Home' Trinidad and Tobago Guardian : December 27th 2013 Contents B38
Guardian www.guardian.co.tt Friday, December 27, 2013
Consolidated Financial Statements
30 September 2013
2 Summary of Significant Accounting Policies (continued)
2.25 Intangible assets
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's
share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition.
Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill on acquisition of
associates is included in investment in associates.
Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses.
Gains and losses on disposal of an entity include the carrying amount of goodwill relating to the
(b) Other Intangible assets
Other intangible assets are initially recognised when they are separable or arise from contractual
or other legal rights, the cost can be measured reliably and in the case of intangible assets not
acquired in a business combination, where it is probable that future economic benefits attributes
to the assets with flow from their use. The value of intangible assets which are acquired in a
business combination is generally determined using income approach methodologies such as the
discounted cash flow method.
Other intangible assets are stated at cost less amortisation and provisions for impairment, if any,
plus reversals of impairment, if any. They are amortised over their useful lives in a manner that
reflects the pattern to which they contribute to future cash flow.
2.26 Fiduciary activities
The Group acts as trustees and in other fiduciary capacities that result in the holding or placing of assets
on behalf of individuals, trusts, retirement benefit plans and other institutions. These assets and income
arising thereon are excluded from these consolidated financial statements, as they are not assets of the
Group (Note 3.4).
2.27 Earning per share
Earnings per share is calculated by dividing the profit attributable to the equity holders, by the weighted
average number of ordinary shares in issue during the year.
2.28 Segment reporting
The Group's segmental reporting is based on the following: Retail Banking, Corporate Banking,
Investment Banking, Asset Management and Group functions.
3 Financial Risk Management
The Group's activities expose it to a variety of financial risks and those activities involve the analysis,
evaluation, acceptance and management of some degree of risk or combination of risks. Taking risk
is core to the financial business, and the operational risks are an inevitable consequence of being in
business. The Group's aim is therefore to achieve an appropriate balance between risk and return and
minimise potential adverse effects on the Group's financial performance.
The Group's risk management policies are designed to identify and analyse these risks, to set appropriate
risk limits and controls, and to monitor the risks and adherence to limits by means of reliable and up-
to-date information systems. The Group regularly reviews its risk management policies and systems to
reflect changes in markets, products and emerging best practice.
Risk Management Framework
The Board of Directors has overall responsibility for the establishment and oversight of the Group's
risk management framework. To assist the Board of Directors in fulfilling its duties, two Board Sub-
Committees were established to monitor and report to the Board of Directors on the overall risks within
The Group Enterprise Risk Unit, headed by the Group Chief Risk Officer, is responsible for the
management, measurement, monitoring and control of operational, market and credit risk for the
Group through the Group Operational Risk Unit, Group Credit and Risk Administration Unit, Group
Market Risk Unit and Group Business Continuity Planning Unit.
The Group has also established the Asset Liability Committee (ALCO) to manage and monitor the
policies and procedures that address financial risks associated with changing interest rates, foreign
exchange rates and other factors that can affect the Group's liquidity. The ALCO seeks to limit risk
to acceptable levels by monitoring and anticipating possible pricing differences between assets and
liabilities across the Bank and the Group's various companies via the Group's Treasury and International
Trade Centre. The Group Treasury and International Trade Centre's primary role and responsibility is to
actively manage the Group's liquidity and market risks.
As part of its mandate, the Board establishes written principles for overall risk management, as well as
ensuring that policies are in place covering specific areas of risk, such as foreign exchange risk, interest
rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments.
In addition, the Group Internal Audit Department is responsible for the independent review of risk
management and the control environment, and reports its findings and recommendation to the Board
The most important types of risk are credit risk, liquidity risk, market risk and other operational risk.
Market risk includes currency risk, interest rate and other price risk.
3.1 Credit risk
Credit exposures arise principally in lending activities that lead to loans and advances and in investment
activities that bring debt securities and other bills into the Group's asset portfolio. Credit risk also occurs
in off-balance sheet financial instruments such as loan commitments. This risk relates to the possibility
that a counter party will cause a financial loss to the Group by failing to discharge an obligation. All
the Group's lending and investment activities are conducted with various counter parties and it is in
pursuing these activities that the Group becomes exposed to credit risk.
It is expected that these areas of business will continue to be principal ones for the Group in the future
and with loans and advances currently comprising a significant portion of the Group's assets and being
responsible for a substantial portion of the revenue generated, it is anticipated that the Group will
continue to be exposed to credit risk well into the future. The management of credit risk is therefore
of utmost importance to the Group and an appropriate organisational structure has been put in place
to ensure that this function is effectively discharged for the Group's business; management therefore
carefully manages its exposure to credit risk. Exposure to credit risk is managed through appropriate
credit policies, procedures, practices and audit functions, together with approved limits. Exposure is also
managed by obtaining collateral and corporate and personal guarantees.
3.1.1 Credit risk management
In its management of credit risks, the Group has established an organisational structure which supports
the lending philosophy of the Group. This structure comprises the Board of Directors, the Board Credit
Committee (BCC), Senior Management Enterprise-wide Risk Committee (SMERC), the Chief Risk
Officer (CRO), the Credit Administration Department and the Internal Audit Department. The Board
of Directors maintains general oversight to ensure that policies and procedures are consistent with the
strategic direction and credit philosophy of the Group and that they serve to bring the required level of
protection over assets that are exposed to credit risks. To facilitate day to day decision making and timely
implementation of decisions, the Board has delegated authority for specific areas to specific committees
and/or officers with an appropriate reporting system to the Board. The BCC focuses primarily on credit
risk appetite and in so doing sanctions amendments to credit policies, delegation of lending authority to
senior management and credit requests exceeding the authority of management. The SMERC together
with the CRO monitors the effectiveness of credit procedures and policies and may direct changes
to strategies to improve the effectiveness of policies. The major focus of the Credit Administration
Department is to formulate credit policies, monitor compliance with them and on a continuous basis to
assess their relevance to the changing business environment. Most of these policies are established and
communicated through the Group's written Credit Policy Manual. This document sets out in detail the
current policies governing the lending function and provides a comprehensive framework for prudent
risk management of the credit function. Major areas of focus are General Credit Criteria, Credit Risk
Rating, Controls Risk Mitigants over the Credit Portfolio and Credit Concentration among others.
3.1.2 Credit risk measurement
As part of the on-going process of prudent risk management, the Group's policy is to risk rate credit
facilities at the time of approval and on a regular basis. The rating process partitions the portfolio
into un-criticised (higher quality loan assets) and criticised sections (the lower quality/impaired assets
evaluated under the Credit Classification System). The Credit Classification System is in place to assign
risk indicators to credits in the criticised portfolio and engages the traditional categories utilised by
3.1.3 Credit classification system
(a) Loans to customers
The Group's Credit Classification System is outlined as follows:
(b) Debt securities and other bills
The Group utilises external ratings such as local and international credit rating agencies or their
equivalent in managing credit risk exposures for debt securities and other bills.
Notes to the Consolidated Financial Statements (continued)
(expressed in Trinidad and Tobago dollars)
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