Annual Report 2012 - National Savings Bank

123ASSESSING AND MANAGING OUR RISK FACTORSRISK MANAGEMENTidiosyncratic situations. These stress testsare reviewed periodically to representcurrent market conditions as per theBoard approved Stress Test Policy.The following scenario summary oninterest rate risk indicates that the Bankis still able to maintain the protabilityeven if the FD rate on all xed depositsincreased by 0.5% and 1% whileTreasury Bill and Treasury Bond ratesremain unchanged. These types ofstress tests are very much helpful in aninterest rate rising scenario.Foreign Exchange RiskForeign exchange risk (also known asexchange rate risk or currency risk) is anancial risk posed by an exposure tounanticipated changes in the exchangerate between two currencies. In termsof foreign currency (FC) operations,the Bank is only engaged in acceptingsavings and xed deposits in majorcurrencies, accepting remittances fromcustomers and investing in more orless in the same tenure. Further, theBank selects the investing banks basedon their rating and the selected bankscurrently are in higher notches ofrating. Hence, the foreign exchange riskfaced by the Bank is at a minimum andthe mismatch of the foreign currencyassets and liabilities is at a manageablelevel.Item Actual 2012 Scenario 10.5%Scenario 21%PBT (Rs.Million) 6,719 3,762 2,292P/L Impact (%) 100 56 34Interest Cost/ Interest Income (%) 79 86 89Margin (%) 3.1 2.4 2.1Gearing (%) 5.1 4.7 4.5Foreign Currency Investments in Banks28%AA (Government)AA (Private)2%AA- (Private)70%NATIONAL SAVINGS BANK . ANNUAL REPORT 2012