Annual report 2008-OK-B-up.qxp - Canadia Bank Plc.

NOTES TO THE FINANCIAL STATEMENTS
31. EVENTS AFTER THE BALANCE SHEET DATE
i) Reserve requirement
On 26 January 2009, the Central Bank issued a Prakas requiring all commercial banks to maintain reserve
requirements against deposits and borrowings at a daily average balance equal to 8% in Riel and 12% in
foreign currencies with the Central Bank. This Prakas superseded the existing Prakas which require reserve
requirements at 8% in Riel and 16% in foreign currencies.
ii) Classification and provision for bad and doubtful debts
On 25 February 2009, the Central Bank issued a Prakas, B7-09-074 revising loans classification and
provisioning for banks and financial institutions. It applies for loans and advances or other assets with
similar nature. The Prakas replaces existing Prakas B7-00-51 and B702-145 from 25 February 2009. The
minimum mandatory loan loss provision is made depending on the classification concerned unless other
information is available to indicate worsening.
Below table compares the current and new loan classifications and minimum provisioning requirements:
Classifications Minimum Provisioning Minimum Provisioning
Requirements
Requirements
Current
New
Standard 0% 1%
Special mention NA 3%
Sub-standards 10% 20%
Doubtful 30% 50%
Loss 100% 100%
Both past due and qualitative factors shall be taken into account for loan classification and provisioning.
32. FINANCIAL RISK MANAGEMENT
The Bank's activities expose it to a variety of financial risks: credit risk, market risk (including currency risk,
interest rate risk and price risk), and liquidity risk. Taking risk is core to the financial business, and the operational
risks are an inevitable consequence of being in business.
The Bank does not use derivative financial instruments such as foreign exchange contract and interest rate
swaps to manage its risk exposure.
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