Annual REPORT

Recommendations

Info

NOTES TO THE FINANCIAL STATEMENTS (Continued) ANNUAL <strong>REPORT</strong> AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued) (a) Credit risk (Continued) Loans and advances neither past due nor impaired Apart from the loans and advances to customers all other credit exposures are neither past due nor impaired. The group classifies loans and advances under this category for those exposures that are up to date and in line with contractual agreements. These exposures will normally be maintained within approved product programs and with no signs of impairment or distress. These exposures are categorised internally as grade 1-3, that is, normal accounts in line with CBK prudential guidelines and a provision of 1 % is made and appropriated from revenue reserves to statutory reserves. Loans and advances past due but not impaired loans Loans where the contractual interest or principal payments are past due but the group believes that impairment is not appropriate on the basis of the level of security/collateral available and/or the stage of collection of amounts owed to the group are classified as past due but not impaired. These exposures are graded internally as category 4-5 that is watch accounts in the group’s internal credit risk grading system, in line with CBK guidelines. Allowances for impairment The group establishes an allowance for impairment losses that represents its estimate of incurred losses in its loan portfolio. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loan loss allowance established for homogeneous assets in respect of losses that have been incurred but have not been identified on loans subject to individual assessment for impairment. The internal credit risk grading system which is in line with CBK prudential guidelines focus on expected credit losses – that is taking into account the risk of future events giving rise to losses. In contrast, impairment allowances are recognised for financial reporting purposes only for losses that have been incurred at the date of the statement of financial position based on objective evidence of impairment. Due to the different methodologies applied, the amount of incurred credit losses provided for in the statement of comprehensive income is usually lower than the amount determined from the expected loss model that is used for internal operational management and banking regulation purposes. Write-off policy When a loan is uncollectible it is written off against the related provisions for loan impairment. Such loans are written off after all the necessary recovery procedures have been completed and the amount of loan has been determined. Subsequent recoveries of amounts previously written off are recognised as gains in the profit or loss. The group holds collateral against loans and advances to customers in the form of mortgage interests over property, other registered securities over assets, and guarantees. Estimates of fair value are based on the value of collateral assessed at the time of borrowing, and generally are not updated except when a loan is individually assessed as impaired. Collateral generally is not held over loans and advances to banks, except when securities are held as part of reverse repurchase and securities borrowing activity. Settlement risk The group’s activities may give rise to risk at the time of settlement of transactions and trades. Settlement risk is the risk of loss due to the failure of a bank to honour its obligations to deliver cash, securities or other assets as contractually agreed. Settlement limits form part of the credit approval/limit monitoring process described earlier. Acceptance of settlement risk on free settlement trades requires transaction specific or counterparty specific approvals from bank risk. 66
ANNUAL <strong>REPORT</strong> AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 NOTES TO THE FINANCIAL STATEMENTS (Continued) 4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued) (a) Credit risk (Continued) Concentration of risk Details of significant concentrations of the group’s assets, liabilities and off balance sheet items by industry groups are as detailed below: i) Advances to customers 2015 2014 Sh’000 % Sh’000 % Manufacturing 163,447 1 102,838 1 Wholesale and retail 18,008,603 31 10,103,102 26 Transport and communication 9,250,352 16 4,338,913 11 Agricultural 2,374,658 4 1,758,171 4 Business services 431,637 1 350,973 1 Building and construction 8,365,533 14 4,869,590 12 Other 18,798,822 33 17,733,836 45 _________ ______ _________ _____ ii) Customer deposits 57,393,052 100 39,257,423 100 ======== ====== ======== ==== Central and local Government 259,947 - 207,337 1 Co-operative societies 405,224 1 317,472 1 Insurance companies 279,941 1 202,089 - Private enterprises & individuals 61,649,740 98 46,309,841 98 Non-profit institutions 116,007 - 99,741 - _________ ______ _________ _____ iii) Off balance sheet items (letters of credit and guarantees) 62,710,859 100 47,136,480 100 ======== ====== ======== ==== Trading 2,324,101 100 2,737,651 100 ======== ====== ======= ===== (b) Liquidity risk Liquidity risk is the risk that the group will encounter difficulty in meeting obligations from its financial liabilities when they fall due as a result of customer deposits being withdrawn, cash requirements from contractual commitments or other cash outflows. Management of liquidity risk The group’s liquidity risk management is carried out within the group and monitored by the Asset Liability committee (ALCO). The group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the group’s reputation 67
Page 1 and 2:
ANNUAL REPORT AND FINANCIAL STATEME
Page 3 and 4:
Page 5 and 6:
Page 7 and 8:
BOARD OF DIRECTORS ANNUAL REPORT AN
Page 9 and 10:
Page 11 and 12:
CHAIRMAN’S STATEMENT REVIEW OF TH
Page 13 and 14:
CHAIRMAN’S STATEMENT (Continued)
Page 15 and 16:
CHAIRMAN’S STATEMENT (Continued)
Page 17 and 18: CHAIRMAN’S STATEMENT (Continued)
Page 19 and 20: ANNUAL REPORT AND FINANCIAL STATEME
Page 29 and 30: FAMILY BANK INSURANCE AGENCY LIMITE
Page 35 and 36: CORPORATE GOVERNANCE STATEMENT ANNU
Page 37 and 38: REPORT OF THE DIRECTORS ANNUAL REPO
Page 47 and 48: 2 ACCOUNTING POLICIES (Continued) N
Page 49 and 50: NOTES TO THE FINANCIAL STATEMENTS (
Page 67: ANNUAL REPORT AND FINANCIAL STATEME
Page 107 and 108: Branches ANNUAL REPORT AND FINANCIA
show all

Annual REPORT

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?