Page 120 - 2021 ANNUAL REPORT draft

A detailed template with internal and external factors that might impact the bank adversely is used to monitor
the bank's exposure to reputational risk. All adverse trends identified are reported to relevant stakeholders
for timely redress.

• Taxation risk

Taxation risk refers to the risk that new taxation laws will adversely affect the Bank and/or the loss as a
result of noncompliance with tax laws. The taxation risk is managed by monitoring applicable tax laws,
maintaining operational policies that enable the Bank to comply with taxation laws and, where required,
seeking the advice of tax specialists.

5. Capital management Regulatory

capital

The Bank’s regulator, the Central Bank of The Gambia sets and monitors capital requirements for the Bank.
The regulatory capital is analyzed into two tiers:

Tier 1 capital includes ordinary share capital, share premium, retained earnings, translation reserve and
non-controlling interests after deductions for goodwill and intangible assets, and other regulatory
adjustments relating to items that are included in equity but are treated differently for capital adequacy
purposes.

Tier 2 capital includes qualifying subordinated liabilities, collective impairment allowances and the element
of fair value reserve relating to unrealized gains on equity instruments classified as FVOCI.

Investments in unconsolidated subsidiaries and associates are deducted from Tier 1 or Tier 2 capital in
arriving at the regulatory capital. Various limits are applied to elements of the capital base. The qualifying
tier 2 capital cannot exceed tier 1 capital. There are also restrictions on the amount of collective impairment
allowances that may be included as part of tier 2 capital (1.25% of risk assets and hybrid instruments –
convertible bonds). Banking operations are categorized mainly as trading book or banking book, and
riskweighted assets are determined according to specific requirements that seek to reflect the varying levels
of risk attached to the assets and off-financial position exposures.

The Bank’s policy is to maintain a strong capital base so as to maintain investor, credit and market
confidence and to sustain future development of the business. The impact of the level of capital on
shareholders’ return is also recognized and the bank recognizes the need to maintain a balance between
the higher returns that might be possible with greater gearing and the advantages and security afforded by
a sound capital position.

The Bank and its individually regulated operations has complied with all externally imposed capital
requirements throughout the year. There have been no material changes in the Bank’s management of
capital during the year.

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Guaranty Trust Bank (Gambia) Limited Financial Statements December 2021