9
 Annex
Examples for Sensitivity Tests
Category  Description
Interest Rates  (i) Parallel yield curve shift
(ii) Change of yield curve slope
(iii) Shift of curve and changing slope
Equities  (i) Shocks to levels and volatilities
(ii) Shocks to levels/volatilities only
Exchange Rates  (i) Shocks to levels only
(ii) Shocks to levels and volatilities
Credit  Shocks to credit spreads
Others  Shocks to various volatilities

Examples for Stress Test Scenarios
Category  Stress Test Scenarios
Credit Risk
 (i) Movement in Non -Performing Assets(NPAs)
(a) Increase in NPAs
(b) Migration among  NPA categories
(c) Default of large borrower/s
(d) Default in a specific sector/industry/region
(ii) Change in impairment
(a) Probability of defaults (PD) for individual counterparty,
portfolio or sector
(b) Loss given defaults(LGD) for specific facility types
(c) Change in expected cash flows
(iii) Credit concentration to a:
(a) Single borrower/ group of borrowers
(b) Sector
(c) Industry
(d) Region
(iv) Collaterals
(a) Factors affecting  on unencumbered position of


10
 collaterals/guarantees
(b) Limits on the degree of reliance , e.g.; illiquid nature  of
collaterals
(c) concentration
(v) Ratings
Impact  on internal/external rating migrations
(vi) Economic movements
Changes in macro -economic variables , e.g., rise in oil prices,
global/country specific slowdowns, international/market risk
events, extreme liquidity conditions, war situation etc.
Interest Rate Risk
(Rate of Return Risk in
the banking book and
Benchmark Rate Risk in
the trading book for
Islamic operations)  (i) Banking Book (Investment Portfolio)
(a) Parallel shifts in the yield curve /yield curve twists
(b) Basis changes
(c) Option and prepayment
(ii) Trading Book (Trading Portfolio)
(a) Market moves
 Decline in market value of financial instruments due to
adverse changes in market prices
 Volatility changes and twists in the term structure of
volatility
 Changing credit spreads of bonds and securities
 Contagion effect due to adverse market direction ; eg.;
global tightening (focusing on increasing of short -term
and long-term interest rate)
(b) Model assumptions
 Historical volatilities
 Correlations, i.e. positive, negative, perfect or un -
correlated
(c) Product complexity
 Derivative  instruments when market is illiquid
 Structured products with embedded multiple risks


11
 Foreign Exchange Risk  Adverse movement in exchange rates; e.g.;  impact o f net open
position on major currencies , impact of major customers with
substantial foreign exchange position .
Equity  Risk  (i) General risk : Relating to major change in the overall stock
market index
(ii) Specific risk : Relating  to the  individual issuer
Liquidity Risk  (i) Liquidity crisis
(ii) Credit tightening  (bank specific, market specific or
combination of both)
(iii) Speed and time period  to act

(Refer Explanatory Note 1/2014 on Guidelines on Stress Testing of Licensed Commercial Banks
and Licensed Specialised Banks / FAQ s)


12
 Explanatory Note 1/2014

Guidelines on Stress Testing
of Licensed Commercial Banks and Licensed Specialised Banks

Frequently Asked Questions (FAQs)
These Frequently Asked Questions (FAQs) have been developed to assist banks in carrying -out
stress testing activities in accordance with the Guidelines on Stress Testing of LCBs and LSBs
and to clarify the possible queries relating to these Guidelines.

Q1 – Wha t is the overall purpose of issuing stress testing guidelines  to banks ?
(a) The key objective of issuing these guidelines  is to provide guidance  to banks on the
critical areas pertaining to stress testing and to provide broad principles  that banks could
follow in carr ying-out stress testing activities .
(b) In addition, to reinforce the importance of stress testing as a risk management tool  to
evaluate the potential effects on bank’s financial position arising from cer tain unlikely
but plausib le events or movements in financial variables .

Q2 – Does a bank have the flexibility to determine suitable models, appropriate
methodologies and frequency of stress testing, depending on the approaches that they have
adopted?
Yes.
(a) The principle advocated  in these guidelines is that banks have the flexibility with regard
to the design and methodology adopted, so long as the management is satisfied with the
robustness of the process and assumptions.
(b) The models used for stress testing shall be appropriate in  the context of risk exposures
and size and complexity of operations.
(c) The frequency of stress testing shall be commensurate with the nature of risks to which
banks are exposed  to. In case where the approach adopted limits the frequency of the
stress test c onducted, the management should re -consider the appropriateness of the
approach used vis -à-vis the risk profile of the portfolio.


13
 Q3 – Why these guidelines does not provide common risk factors and magnitude s of shock s
to assist banks in developing appropriate scenarios?
(a) It is not the intention of these guidelines to specify standard scenarios for comparability
across banking industry.
(b) Given the objective and the scope of these guidelines, the prescribed scenarios may n ot
be broad enough to cover all the detailed information and experiences of specific bank or
may be irrelevant to others.
(c) Hence, banks should identify their own vulnerabilities as they have the best
understanding of their own business exposure and inherent  vulnerabilities.

Q4 - Why these guidelines  does not specify any examples for operational risk events or
scenarios?
(a) By nature, operational risk events or scenarios are specific to a particular bank.
Therefore, these guidelines are not specified any common scenarios for operational risk.
(b) Based on business models, risk management systems, risk exposure, internal control
policies and procedures banks are free to generate operational risk scenarios, which suits
to their size and complexity of business operations.

Q5 - What is the acceptance level of second round or spillover effects? Is there a specific
approach/common method ology to link the second layer risk elements to the first layer risk
factors?
(a) While acknowledging the challenge in incorporating second round effects and
understanding the complexity of the links between the scenarios, these guidelines do not
specify any c ommon methodology to conduct such an exercise.
(b) Banks are expected to capture the second round effect based on the reasonable
expectation of the impact at least for the portfolio of material risk.

Q6 – What are the possible measures available to handle non -availability of adequate data
in carrying -out stress testing?
(a) Lack of complete data does not preclude stress testing . However, the quality of data will


(a) Lack of complete data does not preclude stress testing . However, the quality of data will
improve stress testing results and usefulness.
(b) Banks may make additional assumptions or use proxy data as appropriately.
(c) However, this shall not be considered as a long -term solution to the non -availability of
adequate data  and banks are required to build and maintain necessary and appropriate
date for this purpose.


MONETARY BOARDCENTRAL BANK OF SRI LANKASeptember 2015 BANKING ACT DIRECTIONS No. 02 of 2015LOAN TO VALUE RATIO FOR LOANS AND ADVANCESIN RESPECT OF MOTOR VEHICLESIssued under Sections 46(1) and 76(J)(1) of the Banking Act, No. 30 of 1988, as amended.The Monetary Board issues 'Directions as follows for the implementation of a loan to value (LTV) ratio in respect of loans and advances granted by licensed commercial banks (LCBs) and licensed specialised banks (LSBs) for the purpose of purchase or utilisation of motor vehicles.1. Empowerment1.1In terms of Sections 46(1) and 76(J)(1) of the Banking Act, in orderunder theto ensure the soundness of the banking system, the Monetary BoardBanking Actis empowered to issue Directions to all or any LCB and LSB, respectively, regarding the manner in which any aspect of the business of such banks is to be conducted.2. Maximum LTV2.1Commencing 15 September 2015, every LCB and LSB shall notRatiogrant loans and advances for the purpose of purchase or utilisation of a motor vehicle in excess of 70 per cent of the value of such vehicle (LTV Ratio of 70 per cent).2.2An LCB or LSB shall not grant loans and advances for the purpose of purchase or utilisation of motor vehicles, other than loans and advances granted in accordance with Direction 2.1 above.3. Interpretations3.1 In these Directions,(a) Loans and advances shall include finance leases, hire purchase facilities and other loans and advances granted for the purpose of purchase or utilisation of motor vehicles.(b) The value of the motor vehicle shall be the market value obtained from a professional valuer at the time of granting loans and advances, as per the prevailing practice.VjprXJ "Arjuna MahendranChairman of the Monetary Board andGovernor of the Central Bank of Sri Lanka


MONETARY BOARDCENTRAL BANK OF SRI LANKAOctober 2015BANKING ACT DIRECTIONSNo. 03 of 2015LOAN TO VALUE RATIO FOR LOANS AND ADVANCESIN RESPECT OF MOTOR VEHICLESIssued under Sections 46(1) and 76J(1) of the Banking Act, No. 30 of 1988, as amended.Banking Act Direction No. 02 of 2015 dated 14 September 2015 on the above subject shall come in to force with effect from 01 December 2015.Arjuna MahendranChairman of the Monetary Board and Governor of the Central Bank of Sri Lanka


$ goor Oco OuotgO
Eamfuma r$didfiu arnid
CEHINff. BAilT OF $NI LIilI(A
03 August 2015 CIRCULAR nlefz 021171500/0063/001
Bank Supervision Department
To: The Chief Executive Officers of Licensed Commercial Banks and
Licensed Specialised Banks
Suspension of Lanka Rating Agency Ltd. as an Acceptable Credit Rating Agency
The Monetary Board has decided to suspend Lanka Rating Agency Ltd (LRA) as an
accepable credit rating agency for regulatory requirements pertaining to licenced commercial
banks and licensed specialised banks with effect from 01.07.2015, consequent to the non-
renewal of registration granted to LRA by the Securities and Exchange Commission of Sri
Lanka.
Accordingly, you are requested to take appropriate measures in this regard.
(Mrs.)TMJYPFernando
Director of Bank Supervision
6 OeD O.DO, eclo 30, deDrA€d oJO(D,
lD.. s(r. 5OO, slo€O Of, € Cplooo
I s+fizanlooasg6 qgLb onrg, @o. 30 uor$u$ mnopmp GEr(BDq I
g. Glu. Qo.590, Gengdq 01, e$do6lortol 6, t{0.30, Janadhlpdrl Mardra, Colombo 1
P. 0. Bu.590, Colombo 01, Sil lrnlo.
@ www.cbsl.gov.lk ld gau24ttz11 M banksup@cbsl.lk
)


02 December 2015$ goaor Oco 0roAO
Boildffire rofrdfu nrdld
CE]{TRAI BAIT OF $H I.tr*I(A
GUIDELINE
BANK SUPERVISION DEPARTMENTRefz 02 I 17 I 550/0002/003
To: The Chief Executive Officers of Licensed Commercial Banks
Key Management Personnel in Banking Act Direction on Corporate Governance
We write to inform you that key management personnel in Banking Act Direction No. 1l of
2007 on Corporate Govemance for Licensed Commercial Banks (LCBs) in Sri Lanka shall
mean Officers Performing Executive Functions of LCBs as referred to in the Banking Act
Determination No. 3 of 2010 on Assessment of Fitness and Propriety of Offrcers Performing
Executive Functions in LCBs.
Ms. S H Gunawardena
Director of Bank Supervision
6 OeD g(D€b qclo 80, dr'oaeo EOo,
a, scr.5OO, slsreo Of, € CpoO
( sa rr zczzrooless6q5rir ong, OdD. 30 entrrfuCl onogmg 66rT(Uriq I
p. Ou. Qo.590, Oon@dq 01, E.)doEl-eyol 6, ilo.30, Janadhlpahl ilaur0r!, ColomDo I
P. 0. Bu.59O, ColomDo 01, Srl lr.rlo.
@ www.cbsl.gov.lk H gnn24tTrtl 4 banksup@cbsl.lk


$ goorQlo0soe0
Bsiltims rofri$rr eisdld
cEI{I[At 3A1{l( 0F sRl L[*l(A
GUIDELINE
BANK SUPERYISION DEPARTMENTRef: 02/171550/0002/00302 December 2015
To:The chief Executive oflicers of Licensed Specialised Banks
Key Management Personnel in Banking Act Direction on corporate Governance
We write to inform you that key management personnel in Banking Act Direction No' 12 of
2007 oncorporate Governance for Licensed Specialised Banks (LSBs) in Sri Lanka shall
mean officers performing Executive Functions of LSBs as referred to in the Banking Act
Determination No. 4 0f 2010 0n Assessment of Fitness and propriety of officers Performing
Executive Functions in LSBs.
Ms. S H Gunawardena
Director of Bank SuPervision
o O{D OtD€b ttoo so' dooaed &Oo'
s.scr.Soo, eloogo or, € eplooo
( sa rt zlzzroomss6 ggrb onq, So. ao umn$u$ onoporp o6n(9d'q I
pi. Ou. Qo.590, O"og1Ol 01' 6a:doelrvd 6, ilo.30, hnadhlgdil t.uiul., Colombo 1
P . 0. Bor 590, Golombo 01' $l t nlo'
@ www.cbsl'gov.lkH gqu247771i 4 banksup@cbsl.lk


@ goor @co OcoqO
@onjma lo$dur onid
CENTRAL BANK OF SR! TANKA
Ocoug@lw6oqettsoo@dqo ourridl Gro$unrianorg plomur6eonro BankSupervislon Department
Ref: 02 / 04 / 002 I 00 | 5 / 002
\S April20l5
To: The Chief Executive Officers of Licensed Commercial Banks
and Licensed Specialised Banks
Dear Sir/Madam
Expanding Access to Banking
We wish to draw your attention to the Interim Budget - 2015 enumerating several measures to
enhance access to banking as summarised below:
(i) Commercial banks to open their branches in remote areas.(ii) To open accounts to new customers without requiring a minimum initial deposit.(iii) To make all efforts to initiate bank accounts for all citizens and all grants and
allowances that may devolve on them to be remitted through the banking system in the
near future.
(iv) To simplifu rules and regulations, particularly in lending operations, to facilitate
borrowers and the new simplified systems to be implemented from September 2015.
2. We request you to take appropriate measures to implement the above.
Yours faithfully
ffi*JypFernando
Director of Bank Supervision
6 Oo Oo@, qeo 80, dooule6 &Oo,
qts. ec,.5OO, slotgo Ol, € €p@O6 qSLb onq, Oa>. 30 s6rn!6lultl urogog Ostr@rbq 1
F. Ou. eo.590, Oenqed'q 01, ea:flioalrvol 6, ilo.30, ranadhl9itrl illaua$a, Colombo 1
P.0.Botr 590,Colombo 01, Sil tanlo.
H safi2471211 www.cbsl.gov,lk

data\CBSL\2015\Expanding Access to Banking_0.pdf


03 August 2015S goor @en Orerg0
Sa:rdrmra r.c4iidrl eurdd
CEIIITRAL BAilI{ OF SRI lAHlffi
CIRCULAR Ref: o2lo1too6to2ootoo2
Bank Supervision Department
To: The Chief Executive Officers of Licensed Commercial Banks
and Licensed Specialised Banks
Introduction of Web-based Returns on Operations of Banking Outlet
The following new web based retums will be introduced in order to replace the information on
operations of banking outlets currently being submitted quarterly by e-mail as per schedules
II, III and IV of our letter dated 18.01.2012.
i. BSD-QF-16-BD - Branch Distribution
ii. BSD-QF-16-TM - Automated Teller Machines (ATMs)
iii. BSD-QF-16-SU - Student Savings Units
iv. BSD-QF-16-BP - Branch Performance
For the purpose of maintaining consistency, banks are required to submit the relevant
information for the quarters ended 31.12.2014,31.03.2015 and 30.06.2015 by 31.08.2015.
Thereafter, these returns should be submitted on a quarterly basis, within 21 days after the end
of each quarter.
The information required to be submitted under schedule I of the letter mentioned
above should continue to be emailed within 7 days of occurrence to banksup@cbsl.lk.
#fl=.(Mrs.)TMJYPFernando
Director of Bank Supervision
6 OeD Oog, qorD 30, deDrA€6 gloo,
lDE. ocr.500, @lo1€0 Ol, 6 eprolo
I %fi zttz'toorcss6 ggLb onrg, 6N. 30 efltrptupil mrogog G*ffi1gbq I
E. Ou. Od.590, GsrcArirq 01, Oo)rio6Lev6l 0, N0.30, Janadhipathl Mawatha, Colombo 1
P . 0. Box 590, Colombo 01, Sd lanka.
@ www.cbsl.gov.lk lJ ga't't 2477711 fi banksup@cbsl.lk

data\CBSL\2015\introduction of_web_based_returns on Operations of Banking Outlet_0.pdf


31 March 2015,<ffi,'i#a'fuffi\ry*sryz
MONETARY BOARI)
CENTRAL BANK OF SRI LANKA
BANKING ACT DIRECTIONS No.01 of 2015
LIQUIDITY COVERAGE RATIO UNDER BASEL III LIQUIDITY STANDARDS FOR
LICENSED COMMERCIAL BANKS AND LICENSED SPECIALISED BANKS
Issued under Sections 46(l) and 76(J)(1) of the Banking Act, No. 30 of 1988, last amended by
the Banking Act, No. 46 of 2006.
The Monetary Board issues these Directions for the implementation of Liquidity Coverage Ratio
for Licensed Commercial Banks (LCBs) and Licensed Specialised Banks (LSBs) in accordance
with "Basel III: International Framework for Liquidity Risk Measurement, Standards and
Monitoring" and'oBasel III: The Liquidity Coverage Ratio and Liquidity Risk Monitoring Tools"
issued by the Basel Committee on Banking Supervision in December 2010 and January 2013,
respectively.
1. Empowerment
under the
Banking Act
2. Minimum LCR
RequirementIn terms of Sections a6(1) and 76(J)(1) of the Banking Act, in
order to ensure the soundness of the banking system, the
Monetary Board is empowered to issue Directions to all or any
LCB and LSB, respectively, regarding the manner in which any
aspect ofthe business of such banks are to be conducted.
Commencing from 1 April 2015, every LCB and LSB shall
maintain Liquidity Coverage Ratios (LCR) as prescribed in Annex
I hereto in respect of Rupee Liquidity Minimum Requirement for
local currency operations and All Currency Liquidity Minimum
Requirement for the overall operations effective from the dates
indicated below.
Effective Date1
April
2015I
January
zAt61
January
20171
January
20181
January
2019
onwards
Minimum
Requirement
(per cent)60 70 80 90 100

data\CBSL\2015\Liquidity coverage ratio under Basel III liquidity standards for licensed com banks and licensed specialised banks-compressed_0.pdf


31 March 2015€
MONETARY BOARI)
CENTRAL BANK OF SRI LANKA
BANKING ACT DIRECTIONS No.01 of2015
3.Implement
appropriate
systems
4. Regulatory
Reporting
5. Monitoring
ToolsEvery LCB and LSB shall develop and implement appropriate
systems and provide all resources necessary to implement LCR as
per the Direction 2 above.
Every LCB and LSB shall submit two separate retums on a
monthly basis on or before the fifteenth day of the following
month as per the formats and guidelines given in Appendices I to
III to the Annex I hereto, via the Web-based Off-site Surveillance
System.
Every LCB and LSB shall also monitor its liquidity position using
the monitoring tools stated below as recorlmended in "Basel III:
The Liquidity Coverage Ratio and Liquidity Risk Monitoring
Tools" issued on January 2013 and document processes for
application of such tools. However, this monitoring shall be only
an additional minimum requirement and every LCB and LSB shall
also monitor the liquidity position further relative to its size and
nature of the business operations.
(i) Contractual Maturity Mismatch: Develop a metric to
identifr contractual maturity mismatch profile, i.e., the gaps
between the contractual inflows and outflows of liquidity for
defined time bands to assess the potential liquidity needs.
(iD Concentration of Funding: Develop a metric to mitigate
the funding concentration risk that may arise from
signifi cant counterparties, products/instruments, currencies,
etc.


31 March 2015+
MONETARY BOARD
CENTRAL BANK OF SRI LANKA
BAIIKING ACT DIRECTIONS No.01 of 2015
(iiD LCR by Significant f,'oreign Currency: Develop a metric
to monitor LCR in each significant currency on an ongoing
basis in order to capture potential curency mismatches. For
the purpose of this Direction, significant currencies shall be
determined intemally based on the bank's volume of
transactions in such currencies and its ability to raise funds
in foreign crtrrency markets.
(iv) Available Unencumbered Assets: Develop a metric to
provide data on the volume and key characteristics of all
available unencumbered assets which have the potential to
be used as collateral for raising additional funding from the
secondary market and/or central banks.
fu^
P Samarasiri
Senior Deputy Governor
Central Bank of Sri Lanka


Banking Act Direction s No. 01 of 2015
Liquidity Coverage Ratio under Basel III Liquidity Standards for
Licensed Commercial Banks and  Licensed Specialised Banks

 Annex I

BASEL III LIQUIDITY STANDARDS
ON LIQUIDITY COVERAGE RATIO


Banking Act Direction s No. 01 of 2015
Liquidity Coverage Ratio under Basel III Liquidity Standards for
Licensed Commercial Banks an d Licensed Specialised Banks
1

 Annex I
1. INTRODUCTION
1.1. The re cent global financial crisis that began in 2007 revealed that certain banks even
with adequate capital levels experienced severe stress due to lack of prudent liquidity
risk management practices and due to sudden evaporation of liquidity from the market
resulting from withdrawals of credit lines by market participants.
1.2. The Basel Committee on Banking Supervision (BCBS) issued the Basel III rules on
liquidity risk measurement, standards and monitoring on 16.12.2010. Two minimum
standards, viz., the Liquidit y Coverage Ratio and the Net Stable Funding Ratio, were
prescribed by BCBS. In January 2013, the Basel Committee's oversight body, the
Group of Central Bank Governors and Heads of Supervision (GHOS) endorsed the
Basel III Liquidity Rule on LCR as the globa l minimum standard for liquidity risk.
1.3. LCR is expected to improve the banking sector’s ability to absorb shocks arising from
financial and economic stress, thus, reducing the risk of spillover from the financial
sector to the real economy. LCR is one of t he Basel Committee's key reforms to
strengthen global liquidity regulations with the goal of promoting a more resilient
banking sector.
1.4. Basel III Liquidity Standards mainly focus on internationally active banks. However,
regulators have adopted these stan dards for other  banks too with the view to further
stren gthen liquidity risk management, better comparison wit h international best
practices, facilitate entity rating, Sovereign rating and international fund raising
activities.

2. THE REGULATORY FRAMEWORK
2.1. Objective of LCR:
LCR intends to:
a) promote short -term resilience of the liquidity risk profile of banks ensuring that


a) promote short -term resilience of the liquidity risk profile of banks ensuring that
banks have an adequate stock of unencumbered high -quality liquid assets  that can
be converted easily and immediately into cash in secondary market to meet their
liquidity needs for a period of 30 calendar days under a liquidity stress scenario ;
and
b) improve the banking sector’s ability to absorb shocks arising from financial and
economic stress, whatever the source, thus reducing the risk of sp illover from the
financial sector to the real economy.


Banking Act Direction s No. 01 of 2015
Liquidity Coverage Ratio under Basel III Liquidity Standards for
Licensed Commercial Banks an d Licensed Specialised Banks
2

 Annex I

2.2. Scope of application
Initially, LCR framework shall be applicable to banks on a standalone ( “Solo”) level
including overseas operations through branches. Subsequently, for the banks
incorporated in S ri Lanka, the scope will be extended to the consolidate d (“Group”)
level.
2.3. LCR computation
The computation of  LCR shall be based on the follo wing formula.

2.4. Definition of High Quality Liquid A ssets ( HQLA)
2.4.1. HQLA are assets that  satisfy all the following conditions :
a) can be easily and immediately converted into cash at little or no  loss of value,
b) can be rea dily sold or used as collateral to obtain funds  in a range of stress
scenarios , and
c) are unencumbered , i.e., without legal, regulatory or operational impediments.

2.4.2. Characteristics of HQLA
In determining HQLA , banks shall consider the fundamental characteris tics and
market related characteristics  of such assets.

a) Fundamental characteristics
i)          Low credit and market risk : Assets that are less risky tend to have high
liquidity. High credit standing of the issuer and a low degree of
subordination increases  an asset’s liquidity. Low duration, low volatility,
low inflation risk and denomination in a convertible currency with low
foreign exchange risk enhance an asset’s liquidity.
ii) Ease and certainty of valuation : An asset’s liquidity increases if market
participants are more likely to agree on its valuation. The pricing formula
of a HQLA  must be easy to calculate and should not depend on strong
assumptions. The inputs into the pricing formula must also be publicly
available. In practice, this should rule out t he inclusion of most structured
or exotic products.


or exotic products.

 LCR =         Stock of high quality liquid assets                          *100
              Total net cash outflows over the next 30 calendar days


Banking Act Direction s No. 01 of 2015
Liquidity Coverage Ratio under Basel III Liquidity Standards for
Licensed Commercial Banks an d Licensed Specialised Banks
3

 Annex I

iii) Low correlation with risky assets : The stock of HQLA  should not be
subject to highly correlated risk. For example, assets issued by financial
institutions are more likely to be illiquid in times of li quidity stress in the
banking sector.
iv) Listed on a developed and recognised exchange market : Being listed
increases an asset’s transparency.

b) Market related characteristics
i)       Active and sizable market : The asset should have active outright sale or
repurchase agreement (repo) market at all times, i.e., a large number of
market participants and a high trading volume. There should be historical
evidence of market breadth such as price impact per unit of liquidity and
market depth such as units of the asse t that can be traded for a given price
impact.
ii) Presence of committed market makers : Quotes should be available for
buying and/or selling a high -quality liquid asset.
iii) Low market concentration : A diverse group of buyers and sellers in an
asset’s market inc reases the reliability of its liquidity.
iv) Capital f light to wards  quality  assets: Historically, the market should
have shown tendencies to move into these types of assets in a systemic
crisis.

2.5. Categories of HQLA
HQLA are categori sed into two  broad catego ries. Assets to be included in each
category are those that the bank is holding on the first day of the stress period,
irrespective of their residual maturity .
a) Level 1  assets : Include cash in hand, qualifying Central Bank reserves and
qualifying marketable  securities that attract a 0% risk weight  under the Basel II
Capital Adequacy Framework.
b) Level 2 assets:  Include Level 2A assets and Level 2B assets up to a maximum of
40% of total HQLA.


40% of total HQLA.
(i) Level 2A assets : Include qualifying marketable securities and quali fying
non-financial corporate debt securities that attract a 20% risk weight under
the Basel II Capital Adequacy Framework  and qualifying investments in gilt
unit trusts , subject to a 15% haircut.


Banking Act Direction s No. 01 of 2015
Liquidity Coverage Ratio under Basel III Liquidity Standards for
Licensed Commercial Banks an d Licensed Specialised Banks
4

 Annex I
(ii) Level 2B assets : Include qualifying non -financial corporate  debt securities
with an External Credit Rating between A+ to BBB - and qualifying non -
financial common equity shares , subject to a 50% haircut. Level 2B assets
are limited to a maximum of 15% of total HQLA.

Assets to be included in each category  with the  applicable factors and limitations are
indicated below.

Item  Factor
Stock of HQLA
A. Level 1 assets
 Cash in hand
100%   Qualifying C entral Bank balances and reserves in excess of the
Statutory Reserves Ratio (SRR)
 Qualifying marketable securities with a 0% risk weight
 B. Level 2 assets  (maximum of 40% of HQLA)
Level 2A assets
 Qualifying marketable securities with a 20% risk weight
85%  Qualifying non-financial corporate debt securities (including
commercial paper and promissory notes)
 Qualifying  investments in gilt unit t rust backed by government of
Sri Lanka  securities
Level 2B assets  (maximum of 15% of HQLA)
 Qualifying non-financial corporate debt securities (including
commercial paper and promissory notes) with an External Credit
Rating be tween A+ to BBB - 50%
 Qualifying  non-financial  common equity shares
Total value of stock of HQLA

2.6. Total net cash outflows
2.6.1 Total net cash outflows are defined as the total expected cash outflows minus total
expected cash inflows for the subsequent 30 cal endar days. Total expected cash
outflows are calculated by multiplying the outstanding balances of various categories
or types of liabilities and off -balance sheet commitments by the rates at which they are
expected to run off or be drawn down. Total expec ted cash inflows are calculated by
multiplying the outstanding balances of various categories of contractual receivables


multiplying the outstanding balances of various categories of contractual receivables
by the rates at which they are expected to flow in up to an aggregate cap of 75% of the
total expected cash outflows.


Banking Act Direction s No. 01 of 2015
Liquidity Coverage Ratio under Basel III Liquidity Standards for
Licensed Commercial Banks an d Licensed Specialised Banks
5

 Annex I
2.6.2 Banks shall  not double count items, i .e., if an asset is included as part of the “stock of
HQLA” (i.e. numerator), the associated cash inflows cannot be counted as “cash
inflows ” (i.e. part of the denominator).
2.7. Appendices
The R eporting formats for Rupee Liquidity Requirement  (BSD -MF-19-RR) and  All
Currency Liquidity Requirement  (BSD -MF-19-AR) along with the Guidelines for
calculation of LCR and  Mapping of notations of the Credit Rating Agencies for
classification of assets for LCR  are attached as follows.
2.7.1 Appendix  I - Reporting formats  for both Rupee Liquidity Requirement and All
Currency Liquidity Requirement .
2.7.2 Appendix  II - Guide lines  for calculation of Liquidity Coverage ratio .
2.7.3 Appendix  III - Mapping of notations of the Credit Rating Agencies for classification
of assets for LCR .


Banking Act Direction s No. 01 of 201 5
 Liquidity Coverage Ratio under Basel III Liquidity Standards f or
Licensed Commercial Banks  and Licensed Specialised Banks

i

Appendix I

Reporting Formats for Rupee Liquidity Requirement (BSD -MF-19-RR)
Reporting Formats for  All-Currency Liquidity Requirement  (BSD -MF-19-AR)
Monthly  Financial Return (LKR'000)

Name of the  Bank :

As at:

Part I - Calculation of LCR
Web -based
Return Code  Item  Amount
19.1.1.0.0.0  Total Stock of H QLA = 19.2.0.0.0.0 of Part II
19.1.2.0.0.0  Total Cash Outflows = 19.3.0.0.0.0 of Part III
19.1.3.0.0.0  Total Cash Inflows = 19.4.0.0.0.0 of  Part IV
19.1.4.0.0.0  Net Cash Outflows = 19.1.2.0.0.0  - MIN( 19.1.3.0.0.0 , 75%* 19.1.2.0.0.0)
19.1.5.0.0.0  Liquidity Coverage Ratio,%  = ( 19.1.1 .0.0.0/19 .1.4.0.0.0)*100

Part II - Calculation of High Quality Liquid Assets (HQLA)
Web -based
Return Code  Asset  Amount  Factor  Weighted
Amount
19.2.0.0.0.0  Total stock of HQLA
19.2.1.0.0.0  Total Adjusted Level 1 Assets
19.2.1.1.0.0  Level 1 Assets
19.2.1.1.1.0  Cash in hand   100%
19.2.1.1.2.0  Qualifying central bank balances and reserves in excess of
Statutory Reserve Ratio   100%
19.2.1.1.3.0  Qualifying marketable securities with a 0% risk weight
19.2.1.1.3.1  Issued by sovereigns   100%
19.2.1.1.3.2  Guaranteed by sovereigns   100%
19.2.1.1.3.3  Issued or guaranteed by central banks   100%
19.2.1.1.3.4  Issued or guaranteed by BIS, IMF, ECB and European
Community or MDBs   100%
19.2.1.2.0.0  Adjustments
19.2.1.2.1.0  Add: Market value of level 1 securities pledged for secured
funding   100%
19.2.1.2.2.0  Add: Amounts extended through  secured lending   100%
19.2.1.2.3.0  Less: Market value of level 1 securities received for
secured lending   100%
19.2.1.2.4.0  Less: A mount s raised through  secured funding   100%
19.2.2.0.0.0  Total Adjusted Level 2A Assets


19.2.2.0.0.0  Total Adjusted Level 2A Assets
19.2.2.1.0.0  Level 2A Assets
19.2.2.1.1.0  Qualifying marketable securities with a 20% risk weight:
19.2.2.1.1.1  Issued or guaranteed by sovereigns   85%
19.2.2.1.1.2  Issued or guaranteed by central banks   85%
19.2.2.1.1.3  Issued or guarantee d by Public Sector Enterprises   85%
19.2.2.1.1.4  Issued or guaranteed by MDBs   85%
19.2.2.1.2.0  Qualifying non -financial Corporate debt securities
(including commercial paper and promissory notes)   85%


Banking Act Direction s No. 01 of 201 5
 Liquidity Coverage Ratio under Basel III Liquidity Standards f or
Licensed Commercial Banks  and Licensed Specialised Banks

ii

Appendix I
19.2.2.1.3.0  Qualifying investments in  gilt unit trust backed by
Government of Sri Lanka (GOSL) securities           85%
19.2.2.2.0.0  Adjustments
19.2.2.2.1.0  Add: Market value of level 2A securities pledged for
secured funding   85%
19.2.2.2.2.0  Add: Amounts extended through  secured lending   85%
19.2.2.2.3.0  Less: Market value of level 2A securities received for
secured lending   85%
19.2.2.2.4.0  Less: A mount s raised through  secured funding   85%
19.2.3.0.0.0  Total Adjusted Level 2B Assets
19.2.3.1.0.0  Level 2B Assets
19.2.3.1.1.0  Qualifying non -financial corporate debt securities
(including commercial paper and promissory notes)
with an External Credit Rating between A+ to BBB -   50%
19.2.3.1.2.0  Qualifying non -financial common equity shares   50%
19.2.3.2.0.0  Adjustments
19.2.3.2.1.0  Add: Market value of level 2B securities pledged for
secured funding   50%
19.2.3.2.2.0  Add: Amounts extended through  secured lending   50%
19.2.3.2.3.0  Less: Market value of level 2B securities received for
secured lending   50%
19.2.3.2.4.0  Less: A mount s raised through  secured funding   50%

Part III - Calculation of Total C ash Outflows
   Web -based
Return Code  Item  Amount  Factor  Weighted
Amount
19.3.0.0.0.0  Total c ash outflows
19.3.1.0.0.0  Deposits
19.3.1.1.0.0  Demand , savings  and term deposits (less than 30 days
maturity)
19.3.1.1.1.0  Retail customers   10%
19.3.1.1.2.0  Small business customers   10%
19.3.1.2.0.0  Term deposits with residual maturity greater than 30 days   0%
19.3.2.0.0.0  Unsecured wholesale funding
19.3.2.1.0.0  Operational deposits generated by clearing, custody and
cash management activities   25%


cash management activities   25%
19.3.2.2.0.0  Cooperative banks in an institutional network (qualifying
deposits with the ce ntralised institution)   25%
19.3.2.3.0.0  Non-financial corporates, sovereigns, central bank s,
MDBs and P ublic Sector Enterprise s   40%
19.3.2.4.0.0  Other legal entity customers   100%
19.3.3.0.0.0  Secured funding transaction s
19.3.3.1.0.0  Backed by Level 1 assets   0%
19.3.3.2.0.0  Backed by Level 2A assets   15%
19.3.3.3.0.0  Backed by Level 2B assets   50%
19.3.3.4.0.0  Backed by  all other assets   100%
19.3.4.0.0.0  Undrawn portion of committed (irrevocable) facilities
and other contingent funding obligations
19.3.4.1.0.0  Committed (irrevocable) credit & liquidity facilities


Banking Act Direction s No. 01 of 201 5
 Liquidity Coverage Ratio under Basel III Liquidity Standards f or
Licensed Commercial Banks  and Licensed Specialised Banks

iii

Appendix I
19.3.4.1.1.0  Undrawn committed credit & liquidity facilities to retail
and small business customers   5%
19.3.4.1.2.0  Undrawn committed credit facilities to non -financial
corporates, sovereigns, CBs, PSEs and MDBs   10%
19.3.4.1.3.0  Undrawn committed liquidity facilities to non -financial
corporates, sovereigns, CBs, PSEs and MDBs   30%
19.3.4.1.4.0  Undrawn committed liquidity facilities to banks subject to
prudential supervision   40%
19.3.4.1.5.0  Undrawn committed credit facilities to other financial
institutions   40%
19.3.4.1.6.0  Undrawn committed liquidity facilities to other financial
institutions   100%
19.3.4.1.7.0  Undrawn committed credit & liquidity facilities to other
legal entities   100%
19.3.4.2.0.0  Other contingent funding obligations
19.3.4.2.1.0  Unconditionally revocable "uncommitted" credit and
liquidity facilities   0%
19.3.4.2.2.0  Trade Finance related obligations (including guarantees
and letters of credit)   5%
19.3.4.2.3.0  Guarantees unrelated to trade finance obligations   0%
19.3.4.2.4.0  Other contractual cash outflows   100%
19.3.5.0.0.0  Additional requirements
19.3.5.1.0.0  Net derivative cash outflows   100%
19.3.5.2.0.0  Any other contractual cash outflows   100%

Part IV - Calculation of Total C ash Inflows
Web -based
Return Code  Item  Amount  Factor  Weighted
Amount
19.4.0.0.0.0  Total c ash inflows
19.4.1.0.0.0  Maturing secured lending transactions backed by the
following collateral
19.4.1.1.0.0  Backed by Level 1 assets   0%
19.4.1.2.0.0  Backed by  Level 2A assets   15%
19.4.1.3.0.0  Backed by Level 2B assets   50%
19.4.1.4.0.0  Margin lending backed by non-Level 1 or non -Level 2
collateral   50%


19.4.1.4.0.0  Margin lending backed by non-Level 1 or non -Level 2
collateral   50%
19.4.1.5.0.0  Backed by all other assets   100%
19.4.2.0.0.0  Committed facilities
19.4.2.1.0.0  Credit facilities   0%
19.4.2.2.0.0  Liquidity facilities   0%
19.4.2.3.0.0  Other contingent funding facilities   0%
19.4.3.0.0.0  Other inflows by counterparty which are maturing within
30 days
19.4.3.1.0.0  Retail and small business customers   50%
19.4.3.2.0.0  Non-financial wholesale counterparties   50%
19.4.3.3.0.0  Cent ral Banks, Banks and Financial I nstitutions   100%
19.4.4.0.0.0  Operational deposits   0%
19.4.5.0.0.0  Other cash inflows
19.4.5.1.0.0  Net derivative cash inflow s  100%
19.4.5.2.0.0  Other contractual cash inflows   50%


Banking Act Direction s No. 01 of 201 5
Liquidity Coverage Ratio under Basel III Liquidity Standards f or
Licensed Commercial Banks and Licensed Specialised Banks

iv

Appendix I I
Guid elines for Calculation of Liquidity Coverage Ratio
Web -based
Return Code  Item
19.2.0.0.0.0  Total stock of HQLA
19.2.1.0.0.0  Total Adjusted Level 1 Assets
19.2.1.1.0.0  Level 1 Assets
19.2.1.1.1.0  Cash in hand
  All cash (coins and bank notes) held by the bank that is  immediately available to meet obligations.
19.2.1.1.2.0  Qualifying central bank balances and reserves in excess of Statutory Reserve Ratio (SRR)
  Central Bank  balances and reserves in excess of SRR maintained which can be drawn down in times of
stress. The balance held at CBSL which represents part of the capital held in foreign currency
should not be included, since it is part of capital.
19.2.1.1.3.0  Qualifying marketable securities with a 0% risk weight and shall satisfy all of the following:
(i) Traded in large, deep and active repo or cash markets characterized by  a low level of concentration;
(ii) Have a proven record as a reliable source of liquidity in the markets (repo or sale) even during stressed
market conditions;
(iii) Not an obligation of a financial institution or any of its affiliated entities;
(iv) At the mark to market value;
(v) Excluding securities pledged for secured funding/ repo irrespective of the maturity ;
(vi) Including securities received for secured lending/ reverse repo maturing over 30 days.
19.2.1.1.3.1  Issued by sovereigns
  Government of Sri Lanka - all claims. Foreign Sovereigns - where the sovereign attracts an External
Credit Rating between AAA to AA -.
19.2.1.1.3.2  Guaranteed by sovereigns
  Government of Sri Lanka - all claims. Foreign Sovereigns - where the sovereign attracts an External
Credit Rating between AAA to AA -.
19.2.1.1.3.3  Issued or guaranteed by central banks  (CBs)


Credit Rating between AAA to AA -.
19.2.1.1.3.3  Issued or guaranteed by central banks  (CBs)
  Central Bank of Sri Lanka - all claims. Foreign Central Banks - where the sovereign attracts an
External C redit Rating between AAA to AA -.
19.2.1.1.3.4  Issued or guaranteed by BIS, IMF, ECB and European Community or MDBs
  Issued or guaranteed by Bank for International Settlements (BIS), the International Monetary Fund
(IMF), the European Central Bank (ECB), European Community (EC) and the following eligible
Multilateral Development Banks (MDBs)
* The World Bank Group comprising of the International Bank for Reconstruction and Development
(IBRD) and the International Finance Corporation (IFC)
* The Asian Development Bank (ADB)
* The African Development Bank (AFDB)
* The European Bank for Reconstruction and Development (EBRD)
* The Inter -American Development Bank (IADB)
* The European Investment Bank (EIB)
* The European Investment Fund (EIF)
* The Nordic Investment Bank (NIB)
* The Caribbean Development Bank (CDB)
* The Islamic Development Bank (IDB)
* The Council of Europe Development Bank (CEDB)
* The International Finance Facility for Immunization (IFFIm)


Banking Act Direction s No. 01 of 201 5
Liquidity Coverage Ratio under Basel III Liquidity Standards f or
Licensed Commercial Banks and Licensed Specialised Banks

v

Appendix I I
19.2.1.2.0.0  Adjustments
19.2.1.2.1.0  Add: Market value of level 1 securities pledged for secured funding
  Market value of the Level 1 asset collateral extended on secured funding or repo transactions that
mature within 30 days.
19.2.1.2.2.0  Add: Amounts extended through  secured lending
  Amounts extended through  secured lending or reverse repo transactions maturing within 30 days, in
which the bank has extended cash and obtained collateral in the form of Level 1 (where collateral
obtained not re -used).
19.2.1.2.3.0  Less: Market value of level 1 securities received for secured lending
  Market value of the Level 1 asset collateral (where collateral obtained not re -used) received on secured
lending or reverse repo transactions maturing within 30 days, in which the bank has extended cash and
obtained collateral in the form of Level 1.
19.2.1.2.4.0  Less: Amounts raised through  secured funding
  Amount s raised through  secured funding or repo transactions conducted that mature within 30 days and
are backed by Level 1 assets.
19.2.2.0.0.0  Total Adjusted Level 2A Assets
19.2.2.1.0.0  Level 2A Assets
19.2.2.1.1.0  Qualifying marketable securities with a 20% risk weight and shall satisfy all of the following
conditions:
(i) Traded in large, deep and active repo or cash markets characterised by a low level of concentration;
(ii) Have a proven record as a reliable source of liquidity in the markets (repo or sale) even during stressed
market conditions (i.e. A maximum decline of price or increase in haircut not exceeding 10% over a
30-day period of significant liquidity stress );


(iii) Not an obligation of a financial institution or any of its affiliated entities;
(iv) At the mark to market value;
(v) Excluding securities pledged for secured funding/ repo irrespective of the maturity;
(vi) Including securities received for secured lending/ reverse repo maturing over 30 days.
19.2.2.1.1.1  Issued or guaranteed by sovereigns
  Foreign Sovereigns - where the sovereign attracts an External Credit Rating between A+ to A -.
19.2.2.1.1.2  Issued  or guaranteed by CBs
  Foreign Central Banks - where the sovereign attracts an External Credit Rating between A+ to A -.
19.2.2.1.1.3  Issued or guaranteed by Public Sector Enterprises (PSEs)
  Domestic and foreign PSEs - where PSE attracts an External Credit Rating between AAA to AA -.
19.2.2.1.1.4  Issued or guaranteed by MDBs
  MDBs other than MDBs listed above in 19.2.1.1.3. 4 where MDB attracts an External C redit Rating
between AAA to AA -.
19.2.2.1.2.0  Qualifying non -financial corporate debt securities (including commercial paper and promissory
notes)  that satisfy all of the following conditions:
(i) Not issued by a financial institution or any of its affiliated entities;
(ii) With  an External  Credit Rating  of at least AA -;
(iii) Traded in large, deep and active repo or cash markets characterised by a low level of concentration;
(iv) Have a proven record as a reliable source of liquidity in the markets (repo or sale) even during stressed
market conditions. (i.e. A maximum decline of price or increase in haircut not exceeding 10% over a
30-day period of  significant liquidity stress);
(v) At the mark to market value;
(vi) Excluding securities pledged for secured funding/ repo irrespective of the maturity;
(vii) Including securities received for secured lending/ reverse repo maturing over 30 days.


Banking Act Direction s No. 01 of 201 5
Liquidity Coverage Ratio under Basel III Liquidity Standards f or
Licensed Commercial Banks and Licensed Specialised Banks

vi

Appendix I I
  In case of commercial paper and promissory notes
(i) The issuer should be a non -financial institution
(ii) All existing facilities obtained by the issuer from the investee bank should be "performing" in terms of
the Banking Act Direction on Classification of Loans and Advances, Income Recognition and
Provisioning.
(iii) Commercial Paper/Promissory Notes should be backed by an approved standby credit line supporting
the issue to the full redemption value from another licensed bank.
19.2.2.1.3.0  Qualifying investments in Gilt Unit Trust (GUT) backed by GOSL securities, subject to:
(i) GUTs should be open ended mutual funds;
(ii) Underlying investment portfolio of GUTs should always be Sri Lanka Government Securities;
19.2.2.2.0.0  Adjustments
19.2.2.2.1.0  Add: Market value of level 2A securities pledged for secured funding
  Market value of the Level 2A asset collateral extended on secured funding or repo transactions that
mature within 30 days.
19.2.2.2.2.0  Add: A mounts extended through  secured lending
  Amounts extended through  secured lending or reverse repo transactions maturing within 30 days, in
which the bank has extended cash and obtained collateral in the form of Level 2A (where collateral
obtained not re -used).
19.2.2.2.3.0  Less: Market value of level 2A securities received for secured lending
  Market value of the Level 2A asset collateral (where collateral obtained not re -used) received on
secured lending or reverse repo transactions maturing within 30 days, in which the bank has extended
cash and obtained collateral in the form of Level 2A.
19.2.2.2.4.0  Less: A mounts raised through  secured funding
  Amount s raised through  secured funding or repo transactions that mature within 30 days and are


Amount s raised through  secured funding or repo transactions that mature within 30 days and are
backed by Level 2A assets.
19.2.3.0.0.0  Total Adjusted Level 2B Assets
19.2.3.1.0.0  Level 2B Assets
19.2.3.1.1.0  Qualifying non -financial corporate debt securities (including commercial paper and promissory
notes) that satisfy all of the following conditions:
(i) Not issued by a financial institution or any of its affiliated entities;
(ii) With  an External Credit Rating between A+ and BBB -;
(iii) Traded in large, deep and active repo or cash markets characterised by a low level of concentration;
(iv) Have a proven record as a reliable source of liquidity in the markets (repo or sale) even during stressed
market conditions (i.e. A maximum decline of price or increase in haircut not exceeding 20% over a
30-day period of significant liquidity stress);
(v) At the mark to market value;
(vi) Excluding securities pledged for secured funding/ repo irrespective of the maturity ;
(vii) Including securities received for secured lending/ reverse repo maturing over 30 days.
  In case of commercial paper and promissory notes
(i) The issuer should be a non -financial institution
(ii) All existing facilities obtained by the issuer from the investee bank should be "performing" in terms of
the Banking Act Direction on Classification of Loans and Advances, Income Recognition and
Provisioning
(iii) Commercial Paper/Promissory Notes should be backed by an approved standby credit line , supporting
the issue to the full redemption value from another licensed bank.
19.2.3.1.2.0  Qualifying non -financial common equity shares that satisfy all of the following conditions:
(i) Not issued by a financial institution or any of its affiliated entities;
(ii) Traded at recognized stock exchange and centrally cleared;
(iii) Traded in large, deep and active repo or cash markets characterised by  a low level of concentration;


Banking Act Direction s No. 01 of 201 5
Liquidity Coverage Ratio under Basel III Liquidity Standards f or
Licensed Commercial Banks and Licensed Specialised Banks

vii

Appendix I I
(iv) Have a proven record as a reliable source of liquidity in the markets (repo or sale) even during stressed
market conditions (i.e. , maximum decline of share price or increase in haircut not exceeding 40% over
a 30 day period of significant liquidity stress);
(v) Excluding securities pledged for secured funding/ repo irrespective of the maturity;
(vi) Including securities received for secured lending/ reverse repo maturing over 30 days.
19.2.3.2.0.0  Adjustments
19.2.3.2.1.0  Add: Market value of level 2B securities pledged for secured funding
  Market value of the Level 2B asset collateral extended on secured funding or repo transactions that
mature within 30 days.
19.2.3.2.2.0  Add: A mounts ext ended through  secured lending
  Amounts extended through  secured lending or reverse repo transactions maturing within 30 days, in
which the bank has extended cash and obtained collateral in the form of Level 2B (where collateral
obtained not re -used).
19.2.3.2.3.0  Less: Market value of level 2B securities received for secured lending
  Market value of the Level 2B asset collateral (where collateral obtained not re -used) received on
secured lending or reverse repo transactions maturing within 30 days, in which the bank has extended
cash and obtained collateral in the form of Level 2B.
19.2.3.2.4.0  Less: Amounts raised through  secured funding
  Amount raised through  secured funding or repo transactions that mature within 30 days and are backed
by Level 2B assets.
19.3.0.0.0.0  Total c ash outflows (Capital and accrued interest if any)
19.3.1.0.0.0  Deposits (including dormant deposits, collateralised customer deposits against lending , margin deposits
and insured deposits under the Sri Lanka Deposit Insurance Scheme)


and insured deposits under the Sri Lanka Deposit Insurance Scheme)
19.3.1.1.0.0  Demand, saving s and term deposits (less than 30 days maturity)
19.3.1.1.1.0  Retail customers
  Deposits placed with a bank by a natural person.
19.3.1.1.2.0  Small business customers
  Deposits placed with a bank by non -natural person (i.e. , legal entities of sole proprietorships,
partnerships and clubs and societies).
19.3.1.2.0.0  Term deposits with residual maturity greater than 30 days
  Cash outflows related to retail term deposits with a residual maturity or withdrawal notice period of
greater than 30 days will be excluded from total expected cash outflow s if the depositor has no legal
right to withdraw deposits within 30 days or if early withdrawal results in a significant penalty that is
materially greater than the loss of interest.
  If a bank allows a depositor to withdraw such deposit without applying the corresponding penalty, or
despite a clause that says depositor has no legal right to withdraw, the entire category should be treated
as demand deposits regar dless of the remainin g maturity.
19.3.2.0.0.0  Unsecured wholesale funding
  Wholesale deposits and other general obligations that are raised from legal entities ( incorporated
companies ). Wholesale deposits also include dormant deposits, collateralised  customer deposits against
lending , margin deposits and insured deposits under the Sri Lanka Deposit Insurance and Liquidity
Support Scheme. In case of other general obligation s, they shall not be collateralised  by legal rights to
specifically designated assets owned by the borrowing institution in the case of bankruptcy, insolvency,
liquidation or resolution. Obligations related to derivative contracts are explicitly excluded from this
definition.
19.3.2.1.0.0  Operational deposits generated by clearing, custody and cash management activities


19.3.2.1.0.0  Operational deposits generated by clearing, custody and cash management activities
  Financial and non -financial customer deposits  place d with a bank , in order to facilitate their access and
ability to use payment and settlement systems or make payments. These services must be provided
under a legally binding agreement in addition to the account mandate to institutional customers (e.g.
Vostro Accounts a nd collection accounts).


Banking Act Direction s No. 01 of 201 5
Liquidity Coverage Ratio under Basel III Liquidity Standards f or
Licensed Commercial Banks and Licensed Specialised Banks

viii

Appendix I I
19.3.2.2.0.0  Cooperative banks in an institutional network (qualifying deposits with the centralized
institution)
  Group of legally autonomous banks with a statutory framework of cooperation with common strategic
focus and brand  where specific functions are performed by central institutions. (e.g. , Samurdhi banks,
rural banks , sanasa saving societies , cooperative societies ).
19.3.2.3.0.0  Non-financial Corporates, Sovereigns, CBs, MDBs and PSEs
  All deposits and other extensions of unsecured funding from non -financial corporate customers,
sovereign s, CBs, MDB s and  PSEs not held specifically for operational purposes.
19.3.2.4.0.0  Other legal entity customers
  Deposits and other funding from other institutions (including banks, security firms, insurance
companies,  etc.), fiduciaries, beneficiar ies, conduits and special purpose vehicles, affiliated entities of
the bank and other entities that are not specifically held for operational purposes and not included in the
prior categories.
19.3.3.0.0.0  Secured  Funding  Transactions
19.3.3.1.0.0  Backed by Level 1 assets
  Amount s raised through  secured funding or repo transactions not conducted with the bank's domestic
central bank and that  mature within 30 days and are backed by Level 1 assets.
19.3.3.2.0.0  Backed by Level 2A assets
  Amount s raised through  secured funding or repo transactions not conducted with the bank's domestic
central bank and that  mature within 30 days and are backed by Level 2A assets.
19.3.3.3.0.0  Backed by Level 2B assets
  Amount s raised through  secured funding or repo transactions not conducted with the bank's domestic
central bank and that  mature within 30 days and are backed by Level 2B assets.
19.3.3.4.0.0  Backed by all other assets


19.3.3.4.0.0  Backed by all other assets
  Amount s raised through  secured funding or repo transactions not conducted with the bank's domestic
central bank and that  mature within 30 days and are backed by other assets (non -HQLA).
19.3.4.0.0.0  Undrawn portion of committed (irrevocable) facilities and other contingent funding obligations
19.3.4.1.0.0  Committed (irrevocable) credit & liquidity facilities
19.3.4.1.1.0  Undrawn committed credit & liquidity facilities to retail and small business customers
19.3.4.1.2.0  Undrawn committed credit facilities to non -financial corporates, sovereigns, CBs, PSEs and MDBs
19.3.4.1.3.0  Undrawn committed liquidity facilities to non -financial corporates, sovereigns, CBs, PSEs and MDBs
19.3.4.1.4.0  Undrawn committed credit & liquidity facilities to banks subject to prudential supervision
19.3.4.1.5.0  Undrawn committed credit facilities to  other financial institutions
19.3.4.1.6.0  Undrawn committed liquidity facilities to financial institutions
19.3.4.1.7.0  Undrawn committed credit & liquidity facilities to other legal entities
19.3.4.2.0.0  Other contingent funding obligations
  Other contingent funding liabilities such as guarantees, Letter of Credit (LC), recoverable credit and
liquidity facility.
19.3.4.2.1.0  Unconditionally revocable "uncommitted" credit and liquidity facilities
  Balances of undrawn credit and liquidity facilities where the bank has the right to unconditionally
revoke the undrawn portion of these facilities (e.g. , Overdraft and credit card undrawn portion).
19.3.4.2.2.0  Trade Finance related obligations (including guarantees and letters of credit)
  Trade finance instruments consist of trade -related (import - export related) obligations directly
underpinned by the movement of goods or the provision of services.
19.3.4.2.3.0  Guarantees unrelated to trade finance obligations
  The outstanding amount of guarantees unrelated to trade finance obligations.


Banking Act Direction s No. 01 of 201 5
Liquidity Coverage Ratio under Basel III Liquidity Standards f or
Licensed Commercial Banks and Licensed Specialised Banks

ix

Appendix I I
19.3.4.2.4.0  Other contractual cash outflows
  Any other contractual cash outflows within the next 30 calendar days should be captured in this
standard, such as outflows to cover unsecured collateral borrowings, uncovered short positions,
dividends or contractual interest payments as to what comprises the amounts included in this line.
19.3.5.0.0.0  Additional requirements
19.3.5.1.0.0  Net derivative cash outflows
  Banks should calculate, in accordance with their existing valuation methodologies, expected
contractual derivative cash inflows and outflows. Cash flows may be calculated on a net basis (i.e. ,
inflows can offset outflows) by counterparty. The sum of all net cash outflows should be r eported here.
The sum of all net cash inflows should be reported in net derivative cash inflow s. Where derivative
payments are collateralised  by HQLA, cash outflows should be calculated net of any corresponding
cash or collateral inflows that would result, all other things being equal, from contractual obligations
for cash or collateral to be provided to the bank, if the bank is legally entitle d and operationally capable
to re -use the collateral in new cash raising transactions once the collateral is received. This is in line
with the principle that banks should not double count liquidity inflows and outflows.
19.3.5.2.0.0  Any other contractual cash outflows
  Including any amount required to be installed in the central bank reserves within 30 days, any other
contractual cash outflows.
19.4.0.0.0.0  Total c ash inflows
19.4.1.0.0.0  Maturing secured lending transactions backed by the following collateral
19.4.1.1.0.0  Backed by Level 1 assets
  Amounts extended through  secured lending or reverse repo transactions maturing within 30 days, in


which the bank has extended cash and obtained collateral in the form of Level 1 (where collateral
obtained not re -used).
19.4.1.2.0.0  Backed by Level 2A Assets
  Amounts extended through  secured lending or reverse repo transactions maturing within 30 days, in
which the bank has extended cash and obtained collateral in the form of Level 2A (where collateral
obtained not re -used).
19.4.1.3.0.0  Backed by Level 2B Assets
  Amounts extended through  secured lending or reverse repo transactions maturing within 30 days, in
which the bank has extended cash and obtained collateral in the form of Level 2B  (where collateral
obtained not re -used).
19.4.1.4.0.0  Margin lending backed by non -Level 1 or non -Level 2 collateral
  Amounts extended through  collateralised loans extended to customers for the purpose of taking
leveraged trading positions (“margin loans”) made against non -HQLA collateral.
19.4.1.5.0.0  Backed by all other assets
  Amounts extended through  such transactions (other than those reported in 19.4.1.4.0.0) in which the
bank has obtained collateral in another form than Level 1 or Level 2 assets.
19.4.2.0.0.0  Committed facilities
  Committed credit , liquidity or other contingent funding facilities that  the bank holds  in other
institutions for its own purpose.
19.4.2.1.0.0  Credit facilities
19.4.2.2.0.0  Liquidity facilities
19.4.2.3.0.0  Other contingent funding facilities
19.4.3.0.0.0  Other inflows by counterparty w hich are maturing within 30 days
19.4.3.1.0.0  Retail and small business customers
 All payments (including interest payments and installments) from retail customers on performing
facilities that is contractually due within the 30-day horizon.
19.4.3.2.0.0  Non-financial wholesale counterparties
 All payments (including interest payments and installments) from non -financi al wholesale
counterparties on performing facilities that is contractually due within the 30 -day horizon.


Banking Act Direction s No. 01 of 201 5
Liquidity Coverage Ratio under Basel III Liquidity Standards f or
Licensed Commercial Banks and Licensed Specialised Banks

x

Appendix I I
19.4.3.3.0.0  Cent ral Banks, Banks and Financial I nstitutions
 All payments (including interest payments and installments) from central banks, banks and financial
institutions on performing facilities that is contractually due within the 30 -day horizon.
19.4.4.0.0.0  Operational deposits
  Deposits held at other financial institutions for operational purposes such as clearing, custody and cash
management purposes. Also includes deposits held at centralised  institution of network of co -operative
banks. These services must be provided under a legally binding agreement to institutional customers
(e.g., Nostro Accounts , collection accounts , cash items in process of collection ).
19.4.5.0.0.0  Other cash inflows
19.4.5.1.0.0  Net derivative cash inflow s
 Banks should calculate, in accordance with their existing valuation methodologies, expected
contractual derivative cash inflows and outflows. Cash flows may be calculated on a net basis (i.e. ,
inflows can offset outflows) by counterparty. The sum of all net cash inflows should be reported here.
The sum of all net cash outflows should be reported in net derivative cash outflow s. Where derivatives
are collateralised by HQLA, cash inflows should b e calculated net of any corresponding cash or
contractual collateral outflows that would result, all other things being equal, from contractual
obligations for cash or collateral to be posted by the bank, given these contractual obligations would
reduce th e stock of HQLA. This is in line with the principle that banks should not double count
liquidity inflows and outflows.
19.4.5.2.0.0  Other contractual cash inflows
  Any other contractual cash inflows to be captured.


Banking Act Direction s No. 01 of 201 5
Liquidity Coverage Ratio under  Basel III Liquidity Standards f or
Licensed Commercial Banks and Licensed Specialised Banks

xi

Appendix III
Mapping of Notations of the Credit Rating Agencies  for classification of assets for LCR

Fitch
Rating
Lanka  RAM
Ratings
(Lanka)
Limited  ICRA
Lanka
Limited  Standard
and Poor’s  Moody’s   Fitch
Ratings  Rating
Scale for
LCR
AAA (lka)  AAA  (SL) AAA  AAA  Aaa  AAA  AAA
AA+ (lka)  AA+  (SL) AA+  AA+  Aa1  AA+  AA+
AA (lka)  AA (SL) AA  AA  Aa2  AA  AA
AA- (lka)  AA- (SL) AA - AA-  Aa3  AA-  AA-
A+ (lka)  A+ (SL) A+  A+  A1  A+  A+
A (lka)  A (SL) A  A  A2  A  A
A-    (lka)  A- (SL) A - A-  A3  A-  A-
BBB+ (lka)  BBB+  (SL) BBB+  BBB+  Baa1  BBB+  BBB+
BBB (lka)  BBB  (SL) BBB  BBB  Baa2  BBB  BBB
BBB - (lka)  BBB - (SL) BBB - BBB -  Baa3  BBB -  BBB -
BB+ (lka)  BB+  (SL) BB+  BB+  Ba1  BB+  BB+
BB (lka ) BB (SL) BB  BB  Ba2  BB  BB
BB- (lka)  BB- (SL) BB - BB-  Ba3  BB-  BB-
B+ (lka)  B+ (SL) B+  B+  B1  B+  B+
B (lka)  B (SL) B  B  B2  B  B
B- (lka) &
Lower  B- & Lower  (SL) B - &
Lower  B- & Lower  B3 & Lower  B- & Lower  B- & Lower


@ goor @eo OooqO
@odrarm lopdu orrjd
CENTRAL BANK OF SRI TANKA
areOq6lxaas€cro6tas@dag ounirdl GLo$unrtoror$ $enourd;oonrb BankSupervlslon Department
Ref: 02 I 17 I 600 I 00021 002
28 May 2015
To: The Chief Executive Officers of Licensed Commercial Banks
Dear Sir/ Madam
Recovery of Accommodation to Exporters
We write to inform you that:
a. the Circular dated 16 October 2014 on the above subject is hereby rescinded, and
b. the Circulars dated 22 January 2001,29 January 2001, 16 February 2001 and 30 March
2001 on the above subject shall come into effect with an amendment to reduce the
enhanced interest rate stated in the said Circulars from 1,000 basis points to 500 basis
points.
This Circular shall come into operation with effect from 01 June 2015 and banks shall ensure that
relevant customers are informed of the applicability of this Circular in advance.
Yours faithfully,
&-
ffittJYPFernando
Director of Bank Supervision
o Oo Otoe, eelo t0, d€DoEleA gJOo,
tDs.ec,.59O, @eO Ol, € Oplo€
, ( s4fi24771oot6ss6 qb6 Dnq, Qa:. ro con$u$ onopog O6tr(9tnl 1
D. Ou. eo.590, OcnO6q 01, Sddo6ld E, ilo. 30, Jantdhlpdil tlaxilta, Colombo I
P .0, Bd. 500, oolombo 01, &l Lntka,
@ www.cbsl.gov.lk H sau24r7711 E banksup@cbsl.lk

data\CBSL\2015\Recovery of Accommodation to Exporters Circular issued on 28th May 2015_0.pdf


6 golur @lo OrosUO
Beunirene lo$#u nrdxff
CEilIRAL BAilK OF SRI I.AillU
03 August 2015 CIRCULAR Rer: o2n7t6ootooo2too2
Bank Supervision Department
To: The Chief Executive Officers of Licensed Commercial Banks
Recovery of Accommodation to Exporters
Further to our Circular dated 28 May 2015 on the above subject, licensed commercial banks
(LCBs) are informed of the following.
l) The Central Bank of Sri Lanka, after considering the representations made by the Tea
exporters that remittance of export proceeds is delayed due to geopolitical factors
confronted by countries importing tea products from Sri Lanka, has decided that LCBs
may use their judgment and discretion to enhance the period granted to settle export
credit out of export proceeds up to 180 days from the date of shipment in respect of
credit granted to tea exports, provided that such decision be taken by a duly authorised
officer performing executive functions in the respective bank.
2) This Circular shall come into operation with effect from 01 June 2015.
fr(IvIrs.)TMJYPFemando
Director of Bank Supervision
o OeD Oog, qelD 30, deDoAcro olO(D,
lD6. @e. 5OO, elot€io Ol, € €plDro
( sn r zazztoolesg6 eU6 @mg, ga). 30 etrrgtlugfl onopop Ostr(grbq 1
p. Gu. Qa>.590, Oonqeiix{ 0l, ea)rd|o6[6v6] 6, t{0,30, Janadhlpathl Maf,alha, Colombo 1
P.0.Bor590,Colombo 01, Srl lrnka,
@ www.cbsl.gov.lk ld %u2417211 M banksup@cbsl.lk

data\CBSL\2015\Recovery_of_Accommodation_to_Exporters Circular issued on 03rd August 2015_0.pdf


29 December2016MONETARY BOARI)
CENTRAL BANK OF SRI LANKA
BANKING ACT DIRECTIONS No.01 of2016
CAPITAL REQUIREMENTS UNDER BASEL III
F'OR LICENSED COMMERCIAL BANKS AND LICENSED SPECIALISED BANKS
In terms of powers conferred by Sections l9(7Xa) and 76G(7) of the Banking Act No. 30 of
1988, the Monetary Board has determined the minimum capital ratios for licensed commercial
banks (LCBs) and licensed specialised banks (LSBs) having regard to the guidelines issued by
the Bank for Intemational Settlements in June 2006, December 2010 and revised in June zDll.
1. Empowerment 1.1
Scope of
Application
3. Minimum
Capital
Requirements
and Buffers1.2
2.1In terms of Section 102 of the Monetary Law Act, the Monetary
Board may from time to time by Order prescribe the minimum capital
ratios which the capital of LCBs and LSBs shall bear to the total
volume of their assets or to any specified category of such assets.
In terms of Sections 46(1) and 76J(l) of the Banking Act, in order to
ensure the soundness of the banking system, the Monetary Board is
empowered to issue Directions to all or any LCB and LSB, regarding
the manner in which any aspect of the business of such banks is to be
conducted.
These Directions shall be applicable to every LCB and LSB:
(i) Incorporated in Sri Lanka on a solo and consolidated basis
(ii) Branches of banks incorporated or established outside Sri
Lanka on a standalone basis
3.1 Commencing 01 July 2017, every LCB and LSB shall maintain, at
all times, the minimum capital ratios and buffers as prescribed in
Schedule I hereto in respect of total risk weighted assets.
3.2 The effective dates for implementation and ratios are indicated in
Tables I and2 below.


29 December 2016MONETARY BOARD
CENTRAL BANK OF SRI LANKA
BANKING ACT DIRECTIONS No.01 of2016
Table 1 - Banks with Assets Less than Rs. 500 billion
Components of Capital 0t.w.wt7 01.01.2018 01.01.2019
Common Equity Tier 1
including Capital
Conservation Buffer5.75o/" 6.375% 7.00Y,
Total Tier I including
Capital Conservation Buffer7.25% 7.875% 8.54o/o
Total Capital Ratio
including Capital
Conservation Buffer11.25% |t.875% 12.50%
4.t 4.Maintain
Adequate Capital
above the
Minimum Capital
RequirementTable 2 - Banks with Assets of Rs. 500 billion and Above
Compouents of Capital 0t.w.2tt7 01.81.2018 01.sl.2019
Common Equiry Tier I
including Capital
Conservation Buffer and
Capital Surcharge on
Domestic Systemically
Important Banks6.25% 7.37s% 8.50%
Total Tier I including
Capital Conservation Buffer
and Capital Surcharge on
Domestic Systemically
Important Banks7.75% 8.875% 10.00%
Total Capital Ratio including
Capital Conservation Buffer
and Capital Surcharge on
Domestic Systemically
Important Banks11.75% 12.875% 14.00%
Every LCB and LSB shall, at all times maintain adequate capital to
cover its exposures to all risks considering the requirements specified
in the Regulatory Framework on Supervisory Review Process (SRp)
in Schedule II hereto.


29 December2016MONETARY BOARI)
CENTRAL BANK OF SRI LANKA
BANKING ACT DIRECTIONS No.01 of20l6
5. Disclosure
Requirements
6. Steps to Secure
Compliance
7. Revocation of
Directions and
Circulars6.1
6.24.2 Every LCB and LSB shall develop and implement a sound Internal
Capital Adequacy Assessment Process (ICAAP) in accordance with
the requirements specified in Regulatory Framework on SRP.
4.3 All LCBs and LSBs shall submit a Board approved ICAAP
Document to the Director of Bank Supervision within five months
from the end of its financial year.
5.1 Commencing 1 July 2017, every LCB and LSB shall disclose key
information in relation to regulatory capital, liquidity and risk
management with the published financial statements as specified in
Schedule III with comparative information on both solo and
consolidated basis.
In the event any bank needs to augment its capital to meet the above
regulatory capital ratios, such bank shall comply with these
Directions commencing 01 July 2017.
Where an LCB or an LSB has failed to comply with these Directions,
such LCB or LSB shall not pay dividends or repatriate profits or
adopt any other measure that will further deteriorate the regulatory
capital position of such LCB or LSB until such compliance is
effected and confirmed by the Director of Bank Supervision.
The following Directions and Circulars are hereby revoked.
(i) Circulars No. 02104/002/0105/001 and 02/04100210151/001
dated 20 March 2001 on Publication of Capital Adequacy
Statements in the Annual Report
(iD Circular No. 02104/003/0400/002 dated 16 December 2004 on
Shipping Guarantees Issued by Banks
(iii) Circular dated 26 December 2007 on the Adoption of Basel II
Capital Adequacy Framework beginning 2008


29 December 2016MONETARY BOARI)
CENTRAL BANK OF SRI LANKA
BANKING ACT DIRECTIONS No.01 of2016
(iv) Banking Act Directions No. 9 and 10 of 2007 on Maintenance
of Capital Adequacy Ratio
(v) Disclosure requirements in Section H of the Banking Act
Directions No. 7 of 2011 on Integrated Risk Management
Framework for Licensed Banks
(vi) Banking Act Directions No. 9 and l0 of 20ll on Amendment
to Directions on Maintenance of Capital Adequacy Ratio
(vii) Circular No. 021171500/0086/001 dated 07 Decemb er 2012 on
ICRA Lanka Limited - Recognition as an Extemal Credit
Assessment Institution
(viii) Banking Act Directions No. 5 of 2013 on Supervisory Review
Process (Pillar 2 of Basel II) for Licensed Commercial Banks
and Licensed Specialised Banks
(ix) Revised Guidelines dated 31 March 2014 on Computation of
Risk Weighted Amount for Operational Risk - Implementation
of the Standardised Approach
(x) Circular No. 021171600100291001 dated 31 March 2014 on
Implementation of the Standardised Approach on Computation
of Risk-Weighted Amount for Operational Risk under Basel II
Capital Adequacy Framework issued to LCBs and LSBs
*/r;"Jo^-7,
Dr. Indrajit Coomaraswamy
Chairman of the Monetary Board and
Governor of the Central Bank of Sri Lanka


Banking Act Directions No. 01 of 2016
Capital Requirements Under Basel III for Licensed Commercial Banks a nd
Licensed Specialised Banks
1

SCHEDULE I

PILLAR I
MINIMUM CAPITAL REQUIREMENTS AND
BUFFERS


2
 ABBREVIATIONS

AMA  –  Advanced Measurement Approaches
AT1 – Additional Tier 1
BIA –  Basic Indicator Approach
BIS –  Bank for International Settlements
BCBS  –  Basel Committee on Banking Supervision
CAR  –  Capital Adequacy Ratio
CBSL  –  Central Bank of Sri Lanka
CCB  – Capital Conservation Buffer
CCR  –  Counterparty Credit Risk
CET1  – Common Equity Tier 1
CIPC  –  Cash Items in the Process of Collection
CRM  –  Credit Risk Mitigation
D-SIB – Domestic Systemically Important Bank
ECAI  –  External Credit Assessment Institution
GOSL  –  Government of Sri Lanka
IMF  –  International Monetary Fund
LKR  –  Sri Lanka  Rupee
MDB  –  Multilateral Development Bank
NPA  –  Non Performing Assets
PSE  –  Public Sector Entities
RWA  – Risk Weighted Assets
SA  –  Standardised Approach
SLECIC  –  Sri Lanka Export Credit Insurance Corporation
SME  –  Small and Medium Enterp rise
SMM  –  Standardised Measurement Method
LCB  –  Licensed Commercial Bank
LSB  –  Licensed Specialised Bank


3
 MINIMUM CAPITAL REQUIREMENTS AND BUFFERS UNDER BASEL III
1. Implementation of Basel III Framework
1.1 Commencing 01 July 2017 capital ratios  of licensed banks will be computed based on
the document “ Basel III: A Global Regulatory Framework for More Resilient Banks
and Banking System”  issued by the Basel Committee o n Banking Supervision (BCBS)
of the Bank for International Settlement in Decembe r 2010 (Revised in June 2011) .
2. Capital Requirements
2.1 Total Regulatory Capital
Regulatory capital  of licensed banks  will consist the following:
i) Tier 1 Capital
a) Common Equity Tier 1 capital (CET1)
b) Additional Tier 1 capital (AT1)
ii) Tier 2 Capital
2.2 Risk Weighted Assets
Capital  requirements  shall be maintained as a percentage of risk weighted assets (RWA)
calculated based on the following approaches:
i) The Standardised Approach for credit risk
ii) The Standardised Measurement Method for market risk
iii) The Ba sic Indicator Approach, the Standardised Approach or the Alternative
Standardised Approach for operational risk
2.3 Capital Buffers
Capital buffers shall  be implemented on staggered basi s and are required to be
maintained above the minimum CET1 and total capi tal as a percentage of RWA as
follows :
i) Capital Conservation Buffers  (CCB s) for all licensed banks
ii) Capital Surcharge for Domestic Systemically Important Banks (D -SIBs) for
licensed banks with total asset s equal to or greater than  Rs. 500 billion
iii) Countercyclical Buffers w ill be implemented as and when excess aggregate credit
growth is judged to be associated with a build -up of system wide risk


4
 2.4 Timeline of Implementation
Capital requirements  as a percentage of RWA  shall be applied  on a staggered basis to
be fully implemented by 01 January 2019 as indicated in Table 1  and 2  below.
Table 1
Capital Requirements  for Banks with Assets Less t han Rs. 500 billion
Ratios (%)  01.07.2017  01.01.2018  01.01.2019
Minimum CET1  4.50 4.50 4.50
CCB  1.25 1.875  2.50
Minimum CET1 plus CCB  5.75 6.375  7.00
Minimum Tier 1 plus CCB  7.25 7.875  8.50
Minimum Total Capital plus CCB  11.25  11.875  12.50
Table 2
Capital Requirements  for Banks with Total Assets of Rs. 500 billion  or above
Ratios (%)  01.07 .2017  01.01.2018  01.01.2019
Minimum CET1  4.50 4.50 4.50
CCB  1.25 1.875  2.50
Capital Surcharge for D -SIBs  0.50 1.000  1.50
Minimum CET1 plus CCB and
Capital Surcharge for D -SIBs  6.25 7.375  8.50
Minimum Tier 1 plus CCB and
Capital Surcharge for  D -SIBs  7.75 8.875  10.00
Minimum Total Capital plus CCB
and Capital Surcharge for D -SIBs  11.75  12.875  14.00
2.5 The difference between the m inimum total c apital ratio (including buffers)  and the
minimum Tier 1 r atio (including buffers)  can be met with Tier 2 c apital or higher forms
of capital subject to the condition th at the bank shall raise Tier 2 c apital only up to a
maximum of 100 per cent of CET1 capital.
3. Transitional Arrangements
3.1 Capital instruments that do not meet the eligibility criteria for inclusion in CET1 c apital
will be excluded with effect from 01 July  2017 .
3.2 Capital instruments issued up to 31 December 2016 will be eligible to be included in
Tier 2 capital subject to a discount of 1/5th each year during the four years  immediately
preceding maturity.


5
 4. Submission of Data
4.1 All banks shall report  the position as at the last calendar day of ea ch quarter/financial
year, through t he web -based system as follows:
i) The q uarterly return (BSD -QF-20-CR) within 1 month after the end of each
quarter .
a) Revision to the return shall be made in the following  quarter immediately after
completion of the audit .
ii) The a nnual audited return  (BSD -AF-20-CR) within 6 months afte r the end of the
financial year.
4.2 If the submission deadline falls on a bank holiday, it will be deferred to the next working
day.
4.3 The reporting formats and instructions on calculation of capital ratios  are given  as
follows :
 Appendix I :  Reporting Formats for Capital Requirements
 Appendix I I :  Part I - Computation of Capital Ratio s
 Appe ndix II I :  Part II - Guidelines for Computation  of Total Capital
 Appendix I V :  Part III  - Guidelines on Computation of Total Risk Weighted Assets


Appendix I
6
 REPORTING FORMATS FOR CAPITAL  REQUIREMENTS

Part I – Computation of Capital Ratio s
Web Based
Return Code  Item  Amount
20.1.1 .0.0.0 Common Equity Tier 1  Capital
20.1.2.0.0.0  Total Tier 1 Capital
20.1.3 .0.0.0 Total Capital
20.1.4 .0.0.0 Total Risk Weighted Amount
20.1.4.1.0 .0 Risk Weighted Amount  for Credit Risk
20.1.4.2.0 .0 Risk Weighted A mount  for Market Risk
20.1.4 .3.0.0 Risk Weighted A mount  for Operational Risk
20.1. 5.0.0 .0 Common Equity Tier 1 Capital Ratio
20.1. 5.1.0.0  Capital conservation buffer
20.1. 5.2.0 .0 Capital surcharge on D -SIBs
20.1. 6.0.0 .0 Total Tier 1 Capital Ratio
20.1. 7.0.0 .0 Total Capital Ratio

Part II – Computation of Total Capital  (Rs. ‘000)
Web Based
Return Code  Item  Amount
20.2.1.1.0.0  Common Equity Tier 1 (CETI) Capital after Adjustments
20.2. 1.1.1.0  Total Common Equity Tier 1 (CET1) Capital
20.2. 1.1.1.1  Equity capital or stated capital/ assigned capital
20.2. 1.1.1.2  Reserve fund
20.2. 1.1.1.3  Published retained earnings/(Accumulated retained losses)
20.2. 1.1.1.4  Accumulated other comprehensive income (OCI)
20.2. 1.1.1.5  General and other disclosed reserves
20.2. 1.1.1.6  Unpublished current year's profit/ (losses ) and gains reflected in OCI
20.2. 1.1.1.7  Ordinary shares issued by consolidated banking and financial subsidiaries of the
bank and held by third parties
20.2. 1.1.2.0  Total Adjustments to CET1 Capital
20.2. 1.1.2.1  Goodwill (net)
20.2. 1.1.2.2  Other i ntangible assets (net)
20.2. 1.1.2.3  Revaluation losses  of property, plant and equipment
20.2. 1.1.2.4  Deferred tax assets (net)
20.2. 1.1.2.5  Cash flow hedge reserve
20.2. 1.1.2.6  Unrealised gains on sale related securitisation transactions
20.2. 1.1.2.7  Shortfall of the cumulative impairment to specific provisions
20.2. 1.1.2.8  Changes in own credit risk
20.2. 1.1.2.9  Defined benefit pension fund assets


20.2. 1.1.2.8  Changes in own credit risk
20.2. 1.1.2.9  Defined benefit pension fund assets
20.2. 1.1.2.10  Investment in own shares
20.2. 1.1.2.11  Reciprocal cross holdings in the capital of banking and other financial institutions
20.2. 1.1.2.12  Investments in the capital of banking and financial institutions where the bank does
not own more than 10 per cent of the  issued ordinary share capital of the entity


7 Web Based
Return Code  Item  Amount
20.2. 1.1.2.13  Significant investments in the capital of financial institutions where the bank own s
more than 10 per cent of the issued  ordinary share capital of the entity
20.2. 1.1.2.14  Shortfall of capital  in financial subsidiaries
20.2. 1.1.2.15  Regulato ry adjustments applied to CET1 c apital due to insufficient AT1 and T ier 2
capital to cover adjustments
20.2. 1.1.2.16  Amount due from head office & branches outside Sri Lanka in Sri Lanka n Rupees
20.2. 1.1.2.17  Amount due to head office & branches outside Sri Lanka in Sri Lanka n Rupees
20.2. 1.1.2.18  Amount due from head office & branches outside Sri Lanka in Foreign Currency
(net)
20.2. 2.1.0.0  Additional Tier 1 (AT1) Capital after Adjustments
20.2. 2.1.1.0  Total Additional Tier 1 (ATI) Capital
20.2. 2.1.1.1  Qualifying Additional Tier 1 capital i nstruments
20.2. 2.1.1.2  Instruments issued by consolidated banking and  financial subsidiaries of the bank
and held by third parties
20.2. 2.1.2.0  Total Adjustments to AT1 Capital
20.2. 2.1.2.1  Investment in own shares
20.2. 2.1.2.2  Reciprocal cross holdings in AT1 capital instruments
20.2. 2.1.2.3  Investments in the capital of banking and financial institutions where the bank does
not own more than 10 per cent of the issued ordinary share capital of the  entity
20.2. 2.1.2.4  Significant investments in the capital of banking and financial institutions where the
bank own more than 10 per cent of the issued ordinary share capital of the entity
20.2.2.1.2.5  Regulatory adjustments applied to AT1 due to insufficient Tier 2 capital to cover
adjustments
20.2. 3.1.0.0  Tier 2 Capital after Adjustments
20.2. 3.1.1.0  Total Tier 2 Capital
20.2. 3.1.1.1  Qualifying Tier 2 capital i nstruments
20.2. 3.1.1.2  Revaluation  gains
20.2. 3.1.1.3  General  provisions


20.2. 3.1.1.2  Revaluation  gains
20.2. 3.1.1.3  General  provisions
20.2. 3.1.1.4  Instruments issued by consolidated banking and financial subsidiaries of the bank
and held by third parties
20.2. 3.1.2.0  Total Adjustments to Tier 2 Capital
20.2. 3.1.2.1  Investment in own shares
20.2. 3.1.2.2  Reciprocal cross holdings in Tier 2 capital instruments
20.2. 3.1.2.3  Investments in the capital of financial institutions and where the bank does not own
more than 10 per cent of the issued capital carrying voting  rights of the issuing entity
20.2. 3.1.2.4  Significant investments in the capital of banking and financial institutions where the
bank own more than 10 per cent of the issued ordinary share capital of the entity
20.2. 4.1.0.0  Total Tier 1 Capital
20.2. 5.1.0.0  Total Capital


8 Part III( A) – Computation of Risk Weighted Amount for Credit Risk (Rs. ‘000)
Web Based
Return Code  Assets  Principal
Amount of On -
Balance Sheet
Items  Credit
Equivalent of
Off-Balance
Sheet Items  Total  Risk
Weight
% Risk
Weighted
Assets
Amount
20.3.1.0.0.0  Total Risk W eighted A mount for
Credit Risk
20.3.1.1.0.0  Claims on Central Government and
Central Bank of Sri Lanka
20.3.1.1.1.0  Central Government
20.3.1.1.1.1  Rupee Claims on Central Government     0
20.3.1.1.2.2  Foreign Claims on Central
Government     20
20.3.1.1.2.0  Central Bank of Sri Lanka     0
20.3.1.2.0.0  Claims on Foreign Sovereigns and
their Central Banks
20.3.1.2.1.0  AAA to AA -    0
20.3.1.2.2.0  A+ to A -    20
20.3.1.2.3.0  BBB+ to BBB -    50
20.3.1.2.4.0  BB+ to B -    100
20.3.1.2.5.0  Below B -    150
20.3.1.2.6.0  Unrated     100
20.3.1.3.0.0  Claims on Public Sector Entities
(PSEs)
20.3.1.3.1.0  AAA to AA -    20
20.3.1.3.2.0  A+ to A -    50
20.3.1.3.3.0  BBB+ to BB -    100
20.3.1.3.4.0  Below BB -    150
20.3.1.3.5.0  Unrated     100
20.3.1.4.0.0  Claims on Official Entities and
Multilateral Development
Banks(MDBs)
20.3.1.4.1.0  BIS,IMF, ECB, EC and Eligible
MDBs     0
20.3.1.4.2.0  AAA+ to AA -    20
20.3.1.4.3.0  A+ to BBB -    50
20.3.1.4.4.0  BB+ to B -    100
20.3.1.4.5.0  Below B -    150
20.3.1.4.6.0  Unrated     100
20.3.1.5.0.0  Claims on Banks
20.3.1.5.1.0  Rupee Exposures less than 3 months
20.3.1.5.1.1  AAA to BBB -    20
20.3.1.5.1.2  BB+ to B -    50
20.3.1.5.1.3  Below B -    150
20.3.1.5.1.4  Unrated     100
20.3.1.5.2.0  Foreign Currency Exposures less
than 3 months
20.3.1.5.2.1  AAA to A -    20


9 Web Based
Return Code  Assets  Principal
Amount of On -
Balance Sheet
Items  Credit
Equivalent of
Off-Balance
Sheet Items  Total  Risk
Weight
% Risk
Weighted
Assets
Amount
20.3.1.5.2.2  BBB+ to BBB -    50
20.3.1.5.2.3  BB+ to B -    100
20.3.1.5.2.4  Below B -    150
20.3.1.5.2.5  Unrated     100
20.3.1.5.3.0  Rupee and Foreign Currency
Exposures more than 3 months
20.3.1.5.3.1  AAA to AA -    20
20.3.1.5.3.2  A+ to BBB -    50
20.3.1.5.3.3  BB+ to B -    100
20.3.1.5.3.4  Below B -    150
20.3.1.5.3.5  Unrated     100
20.3.1.6.0.0  Claims on Financial Institutions
20.3.1.6.1.0  Claims on Financial Institutions
Regulated by CBSL
20.3.1.6.1.1  AAA to AA -    20
20.3.1.6.1.2  A+ to BBB -    50
20.3.1.6.1.3  BB+ to B -    100
20.3.1.6.1.4  Below B -    150
20.3.1.6.1.5  Unrated     100
20.3.1.6.2.0  Claims on Other Financial
Institutions
20.3.1.6.2.1  AAA to AA -    20
20.3.1.6.2.2  A+ to A -    50
20.3.1.6.2.3  BBB+ to BB -    100
20.3.1.6.2.4  Below BB -    150
20.3.1.6.2.5  Unrated     100
20.3.1.7.0.0  Claims on Corporates
20.3.1.7.1.0  AAA to AA -    20
20.3.1.7.2.0  A+ to A -    50
20.3.1.7.3.0  BBB+ to BB -    100
20.3.1.7.4.0  Below BB -    150
20.3.1.7.5.0  Unrated     100
20.3.1.8.0.0  Retail Claims
20.3.1.8.1.0  Retail claims that qualify for
regulatory capital purposes
20.3.1.8.1.1  SME exposure s secured on immovable
property     60
20.3.1.8.1.2  Other S ME exposures     75
20.3.1.8.1.3  Individual e xposures     75
20.3.1.8.2.0  Retail claims that do not qualify for
regulatory capital purposes     100
20.3.1.8.3.0  Claims Secured by Gold
20.3.1.8.3.1  Loan to Value Ratio equal  to or less
than 70%     0


10 Web Based
Return Code  Assets  Principal
Amount of On -
Balance Sheet
Items  Credit
Equivalent of
Off-Balance
Sheet Items  Total  Risk
Weight
% Risk
Weighted
Assets
Amount
20.3.1.8.3.2  Loan to Value Ratio over 70% and less
than 100%     20
20.3.1.8.3.3  Loan to Value Ratio  equal to or  over
100%     100
20.3.1.9.0.0  Claims Secured by Residential
Property
20.3.1.9.1.0  Claims that qualify for regulatory
capital purposes     50
20.3.1.9.2.0  Claims that do not qualify for
regulatory capital purposes     100
20.3.1.10.0.0  Claims Secured by Commercial Real
Estate     100
20.3.1.11.0.0  Non-Performing Assets (NPAs)
20.3.1.11.1.0  Specific Provisions are equal to or
more than 20%     100
20.3.1.11.2.0  Specific Provisions are less than 20%     150
20.3.1.12.0.0  Non-Performing Assets Secured by
Residential Property
20.3.1.12.1.0  Specific Provisions are equal to or
more than 20%     50
20.3.1.12.2.0  Specific Provisions are less than 20%     100
20.3.1.13.0.0  Higher R isk Categories
20.3.1.13.1.0  Ventu re capital funds/companies and
private equity investments     150
20.3.1.13.2.0  Significant investments in the capital
of financial institutions     250
20.3.1.14.0.0  Cash Items and Other A ssets
20.3.1.14.1.0  Cash Items
20.3.1.14.1.1  Notes and c oins in own v ault    0
20.3.1.14.1.2  Gold b ullion held in own v ault    0
20.3.1.14.1.3  Cash items in the p rocess of collection     20
20.3.1.14.2.0  Other Assets
20.3.1.14.2.1  Property Plant and Equipment     100
20.3.1.14.2.2  Other Assets/Exposures     100

Part III(B ) – Credit Equivalent of Off -Balance Sheet Items (Rs. ‘000)
Web Based
Return Code  Description  Principal amount
of Off -Balance
Sheet Items  Credit
Conversion
Factor (%)  Credit Equivalent
of Off-Balance
Sheet Items
20.3.2.0.0.0  Off-balance Sheet Items
20.3.2.1.0.0  Direct Credit Substitutes


20.3.2.0.0.0  Off-balance Sheet Items
20.3.2.1.0.0  Direct Credit Substitutes
20.3.2.1.1.0  General Guarantees of Indebtedness   100
20.3.2.1.2.0  Standby LCs serving as Financial Guarantees   100
20.3.2.1.3.0  Bank Acceptances   100


11 Web Based
Return Code  Description  Principal amount
of Off -Balance
Sheet Items  Credit
Conversion
Factor (%)  Credit Equivalent
of Off-Balance
Sheet Items
20.3.2.1.4.0  Others (please specify)   100
20.3.2.2.0.0  Transaction -related Contingencies
20.3.2.2.1.0  Performance Bonds, Bid Bonds & Warranties   50
20.3.2.2.2.0  Standby LCs Related to Particular
Transactions   50
20.3.2.2.3.0  Others (please specify)   50
20.3.2.3.0.0  Short -Term Self -Liquidating Trade -Related
Contingencies
20.3.2.3.1.0  Shipping Guarantees   20
20.3.2.3.2.0  Documentary Letters of Credit   20
20.3.2.3.3.0  Trade Related Acceptances   20
20.3.2.3.4.0  Others (please specify)   20
20.3.2.4.0.0  Sale and Repurchase Agreements and
Assets Sale with recourse where the credit
risk remains with the Bank
20.3.2.4.1.0  Sale and Repurchase Agreements   100
20.3.2.4.2.0  Housing Loans Sold with Recourse   100
20.3.2.4.3.0  Other Assets Sold  with Recourse   100
20.3.2.4.4.0  Forward Assets Purchase   100
20.3.2.4.5.0  Partly Paid Shares/Securities   100
20.3.2.4.6.0  Others (please specify)   100
20.3.2.5.0.0  Obligations under an On -going
Underwriting Agreement
20.3.2.5.1.0  Underwriting of Shares/Securities Issue   50
20.3.2.5.2.0  Note Issuance Facilities and Revolving
Underwriting Facilities   50
20.3.2.5.3.0  Others (please specify)   50
20.3.2.6.0.0  Other commitments with an o riginal
maturity of up to one year or which can be
unconditionally cancelled at any time
20.3.2.6.1.0  Formal Standby Facilities and Credit Lines   0
20.3.2.6.2.0  Undrawn Term Loans   0
20.3.2.6.3.0  Undrawn Overdraft Facilities/Unused Credit
Card Lines   0
20.3.2.6.4.0  Others (please specify)   0
20.3.2.7.0.0  Commitments with an original maturity up
to 1 year
20.3.2.7.1.0  Formal Standby Facilities and Credit Lines   20
20.3.2.7.2.0  Undrawn Term Loans   20
20.3.2.7.3.0  Others (please specify)   20


20.3.2.7.2.0  Undrawn Term Loans   20
20.3.2.7.3.0  Others (please specify)   20
20.3.2.8.0.0  Other commitments with an o riginal
maturity of over one year
20.3.2.8.1.0  Formal Standby Facilities and Credit Lines   50
20.3.2.8.2.0  Undrawn Term Loans   50
20.3.2.8.3.0  Others (please specify)   50


12 Web Based
Return Code  Description  Principal amount
of Off -Balance
Sheet Items  Credit
Conversion
Factor (%)  Credit Equivalent
of Off-Balance
Sheet Items
20.3.2.9.0.0  Foreign Exchange Contracts
20.3.2.9.1.0  Original maturity -less than one year   2
20.3.2.9.2.0  Original maturity -more than one year and less
than two years   5
20.3.2.9.3.0  Original maturity -more than two years (for
each additional year)   3
20.3.2.10.0.0  Interest Rate Contracts
20.3.2.10.1.0  Original maturity -less than one year   0.5
20.3.2.10.2.0  Original maturity -more than one year and less
than two years   1
20.3.2.10.3.0  Original maturity -more than two years (for
each additional year)   1

Part III( C) – Exposures Recognised under Credit  Risk Mitigation (CRM)  (Rs. ‘000)
Web Based
Return Code  CRM techniques  Principal Amount
20.3.3.0.0.0  Total CRM exposure
20.3.3.1.0.0  Collateralised transactions
20.3.3.1.1.0  Retail Exposure
20.3.3.1.1.1  Cash
20.3.3.1.1.2  Government Securities
20.3.3.1.1.3  Provident Fund Balances
20.3.3.1.1.4  Debt securities rated by a r ecognised ECAI
20.3.3.1.1.5  Debt securities not rated by a recognised ECAI
20.3.3.1.1.6  Equities that are included in a main i ndex
20.3.3.1.2.0  Other Exposures
20.3.3.1.2.1  Cash
20.3.3.1.2.2  Government Securities
20.3.3.1.2.3  Provident Fund Balances
20.3.3.1.2.4  Debt Securities rated by a r ecognised ECAI
20.3.3.1.2.5  Debt Securities not rated by a r ecognised ECAI
20.3.3.1.2.6  Equities that are included in a main i ndex
20.3.3.2.0.0  Other CRM Techniques
20.3.3.2.1.0  On-balance s heet netting
20.3.3.2.2.0  Guarantees

Part IV – Computation of Risk Weighted Amount for Market Risk (Rs. ‘000)
Web Based
Return Code  Item  Capital Charge
Amount
20.4.1.0.0.0  Total Capital Charge for Market Risk =
(20.4.1.1.0.0   +  20.4.1.2.0.0   +  20.4.1.3.0.0)


13 Web Based
Return Code  Item  Capital Charge
Amount
20.4.1.1.1.1  Net Long or Short  Position
20.4.1.1.1.2   Horizontal Disallowance
20.4.1.1.1.3  Vertical Disallowance
20.4.1.1.1.4  Options
20.4.1.1.2.0  Specific Interest Rate Risk
20.4.1.2.0.0  Capital Charge for Equity =  (20.4.1.2.1.0  + 20.4.1.2.2.0)
20.4.1.2.1.0  General Equity Risk
20.4.1.2.2.0  Specific Equity Risk
20.4.1.3.0.0  Capital Charge for Foreign Exchange & Gold
20.4.2.0.0.0  Total Risk -Weighted Amount for Market Risk =  (20.4.1.0.0.0* …)

Part V(A ) - Computation of Risk Weighted Amount for Operational Risk (Rs. ‘000)
Web Based
Return Code  Business Lines
(20.5.1.4.0.0)  Capital Charge
Factor
 (α and β )
(20.5.1.5.0.0)  Fixed Factor
‘m’
(20.5.1.6.0.0)  Gross Income
(20.5.1.7.0.0)  Capital Charges
(20.5.1.8.0.0)
1st
Yr 2nd
Yr 3rd
Yr 1st
Yr 2nd
Yr 3rd
Yr
20.5.1.1.0.0  The Basic Indicator
Approach  15%
20.5.1.2.0.0  The Standardised
Approach
20.5.1.2.1.0  Corporate Finance  18%
20.5.1.2.2.0  Trading and Sales  18%
20.5.1.2.3.0  Payment and Settlement  18%
20.5.1.2.4.0  Agency Services  15%
20.5.1.2.5.0  Asset Management  12%
20.5.1.2.6.0  Retail Brokerage  12%
20.5.1.2.7.0  Retail Banking  12%
20.5.1.2.8.0  Commercial Banking  15%
20.5.1.3.0.0  The Alternative
Standardised Approach
20.5.1.3.1.0  Sub Total
20.5.1.3.1.1  Corporate Finance  18%
20.5.1.3.1.2  Trading and Sales  18%
20.5.1.3.1.3  Payment and Settlement  18%
20.5.1.3.1.4  Agency Services  15%
20.5.1.3.1.5  Asset Management  12%
20.5.1.3.1.6  Retail Brokerage  12%
20.5.1.3.2.0  Sub Total
20.5.1.3.2.1  Retail Banking  12%  0.035
20.5.1.3.2.2  Commercial Banking  15%  0.035
20.5.1.9.0.0  Capital Charges for
Operational Risk
20.5.1.9.1.0  The Basic Indicator
Approach


14 Web Based
Return Code  Business Lines
(20.5.1.4.0.0)  Capital Charge
Factor
 (α and β )
(20.5.1.5.0.0)  Fixed Factor
‘m’
(20.5.1.6.0.0)  Gross Income
(20.5.1.7.0.0)  Capital Charges
(20.5.1.8.0.0)
1st
Yr 2nd
Yr 3rd
Yr 1st
Yr 2nd
Yr 3rd
Yr
20.5.1.9.2.0  The Standardised
Approach
20.5.1.9.3.0  The Alternative
Standardised Approach
20.5.1.10.0.0  Risk -Weighted Amount
for operational Risk
20.5.1.10.1.0  The Basic Indicator
Approach (20.5.1.9.1.0
*…)
20.5.1.10.2.0  The Standardised
Approach (20.5.1.9.2.0
* …)
20.5.1.10.3.0  The Alternative
Standardised Approach
(20.5.1.1.9.3 * …)

Part V( B) – Computation of Gross Income  for Operational Risk - Basic Indicator Approach and t he
Standardised Approach  (Rs. ‘000)
 Interest Income
20.5.2.3.0.0  Interest
Expenses
20.5.2.4.0.0  Non-Interest
Income
20.5.2.5.0.0  Realized Profits
from the Sale of
Securities in the
Banking Book
20.5.2.6.0.0  Extraordinary/
Irregular Item  of
Income
20.5.2.7.0.0
Web Based
Return Code  Business Lines  1st
Yr 2nd
Yr 3rd
Yr 1st
Yr 2nd
Yr 3rd
Yr 1st
Yr 2nd
Yr 3rd
Yr 1st
Yr 2nd
Yr 3rd
Yr 1st
Yr 2nd
 Yr 3rd
Yr
20.5.2.1.0.0  Basic Indicator
Approach
20.5.2.2.0.0  Standardised
Approach
20.5.2.2.1.0  Corporate Finance
20.5.2.2.2.0  Trading and Sales
20.5.2.2.3.0  Payment and
Settlement
20.5.2.2.4.0  Agency Services
20.5.2.2.5.0  Asset Management
20.5.2.2.6.0  Retail Brokerage
20.5.2.2.7.0  Retail Banking
20.5.2.2.8.0  Commercial
Banking


15 Part V(B) – Computation of Gross Income  for Operational Risk - The Alternative  Standardised
Approach (Rs. ‘000)
 Interest Income
20.5.2.3.0.0  Interest
Expenses
20.5.2.4.0.0  Non-Interest
Income
20.5.2.5.0.0  Realized Profits
from the Sale of
Securities in the
Banking Book
20.5.2.6.0.0  Extraordinary/
Irregular Item of
Income
20.5.2.7.0.0
Web Based
Return Code  Business Lines  1st
Yr 2nd
Yr 3rd
Yr 1st
Yr 2nd
Yr 3rd
Yr 1st
Yr 2nd
Yr 3rd
Yr 1st
Yr 2nd
Yr 3rd
Yr 1st
Yr 2nd
 Yr 3rd
Yr
20.5.2.3.0.0
 The Alternative
Standardised
Approach
20.5.2. 3.1.0  Sub Total
20.5.2. 3.1.1  Corporate Finance
20.5. 2.3.1.2  Trading and Sales
20.5.2. 3.1.3  Payment s and
Settlement
20.5.2. 3.1.4  Agency Services
20.5.2. 3.1.5  Asset Management
20.5.2. 3.1.6  Retail Brokerage


Appendix II
16
 PART I – GUIDELINES FOR COMPUTATION OF CAPITAL RATIO S

Web Based
Return Code  Item
20.1.1.0.0.0  Common Equity Tier 1 Capital
Total Common Equity Tier 1 capital after adjustment = WBRC 20.1.1.1.0.0 of
Part II . Automatically added.
20.1.2.0.0.0  Total Tier 1 Capital
Total Tier 1  capital after adjustment = WBRC 20.1.4.1.0.0 of Part II .
Automatically added .
20.1.3.0.0.0  Total Capital
Total capital = WBRC 20.1.5.1.0.0 of Part II. Automatically added .
20.1.4.0.0.0  Total Risk Weighted Amount
20.1.4.1.0.0  Risk Weighted Amount for Credit Risk =  WBRC 20.3.1.0.0.0 of Part III (A)
20.1.4.2.0.0  Risk Weighted Amount for Market Risk  = WBRC 20.4.2.0.0.0 of Part IV
Automatically added .
20.1.4.3.0.0  Risk Weighted Amount for Operational Risk = WBRC 20.5.1.10.1.0  or
20.5.1.10.2.0  or 20.5.1.10.3.0 of Part V( A)
Automatically added .
20.1.5.0.0.0  Common Equity Tier 1 Capital Ratio = 20.1.1.0.0.0/20.1.4.0.0.0
20.1.5.1.0.0  Capital conservation buffer
20.1.5.2.0.0  Capital surcharge on D -SIBs
20.1.6.0.0.0  Total Tier 1 Capital Ratio = 20.1.2.0.0.0/20.1.4.0.0.0
20.1.7.0.0.0  Total Capital Ratio  = 20.1.3.0.0.0/20.1.4.0.0.0


Appendix III
17
 PART II - GUIDELINES FOR CALCULATION OF TOTAL CAPITAL
Part II(A) – COMPUTATION OF TOTAL REGULATORY CAPITAL
Web Based
Return
Code  Item
20.2. 1.1.0.0  Common Equity Tier 1 (CET1 ) Capital after Adjustments
20.2.1.1.1.0  Common Equity Tier 1 (CET1) Capital
20.2.1.1.1.1  Equity Capital ( Stated Capital)/Assigned Capital
(1)  Licensed Banks Incorporated in Sri Lanka
 i) Equity capital shall comprise both voting and non -voting ordinary share capital, including share
premium/discounts .
 ii) Non-voting ordinary shares should be identical in all aspects to voting ordinary shares except for
voting rights .
(2)  Licensed Banks Incorporated Outside Sri Lanka (branches or subsidiaries of foreign banks
established in Sri Lanka)
 Capital that shall be assigned to the branch/subsidiary by the head office of licensed banks
incorporated or established outside Sri Lanka.
(3)  Criteria for Classification/Inclusion as Equity Capital for Regulatory Capital Purposes
 i) Highest subordinated claim at the time of liquidation of the bank .
 ii) Entitled to a claim on the residual assets that is proportional to its share of issued capital, after
all senior claims have been repaid in liquidation .
 iii) Principal is perpetual and never repaid outside of liquidation .
 iv) Bank will not indicate any expectation that the instrument will be bought back, redeemed or
cancelled and the statutory or contractual terms shall not provide any feature which might give
rise to such an expectation .
 v) Distributions are paid out of distributable items available for ordinary shareholders. The level
of distributions is not tied or linked to the amount paid at issuance and is not subject to a
contractual cap. However, the amount of distributions shall be limited to a maximum of
distributable items .
 vi) There are no circum stances under which the distributions are obligatory .


vi) There are no circum stances under which the distributions are obligatory .
 vii) Distributions are paid only after all legal and contra ctual obligations have been met and
payments on more senior capital instruments have been made. Accordingly, no preferential
distributions are permitted .
 viii) It is the issued capital that takes the first and proportionately greatest share of any losses as they
occur .
 ix) The paid -in amount is recognised as equity capital for determining the statement of financial
position insolvency .