Contents
Chairman’s statement to the shareholders
1
FIMBank group performance 2021
2
Directors’ report
5
Statement of compliance with the principles of good corporate governance
13
Remuneration report
23
Financial statements:
Statements of financial position
28
Statements of profit or loss
30
Statements of other comprehensive income
31
Statements of changes in equity
32
Statements of cash flows
36
Notes to the financial statements
38
Statement by the directors pursuant to Capital Markets Rule 5.68
153
Independent auditors’ report
154
Schedules to the annual report
Statements of profit or loss – 5 year summary
167
Statements of financial position – 5 year summary
168
Cash flow statements – 5 year summary
169
Accounting ratios – 5 year summary
170
Directors and executive management
171
FIMBank Group Annual Report & Financial Statements 2021
1
Chairman’s statement to the shareholders
Dear Shareholder,
FIMBank’s performance in 2021 continued to be impacted by the negative economic trail left behind by the COVID-19 pandemic. As the world
works towards an exit from the pandemic, the effects of the measures and restrictions imposed by several countries around the world are expected
to continue impacting global economies. Although we have seen remarkable efforts with respect to the vaccination campaigns across the
continents, progress and recovery have been hindered by the emergence of new variants which, to varying extents, have led to a renewed rise in
case numbers. Inflationary pressures have also made their mark, and show no signs of stopping anytime soon, also in view of the recent invasion
of Ukraine by Russia.
Although 2021 displayed signs of recovery, world economies were still operating in the face of unprecedented challenges. In this regard, the Group
has also been impacted, as it confronts significant challenges related to global supply chains, supply-side bottlenecks, lockdowns and travel
restrictions, among others. Such challenges are expected to persist in characterising future developments. Research by the World Economic Forum
suggests that commodity price shocks, growing inflation and a fragmented energy transition are amongst the greatest threats to global trade in
2022. Throughout the pandemic, the FIMBank Group has strived to constantly monitor, evaluate and adapt in order to maintain effective and
efficient operations.
In this context, the year in review has served to highlight the Group’s financial and business resilience, as evidenced by the fact that we managed
to turn around a loss of USD47.0 million in 2020, to a contained deficit of USD3.6 million in 2021. Going forward our sights are firmly set on
profitability. We have spent the last year tailoring and implementing measures designed to strengthen the Group’s business fundamentals, which
should lead to a significant boost in performance. This, together with the energy we have been dedicating towards securing planned recoveries
and reducing the impact of non-performing exposures, will allow us to achieve our forecasted targets of sustainable profitability.
Maintaining high levels of operational and business continuity during such troubling times would not have been possible without the Group’s
consistent investment in advanced IT infrastructure. This has enabled our employees throughout our international network to work securely and
remotely from their own home. The deployment of the latest technology has also been a steady feature in the way we operate and interact both
internally, as well in relation to all our stakeholders. This is a reflection of our commitment to the digital transformation process which has been
taking place throughout the Group.
The situation remains one that demands constant monitoring to mitigate against emerging threats. In this uncertain environment, customer
centricity remains a fundamental pillar of our strategy. We see this mindset as critical to allow our people to create mutually beneficial solutions
for our wide-ranging clientele, seeing them not just as customers, but as partners in growth. We look at the future with optimism, underlined by a
commitment to continue enhancing our activities in markets where we have already have a presence, while strengthening our visibility in Malta,
our home market, by expanding our product offering to provide a wider spectrum of services to corporate clients. We strongly believe in our
capability in forging partnerships with our clients, and that the value of a dependable banking partner goes beyond the delivery of financial
solutions. To that end, we strive to provide a high-quality banking experience to our customers, by building relationships and offering products and
services designed to enable their business to grow and prosper.
Although developments in our operating environment induce a strong measure of prudence in our outlook for 2022, there is no doubt in the
confidence we place in the measures put in place by our GCEO, Adrian A. Gostuski, and his senior management team, aimed at leading the Group
towards operational success and sustainable growth and profitability.
Investor relations continue to play an important role for our institution, and throughout the year in review, we have continued to foster initiatives
aimed at engaging with all stakeholders. On behalf of the Board, I would like to take this opportunity to extend our sincere gratitude for the
constant demonstration of trust and loyalty by all our Shareholders, with a special mention going to our majority shareholder, the KIPCO Group,
for their solid and continued backing during these challenging times.
Finally, I would like to conclude by expressing my thanks and appreciation to the Directors, management and employees of the FIMBank Group,
for their commitment and dedication during these challenging times.
Signed by John C. Grech (Chairman) on 13 April 2022
FIMBank Group Annual Report & Financial Statements 2021
2
FIMBank Group performance 2021
CEO’s message
FIMBank’s financial performance in 2021 continued to be materially impacted by COVID-19 and the new mutations of the virus. Although the
financial and operating performance of the Group improved significantly, this was hindered by the implementation of lockdowns as well as travel
restrictions, together with disruptions in global supply chains.
The pandemic left the global economy in disarray, upsetting supply chains across continents and leaving the world short of a plethora of goods,
ranging from machinery and microchips, to container vessels that transport goods across the seas. As a result, many suppliers have not been able
to keep up with the sudden surge in demand as economies have begun to reopen. Moreover, inflation has spiked in recent months, riding on a
surge in energy prices. Production bottlenecks are pushing prices even higher, raising fears that a combination of government stimuli and the
inevitable economic snapback will cause prices to overheat.
Overview of financial results
The FIMBank Group registered a post-tax loss of USD3.6 million for the financial year ended 31 December 2021, compared to a post-tax loss of
USD47.0 million in 2020. Despite the unprecedented health and economic crises brought on by the COVID-19 pandemic, the Group’s performance
continues to reflect its resilience, loss-absorbing capacity and capability to recover rapidly. During the period in review, the Group retained its focus
on safeguarding its capital and liquidity, which remain strong and well above regulatory minima. During 2021, the Group’s net operating revenues
rose by 6%, to USD41.2 million, while there was only a marginal increase of 4% in operating expenses, to reach USD40.5 million. The Group’s net
interest margins felt the impact of a persistently low global interest environment. As a result, net interest income dropped by 13% to USD24.9
million. This decrease was fully offset by the net fee and commission income, which increased by 21%, from USD9.0 million to USD10.8 million,
together with a USD3.0 million gain from trading assets.
At the end of the period under review, the Group’s total consolidated assets stood at USD1.79 billion, down by 2.5%, or USD45.6 million, when
compared to 2020.
The Group’s consolidated liabilities, standing at USD1.56 billion, reflected a 2.3% drop, equivalent to USD36.4 million, from the previous year. The
Group raised USD233 million in long term funding, by participating in the Targeted Longer-Term Refinancing Operations (TLTRO) launched by the
European Central Bank.
During the period under review, the Group’s strategy was revitalised to counter the new economic realities, as well as addressing developments on
the regulatory and compliance spheres. In line with its strong compliance-focused policy, the Group exited various business activities, jurisdictions,
and customer groups. A combination of factors impacted market demand, productivity and trade flows, which resulted in difficulties in the
origination of business within the context of the revised Group’s risk appetite. This was reflected in a reduction of trade finance business of USD51
million. Momentum was, however, restored towards the end of the year, when encouraging growth was registered, resulting in a higher factoring
balance to the tune of USD70 million.
During 2021, the Group was successful in recovering certain non-performing assets and has written-off some fully provided delinquent exposures.
These developments, along with other measures, have contributed to lower non-performing ratios. Management is committed to continue with
this recovery process. As at 31 December 2021, the Group’s CET1 ratio stood at 18.7% and the Group’s TCR at 18.7%. The average TCR for the year
was 19.5%, well above the regulatory requirement which includes the SREP add-on.
Throughout the period under review, the Group did not require recourse to any of the COVID-19 capital relief measures, which had been announced
by the ECB and the MFSA in 2020.
In November 2021, the Bank decided to close the Hellenic Branch in Greece, a process which was concluded in February 2022. This decision
complements the overarching strategy of simplifying and reducing complexities, allowing the Group to focus on consolidating its position in
specific target markets. Meanwhile, a Greek helpdesk has been set up in Malta in order to continue providing existing clients with a high level of
service.
FIMBank Group Annual Report & Financial Statements 2021
3
Business unit performance
London Forfaiting Company Ltd (“LFC”)
During the period under review the trade finance market was subdued and margins remained depressed. Continued low commodity prices and
increasing uncertainty in the market, arising from the repeated occurrences of COVID-19 outbreaks, gave rise to a challenging business
environment for LFC. Notwithstanding this, the fully owned subsidiary was able to navigate through the changes with little disruption and by the
end of the year matters were normalising.
Amidst these challenges, LFC only experienced isolated payment delays and by year-end there were nascent signs of a recovery as commodity
prices stabilised and began an upward trend. Interest rates were also trending upwards in all major currencies. LFC demonstrated its resilience by
registering a USD8.1 million profit for the year, an increase of 10% over the previous twelve-month period.
India Factoring and Finance Solutions Private Ltd (“India Factoring”)
India Factoring retained its leadership position in the provision of factoring services in India for the fourth consecutive year. The company continues
to support small and medium enterprises with tailor-made working capital solutions. Clients benefit from access to immediate liquidity, to smooth
out cash requirements, improve financial planning, and more importantly, optimise their financials. During 2021, India Factoring proved to be very
effective in onboarding new clients, growing and diversifying its portfolio and stabilising revenues. Despite the prevalent challenging environment,
the company increased its factoring portfolio and delivered an encouraging financial result for 2021.
The Egyptian Company for Factoring S.A.E. (“Egypt Factors”)
Egypt Factors experienced a slow first half of the year, mainly due to the second wave of the pandemic. However, it adapted successfully to the
current environment, and rebounded with steady growth during the second half of the year, with increased volumes exceeding the targets set for
the year, and with the company registering a profit for the year. During 2021, Egypt Factors received the highest rating for its import and export
factoring services in Africa and the Middle East, based on the Factors Chain International (FCI) survey results, collected from 400 members in 90
countries. Egypt Factors was the first licensed Egyptian company specialising in factoring services, and this prestigious award was seen as
recognising Egypt Factor’s pioneering role in the financial services sector in Egypt.
Investment in technology
Technology is a critical component of modern banking, and throughout the past years, FIMBank has continued to invest in this area. During the
year in review, we successfully completed the deployment of the second phase of our financial crime risk management platform. This allows for an
integrated solution encompassing anti-money laundering, and internal fraud support, allowing the Compliance function to manage even more
effectively money laundering risks. Moreover, the new platform provides advanced ‘Know Your Customer’ capabilities, and improved risk profiling,
risk scoring and transaction monitoring. We also completed all the groundwork for the upgrade of the Bank’s digital banking platform, FIMBank
Direct, a project that will be completed in 2022. With the new version of FIMBank Direct, we primarily aim to improve our customer’s digital journey
and increase functional capabilities. This channel will continue to provide an integrated solution where customers can manage their banking
requirements securely.
Our steady investment in technology platforms and infrastructure over the years has enabled the Bank to transition seamlessly to a remote working
model for our employees. Going forward, the office will continue to play an important role as a place of work, not least due to social factors such
as face-to-face collaboration, personal contact, and workplace interaction. The remote-working paradigm is however here to stay, albeit now
converting into a hybrid model. Regardless, the Bank already had policies in place to allow employees flexibility in this regard.
FIMBank Group Annual Report & Financial Statements 2021
4
Corporate Social Responsibility
In 2021, FIMBank contributed funds to the Research Trust of the University of Malta (RIDT) and the University of Malta to develop a research study
based on the findings and remains resulting from the excavation of deposits, retrieval of faunal material and extraction of speleothems. This
specialised research will require the valuable contribution of foreign scientists and should produce a series of major scientific peer-reviewed papers,
each of which will contribute to existing knowledge on the subject. The project is being conducted in tandem with the Superintendence of Cultural
Heritage.
Moreover, during the past year, FIMBank and its employees donated to several local philanthropic organisations, including Europa Donna, which
is dedicated to providing support to breast cancer survivors and to bring about awareness of breast cancer in Malta.
The Environmental, Social and Governance (ESG) standards are increasingly taking on an even greater significance and organisations have a
greater role to play. Businesses have a direct influence on the health of nations through their role as an employer, the products and services they
offer as well as their external influence on the environment and the communities in which they operate. The FIMBank Group acknowledges its
responsibility to share in the community's development and values. To this end we have engaged external consultants to assist us in implementing
an ESG framework within the organisation that will allow us to support the European Union ESG objectives and to manage the risks posed by
environmental change to the Group, its customers, and society as a whole. As we integrate ESG into our business strategy we will effectively
promote sustainability in the investment decision-making process, working towards a more resilient future.
Outlook and way forward
Developments arising from the pandemic remain one of the main elements that will need to continue to be monitored going forward. Despite the
implementation of comprehensive vaccination campaigns, the risk of the emergence of new COVID-19 variants continues to pose a threat to the
progress made. The gradual removal of restrictions in many countries lets us dare to hope that a transition to normality is more imminent.
Nevertheless, the pandemic has left the global economy in the shadow of two significant vulnerabilities, namely high inflation and volatile financial
markets. Russia’s recent invasion of Ukraine also carries additional and huge risks for a world economy that is yet to fully recover. The aftershocks
arising from the invasion could easily worsen both inflation and financial market volatility.
In a more local context, the immediate removal of Malta’s name from the Financial Action Task Force’s advanced monitoring list remains a priority.
This should come about through a commitment to have structures in place to safeguard Malta’s reputation and avoid a repeat occurrence. We are
confident that the country will demonstrate progress in its enforcement capabilities, in terms of its anti-money laundering and funding of terrorism
framework and proliferation financing. The Group will continue to monitor developments, while remaining prepared to adjust to any changes in
this respect.
Concluding remarks
In view of the challenging macroeconomic outlook, and amid concerns over high inflation and geopolitical uncertainty, FIMBank’s projections
remain grounded and cautious. The Group will continue to execute its strategy in search of business opportunities that match its risk appetite, on
the principle of risk adjusted returns. This will result in moderate growth in diversified product offerings in business lines that provide superior
returns. The Group’s Balance Sheet is more resilient than previous years, with lower legacy exposures and improved sustainable revenue
generation capabilities.
Our experience over the past year has demonstrated our ability to change and adapt, and it has shown us what we can achieve when we all work
together to overcome such an unprecedented situation. The Bank has also enhanced its support to customers during this time. This is in line with
our strong belief that once a relationship is created, the customer becomes an active stakeholder and an integral focal point for all decisions related
to financial products and multi-channel service delivery. Our objective will be for this commitment to customer centricity, to be seamlessly
integrated in a prudently designed ecosystem that guarantees realisation of mutual value. Customer centricity remains our primary mission and
will continue to underly a continuous group-wide endeavour for the provision of a superior customer experience.
Finally, I would like to take this opportunity to express my sincere thanks and gratitude to our Board of Directors, management and all our
employees for their dedication, hard work and support.
Signed by Adrian A. Gostuski (Chief Executive Officer) on 13 April 2022
FIMBank Group Annual Report & Financial Statements 2021
5
Directors’ report
For the year ended 31 December 2021
The Directors present their report together with the Audited Financial Statements of FIMBank p.l.c. (the “Bank”), and FIMBank Group of
Companies (the “Group”) for the year ended 31 December 2021. This report is prepared in accordance with Article 177 of the Companies Act, 1995
(Chapter 386, Laws of Malta, (“The Companies Act”)) including the further provisions as set out in the Sixth Schedule of the Companies Act.
Results for the year
The Group and the Bank reported a loss after tax of USD3,612,523 and USD663,219 respectively for the year under review.
Further information about the results are provided in the Statements of Profit or Loss and the Statements of Other Comprehensive Income on
pages 30 and 31 and in the Review of Performance section within this report.
Group structure and principal activities
The Group comprises the Bank and its wholly owned subsidiaries, London Forfaiting Company Limited (“LFC”), FIM Business Solutions Limited
(“FBS”), FIM Property Investment Limited (“FPI”), The Egyptian Company for Factoring S.A.E. (“Egypt Factors”), FIM Holdings (Chile) S.p.A.
(“FHC”) and FIMFactors B.V. (“FIMFactors”). LFC and FIMFactors are themselves parents of a number of subsidiaries as set out in Note 26 to the
Financial Statements. The Group is supervised on a consolidated basis by the Malta Financial Services Authority (“MFSA”), whilst some of its
subsidiaries and branches are subject to authorisation and regulation according to the respective jurisdictions in which they operate.
A brief description of the activities in the Group follows (% shareholding follows after the name):
The Bank is a public limited company registered under the laws of Malta and listed on the Malta Stock Exchange. It is licensed as a credit
institution under the Banking Act, 1994. The Bank is principally active in providing international trade finance and to act as an intermediary to
The Bank has a branch registered in Dubai International Finance Centre, United Arab Emirates, which is regulated by the Regulator in the UAE.
During the Board of Directors’ meeting held on 10 November 2021, a resolution was passed to close the Hellenic Branch in Greece. The closure
was finalised on 28 February 2022.
LFC (100%) is registered in the United Kingdom as a private limited liability company. It was founded in 1984 and provides international trade
finance services (with particular focus on forfaiting business) through an international network of offices. Some of these offices have distinct
corporate status in the various jurisdictions where they are providing the service. LFC’s activities include the trading of bills of exchange,
promissory notes, loans, deferred payment letters of credit and the provision of other financial facilities to companies and banks.
FBS (100%), registered in Malta, has as its primary purpose the provision of information technology and support services to the Group.
FPI (100%), registered in Malta, owns and manages FIMBank’s Head Office and other properties leased from third parties. FPI is responsible for
facility management activities and the leasing of commercial and office space within Mercury Tower to related parties and third-party tenants.
Egypt Factors (100%), registered in Egypt, is active in providing factoring services to Egyptian companies.
FHC (100%), registered in Chile, previously served as a corporate vehicle. At reporting date FHC was in liquidation, which process was finalised
in March 2022.
FIMFactors (100%), registered in the Netherlands, is the corporate vehicle for the Bank’s holdings in factoring subsidiaries and associated
companies. These are:
a. India Factoring and Finance Solutions (Private) Limited (88.16%), incorporated in Mumbai, India, to carry out the business of factoring in
India. India Factoring is regulated by the Reserve Bank of India.
b. BrasilFactors S.A. (50%), an equity-accounted investee incorporated in São Paulo, Brazil, with its core business focused on factoring
services, targeting small and medium-sized companies. The other shareholder in this company is China Construction Bank (50%).
FIMBank Group Annual Report & Financial Statements 2021
6
Review of performance
The financial period ended 31 December 2021 returned a loss of USD3.6 million for FIMBank Group, compared to a loss of USD47.0 million
registered in 2020. This performance shows the Group’s resilience and its ability to absorb a significant loss and recover in a relatively short period
of time. In line with the strategy, the Group has positioned itself to capture further improvements in its performance, which shall allow the Group
to reach its forecasted targets and improve profitably in a sustainable manner.
Throughout the year the global economy has shown a strong recovery as the COVID-19 vaccination programs were rolled-out. However, recovery
has proceeded at a slower pace than the world has hoped for, as new mutations in the COVID-19 virus have developed. The financial and operating
performance of the Group, although importantly improved, remained marked by the disruptions in global supply chains, supply-side bottlenecks,
lockdowns and travel restrictions among others.
Global fiscal policies remained strong and monetary policies remained expansionary particularly in U.S. and the EU, resulting into low interest rates
for the key operational currencies of the Group. The Group’s net interest margins felt the impact of this persistently low global interest
environment. Ongoing headwinds from low interest rates were however offset by higher fee income and improved valuations of trading assets and
other financial instruments.
The Group was successful in its effort to recover some legacy non-performing exposures and progress was made on other legacy clients for which
recovery is expected in the immediate or near future. The pandemic has had its impact on various legal jurisdictions causing delays in arbitration
proceedings.
The Group is reaping the tangible benefits of the de-risking process. This process commenced in year 2019 and while the key features are already
in place, further calibration continued throughout the year under review. Despite the ongoing global turmoil, the Group has classified only one new
exposure as non-performing, which was also non-material. In addition to the actual cash recoveries, the Group reviewed in depth the level of gross
non-performing exposures and written-off some fully provided exposures which were not expected to be recovered. This has not only improved
the Group’s asset quality ratios, but it will also allow management to focus on other ongoing recovery streams and on maintaining and growing
the performing portfolios.
The Group’s strategy has been revitalised to adapt to the new economic realities and to developments in the regulatory and compliance fronts.
Shifting away from business activities, jurisdictions and customer groups that do not comply with our improved compliance framework, the Group
focused on solidifying its foundations of trade finance, forfaiting, factoring and real estate business. This allows the Group to capture business
opportunities, the moment the right economic conditions present themselves, while maintaining the improved overall risk profile.
Continued low commodity prices, high market liquidity, depressed margins and market uncertainty gave rise to a challenging business
environment for LFC. However, the Company experienced only isolated payment delays during the year and by year-end business practices were
returning to normal. Forfaiting portfolio growth was cautious and limited by external and internal factors. LFC maintained its dynamic capability
to quickly upscale or downsize the portfolio given the right parameters. LFC’s resilience is substantiated by the USD8.1 million profits it returned
for 2021, representing a 10% increase from the previous year.
Despite the various challenges formed by the multiple waves of the COVID-19 virus, India Factoring managed to gradually increase its factoring
portfolio and exceeded the budget. The company closed the year with a profit after tax of USD1.9 million compared to a loss of USD1.1 million in
2020. The company onboarded new customers with robust financials and structures and continued to recover debt from legacy clients.
Egypt Factors had initially experienced a decline in its factoring portfolio due to the second pandemic wave, however, it picked-up and with steady
growth exceeded budgeted portfolio by year-end. The company returned a profit of USD0.5 million, which was 142% higher than previous year.
The company recorded recoveries and released some provisions for performing portfolios. In line with the rest of the Group, some fully provided
legacy exposures which were not expected to be recovered were written-off, allowing management to focus on growing the performing portfolio.
Throughout the period under review, the Group did not require to utilize any of the COVID-19 capital relief measures, which were announced by
the ECB and the MFSA in 2020. The Group’s capital position remained strong with an average Total Capital Ratio (“TCR”) of 19.5%. This was well
above the 17.5% minimum TCR requirement which includes the Supervisory Review and Evaluation Process (“SREP”) add-on. This relatively high
requirement had a direct impact on business volumes and revenues however, management is committed to operate above these requirements.
The MFSA concluded a SREP towards the end of the year under review, and a new decision has been issued and applicable as from 2022. The MFSA
recognised the improvements and refinements the Group and its management have developed on various fronts and therefore reduced the Pillar
2 Requirement (“P2R”) by 1.5% to 4.5% and upheld the Pillar 2 Guidance (“P2G”) at 1%. This creates space for the Group to originate additional
assets that fall within its risk appetite and that generate incremental revenue streams.
The Group maintained a strong liquidity position throughout the year with an average Liquidity Coverage Ratio (“LCR”) of 243% and an average
Net Stable Funding Ratio (“NSFR”) of 139%. Both liquidity metrics were well above the regulatory minimum requirement and the Group’s internal
risk appetite level.
FIMBank Group Annual Report & Financial Statements 2021
7
Statements of profit or loss
For the year ended 31 December 2021, the Group registered a post-tax loss of USD3.6 million compared to a post-tax loss of USD47.0 million in
2020. Group earnings per share were negative at US cents 0.74 (2020: negative US cents 8.98). The results for the year under review are summarised
in the table below, which should be read in conjunction with the explanatory commentary that follows:
Group
2021
2020
Movement
USD
USD
USD
Net interest income
24,868,755
28,643,150
(3,774,395)
Net fee and commission income
10,837,563
8,969,681
1,867,882
Net results from trading assets and other financial instruments
3,027,000
(397,564)
3,424,564
Net results from foreign currency operations
612,647
553,537
59,110
Dividend income
1,089,189
240,817
848,372
Other operating income
728,990
893,869
(164,879)
Net operating revenues
41,164,144
38,903,490
2,260,654
Operating expenses
(40,549,282)
(39,036,105)
(1,513,177)
Operating income/(loss) before net impairment
614,862
(132,615)
747,477
Net impairment losses
(1,907,796)
(35,677,319)
33,769,523
Operating loss after net impairment
(1,292,934)
(35,809,934)
34,517,000
Taxation
(2,319,589)
(11,222,821)
8,903,232
Loss for the period
(3,612,523)
(47,032,755)
43,420,232
Net operating revenues rose by 6% to USD41.2 million. Net interest income (NII) dropped by USD3.8 million (13%) year on year, to USD24.9 million.
While average volumes of interest-generating assets dropped by 3%, and average volumes of high liquid assets attracting lower or negative interest
rates increased by 25%, the drop in NII was predominantly due to the impact of low global interest rates and narrowing spreads. The low interest
environment and narrowing spreads had a negative impact on interest income which was USD4.7 million (11%) lower than previous year, however,
this was partially offset by the positive impact that low interest rates had on interest expense. Borrowing and deposit-taking costs decreased by
USD1.0 million (7%) year on year, despite that average volumes grew by 9%. At USD10.8 million, net fee income was USD1.9 million (21%) higher
than previous year, as in 2021 LFC saw the highest transaction turnover recorded since LFC’s acquisition by FIMBank.
The Group recognised net gains of USD3.0 million from trading assets and other financial instruments, compared to a net loss of USD0.4 million in
prior year. Despite the challenging market conditions and low interest rates, forfaiting assets were the main contributors, registering a USD1.9
million gain. This was USD2.6 million higher than 2020, even though average balances were slightly lower during the year under review. Realised
gains on financial assets at FVOCI at USD0.7 million were USD0.6 million (43%) lower than previous year. Gains on financial assets at FVTPL at
USD0.4 million were USD1.4 million higher than the fair value loss recognised in the previous year.
In 2021, the Group recorded a USD1.1 million dividend from its investment in an unlisted sub-fund of a local collective investment scheme. Net
results from foreign currency operations at USD0.6 million and other operating income at USD0.7 million were fairly stable compared to prior year.
Operating expenses were managed well with a 4% marginal increase to reach USD40.5 million. The Group continued investing in its human
resources through the attraction, retention and training of employees. Technological investments continued, particularly in the business and
regulatory space.
Driven by an improving credit environment, the Group recognised USD1.9 million net provisions for credit losses, compared to USD35.7 million
recognised in 2020, which was the year subjected to a number of COVID-19 related impairment events. On performing Stage 1 and Stage 2
exposures, USD2.3 million of provisions were released, on the basis of lower expected credit losses, lower probabilities of default and improving
macro-economic indicators. In comparison in 2020 the Group recorded an impairment charge of USD0.6 million.
During the year under review the Group has recovered over USD25.0 million of non-performing assets and recognised USD 1.4 million (2020:
USD1.1 million) recoveries in the Income Statement. The Group had also written-off USD21.4 million (2020: USD 10.9 million) of fully provided
non-performing exposures, on which the Group had no reasonable expectations of recovering the contractual cash flows. In the majority of cases,
the Group had not forgiven the debt and is not precluded from enforcing, selling, or transferring the credit to another entity. These developments
along with other measurements have helped the Group to lower its NPL Ratio by approximately 500 basis points within the year under review.
FIMBank Group Annual Report & Financial Statements 2021
8
The Group reversed USD15.8 million of Stage 3 provision. USD28.1 million were reversed upon recovery or write-off of non-performing exposures,
whereas USD12.3 million was a coverage increase for pre-existing non-performing exposures and coverage for legal fees incurred in the process of
recovering the Group’s delinquent portfolio.
The Group performed an impairment assessment of goodwill on two of its main subsidiaries (India Factoring and Egypt Factors). The concluded
value-in-use from the valuations for both entities, supported the carrying amount of these two entities, as well as the goodwill on the Group’s
Balance Sheet. The value-in-use was based on a long-range plan that takes into account the long-term subsidiaries’ prospects and business
volumes. In 2020 goodwill for India Factoring was impaired by USD2.7 million.
Though an external valuation was performed on the Group’s investment property, this did not result in any upward or downward movement as the
market value of the property remained largely unvaried when compared to prior years.
Financial position
At 31 December 2021, total consolidated assets stood at USD1.79 billion, down by USD45.6 million or 2.5% from end-2020. Average total
consolidated assets were 4% higher than the average for prior year.
Compared to previous year, the Group closed the year with higher balances in factoring (by USD70 million) and with lower balances in treasury
assets which includes HQLA (by USD55 million), trade finance (by USD51 million), trading assets (by USD12 million) and loans to banks (by USD11
million).
Throughout the year the Group upheld its strategy to hold strong liquidity and capital positions, as many economies faced pandemic resurgences.
Consequently, average balances for treasury assets were USD143 million higher than previous year.
Average factoring balances were also higher by USD28 million, whereas average balances were lower for trade finance (by USD35 million), loans
to banks (by USD7 million) and trading assets (by USD5 million). The Group continued with its strong compliance focused strategy, thus has exited
some business activities, jurisdiction and customer groups. The pandemic also had an impact on market demand, productivity and trade flows,
creating difficulties in originating new business within the Group’s risk appetite, monitoring transactions, completing documentation, and client
onboarding, among other issues. Though this combination of factors did not present the Bank with the right opportunities to grow some of its
portfolios earlier in the year, the Group gained momentum towards the end of the year and registered growth in areas that fall within the Group’s
risk appetite and compliance standards.
In performing its assessment on the carrying amounts of deferred tax, investment in subsidiaries and goodwill, management have weighed in the
course of the COVID-19 pandemic and the progress made with vaccination programs, the global low interest rate environment and signs of
increasing inflation rates, along with other factors having a significant impact on global economic activities. In their assessment, management
have concluded that these balance sheet items were carried in the Balance Sheet at the appropriate value, and therefore did not require an
impairment charge.
The Group had consolidated liabilities of USD1.56 billion as at 31 December 2021, a drop of USD36.4 million from prior year. Average balances for
2021 were higher than previous year by USD158 million for bank deposits and wholesale funding and lower for corporate and retail deposits (by
USD37 million) and debt securities in issue (by USD17 million). The Group raised long-term funding by participating in the Targeted Longer-Term
Refinancing Operations (TLTRO) launched by ECB in the wake of the COVID-19 pandemic. At as year-end this amounted to USD233 million.
Reflecting the loss for the year and other equity adjustments, total equity decreased by USD9.2 million to USD224.0 million. The Group’s share
capital remained unchanged throughout the year under review. At 31 December 2021 the Group’s CET1 ratio stood at 18.7% (2020: 18.5%) and the
Group’s TCR at 18.7% (2020: 18.5%).
Total consolidated commitments at USD153.6 million consist mainly of confirmed letters of credit, documentary credits, commitments to purchase
forfaiting assets and factoring commitments. As a consequence of Malta’s grey-listing by the Financial Action Task Force, the Bank suffered in
particular a reduction in letters of credit. Total consolidated contingent liabilities, principally consisting of outstanding guarantee obligations, stood
at USD2.0 million.
FIMBank Group Annual Report & Financial Statements 2021
9
Principal risks and uncertainties
FIMBank is a banking group offering a suite of trade finance products across the different geographies it operates in, mainly emerging markets.
The risks associated with this business model are multiple and varied. Exposure to credit risk, liquidity risk, interest rate risk and foreign exchange
risk arises in the normal course of the Group’s business. As the Group is mainly engaged in cross-border trade finance transactions, the business
performance is also impacted by the overall performance of the world economy, in particular to the level of cross-border trade between countries
at varying stages of their economic development and which may not yet have achieved the level of stability of developed countries. This exposes
the Group to risks of political and economic changes including volatilities to commodity prices, exchange control regulation and difficulties in
preserving own legal rights.
Both FIMBank and its main group entities are exposed to such risks in different degrees based on their size and complexity. FIMBank, as the parent
company, ensures that all group entities adhere to the Group’s risk, governance and compliance frameworks as updated from time to time.
On 11 March 2020, the World Health Organisation declared that the novel Coronavirus (“COVID-19”) could be characterized as a pandemic. The
impact of the outbreak is widespread across the globe and has distressed many countries including those markets where the Group operates. The
circumstances have rapidly evolved, forcing Governments to implement severe measures and restrictions, including partial or full lockdowns,
restrictions on business activities, public gatherings, public spaces, travel, transportation, schools, retail stores, and various other activities.
Businesses were forced to close or restrict their activities including restricted access to offices, outlets, warehouses and production plants. The
pandemic, as well as these restrictive measures, have created a significant amount of uncertainty and disruption in economic activity and have
impacted all industries.
Further disclosures on the Group’s principal risks and uncertainties are provided in Note 5 of this Annual Report and the 2021 Pillar III Disclosures
Report published on the Bank’s website.
Outlook for 2022
While there was hope that the world conquers the pandemic also with good vaccination progress, new Covid-19 variants have emerged. Although
the recent signs indicate that the new variants are more manageable than what the world has seen in the past, pandemic development remain one
of the relevant items to observe over the course of the upcoming year. We are hopeful that the current situation, that of gradually removing
restrictions, will soon transform into a new norm which is sustainable and closer to ‘business-as-usual’, reducing the level of uncertainty caused by
the pandemic.
After the expansionary monetary measures introduced during the past years, reports of increasing inflation beyond the target levels emerged. The
policy reaction of Governments and Central Banks are another important indicator to follow. We are already observing increasing key interest
rates, which is in line with the market consensus expectation. The Group’s Balance Sheet structure is positioned favourably for the increasing
interest rates scenario.
While today’s interconnected world calls for close watch of the geopolitical situation and specific tensions which might impact among others global
supply chains, trade volumes and commodity prices, other Malta specific developments like the grey-listing have to be continually monitored and
addressed with due attention. Having noted this, the Group will continue executing its strategy pursuing business opportunities within its risk
appetite on the principle of risk adjusted returns. The Group’s Balance Sheet is more resilient than in previous years with lower legacy exposures
and improved sustainable revenue generating capabilities.
Within our customer centric focus, we project moderate growth in diversified product offerings, in business lines and in geographies that provide
superior returns and pose less risks, to generate consistent value to the organisation. Complex structures are being gradually eliminated and
business lines are being streamlined, including the closure of our Hellenic Branch in Greece. While simplifying the Group structure, we shall aim to
solidify our local presence in Malta.
The recent conclusion of the MFSA in the Supervisory Review and Evaluation Process (SREP) that resulted in a reduced Pillar 2 Requirement (P2R)
by 1.5% is welcomed by the Group. This result allows for growth in asset portfolios and creates an opportunity for the Group to convert its asset
origination power into incremental tangible revenue streams. In continuation of the 2021 success in decreasing the absolute amount of non-
performing assets and improvement in coverage ratios, the fully dedicated Recovery function shall support the Group in maintaining this
momentum. The frontline teams are also equipped to originate business that results in improved credit quality ratios and revenue generation.
In a context of developing regulatory framework including the very relevant ESG topic, the Group’s ongoing drive to improve governance and
controls shall be a source of future sustainable growth. Having a pool of human capital, that are highly skilled across multiple disciplines, continued
investment in IT infrastructure and having the backup of a solid shareholder base, FIMBank is well positioned to progress towards its strategic
objectives in a steady, sustainable manner.
FIMBank Group Annual Report & Financial Statements 2021
10
Dividends and reserves
As none of the reserves are available for distribution, the Board of Directors will not be recommending the payment of a dividend to the Annual
General Meeting of Shareholders (2020: Nil).
Standard licence conditions and regulatory sanctions
During the year under review, no breaches of licence requirements occurred. Moreover, no regulatory sanctions were taken against the Bank.
Approvals at the annual general meeting of shareholders
The Bank convened its Annual General Meeting on 15 July 2021 and all statutory Ordinary Resolutions were approved.
Shareholder register information pursuant to Capital Markets Rule 5.64
The Directors refer to the following disclosures in terms of the Capital Markets Rule 5.64:
a. details of the structure of the share capital, the class of shares and the rights and obligations attached to it and the percentage of total share
capital that it represents are, unless otherwise stated in this report, disclosed in the Notes to the Financial Statements;
b. except as provided for by Article 41 of the Articles of Association of the Bank, or where the consent of the Supervisory Authority may be required,
there are no restrictions on the transfer of securities, or limitations on the holding of securities, or the need to obtain the approval of the Bank
or other holders of securities of the Bank for any such transfer or holding. Shareholders holding 5% or more of the share capital as at 31
December 2021 are as follows
No of shares
% holding
United Gulf Holding Company B.S.C
410,812,110
78.63%
Burgan Bank K.P.S.C. (“BBK”)
44,394,499
8.50%
In addition to the Shareholders listed in the above table, as at 31 December 2021, Tunis International Bank S.A. (a subsidiary of BBK) holds
9,207,000 shares (1.76%);
c. there is no share scheme in place which gives employees the rights to any form of control;
d. the Bank’s Articles of Association do not contain more stringent provisions than the ones contained in the Companies Act governing the changes
or variations in the rights attached to shares;
e. in terms of Article 12 of the Bank’s Articles of Association, the rights attached to any class of shares may be varied either with the consent in
writing of the holders of not less than 80% of the issued shares of that class or with the sanction of an extraordinary resolution passed at a
separate general meeting of the holders of shares of that class. The Banking Act obliges the Bank to obtain the consent of the Supervisory
Authority (MFSA) to effect any material change in voting rights;
f. the rules and procedures governing the appointment and replacement of Board Members are provided by the Articles of Association and are
referred to in the Statement of Compliance with the Principles of Good Corporate Governance. Any amendments to the Articles shall be by
means of an extraordinary resolution in accordance with the provisions of Articles 90 and 91;
g. unless otherwise disclosed in this Annual Report, there are no significant agreements to which the Bank is a party and which take effect, alter
or terminate upon a change of control of the Bank following a takeover bid and the effects thereof; and
h. there are no agreements between the Bank and its Board Members or employees providing for compensation if they resign or are made
redundant without valid reason or if their employment ceases because of a takeover bid.
At 31 December 2021 the Bank had no securities with special control rights in accordance with the Capital Markets Rule 5.64.4.
FIMBank Group Annual Report & Financial Statements 2021
11
Events after the financial reporting date
On 28 February 2022, the Hellenic Branch in Athens, Greece was officially closed.
On 2 March 2022, FIM Holdings (Chile) S.p.A. was officially liquidated. FIM Holdings (Chile) S.p.A. was a wholly owned subsidiary registered in Chile
and served as the corporate vehicle for Latam Factors S.A., which entity was sold to third parties during 2018. FIM Holdings (Chile) S.p.A. was put
into liquidation during 2019 and its liquidation had no financial impact on the Financial Statements as at reporting date.
The conflict in Ukraine has prompted management to take the appropriate steps to monitor the possible impact this might have on the Group both
directly and indirectly. The Group’s direct exposure to Russia and Ukraine is limited, with USD1.3 million outstanding to a state-owned bank in
Ukraine. Several client limits were reduced and country limits were suspended. Increased monitoring was put in place on customers that could be
indirectly impacted by the war, either through their trading activity, commodity volatility, sanctions or other general impacts. A portfolio review
concluded that our clients are well positioned to absorb any impact from the current situation. We will continue to take appropriate actions as
needed, to protect the quality of the Group’s portfolio.
Going concern
As required by the Capital Markets Rule 5.62, upon due consideration of the Bank’s performance, financial position, capital adequacy and solvency,
the Directors confirm that, at the time of approving these Financial Statements, the Bank is capable of continuing to operate as a going concern
for the foreseeable future.
Directors
The Directors who served during the financial year (inclusive of any changes to the date of this report) were:
John C. Grech (Chairman) CGC, BCC, BRIC
Masaud M.J. Hayat (Vice Chairman) NRC
Abdel Karim A.S. Kabariti CGC, NRC
Claire Imam Thompson CGC, BAC, BRC
Edmond Brincat BAC, NRC
Hussain Abdul Aziz Lalani BAC, BRC, BRIC
Majed Essa Ahmed Al-Ajeel CGC, NRC
Mohamed Fekih Ahmed BCC
Osama Talat Al-Ghoussein BRC Retired on 31 March 2022
Rabih Soukarieh BCC
Rogers David LeBaron CGC, NRC
Denotes membership of:
• Board Audit Committee (BAC)
• Board Credit Committee (BCC)
• Board Review and Implementation Committee (BRIC)
• Board Risk Committee (BRC)
• Corporate Governance Committee (CGC)
• Nomination and Remuneration Committee (NRC)
FIMBank Group Annual Report & Financial Statements 2021
12
Statement of responsibility
This Statement of responsibility is required in terms of the Capital Markets Rule 5.55.2 and set out in the form required by the Capital Markets Rules
5.67 to 5.69.
The Companies Act, 1995 (Chapter 386, Laws of Malta) requires the Directors of the Bank to prepare financial statements for each financial year
which give a true and fair view of the financial position of the Bank and the Group as at the end of the financial year and of the profit or loss of the
Bank and the Group for that period in accordance with the requirements of International Financial Reporting Standards as adopted by the EU.
The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy, at any time, the financial position of
the Bank and the Group and to enable them to ensure that the financial statements have been properly prepared in accordance with the provisions
of the Companies Act, 1995 (Chapter 386, Laws of Malta) and the Banking Act, 1994 (Chapter 371, Laws of Malta). The Directors also ensure that
the financial statements of the Group are prepared in accordance with Article 4 of the IAS Regulation.
The Directors are also responsible for safeguarding the assets of the Bank and the Group and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors, through oversight of management, are responsible to ensure that the Bank and the Group establish and maintain internal controls
to provide reasonable assurance with regard to reliability of financial reporting, effectiveness and efficiency of operations and compliance with
applicable laws and regulations.
Management is responsible, with oversight from the Directors, to establish a control environment and maintain policies and procedures to assist
in achieving the objective of ensuring, as far as possible, the orderly and efficient conduct of the Bank’s business. This responsibility includes
establishing and maintaining controls pertaining to the Bank’s and the Group’s objective of preparing financial statements as required by the
Companies Act, 1995 (Chapter 386, Laws of Malta) and managing risks that may give rise to material misstatements in those financial statements.
In determining which controls to implement to prevent and detect fraud, management considers the risks that the financial statements may be
materially misstated as a result of fraud.
Independent auditors
KPMG have expressed their willingness to continue in office as auditors of the Bank. A resolution proposing their re-appointment will be submitted
at the forthcoming Annual General Meeting.
Approved by the Board of Directors and signed on its behalf by John C. Grech (Chairman) and Masaud M.J. Hayat (Vice Chairman) on 13 April
2022
Registered Address
Mercury Tower
The Exchange Financial and Business Centre
Elia Zammit Street
St. Julian’s STJ 3155
Malta
FIMBank Group Annual Report & Financial Statements 2021
13
Statement of compliance with the principles of good
corporate governance
For the year ended 31 December 2021
Introduction
Pursuant to the requirements of Capital Markets Rules 5.94 et seq of the Malta Financial Services Authority (the “MFSA”), the Board of Directors
(the “Board” or “Directors”) of FIMBank p.l.c. hereby details the extent to which the Code of Principles of Good Corporate Governance (the
“Principles”), published as Appendix 5.1 to Chapter 5 of the Capital Markets Rules, have been adopted together with the effective measures taken
to ensure compliance with such Principles.
Part 1: Compliance with the principles
The Board firmly believes that strong corporate governance permits the Bank and the Group to benefit from greater transparency in its activities,
as well as in its relations with the market, thereby enhancing integrity and confidence. Although the Principles are not mandatory, the MFSA has
recommended that listed companies endeavour to adopt such Principles. The Board has considered this to be in the best interest of the
Shareholders because they commit the Directors, management and employees of the Bank to internationally recognised standards of corporate
governance.
Ultimate responsibility for good corporate governance remains with the Directors who have therefore resolved to adopt the Principles and endorse
them accordingly, except for those instances where particular circumstances exist that warrant non-adherence thereto, or at least postponement
for the time being. The Board is committed to improve further its corporate governance standards which is an ongoing process.
Principle 1: Roles and responsibilities of the board
The Board of Directors’ terms of reference are included in the relevant charter and can be summarised as follows:
The Board is responsible for the overall long-term direction of the Group, for setting its strategy and policies and ensuring that they are pursued
through good management practices. The Board carries out its responsibilities by:
a. exercising prudent and effective controls and ensuring that such controls are appropriately reviewed for effectiveness and monitored for
compliance on a regular basis;
b. determining the strategic aims and the organisational structure;
c. regularly reviewing management performance and ensuring that the Group has the appropriate mix of financial and human resources to run
its business;
d. being conversant with relevant statutory and regulatory requirements;
e. ensuring that all Directors regularly attend meetings of the Board, agree on business objectives, financial plans and general parameters within
which the Board, the Board Committees and management are to function;
f. ensuring that systems and controls are in place to mitigate significant business risks and that exposures are identified and properly managed;
g. setting appropriate business standards, codes of corporate governance and ethical behaviour for all Directors and employees, as well as
monitoring their performance;
h. appointing the Group Chief Executive Officer (“GCEO”) who is entrusted with day-to-day management of the Group and its operations,
together with members of management; and
i. appointing senior management through the Nomination and Remuneration Committee.
Over the years, the Board has created a framework through which it effectively performs its functions and discharges its liabilities. The Board has
also established terms of reference and charters for the various Board Committees and the conduct of their meetings.
The Members of the Board of Directors of the Bank bring to their office, a mix of backgrounds and capabilities, ranging from business to financial
services. This ensures a good blend of expertise and experience. Moreover, the suitability of any individual to become a Director of the Bank is, in
the first place assessed by the Nomination and Remuneration Committee. As part of its work, this Committee is tasked with performing an annual
evaluation of the Board’s overall performance in addition to an evaluation on the performance of each individual Member. This includes an
evaluation of the knowledge and experience of each Member while also assessing their authorities and leadership skills. As a result, this Committee
screens individuals for the position of Director against the Bank’s requirements at the time. Subsequently, the proposal for an individual to become
a Director is assessed by the MFSA which reviews, inter alia, the individual’s competence to serve as Director against established ‘fit and proper’
criteria. In this connection, the individual is required to provide all information, including detailed personal and career information, as the
competent authorities may deem necessary. Upon appointment, new Directors receive general information about the Bank, its business and
affairs, and queries in this regard are in the first instance handled by the Company Secretary and/or the GCEO.
FIMBank Group Annual Report & Financial Statements 2021
14
Principle 2: Roles and responsibilities of the chairman and of the chief executive officer
The roles of the Chairman and of the GCEO are completely separate from one another to ensure clear division of responsibilities at the head of the
Bank.
The Chairman is a non-executive officer who is selected from amongst the Directors. The Chairman is responsible for leading the Board and setting
its agenda, ensuring that the Directors receive precise, timely and objective information so that they can properly execute their duties, encouraging
their active engagement in meetings and issues brought before the Board and ensuring effective communication with Shareholders.
The GCEO is the most senior executive of the Group and is appointed by the Board of Directors. He is responsible for leading the management in
the execution of the strategy and to run the day-to-day activities of the Group.
Principle 3: Board composition and appointment of directors
The Bank’s Articles of Association (the “Articles”) contain detailed provisions (in Clauses 93 to 114) as to the manner of appointment and retirement
of the Directors. Directors hold office from the close of the Annual General Meeting at which they are appointed until the day of the consecutive
Annual General Meeting, at which they become eligible for re-election. The Articles also provide that the Chairman and Vice Chairman are to be
appointed by the Directors from amongst their number and shall hold office for a period of one year, unless otherwise decided by a simple majority
of the Board. Any Member may nominate an individual in the manner prescribed by the Articles, provided that such nomination is seconded by a
Member or Members who in aggregate hold at least twenty thousand shares between them.
As at the date of this Statement, the Directors and their respective first date of appointment to the Board, including identification as required by
Code Provision 3.2 for those Directors deemed independent as per the Capital Market Rules, are as follows:
Year when first appointed
John C. Grech (Chairman)
2004
Rogers David LeBaron 2006
Majed Essa Ahmed Al-Ajeel
2013
Masaud M.J. Hayat (Vice Chairman)
2013
Mohamed Fekih Ahmed
2013
Rabih Soukarieh
2013
Osama Talat Al-Ghoussein
2014
Edmond Brincat (Independent Director)
2017
Hussain Abdul Aziz Lalani
2017
Abdel Karim A.S. Kabariti
2020
Claire Imam Thompson * (Independent Director)
2020
‘ * ‘ Claire Imam Thompson was appointed by the Shareholders on 30 November 2020 and regulatory approval was obtained on 23 February 2021.
Except for their involvement in Board Committees as described below, all Directors hold office in a non-executive capacity.
The Board considered and resolved that all Non-Executive Directors meet the requisites for them to be deemed independent in view of the fact
that all Directors signed a written declaration of independence prior to the publication on this Annual Report. This decision was based on the
representations given by the individual Directors, including those with a shareholding in the Bank or associated with entities having a
shareholding in the Bank or who have served on the Board for more than twelve consecutive years, which does not in any way impair these
Directors’ ability to consider appropriately the issues which are brought before the Board. In terms of Principle 3.4, each Non-Executive Director
has confirmed in writing to the Board that he undertook:
to maintain in all circumstances his independence of analysis, decision and action;
not to seek or accept any unreasonable advantages that could be considered as compromising his independence; and
to clearly express his opposition in the event that he finds that a decision of the Board may harm the Bank.
Another written declaration of independence shall be signed by all the Non-Executive Directors in April 2022. In addition to the declaration
provided, the Board considers such Directors to bring a sufficiently balanced character and frame of mind to their duties and judgment that they
are consequently deemed to be independent. The Bank monitors that each Director limits the number of any directorships held in other companies.
The Bank considers that the Directors have sufficient time to perform their duties and responsibilities in terms of law. The management body of
the Group is deemed to be the Board of Directors, which is appointed in accordance with the Bank’s Articles of Association.
FIMBank Group Annual Report & Financial Statements 2021
15
As at 31 December 2021, the Board of Directors consisted of:
Number of directorships held
(including FIMBank p.l.c. and its subsidiaries)
John C. Grech (Chairman)
12
Masaud M. J. Hayat (Vice Chairman)
12
Abdel Karim Kabariti
4
Claire Imam Thompson
2
Edmond Brincat
14
Hussain Abdul Aziz Lalani
4
Majed Essa Ahmed Al-Ajeel
3
Mohamed Fekih Ahmed
5
Osama Talat Al-Ghoussein
4
Rabih Soukarieh
4
Rogers David LeBaron
1
The directorships held by the Directors in non-EU entities are not subject to MFSA approval.
Principles 4 and 5: Duties and proceedings of directors
The Board of the Bank carries out its duties through a structure that starts with the strategy and policy formulated at meetings and subsequently
delegated to committees and management for implementation and execution at various levels, both functional and operational.
In the first instance, the proceedings of Directors are regulated by the Bank’s Articles of Association. Meetings of the Board for any calendar year
are normally set at the last meeting of the preceding year, so that advance preparation and daily planning for the meetings can be made. Meetings
are held at least quarterly and are formally notified by the Company Secretary at least seven days before the meeting with the issuance of the
agenda for the forthcoming meeting. Occasionally, meetings are also called at short notice or on an ad hoc basis, in which case the Directors may
decide to waive the statutory period of notice. The agenda is accompanied by such papers and documents as are necessary to inform Directors of
issues relating to their roles and responsibilities, and in particular of the decisions they are expected to take. During the year, all Directors were
duly notified of every meeting and given the statutory notice period. With notices of meetings, the Directors are also served with Alternate Director
Appointment Forms which, in case of non-attendance, they are invited to complete and send to the Company Secretary prior to the meeting.
The Board held five meetings in 2021. All Members of the Board were present for all five meetings except for Masaud M.J. Hayat, who was excused
in May and November and Abdel Karim A.S. Kabariti, who was excused for the December meeting. Meetings include presentations by
management, whilst other information and documentation is made available for perusal by the Directors at their request. Members of senior
management attend Board Meetings by invitation depending on the agenda content and relevance. The Board also might request that the
Meetings be attended by other employees or by professional advisors, as and when necessary. In all other circumstances, the Directors are
expected to play a full and constructive role in the Group’s affairs. As soon as possible after a Meeting, draft minutes are circulated amongst the
Members for their information. Minutes are then read and approved at the following Meeting. Directors are provided with Board documents and
can also be provided with all past minutes of Board and Committee Meetings upon request.
Board Meetings also serve as an opportunity to report on the progress and decisions of the Committees, covered under Principle 8. All Board
Committees are either a mix of Directors and management (Board Review and Implementation Committee) or include the participation of
management (Board Audit Committee, Nomination and Remuneration Committee, Corporate Governance Committee, Board Credit Committee
and Board Risk Committee). Committees report to the Board on their activities through their respective Chairman at each Board Meeting.
Management reporting is also done directly to the Board at each meeting, either by means of an update presentation from the GCEO or usually
through the Board Review and Implementation Committee. In any case, each Board Meeting receives an update on the performance of the Bank
and the Group, on known risk cases, litigation and potential problems, about key strategic developments, including the progress of investees such
as subsidiaries and joint ventures and key financial indicators that enable performance to be measured against internal budgets, industry peers
and prior financial periods.
FIMBank Group Annual Report & Financial Statements 2021
16
Principle 6: Information and professional development
Upon first appointment, all Directors are offered an introduction to the Bank and Group which includes a tailored induction and familiarisation by
the GCEO and the Company Secretary. This usually covers legal and statutory responsibilities as well as a good overview of the Group’s business
and activities. Access to the services of the Company Secretary and resources of the Bank, including where necessary, independent professional
advice at the Bank’s expense, are also available.
Training sessions have been held in 2021 in order for Directors to have the necessary knowledge on their duties and responsibilities.
Moreover, the Board ensures that the GCEO maintains systems and procedures for the development and training of management and employees
generally, in order to retain the best quality employees, optimise on management and employee morale and to continue developing the succession
plan for senior management. The GCEO is responsible for the recruitment and appointment of senior management following the approval of the
Nomination and Remuneration Committee.
Principle 7: Evaluation of the board’s performance
Members of the Board of Directors are subject to comprehensive ‘fit and proper’ tests by the Supervisory Authorities before they are formally
cleared for appointment to the Board. The Board undertakes an annual evaluation of its own performance and that of its Committees. The
evaluation forms are then evaluated by a Committee, which function has been entrusted to the Nomination and Remuneration Committee, which
then reports directly to the Board Chairman who is required to act on the results of the performance evaluation process. The outcome would be to
ascertain the strengths and to address the weaknesses of the Board and its Committees and to report this to the Board itself and, where
appropriate, to report at the Annual General Meeting. This exercise began in 2013 and has been repeated annually ever since. The self-evaluation
of the Board and its Committees and the addition of the two new Directors, led to some changes to the Committee composition. Details regarding
the changes to Committee composition have been disclosed under Principle 8: Changes to committee memberships during 2021. The last
evaluations from Directors were requested in the last quarter of 2021 and were presented to the Nomination and Remuneration Committee in
April 2022.
Principle 8: Board committees
The Bank’s Articles of Association establish that the Directors may delegate certain powers, authorities and discretions to any person and/or
Committee appointed by them. The composition of such Committees, as well as the participation of Directors on them, is decided upon by the
Board.
Accordingly, the Board has established the following Committees:
Board Review and Implementation Committee
Board Audit Committee
Board Risk Committee
Assets Liabilities Committee
Nomination and Remuneration Committee (further information can be found in the Remuneration Report on page 23)
Board Credit Committee
Corporate Governance Committee
Board review and implementation committee
The Board Review and Implementation Committee (“BRIC”) acts as the delegated authority by the Board in overseeing the activities and
management of the Group. The Board Review and Implementation Committee terms of reference are included in the Board Review and
Implementation Committee Charter.
The Members of the Board Review and Implementation Committee as at 31 December 2021 are the following:
John C. Grech (Chairman)
Hussain Abdul Aziz Lalani ((Vice Chairman)
Adrian A. Gostuski (Non-Voting Member)
The Board Review and Implementation Committee met on nine occasions during 2021.
FIMBank Group Annual Report & Financial Statements 2021
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Board audit committee
The Board Audit Committee (“BAC”) assists the Board of Directors in fulfilling its supervisory and monitoring responsibilities, according to detailed
terms of reference included in the Board Audit Committee Charter and which reflect the requirements of the Capital Markets Rules, as well as
current best practices and recommendations of good corporate governance. The terms of reference of the Board Audit Committee, as detailed in
the Board Audit Committee Charter include:
the monitoring of the financial reporting process, including the audit of the annual and consolidated accounts;
the monitoring of the effectiveness of the Group’s internal control, internal audit, compliance and risk management systems;
the maintenance of communication on such matters between the Board, management, External Auditors, and the Internal Audit and
Compliance functions;
the monitoring and reviewing of the External Auditor’s independence, and in particular, the provision of additional services to the Bank;
the monitoring and reviewing of proposed transactions by the Group with related parties; and
the performance of the Group’s Internal Audit and Compliance functions.
It is the responsibility of the Board Audit Committee to recommend the appointment of the Statutory Auditor in line with the Capital Markets Rules
5.127.6 and in accordance with Article 16 of the Statutory Audit Regulation. The Board Audit Committee also considers the nature of related party
transactions, vets and approves them. Both the Board Audit Committee’s and the Head of Internal Audit’s terms of reference clearly stipulate their
independence from other Board Committees and management, and such independence is also acknowledged by external regulatory verification.
The Head of Internal Audit has direct access to the Board Audit Committee Chairman at all times and attends all meetings. The Group Chief
Compliance Officer also has direct access to the Board Audit Committee Chairman and attends all meetings. In addition, the composition of the
Members of the Board Audit Committee includes two individuals who are also Members of the Board Risk Committee.
The Members of the Board Audit Committee as at 31 December 2021 are the following:
Edmond Brincat (Chairman – Independent Director)
Hussain Abdul Aziz Lalani (Vice Chairman)
Claire Imam Thompson (Member– Independent Director)
Rogers David LeBaron is a non-voting, permanent invitee of the BAC.
In line with Capital Markets Rule 5.117.4, the Chairman of the Board Audit Committee is appointed by the Board of Directors and with reference to
Capital Markets Rule 5.117.3, all Members of the Board Audit Committee are designated as competent in auditing and/or accounting as per
qualifications listed hereunder.
Edmond Brincat joined the GO Group in 1999, part of the team entrusted to set up and launch Go Mobile, Malta’s second mobile operator and in
2006 he was appointed as the Group’s Chief Finance Officer, a position he held until 31 January 2018. In February 2018, Edmond Brincat joined
SmartCity (Malta), a subsidiary of Dubai Holding LLC, and currently acts as the company’s Chief Executive Officer. Edmond Brincat obtained a
Bachelor of Arts degree in accounts from the University of Malta in 1991 and is a Certified Public Accountant and a Fellow of the Malta Institute of
Accountants.
Hussain Abdul Aziz Lalani is the Chief Executive Officer of United Gulf Bank (“UGB”), Bahrain and has worked extensively with the Board of
Directors on advisory transactions in his previous capacity as UGB’s Chief Financial Officer. Hussain Abdul Aziz Lalani is a Chartered Accountant
and a Certified Information Systems Auditor and holds a Bachelor of Commerce degree from the University of Karachi, Pakistan.
Claire Imam Thompson currently holds the position of Executive Vice President, Head of Global Trade, Enterprise Partnerships at Mastercard.
Claire Imam Thompson is an accountant by profession and also holds a Bachelor of Science (Hons) in Business Studies which she obtained from
the University of Bradford.
The Bank considers that the Committee Members as a whole have the relevant competence as required by the Capital Markets Rule 5.118, having
evaluated the balance of knowledge, skills, diversity and experience of the members of the Committee, thereby ensuring that they have the
requisite experience, personal abilities and integrity and that they adhere to sound professional practices.
All Members of the Board Audit Committee have signed a written declaration of independence. In effect, the Board of Directors of the Bank
consider these Members to be independent. Furthermore, the Committee Members as a whole, have the competence relevant to the sector in
which the Bank is operating.
The Board Audit Committee normally requests members of management to attend its Meetings for selective items of the respective agenda.
The Board Audit Committee held nine meetings during 2021 and all Members were present for all nine meetings. The Group Head of Internal Audit
was invited and attended all meetings. The External Auditors were invited to seven of the Board Audit Committee Meetings (February 2021, April
2021, May 2021, August 2021 and December 2021). The External Auditors were only present for the agenda item which considered and discussed
the 2020 Statutory External Audit (February 2021), 2020 Annual Report (April 2021), 2020 Management Letter (April 2021), Interim Report for the
period ended 30 June 2021 (August 2021) and Statutory Audit Plan for Financial Year ending 31 December 2021 (December 2021).
FIMBank Group Annual Report & Financial Statements 2021
18
Board risk committee
The Board Risk Committee (“BRC”) is responsible for overseeing the Group’s risk management strategy, systems and policies, and for
recommending appropriate risk appetite parameters for approval by the Board of Directors. The Board Risk Committee is also responsible for the
oversight of operational, market, reputational and legal risk matters.
The Board Risk Committee Members as at 31 December 2021 are the following:
Hussain Abdul Aziz Lalani (Chairman)
Osama Talat Al-Ghoussein (Vice Chairman)
Claire Imam Thompson (Member)
During 2021, the Board Risk Committee met on thirteen occasions.
Assets liabilities committee
The Assets Liabilities Committee (“ALCO”) is a decision-making body responsible for allocating the Group’s assets and liabilities to meet the
Group’s risk and profitability objectives.
The ALCO is composed of representatives of senior management, vested with the power to make decisions. As at 31 December 2021, the voting
members of the ALCO were the following:
Zbigniew Makula (Chairman)
Adrian A. Gostuski (Member)
Julio Bonifacino (Member)
Ronald Haverkorn (Member)
Juraj Beno (Member)
Simon Lay (Member)
Chris Trapani (Head of Cash Management & Central Customer Services), Tiziri Hamidouche (Deputy Head of Treasury), Corinne Lanfranco (Head
of Financial Institutions & Deposits), Simon Vickery (Head of Non-Credit Risk Management), Kamel Moris (Chief Commercial Officer Trade &
Commodity Finance) and Clinton Bonnici (Asset Liabilities Management Manager) are non-voting, permanent invitees of the ALCO.
During 2021, the Assets Liabilities Committee met on five occasions.
Board credit committee
The Board Credit Committee (“BCC”) is a Committee appointed by the Board of Directors of FIMBank. The Board Credit Committee is directly
responsible and accountable to the Board. The Board may delegate any of its authorities and powers in relation to the BCC to the Board Risk
Committee. The Board Credit Committee main powers and duties are to:
review credit applications and approve credit limits and specific transactions, up to the legal lending limit of the Bank and within the guidelines
specified in the Group’s Credit Policy Procedures; and
review and consider for approval country limit applications, within the guidelines specified in the Group’s Credit Policy Procedures.
The Board Credit Committee Members as at 31 December 2021 are the following:
John C. Grech (Chairman)
Rabih Soukarieh (Vice Chairman)
Mohamed Fekih Ahmed (Member)
Adrian A. Gostuski (GCEO) and Ronald Haverkorn (GCRO) are non-voting, permanent invitees of the BCC.
During 2021, the Board Credit Committee met on seventeen occasions.
FIMBank Group Annual Report & Financial Statements 2021
19
Corporate governance committee
The purpose of the Corporate Governance Committee (“CGC”) is to review the Bank’s internal delegations, policies and procedures to ensure
compliance with legislative and regulatory requirements and alignment to industry’s best practice.
The Corporate Governance Committee Members as at 31 December 2021 are the following:
Majed Essa Ahmed Al-Ajeel (Chairman)
John C. Grech (Vice Chairman)
Abdel Karim A.S. Kabariti (Member)
Claire Imam Thompson (Member)
Rogers David LeBaron (Member)
During 2021, the Corporate Governance Committee met on four occasions.
Nomination and remuneration committee
The Nomination and Remuneration Committee (“NRC”) is currently composed of five members, one of whom is an independent director. The
Nomination and Remuneration Committee is governed by the NRC’s Charter as may be amended by the Board of Directors (“Board”) in line with
the relevant laws and regulations. The Charter establishes the authority and responsibilities conferred by the Board to the NRC in line with
Appendix 5.1 (8) (A) & (B) of the Code of Principles of Good Corporate Governance. Inter alia the NRC carries out the following tasks:
presents recommendations to the Board regarding nomination to the Board’s membership in accordance with approved policies, standards,
and instructions on nomination regulations for the Board of Director’s membership;
performs an annual review of the needs required with regard to suitable skills for Board membership and performs an annual review of the
Board of Directors’ structure and presents recommendations on the changes which can be performed in accordance with the Bank’s interest;
performs an annual evaluation of the Board’s overall performance and the performance of each Member and the Board Committees; and
conducts as and when required, including on an annual basis, suitability assessments of prospective/appointed Directors, officers holding a
senior management position and key function holders.
In addition to the above, the NRC provides information and summaries on the background of some important issues of the Bank and presents the
reports and information to the Board. It ensures that the Board is continuously updated on the latest issues related to the banking profession.
Details regarding the Remuneration Policy and remuneration related matters have been disclosed under the Remuneration Policy and
Remuneration Report.
The Nomination and Remuneration Committee Members as at 31 December 2021 are the following:
Masaud M.J. Hayat (Chairman)
Majed Essa Ahmed Al-Ajeel (Vice Chairman)
Abdel Karim A.S. Kabariti (Member)
Edmond Brincat (Member)
Rogers David LeBaron (Member)
John C. Grech (FIMBank Chairman) and Adrian A. Gostuski (GCEO) are non-voting, permanent invitees of the NRC.
During 2021, the Nomination and Remuneration Committee met on four occasions.
All members were present for all four meetings except for Majed Essa Ahmed Al-Ajeel who was excused for the April meeting. Abdel Karim A.S.
Kabariti was appointed as member in May 2021 and was excused for the May and December meetings.
Changes to committee membership during 2021
During 2021, Claire Imam Thompson was appointed Member of the Board Risk Committee and Edmond Brincat is no longer a Member of the Board
Risk Committee.
Claire Imam Thompson and Abdel Karim A.S. Kabariti were appointed Members of the Corporate Governance Committee.
Abdel Karim A.S. Kabariti was appointed Member of the Nomination and Remuneration Committee.
Claire Imam Thompson was appointed Member of the Board Audit Committee.
FIMBank Group Annual Report & Financial Statements 2021
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Principles 9 and 10: Commitment to institutional shareholders, an informed market and
transparency in dealings by directors, management and staff
The Chairman arranges for all Directors including the Chairmen of all the Committees to be available to answer questions at the Annual General
Meeting. All eligible Shareholders are served with a notice to attend the Annual General Meeting, which is usually held during the first half of the
year, however as a result of the pandemic and further to legislative amendments carried out to the Companies Act in this respect, during the year
2021 the Annual General Meeting of the Bank was held in July. The notice contains all the resolutions proposed for approval by the Annual General
Meeting and, as necessary, notes accompanying such resolutions. Pursuant to the Companies Act, notices are delivered to Shareholders at least
fourteen clear days before the date of the Annual General Meeting. Advance notification of the resolutions proposed for approval is also given by
way of a Company Announcement as soon as these are decided and approved, normally at the same Board Meeting that approves the Annual
Financial Statements. The Board also considers the Annual Report to be an effective document which, in addition to the statutory disclosures,
contains detailed information about the Group’s performance. Moreover, the Board ensures that the Annual General Meeting serves as a medium
at which information is communicated to Shareholders in a transparent and accountable manner. Additionally, the Bank holds meetings from time
to time with financial intermediaries and financial market practitioners to disseminate information about the Group’s progress, activities and
financial performance. These meetings are usually organised to follow the publication of the half yearly and annual financial results as well as in
connection with other Group developments and events. Procedures are in place to resolve conflicts between minority shareholders and controlling
shareholders.
The Board complies with the provisions of the Bank’s Memorandum and Articles of Association, as well as all legislation, rules and regulations that
require it to maintain a fair and informed market in the Bank’s equity securities. It discharges its obligations by having in place, formal procedures
for dealing with potentially price-sensitive information and ensuring the proper conduct of its officers and employees in that regard. Regular
contact with Shareholders and the general market is maintained through Company Announcements, which are issued in conformity with the
obligations arising from the Capital Markets Rules. During 2021 the Bank issued fourteen announcements.
The Board also complies with the provisions of the Bank’s Articles of Association insofar as minority rights are concerned. In accordance with the
article 65 of the Bank’s Articles of Association, minority Shareholders may convene an Extraordinary General Meeting, in the same manner, as
nearly as possible, as that in which meetings may be convened by the Directors.
The Bank also maintains a presence on the web through www.fimbank.com which, includes an informative and comprehensive Investor Relations
section that contains, amongst other things, all Company Announcements, Annual General Meeting information and regulated information.
The FIMBank Financial Instruments Internal Code of Dealing which has been drawn up in accordance with the requirements of the Capital Markets
Rules contains dealings restriction guidelines and reporting procedures to be observed by Directors, management and employees when dealing,
or prospecting to deal, in the Bank’s equity securities. Directors and employees are also notified by the Company Secretary of their obligations to
observe the restricted ‘time-windows’ accompanying the publication of half yearly and annual financial results during which no dealings in the
Bank’s equity securities are allowed.
Control by any Shareholder, whether direct or indirect, and any potential abuse thereof, is regulated by the Banking Act and Rules issued
thereunder. The Act and such Rules provide mechanisms for, and obligations on, persons intending to acquire control, as well as on all Directors
and management, to notify and report to the supervisory authorities in such eventuality. There are additional obligations on Directors in terms of
the Capital Markets Rules and there is good communication in place between the management, the Company Secretariat and the Board to ensure
that any issues are flagged and acted upon appropriately.
Principle 11: Conflicts of interest
While the overall tone for instilling a strong culture about the proper management of conflicts of interest is set at the top, situations of potential
conflicts of interest with Board Members are in the first instance specifically regulated by Clauses 119 and 120 of the Bank’s Articles of Association.
In terms of the Articles of Association, in the event of a conflict-of-interest situation, real or potential, arising in connection with any matter, the
interest has to be declared. In particular, the Director concerned refrains from taking part in proceedings relating to the matter and his vote is
excluded from the count of the decision. The minutes of Board Meetings, as well as those of Board Committees, invariably shall include a suitable
record of such declaration and of the action taken by the individual Director concerned. In the event that such steps do not eliminate the grounds
for conflict then the Director should consider resigning. Similar arrangements apply to management in the course of the conduct of their duties at
Board Committees. Besides, where Directors and management have related party involvements, these are reported and it is an integral part of the
Board Audit Committee’s terms of reference to provide oversight on related party transactions.
FIMBank Group Annual Report & Financial Statements 2021
21
The number of shares held in the Bank by Directors directly in their name as at 31 December 2021 is as follows:
John C. Grech (Chairman) * 1,760,000
Abdel Karim A.S. Kabariti * Nil
Claire Imam Thompson Nil
Edmond Brincat Nil
Hussain Abdul Aziz Lalani * Nil
Majed Essa Ahmed Al-Ajeel * Nil
Masaud M.J. Hayat (Vice Chairman) * Nil
Mohamed Fekih Ahmed * Nil
Osama Talat Al-Ghoussein * Nil
Rabih Soukarieh * Nil
Rogers David LeBaron Nil
‘ * ‘ Aside from these direct interests in the shareholding of the Bank, these Directors are considered to be associated with companies that hold a
beneficial interest in the Bank’s shareholding. No Shareholder is entitled to any automatic right to nominate or appoint a Director on the Board.
Details of outstanding loans, guarantees or similar facilities made available to related parties or beneficial interests thereof, including Directors,
are disclosed in the Notes to the Financial Statements.
Principle 12: Corporate social responsibility
The Board of Directors encourages that sound principles of corporate social responsibility are adhered to in the ongoing management practices of
the Group. As a result, from time to time the Bank and its subsidiaries are involved in supporting initiatives at both national and community level
aimed at contributing economic and societal development. They also assist and promote small-scale projects of a charitable and humanitarian
nature. Further details of corporate social responsibility initiatives undertaken by the Group in 2021 are explained in the CEO’s Message of the
Annual Report.
Part 2: Non-compliance with the principles
Principle 2.3: Chairman and chief executive
The existing Chairman of the Board of Directors is not an independent member in terms of the Capital Markets Rules. This notwithstanding, the
Bank considers the non-compliance with this Principle not to be of concern in view of the fact that John C. Grech has signed a written declaration
whereby he has declared that he undertakes to maintain in all circumstances his independence of analysis, decision and action, not to seek or
accept any unreasonable advantages that could be considered as compromising his independence and to clearly express his opposition in the event
that he finds that a decision of the Board may harm the Bank.
Principle 3: Composition of the board
Principle 3 in Appendix 5.1 of the Capital Market Rules requires that the Board should be composed of executive and non-executive directors
including independent non- executives. The Board of Directors of FIMBank is comprised solely of Non-Executive Directors. This notwithstanding,
the Bank considers the non-compliance with this Principle not to be of concern in view of the fact that members of senior management and the
Group Chief Executive Officer attend Board Meetings by invitation depending on the agenda content and relevance. Furthermore, the Board
Review and Implementation Committee already consists of a mix of Non-Executive Directors and a member that forms part of the Bank’s Executive
Management. This provides the balance suggested in Principle 3.The Bank considers the non-compliance with principle 3.4 not to be of concern in
view of the fact that all Directors with the exception of two signed the written declaration of independence by 2021 and the other two signed a
written declaration in February 2022, whereby they all declared that they undertake to maintain in all circumstances their independence of analysis,
decision and action, not to seek or accept any unreasonable advantages that could be considered as compromising their independence and to
clearly express their opposition in the event that they find that a decision of the Board may harm the Bank.
Principle 4: Succession policy for directors
Whereas Capital Markets Rule 4.2.7 calls on the Directors to develop a succession policy for the future composition of the Board, and ‘particularly
the executive component thereof, for which the Chairman should hold key responsibility’, this is considered to be not applicable in view of the fact
that the Board is composed solely of non-executive members. During the May and August NRC meetings of 2021, the Nomination and
Remuneration Committee discussed the management succession plan. The Nomination and Remuneration Committee ensures that a succession
plan for management is updated and outlines interim and long-term successors.
FIMBank Group Annual Report & Financial Statements 2021
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Principle 8: Nomination and remuneration committee
The manner in which the Directors are nominated for appointment follows the procedure set out in the Articles of Association, i.e. any nomination
must be seconded by a Member or Members who in the aggregate holds at least 20,000 shares. This process is also rendered public with an
announcement in the Maltese press, usually in the first quarter of the financial year and in good time before the Annual General Meeting, which
allows at least ten business days for any nomination to be made to the Company Secretary.
The existing Chairman and Vice Chairman of the Nomination and Remuneration Committee are not independent members in terms of the Capital
Markets Rules, as set out in terms of Principle 8.A.1 of the Code of Principles of Good Corporate Governance. This notwithstanding, the Bank
considers the non-compliance with this Principle not to be of concern in view of the fact that both the Chairman and Vice Chairman of the NRC
have signed a written declaration whereby they have declared that they undertake to maintain in all circumstances their independence of analysis,
decision and action.
Internal control
The Board is ultimately responsible for the identification and evaluation of key risks applicable to the different areas of the business of the Group,
and for ensuring that proper systems of internal control are in place. The Board has delegated management with the task of creating an effective
control environment to the highest possible standards. The Internal Audit function performs periodic audits to specifically test compliance with
policies, standards and procedures and the effectiveness of the internal control environment within the Group. To ensure the effectiveness of the
internal systems of control the Head of Internal Audit reviews and tests such systems independently from management, adopting a risk-based
approach. The Internal Auditor reports to the Board Audit Committee, however, the Chairman of the Board of Directors is copied with all Internal
Audit Reports issued.
The Board has identified key features within the Group’s environment of internal controls to ensure compliance with the Principles. The
management is responsible for the identification and evaluation of key risks applicable to the respective areas of business. The Board receives
regular reports from management giving detailed and comprehensive analysis of financial and operational performance, including variance
analysis between budgeted and actual figures, activities and prospects.
Capital Markets Rule 5.97.5 and Rule 5.97.8
Capital Markets Rule 5.97.5 and Rule 5.97.8 are not applicable. Whilst Capital Markets Rule 5.97.5 is not applicable, this information is found in the
Directors’ Report.
It is also hereby declared that the contents of the Directors’ Report and of this Statement of Compliance with the Principles of Good Corporate
Governance cover the requirements of the provisions of Capital Markets Rule 5.97.
Approved by the Board of Directors and signed on its behalf by John C. Grech (Chairman) and Masaud M.J. Hayat (Vice Chairman) on 13 April
2022
FIMBank Group Annual Report & Financial Statements 2021
23
Remuneration report
For the year ended 31 December 2021
This section incorporates the Statement of the Nomination and Remuneration Committee and the Directors’ Remuneration Report as required by
Chapters 5 and 12 of the Capital Markets Rules, respectively.
Statement of the Nomination and Remuneration Committee (as per
Section 8 of the Principles)
Terms of reference and membership
The Nomination and Remuneration Committee (“NRC”) is responsible for ensuring that the Directors and Executive Management of FIMBank
Group have the appropriate mix of skills, qualifications and experience necessary to fulfil their supervisory and management responsibilities. The
NRC also reviews on an annual basis, the remuneration of the Board of Directors and that of Executive Management and ensures that it is in line
with principles of good governance.
As at 31 December 2021, the NRC was composed of five members, Masaud M.J. Hayat (Chairperson), Majed Essa Ahmed Al-Ajeel (Vice-
Chairperson), Rogers David LeBaron, Edmond Brincat (Independent Member) and Abdel Karim A.S. Kabariti. John C. Grech and Adrian A. Gostuski
in their capacity as Chairman of the Group and Group Chief Executive Officer (“GCEO”) respectively, attended the NRC’s meetings as permanent
invitees, Simon Lay in his capacity as CEO of LFC was invited to present one agenda item in the NRC meeting held August 2021. The Group Chief
Human Resources Officer (“GCHRO”) acted as Board Committee Secretary.
Meetings
The Committee met four times during the period under review, which meetings were attended as follows:
Members Attended
Masaud M.J. Hayat (Chairperson) 4
Majed Essa Ahmed Al-Ajeel (Vice-Chairperson) 3
Abdel Karim A.S. Kabariti (appointed as Member in May 2021) 1
Edmond Brincat (Member) 4
Rogers David LeBaron (Member) 4
The following matters were discussed and, or determined:
a. New independent Directors and Group appointed Directors;
b. Chairman’s role and performance;
c. Directors’ remuneration;
d. Board of Directors evaluation, Director’s self-assessment and Board Committees self-assessment;
e. NRC charter;
f. Board Committees memberships;
g. Remuneration Policy and CRD V;
h. Executive Management recruitment, appointments, performance, promotions, succession and remuneration;
i. Group salary review, bonus allocation and out of cycle increases/payments;
j. Succession planning for all entities;
k. Control functions (independence, recruitment, succession and performance);
l. Subsidiary CEOs;
m. HR Policies; and
n. NRC and Remuneration Policy statements for Annual Report.
FIMBank Group Annual Report & Financial Statements 2021
24
Remuneration statement
The NRC has the role of making recommendations on the Board of Directors’ remuneration. The guiding principle, as outlined in the Remuneration
Policy and the Remuneration Policy Supplement, is that the remuneration for the Directors shall be competitive to ensure that the Group attracts
and retains outstanding individuals of integrity, calibre, credibility and who have the necessary skills and experience to bring an independent
judgement to bear on the issues of strategy, performance and resources for the success of the Group. Directors are remunerated through a fixed-
fee structure which varies according to whether the appointment is that of an Independent Director or otherwise and to whether the directors are
chairpersons or members of the other respective Board Committees.
The Annual General Meeting of Shareholders approves the maximum annual aggregate remuneration which the Directors may receive for the
holding of their office. At the Annual General Meeting held remotely on 15 July 2021, the Shareholders approved the maximum aggregate
emoluments of the Directors for the financial year ending 31 December 2021 at USD450,000 (2020: USD450,000). Directors, in their capacity as
Directors of the Bank, are not entitled to profit sharing, share options or pension benefits. The total fees paid specifically for Board of Directors
Meetings for the financial year ending 31 December 2021 amounted to USD204,918.
Code provision 8.A.5
For 2021, the total payments received by the Directors from the Bank and the Group were:
fixed remuneration USD414,833
variable remuneration Nil
executive share options Nil
expenses relating to meetings Nil
fringe benefits USD1,032
The fixed annual remuneration is inclusive of remuneration with respect to Committee/s the Directors are members of.
The NRC ensures that while its remuneration practices are in compliance with existing EU/Maltese directives and regulations, including the
applicable Capital Requirements Directive V and the Capital Requirements Regulation, it also ensures that the remuneration packages reflect
industry benchmarks. This makes it possible for the Group to attract and retain Executives with the right qualities and skills for the proper
management of the Group as well as the proper execution of the strategy as laid down by the Board of Directors. Unless the current economic
scenario changes materially, no new significant changes are envisaged for the financial year ending 2022.
The various remuneration components, including that for Executive Management are:
fixed remuneration;
variable remuneration; and
fringe benefits.
These components are combined to ensure an appropriate and balanced remuneration package that reflects the employee’s grade and
professional activity within the Group. Executive Management are not entitled to supplementary pension or early retirement schemes.
For 2021, the total payments received by Executive Management (members within the C-suite) from the Bank and the Group were:
fixed remuneration USD1,943,103
variable remuneration USD233,452
executive share options granted Nil
fringe benefits USD467,237
Additional disclosures on the governance process related to the variable portion of remuneration have been made under the Directors’
Remuneration Report and under the Remuneration Policy which can be found in the 2021 Pillar III Disclosures Report published on the Bank’s
website.
Executive Management of the Bank hold both definite and indefinite contracts with varying notice periods, all of which are in line with local
legislation. The contracts of Directors and Executive Management do not include provisions for termination payments and other payments linked
to early termination, except for those required by law.
NRC decisions are determined by the guidelines set by the Board of Directors when reviewing the Group budget.
FIMBank Group Annual Report & Financial Statements 2021
25
Directors’ Remuneration Report (as per Capital Market Rules 12.26K)
This report is being included with the purpose of providing the level of transparency as required with effect from reporting year 2020, following the
enactment of Directive EU2017/828 (often referred to as “SRD II”) and the consequential changes to the Capital Markets Rules, more specifically
Chapter 12 which deals with shareholders’ rights. The amounts disclosed reflect the Remuneration Policy Supplement (“Policy”) as approved by
the Annual General Meeting held on 30 November 2020 and published on the Bank’s website. The Policy was implemented without making any
derogations and, or deviations from the procedure for the implementation of the Remuneration Policy as defined in Chapter 12 of the Capital
Markets Rules.
The total remuneration of each individual Director is detailed in the tables below. The Non-Executive Directors only receive fixed fees per meeting
for their participation at Board and Committee level. Consequently, the percentage split between fixed and variable should be taken as 100% vs
0%. The tables include remuneration received by the Bank’s Directors, the GCEOs (former and current) from the Bank. They did not receive any
remuneration from the Bank’s subsidiaries. The Deputy CEO, also included in the tables below in line with the requirement of Chapter 12 of the
Capital Markets Rules, received all his remuneration from London Forfaiting Company Ltd (LFC), the subsidiary where he holds the position of
CEO. For information about the general performance and events of material importance of the Group refer to the Statements of Profit or Loss and
the Statements of Other Comprehensive Income on pages 30 and 31 and in the Review of Performance section within the Director’s Report. These
did not impact the total remuneration of Directors. The Group’s approach to remuneration is that of ensuring that the Group is able to attract and
retain talented and high performing directors by recognising, valuing and fairly rewarding their contributions while remaining aligned to the
Group’s long-term strategy, risk appetite, sustainable performance and corporate values.
The Non-Executive Directors did not receive any base salary, variable remuneration or compensation in respect of extraordinary items and pension
contributions.
Name of director
Directors remuneration
Notes
2021
2020
* Difference
USD
USD
%
John C. Grech 101,032 98,240 2.84
No change in fee structure. Difference due to number of sittings held in
2021
Masaud M.J. Hayat 17,000 20,512 (17.12)
No change in fee structure. Difference due to number of sittings held in
2021 and 2020
Abdel Karim A.S. Kabariti 17,667 1,835 140.69
Remuneration for 2020 is for part year in quarter 4 and was only in respect
to his membership on the Board of Directors. Annualized % increase is
mainly due to fees for new memberships on CGC and NRC in 2021
Claire Imam Thompson
38,333
-
-
Started receiving fees in March 2021
Edmond Brincat 47,333 46,569 1.64
Difference due to two changes in Committee membership in 2021 and
2020 respectively
Hussain Abdul Aziz Lalani 36,750 34,857 5.43
No change in fee structure. Difference due to number of sittings held in
2021 and 2020
Majed Essa Ahmed Al-Ajeel 25,750 21,117 21.94
No change in fee structure. Difference due to number of sittings held in
2021 and 2020
Mohamed Fekih Ahmed 27,000 28,344 (4.74)
No change in fee structure. Difference due to number of sittings held in
2021 and 2020
Osama Talat Al-Ghoussein
19,000
19,308
(1.60)
No change in fee structure
Rabih Soukarieh 23,000 26,067 (11.77)
No change in fee structure. Difference due to number of sittings held in
2021 and 2020
Rogers David LeBaron
63,000
63,043
(0.07)
No change in fee structure
‘ * ‘ Differences also include fluctuation in rate of exchange.
Name of director
Position
John C. Grech
Chairperson FIMBank BoD, Chairperson LFC BoD, Chairperson BRIC, Chairperson BCC, Vice Chairperson CGC,
Permanent Invitee NRC
Masaud M.J. Hayat
Vice Chairperson BoD, Chairperson NRC
Abdel Karim A.S. Kabariti
Member BoD, Member CGC, Member NRC
Claire Imam Thompson
Member BoD (independent member), Member BAC, Member BRC, Member CGC
Edmond Brincat
Member BoD (independent member), Chairperson BAC, Member NRC
Hussain Abdul Aziz Lalani
Member BoD, Chairperson BRC, Vice Chairperson BAC, Vice Chairperson BRIC, Member LFC BoD
Majed Essa Ahmed Al-Ajeel
Member BoD, Chairpeson CGC, Vice Chairperson NRC, Member LFC BoD
Mohamed Fekih Ahmed
Member BoD, Member BCC, Member LFC BoD
Osama Talat Al-Ghoussein
Member BoD, Vice Chairperson BRC
Rabih Soukarieh
Member BoD, Vice Chairperson BCC
Rogers David LeBaron
Member BoD, Member CGC, Member NRC, Permanent Invitee BAC
FIMBank Group Annual Report & Financial Statements 2021
26
Name of executive
Executive remuneration
Notes
2021
2020
* Difference
USD
USD
%
Adrian A. Gostuski 634,882 412,029 15.56
Remuneration for 2020 is for his part year in his capacity as AGCEO. **
Increase in remuneration in 2021 is mainly due to variable remuneration
and salary review following his confirmation in the capacity of GCEO
Simon Lay 782,889 727,920 7.55
Increase in remuneration in 2021 is mainly due to a one-time long service
award and national insurance contributions
Murali Subramanian
-
696,705
-
‘ * ‘ Differences also include fluctuation in rate of exchange.
‘ ** ‘ Adrian A. Gostuski was appointed as AGCEO on 30 March 2020 and GCEO on 7 April 2021.
Name of executive
Position
Adrian A. Gostuski
GCEO FIMBank, Chairperson MCC, Member ALCO, Member ERPC, Member ITSC, Member ORMC,
Non-Voting Member BRIC, Chairperson Egypt Factors BoD, Chairperson India Factoring BoD, Chairperson FPI
BoD, Member Brasil Factors BoD, Member FBS BoD
Simon Lay
Deputy CEO FIMBank, CEO LFC, Member MCC, Member ALCO, Member ERPC
Murali Subramanian ***
GCEO FIMBank; Chairperson EXCO, Chairperson MCC, Member ALCO, Member ORMC,
Chairperson Egypt Factors BoD, Chairperson India Factoring BoD, Member FBS BoD, Member Brasil Factors
BOD, Member FBS BOD
‘ *** ‘ The definite contract of Murali Subramanian expired on 5 August 2020.
The Executives received all remuneration from the Bank with the exception of Simon Lay whose remuneration is received from a subsidiary of the
Bank.
FIMBank performance
Performance indicators
2021
2020
* Difference
USD
USD
%
Operating income/(loss) before net impairment
614,682
(132,615)
563.51
Loss for the period
(3,612,523)
(47,032,755)
92.32
Gross non-performing assets
148,726,146
226,803,023
34.42
Average remuneration on full-time equivalent basis of employee
2021
2020
* Difference
USD
USD
%
Employees of the Company
76,206
69,573
9.53
Employees of the Group
73,137
64,944
12.62
‘ * ‘ Percentages in respect of FIMBank Performance between 2021 and 2020 are being shown as positive given that all denote improvements.
FIMBank Group Annual Report & Financial Statements 2021
27
Remuneration for executives for the 2021
Fixed remuneration
Variable remuneration
Name of
executive
Base
salary Fees
Fringe
benefits
One-year
variable
Multi-
year
variable
Extraordinary
items
Pension
expense
Total
remuneration
Proportion of
fixed and variable
remuneration
USD
USD
USD
USD
USD
USD
USD
USD
Adrian A. Gostuski
377,283
-
144,336
113,263
-
-
-
634,882
82% - 18%
Simon Lay
*
491,830
- 82,466
**
120,189
- - 88,404 782,889
85% - 15%
‘ * ‘ This amount includes USD32,411 awarded to Simon Lay as a long term service award.
‘ ** ‘ This amount corresponds to EUR100,000 as awarded by the NRC. This amount is converted to GBP, the currency in which the Director receives
his remuneration and thereafter converted to the reporting currency (USD).
The remuneration of the Non-Executive Directors is the same as reported in the tabulation above and comprises fees only, except for the case of
the Chairman of the Board of Directors whose total emoluments for the 2021 comprise USD100,000 in fees and USD1,032 in fringe benefits.
The variable remuneration awarded to the Executives during the reporting year (performance bonus in respect of financial year 2020) reflects their
overall performance. In determining the variable remuneration of both the former GCEO and the current Deputy CEO, their performance was
assessed by the NRC against specific goals related to financials as well as other criteria namely, service/client delivery, risk and control, leadership
and people management, market position and project and initiatives. On the basis of this assessment, the NRC approved an award of 100% of the
maximum awardable performance bonus to both the GCEO and the Deputy CEO. This in view of the GCEO’s extraordinary efforts to strategically
redirect the Group towards a more sustainable business model and Deputy CEO’s material contribution in ensuring that LFC remains a profit-
making entity for the Group also in 2020.
The Group did not reward any of its Directors with any share-based remuneration. Likewise, there was no need to reclaim any variable
remuneration, neither in the form of malus nor in the form of clawback.
Denotes membership of:
FIMBank Board of Directors (BoD)
Board Audit Committee (BAC)
Board Credit Committee (BCC)
Board Review and Implementation Committee (BRIC)
Board Risk Committee (BRC)
Corporate Governance Committee (CGC)
Nomination and Remuneration Committee (NRC)
Asset Liabilities Committee (ALCO)
Management Credit Committee (MCC)
Emerging Risk and Provisioning Committee (ERPC)
IT Steering Committee (ITSC)
Operational Risk Management Committee (ORMC)
In accordance with Capital Markets Rule 12.26N, the External Auditors have checked that all information, as required in terms of Appendix 12.1 of
Chapter 12 of the Capital Markets Rules, has been included in the Directors’ Remuneration Report within this Remuneration Report.
FIMBank Group Annual Report & Financial Statements 2021
28
Statements of financial position
As at 31 December 2021
Group
Bank
2021
2020
2021
2020
Note
USD
USD
USD
USD
Assets
Balances with the Central Bank of Malta,
treasury bills and cash
18
239,982,048
319,267,749
Derivative assets held for risk management
19
841,688
1,019,288
Trading assets
20
-
-
Loans and advances to banks
21
182,458,548
179,364,067
Loans and advances to customers
22
745,564,139
779,834,360
Financial assets at fair value through
profit or loss
23
19,966,163
20,385,323
Financial assets at fair value through
other comprehensive income
24
162,408,542
153,327,686
Investments at amortised cost
25
9,914,754
9,839,457
Investments in subsidiaries
26
159,448,858
147,436,214
Property and equipment
27
1,965,249
3,507,509
Investment property
28
-
-
Intangible assets and goodwill
29
3,774,315
4,008,725
Current tax assets
66,667
76,225
Deferred tax assets
30
16,336,538
15,590,955
Other assets
31
3,848,321
5,570,562
Total assets
1,546,575,830
1,639,228,120
Liabilities and equity
Liabilities
Derivative liabilities held for risk management
19
1,533,556
1,629,434
Amounts owed to banks
32
497,633,356
387,900,641
Amounts owed to customers
33
838,675,598
1,037,118,337
Debt securities in issue
34
-
-
Current tax liabilities
-
-
Deferred tax liabilities
30
-
-
Provision for liabilities and charges
35
201,775
173,051
Other liabilities
36
7,921,481
7,645,488
Total liabilities
1,345,965,766
1,434,466,951
Equity
Share capital
37
261,221,882
261,221,882
Share premium
37
858,885
858,885
Reserve for general banking risks
37
2,218,995
3,358,738
Currency translation reserve
37
(10,941,184 )
(10,011,229 )
-
-
Fair value reserve
37
(1,074,305)
2,413,581
Other reserve
37
2,681,041
2,681,041
Accumulated losses
37
(42,869,373 )
(39,027,680 )
(65,296,434)
(65,772,958)
Total equity attributable to equity holders of the Bank
200,610,064
204,761,169
Non-controlling interests
38
-
-
Total equity
200,610,064
204,761,169
Total liabilities and equity
1,546,575,830
1,639,228,120
FIMBank Group Annual Report & Financial Statements 2021
29
Statements of financial position
As at 31 December 2021
Group
Bank
2021
2020
2021
2020
Note
USD
USD
USD
USD
Memorandum items
Contingent liabilities
39
39,327,362
44,246,902
Commitments
40
107,469,111
105,245,766
The official middle rate of exchange issued by the European Central Bank between US Dollar and Euro as at 31 December 2021 was 1.1326 (2020:
1.2271).
The Notes on pages 38 to 152 are an integral part of these Financial Statements.
The Financial Statements on pages 28 to 152 were approved and authorised for issue by the Board of Directors on 13 April 2022.
Signed by John C. Grech (Chairman) and Masaud M.J. Hayat (Vice Chairman) on 13 April 2022
FIMBank Group Annual Report & Financial Statements 2021
30
Statements of profit or loss
For the year ended 31 December 2021
Group
Bank
2021
2020
2021
2020
Note
USD
USD
USD
USD
Interest income
9
19,588,232
22,721,724
Interest expense
9
(12,603,475 )
(13,567,776 )
(10,457,006)
(11,482,001)
Net interest income
9
9,131,226
11,239,723
Fee and commission income
10
4,940,843
5,366,867
Fee and commission expense
10
(5,061,985 )
(5,287,088 )
(2,165,538)
(2,552,278)
Net fee and commission income
10
2,775,305
2,814,589
Net trading results
11
(121,164 )
(594,353)
(831,244)
Net gain from other financial instruments carried
at fair value
12
1,137,221
277,137
Dividend income
13
16,989,049
7,240,817
Losses on lease modifications
(27,037)
-
Other operating income
14
133,940
120,725
Other operating expenses
(128,908 )
(128,906)
-
Operating income before net impairment
29,416,445
20,861,747
Net impairment charge on financial assets
5
(1,907,796 )
(32,990,319 )
(3,699,557)
(34,272,400)
Impairment of goodwill
(2,687,000 )
-
-
Impairment of investments in subsidiaries
(87,356)
(9,314,000)
Operating income/(expense)
25,629,532
(22,724,653)
Administrative expenses
15
(37,085,595 )
(35,610,076 )
(23,213,366)
(23,722,803)
Depreciation and amortisation
27/29
(3,334,779 )
(3,426,029 )
(2,965,967)
(2,962,370)
Total operating expenses
(40,420,374 )
(39,036,105 )
(26,179,333)
(26,685,173)
Loss before tax
(1,292,934 )
(35,809,93 4 )
(549,801)
(49,409,826)
Taxation
16
(2,319,589 )
(11,222,821 )
(113,418)
(6,566,776)
Loss for the year
(3,612,523 )
(47,032,755 )
(663,219)
(55,976,602)
Loss attributable to:
Owners of the Bank
(3,840,703 )
(46,898,575 )
(663,219)
(55,976,602)
Non-controlling interests
38
(134,180 )
-
-
(3,612,523 )
(47,032,755 )
(663,219)
(55,976,602)
Earnings per share
Basic loss per share (US cents)
17
(0.74 )
(8.98 )
(0.13)
(10.71)
The Notes on pages 38 to 152 are an integral part of these Financial Statements.
FIMBank Group Annual Report & Financial Statements 2021
31
Statements of other comprehensive income
For the year ended 31 December 2021
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Loss for the year
(3,612,523 )
(47,032,755 )
(663,219)
(55,976,602)
Other comprehensive expense:
Items that will not be reclassified to profit or loss:
Movement in fair value reserve:
– Property and equipment - net change in fair value
(399,566 )
-
-
(399,566 )
-
-
Items that are or may be reclassified subsequently to
profit or loss:
Movement in translation reserve:
– Foreign operations - foreign currency translation differences
(1,677,971 )
(2,878,066 )
-
-
Movement in fair value reserve:
– Debt investments in fair value through other comprehensive
income - net change in fair value
(3,484,283 )
(3,484,283)
3,784,630
– Debt investments in fair value through other comprehensive
income - reclassified to profit or loss
(749,186 )
(1,308,075 )
(749,186)
(1,308,075)
Related tax
(420,207 )
745,583
(420,207)
(5,165,857 )
(821,718 )
(3,487,886)
2,056,348
Other comprehensive (expense)/income, net of tax
(5,565,42 3 )
(821,718 )
(3,487,886)
2,056,348
Total comprehensive expense
(9,177,946 )
(47,854,473 )
(4,151,105)
(53,920,254)
Total comprehensive expense attributable to:
Owners of the Bank
(9,399,277 )
(47,767,412 )
(4,151,105)
(53,920,254)
Non-controlling interests
(87,061 )
-
-
(9,177,946 )
(47,854,473 )
(4,151,105)
(53,920,254)
FIMBank Group Annual Report & Financial Statements 2021
32
Statements of changes in equity
For the year ended 31 December 2021
Group
Attributable to equity holders of the Bank
Share
capital
Share
premium
Reserve for
general
banking risks
Currency
translation
reserve
Fair value
reserve
Other
reserve
Accumulated
loss
Total
Non-
controlling
interests
Total
equity
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
Balance at 1 January 2021
(10,011,229 )
(39,027,680 )
Total comprehensive expense
Loss for the year
(3,840,703 )
(3,840,703 )
(3,612,523 )
Other comprehensive expense:
Fair value reserve:
–
Debt investments at fair value through other
comprehensive income - net change
in fair value
(2,738,700 )
(2,738,700 )
(2,738,700 )
– Debt investments at fair value through other
comprehensive income - reclassified
to profit or loss
(749,186 )
(749,186 )
(749,186 )
– Property and equipment - net change in fair value
(399,566 )
(399,566 )
(399,566 )
Translation reserve:
– Foreign operations - foreign translation difference
(1,671,122 )
(1,671,122 )
(6,849 )
(1,677,971 )
Total other comprehensive expense
(1,671,122 )
(3,487,886 )
(399,566 )
(5,558,574 )
(6,849 )
(5,565,423 )
Total comprehensive expense
(1,671,122 )
(3,487,886 )
(4,240,269 )
(9,399,277 )
(9,177,946 )
Transfer between reserves
(1,139,743 )
Balance at 31 December 2021
(10,941,184 )
(42,869,373 )
FIMBank Group Annual Report & Financial Statements 2021
33
Statements of changes in equity
For the year ended 31 December 2020
Group
Attributable to equity holders of the Bank
Share
capital
Share
premium
Reserve for
general
banking risks
Currency
translation
reserve
Fair value
reserve
Other
reserve
Retained
earnings/
(Accumulated
loss) Total
Non-
controlling
interests
Total
equity
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
Balance at 1 January 2020
(7,086,044 )
(1,471,364 )
Total comprehensive expense
Loss for the year
(46,898,575 )
(46,898,575 )
(134,180 )
(47,032,755 )
Other comprehensive expense:
Fair value reserve:
– Debt investments at fair value through other
comprehensive income - net change
in fair value
– Debt investments at fair value through other
comprehensive income - reclassified
to profit or loss
(1,308,075 )
(1,308,075 )
(1,308,075 )
Translation reserve:
– Foreign operations - foreign translation difference
(2,925,185 )
(2,925,185 )
(2,878,066 )
Total other comprehensive expense
(2,925,185 )
(868,837 )
(821,718 )
Total comprehensive expense
(2,925,185 )
(46,898,575 )
(47,767,412 )
(87,061 )
(47,854,473 )
Transfer between reserves
(3,066,721 )
(1,965,897 )
Balance at 31 December 2020
(10,011,229 )
(39,027,680 )
FIMBank Group Annual Report & Financial Statements 2021
34
Statements of changes in equity
For the year ended 31 December 2021
Bank
Share
capital
Share
premium
Reserve for
general
banking risks
Fair value
reserve
Other
reserve
Accumulated
losses
Total
equity
USD
USD
USD
USD
USD
USD
USD
Balance at 1 January 2021
261,221,882
858,885
3,358,738
2,413,581
2,681,041
(65,772,958)
204,761,169
Total comprehensive expense
Loss for the year
-
-
-
-
-
(663,219)
(663,219)
Other comprehensive expense:
Fair value reserve:
– Debt investments at fair value through other comprehensive income - net change in fair value
-
-
-
(2,738,700)
-
-
(2,738,700)
– Debt investments at fair value through other comprehensive income - reclassified to profit or loss
-
-
-
(749,186)
-
-
(749,186)
Total other comprehensive expense
-
-
-
(3,487,886)
-
-
(3,487,886)
Total comprehensive expense
-
-
-
(3,487,886)
-
(663,219)
(4,151,105)
Transfer between reserves
-
-
(1,139,743)
-
-
1,139,743
-
Balance at 31 December 2021
261,221,882
858,885
2,218,995
(1,074,305)
2,681,041
(65,296,434)
200,610,064
FIMBank Group Annual Report & Financial Statements 2021
35
Statements of changes in equity
For the year ended 31 December 2020
Bank
Share
capital
Share
premium
Reserve for
general
banking risks
Fair value
reserve
Other
reserve
Accumulated
losses
Total
equity
USD
USD
USD
USD
USD
USD
USD
Balance at 1 January 2020
261,221,882
858,885
2,323,486
357,233
2,681,041
(8,761,104)
258,681,423
Total comprehensive expense
Loss for the year
-
-
-
-
-
(55,976,602)
(55,976,602)
Other comprehensive income:
Fair value reserve:
– Debt investments at fair value through other comprehensive income - net change in fair value
-
-
-
3,364,423
-
-
3,364,423
– Debt investments at fair value through other comprehensive income - reclassified to profit or loss
-
-
-
(1,308,075)
-
-
(1,308,075)
Total other comprehensive income
-
-
-
2,056,348
-
-
2,056,348
Total comprehensive expense
-
-
-
2,056,348
-
(55,976,602)
(53,920,254)
Transfer between reserves
-
-
1,035,252
-
-
(1,035,252)
-
Balance at 31 December 2020
261,221,882
858,885
3,358,738
2,413,581
2,681,041
(65,772,958)
204,761,169
FIMBank Group Annual Report & Financial Statements 2021
36
Statements of cash flows
For the year ended 31 December 2021
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Cash flows from operating activities
Interest and commission receipts
28,973,357
25,609,316
Exchange received/(paid)
(12,300,696 )
9,317,492
(11,405,644)
Interest and commission payments
(12,647,022 )
(37,471,828 )
(13,639,330)
(13,793,109)
Payments to employees and suppliers
(34,541,419 )
(36,713,674 )
(21,384,875)
(27,271,356)
Operating profit /(loss) before changes in operating
assets/liabilities 17,264,441 (18,613,92 2 ) 3,266,644 (26,860,793)
Decrease/(Increase) in operating assets:
– Trading assets
-
-
– Loans and advances to customers and banks
(49,314,586 )
(117,922,078 )
9,902,960
(132,591,160)
– Other assets
1,878,571
4,068,416
(Decrease)/Increase in operating liabilities:
– Amounts owed to customers and banks
(102,639,099 )
(114,492,171)
216,340,869
– Other liabilities
(40,600 )
(2,133,345 )
(31,993)
(1,965,939)
– Net advances from subsidiary companies
(19,141,340)
3,250,217
Net cash (absorbed by)/generated from operating activities
before income tax
(121,280,101 )
(118,617,329)
62,241,610
Income tax paid
(409,062 )
(829,093 )
(115,683)
(393,419)
Net cash flows (used in)/from operating activities
(121,689,1 63 )
(118,733,012)
61,848,191
Cash flows from investing activities
Proceeds to acquire financial assets at fair value
through other comprehensive income
(74,874,050 )
(109,616,706 )
(74,874,050)
(109,616,706)
Payments to acquire shares in subsidiary companies
-
(1,801,829)
Payments to acquire property and equipment
(518,656 )
(477,381 )
(399,511)
(142,744)
Payments to acquire intangible assets
(779,861 )
(393,096 )
(779,881)
(393,096)
Proceeds on disposal of financial assets at fair value
through profit or loss
160,770
105,639,259
Proceeds on disposal of financial assets at fair value
through other comprehensive income 50,918,619 49,246,582 50,918,619 49,246,582
Proceeds on disposal of property and equipment
9,751
-
Receipt of dividend
4,889,049
240,817
Net cash flows (used in)/from investing activities
(23,994,238 )
(20,075,253)
43,172,283
(Decrease)/Increase in cash and cash equivalents c/f
(145,683,401 )
(138,808,265)
105,020,474
FIMBank Group Annual Report & Financial Statements 2021
37
Statements of cash flows
For the year ended 31 December 2021
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
(Decrease)/Increase in cash and cash equivalents b/f
(145,683,401 )
(138,808,265)
105,020,474
Cash flows from financing activities
– Net movement in debt securities
(5,490,217 )
(28,492,240 )
-
-
– Payment of lease liabilities
(1,139,127 )
(967,167 )
(1,787,096)
(997,729)
Net cash flows used in financing activities
(6,629,344 )
(29,459,40 7 )
(1,787,096)
(997,729)
(Decrease)/Increase in cash and cash equivalents
(152,312,745 )
(140,595,361)
104,022,745
Analysed as follows:
– Effect of exchange rate changes on cash and cash equivalents
(24,586,990 )
(26,036,980)
29,536,105
– Net (decrease)/increase in cash and cash equivalents
(127,725,75 5 )
(114,558,381)
74,486,640
(Decrease)/Increase in cash and cash equivalents
(152,312,745 )
(140,595,361)
104,022,745
Cash and cash equivalents at beginning of year
267,909,686
163,886,941
Cash and cash equivalents at end of year
127,314,325
267,909,686
FIMBank Group Annual Report & Financial Statements 2021
38
Notes to the financial statements
For the year ended 31 December 2021
1
Reporting entity
24
Financial assets at fair value through
2
Basis of preparation
other comprehensive income
3
Significant accounting policies
25
Investments at amortised cost
4
Changes in accounting policies
26
Investments in subsidiaries
5
Financial risk review
27
Property and equipment
6
Fair values of financial instruments
28
Investment property
7
Classification of financial assets and liabilities
29
Intangible assets and goodwill
8
Operating segments
30
Deferred taxation
9
Net interest income
31
Other assets
10
Net fee and commission income
32
Amounts owed to banks
11
Net trading results
33
Amounts owed to customers
12
Net gain from other financial instruments
34
Debt securities in issue
carried at fair value
35
Provision for liabilities and charges
13
Dividend income
36
Other liabilities
14
Other operating income
37
Equity
15
Administrative expenses
38
Non-controlling interest
16
Taxation
39
Contingent liabilities
17
Earnings per share
40
Commitments
18
Balances with the Central Bank of Malta,
41
Cash and cash equivalents
treasury bills and cash
42
Leases
19
Derivatives held for risk management
43
Related parties
20
Trading assets
44
Capital commitments
21
Loans and advances to banks
45
Financial commitments
22
Loans and advances to customers
46
Subsequent events
23
Financial assets at fair value through profit or loss
47
Ultimate parent company
FIMBank Group Annual Report & Financial Statements 2021
39
Notes to the financial statements
For the year ended 31 December 2021
Reporting entity
and for the year ended 31 December 2021 comprise the Bank and its subsidiaries (together referred to as the “Group” and individually
as “Group entities”).
Basis of preparation
The Financial Statements have been prepared and presented in accordance with International Financial Reporting Standards as
adopted by the EU. All references in these Financial Statements to IAS, IFRS or SIC/IFRIC interpretations refer to those adopted by the
EU.
Article 4 of Regulation 1606/2002/EC requires that, companies governed by the law of an EU Member State shall prepare their
consolidated financial statements in conformity with IFRS as adopted by the EU if, at their reporting date, their securities are admitted
to trading on a regulated market of any EU Member State. This Regulation prevails over the provisions of the Companies Act, 1995,
(Chapter 386, Laws of Malta) to the extent that the said provisions of the Companies Act, 1995, (Chapter 386, Laws of Malta) are
incompatible with the provisions of the Regulation.
These Financial Statements have also been drawn up in accordance with the provisions of the Banking Act, 1994 (Chapter 371, Laws of
Malta) and the Companies Act, 1995 (Chapter 386, Laws of Malta).
On 11 March 2020, the World Health Organisation declared that the novel Coronavirus (“COVID-19”) could be characterized as a
pandemic. The impact of the outbreak was widespread across the globe and has distressed many countries including those markets
where the Group operates. The circumstances have forced Governments to implement severe measures and restrictions, including
partial or full lockdowns, restrictions on business activities, public gatherings, public spaces, travel, transportation, schools, retail
stores, and various other activities. Businesses were forced to close or restrict their activities including restricted access to offices,
outlets, warehouses and production plants. The pandemic, as well as these restrictive measures, have created a significant amount of
uncertainty and disruption in economic activity and had an impact across all industries.
The Group ensured that all stakeholders, particularly its customers and employees were supported in more ways than one. As expected,
the pandemic and its effects on the global economy had a significant impact on the banking industry, client services, asset valuations,
expected credit losses and revenues to name a few. The Group has taken necessary measures to maintain a strong balance sheet and
liquidity buffers whilst also recognising any deterioration of asset value where appropriate.
Although the financial performance has been significantly impacted by the pandemic and although there is still a high degree of
uncertainty and risk associated with the pandemic and the global economic forecasts, the Board of Directors confirm that, at the time
of approving these Financial Statements, the Group is capable of continuing to operate as a going concern for the foreseeable future.
In preparing these Financial Statements, consideration has also been given to the Public Statement ESMA 32-63-1186, issued by the
European Securities and Markets Authority on 29 October 2021, which promotes transparency and consistent application of European
requirements for information provided in the annual financial reports of listed companies under the current circumstances related to
the COVID-19 pandemic.
The Financial Statements were authorised for issue by the Board of Directors on 13 April 2022.
FIMBank Group Annual Report & Financial Statements 2021
40
The Financial Statements have been prepared on the historical cost basis except for the following which are measured at fair value:
derivatives held for risk management;
trading assets;
financial assets at fair value through profit or loss;
financial assets at fair value through other comprehensive income;
freehold land and premises and improvement to premises; and
investment property.
These Financial Statements are presented in United States Dollars (“USD”), which is the Bank’s functional currency.
In preparing these consolidated financial statements, management has made judgements, estimates and assumptions that affect the
application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may
differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.
In preparing these Financial Statements, the significant judgments made by management in applying the Group’s Accounting Policies
and the key sources of estimation uncertainty were impacted by the volatility resulting from the COVID-19 pandemic. Such impact on
specific areas of significant judgement is separately disclosed in Notes 5, 26, 27, 28, 29 and 30 of these Financial Statements.
Information about judgements made in applying Accounting Policies that have the most significant effects on the amounts recognised
in the Financial Statements is included in the following notes:
Accounting Policy 3.10.2 – classification of financial assets: assessment of the business model within which the assets are held and
assessment of whether the contractual terms of the financial asset are Solely Payments of Principle and Interest (“SPPI”) on the
principal amount outstanding; and
Note 5.2.1.3 – establishing the criteria for determining whether credit risk on the financial asset has increased significantly since
initial recognition, determining methodology for incorporating forward-looking information into measurement of the Expected
Credit Losses (“ECL”) and selection and approval of models used to measure ECL.
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year
ending 31 December 2021 is set out below in relation to the impairment of financial instruments and in the following Notes in relation
to other areas:
Accounting Policy 3.10.8 – impairment of financial instruments: key assumptions used in estimating recoverable cash flows;
Note 2.4.2.1 – determination of the fair value of financial instruments with significant unobservable inputs;
Note 5 – impairment of financial instruments: determining inputs into the ECL measurement model, including incorporation of
forward-looking information;
Note 29.2 – impairment testing for CGUs containing goodwill: key assumptions underlying recoverable amounts; and
Note 30 – recognition of deferred tax assets: availability of future taxable profit against which carry-forward tax losses can be used.
FIMBank Group Annual Report & Financial Statements 2021
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A number of the Group’s Accounting Policies and disclosures require the measurement of fair values, for both financial and non-
financial assets and liabilities.
The Group has an established control framework with respect to the measurement of fair values. This framework includes reports to
the Group’s Chief Financial Officer and Executive Management having overall responsibility for overseeing all significant fair value
measurements, including Level 3 fair values. Market risk and related exposure to fair value movement is also a key function of the
Group’s Assets Liabilities Committee and all valuations of financial instruments are reported to the Committee for review and approval.
Significant valuation issues are reported to the Group’s Board Audit Committee.
The Group measures fair values of an asset or liability using the following fair value hierarchy that reflects the significance of the inputs
used in making the measurements:
Level 1: inputs that are quoted market prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly (i.e. derived
from prices). This category includes assets or liabilities, valued using quoted market prices in active markets for similar instruments;
quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques in which
all significant inputs are directly or indirectly observable from market data.
Level 3: inputs that are unobservable. This category includes all assets or liabilities for which the valuation technique includes inputs
not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category also
includes assets or liabilities that are valued based on quoted prices for similar instruments for which significant unobservable
adjustments or assumptions are required to reflect differences between the instruments.
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value
measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the
entire measurement.
The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change
has occurred.
Further information about the assumptions made in measuring fair values is included in the following Notes:
Note 6 – fair values of financial instruments;
Note 27 – property and equipment; and
Note 28 – investment property.
FIMBank Group Annual Report & Financial Statements 2021
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Significant accounting policies
The Group has consistently applied the following Accounting Policies to all periods presented in these Consolidated Financial
Statements, except as mentioned otherwise (Refer to Note 4).
The Group accounts for business combinations using the acquisition method when the acquired set of activities and assets meets the
definition of a business and control is transferred to the Group.
In determining whether a particular set of activities and assets is a business, the Group assesses whether the set of assets and activities
acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability to produce outputs.
The Group has an option to apply a ‘concentration test’ that permits a simplified assessment of whether an acquired set of activities
and assets is not a business. The optional concentration test is met if substantially all of the fair value of the gross assets acquired is
concentrated in a single identifiable asset or group of similar identifiable assets. The consideration transferred in the acquisition is
generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment.
Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related
to the issue of debt or equity securities. The consideration transferred does not include amounts related to the settlement of pre-
existing relationships. Such amounts are generally recognised in profit or loss.
Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that
meets the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within
equity. Otherwise, other contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair
value of the contingent consideration are recognised in profit or loss.
If share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree’s employees
(acquiree’s awards), then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration
transferred in the business combination. This determination is based on the market-based measure of the replacement awards
compared with the market-based measure of the acquiree’s awards and the extent to which the replacement awards relate to pre-
combination service.
Subsidiaries are entities controlled by the Group. The Group ‘controls’ an entity if it is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those returns through its power over the entity. The Group reassesses
whether it has control if there are changes to one or more of the elements of control. This includes circumstances in which protective
rights held (e.g. those resulting from a lending relationship) become substantive and lead to the Group having power over an investee.
The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control
commences until the date on which control ceases.
Equity-accounted investees are those entities in which the Group has significant influence, but not control or joint control, over the
financial and operating policies.
A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net assets of the
arrangement, rather than rights to its assets and obligations for its liabilities.
Interests in equity-accounted investees and joint ventures are accounted for using the equity method. They are initially recognised at
cost, which includes transaction costs. Subsequent to initial recognition, the Consolidated Financial Statements include the Group’s
share of the profit or loss and OCI of equity-accounted investees, until the date on which significant influence or joint control ceases.
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Non-controlling interests are measured initially at their proportionate share of the acquiree’s identifiable net assets at the date of
acquisition. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.
A discontinued operation is a component of the Group’s business, the operations and cash flows of which can be clearly distinguished
from the rest of the Group and which:
1. represents a separate major line of business or geographic areas of operations;
2. is part of a single co-ordinated plan to dispose of a separate major line of business or geographic area of operations; or
3. is a subsidiary acquired exclusively with a view to re-sell.
Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be classified as
held-for-sale.
When an operation is classified as a discontinued operation, the comparative Statement of Profit or Loss and OCI is re-presented as if
the operation had been discontinued from the start of the comparative year.
Intra-group balances and transactions, and any unrealised income and expenses (except for foreign currency transaction gains or losses)
arising from intra-group transactions, are eliminated. Unrealised losses are eliminated in the same way as unrealised gains, but only to
the extent that there is no evidence of impairment.
When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related NCI and other
components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured
at fair value when control is lost.
Transactions in foreign currencies are translated into the respective functional currency of the operation at the spot exchange rate at
the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at
the spot exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in
the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised
cost in foreign currency translated at the spot exchange rate at the end of the year.
Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at
the spot exchange rate at the date on which the fair value is determined. Non-monetary items that are measured based on historical
cost in a foreign currency are translated using the spot exchange rate at the date of the transaction.
Foreign currency differences arising on translation are generally recognised in profit or loss. However, foreign currency differences
arising from the translation of the following items are recognised in OCI:
equity investments in respect of which an election has been made to present subsequent changes in fair value in OCI;
a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective (see
Accounting Policy 3.13.1); and
qualifying cash flow hedges to the extent that the hedge is effective.
FIMBank Group Annual Report & Financial Statements 2021
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The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into
US Dollar at spot exchange rates at the reporting date. The income and expenses of foreign operations are translated into US Dollar at
spot exchange rates at the dates of the transactions.
Foreign currency differences are recognised in other comprehensive income, and accumulated in the foreign currency translation
reserve, except to the extent that the translation difference is allocated to non-controlling interest.
When a foreign operation is disposed of such that control is lost, the cumulative amount in the currency translation reserve is transferred
to profit or loss as part of the gain or loss on disposal. On the partial disposal of a subsidiary that includes a foreign operation whilst
retaining control then the relevant proportion of the cumulative amount is re-attributed to non-controlling interest.
Interest income and expense are recognised in profit or loss using the effective interest method. The effective interest rate is the rate
that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to:
the gross carrying amount of the financial asset; or
the amortised cost of the financial liability.
When calculating the effective interest rate for financial instruments other than purchased or originated credit-impaired assets, the
Group estimates future cash flows considering all contractual terms of the financial instrument, but not ECL. For purchased or
originated credit impaired financial assets, a credit-adjusted effective interest rate is calculated using estimated future cash flows
including ECL.
The calculation of the effective interest rate includes transaction costs and fees and points paid or received that are an integral part of
the effective interest rate. Transaction costs include incremental costs that are directly attributable to the acquisition or issue of a
financial asset or financial liability.
The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured on
initial recognition minus the principal repayments, plus or minus the cumulative amortisation using the effective interest method of
any difference between that initial amount and the maturity amount and, for financial assets, adjusted for any expected credit loss
allowance.
The gross carrying amount of a financial asset is the amortised cost of a financial asset before adjusting for any expected credit loss
allowance.
The effective interest rate of a financial asset or financial liability is calculated on initial recognition of a financial asset or a financial
liability. In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when
the asset is not credit impaired) or to the amortised cost of the liability. The effective interest rate is revised as a result of periodic re-
estimation of cash flows of floating rate instruments to reflect movements in market rates of interest. The effective interest rate is also
revised for fair value hedge adjustments at the date amortisation of the hedge adjustment begins.
However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by
applying the effective interest rate to the amortised cost of the financial asset. If the asset is no longer credit-impaired, then the
calculation of interest income reverts to the gross basis.
For financial assets that were credit-impaired on initial recognition, interest income is calculated by applying the credit-adjusted
effective interest rate to the amortised cost of the asset. The calculation of interest income does not revert to a gross basis, even if the
credit risk of the asset improves.
For information on when financial assets are credit-impaired see Accounting Policy 3.10.8.
FIMBank Group Annual Report & Financial Statements 2021
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Interest income calculated using the effective interest method presented in the Statement of Profit or Loss and OCI includes:
interest on financial assets and financial liabilities measured at amortised cost;
interest on debt instruments measured at fair value through other comprehensive income;
negative interest on financial liabilities measured at amortised cost; and
interest income on other financial assets at fair value through profit or loss.
Interest expense presented in the Statement of Profit or Loss and OCI includes:
financial liabilities measured at amortised cost;
negative interest on financial assets measured at amortised cost;
interest expense on lease liabilities; and
interest expense on other financial liabilities at fair value through profit or loss.
Cash flows related to capitalised interest are presented in the Statement of Cash Flows consistently with interest cash flows that are
not capitalised.
Fees and commission income and expense that are integral to the effective interest rate on a financial asset or liability are included in
the measurement of the effective interest rate.
If a loan commitment is not expected to result in the draw-down of a loan, then the related loan commitment fee is recognised on a
straight-line basis over the commitment period.
Other fees and commission income, including account servicing fees, sales commission, placement fees and syndication fees, are
recognised as the related services are performed.
Other fees and commission expense relate mainly to transaction and service fees, which are expensed as the services are received.
Net trading results comprises gains less losses related to trading assets and liabilities and net trading gains or losses on derivatives held
for risk management purposes and includes all realised and unrealised fair value changes and foreign exchange differences.
Net gain or loss from other financial instruments at fair value through profit or loss relates to non-trading derivatives held for risk
management purposes that do not form part of qualifying hedging relationships, financial assets and financial liabilities designated as
at fair value through profit or loss and also non-trading assets mandatorily measured at fair value through profit or loss.
Dividend income is recognised when the right to receive income is established. Usually this is the ex-dividend date for equity securities.
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
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At commencement or on modification of a contract that contains a lease component, the Group allocates consideration in the contract
to each lease component on the basis of its relative standalone price. However, for leases of office premises the Group has elected not
to separate non-lease components and accounts for the lease and non-lease components as a single lease component.
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially
measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove any improvements made
to office premises.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease
term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements
of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing
rate. Generally, the Group uses its incremental borrowing rate as the discount rate.
The Group determines its incremental borrowing rate by analysing its borrowings from various external sources and makes certain
adjustments to reflect the terms of the lease and type of asset leased.
Lease payments included in the measurement of the lease liability comprise the following:
fixed payments, including in-substance fixed payments;
variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
amounts expected to be payable under a residual value guarantee; and
the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal
period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the
Group is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future
lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be
payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or
termination option or if there is a revised in-substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset
or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The Group presents right-of-use assets in ‘property and equipment’ and lease liabilities in ‘other liabilities’ in the Statement of Financial
Position.
The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term leases. The
Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
At inception or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to
each lease component on the basis of their relative stand-alone selling prices.
When the Group acts as a lessor, it determines at lease inception whether the lease is a finance lease or an operating lease.
To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards
incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease.
As part of this assessment, the Group considers certain indicators such as whether the lease is for the major part of the economic life
of the asset.
FIMBank Group Annual Report & Financial Statements 2021
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The Group applies the derecognition and impairment requirements in IFRS 9 to the net investment in the lease (see Accounting Policies
3.10.3 and 3.10.8). The Group further regularly views estimated unguaranteed residual values used in calculating the gross investment
in the lease.
Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to a business
combination, or items recognised directly in equity or in OCI.
The Group has determined that interest and penalties related to income taxes, including uncertain tax treatments, do not meet the
definition of income taxes, and therefore has accounted for them under IAS 37 Provisions, Contingent Liabilities and Contingent Assets
and has recognised the related expenses in ‘other expenses’.
Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax
payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax
amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted
or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends.
Current tax assets and liabilities are offset only if certain criteria are met.
Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognised for:
temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that
affects neither accounting nor taxable profit or loss;
temporary differences related to investments in subsidiaries to the extent that the Group is able to control the timing of the reversal
of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it
is probable that future taxable profits will be available against which they can be used. Future taxable profits are determined based on
the reversal of relevant taxable temporary differences. If the amount of taxable temporary differences is insufficient to recognise a
deferred tax asset in full, then future taxable profits, adjusted for reversals of existing temporary differences, are considered, based on
business plans for individual subsidiaries in the Group. Deferred tax assets are reviewed at each reporting date and are reduced to the
extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of
future taxable profits improves.
Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that
future taxable profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates
enacted or substantively enacted at the reporting date, and reflects uncertainty related to income taxes, if there is any.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the
reporting date, to recover or settle the carrying amount of its assets and liabilities. For this purpose, the carrying amount of investment
property measured at fair value is presumed to be recovered through sale, and the Group has not rebutted this presumption.
Deferred tax assets and liabilities are offset only if certain criteria are met.
FIMBank Group Annual Report & Financial Statements 2021
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The Group initially recognises loans and advances, deposits, debt securities issued and subordinated liabilities on the date on which
they are originated. All other financial instruments (including regular-way purchases and sales of financial assets) are recognised on the
trade date, which is the date on which the Group becomes a party to the contractual provisions of the instrument.
A financial asset or financial liability is measured initially at fair value plus, for an item not at fair value through profit or loss, transaction
costs that are directly attributable to its acquisition or issue. The fair value of a financial instrument at initial recognition is generally its
transaction price.
On initial recognition, a financial asset is classified as measured at: amortised cost, fair value through other comprehensive income
(debt or equity) or fair value through profit or loss.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated at fair value through
profit or loss:
the asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and
the contractual terms of the financial asset give rise on specified dates to cash flows that are SPPI.
A debt instrument is measured at fair value through other comprehensive income only if it meets both of the following conditions and
is not designated as fair value through profit or loss:
the asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial
assets; and
the contractual terms of the financial asset give rise on specified dates to cash flows that are SPPI.
On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent
changes in fair value in OCI (see Accounting Policy 3.15). This election is made on an investment-by-investment basis.
All other financial assets are classified as measured at fair value through profit or loss.
In addition, on initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be
measured at amortised cost or at fair value through other comprehensive income at fair value through profit or loss, if doing so
eliminates or significantly reduces an accounting mismatch that would otherwise arise (see Accounting Policy 3.10.9).
The Group makes an assessment of the objective of a business model in which an asset is held at a portfolio level because this best
reflects the way the business is managed, and information is provided to management. The information considered includes:
the stated policies and objectives for the portfolio and the operation of those policies in practice. In particular, whether
management’s strategy focuses on earning contractual interest revenue, maintaining a particular interest rate profile, matching the
duration of the financial assets to the duration of the liabilities that are funding those assets or realising cash flows through the sale
of the assets;
how the performance of the portfolio is evaluated and reported to the Group’s management;
the risks that affect the performance of the business model (and the financial assets held within that business model) and its strategy
for how those risks are managed;
how managers of the business are compensated (e.g. whether compensation is based on the fair value of the assets managed or the
contractual cash flows collected); and
the frequency, volume and timing of sales in prior periods, the reasons for such sales and its expectations about future sales activity.
However, information about sales activity is not considered in isolation, but as part of an overall assessment of how the Group’s
stated objective for managing the financial assets is achieved and how cash flows are realised.
Financial assets that are held for trading or managed and whose performance is evaluated on a fair value basis are measured at fair value
through profit or loss because they are neither held to collect contractual cash flows nor held both to collect contractual cash flows and
to sell financial assets.
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For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined
as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular
period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as profit margin.
In assessing whether the contractual cash flows are SPPI, the Group considers the contractual terms of the instrument. This includes
assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows
such that it would not meet this condition. In making the assessment, the Group considers:
contingent events that would change the amount and timing of cash flows;
leverage features;
prepayment and extension terms;
terms that limit the Group’s claim to cash flows from specified assets (e.g. non-recourse loans); and
features that modify consideration of the time value of money (e.g. periodical reset of interest rates).
The Group holds a portfolio of long-term fixed-rate loans for which the Group has the option to propose to revise the interest rate at
periodic reset dates. These reset rights are limited to the market rate at the time of revision. The borrowers have an option to either
accept the revised rate or redeem the loan at par without penalty. The Group has determined that the contractual cash flows of these
loans are SPPI because the option varies the interest rate in a way that is consideration for the time value of money, credit risk, other
basic lending risks and costs associated with the principal amount outstanding.
Equity instruments have contractual cash flows that do not meet the SPPI criterion. Accordingly, all such financial assets are measured
at FVTPL unless the FVOCI option is selected.
In some cases, loans made by the Group that are secured by collateral of the borrower limit the Group’s claim to cash flows of the
underlying collateral (non-recourse loans). The Group applies judgment in assessing whether the non-recourse loans meet the SPPI
criterion. The Group typically considers the following information when making this judgement:
whether the contractual arrangement specifically defines the amounts and dates of the cash payments of the loan;
the fair value of the collateral relative to the amount of the secured financial asset;
the ability and willingness of the borrower to make contractual payments, notwithstanding a decline in the value of collateral;
whether the borrower is an individual or a substantive operating entity or is a special-purpose entity;
the Group’s risk of loss on the asset relative to a full-recourse loan;
the extent to which the collateral represents all or a substantial portion of the borrower’s assets; and
whether the Group will benefit from any upside from the underlying assets.
Financial assets are not reclassified subsequent to their initial recognition, except in the period after the Group changes its business
model for managing financial assets.
See Accounting Policies 3.12, 3.13, 3.14 and 3.15.
The Group classifies its financial liabilities, other than financial guarantees and loan commitments, as measured at amortised cost.
See Accounting Policies 3.12, 3.13, 3.21 and 3.23.
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The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire (see also
Accounting Policy 3.10.4), or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the
risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all
of the risks and rewards of ownership and it does not retain control of the financial asset.
On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the
portion of the asset derecognised) and the sum of (i) the consideration received (including any new asset obtained less any new liability
assumed) and (ii) any cumulative gain or loss that had been recognised in OCI is recognised in profit or loss.
Any cumulative gain/loss recognised in OCI in respect of equity investment securities designated at fair value through other
comprehensive income is not recognised in profit or loss on derecognition of such securities, as explained in Accounting Policy 3.15.
Any interest in transferred financial assets that qualify for derecognition that is created or retained by the Group is recognised as a
separate asset or liability.
The Group enters into transactions whereby it transfers assets recognised on its Statement of Financial Position but retains either all
or substantially all of the risks and rewards of the transferred assets or a portion of them. In such cases, the transferred assets are not
derecognised. Examples of such transactions are securities lending and sale-and-repurchase transactions.
When assets are sold to a third party with a concurrent total return swap on the transferred assets, the transaction is accounted for as
a secured financing transaction similar to sale-and repurchase transactions, because the Group retains all or substantially all of the risks
and rewards of ownership of such assets.
In transactions in which the Group neither retains nor transfers substantially all of the risks and rewards of ownership of a financial asset
and it retains control over the asset, the Group continues to recognise the asset to the extent of its continuing involvement, determined
by the extent to which it is exposed to changes in the value of the transferred asset.
In certain transactions, the Group retains the obligation to service the transferred financial asset for a fee. The transferred asset is
derecognised if it meets the derecognition criteria. An asset or liability is recognised for the servicing contract if the servicing fee is
more than adequate (asset) or is less than adequate (liability) for performing the servicing.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.
If the terms of a financial asset are modified, then the Group evaluates whether the cash flows of the modified asset are substantially
different. If the cash flows are substantially different, then the contractual rights to cash flows from the original financial asset are
deemed to have expired. In this case, the original financial asset is derecognised (see Accounting Policy 3.10.3) and a new financial asset
is recognised at fair value plus any eligible transaction costs. Any fees received as part of the modification are accounted for as follows:
fees that are considered in determining the fair value of the new asset and fees that represent reimbursement of eligible transaction
costs are included in the initial measurement of the asset; and
other fees are included in profit or loss as part of the gain or loss on derecognition.
If cash flows are modified when the borrower is in financial difficulties, then the objective of the modification is usually to maximise
recovery of the original contractual terms rather than to originate a new asset with substantially different terms. If the Group plans to
modify a financial asset in a way that would result in forgiveness of cash flows, then it first considers whether a portion of the asset
should be written-off before the modification takes place (see Note 5.2.1.5 for write-off policy). This approach impacts the result of the
quantitative evaluation and means that the derecognition criteria are not usually met in such cases.
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If the modification of a financial asset measured at amortised cost or fair value through other comprehensive income does not result in
derecognition of the financial asset, then the Group first recalculates the gross carrying amount of the financial asset using the original
effective interest rate of the asset and recognises the resulting adjustment as a modification gain or loss in profit or loss. For floating-
rate financial assets, the original effective interest rate used to calculate the modification gain or loss is adjusted to reflect current
market terms at the time of the modification. Any costs or fees incurred and fees received as part of the modification adjust the gross
carrying amount of the modified financial asset and are amortised over the remaining term of the modified financial asset.
If such a modification is carried out because of financial difficulties of the borrower (see Accounting Policy 3.10.8), then the gain or loss
is presented together with impairment losses. In other cases, it is presented as interest income calculated using the effective interest
rate method (see Accounting Policy 3.3).
The Group derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially
different. In this case, a new financial liability based on the modified terms is recognised at fair value. The difference between the
carrying amount of the financial liability derecognised and consideration paid is recognised in profit or loss. Consideration paid includes
non-financial assets transferred, if any, and the assumption of liabilities, including the new modified financial liability.
If the modification of a financial liability is not accounted for as derecognition, then the amortised cost of the liability is recalculated by
discounting the modified cash flows at the original effective interest rate and the resulting gain or loss is recognised in profit or loss.
For floating-rate financial liabilities, the original effective interest rate used to calculate the modification gain or loss is adjusted to
reflect current market terms at the time of the modification. Any costs and fees incurred are recognised as an adjustment to the carrying
amount of the liability and amortised over the remaining term of the modified financial liability by re-computing the effective interest
rate on the instrument.
If the basis for determining the contractual cash flows of a financial asset or financial liability measured at amortised cost changes as a
result of interest rate benchmark reform, then the Group updates the effective interest rate of the financial asset or financial liability to
reflect the change that is required by the reform. A change in the basis for determining the contractual cash flows is required by interest
rate benchmark reform if the following conditions are met:
the change is necessary as a direct consequence of the reform; and
the new basis for determining the contractual cash flows is economically equivalent to the previous basis – i.e. the basis immediately
before the change.
If changes are made to a financial asset or financial liability in addition to changes to the basis for determining the contractual cash
flows required by interest rate benchmark reform, then the Group first updates the effective interest rate of the financial asset or
financial liability to reflect the change that is required by interest rate benchmark reform. After that, the Group applies the policies on
accounting for modifications set out above to the additional changes.
Financial assets and liabilities are offset and the net amount presented in the Statement of Financial Position when, and only when, the
Group currently has a legally enforceable right to set off the recognised amounts and it intends either to settle on a net basis or to
realise the asset and settle the liability simultaneously.
Income and expenses are presented on a net basis only when permitted under IFRSs, or for gains and losses arising from a group of
similar transactions such as in the Group’s trading activity.
The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at
initial recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any
difference between the initial amount recognised and the maturity amount, minus any reduction for impairment.
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Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access
at that date. The fair value of a liability reflects its non-performance risk.
When one is available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument.
A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing
information on an ongoing basis.
If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable
inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market
participants would take into account in pricing a transaction.
The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price – i.e. the fair value of
the consideration given or received. If the Group determines that the fair value at initial recognition differs from the transaction price
and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation
technique that uses only data from observable markets, then the financial instrument is initially measured at fair value, adjusted to
defer the difference between the fair value at initial recognition and the transaction price. Subsequently, that difference is recognised
in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by
observable market data or the transaction is closed out.
If an asset or a liability measured at fair value has a bid price and an ask price, then the Group measures assets and long positions at a
bid price and liabilities and short positions at an ask price.
Portfolios of financial assets and financial liabilities that are exposed to market risk and credit risk that are managed by the Group on
the basis of the net exposure to either market or credit risk are measured on the basis of a price that would be received to sell a net long
position (or paid to transfer a net short position) for a particular risk exposure. Those portfolio-level adjustments are allocated to the
individual assets and liabilities on the basis of the relative risk adjustment of each of the individual instruments in the portfolio.
The fair value of a demand deposit is not less than the amount payable on demand, discounted from the first date on which the amount
could be required to be paid.
The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the change
has occurred.
Further details on the determination of fair values are disclosed in Note 2.4.2.1.
The Group recognises loss allowances for the ECL on the following financial instruments that are not measured at fair value through
profit or loss:
financial assets that are debt instruments;
financial guarantee contracts issued; and
loan commitments issued.
No impairment loss is recognised on equity investments.
The Group measures loss allowances at an amount equal to lifetime ECL, except for the following, for which they are measured as 12-
month ECL:
debt investment securities and loans and advances that are determined to have low credit risk at the reporting date; and
other financial instruments (other than lease receivables) on which credit risk has not increased significantly since their initial
recognition (see Note 5.2.1.8).
The Group considers a debt investment security or a loan to have low credit risk when its credit risk rating is equivalent to the globally
understood definition of ‘investment grade’.
12-month ECL are the portion of ECL that result from default events on a financial instrument that are possible within the 12-months
after the reporting date. Financial instruments for which a 12-month ECL is recognised are referred to as ‘Stage 1 financial instruments’.
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Life-time ECL are the ECL that result from all possible default events over the expected life of the financial instrument. Financial
instruments for which a life-time ECL is recognised but which are not credit-impaired are referred to as ‘Stage 2 financial instruments’.
Financial instruments allocated to Stage 2 are those that have experienced a significant increase in credit risk since initial recognition
but are not credit-impaired.
Financial instruments for which lifetime ECL are recognised and that are credit-impaired are referred to as ‘Stage 3 financial
instruments’.
ECL are a probability-weighted estimate of credit losses. They are measured as follows:
financial assets that are not credit-impaired at the reporting date: as the present value of all cash shortfalls (i.e. the difference
between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive);
financial assets that are credit-impaired at the reporting date: as the difference between the gross carrying amount and the present
value of estimated future cash flows;
undrawn loan commitments: as the present value of the difference between the contractual cash flows that are due to the Group if
the commitment is drawn down and the cash flows that the Group expects to receive; and
financial guarantee contracts: the expected payments to reimburse the holder less any amounts that the Group expects to recover.
When discounting future cash flows, the following discount rates are used:
financial assets other than purchased or originated credit-impaired (POCI) financial assets and lease receivables: the original
effective interest rate or an approximation thereof;
POCI assets: a credit-adjusted effective interest rate;
lease receivables: the discount rate used in measuring the lease receivable;
undrawn loan commitments: the effective interest rate, or an approximation thereof, that will be applied to the financial asset
resulting from the loan commitment; and
financial guarantee contracts issued: the rate that reflects the current market assessment of the time value of money and the risks
that are specific to the cash flows.
In light of the spread of COVID-19 across the globe, the Group has assessed the impact of the outbreak on the credit risk over the
expected life of its financial assets.
In measuring expected credit losses (“ECL”), the Group relies on risk and economic data and modelling techniques provided by Moody’s
Analytics – a global firm specialising in areas of credit risk analysis, economic and regulatory capital calculation, economic research and
other areas intrinsically linked to the ECL model.
The model used for this review period was based on three possible scenarios covering a wide range of possible outcomes. Each scenario
assumed different epidemiological and economic circumstances, recoveries from the COVID-19-induced recession that played out
differently in different parts of the world and different use of monetary and fiscal policies, including different levels of:
infection spread, fatality rates, hospitalisation rates, Omicron outbreak of COVID-19, vaccine efficacy;
financial market conditions, geopolitical tensions, debt sustainability, pace of domestic recovery, fiscal stimulus;
oil prices, interest rates, unemployment rates, GDP rates, global demand, supply chain disruptions, shortages and delays, surging
energy costs; and
business bankruptcies, consumer and business confidence, stock, money and bond market sentiment, tourism and business travel.
See also Note 5.2.1.8.
If the terms of a financial asset are renegotiated or modified or an existing financial asset is replaced with a new one due to financial
difficulties of the borrower, then an assessment is made of whether the financial asset should be derecognised (see Accounting Policy
3.10.3) and ECL are measured as follows:
if the expected restructuring will not result in derecognition of the existing asset, then the expected cash flows arising from the
modified financial asset are included in calculating the cash shortfalls from the existing asset (see Note 5.2.1.8); and
if the expected restructuring will result in derecognition of the existing asset, then the expected fair value of the new asset is treated
as the final cash flow from the existing financial asset at the time of its derecognition. This amount is included in calculating the cash
shortfalls from the existing financial asset that are discounted from the expected date of derecognition to the reporting date using
the original effective interest rate of the existing financial asset.
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At each reporting date, the Group assesses whether financial assets carried at amortised cost and debt financial assets carried at fair
value through other comprehensive income are credit-impaired (referred to as ‘Stage 3 financial assets’). A financial asset is ‘credit-
impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have
occurred.
Evidence that a financial asset is credit-impaired includes the following observable data:
significant financial difficulty of the borrower or issuer;
a breach of contract such as a default or past due event;
the restructuring of a loan or advance by the Group on terms that the Group would not consider otherwise;
it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or
the disappearance of an active market for a security because of financial difficulties.
A loan that has been renegotiated due to a deterioration in the borrower’s condition is usually considered to be credit-impaired unless
there is evidence that the risk of not receiving contractual cash flows has reduced significantly and there are no other indicators of
impairment. In addition, a financial asset that is overdue for 90 days or more is considered credit-impaired even when the regulatory
definition of default is different.
POCI financial assets are assets that are credit-impaired on initial recognition. For POCI assets, lifetime ECL are incorporated into the
calculation of the effective interest rate on initial recognition. Consequently, POCI assets do not carry an impairment allowance on
initial recognition. The amount recognised as a loss allowance subsequent to initial recognition is equal to the changes in lifetime ECL
since initial recognition of the asset.
Loss allowances for ECL are presented in the Statement of Financial Position as follows:
financial assets measured at amortised cost: as a deduction from the gross carrying amount of the assets;
loan commitments and financial guarantee contracts: generally, as a provision;
where a financial instrument includes both a drawn and an undrawn component, and the Group cannot identify the ECL on the loan
commitment component separately from those on the drawn component: the Group presents a combined loss allowance for both
components. The combined amount is presented as a deduction from the gross carrying amount of the drawn component. Any
excess of the loss allowance over the gross amount of the drawn component is presented as a provision; and
debt instruments measured at fair value through other comprehensive income: no loss allowance is recognised in the Statement of
Financial Position because the carrying amount of these assets is their fair value. However, the loss allowance is disclosed and is
recognised in retained earnings.
Loans and debt securities are written-off (either partially or in full) when there is no reasonable expectation of recovering a financial
asset in its entirety or a portion thereof. This is generally the case when the Group determines that the borrower does not have assets
or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. This assessment is carried
out at the individual asset level.
Recoveries of amounts previously written-off are included in ‘net impairment charge on financial assets’ in the Statement of Profit or
Loss and OCI. Financial assets that are written-off could still be subject to enforcement activities in order to comply with the Group’s
procedures for recovery of amounts due.
On initial recognition, the Group has designated certain financial assets as at fair value through profit or loss because this designation
eliminates or significantly reduces an accounting mismatch that would otherwise arise.
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The Group has designated certain financial liabilities as at fair value through profit or loss in either of the following circumstances:
the liabilities are managed, evaluated and reported internally on a fair value basis; or
the designation eliminates or significantly reduces an accounting mismatch that would otherwise arise.
Note 7 sets out the amount of each class of financial asset or financial liability that has been designated as at fair value through profit
or loss. A description of the basis for each designation is set out in the note for the relevant asset or liability class.
Cash and cash equivalents include notes and coins on hand, unrestricted balances held with central banks and highly liquid financial
assets with original maturities of three months or less from the date of acquisition that are subject to an insignificant risk of changes in
their fair value, and are used by the Group in the management of its short-term commitments.
Cash and cash equivalents are carried at amortised cost in the Statement of Financial Position.
Trading assets and liabilities are those assets and liabilities that the Group acquires or incurs principally for the purpose of selling or
repurchasing in the near term or holds as part of a portfolio that is managed together for short-term profit or position taking.
Trading assets and liabilities are initially recognised and subsequently measured at fair value in the statements of financial position,
with transaction costs recognised in profit or loss. All changes in fair value are recognised as part of net trading results in profit or loss.
Trading assets and liabilities are not reclassified subsequent to their initial recognition, except that non-derivative trading assets, other
than those designated at fair value through profit or loss upon initial recognition, may be reclassified out of the fair value through profit
or loss (i.e. trading) category if they are no longer held for the purpose of being sold or repurchased in the near term and the following
conditions are met:
if the financial asset would have met the definition of loans and receivables (if the financial asset had not been required to be
classified as held for trading at initial recognition), then it may be reclassified if the Group has the intention and ability to hold the
financial asset for the foreseeable future or until maturity; and
if the financial asset would not have met the definition of loans and receivables, then it may be reclassified out of the trading
category only in rare circumstances.
Derivatives held for risk management purposes include all derivative assets and liabilities that are not classified as trading assets or
liabilities. All derivatives are measured at fair value in the Statement of Financial Position.
The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures.
Derivatives are initially measured at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes
therein are recognised in profit or loss.
When a derivative instrument or a non-derivative financial liability is designated as the hedging instrument in a hedge of a net
investment in a foreign operation, the effective portion of, for a derivative, changes in the fair value of the hedging instrument or, for a
non-derivative, foreign exchange gains and losses is recognised in OCI and presented in the translation reserve within equity. The
effective portion of the change in fair value of the hedging instrument is computed with reference to the functional currency of the
parent entity against whose functional currency the hedged risk is measured. Any ineffective portion of the changes in the fair value of
the derivative or foreign exchange gains and losses on the non-derivative is recognised immediately in profit or loss. The amount
recognised in OCI is fully or partially reclassified to profit or loss as a reclassification adjustment on disposal or partial disposal of the
foreign operation, respectively.
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The loans and advances to banks caption in the Statement of Financial Position includes loans and advances measured at amortised
cost (see Accounting Policy 3.10.2); these are initially measured at fair value plus incremental direct transaction costs, and subsequently
at their amortised cost using the effective interest method.
Loans and advances to customers caption in the Statement of Financial Position include:
loans and advances measured at amortised cost (see Accounting Policy 3.10.2); they are initially measured at fair value plus
incremental direct transaction costs, and subsequently at their amortised cost using the effective interest method;
loans and advances mandatorily measured at fair value through profit or loss or designated at fair value through profit or loss (see
Accounting Policy 3.10.2); these are measured at fair value with changes recognised immediately in profit or loss; and
finance lease receivables (see Accounting Policy 3.8).
When the Group purchases a financial asset and simultaneously enters into an agreement to resell the asset (or a substantially similar
asset) at a fixed price on a future date (reverse repo or stock borrowing), the consideration paid is accounted for as a loan or advance,
and the underlying asset is not recognised in the Group’s financial statements.
The investment securities in the Statement of Financial Position include:
debt investment securities measured at amortised cost (see Accounting Policy 3.10.2); these are initially measured at fair value plus
incremental direct transaction costs, and subsequently at their amortised cost using the effective interest method;
debt and equity investment securities mandatorily measured at fair value through profit or loss or designated at fair value through
profit or loss (see Accounting Policy 3.10.2); these are at fair value with changes recognised immediately in profit or loss;
debt securities measured at fair value through other comprehensive income; and
equity investment securities designated at fair value through other comprehensive income.
For debt securities measured at fair value through other comprehensive income, gains and losses are recognised in OCI, except for the
following, which are recognised in profit or loss in the same manner as for financial assets measured at amortised cost:
interest revenue using the effective interest method;
ECL and reversals; and
foreign exchange gains and losses.
When a debt security measured at fair value through other comprehensive income is derecognised, the cumulative gain or loss
previously recognised in OCI is reclassified from equity to profit or loss.
The Group elects to present in OCI changes in the fair value of certain investments in equity instruments that are not held for trading.
The election is made on an instrument-by-instrument basis on initial recognition and is irrevocable.
Fair value gains and losses on such equity instruments are never reclassified to profit or loss and no impairment is recognised in profit
or loss. Dividends are recognised in profit or loss (see Accounting Policy 3.10.2) unless they clearly represent a recovery of part of the
cost of the investment, in which case they are recognised in OCI. Cumulative gains and losses recognised in OCI are transferred to
retained earnings on disposal of an investment.
Investments in subsidiaries, associates and joint ventures are shown in the separate statements of financial position at cost less any
impairment losses (see Accounting Policy 3.20).
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Items of property and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses.
Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.
If significant parts of an item of property and equipment have different useful lives, then they are accounted for as separate items
(major components) of property and equipment.
Any gain or loss on disposal of an item of property and equipment is recognised within other income in profit or loss.
Items of property and equipment are initially measured at cost. Cost includes expenditures that are directly attributable to the
acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly
attributable to bringing the assets to a working condition for their intended use, and capitalised borrowing costs. Purchased software
that is integral to the functionality of the related equipment is capitalised as part of that equipment. If significant parts of an item of
property or equipment have different useful lives, then they are accounted for as separate items (major components) of property and
equipment.
Subsequent to initial recognition, freehold land and buildings are carried at fair value at the date of revaluation, less any subsequent
accumulated depreciation and subsequent accumulated impairment losses.
Revaluations are performed by a professionally qualified architect on a regular basis such that the carrying amount does not differ
materially from that which would be determined using fair values at the end of the reporting period. Fair value does not reflect future
capital expenditure that will improve or enhance the property and does not reflect the related future benefits from this future
expenditure other than those a rational market participant would take into account when determining the value of the property. Any
surpluses arising on such revaluation are recognised in other comprehensive income and accumulated in equity as a revaluation reserve
unless they reverse a revaluation decrease for the same asset previously recognised in profit or loss, in which case the increase is
credited to profit or loss to the extent of the decrease previously charged. Any deficiencies resulting from decreases in value are
deducted from this fair value reserve to the extent that the balance held in this reserve relating to a previous revaluation of that asset
is sufficient to absorb these and charged to profit or loss thereafter.
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow
to the Group. Ongoing repairs and maintenance are expensed as incurred.
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of
property and equipment since this most closely reflects the expected pattern of consumption of the future economic benefits embodied
in the asset. Improvements to leasehold premises are depreciated over the shorter of the lease term and their useful lives.
Land is not depreciated.
The estimated useful lives for the current and comparative periods are as follows:
building 50 years
computer system 7 years
computer equipment 5 years
others 4 – 14 years
Depreciation methods, useful lives and residual values are reassessed at each financial year-end and adjusted if appropriate.
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When the use of a property changes from owner-occupied to investment property, the property is re-measured to fair value and
reclassified accordingly. Any gain arising on this re-measurement is recognised in profit or loss to the extent that it reverses a previous
impairment loss on the specific property, with any remaining gain recognised in OCI and presented in the revaluation reserve. Any loss
is recognised in profit or loss.
Property that is held for long term rental yields or for capital appreciation or both, and that is not occupied by the Group is classified as
investment property. Investment property also includes property that is being developed for future use as investment property, when
such identification is made.
Investment property is initially measured at cost, including related transaction costs. Subsequent to initial recognition, investment
property is carried at its fair value with any change therein recognised in profit or loss.
Revaluations are performed by a professionally qualified architect on a regular basis such that the carrying amount does not differ
materially from that which would be determined using fair values at the end of the reporting period. Fair value does not reflect future
capital expenditure that will improve or enhance the property and does not reflect the related future benefits from this future
expenditure other than those a rational market participant would take into account when determining the value of the property.
Investment property is derecognised either when it has been disposed of or when the investment property is permanently withdrawn
from use and no future economic benefit is expected from its disposal. Any gain or loss on disposal of investment property (calculated
as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss. When
investment property that was previously classified as property, plant and equipment is sold, any related amount included in the
revaluation reserve (see Accounting Policy 3.17.4) is transferred to retained earnings.
If an investment property becomes owner-occupied, it is reclassified to property and equipment. Its fair value at the date of the
reclassification becomes its cost for subsequent accounting purposes.
1. Goodwill: goodwill that arises upon the acquisition of subsidiaries is presented with intangible assets (see Accounting Policy 3.1.2).
Subsequent to initial recognition, goodwill is measured at cost less any accumulated impairment losses.
2. Software: software acquired by the Group is stated at cost less accumulated amortisation and any accumulated impairment losses.
Expenditure on internally developed software is recognised as an asset when the Group is able to demonstrate its intention and
ability to complete the development and use the software in a manner that will generate future economic benefits and can reliably
measure the costs to complete the development. The capitalised costs of internally developed software include all costs directly
attributable to developing the software and capitalised borrowing costs and are amortised over its useful life. Internally developed
software is stated at capitalised cost less accumulated amortisation and any accumulated impairment losses.
3. Other intangible assets: other intangible assets, including customer relationships and entity funding arrangements, that are
acquired by the Group and have finite useful lives are measured at cost less accumulated amortisation and any accumulated
impairment losses.
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it
relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as
incurred.
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Amortisation is calculated to write-off the cost of intangible assets less their estimated residual values using the straight-line method
over their estimated useful lives and is generally recognised in profit or loss. Goodwill is not amortised. The estimated useful life for
current and comparative periods are as follows:
software 7 years
other intangible assets 5 years
Amortisation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.
At each reporting date, the Group reviews the carrying amount of its non-financial assets, other than deferred tax assets and investment
property, to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount
is estimated. Goodwill is tested annually for impairment.
For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets
that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the
“cash-generating unit” or “CGU”). Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are
expected to benefit from the synergies of the combination.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset or CGU.
An impairment loss is recognised if the carrying amount of an asset or a CGU exceeds its recoverable amount.
The Group’s corporate assets, other than goodwill, do not generate separate cash inflows and are used by more than one CGU.
Corporate assets are allocated to CGUs on a reasonable and consistent basis and tested for impairment as part of the testing of the
CGUs to which the corporate assets are allocated.
Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the
carrying amount of any goodwill allocated to the CGU and then to reduce the carrying amount of the other assets in the unit (group of
units) on a pro-rata basis.
An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the
asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation,
if no impairment loss had been recognised.
Deposits, debt securities in issue and subordinated liabilities are the Group’s sources of debt funding.
When the Group sells a financial asset and simultaneously enters into an agreement to repurchase the asset (or a similar asset) at a
fixed price on a future date (‘repo’ or ‘stock lending’), the arrangement is accounted for as a deposit, and the underlying asset continues
to be recognised in the Group’s financial statements.
The Group classifies capital instruments as financial liabilities or equity instruments in accordance with the substance of the contractual
terms of the instruments.
Deposits, debt securities in issue and subordinated liabilities are initially measured at fair value less incremental direct transaction costs,
and subsequently measured at their amortised cost using the effective interest method. The Group did not choose to carry any non-
derivative liabilities at fair value through profit or loss.
FIMBank Group Annual Report & Financial Statements 2021
60
When the Group designates a financial liability as at fair value through profit or loss, the amount of change in the fair value of the liability
that is attributable to changes in its credit risk is presented in other comprehensive income as a liability credit reserve. On initial
recognition of the financial liability, the Group assesses whether presenting the amount of change in the fair value of the liability that
is attributable to credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. This
assessment is made by using a regression analysis to compare:
the expected changes in the fair value of the liability related to changes in the credit risk; with
the impact on profit or loss of expected changes in the fair value of instruments whose characteristics are economically related to
the characteristics of the liability.
Amounts presented in the liability credit reserve are not subsequently transferred to profit or loss. When these instruments are
derecognised, the related cumulative amount in the liability credit reserve is transferred to retained earnings.
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated
reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and,
where appropriate, the risks specific to the liability.
A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than
the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the
expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established,
the Group recognises any impairment loss on the assets associated with that contract.
Financial guarantees are contracts that require the Group to make specified payments to reimburse the holder for a loss that it incurs
because a specified debtor fails to make payment when it is due in accordance with the terms of a debt instrument. Loan commitments
are firm commitments to provide credit under pre-specified terms and conditions.
Financial guarantees issued and loan commitments are initially measured at fair value. Subsequently, they are measured at the higher
of the loss allowance determined in accordance with IFRS 9 and the amount initially recognised less, when appropriate, the cumulative
amount of income recognised in accordance with the principles of IFRS 15. Other loan commitments issued are measured at the sum
of (i) the loss allowance determined in accordance with IFRS 9 and (ii) the amount of any fees received, less, if the commitment is
unlikely to result in a specific lending arrangement, the cumulative amount of income recognised. Derecognition policies in Accounting
Policy 3.10.3 are applied to loan commitments issued and held.
The Group has not issued any loan commitments that are measured at fair value through profit or loss.
Liabilities arising from financial guarantees and loan commitments are included within provisions.
The Malta-registered Group entities contribute towards a defined contribution state pension plan in accordance with Maltese
legislation. Other subsidiaries contribute to other defined contribution plans. The Group does not have a commitment beyond the
payment of fixed contributions. Related costs are recognised as an employee benefit expense in profit or loss in the periods during
which services are rendered by employees.
FIMBank Group Annual Report & Financial Statements 2021
61
The grant date fair value of equity-settled share-based payment awards (i.e. stock options) granted to employees is recognised as an
employee expense, with a corresponding increase in equity, over the period in which the employees unconditionally become entitled
to the awards. The amount recognised as an expense is adjusted to reflect the number of share awards for which the related service
and non-market performance vesting conditions are expected to be met such that the amount ultimately recognised as an expense is
based on the number of awards that meet the related service and non-market performance conditions at the vesting date.
For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to
reflect such conditions and there is no true-up for differences between expected and actual outcomes.
The fair value of the amount payable to employees in respect of SARs, which are settled in cash, is recognised as an expense with a
corresponding increase in liabilities, over the period during which the employees become unconditionally entitled to payment. The
liability is remeasured at each reporting date and at settlement date based on the fair value of the SARs. Any changes in the liability
are recognised as personnel expenses in profit or loss
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of an equity instrument are deducted from
the initial measurement of the equity instruments.
When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is
recognised as a change in equity. Repurchased shares are classified as treasury shares and presented as a deduction from total equity.
When such shares are later reissued, sold or cancelled, the consideration received is recognised as a change in equity. No gain or loss is
recognised in the Statement of Profit or Loss.
The Group presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. Basic EPS is calculated by dividing the
profit or loss that is attributable to ordinary shareholders of the Bank by the weighted average number of ordinary shares outstanding
during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted
average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options
granted to employees.
As at December 2021, basic and diluted earnings per share were equal.
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to transactions with any of the Group’s other components, whose operating
results are reviewed regularly by Executive Management (being the chief operating decision maker) to make decisions about resources
allocated to each segment and assess its performance, and for which discrete financial information is available. Segment results that
are reported to Executive Management include items that are directly attributable to a segment as well as those that can be allocated
on a reasonable basis.
FIMBank Group Annual Report & Financial Statements 2021
62
A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2021 and earlier
application is permitted, however, the Group has not early adopted them in preparing these Financial Statements.
The following amended standards are not expected to have a significant impact on the Group’s Financial Statements:
amendments to IAS 1 – presentation of financial statements: classification of liabilities as current or non-current;
amendments to IAS 1 – presentation of financial statements and IFRS practice statement 2: disclosure of accounting policies;
amendments to IAS 8 – accounting policies, changes in accounting estimates and errors: definition of accounting estimates;
amendments to IAS 12 – deferred tax related to assets and liabilities arising from a single transaction;
amendments to IAS 16 – property, plant and equipment: proceeds before intended use;
amendments to IAS 37 – onerous contracts – cost of fulfilling a contract;
amendments to IFRS 3 – reference to conceptual framework;
amendments to IFRS 16 – leases: COVID-19 related rent concessions beyond 30 June 2021;
amendments to IFRS 17 – insurance contracts; and
annual improvements to IFRS Standards 2018-2020.
Changes in accounting policies
Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) (the “Phase 2 amendments”)
became effective on 1 January 2021. While the amendments to IAS 39, IFRS 4 and IFRS 16 did not impact the Group, the amendments
to IFRS 9 has provided certain reliefs which the Group has applied on its transition to the IBOR Reform. The reliefs allow an entity, when
changing the basis for determining contractual cash flows for financial assets and liabilities that are necessary as a direct consequence
of IBOR Reform and which are considered economically equivalent, to not account for an immediate gain or loss in the income
statement, but instead to adjust the effective interest rate of the instruments. The Group has applied the practical expedient for the
‘Phase 2 amendments’ offered under IFRS9 on its contract modifications as a result of the IBOR Reform.
Further information about the interest rate benchmark reform is disclosed in Note 5.4.3.
Financial risk review
This Note presents information about the Group’s exposure to financial risks, the Group’s objectives, policies and processes for
measuring and managing risk, and the Group’s management of capital.
The Group has exposure to the following risks from financial instruments:
a. credit risk:
default risk;
concentration risk;
counterparty credit risk;
settlement risk; and
foreign exchange lending risk;
b. liquidity risk;
c. market risk:
foreign exchange risk;
interest rate risk in the banking book;
position risk in the traded debt instruments; and
price risk;
d. operational risk; and
e. reputational and conduct risk.
FIMBank Group Annual Report & Financial Statements 2021
63
The risk factors associated with the banking industry are multiple and varied. Exposure to the above-mentioned risks arises in the
normal course of both the Bank’s and the Group’s business. As the Group is mainly engaged in trade finance business, control over
contingent liabilities and commitments is fundamental since the risks involved are substantively the same as with on-balance sheet
items. The Board is ultimately responsible for the identification and evaluation of key risks applicable to the different areas of the
business of the Group and for ensuring that proper systems of internal controls are in place. The Board Risk Committee ("BRC"), a Board
committee, has the aim of assisting the Board in fulfilling its responsibilities concerning the establishment and implementation of the
Group’s risk management strategy, systems and policies. The scope of the Committee’s responsibility covers the Bank and all its Group
entities. Management is ultimately delegated with the task of creating an effective control environment to the highest possible
standards. The Internal Audit function monitors compliance with policies, standards and procedures and the effectiveness of the
internal control environment of the Group. The Internal Auditor periodically reviews and tests the internal systems of control
independently from management, adopting a risk-based approach. The Internal Auditor reports to the Board Audit Committee. All
reports are circulated and also copied to the Chairman of the Board of Directors.
Adherence to the various banking directives and rules issued by the regulatory authorities from time to time and applicable to credit
institutions licensed in Malta is and shall continue to form the basis of the risk control environment of the Group. The Group is
committed to ensuring strict compliance with the thresholds established by the regulatory frameworks in relation to capital adequacy,
liquidity and other key regulatory ratios, credit management, quality of assets and financial reporting.
Credit risk is the risk that one party to a financial transaction might fail to fulfil an obligation and cause the other party to incur a financial
loss. The Group finances international trade in many countries worldwide, especially emerging markets, which in turn entails an
exposure to sovereign, bank and corporate credit risk. Credit risk is not only associated with loans but also with other on- and off-
balance sheet exposures such as letters of credit, guarantees, acceptances and money market products.
The Group is exposed to the following types of credit risk:
default risk;
concentration risk;
counterparty credit risk;
settlement risk; and
foreign exchange lending risk.
The Group’s credit risk management practises adopted in the previous reporting period, in response to the COVID -19 pandemic
persisted during the year of review, with a more cautious approach maintained when measuring ECL. The Group’s assumption in
determining whether the credit risk of a financial instrument has increased significantly since initial recognition was updated to provide
for exposures were the Group applied moratoria on loan repayments. In addition, the Group performed a number of sensitivity tests
when measuring ECL, including the following:
calculating lifetime ECL on exposures were the Group applied moratoria on loan repayments;
altering the weighting of the upside, downside and base case economic scenarios;
disregarding the upside scenario and applying a 50%-50% weighting on the downside and base case economic scenarios; and
assessing the impact of having a 100% downside economic scenario.
For more information on how the COVID-19 considerations were incorporated in the methods, assumptions and information used to
measure ECL, please see Accounting Policy 3.10.8.
FIMBank Group Annual Report & Financial Statements 2021
64
Default risk is the chance that a borrower, whether corporate or personal or other, becomes unable to repay their credit obligations to
the Bank.
Strict credit assessment and control procedures are in place in order to monitor such exposures. Overall responsibility for credit risk is
entrusted to the BCC which is responsible for overseeing adherence to the Group’s credit policy and for approving individual limits for
banks and corporates. The BCC has also delegated some credit approval authorities, up to limited amounts, to members of
management of the Bank and to risk committees set up at the subsidiaries. Country limits are approved by the BCC. The BCC is also
responsible for the oversight of operational, legal and reputational risk related to credit activity. Further information on the composition
and function of the BCC is found in the Statement of Compliance with the Principles of Good Corporate Governance.
The Group also ensures that it has a reasonable mix of loans to customers. This diversification of credit among different economic
sectors is adopted by the Group to mitigate such risks. The Group also monitors its risk on balances held with other banks and
establishes limits for them. The risks associated with off-balance sheet assets and liabilities arise from the normal course of banking
operations. In the case of risks associated with inter-bank participants under letters of credit, the Group exercises the same credit
controls as those applied to on-balance sheet exposures and limits are established accordingly.
All on- and off- balance sheet exposures are approved after a thorough review of the counterparties’ creditworthiness. Whilst any
external rating of the counterparty by established Credit Rating Agencies is taken into account, an internal rating is given to each obligor
and credit support provider. The Group has access to a host of analytical aids, including Moody’s CreditLens, which is used to assign
internal credit ratings. Whilst the credit review process makes use of the Moody’s tool, which is used to assess customers’ financial
statements and other qualitative data, it also includes an analysis of: relevant markets and sectors, the outlook for commodity prices,
the structure of proposed transactions, the market position of the relevant counterparties and other assessments appropriate to the
specific exposure to the customer.
The following table sets out information about the credit quality of assets. Unless specifically indicated, for financial assets, the
amounts in the table represent gross carrying amounts. For contingent liabilities and commitments, the amounts in the table represent
the amounts committed.
FIMBank Group Annual Report & Financial Statements 2021
65
Group – 31 December 2021
2021
12-month PD
ranges
Stage 1
Stage 2
Stage 3
Total
USD
USD
USD
USD
Balances with the Central Bank of Malta,
treasury bills and cash
Grades 1 to 4- low risk
Grades 5+ to 5- fair risk
0.06% - 0.2%
0.26% - 0.26%
223,146,495
16,971,941
-
-
-
-
223,146,495
16,971,941
240,118,436
-
-
240,118,436
Loss allowance
(119,597)
-
-
(119,597)
Carrying amount
239,998,839
-
-
239,998,839
Loans and advances to banks
Grades 1 to 4- low risk
0.17% - 0.72%
111,995,895
-
-
111,995,895
Grades 5+ to 5- fair risk
0.92% - 3.55%
6,611,439
-
-
6,611,439
Grades 6+ to 7 substandard
1.27% - 9.23%
78,180,723
2,086,670
-
80,267,393
196,788,057
2,086,670
-
198,874,727
Loss allowance
(363,708)
(22,443)
-
(386,151)
Carrying amount
196,424,349
2,064,227
-
198,488,576
Loans and advances to customers
Grades 1 to 4- low risk
0.03% - 0.71%
26,462,373
7,434,690
-
33,897,063
Grades 5+ to 5- fair risk
0.2% - 1.67%
146,280,818
22,137,848
-
168,418,666
Grades 6+ to 7 substandard
0.35% - 7.39%
223,231,799
97,784,507
-
321,016,306
Grade 7- to 8- doubtful
2.07% - 100%
626,142
47,403,330
2,356,861
50,386,333
Grade 9 to 10 loss
100%
-
35,656
137,943,170
137,978,826
396,601,132
174,796,031
140,300,031
711,697,194
Loss allowance
(1,267,844)
(2,740,295)
(78,776,715)
(82,784,854)
Carrying amount
395,333,288
172,055,736
61,523,316
628,912,340
Financial assets at fair value through
other comprehensive income
Grades 1 to 4- low risk
0.02% - 0.23%
164,896,615
-
-
164,896,615
Carrying amount at cost
164,896,615
-
-
164,896,615
Carrying amount at fair value
162,408,542
-
-
162,408,542
Loss allowance
(82,065)
-
-
(82,065)
Investments at amortised cost
Grades 1 to 4- low risk
0.99%
9,972,376
-
-
9,972,376
9,972,376
-
-
9,972,376
Loss allowance
(57,622)
-
-
(57,622)
Carrying amount
9,914,754
-
-
9,914,754
Contingent liabilities
Grades 1 to 4- low risk
0.38% - 0.6%
100,294
-
-
100,294
Grades 5+ to 5- fair risk
0.2% - 2.38%
70,855
61,015
-
131,870
Grades 6+ to 7 substandard
0.54% - 4.44%
1,152,054
-
-
1,152,054
Grade 9 to 10 loss
100%
-
-
566,316
566,316
Carrying amount
1,323,203
61,015
566,316
1,950,534
Loss allowance
(823)
-
(161,243)
(162,066)
Commitments
Grades 1 to 4- low risk
0.06% - 0.6%
38,795,787
-
-
38,795,787
Grades 5+ to 5- fair risk
0.2% - 1.67%
44,960,903
-
-
44,960,903
Grades 6+ to 7 substandard
0.55% - 9.75%
69,390,613
470,931
-
69,861,544
Carrying amount
153,147,303
470,931
-
153,618,234
Loss allowance
(94,841)
(2,421)
-
(97,262)
FIMBank Group Annual Report & Financial Statements 2021
66
Group – 31 December 2020
2020
12-month PD
ranges
Stage 1
Stage 2
Stage 3
Total
USD
USD
USD
USD
Balances with the Central Bank of Malta,
treasury bills and cash
Grades 1 to 4- low risk
0.08% - 0.51%
307,168,780
12,271,444
-
319,440,224
307,168,780
12,271,444
-
319,440,224
Loss allowance
(131,651)
(21,049)
-
(152,700)
Carrying amount
307,037,129
12,250,395
-
319,287,524
Loans and advances to banks
Grades 1 to 4- low risk
0.17% - 1.85%
109,041,004
-
-
109,041,004
Grades 5+ to 5- fair risk
1.20% - 3.71%
4,701,296
583
-
4,701,879
Grades 6+ to 7 substandard
2.18% - 12.71%
70,572,317
2,623,574
-
73,195,891
Grade 9 to 10 loss
100%
-
-
10,192,358
10,192,358
184,314,617
2,624,157
10,192,358
197,131,132
Loss allowance
(775,489)
(75,487)
(3,140,579)
(3,991,555)
Carrying amount
183,539,128
2,548,670
7,051,779
193,139,577
Loans and advances to customers
Grades 1 to 4- low risk
0.05% - 0.80%
14,320,509
8,418,899
-
22,739,408
Grades 5+ to 5- fair risk
0.27% - 2.38%
116,289,685
22,669,330
-
138,959,015
Grades 6+ to 7 substandard
1.00% - 28.01%
167,842,212
138,235,845
-
306,078,057
Grade 7- to 8- doubtful
7.43% - 43.25%
-
29,097,910
-
29,097,910
Grade 9 to 10 loss
100%
-
-
196,700,238
196,700,238
298,452,406
198,421,984
196,700,238
693,574,628
Loss allowance
(2,069,713)
(3,618,347)
(95,890,842)
(101,578,902)
Carrying amount
296,382,693
194,803,637
100,809,396
591,995,726
Financial assets at fair value through
other comprehensive income
Grades 1 to 4- low risk
0.02% - 0.51%
147,700,809
-
-
147,700,809
Carrying amount at cost
147,700,809
-
-
147,700,809
Carrying amount at fair value
153,327,686
-
-
153,327,686
Loss allowance
(71,827)
-
-
(71,827)
Investments at amortised cost
Grades 1 to 4- low risk
1.35%
9,910,131
-
-
9,910,131
9,910,131
-
-
9,910,131
Loss allowance
(70,674)
-
-
(70,674)
Carrying amount
9,839,457
-
-
9,839,457
Contingent liabilities
Grades 1 to 4- low risk
0.21% - 0.34%
418,921
-
-
418,921
Grades 5+ to 5- fair risk
0.28% - 3.05%
444,468
-
-
444,468
Grades 6+ to 7 substandard
1.78% - 14.4%
1,047,029
-
-
1,047,029
Carrying amount
1,910,418
-
-
1,910,418
Loss allowance
(9,611)
-
-
(9,611)
Commitments
Grades 1 to 4- low risk
0.04% - 0.23%
8,156,224
-
-
8,156,224
Grades 5+ to 5- fair risk
0.27% - 1.58%
48,548,128
-
-
48,548,128
Grades 6+ to 7 substandard
1.10% - 28.10%
44,800,227
3,538,877
-
48,339,104
Carrying amount
101,504,579
3,538,877
-
105,043,456
Loss allowance
(14,808)
(153,176)
-
(167,984)
FIMBank Group Annual Report & Financial Statements 2021
67
Bank – 31 December 2021
2021
12-month PD
ranges
Stage 1
Stage 2
Stage 3
Total
USD
USD
USD
USD
Balances with the Central Bank of Malta,
treasury bills and cash
Grades 1 to 4- low risk
0.06% - 0.2%
223,129,704
-
-
223,129,704
Grades 5+ to 5- fair risk
0.26% - 0.26%
16,971,941
-
-
16,971,941
240,101,645
-
-
240,101,645
Loss allowance
(119,597)
-
-
(119,597)
Carrying amount
239,982,048
-
-
239,982,048
Loans and advances to banks
Grades 1 to 4- low risk
0.17% - 0.63%
110,813,293
-
-
110,813,293
Grades 6+ to 7 substandard
1.27% - 9.23%
70,214,711
1,798,907
-
72,013,618
181,028,004
1,798,907
-
182,826,911
Loss allowance
(345,928)
(22,435)
-
(368,363)
Carrying amount
180,682,076
1,776,472
-
182,458,548
Loans and advances to customers
Grades 1 to 4- low risk
0.04% - 0.71%
355,864,012
-
-
355,864,012
Grades 5+ to 5- fair risk
0.2% - 1.42%
105,212,988
16,868,547
-
122,081,535
Grades 6+ to 7 substandard
0.35% - 7.39%
152,994,192
57,893,853
-
210,888,045
Grade 7- to 8- doubtful
2.07% - 30.46%
-
7,149,724
-
7,149,724
Grade 9 to 10 loss
100%
-
35,656
118,502,153
118,537,809
614,071,192
81,947,780
118,502,153
814,521,125
Loss allowance
(1,663,749)
(2,051,951)
(65,241,286)
(68,956,986)
Carrying amount
612,407,443
79,895,829
53,260,867
745,564,139
Financial assets at fair value through
other comprehensive income
Grades 1 to 4- low risk
0.02% - 0.23%
164,896,615
-
-
164,896,615
Carrying amount at cost
164,896,615
-
-
164,896,615
Carrying amount at fair value
162,408,542
-
-
162,408,542
Loss allowance
(82,065)
-
-
(82,065)
Investments at amortised cost
Grades 1 to 4- low risk
0.99%
9,972,376
-
-
9,972,376
9,972,376
-
-
9,972,376
Loss allowance
(57,622)
-
-
(57,622)
Carrying amount
9,914,754
-
-
9,914,754
Contingent liabilities
Grades 1 to 4- low risk
0.38% - 0.6%
37,895,938
-
-
37,895,938
Grades 5+ to 5- fair risk
0.2% - 2.38%
70,854
61,015
-
131,869
Grades 6+ to 7 substandard
0.54% - 4.44%
733,239
-
-
733,239
Grade 9 to 10 loss
100%
-
-
566,316
566,316
Carrying amount
38,700,031
61,015
566,316
39,327,362
Loss allowance
(752)
-
(161,243)
(161,995)
Commitments
Grades 1 to 4- low risk
0.06% - 0.6%
19,960,002
-
-
19,960,002
Grades 5+ to 5- fair risk
0.2% - 1.67%
34,662,969
-
-
34,662,969
Grades 6+ to 7 substandard
0.55% - 9.75%
52,375,209
470,931
-
52,846,140
Carrying amount
106,998,180
470,931
-
107,469,111
Loss allowance
(37,358)
(2,422)
-
(39,780)
FIMBank Group Annual Report & Financial Statements 2021
68
Bank – 31 December 2020
2020
12-month PD
ranges
Stage 1
Stage 2
Stage 3
Total
USD
USD
USD
USD
Balances with the Central Bank of Malta,
treasury bills and cash
Grades 1 to 4- low risk
0.08% - 0.51%
307,149,005
12,271,444
-
319,420,449
307,149,005
12,271,444
-
319,420,449
Loss allowance
(131,651)
(21,049)
-
(152,700)
Carrying amount
307,017,354
12,250,395
-
319,267,749
Loans and advances to banks
Grades 1 to 4- low risk
0.17% - 0.7%
101,823,439
-
-
101,823,439
Grades 6+ to 7 substandard
2.18% - 12.37%
68,841,826
2,423,043
-
71,264,869
Grade 9 to 10 loss
100%
-
-
10,192,358
10,192,358
170,665,265
2,423,043
10,192,358
183,280,666
Loss allowance
(704,578)
(71,442)
(3,140,579)
(3,916,599)
Carrying amount
169,960,687
2,351,601
7,051,779
179,364,067
Loans and advances to customers
Grades 1 to 4- low risk
0.05% - 0.8%
6,213,969
498
-
6,214,467
Grades 5+ to 5- fair risk
0.27% - 2.24%
388,936,722
22,669,330
-
411,606,052
Grades 6+ to 7 substandard
1.16% - 27.59%
184,578,519
83,770,273
-
268,348,792
Grade 7- to 8- doubtful
7.43% - 43.25%
-
7,396,380
-
7,396,380
Grade 9 to 10 loss
100%
-
-
164,144,690
164,144,690
579,729,210
113,836,481
164,144,690
857,710,381
Loss allowance
(1,866,268)
(2,328,744)
(73,681,009)
(77,876,021)
Carrying amount
577,862,942
111,507,737
90,463,681
779,834,360
Financial assets at fair value through
other comprehensive income
Grades 1 to 4- low risk
0.02% - 0.51%
147,700,809
-
-
147,700,809
Carrying amount at cost
147,700,809
-
-
147,700,809
Carrying amount at fair value
153,327,686
-
-
153,327,686
Loss allowance
(71,827)
-
-
(71,827)
Investments at amortised cost
Grades 1 to 4- low risk
1.35%
9,910,131
-
-
9,910,131
9,910,131
-
-
9,910,131
Loss allowance
(70,674)
-
-
(70,674)
Carrying amount
9,839,457
-
-
9,839,457
Contingent liabilities
Grades 1 to 4- low risk
0.21% - 0.34%
418,921
-
-
418,921
Grades 5+ to 5- fair risk
0.28% - 3.05%
43,193,696
-
-
43,193,696
Grades 6+ to 7 substandard
1.78% - 14.4%
634,285
-
-
634,285
Carrying amount
44,246,902
-
-
44,246,902
Loss allowance
(5,067)
-
-
(5,067)
Commitments
Grades 1 to 4- low risk
0.17% - 0.23%
9,720,642
-
-
9,720,642
Grades 5+ to 5- fair risk
0.27% - 1.58%
58,717,340
-
-
58,717,340
Grades 6+ to 7 substandard
1.1% - 28.1%
33,268,907
3,538,877
-
36,807,784
Carrying amount
101,706,889
3,538,877
-
105,245,766
Loss allowance
(14,809)
(153,175)
-
(167,984)
FIMBank Group Annual Report & Financial Statements 2021
69
The following table sets out information about the overdue status of financial assets under Stages 1, 2 and 3:
Group – 31 December 2021
2021
Stage 1
Stage 2
Stage 3
Total
USD
USD
USD
USD
Loans and advances to banks
Current
196,788,057
2,063,270
-
198,851,327
Overdue < 30 days
-
23,400
-
23,400
Overdue > 30 days
-
-
-
-
Total
196,788,057
2,086,670
-
198,874,727
Loans and advances to customers
Current
357,154,217
150,204,216
-
507,358,433
Overdue < 30 days
39,446,915
15,646,321
-
55,093,236
Overdue > 30 days
-
8,945,494
140,300,031
149,245,525
Total
396,601,132
174,796,031
140,300,031
711,697,194
Group – 31 December 2020
2020
Stage 1
Stage 2
Stage 3
Total
USD
USD
USD
USD
Loans and advances to banks
Current
184,314,617
2,624,157
-
186,938,774
Overdue < 30 days
-
-
-
-
Overdue > 30 days
-
-
10,192,358
10,192,358
Total
184,314,617
2,624,157
10,192,358
197,131,132
Loans and advances to customers
Current
255,311,775
98,118,764
4
353,430,543
Overdue < 30 days
43,140,631
81,551,810
2,093
124,694,534
Overdue > 30 days
-
18,751,410
196,698,141
215,449,551
Total
298,452,406
198,421,984
196,700,238
693,574,628
Bank – 31 December 2021
2021
Stage 1
Stage 2
Stage 3
Total
USD
USD
USD
USD
Loans and advances to banks
Current
181,028,006
1,775,507
-
182,803,513
Overdue < 30 days
-
23,400
-
23,400
Overdue > 30 days
-
-
-
-
Total
181,028,006
1,798,907
-
182,826,913
Loans and advances to customers
Current
584,475,445
65,703,700
-
650,179,145
Overdue < 30 days
29,595,747
15,082,474
-
44,678,221
Overdue > 30 days
-
1,161,606
118,502,153
119,663,759
Total
614,071,192
81,947,780
118,502,153
814,521,125
FIMBank Group Annual Report & Financial Statements 2021
70
Bank – 31 December 2020
2020
Stage 1
Stage 2
Stage 3
Total
USD
USD
USD
USD
Loans and advances to banks
Current
170,665,265
2,423,043
-
173,088,308
Overdue < 30 days
-
-
-
-
Overdue > 30 days
-
-
10,192,358
10,192,358
Total
170,665,265
2,423,043
10,192,358
183,280,666
Loans and advances to customers
Current
538,461,019
64,326,592
4
602,787,615
Overdue < 30 days
41,268,191
45,235,754
2,093
86,506,038
Overdue > 30 days
-
4,274,135
164,142,593
168,416,728
Total
579,729,210
113,836,481
164,144,690
857,710,381
In 2021, there were no overdue balances for ‘balances with the Central Bank of Malta and treasury bills’, ‘financial assets at fair value
through other comprehensive income’ and ‘investments at amortised cost’ (2020: Nil).
The following table sets out information about the credit quality of ‘trading assets’. The analysis has been based on Moody’s and Fitch
ratings.
Group
2021
2020
USD
USD
Trading assets
Rated AAA
-
-
Rated AA- to AA+
-
4,312,015
Rated A- to A+
244,584
1,300,437
Rated BBB+ below
234,848,775
255,103,459
Unrated
204,891,844
191,610,636
Carrying amount
439,985,203
452,326,547
Loans with renegotiated terms are loans that have been restructured due to deterioration in the borrower’s financial position and where
the Group has made concessions that it would not otherwise consider. Conditions for treatment of such renegotiated loans are outlined
in the Group’s forbearance policy which is in line with the EBA/GL/2018/06 Guidelines on management on non-performing forborne
exposures. Forbearance refers only to those loan modification or renegotiations in response to actual or perceived financial difficulties
of a customer.
The contractual terms of a loan may be modified for a number of reasons including changing market conditions, customer retention
and other factors not related to the current or potential credit deterioration of a customer. An existing loan whose terms have been
modified may be derecognised and the renegotiated loan recognised as a new loan at fair value in accordance with Accounting Policy
3.10.
When the terms of a financial asset are modified and the modification does not result in derecognition, the determination of whether
the asset’s credit risk has increased significantly reflects comparison of:
its remaining lifetime ‘Probability of Default’ (“PD”) at the reporting date based on the modified terms; with
the remaining lifetime PD estimated based on data on initial recognition and the original contractual terms.
When modification results in derecognition, a new loan is recognised and allocated to Stage 1 (assuming it is not credit-impaired at that
time).
FIMBank Group Annual Report & Financial Statements 2021
71
The Group renegotiates loans to customers in financial difficulties (referred to as ‘forbearance activities’) to maximise collection
opportunities and minimise the risk of default. Under the Group’s forbearance policy, loan forbearance is granted on a selective basis if
the debtor is currently in default on its debt or if there is a high risk of default, there is evidence that the debtor made all reasonable
efforts to pay under the original contractual terms and the debtor is expected to be able to meet the revised terms.
The revised terms usually include extending the maturity, changing the timing of interest payments and amending the terms of loan
covenants. Both bank and corporate loans are subject to the forbearance policy.
For the purposes of disclosures in these Financial Statements, ‘loans with renegotiated terms’ are defined as loans that have been
restructured due to a deterioration in the borrower’s financial position, for which the Group has made concessions by agreeing to terms
and conditions that are more favourable to the borrower than the Group had provided initially and that it would not otherwise consider.
For financial assets modified as part of the Group’s forbearance policy, the estimate of PD reflects whether the modification has
improved or restored the Group’s ability to collect interest and principal and the Group’s previous experience of similar forbearance
action. As part of this process, the Group evaluates the borrower’s payment performance against the modified contractual terms and
considers various behavioural indicators.
Generally, forbearance is a qualitative indicator of a significant increase in credit risk and an expectation of forbearance may constitute
evidence that an exposure is credit-impaired (see Accounting Policy 3.10.8). A customer needs to demonstrate consistently good
payment behaviour over a period of time before the exposure is no longer considered to be credit-impaired/in default or the PD is
considered to have decreased such that the loss allowance reverts to being measured at an amount equal to Stage 1. A loan continues
to be presented as part of loans with renegotiated terms until maturity, early repayment or write-off.
During the financial years ended 31 December 2021 and 2020 there have been no changes in the forbearance criteria applied to
renegotiated facilities. Following the impact of COVID-19 on the economy, governments of those countries in which the Group
operates in, allowed institutions to apply a payment moratorium on existing facilities. These schemes are preventative in nature, are
applicable to a large group of obligors and offer the same conditions to all borrowers that apply.
Based on these criteria being fulfilled, EBA/GL/2020/02 Guidelines on legislative and non-legislative moratoria on loan repayments
applied in the light of the COVID-19 crisis, clarifies that the application of such moratorium schemes to the Group’s facilities should not
change the classification of exposures under the definition of forbearance in accordance with Article 47b of Regulation (EU) No 575/2013
as amended by Regulation (EU) 2019/630 or change whether they are treated as distressed restructuring in accordance with Article
178(3)(d) of that Regulation. Accordingly, applying such a moratorium in itself should not lead to reclassification of the exposure as
forborne, unless the facility was already classified as forborne.
For the Group, the aggregate amount of renegotiated and forborne loans at reporting date amounted to USD20,167,453 (2020:
USD27,715,364), of which USD4,330,159 are performing (2020: USD3,225,698), whilst USD15,837,294 (2020: USD24,489,666) are non-
performing with an extendible collateral value of USD1,979,638 (2020: USD234,923). Interest income recognised during 2021 in respect
to renegotiated and forborne assets amounts to USD854,315 (2020: USD896,923).
For the Bank, the aggregate amount of renegotiated and forborne loans at reporting date amounted to USD15,517,797 (2020:
USD13,957,686), of which USD1,948,525 (2020: USD nil) are performing, whilst USD13,569,272 (2020: USD13,957,686) are non-
performing with an extendible collateral value of USD1,964,585 (2020: USD234,923). Interest income recognised during 2021 in respect
to renegotiated and forborne assets amounts to USD396,968 (2020: USD195,283).
FIMBank Group Annual Report & Financial Statements 2021
72
Movement in forbearance activity during the year is as follows:
Group – 31 December 2021
2021
Stage 2
Stage 3
Total
USD
USD
USD
At 1 January
3,225,698
24,489,666
27,715,364
Additions
2,342,499
3,728,355
6,070,854
Recovered
(1,238,038)
(12,596,111)
(13,834,149)
Written-off
-
215,384
215,384
Reclassified
-
-
-
At 31 December
4,330,159
15,837,294
20,167,453
Group – 31 December 2020
2020
Stage 2
Stage 3
Total
USD
USD
USD
At 1 January
4,095,780
26,318,611
30,414,391
Additions
2,776,034
4,263,248
7,039,282
Recovered
(2,610,299)
(215,003)
(2,825,302)
Written-off
-
(6,913,007)
(6,913,007)
Reclassified
(1,035,817)
1,035,817
-
At 31 December
3,225,698
24,489,666
27,715,364
Bank – 31 December 2021
2021
Stage 2
Stage 3
Total
USD
USD
USD
At 1 January
-
13,957,686
13,957,686
Additions
1,948,525
2,972,186
4,920,711
Recovered
-
(3,360,600)
(3,360,600)
Written off
-
-
-
Reclassified
-
-
-
At 31 December
1,948,525
13,569,272
15,517,797
Bank – 31 December 2020
2020
Stage 2
Stage 3
Total
USD
USD
USD
At 1 January
1,634,801
20,180,830
21,815,631
Additions
-
904,866
904,866
Recovered
(1,634,801)
(215,003)
(1,849,804)
Written off
-
(6,913,007)
(6,913,007)
Reclassified
-
-
-
At 31 December
-
13,957,686
13,957,686
FIMBank Group Annual Report & Financial Statements 2021
73
The key inputs into the measurement of ECL are the term structure of the following variables:
probability of default (“PD”);
loss given default (“LGD”); and
exposure at default (“EAD”).
ECL for exposures in Stage 1 is calculated by multiplying the 12-month PD by LGD and EAD. Lifetime ECL is calculated by multiplying
the lifetime PD by LGD and EAD.
The methodology of estimating PDs is discussed below under the heading ‘generating the term structure of PD’.
LGD is the magnitude of the likely loss if there is a default. The Group uses LGD rates derived from Moody’s data for the credit quality
and industry in which a client is classified, while also including tailormade qualitative overlays and collateral where applicable. The LGD
models consider the structure, collateral, seniority of the claim, counterparty industry and recovery costs of any collateral that is
integral to the financial asset.
EAD represents the expected exposure in the event of a default. The Group derives the EAD from the current exposure to the
counterparty and potential changes to the current amount allowed under the contract and arising from amortisation. The EAD of a
financial asset is its gross carrying amount at the time of default. For lending commitments, the EADs are potential future amounts
that may be drawn under the contract, which are based on estimated credit conversion factors. For financial guarantees, the EAD
represents the expected amount of the guaranteed exposure when the financial guarantee becomes payable.
As described above, and subject to using a maximum of a 12-month PD for Stage 1 financial assets, the Group measures ECL considering
the risk of default over the maximum contractual period (including any borrower’s extension options) over which it is exposed to credit
risk, even if, for credit risk management purposes, the Group considers a longer period. The maximum contractual period extends to
the date at which the Group has the right to require repayment of an advance or terminate a loan commitment or guarantee.
In measuring expected credit losses, the Group relies on risk and economic data and modelling techniques provided by Moody’s
Analytics.
Post-model adjustments (PMAs) are short-term adjustments to the ECL balance as part of the year-end reporting process to reflect
late updates to market data, known model deficiencies and expert credit judgement.
The Group has internal governance frameworks and controls in place to assess the appropriateness of all PMAs. The aim of the Group
is to incorporate these PMAs into the ECL models, where possible, as part of the periodic recalibration and model assessment
procedures.
The following tables show reconciliations from the opening to the closing balance of the loss allowance by class of financial instrument:
FIMBank Group Annual Report & Financial Statements 2021
74
Group – 31 December 2021
2021
Stage 1
Stage 2
Stage 3
Total
USD
USD
USD
USD
Balances with Central Bank of Malta, treasury bills
and cash
Balance at 1 January
131,651
21,049
-
152,700
Net remeasurement of loss allowance
(25,242)
-
-
(25,242)
New financial assets originated or purchased
19,318
-
-
19,318
Financial assets that have been derecognised
(6,130)
(21,049)
-
(27,179)
Balance at 31 December
119,597
-
-
119,597
Loans and advances to banks
Balance at 1 January
775,489
75,487
3,140,579
3,991,555
Transfer to Stage 1
166
(166)
-
-
Net remeasurement of loss allowance
(70,359)
(53,941)
-
(124,300)
New financial assets originated or purchased
263,977
1,063
-
265,040
Financial assets that have been derecognised
(605,269)
-
(1,349,148)
(1,954,417)
Interest and fee in suspense
-
-
(1,728,518)
(1,728,518)
Foreign exchange and other movements
(296)
-
(62,913)
(63,209)
Balance at 31 December
363,708
22,443
-
386,151
Loans and advances to customers
Balance at 1 January
2,069,713
3,618,347
95,890,842
101,578,902
Transfer to Stage 1
34,852
(34,852)
-
-
Transfer to Stage 2
(4,348)
4,348
-
-
Transfer to Stage 3
-
(88,319)
88,319
-
Net remeasurement of loss allowance
(621,888)
(583,301)
4,253,102
3,047,913
New financial assets originated or purchased
186,900
263,390
-
450,290
Financial assets that have been derecognised
(394,698)
(438,004)
2,457,793
1,625,091
Write-offs
-
-
(21,313,112)
(21,313,112)
Interest and fee in suspense
-
-
(4,629,946)
(4,629,946)
Foreign exchange and other movements
(2,687)
(1,314)
2,029,717
2,025,716
Balance at 31 December
1,267,844
2,740,295
78,776,715
82,784,854
Financial assets at fair value through other
comprehensive income
Balance at 1 January
71,827
-
-
71,827
Net remeasurement of loss allowance
(8,849)
-
-
(8,849)
New financial assets originated or purchased
34,115
-
-
34,115
Financial assets that have been derecognised
(15,028)
-
-
(15,028)
Balance at 31 December
82,065
-
-
82,065
Investments at amortised cost
Balance at 1 January
70,674
-
-
70,674
Net remeasurement of loss allowance
(13,052)
-
-
(13,052)
Balance at 31 December
57,622
-
-
57,622
Contingent liabilities
Balance at 1 January
9,611
-
-
9,611
Net remeasurement of loss allowance
(1,226)
-
-
(1,226)
New financial assets originated or purchased
212
-
161,243
161,455
Financial assets that have been derecognised
(7,774)
-
-
(7,774)
Balance at 31 December
823
-
161,243
162,066
Commitments
Balance at 1 January
14,808
153,176
-
167,984
Net remeasurement of loss allowance
(6,885)
-
-
(6,885)
New financial assets originated or purchased
94,840
2,421
-
97,261
Financial assets that have been derecognised
(7,922)
(153,176)
-
(161,098)
Balance at 31 December
94,841
2,421
-
97,262
FIMBank Group Annual Report & Financial Statements 2021
75
Group – 31 December 2020
2020
Stage 1
Stage 2
Stage 3
Total
USD
USD
USD
USD
Balances with Central Bank of Malta, treasury bills
and cash
Balance at 1 January
-
-
-
-
Net remeasurement of loss allowance
125,521
-
-
125,521
New financial assets originated or purchased
6,130
21,049
-
27,179
Balance at 31 December
131,651
21,049
-
152,700
Loans and advances to banks
Balance at 1 January
542,278
117,390
2,559,841
3,219,509
Transfer to Stage 1
51
(51)
-
-
Transfer to Stage 2
(4,564)
4,564
-
-
Net remeasurement of loss allowance
(80,628)
(46,390)
-
(127,018)
New financial assets originated or purchased
664,990
-
-
664,990
Financial assets that have been derecognised
(346,075)
(26)
-
(346,101)
Interest and fee in suspense
-
-
461,295
461,295
Foreign exchange and other movements
(563)
-
119,443
118,880
Balance at 31 December
775,489
75,487
3,140,579
3,991,555
Loans and advances to customers
Balance at 1 January
973,713
4,395,859
71,037,784
76,407,356
Transfer to Stage 1
7,018
(7,018)
-
-
Transfer to Stage 2
(68,074)
68,074
-
-
Transfer to Stage 3
(2,926)
(366,741)
369,667
-
Net remeasurement of loss allowance
29,929
(328,070)
25,813,877
25,515,736
New financial assets originated or purchased
1,903,735
513,739
5,215,423
7,632,897
Financial assets that have been derecognised
(765,963)
(649,167)
1,854,327
439,197
Write-offs
-
-
(10,752,659)
(10,752,659)
Interest and fee in suspense
-
-
817,911
817,911
Foreign exchange and other movements
(7,719)
(8,329)
1,534,512
1,518,464
Balance at 31 December
2,069,713
3,618,347
95,890,842
101,578,902
Financial assets at fair value through other
comprehensive income
Balance at 1 January
91,978
-
-
91,978
Net remeasurement of loss allowance
(4,283)
-
-
(4,283)
New financial assets originated or purchased
71,666
-
-
71,666
Financial assets that have been derecognised
(87,534)
-
-
(87,534)
Balance at 31 December
71,827
-
-
71,827
Investments at amortised cost
Balance at 1 January
179,444
-
-
179,444
New financial assets originated or purchased
70,674
-
-
70,674
Financial assets that have been derecognised
(179,444)
-
-
(179,444)
Balance at 31 December
70,674
-
-
70,674
Contingent liabilities
Balance at 1 January
9,751
391
-
10,142
Net remeasurement of loss allowance
162
-
-
162
New financial assets originated or purchased
9,329
-
-
9,329
Financial assets that have been derecognised
(9,631)
(391)
-
(10,022)
Balance at 31 December
9,611
-
-
9,611
Commitments
Balance at 1 January
56,870
21,423
-
78,293
Transfer to Stage 2
(88)
88
-
-
Net remeasurement of loss allowance
(16,682)
171
-
(16,511)
New financial assets originated or purchased
12,651
152,917
-
165,568
Financial assets that have been derecognised
75,153
(21,423)
-
53,730
Write-offs
(113,096)
-
-
(113,096)
Balance at 31 December
14,808
153,176
-
167,984
FIMBank Group Annual Report & Financial Statements 2021
76
Bank – 31 December 2021
2021
Stage 1
Stage 2
Stage 3
Total
USD
USD
USD
USD
Balances with Central Bank of Malta, treasury bills
and cash
Balance at 1 January
131,651
21,049
-
152,700
Net remeasurement of loss allowance
(25,242)
-
-
(25,242)
New financial assets originated or purchased
19,318
-
-
19,318
Financial assets that have been derecognised
(6,130)
(21,049)
-
(27,179)
Balance at 31 December
119,597
-
-
119,597
Loans and advances to banks
Balance at 1 January
704,578
71,442
3,140,579
3,916,599
Net remeasurement of loss allowance
(6,814)
(50,070)
-
(56,884)
New financial assets originated or purchased
251,152
1,063
-
252,215
Financial assets that have been derecognised
(602,988)
-
(1,349,148)
(1,952,136)
Interest and fee in suspense
-
-
(1,728,518)
(1,728,518)
Foreign exchange and other movements
-
-
(62,913)
(62,913)
Balance at 31 December
345,928
22,435
-
368,363
Loans and advances to customers
Balance at 1 January
1,866,268
2,328,744
73,681,009
77,876,021
Transfer to Stage 1
1,485
(1,485)
-
-
Transfer to Stage 2
(4,348)
4,348
-
-
Transfer to Stage 3
-
(179)
179
-
Net remeasurement of loss allowance
(164,405)
(104,477)
3,903,892
3,635,010
New financial assets originated or purchased
202,441
96,335
-
298,776
Financial assets that have been derecognised
(237,692)
(271,335)
2,588,703
2,079,676
Write-offs
-
-
(18,533,957)
(18,533,957)
Interest and fee in suspense
-
-
1,539,148
1,539,148
Foreign exchange and other movements
-
-
2,062,312
2,062,312
Balance at 31 December
1,663,749
2,051,951
65,241,286
68,956,986
Financial assets at fair value through other
comprehensive income
Balance at 1 January
71,827
-
-
71,827
Net remeasurement of loss allowance
(8,849)
-
-
(8,849)
New financial assets originated or purchased
34,115
-
-
34,115
Financial assets that have been derecognised
(15,028)
-
-
(15,028)
Balance at 31 December
82,065
-
-
82,065
Investments at amortised cost
Balance at 1 January
70,674
-
-
70,674
Net remeasurement of loss allowance
(13,052)
-
-
(13,052)
Balance at 31 December
57,622
-
-
57,622
Contingent liabilities
Balance at 1 January
5,067
-
-
5,067
Net remeasurement of loss allowance
(1,226)
-
-
(1,226)
New financial assets originated or purchased
141
-
161,243
161,384
Financial assets that have been derecognised
(3,230)
-
-
(3,230)
Balance at 31 December
752
-
161,243
161,995
Commitments
Balance at 1 January
14,809
153,175
-
167,984
Net remeasurement of loss allowance
(6,885)
-
-
(6,885)
New financial assets originated or purchased
37,357
2,421
-
39,778
Financial assets that have been derecognised
(7,923)
(153,174)
-
(161,097)
Balance at 31 December
37,358
2,422
-
39,780
FIMBank Group Annual Report & Financial Statements 2021
77
Bank – 31 December 2020
2020
Stage 1
Stage 2
Stage 3
Total
USD
USD
USD
USD
Balances with Central Bank of Malta, treasury bills
and cash
Balance at 1 January
-
-
-
-
Net remeasurement of loss allowance
125,521
-
-
125,521
New financial assets originated or purchased
6,130
21,049
-
27,179
Balance at 31 December
131,651
21,049
-
152,700
Loans and advances to banks
Balance at 1 January
428,246
117,339
2,559,841
3,105,426
Net remeasurement of loss allowance
(70,599)
(45,871)
-
(116,470)
New financial assets originated or purchased
663,559
-
-
663,559
Financial assets that have been derecognised
(316,628)
(26)
-
(316,654)
Interest and fee in suspense
-
-
461,295
461,295
Foreign exchange and other movements
-
-
119,443
119,443
Balance at 31 December
704,578
71,442
3,140,579
3,916,599
Loans and advances to customers
Balance at 1 January
544,983
2,467,636
43,814,413
46,827,032
Transfer to Stage 1
7,018
(7,018)
-
-
Transfer to Stage 2
(9,354)
9,354
-
-
Transfer to Stage 3
(2,926)
(297,483)
300,409
-
Net remeasurement of loss allowance
53,401
(30,078)
26,707,450
26,730,773
New financial assets originated or purchased
1,745,170
253,717
5,215,423
7,214,310
Financial assets that have been derecognised
(472,024)
(67,384)
411,791
(127,617)
Write-offs
-
-
(9,226,421)
(9,226,421)
Interest and fee in suspense
-
-
4,983,165
4,983,165
Foreign exchange and other movements
-
-
1,474,779
1,474,779
Balance at 31 December
1,866,268
2,328,744
73,681,009
77,876,021
Financial assets at fair value through other
comprehensive income
Balance at 1 January
91,978
-
-
91,978
Net remeasurement of loss allowance
(4,283)
-
-
(4,283)
New financial assets originated or purchased
71,666
-
-
71,666
Financial assets that have been derecognised
(87,534)
-
-
(87,534)
Balance at 31 December
71,827
-
-
71,827
Investments at amortised cost
Balance at 1 January
179,444
-
-
179,444
New financial assets originated or purchased
70,674
-
-
70,674
Financial assets that have been derecognised
(179,444)
-
-
(179,444)
Balance at 31 December
70,674
-
-
70,674
Contingent liabilities
Balance at 1 January
9,688
391
-
10,079
Net remeasurement of loss allowance
163
-
-
163
New financial assets originated or purchased
4,784
-
-
4,784
Financial assets that have been derecognised
(9,568)
(391)
-
(9,959)
Balance at 31 December
5,067
-
-
5,067
Commitments
Balance at 1 January
53,658
21,422
-
75,080
Transfer to Stage 2
(88)
88
-
-
Net remeasurement of loss allowance
(16,432)
171
-
(16,261)
New financial assets originated or purchased
12,651
152,917
-
165,568
Financial assets that have been derecognised
78,116
(21,423)
-
56,693
Write-offs
(113,096)
-
-
(113,096)
Balance at 31 December
14,809
153,175
-
167,984
FIMBank Group Annual Report & Financial Statements 2021
78
The following table provides a reconciliation between:
amounts shown in the above tables reconciling opening and closing balances of loss allowance per class of financial instrument; and
the ‘net impairment charge on financial assets’ line item in the Group’s Statements of Profit or Loss.
Group – 31 December 2021
Group – 31 December 2020
Balances with
the Central
Bank of Malta,
treasury bills
and cash
Loans and
advances
to banks
Loans and
advances
to customers
Financial assets
at fair value
through other
comprehensive
income
Investments
at amortised
cost
Contingent
liabilities Commitments
Other assets Total
USD
USD
USD
USD
USD
USD
USD
USD
USD
Net remeasurement of loss allowance
(25,242)
(124,300)
3,047,913
(8,849)
(13,052)
(1,226)
(6,885)
(63,139)
2,805,220
New financial assets originated or purchased
19,318
265,040
450,290
34,115
-
161,455
97,261
-
1,027,479
Financial assets that have been derecognised
(27,179)
(1,954,417)
1,625,091
(15,028)
-
(7,774)
(161,098)
56,624
(483,781)
Total
(33,103)
(1,813,677)
5,123,294
10,238
(13,052)
152,455
(70,722)
(6,515)
3,348,918
Recoveries of amounts previously written-off
-
(520,067)
(921,055)
-
-
-
-
-
(1,441,122)
Total
(33,103)
(2,333,744)
4,202,239
10,238
(13,052)
152,455
(70,722)
(6,515)
1,907,796
Balances with
the Central
Bank of Malta,
treasury bills
and cash
Loans and
advances
to banks
Loans and
advances
to customers
Financial assets
at fair value
through other
comprehensive
income
Investments
at amortised
cost
Contingent
liabilities
Commitments
Other assets
Total
USD
USD
USD
USD
USD
USD
USD
USD
USD
Net remeasurement of loss allowance
125,521
(127,018)
25,515,736
(4,283)
-
162
(16,511)
63,139
25,556,746
New financial assets originated or purchased
27,179
664,990
7,632,897
71,666
70,674
9,329
165,568
-
8,642,303
Financial assets that have been derecognised
-
(346,101)
439,197
(87,534)
(179,444)
(10,022)
53,730
725
(129,449)
Total
152,700
191,871
33,587,830
(20,151)
(108,770)
(531)
202,787
63,864
34,069,600
Recoveries of amounts previously written-off
-
-
(1,079,281)
-
-
-
-
-
(1,079,281)
Total
152,700
191,871
32,508,549
(20,151)
(108,770)
(531)
202,787
63,864
32,990,319
FIMBank Group Annual Report & Financial Statements 2021
79
Bank – 31 December 2021
Bank – 31 December 2020
Balances with
the Central
Bank of Malta,
treasury bills
and cash
Loans and
advances
to banks
Loans and
advances
to customers
Financial assets
at fair value
through other
comprehensive
income
Investments at
amortised cost
Contingent
liabilities
Commitments
Total
USD
USD
USD
USD
USD
USD
USD
USD
Net remeasurement of loss allowance
(25,242)
(56,884)
3,635,010
(8,849)
(13,052)
(1,226)
(6,885)
3,522,872
New financial assets originated or purchased
19,318
252,215
298,776
34,115
-
161,384
39,778
805,586
Financial assets that have been derecognised
(27,179)
(1,952,136)
2,079,676
(15,028)
-
(3,230)
(161,097)
(78,994)
Total
(33,103)
(1,756,805)
6,013,462
10,238
(13,052)
156,928
(128,204)
4,249,464
Recoveries of amounts previously written-off
-
(520,067)
(29,840)
-
-
-
-
(549,907)
Total
(33,103)
(2,276,872)
5,983,622
10,238
(13,052)
156,928
(128,204)
3,699,557
Balances with
the Central
Bank of Malta,
treasury bills
and cash
Loans and
advances
to banks
Loans and
advances
to customers
Financial assets
at fair value
through other
comprehensive
income
Investments at
amortised cost
Contingent
liabilities
Commitments
Total
USD USD USD
USD
USD
USD
USD
USD
Net remeasurement of loss allowance
125,521
(116,470)
26,730,773
(4,283)
-
163
(16,261)
26,719,443
New financial assets originated or purchased
27,179
663,559
7,214,310
71,666
70,674
4,784
165,568
8,217,740
Financial assets that have been derecognised
-
(316,654)
(127,617)
(87,534)
(179,444)
(9,959)
56,693
(664,515)
Total
152,700
230,435
33,817,466
(20,151)
(108,770)
(5,012)
206,000
34,272,668
Recoveries of amounts previously written-off
-
-
(268)
-
-
-
-
(268)
Total
152,700
230,435
33,817,198
(20,151)
(108,770)
(5,012)
206,000
34,272,400
FIMBank Group Annual Report & Financial Statements 2021
80
The Group writes off a loan/security balance (and any related allowances for impairment losses) when it has been unequivocally
determined that the loan/security is uncollectible. This determination is reached after considering information such as the occurrence
of significant changes in the borrower/issuer’s financial position such that the borrower/issuer can no longer pay the obligation, that
proceeds from collateral will not be sufficient to pay back the entire exposure, or that future recoverability efforts are deemed
unfeasible.
The table below shows the gross carrying value of loans written-off. Loss allowance on loans written-off are disclosed in Note 5.2.1.4.
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Loans and advances to customers
Written-off
48,455,745
19,528,228
36,172,515
9,612,544
Loans are typically secured either by cash collateral, property (including shipping vessels), credit insurance cover, bank guarantees,
corporate guarantees, personal guarantees, pledged goods or some combination thereof. Each collateral type is given a weighting
determined by internal policy. These collaterals are reviewed periodically by management both in terms of exposure to the Bank and
the Group and also to ensure the validity and enforceability of the security taken under default events. Estimates of fair value are also
updated periodically together with such reviews. Collateral usually is not held against investment securities, and no such collateral was
held at 31 December 2021 and 2020.
An estimate of the fair value of collateral and other security enhancements held against financial assets is shown below:
Group – 31 December 2021
Loans and
advances to
banks
Loans and
advances to
customers
Commitments
outstanding
Contingent
liabilities
Total
USD
USD
USD
USD
USD
Cash or quasi cash
2,528,428
145,348,195
9,709,661
767,158
158,353,442
Property
-
56,686,127
34,187,304
-
90,873,431
Other
-
98,725,704
9,003,395
-
107,729,099
2,528,428
300,760,026
52,900,360
767,158
356,955,972
Group – 31 December 2020
Loans and
advances to
banks
Loans and
advances to
customers
Commitments
outstanding
Contingent
liabilities
Total
USD
USD
USD
USD
USD
Cash or quasi cash
4,799,198
126,854,935
10,944,353
715,848
143,314,334
Property
-
91,388,359
-
-
91,388,359
Other
-
106,926,074
7,753,880
-
114,679,954
4,799,198
325,169,368
18,698,233
715,848
349,382,647
Bank – 31 December 2021
Loans and
advances to
banks
Loans and
advances to
customers
Commitments
outstanding
Contingent
liabilities
Total
USD
USD
USD
USD
USD
Cash or quasi cash
2,528,428
61,798,827
9,709,661
767,158
74,804,074
Property
-
56,686,127
34,187,304
-
90,873,431
Other
-
98,724,487
9,003,395
-
107,727,882
2,528,428
217,209,441
52,900,360
767,158
273,405,387
FIMBank Group Annual Report & Financial Statements 2021
81
Bank – 31 December 2020
Loans and
advances to
banks
Loans and
advances to
customers
Commitments
outstanding
Contingent
liabilities
Total
USD
USD
USD
USD
USD
Cash or quasi cash
4,799,198
73,240,246
10,944,353
715,848
89,699,645
Property
-
91,388,359
-
-
91,388,359
Other
-
106,926,074
15,542,302
-
122,468,376
4,799,198
271,554,679
26,486,655
715,848
303,556,380
With the exception of cash collateral, as disclosed in this Note and in Notes 32 and 33, the Group and Bank do not carry financial
instruments which are subject to offsetting in the Statements of Financial Position. Group entities have a legal enforceable right to
offset such collaterals against the respective facilities for which the collateral is taken under default events. At 31 December 2021 and
2020, all financial assets and respective collaterals are disclosed separately in the Financial Statements without any offsetting.
See Accounting Policy 3.10.8.
When determining whether the risk of default on a financial instrument has increased significantly since initial recognition, the Group
considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both
quantitative and qualitative information and analysis, based on the Group’s historical experience and expert credit assessment and
including forward-looking information.
The objective of the assessment is to identify whether a significant increase in credit risk has occurred for an exposure by comparing:
the remaining lifetime PD as at the reporting date; with
the remaining lifetime PD for this point in time that was estimated at the time of initial recognition of the exposure (adjusted where
relevant for changes in prepayment expectations).
The Group uses three criteria for determining whether there has been a significant increase in credit risk:
quantitative test based on changes in internal credit ratings and changes in PD of obligors;
qualitative indicators; and
a backstop of 30 days past due.
The Group assesses whether credit risk has increased significantly since initial recognition at each reporting date. Determining whether
an increase in credit risk is significant depends on the characteristics of the financial instrument and the borrower, and the geographical
region.
As a general indicator, credit risk of a particular exposure is deemed to have increased significantly since initial recognition if, based on
the Group’s quantitative modelling, there is a two-grade deterioration from the rating at origination.
The credit risk may also be deemed to have increased significantly since initial recognition based on qualitative factors linked to the
Group’s credit risk management processes that may not otherwise be fully reflected in its quantitative analysis on a timely basis. This
will be the case for exposures that meet certain heightened risk criteria, such as placement on a watch list. Such qualitative factors are
based on its expert judgment and relevant historical experiences.
As a backstop, the Group considers that a significant increase in credit risk occurs no later than when an asset is more than 30 days past
due. Days past due are determined by counting the number of days since the earliest elapsed due date in respect of which full payment
has not been received. Due dates are determined without considering any grace period that might be available to the borrower.
FIMBank Group Annual Report & Financial Statements 2021
82
The Group applies a further backstop when the rating of the obligor reaches a level that is equivalent to a facility in arrears. A significant
increase in credit risk occurs where the obligor is internally graded below 7- (see below grading table).
If there is evidence that there is no longer a significant increase in credit risk relative to initial recognition, then the loss allowance on
an instrument returns to being measured as 12-month ECL. Some qualitative indicators of an increase in credit risk, such as delinquency
or forbearance, may be indicative of an increased risk of default that persists after the indicator itself has ceased to exist. In these cases,
the Group determines a probation period during which the financial asset is required to demonstrate good behaviour to provide
evidence that its credit risk has declined sufficiently. When contractual terms of a loan have been modified, evidence that the criteria
for recognising lifetime ECL are no longer met includes a history of up-to-date payment performance against the modified contractual
terms.
IFRS 9 allows low credit risk expedient for the purpose of allocating stages to the exposures based on the significant increase in credit
risk of the exposures. Under this expedient, an entity may assume that the credit risk on a financial instrument has not increased
significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date. Loans and
advances to related entities generally classify as having a low credit risk for the purpose of determining ECL in the separate financial
statements.
The Group applies this practical expedient to investment grade (BBB- and better) exposures.
The Group allocates each exposure to a credit risk grade based on a variety of data that is determined to be predictive of the risk of
default and applying experienced credit judgement. Credit risk grades are defined using qualitative and quantitative factors that are
indicative of risk of default. These factors vary depending on the nature of the exposure and the type of borrower.
Credit risk grades are defined and calibrated such that the risk of default occurring increases exponentially as the credit risk deteriorates
so, for example, the difference in risk of default between credit risk grades 1 and 2 is smaller than the difference between credit risk
grades 2 and 3.
Each exposure is allocated to a credit risk grade on initial recognition using Moody’s CreditLens or external credit agency rating, or
expert judgement based on the information available for the obligor. Exposures are subject to ongoing monitoring, which may result
in an exposure being moved to a different credit risk grade. The monitoring typically involves use of the following data:
information obtained during periodic review of customer files – e.g. audited financial statements, management accounts, budgets
and projections. Examples of areas of particular focus are: gross profit margins, financial leverage ratios, debt service coverage,
compliance with covenants, quality of management and senior management changes;
data from credit reference agencies, press articles and changes in external credit ratings;
actual and expected significant changes in the political, regulatory and technological environment of the borrower or in its business
activities;
payment record – this includes overdue status as well as a range of variables about payment ratios;
requests for and granting of forbearance; and
existing and forecast changes in business, financial and economic conditions.
The table below provides an indicative mapping of how the Group’s internal credit risk grades relate to conditional PD and to external
credit ratings of Moody’s or their equivalent.
Grading
12-month weighted-average PD
External rating
Grades 1 to 4- low risk
0.19%
Aaa-Baa3
Grades 5+ to 5- fair risk
0.63%
Ba1-Ba3
Grades 6+ to 7 substandard
2.92%
B1-Caa2
Grades 7- to 8- doubtful
19.52%
Caa3-Ca
Grades 9 to 10 loss
100.00%
C
FIMBank Group Annual Report & Financial Statements 2021
83
The term structure of PDs follows a two-staged approach. In the first instance, internal credit risk grades are mapped to Moody’s official
credit rating-scale table. Following this, the resultant credit rating is converted into a Point in Time (“PIT”) PD term structure using
Moody’s ‘Rating to PIT PD’ converter. This is done through statistical models which analyse the data collected and generate estimates
of the remaining lifetime PD of exposures and how these are expected to change as a result of the passage of time – based on the
obligor’s agency rating, country and industry information.
The Group considers a financial asset to be in default when:
the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realising
security (if any is held);
the borrower is more than 90 days past due on any material credit obligation to the Group. Overdrafts are considered as being past
due once the customer has breached an advised limit or been advised of a limit smaller than the current amount outstanding; or
it is becoming probable that the borrower will restructure the asset as a result of bankruptcy due to the borrower’s inability to pay
its credit obligations.
In assessing whether a borrower is in default, the Group considers indicators that are:
qualitative: e.g. breaches of covenant;
quantitative: e.g. overdue status and non-payment on another obligation of the same issuer to the Group; and
based on data developed internally and obtained from external sources.
Inputs into the assessment of whether a financial instrument is in default and their significance may vary over time to reflect changes
in circumstances. The Group has implemented the definition of default as per Article 178 of the CRR which stipulates that a default shall
be considered to have occurred when either or both of the following criteria are present: there are material credit obligations due by
the obligor which are more than 90 days past due and / or the obligor is considered as unlikely to pay its credit obligations without the
realization of collateral. This definition is used for the purpose of measuring ECL and identifying assets as having undergone a
significant increase in credit risk or being credit-impaired
The Group incorporates forward-looking information into both the assessment of whether the credit risk of an instrument has increased
significantly since its initial recognition and the measurement of ECL.
The Group formulates three economic scenarios: a base case, which is the median scenario assigned a 40% probability of occurring,
and two less likely scenarios, one upside and one downside, each assigned a 30% probability of occurring. Economic data for each of
the three scenarios, both historical and forecasted, are sourced from Moody’s Analytics on a quarterly basis. The historical data in
Moody’s Analytics’ model reflects economic data published by national statistical offices and by third party aggregators such as the
World Bank and the International Monetary Fund. Forecasting is done by Moody’s Analytics through its Global Macro Model which is
composed of a number of calculations that develop into relationships across series within each national economy. The parameters used
by the model are estimated using econometric techniques through observable historical covariation over the macroeconomic time
series.
Moody’s Analytics regularly updates the base case forecast and alternative scenarios. The upside and downside scenario will present
hypothetical events that push the economy away from the base case outlook. The base case forecast and the two alternative scenarios
are each assigned probability based on a distribution of average growth.
The Group uses Moody’s Analytics GCorr Macro
TM
model to link credit-risk factors to macroeconomic variables using the following
information for each counterparty: industry, country and sensitivity of the counterparty to systemic risk. The Group has identified and
documented key drivers of credit risk and credit losses. The key drivers of credit risk for portfolios are: GDP growth, unemployment
rates and equity prices. For exposures to specific industries and/or regions, the key drivers also include relevant commodity prices, such
as oil prices. The Group uses economic data from twelve different geographies which broadly represent the exposures carried by the
Group at reporting date. In cases where a specific country exposure is not available within these twelve geographies, the exposure
would be linked to the geography with the closest economic structure and credit risk.
FIMBank Group Annual Report & Financial Statements 2021
84
The economic scenarios for the top five geographies used as at 31 December 2021 included the following key indicators for the years
ending 31 December 2022 to 2026.
Year-on-year change
Country: Malta
2022
2023
2024
2025
2026
Equity
Base
15%
6%
5%
4%
6%
Upside
33%
0%
1%
3%
6%
Downside
-17%
18%
19%
8%
6%
GDP growth
Base
4%
3%
2%
2%
2%
Upside
6%
3%
2%
2%
2%
Downside
-2%
3%
3%
3%
2%
Country: Germany
2022
2023
2024
2025
2026
Equity
Base
0%
0%
0%
-1%
-1%
Upside
7%
2%
-3%
-4%
-2%
Downside
-15%
9%
2%
-1%
-1%
GDP growth
Base
3%
3%
2%
1%
1%
Upside
6%
3%
1%
1%
1%
Downside
-2%
4%
3%
2%
1%
Country: India
2022
2023
2024
2025
2026
Equity
Base
0%
1%
2%
4%
2%
Upside
7%
1%
2%
3%
3%
Downside
-21%
11%
5%
5%
3%
GDP growth
Base
8%
7%
6%
6%
5%
Upside
10%
8%
7%
6%
5%
Downside
-1%
7%
7%
5%
6%
Country: United Arab Emirates
2022
2023
2024
2025
2026
Equity
Base
0%
1%
2%
5%
5%
Upside
6%
-1%
1%
3%
5%
Downside
-25%
14%
12%
4%
1%
Oil price
Base
-18%
-3%
1%
4%
3%
Upside
-14%
1%
1%
4%
4%
Downside
-52%
31%
7%
9%
6%
Country: Italy
2022
2023
2024
2025
2026
Equity
Base
0%
3%
5%
6%
6%
Upside
12%
2%
2%
3%
5%
Downside
-24%
17%
10%
8%
7%
Eurozone GDP
Base
3%
2%
2%
2%
1%
Upside
5%
2%
2%
1%
1%
Downside
-3%
3%
3%
2%
2%
Eurozone unemployment
Base
-1%
-2%
0%
0%
0%
Upside
-9%
-3%
2%
3%
1%
Downside
24%
3%
-3%
-6%
-6%
The ECL is sensitive to judgements and assumptions made regarding formulation of forward-looking scenarios and how such scenarios
are incorporated into the calculations. Management performs a sensitivity analysis on the ECL recognised on material classes of its
assets.
The tables below show the loss allowance assuming each forward-looking scenario (e.g. base case, upside and downside) were
weighted 100% instead of applying scenario probability weights across the three scenarios. For ease of comparison, the tables also
include the probability-weighted amounts that are reflected in the Financial Statements. The model driven staging of exposures may
change under the different scenarios as described below and accordingly impact the extent of Stage 2 loans as a proportion of gross
exposure.
FIMBank Group Annual Report & Financial Statements 2021
85
Group – 31 December 2021
2021
Upside
Base Case
Downside
Probability-
weighted
USD
USD
USD
USD
Gross exposure
1,478,640,043
1,478,640,043
1,478,640,043
1,478,640,043
Loss allowance
81,717,835
82,174,423
85,553,746
83,689,617
Proportion of assets in Stage 2
11.95%
12.00%
27.29%
12.00%
Group – 31 December 2020
2020
Upside
Base Case
Downside
Probability-
weighted
USD
USD
USD
USD
Gross exposure
1,480,400,820
1,480,400,820
1,480,400,820
1,480,400,820
Loss allowance
103,116,506
103,690,952
108,752,530
106,106,391
Proportion of assets in Stage 2
12.89%
13.02%
25.94%
14.65%
Bank – 31 December 2021
2021
Upside
Base Case
Downside
Probability-
weighted
USD
USD
USD
USD
Gross exposure
1,556,627,074
1,556,627,074
1,556,627,074
1,556,627,074
Loss allowance
67,858,994
68,276,647
71,676,987
69,786,408
Proportion of assets in Stage 2
5.41%
5.41%
24.85%
5.41%
Bank – 31 December 2020
2020
Upside
Base Case
Downside
Probability-
weighted
USD
USD
USD
USD
Gross exposure
1,673,141,985
1,673,141,985
1,673,141,985
1,673,141,985
Loss allowance
79,610,103
80,057,579
84,310,063
82,260,870
Proportion of assets in Stage 2
7.16%
7.16%
16.40%
7.89%
FIMBank Group Annual Report & Financial Statements 2021
86
The Group has established policies requiring limits on counterparties and countries, and controls in relation to concentration to specific
sectors, and industries, thus ensuring a more diversified on- and off- balance sheet lending portfolios.
Single-name counterparty limits follow the prudential rules emanating from the CRR which apply maximum limits for large exposures.
A large exposure is defined as a consolidated exposure to a single entity or an economic group that exceeds 10% of a bank's regulatory
capital. The maximum limit for non-institutions is 25% of regulatory capital. The maximum limit for institutions is 25% of its regulatory
capital or EUR150 million whichever is the higher. Where the amount of EUR150 million is higher than 25% of the bank’s regulatory
capital a reasonable limit shall be determined by the Group which however shall not exceed 100% of regulatory capital. It must also be
noted that a further prudential rule-of-thumb followed by the Group on large exposures is that initial lending limits for new
counterparties are usually set at a much lower level than the Group’s legal lending limit. These limits might either remain at the original
level, based on ongoing credit research on the name, or build up towards the Group’s legal lending limit in a gradual manner, as the
knowledge of the counterparty by the Bank consolidates through time.
Concentration risk by geographical region is monitored by the BCC and supervised by the BRC. The Group monitors concentrations of
credit risk by geographic location based on the exposure country of the borrower (“country risk”). Country risk refers to risks associated
with the economic, social and political environment of the obligor’s exposure country. A component of country risk is transfer risk which
arises when a borrower’s obligation is not denominated in the respective local currency. The currency of the obligation may become
unavailable to the borrower regardless of its particular condition. The policy governing country risk concentration defines a ceiling – in
terms of percentage of the Group’s Own Funds – for each individual country exposure, which is linked to the rating granted to each
country by international rating agencies. The ceiling increases (up to a maximum of 100% of the Bank’s Own Funds for investment
grade countries) with the rating of the country. As for single-name limits, country limits do not automatically increase to the pre-defined
ceiling, as the initial assessment is based on the country’s specific economic, financial and political risk conditions. Group entities put
forward their business request and counterparty approval requests to the Group Head of Risk following a thorough review from the
local risk managers.
Concentration risk by sector is mitigated by the particular nature of the Group’s business, i.e. a specialised trade finance institution with
a focus on emerging markets. A significant portion of the Bank’s exposure relates to banks’ risk, located in a number of geographies
and hence diversified by virtue of the country limit policy specified in the above paragraph, which usually guarantee/confirm the
payment risk of the importers under international trade finance operations. Exposure to particular sectors is monitored indirectly
through monitoring of the trends of the underlying commodities. Exposure to corporate entities in many cases consists of bridge
financing towards a sale of goods/commodities which will eventually settle from receivables generated from the buyers of goods, bank
letters of credit, or even settled directly by the customer. Depending on the sector of exposure an overall sector limit might be assigned
by the Bank’s BCC, with such limits being reviewed regularly. These include specialised sectors such as ship demolition financing, which
is collateralised through a mortgage on each vessel financed, and real estate project financing, which is collateralised by a mortgage
over property.
As the Group carries out activities with counterparties in emerging markets, there are certain risk factors which are particular to such
activities and which require careful consideration by prospective investors since they are not usually associated with activities in more
developed markets. Such exposure relates to the risks of major political and economic changes including but not limited to, higher price
volatility, the effect of exchange control regulations and the risks of expropriation, nationalisation and/or confiscation of assets. The
ineffectiveness of the legal and judicial systems in some of the emerging markets, including those in which the Group is carrying out
activities, may pose difficulties for the Group in preserving its legal rights.
The BCC approves country limits after these are presented with reports covering the political and economic situations for each of the
countries to which a limit is issued.
FIMBank Group Annual Report & Financial Statements 2021
87
The following are the Group’s and Bank’s region concentrations:
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Balances with the Central Bank of Malta,
treasury bills and cash
– Europe
239,998,839
319,287,524
239,982,048
319,267,749
Trading assets
– Europe
87,976,874
106,398,354
-
-
– Sub-Saharan Africa
95,475,315
103,085,874
-
-
– Middle East and North Africa (MENA)
86,337,206
111,732,865
-
-
– Commonwealth of Independent States (CIS) region
15,082,254
12,460,725
-
-
– Others
155,113,554
118,648,729
-
-
Loans and advances to banks
– Europe
162,271,327
138,051,074
161,959,210
137,859,088
– Sub-Saharan Africa
2,765,778
11,644,118
2,765,778
11,644,118
– Middle East and North Africa (MENA)
16,747,208
26,406,481
11,649,034
24,723,229
– Commonwealth of Independent States (CIS) region
1,614,058
2,244,044
1,597,336
2,194,777
– Others
15,090,205
14,793,860
4,487,190
2,942,855
Loans and advances to customers
– Europe
222,236,329
257,553,603
455,547,583
517,069,974
– Sub-Saharan Africa
1,461,080
1,571,746
305,572
271,886
– Middle East and North Africa (MENA)
223,829,636
188,352,048
193,609,028
170,774,887
– Others
181,385,295
144,518,329
96,101,956
91,717,613
Financial assets at fair value through profit or loss
– Europe
19,119,728
20,385,323
19,119,728
20,385,323
– Middle East and North Africa (MENA)
846,435
-
846,435
-
Financial assets at fair value through other
comprehensive income
– Europe
162,408,542
153,327,686
162,408,542
153,327,686
Investments at amortised cost
– Middle East and North Africa (MENA)
9,914,754
9,839,457
9,914,754
9,839,457
Contingent liabilities
– Europe
1,556,735
1,569,969
38,933,563
43,906,453
– Middle East and North Africa (MENA)
393,799
340,449
393,799
340,449
– Others
-
-
-
-
Commitments
– Europe
69,430,972
59,312,946
66,152,348
67,286,011
– Sub-Saharan Africa
38,809,596
17,779,903
10,160,559
13,189,724
– Middle East and North Africa (MENA)
16,502,518
3,561,524
17,499,492
5,125,218
– Others
28,875,148
24,389,083
13,656,712
19,644,813
1,855,243,185
1,847,255,714
1,507,090,667
1,611,511,310
FIMBank Group Annual Report & Financial Statements 2021
88
The following are the Group’s and Bank’s sector concentrations:
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Balances with the Central Bank of Malta,
treasury bills and cash
– Financial intermediation
98,304,907
245,686,037
98,288,116
245,666,262
– Other services
141,693,932
73,601,487
141,693,932
73,601,487
Trading assets
– Industrial raw materials
71,443,833
65,792,606
-
-
– Shipping and transportation
665,080
-
-
-
– Wholesale and retail trade
46,268,358
41,668,103
-
-
– Financial intermediation
248,836,273
232,900,663
-
-
– Other services
72,771,659
111,965,175
-
-
Loans and advances to banks
– Financial intermediation
198,488,576
193,139,577
182,458,548
179,364,067
Loans and advances to customers
– Industrial raw materials
306,270,182
276,957,626
109,399,209
134,351,441
– Shipping and transportation
3,008,011
2,612,759
144,774
156,895
– Wholesale and retail trade
144,572,985
172,658,864
98,706,888
151,900,007
– Financial intermediation
64,111,105
52,532,220
414,106,815
382,836,339
– Real estate activities
32,052,981
29,404,238
57,273,782
58,237,698
– Other services
78,897,076
57,830,019
65,932,671
52,351,980
Financial assets at fair value through profit or loss
– Financial intermediation
19,913,086
20,332,246
19,913,086
20,332,246
– Other services
53,077
53,077
53,077
53,077
Financial assets at fair value through other
comprehensive income
– Shipping and transportation
11,059,246
5,008,684
11,059,246
5,008,684
– Financial intermediation
60,202,890
65,199,200
60,202,890
65,199,200
– Other services
91,146,406
83,119,802
91,146,406
83,119,802
Investments at amortised cost
– Financial intermediation
9,914,754
9,839,457
9,914,754
9,839,457
Contingent liabilities
– Industrial raw materials
293,676
613,359
293,676
613,359
– Wholesale and retail trade
372,754
396
372,754
396
– Financial intermediation
202,775
790,453
37,998,418
43,539,680
– Real estate activities
31,091
25,995
31,091
25,995
– Other services
1,050,238
480,215
631,423
67,472
Commitments
– Industrial raw materials
26,001,031
38,175,330
31,093,594
44,621,725
– Shipping and transportation
-
-
415,440
57,646
– Wholesale and retail trade
34,686,933
21,452,255
42,546,431
19,648,317
– Financial intermediation
65,024,247
22,145,958
19,691,378
21,441,523
– Real estate activities
12,082,711
18,255,332
12,082,711
18,255,332
– Other services
15,823,312
5,014,581
1,639,557
1,221,223
1,855,243,185
1,847,255,714
1,507,090,667
1,611,511,310
FIMBank Group Annual Report & Financial Statements 2021
89
Counterparty credit risk is defined as the risk that a counterparty to an over-the-counter derivative transaction may default before
completing the settlement of the transaction. An economic loss might occur if the transaction has a positive economic value at the time
of default.
Use of derivatives within the Group is limited to hedging balance-sheet positions, hedging capital investments, interest rate hedging
on behalf of LFC and, to a lesser extent, to satisfy customer requests (for example, for foreign exchange hedging). The Group’s Treasury
unit is responsible for the internal management of such instruments.
Such a risk is monitored through the setting up of counterparty limits to capture the position and settlement risks associated with
forward and other derivative instruments. The Group has in place operational procedures to mitigate these risks. Counterparty credit
risk is assigned a capital charge using the mark-to-market method, based on the residual maturities of the contracts.
Settlement risk arises through failed delivery versus payment (“DvP”) transactions and for all non-DvP trades. The Group faces
settlement risk due to the fact that few financial transactions are settled simultaneously or on a same day basis. Consequently, the
Group could suffer a loss if the counterparty fails to deliver on settlement date.
In order to mitigate against this risk, the Group has in place settlement lines where a limit is placed on the maximum settlement
exposure against a single counterparty. These limits are reviewed at least annually. Through the setting of these limits, the Group
ensures that it is not over-exposed to individual counterparties as a result of non-settlement of transactions. In addition, daily
reconciliations are made on all accounts held with correspondent banks to match transactions recorded on the various operating
systems, and any mismatches are investigated. This ensures timely detection of any non-settlement by counterparties so that
appropriate steps are taken to correct the issue.
Foreign exchange lending risk is the risk that borrowers default due to movements in foreign exchange rates. The Group lends primarily
in USD, but the customers of the Group may not necessarily operate in USD. As a result, foreign exchange rate movements could
negatively affect the Group’s borrowers. In the event that the currency of lending appreciates when compared to their currency of
operation, loan repayments may be more costly in real terms and may increase the Group’s probability of default.
Trade finance facilities are provided to customers that operate in USD. In fact, this is observed at initial stages of on-boarding. However,
in situations where this is not the case, the Group does not have specific mitigation measures to address FX lending risk but accepts
such risk as part of its business.
Liquidity risk is the risk that the Group may be unable to meet its obligations as they become due because of an inability to liquidate
assets or obtain adequate funding or that it cannot easily unwind or offset specific exposures without significantly lowering market
prices because of inadequate market depth or market disruptions.
Liquidity risk arises in the general funding of the Group’s activities and the management of positions. It includes both the risk of being
unable to fund assets at appropriate maturities and rates as well as the risk of being unable to liquidate an asset at a reasonable price
and in an appropriate time frame. The Group raises funds from deposits, other financial institutions (by means of loans and money
market placements), by issuing promissory notes and similar paper and through increases in share capital and plough back of profits.
In response to the impact of COVID-19, the Group maintained a strong liquidity profile with an elevated level of high-quality liquid
assets maintaining its Liquidity Coverage Ratio on average above 150% to mitigate the risk of unexpected liquidity outflows or
shortfalls; well above the regulatory minimum of 100%.
FIMBank Group Annual Report & Financial Statements 2021
90
Liquidity risk is managed by maintaining significant levels of liquid funds, and identifying and monitoring changes in funding required
to meet business goals driven by management.
The Group’s ALCO is responsible for establishing appropriate asset and liability management policies, monitoring their application and
reviewing financial information on the basis of which investment and funding decisions are taken. The daily application of the asset and
liability management policies rests with the Treasury unit of the Group.
The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s
reputation.
The Treasury unit receives information from other business units regarding the liquidity profile of their financial assets and liabilities
and details of other projected cash flows arising from projected future business. Treasury then maintains a portfolio of short-term liquid
assets, largely made up of short-term liquid investment securities, loans and advances to banks and other inter-bank facilities, to ensure
that sufficient liquidity is maintained within the Group as a whole. The liquidity requirements of business units and subsidiaries are met
through short-term loans from Treasury to cover any short-term fluctuations and longer term funding to address any structural liquidity
requirements.
When an operating subsidiary is subject to a liquidity limit imposed by its local regulator, the subsidiary is responsible for managing its
overall liquidity within the regulatory limit in co-ordination with Treasury. Treasury monitors compliance of all operating subsidiaries
with local regulatory limits on a daily basis.
The daily liquidity position is monitored and regular liquidity stress testing is conducted under a variety of scenarios covering both
normal and more severe market conditions. All liquidity policies and procedures are subject to review and approval by ALCO. Daily
reports cover the liquidity position of both the Bank and operating subsidiaries. A summary report, including any exceptions and
remedial action taken, is submitted regularly to ALCO.
The key measures used by the Group for managing liquidity risk are the following:
The LCR is a ratio of the Group’s buffer of unencumbered high quality liquid assets to its net liquidity outflows over a 30 calendar day
stress period. Net liquidity outflows are calculated by deducting the Group's liquidity inflows from its liquidity outflows. During a 30-
day stressed period, the Group should be able to convert quickly its liquid assets into cash without recourse to central bank liquidity or
public funds, which may result in its liquidity coverage ratio falling temporarily below the required minimum level. The regulatory LCR
minimum requirement is 100%. Additional disclosures are included within the Pillar III Disclosures Report.
FIMBank Group Annual Report & Financial Statements 2021
91
Group - 31 December 2021
Carrying amount
Gross nominal
inflow/
(outflow)
Less than
1 month
Between 1
& 3 months
Between 3
& 6 months
Between 6
months
& 1 year
Between 1
& 2 years
More than
2 years
USD
USD
USD
USD
USD
USD
USD
USD
Assets
Balances with the Central Bank of Malta, treasury
bills and cash
239,998,839
239,992,637
105,240,606
79,094,499
35,227,927
20,429,605
-
-
Trading assets
439,985,203
459,710,913
20,360,930
64,893,612
135,281,889
156,002,329
49,727,646
33,444,507
Derivative assets held for risk management
841,688
841,688
330,545
170,663
266,418
74,062
-
-
Loans and advances to banks
198,488,576
198,866,712
36,924,311
46,743,020
102,043,148
11,445,101
113,796
1,597,336
Loans and advances to customers
628,912,340
644,423,464
255,115,001
73,602,203
92,009,480
122,743,214
66,442,942
34,510,624
Financial assets at fair value through profit or loss
19,966,163
19,966,163
19,966,163
-
-
-
-
-
Financial assets at fair value through other
comprehensive income
162,408,542
169,616,733
-
5,143,337
3,022,131
5,007,838
14,246,625
142,196,802
Investments at amortised cost
9,914,754
11,422,623
-
-
751,869
-
10,670,754
-
Total assets
1,700,516,105
1,744,840,933
437,937,556
269,647,334
368,602,862
315,702,149
141,201,763
211,749,269
Liabilities
Derivative liabilities held for risk management
(1,499,026)
(1,499,026)
(988,530)
(167,245)
(254,632)
(70,904)
(17,715)
-
Amounts owed to banks
(563,553,044)
(563,657,262)
(235,068,025)
(91,023,200)
(84,021,494)
(75,742,540)
(55,663,470)
(22,138,533)
Amounts owed to customers
(934,096,196)
(935,314,919)
(459,948,649)
(219,389,020)
(108,880,494)
(145,136,626)
(1,144,523)
(815,607)
Debt securities in issue
(45,345,575)
(45,465,377)
(11,326,302)
(34,139,075)
-
-
-
-
Other liabilities – finance lease liabilities
(2,224,451)
(2,371,881)
(40,275)
(122,126)
(211,075)
(385,114)
(666,402)
(946,889)
Total liabilities
(1,546,718,292)
(1,548,308,465)
(707,371,781)
(344,840,666)
(193,367,695)
(221,335,184)
(57,492,110)
(23,901,029)
Liquidity gap
(269,434,225)
(75,193,332)
175,235,167
94,366,965
83,709,653
187,848,240
FIMBank Group Annual Report & Financial Statements 2021
92
Group - 31 December 2020
Carrying amount
Gross nominal
inflow/
(outflow)
Less than
1 month
Between 1
& 3 months
Between 3
& 6 months
Between 6
months
& 1 year
Between 1
& 2 years
More than
2 years
USD
USD
USD
USD
USD
USD
USD
USD
Assets
Balances with the Central Bank of Malta, treasury
bills and cash
319,287,524
319,269,288
245,667,800
40,492,695
23,303,759
9,805,034
-
-
Trading assets
452,326,547
474,594,995
20,160,865
73,094,244
120,746,166
164,246,820
62,945,831
33,401,069
Derivative assets held for risk management
991,624
991,624
381,065
255,757
154,494
103,641
-
96,667
Loans and advances to banks
193,139,577
193,709,545
77,835,418
25,758,577
24,834,507
62,765,055
321,211
2,194,777
Loans and advances to customers
591,995,726
605,559,596
336,552,900
102,270,292
46,567,201
22,753,339
38,461,848
58,954,016
Financial assets at fair value through profit or loss
20,385,323
20,385,323
20,385,323
-
-
-
-
-
Financial assets at fair value through other
comprehensive income
153,327,686
160,275,795
5,064,560
12,960,170
-
-
13,475,035
128,776,030
Investments at amortised cost
9,839,457
11,263,445
42,365
122,993
247,353
498,806
512,472
9,839,456
Total assets
1,741,293,464
1,786,049,611
706,090,296
254,954,728
215,853,480
260,172,695
115,716,397
233,262,015
Liabilities
Derivative liabilities held for risk management
(1,629,434)
(1,629,434)
(1,132,648)
(244,993)
(150,815)
(100,978)
-
-
Amounts owed to banks
(429,443,480)
(430,887,545)
(163,498,527)
(56,955,028)
(37,119,197)
(63,488,093)
(48,668,548)
(61,158,152)
Amounts owed to customers
(1,101,570,295)
(1,104,632,613)
(606,230,681)
(231,909,341)
(101,532,513)
(160,850,140)
(3,220,960)
(888,978)
Debt securities in issue
(50,832,661)
(51,007,014)
(15,963,617)
(16,637,317)
(18,406,080)
-
-
-
Other liabilities – finance lease liabilities
(2,416,376)
(2,569,346)
(36,045)
(159,098)
(402,576)
(403,344)
(562,599)
(1,005,684)
Total liabilities
(1,585,892,246)
(1,590,725,952)
(786,861,518)
(305,905,777)
(157,611,181)
(224,842,555)
(52,452,107)
(63,052,814)
Liquidity gap
(80,771,222)
(50,951,049)
58,242,299
35,330,140
63,264,290
170,209,201
FIMBank Group Annual Report & Financial Statements 2021
93
Bank - 31 December 2021
Carrying amount
Gross nominal
inflow/
(outflow)
Less than
1 month
Between 1
& 3 months
Between 3
& 6 months
Between 6
months
& 1 year
Between 1
& 2 years
More than
2 years
USD
USD
USD
USD
USD
USD
USD
USD
Assets
Balances with the Central Bank of Malta, treasury
bills and cash
239,982,048
239,975,846
105,223,815
79,094,499
35,227,927
20,429,605
-
-
Derivative assets held for risk management
841,688
841,688
330,545
170,663
266,418
74,062
-
-
Loans and advances to banks
182,458,548
182,743,756
28,891,686
46,734,928
93,976,423
11,429,587
113,796
1,597,336
Loans and advances to customers
745,564,139
770,306,022
159,339,704
159,912,767
188,631,659
134,341,041
58,087,355
69,993,496
Financial assets at fair value through profit or loss
19,966,163
19,966,163
19,966,163
-
-
-
-
-
Financial assets at fair value through other
comprehensive income
162,408,542
169,616,733
-
5,143,337
3,022,131
5,007,838
14,246,625
142,196,802
Investments at amortised cost
9,914,754
11,422,623
-
-
751,869
-
10,670,754
-
Total assets
1,361,135,882
1,394,872,831
313,751,913
291,056,194
321,876,427
171,282,133
83,118,530
213,787,634
Liabilities
Derivative liabilities held for risk management
(1,533,556)
(1,533,556)
(1,023,060)
(167,245)
(254,632)
(70,904)
(17,715)
-
Amounts owed to banks
(497,633,356)
(496,507,491)
(227,187,254)
(51,824,512)
(83,492,475)
(56,201,247)
(55,663,470)
(22,138,533)
Amounts owed to customers
(838,675,598)
(839,844,878)
(411,948,191)
(183,721,239)
(97,153,753)
(145,061,565)
(1,144,523)
(815,607)
Other liabilities – finance lease liabilities
(1,128,594)
(1,163,722)
(658,879)
(19,376)
(29,064)
(75,657)
(121,944)
(258,802)
Total liabilities
(1,338,971,104)
(1,339,049,647)
(640,817,384)
(235,732,372)
(180,929,924)
(201,409,373)
(56,947,652)
(23,212,942)
Liquidity gap
(327,065,471)
55,323,822
140,946,503
(30,127,240)
26,170,878
190,574,692
FIMBank Group Annual Report & Financial Statements 2021
94
Bank - 31 December 2020
Carrying amount
Gross nominal
inflow/
(outflow)
Less than
1 month
Between 1
& 3 months
Between 3
& 6 months
Between 6
months
& 1 year
Between 1
& 2 years
More than
2 years
USD
USD
USD
USD
USD
USD
USD
USD
Assets
Balances with the Central Bank of Malta, treasury
bills and cash
319,267,749
319,249,513
245,648,025
40,492,695
23,303,759
9,805,034
-
-
Derivative assets held for risk management
1,019,288
1,019,288
408,729
255,757
154,494
103,641
-
96,667
Loans and advances to banks
179,364,067
179,930,399
64,089,061
25,758,577
24,834,507
62,732,266
321,211
2,194,777
Loans and advances to customers
779,834,360
808,734,682
473,744,363
75,208,801
27,134,682
74,703,307
45,048,056
112,895,473
Financial assets at fair value through profit or loss
20,385,323
20,385,323
20,385,323
-
-
-
-
-
Financial assets at fair value through other
comprehensive income
153,327,686
160,275,795
5,064,560
12,960,170
-
-
13,475,035
128,776,030
Investments at amortised cost
9,839,457
11,263,445
42,365
122,993
247,353
498,806
512,472
9,839,456
Total assets
1,463,037,930
1,500,858,445
809,382,426
154,798,993
75,674,795
147,843,054
59,356,774
253,802,403
Liabilities
Derivative liabilities held for risk management
(1,629,434)
(1,629,434)
(1,132,648)
(244,993)
(150,815)
(100,978)
-
-
Amounts owed to banks
(387,900,641)
(388,772,600)
(149,626,584)
(37,049,483)
(35,420,335)
(56,849,498)
(48,668,548)
(61,158,152)
Amounts owed to customers
(1,037,118,337)
(1,038,776,823)
(582,675,126)
(218,933,161)
(92,973,520)
(140,446,968)
(3,103,390)
(644,658)
Other liabilities – finance lease liabilities
(2,864,380)
(2,960,976)
(753,262)
(20,993)
(173,546)
(824,183)
(776,474)
(412,518)
Total liabilities
(1,429,512,792)
(1,432,139,833)
(734,187,620)
(256,248,630)
(128,718,216)
(198,221,627)
(52,548,412)
(62,215,328)
Liquidity gap
75,194,806
(101,449,637)
(53,043,421)
(50,378,573)
6,808,362
191,587,075
FIMBank Group Annual Report & Financial Statements 2021
95
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices.
Market risk comprises four types of risk: foreign exchange risk, interest rate risk, position risk and other price risk. The objective of
market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return
on risk.
The Group manages these risks as noted below and furthermore, they are tracked by the Asset-Liability Committee on a monthly basis
using various metrics and by the Board Risk Committee on a quarterly basis against the Bank’s Risk Appetite Statement.
The Group’s bond portfolio (other price risk) is largely comprised of investments in bonds issued by the governments of countries in the
European Union and European banks. It is to be noted that the Bank’s purchase of government and bank bonds is primarily for the
purposes of liquidity management, albeit profit on bonds may be crystallised from time-to-time, and ECB initiatives to support the
Eurozone has moderated volatility in these assets and maintained liquidity.
The forfaiting portfolio (position risk) is comprised of assets originating from banks and companies operating in many market sectors
in a very broad range of countries, the majority of which are emerging markets. The Group regularly updates its mark-to-market
positions and recording the unrealized and realized profits and losses. The performance of this portfolio remained within risk
parameters and well within the stress tests applied as part of the regular ICAAP process; where stresses applied in 2021 assumes
ongoing concerns about the possible evolution of the COVID-19 pandemic that would prolong the economic contraction.
The Group manages its interest rate risk using an in-house Interest Rate Risk in the Banking Book (‘IRRBB’) model that considers the
maturity mismatch for its primary currencies and the effect the 6 European Central Bank mandated interest rate shock scenarios have
on Net Interest Income (‘NII’) and the Economic Value of Equity (‘EVE’). Foreign exchange risk is managed at a Group level with a
relatively low tolerance for open market positions with currency hedges purchased as necessary.
Foreign exchange risk is attached to those monetary assets and monetary liabilities of the Group that are not denominated in the
functional currency of the Group. Transactional exposures give rise to foreign currency gains and losses that are recognised in the
Statements of Profit or Loss. Currency risk is mitigated by a closely monitored currency position and is managed through matching
within the foreign currency portfolio and capital hedging.
However, mismatches could arise where the Group enters into foreign exchange transactions (for example, foreign currency swaps)
which could result in an on-balance sheet mismatch mitigated by an off-balance sheet hedging contract. Other mismatches are allowed
up to an established threshold, and any excesses are regularised immediately. The Group ensures that its net exposure is kept to an
acceptable level by buying and selling foreign currencies spot or forward rates when considered appropriate.
FIMBank Group Annual Report & Financial Statements 2021
96
Group - 31 December 2021
All amounts are expressed in USD
In reporting
currency
EUR
INR
Other
currencies
Total
Assets
Balances with the Central Bank of Malta,
treasury bills and cash 4,291 239,990,565 158 3,825 239,998,839
Trading assets
310,064,673
120,605,927
-
9,314,603
439,985,203
Loans and advances to banks
10,235,233
172,362,945
10,903,665
4,986,733
198,488,576
Loans and advances to customers
324,059,128
255,073,849
22,847,679
26,931,684
628,912,340
Financial assets at fair value through
profit or loss 899,512 19,066,651 -
-
19,966,163
Financial assets at fair value
through other comprehensive income 54,820,240 107,588,302 -
-
162,408,542
Investments at amortised cost
-
-
-
9,914,754
9,914,754
Other assets
5,380,123
1,988,442
11,026,880
29,020
18,424,465
Liabilities
Amounts owed to banks
(384,742,995)
(160,511,176)
(2,691,699)
(15,607,174)
(563,553,044)
Amounts owed to customers
(197,385,930)
(726,303,696)
(111,369)
(10,295,201)
(934,096,196)
Debt securities in issue
-
(45,345,575)
-
-
(45,345,575)
Other liabilities
(11,571,439)
(5,247,466)
(933,321)
(2,280,631)
(20,032,857)
Net on balance sheet financial position
111,762,836
(20,731,232)
41,041,993
22,997,613
155,071,210
Notional amount of derivative
Instruments held for risk
management
49,855,270
13,722,001
(40,200,000)
(23,377,271)
-
Net foreign exchange exposure
(7,009,231)
841,993
(379,658)
The USD40.2m (2020: USD44.8m) derivative instruments are held by the Bank to manage the risk of INR foreign exchange risk that
occurs on consolidation.
FIMBank Group Annual Report & Financial Statements 2021
97
Group - 31 December 2020
All amounts are expressed in USD
In reporting
currency
EUR
INR
Other
currencies
Total
Assets
Balances with the Central Bank of Malta,
treasury bills and cash 4,247 319,275,218 245 7,814 319,287,524
Trading assets
294,254,934
148,996,727
-
9,074,886
452,326,547
Loans and advances to banks
35,088,241
145,957,692
9,249,938
2,843,706
193,139,577
Loans and advances to customers
269,047,917
290,268,588
20,143,552
12,535,669
591,995,726
Financial assets at fair value through
profit or loss 53,077 20,332,246 - - 20,385,323
Financial assets at fair value
through other comprehensive income 55,918,787 97,408,899 - - 153,327,686
Investments at amortised cost
-
-
-
9,839,457
9,839,457
Other assets
7,026,566
2,165,000
11,331,012
889,444
21,412,022
Liabilities
Amounts owed to banks
(275,097,578)
(149,502,499)
-
(4,843,403)
(429,443,480)
Amounts owed to customers
(257,889,811)
(829,213,854)
(110,517)
(14,356,113)
(1,101,570,295)
Debt securities in issue
-
(50,832,661)
-
-
(50,832,661)
Other liabilities
(9,436,899)
(4,701,201)
(1,050,602)
(2,223,322)
(17,412,024)
Net on balance sheet financial position
118,969,481
(9,845,845)
39,563,628
13,768,138
162,455,402
Notional amount of derivative
Instruments held for risk
management
55,208,397
2,675,108
(44,800,000)
(13,083,505)
-
Net foreign exchange exposure
(7,170,737)
(5,236,372)
684,633
Bank - 31 December 2021
All amounts are expressed in USD
In reporting
currency
EUR
INR
Other
currencies
Total
Assets
Balances with the Central Bank of Malta,
treasury bills and cash
-
239,981,630
-
418
239,982,048
Loans and advances to banks
8,101,051
172,052,595
-
2,304,902
182,458,548
Loans and advances to customers
434,938,420
298,133,587
-
12,492,132
745,564,139
Financial assets at fair value through
profit or loss
899,512
19,066,651
-
-
19,966,163
Financial assets at fair value through other
comprehensive income
54,820,240
107,588,302
-
-
162,408,542
Investments at amortised cost
-
-
-
9,914,754
9,914,754
Other assets
42,759
1,531,048
49
241,874
1,815,730
Liabilities
Amounts owed to banks
(350,701,479)
(146,891,877)
-
(40,000)
(497,633,356)
Amounts owed to customers
(130,845,258)
(707,174,512)
-
(655,828)
(838,675,598)
Other liabilities
(2,944,696)
(4,455,558)
-
(757,532)
(8,157,786)
Net on balance sheet financial position
14,310,549
(20,168,134)
49
23,500,720
17,643,184
Notional amount of derivative
Instruments held for risk
management
49,855,270
13,722,001
(40,200,000)
(23,377,271)
-
Net foreign exchange exposure
(6,446,133)
(40,199,951)
123,449
FIMBank Group Annual Report & Financial Statements 2021
98
Bank - 31 December 2020
All amounts are expressed in USD
In reporting
currency
EUR
INR
Other
currencies
Total
Assets
Balances with the Central Bank of Malta,
treasury bills and cash
-
319,265,738
-
2,011
319,267,749
Loans and advances to banks
32,291,779
145,850,466
-
1,221,822
179,364,067
Loans and advances to customers
420,765,401
348,452,118
-
10,616,841
779,834,360
Financial assets at fair value through
profit or loss
53,077
20,332,246
-
-
20,385,323
Financial assets at fair value through other
comprehensive income
55,918,787
97,408,899
-
-
153,327,686
Investments at amortised cost
-
-
-
9,839,457
9,839,457
Other assets
52,319
1,759,381
4,127
1,073,961
2,889,788
Liabilities
Amounts owed to banks
(261,066,423)
(126,714,602)
-
(119,616)
(387,900,641)
Amounts owed to customers
(218,545,685)
(810,464,365)
-
(8,108,287)
(1,037,118,337)
Other liabilities
(3,550,538)
(3,968,296)
-
(299,705)
(7,818,539)
Net on balance sheet financial position
25,918,717
(8,078,415)
4,127
14,226,484
32,070,913
Notional amount of derivative
Instruments held for risk
management
55,208,397
2,675,108
(44,800,000)
(13,083,505)
-
Net foreign exchange exposure
(5,403,307)
(44,795,873)
1,142,979
The following exchange rates were applied during the year:
Average rate
Reporting date
mid-spot rate
2021
2020
2021
2020
1 EUR
1.1825
1.1398
1.1326
1.2271
1 INR
0.0135
0.0135
0.0135
0.0137
A 7% strengthening of the following currencies against the US Dollar at 31 December would have increased/(decreased) equity and/or
profit or loss by amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.
Group
Bank
Equity
Profit or
loss
Equity
Profit or
loss
USD
USD
USD
USD
2021
EUR
(490,646)
(490,646)
(451,229)
(451,229)
INR
58,940
-
(2,813,997)
(2,813,997)
Other currencies
(26,576)
(26,576)
8,641
8,641
2020
EUR
(501,951)
(501,951)
(378,231)
(378,231)
INR
(366,546)
-
(3,135,711)
(3,135,711)
Other currencies
47,924
47,924
80,009
80,009
A 7% weakening of the above currencies against the US Dollar at 31 December would have an equal but opposite effect on the above
currencies to the amounts shown above, on the basis that all other variables remain constant.
FIMBank Group Annual Report & Financial Statements 2021
99
Position risk in traded debt instruments refers to the risk of adverse effects on the value of positions in the trading book of general
movements in market interest rates or prices or movements specific to the issuer of a security.
Interest rate risk refers to the risk to earnings from the Group’s financial instruments, both in the trading and non-trading books, to
movements in interest rates. The risk impacts the earnings and equity of the Group as a result of changes in the economic value of its
assets, liabilities and off-balance sheet instruments. The Group’s operations are subject to interest rate fluctuations to the extent that
interest-earning assets and interest-bearing liabilities mature or re-price at different times or at different amounts.
Accordingly, interest rate risk is managed through the use of maturity/re-pricing schedules that distribute interest-bearing assets and
liabilities into different time bands. The determination of each instrument into the appropriate time period is dependent on the
contractual maturity (if fixed rate) or time remaining to their next re-pricing date (if floating rate). This method also referred to as ‘gap
analysis’, will eventually portray the Group’s sensitivity of earnings. On the other hand, the modified duration method is used to
measure the sensitivity of equity valuation to changes in interest rates.
A positive, or asset-sensitive, gap arises when assets (both on- and off-balance sheet) exceed liabilities in the corresponding time band,
and this implies that the Group’s net interest income (and therefore capital) could decline as a result of a decrease in the level of interest.
To the contrary, a negative, or liability-sensitive, gap implies that net interest income could decrease as a result of an increase in interest
rates.
Interest rate risk in the banking book (IRRBB) is managed on a monthly basis. Additional disclosures are included within the Pillar III
Disclosures Report.
FIMBank Group Annual Report & Financial Statements 2021
100
Group – 31 December 2021
Less than
1 month
Between
1 & 3 months
Between
3 & 6 months
Between
6 months
& 1 year
More than
1 year
Non-interest
bearing
Total
USD
USD
USD
USD
USD
USD
USD
Assets
Balances with the Central Bank of Malta, treasury bills and cash
98,280,828
-
-
-
-
141,718,011
239,998,839
Trading assets
-
-
-
-
-
439,985,203
439,985,203
Loans and advances to banks
2,198,487
45,849,623
101,859,284
11,330,122
-
37,251,060
198,488,576
Loans and advances to customers
398,196,134
12,408,888
26,153,547
11,765,498
2,597
180,385,676
628,912,340
Financial assets at fair value through profit or loss
-
-
-
-
-
19,966,163
19,966,163
Financial assets at fair value through other comprehensive income
-
5,011,000
3,003,300
4,998,000
148,599,518
796,724
162,408,542
Investments at amortised cost
-
-
9,917,355
-
-
(2,601)
9,914,754
Other assets
-
-
-
-
-
88,797,933
88,797,933
Total assets
498,675,449
63,269,511
140,933,486
28,093,620
148,602,115
908,898,169
1,788,472,350
Liabilities
Amounts owed to banks
171,105,298
78,729,679
82,200,000
62,100,414
79,284,177
90,133,476
563,553,044
Amounts owed to customers
316,071,119
177,657,319
90,300,069
143,938,104
1,874,654
204,254,931
934,096,196
Debt securities in issue
11,285,407
33,940,299
-
-
-
119,869
45,345,575
Other liabilities
-
-
-
-
-
21,497,352
21,497,352
Equity
-
-
-
-
-
223,980,183
223,980,183
Total liabilities and equity
498,461,824
290,327,297
172,500,069
206,038,518
81,158,831
539,985,811
1,788,472,350
Less than
3 months
Between
3 & 6 months
Between
6 months
&1 year
More than
1 year
Non-interest
bearing
Total
USD
USD
USD
USD
USD
USD
Assets
561,944,960
140,933,486
28,093,620
148,602,115
908,898,169
1,788,472,350
Liabilities
(788,789,121)
(172,500,069)
(206,038,518)
(81,158,831)
(539,985,811)
(1,788,472,350)
Interest sensitivity gap
(226,844,161)
(31,566,583)
(177,944,898)
67,443,284
368,912,358
-
Cumulative gap
(226,844,161)
(258,410,744)
(436,355,642)
(368,912,358)
-
-
Change in interest rate for the
period:
200bps increase
(3,402,662)
(315,666)
(296,575)
200bps decrease
3,402,662
315,666
296,575
FIMBank Group Annual Report & Financial Statements 2021
101
Group – 31 December 2020
Less than
1 month
Between
1 & 3 months
Between
3 & 6 months
Between
6 months
& 1 year
More than
1 year
Non-interest
bearing
Total
USD
USD
USD
USD
USD
USD
USD
Assets
Balances with the Central Bank of Malta, treasury bills and cash
245,785,027
-
-
-
-
73,502,497
319,287,524
Trading assets
93,941,083
155,650,395
85,556,941
89,255,904
23,685,472
4,236,752
452,326,547
Loans and advances to banks
32,396,387
25,770,033
25,156,461
61,927,844
-
47,888,852
193,139,577
Loans and advances to customers
365,698,846
33,083,018
20,341,094
2,890,995
56,770
169,925,003
591,995,726
Financial assets at fair value through profit or loss
-
-
-
-
-
20,385,323
20,385,323
Financial assets at fair value through other comprehensive income
5,006,000
12,369,616
-
-
134,749,568
1,202,502
153,327,686
Investments at amortised cost
9,855,453
-
-
-
-
(15,996)
9,839,457
Other assets
-
-
-
-
-
93,744,183
93,744,183
Total assets
752,682,796
226,873,062
131,054,496
154,074,743
158,491,810
410,869,116
1,834,046,023
Liabilities
Amounts owed to banks
84,817,155
46,317,155
36,524,926
61,616,721
110,442,999
89,724,524
429,443,480
Amounts owed to customers
451,946,805
201,037,001
101,183,012
143,614,995
3,631,871
200,156,611
1,101,570,295
Debt securities in issue
15,907,032
16,558,799
18,250,092
-
-
116,738
50,832,661
Other liabilities
-
-
-
-
-
19,041,458
19,041,458
Equity
-
-
-
-
-
233,158,129
233,158,129
Total liabilities and equity
552,670,992
263,912,955
155,958,030
205,231,716
114,074,870
542,197,460
1,834,046,023
Less than
3 months
Between
3 & 6 months
Between
6 months
&1 year
More than
1 year
Non-interest
bearing Total
USD
USD
USD
USD
USD
USD
Assets
979,555,858
131,054,496
154,074,743
158,491,810
410,869,116
1,834,046,023
Liabilities
(816,583,947)
(155,958,030)
(205,231,716)
(114,074,870)
(542,197,460)
(1,834,046,023)
Interest sensitivity gap
162,971,911
(24,903,534)
(51,156,973)
44,416,940
(131,328,344)
-
Cumulative gap
162,971,911
138,068,377
86,911,404
131,328,344
-
-
Change in interest rate for the
period:
200bps increase
2,444,579
(249,035)
(85,262)
200bps decrease
(2,444,579)
249,035
85,262
FIMBank Group Annual Report & Financial Statements 2021
102
Bank – 31 December 2021
Less than
1 month
Between
1 & 3 months
Between
3 & 6 months
Between
6 months
& 1 year
More than
1 year
Non-interest
bearing
Total
USD
USD
USD
USD
USD
USD
USD
Assets
Balances with the Central Bank of Malta, treasury bills and cash
98,280,828
-
-
-
-
141,701,220
239,982,048
Loans and advances to banks
2,078,609
45,842,928
93,976,423
11,315,479
-
29,245,109
182,458,548
Loans and advances to customers
633,423,204
15,814,564
18,687,760
1,558,934
-
76,079,677
745,564,139
Financial assets at fair value through profit or loss
-
-
-
-
-
19,966,163
19,966,163
Financial assets at fair value through other comprehensive income
-
5,011,000
3,003,300
4,998,000
148,599,518
796,724
162,408,542
Investments at amortised cost
-
-
9,917,355
-
-
(2,601)
9,914,754
Other assets
-
-
-
-
-
186,281,636
186,281,636
Total assets
733,782,641
66,668,492
125,584,838
17,872,413
148,599,518
454,067,928
1,546,575,830
Liabilities
Amounts owed to banks
138,500,000
50,000,000
82,200,000
57,570,506
79,284,177
90,078,673
497,633,356
Amounts owed to customers
309,414,846
177,657,319
95,529,674
143,968,176
1,874,654
110,230,929
838,675,598
Other liabilities
-
-
-
-
-
9,656,812
9,656,812
Equity
-
-
-
-
-
200,610,064
200,610,064
Total liabilities and equity
447,914,846
227,657,319
177,729,674
201,538,682
81,158,831
410,576,478
1,546,575,830
Less than
3 months
Between
3 & 6 months
Between
6 months
& 1 year
More than
1 year
Non-interest
bearing
Total
USD
USD
USD
USD
USD
USD
Assets
800,451,133
125,584,838
17,872,413
148,599,518
454,067,928
1,546,575,830
Liabilities
(675,572,165)
(177,729,674)
(201,538,682)
(81,158,831)
(410,576,478)
(1,546,575,830)
Interest sensitivity gap
124,878,968
(52,144,836)
(183,666,269)
67,440,687
43,491,450
-
Cumulative gap
124,878,968
72,734,132
(110,932,137)
(43,491,450)
-
-
Change in interest rate for the
period:
200bps increase
1,873,185
(521,448)
(306,110)
200bps decrease
(1,873,185)
521,448
306,110
FIMBank Group Annual Report & Financial Statements 2021
103
Bank – 31 December 2020
Less than
1 month
Between
1 & 3 months
Between
3 & 6 months
Between
6 months
& 1 year
More than
1 year
Non-interest
bearing
Total
USD
USD
USD
USD
USD
USD
USD
Assets
Balances with the Central Bank of Malta, treasury bills and cash
245,785,027
-
-
-
-
73,482,722
319,267,749
Loans and advances to banks
32,347,523
25,770,033
25,156,461
61,927,844
-
34,162,206
179,364,067
Loans and advances to customers
629,690,759
28,578,930
15,704,363
8,812
5,030,340
100,821,156
779,834,360
Financial assets at fair value through profit or loss
-
-
-
-
-
20,385,323
20,385,323
Financial assets at fair value through other comprehensive income
5,006,000
12,369,616
-
-
134,749,568
1,202,502
153,327,686
Investments at amortised cost
9,855,453
-
-
-
-
(15,996)
9,839,457
Other assets
-
-
-
-
-
177,209,478
177,209,478
Total assets
922,684,762
66,718,579
40,860,824
61,936,656
139,779,908
407,247,391
1,639,228,120
Liabilities
Amounts owed to banks
61,000,000
36,500,000
35,000,000
55,295,006
110,442,999
89,662,636
387,900,641
Amounts owed to customers
450,562,302
201,037,001
97,871,004
143,647,576
3,631,871
140,368,583
1,037,118,337
Other liabilities
-
-
-
-
-
9,447,973
9,447,973
Equity
-
-
-
-
-
204,761,169
204,761,169
Total liabilities and equity
511,562,302
237,537,001
132,871,004
198,942,582
114,074,870
444,240,361
1,639,228,120
Less than
3 months
Between
3 & 6 months
Between
6 months
& 1 year
More than
1 year
Non-interest
bearing
Total
USD
USD
USD
USD
USD
USD
Assets
989,403,341
40,860,824
61,936,656
139,779,908
407,247,391
1,639,228,120
Liabilities
(749,099,303)
(132,871,004)
(198,942,582)
(114,074,870)
(444,240,361)
(1,639,228,120)
Interest sensitivity gap
240,304,038
(92,010,180)
(137,005,926)
25,705,038
(36,992,970)
-
Cumulative gap
240,304,038
148,293,858
11,287,932
36,992,970
-
-
Change in interest rate for the
period:
200bps increase
3,604,561
(920,102)
(228,343)
200bps decrease
(3,604,561)
920,102
228,343
FIMBank Group Annual Report & Financial Statements 2021
104
An increase of 200 basis points at the reporting date would result in a decrease in equity and profit or loss for the Group by the amounts
shown below. However, for the Bank this increase would result in an increase in equity and profit or loss by the amounts shown below.
This analysis assumes that all other variables, in particular foreign currency rates, remain constant.
Group
Bank
Equity
Profit or loss
Equity
Profit or loss
USD
USD
USD
USD
2021
(4,014,903)
(4,014,903)
1,045,626
1,045,626
2020
2,110,282
2,110,282
2,456,116
2,456,116
A decrease of 200 basis points at the reporting date would have equal but opposite effect on the above instruments to the amounts
shown above, on the basis that all other variables remain constant.
A fundamental reform of major interest rate benchmarks is being undertaken globally, replacing some interbank offered rates (“IBOR”)
with alternative nearly risk-free rates (“RFR”), referred to as ‘IBOR reform’. The Group has significant exposure to certain IBORs on its
financial instruments that are being reformed as part of these market-wide initiatives.
The main risks to which the Group has been exposed as a result of IBOR reform are operational. For example, the renegotiation of loan
contracts through bilateral negotiation with customers, updating of contractual terms, updating of systems, revision of operational
controls related to the reform, as well as managing related tax and accounting implications and regulatory risks. Financial risk is
predominantly limited to interest rate risk.
The Group established an IBOR Conversion Steering Committee to manage its transition to alternative rates. The objectives of the
IBOR Committee include evaluating the extent to which loans advanced, loan commitments, liabilities, derivatives and leases reference
IBOR cash flows, whether such contracts need to be amended as a result of IBOR reform and how to manage communication about
IBOR reform with counterparties.
The Group has engaged an external consultancy company to conduct respective impact analysis and provide strategic
recommendations and best practices on how to efficiently conduct this transition. Following the recommendations received, the Group
has implemented an IBOR conversion project, appointing an IBOR Conversion Steering Committee, Program Manager, Project
Manager and Project Team, which consists of senior and experienced representatives from main areas of the Group. The respective
comprehensive project plan was prepared and executed by the Project Team, who have been collaborating with other business
functions as needed. The IBOR Committee provides periodic updates to the Board Review and Implementation Committee (“BRIC”).
For contracts indexed to an IBOR that mature after the expected cessation of the IBOR rate, the IBOR Committee has established
policies to amend the contractual terms. These amendments include the addition of fallback clauses or replacement of the IBOR rate
with an alternative benchmark rate.
The Bank’s risk exposure that is directly affected by the interest rate benchmark reform predominantly comprises its trade finance and
real estate loans, factoring agreements and its forfaiting portfolio which are measured at amortised cost or at fair value through profit
or loss. Such instruments are, in the absolute majority, denominated in USD, EUR and GBP and have floating rates linked to IBOR. The
value of such financial instruments in the books of the Group is extensive, although several contracts have short term tenures which
matured before the end of 2021 and therefore were not affected by the IBOR Reform since LIBOR rates were available until 31
December 2021.
The IBOR Conversion Steering Committee approved a policy requiring that, with effect from 5 October 2021:
all newly originated floating-rate contracts denominated in EUR and GBP, to be referenced to €STR, EURIBOR and SONIA forward
looking term-rates;
existing floating-rate contracts denominated in EUR and GBP, to be converted to €STR, EURIBOR and SONIA forward looking term-
rates by 31 December 2021;
a flexible approach to be adopted allowing for new contracts denominated in USD to be referenced to either LIBOR or SOFR until
full market readiness is detected.
FIMBank Group Annual Report & Financial Statements 2021
105
The Group initiated communication with counterparties, confirming the specific changes being implemented. The Group continues to
engage with industry participants and counterparties to ensure an orderly transition to risk free rates and to minimise the risks arising
from transition.
The table below sets out the IBOR rates that the Group had exposure to, the new benchmark rates to which these exposures have or are
being transitioned:
Currency
Benchmark before reform
Benchmark after reform
USD
USD LIBOR
SOFR
EUR
EURO EURIBOR
EURIBOR reformed
EUR
EONIA
€STR
GBP
GBP LIBOR
SONIA
In March 2021, the Financial Conduct Authority (FCA), as the regulator of ICE (the authorised administrator of LIBOR), announced that
after 31 December 2021 LIBOR settings for sterling, euro and the one-week and two-month US dollar settings will either cease to be
provided or no longer be representative. The remaining US dollar settings will either cease to be provided or no longer be representative
after 30 June 2023.
The following table contains details of all the financial instruments held by the Group, which have transitioned to risk free rates or
currently being transitioned to risk free rates at 31 December 2021:
As at 31 December 2021
Carrying amount
Of which:
subject to IBOR
reform
Of which:
subject to IBOR
reform and have yet
to transition to an
alternative
benchmark interest
rate
USD
USD
USD
Non-derivative assets measured at amortised cost
Balances with Central Bank, treasury bills & cash
EUR
240,110,161
-
-
GBP
3,407
-
-
USD
4,291
-
-
Other
577
-
-
240,118,436
-
-
Financial assets at amortised cost
Other
9,972,376
-
-
9,972,376
-
-
Financial assets at fair value through OCI
EUR
107,588,301
-
-
USD
54,820,241
-
-
162,408,542
-
-
Loans and advances to banks
EUR
172,362,946
66,969
-
GBP
1,982,529
-
-
USD
10,603,872
443,361
-
Other
13,925,380
-
-
198,874,727
510,330
-
Loans and advances to customers
EUR
277,837,174
180,889,850
-
GBP
8,855,894
3,002,396
-
USD
371,458,011
142,211,804
103,884,269
Other
53,546,115
-
-
711,697,194
326,104,050
103,884,269
Non-derivative assets measured at fair value through
profit or loss
Trading Assets
EUR
120,605,928
-
-
GBP
9,314,603
-
-
USD
310,064,672
182,993,967
182,993,967
439,985,203
182,993,967
182,993,967
FIMBank Group Annual Report & Financial Statements 2021
106
The following table contains details of all the financial instruments held by the Bank, which have transitioned to risk free rates or
currently being transitioned to risk free rates at 31 December 2021:
As at 31 December 2021
Carrying amount
Of which:
subject to IBOR
reform
Of which:
subject to IBOR
reform and have yet
to transition to an
alternative
benchmark interest
rate
USD
USD
USD
Non-derivative assets measured at amortised cost
Balances with Central Bank, treasury bills & cash
EUR
240,101,227
-
-
GBP
418
-
-
240,101,645
-
-
Financial assets at amortised cost
Other
9,972,376
-
-
9,972,376
-
-
Financial assets at fair value through OCI
EUR
107,588,301
-
-
USD
54,820,241
-
-
162,408,542
-
-
Loans and advances to banks
EUR
172,052,595
66,969
-
GBP
1,915,736
-
-
USD
8,469,417
443,361
-
Other
389,163
-
-
182,826,911
510,330
-
Loans and advances to customers
EUR
320,824,100
267,823,661
-
GBP
13,139,243
1,934,870
-
USD
480,557,782
361,884,515
323,556,980
814,521,125
631,643,046
323,556,980
FIMBank Group Annual Report & Financial Statements 2021
107
The Group is also exposed to price risk on other assets (i.e. other than traded debt instruments) that arises out of changes in market
values not related to changes in interest rates or foreign currency. Generally, these would be factors directly related to the issuer’s or
exposure’s financial stability and performance.
The Group is exposed to price risk which arises from debt investments measured at fair value through other comprehensive income, as
well as equity investments measured at fair value through profit or loss. Price risk is deemed to be less relevant for the forfaiting
portfolio. Investments recorded at fair value through other comprehensive income and fair value through profit or loss are both
measured by reference to their market values in active markets.
For marketable securities, price risk is mainly mitigated by investing in a diversified portfolio of instruments in industries and regions
where the Group has specialised knowledge and expertise. The marketable securities portfolio is monitored on a daily basis and
decisions to sell assets prior to or to hold until maturity depends on the Group’s outlook of the underlying assets as well as liquidity
requirements and profit opportunity arising out of the disposal of an instrument. Changes in the market value of marketable securities
would directly impact equity.
The financial assets designated at fair value through profit or loss include equity shares in sub-funds of a local collective investment
scheme. It is assumed that units held in the funds are not easily liquidated, particularly under stress, hence these investments are
considered as non-high quality liquid assets (“non-HQLAs”). Additionally, the financial assets designated at fair value through other
comprehensive income include a mixture of HQLA and non-HQLAs. All things being equal, the less liquid the assets are, the more their
susceptibility to price risk.
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Financial assets at fair value through profit or loss
19,966,163
20,385,323
19,966,163
20,385,323
Financial assets at fair value through other
comprehensive income
162,408,542
153,327,686
162,408,542
153,327,686
Trading assets
439,985,203
452,326,547
-
-
A 10% increase in the price at the reporting date would have increased equity and profit or loss by the amounts shown below. This
analysis assumes that all other variables, in particular interest rates, remain constant.
Group
Bank
Equity
Profit or loss
Equity
Profit or loss
USD
USD
USD
USD
2021
62,235,991
45,995,137
18,237,471
1,996,616
2020
62,603,956
47,271,187
17,371,301
2,038,532
A decrease in the price of securities at the reporting date would have had an equal but opposite effect to that shown above, on the basis
that all other variables remain constant.
FIMBank Group Annual Report & Financial Statements 2021
108
The Group defines operational risks as the risk of loss resulting from inadequate or failed internal processes, people or IT systems, or
from external events. When policies, processes or controls fail to perform, there is potential of business disruption which can lead to
financial losses. Operational risk exposures are managed through the implementation of a common framework for the identification,
assessment, reporting, control and monitoring of operational risk. The Group invested in technology to manage and mitigate against
operational risk and a strong operational risk awareness is embedded in the culture of the Group.
The Group cannot expect to eliminate all operational risk but its main objective is to maintain such risk within acceptable levels and
parameters. Although the prime responsibility of establishing detailed processes to identify, assess, monitor and report operational
risks in accordance with the Operational Risk Management (“ORM”) policy, lies with the Business/Support Unit head functions and the
appointed Operational Risk Champion in each department, an independent Operational Risk Management Unit (“ORMU”) within Risk
Management Group and a senior management Operational Risk Management Committee (“ORMC”) exist to oversee and embed the
operational risk culture within the Group. Each of the respective roles and responsibilities are covered under the Group ORM policy
which was approved by the Board.
The Group maintains an operational risk management system that facilitates the recording of: operational risk incidents, the root
causes of incidents; and, where appropriate, action plans to correct incidents and prevent future recurrences. The ORMU assesses the
identified reported operational risk exposure and recommends measures to manage and mitigate such risks. Any significant
operational lapses are escalated and discussed in ORMC for review of corrective measures to be eventually considered.
The Group has in place an enterprise wide Operational Risk Management framework to measure, control, improve and monitor the
operational risks that the organisation faces. The Group states its tolerance for Operational Risk in the Group Risk Appetite Framework
and performance against this metric is tracked by the ORMC and, BRC.
As part of the Enterprise Risk Management Framework (“ERM”), the Group maintains a Business Continuity Management Program
(“BCM”). The BCM falls within the ERM of the Group. The BCM addresses the set of operational risks where environmental factors or
poor operational controls raise the potential for loss of or damage to the Group’s operations (including people, information,
infrastructure and premises). The objectives of the programme are to protect group employees, assets and reputation; ensure
availability of services; identify responsibilities; and meet stakeholders’ expectations. Critical systems and procedures are regularly
tested, to ensure continued improvement.
Two key components of operational risk are IT risk and legal risk. In view of the importance to monitor and mitigate both risks they are
considered separately below.
Information Technology (“IT”) risk comes about as a result of internal and external events arising from the use and changes to
technology that enable and service business processes due to the potential impact to the latter from threats in the general security
landscape. Inadequate information technology and processing, inadequate IT strategy and policy or inadequate use of the Group’s
information technology may all increase IT risk beyond levels that are acceptable to the organisation.
The Group has an IT Steering Committee, the main aim of which is to ensure that strategic decisions relating to IT (including cyber
security) are aligned with the overall Group’s business strategy.
The Group adopts various measures to manage IT risk and strives to keep up to date with the changes and developments in the IT
environment. The Group is also constantly on the look-out for new risks and vulnerabilities with the aim to safeguard the business and
Group against these risks.
The Group has well established policies and procedures aimed at regulating the use of technology assets which, amongst others,
safeguards against information security breaches. The Group also operates a contingency site for systems that are classified as mission
critical. The Group is committed to ongoing development and testing of its Business Continuity Plan to ensure awareness, relevance
and effectiveness, and to maintain effective IT controls to reduce losses caused by system disruption or unauthorised use.
FIMBank Group Annual Report & Financial Statements 2021
109
The Group is exposed to legal risk as a result of the different legal systems used in the different jurisdictions in which it operates. To
mitigate this risk, it seeks legal opinions from the jurisdictions in which it intends to operate, in order to ascertain its potential liabilities
when doing business there, including the extent to which an adverse judgement might result in excessive or punitive damages.
With reference to documentation, the Group endeavours to ensure that for each transaction a detailed due diligence is carried out and
that documentation is always tailored to the legal requirements of the jurisdiction in which the transaction takes place by seeking local
legal advice to ascertain which formalities have to be followed locally to ensure a valid transaction.
The Group has an independent Legal Department deputed to the function of identifying, assessing, monitoring and
controlling/mitigating the legal risks which the Group is likely to encounter in its day-to-day activities across the jurisdictions in which
it operates.
Compliance and Financial crime risk may arise from operational failure, failure to comply with relevant legislations and regulations –
including but not limited to: Anti–Money Laundering (“AML”) and Combating the Financing of Terrorism (“CFT”), Sanctions
Regulations and Banking Regulations. These can include acts of misconduct or omissions on the part of its Directors and/or officers
and/or representatives overseas, even in matters which are unrelated to their mandate or position within the Group. The impact to the
Group for non-compliance with the applicable regulations can be substantial and can include formal enforcement actions, monetary
penalties, informal enforcement actions, and enhanced supervisory monitoring. All employees, officers and directors have a
responsibility to conduct business ethically and with integrity, in line with Bank’s Compliance Manual and related policies.
To this purpose, detailed AML, CFT and fraud documentation policies and procedures, a robust Customer Acceptance Policy as well as
strong oversight by the Group’s Board and management have been devised. These policies and procedures are updated regularly to
reflect the latest changes in regulations, legislation and related guidance.
The Group uses qualitative research tools to assess the adequacy of prospective clients and transactions and implemented Anti-Money
Laundering software for the screening of incoming and outgoing messages and payments as well as rating of corporate and business
relationships. Through these procedures, the Group is able to identify transactions and clients which pose a higher risk compared to
others. These include Politically Exposed Persons, clients and transactions deriving from non-compliant jurisdictions and
correspondent banking. In addition, reputational risk is also indirectly mitigated through the setting of country limits. Some of the
criteria used in setting up a transaction limit for particular countries are closely related to reputational risk, including issues relating to
the political environment such as the fairness and frequency of election processes and access to power and effectiveness in reforming
political systems and implementing economic agendas.
The Group also conducts extensive training on sanctions, AML and CFT regulations and policies.
Conduct risk is defined as the current or prospective risk of losses to an institution arising from inappropriate supply of financial services
including cases of wilful or negligent misconduct. Conduct risk covers a wide range of issues and may arise from many business
processes and products. Examples of conduct risk are: collusion, market manipulation, overcharging customers or not treating them
fairly; selling complex products to unsophisticated clients; setting overly aggressive sales targets; and failure to manage conflicts of
interest, amongst others. An employee’s misconduct may lead to not only material losses but also reputational damage.
The Bank promotes a culture of openness, transparency and fairness in respect of both employee-employee and employee-client
interactions in addition to having in place a number of policies and procedures to govern conduct risk. Such controls include product
design and approval processes, client selection criteria, treating customers fairly guidelines, employee conduct policies and others. The
Bank also ensures that there are adequate controls governing systems access and transactional approvals to ensure that all activity is
appropriately authorized and in line with its expectations.
FIMBank Group Annual Report & Financial Statements 2021
110
Reputational risk at FIMBank is defined as the risk of possible damage to the Bank’s brand and reputation, and the associated risk to
earnings, capital or liquidity arising from any association, action or inaction, which could be perceived by stakeholders to be
inappropriate, unethical or inconsistent with the Bank’s values and beliefs. Reputational risk could be particularly damaging for the
Group since the nature of its business requires maintaining the confidence and trust from its employees, shareholder, depositors,
creditors, and from the public in general. The ensuing damage to the Bank’s reputation can be significant and can result in loss of
customers, increased costs and ultimately, a reduction in income. Other than third parties, employees through their words and deeds,
can also cause damage to the Bank’s brand.
Much like conduct risk, the Bank controls its reputational risk through the promotion of an internal culture that is cognisant of such risk
and the existence of policies and procedures mitigating the risk. The Bank ensures that it maintains strong procedures and controls
governing customer and counterparty vetting (KYC, KYCC, etc.) and makes use of market leading automated systems for mitigating
risks associated with financial crime to ensure that the Bank is not inadvertently supporting criminal activity.
The Group’s regulatory capital consists of Common Equity Tier 1 (“CET1”) capital, which includes ordinary share capital, related share
premiums, retained earnings, reserves and NCI after adjustment for dividends proposed after the year-end and deductions for goodwill,
intangible assets and other regulatory adjustments relating to items that are included in equity but are treated differently for capital
adequacy purposes.
The Group’s policy is to maintain a strong capital base to maintain investor, creditor and market confidence and to sustain the future
development of the business. The impact of the level of capital on shareholders’ returns is also recognised and the Group recognises
the need to maintain a balance between the higher returns that might be possible with greater gearing and the advantages and security
afforded by a stronger capital position.
The Group and its individually regulated operations have complied with all externally imposed capital requirements. The Group adheres
to the requirements set out in the Capital Requirements Regulation (“CRR”) and Capital Requirements Directive (“CRD IV”), constituting
the European implementation of the Basel accord of 2010.
Pillar I covers credit, market, and operational risks which provides the minimum capital requirements as a percentage of risk-weighted
assets, while Pillar II (Supervisory Review and Evaluation Process) involves both banks and regulators taking a view on whether a bank
should hold additional capital against risks not covered in Pillar I. Part of the Pillar II process is the Internal Capital Adequacy Assessment
Process (“ICAAP”) which is the Bank’s self-assessment of risks not captured by Pillar I.
2021 Pillar III Disclosures Report published on the Bank’s website includes additional regulatory disclosures in terms of Banking Rule
BR/07/2014 ‘Publication of annual report and audited financial statements of credit institutions authorised under the Banking Act, 1994’.
FIMBank Group Annual Report & Financial Statements 2021
111
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Own funds
Tier 1
Paid up capital instruments
261,221,882
261,221,882
261,221,882
261,221,882
Share premium
858,885
858,885
858,885
858,885
(Accumulated losses)/Retained earnings
(42,869,371)
(39,027,680)
(65,296,438)
(65,772,958)
Other reserves
4,139,983
9,697,570
3,825,730
8,453,359
Deductions:
Goodwill accounted for as intangible asset
(5,605,349)
(5,664,745)
-
-
Other intangible assets
(456,370)
(1,420,907)
(445,851)
(1,408,920)
Deferred tax liabilities associated to other intangible assets
-
-
-
-
Deferred tax asset that rely on future profitability and
arise from temporary differences (3,273,047)
(3,287,818) -
-
Market value of assets pledged in favour of
Depositor Compensation Scheme (4,433,866)
(5,098,388) (4,433,866)
(5,098,388)
Insufficient coverage for non-performing exposures
(297,448)
-
-
-
Value adjustments due to the requirements for
prudent valuation (624,701)
(628,661) (344,199)
(328,112)
Other transitional adjustments
4,765,539
6,614,306
1,984,150
2,777,810
Common equity tier 1
213,426,137
223,264,444
197,370,293
200,703,558
Total tier 1
213,426,137
223,264,444
197,370,293
200,703,558
Total tier 2
-
-
-
-
Total own funds
213,426,137
223,264,444
197,370,293
200,703,558
FIMBank Group Annual Report & Financial Statements 2021
112
Fair values of financial instruments
The Group’s Accounting Policy on fair value measurements is discussed in Accounting Policy 3.10.7.
The determination of fair value for financial assets and liabilities for which there is no observable market price requires the use of
valuation techniques as described in Accounting Policy 3.10.7. For financial instruments that trade infrequently and have little price
transparency, fair value is less objective, and requires varying degrees of judgement depending on liquidity, concentration, uncertainty
of market factors, pricing assumptions and other risks affecting the specific instrument. The fair value framework and hierarchy that
reflects the significance of the inputs used in measuring financial instruments is set out in Note 2.4.2.1.
Valuation techniques include net present value and discounted cash flow models, comparison to similar instruments for which market
observable prices exist, and other valuation models. Assumptions and inputs used in valuation techniques include risk-free and
benchmark interest rates, credit spreads and other premia used in estimating discount rates, bond and equity prices, foreign currency
exchange rates, and expected price volatilities and correlations.
The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the
asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date.
The Group uses widely recognised valuation models for determining the fair value of common and more simple financial instruments,
like interest rate and currency swaps that use only observable market data and require little management judgement and estimation.
Observable prices and model inputs are usually available in the market for listed debt securities and exchange traded derivatives and
simple over-the-counter derivatives like currency rate swaps. Availability of observable market prices and model inputs reduces the
need for management judgement and estimation and, also reduces the uncertainty associated with determination of fair values.
Availability of observable market prices and inputs varies depending on the products and markets and is prone to changes based on
specific events and general conditions in the financial markets.
For more complex instruments, the Group uses proprietary valuation models, which are usually developed from recognised valuation
models. Some or all of the significant inputs into these models may not be observable in the market and, are derived from market prices
or rates or are estimated based on assumptions. Example of instruments involving significant unobservable inputs include certain loans
and securities for which there is no active market. Valuation models that employ significant unobservable inputs require a higher degree
of management judgement and estimation in the determination of fair value. Management judgement and estimation are usually
required for selection of the appropriate valuation model to be used, determination of expected future cash flows on the financial
instrument being valued, determination of probability of counterparty default and prepayments and selection of appropriate discount
rates.
Fair value estimates obtained from models are adjusted for any other factors, such as liquidity risk or model uncertainties, to the extent
that the Group believes that a third-party market participant would take them into account in pricing a transaction. Fair values reflect
the credit risk of the instrument and include adjustments to take account of the credit risk of the Group entity and the counterparty
where appropriate.
FIMBank Group Annual Report & Financial Statements 2021
113
The table below analyses financial instruments measured at fair value by the level in the fair value hierarchy into which the fair value
measurement is categorised.
Level 1
Level 2
Level 3
Total
Note
USD
USD
USD
USD
Assets
Derivative assets held for risk management:
– foreign exchange
19
-
841,688
-
841,688
Trading assets
20
-
-
439,985,203
439,985,203
Financial assets at fair value through profit or loss
23
-
53,077
19,913,086
19,966,163
Financial assets at fair value through other
comprehensive income
24
162,408,542
-
-
162,408,542
Liabilities
Derivative liabilities held for risk management:
– foreign exchange
19
-
1,499,026
-
1,499,026
Level 1
Level 2
Level 3
Total
Note
USD
USD
USD
USD
Assets
Derivative assets held for risk management:
– foreign exchange
19
-
991,624
-
991,624
Trading assets
20
-
-
452,326,547
452,326,547
Financial assets at fair value through profit or loss
23
-
53,077
20,332,246
20,385,323
Financial assets at fair value through other
comprehensive income
24
153,327,686
-
-
153,327,686
Liabilities
Derivative liabilities held for risk management:
– foreign exchange
19
-
1,629,434
-
1,629,434
Level 1
Level 2
Level 3
Total
Note
USD
USD
USD
USD
Assets
Derivative assets held for risk management:
– foreign exchange
19
-
841,688
-
841,688
Financial assets at fair value through profit or loss
23
-
53,077
19,913,086
19,966,163
Financial assets at fair value through other
comprehensive income
24
162,408,542
-
-
162,408,542
Liabilities
Derivative liabilities held for risk management:
– foreign exchange
19
-
1,499,026
-
1,499,026
– interest rate
19
-
34,530
-
34,530
FIMBank Group Annual Report & Financial Statements 2021
114
Level 1
Level 2
Level 3
Total
Note
USD
USD
USD
USD
Assets
Derivative assets held for risk management:
– foreign exchange
19
-
991,624
-
991,624
– interest rate
19
-
27,664
-
27,664
Financial assets at fair value through profit or loss
23
-
53,077
20,332,246
20,385,323
Financial assets at fair value through other
comprehensive income
24
153,327,686
-
-
153,327,686
Liabilities
Derivative liabilities held for risk management:
– foreign exchange
19
-
1,629,434
-
1,629,434
Transfers of financial instruments between different levels of the fair value hierarchy, if any, are recorded as of the end of the reporting
period. There were no transfers in or out of Level 3 during the reporting period.
The following table shows a reconciliation from the opening balances to the closing balances for fair value measurements in Level 3 of
the fair value hierarchy.
Trading
assets
Financial assets at
fair value through
profit or loss
Total
USD
USD
USD
Balance at 1 January 2021
452,326,547
20,332,246
472,658,793
Total gains and losses in profit or loss
651,802
388,035
1,039,837
Purchases
623,419,539
898,492
624,318,031
Settlements
(627,692,362)
(143,654)
(627,836,016)
Effects of movement in exchange rates
(8,720,323)
(1,562,033)
(10,282,356)
Balance at 31 December 2021
439,985,203
19,913,086
459,898,289
Trading
assets
Financial assets at
fair value through
profit or loss
Total
USD
USD
USD
Balance at 1 January 2020
460,238,536
125,289,721
585,528,257
Total gains and losses in profit or loss
(1,300,287)
(670,197)
(1,970,484)
Purchases
471,299,660
-
471,299,660
Settlements
(490,598,518)
(106,000,000)
(596,598,518)
Effects of movement in exchange rates
12,687,156
1,712,722
14,399,878
Balance at 31 December 2020
452,326,547
20,332,246
472,658,793
FIMBank Group Annual Report & Financial Statements 2021
115
Financial assets at
fair value through
profit or loss
USD
Balance at 1 January 2021
20,332,246
Total gains and losses in profit or loss
388,035
Purchases
898,492
Settlements
(143,654)
Effects of movement in exchange rates
(1,562,033)
Balance at 31 December 2021
19,913,086
Financial assets at
fair value through
profit or loss
USD
Balance at 1 January 2020
125,289,721
Total gains and losses in profit or loss
(670,197)
Purchases
-
Settlements
(106,000,000)
Effects of movement in exchange rates
1,712,722
Balance at 31 December 2020
20,332,246
The change in unrealised gains or losses for the year included in profit or loss relating to those assets held at 31 December 2021
amounted to USD296,438 (2020: USD 802,723).
These gains and losses are recognised in profit or loss as ‘Net gain from other financial instruments carried at fair value’.
The below sets out information about significant unobservable inputs used at 31 December 2021 in measuring financial instruments
categorised as Level 3 in the fair value hierarchy.
The ‘trading assets’ portfolio represent forfaiting assets, that is the discounting of receivables generated from an export contract on a
without recourse basis. The assets would be evidenced by a number of different debt instruments including bills of exchange,
promissory notes, letters of credit and trade or project related syndicated and bi-lateral loan (financing) agreements.
The Group establishes fair value of its trading assets using a valuation technique based on the discounted expected future principal and
interest cash flows. The discount rate is an estimate based on current expected credit margin spreads and interest rates at the reporting
date. Inputs to valuation technique reasonably represent market expectation and measures of risk-return factors inherent in the
financial instrument.
The Group uses the LIBOR yield curve as of each reporting date, plus an adequate credit margin spread to discount the trading assets
held. At 31 December 2021, the interest rates used range between 0.98% and 19.30% (2020: between 2.06% and 10.27%).
The effect of a one-percentage point increase/(decrease) in the interest rate on trading assets at 31 December 2021 would
increase/(decrease) the Group equity by approximately USD2,835,580 (2020: USD1,115,543).
FIMBank Group Annual Report & Financial Statements 2021
116
As at December 2021, ‘financial assets at fair value through profit or loss’ mainly represent holdings in two sub-funds and a foreign
holding company, as follows:
an unlisted sub-fund of a local collective investment scheme regulated by the MFSA, which is independently run by an investment
manager licensed and regulated by the Financial Conduct Authority in London. The sub-fund invests in sustainable energy plants
with returns generated throughout the life of each plant.
The fair value is measured by the Group based on periodical net asset valuations prepared by the scheme’s independent
administrator. The sub-fund’s assets are marked to fair market value. Assets are marked at observable traded prices where that is
possible. Where there is no observable price, the assets are marked in accordance with best market practice. This may involve the
use of models and forward projections. Inputs and assumptions used in these models may be subjective and could include a number
of highly judgemental uncertainties including the projected valuations of the individual plants and the future potential income from
each plant.
The effect of a ten-percentage point increase/(decrease) in the net asset value of the sub-fund at 31 December 2021 would
increase/(decrease) the Bank and Group equity by approximately USD1,737,699 (2020: USD1,851,723).
an unlisted sub-fund of a local collective investment scheme regulated by the MFSA, which is independently run by an investment
manager licensed and regulated by the Financial Conduct Authority in UK. The sub-fund invests in a variety of investments, with
relative complex structures and limited liquidity.
The fair value is measured by the Group based on periodical net asset valuations prepared by the scheme’s independent
administrator. The sub-fund’s assets are marked to fair market value. Assets are marked at observable traded prices where that is
possible. Where there is no observable price, the assets are marked in accordance with best market practice. This may involve the
use of models and forward projections. Inputs and assumptions used in these models may be subjective and could include a number
of highly judgemental uncertainties including the projected valuations of the individual assets and the future potential income from
each asset.
The effect of a ten-percentage point increase/(decrease) in the net asset value of the sub-fund at 31 December 2021 would
increase/(decrease) the Bank and Group equity by approximately USD168,967 (2020: USD181,502).
A foreign holding company registered in the State of Kuwait. The fair value is measured by the Group based on a market price
quoted by a custodian.
The effect of a ten-percentage point increase/(decrease) in the net asset value of the equity shares at 31 December 2021 would have
increased/(decreased) the Bank and Group equity by approximately USD84,643.
FIMBank Group Annual Report & Financial Statements 2021
117
Classification of financial assets and liabilities
The following tables provide a reconciliation between line items in the Statements of Financial Position and categories of financial
instruments.
Mandatorily
at fair value
through
profit or loss
Designated
at fair value
through
profit or loss
Fair value
through other
comprehensive
income debt
instruments
Amortised
cost
Total
carrying
amount
USD
USD
USD
USD
USD
Balances with the Central Bank of
Malta, treasury bills and cash -
-
-
239,998,839 239,998,839
Derivative assets held for risk
management 841,688 -
-
-
841,688
Trading assets
439,985,203
-
-
-
439,985,203
Loans and advances to banks
-
-
-
198,488,576
198,488,576
Loans and advances to customers
-
-
-
628,912,340
628,912,340
Financial assets at fair value through
profit or loss
19,913,086
53,077
-
-
19,966,163
Financial assets at fair value through
other comprehensive income
-
-
162,408,542
-
162,408,542
Investments at amortised cost
-
-
-
9,914,754
9,914,754
Total financial assets
460,739,977
53,077
162,408,542
1,077,314,509
1,700,516,105
Derivative liabilities held for risk
management
1,499,026
-
-
-
1,499,026
Amounts owed to banks
-
-
-
563,553,044
563,553,044
Amounts owed to customers
-
-
-
934,096,196
934,096,196
Debt securities in issue
-
-
-
45,345,575
45,345,575
Total financial liabilities
1,499,026
-
-
1,542,994,815
1,544,493,841
FIMBank Group Annual Report & Financial Statements 2021
118
Mandatorily
at fair value
through
profit or loss
Designated
at fair value
through
profit or loss
Fair value
through other
comprehensive
income debt
instruments
Amortised
cost
Total
carrying
amount
USD
USD
USD
USD
USD
Balances with the Central Bank of
Malta, treasury bills and cash
-
-
-
319,287,524
319,287,524
Derivative assets held for risk
management
991,624
-
-
-
991,624
Trading assets
452,326,547
-
-
-
452,326,547
Loans and advances to banks
-
-
-
193,139,577
193,139,577
Loans and advances to customers
-
-
-
591,995,726
591,995,726
Financial assets at fair value through
profit or loss
20,332,246
53,077
-
-
20,385,323
Financial assets at fair value through
other comprehensive income
-
-
153,327,686
-
153,327,686
Investments at amortised cost
-
-
-
9,839,457
9,839,457
Total financial assets
473,650,417
53,077
153,327,686
1,114,262,284
1,741,293,464
Derivative liabilities held for risk
management
1,629,434
-
-
-
1,629,434
Amounts owed to banks
-
-
-
429,443,480
429,443,480
Amounts owed to customers
-
-
-
1,101,570,295
1,101,570,295
Debt securities in issue
-
-
-
50,832,661
50,832,661
Total financial liabilities
1,629,434
-
-
1,581,846,436
1,583,475,870
Mandatorily
at fair value
through
profit or loss
Designated
at fair value
through
profit or loss
Fair value
through other
comprehensive
income debt
instruments
Amortised
cost
Total
carrying
amount
USD
USD
USD
USD
USD
Balances with the Central Bank of
Malta, treasury bills and cash
-
-
-
239,982,048
239,982,048
Derivative assets held for risk
management
841,688
-
-
-
841,688
Loans and advances to banks
-
-
-
182,458,548
182,458,548
Loans and advances to customers
-
-
-
745,564,139
745,564,139
Financial assets at fair value through
profit or loss
19,913,086
53,077
-
-
19,966,163
Financial assets at fair value through
other comprehensive income
-
-
162,408,542
-
162,408,542
Investments at amortised cost
-
-
-
9,914,754
9,914,754
Total financial assets
20,754,774
53,077
162,408,542
1,177,919,489
1,361,135,882
Derivative liabilities held for risk
management
1,533,556
-
-
-
1,533,556
Amounts owed to banks
-
-
-
497,633,356
497,633,356
Amounts owed to customers
-
-
-
838,675,598
838,675,598
Total financial liabilities
1,533,556
-
-
1,336,308,954
1,337,842,510
FIMBank Group Annual Report & Financial Statements 2021
119
At 31 December 2021 and 31 December 2020, the fair value of the financial assets measured at amortised cost is approximately equal
to the carrying amount. The approximate fair value is based on the following:
‘balances with Central Bank of Malta, treasury bills and cash’ and ‘investments at amortised cost’
The majority of these assets reprice or mature in less than one hundred eighty days. Hence their fair value is not deemed to differ
materially from their carrying amount at the respective reporting dates.
‘loans and advances to banks’ and ‘loans and advances to customers’
Loans and advances to banks and
financial reporting date. 80% of the Group’s loans and advances to banks and customers are all repayable within a period of less
than 12 months and the interest is re-priced to take into account changes in benchmark rate. As a result, the carrying amount of
loans and advances to customers is a reasonable approximation of fair value.
‘amounts owed to banks’, ‘amounts owed to customers’ and ‘debt securities in issue’
The majority of these liabilities reprice or mature in less than one year. Hence their fair value is not deemed to differ materially from
their carrying amount at the respective reporting dates.
The Group’s debt securities in issue are subject to fixed and variable interest rates. Interest rates on debt securities are further
disclosed in Note 34.
Mandatorily
at fair value
through
profit or loss
Designated
at fair value
through
profit or loss
Fair value
through other
comprehensive
income debt
instruments
Amortised
cost
Total
carrying
amount
USD
USD
USD
USD
USD
Balances with the Central Bank of
Malta, treasury bills and cash
-
-
-
319,267,749
319,267,749
Derivative assets held for risk
management
1,019,288
-
-
-
1,019,288
Loans and advances to banks
-
-
-
179,364,067
179,364,067
Loans and advances to customers
-
-
-
779,834,360
779,834,360
Financial assets at fair value through
profit or loss
20,332,246
53,077
-
-
20,385,323
Financial assets at fair value through
other comprehensive income
-
-
153,327,686
-
153,327,686
Investments at amortised cost
-
-
-
9,839,457
9,839,457
Total financial assets
21,351,534
53,077
153,327,686
1,288,305,633
1,463,037,930
Derivative liabilities held for risk
management
1,629,434
-
-
-
1,629,434
Amounts owed to banks
-
-
-
387,900,641
387,900,641
Amounts owed to customers
-
-
-
1,037,118,337
1,037,118,337
Total financial liabilities
1,629,434
-
-
1,425,018,978
1,426,648,412
FIMBank Group Annual Report & Financial Statements 2021
120
Operating segments
The group has five significant reportable segments (trade finance, forfaiting, factoring, real estate and treasury) which are represented
by different Group entities.
Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit
before tax, as included in the internal management reports that are reviewed by Executive Management. Segment profit is used to
measure performance as management believes that such information is the most relevant in evaluating the results of certain segments
relative to other entities that operate within these industries.
In the table below, ‘interest income’ is disclosed gross of interest expense since it represents the revenue measure used by Executive
Management in assessing the performance of each segment. ‘Net interest income’ is disclosed in Note 9, including further analysis of
its components.
Trade finance
Forfaiting
Factoring
Real estate
Treasury
Total
USD
USD
USD
USD
USD
USD
External revenue
Interest income
2,812,731
17,533,106
9,398,610
4,058,183
3,670,705
37,473,335
Net fee and commission income
1,130,896
5,900,173
3,588,083
750,030
442,476
11,811,658
Net trading results
-
1,431,007
-
-
1,071,419
2,502,426
Net gain from other
financial instruments
-
-
-
-
1,137,221
1,137,221
Dividend income
1,089,189
-
-
-
-
1,089,189
5,032,816
24,864,286
12,986,693
4,808,213
6,321,821
54,013,829
Reportable segment (loss)/profit
before income tax
(8,643,915)
6,944,840
(4,060,541)
2,170,415
1,604,540
(1,984,661)
Reportable segment assets
177,212,662
444,928,907
446,963,427
54,242,483
590,666,529
1,714,014,008
Reportable segment liabilities
71,353,439
94,101,409
144,015,176
-
1,243,193,425
1,552,663,449
Trade finance
Forfaiting
Factoring
Real estate
Treasury
Total
USD
USD
USD
USD
USD
USD
External revenue
Interest income
3,813,627
20,568,391
8,768,549
4,967,958
1,068,750
39,187,275
Net fee and commission income
2,001,284
4,645,973
3,394,903
881,770
682,226
11,606,156
Net trading results
-
-
-
-
(121,164)
(121,164)
Net gain from other
financial instruments
-
-
-
-
277,137
277,137
Dividend income
240,817
-
-
-
-
240,817
6,055,728
25,214,364
12,163,452
5,849,728
1,906,949
51,190,221
Reportable segment (loss)/profit
before income tax
(34,110,787)
5,365,965
(5,185,365)
2,123,915
(2,260,476)
(34,066,748)
Reportable segment assets
230,740,331
459,398,105
322,815,443
93,693,321
651,047,518
1,757,694,718
Reportable segment liabilities
76,380,384
90,020,926
75,157,615
-
1,323,043,782
1,564,602,707
FIMBank Group Annual Report & Financial Statements 2021
121
The financial position and performance of items not falling within any of the significant reportable segments is grouped as ‘other’, and
this includes items of non-core activities mainly related to the letting of property to third parties and IT solutions.
2021
2020
USD
USD
Revenues
Total revenue for reportable segments
54,013,829
51,190,221
Consolidated adjustments
(975,515)
(3,543,716)
Other revenue
600,397
4,824,761
Consolidated revenue
53,638,711
52,471,266
Profit or loss
Total loss for reportable segments
(1,984,661)
(34,066,748)
Other gains/(losses)
1,614,235
(1,585,424)
(370,426)
(35,652,172)
Effect of other consolidation adjustments on segment results
(922,508)
(157,762)
Consolidated loss before tax
(1,292,934)
(35,809,934)
2021
2020
USD
USD
Assets
Total assets for reportable segments
1,714,014,008
1,757,694,718
Other assets
74,448,793
76,125,320
1,788,462,801
1,833,820,038
Effect of other consolidation adjustments on segment results
9,549
225,985
Consolidated assets
1,788,472,350
1,834,046,023
Liabilities
Total liabilities for reportable segments
1,552,663,449
1,564,602,707
Other liabilities
12,575,017
38,476,799
1,565,238,466
1,603,079,506
Effect of other consolidation adjustments on segment results
(746,299)
(2,191,612)
Consolidated liabilities
1,564,492,167
1,600,887,894
FIMBank Group Annual Report & Financial Statements 2021
122
In presenting information on the basis of geographical areas, revenue is based on the geographical location of customers, and assets
are based on the geographical location of the assets – separately disclosing countries which exceed 10% of the total.
External revenues and net trading
results
2021
2020
USD
USD
Malta
9,069,378
9,716,486
India
6,176,542
5,648,251
Other countries (individually less than 10%)
38,392,791
37,106,528
53,638,711
52,471,265
Malta
Other countries
Total
2021
2020
2021
2020
2021
2020
USD
USD
USD
USD
USD
USD
Non-current assets
52,762,681
54,539,884
4,748,188
4,549,087
57,510,869
59,088,971
‘Non-current assets’ include ‘property and equipment’, ‘investment property’ and ‘intangible assets and goodwill’.
Net interest income
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Interest income
On negative interest Central Bank of Malta funding
634,925
559,670
634,925
559,670
On loans and advances to banks
601,227
749,343
194,887
359,886
On loans and advances to customers
17,670,854
19,083,222
11,820,430
13,529,312
On loans and advances to subsidiary companies
-
-
5,904,351
7,022,253
18,907,006
20,392,235
18,554,593
21,471,121
On forfaiting assets
17,531,585
20,568,088
-
-
On financial assets at fair value through
other comprehensive income
500,599
745,196
500,599
745,196
On investments at amortised cost
372,810
410,919
372,810
410,919
On other trade finance activities
160,230
94,488
160,230
94,488
37,472,230
42,210,926
19,588,232
22,721,724
Interest expense
On amounts owed to banks
4,168,473
3,903,190
2,723,464
2,899,533
On amounts owed to customers
6,281,151
7,570,083
6,281,151
7,570,084
On debt securities in issue
685,627
1,086,043
-
-
On amounts owed to subsidiary companies
-
-
1,343
402
On Central Bank of Malta funding and negative interest deposits
933,065
743,346
933,065
743,346
On negative interest treasury balances
459,337
154,374
459,337
154,374
On lease liability with third parties
75,822
110,740
17,022
22,470
On lease liability with subsidiaries
-
-
41,624
91,792
12,603,475
13,567,776
10,457,006
11,482,001
Net interest income
24,868,755
28,643,150
9,131,226
11,239,723
Included in Group and Bank are ‘interest income’ and ‘interest expense’ payable to the parent company and other related companies
(see Note 43).
FIMBank Group Annual Report & Financial Statements 2021
123
Net fee and commission income
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Fee and commission income
Credit related fees and commission
2,017,411
2,012,475
2,000,046
1,991,286
On letters of credit
1,025,129
792,183
1,059,076
882,437
On factoring
5,262,546
4,228,617
832,564
1,021,866
On forfaiting
6,650,820
5,530,736
-
-
On IT solutions
-
95,000
-
-
Charged to subsidiaries
-
-
252,731
111,120
Other fees
943,642
1,597,758
796,426
1,360,158
15,899,548
14,256,769
4,940,843
5,366,867
Fee and commission expense
Correspondent banking fees
311,282
602,791
235,845
541,759
Credit related fees and commission
548,121
764,614
316,437
410,551
On forfaiting
924,623
1,177,298
-
-
On factoring
2,110,498
1,565,628
1,076,934
902,724
Insurance cover
1,146,048
1,153,417
506,173
618,281
Charged by subsidiaries
-
-
10,158
55,623
Other fees
21,413
23,340
19,991
23,340
5,061,985
5,287,088
2,165,538
2,552,278
Net fee and commission income
10,837,563
8,969,681
2,775,305
2,814,589
Included in Group and Bank are ‘fee and commission income’ and ‘fee and commission expense’ payable to the parent company and
other related companies (see Note 43).
Net trading results
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Net trading income/(expense) from assets held for trading
1,889,779
(680,804)
-
-
Foreign exchange rate results
1,554,424
1,809,201
1,392,276
2,145,012
Net results on derivatives held for risk management
(941,777)
(1,249,561)
(1,986,629)
(2,976,256)
2,502,426
(121,164)
(594,353)
(831,244)
Net gain from other financial instruments carried at fair value
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Investment securities
Equity investments at fair value through profit or loss
388,035
(1,030,938)
388,035
(1,030,938)
Debt investments at fair value through
other comprehensive income 749,186 1,308,075 749,186 1,308,075
1,137,221
277,137
1,137,221
277,137
FIMBank Group Annual Report & Financial Statements 2021
124
Dividend income
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Dividend income from equity investments at
fair value through profit or loss 1,089,189 240,817 1,089,189 240,817
Dividend income from subsidiary undertaking
-
-
15,899,860
7,000,000
1,089,189
240,817
16,989,049
7,240,817
Other operating income
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Rental income from leased property
720,996
891,314
124,189
120,703
Profit on disposal of property and equipment
7,994
2,533
9,751
-
Other non-trading income
-
22
-
22
728,990
893,869
133,940
120,725
Administrative expenses
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Personnel expenses
25,949,981
24,914,693
14,792,481
14,766,236
Expenses relating to short-term leases and
leases of low-value assets 252,975 204,920 123,132 92,039
Other administrative expenses
10,882,639
10,490,463
7,202,358
7,583,904
Recharge of services rendered by subsidiaries
-
-
1,095,395
1,280,624
37,085,595
35,610,076
23,213,366
23,722,803
No ‘expenses relating to short-term leases and leases of low-value assets’ for the Bank were payable to subsidiary companies (2020:
USD2,872).
Included in ‘other administrative expenses’ of the Bank and Group for the financial year ended 31 December 2021 are the following fees
charged by the Group Statutory Auditors:
Audit services
Other assurance
services
Tax
advisory services
Other
non-audit services
2021
2020
2021
2020
2021
2020
2021
2020
USD
USD
USD
USD
USD
USD
USD
USD
By the auditors of the parent
411,952
323,796
160,143
174,566
13,311
9,658
6,976
14,880
By the auditors of subsidiaries
293,723
322,990
112,133
51,648
2,803
2,770
-
485
All fees are inclusive of indirect taxes.
FIMBank Group Annual Report & Financial Statements 2021
125
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Directors’ emoluments
414,414
388,320
414,414
359,977
Staff costs:
- wages, salaries and allowances
24,112,170
23,190,904
13,817,936
13,833,820
- defined contribution costs
1,423,397
1,335,469
560,131
572,439
25,949,981
24,914,693
14,792,481
14,766,236
The average number of persons employed during the year was as follows:
Group
Bank
2021
2020
2021
2020
No. of
No. of
No. of
No. of
employees
employees
employees
employees
Executive and senior managerial
39
40
22
22
Other managerial, supervisory and clerical
277
296
152
162
Other staff
8
9
-
2
324
345
174
186
In May 2019, the Annual General Meeting authorised the Board of Directors of the Bank to issue and allot up to a maximum of
10,000,000 Equity Securities over a period of five years limitedly, for the purpose of implementing the Employee Share Award Scheme
Rules.
During 2021 and 2020 the Bank has not awarded shares under the Employee Share Award Scheme.
India Factoring has an Employee Stock Option Plan (ESOP), under which it has granted 2,844,000 options to the eligible employees of
the company on the basis of their service and other eligibility criteria. The ESOP is monitored by India Factoring Employee Welfare
Trust, a shareholder of India Factoring.
At 31 December 2021, the company had 2,152,800 (31 December 2020: 2,152,800) outstanding share options, at an exercise price of
INR10/option (31 December 2020: INR10/option).
FIMBank Group Annual Report & Financial Statements 2021
126
Taxation
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Current tax
(721,589)
(1,010,351)
(113,418)
(566,776)
Deferred tax
- deferred tax assets
(1,598,000)
(10,212,470)
-
(6,000,000)
Taxation
(2,319,589)
(11,222,821)
(113,418)
(6,566,776)
Before tax
Tax benefit
Net of tax
USD
USD
USD
Items that will not be reclassified to profit or loss
Movement in fair value reserve (property and equipment)
(399,566)
-
(399,566)
(399,566)
-
(399,566)
Items that are or may be reclassified subsequently to profit or loss
Movement in translation reserve:
- Foreign currency translation differences for foreign operations
(1,677,971)
-
(1,677,971)
(1,677,971)
-
(1,677,971)
Movement in fair value reserve (debt instruments):
- Net change in fair value
Fair value movement
(3,494,521)
745,583
(2,748,938)
Loss allowance
10,238
-
10,238
(3,484,283)
745,583
(2,738,700)
- Net amount reclassified to profit or loss
Fair value movement
(749,186)
-
(749,186)
(749,186)
-
(749,186)
(6,311,006)
745,583
(5,565,423)
FIMBank Group Annual Report & Financial Statements 2021
127
Before tax
Tax expense
Net of tax
USD
USD
USD
Items that are or may be reclassified subsequently to profit or loss
Movement in translation reserve:
- Foreign currency translation differences for foreign operations
(2,878,066)
-
(2,878,066)
(2,878,066)
-
(2,878,066)
Movement in fair value reserve (debt instruments):
- Net change in fair value
Fair value movement
5,916,567
(420,207)
5,496,360
Amortisation
(2,111,785)
-
(2,111,785)
Loss allowance
(20,152)
-
(20,152)
3,784,630
(420,207)
3,364,423
- Net amount reclassified to profit or loss
Fair value movement
(1,308,075)
-
(1,308,075)
(1,308,075)
-
(1,308,075)
(401,511)
(420,207)
(821,718)
Before tax
Tax benefit
Net of tax
USD
USD
USD
Items that are or may be reclassified subsequently to profit or loss
Movement in fair value reserve (debt instruments):
- Net change in fair value
Fair value movement
(3,494,521)
745,583
(2,748,938)
Loss allowance
10,238
-
10,238
(3,484,283)
745,583
(2,738,700)
- Net amount reclassified to profit or loss
Fair value movement
(749,186)
-
(749,186)
(749,186)
-
(749,186)
(4,233,469)
745,583
(3,487,886)
Before tax
Tax expense
Net of tax
USD
USD
USD
Items that are or may be reclassified subsequently to profit or loss
Movement in fair value reserve (debt instruments):
- Net change in fair value
Fair value movement
5,916,567
(420,207)
5,496,360
Amortisation
(2,111,785)
-
(2,111,785)
Loss allowance
(20,152)
-
(20,152)
3,784,630
(420,207)
3,364,423
- Net amount reclassified to profit or loss
Fair value movement
(1,308,075)
-
(1,308,075)
(1,308,075)
-
(1,308,075)
2,476,555
(420,207)
2,056,348
FIMBank Group Annual Report & Financial Statements 2021
128
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Loss before tax
(1,292,934)
(35,809,934)
(549,801)
(49,409,826)
Tax income using the domestic income tax rate of 35%
452,527
12,533,477
192,430
17,293,439
Tax effect of:
Non-deductible expenses
(21,590)
(108,982)
(1,296)
(74,326)
Non-deductible capital loss
-
(940,450)
(30,575)
(3,259,900)
Non-taxable income
412,622
90,488
5,946,167
2,534,286
Unrecognised temporary differences
(4,769,976)
(24,123,723)
(6,146,421)
(22,690,463)
Investment tax credit
-
22,762
-
-
Different tax rates on capital gains
(332)
-
(332)
-
Different tax rates in foreign jurisdictions
1,607,160
1,303,607
(73,391)
(369,812)
Taxation
(2,319,589)
(11,222,821)
(113,418)
(6,566,776)
Earnings per share
The calculation of basic loss per share has been based on the following results attributable to ordinary shareholders and weighted
average number of ordinary shares outstanding.
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Loss attributable to Equity Holders of the Bank
(3,840,703)
(46,898,575)
(663,219)
(55,976,602)
2021
2020
No. of shares
No. of shares
Weighted average number of ordinary shares at 31 December (basic)
522,443,763
522,443,763
FIMBank Group Annual Report & Financial Statements 2021
129
Balances with the Central Bank of Malta, treasury bills and cash
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Cash
24,079
26,531
7,288
6,756
Balances with the Central Bank of Malta
98,381,107
245,785,027
98,381,107
245,785,027
Treasury bills
141,713,250
73,628,666
141,713,250
73,628,666
Loss allowance
(119,597)
(152,700)
(119,597)
(152,700)
239,998,839
319,287,524
239,982,048
319,267,749
‘Balances with the Central Bank of Malta’ include a reserve deposit of EUR8,451,100 (USD9,571,979) (2020: EUR9,131,084
(USD11,205,159) in terms of Regulation (EC) No: 1745/2003 of the European Central Bank.
At 31 December 2021, ‘treasury bills’ included assets with a carrying amount of USD141,713,250 (2020: USD56,448,644) pledged in
favour of third parties under borrowing arrangements.
Derivatives held for risk management
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Derivative assets held for risk management
- foreign exchange
841,688
991,624
841,688
991,623
- interest rate
-
-
-
27,665
841,688
991,624
841,688
1,019,288
Derivative liabilities held for risk management
- foreign exchange
(1,499,026)
(1,629,434)
(1,499,026)
(1,629,434)
- interest rate
-
-
(34,530)
-
(1,499,026)
(1,629,434)
(1,533,556)
(1,629,434)
Trading assets
‘Trading assets’ represent forfaiting assets held by London Forfaiting Company Limited and comprise bills of exchange, promissory
notes and transferable trade related loans. These assets are held for short-term trading.
At 31 December 2021, there were no ‘trading assets’ pledged in favour of third parties under reverse-repos or borrowing arrangements
(2020: Nil).
FIMBank Group Annual Report & Financial Statements 2021
130
Loans and advances to banks
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Repayable on call and at short notice
35,044,550
38,558,675
27,011,814
32,298,834
Term loans and advances
22,489,142
44,245,546
14,474,062
36,654,921
57,533,692
82,804,221
41,485,876
68,953,755
Pledged in favour of third parties
141,341,035
114,326,911
141,341,035
114,326,911
Gross loans and advances to banks
198,874,727
197,131,132
182,826,911
183,280,666
Loss allowance
(386,151)
(3,991,555)
(368,363)
(3,916,599)
Net loans and advances to banks
198,488,576
193,139,577
182,458,548
179,364,067
‘Pledged in favour of third parties’ is comprised exclusively of assets pledged in favour of third parties under borrowing arrangements.
See Note 43 for balances due from related parties.
Loans and advances to customers
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Repayable on call and at short notice
479,749,066
387,390,649
199,573,375
192,412,375
Term loans and advances
226,756,238
300,689,617
226,749,228
300,663,190
706,505,304
688,080,266
426,322,603
493,075,565
Pledged in favour of third parties
5,191,890
5,494,363
5,191,890
5,494,363
Amounts owed by subsidiary companies
-
-
383,006,632
359,140,454
Total loans and advances to customers
711,697,194
693,574,629
814,521,125
857,710,382
Loss allowance
(82,784,854)
(101,578,903)
(68,956,986)
(77,876,022)
Net loans and advances to customers
628,912,340
591,995,726
745,564,139
779,834,360
‘Pledged in favour of third parties’ include an amount of USD365,808 (2020: USD328,797) pledged in favour of the Single Resolution
Fund and USD4,705,713 (2020: USD5,098,385) pledged in favour of the Depositor Compensation Scheme.
‘Amounts owed by subsidiary companies’ include facilities that are unsecured and repayable on demand. Pricing of facilities is
dependent on the currency of funding and market conditions.
During 2021, a stage 3 loan was partially settled by transfer of 7,609,907 shares in Tawazun Holding Company (KSC) (refer to Note 23).
See Note 43 for balances due from other related parties.
FIMBank Group Annual Report & Financial Statements 2021
131
Financial assets at fair value through profit or loss
At reporting date, the Group and Bank held an investment in two unlisted sub-funds of a local collective investment scheme regulated
by the MFSA, which is independently run by an investment manager licensed and regulated by the Financial Conduct Authority in
London. An investment amounting to USD17,376,985 (2020: USD18,517,229) in Sustainable Investment Fund, a sub-fund that invests
in sustainable energy plants with returns generated throughout the life of each plant and an investment amounting to USD1,689,666
(2020: USD1,815,017) in Global Opportunities Fund, a sub-fund that invests in a variety of investments, with relative complex structures
and limited liquidity.
At reporting date, the Group and Bank holds more than 50% of the units in Sustainable Investment Fund. However, these shares do not
carry any voting rights in relation to management and control of the sub-fund. The Group and Bank do not have the power to direct the
relevant activities of the sub-fund or to affect the amount of own returns. As a result, the Group and Bank is not consolidating the
investment and is measuring it at fair value through profit or loss.
During 2020, the Group and Bank has redeemed all the units in Trade Finance Fund. As part of the redemption process, the Bank has
bought back the trade finance assets from the sub-fund, which were originally sold to the sub-fund by the Bank. This redemption has
resulted in a realised loss of USD360,741 for the Bank and the Group.
During 2021, the Group and Bank acquired 0.777% equity shares in a foreign holding company, Tawazun Holding Company (KSC),
through a debt settlement agreement. The settlement value has been determined by reference to the fair value of the acquired equity
shares amounting to USD898,492 (Refer to Note 22).
Financial assets at fair value through other comprehensive
income
‘Financial assets at fair value through other comprehensive income’ is comprised exclusively of debt instruments.
At 31 December 2021, ‘financial assets at fair value through other comprehensive income’ included assets with a carrying amount of
USD121,958,073 (2020: USD127,809,734) pledged in favour of third parties under borrowing arrangements.
Investments at amortised cost
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Debt investments at amortised cost
9,972,376
9,910,131
9,972,376
9,910,131
Loss allowance
(57,622)
(70,674)
(57,622)
(70,674)
9,914,754
9,839,457
9,914,754
9,839,457
FIMBank Group Annual Report & Financial Statements 2021
132
Investments in subsidiaries
Bank
2021
2020
USD
USD
At 1 January
147,436,214
147,948,385
Additional investment in London Forfaiting Company Limited
12,100,000
7,000,000
Additional investment in FIMFactors B.V.
-
1,801,829
Movement in impairment of investments
(87,356)
(9,314,000)
At 31 December
159,448,858
147,436,214
Name of company
Country of
incorporation
Nature of
business
Equity
interest
Bank
2021
2020
2021
2020
%
%
USD
USD
FIM Business Solutions Limited
Malta
IT services
provider
100
100
5,000
5,000
FIM Property Investment Limited
Malta
Property
management
100
100
1,005,749
1,005,749
London Forfaiting Company Limited
United Kingdom
Forfaiting
100
100
106,466,435
94,366,435
The Egyptian Company for Factoring S.A.E.
Egypt
Factoring
100
100
11,664,983
11,664,983
FIMFactors B.V.
Netherlands
Holding
company
100
100
40,306,690
40,394,046
FIM Holdings (Chile) S.p.A.
Chile
Holding
company
100
100
1
1
159,448,858
147,436,214
The carrying amount of the ‘investments in subsidiaries’ is stated net of impairment, amounting to USD50,055,426 (2020:
USD49,968,070), in relation to FIMFactors B.V., The Egyptian Company for Factoring S.A.E. and FIM Holdings (Chile) S.p.A.
The Bank, indirectly through FIMFactors B.V. controls India Factoring and Finance Solutions Private Limited, incorporated in India, to
carry out the business of factoring in India. As at December 2021, the Bank held 88.16% (2020: 88.16%) shareholding.
The Bank, indirectly through London Forfaiting Company Limited controls London Forfaiting International Limited, a holding company
incorporated in the United Kingdom. As at December 2021, the Bank held 100% (2020: 100%) shareholding.
In turn, London Forfaiting International Limited controls the following subsidiaries:
Name of company
Country of incorporation
Nature of business
Equity interest
2021
2020
%
%
London Forfaiting Americas Inc.
United States of America
Marketing
100
100
London Forfaiting do Brasil Ltda.
Brazil
Marketing
100
100
At each reporting date the Bank carries out an impairment assessment to calculate the recoverable amounts of its investment in
subsidiaries and determine the possibility of an impairment loss. At reporting date this was particularly important in light of the wide-
ranging impact of the COVID-19 pandemic. The Bank has carried out the assessment to detect any indication of impairment with the
existing and possible pandemic effects in mind. In performing this assessment, the Bank considered the expected drops in business
volumes and other adverse impacts the pandemic could have on the subsidiaries and the industries, geographies and economies they
operate it. This assessment was carried out on the basis of the underlying performance of each subsidiary. The resulting net impairment
loss for the year amounted to USD87,356 (2020: USD9,314,000).
The assumptions and methodology applied in determining the recoverable amount of a CGU are disclosed in Note 29.2.1.
FIMBank Group Annual Report & Financial Statements 2021
133
Property and equipment
Freehold
Land
Buildings
Computer
system
Improvement
to premises
Computer
equipment
Others
Total
USD
USD
USD
USD
USD
USD
USD
Cost
At 1 January 2020
7,759,088
26,546,212
1,955,011
1,293,994
4,153,477
3,013,312
44,721,094
Additions
-
469,044
-
63,994
189,302
80,413
802,753
Disposals
-
-
-
-
(26,911)
(8,368)
(35,279)
Lease modifications that decrease
the scope of the lease
-
(389,108)
-
-
-
-
(389,108)
Effect of movement in
exchange rates -
(15,587)
-
(4,927) (6,342) (4,001) (30,857)
At 31 December 2020
7,759,088
26,610,561
1,955,011
1,353,061
4,309,526
3,081,356
45,068,603
At 1 January 2021
7,759,088
26,610,561
1,955,011
1,353,061
4,309,526
3,081,356
45,068,603
Reclassification
(265,512)
(120,402)
-
-
-
-
(385,914)
Additions
-
955,519
-
8,682
408,652
69,608
1,442,461
Disposals
-
-
-
-
(115,789)
(121,548)
(237,337)
Lease modifications that decrease
the scope of the lease
-
(77,605)
-
-
-
-
(77,605)
Effect of movement in
exchange rates
-
(11,563)
-
(4,101)
(3,934)
(2,583)
(22,181)
At 31 December 2021
7,493,576
27,356,510
1,955,011
1,357,642
4,598,455
3,026,833
45,788,027
Depreciation
At 1 January 2020
-
2,365,377
1,955,011
449,079
3,509,126
2,656,032
10,934,625
Charge for the year
-
1,733,562
-
202,863
312,867
121,080
2,370,372
Release on disposals
-
-
-
-
(26,911)
(8,040)
(34,951)
Lease modifications that decrease
the scope of the lease
-
(358,371)
-
-
-
-
(358,371)
Effects of movement in
exchange rates -
(1,949) -
(1,042) (3,940) (2,957) (9,888)
At 31 December 2020
-
3,738,619
1,955,011
650,900
3,791,142
2,766,115
12,901,787
At 1 January 2021
-
3,738,619
1,955,011
650,900
3,791,142
2,766,115
12,901,787
Reclassification
-
-
-
-
1,713
11,939
13,652
Charge for the year
-
1,686,817
-
187,629
306,845
111,420
2,292,711
Release on disposals
-
-
-
-
(114,032)
(121,548)
(235,580)
Lease modifications that decrease
the scope of the lease
-
(77,605)
-
-
-
-
(77,605)
Effects of movement in
exchange rates
-
(8,442)
-
(3,024)
(3,540)
(2,386)
(17,392)
At 31 December 2021
-
5,339,389
1,955,011
835,505
3,982,128
2,765,540
14,877,573
Carrying amounts
At 1 January 2020
7,759,088
24,180,835
-
844,915
644,351
357,280
33,786,469
At 31 December 2020
7,759,088
22,871,942
-
702,161
518,384
315,241
32,166,816
At 31 December 2021
7,493,576
22,017,121
-
522,137
616,327
261,293
30,910,454
Carrying amount had the assets
been carried at cost
At 31 December 2021
4,816,132
15,630,217
-
522,137
614,478
251,662
21,834,626
As at 31 December 2021, ‘buildings’ includes right-of-use assets of USD2,163,727 (2020: USD2,189,052) related to leased branches and
office premises (see Note 42).
FIMBank Group Annual Report & Financial Statements 2021
134
Buildings
Computer
system
Improvement
to premises
Computer
equipment
Others
Total
USD
USD
USD
USD
USD
USD
Cost
At 1 January 2020
5,815,093
1,955,011
710,821
3,224,642
2,042,438
13,748,005
Additions
110,340
-
-
126,548
16,196
253,084
Lease modifications that increase
the scope of the lease
(44,278)
-
-
-
-
(44,278)
At 31 December 2020
5,881,155
1,955,011
710,821
3,351,190
2,058,634
13,956,811
At 1 January 2021
5,881,155
1,955,011
710,821
3,351,190
2,058,634
13,956,811
Additions
-
-
-
382,305
17,206
399,511
Release on disposals
-
-
-
-
(53,890)
(53,890)
Lease modifications that increase
the scope of the lease
33,840
-
-
-
-
33,840
At 31 December 2021
5,914,995
1,955,011
710,821
3,733,495
2,021,950
14,336,272
Depreciation
At 1 January 2020
1,581,687
1,955,011
343,747
2,766,644
1,871,857
8,518,946
Charge for the year
1,603,720
-
49,544
219,327
57,765
1,930,356
At 31 December 2020
3,185,407
1,955,011
393,291
2,985,971
1,929,622
10,449,302
At 1 January 2021
3,185,407
1,955,011
393,291
2,985,971
1,929,622
10,449,302
Charge for the year
1,625,813
-
48,947
230,782
46,134
1,951,676
Release on disposals
-
-
-
-
(53,890)
(53,890)
Lease modifications that increase
the scope of the lease
23,935
-
-
-
-
23,935
At 31 December 2021
4,835,155
1,955,011
442,238
3,216,753
1,921,866
12,371,023
Carrying amounts
At 1 January 2020
4,233,406
-
367,074
457,998
170,581
5,229,059
At 31 December 2020
2,695,748
-
317,530
365,219
129,012
3,507,509
At 31 December 2021
1,079,840
-
268,583
516,742
100,084
1,965,249
As at 31 December 2021, ‘buildings’ is comprised exclusively of right-of-use assets related to leased branches and office premises (see
Note 42).
FIMBank Group Annual Report & Financial Statements 2021
135
Land and buildings are revalued by an independent, professionally qualified architect in accordance with Accounting Policy 3.17.1.
Valuations of land and buildings are done using the ‘investment income approach’ whereby market value is derived by capitalising at
an appropriate yield rate, the annual income produced, should the property be leased out to third parties. The income is based on actual
rental income as per current lease agreements. To determine the reasonableness of the actual rates being used a comparison is then
drawn between the actual rates and rental rates of other properties, taking cognisance of the location, size, layout, and planning and
energy performance considerations.
The land and premises were revalued on 31 December 2021.
The valuation contains a ‘valuation uncertainty’ clause as defined in the European Valuation Standards 2016, and in line with the ‘Kamra
tal-Periti’ Valuation Standards COVID-19 Guidance Note (May 2020), due to the market disruption caused by the COVID-19 pandemic,
which resulted in a reduction in transactional evidence and market yields. This clause does not invalidate the valuation but implies that
there is more uncertainty than under normal market conditions. Accordingly, the valuer cannot attach as much weight as usual to
previous market evidence for comparison purposes, and there is an increased risk that the price realised in an actual transaction would
differ from the value conclusion.
Property fair value measurement is classified as Level 3 (see Note 2.4.2.1). Significant unobservable inputs used in the valuation of these
properties is the rental income and the percentage capitalisation rate which indicates the multiplier relationship between net rental
income and property value. Further details about these significant inputs are summarised in the table below:
Valuation technique
Significant
unobservable inputs
Range of
unobservable inputs
per annum
Inter-relationship between key
unobservable inputs and fair
value measurements
Office space
Investment income
approach
Rental value per
square metre
€282 to €523
The higher the rate per square
metre the higher the fair value
Investment income
approach
Capitalisation rate 6.0%
The higher the capitalisation rate
the lower the fair value
Parking space
Investment income
approach
Rental value per
square metre
€65 to €125
The higher the rate per square
metre the higher the fair value
Investment income
approach
Capitalisation rate 7.5%
The higher the capitalisation rate
the lower the fair value
Stores and ancillary
Investment income
approach
Rental value per
square metre
€105 to €175
The higher the rate per square
metre the higher the fair value
Investment income
approach
Capitalisation rate 9.0%
The higher the capitalisation rate
the lower the fair value
Investment property
Group
2021
2020
USD
USD
Cost
At 1 January
17,223,820
17,223,820
Fair value movements
-
-
At 31 December
17,223,820
17,223,820
Carrying amounts
Cost
7,049,357
7,049,357
Net fair value gains
10,174,463
10,174,463
Carrying amount
17,223,820
17,223,820
‘Investment property’ comprises a number of areas within the Group Head Office building in St. Julian’s, Malta which are available for
rent to third parties.
FIMBank Group Annual Report & Financial Statements 2021
136
Investment property is revalued by an independent professionally qualified architect in accordance with Accounting Policy 3.18. The
valuation of investment property is prepared using only the ‘investment income approach’, whilst the ‘comparative value approach’ is
only considered as a validation technique.
Under the ‘investment income approach’, the market value is derived by capitalising at an appropriate yield rate, the annual income
produced, should the property be leased out to third parties. The income is based on actual rental income as per current lease
agreements. To determine the reasonableness of the actual rates being used a comparison is then drawn between the actual rates and
rental rates of other properties, taking cognisance of the location, size, layout, and planning and energy performance considerations.
Under the ‘comparative value approach’ the market value of the property is estimated by selecting an appropriately adjusted price per
unit (€/square metre) based on transactions in comparable properties located in proximity to the property.
The investment property was last revalued on 31 December 2021.
The valuation contains a ‘valuation uncertainty’ clause as defined in the European Valuation Standards 2016, and in line with the ‘Kamra
tal-Periti’ Valuation Standards COVID-19 Guidance Note (May 2020), due to the market disruption caused by the COVID-19 pandemic,
which resulted in a reduction in transactional evidence and market yields. This clause does not invalidate the valuation but implies that
there is more uncertainty than under normal market conditions. Accordingly, the valuer cannot attach as much weight as usual to
previous market evidence for comparison purposes, and there is an increased risk that the price realised in an actual transaction would
differ from the value conclusion.
Property fair value measurement is classified as Level 3 (see Note 2.4.2.1). Significant unobservable inputs used in the valuation of these
properties is the rental income and the percentage capitalisation rate which indicates the multiplier relationship between net rental
income and property value. Further details about these significant inputs are summarised in the table below:
Valuation technique
Significant
unobservable inputs
Range of
unobservable inputs
per annum
Inter-relationship between key
unobservable inputs and fair
value measurements
Office space
Investment income
approach
Rental value per
square metre
€282 to €523
The higher the rate per square
metre the higher the fair value
Investment income
approach
Capitalisation rate 6.0%
The higher the capitalisation rate
the lower the fair value
Retail space
Investment income
approach
Rental value per
square metre
€290 to €300
The higher the rate per square
metre the higher the fair value
Investment income
approach
Capitalisation rate 7.5%
The higher the capitalisation rate
the lower the fair value
Stores and ancillary
Investment income
approach
Rental value per
square metre
€105 to €175
The higher the rate per square
metre the higher the fair value
Investment income
approach
Capitalisation rate 9.0%
The higher the capitalisation rate
the lower the fair value
FIMBank Group Annual Report & Financial Statements 2021
137
Intangible assets and goodwill
Goodwill
Software
Total
USD
USD
USD
Cost
At 1 January 2020
14,943,886
10,834,645
25,778,531
Additions
-
488,096
488,096
Effects of movement in exchange rates
(310,195)
(4,169)
(314,364)
At 31 December 2020
14,633,691
11,318,572
25,952,263
At 1 January 2021
14,633,691
11,318,572
25,952,263
Additions
-
779,861
779,861
Release on disposals
-
(2,266,153)
(2,266,153)
Effects of movement in exchange rates
(210,149)
(2,826)
(212,975)
At 31 December 2021
14,423,542
9,829,454
24,252,996
Accumulated amortisation and impairment losses
At 1 January 2020
6,437,802
6,232,848
12,670,650
Charge for the year
-
1,055,796
1,055,796
Impairment loss
2,687,000
-
2,687,000
Effects of movement in exchange rates
(155,857)
(3,661)
(159,518)
At 31 December 2020
8,968,945
7,284,983
16,253,928
At 1 January 2021
8,968,945
7,284,983
16,253,928
Charge for the year
-
1,042,068
1,042,068
Release on disposals
-
(2,266,153)
(2,266,153)
Effects of movement in exchange rates
(150,753)
(2,689)
(153,442)
At 31 December 2021
8,818,192
6,058,209
14,876,401
Carrying amounts
At 1 January 2020
8,506,084
4,601,797
13,107,881
At 31 December 2020
5,664,746
4,033,589
9,698,335
At 31 December 2021
5,605,350
3,771,245
9,376,595
FIMBank Group Annual Report & Financial Statements 2021
138
Software
USD
Cost
At 1 January 2020
8,583,508
Additions
393,096
At 31 December 2020
8,976,604
At 1 January 2021
8,976,604
Additions
779,881
At 31 December 2021
9,756,485
Accumulated amortisation
At 1 January 2020
3,935,866
Charge for the year
1,032,013
At 31 December 2020
4,967,879
At 1 January 2021
4,967,879
Charge for the year
1,014,291
At 31 December 2021
5,982,170
Carrying amounts
At 1 January 2020
4,647,642
At 31 December 2020
4,008,725
At 31 December 2021
3,774,315
For the purposes of impairment testing, goodwill is allocated to the Group’s CGUs as follows:
Group
2021
2020
USD
USD
India Factoring
- cost, net of exchange differences
12,292,542
12,502,691
- accumulated impairment, net of exchange differences
(8,818,192)
(8,968,945)
Egypt Factors
- cost
2,131,000
2,131,000
5,605,350
5,664,746
In 2020, the CGUs have been affected by the COVID-19 pandemic, which resulted in an impairment of USD2,687,000 on one of the
CGUs. In 2021 a similar assessment was carried out and the Bank concluded that no impairment is required. When calculating the
recoverable amount, the additional uncertainty and adverse impact of COVID-19 were taken into account by adjusting the expected
cash flows. Management’s expectations reflect performance to date and are based on its experience in times of recession and
consistent with the assumptions that a market participant would make.
FIMBank Group Annual Report & Financial Statements 2021
139
The recoverable amount of this CGU was based on its value-in-use, determined using the ‘income approach’ to business valuations.
This approach provides an estimate of the present value of the monetary benefits expected to flow to the owners of the business. It
requires projection of the cash flows that the business is expected to generate. These cash flows are then converted to their present
value by means of discounting, using a rate of return that accounts for the time value of money and the appropriate degree of risk in
the investment. The value of the business, or recoverable amount, is the sum of the discounted cash flows.
At reporting date, the recoverable amount was determined to be higher than the carrying amount of the CGU and the carrying amount
of goodwill was deemed to be appropriate.
Financial projections for a ten-year period form the basis for the discounted cash flow analysis used to determine value-in-use. These
projections were based on expectations of future outcomes, taking into account past experience adjusted for the anticipated revenue
cumulative annual growth rate of 25.6% (2020: 23.9%). Revenue growth was projected taking into account the updated business model
of the entity and the estimated growth over the projection period. Management has approved the forecasts, relating to the business
carried out by India Factoring, which are based on a strategy to grow the business in a changing market landscape, whilst ensuring an
effective operational and control environment.
In 2021, the terminal value or the value attributed to the CGU beyond the explicit forecast period, was estimated using a ‘gordon growth
model’. This determination assumed a long-term growth rate of 5.0% (2020: 5.0%), which is considered appropriate considering the
industry and economy growth estimates.
The ‘income approach’ requires the application of an appropriate discount rate that reflects the risks of the cash flows. As the valuation
discounts cash flows available to equity shareholders, the valuation model adopts the ‘cost of equity’ as the discount rate.
IAS 36 - Impairment of Assets, requires pre-tax cash flows to be discounted using pre-tax discount rate. The pre-tax discount rate cannot
be obtained by grossing up the post-tax discount rate by the standard rate of tax, as the pre-tax rate needs to take into account the
post-tax discount rate, the timing of the future cash flows and the useful life of the asset or CGU. The pre-tax discount rate is estimated
by an iterative process which is used to solve for a rate that, when applied to the pre-tax cash flows, results in the same total invested
capital value of the CGU as estimated based on the post-tax cash flows.
As at 31 December 2021, the pre-tax and post-tax discount rate for the CGU were 22.1% (2020: 20.0%) and 18.0% (2020: 16.5%)
respectively. The post-tax discount rate (representing the cost of equity) applied on valuation date is based on the rate of 10-year
government bonds issued by the Government in India and in the same currency as the cash flows, adjusted for a risk premium to reflect
both the increased risk of investing in equities generally and the systemic risk of the specific entity.
The key assumptions described above may change as economic, political and market conditions change. An adverse movement in a
key assumption may lead to an impairment of goodwill. The break-even post tax discount rate, that is the rate at which the recoverable
amount would be equal to the carrying amount of the CGU, is 18.6% (2020: 16.5%). At the constant discount rate used the break-even
long-term growth rate that would reduce the recoverable amount to the carrying amount of the CGU is 3.3% (2020: 5.0%).
Whilst it is inherent that actual results may differ from those budgeted, and such variations may be significant, the Directors believe
that the business plan can be supported, such that the Group will recover the recoverable amount of goodwill post impairment charges,
as recognised at 31 December 2021.
FIMBank Group Annual Report & Financial Statements 2021
140
The recoverable amount of this CGU was based on its value-in-use in accordance with the requirements of IAS 36. This approach
provides an estimate of the present value of the monetary benefits expected to flow to the owners of the business. It requires projection
of the cash flows that the business is expected to generate. These cash flows are then converted to their present value by means of
discounting, using a rate of return that accounts for the time value of money and the appropriate degree of risk in the investment. The
value of the business, or recoverable amount, is the sum of the discounted cash flows.
At reporting date, the recoverable amount was determined to be higher than the carrying amount of the CGU and the carrying amount
of goodwill was deemed to be appropriate.
Financial projections for a five-year period form the basis for discounted cash flow analysis used to determine value-in-use. These
projections were based on expectations of future outcomes based on past experience, adjusted for a revenue cumulative annual growth
rate of 21.5% (2020: 16.9%). Revenue growth was projected by taking into consideration the updated business model of the entity and
the estimated growth over the projection period. Management has approved the forecasts, relating to the business carried out by Egypt
Factoring, which are based on a strategy to grow the business in a changing market landscape, whilst ensuring an effective operational
and control environment.
The terminal value, or the value attributed to the CGU beyond the explicit forecast period, was estimated assuming a long-term growth
rate of 3.0% (2020: 3.0%), which is considered appropriate considering the industry and economy growth estimates.
The value-in-use estimate requires the application of an appropriate discount rate that reflects the risks of the cash flows. As the
valuation discounts cash flows available to equity shareholders, the valuation model adopts the “cost of equity” as the discount rate.
IAS 36 requires pre-tax cash flows to be discounted using pre-tax discount rate. As Egypt Factors is a free-trade zone entity which profits
are exempt from tax, the pre-tax and post-tax discount rates are identical.
As at 31 December 2021, the discount rate for the CGU was 12.0% (2020: 12.0%). The discount rate (representing the cost of equity)
applied on valuation date is based on the rate of the Central Bank of Egypt, representing the functional currency and equity of the
company, adjusted for a risk premium to reflect both the increased risk of investing in equities generally and the systemic risk of the
specific entity.
The key assumptions described above may change as economic, political and market conditions change. Whilst the recoverable amount
is higher than the carrying amount, an adverse movement in a key assumption may lead to an impairment of goodwill. The break-even
post tax discount rate, that is the rate at which the recoverable amount would be equal to the carrying amount of the CGU, is 15.3%
(2020: 16.0%). At the constant discount rate used on 31 December 2021, the break-even long-term growth rate that would reduce the
recoverable amount to the carrying amount of the CGU is -2.3% (2020: -3.7%).
Whilst it is inherent that actual results may differ from those budgeted, and such variations may be significant, the Directors believe
that the business plan can be supported, such that the Group will recover such goodwill at least at the amount stated.
FIMBank Group Annual Report & Financial Statements 2021
141
Deferred taxation
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Deferred tax assets
Tax effect of temporary differences relating to:
- excess of capital allowances over depreciation
(665,157)
(666,297)
(735,325)
(735,325)
- allowances for uncollectibility
6,216,552
6,955,456
6,810,121
6,810,121
- changes in fair value of financial instruments
1,408,167
662,584
1,408,167
662,584
- unabsorbed capital allowances
622,026
622,026
622,026
622,026
- unabsorbed tax losses
17,252,983
18,216,009
8,145,593
8,145,593
- other temporary differences
85,956
85,956
85,956
85,956
Total deferred tax assets
24,920,527
25,875,734
16,336,538
15,590,955
Deferred tax liabilities
Tax effect of temporary differences relating to:
- fair valuation of property and equipment
2,837,170
2,837,170
-
-
- fair valuation of investment property
1,377,905
1,377,905
-
-
Total deferred tax liabilities
4,215,075
4,215,075
-
-
In years 2020 and 2021, the Bank’s growth was impacted by the continuation of the de-risking process, which had started in 2019, as
well as the COVID-19 pandemic. After the Bank has assessed the probability of future taxable profits, the Bank established that it will
generate enough future taxable profits to absorb the carrying amount of recognised tax losses and temporary differences and therefore
has not written-off any of its recognised deferred tax asset (2020: USD 6.0million).
During 2020 a subsidiary had also written-off USD2.8 million of recognised deferred tax asset, which was related to the recoverability
of tax losses having a finite expiry date. In 2021, after assessing the probability of future taxable profits, the subsidiary concluded that
it will generate enough future taxable profits to absorb the carrying amount of the recognised tax losses and temporary differences and
therefore no write-off was required.
At financial reporting date, the Bank had unutilised tax losses and temporary differences that were unrecognised, amounting to
USD101.2 million. In addition, other Group entities had unutilised tax losses and tax credits that were unrecognised, amounting to
USD38.0 million and USD0.7 million respectively. Unrecognised unabsorbed tax losses amounting to USD9.4 million carried in a group
entity, have an expiry period ranging between 31 March 2024 to 31 March 2025.
FIMBank Group Annual Report & Financial Statements 2021
142
Opening
balance
Recognised in
other
comprehensive
income
Recognised in
profit or loss
Effect of
movement in
exchange rates
Closing
balance
USD
USD
USD
USD
USD
2021
Excess of capital allowances over depreciation
(666,297)
-
2,313
(1,173)
(665,157)
Allowances for uncollectibility
6,955,456
-
(740,330)
1,426
6,216,552
Changes in fair values of financial instruments
662,584
745,583
-
-
1,408,167
Unabsorbed capital allowances
622,026
-
-
-
622,026
Unabsorbed tax losses
18,216,009
-
(859,983)
(103,043)
17,252,983
Other temporary differences
85,956
-
-
-
85,956
25,875,734
745,583
(1,598,000)
(102,790)
24,920,527
2020
Excess of capital allowances over depreciation
(676,574)
-
11,653
(1,376)
(666,297)
Allowances for uncollectibility
21,961,232
-
(14,655,489)
(350,287)
6,955,456
Changes in fair values of financial instruments
1,036,187
(420,207)
46,604
-
662,584
Unabsorbed capital allowances
625,183
-
(3,157)
-
622,026
Unabsorbed tax losses
13,694,998
-
4,434,523
86,488
18,216,009
Other temporary differences
132,560
-
(46,604)
-
85,956
36,773,586
(420,207)
(10,212,470)
(265,175)
25,875,734
Opening
balance
Recognised in
other
comprehensive
income
Recognised in
profit or loss
Effect of
movement in
exchange rates
Closing
balance
USD
USD
USD
USD
USD
2021
Excess of capital allowances over depreciation
(735,325)
-
-
-
(735,325)
Allowances for uncollectibility
6,810,121
-
-
-
6,810,121
Changes in fair values of financial instruments
662,584
745,583
-
-
1,408,167
Unabsorbed capital allowances
622,026
-
-
-
622,026
Unabsorbed tax losses
8,145,593
-
-
-
8,145,593
Other temporary differences
85,956
-
-
-
85,956
15,590,955
745,583
-
-
16,336,538
2020
Excess of capital allowances over depreciation
(738,479)
-
3,157
(3)
(735,325)
Allowances for uncollectibility
12,810,116
-
(6,000,000)
5
6,810,121
Changes in fair values of financial instruments
1,036,187
(420,207)
46,604
-
662,584
Unabsorbed capital allowances
625,183
-
(3,157)
-
622,026
Unabsorbed tax losses
8,145,595
-
-
(2)
8,145,593
Other temporary differences
132,560
-
(46,604)
-
85,956
22,011,162
(420,207)
(6,000,000)
-
15,590,955
FIMBank Group Annual Report & Financial Statements 2021
143
Opening
balance
Recognised in
other
comprehensive
income
Recognised in
profit or loss
Closing
balance
USD
USD
USD
USD
2021
Changes in fair value of investment property
and property and equipment
(4,215,075)
-
-
(4,215,075)
2020
Changes in fair value of investment property
and property and equipment (4,215,075)
-
-
(4,215,075)
Other assets
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Accounts receivable and prepayments
3,927,217
4,068,509
3,575,093
3,304,376
Accrued income
49,832
85,470
68,552
60,925
Indirect taxation
242,947
1,624,916
181,705
1,532,250
Other assets
24,388
611,406
22,971
673,011
4,244,384
6,390,301
3,848,321
5,570,562
‘Accounts receivable and prepayments’ includes an amount of USD1,045,631 (2020: USD940,905) related to subsidiaries of the Bank.
‘Accrued income’ includes an amount of USD43,843 (2020: USD28,030) related to subsidiaries of the Bank.
See Note 43 for balances due to related parties.
Amounts owed to banks
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Term loans and deposits
476,598,906
340,866,049
410,679,218
299,323,210
Repayable on demand
86,954,138
88,577,431
86,954,138
88,577,431
563,553,044
429,443,480
497,633,356
387,900,641
The Group includes balances amounting to USD15,092,139 (2020: USD16,478,809) and the Bank includes balances amounting to
USD15,092,139 (2020: USD16,478,809) held as collateral for irrevocable commitments. Pledges are generally conducted under terms
that are usual and customary for standard borrowing contracts.
See Note 43 for balances due to related parties.
FIMBank Group Annual Report & Financial Statements 2021
144
Amounts owed to customers
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Term deposits
679,438,958
788,095,645
679,438,958
788,095,646
Repayable on demand
254,657,238
313,474,650
151,700,283
247,803,193
934,096,196
1,101,570,295
831,139,241
1,035,898,839
Amounts owed to subsidiaries
-
-
7,536,357
1,219,498
934,096,196
1,101,570,295
838,675,598
1,037,118,337
The Group and the Bank have deposits amounting to USD54,068,183 (2020: USD50,430,746) and USD55,986,370, (2020:
USD50,430,746), respectively, held as collateral for irrevocable commitments. Pledges are generally conducted under terms that are
usual and customary for standard borrowing contracts. ‘Amounts owed to subsidiaries’ include facilities that are interest-free,
unsecured and repayable on demand.
See Note 43 for balances due to related parties.
Debt securities in issue
2021
2020
USD
USD
Opening balance
50,832,661
79,550,865
Drawdowns
109,118,677
122,720,858
Repayments
(114,605,763)
(151,439,062)
Closing balance
45,345,575
50,832,661
‘Debt securities in issue’ comprise of promissory notes with a tenor of up to one year. The Group’s effective interest rate ranges between
1.50% and 1.70% (2020: 1.00% and 1.75%).
Provision for liabilities and charges
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Expected credit loss provision on contingent liabilities
161,997
5,067
161,997
5,067
Expected credit loss provision on commitments
97,333
172,528
39,778
167,984
Provision for restoration costs
97,392
98,294
-
-
356,722
275,889
201,775
173,051
Other liabilities
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Creditors and accruals
11,469,573
9,006,242
6,311,826
4,186,288
Deferred fee income
664,106
618,860
26,300
108,064
Indirect taxation
104,391
112,029
57,896
56,924
Lease liabilities
2,224,450
2,416,376
1,128,593
2,864,380
Other liabilities
396,865
429,828
396,866
429,832
14,859,385
12,583,335
7,921,481
7,645,488
‘Creditors and accruals’ include an amount of USD 30,647 (2020: Nil) payable to subsidiaries of the Bank. See Note 43 for balances due
to related parties.
FIMBank Group Annual Report & Financial Statements 2021
145
Equity
2021
2020
Shares of 50 US cents
Shares of 50 US cents
Shares
USD
Shares
USD
Authorised
Ordinary shares at 31 December
1,000,000,000
500,000,000
1,000,000,000
500,000,000
Issued and fully paid up
Ordinary shares at 31 December
522,443,763
261,221,882
522,443,763
261,221,882
Ordinary shares
2021
2020
No of shares
No of shares
On issue at 1 January
522,443,763
522,443,763
On issue at 31 December
522,443,763
522,443,763
The share premium represents the excess, net of issue costs, over the nominal value of shares, received through a number of capital
raising initiatives including new equity from strategic shareholders, rights issues, scrip dividend and allotment of shares under the
executive share option schemes. This reserve is non-distributable.
The reserve for general banking risks is a regulatory reserve created by virtue of Banking Rule 9 - Measures Addressing Credit Risks
Arising from the Assessment of the Quality of Asset Portfolios of Credit Institutions authorised under the Banking Act 1994. Under this
Rule, banks are required to calculate a regulatory allocation which would be equal to their level of non-performing exposures (gross of
any collateral but reduced for suspended interest) reduced by the specific impairment allowance as calculated and disclosed in these
Financial Statements. An amount ranging between 2.5% and 5.0% of the regulatory allocation is then appropriated to the ‘reserve for
general banking risks’.
The currency translation reserve consists of exchange differences arising on the translation of the net investment in foreign operations
and the fair value changes on the hedging of net investment in foreign operations.
The fair value reserve comprises:
the cumulative net change in the fair value of revalued property; and
the cumulative net change in the fair value of debt securities measured at fair value through other comprehensive income until the
assets are derecognised or reclassified. This amount is increased by the amount of loss allowance.
Amounts recognised in fair value reserve are net of deferred tax.
The reserve consists of amounts representing the difference between the net proceeds received on the sale of own shares, net of the
relative acquisition costs and the share issue costs by a subsidiary undertaking.
FIMBank Group Annual Report & Financial Statements 2021
146
No dividends were declared or paid during the year (2020: Nil). As none of the reserves are available for distribution, the Board of
Directors will not be recommending the payment of a dividend for the financial year ended 31 December 2021.
The transfer between reserves represents amounts transferred from retained earnings to the ‘reserve for general banking risks’ and
‘other reserves’ in accordance with regulatory requirements, and a restatement of the amounts attributed over the years to ‘non-
controlling interest’ consequent to dilution of holdings in India Factoring.
At 31 December 2021, the Bank had accumulated losses of USD65,296,434 (2020: USD65,772,958).
Non-controlling interest
The following table summarises the information relating to the Group’s subsidiary that has a material non-controlling interest (“NCI”),
before any intra-group eliminations:
India Factoring
Acquisition date
31 March 2014
NCI percentage
11.84%
USD
Total assets
219,950,862
Total liabilities
(177,470,440)
Net assets
42,480,422
Carrying amount of NCI
628,803
Profit for the year
1,927,198
Profit allocated to NCI
228,180
Net decrease in cash and cash equivalents
(5,155,389)
India Factoring
Acquisition date
31 March 2014
NCI percentage
11.84%
USD
Total assets
145,466,659
Total liabilities
(104,220,150)
Net assets
41,246,509
Carrying amount of NCI
407,472
Loss for the year
(1,133,283)
Loss allocated to NCI
(134,180)
Net increase in cash and cash equivalents
10,237,823
‘Non-controlling interest’ includes a restatement from ‘retained earnings’ of the amounts attributed over the years, consequent to
dilution of holdings in India Factoring.
FIMBank Group Annual Report & Financial Statements 2021
147
Contingent liabilities
‘Contingent liabilities’ comprise of guarantee obligations incurred on behalf of third parties. Guarantees issued to subsidiaries amount
to USD37,795,644 (2020: USD42,749,228).
As at December 2021, an expected credit loss allowance, determined in accordance with IFRS 9, amounting to USD162,066 (2020:
USD9,611) for the Group and USD161,995 (2020: USD5,067) for the Bank, was recognised and presented within ‘provision for liabilities
and charges’.
Commitments
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Commitments to purchase assets
Undrawn credit facilities
70,437,057
73,013,249
70,437,057
72,221,019
Confirmed letters of credit
37,269,149
13,321,329
16,123,849
21,267,521
Documentary credits
7,540,705
3,103,424
7,540,705
3,103,424
Factoring commitments
-
-
13,367,500
8,653,802
Commitment to purchase assets
58,371,323
15,605,454
-
-
Commitments to sell assets
Commitment to sell assets
(20,000,000)
-
-
-
153,618,234
105,043,456
107,469,111
105,245,766
The Group has total sanctioned limits to customers amounting to USD1,951,786,983 (2020: USD1,942,816,642). The Bank has
confirmed USD5,461,395 (2020: USD7,946,191) of documentary credits in favour of subsidiary companies.
As at December 2021, an expected credit loss allowance, determined in accordance with IFRS 9, amounting to USD97,262 (2020:
USD167,984) for the Group and USD39,780 (2020: USD167,984) for the Bank, was recognised and presented within ‘provision for
liabilities and charges’.
See Note 43 for ‘commitments’ to related parties.
Cash and cash equivalents
Balances of cash and cash equivalents as shown on the Statements of Financial Position are analysed as follows:
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Balances with the Central Bank of Malta, treasury bills and cash
239,956,890
319,440,224
239,940,100
319,420,449
Loans and advances to banks
34,534,224
59,511,564
26,501,486
51,882,865
Amounts owed to banks
(184,880,010)
(137,027,939)
(139,127,261)
(103,393,628)
Cash and cash equivalents at end of year
89,611,104
241,923,849
127,314,325
267,909,686
Adjustment to reflect balances with contractual maturity of
more than three months
(214,676,733)
(158,940,228)
(202,507,085)
(157,178,511)
As per statements of financial position
(125,065,629)
82,983,621
(75,192,760)
110,731,175
Analysed as follows:
Balances with the Central Bank of Malta, treasury bills and cash
239,998,839
319,287,524
239,982,048
319,267,749
Loans and advances to banks
198,488,576
193,139,577
182,458,548
179,364,067
Amounts owed to banks
(563,553,044)
(429,443,480)
(497,633,356)
(387,900,641)
(125,065,629)
82,983,621
(75,192,760)
110,731,175
FIMBank Group Annual Report & Financial Statements 2021
148
Leases
The Group leases a number of branch and office premises that are accounted for in accordance with IFRS 16 provisions. The leases run
for a period ranging from two to sixteen years. Some leases have an option to renew the lease after that date. Some leases provide for
additional rent payments that are based on changes in local price indices.
The Group also leases some other office premises, motor vehicles and IT equipment, which are low in value and/or short-term. The
Group has elected not to recognise right-of-use assets and lease liabilities for these leases.
Information about leases for which the Group is a lessee is presented below.
Right-of-use assets relate to leased office premises that are presented within ‘property and equipment’ (see Note 27).
Group
Bank
Office premises
Office premises
Office premises
Office premises
2021
2020
2021
2020
USD
USD
USD
USD
Balance at 1 January
2,189,053
2,910,720
2,695,748
4,233,406
Depreciation charge for the year
(946,008)
(1,002,665)
(1,625,813)
(1,603,720)
Additions
923,805
325,372
-
110,340
Lease modifications that increase the scope
of the lease
-
-
9,905
-
Lease modifications that decrease the scope
of the lease
-
(30,737)
-
(44,278)
Effect of movement in exchange rates
(3,123)
(13,637)
-
-
Balance at 31 December
2,163,727
2,189,053
1,079,840
2,695,748
The Bank’s right-of-use assets include the lease of office premises from a subsidiary.
Group
Bank
Office premises
Office premises
Office premises
Office premises
2021
2020
2021
2020
USD
USD
USD
USD
Balance at 1 January
2,416,376
2,991,633
2,864,380
3,629,816
Additions
923,805
325,372
-
110,340
Lease modifications that increase the scope
of the lease -
-
36,941 -
Lease modifications that decrease the scope
of the lease -
(30,737) -
(45,771)
Lease termination costs transferred to provision
for restoration cost -
(98,294) -
-
Interest expense
75,822
110,740
58,646
115,756
Payments
(1,139,127)
(967,167)
(1,787,096)
(997,729)
Effect of movement in exchange rates
(52,426)
84,829
(44,278)
51,968
Balance at 31 December
2,224,450
2,416,376
1,128,593
2,864,380
The Bank’s lease liabilities include the lease of office premises from a subsidiary.
FIMBank Group Annual Report & Financial Statements 2021
149
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Interest on lease liabilities
75,822
110,740
58,646
114,262
Expenses relating to short-term leases
229,221
187,828
103,051
68,572
Expenses relating to leases of low-value assets,
excluding short-term leases of low-value assets
23,754
17,092
20,081
23,467
Some leases of office premises contain extension options exercisable by the Group up to twelve months before the end of the non-
cancellable contract period. Some extension options held are exercisable only by the Group and not by the lessors. The Group assesses
at lease commencement date whether it is reasonably certain to exercise the extension options. The Group reassesses whether it is
reasonably certain to exercise the options if there is a significant event or significant changes in circumstances within its control.
The Group leases out its investment property. The Group has classified these leases as operating leases, because they do not transfer
substantially all of the risks and rewards incidental to the ownership of the assets. Note 28 sets out information about the operating
leases of investment property.
Rental income recognised by the Group during the year ended 31 December 2021 was USD0.72 million (2020: USD0.89 million).
The following table sets out a maturity analysis of lease payments, showing the undiscounted lease payments to be received after the
reporting date:
Group
Bank
2021
2020
2021
2020
USD
USD
USD
USD
Less than one year
583,518
703,312
25,058
150,350
Between one and five years
457,628
601,106
-
250,583
Total
1,041,146
1,304,418
25,058
400,933
FIMBank Group Annual Report & Financial Statements 2021
150
Related parties
The Bank has a related party relationship with its significant shareholders, subsidiaries, directors, executive officers and companies
forming part of the KIPCO Group. For the purpose of this Note, significant shareholders include all shareholders (and their connected
parties) holding at least five percent of the issued share capital of the Bank.
The aggregate values of transactions and outstanding balances related to the parent and subsidiaries of the parent company were as
follows:
Parent
Subsidiaries of parent
2021
2020
2021
2020
Note
USD
USD
USD
USD
Assets
Derivative assets held for risk management
19
-
-
-
96,667
Loans and advances to banks
21
-
-
-
-
Loans and advances to customers
22
42,259,198
45,650,284
-
-
Investments at amortised cost
25
9,972,376
9,910,131
-
-
Liabilities
Derivative liabilities held for risk management
19
-
-
17,715
-
Amounts owed to banks
32
-
-
1,306,953
-
Amounts owed to customers
33
40,647,843
41,404,324
2,583
2,658
Statements of profit or loss
Interest income
9
1,815,398
2,117,999
-
-
Interest expense
9
-
(9,342)
-
-
Fee and commission income
10
120
315
3,861
-
Fee and commission expense
10
(6,216)
(6,156)
-
-
Net trading results
11
-
-
(114,382)
40,923
Administrative expenses
15
-
-
(326,800)
(232,392)
The aggregate values of transactions and outstanding balances related to the shareholder having significant influence, subsidiary of
shareholder having significant influence and other related companies were as follows:
Shareholder having
significant influence
Subsidiary of shareholder
having significant influence
Other related companies
2021
2020
2021
2020
2021
2020
Note
USD
USD
USD
USD
USD
USD
Assets
Loans and advances to banks
21
47,629
115,255
11,326,311
22,542,889
-
-
Loans and advances to customers
22
-
-
-
-
42,733,988
40,738,038
Liabilities
Amounts owed to banks
32
-
-
10,002,778
22,550,135
-
-
Amounts owed to customers
33
-
-
-
-
2,920,956
18,904
Other liabilities
36
-
-
-
-
730
-
Statements of profit or loss
Interest income
9
-
-
16,706
43,949
1,503,255
1,073,397
Interest expense
9
(54,793)
-
(304,095)
(260,323)
-
(14)
Fee and commission income
10
-
-
-
-
47,333
49,092
Fee and commission expense
10
-
(99)
-
-
(763)
-
Net trading results
11
(101,477)
216,016
-
-
-
-
Administrative expenses
15
-
(11,095)
-
-
-
-
FIMBank Group Annual Report & Financial Statements 2021
151
Directors
Executive officers
2021
2020
2021
2020
Note
USD
USD
USD
USD
Assets
Loans and advances to customers
22
-
-
1,114
8,647
Other assets
31
-
-
1,066
1,446
Liabilities
Amounts owed to customers
33
655,413
595,528
340,822
709,525
Statements of profit or loss
Interest income
9
-
-
25
111
Interest expense
9
(8,125)
(7,145)
(1,569)
(2,550)
Fee and commission income
10
160
44
-
115
Administrative expenses - remuneration
15
(414,833)
(360,760)
(2,176,655)
(2,979,087)
Administrative expenses - other long-term benefits
15
(1,032)
(963)
(467,237)
(757,123)
Administrative expenses - short-term employee benefits
15
-
-
-
(46,855)
Administrative expenses - others
15
-
(11,173)
(855)
(20,970)
Directors of the Group control less than 1 per cent of the voting shares of the Bank (2020: less than one per cent).
Other related parties
2021
2020
Note
USD
USD
Liabilities
Amounts owed to customers
33
352,460
369,028
Statements of profit or loss
Interest expense
9
(5,205)
(16,241)
Fee and commission income
10
-
4
Other related party transactions relate to family members of Directors of the Group.
Information on amounts related to subsidiary companies are reported in Notes 9, 10, 11, 13, 15, 21, 22, 31, 32, 33, 36, 39 and 40 of these
Financial Statements.
Capital commitments
At financial reporting date the Group had the following commitments:
2021
2020
USD
USD
Authorised and contracted
201,375
711,000
Authorised but not contracted
312,827
138,729
514,202
849,729
FIMBank Group Annual Report & Financial Statements 2021
152
Financial commitments
At financial reporting date the Group had the following commitments:
2021
2020
USD
USD
Authorised and contracted
5,002,794
4,834,532
Authorised but not contracted
1,040,570
959,141
6,043,364
5,793,673
Subsequent events
On 28 February 2022, the Hellenic Branch in Athens, Greece was officially closed.
On 2 March 2022, FIM Holdings (Chile) S.p.A. was officially liquidated. FIM Holdings (Chile) S.p.A. was a wholly owned subsidiary
registered in Chile and served as the corporate vehicle for Latam Factors S.A., which entity was sold to third parties during 2018. FIM
Holdings (Chile) S.p.A. was put into liquidation during 2019 and its liquidation had no financial impact on the Financial Statements as
at reporting date.
The conflict in Ukraine has prompted management to take the appropriate steps to monitor the possible impact this might have on the
Group both directly and indirectly. The Group’s direct exposure to Russia and Ukraine is limited, with USD1.3 million outstanding to a
state-owned bank in Ukraine. Several client limits were reduced and country limits were suspended. Increased monitoring was put in
place on customers that could be indirectly impacted by the war, either through their trading activity, commodity volatility, sanctions
or other general impacts. A portfolio review concluded that our clients are well positioned to absorb any impact from the current
situation. We will continue to take appropriate actions as needed, to protect the quality of the Group’s portfolio.
Ultimate parent company
The ultimate parent company of FIMBank p.l.c. is Kuwait Projects Company (Holding) K.S.C.P. (“KIPCO”) a company registered in
Kuwait. The registered address is KIPCO Tower, Khalid Bin Al Waleed Street, Sharq, Kuwait City.
The immediate parent company is United Gulf Holding Company B.S.C. (“UGH”), a holding company licensed by the Ministry of
Industry, Commerce and Tourism in Bahrain. The registered address is PO Box 5565, Diplomatic Area, UGB Tower, Manama, Kingdom
of Bahrain.
FIMBank Group Annual Report & Financial Statements 2021
153
Statement by the directors pursuant to Capital
Markets Rule 5.68
For the year ended 31 December 2021
We, the undersigned, declare that to the best of our knowledge, the Financial Statements set out on pages 28 to 152 prepared in accordance with
the requirements of International Financial Reporting Standards as adopted by the EU give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Bank and its subsidiaries included in the consolidation taken as a whole and that this report includes a fair review
of the development and performance of the business and the position of the Bank and its subsidiaries included in the consolidation taken as a
whole, together with a description of the principal risks and uncertainties that they face.
Signed on behalf of the Board of Directors by John C. Grech (Chairman) and Masaud M.J. Hayat (Vice Chairman) on 13 April 2022
FIMBank Group Annual Report & Financial Statements 2021
154
Independent auditors’ report
To the shareholders of FIMBank p.l.c.
Report on the audit of the financial statements
Opinion
We have audited the financial statements of FIMBank p.l.c. (the “Bank” or the “Company”) and of the Group of which the Company is the
parent, which comprise the statements of financial position as at 31 December 2021, the statements of profit or loss and other comprehensive
income, changes in equity and cash flows for the year then ended, and notes, comprising significant accounting policies and other explanatory
information.
In our opinion, the accompanying financial statements:
a. give a true and fair view of the financial position of the Bank and the Group as at 31 December 2021, and of their financial performance and
their cash flows for the year then ended in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the EU; and
b. have been properly prepared in accordance with the provisions of the Companies Act, 1995 (Chapter 386, Laws of Malta) (the “Act”) and the
Banking Act, 1994 (Chapter 371, Laws of Malta) (the “Banking Act”) and, additionally, specifically in relation to those of the Group, with the
requirements of Article 4 of the Regulation on the application of IFRS as adopted by the EU.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities under those standards are further
described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We are independent of the Company
in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants
(including International Independence Standards) (IESBA Code), together with the ethical requirements that are relevant to our audit of the
financial statements in accordance with the Accountancy Profession (Code of Ethics for Warrant Holders) Directive issued in terms of the
Accountancy Profession Act (Chapter 281, Laws of Malta), and we have fulfilled our other ethical responsibilities in accordance with these
requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of
the current year (selected from those communicated to the audit committee), and include a description of the most significant assessed risks
of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit
strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
We summarise below the key audit matters, together with our response by way of the audit procedures we performed to address that matter
in our audit, and key observations arising with respect to such risks of material misstatement.
FIMBank Group Annual Report & Financial Statements 2021
155
Independent auditors’ report
To the shareholders of FIMBank p.l.c.
Assessment of the carrying amounts of goodwill at group level and investment in subsidiaries at
company level
Accounting policy notes 2.4.2, 3.1.1, 3.1.2, 3.16, 3.19 and 3.20 to the financial statements and notes 26 and 29 for further disclosures.
Goodwill’ (Group: USD5,605,349); and ‘Investment in subsidiaries’ (Company: USD159,448,858).
‘Investment in subsidiaries’ includes, among others, the investment in The Egyptian Company for Factoring S.A.E. (referred to as “Egypt
Factors”) and, indirectly through FIM Factors B.V., the investment in India Factoring and Finance Solutions Private Limited (referred to as “India
Factoring”), to which the key audit matter relates.
The Group
The Group holds goodwill relating to the acquisition of the interests in Egypt Factors and India Factoring (the “components”). Both components
are separately identified by the Group as cash generating units (“CGU” or ”CGUs”), in line with the applicable financial reporting framework, as
they generate cash-inflows for the Group that are largely independent of the cash inflows generated by other assets or groups of assets.
At Group level, an assessment of each CGU is required annually by the relevant financial reporting framework to establish whether the
recoverable amount is at least equal to the carrying amount, and therefore, whether any impairment should be recorded. Significant judgement
is required in determining the recoverable amount of each CGU, namely due to the (i) inherent uncertainty in forecasting the future cash flows;
and the (ii) judgement required in determining the appropriate discount rates and expected long term growth rates applied to those cash flows
in arriving at the value-in-use (being the basis on which the carrying amount is determined). The impact of COVID-19 has resulted in
unprecedented economic conditions, which in turn heightens the level of judgement required to determine the inputs used in calculating the
recoverable amount of each CGU.
The Company
‘Investments in subsidiaries’ are carried at cost less any impairment losses in the Company’s statement of financial position. That financial
statement caption includes the components to which those CGUs relate (Egypt Factors and India Factoring). Any impairment relating to those
CGUs may result in the Company’s investment in subsidiaries being impaired should such impairment result in the recoverable amount of the
related investment being lower than its carrying amount.
Our response
For each of the CGUs, as part of our procedures:
we evaluated the reasonableness of the data used in the preparation of the cash flow forecasts (in the main, projected factoring volumes
and margins) with reference to our understanding of the components’ historical trends and the continued impact of COVID-19 during the
year;
we involved our valuation specialist to assist us in assessing the valuation of India Factoring and of Egypt Factors (performed by experts
engaged by the Group in the respective jurisdiction). Involvement included assessing (i) the appropriateness of the selected valuation model;
and (ii) whether the discount rates and the expected long-term growth rates applied to the cash flow forecasts were within a reasonable
range by comparison with market data consisting mainly of the respective country Gross Domestic Product growth rate and rate of inflation;
we assessed the impact of reasonable possible changes in the key assumptions in the valuation model including discount rates and expected
long term growth rates used for estimating the recoverable amounts of each CGU in concluding on the impairment assessment, and
assessed whether there were any indicators of management bias in the selection of those assumptions; and
we compared the Group’s and Company’s 2021 budgets with the actual performance for the reporting period, and made enquiries as to the
reasons for any significant variations identified and assessed the reasonableness of the explanations provided, by corroborating these
against our knowledge of the Group.
We have no key observations to report, specific to this matter.
FIMBank Group Annual Report & Financial Statements 2021
156
Independent auditors’ report
To the shareholders of FIMBank p.l.c.
Recoverability of recognised deferred tax assets
Accounting policy note 3.9 to the financial statements and note 30 for further disclosures.
‘Deferred tax assets’ (Group: USD24,920,527 and Company: USD16,336,538).
The Group and the Company recognised deferred tax assets in respect of the future benefit of net deductible temporary differences and
accumulated tax losses. In accordance with the applicable financial reporting framework, the recognition of those deferred tax assets is
permitted to the extent that it is probable that future taxable profits will be available against which these assets can be used. Such restrictions
are more pronounced in certain jurisdictions, in which the Group operates, where the carry forward of losses to future periods are time-barred.
The recognition of deferred tax assets, therefore, requires significant judgement in estimating future profitability (and the extent of taxable
profits) based on business plans drawn up by the directors. Due to estimation uncertainty, the projected relief of the tax losses, for which the
deferred tax assets are recognised, might be materially different from the amount ultimately relieved.
Our response
As part of our procedures:
we assessed the applicability of enacted and substantively enacted tax laws that support the recognition of the deferred tax assets;
we evaluated the assumptions underlying the Company’s and its subsidiaries’ projections used to support the recognition of the deferred
tax asset having regard to (i) our understanding of the respective jurisdiction and applicable fiscal legislation; and (ii) the current pipeline of
new business;
specifically in relation to carry forward losses subject to time-barring, we also assessed the impact of reasonable possible changes in the
underlying assumptions of the forecasts, including the impact of COVID-19, on the Group’s ability to utilise the losses before their expiry;
and
we compared the Group’s and Company’s 2021 budgets with the actual performance for the reporting period, and made enquiries as to the
reasons for any significant variations identified and assessed the reasonableness of the explanations provided, by corroborating these
against our knowledge of the Group and by evaluating the sales pipeline and evidencing a significant shift in lower risk business as a result
of the Group’s continued de-risking process.
We have no key observations to report, specific to this matter.
FIMBank Group Annual Report & Financial Statements 2021
157
Independent auditors’ report
To the shareholders of FIMBank p.l.c.
Measurement of impairment allowances on loans and advances measured at amortised cost,
including off-balance sheet elements of the allowance
Accounting policy note 3.10.8 to the financial statements and notes 2.4.1, 2.4.2, 5.2.1.1, 5.2.1.4, 21, 22, and 35 for further disclosures.
Expected credit loss allowance on loans and advances to banks at amortised cost (Group: USD198,874,727 and Company: USD182,826,911)
amounted to USD386,151 - Group and USD368,363 - Company.
Expected credit loss allowance on loans and advances to customers at amortised cost (Group: USD711,697,194 and Company: USD814,521,125)
amounted to USD82,784,854 - Group and USD68,956,986 - Company.
Expected credit loss provision on off-balance sheet credit exposures (Group: USD155,568,768 and Company: USD146,796,473) amounted to
USD259,328 - Group and USD559,775 - Company.
Subjective estimate
The calculation of Expected Credit Loss (“ECL”) involves significant judgement and estimates. Of all the Group’s financial instruments, the
most significant impact in terms of complexities around the measurement of the ECL and of the materiality of the resultant allowances was in
relation to the Group’s lending activities to banks and customers (and the related off-balance sheet elements). In that regard, our key areas of
audit focus in the Group’s calculation of the ECL were the following:
Model estimation - Inherently judgmental modelling is used to estimate ECLs which involve determining ‘Probabilities of Default’ (“PD”),
‘Loss Given Default’ (“LGD”), and ‘Exposures at Default’ (“EAD”). In particular, the PD models are the key drivers of the Group’s ECL
calculation and are therefore the most significant judgmental element of the Group’s ECL modelling approach.
Economic scenarios - Significant judgment is applied in determining the selection of (i) forward-looking macroeconomic scenarios, (ii) the
associated scenario probabilities and (iii) the material economic variables which drive the scenarios and the related weightings, especially
when considering the current uncertain economic environment as a result of COVID-19.
Qualitative adjustments to the model-driven ECL results may be raised by the Group to address known impairment model limitations or
emerging trends. Estimating those adjustments also involves significant judgement.
Identification of a significant increase in credit risk (“SICR”) is also a key area of judgement within the Group’s ECL calculation, which was
heightened as a result of COVID-19 as the application of the SICR criteria determines whether a twelve month or lifetime provision is
recorded.
Individually assessed as stage 3 exposures may be materially misstated if individual impairments are not appropriately identified and
estimated. The calculation of expected credit losses includes a range of estimates of future cash flows and valuation of collateral, which are
inherently uncertain and judgemental.
The disclosures regarding the application of IFRS 9 are key to explaining the key judgements made, as referred to in this key audit matter, and
inputs used to generate the IFRS 9 ECL results.
FIMBank Group Annual Report & Financial Statements 2021
158
Independent auditors’ report
To the shareholders of FIMBank p.l.c.
Our response
As part of our procedures:
we assessed the design and implementation as well as the operating effectiveness of controls within the ECL process with respect to (a) the
approval of the credit application by the Credit Committee or the delegated authority (depending on monetary value); and (b) the review
of ECL provision levels and movements by the Head of Finance and the Chief Risk Officer;
we involved our financial risk modelling specialists in evaluating:
o the appropriateness of the Group’s selected IFRS 9 impairment methodologies within the ECL model by reference to the sensitivity
analysis as performed by the Group with respect to the ECL model results; and
o the appropriateness of the SICR criteria used; and
we involved our economics specialists to assist in assessing:
o the appropriateness of the Group’s methodology for determining the macroeconomic scenarios used and the reasonableness of the
probability weightings applied to them;
o the relevance of the key macroeconomic variables used in the ECL model; and
o the reasonableness of the Group’s consideration of the ECL impact of the economic environment due to COVID-19.
Specifically in relation to a sample of performing loans (‘stage 1’ and ‘stage 2’), we:
performed testing over key data elements (EAD, PD and LGD) impacting the ECL calculations to assess the accuracy of information used;
and
performed tests to determine whether a significant increase in credit risk was appropriately identified by the Group, including ‘days past
due’.
Specifically in relation to a sample of loans and advances discussed in the Board Risk Committee and the Credit Committee (the “focus
exposures”), including those not otherwise automatically captured by the ECL model as non-performing loans (‘stage 3’):
we performed credit reviews focusing on the borrowers’ ability to repay from normal operations, the performance history of the account
and receipts after the financial reporting date; and
in the case of non-performing loans, we evaluated the appropriateness of the inputs, particularly the LGD and discount rates used in the
ECL model. In cases where the LGD involved the realisation of collateral, we corroborated the extendible value of collateral with external
data sources.
We assessed management’s determination for the need of any post model adjustments required to capture possible model defects.
We assessed whether the disclosures in relation to IFRS 9 adequately explain the key judgements made and significant inputs used in the
recognition of expected credit losses as at the end of the financial reporting period.
We have no key observations to report, specific to this matter.
FIMBank Group Annual Report & Financial Statements 2021
159
Independent auditors’ report
To the shareholders of FIMBank p.l.c.
Valuation of unquoted assets measured at fair value
Accounting policy notes 2.4.2, 3.10.9 and 3.12 to the financial statements and notes 20 and 23 for further disclosures.
Shares in two sub-funds of a local unlisted collective investment scheme (Bank and Group: USD19,066,651) included within ‘Financial assets
designated at fair value through profit or loss’; and ‘Trading assets’ (Group: USD439,985,203).
The fair value of certain financial assets held by the Group is determined through the application of valuation techniques that involve the
exercise of judgement, and the use of assumptions based on limited observable market data. Covid-19 has resulted in markets being more
volatile. The level of judgement surrounding the valuation of unquoted assets increased due to the heightened market volatility. These
unquoted assets relate primarily to:
the equity instruments in the form of shares (classified as financial assets at fair value through profit or loss) held in two sub-funds of a local
unlisted collective investment scheme (‘the Funds’) which hold assets that cannot be valued through observable market data; and
the trading assets, held by London Forfaiting Company Limited (“LFC”), that represent forfaiting assets (discounted receivables generated
from an export contract) whose valuation incorporates significant unobservable inputs.
Our response
For equity instruments held in the Funds we performed the following:
we assessed the audited financial information of the Funds and quarterly net asset value as published by the fund administrator;
we evaluated available financial information in relation to direct exposures held by the Funds and assessed replies to further enquiries in
relation to these direct exposures; and
we considered other relevant publicly available information.
In relation to forfaiting financial assets, as part of our procedures:
we assessed the design and implementation as well as the operating effectiveness of the following controls:
o Approval levels for all deals;
o Authorisation of accounting instructions; and
o Management review control – Review of rationale of risk margin.
we involved our valuation specialist to independently reprice a sample of fixed and floating forfaiting assets in order to determine a range
of the fair value, for the purpose of testing LFC’s methodology. The final sample included counterparties and contracts covering each
country and industry in the forfaiting assets portfolio where exposure was material;
we tested a sample of exposures covering all countries and industries within the residual population, by challenging LFC as to the validity of
the assumptions used in setting the risk premium within the discount rate by assessing consistency with publicly available information and
information from other sources;
we tested the accuracy of the LIBOR rates and other inputs (such as the average life at value date, average LIBOR) employed by LFC by
comparing the LIBOR rates with information available to the public from tested sources, and other inputs to data within the forfeiting
system; and
we also back tested a sample of disposals during the year to determine the appropriateness of the prior period valuations. This was achieved
by comparing the disposal price of the asset with the latest fair value, at end of the month prior to sale of the asset to determine whether
those fair values were appropriate.
We have no key observations to report, specific to this matter.
FIMBank Group Annual Report & Financial Statements 2021
160
Independent auditors’ report
To the shareholders of FIMBank p.l.c.
Other information
The directors are responsible for the other information which comprises:
the ‘Chairman’s Statement to the Shareholders’;
the ‘FIMBank Group Performance 2021’;
the ‘Directors’ Report’;
the ‘Statement of Compliance with the Principles of Good Corporate Governance’;
the ‘Remuneration Report’;
the ‘Statement by the Directors pursuant to Capital Markets Rule 5.68’; and
the ‘Schedules to the annual report’
but does not include the financial statements and our auditors’ report thereon.
Our opinion on the financial statements does not cover the other information and, other than in the case of the directors’ report on which we
report separately below in our ‘Opinion on the Directors’ Report’, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information, and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial statements
The directors are responsible for the preparation of financial statements that (a) give a true and fair view in accordance with IFRS as adopted
by the EU, and (b) are properly prepared in accordance with the provisions of the Act and the Banking Act, and, additionally, specifically in
relation to those of the Group, with the requirements of Article 4 of the Regulation on the application of IFRS as adopted by the EU. The
directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Company’s and the Group’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either
intend to liquidate the Company and/or the Group or to cease operations, or have no realistic alternative but to do so.
The directors are also responsible for overseeing the financial reporting process.
FIMBank Group Annual Report & Financial Statements 2021
161
Independent auditors’ report
To the shareholders of FIMBank p.l.c.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that includes our opinion. ‘Reasonable assurance’ is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit.
We also:
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal control.
Consider the extent of compliance with those laws and regulations that directly affect the financial statements, as part of our procedures
on the related financial statement items. For the remaining laws and regulations, we make enquiries of directors and other management,
and inspect correspondence with the regulatory authority, as well as legal correspondence. As with fraud, there remains a higher risk of
non-detection of other irregularities (whether or not these relate to an area of law directly related to the financial statements), as these
may likewise involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s and the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by
the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s and the Group’s
ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’
report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the
Company and/or the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial
statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to
express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the
Group audit. We remain solely responsible for our audit opinion.
We communicate with the audit committee regarding, among other matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the audit committee with a statement that we have complied with relevant ethical requirements regarding independence, and
communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where
applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with the audit committee, we determine those matters that were of most significance in the audit of the
financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law
or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not
be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
FIMBank Group Annual Report & Financial Statements 2021
162
Independent auditors’ report
To the shareholders of FIMBank p.l.c.
Opinion on the directors’ report
The directors are responsible for preparing a directors’ report in accordance with the provisions of article 177 of the Act and other applicable
legal requirements, and is to include a statement that the Company is a going concern with supporting assumptions or qualifications as
necessary, as required by Capital Markets Rule 5.62 issued by the Listing Authority in Malta.
We are required to consider whether the information given in the directors’ report for the accounting period for which the financial statements
are prepared is consistent with those financial statements; and, if we are of the opinion that it is not, we shall state that fact in our report. We
have nothing to report in this regard.
Pursuant to article 179(3) of the Act, other than for the non-financial information that is exclusively required to be disclosed by paragraph 8 of
the Sixth Schedule of the Act with respect to the Bank, and paragraph 11 of the Sixth Schedule of the Act with respect to the Group (and on
which we report separately below in our ‘Report on Other Legal and Regulatory Requirements’), we are also required to:
express an opinion on whether the directors’ report has been prepared in accordance with the applicable legal requirements; and
state whether, in the light of the knowledge and understanding of the entity and its environment obtained in the course of our audit of the
financial statements, we have identified material misstatements in the directors’ report, giving an indication of the nature of any such
misstatements.
Pursuant to Capital Markets Rule 5.62 of the Capital Markets rule issued by the Listing Authority in Malta, we are required to review the
directors’ statement in relation to going concern.
In such regards:
in our opinion, the directors’ report has been prepared in accordance with the applicable legal requirements;
we have not identified material misstatements in the directors’ report; and
we have nothing to report in relation to the statement on going concern.
Report on other legal and regulatory requirements
Matters on which we are required to report by the Act, specific to public-interest
entities
Pursuant to article 179B(1) of the Act, we report as under matters not already reported upon in our ‘Report on the Audit of the Financial
Statements’:
we were first appointed as auditors by the shareholders on 8 November 1994, and subsequently reappointed at the Company’s general
meetings for each financial period thereafter. The period of total uninterrupted engagement is twenty-seven years;
our opinion on our audit of the financial statements is consistent with the additional report to the audit committee required to be issued by
the Audit Regulation (as referred to in the Act); and
we have not provided any of the prohibited services as set out in the Accountancy Profession Act.
FIMBank Group Annual Report & Financial Statements 2021
163
Independent auditors’ report
To the shareholders of FIMBank p.l.c.
Matters on which we are required to report by the Banking Act and by exception by
the Act
Pursuant to article 31(3)(a), (b) and (c) of the Banking Act, in our opinion:
we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purpose of
our audit;
proper books of account have been kept by the Bank so far as appears from our examination thereof; and
the Bank’s financial statements are in agreement with the books of account.
Furthermore, we have nothing to report in respect of the above matters, where the Act requires us to report to you by exception pursuant to
articles 179(10) and 179(11).
Pursuant to article 31(3)(d) of the Banking Act, in our opinion and to the best of our knowledge and belief and, on the basis of the explanations
given to us, the financial statements give the information required by law in force in the manner so required.
FIMBank Group Annual Report & Financial Statements 2021
164
Independent auditors’ report
To the shareholders of FIMBank p.l.c.
Report on compliance with the requirements of the Commission Delegated
Regulation (EU) 2018/815 supplementing Directive 2004/109/EC (the “ESEF
Regulation”), by reference to Capital Markets Rule 5.55.6 issued by the Listing
Authority
We have undertaken a reasonable assurance engagement in accordance with the requirements of Directive 6 issued by the Accountancy Board
in terms of the Accountancy Profession Act, 1979 (Chapter 281, Laws of Malta), the Accountancy Profession (European Single Electronic
Format) Assurance Directive, on the Group’s Annual Report and Financial Statements for the year ended 31 December 2021, prepared in a
single electronic reporting format.
Responsibilities of the directors for compliance with the requirements of the ESEF Regulation
As required by Capital Markets Rule 5.56A, the directors are responsible for the preparation of the Annual Report and Financial Statements in
XHTML format, including the specified mark-ups, in accordance with the requirements of the ESEF Regulation.
In addition, the directors are responsible for such internal control as they determine is necessary to enable the preparation of the Annual Report
and Financial Statements that is in compliance with the requirements of the ESEF Regulation.
Auditors’ responsibilities to report on compliance with the requirements of the ESEF Regulation
Our responsibility is to obtain reasonable assurance about whether the Annual Report and Financial Statements in XHTML format, including
the specified mark-ups, comply in all material respects with the ESEF Regulation based on the evidence we have obtained.
In discharging that responsibility, we:
obtain an understanding of the entity’s financial reporting process, including the preparation of the Annual Report and Financial
Statements, in accordance with the requirements of the ESEF Regulation;
perform validations to determine whether the Annual Report and Financial Statements has been prepared in accordance with the
requirements of the technical specifications of the ESEF Regulation; and
examine the information in the Annual Report and Financial Statements to determine whether all the required mark-ups therein have been
applied and whether, in all material respects, they are in accordance with the requirements of the ESEF Regulation.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Opinion
In our opinion, the Annual Report and Financial Statements for the year ended 31 December 2021 has been prepared, in all material respects,
in accordance with the requirements of the ESEF Regulation, by reference to Capital Markets Rule 5.55.6.
The Principal authorised to sign on behalf of KPMG on the audit resulting in this independent auditors’ report is Noel Mizzi.
Signed by Noel Mizzi on 13 April 2022
KPMG
Registered Auditors
FIMBank Group Annual Report & Financial Statements 2021
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Independent auditors’ report
To the shareholders of FIMBank p.l.c.
Report required by Capital Markets Rules 5.98 and 12.26N issued
by the Malta Financial Services Authority (the “MFSA”)
We were engaged by the Directors of FIMBank p.l.c. (the “Bank”) to report on the disclosures of specific elements in the Statement of compliance
with the principles of good corporate governance and the Remuneration report (the “Disclosures”) as at 31 December 2021 as to whether they are
in compliance with the corporate governance regulations and information to be provided in the Remuneration report set out in the Capital Markets
Rules issued by the MFSA (the “Capital Markets Rules”). More specifically, we are required to report on the Disclosures in the form of an
independent reasonable assurance conclusion about whether:
a. in light of our knowledge and understanding of the Bank and its environment obtained in the course of the statutory audit, we have identified
material misstatements with respect to the information referred to in Capital Markets Rules 5.97.4 (dealing with the Bank’s internal control and
risk management systems in relation to the financial reporting process) and 5.97.5 (where a takeover bid applies). Where material
misstatements are identified in relation to those requirements, we shall, in addition to our conclusion, provide an indication of the nature of
such misstatements;
b. the Disclosures include the other information required by Capital Markets Rule 5.97, insofar as it is applicable to the Bank; and
c. the Disclosures include the information required by Appendix 12.1, ‘Information to be provided in the Remuneration Report’, to Chapter 12 of
the Capital Markets Rules (as applicable).
Responsibilities of the Directors
The Directors are responsible for preparing and presenting the Disclosures in accordance with the requirements of the Capital Markets Rules.
This responsibility includes designing, implementing and maintaining internal control as they determine is necessary to enable the preparation and
presentation of the Disclosures that are free from misstatement.
The directors are also responsible for preventing and detecting fraud and for identifying and ensuring that the Bank complies with laws and
regulations applicable to its activities. The directors are responsible for ensuring that personnel involved in the preparation and presentation of the
Disclosures are properly trained, systems are properly updated and that any changes in reporting relevant to the Disclosures encompass all
significant business units.
Our Responsibilities
Our responsibility is to examine the Disclosures prepared by the Bank and to report thereon in the form of an independent reasonable assurance
conclusion based on the evidence obtained. We conducted our engagement in accordance with International Standard on Assurance Engagements
3000 (Revised), Assurance Engagements Other Than Audits or Reviews of Historical Financial Information (“ISAE 3000”) issued by the International
Auditing and Assurance Standards Board. That standard requires that we plan and perform our procedures to obtain reasonable assurance about
whether the Disclosures are properly prepared and presented, in all material respects, in accordance with the requirements set out in the relevant
Capital Markets Rules.
The firm applies International Standard on Quality Control 1 Quality Control for Firms that Perform Audits and Reviews of Historical Financial
Information, and Other Assurance and Related Services Engagements and, accordingly, maintains a comprehensive system of quality control
including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and
regulatory requirements.
We have complied with the independence and other ethical requirements of the International Ethics Standards Board for Accountants’
International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), together with the ethical
requirements that are relevant to our assurance engagement in accordance with the Accountancy Profession (Code of Ethics for Warrant Holders)
Directive issued in terms of the Accountancy Profession Act (Chapter 281, Laws of Malta), and we have fulfilled our other ethical responsibilities in
accordance with these requirements and the IESBA Code.
The procedures selected and our determination of the nature, timing and extent of those procedures, will depend on our judgment, including the
assessment of the risks of material misstatement of the preparation and presentation of the Disclosures whether due to fraud or error.
FIMBank Group Annual Report & Financial Statements 2021
166
Independent auditors’ report
To the shareholders of FIMBank p.l.c.
In making those risk assessments, we have considered internal control relevant to the preparation and presentation of the Disclosures in order to
design assurance procedures that are appropriate in the circumstances, but not for the purposes of expressing a conclusion as to the effectiveness
of the Bank’s internal control over the preparation and presentation of the Disclosures. Reasonable assurance is less than absolute assurance.
We are not required to, and we do not, consider whether the directors’ statements on internal control and risk management systems cover all the
risks and controls in relation to the financial reporting process or form an opinion on the effectiveness of the Bank’s corporate governance
procedures or its risks and control procedures, nor on the ability of the Bank to continue in operational existence. Our opinion in relation to the
disclosures pursuant to Capital Markets Rules 5.97.4 and 5.97.5 (as appropriate) is based solely on our knowledge and understanding of the Bank
and its environment obtained in forming our opinion on the audit of the financial statements.
As part of this engagement, we have not performed any procedures by way of audit, review or verification of the Disclosures nor of the underlying
records or other sources from which the Disclosures were extracted.
Other Information
We also read the other information included in the Annual Report and Financial Statements that contains the Disclosures, and our report thereon,
in order to identify material inconsistencies, if any, with the Disclosures. We have nothing to report in this regard.
Conclusion
Our conclusion has been formed on the basis of, and is subject to, the matters outlined in this report.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion.
In our opinion:
a. in light of our knowledge and understanding of the Bank and its environment obtained in the course of the statutory audit, we have not
identified material misstatements with respect to the information requirements referred to in Capital Markets Rules 5.97.4 and 5.97.5;
b. the Disclosures include the other information required by Capital Markets Rule 5.97; and,
c. the Disclosures include the information required by Appendix 12.1 to Chapter 12 of the Capital Markets Rules.
The Principal authorised to sign on behalf of KPMG on the work resulting in this assurance report is Noel Mizzi.
Signed by Noel Mizzi on 13 April 2022
KPMG
Registered Auditors
FIMBank Group Annual Report & Financial Statements 2021
167
Schedule I
Statements of profit or loss
2021
2020
2019
2018
2017
USD
USD
USD
USD
USD
Interest income
19,588,232
22,721,724
30,311,233
35,303,561
28,323,748
Interest expense
(10,457,006)
(11,482,001)
(14,037,860)
(19,139,771)
(17,738,857)
Net interest income
9,131,226
11,239,723
16,273,373
16,163,790
10,584,891
Fee and commission income
4,940,843
5,366,867
7,753,143
12,849,903
11,048,533
Fee and commission expense
(2,165,538)
(2,552,278)
(3,078,283)
(2,799,252)
(2,482,765)
Net fee and commission income
2,775,305
2,814,589
4,674,860
10,050,651
8,565,768
Net trading results
542,868
(554,107)
3,107,935
2,632,452
(3,031,664)
Dividend income
16,989,049
7,240,817
43,591,794
17,660,271
10,446,343
Losses on lease modifications
(27,037)
-
-
-
-
Other operating income
133,940
120,725
118,904
125,068
87,088
Other operating expenses
(128,906)
-
-
-
-
Operating income before net impairment losses
29,416,445
20,861,747
67,766,866
46,632,232
26,652,426
Net impairment (charge)/reversal on financial assets
(3,699,557)
(34,272,400)
(14,210,257)
(15,514,849)
1,790,863
Impairment of investments in subsidiaries
(87,356)
(9,314,000)
-
(1,455,270)
(2,558,752)
Operating income/(expense)
25,629,532
(22,724,653)
53,556,609
29,662,113
25,884,537
Administrative expenses
(23,213,366)
(23,722,803)
(20,305,701)
(23,787,047)
(24,785,664)
Depreciation and amortisation
(2,965,967)
(2,962,370)
(2,896,531)
(1,022,470)
(922,457)
Total operating expenses
(26,179,333)
(26,685,173)
(23,202,232)
(24,809,517)
(25,708,121)
(Loss)/Profit before tax
(549,801)
(49,409,826)
30,354,377
4,852,596
176,416
Taxation
(113,418)
(6,566,776)
(765,433)
(1,115,249)
(60,598)
(Loss)/Profit for the year
(663,219)
(55,976,602)
29,588,944
3,737,347
115,818
FIMBank Group Annual Report & Financial Statements 2021
168
Schedule II
Statements of financial position
2021
2020
2019
2018
2017
USD
USD
USD
USD
USD
Assets
Balances with the Central Bank of Malta,
treasury bills and cash
239,982,048
319,267,749
208,259,407
151,891,005
208,147,513
Derivative assets held for risk management
841,688
1,019,288
96,285
109,727
722,256
Loans and advances to banks
182,458,548
179,364,067
232,351,750
321,550,241
203,552,663
Loans and advances to customers
745,564,139
779,834,360
811,152,849
730,708,445
581,529,952
Financial assets at fair value through profit or loss
19,966,163
20,385,323
125,342,798
173,438,374
-
Financial assets at fair value through other
comprehensive income
162,408,542
153,327,686
79,367,556
87,468,166
-
Investments at amortised cost
9,914,754
9,839,457
9,785,496
9,923,499
-
Investments available-for-sale
-
-
-
-
261,244,798
Investments in subsidiaries
159,448,858
147,436,214
147,948,385
102,595,614
94,050,884
Property and equipment
1,965,249
3,507,509
5,229,059
968,472
1,035,490
Intangible assets
3,774,315
4,008,725
4,647,642
4,669,342
2,736,599
Current tax assets
66,667
76,225
226,886
-
1,052,348
Deferred tax assets
16,336,538
15,590,954
22,011,162
22,599,041
23,303,267
Other assets
3,848,321
5,570,563
8,824,153
7,352,443
9,005,794
Prepayments and accrued income
-
-
-
-
7,054,755
Total assets
1,546,575,830
1,639,228,120
1,655,243,428
1,613,274,369
1,393,436,319
Liabilities and equity
Liabilities
Derivative liabilities held for risk management
1,533,556
1,629,434
193,691
2,928,925
723,454
Amounts owed to banks
497,633,356
387,900,641
405,072,025
398,815,757
393,247,791
Amounts owed to customers
838,675,598
1,037,118,337
978,134,002
961,292,743
815,812,570
Debt securities in issue
-
-
-
14,849,948
-
Subordinated liabilities
-
-
-
-
50,000,000
Provision for liabilities and charges
201,775
173,051
85,159
269,784
-
Other liabilities
7,921,481
7,645,488
13,077,128
5,708,599
793,060
Accruals and deferred income
-
-
-
-
7,818,090
Total liabilities
1,345,965,766
1,434,466,951
1,396,562,005
1,383,865,756
1,268,394,965
Equity
Share capital
261,221,882
261,221,882
261,221,882
252,720,107
157,265,562
Share premium
858,885
858,885
858,885
9,275,773
173,113
Reserve for general banking risks
2,218,995
3,358,738
2,323,486
1,242,511
608,284
Fair value reserve
(1,074,305)
2,413,581
357,233
758,254
81,501
Other reserve
2,681,041
2,681,041
2,681,041
2,681,041
2,681,041
Accumulated losses
(65,296,434)
(65,772,958)
(8,761,104)
(37,269,073)
(35,768,147)
Total equity
200,610,064
204,761,169
258,681,423
229,408,613
125,041,354
Total liabilities and equity
1,546,575,830
1,639,228,120
1,655,243,428
1,613,274,369
1,393,436,319
Memorandum items
Contingent liabilities
39,327,362
44,246,902
61,628,654
67,466,612
57,601,096
Commitments
107,469,111
105,245,766
143,026,427
158,386,020
254,253,843
FIMBank Group Annual Report & Financial Statements 2021
169
Schedule III
Cash flow statements
2021
2020
2019
2018
2017
USD
USD
USD
USD
USD
Net cash flows (used in)/from
operating activities
(118,733,012)
61,848,191
28,447,866
(115,353,903)
20,694,088
Cash flows from investing activities
Payments to acquire financial assets at
fair value through profit or loss - - (2,469,245) (18,092,429) -
Payments to acquire financial assets at fair value
through other comprehensive income (74,874,050) (109,616,706) (84,984,922) - -
Payments to acquire financial assets at
amortised cost -
-
-
(9,881,423) -
Payments to acquire shares in
subsidiary companies -
(1,801,829) (5,352,772) - (10,304,042)
Payments to acquire shares in other investments
-
-
-
(35,210)
-
Payments to acquire property and equipment
(399,511)
(142,744)
(372,658)
(344,451)
(195,368)
Payments to acquire intangible assets
(779,881)
(393,096)
(951,219)
(2,543,743)
(727,136)
Proceeds on disposal of financial assets at
fair value through profit or loss 160,770 105,639,259 50,000,000 - -
Proceeds on disposal of financial assets at fair
value through other comprehensive income 50,918,619 49,246,582 93,035,159 15,000,000 -
Proceeds on disposal of available-for-sale
financial assets -
-
-
- 62,397,260
Proceeds from maturity of investments
held-to-maturity -
-
-
- 27,543,320
Proceeds on disposal of property and equipment
9,751
-
3,551
-
2,674
Receipt of dividend
4,889,049
240,817
4,628,411
7,472,717
10,207,806
Cash flows (used in)/generated from
investing activities
(20,075,253)
43,172,283
53,536,305
(8,424,539)
88,924,514
Cash flows from financing activities
Issue of share capital
-
-
84,887
54,557,207
98,077
Net movement in debt securities
-
-
(14,834,943)
14,834,942
-
Payment of lease liabilities
(1,787,096)
(997,729)
(2,354,026)
-
-
Net cash flows (used in)/from
financing activities
(1,787,096)
(997,729)
(17,104,082)
69,392,149
98,077
(Decrease)/Increase in cash and cash equivalents
(140,595,361)
104,022,745
64,880,089
(54,386,293)
109,716,679
Cash and cash equivalents at beginning of year
267,909,686
163,886,941
99,006,852
153,393,145
43,676,466
Cash and cash equivalents at end of year
127,314,325
267,909,686
163,886,941
99,006,852
153,393,145
FIMBank Group Annual Report & Financial Statements 2021
170
Schedule IV
Accounting ratios
2021
2020
2019
2018
2017
%
%
%
%
%
Net interest income and other operating income to total assets
2.05
1.43
4.28
3.06
2.09
Operating expenses to total assets
(1.69)
(1.63)
(1.40)
(1.54)
(1.84)
(Loss)/Profit before tax to total assets
(0.04)
(3.01)
1.83
0.30
0.01
Pre-tax return on capital employed
(0.27)
(24.13)
11.73
2.12
0.14
(Loss)/Profit after tax to equity
(0.33)
(27.34)
11.44
1.63
0.09
2021
2020
2019
2018
2017
Weighted average number of shares in issue (000’s) *
522,444
522,444
514,568
459,637
329,878
Net assets per share (US cents) *
38.40
39.19
50.27
49.91
37.91
Basic earnings per share (US cents) *
Basic
(0.13)
(10.71)
5.75
0.81
0.04
Diluted
(0.13)
(10.71)
5.75
0.81
0.04
‘ * ‘ Weighted average number of shares in issue and ratios for 2017 to 2018 have been restated to reflect the number of shares in issue as a result
of the 2019 bonus issue of shares.
FIMBank Group Annual Report & Financial Statements 2021
171
Directors and executive management
Board of Directors John C. Grech (Chairman)
Masaud M.J. Hayat (Vice Chairman)
Abdel Karim A.S. Kabariti
Claire Imam Thompson
Edmond Brincat
Hussain Abdul Aziz Lalani
Majed Essa Ahmed Al-Ajeel
Mohamed Fekih Ahmed
Osama Talat Al-Ghoussein (retired on 31 March 2022)
Rabih Soukarieh
Rogers David LeBaron
Company Secretary Andrea Batelli
Registered Address Mercury Tower
The Exchange Financial and Business Centre
Elia Zammit Street
St. Julian’s STJ 3155
MALTA
Contact Number Tel: +356 2132 2100
Executive Management
FIMBank p.l.c.
Group Chief Executive Officer Adrian A. Gostuski
First Executive Vice President Simon Lay Deputy Chief Executive Officer
Executive Vice Presidents Andrea Batelli Group General Counsel,
Head of Investor Relations & Company Secretary
Julio Bonifacino Chief Investment Officer, Structuring Executive
& Advisor to the GCEO
Juraj Beno Group Chief Financial Officer
Thomas Dodd Group Chief Compliance Officer & MLRO
Ronald Haverkorn Group Chief Risk Officer
London Forfaiting Company Limited
Chief Executive Officer Simon Lay
Company Secretary William Ramzan Head of Finance
India Factoring and Finance Solutions (Private) Limited
Chief Executive Officer Ravi Valecha
Company Secretary Swati Zawar Manager – Compliance
The Egyptian Company for Factoring S.A.E.
Chief Executive Officer Ahmed Shaheen
Company Secretary Mohamed Gamaleldien Head of Legal