| Item | As at 31 December 2018 |
As at
31 December 2017 |
| Regulatory capital (lkr ’000) | ||
| Common equity Tier I capital | 7,419,999 | 7,293,936 |
| Tier I capital | 7,419,999 | 7,293,936 |
| Total capital | 8,462,226 | 8,564,260 |
| Regulatory capital ratio (%) | ||
| Common equity Tier I capital ratio (minimum requirement – 2018: 6.375%, 2017: 5.75%) | 11.00 | 12.42 |
| Tier I capital ratio (minimum requirement – 2018: 7.875%, 2017: 7.25%) | 11.00 | 12.42 |
| Total capital ratio (minimum requirement – 2018: 11.875%, 2017: 11.25%) | 12.54 | 14.59 |
| Regulatory liquidity | ||
| Statutory liquid assets (lkr ’000) | 14,811,217 | 11,829,936 |
| Statutory liquid assets ratio (minimum requirement – 20%) | ||
| Domestic banking unit (%) | 23.22 | 21.34 |
| Off-shore banking unit (%) | – | – |
| Total stock of high quality liquid assets (lkr ’000) | 3,460,374 | 1,736,506 |
| Liquidity coverage ratio – (%) rupee (minimum requirement – 2018: 90%, 2017 – 80%) | 142.15 | 94.09 |
| Liquidity coverage ratio – (%) all currency (minimum requirement – 2018: 90%, 2017 – 80%) | 142.15 | 94.09 |
| Amount LKR ’000 | ||
| Item | As at 31 December 2018 |
As at 31 December 2017 |
| Common equity Tier I (CET I) capital after adjustments | 7,419,999 | 7,293,936 |
| Common equity Tier I (CET I) capital | 7,448,727 | 7,331,160 |
| Equity capital (stated capital)/assigned capital | 5,921,538 | 5,758,689 |
| Reserve fund | 215,612 | 197,764 |
| Published retained earnings/(accumulated retained losses) | 1,280,762 | 1,340,504 |
| Published accumulated Other Comprehensive Income (OCI) | – | – |
| General and other disclosed reserves | 30,815 | 34,203 |
| Unpublished current year’s profit/(losses) and gains reflected in OCI | – | – |
| Ordinary shares issued by consolidated banking and financial subsidiaries of the Bank and held by third parties | – | – |
| Total adjustments to CET I capital | 28,728 | 37,224 |
| Goodwill (net) | – | – |
| Intangible assets (net) | 3,728 | 8,148 |
| Others (investments in the capital of banking and financial institutions) | 25,000 | 29,076 |
| Additional Tier I (AT I) capital after adjustments | – | – |
| Total Additional Tier I (AT I) capital | – | – |
| Qualifying additional Tier I capital instruments | – | – |
| Instruments issued by consolidated banking and financial subsidiaries of the Bank and held by third parties | – | – |
| Total adjustments to AT I capital | – | – |
| Investment in own shares | – | – |
| Others (specify) | – | – |
| Tier II capital after adjustments | 1,042,227 | 1,270,324 |
| Tier II capital | 1,067,227 | 1,299,400 |
| Qualifying Tier II capital instruments | 711,628 | 992,970 |
| Revaluation gains | – | – |
| Loan loss provisions | 355,599 | 306,430 |
| Instruments issued by consolidated banking and financial subsidiaries of the Bank and held by third parties | – | – |
| Total adjustments to Tier II | 25,000 | 29,076 |
| Investment in own shares | – | – |
| Others (investments in the capital of financial institutions) | 25,000 | 29,076 |
| CET I capital | 7,419,999 | 7,293,936 |
| Total Tier I capital | 7,419,999 | 7,293,936 |
| Total capital | 8,462,226 | 8,564,260 |
| Total Risk Weighted Assets (RWA) | 67,474,294 | 58,717,587 |
| RWAs for credit risk (Table 1) | 62,660,450 | 53,619,752 |
| RWAs for operational risk (Table 2) | 4,813,844 | 5,081,280 |
| RWAs for market risk (Table 3) | – | 16,554 |
| CET 1 capital ratio (including capital conservation buffer, countercyclical capital buffer and surcharge on D-SIBs) (%) | 11.00 | 12.42 |
| of which: capital conservation buffer (%) | – | – |
| of which: countercyclical buffer (%) | – | – |
| of which: capital surcharge on D-SIBs (%) | – | – |
| Total Tier I capital ratio (%) | 11.00 | 12.42 |
| Total capital ratio (including capital conservation buffer, countercyclical capital buffer and surcharge on D-SIBs) (%) | 12.54 | 14.59 |
| of which: capital conservation buffer (%) | – | – |
| of which: countercyclical buffer (%) | – | – |
| of which: capital surcharge on D-SIBs (%) | – | – |
| Asset Class | Amount (LKR ’000) as at 31 December 2018 | |||||
| Exposures before Credit Conversion Factor (CCF) and CRM |
Exposures post CCF and CRM | RWA and RWA density (%) | ||||
| On-balance sheet amount | Off-balance sheet amount | On-balance sheet amount | Off-balance sheet amount | RWA | RWA density (%) | |
| Claims on Central Government and CBSL | 3,225,200 | – | 3,225,200 | – | – | 0 |
| Claims on foreign sovereigns and their Central Banks | – | – | – | – | – | – |
| Claims on public sector entities | – | – | – | – | – | – |
| Claims on official entities and multilateral development banks | – | – | – | – | – | – |
| Claims on banks exposures | 13,280,750 | – | 13,280,750 | – | 2,690,254 | 20 |
| Claims on financial institutions | – | – | – | – | – | – |
| Claims on corporates | 209,639 | – | 209,639 | – | 92,757 | 44 |
| Retail claims | 71,824,374 | – | 66,469,118 | – | 52,840,130 | 79 |
| Claims secured by residential property | 4,723,711 | – | 4,723,711 | – | 3,040,257 | 64 |
| Claims secured by commercial real estate | – | – | – | – | – | – |
| Non-performing assets (NPAs) | 1,106,108 | – | 1,106,108 | – | 1,330,472 | 120 |
| Higher-risk categories | – | – | – | – | – | – |
| Cash items and other assets | 2,838,899 | 679,989 | 2,838,899 | 285,099 | 2,666,580 | 85 |
| Total | 97,208,682 | 679,989 | 91,853,426 | 285,099 | 62,660,450 | 68 |
Note:
(i) NPAs – As per Banking Act Directions on classification of loans and advances, income recognition, and provisioning.
(ii) RWA Density – Total RWA/Exposures post CCF and CRM.
| Description | Amount (LKR ’000) as at 31 December 2018 (Post CCF and CRM) | |||||||
| Risk weight Asset classes | 0% | 20% | 50% | 75% | 100% | 150% | >150% | Total credit exposures amount |
| Claims on Central Government and CBSL | 3,225,200 | – | – | – | – | – | – | 3,225,200 |
| Claims on foreign sovereigns and their Central Banks | – | – | – | – | – | – | – | – |
| Claims on public sector entities | – | – | – | – | – | – | – | – |
| Claims on official entities and multilateral development banks | – | – | – | – | – | – | – | – |
| Claims on banks exposures | – | 13,167,070 | 113,680 | – | – | – | – | 13,280,750 |
| Claims on financial institutions | – | – | – | – | – | – | – | – |
| Claims on corporates | – | 146,103 | – | – | 63,536 | – | – | 209,639 |
| Retail claims | 82,576 | 1,077,164 | – | 50,738,720 | 14,570,657 | – | – | 66,469,118 |
| Claims secured by residential property | – | – | 3,366,908 | – | 1,356,802 | – | – | 4,723,711 |
| Claims secured by commercial real estate | – | – | – | – | – | – | – | – |
| Non-performing assets (NPAs) | – | – | 10,916 | – | 635,546 | 459,645 | – | 1,106,108 |
| Higher-risk categories | – | – | – | – | – | – | – | – |
| Cash items and other assets | 424,504 | 41,143 | – | – | 2,658,351 | – | – | 3,123,998 |
| Total | 3,732,281 | 14,431,480 | 3,491,505 | 50,738,720 | 19,284,893 | 459,645 | – | 92,138,525 |
| Gross income (LKR ’000) as at 31 December 2018 | |||||
| Business lines | Capital charge factor |
1st year | 2nd year | 3rd year | Amount |
| The basic indicator approach | 15% | 4,209,531 | 3,587,217 | 3,636,133 | |
| Capital charges for operational risk (LKR ’000) the basic indicator approach | 571,644 | ||||
| Risk-weighted amount for operational risk (LKR ’000) the basic indicator approach | 4,813,844 | ||||
| Business lines | RWA Amount as at 31 December 2018 (LKR ’000) |
| (a) RWA for interest rate risk | – |
| General interest rate risk | – |
| (i) Net long or short position | – |
| (ii) Horizontal disallowance | – |
| (iii) Vertical disallowance | – |
| (iv) Options | – |
| Specific interest rate risk | – |
| (b) RWA for equity | – |
| (i) General equity risk | – |
| (ii) Specific equity risk | – |
| (c) RWA for foreign exchange and gold | – |
| Capital charge for market risk {(a) +(b) + (c)} * car | – |
A proper “Capital Management Process” is vital in ensuring the long-term stability of the business, SANASA Development Bank has continued to maintain Capital Adequacy Ratios at healthy levels by keeping a significant margin over and above the regulatory minimum requirements. The Basel III Capital Standards introduced by the CBSL with effect from 1 July 2017 provides stringent framework for banks to enhance the quality, consistency, and the transparency of their “capital” through the introduction of new capital buffers, new mandatory disclosure requirements and revised definitions for capital instruments. Under the new directive, minimum Regulatory Requirements for Tier I Capital Ratio (5%) and Total Capital Ratio (10%) have been increased significantly to 8.50% and 12.50% respectively, with banks required to comply with these requirements over a period of 18 months, to meet the 1 January 2019 international time line for the implementation of Basel III.
In order to comply with the new Basel III guidelines, SANASA Development Bank’s Capital Management Process is under supervision of Board Strategic Planning Committee. The three year (2018-2020) Capital Management Plan rolled out has been integrated with the Internal Capital Adequacy Assessment Process (ICAAP) as well as the Bank’s Strategic Plan, taking cognisance of the estimated negative impact to the Bank’s capital structure arising from changes in new regulations such as SLFRS 9, Inland Revenue Act, etc. Efforts taken to comply with the Basel III regulations saw the Bank increases its capital levels by issuing Basel III compliant debt instruments. Steps were also taken to optimise the capital ratios by rebalancing the Risk Weighted Assets (RWA).
Moving forward with the Capital Management Plan, the Bank will execute specific medium-term and long-term strategies to raise both Tier I and Tier II capital in line with Basel III minimum regulatory requirements. In addition, timely actions have been identified and will be executed during the coming years to optimise the Risk Weighted Assets for the purpose of improving the capital allocation of the Bank.
| Amount (LKR ’ 000) | ||||
| Item | As at 31 December 2018 | As at 31 December 2017 | ||
| Total un-weighted value |
Total weighted value |
Total un-weighted value |
Total weighted value |
|
| Total stock of high-quality liquid assets (HQLA) | 3,482,290 | 3,460,374 | 4,869,546 | 1,736,506 |
| Total adjusted Level 1 assets | 3,336,186 | 3,336,186 | 1,041,904 | 1,041,904 |
| Level 1 assets | 3,336,186 | 3,336,186 | 1,041,904 | 1,041,904 |
| Total adjusted Level 2A assets | 146,103 | 124,188 | 3,815,227 | 3,242,943 |
| Level 2A assets | 146,103 | 124,188 | 3,815,227 | 3,242,943 |
| Total adjusted Level 2B assets | – | – | 12,415 | 6,208 |
| Level 2B assets | – | – | 12,415 | 6,208 |
| Total cash outflows | 68,601,375 | 9,737,202 | 57,993,974 | 3,165,395 |
| Deposits | 50,445,248 | 5,044,525 | 54,580,495 | 1,513,777 |
| Unsecured wholesale funding | 17,085,209 | 4,271,302 | 2,659,335 | 1,063,734 |
| Secured funding transactions | 47,835 | 47,835 | 55,530 | 55,530 |
| Undrawn portion of committed (irrevocable) facilities and other contingent funding obligations | 1,023,083 | 373,539 | 698,614 | 532,354 |
| Additional requirements | – | – | – | – |
| Total cash inflows | 19,479,079 | 10,518,710 | 6,131,699 | 1,319,898 |
| Maturing secured lending transactions backed by collateral | 3,482,290 | 21,915 | 1,041,904 | – |
| Committed facilities | 1,250,000 | – | 2,450,000 | – |
| Other inflows by counterparty which are maturing within 30 days | 14,746,790 | 10,496,795 | 2,639,795 | 1,319,898 |
| Operational deposits | – | – | – | – |
| Other cash inflows | – | – | – | – |
| Liquidity coverage ratio (%) (stock of high quality liquid assets/ total net cash outflows over the next 30 calendar Days)* 100 | – | 142.15 | – | 94.09 |
| Description of the capital instrument | Stated capital | Subordinated term debt (2016) | Subordinated term debt (2016) |
| Issuer | SANASA Development Bank PLC | SBI FMO Emerging Asia Financial Sector Fund PTE. LTD | Nederlandse Financierings – Maatschappij Voor Ontwikkelingslanden N.V. (FMO) |
| Unique identifier | LK0412N00003 | N/A | N/A |
| Governing Law of the Instrument | Companies Act, No. 07 of 2007, Colombo Stock Exchange Regulations | Companies Act No. 07 of 2007, Colombo Stock Exchange Regulations | Companies Act No. 07 of 2007, Colombo Stock Exchange Regulations |
| Original date of issuance | May 2012 to May 2018 | December 2016 | December 2016 |
| Par value of instrument (LKR) | 100 | N/A | N/A |
| Perpetual or dated | Perpetual | Dated | Dated |
| Original maturity date, if applicable | N/A | December 2021 | December 2021 |
| Amount recognised in regulatory capital (in LKR ’000 as at reporting date) |
5,758,689 | 491,798 | 219,830 |
| Accounting classification (equity/liability) | Equity | Liability | Liability |
| Issuer call subject to prior supervisory approval | |||
| Optional call date, contingent call dates and redemption amount (LKR ‘000) | N/A | N/A | N/A |
| Subsequent call dates, if applicable | N/A | N/A | N/A |
| Coupons/dividends | |||
| Fixed or floating dividend/coupon | Floating dividend | Floating coupon | Floating coupon |
| Coupon rate and any related index (%) | N/A | 6 Months T-Bill Rate+450bps | 6 Months T-Bill Rate+550bps |
| Non-cumulative or cumulative | Non-cumulative | Cumulative | Cumulative |
| Convertible or Non-convertible | Non-convertible | Convertible | Convertible |
| If convertible, conversion trigger (s) | N/A | N/A | N/A |
| If convertible, fully or partially | N/A | Fully or partially subject to a maximum of 15% of the issued share capital | Fully or partially subject to a maximum of 15% of the issued share capital |
| If convertible, mandatory or optional | N/A | Optional | Optional |
| If convertible, conversion rate | N/A | LKR 140 or 1.1x of book value per share which ever is lower in the event if Bank issues new shares to any new investor |
LKR 140 or 1.1x of book value per share which ever is lower in the event if Bank issues new shares to any new investor |
| Amount (LKR ‘000 as at 31 December 2018) | ||||||
| a | b | c | d | e | ||
| Item | Carrying values as reported in published financial statements |
Carrying values under scope of regulatory reporting |
Subject to credit Risk framework |
Subject to market risk framework |
Not subject to capital requirements or subject to deduction from capital |
Explanation for differences between accounting and regulatory reporting |
| Assets | ||||||
| Cash and cash equivalents | 4,171,939 | 4,257,217 | 4,257,217 | Impairment of financial assets under SLFRS 9 | ||
| Placements with banks | 9,528,426 | 9,375,500 | 9,375,500 | Interest receivable on placements with banks is classified as other assets in regulatory reporting. Impairment of financial assets under SLFRS 9 | ||
| Financial assets fair value through profit or loss | 146,103 | 146,103 | 146,103 | In regulatory reporting these investments are classified as investments – trading account |
||
| Financial assets at amortised cost |
||||||
| – Loans and receivables to other customers | 77,507,021 | 78,219,982 | 78,575,582 | (355,599) | In regulatory reporting loans and receivables to customers arrived after netting off CBSL time based provisions. However, in published Financial Statements loans and receivables to customers arrived after netting off impairment allowances as per SLFRS 9 | |
| – Debt and other instruments | 3,405,600 | 3,388,880 | 3,338,880 | 50,000 | Interest receivable on debt and other instruments is classified as other assets in regulatory reporting. Impairment of financial assets under SLFRS 9 | |
| Financial assets measured at fair value through other comprehensive income | 60,148 | 63,536 | 63,536 | Impairment of financial assets under SLFRS 9 | ||
| Property, plant and equipment | 704,738 | 705,516 | 705,516 | |||
| Investment properties | 22,335 | 22,335 | 22,335 | |||
| Intangible assets | 3,728 | 3,728 | – | 3,728 | ||
| Defferred tax assets | 69,415 | – | – | |||
| Other assets | 1,198,314 | 724,013 | 724,013 | The difference is due to audit adjustments and interest receivable on investments recognition | ||
| Total assets | 96,817,767 | 96,906,810 | 97,208,682 | – | (301,871) | |
| Liabilities | ||||||
| Due to banks | – | – | ||||
| Due to other customers | 67,474,822 | 64,337,626 | – | Interest payable on deposits are stated under other liabilities in regulatory reporting | ||
| Other borrowings | 15,420,968 | 15,075,069 | – | Interest payable on borrowings are stated under other liabilities in regulatory reporting | ||
| Debt securities issued | 4,198,548 | 4,000,000 | – | Interest payable on borrowings are stated under other liabilities in regulatory reporting | ||
| Subordinated term debts | 1,008,028 | 992,970 | – | Interest payable on borrowings are stated under other liabilities in regulatory reporting | ||
| Current tax liabilities | 143,988 | 141,270 | – | Taxes are computed based on different profits under each reporting method | ||
| Deferred tax liabilities | – | 58,000 | – | Due to deferred tax adjustments defined benefit obligation and audit adjustments | ||
| Other liabilities | 1,122,688 | 5,087,239 | – | Interest payable on borrowing and deposits added to the other liabilities in regulatory reporting | ||
| Total liabilities | 89,369,040 | 89,692,174 | – | |||
| Off–balance sheet liabilities | ||||||
| Guarantees | 182,986 | 182,986 | 182,986 | |||
| Undrawn loan commitments | – | 497,003 | 497,003 | |||
| Shareholders’ equity | ||||||
| Equity capital (stated capital)/ assigned capital | 5,921,538 | 5,921,538 | – | |||
| of which amount eligible for CET I | 5,921,538 | 5,921,538 | – | |||
| of which amount eligible for AT I | – | – | – | |||
| Retained earnings | 1,280,762 | 1,260,402 | – | Due to differences which arise in profits computed in previous GAAP and SLFRSs | ||
| Accumulated other comprehensive income | (15,842) | – | – | |||
| Other reserves | 262,268 | 231,967 | – | |||
| Total shareholders’ equity | 7,448,727 | 7,413,907 | – | |||