UNITY BANK LIMITED 2022 Financial Report UNITY BANK LIMITED 2022 Financial Report
ABN 11 087 650 315
ABN 11 087 650 315
The level of capital ratio can be affected by growth in assets relative to growth in reserves and by changes in the mix of assets. To manage the Bank ’s capital , the Bank reviews the ratio monthly and monitors major movements in the asset levels. Policies have been implemented to require reporting to the Board and the regulator if the capital ratio falls below 12.5%. Further, a 5-year capital budget projection of the capital levels is maintained annually to address how strategic decisions or trends may impact on the capital level. Pillar 2 Capital on Operational Risk This capital component was introduced as from the 1 st of January 2012 and coincided with changes in the asset risk weightings for specified loans and liquid investments. Previously no operational charge was prescribed. The Bank uses the Standardised approach which is considered to be most suitable for its business given the small number of distinct transaction streams. The Operational Risk Capital requirement is calculated by mapping the Bank ’s three-year average net interest income and net non-interest income to the Bank ’s various business lines. Based on this approach, the Bank ’s operational risk requirement is as follows: • Operational risk capital $6,745,996 [2021 - $6,057,791] It is considered that the Standardised approach accurately reflects the Bank ’s operational risk other than for the specific items set out below. Internal Capital Adequacy Management The Bank manages its internal capital levels for both current and future activities through a combination of the various committees. The outputs of the individual committees are reviewed by the Board in its capacity as the primary governing body. The capital required for any change in the Bank ’s forecasts for asset growth, or unforeseen circumstances, are assessed by the Board. The finance department then update the forecast capital resources models produced and the impact upon the overall capital position of the Bank is reassessed. In relation to the operational risks, the major measurement for additional capital are recognised by the monitoring and stress testing for: 1. Asset impairment – the impact of economic and employment factors on the loan losses, and/or recovery of investments. 2. Property Value Decline – the impact on property values declining and the related exposure to higher capital required to recognise potential losses or risk weight on assets. 3. Interest rate risk – measures the impact on capital from changes in interest rates impacting the net interest margin and net surplus. 4. Events impacting on additional costs of retention of liquid funds and exercising available liquidity drawdown facilities.
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