Commercial Bank of Ceylon PLC

The Banking Act Direction No. 11 of 2007 and subsequent amendments thereto on Corporate Governance for Licensed Commercial Banks in Sri Lanka issued by the Central Bank of Sri Lanka (the Direction)

Section

Principle, compliance, and implementation

Complied

3 (1)

Responsibilities of the Board

3 (1) (i)

The Board has strengthened the security and the soundness of the Bank in the following manner:

a.

Setting strategic objectives and corporate values
The Bank’s strategic objectives and corporate values are determined by the Board as set out on pages 72 to 151 and pages 192 to 213. These are communicated to all levels of employees through structured meetings and reinforced monthly at team meetings which review performance vis-à-vis strategic goals. The corporate values are included in the Code of Conduct and Business Ethics which is communicated to all employees via hard copy and Bank’s intranet, through orientation programmes and reinforced at meetings.

b.

Approving overall business strategy including risk policy and management
The Board provided direction and guidance for preparation of the five year Corporate Strategic Plan from 2025-2029 which was approved by the Board after discussing related issues in detail with the Corporate Management. It is aligned to the overall Risk Strategy of the Bank through involvement of the Independent Risk Management Committee. The risk appetite of the Bank is embedded throughout the corporate plan in allocation of capital, adoption of risk matrix to measure the risk levels and in defining key performance indicators which include both quantitative and qualitative criteria. Additionally, governance and compliance are embedded into the Bank’s Risk Management Policy Framework and included in the strategic goals.

The Bank’s Strategic Plan for 2025-2029 was approved on December 20, 2024 by the Board at a special Board meeting with the presence of all the members of Corporate Management.

c.

Risk management
The BIRMC is tasked with approving the Bank’s Risk Policy, defining the risk appetite, identifying principal risks, setting governance structures and implementing systems to measure, monitor and manage the principal risks. “Risk Governance
and Management” on pages 254 to 284 and the “Report of the BIRMC” on pages 218 to 220 provide further insights on
risk management policies and processes of the Bank.

d.

Communication with all stakeholders
The Board has approved and implemented the following communication policies with stakeholders:

Shareholders – The Policy on Relations with Shareholders and Investors of the Bank explicitly provides for effective and timely communication to shareholders of material matters and performance. Interim Financial Statements are made available to shareholders within 45 days for the first three quarters and within 60 days for the last quarter from the end of the relevant quarter and a press release is issued providing a review of the Bank’s performance on a quarterly basis. Performance of the Bank is set out in the Annual Report of the Bank which is circulated to shareholders 15 working days prior to the Annual General Meeting (AGM).
The AGM is the key forum for contact with shareholders and the Bank has a history of well attended AGMs where shareholders take an active role in exercising their rights. Details of attendance of the shareholders at AGMs during the past five years is given in the Table 46 on page 209.

The AGM 2024 was held in the form of a physical meeting.

Additionally, the “Investors” page on the Bank’s website contains the Interim Financial Statements and Annual Reports together with key disclosures on risk management.

The Bank also provides information to equity analysts to facilitate high quality information in research reports which are made available to investors by stockbrokers.

Customers – Customers include, inter alia, depositors and borrowers. The Bank’s Financial Consumer Protection Policy which also includes the Customer Complaint Handling Policy has been disseminated to all customer contact points in all three languages. This document outlines the policy set out by the Bank to handle customer complaints, provides contact numbers to reach the Bank as well as the Financial Ombudsman. There is a 24-hour trilingual customer hotline set up for this purpose and reports are reviewed by both the EIRMC and BIRMC.
Staff – Employees and representatives of the trade unions are given unrestricted access to the Management to discuss their concerns. The Deputy General Manager – Human Resource Management coordinates communication between the Board and the employees.

e.

Internal control system and management information systems
The Board is assisted in this regard by the BAC who reviews the adequacy and the integrity of the Bank’s internal control system and management information system. The BAC has reviewed reports from the Internal Audit Department and the External Auditors in carrying out this function and also reviewed management responses on same, during the year.

f.

Key Management Personnel (KMP)
KMP are defined in the Sri Lanka Accounting Standard – LKAS 24 on “Related Party Disclosures”, as the persons who significantly influence policy, direct activities and exercise control over business activities, operations and risk management. All appointments of designated KMP are recommended by the BNGC and approved by the Board.

For financial reporting purposes, the Board of Directors of the Bank (including Executive and Non-Executive Directors) is considered as KMP of the Bank.

Further, for corporate governance reporting and monitoring purposes, the Bank has also included all members of the Corporate Management into the category of KMP.

g.

Define areas of authority and key responsibilities for Directors and KMP
The Board Charter sets out the matters specifically reserved for Board, defining the areas of authority and key responsibilities
of the Board of Directors. Areas of authority and key responsibilities for members of the Corporate Management are stated in
the job descriptions of each member.

h.

Oversight of affairs of the Bank by KMP
The Board reviews the performance of the Bank vis-à-vis the strategic plan and receives reports from its Committees on financial reporting, internal control, risk management, changes in KMP and other relevant matters delegated to the Committees.

Additionally, other KMP make regular presentations to the Board on matters under their purview and are also called in by the Board to explain matters relating to their areas.

i.

Assess effectiveness of own governance practices
Completed Board evaluation forms were received from all Board Members for 2024 for review and the responses were
discussed at a BNGC meeting and at a subsequent Board meeting. Matters of concern noted are followed-up and improved
upon during the year to continuously improve the governance practices of the Bank.

j.

Succession plan for KMP
There is a formal succession plan in place with named successors for KMP together with development plans to ensure
their readiness.

k.

Regular meetings with KMP
Progress towards corporate objectives is a regular agenda item for the Board and members of the Corporate Management are regularly involved in the Board level discussions on the same. Additionally, they make key agenda items or are called in for discussions at the meetings of the Board and presentations on its Committees on policy and other matters relating to their areas on a regular basis.

l.

Regulatory environment and maintaining an effective relationship with regulator
Directors are briefed about regulatory developments at Board meetings by the KMP to facilitate effective discharge of their responsibilities. Members of the BAC and the BIRMC are also briefed on regulatory developments at their meetings by
the Heads of Internal Audit, Risk, and Compliance. Board Members attend the Director Forums arranged by the CBSL as well.

m.

Appointment of the External Auditors
The policy of rotation of auditors of the Bank was, once in every five years, in keeping with the principles of good corporate governance. At the end of the five-year period, quotations are called from suitable audit firms, prior to the recommendation of
new auditors as per the rotation policy. In addition, External Auditors submit a statement annually confirming their independence as required by Section 163 (3) of the Companies Act No. 07 of 2007 (as amended) in connection with external audit.

Messrs Ernst & Young (former external auditor of the Bank) completed six consecutive years of external audit with the audit of the Financial Statements for year ended December 31, 2023. Although the Bank used to rotate the external auditor every five years, as per the previous policy, Messrs Ernst & Young was retained as the external auditor of the Bank for an additional year, considering the fact that the CBSL deployed Messrs KPMG (the present external auditor) to conduct an Asset Quality Review on the Banking Sector in the country in year 2023.

Accordingly, at the AGM held on March 28, 2024, Messrs KPMG was appointed as the external auditor and the Directors were authorised to fix their remuneration as approved by the shareholders.

However, the policy of rotation of auditors was updated to, change the auditors of the Bank once in every six years and also to change the engagement partner once in every three years, in line with the requirements of the Banking (Amendment)
Act No. 24 of 2024.

3 (1) (ii)

Appointment of Chairman and CEO and defining and approving their functions and responsibilities
Positions of the Chairman and the Managing Director/Chief Executive Officer (CEO) are separated in the Board Charter to maintain a balance of power. Further, functions and responsibilities of the Chairman and the CEO are defined and approved
in line with Section 3 (5) of the Direction as further explained on pages 464 and 465

3 (1) (iii)

Regular Board meetings
Board meetings are held each month on a regular basis and special meetings are scheduled as and when the need arises, at which Directors present at the meetings actively participate in deliberating matters set before the Board. Attendance at Board meetings is given on pages 198 and 199 together with the number of meetings of the Board. The Bank has minimised obtaining approval via circular resolutions and it is carried out only on an exceptional basis and such resolutions are ratified by the Board at the next meeting.

3 (1) (iv)

Arrangements for Directors to include proposals in the agenda
Notice of Meeting is circulated two weeks prior to the meeting and Directors may submit proposals for inclusion in the agenda on discussion with the Chairman on matters relating to the business of the Bank.

3 (1) (v)

Notice of Meetings
Notice of Meetings, together with the agenda and Board papers for the Board meetings are circulated to the Directors seven days prior to the meeting providing Directors adequate time to attend and submit any urgent proposals.

3 (1) (vi)

Directors’ attendance
The Directors are apprised of their attendance in accordance with the Direction. Details of the Directors’ attendance are set out on page 199. No Director has been absent from three consecutive meetings.

3 (1) (vii)

Appointment and setting responsibilities of the Company Secretary
The Board appoints and sets responsibilities of the Company Secretary in accordance with the Companies Act, Banking Act Directions, and the Articles of Association of the Bank under advisement of the BNGC. Refer “Role of Company Secretary” on page 205 for further details.

3 (1) (viii)

Directors’ access to advice and services of the Company Secretary
All Board Members have full access, to the advice and services of the Company Secretary to ensure that proper Board procedures are followed and all applicable rules and regulations are complied with.

3 (1) (ix)

Maintenance of Board minutes
Company Secretary maintains the minutes of the Board meetings and circulates same to all Board Members after review by the CEO and the Chairman. The minutes are reviewed and approved at the next Board meeting after incorporating any amendments/inclusions proposed by other Directors.

Additionally, the Directors have access to past Board papers and minutes through a secure electronic link.

3 (1) (x)

Maintaining minutes with sufficient details to serve as a reference for regulators and supervisory authorities
The minutes of the meetings include:

a summary of data and information used by the Board in its deliberations;
the matters considered by the Board;
the fact-finding discussions and the issues of contention or dissent;
the testimonies and confirmations of relevant executives with regard to the Board’s strategies and policies and adherence to relevant laws and regulations;
matters regarding the risks to which the Bank is exposed and an overview of the risk management measures including reports of the BIRMC;
the decisions and Board resolutions including reports and minutes of all Board Committees; and
the actions to be taken by the KMP.

3 (1) (xi)

Directors’ ability to seek independent professional advice
Directors can obtain independent professional advice, as and when necessary, in discharging their responsibilities according
to a procedure approved by the Board. This function is coordinated by the Company Secretary.

3 (1) (xii)

Dealing with conflicts of interest
The Directors make declarations of their interests at appointment, annually and whenever there is a change in same. A quarterly report is sent to the Board on possible areas of conflict (if any). Directors withdraw from the meeting, abstain from participating in the discussions, voicing their opinion or approving, in situations where there is a conflict of interest.

Additionally, such Director’s presence is disregarded in counting the quorum in such instances. Key appointments of the Directors in other entities are indicated in their profiles appearing on pages 38 to 45 and “Directors’ Interest in Contracts with the Bank” as disclosed on pages 252 and 253.

3 (1) (xiii)

Formal schedule of matters reserved for Board decision
The Board has put in place systems and controls to facilitate the effective discharge of Board functions.

Pre set agenda of meetings ensures the direction and control of the Bank are firmly under Board’s control and authority in line with regulatory codes, guidelines and international best practice.

3 (1) (xiv)

Inform Central Bank on probable solvency issues
The Bank is solvent and no situations have arisen to challenge its solvency. A Board approved procedure is in place to inform the Director of Bank Supervision prior to taking any decision or action if the Bank is about to become insolvent or about to suspend payments to its depositors and other creditors.

3 (1) (xv)

Capital adequacy
The Board monitors capital adequacy and other prudential measures to ensure compliance with regulatory requirements, and the Bank’s defined risk appetite. The Bank is in compliance with the minimum capital adequacy requirements.

Refer Annex: 2 Basel III- Disclosures under Pillar 3 as per Banking Act Direction No. 01 of 2016 on pages 491 to 503.

3 (1) (xvi)

Publish Corporate Governance Report in this Annual Report
Annual Corporate Governance Report of the Bank is set out on pages 192 to 213 of this Annual Report.

3 (1)(xvii)

Self-assessment of Directors
The Bank has adopted a system of self-assessment, to be undertaken by each Director, annually. Each member of the Board carried out a self-assessment of his/her own effectiveness as an individual as well as the effectiveness of the Board as a whole. Further, each Director carries out an assessment of “fitness and propriety” to serve as a Director.

3 (2)

Board Composition

3 (2) (i)

Number of Directors
As per the Direction and Articles of Association of the Bank the number of Directors should not be less than seven and not more than thirteen.

The Bank’s Board comprised of Twelve Directors as at December 31, 2024.

3 (2) (ii)

Period of service of a Director
The period of service of a Director is limited to nine years excluding the Executive Directors as per the Direction issued to Licensed Commercial Banks. Details of their tenures of service are given on page 199.

3 (2) (iii)

Board balance
There are two Executive Directors and ten NEDs which is compliant with the requirement to limit the number of Executive Directors to one-third of the total.

3 (2) (iv)

Independent NEDs
The Board has ten Independent Directors which is well above the regulatory requirement to have at least one
third of the total number of Directors, to be INEDs to satisfy the criteria for determining independence.

3 (2) (v)

Alternate Directors appointed to represent an Independent Director
There are no Alternate Directors on the Board of the Bank.

3 (2) (vi)

Criteria for Non-Executive Directors
NEDs are persons with proven track records and necessary skills and experience to bring independent judgement to bear on issues of strategy, performance and resources.

Directors nominate names of eminent professionals or academics from various disciplines to the BNGC who peruse the profiles and recommend suitable candidates to the Board.

3 (2) (vii)

More than half the quorum to comprise Non-Executive Directors
This requirement is strictly observed and it is noteworthy that the majority of the Board are NEDs.

3 (2) (viii)

Identify Independent Non-Executive Directors in communications and disclose categories of Directors in this
Annual Report
The Independent NEDs are expressly identified as required in all corporate communications that disclose the names of Directors of the Bank. The composition of the Board, by category of Directors, including the names of Executive and Non-Executive Directors and Independent and Non-Independent Directors are given on page 199.

3 (2) (ix)

Formal and transparent procedure for appointments to the Board
The Board has established a BNGC, Terms of Reference of which comply with the specimen given in the Code of Best Practice on Corporate Governance. The Board has also developed a succession plan together with the BNGC to ensure the orderly succession of appointments to the Board.

3 (2) (x)

Election of Directors filling casual vacancies
All Directors appointed to the Board are subject to election by shareholders at the first AGM after their appointment.

Refer pages 238 to 245 of the “Statement of Compliance”

3 (2) (xi)

Communication of reasons for removal or resignation of Director
Resignations of Directors and the reasons are promptly informed to the regulatory authorities and shareholders together with a statement confirming any matters that need to be brought to the attention of shareholders.

3 (2) (xii)

Prohibition of Directors or employees of a Bank becoming a Director of another bank
The Board and the BNGC take into account this requirement in their deliberations when considering appointments of Directors.

None of the Directors are directors or employees of any other bank registered in Sri Lanka. Ms Lee, Director of the Bank, is also on the Board of Directors of DBS Group Holdings Ltd., Singapore and DBS Bank Ltd., Singapore. The CBSL has communicated that it has no objection to the said appointment.

3 (3)

Criteria to assess fitness and propriety of Directors

3 (3) (i)

Age of Director should not exceed 70 There are no Directors who are over 70 years of age.

3 (3) (ii)

Directors should not be Directors of more than 20 companies/entities/institutions inclusive of subsidiaries or associate companies of the Bank.
No Director holds directorships in excess of 20 companies/entities/institutions inclusive of subsidiaries or the associate of the Bank.

3 (4)

Management functions delegated by the Board

3 (4)(i)

Directors shall carefully study and clearly understand the delegation arrangements.

3 (4) (ii)

Extent of delegation should not hinder the Board’s ability to discharge its functions

3 (4) (iii)

Review delegation arrangements periodically to ensure relevance to operations of the Bank
The Board reviews and approves the delegation arrangements of the Bank annually and ensures that the extent of delegation addresses the business needs of the Bank whilst enabling the Board to discharge their functions effectively. Consequently,
the Board takes time to study and understand the delegation arrangements as referred to in the Section 3 (4) (i) and (ii) above.

3 (5)

The Chairman and Chief Executive Officer

3 (5) (i)

Separation of roles
There is a clear separation of duties between the roles of the Chairman and the CEO, thereby preventing unfettered powers
for decision-making being vested with one person.

3 (5) (ii)

A Non-Executive Independent Director as the Chairman or if not independent, designation of an Independent Director
as the Senior Director
The Chairman is an Independent Non-Executive Director.

3 (5) (iii)

Disclosure of identity of Chairman and CEO and any relationships with the Board Members
The identity of the Chairman and the CEO are disclosed in the Annual Report on pages 40 and 41 on “Board of Directors and Profiles”.

The Board is aware that there are no relationships whatsoever, including financial, business, family, any other material/relevant relationship between the Chairman and the CEO. Similarly, no relationships prevail among the other members of the Board.

3 (5) (iv)

Chairman to provide leadership to the Board
Board approved list of functions and responsibilities of the Chairman includes, “Providing leadership to the Board” as a responsibility of the Chairman. The Board’s Annual Assessment Form includes an area to measure the “Effectiveness of the Chairman in facilitating the effective discharge of Board functions”.

All key and appropriate issues are discussed by the Board on a timely basis.

3 (5) (v)

Responsibility for agenda lies with the Chairman but may be delegated to the Company Secretary
The Company Secretary draws up the agenda for the meetings in consultation with the Chairman.

3 (5) (vi)

Ensure that Directors are properly briefed and provided adequate information
The Chairman ensures that the Board is sufficiently briefed and informed regarding the matters arising at Board meetings. The following procedures ensure that:

Circulation of Board papers including minutes of the previous meeting, seven days prior to meeting
Clarification of matters by KMP when required

3 (5) (vii)

Encourage active participation by all Directors and lead in acting in the interests of the Bank
This requirement is addressed in the list of functions and responsibilities of the Chairman approved by the Board.

3 (5) (viii)

Encourage participation of Non-Executive Directors and relationships between Non-Executive and Executive Directors
Ten members of the Board are NEDs which creates a conducive environment for active participation by the NEDs. Additionally, NEDs chair the Committees of the Board providing further opportunity for active participation.

3 (5) (ix)

Refrain from direct supervision of KMP and executive duties
The Chairman does not get involved in the supervision of KMP or any other executive duties.

3 (5) (x)

Ensure effective communication with shareholders
The Bank historically has active shareholder participation at the AGM. At the AGM the shareholders are given the opportunity to take up matters for which clarification is needed. These matters are adequately clarified by the Chairman and/or CEO and/or any other officer. The AGM 2024 was held in the form of a physical meeting.

The shareholder participation at AGMs is given on page 209 of the “Annual Corporate Governance Report”.

3 (5) (xi)

CEO functions as the apex executive in charge of the day-to-day operations
The day-to-day operations of the Bank have been delegated to the CEO by the Board of Directors.

3 (6)

Board appointed committees

3 (6) (i)

Establishing Board Committees, their functions and reporting
The Board has established ten committees of which six are mandatory with the remainder appointed to meet the business needs of the Bank. Refer “Governance Structure” on page 197.

All the Board Committees of the Bank have its own written Terms of Reference. Each committee has a Secretary to arrange the meetings and maintain minutes, records, etc., under the supervision of the Chairman of the Committee. The Reports of the Board Committees are given on pages 214 to 237. The Chairpersons of the Committees are available at the AGM to clarify any matters that may be referred to them by the Chairman.

3 (6) (ii) a.

Board Audit Committee (BAC) Chairman of the Committee shall be an Independent Non-Executive Director who possesses qualifications and experience in accountancy and/or audit
Chairman of the Committee is an Independent Non-Executive Director with qualifications and experience in accountancy.
His profile is given on page 40.

b.

Committee to comprise solely of Non-Executive Directors All members of the BAC are Independent Non-Executive Directors.

c.

Board Audit Committee functions
In accordance with the Terms of Reference, the BAC has made the following recommendations:

the appointment of the External Auditor for audit services to be provided in compliance with the relevant statutes;
the implementation of the Central Bank Guidelines issued to Auditors from time to time;
the application of the relevant Accounting Standards; and
the service period, audit fee and any resignation or dismissal of the Auditor.

The BAC ensures that the service period of the engagement of the external audit partner shall not exceed five years, and that the particular audit partner is not re-engaged for the audit before the expiry of three years from the date of the completion of the previous term.

d.

Review and monitor External Auditor’s independence and objectivity and the effectiveness of the audit processes
The Board has adopted a Policy of rotation of Auditors, as explained in detail under section 3(1)(i)m on “Appointment of the External Auditors”.

e.

Provision of non-audit services by External Auditor
The Bank had developed a comprehensive Board Approved Policy on engagement of External Auditor for Non Audit services. Following action is taken prior to the assignment of non-audit services to External Auditors by the Bank:

Considered whether the skills and experience of the audit firm make it a suitable provider of non-audit services
If the Management is of the view that the independence is likely to be impaired with the assignment of any non-audit services to External Auditors, no assignment will be made to obtain such services.
Further, relevant information is obtained from External Auditors to ensure that their independence is not impaired, as a result of providing any non-audit services.
Pre approval of the BAC and the approval of the Board is obtained prior to engagement of the External Auditor for Non Audit services as per the Policy.

f.

Determines scope of audit
The Committee discussed the Audit Plan, nature and scope of the audit with External Auditors to ensure that it includes:

(i) an assessment of the Bank’s compliance with the relevant Directions in relation to corporate governance and the management’s internal controls over financial reporting; and

(ii) the preparation of Financial Statements for external purposes in accordance with relevant accounting principles and reporting obligations.

(iii) the co-ordination between the audit firms, when more than one audit firm is involved within the Group.

g.

Review financial information of the Bank
The BAC reviews the financial information of the Bank, in order to monitor the integrity of the Quarterly/Annual Financial Statements, quarterly reports prepared for disclosure, Annual Report and the significant financial reporting judgements contained therein. The review focuses on the following:

(i) major judgemental areas;

(ii) any changes in accounting policies and practices;

(iii) significant adjustments arising from the audit;

(iv) the going concern assumption; and

(v) compliance with relevant Accounting Standards and other legal requirements.

The BAC makes their recommendations to the Board on the above on a quarterly basis.

h.

Discussions with External Auditor on interim and final audits
The BAC discusses issues, problems and reservations arising from the interim and final audits with the External Auditor. The Committee met on two occasions with the External Auditor, without the presence of executive staff of the Bank.

i.

Review of management letter and Bank’s response
The BAC has reviewed the External Auditor’s Management Letter and the Management’s response thereto.

j.

Review of internal audit function
The Annual Audit Plan prepared by the Internal Audit Department is submitted to the BAC for approval. This Plan covers the scope, functions and resource requirements relating to the Audit Plan and has the necessary authority to carry out its work.

The services of four audit firms have been obtained to assist the Internal Audit Department to carry out the audit function. Prior approval of the BAC has been obtained in this regard.

The Committee reviewed the reports submitted by Internal Audit Department and ensures that appropriate action is taken on the recommendations.

The Deputy General Manager – Management Audit (DGM-MA), who leads the Internal Audit Department, reports directly to the BAC and his performance appraisal is reviewed by the BAC.

The BAC is to recommend any appointment, terminations/resignations of the head, senior internal audit staff members and outsourced service providers to the internal audit function.

The above processes ensure that audit function is independent of the activities it audits and that it is performed with impartiality, proficiency and due professional care.

Ensure that the Committee is appraised of resignations of senior staff members of the internal audit department including the DGM – MA and any outsourced service providers, and to provide an opportunity to the resigning senior staff members and outsourced service providers to submit reasons for resigning.

k.

Internal investigations
The committee shall consider the major findings of internal investigations and management’s responses thereto.

l.

Attendees at Board Audit Committee meeting
The Chief Financial Officer, DGM-MA and a representative of the External Auditors normally attend meetings. Other Board Members and Managing Director/CEO may also attend meetings upon the invitation of the Committee.

The Committee met with the External Auditors without the Executive Directors being present on two occasions during the year. Refer the “Report of the BAC” given on pages 214 to 217.

m.

Explicit authority, resources and access to information
The Terms of Reference for the BAC includes:

(i) explicit authority to investigate into any matter within its Terms of Reference;

(ii) the resources which it needs to do so;

(iii) full access to information; and

(iv) authority to obtain external professional advice and to invite outsiders with relevant experience to attend, if necessary.

Refer the “Report of the BAC” on pages 214 to 217.

n.

Regular meetings
The BAC had scheduled regular quarterly meetings and additional meetings were scheduled when required. Accordingly, the Committee met 08 times during the year. Members of the BAC are served with due notice of issues to be discussed and the conclusions in discharging its duties and responsibilities are recorded in the minutes of the meetings maintained by the Secretary of the BAC.

o.

Disclosure in Annual Report
The “Report of the BAC” on pages 214 to 217 includes the following:

(i) details of the activities of the BAC;

(ii) the number of BAC meetings held in the year; and

(iii) details of attendance of each member at such meetings.

p.

Maintain minutes of meetings
DGM-MA serves as the Secretary for the BAC and maintains minutes of the Committee meetings.

q.

Whistle-blowing policy and relationship with External Auditor
The Bank has a whistle-blowing policy which has been reviewed and approved by the BAC and the Board of Directors.
Board’s responsibility towards encouraging communication on any non-compliance and unethical practices are addressed
in the Board Charter.

A process is in place and arrangements are in effect to conduct a fair and independent investigation and appropriate follow-up action regarding any concerns raised by the employees of the Bank, in relation to possible improprieties in financial reporting, internal controls or other matters. The BAC is the key representative body for overseeing the Bank’s relations with the External Auditor and meets the External Auditor on a regular basis to discharge this function.

3 (6) (iii)

Board Human Resources and Remuneration Committee (BHRRC) Charter of the Committee
The BHRRC is responsible for:

(a) determining the remuneration policy relating to Directors, CEO and KMP;

(b) setting goals and targets for the Directors, CEO and KMP; and

(c) evaluating performance of the CEO and KMP against agreed targets and goals and determining the basis for revising remuneration, benefits and other payments of performance-based incentives.

(d) The CEO attends all meetings of the Committee, except when matters relating to the CEO are being discussed.

Refer the “Report of the BHRRC” on pages 224 to 225.

3 (6) (iv) a.

Board Nominations and Governance Committee (BNGC)
Appointment of Directors, CEO and KMP
The Committee has developed and implemented a procedure to appoint new Directors, CEO and the members of the Corporate Management of the Bank.

The Committee has also developed a proactive process for planning and assessment of candidates for the succession of Executive and Non-Executive Directors, CEO and KMP appointments within the Bank, its Subsidiaries, and the Associate (the Group).

The Committee also oversee appointment and composition of the Sharia Supervisory Board (SSB or Sharia Board) of the Bank’s Islamic Banking Unit (IBU).

The Committee was chaired by the Chairman of the Bank from April 22, 2024, to September 30, 2024. Ms J Lee was appointed as the Chairperson of the Committee effective from October 01, 2024. The Committee comprises three other independent Non-Executive Directors (NEDs). The CEO may be present at meetings by invitation. Refer the “Report of the BNGC” on pages 221 to 223.

b.

Re-election of Directors
The Committee makes recommendations regarding the re-election of current Directors, considering the performance and contribution made by the Director concerned towards the overall discharge of the Board’s responsibilities also considering the requirements of the Articles of Association. Refer the “Statement of Compliance” given on pages 238 to 245.

c.

Eligibility criteria for appointments to key managerial positions including CEO
The Committee sets the eligibility criteria to be considered, including qualifications, experience and key attributes, for appointment or promotion to key managerial positions including the position of the CEO. The Committee considers the applicable statutes and guidelines in setting the criteria.

d.

Fit and proper persons
The Committee obtains annual declarations from Directors, CEO and COO to ensure that they are fit and proper persons to hold office as specified in the criteria given in the Section 3 (3) of this Direction and as set out in the statutes.

Further, the BNGC obtains declarations from other KMP to ensure that they too are fit and proper persons to hold office as specified in the said Direction, at the time of their appointment or consequent to any changes in their designation.

e.

Succession plan and new expertise
The Committee has developed a succession plan for the Directors and KMP. The need for new expertise may be identified by the Board or its Committees and brought to the attention of the BNGC who will take appropriate action.

f.

Committee to be chaired by an independent Director
The Committee was chaired by an Independent Non-Executive Director.

3 (6) (v) a.

Board Integrated Risk Management Committee (BIRMC)
Composition of BIRMC
The Committee comprises NEDs, the Managing Director/CEO and the Chief Risk Officer (CRO) who serves as a Non-Board Member. Other KMP supervising credit, market, liquidity, operational, and strategic risks are invited to attend the meetings on a regular basis.

b.

Risk assessment
The Committee has approved the policies on Credit Risk Management, Market Risk Management and Operational Risk Management, which provide a framework for management and assessment of risks. Further, Internal Capital Adequacy Assessment Process is being reviewed by the Committee annually. Accordingly, monthly information on pre-established risk indicators is reviewed by the Committee in discharging its responsibilities as per the Terms of Reference.

Refer the “Report of the BIRMC” on pages 218 to 220.

c.

Review of management level committees on risk
The Committee shall review the adequacy and effectiveness of all management level Committees such as Credit Policy Committee, Asset and Liability Management Committee (ALCO), Executive Integrated Risk Management Committee (EIRMC) etc., to assess their adequacy and effectiveness in addressing specific risks and managing them within the quantitative and qualitative risk limits specified by the Board of Directors. These limits are set out in the Risk Appetite Statement of the Bank and are reviewed by the Board on a regular basis.

d.

Corrective action to mitigate risks exceeding prudential levels
Actual exposure levels under each risk category are monitored against the tolerance levels when preparation of “Risk Profile Dashboard” of the Bank, which is circulated among members of the BIRMC monthly and discussed in detail at quarterly meetings. The Committee takes prompt corrective action to mitigate the effects of specific risks in case, such risks are at levels beyond the prudent levels decided by the Committee on the basis of the Bank’s policies and regulatory and supervisory requirements.

e.

Frequency of meetings
The Committee meets quarterly and schedules additional meetings when required. The agenda covers matters assessing all aspects of risk management including updated business continuity plans. The Committee met 05 times during 2024.

f.

Actions against officers responsible for failure to identify specific risks or implement corrective action
The Committee refers such matters, if any, to the Human Resources Department for necessary action with observations and suggestions.

g.

Risk Assessment Report to the Board
A comprehensive report of the meeting is submitted to the Board after each Committee meeting, by the Secretary of the Committee for their information, views, concurrence or specific directions.

h.

Compliance function
A compliance function has been established to assess the Bank’s compliance with laws, regulations, regulatory guidelines, internal controls and approved policies on all areas of business operations. This function is headed by a dedicated Compliance Officer who reports to the BAC and the BIRMC. The Compliance Officer submits a Positive Assurance Certificate on Compliance with mandatory banking and other statutory requirements on a quarterly basis to BAC and BIRMC.

3 (7)

Board Related Party Transactions Review Committee (BRPTRC)

3 (7) (i)

Avoid conflict of interest
The BRPTRC oversees the processes relating to this subject and its Report is given on pages 226 and 227. All members of the Board are required to make declarations of the positions held with related parties at the time of appointment and annually thereafter. In the event of any change (during the year), the Directors are required to make a further declaration to the Company Secretary. Directors refrain from participating at relevant sessions, in which lending to related entities Note 62 to the Financial Statements on “Related Party Disclosures” on pages 420 to 424 are discussed to avoid any kind of influence and conflict of interest.

Transactions carried out with related parties as defined by the Sri Lanka Accounting Standard – LKAS 24 on “Related Party Disclosures”, in the normal course of business, are disclosed in Note 62 to the Financial Statements on “Related Party Disclosures” on pages 420 to 424 Directors’ interest in contracts, which do not fall into the definition of related party transactions as per LKAS 24, are reported separately in the Annual Report, excluded from Notes to Financial Statements. Refer pages 252 and 253 for more details.

3 (7) (ii)

Related party transactions covered by the Direction
| The Related Party Transactions Policy approved by the Board, covers the following transactions:

(a) The grant of any type of accommodation, as defined in the Monetary Board’s Directions on maximum amount of accommodation;

(b) The creation of any liabilities of the Bank in the form of deposits, borrowings and investments;

(c) The provision of any services of a financial or non-financial nature to the Bank or received from the Bank;

(d) The creation or maintenance of reporting lines and information flows between the Bank and any related parties, which may lead to sharing of potentially proprietary, confidential or otherwise sensitive information that may give benefits to such related parties.

3 (7) (iii)

Prohibited transactions
The Bank’s Related Party Transactions Policy prohibits transactions, which would grant related parties more favourable treatment than that accorded to other customers. These include the following:

(a) Granting of “total net accommodation” to related parties, exceeding a prescribed percentage of the Bank’s regulatory capital;

(b) Charging of a lower rate of interest than the Bank’s best lending rate or paying more than the Bank’s deposit rate for a comparable transaction with an unrelated comparable counterparty;

(c) Providing of preferential treatment, such as favourable terms, covering trade losses and/or waiving fees/commissions, that extend beyond the terms granted in the normal course of business undertaken with unrelated parties;

(d) Providing services to or receiving services from a related party without an evaluation procedure;

(e) Maintaining reporting lines and information flows that may lead to sharing potentially proprietary, confidential or otherwise sensitive information with related parties, except as required for the performance of legitimate duties and functions.

3 (7) (iv)

Granting accommodation to a Director or close relation of a Director
A procedure is in place for granting accommodation to Directors or to a close relation/Close Family Member (CFM) of Directors. Such accommodation requires approval at a meeting of the Board of Directors, by not less than two-third of the number of Directors, other than the Director concerned, voting in favour of such accommodation or through circulation of papers,
which require approval by all. The terms and conditions of the facility include a proviso that it will be secured by such security,
as may from time to time be determined by the Monetary Board as well. Refer section on “Conflicts of Interest” on page 198 for more details.

3 (7) (v)

Accommodations granted to persons, concerns of persons, or close relations of persons, who subsequently are appointed as Directors of the Bank
The Company Secretary obtains declarations/affidavits from all Directors prior to their appointment and they are requested to declare any further transactions.

Employees of the Bank are aware of the requirement to obtain necessary security, as defined by the Monetary Board, if the need arises.

Processes for compliance with this regulation is also monitored by the Compliance Unit.

3 (7) (vi)

Favourable treatment or accommodation to bank employees or their close relations
No favourable treatment/accommodation is provided to Bank employees, other than staff benefits. Employees of the Bank are informed through operational circulars, to refrain from granting favourable treatment to other employees or their close relations or to any concern in which an employee or close relation has a substantial interest.

3 (7) (vii)

Remittance of accommodation subject to Monetary Board approval
No such situation has arisen during the year.

3 (8)

Disclosures

3 (8) (i)

Publish Annual and Quarterly Financial Statements
Annual Audited Financial Statements and Interim Financial Statements of the Bank were prepared and published during 2024 in the newspapers (in Sinhala, Tamil and English), in accordance with the formats prescribed by the Supervisory and Regulatory Authorities and applicable accounting standards.

3 (8) (ii) a.

Disclosures in Annual Report A statement to the effect that the Annual Audited Financial Statements have been prepared in line with applicable accounting standards and regulatory requirements, inclusive of specific disclosures
Disclosures on the compliance with the applicable accounting standards and regulatory requirements in preparation of the Annual Audited Financial Statements, have been made in the “Statement of Directors’ Responsibility for Financial Reporting” and “Managing Director/Chief Executive Officer’s and Chief Financial Officer’s Statement of Responsibility”. Refer pages 246 to 247 and 251.

b.

Report by the Board on the Bank’s internal control mechanism
The Annual Report includes the reports where the Board confirms that the financial reporting system has been designed to provide reasonable assurance regarding the reliability of financial reporting and that the preparation of Financial Statements for external purposes has been done in accordance with relevant accounting principles and regulatory requirements. Please refer the following statements for more details.

Annual Report of the Board of Directors on pages 4 and 5.

Statement of Compliance on pages 238 to 245.

Statement of Directors’ Responsibility for Financial Reporting on pages 246 and 247.

Directors’ Statement on Internal Control over Financial Reporting and Risk Management on pages 248 and 249.

c.

External Auditors Assurance Report on the Effectiveness of the Internal Control Mechanism
The Bank has obtained an assurance report on the Effectiveness of Internal Controls over financial reporting,
which is published on page 250.

d.

Details of Directors, including names, fitness and propriety, transactions with the Bank and the total of fees/remuneration paid by the Bank
Profiles of Board Members are given on pages 38 to 45. Directors’ Interests in Contracts with the Bank on pages 252 and 253. Details of transactions with the Bank are given in Note 62 to the Financial Statements on pages 420 to 424. Details of remuneration paid by the Bank are given in Note 21 to the Financial Statements on page 342.

e.

Total accommodation granted to each category of related party and as a percentage of the Bank’s regulatory capital
The net accommodation granted to each category of related party as a percentage of the Bank’s Regulatory Capital are
given below: Direct and indirect accommodation to related parties as at December 31, 2024.

Category of related party		Rs. Mn.	%
a	Subsidiary companies of the Bank	2,646	0.93
b	Associate of the Bank	–	–
c	Directors of the Bank*	6	0.00
d	Members of the Corporate Management of the Bank	429	0.15
e	Close relations of the Bank’s Directors	232	0.08
f	Close relations of the members of the Corporate Management	22	0.01
g	Shareholder owning a material interest in the Bank	–	–
h	Entities in which Directors/KMP or their close relations have a substantial interest	3,473	1.22

* Include both NEDs and EDs

f.

Aggregate values of remuneration to and transactions with Directors and members of the Corporate Management

Category	Rs. Mn.
Remuneration paid for the year ended December 31, 2024	1,112
Accommodation granted – as at December 31, 2024	444
Deposits – as at December 31, 2024	834
Securities sold under repurchase agreements – as at December 31, 2024	13
Investments in debentures – as at December 31, 2024	45

g.

External Auditors Certification of Compliance with the Direction
The factual findings report has been issued by the External Auditors on the level of compliance with the requirements of these regulations.

The findings presented in their report addressed to the Board did not identify any inconsistencies.

h.

Report confirming compliance with prudential requirements, regulations, laws, and internal controls
The Statement of Directors’ Responsibility for Financial Reporting on pages 246 and 247, “Directors’ statement on Internal Control over Financial Reporting and Risk Management” on pages 248 and 249 and item 35 of the “Statement of Compliance” on page 244, clearly sets out details regarding compliance with prudential requirements, regulations, laws, and internal controls.

i.

Non-compliance Report
There were no supervisory concerns on lapses in the Bank’s Risk Management Systems or non-compliance with the Direction that have been pointed out by the Director of the Bank Supervision Department of the CBSL and therefore, there is no disclosure in this regard.

3 (9)

Transitional and other general provisions
The Bank has complied with the transitional provisions, where applicable.

Compliance with the Code of Best Practice on Corporate Governance 2023 (the Code) issued by The Institute of Chartered Accountants of Sri Lanka

Code ref.	Compliance and implementation	Complied
A.	Directors
A.1	The Board The Board of Commercial Bank comprises twelve eminent professionals drawn from multiple fields and ten out of them are Non-Executive Directors (NEDs). They bring diverse perspectives and independent judgement to deliberate on matters set before the Board. Directors are elected by shareholders at the AGMs with the exception of the Managing Director (MD)/Chief Executive Officer (CEO) and the Chief Operating Officer (COO) who are appointed by the Board and remain as Executive Directors (EDs) until retirement, resignation or termination of such appointment. Casual vacancies are filled by the Board based on the recommendations of the Board Nominations and Governance Committee (BNGC) as provided for in the Articles of Association. The Board is assisted by the Company Secretary.
A.1.1	Regular meetings The Board meets on a monthly basis and each Board Committee also has its own schedule of meetings as set out in the respective Committee reports. The regularity of Board meetings and the structure and process of submitting information have been agreed to and documented by the Board. Attendance at meetings is summarised in Figure 45 on page 199. Information required to be reported to the Board under this Section is reported on a regular basis.
A.1.2	Role and responsibilities of the Board The roles and responsibilities of the Board are set out in the Board Charter as summarised on page 203.
A.1.3	Act in accordance with laws The Board has an approved working procedure in place to facilitate compliance with the relevant laws, CBSL Directions and guidelines and international best practice with regard to the operations of the Bank. This includes provision to obtain independent professional advice as and when necessary by any Director coordinated through the Company Secretary.
A.1.4	Access to advice and services of Company Secretary All Directors are able to obtain the advice and services of the Company Secretary. The appointment and removal of the Company Secretary is a matter involving the whole Board under the advisement of the BNGC, as it is a Key Management Position. The Bank has obtained appropriate insurance coverage as recommended by the BNGC for the Board of Directors and the Members of the Corporate Management. Refer Section on “Role of the Company Secretary” on page 205 for further details on role of the Company Secretary.
A.1.5	Independent judgement The Board comprises of senior professionals who are luminaries in their respective fields and use their independent judgement in discharging their duties and responsibilities on matters of strategy, performance, resource allocation, risk management, compliance, and standards of business conduct. The composition of the Board ensures that there is a sufficient balance of power and contribution by all Directors which minimises the tendency for one or a few members of the Board to dominate the Board processes or decision-making.
A.1.6	Dedicate adequate time and effort to matters of the Board and the Company Board meetings and Board Committee meetings are scheduled well in advance and the relevant papers are circulated a week prior to the meeting using electronic means to ensure that Directors have sufficient time to review the same and call for additional information or clarifications, if required. While there is provision to circulate papers closer to the meeting in exceptional circumstances, this is generally discouraged. Members of the Corporate Management Team and external experts make presentations to the Board on the business environment, regulatory changes, operations, and other developments on a regular basis to enhance the knowledge of the Board on matters relevant to the Bank’s operations. The NEDs dedicate approximately eighty-four days per annum for the affairs of the Bank and those Directors who are also on the BAC and the BIRMC dedicate a further ten days each for the affairs of the Bank.
A.1.7	If necessary in the best interest of the Bank, one-third of the Directors can call for a resolution to be presented to the Board.
A.1.8	Board induction and training Refer Section on “Induction and Training of Directors” on page 206.
A.2	Separating the business of the Board from the executive responsibilities for management of the Company The positions of the Chairman and the CEO have been separated in line with best practice in order to maintain a balance of power and authority. The Chairman is an Independent Non-Executive Director whilst the CEO is an Executive Director appointed by the Board. The roles of the Chairman and the CEO are clearly defined in the approved Board paper and the Board Charter.
A.3	Chairman’s role in preserving good corporate governance The Chairman provides leadership to the Board, preserving order and facilitating the effective discharge of duties of the Board and is responsible for ensuring the effective participation of all Directors and maintaining open lines of communication with KMP, acting as a sound Board on strategic and operational matters. The agenda for Board meetings is developed by the Chairman in consultation with the Directors, the CEO, and the Company Secretary, taking into consideration matters relating to strategy, performance, resource allocation, risk management, and compliance. Sufficiently detailed information on matters included in the agenda is provided to the Directors on time. Both Executive Directors and NEDs ensure the balance of power on the Board, for the benefit of the Bank, by effectively participating in decision making. All Directors have been made aware of their duties and responsibilities and the Board and Committee structures. All Directors are encouraged to seek information necessary to discuss matters on the agenda. Views expressed by Directors on issues under consideration are recorded in the minutes.
A.4	Availability of financial acumen and knowledge to offer guidance on matters of finance The Chairman of the BAC who is a NED is a Fellow Member of the CA Sri Lanka ensuring a sufficiency of financial acumen within the Board on matters of finance. Additionally, EDs and a NED are professionals with vast experience on matters of finance.
A.5	Board balance The Chairman is an Independent Non-Executive Director. The Board comprises of ten NEDs and two EDs facilitating an appropriate balance within the Board. NEDs are independent of management and free of business dealings that may interfere with the exercise of their unfettered and independent judgement. They submit annual declarations to this effect which are evaluated to ensure compliance with the criteria for determining independence in line with the requirements of the applicable regulations and this Code. There are no Alternate Directors appointed to represent the Directors of the Bank.
A.6	Provision of appropriate and timely information Board Members receive information regarding matters set before the Board a week prior to the meetings. The Chairman ensures that all Directors are properly briefed on same by requiring the presence of members of the Corporate Management when deemed necessary. Management also makes presentations on regular agenda items to the Board and its Committees. Additionally, the Directors have access to members of the Corporate Management to seek clarifications or additional information on matters presented to the Board. Directors who are unable to attend a meeting is updated on proceedings through formally documented minutes, which are also discussed at the next meeting to ensure follow-up and proper recording. Minutes of a meeting is ordinarily provided to Directors at least within two weeks after the meeting date.
A.7	Appointments to the Board and re-election Refer Section on “Appointments and retirements/resignations of Directors” given on page 206 and Report of the BNGC on pages 221 to 223.
A.8	All Directors should submit themselves for re-election at regular intervals Refer Section on “Re-election/election of Directors” on page 206. In the event of resignation of a Director prior to completion of his/her appointed term, such resignation including reasons for decision shall be communicated in writing.
A.9	Appraisal of Board and Board Committee performance Refer Section on “Board and Board Committee evaluations” on page 208.
A.10	Annual Report to disclose specified information regarding Directors
	Information specified in the Code with regard to Directors is disclosed within this Annual Report as follows: Refer pages 38 to 45 for the Profiles including qualifications, expertise, material business interests and key appointments. Refer pages 252 and 253 for details on Directors’ Interest in contracts with the Bank. Refer Note 21 to the Financial Statements on page 342 for the details on Remuneration paid to Directors. Refer Note 62 to the Financial Statements on Related Party Disclosures on pages 420 to 424. Refer page 199 and pages 214 to 237 Membership of committees and attendance at Board meetings and Committee meetings.
A.11	Appraisal of the CEO Refer section on “Appraisal of the Chief Executive Officer” on page 208.
B.	Directors’ remuneration
B.1	Remuneration procedure Refer section on “Directors’ and Executive remuneration” on page 207 and Report of the BHRRC on pages 224 and 225.
B.2	Remuneration Committee and Level and make-up of remuneration Refer section on “Components of remuneration” on page 207.
B.3	Disclosures related to remuneration in Annual Report Refer section on “Directors’ and Executive remuneration” on page 207. Refer Note 21 to the Financial Statements on page 342 for the details on Remuneration paid to Directors. Refer pages 224 and 225 for the Report of the BHRRC. Refer Note 62.2.1 to the Financial Statements on page 420 for the details on Compensation to KMP.
C.	Relations with shareholders
C.1	Constructive use of the AGM and conduct of other General Meetings The AGM provides a forum for all shareholders to participate in decision-making matters reserved for the shareholders which typically include proposals to adopt the Annual Report and Accounts, election and re-election of Directors and Auditors and other matters requiring special resolutions as defined in the Articles of Association or the Companies Act No. 07 of 2007 (as amended). Separate resolutions are proposed for each material issue. The Chairman ensures the presence of the Chairmen of the BAC, BHRRC, BNGC and BRPTRC to respond to any questions that may be directed to them. Notice of the AGM is circulated together with the Annual Report and Accounts which includes information relating to any other resolutions that may be set before the shareholders at the AGM fifteen working days in advance. The Bank ensures that all valid proxy appointments received for the AGM are counted and properly recorded. A summary of the procedures governing voting at General Meetings is included under “Shareholder engagement and voting” section on page 208 of this Annual Report. Where a vote is required on a show of hands, the Bank will ensure that information required under the Code will be made available at the meeting and be published in the website within a month from the date of the AGM.
C.2	Communication with shareholders The Policy on Relations with Shareholders and Investors sets out multiple channels of communication for engaging with shareholders. Channels include investor section of the website at http://www.combank.lk/investors, press releases and notices in English, Sinhala and Tamil newspapers and required disclosures to the CSE which are published on the CSE website. The Bank’s website provides information on risk management, debenture issues, economy and financial markets in addition to the financial information. The Interim Financial Statements are published in English, Sinhala and Tamil newspapers within stipulated deadlines. Every effort is made to ensure that the Annual Report provides a balanced review of the Bank’s performance. The principal forum for shareholders is the AGM, while matters can also be raised through the Company Secretary. The Company Secretary keeps the Board apprised of issues raised by the shareholders to ensure that they are addressed in an appropriate manner in keeping with the corporate values of the Bank. Matters raised in writing are responded to in writing by the Company Secretary.
C.3	Disclosure of major and material transactions The Policy on Relations with Shareholders and Investors addresses the need to disclose major and material transactions to shareholders as required by the rules and regulations of the SEC and the CSE and the Bank has in place a defined process to comply with the requirements. There were no transactions which would materially alter the Bank’s or Group’s net assets nor any major related party transactions apart from those disclosed as follows: Refer page 208 for details on “Shareholder engagement and voting”. Refer pages 238 to 245 for the ”Statement of Compliance’‘. Refer Note 62 to the Financial Statements on Related Party Disclosures on pages 420 to 424.
D.	Accountability and audit
D.1	Present a balanced and understandable assessment of the Company’s financial position, performance, business model, governance, structure, risk management, internal controls, and challenges, opportunities and prospects All efforts are taken to ensure that the Annual Report presents a balanced review of the Bank’s financial position, performance, Business Model, Governance, Structure, Risk Management, Internal Controls, and Challenges, Opportunities and Prospects combining narrative and visual elements to facilitate readability and comprehension. Due care has been exercised to ensure that all statutory requirements are compiled within the Annual Report and the issue of interim communications on financial performance which are reviewed by the BAC and recommended prior to publication. The following disclosures as required by the Code are included in this Report:
	Management Discussion and Analysis – Refer pages 83 to 151. Risk Management and Governance – Refer pages 254 to 284. Annual Report of the Board of Directors – Refer pages 04 and 05. Statement of Compliance – Refer pages 238 to 245. Statement of Directors’ Responsibility for Financial Reporting – Refer pages 246 and 247 Directors’ Statement on Internal Control over Financial Reporting and Risk Management – Refer pages 248 and 249 Managing Director/Chief Executive Officer’s and Chief Financial Officer’s Statement of Responsibility on page 251. Independent Auditor’s Report on page 250. Related Party Transactions disclosed in Note 62 to the Financial Statements on pages 420 to 424 and the process in place is described in the Report of the BRPTRC on pages 226 and 227. In the unlikely event of the net assets of the Company falling below 50% of Shareholders’ Funds, the Board will summon an Extraordinary General Meeting (EGM) to notify the shareholders of the position and to explain the remedial action being taken. The Annual Report clearly explains how net assets have increased during the year in the Financial Review on pages 152 to 158.
D.2	Process of risk management and a sound system of internal control to safeguard shareholders’ investments and the Company’s assets The Board is responsible for determining the risk appetite for achieving the strategic objectives and formulates and implements appropriate processes for risk management and internal control systems to safeguard shareholder investments and assets of the Bank. The BIRMC assists the Board in discharge of its duties with regard to risk management and the BAC assists the Board in the discharge of its duties in relation to internal control which in turn is supported by the Inspection Department. Their responsibilities are summarised in the respective Committee Reports and have been formulated with reference to the requirements of the Code and the Direction on Corporate Governance and the Bank’s business needs. The BIRMC is supported by the Integrated Risk Management function of the Bank and a comprehensive report of how the Bank manages risk is given in the Section on “Risk Governance & Management” on pages 254 to 284 , the Report of the BIRMC on pages 218 and 220 and Statement of Directors’ Responsibility for Financial Reporting – Refer pages 246 and 247.
D.3	Board Audit Committee (BAC) The BAC comprises of 5 independent NEDs and a summary of its responsibilities and activities are given in the Report of the BAC as appearing on pages 214 to 217. It is supported by the Internal Audit function of the Bank reporting directly to the BAC. As a consequence of ensuring adherence to Banking Act Directions No. 05 of 2024 on Corporate Governance for Licensed Banks, Mr P Y S Perera was appointed to chair the Committee with effect from January 01, 2025. Mr P Y S Perera is a Fellow member of the Institute of Charted Accountants of Sri Lanka and the Chartered Institute of Management Accountants, UK. The Committee was previously chaired by Mr R Senanayake, who held the position from September 25, 2020 up to December 31, 2024. Mr R Senanayake remains a member of the Committee. He is also a Fellow member of CA Sri Lanka. Additionally, the Committee has appointed Mr W N I C Fernando, FCA, and FCMA, as a Consultant to the Committee, who is invited to the meetings. Refer Report of the BAC on page 215 for the purpose, duties and responsibilities. The Board also obtains assurance from its External Auditors on the effectiveness of internal controls on financial reporting which is given on page 250.
D.4	Board Integrated Risk Management Committee (BIRMC) The BIRMC was established in compliance with the Section 3(6) of the Direction No. 11 of 2007, to assist the Board in overseeing the risk management framework of the Bank. It particularly assists the Board oversight of determining risk appetite, identification and classification of risks, reviewing risk management outcomes and mitigation actions, process to manage ESG risks etc. The Committee comprises of 5 NEDs and 1 ED (Managing Director/Chief Executive Officer). As a consequence of ensuring adherence to Banking Act Direction No. 05 of 2024 on Corporate Governance for Licensed Banks, Mr R Senanayake was appointed to chair the Committee with effect from January 01, 2025. The Committee was previously chaired by Mr J Lee, who held the position from March 10, 2022 to December 31, 2024. The CFO who is also the Secretary to the Committee attend all meetings. CIO and other heads of Strategic Business Units participate for meetings by invitation. A summary of role, responsibilities and activities of the Committee are given in the report of the BIRMC on pages 218 and 220.
D.5	Board Related Party Transactions Review Committee (BRPTRC) The BRPTRC comprises of 3 Independent NEDs. The two EDs also attend the meetings by invitation. A summary of responsibilities and activities are given in the report of the BRPTRC on pages 226 and 227. The Bank has a Board-approved Related Party Transactions Policy in place which addresses requirements under this section.
D.6	Code of Ethics The Bank has an internally-developed Code of Business Conduct and Ethics which is applicable to Directors, other KMP, and all other employees. The Bank also has Board approved policy applicable to dealing in shares of the Bank which are fully compliant with the Listing Rules of the CSE.
	The Code of Conduct of the Bank is in compliance with the requirements of the Schedule N of the Code on “Code of Business Conduct and Ethics” which encompasses conflict of interest, bribery and corruption, entertainment and gifts, accurate accounting and record-keeping, fair and transparent procurement practices, corporate opportunities, confidentiality, fair dealing, protection and proper use of Company assets including information assets, sexual harassment, discrimination and abuse, compliance with laws, rules and regulations (including insider trading laws) and encouraging the reporting of any illegal, fraudulent, or unethical behaviour. Further, the Bank has a well-established whistle-blower process in order to deal with complaints received from various stakeholders in relation to non-compliance with the Bank’s code of business conduct and ethics. Refer sections on “Code of Business Conduct & Ethics” and “Whistleblowing” on pages 210 and 211.
D.7	Corporate governance disclosures The Annual Corporate Governance Report from pages 192 to 213 comply with the disclosure requirements of the Code.
E. & F.	Institutional Investors and Other Investors Shareholder Voting The Bank has 16,966 ordinary voting shareholders as at end 2024, of which 728 are institutional shareholders. The Bank has regular dialogue with the large institutional shareholders and any concerns of these institutional shareholders expressed at the meetings is communicated to the Board as a whole. All shareholders are encouraged to exercise their voting powers at the AGM. The Bank facilitates the analysis of its securities by encouraging both foreign and local analysts covering the Bank with structured meetings where they are able to obtain information and explanations required for evaluating the current and future performance of the Bank, sector and country. Additionally, the investor relations section on the Bank’s website has key information required by shareholders and analysts. The Interactive Annual Report also has a tab where investors can provide feedback and request for specified information. All prospectuses include a clause which require all prospective investors in shares and debentures of the Bank to seek independent professional advice before investing.
G.	Internet of things and cyber security Refer section on “Internet of things and cyber security” on page 211.
H.	Sustainability: ESG Risks and Opportunities
	Sustainability: ESG related risks and opportunities The Board considers Sustainability/ESG-related risks and opportunities in the Bank’s business model, short and medium term planning and in its long-term strategy that could reasonably be expected to affect the Bank’s prospects. The Board and the KMP engage with and consider the views of its stakeholders to better understand and manage the Bank’s Sustainability/ESG-related risks and opportunities and have integrated sustainability/ESG related policies and practices into Bank’s strategy, business model, governance and risk management. The Annual Report contains information, which enables investors and other stakeholders to assess how ESG risks and opportunities are recognised, managed, measured and reported as described under following sections of the Annual Report. Engaging with our stakeholders on pages 62 to 65 and Material Matters on pages 66 to 71. Business model for sustainable value creation on pages 72 to 77. Management Discussion and Analysis on pages 83 to 151. Risk governance and management on pages 254 to 284. This Annual Report has been prepared in accordance with International <IR> Framework, GRI Guidelines, “ A Preparer’s Guide to Integrated Corporate Reporting”, “Handbook on Integrated Corporate Reporting” and “Guideline on Non-financial Reporting” published by CA Sri Lanka.
I.	Establishment and Maintenance of Policies
I.1	Policies relating to governance are maintained by the Bank and details relating to implementation of such policies are hosted in the website. A list of such policies and the web reference is given below; Matters relating to the Board of Directors Board Committees Corporate Governance, Nominations and Re-election Remuneration Internal Code of Business conduct and ethics for all Directors and employees, including policies on trading in the Bank’s Listed Securities Risk Management and Internal Controls Relations with Shareholders and Investors Environmental, Social and Governance Sustainability Control and Management of Company Assets and Shareholder Investments Corporate Disclosures Whistleblowing Anti-Bribery and Corruption
I.2	The Bank has established and maintain a formal policy governing matters relating to the Board of Directors. The policy should inter alia address Board balance, diversity, frequency of meetings, maximum number of directors, number of meetings a Director should attend etc.

Section	Principle, compliance and implementation	Complied
9.1.3	Statement confirming the extent of compliance with the Corporate Governance Rules
9.2.1	The Bank shall establish and maintain the following policies and disclose the fact of existence of such policies together with the details relating to the implementation of such policies by the Bank, on its website. (a) Policy on the matters relating to the Board of Directors (b) Policy on Board Committees (c) Policy on Corporate Governance, Nominations and Re-election (d) Policy on Remuneration (e) Policy on Internal Code of Business conduct and Ethics for all Directors and employees, including policies on trading in the Entity’s listed securities (f) Policy on Risk management and Internal controls (g) Policy on Relations with Shareholders and Investors (h) Policy on Environmental, Social and Governance Sustainability (i) Policy on Control and Management of Company Assets and Shareholder Investments (j) Policy on Corporate Disclosures (k) Policy on Whistleblowing (l) Policy on Anti-Bribery and Corruption
9.2.2	Any waivers from compliance with the Internal Code of business conduct and ethics or exemptions granted.	Not Applicable
9.2.3	(i) List of policies in place as per Section 9.2.1, with reference to website (ii) Any changes to policies adopted
9.2.4	The Bank has a process in place to make available policies referred in Section 9.2.1 above, to shareholders upon a written request being made for any such Policy.
9.3.1	The Bank shall ensure that the following Board committees are established and maintained at a minimum and are functioning effectively. The said Board committees at minimum shall include; (a) Nominations and Governance Committee (b) Remuneration Committee (c) Audit Committee (To perform Audit and Risk Functions) (d) Related Party Transactions Review Committee. The Board has established ten committees including six mandatory committees of which two separate committees have been established to perform Audit and Risk Functions. Refer Figure 44 on “Governance Structure” on page 197. Pursuant to the provisions of the Banking Act Directions No.01 of 2023 dated February 02, 2023 issued by the Central Bank of Sri Lanka (CBSL), all licensed banks are, inter alia, mandatorily obliged to establish a board level subcommittee to operate during the years 2023 and 2024, entrusting the responsibility of evaluating and approving, non-essential and / or non-urgent expenditure and / or capital expenditure to be incurred by the bank, if any. Accordingly, the Bank being legally obliged established a Board Capital Expenditure Review Committee to ensure compliance with the provisions of the said Direction.
9.3.2	The Bank shall comply with the composition, responsibilities and disclosures required in respect of the above Board Committees as set out in these Rules. Refer Sections 9.11, 9.12, 9.13 & 9.14 below.
9.3.3	The Chairperson of the Board of Directors of the Bank shall not be the Chairperson of the Board Committees referred to in Section 9.3.1 above.
9.4.1	The Bank shall maintain records of all resolutions and the following information upon a resolution being considered at any General Meeting of the Bank. The Bank shall provide copies of the same at the request of the Exchange and/or the SEC. (a) The number of shares in respect of which proxy appointments have been validly made; (b) The number of votes in favour of the resolution; (c) The number of votes against the resolution; and (d) The number of shares in respect of which the vote was directed to be abstained
9.4.2	(a) The policy on effective communication and relations with shareholders and investors. The Bank has a Board approved Policy on Relations with Shareholders and Investors. (b) The contact person for such communication Refer Inner back cover. (c) The policy on relations with shareholders and investors on the process to make all Directors aware of major issues and concerns of shareholders. The Bank has a Board approved Policy on Relations with Shareholders and Investors.
9.5.1	The Bank shall establish and maintain a formal policy governing matters relating to the Board of Directors. The policy shall include the contents specified under Section 9.5.1 of the Listing Rules. The Bank has a Board approved Policy on the matters relating to the Board of Directors.
9.5.2	Policy on matters relating to the Board of Directors. Confirmation on compliance with the requirements of the Policy on matters relating to the Board of Directors. If non-complied reasons for the same with proposed remedial action. The Bank has a Board approved Policy on the matters relating to the Board of Directors.
9.6.1	The Chairperson of the Bank shall be a Non-Executive Director and the positions of the Chairperson and CEO shall not be held by the same individual, unless otherwise a SID is appointed in terms of Rule 9.6.3 below. Refer page 199 for Figure – 45 on “Composition of the Board and Attendance”.
9.6.2	Where the Chairperson of a Listed Entity is an Executive Director and/or the positions of the Chairperson and CEO are held by the same individual, such entity shall make a Market Announcement within a period of one (1) month from the date of implementation of these Rules, or an Immediate Market Announcement if such date of appointment and/or combination of the said roles falls subsequent to the implementation of these Rules. Not applicable since there is a clear separation of duties between the roles of the Chairman and CEO.	Not Applicable
9.6.3	Report of Senior Independent Director (SID) demonstrating the effectiveness of duties. Not applicable since there is a clear separation of duties between the roles of the Chairman and CEO. Therefore, the requirement for the Bank to appoint a Senior Independent Director (SID) does not arise.	Not Applicable
9.6.4	Rationale for appointing SID Not applicable since there is a clear separation of duties between the roles of the Chairman and CEO. Therefore, the requirement for the Bank to appoint a Senior Independent Director (SID) does not arise.	Not Applicable
9.7.1	The Bank shall take necessary steps to ensure that their Directors and the CEO are, at all times, fit and proper persons as required in terms of these Rules: In evaluating fitness and propriety of the persons referred in these Rules, the Bank shall utilise the ‘Fit and Proper Assessment Criteria’ set out in Section 9.7.3 below.
9.7.2	The Bank shall ensure that persons recommended by the Nominations and Governance Committee as Directors are fit and proper as required in terms of these Rules before such nominations are placed before the shareholders’ meeting or appointments are made.
9.7.3	A Director or the CEO of the Bank shall not be considered ‘fit and proper’ if she or he does not possess the fit and proper assessment criteria specified under “Honesty, Integrity and Reputation”, “Competence and Capability” and “Financial Soundness” in Section 9.7.3 (a), (b) and (c) respectively.
9.7.4	The Bank shall obtain declarations from their Directors and CEO on an annual basis confirming that each of them have continuously satisfied the Fit and Proper Assessment Criteria set out in Section 9.7.3 during the financial year concerned and satisfies the said criteria as at the date of such confirmation.
9.7.5	(a) Statement on Directors and CEO satisfying Fit and Proper Assessment Criteria (b) Any non-compliance/s and remedial action taken Profile of the Board of Members are given on pages 38 to 45. Item 08 of the Statement of Compliance given on page 238
9.8.1	The Board of Directors of the Bank, at a minimum, consist of five (05) Directors. The Board of Directors of the Bank consist of twelve (12) Directors. Profile of the Board of Members are given on pages 38 to 45.
9.8.2	Minimum Number of Independent Directors (a) The Board of Directors of the Bank shall include at least two (2) Independent Directors or such number equivalent to one third (1/3) of the total number of Directors of the Listed Entity at any given time, whichever is higher. The Board has ten (10) independent directors, which is well above the above requirement. Refer Figure – 45 on “Composition of the Board and Attendance” on page 199. (b) Any change occurring to this ratio shall be rectified within ninety (90) days from the change. There was no change to this ratio during the year.
9.8.3	A Director shall not be considered independent if he/she does not fulfil the criteria defining under Section 9.8.3 of the Listing Rules. All the independent directors of the Bank fulfil the criteria defining independence under Section 9.8.3 of the Listing Rules.
9.8.5	Process in place for the determination of ‘Independence’ of the Directors (a) Each Director to submit a signed and dated declaration annually of his or her independence or non-independence (b) Names of Directors determined to be ‘independent’ Refer Figure – 45 on “Composition of the Board and Attendance” on page 199. (c) Immediate market announcement to be made if the Board determines that the independence of an Independent Director has been impaired.	Not Applicable
9.9	Requirements to be complied in relation to “Alternate Directors”. There are no Alternate Directors on the Board of the Bank.	Not Applicable
9.10.1	The Bank shall disclose its policy on the maximum number of directorships it’s Board Members shall be permitted to hold in the manner specified in Rule 9.5.1. In the event such number is exceeded by a Director(s), the Entity shall provide an explanation for such non-compliance in the manner specified in Rule 9.5.2 above. As per the Terms of Reference of the Board Nominations and Governance Committee, which is in compliance with the requirements of the Banking Act Direction No. 11 of 2007, the maximum number of directorships its Board Members permitted to hold is twenty.
9.10.2	The Bank shall, upon the appointment of a new Director to its Board, make an immediate Market Announcement setting out the brief resume of such Director, his/her capacity of directorship; and, Statement by the Entity indicating whether such appointment has been reviewed by the Nominations and Governance Committee of the Bank.
9.10.3	The Bank shall make an immediate Market Announcement regarding any changes to the composition of the Board Committees referred to in Section 9.3 above containing, at minimum, the details of changes including the capacity of directorship with the effective date thereof.
9.10.4	Directors details name, qualifications and brief profile nature of his/her expertise in relevant functional areas whether either the Director or Close Family Members has any material business relationships with other Directors whether Executive, Non-Executive and/or Independent Director total number and names of companies in Sri Lanka in which the Director concerned serves as a Director and/or KMP stating whether listed or unlisted, whether functions as Executive or Non-Executive (If the directorships are within the Group names need not be disclosed) number of Board meetings attended names of Board Committees in which the Director serves as Chairperson or a member Attendance of Board Committee meetings Profile of the Board Members are given on pages 38 to 45. Composition of the Board and attendance on page 199. Terms of Reference and powers of SID	Not Applicable
9.11	Board Nominations and Governance Committee (BNGC)
9.11.1	Bank shall have a BNGC that conforms to the requirements set out in Rule 9.11 of these Rules. The Bank has a BNGC that conforms with the requirements set out in Section 9.11.
9.11.2	The Bank shall establish and maintain a formal procedure for the appointment of new Directors and re-election of Directors to the Board through the BNGC. Refer Report of the BNGC on pages 221 to 223.
9.11.3	The BNGC shall have a written Terms of Reference clearly defining the scope, authority, duties and matters pertaining to the quorum of meetings Refer Report of the BNGC on pages 221 to 223.
9.11.4	Composition of the BNGC (1) The members of the BNGC shall; (a) comprise of a minimum of three (03) Directors of the Listed Entity, out of which a minimum of two (02) members shall be Independent Directors of the Listed Entity. (b) not comprise of Executive Directors of the Listed Entity. (2) An Independent Director shall be appointed as the Chairperson of the BNGC by the Board of Directors. (3) The Chairperson and the members of the BNGC shall be identified in the Annual Report of the Listed Entity. Refer the Composition of the BNGC given on page 221.
9.11.5	The functions of the BNGC Refer the Report of the BNGC on pages 221 to 223.
9.11.6	BNGC Report Names of chairperson and members with nature of directorship Date of appointment to the committee. Availability of documented policy and processes when nominating Directors. Requirement of re-election at regular intervals at least once in 3 years Board diversity. Effective implementation of policies and processes relating to appointment and reappointment of Directors. Details of directors re-appointed. Performance of periodic evaluation of board. Process adopted to inform independent directors of major issues. Induction/orientation programs for new directors on corporate governance, Listing Rules, securities market regulations or negative statement.
	Annual update for all directors on corporate governance, Listing Rules, securities market regulations or negative statement. Compliance with independence criteria. Statement on compliance with corporate governance rules, if non-compliant reasons and remedial actions. Refer the Report of the Board Nominations and Governance Committee on pages 221 to 223.
9.12	Board Human Resources and Remuneration Committee (BHRRC)
9.12.3	BHRRC The BHRRC shall establish and maintain a formal and transparent procedure for developing policy on Executive Directors’ remuneration and for fixing the remuneration packages of individual Directors. No Director shall be involved in fixing his/her own remuneration. Refer “Directors’ and Executive remuneration” on page 207 and Report of the BHRRC given on pages 224 and 225.
9.12.4	Remuneration for Non-Executive Directors should be based on a policy which adopts the principle of non-discriminatory pay practices among them to ensure that their independence is not impaired. Refer “Directors’ and Executive remuneration” on page 207 and Report of the BHRRC given on pages 224 and 225.
9.12.5	BHRRC shall have a written terms of reference clearly defining its scope, authority, duties and matters pertaining to the quorum of meetings. Refer the Report of the BHRRC on pages 224 and 225.
9.12.6	Composition of the BHRRC (1) The members of the BHRRC shall; (a) comprise of a minimum of three (03) Directors of the Listed Entity, out of which a minimum of two (02) members shall be Independent Directors of the Listed Entity. (b) not comprise of Executive Directors of the Listed Entity.
	(2) An Independent Director shall be appointed as the Chairperson of the BHRRC by the Board of Directors.
	Refer the Report of the BHRRC on pages 224 and 225.
9.12.7	The functions of the BHRRC Refer the Report of the BHRRC on pages 224 and 225.
9.12.8	BHRRC Report – Names of chairperson and members with nature of directorship – Statement regarding the Remuneration Policy – The aggregate remuneration of the Executive and Non-Executive Directors. Refer the Report of the BHRRC on pages 224 and 225. Refer Note 62 to the Financial Statements on pages 420 to 424 on “Related Party Disclosure”
9.13	Board Audit Committee (BAC)
9.13.1	Perform Audit and Risk functions specified in Section 9.13.4 of the Listing Rules. The Audit functions of the Section 9.13.4 are performed by the BAC while a separate Committee, BIRMC has been formed to perform the Risk functions.
9.13.2	The BAC shall have a written terms of reference clearly defining its scope, authority and duties. The BAC has a written terms of reference clearly defining its scope, authority and duties. Refer Report of the BAC on pages 214 to 217.
9.13.3	(1) The members of the BAC shall; (a) comprise of a minimum of three (03) directors of the Listed Entity, out of which a minimum of two (02) or a majority of the members, whichever higher, shall be Independent Directors. (b) not comprise of Executive Directors of the Listed Entity. (2) The quorum for a meeting of the BAC shall require that the majority of those in attendance to be independent directors. (3) The BAC may meet as often as required provided that the BAC compulsorily meets on a quarterly basis prior to recommending the financials to be released to the market. (4) An Independent Director shall be appointed as the Chairperson of the BAC by the Board of Directors. (5) Unless otherwise determined by the BAC, the CEO and the Chief Financial Officer (CFO) of the Listed Entity shall attend the BAC meetings by invitation. Provided however where the Listed Entity maintains a separate Risk Committee, the CEO shall attend the Risk Committee meetings by invitation. (6) The Chairperson of the BAC shall be a Member of a recognized professional accounting body. Provided however, this Rule shall not be applicable in respect of Risk Committees where a Listed Entity maintains a separate Risk Committee and Audit Committee. Refer the Report of the BAC on pages 214 to 217.
9.13.4	The functions of the BAC Refer the Report of the BAC on pages 214 to 217.
9.13.5	Disclosures in the Annual Report (1) The Bank shall prepare an BAC Report which shall be included in the Annual Report (2) The BAC Report shall contain disclosures set out in Section 9.13.5 Refer the Report of the BAC on pages 214 to 217.
9.14	Board Related Party Transactions Review Committee (BRPTRC)
9.14.1	The Bank shall have a BRPTRC that conforms to the requirements set out in Section 9.14. The BRPTRC of the Bank conforms to the requirements of the Section 9.14 as given below.
9.14.2	Composition of the BRPTRC The BRPTRC shall comprise of a minimum of three (03) Directors of the Listed Entity, out of which two (02) members shall be Independent Directors of the Listed Entity. It may also include executive directors, at the option of the Listed Entity. An Independent Director shall be appointed as the Chairperson of the Committee. The BRPTRC of the Bank comprises of four (4) Independent NEDs. The two EDs also attend the meetings by invitation. The Chairman of the BRPTRC is an Independent NED.
9.14.3	Functions of the BRPTRC as set out in Section 9.14.3. Refer the Report of the BRPTRC on pages 226 and 227.
9.14.4	General Requirements (1) The BRPTRC shall meet at least once a calendar quarter. It shall ensure that the minutes of all meetings are properly documented and communicated to the Board of Directors. (2) The members of the BRPTRC should ensure that they have, or have access to, enough knowledge or expertise to assess all aspects of proposed Related Party Transactions, and where necessary, should obtain appropriate professional and expert advice from an appropriately qualified person. (3) Where necessary, the Committee shall request the Board of Directors to approve the Related Party Transactions which are under review by the Committee. In such instances, the approval of the Board of Directors should be obtained prior to entering into the relevant Related Party Transaction. (4) If a Director of the Listed Entity has a material personal interest in a matter being considered at a Board Meeting to approve a Related Party Transaction as required in Rule 9.14.4(3), such Director shall not: (a) be present while the matter is being considered at the meeting; and, (b) vote on the matter Refer the Report of the BRPTRC on pages 226 and 227.
9.14.5	Review of Related Party Transactions by the BRPTRC Refer the Report of the BRPTRC on pages 226 and 227.
9.14.6	Shareholder approval The Bank shall obtain shareholder approval by way of a Special Resolution for the Related Party Transactions as set out in Section 9.14.6. The RPTs policy of the Bank provides for obtaining shareholder approval by way of a Special Resolution for non-recurrent and recurrent RPTs identified in this Section. There were no RPTs during the year which required Shareholder approval as set out in Section 9.14.6.
9.14.7	The Bank shall make an immediate Market Announcement to the Exchange for RPTs as set out in Section 9.14.7 (a) and (b). The RPTs policy of the Bank provides for making an immediate Market Announcement to the Exchange for RPTs identified in this Section. There were no RPTs during the year which required immediate Market Announcement as set out in Section 9.14.7.
9.14.8 (1)	Related Party Disclosures Non-recurrent RPT exceeding 10% of the Equity or 5% of the Total Assets, whichever is lower (in the specified format) Refer Note 62 to the Financial Statements on pages 420 to 424 on “Related Party Disclosure”
9.14.8 (2)	Recurrent RPT exceeding 10% of the gross revenue/income Refer Note 62 to the Financial Statements on pages 420 to 424 on “Related Party Disclosure”
9.14.8 (3)	Related Party Transactions Review Committee Report – Names of the Directors comprising the Committee – Statement that the Committee has reviewed RPTs and communicated comments/observations to the Board – Policies and procedures adopted by the Committee Refer the Report of the BRPTRC on pages 226 and 227.
9.14.8 (4)	Affirmative declaration by the Board of Directors on compliance with RPT Rules or negative statement to that effect. Refer the Annual Report of the Board of Directors on pages 04 and 05.
9.14.9	Acquisition and disposal of assets from/ to Related Parties Except for transactions set out in Section 9.14.10, the Bank shall ensure that neither the Bank nor any of its subsidiaries, acquires a substantial asset from, or disposes of a substantial asset to, any Related Party of the Entity without obtaining the approval of the shareholders of the Entity by way of a Special Resolution. During the year, there were no acquisition/disposal of substantial assets from/to Related Parties.
9.16	Additional disclosures by Board of Directors Declaration on following; All material interests in contracts involving in the Bank and have refrained from voting on matters in which they were materially interested Review of the internal controls covering financial, operational and compliance controls and risk management and obtained reasonable assurance of their effectiveness and successful adherence, and, if unable to make any of these declarations an explanation on why it is unable to do so; Made themselves aware of applicable laws, rules and regulations and are aware of changes particularly to Listing Rules and applicable capital market provisions; Disclosure of relevant areas of any material non-compliance with law or regulation and any fines, which are material, imposed by any government or regulatory authority in any jurisdiction where the Entity has operations. Refer item 35 of the Statement of Compliance given on page 244.

Disclosure requirements under the prescribed format issued by the Central Bank of Sri Lanka for preparation, presentation and publication of Annual Audited Financial Statements of Licensed Banks via the Circular No.05 of 2024 dated December 31, 2024

Disclosure requirements		Description
1.	Information about the significance of financial instruments for financial position and performance
1.1	Statement of Financial Position
1.1.1	Disclosures on categories of financial assets and financial liabilities.	Notes to the Financial Statements: Note 26 – Classification of financial assets and financial liabilities
1.1.2	Other disclosures
	(i) Special disclosures about financial assets and financial liabilities designated to be measured at fair value through profit or loss, including disclosures about credit risk and market risk, changes in fair values attributable to these risks and the methods of measurement.	Material Accounting Policies: Note 7.1.3.5.2 Financial assets designated at FVTPL Note 7.1.4.1.2 Financial liabilities designated at FVTPL
	(ii) Reclassifications of financial instruments from one category to another.	Material Accounting Policies: Note 7.1.6 – Reclassification of financial assets and liabilities
	(iii) Information about financial assets pledged as collateral and about financial or non-financial assets held as collateral.	Notes to the Financial Statements: Note 66.1.4 – Collateral arrangements
	(iv) Reconciliation of the impairment allowance account for credit losses by class of financial assets.	Notes to the Financial Statements: Movement in provision for impairment during the year for each classes of assets are given in the following Notes Note 28.1 – Cash and cash equivalents Note 29.1 – Balances with Central Banks Note 30.1 – Placements with banks \| Notes 33.2 and 33.3 (c) – Financial assets at amortised cost – Loans and advances to other customers and Lease/ hire purchase receivable Note 34.1 – Financial assets at amortised cost – Debt and other financial instruments
	(v) Information about compound financial instruments with multiple embedded derivatives.	Material Accounting Policies: Note 7.1.5.5 Embedded derivatives The Bank does not have compound financial instruments with multiple embedded derivatives
	(vi) Breaches of terms of loan agreements.	None
1.2	Statement of Comprehensive Income
1.2.1	Disclosures on items of income, expense, gains, and losses.	Notes to the Financial Statements: Notes 12 – 23 to the Financial Statements
1.2.2	Other disclosures
	(i) Total interest income and total interest expense for those financial instruments that are not measured at fair value through profit and loss.	Notes to the Financial Statements: Note 13 – Net interest income
	(ii) Fee income and expense.	Notes to the Financial Statements: Note 14 – Net fee and commission income
	(iii) Amount of impairment losses by class of financial assets.	Notes to the Financial Statements: Note 18 – Impairment charges/(reversal) and other losses
	(iv) Interest income on impaired financial assets.	Notes to the Financial Statements: Note 13.1 – Interest income
1.3	Other disclosures
1.3.1	Accounting policies for financial instruments.	Material Accounting Policies: Note 7.1 – Financial instruments – Initial recognition, classification and subsequent measurement
1.3.2	Information on financial liabilities designated at FVTPL. (i) If a bank is presenting the effects of changes in that financial liability’s credit risk in other comprehensive income (OCI): – any transfers of the cumulative gain/loss within equity during the period, including the reasons for the transfers; – if the liability is derecognised during the period, then the amount (if any) presented in OCI that was realised at derecognition; – detailed description of the methodologies used to determine whether presenting the effects of changes in a liability’s credit risk in OCI would create or enlarge an accounting mismatch in profit or loss; and	Material Accounting Policies: Note 7.1.4.1.2 Financial liabilities designated at FVTPL
	(ii) Detailed description, if the effects of changes in a liability’s credit risk are presented in profit or loss.	Material Accounting Policies: Note 7.1.4.1.2 Financial liabilities designated at FVTPL
1.3.3	Investments in equity instruments designated at FVOCI (i) Details of equity instruments that have been designated at FVOCI and the reasons for the designation.	Notes to the Financial Statements: Note 35 – Financial assets measured at fair value through other comprehensive income
	(ii) Fair value of each investment at the reporting date.	Notes to the Financial Statements: Note 35.2 – Equity securities
	(iii) Dividends recognised during the period, separately for investments derecognised during the reporting period and those held at the reporting date.	Notes to the Financial Statements: \| Note 17 – Net other operating income
	(iv) Transfer of cumulative gain or loss within equity during the period and the reasons for those transfers.	Statement of Profit or Loss and Other Comprehensive Income and Statement of Changes in Equity.
	(v) If investments in equity instruments measured at FVOCI are derecognised during the reporting period, – reasons for disposing of the investments – fair value of the investments at the date of derecognition – the cumulative gain or loss on disposal	Statement of Profit or Loss and Other Comprehensive Income and Statement of Changes in Equity. There were no equity instruments disposal during the years 2024 and 2023.
1.3.4	Reclassification of financial assets
	(i) For all reclassifications of financial assets in the current or previous reporting period – date of reclassification – detailed explanation of the change in the business model and a qualitative description of its effect on the financial statements – the amount reclassified into and out of each category	Material Accounting Policies: Note 7.1.6 Reclassification of financial assets and liabilities. During the years 2024 & 2023, the Bank did not reclassify financial assets.
	(ii) For reclassifications from FVTPL to amortised cost or FVOCI – the effective interest rate (EIR) determined on the date of reclassification – the interest revenue recognised	During the years 2024 & 2023, the Bank did not reclassify financial instruments from FVTPL to amortised cost or FVOCI.
	(iii) For reclassifications from FVOCI to amortised cost, or from FVTPL to amortised cost or FVOCI – the fair value of the financial assets at the reporting date – the fair value gain or loss that would have been recognised in profit or loss or OCI during the reporting period if the financial assets had not been reclassified.	During the years 2024 & 2023, the Bank did not reclassify financial assets from FVOCI to amortised cost or FVTPL to amortised cost or FVOCI.
1.3.5	Information on hedge accounting	Material Accounting Policies: Note 7.1.5 – Derivatives held for risk management purposes and hedge accounting
1.3.6	Information about the fair values of each class of financial asset and financial liability, along with:
	(i) Comparable carrying amounts.	Notes to the Financial Statements: Note 27.1 – Assets and liabilities measured at fair value and fair value hierarchy Note 27.3 – Financial instruments not measured at fair value and fair value hierarchy
	(ii) Description of how fair value was determined.	Material Accounting Policies: Note 4 – Fair value measurement Notes to the Financial Statements: Note 27 – Fair value measurement
	(iii) The level of inputs used in determining fair value.	Notes to the Financial Statements: Note 27.3 – Financial instruments not measured at fair value and fair value hierarchy Note 27.4 – Valuation techniques and inputs in measuring fair values Note 38.5 (b) – Information on freehold land and buildings of the Bank and the Group – Valuations. Note 38.5 (c) – Valuation techniques and sensitivity of the fair value measurement of the freehold land and buildings of the Bank and Group
	(iv) a. Reconciliations of movements between levels of fair value measurement hierarchy. b. Additional disclosures for financial instruments> that fair value is determined using level 3 inputs.	There were no movements between levels of fair value hierarchy during the year under review. Notes to the Financial Statements: Note 27.2 – Level 3 Fair value measurement
	(v) Information if fair value cannot be reliably measured.	None
2.	Information about the nature and extent of risks arising from financial instruments
2.1	Qualitative disclosures
2.1.1	Risk exposures for each type of financial instrument	Material Accounting Policies: Note 3 – Financial Risk Management Notes to the Financial Statements: Note 66 – Financial Risk Review
2.1.2	Management’s objectives, policies and processes for managing those risks.	Material Accounting Policies: Note 3 – Financial Risk Management Refer the Section on “Risk Governance and Management” for comprehensive disclosure of Management’s objectives, policies and processes.
2.1.3	Changes from the prior period.	There were no major policy changes during the year under review.
2.2	Quantitative disclosures
2.2.1	Summary of quantitative data about exposure to each risk at the reporting date.	Notes to the Financial Statements: Note 66 – Financial Risk Review
2.2.2	Disclosures about credit risk, liquidity risk, market risk, operational risk, interest rate risk and how these risks are managed.
	(i) Credit risk (a) Maximum amount of exposure (before deducting the value of collateral), description of collateral, information about credit quality of financial assets that are neither past due nor impaired and information about credit quality of financial assets.	Notes to the Financial Statements: Note 66.1.1 – Credit Quality Analysis Note 66.1.4 – Collateral arrangements
	(b) For financial assets that are past due or impaired, disclosures on age, factors considered in determining as impaired and the description of collateral on each class of financial asset.	Notes to the Financial Statements: Note 66.1.1 – Credit Quality Analysis Note 18 – Impairment charges/(reversal) and other losses – Section on “Collateral valuation”. Note 66.1.4 – Collateral arrangements Material Accounting Policies: Note 7.1.12 – Identification and measurement of impairment of financial assets
	(c) Information about collateral or other credit enhancements obtained or called.	Notes to the Financial Statements: Note 66.1.4 – Collateral arrangements
	(d) Credit risk management (CRM) practices
	– Information about CRM practices and how they relate to the recognition and measurement Expected Credit Losses (ECL), including the methods, assumptions and information used to measure ECL	Material Accounting Policies: Note 2.12.6 – Impairment losses on financial assets Note 7.1.12 – Identification and measurement of impairment of financial assets Notes to the Financial Statements: Note 18 – Impairment charges/(reversal) and other losses
	– Quantitative and qualitative information to evaluate the amounts in the Financial Statements arising from ECL, including changes and the reasons for those changes	Material Accounting Policies: Note 7.1.12 – Identification and measurement of impairment of financial assets Notes to the Financial Statements: Note 18 – Impairment charges/(reversal) and other losses Note 66.1.1 – Credit Quality Analysis
	– How the Bank determines whether the credit risk of financial instruments has increased significantly since initial recognition, including whether and how financial instruments are considered to have low credit risk, including the classes of financial instruments to which the low credit risk exception has been applied; and the presumption that financial assets with contractual payments more than 30 days past due (DPD) have a significant increase in credit risk (SICR) has been rebutted	Material Accounting Policies: Note 7.1.12.2 – Significant increase in credit risk
	– The Bank’s definitions of default for different financial instruments, including the reasons for selecting those definitions	Material Accounting Policies: Note 7.1.12.3 – Definition of default and credit impaired assets
	– How instruments are grouped if ECL are measured on a collective basis	Material Accounting Policies: Note 7.1.12.5 Grouping financial assets measured on collective basis Notes to the Financial Statements: Note 18 – Impairment charges/(reversal) and other losses
	– How the Bank determines that financial assets are credit-impaired	Material Accounting Policies: Note 7.1.12.3 – Definition of default and credit impaired assets
	– The Bank’s write-off policy, including the indicators that there is no reasonable expectation of recovery	Notes to the Financial Statements: Note 18 – Impairment charges/(reversal) and other losses – “Write-off of financial assets”
	– How the modification requirements have been applied, including how the bank determines whether the credit risk of a financial asset that has been modified subject to a lifetime ECL allowance has been improved to the extent that the loss allowance reverts to being measured at an amount equal to 12-month ECL and monitors the extent to which the loss allowance on those assets subsequently reverts to being measured at an amount equal to lifetime ECL	Material Accounting Policies: Note 7.1.8 – Modification of financial assets and financial liabilities Notes to the Financial Statements: Note 66.1.1 (b) Credit exposure movement – ECL stage-wise Note 66.1.1 (c) Provision for impairment (ECL) movement
	(e) ECL calculations
	– Basis of the inputs, assumptions and the estimation techniques used when – estimating 12 month and lifetime ECL – determining whether the credit risk of financial instruments has increased significantly since initial recognition; and – determining whether the financial assets are credit-impaired	Material Accounting Policies: Note 2.12.6 – Impairment losses on financial assets Notes to the Financial Statements: Note 7.1.12 – Identification and measurement of impairment of financial assets
	– How forward-looking information has been incorporated into the determination of ECL, including the use of macro-economic information; and	Notes to the Financial Statements: Note 18 – Impairment charges/(reversal) and other losses – “Forward-looking information”
	– Changes in estimation techniques or significant assumptions made during the reporting period and the reasons for those changes.	Material Accounting Policies: Note 2.12.6 – Impairment losses on financial assets
	(f) Amounts arising from ECL
	– Reconciliation for each class of financial instrument of the opening balance to the closing balance of the impairment loss allowance – Explain the reasons for changes in the loss allowances in the reconciliation	Notes to the Financial Statements: Movement in provision for impairment during the year for each classes of assets are given in Notes 28.1 – Cash and cash equivalents, 29.1 - Balances with Central Banks, 30.1 – Placements with banks, 33.2 and 33.3 (c) – Financial assets at amortised cost – Loans and advances to other customers, 34.1 – Financial assets at amortised cost – Debt and other financial instruments Note 66.1.1 (c) Provision for impairment (ECL) movement
	(g) Collateral
	– Amount that best represents the bank’s maximum exposure to credit risk at the reporting date, without taking into account of any collateral held or other credit enhancements; – Narrative description of collateral held as security and other credit enhancements, (except for lease receivables), including; – discussion on the nature and quality of the collaterals held; – explanation on any significant changes in quality as a result of a deterioration of changes in the bank’s collaterals policies during the reporting period; – information about the financial instruments for which the bank has not recognised a loss allowance because of the collateral; – quantitative information about the collateral held as security and other credit enhancements; – information about the fair value of the collateral and other credit enhancements, or to quantify the exact value of the collateral that was included in the calculation of ECL	Notes to the Financial Statements: Note 66.1 – Credit risk
	(h) Written-off assets – contractual amount outstanding of financial assets written off during the reporting period that are still subject to enforcement activity.	Notes to the Financial Statements: Note 33.2 – Movement in provision for impairment during the year Note 17 – Net other operating income
	(i) Pillar III disclosures of the Banking Act Directions No. 01 of 2016 on Capital requirements under Basel III for Licensed Banks.	Notes to the Financial Statements: Note 66.5 – Capital management and Pillar III disclosures as per Basel III
	(ii) Liquidity risk (a) A maturity analysis of financial assets and liabilities.	Notes to the Financial Statements: Note 60 – Maturity Analysis – Group Note 66.2.2 – Maturity analysis of financial assets and financial liabilities and contingent liabilities and commitments
	(b) Description of approach to risk management.	Material Accounting Policies: Note 3 – Financial Risk Management Refer the Section on “Risk Governance and Management”
	(c) Pillar III disclosures of the Banking Act Directions No. 01 of 2016 on Capital requirements under Basel III for Licensed Banks.	Annex 2 – Basel III – Disclosures under pillar III as per Banking Act Direction No. 01 of 2016
	(iii) Market risk (a) A sensitivity analysis of each type of market risk to which the Bank is exposed.	Notes to the Financial Statements: Note 66.3.2 – Exposure to interest rate risk – sensitivity analysis
	(b) Additional information, if the sensitivity analysis is not representative of the Bank’s risk exposure.	Notes to the Financial Statements: Note 66.3.3 – Exposure to currency risk – Non-trading portfolio
	(c) Pillar III disclosures of the Banking Act Directions No. 01 of 2016 on Capital requirements under Basel III for Licensed Banks.	Annex 2 – Basel III – Disclosures under pillar III as per Banking Act Direction No. 01 of 2016
	(iv) Operational risk Pillar III disclosures of the Banking Act Directions No. 01 of 2016 on Capital requirements under Basel III for Licensed Banks.	Annex 2 – Basel III – Disclosures under pillar III as per Banking Act Direction No. 01 of 2016
	(v) Equity risk in the banking book (a) Qualitative Disclosures – Differentiation between holdings on which capital gains are expected and those taken under other objectives including for relationship and strategic reasons	Notes to the Financial Statements: Note 32 – Financial assets recognised through profit or loss – measured at fair value Note 35 – Financial assets measured at fair value through other comprehensive income
	– Discussion of important policies covering the valuation and accounting of equity holdings in the banking book	Note 66.3.4 – Exposure to equity price risk
	(b) Quantitative Disclosures – Value disclosed in the Statement of Financial Position of investments, as well as the fair value of those investments; for quoted securities, a comparison to publicly quoted share values where the share price is materially different from fair value	Notes to the Financial Statements: Note 32 – Financial assets recognised through profit or loss – measured at fair value Note 35 – Financial assets measured at fair value through other comprehensive income
	– The types and nature of investments	Material Accounting Policies: Note 7.1.3.4 – Financial assets measured at FVOCI Note 7.1.3.5 – Financial assets measured at FVTPL Notes to the Financial Statements: Note 32 – Financial assets recognised through profit or loss – measured at fair value Note 35 – Financial assets measured at fair value through other comprehensive income
	– The cumulative realised gains/(losses) arising from sales and liquidations in the reporting period	Statement of Profit or Loss and Other Comprehensive Income Notes to the Financial Statements: Note 15 – Net gains/(losses) from trading
	(vi) Interest rate risk in the banking book (a) Qualitative Disclosures Nature of interest rate risk in the banking book (IRRBB) and key assumptions.	Notes to the Financial Statements: Note 66.3.2 – Exposure to Interest Rate Risk – Sensitivity analysis Refer the Section on “Risk Governance and Management”
	(b) Quantitative disclosures – The increase/(decline) in earnings or economic value (or relevant measure used by management) for upward and downward rate shocks according to the management’s method for measuring IRRBB, broken down by currency (as relevant)	Notes to the Financial Statements: Note 66.3.2 – Exposure to Interest Rate Risk – Sensitivity analysis Refer the Section on “Risk Governance and Management”
2.2.3	Information on concentrations of risk.	Notes to the Financial Statements: Note 66.1.5 – Concentration of credit risk
3.	Other disclosures
3.1 3.1.1	Capital Capital structure
	(i) Qualitative disclosures Summary information on the terms and conditions of the main features of all capital instruments, especially in the case of innovative, complex, or hybrid capital instruments.	Notes to the Financial Statements: Note 66.5 – Capital Management and Pillar III disclosures as per Basel III
	(ii) Quantitative disclosure (a) The amount of Tier 1 capital, with separate disclosure of: Stated capital/common stock Reserves Non-controlling interests in the equity of subsidiaries Other capital instruments Deductions from Tier 1 capital (b) The total amount of Tier 2 capital (c) Other deductions from capital (d) Total eligible capital	Notes to the Financial Statements: Note 66.5 – Capital Management and Pillar III disclosures as per Basel III Refer the Section on “Risk Governance and Management”
3.1.2	Capital adequacy (i) Qualitative disclosures A summary discussion of the Bank’s approach to assessing the adequacy of its capital to support current and future activities.	Notes to the Financial Statements: Note 66.5 – Capital Management and Pillar III disclosures as per Basel III Refer the Section on “Risk Governance and Management”
	(ii) Quantitative disclosures \| (a) Capital requirements for credit risk, market risk, and operational risk (b) Total and Tier 1 capital ratio	Notes to the Financial Statements: Note 66.5 – Capital Management and Pillar III disclosures as per Basel III Refer the Section on “Risk Governance and Management”

ANNUAL REPORT 2024

My Report

SUPPLEMENTARY INFORMATION

Annex 1: Compliance with Governance Directions, Rules and Codes

Annex 1.1: Compliance with Banking Act Direction

The Banking Act Direction No. 11 of 2007 and subsequent amendments thereto on Corporate Governance for Licensed Commercial Banks in Sri Lanka issued by the Central Bank of Sri Lanka (the Direction)

Annex 1.2: Compliance with Code of Best Practice on Corporate Governance

Compliance with the Code of Best Practice on Corporate Governance 2023 (the Code) issued by The Institute of Chartered Accountants of Sri Lanka

Annex 1.3: Compliance with Section 9 of the Listing Rules issued by the Colombo Stock Exchange

Annex 1.4: Disclosure Requirements in Annual Financial Statements as required by the CBSL

Disclosure requirements under the prescribed format issued by the Central Bank of Sri Lanka for preparation, presentation and publication of Annual Audited Financial Statements of Licensed Banks via the Circular No.05 of 2024 dated December 31, 2024