BoC continuously monitors the operating environment using a PESTEL framework to identify material risks and opportunities that may affect its ability to generate value in the short, medium, and long term. The following are the critical factors that influenced the Bank's performance and strategy during the year.


  • Political instability and change in the Government during the year.



  • Economic crisis-led disruptions and contraction of the economy in 2022.
  • External sector imbalance continues, amidst foreign exchange liquidity crisis, default on sovereign debt obligations, and sharp devaluation of the Sri Lankan Rupee. However, trade deficit narrowing towards the year end, amidst regulatory restrictions and increased price-competitiveness of exports.
  • Tourism sector faces fourth consecutive year of depressed performance due to global and local factors, although numbers picked up considerably compared with 2021.
  • Driven by monetary policy to curb inflation, interest rates ballooned in 2022 after gradual increase at the end of 2021.
  • Inflation levels skyrocketed and peaked in November 2022 brought on by global disruptions and deepening of the Country’s economic crisis.
  • Sovereign rating downgrade and resulting downgrades for corporations and declining investor confidence.
  • Rising credit risk amidst deterioration of asset quality brought on by multiplicity of economic shocks and protracted economic stress.
  • Decrease in worker remittances.
  • Ongoing discussions on external and domestic debt restructuring.


  • Outward migration growing to unprecedented levels resulting in drain of skilled personnel and the attendant pressures on institutions and households.
  • Social unrest and demand for more transparency and economic stability.
  • Changing customer experience and expectations.
  • Household stress and food insecurity resulting from affected livelihoods, reduced incomes, reduced purchasing power, rising cost of living.
  • People faced difficulties to make essential FOREX payments such as student fees etc.



  • Changes in the expectations, habits, and interactions of customers in a post-pandemic scenario (along with increasing numbers of Millennial and Gen Z customers more generally) leading to greater digitalisation and adoption of digital platforms and processes.
  • Exponential efficiency and scale benefits from Robotic Process Automation (RPA) and workflow automation.
  • Rapid growth in practical application of Machine Learning (ML) and Artificial Intelligence (AI) across all sectors, including personal interactions.
  • Increased cybersecurity risk alongside greater digitalisation across all sectors.


  • Publication of Sri Lanka’s Green Finance Direction by the CBSL, setting a direction for the Country’s Sustainable Financing efforts.
  • Environmental risks continue to grow in importance amidst progression of climate change across the globe.
  • Greater expectation from multilateral and bilateral lenders for responsible lending decisions that include social and environmental considerations.
  • Customer awareness of environmental implications continues to grow.



  • Regulatory restrictions on foreign currency outflows from the banking system.
  • Import restrictions on certain categories of commodities.
  • New regulations and compliance requirements.
  • Extension of debt moratoriums and concessions to crisis-affected borrowers during the year, and new concessions expected to be announced for the new year.
  • Deferment of recovery action.
  • Changes in the tax regime affecting corporates and individuals.

Potential Impact on BoC’s Strategy and Performance

The trends in the operating environment had a significant impact on the Bank's strategy and performance, presenting both opportunities and risks that influenced the Bank’s ability to create value.


Shortage of foreign currency affected the Bank's ability to fund cross-border transactions and has led to a decrease in import-related fee and commission income.

With limited foreign currency resources available, certain sectors that were of national importance (e.g. essential imports) had to be serviced at the expense of other, perhaps more lucrative opportunities.

High interest rate regime and pressures on capital limiting opportunities for growth of loan book.

Loss to earnings and impact on profit margins due to increased provisioning.

Limitation in sourcing foreign funding amidst Sovereign and institutional rating downgrade.

Insufficient funds in inter-bank market which hampered inter-bank borrowing.

Increased regulator oversight and reporting burden.

Supply chain and transportation difficulties.


Provision of working capital requirement to meet needs of businesses affected by the crisis.

Growth in gross interest income due to high interest regime.

Brand equity gains and customer loyalty gains from supporting customer priorities and national needs during the crises.

Overseas operations, inward remittance market-share, and strength of cross-border relationships hold the bank in good stead amidst increasing criticality of foreign exchange.

Space for growth in Bank’s role as a Participatory Financial Institution (PFI) aligned with Sri Lanka’s economic recovery.

Retention of customer base holds promise for strong rebound and growth aligned with Country’s economic recovery.

Greater opportunities from the export sector that benefits from price-competitiveness and nationally supported growth opportunities.

Improve digital penetration and digital literacy of the customer base.

Leverage technology for increased process efficiencies and cost savings.

Customer experience impacted by digitalisation stands to enhance the Bank’s competitiveness.


Increased credit risk due to reduced repayment capability of borrowers in the face of multiple economic crises, resulting in adverse effects on portfolio quality.

Increased credit risk from government and state owned enterprises, in light of sovereign default and fiscal deficit.

Increased liquidity risk throughout the year amidst regulatory requirements, adverse impact on portfolio quality, and shortage of foreign currency.

Pace of digital advancement poses a threat of technological obsolescence.

Increased people-related risks amidst growing outward migration and turnover, particularly among the younger demographic.

Increased information security/IT risk aligned with growth in digitalisation.

Impact of climate change on climate-sensitive industries that play a key role in food security, rural development, and export earnings.

With economic recovery a priority, environmental issues could be de-prioritised or downgraded.

Pressure on NIM and impact on profitability.