Regulatory Capital (LKR '000)

Commom Equity 90,644,654 91,682,073

Tier I Capital 90,644,654 91,682,073

Total Capital 119,671,398 120,708,817

Regulatory Capital Ratios (%)

Common Equity Tier I Capital Ratio (Minimum Requirement - 4.5% (with

effect from 01.07.2017)12.30% 12.26%

Tier I Capital Ratio (Minimum Requirement -7.75% (with effect from

01.07.2017 )12.30% 12.26%

Total Capital Ratio (Minimum Requirement -11.75% (with effect from

01.07.2017 )16.24% 16.14%

Regulatory Liquidity

Statutory Liquid Assets (LKR '000) 213,594,125

Statutory Liquid Assets Ratio (Minimum Rquirement -20% )

Domestic Banking Unit (%) 26.65%

Off-Shore Banking Unit (%) 32.45%

Liquidity Coverage Ratio (%) - Rupee (Minimum Requirement - 80%with

effect from 01.01.2017 )237.92%

Liquidity Coverage Ratio (%) - All Currency (Minimum Requirement -

80% with effect 01.01.2017 )182.95%

Basel III - Disclosures Under Pillar 3 as per the Banking Act Direction No.01 of 2016

Template 01

September 30, 2017

Key Regulatory Ratios - Capital and Liquidity

Item

Bank Group

Bank Group

Common Equity Tier I (CETI) Capital after Adjustments 90,644,654 91,682,073

Total Common Equity Tier I (CET1) Capital 92,523,079 92,741,733

Equity Capital (Stated Capital) /Assigned Capital 37,041,837 37,041,837

Reserve fund 5,647,890 5,647,993

Published retained earnings/(Accumulated retained losses) 17,632 (1,526)

Published Accumulated Other Comprehensive Income (OCI) (1,693,711) (1,681,027)

General and other disclosed reserves 43,969,512 43,969,512

Unpublished current year's profit/(losses) and gains reflected in OCI 7,539,919 7,539,919

Ordinary shares issued by consolidated banking and financial subsidiaries of

the bank and held by third parties - 225,025

Total Adjustments to CET1 Capital 1,878,425 1,059,660

Goodwill (net) - 400,045

Intangible Assets (net) 579,963 659,615

Significant investments in the capital of financial institutions where the bank

owns more than 10 per cent of the issued ordinary share capital of the entity1,298,462 -

Additional Tier 1 (AT1) Capital after Adjustments - -

Total Additional Tier 1 (ATI) Capital - -

Qualifying Additional Tier 1 Capital Instruments - -

Instruments issued by consolidated banking and financial subsidiaries of the

bank and held by third parties - -

Total Adjustments to AT1 Capital - -

Investment in own shares - -

Others (Specify)

Tier 2 Capital after Adjustments 29,026,744 29,026,744

Total Tier 2 Capital 29,026,744 29,026,744

Qualifying Tier 2 Capital Instruments 23,709,215 23,709,215

Revaluation gains 2,040,935 2,040,935

Loan Loss Provisions 3,276,594 3,276,594

Instruments issued by Consolidated Banking and Financial Subsidiaries of the

Bank and held by Third Parties - -

Total Adjustments to Tier 2 Capital - -

Investment in own shares - -

Others (Specify)

CET1 Capital 90,644,654 91,682,073

Total Tier 1 Capital 90,644,654 91,682,073

Total Capital 119,671,398 120,708,817

Template 02

Item

Amount ( LKR '000)

September 30, 2017

Basel III Computation of Capital Ratios as at September 30, 2017

Item

Amount ( LKR '000)

Basel III Computation of Capital Ratios as at September 30, 2017

Bank Group

Total Risk Weighted Amount 736,888,111 747,734,755

Risk Weighted Amount for Credit Risk 675,864,975 686,242,946

Risk Weighted Amount for Market Risk 6,161,591 6,161,591

Risk Weighted Amount for Operational Risk 54,861,546 55,330,218

CET1 Capital Ratio (including Capital Conservation Buffer,Countercyclical

Capital Buffer & Surchage on D - SIBs) (%)12.30% 12.26%

Of which : Capital Consevation Buffer (%)

Of which : Countercyclical Buffer (%)

Of which : Capital Surcharge on D -SIBs (%)

Total Tier 1 Capital Ratio (%) 12.30% 12.26%

Total Capital Ratio (Including Capital Conservation Buffer,Countercyclical

Capital Buffer & Surcharge on D-SIBs (%)16.24% 16.14%

Of which : Capital Consevation Buffer (%)

Of which : Countercyclical Buffer (%)

Of which : Capital Surcharge on D -SIBs (%)

Item

Amount ( LKR '000)

September 30, 2017

Total Un-weighted

Value

Total weighted

Value

Total stock of High Quality Liquid Assets (HQLA) 162,066,841 161,853,895

Total Adjusted Level 1 Assets 161,640,948 161,640,948

Level 1 Assets 161,640,948 161,640,948

Total Adjusted Level 2A Assets - -

Level 2A Assets - -

Total Adjusted Level 2B Assets 425,893 212,947

Level 2B Assets 425,893 212,947

Total Cash outflows 1,082,827,251 191,894,628

Deposits 616,778,694 61,677,869

Unsecured wholesale funding 219,823,108 101,031,398

Secured funding transaction - -

Undrawn portion of committed (irrevocable) facilities and other

contingent funding obligations

246,225,449 29,185,361

Additional requirements - -

Total Cash Inflows 156,812,930 103,427,621

Maturing secured lending transactions backed by the following

collateral

37,993,606 37,580,732

Committed facilities - -

Other inflows by counterparty which are maturing within 30 days 71,486,360 43,995,027

Operational deposits 10,062,797 -

Other cash inflows 37,270,167 21,851,862

Liquidity Coverage Ratio (%) (Stock of High Quality Liquid

Assets/Total Net Cash Outflows over the Next 30 Calender

Days)*100

182.95%

Template 04

Item

Amount (LKR'000)

Reporting Period

Basel III Computation of Liquidity Coverage Ratio as at September 30, 2017

Description of the Capital Instrument Stated CapitalDebentures - Type

"A" - 1

Debentures - Type

"A" - 2

Debentures - Type

"B" - 1

Debentures - Type

"B" - 2IFC Borrowings

Issuer Commercial Bank Commercial Bank Commercial Bank Commercial Bank Commercial Bank

Inernational

Finance

Corparation

Unique Identifier (e.g., ISIN or Bloomberg

Identifier for Private Placement)

Governing Law(s) of the Instrument Sri Lanka Sri Lanka Sri Lanka Sri Lanka Sri Lanka United State

Original Date of Issuance N/A March 8, 2016 October 27, 2016 March 8, 2016 October 27, 2016 March 13, 2013

Par Value of Instrument LKR 100/- LKR 100/- LKR 100/- LKR 100/-

Perpetual or Dated Perpetual Dated Dated Dated Dated Dated

Original Maturity Date, if Applicable N/A March 8, 2021 October 27, 2026 March 8, 2021 October 27, 2026

Amount Recognised in Regulatory Capital (in

LKR ‘000 as at the Reporting Date) 37,042,046 3,544,272 5,071,800 1,749,090 1,928,200 11,415,853

Accounting Classification (Equity/Liability) Equity Liability Liability Liability Liability Liability

Issuer Call subject to Prior Supervisory

Approval No Yes Yes Yes Yes Yes

Optional Call Date, Contingent Call Dates and

Redemption Amount (LKR ‘000) N/A 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 N/A

Coupons/Dividends

Fixed or Floating Dividend/Coupon N/A Fixed Fixed Fixed Fixed Floating

Coupon Rate and any Related Index 10.75% 12.00% 11.25% 12.25%

06 Months LIBOR

+ 5.75%

Non-Cumulative or Cumulative

Convertible or Non-Convertible

If Convertible, Conversion Trigger (s) N/A N/A N/A N/A N/A N/A

If Convertible, Fully or Partially N/A N/A N/A N/A N/A N/A

If Convertible, Mandatory or Optional N/A N/A N/A N/A N/A N/A

If Convertible, Conversion Rate N/A N/A N/A N/A N/A N/A

Template 05

Main Features of Regulatory Capital Instruments

On-Balance Sheet

Amout

Off-Balance Sheet

Amout

On-Balance Sheet

Amout

Off-Balance Sheet

AmoutRWA RWA Density (%)

Claims on Central Government and Central Bank of Sri Lanka 295,501,193 65,067,500 295,501,193 1,301,350 - -

Claims on Foreign Sovereigns and their Central Banks 14,743,107 - 14,743,107 - 14,743,107 100.00

Claims on Public Sector Entities (PSEs) 7,520 - 7,520 - 7,520 100.00

Claims on Official Entities and Multilateral Development Banks(MDBs) - - - - - -

Claims on Banks Exposures 21,212,405 127,857,625 21,212,405 2,690,435 13,914,297 58.21

Claims on Financial Institutions 26,791,809 - 26,791,809 - 12,675,208 47.31

Claims on Corporates 383,818,214 305,024,759 331,898,393 61,779,156 379,539,110 96.41

Retail Claims 238,514,708 16,697,041 202,462,357 7,665,695 173,218,698 82.43

Claims Secured by Residential Property 59,854,730 - 59,854,730 - 47,416,053 79.22

Claims Secured by Commercial Real Estate - - - - - -

Non-Performing Assets (NPAs) 6,885,116 - 6,885,116 - 9,034,509 131.22

Higher-risk Categories 919,431 - 919,431 - 2,298,578 250.00

Cash Items and Other Assets 45,672,804 - 45,672,804 - 23,017,896 50.40

Total 1,093,921,038 514,646,924 1,005,948,866 73,436,636 675,864,975 62.62

Template 07

Credit Risk under Standardised Approach

Credit Risk Exposures and Credit Risk Mitigation (CRM) Effects

Asset Class

Amount (LKR '000) as at September 30, 2017

Exposures before Credit Conversion Factor

(CCF) and CRMExposures post CCF and CRM RWA and RWA Density (%)

Description

Risk Weight / Asset Class 0% 20% 50% 60% 75% 100% 150% >150%Total Credit

Exposures Amount

Claims on Central Government and Central Bank of Sri Lanka 296,802,543 - - - - - - - 296,802,543

Claims on Foreign Sovereigns and their Central Banks - - - - - 14,743,107 - - 14,743,107

Claims on Public Sector Entities (PSEs) - - - - - 7,520 - - 7,520

Claims on Official Entities and Multilateral Development Banks(MDBs) - - - - - - - - -

Claims on Banks Exposures - 6,772,037 9,141,826 - - 7,988,976 - - 23,902,840

Claims on Financial Institutions - 3,511,554 22,614,716 - - 665,539 - - 26,791,809

Claims on Corporates - 10,953,052 10,751,995 - - 371,972,502 - - 393,677,549

Retail Claims 732,194 433,385 - 9,869,562 127,530,506 71,562,404 - - 210,128,052

Claims Secured by Residential Property - - 24,877,356 - - 34,977,375 - - 59,854,730

Claims Secured by Commercial Real Estate - - - - - - - - -

Non-Performing Assets (NPAs) - - 32,244 - - 2,521,842 4,331,030 - 6,885,116

Higher-risk Categories - - - - - - - 919,431 919,431

Cash Items and Other Assets 17,631,961 6,278,684 - - - 21,762,159 - - 45,672,804

Total 315,166,698 27,948,712 67,418,137 9,869,562 127,530,506 526,201,425 4,331,030 919,431 1,079,385,502

Template 08

Credit Risk under Standardised Approach

Exposures by Asset Classes and Risk Weights

Amount (LKR '000) as at September 30, 2017 (Post CCF & CRM)

Bank Group

(a) RWA for Interest Rate Risk 269,072 269,072

General Interest Rate Risk 125,098 125,098

i) Net Long or Short Position 125,098 125,098

ii) Horizontal Disallowance- -

iii) Vertical Disallowance- -

iv) Options- -

Specific Interest Rate Risk 143,974 143,974

(b) RWA for Equity 59,994 59,994

i) General Equity Risk32,225 32,225

ii) Specific Equity Risk27,769 27,769

(c) RWA for Foreign Exchange & Gold 394,921 394,921

Capital charge for Market Risk [ (a ) + (b +( c ) * CAR6,161,591 6,161,591

Template 09

Market Risk under Standardised Measurment Method

Item

RWA Amount (LKR '000) as at

September 30, 2017

1st Year 2nd Year 3rd Year

The Basic Indicator Approach 15% 37,906,086 42,959,415 48,059,131

The Standardised Approach - - -

Corporate Finance 18% - - -

Trading and Sales 18% - - -

Payment and Settlement 18% - - -

Agency Services 15% - - -

Asset Management 12% - - -

Retail Brokerage 12% - - -

Retail Banking 12% - - -

Commercial Banking 15% - - -

The Alternative Standardised Approach

Corporate Finance 18% - - -

Trading and Sales 18% - - -

Payment and Settlement 18% - - -

Agency Services 15% - - -

Asset Management 12% - - -

Retail Brokerage 12% - - -

Retail Banking 12% 0.035

Commercial Banking 15% 0.035

The Basic Indicator Approach 6,446,232

The Standardised Approach

The Alternative Standardised Approach

The Basic Indicator Approach 54,861,546

The Standardised Approach

The Alternative Standardised Approach

Capital Charges for Operational Risk ( LKR'000)

Risk-Weighted Amount for Operational Risk (LKR'000)

Template 10

Operational Risk under Basic Indicator Approach / The Standardised Approach / The Alternative Standardised Approach

Business LinesCapital

Charge FactorFixed Factor

Gross Income (LKR '000) Risk weighted Assets Amount

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 1,098,985,741 1,097,775,428 1,005,948,866 5,568,580 86,574,003

Cash and Cash Equivalents 25,896,049 27,699,639 27,699,639

Balances with Central Banks 46,164,247 40,883,479 40,883,479

Placements with Banks 12,378,863 16,429,573 16,429,573

Derivative Financial Instruments 2,363,141

Other Financial Instruments - Held-For-Trading 5,246,327 5,246,327 5,246,327

Financial Assets Designnated at Fair Value through

Profit or Loss

Loans and Receivables to Banks 638,427

Loans and Receivables to Other Customers 707,431,178 707,830,256 623,134,679 84,695,577

Financial investments - Available-for-sale 156,151,241

Financial investments – Held-to-maturity 63,567,170 270,629,351 270,307,098 322,253

Financial investments – Loans and receivables 48,205,468

Investments in Subsidiaries 2,564,879 2,564,879 1,266,417 1,298,462

Investments in Associates and Joint Ventures 44,331 44,331 44,331

Property, plant & equipment 10,700,347 10,700,347 10,700,347

Investment Properties

Goodwill and Intangible assets 579,963 579,963 579,963

Deferred Tax Assets -

Other Assets 17,054,110 15,167,283 15,483,304

Liabilities 996,466,791 994,821,353

Due to banks 41,847,322

Derivative Financial Instruments 3,489,848

Securities sold under repurchase agreements 60,212,617 61,448,330

Other Financial Liabilities - Held-For-Trading

Financial Liabities Designated at Fair Value through

Profit or Loss

Due to Other Customers 818,564,433 802,286,405

Other Borrowings 24,423,731 75,950,755

Debt Securities Issued

Current Tax Liabilities 3,676,796 3,638,854

Deferred Tax Liabilities 920,553 2,104,987

Other Provisions 1,874

Other Liabilities 17,923,742 36,212,592

Due to Subsidiaries 35,271

Subordinated Term Debts 25,370,604 13,179,430

Off- Balance Sheet Liabilities 562,482,289 562,482,289 73,436,636

Guarantees 47,277,151 47,277,151 27,972,950 5,730,776

Performance Bonds 24,302,653 24,302,653 10,843,773 1,307,554

Letter of Credit 46,938,526 46,938,526 9,258,358 129,347

Other Contingent Items 297953163.4 297,953,163 11,144,542 806

Undrawn Loan Commitments 29,229,186 29,229,186 14,217,012

Other Commitments 116,781,609 116,781,609

Shareholders' Equity

Equity Capital (Stated Capital)/Assigned Capital

of which Amount Eligible for CET1 37,042,046 37,042,046

of which Amount Eligible for AT1 -

Retained Earnings 11,691,774

Accumulated Other Comprehensive Income (2,105,511)

Other Reserves 55,890,641 65,912,030

Total Shareholders' Equity 102,518,950 102,954,076

Template 11

Differences between Accounting and Regulatory Scopes and Mapping of Financial Statement Categories with Regulatory Risk Categories – Bank Only

Item

Amount (LKR '000) as at September 30, 2017

Notes: Where a single item attracts capital charges according to more than one risk category, it should be reported in all columns that it attracts a capital charge.

As a consequence, the sum of amounts in columns (c) to (e) may be greater than the amount in column (b). An explanation note must be provided for such

reporting for reconciliation purpose.

OTHER RISK MANAGEMENT DISCLOSURES

Financial Highlights

Rs Mn Performance 2Q Annual Performance

(For the six months ended)

2017 2016

% Change 2017 2016

% Change

Net Interest Income 9,159.8 7,997.9 14.53% 17,821.2 16,110.8 10.62% Net fee and commission income 1,956.2 1,508.9 29.64% 3,977.4 2,968.9 33.97% Other income 756.7 496.7 52.35% 1,605.1 1,902.3 -15.63% Less: Impairment for loans and other losses 695.3 551.2 26.14% 937.0 1,546.3 -39.40% Net operating income 11,177.4 9,452.3 18.25% 22,466.7 19,435.8 15.59% Operating expenses 4,831.1 4,437.7 8.86% 9,779.8 9,044.5 8.13% Operating profit before VAT & NBT 6,346.3 5,014.6 26.56% 12,686.9 10,391.3 22.09% Less: Financial VAT & NBT 1,143.2 698.7 63.62% 2,262.0 1,495.9 51.21% Profit before income tax 5,203.1 4,315.9 20.56% 10,424.9 8,895.4 17.19% Less - Income tax expense 1,438.6 1,062.1 35.45% 2,885.0 2,407.3 19.85% Profit for the Period 3,764.5 3,253.8 15.70% 7,539.9 6,488.1 16.21%

ROA has been hovering around industry average whilst ROE has slightly deteriorated during second half compared to industry performance resulting from the latest Rights Issue of the

Bank

NIM continued to be under pressure compared to Industry Performance and CAR continued to be above the Industry

A proven track record of improving asset quality whilst growing the portfolio of the

Bank

Bank continued to manage Liquid Assets in an efficient manner

Financial Stability Through Risk Management

A clear understanding of risks surrounding the business activities is essential for any organisation to create sustainable stakeholder value through executing its strategies. It is therefore, essential to reinforce the overall strategy of an organisation with a prudent risk management strategy so that the opportunities could be optimised while minimising the effects of down-side risks. Banks which are responsible for the vital role of financial intermediation in the economy should be more committed to managing their risks in a prudent and transparent manner compared to a normal business organisation. Accordingly, Basel Committee on Banking Supervision has formulated broad supervisory standards and guidelines to inculcate industry best practices across the banking institutions through ‘Basel Accords’ (Basel II, the second of the Basel Accords which has been extended by Basel III). While Basel Accord encourages convergence towards common approaches and standards, the ultimate purpose of these rules is to create financial stability and resilience in financial sector institutions.

Value Creation through Operational Efficiency

Basel II Framework

The Basel II framework is built on three Pillars and the progress made by the Bank in achieving these standards are discussed below:

Pillar 1

Pillar 2

Pillar 3

Concept

Maintenance of minimum regulatory capital for credit risk, market risk and operational risk.

Supervisory review process to evaluate the activities and risk profile of the Bank to determine whether the Bank should hold higher level of capital than the minimum requirement in Pillar 1. This mechanism is commonly known as ICAAP (Internal Capital Adequacy Assessment Process).

Complements the minimum capital requirement and the supervisory review process (i.e., the first and the second pillars) by developing a set of disclosure requirements to facilitate market participants to assess the risk exposures of banks and way in which the risks are managed.

Progress Made by the Bank

Computation of capital adequacy as per regulatory requirements.

The Bank has implemented a comprehensive ICAAP framework since December, 2013 with the assistance of an overseas risk consultancy firm.

The Bank started providing a comprehensive set of risk management disclosures from 2012 in line with the regulatory requirements to enhance market discipline.

In addition to meeting the requirements stated in the Risk Management Framework prescribed by the regulator, the Bank has progressed well in implementing the International Best Practices of Risk Management by acquiring risk management software systems for Credit, Market and Operational risks.

Basel III and Beyond

In compliance with the regulatory requirements, the Bank has initiated establishing one of the standards prescribed under Basel III Framework - Liquidity Coverage Ratio (LCR). Accordingly, Bank started submitting these reports since March 2015.

With the objective of achieving a more resilient banking system in the country, CBSL is to implement Basel III minimum capital requirements from July 01, 2017 with specified timelines to increase minimum capital ratios to be fully implemented by January 01, 2019.

In line with such directive, introduction of various capital buffers and strengthening of level of capital as well as avoidance of systemic risk is expected to be achieved. The Bank is gearing to embrace changes to be proposed in line with this and work towards providing a safe banking system to our stakeholders.