is being met and how cash flows are being realized. The business model assessment is based on reasonably expected scenarios without considering "worst case" or "stress case" scenarios. If, after initial recognition, cash flows occur in a manner that differs from the Bank's original expectations, the Bank does not change the classification of the remaining financial assets held in that business model, but rather considers such information when evaluating a new issue or a fortune with newly acquired funds. 7.1.3.2 Assess whether contractual cash flows are solely payments of principal and interest (SPPI test) As a second step in its classification process, the Group assesses the contractual terms of financial assets to determine whether they meet the SPPI test. For the purposes of this evaluation, "principal amount" is defined as the fair value of the financial asset at the time of initial recognition and may vary throughout the life of the financial asset (z). “Interest” is defined as consideration for the time value of money and credit risk associated with the principal amount outstanding over a period of time and other fundamental credit risks and costs, and profit margin. In contrast, contractual terms that create more than minor risk or volatility in contractual cash flows that are not related to a basic credit agreement do not result in contractual cash flows that are solely payments of principal and interest on the outstanding principal balance. In such cases, the financial asset is measured at FVTPL. When evaluating whether the contractual cash flows are solely payments of principal and interest on the principal amount outstanding, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of the contractual cash flows in such a way that it would not meet that condition. When making the evaluation, the Group considers: contingent events that would change the amount and timing of the cash flows; z-leverage functions; z prepayment and renewal conditions; z conditions that limit the Group's right to cash flows from specific assets; and z-characteristics that modify the consideration of the value of money in time. The Group maintains a portfolio of long-term, fixed-rate loans for which the Group has the ability to propose a change in the interest rate on periodic review dates. These reset rights are limited to the market rate at the time of review. Borrowers have the option of accepting the modified interest rate or repaying the loan at face value without penalty. The Group has determined that the contractual cash flows of these loans are solely payments of principal and interest because the option varies the interest rate to reflect the time value of money, credit risk, other fundamental credit risks and associated costs. with the outstanding principal amount. See Notes 7.1.3.3 to 7.1.3.5 below for details on the different types of financial assets captured in the SOFP.
169. 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. Financial assets measured at amortized cost are detailed in Notes 7.1.3.3.1 to 7.1.3.3.6 below: 7.1.3.3.1 Loans with banks and other customers Loans with banks and other customers include loans with banks, loans and credits for group leasing. The detail of "Due to banks and other customers" is detailed in Note 33 and Note 34 on pages 201 to 205. 7.1.3.3.2 Securities purchased under resale agreements (reverse repos) When the Group acquires a financial asset and at the same time enters into an agreement to resell the asset (or a similar asset) at a specified price at a later date (reverse repos) repos) closing, the contract is accounted for as a financial asset in the SOFP, reflecting the substance of the transaction as a loan made by the Group. Subsequent to initial recognition, these issued securities are measured at amortized cost using the EIR with related interest income/receivables recorded as interest income in the Profit and Loss Account. For details of "Securities purchased under resale agreement" see SOFP on page 145. 7.1.3.3.3 Debt and other financial instruments measured at amortized cost The detail of "Debt and other financial instruments measured at amortized cost" is included in Note 35 on page 206. 7.1.3.3.4 Cash and cash equivalents The details on "Cash and cash equivalents" are given in note 28 on page 196. 7.1.3.3.5 Balances in central banks The detail of "Balances in central banks” can be found in Note 29 on page 197. 7.1.3.3.6 Loans in banks The detail of “Loans in banks” can be found in Note 30 on page 197. 7.1.3.4.1 Qualified debt instruments in FVOCI Debt instruments are rated in FVOCI when they are maintained within a business model whose objective is to hold and sell financial assets for collection, where the contractual cash flows of the asset are payments that are solely principal payments and Represent tan interest payments on outstanding principal amounts. For details on “Debt instruments to FVOCI” see Note 36 on page 207. 7.1.3.4.2 Equity instruments designated to FVOCI On initial recognition, the Group irrevocably designates some of its equity instruments held for strategic purposes and regulatory as instruments classified as equity in FVOCI. The detail of “Equity Instruments at FVOCI” can be found in Note 36 on page 207. 7.1.3.5 Financial assets measured at FVTPL All financial assets not classified at amortized cost or FVOCI are classified as measured at FVTPL. Financial assets measured at FVTPL include financial assets that are held or managed for trading and whose performance is measured based on fair value that are measured at FVTPL because they are not held for the collection of contractual cash flows or for collection and sale of contractual cash flows are converted into assets. Financial assets measured at FVTPL are discussed in Notes 7.1.3.5.1 and 7.1.3.5.2 below. 7.1.3.5.1 Financial assets held for trading The detail of "Financial assets held for trading" is provided in note 32 on page 198 or the loss is disclosed in note 31 on page 198. 7.1.3.5.2 Assets assets designated as FVTPL On initial recognition, the Group may irrevocably designate a financial asset that otherwise qualifies to be measured at amortized cost or FVOCI as FVTPL if such designation eliminates or reduces an accounting mismatch that otherwise arises from the measurement of assets or liabilities or the recognition of gains or losses thereon on any other basis. The Group has not designated any financial assets at initial recognition at FVTPL at the end of the reporting period. 7.1.4 Classification and subsequent measurement of financial liabilities The Group classifies financial liabilities other than financial guarantees and loan commitments in one of the following categories: z Financial liabilities at FVTPL and within this category as – – held for trading; or - Appointed to FVTPL; z Financial liabilities measured at amortized cost. The subsequent valuation of financial liabilities depends on their classification. See notes 7.1.4.1 and 7.1.4.2 as described below: 7.1.4.1 Financial liabilities at FVTPL Financial liabilities at FVTPL include financial liabilities held for trading and financial liabilities designated as FVTPL on initial recognition. See Notes 7.1.4.1.1 and 7.1.4.1.2 below. 7.1.4.1.1 Financial liabilities held for trading The detail of "Derivative financial liabilities" classified as financial liabilities held for trading are detailed in note 45 on page 231. 7.1.4.1.2 Financial liabilities designated as FVTPL Financial liabilities designated as FVTPL are recognized in SOFP at fair value when; z The disclosure eliminates or significantly reduces inconsistent treatment that would otherwise arise from the measurement of assets or liabilities, or the recognition of gains or losses thereof on any other basis, or from the notes to the financial statements designed to identify assets to hold to collect contractual cash flows; and For financial assets measured at FVOCI, see Notes 7.1.3.4.1 and 7.1.3.4.2. Financial assets designated as FVTPL are recognized at their fair value in the SOFP. Changes in fair value are recognized in “Net gain or loss on financial assets and liabilities designated at FVTPL”. Interest income is accrued in 'Interest income' using the EIR, while dividend income is recognized in 'Other operating income' when the right to receive payment has been established. Financial statements z The asset is held as part of a business model Financial assets at FVOCI include debt and equity instruments that are measured at fair value through other comprehensive income. Annual Report 2020 A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as FVTPL: 7.1.3.4 Financial assets measured at FVOCI Commercial Bank of Ceylon PLC 7.1.3.3 Financial assets measured at amortized cost, for example , A group of financial liabilities or financial assets and financial liabilities are managed and their performance assessed on a fair value basis in accordance with a documented risk management or investment strategy and information about the group is provided to key management personnel of the entity on that basis, or 7,167
170. z Liabilities that contain one or more embedded derivatives, unless they do not materially alter the cash flows that would otherwise be required by the contract, or it is clear with little or no analysis that on first consideration of a similar instrument, separating embedded derivatives is prohibited. Changes in fair value are reported in “Fair value gains/(losses) on financial instruments at FVTPL”, except for changes in the fair value of liabilities measured at FVTPL due to changes in the Bank's own credit risk. Said changes in fair value are recorded in the own credit reserve via ORI and are not reclassified to the income statement. Interest paid/payable is accumulated under 'Interest Expense' using the EIR. The Group did not report any financial liabilities to FVTPL at the end of the period. 7.1.4.2 Financial liabilities at amortized cost The detail of 'Paid Securities' can be found in the SOFP on page 145. 7.1.4.2.3 Liabilities against depositors For the detail of “Liabilities against depositors”, see Note 46 hereinafter page 231. 7.1.4.2.4 Other third-party resources For the detail of "Other third-party resources", see Note 47 on page 232. The Group classifies capital instruments as financial liabilities or equity instruments according to the content of the contractual terms of the instrument. The Group designates certain derivatives held for risk management and certain non-derivative financial instruments as hedging instruments in qualified hedging relationships. When the hedging relationship is initially designated, the Group formally documents the relationship between the hedging instrument and the hedged item, including the risk management objective and strategy in establishing the hedging relationship, together with the methodology used to assess the hedging relationship. effectiveness of the hedging relationship. The Group assesses, both at the inception of the hedging relationship and on an ongoing basis, whether the hedging instrument is expected to be highly effective in offsetting changes in the fair value or cash flow of the corresponding hedged item during the reporting period. which the coverage is made. designated and if the actual results of each protection within a range of 80% to 125%. For a cash flow hedge of a forecast transaction, the Group assesses whether the forecast transaction is highly probable and presents a risk of fluctuations in cash flows that could ultimately affect profit or loss. After initial recognition, such financial liabilities are subsequently measured at amortized cost using the EIR method. The amortized cost is calculated considering the discounts or premiums in the acquisition and the fees or charges that are an integral part of the EIR. 7.1.4.2.1 Bank debts The detail of "Bank debts" is detailed in note 44 on page 230 Fixed price at a later date (repos), the agreement is accounted for as a financial liability in the SOFP, reflecting the substance of the transaction as reflects a deposit. Subsequent to initial recognition, these securities are measured at amortized cost using the TIE and the related interest payable is recorded as 'Interest expense' in the Profit and Loss Account. Financial liabilities issued by the Group that are not designated as FVTPL are classified as financial liabilities at amortized cost under “Bank debt”, “Resale values”, “Debts to depositors”, “Other liabilities” or “Subordinated liabilities”. if the terms of the contractual arrangement result in the Group being obliged to deliver cash or another financial asset to the holder or to settle the obligation by means other than exchanging a fixed amount of cash or another financial asset for a fixed number of own shares. The amortization of the EIR is included in the profit and loss account under 'Interest expense'. Gains and losses are also recognized in income when the liability is written off and as part of the amortization of the EIR. 7 7.1.4.2.2 Repurchase agreements 7.1.4.2.5 Subordinated liabilities See Note 51 on page 240 for details of “Subordinated liabilities”. 7.1.5 Derivatives held for risk management purposes and hedge accounting purposes for risk management purposes include all derivative assets and liabilities not classified as trading assets and liabilities. Derivatives held for risk management purposes are measured at fair value in the SOFP. The Group currently uses cash flow hedging relationships for risk management purposes as explained in Notes 7.1.5.1 to 7.1.5.5 below: 7.1.5.1 Fair value hedges When a derivative is designated as a hedging instrument in a fair value hedge of a recognized asset or liability or firm commitment that could affect profit or loss, changes in the fair value of the derivative are recognized immediately in profit or loss in the same caption as the hedged item that is attributable to the risk being covered. If the hedging derivative expires or is sold, canceled or exercised, or the hedging relationship no longer meets the criteria for fair value hedge accounting, or the hedge designation is revoked, hedge accounting discontinues prospectively. However, if the derivative is novated to a central counterparty by either party by law or regulation without changes to its terms other than those required for novation, the derivative will not be deemed to have expired or terminated. Any adjustment up to the discontinuation date of an item that uses the effective interest method is amortized through profit or loss over its remaining life as part of the item's recalculated EIR. 7.1.5.2 Cash flow hedges When a derivative is designated as a hedging instrument to hedge variability in cash flows that are attributable to a specific risk associated with a recognized asset or liability that could affect profit or loss, the portion effective fair value of the derivative, the value is recognized in OCI and included in the hedge reserve within equity. Any ineffective portion of the changes in the fair value of the derivative is recognized immediately in results. The amount recognized in ORI is reclassified to results as a reclassification adjustment in the same period in which the hedged cash flows affect profit or loss and in the same item in the income statement and in ORI. If the hedging derivative expires or is sold, terminated or exercised, or the hedging relationship no longer meets the criteria for cash flow hedge accounting, or the hedge designation is revoked, hedge accounting is discontinued prospectively. . However, if the derivative is novated by both parties as a result of a law or regulation without novation to a central counterparty
171. 7.1.5.3 Net investment hedges When a derivative instrument or a non-derivative financial liability is designated as a hedging instrument in a hedge of a net investment in a foreign operation, the effective portion of the changes in fair value is recognized. of the hedging instrument in ORI and in the conversion reserve within equity. Any ineffective portion of the changes in the fair value of the derivative is recognized immediately in results. The amount recognized in other comprehensive income is reclassified to income as a reclassification amount when the foreign operation is sold. 7.1.5.4 Other derivatives not held for trading If the derivative is not held for trading and is not designated in a qualifying hedging relationship, any change in its fair value is recognized immediately in profit or loss as a component of other financial income instruments to FVTPL. 7.1.5.5 Embedded derivatives An embedded derivative is a component of a hybrid instrument that also contains a non-derivative host contract, with the effect that some of the cash flows of the combined instrument vary in a similar way to a stand-alone derivative. An embedded derivative causes some or all of the cash flows that would otherwise be required by the contract to change in accordance with a specified interest rate, financial instrument price, commodity price, exchange rate, price index, or rate, credit score, or credit index. , or another variable if it is a non-financial variable is not a contracting party. A derivative that is linked to a financial instrument but is contractually transferable independently of that instrument or has a different counterparty to that instrument is not an embedded derivative but a separate financial instrument. Derivatives may be embedded in another contractual arrangement (a master contract). The Group treats derivatives embedded in financial liabilities and non-financial host contracts as separate derivatives if: z the host contract itself is not accounted for at FVTPL; the embedded derivative is not closely related to the economics and risks of the host contract. Separate embedded derivatives are measured at fair value with any change in fair value recognized in profit or loss unless they are part of a qualifying cash flow or net investment hedge relationship. Separate embedded derivatives are presented in the SOFP together with the host contract. Derivatives embedded in financial assets are classified based on the business model and their contractual terms and are not separated as explained in Notes 7.1.3.1 and 7.1.3.2 on page 166. Separated embedded derivatives are measured at fair value at through profit or loss with all changes in fair value unless they were part of a qualifying net investment or cash flow hedge relationship. Separate embedded derivatives are presented in the SOFP together with the host contract. 7.1.6 Reclassification of financial assets and financial liabilities Financial assets are not reclassified after initial recognition unless, and only in exceptional circumstances, the Group changes its business model objective to manage such financial assets, resulting in the acquisition, sale or termination of a line of business. During the year, the Bank reclassified a portion of its Sri Lanka Government Bond (SLSB) portfolio from Fair Value Through Other Comprehensive Income (FVOCI) to Amortized Cost as a result of changes in the asset management business model. , in line with the CA Sri Lanka Policy for Accounting in the Event of the COVID-19 Outbreak. See note 36.1 on page 208 for more details. Financial liabilities are not reclassified as such reclassifications are not permitted as of the IFRS 9 date). Consequently, prior periods are not restated. z At fair value through other comprehensive income The fair value at the reclassification date becomes the new gross carrying amount. The EIR is calculated based on the new gross book value. Subsequent changes in fair value are recognized in ORI. z At amortized cost The fair value at the reclassification date becomes the new book value. The EIR is calculated based on the new gross book value. 7.1.6.2.2 Reclassification of financial instruments to "FVOCI" z at fair value through profit or loss The accumulated balance in OCI is reclassified to results on the reclassification date. Notes to the financial statements z The economic characteristics and risks of 7.1.6.2 Evaluation of reclassification of financial assets 7.1.6.2.1 Reclassification of financial instruments to "FVTPL" z at amortized cost The financial asset is reclassified at fair value. The accumulated balance in the OCI is eliminated and used to adjust the fair value at the reclassification date. The adjusted amount becomes the amortized cost. The TIE determined at initial recognition and the gross carrying amount are not adjusted for reclassification. 7.1.6.2.3 Reclassification of financial instruments at “amortized cost” z to FVOCI The asset is remeasured at fair value with all differences recorded in ORI. The TIE determined at initial recognition is not adjusted for reclassification. z A FVTPL The fair value at the reclassification date becomes the new book value. The difference between the amortized cost and the fair value is recognized in results. Financial Statements See Note 45.1 on page 231 for details of “cash flow hedges” would meet the definition of a derivative if contained in a separate contract; e Annual Report 2020 z The terms of the embedded derivative Commercial Bank of Ceylon PLC change its terms, except where required for novation, then the derivative will not be deemed to have expired or terminated. 7.1.7 Derecognition of financial assets and financial liabilities 7.1.7.1 Financial assets The Group derecognizes a financial asset (or a part of it, if applicable) when the contractual rights to the cash flows of the financial asset expire or are lost the rights to receive them. transferred the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred or in which the Group does not transfer or retain substantially all the risks and rewards of ownership and does not control the financial asset retains assets. 7 169
172. When derecognising a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the derecognised portion of the asset) and the total consideration received (including new assets received less new liabilities assumed) and any cumulative gain or loss that resulting from this recognized in the OCI are recognized in results. Commercial Bank of Ceylon PLC Annual Report 2020 Financial Statements Notes to Financial Statements However, cumulative gains/losses recognized in OCI in respect of equity securities designated as FVOCI are not recognized in profit or loss on derecognition of those securities. Any interest in a transferred financial asset that is eligible for derecognition and that is created or retained by the Group is accounted for as a separate asset or liability. The Group enters into transactions in which it transfers assets recorded in its SOFP but retains all or substantially all the risks and rewards of the transferred assets or a part thereof. In such cases, the transferred assets are not written off. When assets are sold to a third party with a concurrent total return rate swap on the transferred assets, the transaction is accounted for as a secured financing transaction similar to repurchase agreements because the Group retains all or substantially all risks and rewards. of the property. of such goods. When the Group has transferred its right to receive cash flows from an asset, or has entered into a transfer agreement, and has not transferred or retained substantially all the risks and rewards of the asset, nor has it transferred control of the asset, the asset is recognized to the extent of the Group's continuing interest in the asset. In this case, the Group also recognizes an associated liability. The transferred asset and the associated liability are valued based on the rights and obligations retained by the Group. 7.1.7.2 Financial liabilities The Group derecognizes a financial liability when its contractual obligations are fulfilled, canceled or expire. 7.1.8 Modification of financial assets and financial liabilities 7.1.8.1 Modification of financial assets When the conditions of a financial asset are modified, the Group assesses whether the cash flows of the modified asset are significantly different. If the cash flows differ significantly, the contractual rights to the cash flows of the original financial asset are deemed to have expired. In this case, the original financial asset is derecognized and a new financial asset is recognized at its fair value. 7 170 If the cash flows of the modified asset measured at amortized cost do not differ significantly, the modification will not result in the derecognition of the financial asset. In this case, the Group recalculates the gross book value of the financial asset and recognizes the amount resulting from the gross book value adjustment as a gain or loss from changes charged to results. If such a modification is made due to the financial difficulties of the borrower, the gain or loss is presented together with an impairment loss measured at the interest rate before the modification. In other cases, it is presented as interest income. 7.1.8.2 Change in Financial Liabilities In accordance with Circulars No. 4 and 5 of 2020 issued by CBSL dated March 24, 2020 and March 27, 2020 respectively, the Bank granted payment deferrals to Eligible Clients affected by COVID -19, for which the original contract was modified. In this sense, banks were allowed to charge up to 7% per year on deferred installments during the moratorium on the Equal Monthly Installment Loan (EMI). Various types of interest rate concessions were granted to customers for other loans. With a view to addressing the challenges faced by businesses and individuals due to the second wave of COVID-19, the CBSL also ordered banks to extend the debt moratorium for such businesses and individuals for an additional six months to As of October 1, 2020 Authorized banks are expected to convert the principal and interest owed during the moratorium period from October 1, 2020 to March 31, 2021 into a term loan. The repayment term of the new loans is at least two years, but it may vary depending on the conditions agreed with the borrower. Banks were allowed to claim interest at a rate no higher than the latest auction rate for 364-day T-bills available through April 1, 2021, plus 1 percent per annum. 7.1.9 Offsetting Financial Instruments Changes to the original terms of the loans due to prior COVID-19 moratoriums did not result in the derecognition of the original loans as management concluded the changes were not material. Consequently, a modification loss (Day 1 modification loss) was recorded in Interest income in Note 13.1, being the difference between the original book value of the loan (before the modification) and the discounted present value of the revised cash flows (at the original EIR). ) as of the date of the loan modification. The Group recognizes interest income on the recalculated gross book value based on the original TIE from the start of the moratorium until the end of the term of the instrument. If an existing financial liability is replaced with another from the same lender on significantly different terms, or if the terms of an existing liability are significantly modified, such substitution or modification is treated as derecognition of the original liability and recognition of a new liability. . In this case, a new financial liability is recognized at fair value based on the modified conditions. The difference between the book value of the extinguished financial liability and the new financial liability with modified terms is recognized in results. Financial assets and financial liabilities are offset and the net amount is reported in the SOFP if and only if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis or to realize the assets and settle passives at the same time. Income and expenses are presented on a net basis only when permitted by IFRS or for gains and losses arising from a group of similar transactions such as B. from the group's business activities. 7.1.10 Amortized cost and gross carrying amount The “amortized cost” of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition, less principal payments, plus or minus the accumulated amortization using the EIR Method of any difference between that initial amount and the maturity amount and, for financial assets, adjusted for ECL provisions. The “gross carrying amount of a financial asset” is the amortized cost of a financial asset before considering an ECL impairment. 7.1.11 Fair value of financial instruments The measurement of the fair value of financial instruments, including the fair value hierarchy, is explained in notes 4 and 27 on pages 163 and 192. 7.1.12 Identification and measurement of asset impairment 7.1.12.1 General description of ECL policies The Group recognizes a provision for expected credit losses (ECL) in loans and accounts receivable from banks and other customers, debt instruments measured at amortized cost and other financial instruments FVOCI rated debt instruments , loan commitments and financial guarantee agreements.
173. Risk(SICR) once the origination has been identified, the financial asset moves to Stage 2 and the Group recognizes a provision for LTECL. See Note 7.1.12.2 for a description of how the group determines when a SICR has occurred. z Stage 3: When a financial asset is credit-impaired, it goes to Stage 3 and the Group recognizes a provision for LTECL with a probability of default of 100%. See Note 7.1.12.3 for a description of how the Group defines non-performing and credit-impaired assets. Purchased or Obtained Credits (POCI) Financial Assets: Financial assets that are credit-impaired at the time of initial recognition are classified in Level 3, with a book value that already exceeds the LTECL. At the balance sheet date, the Group has no POCI loans. The key judgments and assumptions made by the Group to comply with the requirements of IFRS 9 are explained below: 7.1.12.2 Significant increase in credit risk (SICR) When determining whether the credit risk of a financial instrument has increased significantly since the initial recognition, the Group considers appropriate and reasonable information that is relevant and available without undue cost or effort. This includes analysis of quantitative and qualitative information based on the Group's historical experience and credit rating, as well as forward-looking information. The Group considers that an exposure has significantly increased credit risk when a customer's contractual payments are more than 30 days past due, in accordance with the rebuttable presumption of IFRS 9. The Group reviews, individually on each date of presentation, loans, and borrowings that exceed a predefined threshold to determine whether credit risk has increased significantly from inception before a receivable defaulted. These indicators include, but are not limited to: geographic locations or natural disasters that directly impact the performance of a client/group of clients or an instrument. z If the value of the guarantee is significantly reduced and/or the viability of the guarantee is in doubt. z When a customer is the subject of litigation, this has a significant impact on the performance of the credit line. z Frequent changes in the management of an institutional client. z Delay in the start of commercial operations/projects by more than two years from the originally agreed date. z Modification of the terms that give rise to concessions, including renewals, deferred payments, waivers of agreements, z if the client dies or declares bankruptcy. z If the bank cannot contact or locate the customer. z A decrease in customer sales and/or pre-tax profit of 50% or more compared to the prior year. z Erosion of net worth of more than 25% compared to the previous year. Credit lines/exposures that show one or more of the above indicators are treated as lines with SICR and valued accordingly in ECL calculations. The Group regularly monitors the effectiveness of the criteria used to determine the SICR to confirm that the criteria are capable of determining the SICR before a receivable defaults. For external credit rated debt instruments that are measured at amortized cost or FVOCI, the Group determines the SICR based on the generally accepted definitions of investment grade/non-investment grade ratings published by international rating agencies. Debt securities move to Stage 2 when their credit risk increases beyond investment grade. 7.1.12.3 Definition of past-due and credit-impaired assets The Group considers that loans and loans to other customers are past-due when: z the borrower is unlikely to pay. In assessing whether a borrower has defaulted, the Group reviews its significant loans individually and loans above a pre-defined threshold at each reporting date. The Group considers that credit lines/delinquent clients have credit deterioration with one or more of the indicators listed in note 7.1.12.2 above. In addition, as per “CBSL Guidelines for Banks Licensed to Adopt the Sri Lanka Financial Reporting Standard – IFRS 9: Financial Instruments”, all credit facilities/clients classified as delinquent as per CBSL instructions are classified as credit risk. level 3. 7.1.12.4 Movement between levels Financial assets may be transferred between different categories (other than POCI) based on their relative change in credit risk since initial recognition. Financial instruments are removed from Stage 2 if their credit risk is no longer considered to have increased significantly since initial recognition based on the assessments described in Note 7.1.12.2. Financial instruments move from Stage 3 when they no longer show evidence of credit impairment as described above. 7.1.12.5 Grouping of collectively valued financial assets The Group calculates ECL collectively or individually. The asset classes for which the Group calculates ECL on an individual basis include: z impaired credit lines of individual significant customers z treasury, commercial and interbank relationships (for example, amounts owed by banks, money on demand and at short-term, placements with banks, government securities, investments in debt securities, etc.) those financial assets for which the Group determines that no provision for individual impairment is required are valued collectively for ECL. For the purposes of calculating ECL collectively, financial assets are grouped based on similar risk characteristics. Accounts receivable from other customers are combined into homogeneous portfolios based on a combination of product and customer characteristics. Notes to the Financial Statements z Level 2: if there is a significant increase in credit quality z if there is a significant change in the In addition, the Group assigns financial assets to Level 3 if the external credit rating assigned to the respective asset is “default”. Financial statements that were initially credit-impaired are classified in Level 1. For financial instruments in Stage 1, their ECL is measured at an amount that corresponds to the ratio of lifetime expected credit losses (LTECL) resulting from default events that are possible within the next 12 months (12 million ECL). Forecasts of future economic conditions directly affect the performance of a client/client group, portfolio or instrument. Annual Report 2020 z Stage 1: A financial asset that does not z Where appropriate and reasonable Commercial Bank of Ceylon PLC IFRS 9 describes a “three stage” impairment model based on changes in credit quality since initial recognition. For more details on the calculation of ECL, see Note 18 on pages 182 to 185. 7 Obligations with the group as a whole, without the group resorting to measures such as the realization of guarantees (if any); or z The borrower is 90 days past due on its contractual payments. 171
174. Commercial Bank of Ceylon PLC Annual Report 2020 Financial Statements Notes to the Financial Statements 7.2 Non-current assets and disposal groups of elements held for sale The Group intends to recover the value of non-current assets and disposal groups of elements classified as held for sale at the balance sheet date mainly through a sale transaction and not through continued use. This condition is only considered fulfilled if the sale is highly probable and the asset or group of assets for disposal is available for sale in its current state, management has committed to the sale, and the sale is expected to be completed within one year from the date of classification According to the Sri Lanka Accounting Standard – IFRS 5 on “Non-current assets held for sale and discontinued operations” (IFRS 5), these assets are valued at the lower of the value in books and fair value less costs to sell. Subsequently, the Group assesses at each balance sheet date or more frequently whether events or changes in circumstances indicate that the asset or group of assets is impaired. The Group recognizes an impairment loss for each initial or subsequent write-down of assets to fair value less costs to sell and also recognizes a gain for any subsequent increase in fair value less costs to sell of an asset only for the cumulative amount. of previously recognized impairment. An impairment loss is allocated first to goodwill and then pro rata to the remaining assets and liabilities, except that no loss is allocated to financial assets, deferred tax assets or employee benefit assets, which remain consistent with the other values ​​of the Group. Accounting principles are evaluated. Consequently, the Group does not write off or write off any impairment of assets classified as held for sale after classification. In the statement of income for the reporting period and the comparative period of the prior year, income and expenses from discontinued operations are reported separately from income and expenses from continuing operations, except for result after tax, even if the group is an NCI in a subsidiary after the sale. The resulting profit or loss (after tax) is shown separately in the Profit and Loss Account. 7.3 Tangible assets Details of “tangible assets” can be found in note 39 on pages 214 to 225. 7.3.1 Depreciation For details on “depreciation” see note 20 on pages 185 and 186. 7 172 7.3. 2 Borrowing costs In accordance with the Sri Lanka Accounting Standard – IAS 23 on “Borrowing Costs” (IAS 23), the Group capitalizes borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset. as part of the cost of the asset. A qualifying asset is an asset that takes a considerable period of time to be ready for its intended use or sale. Other borrowing costs are recognized in income in the period in which they are incurred. 7.4 Investment properties Investment properties are initially valued at cost, including transaction costs. Then, the Group values ​​the investment properties using the fair value model. Any gain or loss arising from a change in the fair value and rental income of the investment property is included in other operating income. The detail of "Investment property" is detailed in note 40 on pages 225 and 226. 7.5 Intangible assets The detail of "Intangible assets" is detailed in note 41 on pages 226 to 228 under the heading "Amortization of intangible assets" within "Amortization" of the Profit and Loss Account. See Note 20 on pages 185 and 186. 7.6 Impairment of non-financial assets At each balance sheet date, the Group reviews the book values ​​of its non-financial assets (excluding investment property and deferred tax assets) to determine whether there is any indication of impairment If such indications exist, the recoverable amount of the asset is estimated. Goodwill is reviewed annually for impairment. For impairment testing, assets are grouped into the smallest group of assets that generate cash inflows from continuing use that are largely independent of cash inflows from other assets or CGUs. Goodwill resulting from a business combination is allocated to the CGUs or groups of CGUs that are expected to benefit from the synergies of the combination. The "recoverable amount" of an asset or CGU is the higher of its value in use and its fair value less costs to sell. “Value in use” is based on estimated future cash flows discounted to present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the specific risks of the asset or CGU. An impairment is recognized when the book value of an asset or CGU exceeds its recoverable amount. The Group's corporate assets do not generate separate cash inflows and are used by more than one CGU. The company's assets are allocated to CGUs on an appropriate and consistent basis and are tested for impairment as part of the review of the CGUs to which the company's assets are allocated. Impairments are recognized in results. They are allocated to first reduce the carrying amount of any goodwill allocated to the CGU and then pro rata reduce the carrying amounts of the other assets in the CGU. An impairment loss related to goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the carrying amount of the asset does not exceed the carrying amount that would have been determined, less depreciation, had no impairment loss been recognized. 7.7 Dividends Payable Dividends from common shares are recognized as a liability and deducted from equity when recommended and declared by the Board of Directors and approved by shareholders. Interim dividends are deducted from principal when declared and are no longer at the discretion of the bank. Dividends for the year that are authorized and not scheduled after the balance sheet date are accounted for as a post balance sheet event in accordance with the Sri Lanka Accounting Standard - IAS 10 on “Post Balance Sheet Date Events” (IAS 10) note 69 on page 290. 7.8 Employee benefits 7.8.1 Defined benefit plans (DBP) A DBP is a post-employment benefit plan other than a defined contribution plan (DCP) as defined in the Sri Lanka Accounting Standard - IAS 19 on “Employee Benefits” (LCAS 19). 7.8.1.1 Defined Benefit Plans 7.8.1.1.1 Description of Plans and Categories of Covered Employees The Bank operates three types of defined benefit pension plans for its employees as described below: (a) The Bank has a fund of authorized pensions established in 1992. Under the Trust Agreement, only those employees who were under the age of 45 on January 1, 1992 were registered with the pension fund to leave a minimum contribution for a period of 10 years before being entitled to withdraw
175. The bankThe net obligation with respect to defined benefit plans is calculated separately for each plan by estimating the amount of future benefits earned by employees in the current and prior periods, discounting that amount and deducting the fair value of the defined benefit assets. plan, under IAS 19, as described in note 49 on pages 233 to 239. If the benefits of a plan are modified or a plan is cut, the resulting change in benefit related to past service or gain or reduction loss is recognized immediately in profit or loss. The Group recognizes gains and losses on the liquidation of a DBP when the liquidation occurs. Past service cost is recognized as an expense on a straight-line basis over the period until consolidation occurs. If the rights have already vested after the introduction or change in a pension plan, the past service cost is recognized immediately. The amounts spent by DBP and the provisions recognized by DBP, together with the detail of the valuation methods, are disclosed in notes 19 and 49 on pages 185 and 233 to 239, respectively. (b) Provisions have been created for pensions for those employees who retired before January 1, 2000 and for whom the Bank has not been able to make contributions to the pension fund for more than 10 years. Although this liability is not funded, it has been fully accumulated in the financial statements; 7.8.1.1.2 Recognition of actuarial gains or losses Actuarial gains or losses are recognized in OCI in the period in which they arise. 7.8.1.1.3 Recognition of pension obligations The defined benefit asset or defined benefit obligation comprises the present value of the defined benefit obligation less past service cost not yet recognized and less the fair value of plan assets of which the obligations will be assumed. settled directly. The value of an asset is limited to the sum of the unrecognized past service cost and the present value of the economic benefit available in the form of refunds from the plan or reductions in future contributions to the plan. Defined benefit obligations are calculated annually by a qualified actuary using the projected unit credit method. Calculation Results 7.8.2 Defined Contribution Plans (DCPs) A DCP is a post-employment plan under which an entity pays fixed contributions to a separate entity and has no legal or constructive obligation to pay any additional amount. Obligations with DCPs are recognized in results when the related service is provided. Contributions paid in advance are recognized as an asset to the extent that a cash refund or a reduction in future payments is available. The Group has three plans of this type, as explained in notes 7.8.2.1, 7.8.2.2 and 7.8.2.3. The amounts recognized as an expense by DCPs through results are disclosed in note 19 on page 185. 7.8.2.1 Defined Contribution Plan As mentioned in note 7.8.1.1.1(a), in 2006 the Bank reorganized its pension plan from DBP to DCP. This restructured plan was offered on a voluntary basis to eligible . The future service package includes monthly contributions to be made by the Bank for those employees who have accepted the offer during the remaining period of service at predetermined contribution rates that will be applied to their salaries, which are expected to increase by 10% annually for this purpose. . based on the salary level in effect at the time this program was launched. In addition, the interest accrued by the assets of the DCP will also be attributed to the employees who have opted for the reorganization. The assets of this Fund are kept separate from those of the Bank and are managed independently by the Trustees in accordance with the terms of the Trust Agreement. 7.8.2.2 Employee Provident Fund The Bank and employees contribute 12% and 8% of each employee's salary, respectively, to an approved private provident fund. Other local entities of the Group and their employees contribute to the Employees Provident Fund administered by CBSL in the same percentages as above. 7.8.2.3 Employee Trust Fund The Bank and other local Group entities contribute 3% of each employee's salary to the Employee Trust Fund administered by CBSL. 7.8.2.4 Defined Contribution Pension Fund (DCPF) A DCPF was established on March 1, 2020, administered by a Board of Trustees composed of representatives of employee organizations and management. Notes to the annual financial statements The Bank's subsidiaries do not operate pension funds. The remeasurement of the net defined benefit liability, which consists of actuarial gains and losses, the return on plan assets (excluding interest), and the effect of the asset ceiling (excluding interest, if applicable) is recognized immediately in OCI. The Group determines the net interest expense/(income) on the net defined benefit liability/(asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the year to the net defined benefit liability at that moment. /(asset) considering changes in the net liability/(asset) of defined benefit plans during the period due to contributions and benefit payments. Net interest expense and other DBP-related expenses are recognized in income. Financial Statements In 2006 the Bank offered a restructured pension plan to convert the DBP into a DCP for the Bank's pensionable workers and more than 99% of them accepted it. Consequently, the aforementioned pension fund will only cover those employees who did not opt ​​for the restructured pension scheme and those employees who were previously covered by the pension fund but retired before the restructured pension scheme entered into force; Bank. The plan provides for lump sum payments in lieu of severance pay/monthly pensions to eligible employees upon separation in exchange for the relinquishment of their pension rights. The package offered consisted of a package of past services and a package of future services. Annual Report 2020 Annual Report 2020 The shortfall due to the past benefit package exceeding the funds available from the pension fund was assumed by the Bank in 2006 in the form of future refunds from the plan or reductions in future contributions to the plan. The applicable minimum financing requirements are taken into account when calculating the present value of the economic benefit. Pension from the Commercial Bank of Ceylon PLC from the pension fund. In addition, only employees who joined the bank before January 1, 2000 were eligible for this pension plan. Employees who have joined since 2000 and are not covered by the restructured bank pension plan are eligible for the new DCPF. Bank and who are employed by the Bank as of March 1, 2020. The initial lump sum based on the gratuity claim as of February 29, 2020 will be paid into accounts opened in the name of individual eligible employees. The Bank will contribute a percentage equal to seven decimal places of five percent (7.5%) of the monthly salary of each Eligible Employee to the DCPF each month from March 1, 2020 until termination of employment. 7 173
176. Notes to Financial Statements Annual Financial Statement Report 2020 Commercial Bank of Ceylon PLC Employees may not withdraw funds from DCPF prior to termination of employment. In the event of early separation prior to retirement (excluding death), eligible employees have the right to withdraw the accumulated amounts from their respective DCPF accounts. However, Eligible Employees are not eligible for a DCPF payment if their period of service is less than 5 years (similar to gratuity payments made upon separation under the Termination and Separation Gratuities Act). ). In the event of death of an employee during service, the accumulated balance in the member's account will be released in full to designated parties/legal heirs if service is more than 5 years. 7.8.3 Other long-term employee benefits The Group's net obligation for long-term employee benefits other than pension plans is the amount of future benefits that employees have earned in exchange for their service in the current and previous periods. This benefit is discounted to determine its present value and the fair value of the associated assets is deducted. The discount rate used as the yield at the balance sheet date is the current market rate extrapolated to reflect the long-term discount rate based on short-term corporate/government bond market rates and the expected rate of inflation at long term. The calculation is based on the projected unit credit method. Revaluations are recognized in the results of the year in which they occur. The Group has no other long-term benefit plans for employees. 7.8.4 Termination benefits Termination benefits are recognized as an expense at the earlier date when the Group can no longer withdraw the offer of those benefits and when the Group recognizes the costs of a restructuring. If payments are not expected to be completed in full within 12 months of the balance sheet date, they are discounted. 7.8.5 Short-term employee benefits Short-term employee benefits are recognized as an expense when the related service is rendered. A liability is recognized for the amount that is expected to be paid if the Group has a present, legal or implicit obligation to pay that amount as a result of the service provided by the employee and the obligation can be reliably estimated. 7.8.6 Share-based payment arrangements Share-based payment arrangements in which the bank receives services in exchange for its own equity instruments174 are accounted for as share-based payment transactions that settle with equity instruments, regardless of how the bank's equity instruments are obtained. bank. Senior employees of the Bank receive compensation in the form of share-based payment transactions in which employees render services in exchange for equity instruments (equity settlement transactions). The Group does not engage in cash-settled share-based payment transactions. The Group applies the requirements of the Sri Lanka Accounting Standard - IFRS 2 on “Share-based Payments” (IFRS 2) in accounting for transactions with share-based payments that are settled with equity instruments, if any, awarded after January 1, 2012 and not accrued from January 1, 2012 vested at the same time. Under IFRS 2, the grant-date fair value of equity-settled share-based payments (ie share options) granted to employees is recognized as compensation expense with the corresponding increase in equity during the period in which employees are unconditionally entitled to awards. The amount recognized as expense is adjusted to reflect the number of shares granted for which the related service vesting conditions and non-market performance are expected to be satisfied, such that the final amount recognized as expense is based on the number of shares granted that service related - and meet off-market performance conditions on the exercise date. For share-based payment awards without vesting conditions, the fair value of the share-based payment is determined at grant date to reflect these conditions and there is no consideration for differences between expected and actual results. Employee Stock Option Plans Granted - 2015 and 2019 are subject to the above accounting. Details of employee stock option plans are provided in Note 53 on page 241. The dilutive effect of options outstanding is reflected as additional share dilution in the diluted earnings per share calculation as disclosed in Note 24.1 and Note 24.2 on page 189. 7.9 Other liabilities For details of "Other liabilities" see Note 49 on pages 233 to 239. 7.10 Restructuring Provisions for restructuring are recognized when the Group has approved a detailed restructuring plan and formal and the restructuring has started or has been publicly announced. No future operating losses are anticipated to result from such reorganization. At the balance sheet date, the Group has no provision for restructuring. 7.11 Onerous contracts A provision for onerous contracts is recognized when the expected benefit that the Group will obtain from a contract is less than the unavoidable costs of meeting its contractual obligations. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before constituting a provision, the Group recognizes any loss due to impairment of the assets related to this contract. At the balance sheet date, the Group had no onerous contracts. 7.12 Bank lien A provision for bank lien is established when the condition that gives rise to payment of the lien is met. If a delivery obligation is subject to a minimum activity threshold such that the forcing event reaches a minimum activity, a provision is recognized when that minimum activity threshold is reached. 7.13 Financial Guarantees, Letters of Credit and Unused Credit Commitments “Financial Guarantees” are contracts that require the Group to make specific payments to reimburse the holder for a loss incurred due to the failure of a specific debtor to make payment to its maturity in accordance with the Terms of a debt instrument. Unused loan commitments and letters of credit are commitments in which the bank is obligated to make credit available to the customer for the duration of the commitment with predetermined terms. Financial guarantees are initially recognized in the financial statements (within other liabilities) at their fair value, that is, the premium received. After initial recognition, the Bank's liability under each guarantee is measured at the higher of the amount originally recognized less accumulated amortization recognized in the Profit and Loss Account and the ECL provision, if any. The premium received is recognized in Note 14.1 "Commission income" on a straight-line basis during the term of the guarantee. The notional contractual value of financial guarantees, letters of credit and undrawn commitments when an arm's length loan has been agreed is not recorded in the SOFP. The notional amounts of these instruments together with the corresponding PCE are disclosed in note 58 on page 248.
177. 7.16 Share capital and reserves For details of "Share capital and reserves" see notes 52, 54, 55 and 56 to the financial statements on pages 241 and 244 to 248. 7.17 Earnings per share (UPA) Detail of "Basic and diluted EPS ” are given in note 24 on page 189. 7.18 Business Segments The detail of “Business Segments” is provided in Note 62 on pages 253 to 255. 7.19 Trust assets The Bank provides trust services and other services fiduciaries that result in the holding or investing of assets on behalf of their clients. The trust assets are not included in these financial statements because they do not belong to the Bank. 8. Significant accounting and measurement methods – Recognition of income and expenses The detail of "Income and expenses" can be found in notes 12 to 21 on pages 178 to 187. 8.1 Interest Income and Expenses The detail of "Income and Expenses for Interest” is found in Note 13 onwards, pages 178 to 180. 8.2 Income and Expenses for Fees and Commissions Listed on pages 180 and 181. Losses) in financial investments or other income (net) based on the underlying classification from the investment. The detail of "Dividend Income" is detailed in notes 15 and 17 on pages 181 and 182. 8.6 Leases The Group initially assesses whether a contract is or contains a lease if the contract conveys the right to control the lease to use an asset identified for a specified period of time in exchange for consideration in accordance with the guidance of IFRS 16. This assessment considers: whether the lessee has the right throughout its useful life to obtain all the economic benefits from the use of the asset identified and the right to direct how and for what purpose the identified asset is used. After evaluating whether a contract is or contains a lease, the Group determines whether it contains additional lease or non-lease (service) components based on the detailed guidance in IFRS 16. An asset is a separate lease component when the lessee can benefit from the use of the underlying asset, either alone or together with other resources that are readily available to the lessee, and the underlying asset is not highly dependent on or closely related to the other underlying assets in the contract. 8.6.1 The Group as lessee In accordance with IFRS 16, when the Group has determined that a contract contains a lease component and one or more additional lease components or non-lease components, the consideration for the contract is allocated to each lease component on the basis of the relative unit price of the lease component and the aggregate unit price of the non-lease components. Details of “right of use” and “leasing liability” are provided in notes 39 and 49 on pages 214 and 233, respectively. 8.6.2 Group as lessor Similar to the above, the group determines at contract inception whether the contract contains a lease component and one or more additional lease components or non-lease components. If there are one or more additional lease or non-lease components, the Group distributes the consideration based on the IFRS 15 guidelines. Notes to the financial statements 7.15 Contingent liabilities and commitments In notes 58 and 60 on pages 248 and 250 a detailed list of “Contingent liabilities and commitments” and “Litigation against the Bank” is included. 8.5 Dividend income Dividend income is recognized when the right to receive it is established. Typically, this is the ex-dividend date for listed shares. After initial recognition, the Group applies the cost model for the right-of-use asset and depreciates the asset from the start date to the end of the underlying asset's useful life. If the right does not transfer ownership of the asset, the Group amortizes it from the start date until the end of the useful life of the right-of-use asset or the end of the lease term, whichever occurs first. In addition, the interest expense for the lease liability is recognized in results. Financial Statements Details of the commitments are given in note 58 on page 248. 8.4 Net gains/(losses) on derecognition of financial assets Details of “Net gains/(losses) on derecognition of financial assets” are provided on Note 16 on page 181. On the inception date, the Group recognizes a right-of-use asset and a lease liability, which is measured at the present value of the lease payments payable at that time. Lease payments are discounted using the IBR. 8.6.2.1 Finance lease – Group as lessor In accordance with IFRS 16, a lease that transfers substantially all the risks and rewards of ownership of an underlying asset is classified as a finance lease. At the inception date, the Group recognizes assets held under finance leases in the SOFP and reports them as a lease receivable in an amount equal to the net investment in the lease. The net investment in the lease is obtained by discounting the outstanding lease payments at the interest rate contained in the lease, that is, h the interest rate that makes the present value of the lease payments equal to the fair value of the underlying asset. and initial direct costs. The Group's net investment in leases is included in Note 33 “Debts with banks” and Note 34 “Debts from other customers”, respectively. Finance income receivable is recognized in 'Interest income' over the lease term to provide a constant rate of return on the net investment in the lease. Annual Report 2020 7.14 Commitments All identifiable risks are taken into account to determine the amount of known liabilities, as explained in note 7.9 above. 8.3 Net gains/(losses) from trading activities The detail of “Net gains/(losses) from trading activities” is detailed in Note 15 on page 181. Commercial Bank of Ceylon PLC's loan commitments at rates for below market value are initially measured at fair value and subsequently measured at the higher of the ECL provision and the originally recognized amount, less the cumulative amount of recognized revenue, where applicable. 8.6.2.2 Operating leases – Group as lessor In accordance with IFRS 16, a lease is classified as an operating lease if it does not transfer substantially all the risks and rewards of ownership of an underlying asset. The Group recognizes lease payments 7 8 175
178. of operating leases as income on a straight-line basis. Initial direct costs incurred in negotiating operating leases are added to the book value of the leased asset and are recognized over the lease term on the same basis as lease income. Contingent rents are recognized as income in the period in which they are accrued. For details on 'Operating Leases', see Note 67 on page 261. Commercial Bank of Ceylon PLC Annual Report 2020 Financial Statements Notes to Financial Statements 8.7 Rental income and expenses Rental income and expenses are recognized in profit or loss on the accrual basis. 9. Significant Accounting Policies – Income Tax Expense 9.1 Income Tax Expense 9.1.1 Current Taxes The detail of “Income Tax Expense” is detailed in Note 23 on pages 187 and 188. 9.1. 2 Deferred tax For more details on "Deferred tax assets and liabilities" see Note 42 on pages 228 to 230. 9.1.3 Tax risks In determining the amount of current and deferred taxes, the Group takes into account the impact of tax risks, including the question of whether additional taxes and penalties are due. The determination of the tax liability with the authorities may change the item already recorded in the financial statements and such changes in the tax liability could affect the tax expense in the period in which such determination is made, either as excess or shortfall. provision. 9.1.4 Proposed changes to the Income Tax of the State Tax Proposals In accordance with the notice dated April 08, 2020 issued by the Department of Internal Revenue on "Implementation of Proposed Changes to the Internal Revenue Law No. 24 of 2017", effective as of January 1, 2020; z The corporate tax rate has been revised from 28% to 24%. However, such revisions were not included in the calculation of the tax obligations on the income until enactment and formal amendments to the Internal Revenue Act z The Bank has exercised the exemption from interest income on the Sri Lanka Development Bonds announced pursuant to the above notice effective 1 April 2018 However, other exemptions that can be claimed as of January 1, 2020 have not been included in the calculation of income tax liability as of December 31, 2020 pending enactment and formal modification of the Internal Revenue Law. 9.2 Crop Insurance Lien (CIL) Pursuant to the provisions of Section 14 of the Finance Law No. 12 of 2013, the CIL was introduced from April 1, 2013 and is payable to the National Crop Insurance Trust Fund. Insurance. Currently the CIL is payable at 1% of the profit after taxes. 9.3 Withholding Tax (WHT) on dividends paid by the Bank, Subsidiaries and Associates 9.3.1 WHT on dividends paid by the Bank Withholding taxes arising from the payment of dividends by the Bank will be accounted for when it is recognized the liability to pay the corresponding dividend is recognized until December 31, 2019. Pursuant to the notice issued by the Treasury Department on February 18, 2020, the requirement to deduct WHT on dividends was eliminated as of December 1, 2020. January 2020. 9.3.2 WHT on dividends paid by subsidiaries and related dividends received by the Bank from its subsidiaries and related companies were subject to a 14% withholding deduction until December 31, 2019. As of January 1 In 2020, the requirement to deduct WHT was removed (as mentioned in note 9.3.1 above). 9.4 Economic Service Charge (CES) Pursuant to the provisions of the Finance Law No. 11 of 2004 and its amendments, the CES was introduced as of April 1, 2004. The ESC was payable at 0.5% of total sales and was deductible from income tax payments. Unclaimed ESC may be carried over and offset against income tax due in the following three years, including the current assessment year. According to the notice published by the Department of the Treasury on January 1, 2020, the ESC was abolished as of January 1, 2020. 9.5 Value Added Tax on Financial Services (VAT FS) The added value attributable to the provision of financial services is calculated by adjusting the economic depreciation, calculated at the rates prescribed by the Treasury, to accounting profit before income tax and emoluments payable. The remuneration to be paid includes benefits in kind and non-monetary benefits, including contributions or accruals related to termination benefits. The amount of VAT FS calculated at the time of determining the profit or loss for the period is presented in note 22 on page 187. 9.6 National Construction Tax on Financial Services (NBT FS) As of January 1, 2014, the a 2% NBT on the provision of financial services through an amendment to Law NBT No. 09 of 2009. Until November 30, 2019, NBT was taxable on the same basis used for the calculation of VAT on the financial services, as explained in note 9.5 above. According to a notice published by the Treasury Department on November 29, 2019, NBT was abolished effective December 1, 2019. The amount of NBT FS calculated to determine profit or loss in 2019 is disclosed in note 22 in the page 187. 9.7 Debt Redemption Rate on Financial Services (DRL FS) Pursuant to Finance Law No. 35 of 2018, effective October 1, 2018, a DRL FS of 7% on value added was introduced attributable to the provision of financial services by any financial institution. DRL FS was subject to tax on the same basis used for the calculation of VAT FS on financial services, as explained in note 9.5 above. According to a notice published by the Treasury on January 20, 2020, the DRL FS was abolished as of January 1, 2020. The amount of DRL FS calculated to determine profit or loss in 2019 is disclosed in Note 22 in the page 187 10. Significant Accounting Policies – Statement of Cash Flows 10.1 Statement of Cash Flows The statement of cash flows is prepared using the “indirect method” preparing cash flows in accordance with the Sri Lanka Accounting Standard – IAS 7 on the "Statement of cash flows" (IAS 7). Gross cash and cash equivalents include highly liquid short-term investments that are readily convertible into known amounts of cash and are subject to negligible risk of changes in value. The cash and cash equivalents referred to in the cash flow statement include the items explained in note 28 on page 196. The cash flow statement is on page 154.
179. 11. Amendments to accounting standards issued but not yet in effect The amended standards and interpretations that have been issued but are not yet in effect as of the date of publication of the Bank's financial statements are detailed below. The Group/Bank intends to apply these standards, if applicable, when they come into effect. The Group/Bank is currently evaluating the potential impact of this change on its financial statements. Amendments to IFRS 16 – Rental concessions related to COVID-19 The amendments exempt lessees from applying the IFRS 16 guidance on accounting for rental concessions for rental concessions arising as a direct result of the pandemic of COVID-19. As a practical matter, a tenant may choose not to consider whether a landlord's COVID-19-related rent concession constitutes a lease modification. A lessee making this election accounts for any change in lease payments that arises from lease concessions related to COVID-19 in the same way that it would account for the change under IFRS 16 if the change were not a lease change. Financial Reporting These amendments to various standards are effective for annual reporting periods beginning on or after January 1, 2021. Annual Report 2020 The Phase 2 IBOR reforms include a number of relaxations and additional disclosures. The amendments help entities apply IFRS when changes in contractual cash flows or hedging relationships arise as a result of the reform. Commercial Bank of Ceylon PLC The amendments to IFRS 9 and IAS 39 provide a number of exemptions that apply to all hedging relationships directly affected by interest rate reform. A hedging relationship is affected if the reform creates uncertainty about the timing and/or amount of cash flows based on the benchmark of the underlying or hedging instrument. Notes to the Financial Statements Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 – Reform of the Reference Interest Rate (Phases 1 and 2) – (“IBOR Reform”) The amendment applies to the annual periods beginning on or after June 1, 2020. This change is not expected to have a significant impact on the Group/Bank's financial statements in the foreseeable future. 11 177
180. 12. Gross profit Accounting and valuation methods Revenue is recognized to the extent that it is probable that the economic benefit will flow to the Group and the revenue can be reliably determined. GROUP 2020 Rs. ’000 2019 Rs. ’000 2020 Rs. ’000 2019 Rs. '000 178 124,087,713 129,287,743 122,330,386 127,779,540 180 11,839,689 12,874,966 11,268,543 12,406,584 15 181 1,878,060 1,360,833 1,878,086 1,360,858 16 181 6,390,197 1,135,711 6,390,197 1,135,711 17 182 Note Page No. Ingresos de intereses 13.1 Ingresos de tarifa y comisión 14.1 Ganancias netas/(pérdidas) de las ganancias netas trading/(losses) from the breakdown of financial assets Other operating income, total net 7,770,754 6,081,876 7,844,269 6,023,591 151,966,413 150,741 .129 1499,711,481018,48,48,48 years. recognized in the Profit and Loss Account includes: – Interest on financial assets measured at amortized cost (CA) calculated using the TIE method; Annual Report 2020 Notes to the Financial Statements For the year ended December 31 – Interest on financial assets at fair value through profit or loss (FVTPL) calculated using the EIR method; Commercial Bank of Ceylon PLC BANK – Interest on financial assets at fair value through other comprehensive income (FVOCI) calculated using the EIR method; – Interest on financial liabilities measured at amortized cost calculated using the TIE method. Effective interest rate (ERI) The EIR is the rate that exactly discounts estimated future cash receipts or payments over the expected life of the financial instrument: The credit-adjusted EIR is the rate that, according to the original approach, discounts inflows of estimated future cash (including credit losses) at amortized cost. z is the gross carrying amount of the financial asset; or z the amortized cost of the financial liability. In calculating the EIR for financial instruments that are not credit-impaired assets, the Bank estimates future cash flows taking into account all contractual terms of the financial instrument, but not expected credit losses (ECL). For credit-impaired financial assets classified as Stage 3, a credit-adjusted EIR is calculated using estimated future cash flows, including ECL. The EIR calculation includes transaction costs and fees, as well as points paid or received, which are an integral part of the EIR. For financial assets that were credit-impaired at initial recognition, interest income is calculated by applying the credit-adjusted EIR to the amortized cost of the asset. Interest income is not calculated on a gross basis even if the credit risk of the asset improves. Group for the year ended December 31, Note Page No. Interest 13.1 178 Less: Interest Expense 13.2 179 Bank of Net Interest Income 2020 Rs. '000 2019 Rs.' 000 2020 Rs. '000 2019 Rs 127,779,540 73,218,911 80,931,352 72,759,045 80,571,268 50,868,802020202 years. 49,571,341 47,208,272 13.1 Interest income GROUP 2020 Rs. '000 2019 Rs. '000 2020 Rs. '000 2019 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 For the year ended December 31, note 12 13 page no. Placements with banks 777,425 931,571 754,313 918,690 Securities purchased under resale agreements 836,773 1,906,902 836,773 1,906,667 1,831,327 474,478 1,831,327 474,478 34.902 67.453 34.902 67.453 1,796.425 407.025 1,796.425 407.025 84.257.196 100.444.369 -LOANS -LOWS -AMIVETS -AMIVULTS -AMBULTUMS FINDUMBULTE INSTANGTUMGE INSTECTULE FINDUMBULTE INSTECTUME INSTANGTUME INSTANGTUME INSTANGTUME FINANZETS FINANGENTTURTEGEBULTEN FUND FIVE FOR FINDUMBULTUGE FUNGE INSTANGTUME INSTANGTUME INSTANGTEN INGBULTIKE
181. Financial assets at amortized cost– Debt and other financial instruments Financial assets at fair value through other comprehensive income Accrued interest on impaired loans and accounts receivable from other customers 34.2(a) and 34.2(b) 204 Other interest income Total 2020 Rs 000 2019 Rs 000 2020 Rs. '000 2019 Rs. '000 13,194,851 7,819,563 12,891,769 7,572,183 18,053,545 15,091,368 18,031,388 15,067,335 2,895,955 1,258,339 2,850,806 1,258,339 11,375 7,884 1,634 1,725 ​​​​​​​​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 las medidas de alivio por value of Rs 2,640,810 crore (approx) was offset in interest income. 13.2 GROUP Interest Expenses For the year ended December 31, Note Page No. Liabilities with Banks Financial Liabilities Derivatives Repurchased Securities Financial Liabilities at Amortized Cost - Amounts owed to Depositors Loans for Refinancing Loans in Foreign Currency Subordinated Liabilities Interest Expenses on Liabilities for Leases 49.1 233 Total BANK 2020 Rs. '000 2019 Rs. '000 2020 Rs. '000 2019 Rs. '000 2,845,641 2,484,166 2,657,662 2,201,489 65,473 63,161 65,473 63,161 3,516,363 3,256,622 3,524,261 3,267,124 61,416,382 69,503,417 61,120,047 69,387,322 578,780 472,813 578,780 472,813 603,597 872,931 603,597 872,931 3,756,921 3,848,979 3,756,921 3,848,979 435,754 429,263 452,304 457.449 73.218.911 80.931.352 72.759.045 80.571.268 13.3 Ingresos netos por interest from government securities Interest income and interest expense on government securities listed in Notes 13.3(a), 13.3(b) and 13.3(c) below are fixed and have been taken from interest income and interest expense disclosed in Notes 13.1 and 13.2 respectively and in accordance with those published by the Central Bank of Sri Lanka. 13.3(a) Nettozinserträge Aus Sri Lanka Government Securities Group Bank 2020 Rs. '000 2019 Rs.' 000 2020 Rs. '000 2019 Rs.' 000 31,523,186 23,158,214 31,501,029 23,133,946 PURCHASED AGREEMENT SENES OF SENESESS ASSECENTS UNDER CONCEMENT OF VALUES OF VALUES SERIES SEVALS OF CONSALES OF SELESENT VALUES OF THE CASE. or loss 662,961 277,760 662,961 277,760 For the year ended December 31, Interest income 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 3,499,898 3,252,089 3,507,796 3,262,591 Less: Interest expense Securities sold with repurchase agreement Net interest income 3,499,898 3,252,089 3,507,796 3,262,591 28,023,288 19,906,125 27,993,233 19,871,355 Notes to the Financial Statements Page no. Financial Statements Note Annual Report 2020 For the year ended December 31, BANK Commercial Bank of Ceylon PLC GROUP 13 179
182. 13.3 (b) Net interest income of the Bangladesh Government Securities GROUP For the year ended December 31 Interest income Securities acquired under resale agreements Financial assets recognized in profit or loss Financial assets measured at amortized cost – debt securities and other financial instruments Notes to the financial statements Less: Interest expense Repurchase agreements Nettozinsertrag BANK 2020 Rs. '000 2019 Rs. '000 2020 Rs. '000 2019 Rs. '000 1,823,578 1,318,173 1,823,578 1,318,173 218,464 277,881 218,464 277,881 1,133,464 129,265 1,133,464 129,265 471,650 911,027 471,650 911,027 16,465 4,533 16,465 4,533 16,465 4,533 16 465 4 533 1 807 113 1 313 640 1 807 113 1 313 640 13.3 (c) Ingresos netos por intereses de Maldives Government Securities GROUP For the year ended December 31, Interest income Financial assets at amortized cost - Debt and other financial instruments Net interest income BANK 2020 R '000 2019 Rs.'000 2020 Rs - Expenses that are an integral part of the EIR of a financial asset or financial liability are capitalized and included in the measurement of the EIR and are recognized in the income statement during the expected life of the instrument. Other fee and commission income, including service fees, investment management fees, sales commissions and placement fees, is recognized when the related services are provided. If a loan commitment is not expected to result in a loan drawdown, the associated loan origination fees are recognized on a straight-line basis over the commitment period. z The company can identify the rights of each party. Other fee and commission expenses relate primarily to transaction and service fees, which are charged to expenses as services are consumed. In accordance with IFRS 15, the Bank applies a five-step revenue recognition model based on principles. Consequently, revenue is recognized only when all of the following criteria are met: z The contracting parties have approved the contract or contracts; in relation to the goods or services to be transferred; z The entity can identify the payment terms of the goods or services to be transferred; z The contract has commercial substance; z It is probable that the entity will collect the consideration to which it is entitled in exchange for the goods or services transferred to the customer. The Bank's applicability of IFRS 15 is limited to fee and commission income. GROUP 2020 Rs. '000 2019 Rs. '000 2020 Rs. '000 2019 Rs. '000 180 11,839,689 12,874,966 11,268,543 12,406,584 181 2,018,014 2,123,128 2,012,138 2,117,072 9,821,675 10,751,838 9,256,405 10,289,512 For the year ended December 31, Fee and commission income Less: Fee and Gastos por comisiones Ingresos netos por honorarios y comisiones BANCO Nota Página No. 14.1 14.2 14.1 Ingresos por commissions CONSOLIDATED For the year ended December 31 Services related to loans and credits Services related to credit and debit cards Services related to transactions and remittances Services related to deposits Services related to guarantees Other financial services Total 13 14 180 2020 Rs. '000 BANK 2019 Rs. '000 2020 Rs. '000 2019 Rs. '000 861,317 881,213 787,785 813,785 3,723,129 4,566,923 3,723,129 4,566,923 4,431,425 3,998,926 4,250,211 3,783,596 1,151,909 1,852,565 1,122,747 1,788,810 908,508 942,615 900,485 936,720 763,401 632,724 484,186 516,750 11,839,689 12,874,966 11,268,543 12,406,584
183. 14.2 Fees and commissions GROUP Expense 2020 Rs. '000 For the year ended December 31 Loans and loan related services Credit and debit card related services Transaction and remittance related services Other financial services Total BANK 2019 Rs. '000 2020 Rs. '000 2019 Rs. '000 48,591 54,028 47,443 51,637 1,811,962 1,877,797 1,811,962 1,877,797 55,456 62,299 50,728 58,634 102,005 129,004 102,005 129,004 2,018,014 2,123,128 2,012,138 2,117,072 For the year ended December 31, Derivative financial instruments Foreign exchange gains/(losses) from banks and other customers BANK 2020 Rs . '000 2019 Rs.' 000 2020 Rs. '000 2019 Rs.' 000 977,206 1,078,749 977,206 1,078,749 977,206 1,078,749 977,206 1,078,749 Asignaciones financieras reconocidas a través de ganancias o pérdidas medidas en el valor justo 557. /(pérdidas) 226.036 26.386 226.036 26.386 Plusvalías netas 331.543 41.162 331.543 41.162 Patrimonio es Net mark-to-market gains/( losses) 343,275 214,536 343,301 214,561 303,612 200,299 303,612 200,327 Net capital gains 20,468 916 20,506 919 Dividend income 19,195 13,321 19,183 13,315 1,878,060 1,360,833 1,878,086 1,360,858 Total 16. Net gains/(losses) from derecognition of financial Activos Políticas contables Las ganancias/(pérdidas) netas from derecognition of financial assets include all realized gains less losses related to debt instruments measured at FVOCI and financial assets measured at amortized cost. GRUPPE Für das am 31. December end Jahr wurden BANK 2020 Rs. '000 2019 Rs. '000 2020 Rs. '000 2019 Rs. '000 6,390,197 1,135,711 6,390,197 1,135,711 6,390,197 1,135,711 6,390,197 1,135,711 6,390,197 1,135,711 6,390,197 1,135,711 Financial assets measured at fair value through otros resultados integrales Títulos públicos Plusvalías netas Estados financieros totales Informe anual del GRUPO 2020 “Ganancias/(pérdidas) netas por negociación” comprende las ganancias menos losses in respect of trading assets and liabilities and also includes all realized and unrealized changes in fair value associated therewith Capital gains and losses, dividend income from trading assets and foreign exchange gains/(losses). Commercial Bank of Ceylon PLC Accounting policies Notes to financial statements 15. Net profit/(loss) on operations 14 15 16 181
184. 17. Other net operating income Accounting policies Other net operating income includes foreign exchange gains and losses, dividend income from equity instruments at fair value through other comprehensive income, dividend income from group companies, gains/losses on disposal of property, plant and equipment and rental income. GROUP 2020 Rs. '000 for the year ended December 31, profits/(losses) in the sale of property, plant and equipment Page No. 17.1 182 Gains on Revaluation of Foreign Exchange 19,731 926 7,958 7,361,099 5,647,577 157,103 20,360 157,103 20,360 98,200 85,397 28,419 39,796 396 Dividend Inome from Sonstig Beteiligungspapiere - 28.739 Gewinn Aus Eigentümerwechsel 40.076 - 14.498 183,579 182 ABZÜGLICH: Gewinn Aus Eigentümerwechsel 218.114 - GESAMT (14.498) 7.770.754 17.1 Gains/(Losses/Losses) Annual 2020 Commercial Bank of Ceylon PLC – 7,844,269 208,005 – 6,023,591 Accounting-related disposal proceeds less additional disposal costs. This is recognized as an item in "Other operating income" in the year in which the Group transfers control of the asset to the buyer. Rental income is recognized in the profit and loss account on an accrual basis. Accounting policies Impairments in accordance with IFRS 9 The Group recognizes a provision for expected credit losses (ECL) for the following financial instruments that are not measured at FVTPL: z cash and cash equivalents; z loans with banks; z Accounts receivable from credit institutions; z accounts receivable from other customers; z Financial assets at amortized cost – debt securities and other financial instruments; z Debt securities measured at fair value through other comprehensive income; z Loan commitments and financial investments are not impaired. The credit risk assessment and ECL estimate must be unbiased and probability-weighted and must incorporate all available information relevant to the assessment, including information about past events, current conditions, and reasonable and reasonable projections of economic conditions to date. reporting. In addition, the ECL estimate must take into account the time value of money. 182 198,522 14,498 18. Impairment and other losses Guarantee contracts. 17 18 – 17.2 Rental income accounting policy The gain or loss on the disposal of property, plant and equipment is determined as the difference between the book value of the assets at the time of disposal and Rs 2019,000 5,783,595 – 17.2 2020 Rs. '000 5,820 Dividend income from subsidiaries Notes to the financial statements 2019 Rs Based on a predefined threshold, the Group individually verifies whether the credit risk increases significantly (SICR). If a particular loan is impaired, the amount of the loss is calculated as the difference between the book value of the asset and the present value of estimated future cash flows. If the Group determines that no specific provision is required, these financial assets are tested for impairment together with the rest of the portfolio. The group calculates ECL using three main components; a probability of default (PD), loss given default (LGD) and exposure given default (EAD) as part of the collective assessment. These parameters are generally derived from internally developed statistical models and historical data and are then adjusted to reflect forward-looking information. z PD – The probability of default represents the probability that a debtor defaults on its financial obligations (as defined in Note 7.1.12.3) either during the next 12 months (12-month PD) or during the remaining term (12-month PD). for life) of the obligation. PD estimates are estimates as of a specific date, and days past due (DPD) are the primary input for determining the PD maturity structure for exposures. DPDs are determined by counting the number of days from the expiration date. The group uses statistical modeling to analyze the collected data and produces estimates of the remaining lifetime exposure PDs and how they are expected to change over time. z LGD: Loss Given Default is an estimate of the loss incurred if a default occurs at a given time. It is based on the difference between the contractual cash flows due and those that the lender would expect, including the realization of the guarantee. The Group estimates LGD parameters based on historical recovery rates of exposures to defaulting counterparties. They are calculated on the basis of a discounted cash flow using EIR as a discount factor. LGD is usually expressed as a percentage of EAD. z EAD: Exposure in the event of a default represents the expected exposure in the event of a default. The Group estimates the EAD taking into account the amortization of principal and interest from the balance sheet date to
185. EAD of a debt instrument is its gross book value. Credit cards and revolving lines of credit The Group's product offering includes a variety of corporate and retail lines of credit and overdrafts. The Group reviews the sanction limits at least annually and therefore has the right to remove and/or reduce the limits. Therefore, the Group only calculates the 12-month ECL provision (12 million ECL) for these facilities. The EAD results from the maximum of the two penalty limits, adjusted by the credit conversion factor (CCF), and the gross book value of the loan (amount used). The EAD of Level 3 contracts is limited to the gross book value equal to the amount used, as the Group is expected to freeze the limits of these contracts up to the amount used. The expected 12-month PDs are applied to the EAD and multiplied by the expected LGD and discounted as a proxy to the original EIR. Unused commitments When estimating the lifetime ECL (LTECL) for unused commitments, the Group estimates the expected portion of the commitment that will be used during its expected life. The ECL is then based on the present value of expected defaults when the loan is withdrawn. Expected defaults are discounted approximately at the expected EIR of the loan. For loan commitments and forward-looking information The Group considers forward-looking information both in its assessment of whether the credit risk of an instrument has increased significantly since initial recognition and in its assessment of ECL. The group also obtained senior credit opinions from economists and credit and risk management departments to formulate a reference, best and worst case scenario. The base case represents the most likely outcome and is aligned with the information used by the group for strategic planning and budgeting. The Group has identified and documented key credit risk factors, both quantitative and qualitative, for various portfolio segments. Quantitative economic factors are based on economic data and forecasts published by the CBSL and other reliable sources. Quantitative factors of credit risk Qualitative factors of credit risk GDP growth Status of industrial businesses Unemployment rate Regulatory impact Interest rate (AWPLR) Government policy Inflation rate Exchange rate ECL calculation The Group evaluates the provision in LTECL , except for the following, which is measured as 12m ECL. z Accounts receivable for which credit risk has not increased significantly since initial recognition. z Debt securities that have a low credit risk at the reporting date. The Group considers that a debt instrument has a low credit risk if it has an investment grade credit risk rating. Impaired at the balance sheet date: as the present value of all defaults (ie the difference between the cash flows that the entity owes by contract and the cash flows that the Group expects); z Financial assets that are credit-impaired at the balance sheet date: as the difference between the gross book value and the present value of expected cash flows; z Undrawn loan commitments: as the present value of the difference between the contractual cash flows to which the Group is entitled if the commitment is withdrawn and the cash flows that the Group expects to receive; z Financial guarantee contracts: the payments that are expected to be reimbursed to the holder less the amounts that the Group expects to collect. Financial assets not credit-impaired at the balance sheet date As described above, the Group calculates an ECL provision of 12 million based on the expectation that a default will occur within 12 months of the balance sheet date. These 12-month expected PDs are applied to EAD and multiplied by the economic factor adjustment, the expected LGD, and discounted as a proxy to the original EIR. If the loan has a SICR from inception, the Group recognizes a provision for LTECL based on the estimated PDs over the life of the instrument. Credit-impaired financial assets at the balance sheet date The provision for credit-impaired financial assets, measured individually, is calculated as the difference between the gross book value of the asset and the present value of estimated future cash flows Expected future cash flows They are based on estimates made by the credit risk officer at the reporting date and reflect reasonable and reasonable assumptions and forecasts about future recoveries and expected future interest payments. The Group periodically reviews the assumptions used to forecast future cash flows. Notes to the financial statements LGD for debt securities issued by the Government of Sri Lanka in rupees is considered 0%, LGD for foreign currency denominated securities issued by the Government (Sri Lanka Development Bonds (SLDB) and Sri Lanka Sovereign Bonds). Lanka (SLSB)) is considered 20% as per the guideline issued by the Central Bank of Sri Lanka and 45% for all other LGD instruments. z Financial assets other than the financial statements of loans The Group has no historical experience of losses on debt instruments at amortized cost and debt instruments at FVOCI. Therefore, the group considers PDs published by external sources (eg Bloomberg). Financial Guarantee Contracts. The Bank's liability under each guarantee is measured at the higher of the amount originally recognized less the accumulated amortization recognized in the income statement and the ECL provision. To this end, the bank estimates the ECL based on the present value of the expected payments to reimburse the holder for any credit loss incurred. Deficits are discounted using the risk-adjusted interest rate for the exposure. The provision for expected credit losses related to financial guarantee contracts is included in “Other liabilities”. PCEs are measured as follows: Annual Report 2020 Losses due to impairment of investments Losses due to impairment of investments include the PCEs of debt securities at FVOCI and financial assets at amortized cost. In the case of letters of credit, the PCE value adjustments are presented in “Other liabilities”. Event of default of Commercial Bank of Ceylon PLC together with any expected withdrawal of the committed lines. To calculate the EAD of a Stage 1 loan, the Group assesses potential default events within a 12-month period. For all other loans, the EAD for events of default is taken into account during the life of the financial instrument. Additionally, the loans identified as impaired in Note 7.1.12.3 and the loans with a probability of default of 100% are subjected to impairment tests. Valuation of guarantees The Bank seeks to use guarantees whenever possible to mitigate its exposure to financial assets. Collateral comes in various forms such as cash, gold, government securities, letters of credit/guarantees, real estate, accounts receivable, inventory, other non-financial assets, and credit enhancements such as offset agreements, etc. 18 183
186. Commercial Bank of Ceylon PLC Annual Report 2020 Financial Statements Notes to the Financial Statements Collateral Seized The BankIt is our policy to maintain the redeemed collateral at its fair value on the redemption date and such assets will be disposed of at the earliest possible date. These assets are reported as assets held for sale in accordance with the Sri Lanka Accounting Standard – IFRS 5 on “Non-current assets held for sale and discontinued operations”. Cancellation of financial assets Loans and debt instruments are canceled (in whole or in part) when there is no realistic prospect of repayment. This is often the case when the bank determines that the borrower does not have assets or sources of income that can generate sufficient cash flows to pay the repaid amounts. However, the derecognised financial assets could continue Base case % worst case % scenario Probability weighting 15.00 40.00 45.00 In addition, the Group considers that there has not been a material impact of COVID-19 on the value of the assets pledged as collateral and therefore no further adjustment to ECL in this regard. Please see Note 2.12.5 on page 158 for a detailed discussion of the significant assumptions and estimates used to capture the impact of COVID-19 on ECL provisions. GROUP For the year ended December 31, Notes Loans and advances to other customers Page No. 34.2(a) & 34.2(b) 204 BANK 2020 $ '000 2019 $ '000 2020 $ '000 2019 $ ' 000 18,124,673 10,309,857 17,865,211 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 3,291,313 1,020,414 3,287,083 1,016,571 21,415,986 11,330,271 21,152,297 11,060,214 – 327,855 Other financial assets and off-balance sheet credit exposures Total impairment charges Investments in subsidiaries 18.1 & 18.2 184 & 185 37 .1 211 - Total direct write-downs - 3,546 1,252 3,546 1,252 21,419,532 11,331,523 21,483,698 11,061,466 18.1 Impairment charge in the Profit and Loss Account - Group 2020 Corresponding to the year ended December 31, note sheet No. 6 – 1 Loans in banks 30.1 197 (5,633) – – (5,633) (2,120) – – (2,120) Financial assets held for amortization cost of liabilities – loans and advances to banks os 33.1 202 (26) – – (26) 75 – – 75 Financial assets at amortized cost – loans and advances to other customers 34.2 (a) 204 3,901,554 10,359,763 18,124,673 (108,915) – 3,863 .356 F Financial assets at amortized cost: liabilities and other financial instruments 35.1(a) 206 Financial assets at fair value through other comprehensive income 36.2 Liabilities and contingent commitments 58.3(a) 250 Total 3,863,356 208 Level 2,000 rupees 2019 Stage 1 Rs 1,000 Individual Impairment 184 Best Case % As of Dec 31, 2020 As of Balance Sheet Date, Bank has captured the impact on ECL due to COVID-19 through modeled result and management overlays. Management overlays include additional ECL provisions of Rs 2,899,290 crore (approximately) to assess lifetime ECL on outstanding claims from borrowers operating in risky industries affecting the PD and LGD load in the model ECL valued at Rs 1,182,754 crore (approximately) and implications for changing probability weights assigned to multiple economic scenarios and emphasis on qualitative factors used to assess forward-looking macroeconomic indicators for ECL at Rs 1,106,486 crore (approx. ). Collective Impairment 18 Probability Weighting Scenario (Bank) execution actions to comply with the Bank's procedures to recover the amounts owed. - 3,901.554 paragraph 3 000 3,983,706 RS. Total '000 level 1 RS. 000 3,376.057 14,140,967 - (108,915) level 2 Rs. – 814,141 – – 814,141 265,999 – 799,389 239,399 98,060 3,958,799 10,334,696 21,415,986 404,357 2,609,148 767,211 7,122,491 0.057,2065 Rstage
187. 18.2 Impairment Expense for Profit and Loss Account - Bank 2020 2019 Total Rs 000 Rs 1,000 Stage Rs 2,000 Stage Rs 3,000 Stage Total Rs 000 Appendix Page No. Cash and Cash Equivalents 28 , 1,196 ( 2,526) - - (2,526) 1,350 - - 1,350 Loans in banks 30.1 197 (5,651) - - (5,651) (2,144) - - (2,144) Financial assets at amortized cost - loans and advances to banks 33.1 202 ( 26 ) – – (26) 75 – – 75 Financial assets at amortized cost – Loans to other customers 34.2 (b) 204 3,925,463 10,083,744 17,865,214 (41,669) 3,856,007 Individual provision – Collective provision Financial assets at cost amortized – Debt and other financial instruments 3,856,007 35.1 (b) 206 Financial assets measured at fair value through other comprehensive income 36.2 Contingent liabilities and commitments 208 3,925,463 3,967,287 3,967,287 6,116,457 13,897,927 2,447. 313 – (41,669 3981) – 2,161.8 –6 ,681,829 7,940 – 814,141 – – 814,141 265,999 – 7 99,316 236,209 98,060 3,982,708 10,058,677 21,152,297 467,760 2,545,373 767,138 58.3 (b) 250 Total – 7,110,912 57,245 (25,067) 7,637,999 10,043,643 1,931,678 1,931,678 5,706,321 8,111,965 1 52.870 160.810 – 265.999 256.212 590.481 8.047.081 11.060.214 19. Gastos de personal por métodos de contabilidad y evaluation see note 7.8 on pages 172 to 174. Bank Group 2020 2019 Rs. '000 2020 2019 RS. the year ended December 31, note p. Salary and bonus 19.1 Pension costs 19.1 Contributions to contribution plans/defined benefits: Financed schemes 1,702,824 1,396,492 1,673,272 1,373,102 49.2 (c) and 49.3 (c) 234 and 235 234.986 485,566 210.795 469946 to defined benefit plans – Unfunded schemes Total 112,203 – – 1,420,133 1,385,367 1,393,306 1,373,725 14,992,748 14,408,914 14,563,999 14,082,659 19.1 Gehalts-, Bonus- und Pensionskosten 19.2 Anteilsbasierte Vergütung 19.3 Sonstige Aufwendungen Gehalt, Bonus und Beiträge zu beitragsorientierten/leistungsorientierten Plänen anteriormente también incluye las cantidades y contribuciones paid on behalf of the Executive Directors. The Bank has a share-based payment plan that is settled with capital, the detail of which is detailed in Note 53 on page 241. This includes expenses such as overtime pay, vacation pay, medical and hospital expenses, as well as such as training/recruitment expenses and employee benefits, etc. Report 2020 Tier 1 Rs.' 000 Commercial Bank of Ceylon PLC For the year ended December 31, 20. Depreciation Accounting Policies Depreciation Depreciation is calculated by depreciating the cost of property, plant and equipment less its estimated residual value using the straight-line method over its useful life estimated and recognized in the Profit and Loss Account. Own land is not depreciated. Right-of-use assets are amortized over the useful life of the assets. However, if there is insufficient certainty that the Group will obtain the property at the end of the lease term, the assets are depreciated over the estimated useful life and the lease term, whichever is shorter. 185
188. The estimated useful life of the property., fixtures and equipment of the Bank as of December 31, 2020 as follows: Asset Class Percentage Depreciation Per Year Period (Years) 2.5 40 20 5 20 5 20 5 20 5 10 10 Commercial Bank of Ceylon PLC Annual Report 2020 Statements Notes to the Financial Statements Own and leased buildings Automobiles Computer equipment Office equipment, furniture and fixtures Office equipment Office interiors Furniture and fixtures 20 21 The above rates are compatible with the rates used by all group companies and these rates They did not change during the year. Depreciation rates are determined separately for each significant part of an item of property, plant and equipment and depreciation begins when it is available for use, i. h if it is in the place and conditions required for its operation provided by management. Depreciation of an asset ends on the date before the asset is disclosed All classes of property, plant and equipment together with a reconciliation of book values ​​and accumulated depreciation at the beginning and end of the year together with other relevant information Note 39 on pages 214 to 225. Depreciation methods, useful lives and residual values ​​are reassessed at each balance sheet date and adjusted if necessary. Depreciation Percentage per Year Period (Years) Computer Software 20 5 Brand 20 5 Asset Class The above rates are compatible with the rates used by all group companies and these rates have not changed during the year. Unamortized balances of finite-lived intangible assets are reviewed for impairment whenever there is an indication of impairment and are recognized in the income statement to the extent that it is no longer probable that they will be recovered in the expected period in which they are can achieve future benefits. . Depreciation methods, useful lives and residual values ​​are verified at each balance sheet date and adjusted if necessary. Group depreciation of property depreciation of rights of use depreciation of computer software depreciation of total bank brands 2020 2019 RS. 39.1 & 39.3 – 2,989,031 – 2,754,521 21. Other Operating Expenses Accounting Policies These expenses are recognized in the Profit and Loss Account based on a direct correlation between the costs incurred and the generation of specific income. All expenses incurred in the operation of the business and maintenance of property, plant and equipment in good working order are charged to the income statement. GROUP For the year ended December 31 Directors' fees Auditors' fees Audit fees and expenses Audit-related fees and expenses Non-audit-related fees and expenses Professional and legal expenses Deposit insurance premiums paid to banks plants Donations, including contributions made to the CSR Trust Fund Establishment costs Property maintenance Loss from market valuation of investment properties Loss from revaluation of land and buildings Office and maintenance costs Total 186 is classified as held for sale or at the time the asset is derecognised. Amortization of Intangible Assets Intangible assets are amortized using the straight-line method to amortize the cost during their estimated economic life from the date they are available for use at the following rates: Note Page No. 21.1 Rs 187 2020. '000 BANK 2019 Rs. '000 2020 Rs. '000 2019 Rs. '000 81,117 80,247 53,249 52,448 34,298 32,574 23,530 22,530 20,140 21,188 11,500 11,500 7,725 7,655 7,600 7,600 6,433 3,731 4,430 3,430 834,415 1,073,590 1,197,049 1,403,364 977,846 839,685 975,824 839,313 96,925 94,010 96,855 93,991 1,644,397 1,878,292 1,482,800 1,748,143 1,797,222 1,649,310 1,814,939 1,638,747 40 225 12,096 – 39.1 215 39,872 – – 39,872 – – 2,648,982 3,227,608 2,202,818 2,789,920 8,167,170 8,875,316 7,886,936 8,588,456
189. 21.1 Directors' fees Directors' fees represent the salaries paid to executive and non-executive directors of the Group and the Bank. 22. Taxes on Financial Services Accounting Policies See Notes 9.5 to 9.7 on page 176. Page No. 2020 Rs. '000 2019 Rs. '000 2020 Rs. '000 2019 RS (suppressed as of December 1, 2019) 9.6 176 - 553,802 - 548,708 Debt refund Levy (Abolid Bilanziermier Income tax expense is recognized in the income statement, except to the extent that it relates to items recognized directly in equity or in ORI. Current taxes “Current taxes” comprise the expected tax payable or receivable on taxable profit or loss for the year and any adjustment in tax payable or receivable with respect to prior years. The current tax asset or liability is the best estimate of the expected amount of tax to be paid or received, reflecting any uncertainty surrounding income taxes. It is valued using the tax rates applicable at the date of the balance sheet or soon applicable. Current taxes also include taxes derived from dividends. Consequently, the tax provisions are constituted based on the fiscally adjusted accounting profit for the year in accordance with the provisions of the Internal Revenue Law No. 24 of 2017, effective as of April 1, 2018. This also includes the components of tax expense, effective tax rates and a reconciliation between profit before tax and tax expense as required by the Sri Lanka Accounting Standard - IAS 12 on "Income Taxes". The tax provision for foreign operations is formed on the basis of the accounting profit for the year, adjusted for tax purposes in accordance with the provisions of the relevant laws of those countries, using the tax rates in force on the date of the report. that they are not likely to be reversed in the short term; and z taxable temporary differences arising in the initial recognition of goodwill. Additional taxes derived from the distribution of dividends by the Group are recognized at the same time as the liability to pay the corresponding dividend is recognized. These amounts are generally recognized in profit or loss because they generally relate to revenue from transactions that were initially recognized in profit or loss. Deferred taxes Deferred taxes are recognized in relation to temporary differences between the carrying amounts of assets and liabilities for accounting purposes and the amounts used for tax purposes. Deferred taxes are not recognized for: z temporary differences in the initial recognition of assets or liabilities in a transaction that is not a business combination and that does not affect accounting or taxable profit or loss; z Temporary differences related to investments in subsidiaries to the extent that deferred tax assets are recognized for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which can be used. Deferred tax assets are reviewed at each balance sheet date and reduced to the extent that the related tax benefit is no longer likely to be realized. Unrecognized deferred tax assets are remeasured at each balance sheet date and are recognized to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred taxes are measured at the tax rates that are expected to apply to temporary differences when they are reversed, using the tax rates in effect or soon to be in force at the balance sheet date. Deferred tax measurement reflects the tax consequences that would arise if the Group expected to realize or settle the book values ​​of its assets and liabilities at the balance sheet date. Financial Statements Note Annual Report 2020 For the year ended December 31 Notes to the Financial Statements BANK Commercial Bank of Ceylon PLC GROUP The corporate breakdown of income tax expense in the Profit and Loss Account is as follows: GROUP For the Year Ended December 31 Note Page No. Applicable Income Tax Rate % Tax Expenses for the Current Year Bank 2020 2019 Rs. '000 Rs.' 000 10,178,040 8,600,955 8,308,597 National Banking Unit Income Tax Expense 28 6.54777.0771 4.87 Shore Banking Center 28 899,668 899,668 882,204 Bangladesh Income Tax Expense Operation 40 3,220.142 3,209.14 .134 Benefit Remittanz Operation Operation Operation
190. GROUP For the year ended December 31, Note Page No. Applicable Income Tax Rate % Withholding Tax on Dividends Received 14 Commercial Development Company PLC Income Tax Charge 28 CBC Tech Solutions Limited BANK Income Tax Charge 2020 2019 2020 2019 Rs. '000 Rs. '000 Rs. 56 035 44 289 – – 28 38 155 32 113 – – CBC Finance Limited Income tax expense 28 83 977 59 057 – – Commercial Bank of Maldives Private Limited Income tax expense 25 109 076 147 259 Commex Sri Lanka S.R.L. – Italy 24 Income tax expense of CBC Myanmar Micro Finance Company Limited 25 Income tax expense of Commercial Insurance Brokers Private Limited 28 14,510 – – – – – 6,714,417 – – 17,128 8,596 – – – Commercial Bank of Ceylon PLC Annual report 2020 Financial statements Notes to the financial statements Previous years Sub/ (Over) provision for taxes with respect to previous years 48 232 (121,298) (989,148) (113,565) (991,884) Reversal of deferred taxes 42.1 228 ( 2,623,679) (2,048,100) (2,615,567) (2,002,575 ) 7,433,063 5,563,500 7,137,823 5,314,138 Effective Tax Rate (including deferred taxes) (%) 30.36 23.79 Effective Tax Rate (excluding 4%) 3.7 deferred taxes 4.7 Total in Internal Revenue corporate tax rate from 28% to 24%. However, the Bank has not incorporated the above revisions into its calculation of liability for income tax pending promulgation and formal changes to the Internal Revenue Law. If the above proposal were to be considered, the impact on the profit and loss account for the year ended 31 December 2020 would be an income tax reversal of Rs 306,956 crore (reversal of Rs 1,063,834 crore). income tax payable and a deferred tax expense of Rs 756,878 crore). In addition, the impact on the profit and loss account and other comprehensive income would be a reversal of deferred tax of Rs 445,812 crore Exemption 23.1 Reconciliation of accounting profit to income tax expense A reconciliation between taxable profit and accounting profit multiplied by the statutory tax 2020 2019 2020 2019 Rs. '000 Rs.' 000 24,519,860 22,983,312 22,339,105 7,59,517 7,300,914. 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 40 2,310,809 2,339,627 2,310,809 2,339,627 24, 25 & 28 291,420 384,586 Bangladesh operation of the Bank – – Tax effect of exempt income (1,528,341) ( 1,844,454) (1,528,341) (1,844,454) Tax effect of n 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) In the income statement at the effective income tax rate (2,800) - 325,672 275,751 325,672 232 (121,298) (989,148) (113,565) (991,884) 228 (2,623,679) ( 2,048,679) (2,048,679) 7,137,823 5,314,138 – 42.1 – 275,751 Withholding taxes on dividends received 188 Applicable income tax rate % before taxes Operating profit before taxes on operating subsidiaries 23 in accordance with the Notice on interest income from bonds Sri Lankan Development Agency mentioned above with effect from April 1, 2018. However, other exemptions available as of January 1, 2020 have not been included in the calculation of income tax liability as of December 31, 2020 pending promulgation and formal modification of the Internal Revenue Law. 14,930 - 14,510
191. 24. Earnings per share (EPS) accounting policy The Group calculates basic and diluted earnings per share for its ordinary shares. Basic earnings per share is calculated by dividing the profit or loss attributable to the Group's common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share are calculated by dividing the profit or loss attributable to common shareholders of the Group by the weighted average number of common shares outstanding, adjusted for the effect of any potentially dilutive common shares that include stock options granted to shareholders. employees as part of employee shares. Options Option Plans (ESOP). El detalle de la UPA básica y diluida se presenta a continuación: 24.1 Utilidad por acción ordinaria básica y diluida GRUPO Nota Página No. BANK 2020 2019 2020 2019 16,939,950 17,263,259 16,373,489 17,024,967 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 UNVEVFNIS ERGEBNIS JE STAMMAKTIE (RS.) 15.70 16.41 15.18 16.19 Gains diluted by common action (rs.) 15.70 16.41 15.41 15.18 16.19 January 1. of issuance and allocation of new shares of the complementary dividend of 2018 41 Add.1 Number.2 52 Add.1 Stock satisfaction for issuance and allocation of new shares of f Annual dividend of 2019 52.1 241 24,201,866 – 24,201,866 Addendum : Number of shares issued to IFC parties (private placement) 52.1 241 115 197 186 – 27 068 191 Add: Number of shares issued under ESOP-2008 52.1 241 – 1 166 905 .638 – 16,490,624 1,027,213,201 293,385 – 1,027,213,201 – 16,490,624 24,201,866 – 1,051,415,067 266,687 Add: Number of common shares outstanding as per ESOP-2015 – – – – Add: Number of common shares outstanding as per ESOP-20 common share 1,166,905,638 1,027,506,586 1,078,776,0513, Add on number of bonus 4 1,078,776,6513: options outstanding under 2008 ESOP at year-end – – – – Add: bonus element on number of options outstanding under 2015 ESOP at year-end – – – – Add: element bonus on the number of options outstanding under ESOP 2019 at the end of the year – – – – Weighted average number of common shares for the calculation of diluted earnings per common share (*) 1,166,905,638 1,027,506,586 1,078,776, 643 Weighted average number of common shares at the end of the reporting year 2020 with basic earnings per share number of as denominator see Common shares: Commercial Bank of Ceylon PLC Profit for the year attributable to shareholders of the bank (Rs. '000) Notes to the Financial Statements Amount used as numerator: 1,051,681,754 (*) The weighted average number of common shares for basic EPS and diluted EPS are the same since the market price of the common shares with voting rights is lower than the price of offer of the ESOPs as of December 31, 2020. 24 189
192. 25. Dividends on common shares Accounting policies See Note 7.7 on page 172. GROUP AND BANK 2020 Second Provisional Rs. 3.00 per share for 2019 2019 Second Provisional Rs. 3.00 per share for 2018 (Paid on Feb 24, 2020) Rs. 000 (Paid on Feb 15, 2019) Rs. '000 Commercial Bank of Ceylon PLC Annual Report 2020 Financial Statements Notes to Financial Statements Net Dividend Paid to Common Shareholders from Ordinary Profits 1.50 per Share for 2019 (Paid on 18 November 2019) Rs 2,638,304,000 – 1,334,442 394,565 – 206,818 3,032,869 – 1,541,260 Dividends for 2019 (Paid in 2020) Dividends for 2020, 3020 for common and non-voting shareholders on January 3020 for non-voting shareholders of the Bank for the year ended on December 31, 2019 and said dividend was paid on February 24, 2020. It is important to note that although the Bank has historically declared and paid interim dividends in the form of cash dividends, in 2020 (for the year ended December 31, December 2020) the Bank did not declare cash dividends, in accordance with the restrictions of the Central Bank of Sri Lanka on the payment of interim cash dividends for the financial year 2020, in accordance with the ins instructions issued by Decree Law No. 03 of 2020 of May 13, 2020 on "Restrictions on discretionary payments by authorized banks". In addition, the Board of Directors of the Bank recommended and paid a final dividend of Rs 2.00 per share, which was paid by the issue and allotment of new voting and non-voting ordinary shares of the Bank for the year ending 31 December 2019, and these new shares were listed on July 6, 2020. 2020 26. Classification of financial assets and liabilities The following tables show a reconciliation between the balance sheet items and the categories of financial assets and liabilities of the Group and the Bank: 26.1 Classification of financial assets and liabilities – Group As of December 31, 2020 Financial instruments recognized in results (FVTPL) Note page number Rs.'000 Financial instruments at amortized cost (AC) Rs.'000 As of December 31, 2019 Financial instruments at fair value through other comprehensive income (FVOCI ) Rs.'000 Total financial instruments recognized in profit or loss (FVTPL) Financial instruments os at amortized cost (AC) Financial instruments at fair value through other comprehensive income (FVOCI) Total Rs. '000 Rs. '000 Rs. '000 Rs '000 Rs. '000 Activos financieros Efectivo y equivalentes de efectivo 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 – – - 13,147,534 - 13,147,534 FINANCY DERIVATIVE ASSETS 31 198 2,636,717 - - 2,636,717 1,830,927 - - 1,830,927 financial assets recognized in results - valued at fair value 32,198 35.189.471 - - - 35.189.471 21.468.033 - 2133 resale 25 26,190 – –
193. Stand 31.12'000 Financial instruments at amortized cost (AC) Financial instruments at fair value through other comprehensive income (FVOCI) Total Rs. '000 Rs. '000 Rs. '000 Rs. 000Rs. 1,000 Financial assets at amortized cost - Accounts receivable from banks 33 201 - 779,705 - 779,705 - 757,787 - 757,787 Financial assets at amortized cost - accounts receivable from other customers 34 202 - 909,829,172 - 909,829,172 - 9,31,91 financial assets in FortGefrten yschungskosten.999 - T. 302,059,529 – 107,059,021 – 107,059,021 Financial assets measured at fair value through other comprehensive income 207 36 Total financial assets – 37,826,188 – 1,395,704,035 278,716,794 278,716,794 278,716,794 1,712,247,017 – 23,298,960 – 1,139,569,812 197,825,017 197,825,017 197,825,017 1,360,693,789 finance al liabilities Due to banks 44 230 Derivative financial liabilities 45 231 Securities sold under repurchase agreements Financial liabilities at amortised cost – Due to depositors – 1,501,262 88,248,056 – – 88,248,056 – 1,501,262 – 1,495,317 53,807,425 – – 53,807,425 – 1,495,317 – 91,411,522 – 91,411,522 – 51,117,342 – 51,117,342 46 231 – 1,286,616,399 – 1,286,616,399 – 1.0 68,982,587 – 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 240 – 38,247,138 – 38,247,138 – 37,886,789 – 37,886,789 1,559,079,048 – 1,560,580,310 1,235,043,036 – 1,236,538,353 51 Total financial liabilities 1,501,262 1.495.317 26.2 Clasificación de activos Financial Instruments and Financial Liabilities - Bank As of December 31, 2020 Financial Instruments Recognized in Results (FVTPL) Note Page No. Rs. '000 Financial instruments at amortized cost (AC) Rs. '000 As of December 31, 2019 ES Financial instruments at fair value through other comprehensive income (FVOCI) Thousands of rupees Total financial instruments at fair value through profit or loss (FVTPL) Financial instruments at amortized cost (AC) Financial instruments at fair value through other comprehensive income (FVOCI) Total Rs '000 Rs.' 000Rs. '000 Rs.' 000Rs. '000 Financial assets in 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 - 39,12,46,46,466,46.46 years with banks 30 197 – 15,938,982 – 15,938,982 – 24,527,241 – 24,527,241 – – – 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 Activos financieros a coste amortizado – Préstamos y anticipos a bancos 33 201 – 779.705 – 779.705 – 757.787 – 757.787 Activos financieros ets at amortised cost – Loans and advances to other customers 34 202 – 896,845,453 – 896,845,453 – 884,645,744 – 884,645,744 Financial ASSETS AT MORTSED COST - DEBT AND OTHER FINANCIAL INSTRUMENTS 35 206 - 292,727,566 - 292,727,566 - 101,144,819 - 101,144,819 IM RAHMEN VON WIEDERKAUFSVEREINBARUNGEN GEKAUFTE WEERTPAPIERA - - NOTES TO THE FINANCIAL STATEMENTS RS. Financial instruments at fair value through other comprehensive income (FVOCI) Annual report 2020 Note Page No. Financial Instruments at Amortized Cost (AC) Commercial Bank of Ceylon PLC Financial Instruments Recognized in Profit or Loss (FVTPL) 26,191
194. Stand 31.12000 Note Page No. Financial assets at fair value through other comprehensive income 36 – 207 Total financial assets 37,826,188 Financial instruments at amortized cost (AC) Rs 31 Dec. 2019 Financial instruments at fair value through other comprehensive income (FVOCI) Thousands of rupees Financial total financial instruments at fair value through profit or loss (FVTPL) Financial instruments at amortized cost (AC) Financial instruments at fair value through other income integral (FVOCI) Total Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 197,568,330 197,568,330 278,461,369 278,461,369 278,461,369 1,683,800,995 - 23,298,960 - 1,116,218,982 197,568,330 1,337,086,272 s 45 231 Securities sold under repurchase agreements 192 87,451,306 – – 87,451,306 – 1,501,262 – 1,495,317 51,505,694 – – 51,505,694 – 1,495,317 – 91,437,612 – 91,437,612 – 51,220,023 – 51,220,023 231 – 1,265,965,918 – 1,265,965,918 – 1,053,307,660 – 1,053,307,660 47 232 – 54,555,933 – 54,555,933 – 23,248,893 – 23,248,893 51 240 – 38,247,138 – 38,247,138 – 37,886,789 – 37,886,789 1,537,657,907 – 1.539.159.169 1.217.169.059 – 1.218.664.376 Finanzielle Verbindlichkeiten zu fortgeführten Anschaffungskosten – Verbindlichkeiten gegenüber Einlegern 46 Finanzielle Verbindlichkeiten zu fortgeführten Anschaffungskosten – Sonstige Ausleihungen Nachrangige Verbindlichkeiten Summe finanzielle Verbindlichkeiten 1,501,262 1,495. 317 27. Fair value measurement Accounting policies The Group measures fair value using the following fair value hierarchy, which reflects the importance of the inputs used in the measurement. An analysis of the fair value measurement of financial and non-financial assets and liabilities is provided below: Level 1 entries that are quoted (unadjusted) market prices in an active market for identical instruments. When available, the Group determines the fair value of an instrument using quoted asset prices or broker price quotes (assets and long positions are valued at a bid price; liabilities and short positions are valued at a price of demand), without deducting transaction costs. A market is considered active when transactions in assets or liabilities take place with sufficient frequency and volume to provide price information on a continuous basis. Level 2 Inputs other than the prices quoted in Level 1 that are directly observable (ie, as prices) or indirectly 26 27 – 1,501,262 (ie, derived from prices). This category includes instruments classified in; (a) quoted prices in active markets for similar instruments, (b) quoted prices for identical or similar instruments in markets that are considered to be less active, or (c) other valuation techniques in which nearly all significant inputs are market data observable, directly or indirectly. Level 3 inputs that are not observable. This category includes all instruments for which the valuation technique includes inputs that are not based on observable data and the unobservable inputs have a significant impact on the valuation of the instrument. This category includes instruments valued based on quoted prices of similar instruments that require significant unobservable adjustments or assumptions to reflect the differences between the instruments. Valuation techniques include present value and discounted cash flow models and comparison with similar instruments for which there are observable market prices. The assumptions and data used in the valuation techniques include risk-free and reference interest rates, risk premiums when estimating discount rates, bond and stock prices, exchange rates, expected price volatility, and revisions. Observable prices or model inputs, such as market interest rates, are often available in the market for publicly traded stocks and government securities, such as Treasury bills and Treasury bonds. The availability of observable prices and model inputs reduces the need for management judgments and estimates while reducing the uncertainty associated with determining fair values. Models are adjusted to reflect the bid-ask spread to reflect the cost of closing positions, credit and debit valuation adjustments, liquidity spreads, and model limitations. In addition, gains or losses calculated when such financial instruments are initially recognized ('Day 1' gain or loss) are deferred and recognized only when the entries become observable or when the instrument is derecognized.
195. 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 at the balance sheet date by level in the fair value hierarchy into which the measurements were classified of fair value. These amounts were based on balance sheet values: GROUP As of December 31, 2020 Level 1 Rs. '000 Note Page No. 39 214 – 40 225 – – Level 2 Rs. '000 BANK Tier 3 Rs. '000 Level 1 Rs. '000 Level 2 000 Rs - 15,417,319 15,417,319 - - - 67,116 67,116 - - - 15,484,435 15,484,435 - - Level 3 Rs. 000 Total Rs -financial assets Property, plant and equipment - Financial assets 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 options2 9,7 – Currency8 9,7 9,872 4.814 – 4.814 – 4.814 – 4.814 Erfolgswirksam erfasste finanzielle Vermögenswerte – bewertet zum beizulegenden Zeitwert 32 198 Staatspapiere Aktien – 1,321,878 1.321,878 - - 1,321,878 - 280,100,559 - 279,845,258 207 Gobierno 223,589,375 56,511,184 Equity Securities 239,773 - 52,296 292,069 223,3344,074 524,521, 52128,5218,518,518,518,518,518ESTRO 21918ES ,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 Financial liabilities Derivative financial liabilities 45 231 Currency swaps – 1,132,513 – 1,132,513 - 1,132,513 - 1,132,513 Type Interest Swaps - 142,376 - 142,376 - 142,376 Term Contracts - 216.709 - 216.709 - 216,709 Cash Contracts - 5.016 - 5.016 - 5,016 currency options - 4.648 - 4,648 - 4,648 - 1.501.501.501.501.262 RS. '000 Tier 2 Rs. 000 - 11,810. '000 Total Rs. Non-financial assets at fair value – Commercial Bank of Ceylon PLC Land and buildings Investment property Non-financial assets Property, plant and equipment Land and buildings Investment property Total non-financial assets at fair value – 11,078,500 – 11,078,500 Financial assets Financial assets Derivatives 31,198 Currency swaps - 1,410,476 - 1,410,476 - 1,410,476 - 1,410,476 Forward contracts - 411,958 - 411,958 - 411,958 - 411,958 Spot contracts - 8,493 - 8,493 - 8,493 8,493 - 8,493
196. GROUP A 31.12'000 Level 1 Rs. '000 Level 2 Rs. '000 Level 2 Rs. '000 Stufe 3 Rs. '000 Gesamt Rs. '000 – – 20,484,895 20,484,895 – – 20,484,895 983,138 – – 983,138 983,138 – – 983,138 – 198,465,987 – 198,209,424 169,013 – 51,710 220,723 141,199,460 57,009,964 169,013 – 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 Derivative financial liabilities 45 231 Currency swaps – 1,140,261 – 1,140,261 – 1.140.261 – Swaps de tipos de interés – 53.295 – 53.295 – 53.295 – 53.295 Contratos a plazo – 295 .838 - 295,838 - 295,838 - 295,838 Cash contracts - 5,923 - 5,923 - 5,923 - 5,923 - 1,495,317 - 1,495,317 - 1,495,317 - 1,495,317 Total liabilities at fair value 27.2 Level 3 Measurement at fair value of property, plant and commercial equipment of the Bank (PPEy) PLC Level 3 Rs. 20 484 895 141 456 023 57 009 964 Capital values ​​The reconciliation from the beginning balance to the end for land and buildings in Level 3 of the fair value hierarchy is established in notes 39.1 to 39.4 on pages 215 to 218 that shows. The reconciliation of the revaluation surplus for land and buildings categorized as Level 3 in the fair value hierarchy is shown in the Statement of Changes in Equity on pages 146 to 153. Note 39.5(b) on page 219 provides information on Significant unobservable inputs used in the fair value measurement as of December 31, 2020 Value of land and buildings categorized as Level 3 in the fair value hierarchy. Note 40.1(c) on page 226 provides details of the valuation techniques used and the sensitivity of the fair value measurement to significant unobservable changes in input data. 27.3 Financial instruments not measured at fair value and fair value hierarchy The following methods and assumptions are used to determine the fair value of financial instruments that are not yet recognized at fair value on the balance sheet: Fixed income financial instruments Investment properties Fixed-rate fair value Financial assets and liabilities measured at amortized cost (for example, fixed-rate loans and receivables, depositors, subordinated debt) are estimated based on the discounted cash flow approach. This approach uses current market interest rates for similar financial instruments as a significant unobservable input to determine fair value and is therefore classified within Level 3 of the fair value hierarchy. The reconciliation from the opening balance to the closing balance for investment property within Level 3 of the fair value hierarchy is available in Note 40 on page 225) on page 224 provides details of the valuation methods used and the sensitivity of the fair value measurement to significant unobservable changes in parameters Note 40.1 (b) on page 226 provides information on significant unobservable inputs used to determine the fair value of investment properties categorized as Level 3 in the fair value hierarchy as of December 31, 2020 194 Tier 2,000 rupees 207 Government bonds 27 Tier 1,000 rupees BANK A significant increase/(decrease) in the market interest rate would result in a lower fair value/( older) informed. 1,140,261 Assets whose fair value equals book value Financial assets and liabilities with short maturities or short revaluation intervals are assumed to have book values ​​that approximate their fair value. This assumption also applies to sight deposits and savings deposits without a fixed term.
197. The following table shows the fair values ​​of financial assets and financial liabilities that are not measured at fair value and the associated fair value hierarchy used: GROUP As of December 31, 2020 BANK Level 1 Level 2 Level 3 Total Fair Values ​​Total Carrying Amount Level 1 Level 2 Level 3 Total Fair Values ​​Total Carrying Amount Rs. '000 Rs. '000 Rs. '000 Rs. '000 rs'000 rs'000 rs'000 rs'000 rs'000 Note No. of Page and Cash equals 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 - 115,358,358,732 - 115,35. 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 Financial assets 33 201 - 779,705 Activos financieros a costos amortizados - préstamos y avances a otros clientes 34 202 - - Activos financieros a costo amortizado - Deuda y otros financial instruments 35 206 Total financial assets 258,101,089 10,530,450 258,101,089 194,345,784 - 913,411,806 - - - - 779,270,417,20707070 years. – 268,631,539 302,059,529 913,411,806 1,365,858,679 1,395,704,035 248,769,126 – 779,705 – 10,530,450 248,769,126 188,470,869 – – 900,428,087 – – – 779,705 779,705 900,428,087 896,845,453 259,299,576 292,727,566 900,428,087 1,337,668,082 1,367,513,438 Financial liabilities Due to banks 44 230 Securities sold under repurc hase agreements – – – 91,411,522 88,248,056 88,248,056 88,248,056 – 91,411,522 91,411,522 – 1,290,852,077 1,290,852,077 1,286,616,399 – – – – 91,437,612 87,451,306 – 87,451,306 87,451,306 91,437,612 91,437,612 Financial liabilities at amortised cost – Due to depositors 46 231 – – Financial liabilities at amortised cost – Other borrowings 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 91,411,522 1,473,460,063 1,564,871,585 1,559,079,048 – Total financial liabilities – 91,437,612 1,452,012,832 1,543,450,444 1,537,657,907 GROUP As at D December 31, 2019 1,270,201,596 1,270,201,596 1,265,965,918 BANK Level 1 Stufe 2 Stufe '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs.' 52,534,730 – 46,101,232 46,101,232 – 39,461,127 – 39,461,127 39,461,127 24,903,809 – 24,903,809 24,903,809 – 24,527,241 – 24,527,241 24,527,241 – 13,147,534 – 13,147,534 13,147,534 – 13,147,534 – 13,147,534 13,147,534 757,787 – 757,787 757,787 – 757,787 – 757,787 757,787 896,280,708 893,919,311 – 887,007,141 884.645.744 Anmerkung Seite Nr. Zahlungsmittel und Cash equivalents 28,196 – 53,681,118 Balances at central banks 29,197 – 46,101,232 Placements with banks 30,197 – Financial assets Securities acquired under a resale agreement Financial assets at amortized cost – Loans and advances to banks 33,201 – Financial assets at Amortized cost - loans and advances to other customers 34 202 - Financial assets at amortized cost - Debt and other financial instruments 35 206 Total financial assets 105,056,577 105,056,577 - 138,591,480 896,280,708 105,056,577 107,059,059,021 896,280,7,13,13, 75 53,807,425 53,807,425 53,807,42 5 – 51,117,342 51,117,342 – – – 99,142,375 130,428,419 887,007,141 99,142,375 101,144,819 887,007,141 – 1,116,577,935 1,116,218,982 51,505,694 51,505,694 51,505,694 51,220,023 51,220,023 Notes to the Financial Statements – Financial Statements – Annual Report 2020 – Financial assets at amortised cost – Loans and advances to banks Commercial Bank of Ceylon PLC Securities purchased under resale agreements Financial liabilities owed to banks 44,230 Securities sold under repurchase agreements – – – 51,117,342 – – 51,220,023 – Financial liabilities at amortized cost – Due to depositors 46,231 – – 1,067,138,675 1,067,138,0575 –68,582,5 4 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 Subordinated liabilities 51 240 – – 39,479,119 39,479,119 37,886,789 – – 39,479,119 39,479,119 37,886,789 1,183,674,112 1,234,791,454 1, 235 ,043,036 - 1,165,697,454 1,216,917, 477 1,217,169,059 Total Financial Liabilities - 51,117,342 51,220,023 27 195
198. 27.4 Valuation techniques and inputs used to determine fair value The following table provides information on the valuation techniques and inputs used to determine the fair value of derivative financial assets and liabilities within Level 2 of the fair value hierarchy, as disclosed in Note 27.1 disclosed on page 193. Nature of financial instruments Fair value for valuation process December 31, 2020 (in Rs. 000) Derivative financial assets Commercial Bank of Ceylon PLC Annual report 2020 Financial statements Notes to Financial Statements Derivative Financial Liabilities Key Valuation Inputs 2,636,717 Adjusted Forward Rate Method z Spot Exchange Rate This approach considers the expected forward exchange rate present value of 1,501,262 at the balance sheet date as the fair value. The forward exchange rate is forecast based on the spot exchange rate and the forward premium/discount is calculated using the extrapolated interest rates of the currency pairs considered. When calculating present value, the interest rate difference between two currencies under consideration is used as the discount rate. z Differences in interest rates between the currencies considered 28. Cash and cash equivalents Accounting policies Cash and cash equivalents include cash on hand, demand deposits with banks and demand loans/short-term and highly liquid financial assets with original maturities of 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 to manage its short-term liabilities. Where appropriate, these items are included in the financial statements at their nominal or gross value. There was no cash and cash equivalents held by the group companies that were not available to the group. Cash and cash equivalents are presented in the balance sheet at their amortized cost. KONZERN-Anmerkung 2019 Rs. '000 2020 Rs. '000 2019 Rs. '000 26,681,454 26,592,518 26,152,779 26,094,112 24,502,554 22,633,898 24,502,675 22,636,242 2,178,900 3,958,620 1,650,104 3,457,870 22,759,243 9,420,183 22,283,515 8,857,498 Page No. Efectivo en caja Monedas y billetes en moneda nacional Monedas y billetes en moneda extranjera Saldos en bancos Bancos locales Bancos del exterior Dinero a la vista y a corto plazo Efectivo bruto y equivalentes de efectivo (*) Menos: Provisión por deterioro 28.1 173.152 172.295 22.586.091 9.247.888 – – 22,283,515 8,857,498 1,817,574 17,674,124 1,817,574 17,588,827 51,258,271 53,686,825 50,253,868 52,540,437 3,241 5,707 3,241 5,707 51,255,030 53,681,118 50,250,627 52,534,730 196 Net cash and cash equivalents BANK 2020 Rs. '000 Zum 31. Dezember (*) Bruttozahlungsmittel und Zahlungsmitteläquivalente werden in der Kapitalflussrechnung ausgewiesen. 28.1 Movement in impairment provision during the year BANK GROUP Note Page No. 2020 2019 2020 2019 Rs 000 Rs 000 000 Rs as at 1 January, charge/(rewrite) to income statement 27 28 18.1 & 184 and 18.2 185 Exchange rate variation of provisions in foreign currency Balance as of December 31 The analysis of cash and cash equivalents maturities is presented in Note 61 on pages 251 to 253. 196 60 (56) 60 (56 ) 3,241 5,707 3,241 5,707
199. 29. Central Bank Balances Accounting Policies Central bank balances consist of statutory/non-statutory central bank balances and are recognized on the balance sheet at amortized cost. Bank Group 2020 2019 2020 2019 Rs. '000 Rs.' 000Rs. '000 Rs.' 000 AT 31 Dec, 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 5,323,2,2,20,24,24,20 st. 8,247,155 Balances with Maldives Monetary Authority 1,275,457 1,481,327 – – Balances with Maldives Monetary Authority Total – – 3,112,170 5,158,778 115.358.732 46.101.232 94.405.316 – – – – – 110.971.105 39.461.127 Die Fälligkeitsanalyse der Guthaben bei Zentralbanken ist in Anmerkung 61 maintain a statutory reserve for all passive deposits denominated in Sri Lanka rupees as set out on pages 251 to 253. Pursuant to the provisions of Section 93 of the Monetary Act Act, a cash deposit is maintained in the Central Bank of Sri Lanka. As of December 31, 2020, the cash reserve requirement was 2.00% of Rs deposit liabilities and this rate was applied from June 16, 2020. The cash reserve requirement in the period between March 16, 2020 and June 15, 2020 it was 4.00%. (5.00% in 2019 and this rate was in effect until March 15, 2020). There is no reserve requirement for the foreign currency deposit liabilities of the National Banking Unit (DBU) and the deposit liabilities of the Offshore Banking Center (OBC) in Sri Lanka. Balances at Bangladesh Bank Bangladesh Bank operations are required to promptly maintain the statutory liquidity requirement and require liabilities (both in local and foreign currency) partly in the form of a cash reserve requirement and the balance at the form of foreign currency and/or in the form of unencumbered securities held at the Bangladesh Bank. As per Bangladesh Bank regulations, the statutory liquidity requirement as of December 31, 2020 was 17.00% (18.50% in 2019) for timely payments (both local and foreign), including 4.00% ( 5.50% in 2019) of the cash reserve requirement and the balance of 13.00% (13.00% in 2019) may be in foreign currency and/or also in unencumbered securities at Bangladesh Bank. Balances with the Maldives Monetary Authority The Maldives Banking Law No. 24 of 2010, Section 25 requires the Bank to maintain a legal reserve on all foreign currency denominated deposits, liabilities and local currency deposits, excluding interbank deposits of other banks in Maldives and margin letters of credit to hold deposits. According to the Banking Regulations of the Maldives Monetary Authority, the Minimum Reserve Requirement (MRR) as of December 31, 2020 was 5.00% for Rufiyaa deposits and 7.50% for US dollar deposits . (10.00% in 2019). The local currency reserve requirement must be met in the form of Rufiyaa deposits, while the foreign currency reserve requirement must be met in the form of US dollar deposits. 30. Placements in Banks GROUP As at 31 December Note Page No. BANK 2020 2019 2020 2019 Rs. '000 Rs. '000 Rs. '000 Rs 10,516,976 5,571,592 10,516,976 16,424,913 24,912,430 15,941,985 24,535,837 3,046 8,621 3,003 8,596 16,421,867 24,903,809 15,938,982 24,527,241 Gross placements with bancos Menos: Provisión para deterioro 30.1 197 Colocaciones netas con bancos Estados financieros – Geschäftsbericht 2020 94.405.316 Guthaben bei der Bangladesh Bank Commercial Bank of Ceylon PLC Guthaben bei Central Bank of Sri Lanka Notes to financial statements Non-regulatory central bank balances 30.1 Development of Impairment Provision during the year GROUP Note Page No. BANK 2020 2019 2020 2019 Rupees '000 Rs. as of December 31 8,621 10,784 8,596 10,784 (5,633 ) (2,120) (5,651) (2,144) 58 (43) 58 (44) 3,046 8,621 3,003 8,596 The analysis of maturity of loans with banks is shown in note 61 on pages 251 to 25. 197
200. 31. Derivative financial assets Accounting policies The Bank uses derivatives such as interest rate swaps, currency swaps, forward currency contracts, currency options, etc. Derivative financial assets are recognized at fair value. Changes in the fair value of derivatives are included in the Profit and Loss Account under “Net trading gains/(losses)”. Under IFRS 9, embedded derivatives are not separated from a financial asset and are classified entirely based on the business model and its contractual terms. Derivatives embedded in non-financial host contracts are treated separately and measured at fair value if their economic characteristics and risks are not closely related to those of the host contract, a separate instrument on the same terms as an embedded derivative would meet the definition of an embedded derivative. derivative, and the host contract itself is not held for trading or at fair value through profit or loss. Host-segregated embedded derivatives are held at fair value in the trading book, and changes in fair value are recognized in the income statement. Anhang zum Jahresabschluss KONZERN 2019 2020 2019 Rs. '000 Rs. '000 Rs. '000 Rs. '000 2,636,717 1,830,927 2,636,717 1,830,927 1,880,510 1,410.476 1,880,510 1,410.476 741.521 411.958 741.521 411.958 SPOT Contracts 9,872 8.493 9,872 8,49 Derivative financial assets – Held for trading Foreign currency derivatives Foreign currency swaps Forward contracts Commercial Bank of Ceylon PLC Annual report 2020 Financial statements Total 198 2,636,717 1,830,927 2,636,717 1,830,927 The maturity analysis of derivative financial assets is included in note 61 in the pages 251 to 253 held for trading. Financial assets are classified as held for trading if: z they are acquired mainly for the purpose of selling or repurchasing them in the short term; or z They are held as part of a jointly managed portfolio for short-term profit or taking positions; or z They form part of derivative financial instruments entered into by the Group that are not financially 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 is recorded under the headings 'Interest income' and 'Net trading gains/(losses)' in the Profit and Loss Account, respectively, according to the terms of the contract or when the right to get paid. Financial assets held for trading include instruments such as government and other debt and equity instruments acquired primarily for the purpose of selling or repurchasing them in the short term. In addition, in accordance with IFRS 9, financial assets recognized through results include all financial assets not classified as FVOCI and amortized cost. Group bank 2020 margin '000 2019 Rs.' 000 2019 Rs. '000 199 33.867.593 20.4895 33.484.895 199 1.321.138 1.3218 989.47.462.
201. 32.1 GRUPPE Staatsanleihen Zum 31. December, Treasury Bills BANK 2020 Rs. 000 2019 Rs.'000 2020 Rs.'000 2019 Rs.'000 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 activos financieros reconocidos a través de resultados se proporciona en la Nota 61 en las pages 251 to 253. 32.2 Variable income securities - Group and bank As of December 31, 2020 Investment cost Number of shares Market price Market value Investment cost Rs. Rs. '000 Rs.' 000Rs. Rs. '000 Rs. '000 86.50 6,142 5,836 6,142 5,836 65.30 230 234 152,745 126.50 19,322 17,546 48,000 100.60 4,829 5,000 244,110 78.10 19,065 36,021 1,396 60.00 84 85 206,437 135.60 27,993 28,331 1,107 46.00 51 51 71,574 87,268 76.60 7,660 3,676 100.000 Automóviles y componentes Kelani Tires PLC 71.000 Subtotal – – – – – – – – Banks DFCC Bank PLC Hatton National Bank PLC Hatton National Bank PLC (non-voting) Na National Development Bank PLC Nations Trust Bank PLC Sampath Bank PLC Seylan Bank PLC 3,516 Subtotal - 85 - 226,595 - 59,973 - - 172.20 - 100.00 - 162.40 - 15 12 - - 22.660 34.381 - - 9.740 9.756 - - 32.415 47.0.509 5,9,1509 5,9,509 3,676 CAPITAL GOODS ACL CABLES PLC 100,000 AITKEN SPENCE PLC 239,409 57.80 13,80 13,838 9,684 350 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 62 80,00 5 2 130.611 167.60 21.890 20.5 72.50 4 5 Hemas Holding plc John Keells Holdings Plc - Lanka Waltiles Holdings PLC - Lanka 165,000 - 149,684 - 25.728 - - - - - Renuka Holdings PLC 117.158 15.00 117,158 19.30 HOLDS HOLKA (NON -voter) ROYAL CERAMICS LANKA PLC 155.927 155.927 88.057 80.165 100.516 INTERIOR TOTAL NOTES Share Price Annual Report 2020 Number of Shares Commercial Bank of Ceylon PLC Sector/Company Name Consumer Durables & Apparel Teejay Lanka PLC 40,000 38.00 Subtotal - - - - - - - - - Consumer Services John Keells Hotels Plc 267,608 11.00 2,944 3,473 267,608 11.60 3,104 3,473
202. Stand 31.12, 2020 Sector/Company Name Number of shares As of December 31, 2019 Market price Market value Investment cost Number of shares Market price Market value Investment cost 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 19,424 USD 218.73 794,490 19,424 USD 187.90 663,346 VISA Inc. Financial Statements Notes to the Financial Statements Subtotal Annual Report 2020 823,620 25,608 15,366 15,013 15,366 15,013 27,750 18,156 250,000 – 695,232 25,368 13,034 15,013 13,034 15,013 17,125 18,156 Energy Lanka IOC PLC 685,975 22.40 Subtotal 685,984 19.00 Food, Beverage and Tobacco Ceylon Grain Ascensores PLC 250.000 Kotagala Plantations PLC 302.625 9,00 2.724 9.172 302.625 7.20 2.179 9.172 Lanka Milk Foods (CWE) PL C 250,000 148.90 37,225 27,866 250,000 100.10 25,025 27,866 10,000 585.00 5,850 5,560 245,960 52.00 12,790 9,814 245,960 Lion Brewery Ceylon PLC Melstacorp PLC Pelwatte Sugar Industries PLC Renuka Lebensmittel (ohne Stim Mrecht) 111.0 0- 68.50- 43.50-- 10,699 9,814 12,300 0.10 1 351 12,300 0.10 1 351 1,000 13.90 14 15 1,000 12.30 12 15 86,354 70,934 55.041 65,374 Equipment and Subtotal Care Services Ceylon Hospitals PLC Commercial Bank PLC (no votando) 121,900 103.20 12,580 12,868 121111111. 67.40 4,118 4,423 18,079 17,291 13,626 17,291 2,745 1,898 Subtotal Insurance People's Insurance PLC 126,500 28.20 3,567 1,898 Softlogic Life Insurance PLC 120,000 34.80 4,176 3,739 7,743 5,637 11,692 161,400 Subtotal 126,500 – 21.70 – – – 2,745 1,898 7,683 11,692 Materials Chemical Industries Colombo Holding PLC (Non- votación) 161.400 151,60 24.468 Productos sumergidos PLC 200.000 347,30 69.460 24.239 200.000 84,00 16,800 24,239 90,100 568.60 51,231 13,388 107,100 190.00 20,349 15,914 145,159 49,319 44,832 51,845 14.40 2,640 2,717 183,320 16.00 2,933 2,717 – – – 25,000 30.00 750 531 2,640 2,717 3,683 3,248 – – 19,667 26,667 – – 19,667 26,667 11, 675 6,300 11,675 6,300 Haycarb PLC Subtotal 47.60 Real Estate Overseas Reality Ceylon PLC CT Land Development PLC 183,320 – Subtotal Retailing 32 RIL Property PLC – – Subtotal 3,333,333 5.90 Telecommunication Services Dialog Axiata PLC Subtotal 200 1,399,172 12.40 17,350 17,350 17,350
203. Stand 31.12, 2020 Sector/Company Name Number of shares As of December 31, 2019 Market price Market value Investment cost Number of shares Market price Market value Investment cost Rs. Rs. '000 Rs. '000 Rs. Rs. '000 Rs.' 000 10.20 6,611 6,481 7.50 4,861 6,481 Total 6,611 6,481 4,861 6,481 1,321,878 409,374 983,138 374,248 Market - Profit/Loss - Loss). , 2020 Industry/Sector Cost of Capital Rs 000 Rs 000 % 6,142 5,836 0.46 Automobiles & Components Banks Capital Goods As of December 31, 2019 Market Value Market Value Initial Investment Cost Rs 000 44,149 Rs 3, 30 113.187 100.517 8,56 80.165 6 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 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 2,640 2,717 0.20 3,683 3,248 0.37 Real Estate Retailing – Telecommunication Services 17,350 Utilities 6,611 Subtotal 1,321,878 Mark to market gains/ ( losses) – 19,667 26,667 2.00 11,442 – 1.31 11,675 6,300 1.19 6,481 0.50 4,861 6,481 0.49 40 9,374 100. 00 983,138 374,248 100.00 912,504 Market value of equity securities 1,321,878 608,890 1,321,878 100.00 983,138 983,138 100.00 33. Financial assets at fortgeführte Anschaffungskosten – Forderungen an Kreditinstitute Rechnungslegung pol icy „Finanzielle Vermögenswerte zu fortgeführten Anschaffungskosten – Forderungen an Kreditinstitute“ beinhaltet Forderungen gegenüber Banken. In accordance with IFRS 9, loans and accounts receivable from banks are assets held as part of a business model whose objective is to hold the assets to collect contractual cash flows and the contractual terms of the assets give rise to cash flows. at specific times. which are only payment of principal and interest on the outstanding principal. After initial measurement, loans and advances to banks are subsequently measured at gross book value using TIE less impairment provisions, unless the Group designates these assets at fair value through profit or loss. The EIR is calculated taking into account discounts or premiums on the purchase, fees and charges. Amortization is included in 'Interest income' while impairment losses are recorded in 'Impairment and other losses' in the Profit and Loss Account. GROUP As of December 31, Note on page No. 33.1 202 Gross loans and advances (Currency - US dollars) Less: Provision for loans and advances Net financial statements Subtotal 648,100 Annual report 2020 648,100 Commercial Bank of Ceylon PLC LVL Energy Fund PLC Notes to financial statements Utilities BANK 2020 Rs. '000 2019 Rs. '000 2020 Rs. '000 2019 Rs.
204. 33.1 Evolution of the provision for impairment during the year GROUP Note Page No. 18.1 & 18.2 184 & 185 BANK 2020 $ '000 2019 $ '000 2020 $ '000 2019 $ '000 111 36 111 36 (26) 75 (26) 75 85 111 85 111 Movement in stage 1 impairment Balance at January 1, charge/(re-election) in income statement Balance at December 31, Commercial Bank of Ceylon PLC Annual report 2020 Financial statements Notes to financial statements The Maturity Analysis of Loans and Advances to Banks is shown in note 61 on pages 251 to 253. The Bank stopped making payments to counterparty banks for oil hedges as of June 2, 2009 in response to an order received from the Controller of Exchange of the Central Bank of Sri Lanka. As a result, one of the counterpart banks appropriated USD 4.17 billion. (Rs. 779,790 Mn.), which was deposited with them as security. This claim was contested by the bank. Given the bank's position in this regard, both the deposit (made by the bank) and the amount owed to said counterparty have been recorded on the balance sheet. 34. Financial assets at amortized cost – Loans and accounts receivable from other customers Accounting policies Financial assets at amortized cost – Loans and accounts receivable from other customers include the Group's loans and accounts receivable and lease receivables. In accordance with IFRS 9, "Loans and receivables from other customers" are assets held within a business model whose objective is to hold the assets to collect contractual cash flows and the contractual terms of the assets give rise to cash in specific dates Flows that are solely payments of principal and interest on the outstanding principal. When the Group is the lessor in a lease that transfers substantially all the risks and rewards of ownership of the asset to the lessee, the arrangement is classified as a finance lease. Finance lease receivables, less rent originally received, unearned lease income and impairment provisions, are classified as lease receivables and are included under “Loans to other customers” on the balance sheet. After the initial valuation, “Loans and advances to other customers” are subsequently valued at their gross book value using the TIE less any impairment provisions, unless the Group designates the loans and advances at fair value through profit or loss. The EIR is calculated taking into account discounts or premiums on the purchase, fees and charges. Amortization is included in 'Interest income' while impairment losses are recorded in the Profit and Loss Account under 'Impairment and other losses'. GROUP BANK 2020 2019 2020 2019 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Gross loans and advances 961,859,118 930,737,391 947,841,905 920,457,235 Stage 1 750,494,287 726,626,174 740,254,706 720,005,896 Stage 2 106,934,723 105,913,673 105,011,766 103,788,356 104,430,108 98,197,544 102,575,433 96,662,983 52,029,946 36,818,080 50,996,452 35,811,491 Etapa 1 6.567.755 2.702.070 6.470.880 2.613.480 Etapa 2 12.394.001 12.244 .433 8,318,831 As of December 31, grade without level 3 * Less: Provision for value reduction level 3 Nettledite and Entries 34.2 (A) and 34,009 32,281,139 24,879,180 909,829,172 893,919,311, 879, 896 , 896, 896. . 879,849 crore (2019 - Rs. 940,059 crore) awarded against guarantees from the Government of Sri Lanka. The maturity analysis of amounts owed by other customers is shown in Note 61 on pages 251 to 253. 33 34 202
205. 34.1 Analysis of Financial Assets at Amortized Cost – Loans to Other Clients 34.1 (a) By Product GROUP As of December 31 Note Page No. BANK 2020 2019 2020 2019 $ '000 $ '000 $ '000 $ '000 104,436,468 137,643,817 102,957,968 135,717,795 80,580,434 72,194,299 80,063,332 71,729,612 37,237,050 36,147,829 35,815,635 34,169,283 14,994,861 14,975,902 14,994,861 14,975,902 Credit cards Pawning 34.3 204 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 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 Short term 135,165,669 150,536,419 132,098,509 150,257,462 Long term 418,650,469 370,852,399 411,651,796 365,58,319 35,944,177 31,477,723 35,944,177 31,477,723 961,859,118 930,737,391 947,841,905 920.235 TERM LOANS BILLS OF EXCHANGE TOTAL 34.1 '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 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 As at December 31, Singapore Dollar – 2,512 Bangladesh Taka 84,659,542 71,252,778 Maldivian Rufiyaa 3,611,052 3,141,714 Others Total – 84,659,542 – 2,512 71,252,778 – 452,798 302,617 8,077 15,308 961,859,118 930,737,391 947,841,905 920,457,235 34.1 (c) By industry GROUP BANK 2020 2019 2020 2019 Rs. '000 Rs. '000 Rs. '000 Rs. '000 78,617,259 68,775,119 78,331,232 68,549,963 1,288,474 1,118,938 1,288,474 1,118,243 46,454,293 45,439,269 45,374,182 45,032,791 216,286,919 201,412,039 216,240,633 200,919,556 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 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 As at December 31, Agriculture and fishing Arts, entertainment and recreation Construction Consumption and other Educación Estados financieros Arrendamiento/compra a plazos Cuenta por cobrar Informe anual 2020 Commercial Finance Commercial Bank of Ceylon PLC Overdrafts Notes to Financial Statements Loans and advances 34 203
206. GROUP BANK 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 Al 31 de diciembre de 34.2 Movimiento en la provisión por deterioro during the year 34.2 (a) Group Commercial Bank of Ceylon PLC Annual report 2020 Financial statements Financial statements Notes to financial statements Stage 1 Note Page number Balance at 1 January, charge/(write back) to earnings - and calculation of loss 18.1 184 2019 2020 2019 Rupien '000 Rs.' 000Rs. '000 Rs.' 000Rs. '000 2,702,070 2,494,001 5,984.009 21.571818.080 30,343,820 3,863,356 (108,915) 7,907,684 18.124.673 10.309.857 (365.444) (2,596,520) (366.592) (2,606) (2,606) 1,562) 1,728 (243) – – – – – – – – 178 6,567,755 12,396,301 2,702,070 6,035 (2,895,955) (1,258,339) 305,917 18,578 33,065,890 25,622,009 8,494,001 43,823 4,230 (2,895,955) (1,258,339) 305,917 18,578 52,029,946 36,818,080 Stage 1 nota página no. Balance as of January 1, charge/(reelection) in the profit and loss account 18.2 185 Net amortization during the year Accrued interest/(reversals) on impaired loans and receivables 13.1 Total 2020 2019 2020 2019 2020 2019 000 rupees 000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 2,613,480 2,659,185 8,318,831 5,873,226 24,879,180 20,596,642 35,811,491 29,129,053 3,856,007 (41,669) 3,925,463 2,447,313 10,083,744 7,637,999 17,865,214 10,043,643 1,559 178 Other movements Balance as at 31 de diciembre de Etapa 3 2019 (166) Variación de tipo de cambio en provisiones de moneda extranjera Etapa 2 2020 (906) ( 2,396) (1,640) 1,045 (590) – – – – – – – 6,470,880 2,613,480 12,244,433 (110,886) ( 1,118) – 4 5,915 (2,850,806) 8,318,831 (2,121,195) (3,121,958) ) 41,878 (2,850,806) (2,125,129) 3,685 (1,258,339) 240.633 18.578 240.633 18.578 32.281.139 24,879,180 50.996.452 35.811.491 34.3 Lease/HIRE- HIRE- ca Ufforderung Bank 2020 2019 2019 2019 Rs. '000 Rs.' 000Rs. '000 Rs.' 000 37,237,050 36,147,829 35,815,635 34,169,283 dentro de un año 34.3 (a) y 34.3 (b) 205 14,897,348 15,538,283 (44,14141414. 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 34.3 (C) (II) (I) & 34 205 1,161,222 1,153,134 1,004, 12392,392,392,93,93,93,93,93,93,915,95,912,912 95,95,95,95,95,95,95,95,95,95,95,95,95,912. Account receivable 204 39,600 34.2 (b) Bank As of December 31 34 (1,150) 2,495 Other variations Balance as of December 31 Total 2020 Exchange rate variation of Foreign currency provisions 13.1 Stage 3 2019 Net amortization during the Year Interest accrued/(reversals) of Stage 2 impaired accounts receivable 2020 807,656 800,885 683,256 666,670 36,075,828 34,994,695 34,811,512 33,226,901
207. 34.3 (A) RENT/RENTAL ACCOUNT WITH PURCHASE OPTION - GROUP 2019 2020 2019 2020 2019 000 RUPIAS 000 RUPIAS 000 RUPIAS 000 RUPIAS 000 RUPIAS 000 RUPIAS 000 RUPIAS 25 702 437 23 713 7231 91.506 45,169,035 43,692,575 4,432,208 4,208 4,349,060 3,12. 3,214 8,564 7,931,985 7,544,746 14,897,348 15,538,778 22,205,874 20,526,109 133,828 82,942 37,237,050 36,147,829 708,728 667,590 451,251 484,595 1,243 949 1,161,222 1,153,134 Less: Provision for impairment 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 Subtotal 570,646 527,772 236,697 272,982 313 131 807,656 800,885 14,188,620 14,871,188 21,754,623 20,041,514 132,585 81,993 36,075,828 34,994,695 34.3 (b) Lease/Hire purchase receivable – Bank Within one year Total lease/hire purchase receivable Less: Nicht verdiente Leasing- /Hire- ingresos por compras Arrendamiento bruto/arrendamiento with option to collect From one to five years After c five years Total 2020 2019 2020 2019 2020 2019 20 20 2019 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 18,417,920 18,698,793 24,891,164 22,424,947 133,107 89,478 43,442,191 41,213,218 4,273,803 4,094,452 3,349,888 2,941,006 2,865 8,477 7,626,556 7,043,935 14,144,117 14,604,341 21,541,276 19,483,941 130,242 81,001 35,815,635 34,169,283 942,382 As at December 31, Less: Provision for impairment 629,680 578,412 373,618 363,442 825 528 1,004,123 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 13,514,437 14,025,929 21,167,658 19,120,499 80,473 34,811,512 33,226,901 Subtotal 129,417 34.3 (c) Movement in provision for impairment during the year 34.3 (c) ( i) Gruppenphase 1 Phase 2 Phase 3 Gesamt 2020 2019 2020 2019 2020 2019 2020 2019 Rs '000 Rs '000 Rs '000 Rs '000 Rs '000 Rs '000 Rs '000 Rs 1,125,076) Charge/(Rewrite) Results 13,626 (12,233) 80,190 154,813 299,132 156,206 354,509 (76) (730) (125,223) (125,299) ( 309,920) (16,395) Annual - Interest accrued - Accrued Accounts receivable - - - - (21,673) (16,395) (21,673) Other movements - - - - (1,146) (136) (1,146) Balance as of December 31 95,265 258,301 2020 2019 2020 2019 2020 2019 2020 2019 Rs. '00,000 Rs. '000 Rs.' 000Rs. '000 Rs.' 000Rs. '000 RS 942,382 818,897 Load/(Write again) to the state status 16,751 (1,981) 28,404 93,321 101,115 203,844 146,270 295,184 270,) 81 639 1 153 134 Notes to the financial statements Bruttoforderung realisierte Erträge aus Leasing/rental purchase After five years Annual report 2019 Annual report 20 20 Total lease/rental receivables One to five years 2020 Commercial Bank of Ceylon PLC Within one year As of 31 December 34.3 (c) (ii) Bank Stage 1 Net amortization during the year - Accrued interest/(reversals) on impaired loans and accounts receivable - Other movements - Balance as of December 31 91,742 Level 2 Level 3 Total - (698) ( 61.710) (152,379) (61,710) (155.168) - - - (21.673) (16,395) (21,673) (16,395) - - - - (1,146) (136) (1,146) (2,091) 74.991 229.125 200.721 683.256 666.670 1.004 (136) 942.382 205
208. 35. Financial assets at amortized cost – Liabilities and other financial instruments Accounting principle In accordance with IFRS 9, financial assets are measured at amortized cost if they meet the following two conditions and are not designated as FVTPL: z The asset is held within a business model whose objective is to hold assets to collect contractual cash flows; 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. Rates and Charges that are an integral part of the EIR. Amortization is included in 'Interest income' while impairment losses are included in 'Loan impairment losses and other losses' in the Profit and Loss Account. After initial measurement, these assets are subsequently measured at amortized cost (gross carrying amount using EIR, less impairment). Die fortgeführten Anschaffungskosten werden unter Berücksichtigung von Abschlägen oder Aufschlägen beim Erwerb und Anmerkungen zum Jahresabschluss KONZERN-Jahresabschluss Geschäftsbericht 2020 2019 2020 2019 Rs. '000 Rs. '000 Rs. '000 282,664,666 83,350,413 282,294,843 82,986,575 186,530,856 47,278,715 186,530,856 47,278,715 96,133,810 36,071,698 95,763,987 35,707,860 11,254,899 15,284,770 11.254.899 15.284.770 Página núm. Government Securities: Sri Lanka Treasury Bonds Sri Lanka Sovereign Bonds (*) Government Securities: Bangladesh Treasury Bills: Treasury Bonds Government Securities: Maldives Commercial Bank of Ceylon PLC 2020 Rs. 4,080,152 11,254,899 11,204,618 11,254,899 8,969,091 5,553,077 – – 8,969,091 5,553,077 – – 11,204,618 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 35.1(a) & 35.1(b ) 206 2115842 429775 2108891 427062 302059529 107059021 292727566 101144819 Less: Provision for Total impairment (*) See Note 36.1 on page 208 for details of the reclassification of the share for the Year in the category Fair value through other comprehensive income (FVOCI) converted to amortized cost. 35.1 Movement in the provision for impairment during the year 35.1(a) Group phase 1 note page no. Balance as of January 1, charge/(reverse) to the profit and loss account 18.1 184 Exchange rate variation foreign currency provisions Balance as of December 31 Tier 2 Tier 3 total 2020 2019 2020 2019 2020 2019 '000 rupees' 000 '000 rupees' 000 276,905 268,340 - - 429,775 1,685,968 8,569 - - - 1,685.9 -49 9 (6 -49) 9 ( (6 - 9) 1,685.9 -49 1,962,972 276,905 - - 2,115,842 429,775 152,870 - 152,870 - 152,870 152,870 35.1 (b) Bank Stage 1 Note 35 Page No. Balance as of January 1, charge/(rewrite) to loss account and earnings Balance at December 31 18.2 185 Level 2 Level 3 Total 2020 2019 2020 2019 2020 2019 2020 2019 '000 rupees' '000 rupees' 000 rupees . '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 274,192 266,252 – 427,062 266,252 1,681,829 7,940 – – - 152,870 1,681,829 160,810 1,956,021 274,192 – – 152,870 152,870 2,108,891 427,062 – 152,870 – The maturity analysis of financial Assets at costo amortizado - Deuda y otros instrumentos financieros se presenta en la Nota 61 en las páginas 251 to 253. 206
209. 35.2 Schuldverschreibungen GRUPPE Anzahl der Schuldverschreibungen 2019 Buchwert Anzahl der Schuldverschreibungen Rs. '000 Rs. '000 Buchwert Rs. '000 919,100 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 3,000,000 328.59 2.902.500 319,130 ​​​​​​328.529 10,000,000 1,097.500 - 2,902.500 319,130 ​​​​​​10,000,097.500 Commercial Leasing and Finance PLC - - Dunamis Capital SPS - 500,000 50,403 Hayleys PLC - 8,000,000 000 000,000,000 000 000,000,000 000,000,000 000,000,000,000,000,000,000,000,000. Subtotal 561,716 561,716 2,520,350 2,520,350 35.3 Certificates of Confidence Group Group 2020 2019 2020 2019 2019 Cargo Value Cargo Cargo Cargo Cargo Cargo Cargo Cargo Cargo Cargo Cargo Cargo Transport Value Transport Value Transport Value Transport Value Transport Value Transport Value Transport Value Transport Value Value for Transport value value for transport value Who t of transport value value of transport value value of transport value value of transport value. Rs. '000 Rs. '000. Rs. '000. Rs. 1,000 Richard Pieris Arpico Finance Ltd. 724,589 777,994 724,589 777,994 Interim Total 724,994 724,589 777,994 35.4 Company Shares in Bangladesh Group Bank 2020 2019 Book Value Book Value Book Value R. '000 Rs.' Revenue Accounting Policies Under IFRS 9, this includes 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 FVTPL is not designated: z The asset is held within a business model whose objective is to obtain contractual cash flows and financial assets for sale ; and Notes to Financial Statements Book Value Financial Statements Number of notes Rs., which 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 due to changes in fair value recognized in ORI. Interest income, foreign exchange gains and losses, ECL and reversals are recognized in profit or loss. Upon derecognition, accumulated gains or losses previously recognized in other comprehensive income are reclassified from other comprehensive income to the statement of income. Equity instruments at FVOCI At initial recognition, the Bank occasionally chooses to irrevocably classify some of its equity investments held for strategic purposes as equity instruments at FVOCI if they meet the definition of equity under IAS 32 "Financial Instruments: Presentation" and are not held for trade. Such classification is determined from instrument to instrument. 35 36 Gains and losses from these equity instruments are never reclassified to results, but are transferred directly to retained earnings at the time of derecognition. Dividends are recognized in the profit and loss account under the heading "Other operating results" when the legal claim for their payment arises. Equity instruments in FVOCI are not subject to an impairment test. 207
210. GROUP 2020 Rs. '000 2019 Rs '000 2020 Rs '000 2019 Rs '000 280,100,559 198,465,987 279,845,258 198,209,424 Al 31 de diciembre, Nota Página No. 36.1 208 36.2 208 BANK Government securities Government Securities – Sri Lanka Less: Provision for impairment Equity securities 1,675,834 861,693 1,675,834 861,693 278,424,725 197,604,294 278,169,424 197,347,731 292,069 220,723 291,945 220,599 239,773 169,013 239,773 169,013 36.3 (a) & 36.3 (b) 208 & 209 Börsennotierte Aktien Nicht Notas de acciones enumeradas a los estados financieros de los estados financieros consolidados Informe anual 2020 51,710 52,172 51,586 197,825,017 278,461,369 197,568,330 Nota 61 on pages 251 to 253. 36.1 Banco 2020 government bonds rs. '000 2019 Rs.' 000 2019 Rs. 9,215,734 174,357,979 74,818,967 174,357,979 74,818,967 Sri Lanka Sovereign Bonds (*) 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 57,009,964 280,100,559 198,465,987 279,845,258 198,209,424 Treasury Bonds Commercial Bank of Ceylon PLC 52,296 278,716,794 Subtotal (*) Th El Banco reclasificó parte de su cartera SLSB with a nominal value of Rs 28,050,000 (USD 150 million) and Rs 32,117,250 thousand (USD 171,750 million) of FVOCI at amortized cost, as a result of changes in the asset management business model June 30 2020 and 1 July 2020, respectively, in accordance with the Guidelines issued by CA Sri Lanka Accounting Considerations with the COVID-19 Outbreak. There were no changes to the effective interest rate used and interest income recognized for a reclassified SLSB portfolio for the period. The fair value of the reclassified portfolio as of December 31, 2020 was Rs 36,943,692 crore The fair value loss of Rs 16,900,049 crore (after tax) would have been recorded in ORI during the period if the assets financial statements would not have been reclassified. 36.2 Evolution of the provision for impairment during the year Group Bank Note 2020 Rs. '000 2020 Rs.' 000 861,693 595,693 595,694 265,999 8199 1,675,831.83 1,693 1,693 1.83 1. 36.3 Equity values ​​(a) 36.3 as of December 31, 2020 group sector/company name Bank Number of market value Shares Investment costs Rs. '000 Rs. '000 21.10 15,070 9,999 15,070 9,999 224,703 209,026 224,703 209,026 239,773 6 Subtotal Alum.
211. $. Rev. '000 3,427,083 Bdt 2.75 20,853 20,637 100.00 564 1,000,000 10,000 10.00 5,000 5,000 689,590 47 EUR 841.90 Number of market value costs for investments. Rs. '000 Rs. '000 3,427,083 BDT 2.75 20,853 20,853 4,400 100.00 440 440 1,000,000 10.00 10,000 10,000 500,000 10.00 5,000 5,000 8,620 689,590 12.50 8,620 8,620 47 EUR 841.90 7,259 7,259 7,259 7,259 52,296 52,296 52,172 52,172 292,069 271,321 291,945 271,197 Market price Market value Cost de la inversión 36,3 (b) Value of shares - As of December 31, 2019 GROUP Sector/Company name Listed shares: Banking, Finance and Insurance DFCC Bank PLC Hatton National Bank PLC Nations Trust Bank PLC National Development Bank PLC Sampath Bank PLC Seylan Bank PLC Subtotal Materials Alumex PLC Retail Subtotal RIL Property PLC Subtotal Total - Listed Shares Unlisted Shares: Other Financial Services Central Depository of Bangladesh Ltd. Credit Information Bureau of Sri Lanka LankaClear (Pvt) Limited Lanka Financial Services Bureau Limited Lanka Ratings Agency Limited Society for Worldwide Interbank Financial Telecommunication (SWIFT) Total: Unlisted Shares Total Shares of r equity BANK Number Market price Market value Shares Investment cost Rs. Rs. '000 Rs. 000 3,496 91.90 321 155 12,383 172.20 2,396 80.00 112 6.1464 1,085 714,200 26,128,266 Number of shares Rs. '000 3.496 91.90 373 12.383 172.20 2.132 373 27 1,396 80.00 112 27 614 249 6,144 100.00 614 249 162.40 1,050 664 6,464 162.40 1,050 664 52.50 57 26 1,085 52.50 57 26 4,286 1,494 4,286 1,494 10,570 9,999 10,570 9,999 10,570 9,999 10,570 9,999 154,157 209,026 154,157 209,026 154,157 209,026 154,157 209,026 169,013 220,519 169,013 220,519 20.267 14.90 5.90 714,266 14.90 5.427.083 BDT 2.75 20.267 3.427.083 BDT 2.75 20.264 564 56,00 440 1.000.000 10.000.000 10,000 1,000,000 10.00 10,000 10,000 500,000 10.00 5,000 5,000 500,000 10.00 5,000 5,000 689,590 12.50 8,620 8,620 689,590 12.50 8,620 8,620 47 EUR 841.90 7,259 7,259 47 EUR 841.90 7,259 7,259 51,710 51,710 51,586 51,586 220,723 272,229 220,599 272,105 Notes to the Financial Statements Cost of investment Financial Statements Unquoted acciones: Otros servicios financieros Central Depository of Bangladesh Ltd. Credit Information Bureau of Sri Lanka LankaClear (Pvt) Limited Lanka Financial Services Bureau Limited Lanka Ratings Agency Limit d Society for Worldwide Interbank Financial Telecommunication (SWIFT) Total - Unlisted Shares Total Share Values ​​Number Market Price Market Value Shares Annual Report 2020 Sector/Company Name BANK Commercial Bank of Ceylon PLC GROUP 36 209
212. 37. Investments in subsidiaries Accounting principles Annual financial statements Notes to the annual financial statements Subsidiaries are investments controlled by the Group. The Group “controls” an investee when it is exposed, or has rights, to variable returns from its interest in the investee and has the ability to affect those returns through its power over the investee. The Group reassesses whether it has control when one or more control elements change. This includes circumstances where ownership rights held (eg from a lending relationship) become material and result in the Group obtaining power of disposition over an associated company. Acquisition costs are measured at the fair value of the consideration including contingent consideration. The identifiable assets, liabilities and contingent liabilities acquired are valued at their fair value at the time of acquisition. After the initial valuation, the Bank continues to recognize shares in subsidiaries at cost. The financial statements of the subsidiaries are included in the consolidated financial statements from the date control begins to the date control ends. Director, Non-Bank Financial Institutions Supervision Department, Central Bank of Sri Lanka. Also, CBC Myanmar Microfinance Company Limited's fiscal year ends on March 31 due to requirements of the Myanmar Financial Regulatory Authority. The financial statements of all group subsidiaries have a common financial year ending December 31, with the exception of CBC Finance Ltd. and CBC Myanmar Microfinance Company Limited, whose financial year ends March 31. The annual financial statements of the Bank's subsidiaries are prepared using standard accounting and valuation methods. All balances, transactions, unrealized gains and losses from intercompany transactions, intercompany income and expenses are eliminated in full. The reason why CBC Finance Ltd uses a different reporting date. lies in the requirement imposed by the Central Bank of Sri Lanka for licensed financial companies to publish their key financial data and key performance indicators for a 12-month period ending March 31 and 6-month periods ending March 30. September of each year, in accordance with the format prescribed by the legislature loans and advances. All of the Bank's subsidiaries are incorporated in Sri Lanka except Commex Sri Lanka S.R.L., Commercial Bank of Maldives Private Limited and CBC Myanmar Microfinance Company Limited, which are incorporated in Italy, Republic of Maldives and Myanmar, respectively. GROUP BANK 2020 As of Dec 31, Tenure (****) Note Page No. % Historical Cost Market Value/Directors' Valuation Rs 000 2020 2019 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs PLC (*) 90 – – – – 261,198 (@ Rs. 117.00) (10,800,000 ordinary shares) 854,280 (@ Rs. 79.10) (10,800,000 ordinary shares as of December 31, 2019) CBC Tech Solutions Limited (formerly known as Onezero Company Limited ) 100 - - 5,000 5,000 5,000 60 - - - - - - - - - - - - - - - - - - - - - 3,791,046 2,791,046 2,791,046 - 046,046 2,791 .046 - - 046 - 046 - 046 - 046--046-046, 2.791.046 100--. – – – 370 633 327 855 370 633 327 855 (500,001 ordinary shares) (500,001 ordinary shares as of December 31, 2019) Commercial Insurance Brokers (Pvt) Ltd. (**) (359,999 ordinary shares) (239,999 ordinary shares as of December 31, 2019) (58 in 2019) Unlisted: CBC Finance Ltd. (formerly known as Serendib Finance Ltd.) (221,793,474 common shares) (151,469,986 common shares as of December 31, 2019) 37 Subsidiaries foreign: Not listed: Commex Sri Lanka S.R.L. (registered in Italy) (***) (300,000 common shares) (30 0,000 common shares as of December 31, 2019) 210
213. GROUP BANK 2020 at 31.12'000 2020 2019 Rs. '000 2019 Historical Cost Market Value / Directors Valuation Historical Cost Market Value / Directors Valuation Rs. Rs. '000 Rs. '000. Rs. '000. Rs. '000. - 6,179,062 7,138,686 5,054,062 5,604,366 - - - 5,808,429 (104,500 common shares) (104,500 common shares as of December 31, 2019) CBC Myanmar Microfinance Co. Limited 37.1,211 (370,633) Total net of (*) Bank , the interest in Commercial Development Company PLC (in which the Bank originally held a 94.55% interest, to meet the requirements of Colombo Stock Exchange Listing Rule No. 7.13 on minimum public participations. In Consequently, since November 2015, the Bank has sold 545,705 shares through the Colombo Stock Exchange, reducing its interest in said company to 90.00% as of December 31, 2019. As a result of the above sale, the The Bank's shareholding has changed, maintaining control In accordance with IFRS 10 – 7,138,686 (42,778) 5,011,284 – 5,604,366 “Consolidated financial statements”, changes in the ownership interest of a parent in a su subsidiary that do not result in the parent losing control are equity transactions and therefore the resulting gain/loss is recognized in equity. in 2019. 60% of 40%. Prior to the above acquisition, the Bank held a 58% beneficial interest (40% direct and 18% indirect) in CIBL. (**) The Bank acquired an additional 20% interest (120,000 shares) in Commercial Insurance Brokers (Private) Limited (CIBL) for a purchase price of Rs 125 million (Rs 125,000,000/-) from its own subsidiary, Commercial Development Co. PLC on December 30, 2020. (****) Unless otherwise noted, ownership interest remains unchanged from 2019 to 2020. (***) Investment in Commex Sri Lanka S.R.L. Italy suffered a total deterioration during the year. The analysis of maturities of investments in subsidiaries is presented in note 61 on pages 251 to 253. Consequently, the Bank's direct participation in CIBL increased to 37.1 Change in the Provision for Impairment of Subsidiaries During the Year GROUP Note Page No. 18 182 Balance as of January 1, charge/(reverse) to the Profit and Loss Account Balance as of December 31, BANK 2020 2019 2020 2019 Rs. '000 Rs. '000 Rs. '000 Shares of Rs in Commercial Insurance Brokers (Private) Limited of Chemanex PLC for a purchase price of Rs. 343,955 thousand. The bank owns vo I obtained all relevant regulatory approvals for the acquisition of this company. 37.2.1 Consideration transferred The buyout consideration disclosed above was settled in the form of cash and fair value of investments in associates on the Group's books. Financial statements Provision for impairment Annual report 2020 Total gross Commercial Bank of Ceylon PLC (2,420,000 ordinary shares as of December 31, 2019) Notes to the financial statements (2,420,000 ordinary shares) 37.2.2 Identifiable assets acquired and liabilities assumed The The reported amounts of assets acquired and the liabilities assumed by Commercial Insurance Brokers (Private) Limited at the time of acquisition are as follows. Note Recognized fair value at acquisition Thousands of rupees Page No. Assets Cash and cash equivalents 37 158 284 Loans and receivables from other customers 4,960 Property, plant and equipment (net) 39.1 215 435 428 Investment properties 40 225 46 350 211
214. Commercial Bank of Ceylon PLC Annual Report 2020 Financial Statements Notes to the Financial Statements Intangible Assets(net) 212 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 compensation 49.2 (b) 234 (30,253) Other liabilities (34,511) Total Liabilities ( 167,308) Fair value of net identifiable assets at the acquisition date 511,734 Fair value of net identifiable assets at the acquisition date attributable to the Bank 298,853 The fair value of land and buildings acquired and investment property was determined using Valuations performed by an independent appraiser are determined by a professional appraiser. 37.2.3 Goodwill Goodwill resulting from the acquisition is recognized as the excess of the consideration transferred over the identifiable net assets acquired and the liabilities assumed. Note Page No. Rs. Thousands Consideration transferred 37.2.4 212 343,955 Acquisition date fair value of net identifiable assets attributable to the Bank 37.2.2 211 (298,853) Goodwill 45,102 37.2.4 Cost of acquisition of a subsidiary, less cash acquired GROUP Purchase total consideration transferred Fair value of investments in associates on the books of the Group BANK Rs '000 thousand rupees 343,955 250,000 93,955 Cash payment 250,000 Cash and cash equivalents acquired in a business combination (158,284) Cost of acquisition of subsidiary, less cash acquired 91,716 – 250,000 – 0 250,000 – 0 250,100 38. Investments in associated companies Accounting principles Associated companies are companies in which the Group has significant influence but not control over the associated company due to its power to dispose of the returns variables. Significant influence is presumed when the Group holds 20% or more of the voting rights of another company. Investments in associates are accounted for using the equity method and are initially recorded at cost as defined in Sri Lanka Accounting Standards - IAS 28 on "Investments in Associates and Joint Ventures". The Group's investment includes the goodwill identified in the acquisition less accumulated impairment losses. The consolidated financial statements include the Group's share of income and expenses and changes in equity of investments accounted for using the equity method, after adjustments to align accounting policies with those of the Group. 000 Page number from the date Significant Influence begins to the date Significant Influence ends. Consequently, investments in associates are accounted for using the equity method at cost plus changes in the Group's interest in the associate's net assets after acquisition and are reported as a separate item on the balance sheet. The income statement reflects the Group's participation in the operating profit of associates. Any change in the OCI of these investees is presented as part of the Group's OCI. If there has been a change recognized directly in the associate's equity, the Group recognizes its participation in any change in equity through the OCI, if any. Unrealized gains and losses from transactions between the Group and the associate are eliminated in proportion to the interest in the associate. If the Group's share of the loss exceeds its interest in an equity-accounted investee, the book value of that interest, including long-term investments, is reduced to zero and no further losses are recognized, except to the extent that the Group did not thus commit or make payments on behalf of the investee. If the associate subsequently reports earnings, the Group does not recognize its share of those earnings until its share of the earnings is equal to its share of previously unrecognized losses. The Group stops using the equity method from the date it ceases to have significant influence over an associate and accounts for such investments in accordance with the Sri Lanka Accounting Standard - IFRS 9 on 'Financial Instruments'.
215. the amount of the impairment, measured as the difference between the recoverable amount of the associate and its carrying amount, and reports the loss as "Participation in Associate Profits" in the Profit and Loss Account. After applying the equity method, the Group determines whether it is necessary to recognize an impairment loss on its investment in its associate. At each balance sheet date, the Group determines whether there is any objective evidence that the investment in the associate is impaired. If such evidence is available, the Group calculates the shares in associated companies at cost in the individual financial statements. 2020 Book Value Cost Book Value Rs. '000 Rs. '000 Rs. '000 Rs. Sri Lanka 22.92 4,110,938 2019 Acquisition costs Number of shares 38.1 Reconciliation of summary financial information The consolidated financial statements are as follows: 2020 Note Page no. commercial insurance brokers (pvt) ltd. Total Equity Investments Lanka Ltd. Commercial Insurance Brokers (pvt) ltd. 000 rupees 000 rupees 000 rupees 000 rupees 000 rupees Comprehensive income 7,334 – 7,334 (1,281) 49,906 49,925 /8 Period recognized in income statement, after tax 3,898 – 3,898 (339) 10,331 9,992 Profit and loss and other Comprehensive income, after taxes 3,436 – 3,436 (942) 39,575 38,633 (409) (409) 38.2 (a) 213 Movement due to change in equity Dividends received Acquisition of control of associate 37.2 .4 212 Balance as of December 31 December - - - - - - - - (2,760) (2,760) - - - - ( 93,955) (93,955) 64,155 – 64,155 56,821 – 56,821 38.2 The summarized financial information regarding associates is detailed below: 38.2 (a) Account Summary Profit and Loss 2020 For the Year Ended December 31, 2019 Equity Investments Lanka Ltd. Commercial Insurance Brokers (pvt) ltd. Total Equity Investments Lanka Ltd. Commercial Insurance Brokers (pvt) ltd. Rs. '000 Rs.' 000.rs. '000. Rs.' 000.rs. (16,887) 17,006 - 17,006 (1,480) 56,147 54,667 3,898 - 3,898 (339) 10,331 9,992 14,989 - 14,989 (4,109) of another global result of continued operations, Nach Steuern 3,436 - 3,436 (942) 39.575 38.633 using the equity method recognized in the statement of income and in the statement of income and other comprehensive income 7,334 – 7,334 (1,281) 49,906 48,625 Notes to the financial statements Participations Financial statements Formation and operations Annual report 2020 As of December 31, Commercial Bank of Ceylon PLC Upon losing significant influence over the associate, the Group measures and recognizes all retained investments at fair value Lue. Any difference between the carrying amount of the associate when control is lost and the fair value of the retained interest and the proceeds of the disposal is recognized in results. 38 213
216. 38.2(b) 2020 Summary Balance Sheet As of December 31, Commercial Insurance Brokers (Pvt) Ltd. Capital Investments Lanka Ltd. Commercial Insurance Brokers (pvt) ltd. Rs. '000 Rs. '000 Rs. 48,172)-279, 910-247,912 510). Net assets Group share in net assets – – (93,955) 56,821 – The maturity analysis of investments in associates is presented in note 61 on pages 251 to 253. 39. Property, plant and equipment and rights of use Accounts annual Accounting and valuation principles Basis of recognition Property, plant and equipment are recognized when it is probable that the future economic benefit associated with the asset will flow to the Group and the acquisition cost of the asset can be reliably determined. Commercial Bank of Ceylon PLC – 64,155 The Group accounts for its interest in the net assets of associates using the equity method to arrive at the Directors' valuation. The Group applies the requirements of the Sri Lanka Accounting Standard – IAS 16 on “Property, Plant and Equipment” in accounting for its own assets held and used for rendering services, leasing to others or for administrative purposes and is expected to cease used for more than one year. Basis of valuation An item of property, plant and equipment that meets the requirements for recognition as an asset is valued at acquisition cost when first recognized. Acquisition costs include expenses directly attributable to the acquisition of the asset and consequent costs (excluding daily maintenance costs), as explained below. The cost of self-constructed assets includes the cost of materials and labor, all other costs directly attributable to bringing the asset to a working condition for its intended use, and the cost of dismantling and removing items and restoring the site. , located and capitalized loans. Costs Purchased software that is an integral part of the functionality of the associated equipment is capitalized as part of the computer equipment. If parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of the item of property, plant and equipment. 214 - Carrying amount of investments in associates Annual Report 2020 Notes to the financial statements Acquisition of control of associate 38 39 2019 Equity Investments Lanka Ltd. z Historical cost model The Group applies the historical cost model to all property, plant and equipment other than owned land and owned and leased buildings. They are recorded at acquisition cost plus accessory costs less accumulated depreciation and accumulated impairments. z Revaluation model The Group uses the revaluation model for all classes of freehold land, condominiums and leases for valuation after initial recognition. Such properties are carried at revaluation amounts equal to their fair value at the revaluation date less any subsequent accumulated depreciation of buildings and accumulated impairment losses charged after the valuation date. The Group's leased land, condominiums and buildings are revalued by independent professional appraisers every three years, or more frequently if fair values ​​differ significantly from book values, to ensure that book values ​​do not differ from fair values ​​in the date of the report. Upon revaluation of an asset, any increase in book value is recognized in revaluation surplus within equity by OCI or used to reverse a prior revaluation loss on the same asset that has been charged to the income statement. In this case, the increase is recognized as income only to the extent of the amounts previously written off. Any reduction in book value is recognized as an expense in the income statement or charged to the revaluation surplus in equity through ORI only to the extent of the credit in the revaluation surplus in relation to that asset. Any remaining balance in the revaluation reserve in respect of an asset is transferred directly to retained earnings upon derecognition or sale of the asset. As of December 31, 2020, the Group has revalued its owned land, owned and leased buildings. The significant methods and assumptions, including unobservable market data, used to estimate fair value are disclosed in Note 39.5 (b) and Note 39.5 (c). As of December 31, 2020, the Bank carried out a revaluation of its own land, buildings occupied by its owners and leased as established in Section 7.1(b) of Instruction No. 01 of 2014 on the "Valuation of Assets Properties of Authorized Commercial Banks ” issued by the CBSL and recorded the gains/(losses) for revaluation in the financial statements. The next revaluation of freehold land, freehold buildings and inheritable building rights will take place before December 31, 2023. Subsequent expenses Subsequent expenses are capitalized only when it is probable that the future economic benefits of the expense will flow To the group. Repairs and ongoing maintenance are expensed when incurred. Derecognition An item of property, plant and equipment is derecognised when it is disposed of or when no future economic benefit is expected.
217. of its use. Any gain or loss arising from the derecognition of the asset (calculated as the difference between the net amount of the disposal and the book value of the asset) is recognized in results under the heading "Other operating income" in the year in which the asset is written off. When replacement costs are recognized in the carrying amount of an item of property, plant and equipment, the remaining carrying amount of the replaced part is written off in accordance with the requirements of the Sri Lanka Accounting Standard - IAS 16 on 'Fixed assets'. Works in progress These are capital expenses incurred directly in the construction of buildings, large plants and machines, in the development of systems and pending capitalization. They are presented in the balance sheet at cost less accumulated impairment losses. Work in process is transferred to the relevant asset when it is in the location and condition necessary to operate in the manner intended by management (ie available for use). Right-of-use assets Right-of-use assets are included with property, plant, and equipment on the balance sheet. Computer equipment Motor vehicles Equipment, furniture and office supplies Investments in process Right of use Total 2020 Total 2019 $ '000 $ '000 $ '000 $ '000 $ '000 $ '000 $ '000  513,803 6,326,264 34,132,719 26,133,242 balance of cost /Valuation as of January 1, 7,792,197 4,394,940 1,240,759 6,523,758 549,127 6,791,871 Effect of the adoption of SLFRS 16 - - - - - - - - - 5,044444 RECORDS OF THE PERSON OF THE EFERICIA OF THE SLFRS OF SLFRS. - - - - - - 525,137 Additions/transfers for the year - 3,787 Transfer of accumulated depreciation of revalued assets - Surplus from real estate revaluation Loss from revaluation over accumulated reserve (531,311) 1,611,745 2,046,597 21 186 (17,508) Withdrawals for the year - exchange rate variation - transfers/adjustments - balance as of December 31 (22,364) 10,725 11,936 414,301 202,604 789,216 1,948,928 - - - - - 26,193 - - - - - - - - (39,872) – – (186,877) (142.690 ) 84,726 (60,358) – – – – – – (116,352) – (12,894) (57,631) 8,023 3,119 20,038 – – 9,386,434 6,032,851 1,179,686 6,931,788 (900) 551,288 7,167,679 – (141,202) 53,546 - (629,302) 2,673,746 (97,991) - 141,202 516,359 3,684,535 (900) 575,205 7,169,026 38,993,957 - - - (73,202) 34,132,719 Depreciation and amortization of the expensation of the expensation of the expelled and the expelled and the expelled of the expense of the Exhibition n and the Interest of the Expression of the Expression of the Exposure and the Interest of the Expression. for the year 20 - 185 376,531 - - 156,746 83,564 4,634,391 - - 36,590 Impairment - Reclassification of accumulated depreciation on revalued assets - Withdrawals for the year - - - Exchange rate variations - - - Transfers/Adjustments - - - Balance as of December 31 - 1,966 - (531,311) - ( 97,991) - - 699,928 - - 340,958 5,099,906 - - 64,784 - - - - - 634,588 - 1,072,711 11,608,061 - - 1,1996 - - 2,791,740 - -7 - , -2 -7 - , - , -10 -2 (6 -9, -9 -1) 629,302). – – 20,624 – – – – (116,202) – – – – – 22,163 5,223,064 395,048 5,693,271 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 December 31, 2019 7,792,197 4,018,409 1,157,195 1,889,367 208,169 1.6 91,965 513,803 5,253,553 - Building Rent Financial Report 9,118,006 25,636 89,709 2,588,863 - Annual Report 2020 Page No. 11,608,061 – 39 – 22,524,658 215
218. 39.2 Group – 2019 Note Page No. Own land Own buildings Rental buildings Computer equipment Motor vehicles Office equipment, furniture and accessories Works in progress Right of use Total 2019 Total 2018 Rs.'000 Rs.'000 Rs.'000 Rs.000 Rs.'000 Rs.'000 Rs. '000 Rs.' 000Rs. '000' Rs. '000 7,465,645 4,294,255 1,240,759 5,957,479 480.508 6,363,950 330,646 26,133,242 24,218,184 Costo/valiente/valiente 37.2.2 Combinación Adiciones/traslados del ejercicio Retiros del ejercicio Variación tipo de cambio 211 Traspasos/ajustes Saldo al 31/12 589.097 39.990 560.785 1.294.192 2.673.746 2,081,002 (36,097) (23,832) (82,961) -4 - (82,961) -4 - (82,961) -4 - (82,961) -4 - - (142.96) (4.643) (26.35) (26, 63) (2, 2,045) (8,898) - 1) - (4,643) (2,045) (8,898) - - 1) - (4,643) (2,045) (8,898) - - 1) -) (4,643) (2, 2,045 ) (8,898) - -) -) – (73,202) (1,200) 6,326,264 34,132,719 26,133,242 10,448 7,792,197 4,394,940 1,240,759 6,523,758 549,127 6,791,871 193,632 47,983 3,992,128 273,940 4,610,323 – – 54,506 (10,448) – 5,076,844 183.157 513.803 Amortización acumulada y pérdidas por deterioro B Balance a January 1 - Impact of the application of IFRS 16 - - - Accumulated amortization assumed in business combination 37.2.2 211 - 26,925 Charge for the year 20 185 - 155,974 - 35,581 - - - - 12,313 22,623 27,848 – 669,307 68,141 612,785 – Impairment – ​​– – Withdrawals during the year – – – (35,612) (22,621) Exchange rate variation – - - (2,390) Transfers/Adjustments - - - (1,355) Balance as of December 31 - - - - - - - - - - (1,125) (5,926) - - (65,125) - - 83,564 4,634,391 340,958 5,099,906 25,636 - 89,709 1,047, 09 (79,999) 376,531 9,118,036 25,118,036 amber net book value , 2019 7,792,197 4,018,409 1,157,195 1,889,367 208,169 1,691,965 513,803 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 2,588,863 – 7,901,150 – – 1,383,581 – (138,232) ( 265.704 ) - (9.441) 99.052 - (66.480) (73) 1,072,711 11,608,061 9,118,006 5,253,553 22,524,658 - - - 17,015,236 The book value of the Group's revalued assets that would have been included in the financial statements if the assets had been recorded at cost less depreciation as follows: 2020 As of December 31, 2019 Cost Accumulated depreciation Val or Net Book Cost Accumulated Depreciation Net Book Value $ '000 $ '000 $ '000 $ '000 $ '0 00 Rs. ’000 1,121,538 1,121,538 Class of asset Freehold land 1,121,538 Freehold buildings 1,855,883 539,333 1,316,550 1,710,894 492,927 1,217,967 341,196 312,540 28,656 330,470 297,059 33,411 3,318,617 851,873 2,466,744 3,162,902 789,986 2,372,916 Leasehold buildings Total – – 1,121,538 39.3 Bank – 2020 Freehold land Note Page No. Rs. '000 Freehold Leasing Buildings Rs. '000 Rs. '000 Computer equipment Motor vehicles Rs. '000 Rs. '000 Office equipment, furniture and accessories Rs. '000 Capital Work in progress Right of use Total 2020 Total 2019 Rs. '000 Rs. Rs. '000 Rs. '000 6,461,845 31,714,275 24,149,652 Cost/Valuation 39 Balance as of January 1, 216 7,232,962 4,187,178 100,037 Impact of applying IFRS 16 – – – Accumulated depreciation additions/transfers of 7 during the year 7 - 3, depreciation of 7 assets - 429.5, 61 - 429.5, 6 201,750 - 505,742 - - 300 - 6,591,931 509,517 - 394,743 - - 202,069 - - 734,837 - - 1,841,478 (992,538). 158 –
219. Property Notice Page Number. Real Estate Revaluation Surplus Condominiums Leases Buildings '000 Rs. '000 Rs. Total 2020 Total 2019 Rs. '000 Rs. in thousands – – – – – – – – – – – (39,872) – (164,956) – – – Exchange difference – – – 6,767 Transfers/Adjustments – – - Balance as of December 31, '000 Rs. ) (141,202) (141,202). ) (900) (73,202) 6,827,393 205,169 6,948,465 570,384 7,242,811 36,510,627 31,714,275 4,582,679 145,161 4,978,990 1,139,373 11,207,072 8,848,406 – Charge for the year 20 185 – – 152,679 19,229 – 2,934 – 686,409 Impairment loss – Transfer of accumulated depreciation on assets revalued – Disposals during the year - - - Exchange Rate Variation - - - 4,302 Transfers/Adjustments - - - - Balance as of December 31 - - - (494,319) - - - - - - - (114,051) - 17,520 599,971 - - - - 1,271,927 2,731 .440 - - - - - (494,319) - - (163,053) - - 17,093 - - 10,591 - - - (49,002) 2,200 - - 22,163 5,159,339 164,881 5,540,550 - - - 2,411,300 13,298,233 NET BOOK VALUE AS AT DECEMB 77,874 1,668,054 40,288 1,407,915 570,384 4,831,512 0,394 Net Book Value as of December 31, 2019 7,232,962 380,808 1,846,376 56,612,517 5,322,472 Buildings '0 Computers owned. Rs.'000 Rs.'000 Rs.'000 Thousands of rupees 7,243,410 4,170,205 100,037 5,902,923 201,175 6,205,242 326,660-13,188 2,541,281---(119,651) (6,6720). $ '000 Total 2019 Total 2018 $ '000 $ '000' Cost/Valuation Balance as of January 1, Impact of IFRS 16 Implementation – – – Additions/Transfers during the year – 6,525 – 567,689 7,890 549,005 Disposals during the year - - - (35,508) (5,270) (81,940) - ( 4,512) (2,045) - (1,537) - Exchange Rate Variation - Transfers/Adjustments Balance as of December 31, - - - - 24,149,652 22,338,222 5,209. 465 5,209,465 - 1,29,641.35 1,924.192 - (2,392). (57,080) 110,449 (71,665) – (73,202) (1,200) (10,448) 10,448 7,232,962 4,187,178 100,037 6,429,055 201,750 6,591,931 189,127 16,295 3,963,596 134,197 4,545,191 – – 182,857 509,517 – 6,461,845 31,714,275 24,149,652 Accumulated Depreciation and Impairment Losses Balance as at January 1, – Effect acceptance of IFRS 16 rates for the year - 20,185 - - 152,513 - - - - - - 8,848,406 7,703,512 - 13,188 13,188 - 2,934,657,936 17,359,584,354 - 2,934). Year - - - (35,071) (5,270) z Variation rate - - - (2,427) (1,125) (6,120) - - (9,672) Transfers/Adjustments - - - (1,355) - (65,125) - - (66,480) ( 73) Stand zum 31. Dezember – – 1.139.373 11,207,072 8,848,406 5,322,472 20,507,203 – 341,640 19,229 4,582,679 145,161 4,978,990 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 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 - - Financial statements Effect of the adoption of IFRS 16 341,640 Annual Report 2020 - Balance of Commercial Bank of Ceylon PLC as of January 1 Notes to the financial statements Accumulated depreciation and impairment losses 39 15,301. 246 217
220. The book value of the bank.The revalued assets that would have been included in the financial statements if the assets had been carried at cost less depreciation are as follows: 2020 As of December 31, 2019 Cost Accumulated Depreciation Net Book Value Cost Accumulated Depreciation Net Book Value Rs. '000 Rs.' 000Rs. '000 Rs. '000 Rs. '000 Rs. '000 Class of asset Freehold land Freehold buildings 958,572 1,800,362 Leasehold buildings Total – 527,085 958,572 958,572 1,273,277 1,655,373 – 481,833 958,572 1,173,540 98,138 69,482 28,656 98,138 64,727 33,411 2,857,072 596,567 2,260,505 2,712,083 546,560 2,165,523 Commercial Bank of Ceylon PLC Informe anual 2020 Estados financieros Notas a los estados Financials Maturity analysis of property, plant and equipment is found in Note 61 on pages 251 to 253 7.6 (viii) of the Colombo Stock Exchange "Continuing Listing Requirements" ] Location Building Extension Number ( hangers) G Building (sq. ft.) Revalued Amounts Land Revalued Amounts Building Rs. '000 Rs. 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, Nou 23, Lilly Avenue, Welimada Straße, Heputale 1 258 5.662 51.400 24.400 75.800 59.305 1 14 11,216 52,500 87,375 139,875 136,650 Branchgäude Battaramulla - Nr. 213, Kaduwela Road, Battaramulla - 133, Kaduwela, Batora. Colombo 08 1 Chilaw – No. 44, Colombo Road, Chilaw 1 35 Municipal Office – No. 98, York Street, Colombo 01 1 – Duplication Road – Nos. 405, 407, R A De Mel Mawatha, Colombo 03 1 20 4,194 Galewela – No. 49/57, Matale Road, Galewela 1 99 5,632 Galle Main Street – No. 130, Main Street, Galle 1 7 Galle Fort – No. 22, Church Street, Fort, Galle 1 Gampaha – No. 51, Queen Mary's Road, Gampaha 16 50.000 16.880 246.000 9.420 114.693 50.000 50.000 254.000 – 500.00 0 386,080 37,708 152,401 130,965 600,000 600,000 38,687 370,000 30,000 400,000 227,332 39,600 16,900 56,500 46,337 3,675 60,750 9,600 70,350 62,006 100 11,625 262,015 98,185 360,200 438,477 1 33 4,775 105,280 10,720 116.000 83.866 Hikkaduwa- Nope. 217, Galle Road, Hikkaduwa 1 37 7,518 43,470 29,680 73,150 60.999 Ja-La-LaL – No. 89, Hirimbura Cross Road, Karapitiya 1 38 3,627 73,720 Kegalle – No. 186, Main Street, Kegalle 1 85 2,650 172,500 Keyzer Street – No. No. 285, Galle Road, Colombo 03 1 17 Kotahena – No. 198, George R de Silva Mawatha, Kotahena, Colombo 13 1 Kurunegala - No. 4, Surisma Mawatha, Kurunegala Maharagama - No. 154, High Level Road, Maharagam 104,054 16,254 299,000 65,500 364,500 284,840 28 26,722 279,000 190,000 469,000 391,250 1 50 10,096 257,390 42,610 300,000 276,760 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 2660,771 Matara - No. 18, Station Road, Matara 1 38 8.137 30.835 100.384 Minuwangoda - No. 9, Siri Warsa Mawatha, Minuwangoda 1 5,550 71,250 14.23 11,193 263,000 137,000 400 268,857 Narmala Narmala - 857 Narmala - Narmala - Narmala - Narmala - Narmala - 857 Narmala - Narmala - 857 Narmala - 857 Narmala - Narmala - Narmala - 857 Narmala - 857 Narmala - 55, Negombo Road, Narammala 1 41 5,353 71,871 20,624 92,495 80,021 Negombo - NOS. , 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
221. Net Book Net Book Value/ Value before revaluation Revaluation amount Rs. '000 Rs. 000 Revalued amounts Land Revalued amounts Buildings Rs. '000 Rs. 375 Galle Street, Panadura 1 12 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 11 40 – 3.07 – 8.07 – 8.07 80,960 58 Pettleh Stores – Shopping Complexes People's Park, Colombo 11 1 - Pettah - Main Street No. 280, Main Street, Pettah, Colombo 11 1 20 Trincomalee – No. 474, Power House Road, Trincomalee - 6,168 225 - 22,760 530,000 100 bar Land 125,940 6,670 4,705 0320,750 125.425 100,000 - Union Place - No. 1, Union Place, Colombo 02 1 30 63.385 720,000.200.38.200.38.200.38.20,000.20, 000.20,000,000 0.200,000 0. . 1,643,410 Wennappuwa-Nos. 262, 264, Colombo Road, Wennappuwa 1 36 9,226 81,000 34,000 115,000 8,774,704 5,841,664 14,616,368 27,000 107,000 85,283 93,000 79,386 406,967 392,251 Total – Bank 38 81,793 11,070,810 Subsidiaries Commercial Development Company PLC Tangalle – Nr. 148, Matara Road, Tangalle 1 49 4.257 80.000 Negombo - Fernando Avenue No. 18, Negombo 1 19 9,226 93,000 1 19 9,532 355,000 51,967 - Commercial Insurance Brokers (Private) Limited Colombo - No. 347, Dr. Colvin R. De Silva Mawatha, Colombo 02 CBC Finance Limited. Kandy-No. 182, Katugasta Road, Kandy 1 4 3,714 18.100 26,900 45,000 39,768 Kandy - No. 187, Katugasta Road, Kandy 1 13 9,480 65.630 85.320 150.950 133.317 9.386.434 6,032,851 TOTAL - GROUP 43 15.419.419.419.285 11. b) Information on freehold land and buildings of the Bank and Group “v) of Revisions Rule No. 6 (Asiii) [Asiii] 7. Colombo Stock Exchange Continuous Listing Requirements” Mandatory] Date of Valuation: December 31, 2020 Name of Professional Appraiser/Location and Address Valuation Methodology and Significant Unobservable Inputs Estimation Range for Unobservable Inputs Net Book Value Before Revaluation Revaluation Amount Gain/(Loss) of the revaluation), The land buildings land buildings Rs. '000 Rs.' 000Rs. '000 91.754 39.211 114.708 22.939 18.225 9.841 105.720 379 56.250 14. 749) 82,000 22,054 109,000 23,000 27,000 946 h m No. 9, Siriwardena Mawatha, Minuwangoda Comparable market method z Price per rack for land Rs 3,250,000 pp z Price per square foot for building Rs 5,000 sqft z Depreciation rate 20% Comparable market method z Price per rack for land 3,200 Rs ,000 pp z price per square foot for building 4,500 ft² z depreciation rate 50% Market comparable method z price per rack for land Rs 2,850,000 pp z price per square foot for building 4,500 ft² z depreciation rate 40% Notes a Financial Statements Building (Sqft) Scope of Financial Statements (Hangers) Annual Report 2020 Number of Buildings Commercial Bank of Ceylon PLC Location P B Kalugalagedara Keyzer Street No. 32, Keyzer Street, Co lombo 11 Comparable market method z Price per rack for land Rs 14,000,000 pp z Price per square foot for buildings Rs 500 to Rs 5,225 ft² 39,219
222. Name of professional appraiser/Location and address Kollupitiya No. 285, Galle Road, Colombo 03 Commercial Bank of Ceylon PLC Annual Report 2020 Financial Statements Notes to Financial Statements Kotahena No. 198, George R De Silva Mawatha, Kotahena, Colombo 13 220 Estimated range for entries no observable Market Comparable Method z Price per hanger for land Rs 19,500,000 pp z Price per square foot for buildings Rs 1,185 to Rs 5,225 ft² Investment method z Gross Monthly rent Net value Before reassessment of redevelopment amount of reassessment of profit/(loss), buildings on land buildings on land buildings on land Rs. '000 Rs.' 000Rs. 190,000 82,000 (4,250) 52,500 84,150 52,500 87,375 rupees 15,306,000 z years purchase (present value of one unit per period) 18.18 Mr R S Wijesuriya Battaramulla No. 213, Kadu Batwela Road, Battaramula Battaramulla No. 213, Commercial Roadcomparable, Kaduwela Method z Price per rack for ground Rs 3,750,000 pp z Price per square foot to build Rs. 7,500 ft² Market Comparison Method z Price per rack for land Panadura Market Comparison Method No. 375, Galle R OAD, Panadura z Price per rack for land Z Price per square foot for buildings 50,000 - 50,000 - - 3,750,000 pp 36.900 36.040 30,750 40,092 (6,150) 4,052 72,100 90.800 18,700 3,640 41.105 51,400 6,400 6. 229.107 521,000 272,000 42.2.500 7.200 7.200 7. 55.771 201.000 76,000 9.229 RS.6.500 FT² SAV² SARATH G. to Rs. 250,000 pp z Price per square foot for the building Rs. 5,250 to Rs. 5,750 sqft z Depreciation rate 40% Holiday Bungalow – Haputale Market Comparable Method No. 23, Lilly Avenue z Price per hanger for Land Welimada Road z Price per square foot for Haputale buildings z Depreciation rate Kandy No. 120, Kotugodella Veediya, Kandy Kegalle No. 186, Main Street, Kegalle Matale No .70, Kings Street, Matale 39 valuation method and us 250,000 pp Rs 3,750 to Rs 7,500 55% Market Comparable Method z Price per ground hanger Rs 12,500,000 pp z Price per square foot for buildings Rs 7,000 to Rs 10,500 z Depreciation rate 65% and 70% Comparable to market Method z Price per hanger for land from Rs 1,250,000 to Rs 3,500,000 pp z Price per square foot for buildings of 6,000 ft² z Depreciation rate 55% Market comparable method z Price per hanger for land from Rs 1,750,000 to Rs 4,000,000 pp z Price per square foot to build Rs. 10,750 square feet z depreciation rate 20% and 40%
223. Name of professional appraiser/Location and Address Nuwara Eliya No. 36/3, Buddha Jayanthi Mawatha, Nuwara Eliya Valuation Method and Significant Unobservable Inputs Estimated Range for Unobservable Inputs Market Comparison Method z Price per hanger for land Rs. 3,000,000 to Rs. 4,500,000 pp z Price per square foot of building Rs 10,750 sq ft z depreciation rate 30% Net book value before revaluation of revaluation amount of revaluation gain/(loss) incurred in Rs 000 Rs 000 Rs 000 000 rupias 124 800 68 023 187 000 76,800 62,200 8,777 54,000 8,006 60,750 9,600 6,750 1,594 255,650 182,827 262,015 98,185 6,365 (82,005) 35,670 25,329 43,470 29,680 7,800 4,351 88,829 14,625 73,720 19,180 – 4,555 60,080 26,304 69,465 30,835 9,385 4,531 z Price per square foot for building Rs 2,000 to Rs. 3,250 ft² Market Comparable method z Price per rack for land Rs 6,500,000 pp z Price per square foot for construction 6,500 ft² Market I comparable method z price per rack for land from Rs 900,000 to Rs 1,350,000 pp z price per square foot for buildings from Rs 3,250 to Rs 4,250 m² Market Comparable method Karapitiya No. 89, Hirimbura Cross Road z price per hanger for land Karapitiya z Price Per square foot for building No. 18 Matara, Station Road, Matara Trincomalee No. 474 , Power House Road, Trincomalee Rs 2,000,000 per person 4,500 ft² market Comparable method z Price per rack for land Rs 1,250,000 to Rs 2,250,000 per person z Price per square foot to build Rs 3,250 to Rs 4,000 ft² Method market comparison z price per rack for ground 100,000 – 125,425 – 25,425 – 1,000,000 – 429,825 – (570,175) – Rs 1,250,000 pp S. Suresh Jaffna No. 474, Hospital Road, Jaffna Market Method comp arable z Price per plot rack Rs 5,500,000 to Rs 7,000,000 per person Siri Nissanka Borella No. 92, D S Senanayake Mawatha, Colombo 08 Municipal Office No. 98, York Street, Colombo 01 Chief Executive's Bungalow No. 27 , Queens Road, Colombo 03 Narahenpita No. 201, Kirula Road, Narahenpita, Colombo 05 Market Comparable Method z196,000 Price per ground perch Rs. 15,750,000 pp z Price per square foot for construction Rs. 15,000 sq. ft. Comparable market method – z Price per ground rack Rs. 24,000,000 pp z Price per 20,000 ft² Market Comparable Method z Price per rack for land Rs 18,000,000 z Price per square foot for buildings 10,000 ft² Market Comparable Method z Price per rack for land Rs 12,000,000 p.p. z Price per square foot to build Rs.12,500 p.sq.ft. 190,080 38,687 246,000 – 254,000 600,000 50,000 – 63,920 Hikkaduwa Annual Report No. 217, Galle Road, Hikkaduwa Rs. 9,000,000 pp Annual Report 2020 Galle Fort No. 22, Church Street, Fort, Galle Market Comparison Method z Price Per Hanger for Land Commercial Bank of Ceylon PLC Galle Main Street No.130, Main Street, Galle Notes to Sunil Financial Statements Fernando Associates Pvt Ltd 561 313 961,000 27,300 1,150,000 50,000 189,000 22,700 176,850 7,850 92,850 263,000 137,000 87,000 44,143 39,221
224. Name of professional appraiser/Location and Address Peliyagoda Warehouse No. 37, New Nuge Road, Peliyagoda Financial Statements Notes to Financial Statements Pettah – Main Street no. 280, Main Street, Pettah, Colombo 11 Union Place No. 1, Union Place, Colombo 02 Duplication Road No. 405, 407, R A De Mel Mawatha, Colombo 03 Maharagama No. 154, Highlevel Road, Maharagama Nugegoda No. 100, Stanley Thilakaratne Mawatha, Nugegoda Wellawatte No. 343, Galle Road, Colombo 06 Valuation methodology and significant unobservable inputs Range of estimates for unobservable inputs Market Comparison Method Net book value before revaluation of Rs 5,000,000 pp z Price per square foot to build Rs 2,500 per square foot to Rs 8,500 per square foot Market comparison method z price per rack for land Rs 26,500,000 PP z price per square foot for building 16,250 ft² Comparable market method z price per rack for land 24,000,000 rupees z price per square foot for building 23,000 sf market comparable method price z per hanger for land 18,500,000 pp z price per square foot for building 5,500 ft² market Market Comparable Method z price per rack for land Rs 7,500,000 pp z price per square foot for building 8,000 ft² market Comparable Method z Price per rack for land Rs. 12,500,000 pp z Price per square foot for construction Rs. 10,650 sq. ft. Market Comparable method z Price per ground rack Rs. 18,000,000 pp z Price per square foot for construction Rs. 25,000 sf Land Revaluation Profit / (Loss) Buildings Land Buildings Land Buildings $ '000 $ '000 $ '000 $ '000 $ '000 $ '000 – z Price per rack for land Revalued amount of 7,737 – 116,000 – 108,263 360,000 171,132 530,000 320,000 170,000 148,868 500,000 883,072 720,000 1,480,000 220,000 596,928 220,400 6,932 370,000 30,000 149,600 23,068 93,000 41,360 133,000 67,000 40,000 25,640 150,000 52,800 485,000 115,000 335,000 62,200 650,000 993,410 818,000 1.282.000 168.000 288.590 33.000 23.771 43.000 30.000 10.000 6.229 136.000 31.680 167.000 39.000 31 000 7 320 Commercial Bank of Ceylon plc Annual Report 2020 W D P Rupananda Ja-Ela No. 140, Negombo Street People's Park Shopping Complex, Colombo 11 Market Comparable Method, p. Price per plot rack Rs 3,250,000 pp z Price per square foot for construction 6,000 ft² z Depreciation rate 30% Comparable market method z Price per plot rack Rs 3,500,000 to Rs 5,000,000 pp z Price per square foot for construction Rs 5,000 to Rs 6,250 ft² z Depreciation rate 48% and 35% Investment method z Gross monthly rent (Cash value of 1 unit per period) Wennappuwa Nos. 262, 264, Colombo Road, Wennappuwa 222 – 80,000 – 21,040 – 4,750 – 6,670 – 1,920 18.18 4 months per year Investment Method z Gross Monthly Income Purchase Rs in years z Null Period Pettah – Stores People's Park Shopping Complex, Colombo 11 – Rs 550,000 hrs 16.67 4 months per year Method Market Comparable 54,000z Price per hanger for land Rs 2,250,000 pp z Price per square foot for buildings Rs 4,600 to 6,200 ft² at 35% depreciation rate 27,793 81,000 34,000 27,000 6,207
225. Name of professional appraiser/Evaluation method of location and direction and establishment area of ​​essential inputs for non-observable inputs '000 Rs.' 000Rs. '000 29,700 16,600 9,900 263 236,800 39,960 42,610 20,61,604 18,417 71,871 20,624 10,267 2,207 7,232,962 3,837,8496,848 666 666 666 55, Negombo Road, Narammala Rs 400,000 pp z Price per square foot for building Rs 2,000 to Rs 4,000 ft² z Depreciation rate 19% and 27% Comparable market method z Price per hanger for land Rs 4,200,000 p.p. 5,500,000 pp z Price per square foot for buildings from Rs 3,500 to 4,750 z Depreciation rate 15% Market comparable method z Price per hanger for land Rs 1,750,000 z Price per square foot for buildings from Rs 4,000 z Depreciation rate 8 % Total - Bank 8,774,704 5,841,664 1,559,250 2,026,180 Subsidiaries Commercial Development Company PLC G M Gamage Tangalle Investment method no. 48, Matara Road, Tangalle z Gross monthly rent No (Present value of 1 unit per period) z Invalid period G H A P K Fernando Negombo 80,000 150,000 rupees 18.18 N/A Market comparison method z Price per hanger for land Reports Kurunegala No. 4, Suratissa Mawatha, Kurunegala Market Comparison Method z Price per hanger for land 79,386 – 93,000 – Rs 5,000,000 pp Annual Report 2020 Galewela No. 49/57, Matale Road, Galewa Notes to the statements Financial W S Pemaratne G J Sumanasena Colombo No. 347, Dr . Colvin R de Silva Mawatha Colombo 02 Market -Comparable method Z Price per ground hanger Rs. 18,500,000 pp Z Precio por pie cuadrado para edificios 7.500 ft² Z Tasa de depreciación 30% 337,000 55,000 51.967 18000 (3.284) 16.400 23.100 26.900 3.53 59,662 733355 65,65,65,65,65,650 80 850 80 80 80 80 80S 80 80 80 80 80 80 SECONDS OF 5,968 11,665 7,792,197 4,008,618 CBC Finance Limited. (*) Kandy No. 182, Katugastota Road, Kandy Kandy No. 187, Katugastota Road, Kandy Comparable market method z Price per rack for land Rs 5,500,000 pp z Price per square foot for construction 7,250 ft² market Comparable method z Price per rack for land Rs 5,500,000 pp z Price per square foot for construction Rs 9,000 ft² Total - group pp – per rack p.sq.ft. - per square foot p.m. - per month Commercial Bank of Ceylon PLC Commercial Insurance Brokers (Private) Limited 9,386,434 6,032,851 1,611,745 2,046,597 p.a. - for year 39 (*) The valuation was made for the year ended March 31, 2020. 223
226. 39.5 (c) Valuation techniques and sensitivity of fair value measurements of land and buildings owned by the Bank and the Group The description of the above valuation techniques is tabulated together with illustrative descriptions of the sensitivity of fair value measurements to significant unobservable changes in the input data. next: market comparison method This method takes into account the sale price of a similar property within a relatively short period of time to determine the fair value of the property being revalued. This involves evaluating recent active market prices for similar assets, making appropriate adjustments for differences in the size, type, location and condition of specific properties. In this process, unusual transactions that indicate highly motivated buyers or sellers are overcompensated because the price may not adequately reflect fair market value. Investment Method With this method, expected rental income is capitalized at a reasonable rate of years of purchase, which currently characterizes the real estate market. Significant unobservable valuation inputs (ranges for each property are given in the table above) Price per hanger for land Price per square foot for building Building depreciation rate Gross annual rents 39.6 Ownership restriction on tangible assets 39.8 Third party compensation for Items of Tangible Assets - Commercial Bank of Ceylon PLC Financial Statements Years Acquired (present value of 1 unit per period) Null Period Annual Report 2020 Notes to Financial Statements Valuation Technique Fair Value Measurement Sensitivity to Inputs Estimated Fair Value would increase/(decrease) if; Price per rack for land would increase/(decrease) Price per square foot for buildings would increase/(decrease) Depreciation rate for buildings would decrease/(increase) Estimated fair value would increase/(decrease) if; Annual gross income would increase/(decrease) Years of service would increase/(decrease) Nullification period would decrease/(increase) There were no restrictions on ownership of the Group/Bank's property, plant and equipment at the balance sheet date . 39.7 Property, plant and equipment pledged as collateral for liabilities - Bank As of the balance sheet date, there are no property, plant and equipment pledged as collateral for liabilities. Compensations received/received from third parties for depreciated, lost or abandoned items of property, plant and equipment at the Bank's balance sheet date are as follows: 2020 Rs. '000 2019 Rs. '000 9,510 6,654 Total Applications Received (4,775) (3,619 ) Total Applications Rejected – – 4,735 3,035 Rs 0.9 Fully Depreciated Fixed Assets – Bank The cost of the Bank's fully depreciated fixed assets still in use are as follows : As of December 31, Motor Vehicles 39.10 Temporary Unused Fixed Assets – Bank 39 The following fixed assets of the Bank were temporarily unused (until the assets were issued to the Company Units): 2020 Rs. '000 2019 Rs furniture, fixtures and accessories 116,135 92,110 as of December 31, 224
227. 39.11 Subjects - Bank - Bank of active use The following bank material systems were withdrawn from active use: 2020 marginal nº '000 2019 Rec. 9,544 4,386 for both. An investment property is recognized when it is probable that the future economic benefits associated with the investment property will flow to the Group and the cost of the investment property can be measured reliably. The Group reports investment properties at fair value. If part of the property is held to earn rentals or capital gains and another part is held for use in the production or delivery of goods or services, or for administrative purposes, the Group accounts for the parts separately if those parts can be sold separately ( or leased separately under a finance lease). If the parts cannot be sold separately, the property is treated as investment property only if an immaterial part is held for the production or supply of goods or services or for administrative purposes. Investment properties are written off when they have been sold or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net proceeds from the sale and the carrying amount of the asset is recognized in other operating income. GROUP Notes Page No. 37.2.2 211 BANK 2020 2019 2020 2019 $ '000 $ '000 $ '000 $ Acquisitions Additions later in the year Fair value gains/(losses) 21 186 Balance as of December 31 - - 46,350 - - - 32,821 - - 41 - - (12,096) 67,116 - 46,350 - - - - - - The maturity analysis of investment property is detailed in note 61 on pages 251 to 253. In 2020 there were no capitalized financial costs related to the acquisition of real estate investments (2019 - zero). Financial Statements Accounting Policies Annual Report 2020 40. Investment Property Commercial Bank of Ceylon PLC There were no capitalized borrowing costs related to the acquisition of property, plant and equipment in 2020 (2019 – Nil). Notes to the financial statements 39.12 Borrowing costs 40.1 (a) Information on the Group's investment properties - extent and location [As required by Colombo Stock Exchange Rule No. 7.6 (viii) "Continuous Listing Requirements" ] Extension Location Number Buildings Fair Value of Buildings (Perches) (Sqm) Investment Property – Land Fair Value of Investment Property – Building Rs. '000 Rs. '000 Book value of investment property before market valuation – Land Rs. '000 Book Value of Investment Property Pre-Market Valuation Building Rs. '000 39 40 Commercial Insurance Brokers Private Ltd. 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
228. 40.1(b) Group Investment Property Information - Valuations [in accordance with Colombo Stock Exchange Rule No. 7.6 (viii) “Continuing Listing Requirements”] Valuation Date: 31 December 2020 Name of Professional Appraiser/ Location and Address Valuation Method and Significance Unobservable Inputs Estimated Range for Unobservable Inputs Pre-Fair Valuation Book Value of Investment Property Land (Rs. '000) Building (Rs. '000) Fair Value of investment property Land (Rs. '000) 0.000) Building (Rs 0.000) Fair gain/(loss) of value recognized in profit and loss account Land (Rs 0,000) Building (Thousands of Rs) Commercial Insurance Brokers Private Ltd. GJ Sumanasena #347, Dr. Colvin R De Silva Mawatha, Colombo 02, Sri Lanka Market comparable method z Price per square foot z Depreciation rate Rs. 7500 sqft 30% - Rs. 300,000 pp 3,866 Rs. 60,000 pp 28,996 46,350 - 42,750 - (3,600) - 1,746 - - ) (10,242 – (8,496) (3,600) Commercial Bank of Ceylon PLC Annual report 2020 Financial statements Notes to financial statements C B C Finance Ltd K M U Dissanayake, Lot – 04, Plan No. 1652, Bulumulla, Kiribathkumbura Lot – 01, Land No. 1366, Boyagama, Pilimathalawa Market Style Method z Price per Perch 226 5,612 – 18,754 Market Style Method z Price per Perch Total 32,862 46,350 24,366 42,750 40.1 and c) Valuation techniques sensitivity of the fair value measurement of the Group's investment properties The description of the The valuation techniques identified above, together with illustrative descriptions of the sensitivity of the fair value measurement to changes in significant unobservable inputs, are tabulated below. continued: Valuation Technique Significant Unobservable Valuation Data (Ranges for each property are identified in the table above) Comparison Market Method This method All take into account the sale price of a similar property within a reasonably recent period of time in determining the fair value price per hanger for the land being revalued. This involves evaluating the most recent asset price per square foot to construct market prices for similar assets, making appropriate adjustments for differences in the size, type, location, and condition of specific properties. In this process, atypical transactions that indicate particularly motivated depreciation rates for buyers or sellers of buildings are overcompensated because the price may not adequately reflect fair market value. Sensitivity of fair value measurement to inputs Estimated fair value would increase/(decrease) if; The price per land would increase/(decrease) The price per square foot of the buildings would increase/(decrease) The depreciation rate of the buildings would increase/(decrease) Trademarks and computer software. Basis of recognition An intangible asset is recognized when it is probable that future economic benefits associated with the asset will flow to the entity and the cost of the asset can be determined reliably in accordance with the Sri Lanka Accounting Standard - IAS 38 on "Intangible Assets". intangibles". ”. Intangible assets acquired separately are initially recognized at cost. The acquisition costs of intangible assets acquired as part of a business combination correspond to their fair value at the time of acquisition. After initial recognition, these assets are recorded on the balance sheet at cost less accumulated depreciation and accumulated impairment losses, if any. 40 41 – Subsequent disbursements Subsequent disbursements on intangible assets are capitalized only if they increase the future economic benefit of the asset to which they refer. All other expenses are charged to results when incurred. Useful lives, amortization and impairment The useful lives of intangible assets are estimated to be finite or indefinite. The useful lives, amortization and impairment of finite and indefinite intangible assets are described below: z Intangible assets with finite useful lives and amortization Intangible assets with finite useful lives are amortized over their useful lives. The amortization period and amortization method for an intangible asset with a finite useful life are reviewed at least on each balance sheet date. Changes in the expected useful life or in the expected pattern of consumption of the future economic benefits contained in the asset are accounted for by changing the depreciation period or method, if any, and are treated as changes in accounting estimates that require prospective application. . The amortization of intangible assets with a finite useful life is carried to results as it is incurred. z Goodwill Goodwill arising from the acquisition of subsidiaries is reported in intangible assets. Goodwill is initially measured at cost, which is the difference between the total consideration transferred and the reported amount of non-controlling interests and any prior interest over the net identifiable assets acquired and liabilities assumed. After initial recognition, goodwill is valued at acquisition cost less
229. – The ability to reliably measure effort during development. Subsequent disbursements for software assets are only capitalized if they increase the future economic benefits of the respective asset to which they relate. All other expenses are charged to results when incurred. – The capacity to use the intangible asset generated. After initial recognition of development costs as an asset, the asset is measured at cost less accumulated depreciation and accumulated impairment losses. z Research and development costs Research costs are expensed when incurred. Development costs of an individual project are capitalized as an intangible asset if the Group can demonstrate: At the balance sheet date, the Group has not capitalized any development costs as internally generated intangible assets. – The technical feasibility of completing the intangible asset so that the asset is available for use or sale. GROUP As of December 31 Note Page No. Computer software 41.1 227 Software under development 41.2 228 Goodwill on business combination BANK Brand 2020 2019 2020 2019 Rs 000 Rs 000 000 Rs 581,601 375,742 573,414 445,1490 - total 51.1480 - - - - - - - - - - - 000 Rs. '000 Rs. .436 1,080,010 41.1 EDP software GROUP Note page no. BANK Acquisition costs/valuation as of January 1, business combination EDP software acquisition 37.2.2 211 Additions for the year: 229,494 disposals/depreciation for the year (280) Rate variance exchange rate 13,062 Balance of transfers/adjustments as of December 31, 17,328 339,200 - 178,763 - 311,544 - - - (2,697) 2,979 (1,261) 24,700 35,100 24,700 35,7,7,7,7,72,72,92,92. 2,500,261 2,293,819 1,698,136 1,435,108 1,581,223 1,368,950 Notes to financial statements Expenses at Selbst entwicke Old software is recognized as an asset when the Group can demonstrate its intent and ability to complete development and use the software in a way that generates future economic benefits and can reliably determine the cost of completing development. – The availability of resources to complete the asset. Financial Statements Software acquired by the Group is valued at cost less accumulated amortization and any accumulated impairment loss. – The asset will generate future economic benefits. Annual Report 2020 z Computer software: your intention to complete and your ability to use or sell the asset. Internally generated software capitalized costs include all costs directly attributable to software development as well as capitalized borrowing costs and are amortized over the useful life. In-house developed software is recorded at capitalized cost less accumulated amortization and accumulated impairment losses. Commercial Bank of Ceylon PLC accumulated impairment losses. For impairment testing purposes, goodwill acquired in a business combination is allocated from the acquisition date to each cash-generating unit of the Group that is expected to benefit from the combination, regardless of whether they are other assets or liabilities of the acquired company. assigned to these units. Accumulated amortization and impairments Balance as of January 1 Accumulated amortization acquired in the business combination 37.2.2 211 Amortization for the year 20 185 Impairment Disposals/amortization for the year Exchange rate variations Transfers/adjustments Balance as of December 31, net book value at December 31, - 310,946 11,526 252,392 - 257,591 - 213,240 - - - - (280) - - - 7,358 (890) 1,857 (967) - - - - 2,016,160 1,698,136 1,840,671 1,571,3.223
230. 41.2 Software in Development BANCO DEL GRUPO 2020 2019 2020 2019 $ '000 $ '000 $ '000 Annual – – – Reclassifications/Adjustments (24,700) (35,100) (24,70) (35,100) Balance as of December 31 581,601 375,742 573,273 367,414 There are no restrictions on ownership of the Group's intangible assets at the balance sheet date. In addition, no elements of liabilities were given as guarantee. In 2020 there were no capitalized financial costs related to the acquisition of intangible assets (2019 - nil). The maturity analysis of intangible assets is presented in note 61 on pages 251 to 253. 42. Deferred tax assets and liabilities Accounting policies A company's net deferred tax assets/liabilities cannot be offset against net deferred tax assets/liabilities for deferred taxes from another company. There is no legally enforceable right to compensation. Group registered under latent tax rights registered under latent tax debts Summary of net latent tax rights Bank 2020 2019 Rs. SUBSUMMED TABULATED TABEM. Statement 23 Amount (arising)/transferred to Profit and Loss and Other Comprehensive Income Amount (arising)/transferred to retained earnings when ESOP expired Exchange rate mismatch Balance as of December 31 228 Page No. Balance as of January 1 Amount ( arisen)/transferred to Retained earnings (Deferred tax on IFRS 16 transition adjustment) 41 42 BANK 2020 187 2020 2019 2019 Tax effect of temporary difference Tax effect of temporary difference Tax effect of temporary difference Tax effect of temporary difference Rs. '000 Rs. '000 Rs. '000 Rs.' 000Rs. '000 Rs. '000 Rs. '000 72,398 113,707 (2,965,274) (782,937) 689,757 294,059 (2,490,485) (646,248) (317,443) (88,884) 7,144,426 2,048,100 (3,460,011) (968,803) (205,811) (57,627) ( 123,489) (34,577) – 9,367,632 (1,344,489) – (147,193) – 7,948,348 – 2,623,679 (376,457) – (41,214) 12,005 2,331,720 – 72,398 (1,565) 113,707 – 9,347,208 (1,351,271) – (147,193) – 8,538,501 – 2,615,567 (378,356) – (41.214 ) 9.804 2.499.860 – – 6.969. 438 2,002,575 (3,459,896) (968,771) (205,811) (57,627) (123,489) (34,577) – 689,757 (1,293) 294,059
231. 42.2 Reconciliation of Deferred Tax Assets – Consolidated Balance Sheet Profit or Loss Other Comprehensive Income 2020 2019 2020 2019 2020 2019 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs ) 100,858 Tax effect on actuarial Losses in defined benefit plans 101,333 87,511 Unrealized gain/(loss) on financial assets at fair value through other comprehensive income 366,456 (175,938) Vacation entitlement 119,304 134,209 Tax effect on actuarial losses By completion of vacations 140,168 834.168 for 81,168 finished/December, Gesterese Steuervermögen Für: LEISTUNGSBONUSSSTEUER AUF Spezifische Bestimmungen Betrieb - - 542,394 - (8,505) - 55,597 - 16,736 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 90,735 50,635 40,100 50,635 8,228,529 5,208,913 2,424,075 1,490,695 – 636,755 – ( 950.976) Pasivos por impuestos diferidos sobre: ​​​​Depreciación acelerada por impuestos – Bienes propios 556.292 600.169 43.877 8.684 - - Amortización acelerada fiscal - bienes alquilados 1.378.413 161.274 508.689 - - Revisión para Owned building 1,686,62,121 38,230 New excess valuation over Owned Land (*) 2.220.3. the impact of the exchange rate department - - - 5.809 5.09 5.09 5.09 5.095,095,095,095,095,095,095,095,095,095,03.22.226) exchange rate variance. Net income Deferred tax assets as of December 31 - (31,082) (12,428) (562,453) - (447,609) - (3,573) - - (17,590) 1,802 423 (237) 199,604 557,405 (1,013,212) (17,827) 2.69, 23 0.1 376.457) (968.803) (*) In accordance with the Internal Revenue Law No. 24 of 2017, which came into effect on April 1, 2018, capital goods/companies will be taxed at the tax rate of companies in force at the time of disposal. Accordingly, a deferred tax liability of 28% has been recognized on the revaluation surplus in relation to owner-occupied real estate in these financial statements. 42.3 Reconciliation of Net Deferred Tax Assets – Bank Balance Sheet Profit or Loss Other Comprehensive Income 2020 2019 2020 2019 2020 2019 Rs 000 Rs 000 000 Rs 000 000 on Actuarial Losses in Defined Benefit Plans 100,911 87,167 Unrealized Gain/(Loss) Financial assets at fair value through another integral income 366,288 (176,355) Vacation Right 119,304 134,209 Fiscal effect on actuarial losses in the license paid shipping 140,168,571 to 888 39,865 14,923 148,923 157,428 (8,505) 157,428 - - 89,134 46,696 42,696 4 – 7,847,848 4,814,937 2,437,199 1,479,758 For the year ended/as at December 31, Aktive latente Steuern auf: Wertminderungsrückstellung Hedging-Rücklage Latente Steuern auf Einzelrückstellung Operating- Leases - - (14,905 ) - - - - - 13 .744 9.108 - 542.643 (1.000. 898) 3,385 - 1,175,454 - - 55,597 - 16,736 - - - - - 24,942 636,926 Annex Latent taxes on previous losses 131,178 4,049,843 - Annual Accounts 121.4 14 905) – – Commercial Bank of Ceylon PLC Share-settled share-based payment transactions – 42 24 264 (950 790) 229
232. During the past year/As of December 31 Balance sheet Other comprehensive income 2020 2019 2020 2019 2020 2019 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 000 Rs Deferred tax liabilities on: Accelerated depreciation for tax purposes – Own assets 474,605 ​​574,605 ​​–608 574,608 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 Revaluation surplus on freehold land ( *) 2.194.104 1.756.155 56.818 20.602 Steuereffekt sobre ganancias actuariales en planes de beneficios definidos Efecto de Changes in exchange rates - Commercial Bank of Ceylon PLC Annual report 2020 Financial statements Notes to the financial statements 5,347,988 4,520,878 Impact of deferred tax on profit or loss and other comprehensive income for the year Net deferred tax asset at 31 December 2,499,860 – (437,949) - (31,082) - (5,134) (10,227) 1,530 423 (237) 178,368 522,817 (1,015,282) (17,981) 2,615,567 2,002,575 (3 8,356) (968,771) 294,059 For the maturity analysis of deferred tax assets, see Note 61 on pages 251 to 253. 43. Other assets GROUP Al Dec 31 Accounts Receivable BAN K 2020 2019 2020 2019 $ '000 $ '000 $ '000 Rs. '000 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 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 20,195,153 23,443,869 19,619,149 23,322,247 Total The maturity analysis de otros Assets are disclosed in note 61 on pages 251 to 253. 44. Liabilities to banks Accounting and valuation methods They are overnight loans, credit balances in nostro accounts and bank debts. After initial recognition, these are measured at amortized cost using the EIR method. Interest paid/payable on these loans is recognized in income. GROUP As of December 31, Loans in local currency Loans in foreign currency Securities sold with repurchase agreement (*) Total BANK 2020 2019 2020 2019 $ '000 $ '000 $ '000 $ 913,719 2,806,443 84,349,312 47,910,944 The análisis de vencimiento de to banks is given in Note 61 on pages 251 to 253. – 84,466,281 504,712 47,910,944 2,985,025 3,090,038 2,985,025 3,090,038 88,248,056 53,807,425 87,451,306 51,505,694 (*) Securities sold under repurchase (Repo) Vereinbarungen werden auf der Vorderseite der Balance sheet shown, except for repos with banks. 230 (17,744) (*) In accordance with Finance Law No. 24 of 2017, property/business assets will be taxed at the Corporation Tax rate applicable to capital gains at the time of disposal. Accordingly, a deferred tax liability of 28% has been recognized on the revaluation surplus in relation to owner-occupied real estate in these financial statements. Financial liabilities 42 43 44 – (572,622) – –
233. 45. Host-derived financial liabilities are recorded at fair value in the trading portfolio, and changes in fair value are recognized in income. Derivatives are carried at fair value with the corresponding gains or losses included in trading income in the profit and loss account. 2020 2019 2020 2019 Rupien '000 Rs. '000 Rs. '000 Rs. '000 1,358,886 1,442,022 1,358,886 1,442,022 1,132,513 1,140,261 1,132,513 1,140,261 216,709 295,838 216,709 295,838 Spot contracts 5,016 5,923 5,016 5,923 Currency options 4,648 – 4,648 – As at December 31, Note Page No. Pasivos financieros derivados – Mantenidos para negociación Derivados de moneda extranjera Permutas de divisas Contratos term Derivative financial liabilities – Cash flow hedges maintained for risk management Interest rate swaps 45.1 231 Total 142,376 53,295 142,376 53,295 1,501,262 1,495,317 1,501,262 1,495,317 45 .1 Derivative financial liabilities – Cash flow hedges maintained for risk management risks, a floating rate loan denominated in a foreign currency. During the year, a loss (after tax) of Rs 64,139 crore (2019 - Loss (after tax) of Rs 62,391 crore) related to the effective portion of cash flow hedges was recorded at OCI. The maturity analysis of derivative financial liabilities is presented in note 61 on pages 251 to 253. 46. ​​Financial liabilities at amortized cost - amounts owed to depositors Accounting policies Includes non-interest-bearing deposits, savings deposits, term deposits, sight deposits and certificates of deposit. Subsequent to initial recognition, deposits are measured at amortized cost using the EIR method unless the Group designates the liabilities at fair value through profit or loss. Interest paid/payable on these deposits is included under 'Interest Expense' in the Profit and Loss Account. GROUP BANK 2020 2019 2020 2019 Rs. '000 Rs. '000 Rs. '000 Rs. '000 967,297,104 800,224,277 964,759,360 800,688,240 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 29,289 54,047 29,289 54,047 319,319,295 268,758,310 301,206,558 252,619,420 Current account balances 47,108,754 31,851,740 39,808,968 23,694,078 Savings deposits 97,540,150 77,548,427 93,773,096 73,941,830 174,670,391 159,358,143 167,624,494 154,983,512 As at December 31, Einlagen in Landeswährung Kontokorrentguthaben Einlagenzertifikate Einlagen in Fremdwährung Termineinlagen Gesamt 1.286.616.399 1.068.982.587 Anhang zum Jahresabschluss BANK Jahresabschluss KONZERN Geschäftsbericht 2020 In finanzielle Verbindlichkeiten eingebettete Los derivados se tratan por separado y se reconocen por su valor razonable cuando sus características económicas y riesgos no are closely related to those of the main contract are linked, a separate instrument with l The same terms as an embedded derivative would satisfy the definition of a derivative and the host contract itself would not be held for trading or at fair value through profit or loss. Embedded derivatives have been separated Commercial Bank of Ceylon PLC Derivative financial liabilities – held for trading Derivative financial liabilities are classified as held for trading. This category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedging relationships. 45 46 1,265,965,918 1,053,307,660 231
234. 46.1 Análisis der Verbindlichkeiten gegenüber Kunden/Einlagen von Kunden GRUPPE BANK 2020 2019 2020 2019 Rs. '000 Rs. '000 Rs. '000 Rs. '000 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 29,289 54,047 29,289 54,047 As at December 31, (a) By product Certificates of deposit Total 1,286,616,399 1,068,982,587 1,265,965,918 1,053,307,660 Financial Statements Notes to the Financial Statements (b) By currency Sri Lankan Rupee 967,296,908 800,224,277 964,759,164 800,688,240 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 11,163,481 10,354,089 11,276,248 10,270,310 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 Gesamt 1.286.616.399 1.068.982.587 – 1.623.823 – 1.388.626 1.265.965.918 1.053.307.660 (c) Nach Institut/Kunden Einlagen von Banken Abh os its from finance companies 2,740,854 2,731,885 7,924,439 5,632,555 2,837,563 2,731,885 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 Commercial Bank of Ceylon PLC Annual Report 2020 The maturity analysis of financial liabilities at amortised cost – Due to depositors is given in Note 61 auf den Seiten 251 bis 253. 47. Finanzielle Verbindlichkeiten zu fortgeführten Anschaffungskosten – Sonstige Verbindlichkeiten KONZERN Zum 31. Diciembre BANCO 2020 2019 2020 2019 Rs. '000 Rs. '000 Rs. '000 Rs. '000 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. Laufende Steuerverbindlichkeiten KONZERN-Anmerkung Seite Nr. Saldo zum 1. Januar, Übernommene Steuerschuld bei Unternehmenszusammenschluss 37.2.2 211 Rückstellung für das Jahr 46 47 48 Auflösung (Über-)/Unterrückstellung 187 Selbstveranlagungszahlungen Quellensteuer/andere Guthaben Wechsel Zinssatzabweichung Saldo zum 31. Dezember Die Fälligkeitsanalyse der laufenden Steuerverbindlichkeiten ist in Anmerkung 61 auf den Seiten 251 bis 253 angegeben. 232 2019 2020 2019 Rs. '000 Rs. '000 Rs. '000 Rs. '000 5,197,188 6,735,997 4,967,644 6,566,358 – 10,178,040 23 BANK 2020 13,660 8,600,747 – 9,866,955 – 8,308,597 (121,298) (989,148) (113,565) (991,884) (7,748,870) (8,301,839) (7,428,411) (8,087,930) (585,419) (841,251) (580,871) (805.060) 71.364 (20.978) 66.240 (22.437) 6.991.005 5.197.188 6.777.992 4.967.644
235. 49. Other Liabilities Accounting Policies Other liabilities include fee and expense accruals, bonuses/pensions, vacation accruals and other accruals. These liabilities are recognized for the amounts that are expected to be paid on the balance sheet date. 2020 2019 RUPIAS '000 rs.000 accrued expenses 3.076.619 2,112.034 3.003.243 2,016,803 checks sent in compensation 5.001.397 5.005.006 5.001.397 5.005.006 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 1,160,141 1,127,571 1,160,141 1,127,571 Payable on oil hedging transactions Impairment provision in respect of off-balance sheet credit exposures 58.3 (a) & 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 Gesamt 33.572.283 30.775.884 33.037.669 30.496.709 58.3 (b) 250 El análisis de maturity of other liabilities is shown in note 61 on pages 251 to 253. Rs. '000 Rs. '000 Rs. '000 Rs ,39 SLFRS 16 Additions Exchange rate variance Accretion of interest 13.2 179 Payments Balance as at December 31, 5,055,939 4,418,459 5,146,689 4,594,604 551,253 1,294,192 496,145 1,294,192 60,460 (36,971) 52,316 (34,216) 435,754 429,263 452,304 457,449 (1,116,209) (1,049,004) ( 1,208,181) ( 1,165,340) 4,987,197 5,055,939 4,939,273 5,146,689 The lease liability maturity analysis is presented in note 61 to 253.1 on pages 253. 49.1 (a) Lease liability sensitivity analysis The following table illustrates the impact of possible changes in the incremental borrowing rate on the bank lease liability as of December 31, 2020. Sensitivity Effect of GROUP variable on balance sheet (lease liability) Rs '000 BANK sensitivity Effect on income statement '000 rupees Sensitivity Effect on balance sheet (Lease liability) '000 rupees Sensitivity Effect on income statement two Annual Account 2019 Rs '000 Note Annual Report 2020 2020 Rs PLC GROUP Rs. in '000 1% increase in the incremental interest rate (154,808) 35,945 (148,164) 31,211 1% decrease in the incremental interest rate 164,089 (38,757) 157,154 (33,665) 49.1 (b) Undiscounted cash flow The following table illustrates the maturity analysis of the minimum cash-based lease liability without discount 49 BANK As of December 31 Less than 1 year Between 1 and 5 years More than 5 years Total 2020 000 rupees 2019 0.090 rupees 7,088,759 233
236. 49.2 Provision for severance pay As of December 31, 2020, Mr. M. Poopalanathan, AIA, of Messrs Actuarial & Management Consultants (Pvt) Ltd., a firm of professional actuaries, has performed an actuarial valuation of severance pay. dismissal payable. The valuation method used by actuaries to measure the liability is the Projected Unit Credit (PUC) Method, which is the method recommended by the Sri Lanka Accounting Standard - IAS 19 on Employee Benefits. Commercial Bank of Ceylon PLC Annual Report 2020 Financial Statements Notes to Financial Statements 49.2 (a) Actuarial Assumptions Type of Assumption Criteria Description Population Mortality - In Service A 1967-70 mortality table published by the London Institute of Actuaries Staff turnover The turnover rate at an age represents the probability that an employee will retire within one year of that age for reasons other than death, illness, or normal retirement. The actuarial valuation as of 12/31/2020 used the same withdrawal rates used in the last valuation (as of 12/31/2019) to determine the liability of active employees in the bonus for employees who exceed the specified retirement age, it is He assumed they retire on his next birthday. Weighted average duration of the defined benefit obligation 19 years Discount rate Operating in Sri Lanka In the absence of a deep long-term bond market in Sri Lanka, a long-term interest rate of 8.00% per annum (2019 – 10.50% per annum) to cover future liabilities under Discount to take into account the expected long-term inflation rate. Financing operation in Bangladesh In the absence of high-quality long-term corporate or government bonds with a maturity matching the liabilities, a long-term interest rate of 7.00% per annum (2019 - 8.00% per annum) was used. to discount future liabilities taking into account the expected long-term rate of inflation. Salary increases in Sri Lanka A salary increase of 8.00% per annum (2019 – 10.00% per annum) was used in relation to active staff. Use in Bangladesh A salary increase of 9.00% per annum (2019 – 10.00% per annum) in relation to active employees was used. 49.2(b) Evolution of the accumulation of bond payments CONSOLIDATED Balance as of January 1, bond payments assumed in business combination Expense recognized in results Exchange rate fluctuation Amount paid during the year (Gains)/actuarial losses recognized in other comprehensive income Note Page No. 37.2 211 2020 2019 Rs. '000 Rs.' 000Rs. '000 2,114,432 1,778,016 2,020.984 1,726.920 - 207.998 49.2 (c) Balance as in December - 30,257.642 183.807 - 442.02222 10.758 (5,750) 10.758.75828 (5,750) (489.137) ) (1.133) (65.218) (9,060) (65,768) 1,842,918 2,114,432 1,719,971 92.440.2040.8 In the Entrees and Profit account '00 Group Gratification 000 Rupias 000 Rupias 153.018 192.671 185.649 54.971 40.373 207.802 457 45 2 (d) Sensitivity analysis. illustrates the impact derived from the possible changes in the discount rate and the salary escalation rates in the valuation of the gratuity of the Group and der Bank as of December 31, 2020. GROUP 49 Variable 1% increase in the discount rate 1% decrease in discount rate 1% increase in salary 1% decrease in salary 234 BANK Balance sheet sensitivity effect (Benefits Liability) Balance sheet sensitivity effect (Benefits obligation) '000 Rs .
237. 49.3 Provision for unfunded pension plans Mr. M. Poopalanathan, AIA, of Messrs Actuarial & Management Consultants (Pvt) Ltd., a firm of professional actuaries, performed an actuarial valuation of the unfunded pension obligation as at December 2020. The valuation method used by the actuary to value the liability is the Projected Unit Credit (PUC) Method, which is the method recommended by the Sri Lanka Accounting Standard, IAS 19 Employee Benefits. Demographic mortality – in service A 1967-70 mortality table published by the London Institute of Actuaries After retirement A pension table (90) (men and women) published by the London Institute of Actuaries Staff turnover The rate Retirement rate at an age represents the probability that an active employee will retire within the year following that age through causes other than death, illness, and normal retirement. The actuarial valuation as of December 31, 2020 used the same exit rates used in the last valuation (as of December 31, 2019) to determine the obligations of active employees in the capitalization regime. Assumptions about disability similar to those used in other comparable disability systems were used because the data needed for a 'system-specific' study were not available. Normal retirement age 55 or 60 years at the employee's choice. Financial discount rate In the absence of a deep long-term bond market in Sri Lanka, a long-term interest rate of 8.00% per annum (2019 – 10.50% per annum) was used to discount future debt taking into account account the expected long-term rate of inflation. Salary increases A salary increase of 8.00% per year (2019 – 10.00% per year) was used in relation to active employees. Pension Increase Rate After Retirement There is no agreed rate increase, although pension payments are subject to periodic increases and increases are granted solely at the Bank's discretion. Therefore, no specific course was adopted for this evaluation. 49.3(b) Movements in the provision for non-funded pension plans GROUP Note Page No. Balance as of January 1, expense recognized in the income statement 49.3(c) 235 Amount paid during the year Actuarial Transfers (gains)/losses, The other results are recorded on December 31, Bank 2020 2019 2020 2019 Rs. '000 Rs.' 000 257,031 242,819 26,988 27,924 (48,789) (48,692) (48,789) ) (48,789) - - - - - - - - - - - - - 1,000 Interest Expense 26 988 27 924 26 988 27 924 Total 27 6 928 7 26 928 924 For the year ended December 31 49.3 (d) Actuarial valuation sensitivity analysis: financial statements of the unfunded retirement plan Description J Annual Report 2020 Criteria Commercial Bank of Ceylon PLC Type of Assumption Notes to the Financial Statements 49.3 (a ) Actuarial Assumptions The following table illustrates the impact of potential changes in the discount rate and salary adjustment rates in the Bank's non-funded pension plan as of December 31, 2020 1% increase in the discount rate (12,842) (12,842 ) 1% decrease in the discount rate 14,129 14,129 1% increase in salary – – 1% decrease in salary – – 49,235
238. 49.4 Holiday Accrual Provision As of December 31, 2020, Mr M. Poopalanathan, AIA, of Messrs Actuarial & Management Consultants (Pvt) Ltd, a firm of professional actuaries, carried out an actuarial valuation of the accrual of vacation holidays. The valuation method used by actuaries to measure the liability is the Projected Unit Credit (PUC) Method, which is the method recommended by the Sri Lanka Accounting Standard - IAS 19 on Employee Benefits. 49.4 (a) Actuarial Assumptions Type of Assumption Criteria Demographic Statement Notes to Financial Statements Financial Description Mortality – in service A 1967-70 mortality table issued by the London Institute of Actuaries Staff turnover The probability that a member will leave the Plan a year between the ages of 20 and 55. Disability The probability that a member between the ages of 20 and 55 will become disabled within one year. Discount rate In the absence of a deep long-term bond market in Sri Lanka, a long-term interest rate of 8.00% per annum (2019 – 10.50% per annum) has been used to discount future liabilities taking into account the expected long-term rate of inflation. Salary increases A salary increase of 8.00% per year (2019 – 10.00% per year) was used in relation to active employees. rs. '000 Rs. '000 Rs. '000 781,362 709,495 781,362 709,495 82,043 81,592 82,043 81,592 (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 Diciembre 31.926.686 781.362 926.686 781.362 Commercial Bank of Ceylon PLC Annual Report 2020 49.4 (c) Charges recognized in the Profit and Loss Account – Vacation Account 49 236 GROUP For the year ended December 31 Interest Cost Current Service Cost Total BANK 2020 2019 2020 2019 Rs ' 000 Rs '000 Rs '000 Rs in '000 82,043 81,592 82,043 81,592 – 82,043 – 81,592 – – 82,043 81,592 49.4 (d) Sensitivity analysis of actuarial valuation: accrual of vacations The following table illustrates the impact of possible changes in the discount rate and salary adjustment rates on the valuation of the bank's vacation accrual obligation as of December 31, 2020. GROUP Variable BANK Balance sheet sensitivity effect (Obligation n of benefits) Balance sheet sensitivity effect (Benefits obligation) Rs '000 Rs in thousands 1% Increase discount rate (113,523) (113,523) Decrease 1% discount rate 138,846 138,846 Increase 1% salary 141,729 141,729 Decrease 1% salary (117,760) (117,760)
239. 49.5 Employee Retirement Benefits 49.5.1 Pension Fund - Defined Benefit Plan Mr M. Poopalanathan, AIA, of Messrs Actuarial and Management Consultants (Pvt) Ltd., performed an actuarial valuation of the Pension Fund as at 31 December 2020. A firm of professional actuaries. The valuation method used by actuaries to value the Fund is the Projected Unit Credit (PUC) Method, which is the method recommended by the Sri Lanka Accounting Standard - LKAS 19 on Employee Benefits. The assets of the Fund, which are managed independently by the Trustees under the terms of the Trust Agreement, are kept separate from those of the Bank. Demographic mortality – in service A 1967-70 mortality table published by the London Institute of Actuaries After retirement A pension table (90) (men and women) published by the London Institute of Actuaries Staff turnover The rate Retirement rate at an age represents the probability that an active employee will retire within the year following that age through causes other than death, illness, and normal retirement. The actuarial valuation as of December 31, 2020 used the same withdrawal rates that were used in the last valuation (as of December 31, 2019) to determine the repayment obligation of active employees in the financed institution. Disability Similar assumptions to those used in other comparable systems for disability were used because the data required for a 'system specific' study were not available. Financial Normal retirement age 55 or 60 years at the worker's choice. Discount rate In the absence of a deep long-term bond market in Sri Lanka, a long-term interest rate of 8.00% per annum (2019 – 10.50% per annum) has been used to discount future liabilities taking into account the expected long-term rate of inflation. Salary increases A salary increase of 8.00% per year (2019 – 10.00% per year) was used in relation to active employees. Postretirement Pension Increase Rate There is no agreed rate of increase, although pension payments are subject to periodic increases and increases are granted solely at the Bank's discretion. Therefore, no specific course was adopted for this evaluation. 49.5.1(b) Change in present value of defined benefit obligation: bank balances as of January 1, interest cost Current service cost Benefits paid during the year (actuarial gains)/losses Balance as of December 31, 2020 2019 000 Rs 247,761 thousand Rs 217,829 26,015 25,050 3,913 400 (19,405) (19,101) 36,401 19,583 294,761 49.5.1'000 Rs. 214,198 204,860 Expected contributions from plan assets 33,563 2,145 (19,405) (19,405) (19,405) (19,405). by plan Actuarial gains/(losses) on plan assets as of December 31, Financial statements Description Annual report 2020 Criteria Commercial Bank of Ceylon PLC Type of assumption Notes to financial statements 49.5.1 (a) Actuarial assumptions 49.5.1 (d) Liability recorded on balance sheet Note Page No. 2020 2019 Rs. '000 Rs. Thousands Present value of defined benefit obligations as of 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) 39,068 33,563 Net liability reported in other liabilities 49 237
240. 49.5.1(e) The plan assets are broken down as follows: 2020 2019 Rs 000 Rs 1000 Bank deposits 255 617 214 198 Total 255 617 214 198 49.5.2 W&OP Fund – Defined Benefit Plan Commercial Bank of Ceylon PLC Annual Report 2020 Financial Statements Notes to the Financial Statements Mr M Poopalanathan, AIA, of Messrs Actuarial & Management Consultants (Pvt) Ltd, a firm of professional actuaries, carried out an actuarial valuation of the Retirement Pension W&OP Fund as at 31 December The valuation method used by actuaries to value the Fund is the Projected Unit Credit (PUC) Method, which is the method recommended by the Sri Lanka Accounting Standard - LKAS 19 on Employee Benefits. The assets of the Fund, which are managed independently by the Trustees under the terms of the Trust Agreement, are kept separate from those of the Bank. 49.5.2 (a) Actuarial Assumptions Type of Assumption Criteria Description Demographic Mortality - In Service A 1967-70 mortality table published by the Institute of Actuaries, London After Retirement A(90) Annuity table (men and women) published by the Institute of Actuaries, London Employee turnover The exit rate at a given age represents the probability that an active employee will retire within one year of that age for reasons other than death, illness and normal retirement. The actuarial valuation as of December 31, 2020 used the same withdrawal rates that were used in the last valuation (as of December 31, 2019) to determine the repayment obligation of active employees in the financed institution. Disability Similar assumptions to those used in other comparable systems for disability were used because the data required for a 'system specific' study were not available. Normal retirement age 55 or 60 years at the employee's choice. Discount rate In the absence of a deep long-term bond market in Sri Lanka, a long-term interest rate of 8.00% per annum (2019 – 10.50% per annum) has been used to discount future liabilities taking into account the expected long-term rate of inflation. Salary increases A salary increase of 8.00% per year (2019 – 10.00% per year) was used in relation to active employees. Financial Retirement Annuity There is no agreed rate increase, although annuity payments are subject to periodic increases and increases are granted solely at the Bank's discretion. Therefore, no specific course was adopted for this evaluation. 49.5.2(b) Change in present value of defined benefit obligation – Bank balances at 1 January Interest cost Current service cost Transfers 2020 2019 Rs 000 (gain)/loss 27,614 5,896 Balance at 31 December 98,216 68,860 (5,786) 49.5 .2 (c) Change in fair value of plan assets Fair value at 1 January Expected return on plan assets Rs 49,2019 Contribution paid to Plan 12,805,280 Benefits paid under the Plan (5,938) (5,786) 6,278 (12,976) 75,084 56,053 Actuarial gains/(losses) on plan assets Fair value at 31 December Rs 238,000
241. 49.5.2 (d) Liability recognized in the balance sheet 2020 2019 $ '000 $ '000 Note Page No. Present value of the defined benefit obligation as of December 31 49.5.2 (b) 238 98,216 68,860 Fair value of the plan assets 49.5. 2 (c) 238 (75,084) (56,053) 23,132 12,807 Net liability included in other liabilities 75,084 56,053 Total 75,084 56,053 49.5.3 Pension fund - defined contribution plan In 2006 the Bank converted its pension plan, which was a defined benefit plan (DBP), in a restructured defined contribution plan (DCP). This restructured plan was offered to eligible bank employees on a voluntary basis. The system provided for the payment of lump sums in lieu of monthly or commuting pensions to eligible workers upon separation in exchange for waiving their pension rights. The package offered consisted of a package of past services and a package of future services. In 2006, the bank assumed costs that, due to the previous benefits package, exceeded the funds available to the pension fund. The future benefit package includes monthly contributions to be paid by the Bank for employees who have accepted the offer, to be paid during the remaining period of service, at fixed contribution rates, to be applied to their salaries and for this purpose expect them to increase. 10.00% per annum Likewise, the interest earned by the DCP assets will also be allocated to the employees who have adhered to the restructured plan. 49.5.3 (a) Pension Fund - Defined Contribution Plan - 2020 During the year, the Bank converted its Sri Lanka Business Grant Plan from a Defined Benefit Plan (DBP) to a Defined Contribution Plan (DCP). See Note 7.8.2.4 on page 173 for more details. 50. Accounts payable to subsidiaries GROUP AS AT 31 December BANK 2020 2019 2020 2019 Rs 000 Rs 000 000 Rs Finance Limited – – – – Commex Sri Lanka S.R.L. - Italy - - - - Commercial Bank of Maldives Private Limited - - - - CBC Myanmar Microfinance Company Limited - - - - Subtotal - - - - Total - - Commercial Insurance Brokers (Private) Limited Subtotal - - 97,015 - - 54,292 Foreign affiliates 97,015 Financial statements Deposits held with the Bank Annual report 2020 2019 Rs. '000 Commercial Bank of Ceylon PLC 2020 Rs 61 on pages 251 to 253. 49 50 239
242. 51. Subordinated liabilities Accounting policies They represent the funds raised by the Group for long-term financing needs. After initial recognition, they are valued at amortized cost using the EIR method, unless the Group designates them at fair value through profit or loss. Interest paid/payable is recognized in results. GROUP Note 2020 2019 2020 2019 $ '000 $ '000 $ '000 $ '000 36,810,680 36,904,430 36,810,680 36,904,430 Page No. Balance as of January 1, amount borrowed during the year - payments/repayments during the year notes to the financial statements 51.1 240 - 36,810,680 36,904,430 393,750 (93,750) 393,750 (93,750) 39,174) 1,070,181 1,115,283 1,070,181 1,115,283 38,247,138 37,886,789 38,247,138 37,886,789 51.1 Categories of subordinated liabilities GROUP Categories Interest payable frequency Colombo Stock Exchange Listing Allotment date Maturity date BANK Effective annual yield 2020 2019 2020 2019 2020 2019 % % rs. '000 Rs. '000 Rs. '000 Rs.' 000 Annual report 2020 2016/2021-10.75% p. C. Biennial List 09-03-2016 08-03-2021 11-04 11-04 4,430,340 4,430,340 4,430,340 4,430,340 4,430,340 4,430,340 % P.10.2016 2016 10/27/2021 12.36 12.36 5.071,071,800 5,07,800 5,07,800 5,07,800 5,07. 800 5,071,800 2016/2026 – 11.25% annual 1,749,090 1,749,090 1,749,090 2016 – 120.25% p. C. Biennial listed 10/28/2016 10/27/2026 12.63 12.63 1,928,200 1,928,200 1,928,200 1,928,200 2018/2023 - 12.00% p.a. Biennial listed 07/23/2017 02.23017 02.23018 12.36. of Ceylon PLC fixed interest ribbon 2018/2028 - 12.50 % p.A. Listed Biannually 23.2028 12.89 12.606.160 1.60 1. .2023 6.005 8.388 14,025,000 13,631,250 14,025,000 13,631,250 37,204,430 36,810,680 37,204,430 36,810,680 Floating rate subordinated loans IFC Borrowings – 6 M LIBOR + 5.75% Total 51.2 Pasivos subordinados por vencimiento Konzern Zum 31. Dezember 51 Bank 2020 2019 2020 2019 Rs. '000 Rs.' 000Rs. '000 Rs.' 000 payable within one year 9,502,140 PAYMENT AFTER one year 27,702,290 36,810,680 27,702,290 36,810 payable after one year 27,702,290 36,810,680 27,702,290 36,810. 36,810,680 37,204. The Bank had no principal, interest or other defaults with respect to its subordinated debt for the year ended December 31, 2020. The maturity analysis of the subordinated debt is included in note 61 on pages 251 to 253. 240
243. 52. Share capital Accounting policies The Bank's common shares are valued at the amount paid per common share less directly attributable issuance costs. Proceeds from issuance of common voting shares to IFC parties (private placement) 2019 2020 2019 Rs.'000 Rs.'000 Rs. of the employee stock option plan Withdrawal of the employee stock option reserve: 56.5 Issuance of common shares as part of the dividend will be satisfied in the form of the issuance and allotment of new shares Voting common shares Ordinary non- voting shares Balance as at December 31, 30,128 – 247 9,215,775 – – – 30,128 – – – 2,055,014 1,738,948 2,055,014 1,738,948 1,922,505 1,627,125 1,922,505 1,627,125 132,509 111,823 132,509 111,823 52,187,747 40,916,958 52,187,747 40,916,958 52.1 Movimiento en el número de acciones de las acciones de la votación de las actions of actions. 115,197,186 Issue of ordinary shares with voting rights under the employee stock option plan Issue of ordinary shares under final dividend in the form of the issue and satisfied allotment of new shares Status as of December 31 Shares of Commercial Bank of Ceylon PLC They are listed on the Colombo Stock Exchange. The Bank's non-voting common shares rank pari passu with the Bank's voting common shares with respect to all rights except voting rights in resolutions passed at general meetings. – – 293,385 – – – – 22,485,434 15,249,529 1,716,432 1,241,095 1,098,934,937 961,252,317 67,970,701 66,254,269 There are currently two employee participation plans. See Note 53 for more details. 53. Share-based payment 53.1 Description of the share-based payment arrangement At the balance sheet date, the Group had the following equity-settled share-based payment arrangement granted after January 1, 2012, the effective date of the accounting standard NIF 2 "Payments based on shares". Notes to the financial statements Balance as of January 1, 2020 Rs. '000 Financial Statements Page Number Annual Report 2020 Notes BANK Commercial Bank of Ceylon PLC GROUP Employee Stock Option Program - 2015 The bank received shareholder approval at an extraordinary general meeting on March 31, 2015 to introduce a Employee Stock Option Plan for the benefit of all executive officers grade 1A and above by creating up to 2% of voting common shares over a three-year period with 0.5% ownership in the first two years and a 1% share in the first two years. past five years if the bank achieves specified performance targets. Performance conditions include minimum performance targets that exceed budget and industry peers, and service conditions include minimum service completion by the award dates of each tranche. 52 53 241
244. The main terms and conditions related to the offer are set forth below.: Tranches Issuance Percentage of New Voting Shares (Maximum) Grant Date Strike Price (Rs.) Strike Between Strike Date Commercial Bank of Ceylon PLC Annual Report 2020 Financial Statements Notes to Financial Statements Terms of Acquisition Tranche I Tranche II Tranche III 0.50% 0.50% 1.00% April 1, 2015 April 1, 2015 April 1, 2015 120.46 134.74 136.35 October 1, 2016 to September 30, 2019 October 1, 2017 to September 30, 2020 October 1, 2018 to September 30, 2020 September 30, 2018 September 3, 2017 September 30, 2018 1½ years of service from the date of grant and compliance with previous conditions of performance for fiscal year 2015 2½ years of service from the date of grant and fulfillment of the previous conditions of performance for fiscal year 2015 Year 2016 3½ years of service from the date of grant and fulfillment of the conditions of performance in view of for fiscal year 2017 59,615 61,400 138,632 Number of options granted as of the grant date it Options g granted to key management personnel Options granted to other senior executives 4,161,150 4,167,461 9,312,978 Total number of options granted to the vesting date 4,220,765 4,228,861 9,451,610 (3,228,021) ( 4,048,728) - (992,744) (180.13 due) Number of options canceled3 as of December 31, 2020 Number of options to be exercised as of December 31, 2020 - - 9,451,610 All options will be exercised by physical delivery of fulfilled common shares with voting rights of the bank. There are no cash settlement alternatives, nor does the Bank have a historical cash settlement policy for this type of option. The exercise price of each tranche is calculated based on a volume-weighted average market price of the Bank's common shares (with voting rights) during the thirty (30) market-day period six months prior to the date of exercise. 53.2 Determination of fair value As required by IFRS 2 on “Share-based payments”, the grant date fair value of the 2015 ESOP was estimated using the binomial valuation model, taking into account various terms and conditions. conditions under which the stock options were granted. The data used to measure the fair value at the grant date of the ESOP 2015 were as follows: Tranches Description of valuation data Tranche I Tranche II Tranche III Expected dividend rate (%) 3.50 3.50 3.50 Risk Free Interest Rate (%) 8.00 8.00 8.00 Probability of Stock Price Increase (%) 80.00 80.00 80.00 Probability of Stock Price Decrease (%) 20 .00 20.00 20.00 Size of annual share price increase (%) 20.00 20.00 20.00 Magnitude of annual share price decrease (%) 10.00 10.00 10, 00 206.90 227.54 250.24 Initial expected strike price (Rs.) The above share price increases are based on an assessment of the bank's historical share price volatility over the past 10 years, adjusted by the postwar growth of the All Stocks Price Index published by the Colombo Stock Exchange. 53 242
245. 53.3 Reconciliation of outstanding stock options The number and weighted average exercise price of stock options are as follows: 120.46 134.74 136.35 2020 number of voting shares vested and exercised at 1 January, - during the year exercised - number of options expired - number of options outstanding as of December 31 - 2019 2020 2019 2020 2019 3,228,021 4,048,728 4,048,728 9,451,610 9,451,610 - - (3,28,021,021 ) - (4048, - - - 45). in the statement of income The cumulative expense recognized for transactions settled with equity instruments at each balance sheet date up to the exercise date reflects the extent to which the exercise period has expired and the Group's best estimate of the number of equity instruments patrimony that finally become inalienable. Consequently, the expense in the income statement represents the movement in the accumulated expense recognized at the beginning and end of that period and is included in the expense for employee benefits [see note 19]. Employee Stock Option Plan: 2019 The Bank received shareholder approval at an Extraordinary General Meeting on January 30, 2020 to introduce an Employee Stock Option Plan for the benefit of all grade officers 1A and above by creating up to 2% of the voting common shares. at a rate of 0.5% equity in the first two years and 1% equity in the final year over a period of three to five years if the bank meets certain performance targets. Performance conditions include minimum performance targets that exceed budget and industry peers, and service conditions include minimum service completion by the award dates of each tranche. The main terms related to the Offer are set out below: Tranches Percentage of issue of New Voting Shares (Maximum) Grant Date Strike Price (Rs.) Exercisable between the Grant Date Tranche I Tranche II Tranche III 0.50% 0.50% 1.00% January January 30, 2020 January 30, 2020 January 30, 2020 91.65 85.13 To be decided July 1, 2020 to June 30, 2023 October 1, 2020 to September 30, 2023 October 1, 2021 to September 30, 2024 June 30, 2020 September 30, 2020 September 30, 2021 6 months of service from grant date and compliance with above performance conditions for fiscal year 2018 6 months of service from the date of grant and satisfaction of the previous performance conditions for the fiscal year 2019 6 months of service from the date of grant and satisfaction of the previous performance conditions on the conditions of disem for the year 2020 89,187 99,010 – Options granted to other officers 4,716,598 4,706,872 – At the end r Total options vested 4,805,785 4,805,882 – Vesting conditions Number of options vested at the vesting date Options granted to personnel management key Options canceled due to non-acceptance – – – Number of options exercised as of December 31, 2020 – – – Number of options to be exercised as of December 31, 2020 December 2020 4,805,785 4,805,882 Notes to the financial statements Tranche III Financial Statements Year Tranche II Annual Report 2020 Tranche I Strike Price Commercial Bank of Ceylon PLC Tranche - All options will be settled by physical delivery of common voting shares of The Bank. There are no cash settlement alternatives, nor does the Bank have a historical cash settlement policy for this type of option. 53 The exercise price of each tranche is calculated on the basis of a volume-weighted average market price of the Bank's common shares (with voting rights) during the thirty (30) market-day period six months prior to the exercise date. 243
246. 53.5 Determination of fair value As required by IFRS 2 on Share-Based Payments, the grant date fair value of the 2019 ESOP was estimated using the binomial valuation model, taking into account various terms and conditions governing the stock options. The inputs used in the 2019 ESOP grant date fair value measurement were as follows: Commercial Bank of Ceylon PLC 2020 Annual Report Financial Statements Notes to Financial Statements Tranches Description of Valuation Inputs Tranche I Tranche II Tranche III Rate expected dividend (%) 4.31 4.31 4.31 Risk-free interest rate (%) 8.22 8.22 8.22 Probability of share price increase (%) 55.00 55.00 55.00 Probability of share price decline (%) 45.00 45.00 45.00 Size of annual share price appreciation (%) 19.00 19.00 19.00 Annual Magnitude of decline of share price (%) (12.00) (12.00) (12.00) Initial expected strike price (Rs.) 100.22 100 .74 101.45 last 10 years adjusted for growth of the postwar in the Colombo Stock Exchange's All Stocks Price Index. 53.6 Reconciliation of outstanding share options The number and weighted average exercise price of share options is as follows: Tranche Tranche I Tranche II Tranche III 91.65 85.13 Exercise price to be determined Year Number of voting shares to be exercised and exercised on January 1, Granted during the year 2020 2019 2020 2019 2020 2019 – – – – – – – – – Exercised during the year – – – – – – Number of options lost – – – – – – – – – Number of Voting shares vested and vested as of December 31 4,805,785 4,805,882 4,805,785 – 4,805,882 53.7 The expense recognized in the statement of income reflects the cumulative expense recognized for equity-settled transactions at each balance sheet date up to the exercise date reflects the the extent to which the exercise period has expired and the Group's best estimate of the number of equity instruments that will ultimately remain ungranted if possible. Consequently, the expense in the income statement represents the movement in cumulative expense recognized at the beginning and end of that period and is included in employee benefit expense [see note 19 on page 185]. 54. Legal reserves Accounting policies The Group maintains a series of legal and voluntary reserves to comply with various legal and operational requirements. Details of these reserves, including the nature and purpose of holding them, are set out in Notes 54, 55 and 56 on pages 244 to 248 2020 2019 Rs 000 000 Rs 9,024,065 8,205,391 9,285,233 8,387,701 5 381 206
247. 54.1 Statutory Reserve Fund GROUP BANK 2020 2019 2020 2019 Rs. '000 Rs. '000 Rs. '000 Rs. 9,024,065 8,205,391 The Balance in the Legal Reserve Fund shall only be used for the purposes set forth in Section 20(2) of Banking Law No. 30 of 1988 2019 2020 2019 Rs '000 Rs. '000 Rs. '000 Rs. 5,182,185 4,949,955 5,144,433 5,063,076 - As of January 1 - Adjusted comprehensive income Net income Other income after taxes Dividends paid Unclaimed dividends Deducted/(Dividend paid) with respect to previous years Reclassification of the acquisition cost of expired shares ESOP (neto de impuestos) Transferencias to other reserves – (57,627) (57,627) 5,182,185 4,892,328 5,144,433 5,005,449 16,714,932 17,205,859 16,152,169 16,968,027 16,939,950 17,263,259 16,373,489 17,024,967 (225,018) (57,400) (221,320) (56,940) (5,137,534) (6,596,161) – 5.137. 534 - 6,596,161 100 - 350 105,980 88,913 - 8,747,532 - 10,413,523 - 114 105,980 - 8,668,674 - 547 88,913 - 10,321,248 interests for partial sale of subsidiary - (9,379) Au Movement -0 - -6.6,13 8,124,261 5,182,185 7,596,260 5,144,433 56. Other Reserves 56. (a) Current Year - 2020 GROUP Movement/Transfers Balance as of December 31, Balance as of January 1, Movement/Transfers Balance on December 31, rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 2,666,983 10,504,768 7,088,054 2,574,858 9,662,912 74,970,003 67,120,003 7,850,000 74,970,003 463,884 1,785,441 (1,323,110) 3,325,924 2,471,983 433,503 468,494 Note Page No. Reserva de revaluación 56.1 246 7,837,785 Reserva general 56.2 246 67,120,003 7,850,000 Reserva de valor razonable 56.3 247 1,783,503 (1,319,619) Reserva de traducción al extranjero 56.4 247 2,765,992 Opción de empleados 56.5 247 468,494 HEDGEGGING 56.4 247. 559,932 (34,991) (64,139) 9,658,166 (102,511) 89,595,571 (38,372) 78,895,603 439,883 (34,991) (64,139) 9,442,501 Estados Financieros Página No. Sección 20(1) de la Banking Law No. 30 of 1988 entertaining. Consequently, the fund is formed by allocating an amount equal to at least 5% of the profit after taxes but before declaring a dividend or any profit transferred to another party until the reserve equals 50% of the declared capital of the fund. Bank, and then an additional sum equal to 2% of that profit until the amount of said reserve fund is equal to the declared capital of the bank. 462,331 54 55 56 2,911,866 433,503 (102,511) 88,338,104 245
248. 56. (b) Prior Year - 2019 Commercial Bank of Ceylon PLC Annual Report 2020 Financial Statements Notes to Financial Statements GROUP Movements/Transfers Balance as of December 31, Balance as of January 1, Movements/Transfers Balance as of December 31, Rs.' 000 000 rupias 000 rupias 000 rupias 000 rupias 000 rupias Número de página Revaluation reserve 56.1 246 7,819,131 18,654 7,837,785 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) 67,855,834 12,081,571 79,937,405 66,840,848 12,054,755 78,895,603 Total – 7,088,054 56.1 Revaluation reserve Bilanzierungs- und Bewertungsmethoden Die Revaluation surplus relates to revaluation of owned land and buildings and represents changes in the fair value of land and buildings at the time of revaluation GROUP BANK 2020 2019 2020 2019 Rs. '000 Rs. '000 Rs. '000 Rs. 1,000 As of January 1 7,837,785 7,819,131 7,088,054 7,088,054 Gain from revaluation of owned land and buildings 3,672,202 - 3,585,430 - (1,009,733) - (1,010,572) - Effect of deferred tax on gain from revaluation of owned land and buildings and Buildings - Share in other comprehensive income of the associate Change due to change of ownership Balance as of December 31 - - - - 39,575 - - 4,514 (20,921) - - 10,504,768 7,837,785 9,662,912 7,088,054 56.2 General reserve Policies accounting The Bank obtains excess profits, after the payment of the interim dividend and after the retention of sufficient profits to pay the proposed complementary dividends, from the retained earnings account to the general reserve account. The purpose of constituting the general reserve is to deal with possible unknown future liabilities. GROUP BALANCE TO January 1 BALANCE TO DECEMBER 31 246 BALANCE TO GAN out Transfers during the year 56 BANCO BANCO 2020 2019 2020 2019 000 RUPIAS 000 RUPIAS 000 RUPIAS 003 67120003 57650003 7850000 94850000 70 74970003 67120003 74970020 67.1
249. 56.3 Fair value reserve Accounting policies The fair value reserve comprises the cumulative net change in the fair value of financial assets that are measured at fair value through other comprehensive income until these investments are written off or impaired. Part of the other general result of the associated company of the associated company Adequate as of December 31, 2019, 2019 Rs. '000 Reg. 462,331 – 1,785,441 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 companies. As of the balance sheet date, the assets and liabilities of the Bank in Bangladesh and the Bank's foreign subsidiaries were translated into the presentation currency (Sri Lankan rupee) at the exchange rate prevailing on the balance sheet date and in the income statement. revenues have been converted at the average exchange rate for the period. Translation differences arising from the translation of these annual financial statements are recorded in the translation reserve without effect on results. CONSOLIDATED Balance as of January 1 of net gains/(losses) from translation of financial statements of foreign operations. '000 Rs. '000 Rs. '000 Rs. '000 2,765,992 3,157,052 2,471,983 2,871,770 596,723 (396,201) 439,883 (399,787) (36,791) 3,325,924 5,141 2,765,992 – 2,911,866 – 2,471,983 56.5 Employee share option reserve Notes to the Financial Statements Net fair value gains /(pérdidas) al volver a medir los activos financieros al fair value through Other comprehensive income 2020 Rs. 1,000 Financial Statements Balance as of January 1, BANK Annual Report 2020 GROUP Employee stock option reserve is used to record the value of equity-settled share-based payment transactions that Employees, including key employees, will be granted as part of your salary. CONSOLIDATED Note Page Number Balance at 1 Jan, Transfers during the year 19,185 Transfers to Reported Capital 52,241 Transfer to Retained Earnings in Due ESOP Balance at 31 Dec, BANK 2020 2019 2020 2019 '000 Rs' 000 Rs Thousands of Rs 468 494 591 984 468 494 591 984 112 203 – – – 112 203 – – Commercial Bank of Ceylon PLC
250. 56.6 Hedging reserve Accounting policies The hedging reserve comprises the effective portion of the cumulative net change in the fair value of the hedging instruments used in cash flow hedges until their subsequent recognition in profit or loss as the cash flows of the hedge represent the influence of profit or loss. GROUP Notes to Financial Statements Financial Statements Annual Report 2020 Commercial Bank of Ceylon PLC 248 2020 2019 2020 2019 Rs 000 Rs 000 64,139) (62,391) (64,139) (62,391) (102,511) (38,372) (102 511) (38,372) Balance as of December 31 56 57 58 BANK 57. Minority interests Accounting policies Minority interests (INC) are accounted for with their proportional participation in the identifiable net assets of the acquiree at the acquisition date. 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 minority interests in three subsidiaries, namely Commercial Development Company PLC (10% NCI), Commercial Insurance Brokers (Pvt) Limited (40% NCI) and Commercial Bank of Maldives Private Limited (45% NCI). %) as at the balance sheet date, below: Balance sheet as of January 1, net income Other comprehensive income after tax Dividends paid for the year Unclaimed dividends absorbed/(dividends paid) with respect to prior years Reinstatement of unclaimed shares Controller due to the partial sale of subsidiary acquisition of subsidiary with non -controlling participations 2020 2019 $ '000 1,589,234 1,198,981 146,847 46,456 (5,077) (5,010) 24 (10,644) - Balance as of December 31, 1,755,300 212,881 1,583,581 59,88 not probable internal or not easily measurable as defined in the Sri Lanka Accounting Standard – IAS 37 on “Provisions, Liabilities Contingents and Contingent Assets”. These consist of financial guarantees, letters of credit and other undrawn credit commitments. Letters of credit and guarantees oblige the bank to make payments on behalf of the client in case of a specific action, usually related to the import or export of goods. Guarantees and standby letters of credit carry similar credit risk as loans. In order to meet the financial needs of customers, the Bank enters into various irrevocable commitments and contingent liabilities. In the normal course of its operations, the Bank enters into various irrevocable commitments and incurs certain contingent liabilities through legal proceedings with its customers. Contingent liabilities are not recognized on the balance sheet, but are disclosed unless they are unlikely to occur. Although these obligations may not be reflected in the balance sheet, they do involve credit risk and therefore form part of the Bank's general exposure as disclosed in Note 58.1 on page 249.
251. Contingent liabilities 2020 2019 2020 2019 Rs. '000 Rs. '000 Rs. '000 Rs. '000 599,110,072 470,935,864 598,121,484 470,624,684 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 52,317,807 419,766,883 321,249,850 419,707,047 321,236,270 131,451,613 110,025,943 130,590,214 109,374,589 130,418,187 109,676,108 129,571,427 109,046,521 1,033,426 349,835 1,018,787 328,068 730,561,685 580,961,807 728,711,698 579,999,273 Other contingencies 58.1 249 Commitments Undrawn commitments auf direkte Vorschüsse Kapitalzusagen Gesamt 58,2 249 58,1 Sonstige Eventualverbindlichkeiten GROUP BANK 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 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 As at December 31, Others: – 1,149,011 – 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 Bills for collection 46,389,435 29,272,988 46,331,398 29,269,762 14,545 11,344 14,545 11,344 Bullion on consignment Other contingencies Subtotal 1,578,800 1,547,390 1,578,800 1,547,390 419,766,883 321,249,850 419,707,047 321,236,270 58.2 Capital commitments The Group has commitments for acquisition of property, plant und Ausrüstung und immaterialle Vermögenswerte, die mit dem gewöhnlichen Geschäftsablauf verbunden sind und vom Vorstand genehmigt wurden, die Einzelhei ten von whi ch lauten wie folgt: GROUP BANK 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 Zum 31. Dezember genehmigt, aber nicht vertraglich vereinbart für Zwischensumme – 1.033.426 – 349.835 – 1.018.787 Anmerkungen zum Jahresabschluss Seite Nr. Jahresabschluss Anmerkung Geschäftsbericht 2020 Zum 31. Dezember BANCO Commercial Bank of Ceylon PLC GROUP – 328.068 58 249
252. 58.3 Evolution of the provision for impairment during the year 58.3 (a) Group Phase 1 Note Page No. Balance as of January 1, charge/(reverse) to the profit and loss account 18.1 184 Variation in exchange rate provisions in currency Foreign Balance as of December 31, Level 2 Level 3 Total 2020 2019 2020 2019 2020 2019 Rs. '000 Rs.' 000Rs. '000 Rs.' 000Rs. '000 768,932 187,177 364.7431 1,320,080 726,640 767,211 239,399 57,245 98,060 (25.06). (231) 1 536 100 768 100 – – – 244 482 187 237 339 676 789 (231) 2 120 258 1 320 080 – 364 743 Annual report 2020 Financial statements Anmerkungen zum Jahresabschlus)s /(rewrite in statement of results 18.2 185 Exchange rate variation of foreign currency provisions Balance as of December 31, Level 2 Level 3 Total 2020 2019 2020 2019 2020 2019 2020 2019 Rs. '000 Rs.' 000Rs. '000 Rs.' 000 764.857 528.932 187,177 364.7431 1,316,837 767.138 236.20. ) 256,212 799,316 590,481 696 (284) 1,532,691 764,857 – – – 244,482 187,237 339,676 696 (284) 2.116.849 1.316.837 – 364.743 58,4 Pasivos contingentes y compromisos de subsidiarias y asociadas 58.4 (a) Eventualverbindlichkeiten und -verpflichtungen von Tochtergesellschaften Eventualverbindlichkeiten und -verpflichtungen der Tochtergesellschaft Commercial Bank of Maldives Private Limited have been included in the group's consolidated financial statements, while other subsidiaries have been included in the group's consolidated financial statements there are no contingent liabilities or obligations at the reporting date. 58.4 (b) Contingent liabilities and commitments of associates The Group's associate, Equity Investments Lanka (Private) Limited, has no contingent liabilities at the balance sheet date. (As at December 31, 2019 – Nil) 59. Net assets value per ordinary share GROUP As at December 31, BANK 2020 2019 2020 2019 159,192,812 134,424,249 157,146,176 133,162,385 1,166,905,638 1,027,506,586 1,166,905,638 1,027,506,586 136.42 130.83 134.67 129.60 Amounts used as the numerator: Total equity attributable to bank shareholders (Rs. 000) Number of common shares used as denominator: Total number of shares Net asset value per share (Rs.) 60. Litigation against the bank Litigation is common in the banking industry due to the nature of the business . The Bank has an established protocol for handling such legal claims. Outstanding legal claims for which the Bank has already made provisions for possible losses in its financial statements or has realizable guarantees to cover damages are not included below, as the Bank does not expect cash outflows from such claims. However, additional adjustments to the financial statements are made when necessary due to the adverse effects of legal claims based on professional advice obtained as to the certainty of the result and also based on a reasonable estimate. 58 59 60 All legal cases against the Bank were presented to the Integral Risk Management Committee of the Board of Directors and progress was discussed. Consequently, the following are the unresolved legal claims against the Bank as of December 31, 2020 for which no restatements have been made to the financial statements due to the uncertainty of their result. In addition, there are lawsuits against the bank, which is not mentioned here, for being irrelevant to business operations. 250
253. Courts and procedures not. A High Court Bank Cover Business Transaction 571/2008 MR Case Value Description Complaint (Rs. '000) Current Status 1,500,000 Court action brought by the claimant to prevent the bank from exercising the inherent rights of the settlement bank to be exercised with the Plaintiff's $15 million deposit against a sum owed by Plaintiff under a hedge agreement. The plaintiff has appealed the judgment to the Supreme Court. Recovery of funds from client Colombo District Court DMR 974/2016 27,000 The claimant has filed a claim for recovery of an amount together with interest related to the amount retained by the bank which failed to pay the claimant, because incorrect documents were provided for a bank transfer. attached. The process is complete. Written submissions must be filed by January 18, 2021. Commercial Money Recovery Client High Court 771/19/MR 60,000 five bank guarantees in favor of the Director General of Customs, who is the second defendant. Briefs related to preliminary appeals of January 29, 2021. Special Client Hearing Special Commercial Court 193/2020 463,918 plaintiffs filed an action requesting that the payment of the guarantees issued by the Bank in favor of RDA be prevented, which is the beneficiary, and the first defendant. The case was referred to the Mercantile Court. Customer Special District Court Kaduwela 515/SPL 458.895 The plaintiffs have filed a lawsuit to prevent payment of the guarantees issued by the Bank in favor of RDA, the beneficiary and first defendant. Summoned on February 8, 2021. 55,000 Legal action initiated by the plaintiff requesting 10% of the sale price deposited in a property auction conducted by the bank because the 90% balance was not deposited within 30 days after the auction. Preliminary proceedings are scheduled for March 15, 2021. Superior Court of Commerce 36/96(1) 183,050 Legal action initiated by a client in relation to a forward foreign exchange contract. The judgment was handed down in favor of the bank dismissing the plaintiff's claim, but the plaintiff has appealed the judgment to the Supreme Court. The next hearing is scheduled for May 28, 2021. Commercial Bank of Ceylon PLC Customer Complaint on Forex Forex Contract Annual Report 2020 Commercial High Money Court Customer Recovery 52/2020 (formerly District Court of Colombo DMR 2855/ 18) Notes to the financial statements Type of case Financial statements Claimant 61. Group maturity analysis (i) The remaining contractual term to maturity at the balance sheet date of the assets used by the group is as follows: Up to 3 months 3 to 12 months 1 to 3 years 3 to 5 years More than 5 years Total as of 12/31/2020 Total as of 12/31/2019 $ '000 $'000 $'000 $'000 $'000 $'000 $'000 $ Central banks 96,288,395 - - - - - 96,288,395 9,405,251 - - 16,421,821. Derivative financial assets – – – – – – – – – – – – – – – Financial assets recognized in results – At fair value Financial assets at amortized cost – Loans and advances to banks 33,867,593 – 33,867,593 – 60 61 13,147. 534 – 20,484 .892 -251
254. Financial assets at amortized cost– Accounts receivable from other customers Financial assets at amortized cost – Debt securities and other financial instruments Up to 3 months 3 to 12 months 1 to 3 years 3 to 5 years More than 5 years Total as of 12/31/2020 Total as of 12/12 / 31/2019 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 282,907,569 238,759,344 226,898,580 108,515,111 52,748,568 909,829,172 893,919,311 14,342,815 34,304,029 81,163,942 95,163,248 77,085,495 302,059,529 107,059,021 197,604,418 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 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 Commercial Bank of Ceylon PLC Informe anual 2020 Estados financieros Notas a los estados financieros ements Financial assets Cash and cash equivalents 49,440,697 Balances with Central Banks 12,376,032 – 5,826,956 – 467,141 – 195,411 – 204,797 49,440,697 36,012,701 19,070,337 36,695,981 Securities – – Purchases – from – Banks – – – – Placements – – from – – 4,372 – 2,636,717 1,830,927 – 1,321, 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 property – – – – 67,116 67,116 46,350 Acquisition cost – Loans and accounts receivable a bancos Activos financieros a amortizar coste – Préstamos y partidas a cobrar a otros clientes Activos financieros a coste amortizado – Pasivos un d andere Finanzinstrumente Finanzielle Vermögenswerte, die erfolgsneutral zum beizulegenden Zeitwert bewertet werden 20.267 779.705 271.802 292.069 220.599 Abgegrenzte nicht finanzielle Vermögenswerte tax assets 2,735,566 530,165 498,471 3,782,593 20,195,153 23,443,869 5,076,160 718,521 32,357,314 123,790,539 3,523,049 1,105,344 29,600,719 319,245,007 486,150,77 3 250,518,748 185,019,587 – Other assets 12,628,329 Total non -interest earning assets as at 31.12.2020 Total non-interest earning assets as at 31.12.2019 – 2,735,566 1,709,265 1,576,495 76,858,021 8,780,523 77,059,697 13,459,904 Total assets S - AS AT 31.12.2020 521,562,038 Total Assets - AS AT 31.2.2019 - - 493,996,896 273,969,723 352,990,201 186.107.319 101.877.227 Percentage - at 31.12.2020 (*) 29.60 18.11 27.21 10.50 Percentage 19.21 7.23 124.713 1.76,153 1.408.941.366 100.00.00.00.00.00 Regards 00 00 00 Regards. assets used. (ii) The remaining contractual life at the balance sheet date of the liabilities and own funds used by the Group is shown below: Up to 3 months 3 to 12 months 1 to 3 years 3 to 5 years More than 5 years Total as of December 31 12/31/2020 Total as of 12/31 2019 $ '000 $ '000 $ '000 $ '000 $ '000 $ '000 Repurchase agreements 61 Financial liabilities at amortized cost - due to depositors 252 – – 76,522,217 14,889 .305 680,635,849 432,568,744 – – – – – – – 36,242,319 12,481,684 16,138,286 – – 91,411,522 51,117,342 1,178,069,4082
255. Up to 3 months 3 to 12 months 1 to 3 years 3 to 5 years More than 5 years Total as of December 31.12.2020 Gesamt zum 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 897,343 – 108,549,517 – 142,376 – – 11,364,554 1,709,860 – – 1,501,262 1,495,317 – – – – – – – – – 108,549,517 – 75,861,247 Financial liabilities at amortised cost – Other borrowings – – – – – – – Subordinated liabilities – – – – – – – – – – Non-financial liabilities Current tax liabilities Deferred tax liabilities Other liabilities 1,747,751 5,243,254 – – 13,877,801 12,381,908 403,846 1,454,663 5,197,188 403,846 416,458 3,403,666 33,572,283 30,775,884 – 2,454,245 6,991,005 – 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 1,589,234 323,331,176 Total non-interest -que devengan pasivos y patrimonio al 31.12.2020 136.001.166 18,522,505 2,000,885 2,454,245 164,352,375 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 Total liabilities and equity – as at 31.12.2020 939,374,993 531,040,607 80,512,971 21,271,624 190,295,958 Total liabilities and equity – as at 31.12.2019 724,274,786 417,462,500 55,547,409 46,549,297 165,107,374 Porcentaje - AL 31.12.2020 (*) 53.29 30.13 4.57 1.21 10.80 porcentaje - A 31.12.2019 (*) 51.41 29.63 3.94 3.30 11.72 251,469,437 1.762. Verbindlichkeiten und Gesellschaftermittel of jedes Laufzeitband als Prozentsatz der gesamten Verbindlichkeiten und der von der Gruppe eingesetzten Gesellschaftermittel. 62. Geschäftssegmente Rechnungslegungsgrundsätze Ein Geschäftssegment ist eine Komponente des Konzerns, die Geschäftstätigkeiten ausübt, aus denen sie Einnahmen erzielen und Ausgaben tätigen kann, einschließlich Einnahmen und Ausgaben, die sich auf Transaktionen mit anderen Komponenten der Gruppe beziehen, deren Betriebsergebnisse regelmäßig vom Corporate Management Team unter der Leitung des Director General/Director General (als Hauptentscheidungsträger) überprüft, um Entscheidungen über die jedem Segment zugewiesenen Ressourcen zu treffen und seine Leistung zu bewerten, und für die gesonderte Finanzinformationen verfügbar sind. Der Konzern hat fünf strategische Geschäftsbereiche (segmento operativo), die berichtspflichtige Segmente sind, nämlich: z Privatkundengeschäft, z Firmenkundengeschäft, z internationale Geschäfte, z Handel/Treasury, z NBFI, Immobilien und Dienstleistungen werden in gewisser Hinsicht unterschitschlused de Konzer. Ertragssteuern werden auf Konzernbasis verwaltet und nicht den operativen Segmenten zugeordnet. Die folgende Tabelle enthält Informationen zu Erträgen, Gewinnen und Vermögenswerten und Verbindlichkeiten der strategischen Geschäftsbereiche des Konzerns für das Geschäftsjahr zum 31. Dezember 2020 sowie Vergleichszahlen für das Geschäftsjahr zum 31. Dezember 25162019.
256. For 31.12, Privatkundengeschäft Firmenkundengeschäft 2020 Rs. '000 2019 Rs. '000 2020 Rs. '000 2019 Rs. '000 26,764,757 27,988,262 8,996,447 10,555,019 96,113 293,571 141,319 (197,352) 5,590,664 6,298,366 2,269,088 2,357,802 451,804 44,930 5,079 4,011 External operating income: Net interest income Foreign exchange Ingresos netos por honorarios y comisiones Otros ingresos Ingreso operativo total Cargos por deterioro y otras pérdidas Ingreso operativo neto Commercial Bank of Ceylon PLC Informe anual 2020 Estados financieros Notas a los estados financieros Resultado del segmento 62,254 32,903,338 34,625,129 11,411,933 12,719,480 (12,548,294) (8,185,605, 40 ,65) (2,657,152) 20,355,044 26,439,523 5,246,526 10,062,328 6,427,440 9,837,267 3,058,224 6,822,088 Profit from operations Share of profit of associates (after tax) Income tax expense Net profits for the year attributable to retail customers1 Non-controlling interests of parent company. geschäft 2020 Rs. '000 2019 Rs. '000 2020 Rs. '000 2019 Rs. '000 628,115,371 544,782,281 323,883,043 337,929,901 Other information Segment assets 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 '000 2020 '000 rupias 2020 '000 rupias 2019 '000 rupias 2019 '000 rupias
257. Total/consolidated 5,439,904 5,658,240 1,391,472 1,777,036 1,273,871 1,238,145 8,005 4,006 314,503 152,713 365,544 796,000 10,310 6,167,497 1,214,550 838,796 840,539 (592,883) 8,901,247 8,683,731 15,535,516 5,542,453 1,649,442 1,542,045 6,328,012 4,573,811 (232,893) 26 (75) (206,221) 22,271 2019 Rs. '000 2020 Rs. '000 2019 Rs. '000 2020 Rs. '000 2019 Rs. '000  2020 Rs. '000 2019 Rs. '000  3,707,529 (381,397) 496,073 548,801 5,464,092 3,987,466 50,868,802 48,356,391 5,652,485 4,705,294 70 (8) 1,091,259 283,803 8,372,718 6,862,344 700,806 9,821,675 10,751,838 (398,264) 7,666,293 1,716,076 (2,289,624) (278,068) (210,012) 8,695,026 8,706,002 13,245,892 5,264,385 1,439,430 1,309,152 5,237,040 5,514,956 10,440,327 3,908,482 437,531 376,357 76,729,488 67,686,649 (21,419,532) (11,331,523) 6,328,038 4,573,736 55,309,956 56,355,126 (1,084,600) (3,485,246) 24,515,962 22,973,904 24,515,962 22,973,904 3,898 9,992 (7,433,063) (5,563,500) (146,847) (157,137) 16,939,950 International operations Dealing/treasury NBFI, Real Estate & Services 2020 Rs. '000 2019 Rs. '000 2020 Rs. '000 2019 Rs. '000 2020 Rs. '000 2019 Rs. en TSD. 209.243.351 173.080.105 602.609.010 369.624.769 11.306.239 10.014.567 – – – – – Nicht zugewiesen/Eliminierungen 2020 Rs. 000 (12.725.016) 64.155 – 2019 Rs. '000  (26.547.078) 56.821 17.263.259 Gesamt/konsolidiert 2020 Rs. '000 2019 Rs. ’000  1,762,431,998 1,408,884,545 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 International operations 2020 Rs. '000 2019 Rs. '000 Handel/Schatzkammer 2020 Rs. '000 NBFI, Immobilien & Dienstleistungen 2019 Rs. '000 2020 Rs. '000 2019 Rs. '000 Nicht zugewiesen/Eliminierungen 2020 Rs. '000 2019 Rs. '000  Gesamt/konsolidiert 2020 Rs. '000 2019 Rs. ’000 (3,846,592) 17,581,879 2,068,509 3,262,836 960,434 (9,754,534) (1,150,811) (41) (1,348,643) - (460,053) (415,088) (2,428) a las notas de las notas. '000 Jahresabschluss NBFI, Immobilien & Dienstleistungen 2019 Rs. '000 Jahresbericht 2020 Handel/Schatzkammer 2020 Rs. '000 Commercial Bank of Ceylon PLC Internationale Geschäftstätigkeit 63. Angaben zu verbundenen Parteien Rechnungslegungsgrundsatz Die Bank führte Transaktionen im Rahmen des gewöhnlichen Geschäftsbetriebs zu marktüblichen Preisen mit Parteien durch, die gemäß dem Sri Lanka Accounting Standard als verbundene Parteien definiert sind „LKAS Disclosures“, mit Ausnahme von Transaktionen, die das Key Management Personnel (KMP) im Rahmen von Programmen in Anspruch genommen hat, die für alle Mitarbeiter einheitlich zu ermäßigten Preisen gelten. 62 63 63.1 Muttergesellschaft und oberste beherrschende Partei Die Bank hat keine eigene identifizierbare Muttergesellschaft. 255
258. 63.2 Key Management Personnel (KMP) Transactions According to the Sri Lanka Accounting Standard - LKAS 24 on Related Party Disclosures, KMPs are persons responsible for planning, directing and controlling the activities of the Company directly or indirectly authorized and responsible. Bank KMP The Bank's board of directors (including executive and non-executive directors) have been identified as the Bank's KMP. KMP Group As the Bank is the ultimate parent company of the subsidiaries detailed in Note 1.3 on page 155, the Bank's Board of Directors has the authority and responsibility to plan, direct and control, directly or indirectly, the Group's activities. Consequently, the Board of Directors of the Bank is also the KMP of the Group. Therefore, officers who are only directors of the subsidiaries and not of the bank were classified as KMP only for that respective subsidiary. Commercial Bank of Ceylon PLC Annual Report 2020 Financial Statements Notes to Financial Statements 63.2.1 Remuneration to KMP GROUP 2020 2019 2020 2019 Rs.'000 Rs.'000 Rs.'000 Rs. Year Short-term benefits Post-employment benefits Total BANK 8,988 8,342 8,988 8,342 217,354 208,794 212,068 204,301 63.2.2 Transactions with KMP members and their arrangements CFMs of a KMP are those family members who are expected to use that KMP in their transactions to influence or be influenced by the Bank. They may include KMP's partner and children, children of KMP's partner, and dependents of KMP's or KMP's partner. CFM has also been identified as a related party of the group/bank. 63.2.1 Balance - Bank Annual balance Annual balance 2020 2019 Rs. '000 Rs.' 000 financial assets at amortized cost - loans and advances 38,620 54.472 56,942 TOT 2,000 2,000 2,000 322.489 353.104 370.470 ASS Financial liabilities at amortized cost 370.470 309.15 Total subordinated passive depositors 63.2.2 Committees and eventual as Banking as Banking Annual Headar Annual 2020 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 '000 Rs. 1,000 Undrawn Facilities 29,544 13,740 19,485 14,581 Total 29,544 13,740 19,485 14,581 14,581 14,581 14,581 14,581 14,581 14,581 14,581 3.2.2. Direct and indirect accommodation as a percentage of the bank's regulatory capital at the end of the year 63 Direct and indirect accommodation as a percentage of the bank's regulatory capital at the end of the year No impairment losses were recognized in KMP for outstanding balances and CFM creditors. 256 2020 2019 0.04 0.04
259. 63.2.2.4 Profit and Loss Account - Bank For the year ended December 31, Note Page No. 2020 2019 Rs. Rs '000 Share-based transactions of KMP and CFM Number of common shares held by KMP and CFM Dividends paid (in Rs. '000) ESOP 2015 Year End 2020 2019 868,595 932,543 1,670 5,900 ESOP 2019 2020 2019 N/A 2020 2019 Number of cumulative options vesting under the Employee Share Option Plan (ESOP) Tranche II Tranche III – 138,632 61,400 138,632 61,400 138,617 9 –90 – 90,632 8 I Notes to the Financial Statements Financial Statements 63.2.3 Transactions, arrangements and understandings with entities controlled by KMP or its CFM and/or jointly controlled companies There were no significant transactions during the year. 63.3 Transactions with group companies 63.3.1.1 Balance Annual registration 2020 2019 2020 2019 Rs. '000 Rs.' 000 1,396,450 2,839,898,934 2,095,752 Assets of financial assets at amortized costs. 66,318 1,547,209 2,941,035 2,507,473 2,162.16. 483,366 306,010 56,183 72,409 62,730 69,277 830,536 713,188 644,044 491,454 Liabilities Securities sold under repurchase agreements Financial Verbindlichkeiten zu fortgeführten Anschaffungskosten – Verbindlichkeiten gegenüber Einlegern Sonstige Verbindlichkeiten Summe Commercial Bank of Ceylon PLC 63.3.1 Transaktionen mit Tochtergesellschaften Annual Report 2020 Group companies include the Bank's subsidiaries and associate . 63.3.1.2 Commitments and contingencies Year-end balance sheet Average balance sheet 2020 2019 2020 2019 Rs 000 Rs 000 Rs 000
260. 63.3.1.3 Direct and Indirect Adjustment Year End Balance Direct and Indirect Adjustment as Percentage of Bank Regulatory Capital 2020 2019 0.96 1.94 63.3.1.4 Profit and Loss Account 2020 2019 Rs 000 Interest Income 207 530 270 867 Interest expenses 33,700 36,458 Other income 126,742 106,972 Other expenses 738,331 730,982 Dividend income 98,200 85,397 2020 2019 68,083 93,007 Commercial Bank of Ceylon PLC Annual Report 2020 Financial Statements Notes to the financial statements for the year ended December 31, 63 1.5 other transactions For the year ended December 31: Payments to CBC Tech Solutions Limited in connection with the purchase of computer hardware and software (Rs. 000) Number of common (non-voting) shares of the Bank held by subsidiaries at the end of the year - Dividends paid (Rs '000) 2,439 5 23 63.3.1.6 Inter-company transactions carried out by other companies in the group Details of C transactions BC Finance Limited with Commercial Development Company PLC (CDC) and CBC Tech Solutions Limited. Balance at the end of the year Subsidiary Transaction type CBC Finance Limited Transactions with CDC PLC Average annual balance 2020 2019 2020 2019 Rs. '000 Rs. '000 Rs. '000 Rs. Rs in 1,000 Assets 63 Financial assets at amortized cost – Loans and accounts receivable – – – – Total – – – – Financial liabilities at amortized cost – Liabilities with depositors 1,679 5,695 2,526 2,843 Total 1,679 5,695 2,526 2,843 Liabilities 258
261. 63.3.2.2 Commitments and contingencies Year-end balance sheet Average balance sheet 2020 2019 2020 2019 Rs 000 Rs 000 Rs 000 For the year ended December 31 Interest income – – Interest expense 122 1,052 Other income – 5,730 Other expense – 420 2020 2019 5,000 – – – Number of ordinary (voting) shares of the bank held by associates during the year - Final dividends paid (Rs. '000) Financial statements 63.3.2.4 Other transactions Notes to financial statements 63.3.2.3 Account of Profit and Loss 63.4 Transactions with Other Associated Companies Other associated companies include significant investors (whether individuals or legal entities) that have control or have common control or significant influence, post-employment benefit plans for employees of the bank 63.4.1 Operations in post-employment benefit plans for Bank employees Annual Average Balance 2020 2019 2020 2019 $ '000 '000 $ '000 $ '000 Assets Financial assets COSTS AT AMORTIZED COST - Loans and Advances - - 148 39 Total - - 148 39 Financial liabilities at amortized 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 63.70 86 86 86 86 86. 820 430 1 108 193 Commercial Bank of Ceylon PLC Balance at Year End Annual Report 2020 63.4.1.1 Balance 63.5 Recurring Related Party Transactions There are no recurring related party transactions totaling more than 10% of the bank's gross income. 63 63.6 One-time transactions with related parties There are no one-time transactions with related parties that exceed 10% of equity or 5% of total assets, whichever is less. 259
262. 64. Non-cash items included in profit before taxes GROUP For the year ended December 31 Depreciation of property, plant and equipment Amortization of intangible assets Impairment and other losses Commercial Bank of Ceylon PLC Annual Report 2020 Financial Statements Notes to Financial Statements Impairment Subsidiaries 2019 2020 2019 Rs. '000 Rs.' 000Rs. '000 2,791,740 2,588,863 2,731,440 2,541,281 310,946 252,392 257,591 213,240 21,415,986 11,330,271 21,152,297 11,060,214 – – 12,096 – Loss on revaluation of land and buildings 39,872 – 327,855 – 39,872 – – – Accretion of interest on lease liability 435,754 429,263 452,304 457,449 Contribuciones a planes de beneficios definidos – Unfunded plans 234,986 485,566 210,795 469,946 82,043 81,592 82,043 81,592 Provision made or/a Vacation redemption Settlement through equity instruments payable to subordinated shares or Non-amortizing interest-based payments and Financial instruments at fair value through profit or loss 112,203 – 112.20 – 11,701 12,210 11,701 12,210 (529,648) (226,686) (529,648) (226,713) Effect of exchange rate variation on loans and advances to banks (21,892) 5,212 (21,212) (21,212) 21,212) and rights of use of assets (64,102) 50,917 (52,398) 47,408 Effect of exchange rate variations on intangible assets (5,666) 1,807 (1,122) Effect of exchange rate variations on defined benefit plans 10,758 (5,750) 10,758 (5,750) Effect of exchange rate variations on subordinated liabilities 393 750 (93 750) ) 393 750 (93 750 ) Net effect of exchange rate variations on deferred tax assets (12,005) 1,565 (9,804 ) 1,293 Net effect of exchange rate variations on income tax liabilities 71,364 ( 20,978 ) 66,240 (22,437) Net effect of exchange rate variations on the lease liability 60,460 (36,971) (34,321) 52,321) Total notional tax and withholding credits (585,419) 24,764,927 (841,251) 14,014,272 (580,871) 24,705,430 294 (805,060) 13,702,213 65. Change in GROUP operating assets For the year ended December 31, Net (increase) /Decrease Financial Instruments Net (increase) /Decrease (Increase)/ Decrease in Balances in Central Banks Net (Increase)/Decrease in Loans S at Banks Bank 2020 2019 2020 2019 $ '000 $' 000 $ '000 $' 000 (805,790) 6,045,676 (805,790) 6,045,676 (59.2) 9,305,303 (71,509,978) 14,923,463 8,487,575 (5,003,174) 3,634,022) 13,147,534 (3,634,022) Net (increase)/decrease in other financial assets recognized through profit or loss ( 13,191,790) (15,707,023) (13,191,790) (15,706,996) (Net increase)/decrease in accounts receivable customers (34,067,357) (36,612,232) (30,064,923) (33,589,071) Net (increase)/decrease in financial assets at fair value comprehensive income (83,571,404) (17,155,771) (83,572,933) (17,153,529) (198,751,695) (21,296,002) (195,329,795) (20,800,149) Net (Increase)/decrease in securities acquired under resale agreements 20 .0 Total Other assets, net (Increase)/decrease 2 Rs. 1,000 Losses in Fair Value of Real Estate Investments Net (Increase)/Decrease Financial Assets at Amortized Cost – Debt and Other Financial Instruments 64 65 BANK 3,248,716 (374,761 0.711) (161,130) (84,218,375) 3,703,098 (369,7098 ) (208,076) (74,076)
263. 66. Change in operating liabilities 2020 2019 2020 2019 Rs '000 Rs '000 /(decrease) in financial derivative instruments (83,136) Net increase/(decrease) in securities issued Net increase/(decrease) in other loans Increase/(decrease) in other liabilities (6,579,761) (83,136) 1,404,613 (6,579,761) 40,294,180 2,165,948 40,217,589 2,115,561 217,633,812 74,611,712 212,658,258 70,270,346 31,307,040 (2,113,019) 31,307,040 (2,113,019) 2,115,855 349,416 2,027,671 404,196 Net increase/(decrease) in due to subsidiaries – Total BANK 325,708,382 – 69.879.669 42,723 13,337 322,115,757 65,515,273 67. Operating leases 67.1 Operating lease commitments (Accounts receivable) Accounting policy The Group has signed operating leases for the rental of its own properties (mainly areas that are not currently occupied by branches) . Leasing contracts contain clauses that allow for periodic upward revision of rental income to reflect market conditions. These lease contracts have an average term of five to ten years. The Group is not subject to any restrictions as a result of entering into these leases. Addendum to the annual financial statements in 2019 2020 2019 Rs. '000 Rs.' 000 5,853 3,743 4,793 Between one and five years More than five years 20,140 13,168 8,314 11,261 Total 34,226 The test note presents information on the bank's exposure to financial risks and the bank's management of capital Information on the Bank's financial risk management Page No. Introduction 68.1 Credit risk 262 68.1.1 Credit quality analysis 263 68.1.2 Impaired financial assets 274 68.1.3 Sensitivity analysis of the provision for accounts receivable from other customers 275 68.1 .4 Guarantees maintained 275 68.1. 5 Credit risk concentration 275 68.2 278 Liquidity risk 68.2.1 Liquidity risk 279 68.2.2 Maturity analysis of financial assets and financial liabilities 280 68.2.3 Cash reserves 283 68.2.4 Available financial assets that support future financing 284 Annual Report 2020 2020 Rs. '000 As of December 31 Less than 1 year BANK Commercial Bank of Ceylon PLC Consolidated financial statements The future minimum rents receivable from non-cancellable operating leases are as follows: 66 67 68 261
264. Notes to the financial statements Annual report on financial statements 2020 Commercial Bank of Ceylon PLC For information about the BankFinancial Risk Management Framework Page No. 68.3 284 Market Risk 68.3.1 Market Risk - Trading and Investment Portfolio 285 68.3.2 Interest Rate Risk - Sensitivity Analysis 286 68.3.3 Currency Risk - Investment Portfolio Non-Trading 287 68.3.4 Share Price Risk 289 68.4 Operational Risk 289 68.5 Capital Management and Basel III Pillar III Disclosures 289 68.5.1 Regulatory Capital 289 68.5.2 Capital Allocation 290 68.5.3 Basel III Pillar III Disclosures Basel III 290 Introduction As a financial intermediary, the Bank is exposed to various types of risk, including credit, market, liquidity and operational risks inherent in the Bank's activities. Managing these risks is fundamental to the bank's sustainability and plays a central role in all of the bank's activities. The risk management function seeks to anticipate potential risks, analyze them and take precautionary actions to mitigate the impact of risks and optimize them through risk-adjusted returns within the bank's risk appetite. Risk Management Framework The Board of Directors (BOD) has overall responsibility for and oversight of the Bank's risk management framework. The Board of Directors' Integrated Risk Management Committee (BIRMC), a mandatory subcommittee established by the Board of Directors, is in turn tasked with developing the Bank's risk management policies and supervising their proper compliance through the Integrated Risk Management Executive Committee. Risks (EIRMC). The risk management policy establishes the Bank's risk appetite and has incorporated risk limits and controls to monitor compliance with the applicable limits. These policies and systems are regularly reviewed to reflect changing market conditions and the products and services offered. The Bank strives to promote a culture of risk management through continuous training, ethics and work standards. See note 3.2 on page 160 for more information on the Bank's risk management system. 68 262 The business units of the Integrated Risk Management Department (IRMD) are the owners of the risks and have primary responsibility for risk management. The IRMD acts as a second line of defense in risk management. The IRMD reports to the BIRMC through the Chief Risk Officer, thus ensuring its independence. Risk Measurement and Reporting The Bank uses sound risk measurement techniques based on the nature of the risk and industry best practices. The bank also performs stress tests, which are a key aspect of the Internal Capital Adequacy Assessment Process (ICAAP). The bank's risk management framework provides information on the impact of extreme but plausible scenarios on the bank's risk profile. The results are first reported to the EIRMC and then periodically to the BIRMC. The bank establishes guidelines, limits and thresholds within the bank's risk appetite. These limits reflect the Bank's business strategy and market environment, as well as the Bank's risk appetite (risk appetite). Therefore, the monitoring and control mechanism is based on the Bank's risk appetite. 68.1 Credit risk The financial loss resulting from a borrower or counterparty to a financial instrument that fails or is late in meeting its contractual obligations is called credit risk. It arises mainly from loans to banks and other customers, investments in debt securities and other financial instruments. In addition to credit risk from direct funding exposures (i.e. balance sheet exposures), indirect liabilities such as letters of credit, guarantees, etc. they would also expose the bank to credit risk. The Bank ensures rigorous credit risk management practices to manage the general elements of credit risk exposure (such as individual obligor default risk, country and industry concentration risk, etc.).
265. 68.1.1 Credit quality analysis 68.1.1 (a) Maximum credit risk by rating The following tables provide information on the credit quality of financial assets measured at amortized cost, debt instruments measured at FVOCI, and contingent liabilities and commitments. Non-ECL Book Value Rs.'000 Rs.'000 Risk-Free Investments 26,152,779 26,152,779 Rating 0-4: Investment Grade 23,220,892 – 23,220,892 – – 880,197 – 880,197 – – As of 31 December 2020 Subject to 12-month ECL (Tier 1) Note Page Number Rs. '000 Lifetime ECL - Non-Credit Impaired (Level 2) Rs. '000 Lifetime ECL - Credit Impaired (Level 3) Rs. '000 Cash and cash equivalents - - - - - Qualification 9: Extreme Risk - - - - Gross Carrying Amount 50,253,868 Less: Provision For Impairment Net Carrying Amount 3,241 28 196 26,152,779 - 50,250,627 26,152,779 94,405,316 94,405,316 24,101,089 - - - - - - - - - - - - - - - - 3. – – Platzierungen bei Zentralbanken und anderen Banken Risikofreie Anlagen (ohne gesetzliche Reserve) Rating 0-4: Investment grade rating 5-6: Medium risk rating 7-8: High risk – – 13,909,368 – – 2,032,617 – 2,032,617 – – – – – Rating 9: Extreme risk – Gross book value 110,347 .301 Less: Provision for impairment Net Book Value - 13,909,368 – – 94,405,316 3,003 29 and 30 197 110,344,298 94,405,316 – – – – 15,941,985 – – – 3,003 – – 15.9 At amortized cost Loans and advances to banks Government bonds (risk-free investments) – – – – – Rating 0 -4: Investment grade – – – – – Rating 5-6: Medium risk – – Rating 7-8: High risk 779,790 – – – – – Lev 9: Extreme risk – – – – – Gross viability amount 779,790 Less: Provision for impairment Net book value – – 85 33 201 779,705 – 779,790 779,790 – – 85 – – 779,705 – – – – Financial assets at amortized cost – Loans and partidas a cobrar a otros clientes Bonos del Estado (activos libres de riesgo) – – – Calificación 0-4: Grado de inversión (*) 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 17,276,070 – 3,404,791 5,000,618 8,870,661 Rating 9: Extreme risk 51,272,090 – Gross carrying amount 947,841,905 Rating 7-8: High risk Less: Provision for impairment Net carrying amount 50,996,452 34 202 896,845,453 – 107,893 37,406 51,126,791 740,254,706 105,011,766 102,575,433 6,470,880 12,244,433 32,281,139 733,783,826 92,767,333 70,294,294 Financial Statements Rating 7-8 : High risk Notes to the Financial Statements – Annual Report 2020 – Commercial Bank of Ceylon PLC Bewertung 5-6: Mittleres Risiko – 68 263
266. Stand 31.12, 2020 Book value Not subject to ECL Rs. '000 Rs. '000 Lifetime ECL - Non-Credit Impaired (Stage 2) Rs. '000 Lifetime ECL - Credit Impaired (Stage 3) Rs. '000 Financial assets at amortized cost – Debt Securities and Other Financial Instruments Government Securities (Risk Free Assets) Rating 0-4: Investment Grade Rating 5-6: Moderate Risk Rating 7-8: High Risk Notes to the Financial Statements Financial Statements Net Book Value Amount - 96,897,422 - - - 410 - - 294,836,457 Less: Provision for impairment 2,108,891 35 206 - 410 152,870 Gross - Carry button - 96,897,422 - Rating 94: extem. – – – 197,785,755 – 292,727,566 197,785,755 201,037,500 201,037,500 – Financial assets at fair value through other comprehensive income Government Bonds (risk-free investments) Rating 0-4: Investment grade 78,807. 758 Rating 5-6: Moderate risk 291,945 – – – – Rating 7- 8: High risk - - - - - Rating 9: Extreme risk - - - - - Gross book value 280,137,203 Less: Impairment Net Net Value 1,675,834 36 207 278,461,369 291,945 - 78,807,758 201,329.4 45 - 201,329,445 78,807,7,75,75,75,75,75,75,75 years old. -balance (**) Annual Report 2020 Liabilities and contingent commitments (i) Loan commitments Grade 0-6: Investment grade at medium risk 129,571,427 Grade 7 -9: Hohes Risiko zum extremen Risiko-Bruttomagerbetrag 129,571,427-- -127,131. 083-1,655.472-784.872-127.131.083 1,655.472 784.872 241.564.914 1,204,204,386.386, 386, 472 1486 1486, 22. to extreme risk – Gross carrying amount 355,337,535 – – – – 598,121,484 355,337,535 241,564,914 1,204,386 14,649 355, 337,535 368,695,997 2,859,858 799,521 1,532,691 244,482 339,676 Total contingent liabilities and commitments 58 248 727,692,911 Provision for impairment 58.3 (b) 250 2,116,849 – Carrying amount Not subject to ECL Rs. '000 Rs. '000 Risikofreie Anlagen 26,094,112 26,094,112 Rating 0- 4: Investment grade 22,822,901 - 22,822,901 - - 3,623,424 - 3,623,424 - - - - - - - - - - As of December 31, 2019 Subject to 12-month ECL (Tier 1) Note Page No. Rs '000 Lifetime ECL - No Credit Impaired (Tier 2) Rs.'000 Lifetime ECL - Credit Impaired (Tier 3) Rs Amount in gross books 264 - - 52,540,437 - - 26,094,112 - 26,446,325 - -
267. Stand 31.12, 2019 Book value Not subject to ECL Rs. '000 Rs. '000 Subject to 12-month ECL (Stage 1) Notes Page No. 28 196 Less: Provision for impairment Net Book Value 5,707 52,534,730 – 26,094,112 Rs. '000 Lifetime ECL - Non-Credit Impaired (Stage 2) Rs. '000 Lifetime ECL - Credit Impaired (Stage 3) Rs. 042 - - Rating 7-8: High risk - - - - - Rating 9: Extreme risk - - - - - Gross Book Value less: Provision for impairment Net book value 29 and 30 197 24 535 837 - 24 535 837 - - 8 596 - 8 596 - - 24 527 241 – 24 527 241 – – – – – – – – – – – Financial assets at amortized cost – loans and advances to banks Government bonds (risk-free investments) rating 0-4: degree of investment rating 5-6: medium risk – – – – 757,898 – 757,898 Rating 7-8: high risk – – – – Rating 9: extreme risk – – – – – – – gross b Carrying amount 757,898 Less: Provision for impairment Value net accounting 33 201 – 757,898 111 – 111 – – 757,787 – 757,787 – – Financial assets at amortized cost – Loans and receivables from other customers Government Bonds (risk-free investments) – – – – – Rating 0- 4: Grade investment (*) 688,520,415-597,141,302 68,922,076 22,457,037 Rating 5-6: Mittleres Risiko 15,520.60 2 165,599,864-119,783,738 30,295,524 Rating 7-8 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 35,811,491 – 2,613,480 8,318,831 24,879,180 884,645,744 – 717,392,416 95,469,525 71,783,803 Less: Provision for impairment Nettobuchwert 34 202 Finanzielle Vermögenswerte zu fortgeführten Anschaffungskosten – Schuldtitel und andere Finanzinstrumente Staatspapiere (risikofreie Anlagen ) 62,563,485 Rating 0 -4: Investment Grade (*) 38,853,334 – 38,853,334 – – 2,192 – 2,192 – – – – – – – – – 152,870 – 152,870 274,192 – 152,870 38,581,334 – – – – – – Rating 5-6: Medium risk Rating 7-8: High risk Rating 9: Extreme risk 152,870 Gross book value 101,571,881 Reduced: Net value 427,062 35 206 48,563,485 - 101,144,819 62,563,485 84,034,701 114,179,805 452.6 Annual Financial Statements 21,583,795 Announcement 2020 Rating 5–6 Bank of Ceylon Investment Grade Notes 0-4 to Financial Statements Risk Free Investments (exclu going legal reserves) – 68 Financial assets at fair value through other comprehensive income Government Securities (Risk Free Investments) Rating 0-4: Investment Grade – 114,174,723 265
268. Stand 31.12, 2019 Book value Not subject to ECL Rs. '000 Rs. '000 216,313 216,313 Subject to 12-month ECL (Tier 1) Notes Page # Rating 5-6 - Medium Risk Lifetime ECL - No Credit Impairment (Tier 2) Rs. Rs. '000 Lifetime ECL – Credit Impairment (Level 3) Rs.k – – – Rating 7-8: High Risk – – – – – Rating 9: Extreme Risk – – – – – Gross Book Value 198,430,023 Less: Impairment net Book value 84,255,300 861,693 36 207 197,568,330 – 84,255,300 114,174,723 – – 861.69 – – 113,313,030 – – Notes to financial statements Off-balance sheet (**) Contingent liabilities and commitments (i ) Loan commitments Class 0-6: investment grade to Medium Risk 109,046,521 Class 7-9: High risk to extreme risk Gross amount payable Closing Closing Annual report 2020-109,046,521-107,481,309 816,932--748,280-107,481,309 816,932 748,2627 5 amount Commercial Bank of Ceylon PLC – – – – – – 470,624,684 277,228,454 191,275,266 2,111,794 9,170 277,228,454 298,756,575 2,928,726 757,450 764,857 187,237 364,743 Total contingent liabilities and commitments 58 248 5 79.671.205 Rückstellung für Wertminderung 58,3 (b) 250 1.316.837 – ( *) Investment grade also includes cash and gold. (**) The above amounts do not include the Bank's capital commitments, which are detailed in Note 58 to “Contingent Liabilities and Commitments” on pages 248 to 250. Financial assets at amortized cost – loans and advances to other customers and contingent liabilities and commitments are categorized based on the internal credit rating of the bank and other financial assets are categorized based on the external credit rating of the corresponding counterparty. 68.1.1(b) Movement in Credit Exposure – Incremental ECL The following tables show reconciliations of opening to closing balances of gross book values ​​by class of financial instrument. As of December 31, 2020 Lifetime ECL 12 Months Lifetime ECL Non-ECL Credit Impaired Credit Impaired (Stage 3) (Stage 2) (Stage 1) Book Value Not subject to ECL Rs. '000 Rs. '000 Rs. 000 52,540,437 26,094.rs or financial assets exchanged (excluding amortization) as of December 31, 2020 - 15,302,258 (17,588,827) 50,253,868 - 58,667 - 26,152,779 - - 15,243,591 - - - - (17,588,827) - - - - 24,101,101,101,10. - STATE - ETAPEDE. - - - - Stage 2 transfer - - - - - Stage 3 transfer - - - - - New assets issued or purchased 110,347,301 - 110,347,301 – – Financial assets written off or amortized (without amortization) (24,535. 837) – (24,535,837) ) – – As of December 31, 2020 110,347,301 – 110,347,301 – –
269. Stand 31.12, 2020 Book value Not subject to ECL Rs. '000 Rs. '000 Lifetime ECL 12 months Lifetime ECL Non-ECL Credit-impaired Credit-impaired (Level 3) (Level 2) (Level 1) Rs. '000 Rs. '000 Rs. – – – – Transfer to Stage 2 – – – – – Transfer to Stage 3 – – – – – Balance as of December 31, 2020 – 757 898 21 892 – 21 892 – – 779 790 – 779 790 – – 920 457 235 Assets financieros a costo amortizado – préstamos y Prepayments to other customers Gross book value as of 1 January 2020 - 720,005,896 103,788,356 96,662,983 Stage 1 transfer - - 20,487,691 (18,999,879) (1,487,812) Stage 2 transfer - - (31,801,869) 38,440,6385 (38,440,638) ( 5,993,488) (12,040,494) 18,033,982 Newly created or purchased assets Derecognized or redeemed financial assets (excluding amortization) Depreciation Changes in contractual cash flows due to modifications that do not give rise to derecognition As of December 31, 2020 443,948. 164 – 4 15.360.708 (21.045.541 752 426,887,802) – (377,804,008) (33,030,153) (16,053,641) (2,467,810) – (224) (1,512) (2,466,074) 12,792,118 – 947,841,905 – – 740,254,706 5,810,012 6,982,106 105,011,766 102,575,433 Financial assets at amortised cost – Debt and other ins financial instruments Gross carrying amount as of January 1, 2020 101,571,881 62,563,485 38,855,526 – 152,870 Transfer to Stage 1 – – – – – Transfer to Stage 2 – – – – – Transfer to Stage 3 – – – – – 6,160 0.423 – – New assets created or purchased 145,802,188 Financial assets written off or reimbursed (excluding write-offs) (14,670,492) Reclassification adjustment Exchange rate adjustments As of December 31, 2020 60,395,321 139,641. 765 (5,125,601) - (9,544,891) –5 - 1,32197.59 60.39 706,107 1,031,452 - 294,836,457 197,785,756 96,897,831 - 198,430,022 84,255,299 114,174,174,723 - 152.870 Integrate in another Integical Books In the Books In the Books In the Books In the Bind. January – 202 – – – Step to Stage 2 – – – – – Step to Stage 3 – – – – – New assets invested or purchased 214,537,999 180,922,180 33,615,819 – – Financial assets written off or redeemed (without amortization) (73,534,874 ) (66,188,953) (7,345,921) - - Reclassification to Jungs (60,395,321) - (60,395,321) - - 3,038,243 - 3,038,243 - - (4,279,784) - - 78,807,759 - - - Reading exchange adjustments for remeasurement - 312, 312, 2020 ( 1.92020) (1,92020) (1,92020) (1,92020) (1,92020) (1,92020) (1,92020) (1.920202) (1,92020) (1,920202) (1,920202) (1.920202) (1,920202) (1,920202) (1.9202) (1,92020) (1,92020) (1.92020202) (1, 2020 Exchange rate adjustments 757,898 Annual Report 2020 – Transfer to Stage 1 Commercial Bank of Ceylon PLC Gross carrying amount as of January 1, 2020 Notes to financial statements Financial assets at amortized cost – Loans and advances to banks 68 Contingent liabilities and commitments Gross carrying amount as of January 1, 2020 57 9,671,205 277,228,454 298,756,575 2,928,726 757,450 (24,328) Transfer to stage 1 - - 1,751,702 (1,727,374) Transfer to stage 2 - (1,417,620) 1,420,288 Transfer to stage 3 - - ( 195,801) (195,687)
270. Lifetime ECL 12 months Lifetime ECL no ECL credit impaired credit impaired(Level 3) (Level 2) (Level 1) Book value Not subject to ECL Rs. 000Rs. '000 Rs. '000 Rs .081 70,612,141 433,905 As of December 31, 2020 727,692,911 355,337,535 368,695,997 Book values ​​not subject to R.5.8 2.8,000 Rs. '000 Rs As of December 31, 2020 As of December 31, 2019 Rs. '000 (1,133,421) 799,521 Lifetime ECL Lifetime 12-month ECL Non-ECL Credit impaired Credit impaired (Level 3) (Level 2) (Level 1) Thousands of rupees 1,000 rupees Notes to financial statements Cash and cash equivalents Value Accounting Gross as of January 1, 2019 Financial Statements Annual Report 2020 Commercial Bank of Ceylon PLC – Transfer to Stage 1 – – – – – Transfer to Stage 2 – – – – – Transfer to Stage 3---- -- New assets created or purchased 17,879,445 Dere ane financial assets Recognized or Paid (excluding amortization) (4,873,484) as of December 31, 2019 52,540,437 1,821,328-26,112 16,112,---058,058,058,058,058,050,855,058,058,8508.058 - - Placements in central banks and other banks Gross book value as of January 1, 2019 19,909,299 - Transfer to Stage 1 - - - - - Transfer to Stage 2 - - - - - - - - Transfer to Stage 3 - - New assets created or acquired 24,535,837 - 24,535,837 - - Financial assets written off or amortized (without amortization) (19,909,299) - (19,909,299) - - As of December 31, 2019 24,535,837 - 24,535,837 - - 763,074 - 763.07 Amortized gross book financial assets4 amount as of January 1, 2019 Reclassification to Stage 1 – – – – – Reclassification to Stage 2 – – – – – Reclassification to Stage 3 Currency adjustments As of December 31, 2019 – – – – – (5,176) – (5,176) - - 757,898 - 757,898 - - 890,229,368 - 745,617 91,600,192 Financial assets for ongoing acquisition costs - Lawsuits against other customers Stage 2 - - (40,641,087 (2,868,467 ) - (22,437.00) (22,437.00) – 370,523,503 9,353,947 Transfer to Stage 3 New assets originated or purchased 400,415,183 Ac financial assets written off or reimbursed (excluding write-offs) (399,373,750) – (348,543,034) (36,985,925) (13,844,791) (3,932,317)-(17,533) (6.28.67) (6.28.67) ) (3.886.112) 33.118.751-920.457.235 write compatibilities in the contract change changes in contract change changes. 720,005,896 – 103,788,356 96,662,983 41,443,155 156,627 Financial assets at amortized cost – Liabilities and other financial instruments Gross book value as of January 1, 2019 268 84,121,688 42,521,906 – Step to stage 1 – – – – – Step by step – 2
271. Stand 31.12, 2019 Book value Not subject to ECL Rs. '000 Rs. '000 Transfer to Stage 3 – – ECL life 12 months ECL life without ECL Credit-impaired Credit-impaired (Stage 3) (Stage 2) (Stage 1) Rs ,000 – Rs,000 thousand (152,870) 152,870 New assets Invested or acquired 52,520,358 35,054,020 17,466,338 – – Financial assets written off or redeemed (excluding amortization) (35,062,340) (15,130,626) (19.75) at December 0.27 (19,925) (3,957) Exchange rate adjustment 7,825) 118,185 (126,010) - 101,571,881 62,563,485 38,855,526 - - 177,102,423 95,702,465 81,399,958 - - 152,870 - Gross book value as at 19 January -20 - New invested - or assets purchased 113,896,437 63,846,493 50,049,944 – – Financial assets derecognised or redeemed (excluding amortización) (96,337,023) (77,666,054) (18,670,969) – – Exchange rate adjustments (430,569) Change in fair value due to Revaluation as of December 31, 2019 (430,569) - - 4,198,755 2,372,396 - 1,826,359 - - 198,430,023 84,255,300 114,174,723 - - 603,424,699 312,347, 333 Notes to the Financial Statements Through Financial Assets Measured AT Fair Value 2,786,052 564,260 - - 102) (1,246) Stage 2 Transfer - - (2,553,974) 2,558,608 (4,634) Stage 3 Transfer - - (444,019) -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 68.1.1 (c) Credit Impairment (Level 2) (Level 1) As of December 31, 2020 Note Page Number Rs. '000 Rs. '000 Lifetime ECL - Credit Impaired (Level 3) Rs. '000 Total Rs thousands of cash and cash equivalents Impairment provision (ECL) as of January 1, 2020 5,707 5,707 – – Transfer to Stage 1 – – – – Transfer to Stage 2 – – – – Transfer to Stage 3 – Net new measurement of impairment New assets created or acquired Financial assets written off or amortized (without amortization) Exchange rate adjustments as of December 31, 2020 28.1 196 - - - 1,844 - - 836 - - - - 59 - - 59 3,241 - - 3,241 8,597 - - 8,597 (5,205) Annual Report 2020 287,727,054 Transfer to Stage 1 Commercial Bank of Ceylon PLC Gross carrying amount as of January 1, 2019 Financial statements Contingent liabilities and commitments 1,844 836 (5,205 ) Placements in central banks and other banks Impairment provision (ECL) as of January 1, 2020 68 Transition to Stage 1 – – – – Transition to Stage 2 – – – – Transition to Stage 3 – – – – Impairment remeasurement – ​​– – – 269
272. 12 Monate ECL Lifetime ECL– No credit impairment (Stage 2) (Stage 1) As of December 31, 2020 Note Page No. Newly invested or purchased assets Derecognized or redeemed financial assets (excluding amortization) Rs. '000 Rs. '000 Lifetime ECL – Credit Impaired (Stage 3) Rs 000 Total Rs 000 2946 - - 2946 (8597) - - (8597) 57 - - 57 3003 - - 3003 111 - - 111 Transfer to Stage 1 - - - - Transfer to stage 2 - - - - Transfer to stage 3 – – – – Exchange rate adjustments as of December 31, 2020 30.1 197 Financial assets at amortized cost: loans and advances to banks Commercial Bank of Ceylon PLC Annual report 2020 Financial statements Notes to the financial statements Valuation allowance (ECL) as of January 1, 2020 Net revaluation Impairment as of December 31, 2020 33.1 202 (26) – – (26) 85 – – 85 Financial assets at amortized cost – Accounts receivable from other customers 2,613,480 Allowance (ECL) as of January 1, 2020 8,318,831 24,879,180 35,811,491 Transfer to Stage 1 824,628 (601,636) (222,992) – Transfer to Stage 2 (218,565) 425.99 (207,285) – Transfer to Stage 3 (46,261) (1,015,454) 1,061,715 – Net remeasurement of impairment 1,358,343 3,333,664 7,187, 518 New assets originated or acquired 2,545,958 1,919,933 742,084 5,207,975 (1,359,582) (984,340) (2,952,017) (860) (110,932) (111,958) (608,095) Financial assets written off or amortized (excluding amortizations) Exchange rate write-downs 1.56 and 56 adjustments 1,045 Accrued interest for insolvencies and advances – – Other movements – – Changes in contractual cash flows due to modifications that did not give rise to cancellations As of December 31, 2020 – 34.2 (b) 204 6,470,880 39,274 (2,850,806) 240.633 11.879.525 41,878.86) 240.633 1,222,641 2,507,090 3729731 1224443 32281139 50996452 ​​152870 427062 Stage 1 – – – – Transfer to Stage 2 – – – – Transfer to Stage 3 – – – – Net new measurement of impairment 324,126 – – 324,126 New investment or acquired assets 659,955 - - 659,955 (32) Financial assets given from written off or redeemed (without amortization) Adjustment of r eclassification As of December 31, 2020 3 5.1 (b) 206 - - 697,780 - - 1,956,021 - 152,870 (32) 697,780 2,108,891 Financial assets measured at fair value 861,693 Impairment provision (ECL) as of January 1, 2020 68 - - - - - Step to Stage 2 - - - - Step to Stage 3 - - - - Remeasurement of impairment, net - - - - 2,373,614 Newly created or acquired assets 2,373,614 - - Financial assets written off or amortized (without amortization) (861,693) - - (861,693) Reclassification adjustment (697,780) - - (697,780) - - As of December 31, 2020 270 8 61,693 - Transfer to Stage 1 36.2 208 1,675,834 1,675,834
273. 12 Monate ECL Lifetime ECL– No credit impairment (Stage 2) (Stage 1) As of December 31, 2020 Note page number Rs. '000 Rs. '000 Lifetime ECL – Credit Impaired (Stage 3) Rs. '000 Total Rs. 1,000 Contingent liabilities and commitments 764,857 187,237 364,743 Transfer to Stage 1 65,448 (52,794) (12,654) - Transfer to Stage 2 (12,406) 13,229 (823) - Transfer to Stage 3 (433) 695 Currency adjustments As of December 31, 2020 Rs. 58.3 (b) 250 1,532 691 12,196 222,974 (127,701) (254,825) – 244,482 12-month ECL Lifetime ECL – Non-credit-impaired (Level 2) (Level 1) Rs. '000 '000 – 339,676 ECL lifetime – Credit-impaired (Level 3) Rs. 710 1,446,679 (646,652) 695 2,116,849 Total Thousands of Rs Cash and Cash Equivalents Impairment Provision (ECL) as at 1 Jan 2019 – – Transfer to Stage 1 – – – – Transfer to Stage 2 – – – – 4,413 Transfer to Stage 3 4,413 – – – – (252) – – (252) New investment or acquisition assets 5,261 – – 5,261 Reimbursed rights or financial assets (excluding amortization) (3,659) - - ( 3,659) (56) - - (56) 5,707 - - 5,707 10,784 - - 10,784 Net new measurement of impairment Exchange rate adjustments As of December 31, 2019 28.1 196 Loans in central banks and other banks Provision for impairment (ECL ) as of January 1, 2019 Transfer to Stage 1 – – – – Transfer to Stage 2 – – – – Transfer to Stage 3 – – – – – Remeasurement of impairment Assets newly invested or purchased Financial assets given from