Financial Statements - United Bank Limited

NOTES TO AND FORMING PART OF THE UNCONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2012
22.3 Trade-related contingent liabilities
2012 2011
------- (Rupees in '000) -------
Contingent liabilities in respect of letters of credit opened favouring
Government 54,515,574 37,368,414
Others 91,938,820 85,651,395
146,454,394 123,019,809
22.4 Other contingencies
Claims against the Bank not acknowledged as debts 23,818,821 22,214,453
22.5 Commitments to extend credit
The Bank makes commitments to extend credit in the normal course of its business but these being revocable
commitments do not attract any significant penalty or expense if the facility is unilaterally withdrawn.
22.6 Commitments in respect of forward foreign exchange contracts
2012 2011
------- (Rupees in '000) -------
Purchase 119,658,061 136,641,383
Sale 90,502,058 94,144,141
22.7 Commitments in respect of derivatives
Interest rate swaps 8,059,417 8,444,451
Cross currency swaps 12,490,616 35,041,839
FX options - purchased 37,234 -
FX options - sold 37,234 -
Forward sale of government securities 308,867 -
22.8 Commitments in respect of capital expenditure 2,150,282 1,082,145
22.9 For contingencies relating to taxation refer note 13.1
23. DERIVATIVE INSTRUMENTS
Derivatives are a type of financial contract, the value of which is determined by reference to one or more underlying
assets or indices. The major categories of such contracts include forwards, futures, swaps and options. Derivatives
also include structured financial products that have one or more characteristics of forwards, futures, swaps and
options.
The Bank, as an Authorized Derivative Dealer (ADD) is an active participant in the Pakistan derivatives market and
offers a wide variety of derivatives products covering both hedging and market making to satisfy customers’ needs.
Where required, specific approval is sought from the SBP for each transaction:
The authority for approving policies lies with the Board of Directors (BoD) and the Board Risk Management
Committee (BRMC). The Market Risk Committee (MRC) is responsible for ensuring compliance with these policies.
With regard to derivatives, the MRC is authorized to:
-
Review the derivatives business with reference to market risk exposure and assign various limits in accordance
with the risk appetite of the Bank
28