F Uture of Banking

Future of Banking Future Commercial Bank of Ceylon PLC Commercial Bank of Ceylon PLC Annual Report 2016 www.combank.lk Commercial Bank of Ceylon PLC Annual Report 2016 Predicting the future of banking is something we cannot accomplish with certainty today. However, there should not be any dispute in asserting that the future of banking will be a function of such variables as understanding customer aspirations, application of appropriate technology, harnessing mind power and tempering it with a good dose of heart. This will happen within a solid supervisory framework provided by the regulator. This process will colour and shape banking of the future and expedite its arrival. Welcome to the Future of Banking. A Functional Equation to help understand the Future of Banking… State-of-the-Art A Good Dose in Technology of Heart Power of Evolving Customer the Human Aspirations Mind c + t + m + h F= f r Future of Regulatory Banking Framework Our Vision Our Mission To be the most technologically advanced, Providing reliable, innovative, customer-friendly financial services, innovative and customer-friendly financial services utilising cutting-edge technology and focusing continuously on productivity organisation in Sri Lanka, poised for further improvement whilst developing our staff and acquiring necessary expertise expansion in South Asia. to expand locally and regionally. CONTENTS Content 003 Introduction to the 48th Annual Report 177 Financial Reports 179 Financial Calender – 2016 005 Strategic Report 180 Independent Auditors’ Report 006 About Us 181 Financial Statements Highlights – Bank 006 Who We Are 182 Financial Statements – Table of Content 008 Our Journey 183 Income Statement 010 Our Board of Directors 184 Statement of Profit or Loss and Other 014 Highlights – Financial and Non-Financial Comprehensive Income 016 Performance Highlights 185 Statement of Financial Position 018 Chairman’s Review 186 Statement of Changes in Equity – Group 022 Managing Director’s Review 188 Statement of Changes in Equity – Bank 028 Charting Our Course 190 Statement of Cash Flows 028 How We Create Value 191 Notes to the Financial Statements 030 Connecting with Stakeholders 032 Materiality Matters 353 Annexes 036 A Winning Strategy 354 Annex 1: Governance 354 Annex 1.1: Compliance with Banking Act 037 Management Discussion and Analysis Direction 038 Our Operating Environment 367 Annex 1.2: Codes of Best Practice on 046 Capital Management Corporate Governance 046 Financial and Manufactured Capital 372 Annex 1.3: Other Disclosure 052 Social and Network Capital Requirements 064 Intellectual Capital 377 Annex 2: Risk and Capital 068 Human Capital Management Report 076 Natural Capital 414 Annex 3: GRI Content Index: 082 Key Business Line Review “In Accordance” – Core 082 Personal Banking 420 Annex 4: Materiality Mapping 090 Corporate Banking 422 Annex 5: Independent Assurance Reports 094 Treasury 422 Independent Assurance Report on Sustainability Reporting – KPMG 098 International Operations 424 Independent Assurance Statement on 102 Subsidiaries and Associates Non-Financial Reporting – DNV GL 104 What the Future Holds 108 Investor Relations 427 Supplementary Information 428 Our Sustainability Footprint 123 Governance 430 Decade at a Glance 124 How We Govern 434 Income Statement (US Dollars) 134 Corporate Management and Profiles 435 Statement of Financial Position (US Dollars) 136 Senior Management 436 Events 140 Board Subcommittee Reports 440 Correspondent Banks and Agent Network 140 Board Audit Committee Report 442 Group Structure 143 Board Integrated Risk Management 443 Glossary of Financial and Banking Terms Committee Report 446 Alphabetical Index 145 Board Nomination Committee Report 447 Abbreviations 147 Board Human Resources and Remuneration Committee Report 448 Notice of Meeting – Annual General Meeting 149 Board-Related Party Transactions Review Committee Report 450 Circular to the Shareholders on the Final Dividend for 2016 150 Board Credit Committee Report Form of Proxy (Voting Shareholders) 151 Board Investment Committee Report Annual General Meeting – Enclosed 152 Board Technology Committee Report Form of Proxy (Non-Voting Shareholders) 153 Annual Report of the Board of Directors Annual General Meeting – Enclosed 164 Statement of Directors’ Responsibility Stakeholder Feedback Form – Enclosed 166 Directors’ Statement on Internal Control 168 Assurance Report on Internal Control Corporate Information – Inner Back Cover 169 Managing Director’s and Chief Financial Officer’s Statement of Responsibility 170 Directors’ Interest in Contracts with the Bank 172 Managing Risk: An Overview Strategic Report INTRODUCTION TO THE 48TH ANNUAL REPORT Basis of Preparation Material aspects boundaries are based on This is the 48th Annual Report of both internal and external assessments Commercial Bank of Ceylon PLC, which carried out covering the Bank’s operations in Financial Reporting covers the financial year ended December Sri Lanka and where specified, Bangladesh, 31, 2016 and this Integrated Annual Report where the Bank has 19 branches. sets out a balanced review of our financial, Sri Lanka Accounting social and environmental performance. Both quantitative and qualitative data are Standards provided and it has been our intention Companies Act No. 07 of 2007 This is also our 8th Report presenting to provide reliable external benchmarks information in accordance with the GRI where possible to facilitate comparison and Guidelines and the third Report based on further analysis for convenience of readers GRI G4 Guidelines, with the most recent of this Report. Report being for the year ended December Narrative Reporting 31, 2015 for which comparatives are given Quality Assurance in this Report. We have taken every effort to ensure that our Report reflect a balance review that is There were no restatements of previously Integrated Reporting complete and accurate. It is our intention Framework reported financial, social or environmental to provide credible information with the information. aid of visual elements such as graphs and tables in a consistent manner facilitating The guiding principles, regulations, codes clarity and comparability. and Acts used for financial and narrative reporting, reporting on sustainability goals Sustainability Reporting and practices and for reporting on how the External Assurance Bank is governed is depicted pictorially as The Bank seeks independent opinion on shown below. Further, we also followed the Financial Statements from its External Auditors who are rotated every five (5) GRI G4 Guidelines the guidelines given in the ‘Preparer’s “In Accordance”-Core Guide to Integrated Corporate Reporting’, years to ensure their independence and a publication by The Institute of Chartered objectivity as required by the guidelines GRI G4 Financial Services Sector Disclosures Accountants of Sri Lanka (CA Sri Lanka) in issued by the regulators. Assurance is also the preparation of this Report. obtained on our social and environmental UNGC Principles processes from Messrs DNV GL Business Commercial Bank of Ceylon PLC, the Assurance Lanka (Pvt) Ltd. who represent parent entity of the Group, accounts for DNV GL and performance indicators from over 95% of Group's revenue, assets, Messrs KPMG. borrowings and employees and therefore, Corporate Governance is the main entity for which social and Commercial Bank of Ceylon PLC, the environment information is presented Board of Directors and Management does in the narrative sections of this Report not have any relationship with Messrs unless otherwise referred to as Group or DNV GL or KPMG, apart from latter’s Code of Best Banking Act Consolidated. Thus, although the Bank’s engagement as the Independent External Practice on Direction five subsidiaries, Commercial Development Auditor of the Group. The Bank’s Managing Corporate No. 11 Governance of 2007 Company PLC, ONEzero Company Ltd., Director, who is an Executive Director of Serendib Finance Ltd., Commex the Board and members of the Corporate Sri Lanka S.R.L. Italy and Commercial Management of the Bank are responsible Bank of Maldives Private Limited together for sustainability practices and disclosures with two associate companies, Equity made in this Report, worked with the external assurance providers on the Investments Lanka Ltd., and Commercial Assurance Insurance Brokers (Pvt) Ltd. are report content. consolidated in the preparation of Group Financial Statements, but are excluded Financial Statements from the social and environment reporting process. Non-Financial Information Commercial Bank of Ceylon PLC Annual Report 2016 3 Strategic Report Introduction to the 48th Annual Report This Annual Report has been structured as depicted below into six sections, namely Strategic Report, Management Discussion and Analysis, Governance, Financial Reports, followed by Annexes and Supplementary Information. Strategic Report Management Discussion and Analysis An introduction to the Bank and a highlevel view of A concise and balanced review of our how we formulate strategy and deliver results operating environment, business verticals and how we utilised the capitals to deliver value to stakeholders Page 5 Page 37 Governance Overview of how we maintain balance between stakeholder interests and exercise oversight of affairs of the Bank, including management of risks Page 123 Financial Reports Our Financial Statements and supporting notes together with the Auditors’ opinion presented in accordance with regulatory requirements Page 177 Annexes Supplementary

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