The Case Study - Seylan Bank

Seylan Bank PLC Annual Report 2009 75Corporate Governance reportINTRODUCTION“Weak governance of banks reverberatesthroughout the economy with negative ramificationsfor economic development” (Ross Levine - GlobalCorporate Governance Forum, 2003).“Given the important financial intermediationrole of banks in an economy, their high degree ofsensitivity to potential difficulties arising fromineffective corporate governance and the need tosafeguard depositors’ funds, corporate governancefor banking organizations is of great importance…” (BASEL Committee on Banking Supervision -February 2006).For Seylan, the above words serve as a bleakreminder of the events which took place in December2008 - the difficulties faced by the Bank precipitatedby a series of withdrawals which commenced withthe collapse of a company within the CeylincoGroup. Timely intervention by the Central Bank ofSri Lanka together with Management assistancefrom Bank of Ceylon and appointment of a strongand independent board of directors paved the wayfor the Bank to make a recovery unprecedented andunparalleled in the history of the banking sector inthe country particularly when its occurrence was inthe midst of the global financial crisis.The implementation and enforcement of soundcorporate governance principles have thereforebecome even more critical in this context.The newly-appointed board comprising of alleminent professionals in their respective fields arefirm in their resolve that both the board and thesenior management team and staff should act atall times with integrity and honesty and functionin an environment where the highest elementof ethical business conduct is maintained. Theyhave therefore pledged their commitment towardsadoption and implementation of transparent andeffective corporate governance practices within theBank with the view of enhancing business prosperityand corporate accountability and realising notonly long-term shareholder value and acquiringand retaining the trust of its depositors but alsosafeguarding the interests of all its stakeholders.COMPLIANCE REQUIREMENTSPursuant to Seylan Bank board being re-constitutedin December 2008, the new board commenceddetailed compliance with Corporate Governanceprinciples and guidelines with particular referenceto the following during 2009:• the Banking Act Direction No. 11 of 2007(Corporate Governance for Licensed CommercialBanks in Sri Lanka) issued by the MonetaryBoard of the Central Bank of Sri Lanka includingsubsequent amendments there to (CBSL Code);• the Colombo Stock Exchange rules on CorporateGovernance (applicable on a voluntary basis forlisted entities until 1st April 2008 and for banksuntil 31st December 2008) and mandatorythereafter.• the Code of Best Practice of CorporateGovernance jointly issued by the Securities& Exchange Commission of Sri Lanka (SEC)and the Institute of Chartered Accountants ofSri Lanka (ICASL).The Bank is required to mandatorily comply withthe Corporate Governance rules of the Code of BestPractice of Corporate Governance laid down as perCentral Bank Direction No. 11 of 2007 as amendedas aforesaid and also the Colombo Stock Exchangerules of Corporate Governance for listed entitieswhich became mandatory for banks with effectfrom the financial year commencing January 2009.Compliance with the ICASL/SEC Code of Best Practiceon Corporate Governance is on a voluntary basis.