Enterprise governance at CDB

Despite the complexities and unprecedented challenges of the external environment and macro conditions, CDB clearly exhibited the resilience of its business under multiple scenarios, and was able to continuously create value for all our stakeholders. It is the scope of responsibilities and practices exercised by the Board and the management that enabled such smooth navigation as CDB enterprise governance provides correct strategic direction, ensures the achieving of set objectives, guarantees proper risk management, and verifies responsible use of resources. Moreover, CDB continues to maintain the accountability framework at an optimum level with the right balance of conformance and performance.

Corporate governance at CDB

GRI 2-9, 2-13

Sound corporate governance practices form the basis of smooth, effective and transparent operations of CDB, which ensures attracting investments, protecting shareholders’ and other stakeholders’ rights, and enhancing shareholder value. CDB's Corporate Governance underpins the responsible approach in meeting its commitments to all its stakeholders. Furthermore, healthy working relationships are created between all management levels of the organisation through good corporate governance.

As part of our endeavour to comply with and adopt the external/internal and mandatory/voluntary Corporate Governance practices, the Board is always committed towards bolstering the effectiveness of the CDB’s governance model whilst deepening competitive advantage by adding value, through responsible conduct, effective leadership, robust risk management, clear performance management, greater transparency and a sound ethical culture. We have developed a framework that, in our opinion, enumerates all the components of a responsible and effective approach to governance which is kept under regular review.

Business governance at CDB

GRI 2-13

It is vital that our governance structure supports and enables the Board to effectively shape and oversee our strategies. Business units are structured within the framework in a manner that creates the right operating rhythm, which in turn facilitates the end-to-end governance between the management and the Board. Further, CDB's strategies are assessed regularly in terms of their implementation, ongoing relevance, and success. Business governance also contributes towards value creation through the effective allocation of resources. Sustainable and shared value creations emanate from accelerating the strategies and managing constraints in terms of operations, finance, human resources, and information technology.

Compliance at CDB

Since compliance in financial institutions is becoming increasingly rigorous and sophisticated, with the growing regulatory demands amid the current challenging business conditions, CDB has cultivated a strong compliance philosophy and continues to invest in team members, processes and technology. CDB proactively and promptly enforces compliance across the Company through strengthening the “Compliance Culture” initiative, and sets the tone at the top for compliance, recognising its public commitment at the highest level of the institution to comply with all laws, regulations, directions, rules, regulatory guidelines and approved policies. The process depicted below is subject to continuous review as CDB strives to improve its effectiveness further.

Governance and oversight

The Board of Directors of CDB is responsible for overseeing the management of non-compliance risks and implementation of the compliance framework across the Organisation. The governance structure is further strengthened by implementing the principles of shared compliance responsibility and independence of the compliance function at CDB. The guiding documents of the Board of Directors, the Board Charter and the Terms of Reference of Board Subcommittees facilitate the governance and oversight of compliance adequately. The compliance function at CDB is headed by a Key Responsible Person (KRP) and is supported by all levels of the Organisation.

Policies and procedures

The compliance Manual and framework, control documents, core processes and legal responsibilities are reviewed and approved as required by the Board. The Compliance Policy Manual and the Anti-Money Laundering and Combating the Financing of Terrorism are the two primary enabling policy documents which address the entire legal and regulatory landscape. Specifically, the procedures thus designed are communicated to all stakeholders to ensure that they are aware of their compliance responsibilities.

Risk assessment

The compliance team in liaison with risk, audit and other departments identifies and documents the compliance risks associated with CDB and evaluates its internal controls, where identified deficiencies are addressed subsequently.

The dynamic nature of the process ensures that both ongoing compliance risks of the business and new risks, arising by virtue of new enactments, fresh interpretations of laws or regulations, and new business propositions of the business units are captured by the comprehensive annual assessment in addition to ad-hoc assessments and periodic reporting to IRMC.

Monitoring and testing

The robotic process automation (RPA) ensuring compliance with CDD rules is further strengthened and now supported by in-house developments such as the CDB Digi App platform. Further improvements have been made to inbuilt mechanisms to identify, monitor, and report suspicious transactions. For instance, internally developed PEP Dashboard enables the effective monitoring of transactions executed by Politically Exposed Persons. Moreover, the Compliance team conducts comprehensive reviews of departments and spot reviews to ensure compliance at all times.

Communication, awareness, and training

Compliance Division pioneered in creating a compliance culture within the Organisation and Compliance Representatives are appointed across all the departments and branches. All compliance team members undergo continuous training where facilitations are being made to improve their technical knowledge and know-how as well as other relevant skills. Internal staff also conduct compliance training sessions for all departments and branches in addition to the compliance culture creation sessions. Moreover, all relevant staff regularly participate in awareness and training sessions organised and conducted by regulators and industry professionals. Interactive learning is promoted at CDB via compliance quizzes organised on AML, consumer protection etc., where the best performers are rewarded, along with video modules on compliance aspects on the CDB E-Learning platform, QR code-enabled e-flyers, and etc.

Escalation, investigation, and resolution

The independence granted and assured enables the investigation of matters of non-compliance effectively and the compliance officer is sufficiently equipped to gather all relevant information. The escalation process is well-supported by the governance structure where direct reporting to the Management and Board subcommittees is available. Further, smooth and more effective resolution has been achieved at CDB through the compliance culture initiative.

Regulatory interaction and coordination

The compliance team proactively monitors the external regulatory implications introduced and circulated by CBSL, FIU, SEC, CSE, and etc. The Compliance Officer being the primary contact point between the organisation and the regulator, maintains a healthy, regular and periodic interaction with the respective regulatory authorities where, in addition to complying with all reporting requirements, the demands of the regulators are also analysed and implemented accordingly at CDB.

Directors’ attendance at Board Meetings and Members of the Board Subcommittees

#	Director’s Name	Executive	Non-Executive	Independent	Non-Independent	Board Meeting (Attended/ Eligibility)	Integrated Risk Management Committee	Remuneration Committee	Audit Committee	Related Party Transactions Review Committee	Nomination Committee	Credit Committee
01.	Mr J R A Corera					12/12
02.	Mr W P C M Nanayakkara					12/12
03.	Mr T M D P Tennakoon					12/12
04.	Mr R H Abeygoonewardena					12/12
05.	Mr S V Munasinghe					11/12
06.	Mr D A De Silva					11/12
07.	Mr E Karthik					12/12
08.	Senior Prof S P P Amaratunge					12/12
09.	Prof P N Gamage					11/12
10.	Ms P R W Perera					12/12
11.	Mr J P Abhayaratne					12/12
12.	Mr S Kumarapperuma					12/12
13.	Mr E R S G S Hemachandra					12/12

Chairperson’s responsibilities	MD/CEO’s responsibilities
Promotes the highest levels of corporate governance standards, and offers the Board, effective leadership.	Leads and guides the implementation of the business strategy, ensuring that the organisation’s culture and values are upheld.
Sets the Board’s agenda, culture, and values while exercising strong strategic oversight on the Board.	Leads the Management team of CDB with responsibility for the day-to-day operations of the Company, under authority delegated to him by the Board.
Leads the Board by challenging the propositions and proposals of the Management and promotes candid and fruitful discussion among Directors.	Monitors and reports to the Board on the performance of CDB and its compliance with applicable legal and regulatory obligations.
Assesses, recommends and makes arrangements to the Board, annually, on the effectiveness and performance of the Board, the Subcommittees and individual Directors.	Maintains relationships with key internal and external stakeholders, such as the Board, the Chairperson, the regulators, the Government, and the investors.
Ensures appropriate steps are taken to maintain effective communication with shareholders and that the views of shareholders are communicated to the Board.	Ensures proper succession planning of the Executive Team and assesses their performance.

Corporate governance disclosures

GRI 2-10, 2-11, 2-12, 2-15, 2-16, 2-17, 2-18, 2-19, 2-25

CDB subscribes to the voluntary requirements set out by the Code of Best Practice on Corporate Governance 2017, issued by the Institute of Chartered Accountants of Sri Lanka (the ICASL) in addition to complying with all mandatory requirements stipulated by the regulatory bodies. CDB has already adopted and is in compliance with the newly enacted Corporate Governance Direction No. 05 of 2021 which came into effect from 01 July 2022, except for a couple of aspects provided under the transitional provisions, which require gradual adaptation, and until effective, the relevant provisions of Direction No. 03 of 2008 (Corporate Governance) are complied with. Further disclosure details are as follows.

Caption	ICASL reference	CBSL section	Principle, compliance and implementation	Status of compliance
The Board
Board Meetings	A.1.1	7.1 – 7.4	Board meetings are held monthly with proper notice and due arrangements for any matters or proposals to be put forth, mainly to review the performance of the Company and other matters referred to the Board by the heads of respective divisions, while special Board meetings are convened whenever necessary. These meetings facilitate prompt action so that the business processes are continuously aligned with the expectations of all stakeholders. Information is furnished adequately at these meetings enabling review and discussion of the Company’s performance on both financial and non-financial targets and future expectations. Inter-alia, matters on risk factors, compliance, internal control system and decisions taken by the CEO are also discussed.
The Quorum		7.5	The quorum for Board Meetings is specified in the Board Charter in line with the provision and all the Members except three Directors, have attended all the meetings during the financial year 2022/23. Attendance of Board Meetings.
Manner of attendance		7.9	For all scheduled and ad-hoc meetings participation is in person unless general or individual circumstances demand otherwise.
Governance Framework		2	The Board approved governance framework which is under strict review addresses all the aspects stated in the provision.
Responsibilities of the Board	A.1.2	1.1	The Board takes full responsibility for leading, governing, guiding and monitoring the entire performance of the Company and enforces standards of accountability, all with a view to enable the Management to execute its responsibilities effectively.
		Business Strategy and Governance Framework 1.2	The Board leads the Company over a three-year strategic plan approved by it, monitors its implementation by the Management and reviews the Company’s strategic direction. The governance framework is set up by the Board Charter, and the Board oversee the implementation of the Company’s governance framework periodically reviewing the adequacy and the integrity of the framework to ensure that it remains appropriate to the conditions and the complexities of the Company’s operations. Also, Board appoints the Chairperson and CEO with well-defined roles and responsibilities as its agents.
		Corporate Culture and Values 1.3	The Board at the top, sets up a sound corporate culture and values which is then disseminated to all levels of the Company through shared ownership and responsibility. The Code of Conduct and Policy of Communication with all stakeholders are approved by the Board and serve as guidelines to abide by. Sustainable finance at CDB is derived from the vision and values of the Company itself and implemented as depicted in who we are section.
		Risk Appetite, Risk Management and Internal Controls 1.4	The Board and the Subcommittees appointed ensure that the risk appetite is consistent with the Company strategies where rigorous oversight and monitoring are carried out on the adequacy and effectiveness of the Company’s risk management systems and internal controls at all three lines of defences. A Board-approved Enterprise Risk Management Policy along with the risk appetite statement of CDB supplement the comprehensive risk management framework created within the organisation. Further, CDB also has a Board-approved comprehensive Business Continuity and Disaster Recovery Plan (BCP) and is reviewed continuously.
		Board Commitment and Competency 1.5	The Board is comprised of experienced, skilled and knowledgeable professionals, satisfying the regulatory criteria (as depicted in Director’s profiles) and have attended all meetings, of which the deliberations made are properly documented. The Board Charter also enables obtaining external independent professional advice when required. The Board, each Director and Board Subcommittees are directed to an annual self-assessment of which the records are duly maintained and discussed at Board Meetings. Further, the training opportunities and requirements foster an environment for continuous improvement.
		Oversight of Senior Management 1.6	Key Responsible Persons are identified as per the regulatory requirements and their specific job roles, responsibilities and authority are clearly defined. Senior Management also satisfy the fit and proper criteria and drive the management-level committees of the Company in addition to their active engagement at Board Meetings when required, in its deliberations. Further oversight of the management is ensured through the Managing Director/CEO who then reports to the Board. A Board-approved succession plan is also in place for Senior Management.
		Adherence to the Existing Legal Framework 1.7	Via the governance framework and the Board-approved Communication policy, the Board ensures that all stakeholders are treated equitably. The Company adheres to all laws, regulations, rules, directions and guidelines issued by CBSL and other regulatory authorities which are monitored by the independent compliance function and the compliance culture promotes the shared ownership and responsibility of all individuals in adhering to the set policies and guidelines.
Compliance with laws and access to independent professional advice	A.1.3	1.5 (e), 1.7 and 2.1 (h)	The Board collectively and individually abide by the legal framework. A procedure has been put in place for Directors to seek independent professional advice, in furtherance of their duties, at the Company’s expense. This will be coordinated through the Board Secretary, as and when it is required.
Advice and services of the Company Secretary	A.1.4	2.1 (i), 8	In terms of the Company’s Act, Ms M S Senaratne, appointed at the Senior Management level to act as the Company Secretary of the Company, and provides guidance to the Board and oversees compliance with the Companies Act, Board processes, and other relevant laws and regulations. By the Board Charter and procedures, all Directors are provided access to the counsel and services of the Company Secretary and to make sure that all Board procedures, applicable laws, rules, instructions, and regulations are followed. The Company Secretary is responsible for preparing the agenda of the Board Meetings in cooperation with the Chairperson. The minutes of the Board Meetings are kept by the Company Secretary and are sufficiently detailed. Any Director may review the minutes upon request which along with other Board submissions, are kept filed for a minimum of six years.
Independent judgement of Directors	A.1.5	2.1 (e), 3.6 (a)	In addition to the Independent Directors that are tasked with bringing in independent judgement, the governance structure, Board culture and values of CDB enable all Directors to exercise independent judgements free from unwanted encumbrances hindering efficiency.
Dedication of adequate time and effort for matters of the Board	A.1.6	1.5 (a) and 7.4	The Board members dedicate adequate time and effort to fulfil their duties as Directors of the Company (both before and after the Board meetings) to ensure that the duties and responsibilities owed to the Company are discharged accordingly. In addition to Board meetings, they have attended Subcommittee meetings and also have made decisions via circular resolutions where necessary. Further meetings and additional discussions are held with the management whenever the need arises.
Resolutions to be Presented	A.1.7		One-third of the Directors can call for a resolution to be presented to the Board.
Training for new and existing Directors	A.1.8	1.5 (c)	The Board, through the office of the Chairperson and Company Secretary conducts a comprehensive induction programme with a review of background material, meetings with Senior Management and visits to the CDB’s facilities. Both new and existing Directors of the Company are provided governance related education and training and development in areas specific to the roles undertaken by the Directors in their capacities within the Board Committees and in general on common regulatory matters. The Board also ensures that Directors and Senior Management take part in technical training programmes as well as in personal development programmes. Director training focus areas for 2022/23 were, Training on AML/CFT compliance Training on cybersecurity
Delegation of functions by the Board		9	Following Board Subcommittees have been formed: Board Audit Committee (BAC) Integrated Risk Management Committee (IRMC) Credit Committee (Voluntary Board Subcommittee) Remuneration Committee Nomination Committee Related Party Transactions Review Committee (RPTRC) The Board Charter and the approved Governance framework stipulate the delegation of authority limits and provide for the delegated functions. The Board Subcommittees as well as management committees function with defined limits, controls and reporting lines as depicted in the Governance structure, and the Board’s capacity to perform its duties has not been impacted by such delegation. The roles and responsibilities of the Committees and their entire structure is reviewed periodically considering the business conditions and complexities.
Board Subcommittees		10	Board Subcommittees are formed abiding by the regulatory framework and meetings are held regularly as stipulated by the provision (Currently BIRMC and BAC Meetings occur quarterly) details of which could be found on this section Performance, duties, and functions of all Subcommittees are disclosed on Committee Reports of the Annual Report. Each Subcommittee has a written term of reference in place that clearly outlines its role, authority and responsibilities. All Board Subcommittees currently consist of a minimum of three Board Members who possess appropriate experience, skills and knowledge. The Chairs and Members of the Board’s Subcommittees shall be considered for rotation as needed. The Company Secretary is the Secretary to all Board Subcommittees except for BIRMC and BAC where Head of Risk and Head of Internal Audit functioned as the secretary in line with the provisions. The secretarial functions are discharged under the supervision of the Chairperson of the Subcommittees and the Board receives minutes from each of the aforementioned Committees for evaluation. Transitional Provision is available till 1 July 2024 to fully comply with subsections 10.1 (a) and (e) of the new Corporate Governance direction.
Chairperson and Chief Executive Officer (CEO)
Division of responsibilities of the Chairperson and MD/CEO	A.2	6.1	The roles of the Chairperson and the MD/CEO are separated and documented. The Chairperson is an Independent Non-Executive Director while the MD/CEO serves as an Executive Director of the Company ensuring a balance of authority in strategic and operational decisions making. The Chairperson is responsible for leading, directing and managing the Board to ensure that it operates effectively discharging its legal and regulatory responsibilities while the MD/CEO’s role is primarily to conduct the business operations of the Company with the support of the Corporate Management.
Responsibilities of the CEO		6.5	The MD/CEO’s duties and obligations approved by the Board are in place. He serves as the apex executive responsible for the day-to-day operations of the Company and functions as the direct link between the Board and Management.
Chairperson’s Role
Role of the Chairperson	A.3	6.4	The Chairperson’s main role is to lead and manage the Board and ensure effectiveness in all aspects of the Board. The Chairperson of CDB is an Independent Non-Executive Director whose key responsibilities and duties have been approved by the Board ensuring that the Chairperson does not engage in direct supervision of Senior Management or any other day-to-day operational activities. The Chairperson’s role encompasses that; The views of Directors on issues under consideration are ascertained The Board is in complete control of the Company’s affairs and alert to its obligations to all shareholders and other stakeholders All Directors are encouraged to make an effective contribution within their respective capabilities, for the benefit of the Company A balance of power between Executive and Non-Executive Directors is maintained Annual assessment of the performance and contribution during the past 12 months of the Board and the CEO is conducted. The views of the Board to the shareholders and public are represented. Moreover, the self-evaluation process ensures that the above are fulfilled. For communication with all stakeholders, including depositors, creditors, shareholders, and borrowers, the Board-approved communication policy is in place. The Chairperson has delegated the responsibility of preparing the agenda of Board meetings to the Company Secretary in consultation with him.
Financial Acumen
Availability of sufficient financial acumen and knowledge	A.4	1.5 (b), 3.1, 3.7 (b)	All members of the Board possess vast experience, qualifications, adequate skills, and knowledge in the relevant fields and satisfy the specified regulatory criteria. Directors’ profiles are provided on BOD Profiles.
Balance of the Board
Presence of Non-Executive Directors	A.5 and A.5.1	3.6	During the FY 2022/23, seven of the thirteen Directors were Non-Executives (NED).
Independent Directors	A.5.2	3.7 (a) and (b)	During the FY 2022/23, five out of seven Non-Executive Directors were independent.
Independence evaluation review	A.5.3 and A.5.5	3.7 (c)	All five independent Directors are independent of management and free of any business or other relationship that could impair their independence.
Signed declaration of independence	A.5.4		All Non-Executive Directors of the Company have made written submissions as regards their independence against the specified criteria set out by the Company, which is in line with the specified regulatory criteria.
Determination of independence of the Directors by the Board	A.5.5	3.7 (d)	The Board has determined the independence of Directors based on the declarations submitted by the NEDs, as to their independence, as a fair representation and will continue to evaluate their independence annually in line with all situations of independence provided by the Direction and Code. No circumstances have arisen for the determination of independence by the Board, beyond the criteria specified by the Code and CBSL regulations.
Duty on immediate self-disclosure of any change to independence		3.7 (e)	No such circumstance transpired during the financial year.
Appointment of Alternative Director	A.5.6	3.8	No such circumstance transpired during the financial year.
Senior Independent Director	A.5.7 and A.5.8	6.2 and 6.3	The Chairperson of the Company Mr J R A Corera is a Non-Executive Independent Director hence provisions on Senior Independent Director are not applicable and required.
Meeting with Non-Executive Directors	A.5.9	7.6	The Chairperson for FY 2022/23 met twice with the Non-Executive Directors without the presence of the Executive Directors.
Executive Directors		3.5	5 Executive Directors, excluding CEO report through the CEO with functional reporting lines in the governance framework in addition to heading their respective division. The position of Managing Director/CEO is held by Mr W P C M Nanayakkara and the Company’s Executive Directors do not hold any Executive Directorships or Senior Management positions in any other Company.
Recording of concerns in Board minutes	A.5.10	8.6	Minutes of all meetings are duly recorded in sufficient detail and retained by the Company Secretary under the supervision of the Chairperson. The minutes contain the discussions and decisions of the Board, key deliberations and a summary of data and information used along with the explanations and confirmations of relevant parties, rationale for each decision made, and any significant concerns and dissenting views expressed. The minutes also specify if any Director abstained from voting or excused himself from deliberating on a particular matter.
Supply of Information
Information to the Board by the Management	A.6.1	2.1 (h)	The Board was provided with all relevant information timely by the Management by way of Board Papers and proposals. The Board sought additional information as and when required. Senior Management made presentations on issues of importance. The Chairperson ensured that all Directors were briefed on matters arising from Board Meetings. The Directors have free and open contact with Senior Management of the Company.
Facilitation for effective conduct of Board Meetings	A.6.2	7.2,7.3 and 8.7	Board was provided with all relevant information and its members and management actively engage in deliberations. The Board sought additional information as and when necessary. The Company Secretary prepares the agenda and keeps the minutes of meetings open for inspection at any time for the Directors. Further, refer the Board Meetings write-up.
Appointments to the Board
Procedure for the appointment of Board Directors and establishment of the Nomination Committee	A.7.1	2.1 (f), 4.1, 5.1, 10.1 (b) and 10.4 (c)	Nomination Committee established with specific terms of reference ensures the formal and transparent procedure for Board appointments. Selection, nomination, appointment, election, and retirement are subject to the Company policies which are aligned with the Finance Business Act Direction No. 06 of 2021, on the assessment of fitness and propriety of key responsible persons. During the financial year 2022/23, there were no new appointments to the Board.
		10.4 (a) and (b)	The Committee is comprised of four Non-Executive Directors of whom three are independent. The Company Secretary functions as the secretary of the Committee.
Assessment of Board composition by Nomination Committee	A.7.2	10.4 (d) – (f) and 10.4 (i)	An annual assessment of the Board-composition is conducted to ascertain whether the combined knowledge and experience of the Board match the strategic demands of the Company. The findings of such assessments are taken into account when new Board appointments are considered and when incumbent Directors come up for re-election.
Cooling off periods prior to appointments		3.9	All appointments to the Board as Directors and CEO including being designated as Independent Directors are subject to the cooling off periods and during the financial year, no such circumstance transpired.
Other duties of the Nomination Committee		10.4 (g) and (j)	The job descriptions (JDs) for CEO/MD and Senior Management are developed in accordance with the Board Charter, and appointment policies set out the eligibility criteria. The Board approved succession plan is in place. The Committee Identifies and recommends suitable candidates for Directors and Senior Management and also regularly review the composition and structure in order to identify and recommend additional or new expertise.
Independence of the Committee		10.4 (k)	The Committee does not participate in decision-making relating to its own appointment matters and the Chairperson on the appointment of the successor. The Committee is independent of the Management and is totally free from any business, personal or any other relationships that may interfere in making independent judgements.
Common Directorships and limits for Directorships		3.10 and 3.11	No such circumstance/requirement transpired in 2022/23.
Disclosure of details of new Directors to shareholders	A.7.3	10.4 (h)	When new Directors are appointed to the Board, a brief resume of each such Director including the nature of his/her experience, qualifications and the names of companies in which the Director holds directorship, membership, etc., are presented at shareholder meetings and are forwarded to the Central Bank of Sri Lanka and Colombo Stock Exchange (CSE) in addition to disclosing the information in the annual report.
Re-election
Terms of appointment of Non-Executive Directors	A.8.1		Articles of Association of the Company require each Director to retire by rotation once in every three years and is required to stand for re-election by the shareholders at the Annual General Meeting. The proposed re-election of Directors is subjected to prior review by the Board.
Election and Re-election of all Directors by the shareholders	A.8.2		Refer comment above.
The total period of service of a Director		3.3 and 3.4	The period of service of all current Directors is below nine years except for the CEO and Executive Directors.
Age limit		4.2 and 4.3	All the Directors of the Company are below the age of 70 years.
Early resignation of Director	A.8.3	4 (2) and 5 (1)	No such incidents occurred in financial year 2022/23.
Non-attendance of Board Meetings		7.8	Provision is reflected in the Company policies and not applicable for financial year 2022/23, except three Directors, all Directors have attended all the meetings. Please refer Directors attendance.
Appraisal of Board Performance
Annual appraisal of Board performance and that of its Committees	A.9.1 and A.9.2	1.5 (d), 6.4 (j)	The Board annually evaluated its performance against the annual objectives set at the beginning of the year. The performance of Board Subcommittees were also evaluated similarly.
Review process at the time of re-election of a Director	A.9.3	10.4 (e)	The Board has adopted a robust process to review the participation, contribution and engagement of each Director at the time of re-election.
Disclosure of performance evaluations	A.9.4	16.1 iii	Refer page 150 for the Report of the Remuneration Committee in the Annual Report for details of the criteria considered for performance evaluation of the Board.
Disclosure of Information in Respect of Directors
Information set out in relation to each Director in the Annual Report	A.10	16.1 ii	Details of Directors are given in BOD Profiles section in this Annual Report.
Appraisal of CEO
Financial and non-financial targets for CEO	A.11.1		MD/CEO’s performance objectives are aligned with the business sustainability of the Company. The performance targets for the MD/CEO are set at the commencement of every financial year by the Board which are in line with the medium and long-term objectives of the Company.
Annual evaluation of the performance of CEO	A.11.2	6.4 (j), 10.5 (g)	There is an ongoing process to evaluate the performance of MD/CEO against the set financial and non-financial targets as described above which is followed by a formal annual review by the Board at the end of each financial year.
Directors’ Remuneration
Remuneration Committee	B.1.1	10.1 (a) and (b), 10.5 (c) – (h)	The Remuneration Committee is responsible for assisting the Board with regard to the remuneration policy for the Executive Directors and the Senior Management, and for making all relevant disclosures. The Committee determines and agrees with the Board, the broad policy framework for the remuneration of the MD/CEO as well. The MD/CEO participates in meetings by invitation in deciding the remuneration of the Senior Management with a view to recruit, retain and motivate the Corporate Management Team.
Composition of the Remuneration Committee	B.1.2 and B.1.3	10.5 (a) and (b)	The three member Committee consists of a majority of Independent Non-Executive Directors and is chaired by an Independent Non-Executive Director, Refer the Remuneration Committee Report on committee reports section.
Remuneration of Non-Executive Directors	B.1.4	10.5 (c)	The Board as a whole decides the remuneration of the Non-Executive Directors with strict adherence to Company policy reflecting the regulatory framework. The Non-Executive Directors receive a fee for being a Director of the Board and additional fee for either chairing or being a member of a Committee, working on special Committees. They do not receive any performance-related incentive payments.
Consultation of the Chairperson and access to professional advice	B.1.5	10.5 (e) – (g)	Inputs of the Chairperson are obtained regularly and external professional advice is sought by the Remuneration Committee, on a need basis through the Board Secretary.
The Level and Makeup of Remuneration
Level and make-up of remuneration	B.2.1 – B.2.9	10.5 (f) and (g)	The Board is mindful of the fact that the remuneration of Executive and the Non-Executive Directors should reflect the expectation of the Company while being sufficient enough to attract and retain the personnel of highest standards. The remuneration package of the MD/CEO is structured to link rewards to corporate and individual performance. The Company’s remuneration framework is designed to create and enhance value for all of CDB’s stakeholders and to ensure that there is a strong alignment between the short-term and long-term interests of the Company.
Remuneration of the Non-Executive Directors	B.2.10	10.5 (c)	Non-Executive Directors receive a nominal fee as disclosed in this Annual Report and do not participate in performance-related incentive schemes.
Disclosure of Remuneration
Disclosure of Directors’ remuneration	B.3.1	16.1 (iv)	Refer the Remuneration Committee Report on page 150 for disclosure on the Remuneration Committee and the remuneration policy of the Company. Also Note 13.1 to the Financial Statement on page 185 provides the aggregate remuneration paid to Executive and Non-Executive Directors.
Relations with Shareholders
Notice of AGM for shareholders	C.1.1		Company ensures that all the notices relevant to the AGM are disseminated well before the meeting and as per the stipulated regulatory timeline.
Proposing separate resolution	C.1.2		Separate resolutions are proposed for all substantially separate issues to provide shareholders with the opportunity to deal with each significant matter distinctly where separate proxy forms are provided and all mannerisms of voting complied with. This mechanism promotes better stewardship while assuring transparency in all activities of the Company.
Use of proxy votes and records of votes	C.1.3		The Company has an effective mechanism to record all proxy appointments and votes as well as total votes for and against and the number of shares in respect of which the votes were withheld for each resolution. Additionally, if the Board in its opinion recognises a substantial deviation, the reasons for the same are identified and addressed accordingly.
Availability of all Chairpersons of Board Subcommittees at the AGM	C.1.4		The Chairperson of the Company ensures that the Chairpersons of all Board-appointed Subcommittees are present at the AGM to respond to all queries under their purview.
Circulation of a summary of the procedures governing voting	C.1.5		A Form of Proxy and a copy of the Annual Report are dispatched to all shareholders together with the notice of meeting, detailing the summary of the procedures resorted to at the meetings as per the legal requirements. The sufficient and adequate notice presents the opportunity for all shareholders to attend the AGM based on their voting status and obtain clarifications for matters of interest to them.
Communication with shareholders	C.2.1 – C2.7	1.3 (d)	The Company has implemented the relevant communication channels and disclosed the policy and methodology along with other regulatory requirements for communication with shareholders.
Major and material transactions	C.3.1 – C.3.2	2.1 (n), 10.1 (a), 12 and 16.1 (v)	During the year there were no major transactions as defined by Section 185 of the Companies Act No. 7 of 2007 which materially affected CDB’s net asset base. Transactions, if any, which materially affect the net assets of the Company, will be disclosed in the quarterly/annual Financial Statements in addition to CSE disclosures. Further, aforementioned transactions are subject to and review by the Board-Related Party Transactions Review Committee headed by an Independent Non-Executive Director of CDB.
Financial and Business Reporting
Reports to public and, Regulatory and Statutory reporting	D.1.1 - D.1.3	10 (1), 16	CDB has reported a true and fair view of its financial position and performance for the year ended 31 March 2023 and at the end of each Quarter of 2022/23. In the preparation of Financial Statements, CDB had strictly complied with the requirements of the Companies Act No. 07 of 2007, the Finance Business Act No. 42 of 2011 and Finance Leasing Act No. 56 of 2000 and are in conformity with Sri Lanka Accounting Standards. CDB has also complied with the reporting requirements prescribed by regulatory authorities such as the Central Bank of Sri Lanka, the CSE, and the Securities and the Exchange Commission of Sri Lanka. Financial Statements are published in newspapers in all three languages.
Declarations by Directors in the Annual Report	D.1.4	16.1 (viii)	Refer Annual Report of the Board of Directors for the Directors Report which covers all aspects under the provision.
Responsibility of Directors and Auditors and report/statement on internal controls	D.1.5	10.2 (d) 16 (i), 16 (ix)	Addressing the regulatory provision, Annual Report of the Company contains Statement of Directors’ Responsibility and Directors’ Statement on Internal Control Over Financial Reporting along with Auditors’ Assurance Report on the Directors’ Statement on Internal Control and Independent Auditors’ Report.
Management Discussion and Analysis	D.1.6	10.1 (c), 16	The Management discussion and analysis is adequately provided in this Annual Report.
Communication with shareholders in the event of net assets falling below the threshold	D.1.7		Addressed on the Director’s report the likelihood of such an occurrence is remote. However, should the situation arise, an EGM will be called for and all mannerisms will be followed for communication with the shareholders.
Disclosure of Related Party Transactions	D.1.8	12, 15.1 (b) v 16.1 (v)	Relevant Related party transactions are adequately and accurately disclosed in the Annual Report in addition to prompt CSE disclosures. Further, all the related party transactions are reviewed by the RPTR Committee. Subject to transitional provisions applicable.
Risk Management and Internal Control
Responsibilities of BOD in maintaining a sound system of risk management and internal controls	D.2.1 and D.2.5	1.4, 10.3. 11.1 and 11.2	The Company has established a comprehensive framework of policies and procedures for risk management and internal controls, which are regularly reviewed and updated by the BIRMC.
Responsibility of all employees		11.3	The Company promotes the Risk management culture and all employees share the responsibility for ensuring effective internal controls.
Directors’ confirmation of risk assessment and management	D.2.2	16.1 (viii), (ix) and (xii)	The Directors Report, and Statement of Internal Control and Management Report addresses the risk management aspect of the Company where Board undertaking is depicted.
Internal audit function	D.2.3	10.2 (g)	The Company has its own in-house Internal Audit Department, which is responsible for the internal audit function.
Review of risk management and internal control system	D.2.4	10.2 (d) (vi) - (viii), (e), (f) and (g) (i) and iii (ii)	The Audit Committee carries out reviews on the process and effectiveness of risk management, internal controls and reports to the Board on a regular basis.
Board Integrated Risk Management Committee
Composition and Secretary of the Committee		10.3 (a) and (b)	The Committee is chaired by an Independent Non-Executive Director and comprised of eight other Directors including the Chairperson of the Company. The Head of Risk functions as the secretary of the Committee in consultation with the Chairperson of the Subcommittee within the parameters of the authority and responsibility delegated to the Committee, the Committee closely collaborates with Key Responsible Personnel when arriving at their decisions. Further details on the Committee are found in the Integrated Risk Management Committee Report in the committee reports Section.
Duties and responsibilities		10.3 (c) – (h)	The Committee through a methodical approach evaluates the impact of all risks on a regular basis using designated risk indicators and management information. The Committee also make recommendations to the Board on risk appetite and risk management. Risk appetite guides the Company in deciding the types and levels of risk on an overall basis as well as on granular levels to meet its strategic business goals. Key risks such as credit, operational, market, liquidity and strategic risks are assessed through the Risk Heat Map and the Risk Dashboard which include both quantitative and qualitative measures. The Committee evaluates the capability and efficiency of Management Committees to manage risks within quantitative and qualitative risk limitations as part of its duties. BCP is reviewed by the Committee which is then updated at the meetings. Also, the Committee assesses the performance of the Head of Compliance and Head of Risk annually.
Compliance function		10.3 (i)	An independent compliance function is in place within the approved governance structure and a compliance officer is appointed at the senior management level void of other encumbrances hindering the independence. Board-approved compliance policies and procedures are in place to ensure compliance with all laws, regulations, directions, rules, regulatory guidelines and approved policies. Compliance philosophy and culture at CDB through shared ownership and responsibility enable the function to be more effective. Periodic reviews are carried out to assess and maintain the level of compliance. The compliance function assesses the compliance requirements when a new product, system or any other development takes place and implements all new legal and regulatory developments promptly. Relationships with all regulatory bodies are well maintained while prompt communication and reporting are ensured.
Risk management function		10.3 (j)	An Independent Risk Management function is in place within the approved governance structure where a separate unit of the department is established under the Head of Risk. Department submits its observations and reports to the Committee promptly in line with the Board approved Risk management framework and policies The Company has implemented integrated risk management controls in accordance with the Direction. A risk heat map is incorporated with stress testing and testing results are regularly communicated and discussed at the Committee level. Continuous reviews are also conducted. The Head of Risk is involved in the strategic planning process. The minutes of BIRMC Meetings and risk reports are presented at the subsequent Board Meeting. The Chairperson of BIRMC provides an overview of significant issues discussed and decisions taken at Committee Meetings to the Board facilitating informed decision-making by the Board.
Audit Committee
Composition	D.3.1	10.1 (a) and (e), 10.2 (a) and (b)	The Company’s Audit Committee consists of three members all of whom are Non-Executive Directors. The Committee operates within clearly defined terms of reference. Details of the members, invitees and the Secretary of the Committee are found in the Audit Committee Report in committee reports section.
Duties	D.3.2	10.1 (b) and 10.2 (d) - (h)	The Committee maintains an appropriate relationship with the External Auditors, KPMG (Chartered Accountants) to ensure their objectivity and independence. The payments to External Auditors for Audit and Non-Audit services are disclosed in the Directors’ Report of the Annual Report. In addition, the Company has established an internal audit function which operates independently and has direct access to the Audit Committee. The External Auditors do not have any relationship (other than that of the Auditor) or any interest in the Company. The Company’s Audit Committee ensures that there is an effective internal control and financial reporting system by adopting the following measures: i. Audits are conducted by the Internal Audit Department, in areas involving high risks as identified in the annual internal audit plan. ii. A structured process is in place for loss reporting, control exception reporting and compliance breach reporting. iii. A comprehensive checklist is used to follow the status of implementation of all audit recommendations. iv. Periodic branch audits are performed on the Company’s branch operations. v. The Company obtains the External Auditor’s certification on the effectiveness of the internal control mechanism on financial reporting.
Disclosures on the Audit Committee	D.3.3	10.1 (c) 16.1 (vi)	Audit Committee Report contained in the Annual Report covers all disclosures under the provision.
The secretary to the Committee		10.2 (c)	The Head of Internal Audit functions as the secretary of the Committee in consultation with the Chairperson of the Subcommittee.
Meetings of the Committee		10.2 (i)	The Committee held 10 meetings in the financial year which included 3 meetings with the External Auditors without the presence of the Executive Directors and Management with due notice of issues to be discussed after which the conclusions arrived at are duly recorded in discharging its duties and responsibilities. The Committee invited members of the Senior Management as well as External Auditors of the Company to participate in the meetings from time to time on a need basis.
Related Party Transactions Review Committee
Establishment and Composition	D.4.1 and D.4.2	10.1 (a) and (e), 12.1 (a)	The Board Related Party Transactions Review Committee headed by an Independent Non-Executive Director with 1 Non-Executive Director and 2 Executive Directors. Please refer the BRPTRC Report on committee reports section more information.
Duties	D.4.3	12.1 (b) and (c), 12.2 and 12.3	The Committee is guided by its terms of reference and the Board Charter and procedures are in place depicting the mannerisms of reporting and reviewing related party transactions. Refer the RPTRC Report and the related party transaction disclosures on committee reports section for more information.
Code of Business Conduct and Ethics
Code of Business Conduct and Ethics	D.5.1	1.3 (b), 14.1, 14.2, 15.1, 16.1 (xi)	The Company has developed a Code of Business Conduct and Ethics for all employees, which primarily addresses conflict of interest, corporate opportunities, confidentiality of information, fair dealing, protection and proper use of the Company’s assets, compliance with applicable laws and regulations and the reporting of any illegal or unethical behaviour.
Whistle Blowing Policy and its implementation		14.3	The Whistle Blowing Policy has been adopted by the Board. All staff are urged to bring up any issue they sincerely believe involves prospective or ongoing misconduct, such as a violation of the Company’s Code of Conduct. Additionally, the process is evaluated and reviewed via the Audit Committee.
Reporting material, price-sensitive information	D.5.2	12.1 (c) 4 and 12.3 (e)	The management of related party transactions and conflicts of interest includes material and price-sensitive information and therefore ensures prompt identification and management.
Purchase of shares by BOD, Key Management and employees involved in Financial Reporting	D.5.3		The management of related party transactions and conflict of interests includes and addresses the purchase of shares by BOD, key management and employees involved in financial reporting enabling prompt identification and management in addition to the disclosure requirements of CSE.
Chairperson’s affirmation and non-violation of the code of conduct and ethics	D.5.4	16.1 (xi)	Refer the Chairperson’s Statement in the Annual Report for details.
Conflict of interest		7.7, 15	At the Board level, all Directors are well aware and guided by Board Charter and Company policies where any conflicting interest will be disclosed immediately and will abstain from any engagement giving rise to conflicts of interest. The Directors are guided by professional conduct and the Board cohesively ensures that no Director acts with undue influence and coercion in addition to the monitoring mechanisms that are in place. Managing conflicts of interest is covered under CDB Board Charter and addresses the requirements in the provision.
Corporate Governance Disclosures
Adherence to principles and practices of good corporate governance	D.6.1	16.1 (x)	The section on Corporate Governance details the current practices of CDB and the level of compliance with the regulations and adherence to best practices. Further, CDB has obtained a review report on Corporate Governance disclosures from the external auditors.
Institutional investors
Shareholder Voting	E.1	1.3 (d), 1.7 (a), 6.4 (i) and 16.1 (xiii)	Institutional shareholders are required to make considered use of their votes and are encouraged to ensure their voting intentions are translated into practice. Annual General Meeting is used as a platform to have an effective dialogue with the shareholders on matters which are relevant and of concern to the general membership. Additionally the Chairperson ensures that shareholder views are represented at the Board, and Company Communication Policy facilitates effective participation.
Evaluation of Governance Disclosures	E.2	1.3 (d), 6.4 (i) and 16.1 (xiii)	Institutional investors are encouraged to give due weight to all relevant factors drawn to their attention, especially on the Board structure and composition.
Other investors
Investing/Divesting Decision	F.1	1.3 (d), 1.7 (a), 6.4 (i) and 16.1 (xiii)	Individual shareholders are encouraged to carry out adequate analysis and seek independent advice on their investing or divesting decisions.
Shareholder Voting	F.2	1.3 (d), 1.7 (a), 6.4 (i) and 16.1 (xiii)	Individual shareholders are encouraged to participate in General Meetings and exercise their voting rights.
Internet of Things and Cyber Security
Cyber security risk management process	G.1 – G.5	10.3 (c) and (f)	During the financial year, CDB carried out internal and external IT vulnerability tests with the assistance of external parties in order to mitigate cyber security threats. Further, these external parties conducted several Board presentations on the findings along with local/global best practices.
Environment, Society and Governance (ESG)
ESG Reporting	H.1 – H.1.1	16.1 (xii)	Please refer Impact and Sustain pillars.
Environmental Factors	H.1.2	1.3 (c)	Please refer Impact and Sustain pillars.
Social Factors	H.1.3	1.3 (c)	Please refer Impact and Sustain pillars.
Governance	H.1.4	1.3 (c)	Please refer Impact and Sustain pillars.
Board’s Role on ESG Factors	H.1.5	1.3 (c)	Please refer Key Framework and Compliance Report on Impact section.
Group Governance
Responsibilities as a Holding Company		13.1, 16.1 (vii)	Not applicable as of the current financial year.
Responsibilities as a Subsidiary		13.2, 16.1 (vii)	Not applicable as of the current financial year.
Transitional Provision
Transitional and other general provisions		3.2, 3.5 (a), 3.7, 8.1 (b), 10 and 12.1 (a)	The Company has complied with transitional provisions when applicable