Commercial Bank Tier II debenture issue is set to strengthen the bank’s capital base while supporting Basel III compliance requirements. The planned fundraising program reflects strategic financial planning and regulatory alignment within Sri Lanka’s banking sector.
Commercial Bank Tier II debenture issue aims to strengthen capital and compliance
Commercial Bank Tier II debenture issue marks a significant step in strengthening the bank’s capital structure and supporting long-term financial stability. Commercial Bank of Ceylon PLC has announced plans to raise up to Rs. 20 billion through Basel III-compliant listed debentures, subject to regulatory and shareholder approvals.
The proposed capital-raising initiative will be executed through three separate tranches, each structured to meet international banking standards. According to the bank, the fundraising plan involves issuing up to 100 million listed, rated, unsecured, subordinated, and redeemable debentures, each with a face value of Rs. 100. These instruments will carry maturity periods of five, seven, and ten years, providing investors with multiple investment horizon options.
The debentures will also incorporate a non-viability conversion feature, which aligns with Basel III regulatory requirements designed to strengthen banking sector resilience during financial stress scenarios. This feature allows debt instruments to be converted into equity if a bank reaches a point of non-viability, thereby supporting capital adequacy and protecting depositors.
The Commercial Bank Tier II debenture issue includes provisions to increase fundraising depending on investor demand. The bank has reserved the option to issue an additional tranche of up to 50 million debentures, valued at Rs. 5 billion, if the initial issue receives strong subscription interest. Furthermore, the Board retains discretion to issue a further 50 million debentures, raising another Rs. 5 billion, subject to market demand and regulatory approvals. If fully subscribed, the total fundraising program could reach the targeted Rs. 20 billion.
Market analysts note that Tier II capital instruments play an important role in strengthening a bank’s supplementary capital base. These instruments enhance financial flexibility and support lending capacity, particularly during periods of economic uncertainty. Strengthening capital adequacy ratios also improves a bank’s ability to manage risk and maintain regulatory compliance under evolving global banking standards.
In addition to the debt capital initiative, Commercial Bank has proposed establishing an Employee Share Option Plan covering ordinary voting shares. The proposed scheme is designed to enhance employee engagement and align workforce incentives with long-term institutional performance. The bank stated that the ESOP will be implemented over a three-year period from 2026 to 2028.
Under the proposed share option program, the total number of share options to be granted could reach 46,195,156 shares, based on the number of shares currently in issue as of 29 January 2026. The maximum level of equity dilution under the scheme has been capped at three percent of the bank’s ordinary voting shares, ensuring that existing shareholder interests remain safeguarded while allowing for employee participation.
Commercial Bank confirmed that the ESOP structure complies with the Colombo Stock Exchange Listing Rules. The plan remains subject to in-principle approval from the Colombo Stock Exchange for issuing and listing shares arising from the scheme. Final implementation will also require shareholder approval through a special resolution at a General Meeting.
As of late January 2026, Commercial Bank’s stated capital stood at approximately Rs. 91.65 billion. The capital structure comprises more than 1.53 billion voting shares and over 96 million non-voting shares. Analysts observe that the bank’s decision to combine capital market fundraising with employee incentive programs reflects a balanced approach to financial and organisational growth.
The Commercial Bank Tier II debenture issue is expected to support the bank’s strategic expansion plans while strengthening financial buffers in line with regulatory requirements. Enhanced capital levels provide banks with greater capacity to extend credit, invest in digital transformation, and maintain financial stability during economic fluctuations.
The Sri Lankan banking sector has been increasingly focusing on strengthening capital adequacy following recent economic challenges. Banks have adopted various capital-raising strategies to meet Basel III requirements, improve investor confidence, and ensure sustainable long-term growth. Commercial Bank’s latest initiative aligns with broader sector trends aimed at reinforcing financial resilience.
Industry observers suggest that successful execution of the debenture program could strengthen investor participation in Sri Lanka’s corporate debt market. Increased availability of high-quality debt instruments provides investors with diversified investment options while supporting capital market development.
Overall, the Commercial Bank Tier II debenture issue represents a strategic effort to reinforce capital strength, support regulatory compliance, and enhance long-term financial sustainability. The combined approach of debt capital raising and employee share incentives highlights the bank’s focus on growth, governance, and institutional stability.