Narrative disclosures: their relevance and impact

The aim of accounting narrative revelation is to advise both current & A ; possible investors of the non fiscal informations, accounting schemes & A ; methods used when set uping periodic corporate fiscal statements. These corporate fiscal statements contain, but are non limited to, the hard currency flow statement, the income statement, the balance sheet & A ; the equity statement of shareholders. The complete revelation rule requires that whichever event that would hold a hit on the fiscal statements need to be disclosed.

As has been seen rather often in recent yearss, the significance of unwraping complete & A ; precise accounting information can hold huge & amp ; enduring effects on the individuals, households, rivals, investors, markets, creditors & A ; a batch of other groups linked with immense concern houses. These groups are identified in the accounting Earth as stakeholders in the corporation. Corporate fiscal statements are used by both internal & A ; external users. Generally internal users use the fiscal statements to be after their hereafter.

The replies to tonss of important inquiries are gleaned from the corporate fiscal statements. For case, a fiscal statement may reply whether or non the company can afford to give its employees raises & A ; whether there is adequate money on manus to develop existing undertakings. It may besides uncover that merchandises are the most profitable, besides that are the least profitable. The statement may besides reply the issue of whether a separation needs to be shut down to maintain the company afloat.

Accounting narrative revelation can acquire many signifiers. This revelation is most often found in the notes to one-year fiscal statements, presidents ‘s Statement, managers ‘ study, runing and Financial Review every bit good as hearers report. Lots of accounting revelations can be found in the notes sector of the company concluding study.

A figure of companies really make their one-year studies look really nice, holding them professionally designed & A ; published. Other corporations rely merely on their official authorities registering to direct to possible & A ; current investors. Lots of times, companies will do available their one-year studies on their company websites, typically on their stockholder dealingss or related page. It can besides be possible to order a difficult transcript of the concluding study & A ; have it station by mail.

Sampath Bank the company that I studied has continued to get the better of challenges through invention and prudent scheme. They have been able to work through rising prices and skyrocketing involvement rates and even a regulative environment that sometimes did non present an even playing field for a wholly Sri Lankan Bank. However, they have continued to be the Bank with a Heart though they were non in a place to make the degree set by the Commercial Bank. Product and service development have been based on client demands and non merely to fit planetary banking tendencies, although technologically Sampath Bank has a open uping IT scheme that enables them to take their merchandises and services to client sections that by and large do non hold entree to banking.

The unsettled political and concern environment that prevailed in 2006 continued into 2007 and 2008 at an escalated degree doing volatility to identify macro-economic indexs such as rising prices, involvement rates and exchange rates. Externally, rough oil monetary values were the chief factor that caused this volatility.

The planetary economic system experienced a tough twelvemonth in 2007 particularly due to the autumn out of the US bomber premier debt sector. This tendency continued in 2008, with the US economic system slouching down to a recession, and the effects of the bomber premier debt crisis get downing to look on the balance sheets of many big fiscal establishments motivating them to cover their losingss, while following more rigorous hazard direction policies to avoid a crisis of this nature in the hereafter.

While the Bank did demo resiliency in a ambitious economic environment where the volatile exchange rate, lifting oil monetary values, gyrating involvement rates, an intensifying civil war and a high revenue enhancement government took its toll, Can be steadfastly believed that Sampath will, in a better environment, perform much better than what have seen this twelvemonth.

When we look at overall public presentation we are able to place how the public presentation has been affected due to internal public presentation every bit good as external variables, which are out of the control of the direction.

The unsettled political and concern environment that prevailed in 2007 continued into 2008 at an escalated degree doing volatility to identify macro-economic indexs such as rising prices, involvement rates and exchange rates. Externally, rough oil monetary values were the chief factor that caused this volatility. The monetary value of a barrel of rough oil ranged between USD 80/- and USD 95/- in 2007 and it was ranged between USD 100/- and USD 128/- during 2008. Although, the Central Bank achieved its pecuniary marks, the rising prices reached new highs towards the terminal of the twelvemonth demoing the impact of oil monetary values. Despite the tight policy steps, the private sector recognition demand remained above Central Bank marks and involvement rates moved upwards due to liquidity deficit in the market.

The escalated terrorist force and political instability caused concerns for investings. The inauspicious scenarios were slightly cushioned by high monetary values in tea, gum elastic and coconut and crisp addition in the remittals from Sri Lankans abroad. However, undiscouraged by inauspicious fortunes, the Bank maintained its satisfactory public presentation in 2008.

We shall look at the overall public presentation in a brief signifier foremost of taking Sampath Bank so comparing with equals.

We can see an betterment in ROE and ROA in the twelvemonth 2008. On the other manus when we look at non involvement income overall image is in increasing motion. This addition in non involvement income has played a major function in increase of ROA and ROE.

On top of all these, looking at involvement disbursal, we can state that there is much increase in all sub classs, out of which, client sedimentations and short term adoptions and refinance have played a major function. Both involvement income and involvement disbursals have increased chiefly because of addition mean involvement rate of the state.

Under non involvement disbursal class all the disbursal points have shown an increase other than proviso for loan losingss.

Ultimately we can come to the decision that even though there is an addition in most of the disbursals, involvement and non involvement income has shown a much higher increase. Therefore we can see an betterment in both ROE and ROA.

The Board is jointly responsible for advancing the success of the company by directing and oversing the company ‘s personal businesss. The Board ‘s function is to supply entrepreneurial leading of the Company within a model of prudent and effectual controls which enable hazard to be assessed and managed for the benefit of all stakeholders.

In order to consolidate bank ‘s place as a strong and autochthonal bank, the Bank has adopted several steps towards accomplishing good corporate administration, consisting success-oriented corporate direction and responsible corporate monitoring. The Board of Directors of the Company consists of 12 non-executive managers and one executive manager. The Executive Director is the pull offing director/chief executive officer of the bank.

The Board is accountable to the stockholders for the Bank ‘s overall public presentation and its duties include: –

Supplying strategic way by the preparation of schemes and concern policies and guaranting effectual.

Guaranting internal and external information flows and appropriate fiscal coverage

Approving one-year budgets and corporate program and one-year and interim fiscal statements.

The assignment of the CEO and sequence planning of the corporate direction

Guaranting attachment to legal and ethical criterions.

Reviewing and beef uping internal control, hazard direction and it systems

Approval of recognition installations transcending the delegated bounds of the executive recognition Committee.

The Board dedicates equal clip for Board Meetings and by and large day of the months regular board meetings are scheduled good in progress. In add-on to this, Board Sub-Committee meetings are held. Sub commissions include nomination commission, audit commission, wage commission, recognition blessing commission, recognition policy commission and strategic planning commission.

Regular Board meetings are held monthly during the latter portion of each month while particular Board meetings are held as and when the demand arises. During the twelvemonth under reappraisal the Board met on 20 occasions for board meetings. When we analyze the attending we can clearly see the attending is really much high.

The Board has initiated the formation of assorted sub-committees, these sub-committees advise the Board in assorted affairs under their horizon. In add-on, the Board obtains independent professional advice from external beginnings whenever the Board deems it necessary.

The function of the Non-Executive Director is complex and demanding. It requires accomplishments, experience, unity certain behaviours and personal properties. Non-Executive Directors need sound judgement and have to hold an questioning head. They should oppugn intelligently, argument constructively, challenge smartly and make up one’s mind dispassionately. And they should listen sensitively to positions of others, inside and outside the Board Room.

In order to carry through their function, Non-Executive Directors must get accomplishments, expertness and knowledge needfully and decently to dispatch their duties. They must be good informed about their concern environment in which the Company operates and the issues it faces. This requires cognition of the market in which the company operates every bit good as a full apprehension of the company ‘s concern itself. Understanding the Company is indispensable to derive credibleness and cut down the inevitable disparity in cognition between Executive and Non-Executive Directors. The Central Bank of Sri Lanka, in its Mandatory Code on Corporate Governance has besides given guidelines categorising Non-Executive Directors as Independent Directors and Non-Independent Directors. Consequently, merely J D Bandaranayke and W M P L De Alwis can be categorized as Independent Directors.

Of the Directors, merely one Director has a significant shareholding, they do non hold any vested involvements and are in a place to add value and convey independent judgement on determination doing free of any undue influence.

Whenever struggle of involvement arises, the relevant managers do non take part in the determination devising procedure.

The audit commission consists of Non-Executive managers and is chaired by Mr. Mohan Abeynaike who has relevant fiscal experience. The commission met six times during the twelvemonth.

The Directors of commission, CEO, COO, AGM-Finance, Manager Systems Audit and a representative of the external hearers usually attend the meetings. The commission has duty for urging to the Board the published histories and for reexamining the Group ‘s fiscal coverage and accounting policies. It is besides responsible for the relationship with the external hearers and for the internal audit map. The commission has duty for urging to the Board the assignment of the external hearers and for reexamining the nature, range and consequences of the one-year external audit. It besides approves the audit fee and, on an one-year footing, assesses the effectivity and independency of the external hearers. It keeps under reappraisal the Group ‘s internal controls and systems for measuring and extenuating fiscal and non-financial hazard.

The nominations commission was chaired by Mr. Edgar Gunatunge. The commission makes recommendations to the Board on the assignment of managers, other places of the senior direction and the rank of Board commissions. In transporting out these undertakings, the commission gives careful consideration to the balance of accomplishments required on the Board, including the demand to reflect diverseness, experience and strong managerial and concern accomplishments. The nominations commission did non run into during the twelvemonth under reappraisal, but all topics that would usually come under this commission were handled at board degree. This Committee has been appointed by the Board, in the event recognition blessings have to be granted, on an pressing footing. The commission can name for a meeting when deemed necessary.

The places of the Chairman and the Chief Executive Officer have been separated maintaining in line with a extremely recommended Corporate Governance rule.

The Chairman of Sampath Bank is Mr. Edgar Gunatunge, a banker with over 53 old ages of banking experience. As the Non Executive Chairman, he ensures that all managers contribute to the sound administration of the Bank in line with their capablenesss. Mr. Gunatunge conducts Board meetings guaranting effectual engagement of all the managers minding to the concerns and keeping the balance of power and ushers fellow board members in accomplishing consensus and integrity.

Mr. Anil Amarasuriya who is the Chief Executive of the Bank, has been with Sampath Bank since 1989. His abroad experience in the banking field is of huge value to his function as the Chief Executive of the Bank. He was appointed as Managing Director in 2000.

A well streamlined direction information system is in topographic point. Histories and relevant informations and information relating to affairs to the Board are available to the Board Members good in progress. Directors are provided with monthly studies of public presentation in progress of each meeting.

There is no ‘standard ‘ or ‘standard non-executive manager ‘ , or can at that place be. It is the scope of accomplishments and properties acquired through a diverseness of experiences and backgrounds that combines to make a cohesive and effectual Board. In maintaining with the Cadbury recommendation, the Board established a nominations commission on 10.01.2002. The Committee comprises the Chairman of the Bank as its Chairman, Deputy Chairman and Chairman of the Audit Committee. Though there are many stockholders, among the major stockholders keeping 5 % of the portions of the Bank, the Articles of Association does non per Se allow shareholding based nominee manager assignments to the Board.

The Company ‘s Articles of Association require any manager appointed by the Board during the twelvemonth to keep office until the following Annual General Meeting and seek reappointment by the stockholders. The articles besides require 1/3 of the managers other than the Managing Director/Chief Executive Officer to retire at each Annual General Meeting and seek reelection. The Companies Act requires that managers over the age of 70 old ages be re-elected by the stockholders for a period of one twelvemonth.

Other than the Managing Director all the Company ‘s managers are Non-Executive Directors. They are paid a nominal manager ‘s fee.

Conformity with Regulatory model has become an indispensable tool in modulating the fiscal market. The Company, on a periodical footing, forwards a figure of verifications to the regulator attesting the conformity to regulations set by them from simple declarations, to complex computations to do the regulator cognizant that the Bank is in line with their aspirations in developing the corporate unity and sustainability of the fiscal sector of the state.

The Board places greater accent on complete revelation of fiscal and non fiscal information within boundaries of commercial world. The quarterly consequences and one-year consequences are published on a timely footing in maintaining with Colombo Stock Exchange ordinances and the Central Bank guidelines.

The Board yearly appraises their ain public presentation in order to guarantee that they are dispatching their duties satisfactorily.

The Board yearly assesses the public presentation of the Chief Executive Officer. At the beginning of the fiscal twelvemonth the Board in audience with the Chief Executive Officer, sets fiscal and non-financial ends to be achieved in maintaining with the short, medium and long term ends of the company that are to be met by the Chief Executive Officer during the class of the twelvemonth. The public presentation of the Chief Executive Officer is evaluated by the Board at the terminal of the twelvemonth in order to determine whether the marks set have been achieved.

The Company attaches importance to the effectivity of its communications with stockholders. It publishes an one-year reappraisal and drumhead fiscal statement every bit good as a full Annual Report. The Company maintains a regular duologue with institutional stockholders and the fiscal community. The Annual General Meeting is one of the chief forums of contact between smaller stockholders and the Board. It is common pattern for the Chief Executive Officer to hold regular contacts with the major stockholders.

Board ensures that the Company has adequate and effectual control systems to back up depositors ‘ involvement and minimise any possible misdirection. In most cases the Company ‘s depositors ‘ financess exceed the stockholders investing. This country is of critical importance. Board is cognizant of it ‘s responsibilities to the stockholders and depositors and tends to strike a balance in steering the Company.

Reasoning Remarksaˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦ .

From the NPL ratio of 7.6 % and other observations we can reasonably notice, that there should be prompt action taken by Sampath Bank to look at the ways, by which they can pull off non executing loans. Further from our past experiences we can state that in a market bear state of affairs, any Bank which does non hold good hazard direction processs will happen it hard to last on its ain. To get the better of this, Sampath Bank can implement tight recognition control and more focal point could be given to investings, where no/less recognition hazard arises. The balance between the hazard free & A ; other securities should be thoughtfully made. A cardinal point to name in favour of Sampath Bank in this respect is that, the bank has increased its investing in exchequer measures & A ; bonds by 67.4 % as at the twelvemonth terminal, which is an addition of about LKR 600 Million.

During the bear market we went through we all got to cognize how of import hazard direction processs are. Some fiscal establishments which did non hold good hazard direction processs found it hard to last on its ‘ ain. As such the Bank should command the hazard through implementing internal and external hazard direction policies like derived functions. But the bank must guarantee that they merely use derived functions to extenuate its hazard, non as a tool to theorize. One such tool is involvement rate barters were you align any mismatch between fixed and variable involvement rates of assets and liabilities. Further exchequer staff fringe benefits should non be paid harmonizing to its section ‘s net incomes, as otherwise it will actuate the staff to theorize, in expectancy of a higher fringe benefit.

With the terminal of a three decennary long internal struggle in the state, Sampath Bank like other Bankss have now got the chance to spread out its operations to the North & A ; east. Further the state as a whole is ready for rapid growing. Banking industry which is to a great extent dependent on the overall market state of affairs will surely be welcoming the terminal of terrorist act from our female parent land.

Though the state is expected for rapid growing, the short term hereafter of the Banks operating in Sri Lanka is hard to foretell as there is a menace of loss of net incomes, due to the involvement rate decreases which was made by Bankss, on the petition of his Excellency the president of Sri Lanka. The bankers are still unsure whether this involvement rate decrease is for a short piece, or it is the long term anticipation in the involvement rate market. The opportunities are that this decrease in the rates will be the future tendency expected. The Bankss may be unable to alter the involvement rate of its current fixed rate depositors, but will hold to cut down its rates when giving out loans, to get the better of competition. After get the better ofing a tuff period, the bank is now set to undertake its new challenges, with all the experiences it learned from the bear market every bit good as what it learned from a clip when terrorist ruled a portion of our state. We would wish to wish Sampath Bank all the really best for its hereafter, and we hope that Sampath Bank will be a light for many more enterprisers, depositors, portion holders and to the society at big.

Market monetary value per portion is a good index of how stockholders perceive about the future public presentation of the organisation. Since 1998 there has been gradual addition in market monetary value per portion.

The authorities is unstable with a hung Parliament. At the clip of authorship, the authorities has abrogated the Cease Fire Agreement ( CFA ) which was signed with the LTTE ( Northern Terrorists ) in the twelvemonth 2002. As an immediate wake of this action the state experienced increased terrorist activities. Co-chairs and other foreign assistance bureaus have non taken excessively kindly to the repeal of the Cease Fire Agreement and may cut down assistance. The Government budget for the twelvemonth 2008 estimation Rs. 700 Bn in gross, of which about Rs. 500 Bn will account to serve autonomous debt. The intensifying war state of affairs may necessitate about Rs. 200 Bn for defence related outgo. In the unstable fiscal state of affairs, drying up in foreign assistance, the Government will hold no pick but to publish money which will convey farther force per unit area on rising prices presently running at about 20 % .

This state of affairs poses the baking sector to run under high uncertainness in the economic system in add-on to adverse universe tendency particularly rough oil monetary values.

Even under adversities Sampath was able to demo an betterment in the portion monetary value, which was 68 rupees in 2008

The torment and convulsion that has beset universe economic systems today, triggered by the mayhem in sub-prime mortgage markets in the USA, has brought place more forcefully than of all time, the absolute necessity of a comprehensive and alley compassing Risk Management government within the nucleus of endeavor.

Recognition hazard, the potency for fiscal loss to the Bank due to borrowers or counterparties, who are non able or willing to pay involvement, refund capital or to carry through their contractual duties is identified as the most important and permeant hazard in banking.

The Board of Directors has reviewed the Credit Risk Management Policy of the Bank, which articulates the Credit Risk Management model and the wide counsel of the full Credit Risk Management procedure, turn toing the parametric quantities within which the Bank identifies, steps, proctors and controls all of its recognition hazard of the single borrowers or counterparties and its portfolios.

The Credit Risk Management Steering Committee has the premier aims of reexamining the Credit Risk Strategy, Policies and Credit Risk Framework from clip to clip and doing appropriate recommendations to the Board when needed. It monitors the Credit Risk of the Bank and ensures conformity with the parametric quantities approved by the Board.

Recognition Risk Management Processaˆ¦aˆ¦ .

The Senior Management is committed to guarantee that the schemes and policies, which have been approved by the Board of Directors, are communicated and proper processs are in topographic point.

The recognition authorization bounds are pre-determined based on the recognition exposure of single clients, which are capable to reexamine sporadically. All the new recognition installations and material changes such as footings, conditions and securities in the bing portfolio are approved by the delegated blessing governments.

The Credit Risk Management procedure starts with an appraisal of the recognition hazard profile of the borrower or counterparty. The recognition allowing standards strongly linked to the internally developed system of Risk Profiling of the borrower or counterparty is based on the nature of the industry and its sensitiveness to economic and market alterations, borrowers ‘ fiscal public presentation and place including the path record and the current capacity of refund, hard currency flow projections and the nature of collateral offered etc.

In-House Developed Online Credit Approval System ( CAS ) helps vastly to keep unvarying processs and patterns regulating recognition blessings throughout the bank along with a speedy procedure.

The Bank proctors the degree of net impaired loans in its portfolio, which is defined as the gross sum of impaired loans less the sum of particular and general commissariats for recognition losingss and involvement in suspense. Due to the prudent recognition hazard direction of the Bank, it has been possible to pull off the NPL place of the Bank at 7.6 % as at the terminal of 2008, which compares good with the mean NPL degrees in the banking industry, in such a convulsion period which prevailed in the sector as a whole.

From the above diagram we can clearly see that non-performing loan of Sampath bank is really much high compared with the best in the industry, which is commercial bank. Bank can extenuate recognition hazard, if the Bank could take disciplinary action to maximize recovery before a installation could be classified as non-performing.

The proviso for the twelvemonth 2007 7.6 % , which is an addition of approximately 1 % against the old twelvemonth. This addition in the NPL ( NPL/Gross Loans ) for the current twelvemonth has been a normal tendency in the banking sector which can be besides seen from Commercial Bank ‘s public presentation were NPL ratio has increased by over 2 % .

Provision for recognition losingss is the incremental sum added to the cumulative particular and general commissariats for recognition losingss during the twelvemonth to convey it up to a degree that the direction considers adequate to absorb all likely recognition related losingss in the Bank ‘s loan portfolio.

The system is automated to observe hazards and study installations, whilst the DMU liaises with the subdivision, the borrower and the recovery governments and takes immediate action to cut down the possible loss to the Bank. The delinquent installations over a threshold, which have greater impact on NPL are brought to the notice of a commission that includes the Managing Director/CEO on a monthly footing to originate immediate recovery action.


Apart from puting maximal exposure bounds, the Bank proctors the several single exposures within prudent bounds, based on single hazard classs at the clip of sing new recognition installations or reexamining the bing exposures.

The traditional pattern of obtaining collateral as a hazard extenuation tool is besides followed, where the nature of collateral has an impact on the hazard profile of the borrower.


The Asset & A ; Liability Management Committee ( ALCO ) of the Bank maintains an overall co-ordinated direction system on the Bank ‘s Balance Sheet and devises schemes for diverse involvement rate, liquidness and portfolio mix scenarios. The function of ALCO involves supplying the necessary foresight and proactive determination doing support for the Strategic Direction of the Bank.

ALCO manages the Bank ‘s portfolio guaranting conformity with the regulative demands, in line with the hazard appetency and hazard tolerance bounds that have been approved and escalated down to the relevant duty and authorization degrees. The hazard bounds have been established based on the Bank ‘s capital strength and complexness degrees and to back up the growing chances of the Bank.

If we look at the commissariats made to loans, we can place that there is an increasing tendency in proviso for recognition card receivables in footings of particular every bit good as general. In add-on looking at portfolio of loan, it is discernible that there is a alteration in a composing, which is increment towards the lease receivable, where this has a less proviso.

From the NPL ratio and other observations we can state that there should be prompt action taken by Sampath Bank to look at the ways, by which they can pull off non executing loan. Further from our past experiences we can state that in a market bear state of affairs, any Bank which does non hold good hazard direction processs will happen it hard to last on its ain. To get the better of this Sampath Bank can implement tight recognition control and more focal point could be given to investings, where no recognition hazard arises.

Market Hazard is the hazard related to the uncertainness of the Bank ‘s net incomes from its trading portfolio caused by alterations in market conditions, such as the involvement rates of assets and liabilities, market volatility and market liquidness.

The Bank is exposed to market hazard because of values of the trading portfolio being sensitive to alterations in the market monetary values and involvement rates. Market hazard consequences from involvement rate, foreign exchange rate, and equity monetary value volatility. This hazard is built-in in the fiscal instruments, used in banking operations and/or activities including loans, sedimentations, securities, short-run adoptions, long-run adoptions, derived functions etc.

Effective foreign exchange hazard direction is focused on maximizing the profitableness of the Bank. A cardinal demand in this context is to explicate and so be guided by comprehensive policies on foreign exchange hazard that clearly stipulates the Bank ‘s aims coupled with the schemes for achieving these aims, and the allotment of duty for exerting the schemes.

Bank ‘s overall market hazard direction model is strengthened by the demands imposed by the BASEL II guidelines. The duty of preparation and execution of appropriate policies and processs for the designation, monitoring and control of market hazard elements that are prevailing in the Corporate Commercial Banking and Treasury concern units is assigned to the ALCO.

Formulation of an independent unit with full duty and functionality on the direction of market hazard has besides been considered to guarantee prudent hazard direction and conformity with the regulative demands.

Interest Rate Risk ( IRR ) , is one of the important constituents of Banks market hazard exposure. In making value to clients through the proviso of a diversified portfolio of sedimentation and progress merchandises, the Bank of course carries assets and liabilities with different involvement rates and adulthood profiles.

Interest Rate hazard is incurred by the Bank due to mismatches in the variables refering to assets and liabilities such as the re-pricing day of the months, hard currency flows, etc. therefore bring forthing an impact on the Net Interest Margin ( NIM ) .

From the above diagram it is discernible that involvement gaining assets do non fit with involvement bearing liabilities, as such the Bank should command the hazard through implementing internal and external hazard direction policies like derived functions. But the bank must guarantee that they merely use derived functions to extenuate its hazard, non as a tool to theorize.

Liquidity is indispensable for Bankss to counterbalance for expected and unexpected balance sheet fluctuations and to supply financess for growing. Sound fiscal direction coupled with uninterrupted monitoring of economic and money market trends is indispensable for effectual liquidness planning.

Liquidity direction at Sampath Bank ensures prudent agreements for run intoing the fiscal duties and facilitation of financess required for the growing. The Bank adopts a intercrossed combination of plus and liability attacks in the direction of its liquidness, in the best involvement of the relevant stakeholders. In other words, liquidness direction of the Bank is performed through proper hard currency flow direction, care of near liquid assets that could be readily converted to hard currency, and prudent direction of Bank ‘s nucleus sedimentations. Liquidity Risk Management Framework has been instrumental in keeping equal liquidness and a healthy support profile during the twelvemonth.

In add-on to the measuring and monitoring of the stipulated liquidness demands on a day-to-day footing, the Bank proactively should calculate the expected liquidness demands together with an action program. Further, eventuality programs can be arranged harmonizing to different emphasis scenarios refering to forecasted market conditions.

Operational Risk is expressed as the hazard of loss ensuing from inadequate or failed internal procedures, people, systems, or from external events.

Whilst appreciating the world that Operational Risk inherently exists in about all the concern activities of a commercial bank, Sampath Bank ‘s Operational Risk Management map strives to place, buttocks and manage those hazards with a position to accomplishing better concern results.

Main duty of the Operational Risk Steering commission is to put the overall way of Operational Risk Management thrust of Sampath Bank, provide corporate degree sponsorship and proctor advancement.

An Operational Risk Management Policy has already been approved by the Board. Existing Standards and Procedures are presently being reviewed and developed to further beef up the endeavor broad Operational Risk Management model.

Operational Hazard in IT and other Product Development Increased debut of Risk Management in cardinal IT and Product Development undertakings has improved hazard direction facets within the procedures, merchandises and systems of the Bank.

Repute hazard refers to adverse impact on the value of the company due to bad repute. Though this hazard is non able to be measured on nonsubjective footing, this has serious impact on future operation of the organisation. If clients are dissatisfied with the service being provided, they will mention others as non to transact this organisation.

Therefore this hazard direction from the board degree will enable them to command as over all.

Legal hazard refers to adverse impact to the organisation originating out of non following with regulations and ordinances set by relevant authorization. Though presently many of the corporate administration demands are non compulsory, in future it seems that following with those demands will be made compulsory. It seems that Sampath Bank adheres to much of the ordinances though those are non compulsory at present. This shows their positive tendency. In add-on there is an increasing towards coverage demands. This should besides be taken in to account when sing future schemes.

Further from the above tabular array and graph we can place that Sampath Bank pays about 60 % as revenue enhancements to the authorities. This includes income revenue enhancement every bit good as VAT on fiscal services. This reminds us that you can non bury the authorities factor in anyway.

All the Bankss in the state are regulated by the Central Bank of Sri Lanka. Central Bank as the chief regulator of the fiscal sector has imposed a figure of ordinance in order to keep the fiscal system stableness. Some of the ordinances imposed include:

5 % Capital Adequacy Ratio when calculated from Tier 1 & A ; 10 % Capital Adequacy Ratio when calculated from Tier 2 ;

Ownership of portion capital by a individual or entity in a bank is limited to 10 % , unless under particular blessing by Central Bank ;

Statutory modesty fund to be held in the Central Bank ;

Central Bank ‘s Repo rate & A ; Reverse- Repo rate, which helps to modulate the market involvement rate ;

Further ordinances sing liquidness, etcaˆ¦ .

Overall when analysing fiscal accounting narration unwrap is thou-rally connected with fiscal information every bit good as those discloses impact to fiscal statements of the Sampath Bank. The narrative revelations made up in fiscal statement helps to understand about the bank fiscal state of affairs, public presentation, hard currency flows for the stakeholders. Therefore accounting narrative discloses more interrelated with the fiscal statement of the Sampath bank.