Annual Report 2012 - Raiffeisen Bank Kosovo JSC

a) Impairment charge for credit losses
The Bank reviews its loan portfolios to assess impairment at least on a quarterly basis. In determining whether an
impairment loss should be recorded in the profit or loss, the Bank makes judgments as to whether there is any observable
data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of loans before
the decrease can be identified with an individual loan in that portfolio. This evidence may include observable data
indicating that there has been an adverse change in the payment status of borrowers in a Bank, or national or local
economic conditions that correlate with defaults on assets in the Bank.
Management uses estimates based on historical loss experience for assets with credit risk characteristics and objective
evidence of impairment similar to those in the portfolio when scheduling its future cash flows. The methodology and
assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any
differences between loss estimates and actual loss experience.
b) Impairment of available for-sale investments
The Bank determines that available-for-sale investments are impaired when there has been a significant or prolonged
decline in the fair value below its cost. This determination of what is significant or prolonged requires judgment.
In making this judgment, the Bank evaluates among other factors, the normal volatility in share price. In addition,
impairment may be appropriate when there is evidence of deterioration in the financial health of the investee, industry
and sector performance, changes in technology, and operational and financing cash flows.
c) Impairment of foreclosed assets
The process of calculating impairment loss requires that the management make significant and complex assumptions
regarding the projected period of sale of foreclosed assets, their estimated net sales value and the corresponding
discount rate, in order to discount to net present value the expected cash flow from sale of specific items of foreclosed
properties.
Management of the Bank believes that the foreclose assets will be sold in a reasonable time frame, with no loss.
d) Recent volatility in global financial markets
The unprecedented crisis in international financial markets, during 2012 and 2011, had some but limited impact in the
financial sector in Kosovo, as there was no major exposure of the sector abroad. Any exposure in Securities was limited
to OECD countries with AAA rating countries. Kosovo banking sector continued its normal operations by relying on
lending to the domestic economy, while its main source of finance remained deposits in Kosovo.
4. Financial risk management
4.1 Overview
The Bank has exposure to the following risks from its use of financial instruments:
This note presents information about the Bank’s exposure to each of the above risks, the Bank’s objectives, policies and
processes for measuring and managing risk, and the Bank’s management of capital.
Risk management framework
The internal controls and additional risk control tools set by Raiffeisen International Risk Management enable the
controlled risk management of the overall Bank. The risk management and risk control tools have been set according to
the latest risk management know-how. The main Risk Management Tools have been endorsed by Raiffeisen International
and are applied for use by the Bank.
covering credit and market risks. The standardised approach is being applied so far. Its transformation into the latest
approach is in the development phase. The implementation of Basel II requirements should ensure a better management
of the capital.
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Addresses Glossary Financial Statements Segment Reports Overview Macroeconomic Environment RBI Vision and Mission Management Board Introduction