Annual Report 2012 - National Savings Bank

121ASSESSING AND MANAGING OUR RISK FACTORSRISK MANAGEMENTwhere 76% represents Fixed Deposits(FDs). On the other hand, the majorityof investments in the Bank representinvestment in government securities inshort to medium term which represents62% of total on balance sheet assets.Hence the Bank is subject to interestrate risk to a greater extent.subjected to re-pricing risk to a greaterextent. Therefore, the Bank gives dueconsideration in managing interestrate risk. ALCO has been constantlymonitoring the market risk factors andmanaging the interest rate risk in arising interest rate scenario.Rate sensitive gap that is preparedbased on rate sensitive assets and ratesensitive liabilities is a major tool usedin forecasting and managing interestrate risk of the Bank. Based on the gapand re-pricing risk faced, decisions arebeing taken by the ALCO to managethe interest rate risk to the optimal level.The composition of FDs amongst thetotal liabilities is on the increasing trendeven though the rate of growth hasreduced from 2011 to 2012. This causesthe Bank to have a high interest costwhich in turn results in reducing netinterest margin. The Savings depositsare also on the increasing trend eventhough at a slower rate. However, theposition of other liabilities and the repoborrowings remains almost same.Measurement of Interest RateRisk and Interest Rate RiskIndicatorsThe Banking Book constitutes 61%of the total balance sheet assets. Onthe other hand the deposits consistof 86% of the total on balance sheetliabilities and equity. Hence, the Bank isRate Sensitive GapItemUp to1 month1 - 3months3 - 6months6 - 12months1 - 3years(Rs.Millions)3 - 5yearsOver 5yearsRate SensitiveAssets 24,814 36,169 56,050 120,410 154,447 57,176 39,416Rate SensitiveLiabilities 86,225 156,124 61,217 131,126 27,965 360 1,619Gap (61,411) (119,955) (5,167) (10,716) 126,482 56,816 37,797Gap as a % ofTotal Liabilities (71) (77) (8) (8) 452 15,782 2,335Rs. Mn400,000350,000300,000250,000200,000150,000100,00050,000-Trend of Liabilities20082009 2010 2011 2012YearSavingsFDsRepoOther LiabilitiesNATIONAL SAVINGS BANK . ANNUAL REPORT 2012