Basel III Disclosure Requirements

TABLE 1: KEY REGULATORY RATIOS - CAPITAL AND LIQUIDITY

n/a - not applicable

* Effective 15th June 2024, CBSL has discontinued the requirement to maintain the Statutory Liquid Assets Ratio.

TABLE 2: CAPITAL RATIOS

TABLE 3 (A) BANK: CREDIT RISK AS AT 31ST DECEMBER 2024 UNDER STANDARDISED APPROACH – CREDIT RISK EXPOSURES AND CREDIT RISK MITIGATION (CRM) EFFECTS

TABLE 3 (B) GROUP: CREDIT RISK AS AT 31ST DECEMBER 2024 UNDER STANDARDISED APPROACH – CREDIT RISK EXPOSURES AND CREDIT RISK MITIGATION (CRM) EFFECTS

TABLE 4 (A) BANK: Credit Risk as at 31st December 2024 (Post CCF & CRM) under Standardised Approach: Exposures by Asset Classes and Risk Weights

TABLE 4 (B) GROUP: Credit Risk as at 31st December 2024 (Post CCF & CRM) under Standardised Approach: Exposures by Asset Classes and Risk Weights

TABLE 5: Operational Risk for the period ended 31st December 2024 under The Alternative Standardised Approach

TABLE 6: Market Risk as at 31st December 2024 under Standardised Measurement Method

SUMMARY DISCUSSION ON ADEQUACY/MEETING CURRENT AND FUTURE CAPITAL REQUIREMENTS

Overview

Having understood that proper "Capital Management" is vital in ensuring the longterm stability of the business, Sampath Bank has consistently maintained Capital Adequacy Ratios over and above the regulatory minimum requirements. This ensured the Bank's stability and resilient amidst the challenging macro-economic environment that prevailed since 2022. As of 31st December 2024, the Bank stands strongly positioned with significant capital buffers, poised to capitalise on opportunities as the economy returns to normalcy.

Capital Allocation

Effective risk management framework would ensure the stability of the Bank, by protecting it against market, credit, liquidity, operational and reputational risk. The main protection provider is the Bank's capital. Determining the optimum capital structure would be one of the most important risk management goals of the Bank. This process involves evaluating the amount of risk each business unit contributes to the total risk of the Bank and the consequent capital requirements. Further, it involves determining the capital charge to each business unit whose activities contributes to Bank's overall risk, thereby inducing the business units to generate returns compensating the risk undertaken by them.

Capital Management Process

The Management regularly assesses the Bank's capital requirements, drawing insights from evolving macroeconomic conditions. The Bank develops a strategic plan and budget covering a three-year period, which is updated annually. This plan includes forecasts for key capital ratios as specified under the Basel III Accord. During the budgeting process, capital ratios are calculated, linked to the anticipated growth in assets and business volumes.

To ensure prudent capital management, the Bank has established tolerance limits for capital ratios and incorporates appropriate measures in its budget to maintain ratios above these limits. Proactive steps are also taken well in advance to raise Tier I and Tier II capital, as outlined in the budget. A robust monitoring mechanism enables the Bank to regularly track performance against the budget, facilitating timely corrective actions in the event of significant deviations.

The Bank has a dynamic ICAAP process that considers qualitative factors, such as reputational and strategic risks, to identify potential shortfalls early.

Before determining dividend payments, the Bank conducts an extensive analysis of the impact on capital, ensuring adequate resources are retained within the organisation to support future growth opportunities.

Through stress testing and scenario analysis, the Bank anticipates and prepares for potential events or circumstances not covered in the budgeting process, that may threaten its capital, ensuring readiness for unforeseen challenges. The Board of Directors oversees the Bank's capital management and reviews the results of stress testing and scenario analysis on a frequent basis.

Moving Forward

Recognising the significance of optimal capital utilisation, the Bank remains committed to optimising its risk-weighted assets and pursuing other capital optimisation strategies.

In a move to bolster its Tier II capital and take advantage of the prevailing low market interest rates, the Bank has announced the issuance of Basel III compliant, Tier II, listed, rated, unsecured, subordinated, redeemable, five-year debentures amounting to Rs 5 Bn, with the option to increase the amount up to Rs 10 Bn, in the event of an oversubscription. The proposed debenture has been approved by the shareholders and the Central Bank of Sri Lanka.

TABLE 7: LIQUIDITY COVERAGE RATIO - ALL CURRENCY

TABLE 8: LEVERAGE RATIO

TABLE 9: NET STABLE FUNDING RATIO

TABLE 10: Main Features of Regulatory Capital Instruments as at 31st December 2024

* In the event of an occurrence of a trigger event as determined at the sole discretion of the Central Bank of Sri Lanka, there would be a conversion of debentures to ordinary voting shares by the company without any requirement of approval by the debenture holders, in compliance with Basel III requirements. Upon the occurrence of a trigger event, the outstanding balance of the debentures including the total par value of the debentures and debenture interest accrued and unpaid as at that date will be permanently converted to ordinary voting shares at the conversion price.

** The conversion rate will be based on the simple average of the daily Volume Weighted Average Price (VWAP) of an ordinary voting share as published by the Colombo Stock Exchange during the three months (03) period, immediately preceding the date of the trigger event.

n/a - not applicable

TABLE 11 BANK: DIFFERENCES BETWEEN ACCOUNTING AND REGULATORY SCOPES AND MAPPING OF FINANCIAL STATEMENT CATEGORIES WITH REGULATORY RISK CATEGORIES AS AT 31ST DECEMBER 2024

TABLE 12 GROUP: ASSESSMENT OF DOMESTIC SYSTEMICALLY IMPORTANT BANKS (D-SIBS) AS AT 31ST DECEMBER 2024