Bahamas - FirstCaribbean International Bank

Notes to the Consolidated Financial Statements
October 31, 2007
(expressed in thousands of Bahamian dollars)
28. Financial risk management (continued)
D. Currency risk
The Bank takes on exposure to effects of fluctuations in the prevailing foreign
currency exchange rates on its financial position and cash flows. The Board of
Directors sets limits on the level of exposure by currency and in total for both
overnight and intra-day positions, which are monitored daily. The table below
summarises the Bank’s exposure to foreign currency exchange rate risk at October
31. The off-balance sheet net notional position represents the difference between
the notional amounts of foreign currency derivative financial instruments, which
are principally used to reduce the Bank’s exposure to currency movements, and
their fair values.
Concentrations of assets, liabilities and credit commitments:
October 31, 2007 BAH US Other Total
$ $ $ $
Assets
Cash and balances with
central bank 103,199 11,567 2,042 116,808
Due from banks 1,161 48,612 102,853 152,626
Derivative financial instruments — 36,713 — 36,713
Financial assets at fair value
through profit or loss — 792,307 — 792,307
Other assets 10,287 20,879 1,496 32,662
Investment securities 133,974 720,623 38,564 893,161
Loans and advances to customers 1,440,983 974,992 — 2,415,975
Property and equipment 20,779 6,094 81 26,954
Retirement benefit assets 11,731 1,771 — 13,502
Goodwill 186,582 1,165 — 187,747
Total assets 1,908,696 2,614,723 145,036 4,668,455
Liabilities
Customer deposits 1,348,011 2,064,913 248,482 3,661,406
Derivative financial instruments — 20,940 10,034 30,974
Debt securities in issue 20,620 — — 20,620
Other borrowed funds — 278,171 — 278,171
Other liabilities 280 29,858 — 30,138
Retirement benefit obligations 3,717 — 97 3,814
Total liabilities 1,372,628 2,393,882 258,613 4,025,123
Net on balance sheet position 536,068 220,841 (113,577) 643,332
Credit commitments 104,967 257,062 1,561 363,590
See Auditors’ Report Page 56.
Concentrations of assets, liabilities and credit commitments (continued)
BAH US Other Total
$ $ $ $
October 31, 2006
(Restated)
Total assets 1,857,111 2,452,370 114,480 4,423,961
Total liabilities 1,336,948 2,274,672 215,603 3,827,223
Net on balance sheet position 520,163 177,698 (101,123) 596,738
Credit commitments 174,841 258,395 1,903 435,139
E. Cash flow and fair value interest rate risk
Cash flow interest rate risk is the risk that the future cash flows of a financial
instrument will fluctuate because of changes in market interest rates. Fair value
interest rate risk is the risk that the value of a financial instrument will fluctuate
because of changes in market interest rates. The Bank takes on exposure to the
effects of fluctuations in the prevailing levels of market interest rates on both
its fair value and cash flow risks. Interest margins may increase as a result of
such changes but may reduce or create losses in the event that unexpected
movements arise. Limits are set on the level of mismatch of interest rate repricing
that may be undertaken, which are monitored on an ongoing basis.
Expected repricing and maturity dates do not differ significantly from the contract
dates, except for the maturity of deposits up to 1 month, which represent
balances on current accounts considered by the Bank as a relatively stable core
source of funding of its operations.
F. Liquidity risk
The Bank is exposed to daily calls on its available cash resources from overnight
deposits, current accounts, maturing deposits, loan draw downs, guarantees and
from margin and other calls on cash settled derivatives. The Bank does not
maintain cash resources to meet all of these needs as experience shows that a
minimum level of reinvestment of maturing funds can be predicted with a high
level of certainty. The Board sets limits on the minimum proportion of maturing
funds available to meet such calls and on the minimum level of interbank
and other borrowing facilities that should be in place to cover withdrawals at
unexpected levels of demand.
The table below analyses assets, liabilities and credit commitments of the Bank
into relevant maturity groupings based on the remaining period at balance sheet
date to the contractual maturity date.
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