Page 96 - RB GRENADA ANNUAL REPORT 2025_ONLINE

96 • Republic Bank (Grenada) Limited 2025 Annual Report • FINANCIALS

Notes to the Financial Statements

For the year ended September 30, 2025. Expressed in Thousands of Eastern Caribbean dollars ($’000), except where otherwise stated.

2 Material accounting policies (continued)
2.5 Summary of material accounting policies (continued)
g Impairment of financial assets (continued)
ii The calculation of ECLs (continued)

Stage 3
For financial assets considered credit-impaired (as defined in Note 18.2), the Bank recognises the LTECLs for these
loans and investments. The method is similar to that for Stage 2 assets, with the PD set at 100 percent.

POCI
POCI assets are financial assets that are credit impaired on initial recognition. The Bank only recognises the
cumulative changes in LTECLs since initial recognition, based on a probability-weighting of the four scenarios,
discounted by the credit adjusted EIR.

In most instances, LGDs are determined on an individual loan or investment basis, including discounting the
expected cash flows at the original EIR. Stage 3 LGDs are grouped by similar types to provide percentage averages
to be applied for Stage 1 and Stage 2 loans.

iii Credit cards, overdrafts and other revolving facilities
The Bank’s product offering includes a variety of corporate and retail overdraft and credit card facilities, in which
the Bank has the right to cancel and/or reduce the facilities. The Bank limits its exposure on these revolving
facilities to the outstanding balance for non-performing facilities. For Stage 1 and Stage 2 facilities, the Bank
calculates ECL on a percentage utilisation of the credit card and overdraft limit based on the Bank’s expectations
of the customer behaviour, its likelihood of default and the Bank’s future risk mitigation procedures, which could
include reducing or cancelling the facilities.

The ongoing assessment of whether a significant increase in credit risk has occurred for revolving facilities is
similar to other lending products. This is based on shifts in the customer’s internal credit grade, as explained in
Note 18.2.4, but emphasis is also given to qualitative factors such as changes in usage and repayment patterns.

The interest rate used to discount the ECLs for credit cards is based on the interest rate that is expected to be
charged over the expected period of exposure to the facilities. This estimation takes into account that many
facilities are repaid in full each month and are consequently charged no interest.

iv Treasury Bills, Statutory deposit with Central Bank and Due from banks including related banks
Treasury Bills, Statutory deposits with Central Bank and Due from banks including related banks are short term
funds placed with Central Bank in the country where the Bank is engaged in the full range of banking and
financial activities and correspondent banks.

v Financial guarantees, letters of credit and undrawn loan commitments
The Bank issues financial guarantees, letters of credit and loan commitments.

Financial guarantees, letters of credit and loan commitments are off-balance sheet instruments and have no
history of default.