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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
Notes to the 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
Financial 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
Statements 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
1 Reporting entity 4 Going concern
with the addition of higher credit losses than are classified as financial instruments and held
Cambridge & Counties Bank Limited (referred to as The financial statements are prepared on a going experienced in recent years. Based on the forecasts at amortised cost with an associated loan loss
‘the Bank’) is a company incorporated and domiciled concern basis, as the Directors are satisfied that and stresses performed, the Directors are satisfied provision, as set out in Note 28.
in the United Kingdom. The Bank is registered in the Bank has the resources to continue in business that the Bank will have sufficient regulatory capital – The Bank uses four unbiased probability weighted
England and Wales and has the registered number for a period of at least 12 months from the date and liquidity for a period of at least 12 months from forward looking economic scenarios in its
07972522. The registered address of the Bank is of signing these financial statements. In making the date of approval of these financial statements. estimate of loan loss provisions being the base Independent Auditor’s Report
Charnwood Court, 5b New Walk, Leicester, England, this assessment, the Directors have considered a case, downside, severe downside, and upside.
LE1 6TE. Cambridge & Counties Bank is a UK Bank wide range of information relating to present and – Management have already incorporated an These scenarios and their application in the
that specialises in providing lending and deposit future conditions, including future projections expectation of increasing interest rates and estimate of loan loss provisions are described
products to Small and Medium Enterprises (SMEs). of profitability, impairment, cash flows and continued economic uncertainty into the further in Note 28.
The Bank is a private company limited by shares. capital resources. Bank’s business plan. This uncertainty includes
modelling the impact of the impact of the Bank – Significant Increase in Credit Risk (‘SICR’) – The
2 Basis of accounting The Board remains confident that the offering to of England’s Annual Cyclical Scenario which criteria selected to identify a significant increase
the market remains relevant and attractive, and that tests the resilience of the UK banking system in credit risk is a key area of judgement within the
The Bank’s financial statements have been prepared 2022 will present further opportunities to continue to deep simultaneous recessions in the UK and Bank’s ECL calculation as these criteria determine
in accordance with UK-adopted international to grow customer assets without strain on the global economies. whether a 12 month or lifetime provision is
accounting standards. They have been prepared Bank’s capital or liquidity measures. The Bank’s recorded. The criteria has been reviewed and
under the historic cost convention as modified by 3-year strategic plan is updated quarterly to – The Bank maintains a strong liquidity position updated during 2021. Financial Statements
the revaluation of financial instruments through produce a forward-looking assessment. with its Liquidity Coverage Ratio (LCR) around 3
profit or loss, and the revaluation of financial times higher than the regulatory minimum at the The two key estimates are the Probability of Default
instruments through other comprehensive income. The Directors have a reasonable expectation that end of 2021; and the Loss Given Default.
The financial statements are presented in pounds the Bank has adequate resources to continue in – All the Bank's assets that it has financed,
sterling, which is the functional and presentational operational existence for the foreseeable future. its customers, staff, and key suppliers are UK All the Bank’s loans and advances are allocated to
currency of the Bank. a stage under IFRS 9. Stage 1 loans are loans which
The projections for the Bank’s future performance, based; and are performing as expected with the expected credit
capital strength and liquidity, for a period in excess
Judgements made by the Directors in the of 12 months from the date of approval of these – The Bank and its employees have successfully loss calculation based on a 12-month probability of
application of these accounting policies that accounts all show that the Bank has adequate operated a flexible working policy over the past default. Loans which have seen a significant increase
have significant effect on the financial statements resources to meet its regulatory and operational 2 years enabling a mix of both office and home- in credit risk since original inception, or are over 30
and estimates with a significant risk of material requirements. Therefore, the going concern based working. days in arrears, are held in Stage 2 with the expected
adjustment are discussed in Note 5 to the basis of accounting has been used to prepare the credit loss based on a lifetime probability of default. Notes to the Financial Statements
Financial Statements. Loans which are considered credit impaired or in
financial statements.
default are placed in Stage 3 with the expected
3 Changes in accounting policies credit loss calculation assuming a 100% probability
Whilst the Bank’s primary purpose is serving UK of default and a lifetime loss given default applied.
There have been no changes to the Bank’s businesses, the impact of the current conflict in
accounting policies during 2021. the Ukraine, increases in global energy prices,