Annual Report 2019
Central Bank of the Republic of Armenia
30. Risk management (continued)
Credit quality per class of financial assets
Notes to the 2019 consolidated financial statements
31 December 2018
% in financial
assets
31 December 2019
Credit
rating
Amount
% in financial
assets
Amount
In thousands of Armenian Drams
Placements and investments with
banks and other financial
institutions in domestic currency
Loans to resident financial
institutions under arrangement with
the KfW, the World Bank, Asian
Development Bank and European
Investment Bank
Settled after the end of
the reporting period
Not due at the date of
authorisation of the
consolidated financial
statements for issue
Total
Mortgage refinancing
Total
Deposits and current accounts in
commercial banks
Total
Repurchase agreements and other
overnight facilities
Total
Investments measured at amortised
cost
6,122,724
4.8
5,680,274
4.4
121,853,329
127,976,053
95.2
100.0
122,157,277
127,837,551
95.6
100.0
Settled after the end of
the reporting period
Not due at the date of
authorisation of the
consolidated financial
statements for issue
4,349,372
4.8
3,807,115
5.0
86,024,586
90,373,958
95.2
100.0
72,759,544
76,566,659
95.0
100.0
Settled after the end of
the reporting period
Not due at the date of
authorisation of the
consolidated financial
statements for issue
7,457,060
11.7
12,950,261
25.4
56,469,363
63,926,423
88.3
100.0
37,992,189
50,942,450
74.6
100.0
Settled after the end of
the reporting period
126,669,774
126,669,774
100.0
100.0
163,433,113
163,433,113
100.0
100.0
Settled after the end of
the reporting period
Not due at the date of
authorisation of the
consolidated financial
statements for issue
2,549,404
10.6
583,173
2.4
21,533,083
24,082,487
89.4
100.0
23,507,102
24,090,275
97.6
100.0
3,447,368
3,447,368
(2,593,195)
100.0
3,579,296
100.0
100.0
3,579,296
(2,801,183)
100.0
Total
Other loans
Total
Impairment allowance
Total placements and investments
with banks and other financial
institutions in domestic currency
433,882,868
443,648,161
The Bank makes decisions regarding its placements with local banks and financial institutions taking into account its role
of the banking regulator and the lender of last resort and therefore does not allocate ratings to local banks and financial
institutions. Thus, the analysis of credit quality of these assets is limited to the stage of respective transaction.
Impairment assessment
The Group calculates ECL based on several probability-weighted scenarios to measure the expected cash shortfalls,
discounted at an approximation to the EIR. A cash shortfall is the difference between the cash flows that are due to an
entity in accordance with the contract and the cash flows that the entity expects to receive. The mechanics of the
ECL calculations are outlined below and the key elements are as follows:
PD
EAD
LGD
The Probability of Default is an estimate of the likelihood of default over a given time horizon. A default
may only happen at a certain time over the assessed period, if the facility has not been previously
derecognised and is still in the portfolio.
The Exposure at Default is an estimate of the exposure at a future default date, taking into account
expected changes in the exposure after the reporting date, including repayments of principal and
interest, whether scheduled by contract or otherwise, expected drawdowns on committed facilities,
and accrued interest from missed payments.
The Loss Given Default is an estimate of the loss arising in the case where a default occurs at a given
time. It is based on the difference between the contractual cash flows due and those that the lender
would expect to receive, including from the realisation of any collateral. It is usually expressed as a
percentage of the EAD.
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