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EY webinar on CBSL direction 13 & 14 of 2021 – understanding the regulatory requirements

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From left - Manil Jayesinghe, Country Managing Partner- Ernst & Young and Rajith Perera, Partner-Financial Accounting Advisory Services of Ernst & Young

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.



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ESOFT Metro Campus holds Graduation Ceremony 2021

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Dr. Dayan Rajapakse – Chairman and Managing Director of the ESOFT Group (Right) presenting a certificate to a graduate

The Annual Graduation Ceremony of ESOFT Metro Campus was held at the Bandaranaike International Memorial Hall (BMICH) on the 23rd and 24th of November 2021. A total of 1,800 students graduated at this year’s event. Successful students received their Pearson BTEC Higher National Diplomas, Pearson Level 7 Qualifications, London Metropolitan University (UK) Degrees and MBA’s, Kingston University (UK) Degrees and MSc’s.

It was held across two days and split into 9 sessions, to be in full compliance with health guidelines. In addition to the conferring of degrees, batch tops were awarded gold medals and special awards were made to the top achievers of the programmes.

Keynote addresses were by an eminent group of academics and industry leaders including Mr. Conard Dias CEO, LOLC Finance PLC, Mr. Thushera Kawdawatta – CEO, Axiata Digital Labs, Dr. Dayan Rajapakse – Chairman and Managing Director of the ESOFT Group, Dr. Sampath Wahala – Chairman, Sri Lanka Accreditation Board, Mr. Tishan Subasinghe – Managing Director and joint Managing Partner Moore Stephens Consulting (Pvt) Ltd and Moore Stephens Aiyar, Prof. A.A.C Abeysinghe – M.Phil. PhD Programme Coordinator, Senior Lecturer Faculty of Management & Finance, University of Colombo.

Foreign delegates from the University Partners were present virtually and delivered their speeches and wishes for the graduates via video. The Virtusa careers team were also present on both days in order to provide career opportunities to the young and successful graduates. ESOFT prides itself in producing graduates who are work-ready and able to take on the challenges and opportunities presented by the new economy.

ESOFT has a rich history of 21 years and is the largest private sector higher education network in Sri Lanka, and offers a variety of programmes through an extensive island-wide network of over 40 branches and serves over 40,000 learners each year in a range of programmes from school leaver courses to postgraduate programmes.

ESOFT partnered with Kingston University London in 2012 to offer undergraduate and postgraduate qualifications in engineering and soon established a dedicated College of Engineering in Katubedda. In 2013, they partnered with London Metropolitan University to offer a range of programmes leading to undergraduate and postgraduate awards in Computing, Business, Hospitality, and Travel & Tourism. A range of MSc programmes in IT and an International Doctoral programme for IT, Science and Engineering research areas, has also been introduced via Kingston University.

The ESOFT Group has won local and international awards from Pearson (UK), BCS (UK), NBQSA, National Chamber of Commerce, Federation of Chambers of Commerce of Sri Lanka in recognition of their academic excellence and business performance. Their pinnacle accomplishment was to be recognized by the Sri Lankan Government as a Non-state Degree Awarding Institution in 2019.

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Coconut industry products raking in forex to the tune of $ 7000 yearly – State Minister

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By Steve A. Morrell

Earnings from exporting coconut products amounted to $ 7000 annually. Such exports include jaggery and treacle, which are key products relating to the coconut industry, State Minister of Coconut, Kithul and Palmyrah Cultivation Promotion Arundika Fernando said.

Although coconut, as part of the plantation industry, was not given due recognition, it was now a distinct contributor to forex earnings and was of significant importance to the economy of the country, Fernando said.

The State Minister added: “Development of the coconut plantations includes value addition promotion to its various products, which are now key to sustaining the coconut plantations.

“Such development included propagation of 600,000 nursery plants for distribution among smallholders and large-scale plantations to add further progress to the industry. As a result, the coconut industry is part of the mainstream economy.

“The coconut industry made a substantial financial contribution to the economy of the country. Value addition in all products was key to development. Coconut products, used extensively in allied local industries, were contributors to value addition. This is efficiently handled by the private sector.

“Collaboration with the Jaffna University was on-going to develop kitul and palmyrah.

“Soil testing and further inputs were envisaged for development.

“Export markets would include Europe, Canada and the US. This is particularly true of kitul treacle and jaggery. Value of these exports would reach approximately $ 2 million.”

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INSEE Cement’s 360-Degree Approach Eases Cement Shortage in Sri Lanka

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Operating at maximum production capacity with optimized distribution channels for a number of weeks, INSEE Cement has successfully helped to mitigate the cement shortage that was prevailing in the local market. INSEE Cement’s concentrated and immediate contingency measures across its entire operation at the onset of the shortage ensured an uninterrupted market supply of cement, while also logging a record-high 700,000 MT production output during the third quarter of 2021 for the company.

“As Sri Lanka’s leading cement manufacturer, INSEE Cement took on the responsibility to ensure the local construction industry’s post-COVID-19 revival remained on its trajectory,” stated Gustavo Navarro, Chief Executive Officer at INSEE Cement Sri Lanka. “We continued to fully support government regulations and industrial policies to first stabilize the market, and were able to deploy our island-wide distribution and dealership network to ensure an uninterrupted supply across the island. The loyalty and patience of our customers gave us that extra encouragement we needed to overcome the challenge.”

INSEE Cement operates at a 3.6MT maximum capacity, with a 1.5MT production at the Galle plant, a 1.3MT output from the Puttalam facility and a 0.8MT import capacity at the Colombo Cement Terminal. To mitigate the shortage the company introduced two more additional import vessels to its logistics operation to accelerate production and distribution cycles.

 

 

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