Annual Financial Statements 2020

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. 99

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