FINANCIAL CHRONICLE – The Commercial Bank of Ceylon, a prominent financial institution in Sri Lanka, has received a final National Long-Term Rating of A(lka) for its planned debenture issue valued at 20 billion rupees, as confirmed by Fitch Ratings. This rating is positioned two notches below the bank’s National Long-Term Rating baseline.
Fitch elaborated that this rating decision is based on the anticipated loss severity associated with this category of debt, predicting limited recovery prospects. The proposed debentures do not include features for absorbing losses while the institution remains operational, hence no additional adjustment for non-performance risks was made.
Below is the complete statement:
Fitch Ratings has designated a final National Long-Term Rating of ‘A(lka)’ to the proposed subordinated debentures of Commercial Bank of Ceylon PLC (COMB, AA-(lka)/Stable), which are compliant with Basel III regulations and denominated in Sri Lankan rupees, totaling up to LKR 20 billion. These debentures are set to have maturities of five, seven, and ten years, and will be available for trading on the Colombo Stock Exchange. The bank intends to utilize the funds raised from this issuance to bolster its Tier 2 capital, rectify maturity mismatches within its balance sheet, and facilitate loan expansion.
The bank anticipates that the new debentures will be recognized as regulatory Tier 2 capital under Basel III guidelines. They come with a non-viability clause, which stipulates that they may convert into ordinary voting shares if a specific trigger event occurs, as determined by the Central Bank of Sri Lanka’s Governing Board.
This final rating aligns with the initial expected rating communicated on April 16, 2026, and follows the confirmation of documentation consistent with prior information received.
Key Rating Drivers
Fitch’s assessment places the proposed Basel III Tier 2 debentures two notches below the bank’s National Long-Term Rating anchor. This positioning reflects the agency’s standard notching for loss severity associated with this type of debt, along with expectations of inadequate recovery rates. There has been no additional notching for non-performance risks since the proposed notes lack features that would allow for loss absorption while the bank remains a going concern.
The National Long-Term Rating of COMB serves as the anchor rating for this financial instrument, as it accurately reflects the bank’s independent financial strength and effectively indicates the risk of potential non-viability.
Fitch conducted a review of COMB’s ratings with no adjustments noted on September 8, 2025. For further insights, please refer to our previous rating action commentary, “Fitch Upgrades 10 Sri Lankan Banks’ National Ratings and Affirms Five after Scale Recalibration,” released on January 21, 2025, which discusses key rating drivers and sensitivities.
Rating Sensitivities
Factors that could potentially lead to a negative rating action or downgrade include a reduction in the bank’s National Long-Term Rating, which would subsequently impact the subordinated debt rating. Conversely, an improvement in the bank’s National Long-Term Rating would result in a corresponding upgrade of the subordinated debt rating.
(Colombo/Jul 8/2026)
