Investor Presentaiton

96 96 ANNEXURE C RISK AND CAPITAL MANAGEMENT FUNDING AND LIQUIDITY RISK CONTINUED Credit RISKS Funding and liquidity Market Operational STANDARD BANK NAMIBIA LIMITED Annual financial statements 2020 97 Maturity analysis of financial liabilities by contractual maturity The following table analyses cash flows on a contractual, undiscounted basis based on the earliest date on which the company can be required to pay (except for trading liabilities and derivative liabilities, which are presented as redeemable on demand) and will, therefore, not agree directly to the balances disclosed in the consolidated Statement of financial position. Derivative liabilities are included in the maturity analysis on a contractual, undiscounted basis when contractual maturities are essential for an understanding of the derivatives' future cash flows. Management considers only contractual maturities to be essential for understanding the future cash flows of derivative liabilities that are designated as hedging instruments in effective hedge accounting relationships. All other derivative liabilities, together with trading liabilities, are treated as trading and are included at fair value in the redeemable on demand bucket since these positions are typically held for short periods of time. The table also includes contractual cash flows with respect to off-balance sheet items. Where cash flows are exchanged simultaneously, the net amounts have been reflected. 2020 Liabilities Derivative liabilities Market risk Definition Market risk is the risk of a change in the market value, actual or effective earnings, or future cash flows of a portfolio of financial instruments, including commodities, caused by adverse movements in market variables such as equity, bond and commodity prices, currency exchange and interest rates, credit spreads, recovery rates, correlations and implied volatilities in all of these variables. The company's key market risks are: Redeemable on demand N$'000 Maturing within Maturing between Maturing between 1 month N$'000 1-6 months N$'000 6-12 months N$'000 Maturing after 12 months N$'000 • trading book market risk Total N$'000 401 961 4 177 202 412 427 110 590 5 102 180 Trading liabilities 230 230 Deposit and current accounts 17 176 178 532 107 3 869 251 3 882 457 2 875 979 28 335 972 4 946 1 221 650 458 856 1 695 900 Other financial liabilities 3.900 1 626 8 100 7 188 313 969 334 783 17 180 308 940 640 9 276 203 4 312 520 3 759 394 35 469 065 Debt issued securities Total Unrecognised financial liabilities Letters of credit and bankers' acceptances Financial guarantees Unutilised borrowing facilities Total 2019 25 432 215 457 3 489 1 548 931 4 683 065 4 898 522 3 489 1 574 363 10 448 25 432 1 767 877 4 683 065 6 476 374 14 881 28 335 972 1 591 345 616 154 Liabilities Derivative liabilities 235 124 1 988 244 1 514 309 126 261 3 863 938 Trading liabilities 14 881 Deposits and current accounts 17 176 178 532 107 3 869 251 Debt issued securities 19 400 3 882 457 200 050 2 875 979 Other financial liabilities 1 371 895 616 154 17 176 178 786 631 5 857 495 5 596 816 5 005 170 34 422 290 56 632 114 5 705 62 451 1 195 109 2 844 16 413 872 589 2 086 955 4 329 351 4 329 351 5 581 092 2 958 22 118 872 589 6 478 757 Total Unrecognised financial liabilities Letters of credit and bankers' acceptances Financial guarantees Unutilised borrowing facilities Total • Interest rate in the banking book (IRRBB) • foreign currency risk Trading book market risk Definition Trading book market risk is represented by financial instruments, including commodities, held in the trading book, arising out of normal global markets' trading activity. Approach to managing market risk in the trading book The company's policy is that all trading activities are undertaken within the company's global markets' operations. The market risk functions are independent of the company's trading operations and are overseen by the market risk committee which is accountable to the relevant legal entity ALCOs. All value at risk (VaR) and stressed value at risk (SVaR) limits require prior approval from the respective entity ALCOs. The market risk functions have the authority to set these limits at a lower level. Market risk teams are responsible for identifying, measuring, managing, monitoring and reporting market risk as outlined in the market risk governance standard. Exposures and excesses are monitored and reported daily. Where breaches in limits and triggers occur, actions are taken by market risk functions to bring exposures back in line with approved market risk appetite, with such breaches being reported to management and entity ALCOs. VaR and SVaR The company uses the historical VaR and SVaR approach to quantify market risk under normal and stressed conditions. For risk management purposes VaR is based on 251 days of unweighted recent historical data updated at least monthly, a holding period of one day and a confidence level of 95%. The historical VaR results are calculated in four steps: ⚫ calculate 250 daily market price movements based on 251 days' historical data. Absolute movements are used • • for interest rates and volatility movements; relative for spot, equities, credit spreads, and commodity prices calculate hypothetical daily profit or loss for each day using these daily market price movements aggregate all hypothetical profits or losses for day one across all positions, giving daily hypothetical profit or loss, and then repeat for all other days ⚫ VaR is the 95th percentile selected from the 250 days of daily hypothetical total profit or loss. Daily losses exceeding the VaR are unlikely to occur. Limitations of historical VaR are acknowledged globally and include: ⚫ the use of historical data as a proxy for estimating future events may not encompass all potential events, particularly those which are extreme in nature the use of a one-day holding period assumes that all positions can be liquidated or the risk offset in one day. This will usually not fully reflect the market risk arising at times of severe illiquidity, when a one-day holding period may be insufficient to liquidate or hedge all positions fully ⚫ the use of a 95% confidence level, by definition, does not take into account losses that might occur beyond this level of confidence. VaR is calculated on the basis of exposures outstanding at the close of business and, therefore, does not necessarily reflect intra-day exposures. VaR is unlikely to reflect loss potential on exposures that only arise under significant market movements.

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