The Bank of Ceylon nurtures strong relationships with its primary regulators, which include the Central Bank of Sri Lanka (CBSL), the Securities and Exchange Commission of Sri Lanka (SEC), and the Colombo Stock Exchange (CSE). The Bank honours directives and works to meet the expectation of regulators in letter and principle.
Highlights
Concessions extended
to affected borrowers
Actions taken to operationalise
Sustainable Financing Direction
Regulatory ratios and buffers
maintained
Supervisory examination
concerns addressed
Operating Context
2022 brought about the realisation of Sri Lanka’s most serious economic crisis since Independence; which has had significant impacts on the financial sector. This operating environment necessitated strict regulatory controls to ensure stability of the Country’s financial system. The regulator attentively monitored and supervised related developments during this period. A number of directives and regulations were instituted for financial institutions, while the regulator also recommended supportive measures including concessions and moratoria for other crisis-affected sectors of the economy.
Despite the challenging operating environment, Bank of Ceylon maintained proactive and transparent engagement with regulators to ensure compliance with regulations and guidelines and effective management of the Bank's risk profile. During this period, the Bank prioritised stability of the financial services sector and support to customers and other key stakeholders affected by the crises.
Compliance with New Directives, Regulations, and Guidelines Issued
Bank of Ceylon focused on economic fundamentals and stability of the financial system in 2022. The Bank successfully managed operations with a conservative approach, narrow margins, and stringent controls in place; which ensured there was no breach of ratios or utilisation of buffers. The year closed on an upward trajectory, with additional limits incorporated and capital adequacy ratios in line with benchmarks. Rate benefits and concessions were also extended to borrowers wherever appropriate and within manageable limits.
The Central Bank’s Direction No. 13 of 2021 on Classification, Recognition and Measurement of Credit Facilities and Direction No. 14 of 2021 on Classification, Recognition and Measurement of Financial Assets other than Credit Facilities in LCBs; came into effect on the first of January 2022. In light of the challenging operating environment, these directives were designed to strengthen and harmonise the classification, recognition, and measurement of credit facilities and other financial assets.
Compliance with the directives involved strengthening of BoC’s governance framework, risk management framework, and internal audit functions with regard to increased oversight, monitoring, and reporting of credit facilities and assets. It also entailed reclassification of facilities and calculation of impairment provisions, which had a significant impact on the Bank’s balance sheet during the year.
Further, the Bank of Ceylon worked to meet all other regulatory directives and guidelines issued during the year. Key developments include (but are not limited to):
Regulatory requirements on liquidity ratios: SLAR, LCR, NSFR met and maintained
Concessions extended to affected borrowers: Restructuring, rescheduling, grace periods, etc.
Business revival units operational and mandates defined as per guidelines
Refinancing and interest subsidy schemes operationalised to priority sectors
Operationalisation of sustainable financing roadmap continued
Regulatory reporting requirements upheld
Forex regulations complied with
Margin requirements met
Alignment to The CBSL’s Roadmap for Sustainable Finance
The Central Bank’s Sustainable Finance roadmap outlines plans to develop sustainable financing in the Country, with the aim of better management of Environmental, Social and Governance (ESG) risks, and driving adoption of green, climate-friendly technologies while improving socially and financial inclusivity.
The Community and Environment section outlines in detail; actions taken by the Bank of Ceylon in operationalising Sustainable Financing according to the CBSL roadmap.
Way Forward
As the extent and depth of Sri Lanka’s economic crisis may yet unfold, the Bank will work closely with regulators and all stakeholders to ensure compliance with directives and follow a responsible course that prioritises stability of the financial system.