Annual Report 2019

Central Bank of the Republic of Armenia 30. Risk management (continued) Notes to the 2019 consolidated financial statements Liquidity risk and funding management Liquidity risk is the risk that the Group will be unable to meet its payment obligations when they fall due under normal and stress circumstances. As a fiscal agent of the Government and the monetary authority of the Republic of Armenia, the Bank is responsible for public debt service, the Government's foreign payments. From this perspective proper cash and liquidity management is crucial. Based on the international reserve management objectives Armenia's international reserves have been divided into three tranches working capital, liquidity and investment tranches. While the first two are designed to meet short-term/instant and mid-term liquidity requirements, the purpose of the investment tranche is accumulation of wealth. Depending on the designation of portfolio/tranche the policy varies in terms of benchmarks and the choice between active or passive management. Analysis of financial liabilities by remaining contractual maturities The tables below show liabilities at 31 December 2019 and 31 December 2018 by their remaining contractual maturity. The amounts of liabilities disclosed in the maturity table are the contractual undiscounted cash flows. Such undiscounted cash flows differ from the amount included in the consolidated statement of financial position because the amount in the consolidated statement of financial position is based on discounted cash flows. Financial derivatives are included at the contractual amounts to be paid or received, unless the Group expects to close the derivative position before its maturity date in which case the derivatives are included based on the expected cash flows. In thousands of Armenian Drams Financial liabilities Notes and coins in circulation Deposits and accounts of financial and other institutions Derivative financial liabilities Due to the Government Due to the IMF Other borrowed funds Debt securities issued Total non-discounted financial liabilities 31 December 2019 Demand and less than 1 month From 1 to 3 months From 3 months to 1 year From 1 to 5 years More than 5 years No maturity Total 607,209,301 607,209,301 721,432,655 2,100,625 723,533,280 81,100 56,578,091 150,046,431 1,110,868 125,058,221 81,100 331,682,743 23,094,242 738,484 16,943,615 124,500 387,000 1,386,039,631 151,281,799 167,583,703 65,167,801 73,311,020 7,149,500 145,628,321 11,972,325 70,873,733 143,675,049 245,020,285 161,866,852 7,661,000 82,846,058 143,675,049 2,077,054,561 31 December 2018 Demand and less than From 1 to 3 months From 3 months to 1 year From 1 to 5 years More than 5 years No maturity Total In thousands of Armenian Drams Financial liabilities Notes and coins in circulation Deposits and accounts of financial and other institutions 1 month 566,706,467 566,706,467 612,518,304 200,700 2,100,625 Derivative financial liabilities Due to the Government 97,040 75,591,432 Due to the IMF Other borrowed funds Debt securities issued Total non-discounted financial liabilities 699,760 97,812,401 1,317,354 124,500 1,255,613,003 99,254,255 18,503,791 19,937,289 15,273,479 5,258,160 59,173,419 614,819,629 97,040 191,907,624 85,235,919 72,021,333 3,373,500 162,731,377 21,161,217 85,185,419 145,687,369 273,339,148 173,179,991 8,756,160 106,346,636 145,687,369 1,828,806,059 Market risk Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates, foreign exchange rates, and equity prices. The Group classifies exposures to market risk into either trading or non-trading portfolios. 49

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