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BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED
ANNUAL REPORT 2013
The collective assessment is made for groups of assets with similar risk characteristics, in order to determine whether provision
should be made due to incurred loss events for which there is objective evidence, but the effects of which are not yet evident
in the individual loans’ assessments. The collective assessment takes account of data from the loan portfolio (such as historical
losses on the portfolio, levels of arrears, credit utilisation, loan to collateral ratios and expected receipts and recoveries
once impaired) or economic data (such as current economic conditions, unemployment levels and local or industry–specific
problems). The approximate delay between the time a loss is likely to have been incurred and the time it will be identified as
requiring an individually assessed impairment allowance is also taken into consideration.
Loans with renegotiated terms and the Group’s forbearance policy
Loans with renegotiated terms are loans that have been restructured due to deterioration in the borrower’s financial position,
where the Group has made concessions by agreeing to terms and conditions that are more favourable for the borrower than
the Group has provided initially. The Group implements forbearance policy in order to maximise collection opportunities and
minimise the risk of default. Under the Group’s forbearance policy, loan forbearance is granted on a selective basis in situations
where the debtor is currently in default on its debt, or where there is a high risk of default, there is evidence that the debtor
made all the reasonable efforts to pay under the original contractual terms and it is expected to be able to meet the revised
terms.
The revised terms usually include extending maturity, changing timing of interest payments and amendments to the terms of
loan covenants. All loans are subject to the forbearance policy.
Once the loan is restructured it remains in this category independent of satisfactory performance after restructuring. The
Group’s Credit Committee regularly reviews reports on forbearance activities.
Write-off policy
The Group writes off a loan or an investment debt security balance, and any related allowances for impairment losses, when
it is determined that the loan or security is uncollectible. This determination is made after considering information such as
the occurrence of significant changes in the borrower’s/issuer’s financial position such that the borrower/issuer can no longer
pay the obligation, or that proceeds from collateral will not be sufficient to pay back the entire exposure. For smaller balance
standardised loans, write-off decisions generally are based on a product-specific past due status.
Commitments and guarantees
To meet the financial needs of customers, the Group enters into various irrevocable commitments and contingent liabilities.
Even though these obligations may not be recognised on the statement of financial position, they do contain credit risk and are
therefore part of the overall risk of the Group.
25.3Liquidity risk and funding management
Liquidity risk is defined as the risk that the Group will encounter difficulty in meeting obligations associated with financial
liabilities that are settled by delivering cash or another financial asset. Liquidity risk arises because of the possibility that the
Group might be unable to meet its payment obligations when they fall due under both normal and stressed circumstances. To
limit this risk, management has arranged diversified funding sources in addition to its core deposit base, and adopted a policy
of managing assets with liquidity in mind and of monitoring future cash flows and liquidity on a daily basis. The Group has
developed internal control processes and contingency plans for managing liquidity risk. This incorporates an assessment of
expected cash flows and the availability of high grade collateral which could be used to secure additional funding if required.
The Group maintains a portfolio of highly marketable and diverse assets that are assumed to be easily liquidated in the event of
an unforeseen interruption of cash flow. The Group also has committed lines of credit that it can access to meet liquidity needs.
In addition, the Group maintains a statutory deposit with the Central Bank of Barbados.
Analysis of financial liabilities by remaining contractual maturities
The table below summarises the maturity profile of the undiscounted cash flows of the Group’s financial liabilities as of March
31, 2013 and March 31, 2012 on the basis of their earliest possible contractual maturity.
Notes to the Consolidated Financial Statements
For the year ended March 31, 2013, with comparative figures for 2012
(Expressed in Barbados dollars)
