Annual Report 2012 - National Savings Bank

122ASSESSING AND MANAGING OUR RISK FACTORSRISK MANAGEMENTMaturities of assets and liabilities, KeyRisk and Key Performance Indicators(KRIs/KPIs) are also used as tools inmanaging the interest rate risk of theBank. Interest margin and WeightedAverage Deposit Rate (AWDR) areused as major Key Risk Indicators inmonitoring the behaviour of the depositrates and measuring interest rate riskof the Bank. The ratios indicate thatthe Bank has been able to manage itsNet Interest Income, even though theInterest Margin of the Bank is on adeclining trend.The diversication of assets is based onthe margins and yields that are received.As such a higher proportion of assetsare allocated to sectors that generatehigher margins.The investment in loans and advancesgives the highest margin. Though it ison a decreasing trend, the decrease inmargin from loans and advances is verymarginal. Interest margin from loans tobanks and other nancial institutionshas increased from 2011 to 2012 whilemargin from Government Investments(%)12.010.08.06.04.02.00.0(%)76543210AWDR & Interest Margin2010 2011 2012 Q1 2012 Q2 2012 Q3 2012 Q4Interest Margins2011 2012 Q1 2012 Q2 2012 Q3 2012 Q4has decreased. However, margin fromall the categories show a slight reductionin the fourth quarter of 2012 comparedto the third quarter.AWDRInterest MarginGvt. InvementsLoans and AdvancesLoans to Banksand other nancialinstitutionsStress tests are another tool used to assessand forecast the future interest raterisks faced by the Bank and to analysethe ability of the institution to faceNATIONAL SAVINGS BANK . ANNUAL REPORT 2012