Financial Statements 2003 - National Bank of Kuwait

Notes to the Consolidated Financial Statements31 December 200314 Subsidiary companiesPrincipal operating subsidiaries:Name of company and country of incorporation Principal business % Capital heldNational Bank of Kuwait (International) plc - United Kingdom Banking 100.0NBK Investment Management Limited - United Kingdom Investment management 60.0National Bank of Kuwait (Suisse) S.A. - Switzerland Investment management 100.0National Bank of Kuwait (Lebanon) S.A.L. - Lebanon Banking 85.5National Investors Group Holdings Ltd. - Cayman Islands Investment management 100.0At 31 December 2003, 38.14% (2002: 38.14 percent) of the group’s interest in National Bank of Kuwait (Lebanon)S.A.L. was held by an intermediate holding company, NBK Holding (Liban) S.A.L.15 Commitments and contingent liabilities2003 2002KD 000’s KD 000’sCommitments on behalf of customers for which there arecorresponding liabilities by the customers concerned:Acceptances 72,422 57,986Letters of credit 209,774 158,813Guarantees 618,745 584,621Irrevocable commitments to extend credit 413,923 377,9281,314,864 1,179,348In the normal course of business the group has exposure to various indirect credit commitments which, though notreflected in the balance sheet, are subject to normal credit standards, financial controls and monitoring procedures.These credit commitments do not necessarily represent future cash requirements, since many of these commitmentswill expire or terminate without being funded. Credit losses, if any, which may result from exposure to suchcommitments are not expected to be significant.16 Derivative instrumentsThe group deals in interest rate and foreign exchange derivatives to earn fees, generate trading revenues and manageits asset and liability exposures.Notional principal amounts merely represent amounts to which a rate or price is applied to determine the amounts ofcash flows to be exchanged and do not represent the potential gain or loss associated with the market or credit risk ofsuch instruments.Credit risk in respect of derivative financial instruments arises from the potential for a counterparty to default onits contractual obligations and is limited to the positive fair value of instruments that are favourable to the group.Exchange-traded contracts are subject to daily margin requirements and are, therefore, deemed to have no additionalcredit risk.42