BOB_2017_SMALL
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NOTES TO THE FINANCIAL STATEMENTS<br />
ANNUAL REPORT AND<br />
FINANCIAL STATMENTS <strong>2017</strong><br />
Risk measurement and control<br />
Interest rate, currency, credit, liquidity and other risks are actively managed by management to ensure compliance with the<br />
bank’s risk limits. The bank’s risk limits are assessed regularly to ensure their appropriateness given its objectives and strategies<br />
and current market conditions. A variety of techniques are used by the bank in measuring the risks inherent in its trading and<br />
non-trading positions.<br />
Foreign exchange risk sensitivity<br />
The table below summarises the effect on post-tax profit had the Kenya Shilling weakened by 10% against each currency, with<br />
all other variables held constant. If the Kenya Shilling strengthened against each currency, the effect would have been the<br />
opposite.<br />
<strong>2017</strong> USD GBP EURO Others Total<br />
Effect on profit - Increase / (decrease) 30,566 (21,548) (2,407) 111 6,722<br />
2016 USD GBP EURO Other Total<br />
Effect on profit - Increase / (decrease) 36,162 (26,145) (6,770) 1,758 5,005<br />
Price risk sensitivity<br />
The bank is exposed to price risk on quoted shares, corporate bonds and government securities because of investments that are<br />
classified on the statement of financial position as ‘Available-for-sale’.<br />
The table below summarises the impact on increase in the market price on the bank’s equity net of tax. The analysis is based<br />
on the assumption that the market prices had increased by 5% with all other variables held constant and all the banks equity<br />
instruments moved according to the historical correlation with the price:<br />
Impact on other comprehensive income<br />
<strong>2017</strong> 2016<br />
Kshs. ‘000 Kshs. ‘000<br />
Effect of increase 259,236 213,155<br />
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