Page 54 - Ecobank Gambia Annual Report 2020
P. 54
Financial Statements & Annual Report
Notes to the Financial Statements
for the year ended 31 December 2020 (in Thousands of Gambian Dalasis)
supportable, including historical experience and forward- of internal control, to consistently determine
looking information that is available without undue cost adequate allowances in accordance with the Bank’s
or effort, based on the Bank’s historical experience and stated policies and procedures, IFRS and relevant
expert credit assessment including forward-looking supervisory guidance.
information. ii) Identifying, assessing and measuring credit risk
Multiple economic scenarios form the basis of determining across the Bank from an individual instrument to a
the probability of default at initial recognition and at portfolio level.
subsequent reporting dates. Different economic scenarios iii) Creating credit policies to protect the Bank against
will lead to a different probability of default. It is the the identified risks including the requirements to
weighting of these different scenarios that forms the obtain collateral from borrowers, to perform robust
basis of a weighted average probability of default that ongoing credit assessment of borrowers and to
is used to determine whether credit risk has significantly continually monitor exposures against internal risk
increased. limits.
Based on the Bank’s internal risk rating, Client whose iv) Limiting concentrations of exposure by type of asset,
rating deteriorated to ‘8’ are considered to have counterparties, industry, credit rating, geographic
experienced significant increase in credit risk. Similarly location etc.
restructured facilities and loans who are classified as v) Establishing a robust control framework regarding
watch list or Past due Obligation (PDO) are considered to the authorisation structure for the approval and
have experienced significant increase in credit risk. These renewal of credit facilities.
categories are classified as stage 2 in the ECL model and vi) Developing and maintaining the Bank’s risk grading
assessed for lifetime impairment loss. to categorise exposures according to the degree of
Write-off Loans risk of default. Risk grades are subject to regular
reviews.
Loans and debt securities are written off when the Bank vii) Developing and maintaining the Bank’s processes
has no reasonable expectations of recovering the financial for measuring ECL including monitoring of credit risk,
asset (either in its entirety or a portion of it). This is the incorporation of forward looking information and the
case when the Bank determines that the borrower does method used to measure ECL.
not have assets or sources of income that could generate viii) Ensuring that the Bank has policies and procedures
sufficient cash flows to repay the amounts subject to the in place to appropriately maintain and validate
write-off. A write-off constitutes a derecognition event. models used to assess and measure ECL.
The Bank may apply enforcement activities to financial ix) Establishing a sound credit risk accounting
assets written off. Recoveries resulting from the Bank’s assessment and measurement process that provides
enforcement activities will result in impairment gains. it with a strong basis for common systems, tools
Typically in line with the regulatory guidelines, the Bank and data to assess credit risk and to account for ECL.
write-off loans two years after they are fully provided for. Providing advice, guidance and specialist skills to
b) Credit risk business units to promote best practice throughout
the Bank in the management of credit risk.
The Bank’s Credit Policy Manual which is adopted from The internal audit function performs regular audits
the parent company and serves as the policy reference making sure that the established controls and procedures
for the management of the Bank’s credit risk. The are adequately designed and implemented.
Country Risk Manager has the delegated custodianship Significant increase in credit risk
of the Bank’s credit policy manual and responsible for
ensuring compliance with this policy in the credit cycle as As explained in note 11.10 the Bank monitors all financial
delegated by Board. There is close working relationship assets that are subject to impairment requirements to
and with the Cluster Risk Manager and Group Risk Office assess whether there has been a significant increase in
who support and serve as approval authorities for various credit risk since initial recognition. If there has been a
facility categories and types. significant increase in credit risk the Bank will measure
The Bank’s Board Credit Committee is responsible for the loss allowance based on lifetime rather than
managing the Bank’s credit risk by: 12-month ECL.
i) Ensuring that the Bank has appropriate credit
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risk practices, including an effective system
52 Ecobank Gambia Annual Report 2020
