Effective corporate governance is fundamental to the Bank’s ability to deliver on its purpose and strategy. Our approach to corporate governance sets the foundation for the way we conduct our business and deliver value to our stakeholders. The performance and stability achieved by the Bank signify the value placed on aligning strategic priorities of the Bank with performance and the societal needs at large. The Board placed greater oversight on governance, financial stability, risk management and internal controls amidst a volatile and uncertain business environment to deliver sustainable value to all stakeholders.
During the year under review, significant initiatives were taken to strengthen the corporate governance framework, guided by the principles of fairness, transparency, independence and accountability. Our Board of Directors, comprising of experienced professionals are drawn from diverse backgrounds, who provides strategic oversight and direction, ensuring that our decisions are aligned with our values and long-term objectives.
We strive to foster a culture of integrity, professionalism, and ethical behaviour throughout the Bank, from the top tier to the frontlines. Our employees are our greatest asset, and we empower them to act with honesty, diligence and respect for all stakeholders.
In addition to our internal efforts, we engage with our shareholders, regulators, and other stakeholders to ensure transparency and accountability in our operations. Their feedback and input is greatly valued as it helps us to continuously improve our governance practices and strengthen our relationships with the communities we serve.
Way Forward
Looking ahead, the Bank is committed to upholding the highest standards of corporate governance and ethical conduct whilst remaining true to its ethos. We will continue to review and enhance our governance framework to adapt to evolving regulatory requirements and best practices, ensuring that we remain at the forefront of corporate governance excellence. The Board is committed to guiding the BoC towards its digitialisation aspirations to offer state-of-the-art banking solutions to its customers.
This report and the compliance annexures on pages 353-389 demonstrate the Bank’s approach to governance in practice and continued compliance with corporate governance regulations and best practices. I wish to declare that the principles of good corporate governance are well integrated across BoC and all Directors and employees of the Bank have executed their duties and responsibilities in line with established policies and procedures as well as the Bank’s guidelines for ethical business conduct.
Kavan Ratnayaka Chairman
14 March 2024 Colombo
"
We will continue to review and
enhance our governance framework
to adapt to evolving regulatory
requirements and best practices,
ensuring that we remain at the
forefront of corporate governance
excellence. The Board is committed
to guiding the BoC towards its
digitialisation aspirations to offer
state-of-the-art banking solutions to
its customers.
"
CORPORATE GOVERNANCE
OUR APPROACH TO GOVERNANCE
GRI 2-9
Our commitment to corporate governance is integral to our mission of delivering sustainable value to our stakeholders. The Board ensures that the governance framework supports the achievement of the Bank’s strategic objectives while safeguarding the corporate values, reputation and assets and regularly reviews and updates this to be in line with the evolving regulations and best practices. BoC ventures beyond mandatory compliance and expands conformance practices across all areas of business, promoting responsible corporate behaviour, strengthening operations, addressing expectations of various stakeholder groups and eventually supporting sustained performance.
Our approach to governance is reflected through four key elements of the Bank’s corporate governance framework: People, Processes, Purpose and Performance.
GOVERNANCE FRAMEWORK AND STRUCTURE
Governance Dimensions
Founded on Our Values
People
Processes
Purpose
Performance
Regulatory Requirements •
Bank of Ceylon Ordinance No. 53 of 1938 (referred to as “The Ordinance”) and its amendments
•
Banking Act No.30 of 1988 and subsequent amendments
•
Banking Act Direction No.11 of 2007 on Corporate Governance for Licensed Commercial Banks and subsequent amendments
•
Continuing listing requirements of the Colombo Stock Exchange
•
Securities and Exchange Commission of Sri Lanka Act No. 19 of 2021
Internal Frameworks •
Corporate Governance Policy incorporating among others
•
Board charter
•
Subcommittee charters
•
Code of business conduct and ethics for
Directors
•
Comprehensive policies and procedures
•
Subsidiary Management charter
•
Customer charter
•
HR and people management
•
Strategic and corporate planning
•
Risk management
•
IT and Cyber Security Governance
•
Code of Ethics for employees
Voluntary Compliance •
Code of Best Practice on Corporate Governance issued by the Institute of Chartered Accountants of Sri Lanka
•
GRI Standards issued by the Global Reporting Initiative
•
IR Framework issued by IIRC
•
COBIT 2019 framework issued by ISACA
•
ISO 27001
•
Sustainable Development Goals (SDG’s)
Customer-centricity
Respect for
diversity
Commitment to highest level
of ethics, governance and
professionalism
Focus on agility
and innovation
Accountability
for actions
Shareholder
Executive Management
Compliance
Risk Management
Internal Audit
Secretary to the Board
General Manager
Corporate Management and Executive Committees
Auditor General
Governance Structure
Board
Subcommittees
Audit
Committee
Integrated
Risk Management
Committee
Human
Resources and
Remuneration
Committee
Nomination
and Corporate
Governance
Committee
Information and
Communication
Technology
Committee
Board of Directors
Appointment flow Reporting flow
PEOPLE MAINTAINING
A WELL-BALANCED BOARD
Composition of the Board
The Board of Directors now consists of six Directors who bring a diverse mix of skills, experiences, and expertise. All six Directors serve in a non- executive capacity, while five of them are independent. A representative of the ministry in charge of the subject of finance holds an Ex-officio position on the Board. The composition of the Board is established in the Ordinance, and the relevant Minister responsible for state banks appoints the Directors. A skilled Corporate Management Team supports the Board, and their expertise underpins the Bank’s ability to deliver on its strategy.
Independence
Assessment of independence of Directors follows the guidelines set forth by the CBSL. The Board is satisfied that there are no relationships or circumstances likely to affect or appear to affect, Directors’ independence during the period under review.
Roles and responsibilities
GRI 2-11 | 2-12
As the highest governing body of the Bank, the Board provides strategic and entrepreneurial leadership and sets the appropriate values and standards to align with BoC’s strategic vision and principles of good governance. Apart from this, the Board remains the main authority responsible for proper governance and oversight of key aspects of the business.
The Bank ensures clarity in roles and effective segregation of responsibilities through the Board Charter, which explicitly outlines the roles and responsibilities of the Board. The Chairman of the Board is a Non- Executive Director and provides leadership to the Board, while the General Manager leads the executive leadership team and does not hold a Board position. This separation ensures clarity in roles and effective decision- making. Additionally, no single Director holds unrestricted power in the decision- making process.
STRENGTH IN DIVERSE SKILLS AND EXPERIENCE
Nos.
Law
Finance/
Accounting
and
Management
1
3
1
1
3
2
2
5
Entrepreneurship
1
Engineering
1
Agriculture
1
Military/Civil Service
Agriculture
1
2
Banking/Investment
Banking
2
IT/Fin-tech
1
1
Engineering
Board of
Directors
2023
Board of
Directors
2024
Entrepreneurship
Human Resource
Finance/Accounting and Management
IT/Fin-tech
Risk
Banking/ Investment Banking
Role of Chairman
•
Providing leadership to the Board.
•
Promoting a culture of good governance practices and maintaining the standard of integrity.
•
Fostering a culture of inclusivity by encouraging the expression of diverse views by Board members and ensuring the participation of all Directors during discussions.
•
Ensuring compliance to all applicable laws and regulations.
•
Ensuring shareholder concerns are appropriately addressed.
Role of the General Manager
•
Execution of the strategic agenda set out in the Bank’s Strategic Plan in line with the financial and non- financial targets set by the Board.
•
Monitoring and reporting the Bank’s performance to the Board.
•
Implementing a system including internal controls and audits to identify and manage risks that are material to the business of the Bank.
•
Development of the succession plan for the Senior Management.
•
Building a culture that is based on the Bank’s values.
Delegation of authority
GRI 2-13
Delegation of authority to Board Subcommittees, allows the main Board to allocate sufficient time to matters reserved for its decision making, while ensuring delegated matters receive detailed attention. It also allows the Board to capitalise on the specific expertise of individual Board members. The committees are governed by Board approved mandates and Terms of References. The Chairperson of each committee reports on their respective activities and recommendations during Board meetings, and these are approved by the Board. The day-to-day management of the Bank is delegated to the Corporate Management Team, which is led by the General Manager. In addition, the Bank has established several executive-level committees with clearly defined mandates and responsibilities.
Board Subcommittees
Board Subcommittee
Area of oversight
Audit Committee (AC) (Report of the Committee on pages 122 and 123 )
•
Internal and external audit
•
Internal controls
•
Financial reporting and compliance
Human Resources and Remuneration Committee (RC) (Report of the Committee on pages 126 and 127)
•
Remuneration policy
•
HR Policy
•
Goals and targets for Key Management Personnel
•
Performance evaluation
Nomination and Corporate Governance Committee
(NC) (Report of the Committee on pages 128 and 129)
•
Assessment of fitness and propriety of Key Management Personnel
•
Code of Ethics
•
Effectiveness of the Board and its subcommittees
•
Corporate Governance
Integrated Risk Management Committee (Report of the Committee on pages 124 and 125)
The Company Secretary/Secretary to the Board performs a major role in ensuring that good governance practices are maintained within the Bank at all times. Each member of the Board has access to the advice and services of the Secretary to the Board for matters relating to Board procedures and any clarification on applicable rules and regulations.
•
Plays a key role in implementing the Bank’s Corporate Governance Framework
•
Ensures that Board procedures are followed in line with applicable laws, rules and regulations
•
Regularly reviews the Bank’s governance framework in view of emerging best practices, regulatory changes and stakeholder interests
•
Setting the agenda of Board meetings with the approval of the Chairman
Ms Janaki Senanayake Siriwardane serves as the Secretary to the Board and has been appointed in accordance with the requirements of the Banking Act and relevant amendments.
BOARD REFRESHMENT
GRI 2-10
The Board is refreshed periodically through new appointments, retirement and resignation. Board refreshment allows for the introduction of members with new skills, insights, and perspectives, while retaining valuable industry knowledge and maintaining continuity.
Appointment
Retirement/Resignation
Appointments to the Board are made by the Minister responsible for state banks. Once the criteria for fitness and propriety are verified against the Bank’s internal policy, approval of the Central Bank of Sri Lanka is sought for the new appointments. Under the new Securities and Exchange Commission of Sri Lanka (SEC) Act No. 19 of 2021, the SEC also gives its consent for the new Board appointments.
Any resignations or removals of Directors are also brought to the attention of the same Minister, while the CBSL, SEC and Colombo Stock Exchange (CSE) are kept informed of any changes to the Board.
Appointments during 2023
Resignations during 2023
•
Mr Naresh Abeyesekera
•
Mr A C Manilka Fernando
•
Prof. Kithsiri M Liyanage
•
Mr Harsha Wijayawardana
Appointments during 2024
Resignations during 2024
•
Mr Kavan Ratnayaka
•
Mr Ronald C Perera PC
•
Mr Jehaan Ismail
•
Major General (Rtd.) G A Chandrasiri VSV
•
Mr Jayamin Pelpola
CONFLICT OF INTERESTS
GRI 2-15
A Board approved policy on Conflict of Interest is in place, which is reviewed each year. As a practice at every Board meeting, Directors are required to declare any interest in contracts/new appointments to any other Board or Institution. Directors abstain from participating in the discussions, voicing their opinion or approving in situations where there is a conflict of interest.
MEETINGS AND ATTENDANCE
The Board uses its meetings to discharge its duties and monitor the strategic direction and approach to risk management.
Frequency
Agenda and Board papers
Notice
Meetings
Post meeting
•
At the start of each year, the calendar is set for Board meetings and subcommittee meetings and notice is given to directors
•
Secretary to the Board sets the agenda under the authority delegated by Chairman
•
Directors are free to submit proposals to the agenda for discussion at Board meetings
•
Matters arising from internal/external developments may be added to the agenda
•
Board papers are prepared and electronically circulated to Directors through a secure portal ensuring sufficient time is given to review matters which are to be discussed and seek additional clarifications if required
•
Discussion of performance updates, governance matters and recommendations from subcommittees including risk reports
•
Members of the management team are invited for Board meetings to provide additional clarifications if required
•
The Secretary to the Board prepares the minutes and circulates among Directors through a secure e-solution within 10 days of the meeting
•
Draft minutes are circulated to the Senior Management Team the day following the meeting
•
Minutes are adopted at the subsequent Board meeting
•
Follow up action is taken on outstanding matters
CORPORATE GOVERNANCE
Board and Subcommittee meeting attendance during 2023
The Board held 22 meetings during the year and attendance at these meetings is given below.
Name of Director
Board
meeting
Audit
Committee
meeting
Human
Resources and
Remuneration
Committee
meeting
Nomination
and Corporate
Governance
Committee
meeting
Integrated
Risk
Management
Committee
meeting
ICT
Committee
meeting
Mr Ronald C Perera PC Chairman
22/22
-
-
-
3/7
-
Mr R M Priyantha Rathnayake Ex-officio Director
22/22
12/13
2/2
10/10
7/7
12/12
Major General (Rtd.) G A Chandrasiri VSV Non-Executive Director
20/22
9/13
2/2
10/10
4/7
11/12
Prof. Kithsiri M Liyanage Non-Executive Director
1
17/17
-
1/1
6/6
-
12/12
Mr Naresh Abeyesekera Non-Executive Director
2
16/16
8/8
-
-
3/3
12/12
Mr A C Manilka Fernando Non-Executive Director
3
6/6
5/5
1/1
4/4
-
-
1. Appointed w.e.f 31.03.2023 2. Appointed w.e.f 04.05.2023 3. Resigned w.e.f. 21.04.2023
BOARD INDUCTION AND DIRECTOR TRAINING
Our induction programme is tailored to suit the needs, skills and experience of each new member of our Board. The programme prepares new Board members for their role with BoC, recognising the importance of supporting Directors in meeting their statutory duties, understanding the strategy of the Bank, and engaging them with the decision makers and leaders of the Bank’s day-to-day operations.
Induction packs
Include an overview of the Bank, details on the governance framework regulatory frameworks, and details of the Corporate Management team and Board support framework, among others.
A presentation by the General Manager details the Bank’s history, business model, organisational structure, business verticals, and support functions.
One-on-one meetings and departmental visits are scheduled as necessary or on request.
Presentations
Meetings
Beyond the initial induction, Directors are encouraged to receive comprehensive updates and training on various topics including changes to applicable laws and regulations, changes to standards and codes and emerging trends in the operating landscape, which allow them to obtain the knowledge required to effectively discharge their responsibilities. During the year, the Directors participated in a training on Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT).
The Policy for Directors’ Access to Independent Professional Advice also provides an opportunity for external expert input at the Bank’s expense.
PROCESSES – ESTABLISHING
EFFECTIVE CONTROLS
Policy framework
GRI 2-23 | 2-24
At BoC, we are committed to operating in accordance with a robust policy framework that governs our activities, guides our decision-making processes, and ensures alignment with our strategic objectives, regulatory requirements, and ethical standards. Our policy framework encompasses various areas of our operations, including risk management, people management, IT governance and sustainability management. The framework is regularly reviewed and updated to ensure alignment with changing internal and external factors.
Policies are documented in a clear manner, ensuring that all employees and other relevant parties can easily refer to the policies whenever needed and effective channels of communication are used to introduce and explain policy commitments.
The following is an overview of key policies that form the foundation of our operations.
Risk Oversight
The Board bears the overall responsibility of formulating a robust risk management policy and overseeing the Bank's risk management and internal control frameworks. The Integrated Risk Management Committee (IRMC) and Audit Committee assist the Board in fulfilling its risk management and internal control obligations. Key focus areas addressed during the year are discussed in detail in the Risks and Opportunities report (pages 132 to 148), Report of the Audit Committee (pages 122 to 123) and IRMC Report (pages 124 to 125).
IT Governance
The Board is committed to safeguarding the Bank’s information assets and operational systems and invests extensively in cybersecurity and management systems. A Board approved Information Security Policy is in place which provides the management with direction and support to ensure protection of the Bank’s information assets.
By implementing robust IT governance processes and controls, BoC aims to optimise the value of its IT investments and achieve its strategic objectives in an increasingly digital and competitive environment. The Bank has also appointed a Chief Information Security Officer, in order to implement the Cybersecurity Risk Management Policy. During the year, the Bank worked towards further strengthening its IT governance protocols by laying the initial groundwork to implement the COBIT 2019 Framework and increasing the investments in IT infrastructure, access controls and data loss prevention controls among others.
Risk related functions
•
Approval of the Bank’s risk appetite
•
Regularly assess the principal risks facing the Bank
•
Review of risk appetite dashboards and performance against defined parameters at the IRMC meetings
•
Ensure that mitigating tools are in place to effectively address these risks
Governance of overseas
operations
The Bank has overseas operations in three countries through overseas branches and a fully-owned subsidiary in UK, which are established under the clearance received from CBSL and relevant authorities in those countries. These branches comply with and are monitored by the relevant authorities in their respective countries.
The overseas branches are governed through an "Overseas Branch Charter" which is supervised under the dedicated Assistant General Manager Division. The overseas branch unit reports their performance quarterly to the Board of Directors of the Bank and all strategic level decisions are also escalated to the Board for approval. When appointing CEOs for the overseas branches, approval of the CBSL has to be obtained along with approval from relevant authorities in that country. Compliance, audit and performance are monitored through the BoC Head Office by special audit. The National Audit Office also reviews and conducts audit procedures
Risk Management
Information Technology Management
People Management
Sustainability Management
•
Credit Risk Management Policy
•
Country Risk Management Policy
•
Stress Testing Policy
•
Risk Management Policy
•
ICAAP Policy (Internal Capital Adequacy Assessment Process)
•
Operational Risk Management Policy
•
Fraud Risk Management Policy
•
E–Waste Management Policy
•
Information Security Policy
•
Vulnerability Management Policy
•
Human Resource Policy
•
Training and Development Policy
•
Scheme of Recruitment
•
WFH Policy
•
Exit-interview Policy
•
Anti-bribery and Corruption Policy
•
ESMS Policy
•
Governance Policy
•
Communication Policy
•
Customer Complaint Handling Policy and Procedures
covering those branches in line with annual audit of the Bank. Furthermore, external auditors in the country of operation also conduct independent audits as per the relevant regulations.
Policies introduced 2023
•
Cybersecurity Policy
•
ECL Model Validation Policy
•
Policy of Engagement of External Auditor to provide Non-Audit Services
Compliance
GRI 2-27
BoC has a statutory obligation in terms of the Banking Act and CSE Listing Requirements to comply with regulations, and proactively monitor and assess regulatory developments to determine their applicability and impact on the Group. The Board stays informed about changes in laws, regulations, and industry standards that may impact the Bank's operations and monitors regulatory developments to assess any potential impact on the Bank's compliance obligations and risk exposure. The Board receives regular reports from the Head of Compliance and management on the Bank's status of compliance, including any regulatory violations, enforcement actions, or emerging compliance issues.
For further details please refer pages 353 to 389 of this Annual Report.
COMMUNICATION OF CRITICAL CONCERNS
GRI 2-16 | 2-25
A number of mechanisms have been established to facilitate communication of critical concerns to the Board as follows.
•
Meetings of the Board and subcommittees: Critical concerns may be raised through the relevant subcommittees to the Board or via the General Manager.
•
Whistle-blower in policy.
•
Secretary to the Board: As a conduit between the management and the Board.
CORPORATE GOVERNANCE
PURPOSE – DRIVING ACCOUNTABILITY, TRANSPARENCY AND
INTEGRITY
Value-based culture
GRI 2-25
The Board sets the tone at the top to build a value-based culture within the Bank to foster alignment, cohesion, and shared purpose among employees. BoC’s core values are communicated to all employees through various channels, including corporate
meetings, internal communications, and training sessions. Furthermore, these values are embedded into key business processes, such as performance management, recruitment, and recognition programmes.
The following frameworks facilitate the propagation of such as a culture, acting as a blueprint for the responsible and ethical behaviour expected from employees.
Code of Conduct and Ethics
•
Directors’ Code of Ethics
The Board is bound by the Code
of Business Conduct and Ethics and is required to submit an annual confirmation on their compliance with the provisions of the code. The code aims to propagate a strong culture of integrity, transparency and anti-corruption while encouraging Directors to act in the best interests of the Bank.
•
Employee Code of Ethics
This is applicable to all employees
and clearly sets out the Bank’s expectations in dealing with internal and external stakeholders, behaviour, bribery and corruption.
Whistleblowing Policy
Purpose
Communication
Investigation
A Board-approved Whistle-blowing Policy encourages internal and external stakeholders to report complaints pertaining to suspected theft, fraud, corruption, misuse of the Bank’s assets, or any other actions that are considered unethical or illegal, whilst providing reassurance on confidentiality.
Any stakeholder can voice their concerns/complaints in person, via post, email, phone, fax, website, call center or Facebook chat. Complaints are directed to, and overseen by the Chief Internal Auditor, while complaints made against employees of the DGM grade or above are submitted to the Chairman of the Audit Committee.
•
The relevant authority undertakes an initial review of the complaint received based on the information provided by the complainant and requests for any additional information if required.
•
After the initial assessment work is carried out to resolve the concern as early as possible and if further investigation is required the complainant is notified.
•
The complaint should be resolved within 21 calendar days.
Instances of Non-compliance
Date, the penalty imposed
Date of Payment
Type of Penalty Reasons for the Penalty
Amount (LKR)
To which Law the Penalty imposed for Non-compliance
07.11.2023
21.11.2023
Administrative
Failure to obtain prior approval when entering to business relationships with several politically Exposed Persons
6,000,000.00
Rule 59 of the Financial Institutions (Customer Due Diligence) Rules, No 1 of 2016 published in the Extraordinary Gazette No 1951/13, dated 27 January 2016
Failure to comply with targeted financial sanctions without delay
Regulation 4(7) of UN Regulations No.01 of 2012
•
During the year under review, there were no monetary losses arising as a result of legal proceedings associated with fraud, insider trading, anti-trust, anti-competitive behaviour, market manipulation, malpractice, or other related financial industry laws or regulations other than the instant mentioned above. As a proactive measure, the Bank implemented several system controls and monitoring processes to ensure adherence to guidelines related to Politically Exposed Persons(PEPs) stipulated in the Financial Transactions Reporting Act, No. 06 of 2006 (FTRA).
•
System features and controls have been improved to sanction screening promptly to ensure compliance with regulatory requirements. Awareness levels of the staff were also enhanced through special trainings in order to equip the staff with the necessary due diligence and skills to understand, assess and handle the potential risks associated with PEPs.
Responsible corporate citizenship
The Board is responsible for approving the Bank's strategic direction and ensuring that it aligns with principles of
responsible corporate citizenship. This includes considering the Environmental, Social, and Governance (ESG) implications of strategic decisions and balancing the interests of various stakeholders. The Board provides oversight on all sustainability-related matters while responsibility for implementing the policy lies with a Sustainability Committee, which is chaired by the General Manager. The Board holds the management accountable for achieving ESG-related goals and targets.
The responsibilities of the Sustainability Committee include the following.
•
Taking every Sustainability (ESG) decision of the Bank
•
Checking for the compliance of the CBSL Road Map
•
Approving sustainability related projects
•
Granting approvals to the A category ESMS approvals for the credit facilities
•
Ultimate administrating authority for Sustainability Assurance, ESG Standard Compliance and Environment and Social Risk related decisions
Actions taken to support ESG oversight in 2023
•
Appointment of an ESG consultant to assess the Bank’s current ESG performance and develop tailored strategies to improve ESG performance and align with global standards and best practices.
•
Obtaining external assurance report from Messrs. KPMG for sustainability reporting
•
Following the guidance on ESG reporting issued by Colombo Stock Exchange (CSE)
CORPORATE REPORTING
The Board holds apex responsibility for ensuring the accuracy and integrity of all external reports including the Annual Integrated Report and Annual Financial Statements, which are approved by the Board prior to publication.
This Integrated Annual Report provides a balanced assessment of the Bank’s financial and non-financial position, performance and prospects, in compliance with applicable laws and voluntarily adopted reporting standards, codes and frameworks set out on page 05. Assurance has been obtained by external auditors to enhance credibility.
Anti-corruption
The Bank takes a zero-tolerance approach to bribery and corruption and is committed to acting professionally, fairly and with integrity in all its business dealings and relationships wherever the Bank operates and implementing and enforcing effective systems to counter bribery. The Bank’s policy with regard to anti-corruption and bribery is clearly communicated to all employees during the induction programmes and reinforced through regular training and awareness sessions.
STAKEHOLDER RELATIONS
The Board understands the importance of engaging with stakeholders, including shareholders, employees, customers, suppliers, communities, and regulators, to understand their concerns and perspectives on matters related to the Bank. This dialogue helps the Board make informed decisions and prioritise actions that contribute to responsible corporate citizenship. The Bank’s Communication Policy provides guidance on maintaining effective and relevant communication with internal and external stakeholders and is reviewed by the Nomination and Corporate Governance Committee.
Key engagement mechanisms and responses of the Bank to matters raised are provided in the ‘Stakeholder Needs and Expectations’ section on pages 49 to 52.
THE BOARD’S CONTRIBUTION TO VALUE CREATION
Area of focus
Strategy and
purpose
Formulation and implementation of the Bank’s strategic plan. Refer pages 57 to 60 for the performance against strategy.
Effective use and discharge the duties of Board Subcommittees. Refer pages 114 to 116 for Board Subcommittee meetings held and duties discharged in 2023.
Proactively identifying and mitigating potential impacts of economic developments including rising interest rates, foreign currency liquidity pressures, elevated inflation and regulatory changes among others. Refer pages 44 to 48.
Increased engagement and greater deliberations of issues relating to the protection and revival of vulnerable sectors of the economy. Refer pages 84 to 97.
Governance, controls and
compliance
Reviewing the Bank’s Corporate Governance Policy.
Introducing new policies/frameworks to strengthen the governance and control environment of the Bank.
Evaluation of the annual budget, major capital expenditure, financial delegation and other Board functions.
Ensuring compliance with laws, regulations and ethical standards.
Considering stakeholder interests in decision making.
Providing leadership to responsible business practices and the Bank’s sustainability agenda.
Strengthening IT controls through investments in advanced security infrastructure.
Increased focus on digitalisation.
Monitoring and
reporting
Monitoring periodic financial performance reports, KPI and budget achievements.
Reviewing and approving interim and annual financial statements for publication.
Ensuring the integrity of financial information, internal controls, risk management and business continuity.
Retention of
human capital
Succession planning for Key Management Personnel (KMP).
Discussions on measures to support employees' financial security given the rising cost of living.
Developing a future-ready workforce equipped with the necessary digital skills.
PERFORMANCE – CREATING VALUE THROUGH GOOD GOVERNANCE
CORPORATE GOVERNANCE
Monitoring Board performance
The Bank has a structured process for assessing Board effectiveness through a self-appraisal mechanism. Each Director is required to complete a performance evaluation form, subsequent to which responses are aggregated and presented to the Board. Subcommittees also carry out a similar evaluation.
The Board evaluates the performance of the General Manager (GM) and KMP
annually, based on the financial and non- financial targets outlined in the Strategic Plan. The Human Resources and Remuneration Subcommittee supports the Board in this endeavour. The criteria are agreed with the GM/KMP at the beginning of the year, ensuring clarity in the Board’s expectations. The appraisal takes into consideration dynamics in the operating landscape as well as feedback received from the appraisee.
REMUNERATION
For details of Directors’ remuneration, refer page 200 for details of remuneration of KMP. The report of the Human Resource and Remuneration Committee is on pages 126 and 127.
How we assessed Board
effectiveness in 2023
•
Bank's process for assessing board effectiveness is meticulous and comprehensive.
•
Utilising an evaluation sheet covering all Board member functions, feedback is gathered via a comprehensive format.
•
Percentage calculations and accompanying comments provide transparent insights into performance areas.
•
Competitive
•
Equitable
•
Transparent
•
Inclusive
Remuneration Policy
Remuneration Structure
Fixed pay
Variable pay
Benefits and perquisites
•
Base salary and other fixed components, determined on role and employee grade
•
Incentive bonus
•
Post-employment benefits
•
Loans under special schemes
•
Re-imbursement of medical bills
Key elements of the Bank’s remuneration composition
Remuneration Principles
The Bank’s Remuneration Policy is a critical component of its human resource management and governance framework, which aims to ensure that the team has the resources to drive the Bank’s strategic aspirations, and are duly recognised and rewarded for their contribution towards value creation. The policy takes into account various factors such as performance, market competitiveness, regulatory requirements, and alignment with the Bank’s strategic objectives.
Directors’ remuneration is determined by the Directors’ Remuneration Policy which reflects the particulars of the circulars and letters issued by the Government of Sri Lanka and the particulars of the Ordinance and its amendments. No Director is involved in determining his/her remuneration. Remuneration for the General Manager and Key Management Personnel are based on the Board-approved Remuneration Policy for KMP’s. The Board HR and RC makes recommendations to the Board on the GM/KMP remuneration, based on which the Board approves and provides feedback to the relevant Minister, who grants final approval in accordance with the provisions of the Ordinance and its amendments. The remuneration of the GM and KMP are reviewed every three years.
