Page 90 - CCB_Full-Annual-Report-2021

91
Notes to the
Financial
Statements
1 Reporting entity 4 Going concern
Cambridge & Counties Bank Limited (referred to as
‘the Bank’) is a company incorporated and domiciled
in the United Kingdom. The Bank is registered in
England and Wales and has the registered number
07972522. The registered address of the Bank is
Charnwood Court, 5b New Walk, Leicester, England,
LE1 6TE. Cambridge & Counties Bank is a UK Bank
that specialises in providing lending and deposit
products to Small and Medium Enterprises (SMEs).
The Bank is a private company limited by shares. capital resources.
2 Basis of accounting
The Bank’s financial statements have been prepared
in accordance with UK-adopted international
accounting standards. They have been prepared
under the historic cost convention as modified by
the revaluation of financial instruments through
profit or loss, and the revaluation of financial
instruments through other comprehensive income.
The financial statements are presented in pounds
sterling, which is the functional and presentational
currency of the Bank.
Judgements made by the Directors in the
application of these accounting policies that
have significant effect on the financial statements
and estimates with a significant risk of material
adjustment are discussed in Note 5 to the
Financial Statements.
3 Changes in accounting policies
There have been no changes to the Bank’s
accounting policies during 2021.
The financial statements are prepared on a going
concern basis, as the Directors are satisfied that
the Bank has the resources to continue in business
for a period of at least 12 months from the date
of signing these financial statements. In making
this assessment, the Directors have considered a
wide range of information relating to present and
future conditions, including future projections
of profitability, impairment, cash flows and
The Board remains confident that the offering to
the market remains relevant and attractive, and that
2022 will present further opportunities to continue
to grow customer assets without strain on the
Bank’s capital or liquidity measures. The Bank’s
3-year strategic plan is updated quarterly to
produce a forward-looking assessment.
The Directors have a reasonable expectation that
the Bank has adequate resources to continue in
operational existence for the foreseeable future.
The projections for the Bank’s future performance,
capital strength and liquidity, for a period in excess
of 12 months from the date of approval of these
accounts all show that the Bank has adequate
resources to meet its regulatory and operational
requirements. Therefore, the going concern
basis of accounting has been used to prepare the
financial statements.
Whilst the Bank’s primary purpose is serving UK
businesses, the impact of the current conflict in
the Ukraine, increases in global energy prices,
and inflationary spiral will impact the UK economy 5 Accounting estimates and judgements
and the markets in which we operate. The higher The preparation of financial statements in
corporate leverage and Government deficits could conformity with IFRS requires the use of certain Contents
mean tighter fiscal policy over the medium term critical accounting estimates. It also requires
the onset of Covid 19. The Bank’s conservatism in management to exercise its judgement in the
Contents
following the significant stimulus that accompanied
process of applying the Bank’s accounting policies.
provisions and loss absorbing capacity will continue
The areas involving a higher degree of judgement
to be assessed as part of the Bank’s regular stress
or complexity, or areas where assumptions and
testing exercises. Expected interest rate rises could
add upside to the income growth rate outlook. estimates are significant to the financial statements, Strategic Report
are disclosed below. For each area of management
Over the medium term the coronavirus is likely to
judgement, along with any others which are
become less virulent, and the risk of entrenched
considered material, management prepare a
high inflation is expected to be mitigated through
paper for review and approval by the Bank’s Audit
stabilisation of energy markets and resolution of the
Ukrainian conflict. As part of our Going Concern Committee at least once a year.
assessment all the factors mentioned above have
Loan loss provisioning
been assessed.
The Directors recognise that the current The Bank adopted IFRS 9 in 2018 with the
provisioning methodology changed to an expected
macroeconomic situation will continue to evolve, loss basis.
but do not believe these events will have a materially Corporate Governance Statement
destabilising impact on the Bank’s performance. The Bank has made key judgements and estimates
This conclusion has been reached after taking in its loan loss provisions. The key judgements are:
account of a number of factors including: The
Bank has modelled a severe but plausible downside – The Bank’s business model and its loans and
scenario where the operating environment has advances to customers meet the SPPI (Solely
unemployment and inflation increasing, and Payments of Principal and Interest) criteria and
demand for finance and property prices reducing, therefore all loans and advances to customers
with the addition of higher credit losses than are classified as financial instruments and held
experienced in recent years. Based on the forecasts at amortised cost with an associated loan loss
and stresses performed, the Directors are satisfied provision, as set out in Note 28.
that the Bank will have sufficient regulatory capital – The Bank uses four unbiased probability weighted
and liquidity for a period of at least 12 months from forward looking economic scenarios in its
the date of approval of these financial statements. estimate of loan loss provisions being the base Independent Auditor’s Report
case, downside, severe downside, and upside.
– Management have already incorporated an These scenarios and their application in the
expectation of increasing interest rates and estimate of loan loss provisions are described
continued economic uncertainty into the further in Note 28.
Bank’s business plan. This uncertainty includes
modelling the impact of the impact of the Bank – Significant Increase in Credit Risk (‘SICR’) – The
of England’s Annual Cyclical Scenario which criteria selected to identify a significant increase
tests the resilience of the UK banking system in credit risk is a key area of judgement within the
to deep simultaneous recessions in the UK and Bank’s ECL calculation as these criteria determine
global economies. whether a 12 month or lifetime provision is
recorded. The criteria has been reviewed and
– The Bank maintains a strong liquidity position updated during 2021. Financial Statements
with its Liquidity Coverage Ratio (LCR) around 3
times higher than the regulatory minimum at the The two key estimates are the Probability of Default
end of 2021; and the Loss Given Default.
– All the Bank's assets that it has financed,
its customers, staff, and key suppliers are UK All the Bank’s loans and advances are allocated to
a stage under IFRS 9. Stage 1 loans are loans which
based; and are performing as expected with the expected credit
– The Bank and its employees have successfully loss calculation based on a 12-month probability of
operated a flexible working policy over the past default. Loans which have seen a significant increase
2 years enabling a mix of both office and home- in credit risk since original inception, or are over 30
based working. days in arrears, are held in Stage 2 with the expected
credit loss based on a lifetime probability of default. Notes to the Financial Statements
Loans which are considered credit impaired or in
default are placed in Stage 3 with the expected
credit loss calculation assuming a 100% probability
of default and a lifetime loss given default applied.