CAPITAL ADEQUACY

Capital adequacy is a measure of the financial soundness and the stability of the Bank which is expressed as a ratio of its Capital to Risk Weighted Assets

of Credit, Market and Operational aspects of the business.

Regulatory Capital

The Central Bank of Sri Lanka (CBSL) sets and monitors capital requirements for Licensed Banks in Sri Lanka based on the Basel framework which is an

international standard for banks’ capital adequacy, stress testing and liquidity requirements. As a Domestically Systemically Important Bank (D-SIB), Bank

of Ceylon requires to maintain a minimum Common Equity Tier 1 Ratio of 8.5 %, Tier 1 Ratio of 10% and Total Capital Ratio of 14% according to the

Banking Act Direction No 01 of 2016 and subsequent amendments thereto issued by the CBSL.

Bank of Ceylon has continued to well maintain Capital Adequacy Ratios over and above the Regulatory Capital Requirements. Following comparison

demonstrates the Minimum Regulatory Requirements and the actual positions of Bank of Ceylon.

Components of the Capital

Minimum Regulatory

Requirement from

01.01.2019

Bank’s position as at

31.12.2020

31.12.2021

31.12.2022

31.12.2023

Common Equity Tier 1 (CET 1)

8.50

10.09

12.91

11.34

11.71

Total Tier 1

10.00

11.22

14.25

12.41

12.76

Total Capital

14.00

14.88

17.77

15.38

15.84

Below chart, depicts the components of the Bank’s capital with its compliance imposed by the Regulator.

CAPITAL ADEQUACY - BANK

2020

2021

2022

2023

Total Tier 1

Regulatory Requirement (Tier 1)

Regulatory Requirement (Total Capital)

Total Capital

Sources of Capital

The business plans and financial plans are

prepared ensuring adequate profit generation

by setting appropriate targets for Return on

Assets and Capital. The Bank was able to raise

LKR 10 billion by issuing Basel III compliant

– Tier 2, Listed, Unsecured, Subordinated,

Redeemable debentures in 2023 in order to

boost its capital levels.

Capital Management

The Bank has an ongoing process to evaluate

the adequacy of capital in line with strategic

aspirations and to comply with the BASEL III

guidelines. All large credit proposals are evaluated

with the required capital charge. Lending decisions

and property expansions are evaluated on the

basis of sufficient return on capital. In addition,

necessary actions are taken to optimise the Risk

Weighted Assets by improving asset quality in

order to enhance Capital Adequacy Ratios.

Moving forward, the Bank is executing the

identified medium and long term strategies to

improve Capital Adequacy Ratios in line with

CBSL Minimum Regulatory Requirements.

The Bank is committed to maintaining a strong

and resilient balance sheet by maintaining

optimum levels of capital adequacy in order to

comply with capital adequacy thresholds set by

the CBSL.

Basel III Disclosure Requirements Under Pillar 3 as per Banking Act Direction No 01 of 2016

Disclosure 1 : Key Regulatory Ratios - Capital and Liquidity

As at December 31,

2023

2022

Bank

Group

Bank

Group

Basel III
Regulatory Capital (LKR '000)

Common Equity Tier 1

204,342,671

215,172,411

194,949,918

200,533,817

Tier 1 Capital

222,692,671

233,448,400

213,299,918

218,883,817

Total Capital

276,409,883

288,363,582

264,494,074

270,747,789

Regulatory Capital Ratios (%)

Common Equity Tier 1 Capital Ratio (Minimum Requirement - 8.50%)

11.71

12.10

11.34

Tier 1 Capital Ratio (Minimum Requirement - 10.00%)

12.76

13.12

12.41

12.38

Total Capital Ratio (Minimum Requirement - 14.00%)

15.84

16.21

15.38

15.32

Leverage Ratio (Minimum Requirement - 3.00%)

4.78

4.95

4.59

4.65

As at December 31

Bank

2023

2022

Regulatory Liquidity

Statutory Liquid Assets - Domestic (LKR '000)

1,624,586,784

698,946,861

Statutory Liquid Assets - FCBU (USD '000)

607,206

368,308

Statutory Liquid Assets Ratio (Minimum Requirement - 20%)

Domestic Banking Unit (%)

42.80%

21.22

Off - Shore Banking Unit (%)

54.20%

32.79

Consolidated (%)

45.00%

23.00

Liquidity Coverage Ratio (%)- Rupee (Minimum Requirement 2023-100%, 2022-100%)

316.00

169.00

Liquidity Coverage Ratio (%)- All Currency (Minimum Requirement 2023-100%, 2022-100%)

227.21

122.77

Net Stable Funding Ratio (%) (Minimum Requirement 2023 -100%, 2022 -100%)

145.00

139.00

Disclosure 2 : Basel III Computation of Capital Ratios -31.12.2023

2023

2022

As at December 31

Bank

Group

Bank

Group

LKR '000

Common Equity Tier 1 (CET 1) Capital after Adjustments

204,342,671

215,172,411

194,949,918

200,533,817

Common Equity Tier 1 (CET 1) Capital

229,487,333

236,307,441

219,610,936

221,151,838

Equity Capital (Stated Capital)/ Assigned Capital

25,730,000

Reserve Fund

15,665,000

15,131,000

Published Retained Earnings/(Accumulated Retained Losses)

171,351,609

173,063,302

158,616,238

159,819,481

Published Accumulated other Comprehensive Income (OCI)

16,571,657

21,482,495

19,964,631

20,104,713

General and other Disclosed Reserves

169,067

366,644

169,067

366,644

Unpublished current year's profit/(losses) and gains reflected in OCI

Ordinary shares issued by consoloidated banking and financial subsidaries held by third

parties

Total Adjustments to CET 1 Capital

25,144,662

21,135,030

24,661,017

20,618,021

Goodwill (net)

Intangible Assests (net)

1,352,429

1,452,194

1,360,265

1,511,177

Revaluation losses of property, plant and equipment

52,913

Deferred tax assets (net)

18,580,248

18,644,378

18,903,174

18,924,249

Investments in the capital of banking and financial institutions where the bank does not own

more than 10 percent of the issued ordinary share capital of the entity

1,047,457

985,544

Significant investments in the capital of financial institutions where the bank owns more

than 10 percent of the issued ordinary share capital of the entity

4,111,614

4,214,983

Shortfall of capital in financial subsidiaries

129,682

Additional Tier 1 (AT I) capital after adjustment

18,350,000

Additional Tier 1 (AT I) capital

18,350,000

Qualifying Additional Tier 1 Capital Instruments

18,350,000

Instruments issued by Consolidated Banking and Financial Subsidiaries of the Bank and

held by Third Parties

Total Adjustments to AT 1 Capital

Investment in Own Shares

Others (specify)

Tier 2 Capital after Adjustments

53,717,211

54,915,182

51,194,155

51,863,972

Tier 2 Capital

53,795,872

54,915,182

51,194,155

51,863,972

Qualifying Tier 2 Capital Instruments

24,256,811

24,933,801

21,960,592

22,028,292

Revaluation Gains

9,902,177

General Provisions

19,636,885

20,079,205

19,331,387

19,933,503

Instruments issued by Consolidated Banking and Financial Subsidiaries of the Bank and

held by Third Parties

Total Adjustment to Tier 2

78,661

Investment in Own Shares

Investments in the capital of financial institutions and where the bank does not own more

than 10 percent of the issued capital carrying voting rights of the issuing entity

78,661

Significant investments in the capital of banking and financial institutions where the bank

own more than 10 percent of the issued ordinary share capital of the entity

CET I Capital

204,342,671

215,172,411

194,949,918

200,533,817

Total Tier 1 Capital

222,692,671

233,522,411

213,299,918

218,883,817

Total Capital

276,409,883

288,437,593

264,494,074

270,747,789

2023

2022

As at December 31

Bank

Group

Bank

Group

LKR '000

Total Risk Weighted Assets (RWA)

1,745,441,042

1,778,715,863

1,719,267,173

1,767,715,187

RWAs for Credit Risk

1,570,950,764

1,606,336,396

1,546,510,921

1,594,680,262

RWAs for Market Risk

20,412,633

20,422,929

19,738,892

19,717,359

RWAs for Operational Risk

154,077,644

151,956,538

153,017,360

153,317,566

CET I Capital Ratio (including Capital Conservation Buffer,

Countercyclical Capital Buffer and Surcharge on D-SIBs) (%)

11.71

12.10

11.34

of which : Capital Conservation Buffer (%)

2.50

of which : Countercyclical Buffer (%)

N/A

of which : Capital Surcharge on D-SIBs (%)

1.50

Total Tier 1 Capital Ratio (%)

12.76

13.13

12.41

12.38

Total Capital Ratio (including Capital Conservation Buffer, Countercyclical

Capital Buffer and surcharge on D-SIBs) (%)

15.84

16.22

15.38

15.32

of which : Capital Conservation Buffer (%)

2.50

of which : Countercyclical Buffer (%)

N/A

of which : Capital Surcharge on D-SIBs (%)

1.50

Disclosure 3 : Leverage Ratio

2023

2022

As at December 31

Bank

Group

Bank

Group

LKR '000

Tier 1 Capital

222,692,671

233,448,400

213,299,918

218,883,817

Total Exposures

4,657,073,328

4,715,305,253

4,646,589,230

4,703,126,805

On-Balance Sheet Items (Excluding Derivatives and Securities Financing

Transactions, but including Collateral)

4,361,075,626

4,415,824,079

4,251,645,878

4,307,950,487

Derivative Exposures

12,479,517

26,706,355

Securities Financing Transaction Exposures

80,374,807

83,858,280

183,736,863

183,969,828

Other Off-Balance Sheet Exposures

203,143,377

184,500,134

Basel III Leverage Ratio (%) (Tier 1 Capital/Total Excposure)

4.78

4.95

4.59

4.65

Disclosure 4 : Net Stable Funding Ratio (NSFR) and Liquidity Coverage Ratio (LCR)

As at December 31

2023

2022

LKR '000

Total Available Stable Funding

3,097,126,830

2,186,814,087

Required Stable Funding - On Balance Sheet Assets

2,119,759,169

1,652,394,020

Required Stable Funding - Off Balance Sheet Assets

12,851,224

14,220,143

Total Required Stable Funding

2,132,610,394

1,666,614,164

NSFR

145%

131%

Basel III computation of Liquidity Coverage Ratio - All Currency (Bank Only)

2023

2022

As at December 31,

Total

Un-Weighted

Value

Total

Weighted

Value

Total

Un-Weighted

Value

Total

Weighted

Value

LKR '000

Total Stock of High - Quality Liquid Asset (HQLA)

1,573,846,803

1,566,339,975

528,321,185

522,718,279

Total Adjusted Level I Assets

1,532,855,509

495,276,344

Level 1 Assets

1,530,225,982

496,650,654

Total Adjusted Level 2A Assets

40,867,380

34,737,273

29,235,313

24,850,016

Level 2A Assets

40,867,380

34,737,273

29,235,313

24,850,016

Total Adjusted Level 2B Assets

2,753,441

1,376,721

2,435,217

1,217,609

Level 2B Assets

2,753,441

1,376,721

2,435,217

1,217,609

Total Cash Outflows

4,412,609,059

851,520,467

4,143,573,873

591,674,653

Deposits

2,342,464,299

234,246,430

2,549,717,356

254,971,736

Unsecured Wholesale Funding

1,399,760,314

563,033,322

689,360,250

283,199,642

Secured Funding Transactions

61,244,586

347,682,220

Undrawn Portion of Committed (Irrevocable) Facilities and Other

Contingent Funding Obligations

601,301,767

46,402,622

556,814,047

53,503,275

Additional Requirements

7,838,093

Total Cash Inflows

236,636,601

162,135,509

312,827,811

165,920,811

Maturing Secured Lending Transaction Backed by Collateral

3,500,000

Committed Facilities

5,000,000

Other Inflows by Counterparty which are Maturing Within 30 Days

193,252,127

152,837,733

263,185,809

165,459,409

Operational Deposits

25,586,699

44,180,601

Other Cash Inflows

9,297,776

461,402

Liquidity Coverage Ratio (%) (Stock of High quality Liquid Assets/Total Net

Cash Outflows over the Next 30 Calender Days)*100

227.21

122.77

395

Disclosure 5 : Main Features of Regulatory Capital Instruments

Description of the Capital Instrument

Issuer

Bank of Ceylon

Unique Identifier

LK0357D23771

LK0357D23789

Governing Laws of the Intrument

Laws of Sri Lanka

Original Date of Issuance

29-Dec-16

29-Dec-17

31-Jul-18

27-Jun-19

Par Value of Instrument -LKR

100

Issued quantity (No of Debentures)

7,836

200

50,000,000

67,000,000

30,000,000

Issued Quantity (LKR '000)

784

5,000,000

6,700,000

3,000,000

Perpetual or Dated

Original Maturity Date, if Applicable

28-Dec-24

28-Dec-25

30-Jul-26

26-Jun-24

Amount Recognised in Regulatory Capital

(in LKR' 000 as at the Reporting Date)

118

1,750,000

3,350,000

150,000

Accounting Classification (Equity/Liability)

Liability

Coupons/Dividends

Fixed or Floting Dividend/Coupon

FIXED

FLOATING

FIXED

Coupon Rate and any Related Index %

12.75

15.41

12.75

12.00

11.75

Non-Cumulative or Cumulative

Non-Cumulative

Convertible or Non-Convertible

Non Convertible

Description of the Capital Instrument

Issuer

Bank of Ceylon

Unique Identifier
Governing Laws of the Intrument

Laws of Sri Lanka

Original Date of Issuance

17-Jul-19

18-Jul-19

23-Jul-19

24-Jul-19

26-Jul-19

Par Value of Instrument - LKR

100

Issued quantity (No of Debentures)

10,488,500

22,000,000

25,000,000

4,000,000

611,500

Issued Quantity (LKR '000)

1,048,850

2,200,000

2,500,000

400,000

61,150

Perpetual or Dated

Dated

Original Maturity Date, if Applicable

16-Jul-24

17-Jul-24

22-Jul-24

23-Jul-24

25-Jul-27

Amount Recognised in Regulatory Capital

(in LKR '000 as at the Reporting Date)

104,885

220,000

250,000

40,000

42,805

Accounting Classification (Equity/Liability)

Liability

Coupons/Dividends

Fixed or Floting Dividend/Coupon

FIXED

Coupon Rate and any Related Index %

11.80

11.50

11.75

Non-Cumulative or Cumulative

Non-Cumulative

Convertible or Non-Convertible

Non Viability

write down

Non Viability

write down

Non Viability

write down

Non Viability

write down

Non Viability

write down