Page 121 - CCB_Full-Annual-Report-2021

120 Notes to the Financial Statements 121

The table below analyses the Bank’s contractual financial liabilities including any accrued interest up to the point is the main market risk faced by the Bank, and primarily arises from loans and deposits to customers, liquidity
of maturity as at 31 December. The contractual date is the earliest repayment date of the deposits. holdings and debt securities. Oversight of interest rate risk is monitored by ALCO monthly and is managed
through the use of appropriate financial instruments, including derivatives, with established risk limits, reporting Contents
Contractual maturity analysis at Due within Due after more No contractual Total lines, mandates and other control procedures in place.
Contents
31 December 2021 one year than one year maturity
£’000 Interest rate risk consists of asset-liability gap risk and basis risk.
Customers’ accounts 880,586 153,039 – 1,033,625
– Asset-liability gap risk
Central Bank facilities (TFSME) – 79,371 – 79,371
Where possible the Bank seeks to match the interest rate structure of assets with liabilities, creating a natural Strategic Report
Lease liabilities 104 1,952 – 2,056 hedge. Where this is not possible the Bank will enter into interest rate swap transactions to convert the fixed
rate exposures on loans and advances, customer deposits and debt securities into variable rate exposures.
Derivative financial liabilities – 254 – 254
– Basis risk
Other liabilities – – 5,224 5,224
Basis risk is the risk of loss arising from changes in the relationship between interest rates, which have similar,
Total Liabilities 880,690 234,616 5,224 1,120,530
although not identical, characteristics. This risk is managed by matching and, where appropriate, through the
use of derivatives with established risk limits and other control procedures.
Contractual maturity analysis at Due within Due after more No contractual Total The Bank’s forecasts and plans take account of the risk of interest rate changes and are prepared and stressed
31 December 2021 one year than one year maturity in line with PRA guidance. The following table summarises the re-pricing periods for the Bank’s assets and
£’000 liabilities. Items are allocated to time bands by reference to the earlier of the next contractual interest rate
change and the maturity date. The interest rate sensitivity exposure of the Bank at 31 December 2021 was: Corporate Governance Statement
Deposits 826,252 98,397 – 924,649
Lease liabilities 147 2,055 – 2,202
Other liabilities – – 4,709 4,709
31 December 2021 Within 3 More than More than More than More than Non- Total
Total Liabilities 826,399 100,452 4,709 931,560 £’000 months 3 but less 6 months 1 year but 5 years Interest
than 6 but less less than 5 Bearing
months than 1 year years

Assets
Cash and balances 240,158 – – – – – 240,158
The following table sets outs the Bank’s liquid assets:
During 2021 the Bank repaid the £57m of Treasury at central banks
Bills drawn under the Funding for Lending Scheme
£’000 2021 2020 Loans and advances to:
(FLS). The Bank drew £78m of funding in cash under
Balances with Central banks 240,158 190,962 the Bank of England’s TFSME scheme (Term Funding Banks 12,293 – – – – – 12,293 Independent Auditor’s Report
Scheme with additional incentives for SME) in 2021.
Loans and advances to banks 12,293 9,687 Customers 904,921 9,551 15,054 59,898 4,335 (15,925) 977,834
The Bank has a total of £188m (2020: £122m) of loans
Debt securities 37,137 38,044 and debt securities which are available as collateral to Debt Securities – – 10,210 26,958 – (31) 37,137
support drawings under the Bank of England’s Sterling
Total 289,588 238,693 Other – – – – – 7,449 7,449
Monetary Framework (SMF) facilities.
Total Assets 1,157,372 9,551 25,264 86,856 4,335 (8,507) 1,274,871
The following table sets outs the Bank’s off-balance
sheet assets:
• Market risk Off balance sheet 12,000 – – 9,000 – – 21,000
-
£’000 Asset encumbrance 2021 2020 derivatives
Market risk is the risk that changes in market rates Financial Statements
Funding for Lending – 57,000 negatively impact the earnings or market value of the Liabilities
Scheme Treasury Bills Bank’s assets or liabilities. All the Bank’s exposure to Customers’ accounts (792,286) (52,903) (108,183) (146,374) – (4,027) (1,103,773)
market risk relates to non-trading portfolios.
Total – 57,000 Other liabilities – – – – – (7,281) (7,281)
As at 31 December 2021, the Bank does not have any Total Equity (22,900) – – – – (140,917) (163,817)
customer accounts or derivatives where the interest
– Asset encumbrance rate is set or linked to LIBOR. Total liabilities (815,186) (52,903) (108,183) (146,374) – (152,225) (1,274,871)
The Bank’s assets can be used to support collateral The principal risk to which non-trading portfolios are
requirements for central bank operations, or third party exposed is the risk of loss from fluctuations in the Off balance sheet (21,000) – – – – – (21,000)
repurchase transactions. Assets that have been set future cash flows or fair values of financial instruments derivatives
aside for such purposes are classified as ‘encumbered because of a change in market interest rates. Notes to the Financial Statements
assets’ and cannot be used for other purposes. All Interest Rate 333,186 (43,352) (82,919) (50,518) 4,335 (160,732) –
other assets are defined as ‘unencumbered assets’. Interest rate risk Sensitivity Gap
These assets are readily available to secure funding or Cumulative Gap 333,186 289,834 206,915 156,397 160,732 – –
meet collateral requirements and are not subject to Interest rate risk is the risk of loss arising from adverse
any restrictions. movements in market interest rates. Interest rate risk