Bankers to the Nation Our Vision To be the Nation’s preferred bank with a strong global presence providing customer centric innovative financial solutions. Our Mission To provide highly efficient, customer focused, technologically sophisticated, resilient and innovative financial services to the Nation with global access, empowering employees and enhancing value to the stakeholders. Corporate Value Statement In achieving our vision to be the Nation’s preferred bank, with a strong global presence, providing customer centric innovative financial solutions, we are committed to upholding our core five values as follows: • Being customer centric • Respecting all forms of diversity • Committing towards high level of ethics, governance and professionalism • Focusing towards agility and innovation • Being accountable for all our actions THE ICON OF TRUST With a 79 - year old rich heritage, the Bank of Ceylon has garnered infinite trust and credibility over the years. Occupying the vantage point of Sri Lanka’s banking landscape we reign supreme, positioned as the Number 01 Bank in Sri Lanka. Resonating the financial aspirations of our nation we reach out to a diverse spectrum of customers from SME’s, corporates to individuals representing all walks of life. Powering our nation with financial strength we stand strong as the ‘Bankers to the Nation’. Focused on creating future-proof banking through agile, digitally driven platforms, we have earned infinite trust through our robust performance and our contribution to society as a good corporate citizen. All this makes Bank of Ceylon truly the icon of trust. Bank of Ceylon | Annual Report 2018 CONTENTS Bank of Ceylon Annual Report 2018 • 4 Performance Overview 2018 • 6 Highlights In 2018 • 9 Chairman’s Message • 10 General Manager’s Review • 14 Overview of Bank of Ceylon • 20 Our Footprint • 22 Group Structure • 23 Board of Directors • 24 Corporate Management • 28 Executive Management • 40 “As Sri Lanka’s largest financial institution, Approach to Value Creation • 48 operating the industry’s most extensive network, Bank of Ceylon is one of Sri Lanka’s Stakeholder Engagement • 50 most economically and socially impactful Strategic Report • 52 organisations.” Sustainability at BoC • 58 Economic Contribution • 63 Chairman’s Message • 10 Preserving Value Corporate Governance • 70 Board Subcommittee Reports • 89 Audit Committee Report • 89 Integrated Risk Management Committee Report • 93 Human Resources and Remuneration Committee Report • 96 Nomination and Corporate Governance Committee Report • 98 Information and Communication Technology Committee Report • 100 Risk Management • 102 “I am proud to report that the Bank retained its position as the undisputed leader in Sri Lanka’s Driving Strategy through financial services industry, crossed the LKR 2.0 Business Lines trillion mark in assets, was ranked as Sri Lanka’s No.1 brand..” Economic and Industry Overview • 120 Retail Banking • 126 General Manager’s Review • 14 Corporate and Offshore Banking • 131 International, Treasury, Investment and Overseas Operations • 134 Creating Value through Compliance Annexes Our Capitals Compliance with Code of Best Practice on Corporate Governance 2017 Issued by CA Sri Lanka • 394 Financial Capital • 137 Compliance Requirements as per Banking Manufactured Capital • 142 Act Direction No. 11 of 2007 • 401 Human Capital • 147 Compliance Requirements Enforced by Intellectual Capital • 156 Colombo Stock Exchange • 428 Social and Relationship Capital • 160 Compliance Requirements Enforced by Natural Capital • 171 the Central Bank of Sri Lanka • 430 Capital Adequacy • 434 Certificate of the Directors on Transfer Pricing • 448 Financial Reports Annual Report of the Directors on the State of Affairs of Bank of Ceylon • 179 Supplementary Directors’ Interest in Contracts • 185 Information Directors’ Statement on Internal Control over Milestones • 450 Financial Reporting • 188 GRI Index • 452 Independent Assurance Report • 190 Independent Assurance Report • 457 Directors’ Responsibility for Financial Reporting • 191 Statement of Profit or Loss in USD • 459 Report of the Auditor General • 192 Statement of Comprehensive Income in USD • 460 Statement of Profit or Loss • 196 Statement of Financial Position in USD • 461 Statement of Comprehensive Income • 197 Quarterly Performance • 462 Statement of Financial Position • 198 Share and Debenture Information • 465 Statement of Changes in Equity • 200 Ten Year Statistical Summary – Bank • 467 Statement of Cash Flows • 204 Subsidiaries and Associates • 469 Notes to the Financial Statements • 206 Correspondent Banks by Country • 472 Exchange Companies by Country • 478 Glossary of Financial/ Banking Terms • 480 Corporate Offices and Overseas Branches • 485 Corporate Information • 487 Scan the QR Code with your smart device to view this report online. 4 Bank of Ceylon | Annual Report 2018 Bank of Ceylon ANNUAL REPORT 2018 Standards and Principles The financial statements have been Welcome to our Integrated Report prepared in line with the Sri Lankan Accounting Standards issued by the As the primary publication to our stakeholders, this Integrated Annual Report aims Chartered Accountants of Sri Lanka. The to provide a balanced and comprehensive assessment of how we create value narrative report follows the principles of over the short, medium and long-term while managing the competing interests Integrated Reporting as prescribed in of our stakeholders. The Report presents information relating to our business the International Integrated Reporting model, operating landscape, strategy, corporate governance, risk management, Council’s (IIRC) Integrated Reporting <IR> performance and commitment towards sustainability and is anchored by our Framework. For sustainability reporting, material topics which have been determined through a systematic materiality we have adopted the ‘Core’ criteria of the analysis. GRI Standards published by the Global Reporting Initiative and have followed Scope and Boundary the recommendations for Environment and Social Governance (ESG) Reporting The Report covers the domestic, overseas and offshore operations of by the Colombo Stock Exchange. The Bank of Ceylon (herein referred to as “BoC”) and its subsidiaries (collectively Corporate Governance disclosures are referred to as the “Group”) for the period from 1 January 2018 to 31 December in line with the requirements of the Bank 2018. The financial information presented on pages 196 to 392 of this Report of Ceylon Ordinance No.53 of 1938 and reflects consolidated information while the non-financial information is limited amendments, Banking Act No. 30 of to that of the parent entity, given its dominance within the Group. We adopt an 1988 and subsequent amendments and annual reporting cycle and this Report builds on the Bank’s previous annual report the revised Code of Best Practice on for the financial year ending 31 December 2017. There have been no material Corporate Governance 2017 issued by restatements of non-financial information provided in the previous report. The CA Sri Lanka. Report has been structured based on the six capitals prescribed by the Integrated Reporting <IR> Framework. l Adoption of l Widened the l Followed new l Dedicated l Refined l Compliance the revised coverage of format issued chapter on structure to SLFRS 9. Code of Best material topics by CBSL in the Bank’s to facilitate Practice on beyond those presenting contribution to improved Corporate prescribed financial the economy. readability. Governance by GRI to statements. 2017 issued by include entity CA Sri Lanka. and industry specific topics. Reporting Improvements 5 External Assurance Financial Reporting and the Internal control over Auditor General Financial Reporting Reporting BDO Partners: Chartered Accountants Sustainability Concepts Reporting Corporate Governance Auditor General disclosures Connectivity Reliability Relevance and Strategic Focus and Materiality Comparability Material topics The Report has Manufactured reflect both The Report is presented the Capital Navigation icons positive and anchored by our strategies adopted and signposting negative matters material topics in achieving Social and have been used which impacted which represents triple bottom Human Relationship across the the Bank’s value information that line performance Capital Capital Report to show creation during is vital to our during the year and connectivity. the year. stakeholders. strategies for 2019 and beyond. Navigation Icons Reporting Boundary Financial Intellectual Capital Capital Integrated Reporting Natural Financial Reporting Capital Feedback Non-Financial Reporting We are committed to consistently enhancing the readability and relevance of our reporting and we welcome your suggestions and comments on our Annual Report. Please direct your feedback to, [email protected] Subsidiaries Bank Associates GROUP Internal and external stakeholders, Operating landscape, Risks and Opportunities 6 Bank of Ceylon | Annual Report 2018 PERFORMANCE OVERVIEW 2018 Financial Performance Highlights FINANCIAL CAPITAL Bank Group 2018 2017 Change % 2018 2017 Change % Results of Operations (LKR million) Total income 221,131 189,211 16.9 229,462 197,013 16.5 Net interest income 65,558 58,356 12.3 68,689 61,490 11.7 Profit before taxes on financial services 41,480 37,592 10.3 42,246 38,195 10.6 Profit before tax 31,892 30,343 5.1 32,437 30,816 5.3 Profit after tax 19,479 21,312 (8.6) 19,515 21,487 (9.2) Value to the Government 24,158 28,524 (15.3) 24,583 28,923 (15.0) Financial Position (LKR