Page 77 - Ecobank Gambia Annual Report 2020
P. 77
Total financial liabilities 2,632,919 1,443,087 100,190 - - 4,014,367 8,190,564
- - 1,969,737 933,494
Net on-balance sheet financial position 17,754 (997,752) (56,245) - - 142,402 1,936,228
Credit commitments 1,321,155 472,670 -
Market risk measurement techniques risks that it could be exposed to in extreme conditions.
The Bank applies the ‘value at risk’ methodology (VAR) Both historical and hypothetical events are tested.
to its trading and non-trading portfolios, to estimate Risk reporting
exposure to market risk of positions held and maximum Reports on the bank’s positions are reviewed daily by
losses expected, based on a number of assumptions for the Internal Audit and Compliance Unit. Reports include
various changes in market conditions. The Board sets foreign currency positions and liquidity positions in all
limits on the value of risk that may be accepted for the currencies. Variations to expectations are reviewed and
Bank which are monitored on a daily basis by Bank corrected if need be.
Treasury and Internal Control. The bank defines operational risk as the risk of loss
VAR is a statistically based estimate of the potential loss arising from failed or inadequate internal control
on the current portfolio from adverse market movements. processes, systems or people or from events external to
It expresses the ‘maximum’ amount the Bank might lose, the institution.
but only to a certain level of confidence (98%). Ecobank operates operational risk governance structure
There is therefore a specified statistical probability (2%) that ensures that the Board of Directors and the Chief
that actual loss could be greater than the VAR estimate. Executive Officer have direct responsibility for operational
The VAR model assumes a certain ‘holding period’ until risk.
positions can be closed (10 days). It also assumes that The Board acts through the Risk Committee, whose
market moves occurring over this holding period will decisions are implemented by an independent Risk
follow a similar pattern to those that have occurred over Management department led by the Country Risk
the preceeding10-day period in the past. The Bank’s Manager.
assessment of past movements is based on data for The bank adopts the operational risk policies as
the past five years. The Bank applies these historical approved by the board. The policy defines operational
changes in rates, prices, indices, etc. directly to its current risk management standards which covers the following
positions – a method known as historical simulation. activities:
Actual outcomes are monitored regularly to test the ¦ Identifying, monitoring and managing current and
validity of assumptions and parameters/factors used in
the VAR calculation. potential operational risk exposures;
The use of this approach does not prevent losses outside ¦ Managing ‘’critical risks’’ identified in the course of
of these limits in the event of more significant market
movements. business reviews;
Risk monitoring and control ¦ Following up on reports from Internal Audit and
The Risk Management department is responsible
for reviewing exposure to market risk. The Treasury regulatory authorities and informing the Risk
department monitors interest rate and liquidity risks Committee of issues that involves operational risk
through daily, weekly, and monthly reviews of the ¦ Preparing management information on issues such
structure and pricing of assets and liabilities. Assets as IT security, physical security; business continuity
and Liability Committee (ALCO) meetings are also held and compliance with legislation in those areas.
monthly. (f) Compliance and Regulatory risk
The Bank analyses the impact of unlikely, but not Compliance and Regulatory risk includes the risk of non-
impossible events by means of scenario analysis, which compliance with regulatory requirements. The Bank’s
enables management gain a better understanding of Compliance function is responsible for establishing and
maintaining an appropriate framework of the Banks
www.ecobank.com
Ecobank Gambia Annual Report 2020 75
