Page 106 - CCB_Full-Annual-Report-2021

106 Notes to the Financial Statements 107

27 Financial instruments and fair values – The Bank assumes no obligation to pay amounts to Key considerations in the calculation of the
the eventual recipients unless those amounts have disclosed fair values for those financial assets
The Bank has set out in notes 22, 27, and 28, how it classifies financial assets and liabilities under IFRS 9. been collected from the original financial asset; carried at amortised cost include the following: Contents
The following table summarises the classification and carrying amounts of the Bank’s financial assets and liabilities:
– The Bank is prohibited under the terms of the – Cash and balances at central banks
Contents
2021 Amortised At fair value At fair value Liabilities at Total transfer contract from selling or pledging the
£’000 cost through other through profit amortised cost original asset, other than as security to the These represent amounts with an initial maturity
comprehensive or loss recipients of the cash flows; and of less than 3 months and their carrying value is
income considered to be the fair value.
– The Bank has an obligation to remit any cash flows
Cash & balances at 240,158 – – – 240,158 it collects on behalf of the eventual recipients – Loans and advances to banks Strategic Report
central banks without material delay. The Bank may also not These represent amounts with a maturity of less
reinvest any such cash flows received.
Loans and advances to banks 12,293 – – – 12,293 than 3 months, where adjustments to fair value
Where the above criteria are met, and a transfer is in respect of the credit rating of the counterparty
Debt securities – 37,137 – – 37,137
deemed to have occurred, the Bank evaluates the are not considered necessary. The carrying value
Loans and advances 977,834 – – – 977,834 extent to which it retains the risk and rewards of of the asset is considered to be the fair value.
to customers ownership of the financial asset. Where the Bank – Loans and advances to customers
determines that the risk and reward of ownership
Total 1,230,285 37,137 – – 1,267,422
of the assets has been transferred, the Bank In both the Bank’s Real Estate and Asset Finance
derecognises the asset. If the Bank determines that portfolios, each loan is individually priced based
the risk and reward remains with them, the asset is on the circumstances and credit quality of the
Customers’ accounts – – (253) 1,025,773 1,025,520 not derecognised and remains on the statement of customer. The Bank’s policies in this area have Corporate Governance Statement
Derivatives – – 254 – 254 financial position. not markedly changed and therefore the fair
value of each portfolio is not considered to be
Total – – 1 1,025,773 1,025,774 On derecognition of the financial asset, the Bank materially different to book value.
recognises the difference between the carrying – Customers’ accounts
amount of the asset and the consideration received in
2020 Amortised At fair value At fair value Liabilities at Total the income statement. Customers’ accounts at variable rates are at
£’000 cost through other through profit amortised cost current market rates and therefore the Bank
comprehensive or loss • Derecognition of financial liabilities regards the fair value to be equal to the carrying
income value. The fair value of fixed rate customers’
The Bank derecognises a financial liability only when
Cash & balances at 190,962 – – – 190,962 the obligation, which is specified in the contract, accounts that have been designated as
central banks hedged with interest rate derivatives have been
has been discharged, is cancelled, or expires. determined by discounting estimated future cash
Loans and advances to banks 9,687 – – – 9,687 The Bank may also be required to derecognise a flows based on future market interest rates. The
financial liability where there has been a substantial Independent Auditor’s Report
Derivatives – – 9 – 9 fair value of unhedged fixed rate deposits has
modification. A modification is considered to be been determined by discounting the estimated
Debt securities – 38,044 – – 38,044 substantial where the discounted present value of the future cash flows based on the existing product
cash flows under the new terms, including any fees
Loans and advances 828,380 – – – 828,380 paid net of any fees received and discounted using the rate compared to current market rates for an
to customers equivalent deposit.
original effective interest rate, is at least 10 per cent
Total 1,029,029 38,044 9 – 1,067,082 different from the discounted present value of the – Debt securities
remaining cash flows of the original financial liability.
Where securities are actively traded in a
recognised market, with available and quoted
Customers’ accounts – – 7 917,208 917,215 Fair value prices, these have been used to value these
Total – – 7 917,208 917,215 Fair value of financial assets and financial liabilities instruments. These securities are therefore Financial Statements
are based on quoted market prices. If the market is regarded as having level 1 fair values.
not active, the Bank establishes a fair value by using – Derivatives
appropriate valuation techniques.
The fair value of derivative assets and liabilities
Derecognition
The Bank measures fair values using the following fair are calculated based on the present value of
The following sets out how the Bank derecognises – The contractual right to receive the cash flows value hierarchy, which reflects the significance of the future interest cash flows, discounted at the
assets and liabilities and fair values its assets in of the financial asset have been transferred; or inputs used in making the measurements: market rate of interest at the balance sheet date.
accordance with IFRS 9: The Bank has not been required to post any
– The contractual right to receive the cash flows – Level 1: quoted prices in active markets for identical collateral in respect of its derivatives. Derivative
of the financial asset is retained by the Bank, but
• Derecognition of financial assets assets or liabilities; financial assets and liabilities are classified at fair
the Bank also assumes a contractual obligation value through the income statement.
The Bank derecognises a financial asset only when to pay the cash flows to one or more recipients. – Level 2: inputs other than quoted prices included
the contractual rights to the associated cash flows In respect of point 2 above, the Bank assesses within level 1 that are observable either directly (e.g. Notes to the Financial Statements
expire, or the Bank transfers the financial asset, and whether the following three conditions are all prices) or indirectly (e.g. derived from prices); and
the transfer qualifies for derecognition in accordance
met before treating the financial asset as having – Level 3: inputs for the asset or liability that are not
with the provisions set out in IFRS 9. To qualify for a
been derecognised: based on observable market data.
transfer, the Bank must meet either of the following: