SEYLAN BANK PLC

ANNUAL REPORT 2016

IT’S ALL ABOUT THE JOURNEY
IT’S
ALL
ABOUT
THE
JOURNEY

ANNUAL REPORT 2016

SEYLAN BANK PLC,
Seylan Towers, No. 90, Galle Road, Colombo 03, Sri Lanka.
T: +94-11-2456000 F: +94-11-2456456 E: [email protected] W: www.seylan.lk
Swift: SEYBLKLX
ABOUT OUR OUR
THE BANK VISION MISSION

Seylan Bank PLC is a public To be Sri Lanka’s leading We provide our customers
limited liability company financial services provider with financial services that
incorporated in Sri Lanka as recognised by all our meet their needs in terms
in 1987, and operates from stakeholders. of value, pricing, delivery
its Head Office in Colombo and service.
and through its island-wide
network of banking centres. We will do so through a
team of Seylan Bankers
who are recognised and
rewarded for results
orientation.

We will ensure that our

efforts translate to meeting
the expectations of our
shareholders, whilst always
acting as responsible
corporate citizens.
 IT’S
ALL
ABOUT
THE
JOURNEY
Seylan Bank PLC | Annual Report 2016
 004 005 013
ABOUT OUR VALUE SUSTAINABLE
THIS REPORT CREATION STRATEGY STEWARDSHIP

Highlights Board of Directors

006 014
Letter from the Chairman Senior
008 Management Team
Letter from the Director/ 019
Chief Executive Officer How We Govern
010 022
How We Manage Risks
068

087 095 155 263

OUR VALUE OUR VALUE SUSTAINABLE ANNEXES
CREATION MODEL CREATION STORY RESULTS

The Context Financial Calendar Ten Years at a Glance

096 156 264
Financial Statement of Directors’ Summary of
Value Creation Responsibility for Financial Performance Indicators
098 266
CONTENTS

Reporting
Informed Investors 157 Statement of
116 Comprehensive Income
Chief Executive Officer’s
in US Dollars
Satisfied Customers and Chief Financial Officer’s 267
Responsibility Statement
121 159 Statement of Financial
Position in US Dollars
Motivated Employees Independent 268
130
Auditors’ Report Investor Information
Trusted Partners 160 269
140 Branch Network
Income Statement
Responsible 161 274
Corporate Citizenship Geographical Analysis
144 Statement of Profit or Loss 278
and Other Comprehensive
GRI Content Index
Income 279
162
Sustainability
Statement of Assurance Report
Financial Position 282
163 Alphabetical Index
Statement of
284
Changes in Equity Glossary
164 285
Cash Flow Statement Sinhala Translation of the
168 Chairman’s Letter
288
Notes to the Tamil Translation of the
Financial Statements Chairman’s Letter
171 289
Corporate Information
290
Circular to Shareholders
291
Notice of the Annual
General Meeting
293
Form of Proxy
Enclosed

Investor Feedback Form

SCAN TO VIEW Enclosed
https://www.seylan.lk/annual-reports.html
 IT’S
ALL
ABOUT
THE
JOURNEY

Our strategic plan is set for the years ahead,

just as it was in the years gone by...and we traverse
the new path with our stakeholders,
enjoying the many moments of success and
challenge as we seek mutual well-being and prosperity.
It is this journey undertaken by the Bank and
its stakeholders that empowers and strengthens
and makes the overhauling of mutual goals
that much more satisfying.

It truly is...all about the journey!

 The Change for the Better In 2016, we enhanced our delivery Limitations and Boundary
points by adding 8 new branches,
ABOUT THIS REPORT

The Annual Report 2016 is a focused, This Report mainly covers sustainability
20 ATMs and recruited 218 staff
concise report facilitating better impacts, opportunities and risks arising
members to the Bank.
understanding by the readers, while from the Bank’s activities in the financial
maintaining the transparency of the services sector, where some of the
Our Group consists of a subsidiary
information for the benefit of all our GRI indicators may not be applicable
namely, Seylan Developments PLC, in
stakeholders. In that respect, therefore, to its operations. This Report does not
which the Bank holds an equity stake
it is, comparatively, much leaner but extend to the Bank’s subsidiary, Seylan
of 70.51%, as explained in the Notes to
more robust and more meaningful and Developments PLC, which produces its
the Financial Statements. There were no
user-friendly, which is our aim, to be own Annual Report.
significant changes in the size structure,
able to convey to the general public in
ownership or supply chain of the Bank
particular, the essence of what we all
during 2016.
look forward to each year – a transparent, Content of the Report
lucid and convincing affirmation of the The Report presents both positive and
financial soundness and sustainability negative performance of the Bank in a
of the Bank.
Brands, Products,
manner in which our Stakeholders are
Services and able to see the total picture of the Bank’s
Accordingly, the Report communicates Operational Structure policies, operations and processes.
to the reader, the linkages between The operational structure of the This holistic approach has helped us
our underlying business model that Bank comprises six main sections – to identify our weaknesses and build
fundamentally supports financial Branch Banking, Corporate and on our strengths to make our presence
soundness and prudence and the story Foreign Currency Banking, Retail sustainable.
of how in this process, we relate this Banking, Treasury Operations,
model to value creation for all our International and Trade Finance and
stakeholders. Consequently, the Bank’s the newly formed Project Finance Unit. Comparative Information
approach to sustainability is reflected These divisions of the organisation The Annual Report for the financial
throughout this Report. offer an array of financial services to year 2016, presents Key Performance
customers through various delivery Indicators, together with comparative
channels. A description of our information, for the last year and includes
Profiling the Bank products appears on pages 124 to 125 a summary of sustainability indices,
Seylan Bank PLC, a licensed commercial of this Annual Report. which we have developed to monitor
bank and a public limited liability our performance in relation to diverse
company incorporated in Sri Lanka and stakeholder interests. There are no
listed on the Colombo Stock Exchange, Compliance significant changes/restatements from
commenced its business in 1987 and Both financial and non-financial the previous reporting periods in the
is presently identified as one of the information contained in this Report scope and aspects boundaries.
few systemically important banks are in compliance with all applicable
in Sri Lanka. Corporate information rules and guidelines stipulated by the
regarding the Bank appears on Central Bank of Sri Lanka, the Independent Assurance
page 290 and for information on its Companies Act No. 07 of 2007, The Bank’s policy recognises the
share ownership structure, identity and Listing Rules of the Colombo Stock importance of obtaining an independent
percentage of ownership, please refer Exchange and the Institute of Chartered assurance of its sustainability report and,
to the ‘Investor Information’ section Accountants of Sri Lanka. accordingly, the Bank has obtained the
of this Annual Report.
services of Messrs KPMG for appropriate
assurance in this regard, which appears
Sustainability on pages 282 to 283 of this Annual
Presence and Reporting Framework Report. This Integrated Report can be
Scale of Operation This is our fourth Integrated Report, accessed through our website at
We intermediate financially through a which encompasses economic, https://www.seylan.lk/annual-reports.html
well dispersed network of 166 delivery social and environmental performances
points, 202 ATMs and 100 student savings of Seylan Bank PLC, for the reporting
centres in Sri Lanka. Overseas, we have
Contact Person for
period and the manner, in which we
established a presence through a team relate to our key stakeholders in creating
Editorial Information
of coordinators in Lebanon, Saudi Arabia sustainable value, the details of which are Mrs. Champika Dodanwela
and United Arab Emirates, where we focus contained in the relevant sustainability Chief Financial Officer
on the remittances business through sections of the Report. Our report is Seylan Bank PLC
exchange houses in these countries. We based on the Global Reporting Initiative Tel: 011-2456358
have a staff strength of 3,165 employees, (GRI) G4 and is prepared in accordance Fax: 011-2452612
as at end December 2016. with ‘core’ criteria. e-mail: [email protected]

4 Seylan Bank PLC | Annual Report 2016

 OUR VALUE
CREATION
STRATEGY
005-012

006 008 010

HIGHLIGHTS LETTER FROM LETTER FROM THE DIRECTOR/
THE CHAIRMAN CHIEF EXECUTIVE OFFICER

Seylan Bank PLC | Annual Report 2016 5

 BANK GROUP
HIGHLIGHTS

2016 2015 Change 2016 2015 Change

Rs. ’000 Rs. ’000 % Rs. ’000 Rs. ’000 %

During The Year

Income 38,092,193 28,586,081 33.25 38,132,079 28,628,850 33.19
Operating Profit before Income Tax 5,733,718 5,776,711 (0.74) 5,771,245 5,822,611 (0.88)
Income Tax Expense 1,723,268 1,945,767 (11.44) 1,736,355 1,936,662 (10.34)
Profit Attributable to Equity Holders of the Bank 4,010,450 3,830,944 4.69 4,013,132 3,855,296 4.09
Other Comprehensive Income for the Year, Net of Tax (345,204) (1,053,977) 67.25 (327,867) (1,047,397) 68.70
Total Comprehensive Income Attributable to
Equity Holders of the Bank 3,665,246 2,776,967 31.99 3,680,154 2,805,940 31.16
FINANCIAL

Revenue to Government 3,072,633 3,202,007 (4.04) 3,079,238 3,192,902 (3.56)

Gross Dividend – Note 1,121,121 948,641 18.18 1,121,121 948,641 18.18

At the Year End

Total Equity Attributable to Equity Holders of the Bank 27,772,282 25,055,677 10.84 29,020,274 26,287,740 10.39
Retained Earnings 14,050,233 11,125,666 26.29 14,304,925 11,376,269 25.74
Customer Deposits 273,456,344 224,525,455 21.79 273,456,344 224,525,455 21.79
Customer Loans and Receivables 236,020,197 193,103,942 22.22 236,020,197 193,103,942 22.22
Total Assets 356,012,556 296,330,133 20.14 358,249,441 298,585,564 19.98

Information Per Ordinary Share

Basic/Diluted Earnings per Share (Rs.) 11.63 11.11 4.69 11.63 11.18 4.09
Dividends (Rs.) – Note 3.25 2.75 18.18 3.25 2.75 18.18
Net Assets Value per Share (Rs.) 80.51 72.63 10.84 84.13 76.21 10.39
Market Value (Rs.) – As at End of the Year
– Voting Shares 90.00 95.00 (5.26) – – –
– Non-Voting Shares 59.00 73.00 (19.18) – – –

Statutory/Other Ratios (%)

Core Capital Adequacy
(Minimum Requirement – 5%) 10.74 12.24 (12.25) 10.94 12.48 (12.34)
Total Capital Adequacy
(Minimum Requirement – 10%) 13.18 12.87 2.41 13.33 13.08 1.91
Liquidity
– Domestic Banking Unit Operations (%)
(Minimum Requirement – 20%) 22.68 27.56 (17.71) – – –
– Foreign Currency Banking Unit Operations (%)
(Minimum Requirement – 20%) 26.24 21.51 21.99 – – –
Price Earnings Ratio – Voting (Times) 7.74 8.55 (9.47) 7.74 8.50 (8.94)
– Non-Voting (Times) 5.07 6.57 (22.83) 5.07 6.53 (22.36)
Dividend Cover (Times) – Note 3.58 4.04 (11.38) 3.58 4.06 (11.82)

Note: Dividends are accounted as per the Sri Lanka Accounting Standard – LKAS 10.

Achieved the Highest Total Assets Deposits Base Net Advances Recorded a Healthy
Ever Profit Reached Surpassed Portfolio of Capital Adequacy
Rs. Bn. Rs. Bn. Rs. Bn. Rs. Bn. Ratio of

4.0 356 273 236

13.18%

Net Assets Value per

Share Increased in
2016 to

Rs. 80.51
225
356

236
296
249

273

125

155
184

215

186

193
147

167

137
4.0
2.0

3.0

3.8
2.3

‘12 ‘13 ‘14 ‘15 ‘16 ‘12 ‘13 ‘14 ‘15 ‘16 ‘12 ‘13 ‘14 ‘15 ‘16 ‘12 ‘13 ‘14 ‘15 ‘16

6 OUR VALUE CREATION STRATEGY Seylan Bank PLC | Annual Report 2016
Investor

OPERATIONAL
(%) Rs. Rs.
Recorded Highest ever dividend Earnings per Share
a Return on Equity of 15.18 per share of 3.25 increased to 11.63

Customers

Opened 8 new branches Added 20 ATMs and 6 Cash Revamped Internet

and relocated and Deposit Machines (CDMs) to Banking system,
refurbished 14 branches strengthen and enhance our offering many value
to expand footprint ATM and CDM coverage added functionalities
and enhance customer in the Country with stringent security
convenience enhancement

Employees

over
13 of average
service
Recruited
218 new staff
Over Rs. 1.4 Mn.
annual average
Females
accounted for
years period members to benefits per 43% of employees
the Bank employee

Business Partners

Over Rs. 218 Mn. over registered More than 15 years

purchases from locally
based suppliers
500 suppliers relationship with
22 correspondent banks

Social & Environmental

Opened 40
‘Seylan Pahasara’ Donated over Over 102,237 Kg
libraries across the Rs. 10 Mn. Rs. 16 Mn. of paper
country in 2016, relief to flood for education recycled
raising the total victims related during the
number of libraries pursuits year
to 120

Seylan Bank PLC | Annual Report 2016 OUR VALUE CREATION STRATEGY > HIGHLIGHTS 7
 LETTER FROM THE CHAIRMAN

Despite many challenges, through

judicious execution of a set of coherent
strategies over the past several years we
were able to maintain consistency in our
performance.

8 OUR VALUE CREATION STRATEGY Seylan Bank PLC | Annual Report 2016
Dear shareholders, Our Footprint weaknesses, how we can optimise and
I am pleased to state that Seylan Bank transform them into more productive
Our branch network continues to make a
has been consistent in sustaining its opportunities for the Bank and to be
positive contribution to our bottom line
overall performance during the year able to strike the right balance between
with more branches achieving their Key
under review. Despite many challenges opportunities and market realities.
Performance Indicators compared to last
we were confronted with, judicious year, thus consolidating the investment
execution of a set of coherent strategies we continue to make in them. It is
over the past several years made this imperative therefore that we continue to
Appreciation
possible. As a result, the Bank has leverage on our existing infrastructure, We have witnessed the strides the Bank
emerged as a force to reckon with in the with a firm endeavour to keep our cost has taken in its arduous journey so far.
highly competitive banking space in the structure down, but yet to be able to I am fully aware that it is with the utmost
country and has positioned itself as a improve productivity, which is key to commitment and sincerity of purpose
Systemically Important Bank. any strategy we embark upon. of the Board of Directors, the Chief
Executive Officer Mr. Kapila Ariyaratne
I also wish to make a special reference and the entire staff of the Bank who
Global and Sri Lankan here to the active contribution the Bank traversed this path with determination,
Economy makes for promoting the SME sector of that made this journey over a rough
the country, by optimising the delivery terrain, a reality and worthwhile.
The global economy suffered another
channels of our widespread network of I commend them all and wish them well,
lacklustre year in 2016 due to many
branches to this sector. in our common purpose for the success
reasons such as Brexit, the Chinese
of the Bank. I would also like to thank the
economic slowdown and changes in
former Chairman, Mr. Nihal Jayamanne
US policy. As a result global GDP growth
slowed down and is expected to improve Regulation and Supervision PC for his unwavering commitment
in leading the Bank over three years.
only modestly in 2017. Our financial soundness indicators (FSIs)
We also invited two new Independent
as reflected in our statutory ratios, are
Directors to your Board this year:
Despite the global setbacks and the at healthy levels, but we shall not be
Mr. Anushka Wijesinha and Mrs. Sandya
proliferation of geopolitical risks complacent and shall ensure that we
Salgado, with effect from 1st December
in various parts of the world, the are well positioned for the long term.
2016. I am confident that their extensive
Sri Lankan economy achieved a moderate Strong and tested contingency plans
experience will add tremendous value
growth during the first nine months should be in place to meet internal and
to the Bank.
of 2016. Credit and deposit growth external shocks which can impact these
have moderated, and interest rates FSIs. The Central Bank’s expectations
To our valued customers who have
have remained high throughout the of the industry have already been
continued to be loyal, we look forward
year, reflecting the macroeconomic communicated in their Road Map, and
to taking you along with us on this
environment that prevailed. Basel III has just been implemented.
journey to even greater heights and
These are all factors we need to reckon
thank you for your loyalty and patronage
in our strategies for the future.
which underpins our success. We are
Our Performance also deeply appreciative of the trust
The Bank continued its growth Being a financial intermediary and given
reposed in us by investors and all other
momentum with total assets reaching the increasing risks in the operating
stakeholders, as well as the support we
Rs. 356 Bn. recording over 20% growth environment, our commitment to
have always been able to count on from
in 2016. Both credit and deposits grew good corporate governance and risk
the regulators which has been a great
in a commensurate manner, illustrating management frameworks need not
source of strength to us on this journey.
optimum deployment of our funding be overemphasised. The highest
resources in the pursuit of productive standards of governance and prudent
My sincere thanks go out to each and
assets. The strides we have made are risk management practices have been
every one of you.
reflected in our bottom line which embedded into our culture to ensure
crossed the Rs. 4 Bn. milestone in 2016. full compliance and optimum trade-off
between risk and return.
While strengthening our financial
performance, we continued our focus
on sustainability initiatives, education Our Future Strategy W.M.R.S. Dias
in particular. We built 40 libraries in The question we now need to ask Chairman
schools during the year, increasing ourselves is whether we are geared for
21st February 2017
the total to 120 as detailed in the the future. It is time, therefore to look
sustainability report. at ourselves from afar. This will give
us an entirely independent, external,
perspective of our strengths and

Seylan Bank PLC | Annual Report 2016 OUR VALUE CREATION STRATEGY > LETTER FROM THE CHAIRMAN 9
 LETTER FROM THE DIRECTOR
/CHIEF EXECUTIVE OFFICER

We have successfully embedded a culture

of change and constant improvement
into the organisation over the past few
years. We will now leverage our strengths,
capitalise on opportunities and share
our success with all our stakeholders.

10 OUR VALUE CREATION STRATEGY Seylan Bank PLC | Annual Report 2016
Pursuing a clear strategic vision and The plan period that began with a largely The Seylan Family
rising to a variety of external challenges, internal focus on aspects such as process
Our successful journey in 2016 would not
we have been consistently achieving improvement, staff morale and brand
have been possible without the support
remarkable results over the past few equity ended in 2016 where we focused
of our loyal and committed employees
years. We have also upgraded and on growth and expansion. This bears
who have consistently worked with
strengthened our internal systems and testimony to the fact that we achieved
dedication and team spirit to deliver
processes to ensure that we serve our our strategic imperatives year on year
excellent value to our stakeholders. They
customers better and through that allowing us to compete on equal terms
have also enjoyed an enriching working
added value to all our stakeholders. Our with industry leaders.
environment and the pleasure that comes
3,165 strong work force spread across
with becoming the best that they can
166 Banking Centres has embraced We also succeeded in embedding a
in their chosen field of activity. It is this
this vision as one and working with ‘change and improvement’ mindset into
ethos that inspire our 3,165 employees
commitment, professionalism and an the Organisation, so that continuous
and in turn the Bank is committed to
excellent team spirit has taken the Bank improvement and sustainable change
develop and nurture them to become
along the path to progress. became the norm. However we never
achievers and leaders.
lost sight of the fact that our loyal
For us 2016 is the culmination of the clientele must always be served in a
first stage of a journey undertaken manner that exceeded their expectations,
Our Footprint
along the path defined by our Strategic adding value to them through every
Plan 2012-2016. Along the way we have interaction they had with us. Doing this In expanding our footprint our desire
enjoyed many moments of success with a smile and a genuine commitment is to project our presence selectively
made all the more sweeter by a sense of has paid rich dividends to us through in strategically important places. We
collective achievement in overcoming a deepened relationships and enhanced envisage that all our branches will be
constant stream of challenges. Armed loyalty across all our customer segments. advanced in state-of-the-art service
with this sense of collective achievement This brought in the results that we technology. We are conscious of the
we look forward to the next phase of our achieved and enabled our staff to immense potential in the new growth
journey towards growth and prosperity participate in this success through areas of the Sri Lankan economy, and
which will consolidate and build on the higher remuneration and benefits will invest in preparing our human
good work done so far. as well as enhanced career prospects. resources to cater to these specific
market segments. Our branch network
already comprises 166 Banking Centres
Our 2016 Performance Our New Strategic Plan island-wide. As we grow in geographical
presence and strength, we are
During the year which saw a steady ‘Aspiration 2020’, our strategic plan
committed to provide the best and most
rise in market interest rates we achieved for 2017-2020 has its basic focus
comprehensive banking products and
YOY growth rates of approximately on growth and is built on certain key
services to people across the country.
22% on both our lending and deposit pillars which have been identified. The
portfolios despite stresses faced by some plan has been developed through wide
of our more significant client segments internal participation and expert external
Optimal Capital Level
we achieved this growth while reducing assistance and we are determined
our NPA ratio. Our CASA ratio stood to execute it diligently to achieve the The Bank is maintaining a healthy Capital
at 32.52% despite the shift witnessed set milestones to realise our vision Adequacy and a solid liquidity position.
towards higher yielding products due of becoming the leading financial In 2016 the Bank reported Core Capital
to rising rates but it is noteworthy that services provider, as recognised by our Adequacy Ratio of 10.74% and Total
a significant portion of this CASA is in stakeholders. Capital Adequacy Ratio of 13.18% which
stable longer term products. are above the mandatory levels.
‘Aspiration 2020’ will focus on harnessing
2016 marked the last year of the five the benefits of the digital revolution that With the introduction of new global
year strategic plan that we launched is sweeping across the industry and regulatory standard – Basel III, Banks will
in 2012. I am pleased to highlight that channelling the resultant efficiencies in require increased capital requirements
during this period we have doubled the to improving interaction with our value with an aim to enhance the quality,
size of the Bank while taking big strides creating customers. Our product and quantity and transparency of capital base
in branch expansion and refurbishment, process improvements are all centered and improve the loss absorbing capacity.
brand equity value, enhancing customer around this concept and will be driven The Bank has already taken the measures
service, new product offerings and IT with our core resolve to serve our to adhere to Basel III requirements on
infrastructure. customers better and in a proactive liquidity and capital coverage.
manner. This we are sure will carry us
through to the targets that we have set
out to achieve in ROA, ROE, Brand equity
and market capitalisation.

Seylan Bank PLC | Annual Report 2016 OUR VALUE CREATION STRATEGY > LETTER FROM THE DIRECTOR/CHIEF EXECUTIVE OFFICER 11
 We have been successful in attracting Appreciation
long-term funding from overseas banks
Our achievements have always been
and Development Finance Institutions
made possible through a team effort
who were keen to support our planned
where everyone – from the members
growth in the SME sector. This is the
of the Board to the newest recruits
first time in our history that the Bank
manning our counters – have contributed
has been able to secure such long-term
wholeheartedly towards achieving our
funding together with technical
goals and I sincerely thank the Board
assistance which we believe will stand in
of Directors, members of Corporate and
good stead for our future expansion.
Executive Management and all members
of our staff for their contribution. I also
wish to express my gratitude to the
Contributing to the former Chairman Mr. Nihal Jayamanne
Communities PC under whose stewardship the Bank
Seylan Bank’s journey towards excellence continued its journey to prosperity and
has always been guided and supported with whom it was my privilege to work
by a strong focus on sustainability and closely and welcome the new Chairman
effective community engagement. Mr. Ravi Dias, a well-known and versatile
veteran in the banking industry.
As a responsible corporate citizen,
Seylan Bank continues to engage with Finally none of this would have been
the community to ensure their well-being. possible without our investors, loyal
We have chosen the field of education customers and all other stakeholders
due to its key social impact and through who have reposed their confidence,
the ‘Seylan Pehesara’ Library Project unwaveringly, in the Seylan Bank and
launched in 2012, we have donated and with whom we look forward to continue
equipped 40 new libraries in 2016 taking our journey towards mutual growth and
the total to 120. prosperity. After all, it’s all about the
Journey!

Kapila Ariyaratne
Director/Chief Executive Officer

21st February 2017

12 OUR VALUE CREATION STRATEGY > LETTER FROM THE DIRECTOR/CHIEF EXECUTIVE OFFICER Seylan Bank PLC | Annual Report 2016
 SUSTAINABLE
STEWARDSHIP
013-086

014 019 022

BOARD OF SENIOR HOW WE GOVERN
DIRECTORS MANAGEMENT
TEAM
Corporate Report of the Board
Governance Report Marketing and
Product Development

068
Committee
022 052
Report of the Board Report of the Board
Audit Committee Governance and
Compliance Committee
HOW WE 046 053
MANAGE RISK
Report of the Board Report of the Related
Human Resources Party Transactions
and Remuneration Review Committee
Committee
047 054
Report of the Board Directors’ Statement on
Nomination Committee Internal Control
048 055
Report of the Auditors’ Report on
Board Integrated Internal Control
Risk Management
Committee
049 057
Report of the Report of the Board of
Board Sustainability Directors of Seylan Bank
Committe PLC on the State of
Affairs of the Company
for the Year
050 058
Report of the Board Annexure to the Report
Credit Committee of the Board of Directors
on the State of Affairs of
the Company
051 065

Seylan Bank PLC | Annual Report 2016 13

14
BOARD OF DIRECTORS

4
Mr. Kapila P. Ariyaratne

8
Mr. P.L.S. Kumar Perera

1
Mr. W.M.R.S. Dias
7

Mr. W.D. Kapila Jayawardena

11

Mrs. Sandya K. Salgado

10

Mr. Anushka S. Wijesinha

5

Rear Admiral B. Ananda J.G. Peiris

2
Mr. Ishara C. Nanayakkara
6

Mr. Samantha P.S. Ranatunga

9

Mr. S. Viran Corea

3
Ms. M. Coralie Pietersz

Seylan Bank PLC | Annual Report 2016

The profiles of the Directors who were 1 Committee, Board Credit Committee
on the Board of Seylan Bank PLC as at (Chairman) and Board Sustainability
31st December 2016 are given below. Mr. W.M.R.S. Dias Committee (Chairman).
Their interests in the ordinary voting, Non-Executive Director/Chairman
non-voting shares and the debentures Skills and Experience:
Qualifications:
of the Bank are mentioned in the ‘Report Mr. Nanayakkara is a prominent
FCIB (UK), LLB, Hubert H.
of the Board of Directors’ published entrepreneur serving on the Boards of
Humphrey Fellow
on pages 62. The directorships/ many corporates and conglomerates
positions held by the Directors in in the region. He initially ventured
Appointed to the Board:
other institutions and the substantial into the arena of financial services
On 29th May 2015 as a Non-Executive
shareholdings in other entities are listed with a strategic investment in Lanka
Director and was appointed as its
in the Annexure to the ‘Report of the ORIX Leasing Company PLC and was
Chairman on 9th May 2016.
Board of Directors’ on pages 65 to 67. appointed to the Board in 2002. Today,
he is the Deputy Chairman of LOLC and
Membership on Board Sub-committees:
the Executive Deputy Chairman of LOLC
Board Nomination Committee, Board
Finance PLC, holding directorships in
Governance and Compliance Committee,
many of its subsidiaries and associate
Board Integrated Risk Management
companies.
Committee and Board Marketing and
Product Development Committee.
Backed by over a decade of
professional experience in the industry,
Other Positions in the Bank:
Mr. Nanayakkara holds the role of
Trustee of the Seylan Bank Employees’
Chairman of Commercial Leasing &
Gratuity Trust Fund.
Finance PLC, one of Sri Lanka’s leading
financial service providers, as well
Skills and Experience:
as LOLC Life Assurance Limited. His
Banker by profession having served
vision to cater to the entire value chain
Commercial Bank of Ceylon PLC for a
of the finance sector is manifested
long period and retired after serving as
in the development of Micro Finance,
its Managing Director/Chief Executive
Islamic Finance, factoring through LOLC
Officer in July 2014. Committee Member
Factors, LOLC Life and General Insurance
of the Ceylon Chamber of Commerce.
Companies and stock broking through
LOLC Securities Limited.
Served on the Boards of Commercial
Development Company PLC, Commercial
Leveraging LOLC Group’s expertise
Insurance Brokers (Pvt) Limited,
in the SME sector, the expansion into
LankaClear (Pvt) Limited, Lanka
the micro sector was spearheaded by
Financial Services Bureau Limited and
Mr. Nanayakkara, who is the Chairman
was a Council Member of the Employers’
of its Micro Credit Companies: LOLC
Federation of Ceylon.
Micro Credit Company Limited, the only
private sector microfinance institution
2 in the country with foreign equity,
and BRAC Lanka Finance PLC. He
Mr. Ishara C. Nanayakkara also holds a directorship at PRASAC,
Non-Executive Director/ the largest microfinance company in
Deputy Chairman Cambodia. Mr. Nanayakkara’s interest in
Qualifications: microfinance lead to the inauguration of
Diploma in Business Accounting LOLC Myanmar Micro Finance Company
and Finance (Aus) Limited, a green field investment in
Myanmar in which he was the founding
Appointed to the Board: Chairman, and currently serves as a
On 24th November 2009 as a Director. His proficiency in micro finance
Non-Executive Director of Seylan in the region is further demonstrated
Bank PLC and was appointed as its by his involvement at strategic level in
Deputy Chairman with effect from LOLC Cambodia Limited, the 5th largest
17th January 2013. microfinance company in Cambodia.

Membership on Board Sub-committees: Mr. Nanayakkara’s motivation to expand

Board Nomination Committee, Board into various growth peripheries is
Human Resources and Remuneration further illustrated through his role as

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP > BOARD OF DIRECTORS 15
 the Executive Chairman of Brown & She is a Council Member of The Institute Cochin – India; Sub Lieutenant Technical
Company PLC and Browns Investments of Chartered Accountants of Sri Lanka Course, Cochin – India; Pacific Fleet
PLC. Through strategic investments, he and has served on many committees Combined Force Maritime Component
is committed to catalysing development of the Institute. Course – Hawaii – USA.
in the growth sectors of the Sri Lankan
economy such as construction. His Appointed to the Board:
4
passion for sustainable investment On 8th January 2009 as an Independent
is reflected through his involvement Mr. Kapila P. Ariyaratne Director
in renewable energy, forestry and Director/Chief Executive Officer
plantations. His involvement in the Membership of Board Sub-committees:
Boards of leading companies of Qualifications: Board Nomination Committee
these sectors reflects such business BSc (Honours – First Class), University (Chairman), Board Human Resources
philosophy. of Colombo. and Remuneration Committee, Board
Credit Committee, Board Sustainability
Endorsing his entrepreneurial spirit, Appointed to the Board: Committee, Board Marketing and
Mr. Nanayakkara received the prestigious On 16th February 2015 as an Executive Product Development Committee, Board
‘Young Entrepreneur of the Year’ Award at Director Governance and Compliance Committee
the Asia Pacific Entrepreneurship Awards and Board Related Party Transactions
(APEA) in 2012. Membership of Board Sub-committees: Review Committee.
Board Credit Committee, Board
Sustainability Committee, Board Other Positions in the Bank:
3 Marketing and Product Development Trustee of the Seylan Bank Employees’
Committee and Board Integrated Risk Gratuity Trust Fund.
Ms. M. Coralie Pietersz
Management Committee.
Independent Director/Senior Director
Skills and Experience:
Qualifications: Other Positions in the Bank: A decorated officer of the Sri Lanka
BSc (Hons) Physics (University of Sussex), Trustee of the Seylan Bank Employees’ Navy counting a service record of over
MBA (Heriot-Watt University, Edinburgh), Gratuity Trust Fund and Seylan Bank 34 years during which period he had
ACA (ICA England and Wales), Employees’ Provident Fund. undergone extensive training in the
FCA (CA Sri Lanka) Indian Navy, Bangladeshi Navy, Royal
Skills and Experience: Navy and US Navy. His naval experience
Appointed to the Board: Mr. Kapila Ariyaratne has been includes serving as the Area Commander
On 23rd September 2013 as an functioning as the General Manager/ – Eastern Naval Command, Western
Independent Director and was Chief Executive Officer of Seylan Bank Naval Command and Southern Naval
designated as its Senior Director with PLC since March 2011. He counts over Command. Twice appointed as the
effect from 9th May 2016. 30 years experience having worked for Deputy Area Commander of Northern
several local and international banks Naval Command and Squadron
Membership on Board Sub-committees: acquiring an in-depth knowledge of all Commander Fast Attack Craft and has
Board Audit Committee (Chairperson), aspects of banking both in a local as taken part in almost all major operations
Board Integrated Risk Management well as in an international context. He is in the North and the East. Had also been
Committee, Board Human Resources a holder of a Diploma in Business and the Director – Naval Administration and
and Remuneration Committee, Board Financial Administration and is a Member Welfare, Director – Naval Personnel &
Governance and Compliance Committee of the present Governing Board of the Training and Director General (Services),
and Board Related Party Transactions Institute of Bankers of Sri Lanka. Sri Lanka Navy.
Review Committee
Was granted the accolades of Rana
5
Skills and Experience: Sura Padakkama (RSP), Vishishta Sewa
Has over 20 years experience at senior Rear Admiral B. Ananda J.G. Peiris Vibhushanaya (VSV), and Uttama Seva
level in corporate finance, accounting Independent Director Padakkama (USP) for his service to the
and auditing in several industries in both Nation, while he was also awarded several
private and public sectors including Qualifications:
medals during his tenure of service
several years of experience in the banking Qualified at the National Defence
in the Navy including Sri Lanka Navy
sector. Currently, she is the Finance College – Dhaka – Bangladesh; Passed
50th Anniversary Medal, President’s
Director of Finlays Colombo Limited, Staff Course at the Naval Staff College
Inauguration Medal (1978), North
Hapugastenne Plantations PLC and – New Port – USA; Holds Diploma
East Operation Medal and Purna Bumi
Udapussellawa Plantations PLC. Prior in Security Studies – Hawaii – USA;
Padakkama.
to joining Finlays Colombo Limited, Followed International Patrol Vessel
Ms. Coralie Pietersz was Group Chief Course – Portsmouth – United Kingdom;
Financial Officer of Richard Pieris & Specialised in Long Navigation Course –
Co. PLC.

16 SUSTAINABLE STEWARDSHIP > BOARD OF DIRECTORS Seylan Bank PLC | Annual Report 2016
Rear Admiral Peiris won the admiration He had been a pioneer in coordinating 8
of the entire nation for the pivotal role and setting up of CIC Agribusiness which
he played as the Director General of the is a premier agricultural company in Mr. P.L.S. Kumar Perera
Sri Lanka Civil Defence Force of Sri Lanka Sri Lanka. He has helped in developing Independent Director
from 2009-2015. His contribution to the seed to shelf concept where 20,000
uplift the living standards of the 40,000 farmer families are helped to bring Qualifications:
men and women in the Civil Defence produce to end consumers. He has also BSc (special) (Mathematics) University
Force, speaks volumes. Through healthy studied the agricultural measurement of Colombo, MSc in Statistics, University
involvement of this workforce, he has and productivity systems in many of Ibadan, MA (Economics and
been able to contribute towards the countries. Econometrics), University of Manchester.
development of agriculture and growth in
numerous spheres in Sri Lanka specially Appointed to the Board:
in war torn, affected forward areas.
7 On 23rd September 2013 as an
Independent Director.
Mr. W.D. Kapila Jayawardena
6
Non-Executive Director Membership on Board Sub-committees:
Qualifications: Board Audit Committee, Board
Mr. Samantha P.S. Ranatunga MBA (Financial Management), Governance and Compliance Committee
Independent Director FIB, Associate, ICEA (London). (Chairman), Board Nomination
Qualifications: Committee, Board Related Party
MBA (UK), BSc (Hons) – University Appointed to the Board: Transactions Review Committee
of Delhi On 1st August 2013 as a Non-Executive (Chairman) and Board Integrated Risk
Director Management Committee.
Appointed to the Board:
On 12th January 2010 as a Non-Executive Membership on Board Sub-committees: Skills and Experience:
Director and was re-designated as an Board Audit Committee Over 22 years of executive and
Independent Director in 2011. managerial experience in the Central
Skills and Experience: Bank of Sri Lanka. Has received extensive
Membership on Board Sub-committees: Former CEO and Country Head of training and exposure in capital markets,
Board Audit Committee, Board Citibank N.A. Sri Lanka. Has varied portfolio management and new financial
Nomination Committee, Board experience in the fields of Investment instruments locally and overseas. Held
Integrated Risk Management Committee Banking, Banking Operations, Audit, the position of Additional Controller of
(Chairman), Board Human Resources and Relationship Management, Corporate Exchange at the time of his retirement
Remuneration Committee (Chairman) Finance, Corporate Banking and from the Central Bank of Sri Lanka and
and Board Marketing and Product Treasury Management. Was appointed has also held the position of Deputy
Development Committee (Chairman). as the Chairman of the Sri Lanka Banks Director, Marketing of the Agricultural
Association (SLBA) in 2003/04. Has Development Authority prior to his
Other Positions in the Bank: served as a President of the American posting at the Central Bank of Sri Lanka.
Trustee of the Seylan Bank Employees’ Chamber of Commerce in Sri Lanka Serves as a consultant in reputed private
Gratuity Trust Fund. in 2006/07 and was appointed to the sector organisations. Has served the
Financial Sector Reforms Committee Task Force appointed by the Central
Skills and Experience: (FSRC). A member of the National Bank on Reforms to Exchange Control
Over 20 years experience in the field of Council of Economic Development and represented the Central Bank at Asia
management, marketing and managing (NCED) and has also served as a Board Pacific Group 3rd Annual Meeting on
FMCG business. Joined the Board of Member of the United States-Sri Lanka Money Laundering held in Australia and
CIC on 21st May 2002, appointed as Fulbright Commission. Joined LOLC in at the Indo-Sri Lanka Director-General
the Chief Operating Officer in February the year 2007 as the Group Managing Level Meeting on Anti-smuggling held in
2005 and as the Managing Director/ Director/CEO and heads all business India in 2003.
Chief Executive Officer in April 2009. He and operating functions of LOLC group.
is a Non-Executive Director of a number He is a member of the main Board of the
of unlisted companies in the CIC Group LOLC Group.
including Akzo Nobel Paints Lanka (Pvt)
Limited and a Non-Executive Director of
Chemanex PLC. He is the Chairman of the
Ceylon Chamber of Commerce and has
led the Sri Lanka Chamber of Commerce
delegations to various countries.

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP > BOARD OF DIRECTORS 17
 9 Membership on Board Sub-committees: over 30 years of management experience
Board Credit Committee, Board Related in both corporate and development
Mr. S. Viran Corea Party Transactions Review Committee. sectors.
Non-Executive Director
Skills and Experience: She is also trained at Johns Hopkins
Qualifications:
Mr. Anushka Wijesinha is an economist University in Baltimore, USA, in Strategic
Bachelor-of-Laws (LL.B) and Master-of-
with a track record of research Communications. She was handpicked by
Laws (LL.M) (University of Colombo),
and advisory work across Asia. He Ogilvy & Mather Worldwide to introduce
Attorney-at-Law.
has published many national and the concept of Brand Activation to
international publications, focusing on Sri Lanka and as the CEO of OgilvyAction,
Appointed to the Board:
innovation, private sector development she launched, led and managed this
On 14th May 2015 as a Non-Executive
and international economics. He is company for twelve years.
Director.
currently the Chief Economist of the
Ceylon Chamber of Commerce where he As a professional marketer, Mrs. Sandya
Membership on Board Sub-committees:
heads the Economic Intelligence Unit. Salgado has helped build and
Board Governance and Compliance
manage iconic brands and authored
Committee, Board Sustainability
Mr. Anushka S. Wijesinha was an Asia groundbreaking marketing strategies
Committee and Board Related Party
Development Fellow of the Korea during her tenure in the corporate
Transactions Review Committee.
Development Institute; he headed sector. During this period, she worked
the Industry, Competitiveness and extensively in the financial and banking
Skills and Experience:
Regulatory Policy Unit at the Institute of sectors managing both local and
Counsel and Legal Consultant with
Policy Studies; was Research Officer to international banking and financial
over 19 years experience at the Bar.
the Presidential Commission on Taxation; brands. Mrs. Sandya Salgado was
His experience in private practice has
and was Assistant Director of Economic awarded the title ‘Marketer of the Year’
included the fields of constitutional and
Affairs at the Government Peace in 2001 for her unique contribution to
administrative law, human rights law,
Secretariat. Mr. Wijesinha has previously marketing through the concept of Brand
commercial law, industrial law, arbitration,
undertaken consultancies for the World Activation. She was also awarded ‘Zonta
contract law and land law. He has been
Bank, ADB, UNDP, GIZ and UNESCAP. Woman of Achievement’ in 2006 in
involved as counsel in a number of
recognition of her contribution to socially
landmark cases of national and public
He is a ‘New Champions’ awardee of the responsible marketing communications in
importance, reported in the Sri Lanka
World Economic Forum and the Curator the country.
Law Reports. In 2012, he was picked as
of the World Economic Forum Global
an Asia Society Asia 21 Young Leader.
Shapers Colombo Hub. Moving into the development sector,
Mrs. Sandya Salgado served as the
He has served as a State Counsel at
Senior Communications Specialist at
the Attorney General’s Department 11
the World Bank, providing advice and
of Sri Lanka for several years and
guidance to manage the image and
has represented in court and advised Mrs. Sandya K. Salgado
the reputation of the Bank and the
Government Departments and State Independent Director
Bank funded projects in Sri Lanka and
Institutions in several important matters.
Qualifications: Maldives. She held this position until
He is also a Graduate Member of the
MBA (International) Edith Cowan she resigned in 2015.
Sri Lanka Institute of Directors (SLID),
University, Perth, Australia, BA (English,
having successfully completed its
French, Linguistics) University of Currently she is the Director of a private
Board Leadership Director Certification
Kelaniya, Sri Lanka, MCIM – UK. company, Film Island, functioning as its
Programme.
Business Strategist, with an objective of
Appointed to the Board: developing Cinema Tourism to Sri Lanka.
10 On 1st December 2016 as an Independent She is also a Managing Partner of her
Director. consulting company Good Karma,
Mr. Anushka S. Wijesinha through which she promotes the concept
Independent Director Membership on Board Sub-committees: of Sustainable Business Management.
Board Human Resources and
Qualifications:
Remuneration Committee, Board Fulfilling her social obligations, she
MA Economics and Development
Sustainability Committee and Board serves as Vice-President of the Sri Lanka
[University of Leeds Business School,
Marketing and Product Development Association of Girl Guides, Board Member
UK], BSc (Hons.) Economics [University
Committee. of Lebara Foundation, Council Member
College London, UK].
of the University of Sri Jayewardenepura
Skills and Experience: and Secretary of the International Film
Appointed to the Board:
Mrs. Sandya Salgado is a specialist Producers’ Association of Sri Lanka.
On 1st December 2016 as an Independent
in Strategic Communications and
Director.
Sustainable Business Management with

18 SUSTAINABLE STEWARDSHIP > BOARD OF DIRECTORS Seylan Bank PLC | Annual Report 2016
Director/Chief Executive Officer Senior Deputy General Managers

SENIOR MANAGEMENT TEAM

1 Mr. Kapila Ariyaratne 2 Mr. Tissa Nanayakkara 3 Mr. Nimal Tillekeratne
Senior Deputy General Manager – Retail Banking Senior Deputy General Manager – Operations

Deputy General Managers

4 Mr. Wijitha Rohana 5 Mr. Somadasa Palihawadana 6 Mr. Chitral De Silva

Deputy General Manager – Branch Credit Deputy General Manager – Treasury Deputy General Manager – Branches

7 Mr. Tilan Wijeyesekera 8 Mr. Ramesh Jayasekara 9 Mr. Delvin Pereira

Deputy General Manager – Chief Risk Officer Deputy General Manager – Consumer Finance
Marketing and Personal Banking

10 Mr. Chanaka Goonewardene 11 Mr. Najill Farouk 12 Mr. Jayantha Amarasinghe

Deputy General Manager – Information Technology Deputy General Manager – Corporate Banking Deputy General Manager – Human Resources

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP 19

 13 Mr. Piyal Hennayake 14 Mrs. Champika Dodanwela

Deputy General Manager – Project Finance Chief Financial Officer

Assistant General Managers

15 Miss Rohini Weerakkody 16 Mrs. Yasanthie Udurawane 17 Mr. Shanaka Perera

Assistant General Manager – Operations Assistant General Manager – Credit Administration Acting Head of Treasury/Chief Dealer

18 Mr. Wasantha Karunaratne 19 Mr. Kapila Rathnayaka 20 Mr. Gerald Wanigaratne

Assistant General Manager – Services Assistant General Manager – Premises Maintenance Assistant General Manager – Information Technology

21 Mrs. Kaushalya Hatch 22 Mr. Aruna Fernando

Head of Legal Assistant General Manager – Credit Risk

20 SUSTAINABLE STEWARDSHIP > SENIOR MANAGEMENT TEAM Seylan Bank PLC | Annual Report 2016
Mr. Kapila Ariyaratne Mr. Chanaka Goonewardene Ms. Yasanthie Udurawane
Director/Chief Executive Officer Deputy General Manager – Assistant General Manager –
BSc (Honours – First Class), Information Technology Credit Administration
University of Colombo Associate Member of Institute of Bankers – AIB – Part I
Overall banking experience – Over 30 Years Sri Lanka Overall banking experience – 34 Years
Master’s in Business Administration –
Mr. Tissa Nanayakkara University of Exeter, UK Mr. Shanaka Perera
Senior Deputy General Manager – Retail Banking Certificate of Executive Management – Acting Head of Treasury/Chief Dealer
AIB – Part I PIM Sri Lanka Master’s in Business Administration –
Overall banking experience – 36 Years Member, Institute Management and Information PIM – University of Sri Jayewardenepura
Systems – UK FIB – Institute of Bankers of Sri Lanka (IBSL)
Mr. Nimal Tillekeratne Overall banking experience – 35 Years PG.Ex. Diploma in Bank Management – IBSL
Senior Deputy General Manager – Operations Diploma in Treasury and Risk
Mr. Najill Farouk Management – IBSL
Associate Member of Institute of Bankers
Sri Lanka Deputy General Manager – Corporate Banking CMA (Australia)
Passed finalist of Executive Diploma in Business Associate of Institute of Bankers Overall banking experience – 26 Years
Statistics from University of Moratuwa Master’s Degree in Business –  University
Overall banking experience – 39 Years of Colombo Mr. Wasantha Karunaratne
Overall banking experience – 33 Years Assistant General Manager – Services
Mr. Wijitha Rohana Diploma in Purchasing and Materials
Deputy General Manager – Branch Credit Mr. Jayantha Amarasinghe Management
Deputy General Manager – Human Resources
Associate Member of Institute of Bankers of Overall banking experience – 6 Years
Sri Lanka Master’s in Business Administration –
Buckinghamshire New University
Postgraduate Diploma in Business and Financial Mr. Kapila Rathnayaka
Administration – The Institute of Chartered Bachelor of Law (LLB), Assistant General Manager –
Accountants of Sri Lanka Attorney-at-Law, Premises Maintenance
Overall banking experience – 37 Years National Diploma in Human Resources BSc – Engineering Honours
Management – Institute of Personnel
MBA (PIM USJ) Chartered Engineer
Management Sri Lanka (Inc)
Mr. Somadasa Palihawadana
Corporate Member of Institution of Engineers
Deputy General Manager – Treasury Postgraduate Diploma in Management –
Sri Lanka Institute of Marketing Overall banking experience – 7 Years
BSc (General) – University of Colombo
Overall banking experience – 10 Years
BTI (Part I) Mr. Gerald Wanigaratne
Overall banking experience – 42 Years Mr. Piyal Hennayake Assistant General Manager –
Deputy General Manager – Project Finance Information Technology
Mr. Chitral De Silva MBA (Information Technology) – University
BSC – Engineering Honours
Deputy General Manager – Branches of Wales UWIC
Postgraduate Diploma in Engineering
Executive Diploma in Business Administration Certified Information System Auditor
(EDBA) – University of Colombo MBA in Management of Technology
Certified Information Security Manager
Overall banking experience – 34 Years Chartered Engineer
Overall banking experience – 33 Years
Member IESL, Graduate Member – SLID
Mr. Tilan Wijeyesekera Overall banking experience – 22 Years Ms. Kaushalya Hatch
Deputy General Manager – Head of Legal
Marketing and Personal Banking Mrs. Champika Dodanwela
Attorney-at-Law
FSLIM, Practicing Marketer (SL) Chief Financial Officer
Overall banking experience – 14 Years
Postgraduate Diploma in Marketing Master’s in Business Administration,
Overall banking experience – 6 Years Fellow Member of ACCA UK
Mr. Aruna Fernando
Associate Member of Certified Assistant General Manager –
Mr. Ramesh Jayasekara Management Accountants, Credit Risk
Chief Risk Officer Fellow Member of Institute of Bankers Sri Lanka
Master’s in Business Administration – PIM,
Associate of The Institute of Chartered BSc Applied Accounting University of Sri Jayewardenepura,
Accountants of Sri Lanka BSc Management AIB (Sri Lanka)
Bachelor of Commerce (First Class),
Overall banking experience – 25 Years Postgraduate level Certificate Course in
University of Colombo
Modern Commercial Banking – PIM, University
Associate of Chartered Institute of Ms. Rohini Weerakkody of Sri Jayewardenepura
Marketing – UK
Assistant General Manager – Operations Special Course Credited by GARP on Bank Risk
Associate of Institute of Certified Management, Euromoney Learning Solutions
Associate of the Institute of Bankers –Sri Lanka
Management Accountants
Diploma in Bank Management – IBSL Overall banking experience – 28 Years
Overall banking experience – 12 Years
Master’s in Business Administration
(Hudersfield)
Mr. Delvin Pereira
Deputy General Manager – Consumer Finance ICA International Diploma in Compliance –
International Compliance Association
Master’s in Business Administration –
University of Western Sydney Overall banking experience – 33 Years

Certified Management Accountant – Australia

Intermediate in Banking – Sri Lanka
Overall banking experience – 30 Years

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP > SENIOR MANAGEMENT TEAM 21
 Chairman’s Statement Statements and Disclosures in confident that the governance practices
compliance with Section 3 (1) (xvi) of established are continuously improved
HOW WE GOVERN

The importance of corporate

the Banking Act Direction No. 11 of 2007 and sustained.
governance cannot be overstated
on Corporate Governance (as amended)
in sustaining trust in business. A
and with Section D.5.1 of the Code of As required under principle D.4.2 of the
very good standard of corporate
Best Practice (2013) on Corporate Code of Best Practice on Corporate
governance and reporting are
Governance jointly issued by the Governance, I affirm that to the best of
vital for the effective functioning
Securities and Exchange Commission of my knowledge, there was no violation
of markets, benefiting investors,
Sri Lanka and The Institute of Chartered of any of the provisions of the Code of
stakeholders and the wider public
Accountants of Sri Lanka are made in the Business Conduct and Ethics.
interest. Adherence to corporate
Annual Corporate Governance Report on
governance codes should be
the pages that follow. I wish to state that Yours sincerely,
followed up for a healthy corporate
the recommendations of the Examiners
culture ensuring long-term
of the Central Bank of Sri Lanka and
sustainability of business.
the External Auditors pursuant to their
CORPORATE GOVERNANCE

respective reviews have helped the Bank

The Board of Seylan Bank
in improving its Corporate Governance W.M.R.S. Dias
PLC focuses on influencing,
practices and processes. Chairman
assessing and monitoring good
corporate culture with a view to
With the commitment and support of the 21st February 2017
strengthening same throughout
Board of Directors and the management Colombo
the organisation. To put these
in implementing and maintaining a good
efforts into perspective, the
governance culture within the Bank, I am
Bank has in place a Corporate
Governance Framework formulated
by the Board Governance and
Compliance Committee and
approved by the Board.

Governance Related Highlights/Initiatives of the Board during the Year – 2016

8th May Mr. Nihal Jayamanne PC, Independent Director/Chairman retired in compliance with Section 3 (3) (i) of the
Banking Act Direction No. 11 of 2007 on Corporate Governance (as amended) on reaching the age of 70 years.

9th May Non-Executive Director, Mr. W.M.R.S. Dias was appointed as Chairman.

9th May Independent Director, Ms. Coralie Pietersz was appointed as Senior Director in compliance with
section 3 (5) (ii) of the Banking Act Directions on Corporate Governance.

30th May Board Sub-committees were reconstituted.

28th July Board approved the engagement of Messrs. Boston Consulting Group, India for its next four-year Strategic
Plan – 2017-2020.

29th The responsibilities of the Board Governance and Compliance Committee in relation to the ‘Review of Related
September Party Transactions’ were vested in the Related Party Transactions Review Committee.

1st December Mr. Anushka S. Wijesinha and Mrs. Sandya K. Salgado were appointed as Independent Directors to the Board.

Seylan Bank PLC’s Governance Framework

Seylan Bank PLC is a licensed commercial bank and a public limited liability company listed on the Main Board of the Colombo
Stock Exchange. Seylan Bank’s Corporate Governance Framework is mainly founded on the Banking Act Direction No. 11 of
2007 on Corporate Governance for Licensed Commercial Banks in Sri Lanka issued by the Monetary Board of the Central Bank
of Sri Lanka under Section 46 (1) of the Banking Act No. 30 of 1988 (as amended) (hereinafter referred to as the ‘Banking Act
Directions’), other Banking Act Directions such as the Directions relating to ownership of issued capital carrying voting rights
and risk management; provisions of the Companies Act No. 07 of 2007; the Articles of Association of the Bank and the Code of
Best Practice (2013) on Corporate Governance jointly issued by the Securities and Exchange Commission of Sri Lanka and The
Institute of Chartered Accountants of Sri Lanka and; the Rules of the Colombo Stock Exchange as amended from time to time.

22 SUSTAINABLE STEWARDSHIP Seylan Bank PLC | Annual Report 2016

The Articles of Association of the Bank
is adopted in line with the provisions of An overview of the Bank’s Governance Structure is illustrated below:
the Companies Act No. 07 of 2007 and
the Banking Act No. 30 of 1988 and its
Shareholders
Directions. The Bank is governed by the
regulations contained in the current
Articles, subject however to repeal,
alteration or addition to the Articles Director/Chief
External Auditors Board of Directors
by special resolution when deemed Executive Officer
necessary and appropriate. Where the
provisions of the Banking Act No. 30 of
1988 (as amended) and the Banking Act Company Secretary Governance and Marketing and Product
Direction No. 11 of 2007 on Corporate Compliance Development
Governance (as amended) supersedes
that of the Articles of Association of Nomination Credit

Sub-committees
the Bank, provisions of the Banking Act
and the said Directions prevail over the

Board
provisions contained in the Articles of Sustainability Audit
Association. However, where the Articles
of Association of the Bank set a more Integrated Risk Human Resources
stringent standard than that specified in Management and Remuneration

the Banking Act and/or Directions, such

Related Party
provisions in the Articles of Association Transactions Review
will be followed by the Bank {(Refer:
Section 3 (9) (iv) of the Banking Act Executive
Direction No. 11 of 2007 on Corporate Management
Governance) (Banking and Directions)}. Committees

The Board of Directors proactively

adopts governance policies and practices Head of Internal Management and
Chief Risk Officer Head of Compliance
designed to align the objectives of the Audit Other Employees
Bank with those of its stakeholders
as envisaged in its Vision and Mission Reporting Appointing

Statement and endeavour to promote

standards of ethical behaviour and risk
management across the organisation. Corporate Governance Compliance Report
For purposes of compliance with Section 3 (1) (xvi) of the Banking Act Direction No. 11
of 2007 on Corporate Governance (as amended) and with Section D.5.1 of the Code
Bank’s Governance Principles
of Best Practice (2013) on Corporate Governance jointly issued by the Securities and
Seylan Bank’s approach to corporate Exchange Commission of Sri Lanka (SEC) and The Institute of Chartered Accountants
governance is guided by the core of Sri Lanka (ICASL), the statements and disclosures made from pages 24 to 45 shall
principles of ‘Ethical Culture’, be deemed as the Annual Corporate Governance Report of the Bank.
‘Stewardship’, ‘Independence’,
‘Oversight of Strategy’, ‘Oversight of Risk’,
‘Accountability’, ‘Transparency’ Rules of the Colombo Stock Exchange (CSE)
and ‘Continuous Improvement’. Relating to Corporate Governance
The Bank being a listed entity is bound by and at all times has complied with the
applicable Rules and Circulars of the CSE and the Central Depository Systems (Pvt)
Limited as amended or replaced from time to time including the corporate governance
principles. In terms of Section 7.10 all listed entities are required to include affirmative
statements relating to their compliance with the Corporate Governance Rules of the
CSE. However, in terms of Section 7.10 (c) of the CSE Rules listed licensed commercial
banks (LCBs) are deemed exempted from disclosure requirement under Section 7.10
since such LCBs are mandatorily required to disclose their level of compliance under
the relevant law and regulations, i.e. the Banking Act and Banking Act Directions on
Corporate Governance. The Bank has adequately disclosed its level of compliance
under the Banking Act Directions on Corporate Governance No. 11 of 2007
(as amended) in this Report.

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP > CORPORATE GOVERNANCE 23
 Compliance with the Principles of the Code of Best Practice (2013) on Corporate
Governance jointly issued by the Securities and Exchange Commission of Sri Lanka (SEC)
and The Institute of Chartered Accountants of Sri Lanka (ICASL) (hereinafter referred to as
the ‘Code’ or ‘Code of Best Practice’ in this Corporate Governance Report)
In compliance with Principle D.5.1 of the Code of Best Practice, the Bank’s extent of compliance with the principles and provisions
of the Code under the following main areas of the Code are disclosed below:

Sections

Directors A.1 to A.11

Directors’ Remuneration B.1 to B.3
Relations with Shareholders C.1 to C.3
Accountability and Audit D.1 to D.5
Institutional Investors E.1 and E.2
Other Investors F.1 and F.2
Sustainability Reporting G

A.1 Directors
An Effective Board to Direct and Control the Company
The Directors of the Bank’s Board are professionals with diversified expertise in the fields of banking, finance, accounting, insurance,
law, economics, research, marketing, strategic communication, security, intelligence, etc. as highlighted below:

Director Expertise

Mr. W.M.R.S. Dias – Non-Executive Director/Chairman Banking and Finance

Mr. I.C. Nanayakkara – Non-Executive Director/Deputy Chairman Business, Finance and Insurance
Ms. M.C. Pietersz – Independent Director/Senior Director Corporate Finance, Accounting, Auditing and Banking
Mr. K.P. Ariyaratne – Director/Chief Executive Officer (CEO) Banking and Finance
Rear Admiral B.A.J.G. Peiris – Independent Director Security, Intelligence, Administration 
Mr. S.P.S. Ranatunga – Independent Director Marketing and Management
Mr. W.D.K. Jayawardena – Non-Executive Director Banking, Finance, Treasury Management and Audit
Mr. P.L.S.K. Perera – Independent Director Banking (Central Bank), Exchange Control, Administration
Mr. S.V. Corea – Non-Executive Director Law – Commercial, contract, civil, industrial, constitutional
and human rights
Mr. A.S. Wijesinha – Independent Director Macroeconomics, Research, Policy Advisory
Mrs. S.K. Salgado – Independent Director Strategic Communications and Sustainable Business Management

Further information on each of the Directors’ professional background and work-related experience is provided on pages 15 to 18.
(Profiles of the Directors).

24 SUSTAINABLE STEWARDSHIP > CORPORATE GOVERNANCE Seylan Bank PLC | Annual Report 2016
Board Meetings
Twelve regular Board meetings were held at monthly intervals and five special Board meetings were held at different times of the
year to consider important and/or urgent issues. The details of the eligibility for attendance as against actual attendance of the
Directors at the twelve regular meetings and the two (out of the five) special meetings convened with due notices are given below:

Director/Status/Position Date of Appointment *No. of Meetings No. of Attendance

(and Changes during the Year 2016) Eligible to have Meetings as a
Attended Attended Percentage (%)

Mr. Nihal M. Jayamanne PC – Independent Director/Chairman 30th December 2008 5 5 100

(retired on 8th May 2016)
Mr. W.M.R.S. Dias – Non-Executive Director/Chairman 29th May 2015 14 14 100
(appointed as Chairman with
effect from 9th May 2016)
Mr. Ishara C. Nanayakkara – Non-Executive Director/Deputy Chairman 24th November 2009 14 11 78.57

Ms. M. Coralie Pietersz – Independent Director/Senior Director 23rd September 2013 14 12 85.71
(appointed as Senior Director
with effect from 9th May 2016)
Mr. Kapila P. Ariyaratne – Director/Chief Executive Officer 16th February 2015 14 14 100

Rear Admiral B. Ananda J.G. Peiris – Independent Director 8th January 2009 14 12 85.71

Mr. Samantha P.S. Ranatunga – Independent Director 12th January 2010 14 12 85.71

Mr. W.D. Kapila Jayawardena – Non-Executive Director 1st August 2013 14 12 85.71

Mr. P.L.S. Kumar Perera – Independent Director 23rd September 2013 14 13 92.86

Mr. S. Viran Corea – Non-Executive Director 14th May 2015 14 14 100

Mr. Anushka S. Wijesinha – Independent Director 1st December 2016 **1 1 100

Mrs. Sandya K. Salgado – Independent Director 1st December 2016 **1 1 100

* One adjourned meeting and three Special/Emergency Meetings held (with the required quorum present) were not taken into account for attendance eligibility due to
short notice of less than one working day given.
** Eligibility excluded in respect of one special meeting due to short notice for such meeting in respect of these two Directors who were appointed on 1st December 2016.

Board Responsibilities CEO attends those meetings of the Board’s responsibilities and procedures
Some of the key responsibilities of the Committees in which he is not a member, in terms of the applicable rules,
Board are: determining the structure on invitation. regulations and best practices.
of the management of affairs of the
Reports of the Board Sub-committees Independent Judgement
Bank, delegating business operations
summarising the activities of the
to Key Management Personnel led by of Directors
Committees during the year and signed
the CEO appointed by the Board, policy Directors exercise their independent
by the respective Chairpersons are
making and risk management for the judgement to bear on Board proceedings
published in the Annual Report (refer
business. Banking Act Directions – and assist in strategy formulation and
pages 54 to 56 ) and the attendance
Section 3 (1) – Board Responsibilities direction at Board level and at Board
of the respective Directors who are
in the table reporting compliance with Sub-committee level on matters brought
members of these Committees is
Banking Act Directions (page 32 to 35) up before them for recommendations,
tabulated and given on page 26.
provides a comprehensive update of the decisions or approvals which otherwise
responsibilities carried out by the Board could have materially interfered with
Compliance with Related unfettered judgement.
of Directors.
Regulations and Access to
Independent Professional Advice Dedication of Adequate Time
Board Sub-committees
A Board approved procedure is in place and Effort by the Board and
The Board is authorised under the
enabling Directors to seek independent Board Committees
Articles of Association to delegate
professional advice at the Bank’s expense
its powers and responsibilities to the Notice of meetings, agendas and the
as and when such advice is considered
Committees established by the Board. related papers/reports were circulated
necessary.
The Committees assist the Board minimum seven days prior to the
in discharging its responsibilities. meetings with sufficient time for the
Advice and Services of the Directors to review the papers and
Memberships of the Committees
Company Secretary call for additional information and/or
are structured so as to derive the
The members of the Board have access clarifications. Directors have devoted
best use of the skills across the
to the advice and services of the adequate time at Board meetings as
Board. All Committees are chaired by
Company Secretary in relation to the well as Board Sub-committee meetings
Non-Executive Directors. The Director/
during the year.

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP > CORPORATE GOVERNANCE 25
 Training for Directors
When a Director is appointed to the Board, the Company Secretary presents them with an updated ‘Introductory document for new
Directors’ with relevant material information of the Bank and other guidelines for Directors including the Corporate Governance
Framework, relevant policies, codes, declarations and returns for the Directors’ perusal and compliance. Regular presentations
of different business areas by the respective heads of business units were also arranged and made at Board meetings during
the year which provided an opportunity for Directors to receive a comprehensive understanding and update on the progress of
those functions. During the year, some Directors participated in conferences and forums such as Economic Forums and sessions
organised by vendors on digital banking.

Directors’ Attendance at Board Sub-committee Meetings During the Year 2016 – Number of Meetings Attended of the Number
of Meetings Eligible to Attend by Each Director at Each Sub-committee Meeting are as follows:
Director Audit Integrated Human Nomination Credit Marketing Sustainability Governance Related Party
Risk Resources and and Product and Transactions
Management Remuneration Development Compliance Review

Mr. Nihal M. Jayamanne PC –

Independent Director/Chairman (M) (C) (M) (M) (C)
(retired on 8th May 2016) 1 of 1   2 of 2 3 of 3   1 of 1   1 of 1

Mr. W.M.R.S. Dias –

Non-Executive Director/Chairman (M)  (M)  (M)  (M) (M)
(appointed as Chairman on 9th May 2016) 5 of 5 2 of 2   3 of 3   1 of 1   4 of 4

Mr. Ishara C. Nanayakkara – (M) (M) (C) (C)

Non-Executive Director/Deputy Chairman     2 of 4 4 of 7 14 of 21   2 of 2  

Ms. M. Coralie Pietersz –

Independent Director/Senior Director
(appointed as Senior Director on (C) (M) (M) (M) (M)
9th May 2016) 11 of 11 4 of 4 3 of 4         3 of 4 1 of 2

Mr. Kapila P. Ariyaratne –  (M) (M) (M) (M)

Director/Chief Executive Officer   3 of 3     20 of 21 2 of 2 2 of 2  

Rear Admiral B. Ananda J.G. Peiris – (M) (C) (M) (M) (M) (M) (M)
Independent Director     4 of 4 6 of 7 16 of 21 2 of 2 1 of 2 4 of 4 2 of 2

Mr. Samantha P.S. Ranatunga – (M) (C) **(M/C) (M) (C) (M)
Independent Director 8 of 11 4 of 4 4 of 4 7 of 7   2 of 2 1 of 2  

Mr. W.D. Kapila Jayawardena –  (M)

Non-Executive Director 4 of 6

Mr. P.L.S. Kumar Perera –  (M) (M) **(M/C) (C)

Independent Director   3 of 3 20 of 21     4 of 4 2 of 2

Mr. S. Viran Corea – (M) (M) (M)

Non-Executive Director           2 of 2 3 of 4 2 of 2

Mr. Anushka S. Wijesinha – Appointed to the Board with effect from 1st December 2016 – Not appointed to any Committees during the
Independent Director period ended 31st December 2016.

Mrs. Sandya K. Salgado – Appointed to the Board with effect from 1st December 2016 – Not appointed to any Committees during the
Independent Director period ended 31st December 2016

C – Chairman of Committee M – Member of the Committee

**M/C – Appointed as the Chairman of the Committee subsequent to the retirement of Mr. Nihal M. Jayamanne PC

Note: Additionally, 3 special meetings of the Audit Committee were held on 3 separate days on which regular meetings of the Audit Committee were held.

A.2 Chairman and duties. The CEO functions as the apex responsibilities and make an active
Chief Executive Officer executive-in-charge of the day-to-day contribution to the Board’s affairs.
management of the Bank’s operations He ensures that the Board collectively
The role of the Chairman and that
and business. He is responsible for the decides on key issues and discharges
of the CEO are separate and are not
overall management of the operations its responsibilities effectively. A further
performed by the same individual. There
and business of the Bank as delegated description of the Chairman’s Role is
is a clear division of responsibilities
by the Board. provided under Direction ref: 3 (5) (iv)
of the Chairman, the Board and the
in the table reporting compliance with
executive management all of which
Banking Act Directions (page 38).
are duly documented. The Chairman A.3 Role of the Chairman
does not engage in activities involving
The Chairman provides leadership to
direct supervision of Key Management
the Board and ensures that the Board
Personnel or any other executive
members effectively discharge their

26 SUSTAINABLE STEWARDSHIP > CORPORATE GOVERNANCE Seylan Bank PLC | Annual Report 2016
A.4 Financial Acumen Independent Non-Executive Directors or A.7 Appointment to the Board
As highlighted in first paragraph of item one-third of the total number of Directors,
whichever is higher. This requirement
Procedure for Appointment of
A.1, the Board has adequate number New Directors and the Board
of Directors who possess knowledge was maintained throughout the year as
described in the preceding paragraph. Nomination Committee
and skills in accounting and finance to
The Policy Governing Appointment
contribute and offer guidance to the
The Board has determined the of Directors which is in place takes
Board to decide on matters which involve
independent and non-independent status cognisance of the Board’s role in this
financial analysis and finance related
of the Non-Executive Directors based regard. The Board has vested with the
reviews.
on the declarations submitted by them Board Nomination Committee (BNC), its
during the year. The declaration takes responsibility of identifying individuals
A.5 Board Balance into account the criteria defined in the qualified to become members of the
Banking Act Directions No. 3 (2) (iv), Board and recommending candidates
Board Composition
Section 7.10.4 of the Rules of the for the Board’s selection as Directors
The Board follows the provisions of its Colombo Stock Exchange and the Code whenever the requirement arises for the
Articles of Association and that of the of Best Practice. No circumstances appointment of an additional Director
Banking Act Direction Section 3 (2) (i) have arisen for the determination of or filling of a casual vacancy on the
where it is stated that the number of independence beyond the criteria set out Board. This key responsibility is defined
Directors on the Board of a licensed in the said Directions and guidelines. in Terms of Reference of the BNC. As at
commercial bank shall not be less than 31st December 2016, the BNC comprised
seven and not more than thirteen. No five Non-Executive Directors, majority of
persons were appointed as alternate Proceedings of Board Meetings
whom were independent and was chaired
directors to the Directors on Board during Minutes of Board meetings are recorded
by Independent Director, Rear Admiral
the year. Since the positions of Chairman by the Company Secretary in sufficient
B.A.J.G. Peiris. Please refer page 48 for
and CEO are held by two separate detail to enable a proper assessment to
the Report of the Board Nomination
individuals there was no requirement to be made of the extent of deliberations
Committee for further information on the
appoint a Senior Independent Director. and any decisions taken at the meetings.
Committee.
However, in terms of the Banking The minutes include concerns raised by
Act Directions, Ms. M.C. Pietersz was Directors and also the ultimate decisions
Although, the Board has delegated
appointed as the Senior Director with made by the Board. Directors do not
the responsibility for the selection
effect from 9th May 2016 pursuant to the participate when transactions/matters
and appointment of Directors to the
appointment of Non-Executive Director, in which they have an interest (Directors’
Nomination Committee, subject to the
Mr. W.M.R.S. Dias as Chairman of interest or related party interest) are
approval of the Central Bank of Sri Lanka,
the Bank, who was determined as discussed for decision-making. The
the Board is ultimately responsible
‘non-independent’ being nominated by Board discussed matters without the
for the selection and appointment of
Sri Lanka Insurance Corporation Limited, presence of the Director/CEO when
Directors. They are also responsible when
material shareholder of the Bank. matters concerning the Director/CEO
current Directors come up for re-election
were discussed at Board meetings.
with the best interest of the Bank in mind.
The Board comprised 10 Directors
during the period 1st January to
A.6 Information to the Board Disclosure of Appointment of
8th May 2016, nine Directors from
9th May to 30th November 2016 and Timely and adequate information/ Directors and Their Profiles
11 Directors from 1st December to documents (soft copy format) are Appointments of new Directors to the
31st December 2016. The composition provided to the Board together with the Board are informed to the shareholders
included one Executive Director and agenda and minutes of the previous through announcements to the Colombo
four Non-Independent Non-Executive meetings seven days prior to the regular Stock Exchange and also on the Bank’s
Directors at all times while the balance meetings. When a notice of a special/ corporate website. The status of the
number consisted of Independent emergency meeting is given, the Director appointed (Executive,
Non-Executive Directors. As at purpose of such meeting is duly briefed Non-Executive or Independent), and a
31st December 2016, the Board consisted and related information/documents brief profile of the Director including
of one Executive Director (CEO) and 10 (if any) provided. The members of the the nature and expertise in relevant
Non-Executive Directors of whom six management attend the meetings on-call functional areas, names of companies
were Independent Directors. to respond to queries raised at Board in which he/she held/hold directorships
meetings and to provide additional or memberships are also conveyed in
information when required by the Board the said disclosure. The Bank complied
Non-Executive Directors and members. The Chairman and/or the CEO with this request when Directors,
Independent Directors briefs the Directors on issues arising at Mr. A.S. Wijesinha and Mrs. S.K. Salgado
The Board follows the requirements Board meetings and they also ensure to were appointed to the Board during the
of the Banking Act Directions {Refer brief the new Directors on the Board, the year 2016.
Section No. 3 (2) (iv)}where it is stated background to the matters arising from
that the Board shall have at least three the proceedings of the past meetings.

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP > CORPORATE GOVERNANCE 27
 A.8 Re-election of Directors Direction 3 (2) (x) of the Banking Act The responses to the Board evaluation
Directions, the Directors appointed are questionnaire from the individual
Re-election of Non-Executive subject to election by the shareholders at Directors remain confidential with the
Directors Longest in Office the AGM that follows their appointment. Company Secretary. The Directors’
The re-election of Non-Executive Directors Proposals in terms of the said Articles individual responses to the questionnaire
is carried out in accordance with the and the said Direction for the election together with any remarks and
provisions of the Articles of Association of Mr. Anushka S. Wijesinha and comments are collated by the Company
of the Bank (‘the Articles’). One-third of Mrs. Sandya K. Salgado who were Secretary and submitted to the Board for
the Directors (excluding the Executive appointed on 1st December 2016 have information and/or discussion. Areas of
Directors and any other Directors been included in the Agenda for the AGM concerns are discussed and deliberated
appointed to fill casual vacancies) who scheduled to be held on 31st March 2017. collectively by the Board and processes
are longest in office retires by rotation at for improvement as appropriate are
the Annual General Meeting (AGM) and Reference to the profiles of the Directors decided by the Board. The annual
are re-elected if eligible. The Nomination who were proposed for election/re-election evaluation of the Board’s performance
Committee recommends the re-election is made in the Notice of Meeting/Agenda for 2016 was carried out by the Board in
of the Directors who are due to retire in for the AGM to enable shareholders to February 2017, pursuant to a review by
this manner taking into account their make an informed decision. the Board Governance and Compliance
contribution to the Board. Pursuant Committee.
to obtaining Board’s concurrence of A.9 Annual Appraisal of
the Committee’s recommendation, it Performance of Board and The Board of Directors also submitted
is included in the Agenda of the AGM Board Sub-committees their own self-assessments reporting
seeking shareholders’ approval for the on their extent of contribution to the
The Board has in place a formal process
re-election. Board and to the Board Sub-committees
for reviewing its own performance
they represent while each of the Board
Directors who were subject to re-election and that of its Committees annually.
Sub-committees also carried out an
and re-elected by shareholders at the Every Director is required to complete
evaluation of the performance of the
AGMs held during the last three years are a detailed questionnaire which aims
respective Committee and submitted their
as follows: to obtain Directors’ feedback on the
reports to the Board in January 2017 and
Board’s performance on many aspects
February 2017, respectively.
2014 Rear Admiral B.A.J.G. Peiris including: Structure of the Board and
its Committees; Board culture and
2015 Mr. Nihal Jayamanne PC and A.10 Disclosure of Information
relationships with stakeholders; meeting
Mr. I.C. Nanayakkara in Relation to Directors in the
processes; effectiveness of Board
2016 Rear Admiral B.A.J.G. Peiris and proceedings; implementation of strategy; Annual Report
Mr. S.P.S. Ranatunga evaluation of performance against goals The following information is disclosed
and targets of the CEO and the KMPs; in the sections of this Annual Report as
The Board Nomination Committee succession planning and knowledge and mentioned below:
identified in terms of Article 83 of skills update.
the Articles and recommended the
re-election of Non-Executive Director, Description – Section Disclosing the Requirement Page/s
Mr. W.D.K. Jayawardena and Independent
Name, qualifications and brief profile; nature and expertise in relevant functional areas 15-18
Director Ms. M.C. Pietersz who are due to – Profile of the Directors
retire by rotation in terms of Article 82 of
Whether Executive, Non-Executive and/or Independent 15; 22;
the Articles which said recommendations – Profile of the Directors; Corporate Governance Report; Corporate Information; 290;
were concurred by the Board and have Board and Board Sub-committee Attendance Tables; Report of the Board of Directors 25; 26;
been included in the Agenda for the AGM on the State of Affairs of the Company (‘Directors’ Report’) 58
scheduled to be held on 31st March 2017.
Immediate family and/or material business relationships with other Directors –
– Not applicable – as no Director has any immediate family and/or material business
Directors Appointed for Specified relationship with other Directors. Directors have submitted declarations in this regard.
Term Subject to Election by the zz Names of listed companies in Sri Lanka in which the Director concerned serves 65-67
Shareholders as a Director
In terms of the Banking Act Directions zz Number of Board seats by each Director indicating listed and unlisted companies
on Corporate Governance {Direction and whether in an Executive or Non-Executive capacity
– Annexure to the Directors’ Report
No. 3 (2) (ii) and No. 3 (3) (i)}, the total
period of service of a Director other than Number and percentage of Board meetings attended during the year 25
– Board meetings Attendance Table
a Director who holds position of Chief
Executive Officer shall not exceed nine Names of Board Committees in which the Director serves as Chairman or member 15;26;
years subject to the age limit of 70 years – Profile of the Directors; Board Sub-committee Attendance Table; Reports of the 46-54
respective Sub-committees
whichever occurs first. In terms of Article
89 of the Articles of Association and Committee meetings attended during the year 26
– Board Sub-committee Attendance Table

28 SUSTAINABLE STEWARDSHIP > CORPORATE GOVERNANCE Seylan Bank PLC | Annual Report 2016
A.11 Appraisal of Chief Executive Director/CEO’s (Executive Director) the date of the AGM. The Form of Proxy
Officer (CEO) remuneration and benefits are aligned provides instructions to shareholders as
with the actual performance and market to the completion of the form and voting
The Bank has a formal process for the
compensation levels. They are subject to procedures. This provides an opportunity
evaluation of the CEO. Pursuant to
periodic review by the Human Resources to all shareholders to attend the AGM
the final approval of the budget for the
and Remuneration Committee and by person or by proxy and obtain
year by the Board, at the beginning of
approval of the Board. clarifications on any issues of concern
the year the Board Human Resources and
relating to the Bank and an opportunity
Remuneration Committee in consultation
Non-Executive Directors are paid a to raise issues before voting on matters
with the CEO agree on performance
monthly professional fee and fee for submitted for the shareholders’ approval.
objectives and targets (also referred to
attending Sub-committee meetings
as Key Performance Indicators or KPIs)
which reflect their time commitment and At the last AGM of the Bank which was
aligned with the business strategy of
responsibilities of their role as members held on 31st March 2016, approximately
the Bank.
of the Board and Board Sub-committees. 68% exercised their votes by attending
The Board evaluates the performance Non-Executive Directors are not eligible in person or by proxy. Proxy votes are
of the CEO upon the finalisation of the for performance-based remuneration separately counted and declared at the
Audited Financial Statements for schemes and other performance outset of the Annual General Meeting
related bonuses. and also recorded in the Minutes.
the financial year taking into account
the targets set, the operating An automated process is in place to
Any other payments for the purpose of count the two way proxies received.
environment and the reasons in cases
sign on, retention or termination of staff All members of the Board of Directors
where the performance has been below
members which are not set out in the are present at Annual General Meeting
agreed targets.
employment contracts is reviewed by unless otherwise due to unavoidable
the Human Resources and Remuneration circumstances they have requested to
B.1 Directors’ Remuneration Committee and approved by the Board be excused and such request is informed
Procedure of Directors, before being agreed upon. by the Chairman to the shareholders
A Remuneration Policy recommended at the start of the AGM. Based on the
by the Board Human Resources and subject matter of the question raised,
B.3 Disclosure of Remuneration
Remuneration Committee and approved the Chairman or the Director/CEO or the
Details relating to the composition Director chairing the Sub-committee
by the Board is in place which specifies
of the Board Human Resources and which overlooks the particular subject
the policy for remuneration and
Remuneration Committee its scope, responds to the questions. A separate
compensation to the Board of Directors,
responsibilities, the Bank’s policy on resolution is proposed for each item of
the CEO, Senior Management and other
remuneration, etc. are disclosed in the business providing the shareholders the
staff. Directors collectively decide on the
Report of the Board Human Resources opportunity to consider and decide each
CEO’s remuneration and benefits as well
and Remuneration Committee on page item separately.
as the professional fees and any benefits
47 of the Annual Report. Aggregate
payable to Non-Executive Directors as
remuneration paid during the year to Key
recommended by the Committee. The C.2 Communication
Management Personnel (KMPs) including
Committee seeks independent advice to
the Executive Director and Non-Executive with Shareholders
determine revisions and compensation
Directors is disclosed under the Banking The key channel of disseminating timely
packages when deemed necessary to
Act Directions {Refer Section 3 (8) (ii) (f)} information to the shareholders is the
discharge these responsibilities.
in the table reporting compliance with announcements via the Colombo Stock
Banking Act Directions page 45. Exchange whilst the Annual Report
B.2 Level and make up of and the Annual General Meeting can
Directors’ Remuneration be considered as the primary modes
C.1 Constructive use of Annual
The levels of remuneration of both of communication of the Bank with
General Meeting and Conduct
Executive and Non-Executive Directors the shareholders. A Board approved
of General Meetings Shareholder Communication Policy is
are determined by the Board Human
The Annual General Meeting (AGM) in place and published in the Bank’s
Resources and Remuneration Committee.
is the principal forum in which the corporate website www.seylan.lk. The
The Board is mindful that remuneration
Directors account to the shareholders objective of the Policy is to enhance
offered is adequate to attract and retain
for their stewardship of the Company. long-term shareholder relationship
the services of the Directors. The Bank
Requisite Notice together with the Form through regular communication.
looks at market remuneration levels of
of Proxy and a copy of the Annual Report Shareholders may at any time direct
Directors, CEOs and key positions in
complying with the provisions of the queries, request for publicly available
determining the remuneration to those
Companies Act No. 07 of 2007, CSE Rules information relating to the Bank,
positions in the Bank and also when new
and the Articles of Association of the provide comments and suggestions
appointments are being considered to
Bank are dispatched to all shareholders to the Directors or management or
key positions.
not less than fifteen working days prior to the Company Secretary of the Bank.

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP > CORPORATE GOVERNANCE 29
 The Company Secretary ensures Directors’ Report
that all shareholder queries/requests The Report of the Board of Directors on the State of Affairs of the Company contains
relating to their shareholding are duly declarations of Directors amongst others; that the Company has not engaged in any
addressed and responded effectively activities which contravenes laws and regulations; declaration of all material interests
within a reasonable timeframe. Any in contracts; statements relating to equitable treatment of shareholders, that the
correspondence which requires the Company is a going concern and effectiveness of internal controls.
management’s or Board’s attention is
referred to them accordingly. The following disclosures as required by the Code are included in this Annual Report:

The Bank also complies with the Rules Principle Disclosure and Section of the Annual Report/Comment Page/s
of the Colombo Stock Exchange (CSE)
in promptly disseminating corporate D.1.3 Statements of Responsibilities for Preparation and Presentation
announcements to the CSE which are of Financial Statements
published on the CSE’s website and later zz Directors’ Responsibility for Financial Reporting 157
updated to the Bank’s page of the CSE zz Report of the Auditors 160
website www.cse.lk. The Board reviews
zz Directors’ Statement on Internal Control 55
and approves the contents of major
disclosure documents, including the D.1.4 Management Discussion and Analysis Report
Annual Report and Interim (quarterly) zz ‘Our Value Creation Story’ 95-154
Financial Reports prior to updating
them on the Bank’s website and the D.1.5 Confirmation that the Business is a Going Concern
CSE’s website. zz Report of the Directors on the State of Affairs of the Company 58
zz Directors’ Statement of Responsibility on Financial Statements 157
C.3 Disclosure of Proposed Major published in this Annual Report.
Transactions to Shareholders zz Note 2.5 (ii) to the Financial Statements 171
There were neither material transactions
which would have materially altered the D.1.6 Net Assets Value Against Shareholders’ Funds
Bank’s or Group’s net asset base nor any zz The net assets value was maintained throughout the year and
‘major related party transactions’ during therefore, the requirement to take remedial action by summoning
the year 2016 warranting disclosure an Extraordinary General Meeting did not arise. The Financial
in the Annual Report. Related party Statements explains the movement of net assets during the year.
transactions are disclosed in Note 50
to the Financial Statements. D.1.7 Related Party Transactions
zz Notes 50 to the Financial Statements 253
A Board approved Policy on Related Party Transactions and
D.1 Financial Reporting
Conflicts of Interest is in place which adequately covers the
Proper Disclosure of Interim Bank’s policy and procedures on same.
and Other Price Sensitive and
Statutorily Mandated Reports to
Regulators D.2 Internal Control A fully-fledged Internal Audit Department
is functional and is governed by the
The Bank’s Financial Reports which were Effectiveness of Risk Management Internal Audit Charter. The Head of
published were prepared and presented and Internal Controls Internal Audit reports to the Board
in conformity with the Sri Lanka
A Board approved Risk Management Audit Committee. The Committee
Accounting Standards whilst complying
Framework in terms of the Banking Act reviews internal control issues and risk
with the requirements of the Companies
Direction No. 07 of 2011 is in place. The management measures identified by the
Act No. 07 of 2007, the Banking Act No.
Bank has an ongoing process in place to Internal Audit Division and the adequacy
30 of 1988 (as amended) and also the
identify, evaluate and manage the risks and effectiveness of same is evaluated.
reporting requirements of the Central
that are faced by the Bank. The Board Issues that require the attention of the
Bank of Sri Lanka and the Colombo Stock
has delegated this responsibility to the Board are explained by the Chairperson of
Exchange (as applicable) to give a true
Board Integrated Risk Management the Committee to the Board for discussion
and fair view of the financial position
Committee and the Chief Risk Officer and decision on appropriate actions.
of the Bank. The Financial Reports are
who reports to the Committee quarterly.
reviewed by the Board Audit Committee
The Committee reviews and ensures that The statement on the effectiveness
and approved by the Board prior to
management implements the policies of Bank’s internal control mechanism
releasing them to the Colombo Stock
adopted by the Board by establishing the is reviewed and recommended by the
Exchange and published.
internal controls necessary for same and Board Audit Committee and a Directors’
duly monitoring the implementation. Statement on Internal Control is
published in the Annual Report.

30 SUSTAINABLE STEWARDSHIP > CORPORATE GOVERNANCE Seylan Bank PLC | Annual Report 2016
The Bank also received an assurance An affirmative statement by the F.1 Investing/Divesting Decisions
report from the External Auditors in this Chairman that there has not been by Individual Shareholders
regard pursuant to the independent any violation of any of the provisions As at 31st December 2016, the
audit conducted by them in accordance of the Code has been provided in the shareholding distribution of the Bank
with Sri Lanka Standard on Assurance ‘Chairman’s Statement’ on page 22 reflected a shareholding percentage
Engagements SLSAE 3050 – Assurance of this Report.
of 13.21% by 8,930 individual ordinary
Report for Banks on Directors’ Statement
voting shareholders who make
on Internal Control.
E.1 Institutional Investors effective use of their voting rights at
the General meetings of Shareholders.
As at 31st December 2016, the Bank’s
D.3 Board Audit Committee Shareholders are advised to carry out
ordinary voting shareholder base
adequate analysis or seek independent
During the year, the Board Audit consisted of 9,245 shareholders of which
professional advice in investing and
Committee established with Board 315 with a total percentage of 86.79%
divesting decisions when offers for
approved Terms of Reference comprised were held by Institutional shareholders.
additional capital issues (e.g. rights
more than three Non-Executive These shareholders make effective use
issues) are made by the Bank.
Directors of which more than two were of their voting rights at the General
Independent Directors and was chaired meetings of Shareholders. The Annual
by Independent Director, Ms. M.C. General Meeting is the forum utilised by G.1 Principles of
Pietersz. The Board Audit Committee the Board as well as the Shareholders of Sustainability Reporting
Report on page 46 provides information the Bank to have an effective dialogue
The Bank has adopted the following
relating to the composition, scope and with one another.
principles in Sustainability Reporting to
responsibilities and summary of activities
ensure the maintenance of policies and
carried out by the Committee.
E.2 Evaluation of procedures to develop a sustainable
Governance Disclosures business environment and to make
D.4 Code of Business disclosures on sustainability.
The institutional investors have access
Conduct and Ethics to substantial information relating to
This Annual Report provides a detailed
Two separate Board approved Codes the Bank including the Bank’s Annual
report on the Bank’s sustainability
are in place for the Directors and for the Reports, Interim Reports, Profiles of the
approach, responsibilities and initiatives
employees of the Bank, namely: Board of Directors and other investor
during the year on pages mentioned in
– The Code of Business Conduct and information on its corporate website
the table below. The Board has delegated
Ethics for Directors; and (www.seylan.lk) for this purpose
its responsibility in this respect to the
and particularly the Board structure.
– The Code of Conduct as well as Board Sustainability Committee which
Institutional shareholders are at liberty
the Code of Ethics for the Bank’s functions within the scope of its Terms
to vote on resolutions relating to
employees including the senior of Reference approved by the Board. The
governance arrangements, including
management. Executive Sustainability Committee and
the election/re-election of Directors and
the Sustainability Manager designated
appointment/reappointment of Auditors.
The Code of Business Conduct and are responsible to implement the
Ethics for Directors of Seylan Bank sustainability initiatives and they
covers principles and guidelines which report the progress to the Committee.
the Directors are expected to abide
by to protect the business interests of Page/s
the Bank and to maintain the Bank’s
reputation and foster compliance G.1.1 Principle of Economic Sustainability Governance 116-120
with applicable legal and regulatory
obligations. G.1.2 Principle of Environmental Governance 151-153

G.1.3 Principle of Labour Practices Governance 130-138

The annual declaration to the effect that
the Directors are aware and will abide G.1.4 Principle of Society Governance 145-150
by the Code of Business Conduct and
Ethics for Directors was signed by all G.1.5 Principle of Product Responsibility Governance 121-128
Directors during the year. The adoption
G.1.6 Principle of Stakeholder Identification, Engagement and 91-92
of the Code and Conduct and the Code of
Effective Communication
Ethics for the Bank’s employees has been
communicated to them via email and the G.1.7 Sustainability Reporting and Disclosure
Codes have been uploaded on the Bank’s The Bank’s Sustainability Reporting and Disclosure is based
Intranet for perusal and due adherence on the Global Reporting Initiative Guidelines (GRI). Please refer
by all staff. pages 116 to 154 for a detailed report followed by the Sustainability
Assurance Report of the External Auditors on pages 282 to 283.

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP > CORPORATE GOVERNANCE 31
 Compliance with Banking Act Direction No. 11 of 2007 on Corporate Governance (as amended)
In compliance with Section 3 (1) (xvi) of the Banking Act Direction No. 11 of 2007 on Corporate Governance (as amended)
(hereinafter referred to as the Banking Act Directions or CBSL Directions or Banking Act Directions on Corporate
Governance) including subsequent amendments to the said Directions is disclosed in the Report that follows with references
to the respective Banking Act Directions. The disclosures cover the following eight sub-sections:

zz The Responsibilities of the Board – Section 3 (1) of the Directions

zz The Composition of the Board – Section 3 (2) of the Directions
zz Fitness and Propriety of Directors – Section 3 (3) of the Directions
zz Management Functions delegated by the Board of Directors – Section 3 (4) of the Directions
zz Chairman and Chief Executive – Section 3 (5) of the Directions
zz Board appointed Committees – Section 3 (6) of the Directions
zz Related Party Transactions – Section 3 (7) of the Directions
zz Disclosures – Section 3 (8) of the Directions

The regulations, Directions, Determinations and Circulars issued by the Monetary Board of the Central Bank of Sri Lanka under the
Banking Act No. 30 of 1988 (as amended) can be referred to by accessing the website of the Central Bank of Sri Lanka www.cbsl.gov.lk.

CBSL Direction Level of Compliance

3 (1) Responsibilities of the Board

3 (1) (i) – (a, b, c) Ensuring the Safety and Soundness of the Bank
The Board has taken relevant measures to ensure the safety and stability of the Bank during the year under
review including the following:
zz Providing Strategic Direction – The objectives and strategies were communicated through the annual
budget approved by the Board. The progress on implementation and achievement of the set targets were
reported to the Board by the CFO and the CEO on a monthly basis. The annual budget is aligned to the
Board approved five year Strategic Plan 2012-2016, the progress of which was monitored by the designated
corporate management and the CEO and reported quarterly to the Board in the first two quarters of the
year. The Board waived the requirement for reporting in respect of the second two quarters in view of the
preparation for the next four year Strategic Plan of the Bank.
zz Overall Risk Policies and Risk Management framework in line with the strategies is in place. The Board
Integrated Risk Management Committee ensures that the Bank’s Risk Management Unit headed by the
Chief Risk Officer identifies principal risks and with the approval of the Board puts in place policies and
guidelines for implementation. Systems put in place were constantly tested and reviewed by the Risk
Management Unit and reported to the Committee.

3 (1) (i) (d) Stakeholder Engagement Policy – A Stakeholder Engagement Policy is in place in respect of communication
with all stakeholders, including depositors, creditors, shareholders and borrowers. The Bank also adopted and
implemented the Customer Charter of Licensed Banks as directed in the Banking Act Direction No. 8 of 2011.
A separate Shareholder Communication Policy approved by the Board is also in place. The Customer Charter
and the Shareholder Communication Policy are accessible on the Bank’s website, www.seylan.lk.

A Communication Policy recommended by the Board Marketing and Product Development Committee and
approved by the Board is also in place. This policy provides guiding principles for both internal and external
communication, mainly corporate information to the media and public.

3 (1) (i) (e) Internal control systems and management information systems – Adequacy and integrity of the Bank’s
internal control systems and management information systems were reviewed by the Board Audit Committee.
The decisions and/or actions taken are submitted for Board’s information and/or action as appropriate.

32 SUSTAINABLE STEWARDSHIP > CORPORATE GOVERNANCE Seylan Bank PLC | Annual Report 2016
CBSL Direction Level of Compliance

3 (1) (i) (f) Identification of Key Management Personnel (KMPs) – Directors and identified members of the Senior
Management are deemed as Key Management Personnel of the Bank who are in a position to influence
and exercise control over business activities, operations, audit and risk management. KMPs are deemed as
‘related parties’ and therefore, necessary steps are taken to ensure compliance with the relevant Banking
Act Directions on Related Party Transactions and Provisions of the Sri Lanka Accounting Standards on
Related Party Transactions and to avoid conflicts of interest. The Bank’s Policy on Related Party Transactions
and Avoidance of Conflicts of Interests and the Code of Ethics provide necessary principles, guidelines and
processes to be followed by KMPs.

3 (1) (i) (g) Defining of areas of authority and key responsibilities – The key responsibilities of Key Management
Personnel are defined in their job responsibilities, whilst the Directors derive their responsibilities from the
regulations and directions, mainly, the Banking Act Directions and is documented in the Board approved
Corporate Governance Framework. A Board approved document on Authority and Key Responsibilities for
the Board of Directors and for the Key Management Personnel is also in place.

3 (1) (i) (i) Effectiveness of the Board’s own governance practices – The Board carries out a self-evaluation annually
which process includes an assessment of the effectiveness of the governance practices including the
succession planning, management of conflicts of interest and the determination of weaknesses. The scope
and responsibilities of the Board Governance and Compliance Committee defines this requirement.

3 (1) (i) (h); Oversight of the affairs of the Bank by Key Management Personnel – Policies and decisions of the Board
3 (1) (i) (k) and Board Sub-committees are communicated to the Key Management Personnel by minute extracts
requiring appropriate follow up actions.

Reports and proposals from Key Management Personnel including those pursuant to discussions and
decisions at corporate management meetings or the related Management Committee meetings headed
by the CEO are submitted to the Board and Board Sub-committees for information, review, and/or approval.
These processes ensure appropriate oversight of the Board on the affairs of the Bank carried out by Key
Management Personnel. The CEO and Key Management Personnel heading different areas of authority are
met at meetings of the Board Sub-committees as well as at Board meetings which provide an opportunity
for the Board to discuss the progress and the extent to which policies, corporate strategies and objectives
of the Bank are implemented.

3 (1) (i) (j) Succession plan for Key Management Personnel – The Bank has in place a Succession Plan for Key
Management Personnel including development plans for the successors which were periodically updated
to the Board Nomination Committee.

3 (1) (i) (l) Understanding of the Regulatory Environment – The Board is updated of the changes in the regulatory
environment by the CEO and relevant Key Management Personnel at the Board Sub-committee level and at
Board level which discusses and/or endorses the steps taken to comply with such changes as appropriate.
The Board ensures that the Bank maintains an effective dialogue and relationship with the regulators.

3 (1) (i) (m) Hiring of External Auditors – A Board-approved Policy for hiring and engagement of External Auditors is in
place. The Board Audit Committee is vested with the responsibility of exercising due diligence and oversight
in making necessary recommendation for hiring of the External Auditors in accordance with the said Policy.

3 (1) (ii) Appointment of Chairman and Chief Executive Officer – Mr. Nihal Jayamanne PC who was the
Independent Non-Executive Chairman as at the beginning of the year 2016, retired on 8th May 2016 in terms
of Section 3 (3) (i) of the Banking Act Directions, on reaching the age of 70 years. Non-Executive Director,
Mr. W.M.R.S. Dias was appointed as the Chairman of the Bank with effect from 9th May 2016. Mr. Kapila
Ariyaratne functions as the Director/Chief Executive Officer of the Bank. The functions and responsibilities
of the Chairman and the Chief Executive Officer are defined and documented in the Board-approved
Corporate Governance Framework of the Bank.

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP > CORPORATE GOVERNANCE 33
 CBSL Direction Level of Compliance

3 (1) (iii) Frequency of Board Meetings and participation of Directors – Regular meetings were held monthly with
special meetings held as and when required. Twelve regular Board meetings were held monthly and five
special Board meetings were held at different times of the year to consider important and/or urgent issues.
Resolutions by circulation were restricted to matters of a routine and/or urgent nature.

Quorum – The quorum at Board meetings is minimum five members or above 50% of the number on
the Board whichever is higher and with majority Non-Executive Directors. The quorum required in this
manner was maintained from commencement to the conclusion of proceedings of Board meetings held
during the year.

Directors actively participate and share their views and contribute at Board proceedings. Directors have also
devoted adequate time for Board meetings as well as for Board Sub-committee meetings during the year.
The details of the meetings held and the Directors attendance are disclosed on page 25.

3 (1) (iv); Agenda – There is a formal schedule of matters that are included in the Agenda of regular Board meetings
3 (1) (xiii) held monthly which also includes matters which require the approval of the Board where it is not within
the delegated authority of the management and/or the Board Sub-committees. Since adequate notice of
the next meeting is provided, Directors have the opportunity to include matters and/or proposals to be
considered at Board meetings. The Directors also propose and collectively agree on matters to be included
in the Agenda of Board meetings and Committee meetings.

Timely and adequate information is provided by Management to the Board prior to the regular Board
meetings. Members of the Management also make themselves available on call to respond to queries raised
at Board meetings and to provide additional information when required by the Board members.

3 (1) (v) Notice of Meeting – Notices for the regular monthly meetings of the Board of Directors were emailed by the
Company Secretary to the Directors as well as to the Management at least three weeks prior to the Meeting
whilst the agenda and the connected papers/reports were circulated to the Directors seven days prior to
such regular monthly meetings. Special/emergency meetings were called with lesser notice period due to
the urgency of the matters concerned.

3 (1) (vi) Attendance – At every Board meeting, the Company Secretary apprises the Directors the record of their
attendance at Board meetings held in the period of twelve months immediately preceding the regular Board
meeting. During the year, all Directors attended more than two-thirds of the meetings held over a twelve
month period. None of the Directors were absent at three consecutive meetings held.

3 (1) (vii) Company Secretary – Mrs. N.N. Najumudeen, who is a qualified Chartered Secretary, is the Bank’s
Company Secretary appointed by the Board and is not an employee of any other organisation or institution
(Section 43 of the Banking Act).

The Company Secretary reports to the Board and to the Board Sub-committees on matters relevant to the
proper functioning of the Board and the Board Sub-committees. The Company Secretary is also responsible
for the administration and day-to-day operations of the Company Secretariat including shareholder
communications, communications with the regulatory authorities such as the Colombo Stock Exchange,
the Securities and Exchange Commission of Sri Lanka, the Registrar of Companies and the Central Bank of
Sri Lanka.

3 (1) (viii) The Directors have access to the advice and services of the Company Secretary in ensuring that Board
responsibilities, procedures and applicable rules and regulations are followed.

3 (1) (ix) Minutes of Board Meetings – Minutes of Board meetings are recorded by the Company Secretary in
3 (1) (x) sufficient detail to enable a proper assessment to be made of the extent of deliberations and any decisions
taken at the meetings. Minutes of Board meetings are prepared and circulated to the Directors to enable
them to peruse same and confirm/clarify/rectify and record any discrepancy at the Board meeting that
follows. Minutes are maintained by the Company Secretary for inspection of any Director and required
extracts are also issued on reasonable notice.

3 (1) (xi) Independent Professional Advice – Directors are entitled to seek independent professional advice at the
expense of the Bank in furtherance of their duties and contribution in the interest of the Bank. A Board approved
procedure is in place for this purpose which was reviewed and approved by the Board during the year.

34 SUSTAINABLE STEWARDSHIP > CORPORATE GOVERNANCE Seylan Bank PLC | Annual Report 2016
CBSL Direction Level of Compliance

3 (1) (xii) Avoidance of Conflicts of Interest – Directors avoid conflicts of interests, or the appearance of conflicts
of interest in their activities with and commitments to other organisations or related parties. If a Director
has a conflict of interest in a matter to be considered by the Board, which the Board has determined to be
material, the matter is dealt with at a Board meeting, Directors abstain from voting on any such resolution
in which the Directors have related party interests or are interested by virtue of their directorships. The
interested Directors are not counted in the quorum for the relevant agenda item.

3 (1) (xiii) Schedule of matters reserved for Board’s decision – (Please refer 3 (1) (iv) (Agenda) on page 36).

3 (1) (xiv) Bank’s Ability/Inability to Meet its Obligations on Payments – The Board has adopted a Contingency
Funding Plan which addresses the procedures to be followed by the Bank and keeping the Director Bank
Supervision informed in a liquidity crisis situation, i.e. if it considers that it is, or is unlikely to be able to meet
its obligations or is about to suspend payments due to depositors and other creditors. The Plan was last
reviewed and approved in January 2016. The Bank however, did not face a situation of being unable to meet
its obligations on payments during the year.

3 (1) (xv) Capitalisation of the Bank – The Board has ensured that the Bank duly complies with capital adequacy
requirements as required by the Monetary Board. The revised two year Capital Augmentation Plan for
2016-2018 was approved by the Board and further reviewed pursuant to the Debenture Issue allotment
in July 2016. The plan took into consideration the projected growth patterns, expected targets, and
estimated dividend payouts. The Bank’s total capital ratio was in compliance with the prudential limit
from 2014 to 2016 confirming that it is adequately capitalised unless there is an unexpected growth in
risk-weighted assets.

3 (1) (xvi) Annual Corporate Governance Report – This Report serves to meet the requirement of this provision, viz.
publishing of the Annual Corporate Governance Report in compliance with Direction 3 of these Directions.

3 (1) (xvii) Scheme of Self-assessment – The Board has adopted a Scheme of Self-Assessment. Directors submit their
self-assessment reports annually which are shared with the Directors at a Board meeting and filed of record
by the Company Secretary.

3 (2) The Board’s Composition

3 (2) (i) Board of Directors as at 31st December 2016 – The number of Directors on the Board was not less than
seven or not more than 13 throughout the year.

The number of Directors during the year fluctuated between 9 and 11 due to the retirement of Independent
Director/Chairman, Mr. Nihal Jayamanne PC on 8th May 2016 and the appointment of Mr. A.S. Wijesinha and
Mrs. S.K. Salgado on 1st December 2016.

The Board consisted of the following members as at 31st December 2016:

1. Mr. W.M.R.S. Dias (Non-Executive Director/Chairman) –
appointed as Chairman with effect from 9th May 2016.
2. Mr. I.C. Nanayakkara (Non-Executive Director/Deputy Chairman)
3. Ms. M.C. Pietersz (Independent Non-Executive Director/Senior Director) –
appointed as Senior Director with effect from 9th May 2016.
4. Mr. K.P. Ariyaratne (Director/Chief Executive Officer)
5. Rear Admiral B.A.J.G. Peiris (Independent Non-Executive Director)
6. Mr. S.P.S. Ranatunga (Independent Non-Executive Director)
7. Mr. W.D.K. Jayawardena (Non-Executive Director)
8. Mr. P.L.S.K. Perera (Independent Non-Executive Director)
9. Mr. S.V. Corea (Non-Executive Director)
10. Mr. A.S. Wijesinha (Independent Non-Executive Director)
11. Mrs. S.K. Salgado (Independent Non-Executive Director)

3 (2) (ii) The tenure of directorship of the above named Non-Executive Directors has not exceeded nine years as they
were appointed on or after 8th January 2009.

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP > CORPORATE GOVERNANCE 35
 CBSL Direction Level of Compliance

3 (2) (iii) Director/CEO, Mr. Kapila Ariyaratne is the only Executive Director on the Board appointed for a defined term
of contract approved by the Board which is less than 9 years.

3 (2) (iv) Independent Directors – The number of Independent Non-Executive Directors during the year 2016
fluctuated between 4 and 6 due to the retirement of Independent Director/Chairman, Mr. Nihal Jayamanne
PC on 8th May 2016 and the appointment of Independent Directors, Mr. A.S. Wijesinha and Mrs. S.K. Salgado
on 1st December 2016. The number exceeded the minimum requirement of three Independent Non-Executive
Directors as well as one-third of the total number of Directors on the Board at all times during the year.

The Board determines the Independent and Non-Independent status of the Non-Executive Directors based
on the declarations submitted by them in accordance with the criteria defined in the Banking Act Directions
No. 3 (2) (iv) and Section 7.10.4 of the Rules of the Colombo Stock Exchange. A declaration to this effect is
obtained from Non-Executive Directors at the time of their appointment and thereafter annually.

3 (2) (v) Alternate Directors – No alternate directors were appointed during the year.

3 (2) (vi) Non-Executive Directors – The Non-Executive Directors on the Board consisted of eminent personnel
with extensive experience in the field of banking, finance, law, insurance, marketing, economics, research,
strategic communications and other related fields. Their expertise brought in independent judgements on
issues relating to strategy, performance and resources. The profiles of the Directors are published in the
Bank’s Annual Report on pages 15 to 18.

3 (2) (vii) Non-Executive Directors composition at Board Meetings – Meetings of the Board held during the year
were duly constituted with the required quorum and more than fifty percent of the quorum was represented
by Non-Executive Directors.

3 (2) (viii) Identification of Status of Directors in Corporate Communications – The Directors were identified as
executive; Non-Executive and independent in all corporate communications including the Annual Report
and in this Corporate Governance Report. Persons who held identified positions, e.g., Chairman, Deputy
Chairman and CEO were also disclosed with such designations.

3 (2) (ix) Procedure for Appointment of Directors – A Board approved procedure is in place for the appointment
of new Directors to the Board which acts as a guideline to the Board when appointments to the Board are
considered. The Board Nomination Committee is vested with the responsibility of identifying new Directors
and/or considering the suitability of nominee Directors to the Board.

3 (2) (x) Election of Directors Appointed to Fill Casual Vacancy on the Board – Non-Executive Directors,
Messrs W.M.R.S. Dias and S.V. Corea who were appointed during the year 2015 to fill the casual vacancies on
the Board subsequent to the resignations of the two nominees of Sri Lanka Insurance Corporation Limited
(material shareholder of the Bank) were proposed for election and elected by the shareholders at the Annual
General Meeting (AGM) held on 31st March 2016.

Independent Directors, Mr. A.S. Wijesinha and Mrs. S.K. Salgado who were appointed on 1st December 2016
will be subject to election at the ensuing AGM.

3 (2) (xi) Change of Directorate – Changes of directorate (appointment, resignation, retirement, etc.) are informed to
the shareholders and other interested parties via announcements made to the Colombo Stock Exchange (CSE).
Directors’ resignations/retirements are informed with reasons for such resignation or retirement as appropriate.

The retirement of Independent Director/Chairman, Mr. Nihal Jayamanne PC on 8th May 2016 was notified to
the shareholders through the Colombo Stock Exchange stating that the retirement was in terms of Section
3 (3) (i) of the Banking Act Directions, viz. reaching the age of 70 years.

Information pertaining to change in directorate were also published and incorporated in the notes to the
Interim (quarterly) Financial Statements issued to the CSE and published in the newspapers. Information
pertaining to changes to the directorate during the year is provided in the Report of the Board of Directors
of the Annual Report.

3 (2) (xii) Appointments in any Other Bank – No Director and no employee of the Bank has been appointed,
elected or nominated as a Director of another Bank. No other Bank is a subsidiary or an associate of
Seylan Bank PLC.

36 SUSTAINABLE STEWARDSHIP > CORPORATE GOVERNANCE Seylan Bank PLC | Annual Report 2016
CBSL Direction Level of Compliance

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

All appointments to the Board were made after obtaining approval of the Director, Bank Supervision, Central
Bank of Sri Lanka in terms of Section 42 of the Banking Act No.30 of 1988 (as amended). Declarations and
Affidavits in terms of the said Section 42 were obtained from the persons nominated by the Board and
forwarded to the Director, Bank Supervision for this purpose. Declarations and Affidavits of the continuing
Directors were also forwarded to the Director, Bank Supervision prior to the Annual General Meeting in 2016
for perusal and approval.

The Declarations submitted to and accepted by the Director, Bank Supervision confirm that the Directors
meet the criteria of fitness and propriety as per Section 42 of the Banking Act No. 30 of 1988 (as amended)
and its Directions.

3 (3) (i) Retirement Age of Directors – The related section of the CBSL Direction stipulates that a person
who is over 70 years of age shall not serve as a Director. Other than Independent Director/Chairman,
Mr. Nihal Jayamanne PC who retired from the Board on 8th May 2016 upon reaching the age of 70,
no other Directors on the Board exceeded the age of 70 during the year.

3 (3) (ii) (Amended Directorships in other Companies/Institutions – No Director holds directorships in more than
by Direction No. 3 20 companies/entities/institutions inclusive of subsidiaries or associate companies of the Bank.
of 2013) Please refer Annexure to the Report of the Board of Directors for details (Pages 65 to 67).

3 (4) Management Functions Delegated by the Board of Directors

3 (4) (i) Board Delegation Arrangements in Place – The Board is empowered by the Articles of Association to
3 (4) (ii) delegate any of its powers to Board appointed Sub-committees consisting of such member or members as
3 (4) (iii) the Board thinks fit.

The Board has delegated matters pertaining to the affairs of the Bank to the Board Sub-committees within
the scope of the respective Board approved Terms of Reference. The CEO and other Key Management
Personnel work within the Board approved delegated authority limits and the scope of their job descriptions.

Reviews and revisions of the delegation processes as proposed by the Chief Executive Officer and the
respective Key Management Personnel are carried out by the Board taking into account business needs and
structural changes. The Board ensures that the delegation processes do not hinder or reduce the Board’s
overall powers to effectively discharge its functions and ensures that they remain relevant to the needs of
the Bank.

3 (5) Chairman and the Chief Executive Officer

3 (5) (i) Chairman and Chief Executive Officer – Mr. Nihal Jayamanne PC was the Chairman of the Bank until
8th May 2016 and Mr. W.M.R.S. Dias was appointed as the Chairman on 9th May 2016. Mr. Kapila Ariyaratne
is the Chief Executive Officer (CEO) of the Bank. The Chairman’s role is to provide leadership to the
Board and ensure that the Board discusses and collectively decides on key issues and that it discharges
its responsibilities effectively. The CEO is responsible for the overall management of the operations and
business of the Bank. The division of responsibilities is described in the Corporate Governance Framework
of the Bank.

3 (5) (ii) Independent Status of the Chairman and Senior Director – Upon the retirement of Chairman, Mr. Nihal
Jayamanne PC who was a Non-Executive Independent Director, Mr. W.M.R.S. Dias who is a Non-Executive
Director was appointed as Chairman on 9th May 2016. Independent Director, Ms. M.C. Pietersz was
appointed as Senior Director with effect from 9th May 2016. The Terms of Reference for the Senior Director
was recommended by the Board Governance and Compliance Committee and approved by the Board during
the year.

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP > CORPORATE GOVERNANCE 37
 CBSL Direction Level of Compliance

3 (5) (iii) Disclosure of the Identity and Relationship of the Chairman and the CEO and Other Board Members –
The Declarations submitted by the Directors upon appointment and annually by the continuing Directors as
well as the Declaration submitted by the Chief Executive Officer (CEO) confirm that no relationship of any
nature (including financial, business, family or other material/relevant relationships) existed between the
Chairman and the CEO and between the Chairman and the other members on the Board during the year
2016 other than as described below:
zz Directors, Messrs I.C. Nanayakkara and W.D.K. Jayawardena held common directorships and related party
interests in companies within the LOLC Group and the Browns Group and they represented the Bank’s
material shareholders LOLC Investments Limited and Brown & Company PLC.
zz Directors, Messrs W.M.R.S. Dias and S.V. Corea were nominated to the Board by the Bank’s material
shareholder, Sri Lanka Insurance Corporation Limited.

3 (5) (iv) to 3 (5) (x) Chairman’s Role – The Chairman’s role can be described as follows:
i. Provides leadership to the Board and ensures that the Board effectively discharges its responsibilities
and that all key issues are discussed in a timely manner.
ii. Ensures that the agenda for the Board meetings, preparation of which is delegated to the Company
Secretary, takes into account any matters proposed by the other Directors for inclusion in the Agenda
and that Board papers covering adequate information is circulated to the Directors at least seven days
prior to the meeting.
iii. Directors, especially new Directors on the Board are duly briefed by the Chairman on issues arising at
Board meetings.
iv. Encourages all Directors to make an active contribution to the Board’s affairs. Majority of the
Non-Executive Directors chairs and/or are members of the Board Sub-committees and thereby play an
active role in executing the responsibilities delegated by the Board to the Committees in the best interest
of the Bank.
v. The two Chairpersons during the year, namely Mr. Nihal Jayamanne PC and Mr. W.M.R.S. Dias functioned
in a Non-Executive capacity and did not engage in direct supervision of the Key Management Personnel
or any other executive duties.
vi. Ensures that effective communication with shareholders is maintained and that the views of
shareholders are communicated to the Board. The General meetings of the Bank are forums utilised by
the Board as well as the shareholders of the Bank to have an effective dialogue with one another.

3 (5) (xi) Chief Executive Officer – Mr. Kapila Ariyaratne, Director/Chief Executive Officer (CEO) of the Bank heads
the Senior Management Team of the Bank and reports to the Board of Directors as well as to the Board
Sub-committees. His main function and responsibility is the overall management of the operations and
business of the Bank in line with its strategic objectives.

3 (6) Board Appointed Committees

3 (6) (i) Sub-committees Appointed by the Board – The Board has established nine Board Sub-committees
including the four Committees as set out in these directions, namely the Board Audit Committee, the Board
Human Resources and Remuneration Committee, the Nomination Committee and the Board Integrated Risk
Management Committee.

The other five Committees are the Credit Committee, Sustainability Committee, Marketing and Product
Development Committee, Governance and Compliance Committee and the Related Party Transactions
Review Committee.

The Board appointed Sub-committees function within the Board approved Terms of Reference.

Company Secretary, Mrs. N.N. Najumudeen functioned as the Secretary to each of these Committees during
the year. Minutes of the meeting proceedings and matters arising from the minutes as well as papers/
reports that required Board’s attention and/or decision were circulated to the Board by the Secretary.

The Reports of the Board Sub-committees as reviewed and approved by the Board of Directors are
published in the Annual Report (Pages 46 to 54).

38 SUSTAINABLE STEWARDSHIP > CORPORATE GOVERNANCE Seylan Bank PLC | Annual Report 2016
CBSL Direction Level of Compliance

3 (6) (ii) Board Audit Committee (BAC)

3 (6) (ii) (a) Members and Chairperson of the BAC – Ms. M.C. Pietersz (BSc, MBA, ACA, FCA) is an Independent
3 (6) (ii) (b) Non-Executive Director and was appointed to the BAC as its Chairperson with effect from 27th September
2013. Ms. Pietersz counts over 20 years senior level experience in finance, banking, accounting and audit.

The BAC comprised three Non-Executive Directors during the major part of the year 2016. Two of the three
Non-Executive Directors were Independent, namely, Ms. M.C. Pietersz and Mr. S.P.S. Ranatunga.

3 (6) (ii) (c) BAC’s role with regard to External Auditors – In line with its Terms of Reference, the BAC has reviewed
3 (6) (ii) (d) and/or made relevant recommendations including the following:
zz The re-appointment of Messrs KPMG, Chartered Accountants as the Bank’s External Auditors for audit
services in compliance with the relevant regulations and guidelines. Pursuant to recommendations,
Messrs KPMG were reappointed as the Auditors for the financial year 2016 by the shareholders at the
Annual General Meeting held on 31st March 2016.
zz The implementation of guidelines issued from time to time by the Central Bank of Sri Lanka.
zz The application of relevant accounting standards, including the requirements of the Sri Lanka Financial
Reporting Standards (SLFRS/LKAS) complying with the IAS and the IFRS in all material respects.
zz The incumbent Audit Partner was engaged from the financial year 2014.
zz Representation submitted by the External Auditors stating their independence and the objectivity and
effectiveness of the audit processes in accordance with applicable standards and best practices.

3 (6) (ii) (e) Non-Audit Services – The BAC reviewed the non-audit services provided by the External Auditors and was
of the view that such services were not within the category of services identified as restricted under the
guidelines issued by the Central Bank of Sri Lanka for External Auditors relating to their statutory duties in
terms of Section 39 of Banking Act No. 30 of 1988 and as amended by Banking Act No. 33 of 1995. A Board
approved policy relating to the engagement of non-audit services is in place.

3 (6) (ii) (f) Scope of External Audit – The BAC discussed with the External Auditors, the nature and the scope of audit
in respect of the financial year, 2016 at a meeting held with the Auditors in the last quarter of 2016. The BAC
shared their understanding of the management’s internal controls over financial reporting; the preparation
of Financial Statements in accordance with the relevant accounting principles and reporting obligations and
compliance with the Banking Act Directions on Corporate Governance.

3 (6) (ii) (g) Review of the Bank’s Financial Information – The BAC reviewed/commented/recommended as
appropriate on the Bank’s financial information and reports which were submitted by the Chief Financial
Officer and ensured the relevance of the Financial Statements prepared for disclosure and published in
the Bank’s Annual Report and in the quarterly Financial Statements and reports. The BAC also reviewed
the draft audited interim Financial Statements for the half year ended 30th June 2016 before they were
submitted for Board’s review. The draft interim Financial Statements were reviewed by the Internal Audit
before they were submitted to the BAC by the Chief Financial Officer.

3 (6) (ii) (h) Meeting with the External Auditors – The BAC met with the External Auditors without the presence of the
management and the Director/CEO twice during the year and discussed issues, management responses
arising from the interim and final audits. The External Auditors were also invited to meetings of the BAC to
present and highlight key audit findings of the 2015 year-end audit and to present the Audit plan of the 2016
year-end audit. The BAC ensures that there would be no limitation of scope or incidents that could have a
negative impact on the effectiveness of the external audit.

3 (6) (ii) (i) Management Letters of the External Auditors – The BAC reviewed the Management Letter in respect of
the Audit for the financial year ended 31st December 2015 and also reviewed the findings and observations
on the Interim Audit of the six months ended 30th June 2016 and issued appropriate recommendations and
guidance to ensure that issues were duly addressed/resolved by the respective line management.

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP > CORPORATE GOVERNANCE 39
 CBSL Direction Level of Compliance

3 (6) (ii) (j) I and Internal Audit Functions – The BAC reviewed the adequacy of the internal audit function and ensured that
3 (6) (ii) (j) VI it conformed to the principles of the Internal Audit Charter. The Internal Audit Charter defines the scope,
functions, authority, responsibility, adjudication, external relationship management and ethics that assist
and direct/guide the Internal Audit Department to discharge its functions independently. The BAC has
ensured that the internal audit function was independent of the activities it audits and that it was performed
with impartiality, proficiency and due professional care.

3 (6) (ii) (j) II Internal Audit Plan/Programme – The Internal Audit Division carried out its responsibilities in line with the
approved Audit Plan of the Internal Audit for the year 2016 and reported on the audits carried out and also
updated the status/extent of resolution of findings of the audits carried out, to the BAC. The BAC reviewed
and issued appropriate recommendations as deemed appropriate and ensured that the relevant line
management took steps to address/rectify/resolve the audit findings which were outstanding.

3 (6) (ii) (j) III Appraisals/Assessments of Performance of Senior Staff of the Internal Audit – The Committee noted the
appraisals/assessment of performance of the senior staff of the Internal Audit Department whilst it carried
out an evaluation of the Acting Head of Internal Audit in the first quarter 2016. The evaluation of the Acting
Head of Internal Audit for the year 2016 was carried out by the BAC in January 2017.

3 (6) (ii) (j) IV and Adequacy of Human Resources for Internal Audit Function – The BAC reviewed the adequacy of the
3 (6) (ii) (j) V human resources for the internal audit functions and recommended appointments/succession planning for
the position of Head of Internal Audit. The BAC is apprised of senior staff resignations of the Internal Audit
Department including the reasons for such resignations.

3 (6) (ii) (k) Findings of the Internal Audit – Internal Audit findings with attention on major findings were reported to
the BAC and taken up at the BAC meetings that followed which reviewed the status including management
responses and made appropriate recommendations where necessary.

3 (6) (ii) (l) Invitees to the Meetings of the BAC – The Chief Executive Officer, the Chief Financial Officer and the Acting
Head of Internal Audit attended the meetings of the BAC during the year. Heads of operational and business
units, Information Technology, and Human Resources were also called in to the meetings to discuss the
follow up actions on the audit findings. External Auditors also attended the meetings of the BAC to present
external audit findings. The BAC also met with representatives of the External Auditors on two occasions in
the absence of the Director/CEO and the management members.

3 (6) (ii) (m) Authority to Investigate – The BAC’s Terms of Reference provides it authority to investigate into any matter
within its Terms of Reference; obtain the resources which it needs to carry out the investigation; full access
to information; and authority to obtain external professional advice and to invite outsiders with relevant
experience to be involved, if necessary.

3 (6) (ii) (n) and Meetings of the BAC – The BAC held eleven regular meetings and three special meetings during the year.
3 (6)(ii) (p) The Agenda and the papers for discussions and consideration/approval were circulated prior to the meeting.
The minutes of the proceedings of the meetings were recorded in sufficient detail and maintained by the
Company Secretary who functioned as the Secretary to the Committee.

3 (6) (ii) (o) Report of the BAC – A Report of the BAC signed by the Chairperson is included in this Annual Report
summarising the activities of the BAC, meetings and attendance of the members at the meetings held
during the year. Please refer page 46.

3 (6) (ii) (q) Whistle Blowing Policy – The Bank has put in place a Whistle Blowing Policy. The BAC has ensured that
all employees are duly informed and duly advised of the effective use of the whistle blowing process.
Independent investigations were carried out by the Internal Audit Division on whistle blower complaints
and were reported to the BAC including follow up action as appropriate.

3 (6) (iii) Board Human Resources and Remuneration Committee (BHRRC)

3 (6) (iii) (a) Determination of the Remuneration Policy which aims to establish a transparent procedure for determining the
remuneration, salaries, allowances and other financial or non-financial benefits, perquisites, special incentives,
etc., to Directors, the Chief Executive Officer, the Key Management Personnel as well as other employees of the
Bank is a key responsibility of the Committee. A Board approved Remuneration Policy is in place.

40 SUSTAINABLE STEWARDSHIP > CORPORATE GOVERNANCE Seylan Bank PLC | Annual Report 2016
CBSL Direction Level of Compliance

3 (6) (iii) (b) Goals and Targets – The Key Performance Indicators (goals and targets) of Director/CEO and of the
KMPs in respect of the year 2016 were tabled and approved by the Committee and the Board at the
respective meetings.

3 (6) (iii) (c) Evaluations of the Performance of the CEO and the KMPs – The Committee considered the evaluations of
the performance of the Director/CEO and the KMPs against the approved KPIs for the year 2015 which was an
indicator to determine revision of remuneration and profit/performance based bonus during the year 2016.

3 (6) (iii) (d) Proceedings at Meetings of the BHRRC – Director/CEO attends the meetings of the Committee by invitation.
He was not present at meetings of the Committee, when matters relating to him were being discussed.

Further details summarising the responsibilities of the Committee and attendance of Directors are provided
in the Report of the BHRRC included in this Annual Report on page 47.

3 (6) (iv) Board Nomination Committee (BNC)

3 (6) (iv) (a) Procedure Selection/Appointment of Directors, CEO and KMPs – Appointment of Key Management
Personnel (KMPs) including the Chief Executive Officer (CEO) comes under the scope and responsibilities of
the Board Nomination Committee as set out in its Terms of Reference. The procedure to select and appoint
new Directors is set out in the Board approved Policy Governing Appointment of Directors. A Policy on
Human Resources Planning, Selection and Recruitment of KMPs and a Succession Policy for the KMPs are
also in place.

3 (6) (iv) (b) Re-election of Current Directors – The BNC recommends the re-election of the Directors who are due to
retire in accordance with the Companies Act and the Bank’s Articles of Association (the Articles) taking
into account their contribution to the Board. Pursuant to obtaining Board’s concurrence of the BNC’s
recommendation, it is included in the Agenda of the Annual General Meeting (AGM) seeking shareholders’
approval for the re-election. Pursuant to such recommendations, at the AGM held on 31st March 2016,
Independent Directors, Rear Admiral B.A.J.G. Peiris and Mr. S.P.S. Ranatunga were re-elected in terms of
Article 82 of the Articles.

Re-election of Directors in 2017 – Pursuant to the recommendations of the BNC as well as the Board the
proposals for the re-election of Non-Executive Director, Mr. W.D.K. Jayawardena and Independent Director,
Ms. M.C. Pietersz who are due to retire by rotation in terms of Article 82 of the Articles have been included in
the Agenda of the AGM scheduled to be held on 31st March 2017.

3 (6) (iv) (c) Criteria for Eligibility – CEO and KMPs – The criteria for eligibility such as qualifications, experience and
key attributes are considered for appointment or promotion to the position of CEO and KMPs as defined in
the respective job descriptions each of which have been agreed by the Committee.

3 (6) (iv) (d) Fitness and Propriety of Directors, CEO and KMPs – Affidavits and Declarations to assess the fitness and
propriety of Directors, CEO and Key Management Personnel in terms of the Banking Act and its Directions
are obtained prior to the appointment of Directors and at the time of appointing a KMP. Prior to the date of
the AGM of the Bank every year, the Affidavits and Declarations submitted by the continuing Directors are
forwarded to the Director, Bank Supervision for review and approval.

3 (6) (iv) (e) Succession Plan – The BNC considers and discusses matters relating to succession arrangements of
Directors including retiring Directors prior to such occurrence and also takes into consideration the
regulatory guidelines and criteria to fill any such vacancy. Appointment of Mr. W.M.R.S. Dias as the Chairman
and the appointment of two Independent Directors, namely Mr. A.S. Wijesinha and Mrs. S.K. Salgado
during the year affirms this responsibility. The Committee reviewed the succession arrangements for
Key Management Personnel at its meetings held during the year. A Board approved Policy on Succession
Planning for Key Management Positions is in place.

3 (6) (iv) (f) Composition – The BNC comprised five Non-Executive Directors as at 31st December 2016, three of whom
were Independent and was chaired by Independent Director, Rear Admiral B.A.J.G. Peiris. Director/CEO
attends the meetings of the Committee by invitation.

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP > CORPORATE GOVERNANCE 41
 CBSL Direction Level of Compliance

3 (6) (v) Board Integrated Risk Management Committee (BIRMC)

3 (6) (v) (a) Composition of the Committee – As at 31st December 2016, the BIRMC comprised three Non-Executive
Directors, two of whom were Independent Directors, the Director/CEO and the Chief Risk Officer (CRO)
and was chaired by Independent Director, Mr. S.P.S. Ranatunga. The Chief Financial Officer and the Head
of Compliance were co-opted to the Committee. The CRO is the Key Management Personnel in charge
of supervising broad risk, categories, i.e., market, liquidity, operations, credit and strategic risks and
reports directly to the Committee. The Head of Compliance and Chief Financial Officer are co-opted to this
Committee. Other Key Management Personnel and management attend the meetings when invited by the
Committee.

3 (6) (v) (b) Assessment of Risks – The three Executive Sub-committees, namely the Assets and Liability Management
Committee, the Executive Credit Risk Management Committee and the Executive Market and Operational
Risk Management Committee assess and review the respective categories of risks, namely, credit, market,
liquidity and operational risks coming under their respective purview at their regular meetings. Key
issues were reported to the BIRMC at its quarterly meetings which were reviewed by the Committee and
appropriate advice provided. The risk management policies approved by the Board provide
a framework for management and assessment of the overall risks to the Bank.

The Committee also reviewed the risk assessments on a group basis by considering the risk assessments
of the Subsidiary, Seylan Developments PLC (SDP) the principal activity of which is property development.

3 (6) (v) (c) Effectiveness of Management Level Committees – The reports submitted by the Chief Risk Officer
pursuant to the proceedings of the Asset Liability Management Committee, the Executive Credit Risk
Management Committee and the Executive Market and Operational Risk Management Committee as well as
the minutes of the said Committees were reviewed and the effectiveness of the three Committees assessed
by the BIRMC.

3 (6) (v) (d) Actions to Mitigate Specific Risks – The BIRMC advises on corrective action by the management to
mitigate the effects of specific risks in the case such risks are at levels beyond the prudent levels approved
by the Committee in line with the Bank’s policies and regulatory requirements.

3 (6) (v) (e) Frequency of Meetings – The Committee’s Terms of Reference provides that the Committee shall meet at
least quarterly. The Committee met quarterly during the year 2016.

3 (6) (v) (f) Action Against those who Fail to Identify Specific Risks – Responsible officers of branches or
departments failing to identify specific risks were identified during the internal audit reviews and internal
audit investigations carried out and reported in the audit/investigation reports. Depending on the nature of
the offence the reports were submitted to the line management and/or the Head of Human Resources and/
or Chief Executive Officer and/or to the Disciplinary Unit for appropriate action.

Reports on high risk offences including line management’s action taken to prevent such offences in the
future were submitted to the BIRMC for information and appropriate advice where necessary.

3 (6) (v) (g) Risk Assessment Report to the Board – Copies of the confirmed minutes of the Committee and Committee
recommendations are submitted to the Board meeting that follows the Committee meetings for the Board’s
perusal and appropriate decisions/concurrence.

3 (6) (v) (h) Compliance Function – The Head of Compliance is a Key Management Personnel of the Bank and is
responsible for assessing the Bank’s compliance with laws, regulations, regulatory guidelines and industry
best practices. The Compliance Officer reports to the Committee at its quarterly meetings. The Compliance
Officer also submits a Compliance Report to the Board to its regular meetings held monthly.

42 SUSTAINABLE STEWARDSHIP > CORPORATE GOVERNANCE Seylan Bank PLC | Annual Report 2016
CBSL Direction Level of Compliance

3 (7) Related Party Transactions

3 (7) (i) Avoidance of Conflicts of Interest – The Board takes necessary steps to avoid any conflicts of interest
that may arise from any transaction of the Bank with any person, and particularly with related parties of the
Bank as defined in Direction No. 3 (7) (i) which includes, any of the Bank’s subsidiary companies; Bank’s
associate companies; Directors of the Bank; Key Management Personnel (KMP); a close relation of any of
the Bank’s Directors or KMP; a shareholder owning a material interest in the Bank; a concern in which any of
the Bank’s Directors or a close relation of any of the Bank’s Directors or any of its material shareholders has
a substantial interest.

A Board approved Policy on Related Party Transactions and Avoidance of Conflicts of Interest is in place.

3 (7) (ii) Types of Transactions with Related Parties – Transactions are carried out with related parties in the
normal course of business as disclosed in the Annual Report under Note 50 to the Financial Statements
on ‘Related Party Disclosures’.

3 (7) (iii) Favourable Treatment – The Board ensures that the Bank does not engage in transactions with related
parties, in a manner that would grant such parties ‘more favourable treatment’ than that accorded to other
constituents of the Bank carrying on the same business such as charging of a lower rate of interest than
the Bank’s best lending rate or paying more than the Bank’s deposit rate for a comparable transaction with
an unrelated comparable counterparty and providing services to or receiving services from a related-party
without an evaluation procedure.

The Board has set a prudent percentage of the Bank’s regulatory capital to limit total net accommodation to
related parties.

The Board approved Policy ensures that all employees are aware of these guidelines. Heads of Divisions/
relevant officers who deal in related party transactions consider the Policy guidelines in their evaluations
of related party transactions and provide a confirmation when submitting the return of the respective
transactions to the Compliance Officer on a quarterly basis.

3 (7) (iv) Accommodation to a Director or to a Close Relation of a Director (if any) – was granted with the approval
of the Board of Directors with not less than two-thirds of the number of Directors other than the Director
concerned, voting in favour of such accommodation. Such accommodation is also secured by such security
as may from time to time be determined by the Monetary Board.

3 (7) (v) Obtaining of Required Security for Accommodation Granted to a Related Party of a Director being
Appointed or to a Director Individually Prior to such Director being Appointed
Independent Directors, Mr. A.S. Wijesinha and Mrs. S.K. Salgado who were appointed on 1st December 2016
nor their close relations had been granted any accommodation by the Bank prior to their appointments to
the Board. However, Mrs. S.K. Salgdo held substantial interest in a company to which the Bank has granted
accommodation secured against cash deposits. Since the said facility was a related party transaction, the
Board reviewed same and ensured that it was adequately secured as determined by the Monetary Board of
the Central Bank of Sri Lanka.

3 (7) (vi) Accommodation to Employees or Related Parties Connected to the Employees

No accommodation has been granted on ‘more favourable’ terms such as waiver of fees and/or commissions
to any employee or a close relation of such employee or to any concern in which the employee or close
relation has a substantial interest other than on the basis of a scheme applicable to the employees of the
Bank or when secured by security as may be approved by the Monetary Board in respect of accommodation
granted as per Direction 3 (7) (v) above.

3 (7) (vii) Prior Approval of Monetary Board

The Bank’s Policy on Related Party Transactions provides that no accommodation granted by the Bank
under Direction 3 (7) (v) and 3 (7) (vi), nor any part of such accommodation, nor any interest due thereon
shall be remitted without the prior approval of the Monetary Board and any remission without such approval
shall be void and of no effect. The Bank has complied with this requirement.

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP > CORPORATE GOVERNANCE 43
 CBSL Direction Level of Compliance

3 (8) Disclosures
3 (8) (i) Annual Audited Financial Statements and Quarterly Financial Statements – The Annual Audited Financial
Statements and Quarterly Financial Statements were prepared and published in accordance with the
formats prescribed by the supervisory and regulatory authorities and the Accounting Standards. Annual
Audited Financial Statements were published in the Annual Report while the Quarterly Financial Statements
were published in the newspapers in all three languages.

The above Reports are released to the Colombo Stock Exchange (CSE) and uploaded on its website
www.cse.lk. for the information of the shareholders and the general public prior to publishing in the
newspapers. The Reports are also available on the Bank’s corporate website www.seylan.lk. The ‘Financial
Calendar’ appearing on page 156 provides the relevant dates.

3 (8) (ii) (a) The Directors’ Responsibility Statement for Financial Reporting and the Chief Executive Officer’s
and Chief Financial Officer’s Responsibility Statement for Financial Reporting
The above Statements (pages 157 to 158) confirm that the Financial Statements for the year ended
31st December 2016 published are in conformity with all rules and regulatory requirements.

3 (8) (ii) (b) Directors’ Statement on Internal Control

The above Statement (pages 55 to 56) confirms that the financial reporting system provides reasonable
assurance regarding the financial report and that the preparation of the Financial Statements for external
purposes has been done in accordance with all relevant accounting principles and regulatory requirements.

3 (8) (ii) (c) External Auditors’ Certification

The Bank has obtained an Assurance Report on the internal controls over financial reporting from the
External Auditors in accordance with the ‘Sri Lanka Standard on Assurance Engagements SLSAE 3050 –
Assurance Reports for Banks on Directors’ Statements on Internal Control’. Refer page 57.

3 (8) (ii) (d) Details of the Directors

zz Names, qualifications, expertise: Refer Profiles of Directors on pages 15 to 18.
zz Fitness and Propriety: Refer Report of the Board of Directors on page 61.
zz Details on Directors’ interest in other entities – Refer Annexure to the Report of the Board of Directors on
pages 65 to 67.
zz Related Party Transactions – Refer Note 50 to the Financial Statements.
zz Fees/Remuneration paid to Directors – Refer disclosure under Direction 3 (8) (ii) (f) on page 45.

3 (8) (ii) (e) Total Net Accommodations to Related Parties

Accommodation granted to related parties is given in Note 50 to the Financial Statements.

The net accommodation as at 31st December 2016, granted to each category of related parties as defined in
Direction 3 (7) (i) and as per LKAS 24 is given below as a percentage of the Bank’s regulatory capital:

Category of Related Party Transactions Amount % of Regulatory

Rs. Mn. Capital

Directors, Key Management Personnel and their close relations

(Transactions including credit card accommodations) 280.36 0.89
Subsidiary, Seylan Developments PLC 75.00 0.24
Material shareholders of the Bank and concerns in which a Director
of the Bank or material shareholder has a substantial interest 8,682.48* 27.42
Other entities including common Directorship Entities 5,071.54** 16.02
* Includes Securities Purchased under Resale Agreements – Rs. 1,696 Mn.
** Includes accommodations non-funded, undrawn facilities – Rs. 4,210 Mn.

44 SUSTAINABLE STEWARDSHIP > CORPORATE GOVERNANCE Seylan Bank PLC | Annual Report 2016
CBSL Direction Level of Compliance

3 (8) (ii) (f) Remuneration to Key Management Personnel (KMPs) and Transactions with Key Management Personnel
and Aggregate Values of the Transactions of the Bank with its KMPs
The aggregate remuneration paid to Key Management Personnel and transactions of the Bank with
Key Management Personnel during the year 2016 were as follows:

Remuneration/Transaction Amount
Rs. Mn.

Remuneration to KMPs 218.18

Directors’ Fees for Non-Executive Directors 18.78
Loans and Advances (including Credit Card Accommodations to KMPs
and Non-Executive Directors) 135.78
Deposits of KMPs and Non-Executive Directors 304.40
Investments by KMPs and Non-Executive Directors – Other Investments (Liabilities) 245.10
Other Instruments with KMPs and Non-Executive Directors – Securities Purchased
under Resale Agreements (Assets) 144.58

3 (8) (ii) (g) External Auditors Certification of the Compliance with Direction No. 11 of 2007 on Corporate Governance
The External Auditors have performed an agreed-upon procedure in accordance with the principles set out
in the Sri Lanka Related Services Practice Statement 4750 and have provided a Factual Findings Report to
the Board on the Bank’s extent of compliance with the Directions as disclosed in this Corporate Governance
Report. Please refer confirmation stated at the end of this Report.

3 (8) (ii) (h) Compliance with Prudential Requirements, Regulations, Laws and Internal Controls
Statement of Directors’ Responsibility for Financial Reporting on pages 157 to 158 and Directors’ Statement
on Internal Controls on pages 55 to 56 provide the extent of Bank’s compliance in this regard.

3 (8) (ii) (i) Supervisory Concerns

There were no significant supervisory concerns on lapses in the Bank’s risk management system or
non-compliance with these Directions that have been pointed out by the Director, Bank Supervision,
Central Bank of Sri Lanka and requiring disclosure to the public.

3 (9) Transitional and General Provisions

3 (9) (i) The Board of Seylan Bank PLC was reconstituted on the 30th December 2008 and the current Directors
were appointed on or after the said date. Therefore, the directions relating to compliance with the
transitional provisions of the Banking Act Directions No. 11 of 2007, are not applicable to the Bank.

Confirmation
In terms of Direction 3 (8) (ii) (g) of the Banking Act Direction No. 11 of 2007, on behalf of the Board of Directors, we confirm that the
findings of the ‘Factual Findings Report’ dated 21st February 2017 issued by the Auditors, Messrs KPMG, Chartered Accountants to
the Board of Directors pursuant to the agreed-upon procedure carried out by them in accordance with ‘Sri Lanka Related Services
Practice Statement 4750’ are consistent with the matters disclosed in the above Annual Corporate Governance Report on the
mandatory compliance with the Banking Act Direction No. 11 of 2007.

W.M.R.S. Dias (Mrs.) N.N. Najumudeen
Chairman Company Secretary

21st February 2017

Colombo

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP > CORPORATE GOVERNANCE 45
 The Board Audit Committee, with 30 years experience in auditing, finance, Section Responsibility
authority and responsibilities, vested accounting and banking of which over 20
REPORT OF THE BOARD AUDIT COMMITTEE

by the Board, presents its report for years is at senior level. The profiles of the 3 (6) (ii) (j) Internal Audit Functions
the year ended 2016. This Report members of the Committee are given on Internal Audit Plan/
was approved by the Board of page 15 to 18 of this Annual Report. Programme
Directors.
Appraisals/assessments of
To assist the Committee in fulfilling its performance of senior staff of
role, the Chief Executive Officer, The Chief the Internal Audit Department
Board Audit Committee’s
Financial Officer and the Head of Internal
Objective Audit were invited by the Committee and
Adequacy of human resources
for internal audit function
The overall objective of Seylan attended the meetings of the Committee.
Bank’s Board Audit Committee 3 (6) (ii) (k) Findings of the Internal Audit;
Other members of the Board and senior
and (m) Authority to Investigate
(‘Audit Committee’ or ‘the management/staff of the Bank and
Committee’) is to assist the Board External Auditors were also invited and 3 (6) (ii) (n) Meetings and Minutes of the
to fulfil its oversight responsibilities and (p) Audit Committee
attended the meetings as and when the
for the financial reporting process, Committee required their presence. The 3 (6) (ii) (q) Whistle-Blowing Policy
its systems of internal control, the Company Secretary functioned as the 3 (8) (ii) (b) Internal Controls – Whilst
audit process and the process for Secretary to the Audit Committee. and (c) the management is
monitoring compliance with laws, primarily responsible for the
regulations and codes of conduct. Financial Statements and
Meetings for maintaining effective
internal control over financial
The Committee held a total of reporting and assessing the
Terms of Reference 14 meetings (including three special effectiveness of such control
The scope and responsibilities meetings) during the year, which systems, the Committee
of Seylan Bank’s Board Audit included four meetings with the External maintained vigilance in
Committee emanates from its Terms exercising its oversight role in
Auditors; two without the presence of the
respect of financial reporting,
of Reference approved by the Board. Director/CEO and Management and two internal controls and the risk
meetings in the presence of the Executive management process.
Management.
Composition of the
Committee during the Year Evaluation of the Committee
The Committee comprised: Attendance of the Members
The Board Audit Committee carried
Ms. M. Coralie Pietersz* – at the Audit Committee Meetings
out a self-evaluation/appraisal of its
Independent Director, Chairperson The attendance of the members at the performance and effectiveness during
of the Committee meetings is presented in the table on the year under review and submitted its
Mr. Nihal Jayamanne PC – page 26 of this Annual Report. Report to the Board.
Independent Director (resigned
from the Committee with effect Responsibilities and
from 25th February 2016)
Activities of the Committee
Mr. Samantha P.S. Ranatunga* –
The responsibilities and activities of the
Independent Director
Committee are described in the following Coralie Pietersz
Mr. W.M.R.S. Dias – sections of the Corporate Governance Chairperson
Non-Executive Director Report (pages 39 to 40 of the Annual Audit Committee
(resigned from the Committee Report) which reports compliance with (Independent Director/Senior Director)
with effect from 30th May 2016) the Banking Act Direction No. 11 of 2007 21st February 2017
Mr. W.D. Kapila Jayawardena* – on Corporate Governance.
Colombo
Non-Executive Director (appointed
Section Responsibility
to the Committee with effect from
30th May 2016) 3 (6) (ii) (c) The Audit Committee’s
and (d) role with regard to
*Members as at 31st December 2016
(Independent Director, Mr. Kumar Perera External Auditors
was appointed to the Committee on
3 (6) (ii) (e) Non-Audit Services
25th January 2017)
3 (6) (ii) (f) Scope of External Audit
The Chairperson of the Committee 3 (6) (ii) (g) Review of the Bank’s
is an Associate Member of the Financial Information
Institute of Chartered Accountants 3 (6) (ii) (h) Meeting with the
in England and Wales and a Fellow External Auditors
Member of the Institute of Chartered
3 (6) (ii) (i) Management Letters
Accountants of Sri Lanka, with over of the External Auditors

46 SUSTAINABLE STEWARDSHIP Seylan Bank PLC | Annual Report 2016

The Board Human Resources and except when matters of their own Non-Executive Directors during
Remuneration Committee (‘the BHRRC’ interest, performance and compensation the respective financial year in the

AND REMUNERATION COMMITTEE

REPORT OF THE BOARD HUMAN RESOURCES
or ‘the Committee’) presents its report were discussed. Annual Report.
for the year ended 31st December 2016.
This Report was approved by the Board
Meetings Aggregate Remuneration to
of Directors.
The Committee held four Meetings Directors, CEO and the KMPs
during the year. Two resolutions by Aggregate remunerations paid to
Scope and Objective circulation were also passed to formalise the Directors, CEO and the KMPs
of the Committee the recommendations of the Committee are disclosed under Direction ref
The Committee assists and makes Members on important and urgent 3 (8) (ii) (f) in the table reporting
recommendations to the Board of issues. Decisions and Minutes and/or compliance with the Banking Act
Directors in exercising its oversight role papers on recommendations made by the Directions on Corporate Governance
and responsibilities on matters related to Committee were tabled to the Meetings (page 45).
human resource strategies and policies of the Board of Directors for concurrence
and determination of compensation, or approval/decision as appropriate.
Responsibilities
benefits and remuneration for Directors,
the Chief Executive Officer (CEO) and The attendance of the Members at of the Committee
Key Management Personnel (KMPs) of the Meetings of the Committee was The responsibilities of the
the Bank. Its primary responsibilities satisfactory as presented in the table Committee carried out during
include reviewing, monitoring and on page 26 of the Annual Report. the year, in compliance with the
making recommendations to the Board Banking Act Directions on Corporate
of Directors on matters of strategic Governance No. 11 of 2007 (Banking
Remuneration Policy Act Directions) and the Code of
importance related to human resources
and remuneration of all other employees The Remuneration Policy of the Best Practice (2013) on Corporate
of the Bank as well. The responsibilities Bank aims to establish a formal and Governance, jointly issued by The
are detailed in the Terms of Reference of transparent procedure for determining Institute of Chartered Accountants
the Committee approved by the Board. remuneration, salaries and allowances of Sri Lanka and the Securities and
and other financial benefits and Exchange Commission of Sri Lanka
perquisites to Directors, the CEO, the (Code of Best Practice), have been
Composition of the Committee KMPs and all other employees of the disclosed in the relevant sections of
The Committee comprised the following Bank. The policy and practices are linked the Corporate Governance Report
members during the year 2016: to the short-term and long-term strategic published in the Annual Report as
Mr. Nihal Jayamanne PC – goals and operational objectives of follows:
Independent Director – Chairman of the the Bank and to achieve same, aims to zz 3 (6) (iii) (a) to (d) of the Banking
Committee (retired on 8th May 2016) attract, motivate and retain qualified and Act Directions – Pages 40 to 41.
competent persons (Directors as well as
Mr. Samantha P.S. Ranatunga – zz Sections A.11, B.1, B.2 and B.3
employees) at all levels.
Independent Director – Chairman of the Code of Best Practice –
of the Committee with effect from Page 29.
30th May 2016 Directors’ Remuneration
and Benefits
Mr. Ishara C. Nanayakkara – Self-evaluation
Non-Executive Director The Board as a whole, determines of the Committee
the remuneration and/or allowances
Rear Admiral B. Ananda J.G. Peiris – The Committee carried out a
and fees for both Executive and Non-
Independent Director self-evaluation of the Committee’s
Executive Directors, based on the
Ms. M. Coralie Pietersz – performance during the year and
recommendations of the Committee.
Independent Director submitted its Report to the Board.

(Mrs. Sandya K. Salgado – Independent Director The Terms of Reference of the

was appointed to the Committee with effect from Committee, provides that the Committee
25th January 2017)
shall make recommendations to the
Board for granting any special payments
The Company Secretary functioned as and/or benefits to the Executive
the Secretary to the Committee during Directors, upon their resignation or Samantha Ranatunga
the year. Director/Chief Executive Officer retirement and to any Non-Executive Chairman
(CEO) and Head of Human Resources, Director upon their retirement, Board Human Resources and
who are responsible for overseeing the in addition to normal fees and/or Remuneration Committee
overall Human Resources management remuneration, subject to disclosure (Independent Director)
function of the Bank, attended the of the aggregate value of total special
Meetings on invitation of the Committee 21st February 2017
payments/benefits made to resigning/
and participated in the deliberations Colombo
retiring Executive Directors or retiring

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP 47

 The Board Nomination Committee The Director/Chief Executive Officer Evaluation of the Committee
(‘the Committee’) presents its Report (CEO), Mr. Kapila Ariyaratne and Head
REPORT OF THE BOARD NOMINATION COMMITTEE
The Board Nomination Committee
for the year ended 31st December of Human Resources attended the carried out a self-evaluation of its
2016, pursuant to the review of its Meetings of the Committee on invitation. performance at the Meeting of the
performance during the year 2016. The Company Secretary functioned as Committee and submitted its Report
This report was approved by the the Secretary to the Board Nomination to the Board.
Board of Directors. Committee during the year.

Main Objective of the Board Meeting Proceedings of the

Nomination Committee Board Nomination Committee
The Board Nomination Committee The Committee held seven meetings
was established with the primary during the year. Copies of the minutes
objective of assisting the Board in of the meetings and reports on the
Rear Admiral Ananda Peiris
fulfilling its role and responsibilities recommendations and decisions of the Chairman
involving the appointment of Directors Committee were tabled at the Board Board Nomination Committee
and Key Management Personnel Meetings that ensued for perusal and (Independent Director)
(KMPs) of the Bank. concurrence/decision as appropriate.
21st February 2017
Colombo
Composition of the Board Attendance of Members
Nomination Committee at Meetings
During the year 2016, the Committee Attendance of the members at the
was reconstituted and as at Committee meetings is presented in the
31st December 2016, comprised table on page 26 of the Annual Report.
five Non-Executive Directors, three of
whom were Independent Directors as
Scope of Work and
mentioned below:
Responsibilities of the Committee
Rear Admiral B. Ananda J.G. Peiris –
The responsibilities of the Committee
Independent Director – Chairman
carried out during the year in compliance
of the Committee
with the Banking Act Directions on
Mr. Nihal Jayamanne PC – Corporate Governance No. 11 of 2007
Independent Director (Banking Act Directions) and the Code
(retired on 8th May 2016) of Best Practice (2013) on Corporate
Mr. Ishara C. Nanayakkara – Governance, jointly issued by The
Non-Executive Director Institute of Chartered Accountants
of Sri Lanka and the Securities and
Mr. Samantha P.S. Ranatunga –
Exchange Commission of Sri Lanka
Independent Director
(the Code of Best Practice) have been
Mr. W.M.R.S. Dias – disclosed in the following sections of the
Non-Executive Director Corporate Governance Report:
(appointed on 30th May 2016) zz Section 3 (6) (iv) (a) to (f) of the
Mr. P.L.S. Kumar Perera – Banking Act Directions – Page 41
Independent Director zz Section A.7 and A.8 of the Code of Best
(appointed on 30th May 2016) Practice – Pages 26 to 28

48 SUSTAINABLE STEWARDSHIP Seylan Bank PLC | Annual Report 2016

The Board Integrated Risk functioned as the Secretary to the Integrated Risk Management
Management Committee (‘BIRMC’ or Committee during the year. Policy Framework and System

RISK MANAGEMENT COMMITTEE

REPORT OF THE BOARD INTEGRATED
‘the Committee’) presents its Report Implementation
for the year ended 31st December 2016. Meetings of the BIRMC Review of policies related to risk
The Report was formally presented and
The Committee met four times during management; effectiveness of the
approved by the Board of Directors.
the year on a quarterly basis. The Business Continuity Planning, Disaster
minutes of the Committee meetings were Recovery Testing; progress on the
Overall Objective of the Board implementation of the Baseline Security
recorded by the Secretary and confirmed
Integrated Risk Management Standards; Internal Capital Adequacy
minutes were made available to the
Committee Board of Directors for information whilst Assessment Process, progress on
The Board Integrated Risk Management recommendations and reports of the moving to the Advanced Approaches and
Committee was established with a Committee were submitted to the Board the Regulatory Capital Requirements
mandate to ensure that the Bank for review and appropriate decision. (2016-2019) in line with the Central Bank
implements an approved policy guidelines on BASEL III; were some of the
framework with defined procedures supplementary activities endorsed by the
and systems for identifying, measuring,
Attendance
Committee during the year.
monitoring and controlling all credit, The Chief Risk Officer was present at
market, liquidity and operational and all meetings of the Committee held
during the year. Details of attendance
Risk Management Department
other risks facing the Bank and its
reputation, managing those risks within of the Directors (who were members of The Risk Management Department is an
preapproved limits for risk appetite and the Committee) at the meetings held independent unit headed by the Chief
ensuring compliance. during the year are presented in the table Risk Officer (CRO), which carries out
summarising the attendance of Directors its responsibility to create, to manage
Composition of the BIRMC at Sub-committee meetings on page 26. and to implement a pervasive bank
wide risk culture. The BIRMC reviewed
The Committee was reconstituted
the adequacy of the structure of Risk
during the year: Terms of Reference
Management Department to focus
Mr. Samantha P.S. Ranatunga* – The Terms of Reference of the Committee on improving communication and
Independent Director, Chairman was revised during the year. implementation of risk management
of the Committee
responsibilities at all levels of the Bank.
Ms. M. Coralie Pietersz* – Activities of the Committee A comprehensive report prepared by
Independent Director
The activities carried out by the the Risk Management Department and
Mr. W.D. Kapila Jayawardena – approved by the Committee disclosing
Committee during the year, have been
Non-Executive Director
briefed in the following sections of the the Bank’s level of risk management
(resigned from the Committee
with effect from 30th May 2016) Corporate Governance Report (page 42 and assessment including the levels
of the Annual Report) which reports the of risk under different risk categories,
Mr. P.L.S. Kumar Perera –
Bank’s compliance with the Banking Act is presented on pages 68 to 86 of the
Non-Executive Director, Independent
Director (resigned from the Directions on Corporate Governance No. Annual Report.
Committee 11 of 2007.
with effect from 25th February 2016) Evaluation of the Board Integrated
Section Activities of the Committee/Extent of
Mr. W.M.R.S. Dias* – Risk Management Committee
compliance with the role and responsibilities
Non-Executive Director (appointed defined in the Terms of Reference
The Members of the BIRMC carried out
with effect from 30th May 2016)
3 (6) (v) (b) The process for assessment
a self-assessment of the Committee’s
Mr. Kapila P. Ariyaratne* –
of risks activities during the year and submitted
Director/CEO (appointed with
its Report to the Board.
effect from 25th February 2016) 3 (6) (v) (c) Effectiveness of Management
Mr. Christie Nanayakkara – Level Committees
Chief Risk Officer (resigned with 3 (6) (v) (d) Actions to mitigate specific risks
effect from 30th June 2016)
3 (6) (v) (f) Action against those who fail to
Mr. Ramesh J. Jayasekara* –
identify specific risks
Chief Risk Officer (appointed with
effect from 1st July 2016) Samantha Ranatunga
* Members as at 31st December 2016
Compliance Function Chairman
(Mr. P.L.S. Kumar Perera – Independent Director Board Integrated Risk
The Head of Compliance reports directly
was reappointed to the Committee with effect Management Committee
from 25th January 2017) to the BIRMC and is responsible for the (Independent Director)
due compliance by the Bank with laws,
The Head of Compliance and the Chief regulations, guidelines and industry 21st February 2017

Financial Officer are co-opted to the best practices relating to licensed Colombo
Committee. The Company Secretary commercial banks.

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP 49

 The Board Sustainability Committee Corporate Social Responsibility
(‘the Committee’), with its authority and (CSR) Activities
REPORT OF THE BOARD SUSTAINABILITY COMMITTEE

responsibilities vested by the Board,

The CSR activities during the year were
presents its report for the year 2016.
steered by the Executive Sustainability
This Report was approved by the Board.
Committee headed by Director/CEO.
‘Seylan Pehasara’, the 100 School Library
Composition Project for the period 2013 to 2016 was
successfully completed in March 2016
During the year, the Committee
with the opening of the 100th Library at
comprised:
the Weerapuranappu Model School in
Mr. Ishara C. Nanayakkara – Moratuwa. The Committee approved the
Non-Executive Director continuation of the ‘Seylan Pehasara’
Chairman of the Committee project for establishing a further 150
Mr. Samantha P.S. Ranatunga – school libraries as well as a project
Independent Director for the renovation/maintenance of
the already established 100 libraries
Rear Admiral B. Ananda J.G. Peiris –
at schools across the country during
Independent Director
the next three years. The Bank also
Mr. Kapila P. Ariyaratne – carried out several other CSR projects
Director/CEO to support communities, which included
Mr. S. Viran Corea – initiatives by the branches on a regional
Non-Executive Director basis. Pages 116 to 154 of the Annual
(Mrs. Sandya K. Salgado, Independent Director was Report provide a detailed update of the
appointed to the Committee on 25th January 2017). Sustainability/CSR initiatives of the Bank.

The Chief Financial Officer, the Head The Bank’s External Auditors,
of Marketing and the Assistant General Messrs KPMG were engaged by the
Manager Finance attended the Meetings Bank for assurance services relating to
of the Committee held during the year, Sustainability Reporting, who provided
by invitation. The Company Secretary their assurance report in respect of the
functioned as the Secretary to the year 2016, which is published on pages
Committee. 282 to 283 of the Annual Report.

Meetings Evaluation of the Committee

Two meetings of the Board Sustainability The Committee carried out a
Committee were held during the year self-evaluation of the activities of the
2016 and one Resolution was passed Committee and submitted its Report
by circulation. Details of the Directors’ to the Board.
attendance at the meetings are
presented in the table appearing on page
26 of the Annual Report. Copies of the
confirmed minutes of the meetings were
circulated to the Board for review and
concurrence of the matters discussed.

Terms of Reference and Scope and Ishara Nanayakkara

Responsibilities of the Committee Chairman

The Terms of Reference (TOR) of the Board Sustainability Committee

Committee was revised and approved (Non-Executive Director/
during the year. The scope and Deputy Chairman)
responsibilities of the Committee is set 21st February 2017
out in the TOR which stipulates that Colombo
the Bank shall follow the GRI (Global
Reporting Initiative) Sustainability
Reporting Guidelines for reporting
sustainability initiatives of the Bank.

50 SUSTAINABLE STEWARDSHIP Seylan Bank PLC | Annual Report 2016

The Board Credit Committee (‘the The Company Secretary functioned as
Committee’) presents this Report in the Secretary to the Committee.

REPORT OF THE BOARD CREDIT COMMITTEE

respect of the year 2016, which report
was approved by the Board of Directors. Meetings of the Board
Credit Committee
Scope and Responsibilities The Committee held 21 Meetings during
of the Board Credit Committee the year (27 Meetings were held in 2015).
Six resolutions by circulations were also
To improve the business and soundness
passed from time to time in respect of
of the Bank by promoting and reinforcing
credit proposals, which required approval
a robust and pervasive credit risk
on an urgent basis. Recommendations
acceptance and management culture by:
of the Committee were circulated to
a. Reviewing and where appropriate the Board for approval, whilst copies of
approving credit facilities or the confirmed Minutes were tabled for
recommending them to the Board the perusal of the Board at the monthly
for approval. Board Meetings and important issues
b. Guiding Management to improve discussed. Recommendations of the
credit policies, procedures and Committee, in respect of proposals
lending guidelines and their for new facilities (exceeding a decided
implementation as well as processes limit) were evaluated by the Board at
for recoveries, empowerment the Meetings of the Board of Directors.
and accountability for credit Directors abstained from voting on any
decision-making, resolution in which the Directors had
c. Supporting and reinforcing the related party interests or were interested
independent role of Credit Risk by virtue of their Directorships. Such
Management and ensuring that it Directors were not counted in the
has the ability, determination and quorum for the relevant agenda item.
assertiveness to influence key credit
decision-makers at all levels. The attendance of the members at the
meetings was satisfactory as noted
in the table presenting the Directors’
Composition of the Board attendance at Sub-committee meetings
Credit Committee as at on page 26.
31st December 2016
The Committee comprised:
Evaluation of the Committee
Mr. Ishara C. Nanayakkara –
The Committee carried out an evaluation
Non-Executive Director,
of its proceedings during the year and
Chairman of the Committee
submitted its Report to the Board.
Rear Admiral B. Ananda J.G. Peiris –
Independent Director
Mr. P.L.S. Kumar Perera –
Independent Director
Mr. Kapila P. Ariyaratne –
Director/CEO
(Mr. Kumar Perera resigned from the Committee
with effect from 25th January 2017 and Independent
Ishara Nanayakkara
Director, Mr. Anushka Wijesinha was appointed with Chairman
effect from 25th January 2017.) Board Credit Committee
(Non-Executive Director/
Deputy Chairman)

21st February 2017

Colombo

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP 51

 The Board Marketing and Product Meetings of the Committee
Development Committee (‘the
REPORT OF THE BOARD MARKETING AND
PRODUCT DEVELOPMENT COMMITTEE
The Committee held 2 Meetings during
Committee’), with its authority and the year, whilst 3 Resolutions were
responsibilities vested passed by circulation for approving
by the Board, presents its Report for the product launches and promotions. Refer
year 2016. This report was approved by page 26 for attendance of the members
the Board. at the Meetings. The Committee reviewed
with in-depth deliberations, competitor
Composition of the Board strategies, market share, banking sector
Marketing and Product spends, etc., vis-à-vis the progress and
Development Committee performance of the different products
and promotional campaigns undertaken
During the year, the Committee
by the Bank, in line with the approved
comprised:
Strategic Marketing Plan of the Bank
Mr. Samantha P.S. Ranatunga – for the year 2016. The Committee also
Independent Director, reviewed key initiatives recommended
(Chairman of the Committee) by the Head of Marketing and Personal
Mr. Nihal Jayamanne PC – Banking towards achieving the overall
Independent Director, objectives of the Bank.
(retired on 8th May 2016)
Mr. W.M.R.S. Dias – Copies of the minutes of the Meetings
Non-Executive Director, (appointed and Resolutions passed by circulation
with effect from 30th May 2016) were submitted for the perusal of the
Board. Recommendations (if any)
Rear Admiral B. Ananda J.G. Peiris –
arising from the Meeting proceedings
Independent Director
were taken up at the Board Meetings that
Mr. Kapila P. Ariyaratne – followed the Committee Meetings for
Director/Chief Executive Officer review and comments/decision.
(Mrs. Sandya K. Salgado –
Independent Director, was appointed to
Evaluation of the Committee
the Committee on 25th January 2017)
The Committee carried out a
self-evaluation of the performance and
Head of Marketing and Personal
effectiveness of the Committee during
Banking and the Chief Financial Officer
the year 2016 and submitted its Report
were co-opted to the Committee and
to the Board.
attended regular meetings. The Company
Secretary functioned as the Secretary to
the Committee.

Scope and Objectives Defined

in the Terms of Reference
of the Committee
Samantha Ranatunga
The scope of the Committee, which is Chairman
defined in the Terms of Reference of Board Marketing and Product
the Committee, is to review the overall Development Committee
marketing plans of the Bank, to ensure (Independent Director)
that plans aim to optimise value creation
21st February 2017
for the Bank and support strategic
Colombo
goals. The Committee ensures that the
Bank actively pursues new product
opportunities and develop viable products
with the aim of achieving business growth.

52 SUSTAINABLE STEWARDSHIP Seylan Bank PLC | Annual Report 2016

The Board Governance and Compliance Ms. M. Coralie Pietersz – Compliance
Committee of Seylan Bank PLC Independent Director

AND COMPLIANCE COMMITTEE

REPORT OF THE BOARD GOVERNANCE
The Committee reviewed several
presents its report for the year ended aspects of the Bank’s compliance,
Mr. W.M.R.S. Dias –
31st December 2016. This Report was including risk based compliance
Non-Executive Director
approved by the Board of Directors. processes.
Mr. S. Viran Corea –
Non-Executive Director
Scope and Terms of Reference Evaluation of the Committee
of the Board Governance and The Company Secretary functioned as
The Committee carried out a
Compliance Committee the Secretary to the Committee.
self-evaluation of the performance
The Board Governance and Compliance and effectiveness of the Committee
Committee (hereinafter referred to as The Director/Chief Executive Officer and
and submitted its Report to the
‘the Committee’ or ‘the BGCC’) was the Head of Compliance attended the
Board.
established by the Board of Directors regular meetings of the Committee on
of the Bank with the main objective invitation. The Terms of Reference of the
of assisting the Board of Directors Committee provide that on invitation,
in adopting appropriate governance any of the Directors, the Chief Risk
standards for the Bank in fulfilling the Officer, the Head of Internal Audit and
Board’s responsibility for oversight of any other members of the Management Kumar Perera
shall attend the meetings of the BGCC or Chairman
the corporate governance processes and
practices and compliance practices of part thereof to provide pertinent Board Governance and
information as necessary. Compliance Committee
the Bank.
(Independent Director)

This scope and objective is set out in the 21st February 2017
Meetings of the Board Governance
Terms of Reference of the Committee. Colombo
and Compliance Committee
The Terms of Reference was revised
during the year pursuant to vesting its The Committee held 4 meetings during
responsibility for conforming with the the year. Details of attendance of
provisions of the Code of Best Practice members at the meetings are presented
on Related Party Transactions issued by in the table on page 26 of this Annual
the Securities and Exchange Commission Report. Copies of the Minutes of the
of Sri Lanka and Section 9 of the Rules of Meetings were submitted for the perusal
the Colombo Stock Exchange relating to of the Board. Recommendations arising
‘Related Party Transactions’ to the Related out of the Minutes of the Committee
Party Transactions Review Committee. Meetings were taken up at the Board
Meetings that followed the Committee
Meetings for review and decision.
Composition
During the year, the Committee
Key Responsibilities
comprised the following members:
of the Committee
Mr. Nihal Jayamanne PC –
Governance
Independent Director/Chairman of the
Committee (retired on 8th May 2016) A Corporate Governance Framework
approved by the Board is in place.
Mr. P.L.S. Kumar Perera –
The Committee is responsible for
Independent Director/Chairman of the
providing advice to the Board on the
Committee (appointed as Chairman
most appropriate corporate governance
with effect from 30th May 2016)
policies in particular, the adherence to
Rear Admiral B. Ananda J.G. Peiris – the Corporate Governance Framework
Independent Director of the Bank consistent with the regulations.

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP 53

 The Related Party Transactions Review Rear Admiral B. Ananda J.G. Peiris –
Committee (‘the Committee’ or ‘RPTRC’) Independent Director
REPORT OF THE RELATED PARTY
TRANSACTIONS REVIEW COMMITTEE

of the Board presents its report for

Mr. S. Viran Corea –
the year ended 31st December 2016.
Non-Executive Director
This Report was approved by the Board
(Mr. Anushka S. Wijesinha – Independent
of Directors. Director, was appointed to the Committee
on 25th January 2017)

Establishment of the Committee

The Company Secretary functioned as
The Board Governance and Compliance the Secretary to the Committee.
Committee (BGCC) of the Bank was
established in 2014, with the objective The Director/Chief Executive Officer
of assisting the Board of Directors and the Head of Compliance attended
(‘the Board’) of Seylan Bank PLC in the regular meetings of the Committee
adopting appropriate governance on invitation.
standards for the Bank in fulfilling the
Board’s responsibility for oversight
of the corporate governance and Meetings of the RPTRC
compliance processes and practices. The Committee held 2 Meetings during
A key responsibility of the BGCC was the year. Details of attendance of the
conforming with the provisions of the members at the meetings are presented
Code of Best Practice on Related Party in the table on page 26 of this Annual
Transactions issued by the Securities and Report. Copies of the confirmed minutes
Exchange Commission of Sri Lanka (the of Meetings were submitted for the
SEC Code on Related Party Transactions). perusal of the Board.
The BGCC recommended that the
Board establish a separate committee,
viz. ‘Related Party Transactions Review Review of Related Party
Committee’ to comply with Section Transactions
9 of the Listing Rules of the Colombo Both the BGCC (until September 2016)
Stock Exchange (CSE) and the said SEC and the RPTRC (with effect from October
Code on Related Party Transactions. 2016) ensured compliance with Section 9
Accordingly, a Related Party Transactions of the Rules of the CSE and the SEC Code
Review Committee was constituted by on Related Party Transactions. It was
the Bank in September 2016 and the noted that the Bank did not carry out any
responsibilities of the BGCC relating to related party transactions, which were
review of related party transactions were within the ambit of the said Rules and
vested with the RPTRC. the Code and which required shareholder
approval and/or disclosure.

Terms of Reference of the

Committee Evaluation of the Committee
The Terms of Reference of the Committee The Committee carried out a
prepared in line with the aforementioned self-evaluation of the performance and
Rules and Code was approved by the effectiveness of the Committee and
Board. submitted its Report to the Board.

Composition
The Committee comprised the following
members:
Kumar Perera
Mr. P.L.S. Kumar Perera – Chairman
Independent Director, Related Party Transactions Review
Chairman of the Committee Committee
Ms. M. Coralie Pietersz – (Independent Director)
Independent Director 21st February 2017
Colombo

54 SUSTAINABLE STEWARDSHIP Seylan Bank PLC | Annual Report 2016

Introduction Framework for Managing with the corporate objectives,
Significant Risks strategies and the annual budget

DIRECTORS’ STATEMENT ON INTERNAL CONTROL

The system of internal control is a
critical component of Seylan Bank PLC’s as well as the policies and
The Board has established an ongoing
(‘Bank’) management and a foundation business directions that have been
process for identifying, evaluating and
for safe and sound operations. A sound approved.
managing the significant risks faced
internal control system is established by the Bank and this process includes zz The Internal Audit Division of the
with the intention of ensuring that the enhancing the system of internal controls Bank verifies compliance with
goals and objectives of the Bank will be as and when there are changes to policies and procedures and
met, will achieve long-term profitability business environment and regulatory the effectiveness of the internal
targets and maintain reliable financial guidelines. The process is regularly control systems on an ongoing
and managerial reporting, while ensuring reviewed by the Board and accords basis using samples and rotational
compliance with laws and regulations as with the Guidance for Directors of basis and highlights significant
well as internal policies and procedures. Banks on the Directors’ Statement on findings in respect of any non-
Internal Control issued by the Institute compliance. Audits are carried
The internal control process comprises of Chartered Accountants of Sri Lanka out on all units and branches, the
the following main elements: (ICASL). The Board has assessed the frequency of which is determined
a. Management oversight and internal control system taking into by the level of risk assessed,
control culture. account principles for the assessment of to provide an independent and
internal control system as given in that objective report on operational
b. Risk recognition and assessment.
guidance. As required by the Direction and management activities of
c. Control activities and segregation No. 11 of 2007, section 3 (8) (ii) (b) under these units and branches. The
of duties. the Banking Act, the Board of Directors annual audit plan is reviewed and
d. Information and communication. presents this report. approved by the Audit Committee
e. Monitoring activities and correcting and the findings of the audits are
deficiencies. The management assists the Board in the submitted to the Audit Committee
implementation of the Board’s policies for review at their periodic
The internal control mechanism is and procedures on risk and control meetings.
an ongoing process for identifying, by identifying and assessing the risks zz The Board Audit Committee of
evaluating and managing significant faced, and in the design, operation and the Bank reviews internal control
risks faced by the Bank and ensuring monitoring of suitable internal controls issues identified by the Internal
that the financial reporting system has to mitigate and control these risks. The Audit Division, the external
been designed to provide reasonable Board is of the view that the system auditors, regulatory authorities
assurance regarding the reliability of of internal controls in place is sound and management, and evaluates
financial reporting and the preparation and adequate to provide reasonable the adequacy and effectiveness of
of Financial Statements for external assurance regarding the reliability the risk management and internal
purposes has been done in accordance of financial reporting, and that the control systems. They also review
with the relevant accounting principles preparation of Financial Statements for the internal audit functions with
and regulatory requirements. external purposes and is in accordance particular emphasis on the scope
with relevant accounting principles and of audits and quality of internal
regulatory requirements. audits. The Minutes of the Audit
Responsibility Committee meetings are tabled at
The Board of Directors (‘Board’) is the Board Meeting of the Bank on
Key Features of the Process
responsible for the adequacy and a periodic basis. Further details of
effectiveness of the Bank’s system
Adopted in Reviewing the
the activities undertaken by the
of internal controls. However, such a Design and Effectiveness of the
Audit Committee of the Bank are
system is designed to manage the Bank’s Internal Control System Over
set out in the Audit Committee
key areas of risk within an acceptable Financial Reporting Report on page 46.
risk profile, rather than eliminate the The key processes that have been zz Apart from the Audit Committee,
risk of failure to achieve the policies established in reviewing the design and
Board Committees have been
and business objectives of the Bank. effectiveness and integrity of the system
established with appropriate
Accordingly, the system of internal of internal controls with respect to
empowerment to ensure effective
controls can only provide reasonable financial reporting include the following:
management and supervision
but not absolute assurance against
zz The Board Committees established of the Bank’s core areas of
material misstatement of management
by the Board, assist the Board in business operations. These
and financial information and records or
ensuring the effectiveness of the Committees include the Integrated
against financial losses or fraud.
Bank’s daily operations and that the Risk Management Committee,
Bank’s operations are in accordance Governance and Compliance

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP 55

 Committee, Human Resource and and disclosures of the financial Review of the Statement
Remuneration Committee, the statements of the Bank. These in turn by External Auditors
Nomination Committee, the Credit were observed and checked by the
The External Auditors have reviewed the
Committee, the Sustainability Internal Audit Division for suitability
above Directors’ Statement on Internal
Committee, the Marketing and Product of design and effectiveness on an
Control of the Bank for the year ended
Development Committee and the ongoing basis.
31st December 2016 and reported to the
Related Party Transactions Review zz The Board has also taken into Board that nothing has come to their
Committee. consideration the requirements of attention that causes them to believe
zz Operational committees have also ‘Sri Lanka Financial Reporting that the above statement is inconsistent
been established with appropriate Standards 9 – Financial Instruments’ with their understanding of the process
empowerment to ensure effective which is effective from financial year adopted by the Board in the review of the
management and supervision of commencing from 1st January 2018, design and effectiveness of the internal
the Bank’s core areas of business as it is expected to have significant control system over financial reporting
operations. These committees impact on the classification and of the Bank. Their report to the Board
include the Asset and Liability impairment of financial instruments is disclosed on page 57 to this Annual
Management Committee (ALCO), the of the Bank. A high level impact Report.
Executive Credit Risk Management assessment of potential impact on
Committee, the Executive Market transition to SLFRS 9 has already been By order of the Board of Directors of
and Operational Risk Management completed. The next phase being the
Committee, the Executive Crisis implementation phase will commence Seylan Bank PLC
Management Committee, the Business in March 2017.
Continuity Steering Committee, the zz The recommendations made by the
Senior Management Committee, the external auditors in connection with
Performance Review Committee and the internal control system for the
the Information Technology Steering financial year ended 31st December
Committee. 2015 were taken into consideration W.M.R.S. Dias
zz Policies and procedures to ensure and appropriate measures were Chairman
compliance with internal controls taken to incorporate them. The
and the relevant laws and regulations recommendations made by the external
are set out in operations manuals, auditors in connection with the internal
guidelines and the directives issued control system for the financial year
by the Bank which are updated from ended 31st December 2016 will be
Coralie Pietersz
time to time. addressed in the ensuing year. Chairperson
zz Based on the formats given in the zz This report and assessment does not Board Audit Committee
‘Guidance for Directors of Banks on include the subsidiary of the Bank.
21st February 2017
the Directors’ Statement on internal
control’ in the Sri Lanka Standard
Confirmation
on Assurance Engagements 3050,
issued by The Institute of Chartered Based on the above processes, the Board
Accountants of Sri Lanka, all the confirms that the financial reporting
said controls including the IT general system of the Bank has been designed to
controls and branch level application provide reasonable assurance regarding
controls, were documented. the reliability of financial reporting and
the preparation of Financial Statements
zz In assessing the internal control
for external purposes has been done in
system over financial reporting, the
accordance with Sri Lanka Accounting
management of the Bank collated
Standards (SLFRS/LKAS) and regulatory
all procedures and controls that are
requirements of the Central Bank
connected with significant accounts
of Sri Lanka.

56 SUSTAINABLE STEWARDSHIP > DIRECTORS’ STATEMENT ON INTERNAL CONTROL Seylan Bank PLC | Annual Report 2016
 AUDITORS’ REPORT ON INTERNAL CONTROL
To the Board of Directors To achieve this objective, appropriate also does not require us to consider
of Seylan Bank PLC evidence has been obtained by whether the processes described to
performing the following procedures: deal with material internal control
We were engaged by the Board of
Directors of Seylan Bank PLC (‘Bank’) a. Enquired the Directors to obtain an aspects of any significant problems
to provide assurance on the Directors’ understanding of the process defined disclosed in the Annual Report will, in
Statement on Internal Control by the Board of Directors for their fact, remedy the problems.
(‘Statement’) included in the annual review of the design and effectiveness
report for the year ended 31st December of internal control and compared their Our Conclusion
2016 as set out in pages 55 to 56 in this understanding to the Statement made
Based on the procedures performed,
Annual Report. by the Directors in the Annual Report.
nothing has come to our attention
b. Reviewed the documentation prepared that causes us to believe that the
by the Directors to support their Statement included in the Annual
Management’s Responsibility for
Statement made. Report is inconsistent with our
the Statement on Internal Control
c. Related the Statement made by the understanding of the process the
Management is responsible for the
Directors to our knowledge of the Board of Directors have adopted
preparation and presentation of the
Bank obtained during the audit of the in the review of the design and
Statement in accordance with the
Financial Statements. effectiveness of internal control
“Guidance for Directors of Banks on
d. Reviewed the minutes of the meetings system over the financial reporting of
the Directors’ Statement on Internal
of the Board of Directors and of the Bank.
Control” issued in compliance with the
section 3 (8) (ii) (b) of the Banking Act relevant Board Committees.
Direction No. 11 of 2007, by the Institute e. Attended meetings of the audit
of Chartered Accountants of Sri Lanka. committee at which the annual report,
including the Statement on Internal
Control is considered and approved for Chartered Accountants
Scope of the Engagement in Colombo
submission to the Board of Directors.
Compliance with SLSAE 3050
f. Considered whether the Directors’ 21st February 2017
Our responsibility is to issue a report to
Statement on Internal Control
the Board on the Statement based on
covers the year under review and
the work performed. We conducted our
that adequate processes are in place
engagement in accordance with Sri Lanka
to identify any significant matters
Standard on Assurance Engagements
arising.
SLSAE 3050 – Assurance Report for
Banks on Directors’ Statement on g. Obtained written representations
Internal Control issued by The Institute from Directors on matters material
of Chartered Accountants of Sri Lanka. to the Statement on Internal Control
where other sufficient appropriate
audit evidence cannot reasonably be
Summary of Work Performed expected to exist.
Our engagement has been conducted
to assess whether the Statement is SLSAE 3050 does not require us to
both supported by the documentation consider whether the Statement covers
prepared by or for Directors and all risks and controls, or to form an
appropriately reflects the process the opinion on the effectiveness of the Bank’s
Directors have adopted in reviewing the risk and control procedures. SLSAE 3050
system of internal control of the Bank.

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP 57

 The Directors of Seylan Bank PLC The Bank has been listed on the Colombo There were no significant changes in the
(hereinafter referred to as ‘the Stock Exchange since 5th January 1989. nature of the principal activities of the
REPORT OF THE BOARD OF DIRECTORS OF SEYLAN BANK PLC ON
THE STATE OF AFFAIRS OF THE COMPANY FOR THE YEAR

Board’ or ‘the Directors’) present The Bank’s ordinary shares (both voting Bank and the Group during the financial
their Report on the State of Affairs and non-voting) and its unsecured, year under review.
of Seylan Bank PLC (‘the Bank’ or redeemable debentures are listed in the
‘the Company’) as published in this Colombo Stock Exchange. Fitch Ratings
Annual Report of the Bank which also Lanka Limited has affirmed the Bank’s Group Structure
consists of the following statements National Long-Term Rating at A-(lka) with The only Subsidiary of the Bank, Seylan
for the financial year ended a stable outlook and has affirmed the Developments PLC is a public limited
31st December 2016: Bank’s senior unsecured debentures at liability company listed on the Colombo
zz the Audited Financial Statements A-(lka) whilst assigning a BBB+(lka) for Stock Exchange. The principal activities
of the Bank its subordinated debt. of Seylan Developments PLC are property
zz the Consolidated Financial development and management. The
Statements of the Group and Bank held a 70.51% stake in Seylan
Vision and Mission and Developments PLC as at 31st December
zz the Auditors’ Report on those Corporate Conduct 2016. The Bank received a dividend of
Financial Statements
Rs. 56,339,340/- paid by the Subsidiary
Vision
during the year under review.
This Report hereinafter will also be ‘To be Sri Lanka’s leading financial
referred to as ‘this Report’, ‘Report of services provider – as recognised
the Directors’ or ‘Report of the Board
of Directors’.
by all its stakeholders’. Branch Network
As at 31st December 2016, the Bank’s
Mission branch network consisted of 166 banking
This Report and the aforementioned
zz ‘We provide our customers with centres and 100 Student Savings
Financial Statements were reviewed
financial services that meet their Centres. Details of the Banking centre
and approved by the Board of
needs in terms of value, pricing, locations are given on pages 274 to 277.
Directors on
delivery and service’.
21st February 2017.
zz ‘We will do so through a team of Seylan
The disclosures in this Report
Bankers who are recognised and Review of Performance
rewarded for results orientation’.
conform in 2016 and Future
zz ‘We will ensure that our efforts
to the requirements of the
translate to meeting the expectations
Development Plans
Companies Act No. 07 of 2007, the
of our shareholders, whilst always The letters from the Chairman and the
Banking Act No. 30 of 1988 (as
acting as responsible corporate Chief Executive Officer, and ‘Our Value
amended) and the Directions issued
citizens’. Creation Story’ published in this Annual
by the Monetary Board under the
Report provide an overall assessment
Banking Act, the Listing Rules of
The Bank conducts its business activities and review of the Bank’s operations and
the Colombo Stock Exchange, the
at a high level of ethical standard in financial performance during the year
Code of Best Practice (2013) on
achieving its vision and mission. The 2016 and they speak about the future
Corporate Governance jointly issued
Board of Directors of the Bank as well as development plans of the Bank.
by the Securities and Exchange
its employees have pledged to abide by
Commission of Sri Lanka (SEC)
and comply with the Codes of Conduct
and The Institute of Chartered
and Ethics. Financial Statements and
Accountants of Sri Lanka
(CA Sri Lanka). Financial Reporting
Principal Activities The Bank has adopted Sri Lanka
Accounting Standards and Sri Lanka
The principal activities of the Bank are
Seylan Bank PLC Financial Reporting Standards (LKAS/
commercial banking and provision of
Seylan Bank PLC is a public limited SLFRS) in the preparation of the Financial
related financial services which include
liability company incorporated Statements. Consequently, the necessary
acceptance of deposits, personal banking,
in Sri Lanka on 28th August 1987 quantifications and disclosures have also
trade financing, off shore banking, resident
under the Companies Act No. 17 of been made based on LKAS/SLFRS.
and non-resident foreign currency
1982. The Bank was re-registered as operations, travel-related services,
required under the provisions of the The Audited Financial Statements of
corporate and retail credit, margin trading,
Companies Act No. 07 of 2007 on the Bank and the Group for the financial
pawn broking, project financing, lease
30th May 2007. The registered office year ended 31st December 2016 certified
financing, rural credit, credit card facilities,
and the head office of the Bank is at by the Chief Financial Officer and the
money remittance services, factoring,
‘Seylan Towers’, No. 90, Galle Road, Director/Chief Executive Officer and
dealing in government securities and
Colombo 03. signed by two Directors in terms of
treasury related products, etc.
sections 151, 152 and 168 (1) (b) of

58 SUSTAINABLE STEWARDSHIP Seylan Bank PLC | Annual Report 2016

the Companies Act No. 07 of 2007 as Financial Statements published in this
published in this Annual Report form Annual Report:
an integral part of this Report.
BANK GROUP

Income 2016 2015 2016 2015

Directors’ Responsibility for Rs. Bn. Rs. Bn. Rs. Bn. Rs. Bn.

Financial Reporting Gross Income (Note 6) 38.092 28.586 38.132 28.629

The Directors are responsible for the Operating Income 17.762 16.146 17.813 16.199
preparation of the Financial Statements
of the Bank to reflect a true and fair view
of its state of affairs. The Directors are of
the view that these Financial Statements
Profit and Appropriations
have been prepared in conformity with A summary of the consolidated financial
the requirements of the Companies results of the operations of the Group
Act No. 07 of 2007, the Sri Lanka during the year ended 31st December
Accounting and Auditing Standards Act 2016 is given below:
No. 15 of 1995, Banking Act No. 30 of
2016 2015
1988 (as amended), the Listing Rules Rs. ’000 Rs. ’000
of the Colombo Stock Exchange and
Banking Act Direction No. 11 of 2007 Profit before Income Tax 5,771,245 5,822,611
(as amended) and the Directions and
Less: Income Tax 1,736,355 1,936,662
guidelines thereto.
Profit after Income Tax 4,034,890 3,885,949
The Statement of Directors’ Responsibility Attributable to Non-Controlling Interest 21,758 30,653
for Financial Reporting which appears on
Net Profit Attributable to Equity Holders 4,013,132 3,855,296
pages 157 and 158 of this Annual Report,
form an integral part of this Report of Retained Profit brought Forward after Dividends 10,427,628 7,561,058
the Directors. Profit Available for Appropriation 14,440,760 11,416,354
Transfer to Reserve Fund (200,523) (191,547)
Auditors’ Report Other Transfers/Adjustments 64,688 151,462
The Auditors of the Company Messrs Balance Carried Forward 14,304,925 11,376,269
KPMG, Chartered Accountants have
carried out the audit of the Consolidated
Financial Statements for the financial
year ended 31st December 2016 and
Taxation Acquisition of Property, Plant &
Provision for taxation has been Equipment, Leasehold Rights
their Report on the Financial Statements
computed as indicated in Note 15 and Intangible Assets
appear on page 160 of this Annual Report.
to the Financial Statements. BANK GROUP

2016 2015 2016 2015

Significant Accounting Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Policies Capital Expenditure

850,209 714,214 851,674 774,346
The total capital Expenditure incurred
The significant accounting policies
on the acquisition of Property, Plant &
adopted in the preparation of the
Equipment of the Bank and the Group Freehold Properties
Financial Statements are given on
during the year is given in Notes 29, 30
pages 171 to 199 in this Annual Report. The net book value of freehold properties
and 32 to the Financial Statements.
owned by the Bank and the Group as
at the end of the financial year is given
Capital expenditure approved
Financial Results below:
and contracted as at year ended
Income 31st December 2016 is given in BANK GROUP
The income of the Bank and income of Note 47 to Financial Statements.
2016 2015 2016 2015
the Group as at the end of the year 2016 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000
is given in the table below. An analysis of
2,537,191 1,701,403 4,161,652 3,324,286
the income is given in the Notes to the

SUSTAINABLE STEWARDSHIP > REPORT OF THE BOARD OF DIRECTORS OF SEYLAN BANK PLC ON THE STATE OF
Seylan Bank PLC | Annual Report 2016 AFFAIRS OF THE COMPANY FOR THE YEAR 59
 All freehold land and buildings were Reserves
valued by professionally qualified
Total reserves (including Statutory
independent valuers/panel of Chartered
Reserve Fund) as at the end of the
Valuers/Licensed Surveyors in 2016 and
financial year, are as follows:
brought into the Financial Statements.
Details of freehold properties owned by BANK GROUP
the Bank are given in Note 29.4.1 to the
2016 2015 2016 2015
Financial Statements. Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

17,242,558 14,525,953 18,490,550 15,758,016

Donations
During the year, the Bank made
donations amounting to
Stated Capital
Rs. 12,700,000/- which included a
sum of Rs. 10,000,000/- donated to the The stated capital of the Bank as at 31st
flood victims through the ‘Sathkaraka December 2016 was Rs. 10,529,724,017/-.
Sewa’ in collaboration with EBC Network
in May 2016. (Donations made in 2015 The shares issued by the Bank is given in
amounted to Rs. 436,000/-). the table below:

2016 2015
Recommendation of
Ordinary Voting Shares 175,977,401 175,977,401
Ordinary Dividend and
Solvency Certification Ordinary Non-Voting Shares 168,983,009 168,983,009
The Directors have recommended a
first and final ordinary dividend of
Rs. 3.25 per share (both ordinary
Shareholdings
voting and ordinary non-voting) for As at 31st December 2016, the number
the year ended 31st December 2016. of registered shareholders of the
The dividend of Rs. 3.25 per share will Bank included 9,245 ordinary voting
consist of Rs. 1.00 per share in the shareholders and 6,866 ordinary
form of cash dividend and Rs. 2.25 per non-voting shareholders. The public
share in the form of a scrip dividend. holding as at 31st December 2016 as per
This recommendation is subject to the the Rules of the Colombo Stock Exchange
approval of the shareholders at the is as follows:
Annual General Meeting of the Bank
Public Holding Shareholders No. of Shares Percentage as at Percentage
and upon such approval, the dividend
31st December 31st December
will be paid/issued to the shareholders 2016 2015
registered as at the entitlement date,
i.e. 31st March 2017 on or before Ordinary Voting Shares 9,229 95,506,389 54.28 54.27
12th April 2017. Ordinary Non-voting Shares 6,859 94,581,209 55.96 55.97

The Board of Directors was satisfied that

An analysis of the distribution of public issue to be listed on the Colombo
the Bank would meet the solvency test in
shareholdings and lists of twenty largest Stock Exchange (CSE) upon allotment.
terms of the provisions of Section 56 (3)
ordinary voting and ordinary non-voting The said issue was oversubscribed and
of the Companies Act No. 07 of 2007
shareholders of the Bank are provided on the Bank allotted 50 Mn. debentures
immediately after the proposed dividend.
pages 269 to 271 of this Annual Report. amounting to Rs. 5 Bn. to the investors on
A Certificate of Solvency has also been
15th July 2016 and listed such debentures
obtained by the Bank from the External
on the CSE.
Auditors in compliance with Section 56 (2)
of the Companies Act, confirming the
Debentures Issued
Board’s declaration of solvency. During the Year During the year, the Board also approved
that the Bank proceed with a further
The Bank proceeded with a debenture
Please refer the enclosed ‘Circular to public issue of Debentures to be listed on
issue of 30 Mn. unsecured, subordinated,
Shareholders’ for further details. the CSE and submitted its application to
redeemable debentures of the par value
the CSE seeking approval. The approval
of Rs. 100/- each aggregating up to a
The Bank paid a first and final ordinary was pending as at the date of this Report.
value of Rs. 3 Bn. with an option to issue
dividend (cash) of Rs. 2.75 per share for further 20 Mn. of such Debentures in the
the financial year ended 31st December event of an over subscription, by way of a
2015 on 11th April 2016.

SUSTAINABLE STEWARDSHIP > REPORT OF THE BOARD OF DIRECTORS OF SEYLAN BANK PLC ON THE STATE OF
60 AFFAIRS OF THE COMPANY FOR THE YEAR Seylan Bank PLC | Annual Report 2016
Debt Capital The profiles of the Board of Directors Recommendations for
are given on pages 15 to 18 of this
As at 31st December 2016, the Bank Re-election/Election of
Annual Report.
had issued quoted debentures to the Directors
value of Rs.12,134,870,000/-
All Non-Executive Directors have In terms of Article 82 of the Articles of
(2015 – Rs. 7,134,870,000/-).
submitted signed declarations Association, Mr. W.D. Kapila Jayawardena
Particulars of the quoted debentures as
confirming their independent/non- and Ms. M. Coralie Pietersz retire by
at 31st December 2016 are given on
independent status in compliance with rotation at the forthcoming Annual
page 272 of this Annual Report:
Rule 7.10.2 and 7.10.4 of the Colombo General Meeting (AGM) of the Bank and
Stock Exchange Rules of Corporate offer themselves for re-election pursuant
Investors’ Information Governance. to the Board Nomination Committee
and the Board of Directors evaluating
Information including earnings,
Signed affidavits and declarations in and recommending their re-election as
profitability, dividend, net assets and
terms of Section 42 of the Banking Act Directors.
market value per share is given under
(as amended) have also been submitted
Financial Highlights of this Annual
by the Directors to the Central Bank of In terms of Article 89 of the Articles of
Report. Information pertaining to share
Sri Lanka declaring their ‘fit and proper’ Association, Mr. Anushka S. Wijesinha
prices and debenture prices is given in
status to hold/continue in office as and Mrs. Sandya K. Salgado who were
this Annual Report on pages 271 and 272.
Directors of the Bank. appointed with effect from 1st December
2016 by the Board of Directors will be
Equitable Treatment subject to election by the shareholders
at the forthcoming AGM. The Board
of Shareholders Nomination Committee and the Board
The Bank has at all times ensured the of Directors recommend their election
equitable treatment of its shareholders. as Directors.

Directorate
Changes during 2016

Name of Director Change: Appointment/Resignation/Retirement

Mr. N.M. Jayamanne PC – Retired on 8th May 2016 in terms of Section 3 (3) (i) of the Banking Act Directions No. 11 of 2007
Independent Director/Chairman and Section 210 (1) of the Companies Act No. 07 of 2007 upon reaching the age of 70 years.
Mr. W.M.R.S. Dias –
Non-Executive Director/Chairman Appointed as the Chairman with effect from 9th May 2016.
Ms. M. Coralie Pietersz – Appointed as Senior Director, with effect from 9th May 2016 in terms of Section 3 (5) (ii)
Independent Director/Senior Director of the Banking Act Directions No. 11 of 2007.
Mr. Anushka S. Wijesinha –
Independent Director Appointed with effect from 1st December 2016.
Mrs. Sandya K. Salgado –
Independent Director Appointed with effect from 1st December 2016.

Directors who held office as at 31st December 2016

Name of Director Status as at 31st December 2016

Mr. W.M.R.S. Dias Non-Executive Director/Chairman

Mr. Ishara C. Nanayakkara Non-Executive Director/Deputy Chairman
Ms. M. Coralie Pietersz Independent Director/Senior Director
Mr. Kapila P. Ariyaratne Director/Chief Executive Officer
Rear Admiral B. Ananda J.G. Peiris Independent Director
Mr. Samantha P.S. Ranatunga Independent Director
Mr. W.D.Kapila Jayawardena Non-Executive Director
Mr. P.L.S. Kumar Perera Independent Director
Mr. S. Viran Corea Non-Executive Director
Mr. Anushka S. Wijesinha Independent Director
Mrs. Sandya K. Salgado Independent Director

SUSTAINABLE STEWARDSHIP > REPORT OF THE BOARD OF DIRECTORS OF SEYLAN BANK PLC ON THE STATE OF
Seylan Bank PLC | Annual Report 2016 AFFAIRS OF THE COMPANY FOR THE YEAR 61
 Meetings of the Board Directors’ Interest in Shares and Debentures of the Bank
of Directors Directors’ holdings in shares and debentures of the Bank as at 31st December 2016 are
Twelve regular monthly meetings and five given below:
special meetings were held during the
Name of Director 31.12.2016 31.12.2015 Shares;
year. The special meetings were held to Debentures (Par value: Rs.100/-)
consider and decide on important and
Mr. W.M.R.S. Dias Nil Nil –
urgent issues. Schedules of Directors’
attendance at Board meetings {at the Mr. Ishara C. Nanayakkara Nil Nil –
12 regular meetings and two special Ms. M. Coralie Pietersz Nil Nil –
meetings (of the five special meetings)
Mr. Kapila P. Ariyaratne 36,521 30,000 Ordinary Voting shares
held with due notice} and Directors’
attendance at Board Subcommittee 125,000 125,000 Ordinary Non-voting shares
meetings are presented in the Corporate 30,000 30,000 Debentures 2013/2018 –
Governance Report in this Annual Report Annual interest
on pages 25 and 26. 10,000 10,000 Debentures 2013/2018 –
Semi-Annual interest
32,700 N/A Debentures 2016 –
Directors’ Interest Register Semi- Annual Interest
The Directors have declared their Rear Admiral B. Ananda J.G. Peiris Nil Nil –
interests in contracts to the Board Nil Nil
Mr. Samantha P.S. Ranatunga –
of Directors from time to time in
Mr. W.D. Kapila Jayawardena Nil Nil –
accordance with Section 192 (2) of the
Companies Act No. 07 of 2007 and had Mr. P.L.S.Kumar Perera Nil Nil –
refrained from voting on matters in Mr. S. Viran Corea Nil Nil –
which they were materially interested.
Mr. Anushka S. Wijesinha Nil N/A –
The declarations of disclosures
(if any) are reported to the Board at the Mrs. Sandya K. Salgado Nil N/A –
meeting that ensue such declarations.
Percentage Shareholding of Directors:
All such disclosures made have been
duly recorded in the Directors’ Interest Ordinary voting shares 0.02% 0.02%
Register. Ordinary non-voting shares 0.07% 0.07%

Transactions arising out of the

disclosures made are given in the No change in the Directors’ interest in Directorate of the
shares and debentures occurred after
Note 50 to the Audited Financial Subsidiary, Seylan
Statements. Lists of directorships 31st December 2016 and before the date
of this Report of the Board of Directors. Developments PLC
(stating executive/non-executive/
independent status) held by the Directors The Board of the Subsidiary, Seylan
and their substantial shareholdings Developments PLC as at 31st December
including public listed (quoted) Directors’ Remuneration 2016 comprised six Directors, all of
companies as at 31st December 2016 are Directors’ emoluments paid during the whom are Non-Executive, namely,
provided in the annexure to this Report. year in respect of the Bank and the Group Messrs K.P. Ariyaratne (Chairman),
for the year are given in Note 13 to the S. Palihawadana (Deputy Chairman),
Financial Statements in this Annual R.J. Jayasekara, P.D. Hennayake,
Report in terms of the Section 168 (1) (f) P. Saravanapavan and L.T. Kiringoda.
of the Companies Act No. 07 of 2007. Messrs P. Saravanapavan and
L.T. Kiringoda are Independent
Non-Executive Directors.
Insurance and Indemnity
Pursuant to a decision taken by the Board Sub-committees
Board, as authorised by the Articles The Board is empowered by the
of Association of the Bank, the Bank Articles of Association to delegate
obtained Directors and Officers Liability any of its powers to Board appointed
Insurance Cover in respect of the year Sub-committees consisting of such
2016/17. member or members as the Board thinks
fit. The Board has delegated matters
pertaining to the affairs of the Bank to
the Board Sub-committees within the

SUSTAINABLE STEWARDSHIP > REPORT OF THE BOARD OF DIRECTORS OF SEYLAN BANK PLC ON THE STATE OF
62 AFFAIRS OF THE COMPANY FOR THE YEAR Seylan Bank PLC | Annual Report 2016
scope of the respective Board approved management framework for which the Management Personnel confirm
Terms of Reference. The following Board Bank has an ongoing process in place to compliance with various laws and
Sub-committees were functional as at identify, evaluate and manage the risks regulations and their confirmations are
31st December 2016: that are faced by the Bank. The Directors reported to the Board on a monthly basis
continuously review this process when by the Compliance Officer.
zz Board Audit Committee
the Chief Risk Officer reports and updates
zz Board Integrated Risk Management the Board Integrated Risk Management
Committee Committee at its quarterly meetings. Outstanding Litigation
zz Board Human Resources and The Report of the Board Integrated Risk In the opinion of the Directors and
Remuneration Committee Management Committee is given on page external legal counsels retained by
zz Board Nomination Committee 49 of this Annual Report whilst a detailed the Bank, litigations currently pending
Risk Management Report of the Bank is against the Bank as disclosed in Note
zz Board Credit Committee
given on pages 68 to 86. 46 to the Financial Statements will not
zz Board Sustainability Committee
have a material impact on the financial
zz Board Marketing and Product position of the Bank or its future
System of Internal Control
Development Committee operations.
The Board acknowledges its
zz Board Governance and Compliance
responsibilities for the Bank’s system
Committee
of internal control to facilitate the
zz Related Party Transactions Review Environmental Protection
identification, assessment and
Committee management of risk, the protection of The Bank has not engaged in any activity
shareholders’ investments and the Bank’s that is harmful or hazardous to the
Reports of these Board Sub-Committees assets. The Directors recognise that they environment. Measures taken by the
are published on pages 46 to 54 of this are responsible for providing a return Bank on environmental protection and
Annual Report. to shareholders, which is consistent its sustainability initiatives are detailed in
with the responsible assessment and ‘Our Value Creation Story’ published on
mitigation of risks. pages 95 to 154.
Corporate Governance
The Board of Directors has pledged A system of effective internal controls is a
its commitment towards maintaining critical component of bank management Statutory Payments
an effective corporate governance and a foundation for the safe and sound The Directors are satisfied that all
framework and practices within the Bank operation of banking organisations. statutory payments including all taxes,
to enhance business prosperity and A system of strong internal controls duties and levies payable by the Bank
corporate accountability. The Bank has can help to ensure that the goals and and its Subsidiary, to the Government,
established systems and procedures objectives of the Bank are met, that the regulatory institutions and related to the
to ensure that they are adequately and Bank achieves its long-term profitability employees have been made or where
practically adopted and followed. targets, and maintains reliable financial relevant provided for.
and managerial reporting. Such a system
The extent of compliance with the can also help to ensure that the bank
directions, rules and best practice complies with laws and regulations as Events after the
guidelines are described in the Corporate well as policies, plans, internal rules Reporting Period
Governance Report appearing on pages and procedures, and decrease the risk
No events have occurred after the
22 to 45. of unexpected losses or damage to the
Balance Sheet date which would require
Bank’s reputation.
adjustments to or disclosure in the
The External Certification of the Bank’s
accounts, other than those given in
compliance with the Central Bank's Code The Directors confirm that there is a
Note 49 to the Financial Statements.
of Corporate Governance performed in process for identifying, evaluating and
line with agreed upon procedures set out managing the risks faced by the Bank
in Sri Lanka Related Services Practice and the operational effectiveness of the
Statement (SLRSPS 4750) was provided
Human Resources
related controls, which has been in place
by the Bank’s External Auditors, Messrs for the year under review and up to the During the past year the Board continued
KPMG. date of approval of this Annual Report. its focus on areas of succession planning
for Key Management Personnel,
competency development of staff and
Risk Management and Compliance with Laws consolidation of the performance driven
culture across the Bank. Furthermore,
System of Internal Controls and Regulations the Bank also gave attention to the
Risk Management The Bank has not engaged in any manpower planning strategy towards
The Board has ensured the activities contravening any laws and driving the Bank’s productivity
implementation of a sound risk regulations currently in force. Key while ensuring that we have a high

SUSTAINABLE STEWARDSHIP > REPORT OF THE BOARD OF DIRECTORS OF SEYLAN BANK PLC ON THE STATE OF
Seylan Bank PLC | Annual Report 2016 AFFAIRS OF THE COMPANY FOR THE YEAR 63
 performing and engaged workforce 2016 2015
equipped to deliver core values of the Rs. ’000 Rs. ’000
Bank. The Bank’s staff strength as at
31st December 2016 was 3,165. Audit Fees
Audit Service Fees for the Year under Review 8,843 8,381

Employees’ Share Audit-Related Fees 5,522 4,477

Owning Scheme Non-audit Fees 1,080 366

Six employee share owning trust Consolidated Audit Fees

companies (‘Companies’) were Audit Service Fees for the Year under Review 9,856 9,303
established by the Bank in 1995 and in
Audit-Related Fees 5,522 4,477
1999/2000 which have acquired shares
of the Bank from time to time at the Non-audit Fees 1,175 463
market prices prevailing at that time. The
Bank was the settler of the trusts and the
purchase of the shares were fully funded Based on the declaration made by Notice of Annual
by the Bank. These companies currently Messrs KPMG and as far as the Directors
hold a total of 12,752,994 shares of
General Meeting
are aware, the Auditors do not have
the Bank’s ordinary (voting) shares. any relationship with or interest in the Notice of Meeting relating to the
The details of the facilities granted by Company or its Subsidiary other than Thirtieth Annual General Meeting of
the Bank to these companies for the the provision of audit and non-audit and the Bank scheduled to be held on
purchase of such shares are provided in related services as listed above. 31st March 2017 at 10.00 a.m. at the
Note 50.2.1.1 to the Financial Statements. Kings Court of Cinnamon Lakeside,
The retiring Auditors, Messrs KPMG have No. 115, Sir Chittampalam A. Gardiner
These shares are the subject matter expressed their willingness to continue Mawatha, Colombo 02 is circulated to
of court actions, the details of the in office and a resolution to reappoint the shareholders with this Annual Report.
litigation filed against the Bank and the them as Auditors and to authorise the
six Employee Share Ownership Trust Directors to fix their remuneration will be For and on behalf of the Board of
Companies by certain former employees proposed at the Annual General Meeting. Directors of Seylan Bank PLC,
of the Bank are provided in Note 46 to the
Financial Statements. The Companies will
not be able to dispose of or transfer these Independence of the Auditors
shares until the final determination of the
Based on an assessment carried out by
court actions. Therefore, the Bank is not W.M.R.S. Dias
the Board Audit Sub-committee upon
in a position to comply with Section 5.6.10 Chairman
adoption of a policy for the engagement
of the Listing Rules of the CSE until final
of Auditors, the Board is of the opinion
determination of the said court actions.
that the External Auditors, Messrs KPMG
can be deemed to be independent for
Ishara C. Nanayakkara
Going Concern all intents and purposes considering the
Deputy Chairman
following factors:
The Directors are satisfied that having
considered the financial position, zz No partner from the Firm is on the
operating conditions, regulatory and Board of Seylan Bank or on the Board
other factors and such other matters of its subsidiary.
required to be addressed in the zz The audit and non-audit fees are Kapila P. Ariyaratne
Corporate Governance Code, that the negotiated and are not above industry Director/Chief Executive Officer
Bank has adequate resources to continue norms.
its operations in the foreseeable future.
zz The Firm had the necessary skills to
The Financial Statements of the Bank
competently carry out the non-audit
have accordingly been prepared on a
related assignments entrusted to them.
going concern basis. (Mrs.) N.N. Najumudeen
zz The Auditors do not receive fees from
Company Secretary
other assignments except as stated
Auditors above. 21st February 2017

The Bank’s Auditors during the period zz Partner and Audit-team rotation was Colombo
under review were Messrs KPMG, complied with in 2014.
Chartered Accountants. Audit Fees and zz Messrs KPMG is a firm of high
Consolidated Audit Fees payable/paid to repute.
the Auditors are/were as follows:

SUSTAINABLE STEWARDSHIP > REPORT OF THE BOARD OF DIRECTORS OF SEYLAN BANK PLC ON THE STATE OF
64 AFFAIRS OF THE COMPANY FOR THE YEAR Seylan Bank PLC | Annual Report 2016
Directors Interest Register The entities in which the Directors of the
Bank held directorships and substantial

DIRECTORS ON THE STATE OF AFFAIRS OF THE COMPANY

ANNEXURE TO THE REPORT OF THE BOARD OF
and Directors’ Interest
shareholdings as at the above date are
in Transactions as at disclosed below:
31st December 2016
The Bank carries out transactions in The transactions (if any) of the Bank
the ordinary course of business at with the Directors and with these entities
commercial rates with entities in which are disclosed in Note 50 to the Financial
a Director of the Bank is the Chairman or Statements on pages 253 to 256.
a Director of such entities.

Entity Directorships Substantial

(Executive/Non-Executive Status) Shareholding %
(if any)

Mr. W.M.R.S. Dias (Non-Executive Director/Chairman)

Listed Entities
1. Carson Cumberbatch PLC Non Executive Director* –
2. Senkadagala Finance PLC Non Executive Chairman* –
3. Tokyo Cement Co. (Lanka) PLC Non Executive Director* –

Unlisted Entities
4. Ceylon Tea Marketing (Pvt) Limited Non Executive Director* –
5. South Asia Textiles (Pvt) Limited Non Executive Director* –
* Independent Director

Mr. Ishara C. Nanayakkara (Deputy Chairman/Non-Executive

Director)
Listed Entities
1. Agstar Fertilisers PLC Non-Executive Director –
2. BRAC Lanka Finance PLC Non-Executive Chairman –
3. Browns Capital PLC Non-Executive Chairman –
4. Brown & Company PLC Executive Chairman –
5. Browns Investments PLC Executive Chairman –
6. Commercial Leasing and Finance PLC Non-Executive Chairman –
7. LOLC Finance PLC Executive Deputy Chairman –
8. Lanka ORIX Leasing Company PLC Deputy Chairman/Executive Director 12.60

Unlisted Entities
9. Associated Battery Manufacturers (Cey) Limited Non-Executive Director –
10. F L M C Plantations (Pvt) Limited Non-Executive Director –
11. LOLC International (Pvt) Limited Non-Executive Director –
12. LOLC Life Assurance Limited Non-Executive Chairman –
13. LOLC Micro Credit Limited Non-Executive Chairman –
14. LOLC Myanmar Microfinance Co. Limited Non-Executive Director –
15. LOLC (Private) Limited Non-Executive Director
16. PRASAC Micro Finance Institution Non-Executive Director –
17. Pussellawa Plantations Limited Non-Executive Director –
18. Sagasolar Power (Pvt) Limited Non-Executive Director –
19. Sierra Constructions Limited Non-Executive Director –
20. Medford Investments (Pvt) Limited Shareholder 25.00

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP 65

 Entity Directorships Substantial
(Executive/Non-Executive Status) Shareholding %
(if any)

Ms. M. Coralie Pietersz (Independent Director/Senior Director)

Listed Entities
1. Bogala Graphite Lanka PLC Non-Executive Director* –
2. Haputagastenna Plantations PLC Finance Director (Executive) –
3. Udapussellawa Plantations PLC Finance Director (Executive) –

Unlisted Entities
4. Finlay Airline Agencies (Pvt) Limited Executive Director –
5. Finlay Cold Storage (Pvt) Limited Executive Director –
6. Finlays Colombo Limited Finance Director (Executive) –
7. Finlay Insurance Brokers (Pvt) Limited Executive Director –
8. Finlays Linehaul Express (Pvt) Limited Executive Director –
9. Finlay Plantation Management (Pvt) Limited Executive Director –
10. Finlay Properties (Pvt) Limited Executive Director –
11. Finlay Rentokil Ceylon (Pvt) Limited Executive Director –
12. Finlay Teas (Pvt) Limited Executive Director –
13. Finlay Tea Estates Lanka (Pvt) Limited Executive Director –
14. Finlay Tea Solutions Colombo (Pvt) Limited Executive Director –
* Independent Director

Mr. Kapila P. Ariyaratne (Director/Chief Executive Officer)

Listed Entities
1. Seylan Developments PLC Chairman /Non-executive Director –

Unlisted Entities
2. Esots (Pvt) Limited Non-Executive Chairman –
3. Lanka Financial Services Bureau Limited Non-Executive Director –
4. Sesot (Pvt) Limited Non-Executive Chairman –
5. Seyshop (Pvt) Limited Non-Executive Chairman –
6. Seybest (Pvt) Limited Non-Executive Chairman –
7. Seyfest (Pvt) Limited Non-Executive Chairman –
8. Sotse (Pvt) Limited Non-Executive Chairman –

Rear Admiral B. Ananda J.G. Peiris (Independent Director) No Directorships Nil

Mr. Samantha P.S. Ranatunga (Independent Director)

Listed Entities
1. CIC Holdings PLC Managing Director/CEO (Executive) –
2. Chemanex PLC Non-Executive Director –

Unlisted Entities
3. Akzo Nobel Paints Lanka (Pvt) Limited Non-Executive Director –
4. CIC Agribusiness (Pvt) Limited Non-Executive Director –
5. CIC Agri Produce Export (Pvt) Limited Non-Executive Director –
6. CIC Agri Produce Marketing (Pvt) Limited Non-Executive Director –
7. CIC Dairies (Pvt) Limited Non-Executive Director –
8. CIC Feeds (Pvt) Limited Non-Executive Director –
9. CIC Grains (Pvt) Limited Non-Executive Director –
10. CIC Lifesciences Limited Non-Executive Director –

SUSTAINABLE STEWARDSHIP > ANNEXURE TO THE REPORT OF THE BOARD OF DIRECTORS

66 ON THE STATE OF AFFAIRS OF THE COMPANY Seylan Bank PLC | Annual Report 2016
Entity Directorships Substantial
(Executive/Non-Executive Status) Shareholding %
(if any)

11. CIC Poultry Farms Limited Non-Executive Director –

12. CIC Properties (Pvt) Limited Non-Executive Director –
13. CIC Seeds (Pvt) Limited Non-Executive Director –
14. CIC Vetcare (Pvt) Limited Non-Executive Director –
15. CISCO Speciality Packaging (Pvt) Limited Managing Director –
16. Commercial Insurance Brokers (Pvt) Limited Non-Executive Director –
17. Cropwiz (Pvt) Limited Non-Executive Director –
18. Link Natural Products (Pvt) Limited Non-Executive Director –

Mr. W.D. Kapila Jayawardena (Non-Executive Director)

Listed Entities
1. BRAC Lanka Finance PLC Non-Executive Director –
2. Browns Capital PLC Non-Executive Director
3. Brown & Co. PLC Non-Executive Director –
4. Browns Investments PLC Non-Executive Director –
5. Commercial Leasing & Finance PLC Non-Executive Director –
6. Eden Hotel Lanka PLC Non-Executive Chairman –
7. Lanka ORIX Leasing Co PLC Managing Director/CEO –
8. Palm Garden Hotels PLC Non-Executive Chairman –

Unlisted Entities
9. F L M C Plantations (Pvt) Limited Non-Executive Director –
10. LOLC General Insurance Limited Non-Executive Director –
11. LOLC International (Pvt) Limited Non-Executive Director –
12. LOLC Micro Credit Limited Non-Executive Director –
13. LOLC Securities Limited Non-Executive Chairman –
14. Pussellawa Plantations Limited Non-Executive Director –
15. Riverina Resort (Pvt) Limited Non-Executive Director –

Mr. P.L.S. Kumar Perera (Independent Director) No Directorships Nil

Mr. S. Viran Corea (Non-Executive Director) No Directorships Nil

Mr. Anushka S. Wijesinha (Independent Director)

Unlisted Entities
1. BizEx Consulting (Pvt) Limited Executive Director –
2. FairFirst Insurance Limited Non-Executive Director –
(formerly known as Asian Alliance Insurance Limited)
3. HNB Grameen Finance Limited Non-Executive Director* –
4. Union Assurance General Limited Non-Executive Director* –
* Independent Director

Mrs. Sandya K. Salgado (Independent Director)

Unlisted Entities
1. Film Island (Pvt) Limited Non-Executive Director 18.33
2. Jigsaw International (Pvt) Limited Executive Director 33.31
3. WAD International (Pvt) Limited Non-Executive Director 16.66
[indirect]
4. The Drug Shop Partner 50
(partnership)

SUSTAINABLE STEWARDSHIP > ANNEXURE TO THE REPORT OF THE BOARD OF DIRECTORS

Seylan Bank PLC | Annual Report 2016 ON THE STATE OF AFFAIRS OF THE COMPANY 67
 Integrated Risk originating and managing all risks to audit provides the risk assurance (3rd
business managers within stipulated line of defence). Seylan Bank’s Board
HOW WE MANAGE RISK

Management and
risk limits (1st line of defence). Risk has established two Board committees
Governance Structure management across the entire supported by three executive risk
Risk management in Seylan Bank organisation has been assigned to a management committees to oversee risk
comprises three lines of defence. independent Chief Risk Officer (2nd line management as shown on the following
The Director/Chief Executive Officer of defence). The internal and external chart.
has delegated responsibility for

Integrated Risk Management Structure

Board of Directors

Risk Ownership Risk Control Risk Assurance

Board Integrated Risk

Board Audit Committee
Management Committee

Director/Chief Executive Officer

Executive Executive Market

Assets &
Credit Risk and Operational
Liabilities
Management Risk Management
Committee
Committee Committee
(ALCO)
(ECRMC) (EMORMC)

Corporate Chief Head of Audit

Management Risk Officer and Inspection

Business Credit Market Operational

Auditors
Management Risk Risk Risk

First Second Third

Line of Defence Line of Defence Line of Defence

68 SUSTAINABLE STEWARDSHIP Seylan Bank PLC | Annual Report 2016

At Seylan Bank, having understood Accordingly, credit risk is managed Guidelines are also reviewed biannually to
that risk management is an essential through a comprehensive framework better align the Bank’s lending strategies
component of growth, we have which includes well-defined policies with the emerging trends in the market.
developed risk management policies and procedures that include clearly
and procedures that are applied across structured approval hierarchies and In order to better manage the overall
the Bank to assist the business units in different committees to oversee various credit, liquidity and interest rate risk, the
their daily interaction with customers. aspects of credit risk management Bank mainly focuses on self-liquidating
The regulator recommended risk processes in the Bank. In addition, the facilities with short to medium-term
framework is in place to manage the Bank manages its credit exposures maturities in growing its loan book. In
risk on an integrated basis and monitor through diversification strategies across addition to setting up exposure limits for
developments in real time to provide products, geographies, clients and clients individually, the Bank manages
the right level of information to the customer segments. The Bank’s main counterparty credit exposures, using
attention and action of Integrated objectives in credit risk management the ‘one obligor principle’, so that all
Risk Management Committees. are as follows: facilities to a group of borrowers wholly
zz Maintain a credit risk management or substantially owned or controlled
As per Basel II second Pillar, we prepare framework to ensure quality, by common or related parties are
and submit the findings of Internal Capital consistency and transparency in aggregated and evaluated together under
Adequacy Assessment Process (ICAAP) credit risk approvals at all times. the coordination of a designated Lead
in order to go beyond management of Relationship Manager.
zz Identify, assess and measure credit risk
key risks, namely Credit, Market and
clearly and accurately across the Bank
Operational. We also use tools such as When a number of counterparties are
and within each separate business,
VaR, stress testing and other simulations engaged in similar activities and have
from the level of individual facilities
within approved threshold limits to similar economic characteristics, their
up to the total portfolio.
contain risks. The entire risk management ability to meet contractual obligations
function is carried out with defined zz Control and plan credit risk-taking can be similarly affected by changes
roles and responsibilities and have the in line with external stakeholder in the economic and other conditions,
oversight of the Board of Directors. expectations and avoid undesirable leading to a credit concentration risk.
IT systems are constantly upgraded concentrations. In view of this, the monitoring of credit
to facilitate the risk management zz Monitor credit risk and adherence to concentration is an integral part of the
process, whilst regular training and agreed controls on a continuous basis credit risk monitoring process at Seylan
communication takes place to create to ensure that risk-reward objectives Bank. Accordingly, the Bank constantly
a risk management culture across are met. reviews its credit concentration on a
the Bank. We are ready to implement number of areas such as; geography,
alternative standardised approach in The Credit Standards & Policy Manual product type, industrial sectors and
computing capital on operational risk outlines the fundamental standards maturity. Close monitoring of key ratios/
and certainly geared to adhere to new and disciplines that the Bank has internal thresholds on a continuous basis
guidelines introduced by the regulator. implemented to actively manage credit and stress testing of the credit portfolios
We also have developed a dashboard risk across our lending book. The Credit form another strategy to measure and
to monitor and report comprehensive Procedure Manual on the other hand, monitor the credit concentration risk
overall view of risk with given targets outlines the proper processes to be in Bank’s loan portfolio.
and thresholds to manage risk within adopted in evaluating proposals and
the approved appetite and tolerance. granting of credit facilities to clients. Additionally, the Bank’s credit risk
These standards, policies and procedures management strategy includes;
lay down key roles and responsibilities identifying the emerging risks, which
Credit Risk Management of those required to originate, identify, can impact the business activities of the
Credit risk is defined as the risk of analyse, rate, review, price, report, clients well in advance, ensuring that
a potential loss to the Bank, when diversify, control/mitigate and manage the credit facility or the relationship
counterparty fails to perform on an credit risks and are applicable to all returns the expected profitability, close
obligation, in accordance with the lending activities undertaken by our monitoring of the usage of working
agreed terms or its ability to perform Bank. These two Manuals are reviewed capital facilities to prevent diversion of
such obligation is impaired resulting regularly and updated throughout funds into unintended areas and ensuring
in a loss to the Bank. In essence, the the year on a regular basis to ensure timely repayment of the facilities.
proper management of credit risk consistency with the Bank’s business
underpins a Bank’s financial stability, strategy. The Lending Guidelines Assessment of Credit Risk
growth prospects and profitability and outlines the Bank’s strategic risk/
In order to grow the Bank’s loan book
as such Seylan Bank has developed a reward objectives in the light of evolving
on high quality loans and advances, there
well-structured credit risk management market conditions by clearly setting out
is a clear segregation of duties between
process in order to maintain the quality the preferred industries and lending
transaction originators in business
of the credit portfolio of the Bank at the types to be targeted for lending growth
areas and approving authorities under
optimal level. during each calendar year. The Lending

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP > HOW WE MANAGE RISK 69
 the risk function. All credit exposure proposal (with additional risk mitigants/ recommendations which are aimed
limits are approved within a well-defined conditions wherever necessary) or at reducing the risk of default and
credit approval authority framework. declines it. In addition to this exercise it minimising losses in the event of default.
Credit risk evaluation and approval is is mandatory that all the high value credit The lessons learnt from these reviews
undertaken by experienced credit risk propositions need to be approved by the and recommended actions are referred
professionals operating within a clearly CRO on an independent basis. Further, to Risk Committees and circulated to all
defined delegated authority framework, it is envisaged to assign credit risk lending officers on a regular basis leading
with only the most senior credit officers managers at Area Offices commencing to qualitative improvements across the
entrusted with the higher levels of early 2017 with a view of broad basing Bank’s lending portfolio. In addition,
delegated authority. All high value credit the risk oversight on the medium sized CRRU also involves in conducting training
propositions above a certain threshold credit propositions and simultaneously programmes at Regional locations and at
level are approved by the Board Credit enhancing the delegated authority the Training Centre to educate the branch
Committee or the Board of Directors level of the Area Managers leading to managers and the credit staff about the
as relevant. better efficiencies within the credit proper usage of the Lending Guidelines
approval hierarchy. and evaluation of credit proposals in
The Bank has delegated credit approval order to improve Bank’s credit quality.
authority to individual lending officers, CRMU functions independently but is
based upon a consistent set of standards in regular interaction with the business
Credit Administration Unit
such as experience, judgement and units so that emerging risks and the
ability. These authority levels are lessons learnt through our lending Seylan Bank’s loan portfolio is
subjected to review on an annual basis. and recoveries experiences are used administrated through a Centralised
If an individual lending officer’s authority to continuously improve the Bank’s Credit Administration Division, which
is insufficient to establish, materially policies and practices. ensures efficient and effective post-
change or restructure the required credit sanction customer support including
limits, the proposals are escalated to an CRMU also monitors credit disbursement, settlements, processing
officer or committee having the required concentrations against approved of security documents. Setting up of
higher delegated authority. In addition, prudential exposure limits and the the Unit has effectively reduced the
the individual credit exposure limits on achievements of business and lending transaction costs and improved the
the clients are subjected to a critical portfolio managers in improving credit efficiency in processing and managing
review annually and require the approval quality, as measured by their success a quality credit portfolio for the Bank.
at the appropriate authority level. in minimising overdue/non-performing Further, the Unit is also involved in
Managers recommending, reviewing or advances portfolios and submits regular conducting training for branch and
approving facilities are held accountable reports to the Executive Credit Risk department staff in the procedures
for the outcome. Management Committee (ECRMC) relating to Credit Administration.
recommending the corrective action
wherever required. The Bank plans Credit Rating and Measurement
Functions of Credit Risk
to further strengthen the portfolio
Management monitoring at the CRMU by deploying
Risk measurement plays a central role,
Credit Risk Management Structure along with judgement and experience,
additional staff who are capable of
comprises two main functional in forming risk-taking and portfolio
analysing big data.
components, namely Credit Risk management decisions. It is a primary
Management Unit (CRMU) and the Credit area for sustained investment and
Credit Risk Review Unit (CRRU)
Risk Review Unit (CRRU). While the senior management’s attention.
independently reviews the already
Credit Risk Management Unit evaluates approved high level facilities within
proposals at the pre-sanction stage, the As part of the Bank’s credit risk
three months of drawdown/renewal
Credit Risk Review function assesses the management strategy, a ‘Credit Rating
focusing on the approval, disbursement,
proposals at post-sanction stage. System’ was initially introduced in April
relationship management and credit
2007, with the broader objective of
portfolio management processes.
All high value lending proposals and improving the credit quality of the Bank
Further, CRRU identifies instances
reviews are subjected to an independent through pre-qualifying borrowers for
of non-compliance with credit
critical examination by the CRMU to credit facilities and risk based pricing of
standards, policies, procedures and
ascertain whether the risks have been such credit facilities through an objective
Lending Guidelines, if any. Also, CRRU
fully identified and evaluated, they are in risk analysis. As a further step towards
independently ascertains whether
line with the Bank’s Lending Guidelines developing this credit rating system
there had been any emerging risks that
and risk acceptance criteria, risks to be in line with the vastly changed
have not been addressed at the time
have been adequately mitigated, the macro-economic conditions and as well
of evaluating the credit proposals or
facilities are well-structured and whether as to meet the regulatory requirements
whether there are any facilities where
proposed credit exposures are at prudent vis-à-vis the CBSL/BASEL guidelines, the
any appropriate remedial actions
levels. CRMU then recommends that the Bank upgraded the Credit Rating System
have not been initiated. Based on this
approving authority either approves the during the year 2014. The Bank plans to
critical assessment, CRRU makes

70 SUSTAINABLE STEWARDSHIP > HOW WE MANAGE RISK Seylan Bank PLC | Annual Report 2016
introduce new Credit Rating Models to alternative way of settling the debt Non-Performing Advances
grade customers belonging to important in the event of unforeseen adverse by Collateral Type
business segments at a much more circumstances but firmly believes that
accurate level with specific focus on the the availability of collateral does not Collateral Type 2016 2015
(Secured by) Rs. ’000 Rs. ’000
strengths, weaknesses and business in itself make an unacceptable lending
dynamics of such sectors. Further, one proposition acceptable. Cash/Shares 432,591 135,135
of the main prerequisites of moving to 5,912,148 5,662,485
Immovable Property
the IRB approach for the computation of In instances where the Bank
Movable Assets 567,887 427,118
capital requirement for credit risk is the accommodates highly reputable and
Other Securities 3,278,965 2,682,758
need for vibrant Internal Rating Models to financially strong corporate borrowers,
risk grade the clients and the availability whose performance is regularly and Pawned Articles 57,086 106,137
of through the cycle probability of default rigorously reassessed on the basis Clean 1,327,847 1,165,487
[PD] values for a minimum period of of reliable financial information, we Grand Total 11,576,524 10,179,120
five years. The Bank therefore has taken exceptionally grant facilities on an
Excluding interest receivables.
measures to conduct a gap study to unsecured basis solely based on their
assess the Bank’s readiness to move to cash flows.
the IRB approach with the assistance Monitoring, Reporting and
of two reputed consultancy firms from The Bank uses various techniques and Disclosure of Credit Risk
India during the year 2017. controls to limit and mitigate credit risk
Corporate, Business and Area
exposures and reduce potential credit
Management are primarily responsible
losses. These include documenting
Credit Evaluation and for monitoring the performance of
credit transactions with adequate
Approval Process terms, conditions and covenants in a
their lending to ensure that the Bank’s
The Bank commenced designing credit portfolio profitability and lending
comprehensive and legally enforceable
Loan Origination System [LOS] in mid quality objectives are achieved. Credit
basis and obtaining of guarantees,
December 2015 to streamline the credit risk management uses a comprehensive
financial or other collaterals to provide
evaluation/approval process across range of quantitative tools and Bank
a secondary recourse to minimise credit
all business channels. After a tedious wide credit limits to monitor lending,
losses. Such guarantees serve to mitigate
well-structured development process, contingent commitments and other
the inherent risk due to credit default
the live implementation of this System off-Balance Sheet exposures, profitability,
and minimise any related losses by either
was done at two pilot branches in quality trends and concentrations and
substituting the borrower default risk or
December 2016. The Bank is currently identifies whether the Bank is growing
improving recoveries.
making arrangements to roll out this undue exposure concentrations and
System across all the branches and whether credit risks are adequately
The Bank ensures that the collateral
lending units during the first half of the remunerated. The Risk Management Unit
accepted for risk mitigation purposes is
year 2017. This System is expected to makes recommendations for suitable
of high quality and supported by legally
provide the foundation for an efficient amendments if required, after reviewing
effective and enforceable documentation.
credit appraisal process by reducing the existing credit policy framework.
When determining security, the Bank will
the time taken to evaluate/approve be guided by:
facilities thus improving the quality CRO reports these concentrations
zz Whether the ownership and the title regularly together with his
of the credit portfolio.
to the security is acceptable without recommendations for corrective
any defects or other encumbrances actions to the ECRMC and escalates
Credit Risk Mitigation with stable minimum value and the significantly important matters to
required margin of security in favour the attention of Board Integrated Risk
In mitigating credit risk, the Bank
of the Bank, to support the borrowing Management Committee (BIRMC). This
primarily relies on a rigorous assessment
through the period of repayment. rigorous process enables the Board of
of credit applicants, the strength of their
business model, sustainable financial zz Whether the security can be realised Directors to oversee the Bank’s credit
conditions and our ability to meet their without any difficulties to recover our risk exposures, ensuring that the Bank
financial requirements. Further, the dues fully in an eventuality. quickly identifies emerging risks and
lending proposals are normally required risks that are not aligned with the Board
to show more than one independent Collateral impairment haircuts are approved credit risk appetite and initiates
credible source of repayment. The applied to security valuations, based on timely corrective measures.
primary source is established through conservative and predetermined Loan/
a conservative evaluation of whether Collateral ratios in compliance with the Below, we present the qualitative and
the borrower’s realistic projected cash Banking Act Direction No. 03 of 2008, quantitative disclosures of credit risk
flows will be sufficient to repay their ‘Classification of Loans and Receivables, of the Bank.
debts. The Bank normally requires Income Recognition and Provisioning’.
this to be supported by at least one

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP > HOW WE MANAGE RISK 71
 The Bank implemented the Loan Origination
System [LOS] in two pilot branches in December
2016 to streamline the credit evaluation/approval
process across all business channels.
Qualitative Disclosures in the expected cash flows discounted at on the estimated future cash flows
the effective interest rate being less than of the financial asset or portfolio of
Definition of Past Due and Impaired the loan’s carrying value, an impairment financial assets. Impairment of loans
A non-performing loan is any loan that is allowance will be raised. and receivables is measured as the
90 days or more past due or is otherwise difference between the carrying amount
individually impaired (which represents and the present value of estimated future
Approach on Specific and
those loans against which individual cash flows discounted at the financial
Collective Loan Loss Provisioning:
impairment provisions have been raised) asset’s original effective interest rate.
and excludes: The Bank’s loan loss provisions are
If the carrying amount is less than the
established to recognise impairment
– Loans renegotiated before 90 days discounted cash flows, then no further
losses incurred either on specific loan
past due and on which no default in allowance is necessary. Impairment
assets or within a portfolio of loans
interest payments or loss of principal allowances are measured individually
and receivables.
is expected. for assets that are individually significant,
– Loans renegotiated at or after 90 days and collectively where a portfolio
Impairment allowances may be
past due, but on which there has been comprises homogeneous assets and
assessed and created either for
no default in interest or principal where appropriate statistical techniques
individually significant accounts or,
payments for more than 180 days since are available.
on a collective basis, for groups of
renegotiation and against which no loss individually significant accounts for
of principal is expected. which no evidence of impairment has Credit Risk Concentrations
been individually identified or for high with Limits:
‘Impaired Loans’ comprise loans where volume groups of homogeneous loans Credit concentration risk may arise where
an individually identified impairment that are not considered individually a number of counterparties are engaged
allowance has been raised and loans significant. Individually impaired loans in similar activities and have similar
which are collateralised or where are those loans against which individual characteristics, which could result in
indebtedness has already been written impairment provisions have been raised. inability to meet contractual obligations
down to the expected realisable value. being similarly affected by changes in
This category includes all loans that Estimating the amount and timing of economic or environment conditions.
have been transferred to legal/recovery future recoveries involves significant
departments. The impaired loan category judgement and considers the level Concentration risk is mitigated to a
may include loans, which, while impaired, of arrears as well as the assessment large extent by stipulating prudent credit
are still performing. of matters such as future economic risk limits on various parameters. CBSL
conditions and the value of collateral, also has specified certain guidelines
The ‘accruing past due 90 days or more’ for which there may not be a readily on maximum exposures in respect of
category comprises loans that are accessible market. Loan losses that single/related party borrower limits
90 days or more past due with respect have been incurred but have not been and large exposures.
to principal or interest. An impairment separately identified at the Statement
allowance will be raised against these of Financial Position date are determined Related Party Lending
loans, if the expected cash flows on a portfolio basis, which takes into
discounted at the effective interest rate Related parties include the Major
account past loss experience as a
are less than the carrying value. Shareholders, Subsidiaries, Directors
result of uncertainties arising from the
and Key Management Personnel of the
economic environment and defaults
The ‘impaired and restructured loans’ Bank. The Bank has set an internal limit
based on portfolio trends. Under
category comprises loans not included on the overall exposure to the related
SLFRS/LKAS, impairment allowances
above where, for economic or legal parties and ensured that credit decisions
are recognised where there is objective
reasons related to the debtor’s financial are made on a rational basis, as per the
evidence of impairment as a result
difficulties, a concession has been granted relevant legislation, approved policies
of one or more loss events that have
to the debtor that would not otherwise be and procedures and is based on market
occurred after initial recognition and
considered. Where the concession results terms, with no preferential treatment.
where these events have had an impact

72 SUSTAINABLE STEWARDSHIP > HOW WE MANAGE RISK Seylan Bank PLC | Annual Report 2016
Over Exposure to Geographical Areas, Economic Sectors
Credit Exposures
and Lending Products:
by Product Type
Exposure to a single sector of the economy or lending product or to a narrow
geographical region is another dimension of risk concentration. Borrowers may be 5% 2%
2% 5%
vulnerable in the event of an economic or market downturn affecting their economic 4% 6%
sector, which in turn can affect their ability to service the loans and to mitigate this
risk the Bank sets individual concentration limits for exposure to various sectors.
The Bank closely monitors the quantum and quality of lending by geography (area)
but is of the opinion that weaknesses in any local economy, will not pose a particular 25%

risk in the foreseeable future.

Quantitative Disclosures 1% 50%

Credit Exposure by Product Types as at 31st December 2016

Credit Cards Overdrafts
The core banking products such as term loans and overdrafts account for 70% of total
Housing Pawning
advances. The specialised products are closely monitored to mitigate inherent risks. Leasing Staff Term Loans
Term Loans Trade Finance
Total as at Total as at Margin Trading
31st December 2016 31st December 2015
Rs. ’000 Rs. ’000

Credit Cards 3,803,627 3,189,905

Analysis of the Advances
Housing 12,515,412 11,058,900 Portfolio – Sector Wise
Leasing 14,685,690 14,922,249
10% 9%
Term Loans 119,960,901 86,521,954
4%
Margin Trading 2,658,052 3,241,982 2% 11%
4%
Overdrafts 60,076,383 51,040,860 1%
5%
Pawning 9,609,406 8,979,333
14%
Staff Term Loans 5,521,128 5,149,180 6%

Trade Finance 13,242,583 14,737,608 1%

11%
Grand Total 242,073,182 198,841,971
22%

The Sector-wise Comparison: December 2016 and December 2015 Agricultural & Fishing Financial and
Business Services
Manufacturing
Tourism Infrastucture
Sector Total As at Total As at Transport Other Services
31st December 2016 31st December 2015
Construction Credit Cards
Rs. ’000 Rs. ’000
Traders Pawning
New Economy Other
Agriculture and Fishing 22,248,480 20,428,830
Manufacturing 27,769,604 24,351,199
Tourism 12,857,420 12,133,427
Advances Portfolio
Transport 14,815,137 13,404,195 by Business Unit Wise
Construction 25,976,024 20,035,613
8%
Traders 52,720,784 44,927,045
New Economy 1,779,022 1,478,977
22%
Financial and Business Services 32,678,949 23,069,741
Infrastructure 2,391,832 2,533,766
Other Services 10,274,482 9,517,149
Credit Cards 3,803,627 3,189,905 70%

Pawning* 9,609,406 8,979,333

Other 25,148,415 14,792,791
Branches Head Office Lending Units
242,073,182 198,841,971 Corporate Banking
Grand Total
* Pawning includes agriculture sector lending.

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP > HOW WE MANAGE RISK 73
 Age Analysis of Non-Performing Loans by Product Distribution (Excluding Interest Receivables) –
31st December 2016 Based on CBSL Directions

Loan Category 3-6 Months 6-12 Months 12-18 Months 18 Months Grand
NPA Special NPA NPA NPA Total
Mention Substandard Doubtful Loss
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Credit Cards 61,701 32,817 27,669 202,393 324,580

Housing 167,225 190,115 96,780 426,179 880,299
Leasing 314,758 36,251 27,454 187,395 565,858
Margin Trading – – – 59,759 59,759
Overdrafts 423,788 246,608 125,408 1,632,381 2,428,185
Pawning 13,907 – – 43,179 57,086
Staff Term Loans 9,837 16,598 2,640 17,281 46,356
Term Loans 1,317,815 554,544 238,054 4,742,567 6,852,980
Trade Finance 138,997 22,731 15,000 184,693 361,421
Grand Total 2,448,028 1,099,664 533,005 7,495,827 11,576,524

The Reduction in the Gross NPA & NPA (Net of IIS) Ratios during the Year
%

7.5

4.5

1.5

0
Dec. ’15 Mar. ’16 Jun. ’16 Sep. ’16 Dec. ’16

Gross NPA Ratio NPA (Net of IIS) Ratio

The Net Infection Ratio of the Advances Portfolio during the Year
%

1.50

1.20

0.90

0.60

0.30

0.00
Jan. ’16 Mar. ’16 Jun. ’16 Sep. ’16 Dec. ’16

74 SUSTAINABLE STEWARDSHIP > HOW WE MANAGE RISK Seylan Bank PLC | Annual Report 2016
Stress Tests on Credit Risks as at 31st December 2016

Stress Test On the Credit Concentration Risk – Default by Large Borrowers – Net Impact on CAR
%

-0.6

-1.2

-1.8

-2.4

-3.0
Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec.
’14 ’14 ’14 ’14 ’14 ’14 ’14 ’15 ’15 ’15 ’15 ’15 ’15 ’15 ’15 ’15 ’15 ’15 ’15 ’16 ’16 ’16 ’16 ’16 ’16 ’16 ’16 ’16 ’16 ’16 ’16

Low Medium High

Asset Classification Downgrading Stress Test – Net Impact on CAR

%
0

-0.4

-0.8

-1.2

-1.6

-2.0
May. Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec.
’14 ’14 ’14 ’14 ’14 ’14 ’14 ’14 ’15 ’15 ’15 ’15 ’15 ’15 ’15 ’15 ’15 ’15 ’15 ’15 ’16 ’16 ’16 ’16 ’16 ’16 ’16 ’16 ’16 ’16 ’16 ’16

Low Medium High

Stress Test on Fall in Collateral Value – Net Impact on CAR

%

0.3

-0.3

-0.6

-0.9

-1.2
Jan. Feb. Mar. Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec.
’15 ’15 ’15 ’15 ’15 ’15 ’15 ’15 ’15 ’15 ’15 ’15 ’16 ’16 ’16 ’16 ’16 ’16 ’16 ’16 ’16 ’16 ’16 ’16

Low Medium High

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP > HOW WE MANAGE RISK 75
 Market Risk Management Market Risk Management Unit is reflecting internal and regulatory
established to promote oversight of all requirements. Accordingly, we measure
Market Risk Framework market risks, where a framework is put in market risks by several internally
At Seylan Bank a significant amount place to systematically identify, assess, developed key risk matrices which
of our businesses is subject to market monitor and report the risk arising due include a comprehensive and dynamic
risk, defined as the potential for change to market risk; helping timely escalation limit framework and regulator defined
in the market value of our trading and to senior management and in turn market risk approaches.
investment portfolios. promoting effective decision-making.
The risk managers identify these types Value at Risk (VaR)
Market risk can arise from changes in
of risks through active portfolio analysis VaR is a quantitative measure of the
interest rates and foreign exchange
and engagement with the business areas. potential loss (in value) of fair value
rates, equity prices, commodity prices
and other relevant parameters, such The Market Risk Management Unit positions due to market movements that
as market volatility and market implied which is an integral part of the Risk will not exceed in a defined period of time
default probabilities. Management Unit reports to CRO and and at a defined confidence level.
is overseen and managed by ALCO Our value at risk for the trading businesses
One of the primary objectives of Market
and the EMORMC (Executive Market is based on historical simulation models.
Risk Management is to play the role of
and Operational Risk Management
an independent risk function, to ensure
Committee). We calculate VaR using a 99% confidence
that the business units do not expose
level for a one day holding period. This
the Bank to unacceptable losses outside
Managing and means we estimate there is a 99 in 100
of our risk appetite. To achieve this
Measuring Market Risk chance that a daily mark-to-market loss
objective, Market Risk Management unit
from our trading positions will be less
works closely with the business units and At Seylan Bank we aim to accurately
than the reported VaR.
other control and support teams such as measure all types of market risks by
Finance, Audit, IT and Compliance. a comprehensive set of risk matrices

The Value at Risk (VaR) on the Bank’s trading exposure during the year is depicted in the graphs below:

Value at Risk (VaR) on Government Securities Trading Exposure – 2016

Rs. Mn.
0

-25

-50

-75

-100

-125
Jan. Feb. Mar. Apr. May. Jun. Jul. Aug. Sep. Oct.
’16 ’16 ’16 ’16 ’16 ’16 ’16 ’16 ’16 ’16

VaR on Gov. Sec's Limit

Value at Risk (VaR) on the Forex Net Open Position – 2016

Rs. Mn.
0

-2.50

-5.00

-7.50

-10.00

-12.50
Jan. Feb. Mar. Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec.
’16 ’16 ’16 ’16 ’16 ’16 ’16 ’16 ’16 ’16 ’16 ’16

VaR on Forex Positions Limit

76 SUSTAINABLE STEWARDSHIP > HOW WE MANAGE RISK Seylan Bank PLC | Annual Report 2016
Trading Market Risk To ensure dynamism in risk monitoring Stress Testing and
The Bank’s primary mechanism to and management, the Bank purchased Sensitivity Analysis
manage Trading Market Risk is the a Treasury System which facilitates
Stress testing is a key risk management
application of our Risk Appetite enhanced risk monitoring on a real time
technique, which evaluates the potential
Framework of which the limit framework basis. This has boosted the robustness of
effects of extreme market events and
is a key component. The Management Treasury Middle Office to monitor the risk
extreme movements in individual risk
and the Board supported by Market Risk in real time and escalate any exceptions
factors. It is one of the core quantitative
Management Unit has set Value at Risk, to the management.
tools used to assess the market risk of the
Management Action Trigger Limits and Bank’s positions and complements VaR.
Stop Loss Limits for market risk in the The Treasury is responsible for adhering
trading book. This overall appetite is to the limits against which exposures
Market Risk Management Unit performs
given to our Treasury Division based on are monitored and reported. The Board
stress testing to capture a variety of risks
an established business plan. We have approved risk limits are monitored on
pertaining to portfolios’ and exposures.
aligned these limits down to individual a daily, weekly and monthly basis and
portfolios as well as the dealing personnel the relevant authorities appraised on a
Stress tests/sensitivity analysis carried
of the Treasury Unit. timely manner.
out for the trading exposures and their
impact on profit and capital is depicted
below:

Sensitivity of the Foreign Exchange Exposure as at 31st December 2016

Stress Test Scenario Net Open Open Risk-Weighted Impact on Impact on Net Impact Current
Position USD Position Assets of the Required Capital P&L on CAR CAR
’000 Rs. ’000 Open Position Rs. ’000 Rs. ’000 % %
Rs. ’000

2,406 361,454 36,145

Scenario
Minor -5% 343,381 34,338 1,807 18,073 0.00
Moderate -10% 325,308 32,531 3,615 36,146 -0.01 13.18
Major -15% 307,236 30,724 5,422 54,218 -0.01

Sensitivity of the Equity Trading Exposure as at 31st December 2016

Equity Position (Prior to Stress) Invested Equity Specific Capital General Market Total Capital Current
Value Carrying Value Charge (CSE Listed) Capital Charge Required CAR
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 %

7,592 7,490 749 749 1,498 13.18

Scenario Equity Impact Specific General Market Total Capital Net Impact
Carrying Value on P & L Capital Charge Capital Charge Required on CAR
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 %

Minor -10% 6,741 (749) 674 674 1,348 0.00

Moderate -20% 5,992 (1,498) 599 599 1,198 0.00
Major -30% 5,243 (2,247) 524 524 1,049 0.00

Sensitivity of the Equity AFS Exposure (Listed on the Colombo Stock Exchange) as at 31st December 2016

Equity Position (Prior to Stress) Invested Value Equity Specific General Market Total Capital Current
(CSE Listed) Carrying Value Capital Charge Capital Charge Required CAR
Rs. ’000 (CSE Listed) Rs. ’000 Rs. ’000 Rs. ’000 %
Rs. ’000

279,444 215,145 15,460 21,514 36,974 13.18

Scenario Equity Impact Specific General Market Total Capital Net Impact
Carrying Value on OCI Capital Charge Capital Charge Required on CAR
Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 %

Minor -10% 193,630 (21,514) 13,914 19,363 33,277 0.00

Moderate -20% 172,116 (43,029) 12,368 17,212 29,579 -0.01
Major -30% 150,601 (64,543) 10,822 15,060 25,882 -0.01

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP > HOW WE MANAGE RISK 77
 Market Risk Reporting The Bank measures and monitors the Interest Rate Risk of the
Market Risk Management reporting interest rate risk related to the Trading Banking Book
creates transparency on the risk profile Book and the Banking Book with the use
The following table presents a change
and facilitates the understanding of core of the following risk measures:
in annual net interest income with the
market risk drivers to all levels of the zz PV01: Price value of a basis point rate change by +/-100 and 250 bps and
organisation. The Management Board denotes interest rate risk expressed balance sheet assumed to be stable.
and specialised Committees such as as a cash value, related to maintaining The analysis is based on the following
ALCO and EMORMC receive regular of a given position when interest rates assumptions:
reporting, as well as ad hoc reporting change by one basis point; zz For an interest rate change: Interest on
as required, on market risk, regulatory zz Value at Risk (VaR) savings accounts shall not increase/
capital and stress testing. decrease, except when rates change by
zz NII (Net Interest Income): a change in
the net interest income representing 250 bps, where the savings component
The Board Intergrated Risk Management will increase/decrease by 75 bps only.
the difference between interest income
Committee receives risk information on
and expense with an interest rate zz The interest sensitive assets and
a quarterly basis.
change at a specified level. liabilities are bucketed on their
repricing maturities or failing which
Additionally, Market Risk Management
Additionally, the Bank performs stress tests on their contractual maturities.
Unit produces daily and weekly market
risk specific reports and limit excess involving sensitivity analysis and examines
Change in the Net 31st December 31st December
reports for each asset class on a daily the effects of interest rate changes on the Interest Income 2016 2015

basis which is triggered real time. net interest income of the Bank. per Annum Rs. ’000 Rs. ’000

100 bps +/-265,419 +/-214,664

While the interest rate risk in the
Non-Trading Market Risk banking book is reported on a monthly 250 bps +/-680,274 +/-499,900
Non-trading market risk arises primarily basis, interest rate risk on the trading
from activities in the banking book and book is Marked to Market on a daily
from certain Off-Balance Sheet items. basis and reported to the management Foreign Exchange Risk
Significant market risk factors, the Bank weekly or more frequently during volatile Foreign exchange risk is the risk
is exposed and overseen by the Market market movements. resulting from unhedged positions
Risk Management Unit are: exposed to changes in market exchange
zz Interest rate risk The Bank uses Weighted Average rates due to transactions arising from
Portfolio Durations, to analyse the foreign currency denominated dealings
zz Market risks from Off-Balance Sheet
impact of a 100 bps shift in market yields, or in holding foreign exchange assets
items such as foreign exchange risk
on the prices of Government Securities: and liabilities.
Trading and AFS portfolios.
Interest Rate Risk The majority of this foreign exchange
The interest rate risk generally arises from: The results are presented below: risk triggers through internal trade back
transactions and is therefore reflected
zz Mismatch in repricing dates of assets
Impact of 100 bps Parallel and managed via the Net Open Position
and liabilities, where the risk to the
shift on the Trading and Limit as an unhedged residual risk.
Bank’s revenue, mostly interest
Available-for-Sale Portfolio
income, in the case of unfavourable
Rs. Mn. The objective of currency risk
changes of market interest rates
1,500 management is to protect the exchange
resulting in changes in the interest
gains and obtain financial benefits
gain/loss;
1,200 through transactions concluded in
zz Yield curve risk is the risk of
FX instruments at risk levels accepted
experiencing an adverse shift in market 900 by the Bank.
interest rates associated with investing
in fixed income instruments. The risk 600 Foreign currency risk management
is associated with either a flattening or
process involves its measurement
steepening of the yield curve, which is 300 through:
a result of changing yields.
zz Calculation of the total position
0 of the Bank;
Dec. Mar. Jun. Sep. Dec.
The Bank’s interest rate risk is managed ’15 ’16 ’16 ’16 ’16
by Treasury and is closely monitored by zz Calculation of the position in each
the Market Risk Management Unit. Trading AFS currency;
zz Calculation of Value at Risk (VaR);
zz Sensitivity Analysis.

78 SUSTAINABLE STEWARDSHIP > HOW WE MANAGE RISK Seylan Bank PLC | Annual Report 2016
The following graph presents the NOP In addition, the Bank also performs considers relevant and significant
during the year as a percentage of the the VaR calculations. on the equity liquidity risk, whether on Balance Sheet
Tier I Capital: investment portfolios monthly to identify or Off-Balance Sheet.
the impact on earning.
Un-hedged Open Foreign Our liquidity risk management framework
Currency Ratio The Graphs represent the investments has been an important factor in
% in the trading and the AFS portfolios and maintaining adequate liquidity and in
1.5 the behaviour of market values of the managing our funding profile during
equity investment portfolios: 2016. The risk framework is managed
1.2 mainly through the stock approach and
Equity Investments – Trading the floor approach as per regulatory and
0.9 Rs. Mn. internal guidelines.
10
0.6 The objective of liquidity risk
8 management is to manage funds
0.3 On- and Off-Balance Sheet transactions
6 in order to ensure cost effective funding
0
Dec. Mar. Jun. Sep. Dec.
sources and their appropriate use. The
’15 ’16 ’16 ’16 ’16 4 Bank’s ALCO manages the structure of
the Banks assets and liabilities through a
2 robust maturity mismatch profile so as to
NOP Movement during the year is ensure optimal liquidity management and
depicted in the following graph: 0 achieve financial ratios with the liquidity
Dec. Mar. Jun. Sep. Dec.
’15 ’16 ’16 ’16 ’16 risk levels accepted by the Bank.
Net Open Position
USD ’000 Investment Value Trading Market Value Treasury manages liquidity and funding,
8,000 in accordance with the Management
and Board approved risk appetite
6,400 across a range of relevant matrices, and
Equity Investments –
Available-for-Sale implements a number of tools to manage
4,800 and ensure compliance.
Rs. Mn.

1,000
3,200 In addition, Treasury works closely
800 in conjunction with Market Risk
1,600 Management Unit and Finance to analyse
600 and understand the underlying liquidity
0
Mar. Jun. Sep. Dec.
characteristics of the business portfolios.
’16 ’16 ’16 ’16
400 These characteristics are immediately
brought to the notice of the Members of
High Close Low Average Limit
200
ALCO and frequent meetings are held
to understand changes in the Bank’s
0
position arising from business activities
Equity Investment Risk Dec. Mar. Jun. Sep. Dec. and market circumstances and to address
’15 ’16 ’16 ’16 ’16
Non-trading market risk from investment such needs as and when they arise.
exposures are predominantly the equity Investment Value AFS Market Value
risk arising from our investments Dedicated limits are given to ensure that
categorised as strategic investments and the Bank meets its overall liquidity and
held as Available-for-Sale assets. Liquidity Risk funding appetite.

Liquidity risk is the risk arising from

Held-for-trading equity risk arises mainly The Board Integrated Risk Management
our potential inability to meet payment
due to the investments done for trading Committee is informed of performance
obligations when due or being able to
purposes and is subject to equity price risk. against these risk appetite metrics, on a
meet these obligations at excessive
quarterly Scorecard.
costs. The objective of the Bank’s
Although the Bank’s exposure to this risk
liquidity risk management framework
is negligible, mark to market is done daily The following table represents the matrix
is to ensure that the Bank can fulfil its
on the held-for-trading and available-for- used to measure and manage liquidity
payment obligations at all times and
sale portfolios respectively, to identify and funding risk as per internal and
can manage liquidity and funding risk
the impact on profit/OCI due to changes regulatory requirements:
within the risk appetite. The framework
in equity prices.

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP > HOW WE MANAGE RISK 79
 Ratio Limt December 16 December 15
% % %

Net Loans to Total Assets >60.00 66 65

Loans to Customer Deposits (Calculated as ADR) <97.50 89 89
Liquid Assets to Short-Term Liabilities >70.00 131 137
Large Liabilities (minus) Temporary Investments to Earning Assets (minus) Temporary Investments <10.00 10 8
Purchased Funds to Total Assets <25.00 20 19
Commitments to Total Loans <25.00 15 17

Funding Concentration
Swaps (USD Mn.) 150 91 60
External Borrowing – (Value in Rs. Bn.) 25 17 19

Funding Risk Management The following graph represents the from Board level to business unit levels.
The Bank’s primary instrument for movement of the LCR of the Bank Operational risk is monitored on a
monitoring and managing funding from the 1st quarter to the last quarter regular basis and the operational Risk
risk is the funding profile of assets of 2016: Management Policy Framework
and liabilities. To produce the Funding is practiced in the daily activities of
Movement of the Bank’s all employees.
Matrix, all funding-relevant assets and
Liquidity Coverage Ratio (LCR)
liabilities are mapped into time buckets
corresponding to their contractual or % The objective of the Operational Risk
assumed maturities. This allows the
200 Management (ORM) division is to
Bank to identify expected excesses and establish sound control practices to
shortfalls in liabilities over assets in each
160 increase the effectiveness of the Bank’s
time bucket, facilitating the management resources and minimise financial
of potential liquidity exposures.
120 losses. The Head of operational risk
reports to the Chief Risk Officer and an
The liquidity maturity profile is based
80 Executive Risk Management Committee
on contractual cash flow information. (EMORMC) for reporting and oversight.
If the contractual maturity profile of a
40 The CRO accordingly represents the
product does not adequately reflect the risk function at the Board Integrated
liquidity maturity profile, it is replaced by 0
Mar. Jun. Sep. Dec.
Risk Management Committee (BIRMC)
assumed maturities.
’16 ’16 ’16 ’16 for reporting and accountability. The
BIRMC ensures suitable execution of
LCR (LKR) LCR (All CCY) Limit
its instructions through the defined
Liquidity Coverage Ratio governance structure.
In addition to the internal stress tests, the
Bank calculates the Liquidity Coverage Operational Risk Management division
Ratio (LCR), as set out by the Basel
Operational Risk
has developed practices under the
Committee in January 2013. Management following policies to assist in identifying,
Operational risk is the risk of loss or measuring, monitoring and reporting
The LCR is intended to promote the damage resulting from inadequate operational risk:
short-term resilience of a bank’s liquidity or failed internal processes, people zz Operational Risk Management
risk profile over a 30-day stress scenario. and systems or from external events
zz Corporate Information Security
The ratio is defined as the amount of including legal risk but excluding strategic
High-Quality Liquid Assets that could be risk. Dealing with operational risks is zz Business Continuity Management
used to raise liquidity, measured against a key element of the Integrated Risk zz Incident and Near Miss Management
the total volume of net cash outflows, Management Framework of the Bank. zz Fraud Risk Management
arising from both actual and contingent
zz Insurance Governance
exposures, in a stressed scenario. The
Operational Risk Management zz Business Process Outsourcing
accepted level as stipulated by the Basel
Committee of 100% is to be met by
Framework and Responsibilities
January 2019 until such time the ratio Under the Comprehensive Operational
may evolve between 70-90%. Risk Management Policy and the
Framework, the roles and responsibilities
for operational risk have been defined

80 SUSTAINABLE STEWARDSHIP > HOW WE MANAGE RISK Seylan Bank PLC | Annual Report 2016
Operational Risk Management Concepts & Mitigants

Risk Business
Assessments Continuity

Ide
isk nt
r tR ify
po People Ri
Re

sk
y In
lit
bi

te
ila

rg
nal Events

rity
Ava

Processes
Assets
Exter

isk
Monit

ate R
or R

Co
nfidentiality
alu
i

Ev
sk

Systems

Control Risk

Key Risk Scenario Incident

Indicators Analysis Reporting

Operational Risk Management (ORM) Techniques/Programmes

Based on Basel II and regulatory requirements, the Industry Best Practices have been used to design the following risk management
techniques for ORM programmes.

Technique Management/Mitigation

Risk Control Self-Assessment Centralised key business units/branches of the Bank carry out RCSA at least on an
process (RCSA) annual basis for their business processes to identify the inherent risks proactively.
Findings from the RCSA exercise are used to mitigate the residual risks through
implementation of proper action plans.

Collecting and analysing ILDs are classified into seven loss types and four broad business lines such as Trading
Internal Loss Data (ILD), incident and Sales, Payments and Settlements, Retail Banking, Commercial Banking in which
and near-miss data collection Bank operates its activities. Loss events exceeding Rs. 500,000/- have been reported
as required by the Central Bank (CBSL) quarterly. Following graph exhibits the
operational losses incurred for the last 2 years.

The gross operational losses in 2016 increased to Rs. 29 Mn. compared to Rs. 18 Mn.
in 2015. The major contributors to operational losses attributed to execution delivery
and process management and internal frauds. The control environment, insurance
arrangements and disciplinary actions taken against the policy violators could be
considered as mitigating actions on it.

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP > HOW WE MANAGE RISK 81
 Technique Management/Mitigation

Operational Loss

6%
10%

2%
39%

Internal Fraud
46% 2016 2015 External Fraud
Employment Prcatices and Workplace Security
Clients, Products and Business Practices
82% Damages to Physical Assets
Business Disruption and System Failures
Execution Delivery and Process Management
1% 14%

Establishing and reviewing Key KORIs which are reported at each designated meeting by the way of a dashboard and
Operational Risk Indicators (KORI) monitored against the corresponding threshold levels. The appropriate action plans are
directed to mitigate the risks based on these indicators.

Sample of Key Operational Risk Indicators

Reported High Risk

Audit Audit Findings Card Centre

Sk sact
Tra
ke
les

im ion
n
Fa

me s
tic
Ar

d
Pawning Service Level
& Reputation
Do
AT time
wn

lai r
e
nts
M

Co stom
mp
Cu

Staff
Operations Turnover Human Resource
& Systems

Reviewing information risk, Bank is in the position to identify and respond to suspect information flows and intruder
integrity and availability attacks while observing the system readiness through the information risk management
practices using the tools and techniques such as modern firewall technologies, intruder
detection and prevention systems. Presently, the Bank is in the process of implementing
bank-wide Baseline Security Standard in compliance with the regulatory requirement
and continuous monitoring of cyber attacks.

As per the Information Security Policy and Framework all IT modifications/implementations

are reviewed on information security aspects to avoid operational losses.

Effectiveness of business continuity Business continuity planning (BCP) ensures the capability and resilience to business
and disaster recovery plans (BCP) disruption that may arise from internal or external events and should reduce any
adverse impact on business operations, as well as profitability and reputation. Bank
has a well-established Disaster Recovery Site and carried out several drills for critical
systems including core banking systems in order to verify the readiness of business
continuity-related issues. The related executive committees and regulators are being
updated on outcomes of the BCP and DR drills with the appropriate actions.

82 SUSTAINABLE STEWARDSHIP > HOW WE MANAGE RISK Seylan Bank PLC | Annual Report 2016
Technique Management/Mitigation

Outsourcing services Outsourcing takes place when the Bank uses another party to perform non-core banking
functions that would traditionally have been undertaken by the Bank itself. As a result,
Bank will be benefited in focusing on its core banking activities while having the
non-core functions being taken care by outside experts.

Bank has outsourced some business functions under its comprehensive policy after
evaluating whether the services are suitable for outsourcing based on assessment of
the risks involved and undertaking due diligence tests on the companies concerned
such as credibility and ability of the owners, BCP arrangements, technical and skilled
manpower capability, financial strength, legal etc.

Insurance Arrangements Bank has taken cover from the insurance providers as one of the risk mitigation
strategies for high severity low probability and the uncontrollable operational risk events
such as natural disasters, fire as well as internal and external frauds, errors, omissions,
hold up, employee fidelity etc. However, insurance has not been used for taking upon
us risks that would otherwise not be undertaken thereby avoiding moral hazards.
The insurance policy is reviewed annually for effectiveness of the same.

Reviewing New Products/Processes Bank was able to provide risk assurance for the newly implemented products through
the Product Management Procedure. This procedure includes the proactive risk
identification, assessment and introduced mitigation control for risks inherent to new
products, processes, systems and their amended versions as well as to projects that
have a material impact on Bank’s operations.

Legal Risk Compliance Department, in addition information arranged in a user friendly

Legal Risk arises from failure to to its routine communication with the manner was developed and published
comply with statutory and regulatory Board Integrated Risk Management in the Bank’s intranet to enable staff to
regulations, uncertainty of the outcome Committee (BIRMC) which is its direct have easy access to compliance related
of all litigation and probable adverse reporting line provides updates to the information.
consequences resulting from deficient Board of Directors on the overall status of
documentation. compliance of the Bank at their monthly
Strategic Risk Management
meetings. Compliance related matters
are also discussed at the quarterly Strategic risk is the possibility of current
The Bank manages these legal risks
meetings of the Board Governance and and prospective impact on earnings or
effectively through the Legal Department
Compliance Committee of which the capital arising from adverse business
where all contracts and security
Compliance Officer is a member. decisions, improper implementation of
documentation is legally vetted taking
decisions or lack of responsiveness to
into consideration the applicable
Key Initiatives during the Year 2016: industry changes.
laws and regulations. Interpretation
of provisions of statutes that may be Compliance department was assigned
a dedicated compliance Officer at the The Bank has recently developed a four
applicable are referred to the Legal
beginning of the year to ensure high year strategic plan (2017/2020) and
Department by the Business lines thus
level of compliance risk management. is in the process of implementation.
minimising the risk of non-compliance
The Department was also restructured Corporate management and the Board
with laws and regulations.
with a view of enhancing the scope of takes the responsibility to lead the Bank,
compliance function. while maintaining its vision and mission
Compliance Risk Management in order to minimise the failures in the
The Compliance Department acts Much focus was given during the year on business environment.
as the Control Point in monitoring increasing staff awareness and bridging
and co-ordinating all regulatory knowledge gaps which may lead to In pursuing the Bank’s strategic goals
requirements. It ensures that the Bank compliance breaches. Accordingly an and business objectives, the Bank
complies with all laws, regulations e-learning module was developed on has established clear communication
and best practices recommended by AML compliance the target audience channels at all levels of the organisation,
competent authorities. It is also a key of which is the branch front line staff. allocate systems for operations and
responsibility of Compliance Department Also a comprehensive compliance business lines and increase staff
to ensure prevalence of a compliance reference guide containing all material capabilities through staff development
driven culture within the Bank. and recognition process.

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP > HOW WE MANAGE RISK 83
 Reputation Risk Management in computing the capital adequacy for the business units to evaluate the
Reputation Risk is a threat or danger to credit risk. The Bank has taken steps to counterparty risk. As a result, we have
the goodwill or standing of a business conduct a gap study to assess the Bank’s kept the infection ratio low.
or entity. As risk mitigating actions, the readiness to move to the IRB approach. iii. Implementation of effective credit
Bank has established sound policies and risk review process, where 41%
procedures such as customer complaint We have conducted parallel computation of advances granted have been
management, whistle-blowing policy of capital adequacy on operational risk independently reviewed and identified
to maintain the goodwill in a positive under the alternative standardised shortcomings mitigated to improve
manner. For the purpose of extracting approach and await CBSL green light the credit quality.
customer grievances, each business to proceed.
iv. Rigorous monitoring of
unit has a record of the same for the non-performing advances by the
review of the inspections and responses, We have moved to Pillar II to capture
Executive Credit Risk Management
while such complaints are allowed to be all other risks that are not covered under
Committee enabled to reduce the
made using telephones under the Pillar I through the Internal Capital
NPA ratio.
whistle-blowing policy. The Bank had a Adequacy Assessment Process (ICAAP).
v. Several training programmes were
very few incidents on this type of events
Market disclosures are carried out as per internally designed and conducted to
and successfully solve them without
CBSL Guidelines and as per disclosure improve the risk taking ability of the
any damage.
policy in line with Pillar III requirements. staff of business units.

The Bank also recognise the importance vi. Assign credit managers to area
of making a positive contribution to The Bank has commenced computing offices during 2017 with a view to
society by promoting Corporate Social the liqudity coverage ratio and net stable broadbasing risk oversight of medium
Responsibility (CSR) through ethical funding ratio following the regulators size credit propositions.
banking practices, environmental road map while moving to Basel III vii. Full roll-out of the Loan Origination
awareness and contribution to the requirements and aligning its capital System (LOS) across the network,
community. Accordingly, the Bank’s to liquidity requirements. thereby reducing the time taken
Board Sustainability Committee, to evaluate/approve facility, thus
quarterly monitors the progress of improving the quality of credit.
CSR contribution and its effectiveness. Achievements during 2016 viii. Use data analytics to identify credit
and Outlook for 2017 default behaviours in the product
i Implementation of a new Treasury portfolio.
BASEL III Approach System during 2016. This has boosted ix. Obtain regulatory approval to
and Readiness the robustness of the treasury middle compute capital adequacy of
We have implemented an Internal Credit office to monitor the risk on an online operational risk under the alternative
Rating Module, which will enable to real time basis. standardised approach.
record data and validate same to move ii. The issuance of lending guidelines, x. Upgrade the Bank’s ALM and VaR
to Internal Rating Based approach (IRB) covering specific economic activity/ systems used to monitor market risk
industry segment, has enabled of the Bank.

Key Risk Indicators

Dash Board on Key Credit, Market, Liquidity and Operational Indicators
December December Low Medium High
2016 2015
% %

Credit Risk
Gross NPA Ratio (as per CBSL) 5.14 5.57
NPA Ratio (Net of IIS) (as per CBSL) 4.47 4.68
Impaired Loans (Carrying Amount)/
Loans and Receivables (Carrying Amount) 2.98 3.09
Increase/(Decrease) of Impaired Loans 12.12 -24.94
Past Due Loans + Impaired Loans/
Loans and Receivables (Gross) 12.85 13.88
Past Due Loans/Neither Past Due nor Impaired 8.79 9.57
Increase/(Decrease) of Past Due Loans 13.14 -18.73
Open Credit Exposure 25.35 23.78
Allowance for Impairment/Impaired Loans (Gross) 43.93 46.80

84 SUSTAINABLE STEWARDSHIP > HOW WE MANAGE RISK Seylan Bank PLC | Annual Report 2016
 December December Low Medium High
2016 2015
% %

Market and Interest Rate Risk

Maturity Gaps
Maturity Gap Less than One Year to Total Liabilities Less than 25% -22.74 -22.12

Investments
Government Securities to Total Assets
(Int. Bearing) Less than 30% 20.59 26.87

Equities
Market Value of Equity Investments (Quoted) to
Total Assets (Int. Bearing) Less than 1% 0.08 0.35
Net Open Position Short(-)/Long(+) (USD) 8 Mn. 2.406 Mn. 1.898 Mn.

Liquidity and Funding Risk Measurement Limit December December

2016 2015
Statutory Liquidity Ratio
– Domestic Banking Unit (DBU) (%) 21.00 22.68 27.56
– Foreign Currency Banking Unit (FCBU) (%) 21.00 26.24 21.51

Advances to Deposits Ratio

Advances to Deposits Ratio – Bank (%) 97.50 88.52 88.56
Advances to Deposits Ratio – LCY (%) 97.50 90.43 88.99
Advances to Deposits Ratio – FCY (%) 97.50 70.90 84.20
Advances to Deposits + Debentures (%) 95.00 84.66 85.82
Advances to Stable Funds (%) 100.00 88.50 83.50
Funding Concentration
SWAPs US$ Mn. 150 Mn. 91.00 59.75

Operational Risk Measurement Limit 2016 2015

Pawning Losses as Percentage of Pawning

Capital Outstanding (%) Zero NIL NIL
Cheque Returns as Percentage of Total Cheques
in Clearing (%) 3 3.40 2.69
Non-rectified High Risk Findings (< 90 days)
Over Total High Risk Audit Findings (%) Zero 1.55 1.18
Number of Skimming Cards and Non-EMV Rs. 0.46 Mn. Rs. 1.97 Mn.
Converted POS Transactions Zero 27 Trans 36 Trans
Staff Turnover (%) 4 3.95 5.00
Password Compromise Zero NiL NIL

Seylan Bank PLC | Annual Report 2016 SUSTAINABLE STEWARDSHIP > HOW WE MANAGE RISK 85
 Capital Adequacy Computation – Bank
On-Balance Sheet Assets and Credit Risk-Weighted Assets
Equivalent of Off-Balance Sheet Assets

2016 2015 2016 2015

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

A. Risk Weighted Assets

Credit Risk
Risk-Weighted Assets – On-Balance Sheet Exposure 321,564,364 261,552,019 199,546,741 159,821,286
Risk-Weighted Assets – Off-Balance Sheet Exposure 13,609,868 11,748,938 12,482,908 9,882,115
Total Risk-Weighted Assets – Credit Risk 335,174,232 273,300,957 212,029,649 169,703,401
Total Risk-Weighted Assets – Market Risk 3,947,610 3,562,170
Total Risk-Weighted Assets – Operational Risk 24,319,271 21,767,982

B. Computation of Capital
Total Eligible Core Capital (TIER I Capital) 25,805,714 23,881,138
Total Eligible Supplementary Capital (TIER II Capital) 5,855,771 1,216,750
Total Capital Base 31,661,485 25,097,888

C. Computation of Ratios
Total Risk-Weighted Assets (RWA)
Total Risk-Weighted Assets for Credit Risk 212,029,649 169,703,401
Total Risk-Weighted Assets – Market Risk 3,947,610 3,562,170
Total Risk-Weighted Assets – Operational Risk 24,319,271 21,767,982
Sub Total 240,296,530 195,033,553

Minimum Capital Charge

Minimum Capital Charge for Credit Risk 21,202,965 16,970,340
Minimum Capital Charge for Market Risk 394,761 356,217
Minimum Capital Charge for Operational Risk 2,431,927 2,176,798
Sub Total 24,029,653 19,503,355

Total Capital Available to Meet the Capital Charge for Credit Risk
Total Eligible Core Capital (TIER I Capital) 25,805,714 23,881,138
Total Eligible Supplementary Capital (TIER II Capital) 5,855,771 1,216,750
Total Capital Base 31,661,485 25,097,888

Core Capital Ratio (Minimum Requirement 5%)

Total Eligible Core Capital (TIER I Capital) 25,805,714 23,881,138
Total Risk-Weighted Assets 240,296,530 195,033,553
Core Capital Adequacy Ratio (%) 10.74 12.24

Total Capital Ratio (Minimum Requirement 10%)

Total Capital Base 31,661,485 25,097,888
Total Risk-Weighted Assets 240,296,530 195,033,553
Total Capital Adequacy Ratio (%) 13.18 12.87

86 SUSTAINABLE STEWARDSHIP > HOW WE MANAGE RISK Seylan Bank PLC | Annual Report 2016
 OUR VALUE
CREATION
MODEL
087-094
Seylan Bank PLC, had the distinction of being, at the time of commencement,
one of just two new indigenous banks to gain entry into Sri Lanka’s financial
system, which had, up to then, been dominated by the old-established,
indigenous and foreign banks operating in the country. It has made immense
strides since then and faced many challenges to emerge today as a Bank to be
reckoned with amongst the six systemically important banks in the country,
with total assets in excess of Rs. 350 Bn. The Seylan Group comprises of the
Bank and its subsidiary of Seylan Developments PLC.

Seylan Bank PLC | Annual Report 2016 87

 Our Value Creation Model

Inputs

Capital
Supplier and Social and
Investor Customer Employee Environment
Business Partner Community
• Shareholders' • Service Points • Knowledge • Correspondent • CSR Projects • Waste Management
Funds • New Products and • Experience Relationships • Community • Resource Efficiency
• Local and Foreign Value Additions • Diversity • Purchases from Sponsorships • Responsible
Borrowings • Capital Expenditure Locally-based • Responsible Banking Measures
• Retention Suppliers
• Debentures and Access
• New Alliances • Compliance

• Financial • Human • Recoveries

• Branch Banking
Resources

Risk Management and

Seylan Developments PLC

Our Support Services

Intermediation • Compliance
Our Vision, Mission

Our Main Activities

• Corporate and

Corporate Social
• Marketing
Our Objectives

Responsibility
Business Units
and Strategies

Off-Shore Banking • Maturity • Legal

Governance
and Values

Our Main

Subsidiary
Transformation • Information • Finance
• Retail Banking
Technology
• Treasury • Internal Audit
• Operations
• International and • Supplies,
• Branch Premises and
Trade Finance
Credit/Credit Maintenance
• Project Finance Administration

Institutional Capital

Supplier and Social and

Investor Customer Employee Environment
Business Partner Community
Capital Capital Capital Capital
Capital Capital

• Dividends Paid of • Added 8 New • Average Benefits per • More than 15 Years • Opened 40 new • Recycled 102,237
Rs. 1,121 Mn. Branches, 20 ATMs Employee Rs. 1.4 Mn. of Relationship with Libraries in 2016. Kgs of waste papers.
• Return on Assets and 6 CDMs. • Average Service 22 Correspondent • Total 120 Libraries. • Saved 2.1% of
1.23% and Return • Factoring, Gold Period – Over Banks. Electricity and 3%
on Equity 15.18%. • Donated Over
Loans and Money 13 years . • Over Rs. 218 Mn. of Water compared
Rs. 10 Mn. for
• Interest Paid Market Deposits. Purchases from to last year.
• Promoted 188 Flood Victims
for borrowers/ Locally-based
debenture holders • Spent over Employees. • Saved 1,738 trees.
Suppliers.
Rs. 4 Bn. Rs. 761 Mn. for • Male 57% and
Capital Expenditure. • Over 500 Registered
• Asset Quality Female 43%. Suppliers.
Improved.
• Assurances and
Confirmations.

Outputs

88 OUR VALUE CREATION MODEL Seylan Bank PLC | Annual Report 2016
Why We Create Value friendly and service oriented alternative. Business Ethics
From inception, the Bank attempted to and Integrity
(Our Ultimate Goal)
instil a value-based culture and has been
A natural concomitant of our
A New Strategy for the Future able to successfully uphold these values
compliance culture, we espouse the
to date by presenting itself as a flexible,
With the success of our strategic highest standards of business ethics
customer-friendly, banking institution.
plan 2012/2016 where we achieved and integrity. Business ethics is
We are a Bank built on a more ethical
a commensurate increase across one of our key values by which we
and caring culture. This unique identity
the board, we are now on the cusp of stand and is inculcated into all levels
has helped us to differentiate ourselves
achieving greater heights, ready to of management across the board and
in the business, purely from our
launch our next strategic plan. We are drives our strategy and direction.
recognition of the relationship that exists
now poised to improve our rank in the We have a comprehensive governance
between brand management and the
industry through better management by framework in place and the Corporate
customer, as a strategic enhancer of
benchmarking ourselves against those Governance Report explains these
stakeholder value.
of the leaders in industry. Accordingly measures in detail.
we have hired a renowned firm of external
consultants (Boston Consulting Group Systems, Processes Since the Bank was established in 1987
– BCG) to chart out our strategy for and Technologies with its distinctive promise, ‘The Bank
2017/20. Through innovative product development, with a Heart’ we have made considerable
the Bank has been successful in progress to cater to a new generation of
In consultation with BCG, we have differentiating its position, particularly customers amongst the youth and the
identified certain key strategic in the domain of digital technology. We adolescent population of this country,
imperatives which will form the key are now poised to invest further in the where we see immense potential for
pillars of the 2017-2020 plan. digital space to leverage on increasing an expanded market share.
preference for social media amongst
our target groups. Our internal systems The Bank has, progressively developed
How We Create Value and processes are continuously being a solid internal control system
(A Robust Model) upgraded and developed with a strong encompassing all operations, for
As a commercial bank, Seylan Bank’s focus on Innovation and Information effective accountability and product
business model is primarily centered Technology, has become part and parcel enhancement, which minimises
around financial intermediation and of our customer services and plays a errors, omissions and frauds, while
maturity transformation. vital role in executing our day-to-day ensuring accuracy and completeness
operations. of information for decision-making;
While gearing primarily remains the and for the provision of speedy and
cornerstone of our business model, We are now moving into the digital space. efficient customer solutions. Its essential
we are aware that it exposes the Bank Our latest product, the Seylan Seylfie, a components range from the basic
to a multitude of risks. As you would state-of-the-art digital bank account to controls of segregation of duties.
read later in this report, the Bank has empower the youth, is aimed at the tech
established a sound risk management savvy target group. These are indeed It is our desire to be recognised by
framework with necessary oversight exciting propositions for the future our customers as a reliable and
of the Board of Directors and thereby within the architecture of our new responsible long-term business partner.
has been able to successfully manage strategic plan. We treat our customers as well as our
such risks. competitors, in a professional manner
with respect and offer quality products
Compliance and services, whilst, respecting the
Institutional Capital As a licensed commercial bank with culture of the business segments and
Institutional Capital is an integral part the rank of a systemically important regions in which we operate.
of our value creation model. This together bank in the financial system and as an
with Financial Capital helps the Bank intermediary with fiduciary responsibility, Unlike financial capital, institutional
to deliver value to its stakeholders. the need to be compliant with the legal capital cannot be quantified. However,
Its essential components are intellectual provisions and regulatory directions over the years, we have been able to build
property, knowledge, systems and governing our operations is paramount, on our institutional capital base, which
procedures, brand value, corporate even in the face of severe competitive is supplemented by various forms of
culture, business values, ethics and pressures. A compliance culture external capital such as investor capital,
integrity. has therefore been strongly imbued customer capital, supplier and business
amongst all levels of our staff not only partner capital, community capital and
to protect the Bank from reputational environmental capital in our drive to
Corporate Culture and Value
risk but, more profoundly to stand by deliver value to, and derive value from
Seylan Bank was established with its and not compromise, the high standard stakeholders.
distinctive tagline ‘The Bank with a Heart’ of business ethics that underscores
and has, unequivocally, defined itself as a whatever we do.

Seylan Bank PLC | Annual Report 2016 OUR VALUE CREATION MODEL 89
 Anti-Corruption Sustainability is an integral part of the shareholder value by achieving an
As a responsible corporate citizen Bank’s core business. It is not an ad hoc appropriate trade-off between risk and
and in preserving our reputation at all exercise but is a key element of the return. The details of the approach are
times, the Bank has a written a Code Bank’s strategy and is implemented in explained in detail in the risk report.
of Conduct that, inter alia, includes the interest of all its stakeholders. In
provisions relating to anti-corruption. order to meet all social obligations, the The Board Sustainability Sub-committee,
Having imbued these principles into Bank continues to consciously manage Management Committee, Sustainability
our Code of Conduct, it is a business the impacts of its operations and thereby Manager and Sustainability Wardens
imperative. These provisions have been contributing towards a sustainable drive sustainability of the Bank. The
explained to all staff and are reinforced future. The Bank is open, transparent and Board Sustainability Sub-committee
through continuous review and updates accountable in its sustainability initiatives is responsible for developing strategies
and monitored throughout all business as well as reporting. in line with the core business strategies.
operations. We are proud of our The Management Committee which is
unblemished track record which supports Our CSR strategy which is described in led by Senior Management focuses
our firm resolve to make our operations detail in the report has been revolving on all economic, social and environmental
sustainable into the future. around the stakeholders of the Bank aspects, while overseeing and monitoring
towards the economic prosperity of the entire sustainability process of
the entire nation. It is amalgamated the Bank.
What Creates Value with the core business strategies and
implemented for the best interest of the We are governed by the regulatory
(Healthy Relationships) stakeholders to meet the sustainability directions issued by the Central Bank
Bank’s Approach to Sustainability parameters set below and explained of Sri Lanka (CBSL), the Colombo
A sustainable strategy is the key for the in detail under the stakeholder Stock Exchange (CSE) and industry
long-term viability of any organisation. engagement: codes of best practices, hence ensuring
responsible banking. Certain key
1. Sustainable value creation
Seylan Bank engages with its practices/guidelines are listed below:
2. Service beyond banking
stakeholders on a continuous basis,
Internal Policies for Regulatory Directions and
in order to understand their diverse 3. Recognise human capital Responsible Banking Voluntary Code of Practice
needs and expectations. This provides Adopted by the Bank for
4. Connecting with communities Responsible Banking
insights to its day-to-day operations and
5. Long-Lasting ethical relationship
decision-making processes and in turn zz Staff Code of zz Know your
helps the Bank to deliver value to its 6. Minimising our impact on the Conduct customer policy
stakeholders. environment. zz Information zz Anti-Money
Security Policy laundering policy
The Bank requires the continuous zz Credit Policy zz Customer Charter
Governance, Risk Management
support of its key stakeholders – zz Recovery Policy zz Misleading
and Sustainability Stewardship
investors, customers, employees, and Unethical
suppliers and business partners, Committed to uphold the highest Advertisements
community and the environment. standards of business integrity and zz Treasury zz Display of interest
The Bank benefits from their expertise, professional ethics on all scores, Seylan Investment rates, exchange rates
corporate governance framework Policy and service charges
advice and constructive criticism and
believe that they, in turn, benefit from rewards our stakeholders with a zz Asset and zz Inadequate/Incorrect
greater creation of value, year on Liability Policy Disclosures/press
their relationships with the Bank. In this
year. Sustainability is one of our core statements
light, the Bank has an important role
determinants of the core banking zz Sustainability zz Code of best
to play in allocating financial resources Policy practices on
responsibly and efficiently to activities business which works around maximising
corporate governance
that will generate growth, productivity our shareholders’ wealth in a sustainable issued jointly by The
and support economic transformation manner and safeguarding the rights Institute of Chartered
in its country’s operation. of all our stakeholders, as paramount. Accountants of
Sri Lanka and the SEC

Seylan Bank plays a significant role With all our activities, the Bank’s zz Integrated Risk zz Approval of CBSL
sustainability is also governed by Management for the authority to
in demonstrating transparency in its
our corporate ethics and values. Our Policy accept deposits and
commitment to environmental and social do other banking
practices. Keeping true to its tagline, governance framework is set out in
functions
‘The Bank with a Heart’, Seylan Bank detail in the ‘Corporate Governance’
zz Whistle zz Accounting
wishes the financial well-being of all its segment of this Annual Report.
Blowing Policy Standards –
stakeholders. In delivering this, the Bank SLFRS/LKAS
ensures exemplary governance, robust Risk is an integral aspect of the banking zz Related Party
risk management, efficiently and ethically business and the Bank consistently aims Transactions
driven business operations. towards delivering superior long-term Policy

90 OUR VALUE CREATION MODEL Seylan Bank PLC | Annual Report 2016
Stakeholder Engagement in return have the ability to affect the stakeholder engagement policy clearly
A stakeholder is an individual or a group day-to-day operations of the Bank. defines responsibility and approaches
that has an interest in the Bank and Seylan Bank strives to understand in handling stakeholder engagement.
who can either affect or be affected by what matters to its key stakeholders, We are responsible for coordinating
the activities of the Bank. Stakeholders to build trust and to create value for our engagement effectively with all the
can be internal or external. Internal all its stakeholders in the long-term. stakeholders.
stakeholders are people whose interest
in the Bank comes through a direct Engaging with stakeholders on a The Bank considers stakeholder
relationship, such as employees. External day-to-day basis and maintaining a feedback a critical criterion for the
stakeholders are those who do not healthy relationship, is imperative for the future enhancement of its sustainability
directly work with the Bank but are long-term sustainability of the business. reporting initiatives. As such, an
affected by the actions and outcomes Investor/Stakeholder Feedback forms
of the Bank’s operations. We are committed to developing and are attached to this Report and serve
maintaining appropriate relationships as a formal feedback mechanism, in
While stakeholders are significantly with our stakeholders, across all addition to the continuous stakeholder
affected by the Bank’s operations, they business units and functions. Our engagement process.

Stakeholder Key Topics and Concerns Raised How the Bank Responded to Method of Engagement Frequency of Engagement
Such Topics and Concerns

zz Financial performance of the zz Manage the business zz Annual reports Annually

Bank and business growth effectively and efficiently zz Interim Financial Statements Quarterly
to deliver sustainable
zz Sustainable growth
Investors wealth zz Annual General Meeting Annually
zz Liquidity Management
zz Implement effective risk zz Extraordinary General Meetings As and when required
zz Governance and risk management policies, and zz Investor presentation As and when required
management framework adequate internal controls
zz Media releases As and when required
zz Business overview, business zz Protect and facilitate
strategy and challenges. stakeholder rights and
zz Announcements submitted to the As and when required
ensure fairness and Colombo Stock Exchange
zz Asset quality of the Bank.
transparency zz Face-to-face discussions As and when required
zz Behaviour of key economic
indicators such as interest
zz Ensure regulatory zz Bank website Regularly
rates, exchange rates, etc. compliance and
responsible banking
zz More details on individual
engagement activities
are given under Investor
Relations

zz Product Innovation zz Opinions and concerns of zz Banking Centres Regularly

customers are gathered
zz Make banking convenient zz ATMs Regularly
through various forms of
and flexible
engagement zz Call centres Regularly
Customers
zz Level of customer service
zz Bank’s Call Centre Unit zz Student saving centres Regularly
zz Availability of branches, promptly attending to zz eBanking Regularly
ATMs customer enquiries and
concerns
zz Bank website Regularly
zz Product pricing (interest
rates and fees and charges zz The Bank conducts
zz Customer satisfaction surveys Annually
zz Service quality annual customer surveys zz Customer targeted workshops As and when required
to obtain feedback on
zz Customer complaints As and when required
satisfaction levels and
improvements on products zz Social media channels Regularly
and services
zz Make banking convenient
and flexible by
continuously expanding
branches
zz Delivering superior
customer services with
constant value additions

Seylan Bank PLC | Annual Report 2016 OUR VALUE CREATION MODEL 91
 Stakeholder Key Topics and Concerns Raised How the Bank Responded to Method of Engagement Frequency of Engagement
Such Topics and Concerns

zz Staff welfare measures zz Provide necessary zz Staff meetings Monthly

zz Remuneration training and development zz Performance review meetings Monthly
zz Retain existing talent
zz Effective performance zz Discussion with unions Regularly
Employees appraisal system
of the Bank zz ‘Seylan Banker’ newsletter Quarterly
zz Maintain work-life balance
zz Maintain equal
opportunity, human rights
zz Intranet/ circulars Regularly
zz Motivation and recognition and conducive labour zz Internal circulars Regularly
relations practices zz Latest updates through As and when required
zz Measurements are staff email
undertaken to bring zz Staff activities such as As and when required
about work-life balance get-togethers, sports competitions

zz Fair pricing zz Comprehensive and zz Onsite service representatives Regularly

zz Quality of the suppliers transparent procurement zz Visits and meetings As and when required
goods and services policy with adequate
controls
zz Official communication As and when required
Suppliers zz Operational efficiencies in (Letters, Calls etc.)
and Business the procurement process
zz Regular engagement with
suppliers to identify and
zz Tender invitations As and when required
Partners
zz Transparency and equal resolve issues and build zz Suppliers registration Annually
opportunity in the selection long-lasting relationships
process of the suppliers

zz Investments on community zz Provide assistance for zz Bank’s delivery channels Regularly

zz Access to fair and affordable self-employment through zz Media releases As and when required
banking in rural areas micro financing
zz Sponsorship for As and when required
Community zz Enhance financial
zz Corporate responsibility community events
initiatives inclusion by inculcating
a banking habit
zz Donations As and when required
zz Micro financing and zz Seminars/workshops As and when required
development of SME
zz Support needy children
in education and other zz Bank website Regularly
zz Financial inclusion activities zz Social media Regularly
zz Contribute towards zz ‘Seylan Pehesara’ library project Ongoing
a healthy nation
zz Other contributions
and sponsorships

zz Waste/Energy Management zz Promote green compliance zz CSR activities Regularly

zz Greenhouse gas emissions zz Educate and create zz Awareness workshops Regularly
awareness among staff zz Eco-friendly lending Regularly
Environment members
zz E-based solutions Regularly
zz Reduce Carbon footprints

Stakeholder Engagement Process

Report Define Strategic Purpose and Scope Identification
We at Seylan Bank, engage with many
- Report to Stakeholders - Define Stakeholder Purpose - Identify Stakeholder Groups
stakeholders who have different - Review and Scope - Create Stakeholder List
aspirations and our stakeholder
engagement process is the key
mechanism to identify our main
stakeholders. A comprehensive Monitor Assessment
engagement process is in place which - Monitor
Stakeholder - Conduct Stakeholder
addresses economic, social and Weaknesses and Engagement Assessment
Strengthens Process - Prioritise Stakeholders
environmental issues while distributing for Engagement
responsibility across the Bank.

Evaluation Engagement Develop Strategy

- Evaluate Effectiveness - Identify Engagement Activities - Develop Detailed
and Results - Execute Communication Plan Engagement Plan

92 OUR VALUE CREATION MODEL Seylan Bank PLC | Annual Report 2016
Materiality social impacts that would substantively zz The impacts arising from the activities
influence the assessment and decisions of customers and other contributors to
In the preparation and compilation
of its stakeholders. our supply chain.
of this Report, materiality proved to
be a challenge. zz The degree of value that the Bank can
The basis of our assessment has
deliver in relation to each aspect.
been the degree of significance to our
Materiality Assessment stakeholders and to the Bank to operate
The Bank follows a systematic process
Our goal for this report is to address ethically and as a responsible corporate
to determine materiality of issues to be
the issues our stakeholders such as citizen as detailed below:
reported.
investors, customers, employees, zz Degree of influence the Bank has
suppliers community, environment and
over each aspect. Assessment of
business partners, care about most and
to inform anyone looking for information zz The extent to which the resources in Materiality for Reporting
about our progress as a responsible Bank question are used in Bank’s operations. The table below depicts the
in a clear, comprehensive and accessible zz The extent of various stakeholder significant levels for each economic,
way. Issues that we consider material interactions and their levels of environmental and social aspect from
are those that have a direct or indirect expectations. the point of view of the Bank and its
impact on our stakeholders’ decisions to stakeholders. This applies the principles
zz The degree of responsibility that
do business with us. In this context, the of stakeholder inclusiveness, in the
should be demonstrated by a
sustainability report reflect the Bank’s context of sustainability, materiality and
responsible corporate citizen.
significant economic, environmental and completeness.

Aspect Materiality Relevant Indicators Aspect Boundary

(GRI)

Internal External
Reporting/Not

Suppliers and
Stakeholders

Environment
Overall Bank

Employees

Investors

Customers

Community
Associated

Reporting

Business
Partners
1. Economic Performance H H  G4 – EC1, EC3, EC4 
Economic

2. Market Presence H H  G4 – EC5-EC6 

3. Indirect Economic Impact M H  G4 – EC9  

4. Procurement Practices M M  G4 – EC9 

5. Customer Health and Safety M M  G4 – PR1:PR2 

Social: Product Responsibility

6. Product and Service Labelling L L * –

7. Marketing Communications H H  G4 – PR6:PR7 

8. Customer Privacy H H  G4 – PR8 

9. Compliance H H  G4 – PR9 

10. Product Portfolio H L  G4 – FS1:FS8 

11. Audit M M  G4 – FS9 

12. Active Ownership M M  G4 – FS12 

13. Employment H H  G4 – LA1, LA3 

14. Labour/Management Relations  G4 – LA4 

Social: Labour Practices

H H
and Decent Work

15. Occupational Health and Safety M M  G4 – LA6 

16. Training and Education H H  G4 – LA9:LA11 

17. Diversity and Equal Opportunity H H  G4 – LA12 

18. Equal Remuneration for Men and Women H H  G4 – LA13 

19. Supplier Assessment for Labour Practices L L * –

20. Labour Practices Grievance Mechanisms H H  G4-LA16 

Seylan Bank PLC | Annual Report 2016 OUR VALUE CREATION MODEL 93
 Aspect Materiality Relevant Indicators Aspect Boundary
(GRI)

Internal External

Reporting/Not

Suppliers and
Stakeholders

Environment
Overall Bank

Employees

Investors

Customers

Community
Associated

Reporting

Business
Partners
21. Investment H H  G4 – HR2 
22. Non-Discrimination H H  G4 – HR3 
23. Freedom of Association and Collective Bargaining H H  G4 – HR4 
Social: Human Rights

24. Child Labour H H  G4 – HR5 

25. Forced or Compulsory Labour M M  G4 – HR6 
26. Security Practices M M  G4 – HR7 
27. Indigenous Rights L L * –

28. Assessment – Human Rights L L * –

29. Supplier Human Rights Assessment L L * –

30. Human Rights Grievance Mechanisms H H  G4 – HR12 

31. Local Communities M H  G4 – SO1:SO2 

32. Anti-Corruption H H  G4 – SO4, SO5 
Social: Society

33. Public Policy L L * –

34. Anti-Competitive Behaviour M M  G4 – SO7 

35. Compliance H H  G4 – SO8 
36. Supplier Assessment for Impacts on Society L L * –

37. Grievances Mechanisms for Impacts on Society L L * –

38. Materials L L * –

39. Energy M M  G4 – EN3, EN6 

40. Water M M  G4 – EN8 
41. Biodiversity L L * –

42. Emissions M M  G4 – EN19 

Environment

43. Effluents and Waste L H  G4 – EN23 

44. Products and Services M H  G4 – EN27 
45. Compliance M M  G4 – EN29 
46. Transport M M  G4 – EN30 
47. Overall M M  G4 – EN31 
48. Supplier Environment Assessment L L * –

49. Environmental Grievance Mechanism M M  G4 – EN34 

* Not assessed for the reporting purpose due to remote and insignificant impact to both Bank and its stakeholders. H High M Moderate L Low

Materiality Matrix

10
Significance to the Bank

H Fully
Reported

1, 2, 7, 8, 9, 13, 14, 16, 17, 18, 20, 21, 22, 23, 24, 30, 32, 35 M

4, 5, 11, 12, 15, 25, 26, 34, 39, 40, 42, 45, 46, 47, 49 Partially
Reported
L
3, 31, 44

6, 19, 27, 28, 29, 33, 36, 37, 38, 41, 48 L M H

Not
43 Significance to the Reported
L Low M Moderate H High Associated Stakeholders Group

94 OUR VALUE CREATION MODEL Seylan Bank PLC | Annual Report 2016
 OUR VALUE
CREATION
STORY
095-154
The Seylan Bank is committed to delivering economic value to all
its stakeholders. As such, our core activities are structured and
managed to create economic prosperity through value addition.
External capital supplements financial capital and indeed drives the
generation of financial capital. They are thus integral to each other.
External capital resonates from within our stakeholders, unlike
financial capital which has to be derived. It is the driving force for
the generation of internal capital.

096 098 116

THE CONTEXT FINANCIAL INFORMED INVESTORS
VALUE CREATION

121 130 140

SATISFIED CUSTOMERS MOTIVATED EMPLOYEES TRUSTED PARTNERS

144
RESPONSIBLE CORPORATE CITIZENSHIP
 Outlook for Sri Lanka in 2017 is
THE CONTEXT

somewhat promising. Monetary

policy reforms, growth in tourism,
SME industries, agriculture are
expected to uplift the economy.

The Global Economy political transitions, US interest rate hikes

and protectionist policies. Clarity on the
The global economy suffered another
possible impact of the new US policies is
lackluster year in 2016 with global
still awaited by the US policymakers. The
economic growth remaining soft
Indian economy was expected to slow
for several reasons which were
down due to the currency reforms.
region-specific as well, like structural
adjustments and recurring natural
Global inflation edged upwards in
disasters, amongst others. The key
November recording the highest inflation
dampening factors to global growth
rate in more than two years, primarily due
were the geopolitical events of Brexit,
to increase in commodities prices.
the ongoing civil war in Syria, the change
in the United States, as well as interest
The dollar and the euro remain broadly
rate hikes by the US Federal Reserve,
unchanged in real effective terms.
the forthcoming elections in France and
However, the two main currencies
Germany and the projected slowdown in
which recorded the largest movements
the Chinese economy.
across currencies were the depreciation
of the pound following Brexit and the
Global GDP growth was at 3.1% with
appreciation of the Japanese yen.
only a modest improvement expected
Currencies of commodity exporters have
in 2017. The key challenges to global
generally appreciated with the recovery
growth in 2017 were forecasted to be
in commodity prices.
rising interest rates and inflation and
upward pressure for the US$ from the
new administration’s tax reforms, fiscal Future Outlook
easing, investments in infrastructure etc. According to the Global Economic
Outlook, the World economy’s slow
Key growth drivers in Asia are expected growth momentum will continue due to
to be high productivity especially in China uncertainty in policies, volatile markets
and other emerging economies. The key and geopolitical tensions. Accelerating
challenges for Asian economies would be inflation and a soaring US Dollar as the
geopolitical issues, territorial disputes, Federal Reserve raises interest rates,

96 OUR VALUE CREATION STORY Seylan Bank PLC | Annual Report 2016
are also risks to the economic balance. zz More focus on mid-term and long-term Proactive measures taken by the
The projected increase in global growth Strategies and structural developments. industry progressively over the last
in 2017 is driven primarily by emerging three years to recover NPA, to improve
zz Exports are expected to strengthen
market and developing economies, credit risk management and enhance the
with the improvement of bilateral
indicating the gradual normalisation quality of loan assets. As a result Gross
trade relations.
of macroeconomic conditions in Non-Performing Advances Ratio has
several countries. zz Regaining of GSP+ would strengthen improved as at November end 2016.
the earnings from exports.
zz Sri Lankan plans to create a knowledge Regulatory Capital remained at a healthy
The Sri Lankan Economy based social market economy and an level although overall, capital funds
Gross Domestic Product (GDP) resulted export oriented economy. of the banking sector lagged behind
in a positive growth rate of 4.1% in the the increase in risk weighted assets in
zz Several technology based
third quarter 2016. The industrial sector 2016, with the Core Capital Adequacy
developments specialising in various
recorded an increase while there was a Ratio (CAR) and Total Capital Adequacy
sectors to be envisaged island-wide.
negative growth in the agricultural sector. Ratio still being comfortably above the
mandatory levels of 5% and 10%.
Overall, inflation has been contained The Banking Industry
within mid-single digit levels and core Future Outlook
The banking sector plays a pivotal
inflation continued its upward trend in
role in the development of the In its road map published recently,
2016, reflecting the firming up of demand
country’s economy through financial the Central Bank has identified the
conditions in the economy and the
intermediation. Through a network of key elements which will have an impact
revisions made to the tax structure in the
25 licensed commercial banks for the banking industry in the future.
latter part of the year.
(13 local banks and 12 foreign banks) These are premised almost entirely on
and 7 licensed specialised banks, it strengthening the regulatory framework
The Central Bank’s policy rates –
channels public deposits to investments in line with international best regulatory
Standing Deposit Facility Rate (SDFR)
and consumption. The banking sector practice as espoused by the Basel
and the Standing Lending Facility
continued to enhance efficiency of Committee and, more profoundly,
Rate (SLFR) – stood at 7% and 8.50%
financial intermediation by expanding to ensure a robust and resilient
respectively by the end of November
its outreach via conventional as well banking industry.
2016. Market interest rates were on
as alternative distribution channels,
an upward trend compared to last
development of new products and The proposed enhancement of minimum
year mainly due to monetary tightening
services, streamlining internal processes regulatory capital requirement is
measures.
and improving service standards. expected to strengthen the financial
soundness in the sector.
Credit to the private sector increased
Profit before Tax of the banking industry
during the first ten months in 2016,
increased in 2016 compared to last year. Banking sector will continue to expand
compared to the same period of 2015.
on traditional access points whilst
Earnings from tourism sector recorded
Profitability ratios such as Return on placing more emphasis on digital based
a significant growth compared to the
Assets (ROA) and Return on Equity (ROE) e-Initiatives.
same period last year. The tourist arrivals
have improved marginally during the first
to the country in 2016 crossed two
ten months of 2016. However, the Net
million milestone. Workers’ remittances
interest margin deteriorated this year.

4.1
increased marginally for the first eleven
%
months of the year.
Total assets of the banking sector grew
moderately as at end November 2016.
Future Outlook Loans and advances continued to be
Country to focus on the: the predominant asset class of banking Sri Lanka’s Gross
sector assets.
zz A flexible inflation targeting (FIT) Domestic Product
framework which will strengthen
monetary policy.
Total deposits grew YOY as at end (GDP) grew at a rate
November 2016 with interest bearing
zz An enhanced monetary policy term deposits accounting for the largest of 4.1% in the third
framework which focuses on increase due to higher interest rates
quarter 2016. The
stabilising inflation in mid-single offered and competitive pricing by banks.
digits over the medium-term. This impacted the industry’s non-interest industrial sector
bearing and low cost CASA deposits ratio
zz Growth in certain sectors such
which declined moderately this year.
recorded an increase.
as Tourism, SME industries,
Agriculture etc.

Seylan Bank PLC | Annual Report 2016 OUR VALUE CREATION STORY > THE CONTEXT 97
 Total assets increased by
FINANCIAL VALUE CREATION

20% to Rs. 356 Bn. which was

higher than last year’s growth
rate of 18.9% and indeed one
of the highest asset growth rates
ever achieved.

Financial Review Statement of Financial Position

as at end December 2016
Growth
Highlights: Total assets increased by 20.14% to
Rs. 356 Bn. which was higher than last
zz Maintained the growth year’s growth rate of 18.86% and indeed
momentum in profits to surpass one of the highest asset growth rates
last year’s highest ever with a ever achieved. This enabled the Bank to
profit after tax of Rs. 4.01 Bn. further consolidate its position as one
during the year, the new highest of the systemically important domestic
ever in the Bank’s 29 years history commercial banks in the country’s
financial system.
zz Total Assets base reached
Rs. 356 Bn., a growth of 20.14%
over 2015 Total Assets & Assets Growth
2016 (Rs. Bn.) 2016 (%)
zz Successfully mobilised
Rs. 48.9 Bn. of deposits, 356.01 20.14
a growth of 21.79%
400 25
zz Net advances grew by
Rs. 42.9 Bn., a growth of 22.22% 320 20

zz Achieved regulatory Capital

240 15
Adequacy Ratio of 13.18% which
is above the statutory minimum
160 10
of 10%

zz Strong liquidity ratio of 22.68% 80 5

(DBU) as at 31st December 2016

0 0
’12 ’13 ’14 ’15 ’16
zz Profit per employee increased to
Rs. 1.27 Mn. in 2016. Total Assets Assets Growth

98 OUR VALUE CREATION STORY Seylan Bank PLC | Annual Report 2016
This growth was financed primarily of 10.73% over 2015. Collective Fee and Commission Income
by a commensurate growth in deposits impairment provision declined from The growth momentum in fee and
of 21.79% as against 20.76% in 2015. Rs. 3,718 Mn. to Rs. 3,632 Mn. during commission income was maintained in
The distribution of assets was largely the year under review, reflecting a 2016, at Rs. 3,223 Mn. In 2016, it reflected
in credit which grew by 22.22%. reduction of 2.32%. an increase of 14.66% over the previous
year. This was mainly due to enhanced
Advances Income Statement/ core banking operations and represented
A significant growth momentum in Statement of Profit or Loss 18.15% of total operating income,
credit was experienced during the year, and Comprehensive Income compared to 17.41% recorded in 2015.
resulting in growth of 22.22%. Term
Income
loans grew by 37.18% while overdrafts Net Trading Income, Net Gain
and housing loans also grew by 17.70% During the year, total income increased on Financial Investments and
and 13.17% respectively. by 33.25% to Rs. 38.09 Bn. from Other Operating Income
Rs. 28.58 Bn. in 2015. However, the
Net Trading Income, Net Gain on
Consolidation of the pawning portfolio increase in interest expense by 63.96%
Investments and Other Operating
continued into 2016 with a 7.02% growth. and the declining trend in the net interest
Income accounted for 7.95% of total
Foreign currency financing grew by margin since 2014, from 4.42% in 2015
operating income in 2016 against
10.98%, the major component of which to 4.19% in 2016, due to pressure on
10.06% in 2015, due to capital losses
was in United States Dollar (US$), interest margins impacted net interest
incurred in 2016.
recording a growth of 13.18%. income which grew only by 12.03%. Other
operating income increased by 293.92%
During the year 2016 net capital losses
during the year. It was also noted that the
Deposits recorded in the Income Statement was
non-interest income growth supported
Deposit growth of 21.79% in 2016 Rs. 169 Mn. as against the net capital
the growth in the overall income. An
surpassed our 2015 growth rate of gains of Rs. 317 Mn. recorded in 2015
increase of 293.92% in other operating
20.76%. The deposit campaigns on Government Securities portfolio.
income reported during the year. The
conducted across the island were very growth momentum in Fee and Commission
fruitful which helped to increase the Other operating income in 2016
income was maintained, which grew by
total deposit base to Rs. 273.46 Bn. in recorded a significant increase of
14.66%, albeit lower than the growth rate
a very competitive market. The Bank’s 293.92% over 2015 mainly due to
of 19.75% recorded in 2015.
multiple range of deposit products recovery of loans written off earlier and
with diverse value added features, lower foreign exchange revaluation losses
Net Interest Income (NII) compared to 2015.
targeting a wide spectrum of customer
segments from infants to senior citizens, Total Revenue and
contributed to this growth. Net Interest Income Total Operating Income
2016 (Rs. Bn.) 2016 (Rs. Bn.) Total operating income was Rs. 17,762 Mn.
In our deposit drive in 2016, our low in 2016 as compared to Rs. 16,146 Mn., a
cost CASA deposits accounted for 38.09 13.25 growth of 10% over the last year. NII, net
15.24% (Rs. 7.459 Bn.) of the deposits fee and commission and other operating
40 15
mobilised during the year. The CASA to income contributed for the said increase
total deposits ratio stood at 32.52% in in total operating income.
32 12
2016 despite the shift witnessed from
low cost deposits towards the higher Once the capital losses on Government
24 9
yielding fixed deposits during the year Securities are excluded, total operating
due to the widening of the difference income reflects Rs. 17,931 Mn. as against
16 6
between interest rates on savings Rs. 15,829 Mn. reported in 2015 with a
deposits and term deposits. growth of 13.28% over the year.
8 3

Impaired Loan and

22.2
0 0
’12 ’13 ’14 ’15 ’16
Provision for Impairment %

Impaired loans increased from Total Revenue NII

Rs. 11.2 Bn. to Rs. 12.5 Bn. and the

impairment provision from Rs. 5,738 Mn.
in 2015 to Rs. 6,053 Mn. in 2016. The
The high interest rates on deposits A significant growth
and other borrowings in 2016 saw an
increase in the impairment losses
increase in interest expense by as much of 22.2% in Advances
charged to the P&L. The individual
impairment allowance increased from
as 63.96% against only 0.68% increase was experienced
in 2015, The contribution of NII to total
Rs. 2,020 Mn. in 2015 to Rs. 2,421 Mn.
operating income in 2016 was, higher at during the year.
with a net impairment charge for 2016
74.58% as against 73.24% in 2015.
of Rs. 931.59 Mn. recording an increase

Seylan Bank PLC | Annual Report 2016 OUR VALUE CREATION STORY > FINANCIAL VALUE CREATION 99
 Operating Income, Operating Expenses and Cost to Income Ratio Return on Equity and Assets
2016 (Rs. Bn.) 2016 (Rs. Bn.) 2016 (%) 2016 (%) 2016 (%)

17.76 9.73 62.35 15.18 1.23

20 100 20 2.0

16 80 16 1.6

12 60 12 1.2

8 40 8 0.8

4 20 4 0.4

0 0 0 0
’12 ’13 ’14 ’15 ’16 ’12 ’13 ’14 ’15 ’16

Operating Income Operating Expenses Cost to Income Ratio ROE ROA

Cost to income ratio calculated after considering VAT on financial services.

Operating Expenses Taxation Accordingly, Return on Assets (ROA)

Operating expenses increased The effective tax rate reduced to 30% in stood at 1.23% while Return on Equity
from Rs. 8,624.57 Mn. in 2015 to 2016 against 34% in 2015. Total income (ROE) reported at 15.18%.
Rs. 9,725.15 Mn. in 2016 by 12.76%. tax provision declined by 11.44% for the
Premises equipment and establishment year to Rs. 1,723 Mn. from Rs. 1,946 Mn. Capital
expenses increased by 20.47% against in 2015. The Bank recorded a net deferred The Bank continued to be well
6.36% in 2015, as a result of branch tax liability of Rs. 11.87 Mn. in 2016 against capitalised, with a core capital adequacy
upgrading, refurbishments, relocations Rs. 336.10 Mn. at the end of 2015. The tax ratio and a total capital adequacy ratio of
etc. Other overhead expenses increased effects of temporary differences that led 10.74% and 13.18% respectively in 2016.
by 11.93% over the last year and stood to a significant reduction in deferred tax Internally-generated capital in the form
at Rs. 2,910.67 Mn. in 2016. Further liability are presented in Note 33 to the of retained earnings increased by 26.29%
personnel expenses increased by 9.92% Financial Statements. in 2016, while there was a decline in other
from Rs. 4,194 Mn. to Rs. 4,610 Mn. with
reserves by 18.46% mainly due to the
the increase in staff benefits in 2016. Profitability mark to market loss on the available-for-
The net profit after tax recorded a growth sale portfolio.
of 4.69% and stood at Rs. 4,010.45 Mn.
while the Group net profit after tax Shareholders’ Funds
recorded a year on year growth of 3.83%
Shareholders’ funds increased by
to Rs. 4,034.89 Mn. for the year ended
Rs. 2,716.6 Mn. or by 10.84% in 2016.
31st December 2016.
Accordingly, the net assets value per
share of the Bank improved from
Profit Before and After Income Tax
Rs. 72.63 in 2015 to Rs. 80.51 in 2016,
2016 (Rs. Mn.) 2016 (Rs. Mn.)
while the net assets value per share of
5,733.72 4,010.45 the Group improved from Rs. 76.21 in
2015 to Rs. 84.13 in 2016.
6,000

4,800

3,600

2,400
4.69 %

1,200 A 4.69% growth of

0
profit after tax was
’12 ’13 ’14 ’15 ’16
recorded in 2016.
Profit Before Income Tax Profit After Income Tax

100 OUR VALUE CREATION STORY > FINANCIAL VALUE CREATION Seylan Bank PLC | Annual Report 2016
 Assessment of Economic Capital
Earnings per Share and Total Capital Adequacy
Whilst ensuring compliance with the
Net Assets Value per Share and Liquidity Ratio
% 2016 (%) 2016 (%)
mandatory regulatory capital adequacy
2016 (Rs.) 2016 (Rs.)
ratios, all banks are encouraged to make
11.63 80.51 13.18 22.68 a continuous, internal assessment of
their economic capital needs, relative
12 120 30
to their perceived risk exposures and
10 100
against their projected expansion. This
24
entails a continuous assessment of our
8 80 capital levels against all risk exposures,
18
including those that are not captured
6 60
under the regulatory capital standard,
12
our expansion plans and the resilience
4 40
of our capital levels to withstand internal
6
2 20 or external shocks under stressed
conditions.
0 0 0
’12 ’13 ’14 ’15 ’16 ’12 ’13 ’14 ’15 ’16

Earnings Net Assets Value Total Capital Liquidity

Liquidity – Adequate and in
per Share per Share Adequacy Ratio Ratio Excess of Mandatory Limits
Liquid assets of the Bank represented
The Bank proposes a final dividend of Organic Growth of Capital 29.32% of total assets and 24.83% of
Rs. 3.25 per share (inclusive of a scrip deposits and other liabilities, reflecting
At 13.18% our total regulatory capital
dividend of Rs. 2.25 per share) compared a healthy net credit to deposit ratio of
ratio is well in excess of the mandatory
to the cash dividend of Rs 2.75 per share 86.31% as at 31st December 2016. Liquid
minimum of 10%. More importantly the
in 2015. assets to short-term current and savings
quality of capital is strong and comprises
deposits stood at approximately 99%.
primarily of Tier I common equity or
Liquidity has been well-managed much
core capital as against the mandated
Our Financial Soundness above the statutory limit of 20% of total
minimum of 5%. It is also far in excess
Indicators (FSIs) assets.
of the Basel III CET 1 ratio of 7%. The
The key FSIs which illustrate the financial organic growth of capital represented in
soundness of a banking institution Liquidity in the Domestic Banking Unit
our Core Capital Ratio is the result of the
and which are benchmarked against stood at 22.68% and in the Foreign
Bank’s prudent profit retention policy.
international best regulatory practice Currency Banking Unit at 26.24% against
espoused by the Basel Committee are, Statutory Reserve Fund the statutory minimum of 20% for
in the order of importance: both units. While the liquid assets ratio
Statutory Reserve Fund, which is a
zz Capital Strength/Adequacy measures the stock of liquid assets held
prudential regulatory capital reserve, is
by the Bank to cover its liabilities as they
zz Asset Quality which denotes established by a mandatory transfer of
fall due, the flow of liquid assets too is
the productivity of the Bank’s 5% of profit after tax each year to cover
closely monitored and managed by the
earning assets potential losses in the business. The
Assets and Liabilities Committee (ALCO)
zz Liquidity – which denotes Reserve Fund stood at Rs. 1.38 Bn.
of the Bank, which identifies funding
the Bank’s ability to meet its as at end 2016.
risks through a maturity mismatch
day-to-day obligations analysis of its domestic and foreign
Capital Growth
zz Profitability and earnings currency assets and liabilities and adopts
The growth trend in capital since the appropriate strategies to fund these
Bank was first recapitalised in 2009, gaps at the least cost to the Bank. The
Capital Adequacy – Strong at an annual average growth rate of liquidity ratios, as enumerated in the
over 36% is significant and has helped Risk Management Report, are closely
The bedrock of any financial institution,
the Bank to be compliant with the monitored by the ALCO to ensure the
particularly of a deposit taking bank, is
mandatory capital ratios and to be effective management of the Bank’s
the adequacy and strength of its capital.
comfortably above the regulatory liquidity position.
This is more because banks are highly
minimum since then. This has given the
leveraged institutions which function
Bank the operational flexibility to grow
largely on borrowed funds with minimum
its asset book productively. We are also
levels of capital. In this regard, we are
happy to note that our capital funds
proud to be one of the strongly capitalised
which aggregates Rs. 27.77 Bn., is
banks by local and international regulatory
already in excess of the proposed
standards, despite the increasing trend in
increase in minimum capital funds
risk-weighted assets commensurate with
for domestic banks.
the growth in credit.

Seylan Bank PLC | Annual Report 2016 OUR VALUE CREATION STORY > FINANCIAL VALUE CREATION 101
 The profit after tax for the Bank
recorded a growth of 4.69% and
stood at Rs. 4,010 Mn. while the
Group net profit after tax recorded
a year on year growth of 3.83% to
Rs. 4,035 Mn.
Profitability Sustainable – Highest Cost to Income/Efficiency Ratio Assets – Positive Growth
Achieved in Bank’s History The cost to income ratio increased to Trend Continued
The profit after tax for the Bank recorded 62.35% in 2016 compared to 61.20% in The positive growth trend in total assets
a growth of 4.69% and stood at Rs. 2015, due to an increase in staff salary continued apace at 20.14% in 2016,
4,010.45 Mn. while the Group profit after costs and additional investment on which was higher than the 18.86% growth
tax recorded a year on year growth 3.83% branch relocations and refurbishments in 2015. The growth thrust in 2016 was
to Rs. 4,034.89 Mn. for the year ended (cost to income ratio excluding VAT primarily in loans and advances.
31st December 2016. and NBT in 2016 stood at 54.75%, in
comparison with 53.41% in 2015). Deposits – Growth Momentum
The Bank’s pre-tax profits recorded a
marginal decline of 0.74% to reach Deposits and Deposits Growth
Key Performance Indicators (KPIs)
Rs. 5,733.72 Mn. compared to 2016 (Rs. Bn.) 2016 (%)
Rs. 5,776.71 Mn. in 2015, while Group Growth Trend in Assets, Deposits
pre-tax profits also declined by 0.88% and Advances – Market Share of 273.46 21.79
to Rs. 5,771.24 Mn. 4% Maintained
300 25
Interest rate and market risks inherent in
Return on Assets (ROA) stood at 1.23%
our assets and liabilities were managed 240 20
and Return on Equity (ROE) at 15.18%.
within prudent limits, while ensuring
that adequate liquidity and funding 180 15
sources were available to sustain the
growth of the Bank. The Assets and 120 10
Liabilities Committee strictly monitored
the mismatches in the Balance Sheet
60 5
and improved its structure and tenure
with appropriate deposit mobilising and
0 0
in measures and strategies in credit ’12 ’13 ’14 ’15 ’16

marketing.
Deposits Deposits Growth

2016 2015 Growth Deposits stood at Rs. 273.46 Bn. as

Rs. Mn. Rs. Mn. % at 31st December 2016, compared to
Rs. 224.53 Bn. at the end of 2015, which
Deposits 273,456 224,525 21.79
was a considerable improvement and
Net Loans and Advances 236,020 193,104 22.22 a growth of 21.79%. Deposits funded
Net Interest Income (NII) 13,247 11,825 12.03 76.81% of total assets in 2016. The
growth in low cost deposits was 9.16%
Net Fee, Commission and Other Income 4,515 4,321 4.49 and stood at Rs. 88,927 Mn. as at
Profit after Income Tax 4,010 3,831 4.69 31st December 2016. Low cost CASA

102 OUR VALUE CREATION STORY > FINANCIAL VALUE CREATION Seylan Bank PLC | Annual Report 2016
deposits accounted for 15.24% of ROA and ROE are considered to be
the net deposit growth for 2016 and better benchmarks of performance
accounted for 32.5% of total deposits. to be able to enhance the wealth
Total interest-bearing deposits of the Bank and consequently, the
increased to Rs. 251.81 Bn. in 2016 returns to stakeholders.
from Rs. 206.78 Bn. a year ago. Total
non-interest bearing deposits increased All businesses are concerned with the
to Rs. 21.65 Bn. in 2016 from Rs. 17.75 Bn. prudent allocation of capital, competitive
a year ago. pricing, operational efficiency and
service quality amongst others. Within
Loans and Advances – these considerations, ROA indicates the
Growth Momentum efficiency with which we allocate our
assets to maximise productivity and
Supported by the growth in deposits,
returns. The ROE signifies how efficiently
net loans and advances outpaced
shareholder capital is deployed in the
deposit growth to record a growth
business to maximise the return thereon.
of approximately 22.22% to
Rs. 236.020 Bn. as at 31st December
Our actual and estimated values
2016, which was marginally lower than
are indicated in the table below:
the growth of 24.61% in 2015. The lower
growth momentum in 2016 reflected the Year 2016 2015 2017
business climate in a very competitive Actual Actual Target

market for loans and deposits which

ROE (%) 15.18 15.62 > 15.5
prevailed and was reflected largely in
term loans (37.18%). Pawning advances ROA (%) 1.23 1.40 > 1.45
grew marginally. Credit growth was EPS (Rs.) 11.63 11.11 > 12.00
largely driven by the SME and corporate
Net Assets Value per Share (Rs.) 80.51 72.63 > 90.00
sector. We will continue to focus both
on increasing our market share in the
corporate sector, as well as increased Growth of the Business Volumes
business volumes through the branch The business volumes are to be increased
network. to meet proposed strategic plan growth
targets.
Net Advances and Our actual and estimated growth in
Net Advances Growth deposits and advances are indicated in
Rs. Bn. 2016 (Rs. Bn.) 2016 (%) the table below:
236.02 22.22 Year 2016 2015 2017
Actual Actual Target
250 25 Rs. Bn. Rs. Bn. Rs. Bn.

200 20 Total Deposits 273 225 >325

Total Advances 242 199 >290
150 15

Improvement of Processes
100 10
Further, the Bank is continuously
50 5 working on several strategic initiatives
to enhance the operational efficiency,
0 0
service quality and optimising returns to
’12 ’13 ’14 ’15 ’16
stakeholders as proposed in the strategic
Net Advances Net Advances Growth plan 2017 – 2020.

Project Responsibility

Future Outlook Digitalisation and Automation of Processes Head of Branches/Operations

Increase Shareholder Value Cost Optimisation Chief Financial Officer

Improving returns to its stakeholders is Service Quality Improvements Head of Branches/Operations

a crucial determinant of our continuing
strategic and operational focus.

Seylan Bank PLC | Annual Report 2016 OUR VALUE CREATION STORY > FINANCIAL VALUE CREATION 103
 Performance of Business Units

Branch Banking
Branch banking has been the major
source of the Bank’s business and it
covers a majority of our operations.
Our branch footprint spreads all over the
island with 166 Banking centres and
100 student savings centres, where we
serve all segments of the community.

Focus
Branch Banking is shifting focus
towards multichannel banking solutions
while expanding the traditional branch
network and addressing the needs and
providing solutions to both traditional
and eBanking customers, while offering
variety and convenience.

Key Strengths
zz Island-wide branch network, Strategies and Achievements
distribution of over 200 ATM machines
and introduced 6 CDM machines.
Strategy Achievement
zz Extensive product range covering
newborn to senior citizens and
Mobilise business
individual to large corporate. Opened 8 new branches and added 20 ATMs
volumes through
to the network.
zz Superior customer service with expansion
friendly staff (‘Service from the Heart’).

Enhance customer Seven branches were converted to 365 day banking

convenience centres (Millennium, Galle, Kiribathgoda, Matara, Panadura,
Future Outlook ` Wellawatta and Wennappuwa).

zz Continue in expanding our branch

Installed Cash Deposit Machines (CDM), and Intelligent
network in selected locations and Introduce and Cheque Deposit Systems.
re-modernising branch network enhance multichannel
banking solutions The new version of retail internet banking portal was
focusing on lean, automated and launched in mid 2016.
sales-oriented branch network as
the way forward.

zz The Bank will continue to add new

features, options and a widespread Performance Achieved in 2016
of payment options giving
customers a new experience in
Internet Banking and the security Deposits Advances
of two factor authentication for
certain types of transactions. 20% 27%
zz Increase investment in technology 104% 104%
based self-service channels
available for customers 24/7.

zz The Bank will also take into

consideration the level of 46% 22%
sophistication required in
digitalisation efforts to facilitate 107% 99%
the transactional banking. Profits
Year on year Achievement
Operating
Increase/(Decrease) of the Budget
Income

104 OUR VALUE CREATION STORY > FINANCIAL VALUE CREATION Seylan Bank PLC | Annual Report 2016
 Corporate and
Off-shore Banking
Corporate Banking division is made up
with Domestic Banking Unit (DBU) and
Foreign Currency Banking Unit (FCBU).

Focus
Strengthening and expanding
relationship with the Bank’s corporate
customers through customised service
with tailor-made products backed by
skillful relationship management while
growing corporate banking portfolio of
the Bank.

Key Strengths
zz Provide customised banking solutions
while offering a wide range of product
and service portfolio.
zz Experienced and skillful team. Strategies and Achievements

Strategy Achievement

Customised the services and product solutions to suit the

needs of the customers business.
Customer
centric offerings Strengthened the existing corporate relationships, and
penetrate the market to acquire profitable corporate
relationships.

Established new relationships and expand the clientele.

Finding new
Future Outlook business avenues
Focused on growing trade customers.
Strengthened the risk management initiatives.
zz Continue to maintain a healthy
level of credit quality while
achieving loan book growth
focusing on sectors such as
Construction, Logistics, Tourism,
Telecommunication, Healthcare,
Pharmaceuticals and BOI
approved ventures.
Performance Achieved in 2016
zz Establish relationship with large
corporate with special emphasis
on export-oriented companies, Deposits Advances
off-shore and participate in
syndicate loans. 36% 15%
zz Further strengthen risk awareness 122% 98%
and risk based decision-making.

zz Strengthen the trade finance

business and infrastructure
projects lending and capitalise 22% 12%
on such business opportunities.
99% 88%
Year on year Achievement
Profits Operating
Increase/(Decrease) of the Budget
Income

Seylan Bank PLC | Annual Report 2016 OUR VALUE CREATION STORY > FINANCIAL VALUE CREATION 105
 Retail Banking Credit Cards
The Bank’s retail banking business
represents credit cards, pawning,
leasing, housing loans, margin trading,
personal loans and factoring which
serves its customers through branch
network.

The Bank was successful in achieving

its objectives of increasing portfolios in
stiff market conditions. Further, Bank
introduced several innovative solutions
as well as conducted aggressive
marketing campaigns and offered
exclusive benefits for our customers
throughout the year.

Focus
Focus on eChannels for delivery,
introduce aggressive sales culture and
differentiate through friendly customer
service in contributing to increased
volumes and bottom line.
Strategies and Achievements
Key Strengths
zz Superior and friendly customer Strategy Achievement
service.
Recruited and developed a strong direct sales team.
zz Widespread product portfolio. Introduce Carried out sales promotional activities in selected cities,
zz Equipped with island-wide branch sales culture private and government sector offices and leading
network with modern electronic super markets.
banking space.
Exclusive credit/debit card offers.
Enhance the
volumes and value Launched Mpay card acceptance facility to SME
customer segment.

Performance Achieved in 2016

Future Outlook Advances Income

zz Aggressive drive for credit card 19% 8%

base growth through customer
107% 96%
acquisition and retention.

zz Providing personalised
customer offers according
to their lifestyle needs.

zz Further strengthen the direct 98% 38%

sales team and make them a
No. of Year on year Achievement
part of Bank’s central sales team. New Cards Increase/(Decrease) of the Budget Card Usage

106 OUR VALUE CREATION STORY > FINANCIAL VALUE CREATION Seylan Bank PLC | Annual Report 2016
 Pawning

Strategies and Achievements

Strategy Achievement

Granted selective lending with more personalised service.

Growth in
Conducted branch level outdoor promotional campaigns
pawning base
with the participation of a renowned Radio channel.
Introduced Gold loan facility to customers.

Enhance service
Closely monitored market conditions and guided
excellence and close
branches with regulatory changes.
monitoring

Performance Achieved in 2016

Future Outlook
Advances Income

zz Continue to grow the pawning Year on year

base with envisaged expansion. 7% 35% Increase/

(Decrease)

93% 104% Achievement

of the Budget

Leasing

Strategies and Achievements

Strategy Achievement

Sustain the growth

despite the restricted Moved to potential business avenues.
business environment

Sponsored the ‘Colombo Motor Show 2016’ which is

considered as the premier motor show in the country,
Enhance brand as well as sponsored ‘Auto Vision 2016’.
visibility
Conducted branch level promotional campaigns named
‘Seylan Riyapola’ with vehicle dealers in the area.

Performance Achieved in 2016

Future Outlook
Advances Income

zz Maintain the growth momentum Year on year

and remain competitive in the
(2)% 8% Increase/
(Decrease)
market.
84% 87% Achievement
of the Budget

Seylan Bank PLC | Annual Report 2016 OUR VALUE CREATION STORY > FINANCIAL VALUE CREATION 107
 Housing

Strategies and Achievements

Strategy Achievement

Pursued tie-ups with property developers, real estate

Strategic tie-ups
agents, and leading contractors.

Sponsored the ‘Seylan Kedella’, ‘Art of Living Exhibition’

Enhance brand
2016 and ‘Construct Exhibition 2016 ’ considered as
visibility
leading housing exhibitions in the country.

Future Outlook
Performance Achieved in 2016
zz Pursue tie-ups with property
developers, real estate agents, Advances Income
condominium property developers Year on year
and leading contractors. 13% 19% Increase/
(Decrease)

zz Enhance brand visibility. 95% 107% Achievement

of the Budget

Margin Trading

Strategies and Achievements

Strategy Achievement

Managed to maintain the portfolio throughout the year

Retain the portfolio
despite the market conditions.

Performance Achieved in 2016

Advances Income
Future Outlook
Year on year
(18)% 1% Increase/
(Decrease)
zz Market analysts predict an
improvement in the stock market 62% 86% Achievement
of the Budget
during the year 2017 and plan to
capitalise on the upturn.

108 OUR VALUE CREATION STORY > FINANCIAL VALUE CREATION Seylan Bank PLC | Annual Report 2016
 Personal Loans

Strategies and Achievements

Strategy Achievement

Sponsored Educational fairs.

Enhance brand
Tie-ups with listed companies.
visibility
Media campaign for awareness of products.

New product Introduced new loan products targeting key segments.

offerings (Government employees etc.)

Future Outlook
Performance Achieved in 2016

zz Expand and further strengthen the New Advances Income

sales and marketing strategies. Year on year
88% Rs. 106 Mn. Increase/
(Decrease)

Factoring

Strategies and Achievements

Strategy Achievement

New unit Set-up under Consumer Finance Unit to

conduct factoring business.
Focus on product Main emphasis was given to streamline systems,
development policies and procedures pertaining to factoring.
Product introduction training conducted to create
awareness among credit related staff.

Performance Achieved in 2016

Advances Income

Future Outlook Rs. 445 Mn. Rs. 17 Mn. Achievement

of the Year

zz Continue to focus on business

development by making availability
the product at all our branches.
* Factoring set up in 2016

Seylan Bank PLC | Annual Report 2016 OUR VALUE CREATION STORY > FINANCIAL VALUE CREATION 109
 Treasury
Despite volatility in local and
international market conditions,
the Bank’s treasury division had
a successful year.

Our treasury division consists of

Treasury Department, Primary Dealer
Unit and Gold Investment Unit.

Focus
Managing Assets and Liabilities, sourcing
of funds towards capital adequacy,
maintaining adequate liquidity positions,
managing interest rate risk, currency
risk for the Bank in compliance with
regulatory requirements.

Key Strengths
zz Ability to offer a sophisticated
range of treasury products.
zz Experienced and dedicated staff Strategies and Achievements
to manage the critical functions.
Strategy Achievement

Diversified the Treasury investment portfolio.

Increased funding lines were sourced from international
Proactively manage
banks to finance the Bank’s expanding trade and related
the portfolio
Future Outlook activities.
Increased forex trading lines.
zz The phase 2 of the integrated
treasury management system
Implemented a robust treasury risk management
incorporating commodities (gold), Improve risk
framework and limit structure as per regulatory
equity, corporate debt and market management
requirements.
risk modules.

zz The government securities and The fully integrated new treasury management system
the corporate debt portfolios will was implemented during the year. The system facilitates
be prudently managed to enhance Process straight through processing of Government securities,
profitability and mitigate risks. improvements Forex and Money market products, online exchange
position monitoring and online monitoring of treasury
related regulatory and internal risk parameters.
zz The treasury will liaise closely with
trade finance, corporate banking
divisions and branches to enhance
the trade volumes to increase the
exchange income.

zz The treasury corporate sales

desk will be strengthened and Performance Achieved in 2016
would be deployed to acquire
new treasury and trade customers, Profits Income
treasury product sales, customer Year on year
advisory services in relation to (21)% 10% Increase/
(Decrease)
treasury and high value deposit
mobilisation etc. 69% 94% Achievement
of the Budget

110 OUR VALUE CREATION STORY > FINANCIAL VALUE CREATION Seylan Bank PLC | Annual Report 2016
 International and Trade Finance
Bank’s International Division was
restructured to handle the operational
aspects of the trade and remittances
services while strengthening and
delegating the branches to promote
the business which created strong
relationships with customers.

Focus
Centralised processing of all Import and
Export related transactions of the Bank
whilst maintaining relationships with
global correspondent banks.

Key Strengths
zz Successfully maintaining a global
network of over 300 correspondent
banking/financial relationships.
zz Facilitating to enhance the trade
knowledge of customers.
zz Long standing relationship with Strategies and Achievements
correspondent banks, exchange
houses and remittance services. Strategy Achievement

Flexible trade tariff and competitive exchange rates,

Focus on business enabled us to create a sustainable competitive advantage.
Future Outlook
development Introduced a special promotion for ‘Permit Holders’ with
concessions.
zz Further diversifying the trade
portfolio and canvass trade clients
Successful negotiations with Correspondent Banks for
from diversified segments. higher rebates on trade transactions.
Focus on business
zz Special Tariff of charges to development Visits made to most of the existing and potential trade
clients to revive relationship which in turn helped to
be introduced exclusively for
improve trade business.
‘Entrepot Trade’ in order to attract
both Import & Export business.

zz Strengthen the existing

correspondent banking
relationships with Performance Achieved in 2016
globally-reputed banks.
Trade
zz Bank will look forward to Loans Income
continue the expansion of
agent network to have greater
(10)% (2)%
convenience for remitters.

zz The Bank will venture into a new 87% 79%

trade services system in 2017. It
will give the Bank an enormous
flexibility in handling trade related
services and also it will be the 30%
platform for the trade service 21%
module in corporate internet
No. of Value of
banking portal. Year on year Achievement
Remittances
Remittances Increase/(Decrease) of the Budget

Seylan Bank PLC | Annual Report 2016 OUR VALUE CREATION STORY > FINANCIAL VALUE CREATION 111
 Project Finance
Project Finance Department was
set up in 2016.
Strategies and Achievements

Focus Strategy Achievement

Actively participate in the development
of infrastructure and other economic Networking with project finance and corporate banking
activities, promote lending and other divisions of other banks for loan syndication.
Focus on product
services. development
Actions were taken to identify and cater to project finance
requirements of customers.
Steps taken internally to promote project related lending.
Key Strengths
zz New offering to the customers.
zz Ability to offer comprehensive
financial packages. Future Outlook
zz Current national demand for
project finance. zz Be the first choice Banker for
syndications by leading banks.

zz Explore FCBU project lending and

projects approved by BOI.

zz Develop links with industry

associations to gain opportunities.

Support Functions
Recoveries
Focus
Facilitate branches to minimise
non-performing advances, monitoring
of new additions, take prompt actions
wherever necessary and initiate
recovery actions. Strategies and Achievements

Strategy Achievement

Future Outlook Measures were initiated to timely identify potential NPA,

monitor and initiate corrective actions.

zz Centralise collection unit to be Assessed risk-related controls, ensure high level of

credit quality.
formed to monitor and follow up Strengthen the recovery
delinquencies. Further strengthened the monitoring process.
and monitoring process
A separate unit was formed to concentrate on recovery
zz Strengthen the monitoring process of clients whose outstandings have been written off/down.
and ensure high level of credit Special recovery clinics were conducted island-wide
quality. with the assistance of area offices.

112 OUR VALUE CREATION STORY > FINANCIAL VALUE CREATION Seylan Bank PLC | Annual Report 2016
 Marketing

This department plays a pivotal role

in raising the Bank’s corporate image,
positioning product portfolio.

Focus
Enhance overall Bank’s corporate
image, strengthen corporate position
and promote the products and
services offered by the Bank.

Key Strengths
zz Extensive and innovative product
portfolio.
zz Well positioned corporate brand
and visibility.

Strategies and Achievements

Strategy Achievement

Future Outlook Strengthened corporate brand equity through enhanced

visibility and loyalty building.
Enhance the brand Enhanced consumer engagement with the brands,
zz Enhance the brand equity. equity and value products and services.
Re-focused on public relations strategy to gain higher
zz Enhance below the line
stakeholder visibility.
performance: Increase visibility
and support product campaigns
through increased visibility at Launched ‘Money Market’ savings accounts, ‘Gold Loans’
and ‘Factoring’ as new products, targeting different
below the line level. Innovative products customer segments.
offering
zz Enhance distribution through Revamped ‘Seylan Sure’ product to offer enhanced benefits
alternate channel development. for customers.

zz Smarter, proactive media strategy

to gain higher share of voice with Measures were taken to enhance Bank’s social and digital
Enhance social and
increase efficiency on media. media visibility in the digital space as the most socially
digital marketing
engaged bank in Sri Lanka.

Seylan Bank PLC | Annual Report 2016 OUR VALUE CREATION STORY > FINANCIAL VALUE CREATION 113
 Information Technology
As a key facilitator for the Bank’s
operations, Information Technology
plays a leading role in providing
technological solutions to the entire
Bank to provide a competitive edge in
today’s banking environment.

Focus
Providing continuous support to ensure
smooth integration of all business
operations and improve overall
operational efficiency of the Bank.

Future Outlook

Strategies and Achievements

1. Upgrade the core banking system
and card management system.
Strategy Achievement
2. Further strengthen IT security
and control aspects with: Upgraded ATMs in line with Global standard (the first Bank
to have a fully EMV compliant ATM network in Sri Lanka).
a. Data Leakage Protection (DLP)
Installed self-service Cash Deposits Machines (CDM).
b. Maker/Checker enhancements Enhance IT based
solutions to deliver The new Internet Banking system was implemented for
3. New modules or enhanced superior benefits to retail and mobile platforms.
features: internal and external
Mobile App was implemented allowing customers to do
customers
their banking through their smartphones and tablets.
a. Trade Finance
Introduced One Time Password (OTP) security feature to
Present trade finance the account holders.
module to be replaced with
new module with additional
features. Implemented common electronic fund transfer system.
System improvements
b. Digital signature capturing/ and automation Successfully implemented several new solutions.
(i.e. - One Time Password – OTP, eLearning and training).
biometric, Mcash and eZ Cash.

Branch Credit
Facilitate credit approval process,
guide branches on regulatory
requirements, inculcate best credit
practices and simplify credit process.

114 OUR VALUE CREATION STORY > FINANCIAL VALUE CREATION Seylan Bank PLC | Annual Report 2016
 Strategies and Achievements

Strategy Achievement

Continued to grow the SME and commercial lending

Growth of business
through the branch network and also to focused on
volumes
selected sectors.

Future Outlook

zz Focus on business opportunities Enhanced customer Conducted eight capacity building training programmes
capabilities and build through resource personnel for low end SME clients in
arising through strategic relatonship branches.
development projects initiated by
the Government such as Tourism,
Construction etc.
Strengthened risk
Further strengthened the risk management and monitoring
zz Increase commercial, high end management and
processes.
SME portfolio for existing clients operational process
and potential new clients.

Credit Administration Unit

Carry out all credit administration process
of the Bank which ensures the clear
distinction between credit marketing and
origination functions are maintained, while
assuaging quality credit documentation Strategies and Achievements
processes are in place.
Strategy Achievement

Future Outlook
Centralisation of Centralised recovery of charges relating to loans as per
zz Centralising issuance of facility processes approved terms.
commitment letters to ensure
that all terms and conditions of
approval and also internal and
Conducted training for credit staff to inculcate proper credit
external controls are
Knowledge sharing discipline and ensure both internal and external controls
not compromised. are not compromised.

Group Performance
Seylan Developments PLC
Seylan Developments PLC (SDP) SDP manages and maintains ‘Seylan Mr. S. Palihawadana
is a public limited liability company Towers’ which comprises twin towers Deputy Chairman/Non-Executive
incorporated in Sri Lanka on 3rd in which the East Tower is the Head Director
September 1992, quoted on the Office of Seylan Bank PLC and West Mr. P. Saravanapavan
Colombo Stock Exchange on the Tower comprises 16 numbers of luxury Independent Non-Executive Director
same day and re-registered under apartments. Mr. R.J. Jayasekara
the Companies Act No. 07 of 2007, Non-Executive Director
on 22nd May 2008. Seylan Bank PLC The Company’s Board of Directors
Mr. P. Hennayake
is the Parent Company of Seylan is as follows:
Non-Executive Director
Developments PLC holding 70.51% Mr. Kapila P. Ariyaratne
as at 31st December 2016, compared Chairman/Non-Executive Director Mr. L.T. Kiringoda
Independent Non-Executive Director
to 70.42% recorded in 2015.

Seylan Bank PLC | Annual Report 2016 OUR VALUE CREATION STORY > FINANCIAL VALUE CREATION 115
 INFORMED INVESTORS

We are committed to deliver maximum

value to our shareholders. Our core
activities are structured and managed to
create economic prosperity through value
additions, through a consistent growth in
our Key Performance Indicators.

Our key strategic priorities in 2016 are:

Economic Policy zz Consistent creation of wealth and
sustainable growth.
Seylan Bank is committed to
delivering economic value to all zz Ensuring a sustainable return.
its stakeholders. As such, our zz Transparent and responsible banking.
core activities are structured and