Business
EY webinar on CBSL direction 13 & 14 of 2021 – understanding the regulatory requirements
The Central Bank of Sri Lanka (CBSL) directions on classification, recognition and measurement of credit facilities and other financial assets will come into effect from 01st January 2022 onwards. It’s paramount for bankers to understand the regulatory expectations in this regard. New directions were introduced with the objective of harmonizing the regulatory framework with Sri Lanka Financial Reporting Standards-SLFRS 9 Financial Instruments.
The regulator has emphasized the importance of having a comprehensive credit risk management framework while stipulating its main components. Accordingly, Licensed Commercial Banks (LCBs) are expected to have a framework covering all aspects of credit lifecycle of its financial assets which includes, policy on classification, potential risk, under performing loans and write-offs, guidelines on computing Expected Credit Losses (ECL) & disclosures.
A high-profile deliberation on this crucial theme conducted by Manil Jayesinghe, Country Managing Partner, Ernst & Young, Sri Lanka and Maldives and Rajith Perera, Partner, Financial Accounting Advisory Services of Ernst & Young, Sri Lanka is to be held on 22 November 2021 where they will discuss regulatory expectations combined with Financial Reporting Risk Management challenges faced by banks.
Apart from the emphasize on governance, compliance with new regulation will induce other technical and operational changes for banking community. Mainly, change in the definition of Non-performing loans (NPL) may trigger system modifications and classification for certain segments of the loan portfolio while the specific and general provision based on the subclassification will cease to exist and provision determination will be based on SLFRS 9 Financial Instruments combined with the directive providing additional guidance as appropriate. Deliberation on “Significant Increase in Credit Risk” (SICR) will require lending officers to exercise judgement and have well documented policies and processes to ensure consistency in terms of staging its credit facilities. Another aspect which needs early intervention is on recognition of interest income for stage 3 facilities which shall be recognized in line with SLFRS 9 Financial Instruments. Banks may review the mechanism for income recognition as the interest suspension is no longer relevant with the revocation of the respective circulars.
Further, there will be impairment charges defined based on SLFRS 9 and the directive based on 12months Expected Credit Loss (ECL) and Lifetime ECL. Minimum Stage 1 Provision of 0.5% will be maintained and in the event 0.5% is not maintained adequate appropriations to be made from Equity.
Another important requirement under the new direction is on managing model risk. Banks are requested to develop comprehensive policies in relation to model governance covering life cycle of model development and validation. Given the increased use of sophisticated models with the implementation of SLFRS 9, regulatory requirement is timely to ensure accuracy and completeness of financial information. Further, if any changes in the credit models are required, the rationale and justification for such change shall be evaluated by the Chief Risk Officer, Integrated Risk Management Committee and approved by the Board of Directors.
The directive states that scope of internal audit function should be enhanced to independently evaluate the effectiveness of the credit risk assessment & measurements. Further, the Internal Audit function will at least annually, validate and evaluate all credit risk assessment models, inputs and assumptions used along with data smoothening. An assurance on the adequacy and effectiveness of back testing should be provided from third line of defense perspective.
Economists, banking and financial service professionals and other decision makers interested are invited to join for further deliberations on this crucial theme webinar with Ernst and Young, on 22nd November 2021 from 09.00 am to 12.00 pm. For registrations contact Thilini Perera on Thilini.perera1@lk.ey.com or Tel. +94 770623529.
Business
Needs of populace hit by Cyclone Ditwah seen as waiting to be addressed
By Hiran H. Senewiratne
The government is yet to address fully the needs of the Cyclone Ditwah affected populace though one year has elapsed. The devastation cost the country more than US $ 4.1 billion, an Australia-based Chartered Engineer of Sri Lankan origin said.
‘Cyclone Ditwah affected more than 2.2 million people in 25 districts, which is considered to be one tenth of the population. However, only 39 percent of the allocated funds have been spent to date, the speaker, a one-time General Secretary of the JVP, now living in Australia Lionel Bopage said.
He made these comments at a Rotary Club Colombo South monthly meeting held at the Kingsbury Hotel, Colombo recently.
Bopage quoted from a Loughborough University research report published in February to the effect that Sri Lanka has under invested in prevention but over invested in recovery.
Bopage added: ‘The largest single economic category affected were not buildings but the agriculture sector which provides livelihoods for the majority of affected persons. Therefore agricultural livelihoods have been hit most.
‘More than 58,000 hectares of paddy lands were flooded in the Eastern districts alone, while 46 reservoirs reached critical spill level or failed outright following the disaster.
‘A rapid education sector assessment found that 1,682 schools were affected and more than 555,000 children were unable to attend schools. Further, 622 water supply schemes had been left non-functional and apart from that 11300 homes were damaged or destroyed. But reconstruction is happening at a very slow pace.
‘Tens of thousands of households in the hill country and in the East are still living in damaged properties and on unstable slopes drawing water from schemes that have not been restored.
‘ A Post Disaster Needs Assessment put the cost of resilience at US$ 3.4 billion but restoration work is happening at a slow pace even with foreign donor assistance.’
Business
WB forecast buoys bourse but weak investor participation slows momentum
By Hiran H. Senewiratne
The CSE yesterday kicked off on a positive note due to a World Bank forecast that Sri Lanka could achieve 4.4 percent economic growth this year but later lost momentum due to weak investor participation.
Amid those developments both indices moved upwards. The All Share Price Index went up by 132 points while S and P SL20 rose by 21.02 points.
Turnover stood at Rs 1.97 billion with three crossings. Those crossings were; Lanka IOC 2.7 million shares crossed to the tune of Rs 470 million; its shares traded at Rs 127, CCS 2.7 million shares crossed to the tune of Rs 315 million; its shares sold at Rs 118 and JKH five million shares crossed for Rs 91.5 million; its shares traded at Rs 18.30.
In the retail market companies that mainly contributed to the turnover were; Commercial Credit and Finance Rs 126 million (1.3 million shares traded), Lanka IOC Rs 98 million (775,000 shares traded), Asiri Surgical Hospitals Rs 77 million (7.6 million shares traded), Commercial Bank Rs 51.3 million (307,000 shares traded), Sampath Bank Rs 46 million (325,000 shares traded), HNB Rs 37 million (98000 shares traded) and Tokyo Cement Rs 31 million (393,000 shares traded). During the day 50 million share volumes changed hands in 14547 transactions.
It is said that the petroleum sector performed well, especially Lanka IOC, while in the banking sector counters, especially Commercial Bank and Sampath Bank performed well. In the manufacturing sector, JKH impressed.
TAL Lanka Hotels announced that it has scheduled an Extraordinary General Meeting on October 29 to obtain shareholder approval for a proposed Rs 1.87 billion rights issue. The proceeds will be utilized for the repayment of bank borrowings, part refurbishment of the Taj Samudra Hotel in Colombo, settlement of vendor liabilities, and general corporate requirements.
Yesterday the rupee was quoted at Rs 330.95/331.05 to the US dollar in the spot market, weaker from Rs 330.85/95 the previous day, while bond yields were quoted broadly steady, dealers said.
Business
Huawei continues to showcase practical AI applications at Sri Lanka AI Week 2026
Sri Lanka AI Week 2026 continued into its second day bringing together government, industry, academia and technology partners to explore practical applications of artificial intelligence. As the AI Technology Partner for the second consecutive year, Huawei showcased 18 use cases spanning government, education, finance, industry, green energy and everyday life, demonstrating how AI can be applied to real-world needs.
Prime Minister Dr. Harini Amarasuriya visited the Huawei exhibition together with officials from the Ministry of Education, Higher Education and Vocational Education, experiencing the Smart Classroom, AI in Education and MindGraph by Beijing Normal University demonstrations. The Smart Classroom demostration highlighted how connected technologies can bring teachers and students in different locations into a shared learning environment, while the AI in Education showcase demonstrated how AI can support teachers, enhance learning and enable more personalised education. The Prime Minister praised the efforts of the Ministry of Education, Higher Education and Vocational Education, Huawei and their partners to demonstrate practical applications of AI in education, noting the role of technology in supporting teachers, expanding learning opportunities, and advancing a more inclusive, equitable and future-ready education system.
Later in the day, Deputy Minister of Digital Economy Eng. Eranga Weeraratne, Deputy Minister of Industry and Entrepreneurship Development Chathuranga Abeysinghe, Secretary to the Ministry of Digital Economy Waruna Sri Dhanapala, and Chinese Ambassador Wei Huaxiang visited the Huawei exhibition and explored the AI Hands-On Classroom AI Empowering Industry, AI in Education and Smart Classroom demonstrations. Deputy Minister Weeraratne praised Huawei’s practical approach to showcasing AI applications, noting their relevance to Sri Lanka’s digital transformation across education, industry and skills development. The engagement also extended across the wider AI ecosystem, with industry professionals, technology partners, academics and other visitors engaging with the demonstrations and expressing appreciation for Huawei’s practical approach to applying AI across different areas of society and the economy.
Daniel Wu, CEO of Huawei Sri Lanka, said that Huawei will continue bringing global experience, technology and ecosystem resources to Sri Lanka, while working side by side with local partners to build local capabilities, develop local talent and create real value for the country. “I believe that by working together, we can make AI not only more intelligent, but also more local, more inclusive, and more meaningful for everyone,” he said.
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