Board Credit Committee Report

The Committee focused its efforts on reducing the Stage III portfolio through effective monitoring, risk assessment, decision making and advisory while enhancing the credit growth and profitability.

Vajira Kulatilaka

Chairman

Regular attendees to the Committee meetings by invitation:
  • Consultant to the Committee - Mr Janakan Selvaratnam representing BDO Partners.
  • Any other officer/s required by the Committee.

The Company Secretary functioned as the Secretary to the Committee and in his absence, a nominee appointed by the Company Secretary functioned as the Secretary to the Committee during the year under review.

FORMATION OF THE COMMITTEE

The Credit Committee was established on 9th December 1987 and was subsequently re-titled as the Board Credit Committee (BCC) on 22nd October 2008. At present, the Committee focuses on streamlining lending practices in alignment with regulatory requirements, risk appetite and business strategy to achieve its objectives in a competitive business environment.

COMMITTEE MEMBERSHIP DURING THE YEAR 2024
Board Member Directorship Status Membership Status Attendance (Attended/Eligible to Attend)
Mr Vajira Kulatilaka Independent/Non-Executive Chairman 21/21
Mr Rushanka Silva Non-Independent/Non-Executive Member 19/21
Mrs Keshini Jayawardena Independent/Non-Executive Member 21/21
Mr Vinod Hirdaramani Independent/Non-Executive Member 16/21
Mrs Ayodhya Iddawela Perera Executive Member 21/21

Refer pages 186 to 189 for the profiles of the committee members.

KEY ACTIVITIES IN 2024

As one of the priority areas, the BCC gave its direction and value additions on case- by-case basis to the Business Revival Unit, which was set up as a specialised unit to evaluate stressed exposures and to support the viable businesses to revive with necessary restructures and re-schedulements. The experience and knowledge of the BCC members in diverse sectors have contributed to its success and improvement of credit quality.

KEY RESPONSIBILITIES OF THE COMMITTEE

Overseeing the credit management of the Bank, including;

  • Ensuring Board approved internal credit policies exist in the Bank, containing at a minimum, elements required under the Risk Management Framework as set out in the Banking Act Direction No. 7 of 2011.
  • Periodically reviewing all such internal credit policies including changes initiated by the management and recommending them with or without modifications to the Board for approval.
  • Ensuring that the Bank's credit policies comply with the statutory requirements prescribed by the regulatory/supervisory authorities.
  • Ensuring that there is an emphasis on maintaining a diversified portfolio of risk assets in line with the desired risk return profile and within the risk appetite of the Bank.
  • Ensuring that Board approved portfolio exposure limits are established by obligor, industry and geography.

To ensure the operation of a sound credit origination process by;

  • Recommending delegation of Lending Powers to Management personnel for Board approval in line with the Banking Act Direction No. 7 of 2011 dated 5th October 2011 on Integrated Risk Management, Annexure B on Credit Risk Management, reviewing these regularly and overseeing compliance therewith.
  • Reviewing and approving credit proposals over the delegated authority granted to Key Management Personnel and Committees in accordance with Board approved credit policies and standards.
  • Reviewing and recommending to the Board credit facilities, which the Committee believes, require Board approval.

Reviewing the quality and performance of the Bank's credit portfolio by;

  • Calling for annual/half-yearly industry studies and single borrower reviews.
  • Requesting regular portfolio reviews of sectors/industries/countries to which the Bank has exposure.
  • Requesting regular reviews of clients (inclusive of groups) with large exposures.
  • Requesting rapid reviews of Non- Performing and Watch Listed customers and those likely to move into Watch Listing or NPA.
  • Requesting high-level portfolio reviews in the movement of the various stages in impairment.

Maintaining adequate controls over credit risk through;

  • Ensuring credit risk exposure is kept within acceptable limits to maximise the Bank's risk adjusted rate of return.
  • Ensuring stress tests are conducted, where deemed appropriate.

Maintaining appropriate credit administration, measuring and monitoring processes through;

  • Ensuring consistent standards are maintained for the origination, documentation, and maintenance of documents for extension of credit.
  • Ensuring that every obligor and facility is assigned a risk rating.

Identification and administration of problem credits through;

  • Monitoring on an ongoing basis the Bank's credit quality, reviewing periodic credit portfolio reports and assessing portfolio performance.
  • Ensuring post-credit monitoring, remedial management and postmortem reviews are performed, where deemed appropriate.

Understanding the cyclical aspects of the economy (both internal and external) through;

  • Monitoring the resulting shifts in the composition and quality of the loan portfolio.
  • Understanding the credit risk posed by the existing portfolio and reviewing methods of mitigating them in the short and long term.
  • Understanding the micro and macro environment to ascertain both risks and opportunities by requesting independent views of economists/ institutions.

Proper evaluation of new business opportunities by;

  • Ensuring all new credit risk related products are reviewed from a credit risk management perspective.

Adopting Circular Resolutions

  • To adopt decisions via circular resolutions in any means (includes any secure electronic mode, email etc.) where the quorum could not be met and/or in an instance, when a meeting could not be convened due to unforeseen/unavoidable reasons. Such circular resolution shall fulfil the purpose of a quorum required for a meeting and shall be as valid and effectual as if it had been passed at a duly constituted meeting of the BCC.
  • Any other activity within the scope of credit related activities that is deemed by the Committee to be required which will serve to enhance its or the credit function's effectiveness and efficiency.
  • Review the Terms of Reference of the Committee periodically, to ensure that it reflects industry best practices at all times.
REPORTING TO THE BOARD

The minutes of the Committee meetings were tabled at Board meetings thereby providing the Board members with access to the deliberations of the Committee.

PROFESSIONAL ADVICE

The Committee has the authority to seek external professional advice on matters within its purview. Mr Janakan Selvaratnam is acting as the Credit Consultant of the Committee for the year under review.

PERFORMANCE EVALUATION OF THE COMMITTEE

The annual self-evaluation of the Committee was conducted at the year- end by the members of the Committee. The results were discussed at the Committee with, where necessary, areas for improvement being identified and the plans for improvement being communicated to the Board.

On behalf of the Board Credit Committee,

VAJIRA KULATILAKA

Chairman - Board Credit Committee

17th February 2025

Colombo, Sri Lanka

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