44
BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED
ANNUAL REPORT 2013
Notes to the Consolidated Financial Statements
For the year ended March 31, 2013, with comparative figures for 2012
(Expressed in Barbados dollars)
25. FINANCIAL RISK MANAGEMENT (CONTINUED)
25.1Introduction
(continued)
Risk mitigation
As part of its overall risk management, the Group invests a portion of its available funds in lending, financial investments and
non-earning assets. The Group’s main source of income is derived from lending and it seeks to actively use collateral to reduce
its credit risk. The Group also has sought long term funding requirements to match their long term loan position.
In order to avoid excessive concentrations of risk, the Group’s policies and procedures include specific guidelines to focus on
maintaining a diversified portfolio.
25.2Credit risk
Credit risk is the risk that the Group will incur a loss because its customers or counterparties fail to discharge their contractual
obligations. The Group manages and controls credit risk by setting limits on the amount of risk it is willing to accept for
individual counterparties and by monitoring exposures in relation to such limits. Credit risk exposures arise principally in lending
activities that lead to loans and advances, and investment activities that bring debt securities into the Group’s asset portfolio.
There is also credit risk in off-balance sheet financial instruments, such as commitments.
Loans and advances
The Group employs a range of policies and practices to mitigate credit risk relating to loans and advances. The most traditional
of these is the taking of security for funds advanced. The principal collateral types for loans and advances within the Group are:
- Mortgages over residential properties
- Charges over financial instruments such as debt securities and equities
- Charges over business assets such as premises
- Hypothecation of deposit balances
It is the Group’s policy to dispose of repossessed properties in an orderly fashion. The proceeds are used to reduce or repay the
outstanding claims. The Group does not occupy repossessed properties for business use.
Financial investments
The Group limits its exposure to credit risk by investing only in entities that have high credit ratings and Government of
Barbados securities. Government securities are invested over a longer period than term deposits with other financial institutions
which typically mature within one year. The Group has invested in available-for-sale equity instruments as well which gives it an
opportunity to monitor the performance of these companies over time and make economic decisions where warranted. The
Group has documented investment policies in place, which guide the management of credit risk on investments.
Exposure to credit risk before collateral held or other credit enhancements
Maximum exposure
2013
2012
Credit risk exposures relating to on-balance sheet assets are as follows:
Loans and advances to customers:
Consumer
$ 461,168,052
444,978,460
Mortgages
301,247,224
298,721,561
Business
9,100,051
3,391,587
Financial investments:
Held to maturity
16,377,955
11,317,370
Loans and receivables
3,272,398
4,214,891
Cash resources
117,433,453
102,900,958
Credit risk exposures relating to off-balance sheet items are as follows:
Loan commitments
57,836,767
49,942,458
Total maximum exposure
$ 966,435,900
915,467,285
