Page 209 - Capricorn IAR 2020

2020 INTEGRATED ANNUAL REPORT
NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS (continued)
for the year ended 30 June 2020
3. FINANCIAL RISK MANAGEMENT (continued)
3.7 Capital management
The Group’s objectives when managing capital, which is a broader concept than the ‘equity’ on the face of the statement of financial position, are to:
• Comply with the capital requirements set by the regulators of the banking markets where the entities within the Group operate
• Safeguard the Group’s ability to continue as a going concern so that it can continue to provide returns for shareholders and
benefits for other stakeholders
• Maintain a strong capital base to support the development of its business
Capital management for the banking group
The Bank of Namibia requires each bank or banking group to maintain the following capital adequacy ratios:
• Tier 1 capital to total assets, as reported in the statutory return, at a minimum of 6%, referred to as the leverage capital ratio
• Tier 1 capital to risk-weighted assets at a minimum of 7%, referred to as Tier 1 risk-based capital ratio
• Total regulatory capital to risk-weighted assets at a minimum of 10%, referred to as total risk-based capital ratio
The Group’s regulatory capital is divided into three tiers:
• Tier 1 capital: share capital (net of any book values of the treasury shares, if any), non-controlling interest arising on
consolidation from interests in permanent shareholders’ equity, retained earnings and reserves created by appropriations of
retained earnings. The book value of goodwill is deducted in arriving at Tier 1 capital
• Tier 2 capital: qualifying subordinated loan capital and collective impairment allowances
• Tier 3 capital: includes short-term subordinated debt that may be used only to cover a portion of the banking institution’s
capital charges for market risk
The Bank of Namibia has adopted a standardised approach to Basel II, with risk-weighted assets being measured at three different levels, operational risk, market risk and credit risk.
During 2012, the Bank of Namibia introduced BID 24 – ‘Consolidated supervision’, which denotes consolidation rules only for the purposes of computing regulatory minimum capital requirements. These rules do not impact on accounting consolidation of banking groups, which is done in accordance with IFRS. Although regulatory consolidation may track the accounting consolidation, it is
not identical because of a different approach that is prescribed or required for treatment of certain types of transactions and/or subsidiaries. According to the statutory framework, the Group entities are treated as follows in the Capricorn Group:
Subsidiaries
Bank Windhoek Ltd
Namib Bou (Pty) Ltd
Capricorn Unit Trust Management Company Ltd
Capricorn Asset Management (Pty) Ltd
Capricorn Investment Holdings (Botswana) Ltd (“CIHB”)
Cavmont Capital Holdings Zambia Plc (“CCHZ”)
Capricorn Capital (Pty) Ltd
Mukumbi Investments (Pty) Ltd
Entrepo Holdings (Pty) Ltd
Entrepo Finance (Pty) Ltd
Entrepo Life Ltd
Associates
Sanlam Namibia Holdings (Pty) Ltd
Santam Namibia Ltd
Paratus Namibia Holdings Ltd
Paratus Group Holdings Ltd
Consolidated supervision approach
Full consolidation
Deduction approach
Deduction approach
Deduction approach
Full consolidation
Full consolidation
Deduction approach
Deduction approach
Full consolidation
Full consolidation
Deduction approach
Consolidated supervision approach
Deduction approach
Deduction approach
Deduction approach
Deduction approach
Accounting consolidation approach
Full consolidation
Full consolidation
Full consolidation
Full consolidation
Full consolidation
Full consolidation
Full consolidation
Full consolidation
Full consolidation
Full consolidation
Full consolidation
Accounting consolidation approach
Equity-accounted associates
Equity-accounted associates
Equity-accounted associates
Equity-accounted associates
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