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22. Risk management (continued)
22.3 Liquidity risk (continued)
22.3.1 Analysis of financial liabilities by remaining contractual maturities (continued)
On Up to one 1 to 5 Over 5
2024 demand year years years Total
Undrawn commitments 7,426 – – – 7,426
Acceptances 1,238 1,193 237 43 2,711
Guarantees and indemnities 20 260 52 25 357
Letters of credit 327 328 – – 655
Total 9,011 1,781 289 68 11,149
2023
Undrawn commitments 8,744 – – – 8,744
Acceptances 708 906 399 31 2,044
Guarantees and indemnities 51 338 60 25 474
Letters of credit 309 385 – – 694
Total 9,812 1,629 459 56 11,956
The Group expects that not all of the contingent liabilities or commitments will be drawn before expiry of the
commitments.
22.4 Market risk
Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in
market variables such as interest rates, foreign exchange rates and equity prices.
22.4.1 Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair
values of financial instruments. The Group has an ALCO which reviews on a monthly basis the non-credit and
non-operational risk for the Parent and each subsidiary. Asset and Liability management is a vital part of the risk
management process of the Group. The mandate of the Committee is to approve strategies for the management
of the non-credit risks of the Group, including interest rate, foreign exchange, liquidity and market risks.
The primary tools currently in use are gap analysis, interest rate sensitivity analysis and exposure limits for
financial instruments. The limits are defined in terms of amount, term, issuer, depositor and country. The Group
is committed to refining and defining these tools to be in line with international best practice.
Interest on financial instruments classified as floating is repriced at intervals of less than one year while interest
on financial instruments classified as fixed is fixed until the maturity of the instrument.
An interest rate sensitivity analysis was performed to determine the impact on net profit of a reasonably possible
change in the interest rates prevailing as at September 30, with all other variables held constant. The impact on
net profit is the effect of changes in interest rates on the floating interest rates of financial assets and liabilities.
This impact is illustrated on the following table:
