| Item | As at 31 December 2019 |
As at 31 December 2018 |
| Regulatory capital (LKR ’000) | ||
| Common Equity Tier I (CET I) capital | 7,146,580 | 7,419,999 |
| Tier I capital | 7,146,580 | 7,419,999 |
| Total capital | 11,208,615 | 8,462,226 |
| Regulatory capital ratio (%) | ||
| Common Equity Tier I capital ratio (Minimum requirement – 2019: 7.00%, 2018: 6.375%) | 9.43 | 11.00 |
| Tier I capital ratio (Minimum requirement – 2019: 8.50%, 2018: 7.875%) | 9.43 | 11.00 |
| Total capital ratio (Minimum requirement – 2019: 12.50%, 2018: 11.875%) | 14.80 | 12.54 |
| Leverage ratio (%) (Minimum requirement – 3%) | 6.61 | 7.32 |
| Regulatory liquidity | ||
| Statutory liquid assets (LKR ’000) | 14,831,478 | 14,811,217 |
| Statutory liquid assets ratio (Minimum requirement – 20%) | ||
| Domestic banking unit (%) | 21.74 | 23.22 |
| Off-shore banking unit (%) | – | – |
| Total stock of high-quality liquid assets (LKR ’000) | 5,822,317 | 3,460,374 |
| Liquidity coverage ratio (%) (Minimum requirement – 2019: 100%, 2018: 90%) | ||
| Rupee (%) | 123.77 | 142.15 |
| All currency (%) | 123.77 | 142.15 |
| Net stable funding ratio (%) (Minimum requirement – 100%) | 130.09 | 129.48 |
| Item | Amount (LKR ’000) | |
| As at 31 December 2019 |
As at 31 December 2018 |
|
| Common Equity Tier I (CET I) capital after adjustments | 7,146,580 | 7,419,999 |
| Common Equity Tier I (CET I) capital | 7,687,506 | 7,448,727 |
| Equity capital (stated capital)/assigned capital | 5,921,538 | 5,921,538 |
| Reserve fund | 228,282 | 215,612 |
| Published retained earnings/(accumulated retained losses) | 1,510,081 | 1,280,762 |
| Published accumulated other comprehensive income (OCI) | – | – |
| General and other disclosed reserves | 27,605 | 30,815 |
| Unpublished current year’s profit/(losses) and gains reflected in OCI | – | – |
| Ordinary shares issued by consolidated banking and financial subsidiaries of the Bank and held by third parties |
– | – |
| Total adjustments to CET 1 capital | 540,926 | 28,728 |
| Goodwill (net) | – | – |
| Intangible assets (net) | 308,445 | 3,728 |
| Deferred tax assets (net) | 232,482 | 25,000 |
| Investments in the capital of banking and financial institutions | – | – |
| Additional Tier I (AT I) capital after adjustments | – | – |
| Additional Tier I (AT I) capital | – | – |
| Qualifying additional Tier I capital instruments | – | – |
| Instruments issued by consolidated banking and financial subsidiaries of the Bank and held by third parties | – | – |
| Total adjustments to AT I capital | – | – |
| Investment in own shares | – | – |
| Others | – | – |
| Tier II capital after adjustments | 4,062,035 | 1,042,227 |
| Tier II capital | 4,112,035 | 1,067,227 |
| Qualifying Tier II capital instruments | 3,479,793 | 711,628 |
| Revaluation gains | – | – |
| Loan loss provisions | 632,241 | 355,599 |
| Instruments issued by consolidated banking and financial subsidiaries of the Bank and held by third parties | – | – |
| Total adjustments to Tier II | 50,000 | 25,000 |
| Investment in own shares | – | – |
| Investments in the capital of banking and financial institutions | 50,000 | 25,000 |
| CET I capital | 7,146,580 | 7,419,999 |
| Total Tier I capital | 7,146,580 | 7,419,999 |
| Total capital | 11,208,615 | 8,462,226 |
| Total risk weighted assets (RWA) | 75,757,837 | 67,474,294 |
| RWAs for credit risk (Templates 7 and 8) | 69,464,792 | 62,660,450 |
| RWAs for market risk (Template 9) | 6,013 | – |
| RWAs for operational risk (Template 10) | 6,287,032 | 4,813,844 |
| CET I capital ratio (including capital conservation buffer, countercyclical capital buffer and surcharge on D-SIBs) (%) | 9.43 | 11.00 |
| of which: capital conservation buffer (%) | – | – |
| of which: countercyclical buffer (%) | – | – |
| of which: capital surcharge on D-SIBs (%) | – | – |
| Total Tier I capital ratio (%) | 9.43 | 11.00 |
| Total capital ratio (including capital conservation buffer, countercyclical capital buffer and surcharge on D-SIBs) (%) | 14.80 | 12.54 |
| of which: capital conservation buffer (%) | – | – |
| of which: countercyclical buffer (%) | – | – |
| of which: capital surcharge on D-SIBs (%) | – | – |
| Item | Amount (LKR ’000) | |
| As at
31 December 2019 |
As at
31 December 2018 |
|
| Tier I capital | 7,146,580 | 7,136,608 |
| Total exposures | 108,121,304 | 97,558,072 |
| On-balance sheet items (excluding derivatives and securities financing transactions, but including collateral) | 107,242,698 | 96,878,083 |
| Derivative exposures | – | – |
| Securities financing transaction exposures | – | – |
| Other off-balance sheet exposures | 878,606 | 679,989 |
| Basel III leverage ratio (%) (Tier I/total exposure) | 6.61 | 7.32 |
| Item | Amount (LKR ’000) | |||
| As at 31 December 2019 | As at 31 December 2018 | |||
| Total un-weighted value |
Total weighted value |
Total un-weighted value |
Total weighted value |
|
| Total stock of high-quality liquid assets (HQLA) | 5,860,411 | 5,822,317 | 3,482,290 | 3,460,374 |
| Total adjusted Level 1 assets | 3,882,941 | 3,882,941 | 3,336,186 | 3,336,186 |
| Level 1 assets | 4,141,468 | 4,141,468 | 3,336,186 | 3,336,186 |
| Total adjusted Level 2A assets | 1,977,469 | 1,680,849 | 146,103 | 124,188 |
| Level 2A assets | 1,977,469 | 1,680,849 | 146,103 | 124,188 |
| Total adjusted Level 2B assets | – | – | – | – |
| Level 2B assets | – | – | – | – |
| Total cash outflows | 69,964,170 | 11,844,994 | 68,601,375 | 9,737,202 |
| Deposits | 48,834,924 | 4,883,492 | 50,445,248 | 5,044,525 |
| Unsecured wholesale funding | 19,676,689 | 6,341,099 | 17,085,209 | 4,271,302 |
| Secured funding transactions | 66,862 | 66,862 | 47,835 | 47,835 |
| Undrawn portion of committed (irrevocable) facilities and other contingent funding obligations | 1,385,694 | 553,541 | 1,023,083 | 373,539 |
| Additional requirements | – | – | – | – |
| Total cash inflows | 15,453,640 | 7,140,921 | 19,479,079 | 10,518,710 |
| Maturing secured lending transactions backed by collateral | 4,625,498 | 282,028 | 3,482,290 | 21,915 |
| Committed facilities | 1,600,000 | – | 1,250,000 | – |
| Other inflows by counterparty which are maturing within 30 days | 7,728,142 | 6,108,893 | 14,746,790 | 10,496,795 |
| Operational deposits | – | – | – | – |
| Other cash inflows | 1,500,000 | 750,000 | – | – |
| Liquidity coverage ratio (%) (stock of high quality liquid assets/ total net cash outflows over the next 30 calendar days) * 100 |
123.77 | 142.15 | ||
| Description of the capital instrument | Stated capital | Subordinated term debt (2016) |
Subordinated term debt (2016) |
Subordinated term debt (2019) |
Subordinated term debt (2019) |
| Issuer | Sanasa Development Bank PLC |
SBI FMO Emerging Asia Financial Sector Fund PTE. LTD | Nederlandse Financierings-Maatschappij Voor Ontwikkelingslanden N.V. (FMO) | Stichting Fondsbeheer DGGF Lokaal MKB duly represented by Triple Jump B.V. |
Belgian Investment Company for Developing Countries NV/SA – (BIO) |
| Unique identifier | LK0412N00003 | N/A | N/A | N/A | N/A |
| Governing Law of the instrument |
Companies Act No. 07 of 2007, Colombo Stock Exchange Regulations |
Companies Act No. 07 of 2007, Colombo Stock Exchange Regulations, Banking Act Directions | Companies Act No. 07 of 2007, Colombo Stock Exchange Regulations, Banking Act Directions | Companies Act No. 07 of 2007, Colombo Stock Exchange Regulations, Banking Act Directions | Companies Act No. 07 of 2007, Colombo Stock Exchange Regulations, Banking Act Directions |
| Original date of issuance (agreement signed date for subordinated term debts) |
May 2012 to May 2018 | December 2016 | December 2016 | March 2019 | September 2019 |
| Par value of instrument (LKR) | 100 | N/A | N/A | N/A | N/A |
| Perpetual or dated | Perpetual | Dated | Dated | Dated | Dated |
| Original maturity date, if applicable | N/A | December 2021 | December 2021 | March 2024 | September 2024 |
| Amount recognised in regulatory capital (in LKR ’000 as at 31 December 2019) | 5,921,538 | 343,115 | 158,482 | 1,552,017 | 1,426,179 |
| Accounting classification (equity/liability) |
Equity | Liability | Liability | Liability | Liability |
| Issuer call subject to prior supervisory approval | |||||
| Optional call date, contingent call dates and redemption amount (LKR ’000) |
N/A | N/A | N/A | N/A | N/A |
| Subsequent call dates, if applicable | N/A | N/A | N/A | N/A | N/A |
| Coupons/Dividends | |||||
| Fixed or floating dividend/coupon | Floating dividend | Floating coupon | Floating coupon | Floating coupon | Floating coupon |
| Coupon rate and any related index (%) |
N/A | 6 months T-bill rate + 450bps |
6 months T-bill rate + 550bps |
6 months T-bill Rate + 700bps |
6 months LIBOR + 550bps |
| Non-cumulative or cumulative | Non-cumulative | Cumulative | Cumulative | Cumulative | Cumulative |
| Convertible or non-convertible | Non-convertible | Convertible | Convertible | Convertible or write-off | Convertible |
| If convertible, conversion trigger(s) | N/A | N/A | N/A | Conversion trigger(s) applicable as per Banking Act Direction No. 1 of 2016 | Conversion trigger(s) applicable as per Banking Act Direction No. 1 of 2016 |
| If convertible, fully or partially | N/A | Fully or partially subject to a maximum of 15% of the issued share capital | Fully or partially subject to a maximum of 15% of the issued share capital | Fully or partially subject to a maximum of 15% of the issued share capital | Fully or partially subject to a maximum of 15% of the issued share capital |
| If convertible, mandatory or optional | N/A | Optional | Optional | Mandatory upon the occurrence of a trigger event |
Mandatory upon the occurrence of a trigger event |
| If convertible, conversion rate | N/A | LKR 140 or 1.1 x of book value per share which ever is lower in the event if Bank issues new shares to any new investor | LKR 140 or 1.1 x of book value per share which ever is lower in the event if Bank issues new shares to any new investor | Simple average of the daily volume weighted average price (VWAP) of an ordinary voting share of the borrower as published by the Colombo Stock Exchange during the three (3) months period, immediately preceding the date of the trigger event |
Simple average of the daily volume weighted average price (VWAP) of an ordinary voting share of the borrower as published by the Colombo Stock Exchange during the three (3) months period, immediately preceding the date of the trigger event |
| N/A – not applicable |
A proper “capital management process” is vital in ensuring the long-term stability of the business, the capital adequacy ratio is a measure used to determine whether the Bank has sufficient capital to withstand unexpected losses arising from various risks during the course of the business. Therefore, it acts as a layer of cushion in absorbing potential losses arising from the course of the business and safeguarding the depositors’ funds. At present, capital adequacy position of the banks are computed based on banking Act Direction No. 01 of 2016 and subsequent amendments thereto issued by Central Bank of Sri Lanka. SANASA Development Bank has continued to maintain capital adequacy ratios at healthy levels by keeping a significant margin over and above the regulatory minimum requirements.
In order to comply with the new Basel III guidelines, SANASA Development Bank’s capital management process is under supervision of Board Strategic Planning Committee. The three year (2020-2022) Capital Management Plan rolled out has been integrated with the Internal Capital Adequacy Assessment Process (ICAAP) as well as the Bank’s Strategic Plan. Efforts have taken to comply with the Basel III regulations saw the Bank increases its capital levels by issuing Basel III compliant Tier II debt instruments. Steps were also taken to optimise the capital ratios by rebalancing the risk weighted assets (RWA).
Moving forward with the Capital Management Plan, the Bank will execute specific medium-term and long-term strategies to raise both Tier I and Tier II capital in line with Basel III minimum regulatory requirements. In addition, timely actions have been identified and will be executed during the coming years to optimise the risk weighted assets for the purpose of improving the capital allocation of the Bank.
| Asset class | Amount (LKR ’000) as at 31 December 2019 | |||||
| Exposures before credit conversion factor (CCF) and CRM |
Exposures post CCF and CRM |
RWA and RWA density (%) |
||||
| On- balance sheet
amount |
Off-balance sheet
amount |
On- balance sheet
amount |
Off-balance sheet
amount |
RWA | RWA density
(%) |
|
| Claims on Central Government and CBSL | 6,073,691 | – | 6,073,691 | – | – | 0 |
| Claims on foreign sovereigns and their central banks | – | – | – | – | – | – |
| Claims on public sector entities | – | – | – | – | – | – |
| Claims on official entities and multilateral development banks |
– | – | – | – | – | – |
| Claims on banks exposures | 7,719,595 | – | 7,719,595 | – | 1,555,523 | 20 |
| Claims on financial institutions | – | – | – | – | – | – |
| Claims on corporates | 4,340,881 | – | 4,340,881 | – | 1,156,248 | 27 |
| Retail claims | 78,938,348 | – | 73,713,764 | – | 59,065,806 | 80 |
| Claims secured by residential property | 4,987,399 | – | 4,987,399 | – | 3,030,653 | 61 |
| Claims secured by commercial real estate | – | – | – | – | – | – |
| Non-performing assets (NPAs) | 1,753,459 | – | 1,753,459 | – | 1,543,160 | 88 |
| Higher-risk categories | – | – | – | – | – | – |
| Cash items and ther assets | 3,041,941 | 878,606 | 3,041,941 | 385,977 | 3,113,401 | 91 |
| Total | 106,855,313 | 878,606 | 101,630,729 | 385,977 | 69,464,792 | 68 |
Note:
(i) NPAs – As per Banking Act Directions on classification of loans and advances, income recognition and provisioning.
(ii) RWA density – Total RWA/exposures post CCF and CRM.
| Description | Amount (LKR ’000) as at 31 December 2019 (Post CCF & CRM) | |||||||||
| Asset classes | Risk weight | 0% | 20% | 50% | 60% | 75% | 100% | 150% | >150% | Total credit
exposures amount |
| Claims on Central Government and CBSL | 6,073,691 | – | – | – | – | – | – | – | 6,073,691 | |
| Claims on foreign sovereigns and their central banks | – | – | – | – | – | – | – | – | – | |
| Claims on public sector entities | – | – | – | – | – | – | – | – | – | |
| Claims on official entities and multilateral development banks | – | – | – | – | – | – | – | – | – | |
| Claims on banks exposures | – | 7,680,915 | 38,680 | – | – | – | – | – | 7,719,595 | |
| Claims on financial institutions | – | – | – | – | – | – | – | – | – | |
| Claims on corporates | – | 3,480,791 | 800,000 | – | – | 60,090 | – | – | 4,340,881 | |
| Retail claims | 107,644 | 1,495,769 | – | – | 53,374,792 | 18,735,559 | 73,713,764 | |||
| Claims secured by residential property | – | – | 3,913,492 | – | – | 1,073,907 | – | – | 4,987,399 | |
| Claims secured by commercial real estate | – | – | – | – | – | – | – | – | – | |
| Non-performing assets (NPAs) | – | – | 444,910 | – | – | 1,284,238 | 24,311 | – | 1,753,459 | |
| Higher-risk categories | – | – | – | – | – | – | – | – | – | |
| Cash items and other assets | 272,257 | 52,825 | – | 3,102,836 | 3,427,918 | |||||
| Total | 6,453,592 | 12,710,299 | 5,197,082 | – | 53,374,792 | 24,256,630 | 24,311 | – | 102,016,706 | |
| Item | RWA amount (LKR ’000) As at 31 December 2019 |
| (a) RWA for interest rate risk | – |
| General interest rate risk | – |
| (i) Net long or short position | – |
| (ii) Horizontal disallowance | – |
| (iii) Vertical disallowance | – |
| (iv) Options | – |
| Specific interest rate risk | – |
| (b) RWA for equity | 752 |
| (i) General equity risk | 752 |
| (ii) Specific equity risk | – |
| (c) RWA for foreign exchange and gold | – |
| Capital charge for market risk {(a) +(b) + (c) } * CAR | 6,013 |
| Business lines | Capital charge factor |
Gross income (LKR ’000) as at 31 December 2019 | Amount (LKR ’000) |
||
| 1st year | 2nd year | 3rd year | |||
| The basic indicator approach | 15% | 6,103,802 | 5,206,861 | 4,406,918 | |
| Capital charges for operational risk (LKR ’000)
The basic indicator approach |
785,879 | ||||
| Risk-weighted amount for operational risk (LKR ’000)
The basic indicator approach |
6,287,032 | ||||
Template 11Differences between accounting and regulatory scopes and mapping of financial statement categories with regulatory risk categories |
Template 12Explanation for differences between accounting and regulatory reporting |
| Item | Amount (LKR ’000 as at 31 December 2019) | |||||
| a | b | c | d | e | ||
| Carrying values as reported in published financial statements |
Carrying values under scope of regulatory reporting |
Subject to credit risk framework |
Subject to market risk framework |
Not subject to capital requirements or subject to deduction from capital |
||
| Assets | ||||||
| Cash and cash equivalents | 2,429,791 | 2,430,144 | 2,430,144 | – | – | Impairment of financial assets under SLFRS 9. |
| Placements with banks | 5,628,095 | 5,575,852 | 5,575,852 | – | – | Interest receivable on placements with banks is classified as other assets in regulatory reporting. Impairment of financial assets under SLFRS 9. |
| Financial assets fair value through profit or loss | 3,527,310 | 3,526,931 | 3,526,931 | – | – | In regulatory reporting these investments are classified as investments – trading account. Interest receivable on these investments is classified as other assets in regulatory reporting. |
| Financial assets at amortised cost | ||||||
| – Loans and receivables to other customers | 85,823,335 | 86,644,597 | 85,679,206 | – | (632,241) | In regulatory reporting loans and receivables to customers arrived after netting off CBSL time based provisions. However, in published financial statements loans and receivables to customers arrived after netting off impairment allowances as per SLFRS 9. |
| – Debt and other instruments | 6,998,925 | 6,962,371 | 6,866,173 | 46,198 | 50,000 | Interest receivable on debt and other instruments is classified as other assets in regulatory reporting.
Impairment of financial assets under SLFRS 9. |
| Financial assets measured at fair value through other comprehensive income | 56,939 | 60,148 | 60,148 | – | – | |
| Property, plant and equipment | 645,231 | 645,231 | 645,231 | – | – | |
| Right-of-use assets | 651,271 | – | – | – | – | In regulatory reporting Right-of-use asset as per SLFRS 16 is not recognised. |
| Investment properties | 21,279 | 21,279 | 21,279 | – | – | |
| Intangible assets | 308,445 | 308,445 | – | – | 308,445 | |
| Deferred tax assets | 232,482 | 219,859 | – | – | 232,482 | In regulatory reporting deferred tax assets are recorded in other assets. |
| Other assets | 1,460,524 | 980,403 | 2,050,349 | – | – | The difference is due to recognition of interest receivable on investments in regulatory reporting and SLFRS 9 adjustments. |
| Total assets | 107,783,624 | 107,375,259 | 106,855,313 | 46,198 | (41,315) | |
| Liabilities | ||||||
| Due to banks | – | – | – | – | – | |
| Due to other customers | 72,431,923 | 69,233,918 | – | – | – | Interest payable on deposits are stated under other liabilities in regulatory reporting. |
| Other borrowings | 20,299,718 | 20,040,017 | – | – | – | Interest payable on borrowings are stated under other liabilities in regulatory reporting. |
| Debt securities issued | 1,014,034 | 964,560 | – | – | – | Interest payable on borrowings are stated under other liabilities in regulatory reporting. |
| Subordinated term debts | 4,210,566 | 4,200,322 | – | – | – | Interest payable on borrowings are stated under other liabilities in regulatory reporting. |
| Retirement benefit obligations | 479,575 | 429,860 | – | – | – | |
| Current tax liabilities | 187,070 | 168,920 | – | – | – | Taxes are computed based on different profits under each reporting method. |
| Other liabilities | 1,491,759 | 4,518,490 | – | – | – | Interest payable on borrowings and deposits added to the other liabilities in regulatory reporting. |
| Total liabilities | 100,114,645 | 99,556,086 | – | – | – | |
| Off–balance sheet liabilities | ||||||
| Guarantees | 177,752 | 177,752 | 177,752 | – | – | |
| Undrawn loan commitments | – | 700,854 | 700,854 | – | – | |
| Shareholders’ equity | ||||||
| Equity capital (stated capital)/assigned capital | 5,921,538 | 5,921,538 | – | – | – | |
| of which amount eligible for CET I |
5,921,538 | 5,921,538 | – | – | – | |
| of which amount eligible for AT I |
– | – | – | – | – | |
| Retained earnings | 1,491,554 | 1,651,208 | – | – | – | Due to differences which arise in profits computed in regulatory reporting and SLFRSs. |
| Accumulated other comprehensive income | (19,052) | – | – | – | – | |
| Other reserves | 274,939 | 246,426 | – | – | – | |
| Total shareholders’ equity | 7,668,979 | 7,819,172 | – | – | – | |