Investor Presentaiton
98
ANNEXURE CRISK AND CAPITAL MANAGEMENT MARKET RISK CONTINUED
Trading book portfolio characteristics
VaR for the year under review
Trading book market risk exposures arise mainly from residual exposures from client transactions.
TRADING BOOK NORMAL VAR ANALYSIS BY MARKET VARIABLE
2020
Foreign exchange risk
Interest rates
Aggregate¹
Normal VaR
Maximum¹
N$'000
Minimum¹
Average
Closing
N$'000
N$'000
N$'000
478
21
56
73
59
4
25
11
464
19
65
78
2019
Foreign exchange risk
671
17
66
18
Interest rates
Aggregate¹
164
670
3
35
36
83
44
39
1 The maximum and minimum VaR figures reported for each market variable do not necessarily occur on the same day. As a result, the aggregate VaR will not equal
the sum.
TRADING BOOK STRESSED VAR ANALYSIS BY MARKET VARIABLE
2020
Foreign exchange risk
Interest rates
Aggregate¹
Stressed VaR
Maximum¹
N$'000
Minimum¹
N$'000
Average
N$'000
Closing
N$'000
1 558
114
197
215
1 408
173
698
631
1 559
245
745
684
RISKS
Credit
Funding and
liquidity
Market
Operational
INTEREST RATE SENSITIVITY ANALYSIS
2020
STANDARD BANK NAMIBIA LIMITED
Annual financial statements 2020
NAD
USD
TOTAL
Increase in basis points
Sensitivity of annual net interest income (N$'000)
Decrease in basis points
200
100
183 120
341
182 779
200
Sensitivity of annual net interest income (N$'000)
2019
(229 516)
100
(101)
(229 617)
200
283 384
200
(285 078)
100
5 889
100
289 273
(7 116)
(292 194)
Increase in basis points
Sensitivity of annual net interest income (N$'000)
Decrease in basis points
Sensitivity of annual net interest income (N$'000)
Foreign currency risk
Definition
The company's primary non-trading-related exposures to foreign currency risk arise as a result of the translation effect on the
company's net assets in foreign operations, intragroup foreign-denominated debt and foreign-denominated cash exposures and
accruals.
Approach to managing foreign currency risk
The company foreign currency management committee, a subcommittee of the group capital management committee, manages the
risk according to existing legislation, Namibian exchange control regulations and accounting parameters. It takes into account naturally
offsetting risk positions and manages the company's residual risk by means of forward exchange contracts, currency swaps and option
contracts.
Foreign currency risk sensitivity analysis
The table that follows reflects the expected financial impact, in N$ equivalent, resulting from a 5% shock to foreign currency risk
exposures, against N$. The sensitivity analysis is based on net open foreign currency exposures arising from designated net investment
hedges, other derivative financial instruments, foreign-denominated cash balances and accruals and intragroup foreign-denominated
debt. The sensitivity analysis reflects the sensitivity to OCI and profit or loss on the company's foreign denominated exposures.
FOREIGN CURRENCY RISK SENSITIVITY IN N$ EQUIVALENTS¹
2019
Foreign exchange risk
1 209
104
263
117
USD
Euro
GBP
Other
Total
Interest rates
2 831
97
735
846
Aggregate¹
2 704
175
690
755
2020
1 The maximum and minimum VaR figures reported for each market variable do not necessarily occur on the same day. As a result, the aggregate VaR will not equal
the sum of the individual market VaR values, and it is inappropriate to ascribe a diversification effect to VaR when these values may occur on different days.
Total net long position
Sensitivity
N$'000
3 297
1 746
122
2 730
%
5
5
5
5
Impact on profit or loss
N$'000
165
87
6
137
395
Approach to managing IRRBB
Banking book-related market risk exposure principally involves managing the potential adverse effect of interest rate movements on
banking book earnings (IRBB) (net interest income and banking book mark-to-market profit or loss) and the economic value of equity.
The company's approach to managing IRRBB is governed by applicable regulations and is influenced by the competitive environment in
which the company operates. The company's treasury and capital management team monitors banking book interest rate risk on a
monthly basis operating under the oversight of ALCO.
Measurement
The analytical techniques used to quantify IRRBB include both earnings- and valuation-based measures. The analysis takes into account
embedded optionality such as loan prepayments and accounts where the account behaviour differs from the contractual position.
The results obtained from forward-looking dynamic scenario analyses, as well as Monte Carlo simulations, assist in developing optimal
hedging strategies on a risk-adjusted return basis.
Total net long position
N$'000
3 297
1 746
122
2 730
Sensitivity
%
Impact on profit or loss
N$'000
(5)
(165)
(5)
(5)
(5)
(87)
(6)
(137)
(395)
2019
Total net long position
N$'000
2 455
1 663
Sensitivity
%
5
5
65
Impact on profit or loss
N$'000
123
83
4
129
76
2 582
5
339
Total net long position
Sensitivity
N$'000
2 455
1 663
76
2 582
%
(5)
(5)
Go
(5)
(5)
Impact on profit or loss
N$'000
(123)
(83)
(4)
(129)
(339)
1 Before tax.
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