Template 1

Key regulatory ratios – Capital and liquidity

Template 2

Basel III computation of capital ratios

Template 3

Computation of leverage ratio

Template 4

Basel III computation of liquidity coverage ratio

Template 5

Main features of regulatory capital instruments

Template 6

Summary discussion on adequacy/
meeting current and future capital requirements

Overview

A proper “capital management process” is vital in ensuring the long-term stability of the business, the capital adequacy ratio is a measure used to determine whether the Bank has sufficient capital to withstand unexpected losses arising from various risks during the course of the business. Therefore, it acts as a layer of cushion in absorbing potential losses arising from the course of the business and safeguarding the depositors’ funds. At present, capital adequacy position of the banks are computed based on banking Act Direction No. 01 of 2016 and subsequent amendments thereto issued by Central Bank of
Sri Lanka. SANASA Development Bank has continued to maintain capital adequacy ratios at healthy levels by keeping a significant margin over and above the regulatory minimum requirements.

Capital management process

In order to comply with the new Basel III guidelines, SANASA Development Bank’s capital management process is under supervision of Board Strategic Planning Committee. The three year (2020-2022) capital management plan rolled out has been integrated with the Internal Capital Adequacy Assessment Process (ICAAP) as well as the Bank’s Strategic Plan. Efforts have taken to comply with the Basel III regulations saw the Bank increases its capital levels by issuing Basel III compliant Tier - II debt instruments. Steps were also taken to optimise the capital ratios by rebalancing the risk-weighted assets (RWA).

Moving forward

Moving forward with the capital management plan, the Bank will execute specific medium-term and long-term strategies to raise both Tier I and Tier II capital in line with Basel III minimum regulatory requirements. In addition, timely actions have been identified and will be executed during the coming years to optimise the risk-weighted assets for the purpose of improving the capital allocation of the Bank.

Template 7

Credit risk under standardised approach – credit risk exposures and credit risk mitigation
(CRM) effects

Template 8

Credit risk under standardised approach – exposures by asset classes and risk weights

Description		Amount (LKR ’000) as at 31 December 2020 (Post CCF & CRM)
Asset classes	Risk weight	0%	20%	50%	60%	75%	100%	150%	>150%	Total credit exposures amount
Claims on Central Government and CBSL		4,922,786	–	–	–	–	–	–	–	4,922,786
Claims on foreign sovereigns and their central banks		–	–	–	–	–	–	–	–	–
Claims on public sector entities		–	–	–	–	–	–	–	–	–
Claims on official entities and multilateral development banks		–	–	–	–	–	–	–	–	–
Claims on banks exposures		–	11,877,165	–	–	–	–	–	–	11,877,165
Claims on financial institutions		–	–	–	–	–	–	–	–	–
Claims on corporates		–	4,586,196	250,000	–	–	63,056	–	–	4,899,252
Retail claims		132,706	2,153,062	–	–	56,754,675	30,417,374	–	–	89,457,817
Claims secured by residential property		–	–	4,010,446	–	–	928,933	–	–	4,939,379
Claims secured by commercial real estate		–	–	–	–	–	–	–	–	–
Non-performing assets (NPAs)		–	–	571,578	–	–	1,721,527	45,095	–	2,338,200
Higher-risk categories		–	–	–	–	–	–	–	–	–
Cash items and other assets		442,503	37,284	–	–	–	5,208,053	–	–	5,687,839
Total		5,497,995	18,653,707	4,832,024	–	56,754,675	38,338,942	45,095	–	124,122,439

Template 9

Market risk under standardised measurement method

Template 10

Operational risk under basic indicator approach