Compliance Requirements as per Banking Act Direction No. 11 of 2007

The Board shall strengthen the safety and soundness of the Bank by ensuring the implementation of the following:

Strategic objectives are formulated and values are reviewed at sessions held with the participation of the Board and the Key Management Personnel. The Board approved Strategic Plan together with the corporate values were communicated to staff up to Branch Manager level at an offsite location where the Strategy Plan was launched and reinforced by the Corporate Management Team. All other levels of staff were informed through regular briefing sessions and at meetings.

The Board approved Strategic Plan for 2025 to 2029 and the Budget for 2025 is in place. The Corporate values are included in the intranet.

The Bank's overall Business Strategy is included in the rolling Strategic Plan prepared for a period of five years and the related Action Plan for the same period is prepared and approved by the Board.

The risk appetite, risk management framework and mechanisms have also been approved by the Board in line with the Strategic Plan. Measurable goals for the Bank as a whole have been set and performance is measured in line with these goals.

The Board has appointed a Board Integrated Risk Management Committee tasked with approving the Bank's Integrated Risk Management Policy, defining the risk appetite, identifying principal risks, setting governance structures and implementing systems to measure, monitor and manage the principal risks.

The Bank has implemented a process where the Board members discuss the risks arising out of new strategies and the ways and means to mitigate such risks.

A Board approved Integrated Risk Management Policy covering all areas of major risks is in place.

The following reports also provide further details in this regard:

The Board has approved and implemented a Communication Policy covering all stakeholders which was reviewed during the year under review.

The Board Audit Committee which reports to the Board is tasked with reviewing the adequacy and the integrity of the Bank's Internal Control System over Financial Reporting. This Committee reviewed reports from the Internal Audit Department, which reports directly to the Audit Committee and from the External Auditors in carrying out this task. The Board Audit Committee regularly follows up on the rectifications of the findings of the regulators as a tool for further strengthening the Internal Control System.

Internal Audit Department is tasked with the responsibility of conducting information systems audits to assess the effectiveness of the Management Information System (MIS). The Board has reviewed the adequacy of the MIS and the Internal Control System.

The Bank has identified the Assistant General Managers and officers in the grades above that as well as the officers in allied grades as Key Management Personnel (KMP) of the Bank for corporate governance purposes.

Areas of authority and key responsibilities have been defined for the Directors and KMP through the Board Charter and position descriptions of KMP.

A Board approved Board Charter is in place which was reviewed during the year under review.

Performance against the Bank's Strategic Plan is reviewed by the Board based on the Action Plan.

Key Management Personnel make presentations where necessary to the Board on matters under their purview and are also called in by the Board as and when needed to explain matters relating to their areas.

A self-evaluation of the performance of the Board is carried out annually assessing its own governance practices. The areas that need improvements are identified and followed up. The self-assessment of the Board of Directors was carried out for the year 2024 based on the individual evaluation submitted by the continuing Directors on the Board.

A Board approved Policy for the Appointment of Directors to the Board of Bank of Ceylon is in place. A Board approved Conflict of Interest Policy is in place. These two policies were reviewed during the year.

A Board approved succession plan for KMP is in place which was reviewed, revised and recommended to the Board by the Nomination and Corporate Governance Committee.

Key Management Personnel are regularly present or are called in for discussions at the meetings of the Board and its subcommittees on policy and other matters relating to their areas. Progress towards the corporate objectives is monitored based on the Strategic Plan.

On appointment as Directors, they are furnished with all applicable regulatory requirements pertaining to the Bank with the "Board Manual" given in e-form.

The Board members are also briefed about developments in the regulatory environment at Board meetings to ensure that their knowledge is updated regularly to facilitate effective discharge of their responsibilities. Any relevant communication from a regulator is brought to the notice of the Board and they attend any meetings/ training sessions/ workshops/ seminars arranged by the regulators.

The Board is informed of regulatory requirements pertaining to Chennai, Maldives, and Seychelles operations of the Bank through the reports submitted on the performance of overseas branches.

As provided for in the Constitution of the country, the Auditor General is the External Auditor of the Bank as it is a state-owned enterprise.

The Board shall appoint the Chairman and the Chief Executive Officer and define and approve the functions and responsibilities of the Chairman and the Chief Executive Officer in line with Direction 3 (5) of these Directions.

Complied with when read in conjunction with Direction No. 3 (9) (ii). The Chairman is appointed by the Minister under whose purview the Bank falls in terms of the Bank of Ceylon Ordinance No. 53 of 1938 and its amendments. There was no chairman during the period of 23.09.2024 to 03.11.2024.

The Board is vested with the authority to appoint the Chief Executive Officer referred to as the General Manager in the Bank of Ceylon with the approval of the said Minister.

Mr W P R P H Fonseka, who was appointed as the General Manager of Bank of Ceylon with effect from 14 January 2023 continues his service till 05 August 2025. A newly formulated Promotion Policy for selection for the position of the General Manager of the Bank is in place and necessary action is taken in regard to the appointment of the next General Manager of the Bank.

The Board shall meet regularly and Board meetings shall be held at least twelve times a year at approximately monthly intervals. (Bank has fortnightly meetings) Such regular Board meetings shall normally involve active participation in person of a majority of Directors entitled to be present. Obtaining the Board's consent through the circulation of written resolutions/ papers shall be avoided as far as possible.

Regular fortnightly Board meetings are held and special meetings are scheduled as and when the need arises. During the year under review the Board met twenty-six (26) times.

The Bank endeavours to minimise obtaining approval via circular resolutions and it is done only on an exceptional basis and such resolutions are ratified by the Board at the next meeting. During the year 2024, sixteen (16) such resolutions have been adopted by circulation.

The Board shall ensure that arrangements are in place to enable all Directors to include matters and proposals in the agenda for regular Board meetings where such matters and proposals relate to the promotion of business and the management of risks of the Bank.

Meetings are scheduled and the Board is informed at the beginning of each calendar year to enable submission of proposals to the agenda for regular Board meetings.

The Board procedures shall ensure that notice of at least seven days is given of a regular Board meeting to provide all Directors an opportunity to attend. For all other Board meetings, reasonable notice may be given.

Notice of meetings are given through an Annual Calendar at the beginning of the year. Additionally, before every meeting another notice is sent giving more than seven days' notice.

Reasonable notice is given before any special meeting and consent of all Directors is obtained prior to scheduling a special meeting.

The Board procedures shall ensure that a Director who has not attended at least two-thirds of the meetings in the period of 12 months immediately preceding or has not attended the immediately preceding three consecutive meetings held, shall cease to be a Director. Participation at the Directors' meetings through an alternate Director shall, however, be acceptable as attendance.

The Directors are apprised of the need for their attendance to be in accordance with the Corporate Governance Code. Details of the Directors' attendance are set out on page 120.

Directors' attendance has been in compliance with this Direction.

The Board shall appoint a Company Secretary who satisfies the provisions of Section 43 of the Banking Act No. 30 of 1988, whose primary responsibilities shall be to handle the secretariat services to the Board and shareholder meetings and to carry out other functions specified in the statutes and other regulations.

The Secretary, Bank of Ceylon/Secretary to the Board is an Attorney at Law, whose credentials/ qualifications are in compliance with the provisions of Section 43 of the Banking Act No. 30 of 1988 and its amendments.

All Directors shall have access to advice and services of the Company Secretary with a view to ensuring that Board procedures and all applicable rules and regulations are followed.

All members of the Board have the opportunity to obtain the advice and services of the Secretary to the Board who is an Attorney-at- Law and is responsible to the Board for follow-up of Board procedures, compliance with rules and regulations, directions and statutes.

The Company Secretary shall maintain the minutes of Board meetings and such minutes shall be open for inspection at any reasonable time, on reasonable notice by any Director.

The Secretary, Bank of Ceylon/Secretary to the Board maintains the minutes of the Board meetings and circulates the same to all Board members through a secure e-Solution.

The minutes are approved at the subsequent Board meeting.

Additionally, the Directors have access to the past Board papers and minutes through the same e-Solution.

Minutes of Board meetings shall be recorded in sufficient detail so that it is possible to gather from the minutes, as to whether the Board acted with due care and prudence in performing its duties. The minutes shall also serve as a reference for regulatory and supervisory authorities to assess the depth of deliberations at the Board meetings. Therefore, the minutes of a Board meeting shall clearly contain or refer to the following:

Minutes of the meetings are kept covering the given criteria.

There shall be a procedure agreed by the Board to enable Directors, upon reasonable request, to seek independent professional advice in appropriate circumstances, at the Bank's expense. The Board shall resolve to provide separate independent professional advice to Directors to assist the relevant Director or Directors to discharge his/ her/ their duties to the Bank.

A Policy for Directors' Access to Independent Professional Advice is in place which was reviewed during the year under review. The Directors are able to obtain independent professional advice when deemed necessary based on this policy.

Directors shall avoid conflicts of interests, or the appearance of conflicts of interest, in their activities with, and commitments to, other organisations or related parties. If a Director has a conflict of interest in a matter to be considered by the Board, which the Board has determined to be material, the matter should be dealt with at a Board meeting, where Independent Non-Executive Directors [refer to Direction 3 (2) (iv) of these Directions] who have no material interest in the transaction, are present. Further, a Director shall abstain from voting on any Board resolution in relation to which he/ she or any of his/ her close relation or a concern in which a Director has substantial interest, is interested and he/s she shall not be counted in the quorum for the relevant agenda item at the Board meeting.

When there is a situation of a Conflict of Interest the Directors are conscious of their obligation to deal in accordance with the applicable regulations. A Board approved Policy on Conflict of Interest is in place, which was reviewed during the year under review. As a practice every Board meeting, Directors are reminded to declare any interest in contracts/ new appointments to any other Board or Institution. Directors abstain from participating in the discussions, voicing their opinion or approving in situations where there is a conflict of interest.

The Board shall have a formal schedule of matters specifically reserved to it for decision to ensure that the Direction and control of the Bank is firmly under its authority.

Powers reserved for the Board are included in the Board Charter.

The Board shall, if it considers that the Bank is, or is likely to be, unable to meet its obligations or is about to become insolvent or is about to suspend payments due to depositors and other creditors, forthwith inform the Director of Bank Supervision of the situation of the Bank prior to taking any decision or action.

Such a situation has not arisen during the year 2024. Monthly Financial Statements submitted to the Board assures the Board of the Bank's solvency.

The Board shall ensure that the Bank is capitalised at levels as required by the Monetary Board in terms of the Capital Adequacy Ratio and other prudential grounds.

The Board ensures that the Bank is capitalised at levels required by the Monetary Board in terms of the Capital Adequacy Ratio (CAR) and other prudential grounds.

Calculation of CAR is submitted to the Board with the monthly Financial Statements of the Bank.

The Board shall publish in the Bank's Annual Report, an Annual Corporate Governance Report setting out the compliance with Direction 3 of these Directions.

These disclosures are part of the Corporate Governance Report in the Bank's Annual Report.

The Board shall adopt a scheme of self-assessment to be undertaken by each Director annually, and maintain records of such assessments.

A scheme of self-assessment is adopted. The self-assessment reports of the Board members are maintained by the Secretary, Bank of Ceylon/Secretary to the Board.

In respect of year 2024, this assessment was carried out with the Directors who are continuing on the Board since new appointments were made at the latter part of 2024.

The number of Directors on the Board shall not be less than 7 and not more than 13.

According to the Bank of Ceylon Ordinance No. 53 of 1938 and its amendments, the number of Directors permitted on the Board of Bank of Ceylon is six. However, Banking Act Determination No 03 of 2024 mandates it to be Seven Directors and the appointment is in awaited.

Composition of the Board in 2024 is given under Direction No. 3 (2) (viii) of this compliance report. Details of the Board are included in page 171 of the Annual Report.

Amendments proposed to the Bank of Ceylon Ordinance which include increasing the number of Directors to accommodate the requirement of this Direction is in the approval process. With the new Banking Act Determination no. 03 of 2024, Bank has to have a minimum of 10 Directors by 01.06.2025.

(A) The total period of service of a Director other than a Director who holds the position of Chief Executive Officer shall not exceed nine years, and such period in office shall be inclusive of the total period of service served by such Director up to 01 January 2008.

Directors of Bank of Ceylon have been in office for periods less than nine years.

Details of their appointments/ cessations/ resignations are included in the Annual Report on page 121.

An employee of a bank may be appointed, elected or nominated as a Director of the Bank (hereinafter referred to as an "Executive Director") provided that the number of Executive Directors shall not exceed one-third of the number of Directors of the Board. In such an event, one of the Executive Directors shall be the Chief Executive Officer of the Bank.

Bank of Ceylon Ordinance does not provide for Executive Directors in Bank of Ceylon.

The Board shall have at least three Independent Non-Executive Directors or one-third of the total number of Directors, whichever is higher. This sub-direction shall be applicable from 01 January 2010 onwards.

A Non-Executive Director shall not be considered independent if he/she:

Only the Director representing the Ministry of Finance is considered Non- Independent since he represents the shareholder, the Government of Sri Lanka. They are identified under the profiles of the Directors and also under Direction No. 3 (2) (viii) below.

In the event an Alternate Director is appointed to represent an Independent Director, the person so appointed shall also meet the criteria that applies to the Independent Director.

No Alternate Director has been appointed to represent any Independent Director.

Non-Executive Directors shall be persons with credible track records and/ or have necessary skills and experience to bring an independent judgement to bear on issues of strategy, performance, and resources.

The profiles of the Directors who were on the Board of Bank Ceylon is appearing on pages 26 to 29 spell out the necessary information.

A meeting of the Board shall not be duly constituted, although the number of Directors required to constitute the quorum at such meeting is present, unless more than one half of the number of Directors present at such meeting are Non-Executive Directors. This sub-direction shall be applicable from 01 January 2010 onwards.

All the Board members of Bank of Ceylon are Non-Executive Directors.

A Director or an employee of a bank shall not be appointed, elected or nominated as a Director of another bank except where such bank is a subsidiary company or an associate company of the first mentioned bank.

Neither Directors nor employees of Bank of Ceylon are Directors of another Bank, other than for the appointment of a Deputy General Manager to the Pradeshiya Sanwardana Bank as per the requirements of the enabling enactments of this Bank (Pradeshiya Sanwardana Bank Act No. 41 of 2008 which has now been resolved in terms of the Section 42(3) and 76H of the Banking Act, no. 30 of 1988, as amended.

The following rules shall apply in relation to the Audit Committee:

a.The Chairman of the Committee shall be an Independent Non-Executive Director who possesses qualifications and experience in accountancy and/or audit.

The Audit Committee was chaired by Mr Naresh Abeyesekera, Independent Non-Executive Director who had the required qualifications and experience, until 13 November 2024 on which date he submitted his resignation. Mr Jayamin Pelpola who has the necessary qualitication and experience was appointed as the chairman w.e.f. 03 February 2025.

b. All members of the Committee shall be Non-Executive Directors

All Directors of the Bank are Non-Executives.

c. The Committee shall make recommendations on matters in connection with:

In accordance with the Terms of Reference, the Audit Committee makes the following recommendations among many others:

Since the Auditor General is the External Auditor of the Bank, the Committee has no role to play in the appointment of the External Auditor.

d. The Committee shall review and monitor the External Auditor's independence and objectivity and the effectiveness of the audit processes in accordance with applicable standards and best practices.

The Bank's Auditor being the Auditor General, his independence and effectiveness is guaranteed under the Constitution of Sri Lanka.

e. The Committee shall develop and implement a policy on the engagement of an External Auditor to provide non-audit services that are permitted under the relevant statutes, regulations, requirements and guidelines. In doing so, the Committee shall ensure that the provision by an External Auditor of non-audit services does not impair the External Auditor's independence or objectivity. When assessing the External Auditor's independence or objectivity in relation to the provision of non-audit services, the Committee shall consider:

This does not arise since the Auditor General is the Auditor of the Bank.

However, the Committee ensures that provision by an audit firm appointed by the Auditor General to assist him in the audit of the Bank of non-audit services does not impair that firm's independence or objectivity.

f. The Committee shall, before the audit commences, discuss and finalise with the External Auditors the nature and scope of the audit, including:

The scope and the extent of audit have been determined by the Auditor General and M/s Ernst & Young, Chartered Accountants (EY) who assisted the Auditor General in the audit of year 2024.

EY presented the Audit Plan for year 2024 and the Committee agreed with it.

g. The Committee shall review the financial information of the Bank, in order to monitor the integrity of the Financial Statements of the Bank, its Annual Report, accounts and quarterly reports prepared for disclosure, and the significant financial reporting judgements contained therein. In reviewing the Bank's Annual Report and accounts and quarterly reports before submission to the Board, the Committee shall focus particularly on:

There is a continuing process carried out in reviewing monthly, quarterly, and annual financials of the Bank by the Committee and recommendations are made to the Board.

h. The Committee shall discuss issues, problems, and reservations arising from the interim and final audits, and any matters the Auditor may wish to discuss including those matters that may need to be discussed in the absence of Key Management Personnel, if necessary.

The Committee discusses issues, problems and reservations arising from the interim and final audits. The representative of the Auditor General was present at Committee meetings throughout. Only, "One Closed door meeting" was held with the said representative during the year under review and such meetings are facilitated at regular Audit Committee meeting to indicate an agenda item to that effect.

i. The Committee shall review the External Auditor's Management Letter and the Management's response thereto.

j. The Committee shall take the following steps with regard to the internal audit function of the Bank:

The Audit Committee reviews and makes necessary recommendations with regard to the adequacy of the scope, functions and resources of the Internal Audit Department. In this regard the time bound Audit Plan which includes scope, function and the existing/required cadre position of the Internal Audit Department is considered by the Committee.

The Committee reviews the internal audit programme and results of the internal audit procedures and ensures that appropriate actions are taken for improvements.

The performance evaluation of the Chief Internal Auditor and Senior Staff members of the Internal Audit Department for the year 2024 was carried out.

Complied with in regard to the Head of the Internal Audit and any outsourced service providers to the internal audit function. The other senior staff is appointed from amongst the banking staff.

V. Ensure that the Committee is appraised of resignations of senior staff members of the Internal Audit Department including the Chief Internal Auditor and any outsourced service providers, and to provide an opportunity to the resigning senior staff members and outsourced service providers to submit reasons for resigning;

Such a situation has not arisen during the year.

VI. Ensure that the internal audit function is independent of the activities it audits and that it is performed with impartiality, proficiency and due professional care.

According to the organisation structure of the Bank, the Chief Internal Auditor reports directly to the Board through the Audit Committee and he is independent of any operations of the Bank.

k. The Committee shall consider the major findings of internal investigations and Management's responses thereto.

The Audit Committee has reviewed the major findings of internal investigations and management responses thereto.

l. The Chief Finance Officer, the Chief Internal Auditor and a representative of the External Auditors may normally attend meetings. Other Board members and the Chief Executive Officer may also attend meetings upon the invitation of the Committee. However, at least twice a year, the Committee shall meet with the External Auditors without the Executive Directors being present.

The Chief Financial Officer, Chief Internal Auditor, Chief Risk Officer and Chief Compliance Officer and the representative of the Auditor General participate at the Committee meetings. The General Manager also attends the meetings on the invitation of the Committee. The members of the Management are invited for any explanations, if necessary. Closed door meetings are included into the agenda of the meetings and the representative of the Auditor General decides to meet based on the necessity. As indicated under "h" above, only one "closed door meeting" was held during the year with the representative of the Auditor General without the presence of the Executives.

m. The Committee shall have:

n. The Committee shall meet regularly, with due notice of issues to be discussed and shall record its conclusions in discharging its duties and responsibilities.

The Audit Committee schedules regular meetings. Additional meetings are convened when required.

The Committee has met twelve (12) times during the year. The members of the Committee are served with due notice of issues to be discussed and the conclusions in discharging its duties and responsibilities are recorded in the minutes of the meetings.

o. The Board shall disclose in an informative way,

Activities of the Committee are reported in Audit Committee Report in the Annual Report indicated on page 131 to 132.

The attendance details of the Committee are disclosed in the Annual Report on page 120.

p. The Secretary of the Committee (who may be the Company Secretary or the Head of the internal audit function) shall record and keep detailed minutes of the Committee meetings.

Minutes are maintained by the Secretary to the Board/ Secretary, Bank of Ceylon who is also the Secretary to the Committee.

q. The Committee shall review arrangements by which employees of the Bank may, in confidence, raise concerns about possible improprieties in financial reporting, internal control or other matters. Accordingly, the Committee shall ensure that proper arrangements are in place for the fair and independent investigation of such matters and for appropriate follow-up action and to act as the key representative body for overseeing the Bank's relations with the External Auditor.

A Board approved Whistle Blower Policy which covers these aspects is in place which was reviewed during the year 2024 and significant findings are reported to the Audit Committee for appropriate follow-up action. The Audit Committee is the key representative body for overseeing the Bank's relations with the External Auditor viz. the Auditor General in the case of Bank of Ceylon.

The following rules shall apply in relation to the Human Resources and Remuneration Committee:

a. The Committee shall determine the remuneration policy (salaries, allowances and other financial payments) relating to Directors, Chief Executive Officer (CEO) and Key Management Personnel of the Bank.

The Remuneration for Directors is according to the circulars/ letters issued by the Government of Sri Lanka through the relevant Ministry and the Bank of Ceylon Ordinance No. 53 of 1938 and its amendments. The Bank has adopted a Remuneration Policy based on the said circulars/ letters and the Ordinance, which was revised during the year 2024.

The Board approved Remuneration Policy for the Key Management Personnel is in place. The Committee makes recommendations of the remuneration of the KMPs once in three years.

The Committee has met six (06) times during the year under review.

b. The Committee shall set goals and targets for the Directors, CEO and the Key Management Personnel.

The Committee sets Key Performance Indicators for the KMP for the year 2025 with the participation of the full Board. Target are set for the Non Executive Directors.

c. The Committee shall evaluate the performance of the CEO and Key Management Personnel against the set targets and goals periodically and determine the basis for revising remuneration, benefits and other payments of performance based incentives.

Year-end evaluation for 2024 of the members of the corporate management including the General Manager was carried out by this committee other than of the Chief Internal Auditor, Chief Risk Officer and the Chief Compliance Officer since they were evaluated by the respective subcommittees that they are reporting to and summary is to be placed before the committee.

d. The CEO shall be present at all meetings of the Committee, except when matters relating to the CEO are being discussed.

The following rules shall apply in relation to the Nomination Committee:

The Bank has established a Nomination and Corporate Governance Committee. In addition to the duties of the Nomination Committee given under this Direction, certain other duties pertaining to upholding the applicable Corporate Governance Principles are included under the Terms of Reference of this Committee. The Charter for the Committee was reviewed during the year 2024.

The Committee has met eleven (11) times during the year under review.

a. The Committee shall implement a procedure to select/ appoint new Directors, CEO, and Key Management Personnel.

The Directors are appointed by the Minister under whose purview the Bank falls. A Policy on Appointment of Directors (Internally prepared) has been shared with the Line Ministry. According to the provisions of the Bank of Ceylon Ordinance, the Board with the approval of the said Minister appoints the General Manager. There are Board approved policies for the appointment of the General Manager and KMP.

b. The Committee shall consider and recommend (or not recommend) the re-election of current Directors, taking into account the performance and contribution made by the Director concerned towards the overall discharge of the Board's responsibilities.

This does not arise since the Directors are appointed by the relevant Minister.

c. The Committee shall set the criteria such as qualifications, experience and key attributes required for eligibility to be considered for appointment or promotion to the post of CEO and the key management positions.

The Board approved promotion schemes stipulate the attributes required to be eligible to be selected or promoted to the other key management positions.

d. The Committee shall ensure that Directors, CEO, and Key Management Personnel are fit and proper persons to hold office as specified in the criteria given in Direction 3(3) and as set out in the statutes.

Annual affidavits from Directors ensuring that they are fit and proper persons to hold office as specified in the criteria given in Direction 3(3) and as set out in statutes are sent to CBSL.

Also the Committee ensures that KMP are fit and proper persons to hold their offices when they are promoted/ lateral movements are made or appointed as KMP.

e. The Committee shall consider and recommend from time to time, the requirements of additional/ new expertise and the succession arrangements for retiring Directors and Key Management Personnel.

A Succession Plan for the KMP is in place.

Additional or new expertise that is needed are either recommended by the Board subcommittees or decided by the Board.

f. The committee shall be chaired by an Independent Director and preferably be constituted with a majority of Independent Directors.

The committee was complied with the above requirement except during the period 08.01.2024 to 04.02.2024.

The following rules shall apply in relation to the Integrated Risk Management Committee:

a. The Committee shall consist of at least three Non-Executive Directors, Chief Executive Officer and Key Management Personnel supervising broad risk categories, i.e. credit, market, liquidity, operational, and strategic risks. The Committee shall work with Key Management Personnel very closely and make decisions on behalf of the Board within the framework of the authority and responsibility assigned to the Committee.

The Committee comprised of three Non-Executive Directors during the year under review. Additionally, the General Manager and the Chief Risk Officer who supervise credit, market, operational, reputational and strategic risks, the Chief Internal Auditor, Chief Financial Officer and Chief Compliance Officer participate at all Committee meetings at the request of the Committee. Any other KMP and other staff are invited as and when the Committee needs their presence. The Committee works closely with KMP within the framework of authority and responsibility assigned to the Committee.

b. The Committee shall assess all risks, i.e. credit, market, liquidity, operational, and strategic risks to the Bank on a monthly basis through appropriate risk indicators and management information. In the case of subsidiary companies and associate companies, risk management shall be done, both on a bank basis and group basis.

Independent Integrated Risk Management Division of the Bank assesses the credit, market, liquidity, operational, strategic and reputational risks of the Bank based on the policy documents recommended by this Committee and approved by the Board, on a monthly basis and the summary reports are submitted to the Committee at its regular meetings and then to the next immediate Board meeting.

In the case of subsidiaries and associates, a risk management dashboard has been developed to address the risks and is reported to the Committee. A Board approved Group Risk Policy is in place.

c. The Committee shall review the adequacy and effectiveness of all management level committees such as the Credit Committee and the Asset Liability Committee to address specific risks and to manage those risks within quantitative and qualitative risk limits as specified by the Committee.

d. The Committee shall take prompt corrective action to mitigate the effects of specific risks in the case such risks are at levels beyond the prudent levels decided by the Committee on the basis of the Bank's policies and regulatory and supervisory requirements.

Specific quantitative and qualitative risks which go beyond the limits are monitored by the Chief Risk Officer and reported directly to the Committee based on the severity of the issues involved.

e. The Committee shall meet at least quarterly to assess all aspects of risk management including updated business continuity plans.

During the year, the Committee met six (06) times. Details of meetings and attendance are given on page 120.

f. The Committee shall take appropriate actions against the officers responsible for failure to identify specific risks and take prompt corrective actions as recommended by the Committee, and/or as directed by the Director of Bank Supervision.

Formal documented disciplinary action procedure is in place in the Bank to comply with this direction.

g. The Committee shall submit a risk assessment report within a week of each meeting to the Board seeking the Board's views, concurrence and/ or specific directions.

The minutes of the meetings are submitted to the Board meeting immediately following the Committee meeting together with the recommendations and Risk Management Reports.

h.The Committee shall establish a compliance function to assess the Bank's compliance with laws, regulations, regulatory guidelines, internal controls and approved policies on all areas of business operations. A dedicated Chief Compliance Officer selected from Key Management Personnel shall carry out the compliance function and report to the Committee periodically.

The Bank has established a separate compliance function to assess the Bank's compliance with laws, regulations, regulatory guidelines, internal controls and approved policies on all areas of business operations. This function is headed by a dedicated Chief Compliance Officer/ Deputy General Manager and he submits quarterly Compliance Reports to the Committee and monthly Compliance Reports to the Board.

The Compliance function also assesses the Bank's compliance with Internal Controls and approved policies on all areas of business operations.

The Board shall take necessary steps to avoid any conflicts of interest that may arise from any transaction of the Bank with any person, and particularly with the following categories of persons shall be considered as "related parties" for the purposes of this Direction:

The Bank has established a Related Party Transaction Review Committee. A Policy on Related Party Disclosures is in place covering related parties, their transactions, and restrictions on offering more favourable treatment to related parties in order for the Board members to avoid any conflicts of interest in this regard.

a. Any of the Bank's subsidiary companies;

b. Any of the Bank's associate companies;

c. Any of the Directors of the Bank;

d. Any of the Bank's Key Management Personnel;

e. A close relation of any of the Bank's Directors or Key Management Personnel;

f. A shareholder owning a material interest in the Bank;

g. A concern in which any of the Bank's Directors or a close relation of any of the Bank's Directors or any of its material shareholders has a substantial interest.

Directors who have related party transactions are individually requested to declare their transactions. Transactions are monitored through an automated system.

The type of transactions with related parties that shall be covered by this Direction shall include the following:

a. The grant of any type of accommodation, as defined in the Monetary Board's Directions on maximum amount of accommodation;

b. The creation of any liabilities of the Bank in the form of deposits, borrowings and investments;

c. The provision of any services of a financial or non-financial nature provided to the Bank or received from the Bank;

d. The creation or maintenance of reporting lines and information flows between the Bank and any related parties which may lead to the sharing of potentially proprietary, confidential or otherwise sensitive information that may give benefits to such related parties.

Information in this regard, is disclosed in the Annual Report.

The Board shall ensure that the Bank does not engage in transactions with related parties as defined in Direction No. 3 (7) (i) above, in a manner that would grant such parties "more favourable treatment" than that accorded to other constituents of the Bank carrying on the same business. In this context, "more favourable treatment" shall mean and include, treatment including the:

a. Granting of "total net accommodation" to related parties, exceeding a prudent percentage of the Bank's regulatory capital, as determined by the Board. For purposes of this sub-direction:

b. Charging of a lower rate of interest than the Bank's best lending rate or paying more than the Bank's deposit rate for a comparable transaction with an unrelated comparable counterparty;

c. Providing of preferential treatment, such as favourable terms, covering trade losses and/ or waiving fees/ commissions, that extend beyond the terms granted in the normal course of business undertaken with unrelated parties;

d. Providing services to or receiving services from a related party without an evaluation procedure;

e. Maintaining reporting lines and information flows that may lead to sharing potentially proprietary, confidential or otherwise sensitive information with related parties, except as required for the performance of legitimate duties and functions.

The Bank has implemented a Board approved process to monitor related party transactions which is monitored by the Compliance Division and compliance status is indicated in the monthly Compliance Report submitted to the Board. Further, related party transactions are reported to the Audit Committee on a quarterly basis.

Any non-compliance brought to the notice of the Board would be addressed by the Board.

A bank shall not grant any accommodation to any of its Directors or to a close relation of such Director unless such accommodation is sanctioned at a meeting of its Board of Directors, with not less than two-thirds of the number of Directors other than the Director concerned, voting in favour of such accommodation.

This accommodation shall be secured by such security as may from time to time be determined by the Monetary Board as well.

a. Where any accommodation has been granted by a bank to a person or a close relation of a person or to any concern in which the person has a substantial interest, and such person is subsequently appointed as a Director of the Bank, steps shall be taken by the Bank to obtain the necessary security as may be approved for that purpose by the Monetary Board, within one year from the date of appointment of the person as a Director.

b. Where such security is not provided by the period as provided in Direction 3 (7) (v) (a) above, the Bank shall take steps to recover any amount due on account of any accommodation, together with interest, if any, within the period specified at the time of the grant of accommodation or at the expiry of a period of eighteen months from the date of appointment of such Director, whichever is earlier.

c. Any Director who fails to comply with the above sub directions shall be deemed to have vacated the office of Director and the Bank shall disclose such fact to the public.

This sub-direction, however, shall not apply to a Director who at the time of the grant of the accommodation was an employee of the Bank and the accommodation was granted under a scheme applicable to all employees of such bank.

A bank shall not grant any accommodation or "more favourable treatment" relating to the waiver of fees and/or commissions to any employee or a close relation of such employee or to any concern in which the employee or close relation has a substantial interest other than on the basis of a scheme applicable to the employees of such bank or when secured by security as may be approved by the Monetary Board in respect of accommodation granted as per Direction 3 (7) (v) above.

No favourable treatment/ accommodation is provided to any employee of the Bank on more favourable terms unless under general staff loan schemes applicable to all employees of the Bank. Circular instructions have been issued in this regard. Close relations of Bank employees are also not given any favourable treatment.

No accommodation granted by a bank under Direction 3 (7) (v) and 3 (7) (vi) above, nor any part of such accommodation, nor any interest due thereon shall be remitted without the prior approval of the Monitory Board and any remission without such approval shall be void and of no effect.

Such a situation has not arisen during the year 2024.

The Board shall ensure that:

a. Annual Audited Financial Statements and quarterly Financial Statements are prepared and published in accordance with the formats prescribed by the supervisory and regulatory authorities and applicable accounting standards; and that

b. Such statements are published in the newspapers in an abridged form, in Sinhala, Tamil, and English.

The Board shall ensure that the following minimum disclosures are made in the Annual Report:

a. A statement to the effect that the Annual Audited Financial Statements have been prepared in line with applicable accounting standards and regulatory requirements, inclusive of specific disclosures.

Disclosed in the "Annual Report of the Directors on the State of Affairs of the Bank", on pages 168 to 172 and "Directors' Responsibility for Financial Reporting" on page 177.

b. A report by the Board on the Bank's internal control mechanism that confirms that the financial reporting system has been designed to provide reasonable assurance regarding the reliability of financial reporting, and that the preparation of Financial Statements for external purposes has been done in accordance with relevant accounting principles and regulatory requirements.

Disclosed in the "Directors' Statement on Internal Control", on pages 174 and 175 of this Annual Report and "Directors' Responsibility for Financial Reporting" on page 177.

c. The Assurance Report issued by the Auditors under "Sri Lanka Standard on Assurance Engagements SLSAE 3050 – Assurance Reports for banks in Directors' Statements on Internal Control".

The Bank has obtained a certificate on the Effectiveness of Internal Controls over Financial Reporting from the Auditor General which is published on page 176 of this Annual Report.

d. Details of Directors including names, fitness and propriety, transactions with the Bank and the total of fees/ remuneration paid by the Bank.

Details of Directors are given on pages 26 to 29 Directors' Interest in Contracts with the Bank are given on page 173. Remuneration paid by the Bank are given in Note 17 to the Financial Statements on page 218.

e. Total net accommodation as defined in 3 (7) (iii) granted to each category of related parties. The net accommodation granted to each category of related parties shall also be disclosed as a percentage of the Bank's regulatory capital.

"Total net accommodation" granted to each category of related parties during the year 2024 as a percentage of the Bank's regulatory capital is given below:

f. The aggregate values of remuneration paid by the Bank to its Key Management Personnel and the aggregate values of the transactions of the Bank with its Key Management Personnel, set out by broad categories such as remuneration paid, accommodation granted and deposits or investments made in the Bank.

The aggregate amount of remuneration paid by the Bank and transactions with KMP for the year 2024 are stated below:

In addition to above, the Bank has also paid non-cash benefits such as use of vehicles to KMP in line with the approved benefit plan of the Bank.

g. A confirmation by the Board of Directors in its Annual Corporate Governance Report that all the findings of the "Factual Findings Reports" of Auditors issued under "Sri Lanka Related Services Practice Statement 4750" have been incorporated in the Annual Corporate Governance Report provided that Auditors confirm to the Director of Bank Supervision to this effect.

The Bank will obtain a certificate from the Auditor General in compliance with the Corporate Governance Direction No. 11 of 2007. All findings of the Auditors will be incorporated in this Corporate Governance Report and any recommendations will be dealt with in the ensuing year.

h. A report setting out details of the compliance with prudential requirements, regulations, laws and internal controls and measures taken to rectify any material non- compliances.

Indicate in the Annual Report of the Directors on the state of affairs of the Bank on pages 168 to 172.

i. A statement of the regulatory and supervisory concerns on lapses in the Bank's risk management, or non- compliance with these Directions that have been pointed out by the Director of Bank Supervision, if so directed by the Monetary Board to be disclosed to the public, together with the measures taken by the Bank to address such concerns.

Transitional and Other General Provisions Compliance with this Direction shall commence from 01 January 2008 onwards and all licensed commercial banks shall fully comply with the provisions of this Direction by or before 01 January 2009 except where extended compliance dates have been specifically provided for in this Direction.

In respect of the Banks that have been incorporated by specific statutes in Sri Lanka, the Boards as specified in such statutes shall continue to function in terms of the provisions of the respective statutes, provided they take steps to comply with all provisions of this Direction that are not inconsistent with the provisions of the respective statutes.

Bank of Ceylon takes all possible measures to comply with all applicable provisions of this Direction that are not inconsistent with the provisions of Bank of Ceylon Ordinance No. 53 of 1938 and its amendments, the enabling enactment.

Any instances of non-compliance and where Bank of Ceylon has continued to function in terms of the provisions of the statutes applicable to it has been specifically mentioned above against the relevant sections.

a. This Direction shall apply to the branches of the foreign banks operating in Sri Lanka to the extent that it is not inconsistent with the regulations and laws applicable in such bank's country of incorporation. The branch of a foreign bank shall also publish its parent bank's Annual Corporate Governance Report together with its Annual Report and accounts of the branch operations in Sri Lanka.

In the event of a conflict between any of the provisions of this Direction and the Articles of Association (or Internal Rules) pertaining to any bank, the provisions of this Direction shall prevail. However, if the Articles of Association of an individual bank set a more stringent standard than that specified in this Direction, such provisions in the Articles of Association may be followed.

If for any reason such as ill health or any incapacity as provided in the Banking Act, the Monetary Board considers that exemptions referred to in Directions 3 (2) (ii) B, 3 (3)

(i) A and 3 (3) (ii) A should not be availed of, such ground may be notified to the person by the Monetary Board, and after a hearing, the Monetary Board may limit the period of exemption.