2011 Annual Report - Khaleeji Commercial Bank BSC

KHALEEJI COMMERCIAL BANK BSC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2011
BD 000’s
31. RISK MANAGEMENT (continued)
Market Risk (continued)
Management of market risks
The Bank separates its exposure to market risk between trading and non-trading portfolios. The Bank has no trading positions
in equity or commodities and the main source of market risk for the Bank is its foreign exchange exposure and profit rate gap.
The Bank does not do any trading in foreign exchange. The Bank does not engage in proprietary trading of foreign exchange
derivatives. However, the Bank enters into Shari’a compliant foreign exchange risk management transactions to hedge economic
risks to cover significant open positions under its risk management guidelines. All foreign exchange income / losses arising out
of customer transactions and revaluation of statement of financial position assets and liabilities are booked by the treasury
operations. The responsibility for monitoring and managing the related risks also rests with the Treasury department.
Overall authority for market risk management is vested with ALCO. The RMD is responsible for the development of detailed
risk management policies (subject to review and approval by appropriate approval authorities) and the Financial Control
Department is responsible for the day-to-day review of their implementation.
Exposure to profit rate risk-non-trading portfolios
The principal risk to which non-trading portfolios are exposed is the risk of loss from fluctuations in the future cash flows or
fair values of financial instrument because of a change in market profit rates. Profit rate risk is managed principally through
monitoring profit rate gaps and by having pre-approved limits for repricing bands. The ALCO is the monitoring body for
compliance with these limits and is assisted by the Bank’s Risk Management Department in its day-to-day monitoring activities.
A summary of the Bank’s profit rate gap position at 31 December 2011 is as follows:
31 December 2011 Up to 3 - 6 6 months 1 - 3 More than Total
3 months months to 1 year years 3 years
Assets
Placements with financial institutions 76,787 - - - - 76,787
Financing assets 26,538 6,515 4,328 72,118 92,057 201,556
Assets acquired for leasing
(including lease rentals receivable) 366 - - 1,745 11,547 13,658
Investments securities (sukuk) 4,067 8,221 3,664 3,110 2,610 21,672
Total profit rate sensitive assets 107,758 14,736 7,992 76,973 106,214 313,673
Liabilities and investment accounts
Placements from financial institutions 45,435 - - - - 45,435
Placements from non-financial
institutions and individuals 44,965 - 83 72 1,527 46,647
Customers’ current accounts 286 - - - - 286
Equity of investments account holders 128,269 24,601 42,467 30 - 195,367
Total profit rate sensitive liabilities
and investment accounts 218,955 24,601 42,550 102 1,527 287,735
Profit rate gap (111,197) (9,865) (34,558) 76,871 104,687 25,938
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Annual Report 2011