Page 95 - Annual Report 2023

ANNUAL REPORT 2023 26
Notes to the Consolidated Financial Statements for the year ended 31 December 2023
(amounts in USD, unless otherwise stated)

(a) Introduction and overview
The Bank has exposure to the following risks from financial instruments:
• credit risk
• liquidity risk
• market risks
• operational risks

This note presents information about the Bank’s exposure to each of the above risks, the Bank’s objectives, policies and processes
for measuring and managing risk, and the Bank’s management of capital.
A financial instrument is any contract that gives rise to the right to receive cash or another financial asset from another party (financial
asset) or the obligation to deliver cash or another financial asset to another party (financial liability).
Financial instruments result in certain risks to the Bank. The most significant risks facing the Bank are credit risk, liquidity risk and
market risk. Market risk includes foreign currency risk, interest rate risk and other price risks.

Risk management framework
The Board of Directors has overall responsibility for the establishment and oversight of the Bank’s risk management framework. The
Board has established the Bank Risk Committee, Asset and Liability Committee (ALCO), Investment Committee, Risk Management
Group and Credit Committees, which are responsible for developing and monitoring Bank risk management policies in their specified
areas. All these bodies report regularly to the Board of Directors on their activities.

The Bank’s risk management policies are established to identify and analyse the risks faced by the Bank, to set appropriate risk limits and
controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes
in market conditions, products and services offered. The Bank, through its training and management standards and procedures, aims
to develop a disciplined and constructive control environment, in which all employees understand their roles and obligations.

The Bank Audit Committee is responsible for monitoring compliance with the Bank’s risk management policies and procedures, and
for reviewing the adequacy of the risk management framework in relation to the risks faced by the Bank. The Bank Audit Committee is
assisted in these functions by Internal Audit. Internal Audit undertakes both regular and ad-hoc reviews of risk management controls
and procedures, the results of which are reported to the Audit Committee.

(b) Credit Risk
Credit risk is the risk of financial loss to the Bank if a customer or counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Bank’s Loans to customers and other banks and investment securities. For risk management
reporting purposes, the Bank considers all elements of credit risk exposure (such as individual obligor default risk, country and sector
risk). The Bank has formed a Credit Committee to oversee the approval of requests for credits. Credit requests with amounts over
EUR 2,500,000 are approved only upon decision of the Board of Directors of the Bank. There is a continuous focus on the quality of
credits extended both at the time of approval and throughout their lives.

Each business unit is required to comply with Bank credit policies and procedures. Regular audits of business units and Bank Credit
Risk Management Department processes are undertaken by Internal Audit.

i. Maximum credit exposure
The gross carrying amount of financial assets below also represents the Group’s maximum exposure to credit risk on these assets.
Maximum exposures to credit risk before collateral and other credit enhancements as at 31 December 2023 and 31 December 2022
are as follows: