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	Group Structure   Awards and Accolades   Historical Landmarks   Correspondent Banks   Glossary of Financial and Banking Terms   Notice of Meeting   Corporate Information       A Acceptances Promise to pay created when the drawee of a time draft stamps or writes the words ‘accepted’ above his signature and a designated payment date. Accrual Basis Recognising the effects of transactions and other events when they occur without waiting for receipt or payment of cash or its equivalent. Associate An entity, including an unincorporated entity such as a partnership, over which the investor has significant influence and that is neither a subsidiary nor an interest in a joint venture. B Bills for Collection A bill of exchange drawn by an exporter usually at a term, on an importer overseas and brought by the exporter to his bank with a request to collect the proceeds. Bonus Issue (Scrip Issue) The issue of new shares to existing shareholders in proportion to their shareholdings. It is a process for converting a company’s reserves (in whole or part) into issued capital and hence does not involve an infusion of cash. C Capital Adequacy Ratios The relationship between capital and risk-weighted assets as defined in the framework developed by the Bank for International Settlements (BIS) and as modified by the Central Bank of Sri Lanka to suit local requirements. Commitments Credit facilities approved but not yet utilised by the clients as at the Balance Sheet date. Compounded Annual Growth Rate (CAGR) The rate at which it would have grown if it grew at an even rate compounded annually. Contingencies A condition or situation existing at Balance Sheet date where the outcome will be confirmed only by occurrence or non-occurrence of one or more future events. Cost/Income Ratio Operating expenses excluding Loan Loss Provision as a percentage of net income. Corporate Governance The process by which corporate entities are governed. It is concerned with the way in which power is exercised over the management and direction of entity, the supervision of executive actions and accountability to owners and others. Cash Equivalents Short-term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. D Dealing Securities Marketable securities that are acquired and held with the intention of reselling them in the short term. Deferred Taxation Sum set aside for tax in the Financial Statements that may become payable/receivable in a financial year other than the current financial year. Dividend Cover Profit after tax divided by gross dividends. This ratio measures the number of times dividend is covered by current year’s distributable profits. Documentary Credits Commercial letters of credit provided for payment by a bank to the named beneficiary usually the seller of merchandise, against delivery of documents specified in the credit. E Earnings per Ordinary Share (EPS) Profit attributable to ordinary shareholders divided by the number of ordinary shares in issue. Economic Value Added (EVA) A measure of productivity which takes into consideration cost of total invested equity. Effective Tax Rate Provision for taxation excluding deferred tax divided by the profit before taxation.   F Finance Lease A contract whereby a lessor conveys to the lessee the right to use an asset for rent over an agreed period of time which is sufficient to amortise the capital outlay of the lessor. The lessor retains ownership of the asset but transfers substantially all the risks and rewards of ownership to the lessee. Foreign Exchange Profit Profit earned on foreign currency transactions arising from the difference in foreign exchange rates between the transaction/ last Balance Sheet date and the settlement/Balance Sheet date. Also arises from trading in foreign currencies. Foreclosed Properties Properties acquired in full or partial satisfaction of debts. Forward Exchange Contract Agreement between two parties to exchange one currency for another at a future date at a rate agreed upon today. Free Capital Excess of equity capital over net book value of Property, Plant & Equipment, Intangible Assets and Investments. G General Provisions These are provisions made on loans and advances for anticipated losses on aggregate exposures where credit losses cannot yet be determined on an individual facility basis. Guarantees Three party agreement involving a promise by one party (the guarantor) to fulfil the obligations of a person owing a debt if that person fails to perform. H Hedging A strategy under which transactions are effected with the aim of providing cover against the risk of unfavourable price movements (Interest rate, Prices, Commodities). Human Resource Accounting The Human Resource is considered as an asset (although not brought into the Balance Sheet) and the value is computed to focus attention on the management of this valuable asset. I Impairment This occurs when recoverable amount of an asset is less than its carrying amount. Intangible Asset An intangible asset is an identifiable non-monetary asset without physical substance. Interest in Suspense Interest suspended on nonperforming loans and advances. Interest Margin Net interest income expressed as a percentage of average interest earning assets. Interest Spread Represents the difference between the average interest rate earned and the average interest rate paid on interest-earning assets and interest bearing liabilities, respectively. Investment Securities Securities acquired and held for yield or capital growth purposes and are usually held to maturity. K Key Management Personnel Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any Director (whether Executive or otherwise) of that entity. L Liquid Assets Assets that are held in cash or in a form that can be converted to cash readily, such as deposits with other banks, bills of exchange, treasury bills. Loan Losses and Provisions Amounts set aside against possible losses on loans, advances and other credit facilities as a result of such facilities becoming partly or wholly uncollectible. M Market Capitalisation Number of ordinary shares in issue multiplied by the market value of a share as at the year end. Materiality The relative significance of a transaction or an event the omission or misstatement of which could influence the economic decisions of users of Financial Statements.   N Net Assets Value per Ordinary Share Shareholders’ funds excluding Preference Shares if any, divided by the number of ordinary shares in issue. Net Interest Income (NII) The difference between what a bank earns on assets such as loans and securities and what it pays on liabilities such as deposits, refinance funds and inter-bank borrowings. O Off-Balance Sheet Transactions Transactions that are not recognisedm as assets or liabilities in the Balance Sheet but which give rise to contingencies and commitments. Open Credit Exposure Ratio Total net non-performing loans expressed as a percentage of regulatory capital base. P Price Earnings Ratio (P/E Ratio) Market price of a share divided by earnings per share. Provision Cover Total provisions for loan losses expressed as a percentage of net non-performing loans before discounting for provisions on nonperforming loans. Prudence Inclusion of a degree of caution in the exercise of judgement needed in making the estimates required under conditions of uncertainty, such that assets or income are not overstated and liabilities or expenses are not understated. R Related Parties Parties where one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions, directly or indirectly. Return on Average Assets (ROA) Profit after tax divided by the average assets. Risk Weighted Assets On Balance Sheet assets and the credit equivalent of off-Balance Sheet assets multiplied by the relevant risk weighting factors. Repurchase Agreement Contract to sell and subsequently repurchase securities at a specified date and price. Reverse Repurchase Agreement Transaction involving the purchase of securities by a bank or dealer and resale back to the seller at a future date and specified price. Return on Average Equity (ROE) Net profit for the year, less preference share dividends if any, expressed as a percentage of average ordinary shareholders’ equity. S Segmental Analysis Analysis of financial information by segments of an enterprise specifically, the different industries and the different geographical areas in which it operates. Shareholders’ Funds Total of issued and fully paid share capital and capital and revenue reserves. Single Borrower Limit 33% of the regulatory capital base. Statutory Reserve Fund A capital reserve created as per the provisions of the Banking Act No. 30 of 1988. Subsidiary An entity, including an unincorporated entity such as a partnership, which is controlled by another entity (known as the parent). Swaps The simultaneous purchase of an amount of a currency for spot settlement and the sale of the same amount of the same currency for forward settlement. T Tier I Capital Core capital representing permanent shareholders’ equity and reserves created or increased by appropriations of retained earnings or other surpluses. Tier II Capital Supplementary capital representing revaluation reserves, general provisions and other capital instruments which combine certain characteristics of equity and debt such as hybrid capital instruments and subordinated term debts. V Value Added Value of wealth created by providing banking and other related services less the cost of providing such services.
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