REPUBLIC BANK LIMITED
102
Notes to theConsolidatedFinancial Statements
For the year ended September 30, 2014. Expressed in thousands of Trinidad and Tobago dollars ($’000), except where otherwise stated
22 Capital management
The Group’s policy is to diversify its sources of capital, to allocate capital within the Group efficiently and tomaintain a prudent relationship between
capital resources and the risk of its underlying business. Equity increased by $230 million to $8.75 billion during the year under review.
Capital adequacy ismonitored by eachmember of the Group, employing techniques based on the guidelines developed by the Basel Committee
on Banking Regulations and Supervisory Practice (the Basel Committee), as implemented by the respective Central Banks for supervisory purposes.
The Basel risk-based capital guidelines require a minimum ratio of core capital (Tier I) to risk-weighted assets of 4%, with a minimum total qualifying
capital (Tier II) ratio of 8%. Core capital (Tier I) comprises mainly shareholders’equity.
Capital adequacy ratio
2014
2013
Republic Bank Limited
25.77%
27.60%
Republic Finance and Merchant Bank Limited
133.32%
87.00%
Republic Bank (Cayman) Limited
20.83%
15.46%
Republic Bank (Grenada) Limited
15.80%
15.60%
Republic Bank (Guyana) Limited
22.16%
17.86%
Republic Bank (Barbados) Limited
16.02%
21.12%
Atlantic Financial Limited
67.95%
77.63%
At September 30, 2014 the Bank and each of its banking subsidiaries exceeded the minimum levels required for adequately capitalised
institutions.
23 Fair value
In accordance with International Financial Reporting Standard No. 7 ‘Financial Instruments: Disclosures,’ the Group calculates the estimated fair
value of all financial instruments at the statement of financial position date and separately discloses this information where these fair values are
different from net book values.
Where the Group’s available-for-sale investments are not actively traded in organised financial markets, the fair value is determined using
discounted cash flow analysis, which requires considerable judgement in interpreting market data and developing estimates. Accordingly,
estimates contained herein are not necessarily indicative of the amounts that the Group could realise in a current market exchange. The use
of different assumptions and/or estimation methodologies may have a material effect on the estimated fair values. The fair value information
for available-for-sale investments is based on information available to management as at the dates presented. Management is not aware of any
factors that would significantly affect the estimated fair value amounts.
Investments classified as ‘at fair value through profit or loss’are actively traded in organised markets and fair value is determined by reference to
the market price at year end or on the last trade date prior to year end.
Financial instruments where carrying value is equal to fair value:- Due to their short-term maturity, the carrying value of certain financial
instruments is assumed to approximate their fair values. These include cash and cash equivalents, investment interest receivable, customers’
deposit accounts, other fund raising instruments, other assets and other liabilities.
Advances are net of specific and other provisions for impairment. The fair values of advances is based on a current yield curve appropriate for
the remaining term to maturity.
The fair values of the floating rate debt securities in issue is based on quoted market prices where available and where not available is based on
a current yield curve appropriate for the remaining term to maturity. For balances due to banks, where the maturity period is less than one year,
the fair value is assumed to equal carrying value. Where the maturity period is in excess of one year, these are primarily floating rate instruments,
the interest rates of which, reset with market rates, therefore the carrying values are assumed to equal fair values.
The fair value of fixed rate debt securities carried at amortised cost is estimated by comparing market interest rates when they were first
recognised with current market rates offered for similar financial instruments. The estimated fair value of fixed interest-bearing deposits is based
on discounted cash flows using prevailing money market interest rates for facilities with similar credit risk and maturity.
