SBN HOLDINGS LIMITED Annual Report 2022

ANNEXURE B RISK AND CAPITAL MANAGEMENT/RISK continued 136 FUNDING AND LIQUIDITY RISK SBN HOLDINGS LIMITED Annual report 2022 137 Collateral coverage - Total collateral Gross exposure N$'000 Impairment N$'000 Unsecured N$'000 Secured N$'000 1 to 50% N$'000 50 to 100% N$'000 3 925 445 6 127 596 4 655 210 598 085 4 113 827 39 694 1665 4503 690 071 3 925 445 596 420 596 420 4 109 324 4 109 324 21 101 450 12 783 842 949 968 588 608 2 462 793 17 688 689 18 322 830 12 195 234 12 195 234 8 317 608 361 360 2 462 793 5 493 455 30 468 572 995 830 3 152 864 26 319 878 26 954 019 7 948 517 (995 439) 2021 Corporate Sovereign Bank Retail Retail mortgage Other retail Total Add: Financial assets not exposed to credit risk Less: Impairments for loans and advances Less: Unrecognised off-balance sheet items Total exposure Reconciliation to statement of financial position Cash and balances with central banks Derivative assets Trading assets Financial investments Loans and advances (4 090 811) 33 330 839 1 488 497 73 326 619 584 5 670 546 25 382 322 Other financial assets¹ Total 96 564 33 330 839 1 Other financial assets are included in other assets in the statements of financial position. Definition Liquidity risk is defined as the risk that an entity, although solvent, cannot maintain or generate sufficient cash resources to meet its payment obligations in full as they fall due, or can only do so at materially disadvantageous terms. Approach to managing liquidity risk The nature of the group's banking and trading activities gives rise to continuous exposure to liquidity risk. Liquidity risk may arise where counterparties, who provide the group with short- term funding, withdraw or do not roll over that funding, or normally liquid assets become illiquid as a result of a generalised disruption in asset markets. The group manages liquidity in accordance with applicable regulations and within the group's risk appetite framework. The group's liquidity risk management governance framework supports the measurement and management of liquidity across both the corporate and retail sectors to ensure that payment obligations can be met by the group's legal entities, under both normal and stressed conditions. Liquidity risk management ensures that the group has the appropriate amount, diversification and tenor of funding and liquidity to support its asset base at all times. The group manages liquidity risk as three interrelated pillars, which are aligned to the Basel III liquidity requirements. The group maintains a prudent approach to liquidity management in accordance with the applicable laws and regulations. Appropriate liquidity buffers were held in excess of the minimum prudential liquid asset requirements as prescribed by the regulator. Proactive liquidity management in line with group liquidity standards ensured that, despite volatile and constrained liquidity environments at the onset of the Covid-19 pandemic, adequate liquidity was maintained to fully support balance sheet strategies. This has been achieved through continuous engagements between treasury and capital management, risk and business units in which the liquidity risk with respect to on- and off-balance sheet positions was carefully monitored. At the same time consideration has been provided to the adequacy of contingent funding, ensuring sufficiency to accommodate unexpected liquidity demands. The group continues to leverage the extensive deposit franchises across the portfolio to ensure that it has the appropriate amount, tenor and diversification of funding to support its current and forecast asset base while minimising cost of funding. The group manages its liquidity through an internal behavioural profiling of its portfolios. Through this mechanism, the group continuously ensure that it has sufficient marketable assets available in its portfolio to meet the outflow demand in both business as usual as well as stress circumstances. 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 group 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 (SOFP). 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.

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