Half Yearly Report -17-
31 Août 2011 - 8:00AM
UK Regulatory
The market risk for the non - trading portfolio is managed by
monitoring the sensitivity of Bank's financial assets and
liabilities to various interest rate scenarios. The bank monitors
its Net Interest Margin as a primary measure of interest rate
conditions. On foreign exchange risk, the bank monitors currency
mismatches and make adjustments depending on exchange rate movement
forecast. The mismatches are also contained within 10% of the
bank's capital position.
4.3 Liquidity risk
Liquidity risk is the risk that operations cannot be funded and
financial commitments cannot be met timeously. The risk arises when
there is a maturity mismatch between assets and liabilities. The
Bank identifies this risk through maturity profiling of assets and
liabilities and assessment of expected cashflows and the
availability of collateral which could be used additional funding
if required.
The Bank maintains a portfolio of marketable assets that can be
easily liquidated in the event of an unforeseen interruption of
cash flow. The Bank maintains a statutory deposit with the Central
Bank which was accumulated since dollarisation at stipulated rates.
During 2010, the Reserve Bank of Zimbabwe discontinued the payment
of statutory reserves and the amounts accumulated to date had not
been refunded by 30 June 2011. The daily liquidity position is
monitored and regular liquidity stress testing is conducted under a
variety of scenarios covering both normal and more severe market
conditions. All liquidity policies and procedures are subject to
review and approval by ALCO.
The key measure used by the Bank for managing liquidity risk is
the ratio of net liquid assets to deposits to customers. The Bank
monitors its liquidity ratio in compliance with Banking Regulations
to ensure that it is not less than 20% of the liabilities to the
public. Liquid assets consist of cash and cash equivalents, short
term bank deposits and liquid investment securities available for
immediate sale.
4.4 Operational risk
This risk is inherent in all business activities and is the
potential for loss arising from ineffective internal controls, poor
operational procedures to support these controls, errors and
deliberate acts of fraud. The mitigation of the risk and the cost
incurred to reduce the risk is critical. The bank utilizes monthly
Key Risk Indicators to monitor operational risk in all units.
Further to this, the bank has an elaborate Incident Reporting
Policy in which all incidents with a material impact on the
well-being of the bank are reported to risk management. The Board
has a Risk Committee whose function is to ensure that this risk is
minimised. The Risk Committee through the Internal Audit function
and the Risk Management department assesses the adequacy of the
internal controls and makes the necessary recommendations to the
Board.
4.5 Legal and compliance risk
Legal risk is risk from uncertainty due to legal actions or
uncertainty in the applicability or interpretation of contracts,
laws or regulations. Legal risk may entail such issues as contract
formation, capacity and contract frustration. Compliance risk is
the risk arising from non - compliance with laws and
regulations.
To manage this risk the Bank employs a legal practitioner who is
responsible for the drafting, monitoring and executing all
contracts. Permanent relationships are also maintained with firms
of legal practitioners and access to legal advice is readily
available to all departments. The compliance function is
responsible for identifying and monitoring legal and compliance
risks and ensuring that the Bank remains in compliance with all
regulatory requirements.
4.6 Reputational risk
Reputational risk is the risk of loss of business as a result of
negative publicity or negative perceptions by the market with
regards to the way the Bank conducts its business.
To manage this risk, the Bank strictly monitors customers'
complaints, continuously train staff at all levels, conducts market
surveys and periodic reviews of business practices through its
Internal Audit department.
4.7 Strategic risk
This refers to current and prospective impact on the bank's
earnings and capital arising from adverse business decisions or
implementing strategies that are not consistent with the internal
and external environment. To manage this risk, the bank is guided
by a strategic plan that is set out by the board of directors. The
attainment of strategic objectives by the various departments is
monitored periodically at management level. There is an ALCO,
Finance and Strategy Committee at board level responsible for
monitoring overall progress towards attaining strategic objectives
for the bank.
The directors are satisfied with the risk management processes
in the Bank as these have contributed to the minimisation of losses
arising from risky exposures.
4.8 Regulatory Compliance
There were no instances of regulatory non-compliance in the
period under review. The Group remains committed to complying with
and adhering to all regulatory requirements.
4.9 Capital Management
The primary objective of the Bank's capital management is to
ensure that the Bank complies with the RBZ requirements. In
implementing the current capital requirements, the RBZ requires the
Bank to maintain a prescribed ratio of total capital to total risk
weighted assets.
Regulatory capital consists of Tier 1 capital, which comprises
share capital, share premium, retained earnings (including current
year profit), statutory reserve and other equity reserves.
The other component of regulatory capital is Tier 2 capital,
which includes subordinated term debt, revaluation reserves and
portfolio provisions. Tier 3 capital relates to an allocation of
capital to market and operational risk. Various limits are applied
to elements of the capital base. The core capital (Tier 1) shall
comprise not less than 50% of the capital base and portfolio
provisions are limited to 1.25% of total risk weighted assets. The
Bank's regulatory capital position at 30 June 2011 was as
follows:
30 June 31 December
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2011 2010
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US$ US$
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Share capital 16 501 16 501
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Share premium 13 690 931 13 690 931
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Retained earnings 4 035 528 1 976 437
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----------------- -------------
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17 742 960 15 683 869
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Less: capital allocated for market and
operational risk (2 445 011) (1 580 551)
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Credit to insiders (314 489) (115 772)
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Tier 1 capital 14 983 460 13 987 546
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Tier 2 capital (subject to limit as per
Banking
regulations) 862 961 883 414
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Subordinated debt - -
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Regulatory reserve (limited to 1.25% of
risk
weighted assets) 862 961 883 414
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Total Tier 1 & 2 capital 15 846 421 14 870 960
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Tier 3 capital (sum of market and
operational risk capital) 2 445 011 1 580 551
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----------------- -------------
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Total capital base 18 291 432 16 451 511
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Total risk weighted assets 135 341 312 94 154 367
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Tier 1 ratio 11.1% 14.9%
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Tier 2 ratio 0.6% 0.9%
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