UOB Annual Report 2002 - United Overseas Bank

Notes to the Financial Statements
for the financial year ended 31 December 2002
44 Financial Risk Management
(a) Credit Risk (continued)
The following table analyses the Group’s financial assets and credit-related contingent liabilities by geographical concentration
as at the balance sheet date:
The Group
Trade Bills and Placements
Advances to and Balances Other Credit-Related
Customers with Banks Financial Contingent
(Gross) and Agents Assets Liabilities Total
$’000 $’000 $’000 $’000 $’000
2002
Five Regional Countries* 8,453,200 2,671,000 5,338,661 1,691,170 18,154,031
Greater China 2,481,400 1,870,800 747,960 503,610 5,603,770
Singapore 46,403,255 2,579,000 16,836,822 5,641,270 71,460,347
Others** 5,000,900 12,305,421 735,836 846,420 18,888,577
62,338,755 19,426,221 23,659,279 8,682,470 114,106,725
2001
Five Regional Countries* 8,562,500 1,988,000 5,432,807 1,334,350 17,317,657
Greater China 2,911,600 911,400 705,078 352,180 4,880,258
Singapore 47,328,426 5,865,750 15,973,179 5,701,345 74,868,700
Others** 5,408,400 15,980,440 608,962 285,390 22,283,192
64,210,926 24,745,590 22,720,026 7,673,265 119,349,807
* The Five Regional Countries refer to Malaysia, Indonesia, the Philippines, Thailand and South Korea.
** Others comprise mainly other OECD countries.
In addition to the above, the Group also has potential credit risk exposure to undrawn credit facilities of $35,948 million (2001:
$34,354 million). These represent unused portions of the approved credit facilities mainly in the form of loans, guarantees and
trade finance products such as letters of credit. However, the likely amount of exposure is less than the total undrawn credit
facilities since most of these are contingent upon customers maintaining specific credit standards and are cancellable at the
option of the Group subject to notice requirements. From past experience, many of these undrawn credit facilities are expected
to expire without being drawn upon.
(b)
Foreign Exchange Risk
Foreign exchange risk is the risk to earnings and value of foreign currency assets, liabilities and derivative financial instruments
caused by fluctuations in foreign exchange rates.
The Group’s foreign exchange exposures arise from its foreign exchange position-taking or proprietary business, customer
facilitation business as well as a certain amount of structural foreign currency exposures as represented by the net asset values
of its overseas branches and investments in overseas subsidiaries, and long-term investments in overseas properties. The Group
utilises mainly foreign currency forwards and swaps to hedge its foreign exchange exposures.
Foreign exchange risk is managed through risk limits and policies as approved by the Asset Liability Committee. These limits and
policies, such as on the level of exposure by currency and in total for both overnight and intra-day positions, are independently
monitored on a daily basis by the UOB Group’s Risk Management & Compliance Sector, through the Business Area Control Unit.
The following table sets out the Group’s assets, liabilities and derivative financial instruments by currency as at the balance sheet
date. The off-balance sheet gap represents the net contract/underlying principal amounts of derivatives, which are principally
used to reduce the Group’s exposure to currency movements.
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