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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)

vi Forward looking information
The Bank integrates Forward-Looking Indicators (FLIs) and macroeconomic factors into its ECL calculations to
estimate potential future credit risks. Key FLIs include interest rates, inflation trends, unemployment rates, and
industry-specific forecasts, which help assess the probability of default for financial assets. Broader macroeconomic
factors such as Gross Domestic Product (GDP) growth, current account balance, fiscal deficit, foreign exchange
reserves and climate change are also considered. The Bank uses scenario analysis and probability-weighted
outcomes, best to worst case, to model different economic conditions, ensuring more accurate and robust ECL
estimates.

h Collateral valuation
To mitigate its credit risks on financial assets, the Bank seeks to use collateral, where possible. The collateral comes
in various forms, such as cash, securities, letters of credit/guarantees, real estate, receivables, inventories and other
non-financial assets. Collateral, unless repossessed, is not recorded on the Bank’s Statement of financial position.
However, the fair value of collateral affects the calculation of ECLs. It is generally assessed at inception and re-assessed
on a periodic basis.

To the extent possible, the Bank uses active market data for valuing financial assets held as collateral. Other financial
assets which do not have readily determinable market values are valued using models. Non-financial collateral, such
as real estate, is valued based on independent valuations and other data provided by third parties.

i Collateral repossessed
In its normal course of business, should the Bank repossess properties or other assets in its retail portfolio, it sometimes
engages external agents to assist in the sale of these assets to settle outstanding debt. Any surplus funds are returned
to the customers/obligors. As a result of this practice, the residential properties under legal repossession processes
are not recorded on the Statement of financial position.

j Write-offs
The Bank’s accounting policy is for financial assets to be written off either partially or in their entirety only when
the Bank has stopped pursuing the recovery. If the amount to be written off is greater than the accumulated loss
allowance, the difference is first treated as an addition to the allowance that is then applied against the gross carrying
amount. Any subsequent recoveries are credited to other income.

k Leases
The Bank assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the
right to control the use of an identified asset for a period of time in exchange for consideration.

Bank as a lessee
The Bank applies a single recognition and measurement approach for all leases, except for short-term leases and
leases of low-value assets. The Bank recognises lease liabilities to make lease payments and right-of-use assets
representing the right to use the underlying assets.