Home' Trinidad and Tobago Guardian : December 22nd 2016 Contents First Citizens Bank Limited
(A Subsidiary of First Citizens Holdings Limited)
Unconsolidated Financial Statements
30 September 2016
(Expressed in Trinidad and Tobago dollars)
3 Financial risk management (continued)
a. Credit risk (continued)
(v) Loans to customers and other financial assets (continued)
(c) Individually impaired
Individual (retail customers)
Instalment Loans Overdrafts Cards Mortgages
30 September 2016 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Loans to customers
593 24,343 13,849 291,592 22,329 411,637
Fair value of collateral 14,067 75,574
16 --- 13,042 521,021 21,098 644,818
Impairment allowance (26,268) (3,111) (593) (19,024) (2,852) (88,857) (7,118) (147,823)
30 September 2015
Loans to customers
604 23,157 11,268 487,570 13,735 590,246
Fair value of collateral 11,339 75,536
--- 23,790 676,460 29,823 817,142
Impairment allowance (20,060) (3,127) (545) (17,254) (522) (105,590) (2,764) (149,862)
Upon initial recognition of loans to customers, the fair value of collateral is based on
valuation techniques commonly used for the corresponding assets. In the subsequent
periods, the fair value is updated by reference to market price or indices of similar assets.
(d) Loans to customers renegotiated
Restructuring activities include extended payment arrangements, approved external
management plans, modification and deferral of payment. Restructuring policies and
practices are based on indicators or criteria that, in the judgment of management, indicate
that payment will most likely continue. These policies are kept under continuous review.
Restructuring is most commonly applied to term loans. In some cases, restructuring
results in the assets continuing to be impaired but in a number of cases restructuring
is geared to facilitate a correction of the root cause of impairment which eventually
improves collectability of the assets.
(vi) Credit quality of available-for-sale securities
The table below represents an analysis of available-for-sale securities by internal, external and
equivalent rating agency designation.
(vii) Repossessed collateral
Repossessed properties are sold as soon as practicable, with the proceeds used to reduce the
outstanding indebtedness. The Bank does not assume title of these assets, and as a result,
they are not included in the unconsolidated statement of financial position.
(viii) Concentration of risks of financial assets with credit risk exposure
The following table breaks down the Bank's main credit exposure as categorised by industry
sectors of counter parties.
Cash and bank balance
Statutory deposits with central bank
Loans, receivables and available-for-sale investments:
Hotels and guest houses
Transport, storage and communications
Finance, insurance and real estate
Other business services
Real estate mortgages
Due from parent company
Due from subsidiaries
b. Market risk
The Bank takes on exposure to market risk, which is the risk that the fair value or future cash
flows of a financial instrument will fluctuate because of changes in market prices. Market risks
arise from open positions in interest rate, currency and equity products, all of which are exposed
to general and specific market movements and changes in the level of volatility of market rates
or prices such as interest rates, credit spreads, foreign exchange rates and equity prices. The Bank
separates exposures to market risk into either trading or non-trading portfolios.
The market risks arising from trading and non-trading activities are measured separately by the
Group Market Risk department who submit reports to the Senior Management Enterprise Risk
Committee on a regular basis and also reports via the Enterprise Risk Unit to the Board Enterprise
Risk Committee to enable Board oversight of market risk issues. Additionally, on a monthly
basis, the Bank's Market Risk Committee reviews and approves the yield curves used to value all
investment securities and reports on this into the Group ALCO. This Committee also provides for
the consideration of the Group ALCO technical information that may be relevant to current and
developing market conditions from time to time.
Non-trading portfolios primarily arise from the interest-rate management of the Bank's retail
and commercial banking assets and liabilities. Non-trading portfolios also consist of interest rate,
foreign exchange and equity risks arising from the Bank's financial assets available-for-sale.
(i) Currency risk
The Bank takes on exposure to the effects of fluctuations in the prevailing foreign currency
exchange rates on its financial position and cash flows. It is the policy of the Bank not to
engage in speculative foreign exchange activities, since its primary focus is to supply foreign
currency to customers at a profit with the US$ dominating trading. However, as supply usually
lags behind customer demand, the Bank may find itself in an overbought or oversold position.
The Bank's strategy of managing this risk is to buy low and sell high; establish relationships
with corporate foreign exchange earners; limit foreign exchange exposure; avoid speculation
with an aim to keep a balanced position; and match foreign currency denominated assets
with foreign currency denominated liabilities. The Bank does not currently engage in any
hedging activities to mitigate currency risk.
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