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- OPEN JOINT STOCK COMPANY AMRAHBANK JOINT STOCK BANK NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2008
OPEN JOINT STOCK COMPANY AMRAHBANK JOINT STOCK BANK NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2008 (in Azerbaijan Manats) 45
As at 31 December 2008: Maximum exposure Net exposure after offset Collateral Pledged Net exposure after offset and collateral
Cash and balances with the National Bank of the Republic of Azerbaijan 6,919,460 6,919,460 - 6,919,460 Due from banks 1,664,997 1,664,997 - 1,664,997 Loans to customers 39,400,062 39,400,062 36,405,844 2,994,218 Investments available-for-sale 5,762,993 5,762,993 - 5,762,993 Other financial assets 409,480
409,480
409,480 Unused credit lines 121,547
121,547 31,360
90,187
As at 31 December 2007: Maximum exposure Net exposure after offset Collateral Pledged Net exposure after offset and collateral
Cash and balances with the National Bank of the Republic of Azerbaijan 9,347,625 9,347,625 - 9,347,625 Due from banks 619,764
619,764 - 619,764 Loans to customers 38,218,750 38,218,750 24,190,111 14,028,639 Investments available-for-sale 200,000 200,000
- 200,000
Other financial assets 238,933
238,933 - 238,933 Guarantees issued 511,585
511,585 - 511,585 Unused credit lines 384,380
384,380 - 384,380
The types of collateral held for the assets shown in the above tables are disclosed in their respective notes.
Financial assets are graded according to the current credit rating they have been issued by an internationally regarded agency (Fitch Ratings). The highest possible rating is AAA. Investment grade financial assets have ratings from AAA to BBB. Financial assets which have ratings lower than BBB are classed as speculative grade.
The following table details the credit ratings of financial assets held by the Bank as at 31 December 2008:
A BB+ B+ Not Rated Total at 31 December 2008 Cash and balances with the National Bank of the Republic of Azerbaijan - 4,417,256 - 2,502,204 6,919,460 Due from banks 317,819 117,550
152,179 1,077,449 1,664,997 Loans to customers - -
39,400,062 39,400,062 Investments available-for-sale - 5,562,993 - 200,000
5,762,993 Other financial assets - -
409,480 409,480
OPEN JOINT STOCK COMPANY AMRAHBANK JOINT STOCK BANK NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 31 DECEMBER 2008 (in Azerbaijan Manats) 46
As at 31 December 2007: AA BBB BB+ BB B Not Rated Total at 31 December 2007
Cash and balances with the National Bank of the Republic of Azerbaijan - - 6,228,424 - - 3,119,201 9,347,625 Due from banks 401,809 152,415 - 27,515 34,528 3,497
619,764 Loans to customers - -
- - 38,218,750 38,218,750 Investments available-for-sale - - - - - 200,000 200,000
Other financial assets - - - - - 238,933 238,933
The Bank has developed an internal rating model, which allows it to determine the rating of counterparties. The rating of corporate borrowers is based on an analysis of the financial ratios of the borrower, and an analysis of the market and industry sector, in which the borrower operates. The model also takes into consideration various qualitative factors, such as management efficiency and borrower’s market share.
The application of the internal rating model results in a standardized approach in the analysis of corporate borrowers and provides a quantitative assessment of the creditworthiness of a borrower that does not have a rating from an international rating agency. The model takes into account specific local market conditions.
The quality of the internal rating model is examined on a regular basis through an assessment of both its effectiveness and validity. The Bank revises the model when deficiencies are identified.
The Bank applies internal rating methodologies to specific corporate loans and groups of retail and small business loans, which incorporate various underlying master scales that are different from those used by international rating agencies. As a result, it is not possible to make a cross-product score comparison which would agree to the outstanding balance of loans to customers per the balance sheet. As such, more detailed information is not being presented.
The banking industry is generally exposed to credit risk through its financial assets and contingent liabilities. Credit risk exposure of the Bank concentrated within the Republic of Azerbaijan. The exposure is monitored on a regular basis to ensure that the credit limits and credit worthiness guidelines established by the Bank’s risk management policy are not breached.
The following table details the carrying value of assets that are impaired and those financial assets that are neither past due nor impaired:
As at 31 December 2008: Neither past due nor impaired Financial assets that have been impaired 31 December 2008 Total Cash and balances with the National Bank of the Republic of Azerbaijan 6,919,460 - 6,919,460 Due from banks 1,664,997 - 1,664,997 Loans to customers 16,401,891 22,998,171 39,400,062 Investments available-for-sale 5,762,993 - 5,762,993 Other financial assets 409,480
- 409,480
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