Business Banking

New directions on the maintenance of capital adequacy

The Central Bank has released the Directions on Maintenance of Capital Adequacy Ratios under the BASEL II for Licensed Commercial Banks and Licensed Specialised Banks in terms of the provisions under Section 46(1) and 76J(1), respectively, of the Banking Act No. 30 of 1988. These Directions will come into effect from January 1, 2008.

The “International Convergence of Capital Measurement and Capital Standards” widely known as Basel II, issued by the Basel Committee on Banking Supervision (BCBS) of the Bank for International Settlements (BIS), provides several options for adopting these capital standards.

As an initial step towards adopting Basel II, it has been decided to begin with the simpler approach available, and to move to advanced approaches in the medium term, having regard to the preparedness of the banking system.

Accordingly, all Licensed Commercial Banks and all Licensed Specialised Banks are required to apply the Standardised Approach for credit risk, the Standardised Measurement Method for market risk and the Basic Indicator Approach for operational risk, in computing the capital requirement from January 1, 2008.

This new framework is intended to improve the safety and soundness of the banking system by aligning capital adequacy assessment more closely with the underlying main risks, comprising credit risk, market risk and operational risks in banks.

It is also intended to provide banking institutions with stronger incentives to improve risk measurement and management and allow complementary use of market mechanisms to have a greater accountability to other stakeholders of banks.

These Directions can be accessed through the Central Bank’s website www.cbsl.gov.lk

“Greater demand for corporate governance in banks” - MTI

The Global Banking Industry has been subjected to intense and increasing levels of regulations (from Sarbanes Oxley to Basel 11), that has demanded these financial services institutions to dedicated significant focus on ensuring compliance.

In Sri Lanka too, Mandatory Code on Corporate Governance will demand that local financial services institutions ensure compliance.

The Mandatory Code will be instrumental in developing the standard of corporate governance within the banking sector in Sri Lanka.

The Mandatory Code should not be looked at in isolation of the provisions within the present Banking Act. Close scrutiny of the Draft Mandatory Code extensively spells out the responsibilities of the Board, the Directors, Management and a number of other pivotal areas.

MTI’s Senior Business Analyst (Legal and Governance) Yatila Wijemanne said, “these responsibilities should be followed through the rules that have been entrenched under each category.

The rules that have to be compiled would come across as exhaustive, but it is a clear move forward in taking the level of corporate governance within the banking sector to the next level.”

The Mandatory Code details for instance, the composition of the Board and the requirement to understand risk management mechanisms in the interests of depositors, creditors, shareholders and other stakeholders.

Furthermore, aspects relating to the appointment, duties and responsibilities of the Chairman and CEO have also been included.

The Draft Mandatory Code has laid continuous emphasis toward the necessity to consult experts not only within the legal field but other associated fields when concerning the decision-making of the Bank.

Extensive rules have also been drafted on corporate governance elements such as transparency and accountability.

The level of success of the mandatory code will depend according to Yatila Wijemanne on “how banks would take up the challenge to re-organise their respective structures to deal with the changes in the level of corporate governance”.

Business Analyst Lihini Fernando said “the stage is set to analyse the way in which banks would comply with the Mandatory Code”.

MTI Consulting is a leading multinational consultancy company operating in eight countries across Europe, Middle East, South East and Eastern Asia.

MTI has been instrumental in providing their expertise to clients in 33 countries across five continents while handling 275 plus cross - industry projects.

HNB opens customer centre in Divulapitiya

Hatton National Bank (HNB) opened the 168th Customer centre at No. 30, Circular Road, Divulapitiya recently.

The Chief Guest for this occasion was Asst. General Manager - Zone III H. N. J. Chandrasekera.

A large gathering was present on this occasion which included senior bank officials, government officials and local businessmen.

With the opening of this new customer centre HNB will now provide better more spacious and modern infrastructure facilities to people in and around Divulapitiya to carry out banking functions without much hassle.

The HNB Divulapitiya customer centre will provide the complete range of banking facilities ranging from current/savings accounts (Pathum Vimana), import/ export facilities. Singithi (minor savings accounts), Shanthi housing loans, Gami Pubuduwa loans, Credit Cards, NRFC/RFC accounts etc.

NDB Bank opens new branch at Panadura

Extending its operations further, NDB Bank recently opened its latest branch at Panadura. This occasion was graced by the NDB Bank’s Deputy Chief Executive Officer, Eran Wickremaratne.

Customers of NDB Bank’s Panadura branch will have a wide range of services to choose from, particularly with recent additions to the NDB Bank’s extensive product portfolio.

Among the latest additions to NDB Bank’s portfolio are the NDB Bank ‘Vishmitha’ Savings Account which offers an interest free loan, after the completion of one year. The account holders are able to obtain 75% of their average savings balance as an interest free loan once in every 12 months.

These loans can be used for any purpose. In fact, the higher the account balance, the higher the loan option, while the available savings balance receives full interest even while the loan remains outstanding.

With its comparatively high interest rate of 7 per cent paid on the daily balance, the

“Vish-mitha” Savings Account also offers an ATM/ Debit Card free of charge, thus enabling customers to withdraw at any of Sri Lanka’s more than 1000 VISA enabled ATMs.

First anniversary celebration

ANNIVERSARY: Commercial bank’s Kundasale Customer Service Point (CSP), commemorated its first anniversary by opening 600 savings accounts for the employees of Eskimo Fashion Knitwear (Lanka) Limited, Pallekele. Manager of Kundasale CSP Sarath Ranaweera handing over a Pass Book to one of the employees.