UNITY BANK LIMITED 2022 Financial Report UNITY BANK LIMITED 2022 Financial Report
ABN 11 087 650 315
ABN 11 087 650 315
internal audit plan. The Audit Committee receives the internal audit reports on assessment and compliance with the controls and provides feedback to the Risk Committee for their consideration. Asset & Liability Committee (ALCO): This committee meets monthly and has responsibility for managing interest rate risk exposures and ensuring that the treasury and finance functions adhere to exposure limits as outlined in the policies for interest rate GAP. Chief Risk Officer: This person has responsibility for both liaising with the operational function to ensure timely production of information for the Risk committee and ensuring that instructions passed down from the Board via the Risk Committee are implemented. Internal Audit: Internal audit has responsibility for implementing the controls testing and assessment as required by the Audit Committee. Key risk management policies encompassed in the overall risk management framework include: • Interest rate risk • Liquidity management • Credit risk management • Operations risk management including data risk management. The Bank has undertaken the following strategies to minimise the risks arising from financial instruments. MARKET RISK AND HEDGING POLICY The objective of the Bank ’s market risk management is to manage and control market risk exposures in order to optimise risk and return. A. Market risk is the risk that changes in interest rates, foreign exchange rates or other prices and volatilities will have an adverse effect on the Bank's financial condition or results. The Bank is not exposed to currency risk, and other significant price risk. The Bank does not trade in the financial instruments it holds on its books. The Bank is exposed only to interest rate risk arising from changes in market interest rates. The management of market risk is the responsibility of the ALCO Committee, which reports directly to the Risk Committee. (i) INTEREST RATE RISK Interest rate risk is the risk of variability of the fair value or future cash flows arising from financial instruments due to the changes in interest rates. Most banks are exposed to interest rate risk within their Treasury operations. This Bank does not trade in financial instruments. Interest rate risk in the banking book The Bank is exposed to interest rate risk in its banking book due to mismatches between the repricing dates of assets and liabilities. The interest rate risk on the banking book is measured monthly. In the banking book the most common risk the Bank faces arises from fixed rate assets and liabilities. This exposes the Bank to the risk of sensitivity should interest rates change. The level of mismatch on the banking book is set out in Note 33 below. The table set out at Note 33 displays the period that each asset and liability will reprice as at the balance date. This risk is not considered significant to warrant the use of derivatives to mitigate this risk.
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