Group
Exposure Notional Risk Amount Weight 2013 2013 USD USD RISK WEIGHTED ExPOSURE
Type of Exposure:
Sovereign 143,930,767 65,449,484 Public sector entities 44,273,225 27,728,347 Institutions (Banks) 627,085,719 259,144,541 Corporates 570,336,340 504,634,554 Retail 1,954,684 861,186 Retail secured by real estate 3,754,087 3,255,175 Collective investment schemes 7,248,287 - Other items 92,088,750 92,048,971 1,490,671,859 953,122,258
Operational risk 72,462,788
Foreign exchange risk 7,522,419
Total risk weighted exposure 1,033,107,465
OWN FUNDS
Original own funds:
Capital and reserves 152,971,552 Loss for the year (4,215,409) 148,756,142
Intangible assets (1,342,722)
Deduction for investment in regulated entities (13,624,265) Market value of assets pledged in favour of the
Depositor Compensation Scheme (refer to notes 22 and 31) (1,455,699)
Total original own funds 132,333,456
Additional own funds:
Collective impairments 6,283,017 Deduction for investment in regulated entities (6,283,017)
Total additional own funds -
Total own funds 132,333,456
Capital adequacy ratio 12.81%
Regulatory minimum 8.00%
notes to the financial statements
Bank
Exposure Amount Notional Risk Weight 2013 2013 USD USD RISK WEIGHTED ExPOSURE
Type of Exposure:
Sovereign 105,610,238 27,128,955 Public sector entities 44,273,225 27,728,347 Institutions (Banks) 419,846,796 161,080,200 Corporates 717,827,576 581,827,645 Retail 1,954,684 861,186 Retail secured by real estate 3,754,087 3,255,175 Collective investment schemes 7,248,287 - Other items 123,856,284 123,842,764 1,424,371,177 925,724,272
Operational risk 43,796,829
Foreign exchange risk 3,647,378
Total risk weighted exposure 973,168,479
OWN FUNDS
Original own funds:
Capital and reserves 135,634,287 Loss for the year (2,830,769) 132,803,518
Intangible assets (715,513)
Deduction for investment in regulated entities (3,006,713) Market value of assets pledged in favour of the
Depositor Compensation Scheme (refer to notes 22 and 31) (1,455,699)
Total original own funds 127,625,593
Additional own funds:
Collective impairments 6,074,655 Deduction for investment in regulated entities (3,006,713)
Total additional own funds 3,067,942
Total own funds 130,693,535
Capital adequacy ratio 13.43%
Regulatory minimum 8.00%
The capital adequacy ratio of the Group and the Bank for the year ended 31 December 2012 stood at 16.36% and 16.94% respectively.
5
fair values of financial instruments
The Group’s accounting policy on fair value measurements is discussed in accounting policy 3.10.6. 5.1
valuation of financial instruments
The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements:
• Level 1: inputs that are quoted market prices (unadjusted) in active markets for identical instruments. • Level 2: inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in
markets that are considered less than active; or other valuation techniques in which all significant inputs are directly or indirectly observable from market data.
• Level 3: inputs that are unobservable. This category includes all instruments for which the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments.
Valuation techniques include net present value and discounted cash flow models, comparison to similar instruments for which market observable prices exist, and other valuation models. Assumptions and inputs used in valuation techniques include risk-free and benchmark interest rates, credit spreads and other premia used in estimating discount rates, bond and equity prices, foreign currency exchange rates, and expected price volatilities and correlations.
The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date.
The Group uses widely recognised valuation models for determining the fair value of common and more simple financial instruments, like interest rate and currency swaps that use only observable market data and require little management judgement and estimation. Observable prices and model inputs are usually available in the market for listed debt securities and exchange traded derivatives and simple over the counter derivatives like currency rate swaps. Availability of observable market prices and model inputs reduces the need for management judgement and estimation and also reduces the uncertainty associated with determination of fair values. Availability of observable market prices and inputs varies depending on the products and markets and is prone to changes based on specific events and general conditions in the financial markets.
For more complex instruments, the Group uses proprietary valuation models, which are usually developed from recognised valuation models. Some or all of the significant inputs into these models may not be observable in the market, and are derived from market prices or rates or are estimated based on assumptions. Example of instruments involving significant unobservable inputs include certain over-the-counter structured derivatives and certain loans and securities for which there is no active market. Valuation models that employ significant unobservable inputs require a higher degree of management judgement and estimation in the determination of fair value. Management judgement and estimation are usually required for selection of the appropriate valuation model to be used, determination of expected future cash flows on the financial instrument being valued, determination of probability of counterparty default and prepayments and selection of appropriate discount rates.
Fair value estimates obtained from models are adjusted for any other factors, such as liquidity risk or model uncertainties, to the extent that the Group believes that a third party market participant would take them into account in pricing a transaction. Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group entity and the counterparty where appropriate.
The Group has an established control framework with respect to the measurement of fair values. This framework includes reports to the Group’s Executive Management who has overall responsibility for verifying the results of trading in financial instruments and all significant fair value measurements. Market risk and related exposure to fair value movement is also a key function of the Group’s Asset-Liability Committee and all valuations of financial instruments are reported to the Committee for review and approval.
notes to the financial statements
5.2
financial instruments measured at fair value – fair value hierarchy
The table below analyses financial instruments measured at fair value, by the level in the fair value hierarchy into which the fair value measurement is categorised:
Group - 31 December 2013
Level 1 Level 2 Level 3 Total
Note USD USD USD USD
Trading assets 19 - - 272,831,977 272,831,977 Derivative assets held
for risk management 20 - 828,234 - 828,234 Financial assets designated
at fair value through
profit or loss 21 - - 17,700,000 17,700,000 Investments available-for-sale 24 51,726 24,325,921 2,098,557 26,476,204
51,726 25,154,155 292,630,534 317,836,415 Derivative liabilities
held for risk management 20 - 506,477 - 506,477 - 506,477 - 506,477
Group - 31 December 2012
Level 1 Level 2 Level 3 Total
Note USD USD USD USD
Trading assets 19 - - 245,061,077 245,061,077 Derivative assets held
for risk management 20 - 893,552 - 893,552 Financial assets designated
at fair value through
profit or loss 21 13,187,393 - 42,402,000 55,589,393 Investments available-for-sale 24 51,726 - 41,016 92,742 13,239,119 893,552 287,504,093 301,636,764
Derivative liabilities
held for risk management 20 - 791,622 - 791,622 - 791,622 - 791,622
Level 1 Level 2 Level 3 Total
Note USD USD USD USD
Derivative assets held
for risk management 20 - 883,480 - 883,480 Financial assets designated
at fair value through
profit or loss 21 - - 17,700,000 17,700,000 Investments available-for-sale 24 51,726 24,325,920 2,097,856 26,475,502
51,726 25,209,400 19,797,856 45,058,982 Derivative liabilities
held for risk management 20 - 506,477 - 506,477 - 506,477 - 506,477
Bank - 31 December 2012
Level 1 Level 2 Level 3 Total
Note USD USD USD USD
Derivative assets held
for risk management 20 - 939,512 - 939,512 Financial assets designated
at fair value through
profit or loss 21 13,187,393 - 42,402,000 55,589,393 Investments available-for-sale 24 51,726 - 40,314 92,040
13,239,119 939,512 42,442,314 56,620,945 Derivative liabilities
held for risk management 20 - 791,622 - 791,622 - 791,622 - 791,622
notes to the financial statements
5.3
level 3 fair value measurements
5.3.1reconciliation
The following table shows a reconciliation from the beginning balances to the ending balances for fair value measurements in Level 3 of the fair value hierarchy:
Investments available- for-sale USD Total USD Investments available- for-sale USD Total USD
5 fair values of financial instruments - continued
Group - 2013
Financial assets designated at fair value through Trading assets profit or loss
USD USD
Balance at 1 January 2013 245,061,077 42,402,000 41,016 287,504,093 Total gains and losses in profit or
loss (5,507,341) (612,000) - (6,119,341) Total gains and losses in other
comprehensive income - - 69,207 69,207 Purchases 395,499,333 - 1,988,334 397,487,667 Settlements (362,221,092) (24,090,000) - (386,311,092)
Balance at 31 December 2013 272,831,977 17,700,000 2,098,557 292,630,534 Total gains or losses for the year in the above table are presented in the statement of profit or loss and other comprehensive income as follows:
Financial assets designated at fair value through Trading assets profit or loss
USD USD
Total gains and losses in profit or loss
- Net trading results (5,507,341) - - (5,507,341) - Net gain from other financial
instruments carried at fair
value - (612,000) - (612,000) Total gains and losses in other
comprehensive income - Net change in fair value of available-for-sale financial
Financial assets designated at fair value through Trading assets profit or loss
USD USD
Balance at 1 January 2012 230,286,337 41,320,260 41,015 271,647,612 Total gains and losses in
profit or loss 1,298,694 1,081,740 - 2,380,434 Purchases 417,256,238 - - 417,256,238 Settlements (403,780,192) - - (403,780,192)
Balance at 31 December 2012 245,061,077 42,402,000 41,015 287,504,092
Total gains or losses for the year in the above table are presented in the statement of profit or loss and other comprehensive income as follows:
Trading assets USD
Total gains and losses in profit or loss
- Net trading results 1,298,694 - 1,298,694 - Net gain from other financial
instruments carried at fair value - 1,081,740 1,081,740
Bank - 2013
Balance at 1 January 2013 42,402,000 40,314 42,442,314 Total gains and losses in profit or
loss (612,000) - (612,000) Total gains and losses in other
comprehensive income - 69,207 69,207 Purchases - 1,988,335 1,988,335 Settlements (24,090,000) - (24,090,000) Balance at 31 December 2013 17,700,000 2,097,856 19,797,856 Investments available- for-sale USD Total USD Financial assets designated at fair value through profit or loss USD Total USD Financial assets designated at fair value through profit or loss USD Investments available- for-sale USD Total USD
notes to the financial statements Investments available- for-sale USD Total USD Total USD Financial assets designated at fair value through profit or loss USD Investments available- for-sale USD Financial assets designated at fair value through profit or loss USD Total USD
5 fair values of financial instruments - continued
Total gains or losses for the year in the above table are presented in the statement of profit or loss and other comprehensive income as follows: Financial assets designated at fair value through profit or loss USD Total gains and losses in profit or
loss
- Net gain from other financial instruments carried at fair
value (612,000) - (612,000) Total gains and losses in other
comprehensive income - Net change in fair value of available-for-sale financial assets - 69,207 69,207 Bank - 2012 Balance at 1 January 2012 41,320,260 40,314 41,360,574 Total gains and losses in profit or
loss 1,081,740 - 1,081,740
Balance at 31 December 2012 42,402,000 40,314 42,442,314 Total gains or losses for the year in the above table are presented in the statement of profit or loss and other comprehensive income as follows:
Total gains and losses in profit or loss - Net gain from other financial
5.3.2
unobservable inputs used in measuring fair value
The below sets out information about significant unobservable inputs used at 31 December 2013 in measuring financial instruments categorised as Level 3 in the fair value hierarchy: