UNITY BANK LIMITED 2022 Financial Report
ABN 11 087 650 315 UNITY BANK LIMITED 2022 Financial Report
ABN 11 087 650 315
Concentration risk – industry The Bank has a concentration in the retail lending for members who comprise employees and family in the maritime, mining and power industries. This concentration is considered acceptable on the basis that the Bank was formed to service these members, and the employment concentration is not exclusive. Should members leave the industry the loans continue, and other employment opportunities are available to the members to facilitate the repayment of the loans. The details of the geographical and industry concentrations are set out in Note 11. (ii) CREDIT RISK – LIQUID INVESTMENTS Credit risk is the risk that the other party to a financial instrument will fail to discharge their obligation resulting in the Bank incurring a financial loss. This usually occurs when debtors fail to settle their obligations owing to the Bank. There is a concentration of credit risk with respect to investment receivables with the placement of investments in CUSCAL and other financial institutions. The credit policy is that investments are only made to institutions that are credit worthy. Directors have established policies that a maximum of 25% of Tier 1 Capital can be invested with any one financial institution at a time with the exception of Cuscal at 100%. The risk of losses from the liquid investments undertaken is reduced by the nature and quality of the independent rating of the investment body and the limits to concentration on one Bank. Also, the relative size of the Bank as compared to the industry is relatively low such that the risk of loss is reduced. Under the liquidity support scheme at least 3.0% of the total assets must be invested in an approved CUFSS Financial Institution, to allow the scheme to have adequate resources to meet its obligations if needed. The Bank will only invest in Australian Incorporated ADI’s that have been approved by the APRA. External Credit Assessment for Institution Investments The Bank uses the ratings of reputable ratings agencies to assess the credit quality of all investment exposure, where applicable, using the credit quality assessment scale in APRA prudential guidance AGN 112. The credit
quality assessment scale within this standard has been complied with. The exposure values associated with each credit quality step are as follows:
2022 $'000
2021 $'000
Investments With
Carrying Value Past Due Value
Provision Carrying Value
Past Due Value
Provision
CUSCAL - Rated A Government Bodies
29,499 46,636 282,704 70,844
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38,786 26,104 345,304 8,077 30,500 448,771 -
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Banks - Rated AA and Above Banks - Rated below AA Credit Unions - Rated below AA Unrated Institutions - Credit Unions
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11,000 440,683
D. OPERATIONAL RISK Operational risk is the risk of loss to the Bank resulting from deficiencies in processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks. Operational risks in the Bank relate mainly to those risks arising from a number of sources including legal compliance; business continuity; data infrastructure; outsourced services failures; fraud; and employee errors. The Bank ’s objective is to manage operational risk so as to balance the avoidance of financial losses through the implementation of controls, whilst avoiding procedures which inhibit innovation and creativity. These risks are managed through the implementation of polices and systems to monitor the likelihood of the events and minimize the impact. Systems of internal control are enhanced through:
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