Page 105 - 86395_CCB - 2024 Annual Report (web)

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30 Financial risk management Credit exposure
A key component of the Bank’s business is the The Bank’s maximum exposure to Credit Risk after
effective management of risk to ensure that the Bank Impairment to expected credit loss is as follows:
maintains sufficient capital, liquidity and controls
at all times and acts in a reputable way, taking into £’000 2024 2023
account the interests of customers, Regulators and Cash and balances
shareholders. The principal risks the Bank is exposed at central banks 292,850 302,473
to include:
Loans and advances
• Credit Risk
to banks 12,139 10,420
– loans and advances to customers;
– loans and advances to banks Debt securities 65,137 47,409
– debt securities; Loans and advances
• Liquidity Risk; to customers * 1,225,716 1,106,055
• Market Risk; 1,595,842 1,466,357
• Operational Risk; and Commitments to lend ** 150,140 67,531

• Capital adequacy. Gross Credit Risk exposure 1,745,982 1,533,888
Less allowance for
The Bank’s Enterprise Risk Management Framework
and Risk Appetite are set out in the Risk Management expected credit losses (21,123) (22,777)
section of the report. Net Credit Risk exposure 1,724,859 1,511,111
• Credit Risk – loans and advances to customers * Net of Effective Interest Rate liability of £2.7m (2023: £3.2m) and fair value
adjustment for hedged risk of £149k (2023: £nil)
Credit Risk is the risk of financial loss to the Bank if a ** Commitments to lend represent agreements entered into but not advanced
as at 31 December.
customer with a financial instrument fails to meet its
contractual obligations.
The above table represents the maximum Credit
The credit risks associated with lending are managed Risk exposure to the Bank at 31 December 2024,
using detailed lending policies which outline the and 2023, without taking account of any underlying
Bank’s approach to lending, underwriting criteria, security. At 31 December 2024 the value of securities
credit mandates, concentration limits and product held as collateral against drawn loans and advances
terms. The Bank seeks to mitigate Credit Risk by to customers is £2,246m (2023: £1,996m) of which
focusing on business sectors where it has specific £2,082m (2023: £1,862m) is in the form of property),
expertise, and through limiting concentrated £164m (2023: £134m) in the form of assets owned
exposures on larger loans, certain sectors and by the Bank and financed by customers using hire
other factors that can represent higher risk. The purchase and finance leases, and £0.6m (2023:
Bank also seeks to obtain security cover and where £0.9m) is in the form of cash deposits.
appropriate, personal guarantees from borrowers. Credit Risk management
Credit Risk is principally assessed through the
manual underwriting of all transactions. The Bank specialises in providing lending to Small
and Medium Enterprises (SMEs). Its lending is secured
The Board Risk & Compliance Committee has on property. The Bank lends to owner occupied
oversight responsibility for Credit Risk.
businesses to invest in their own commercial
premises, as well as to experienced commercial and
residential property investors. The Bank also has a
growing asset finance business providing finance
to SMEs for business‑critical assets and Classic and
Sports Vehicles through hire purchase and finance
lease facilities. At 31 December 2024, the Bank’s asset
finance loan portfolio totalled £164m (2023: £134m).
Credit Risk is managed in accordance with lending
policies, the Board’s Risk Appetite, and Risk
Management Framework. Lending policies and
performance against Risk Appetite are reviewed
regularly. All applications are reviewed and assessed
by a team of experienced underwriters.

All properties are individually valued at origination, and
regular reports are produced to ensure the property
continues to represent suitable security throughout
the life of the loan. Affordability assessments are also
performed on all loans, and other forms of security