Bank of Baroda (Ghana) Limited

BANK OF BARODA GHANA LIMITED

ANNUAL FINANCIAL STATEMENTS

31 DECEMBER 2015

1


ANNUAL REPORT AND FINANCIAL STATEMENTS

I N D E X

Page

Corporate Information 2

Report of the Directors 3 - 7

Independent Auditor’s Report 8 - 9

Statement of Profit or Loss other Comprehensive Income 10

Statement of Financial Position 11

Statement of Changes in Equity 12

Statement of Cash Flows 13

Notes to the Financial Statements 14-62

2

Corporate Information

Directors:

Mr. B.B. Joshi

Chairman

Mr. Ranganathem Mohan

Managing Director

Mrs.Vindhya V Ramesh

Director

Mr. Larry Kwesi Jiagge

Director

Mr. Naresh K. Tekwani

Director

Registered office: Kwame Nkrumah Avenue

(Near Melcom) Adabraka

Accra

Ghana

P.M.B. No. 298

Accra - North

Accra

Bankers:

Bank of Ghana

Bank of Baroda - Mumbai

Bank of Baroda - New York

Bank of Baroda - London

Bank of Baroda - Brussels

International Commercial Bank

Auditors:

John Nipah & Associates

(Formerly Bola-Sadipe,Xapic & Co)

Chartered Accountants

Shop Number U-16,

Glorex Plaza,

14 Market Street,

Community14,

Sakumono, Tema

P.O. Box CT3486

Cantonments

Accra

Secretary

Rutben and Associates

Legal Practitioners and

Investment Consultants

No. 11 Nii Sai Crescent

East Legon,

P.O. Box KIA 9475

Airport -Accra

DIRECTORS REPORT

3

CORPORATE GOVERNANCE

Bank of Baroda Ghana Limited

The Bank operates in a highly regulated industry and therefore recognizes the importance of complying with

legislation, regulation and codes of best practice. The Bank is committed to business integrity and

professionalism in all its activities. As part of this commitment the Board supports the highest standards of

corporate governance and the development of best practices.

Bank of Baroda (Ghana) Limited has adopted its own internal corporate governance guidelines, which are

embodied in the Bank governance practices. These practices are constantly being monitored to ensure that they

are the best fit for the Bank and serve to enhance business and community objectives.

Board of Directors

The Bank still advocates for an integrated approach to corporate governance as evidenced by the governance

framework. The Board consists of the Chairman, two Executive Directors and one Non-Executive Director. The

independent board provides strategic direction and has ultimate responsibility for the functioning of the Bank.

The independent board provides strategic direction and has ultimate responsibility.

The Board is accountable for all decisions taken by its Board committees and management. The Board and its

committees all operate in terms of agreed mandates, which set out their terms of reference, and are reviewed

and revised regularly in order to keep pace with global developments.

There are three reporting Committees responsible for supporting the Board of Directors

(a) Credit committee

The Committee’s main terms of reference include:

(i) Setting the Bank’s credit governance structure to ensure that there is a clearly defined mandate and

delegated authorities within the structure.

(ii) Reviewing the Bank’s credit portfolio, including trends and provisions and ensuring alignment with

the Bank’s credit strategy and risk appetite.

(iii) Noting and / or approving large exposures as required by the regulatory authorities.

(b) Audit committee

The Role of Audit Committee includes:

(i) Keeps up to date with changes in the legal and regulatory environment affecting the work the

committee monitors for proper execution.

(ii) Follows up the implementation of the audit plan and makes the necessary readjustments

(iii) Reviews the procedures and the functioning of the anti-money laundering and

(iv) Submits to the Board of Directors the measures likely to improve, where applicable, the security of

operations, and monitors the implementation of the selected measures.

(c) Nomination and compensation committee

The primary objective of the Nomination and Compensation Committee in accordance with good corporate

governance is to ensure that the Bank has a Board of Competent and effective composition and is adequately

charges to carry out its responsibility in the best interest of the Bank and its shareholders.

DIRECTORS REPORT

4

(d) Systems of internal control

Bank of Baroda (Ghana) Limited has well-established internal control systems for identifying, managing and

monitoring risks. These are designed to provide reasonable assurance that the risks facing the business are being

controlled. The corporate internal assurance function of the Bank plays a key role in providing an objective

view and continuing assessment of the effectiveness of the internal control systems in the business. The systems

of internal controls are implemented and monitored by appropriately trained personnel and their duties and

reporting lines are clearly defined.

(e) Code of business ethics

Management has communicated the principles in the Bank’s Code of Conduct, to its employees in the

performance of their duties. This code sets the professionalism and integrity required for business operations

which covers compliance with the law, conflicts of interest, environmental issues, reliability of financial

reporting, and strict adherence to the principles so as to eliminate the potential for illegal practices.

Directors and their interest

The directors of the Bank at the date of this report are:

Mr.B.B. Joshi

Chairman

Mr.R.Mohan

Managing Director

Mrs.Vindhya V Ramesh

Director

Mr.Larry Kwesi Jiage

Director

Mr. Naresh K. Tekwani

Director

The directors’ beneficiary interest in the ordinary shares of the Bank as at 31 December, 2015 are as shown per

note 35 of the financial statements.

DIRECTORS REPORT

5

REPORT OF THE DIRECTORS


In accordance with the requirements of section 132 of the Companies Act, 1963, (Act 179), the Directors have

the pleasure in presenting the financial report of the bank for the year ended 31st December, 2015.

Directors’ responsibility for the financial statements

The Bank’s Directors are responsible for the preparation and fair presentation of these financial statements in

accordance with International Financial Reporting Standards, and in the manner required by the Companies

Code, 1963 (Act 179), and the Banking Act, 2004 (Act 673), as amended by the Banking (Amendment) Act,

2007 (Act 738); and for such internal control as the Directors determine is necessary to enable the preparation

of financial statements that are free from material misstatement, whether due to fraud or error.

The Directors have made an assessment of the Bank’s ability to continue as a going concern and have no reason

to believe that the business will not be a going concern in the year ahead.

Principal Activity

The principal activity of the bank is the provision of banking and financial services. There was no change in the

principal activity of the bank in 2015. The bank operates under the Banking Act 2004 (Act 673) as amended by

the Banking (Amendment) Act 2007 (Act 738). The bank is regulated by the Bank of Ghana.

The Bank was incorporated on 18th April 2007 and was authorized to carry on the following businesses on 5th

February, 2008:

(a) Acceptance of deposits, borrowing, raising or taking of deposits or money, lend or advance money on

farms, lands, claims, mining rights, mining titles, fixed or immovable property of every kind, leases,

contracts, goods, wares, merchandise, property, farms and agricultural produce, securities, both

movable and immovable rights of action of whatsoever kind with or without security taking securities

and property, discounting notes, coupons, drafts, Bills of Lading, warrants, debentures, certificates,

scripts and other instruments and securities transferable or negotiable; granting and issuing letters of

credit, bonds and guarantees and circular notes; buying selling and dealing in bullion specie, precious

and base metals and precious stones; to acquire, purchase, subscribe for, hold, issue, guarantee,

underwrite, guarantee the underwriting of and deal in Government, Municipal or other loans, stocks,

funds, shares, debentures, debenture stocks, bonds, bills obligations, buying selling and dealing in

bullion specie, precious and base metals and precious stones; to acquire, purchase subscribe for, hold,

issue, guarantee, underwrite, guarantee the underwriting of and deal in Government,

Municipal or other loans, stocks, funds, shares, debentures, debenture stocks, bonds, bills obligations,

securities and valuables on deposit or for safe custody or otherwise and transacting all kinds of agency

business commonly transacted by Bankers.

(b) To undertake and carry on the business of trade development and finance, including mobilization of

deposits, to offer credit facilities and to provide services to facilitate the payment systems. These

include: Current and Savings Accounts, Fixed and Call Deposits, Cash Collection, Issue of Bonds,

Guarantees and Certificates of Deposit; to engage in the provision of import and export letters of

credit, handling of inward and outward bills for collection, Bills of Exchange, Bills of Lading,

Debentures, Commercial papers, all debt instruments and other negotiable or transferable instruments,

negotiation of export bills, Dealings in Foreign

Exchange, provision of Foreign Currency and Foreign Exchange accounts, handling of Foreign

Transfers, remittances and cheques collection. Issuing and administering means of payments including

credit cards, travellers cheques and bankers drafts/cheques, international transactions and services;

advisory and financial services for small and medium scale industries and enterprises, investment in

financial securities, dealing with money market instruments etc.,

DIRECTORS REPORT

6

(c) To carry on the business of discounting, dealing in exchanges, in specie and securities

(d) To undertake the collection of dividends, debts and taxes for and on behalf of any government person,

Partnership or Association

(e) To carry on Business as a Merchant Bank.

(f) To carry on the business of underwriters of Securities, Finance Houses and Issuing Houses.

(g) To undertake corporate finance operations, loan syndications and securities portfolio management.

(h) To engage in counselling and negotiating in acquisitions and mergers of companies and undertaking

(i) To carry on the business of a hire-purchase finance Company and the business of financing the

operations of leasing companies;

(j) (j) To undertake and execute any trusts, and also to undertake the office of executor, administrator,

receiver,

(k) registrar and to keep for any company, or body, any register relating to any stocks, funds, shares, or

securities,

(l) or to undertake any duties in relation to the registration of transfers and the issue of certificates or the

custody of Securities.

(m) Carrying on and transacting every kind of guarantee, commitments and indemnity business

(n) Managing, selling and realizing any property which may come into the possession of the Company in

satisfaction or part satisfaction of any its claims

(o) Acquiring and holding and generally dealing with any property or any right, title or interest in any

such property which may form the security or part of the security for any loans or advances or which

may be connected with any such security.

(p) Doing all such other things as are incidental or conducive to the promotion or advancement of the

business of the Company.

(q) To do all or any of the above things and as Principals, Agents, Contractors, Trustees, or otherwise,

and by or through Trustees, Agents or otherwise, and either alone or in conjunction with others and

either absolutely or conditionally.

(r) To do all or any of other forms of business that Company is allowed / permitted to do in Ghana.

Larry K Jiagge R.Mohan

Director Managing Director

7

Retained earnings summary

2015

GH¢

2014

GH¢

Profit for the year was 18,121,060

14,726,640

Less: Transfer to Statutory Reserve Fund

Movement in Credit Risk Reserve

(9,060,530)

53,141

(7,363,320)

5,526

Leaving a balance of 9,113,671 7,368,846

To which is added balance on Reserve Fund (Statutory Reserve)

bought forward

20,038,880

12,670,034

Giving a cumulative amount available for distribution of 29,152,551 20,038,880

final dividend for 2015 -

-

Leaving a balance on the Retained Earnings (Income Surplus

Account) carried forward of

29,152,551

20,038,880

Statutory Reserve Fund

In accordance with Section 29(c) of the Banking Act, 2004 (Act 673), as amended by the Banking

(Amendment) Act, 2007 (Act 738), a cumulative amount of GH¢29,097,890 (2014: GH¢20,037,360)

has been set aside in a Statutory Reserve Fund from the Retained Earnings (Income Surplus Account).

The cumulative balance includes an amount set aside from the net profit for the year.

Dividend

The Directors do not recommend the payment of dividends.

Area of operation

The Bank comprises a network of 2 branches and head office.

Going concern The Bank’s management has made an assessment of its ability to continue as a going concern and is

satisfied that it has the resources to continue in business for the foreseeable future. Furthermore,

management is not aware of any material uncertainties that may cast significant doubt upon the Bank’s

ability to continue as a going concern. Therefore, the financial statements continue to be prepared on

the going concern basis.

Approval of the Financial Statements

The directors have taken all the necessary steps to make themselves and John Nipah & Associates are

aware of any information needed in performing the audit of the 2015 Annual Report and account and

as far as each of the directors is aware, there is no relevant audit information of which John Nipah &

Associates is unaware.

The financial statements of the Bank were approved by the Board of Directors and authorized for issue

on 02nd March,2016 and were signed on its behalf by:



8

INDEPENDENT AUDITOR’S REPORT

TO THE MEMBERS OF


Report on the financial statements

We have audited the financial statements of Bank of Baroda Ghana Limited set out on pages 10 to 13,

which comprise the statement of financial position as at 31 December 2015, and the statement of

income statement, statement of other comprehensive income, statement of changes in equity, and

statement of cash flows for the year then ended, and the notes comprising a summary of significant

accounting policies and other explanatory information.

Directors’ responsibility for the financial statements

The Bank’s Directors are responsible for the preparation and fair presentation of these financial

statements in accordance with International Financial Reporting Standards, and in the manner required

by the Companies Code, 1963 (Act 179), and the Banking Act, 2004 (Act 673), as amended by the

Banking (Amendment) Act, 2007 (Act 738); and for such internal control as the directors determine is

necessary to enable the preparation of financial statements that are free from material misstatement,

whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We

conducted our audit in accordance with International Standards on Auditing. Those standards require

that we comply with ethical requirements and plan and perform the audit to obtain reasonable

assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures

in the financial statements. The procedures selected depend on the auditor’s judgement, including the

assessment of the risks of material misstatement of the financial statements, whether due to fraud or

error. In making those risk assessments, the auditor considers internal control relevant to the entity’s

preparation and fair presentation of the financial statements 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 entity’s internal control. An audit also includes evaluating the appropriateness of accounting

policies used and the reasonableness of accounting estimates made by management, as well as

evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for

our audit opinion.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of

Bank of Baroda Ghana Limited at 31 December 2015, and its financial performance and cash flows for

the year then ended in accordance with International Financial Reporting Standards and in the manner

required by the Companies Code, 1963 (Act 179), and the Banking Act, 2004 (Act 673), as amended

by the Banking (Amendment) Act, 2007 (Act 738).

9

INDEPENDENT AUDITOR’S REPORT

TO THE MEMBERS OF

BANK OF BARODA GHANA LIMITED (CONT’D)

Report on other legal and regulatory requirements

The Ghana Companies Act, 1963 (Act 179) requires that in carrying out our audit work we consider

and report on the following matters.

We confirm that:

i. We have obtained all the information and explanations which to the best of our knowledge and

belief were necessary for the purposes of our audit,

ii. In our opinion proper books of accounts have been kept by the Bank, so far as appears from

our examination of those books, and

iii. The balance sheet [Statement of Financial Position] and Profit & Loss of the Bank are in

agreement with the books of accounts.

The Banking Act 2004 (Act 673), section 78 (2), requires that we state certain matters in our

report

We hereby state that:

i. The accounts give a true and fair view of the state of affairs of the Bank and its results for the

period under review,

ii. We were able to obtain all the information and explanation required for the efficient

performance of our duties as auditors,

iii. The Bank transactions are within their powers, and

iv. The Bank has generally complied with the provisions of Act 673 and the Banking

(Amendment) Act of 2007.

Signature: …………………………………

Partner Signing: John Oliver Nipah

Licence No.: ICAG/P/1008

Name of Firm: John Nipah & Associates

Licence No.: ICAG/F/2016/043

Community 14,

Sakumono, Tema


STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2015

10

2015 2014

Note GH¢ GH¢

Interest income 8 31,272,509 25,885,521

Interest expense 9 (3,442,081) (2,965,839)

Net interest income 27,830,428 22,919,682

Fees and commission income 10 254,956 1,059,046

Other operating income 11 1,924,974 712,552

Non-interest income 2,179,930 1,771,598

Operating income 30,010,358 24,691,280

Operating expenses 12 (4,067,222) (3,027,756)

Operating profit before impairment and taxation 25,943,136 21,663,524

Impairment charges on loans 13 (8,000) (164,600)

Provisions and Contingencies and advances (29,000) (322,000)

Profit before taxation 25,906,136 21,176,925

Corporate tax 15(a) (6,496,457) (5,377,768)

Deferred Tax 15(c) 10,673 3,037

National fiscal stabilisation levy 15(d) (1,299,291) (1,075,554)

Profit for the year 18,121,060 14,726,640

Other comprehensive income:

Items that may be reclassified subsequently to profit & loss: - -

Net fair value gains on available for sale financial assets - -

Total comprehensive income for the year 18,121,060 14,726,640

The notes on pages 14 to 62 form an integral part of these financial statements.


STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2015

11

2015 2014

Assets GH¢ GH¢

Cash and balances with Bank of Ghana 16 13,605,961 13,069,576

Financial investment 17 74,288,000 77,181,689

Due from other banks and financial institutions 18 78,706,275 18,565,398

Loans and advances 19 97,406,549 81,089,306

Prepayment & Accrued Income 20 2,672,262 4,283,245

Other assets 21 25,806 16,861

Deferred Tax Assets 15(c) 26,772 16,099

Intangible asset 22 - -

Property and equipment 23 481,115 127,074

Total Assets 267,212,740 194,349,248

Liabilities

Customer deposits 24 112,750,630 91,590,568

Borrowings 25 30,360,000 -

Interest payable 26 160,892 212,410

Other liabilities 27 5,371,805 2,383,861

Taxation 15(b) 295,748 9,804

Total liabilities 148,939,075 94,196,643

Shareholders’ funds

Share capital 28 60,000,000 60,000,000

Shareholders Advance 29 9,771 9,771

Statutory reserve fund 30 29,097,890 20,037,360

Credit risk reserve 31 13,453 66,594

Other reserve 32 - -

Retained earnings 33 29,152,551 20,038,880

Total shareholders’ funds 118,273,665 100,152,605

Total liabilities and shareholders’ funds

267,212,740

194,349,248

Net Assets Value per Share (Ghana Cedi per share) 1.97 1.67

These financial statements were approved by the Board of Directors on _______________ and signed

on its behalf by:





STATEMENT OF CHANGES IN EQUITY


12

Share

Capital

Retained

Earnings

Statutory

Reserve

Credit

Risk

Reserve

Shareholder

’s Advance

Shareholders

Fund

GH¢ GH¢ GH¢ GH¢ GH¢ GH¢

Balance at 1 January 2015 60,000,000 20,038,880 20,037,360 66,594 9,771 100,152,605

Profit for the year - 18,121,060 - - - 18,121,060

Transfer to Statutory Reserve - (9,060,530) 9,060,530 - - -

Transfer to Income Surplus - 53,141 - (53,141) - _____-

As at 31 December 2015 60,000,000 29,152,551 29,097,890 13,453 9,771 118,273,665

Balance at 1 January 2014 60,000,000 12,670,034 12,674,040 72,120 9,771 85,425,965

Profit for the year - 14,726,640 - - - 14,726,640

Transfer to Statutory Reserves - (7,363,320) 7,363,320 - - -

Transfer to Income Surplus - - - - - -

Transfer to credit risk reserve - 5,526 - (5,526) - -

As at 31 December 2014 60,000,000 20,038,880 20,037,360 66,594 9,771 100,152,605



STATEMENT OF CASH FLOWS


13

2015 2014

GH¢ GH¢

OPERATING ACTIVITIES

Operating Profit

25,906,136 21,176,925

Add Back Depreciation & Amortization

175,626 77,156

Adjustment

9804 -

Net cash provided by operating activities

Before changes in operating assets and liabilities 26,071,957 21,254,081

(Increase)/Decrease in Short Investment

2,893,689 (1,683,689)

(Increase)/Decrease in Loans and Overdraft

(16,146,796) (33,078,536)

(Increase)/Decrease in Other Assets

1,602,038 (522,294)

Increase/(Decrease) in Deposits

21,160,062 30,746,241

Increase/(Decrease) in Accounts Payable

2,936,426 693,434

Net Cash Provided by Operating Activities

38,517,375 17,409,237

Corporate Tax paid

(7,564,151) (6,443,528)

Net cash flow from operating activities

31,017,377 10,965,709

INVESTING ACTIVITIES

Purchases of Property, Equipment etc.

(529,667) (74,389)

Purchases of Intangible Assets

- -

Proceeds - Sale of Assets

- -

Net Cash Provided by Investing Activities (529,530) (74,389)

FINANCING ACTIVITIES

Increase/(Decrease) in Stated Capital

- -

Increase/(Decrease) in Shareholders Advance - -

Increase/(Decrease) Short Term Loan

30,189,553 -

Net cash from (used in) financing activities 30,189,553 -

Increase/(decrease) in Cash & Cash Equivalents 60,677,262 10,891,318

Cash and Cash equivalents at 1 January 2015 31,634,974 20,743,656

Cash and Cash equivalents at 31 December 2015 92,312,236 31,634,974


NOTES TO THE FINANCIAL STATEMENTS (CONT’D)


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1. Reporting entity

Bank of Baroda Ghana Limited (the “Bank”) is a bank incorporated in Ghana. The address and registered office

of the Bank is Kwame Nkrumah Avenue, (Near Melcom), Adabraka, Accra, P. M. B. No. 298, Accra – North,

Accra, Ghana.

2. Basis of preparation

a. Statement of compliance

The financial statements have been prepared in accordance with International Financial Reporting Standards

(IFRS) and its interpretations as issued by the International Accounting Standards Board (IASB).

b. Basis of preparation

The financial statements are presented in Ghana cedis which is the Bank’s functional and presentational

currency. All values are indicated in GH¢ unit values only except otherwise indicated. They are prepared on the

historical cost basis except for the following assets and liabilities that are stated at their fair value: derivative

financial instruments, financial instruments at fair value through profit or loss and financial instruments

classified as available-for-sale.

c. Use of estimates and judgements

The preparation of financial statements in conformity with IFRS requires management to make judgement,

estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities,

income and expenses. The estimates and associated assumptions are based on historical experience and various

other factors that are believed to be reasonable under the circumstances, the results of which form the basis of

making the judgement about carrying values of assets and liabilities that are not readily apparent from other

sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting

estimates are recognised in the period in which the estimate is revised if the revision affects only that period or

in the period of the revision and future periods if the revision affects both current and future periods. In

particular, information about significant areas of estimation uncertainty and critical judgements in applying

accounting policies that have the most significant effect on amounts recognised in the financial statements are

described in notes 3g (ix), 3g (xi), 3g (xii) and 15.

d. Fiduciary activities

The Bank commonly acts as trustees and in other fiduciary capacities that result in the holding or placing of

assets on behalf of individuals, trustees and other institution. The assets and income arising thereon are

excluded from this financial statement as they are not assets and income of the Bank.

All the investments made on behalf of third parties are done within the Bank’s operating jurisdiction.




15

3. Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these financial

statements by the Bank.

a. Revenue Recognition

Interest income and expense on available-for-sale assets and financial assets and liabilities held at amortised

cost, are recognized in the statement of profit or loss using the effective interest method.

Gains and losses arising from changes in the fair value of financial assets and liabilities held at fair value

through profit or loss is included in the statement of profit or loss in the period in which they arise. Gains and

losses arising from changes in the fair value of available-for-sale financial assets, other than foreign exchange

gains and losses from monetary items, are recognised directly in equity, until the financial asset is derecognised

or impaired at which time the cumulative gain or loss previously recognised in equity is recognised in the

statement of profit or loss. Dividends are recognised in the statement of comprehensive income when the

Bank’s right to receive payment is established.

b. Interest Income and Expense

Interest income and expense is recognised in statement of profit or loss using the effective interest method. The

effective interest rate is the rate that discounts estimated future receipts or payments through the expected life of

the financial instruments or, when appropriate, a shorter period, to the net carrying amount of the financial asset

or financial liability. The effective interest rate is established on initial recognition of the financial asset or

liability and is not revised subsequently when calculating the effective interest rate; the Bank estimates cash

flows considering all contractual terms of the financial instrument but does not consider future credit losses.

The calculation includes all fees received or paid between parties to the contract that are an integral part of the

effective interest rate, transaction costs and all other premiums or discounts. Transactions costs are incremental

costs that are directly attributable to the acquisition, issue or disposal of a financial asset or liability.

When a financial asset or a group of similar financial assets have been written down as a result of impairment,

interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of

measuring the impairment loss.

Interest income and expense on financial assets and liabilities held at fair value through profit or loss is

recognised in the statement of profit or loss in the period they arise.

c. Fees and Commissions

Fees and commission income and expenses that are an integral part of the effective interest rate on financial

instruments are included in the measurement of the effective interest rate.

Other fees and commission income, including account servicing fees, investment management fees, sales

commission, placement and arrangement fees and syndication fees are recognised as the related services are

performed.

Other fees and commission expense relates mainly to transaction and service fees, which are expensed as the

services are received.




16

d. Other operating income

Other operating income comprises other income including gains or losses arising on fair value changes in

trading assets and liabilities, derecognised available for sale financial assets, and foreign exchange differences.

e. Foreign currency – Reference rate

The transaction rates used are the average of the buying and selling of the underlying inter-bank foreign

exchange rate as quoted by the Ghana Bankers Association. Foreign exchange gains and losses resulting from

the settlement of such transactions, and from the translation at year-end exchange rates of monetary assets and

liabilities denominated in foreign currencies, are recognised in the statement of profit or loss. On-monetary

assets and liabilities are translated at historical exchange rates if held at historical cost or exchange rates at the

date the fair value was determined if held at fair value, and the resulting foreign exchange gains and losses are

recognised in the statement of profit or loss or shareholders’ equity as appropriate.

f. Leases

(i) Where the Bank is the lessee

The leases entered into by the Bank are primarily operating leases. The total payments made under operating

leases are charged to the profit or loss on a straight-line basis over the period of the lease.

When an operating lease is terminated before the lease period has expired, any payment required to be made to

the lessor by way of penalty is recognized as an expense in the period in which termination takes place.

Where the Bank is a lessee under finance leases, the leased assets are capitalized and included in property and

equipment with a corresponding liability to the lessor recognized in other liabilities. Finance charges payable

are recognized over the period of the lease based on the interest rate implicit in the lease to give a constant

periodic rate of return.

(ii) Where the Bank is the lessor

When assets are leased to customers under finance leases, the present value of the lease payments is

recognized as a receivable. The difference between the gross receivable and the present value of the

receivable is recognized as unearned finance income. Lease income is recognised over the term of the lease

using the net investment method (before tax), which reflects a constant periodic rate of return ignoring tax

cash flows.

Assets leased to customers under operating leases are included within property and equipment and depreciated

over their useful lives. Rental income on these leased assets is recognised in the profit or loss on a straight-line

basis unless another systematic basis is more representative.

g. Financial assets and liabilities

i. Date of recognition

All financial assets and liabilities are initially recognised on the trade date, i.e., the date that the Bank becomes a

party to the contractual provisions of the instrument. This includes regular way trades: purchases or sales of

financial assets that require delivery of assets within the time frame generally established by regulation or

convention in the market place.




17

(ii) Categorisation of financial assets and liabilities

The Bank classifies its financial assets in the following categories: financial assets held at fair value through

profit or loss; loans and receivables and available-for-sale financial assets. Financial liabilities are classified as

either held at fair value through profit or loss, or at amortised cost. Management determines the categorisation

of its financial assets and liabilities at initial recognition.

(iii) Financial assets and liabilities held at fair value through profit or loss

This category has two sub-categories: financial assets and liabilities held for trading, and those designated at

fair value through profit or loss at inception. A financial asset or liability is classified as trading if acquired

principally for the purpose of selling in the short term.

Financial assets and liabilities may be designated at fair value through profit or loss when the designation

eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from

measuring assets or liabilities on a different basis, or a group of financial assets and/or liabilities is managed and

its performance evaluated on a fair value basis.

(iv) Loans and advances

Loans and advances are non-derivative financial assets with fixed or determinable payments that are not quoted

in an active market.

(v) Available for sale financial assets

Available-for-sale assets are those non-derivative financial assets that are designated as available for sale or are

not classified as financial assets at fair value through profit or loss, loans and receivable or held to maturity.

(vi) Financial liabilities measured at amortised cost

This relates to all other liabilities that are not designated at fair value through profit or loss.

(vii) Initial recognition

Purchases and sales of financial assets and liabilities held at fair value through profit or loss, available for sale

financial assets and liabilities are recognised on trade- date (the date the Bank commits to purchase or sell the

asset).Loans and receivables are recognised when cash is advanced to customers or borrowers.

Financial assets and liabilities are initially recognised at fair value plus directly attributable transaction cost

except for those that are classified as fair value through profit or loss.

(viii) Subsequent measurement

Available for sale financial assets are subsequently measured at fair value with the resulting changes recognised

in equity. The fair value changes on available for sale financial assets are recycled to the statement of profit or

loss when the underlying asset is sold, matured or derecognised. Financial assets and liabilities classified as fair

value through profit or loss are subsequently measured at fair value with the resulting changes recognised in

income. Loans and receivables and other liabilities are subsequently carried at amortised cost using the

effective interest method, less impairment loss.




18

(ix) Derecognition

Financial assets are derecognised when the right to receive cash flows from the financial assets has expired or

where the Bank has transferred substantially all the risks and rewards of ownership. Any interest in the

transferred financial assets that is created or retained by the Bank is recognised as a separate asset or liability.

Financial liabilities are derecognised when the contractual obligations are discharged, cancelled or expire.

(x) Fair value measurement

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. The fair value measurement is based on the

presumption that the transaction to sell the asset or transfer the liability takes place either:

In the principal market for the asset or liability; or

In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible by the Bank.

The fair value of an asset or a liability is measured using the assumptions that market participants would use

when pricing the asset or liability, assuming that market participants act in their economic best interest.

The Bank measures fair values using the following fair value hierarchy that reflects the significance of the

inputs used in making the measurements:

Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.

Level 2: Valuation techniques based on observable inputs, either directly (i.e., as prices) or indirectly (i.e.,

derived from prices).This category includes instruments 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 where all significant inputs are directly or indirectly observable

from market data.

Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments

where 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 includes instruments that are valued

based on quoted prices for similar instruments where significant unobservable adjustments or assumptions

are required to reflect differences between the instruments.

For complex instruments such as swaps, the Bank uses proprietary models, which are usually developed from

recognised valuation models. Some or all of the inputs into these models may be derived from market prices or

rates or are estimates based on assumptions.

The value produced by a model or other valuation technique may be adjusted to allow for a number of factors as

appropriate, because valuation techniques cannot appropriately reflect all factors market participants take into

account when entering into a transaction. Management believes that these valuation adjustments are necessary

and appropriate to fairly state financial instruments carried at fair value on the statement of financial position

statement of financial position.




19

Day 1 profit or loss

When the transaction price differs from the fair value of other observable current market transactions in the

same instrument, or based on a valuation technique whose variables include only data from observable markets,

the Bank immediately recognises the difference between the transaction price and fair value (a Day 1 profit or

loss) in Net trading income. In cases where fair value is determined using data which is not observable, the

difference between the transaction price and model value is only recognised in the profit or loss when the inputs

become observable, or when the instrument is derecognised.

Reclassification of financial assets

For a financial asset reclassified out of the available-for-sale category, any previous gain or loss on that asset

that has been recognised in equity is amortised to profit or loss over the remaining life of the investment using

the Effective Interest Rate (EIR) Method.

Any difference between the new amortised cost and the expected cash flows is also amortised over the

remaining life of the asset using the EIR. If the asset is subsequently determined to be impaired, then the

amount recorded in equity is recycled to the profit or loss profit or loss.

Reclassification is at the election of management, and is determined on an instrument by instrument basis.

(xi) Offsetting

Financial assets and liabilities are set off and the net amount presented in the statement of financial position

when, and only when, the Bank has a legal right to set off the amounts and 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 by the accounting standards, or for gains

and losses arising from a group of similar transactions such as in the Bank’s trading activity.

(xii) Amortised cost measurement

The amortised cost of a financial asset or liability is the amount at which the financial asset or 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.

(xiii) Identification and measurement of impairment

The Bank assesses at each statement of financial position date whether there is objective evidence that a

financial asset or group of financial assets are impaired. A financial asset or a group of financial assets is

impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result

of one or more events that occurred after initial recognition of the asset (a “loss event”), and that loss event (or

events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that

can be reliably estimated.

Objective evidence that financial assets are impaired can include default or delinquency by a borrower,

restructuring of a loan and other observable data that suggests adverse changes in the payment status of the

borrower.




20

(xiii) Identification and measurement of impairment (cont’d)

The Bank first assesses whether objective evidence of impairment exists individually for financial assets that

are individually significant, and individually or collectively for financial assets that are not individually

significant. If the Bank determines that no objective evidence of impairment exists for an individually assessed

financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit

risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for

impairment and for which an impairment loss is or continues to be recognised, are not included in a collective

assessment of impairment.

If there is objective evidence that an impairment loss on a loan and receivable has been incurred, the amount of

the loss is measured as the difference between the asset’s carrying amount and the present value of estimated

future cash flows (excluding future credit losses that have not been incurred), discounted at the asset’s original

effective interest

rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the

loss is recognised in the profit or loss. If a loan and receivable has a variable interest rate, the discount rate for

measuring any impairment loss is the current effective interest rate determined under the contract.

The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects

cash flows from the realization of the collateral and other sources. For the purposes of a collective evaluation of

impairment, financial assets are grouped on the basis of similar credit risk characteristics (i.e. on the basis of the

Bank’s grading process which considers asset type, industry, geographical location, collateral type, past due

status and other relevant factors).These characteristics are relevant to the estimation of future cash flows for

group of such assets being indicative of the debtors’ ability to pay all amounts due according to the contractual

terms of the assets being evaluated.

Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on

the basis of historical loss experience for assets with credit risk characteristics similar to those in the Bank.

Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current

conditions that did not affect the period on which the historical loss experience is based, and to remove the

effects of conditions in the historical period that do not exist currently.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related

objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s

credit rating), the previously recognised impairment loss is reversed by adjusting the allowance account. The

amount of the reversal is recognised in the statement of profit or loss.

Impairment losses on available-for-sale financial assets are recognised by transferring the difference between

the amortised acquisition cost and current fair value out of equity to the statement of profit or loss .When a

subsequent event causes the impairment loss on an available for sale financial asset to decrease, the impairment

loss is reversed through the statement of profit or loss .However, any subsequent recovery in the fair value of an

impaired available for sale financial asset is recognised directly in equity.

(xiv) Repurchase and reverse repurchase agreements

Securities sold under agreements to repurchase at a specified future date are not derecognised from the

statement of financial position as the Bank retains substantially all of the risks and rewards of ownership. The

corresponding cash received is recognised in the statement of financial position as an asset with a corresponding

obligation to return it, including accrued interest as a liability within Cash collateral on securities lent and

repurchase agreements, reflecting the transaction’s economic substance as a loan to the Bank. The difference

between the sale and repurchase prices is treated as interest expense and is accrued over the life of agreement

using the EIR.




21

(xiv) Repurchase and reverse repurchase agreements (cont’d)

When the counterparty has the right to sell or re-pledge the securities; the Bank reclassifies those securities in

its statement of financial position to financial assets held for trading pledged as collateral or to financial

investments available-for-sale pledged as collateral, as appropriate.

Conversely, securities purchased under agreements to resell at a specified future date are not recognised in the

statement of financial position. The consideration paid, including accrued interest, is recorded in the statement

of financial position, within Cash collateral on securities borrowed and reverse repurchase agreements,

reflecting the transaction’s economic substance as a loan by the Bank. The difference between the purchase and

resale prices is recorded in Net interest income and is accrued over the life of the agreement using the EIR.

If securities purchased under agreement to resell are subsequently sold to third parties, the obligation to return

the securities is recorded as a short sale within financial liabilities held for trading and measured at fair value

with any gains or losses included in Net trading income.

h. Derivative financial instruments

Derivative contracts are initially recognised at fair value on the date on which a derivative contract is entered

into and are subsequently re-measured at their fair value. Fair values may be obtained from quoted market

prices in active markets, recent market transactions, and valuation techniques, including discounted cash flow

models and option pricing models, as appropriate. All derivatives are carried as assets when fair value is

positive and as liabilities when fair value is negative. The fair value changes in the derivative are recognised in

the profit or loss.

i. Cash and cash equivalents

For the purposes of the statement of cash flow, cash and cash equivalents comprise cash on hand, cash and

balances with the Central Bank of Ghana and amounts due from banks and other financial institutions.

j. Investment securities

This comprises investments in short-term Government securities and medium term investments in Government

and other securities such as treasury bills and bonds. Investment securities are categorized as available-for-sale

or trading financial assets and carried in the statement of financial position at fair value.

k. Loans and advances

This is mainly made up loans and advances to customers. Loans and advances are carried in the statement of

financial position at amortised cost, i.e. gross receivable less impairment allowance.




22

l. Property and equipment

(i) Recognition and measurement

Land and buildings are shown at fair value based on periodic, but at least 3-5 years, valuations by

external independent valuers less subsequent depreciation for buildings. Any accumulated depreciation

at the date of revaluation is eliminated against the gross carrying amount of the asset, and the net amount

is restated to the revalued amount of the asset.

All other property and equipment are stated at historical cost less depreciation. Historical cost includes

expenditure that is directly attributable to the acquisition of these assets. Freehold land is not

depreciated. Leasehold land is amortized over the term of the lease and is included as part of property

and equipment. Depreciation on other assets is calculated on the straight-line basis to write down their

cost to their residual values over their estimated useful lives, as follows:

(iii) Depreciation

%

Leasehold

Properties

20

Furniture, fixtures and fittings

20

Office machine and equipment

33.3

Motor vehicles

30

The Bank assesses at each reporting date whether there is any indication that any item of property and

equipment is impaired. If any such indication exists, the Bank estimates the recoverable amount of the

relevant assets. An impairment loss is recognized for the amount by which the asset’s carrying amount

exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs

to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest

levels for which there are separately identifiable cash flows (cash-generating units).

Subsequent costs are included in the assets carrying amounts or recognized as a separate asset, as

appropriate, only when it is probable that future economic benefits associated with the item will flow to

the bank and that the cost of the item can be measured reliably. All other costs are charged to the

income statement as repairs and maintenance costs during the financial period in which they are incurred.

Increases in the carrying amount arising on the revaluation of land and building are credited to reserves

in shareholders’ equity. Decreases that offset previous increases of the same asset are charged against

reserves directly in equity; all other decreases are charged to the income statement.

Gains and losses on disposal of property and equipment are determined by reference to their carrying

amount. These are recorded in the income statement.




23

m. Intangible Assets

(i) Software

Software acquired by the Bank is stated at cost less accumulated amortisation and accumulated impairment

losses.

Subsequent expenditure on software is capitalised only when it increases the future economic benefits embodied

in the specific asset to which it relates. All other expenditure is expensed as incurred.

Amortisation is recognised in the profit or loss on a straight-line basis over the estimated useful life of the

software, from the date that it is available for use. The estimated useful life of software is three to five years.

(ii)Other intangible assets

Other intangible assets that are acquired by the Bank and have finite useful lives are recognised at cost less

accumulated amortisation and 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 expenses excluding expenses on internally generated goodwill and

brands is recognised in profit and loss as incurred.

Amortisation is based on the cost of the asset less its residual value.

Amortisation is recognised in profit and loss on a straight line basis over the lifespan of the asset. The estimated

remaining useful life is four (4) years.

n. Taxation

Current tax is the expected tax payable on taxable income for the year, using tax rates enacted or substantively

enacted at the statement of financial position date, and any adjustment to tax payable in respect of previous

years.

o. Deferred taxation

Deferred tax is provided using the balance sheet method, providing for 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 the following temporary differences: the initial recognition of goodwill, the

initial recognition of assets or liabilities in a transaction that is not a business combination and that affects

neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that

they probably will not reverse in the foreseeable future. Deferred tax is measured at tax rates that are expected

to be applied to the temporary differences when they reverse, based on laws that have been enacted or

substantively enacted by the reporting date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be

available against which the asset can be utilised. 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.




24

p. Events after the reporting date

Events subsequent to the statement of financial position date are reflected in the financial statements only to the

extent that they relate to the year under consideration and the effect is material.

q. Dividend

Dividend payable is recognised as a liability in the period in which they are declared.

r. Deposits, amounts due to banks and borrowings

This is mainly made up of customer deposit accounts, overnight placements by Banks and other financial

institutions and medium term borrowings. They are categorised as other financial liabilities and carried in the

balance sheet at amortised costs.

s. Provisions

A provision is recognised if, as a result of a past event, the Bank 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.

t. Financial guarantees

Financial guarantees are contracts that require the Bank to make specified payments to reimburse the holder for

a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a

debt instrument.

Financial guarantees are initially recognised at their fair value, and the fair value is amortised over the life of the

financial guarantee. The financial guarantees are subsequently carried at the higher of the amortised amount and

the present value of any expected payment (when a payment under the guarantee has become probable).

u. Employee benefits

(i) Defined contribution plans

Obligations for contributions to defined contribution pension plans are recognised as an expense in the profit or

loss when they are due.

(ii) Termination benefits

Termination benefits are recognised as an expense when the Bank is demonstrably committed, without realistic

possibility of withdrawal, to a formal detailed plan to terminate employment before the normal retirement date.

Termination benefits for voluntary redundancies are recognised if the Bank has made an offer encouraging

voluntary redundancy, it is probable that the offer will be accepted and the number of acceptances can be

estimated reliably.




25

(iii) Short-term benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related

service is provided.

A provision is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing

plans if the Bank has a present legal or constructive obligation to pay this amount as a result of past service

provided by the employee and the obligation can be estimated reliably.

(v) Impairment on non-financial assets

The carrying amount of the Bank’s non-financial assets other than deferred tax assets, are reviewed at each

reporting date to determine whether there is any indication of impairment. If any such indication exists then the

asset’s recoverable amount is estimated.

An impairment loss is recognised if the carrying amount of an asset exceeds its recoverable amount. The

recoverable amount of an asset 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 pre-tax discount rate

that reflects current market assessment of the time value of money and risks specific to the asset. Impairment

losses are recognised in the profit or loss.

Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the

loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in estimates

used to determine the recoverable amount. 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.

w. Share capital

(i) Ordinary share capital

Ordinary shares are classified as equity.

(ii) Preference share capital

Preference share capital of the Bank is classified as equity. The preference shares are non-redeemable and

redeemable only at the Bank’s option, and any dividends are discretionary.

x. Earnings per share

The Bank presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is

calculated by dividing the profit or loss attributable to ordinary shareholders of the Bank after adjustments for

preference dividends by the weighted average number of ordinary shares outstanding during the period. The

Bank has no convertible notes and share options, which could potentially dilute its EPS and therefore the

Bank’s Basic and diluted EPS are essentially the same




26

Standards and Interpretations effective in the current period

The following standards, amendments to the existing standards and interpretations issued by the International

Accounting Standards Board are effective for the current period:

Amendments to IFRS 10 “Consolidated Financial Statements”, IFRS 12 “Disclosures of Interests in

Other Entities” and IAS 27 “Separate Financial Statements” – Investment Entities(effective for annual

periods beginning on or after 1 January 2015) published by IASB on 31 October 2012.

The amendments provide an exception to the consolidation requirements in IFRS 10 and require

investment entities to measure particular subsidiaries at fair value through profit or loss, rather than

consolidate them. The amendments also set out disclosure requirements for investment entities.

Amendments to IAS 32 “Financial instruments: presentation” – Offsetting Financial Assets and Financial Liabilities (effective for annual periods beginning on or after 1

January 2015) published by IASB on 16 December 2011.

Amendments provide clarifications on the application of the offsetting rules and focus on four main areas

(a) the meaning of “currently has a legally enforceable right of set-off”; (b) the application of simultaneous

realisation and settlement; (c) the offsetting of collateral amounts; (d) the unit of account for applying the

offsetting requirements.

Amendments to IAS 36 “Impairment of assets” - Recoverable Amount Disclosures for Non-Financial

Assets (effective for annual periods beginning on or after 1 January 2014), published by IASB on 29 May

2013.

These narrow-scope amendments to IAS 36 address the disclosure of information about the recoverable

amount of impaired assets if that amount is based on fair value less costs of disposal. When developing

IFRS 13 Fair Value Measurement, the IASB decided to amend IAS 36 to require disclosures about the

recoverable amount of impaired assets. Current amendments clarify the IASB’s original intention that the

scope of those disclosures is limited to the recoverable amount of impaired assets that is based on fair

value less costs of disposal.

Amendments to IAS 39 “Financial Instruments: Recognition and Measurement”

– Novation of Derivatives and Continuation of Hedge Accounting (effective for annual periods beginning

on or after 1 January 2014), published by IASB on 27 June 2013.

The narrow-scope amendments allow hedge accounting to continue in a situation where a derivative, which

has been designated as a hedging instrument, is novated to effect clearing with a central counterparty as a

result of laws or regulation, if specific conditions are met (in this context, a novation indicates that parties to

a contract agree to replace their original counterparty with a new one).

IFRIC 21 “Levies” (effective for annual periods beginning on or after 1 January 2014), published by

IASB on 20 May 2013.

IFRIC 21 is an interpretation of IAS 37 Provisions, Contingent Liabilities and Contingent Assets. IAS 37

sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a

present obligation as a result of a past event (known as an obligating event).The Interpretation clarifies that

the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant

legislation that triggers the payment of the levy.




27

The adoption of these amendments to the existing standards and interpretations has not led to any changes

in the Entity’s accounting policies.

Standards and Interpretations in issue not yet adopted

At the date of authorisation of these financial statements the following standards, amendments to existing

standards and interpretations were in issue, but not yet effective:

IFRS 9 “Financial Instruments” (effective for annual periods beginning on or after 1 January 2018),

issued on 24 July 2014 is the IASB's replacement of IAS 39 Financial Instruments: Recognition and

Measurement. IFRS 9 includes requirements for recognition and measurement, impairment, derecognition

and general hedge accounting.

Classification and Measurement - IFRS 9 introduces new approach for the classification of financial

assets, which is driven by cash flow characteristics and the business model in which an asset is held. This

single, principle-based approach replaces existing rule-based requirements under IAS 39. The new model

also results in a single impairment model being applied to all financial instruments.

Impairment - IFRS 9 has introduced a new, expected-loss impairment model that will require more timely

recognition of expected credit losses. Specifically, the new Standard requires entities to account for

expected credit losses from when financial instruments are first recognised and to recognise full lifetime

expected losses on a more timely basis.

Hedge accounting - IFRS 9 introduces a substantially-reformed model for hedge accounting, with

enhanced disclosures about risk management activity. The new model represents a significant overhaul of

hedge accounting that aligns the accounting treatment with risk management activities.

Own credit - IFRS 9 removes the volatility in profit or loss that was caused by changes in the credit risk of

liabilities elected to be measured at fair value. This change in accounting means that gains caused by the

deterioration of an entity’s own credit risk on such liabilities are no longer recognised in profit or loss.

Amendments to IFRS 11 “Joint Arrangements” – Accounting for Acquisitions of Interests in Joint

Operations (effective for annual periods beginning on or after 1 January 2016), published by IASB on 12

May 2011.

IFRS 11 introduces new accounting requirements for joint arrangements, replacing IAS 31 Interests in Joint

Ventures. The option to apply the proportional consolidation method when accounting for jointly controlled

entities is removed. Additionally, IFRS 11 eliminates jointly controlled assets to now only differentiate

between joint operations and joint ventures. A joint operation is a joint arrangement whereby the parties that

have joint control have rights to the assets and obligations for the liabilities. A joint venture is a joint

arrangement whereby the parties that have joint control have rights to the net assets.

IFRS 12 “Disclosures of Interests in Other Entities” published by IASB on 12 May 2011. IFRS 12 will

require enhanced disclosures about both consolidated entities and unconsolidated entities in which an entity

has involvement. The objective of IFRS 12 is to require information so that financial statement users may

evaluate the basis of control, any restrictions on consolidated assets and liabilities, risk exposures arising

from involvements with unconsolidated structured entities and non-controlling interest holders' involvement

in the activities of consolidated entities.




28

IFRS 14 “Regulatory Deferral Accounts” (effective for annual periods beginning on or after 1 January

2016), published by IASB on 30 January 2014.

This Standard is intended to allow entities that are first-time adopters of IFRS, and that currently recognise

regulatory deferral accounts in accordance with their previous GAAP, to continue to do so upon transition

to IFRS.

IFRS 15 “Revenue from Contracts with Customers” (effective for annual periods beginning on or after 1

January 2017), published by IASB on 28 May 2014.

IFRS 15 specifies how and when an IFRS reporter will recognise revenue as well as requiring such entities

to provide users of financial statements with more informative, relevant disclosures. The standard

supersedes IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number of revenue-related

interpretations. Application of the standard is mandatory for all IFRS reporters and it applies to nearly all

contracts with customers: the main exceptions are leases, financial instruments and insurance contracts. The

core principle of the new Standard is for companies to recognise revenue to depict the transfer of goods or

services to customers in amounts that reflect the consideration (that is, payment) to which the company

expects to be entitled in exchange for those goods or services. The new Standard will also result in

enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed

comprehensively (for example, service revenue and contract modifications) and improve guidance for

multiple-element arrangements.

Amendments to IFRS 9 “Financial Instruments” and IFRS 7 “Financial Instruments: Disclosures” -

Mandatory Effective Date and Transition Disclosures published by IASB on 16 December 2011.

Amendments defer the mandatory effective date from 1 January 2013 to 1 January 2014. The amendments

also provide relief from the requirement to restate comparative financial statements for the effect of

applying IFRS 9. This relief was originally only available to companies that chose to apply IFRS 9 prior to

2012. Instead, additional transition disclosures will be required to help investors understand the effect that

the initial application of IFRS 9 has on the classification and measurement of financial instruments.

Amendments to IFRS 10 “Consolidated Financial Statements”, IFRS 11 “Joint Arrangements” and

IFRS 12 “Disclosures of Interests in Other Entities” – Transition Guidance published by IASB on 28

June 2012. The amendments are intended to provide additional transition relief in IFRS 10, IFRS 11 and

IFRS 12, by “limiting the requirement to provide adjusted comparative information to only the preceding

comparative period”. Also, amendments were made to IFRS 11 and IFRS 12 to eliminate the requirement to

provide comparative information for periods prior to the immediately preceding period.

Amendments to IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in

Associates and Joint Ventures” - Sale or Contribution of Assets between an Investor and its Associate or

Joint Venture (effective for annual periods beginning on or after 1 January 2016), published by IASB on 11

September 2014.

The amendments address a conflict between the requirements of IAS 28 and IFRS 10 and clarify that in a

transaction involving an associate or joint venture the extent of gain or loss recognition depends on whether

the assets sold or contributed constitute a business.

Amendments to IFRS 11 “Joint Arrangements” – Accounting for Acquisitions of Interests in Joint

Operations published by IASB on 6 May 2014. The amendments add new guidance on how to account for

the acquisition of an interest in a joint operation that constitutes a business. The amendments specify the

appropriate accounting treatment for such acquisitions.




29

Amendments to IAS 16 “Property, Plant and Equipment” and IAS 38 “Intangible Assets” -

Clarification of Acceptable Methods of Depreciation and Amortisation (effective for annual periods

beginning on or after 1 January 2016), published by IASB on 12 May 2013.

Amendments clarify that the use of revenue-based methods to calculate the depreciation of an asset is not

appropriate because revenue generated by an activity that includes the use of an asset generally reflects

factors other than the consumption of the economic benefits embodied in the asset. Amendments also

clarify that revenue is generally presumed to be an inappropriate basis for measuring the consumption of

the economic benefits embodied in an intangible asset. This presumption, however, can be rebutted in

certain limited circumstances.

Amendments to IAS 16 “Property, Plant and Equipment” and IAS 41 “Agriculture” - Agriculture:

Bearer Plants (effective for annual periods beginning on or after 1 January 2016), published by IASB on

30 June 2013.

The amendments bring bearer plants, which are used solely to grow produce, into the scope of IAS 16 so

that they are accounted for in the same way as property, plant and equipment.

Amendments to IAS 19 “Employee Benefits” - Defined Benefit Plans: Employee Contributions

(effective for annual periods beginning on or after 1 July 2013), published by IASB on 21 November

2013.

The narrow scope amendments apply to contributions from employees or third parties to defined benefit

plans. The objective of the amendments is to simplify the accounting for contributions that are

independent of the number of years of employee service, for example, employee contributions that are

calculated according to a fixed percentage of salary.

Amendments to IAS 27 “Separate Financial Statements” - Equity Method in Separate Financial

Statements (effective for annual periods beginning on or after 1 January 2016), Published by IASB on 12

August 2013.

The amendments reinstate the equity method as an accounting option for investments in in subsidiaries,

joint ventures and associates in an entity's separate financial statements.

IAS 27 “Separate Financial Statements” (revised in 2011) published by IASB on 12 May 2011. The

requirements relating to separate financial statements are unchanged and are included in the amended IAS

27. The other portions of IAS 27 are replaced by IFRS 10.

IAS 28 “Investments in Associates and Joint Ventures” (revised in 2011) published by IASB on 12

May 2011. IAS 28 is amended for conforming changes based on the issuance of IFRS 10, IFRS 11 and

IFRS 12.

Revised requirements regarding: (i) meaning of effective IFRSs in IFRS 1; (ii) scope of exception for joint

ventures; (iii) scope of paragraph 52 if IFRS 13 (portfolio exception) and (iv) clarifying the interrelationship

of IFRS 3 and IAS 40 when classifying property as investment property or owner-occupied property.

(Amendments are to be applied for annual periods beginning on or after 1 July 2013),

Annual Improvements to IFRSs 2010 – 2012 Cycle

These improvements are effective from 1 July 2014 and are not expected to have a material impact on the

company. They include:




30

IFRS 2 Share-based Payment

This improvement is applied prospectively and clarifies various issues relating to the definitions of

performance and service conditions which are vesting conditions, including:

A performance condition must contain a service condition

A performance target must be met while the counterparty is rendering service

A performance target may relate to the operations or activities of an entity, or to those of another entity in

the same group

A performance condition may be a market or non-market condition

If the counterparty, regardless of the reason, ceases to provide service during the vesting period, the

service condition is not satisfied

IFRS 3 Business Combinations

The amendment is applied prospectively and clarifies that all contingent consideration arrangements

classified as liabilities (or assets) arising from a business combination should be subsequently measured at

fair value through profit or loss whether or not they fall within the scope of IFRS 9 (or IAS 39, as

applicable).

IFRS 8 Operating Segments

The amendments are applied retrospectively and clarifies that:

An entity must disclose the judgements made by management in applying the aggregation criteria in

paragraph 12 of IFRS 8, including a brief description of operating segments that have been aggregated and

the economic characteristics (e.g., sales and gross margins) used to assess whether the segments are

‘similar’

The reconciliation of segment assets to total assets is only required to be disclosed if the reconciliation is

reported to the chief operating decision maker, similar to the required disclosure for segment liabilities.

IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets

The amendment is applied retrospectively and clarifies in IAS 16 and IAS 38 that the asset may be revalued

by reference to observable data on either the gross or the net carrying amount. In addition, the accumulated

depreciation or amortisation is the difference between the gross and carrying amounts of the asset.

IAS 24 Related Party Disclosures

The amendment is applied retrospectively and clarifies that a management entity (an entity that provides

key management personnel services) is a related party subject to the related party disclosures. In addition,

an entity that uses a management entity is required to disclose the expenses incurred for management

services.

Annual improvements 2011-2013 Cycle

These improvements are effective from 1 July 2014 and are not expected to have a material impact on the

company. They include:

IFRS 3 Business Combinations

The amendment is applied prospectively and clarifies for the scope exceptions within IFRS 3 that:

Joint arrangements, not just joint ventures, are outside the scope of IFRS 3

This scope exception applies only to the accounting in the financial statements of the joint arrangement

itself




31

IFRS 13 Fair Value Measurement

The amendment is applied prospectively and clarifies that the portfolio exception in IFRS 13 can be applied

not only to financial assets and financial liabilities, but also to other contracts within the scope of IFRS 9

(or IAS 39, as applicable).

IAS 40 Investment Property

The description of ancillary services in IAS 40 differentiates between investment property and owner-

occupied property (i.e., property, plant and equipment). The amendment is applied prospectively and

clarifies that IFRS 3, and not the description of ancillary services in IAS 40, is used to determine if the

transaction is the purchase of an asset or business combination.

Annual improvements 2012-2014 Cycle

These improvements which were done in September 2014 are effective beginning on or after 1 January

2016 and are not expected to have a material impact on the company. They include:

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

Adds specific guidance in IFRS 5 for cases in which an entity reclassifies an asset from held for sale to held

for distribution or vice versa and cases in which held-for-distribution accounting is discontinued

IFRS 7 Financial Instruments: Disclosures

Additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset,

and clarification on offsetting disclosures in condensed interim financial statements

IAS 19 Employee Benefits

Clarify that the high quality corporate bonds used in estimating the discount rate for post-employment

benefits should be denominated in the same currency as the benefits to be paid

IAS 34 Interim Financial Reporting

Clarify the meaning of 'elsewhere in the interim report' and require a cross-reference

The Entity has elected not to adopt these standards, revisions and interpretations in advance of their effective

dates. The Entity anticipates that the adoption of these standards, revisions and interpretations will have no

material impact on the financial statements of the Entity in the period of initial application.

4. Regulatory Disclosures

(i) Non–Performing Loans Ratio

Percentage of gross non-performing loans (“substandard to loss”) to total loans/advances portfolio (gross)

BoG -1.98%, IFRS 1.98% (2014:BoG0.48%, IFRS 0.48%).

(ii) Capital Adequacy Ratio

The capital adequacy ratio was calculated at approximately 83.7% (2014: 101.9%).

(iii) Regulatory Breaches

-NIL-




32

5. Contingent liabilities and commitments

2015 2014

GH¢ GH¢

i) Contingent Liabilities 8,424,922 2,545,846

*Pending Legal Suits - -

*There are a number of legal proceedings outstanding against the Bank as at 31 December 2015. Provisions

have been recognised for those cases where the Bank is able to reliably to estimate the probable loss.

.

(ii) Commitments for capital expenditure

There was no commitment for capital expenditure at the statement of financial position date (2014; Nil)

(iii) Unsecured contingent liabilities and commitments

2015 2014

GH¢ GH¢

This relates to commitments for trade letters of credit and guarantees. NIL NIL

6. Social responsibility cost

An amount of GH¢ 5000 (2014: GH¢ 4984) was spent under the Bank’s social responsibility program.

7. Segmental reporting

The Bank was re-segmented during the year 2015. The Bank is organised into three main business segments:

Retail Clients, Commercial Banking, and Corporate Institutional Clients.

Retail Clients

Retail Clients business serves the banking needs of Personal, Priority and International and Business

clients, offering a full suite of innovative products and services to meet their borrowing, wealth

management and transacting needs.

A client-focused approach enables a deeper understanding of clients' evolving needs and provision of

customised financial solutions

Commercial Clients

Commercial Clients focuses on helping mid-sized local companies grow, especially as they expand across

borders. This group of clients is already a key contributor to trade and investment in our footprint markets today

and presents a large and growing opportunity.

Corporate and Institutional Clients

Corporate and Institutional Clients focuses on driving origination by building core banking relationships with

clients across the full range of their product needs.

Some of the Bank’s corporate costs are managed centrally and standardised basis are used to allocate these costs

to the business segments on a reasonable basis.




33

Interest income is reported net as management primarily relies on net interest revenue as a

performance measure, not the gross income and expense.

No revenue from transactions with a single external customer or counterparty amounted to 10% or more

of the Bank’s total revenue in 2015.

No operating segments have been aggregated in arriving at the reportable segment of the Bank.

2015

Class of Business

Retail

Clients

Commercial

Clients

Corporate

&Institutional

Client Unallocated Total

GH¢ GH¢ GH¢ GH¢ GH¢

Net interest income 278304 5287782 15306735 6957608 27830429

Non-interest income 21799 414187 1198962 544982 2179930

Operating income 300103 5701969 16505697 7502590 30010359

Operating Expenses 40129 762447 2207082 1057565 4067223

Operating profit before

impairment losses and

taxation 259974 4939522 14298615 6445025 25943136

Impairment loss

8000 29000 - 37000

Profit before tax 259974 4931522 14269615 6445025 25906136

Total assets

267,212,740

Total liabilities

267,212,740

Segment revenue above represents revenue generated from external customers. There were no inter – segments

sales in the current year (2014: nil)

The accounting policies of the reportable segments are the same as the Bank’s accounting policies.

For the purpose of monitoring segment performance and allocating resources between segments:

All assets are allocated to reportable segments other than other financial assets and current and deferred

tax assets and

All liabilities are allocated to reportable segments other than borrowing, other financial liabilities and

current and deferred tax liabilities.




34

8. Segmental reporting (cont’d)

2014

Class of Business

Retail

Clients

Commercial

Clients

Corporate

&Institutional

Client Unallocated Total

GH¢ GH¢ GH¢ GH¢ GH¢

Net interest income 1145984 3896346 10084660 7792693 22919683

Non-interest income 88580 301172 779503 602343 1771598

Operating income 1234564 4197518 10864163 8395036 24691281

Operating Expenses 151388 514719 1332213 1029436 3027756

Operating profit before

impairment losses and taxation 1083176 3682799 9531950 7365600 21663525

Impairment loss 164600 322000 - 486600

Profit before tax 1083176 3518199 9209950 7365600 21176925

Total assets 194,349,248

Total liabilities 194,349,248

The following table details entity-wide net operating income by product:

2015 2014

GH¢ GH¢

Mortgages and Auto - -

Personal Loans 300,103 1,234,564

High Value Small Business Clients 16,505,697 10,864,163

Consumer Transactional Banking& Wealth Management 5,701,968 4,197,517

Lending and Portfolio Management - -

Transaction Banking 7,502,590 8,395,036

FM Sales - -

Financial Markets (excluding Asset &Liability Management) - -

Asset & Liability Management (ALM) - -




35

9. Interest income

i) Classification

2015 2014

GH¢ GH¢

Placements, Special deposits 1,505,813 882,803

Investment securities 16,639,492 16,257,889

Loans and advances 13,127,205 8,744,829

31,272,509 25,885,521

(ii) Categorisation

Held to maturity 16,639,492 16,257,889

Available for sale instruments 1,505,813 882,803

Loans and advances (Gross) 13,127,205 8,744,829

31,272,509 25,885,521

Included in interest income on loans and advances is a total amount of GH¢ Nil (2014: GH¢ Nil) accrued on

impaired financial assets.

10. Interest expense

2015 2014

GH¢ GH¢

Savings Account 29,921 21,856

Time and other deposits 3,274,416 2,824,491

Borrowings 137,744 119,492

3,442,081 2,965,839

11. Fees and commission income

2015 2014

GH¢ GH¢

Processing fees for Loans 11,209 246,185

Commission Forex transactions 185,670 193,123

Commission Telegraphic Transfers 58,077 614,984

Service Charge - 4,754

254,956 1,059,046

12. Other operating income

2015 2014

GH¢ GH¢

Gains on foreign exchange 979,980 24,813

Revaluation of Foreign Assets 770,050 668,324

Brokerage Earned 79,222 -

Others income 95,722 19,415

1,924,974

712,552




36

13. Operating expenses

2015

2014

GH¢

GH¢

Staff costs (Note 12c)

1,113,692

805,246

Directors’ remuneration (Note 12b)

4,791

1,919

Management Fees

443,924

423,041

Advert and Publicity

122,770

55,968

Electricity

163,498

158,817

Rates and Taxes

4,313

6,038

Rent Expense

1,041,496

653,630

Printing, stationery and related cost

16,810

18,855

Travel, transport & accommodation

56,937

39,295

Telephone & Postage

224,616

245,650

Repairs and Maintenance

97,783

71,271

Insurance

26,766

22,353

Audit Fees

44,780

48,807

Depreciation

175,626

77,156

Other operational cost (Note 12a)

475,074

399,710

4,012,876

3,027,756

12a. Other operational cost

Sundry Charges

295,793

211,248

Computer Charges

106,894

134,851

Other Expenses

72,388

53,611

475,074

399,710

12b. Particulars of directors’ emoluments

In line with section 128 of the Companies Code, 1963 (Act 179), the following are the aggregate of the

directors’ emoluments:

2015

2014

GH¢

GH¢

Allowances and benefits in kind

4,791

1,919

Pension contribution

-

-

Bonus paid

-

-

4,791

1,919




37

12 (c) Staff costs

2015

2014

GH¢

GH¢

Wages & salaries

864,969

617,088

Contributions to Fund

40,175

21,889

Medical expense

27,393

40,988

Other staff benefits

181,156

125,281

1,113,692

805,246

The average number of persons employed by the Bank during the year was 19.

14. Impairment loss

2015 2014

GH¢ GH¢

Individually assessed

8,000

164,600

Collectively assessed

-

-

8,000

164,600

15. Financial instruments classification summary

Financial instruments are classified along four recognition principles: held at fair value through profit or loss

(comprising trading and designated), available-for-sale, held-to-maturity and loans and receivables. These

categories of financial instruments have been combined for presentation on the face of the statement of financial

position.




38

14 (a). The Bank’s classification of its principal financial assets and liabilities are summarised below:

Held at fair

value

through

profit or

Loss

Available

for Sale

Loans &

Receivables

Carrying

Amount

Fair

Value

(Trading)

Note GH¢ GH¢ GH¢ GH¢ GH¢

Financial Assets

Cash and balances with Bank of

Ghana

16

13,605,961 - -

13,605,961

13,605,961

Financial investment 17 74,288,000 - - 74,288,000 74,288,000

Due from other Banks and

financial institutions 18

- 78,706.275

-

78,706,275

78,706,275

Loans and advances 19 - - 97,406,549 97,406,549 97,406,549

Total at 31 December 2015

87,893,961

78,706,275

97,406,549

264,006,785

264,006,785

Financial Assets

16

Cash and balances with Bank of

Ghana 13,069,576 - - 13,069,576 13,069,576

Financial investment 17 77,181,689 - - 77,181,689 77,181,689

Due from other banks and financial

institutions 18

- 18,565,398 - 18,565,398 18,565,398

Loans and advances 19 - - 81,089,306 81,089,306 81,089,306


90,251,265

18,565,398

81,089,306

189,905,969

189,905,969

Held at fair

value

through

profit or

Loss

(Trading)

Financial

Liabilities

Measured

at

Amortised

Cost

Carrying

Amount

Fair

Value

Note GH¢ GH¢ GH¢ GH¢

Financial liabilities

Customer deposits 24 - 112,750,630 112,750,630 112,750,630

Due to other banks and

financial institutions -

-

-

-

Other liabilities 27 - 5,371,805 5,371,805 5,371,805

Borrowings 25 - 30,360,000 30,360,000 30,360,000


-

148,482,435

148,482,435

148,482,435

-

-

-

- Financial Liabilities

Customer deposits 24 - 91,590,568 91,590,568 91,590,568

Other liabilities 27 - 2,383,861 2,383,861 2,383,861

Borrowings 25 - - - -

- 93,974,429 - 93,974,429




39

14 (b) Fair value of financial instruments

Financial instruments recorded at fair value

The following is a description of how fair values are determined for financial instruments that are recorded at

fair value using valuation techniques. These incorporate the Bank’s estimate of assumptions that a market

participant would make when valuing the instruments.

Financial investments – available-for-sale

Available-for-sale financial assets valued using valuation techniques or pricing models primarily consist of

unquoted equities and debt securities. These assets are valued using models that use both observable and

unobservable data. The unobservable inputs to the models include assumptions regarding the future financial

performance of the investee, its risk profile, and economic assumptions regarding the industry and geographical

jurisdiction in which the investee operates.

Other trading assets

Other trading assets valued using a valuation technique consists of certain debt securities and asset–backed

securities. The Bank values the securities using discounted cash flow valuation models which incorporate

observable and unobservable data. Observable inputs include assumptions regarding current rates of interest and

broker statements. Unobservable inputs include assumptions regarding expected future default rates,

prepayment rates and market liquidity discounts.

Fair value hierarchy as defined under Note 3(g-(x)) analysis with respect to Financial Assets and

Financial Liabilities measured on a recurring basis.

The table below analyses financial instruments measured at fair value at the end of the reporting period by the

level in fair value hierarchy, into which the fair value measurement is categorised.

Level 1 Level 2 Level 3 Total

Note GH¢ GH¢ GH¢ GH¢

2015

Government securities 19 - 74,288,000 - 74,288,000


-

74,288,000

-

74,288,000

2014

Government securities 19 - 77,181,689 - 77,181,689


-

77,181,689

-

77,181,689




40

14. Financial instruments classification summary (cont’d)

The level 2 financial assets securities have been valued using the discounted cash flow, discounted at the

market rate of a similar instrument on the market.

The following table shows total gains and losses recognised in profit or loss during the year relating to assets

and liabilities held at the yearend:

2015 2014

GH¢ GH¢

Fair value amount recognised in profit and loss

Financial assets:-

Government securities 74,288,000 77,181,689

There are no transfers between the fair value levels during the year.

Day 1 profit

When financial instruments were initially recognised, valuation techniques used for the fair valuing took into

consideration all observable market data and hence there is no Day 1 profit or loss.

16. Taxation

15 (a) Income tax expense

2015 2014

GH¢ GH¢

Current income tax

6,496,457

5,377,768

National stabilization levy

1,299,291

1,075,554

Deferred income tax

(10,673)

(3,037)

7,785,075 6,450,285




41

15 (b) Corporate Tax

Balance at

Adjustment

Payments

During

Charge

for Balance at

1 January

2014 the year

the year

31/12/2015

GH¢

GH¢

GH¢

GH¢

GH¢

2010

(139,490) -

293,888

(154,412)

14

2011

14

-

1,151,986

(1,152,000) -

2012

-

-

2,692,000

(2,807,000)

(115,000)

2013

(115,000) -

5,420,145

(4,975,828)

329,317

2014

329,317

-

6,114,201

(6,453,322)

(9,804)

2015

(9,804) 9,804

7,500,000

(7,795,748)

(295,748)

The balance is subject to agreement with the Domestic Revenue Division of Ghana Revenue Authority at the

end of the Current tax Year.




42

15 (c) Deferred Income Tax (Asset) Liability

2015

2014

GH¢

GH¢

At 1 January 2015

16,099

13,062

Charge to Profit & Loss 10,673

3,037

Balance at 31 December 2015 26,772

16,099

15 (d) National stabilization levy

In accordance with the National Stabilization Act, 2009, (Act 785) all companies in Banking, Non-Banking

Financial Institutions, Insurance, Mining, Brewery and Communication are supposed to pay a levy of 5% of

profit before tax towards national fiscal stability.

2015 2014

GH¢ GH¢

National stabilization levy 1,299,291 1,075,554

17. Cash and Balances with the Bank of Ghana

2015

2014

Cash in vault

1,710,991

1,460,098

Balances with the Bank of Ghana 11,894,969

11,609,478

13,605,961

13,069,576

The balances with Bank of Ghana include non-interest bearing mandatory reserve deposits of

GH¢11,894,969 (2014: GHS 11,609,478). These funds are not available to finance the Bank’s day-to-

day operations.

18. Financial investment

The movement in government securities is summarized as follows:

2015

2014

GH¢

GH¢

At 1 January 2015

77,181,689

77,181,689

Additions

122,926,250

148,941,939

Disposals (sale and matured)

(125,819,939)

(127258250)

At 31 December 2015

74,288,000

77,181,689




43

19. Due from banks and other financial institutions

2015

2014

GH¢

GH¢

Balances with foreign financial institutions

2,383,775

1,559,616

Balances with local financial institutions

76,322,500

17,005,782

78,706,275

18,565,398

20. Loans and Advances

(a) Analysis by type of facility

2015 2014

GH¢

GH¢

Overdrafts

93,069,899

72,107,169

Term loan

7,274,858 9,939,243

Staff

14,452 25,341

Gross loans and advances 100,359,209

82,071,753

Less: Allowances for impairment (1,019,447)

(982,447)

Interest in Suspense

(1,933,213) -

97,406,549

81,089,306

(b) Analysis by business segments

2015 2014

GH¢ GH¢

Construction

18,804,638 14,018,356

Commerce and finance 55,325,024 12,063,443

Manufacturing

24,801,614 41,097,010

Agriculture Forestry/Fishing 514,527 212,228

Miscellaneous

913,406 14,680,716

Gross loans and advances 100,359,209 82,071,753

Less: Allowances for impairment (1,019,447) (982,447)


(1,933,213) -

97,406,549

81,089,306




44

(c) Analysis by type of customer

2015 2014

GH¢ GH¢

Individuals

910,161 13,870,366

Private enterprise

99,434,596 68,176,046

Staff

14,452 25,341

Gross loans and advances 100,359,209 82,071,753

Less: Allowances for impairment (1,019,447) (982,447)


(1,933,213) -

97,406,549

81,089,306

(d) Analysis of maturity

2015

2014

GH¢

GH¢

Due after 3 months but within 12 months 98,093,604

81,081,656

Due after 12 months but within 5 years 2,265,605

990,097


(982,447)

Interest Suspense (1,933,213)

-

97,406,549

81,089,306

(e) Analysis by security

(f)

Keyratios on loans and advances

Loan loss provision

1.02% 0.21%

Gross non-performing loans ratio 1.98% 0.48%

50 largest exposures to total exposures 99.94% 99.92%

Loan deposit ratio

86.00% 89.61%

2015

2014

GH¢

GH¢

Secured

97,447,456

81,482,127

Unsecured

2,911,753

589,626


(982,447)

Interest Suspense (1,933,213)

-

97,406,549

81,089,306




45

Movement in the Bank’s impairment allowance is as follows:

2015

2014

GH¢

GH¢

Balance at 1 January 2015

982,447

490,233

Additions

74,000

978,814

Impairment - charge to profit and loss account

(37,000)

(486,600)

At 31 December

1,019,447

982,447

21. Prepayment & accrued income

2015

2014

GH¢

GH¢

Prepayments

634,865

450,213

Accrued Interest

2,037,397

3,799,182

Express outward clearing

-

33,850

2,672,262

4,283,245

22. Other assets

2015

2014

GH¢

GH¢

Suspense Staff

Advance

3,442

5,050

Refundable Deposits

2,574

2,574

Suspense General

19,790

9,237

25,806

16,861

Suspense General Break down

10.09.2015

MD land line phone installation

advance 500

09.10.2015

Advance for purchase of x-mas

hampers 3,000

05.11.2015


hampers 3,000

07.12.2015 Advance to vodafone for internet 1,110

11.12.2015


hampers 4,000

15.12.2015


hampers 950

22.12.2015


hampers 5,000

24.12.2015


hampers 1,350

29.12.2015 Advance for branch color 440

31.12.2015 Advance for branch color 440

19,790




46

Refundable deposit is made up of the following

2/5/2008 Amount paid as refundable deposit to owner of house accommodation provided to bank 2,574

23. Intangible assets

Computer Software 2015

2014

GH¢

GH¢

Cost

Balance 01/01/15 146,795

146,795

Additions -

-

Balance 31/12/15 146,795

146,795

Depreciation

Balance 01/01/15 146,795

146,795

Charge for the period -

-

Balance 31/12/15 146,795

146,795

NBV as at 31/12/15 -

-

NBV as at 31/12/14 -

-




47

24. Property, plant and equipment

Leased

Properties

Office

Equipment

Furniture &

Fixtures Motor Vehicle

Total

Cost

GH¢

GH¢

GH¢

GH¢

GH¢

Balance 01/01/15

206,788

109,467

151,408

107,979

575,642

Additions

332,375

28,774

111,528

56,989

529,666

Disposal

-

-

-

-

-

Balance 31/12/15

539,163

138,241

262,936

164,968

1,105,308

Accumulated depreciation

Balance 01/01/15

163,020

98,715

116,583

70,249

448,567

Charge for the year

87,423

14,257

38,399

35546

175,625

Disposal

-

-

-

-

-

Balance 31/12/15

250,443

112,972

154,982

105,795

624,192

NBV as at 31/12/15

288,720

25,269

107,954

59,173

481,116

NBV as at 31/12/14

43,768

10,752

34,825

37,730

127,075




48

25. Due to customers

2015

2014

GH¢

GH¢

Current accounts

31,900,962

26,636,564

Savings

4,030,587

4,307,679

Short Term Deposits

3,593,034

4,120,836

Fixed Deposits

73,226,047

56,525,489

112,750,630

91,590,568

Analysis by type of depositors

2015

2014

GH¢ GH¢

Individual and other private enterprise 68,718,207

56,432,465

Private enterprise

44,032,423

35,158,103

112,750,630

91,590,568

2015

2014

GH¢

GH¢

Current

31,900,962

26,636,564

Non-current

80,849,668

64,954,004

112,750,630 91,590,568

26. Borrowings

2015

2014

GH¢

GH¢

Bank Loan

30,360,000

-

(Borrowing from Bank of Baroda, New York)

US$ 7 m for 6 days @ 1.40% = GHS 26,565,000

US$ 1 m for 4 days @ 1.40% = GHS 3,795,000

GHS 30,360,000

27. Interest payables & accrued expenses

2015

2014

GH¢

GH¢

Accrued Interest payable

112,349

110,125

TDS pending remittance

44,523

102,285

Accrued Expenses

4,020

-

160,892

212,410




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28. Other liabilities

2015

2014

GH¢

GH¢

Bankers cheques & payments

5,251,406

2,023,861

Others

120,399

360,000

5,371,805

2,383,861

There were no other payables (2014: Nil) held as collateral for irrevocable commitments under letters of credit




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29. Stated capital

No. of Shares

2015

2014

GH¢

GH¢

Authorized ordinary Shares

1,000,000,000

Issued Ordinary Shares

600,000,000 60,000,000

60,000,000

30. Shareholder's advances

This represents amount paid by shareholders to the Bank which has not yet been registered as Stated Capital

of the Bank. The amount will be capitalised in the near future.

31. Statutory reserve fund

2015

2014

GH¢

GH¢

At 1 January

20,037,360

12,674,040

Transfer from income surplus account

9,060,530

7,363,320

At 31 December

29,097,890

20,037,360

Statutory reserve represents the cumulative amount set aside from annual net profit after tax as required by

Section 29 of the Banking Act, 2004 (Act 673).The proportion of net profits transferred to this reserve ranges

from 12.5% to 50% of net profit after tax, depending on the ratio of existing statutory reserve fund to paid-up

capital.

32. Regulatory credit risk reserve

2015

2014

GH¢

GH¢

At 1 January

66,594

72,120

Transfer to income surplus account

(53,141)

(5,526)

At 31 December

13,453

66,594

Regulatory credit risk reserve represents the excess of loan impairment provision determined under the Bank of

Ghana guidelines over the provisions for loan impairment.

33. Other reserve - available for sale securities

This is the fair value movement on available for sale financial assets

2015

2014

GH¢

GH¢

At 1 January

-

-

Fair value gain/(loss)

-

-

At 31 December

-

-




51

34. Income surplus account

This amount represents the accumulated annual profit after appropriations available for distribution

2015

2014

GH¢

GH¢

At 1 January

20,038,880

12,670,034

Retained Profit

9,060,530

7,363,320

Transfer from Credit Risk Reserve

53,141

5,526

At 31 December

29,152,551

20,038,880

35. Cash and cash equivalent

For the purposes of the cash flow statement, cash and cash equivalents comprise balances with less than 91days

maturity from the date of acquisition including: cash and balances with Bank of Ghana, treasury bills, other

eligible bills and amounts due from and to banks. Cash and cash equivalents exclude the mandatory reserve

requirement held with Bank of Ghana.

2015

2014

GH¢

GH¢

Cash and balances with bank of Ghana

13,605,961

13,069,576

Government securities

-

-

Due from banks and other financial institution

78,706,275

18,565,398

92,312,236

31,634,974

36. Contingencies and commitments

Contingencies

The Bank conducts business involving acceptances, guarantees, performance bonds and indemnities. The

majority of these facilities are offset by corresponding obligations of third parties. The value of these securities

is not recognized in the statement of financial position.

2015

2014

GH¢

GH¢

Letters of Credit

4,762,054

251,777

Guarantees and other commitments

3,662,869

2,294,068

8,424,922

2,545,846

Nature of Contingent liabilities

Letters of credit commit the Bank to make payments to third parties, on production of documents, which are

subsequently reimbursed by customers. Guarantees are generally written by a bank to support performance by a

customer to third parties. The Bank will only be required to meet these obligations in the event of the

customers’ default

There were no commitments as at the end of the year




52

37. Related Parties transaction

This relates to intercompany dealings and transactions with key management personnel. In the normal course of

business, current accounts were operated and other transactions carried out with related parties. The balances

outstanding as at year-end were as follows:

a) Loans to officers

2015

2014

GH¢

GH¢

Officers and employees

-

-

Interest expense on the above

-

-

-

-

Terms and conditions of related party transaction

b) Transactions with Directors and Key Management Personnel

Directors and key management personnel refer to those personnel with authority and responsibility for planning,

directing and controlling the business activities of the Bank. These personnel are the Executive Directors of the

Bank

Director or any connected person is also a director or key management members of the Bank. The bank did not

make provision in respect of loans to Directors or any key management member during the period under review

(i) Advances to related parties

Advances to customers at 31 December 2015 and 31 December 2014 include loans to related parties (directors

and companies controlled by directors) as follows:

2015

2014

GH¢

GH¢

At 1 January

45,968

27191

Loans advanced during the year

10,000

64430

Loans repayments received

(41,008)

(45653)

Transfer to other loan category

(508)

-

At 31 December 14,452

45,968

The above loans granted to a related party were at arm’s length. The terms of the credit facility are not less

favourable to the bank than those normally offered to other persons.

2015

2014

ii) Deposits from directors

GH¢

GH¢

At 1 January

22,957

10,353

Net movement during the year

(6,599)

5,018

At 31 December

16,358

15,372




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(iii) Remuneration of key management staff

2015 2014

GH¢ GH¢

Fees

443,924

423,041

Directors Expenses

4,791

1919

Salaries & other Benefits -

-

448,715

424,960

Controlling Relationship

Bank of Baroda is related by virtue of its ultimate (100%) controlling interest in Bank of Baroda (Ghana LTD)

38. Social responsibility

In furtherance of our corporate social responsibility, the Bank supported initiatives totalling GH¢ 5000

(2014: GH¢ 4984) to cover activities in the Bank’s key areas of concern, namely health, education and the

environment. These included donations and support for tertiary institutions, programmes for trainee

professionals, health and charitable institutions and cultural and other social events.

39. Breaches on Loan classification, waiver of unpaid interest on a facility and Sanctions

There was no penalty imposed on the Bank in 2015 (2014: Nil)

40. Events after reporting period

No significant event occurred after the end of the reporting date which is likely to affect these financial

statements.

41. Financial risk management

(a) Introduction and overview

The bank has exposure to the following risks arising from the use of financial the instruments.

Typical of such risks are as follows:

credit risk

liquidity risk

market risk

operational risk.

These are principal risks of the bank. This note presents information about the bank exposure

to these risks, including the objectives, policies and processes for measuring and managing the

risks as well as their impact on earnings and capital.

Risk management framework

This depends mainly on the Risk Management framework set out by the Central Bank. Bank

specific framework based on the overall structure of the bank ensures that the Board of

Directors has overall responsibility for the establishment and oversight of the bank’s risk

management framework. The Board has established the Group Asset and Liability (ALCO),

Credit and Operational Risk committees, which are responsible for developing and monitoring

the bank’s risk management policies in their specified areas. All Board committees have both




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executive and non-executive members and report regularly to the Board of Directors on their

activities.

The bank’s risk management policies are established to identify and analyze the risks faced by

the bank, to set appropriate risk limits and controls, and to monitor risks and adherence to

limits. Risk management policies and systems are reviewed regularly to reflect changes in

market conditions, products and services offered. The bank, through its training and

management standards and procedures, aims to develop a disciplined and constructive control

environment, in which all employees understand their roles and obligations.

The bank Audit Committee is responsible for monitoring compliance with the bank’s risk

management policies and procedures, and for reviewing the adequacy of the risk management

framework in relation to the risks faced by the bank. The bank Audit Committee is assisted in

these functions by Internal Audit. Internal Audit undertakes both regular and ad-hoc reviews

of risk management controls and procedures, the results of which are reported to the Audit

Committee.

(b) Credit risk

Credit risk is the risk of financial loss to the bank if a customer or counterparty to a financial

instrument fails to meet its contractual obligations, and arises principally from the bank’s

loans and advances to customers and other banks and investment securities. For risk

management reporting purposes, the bank considers and consolidates all elements of credit

risk exposure.

For risk management purposes, credit risk arising on trading securities is managed

independently, but reported as a component of market risk exposure.

Management of credit risk

The Board of Directors has delegated responsibility for the management of credit risk to its

bank Credit Committee. A separate bank Credit department, reporting to the bank Credit

Committee, is responsible for oversight of the bank credit risk, including:

Formulating credit policies in consultation with business units, covering collateral

requirements, credit assessment, risk grading and reporting, documentary and legal

procedures, and compliance with regulatory and statutory requirements.

Establishing the authorization and structure for the approval and renewal of credit

facilities. Authorization limits are allocated to business unit Credit Officers. Larger

facilities require approval by the Head of Credit Committee or the Board of Directors as

appropriate.

Reviewing and assessing credit risk. The bank Credit assesses all credit exposures in

excess of designated limits, prior to facilities being committed to customers by the

business unit concerned. Renewals and reviews of facilities are subject to the same review

process.

Limiting concentrations of exposure to counterparties, geographies and industries (for

loans and advances), and by issuer, credit rating band, market liquidity and country (for

investment securities).

Developing and maintaining the bank’s risk grading in order to categorize exposures

according to the degree of risk of financial loss faced and to focus management on the

attendant risks. The risk grading system is used in determining where impairment

provisions may be required against specific credit exposures. The current risk grading

framework consists of eight grades reflecting varying degrees of risk of default and the




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availability of collateral or other credit risk mitigation. The responsibility for setting risk

grades lies with the final approving executive / committee as appropriate. Risk grades are

subject to regular reviews by the bank Risk Function.

Reviewing compliance of business units with agreed exposure limits, including those for

selected industries, country risk and product types. Regular reports are provided to bank

Credit committee on the credit quality of local portfolios and appropriate corrective action

is taken.

Providing advice, guidance, specialist skills and training to business units to promote best

practice throughout the bank in the management of credit risk.

Each business unit is required to implement bank credit policies and procedures, with

credit approval authorities delegated from the bank Credit Committee. Each business unit

has a Chief Credit Risk officer who reports on all credit related matters to local

management and the bank Credit Committee. Each business unit is responsible for the

quality and performance of its credit portfolio and for monitoring and controlling all credit

risks in its portfolios, including those subject to central approval.

Regular audits of business units and bank Credit processes are undertaken by Internal

Audit.

Exposure to credit risk 2015 2014

GH¢ GH¢

Impaired loans

Individually impaired 1,955,169 397,474

Allowance for impairment 1,950,660 170,447

Impaired loans, net of individual provisions 4,509 227,027

Loans past due but not impaired 577,911 486,759

Past due up to 30 days 577,911 486,759

Past due 31-60 days - -




Past due more than 150 days - -

Loans neither past due nor impaired 97,826,129 81,187,520

Credit grading 1-12 or equivalent

Less: Portfolio impairment provision 1,950,660 170,447

Total net loans

97,406,549 81,089,306

Maximum credit exposure

At 31 December 2015, the maximum credit risk exposure of the Bank in the event of other parties failing to

perform their obligations is detailed below. No account has been taken of any collateral held and the maximum

exposure to loss is considered to be the instruments’ statement of financial position carrying amount or, for non-

derivative off-statement of financial position transactions, their contractual nominal amounts.




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2015 2014

GH¢ GH¢

Placements with other banks 78,706,275 18,565,398

Loans and advances 97,406,549 81,089,306

Unsecured Contingent liabilities and commitments - -

The Bank holds collateral against loans and advances to customers in the form of mortgage interests over

property, other registered securities over assets, and guarantees. Estimates of fair value are based on the value of

collateral assessed at the time of borrowing, and generally are not updated except when a loan is individually

assessed as impaired.

An estimate of the fair value of collateral and other security enhancements held against financial assets is shown

below:

Loans and receivables

2015 2014

GH¢ GH¢

Against impaired assets 30,579 322,316

Against past due but not impaired assets 514,527 -

(c) Liquidity Risk

The Bank defines liquidity risk as the risk that the Bank will encounter difficulty in meeting obligations

associated with its financial liabilities that are settled by delivering cash or another financial asset.

It is the policy of the Bank to maintain adequate liquidity at all times, and for all currencies. Hence the Bank

aims to be in a position to meet all obligations, to repay depositors, to fulfil commitments to lend and to meet

any other commitments.

Liquidity risk management is governed by the Bank’s Asset and Liability Management Committee (ALCO),

which is chaired by the Managing Director. ALCO is responsible for both statutory and prudential liquidity.

These responsibilities include the provision of authorities, policies and procedures.

ALCO has primary responsibility for compliance with regulations and Bank policy and maintaining a liquidity

crisis contingency plan.

A substantial portion of the Bank’s assets are funded by customer deposits made up of current and savings

accounts and other deposits. These customer deposits, which are widely diversified by type and maturity,

represent a stable source of funds. Lending is normally funded by liabilities in the same currency.

The Bank also maintains significant levels of marketable securities either for compliance with local statutory

requirements or as prudential investments of surplus funds.




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ALCO oversees the structural foreign exchange and interest rate exposures that arise within the Bank. These

responsibilities are managed through the provision of authorities, policies and procedures that are co-ordinated

by ALCO. Compliance with Bank ratios is also monitored by ALCO.

An analysis of various maturities of the Bank’s assets and liabilities is provided below.

Maturities of assets and liabilities

Less than 12

months

over 1 year 2015 2014

Assets GH¢ GH¢ GH¢ GH¢

Cash and balances with Bank of Ghana 13,605,961 - 13,605,961 13,069,576

Short-term government securities 74,288,000 - 74,288,000 77,181,689

Due from other banks and financial institutions 78,706,275 - 78,706,275 18,565,398

Loans and advances 83,724,952 16,634,257 100,359,209 82,071,753

Other assets - 3,205,955 3,205,955 4,443,279

Government bonds medium term securities

Total Liabilities 250,325,188 19,840,212 270,165,400 195,331,695

Liabilities

Customer deposits 112,619,887 130,743 112,750,630 91,590,568

Due to other banks and financial institutions 5,731,805 - 5,731,805 2,393,665

Interest payables and other liabilities 160,892 - 160,892 212,410

Borrowings 30,360,000 - 30,360,000 -

Total liabilities 149,003,327 130743 149,134,070 94,196,643

Net liquidity gap

Total liquid assets (Balance with BOG) - - 250,325,188 157,490,089

Total liabilities - - 149,134,070 94,196,643

Net liquidity gap (Surplus) - - 101,191,118 63,293,446

(d) Market Risks

Management of Market Risk

The Bank recognises market risk as the exposure created by potential changes in market prices and rates, such as

interest rates, equity prices and foreign exchange rates. The Bank is exposed to market risk arising principally

from customer driven transactions.

Market risk is governed by the Bank’s Market Risk unit which is supervised by ALCO, and which agrees

policies, procedures and levels of risk appetite in terms of Value at Risk (“VaR”).The unit provides market risk

oversight and guidance on policy setting. Policies cover both the trading and non-trading books of the Bank. The

non-trading book is defined as the Banking book. Limits are proposed by the businesses within the terms of

agreed policy.

The unit also approves the limits within delegated authorities and monitors exposures against these limits.

Additional limits are placed on specific instruments and currency concentrations where appropriate. Sensitivity

measures are used in addition to VaR as risk management tools.




58

VaR models are back tested against actual results to ensure pre-determined levels of accuracy are maintained.

The Bank’s Market Risk unit complements the VaR measurement by regularly stress testing market risk

exposures to highlight potential risks that may arise from extreme market events that are rare but plausible.

Stress testing is an integral part of the market risk management framework and considers both historical market

events and forward looking scenarios. Ad hoc scenarios are also prepared reflecting specific market conditions.

A consistent stress testing methodology is applied to trading and non-trading books.

Stress scenarios are regularly updated to reflect changes in risk profile and economic events. The unit has

responsibility for reviewing stress exposures and, where necessary, enforcing reductions in overall market risk

exposure. It also considers stress testing results as part of its supervision of risk appetite. The stress test

methodology assumes that management action would be limited during a stress event, reflecting the decrease in

liquidity that often occurs. Contingency plans are in place and can be relied on in place of any liquidity crisis.

The Bank also has a liquidity crisis management committee which also monitors the application of its policies.

The Bank has not identified any limitations of the VaR methodology.

Foreign Exchange Exposure

The Bank’s foreign exchange exposures comprise trading and non-trading foreign currency translation

exposures. Foreign exchange exposures are principally derived from customer driven transactions.

Concentration of Ghana cedi equivalent of foreign currency denominated assets and liabilities and off statement

of financial position items are disclosed below:

USD GBP EUR Others 2015 2014

GH¢ GH¢ GH¢ GH¢ GH¢ GH¢

Assets

Cash and Balances with Bank of Ghana 2,423,097 8,487 13,098 140,375 2,585,057 1,679,648

Due from other Banks and Financial

Institutions 61,007,933 51,678 6,289 - 61,065,900 9,559,866

Loans and Advances 64,155,215 - - - 64,155,215 61,547,060

Other Assets - - - - - -

Total Assets 127,586,245 60,165 19,387 140,375 127,806,172 126,689,909

Liabilities

Customer Deposits 96,162,275 - - - 96,162,275 73,474,023

Due to other Banks and Financial

Institutions 30,360,000 - - - 30,360,000 -

Interest Payable and other Liabilities

Total Liabilities 126,522,275 - - - 126,522,275 73,474,023

Net-on Statement of financial position

Off-statement of financial position Credit

and Commitments




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Sensitivity Analysis

A 5% strengthening of the cedi against the following currencies at 31 December 2015 would have impacted

equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in

particular interest rates, remain constant. The analysis is performed on the same basis for 2014.

Sensitivity analysis

Effect in cedis

31 December 2015

Profit/(loss)

GH¢

USD 363,140

GBP 60,163

EUR 19,387

Others 140,000

31 December 2014

Profit/(loss)

GH¢

USD 619,063

GBP 108,319

EUR 87,446

Others 108,000

A best case scenario 5% weakening of the Ghana cedi against the above currencies at 31 December 2015 would

have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all

other variables remain constant.

Interest Rate Exposure

The principal risk to which non-trading portfolios are exposed is the risk of loss from fluctuations in the future

cash flows or fair values of financial instrument because of a change in market interest rates. Interest rate risk is

managed principally through monitoring interest rate gaps and by having pre-approved limits for re-pricing

bands. ALCO is the monitoring body for compliance with these limits and is assisted by the Bank’s Market Risk

unit in its day-to-day monitoring activities.

The management of interest rate risk against interest rate gap limits is supplemented by monitoring the

sensitivity of the Bank’s financial assets and liabilities to various standard and non-standard interest rate

scenarios. Standard scenarios that are considered on a monthly basis include a 100 basis point (bp) parallel fall

or rise in market interest rates.




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A change of a 100 basis points in interest rates at the reporting date would have impacted equity and profit or

loss by the amounts shown below:

100 b p 100 b p

Increase Decrease

31-Dec-15 GH¢ GH¢

Interest income impact 1,999,521 (1,999,521)

Interest expense impact (1,096,204) 1,096,204

Net impact 903,317 (903,317)

100 b p 100 b p

Increase Decrease

31-Dec-14 GH¢ GH¢

Interest income impact 1,692,971 (1,692,971)

Interest expense impact (835,448) 835,448

Net impact 857,523 (857,523)

Operational risk is the risk of direct or indirect loss due to an event or action resulting from the failure of internal

processes, people and systems, or from external events. The Bank seeks to ensure that key operational risks are

managed in a timely and effective manner through a framework of policies, procedures and tools to identify

assess, monitor, control and report such risks.

The Bank’s Country Operational Risk Committee (CORC) has been established to supervise and direct the

management of operational risks across the Bank. CORC is also responsible for ensuring adequate and

appropriate policies, and procedures are in place for the identification, assessment, monitoring, control and

reporting of operational risks.

The CORC is responsible for establishing and maintaining the overall operational risk framework and for

monitoring the Bank’s key operational risk exposures. This unit is supported by Corporate & Institutional

Clients and Retail Clients Operational Risk units. These units are responsible for ensuring compliance with

policies and procedures in the business, monitoring key operational risk exposures, and the provisions of

guidance to the respective business areas on operational risk.

Capital Management

The Central Bank sets and monitors capital requirements for the Bank. Under the guidelines of the Central

Bank, the Bank is required to maintain a prescribed ratio of total capital to total risk-weighted assets.

The Bank’s capital is analysed into two tiers:

Tier 1 capital, which includes ordinary paid up share capital, permanent preference shares and disclosed

reserves, after deducting certain assets such as investments in capital of other Banks and financial institutions.

Tier 2 capital, which includes some reserves such as the element of the fair value reserve relating to unrealised

gains on equity instruments classified as available-for-sale.




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Various limits are applied to elements of the capital base, and other assets are given various classifications such

as claims on government, claims on the Central Bank and contingent liabilities and risk-weighted assets are

determined according to specified requirements that seek to reflect the varying levels of risk attached to assets

and off-statement of financial position exposures.

The Bank’s policy is to maintain a strong capital base so as to maintain investor, and market confidence and to

sustain future development of the business. The impact of the level of capital on shareholders’ return is also

taken into consideration, and the Bank 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 sound capital position.

The Bank has complied with all externally imposed capital requirements throughout the year.

There has been no material change in the Bank’s management of capital during the year.

41. Below is the capital adequacy ratio as at 31 December, 2015

CAPITAL ADEQUACY RATIO

2015 2014

No ITEMS GH¢ GH¢

1 Paid-up Capital 60,009,771 60,009,771

2 Disclosed Reserves 58,250,441 40,215,257

3 Permanent Preference Shares - -

Tier 1 Capital (1+2+3) 118,260,212 100,225,027

4 Less:

5 Goodwill/Intangibles - -

6 Losses not Provided For 13,453 66,594

10 Net Tier 1 Capital (4-5-6-7-8-9) 118,246,759 100,158,433

13 Hybrid Capital (569,211) -

17 Tier 2 Capital (11+12+13+14+15+16) 117,677,547 100,158,433

(Limited to 100% of 4) - -

18 ADJUSTED CAPITAL BASE (11+17) 117,677,547 100,158,433

19 TOTAL ASSETS (less Contra Items) 267,212,740 194,411,865

Less:

20 Cash on Hand (Cedis) 958,629 737,173

21 Cash on Hand (Forex) 752,363 722,925

22 Claims on Bank of Ghana: 11,894,969 11,609,479

i. Cedi Clearing Account Balance 10,202,650 9,206,906

ii. Forex Account Balance 1,692,319 2,402,573

23 Claims on Government: 74,288,000 77,181,689

i) Treasury Securities (Bills and Bonds) 74,288,000 77,181,689

ii) Stocks - -




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30 80% of claims on Other Banks (Cedis/Forex) 62,965,020 14,852,318

31 50% of claims on Other Fin Institutions. (Public Sector)

(Cedi/Forex)

- -

32 80% of loans guaranteed by government 5,831,448 7,574,531

36 Adjusted Total Assets (19-20-21-,……..,-35) 110,522,311 81,733,751

37 Add: Contingent Liabilitiess -

38 Commercial Letters of Credit Outstanding - -

39 Guarantees / Indemnities 8,424,922 2,545,846

Net Contingent Liabilities. (37+38+....+43-44-45) - 2,545,846

Add:

48 50% of NOP 713,039 404,404

49 100% of 3yrs Average Annual Gross Income 20,870,078 13,611,441

50 ADJUSTED ASSET BASE (36+46+47+48) 140,519,677 98,295,442

51 Adjusted Capital Base as percentage of Adjusted Asset

Base: (18/50 X 100)

83.7% 101.9%

CAPITAL SURPLUS/DEFICIT {18 – (10% of 49)} 103,625,580 90,328,889

Bank of Baroda (Ghana) Limited

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