FirstCaribbean International Bank (Bahamas) Limited

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Notes to Consolidated Financial StatementsFor the year ended October 31, 2009(Expressed in thousands of Bahamian dollars)26. Financial Risk ManagementA. Strategy in using financial instrumentsBy its nature the Bank’s activities are principally related to the use of financial instruments. The Bank accepts depositsfrom customers at both fixed and floating rates and for various periods and seeks to earn above average interestmargins by investing these funds in high quality assets. The Bank seeks to increase these margins by consolidatingshort-term funds and lending for longer periods at higher rates whilst maintaining sufficient liquidity to meet all claimsthat might fall due.The Bank also seeks to raise its interest margins by obtaining above average margins, net of provisions, through lendingto commercial and retail borrowers with a range of credit standing. Such exposures involve not just on-balance sheetloans and advances but the Bank also enters into guarantees and other commitments such as letters of credit andperformance and other bonds.B. Credit riskCredit risk primarily arises from direct lending activities, as well as from trading, investment and hedging activities.Credit risk is defined as the risk of financial loss due to a borrower or counter party failing to meet its obligations inaccordance with agreed terms.Process and controlThe Credit Risk Management Department (“CRMD”) is responsible for the provision of the Bank’s adjudication, oversightand management of credit risk within its portfolios, including the measurement, monitoring and control of credit risk.The CRMD’s credit risk approval authority flows from the Board and is further delegated to the Chairman and theChief Risk Officer (“CRO”). The Credit Executive Committee is responsible for informing the CRO and Chairman ofcredit risk decisions. The Department is guided by the Bank’s Delegation of Authority Policy. Delegation is based onexposure and risk level; where the credit decision relates to larger and or higher risk transactions the Credit Committeeis responsible for the final decision.The Risk and Conduct Review Committee is responsible for approving policy requirements and key risk limits.Credit Risk LimitsCredit Limits are established for all loans (mortgages, personal and business & government) for the purposes ofdiversification and managing concentration. These include limits for individual borrowers, groups of related borrowers,industry sectors, country and geographic regions and products or portfolios. The Bank does not have excessiveconcentration in any single borrower, or related group of borrowers, industry sector or country.CollateralThe Bank’s employs a range of policies and practices to mitigate credit risk. The most traditional of these is the takingof security for funds advanced, which is common practice. The Bank implements guidelines on the acceptability ofspecific classes of collateral or credit risk mitigation. The principal collateral types for loans and advances to customersare:• Mortgages over residential properties;• Charges over business assets such as premises, inventory and accounts receivable;• Charges over financial instruments such as debt securities and equities.The Bank’s credit risk management policies include requirements relating to collateral valuation and management,including verification requirements and legal certainty. Valuations are updated periodically depending upon the natureof the collateral. Management monitors the market value of collateral, requests additional collateral in accordance withthe underlying agreement during its periodic review of loan accounts in arrears. Policies are in place to monitor theexistence of undesirable concentration in the collateral supporting the Bank’s credit exposure.Geographic distributionThe following table provides a distribution of gross loans and advances to customers. Amounts are before allowance forcredit losses, and after credit risk mitigation, valuation adjustments related to the financial guarantors, and collateral onagreements.54
Notes to Consolidated Financial StatementsFor the year ended October 31, 2009(Expressed in thousands of Bahamian dollars)26. Financial Risk Management (Continued)B. Credit risk (continued)Geographic distribution (continued)GrossGrossMaximumMaximumExposureExposureDrawn Undrawn 2009 Drawn Undrawn 2008Bahamas $2,258,967 $ 161,678 $2,420,645 $2,303,959 $174,353 $2,478,312Turks & Caicos 366,633 36,798 403,431 306,858 40,243 347,101$2,625,600 $ 198,476 $2,824,076 $2,610,817 $214,596 $2,825,413Exposures by industry groupsThe following table provides an industry-wide break down of gross loans and advances to customers. Amounts arebefore allowance for credit losses, and after credit risk mitigation, valuation adjustments related to the financial guarantors,and collateral on agreements.Exposures by industry groups (continued)GrossGrossMaximumMaximumExposureExposureDrawn Undrawn 2009 Drawn Undrawn 2008Agriculture $ 16,889 $ 2,103 $ 18,992 $ 15,548 $ 207 $ 15,755Governments 295,025 2,588 297,613 257,293 5,145 262,438Construction 212,323 14,361 226,684 195,265 23,296 218,561Distribution 115,897 25,278 141,175 129,862 23,220 153,082Education - - - 2 - 2Fishing 46,087 4,628 50,715 52,532 4,127 56,659Health & socialwork 17,120 7,951 25,071 7 - 7Hotels &restaurants 283,515 7,808 291,323 255,402 7,732 263,134Individuals &individual trusts 1,042,419 94,532 1,136,951 1,024,195 96,304 1,120,499Manufacturing 28,957 9,773 38,730 33,104 12,403 45,507Mining &quarrying 188 - 188 90 9 99Miscellaneous 262,681 15,163 277,844 322,615 23,338 345,953Other financialcorporations 12,541 1,916 14,457 14,065 4,323 18,388Real estate, renting& other businessactivities 280,617 11,352 291,969 297,872 13,791 311,663Transport,storage &communication 11,341 1,023 12,364 12,965 701 13,666$ 2,625,600 $ 198,476 $ 2,824,076 $ 2,610,817 $ 214,596 $ 2,825,41355
Page 5 and 6: Executive ChairmanMichael K. Mansoo
Page 7: Board of DirectorsMichael MansoorCh
Page 10 and 11: Our CommunitiesUNSUNG HEROESIn 2009
Page 12 and 13: Management’s Discussion and Analy
Page 14: Management’s Discussion and Analy
Page 17 and 18: HeadersConsolidated Financial State
Page 20 and 21: Consolidated Statement of IncomeFor
Page 22 and 23: Consolidated Statement of Cash Flow
Page 24 and 25: Notes to Consolidated Financial Sta
Page 55: Notes to Consolidated Financial Sta
Page 70 and 71: 68Ownership Structure
Page 72 and 73: Notice of MeetingNotice is hereby g
Page 75 and 76: FirstCaribbean International Bank (
Page 77: Proxy FormThe undersigned(please pr

FirstCaribbean International Bank (Bahamas) Limited

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