Commercial Bank of Ceylon : For the year ended 31-12-2023

Basel III - Disclosures Under Pillar 3 as per the Banking Act Direction No.01 of 2016

Disclosure 1

Key Regulatory Ratios - Capital and Liquidity

	Group	Bank
	December 31, 2023	December 31, 2022	December 31, 2023	December 31, 2022
Regulatory Capital (Rs. '000)
Common equity	166,649,326	161,743,687	156,847,378	154,397,407
Tier 1 capital	166,649,326	161,743,687	156,847,378	154,397,407
Total capital	218,423,196	206,898,033	207,684,979	198,689,451
Regulatory Capital Ratios (%)
Common equity Tier 1 capital ratio (minimum requirement - 8.50%)	11.513	11.341	11.442	11.389
Tier 1 capital ratio (minimum requirement - 10.00%)	11.513	11.341	11.442	11.389
Total capital ratio (minimum requirement - 14.00%)	15.090	14.507	15.151	14.657
Leverage ratio (minimum requirement - 3%)	5.29	5.66	5.10	5.56
Regulatory Liquidity
Statutory Liquid Assets - Consolidated (Sri Lankan Operations) (Rs. '000)			843,748,779	622,692,705
Statutory Liquid Assets Ratio - Consolidated (Sri Lankan Operations) (Minimum			46.06	35.88
Requirement - 20%) (%)
Liquidity coverage ratio - Rupee			491.61	405.91
(minimum requirement : 2023 - 100%, 2022 - 90%) (%)
Liquidity coverage ratio - All currency			516.27	293.91
(minimum requirement : 2023 - 100%, 2022 - 90%) (%)
Net stable funding ratio (minimum requirement : 2023 - 100%, 2022 - 90%) (%)			193.70	173.58

Disclosure 2

Basel III Computation of Capital Ratios

	Group		Bank
	December 31, 2023		December 31, 2022	December 31, 2023		December 31, 2022
	Rs. '000		Rs. '000	Rs. '000		Rs. '000
Common Equity Tier 1 (CET 1) Capital after Adjustments	166,649,326		161,743,687	156,847,378		154,397,407
Total Common Equity Tier 1 (CET 1) Capital	204,935,930		196,146,974	198,223,532		191,849,110
Equity Capital (Stated Capital) /Assigned Capital	62,948,003		58,149,621	62,948,003		58,149,621
Reserve fund	13,586,534		12,079,670	12,375,906		11,352,858
Published retained earnings/(Accumulated retained losses)	3,576,101		5,898,150	2,250,494		4,755,271
Published Accumulated Other Comprehensive Income (OCI)	11,661,476		17,825,484	9,819,529		17,440,828
General and other disclosed reserves	110,829,600		100,150,532	110,829,600		100,150,532
Unpublished current year's profit/(losses) and gains reflected in OCI	-		-	-		-
Ordinary shares issued by consolidated banking and financial	2,334,216		2,043,517	-		-
subsidiaries of the bank and held by third parties
Total Adjustments to CET 1 Capital	38,286,604		34,403,287	41,376,154		37,451,703
Goodwill (net)	445,147		445,147	-		-
Intangible Assets (net)	3,844,254		3,668,050	3,736,504		3,563,120
Revaluation losses of property, plant and equipment	-		-	-		-
Significant investments in the capital of financial institutions where the
bank owns more than 10% of the issued ordinary share capital of the	-		-	3,563,126		3,587,383
entity
Deferred tax assets (net)	33,997,203		30,290,090	34,076,524		30,301,200
Additional Tier 1 (AT1) Capital after Adjustments	-		-	-		-
Total Additional Tier 1 (AT 1) 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	-		-	-		-
Reciprocal cross holdings in AT 1 capital instruments	-		-	-		-
Investments in the capital of banking and financial institutions where
the bank does not own more than 10% of the issued ordinary share	-		-	-		-
capital of the entity
Significant investments in the capital of banking and financial
institutions where the bank own more than 10% of the issued ordinary	-		-	-		-
share capital of the entity
Regulatory adjustments applied to AT 1 due to insufficient Tier 2	-		-	-		-
capital to cover adjustments
Tier 2 Capital after Adjustments	51,773,870		45,154,346	50,837,601		44,292,044
Total Tier 2 Capital	51,773,870		45,154,346	50,837,601		44,292,044
Qualifying Tier 2 Capital Instruments	30,893,843		24,457,057	30,893,843		24,457,057
Revaluation gains	4,245,025		4,245,025	4,245,025		4,245,025
Eligible Impairment	16,635,002		16,452,264	15,698,733		15,589,962
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	-		-	-		-
CET1 Capital	166,649,326		161,743,687	156,847,378		154,397,407
Total Tier 1 Capital	166,649,326		161,743,687	156,847,378		154,397,407
Total Capital	218,423,196		206,898,033	207,684,979		198,689,451
	Group		Bank
	December 31, 2023		December 31, 2022	December 31, 2023		December 31, 2022
	Rs. '000		Rs. '000	Rs. '000		Rs. '000
Total Risk Weighted Amount (RWA)	1,447,512,263		1,426,170,040	1,370,781,562		1,355,629,090
Risk Weighted Amount for Credit Risk	1,330,800,123		1,316,181,150	1,255,898,647		1,247,196,997
Risk Weighted Amount for Market Risk	35,042,071		34,795,507	35,024,836		34,776,000
Risk Weighted Amount for Operational Risk	81,670,069		75,193,383	79,858,079		73,656,093
CET1 Capital Ratio (including Capital Conservation	11.513		11.341	11.442		11.389
Buffer,Countercyclical Capital Buffer & Surchage on D - SIBs) (%)
Of which : Capital Conservation Buffer (%)	2.500		2.500	2.500		2.500
Of which : Countercyclical Buffer (%)
Of which : Capital Surcharge on D -SIBs (%)	1.500		1.500	1.500		1.500
Total Tier 1 Capital Ratio (%)	11.513		11.341	11.442		11.389
Total Capital Ratio (Including Capital Conservation	15.090		14.507	15.151		14.657
Buffer,Countercyclical Capital Buffer & Surcharge on D-SIBs (%)
Of which : Capital Conservation Buffer (%)	2.500		2.500	2.500		2.500
Of which : Countercyclical Buffer (%)
Of which : Capital Surcharge on D -SIBs (%)	1.500		1.500	1.500		1.500

Disclosure 3

Leverage Ratio

	Group	Bank
	December 31, 2023	December 31, 2022	December 31, 2023	December 31, 2022
	Rs. '000	Rs. '000	Rs. '000	Rs. '000
Tier 1 Capital	166,649,326	161,743,687	156,847,378	154,397,407
Total Exposures	3,152,965,394	2,856,960,615	3,073,624,948	2,777,299,175
On-balance sheet items
(excluding derivatives and securities financing
transactions, but including collateral)	2,576,134,591	2,452,984,237	2,497,761,245	2,376,179,949
Derivative exposures	334,113,106	190,348,706	334,113,106	190,348,706
Securities financing transaction exposures	151,689,691	105,539,671	151,689,691	103,838,277
Other off-balance sheet exposures	91,028,006	108,088,001	90,060,906	106,932,243
Basel III Leverage Ratio (minimum requirement 3%) (%)	5.29	5.66	5.10	5.56

Disclosure 4

Liquidity Coverage Ratio (LCR)

	December 31, 2023	December 31, 2022
	Total Un-	Total weighted	Total Un-	Total weighted
	weighted Value	Value	weighted Value	Value
	Rs. '000	Rs. '000	Rs. '000	Rs. '000
Total stock of High Quality Liquid Assets (HQLA)	770,542,166	760,373,663	483,964,278	476,447,368
Total Adjusted Level 1 Assets	722,696,096	722,696,096	435,146,578	435,146,578
Level 1 Assets	704,528,042	704,528,042	435,146,578	435,146,578
Total Adjusted Level 2A Assets	65,253,025	55,465,071	48,262,685	41,023,282
Level 2A Assets	65,253,025	55,465,071	48,262,685	41,023,282
Total Adjusted Level 2B Assets	761,099	380,550	555,015	277,508
Level 2B Assets	761,099	380,550	555,015	277,508
Total Cash outflows	2,449,592,965	479,455,036	2,265,841,586	462,213,957
Deposits	1,469,116,533	146,911,654	1,268,623,900	126,862,390
Unsecured wholesale funding	643,914,363	289,926,471	682,874,880	300,282,024
Secured funding transaction	-	-	-	-
Undrawn portion of committed (irrevocable) facilities and	300,966,514	7,021,356	295,415,928	16,142,665
other contingent funding obligations
Additional requirements	35,595,555	35,595,555	18,926,878	18,926,878
Total Cash Inflows	496,833,149	332,174,095	458,161,587	300,105,885
Maturing secured lending transactions backed by the	152,142,219	150,857,303	142,604,695	141,330,270
collateral
Committed facilities	-	-	-	-
Other inflows by counterparty which are maturing within 30	255,940,175	176,047,187	221,927,624	154,828,065
calendar days
Operational deposits	78,211,545	-	85,734,167	-
Other cash inflows	10,539,210	5,269,605	7,895,101	3,947,550
Liquidity Coverage Ratio (%) (Stock of High Quality
Liquid Assets/Total Net Cash Outflows over the Next 30		516.27		293.91
Calendar Days)*100 (minimum requirement - 100%)

Disclosure 5

Net Stable Funding Ratio (NSFR)

	Bank
	December 31, 2023	December 31, 2022
	Rs. '000	Rs. '000
Total available stable funding (ASF)	1,933,461,907	1,767,993,757
Total required stable funding (RSF)	998,198,064	1,018,567,849
Required stable funding - On-balance sheet assets	992,172,206	1,013,512,135
Required stable funding - Off-balance sheet items	6,025,858	5,055,714
NSFR (minimum requirement - 100%) (%)	193.70	173.58

Disclosure 6

Main Features of Regulatory Capital Instruments

Basel III Compliant -Tier 2

Listed, Rated ,Unsecured,

Basel III Compliant -Tier 2

Description of the Capital Instrument

Stated Capital

Subordinated,Redeemable

Listed, Rated ,Unsecured, Subordinated,Redeemable Debentures with a Non - viability Conversion

Debentures

2016 - 2026

2016 - 2026

2018 - 2028

2021 - 2026

2021 - 2028

2022 - 2027

2022 - 2029

2022 - 2032

2023 - 2028

2023 - 2028

2023 - 2030

2023 - 2030

2023 - 2033

2023 - 2033

Type B

Type B

Type B

Type A

Type B

Type A

Type B

Type C

Type A

Type B

Type C

Type D

Type E

Type F

Issuer

Commercial Bank

Unique Identifier (e.g., ISIN or Bloomberg Identifier for Private Placement)

Governing Law(s) of the Instrument

Sri Lanka

Original Date of Issuance

N/A

09/03/2016

28/10/2016

23/07/2018

21/09/2021

21/09/2021

12/12/2022

12/12/2022

12/12/2022

20/12/2023

20/12/2023

20/12/2023

20/12/2023

20/12/2023

20/12/2023

Par Value of Instrument

Rs. 100/-

Perpetual or Dated

Perpetual

Dated

Original Maturity Date, if Applicable

N/A

08/03/2026

27/10/2026

22/07/2028

20/09/2026

20/09/2028

11/12/2027

11/12/2029

11/12/2032

19/12/2028

19/12/2028

19/12/2030

19/12/2030

19/12/2033

19/12/2033

Amount Recognised in Regulatory Capital (in Rs. '000 as at the Reporting Date)

62,948,003

787,091

1,156,920

1,606,160

2,330,609

4,358,000

5,379,744

3,263,820

11,500

2,132,400

7,558,090

32,980

817,760

30,840

1,427,930

Accounting Classification (Equity/Liability)

Equity

Liability

Issuer Call subject to Prior Supervisory Approval

Optional Call Date, Contingent Call Dates and Redemption Amount (Rs. '000)

N/A

Subsequent Call Dates, if Applicable

N/A

Coupons/Dividends

Fixed or Floating Dividend/Coupon

N/A

Fixed

Coupon Rate and any Related Index

11.25% p.a.

12.25% p.a.

12.50% p.a.

9.00% p.a.

9.50% p.a.

28.00% p.a.

27.00% p.a.

22.00% p.a.

14.50% p.a.

15.00% p.a.

13.75% p.a.

14.25% p.a.

13.50% p.a.

14.00% p.a.

Non-Cumulative or Cumulative

Non-Cumulative

Cumulative

Convertible or Non-Convertible

If Convertible, Conversion Trigger (s)

N/A

Not Convertible

*

*

*

*

*

*

*

*

*

*

*

*

If Convertible, Fully or Partially

N/A

N/A

Fully

If Convertible, Mandatory or Optional

N/A

N/A

**

**

**

**

**

**

**

**

**

**

**

**

If Convertible, Conversion Rate

N/A

N/A

***

***

***

***

***

***

***

***

***

***

***

***

1. A "Trigger Event" is determined by and at the sole discretion of the Monetary Board of the Central Bank of Sri Lanka (i.e. conversion of the said Debentures upon
   occurrence of the Trigger Event will be effected by the Bank solely upon being instructed by the Monetary Board of the Central Bank of Sri Lanka), and is defined in the Banking Act Directions No. 1 of 2016 of Web Based Return Code 20.2.3.1.1.1.(10) (iii) (a&b) as a point/event being the earlier of:
   (a) "A decision that a write-down, without which the Bank would become non-viable, is necessary, as determined by the Monetary Board, OR
   (b) The decision to make a public sector injection of capital, or equivalent support, without which the Bank would have become non-viable, as determined by the

(**) Optional. At the discretion of the monetary board of the Central Bank of Sri Lanka upon occurance of trigger points as detailed above.

1. The price based on the simple average of the daily volume weighted average price (VWAP) of an ordinary voting share of the Bank during the three (03) months period, immediately preceding the date of the Trigger Event.

Disclosure 7

Summary Discussion on Adequacy/Meeting Current and Future Capital Requirements

The Bank prepares the Corporate Plan and Budget for a period of 5 years which is rolled over every year and contains the forecast for key ratios mentioned under Basel III accord including the Capital Adequacy Ratios (CARs).

As part of the budgeting process the CARs are computed based on the movements in risk-weighted assets underlying the budgeted expansion of assets, including business volumes. The Bank has set up an internal threshold on minimum CARs and ensures that appropriate measures are taken to maintain the CARs above the said threshold in preparing the budget. The budget also captures the capital augmentation plan covering both internal and external capital sources. The Bank also takes inititives well in advance to raise Tier I and Tier II capital as detailed in the Budget as well as in the Capital Augmentation plan. The Bank has a well established monitoring mechanism to periodically monitor the level of achievement against pre-determined targets to take timely corrective action in case of significant deviations.

Additionally, the Bank has a dynamic ICAAP process with rigorous stress testing embodied in addition to taking into consideration the qualitative aspects such as reputational and strategic risks. The ICAAP process also computes the concentration risk ensuring that the Bank has a well-diversified assets portfolio which is not overly exposed to any individual counterparty or sector. In addition ICAAP process also captures the residual risk to assess the amount of risk that remains after controls are accounted for. This process also proactively identifies the possible gaps in CARs in advance, allowing the Bank to take calculated decisions to optimise utilisation of capital.

Methods of improving the CARs are being evaluated on an ongoing basis and in extreme situations, the Bank will deliberate on strategically curtailing the expansion of risk weighted assets. However, prior to taking such decisions, the Bank will assess the impact on the internally developed thresholds of minimum CARs resulting from the short-term asset expansion plans. The Bank periodically analyses the impact of capital by product and by strategic business unit, to understand the extent of capital consumption to ensure the portfolio optimises the available capital. The Bank is committed to maintaining the internal CAR thresholds despite any leniency provided by Central Bank of Sri Lanka (CBSL) during adverse times.

The Bank has set up a separate Committee headed by the Managing Director to suggest improvements with regard to the Capital and CAR. The Committee deleberates on both internal and external improvements in optimising the utilization of the capital. During the year, Basel Committee met …times and monitored the progress of the activities and suggested many inititives to improve the utilization of the capital.

The Bank has developed a basic RAROC framework and are in the process of fine tuning it in order to make use of the model specially when taking credit decisions. RAROC could be used as the basic hurdle rate in lending decisions.

When deciding the dividend for FY 2023, the Bank carried out numerous analysis to identify the most feasible dividend payout, while ensuring a sustainable growth for FY 2024. The dividend is proposed also ensuring the Bank maintains a quarterly CAR above the minimum thresholds as per the Basel III guidelines, taking into account the capital augmentation plans for the year 2024. In the present context since the Bank has investments in the defaulted Foreign currency bonds and therefore carries out numerous computations and analysis to identify the possible impact to the profitability and the CAR due to restructring of the government bond portfolio. In this regard, a world renowned consultant has been appointed to assist the Bank in restructuring negotiations.

A comprehensive analysis of "Managing Funding and Liquidity: Safeguarding Monetary Fluidity" given on pages 72 in Annual Report 2023.

Disclosure 8

Credit Risk under Standardised Approach

Credit Risk Exposures and Credit Risk Mitigation (CRM) Effects

			Group
	Exposures before Credit Conversion Factor	Exposures post CCF and CRM	RWA and RWA Density (%)
	(CCF) and CRM
As at December 31, 2023
On-Balance Sheet	Off-Balance Sheet	On-Balance Sheet		Off-Balance Sheet	RWA
	Amount	Amount	Amount		Amount
			RWA Density (%)
	Rs. '000	Rs. '000	Rs. '000		Rs. '000	Rs. '000
Claims on Central Government and Central Bank of Sri Lanka	906,240,426	56,743,750	906,240,426		1,134,875	17,708,600	1.95
Claims on Foreign Sovereigns and their Central Banks	170,432,030	-	170,432,030		-	138,469,248	81.25
Claims on Public Sector Entities (PSEs)	5,333,014	-	5,333,014		-	5,333,014	100.00
Claims on Official Entities and Multilateral Development Banks(MDBs)	33,654	-	33,654		-	-	-
Claims on Banks Exposures	187,063,338	118,932,891	187,063,338		6,709,008	82,902,548	42.78
Claims on Financial Institutions	18,607,530	-	18,607,530		-	9,845,044	52.91
Claims on Corporates	676,498,522	444,830,830	608,063,714		59,444,364	638,487,690	95.65
Retail Claims	371,747,646	37,536,815	317,424,801		16,430,580	243,478,692	72.93
Claims Secured by Residential Property	82,514,493	-	82,514,493		-	48,119,031	58.32
Claims Secured by Commercial Real Estate	-	-	-		-	-	-
Non-Performing Assets (NPAs)	85,080,030	-	85,080,030		-	98,187,153	115.41
Higher-risk Categories	-	-	-		-	-	-
Cash Items and Other Assets	110,641,023	-	110,641,023		-	48,269,103	43.63
Total	2,614,191,706	658,044,286	2,491,434,053		83,718,827	1,330,800,123	51.68

Disclosure 8

Credit Risk under Standardised Approach

Credit Risk Exposures and Credit Risk Mitigation (CRM) Effects

			Bank
	Exposures before Credit Conversion Factor	Exposures post CCF and CRM	RWA and RWA Density (%)
	(CCF) and CRM
As at December 31, 2023
On-Balance Sheet	Off-Balance Sheet	On-Balance Sheet		Off-Balance Sheet	RWA
	Amount	Amount	Amount		Amount
			RWA Density (%)
	Rs. '000	Rs. '000	Rs. '000		Rs. '000	Rs. '000
Claims on Central Government and Central Bank of Sri Lanka	905,530,587	56,743,750	905,530,587		1,134,875	17,708,600	1.95
Claims on Foreign Sovereigns and their Central Banks	125,200,900	-	125,200,900		-	93,238,118	74.47
Claims on Public Sector Entities (PSEs)	5,333,014	-	5,333,014		-	5,333,014	100.00
Claims on Official Entities and Multilateral Development Banks(MDBs)	33,654	-	33,654		-	-	-
Claims on Banks Exposures	186,267,458	118,932,891	186,267,458		6,709,008	82,106,668	42.55
Claims on Financial Institutions	18,607,530	-	18,607,530		-	9,845,044	52.91
Claims on Corporates	653,690,809	443,843,440	588,180,309		58,477,264	617,637,185	95.51
Retail Claims	371,508,821	37,536,815	317,185,976		16,430,580	243,436,643	72.97
Claims Secured by Residential Property	82,514,493	-	82,514,493		-	48,119,031	58.32
Claims Secured by Commercial Real Estate	-	-	-		-	-	-
Non-Performing Assets (NPAs)	78,801,548	-	78,801,548		-	89,196,058	113.19
Higher-risk Categories	1,604,105	-	1,604,105		-	4,010,263	250.00
Cash Items and Other Assets	106,391,645	-	106,391,645		-	45,268,023	42.55
Total	2,535,484,564	657,056,896	2,415,651,219		82,751,727	1,255,898,647	50.27

Disclosure 9

Credit Risk under Standardised Approach

Exposures by Asset Classes and Risk Weights (Post CCF & CRM)

					Group
As at December 31, 2023											Total Credit
0%	20%	35%	50%	60%		75%	100%	150%	>150%	Exposures
											Amount
	Rs. '000	Rs. '000	Rs. '000	Rs. '000	Rs. '000		Rs. '000	Rs. '000	Rs. '000	Rs. '000	Rs. '000
Claims on Central Government and Central Bank of Sri Lanka	818,832,299	88,543,002	-	-	-		-	-	-	-	907,375,301
Claims on Foreign Sovereigns and their Central Banks	31,962,782	-	-	-	-		-	138,469,248	-	-	170,432,030
Claims on Public Sector Entities (PSEs)	-	-	-	-	-		-	5,333,014	-	-	5,333,014
Claims on Official Entities and Multilateral Development Banks (MDBs)	33,654	-	-	-	-		-	-	-	-	33,654
Claims on Banks Exposures	-	122,271,184	-	26,219,878	-		-	45,167,111	114,173	-	193,772,346
Claims on Financial Institutions	-	-	-	17,524,972	-		-	1,082,558	-	-	18,607,530
Claims on Corporates	-	22,807,804	-	21,548,290	-		-	623,151,984	-	-	667,508,078
Retail Claims	20,985,178	14,075,340	-	-	68,725,437		122,564,258	107,505,168	-	-	333,855,381
Claims Secured by Residential Property	-	-	52,916,096	-	-		-	29,598,397	-	-	82,514,493
Claims Secured by Commercial Real Estate	-	-	-	-	-		-	-	-	-	-
Non-Performing Assets (NPAs)	-	-	-	45,626	-		-	58,774,532	26,259,872	-	85,080,030
Higher-risk Categories	-	-	-	-	-		-	-	-	-	-
Cash Items and Other Assets	52,197,807	12,717,641	-	-	-		-	45,725,575	-	-	110,641,023
Total	924,011,720	260,414,971	52,916,096	65,338,766	68,725,437		122,564,258	1,054,807,587	26,374,045	-	2,575,152,880