New Technologies of Banking Industry

    1. Block Chain

A Block Chain, originally block chain, is a growing list of records, called blocks that are linked using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. By design, a block chain is resistant to modification of the data. It is "an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way”.

      2. Digital Banking

Digital banking is the digitisation (or moving online) of all the traditional banking activities and programs that historically were only available to customers when physically inside of a bank branch.

      3. AI (Artificial Intelligent)

Artificial intelligence (AI) is the simulation of human intelligence processes by machines, especially computer systems. These processes include learning (the acquisition of information and rules for using the information), reasoning (using rules to reach approximate or definite conclusions) and self-correction.

      4. Cloud Computing

Cloud computing is the on-demand availability of computer system resources, especially data storage and computing power, without direct active management by the user.

      5. Apple Store-Style Experience

      6. Robo Advisor

Basel III

Basel III is a set of international banking regulations developed by the Bank for International Settlements to promote stability in the international financial system. The Basel III regulations are designed to reduce damage to the economy by banks that take on excess risk.

Problems with the original accord became evident during the subprime crisis in 2007. Members of the Basel Committee on Banking Supervision agreed on Basel III in November 2010. Regulations were initially be introduced from 2013 until 2015, but there have been several extensions to March 2019 and January 2022.

Basel III and the Banks

Banks must hold more capital against their assets, thereby decreasing the size of their balance sheets and their ability to leverage themselves. While regulations were under discussion before the financial crisis, the events magnified the need for change.

The Basel III regulations contain several important changes for banks' capital structures. First, the minimum amount of equity, as a percentage of assets, increased from 2% to 4.5%. There is also an additional 2.5% buffer required, bringing the total equity requirement to 7%. This buffer can be used during times of financial stress, but banks doing so will face constraints on their ability to pay dividends and otherwise deploy capital. Banks had until 2019 to implement these changes, giving them plenty of time to prevent a sudden lending freeze as banks scramble to improve their balance sheets.

It is possible that banks will be less profitable in the future due in part to these regulations. The 7% equity requirement is a minimum, and it is likely that many banks will strive to maintain a somewhat higher figure to give themselves a cushion. If financial institutions are perceived as safer, the cost of capital for banks would actually decrease. More stable banks can issue debt at a lower cost. At the same time, the stock market might assign a higher P/E multiple to banks that have a less risky capital structure.

Implantation of Basel III in Sri Lanka

Timeline for Implementation of Basel III capital in Sri Lanka

Ratios (%)	01.01.2017	01.01.2018	01.01.2019
CET1	4.50	4.50	4.50
Capital Conversation Buffer (CCB)	1.25	1.875	2.50
Minimum CET1 plus CCB	5.75	6.375	7.00
Additional Tier 1 Capital (AT1)	1.50	1.5	1.50
Total tier 1 Capital plus CCB	7.25	7.875	8.50
Tier 2 capital	4.00	4.00	4.00
Minimum Total Capital plus CCB	11.25	11.875	12.50
Capital surcharge for D-SIBs	0.500	1.000	1.500
Total Capital for Large Banks	11.750	12.875	14.00

Timeline for Implementation of Basel III Liquidity Standards in Sri Lanka

Ratios (%)	01.01.2017	01.01.2018	01.01.2019	01.07.2019
Liquidity Coverage Ratio (LCR)	80	90	100	100
NSFR			90	100

Timeline for Implementation of Basel III Leverage Standards in Sri Lanka

Ratios (%)	01.01.2019
Leverage Ratio	3

Challenges and Opportunities of 

Banking Industry

Challengers

• Destructive technology – Inability to adapt new technology given time. There are two main technologies,
1. AI (Artificial Intelligent)
2. Cloud Computing
• Political instability
• Intense competition
• Global competition
• Banking Risk – Credit risk and Liquidity risk
• Retention of employers
• Retention of customers
• Lack of skills and competencies of employers
• Rural market penetration
• High transaction cost

Opportunities

• Offering innovative product
• Door to door service approach
• Cyber services
• Non performing advantages management
• Asset reconstructions
• Change in lending process

Banking Products - Sampath Bank

Personal Banking

1.      Savings Accounts 

• Regular Savings :

Sampath Double S : 
          Sri Lankan citizen over 18 years of age

          Minimum initial deposit - Rs. 1000/-

Offers up to 50% bonus on interest monthly, together with an array of other benefits.

Sampath Hit Saver-
          Sri Lankan citizen over 18 years of age

          Minimum initial deposit - Rs. 1000/-

• Childrens Savings :

Samoath Pubudu - This account comprises numerous benefits to help teach your child the value of saving, the pleasure in the habit of saving and guarantees a gamut of exciting gifts and fun activities.

Sampath Sapiri - Sampath Sapiri pays a higher interest and is considered as the investment account for minors.

• Teenage Savings :

Sampath X-SET Account – 
           A comprehensive saving package designed for the youth

           Be a resident of Sri Lanka, between the ages of 13 – 19

           Minimum deposit - Rs. 500/-

           3.5 % per annum interest

• Ladies Accounts :

Ladies 1^st - 
          A unique savings account from Sampath Bank for the modern Sri Lankan women with a promise of more financial freedom, convenience, and advantages.

          Sri Lankan female citizens of 18 years of age and above

          Minimum initial deposit - Rs.1, 000/-.

          3.50 % per annum interest.

• Cinior Citizen Accounts :

Sampath Sanhinda Saver Account - 
          Sri Lankan citizen of 55 years of age and above

          Minimum initial deposit - Rs.1, 000/-

          6.50% per annum interest

• Money Market :

Money Market Account - 
          Specially designed savings accounts which offers higher interest rate for corporate bodies and high net worth individuals.

          Sri Lankan citizen over 18 years of age.

          Minimum initial deposit of Rs.500,000

2.      Loans

•   Housing Laons :

Sevana Housing Loan – Provide for Sri Lankan citizens who have a regular Net Individual Monthly Income exceeding Rs. 60,000/-.

Sevana Dayada Housing Loan - Applicants should be a Sri Lankan Citizen below 55 years of age. The child should be over 18 years of age and employed/employable.

Foreign Currency Housing Loansv - specially designed for Sri Lankans who are working aboard having a monthly income either individually or jointly with spouse.

• Business Loans :

Sampath BIZCASH – Instant business loan against to the gold

Sampath Saviliya -  Speacially business loan for women.

3.      Credit Cards

Visa Infinite

Visa Signature - Offered to people of distinction along with superior rewards and high value deals. This card was first introduced to Sri Lanka by Sampath Bank.

Mastercard World - Empowering cardholder with the flexibility to create all the unique experiences in life, with exemplary service.

Visa Platinum

Gold/Classic - 
            Those over 18 years of age.

            Those with a minimum annual income of LKR 600,000/-.

4.      Term Deposits

• Regular Deposits :

Fixed Deposits - Sri Lankan citizen over 18

Minimum initial deposit - Rs. 25,000/- years of age

Certificate of Deposit - Offered for different time durations – 06 months, 12, months, 24 months, 36 months and 60 months.

Sampath ODFD – Automatic overdraft for fixed deposits

• Flexible Deposits :

Sampath Kalin Cash -
          Sri Lankan citizen over 18 years of age

          Minimum initial deposit - Rs. 50,000/-

 Easy FD - 
          Sri Lankan citizen over 18 years of age.

          Minimum initial deposit - Rs. 25,000/-

• Cineor Citizen FD :

Sampath Sanhinda FD - 
          All Senior Citizens above 55 years of age

          Minimum deposit – Rs.100,000/-

Corporate Banking

1.      Corporate Credit Division

Offers a range of financial products and services both long and short term, which include but not confined to the following:

• Term Loans
• Leasing Facilities
• Money Markets Loan
• Overdrafts

2.      Commercial Credit Division

Providing banking services to its valued customers which goes beyond the traditional norms of the banking industry.

• Export Financing
• Import Financing
• Working Capital Financing
• Leasing Facilities

3.      Corporate Finance Division

Offers a range of Investment Banking Services tailor-made to suit individual client requirements, complemented by its large network and state of the art IT platform.

• Debt Financing
• Investment in Corporate Debt Instruments
• Equity Capital Market
• Underwriting of shares / Debt issues

4.      Development Banking

Development Banking has made significant inroads to the development of business sector of the country.

• Start – up Projects
• Expansions, Relocations and diversifications
• Working Capital Financing
• Bridging Financing

5.      Foreign Currency Banking Unit(FCBU)

Banking Sector of Sri Lanka

The Banking Sector in Sri Lanka accounts for almost 60% of the assets in financial sector. The Central Bank issues banking licenses for two categories of banks such as,

1.  Licensed Commercial Banks
2.  Licensed Specialised BanksBanks (33)

Licensed Commercial Banks

• LCBS are permitted to operate current account accounts (accept “demand – deposits” from the public)
• LCBs are permitted limited foreign exchange transactions with Central bank’s approvals.
• The 26 LCBs which currently operate through a total of more than 6180 branches and over 4655 Automated Teller Machines machines in the country.
• The minimum cash requirement for starting LCBs are,

1.          Local Banks – 20 Billion
2.          Branches of foreign – 12.5 Billion

Amana Bank PLC                                                       Indian Overseas Bank

MCB Bank Ltd                                                           National Development Bank PLC

Nations Trust Bank PLC                                             Pan Asia Banking Corporation PLC

People's Bank                                                              Public Bank Berhad

Sampath Bank PLC                                                     Seylan Bank PLC.

Standard Chartered Bank                                            State Bank of India

The Hongkong & Shanghai Banking                          Union Bank of Colombo PLC

Axis Bank Ltd                                                             Bank of Ceylon

Bank of China Ltd                                                       Cargills Bank Ltd

Citibank, N.A.                                                             Commercial Bank of Ceylon PLC

Deutsche Bank AG                                                      DFCC Bank PLC

Habib Bank Ltd                                                           Hatton National Bank PLC

ICICI Bank Ltd                                                           Indian Bank

Licensed Specialised Banks

• LSBs are not permitted to accept demand deposits from the public therefore do not maintain current accounts for customers.
• LSBs are not permitted to deal in foreign currency.
• LSBs, which currently operate through a total more than 696 banking outlets and 376 ATMs in the country.
• The minimum cash requirements for starting LSBs are 7 Billion.

Housing Development Finance

Lankaputhra Development Bank Ltd.

National Savings Bank

Pradeshiya Sanwardhana Bank

Sanasa Development Bank PLC

Sri Lanka Savings Bank Ltd

State Mortgage & Investment Bank

Those Banks are regulated and supervised by the Central Bank of Sri Lanka under Banking Act No. 30 of 1988, the Monetary Law Act No. 58 of 1949, the Companies Act No. 7 of 2007 and their amendments and the directions, circulars and other regulations issued by CBSL from time to time.