COMPLIANCE REQUIREMENTS AS PER BANKING  

ACT DIRECTION NO. 11 OF 2007

Section

Principle

 Level of compliance during the year 2023

3. (1) The Responsibilities of the Board

3. (1) (i)

The Board shall strengthen the safety and soundness of the Bank 

by ensuring the implementation of the following:

a.   Approve and oversee the Bank’s strategic objectives and 

corporate values and ensure that these are communicated 

throughout the Bank;

Complied with.
Strategic objectives are formulated and values are reviewed at sessions 

held with the participation of the Board and the Key Management 

Personnel. The Board approved Strategic Plan together with the 

corporate values were communicated to staff up to Branch Manager level 

and reinforced by the Corporate Management Team. All other levels of 

staff were informed through regular briefing sessions and at meetings.
The launching of the Strategic Plan was held at an offsite location.

The Board approved a new Strategic Plan for 2024 to 2028 and the 

Budget for 2024 is in place. The Corporate values are included in the 

intranet.

b.   Approve the overall business strategy of the Bank, including 

the overall risk policy and risk management procedures and 

mechanisms with measurable goals, for at least the next 

three years;

Complied with.
The Bank’s overall Business Strategy is included in the rolling Strategic 

Plan generally prepared for a period of three years but in the year 2024 it  

is prepared for five years and the related Action Plan for the same period 

is prepared and approved by the Board.
The risk appetite, risk management framework and mechanisms have also 

been approved by the Board in line with the Strategic Plan. Measurable 

goals for the Bank as a whole have been set and performance is 

measured in line with these goals.

c.   Identify the principal risks and ensure implementation of 

appropriate systems to manage the risks prudently;

Complied with.
The Board has appointed a Board Integrated Risk Management 

Committee tasked with approving the Bank’s Integrated Risk 

Management Policy, defining the risk appetite, identifying principal risks, 

setting governance structures and implementing systems to measure, 

monitor and manage the principal risks.
The Bank has implemented a process where the Board members discuss 

the risks arising out of new strategies and the ways and means to mitigate 

such risks.
A Board approved Integrated Risk Management Policy covering all areas 

of major risks is in place.
The following reports also provide further details in this regard

•   Risk Management Report on pages 132 to 148.

•   Integrated Risk Management Committee Report on pages 124 and 125.

d.   Approve implementation of a policy of communication 

with all stakeholders, including depositors, creditors, 

shareholders and borrowers;

Complied with.
Board has approved and implemented a Communication Policy covering 

all stakeholders which was reviewed during the year under review.

e.   Review the adequacy and the integrity of the Bank’s internal 

control systems and management information systems;

Complied with.
The Board Audit Committee which reports to the Board is tasked with 

reviewing the adequacy and the integrity of the Bank’s Internal Control 

System and Financial Reporting. This Committee reviewed reports 

from the Internal Audit Department, which reports directly to the Audit 

Committee and from the External Auditors in carrying out this task. The 

Board Audit Committee regularly follows up on the rectifications of the 

findings of the regulators as a tool for further strengthening the Internal 

Control System.
Internal Audit Department is tasked with the responsibility of 

conducting information systems audits to assess the effectiveness of the 

Management Information System (MIS). The Board has reviewed the 

adequacy of the MIS and the Internal Control System.

f.   Identify and designate Key Management Personnel;

Complied with.

The Bank has identified the Assistant General Managers and officers 

in the grades above that as well as the officers in allied grades as Key 

Management Personnel (KMP) of the Bank for corporate governance 

purposes.

g.   Define the areas of authority and key responsibilities for the 

Board of Directors themselves and for the Key Management 

Personnel;

Complied with.
Areas of authority and key responsibilities have been defined for the 

Directors and KMP through the Board Charter and position descriptions 

of KMP.

A Board approved Board Charter is in place which was reviewed during 

the year under review.

h.   Ensure that there is appropriate oversight of the affairs of the 

Bank by Key Management Personnel, that is consistent with 

Board policy;

Complied with.
Performance against the Bank’s Strategic Plan is reviewed by the Board 

based on the Action Plan.
Key Management Personnel make presentations where necessary to the 

Board on matters under their purview and are also called in by the Board 

as and when needed to explain matters relating to their areas.

i.   Periodically assess the effectiveness of the Board Directors’ 

own governance practices, including:

(i)   The selection, nomination and election of Directors and 

key Management Personnel

(ii)   The management of conflicts of interests; and

(iii)   The determination of weaknesses and implementation 

of changes where necessary;

Complied with.
A self-evaluation of the performance of the Board is carried out 

annually assessing its own governance practices. The areas that 

need improvements have been identified and are being followed 

up. Appointments to the Board are made by the shareholder, the 

Government of Sri Lanka through the Minister under whose purview 

the Bank comes in terms of the provisions of Bank of Ceylon Ordinance 

No. 53 of 1938 and its amendments. A Board approved Policy for the 

Appointment of Directors to the Board of Bank of Ceylon is in place. A 

Board approved Conflict of Interest Policy is in place. These two policies 

were reviewed during the year.

j.   Ensure that the Bank has an appropriate succession plan for 

Key Management Personnel;

Complied with.
A Board approved succession plan for KMP is in place which was 

reviewed, revised and recommended to the Board by the Nomination, 

and Corporate Governance Committee. 

k.   Meet regularly, on a needs basis, with the Key Management 

Personnel to review policies, establish communication lines 

and monitor progress towards corporate objectives;

Complied with.
Key Management Personnel are regularly present or are called in for 

discussions at the meetings of the Board and its subcommittees on policy 

and other matters relating to their areas. Progress towards the corporate 

objectives are monitored based on the Strategic Plan.

l.   Understand the regulatory environment and ensure that the 

Bank maintains an effective relationship with regulators;

Complied with.
On appointment as Directors, they are furnished with all applicable 

regulatory requirements pertaining to the Bank with the “Board Manual” 

given in e-form.
The Board members are also briefed about developments in the 

regulatory environment at Board meetings to ensure that their 

knowledge is updated regularly to facilitate effective discharge of their 

responsibilities. Any relevant communication from a regulator is brought 

to the notice of the Board and they attend any meetings/training 

sessions/workshops/seminars arranged by the regulators.
Information pertaining to Compliance Reports submitted to the Central 

Bank of Sri Lanka which includes all returns to regulators are presented to 

the Board monthly and monitored by the Board. The Board is informed 

of regulatory requirements pertaining to Chennai, Maldives, and 

Seychelles operations of the Bank through the reports submitted on the 

performance of overseas branches.

m.   Exercise due diligence in the hiring and oversight of External 

Auditors.

Complied with.
As provided for in the Constitution of the country, the Auditor General is 

the External Auditor of the Bank as it is a state-owned enterprise.

3 (1) (ii)

The Board shall appoint the Chairman and the Chief Executive 

Officer and define and approve the functions and responsibilities 

of the Chairman and the Chief Executive Officer in line with 

Direction 3 (5) of these Directions.

Complied with when read in conjunction with Direction No. 3 (9) (ii). The 

Chairman is appointed by the Minister under whose purview the Bank 

falls in terms of the Bank of Ceylon Ordinance No. 53 of 1938 and its 

amendments.

The Board is vested with the authority to appoint the Chief Executive 

Officer referred to as the General Manager in the Bank of Ceylon with the 

approval of the said Minister.
Mr W P R P H Fonseka, was appointed as the General Manager of Bank 

of Ceylon with effect from 14 January 2023 upon the retirement of  

Mr K E D Sumanasiri. A newly formulated Promotion Policy for selection 

for the position of the General Manager of the Bank is in place.

3 (1) (iii)

The Board shall meet regularly and Board meetings shall be held 

at least twelve times a year at approximately monthly intervals. 

Such regular Board meetings shall normally involve active 

participation in person of a majority of Directors entitled to be 

present. Obtaining the Board’s consent through the circulation of 

written resolutions/ papers shall be avoided as far as possible.

Complied with.
Regular fortnightly Board meetings are held and special meetings are 

scheduled as and when the need arises. During the year under review the 

Board met twenty two (22) times. 
The Bank endeavours to minimise obtaining approval via circular 

resolutions and it is done only on an exceptional basis and such 

resolutions are ratified by the Board at the next meeting. During the year 

2023, fifteen (15) such resolutions have been adopted by circulation.

3 (1) (iv)

The Board shall ensure that arrangements are in place to enable 

all Directors to include matters and proposals in the agenda for 

regular Board meetings where such matters and proposals relate 

to the promotion of business and the management of risks of the 

Bank.

Complied with.
Meetings are scheduled and the Board is informed at the beginning of 

each calendar year to enable submission of proposals to the agenda for 

regular Board meetings.

3 (1) (v)

The Board procedures shall ensure that notice of at least 

seven days is given of a regular Board meeting to provide all 

Directors an opportunity to attend. For all other Board meetings, 

reasonable notice may be given.

Complied with.
Notice of meetings are given through an Annual Calendar at the 

beginning of the year. Additionally, before every meeting another notice 

is sent giving more than seven days’ notice.
Reasonable notice is given before any special meeting and consent of all 

Directors are obtained prior to scheduling a special meeting.

3 (1) (vi)

The Board procedures shall ensure that a Director who has 

not attended at least two-thirds of the meetings in the period 

of 12 months immediately preceding or has not attended the 

immediately preceding three consecutive meetings held, shall 

cease to be a Director. Participation at the Directors’ meetings 

through an alternate Director shall, however, be acceptable as 

attendance.

Complied with.
The Directors are apprised of the need for their attendance to be 

in accordance with the Corporate Governance Code. Details of the 

Directors’ attendance are set out on page 116. 
Directors’ attendance has been in compliance with this Direction.

3 (1) (vii)

The Board shall appoint a Company Secretary who satisfies the 

provisions of Section 43 of the Banking Act No. 30 of 1988, 

whose primary responsibilities shall be to handle the secretariat 

services to the Board and shareholder meetings and to carry out 

other functions specified in the statutes and other regulations.

Complied with.
The Secretary, Bank of Ceylon/Secretary to the Board is an Attorney-

at-Law, whose credentials/ qualifications are in compliance with the 

provisions of Section 43 of the Banking Act No. 30 of 1988 and its 

amendments.

3 (1) (viii)

All Directors shall have access to advice and services of 

the Company Secretary with a view to ensuring that Board 

procedures and all applicable rules and regulations are followed.

Complied with.
All members of the Board have the opportunity to obtain the advice and 

services of the Secretary to the Board who is an Attorney-at- Law and is 

responsible to the Board for follow-up of Board procedures, compliance 

with rules and regulations, directions and statutes.

3 (1) (ix)

The Company Secretary shall maintain the minutes of Board 

meetings and such minutes shall be open for inspection at any 

reasonable time, on reasonable notice by any Director.

Complied with.
The Secretary, Bank of Ceylon/Secretary to the Board maintains the 

minutes of the Board meetings and circulates the same to all Board 

members through a secure e-Solution.
The minutes are approved at the subsequent Board meeting.
Additionally, the Directors have access to the past Board papers and 

minutes through the same e-Solution.

3 (1) (x)

Minutes of Board meetings shall be recorded in sufficient detail 

so that it is possible to gather from the minutes, as to whether 

the Board acted with due care and prudence in performing its 

duties. The minutes shall also serve as a reference for regulatory 

and supervisory authorities to assess the depth of deliberations 

at the Board meetings. Therefore, the minutes of a Board 

meeting shall clearly contain or refer to the following:
a.   A summery of data and information used by the Board in its 

deliberations;

b.   The matters considered by the Board;
c.  The fact-finding discussions and the issues of contention or 

dissent which may illustrate whether the Board was carrying 

out its duties with due care and prudence;

d.   The testimonies and confirmations of relevant executives 

which indicate compliance with the Board’s strategies and 

policies and adherence to relevant laws and regulations;

e.   The Board’s knowledge and understanding of the risks 

to which the Bank is exposed and an overview of the risk 

management measures adopted; and

f.   The decisions and Board resolutions.

Complied with.
Minutes of the meetings are kept covering the given criteria.

3 (1) (xi)

There shall be a procedure agreed by the Board to enable 

Directors, upon reasonable request, to seek independent 

professional advice in appropriate circumstances, at the 

Bank’s expense. The Board shall resolve to provide separate 

independent professional advice to Directors to assist the 

relevant Director or Directors to discharge his/ her/ their duties 

to the Bank.

Complied with.
A Policy for Directors’ Access to Independent Professional Advice is in 

place which was reviewed during the year under review. The Directors are 

able to obtain independent professional advice when deemed necessary 

based on this policy.

3 (1) (xii)

Directors shall avoid conflicts of interests, or the appearance of 

conflicts of interest, in their activities with, and commitments to, 

other organisations or related parties. If a Director has a conflict 

of interest in a matter to be considered by the Board, which the 

Board has determined to be material, the matter should be dealt 

with at a Board meeting, where Independent Non-Executive 

Directors [refer to Direction 3 (2) (iv) of these Directions] who 

have no material interest in the transaction, are present. Further, 

a Director shall abstain from voting on any Board resolution in 

relation to which he/ she or any of his/her close relation or a 

concern in which a Director has substantial interest, is interested 

and he/she shall not be counted in the quorum for the relevant 

agenda item at the Board meeting.

Complied with other than where Mr R M Priyantha Rathnayake, Ex-officio 

Director, who represents the Ministry of Finance expressed the concern 

of the Auditor General regarding the balances in the Deputy Secretary to 

Treasury Account maintained at Bank of Ceylon.  
When there is a situation of a Conflict of Interest the Directors are 

conscious of their obligation to deal in accordance with the applicable 

regulations. A Board approved Policy on Conflict of Interest is in place, 

which was reviewed during the year under review. 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.

3 (1) (xiii)

The Board shall have a formal schedule of matters specifically 

reserved to it for decision to ensure that the Direction and 

control of the Bank is firmly under its authority.

Complied with.
Powers reserved for the Board are included in the Board Charter.

3 (1) (xiv)

The Board shall, if it considers that the Bank is, or is likely to be, 

unable to meet its obligations or is about to become insolvent 

or is about to suspend payments due to depositors and other 

creditors, forthwith inform the Director of Bank Supervision of 

the situation of the Bank prior to taking any decision or action.

Complied with.
Such a situation has not arisen during the year 2023. Monthly Financial 

Statements submitted to the Board assures the Board of the Bank’s 

solvency.

3 (1) (xv)

The Board shall ensure that the Bank is capitalised at levels 

as required by the Monetary Board in terms of the Capital 

Adequacy Ratio and other prudential grounds.

Complied with.
The Board ensures that the Bank is capitalised at levels required by the 

Monetary Board in terms of the Capital Adequacy Ratio (CAR) and other 

prudential grounds. 
Calculation of CAR is submitted to the Board with the monthly Financial 

Statements of the Bank.

3 (1) (xvi)

The Board shall publish in the Bank’s Annual Report, an Annual 

Corporate Governance Report setting out the compliance with 

Direction 3 of these Directions.

Complied with.
These disclosures are part of the Corporate Governance Report in the 

Bank’s Annual Report.

3 (1) (xvii)

The Board shall adopt a scheme of self-assessment to be 

undertaken by each Director annually, and maintain records of 

such assessments.

Complied with.
A scheme of self-assessment is adopted and undertaken at the end of the 

year. The self-assessment reports of the Board members are maintained 

by the Secretary, Bank of Ceylon/Secretary to the Board.

3 (2) The Board’s Composition

3 (2) (i)

The number of Directors on the Board shall not be less than 7 

and not more than 13.

According to the Bank of Ceylon Ordinance No. 53 of 1938 and its 

amendments, the number of Directors permitted on the Board of Bank of 

Ceylon is six.
Composition of the Board in 2023 is given under Direction No. 3 (2) (viii) 

of this compliance report. Details of the Board are included in page 112 

of the Annual Report.
Amendments proposed to the Bank of Ceylon Ordinance which include 

increasing the number of Directors to accommodate the requirement of 

this Direction is in the approval process.

3 (2) (ii)

(A)   The total period of service of a Director other than a 

Director who holds the position of Chief Executive Officer 

shall not exceed nine years, and such period in office shall 

be inclusive of the total period of service served by such 

Director up to 01 January 2008.

Complied with.
Directors of Bank of Ceylon have been in office for a period less than nine 

years.
Details of their appointments/ cessations/ resignations are included in the 

Annual Report on page 115.

3 (2) (iii)

An employee of a bank may be appointed, elected or nominated 

as a Director of the Bank (hereinafter referred to as an “Executive 

Director”) provided that the number of Executive Directors shall 

not exceed one-third of the number of Directors of the Board. In 

such an event, one of the Executive Directors shall be the Chief 

Executive Officer of the Bank.

Complied with.
Bank of Ceylon Ordinance does not provide for Executive Directors in 

Bank of Ceylon.

3 (2) (iv)

The Board shall have at least three Independent Non-Executive 

Directors or one-third of the total number of Directors, whichever 

is higher. This sub-direction shall be applicable from 01 January 

2010 onwards.
A Non-Executive Director shall not be considered independent 

if he/she:
a.  Has direct and indirect shareholdings of more than 1% of the 

Bank;

b.  Currently has or had during the period of two years 

immediately preceding his/her appointment as director, any 

business transactions with the Bank as described in Direction 

3 (7) hereof, exceeding 10% of the regulatory capital of the 

Bank;

c.  Has been employed by the Bank during the two-year period 

immediately preceding the appointment as Director;

Complied with. (Except for 04 days from 13 to 17 January)
Only the Director representing the Ministry of Finance is considered Non-

Independent since he represents the shareholder, the Government of 

Sri Lanka. They are identified under the profiles of the Directors and also 

under Direction No. 3 (2) (viii) below.

d.  has a close relation who is a Director or Chief Executive 

Officer or a member of Key Management Personnel or a 

material shareholder of the Bank or another bank. For this 

purpose, a “close relation” shall mean the spouse or a 

financially dependent child;

e.  represents a specific stakeholder of the Bank;
f.  is an employee or a Director or a material shareholder in a 

Company or business organisation:

i.  which currently has a transaction with the Bank as defined 

in Direction 3 (7) of these Directions, exceeding 10% of 

the regulatory capital of the Bank; or

ii. in which any of the other Directors of the Bank are 

employed or are Directors or are material shareholders; or

iii. in which any of the other Directors of the Bank have a 

transaction as defined in Direction No. 3 (7) of these Directions, 

exceeding 10% of regulatory capital in the Bank.

3 (2) (v)

In the event an Alternate Director is appointed to represent an 

Independent Director, the person so appointed shall also meet 

the criteria that applies to the Independent Director.

Complied with.
No Alternate Director has been appointed to represent any Independent 

Director.

3 (2) (vi)

Non-Executive Directors shall be persons with credible track 

records and/ or have necessary skills and experience to bring 

an independent judgement to bear on issues of strategy, 

performance, and resources.

Complied with.
Present Directors’ profiles appearing on pages 28 to 31 spell out the 

necessary information.

3 (2) (vii)

A meeting of the Board shall not be duly constituted, although 

the number of Directors required to constitute the quorum 

at such meeting is present, unless more than one half of the 

number of Directors present at such meeting are Non-Executive 

Directors. This sub-direction shall be applicable from 01 January 

2010 onwards.

Complied with.
All the Board members of Bank of Ceylon are Non-Executive Directors.

3 (2) (viii)

The Independent Non-Executive Directors shall be expressly 

identified as such in all corporate communications that disclose 

the names of Directors of the Bank. The Bank shall disclose the 

composition of the Board, by category of Directors, including 

the names of the Chairman, Executive Directors, Non-Executive 

Directors and Independent Non-Executive Directors in the 

Annual Corporate Governance Report.

Complied with.
Directors during the year 2023 and as at present are given below: 
Mr Kanchana Ratwatte

Chairman/ Independent Non-Executive Director  

(Appointed w.e.f. 02 January 2020 and ceased to be a Director w.e.f.  

01 January 2023)
Mr Ronald C Perera PC

Chairman/Independent Non Executive Director

(Appointed w.e.f. 18.01.2023 and resigned w.e.f. 13.03.2024)
Mr Kavan Ratnayaka

Chairman/ Independent Non-Executive Director  

(Appointed w.e.f. 14 March 2024)
Mr R M Priyantha Rathnayake

Non Independent Non-Executive Ex officio Director  

(Appointed w.e.f. 28 April 2020 and again was Re-appointed  

w.e.f. 29.04.2023).
Mr G Harsha Wijayawardhana

Independent Non-Executive Director  

(Appointed w.e.f. 14 January 2020 and ceased to be a Director  

w.e.f. 13 January 2023)
Mr A C Manilka Fernando

Independent Non-Executive Director

(Appointed w.e.f. 21 April 2020 and ceased to be a Director w.e.f.  

21 April 2023)

Major General (Rtd.) G A Chandrasiri VSV

Independent Non-Executive Director

(Appointed w.e.f. 08 January 2021 and ceased to be a Director w.e.f.  

07 January 2024)
Prof. Kithsiri M Liyanage

Independent Non-Executive Director

(Appointed w.e.f. 31 March 2023)
Mr Naresh Abeyesekera

Independent Non-Executive Director

(Appointed w.e.f. 04 May 2023)
Mr Jehaan Ismail

Independent Non-Executive Director

(Appointed w.e.f. 07 February 2024)
Mr Jayamin Palpola

Independent Non-Executive Director

(Appointed w.e.f. 22 February 2024)

3 (2) (ix)

There shall be a formal, considered and transparent procedure 

for the appointment of new Directors to the Board. There 

shall also be procedures in place for the orderly succession of 

appointments to the Board.

Appointments to the Board are made by the shareholder, the 

Government of Sri Lanka through the Minister under whose purview 

the Bank falls in terms of the provisions of Bank of Ceylon Ordinance 

No. 53 of 1938 and its amendments. A Board approved policy for 

the appointment of Directors to the Board of Bank of Ceylon is in 

place describing the skills, experience, knowledge etc. required to be 

considered to be appointed to the Board and the appointment process 

which is shared with the relevant Ministry.

3 (2) (x)

All Directors appointed to fill a casual vacancy shall be subject to 

election by shareholders at the first General Meeting after their 

appointment.

This does not arise since the relevant Minister appoints Directors.

3 (2) (xi)

If a Director resigns or is removed from office, the Board shall
a.  Announce the Director’s resignation or removal and the 

reasons for such removal or resignation including but not 

limited to information relating to the relevant Director’s 

disagreement with the Bank, if any; and

b.  Issue a statement confirming whether or not there are 

any matters that need to be brought to the attention of 

shareholders.

Complied with.
The Government of Sri Lanka, the sole shareholder of the Bank does 

the appointments as well as the removals through the Minister under 

whose purview the Bank falls. Any resignation is also referred to the 

same Minister. The Central Bank of Sri Lanka, Securities and Exchange 

Commission of Sri Lanka and the Colombo Stock Exchange are kept 

informed of the resignations.

The shareholder of the Bank is the Government and the changes to 

the Directorate are carried out by the Government through the subject 

Minister.

3 (2) (xii)

A Director or an employee of a bank shall not be appointed, 

elected or nominated as a Director of another bank except 

where such bank is a subsidiary company or an associate 

company of the first mentioned bank.

Neither Directors nor employees of Bank of Ceylon are Directors of 

another Bank, other than for the appointment of a Deputy General 

Manager to the Pradeshiya Sanwardana Bank as per the requirements of 

the enabling enactments of this Bank (Pradeshiya Sanwardana Bank Act 

No. 41 of 2008). Prior to appointment as a Director to the Board of Bank 

of Ceylon, an affidavit is obtained in accordance with Section 42 (1) of 

the Banking Act No. 30 of 1988 complying with Direction No. 8 of 2019 

issued on 19 December 2019 ensuring this position.

3 (3) Criteria to Assess the Fitness and Propriety of Directors

3 (3) (i)

The age of a person who serves as Director shall not exceed 70 

years.
a.  In this context, the following general exemption shall apply: 

A Director who has reached the age of 70 years as at  

01 January 2008 or who would reach the age of 70 years 

prior to 31 December 2008 may continue in office for a 

further maximum period of three years commencing  

01 January 2009.

Complied with.
None of the Directors of the Bank are over 70 years of age.

3 (3) (ii)

A person shall not hold office as a Director of more than 20 

companies/ entities/ institutions inclusive of subsidiaries or 

associate companies of the Bank.

Complied with.
No Director holds directorships of more than 20 companies/ entities, etc. 

A declaration is obtained in this regard upon their appointment to the 

Board of Bank of Ceylon and at the year end. 

3 (3) (iii)

A Director or a Chief Executive Officer of a licensed bank 

operating in Sri Lanka shall not be appointed as a Director or 

a Chief Executive Officer of another licensed bank operating 

in Sri Lanka before the expiry of a period of six months from 

the date of cessation of his/ her office at the licensed bank in 

Sri Lanka. Any variation thereto in exceptional situations such 

as where expertise of retiring bankers may be required when 

reconstituting Boards of licensed banks which need restructuring, 

shall be subject to the prior approval of the Monetary Board. 

In this regard, licensed banks shall ensure to adhere to the 

requirement of the cooling-off period when appointing 

Directors or Chief Executive Officer. If a Director is appointed 

to the licensed bank by an appointing authority violating these 

Directions, the licensed bank shall take steps to prevent such 

appointee from exercising any powers or enjoying any privileges 

or against this direction.

Complied with.
This situation has not arisen during the year under review.

3 (4) Management Functions Delegated by the Board

3 (4) (i)

The Directors shall carefully study and clearly understand the 

delegation arrangements in place.

Complied with.
The Board periodically reviews and approves the delegation 

arrangements in place and ensures that the extent of delegation 

addresses the needs of the Bank whilst enabling the Board to discharge 

their functions effectively. The provisions in the governing ordinance are 

considered in this process.

3 (4) (ii)

The Board shall not delegate any matters to a Board Committee, 

Chief Executive Officer, Executive Directors or Key Management 

Personnel, to an extent that such delegation would significantly 

hinder or reduce the ability of the Board as a whole to discharge 

its functions.

3 (4) (iii)

The Board shall review the delegation processes in place on a 

periodic basis to ensure that they remain relevant to the needs 

of the Bank.

3 (5) The Chairman and Chief Executive Officer

3 (5) (i)

The roles of Chairman and Chief Executive Officer shall be 

separate and shall not be performed by the same individual.

Complied with.
The positions of the Chairman and the Chief Executive Officer referred 

to as the General Manager in Bank of Ceylon are held by two different 

individuals.
A Board Charter is in place defining the responsibilities of the Chairman 

and the General Manager. 

3 (5) (ii)

The Chairman shall be a Non-Executive Director and preferably 

an Independent Director as well. In the case where the 

Chairman is not an Independent Director, the Board shall 

designate an Independent Director as the Senior Director with 

suitably documented Terms of Reference to ensure a greater 

independent element. The designation of the Senior Director 

shall be disclosed in the Bank’s Annual Report.

Complied with.
The Chairman of Bank of Ceylon is an Independent Non-Executive 

Director and as such the need to appoint a Senior Independent Director 

does not arise.

3 (5) (iii)

The Board shall disclose in its Corporate Governance Report, 

which shall be an integral part of its Annual Report, the identity 

of the Chairman and the Chief Executive Officer and the nature 

of any relationship [including financial, business, family or other 

material/ relevant relationship(s)], if any, between the Chairman 

and the Chief Executive Officer and the relationships among 

members of the Board.

Complied with.
The identity of the Chairman and the General Manager are disclosed 

in the Annual Report. There are many references to these two roles 

throughout.
No material, financial, business or family relationships exists between the 

Chairman, General Manager and other members of the Board.

3 (5) (iv)

The Chairman shall: 

(a)   provide leadership to the Board; 

(b)   ensure that the Board works effectively and discharges its 

responsibilities; and 

(c)   ensure that all key and appropriate issues are discussed by 

the Board in a timely manner.

Complied with.

3 (5) (v)

The Chairman shall be primarily responsible for drawing up 

and approving the agenda for each Board meeting, taking 

into account where appropriate, any matters proposed by 

the other Directors for inclusion in the agenda. The Chairman 

may delegate the drawing up of the agenda to the Company 

Secretary.

Complied with.
The Secretary, Bank of Ceylon/ Secretary to the Board draws up the 

agenda under the authority delegated by the Chairman based on the 

memoranda submitted through the General Manager. Any other relevant 

items proposed by any Board member are also included into the agenda.

3 (5) (vi)

The Chairman shall ensure that all Directors are properly 

briefed on issues arising at Board meetings and also ensure that 

Directors receive adequate information in a timely manner.

Complied with.
The Chairman ensures that the Board is adequately briefed. The following 

procedures are in place to ensure this:
•   Board papers are circulated well prior to the Board meetings 

through a secured electronic link except for few exceptions which are 

submitted late, if urgent.

•   Pre-Board meetings are held when required.
•   Relevant members of the Management Team are on standby for any 

explanations and clarifications.

•   Management information is provided in agreed formats on a regular 

basis to enable Directors to assess the performance and stability of 

the Bank.

•   Directors are able to seek independent professional advice on a needs 

basis at the Bank’s expense. There is a policy in place in this regard.

3 (5) (vii)

The Chairman shall encourage all Directors to make a full and 

active contribution to the Board’s affairs and take the lead to 

ensure that the Board acts in the best interests of the Bank.

Complied with.

3 (5) (viii)

The Chairman shall facilitate the effective contribution of Non-

Executive Directors in particular and ensure constructive relations 

between Executive and Non-Executive Directors.

Complied with.
The entire Board consists of Non-Executive Directors.

3 (5) (ix)

The Chairman, shall not engage in activities involving direct 

supervision of Key Management Personnel or any other 

executive duties whatsoever.

Complied with.
Chairman is an Independent Non-Executive Director.

3 (5) (x)

The Chairman shall ensure that appropriate steps are taken to 

maintain effective communication with shareholders and that the 

views of shareholders are communicated to the Board.

Complied with.
Effective communication is maintained with the Government of Sri Lanka 

who is the sole shareholder. The Ex-officio Director acts as the channel 

between the Board and the shareholder.

3 (5) (xi)

Chief Executive Officer shall function as the apex executive-in-

charge of the day-to-day management of the Bank’s operations 

and business.

Complied with.
The day-to-day operations of the Bank is the responsibility of the General 

Manager. The Board Charter specifically refers to such authority of the 

General Manager.

3 (6) Board Appointed Committees

3 (6) (i)

Each bank shall have at least four Board committees as set out 

in Directions 3 (6) (ii), 3 (6) (iii), 3 (6) (iv) and 3 (6) (v) of these 

Directions. Each committee shall report directly to the Board. All 

committees shall appoint a secretary to arrange the meetings 

and maintain minutes, records, etc., under the supervision of the 

Chairman of the committee.
The Board shall present a report of the performance on each 

committee, on their duties and roles at the Annual General 

Meeting.

Complied with.
Four subcommittees of the Board (viz. Audit, Human Resources and 

Remuneration, Nomination and Corporate Governance and Integrated Risk 

Management) have been established as required under this Direction which 

are reporting directly to the Board. In addition another subcommittee, viz. 

Information and Communication Technology (ICT) Committee is in place.
The Terms of Reference for each subcommittee are in place and are 

reviewed annually.
The Secretary, Bank of Ceylon/ Secretary to the Board serves as Secretary 

to all subcommittees and maintains minutes etc. with oversight by the 

respective Chairpersons.
The reports of the subcommittees are included in this Annual Report 

indicating the activities carried out during the year under review.
The Government being the sole shareholder, the Annual Report of the 

Bank is submitted to the Parliament of Sri Lanka and to the Ministry in 

charge of the Bank.

3 (6) (ii)

The following rules shall apply in relation to the Audit 

Committee:
a.   The Chairman of the Committee shall be an Independent 

Non-Executive Director who possesses qualifications and 

experience in accountancy and/or audit.

Complied with.
The Audit Committee is chaired by an Independent Non-Executive 

Director who has the required qualifications and experience.

b.   All members of the Committee shall be Non-Executive 

Directors

c.  The Committee shall make recommendations on matters in 

connection with:

i  The appointment of the External Auditor for audit services 

to be provided in compliance with the relevant statutes;

ii  The implementation of the Central Bank Guidelines 

issuedto Auditors from time to time;

Complied with.
All Directors of the Bank are Non-Executives.

Complied with.
In accordance with the Terms of Reference, the Audit Committee makes 

the following recommendations among many others:
•  The implementation of the Central Bank Guidelines issued to auditors 

from time to time.

•  The application of the relevant accounting standards.
Since the Auditor General is the External Auditor of the Bank, the 

Committee has no role to play in the engagement of the External Auditor.

iii  The application of the relevant accounting standards; and
iv  The service period, audit fee and any resignation or 

dismissal of the Auditor; provided that the engagement 

of the audit partner shall not exceed five years, and that 

the particular audit partner is not re-engaged for the 

audit before the expiry of three years from the date of the 

completion of the previous term.

d.   The Committee shall review and monitor the External 

Auditor’s independence and objectivity and the 

effectiveness of the audit processes in accordance with 

applicable standards and best practices

The Bank’s Auditor being the Auditor General, his independence and 

effectiveness is guaranteed under the Constitution of Sri Lanka.

e.   The Committee shall develop and implement a policy on 

the engagement of an External Auditor to provide non-audit 

services that are permitted under the relevant statutes, 

regulations, requirements and guidelines. In doing so, the 

Committee shall ensure that the provision by an External 

Auditor of non-audit services does not impair the External 

Auditor’s independence or objectivity. 

    When assessing the External Auditor’s independence or 

objectivity in relation to the provision of non-audit services, 

the Committee shall consider:

This does not arise since the Auditor General is the Auditor of the Bank.
However, the Committee ensures that provision by an audit firm 

appointed by the Auditor General to assist him in the audit of the Bank of 

non-audit services does not impair that firm’s independence or objectivity.

(i)  Whether the skills and experience of the audit firm make 

it a suitable provider of the non-audit services;

(ii)   Whether there are safeguards in place to ensure 

that there is no threat to the objectivity and/or 

independence in the conduct of the audit resulting from 

the provision of such services by the External Auditor; 

and

(iii)  Whether the nature of the non-audit services, the 

related fee levels and the fee levels individually and in 

aggregate relative to the audit firm, pose any threat to 

the objectivity and/or independence of the External 

Auditor.

f.   The Committee shall, before the audit commences, discuss 

and finalise with the External Auditors the nature and scope 

of the audit, including:

Complied with. 
The scope and the extent of audit have been determined by the Auditor 

General and Messrs Ernst & Young, Chartered Accountants (EY) who 

assisted the Auditor General in the audit of year 2023.

(i)   An assessment of the Bank’s compliance with the relevant 

Directions in relation to corporate governance and the 

Management’s internal controls over financial reporting;

EY presented the Audit Plan for year 2023 and the Committee agreed 

with it.

(ii)  The preparation of Financial Statements for external 

purposes in accordance with relevant accounting 

principles and reporting obligations; and

(iii)  The coordination between firms where more than one 

audit firm is involved

g.   The Committee shall review the financial information of 

the Bank, in order to monitor the integrity of the Financial 

Statements of the Bank, its Annual Report, accounts and 

quarterly reports prepared for disclosure, and the significant 

financial reporting judgements contained therein. In 

reviewing the Bank’s Annual Report and accounts and 

quarterly reports before submission to the Board, the 

Committee shall focus particularly on:
(i) Major judgemental areas;
(ii) Any changes in accounting policies and practices;
(iii) Significant adjustments arising from the audit;
(iv) The going concern assumption; and
(v) The compliance with relevant accounting standards and 

other legal requirements.

Complied with.
There is a continuing process carried out in reviewing monthly, 

quarterly, and annual financials of the Bank by the Committee and 

recommendations are made to the Board.

h.   The Committee shall discuss issues, problems, and 

reservations arising from the interim and final audits, and 

any matters the Auditor may wish to discuss including those 

matters that may need to be discussed in the absence of 

Key Management Personnel, if necessary.

Complied with.
The Committee discusses issues, problems and reservations arising from 

the interim and final audits. The representative of the Auditor General 

was present at Committee meetings throughout. Two “Closed door 

meetings” were held with the said representative during the year under 

review and such meetings are facilitated at regular Audit Committee 

meetings by inclusion of an agenda item to that effect.

i.   The Committee shall review the External Auditor’s 

Management Letter and the Management’s response 

thereto.

Complied with.

j.   The Committee shall take the following steps with regard to 

the internal audit function of the Bank:

(i)   Review the adequacy of the scope, functions and 

resources of the Internal Audit Department, and satisfy 

itself that the Department has the necessary authority to 

carry out its work;

Complied with.
The Audit Committee reviews and makes necessary recommendations 

with regard to the adequacy of the scope, functions and resources of 

the Internal Audit Department. In this regard the time bound Audit Plan 

which includes scope, function and the existing/required cadre position 

of the Internal Audit Department is considered by the Committee.

(ii)  Review the internal audit programme and results of the 

internal audit process and, where necessary, ensure that 

appropriate actions are taken on the recommendations 

of the Internal Audit Department;

Complied with.
The Committee reviews the internal audit programme and results of the 

internal audit procedures and ensures that appropriate actions are taken 

for improvements.

(iii)  Review any appraisal or assessment of the performance 

of the head and senior staff members of the Internal 

Audit Department;

Complied with.
Performance appraisal of Chief Internal Auditor was carried out at the 

time of extending his service contract in 2023. 
Performance evaluation of senior staff members were carried out 

according to the Board approved evaluation process by the Chief Internal 

Auditor for the year 2023 and was submitted to the Committee for its 

endorsement.

(iv)  Recommend any appointment or termination of the 

head, senior staff members and outsourced service 

providers to the internal audit function;

Complied with in regard to the Head of the Internal Audit and any 

outsourced service providers to the internal audit function. The other 

senior staff is appointed from amongst the banking staff.

(v)  Ensure that the Committee is appraised of resignations 

of senior staff members of the Internal Audit Department 

including the Chief Internal Auditor and any outsourced 

service providers, and to provide an opportunity to the 

resigning senior staff members and outsourced service 

providers to submit reasons for resigning;

Complied with.
Such a situation has not arisen during the year.

(vi)  Ensure that the internal audit function is independent 

of the activities it audits and that it is performed with 

impartiality, proficiency and due professional care.

Complied with.
According to the organisation structure of the Bank, the Chief Internal 

Auditor reports directly to the Board through the Audit Committee and 

he is independent of any operations of the Bank.

k.   The Committee shall consider the major findings of internal 

investigations and Management’s responses thereto.

Complied with.
The Audit Committee has reviewed the major findings of internal 

investigations and management responses thereto.

l.   The Chief Finance Officer, the Chief Internal Auditor and a 

representative of the External Auditors may normally attend 

meetings. Other Board members and the Chief Executive 

Officer may also attend meetings upon the invitation of the 

Committee. However, at least twice a year, the Committee 

shall meet with the External Auditors without the Executive 

Directors being present.

Complied with.
The Chief Financial Officer, Chief Internal Auditor, Chief Risk Officer and 

Deputy General Manager (Compliance) and the representative of the 

Auditor General participate at the Committee meetings. The General 

Manager also attends the meetings on the invitation of the Committee. 

The members of the Management are invited for any explanations, if 

necessary. Closed door meetings are included into the agenda of the 

meetings and the representative of the Auditor General decides to 

meet on the necessity. As indicated under “h” above, two closed door 

meetings were held during the year with the representative of the Auditor 

General without the presence of the Executives.

m.   The Committee shall have:

(i)   Explicit authority to investigate into any matter within its 

terms of reference;

(ii)  The resources which it needs to do so;
(iii)  Full access to information; and
(iv)  Authority to obtain external professional advice and to 

invite outsiders with relevant experience to attend, if 

necessary.

Complied with.

n.   The Committee shall meet regularly, with due notice of 

issues to be discussed and shall record its conclusions in 

discharging its duties and responsibilities.

Complied with.
The Audit Committee schedules regular meetings. Additional meetings 

are convened when required.
The Committee has met ten (10) times during the year. The members of 

the Committee are served with due notice of issues to be discussed and 

the conclusions in discharging its duties and responsibilities are recorded 

in the minutes of the meetings.

o.   The Board shall disclose in an informative way,

(i)   Details of the activities of the Audit Committee;
(ii)  The number of Audit Committee meetings held in the 

year; and

(iii)  Details of attendance of each individual Director at such 

meetings.

Complied with.
Activities of the Committee are reported in Audit Committee Report in 

the Annual Report indicated on page 122 to 123.
The attendance details of the Committee are disclosed in the Annual 

Report on page 116.

p.   The Secretary of the Committee (who may be the Company 

Secretary or the Head of the internal audit function shall 

record and keep detailed minutes of the Committee 

meetings.

Complied with.
Minutes are maintained by the Secretary to the Board/ Secretary, Bank of 

Ceylon who is also the Secretary to the Committee.

q.   The Committee shall review arrangements by which 

employees of the Bank may, in confidence, raise concerns 

about possible improprieties in financial reporting, internal 

control or other matters. Accordingly, the Committee 

shall ensure that proper arrangements are in place for the 

fair and independent investigation of such matters and 

for appropriate follow-up action and to act as the key 

representative body for overseeing the Bank’s relations with 

the External Auditor.

Complied with.
A Board approved Whistle Blower Policy which covers these aspects is in 

place which was reviewed during the year 2023 and significant findings 

are reported to the Audit Committee for appropriate follow-up action.
The Audit Committee is the key representative body for overseeing the 

Bank’s relations with the External Auditor viz. the Auditor General in the 

case of Bank of Ceylon.

3 (6) (iii)

The following rules shall apply in relation to the Human 

Resources and Remuneration Committee:
a.   The Committee shall determine the remuneration policy 

(salaries, allowances and other financial payments) relating 

to Directors, Chief Executive Officer (CEO) and Key 

Management Personnel of the Bank.

Complied with.
The Remuneration for Directors is according to the circulars/ letters issued 

by the Government of Sri Lanka through the relevant Ministry and the 

Bank of Ceylon Ordinance No. 53 of 1938 and its amendments. The Bank 

has adopted a Remuneration Policy based on the said circulars/letters 

and the Ordinance, which was revised during the year 2023.
The Board approved Remuneration Policy for the Key Management 

Personnel is in place. The Committee makes recommendations of the 

remuneration of the KMPs once in three years.
The Committee has met two (02) times during the year under review. 

b.   The Committee shall set goals and targets for the Directors, 

CEO and the Key Management Personnel.

Complied with.
The Committee sets Key Performance Indicators for the KMP with the 

participation of the full Board.
Goals and targets for KMP are documented and detailed in the Action 

Plan prepared based on the Strategic Plan of the Bank. The General 

Manager is responsible for the implementation of the Strategic Plan 

through KMPs. Based on the above plans, the Committee recommended 

the goals and targets set for the General Manager and the members 

of the Corporate Management for the year 2023. Goals and targets for 

the Executive Management were set based on the Strategic Plan of the 

Bank by the respective Deputy General Managers with the concent of 

the General Manager. Directors are Non-Executive Directors and as such 

specific goals are not set for them. The Board monitors and drives the 

Strategic Plan of the Bank.

c.   The Committee shall evaluate the performance of the CEO 

and Key Management Personnel against the set targets 

and goals periodically and determine the basis for revising 

remuneration, benefits and other payments of performance-

based incentives.

Complied with.
Year-end evaluation of the members of the Corporate Management 

including the General Manager is carried out by this committee other 

than of the Chief Internal Auditor, Chief Risk Officer and the Deputy 

General Manager (Compliance) since they were evaluated by the 

respective subcommittees that they are reporting to. Evaluation of 

the members of the Executive Management were carried out by the 

respective members of the Corporate Management.

d.   The CEO shall be present at all meetings of the Committee, 

except when matters relating to the CEO are being 

discussed.

Complied with.

3 (6) (iv)

The following rules shall apply in relation to the Nomination 

Committee:

The Bank has established a Nomination and Corporate Governance 

Committee. In addition to the duties of the Nomination Committee 

given under this Direction, certain other duties pertaining to upholding 

the applicable Corporate Governance Principles are included under the 

Terms of Reference of this Committee. The Charter for the Committee 

was reviewed during the year 2023.
The Committee has met ten (10) times during the year under review. 

a.   The Committee shall implement a procedure to select/ 

appoint new Directors, CEO, and Key Management 

Personnel.

The Directors are appointed by the Minister under whose purview the 

Bank falls. A Policy on Appointment of Directors (Internally prepared) 

has been shared with the line Ministry. According to the provisions of 

the Bank of Ceylon Ordinance, the Board with the approval of the said 

Minister appoints the General Manager. There are Board approved 

policies for the appointment of the General Manager and KMP.

b.   The Committee shall consider and recommend (or not 

recommend) the re-election of current Directors, taking into 

account the performance and contribution made by the 

Director concerned towards the overall discharge of the 

Board’s responsibilities.

This does not arise since the Directors are appointed by the relevant 

Minister.

c.   The Committee shall set the criteria such as qualifications, 

experience and key attributes required for eligibility to be 

considered for appointment or promotion to the post of 

CEO and the key management positions.

Complied with.
The Board approved promotion schemes stipulate the attributes required 

to be eligible to be selected or promoted to the other key management 

positions.

d.   The Committee shall ensure that Directors, CEO, and Key 

Management Personnel are fit and proper persons to hold 

office as specified in the criteria given in Direction 3 (3) and 

as set out in the statutes.

Complied with.
Annual affidavits from Directors ensuring that they are fit and proper 

persons to hold office as specified in the criteria given in Direction 3 (3) 

and as set out in statutes are sent to CBSL.
Also the Committee ensures that KMP are fit and proper persons to hold 

their offices when they are promoted/lateral movements are made or 

appointed as KMP.

e.   The Committee shall consider and recommend from time 

to time, the requirements of additional/ new expertise and 

the succession arrangements for retiring Directors and Key 

Management Personnel.

Complied with.

A Board approved Succession Plan for the KMP is in place.

Additional or new expertise that is needed are either recommended by 

the Board subcommittees or decided by the Board.

f.   The Committee shall be chaired by an Independent 

Director and preferably be constituted with a majority 

of Independent Directors. The CEO may be present at 

meetings by invitation.

Complied with.

3 (6) (v)

The following rules shall apply in relation to the Integrated Risk 

Management Committee:

a.   The Committee shall consist of at least three Non-Executive 

Directors, Chief Executive Officer and Key Management 

Personnel supervising broad risk categories, i.e. credit, 

market, liquidity, operational, and strategic risks. The 

Committee shall work with Key Management Personnel very 

closely and make decisions on behalf of the Board within the 

framework of the authority and responsibility assigned to the 

Committee.

Complied with.
The Committee comprised of three Non-Executive Directors during the 

year under review. Additionally, the General Manager and the Chief 

Risk Officer who supervise credit, market, operational, reputational and 

strategic risks, the Chief Internal Auditor, Chief Financial Officer and 

Deputy General Manager (Compliance) participate at all Committee 

meetings at the request of the Committee. Any other KMP and other 

staff are invited as and when the Committee needs their presence. The 

Committee works closely with KMP within the framework of authority and 

responsibility assigned to the Committee.

b.   The Committee shall assess all risks, i.e. credit, market, 

liquidity, operational, and strategic risks to the Bank 

on a monthly basis through appropriate risk indicators 

and management information. In the case of subsidiary 

companies and associate companies, risk management shall 

be done, both on a bank basis and group basis.

Complied with.
Independent Integrated Risk Management Division of the Bank assesses 

the credit, market, liquidity, operational, strategic and reputational 

risks of the Bank based on the policy documents recommended by this 

Committee and approved by the Board, on a monthly basis and the 

summary reports are submitted to the Committee at its regular meetings 

and then to the next immediate Board meeting.
In the case of subsidiaries and associates, a risk management dashboard 

has been developed to address the risks and is reported to the 

Committee. A Board approved Group Risk Policy is in place.

c.   The Committee shall review the adequacy and effectiveness 

of all management level committees such as the Credit 

Committee and the Asset Liability Committee to address 

specific risks and to manage those risks within quantitative 

and qualitative risk limits as specified by the Committee.

Complied with.
This task is carried out every year. Year 2022 review was done in 2023 and 

the year 2023 review will be carried out at the meeting scheduled in April 

2024.

d.   The Committee shall take prompt corrective action to 

mitigate the effects of specific risks in the case such risks 

are at levels beyond the prudent levels decided by the 

Committee on the basis of the Bank’s policies and regulatory 

and supervisory requirements.

Complied with.
Specific quantitative and qualitative risks which go beyond the limits 

are monitored by the Chief Risk Officer and reported directly to the 

Committee based on the severity of the issues involved.

e.   The Committee shall meet at least quarterly to assess all 

aspects of risk management including updated business 

continuity plans.

Complied with.
During the year, the Committee met six (06) times. Details of meetings 

and attendance are given on page 116.

f.   The Committee shall take appropriate actions against the 

officers responsible for failure to identify specific risks and 

take prompt corrective actions as recommended by the 

Committee, and/or as directed by the Director of Bank 

Supervision.

Formal documented disciplinary action procedure is in place in the Bank 

to comply with this direction.

g.   The Committee shall submit a risk assessment report within 

a week of each meeting to the Board seeking the Board’s 

views, concurrence and/ or specific directions.

Complied with.
The minutes of the meetings are submitted to the Board meeting 

immediately following the Committee meeting together with the 

recommendations and Risk Management Reports.

h.   The Committee shall establish a compliance function 

to assess the Bank’s compliance with laws, regulations, 

regulatory guidelines, internal controls and approved 

policies on all areas of business operations. A dedicated 

Compliance Officer selected from Key Management 

Personnel shall carry out the compliance function and report 

to the Committee periodically.

Complied with.
The Bank has established a separate compliance function to assess the 

Bank’s compliance with laws, regulations, regulatory guidelines, internal 

controls and approved policies on all areas of business operations. This 

function is headed by a dedicated Compliance Officer/ Deputy General 

Manager and he submits quarterly Compliance Reports to the Committee 

and monthly Compliance Reports to the Board.
The Compliance function also assesses the Bank’s compliance with 

Internal Controls and approved policies on all areas of business 

operations.

3 (7) Related Party Transactions

3 (7) (i)

The Board shall take necessary steps to avoid any conflicts of 

interest that may arise from any transaction of the Bank with any 

person, and particularly with the following categories of persons 

shall be considered as “related parties” for the purposes of this 

Direction:

Complied with.
A Policy on Related Party Disclosures is in place covering related parties, 

their transactions, and restrictions on offering more favourable treatment 

to related parties in order for the Board members to avoid any conflicts of 

interest in this regard.

a.   Any of the Bank’s subsidiary companies;
b.   Any of the Bank’s associate companies;
c.   Any of the Directors of the Bank;
d.   Any of the Bank’s Key Management Personnel;
e.   A close relation of any of the Bank’s Directors or Key 

Management Personnel;

f.   A shareholder owning a material interest in the Bank;
g.   A concern in which any of the Bank’s Directors or a close 

relation of any of the Bank’s Directors or any of its material 

shareholders has a substantial interest.

Directors who have related party transactions are individually requested 

to declare their transactions. Transactions are monitored through an 

automated system.

3 (7) (ii)

The type of transactions with related parties that shall be 

covered by this Direction shall include the following:
a.   The grant of any type of accommodation, as defined in 

the Monetary Board’s Directions on maximum amount of 

accommodation;

b.   The creation of any liabilities of the Bank in the form of 

deposits, borrowings and investments;

c.   The provision of any services of a financial or non-financial 

nature provided to the Bank or received from the Bank;

d.   The creation or maintenance of reporting lines and 

information flows between the Bank and any related parties 

which may lead to the sharing of potentially proprietary, 

confidential or otherwise sensitive information that may give 

benefits to such related parties.

Complied with.
Information in this regard, is disclosed in the Annual Report.

3 (7) (iii)

The Board shall ensure that the Bank does not engage in 

transactions with related parties as defined in Direction No. 3 

(7) (i) above, in a manner that would grant such parties “more 

favourable treatment” than that accorded to other constituents 

of the Bank carrying on the same business. In this context, 

“more favourable treatment” shall mean and include treatment, 

including the:
a.   Granting of “total net accommodation” to related parties, 

exceeding a prudent percentage of the Bank’s regulatory 

capital, as determined by the Board. For purposes of this 

sub-direction:
(i) “Accommodation” shall mean accommodation as defined 

in the Banking Act Direction No.7 of 2007 on Maximum 

Amount of Accommodation.

(ii)The “total net accommodation” shall be computed by 

deducting from the total accommodation, the cash 

collateral and investments made by such related parties 

in the Bank’s share capital and debt instruments with a 

maturity of five years or more.

b.   Charging of a lower rate of interest than the Bank’s best 

lending rate or paying more than the Bank’s deposit rate 

for a comparable transaction with an unrelated comparable 

counterparty;

c.   Providing of preferential treatment, such as favourable 

terms, covering trade losses and/or waiving fees/

commissions, that extend beyond the terms granted in the 

normal course of business undertaken with unrelated parties;

Complied with.
The Bank has implemented a Board approved process to monitor 

related party transactions which is monitored by the Compliance Division 

and compliance status is indicated in the monthly Compliance Report 

submitted to the Board. Further, related party transactions are reported 

to the Audit Committee on a quarterly basis.
Any non-compliance brought to the notice of the Board would be 

addressed by the Board.

d.   Providing services to or receiving services from a related 

party without an evaluation procedure;

e.   Maintaining reporting lines and information flows that 

may lead to sharing potentially proprietary, confidential or 

otherwise sensitive information with related parties, except 

as required for the performance of legitimate duties and 

functions.

3 (7) (iv)

A bank shall not grant any accommodation to any of its 

Directors or to a close relation of such Director unless such 

accommodation is sanctioned at a meeting of its Board of 

Directors, with not less than two-thirds of the number of 

Directors other than the Director concerned, voting in favour of 

such accommodation.
This accommodation shall be secured by such security as may 

from time to time be determined by the Monetary Board as well.

Complied with.

3 (7) (v)

a.   Where any accommodation has been granted by a bank to 

a person or a close relation of a person or to any concern in 

which the person has a substantial interest, and such person 

is subsequently appointed as a Director of the Bank, steps 

shall be taken by the Bank to obtain the necessary security 

as may be approved for that purpose by the Monetary 

Board, within one year from the date of appointment of the 

person as a Director.

b.   Where such security is not provided by the period as 

provided in Direction 3 (7) (v) (a) above, the Bank shall 

take steps to recover any amount due on account of any 

accommodation, together with interest, if any, within the 

period specified at the time of the grant of accommodation 

or at the expiry of a period of eighteen months from the 

date of appointment of such Director, whichever is earlier.

Complied with.

c.   Any Director who fails to comply with the above sub-

directions shall be deemed to have vacated the office of 

Director and the Bank shall disclose such fact to the public.

d.   This sub-direction, however, shall not apply to a Director 

who at the time of the grant of the accommodation was an 

employee of the Bank and the accommodation was granted 

under a scheme applicable to all employees of such bank.

3 (7) (vi)

A bank shall not grant any accommodation or “more favourable 

treatment” relating to the waiver of fees and/or commissions 

to any employee or a close relation of such employee or to any 

concern in which the employee or close relation has a substantial 

interest other than on the basis of a scheme applicable to the 

employees of such bank or when secured by security as may be 

approved by the Monetary Board in respect of accommodation 

granted as per Direction 3 (7) (v) above.

Complied with.
No favourable treatment/ accommodation is provided to any employee 

of the Bank on more favourable terms unless under general staff loan 

schemes applicable to all employees of the Bank. Circular instructions 

have been issued in this regard. Close relations of Bank employees are 

also not given any favourable treatment.

3 (7) (vii)

No accommodation granted by a bank under Direction 3 (7) 

(v) and 3 (7) (vi) above, nor any part of such accommodation, 

nor any interest due thereon shall be remitted without the prior 

approval of the Monitory Board and any remission without such 

approval shall be void and of no effect.

Complied with.
Such a situation has not arisen during the year 2023.

3 (8) Disclosure

3 (8) (i)

The Board shall ensure that:
a.   Annual Audited Financial Statements and quarterly Financial 

Statements are prepared and published in accordance with 

the formats prescribed by the supervisory and regulatory 

authorities and applicable accounting standards; and that

Complied with.

b.   Such statements are published in the newspapers in an 

abridged form, in Sinhala, Tamil, and English.

3 (8) (ii)

The Board shall ensure that the following minimum disclosures 

are made in the Annual Report:
a.   A statement to the effect that the Annual Audited Financial 

Statements have been prepared in line with applicable 

accounting standards and regulatory requirements, inclusive 

of specific disclosures.

Complied with.
Disclosed in the “Annual Report of the Directors on the State of Affairs 

of the Bank”, on pages 150 to 154 and “Directors’ Responsibility for 

Financial Reporting” on page 159.

b.   A report by the Board on the Bank’s internal control 

mechanism that confirms that the financial reporting system 

has been designed to provide reasonable assurance 

regarding the reliability of financial reporting, and that the 

preparation of Financial Statements for external purposes 

has been done in accordance with relevant accounting 

principles and regulatory requirements.

Complied with.
Disclosed in the “Directors’ Statement on Internal Control”, on pages 156 

and 157 of this Annual Report and “Directors’ Responsibility for Financial 

Reporting” on page 159.

c.   The Assurance Report issued by the Auditors under  

“Sri Lanka Standard on Assurance Engagements SLSAE 

3050 – Assurance Reports for banks on Directors’ 

Statements on Internal Control”.

Complied with.
The Bank has obtained a certificate on the Effectiveness of Internal 

Controls over Financial Reporting from the Auditor General which is 

published on page 158 of this Annual Report.

d.   Details of Directors including names, fitness and 

propriety, transactions with the Bank and the total of fees/ 

remuneration paid by the Bank.

Complied with.
Details of Directors are given on pages 28 to 31 Directors’ Interest in 

Contracts with the Bank are given on page 155. Remuneration paid by 

the Bank are given in Note 17 to the Financial Statements on page 200.

e.   Total net accommodation as defined in 3 (7) (iii) granted to 

each category of related parties. The net accommodation 

granted to each category of related parties shall also be 

disclosed as a percentage of the Bank’s regulatory capital.

Complied with.
“Total net accommodation” granted to each category of related parties 

during the year 2023 as a percentage of the Bank’s regulatory capital is 

given below:
Complied with.

LKR ’000

Percentage

%

Key Management Personnel (KMP)

808,033

0.29

Subsidiaries

1,761,103

0.64

Associates

618,540

0.22

Government and Government– related 

entities (Refer definition in Note 61 of 

Financial Statements)

2,555,864,482

924.66

f.   The aggregate values of remuneration paid by the Bank to 

its Key Management Personnel and the aggregate values 

of the transactions of the Bank with its Key Management 

Personnel, set out by broad categories such as remuneration 

paid, accommodation granted and deposits or investments 

made in the Bank.

Complied with.
The aggregate amount of remuneration paid by the Bank and 

transactions with KMP for the year 2023 are stated below:

LKR ’000

Short-term employment benefits

934,076

Post-employment benefits

156,313

In addition to above, the Bank has also paid non-cash benefits such as 

use of vehicles to KMP in line with the approved benefit plan of the Bank.

LKR ’000

Loans

658,976

Overdrafts

3,099

Credit cards

27,863

Due to customers Deposits

1,475,673

Debentures

-

Undrawn facilities

135,847

g.   A confirmation by the Board of Directors in its Annual 

Corporate Governance Report that all the findings of the 

“Factual Findings Reports” of Auditors issued under  

“Sri Lanka Related Services Practice Statement 4750” have 

been incorporated in the Annual Corporate Governance 

Report provided that Auditors confirm to the Director of 

Bank Supervision to this effect.

Complied with.
The Bank will obtain a certificate from the Auditor General in compliance 

with the Corporate Governance Direction No. 11 of 2007. All findings of 

the Auditors will be incorporated in this Corporate Governance Report 

and any recommendations will be dealt within the ensuing year.

h.   A report setting out details of the compliance with 

prudential requirements, regulations, laws and internal 

controls and measures taken to rectify any material  

non- compliances.

Complied with. 

Indicate in the Annual Report of the Directors on the state of affairs of the 

Bank on pages 150 to 154. 

i.   A statement of the regulatory and supervisory concerns on 

lapses in the Bank’s risk management, or non- compliance 

with these Directions that have been pointed out by the 

Director of Bank Supervision, if so directed by the Monetary 

Board to be disclosed to the public, together with the 

measures taken by the Bank to address such concerns.

Complied with. 

Report on Corporate Governance indicates the instances of non 

compliances relating to Rules 59 and 95 of the Financial Institutions 

(Customer Due Diligence) Rules, No 1 of 2026 and its amendments.

3 (9) (i)

Transitional and Other General Provisions Compliance with this 

Direction shall commence from 01 January 2008 onwards and all 

licensed commercial banks shall fully comply with the provisions 

of this Direction by or before 01 January 2009 except where 

extended compliance dates have been specifically provided for 

in this Direction.

Complied with.

3 (9) (ii)

In respect of the Banks that have been incorporated by specific 

statutes in Sri Lanka, the Boards as specified in such statutes shall 

continue to function in terms of the provisions of the respective 

statutes, provided they take steps to comply with all provisions 

of this Direction that are not inconsistent with the provisions of 

the respective statutes.

Complied with.
Bank of Ceylon takes all possible measures to comply with all applicable 

provisions of this Direction that are not inconsistent with the provisions 

of Bank of Ceylon Ordinance No. 53 of 1938 and its amendments, the 

enabling enactment.
Any instances of non-compliance and where Bank of Ceylon has 

continued to function in terms of the provisions of the statutes applicable 

to it has been specifically mentioned above against the relevant sections.

3 (9) (iii)

This Direction shall apply to the branches of the foreign banks 

operating in Sri Lanka to the extent that it is not inconsistent 

with the regulations and laws applicable in such bank’s country 

of incorporation. The branch of a foreign bank shall also publish 

its parent bank’s Annual Corporate Governance Report together 

with its Annual Report and accounts of the branch operations in 

Sri Lanka.

Not applicable

3 (9) (iv)

In the event of a conflict between any of the provisions of this 

Direction and the Articles of Association (or Internal Rules) 

pertaining to any bank, the provisions of this Direction shall 

prevail. However, if the Articles of Association of an individual 

bank set a more stringent standard than that specified in this 

Direction, such provisions in the Articles of Association may be 

followed.

Not applicable.

3 (9) (v)

If for any reason such as ill health or any incapacity as provided in 

the Banking Act, the Monetary Board considers that exemptions 

referred to in Directions 3 (2) (ii) B, 3 (3)
(i) A and 3 (3) (ii) A should not be availed of, such ground may 

be notified to the person by the Monetary Board, and after a 

hearing, the Monetary Board may limit the period of exemption.

Not applicable.