This note presents information about the Bank’s exposure to financial risks and the Bank’s management of capital.
For information on the Bank’s financial risk management framework |
Page No. |
Introduction |
|
69.1 |
Credit risk |
320 |
69.1.1 |
Credit quality analysis
|
320 |
69.1.2 |
Credit-impaired financial assets
|
332 |
69.1.3 |
Sensitivity of impairment provision on loans and advances to other customers
|
333 |
69.1.4 |
Collateral held
|
333 |
69.1.5 |
Concentration of credit risk
|
334 |
69.2 |
Liquidity risk |
339 |
69.2.1 |
Exposure to liquidity risk
|
339 |
69.2.2 |
Maturity analysis of financial assets and financial liabilities
|
340 |
69.2.3 |
Liquidity reserves
|
343 |
69.2.4 |
Financial assets available to support future funding
|
344 |
69.3 |
Market risk |
345 |
69.3.1 |
Exposure to market risk – Trading and non-trading portfolio
|
345 |
69.3.2 |
Exposure to interest rate risk – Sensitivity analysis
|
347 |
69.3.3 |
Exposure to currency risks – Non-trading portfolio
|
349 |
69.3.4 |
Exposure to equity price risk
|
351 |
69.4 |
Operational risk |
351 |
69.5 |
Capital management and pillar III disclosures as per Basel III |
352 |
69.5.1 |
Regulatory capital
|
352 |
69.5.2 |
Capital allocation
|
353 |
69.5.3 |
Pillar III disclosures as per Basel III
|
353 |
Introduction
As a financial intermediary, the Bank is exposed to various types of risks including credit, market, liquidity and operational risks which are inherent in the Bank’s activities. Managing these risks is critical for the sustainability of the Bank and plays a pivotal role in all activities of the Bank. Risk management function strives to identify potential risks in advance, analyse them and take precautionary steps to mitigate the impact of risk whilst optimising through risk adjusted returns within the risk appetite of the Bank.
Risk management framework
The overall responsibility and oversight of the risk management framework of the Bank is vested with the Board of Directors (BOD). The Board Integrated Risk Management Committee (BIRMC), a mandatory subcommittee set up by the Board, in turn is entrusted with the development of the Bank’s Risk Management Policies and monitoring of due compliance of same through the Executive Integrated Risk Management Committee (EIRMC).
The Risk Management Policies spell out the risk appetite of the Bank and has incorporated risk exposure limits and controls to monitor adherence to the limits in force. These Policies and Systems are reviewed regularly to reflect the changing market conditions and the products and services offered.
The Bank strives to inculcate a risk management culture through continuous training, work ethics and standards.
Refer Note 3.2 for more information on the risk management framework of the Bank.
Integrated Risk Management Department (IRMD)
Business Units are the risk owners and have the primary responsibility for risk management. The IRMD acts as the second line of defence in managing the risk. The IRMD through Chief Risk Officer reports to the BIRMC thus ensuring its independence.
Risk measurement and reporting
The Bank uses robust risk measurement techniques based on the type of risk and industry best practices. The Bank also carries out stress testing which is a key aspect of the Internal Capital Adequacy Assessment Process (ICAAP). The risk management framework of the Bank provides an insight on the impact of extreme, but plausible scenarios on the Bank’s risk profile. The results are reported to the EIRMC and to the BIRMC on a periodic basis.
The Bank establishes policies, limits and thresholds within the risk appetite of the Bank. These limits reflect the business strategy and market environment of the Bank as well as the level of risk that the Bank is willing to accept (risk appetite). The monitoring and control mechanism therefore, is based on risk appetite of the Bank.
69.1 Credit risk
The financial loss resulting from a borrower or counterparty to a financial instrument failing or delaying to meet its contractual obligations is referred to as credit risk. It arises principally from the loans and advances to banks and other customers, investments in debt securities and other financial instruments. In addition to the credit risk from direct funding exposure (i.e. on-balance sheet exposure), indirect liabilities such as Letters of Credit, Guarantees etc. also would expose the Bank to credit risk.
The Bank ensures stringent credit risk management practices overall elements of credit risk exposures (such as individual obliger default risk, country and sector concentration risks).
69.1.1 Credit quality analysis
69.1.1 (a) Maximum exposure to credit risk by risk rating (as per SLFRS 9)
The following table sets out information about the credit quality of financial assets measured at amortised cost, measured at FVOCI and contingent liabilities and commitments.
|
|
Carrying
amount |
Not subject
to ECL |
Subject to |
As at December 31, 2018 |
|
12-month
ECL
(Stage 1) |
Life time ECL – not
credit impaired
(Stage 2) |
Life time ECL –
credit impaired
(Stage 3) |
|
Note |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Cash and cash equivalents
|
|
|
|
|
|
|
Risk free Investments
|
|
24,272,784 |
24,272,784 |
– |
– |
– |
Rating 0-4: Investment grade
|
|
10,392,621 |
– |
10,392,621 |
– |
– |
Rating 5-6: Moderate risk
|
|
4,873,484 |
– |
4,873,484 |
– |
– |
Rating 7-8: High risk
|
|
– |
– |
– |
– |
– |
Rating 9: Extreme risk
|
|
– |
– |
– |
– |
– |
Gross carrying amount |
|
39,538,889 |
24,272,784 |
15,266,105 |
– |
– |
Less : Provision for impairment
|
|
4,413 |
– |
4,413 |
– |
– |
Net carrying amount
|
29 |
39,534,476 |
24,272,784 |
15,261,692 |
– |
– |
Placements with banks |
|
|
|
|
|
|
Government Securities (Risk free investments)
|
|
|
|
|
|
|
Rating 0-4: Investment grade
|
|
15,471,661 |
– |
15,471,661 |
– |
– |
Rating 5-6: Moderate risk
|
|
4,437,638 |
– |
4,437,638 |
– |
– |
Rating 7-8 : High risk
|
|
– |
– |
– |
– |
– |
Rating 9: Extreme risk
|
|
– |
– |
– |
– |
– |
Gross carrying amount |
|
19,909,299 |
– |
19,909,299 |
– |
– |
Less: Provision for impairment
|
|
10,784 |
– |
10,784 |
– |
– |
Net carrying amount |
31 |
19,898,515 |
– |
19,898,515 |
– |
– |
Financial assets at amortised cost – Loans and advances to banks |
|
|
|
|
|
|
Government Securities (Risk free investments)
|
|
– |
– |
– |
– |
– |
Rating 0-4: Investment grade
|
|
– |
– |
– |
– |
– |
Rating 5-6: Moderate risk
|
|
763,110 |
– |
763,110 |
– |
– |
Rating 7-8: High risk
|
|
– |
– |
– |
– |
– |
Rating 9: Extreme risk
|
|
– |
– |
– |
– |
– |
Gross carrying amount |
|
763,110 |
– |
763,110 |
– |
– |
Less: Provision for impairment
|
|
36 |
– |
36 |
– |
– |
Net carrying amount |
34 |
763,074 |
– |
763,074 |
– |
– |
Financial assets at amortised cost –
Loans and advances to other customers |
|
|
|
|
|
|
Government Securities (Risk free investments)
|
|
– |
– |
– |
– |
– |
Rating 0-4: Investment grade (*)
|
|
686,400,750 |
– |
622,743,394 |
56,950,508 |
6,706,848 |
Rating 5-6: Moderate risk
|
|
159,144,668 |
– |
119,388,804 |
32,390,548 |
7,365,316 |
Rating 7-8: High risk
|
|
8,209,350 |
– |
3,485,765 |
1,911,451 |
2,812,134 |
Rating 9: Extreme risk
|
|
36,474,600 |
– |
33,654 |
347,685 |
36,093,261 |
Gross carrying amount |
|
890,229,368 |
– |
745,651,617 |
91,600,192 |
52,977,559 |
Less: Provision for impairment
|
|
29,129,053 |
– |
2,659,185 |
5,873,226 |
20,596,642 |
Net carrying amount |
35 |
861,100,315 |
– |
742,992,432 |
85,726,966 |
32,380,917 |
Financial assets at amortised cost – Debt and other
financial instruments/financial investments –
Held to maturity and loans and receivables |
|
|
|
|
|
|
Government Securities (Risk free investments)
|
|
42,521,906 |
42,521,906 |
– |
– |
– |
Rating 0-4: Investment grade (*)
|
|
41,026,809 |
– |
41,026,809 |
– |
– |
Rating 5-6: Moderate risk
|
|
416,346 |
– |
416,346 |
– |
– |
Rating 7-8: High risk
|
|
156,627 |
– |
– |
156,627 |
– |
Rating 9: Extreme risk
|
|
– |
– |
– |
– |
– |
Gross carrying amount
|
|
84,121,688 |
42,521,906 |
41,443,155 |
156,627 |
– |
Less: Provision for Impairment
|
|
266,252 |
– |
262,381 |
3,871 |
– |
Net carrying amount |
36 |
83,855,436 |
42,521,906 |
41,180,774 |
152,756 |
– |
Financial assets measured at fair value through
other comprehensive income/ financial Investments –
Available for sale |
|
|
|
|
|
|
Government Securities (Risk free investments)
|
|
95,458,096 |
95,458,096 |
– |
– |
– |
Rating 0-4: Investment grade
|
|
81,405,180 |
5,222 |
81,399,958 |
– |
– |
Rating 5-6: Moderate risk
|
|
239,147 |
239,147 |
– |
– |
– |
Rating 7-8: High risk
|
|
– |
– |
– |
– |
– |
Rating 9: Extreme risk
|
|
– |
– |
– |
– |
– |
Gross carrying amount
|
|
177,102,423 |
95,702,465 |
81,399,958 |
– |
– |
Less: Provision for impairment
|
|
595,694 |
– |
595,694 |
– |
– |
Net carrying amount
|
37 |
176,506,729 |
95,702,465 |
80,804,264 |
– |
– |
Off-balance sheet (**)
|
|
|
|
|
|
|
Contingent liabilities and commitments
|
|
|
|
|
|
|
(i) Lending commitments
|
|
|
|
|
|
|
Grade 0-6: Investment grade to moderate risk
|
|
161,062,099 |
54,838,863 |
104,605,989 |
1,142,947 |
474,300 |
Grade 7-9: High risk to extreme risk
|
|
– |
– |
– |
– |
– |
Gross carrying amount |
|
161,062,099 |
54,838,863 |
104,605,989 |
1,142,947 |
474,300 |
(ii)
Contingencies |
|
|
|
|
|
|
Grade 0-6: Investment grade to moderate risk
|
|
497,201,464 |
312,347,334 |
183,121,065 |
1,643,105 |
89,960 |
Grade 7-9: High risk to extreme risk
|
|
– |
– |
– |
– |
– |
Gross carrying amount |
|
497,201,464 |
312,347,334 |
183,121,065 |
1,643,105 |
89,960 |
Total contingent liabilities and commitments |
59 |
658,263,563 |
367,186,197 |
287,727,054 |
2,786,052 |
564,260 |
Provision for Impairment
|
59.4 |
726,640 |
– |
528,932 |
89,177 |
108,531 |
(*) Investment grade also include Cash, Gold.
(**) Amounts reported above does not include capital commitments disclosed in the Note 59 on “Contingent Liabilities and Commitments”.
Financial assets at amortised cost – Loans and advances to other customers and contingent liabilities and commitments categorised based on Bank’s internal risk rating and other financial assets are categorised based on external credit rating of respective counterparties.
69.1.1 (b) Maximum exposure to credit risk by risk rating (as per LKAS 39)
The following table sets out information about the credit quality of financial assets classified as available for sale, held to maturity and loans and receivables.
As at December 31, 2017 |
|
Loans and
receivables to
other customers |
Loans and
receivables
to banks |
Financial
investments |
Lending
commitments
and contingencies |
|
Note |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Maximum exposure to credit risk |
|
|
|
|
|
Carrying amount
|
34 to 37 |
737,446,567 |
640,512 |
271,400,274 |
– |
Amount committed/contingencies
|
59 |
– |
– |
– |
563,048,700 |
At amortised cost – Loans and receivable |
|
– |
– |
– |
– |
Government Securities (Risk free investments)
|
|
– |
– |
40,566,702 |
– |
Rating 0-4: Investment grade (*)
|
|
476,843,647 |
– |
8,145,775 |
– |
Rating 5-6: Moderate risk
|
|
249,066,153 |
640,512 |
– |
– |
Rating S: High risk
|
|
2,035,633 |
– |
– |
– |
Rating 7-9: Extreme risk
|
|
26,762,544 |
– |
– |
– |
Gross carrying amount
|
|
754,707,977 |
640,512 |
48,712,477 |
– |
Less: Provision for impairment (individual and collective)
|
|
17,261,410 |
– |
– |
– |
Net carrying amount |
34, 35
and 36 |
737,446,567 |
640,512 |
48,712,477 |
|
Financial investments – Available for sale |
|
– |
– |
– |
– |
Government Securities (Risk free investments)
|
|
– |
– |
154,167,169 |
– |
Rating 0-4: Investment grade
|
|
– |
– |
546,963 |
– |
Rating 5-6: Moderate risk
|
|
– |
– |
– |
– |
Rating S: High risk
|
|
– |
– |
– |
– |
Rating 7-9: Extreme risk
|
|
– |
– |
– |
– |
Gross/net carrying amount |
37 |
– |
– |
154,714,132 |
– |
Financial investments – Held to maturity |
|
– |
– |
|
– |
Government Securities (Risk free investments)
|
|
– |
– |
53,555,302 |
– |
Rating 0-4: Investment grade
|
|
– |
– |
– |
– |
Rating 5-6: Moderate risk
|
|
– |
– |
10,007,450 |
– |
Rating S: High risk
|
|
– |
– |
– |
– |
Rating 7-9: Extreme risk
|
|
– |
– |
– |
– |
Gross/net carrying amount |
36 |
– |
– |
63,562,752 |
– |
Other financial instruments – Held for trading |
|
– |
– |
|
– |
Government Securities (Risk free investments)
|
|
– |
– |
2,357,876 |
– |
Rating 0-4: Investment grade
|
|
– |
– |
314,745 |
– |
Rating 5-6: Moderate risk
|
|
– |
– |
1,738,292 |
– |
Rating S: High risk
|
|
– |
– |
– |
– |
Rating 7-9: Extreme risk
|
|
– |
– |
– |
– |
Gross/net carrying amount |
33 |
– |
– |
4,410,913 |
– |
Total net carrying amount |
|
737,446,567 |
640,512 |
271,400,274 |
– |
Off-balance sheet (**) |
|
|
|
|
|
Maximum exposure |
|
|
|
|
|
Lending commitments |
|
|
|
|
|
Grade 0-6: Investment grade to moderate risk
|
|
– |
– |
– |
124,594,675 |
Contingencies
|
|
– |
– |
– |
– |
Grade 0-6: Investment grade to moderate risk
|
|
– |
– |
– |
438,454,025 |
Total exposure |
59 |
– |
– |
– |
563,048,700 |
(*) Investment grade also include Cash, Gold.
(**) Amounts reported above does not include capital commitments disclosed in the Note 59 on “Contingent Liabilities and Commitments”.
69.1.1 (c) Credit exposure movement – ECL stage-wise
The following tables show reconciliations from the opening to closing balance of the gross carrying amounts by class of financial instrument.
|
Carrying
amount |
Not subject
to ECL |
12-month
ECL
(Stage 1) |
Life time ECL
– not credit
impaired
(Stage 2) |
Life time ECL –
credit impaired
(Stage 3) |
|
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Cash and cash equivalents |
|
|
|
|
|
Gross carrying amount as at January 1, 2018
|
33,224,619 |
23,280,599 |
9,944,020 |
– |
– |
Transfer to Stage 1
|
– |
– |
– |
– |
– |
Transfer to Stage 2
|
– |
– |
– |
– |
– |
Transfer to Stage 3
|
– |
– |
– |
– |
– |
New assets originated or purchased
|
9,557,624 |
992,185 |
8,565,439 |
– |
– |
Financial assets derecognised or repaid (excluding write-offs)
|
(3,243,354) |
– |
(3,243,354) |
– |
– |
As at December 31, 2018 |
39,538,889 |
24,272,784 |
15,266,105 |
– |
– |
Placements with banks |
|
|
|
|
|
Gross carrying amount as at January 1, 2018
|
17,633,269 |
– |
17,633,269 |
– |
– |
Transfer to Stage 1
|
– |
– |
– |
– |
– |
Transfer to Stage 2
|
– |
– |
– |
– |
– |
Transfer to Stage 3
|
– |
– |
– |
– |
– |
New assets originated or purchased
|
19,909,299 |
– |
19,909,299 |
– |
– |
Financial assets derecognised or repaid (excluding write-offs)
|
(17,633,269) |
– |
(17,633,269) |
– |
– |
As at December 31, 2018 |
19,909,299 |
– |
19,909,299 |
– |
– |
Financial assets at amortised cost – Loans and advances to banks |
|
|
|
|
|
Gross carrying amount as at January 1, 2018
|
640,512 |
– |
640,512 |
– |
– |
Transfer to Stage 1
|
– |
– |
– |
– |
– |
Transfer to Stage 2
|
– |
– |
– |
– |
– |
Transfer to Stage 3
|
– |
– |
– |
– |
– |
Foreign exchange adjustments
|
122,598 |
– |
122,598 |
– |
– |
As at December 31, 2018 |
763,110 |
– |
763,110 |
– |
– |
Financial assets at amortised cost –
Loans and advances to other customers |
|
|
|
|
|
Gross carrying amount as at January 1, 2018
|
754,707,977 |
– |
653,127,277 |
69,036,479 |
32,544,221 |
Transfer to Stage 1
|
– |
– |
18,306,726 |
(18,002,628) |
(304,098) |
Transfer to Stage 2
|
– |
– |
(31,715,554) |
37,146,989 |
(5,431,435) |
Transfer to Stage 3
|
– |
– |
(11,470,573) |
(12,389,882) |
23,860,455 |
New assets originated or purchased
|
422,014,584 |
– |
389,231,399 |
29,382,680 |
3,400,505 |
Financial assets derecognised or repaid (excluding write-offs)
|
(308,833,738) |
– |
(271,826,591) |
(27,858,893) |
(9,148,254) |
Write-offs
|
(1,107,207) |
– |
(1,067) |
(9,567) |
(1,096,573) |
Changes to contractual cash flows due to modifications
not resulting in derecognition
|
23,447,752 |
– |
– |
14,295,014 |
9,152,738 |
As at December 31, 2018 |
890,229,368 |
– |
745,651,617 |
91,600,192 |
52,977,559 |
Financial assets at amortised cost – Debt and other financial instruments/
financial investments – Held to maturity and loans and receivables |
|
|
|
|
|
Gross carrying amount as at January 1, 2018
|
71,708,527 |
48,683,362 |
23,025,165 |
– |
– |
Transfer to Stage 1
|
– |
– |
– |
– |
– |
Transfer to Stage 2
|
– |
– |
(156,627) |
156,627 |
– |
Transfer to Stage 3
|
– |
– |
– |
– |
– |
New assets originated or purchased
|
23,331,446 |
5,578,738 |
17,752,708 |
– |
– |
Financial assets derecognised or repaid (excluding write-offs)
|
(14,583,193) |
(12,252,573) |
(2,330,620) |
– |
– |
Foreign exchange adjustments
|
3,664,908 |
512,379 |
3,152,529 |
– |
– |
As at December 31, 2018 |
84,121,688 |
42,521,906 |
41,443,155 |
156,627 |
– |
Financial assets measured at fair value through other
comprehensive income/financial investments – Available for sale |
|
|
|
|
|
Gross carrying amount as at January 1, 2018
|
195,279,170 |
151,910,811 |
43,368,359 |
– |
– |
Transfer to Stage 1
|
– |
– |
– |
– |
– |
Transfer to Stage 2
|
– |
– |
– |
– |
– |
Transfer to Stage 3
|
– |
– |
– |
– |
– |
New assets originated or purchased
|
85,700,610 |
34,181,954 |
51,518,656 |
– |
– |
Financial assets derecognised or repaid (excluding write-offs)
|
(108,535,424) |
(90,390,300) |
(18,145,124) |
– |
– |
Foreign exchange adjustments
|
4,897,118 |
– |
4,897,118 |
– |
– |
Changes to contractual cash flows due to modifications not
resulting in derecognition
|
(239,051) |
– |
(239,051) |
– |
– |
As at December 31, 2018 |
177,102,423 |
95,702,465 |
81,399,958 |
– |
– |
Contingent liabilities and commitments |
|
|
|
|
|
Gross carrying amount as at January 1, 2018
|
563,048,700 |
257,583,082 |
300,521,203 |
3,932,984 |
1,011,431 |
Transfer to Stage 1
|
– |
– |
2,382,299 |
(2,322,013) |
(60,286) |
Transfer to Stage 2
|
– |
– |
(3,329,668) |
3,335,220 |
(5,552) |
Transfer to Stage 3
|
– |
– |
(530,422) |
(175,917) |
706,339 |
New assets originated or purchased
|
533,541,252 |
327,020,220 |
204,279,007 |
1,897,507 |
344,518 |
Financial assets derecognised or repaid (excluding write-offs)
|
(438,326,389) |
(217,417,105) |
(215,595,365) |
(3,881,729) |
(1,432,190) |
As at December 31, 2018 |
658,263,563 |
367,186,197 |
287,727,054 |
2,786,052 |
564,260 |
Opening balances as at January 1, 2018 reported as per SLFRS 9 and reconciliation between SLFRS 9 and LKAS 39 are given in Note 12 on “Transition disclosures”.
69.1.1 (d) Provision for impairment (ECL) movement
The following table shows reconciliations from the opening to closing balance of the provision for impairment by class of financial instrument.
|
|
12-month
ECL
(Stage 1) |
Life time
ECL – not credit
impaired
(Stage 2) |
Life time
ECL – credit
impaired
(Stage 3) |
Total |
|
Note |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
Provision for impairment (ECL) as at January 1, 2018 |
|
5,286 |
– |
– |
5,286 |
Transfer to Stage 1 |
|
– |
– |
– |
– |
Transfer to Stage 2 |
|
– |
– |
– |
– |
Transfer to Stage 3 |
|
– |
– |
– |
– |
Net remeasurement of impairment |
|
(1,577) |
– |
– |
(1,577) |
New assets originated or purchased |
|
4,989 |
– |
– |
4,989 |
Financial assets derecognised or repaid (excluding write-offs)
|
|
(4,862) |
– |
– |
(4,862) |
Foreign exchange adjustments |
|
577 |
– |
– |
577 |
As at December 31, 2018 |
29.1 |
4,413 |
– |
– |
4,413 |
Placements with banks |
|
– |
– |
– |
– |
Provision for impairment (ECL) as at January 1, 2018
|
|
31,533 |
– |
– |
31,533 |
Transfer to Stage 1
|
|
– |
– |
– |
– |
Transfer to Stage 2
|
|
– |
– |
– |
– |
Transfer to Stage 3
|
|
– |
– |
– |
– |
New assets originated or purchased
|
|
9,980 |
– |
– |
9,980 |
Financial assets derecognised or repaid (excluding write-offs)
|
|
(31,533) |
– |
– |
(31,533) |
Foreign exchange adjustments
|
|
804 |
– |
– |
804 |
As at December 31, 2018 |
31.1 |
10,784 |
– |
– |
10,784 |
Financial assets at amortised cost – Loans and advances to banks
|
|
|
|
|
|
Provision for impairment (ECL) as at January 1, 2018
|
|
139 |
– |
– |
139 |
Transfer to Stage 1
|
|
– |
– |
– |
– |
Transfer to Stage 2
|
|
– |
– |
– |
– |
Transfer to Stage 3
|
|
– |
– |
– |
– |
Net remeasurement of impairment
|
|
(103) |
– |
– |
(103) |
As at December 31, 2018 |
34.1 |
36 |
– |
– |
36 |
Financial assets at amortised cost – Loans and advances to other customers |
|
|
|
|
|
Provision for impairment (ECL) as at January 1, 2018
|
|
3,041,886 |
4,165,027 |
14,211,503 |
21,418,416 |
Transfer to Stage 1
|
|
631,565 |
(552,887) |
(78,678) |
– |
Transfer to Stage 2
|
|
(360,245) |
627,849 |
(267,604) |
– |
Transfer to Stage 3
|
|
(96,237) |
(852,199) |
948,436 |
– |
Net remeasurement of impairment
|
|
(1,174,547) |
611,267 |
2,971,392 |
2,408,112 |
New assets originated or purchased
|
|
1,148,995 |
643,753 |
1,595,640 |
3,388,388 |
Financial assets derecognised or repaid (excluding write-offs)
|
|
(543,484) |
(891,569) |
(660,184) |
(2,095,237) |
Write-offs and recoveries
|
|
(800) |
(819) |
(355,284) |
(356,903) |
Foreign exchange adjustments
|
|
12,052 |
4,470 |
278,179 |
294,701 |
Unwinding of discount
|
|
– |
– |
(360,876) |
(360,876) |
Other movements
|
|
– |
– |
10,466 |
10,466 |
Changes to contractual cash flows due to modifications
not resulting in derecognition
|
|
– |
2,118,334 |
2,303,652 |
4,421,986 |
As at December 31, 2018 |
35.2 |
2,659,185 |
5,873,226 |
20,596,642 |
29,129,053 |
Financial assets at amortised cost – Debt and other financial instruments/
financial investments – Held to maturity and loans and receivables |
|
|
|
|
|
Provision for impairment (ECL) as at January 1, 2018
|
|
69,680 |
– |
– |
69,680 |
Transfer to Stage 1
|
|
– |
– |
– |
– |
Transfer to Stage 2
|
|
(691) |
691 |
– |
– |
Transfer to Stage 3
|
|
– |
– |
– |
– |
Net remeasurement of impairment
|
|
65,916 |
3,180 |
– |
69,096 |
New assets originated or purchased
|
|
128,049 |
– |
– |
128,049 |
Financial assets derecognised or repaid (excluding write-offs)
|
|
(573) |
– |
– |
(573) |
As at December 31, 2018 |
36.1 |
262,381 |
3,871 |
– |
266,252 |
Financial assets measured at fair value through other comprehensive
income/financial investments – Available for sale |
|
|
|
|
|
Provision for impairment (ECL) as at January 1, 2018
|
|
194,256 |
– |
– |
194,256 |
Transfer to Stage 1
|
|
– |
– |
– |
– |
Transfer to Stage 2
|
|
– |
– |
– |
– |
Transfer to Stage 3
|
|
– |
– |
– |
– |
Net remeasurement of impairment
|
|
109,424 |
– |
– |
109,424 |
New assets originated or purchased
|
|
372,576 |
– |
– |
372,576 |
Financial assets derecognised or repaid (excluding write-offs)
|
|
(80,562) |
– |
– |
(80,562) |
As at December 31, 2018 |
37.2 |
595,694 |
– |
– |
595,694 |
Contingent liabilities and commitments |
|
|
|
|
|
Provision for impairment (ECL) as at January 1, 2018
|
|
656,764 |
111,946 |
78,949 |
847,659 |
Transfer to Stage 1
|
|
52,852 |
(27,051) |
(25,801) |
– |
Transfer to Stage 2
|
|
(9,201) |
9,557 |
(356) |
– |
Transfer to Stage 3
|
|
(559) |
(3,920) |
4,479 |
– |
Net remeasurement of impairment
|
|
(47,426) |
20,362 |
24,163 |
(2,901) |
New assets originated or purchased
|
|
343,083 |
72,898 |
97,571 |
513,552 |
Financial assets derecognised or repaid (excluding write-offs)
|
|
(469,481) |
(94,615) |
(70,474) |
(634,570) |
Foreign exchange adjustments
|
|
2,900 |
– |
– |
2,900 |
As at December 31, 2018 |
59.4 |
528,932 |
89,177 |
108,531 |
726,640 |
69.1.1 (e) Age analysis by class of financial assets
The maximum exposure to credit risk for class of financial assets by risk rating and by age are
given below:
As at December 31, 2017 |
Loans and
receivables to
other customers |
Loans and
receivables to
banks |
Financial
investments |
Lending
commitments
and
contingencies |
|
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Government Securities (Risk free investments) |
– |
– |
250,647,049 |
– |
Gross carrying amount |
– |
– |
250,647,049 |
– |
Neither past due nor individually impaired |
|
|
|
|
Rating 0-4: Investment grade
|
472,230,045 |
– |
9,007,483 |
282,344,809 |
Rating 5-6: Moderate risk
|
244,352,749 |
640,512 |
11,745,742 |
280,703,891 |
Gross carrying amount |
716,582,794 |
640,512 |
20,753,225 |
563,048,700 |
Past due but not individually impaired |
|
|
|
|
Less than 3 months
|
8,160,289 |
– |
– |
– |
3 to 6 months
|
856,410 |
– |
– |
– |
6 to 12 months
|
724,801 |
– |
– |
– |
12 to 18 months
|
469,520 |
– |
– |
– |
More than 18 months
|
4,870,915 |
– |
– |
– |
Gross carrying amount |
15,081,935 |
– |
– |
– |
Individually impaired |
|
|
|
|
Less than 3 months
|
12,533,705 |
– |
– |
– |
3 to 6 months
|
1,292,185 |
– |
– |
– |
6 to 12 months
|
404,605 |
– |
– |
– |
12 to 18 months
|
1,209,297 |
– |
– |
– |
More than 18 months
|
7,603,456 |
– |
– |
– |
Gross carrying amount |
23,043,248 |
– |
– |
– |
Total gross carrying amount |
754,707,977 |
640,512 |
271,400,274 |
563,048,700 |
Less: Provision for impairment |
|
|
|
|
Individual
|
7,853,654 |
– |
– |
– |
Collective
|
9,407,756 |
– |
– |
– |
Total provision for impairment
|
17,261,410 |
– |
– |
– |
Total net carrying amount |
737,446,567 |
640,512 |
271,400,274 |
563,048,700 |
The methodology of the impairment assessment is explained in the Note 19.
69.1.1 (f) Credit quality by class of financial assets
The table below shows the credit quality by the class of asset for all financial assets exposed to credit risk,
based on the Bank’s internal credit rating:
|
|
Neither past due nor individually impaired |
|
|
|
As at December 31, 2017 |
|
Government
guarantee |
Investment
grade |
Moderate
risk |
Past due but
not individually
impaired |
Individually
impaired |
Total |
|
Note |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Cash and cash equivalents
|
29 |
– |
33,224,619 |
– |
– |
– |
33,224,619 |
Balances with central banks
|
30 |
44,801,446 |
– |
– |
– |
– |
44,801,446 |
Placements with banks
|
31 |
– |
17,633,269 |
– |
– |
– |
17,633,269 |
Securities purchased under resale
agreements
|
|
– |
– |
– |
– |
– |
– |
Derivative financial assets
|
32 |
– |
2,334,536 |
– |
– |
– |
2,334,536 |
Other financial instruments –
Held for trading
|
33 |
2,357,876 |
314,745 |
1,738,292 |
– |
– |
4,410,913 |
Loans and receivables to banks
|
34 |
– |
– |
640,512 |
– |
– |
640,512 |
Loans and receivables to other customers |
35 |
– |
469,669,456 |
242,786,716 |
9,800,801 |
15,189,594 |
737,446,567 |
Corporate banking
|
|
– |
249,817,145 |
86,639,832 |
5,776,899 |
3,931,899 |
346,165,775 |
Amortised cost
|
|
– |
251,613,579 |
87,342,167 |
6,116,798 |
6,517,529 |
351,590,073 |
Less: Provision for impairment
|
|
– |
1,796,434 |
702,335 |
339,899 |
2,585,630 |
5,424,298 |
Personal banking |
|
– |
219,852,311 |
156,146,884 |
4,023,902 |
11,257,695 |
391,280,792 |
Amortised cost
|
|
– |
220,616,463 |
157,010,582 |
8,965,140 |
16,525,719 |
403,117,904 |
Less: Provision for impairment
|
|
– |
764,152 |
863,698 |
4,941,238 |
5,268,024 |
11,837,112 |
Financial investments – Held to maturity |
36 |
63,562,752 |
– |
– |
– |
– |
63,562,752 |
Government Securities
|
|
63,562,752 |
– |
– |
– |
– |
63,562,752 |
Other investments
|
|
– |
– |
– |
– |
– |
– |
Financial investments –
Loans and receivables
|
36 |
40,566,702 |
8,145,775 |
– |
– |
– |
48,712,477 |
Government securities
|
|
40,566,702 |
– |
– |
– |
– |
40,566,702 |
Other investments
|
|
– |
8,145,775 |
– |
– |
– |
8,145,775 |
Financial investments – Available for sale |
37 |
154,167,169 |
546,963 |
– |
– |
– |
154,714,132 |
Government Securities
|
|
154,167,169 |
– |
– |
– |
– |
154,167,169 |
Quoted shares
|
|
– |
500,278 |
– |
– |
– |
500,278 |
Unquoted shares
|
|
– |
46,685 |
– |
– |
– |
46,685 |
Investment in unit trusts
|
|
– |
– |
– |
– |
– |
– |
Total |
|
305,455,945 |
531,869,363 |
245,165,520 |
9,800,801 |
15,189,594 |
1,107,481,223 |
69.1.1 (g) Financial assets recognised through profit or loss(FVTPL)/ held-for-trading measured at fair value
Held-for-trading investments in debt and equity securities
The table below sets out the credit quality of debt and equity securities classified as financial assets recognised through profit or loss/held-for-trading measured at fair value. Debt securities include investments made by the Bank in Government Securities of Sri Lanka and Bangladesh. The analysis of equity securities is based on Fitch Rating Nomenclature or Equivalent Ratings, where applicable.
|
Note |
2018 |
2017 |
|
Rs. ’000 |
Rs. ’000 |
Debt instruments at FVTPL |
|
|
|
Government Securities – Sri Lanka |
|
|
|
Treasury bills
|
|
1,947,069 |
654,438 |
Treasury bonds
|
|
729,974 |
1,703,438 |
Government Securities – Bangladesh |
|
|
|
Treasury bills
|
|
1,722,637 |
278,618 |
Treasury bonds
|
|
351,680 |
1,459,674 |
Subtotal – Debt instruments at FVTPL |
|
4,751,360 |
4,096,168 |
Equity instruments at FVTPL |
|
|
|
Rated AAA
|
|
21,958 |
12,341 |
Rated AA+ to AA-
|
|
12,798 |
16,492 |
Rated A+ to A
|
|
523,574 |
60,879 |
Rated BBB+
|
|
7,138 |
5,710 |
Unrated
|
|
203,339 |
219,323 |
Subtotal – Equity instruments at FVTPL |
|
768,807 |
314,745 |
Total |
33 |
5,520,167 |
4,410,913 |
Credit exposure arising from derivative transactions
Credit risk arising from derivative financial instruments at any time is limited to those with positive fair values, as reported in the Statement of Financial Position. With gross settled derivatives, the Bank is also exposed to a settlement risk, being the risk that the counterparty failing to deliver the counter value.
The tables below show analysis of credit exposures arising from derivative financial assets and liabilities:
As at December 31, 2018 |
Derivative type |
|
Forward |
SWAPS |
Spot |
Total |
|
Notional
amount |
Fair
value |
Notional
amount |
Fair
value |
Notional
amount |
Fair
value |
Notional
amount |
Fair
value |
|
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Derivative financial assets (Note 1)
|
53,846,072 |
3,340,657 |
97,890,850 |
4,567,868 |
4,189,939 |
1,437 |
155,926,861 |
7,909,962 |
Derivative financial liabilities (Note 2)
|
38,630,808 |
(2,069,807) |
85,093,565 |
(5,946,484) |
2,255,444 |
(5,492) |
125,979,817 |
(8,021,783) |
Note 1 |
|
|
|
|
|
|
|
|
Derivative financial assets by
counterparty type |
|
|
|
|
|
|
|
|
With banks
|
11,448,568 |
502,967 |
97,019,953 |
4,560,325 |
1,808,638 |
613 |
110,277,159 |
5,063,905 |
Other customers
|
42,397,504 |
2,837,690 |
870,897 |
7,543 |
2,381,301 |
824 |
45,649,702 |
2,846,057 |
Total |
53,846,072 |
3,340,657 |
97,890,850 |
4,567,868 |
4,189,939 |
1,437 |
155,926,861 |
7,909,962 |
Note 2 |
|
|
|
|
|
|
|
|
Derivative financial liabilities
by counterparty type |
|
|
|
|
|
|
|
|
With banks
|
24,576,549 |
(1,219,725) |
79,194,194 |
(5,308,624) |
703,977 |
(474) |
104,474,720 |
(6,528,823) |
Other customers
|
14,054,259 |
(850,082) |
5,899,371 |
(637,860) |
1,551,467 |
(5,018) |
21,505,097 |
(1,492,960) |
Total |
38,630,808 |
(2,069,807) |
85,093,565 |
(5,946,484) |
2,255,444 |
(5,492) |
125,979,817 |
(8,021,783) |
As at December 31, 2017 |
Derivative type |
|
Forward |
SWAPS |
Spot |
Total |
|
Notional
amount |
Fair
value |
Notional
amount |
Fair
value |
Notional
amount |
Fair
value |
Notional
amount |
Fair
value |
|
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Derivative financial assets (Note 1)
|
35,831,935 |
1,264,900 |
80,896,084 |
1,067,259 |
4,432,721 |
2,377 |
121,160,740 |
2,334,536 |
Derivative financial liabilities (Note 2)
|
26,602,410 |
(1,015,648) |
83,904,746 |
(2,660,838) |
1,569,843 |
(2,008) |
112,076,999 |
(3,678,494) |
Note 1 |
|
|
|
|
|
|
|
|
Derivative financial assets by
counterparty type |
|
|
|
|
|
|
|
|
With banks
|
10,081,268 |
170,229 |
78,629,102 |
972,827 |
3,617,099 |
2,375 |
92,327,469 |
1,145,431 |
Other customers
|
25,750,667 |
1,094,671 |
2,266,982 |
94,432 |
815,622 |
2 |
28,833,271 |
1,189,105 |
Total |
35,831,935 |
1,264,900 |
80,896,084 |
1,067,259 |
4,432,721 |
2,377 |
121,160,740 |
2,334,536 |
Note 2 |
|
|
|
|
|
|
|
|
Derivative financial liabilities
by counterparty type |
|
|
|
|
|
|
|
|
With banks
|
3,146,244 |
(61,900) |
83,904,746 |
(2,660,838) |
1,569,843 |
(2,008) |
88,620,833 |
(2,724,746) |
Other customers
|
23,456,166 |
(953,748) |
– |
– |
– |
– |
23,456,166 |
(953,748) |
Total |
26,602,410 |
(1,015,648) |
83,904,746 |
(2,660,838) |
1,569,843 |
(2,008) |
112,076,999 |
(3,678,494) |
69.1.2 Credit-impaired financial assets
Reconciliation of changes in the net carrying amount of life time ECL credit impaired (Stage 3) loans and advances as detailed below:
As at December 31, |
2018 |
|
Rs. ’000 |
Stage 3 loans and advances to other customers as at January 1,
|
18,332,717 |
Newly classified as impaired loans and advances during the year
|
23,569,470 |
Net change in already impaired loans and advances during the year
|
(1,055,006) |
Net payment, write-off and recoveries and other movement during the year
|
(8,466,264) |
Impaired loans and advances to customers as at December 31, |
32,380,917 |
Reconciliation of changes in the net carrying amount of individually impaired loans and advances as detailed below:
As at December 31, |
|
2017 |
|
|
Rs. ’000 |
Impaired loans and advances to other customers as at January 1,
|
|
13,648,620 |
Newly classified as impaired loans and advances during the year
|
|
8,177,859 |
Net change in already impaired loans and advances during the year
|
|
361,095 |
Net payment, write-off and recoveries and other movement during the year
|
|
(6,997,980) |
Impaired loans and advances to customers as at December 31, |
|
15,189,594 |
Refer Note 19 for methodology of impairment assessment, on “Impairment losses on loans and advances to other customers”.
Details of provision for impairment for loans and advances to other customers, are detailed in Note 35.
Set out below is an analysis of the gross and net carrying amounts of life time ECL credit impaired (Stage 3) loans and advances to other customers by risk rating:
As at December 31, |
2018 |
|
Gross carrying
amount |
Net carrying
amount |
|
Rs. ’000 |
Rs. ’000 |
Rating 0-4: Investment grade
|
6,706,848 |
6,473,040 |
Rating 5-6: Moderate risk
|
7,365,316 |
7,093,268 |
Rating 7-8 : High risk
|
2,812,134 |
2,320,231 |
Rating 9: Extreme risk
|
36,093,261 |
16,494,378 |
Total |
52,977,559 |
32,380,917 |
Set out below is an analysis of the gross and net carrying amounts of individually impaired loans and advances to other customers
by risk rating.
As at December 31, |
2017 |
|
Gross carrying
amount |
Net carrying
amount |
|
Rs. ’000 |
Rs. ’000 |
Rating 0-4: Investment grade
|
4,613,603 |
4,470,693 |
Rating 5-6: Moderate risk
|
4,713,404 |
4,600,908 |
Rating S : High risk
|
763,567 |
642,017 |
Rating 7-9: Extreme risk
|
12,952,674 |
5,475,976 |
Total |
23,043,248 |
15,189,594 |
69.1.3 Sensitivity of impairment provision on loans and advances to other customers
The Bank has estimated the impairment provision on loans and advances to other customers as at December 31, 2018, subject to various assumptions. The changes to such assumptions may lead to changes in inputs used for the computation of the impairment provision.
The following table demonstrates the sensitivity of the impairment provision of the Bank as at December 31, 2018 to a reasonably possible change in PDs, LGDs and forward looking information.
Sensitivity on ECL |
Sensitivity effect on Statement of Financial Position
[Increase/(Decrease) in impairment provision] |
Sensitivity effect
on Income
Statement
(Rs. ’000) |
|
Stage 1
(Rs. ’000) |
Stage 2
(Rs. ’000) |
Stage 3
(Rs. ’000) |
Total
(Rs. ’000) |
PD 1% increase across all age buckets |
1,593,338 |
467,401 |
– |
2,060,739 |
(2,060,739) |
PD 1% decrease across all age buckets * |
(1,228,148) |
(346,349) |
– |
(1,574,497) |
1,574,497 |
LGD 5% increase |
392,875 |
863,216 |
980,975 |
2,237,066 |
(2,237,066) |
LGD 5% decrease * |
(390,600) |
(859,138) |
(976,572) |
(2,226,310) |
2,226,310 |
Probability weighted Economic Scenarios |
|
|
|
|
|
– Base case 10% increase, worst case 5% decrease and best case 5% decrease |
(4,387) |
(7,014) |
– |
(11,401) |
11,401 |
– Base case 10% decrease, worst case 5% increase and best case 5% increase |
4,382 |
7,342 |
– |
11,724 |
(11,724) |
* The PD/LGD decrease is capped to 0%, if applicable.
69.1.4 Collateral held
Loan-to-value ratio of residential mortgage lending
The table below stratifies eligible credit exposures by ranges of loan-to-value (LTV) ratio. LTV is calculated as the ratio of the gross amount of the loan to the value of the collateral, which is used for the computation of Capital Adequecy Ratios. The value of the collateral for residential mortgage loan is based on the forced sale value determined by professional valuers.
As at December 31, |
2018 |
2017 |
|
Rs. ’000 |
Composition (%) |
Rs. ’000 |
Composition (%) |
LTV ratio |
|
|
|
|
Less than 50%
|
10,948,270 |
27.20 |
11,804,905 |
29.83 |
51% – 70%
|
8,888,518 |
22.08 |
8,952,662 |
22.62 |
71% – 90%
|
11,025,696 |
27.39 |
10,466,905 |
26.45 |
91% – 100%
|
1,807,976 |
4.50 |
1,600,415 |
4.04 |
More than 100% *
|
7,576,759 |
18.83 |
6,745,986 |
17.06 |
|
40,247,219 |
100.00 |
39,570,873 |
100.00 |
* LTV ratio of more than 100% has been arisen due to subsequent disbursements made to the borrower after the initial valuation of the property (the denominator).
Assets obtained by taking the possession of collaterals
Repossession of collaterals is resorted to in extreme situations where action is necessitated to recover the dues. The repossessed assets are disposed, in an orderly and transparent manner and the proceeds are used to reduce or recover the outstanding claims and the amount recovered in excess of the dues is refunded to the customer.
69.1.5 Concentration of credit risk
By setting various concentration limits under different criteria within the established risk appetite framework (i.e., single borrower/group,
industry sectors, product, counterparty and country etc.), the Bank ensures that an acceptable level of risk diversification is maintained
on an ongoing basis. These limits are continuously monitored and periodically reviewed by the Credit Policy Committee, the Executive
Integrated Risk Management Committee and the Board Integrated Risk Management Committee to capture the developments in the
market, political and economic environment both locally and globally to strengthen the dynamic portfolio management practices and
to provide an early warning on possible credit concentrations.
The maximum exposure to credit risk in respect of each item of financial assets in the Statement of Financial Position as at December 31,
as per industry sector and by geographical region of financial assets is given below:
69.1.5 (a) Industry wise distribution
As at December 31, 2018 |
Agriculture,
Forestry and
Fishing |
Manufacturing |
Tourism |
Transportation
and storage |
Construction |
Infrastructure
development |
Wholesale and
retail trade |
Information
technology and
communication
services |
Financial
services |
Professional,
scientific and
technical
activities |
Arts,
entertainment
and recreation |
Education |
Healthcare,
social
services and
support
services |
Consumption |
Lending to
overseas
entities |
Total |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
– |
– |
– |
– |
– |
– |
– |
– |
39,534,476 |
– |
– |
– |
– |
– |
– |
39,534,476 |
Balances with central banks
|
– |
– |
– |
– |
– |
– |
– |
– |
54,384,590 |
– |
– |
– |
– |
– |
– |
54,384,590 |
Placements with banks
|
– |
– |
– |
– |
– |
– |
– |
– |
19,898,515 |
– |
– |
– |
– |
– |
– |
19,898,515 |
Securities purchased under
resale agreements
|
– |
– |
– |
– |
– |
– |
– |
– |
9,513,512 |
– |
– |
– |
– |
– |
– |
9,513,512 |
Derivative financial assets
|
144,810 |
1,850,312 |
9,420 |
– |
12 |
– |
254,533 |
5 |
5,636,056 |
– |
– |
13,913 |
– |
901 |
– |
7,909,962 |
Financial assets recognised through
profit or loss/Held for trading
|
2,028 |
47,212 |
4,848 |
– |
30,897 |
– |
103,084 |
9,587 |
5,290,863 |
– |
– |
– |
31,648 |
– |
– |
5,520,167 |
Government securities
|
– |
– |
|
|
|
|
|
|
4,751,360 |
|
|
|
|
|
|
4,751,360 |
Quoted equity securities
|
2,028 |
47,212 |
4,848 |
– |
30,897 |
– |
103,084 |
9,587 |
539,503 |
– |
– |
– |
31,648 |
– |
– |
768,807 |
Financial assets at amortised cost –
loans and advances to banks
|
– |
– |
– |
– |
– |
– |
– |
– |
763,074 |
– |
– |
– |
– |
– |
– |
763,074 |
Financial assets at amortised cost –
loans and advances to other customers |
81,667,447 |
98,451,570 |
56,566,467 |
10,892,443 |
38,586,302 |
18,888,958 |
208,633,620 |
13,204,339 |
39,550,148 |
22,979,537 |
917,964 |
2,573,713 |
18,134,481 |
164,968,496 |
85,084,830 |
861,100,315 |
Loans and advances*
|
81,667,447 |
98,451,570 |
56,566,467 |
10,892,443 |
38,586,302 |
18,888,958 |
208,633,620 |
13,204,339 |
39,550,148 |
22,979,537 |
917,964 |
2,573,713 |
18,134,481 |
164,968,496 |
85,084,830 |
861,100,315 |
Financial assets at amortised cost –
debt and other financial instruments/
financial investments – Held to maturity
and loans & receivables
|
– |
– |
– |
– |
152,756 |
– |
1,868,572 |
– |
81,834,108 |
– |
– |
– |
– |
– |
– |
83,855,436 |
Government securities
|
– |
– |
– |
– |
– |
– |
– |
– |
77,226,928 |
– |
– |
– |
– |
– |
– |
77,226,928 |
Other investments
|
– |
– |
– |
– |
152,756 |
– |
1,868,572 |
– |
4,607,180 |
– |
– |
– |
– |
– |
– |
6,628,508 |
Financial assets measured at fair value
through other comprehensive income/
financial investments – available for sale |
– |
9,642 |
– |
– |
180,285 |
– |
– |
– |
176,308,182 |
8,620 |
– |
– |
– |
– |
– |
176,506,729 |
Government securities
|
– |
– |
– |
– |
– |
– |
– |
– |
176,262,360 |
– |
– |
– |
– |
– |
– |
176,262,360 |
Equity securities
|
– |
9,642 |
– |
– |
180,285 |
– |
– |
– |
45,822 |
8,620 |
– |
– |
– |
– |
– |
244,369 |
Total |
81,814,285 |
100,358,736 |
56,580,735 |
10,892,443 |
38,950,252 |
18,888,958 |
210,859,809 |
13,213,931 |
432,713,524 |
22,988,157 |
917,964 |
2,587,626 |
18,166,129 |
164,969,397 |
85,084,830 |
1,258,986,776 |
* Loans and advances to other customers referred above do not agree with the Note 35.1 (c-i) since the amounts presented are net of impairment provisions.
In 2018, industry-wise distribution note has been prepared based on the new CBSL classification.
As at December 31, 2017 |
Agriculture
and fishing |
Manufacturing |
Tourism |
Transport |
Construction |
Traders |
New economy |
Financial and
business
services |
Government |
Infrastructure |
Other services |
Other
customers |
Total |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
– |
– |
– |
– |
– |
– |
– |
33,224,619 |
– |
– |
– |
– |
33,224,619 |
Balances with central banks
|
– |
– |
– |
– |
– |
– |
– |
|
44,801,446 |
– |
– |
– |
44,801,446 |
Placements with banks
|
– |
– |
– |
– |
– |
– |
– |
17,633,269 |
– |
– |
– |
– |
17,633,269 |
Securities purchased under resale
agreements
|
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
Derivative financial assets
|
– |
2,261 |
– |
– |
– |
586,294 |
– |
1,745,507 |
– |
– |
474 |
– |
2,334,536 |
Other financial instruments –
Held for trading
|
– |
107,107 |
5,732 |
– |
27,781 |
26,674 |
48,207 |
78,102 |
4,096,168 |
21,142 |
– |
– |
4,410,913 |
Government Securities
|
– |
– |
|
|
|
|
|
|
4,096,168 |
|
|
|
4,096,168 |
Equity securities – Quoted shares
|
– |
107,107 |
5,732 |
– |
27,781 |
26,674 |
48,207 |
78,102 |
– |
21,142 |
– |
– |
314,745 |
Loans and receivables to banks
|
– |
– |
– |
– |
– |
– |
– |
640,512 |
– |
– |
– |
– |
640,512 |
Loans and receivables to other customers*
|
68,713,903 |
112,807,745 |
44,937,470 |
16,820,822 |
104,314,394 |
110,304,070 |
17,031,993 |
47,045,113 |
– |
20,086,388 |
62,567,873 |
132,816,796 |
737,446,567 |
Financial investments – Available for sale |
– |
13,213 |
– |
– |
141,093 |
– |
– |
392,657 |
154,167,169 |
– |
– |
– |
154,714,132 |
Government securities
|
– |
– |
– |
– |
– |
– |
– |
– |
154,167,169 |
– |
– |
– |
154,167,169 |
Equity securities – Quoted shares
|
– |
13,213 |
– |
– |
141,093 |
– |
– |
345,972 |
– |
– |
– |
– |
500,278 |
Equity securities – Unquoted shares |
– |
– |
– |
– |
– |
– |
– |
46,685 |
– |
– |
– |
– |
46,685 |
Investment in unit trusts
|
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
Financial investments –
Held to maturity
|
– |
– |
– |
– |
– |
– |
– |
– |
63,562,752 |
– |
– |
– |
63,562,752 |
Government Securities
|
– |
– |
– |
– |
– |
– |
– |
– |
63,562,752 |
– |
– |
– |
63,562,752 |
Financial investments –
Loans and receivables
|
– |
2,233,016 |
– |
– |
– |
997,423 |
– |
4,678,169 |
40,566,702 |
– |
237,167 |
– |
48,712,477 |
Government Securities
|
– |
– |
– |
– |
– |
– |
– |
– |
40,566,702 |
– |
– |
– |
40,566,702 |
Investment in unit trusts
|
– |
2,233,016 |
– |
– |
– |
997,423 |
– |
4,678,169 |
– |
– |
237,167 |
|
8,145,775 |
Total |
68,713,903 |
115,163,342 |
44,943,202 |
16,820,822 |
104,483,268 |
111,914,461 |
17,080,200 |
105,437,948 |
307,194,237 |
20,107,530 |
62,805,514 |
132,816,796 |
1,107,481,223 |
(*) Loans and advances to other customers referred above do not agree with the Note 35.1 (c-i) due to impairment provisions.
69.1.5 (b) Geographical distribution of loans and advances
The Western Province has recorded a higher percentage of lending based on geographical distribution of the Bank’s lending portfolio. It has accounted for 77% (approximately) of total advances portfolio of the Bank (excluding Bangladesh operations) as at December 31, 2018. Although, Western Province is attracted with highest credit concentration, we believe that a sizable portion of these lending has been utilised to facilitate industries scattered around the country. For example, most of the large corporates which have island-wide operations are being accommodated by the branches and corporate banking division situated in the Western Province and thereby reflecting a fairly diversified geographical concentration contrary to the figures given below:
As at December 31, 2018
Country/province |
Loans and advances by product |
|
Overdrafts
Rs.’000 |
Trade
finance
Rs.’000 |
Lease
receivables
Rs.’000 |
Credit
cards
Rs.’000 |
Pawning
Rs.’000 |
Staff
loans
Rs.’000 |
Housing
loans
Rs.’000 |
Personal
loans
Rs.’000 |
Long–term
loans
Rs.’000 |
Short–term
loans
Rs.’000 |
Bills of
exchange
Rs.’000 |
Total
Rs.’000 |
Sri Lanka
|
|
|
|
|
|
|
|
|
|
|
|
|
Central
|
12,368,967 |
324,872 |
1,712,947 |
733,356 |
53,850 |
– |
3,501,982 |
1,800,433 |
22,507,179 |
1,877,627 |
77,610 |
44,958,823 |
Eastern
|
837,297 |
80,053 |
706,974 |
198,809 |
35,451 |
– |
497,996 |
747,745 |
2,216,533 |
564,293 |
– |
5,885,151 |
North Central
|
805,965 |
82,445 |
1,494,023 |
204,983 |
15,137 |
– |
634,625 |
1,332,540 |
4,770,804 |
937,344 |
– |
10,277,866 |
Northern
|
3,143,610 |
87,895 |
1,693,133 |
253,598 |
533,642 |
– |
1,019,034 |
1,026,339 |
4,751,635 |
794,454 |
– |
13,303,340 |
North Western
|
6,935,115 |
1,108,179 |
3,074,187 |
675,442 |
127,025 |
– |
3,600,616 |
2,381,712 |
13,177,842 |
1,840,553 |
29,935 |
32,950,606 |
Sabaragamuwa
|
5,642,132 |
557,051 |
2,605,371 |
436,668 |
52,130 |
– |
2,959,708 |
1,234,729 |
9,822,913 |
734,262 |
43,195 |
24,088,159 |
Southern
|
6,295,802 |
1,595,289 |
3,810,335 |
728,965 |
97,658 |
– |
5,478,350 |
2,456,355 |
14,566,446 |
977,492 |
27,975 |
36,034,667 |
Uva
|
1,554,385 |
4,711 |
1,014,336 |
223,610 |
21,940 |
– |
2,058,215 |
827,396 |
5,039,094 |
474,082 |
– |
11,217,769 |
Western
|
91,827,217 |
67,267,786 |
21,210,246 |
8,698,453 |
608,281 |
9,127,287 |
40,600,871 |
21,432,269 |
241,468,259 |
89,931,190 |
5,127,244 |
597,299,103 |
Bangladesh
|
7,358,447 |
5,808,033 |
493,995 |
100,803 |
– |
171,191 |
821,429 |
541,227 |
13,970,300 |
36,430,294 |
19,389,112 |
85,084,831 |
Total |
136,768,937 |
76,916,314 |
37,815,547 |
12,254,687 |
1,545,114 |
9,298,478 |
61,172,826 |
33,780,745 |
332,291,005 |
134,561,591 |
24,695,071 |
861,100,315 |
As at December 31, 2017
Country/province |
Loans and advances by product |
|
Overdrafts
Rs.’000 |
Trade
finance
Rs.’000 |
Lease
receivables
Rs.’000 |
Credit
cards
Rs.’000 |
Pawning
Rs.’000 |
Staff
loans
Rs.’000 |
Housing
loans
Rs.’000 |
Personal
loans
Rs.’000 |
Long–term
loans
Rs.’000 |
Short–term
loans
Rs.’000 |
Bills of
exchange
Rs.’000 |
Total
Rs.’000 |
Sri Lanka
|
|
|
|
|
|
|
|
|
|
|
|
|
Central
|
9,105,845 |
234,423 |
1,916,498 |
411,761 |
45,545 |
– |
3,068,331 |
1,477,341 |
18,850,775 |
1,475,025 |
10,947 |
36,596,491 |
Eastern
|
1,117,710 |
30,735 |
627,422 |
96,299 |
24,244 |
– |
359,754 |
530,338 |
2,204,475 |
138,066 |
– |
5,129,043 |
North Central
|
1,106,922 |
87,888 |
1,502,978 |
105,245 |
9,554 |
– |
563,567 |
424,136 |
5,643,030 |
369,027 |
– |
9,812,347 |
Northern
|
2,526,778 |
95,605 |
1,216,214 |
117,523 |
430,787 |
– |
737,940 |
777,142 |
3,536,515 |
434,081 |
– |
9,872,585 |
North Western
|
6,748,789 |
948,591 |
2,956,376 |
356,880 |
117,380 |
– |
3,301,358 |
1,833,343 |
12,636,399 |
1,737,537 |
8,657 |
30,645,310 |
Sabaragamuwa
|
5,023,234 |
544,685 |
2,638,106 |
213,385 |
46,153 |
– |
2,863,952 |
950,615 |
8,441,449 |
805,885 |
137,733 |
21,665,197 |
Southern
|
6,014,775 |
1,464,661 |
3,603,623 |
388,474 |
89,707 |
– |
4,908,557 |
1,948,311 |
13,632,876 |
968,028 |
10,519 |
33,029,531 |
Uva
|
1,516,886 |
25,906 |
1,006,287 |
121,106 |
16,417 |
– |
1,832,132 |
629,553 |
4,376,394 |
425,507 |
– |
9,950,188 |
Western
|
76,142,919 |
50,154,096 |
21,747,218 |
6,956,843 |
555,710 |
7,831,111 |
34,700,747 |
18,696,937 |
225,372,988 |
75,412,905 |
3,941,857 |
521,513,331 |
Bangladesh
|
5,193,417 |
3,925,396 |
258,288 |
58,047 |
– |
117,336 |
476,542 |
385,564 |
10,368,545 |
25,758,410 |
12,690,999 |
59,232,544 |
Total |
114,497,275 |
57,511,986 |
37,473,010 |
8,825,563 |
1,335,497 |
7,948,447 |
52,812,880 |
27,653,280 |
305,063,446 |
107,524,471 |
16,800,712 |
737,446,567 |
Please refer Note 35 for the gross carrying amount of the loans and advances to other customers.
69.2 Liquidity risk
Liquidity risk is the Bank’s inability to meet on or off-balance sheet contractual and contingent financial obligations, as they fall due without incurring unacceptable losses. The principal objective in liquidity risk management is to assess the need for funds to meet such obligations and to ensure the availability of adequate funding to fulfil those needs at the appropriate time, under both normal and stressed conditions.
Therefore, the Bank continuously analyses and monitors its liquidity profile, maintains adequate levels of high quality liquid assets, ensures access to diverse funding sources and has contingency funding agreements with peer banks to meet any unforeseen liquidity requirements. Exposures and ratios against tolerance limits as well as stressed scenarios are regularly monitored in order to identify the Bank’s liquidity position and potential funding requirements.
Assets and Liability Management Committee (ALCO)
ALCO chaired by the Managing Director, has representatives from Treasury, Corporate Banking, Personal Banking, Risk and Finance Departments. The Committee meets fortnightly or more frequently to monitor and manage the assets and liabilities of the Bank and also the overall liquidity position to keep the Banks’ liquidity at healthy levels, whilst satisfying the regulatory requirements.
69.2.1 Exposure to liquidity risk
The key measure used by the Bank for managing liquidity risk is the ratio of liquid assets to total liabilities excluding shareholders’ funds. For this purpose, “liquid assets” include cash and cash equivalents, placements with banks and Government Securities (net). Details of the reported ratio of liquid assets to external liabilities of the Domestic Banking Unit (DBU) and the Off shore Banking Centre (OBC) as at reporting dates are as follows:
|
Domestic Banking Unit |
Off shore Banking Centre |
|
2018
% |
2017
% |
2018
% |
2017
% |
As at December 31,
|
24.47 |
27.28 |
30.20 |
30.95 |
Average for the period
|
25.43 |
26.66 |
30.81 |
31.72 |
Maximum for the period
|
28.82 |
27.98 |
39.21 |
37.00 |
Minimum for the period
|
23.80 |
25.75 |
27.30 |
27.80 |
Statutory minimum requirement
|
20.00 |
20.00 |
20.00 |
20.00 |
The graph below depicts the trends in liquidity ratios of the Bank calculated on a quarterly basis during the period from December 2017 to December 2018:
69.2.2 Maturity analysis of financial assets and financial liabilities
69.2.2 (a) Remaining contractual period to maturity – Bank
(i) Remaining contractual period to maturity of the assets employed by the Bank as at December 31, is detailed below:
As at December 31, |
Up to 3
months |
3 to 12
months |
1 to 3
years |
3 to 5
years |
More than
5 years |
Total as at
December 31,
2018 |
Total as at
December 31,
2017 |
|
Rs. ’000 |
Rs.’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Interest earning assets: |
|
|
|
|
|
|
|
Financial assets |
|
|
|
|
|
|
|
Cash and cash equivalents
|
8,959,135 |
– |
– |
– |
– |
8,959,135 |
3,457,539 |
Balances with central banks
|
5,908,142 |
2,000,899 |
– |
68,550 |
– |
7,977,591 |
1,155,988 |
Placements with banks
|
19,898,515 |
– |
– |
– |
– |
19,898,515 |
17,633,269 |
Securities purchased under resale agreements
|
9,513,512 |
– |
– |
– |
– |
9,513,512 |
– |
Derivative financial assets
|
– |
– |
– |
– |
– |
– |
– |
Financial assets recognised through profit or loss/
held for trading – Measured at fair value
|
4,751,360 |
– |
– |
– |
– |
4,751,360 |
4,096,168 |
Financial assets at amortised cost –
Loans and advances to banks
|
– |
– |
– |
– |
– |
– |
– |
Financial assets at amortised cost –
Loans and advances to other customers
|
320,738,308 |
201,409,774 |
193,654,783 |
99,943,495 |
45,353,955 |
861,100,315 |
737,446,567 |
Financial assets at amortised cost – Debt and other
financial instruments/financial investments –
Held to maturity and Loans and receivables
|
8,599,196 |
11,063,223 |
30,343,068 |
30,561,901 |
3,288,048 |
83,855,436 |
112,275,229 |
Financial assets measured at fair value through
other comprehensive income/financial
Investments – Available for sale
|
14,825,940 |
50,792,907 |
55,334,538 |
54,075,631 |
1,233,344 |
176,262,360 |
154,167,169 |
Total interest earning assets as at December 31, 2018 |
393,194,108 |
265,266,803 |
279,332,389 |
184,649,577 |
49,875,347 |
1,172,318,224 |
|
Total Interest earning assets as at December 31, 2017 |
277,041,769 |
281,538,977 |
258,419,287 |
162,241,360 |
50,990,536 |
|
1,030,231,929 |
Non-interest earning assets: |
|
|
|
|
|
|
|
Financial assets |
|
|
|
|
|
|
|
Cash and cash equivalents
|
30,575,341 |
– |
– |
– |
– |
30,575,341 |
29,767,080 |
Balances with central banks
|
27,250,735 |
16,305,044 |
1,237,212 |
809,047 |
804,961 |
46,406,999 |
43,645,458 |
Placements with banks
|
– |
– |
– |
– |
– |
– |
– |
Securities purchased under resale agreements
|
– |
– |
– |
– |
– |
– |
– |
Derivative financial assets
|
3,304,750 |
3,982,426 |
589,427 |
– |
33,359 |
7,909,962 |
2,334,536 |
Financial assets recognised through profit or loss/
held for trading – Measured at fair value
|
768,807 |
– |
– |
– |
– |
768,807 |
314,745 |
Financial assets at amortised cost –
Loans and advances to banks
|
– |
– |
763,074 |
– |
– |
763,074 |
640,512 |
Financial assets at amortised cost –
Loans and advances to other customers
|
– |
– |
– |
– |
– |
– |
– |
Financial assets at amortised cost – Debt and other
financial instruments/financial investments –
Held to maturity and loans and receivables
|
– |
– |
– |
– |
– |
– |
– |
Financial assets measured at fair value through other
comprehensive income/financial investments –
Available for sale
|
– |
– |
– |
20,651 |
223,718 |
244,369 |
546,963 |
Non-financial assets |
|
|
|
|
|
|
|
Investments in subsidiaries
|
– |
– |
– |
– |
4,263,631 |
4,263,631 |
3,065,935 |
Investments in associates
|
– |
– |
– |
– |
44,331 |
44,331 |
44,331 |
Property, plant and equipment
|
– |
– |
– |
– |
15,301,246 |
15,301,246 |
14,634,710 |
Intangible assets
|
– |
– |
– |
– |
906,112 |
906,112 |
776,810 |
Leasehold property
|
– |
– |
– |
– |
71,652 |
71,652 |
72,594 |
Deferred tax assets
|
– |
– |
– |
– |
– |
– |
– |
Other assets
|
17,802,945 |
225,991 |
1,890,106 |
530,631 |
3,461,449 |
23,911,122 |
17,298,162 |
Total Non-interest earning assets
as at December 31, 2018 |
79,702,578 |
20,513,461 |
4,479,819 |
1,360,329 |
25,110,459 |
131,166,646 |
– |
Total Non-interest earning assets
as at December 31, 2017 |
70,311,817 |
15,953,121 |
2,669,183 |
1,253,732 |
22,953,983 |
|
113,141,836 |
Total assets – As at December 31, 2018 |
472,896,686 |
285,780,264 |
283,812,208 |
186,009,906 |
74,985,806 |
1,303,484,870 |
|
Total assets – As at December 31, 2017 |
347,353,586 |
297,492,098 |
261,088,470 |
163,495,092 |
73,944,519 |
|
1,143,373,765 |
Percentage – As at December 31, 2018* |
36.29 |
21.92 |
21.77 |
14.27 |
5.75 |
100.00 |
|
Percentage – As at December 31, 2017* |
30.38 |
26.02 |
22.83 |
14.30 |
6.47 |
|
100.00 |
(*) Total assets of each maturity bucket as a percentage of total assets employed by the Bank.
(ii) Remaining contractual period to maturity of the liabilities and shareholders’ funds employed by the Bank as at the date of Statement of Financial Position is detailed below:
As at December 31, |
Up to 3
months |
3 to 12
months |
1 to 3
years |
3 to 5
years |
More than
5 years |
Total as at
December 31,
2018 |
Total as at
December 31,
2017 |
|
Rs. ’000 |
Rs.’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Interest-bearing liabilities: |
|
|
|
|
|
|
|
Financial Liabilities |
|
|
|
|
|
|
|
Due to banks
|
11,625,888 |
16,648,582 |
– |
– |
– |
28,274,470 |
48,954,474 |
Derivative financial liabilities
|
– |
– |
|
|
|
– |
– |
Securities sold under repurchase agreements
|
38,858,224 |
6,974,167 |
3,272,071 |
– |
– |
49,104,462 |
49,676,767 |
Financial Liabilities recognised through profit or loss –
Measured at fair value
|
– |
– |
– |
– |
– |
– |
– |
Financial liabilities at amortised cost –
Due to depositors
|
504,105,648 |
352,184,128 |
24,892,407 |
14,112,967 |
16,088,136 |
911,383,286 |
789,533,286 |
Financial liabilities at amortised cost –
Other borrowings
|
266,300 |
1,499,941 |
8,463,641 |
8,507,200 |
6,624,830 |
25,361,912 |
23,786,094 |
Subordinated liabilities
|
739,373 |
387,827 |
9,477,720 |
22,104,087 |
5,283,450 |
37,992,457 |
25,165,924 |
Total interest-bearing liabilities
as at December 31, 2018 |
555,595,433 |
377,694,645 |
46,105,839 |
44,724,254 |
27,996,416 |
1,052,116,587 |
|
Total Interest-bearing liabilities
as at December 31, 2017 |
524,871,276 |
306,214,684 |
38,492,219 |
30,031,857 |
37,506,509 |
|
937,116,545 |
Non-interest bearing liabilities: |
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
Due to banks
|
21,826,611 |
– |
– |
– |
– |
21,826,611 |
8,166,517 |
Derivative financial liabilities
|
3,404,297 |
4,432,899 |
184,587 |
– |
– |
8,021,783 |
3,678,494 |
Securities sold under repurchase agreements
|
– |
– |
– |
– |
– |
– |
– |
Financial liabilities recognised through profit or loss –
measured at fair value
|
– |
– |
– |
– |
– |
– |
– |
Financial liabilities at amortised cost –
due to depositors
|
71,654,028 |
– |
– |
– |
– |
71,654,028 |
60,594,225 |
Financial liabilities at amortised cost –
other borrowings
|
– |
– |
– |
– |
– |
– |
– |
Subordinated liabilities |
– |
– |
– |
– |
– |
– |
– |
Non-financial liabilities |
|
|
|
|
|
|
|
Debt securities issued
|
– |
– |
– |
– |
– |
– |
– |
Current tax liabilities
|
1,274,349 |
5,292,009 |
– |
– |
– |
6,566,358 |
4,143,911 |
Deferred tax liabilities
|
(554,786) |
(328,268) |
(515,164) |
151,947 |
1,892,519 |
646,248 |
3,274,826 |
Other provisions
|
– |
– |
– |
– |
– |
– |
– |
Other liabilities
|
15,524,380 |
2,387,328 |
2,045,280 |
838,683 |
3,410,680 |
24,206,351 |
19,225,364 |
Due to subsidiaries
|
40,955 |
– |
– |
– |
– |
40,955 |
74,523 |
Equity |
|
|
|
|
|
|
|
Stated capital
|
– |
– |
– |
– |
39,147,882 |
39,147,882 |
37,143,541 |
Statutory reserves
|
– |
– |
– |
– |
7,354,143 |
7,354,143 |
6,476,952 |
Retained earnings
|
– |
– |
– |
– |
5,063,076 |
5,063,076 |
4,987,446 |
Other reserves
|
– |
– |
– |
– |
66,840,848 |
66,840,848 |
58,491,421 |
Total non-interest bearing liabilities
as at December 31, 2018 |
113,169,834 |
11,783,968 |
1,714,703 |
996,630 |
123,709,148 |
251,368,283 |
|
Total non-Interest bearing liabilities
as at December 31, 2017 |
75,376,089 |
14,424,025 |
3,532,019 |
1,636,826 |
111,288,261 |
|
206,257,220 |
Total liabilities and equity –
as at December 31, 2018 |
668,765,267 |
389,478,613 |
47,820,542 |
45,714,884 |
151,705,564 |
1,303,484,870 |
|
Total liabilities and equity –
as at December 31, 2017 |
600,247,365 |
320,638,709 |
42,024,238 |
31,668,683 |
148,794,770 |
|
1,143,373,765 |
Percentage – as at December 31, 2018* |
51.30 |
29.88 |
3.67 |
3.51 |
11.64 |
100.00 |
|
Percentage – as at December 31, 2017* |
52.50 |
28.04 |
3.68 |
2.77 |
13.01 |
|
100.00 |
(*) Total liabilities and shareholders’ funds of each maturity bucket as a percentage of total liabilities and shareholders’ funds employed by the Bank.
69.2.2 (b) Non-derivative financial assets and financial liabilities expected to be recovered or settled after 12 months from the reporting date
The table below sets out the carrying amounts of non-derivative financial assets and financial liabilities expected to be recovered or settled after 12 months from the reporting date:
As at December 31, |
2018 |
2017 |
|
Rs. ’000 |
Rs. ’000 |
Financial assets |
|
|
Non-derivative financial assets |
|
|
Balances with central banks
|
2,919,770 |
2,329,368 |
Financial assets at amortised cost – Loans and advances to banks
|
763,074 |
640,512 |
Financial assets at amortised cost – Loans and advances to other customers
|
338,952,233 |
307,676,926 |
Financial assets at amortised cost – Debt and other financial instruments/
financial investments – Held to maturity and Loans and receivables
|
64,193,017 |
73,901,390 |
Financial assets measured at fair value through other comprehensive income/
financial investments – Available for sale
|
110,887,882 |
49,613,501 |
Total |
517,715,976 |
434,161,697 |
Financial liabilities |
|
|
Non-derivative financial liabilities |
|
|
Securities sold under repurchase agreements
|
3,272,071 |
2,746,663 |
Financial liabilities at amortised cost – Due to depositors
|
55,093,510 |
45,325,787 |
Financial liabilities at amortised cost – Other borrowings
|
23,595,671 |
21,036,561 |
Subordinated liabilities
|
36,865,257 |
24,630,973 |
Total |
118,826,509 |
93,739,984 |
69.2.3 Liquidity reserves |
The table below sets out the components of the Bank’s liquidity reserves:
As at December 31, |
2018 |
2017 |
|
Carrying amount |
Fair value |
Carrying amount |
Fair value |
|
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Balances with central banks
|
54,384,590 |
54,384,590 |
44,801,446 |
44,801,446 |
Balances with other banks
|
15,266,105 |
15,266,105 |
9,944,020 |
9,944,020 |
Coins and notes held
|
24,272,784 |
24,272,784 |
23,280,599 |
23,280,599 |
Unencumbered debt securities issued by sovereigns
|
219,505,833 |
216,080,931 |
172,149,322 |
171,675,912 |
Total |
313,429,312 |
310,004,410 |
250,175,387 |
249,701,977 |
69.2.4 Financial assets available to support future funding
The table below sets out the availability of the Bank’s financial assets to support future funding.
As at December 31, 2018 |
|
Encumbered |
Unencumbered |
|
|
|
Pledged as
collateral |
Other |
Available as
collateral |
Other |
Total |
|
Note |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Cash and cash equivalents |
29 |
– |
– |
39,534,476 |
– |
39,534,476 |
Balances with central banks
|
30 |
– |
39,412,442 |
14,972,148 |
– |
54,384,590 |
Placements with banks
|
31 |
– |
– |
19,898,515 |
– |
19,898,515 |
Securities purchased under resale agreements
|
|
– |
– |
9,513,512 |
– |
9,513,512 |
Derivative financial assets
|
32 |
– |
– |
7,909,962 |
– |
7,909,962 |
Financial assets recognised through profit or loss/
held for trading – Measured at fair value
|
33 |
– |
– |
5,520,167 |
– |
5,520,167 |
Financial assets at amortised cost –
Loans and advances to banks *
|
34 |
– |
763,074 |
– |
– |
763,074 |
Financial assets at amortised cost –
Loans and advances to other customers
|
35 |
– |
– |
861,100,315 |
– |
861,100,315 |
Financial assets at amortised cost – Debt and other
financial instruments/financial investments – Held to
maturity and Loans and receivables
|
36 |
– |
– |
83,855,436 |
– |
83,855,436 |
Financial assets measured at fair value through other
comprehensive income/financial investments –
Available for sale
|
37 |
49,267,013 |
– |
127,239,716 |
– |
176,506,729 |
Total |
|
49,267,013 |
40,175,516 |
1,169,544,247 |
– |
1,258,986,776 |
As at December 31, 2017 |
|
Encumbered |
Unencumbered |
|
|
|
Pledged as
collateral |
Other |
Available as
collateral |
Other |
Total |
|
Note |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Cash and cash equivalents
|
29 |
– |
– |
33,224,619 |
– |
33,224,619 |
Balances with central banks
|
30 |
– |
39,766,630 |
5,034,816 |
– |
44,801,446 |
Placements with banks
|
31 |
– |
– |
17,633,269 |
– |
17,633,269 |
Securities purchased under resale agreements
|
|
– |
– |
– |
– |
– |
Derivative financial assets
|
32 |
– |
– |
2,334,536 |
– |
2,334,536 |
Other financial instruments – Held for trading
|
33 |
– |
– |
4,410,913 |
– |
4,410,913 |
Loans and receivables to banks *
|
34 |
– |
640,512 |
– |
– |
640,512 |
Loans and receivables to other customers
|
35 |
– |
– |
737,446,567 |
– |
737,446,567 |
Financial investments – Held to maturity
|
36 |
– |
– |
63,562,752 |
– |
63,562,752 |
Financial investments – Loans and receivables
|
36 |
– |
– |
48,712,477 |
– |
48,712,477 |
Financial investments – Available for sale **
|
37 |
58,768,665 |
– |
95,945,467 |
– |
154,714,132 |
Total |
|
58,768,665 |
40,407,142 |
1,008,305,416 |
– |
1,107,481,223 |
(* ) Represents an amount where the Bank is prevented from exercising the right of lien against the claim made by the Bank due to a Court action.
( ** ) Market value of securities pledged as collateral is considered as encumbered.
69.3 Market risk
Market risk is the risk of losses in on or off-balance sheet positions arising out of movements in prices affecting foreign exchange exposures, interest rate instruments, equity/debt instruments and commodity exposures. The Bank monitors market risk in both trading and non-trading portfolios on an ongoing basis.
69.3.1 Exposure to market risk – trading and non-trading portfolio
The table below sets out the allocation of assets and liabilities subject to market risk between trading and non-trading portfolios:
As at December 31, 2018 |
|
|
Market risk measurement |
|
|
Carrying
amount |
Trading
portfolios |
Non-trading
portfolios |
|
Note |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Assets subject to market risk |
|
|
|
|
Cash and cash equivalents
|
29 |
20,050,789 |
– |
20,050,789 |
Balances with central banks
|
30 |
14,517,678 |
– |
14,517,678 |
Placements with banks
|
31 |
19,898,515 |
– |
19,898,515 |
Securities purchased under resale agreements
|
|
9,513,512 |
– |
9,513,512 |
Derivative financial assets
|
32 |
7,909,962 |
7,909,962 |
– |
Financial assets recognised through profit or loss/held for trading –
Measured at fair value
|
33 |
5,520,167 |
5,520,167 |
– |
Financial assets at amortised cost – Loans and advances to banks
|
34 |
763,074 |
– |
763,074 |
Financial assets at amortised cost – Loans and advances to other customers
|
35 |
861,100,315 |
– |
861,100,315 |
Financial assets at amortised cost – Debt and other financial instruments/
financial investments – Held to maturity and Loans and receivables
|
36 |
83,855,436 |
– |
83,855,436 |
Financial assets measured at fair value through other comprehensive income/
Financial Investments – Available for sale
|
37 |
176,506,729 |
– |
176,506,729 |
Total |
|
1,199,636,177 |
13,430,129 |
1,186,206,048 |
Liabilities subject to market risk |
|
|
|
|
Due to banks
|
45 |
50,101,081 |
– |
50,101,081 |
Derivative financial liabilities
|
46 |
8,021,783 |
8,021,783 |
– |
Securities sold under repurchase agreements
|
|
49,104,462 |
– |
49,104,462 |
Financial liabilities at amortised cost – Due to depositors
|
47 |
937,860,201 |
– |
937,860,201 |
Financial liabilities at amortised cost – Other borrowings
|
48 |
25,361,912 |
– |
25,361,912 |
Subordinated liabilities
|
52 |
37,992,457 |
– |
37,992,457 |
Total |
|
1,108,441,896 |
8,021,783 |
1,100,420,113 |
As at December 31,2017 |
|
|
Market risk measurement |
|
|
Carrying
amount |
Trading
portfolios |
Non-trading
portfolios |
|
Note |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Assets subject to market risk |
|
|
|
|
Cash and cash equivalents
|
29 |
12,387,967 |
– |
12,387,967 |
Balances with central banks
|
30 |
4,601,606 |
– |
4,601,606 |
Placements with banks
|
31 |
17,633,269 |
– |
17,633,269 |
Derivative financial assets
|
32 |
2,334,536 |
2,334,536 |
– |
Other financial instruments – Held for trading
|
33 |
4,410,913 |
4,410,913 |
– |
Loans and receivables to banks
|
34 |
640,512 |
– |
640,512 |
Loans and receivables to other customers
|
35 |
737,446,567 |
– |
737,446,567 |
Financial investments – Available for sale
|
37 |
154,714,132 |
– |
154,714,132 |
Financial investments – Held to maturity
|
36 |
63,562,752 |
– |
63,562,752 |
Financial investments – Loans and receivables
|
36 |
48,712,477 |
– |
48,712,477 |
Total |
|
1,046,444,731 |
6,745,449 |
1,039,699,282 |
Liabilities subject to market risk |
|
|
|
|
Due to banks
|
45 |
57,120,991 |
– |
57,120,991 |
Derivative financial liabilities
|
46 |
3,678,494 |
3,678,494 |
– |
Securities sold under repurchase agreements
|
|
49,676,767 |
– |
49,676,767 |
Due to other customers/deposits from customers
|
47 |
807,630,072 |
– |
807,630,072 |
Other borrowings
|
48 |
23,786,094 |
– |
23,786,094 |
Subordinated liabilities
|
52 |
25,165,924 |
– |
25,165,924 |
Total |
|
967,058,342 |
3,678,494 |
963,379,848 |
69.3.2 Exposure to interest rate risk – Sensitivity analysis
69.3.2 (a) Exposure to interest rate risk – Non-trading portfolio
The possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments gives rise to interest rate risk. The Bank’s policy is to continuously monitor portfolios and adopt hedging strategies to ensure that interest rate risk is maintained within prudent levels.
The tables below analyse the Bank’s interest rate risk exposure on financial assets and financial liabilities. The Bank’s assets and liabilities are included at carrying amounts and categorised by the earlier of contractual re-pricing or maturity dates.
Interest rate gap position of the non-trading portfolio of the Bank is given below:
As at December 31, 2018 |
Up to 3
months |
3 to 12
months |
1 to 3
years |
3 to 5
years |
More than
5 years |
Non-sensitive |
Total |
|
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Financial assets |
|
|
|
|
|
|
|
Cash and cash equivalents
|
7,899,330 |
– |
– |
– |
– |
31,635,146 |
39,534,476 |
Balances with central banks
|
14,517,678 |
– |
– |
– |
– |
39,866,912 |
54,384,590 |
Placements with banks
|
19,898,515 |
– |
– |
– |
– |
– |
19,898,515 |
Securities purchased under resale agreements
|
9,513,512 |
– |
– |
– |
– |
– |
9,513,512 |
Derivative financial assets
|
– |
– |
– |
– |
– |
– |
– |
Other financial instruments held for trading
|
– |
– |
– |
– |
– |
– |
– |
Loans and receivables to banks
|
– |
– |
– |
– |
– |
763,074 |
763,074 |
Financial assets at amortised cost –
Loans and advances to other customers
|
533,455,698 |
150,401,109 |
84,419,598 |
45,481,563 |
39,900,194 |
7,442,153 |
861,100,315 |
Financial assets measured at amortised cost –
Debt and other financial instruments/
financial investments – Held to maturity and
Loans and receivables
|
6,812,657 |
11,090,082 |
25,554,127 |
35,456,787 |
3,292,181 |
1,649,602 |
83,855,436 |
Financial assets measured at fair value through other
comprehensive income/financial investments –
Available for sale
|
71,716,497 |
50,398,511 |
46,968,746 |
4,400,562 |
1,235,701 |
1,786,712 |
176,506,729 |
Total financial assets |
663,813,887 |
211,889,702 |
156,942,471 |
85,338,912 |
44,428,076 |
83,143,599 |
1,245,556,647 |
Financial liabilities |
|
|
|
|
|
|
|
Due to banks
|
26,297,708 |
4,574,999 |
7,320,000 |
7,320,000 |
– |
4,588,374 |
50,101,081 |
Derivative financial liabilities
|
– |
– |
– |
– |
– |
– |
– |
Securities sold under repurchased agreements
|
39,075,611 |
6,771,810 |
3,257,041 |
– |
– |
– |
49,104,462 |
Financial liabilities at amortised cost –
Due to depositors
|
512,016,994 |
351,834,901 |
23,818,232 |
13,279,035 |
13,153,783 |
68,934,369 |
983,037,314 |
Financial liabilities at amortised cost –
Other borrowings
|
19,559,972 |
514,797 |
1,005,084 |
737,950 |
3,544,109 |
– |
25,361,912 |
Subordinated liabilities
|
14,566,489 |
– |
9,748,678 |
8,393,840 |
5,283,450 |
– |
37,992,457 |
Total financial liabilities |
611,516,774 |
363,696,507 |
45,149,035 |
29,730,825 |
21,981,342 |
73,522,743 |
1,145,597,226 |
Interest rate sensitivity gap |
52,297,113 |
(151,806,805) |
111,793,436 |
55,608,087 |
22,446,734 |
9,620,856 |
99,959,421 |
Cumulative gap |
52,297,113 |
(99,509,692) |
12,283,744 |
67,891,831 |
90,338,565 |
99,959,421 |
|
As at December 31, 2017 |
Up to 3
months |
3 to 12
months |
1 to 3
years |
3 to 5
years |
More than
5 years |
Non-sensitive |
Total |
|
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Financial assets |
|
|
|
|
|
|
|
Cash and cash equivalents
|
3,952,578 |
– |
– |
– |
– |
29,272,041 |
33,224,619 |
Balances with central banks
|
4,601,606 |
– |
– |
– |
– |
40,199,840 |
44,801,446 |
Placements with banks
|
16,097,269 |
1,536,000 |
– |
– |
– |
– |
17,633,269 |
Securities purchased under resale agreements
|
– |
– |
– |
– |
– |
– |
– |
Derivative financial assets
|
– |
– |
– |
– |
– |
– |
– |
Other financial instruments – Held for trading
|
– |
– |
– |
– |
– |
– |
– |
Loans and receivables to banks
|
– |
– |
– |
– |
– |
640,512 |
640,512 |
Loans and receivables to other customers
|
460,905,113 |
134,400,971 |
65,554,128 |
38,341,792 |
31,537,815 |
6,706,748 |
737,446,567 |
Financial investments – Available for sale
|
10,573,104 |
68,317,215 |
46,631,198 |
28,638,006 |
– |
554,609 |
154,714,132 |
Financial investments – Held to maturity
|
4,077,406 |
9,871,844 |
12,885,242 |
29,661,660 |
7,066,600 |
– |
63,562,752 |
Financial investments – Loans and receivables
|
41,140,625 |
1,893,522 |
5,678,330 |
– |
– |
– |
48,712,477 |
Total financial assets |
541,347,701 |
216,019,552 |
130,748,898 |
96,641,458 |
38,604,415 |
77,373,750 |
1,100,735,774 |
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
|
Due to banks
|
44,703,696 |
5,366,253 |
– |
– |
– |
7,051,042 |
57,120,991 |
Derivative financial liabilities
|
– |
– |
– |
– |
– |
– |
– |
Securities sold under repurchase agreements
|
36,290,396 |
10,652,592 |
2,733,779 |
– |
– |
– |
49,676,767 |
Due to other customers/Deposits from customers
|
457,830,953 |
286,182,073 |
16,482,261 |
12,360,297 |
10,739,911 |
66,532,016 |
850,127,511 |
Other borrowings
|
18,293,434 |
814,083 |
1,002,777 |
908,493 |
2,767,307 |
– |
23,786,094 |
Subordinated liabilities
|
11,664,201 |
327,156 |
– |
9,500,724 |
3,673,843 |
– |
25,165,924 |
Total financial liabilities |
568,782,680 |
303,342,157 |
20,218,817 |
22,769,514 |
17,181,061 |
73,583,058 |
1,005,877,287 |
Interest rate sensitivity gap |
(27,434,979) |
(87,322,605) |
110,530,081 |
73,871,944 |
21,423,354 |
3,790,692 |
94,858,487 |
Cumulative gap |
(27,434,979) |
(114,757,584) |
(4,227,503) |
69,644,441 |
91,067,795 |
94,858,487 |
|
69.3.2 (b) Exposure to interest rate risk – Non-trading portfolio (rate shocks)
The management of interest rate risk against interest rate gap limits is supplemented by monitoring the sensitivity of the Bank’s financial assets and financial liabilities to various interest rate scenarios.
The following table demonstrates the sensitivity of the Bank’s Income Statement as at the reporting date, due to change in interest rates
by 100 bps with all other variables held constant:
Sensitivity of projected net interest income
|
2018 |
2017 |
Net Interest Income (NII) |
Parallel
increase |
Parallel
decrease |
Parallel
increase |
Parallel
decrease |
|
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
Rs. ’000 |
At at December 31,
|
1,560,756 |
(1,557,263) |
1,243,611 |
(1,241,623) |
Average for the period
|
1,493,675 |
(1,490,832) |
920,414 |
(918,225) |
Maximum for the period
|
1,646,558 |
(1,639,199) |
1,243,611 |
(1,241,623) |
Minimum for the period
|
1,269,334 |
(1,267,132) |
706,442 |
(704,325) |
The graph below depicts the impact on the Net Interest Income due to a rate shock of 100 bps on rupee denominated assets and liabilities and 25bps on FCY denominated assets and liabilities.
The impact of changes in interest rates on NII is measured applying interest rate shocks on static balance sheet. In line with the industry practices, interest rate shocks of 100 bps is applied on LKR denominated assets and liabilities and 25 bps is applied on FCN denominated assets and liabilities. The potential impact on the Bank’s profitability due to changes in rupee and foreign currency interest rates is evaluated to ensure that the volatilities are prudently managed within the internal tolerance limits. Above graph depicts the sensitivity of NII to rate shocks during the years 2017 and 2018.
69.3.3 Exposure to currency risk – Non-trading portfolio
Currency risk arises as a result of fluctuations in the value of a financial instrument due to changes in foreign exchange rates. The Bank has established limits on position by currency and these positions are monitored on a daily basis.
The table below indicates the currencies to which the Bank had significant exposures as at December 31, 2018 and 2017 and the exposure as a percentage of the total capital funds:
Foreign exchange position as at December 31, 2018
Currency |
Spot |
Forward |
Net open
position |
Net position
in other
exchange
contracts |
Overall exposure
in respective
foreign currency |
Overall
exposure in
Rs. |
|
Assets |
Liabilities |
Net |
Assets |
Liabilities |
Net |
|
2 |
3 |
4=2-3 |
5 |
6 |
7=5-6 |
|
8 |
9 |
|
10 |
11 |
|
’000 |
’000 |
’000 |
’000 |
’000 |
’000 |
|
’000 |
’000 |
|
’000 |
’000 |
United States Dollar
|
18,716 |
20,365 |
(1,649) |
2,829 |
6,225 |
(3,396) |
|
10,854 |
– |
|
5,809 |
1,063,097 |
Great Britain Pound
|
666 |
101 |
566 |
30 |
604 |
(574) |
|
(7) |
– |
|
(15) |
(3,466) |
Euro
|
3,522 |
2,435 |
1,087 |
461 |
1,550 |
(1,090) |
|
(8) |
– |
|
(11) |
(2,308) |
Japanese Yen
|
14,126 |
3,320 |
10,806 |
38,645 |
47,696 |
(9,051) |
|
(968) |
– |
|
787 |
1,304 |
Indian Rupee
|
– |
– |
– |
– |
– |
– |
|
– |
– |
|
– |
– |
Australian Dollar
|
468 |
79 |
390 |
150 |
534 |
(384) |
|
– |
– |
|
6 |
747 |
Canadian Dollar
|
50 |
42 |
8 |
– |
– |
– |
|
(7) |
– |
|
1 |
177 |
Other currencies in Usd
|
300 |
189 |
111 |
17 |
63 |
(46) |
|
73 |
– |
|
138 |
25,243 |
Total exposure |
|
|
|
|
|
|
USD |
10,896 |
|
USD |
5,928 |
1,084,794 |
Total capital funds (capital base) as per the audited Basel III computation (Capital base of
the Bank as at December 31, 2018) |
|
|
|
147,398,341 |
Total exposure as a percentage of total capital funds (%) |
|
|
|
|
|
0.74 |
Foreign exchange position as at December 31, 2017
Currency |
Spot |
Forward |
Net open
position |
Net position
in other
exchange
contracts |
Overall exposure
in respective
foreign currency |
Overall
exposure in
Rs. |
|
Assets |
Liabilities |
Net |
Assets |
Liabilities |
Net |
|
2 |
3 |
4=2-3 |
5 |
6 |
7=5-6 |
|
8 |
9 |
|
10 |
11 |
|
’000 |
’000 |
’000 |
’000 |
’000 |
’000 |
|
’000 |
’000 |
|
’000 |
’000 |
United States Dollar
|
22,289 |
22,822 |
(533) |
5,350 |
389 |
4,961 |
|
2,734 |
– |
|
7,162 |
1,100,083 |
Great Britain Pound
|
388 |
473 |
(85) |
36 |
– |
36 |
|
20 |
– |
|
(29) |
(5,991) |
Euro
|
5,479 |
5,696 |
(217) |
– |
– |
– |
|
(52) |
– |
|
(269) |
(49,344) |
Japanese Yen
|
12,181 |
8,754 |
3,427 |
11,278 |
18,042 |
(6,764) |
|
372 |
– |
|
(2,965) |
(4,039) |
Indian Rupee
|
– |
– |
– |
– |
– |
– |
|
- |
– |
|
– |
– |
Australian Dollar
|
482 |
633 |
(151) |
106 |
16 |
90 |
|
10 |
– |
|
(51) |
(6,106) |
Canadian Dollar
|
65 |
13 |
52 |
– |
– |
– |
|
(34) |
– |
|
18 |
2,201 |
Other currencies in Usd
|
705 |
354 |
351 |
– |
170 |
(170) |
|
(88) |
– |
|
93 |
14,285 |
Total exposure |
|
|
|
|
|
|
USD |
2,595 |
|
USD |
6,843 |
1,051,089 |
Total capital funds (capital base) as per the audited Basel III computation (Capital base of the Bank as at December 31, 2017) |
|
|
|
|
|
122,415,882 |
Total exposure as a percentage of total capital funds (%) |
|
0.86 |
The Bank regularly carries out sensitivity analysis on Net Open Position (NOP) due to possible changes in the USD/LKR exchange rate to assess the exposure to Foreign Exchange (FX) Risk. An appropriate shock based on historical USD/LKR exchange rate is applied on the NOP which is measured against the Board-approved threshold limits.
69.3.4 Exposure equity price risk
Equity price risk arises as a result of any change in market prices and volatilities of individual equities. The Bank conducts mark-to-market calculations on a daily, quarterly and on a need basis to identify the impact due to changes in equity prices.
The table below summarises the impact (both to Income Statement and to equity) due to a change of 10% on equity prices.
|
2018 |
2017 |
|
Financial assets
recognised
through profit
or loss
Rs. ’000 |
Financial assets
fair value
through other
comprehensive
income
Rs. ’000 |
Total
Rs. ’000 |
Held for trading
Rs. ’000 |
Available for sale
Rs. ’000 |
Total
Rs. ’000 |
Market value of equity securities as at December 31,
|
768,807 |
195,149 |
963,956 |
314,745 |
500,278 |
815,023 |
Stress Level |
Impact on
Income Statement |
Impact on
OCI |
Impact on equity |
Impact on
Income Statement |
Impact on OCI |
Impact on equity |
Shock of 10% on equity prices (upward)
|
76,881 |
19,515 |
96,396 |
31,475 |
50,028 |
81,503 |
Shock of 10% on equity prices (downward)
|
(76,881) |
(19,515) |
(96,396) |
(31,475) |
(50,028) |
(81,503) |
69.4 Operational risk
Operational risk arises due to inadequate or failed internal processes, people and systems or from external events. Operational risk events which include legal and regulatory implications could lead to financial and reputational losses to the Bank.
The operational risk management framework of the Bank has been defined under the Board-approved operational risk management policy. Operational risk is managed by establishing an appropriate internal control system that requires a mechanism for segregation of related responsibilities within the Bank, and a detailed testing and verification of the Bank’s overall operational systems, and achieving a full harmony between internal and external systems and establishing a fully independent backup facility for business continuity planning.
69.5 Capital management and Pillar III disclosures as per Basel III
Objective
The Bank is required to manage its capital taking into account the need to meet the regulatory requirements as well as the current and future business needs, stakeholder expectations and available options for raising capital.
69.5.1 Regulatory capital
Capital adequacy ratio (CAR) is calculated based on the CBSL directions stemming from Basel III accord. These guidelines require the Bank to maintain a CAR not less than 8.875% with minimum Tier 1 capital with buffers in relation to total risk weighted assets and a minimum total CAR with buffers of 12.875% in relation to total risk weighted assets.
As at December 31, |
2018 |
2017 |
|
Rs. ’000 |
Rs. ’000 |
Common equity Tier 1 (CET1) capital after adjustments
|
107,110,518 |
94,151,253 |
Total common equity Tier 1 (CET1) capital
|
110,822,797 |
96,696,269 |
Equity capital (stated capital)/assigned capital
|
39,147,882 |
37,143,541 |
Reserve fund
|
7,354,143 |
6,476,952 |
Published retained earnings/(accumulated retained losses)
|
5,726,294 |
1,798,112 |
Published accumulated other comprehensive income (OCI)
|
352,491 |
(1,522,156) |
General and other disclosed reserves
|
58,241,987 |
52,799,820 |
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 CET1 capital
|
3,712,279 |
2,545,016 |
Goodwill (net)
|
– |
– |
Other intangible assets (net)
|
906,114 |
776,812 |
Revaluation losses of property, plant and equipment
|
3,813 |
3,813 |
Significant investments in the capital of financial institutions where the Bank owns more than 10%
of the issued ordinary share capital of the entity
|
2,802,352 |
1,764,391 |
Additional Tier 1 (AT1) capital after adjustments
|
– |
– |
Total additional Tier 1 (ATI) capital
|
– |
– |
Qualifying additional Tier 1 capital instruments
|
– |
– |
Instruments issued by consolidated banking and financial subsidiaries of the Bank and held by third parties
|
– |
– |
Total adjustments to AT1 capital
|
– |
– |
Investment in own shares
|
– |
– |
Others (Specify)
|
– |
– |
Tier 2 Capital after adjustments
|
40,287,823 |
28,264,629 |
Total Tier 2 Capital
|
40,287,823 |
28,264,629 |
Qualifying Tier 2 capital instruments
|
33,103,574 |
22,799,002 |
Revaluation gains
|
3,087,658 |
2,024,804 |
Loan loss provisions
|
4,096,591 |
3,440,823 |
Instruments issued by consolidated banking and financial subsidiaries of the Bank and held by third parties
|
– |
– |
Total adjustments to Tier 2 capital
|
– |
– |
Investment in own shares
|
– |
– |
Others (specify)
|
– |
– |
CET1 capital
|
107,110,518 |
94,151,253 |
Total Tier 1 capital
|
107,110,518 |
94,151,253 |
Total capital
|
147,398,341 |
122,415,882 |
69.5.2 Capital allocation
The Management monitors the capital adequacy ratio on a regular basis to ensure that it operates well above the internal limit set by the Bank. The allocation of capital between specific operations and activities, to a large extent, driven by optimisation of return on capital allocated. The amount of capital allocated to each operation or activity is based primarily on regulatory capital requirements, but in some cases, the regulatory requirements do not fully reflect the varying degree of risks associated with different activities. In such cases, the capital requirements may be flexed to reflect differing risk profiles, subject to the overall level of capital to support a particular operation or activity not falling below the minimum required level by the regulator.
69.5.3 Pillar III disclosures as per Basel III
Disclosures under these requirements mainly include the regulatory capital requirements and liquidity, risk weighted assets, discussion on adequacy to meet current and future capital requirements of banks and linkages between financial statements and regulatory exposures. It is required to disclose the templates specified by the Central Bank of Sri Lanka as per Basel III – Minimum disclosure requirements with effective from July 1, 2017.