FIMBank p l c : Publication of the Annual Financial Report for the period ending 31st December 2020

April 08, 2021 at 12:50 pm

COMPANY ANNOUNCEMENT

The following is a Company Announcement issued by FIMBank p.l.c. ("FIMBank" or the "Bank") pursuant to Chapter 5 of the Listing Rules issued by the Listing Authority:

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The Board of Directors of FIMBank met in Malta on 7 April 2021 to approve the Bank's Annual Report and Financial Statements for the financial year ended 31 December 2020. The Bank's Annual Report and Financial Statements is attached to this Company Announcement and has been made available for public viewing on the Company's website at https://www.fimbank.com/en/financial-information.

The Board of Directors resolved that the Bank's Annual Report and Financial Statements be submitted for approval by the shareholders at the forthcoming Annual General Meeting.

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Andrea Batelli

Company Secretary

08 April 2021

Contents

	1
FIMBank group performance 2020	2
	4
Statement of compliance with the principles of good corporate governance	12
Remuneration report	22
Financial statements:
Statements of financial position	26
Statements of profit or loss	28
Statements of other comprehensive income	29
Statements of changes in equity	30
Statements of cash flows	34
Notes to the financial statements	36
Statement by the directors pursuant to Listing Rule 5.68	148
	149

Schedules to the annual report

Statements of profit or loss 5 year summary	161
Statements of financial position 5 year summary	162
Cash flow statements 5 year summary	163
Accounting ratios 5 year summary	164
Additional regulatory disclosures (Pillar III)	165
Directors and executive management	203

FIMBank Group Annual Report & Financial Statements 2020

Throughout the past year, the FIMBank Group has been adamant in its strategy to adapt to the reality brought about by the COVID-19 pandemic, maintaining solid operations notwithstanding several disruptions. The financial results for 2020 follow four years of sustained profitability and should be viewed in the context of the current, unprecedented international scenario.

Since March 2020, the Bank has faced a challenging situation, to which it has been responding promptly and vigorously. During the early days of the outbreak of the COVID- time propose measures to enable the smooth functioning of operations within the Bank.

I am pleased to report that, throughout this difficult period, FIMBank has successfully managed to maintain its operations with minimal disruptions, with the majority of our employees working remotely. This has been primarily due to our significant investment over the years in a robust, flexible and state of the art IT infrastructure. Meanwhile, irrespective of whether restrictions are tightened or relaxed, FIMBank continues to pursue a very prudent approach, with a set capping of employees that can work within the office. This policy is in line with our commitment to promoting a safe environment for our employees and the communities in which we operate, both locally and abroad. In this respect, I must thank all our employees both at head office and across our international network for their professionalism, sense of responsibility and responsiveness to adapting to these difficult circumstances. There is no doubt in my mind that FIMBank owes its resilience in these troubled times to their invaluable contribution.

Although the situation remains one which requires continued monitoring and attention, customer centricity continues to be at the forefront of ent on further optimising our processes

to support our clients during this turbulent period.

In addition to the various impacts of the pandemic, the Group also had to cater for specific provisions to address a number of non-performing exposures which had a noteworthy effect

During this particularly challenging year, and despite the unprecedented turn of events and uncertain environment, the s business fundamentals remained strong and the underlying operational performance proved resilient. Our focus has always been to prioritise long-term value creation, and to ensure that the institution remains robust and capable of delivering a stable financial performance. We remain committed to this strategic vision, whilst taking tangible steps towards recoveries to reduce the impacts of non-performing exposures.

Studies show that the COVID-19 pandemic has spurred dramatically the process of digitalisation by financial institutions and other companies across the globe. FIMBank has embraced this process and has been treating it as a priority in terms of future sustainability. Under the leadership

of our GCEOn, whilst its business model continues to evolve in line with global developments. The fundamentals of the Group

pillars of trade finance expertise to gain competitive advantage and differentiate itself from the competition, efficient decision-making structures committed to execution, customer-centricity, and a consistent stable performance leading to stakeholder value.

While we are guardedly cautious about 2021, we are confident that thanks to the prudent internal measures we have undertaken over the years, and the experience and expertise of our Executive Management, we have in place the appropriate structures within the Group which will allow us to weather these difficult circumstances.

It is especially during these trying times that we appreciate the solid backing that we constantly receive from our majority shareholder, the KIPCO Group. Investor relations remain a key aspect of our enterprise, which is why we continue to foster initiatives aimed at engaging with all our shareholders. On behalf of the Board, I take this opportunity to extend our sincere gratitude for their constant demonstration of trust and loyalty.

Finally, I would like to conclude by expressing my thanks and appreciation to the Directors, management and employees of the FIMBank Group, for their commitment and dedication during these challenging times, whilst wishing them above all, good health.

John C. Grech

Chairman

FIMBank Group Annual Report & Financial Statements 2020

FIMBank Group performance 2020

CEO

financial performance in 2020 was materially impacted by the COVID-19 outbreak. The pandemic has affected most sectors of the global economy through both supply and demand shocks, and the financial sector has not been spared. Disruptions arising from COVID-19 were followed by new and complex challenges, including pressures on operating costs already burdened by increased regulatory and technology requirements.

Overview of financial results

The FIMBank Group registered a post-tax loss of USD47.0 million for the financial year ended 31 December 2020, following a post-tax profit of USD4.5 million in 2019. As the pandemic unfolded, the Group retracted from certain business activities to safeguard its capital and liquidity, which remain strong and well above Operating Results contracted by USD14.0 million, as it grappled with the pandemic and subsequent economic downturn. Consequently, Net Operating Income dropped by 23% to USD39.3 million, while Net Interest and Fee Income decreased by 16% to USD37.6 million.

During the period under review, the Bank adopted an approach of heightened vigilance with respect to risk management, liquidity, as well as market and operational performance. The Group also maintained a prudent stance in its general business strategy, resulting in subdued business volumes and higher liquidity buffers. In the meantime, a number of new non-performing facilities emerged, which required an impairment coverage that was significant, mainly due to a weaker global economic outlook which impacts the chances and timings of possible recoverability. Moreover, the recovery routes of the existing non-performing portfolio suffered mainly due to delays in legal and other proceedings, due to lockdown and other restrictions in the relevant jurisdictions. The effect was a higher level of impairment charges to make up for the delays for the worsening recoverability prospects. Meanwhile, management continues to operate targeted and determined recovery efforts, which should see the desired results in the future.

Throughout this period, the Group increased its available liquidity with ratios well above the regulatory guidelines. At 31 December 2020,

Business unit performance

Whilst the impact of COVID- markets was limited. By the end of the year under review, there were early signs of a recovery, having successfully navigated through the worst crisis for many years. Although margins in general did increase due to the pandemic, this was offset by the continued abundant liquidity in the market. The continued subdued commodity prices and increasing uncertainty in the market from the pandemic gave rise to a challenging business environment for our fully owned subsidiary. During the year, LFC experienced only isolated payment delays. The management team reacted to the market uncertainty by de-risking at an early stage from the higher risk exposures, whilst continuing to actively service its clients. Through proactive risk monitoring and portfolio management, LFC was able to generate another positive contribution to its shareholders and reported a net profit after tax of USD7.4 million (2019: USD10.8 million).

In Malta, the real estate portfolio grew to its set targets and achieved the expected results in terms of returns, asset quality and diversification. rs offering a range of secured lending products in line with the approved risk frameworks. The real estate finance function adopted a cautious and conservative approach to new business and

focused on servicing a select number of established clients, that have a track record with the Bank and are a source of repeat business.

India Factoring also consciously decreased business volumes, with the lowest levels being reached in the middle of the year. As the pandemic usiness activities started to rebound, the volumes progressively improved. Over the course of the year, the export driven book was reignited and diversified to include larger-scale counterparties. The India Factoring business continues to gain

traction, together with the overall economic activity. The company continues to maintain a leading position in the provision of factoring products in India as per FCI statistics over the last three years. With negligible credit impact and stabilised revenue streams, the factoring business model has proven to be resilient even in these turbulent times.

Egypt Factors experienced a very strong start to the year with a significant increase in business momentum and performance. During the second quarter, following the announcement of the Egyptian A increased in a controlled fashion to the pre-pandemic volume levels and revenue yields, by the end of the year.

FIMBank Group Annual Report & Financial Statements 2020

Investment in technology

During 2020, we successfully completed the Phase 1 deployment of our financial crime risk management platform. In 2021, the second phase of this deployment will allow for an integrated solution with anti-money-laundering and internal fraud support, allowing the compliance function to manage even more effectively risks associated with money laundering, apart from advanced KYC capabilities, risk profiling, risk scoring and transaction monitoring. Another significant initiative was the deployment of a security analytics platform that provides capabilities to correlate data from multiple sources and detect threats in real time, through behaviour analysis, leveraged by adaptable artificial intelligence. This platform will further augment our cyber security capabilities.

Employees and new workplace trends

The pandemic significantly changed the way in which we work with our customers and other stakeholders. As from March 2020, we started shifting to a work-from-home model, backed by virtual communication the years in its technology systems has enabled the smooth transition for all employees across our international offices to remote working.

During this period, our dedicated employees made a tremendous effort to support our customers in countering the disruption to their business caused by the pandemic. Our support covered myriad initiatives where we partnered with customers to put in place payment moratoria, restructuring financing and offering short-term credit facilities.

Corporate Social Responsibility

As a Malta-based bank with a global mission, we recognise that our social, environmental and ethical conduct has an impact on our reputation and on the communities within which we operate. We are driven by the belief that we have a moral obligation towards the social progress of the markets we operate in. FIMBank has a clear policy that its business should go beyond offering banking solutions. The Bank's CSR approach is built around our core values, thus reflecting the corporate commitments we make to our clients, shareholders, employees and the communities in which we operate.

Through its CSR programme, FIMBank supported a number of local initiatives focused on creative arts and cultural heritage awareness. The Group contributed towards the setting up of an emergency kitchen in Beirut, an initiative that was launched following a major explosion in the heart of the city, which claimed the lives of hundreds and left thousands injured. Th the volunteers travelling to Lebanon to set up the kitchen and provide up to 15,000 meals daily for the Beirut explosion victims. Moreover, during the past year, FIMBank employees donated several food items to the Malta- Committee.

Outlook and way forward

projections remain grounded and cautious. As global trade flows gradually re-open for business, trade volumes and business levels are expected to return to a minimal growth path from the current deflated levels. The outcome for 2021 will very much depend on further pandemic disruption, with the Group poised to sustain its business fundamentals.

COVID-19 continues to be a tremendous challenge. However, our experience over the past year has demonstrated our ability to change and adapt, and it has shown us what we can achieve when we all work together to overcome such an unprecedented situation. This bodes well for the profound and ambitious transformation that we have ahead of us, which is aimed at achieving sustainable recovery. During these complex times, we will endeavour to remain close to all our partners around the world, and we will strive to maintain the highest levels of business

The macroeconomic environment in 2021 presents a highly challenging scenario, and in these difficult times my thoughts are with you and your families, as all of us continue to come to terms with the effect of the pandemic on our lives. I would also like to take this opportunity to express my sincere thanks and gratitude to our Board members, management and all our employees for their dedication, hard work and support, whilst wishing you all the best of health.

Adrian A. Gostuski

Chief Executive Officer

FIMBank Group Annual Report & Financial Statements 2020

For the year ended 31 December 2020

Group of Companies

20. This report is prepared in accordance with Article 177 of the Companies Act, 1995 (Chapter ) including the further provisions as set out in the Sixth Schedule of the Companies Act.

Results for the year

The Group and the Bank reported a loss after tax of USD47,032,755 and USD55,976,602 respectively for the year under review.

Further information about the results are provided in the Statements of Profit or Loss and the Statements of Other Comprehensive Income on pages 28 and 29 and in the Review of Performance section within this report.

Group structure and principal activities

ents of a number of subsidiaries as set out in Note 26 to the Financial f its subsidiaries

and branches are subject to authorisation and regulation according to the respective jurisdictions in which they operate.

A brief description of the activities in the Group follows (% shareholding follows after the name):

The Bank is a public limited company registered under the laws of Malta and listed on the Malta Stock Exchange. It is licensed as a credit institution under the Banking Act, 1994. The Bank is principally active in providing international trade finance and to act as an intermediary to other financial institutions for international settlements, real estate financing, factoring and loan syndications.
The Bank has two branches registered in Dubai International Finance Centre, United Arab Emirates and Athens, Greece. Both branches are regulated by their respective Regulators;
LFC (100%) is registered in the United Kingdom as a private limited liability company. It was founded in 1984 and provides international trade finance services (with particular focus on forfaiting business) through an international network of offices. Some of these offices have distinct

ills of exchange,

promissory notes, loans, deferred payment letters of credit and the provision of other financial facilities to companies and banks;

FBS (100%), registered in Malta, has as its primary purpose the provision of information technology and support services to the Group;

•	e in Malta. FPI is responsible for the day-to-day management of the

building and leasing of space for commercial purposes;

Egypt Factors (100%), registered in Egypt, is active in providing factoring services to Egyptian companies;
FHC (100%), registered in Chile, previously served as a corporate vehicle and is currently in the process of being liquidated; and

•	and associated

companies. These are:

India Factoring and Finance Solutions (Private) Limited (88.16%), incorporated in Mumbai, India, to carry out the business of factoring in India. India Factoring is regulated by the Reserve Bank of India; and
BrasilFactors S.A. (50%), an equity-accounted investee incorporated in São Paulo, Brazil, with its core business focused on factoring services, targeting small and medium-sized companies. The other shareholder in this company is China Construction Bank (50%).

FIMBank Group Annual Report & Financial Statements 2020

Review of performance

During 2020, the financial and operating performance of the Group was, as expected, marked with the disruption brought about by the COVID- 19 pandemic.

In the first quarter of the year, the Group was implementing the last phase of the de-risking process which was announced in the previous year. As the Group was absorbing the impact which this process had on interest and fee income, the operating performance was nonetheless encouraging, paving the way for a normalised and sustainable future profitability. However, after the first quarter, the uncertainty started unfolding, creating a previously unseen reality which demanded quick adaptation and reaction.

COVID-19 created a major shock to the global economy, with immediate disruption to global supply chains, tangibly evidenced by the closure of industrial plants and ports in major export-driven economies. This was compounded by market volatility resulting in a correction to bonds, equity

and commodity prices. A demand for heightened vigilance to manage the G- liquidity, credit, market and operational amongst others ensued.

At the outset of the crisis, the Group triggered its business continuity contingency plan, to ensure the continued effectiveness of its operations, and the adequate management of risks. The Group has throughout this period increased its available liquidity with ratios well above the regulatory requirements, increasing caution for unforeseen shocks. In parallel, credit monitoring and early-warning indicator tools were enhanced to pre-empt client economic difficulties. During this challenging period, enhanced focus was dedicated to the capital position of the Group and the management of regulatory capital ratios. The Group also took measures to control operating costs across the different resource classes and adapted to new remote working practices, whilst concurrently prioritising the well-being of all employees across the Group network.

Over the course of the year the Group continued to navigate the turbulence whist maintaining a defensive stance on the business with subdued business volumes and higher liquidity buffers. The results of this strategic decision, coupled with a lower interest rate environment, unsurprisingly led to meagre revenue streams. Though the Group managed its expense base carefully, while continuing investing in staff and technology, this was not sufficient to compensate for the revenue loss.

Moreover, several new non-performing facilities emerged which, although limited in number of cases, required an impairment coverage that was significant. This was due to a weaker outlook which impacts the chances and timings of possible recoverability. The recovery routes of the existing non-performing portfolio suffered mainly due to delays in legal and other proceedings, given the various degrees of lockdown restriction in the relevant jurisdictions. The level of impairment coverage had to be improved to make up for these delays and for worsening conditions impacting the recoverability prospects for specific cases.

During the year, the Bank, as a parent of the Group, absorbed the most of the COVID-19 outbreak impact. As a matter of priority, the treasury function ensured a strong liquidity position to weather any unforeseen circumstances. The Bank being cognisant of the unprecedented uncertainty focused on supporting its customers while maintaining the business volumes at lower levels. The response of monetary policy to the COVID-19 crises, by different central banks, has consisted of several measures, including reduction in interest rates, aiming at providing sufficient liquidity to encourage banks to supply credit to the real economy. The lower interest rate environment coupled with subdued volumes and impairment provisions on new and existing non-performing assets, were the main drivers behind the lower operating performance of the Bank.

Across the group, LFC withstood the COVID- robust business model, institutional expertise and risk-balanced approach helped to recover business volumes to pre COVID-19 levels by the end of the year. Positively, the valuations of the assets gradually improved each month after the mid-year which was the lowest point in the year. As

ne with the sectors and geographies

was reconfirmed by the financial performance reported.

During the year India Factoring also consciously decreased business volumes, with their lowest levels around mid-year. As the pandemic situation started to stabilize and clie stabilized revenue stream, the factoring business model was proved to be resilient even in these turbulent times. Over the course of the year the export driven book was reignited and diversified to include larger-scale counterparties. The India Factoring business continues to gain traction as the overall economic activity in India improves.

Similar to other subsidiaries, Egypt Factors had initially scaled down business volumes yet, by end of year has recouped enough to reach pre- pandemic volume levels and revenue yields.

The 2020 results reflect the difficult market conditions, uncertainty and disruption brought by the pandemic and the ever-evolving regulatory challenges. Management and Directors acknowledged these challenges and have dedicated significant time and effort into realigning strategies to put a halt to the depleting returns and to re-position the Group towards the road to gradual and sustainable recovery. These results attest the pital Requirements

and evading the need to resort to any capital relief measures announced by the Regulators in response to the pandemic.

FIMBank Group Annual Report & Financial Statements 2020

Statements of profit or loss

For the year ended 31 December 2020, the Group registered a post-tax loss of USD47.0 million compared to a profit of USD4.5 million in 2019. Group earnings per share were negative at US cents 8.98 (2019: positive US cents 0.86). The results for the year under review are summarised in the table below, which should be read in conjunction with the explanatory commentary that follows:

		Group
	2020	2019	Movement
	USD	USD	USD
Net interest income	28,643,150	32,321,233	(3,678,083)
Net fee and commission income	8,969,681	12,480,522	(3,510,841)
Dividend income	240,817	3,591,794	(3,350,977)
Net results from foreign currency operations	553,537	1,946,289	(1,392,752)
Other operating income	893,869	932,009	(38,140)
Net operating income	39,301,054	51,271,847	(11,970,793)
Operating expenses	(39,036,105)	(37,019,821)	(2,016,284)
Net operating results	264,949	14,252,026	(13,987,077)
Net impairment losses	(35,677,319)	(13,066,172)	(22,611,147)
Net results from trading assets and other financial instruments	(397,564)	6,076,270	(6,473,834)
(Loss)/Profit before tax	(35,809,934)	7,262,124	(43,072,058)
Taxation	(11,222,821)	(2,732,021)	(8,490,800)
(Loss)/Profit for the year	(47,032,755)	4,530,103	(51,562,858)

as the Group grappled with the pandemic and economic downturn.

illion to USD39.3 million. Net interest income and net fees and commission income combined decreased by 16%, from USD44.8 million to USD37.6 million. Revenues dropped due to a combination of circumstances. As the pandemic spread across the globe causing disruptions on many fronts and the world started experiencing economic gloom, the Group had implemented safety measures to protect its financial position. Concurrently, the Group was mindful of the minimum regulatory requirements, and was therefore restricted in writing new business.

As the pandemic unfolded the Group retracted from certain business activities to safeguard its capital and liquidity. Whilst, this came at the cost of revenue generation, it was an inevitable precaution required in these unprecedented times. Some assets which used to generate substantial revenues and became non-performing in 2019 and 2020, some as a direct impact of the pandemic, had their interest suspended due to their non- performing status, with direct impact on interest income. The de-risking strategy initiated in 2019 and which continued in 2020, restricts the Group to enter into certain business transactions, which are risky, but which were high yielding in past years.

II Requirement for the Bank and the Group. This Pillar II Requirement, together with the Minimum Capital Requirement under Pillar I, the Combined Buffer Requirement and the Pillar II Guidance, form the Total Capital Requirement, which shall always be maintained under normal economic conditions. Consequently, the Group is constrained to keep risk weighted assets in check, ensuring compliance with the set requirements at all times. These measures have a direct impact on business volumes and revenues.

Dividend income dropped significantly, from USD3.6 million to USD0.2 million, as the Group withdrew its investment from an unlisted sub-fund of a local collective investment scheme, to reach its objective of abolishing complex structures. As part of the redemption process, the Bank has bought back the trade finance assets from the sub-fund, which were originally sold to the sub-fund by the Bank itself.

volumes of foreign

currency transactions with clients.

ugh the

attraction, retention and training of staff. Technological investments continued, particularly in the business and regulatory space.

FIMBank Group Annual Report & Financial Statements 2020

During the year, the Group recognised additional IFRS 9 Stage 3 impairments of USD22.6 million and wrote-off USD10.9 million of exposures which were previously classified as non-performing. Management based their judgement on information, facts and circumstances as at the reporting date in determining the impairment coverage required for each non-performing exposure. The economic impact of the pandemic had a significant bearing on the potential and timing of recoveries which, in turn had an impact on impairment coverage. The Group believes that potential resolution exists for each non-performing exposure recognised on its balance sheet at reporting date and continues to work towards the recovery of non-performing exposures.

IFRS 9 Stage 1 and Stage 2 impairment allowances increased by USD0.6 million, following a deterioration in counterparty credit worthiness and

an increase in expected credit losses, due to the global economic recession. Consiglobal economy, the Group did not experience severe increases in these allowances, partly because of the de-risking exercise and retraction of business volumes following the pandemic, and partly because of those non-performing exposures that were shifted from Stage 1 and 2 to Stage 3.

The Group has performed an impairment assessment of goodwill. The recoverable amount, which was based on the value-in-use, of the investment in India Factoring, turned out to be lower than the carrying amount. Thus, goodwill was impaired by USD2.7 million. The value-in-use was based on a long-range plan which was more conservative in nature, taking into account the long-term effects of the pandemic on the economy in genera

Despite the economic downturn the Group recorded recoveries of previously written-off exposures amounting to USD1.1 million.

pped by USD6.5 million. Realised gains on financial assets at fair value through other comprehensive income decreased by USD1.1 million as sales on fixed-income bonds dipped. USD0.8 million unrealised losses on fair value through profit or loss were recognised as the Group experienced downward valuations on its investments in local unlisted sub-funds. Realised gains on the trading book dipped by 81% to USD0.7 million, mainly due to a USD3.0 million recovery recorded in the prior year. Unrealised losses recognised on the trading book amounted to USD1.4 million when compared to a USD0.2 million gain recorded last year. Once again, this was attributable to the increased market uncertainty, abundant market liquidity and subdued commodity prices triggered by the pandemic.

ward movement

as the market value of the property remained largely unvaried when compared to prior years.

Financial position

At 31 December 2020, total consolidated assets stood at USD1.83 billion, down by USD59.0 million from end-2019. As discussed above, this was the result of a drop in business volumes, mainly due to the de-risking process, the counteraction taken in response to the pandemic and the SREP Pillar II Requirement set by MFSA during the year. Loans and advances to banks and customers fell by USD110.8 million and trading assets by USD 7.9 million. Financial assets held at fair value though profit or loss fell by USD105.0 million, primarily as a result of the redemption of units in the unlisted sub-fund of a local collective investment scheme. In contrast, treasury assets, which include balances with the Central Bank of Malta, treasury bills and debt securities held at fair value through OCI increased by USD185.0 million. This corroborates with the strategy of the Group set at the start of the pandemic, to protect its liquidity and capital.

The Bank and its subsidiaries have carried out a deferred tax assessment as at December 2020. Given the global economic climate the Bank and India Factors have taken a conservative approach and reversed USD6 million and USD2.8 million of deferred tax assets respectively.

The Group had consolidated liabilities of USD1.6 billion as at 31 December 2020, a drop of USD11.1 million from prior year. Deposits from corporate and retail clients were higher by USD43.7 million, which were offset by a USD51.6 million decline in wholesale funding.

Reflecting the loss for the year and other equity adjustments, total equity shrank by USD47.9 million to USD233.2 million. The Group did not tio stood at

18.5% (2019: 16.9%) and Total Capital Ratio at 18.5% (2019: 16.9%).

Total Group commitments, consisting mainly of confirmed letters of credit, documentary credits, commitments to purchase forfaiting assets and factoring commitments, stood at USD105.0 million whilst contingent liabilities, principally consisting of outstanding guarantee obligations, stood at USD1.9 million.

FIMBank Group Annual Report & Financial Statements 2020

Principal risks and uncertainties

FIMBank is a banking group offering a suite of trade finance products across the different geographies it operates in, mainly emerging markets. The risks associated with this business model are multiple and varied. Exposure to credit risk, liquidity risk, interest rate risk and foreign exchange -border trade finance transactions, the business performance is also impacted by the overall performance of the world economy, in particular to the level of cross-border trade between countries

at varying stages of their economic development and which may not yet have achieved the level of stability of developed countries. This exposes the Group to risks of political and economic changes including volatilities to commodity prices, exchange control regulation and difficulties in preserving own legal rights.

Both FIMBank and its main group entities are exposed to such risks in different degrees based on their size and complexity. FIMBank, as the parent company, ensures that all group entities

The withdrawal of the United Kingdom from the European Union, referred to as Brexit , did not have a significant and operations. The Group operates in a diversified array of markets, sectors and geographies mainly in emerging markets and its exposure to the United Kingdom, with the exception of its investment in LFC, is limited both in terms of business and human resources. Specifically, for LFC with its Head Office in the United Kingdom, the impact was

Notwithstanding a portion of its forfaiting assets are Euro-

recoverability of these exposures were unaff-EU entities, beside own equity and loans from FIMBank, LFC does not place a reliance on EU-sourced funding. The business model of LFC therefore did not require any modifications as a result of Brexit.

impact of the outbreak is widespread across the globe and has distressed many countries including those markets where the Group operates. The circumstances have rapidly evolved, forcing Governments to implement severe measures and restrictions, including partial or full lockdowns, restrictions on business activities, public gatherings, public spaces, travel, transportation, schools, retail stores, and various other activities. Businesses were forced to close or restrict their activities including restricted access to offices, outlets, warehouses and production plants. The pandemic, as well as these restrictive measures, have created a significant amount of uncertainty and disruption in economic activity and are having an impact across all industries.

s and Schedule V to this

Annual Report.

Outlook for 2021

Going into 2021, the world continues to cope, freedom of movement and the global economy. During the first months of 2021 we have observed new waves of infections and governmentresponses with restrictive measures previously lifted now being re-imposed. This extends the uncertainty which the world has experienced over the previous year. However, with the approval and increased production of various vaccinations, the prospect of a rebound throughout 2021 is greater than ever.

Nonetheless, the road to recovery is expected to be gradual and uneven. Governments are working hard to vaccinate populations, which should lead to an ease of restrictive measures and to a repeal of economic relief measures, including wage supplements, bank moratoria and liquidity supply. Investors and consumers need to gain confidence, human mobility needs to pick-up, and trade to make a comeback. Only then would we know the true impact this pandemic has left behind, through resulting social behaviours, unemployment and inflation rates, GDPs, government debts, shifts in sectoral/regional composition of trade and corporate survival rates. This will certainly have an impact on banks worldwide, particularly on their operations, customer relations, profitability, risk profiles and appetite.

Having said that, the Group will continue pursuing business opportunities on the principles of risk adjusted returns. A moderate growth in diversified product offering will be scaled in the business lines and geographies that provide superior returns and pose less risk, to generate consistent value to the organization. The balance sheet has become more resilient after the full implementation of the de-risking process and various other initiatives that are currently being actioned. Complex structures are being gradually eliminated and business lines are being streamlined. Coverage for non-performing assets have been significantly improved, whilst a function fully dedicated to the recovery of non- performing assets has been set-up to pursue our interests. These initiatives shall not only improve the overall portfolio quality but also help the Group with revenue generation and having resilience and sustainability principles high in the strategic priority list. In a context of tighter

sustainable growth. Having a pool of human capital, that are highly skilled across multiple disciplines, continued investment in IT infrastructure and having the backup of a solid shareholder base, FIMBank is well positioned to progress towards its strategic objectives in a steady, sustainable manner.

FIMBank Group Annual Report & Financial Statements 2020

Dividends and reserves

As none of the reserves are available for distribution, the Board of Directors will not be recommending the payment of a dividend to the Annual General Meeting of Shareholders (2019: Nil).

Standard licence conditions and regulatory sanctions

During the year under review the Bank paid an administrative penalty to the FIAU amounting to EUR168,943. The penalty was applied following a compliance review carried out by Supervision in 2018. The Bank had fully cooperated with the FIAU during the review and had taken immediate remedial action soon after the review was concluded. The Bank did not appeal this decision and settled the penalty once notification was received.

There were no breaches of licence requirements nor any other regulatory sanctions against the Bank.

Approvals at the annual general meeting of shareholders

The Bank convened its Annual General Meeting on 30 November 2020 and all statutory Ordinary Resolutions were approved.

Shareholder register information pursuant to Listing Rule 5.64

The Directors refer to the following disclosures in terms of Listing Rule 5.64:

details of the structure of the share capital, the class of shares and the rights and obligations attached to it and the percentage of total share capital that it represents are, unless otherwise stated in this report, disclosed in the Notes to the Financial Statements;
except as provided for by Article 41 of the Articles of Association of the Bank, or where the consent of the Supervisory Authority may be required, there are no restrictions on the transfer of securities, or limitations on the holding of securities, or the need to obtain the approval of the Bank or other holders of securities of the Bank for any such transfer or holding. Shareholders holding 5% or more of the share capital as at 31 December 2020 are as follows

	No of shares	% holding
United Gulf Holding Company B.S.C	410,812,110	78.63%
Burgan Bank K.P.S.C.	44,394,499	8.50%

In addition to Shareholders listed in the above table, as at 31 December 2020, Tunis International Bank S.A. (a subsidiary of BBK) holds 9,207,000 shares (1.76%);

c. there is no share scheme in place which gives employees the rights to any form of control;

rning the

changes or variations in the rights attached to shares;

in terms of Article 12 of thwriting of the holders of not less than 80% of the issued shares of that class or with the sanction of an extraordinary resolution passed at a separate general meeting of the holders of shares of that class. The Banking Act obliges the Bank to obtain the consent of the Supervisory Authority (MFSA) to effect any material change in voting rights;
the rules and procedures governing the appointment and replacement of Board Members are provided by the Articles of Association and are referred to in the Statement of Compliance with the Principles of Good Corporate Governance. Any amendments to the Articles shall be by means of an extraordinary resolution in accordance with the provisions of Articles 90 and 91;
unless otherwise disclosed in this Annual Report, there are no significant agreements to which the Bank is a party and which take effect, alter or terminate upon a change of control of the Bank following a takeover bid and the effects thereof; and
there are no agreements between the Bank and its Board Members or employees providing for compensation if they resign or are made redundant without valid reason or if their employment ceases because of a takeover bid.

At 31 December 2020 the Bank had no securities with special control rights in accordance with Listing Rule 5.64.4.

FIMBank Group Annual Report & Financial Statements 2020

Events after the financial reporting date

In March 2021, the Bank received a cash dividend of USD3.1 million from its wholly owned subsidiary London Forfaiting Company Limited and a cash dividend of USD1.1 million from a financial asset classified at fair value through profit or loss.

There were no other material events or transactions which took place after the financial reporting date which would require disclosure in or adjustment to this Annual Report and Financial Statements.

Going concern

solvency, the Directors confirm that, at the time of approving these Financial Statements, the Bank is capable of continuing to operate as a going concern for the foreseeable future.

Directors

The Directors who served during the financial year (inclusive of any changes to the date of this report) were:

John C. Grech (Chairman)	CGC, BCC, BRIC
Masaud M.J. Hayat (Vice Chairman)	NRC
Abdel Karim A.S. Kabariti		Appointed on 13 August 2020
Adrian Alejandro Gostuski	BRIC, ALCO	Resigned on 4 August 2020
Claire Imam		Appointed on 30 November 2020
Edmond Brincat	AC, NRC, BRC
Geraldine Schembri		Resigned on 15 January 2020
Hussain Abdul Aziz Lalani	AC, BRC, BRIC
Majed Essa Ahmed Al-Ajeel	CGC, NRC
Mohamed Fekih Ahmed	BCC
Osama Talat Al-Ghoussein	BRC
Rabih Soukarieh	BCC
Rogers David LeBaron	CGC, NRC

Denotes membership of:

Assets-LiabilitiesCommittee (ALCO)
Audit Committee (AC)
Board Credit Committee (BCC)
Board Review and Implementation Committee (BRIC) which replaced the Executive Committee
Board Risk Committee (BRC)
Corporate Governance Committee (CGC)
Nomination and Remuneration Committee (NRC)

FIMBank Group Annual Report & Financial Statements 2020

Statement of responsibility

This Statement of Responsibility is required in terms of Listing Rule 5.55.2 and set out in the form required by Listing Rules 5.67 to 5.69.

The Companies Act, 1995 (Chapter 386, Laws of Malta) requires the Directors of the Bank to prepare financial statements for each financial year which give a true and fair view of the financial position of the Bank and the Group as at the end of the financial year and of the profit or loss of the Bank and the Group for that period in accordance with the requirements of International Financial Reporting Standards as adopted by the EU.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy, at any time, the financial position of the Bank and the Group and to enable them to ensure that the Financial Statements have been properly prepared in accordance with the provisions of the Companies Act, 1995 (Chapter 386, Laws of Malta) and the Banking Act, 1994 (Chapter 371, Laws of Malta). The Directors also ensure that the Financial Statements of the Group are prepared in accordance with Article 4 of the IAS Regulation.

The Directors are also responsible for safeguarding the assets of the Bank and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors, through oversight of management, are responsible to ensure that the Bank and the Group establish and maintain internal controls to provide reasonable assurance with regard to reliability of financial reporting, effectiveness and efficiency of operations and compliance with applicable laws and regulations.

Management is responsible, with oversight from the Directors, to establish a control environment and maintain policies and procedures to assist ness. This responsibility includes Financial Statements as required by the

Companies Act, 1995 (Chapter 386, Laws of Malta) and managing risks that may give rise to material misstatements in those Financial Statements.

In determining which controls to implement to prevent and detect fraud, management considers the risks that the Financial Statements may be materially misstated as a result of fraud.

Independent auditors

KPMG have expressed their willingness to continue in office as auditors of the Bank. A resolution proposing their re-appointment will be submitted at the forthcoming Annual General Meeting.

Approved by the Board of Directors on 7 April 2021 and signed on its behalf by:

John C. Grech	Masaud M.J. Hayat
Chairman	Vice Chairman

Registered Address

Mercury Tower

The Exchange Financial and Business Centre

Elia Zammit Street

Malta

FIMBank Group Annual Report & Financial Statements 2020

Statement of compliance with the principles of good corporate governance

For the year ended 31 December 2020

Introduction

published as Appendix 5.1 to Chapter 5 of the Listing Rules, have been adopted together with the effective measures taken to ensure compliance with such Principles.

Part 1: Compliance with the principles

The Board firmly believes that strong corporate governance permits the Bank and the Group to benefit from greater transparency in its activities, as well as in its relations with the market, thereby enhancing integrity and confidence. Although the Principles are not mandatory, the MFSA has recommended that listed companies endeavour to adopt such Principles. The Board has considered this to be in the best interest of the Shareholders because they commit the Directors, management and employees of the Bank to internationally recognised standards of corporate governance.

Ultimate responsibility for good corporate governance remains with the Directors who have therefore resolved to adopt the Principles and endorse them accordingly, except for those instances where particular circumstances exist that warrant non-adherence thereto, or at least postponement for the time being.

The Board is committed to improve further its corporate governance standards which is an ongoing process.

Principle 1: Roles and responsibilities of the board

ce are included in the relevant Charter and can be summarised as follows.

The Board is responsible for the overall long-term direction of the Group, for setting its strategy and policies and ensuring that they are pursued through good management practices. The Board carries out its responsibilities by:

exercising prudent and effective controls and ensuring that such controls are appropriately reviewed for effectiveness and monitored for compliance on a regular basis;
determining the strategic aims and the organisational structure;
regularly reviewing management performance and ensuring that the Group has the appropriate mix of financial and human resources to run its business;
being conversant with relevant statutory and regulatory requirements;
ensuring that all Directors regularly attend meetings of the Board, agree on business objectives, financial plans and general parameters within which the Board, the Board Committees and management are to function;
ensuring that systems and controls are in place to mitigate significant business risks and that exposures are identified and properly managed;
setting appropriate business standards, codes of corporate governance and ethical behaviour for all Directors and employees, as well as monitoring their performance;

h.	-to-day management of the Group and its operations, together with

members of management; and

appointing senior management through the Nomination and Remuneration Committee.

Over the years, the Board has created a framework through which it effectively performs its functions and discharges its liabilities. The Board has also established terms of reference and charters for the various Board Committees and the conduct of their meetings.

FIMBank Group Annual Report & Financial Statements 2020

The Members of the Board of Directors of the Bank bring to their office a mix of backgrounds and capabilities, ranging from business to financial services. This ensures a good blend of expertise and experience. Moreover, the suitability of any individual to become a Director of the Bank is, in the first place assessed by the Nomination and Remuneration Committee. As part of its work, this committee is tasked with performing an annual n evaluation on the performance of each individual Member. This includes an evaluation of the knowledge and experience of each Member while also assessing their authorities and leadership skills. As a result, this

Committee screens individuals for the posi

rector against career information, as the competent authorities may deem necessary. Upon appointment, new Directors receive general information about the Bank,

its business and affairs, and queries in this regard are in the first instance handled by the Company Secretary and/or the CEO.

Principle 2: Roles and responsibilities of the chairman and of the chief executive officer

The roles of the Chairman and of the CEO are completely separate from one another to ensure clear division of responsibilities at the head of the Bank.

The Chairman is a non-executive officer who is selected from amongst the Directors. The Chairman is responsible for leading the Board and setting its agenda, ensuring that the Directors receive precise, timely and objective information so that they can properly execute their duties, encouraging their active engagement in meetings and issues brought before the Board and ensuring effective communication with Shareholders.

The CEO is the most senior executive of the Group. He is responsible for leading the management in the execution of the strategy and to run the day-to-day activities of the Group.

Principle 3: Board composition and appointment of directors

pointment and retirement of the Directors. Directors hold office from the close of the Annual General Meeting at which they are appointed until the day of the consecutive Annual General Meeting, at which they become eligible for re-election. The Articles also provide that the Chairman and Vice Chairman are to be appointed by the Directors from amongst their number and shall hold office for a period of one year, unless otherwise decided by a simple majority of the Board. Any Member may nominate an individual in the manner prescribed by the Articles, provided that such nomination is seconded by a Member or Members who in the aggregate hold at least twenty thousand shares between them.

As at the date of this Statement, the Directors and their respective first date of appointment to the Board are as follows:

Year when first appointed
John C. Grech (Chairman)	2004
Rogers David LeBaron	2006
Masaud M. J. Hayat (Vice Chairman)	2013
Mohamed Fekih Ahmed	2013
Majed Essa Ahmed Al-Ajeel	2013
Rabih Soukarieh	2013
Osama Talat Al-Ghoussein	2014
Hussain Abdul Aziz Lalani	2017
Edmond Brincat	2017
Abdel Karim A.S. Kabariti *	2020
Claire Imam Thompson **	2020

Abdel Karim A.S. Kabariti obtained regulatory approval and was co-opted by the other directors on 13 August 2020. Shareholder approval was then obtained in the AGM held on 30 November 2020.

*Claire Imam Thompson was appointed by the shareholders on 30 November 2020 and regulatory approval was obtained on 23 February 2021.

Except for their involvement in Board Committees as described below, all Directors hold office in a non-executive capacity.

FIMBank Group Annual Report & Financial Statements 2020

In March 2012, after noting the contents of an Internal Memorandum on the subject prepared by the Company Secretary, the Board considered and resolved that all non-executive Directors meet the requisites for them to be deemed independent. This decision was based on the representations given by the individual Directors, including those with a shareholding in the Bank or associated with entities having a shareholding in the Bank or who have served on the Board for more than twelve consecutive years, which does not in any way impair these on-executive Director

has confirmed in writing to the Board that he undertook:

to maintain in all circumstances his independence of analysis, decision and action;
not to seek or accept any unreasonable advantages that could be considered as compromising his independence; and
to clearly express his opposition in the event that he finds that a decision of the Board may harm the Bank.

A written declaration of independence is signed annually by the non-executive Directors, with another written declaration of independence to be signed by the non-executive Directors in April 2021. Some of the Directors have served on the board for more than twelve years. This notwithstanding, the Board considers such Directors to bring a sufficiently balanced character and frame of mind to their duties and judgment that they are consequently deemed to be independent. The Bank monitors that each Director limits the number of any directorships held in other companies (see Schedule V, Section 3.4).

Principles 4 and 5: Duties and proceedings of directors

The Board of the Bank carries out its duties through a structure that starts with the strategy and policy formulated at meetings and subsequently delegated to committees and management for implementation and execution at various levels, both functional and operational.

d for any calendar year are normally set at the last meeting of the preceding year, so that advance preparation and daily planning for the meetings can be made. Meetings are held at least quarterly and are formally notified by the Company Secretary at least seven days before the meeting with the issuance of the agenda for the forthcoming meeting. Occasionally, meetings are also called at short notice or on an ad hoc basis, in which case the Directors may decide to waive the statutory period of notice. The agenda is accompanied by such papers and documents as are necessary to inform Directors of issues relating to their roles and responsibilities, and in particular of the decisions they are expected to take. During the year, all Directors were duly notified of every meeting and given the statutory notice period. With notices of meetings, the Directors are also served with Alternate Director Appointment Forms which, in case of non-attendance, they are invited to complete and send to the Company Secretary prior to the meeting.

The Board held five meetings in 2020. All Members of the Board were present for all five meetings except for Majed Essa Al-Ajeel, who was excused in March and Abdel Karim A.S. Kabariti, who was appointed on 13 August 2020, attended the meeting in September and was excused for the December meeting. Meetings include presentations by management, whilst other information and documentation is made available for perusal by the Directors at their request. Members of senior management attend Board Meetings by invitation depending on the agenda content and relevance. The Board also might request that the Meetings be attended by other employees or by professional advisors, as and when necessary.

s possible after a Meeting, draft minutes are circulated amongst the Members for their information. Minutes are then read and approved at the following Meeting. Directors are provided with Board documents and can also be provided all past minutes of Board and Committee Meetings on request.

Board Meetings also serve as an opportunity to report on the progress and decisions of the Committees, covered under Principle 8. All Board Committees are either a mix of Directors and management (Board Review and Implementation Committee and Credit Committee) or include the participation of management (Audit Committee, Nomination and Remuneration Committee, Governance Committee and Board Risk Committee). Committees report to the Board on their activities through their respective Chairman at each Board Meeting. Management reporting is also done directly to the Board at each meeting, either by means of an update presentation from the CEO or usually through the Board Review and Implementation Committee. In any case, each Board Meeting receives an update on the performance of the Bank and the Group, on known risk cases, litigation and potential problems, about key strategic developments, including the progress of investees such as subsidiaries and joint ventures and key financial indicators that enable performance to be measured against internal budgets, industry peers and prior financial periods.

Principle 6: Information and professional development

Upon first appointment, all Directors are offered an introduction to the Bank and Group which includes a tailored induction and familiarisation by the CEO and the Company Secretary. This usually covers legal and statutory responsibilities as well as a good and activities. Access to the services of the Company Secretary and resources of the Bank, including where necessary, independent professional

Training sessions have been held in 2020 in order for Directors to have the necessary knowledge on their duties and responsibilities.

Moreover, the Board ensures that the CEO maintains systems and procedures for the development and training of management and employees generally, in order to retain the best quality staff, optimise on management and staff morale and to continue developing the succession plan for senior management. The CEO is responsible for the recruitment and appointment of senior management following the approval of the Nomination and Remuneration Committee.

FIMBank Group Annual Report & Financial Statements 2020

Principle 7: E

Members of the Board of Directors are subject to comprehensive fit and proper tests by the Supervisory Authorities before they are formally cleared for appointment to the Board. The board undertakes an annual evaluation of its own performance and that of its committees. The evaluation forms are then evaluated by a Committee, which function has been entrusted to the Nomination and Remuneration Committee, which then reports directly to the Board Chairman who is required to act on the results of the performance evaluation process. The outcome would be to ascertain the strengths and to address the weaknesses of the Board and its committees and to report this to the Board itself and, where appropriate, to report at the Annual General Meeting. This exercise began in 2013 and has been repeated annually ever since. The last evaluations from Directors were requested in the last quarter of 2020 and were presented to the Nomination and Remuneration Committee on 6 April 2021.

Principle 8: Board committees

ticles of Association establish that the Directors may delegate certain powers, authorities and discretions to any person and/or committee appointed by them. The composition of such Committees, as well as the participation of Directors on them, is decided upon by the Board.

Accordingly, the Board has established the following Committees:

Board Review and Implementation Committee
Audit Committee
Board Risk Committee
Assets-LiabilitiesCommittee
Nomination and Remuneration Committee (Remuneration Report on page 22)
Board Credit Committee
Corporate Governance Committee

Board Review and Implementation Committee

by the Board in overseeing the activities and management of the Group. The Board Review and Implementation Committee terms of reference are included in the Board Review and Implementation Committee Charter.

The Members of the Board Review and Implementation Committee as at 31 December 2020 are the following:

John C. Grech (Chairman)

Hussain Abdul Aziz Lalani ((Vice Chairman)

Adrian Alejandro Gostuski (Non-Voting Member)

The Board Review and Implementation Committee met on nine occasions during 2020.

Audit committee

iled terms of reference included in the Audit Committee Charter and which reflect the recent requirements of the Listing Rules, as well as current best practices and recommendations of good corporate governance. The terms of reference of the Audit Committee, as detailed in the Audit Committee Charter include:

the monitoring of the financial reporting process, including the audit of the annual and consolidated accounts;

•

the maintenance of communication on such matters between the Board, management, External Auditors, internal auditors and the compliance function;

•	to the Bank;

the monitoring and reviewing of proposed transactions by the Group with related parties; and

FIMBank Group Annual Report & Financial Statements 2020

It is the responsibility of the Audit Committee to recommend the appointment of the Statutory Auditor in line with the Listing Rules 5.127.6 and in accordance with Article 16 of the Statutory Audit Regulation. The Audit Committee also considers the nature of related party transactions, vets stipulate their independence from other Board Committees and management, and such independence is also acknowledged by external regulatory verification. The Head of

Internal Audit has direct access to the Audit Committee Chairman at all times and attends all meetings. The Head of Compliance also has direct access to the Audit Committee Chairman and attends all meetings. In addition, the composition of the Members of the Audit Committee includes an individual who is also a Member of the Board Risk Committee.

Rights Directive II.

The Members of the Audit Committee as at 31 December 2020 are the following:

Edmond Brincat (Chairman)

Hussain Abdul Aziz Lalani (Vice Chairman)

Rogers David LeBaron is a non-voting, permanent invitee of the AC. As at the date of approval of this statement, Claire Imam Thompson is a member of the Audit Committee.

In line with LR 5.117.4, the Chairman of the Audit Committee is appointed by the Board of Directors and with reference to Listing Rule 5.117.3, all Members of the Audit Committee are designated as competent in auditing and/or accounting. Edmond Brincat joined the GO Group in 1999, part of the team entrusted to set up and launch Go Mobile, Finance Officer, a position he held until 31 January 2018. In February 2018 Mr Brincat joined SmartCity (Malta), a subsidiary of Dubai Holding LLC, as its Chief Operations Officer.

Hussain Abdul Aziz Lalani is the Chief Executive Officer of United Gulf Bank Bahrain and has worked extensively with the Board of Directors on

All members of the Audit Committee have signed a written declaration of independence. In effect, the Board of Directors of the Bank consider these Members to be independent. Furthermore, the Committee Members as a whole, have the competence relevant to the sector in which the Bank is operating.

The Audit Committee normally requests members of management to attend its Meetings for selective items of the respective agenda.

The Audit Committee held nine Meetings during 2020 and all members were present for all nine Meetings. The Group Head of Internal Audit was invited and attended all Meetings. The External Auditors were invited to five of the Audit Committee Meetings (January 2020, March 2020, June 2020, August 2020 and November 2020). The External Auditors were only present for the agenda item which considered and discussed the 2019 Statutory External Audit (January 2020), 2019 Annual Report (March 2020), 2019 Management Letter (June 2020), Interim Report for the period ended 30 June 2020 (August 2020) and Statutory Audit Plan for Financial Year ending 31 December 2020 (November 2020).

Board risk committee

d for recommending appropriate risk appetite parameters for approval by the Board of Directors. The Board Risk Committee is also responsible for the oversight of operational and legal risk matters.

The Board Risk Committee Members as at 31 December 2020 are the following:

Hussain Abdul Aziz Lalani (Chairman)

Osama Talat Al-Ghoussein (Vice Chairman)

Edmond Brincat (Member)

During 2020, the Board Risk Committee met on fifteen occasions.

FIMBank Group Annual Report & Financial Statements 2020

Assets-liabilities committee

The Assets-

-making body respons

The ALCO is composed of representatives of senior management, vested with the power to make decisions. As at 31 December 2020, the voting members of the ALCO were the following:

Zbigniew Makula (Chairman)

Adrian Alejandro Gostuski (Member)

Julio Bonifacino (Member)

Ronald Haverkorn (Member)

Juraj Beno (Member)

Simon Lay (Member)

Chris Trapani - Head of Cash Management & Central Customer Services, Tiziri Hamidouche - Deputy Head of Treasury, Corinne Lanfranco - Head of Financial Institutions & Deposits, Simon Vickery - Head of Non-Credit Risk Management, Kamel Moris Chief Commercial Officer Trade & Commodity Finance and Clinton Bonnici Asset Liabilities Management Manager are non-voting, permanent invitees of the ALCO.

During 2020, the Assets-Liabilities Committee met on nine occasions.

Board credit committee

Directors of FIMBank. The BCC is directly responsible and

accountable to the Board. The Board may delegate any of its authorities and powers in relation to the BCC to the Board Risk C main powers and duties are to:

review credit applications and approve credit limits and specific transactions, up to the legal lending limit of the Bank and within the guidelines

the BCC will analyse and recommend country limits for approval.

The Board Credit Committee Members as at 31 December 2020 are the following:

John C. Grech (Chairman)

Rabih Soukarieh (Vice Chairman)

Mohamed Fekih Ahmed (Member)

Adrian Alejandro Gostuski GCEO and Ronald Haverkorn - GCRO are non-voting, permanent invitees of the BCC.

During 2020, the Board Credit Committee met on sixteen occasions.

Corporate governance committee

es to ensure

The Corporate Governance Committee Members as at 31 December 2020 are the following:

Majed Essa Ahmed Al-Ajeel (Chairman)

John C. Grech (Vice Chairman)

Rogers David LeBaron (Member)

During 2020, the Corporate Governance Committee met on four occasions.

FIMBank Group Annual Report & Financial Statements 2020

Nomination and remuneration committee

or. The e with the relevant laws and regulations. The Charter establishes the authority and responsibilities conferred by the Board to the NRC in line with Appendix 5.1 (8) (A) & (B) of the Code of

Principles of Good Corporate Governance. Inter alia the NRC carries out the following tasks:

•

andards,

performs an annual review of the needs required with regard to suitable skills for Board membership and performs an annual review of the s interest;

and

•

In addition to the above, the NRC provides information and summaries on the background of some important issues of the Bank and presents the reports and information to the Board. It ensures that the Board is continuously updated on the latest issues related to the banking profession.

Details regarding the Remuneration Policy and remuneration related matters have been disclosed under the Remuneration Policy and and Remuneration Report.

The Nomination and Remuneration Committee Members as at 31 December 2020 are the following:

Masaud M.J. Hayat (Chairman)

Majed Essa Ahmed Al-Ajeel (Vice Chairman)

Edmond Brincat (Member)

Rogers David LeBaron (Member)

John C. Grech FIMBank Chairman and Adrian Alejandro Gostuski GCEO are non-voting, permanent invitees of the NRC.

During 2020, the Nomination and Remuneration Committee met on four occasions.

All members were present for all four meetings.

Changes to committee membership during 2020

During 2020, John C. Grech was appointed Chairman of the Board Review and Implementation Committee (replaced the Executive Committee), Hussain Abdul Aziz Lalani was appointed Vice Chairman of the Board Review and Implementation Committee and Adrian Alejandro Gostuski was appointed non-voting member of the Board Review and Implementation Committee.

Geraldine Schembri resigned from the Audit Committee.

Hussain Abdul Aziz Lalani was appointed Chairman of the Board Risk Committee and Edmond Brincat was appointed member of the Board Risk Committee. Adrian Alejandro Gostuski resigned from the Board Risk Committee.

Adrian Alejandro Gostuski, Julio Bonifacino and Juraj Beno were appointed Members of the Assets-Liabilities Committee and Murali Subramanian, Howard Gaunt and Ronald Mizzi resigned from the Assets-Liabilities Committee.

Principles 9 and 10: Commitment to institutional shareholders, an informed market and transparency in dealings by directors, management and staff

The Chairman arranges for all Directors including the Chairmen of all the Committees to be available to answer questions at the Annual General Meeting. All eligible Shareholders are served with a notice to attend the Annual General Meeting, which is usually held during the first half of the year, however as a result of the pandemic and further to legislative amendments carried out to the Companies Act in this respect, during the year 2020 the Annual General Meeting of the Bank was held in November. The notice contains all the resolutions proposed for approval by the Annual General Meeting and, as necessary, notes accompanying such resolutions. Pursuant to the Companies Act, notices are delivered to Shareholders at least fourteen clear days before the date of the Annual General Meeting. Advance notification of the resolutions proposed for approval is also given by way of a Company Announcement as soon as these are decided and approved, normally at the same Board Meeting that approves the Annual Financial Statements. The Board also considers the Annual Report to be an effective document which, in addition to the statutory

Meeting serves as a medium at which information is communicated to Shareholders in a transparent and accountable manner. Additionally, the Bank holds meetings from time to time with financial intermediaries and financial market practitioners to disseminate information about

progress, activities and financial performance. These meetings are usually organised to follow the publication of the half yearly and annual financial results as well as in connection with other Group developments and events. Procedures are in place to resolve conflicts between minority shareholders and controlling shareholders.

FIMBank Group Annual Report & Financial Statements 2020

s and regulations

that require it to maintain a fair and

procedures for dealing with potentially price-sensitive information and ensuring the proper conduct of its officers and staff in that regard. Regular contact with Shareholders and the general market is maintained through Company Announcements, which are issued in conformity with the obligations arising from the Listing Rules. During 2020 the Bank issued nineteen announcements.

The Board also complie same manner, as

nearly as possible, as that in which meetings may be convened by the Directors.

The Bank also maintains a presence on the web through www.fimbank.com, which includes an informative and comprehensive Investor Relations section that contains, amongst other things, all Company Announcements, Annual General Meeting information and regulated information.

The FIMBank Financial Instruments Internal Code of Dealing which has been drawn up in accordance with the requirements of the Listing Rules contains dealings restriction guidelines and reporting procedures to be observed by Directors, management and staff when dealing, or heir obligations to

Control by any Shareholder, whether direct or indirect, and any potential abuse thereof, is regulated by the Banking Act and Rules issued thereunder. The Act and such Rules provide mechanisms for, and obligations on, persons intending to acquire control, as well as on all Directors and management, to notify and report to the supervisory authorities in such eventuality. There are additional obligations on Directors in terms of the Listing Rules and there is good communication in place between the management, the Company Secretariat and the Board to ensure that any issues are flagged and acted upon appropriately.

Principle 11: Conflicts of interest

While the overall tone for instilling a strong culture about the proper management of conflicts of interest is set at the top, situations of potential conflicts of interest with Board Members are in the first instance specifically regulated by Clauses 119 In terms of the Articles of Association, whenever a conflict of interest situation, real or potential, arises in connection with any matter, the interest has to be declared. In particular, the Director concerned refrains from taking part in proceedings relating to the matter and his vote is excluded from the count of the decision. The minutes of Board Meetings, as well as those of Board Committees, invariably include a suitable record of such declaration and of the action taken by the individual Director concerned. Similar arrangements apply to management in the course of the conduct of their duties at Board Committees. Besides, where Directors and management have related party involvements, these are reported and it is an

The number of shares held in the Bank by Directors directly in their name as at 31 December 2020 is as follows:

John C. Grech (Chairman) *	1,760,000
Abdel Karim A.S. Kabariti *	Nil
Claire Imam Thompson **	Nil
Edmond Brincat	Nil
Hussain Abdul Aziz Lalani *	Nil
Majed Essa Ahmed Al-Ajeel *	Nil
Masaud M. J. Hayat (Vice Chairman) *	Nil
Mohamed Fekih Ahmed *	Nil
Osama Talat Al-Ghoussein *	Nil
Rabih Soukarieh *	Nil
Rogers David LeBaron	Nil

Aside from these direct interests in the shareholding of the Bank, these Directors are considered to be associated with companies that hold a beneficial interest in the Ban Details of outstanding loans, guarantees or similar facilities made available to related parties or beneficial interests thereof, including Directors, are disclosed in the Notes to the Financial Statements.

Claire Imam Thompson was appointed by the shareholders on 30 November 2020 and her appointment obtained regulatory approval on 23 February 2021.

FIMBank Group Annual Report & Financial Statements 2020

Principle 12: Corporate social responsibility

The Board of Directors encourages that sound principles of corporate social responsibility are adhered to in the ongoing management practices of the Group. As a result, from time to time the Bank and its subsidiaries are involved in supporting initiatives at both national and community level aimed at contributing economic and societal development. They also assist and promote small-scale projects of a charitable and humanitarian nature. Details of corporate social responsibility initiatives undertaken by the Group in 2020 are explained in other parts of the Annual Report.

Part 2: Non-compliance with the principles

Principle 2.3: Chairman and chief executive

The existing Chairman of the Board of Directors is not an independent member in terms of the Listing Rules. This notwithstanding, the Bank considers the non-compliance with this Principle not to be of concern in view of the fact that John C. Grech has signed a written declaration whereby he has declared that he undertakes to maintain in all circumstances his independence of analysis, decision and action, not to seek or accept any unreasonable advantages that could be considered as compromising his independence and to clearly express his opposition in the event that he finds that a decision of the Board may harm the Bank.

Principle 3: Composition of the board

The Board of Directors of FIMBank is made of non-executive Directors only and the majority of non-executive Directors are not independent. This notwithstanding the Bank considers the non-compliance with this principle not to be of concern since the Board Review and Implementation

Committee already consists of a mix of non-Executive Management. This already provides the balance suggested in Principle 3.

Principle 4: Succession policy for directors

Whereas Listing Rule 4.2.7 calls on the Directors to develop a succession policy for the future composition of the Board, and

executivethe fact that the Board is composed solely of non-executive members. On the other hand, a succession policy for management is in place and is reviewed by the Nomination and Remuneration Committee.

Principle 8: Audit committee

Listing Rules 5.117.2 requires that the majority of the members of the Audit Committee shall be independent of the issuer. Hussain Abdul Aziz Lalani, the existing Vice Chairman of the Audit Committee is not an independent member in terms of the Listing Rules. Geraldine Schembri resigned from the Audit Committee in January 2020.

This notwithstanding, the Bank considers the non-compliance with this Principle not to be of concern in view of the fact that Hussain Abdul Aziz Lalani has signed a written declaration whereby he has declared that he undertakes to maintain in all circumstances his independence of analysis, decision and action, not to seek or accept any unreasonable advantages that could be considered as compromising his independence and to clearly express his opposition in the event that he finds that a decision of the Board may harm the Bank.

Listing 5.117.1 requires that the Audit Committee should have at least three (3) members, This notwithstanding, the Bank considers the non- compliance with this Principle not to be of concern in view of the fact that as at the date of the approval of this statement, Claire Imam Thompson is an independent member of the Audit Committee and the Bank became compliant with the Listing Rules on 23 February 2021, following her approval by the Regulator.

FIMBank Group Annual Report & Financial Statements 2020

Principle 8: Nomination and remuneration committee

The manner in which the Directors are nominated for appointment follows the procedure set out in the Articles of Association, i.e. any nomination must be seconded by a Member or Members who in the aggregate holds at least 20,000 shares. This process is also rendered public with an announcement in the Maltese press, usually in the first quarter of the financial year and in good time before the Annual General Meeting, which allows at least ten business days for any nomination to be made to the Company Secretary.

The existing Chairman and Vice Chairman of the Nomination and Remuneration Committee are not independent members in terms of the Listing Rules, as required in terms of Principle 8.A.1 of the Code of Principles of Good Corporate Governance. This notwithstanding, the Bank considers the non-compliance with this Principle not to be of concern in view of the fact that Masaud M.J. Hayat and Majed Essa Ahmed Al-Ajeel have signed a written declaration whereby they have declared that they undertake to maintain in all circumstances their independence of analysis, decision and action, not to seek or accept any unreasonable advantages that could be considered as compromising their independence and to clearly express their opposition in the event that they find that a decision of the Board may harm the Bank.

Internal control

The Board is ultimately responsible for the identification and evaluation of key risks applicable to the different areas of the business of the Group, and for ensuring that proper systems of internal control are in place. The Board has delegated management with the task of creating an effective control environment to the highest possible standards. The internal audit function performs periodic audits to specifically test compliance with policies, standards and procedures and the effectiveness of the internal control environment within the Group. To ensure the effectiveness of the internal systems of control the Head of Internal Audit reviews and tests such systems independently from management, adopting a risk-based approach. The Internal Auditor reports to the Audit Committee, however, the Chairman of the Board of Directors is copied with all Internal Audit Reports issued.

Principles. The management is responsible for the identification and evaluation of key risks applicable to the respective areas of business. The Board receives regular reports from management giving detailed and comprehensive analysis of financial and operational performance, including variance analysis between budgeted and actual figures, activities and prospects.

Listing Rule 5.97.5

It is also hereby decla Governance cover the requirements of the provisions of Listing Rule 5.97.

Approved by the Board of Directors on 7 April 2021 and signed on its behalf by:

John C. Grech	Masaud M.J. Hayat
Chairman	Vice Chairman

FIMBank Group Annual Report & Financial Statements 2020

Remuneration report

For the year ended 31 December 2020

This Section incorporates the Statement of the NRC and the	Remuneration Report as required by Chapters 5 and 12 of the Listing Rules,
respectively.

Statement of the Nomination and Remuneration Committee (as per Section 8 of the Principles)

Terms of reference and membership

Executive Management of FIMBank Group have the appropriate mix of skills, qualifications and experience necessary to fulfil their supervisory and management responsibilities. The NRC also reviews on an annual basis, the remuneration of the Board of Directors and that of Executive Management and ensures that it is in line with principles of good governance.

In 2020, the NRC was composed of Masaud M.J. Hayat, Majed E. Al-Ajeel, Rogers D. LeBaron and Edmond Brincat. John C. Grech in his capacity as


	permanent invitee, together with outgoing Group Chief Executive Offic	GCEO Murali
Subramanian in March 2020 and the newly appointed	G	Adrian A. Gostuski in May, August and December.

Andrea Batelli in his capacity as Company Secretary was invited and attended part of the meeting held in March 2020. The Group Chief Human

Resources Officer

acted as Board Committee Secretary.

Meetings

The Committee met four times during the period under review, which meetings were attended as follows:

Members	Attended
Masaud M.J. Hayat (Chairman)	4
Majed Essa Ahmed Al-Ajeel (Vice Chairman)	4
Rogers David LeBaron (Member)	4
Edmond Brincat (Member)	4

The following matters were discussed and, or determined:

New Independent Directors and Group appointed Director;
Chair

e.-assessment;

NRC charter;
Due diligence procedure for Board Directors;
Board Committees memberships including the newly created Board Implementation Committee;

Senior management recruitment, appointments and promotions;
New Head of Quality and Internal Control position;
New Data Protection Officer and Deputy Data Protection Officer;
Changes in senior management reporting lines;
Executive Management performance, including the outgoing and newly appointed GCEO;
Group salary review, bonus allocation and out of cycle increases/payments;
Succession in control functions;
Strategy project;

r. Recoveries re-organisation and consultancy;

HR Group policies and procedures;
NRC and Remuneration Policy statements for Annual Report; and

unctions.

FIMBank Group Annual Report & Financial Statements 2020

Remuneration statement

the Remuneration Policy, is that the remuneration and other terms of engagement for the Directors shall be competitive to ensure that the Group attracts and retains outstanding individuals of integrity, calibre, credibility and who have the necessary skills and experience to bring an independent judgement to bear on the issues of strategy, performance and resources for the success of the Group.

The Annual General Meeting of Shareholders approves the maximum annual aggregate remuneration which the Directors may receive for the holding of their office. At the Annual General Meeting held remotely on 30 November 2020, the Shareholders approved the maximum aggregate emoluments of the Directors for the financial year ending 31 December 2020 at USD450,000. Directors, in their capacity as Directors of the Bank, are not entitled to profit sharing, share options or pension benefits. The total fees paid for Board of Directors Meetings for the financial year ending 31 December 2020 amounted to USD178,076.

Code provision 8.A.5

For 2020, the total payments received by the Directors from the Bank and the Group were:

•	fixed remuneration	USD360,760
•	variable remuneration	Nil
•	executive share options	Nil
• expenses relating to meetings	USD11,173
•	fringe benefits	USD963

The fixed annual remuneration is inclusive of remuneration with respect to Committee/s the Directors are members of.

The NRC ensures that while its remuneration practices are in compliance with existing directives and regulations, namely the Capital Requirements Directive IV and the Capital Requirements Regulation, it also ensures that the remuneration packages reflect industry benchmarks. This makes it possible for the Group to attract and retain Executives with the right qualities and skills for the proper management of the Group as well as the proper execution of the strategy laid down by the Board of Directors. Unless the current economic scenario deteriorates, no new significant changes are envisaged for the financial year ending 2021.

The various remuneration components, including that for Executive Management are:

fixed remuneration;
variable remuneration; and
fringe benefits.

professional activity within the Group. Executive Management are not entitled to supplementary pension or early retirement schemes.

For 2020, the total payments received by Executive Management (members within the C-suite) from the Bank and the Group were:

•	fixed remuneration	USD2,680,080
•	variable remuneration	USD299,007
•	executive share options granted	Nil
•	fringe benefits	USD803,978

Additional disclosures on the governance process related to the variable portion of remuneration have been made under the Remuneration Policy and under the Directors

Executive Management of the Bank hold both definite and indefinite contracts with varying notice periods, all of which are in line with local legislation. The contracts of Directors and Executive Management do not include provisions for termination payments and other payments linked to early termination, except for those required by law.

NRC decisions are determined by the guidelines set by the Board of Directors when reviewing the Group budget.

FIMBank Group Annual Report & Financial Statements 2020

s per Listing Rules 12.26K)

This Report is being included with the purpose of providing the level of transparency as required with effect from reporting year 2020, following ing Rules, more specifically Chapter oved by the AGM

mplemented without making any derogations and, or deviations

from the procedure for the implementation of the remuneration policy as defined in Chapter 12 of the Listing Rules.

The total remuneration of each individual director split out by component and the percentage proportion between fixed and variable remuneration is detailed in tables below. The GCEO from the Bank. line with the requirement of Chapter 12 of the Listing Rules, received all his remuneration from London Forfaiting Company (LFC), the subsidiary where he holds the position of CEO. For information about the general performance and events of material importance of the Group refer to the Statements of Profit or Loss and the Statements of Other Comprehensive Income on pages 28 and 29 and in the Review of Performance section

within thoach to remuneration is that of ensuring that the Group is able to attract and retain talented and high performing Directors by recognising, valuing and fairly rewarding their contributions

-term strategy, risk appetite, sustainable performance and corporate values.

A key change in the composition of the Board of Directors is that of Adrian A. Gostuski, who moved from being a non-Executive Director of the Bank to being employed by the Bank as an Executive Vice President as from 23 January 2020, and eventually being appointed as GCEO instead of the outgoing GCEO, Murali Subramanian, with effect from 30 March 2020.

With effect from 13 August 2020, Abdel K. Kabariti was appointed as a non-Executive Director to replace Adrian A. Gostuski. During the AGM held on 30 November 2020, the shareholders re-appointed the same non-Executive Directors together with Claire Imam Thompson. Ms Imam Thompson

The non-Executive Directors did not receive any base salary, variable remuneration or compensation in respect of extraordinary items and pension contributions.

The variable remuneration awarded to Executive Directors during the reporting year (performance bonus in respect of financial year 2019) reflects their performance. In determining the variable remuneration of both the former GCEO and the current Deputy CEO their performance was assessed by the NRC against specific goals related to financials as well as other criteria namely, service/client delivery, risk and control, leadership and people management, market position and project and initiatives. On the basis of this assessment, the NRC approved an award of 50% of the maximum awardable performance bonus to the GCEO. The Deputy CEO was awarded the maximum performance bonus possible in view of the material contribution made by LFC towards the profits registered by the Group in 2019.

The Group did not reward any of its Directors with any share-based remuneration. Likewise, there was no need to reclaim any variable remuneration, neither in the form of malus nor in the form of clawback.

				Proportion of fixed
			Total	and variable
Name of Director	Fees	Fringe Benefits	Remuneration	remuneration
	USD	USD	USD	USD
John C. Grech	97,277	963	98,240	100% - 0%
Masaud M. J. Hayat	20,512	-	20,512	100% - 0%
Abdel Karim Kabariti (Appointed on 13 August 2020) *	1,835	-	1,835	100% - 0%
Adrian A. Gostuski (Resigned on 4 August 2020) **	1,831	-	1,831	100% - 0%
Edmond Brincat	46,569	-	46,569	100% - 0%
Hussain Lalani	34,857	-	34,857	100% - 0%
Majed E. Al-Ajeel	21,117	-	21,117	100% - 0%
Mohamed Fekih Ahmed	28,344	-	28,344	100% - 0%
Osama Talat Al-Ghoussein	19,308	-	19,308	100% - 0%
Rabih Soukarieh	26,067	-	26,067	100% - 0%
Rogers D. LeBaron	63,043	-	63,043	100% - 0%

Remuneration denotes the Director's fees following appointment in August 2020.

Remuneration denotes the amount in Directors fees which was received for January 2020.

							FIMBank Group Annual Report & Financial Statements 2020
Name of Director		Position

		Chairperson FIMBank BoD, Chairperson LFC BoD, Chairperson BRIC, Chairperson BCC, Vice Chairperson CGC,
John C. Grech		Permanent Invitee NRC
Masaud M. J. Hayat		Vice Chairperson BoD, Chairperson NRC
Abdel Karim Kabariti		Member BoD
Adrian A. Gostuski		Member BoD, Member BRC
Edmond Brincat		Member BoD (independent member), Chairperson AC, Member NRC, Member BRC
Hussain Lalani		Member BoD, Chairperson BRC, Vice Chairperson AC, Vice Chairperson BRIC, Member LFC BoD
Majed E. Al-Ajeel		Member BoD, Chairpeson CGC, Vice Chairperson NRC, Member LFC BoD
Mohamed Fekih Ahmed		Member BoD, Member BCC, Member LFC BoD
Osama Talat Al-Ghoussein	Member BoD, Vice Chairperson BRC
Rabih Soukarieh		Member BoD, Vice Chairperson BCC
Rogers D LeBaron		Member BoD, Member CGC, Member NRC, Permanent Invitee AC
					Variable
		Fixed Remuneration	Remuneration
					One-	Multi-			Proportion of fixed
		Base		Fringe	year	year	Extraordinary	Pension	Total	and variable
Name of Executive		Salary	Fees	Benefits	variable	variable	items	expense	remuneration	remuneration
		USD	USD	USD	USD	USD	USD	USD	USD
Murali Subramanian	496,951	-	123,258	61,357	-	14,372	767	696,705	91% - 9%
Adrian A. Gostuski	299,369	-	111,589	-	-	-	1,070	412,029	100% - 0%
Simon Lay	461,633	-	99,783	121,071	-	-	45,433	727,920	83% - 17%
Name of Executive		Position

		GCEO FIMBank; Chairperson EXCO, Chairperson MCC, Member ALCO, Member ORMC,
		Chairperson Egypt Factors BoD, Chairperson India Factoring BoD, Member FBS BoD, Member Brasil Factors
Murali Subramanian *		BOD, Member FBS BOD
		GCEO FIMBank, Chairperson MCC, Member ALCO, Member ERPC, Member ITSC, Member ORMC,
Adrian A. Gostuski **		Non-Voting Member BRIC, Chairperson Egypt Factors BoD, Chairperson India Factoring BoD, Chairperson FPI
		BoD, Member Brasil Factors BoD, Member FBS BoD,
Simon Lay		Deputy CEO FIMBank, CEO LFC, Member MCC, Member ALCO, Member ERPC

The definite contract of Murali Subramanian expired on 5 August 2020. The position was relinquished on 30 March 2020.

Adrian A. Gostuski was appointed as Acting Group Chief Executive Officer on 30 March 2020 and confirmed as Group Chief Executive Officer on 7 April 2021.

Denotes membership of:

FIMBank Board of Directors (BoD)
Audit Committee (AC)
Board Credit Committee (BCC)
Board Review and Implementation Committee (BRIC) which replaced the Executive Committee (EXCO)
Board Risk Committee (BRC)
Corporate Governance Committee (CGC)
Nomination and Remuneration Committee (NRC)
Asset Liabilities Committee (ALCO)
Management Credit Committee (MCC)
Emerging Risk and Provisioning Committee (ERPC)
IT Steering Committee (ITSC)
Operational Risk Management Committee (ORMC)

In accordance with Listing Rule 12.26N, the external auditors have checked that all information, as required in terms of Appendix 12.1 of Chapter

FIMBank Group Annual Report & Financial Statements 2020

Statements of financial position

As at 31 December 2020

		Group	Bank
		2020	2019	2020	2019
	Note	USD	USD	USD	USD
Assets
Balances with the Central Bank of Malta,
treasury bills and cash	18	319,287,524	208,277,004	319,267,749	208,259,407
Derivative assets held for risk management	19	991,624	142,249	1,019,288	96,285
Trading assets	20	452,326,547	460,238,536	-	-
Loans and advances to banks	21	193,139,577	246,078,195	179,364,067	232,351,750
Loans and advances to customers	22	591,995,726	649,890,157	779,834,360	811,152,849
Financial assets at fair value through
profit or loss	23	20,385,323	125,342,798	20,385,323	125,342,798
Financial assets at fair value through
other comprehensive income	24	153,327,686	79,367,556	153,327,686	79,367,556
Investments at amortised cost	25	9,839,457	9,785,496	9,839,457	9,785,496
Investments in subsidiaries	26	-	-	147,436,214	147,948,385
Property and equipment	27	32,166,816	33,786,469	3,507,509	5,229,059
Investment property	28	17,223,820	17,223,820	-	-
Intangible assets and goodwill	29	9,698,335	13,107,881	4,008,725	4,647,642
Current tax assets		1,397,553	1,846,627	76,225	226,886
Deferred tax assets	30	25,875,734	36,773,586	15,590,955	22,011,162
Other assets	31	6,390,301	11,169,850	5,570,562	8,824,153
Total assets		1,834,046,023	1,893,030,224	1,639,228,120	1,655,243,428
Liabilities and equity
Liabilities
Derivative liabilities held for risk management	19	1,629,434	187,700	1,629,434	193,691
Amounts owed to banks	32	429,443,480	452,291,304	387,900,641	405,072,025
Amounts owed to customers	33	1,101,570,295	1,057,824,242	1,037,118,337	978,134,002
Debt securities in issue	34	50,832,661	79,550,865	-	-
Current tax liabilities		337,725	588,368	-	-
Deferred tax liabilities	30	4,215,075	4,215,075	-	-
Provision for liabilities and charges	35	275,889	88,435	173,051	85,159
Other liabilities	36	12,583,335	17,271,633	7,645,488	13,077,128
Total liabilities		1,600,887,894	1,612,017,622	1,434,466,951	1,396,562,005
Equity
Share capital	37	261,221,882	261,221,882	261,221,882	261,221,882
Share premium	37	858,885	858,885	858,885	858,885
Reserve for general banking risks	37	3,358,738	2,323,486	3,358,738	2,323,486
Currency translation reserve	37	(10,011,229)	(7,086,044)	-	-
Fair value reserve	37	13,367,626	11,311,278	2,413,581	357,233
Other reserve	37	2,982,435	2,916,863	2,681,041	2,681,041
(Accumulated losses)/Retained earnings	37	(39,027,680)	10,937,616	(65,772,958)	(8,761,104)
Total equity attributable to equity holders of the Bank		232,750,657	282,483,966	204,761,169	258,681,423
Non-controlling interests	38	407,472	(1,471,364)	-	-

Total equity		233,158,129	281,012,602	204,761,169	258,681,423

Total liabilities and equity		1,834,046,023	1,893,030,224	1,639,228,120	1,655,243,428

FIMBank Group Annual Report & Financial Statements 2020

Statements of financial position

As at 31 December 2020

		Group		Bank
		2020	2019	2020	2019
	Note	USD	USD	USD	USD
Memorandum items
Contingent liabilities	39	1,910,418	4,899,827	44,246,902	61,628,654
Commitments	40	105,043,456	165,939,920	105,245,766	143,026,427

The official middle rate of exchange issued by the European Central Bank between US Dollar and Euro as at 31 December 2020 was 1.2271. The Notes on pages 36 to 147 are an integral part of these Financial Statements.

The Financial Statements on pages 26 to 147 were approved and authorised for issue by the Board of Directors on 7 April 2021 and were signed on its behalf by:

John C. Grech	Masaud M. J. Hayat	Adrian A. Gostuski	Juraj Beno
Chairman	Vice Chairman	Chief Executive Officer	Chief Financial Officer

Statements of profit or loss

For the year ended 31 December 2020

	Note
Interest income	9
Interest expense	9
Net interest income	9
Fee and commission income	10
Fee and commission expense	10
Net fee and commission income	10
Net trading results	11
Net gain from other financial instruments carried
at fair value	12
Dividend income	13
Other operating income	14
Operating income before net impairment
Net impairment charge on financial assets	5
Impairment of goodwill
Impairment of investments in subsidiaries
Operating income/(loss)
Administrative expenses	15
Depreciation and amortisation	27/29
Total operating expenses
(Loss)/Profit before tax
Taxation	16
(Loss)/Profit for the year
(Loss)/Profit attributable to:
Owners of the Bank
Non-controlling interests	38
Earnings per share
Basic (loss)/earnings per share (US cents)	17

FIMBank Group Annual Report & Financial Statements 2020

Group		Bank
2020	2019	2020	2019
USD	USD	USD	USD
42,210,926	50,531,699	22,721,724	30,311,233
(13,567,776)	(18,210,466)	(11,482,001)	(14,037,860)
28,643,150	32,321,233	11,239,723	16,273,373
14,256,769	18,426,111	5,366,867	7,753,143
(5,287,088)	(5,945,589)	(2,552,278)	(3,078,283)
8,969,681	12,480,522	2,814,589	4,674,860
(121,164)	5,837,243	(831,244)	922,619
277,137	2,185,316	277,137	2,185,316
240,817	3,591,794	7,240,817	43,591,794
893,869	932,009	120,725	118,904
38,903,490	57,348,117	20,861,747	67,766,866
(32,990,319)	(13,066,172)	(34,272,400)	(14,210,257)
(2,687,000)	-	-	-
-	-	(9,314,000)	-
3,226,171	44,281,945	(22,724,653)	53,556,609
(35,610,076)	(33,756,493)	(23,722,803)	(20,305,701)
(3,426,029)	(3,263,328)	(2,962,370)	(2,896,531)
(39,036,105)	(37,019,821)	(26,685,173)	(23,202,232)

(35,809,934)	7,262,124	(49,409,826)	30,354,377
(11,222,821)	(2,732,021)	(6,566,776)	(765,433)

(47,032,755)	4,530,103	(55,976,602)	29,588,944
(46,898,575)	4,419,145	(55,976,602)	29,588,944
(134,180)	110,958	-	-
(47,032,755)	4,530,103	(55,976,602)	29,588,944
(8.98)	0.86	(10.71)	5.75

The Notes on pages 36 to 147 are an integral part of these Financial Statements.

FIMBank Group Annual Report & Financial Statements 2020

Statements of other comprehensive income

For the year ended 31 December 2020

		Group		Bank
		2020	2019	2020	2019
		USD	USD	USD	USD
(Loss)/Profit for the year	(47,032,755)	4,530,103	(55,976,602)	29,588,944
Other comprehensive (expense)/income:
Items that are or may be reclassified subsequently to
profit or loss:
Movement in translation reserve:
- Foreign operations - foreign currency translation differences	(2,878,066)	(1,886,278)	-	-
Movement in fair value reserve:
- Debt investments in fair value through other comprehensive
income - net change in fair value	3,784,630	2,004,196	3,784,630	2,004,196
- Debt investments in fair value through other comprehensive
income - reclassified to profit or loss	(1,308,075)	(2,130,473)	(1,308,075)	(2,130,473)
Related tax	(420,207)	(274,744)	(420,207)	(274,744)
Other comprehensive (expense)/income, net of tax	(821,718)	(2,287,299)	2,056,348	(401,021)

Total comprehensive (expense)/income	(47,854,473)	2,242,804	(53,920,254)	29,187,923
Total comprehensive (expense)/income attributable to:
Owners of the Bank	(47,767,412)	2,098,914	(53,920,254)	29,187,923
Non-controlling interests	(87,061)	143,890	-	-
		(47,854,473)	2,242,804	(53,920,254)	29,187,923

FIMBank Group Annual Report & Financial Statements 2020

Statements of changes in equity

For the year ended 31 December 2020

Group

				Attributable to equity holders of the Bank
							Retained
			Reserve for	Currency			earnings/		Non-
	Share	Share	general	translation	Fair value	Other	(Accumulated		controlling	Total
	capital	premium	banking risks	reserve	reserve	reserve	loss)	Total	interests	equity
	USD	USD	USD	USD	USD	USD	USD	USD	USD	USD
Balance at 1 January 2020	261,221,882	858,885	2,323,486	(7,086,044)	11,311,278	2,916,863	10,937,616	282,483,966	(1,471,364)	281,012,602
Total comprehensive income
Loss for the year	-	-	-	-	-	-	(46,898,575)	(46,898,575)	(134,180)	(47,032,755)

Other comprehensive income:

Fair value reserve:

Debt investments at fair value through other comprehensive income - net change


	in fair value	-	-	-	-	3,364,423	-	-	3,364,423	-	3,364,423
-	Debt investments at fair value through other
	comprehensive income - reclassified
	to profit or loss	-	-	-	-	(1,308,075)	-	-	(1,308,075)	-	(1,308,075)
Translation reserve:
-	Foreign operations - foreign translation difference	-	-	-	(2,925,185)	-	-	-	(2,925,185)	47,119	(2,878,066)
Total other comprehensive income	-	-	-	(2,925,185)	2,056,348	-	-	(868,837)	47,119	(821,718)

Total comprehensive income	-	-	-	(2,925,185)	2,056,348	-	(46,898,575)	(47,767,412)	(87,061)	(47,854,473)
Transfer between reserves	-	-	1,035,252	-	-	65,572	(3,066,721)	(1,965,897)	1,965,897	-

Balance at 31 December 2020		261,221,882	858,885	3,358,738	(10,011,229)	13,367,626	2,982,435	(39,027,680)	232,750,657	407,472	233,158,129

FIMBank Group Annual Report & Financial Statements 2020

Statements of changes in equity

For the year ended 31 December 2020

Group

				Attributable to equity holders of the Bank
							Retained
			Reserve for	Currency			earnings/		Non-
	Share	Share	general	translation	Fair value	Other	(Accumulated		controlling	Total
	capital	premium	banking risks	reserve	reserve	reserve	loss)	Total	interests	equity
	USD	USD	USD	USD	USD	USD	USD	USD	USD	USD
Balance at 1 January 2019	252,720,107	9,275,773	1,242,511	(5,166,834)	11,712,299	2,837,122	7,684,096	280,305,074	(1,615,254)	278,689,820
Total comprehensive income
Profit for the year	-	-	-	-	-	-	4,419,145	4,419,145	110,958	4,530,103

Other comprehensive income:

Fair value reserve:

Debt investments at fair value through other comprehensive income - net change


	in fair value	-	-	-	-	1,729,452	-	-	1,729,452	-	1,729,452
-	Debt investments at fair value through other
	comprehensive income - reclassified
	to profit or loss	-	-	-	-	(2,130,473)	-	-	(2,130,473)	-	(2,130,473)
Translation reserve:
-	Foreign operations - foreign translation difference	-	-	-	(1,919,210)	-	-	-	(1,919,210)	32,932	(1,886,278)
Total other comprehensive income	-	-	-	(1,919,210)	(401,021)	-	-	(2,320,231)	32,932	(2,287,299)

Total comprehensive income	-	-	-	(1,919,210)	(401,021)	-	4,419,145	2,098,914	143,890	2,242,804
Transactions with owners of the Bank
Contributions and distributions:
Issue of new shares, net of transaction costs	75,253	9,634	-	-	-	(4,909)	-	79,978	-	79,978
Bonus issue of shares	8,426,522	(8,426,522)	-	-	-	-	-	-	-	-
Total transactions with owners of the Bank	8,501,775	(8,416,888)	-	-	-	(4,909)	-	79,978	-	79,978
Transfer between reserves	-	-	1,080,975	-	-	84,650	(1,165,625)	-	-	-

Balance at 31 December 2019		261,221,882	858,885	2,323,486	(7,086,044)	11,311,278	2,916,863	10,937,616	282,483,966	(1,471,364)	281,012,602

FIMBank Group Annual Report & Financial Statements 2020

Statements of changes in equity

For the year ended 31 December 2020

Bank

				Reserve for
		Share	Share	general	Fair value	Other	Accumulated	Total
		capital	premium	banking risks	reserve	reserve	losses	equity
		USD	USD	USD	USD	USD	USD	USD
Balance at 1 January 2020	261,221,882	858,885	2,323,486	357,233	2,681,041	(8,761,104)	258,681,423
Total comprehensive expense
Loss for the year	-	-	-	-	-	(55,976,602)	(55,976,602)
Other comprehensive expense:
Fair value reserve:
-	Debt investments at fair value through other comprehensive income - net change in fair value	-	-	-	3,364,423	-	-	3,364,423
-	Debt investments at fair value through other comprehensive income - reclassified to profit or loss	-	-	-	(1,308,075)	-	-	(1,308,075)
Total other comprehensive expense	-	-	-	2,056,348	-	-	2,056,348

Total comprehensive expense	-	-	-	2,056,348	-	(55,976,602)	(53,920,254)
Transfer between reserves	-	-	1,035,252	-	-	(1,035,252)	-

Balance at 31 December 2020	261,221,882	858,885	3,358,738	2,413,581	2,681,041	(65,772,958)	204,761,169

FIMBank Group Annual Report & Financial Statements 2020

Statements of changes in equity

For the year ended 31 December 2020

Bank

					Reserve for
			Share	Share	general	Fair value	Other	Accumulated	Total
			capital	premium	banking risks	reserve	reserve	losses	equity
			USD	USD	USD	USD	USD	USD	USD
Balance at 1 January 2019	252,720,107	9,275,773	1,242,511	758,254	2,681,041	(37,269,073)	229,408,613
Total comprehensive income
Profit for the year	-	-	-	-	-	29,588,944	29,588,944
Other comprehensive income:
Fair value reserve:
-	Debt investments at fair value through other comprehensive income - net change in fair value	-	-	-	1,729,452	-	-	1,729,452
-	Debt investments at fair value through other comprehensive income - reclassified to profit or loss	-	-	-	(2,130,473)	-	-	(2,130,473)
Total other comprehensive income	-	-	-	(401,021)	-	-	(401,021)

Total comprehensive income	-	-	-	(401,021)	-	29,588,944	29,187,923
Transactions with owners of the Bank
Contributions and distributions:
Issue of new shares, net of transaction costs	75,253	9,634	-	-	-	-	84,887
Bonus issue of shares	8,426,522	(8,426,522)	-	-	-	-	-
Total transactions with owners of the Bank	8,501,775	(8,416,888)	-	-	-	-	84,887
Transfer between reserves	-	-	1,080,975	-	-	(1,080,975)	-

Balance at 31 December 2019		261,221,882	858,885	2,323,486	357,233	2,681,041	(8,761,104)	258,681,423

FIMBank Group Annual Report & Financial Statements 2020

Statements of cash flows

For the year ended 31 December 2020

			Group		Bank
			2020	2019	2020	2019
			USD	USD	USD	USD
Cash flows from operating activities
Interest and commission receipts	67,872,276	71,560,049	25,609,316	36,009,502
Exchange paid	(12,300,696)	(562,634)	(11,405,644)	(489,810)
Interest and commission payments	(37,471,828)	(25,998,371)	(13,793,109)	(18,937,449)
Payments to employees and suppliers	(36,713,674)	(35,414,659)	(27,271,356)	(18,718,132)
Operating (loss)/profit before changes in operating
	assets/liabilities	(18,613,922)	9,584,385	(26,860,793)	(2,135,889)
Decrease /(Increase) in operating assets:
-	Trading assets	11,620,752	(111,140,231)	-	-
-	Loans and advances to customers and banks	(117,922,078)	71,026,220	(132,591,160)	88,523,168
-	Other assets	4,763,352	(1,485,134)	4,068,416	(1,619,293)
Increase/(Decrease) in operating liabilities:
-	Amounts owed to customers and banks	204,687,776	45,935,781	216,340,869	60,938,417
-	Other liabilities	(2,133,345)	1,140,813	(1,965,939)	1,325,649
-	Net advances from subsidiary companies	-	-	3,250,217	(118,129,368)
Net cash generated from operating activities

	before income tax	82,402,535	15,061,834	62,241,610	28,902,684
Income tax paid	(829,093)	(1,315,725)	(393,419)	(454,818)

Net cash flows from operating activities	81,573,442	13,746,109	61,848,191	28,447,866
Cash flows from investing activities
Payments to acquire financial assets at fair value
	through profit or loss	-	(2,469,245)	-	(2,469,245)
Proceeds to acquire financial assets at fair value
	through other comprehensive income	(109,616,706)	(84,984,922)	(109,616,706)	(84,984,922)
Payments to acquire shares in subsidiary companies	-	-	(1,801,829)	(5,352,772)
Payments to acquire property and equipment	(477,381)	(1,085,120)	(142,744)	(372,658)
Payments to acquire intangible assets	(393,096)	(951,219)	(393,096)	(951,219)
Proceeds on disposal of financial assets at fair value
	through profit or loss	105,639,259	50,000,000	105,639,259	50,000,000
Proceeds on disposal of financial assets at fair value
	through other comprehensive income	49,246,582	93,035,159	49,246,582	93,035,159
Proceeds on disposal of property and equipment	328	8,966	-	3,551
Receipt of dividend	240,817	4,628,411	240,817	4,628,411
Net cash flows from investing activities	44,639,803	58,182,030	43,172,283	53,536,305

Increase in cash and cash equivalents c/f		126,213,245	71,928,139	105,020,474	81,984,171

FIMBank Group Annual Report & Financial Statements 2020

Statements of cash flows

For the year ended 31 December 2020

			Group		Bank
			2020	2019	2020	2019
			USD	USD	USD	USD
Increase in cash and cash equivalents b/f	126,213,245	71,928,139	105,020,474	81,984,171
Cash flows from financing activities
-	Issue of share capital	-	84,887	-	84,887
-	Net movement in debt securities	(28,492,240)	(7,873,209)	-	(14,834,943)
-	Payment of lease liabilities	(967,167)	(751,807)	(997,729)	(2,354,026)
Net cash flows used in financing activities	(29,459,407)	(8,540,129)	(997,729)	(17,104,082)

Increase in cash and cash equivalents	96,753,838	63,388,010	104,022,745	64,880,089
Analysed as follows:
-	Effect of exchange rate changes on cash and cash equivalents	27,958,339	(5,031,085)	29,536,105	(5,356,234)
-	Net increase in cash and cash equivalents	68,795,499	68,419,095	74,486,640	70,236,323
Increase in cash and cash equivalents	96,753,838	63,388,010	104,022,745	64,880,089
Cash and cash equivalents at beginning of year	145,170,011	81,782,001	163,886,941	99,006,852

Cash and cash equivalents at end of year		241,923,849	145,170,011	267,909,686	163,886,941

FIMBank Group Annual Report & Financial Statements 2020

Notes to the financial statements

For the year ended 31 December 2020

1	Reporting entity	24	Financial assets at fair value through
2	Basis of preparation		other comprehensive income
3	Significant accounting policies	25	Investments at amortised cost
4	Changes in accounting policies	26	Investments in subsidiaries
5	Financial risk review	27	Property and equipment
6	Fair values of financial instruments	28	Investment property
7	Classification of financial assets and liabilities	29	Intangible assets and goodwill
8	Operating segments	30	Deferred taxation
9	Net interest income	31	Other assets
10	Net fee and commission income	32	Amounts owed to banks
11	Net trading results	33	Amounts owed to customers
12	Net gain from other financial instruments	34	Debt securities in issue
	carried at fair value	35	Provision for liabilities and charges
13	Dividend income	36	Other liabilities
14	Other operating income	37	Equity
15	Administrative expenses	38	Non-controlling interest
16	Taxation	39	Contingent liabilities
17	Earnings per share	40	Commitments
18	Balances with the Central Bank of Malta,	41	Cash and cash equivalents
	treasury bills and cash	42	Leases
19	Derivatives held for risk management	43	Related parties
20	Trading assets	44	Capital commitments
21	Loans and advances to banks	45	Financial commitments
22	Loans and advances to customers	46	Subsequent events
23	Financial assets at fair value through profit or loss	47	Ultimate parent company

FIMBank Group Annual Report & Financial Statements 2020

Notes to the financial statements

For the year ended 31 December 2020

Reporting entity

e Exchange Financial Statements of the Bank as at and for the

year ended 31 December 2020

Basis of preparation

The Financial Statements have been prepared and presented in accordance with International Financial Reporting Standards as adopted by the EU. All references in these Financial Statements to IAS, IFRS or SIC/IFRIC interpretations refer to those adopted by the EU.

Article 4 of Regulation 1606/2002/EC requires that, companies governed by the law of an EU Member State shall prepare their consolidated financial statements in conformity with IFRS as adopted by the EU if, at their reporting date, their securities are admitted to trading on a regulated market of any EU Member State. This Regulation prevails over the provisions of the Companies Act, 1995, (Chapter 386, Laws of Malta) to the extent that the said provisions of the Companies Act, 1995, (Chapter 386, Laws of Malta) are incompatible with the provisions of the Regulation.

These Financial Statements have also been drawn up in accordance with the provisions of the Banking Act, 1994 (Chapter 371, Laws of Malta) and the Companies Act, 1995 (Chapter 386, Laws of Malta).

On 11 March 2020, the World Health- pandemic. The impact of the outbreak is widespread across the globe and has distressed many countries including those markets where the Group operates. The circumstances have rapidly evolved, forcing Governments to implement severe measures and restrictions, including partial or full lockdowns, restrictions on business activities, public gatherings, public spaces, travel, transportation, schools, retail stores, and various other activities. Businesses were forced to close or restrict their activities including restricted access to offices, outlets, warehouses and production plants. The pandemic, as well as these restrictive measures, have created a significant amount of uncertainty and disruption in economic activity and are having an impact across all industries.

All the while the Group ensured that all stakeholders, particularly its customers and employees were supported in more ways than one. As expected, the pandemic and its effects on the global economy had a significant impact on the banking industry, client services, asset valuations, expected credit losses and revenues to name a few. The impact on the Group was no exception. The Group has taken necessary measures to maintain a strong balance sheet and liquidity buffers whilst also recognising any deterioration of asset value where appropriate.

Although the financial performance has been significantly impacted by the pandemic and although there is still a high degree of uncertainty and risk associated with the pandemic and the global economic forecasts, the Board of Directors confirm that, at the time of approving these Financial Statements, the Group is capable of continuing to operate as a going concern for the foreseeable future.

In preparing these Financial Statements, consideration has also been given to the Public Statement ESMA 32-63-1041, issued by the European Securities and Markets Authority on 28 October 2020, which promotes transparency and consistent application of European requirements for information provided in the annual financial reports of listed companies under the current circumstances related to the COVID-19 pandemic.

The Financial Statements were authorised for issue by the Board of Directors on 7 April 2021.

FIMBank Group Annual Report & Financial Statements 2020

The Financial Statements have been prepared on the historical cost basis except for the following which are measured at fair value:

derivatives held for risk management;
trading assets;
financial assets at fair value through profit or loss;
financial assets at fair value through other comprehensive income;
freehold land and premises and improvement to premises; and
investment property.

These Financial Statements are presented in United States Dollars ( USD

The preparation of the Financial Statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

Accounting Policies and the key sources of estimation uncertainty were impacted by the volatility resulting from the COVID-19 pandemic. Such impact on specific areas of significant judgement is separately disclosed in Notes 5, 26, 27, 28, 29 and 30 of these Financial Statements.

Information about judgements made in applying Accounting Policies that have the most significant effects on the amounts recognised in the Financial Statements is included in the following notes:

Accounting Policy 3.10.2 classification of financial assets: assessment of the business model within which the assets are held and

assessment of whether the contractual terms of the financial asset are	SPPI on the
principal amount outstanding; and

Note 5.2.1.3 establishing the criteria for determining whether credit risk on the financial asset has increased significantly since initial recognition, determining methodology for incorporating forward-looking information into measurement of the Expected

Credit L

and selection and approval of models used to measure ECL.

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ending 31 December 2020 is set out below in relation to the impairment of financial instruments and in the following Notes in relation to other areas:

Note 2.4.2.1 determination of the fair value of financial instruments with significant unobservable inputs;
Accounting Policy 3.10.8 impairment of financial instruments: key assumptions used in estimating recoverable cash flows;
Note 5 impairment of financial instruments: determining inputs into the ECL measurement model, including incorporation of forward-looking information;
Note 29.2 impairment testing for CGUs containing goodwill: key assumptions underlying recoverable amounts; and
Note 30 recognition of deferred tax assets: availability of future taxable profit against which carry-forward tax losses can be used.

FIMBank Group Annual Report & Financial Statements 2020

Accounting Policies and disclosures require the measurement of fair values, for both financial and non- financial assets and liabilities.

The Group has an established control framework with respect to the measurement of fair values. This framework includes reports to Executive Management having overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values. Market risk and related exposure to fair value movement is also a key function of the

-Liabilities Committee and all valuations of financial instruments are reported to the Committee for review and Committee.

The Group measures fair values of an asset or liability using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements:

Level 1: inputs that are quoted market prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes assets or liabilities, valued using quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques in which all significant inputs are directly or indirectly observable from market data.

Level 3: inputs that are unobservable. This category includes all assets or liabilities for which the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant eff includes assets or liabilities that are valued based on quoted prices for similar instruments for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments.

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Further information about the assumptions made in measuring fair values is included in the following Notes:

Note 6 fair values of financial instruments;
Note 27 property and equipment; and
Note 28 investment property.

FIMBank Group Annual Report & Financial Statements 2020

Significant accounting policies

The Group has consistently applied the following Accounting Policies to all periods presented in these Consolidated Financial Statements, except if mentioned otherwise (Refer to Note 4).

Business combinations are accounted for using the acquisition method as at the acquisition date i.e. when control is transferred to the Group.

In determining whether a particular set of activities and assets is a business, the Group assesses whether the set of activities and assets acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability to produce outputs. f whether an acquired set of activities and assets is not a business. The optional concentration test is met if substantially all of the fair value of the gross assets acquired is

concentrated in a single identifiable asset or group of similar identifiable assets. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if they are related to the issue of debt or equity securities. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit consideration transferred or loss.

Any contingent consideration payable is measured at fair value at the acquisition date. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not re-measured and settlement is accounted for within equity. Other contingent consideration is measured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.

If share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree

measuring the consideration transferred in the business combination. This determination is based on the market-based value of the

replacement awards compared with the market-d the extent to which the replacement awards relate to pre-combination service.

Subsidiaries are investees controlled by the Group. The Group controls an investee if it is exposed to, or has rights to, variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The Group reassesses whether it has control if there are changes to one or more of the elements of control. This includes circumstances in which protective rights held (e.g. those resulting from a lending relationship) become substantive and lead to the Group having power over an investee.

The financial statements of subsidiaries are included in the Consolidated Financial Statements from the date that control commences until the date that control ceases. The Financial Statements have been prepared using uniform Accounting Policies for like transactions and other events in similar circumstances.

Equity-accounted investees are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies.

A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities.

Interests in equity-accounted investees and joint ventures are accounted for using the equity method. They are initially recognised at cost, which includes transaction costs. Subsequent to initial recognition, the Consolidated Financial S share of the profit or loss and OCI of equity-accounted investees, until the date on which significant influence or joint control ceases.

FIMBank Group Annual Report & Financial Statements 2020

Non-controlling interests ( NCI ) identifiable net assets at the date of ity

transactions.

A discontinued operation is a component of the from the rest of the Group and which:

represents a separate major line of business or geographic areas of operations;
is part of a single co-ordinated plan to dispose of a separate major line of business or geographic area of operations; or
is a subsidiary acquired exclusively with a view to re-sell.

Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be classified as held-for-sale.

When an operation is classified as a discontinued operation, the comparative Statement of Profit or Loss and OCI is re-presented as if the operation had been discontinued from the start of the comparative year.

Intra-group balances, and income and expenses (except for foreign currency transaction gains or losses) arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related NCI and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at the fair value when the control is lost unless the Group retains significant influence or joint control, in which case such interest is accounted for in accordance with Accounting Policy 3.1.3.

Transactions in foreign currencies are translated into the respective functional currency of the operation at the spot exchange rate at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the spot exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in foreign currency translated at the spot exchange rate at the end of the year.

Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the spot exchange rate at the date on which the fair value is determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated using the spot exchange rate at the date of the transaction.

Foreign currency differences arising on translation are generally recognised in profit or loss. However, foreign currency differences arising from the translation of the following items are recognised in OCI:

equity investments in respect of which an election has been made to present subsequent changes in fair value in OCI;
a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective (see Accounting Policy 3.13.1); and
qualifying cash flow hedges to the extent that the hedge is effective.

FIMBank Group Annual Report & Financial Statements 2020

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into US Dollar at spot exchange rates at the reporting date. The income and expenses of foreign operations are translated into US Dollar at spot exchange rates at the dates of the transactions.

Foreign currency differences are recognised in other comprehensive income, and accumulated in the foreign currency translation reserve, except to the extent that the translation difference is allocated to non-controlling interest. When a foreign operation is disposed of such that control is lost, the cumulative amount in the currency translation reserve is transferred to profit or loss as part of the gain or loss on disposal. On the partial disposal of a subsidiary that includes a foreign operation whilst retaining control then the relevant proportion of the cumulative amount is re-attributed to non-controlling interest.

If the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, then foreign currency differences arising on the item form part of the net investment in the foreign operation and are recognised in other comprehensive income, and accumulated in the translation reserve within equity.

Interest income and expense are recognised in profit or loss using the effective interest method. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to:

the gross carrying amount of the financial asset; or
the amortised cost of the financial liability.

When calculating the effective interest rate for financial instruments other than purchased or originated credit-impaired assets, the Group estimates future cash flows considering all contractual terms of the financial instrument, but not ECL. For purchased or originated credit impaired financial assets, a credit-adjusted effective interest rate is calculated using estimated future cash flows including ECL.

The calculation of the effective interest rate includes transaction costs and fees and points paid or received that are an integral part of the effective interest rate. Transaction costs include incremental costs that are directly attributable to the acquisition or issue of a financial asset or financial liability.

The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured on initial recognition minus the principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount and, for financial assets, adjusted for any expected credit loss allowance.

The gross carrying amount of a financial asset is the amortised cost of a financial asset before adjusting for any expected credit loss allowance.

The effective interest rate of a financial asset or financial liability is calculated on initial recognition of a financial asset or a financial liability. In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit impaired) or to the amortised cost of the liability. The effective interest rate is revised as a result of periodic re-estimation of cash flows of floating rate instruments to reflect movements in market rates of interest. The effective interest rate is also revised for fair value hedge adjustments at the date amortisation of the hedge adjustment begins.

However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortised cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis.

For financial assets that were credit-impaired on initial recognition, interest income is calculated by applying the credit-adjusted effective interest rate to the amortised cost of the asset. The calculation of interest income does not revert to a gross basis, even if the credit risk of the asset improves. For information on when financial assets are credit-impaired see Accounting Policy 3.10.8.

FIMBank Group Annual Report & Financial Statements 2020

Interest income calculated using the effective interest method presented in the Statement of Profit or Loss and OCI includes:

interest on financial assets measured at amortised cost;
interest on debt instruments measured at fair value through other comprehensive income; and
negative interest on financial liabilities measured at amortised cost.

Interest expense presented in the Statement of Profit or Loss and OCI includes:

financial liabilities measured at amortised cost;
negative interest on financial assets measured at amortised cost; and
interest expense on lease liabilities.

Interest income and expense on other financial assets and financial liabilities at fair value through profit or loss are presented in net gain or loss from other financial assets at fair value through profit or loss (see Accounting Policy 3.6).

Cash flows related to capitalised interest are presented in the Statement of Cash Flows consistently with interest cash flows that are not capitalised.

Fees and commission income and expense that are integral to the effective interest rate on a financial asset or liability are included in the measurement of the effective interest rate.

Other fees and commission income, including account servicing fees, sales commission, placement fees and syndication fees, are recognised as the related services are performed. If a loan commitment is not expected to result in the draw-down of a loan, the related loan commitment fees are recognised on a straight-line basis over the commitment period.

Other fees and commission expense relate mainly to transaction and service fees, which are expensed as the services are received.

Net trading results comprises gains less losses related to trading assets and liabilities and net trading gains or losses on derivatives held for risk management purposes and includes all realised and unrealised fair value changes and foreign exchange differences.

Net gain or loss from other financial instruments at fair value through profit or loss relates to non-trading derivatives held for risk management purposes that do not form part of qualifying hedging relationships, financial assets and financial liabilities designated as at fair value through profit or loss and also non-trading assets mandatorily measured at fair value through profit or loss.

Dividend income is recognised when the right to receive income is established. Usually this is the ex-dividend date for equity securities.

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group uses the definition of a lease in IFRS 16.

This policy is applied to contracts entered into (or changed) on or after 1 January 2019.

FIMBank Group Annual Report & Financial Statements 2020

At commencement or on modification of a contract that contains a lease component, the Group allocates consideration in the contract to each lease component on the basis of its relative standalone price. However, for leases of office premises the Group has elected not to separate non-lease components and accounts for the lease and non-lease components as a single lease component.

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove any improvements made to office premises.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate rate. Generally, the Group uses its incremental borrowing rate as the discount rate. The Group determines its incremental borrowing rate by analysing its borrowings from various external sources and makes certain adjustments to reflect the terms of the lease and type of asset leased.

Lease payments included in the measurement of the lease liability comprise the following:

fixed payments, including in-substance fixed payments;
variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
amounts expected to be payable under a residual value guarantee; and
the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The Group presents right-of-	Statement of
Financial Position.

The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term leases. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

At inception or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone selling prices.

When the Group acts as a lessor, it determines at lease inception whether the lease is a finance lease or an operating lease.

To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease.

As part of this assessment, the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

FIMBank Group Annual Report & Financial Statements 2020

The Group applies the derecognition and impairment requirements in IFRS 9 to the net investment in the lease (see Accounting Policies 3.10.3 and 3.10.8). The Group further regularly views estimated unguaranteed residual values used in calculating the gross investment in the lease.

The Group recognises lease payments received under operating leases as income on a straight-line basis over the lease term as part operating incomeThe Group does not have any finance leases under IFRS 16.

Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in OCI.

The Group has determined that interest and penalties related to income taxes, including uncertain tax treatments, do not meet the definition of income taxes, and therefore has accounted for them under IAS 37 Provisions, Contingent Liabilities and Contingent

Assets and has recognised the related

Current tax

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends.

Current tax assets and liabilities are offset only if certain criteria are met.

Deferred tax

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

Deferred tax is not recognised for:

temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;
temporary differences related to investments in subsidiaries to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Future taxable profits are determined based on the reversal of relevant taxable temporary differences. If the amount of taxable temporary differences is insufficient to recognise a deferred tax asset in full, then future taxable profits, adjusted for reversals of existing temporary differences, are considered, based on business plans for individual subsidiaries in the Group. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improves.

Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date, and reflects uncertainty related to income taxes, if there is any.

The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. For this purpose, the carrying amount of investment property measured at fair value is presumed to be recovered through sale, and the Group has not rebutted this presumption.

Deferred tax assets and liabilities are offset only if certain criteria are met.

FIMBank Group Annual Report & Financial Statements 2020

The Group initially recognises loans and advances, deposits, debt securities issued and subordinated liabilities on the date on which they are originated. All other financial instruments (including regular-way purchases and sales of financial assets) are recognised on the trade date, which is the date on which the Group becomes a party to the contractual provisions of the instrument.

A financial asset or financial liability is measured initially at fair value plus, for an item not at fair value through profit or loss, transaction costs that are directly attributable to its acquisition or issue.

On initial recognition, a financial asset is classified as measured at: amortised cost, fair value through other comprehensive income (debt or equity) or fair value through profit or loss.

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated at fair value through profit or loss:

the asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and
the contractual terms of the financial asset give rise on specified dates to cash flows that are SPPI.

A debt instrument is measured at fair value through other comprehensive income only if it meets both of the following conditions and is not designated as fair value through profit or loss:

the asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
the contractual terms of the financial asset give rise on specified dates to cash flows that are SPPI.

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in fair value in OCI (see Accounting Policy 3.15). This election is made on an investment-by-investment basis.

All other financial assets are classified as measured at fair value through profit or loss.

In addition, on initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at fair value through other comprehensive income at fair value through profit or loss, if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise (see Accounting Policy 3.10.9).

The Group makes an assessment of the objective of a business model in which an asset is held at a portfolio level because this best reflects the way the business is managed, and information is provided to management. The information considered includes:

the stated policies and objectives for the portfolio and the operation of those policies in practice. In particular, whether

ng the duration of the financial assets to the duration of the liabilities that are funding those assets or realising cash flows through the sale of the assets;

•

the risks that affect the performance of the business model (and the financial assets held within that business model) and its strategy for how those risks are managed;
how managers of the business are compensated (e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected); and
the frequency, volume and timing of sales in prior periods, the reasons for such sales and its expectations about future sales activity. However, information about sales activity is not considered in isolation, but as pastated objective for managing the financial assets is achieved and how cash flows are realised.

Financial assets that are held for trading or managed and whose performance is evaluated on a fair value basis are measured at fair value through profit or loss because they are neither held to collect contractual cash flows nor held both to collect contractual cash flows and to sell financial assets.

FIMBank Group Annual Report & Financial Statements 2020

defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as profit margin.

In assessing whether the contractual cash flows are SPPI, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making the assessment, the Group considers:

contingent events that would change the amount and timing of cash flows;
leverage features;
prepayment and extension terms;

•	non-recourse loans); and

features that modify consideration of the time value of money (e.g. periodical reset of interest rates).

The Group holds a portfolio of long-termfixed-rate loans for which the Group has the option to propose to revise the interest rate at periodic reset dates. These reset rights are limited to the market rate at the time of revision. The borrowers have an option to either accept the revised rate or redeem the loan at par without penalty. The Group has determined that the contractual cash flows of these loans are SPPI because the option varies the interest rate in a way that is consideration for the time value of money, credit risk, other basic lending risks and costs associated with the principal amount outstanding.

Equity instruments have contractual cash flows that do not meet the SPPI criterion. Accordingly, all such financial assets are measured at FVTPL unless the FVOCI option is selected.

In some cases, loans made by the Group that are secured by collater underlying collateral (non-recourse loans). The Group applies judgment in assessing whether the non-recourse loans meet the SPPI criterion. The Group typically considers the following information when making this judgement:

whether the contractual arrangement specifically defines the amounts and dates of the cash payments of the loan;
the fair value of the collateral relative to the amount of the secured financial asset;
the ability and willingness of the borrower to make contractual payments, notwithstanding a decline in the value of collateral;
whether the borrower is an individual or a substantive operating entity or is a special-purpose entity;

•	lative to a full-recourse loan;
•

whether the Group will benefit from any upside from the underlying assets.

Financial assets are not reclassified subsequent to their initial recognition, except in the period after the Group changes its business model for managing financial assets.

See Accounting Policies 3.12, 3.13, 3.14 and 3.15.

The Group classifies its financial liabilities, other than financial guarantees and loan commitments, as measured at amortised cost.

See Accounting Policies 3.12, 3.13, 3.21 and 3.23.

FIMBank Group Annual Report & Financial Statements 2020

The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire (see also Accounting Policy 3.10.4), or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognised) and the sum of (i) the consideration received (including any new asset obtained less any new liability assumed) and (ii) any cumulative gain or loss that had been recognised in OCI is recognised in profit or loss.

Any cumulative gain/loss recognised in OCI in respect of equity investment securities designated at fair value through other comprehensive income is not recognised in profit or loss on derecognition of such securities, as explained in Accounting Policy 3.15. Any interest in transferred financial assets that qualify for derecognition that is created or retained by the Group is recognised as a separate asset or liability.

The Group enters into transactions whereby it transfers assets recognised on its Statement of Financial Position but retains either all or substantially all of the risks and rewards of the transferred assets or a portion of them. In such cases, the transferred assets are not derecognised. Examples of such transactions are securities lending and sale-and-repurchase transactions.

When assets are sold to a third party with a concurrent total return swap on the transferred assets, the transaction is accounted for as a secured financing transaction similar to sale-and repurchase transactions, because the Group retains all or substantially all of the risks and rewards of ownership of such assets.

In transactions in which the Group neither retains nor transfers substantially all of the risks and rewards of ownership of a financial asset and it retains control over the asset, the Group continues to recognise the asset to the extent of its continuing involvement, determined by the extent to which it is exposed to changes in the value of the transferred asset.

In certain transactions, the Group retains the obligation to service the transferred financial asset for a fee. The transferred asset is derecognised if it meets the derecognition criteria. An asset or liability is recognised for the servicing contract if the servicing fee is more than adequate (asset) or is less than adequate (liability) for performing the servicing.

The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.

If the terms of a financial asset are modified, then the Group evaluates whether the cash flows of the modified asset are substantially different. If the cash flows are substantially different, then the contractual rights to cash flows from the original financial asset are deemed to have expired. In this case, the original financial asset is derecognised (see Accounting Policy 3.10.3) and a new financial asset is recognised at fair value plus any eligible transaction costs. Any fees received as part of the modification are accounted for as follows:

fees that are considered in determining the fair value of the new asset and fees that represent reimbursement of eligible transaction costs are included in the initial measurement of the asset; and
other fees are included in profit or loss as part of the gain or loss on derecognition.

If cash flows are modified when the borrower is in financial difficulties, then the objective of the modification is usually to maximise recovery of the original contractual terms rather than to originate a new asset with substantially different terms. If the Group plans to modify a financial asset in a way that would result in forgiveness of cash flows, then it first considers whether a portion of the asset should be written-off before the modification takes place (see Note 5.2.1.5 for write-off policy). This approach impacts the result of the quantitative evaluation and means that the derecognition criteria are not usually met in such cases.

FIMBank Group Annual Report & Financial Statements 2020

If the modification of a financial asset measured at amortised cost or fair value through other comprehensive income does not result in derecognition of the financial asset, then the Group first recalculates the gross carrying amount of the financial asset using the original effective interest rate of the asset and recognises the resulting adjustment as a modification gain or loss in profit or loss. For floating-rate financial assets, the original effective interest rate used to calculate the modification gain or loss is adjusted to reflect current market terms at the time of the modification. Any costs or fees incurred and fees received as part of the modification adjust the gross carrying amount of the modified financial asset and are amortised over the remaining term of the modified financial asset.

If such a modification is carried out because of financial difficulties of the borrower (see Accounting Policy 3.10.8), then the gain or loss is presented together with impairment losses. In other cases, it is presented as interest income calculated using the effective interest rate method (see Accounting Policy 3.3).

The Group derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different. In this case, a new financial liability based on the modified terms is recognised at fair value. The difference between the carrying amount of the financial liability derecognised and consideration paid is recognised in profit or loss. Consideration paid includes non-financial assets transferred, if any, and the assumption of liabilities, including the new modified financial liability.

If the modification of a financial liability is not accounted for as derecognition, then the amortised cost of the liability is recalculated by discounting the modified cash flows at the original effective interest rate and the resulting gain or loss is recognised in profit or loss. For floating-rate financial liabilities, the original effective interest rate used to calculate the modification gain or loss is adjusted to reflect current market terms at the time of the modification.

Any costs and fees incurred are recognised as an adjustment to the carrying amount of the liability and amortised over the remaining term of the modified financial liability by re-computing the effective interest rate on the instrument.

If the basis for determining the contractual cash flows of a financial asset or financial liability measured at amortised cost changes as a result of interest rate benchmark reform, then the Group updates the effective interest rate of the financial asset or financial liability to reflect the change that is required by the reform. A change in the basis for determining the contractual cash flows is required by interest rate benchmark reform if the following conditions are met:

the change is necessary as a direct consequence of the reform; and
the new basis for determining the contractual cash flows is economically equivalent to the previous basis i.e. the basis immediately before the change.

If changes are made to a financial asset or financial liability in addition to changes to the basis for determining the contractual cash flows required by interest rate benchmark reform, then the Group first updates the effective interest rate of the financial asset or financial liability to reflect the change that is required by interest rate benchmark reform. After that, the Group applies the policies on accounting for modifications set out above to the additional changes.

Financial assets and liabilities are offset and the net amount presented in the Statement of Financial Position when, and only when, the Group currently has a legally enforceable right to set off the recognised amounts and it intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Income and expenses are presented on a net basis only when permitted under IFRSs, or for gains and losses arising from a group of

The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment.

FIMBank Group Annual Report & Financial Statements 2020

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk.

When one is available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price i.e. the fair value of the consideration given or received. If the Group determines that the fair value at initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique that uses only data from observable markets, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value at initial recognition and the transaction price. Subsequently, that difference is recognised in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out.

Portfolios of financial assets and financial liabilities that are exposed to market risk and credit risk that are managed by the Group on the basis of the net exposure to either market or credit risk are measured on the basis of a price that would be received to sell a net long position (or paid to transfer a net short position) for a particular risk exposure. Those portfolio-level adjustments are allocated to the individual assets and liabilities on the basis of the relative risk adjustment of each of the individual instruments in the portfolio.

The fair value of a demand deposit is not less than the amount payable on demand, discounted from the first date on which the amount could be required to be paid.

The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the change has occurred.

Further details on the determination of fair values are disclosed in Note 2.4.2.1.

The Group recognises loss allowances for the ECL on the following financial instruments that are not measured at fair value through profit or loss:

financial assets that are debt instruments;
financial guarantee contracts issued; and
loan commitments issued.

No impairment loss is recognised on equity investments.

The Group measures loss allowances at an amount equal to lifetime ECL, except for the following, for which they are measured as 12- month ECL:

debt investment securities and loans and advances that are determined to have low credit risk at the reporting date; and
other financial instruments (other than lease receivables) on which credit risk has not increased significantly since their initial recognition (see Note 5.2.1.8).

The Group considers a debt investment security or a loan to have low credit risk when its credit risk rating is equivalent to the globally

12-month ECL are the portion of ECL that result from default events on a financial instrument that are possible within the 12-months after the reporting date. Financial instruments for which a 12-month ECL is recognised are referred to as Stage 1

Life-time ECL are the ECL that result from all possible default events over the expected life of the financial instrument. Financial

instruments for which a life-time ECL is recognised but which are not credit-	Stage 2 financial instrume
50

FIMBank Group Annual Report & Financial Statements 2020

Financial instruments allocated to Stage 2 are those that have experienced a significant increase in credit risk since initial recognition but are not credit-impaired.

Financial instruments for which lifetime ECL are recognised and that are credit-i

ECL are a probability-weighted estimate of credit losses. They are measured as follows:

financial assets that are not credit-impaired at the reporting date: as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive);
financial assets that are credit-impaired at the reporting date: as the difference between the gross carrying amount and the present value of estimated future cash flows;
undrawn loan commitments: as the present value of the difference between the contractual cash flows that are due to the Group if the commitment is drawn down and the cash flows that the Group expects to receive; and
financial guarantee contracts: the expected payments to reimburse the holder less any amounts that the Group expects to recover.

In light of the spread of COVID-19 across the globe, the Group has assessed the impact of the outbreak on the credit risk over the expected life of its financial assets.

a global firm specialising in areas of credit risk analysis, economic and regulatory capital calculation, economic research and other areas intrinsically linked to the ECL model.

The model used for this review period was based on three possible scenarios covering a wide range of possible outcomes. Each scenario assumed different epidemiological and economic circumstances, recoveries from the COVID-19-induced recession that played out differently in different parts of the world and different use of monetary and fiscal policies, including different levels of:

infection spread, fatality rates, hospitalisation rates, medical supplies available, development of vaccines;
lock-downmeasures, travel restrictions, business interruption and temporary closure;
oil prices, interest rates, unemployment rates, GDP rates, national debt, companies going in liquidation, consumer and business confidence; and
quantitative easing, fiscal stimulus, state aid and bailout measures.

See also Note 5.2.1.8.

If the terms of a financial asset are renegotiated or modified or an existing financial asset is replaced with a new one due to financial difficulties of the borrower, then an assessment is made of whether the financial asset should be derecognised (see Accounting Policy 3.10.3) and ECL are measured as follows:

if the expected restructuring will not result in derecognition of the existing asset, then the expected cash flows arising from the modified financial asset are included in calculating the cash shortfalls from the existing asset (see Note 5.2.1.8); and
if the expected restructuring will result in derecognition of the existing asset, then the expected fair value of the new asset is treated as the final cash flow from the existing financial asset at the time of its derecognition. This amount is included in calculating the cash shortfalls from the existing financial asset that are discounted from the expected date of derecognition to the reporting date using the original effective interest rate of the existing financial asset.

At each reporting date, the Group assesses whether financial assets carried at amortised cost and debt financial assets carried at fair

value through other comprehensive income are credit-Stage 3- ve

occurred.

FIMBank Group Annual Report & Financial Statements 2020

Evidence that a financial asset is credit-impaired includes the following observable data:

significant financial difficulty of the borrower or issuer;
a breach of contract such as a default or past due event;
the restructuring of a loan or advance by the Group on terms that the Group would not consider otherwise;
it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or
the disappearance of an active market for a security because of financial difficulties.

A financial asset- impaired unless there is evidence that the risk of not receiving contractual cash flows has reduced significantly and there are no other indicators of impairment. In addition, a financial asset that is overdue for 90 days or more is considered credit-impaired even when the regulatory definition of default is different.

Loss allowances for ECL are presented in the Statement of Financial Position as follows:

financial assets measured at amortised cost: as a deduction from the gross carrying amount of the assets;
loan commitments and financial guarantee contracts: generally, as a provision;
where a financial instrument includes both a drawn and an undrawn component, and the Group cannot identify the ECL on the loan commitment component separately from those on the drawn component: the Group presents a combined loss allowance for both components. The combined amount is presented as a deduction from the gross carrying amount of the drawn component. Any excess of the loss allowance over the gross amount of the drawn component is presented as a provision; and
debt instruments measured at fair value through other comprehensive income: no loss allowance is recognised in the Statement of Financial Position because the carrying amount of these assets is their fair value. However, the loss allowance is disclosed and is recognised in retained earnings.

Loans and debt securities are written-off (either partially or in full) when there is no reasonable expectation of recovering a financial asset in its entirety or a portion thereof. This is generally the case when the Group determines that the borrower does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. This assessment is carried out at the individual asset level.

Recoveries of amounts previously written-	net impairment charge on financial	in the Statement of Profit or
Loss and OCI.

Financial assets that are written-off could still be subject to enforcement activities in order to comply with the Group recovery of amounts due.

On initial recognition, the Group has designated certain financial assets as at fair value through profit or loss because this designation eliminates or significantly reduces an accounting mismatch that would otherwise arise.

The Group has designated certain financial liabilities as at fair value through profit or loss in either of the following circumstances:

the liabilities are managed, evaluated and reported internally on a fair value basis; or
the designation eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Note 7 sets out the amount of each class of financial asset or financial liability that has been designated as at fair value through profit or loss. A description of the basis for each designation is set out in the note for the relevant asset or liability class.

FIMBank Group Annual Report & Financial Statements 2020

Cash and cash equivalents include notes and coins on hand, treasury bills, unrestricted balances held with central banks and highly liquid financial assets with original maturities of three months or less that are subject to insignificant risk of changes in their fair value, and are used by the Group in the management of its short-term commitments. Loans and advances to banks and amounts owed to banks that are repayable on demand or have a contractual maturity of three months or less and which form an integral part of the statements of cash flows.

Cash and cash equivalents are carried at amortised cost in the Statement of Financial Position.

Trading assets and liabilities are those assets and liabilities that the Group acquires or incurs principally for the purpose of selling or repurchasing in the near term or holds as part of a portfolio that is managed together for short-term profit or position taking.

Trading assets and liabilities are initially recognised and subsequently measured at fair value in the statements of financial position, with transaction costs recognised in profit or loss. All changes in fair value are recognised as part of net trading results in profit or loss.

Trading assets and liabilities are not reclassified subsequent to their initial recognition, except that non-derivative trading assets, other than those designated at fair value through profit or loss upon initial recognition, may be reclassified out of the fair value through profit or loss (i.e. trading) category if they are no longer held for the purpose of being sold or repurchased in the near term and the following conditions are met:

if the financial asset would have met the definition of loans and receivables (if the financial asset had not been required to be classified as held for trading at initial recognition), then it may be reclassified if the Group has the intention and ability to hold the financial asset for the foreseeable future or until maturity; and
if the financial asset would not have met the definition of loans and receivables, then it may be reclassified out of the trading category only in rare circumstances.

Derivatives held for risk management purposes include all derivative assets and liabilities that are not classified as trading assets or liabilities. All derivatives are measured at fair value in the Statement of Financial Position.

The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures.

Derivatives are initially measured at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognised in profit or loss.

When a derivative instrument or a non-derivative financial liability is designated as the hedging instrument in a hedge of a net investment in a foreign operation, the effective portion of, for a derivative, changes in the fair value of the hedging instrument or, for a non-derivative, foreign exchange gains and losses is recognised in OCI and presented in the translation reserve within equity. The effective portion of the change in fair value of the hedging instrument is computed with reference to the functional currency of the parent entity against whose functional currency the hedged risk is measured. Any ineffective portion of the changes in the fair value of the derivative or foreign exchange gains and losses on the non-derivative is recognised immediately in profit or loss. The amount recognised in OCI is fully or partially reclassified to profit or loss as a reclassification adjustment on disposal or partial disposal of the foreign operation, respectively.

FIMBank Group Annual Report & Financial Statements 2020

Statement of Financial Position includes loans and advances measured at amortised cost (see Accounting Policy 3.10.2); these are initially measured at fair value plus incremental direct transaction costs, and subsequently at their amortised cost using the effective interest method.

to customers

Statement of Financial Position include:

loans and advances measured at amortised cost (see Accounting Policy 3.10.2); they are initially measured at fair value plus incremental direct transaction costs, and subsequently at their amortised cost using the effective interest method;
loans and advances mandatorily measured at fair value through profit or loss or designated at fair value through profit or loss (see Accounting Policy 3.10.2); these are measured at fair value with changes recognised immediately in profit or loss; and
finance lease receivables (see Accounting Policy 3.8).

When the Group purchases a financial asset and simultaneously enters into an agreement to resell the asset (or a substantially similar asset) at a fixed price on a future date (reverse repo or stock borrowing), the consideration paid is accounted for as a loan or advance,

The investment securities in the Statement of Financial Position include:

debt investment securities measured at amortised cost (see Accounting Policy 3.10.2); these are initially measured at fair value plus incremental direct transaction costs, and subsequently at their amortised cost using the effective interest method;
debt and equity investment securities mandatorily measured at fair value through profit or loss or designated at fair value through profit or loss (see Accounting Policy 3.10.2); these are at fair value with changes recognised immediately in profit or loss;
debt securities measured at fair value through other comprehensive income; and
equity investment securities designated at fair value through other comprehensive income.

For debt securities measured at fair value through other comprehensive income, gains and losses are recognised in OCI, except for the following, which are recognised in profit or loss in the same manner as for financial assets measured at amortised cost:

interest revenue using the effective interest method;
ECL and reversals; and
foreign exchange gains and losses.

When a debt security measured at fair value through other comprehensive income is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss.

The Group elects to present in OCI changes in the fair value of certain investments in equity instruments that are not held for trading. The election is made on an instrument-by-instrument basis on initial recognition and is irrevocable.

Fair value gains and losses on such equity instruments are never reclassified to profit or loss and no impairment is recognised in profit or loss. Dividends are recognised in profit or loss (see Accounting Policy 3.10.2) unless they clearly represent a recovery of part of the cost of the investment, in which case they are recognised in OCI. Cumulative gains and losses recognised in OCI are transferred to retained earnings on disposal of an investment.

Investments in subsidiaries, associates and joint ventures are shown in the separate statements of financial position at cost less any impairment losses (see Accounting Policy 3.20).

FIMBank Group Annual Report & Financial Statements 2020

Items of property and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses.

Any gain or loss on disposal of an item of property and equipment is recognised within other income in profit or loss.

Items of property and equipment are initially measured at cost. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, and capitalised borrowing costs. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. If significant parts of an item of property or equipment have different useful lives, then they are accounted for as separate items (major components) of property and equipment.

Subsequent to initial recognition, freehold land and buildings are carried at fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses.

Revaluations are performed by a professionally qualified architect on a regular basis such that the carrying amount does not differ materially from that which would be determined using fair values at the end of the reporting period. Fair value does not reflect future capital expenditure that will improve or enhance the property and does not reflect the related future benefits from this future expenditure other than those a rational market participant would take into account when determining the value of the property. Any surpluses arising on such revaluation are recognised in other comprehensive income and accumulated in equity as a revaluation reserve unless they reverse a revaluation decrease for the same asset previously recognised in profit or loss, in which case the increase is credited to profit or loss to the extent of the decrease previously charged. Any deficiencies resulting from decreases in value are deducted from this fair value reserve to the extent that the balance held in this reserve relating to a previous revaluation of that asset is sufficient to absorb these and charged to profit or loss thereafter.

Subsequent expenditure is capitalised only when it is probable that the future economic benefits of the expenditure will flow to the Group. Ongoing repairs and maintenance are expensed as incurred.

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property and equipment since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Improvements to leasehold premises are depreciated over the shorter of the lease term and their useful lives.

Land is not depreciated.

The estimated useful lives for the current and comparative periods are as follows:

•	building	50 years
•	computer system	7 years
•	computer equipment	5 years
•	others	4 14 years

Depreciation methods, useful lives and residual values are reassessed at each financial year-end and adjusted if appropriate.

When the use of a property changes from owner‑occupied to investment property, the property is re-measured to fair value and reclassified accordingly. Any gain arising on this re-measurement is recognised in profit or loss to the extent that it reverses a previous impairment loss on the specific property, with any remaining gain recognised in OCI and presented in the revaluation reserve. Any loss is recognised in profit or loss.

FIMBank Group Annual Report & Financial Statements 2020

Property that is held for long term rental yields or for capital appreciation or both, and that is not occupied by the Group is classified as investment property. Investment property also includes property that is being developed for future use as investment property, when such identification is made.

Investment property is initially measured at cost, including related transaction costs. Subsequent to initial recognition, investment property is carried at its fair value with any change therein recognised in profit or loss.

Investment property is derecognised either when it has been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gain or loss on disposal of investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss. When investment property that was previously classified as property, plant and equipment is sold, any related amount included in the revaluation reserve (see Accounting Policy 3.17.4) is transferred to retained earnings.

If an investment property becomes owner-occupied, it is reclassified to property and equipment. Its fair value at the date of the reclassification becomes its cost for subsequent accounting purposes.

Goodwill: goodwill that arises upon the acquisition of subsidiaries is presented with intangible assets (see Accounting Policy 3.1.2). Subsequent to initial recognition, goodwill is measured at cost less any accumulated impairment losses.
Software: software acquired by the Group is stated at cost less accumulated amortisation and any accumulated impairment losses. Expenditure on internally developed software is recognised as an asset when the Group is able to demonstrate its intention and ability to complete the development and use the software in a manner that will generate future economic benefits and can reliably measure the costs to complete the development. The capitalised costs of internally developed software include all costs directly attributable to developing the software and capitalised borrowing costs and are amortised over its useful life. Internally developed software is stated at capitalised cost less accumulated amortisation and any accumulated impairment losses.
Other intangible assets: other intangible assets, including customer relationships and entity funding arrangements, that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortisation and any accumulated impairment losses.

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred.

Amortisation is calculated to write-off the cost of intangible assets less their estimated residual values using the straight-line method over their estimated useful lives and is generally recognised in profit or loss. Goodwill is not amortised. The estimated useful life for current and comparative periods are as follows:

•	software	7 years
•	other intangible assets	5 years

Amortisation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.

FIMBank Group Annual Report & Financial Statements 2020

At each reporting date, the Group reviews the carrying amount of its non-financial assets, other than deferred tax assets and investment property recoverable amount is estimated. Goodwill is tested annually for impairment.

For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of

-from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

An impairment loss is recognised if the carrying amount of an asset or a CGU exceeds its recoverable amount.

other than goodwill, do not generate separate cash inflows and are used by more than one CGU. Corporate assets are allocated to CGUs on a reasonable and consistent basis and tested for impairment as part of the testing of the CGUs to which the corporate assets are allocated.

Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro-rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the ion,

if no impairment loss had been recognised.

Deposits, debt securities in

When the Group sells a financial asset and simultaneously enters into an agreement to repurchase the asset (or a similar asset) at a fixed price on a future date ( repo or stock lending ), the arrangement is accounted for as a deposit, and the underlying asset

The Group classifies capital instruments as financial liabilities or equity instruments in accordance with the substance of the contractual terms of the instruments.

Deposits, debt securities in issue and subordinated liabilities are initially measured at fair value less incremental direct transaction costs, and subsequently measured at their amortised cost using the effective interest method. The Group did not choose to carry any non-derivative liabilities at fair value through profit or loss.

When the Group designates a financial liability as at fair value through profit or loss, the amount of change in the fair value of the liability that is attributable to changes in its credit risk is presented in other comprehensive income as a liability credit reserve. On initial recognition of the financial liability, the Group assesses whether presenting the amount of change in the fair value of the liability that is attributable to credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss.

This assessment is made by using a regression analysis to compare:

the expected changes in the fair value of the liability related to changes in the credit risk; with
the impact on profit or loss of expected changes in the fair value of instruments whose characteristics are economically related to the characteristics of the liability.

Amounts presented in the liability credit reserve are not subsequently transferred to profit or loss.

When these instruments are derecognised, the related cumulative amount in the liability credit reserve is transferred to retained earnings.

FIMBank Group Annual Report & Financial Statements 2020

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognises any impairment loss on the assets associated with that contract.

Financial guarantees are contracts that require the Group to make specified payments to reimburse the holder for a loss that it incurs because a specified debtor fails to make payment when it is due in accordance with the terms of a debt instrument. Loan commitments are firm commitments to provide credit under pre-specified terms and conditions.

Financial guarantees issued and loan commitments are initially measured at fair value. Subsequently, they are measured at the higher of the loss allowance determined in accordance with IFRS 9 and the amount initially recognised less, when appropriate, the cumulative amount of income recognised in accordance with the principles of IFRS 15. Other loan commitments issued are measured at the sum of (i) the loss allowance determined in accordance with IFRS 9 and (ii) the amount of any fees received, less, if the commitment is unlikely to result in a specific lending arrangement, the cumulative amount of income recognised. Derecognition policies in Accounting Policy 3.10.3 are applied to loan commitments issued and held.

The Group has not issued any loan commitments that are measured at fair value through profit or loss.

Liabilities arising from financial guarantees and loan commitments are included within provisions.

The Malta-registered Group entities contribute towards a defined contribution state pension plan in accordance with Maltese legislation. Other subsidiaries contribute to other defined contribution plans. The Group does not have a commitment beyond the payment of fixed contributions. Related costs are recognised as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.

The grant date fair value of equity-settledshare-based payment awards (i.e. stock options) granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period in which the employees unconditionally become entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of share awards for which the related service and non-market performance vesting conditions are expected to be met such that the amount ultimately recognised as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.

FIMBank Group Annual Report & Financial Statements 2020

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of an equity instrument are deducted from the initial measurement of the equity instruments.

When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is recognised as a change in equity. Repurchased shares are classified as treasury shares and presented as a deduction from total equity.

When such shares are later reissued, sold or cancelled, the consideration received is recognised as a change in equity. No gain or loss is recognised in the Statement of Profit or Loss.

The Group presents basic and diluted earnings per share ( EPS ) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss that is attributable to ordinary shareholders of the Bank by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees.

As at December 2020, basic and diluted earnings per share were equal.

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur ng results are reviewed regularly by Executive Management (being the chief operating decision maker) to make decisions about

resources allocated to each segment and assess its performance, and for which discrete financial information is available. Segment results that are reported to Executive Management include items that are directly attributable to a segment as well as those that can be allocated on a reasonable basis.

A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2021 and earlier application is permitted, however, the Group has not early adopted them in preparing these Consolidated Financial Statements.

Consolidated Financial Statements:

amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16: interest rate benchmark reform; and
amendments to IFRS 4 Insurance Contracts: deferral of IFRS 9.

The Group is assessing the potential impact on its Consolidated Financial Statements resulting from the following amendments:

annual improvements to IFRS Standards 2018-2020;
amendments to IAS 1 presentation of financial statements: classification of liabilities as current or non-current;
amendments to IAS 1 presentation of financial statements and IFRS practice statement 2: disclosure of accounting policies;
amendments to IAS 8 accounting policies, changes in accounting estimates and errors: definition of accounting estimates;
amendments to IAS 16 property, plant and equipment: proceeds before intended use;
amendments to IAS 37 provisions, contingent liabilities and contingent assets;

• amendment to IFRS 3 business combinations;

amendments to IFRS 16 leases: COVID-19 related rent concessions beyond 30 June 2021; and

• amendments to IFRS 17 insurance contracts.

FIMBank Group Annual Report & Financial Statements 2020

Changes in accounting policies

The Group has initially adopted efinition of a business (amendments to IFRS 3)	from 1 January 2020. A number of other new
standards are also effective from 1 January 2020,	Financial Statements.

The Group applied Definition of a Business (Amendments to IFRS 3) to business combinations whose dates of acquisition are on or after 1 January 2020 in assessing whether it had acquired a business or a group of assets. The amendments do not have a material Financial Statements because the Group has not acquired any subsidiaries during the year. However, the Group

has amended its Accounting Policies for acquisitions on or after 1 January 2020 (see Accounting Policy 3.1.1).

Information about the interest rate benchmark reform is disclosed in Note 5.4.3.

Financial risk review

This Note presents information about

The Group has exposure to the following risks from financial instruments:

credit risk
- default risk;
- concentration risk;
- counterparty credit risk;
- settlement risk; and
- foreign exchange lending risk.
liquidity risk
market risk
- foreign exchange risk;
- interest rate risk in the banking book;
- position risk in the traded debt instruments; and
- price risk.
operational risk; and
reputational and conduct risk

The risk factors associated with the banking industry are multiple and varied. Exposure to the above-mentioned risks arises in the

contingent liabilities and commitments is fundamental since the risks involved are substantively the same as with on-balance sheet items. The Board is ultimately responsible for the identification and evaluation of key risks applicable to the different areas of the business of the Group and for ensuring that proper systems of internal controls are in place. The Board Risk Committee ("BRC"), a Board committee, has the aim of assisting the Board in fulfilling its responsibilities concerning the establishment and implementation d all its Group entities. Management is ultimately delegated with the task of creating an effective control environment to the highest

possible standards. The Internal Audit function monitors compliance with policies, standards and procedures and the effectiveness of the internal control environment of the Group. The Internal Auditor periodically reviews and tests the internal systems of control independently from management, adopting a risk-based approach. The Internal Auditor reports to the Audit Committee, a Board Committee. All reports are circulated and also copied to the Chairman of the Board of Directors.

Adherence to the various banking directives and rules issued by the regulatory authorities from time to time and applicable to credit institutions licensed in Malta is and shall continue to form the basis of the risk control environment of the Group. The Group is committed to ensuring strict compliance with the thresholds established by the regulatory frameworks in relation to capital adequacy, liquidity and other key regulatory ratios, credit management, quality of assets and financial reporting.

FIMBank Group Annual Report & Financial Statements 2020

Credit risk is the risk that one party to a financial transaction might fail to fulfil an obligation and cause the other party to incur a financial loss. The Group finances international trade in many countries worldwide, especially emerging markets, which in turn entails an exposure to sovereign, bank and corporate credit risk. Credit risk is not only associated with loans but also with other on- and off- balance sheet exposures such as letters of credit, guarantees, acceptances and money market products.

The Group is exposed to the following types of credit risk:

default risk;
concentration risk;
counterparty credit risk;
settlement risk; and
foreign exchange lending risk.

The Groupwere updated in response to the COVID-19 pandemic by taking a more cautious approach when measuring ECL. significantly since initial recognition was updated to provide for exposures were the Group applied moratoria on loan repayments. In addition, the Group performed a number of sensitivity tests when measuring ECL, including the following:

calculating lifetime ECL on exposures were the Group applied moratoria on loan repayments;
altering the weighting of the upside, downside and base case economic scenarios;
disregarding the upside scenario and applying a 50%-50% weighting on the downside and base case economic scenarios; and
assessing the impact of having a 100% downside economic scenario.

For more information on how the COVID-19 considerations were incorporated in the methods, assumptions and information used to measure ECL, please see Accounting Policy 3.10.8.

Default risk is the chance that a borrower, whether corporate or personal or other, becomes unable to repay their credit obligations to the Bank.

Strict credit assessment and control procedures are in place in order to monitor such exposures. Overall responsibility for credit risk approving individual limits for banks and corporates within their delegated parameters of authority. Country limits are approved by the BCC. The BCC is also

responsible for the oversight of operational, legal and reputational risk related to credit activity. Further information on the composition and function of the BCC is found in the Statement of Compliance with the Principles of Good Corporate Governance.

The Group also ensures that it has a reasonable mix of loans to customers. This diversification of credit among different economic sectors is adopted by the Group to mitigate such risks. The Group also monitors its risk on balances held with other banks and establishes limits for them. The risks associated with off-balance sheet assets and liabilities arise from the normal course of banking operations. In the case of risks associated with inter-bank participants under letters of credit, the Group exercises the same credit controls as those applied to on-balance sheet exposures and limits are established accordingly.

All on- and off- external rating of the counterparty by established Credit Rating Agencies is taken into account, an internal rating is given to each

		, a software used to assign
internal ratings		. Whilst the credit
review process makes use	tool, which	financial statements, it also includes an analysis of:

relevant markets and sectors, the outlook for commodity prices, the structure of proposed transactions, the market position of the relevant counterparties and other assessments appropriate to the specific exposure to the customer.

The following table sets out information about the credit quality of assets. Unless specifically indicated, for financial assets, the amounts in the table represent gross carrying amounts. For contingent liabilities and commitments, the amounts in the table represent the amounts committed.

FIMBank Group Annual Report & Financial Statements 2020

Group 31 December 2020

Balances with the Central Bank of Malta, treasury bills and cash

Grades 1 to 4- low risk

2020

12-month PD	Stage 1	Stage 2	Stage 3	Total
ranges	USD	USD	USD	USD
0.08% - 0.51%	307,168,780	12,271,444	-	319,440,224

Loss allowance

Carrying amount

Loans and advances to banks
Grades 1 to 4- low risk	0.17% - 1.85%
Grades 5+ to	5- fair risk	1.20% - 3.71%
Grades 6+ to	7 substandard	2.18% - 12.71%
Grade 9 to 10 loss	100.00%

Loss allowance

Carrying amount

307,168,780	12,271,444	-	319,440,224
(131,651)	(21,049)	-	(152,700)
307,037,129	12,250,395	-	319,287,524
109,041,004	-	-	109,041,004
4,701,296	583	-	4,701,879
70,572,317	2,623,574	-	73,195,891
-	-	10,192,358	10,192,358
184,314,617	2,624,157	10,192,358	197,131,132
(775,489)	(75,487)	(3,140,579)	(3,991,555)
183,539,128	2,548,670	7,051,779	193,139,577

Loans and advances to customers Grades 1 to 4- low risk

Grades 5+ to 5- fair risk

Grades 6+ to 7 substandard

Grade 7- to 8- doubtful

Grade 9 to 10 loss

Loss allowance

Carrying amount

Financial assets at fair value through other comprehensive income Grades 1 to 4- low risk

Carrying amount at cost Carrying amount at fair value

0.05% - 0.80%

0.27% - 2.38%

1.00% - 28.01%

7.43% - 43.25%

100.00%

0.02% - 0.51%

14,320,509	8,418,899	-	22,739,408
116,289,685	22,669,330	-	138,959,015
167,842,212	138,235,845	-	306,078,057
-	29,097,910	-	29,097,910
-	-	196,700,238	196,700,238
298,452,406	198,421,984	196,700,238	693,574,628
(2,069,713)	(3,618,347)	(95,890,842)	(101,578,902)
296,382,693	194,803,637	100,809,396	591,995,726
147,700,809	-	-	147,700,809
147,700,809	-	-	147,700,809

153,327,686	-	-	153,327,686

Loss allowance
Investments at amortised cost
Grades 1 to 4- low risk	1.35%
Loss allowance
Carrying amount
Contingent liabilities
Grades 1 to 4- low risk	0.21% - 0.34%
Grades 5+ to 5- fair risk	0.28% - 3.05%
Grades 6+ to 7 substandard	1.78% - 14.4%
Carrying amount
Loss allowance
Commitments
Grades 1 to 4- low risk	0.04% - 0.23%
Grades 5+ to 5- fair risk	0.27% - 1.58%
Grades 6+ to 7 substandard	1.10% - 28.10%

Carrying amount

Loss allowance

(71,827)	-	-	(71,827)
9,910,131	-	-	9,910,131
9,910,131	-	-	9,910,131
(70,674)	-	-	(70,674)
9,839,457	-	-	9,839,457
418,921	-	-	418,921
444,468	-	-	444,468
1,047,029	-	-	1,047,029
1,910,418	-	-	1,910,418
(9,611)	-	-	(9,611)
8,156,224	-	-	8,156,224
48,548,128	-	-	48,548,128
44,800,227	3,538,877	-	48,339,104
101,504,579	3,538,877	-	105,043,456
(14,808)	(153,176)	-	(167,984)

Group 31 December 2019

Balances with the Central Bank of Malta, treasury bills and cash

Grades 1 to 4- low risk

Carrying amount

FIMBank Group Annual Report & Financial Statements 2020

2019

12-month PD	Stage 1	Stage 2	Stage 3	Total
ranges	USD	USD	USD	USD
0.17%	208,277,004	-	-	208,277,004
	208,277,004	-	-	208,277,004

Loans and advances to banks
Grades 1 to 4- low risk	0.12% - 1.04%
Grades 5+ to	5- fair risk	0.48% - 1.67%
Grades 6+ to	7 substandard	1.38% - 8.83%
Grade 9 to 10 loss	100.00%

Loss allowance

Carrying amount

196,714,389	-	-	196,714,389
1,831,929	7,598	-	1,839,527
36,353,415	5,375,248	-	41,728,663
-	-	9,015,125	9,015,125
234,899,733	5,382,846	9,015,125	249,297,704
(542,278)	(117,390)	(2,559,841)	(3,219,509)
234,357,455	5,265,456	6,455,284	246,078,195

Loans and advances to customers
Grades 1 to 4- low risk	0.04% - 0.84%
Grades 5+ to 5- fair risk	0.17% - 3.36%
Grades 6+ to 7 substandard	0.56% - 100%
Grade 7- to 8- doubtful	5.19% - 100%
Grade 9 to 10 loss	100.00%
Loss allowance
Carrying amount
Financial assets at fair value through
other comprehensive income
Grades 1 to 4- low risk	0.01% - 0.56%

Carrying amount at cost

Carrying amount at fair value

66,792,635	14,202,258	-	80,994,893
158,841,089	31,944,688	-	190,785,777
168,019,210	95,253,739	4,195,666	267,468,615
-	36,293,229	3,950,866	40,244,095
-	-	146,804,133	146,804,133
393,652,934	177,693,914	154,950,665	726,297,513
(973,713)	(4,395,859)	(71,037,784)	(76,407,356)
392,679,221	173,298,055	83,912,881	649,890,157
81,477,419	-	-	81,477,419
81,477,419	-	-	81,477,419

79,367,556	-	-	79,367,556

Loss allowance
Investments at amortised cost
Grades 1 to 4- low risk	0.84%
Loss allowance
Carrying amount
Contingent liabilities
Grades 1 to 4- low risk	0.09% - 0.31%
Grades 5+ to 5- fair risk	0.17% - 1.29%
Grades 6+ to 7 substandard	0.83% - 8.83%
Carrying amount
Loss allowance
Commitments
Grades 1 to 4- low risk	0.03% - 0.83%
Grades 5+ to 5- fair risk	0.17% - 2.71%
Grades 6+ to 7 substandard	0.56% - 8.83%

Carrying amount

Loss allowance

(91,978)	-	-	(91,978)
9,964,940	-	-	9,964,940
9,964,940	-	-	9,964,940
(179,444)	-	-	(179,444)
9,785,496	-	-	9,785,496
405,620	-	-	405,620
367,056	-	-	367,056
3,902,482	224,669	-	4,127,151
4,675,158	224,669	-	4,899,827
(9,751)	(391)	-	(10,142)
7,709,247	-	-	7,709,247
83,998,738	4,649,280	-	88,648,018
69,582,655	-	-	69,582,655
161,290,640	4,649,280	-	165,939,920
(56,870)	(21,423)	-	(78,293)

FIMBank Group Annual Report & Financial Statements 2020

Bank 31 December 2020

			2020
	12-month PD	Stage 1	Stage 2	Stage 3	Total
	ranges	USD	USD	USD	USD
Balances with the Central Bank of Malta,
treasury bills and cash
Grades 1 to 4- low risk	0.08% - 0.51%	307,149,005	12,271,444	-	319,420,449

Loss allowance

Carrying amount

Loans and advances to banks
Grades 1 to 4- low risk	0.17%	- 0.7%
Grades 6+ to 7 substandard	2.18% -	12.37%
Grade 9 to 10 loss	100.00%

307,149,005	12,271,444	-	319,420,449
(131,651)	(21,049)	-	(152,700)
307,017,354	12,250,395	-	319,267,749
101,823,439	-	-	101,823,439
68,841,826	2,423,043	-	71,264,869
-	-	10,192,358	10,192,358

Loss allowance

Carrying amount

Loans and advances to customers Grades 1 to 4- low risk

Grades 5+ to 5- fair risk

Grades 6+ to 7 substandard

Grade 7- to 8- doubtful

Grade 9 to 10 loss

Loss allowance

Carrying amount

Financial assets at fair value through other comprehensive income

0.05% - 0.8%

0.27% - 2.24%

1.16% - 27.59%

7.43% - 43.25%

100.00%

170,665,265	2,423,043	10,192,358	183,280,666
(704,578)	(71,442)	(3,140,579)	(3,916,599)
169,960,687	2,351,601	7,051,779	179,364,067
6,213,969	498	-	6,214,467
388,936,722	22,669,330	-	411,606,052
184,578,519	83,770,273	-	268,348,792
-	7,396,380	-	7,396,380
-	-	164,144,690	164,144,690
579,729,210	113,836,481	164,144,690	857,710,381
(1,866,268)	(2,328,744)	(73,681,009)	(77,876,021)
577,862,942	111,507,737	90,463,681	779,834,360

Grades 1 to 4- low risk	0.02% - 0.51%
Carrying amount at cost
Carrying amount at fair value
Loss allowance
Investments at amortised cost
Grades 1 to 4- low risk	1.35%
Loss allowance
Carrying amount
Contingent liabilities
Grades 1 to 4- low risk	0.21% - 0.34%
Grades 5+ to 5- fair risk	0.28% - 3.05%
Grades 6+ to 7 substandard	1.78% - 14.4%
Carrying amount
Loss allowance
Commitments
Grades 1 to 4- low risk	0.17% - 0.23%
Grades 5+ to 5- fair risk	0.27% - 1.58%
Grades 6+ to 7 substandard	1.1% - 28.1%

Carrying amount

Loss allowance

147,700,809	-	-	147,700,809
147,700,809	-	-	147,700,809

153,327,686	-	-	153,327,686
(71,827)	-	-	(71,827)
9,910,131	-	-	9,910,131
9,910,131	-	-	9,910,131
(70,674)	-	-	(70,674)
9,839,457	-	-	9,839,457
418,921	-	-	418,921
43,193,696	-	-	43,193,696
634,285	-	-	634,285
44,246,902	-	-	44,246,902
(5,067)	-	-	(5,067)
9,720,642	-	-	9,720,642
58,717,340	-	-	58,717,340
33,268,907	3,538,877	-	36,807,784
101,706,889	3,538,877	-	105,245,766
(14,809)	(153,175)	-	(167,984)

FIMBank Group Annual Report & Financial Statements 2020

Bank 31 December 2019

			2019
	12-month PD	Stage 1	Stage 2	Stage 3	Total
	ranges	USD	USD	USD	USD
Balances with the Central Bank of Malta,
treasury bills and cash
Grades 1 to 4- low risk	0.17%	208,259,407	-	-	208,259,407
Carrying amount		208,259,407	-	-	208,259,407

Loans and advances to banks
Grades 1 to 4- low risk	0.12% - 0.40%
Grades 6+ to 7 substandard	1.38% - 8.83%
Grade 9 to 10 loss	100.00%

Loss allowance

Carrying amount

194,741,634	-	-	194,741,634
26,325,169	5,375,248	-	31,700,417
-	-	9,015,125	9,015,125
221,066,803	5,375,248	9,015,125	235,457,176
(428,246)	(117,339)	(2,559,841)	(3,105,426)
220,638,557	5,257,909	6,455,284	232,351,750

Loans and advances to customers
Grades 1 to 4- low risk	0.04% - 0.84%
Grades 5+ to 5- fair risk	0.17% - 2.75%
Grades 6+ to 7 substandard	0.56% - 20.39%
Grade 7- to 8- doubtful	5.19% - 42.53%
Grade 9 to 10 loss	100.00%
Loss allowance
Carrying amount
Financial assets at fair value through
other comprehensive income
Grades 1 to 4- low risk	0.01% - 0.56%

Carrying amount at cost

Carrying amount at fair value

60,649,356	1,652	-	60,651,008
411,376,148	29,752,975	-	441,129,123
190,707,577	36,087,959	-	226,795,536
-	12,369,192	-	12,369,192
-	-	117,035,022	117,035,022
662,733,081	78,211,778	117,035,022	857,979,881
(544,983)	(2,467,636)	(43,814,413)	(46,827,032)
662,188,098	75,744,142	73,220,609	811,152,849
81,477,419	-	-	81,477,419
81,477,419	-	-	81,477,419

79,367,556	-	-	79,367,556

Loss allowance
Investments at amortised cost
Grades 1 to 4- low risk	0.84%
Loss allowance
Carrying amount
Contingent liabilities
Grades 1 to 4- low risk	0.09% - 0.31%
Grades 5+ to 5- fair risk	0.17% - 1.29%
Grades 6+ to 7 substandard	0.83% - 8.57%
Carrying amount
Loss allowance
Commitments
Grades 1 to 4- low risk	0.17% - 2.19%
Grades 5+ to 5- fair risk	0.56% - 8.83%

Carrying amount

Loss allowance

(91,978)	-	-	(91,978)
9,964,940	-	-	9,964,940
9,964,940	-	-	9,964,940
(179,444)	-	-	(179,444)
9,785,496	-	-	9,785,496
405,620	-	-	405,620
57,558,292	-	-	57,558,292
3,440,073	224,669	-	3,664,742
61,403,985	224,669	-	61,628,654
(9,688)	(391)	-	(10,079)
86,139,512	4,649,280	-	90,788,792
52,237,635	-	-	52,237,635
138,377,147	4,649,280	-	143,026,427
(53,658)	(21,422)	-	(75,080)

FIMBank Group Annual Report & Financial Statements 2020

The following table sets out information about the overdue status of financial assets under Stages 1, 2 and 3:

Group 31 December 2020
			2020
		Stage 1	Stage 2	Stage 3	Total
		USD	USD	USD	USD
Loans and advances to banks
Current	184,314,617	2,624,157	-	186,938,774
Overdue < 30 days	-	-	-	-
Overdue > 30 days	-	-	10,192,358	10,192,358
Total	184,314,617	2,624,157	10,192,358	197,131,132
Loans and advances to customers
Current	255,311,775	98,118,764	4	353,430,543
Overdue < 30 days	43,140,631	81,551,810	2,093	124,694,534
Overdue > 30 days	-	18,751,410	196,698,141	215,449,551
Total		298,452,406	198,421,984	196,700,238	693,574,628

Group 31 December 2019
			2019
		Stage 1	Stage 2	Stage 3	Total
		USD	USD	USD	USD
Loans and advances to banks
Current	234,899,733	5,382,846	-	240,282,579
Overdue < 30 days	-	-	-	-
Overdue > 30 days	-	-	9,015,125	9,015,125
Total	234,899,733	5,382,846	9,015,125	249,297,704
Loans and advances to customers
Current	361,282,627	168,029,900	554,029	529,866,556
Overdue < 30 days	32,370,307	7,479,602	-	39,849,909
Overdue > 30 days	-	2,184,412	154,396,636	156,581,048
Total		393,652,934	177,693,914	154,950,665	726,297,513

Bank 31 December 2020

			2020
		Stage 1	Stage 2	Stage 3	Total
		USD	USD	USD	USD
Loans and advances to banks
Current	170,665,265	2,423,043	-	173,088,308
Overdue < 30 days	-	-	-	-
Overdue > 30 days	-	-	10,192,358	10,192,358
Total	170,665,265	2,423,043	10,192,358	183,280,666
Loans and advances to customers
Current	538,461,019	64,326,592	4	602,787,615
Overdue < 30 days	41,268,191	45,235,754	2,093	86,506,038
Overdue > 30 days	-	4,274,135	164,142,593	168,416,728
Total		579,729,210	113,836,481	164,144,690	857,710,381

FIMBank Group Annual Report & Financial Statements 2020

Bank 31 December 2019

			2019
		Stage 1	Stage 2	Stage 3	Total
		USD	USD	USD	USD
Loans and advances to banks
Current	221,066,803	5,375,248	-	226,442,051
Overdue < 30 days	-	-	-	-
Overdue > 30 days	-	-	9,015,125	9,015,125
Total	221,066,803	5,375,248	9,015,125	235,457,176
Loans and advances to customers
Current	303,333,640	74,399,450	554,029	378,287,119
Overdue < 30 days	359,399,441	2,751,933	-	362,151,374
Overdue > 30 days	-	1,060,395	116,480,993	117,541,388
Total		662,733,081	78,211,778	117,035,022	857,979,881

In 2020		financial assets at fair value
through other comprehensive income and investments	9: Nil).
	. The analysis has been based on
ratings.
		Group
	2020	2019
		USD	USD
Trading assets
Rated AAA	-	-
Rated AA- to AA+	4,312,015	-
Rated A- to A+	1,300,437	2,022,080
Rated BBB+ below	255,103,459	222,394,955
Unrated		191,610,636	235,821,501
Carrying amount		452,326,547	460,238,536

and where the Group has made concessions that it would not otherwise consider. Conditions for treatment of such renegotiated loans

performing forborne exposures. Forbearance refers only to those loan modification or renegotiations in response to actual or perceived financial difficulties of a customer.

The contractual terms of a loan may be modified for a number of reasons including changing market conditions, customer retention and other factors not related to the current or potential credit deterioration of a customer. An existing loan whose terms have been modified may be derecognised and the renegotiated loan recognised as a new loan at fair value in accordance with Accounting Policy 3.10.

When the terms of a financial asset are modified and the modification does not result in derecognition, the determination of whether

•

the remaining lifetime PD estimated based on data on initial recognition and the original contractual terms.

When modification results in derecognition, a new loan is recognised and allocated to Stage 1 (assuming it is not credit-impaired at that time).

	FIMBank Group Annual Report & Financial Statements 2020
The G	on
	ive basis

if the debtor is currently in default on its debt or if there is a high risk of default, there is evidence that the debtor made all reasonable efforts to pay under the original contractual terms and the debtor is expected to be able to meet the revised terms.

The revised terms usually include extending the maturity, changing the timing of interest payments and amending the terms of loan covenants. Both bank and corporate loans are subject to the forbearance policy.

For the purposes of disclosures in these Financial S g to

terms and conditions that are more favourable to the borrower than the Group had provided initially and that it would not otherwise consider.

has

improved

s and

considers various behavioural indicators.

Generally, forbearance is a qualitative indicator of a significant increase in credit risk and an expectation of forbearance may constitute evidence that an exposure is credit-impaired (see Accounting Policy 3.10.8). A customer needs to demonstrate consistently good payment behaviour over a period of time before the exposure is no longer considered to be credit-impaired/in default or the PD is considered to have decreased such that the loss allowance reverts to being measured at an amount equal to Stage 1. A loan continues to be presented as part of loans with renegotiated terms until maturity, early repayment or write-off.

During the financial years ended 31 December 2020 and 2019 there have been no changes in the forbearance criteria applied to renegotiated facilities. Following the impact of COVID-19 on the economy, governments of those countries in which the Group operates in, allowed institutions to apply a payment moratorium on existing facilities. These schemes are preventative in nature, are applicable to a large group of obligors and offer the same conditions to all borrowers that apply. Refer to section 7.9 of the Additional Disclosures report (unaudited) for more information on the COVID-19 moratoria applied by the Group.

Based on these criteria being fulfilled, EBA/GL/2020/02 Guidelines on legislative and non-legislative moratoria on loan repayments

applied in the light of the COVID-19 crisis, clarifies that the application of suchshould not change the classification of exposures under the definition of forbearance in accordance with Article 47b of Regulation (EU) No 575/2013 as amended by Regulation (EU) 2019/630 or change whether they are treated as distressed restructuring in accordance with Article 178(3)(d) of that Regulation. Accordingly, applying such a moratorium in itself should not lead to reclassification of the exposure as forborne, unless the facility was already classified as forborne.

For the Group, the aggregate amount of renegotiated and forborne loans at reporting date amounted to USD23,780,519 (2019: USD30,414,391), of which USD1,238,038 are performing (2019: USD4,095,780), whilst USD22,542,481 (2019: USD26,318,611) are non- performing with an extendible collateral value of USD234,923 (2019: USD1,805,755). Interest income recognised during 2020 in respect to renegotiated and forborne assets amounts to USD532,998 (2019: USD1,503,244).

For the Bank, the aggregate amount of renegotiated and forborne loans at reporting date amounted to USD13,957,686 (2019: USD21,815,631), of which none (2019: USD1,634,801) are performing, whilst USD13,957,686 (2019: USD20,180,830) are non- performing with an extendible collateral value of USD234,923 (2019: USD1,625,676). Interest income recognised during 2020 in respect to renegotiated and forborne assets amounts to USD195,283 (2019: USD802,839).

FIMBank Group Annual Report & Financial Statements 2020

Movement in forbearance activity during the year is as follows:

Group	31 December 2020
				2020
			Stage 2	Stage 3	Total
			USD	USD	USD
At 1 January	4,095,780	26,318,611	30,414,391
Additions	788,374	2,316,063	3,104,437
Recovered	(2,610,299)	(215,003)	(2,825,302)
Written-off	-	(6,913,007)	(6,913,007)
Reclassified	(1,035,817)	1,035,817	-
At 31 December		1,238,038	22,542,481	23,780,519
Group	31 December 2019
				2019
			Stage 2	Stage 3	Total
			USD	USD	USD
At 1 January	24,039,134	16,730,074	40,769,208
Additions	104,659	3,567,792	3,672,451
Recovered	(12,021,925)	(1,033,673)	(13,055,598)
Written-off	-	(971,670)	(971,670)
Reclassified	(8,026,088)	8,026,088	-
At 31 December		4,095,780	26,318,611	30,414,391
Bank	31 December 2020
				2020
			Stage 2	Stage 3	Total
			USD	USD	USD
At 1 January	1,634,801	20,180,830	21,815,631
Additions	-	904,866	904,866
Recovered	(1,634,801)	(215,003)	(1,849,804)
Written off	-	(6,913,007)	(6,913,007)
Reclassified	-	-	-
At 31 December		-	13,957,686	13,957,686
Bank	31 December 2019
				2019
			Stage 2	Stage 3	Total
			USD	USD	USD
At 1 January	20,228,041	12,615,221	32,843,262
Additions	-	1,426,282	1,426,282
Recovered	(10,567,152)	(915,091)	(11,482,243)
Written off	-	(971,670)	(971,670)
Reclassified	(8,026,088)	8,026,088	-
At 31 December		1,634,801	20,180,830	21,815,631

FIMBank Group Annual Report & Financial Statements 2020

The key inputs into the measurement of ECL are the term structure of the following variables:

•

ECL for exposures in Stage 1 is calculated by multiplying the 12-month PD by LGD and EAD. Lifetime ECL is calculated by multiplying the lifetime PD by LGD and EAD.

dit quality and industry in which a client is classified, while also including tailormade qualitative overlays and collateral where applicable. The LGD models consider the structure, collateral, seniority of the claim, counterparty industry and recovery costs of any collateral that is integral to the financial asset.

EAD represents the expected exposure in the event of a default. The Group derives the EAD from the current exposure to the counterparty and potential changes to the current amount allowed under the contract and arising from amortisation. The EAD of a financial asset is its gross carrying amount at the time of default. For lending commitments, the EADs are potential future amounts that may be drawn under the contract, which are based on estimated credit conversion factors. For financial guarantees, the EAD represents the expected amount of the guaranteed exposure when the financial guarantee becomes payable.

As described above, and subject to using a maximum of a 12-month PD for Stage 1 financial assets, the Group measures ECL t is exposed to credit risk, even if, for credit risk management purposes, the Group considers a longer period. The maximum contractual

period extends to the date at which the Group has the right to require repayment of an advance or terminate a loan commitment or guarantee.

In measuring expected credit losses, the Group relies on risk and economic data and Analytics.

Post-model adjustments (PMAs) are short-term adjustments to the ECL balance as part of the year-end reporting process to reflect late updates to market data, known model deficiencies and expert credit judgement.

The Group has internal governance frameworks and controls in place to assess the appropriateness of all PMAs. The aim of the Group is to incorporate these PMAs into the ECL models, where possible, as part of the periodic recalibration and model assessment procedures.

Total PMAs as at 31 December 2020 shifted opening stage 1 loss allowance of USD32,041 to stage 2 and increased the stage 2 loss allowance by USD51,991 (2019: nil).

The following tables show reconciliations from the opening to the closing balance of the loss allowance by class of financial instrument:

Group 31 December 2020

			2020
		Stage 1	Stage 2	Stage 3	Total
		USD	USD	USD	USD
Balances with Central Bank of Malta, Treasury Bills
and Cash
Balance at 1 January	-	-	-	-
Net remeasurement of loss allowance	125,521	-	-	125,521
New financial assets originated or purchased		6,130	21,049	-	27,179
Balance at 31 December	131,651	21,049	-	152,700
	70

		FIMBank Group Annual Report & Financial Statements 2020
			2020 - continued
		Stage 1	Stage 2	Stage 3	Total
		USD	USD	USD	USD
Loans and advances to banks
Balance at 1 January	542,278	117,390	2,559,841	3,219,509
Transfer to Stage 1	51	(51)	-	-
Transfer to Stage 2	(4,564)	4,564	-	-
Net remeasurement of loss allowance	(80,628)	(46,390)	-	(127,018)
New financial assets originated or purchased	664,990	-	-	664,990
Financial assets that have been derecognised	(346,075)	(26)	-	(346,101)
Interest and fee in suspense	-	-	461,295	461,295
Foreign exchange and other movements	(563)	-	119,443	118,880
Balance at 31 December	775,489	75,487	3,140,579	3,991,555
Loans and advances to customers
Balance at 1 January	973,713	4,395,859	71,037,784	76,407,356
Transfer to Stage 1	7,018	(7,018)	-	-
Transfer to Stage 2	(68,074)	68,074	-	-
Transfer to Stage 3	(2,926)	(366,741)	369,667	-
Net remeasurement of loss allowance	29,929	(328,070)	25,813,877	25,515,736
New financial assets originated or purchased	1,903,735	513,739	5,215,423	7,632,897
Financial assets that have been derecognised	(765,963)	(649,167)	1,854,327	439,197
Write-offs	-	-	(10,752,659)	(10,752,659)
Interest and fee in suspense	-	-	817,911	817,911
Foreign exchange and other movements	(7,719)	(8,329)	1,534,512	1,518,464
Balance at 31 December	2,069,713	3,618,347	95,890,842	101,578,902
Financial assets at fair value through other
comprehensive income
Balance at 1 January	91,978	-	-	91,978
Net remeasurement of loss allowance	(4,283)	-	-	(4,283)
New financial assets originated or purchased	71,666	-	-	71,666
Financial assets that have been derecognised	(87,534)	-	-	(87,534)
Balance at 31 December	71,827	-	-	71,827
Investments at amortised cost
Balance at 1 January	179,444	-	-	179,444
New financial assets originated or purchased	70,674	-	-	70,674
Financial assets that have been derecognised	(179,444)	-	-	(179,444)
Balance at 31 December	70,674	-	-	70,674
Contingent liabilities
Balance at 1 January	9,751	391	-	10,142
Net remeasurement of loss allowance	162	-	-	162
New financial assets originated or purchased	9,329	-	-	9,329
Financial assets that have been derecognised	(9,631)	(391)	-	(10,022)
Balance at 31 December	9,611	-	-	9,611
Commitments
Balance at 1 January	56,870	21,423	-	78,293
Transfer to Stage 2	(88)	88	-	-
Net remeasurement of loss allowance	(16,682)	171	-	(16,511)
New financial assets originated or purchased	12,651	152,917	-	165,568
Financial assets that have been derecognised	75,153	(21,423)	-	53,730
Write-offs	(113,096)	-	-	(113,096)
Balance at 31 December		14,808	153,176	-	167,984

FIMBank Group Annual Report & Financial Statements 2020

Group 31 December 2019

			2019
		Stage 1	Stage 2	Stage 3	Total
		USD	USD	USD	USD
Loans and advances to banks
Balance at 1 January	944,228	265,814	3,871,551	5,081,593
Net remeasurement of loss allowance	(156,025)	(148,449)	-	(304,474)
New financial assets originated or purchased	198,787	26	-	198,813
Financial assets that have been derecognised	(444,422)	-	16,433	(427,989)
Write-offs	-	-	(1,275,570)	(1,275,570)
Interest and fee in suspense	-	-	(40,783)	(40,783)
Foreign exchange and other movements	(290)	(1)	(11,790)	(12,081)
Balance at 31 December	542,278	117,390	2,559,841	3,219,509
Loans and advances to customers
Balance at 1 January	1,132,111	4,238,085	58,017,770	63,387,966
Transfer to Stage 1	172,035	(172,035)	-	-
Transfer to Stage 2	(118,440)	118,440	-	-
Transfer to Stage 3	(62,763)	(957,480)	1,020,243	-
Net remeasurement of loss allowance	(190,751)	776,357	9,601,195	10,186,801
New financial assets originated or purchased	670,964	936,523	2,894,599	4,502,086
Financial assets that have been derecognised	(622,808)	22,290	126,928	(473,590)
Write-offs	-	(562,464)	(6,595,273)	(7,157,737)
Interest and fee in suspense	-	-	5,547,759	5,547,759
Foreign exchange and other movements	(6,635)	(3,857)	424,563	414,071
Balance at 31 December	973,713	4,395,859	71,037,784	76,407,356
Financial assets at fair value through other
comprehensive income
Balance at 1 January	45,764	-	-	45,764
Net remeasurement of loss allowance	8,933	-	-	8,933
New financial assets originated or purchased	83,045	-	-	83,045
Write-offs	22,445	-	-	22,445
Foreign exchange and other movements	(68,209)	-	-	(68,209)
Balance at 31 December	91,978	-	-	91,978
Investments at amortised cost
Balance at 1 January	34,674	-	-	34,674
Net remeasurement of loss allowance	144,770	-	-	144,770
Balance at 31 December	179,444	-	-	179,444
Contingent liabilities
Balance at 1 January	3,574	-	39,861	43,435
Transfer to Stage 2	(1,351)	1,351	-	-
Net remeasurement of loss allowance	(1,502)	(960)	-	(2,462)
New financial assets originated or purchased	9,576	-	-	9,576
Financial assets that have been derecognised	(546)	-	(39,063)	(39,609)
Interest and fee in suspense	-	-	(798)	(798)
Balance at 31 December	9,751	391	-	10,142
Commitments
Balance at 1 January	222,296	4,053	-	226,349
Net remeasurement of loss allowance	(55,851)	-	-	(55,851)
New financial assets originated or purchased	51,733	21,424	-	73,157
Financial assets that have been derecognised	(161,308)	(4,054)	-	(165,362)
Balance at 31 December		56,870	21,423	-	78,293

FIMBank Group Annual Report & Financial Statements 2020

Bank 31 December 2020

			2020
		Stage 1	Stage 2	Stage 3	Total
		USD	USD	USD	USD
Balances with Central Bank of Malta, Treasury Bills
and Cash
Balance at 1 January	-	-	-	-
Net remeasurement of loss allowance	125,521	-	-	125,521
New financial assets originated or purchased		6,130	21,049	-	27,179
Balance at 31 December	131,651	21,049	-	152,700
Loans and advances to banks
Balance at 1 January	428,246	117,339	2,559,841	3,105,426
Net remeasurement of loss allowance	(70,599)	(45,871)	-	(116,470)
New financial assets originated or purchased	663,559	-	-	663,559
Financial assets that have been derecognised	(316,628)	(26)	-	(316,654)
Interest and fee in suspense	-	-	461,295	461,295
Foreign exchange and other movements		-	-	119,443	119,443
Balance at 31 December	704,578	71,442	3,140,579	3,916,599
Loans and advances to customers
Balance at 1 January	544,983	2,467,636	43,814,413	46,827,032
Transfer to Stage 1	7,018	(7,018)	-	-
Transfer to Stage 2	(9,354)	9,354	-	-
Transfer to Stage 3	(2,926)	(297,483)	300,409	-
Net remeasurement of loss allowance	53,401	(30,078)	26,707,450	26,730,773
New financial assets originated or purchased	1,745,170	253,717	5,215,423	7,214,310
Financial assets that have been derecognised	(472,024)	(67,384)	411,791	(127,617)
Write-offs	-	-	(9,226,421)	(9,226,421)
Interest and fee in suspense	-	-	4,983,165	4,983,165
Foreign exchange and other movements		-	-	1,474,779	1,474,779
Balance at 31 December	1,866,268	2,328,744	73,681,009	77,876,021
Financial assets at fair value through other
comprehensive income
Balance at 1 January	91,978	-	-	91,978
Net remeasurement of loss allowance	(4,283)	-	-	(4,283)
New financial assets originated or purchased	71,666	-	-	71,666
Financial assets that have been derecognised		(87,534)	-	-	(87,534)
Balance at 31 December	71,827	-	-	71,827
Investments at amortised cost
Balance at 1 January	179,444	-	-	179,444
New financial assets originated or purchased	70,674	-	-	70,674
Financial assets that have been derecognised		(179,444)	-	-	(179,444)
Balance at 31 December	70,674	-	-	70,674
Contingent liabilities
Balance at 1 January	9,688	391	-	10,079
Net remeasurement of loss allowance	163	-	-	163
New financial assets originated or purchased	4,784	-	-	4,784
Financial assets that have been derecognised		(9,568)	(391)	-	(9,959)
Balance at 31 December	5,067	-	-	5,067
Commitments
Balance at 1 January	53,658	21,422	-	75,080
Transfer to Stage 2	(88)	88	-	-
Net remeasurement of loss allowance	(16,432)	171	-	(16,261)
New financial assets originated or purchased	12,651	152,917	-	165,568
Financial assets that have been derecognised	78,116	(21,423)	-	56,693
Write-offs		(113,096)	-	-	(113,096)
Balance at 31 December	14,809	153,175	-	167,984
	73

FIMBank Group Annual Report & Financial Statements 2020

Bank 31 December 2019

			2019
		Stage 1	Stage 2	Stage 3	Total
		USD	USD	USD	USD
Loans and advances to banks
Balance at 1 January	944,228	265,814	3,871,551	5,081,593
Net remeasurement of loss allowance	(225,758)	(148,501)	-	(374,259)
New financial assets originated or purchased	154,198	26	-	154,224
Financial assets that have been derecognised	(444,422)	-	16,433	(427,989)
Write-offs	-	-	(1,275,570)	(1,275,570)
Interest and fee in suspense	-	-	(40,783)	(40,783)
Foreign exchange and other movements	-	-	(11,790)	(11,790)
Balance at 31 December	428,246	117,339	2,559,841	3,105,426
Loans and advances to customers
Balance at 1 January	610,824	1,944,635	35,355,251	37,910,710
Transfer to Stage 2	(51,495)	51,495	-	-
Transfer to Stage 3	(62,304)	(824,607)	886,911	-
Net remeasurement of loss allowance	44,248	1,275,948	9,989,615	11,309,811
New financial assets originated or purchased	326,342	63,071	2,894,599	3,284,012
Financial assets that have been derecognised	(322,632)	519,558	(7,834)	189,092
Write-offs	-	(562,464)	(5,186,459)	(5,748,923)
Interest and fee in suspense	-	-	(76,831)	(76,831)
Foreign exchange and other movements	-	-	(40,839)	(40,839)
Balance at 31 December	544,983	2,467,636	43,814,413	46,827,032
Financial assets at fair value through other
comprehensive income
Balance at 1 January	45,764	-	-	45,764
Net remeasurement of loss allowance	8,933	-	-	8,933
New financial assets originated or purchased	83,045	-	-	83,045
Write-offs	22,445	-	-	22,445
Foreign exchange and other movements	(68,209)	-	-	(68,209)
Balance at 31 December	91,978	-	-	91,978
Investments at amortised cost
Balance at 1 January	34,674	-	-	34,674
Net remeasurement of loss allowance	144,770	-	-	144,770
Balance at 31 December	179,444	-	-	179,444
Contingent liabilities
Balance at 1 January	3,574	-	39,861	43,435
Transfer to Stage 2	(1,351)	1,351	-	-
Net remeasurement of loss allowance	(1,510)	(960)	-	(2,470)
New financial assets originated or purchased	9,521	-	-	9,521
Financial assets that have been derecognised	(546)	-	(39,063)	(39,609)
Interest and fee in suspense	-	-	(798)	(798)
Balance at 31 December	9,688	391	-	10,079
Commitments
Balance at 1 January	222,296	4,053	-	226,349
Net remeasurement of loss allowance	(56,027)	-	-	(56,027)
New financial assets originated or purchased	48,697	21,423	-	70,120
Financial assets that have been derecognised	(161,308)	(4,054)	-	(165,362)
Balance at 31 December		53,658	21,422	-	75,080

FIMBank Group Annual Report & Financial Statements 2020

The following table provides a reconciliation between:

amounts shown in the above tables reconciling opening and closing balances of loss allowance per class of financial instrument; and

Group	31 December 2020
		Balances with					Financial assets
		the Central					at fair value
		Bank of Malta,	Loans and	Loans and	through other	Investments
		treasury bills	advances	advances	comprehensive	at amortised	Contingent
		and cash	to banks	to customers		income		cost	liabilities	Commitments	Other assets	Total
		USD		USD		USD		USD		USD	USD	USD	USD	USD
Net remeasurement of loss allowance	125,521	(127,018)	25,515,736		(4,283)		-	162	(16,511)	63,139	25,556,746
New financial assets originated or purchased	27,179	664,990	7,632,897		71,666		70,674	9,329	165,568	-	8,642,303
Financial assets that have been derecognised	-	(346,101)	439,197		(87,534)	(179,444)	(10,022)	53,730	725	(129,449)
Total		152,700	191,871	33,587,830		(20,151)	(108,770)	(531)	202,787	63,864	34,069,600
Recoveries of amounts previously written-off	-	-	(1,079,281)		-		-	-	-	-	(1,079,281)
Total		152,700	191,871	32,508,549		(20,151)	(108,770)	(531)	202,787	63,864	32,990,319
Group	31 December 2019
								Financial assets
								at fair value
				Loans and	Loans and	through other
				advances		advances	comprehensive	Investments at	Contingent
				to banks	to customers		income	amortised cost	liabilities	Commitments	Total
					USD		USD		USD		USD	USD	USD	USD
Net remeasurement of loss allowance		(304,474)	10,186,801		8,933		144,770	(2,462)	(55,851)	9,977,717
New financial assets originated or purchased				198,813		4,502,086		83,045		-	9,576	73,157	4,866,677
Financial assets that have been derecognised			(427,989)		(473,590)	22,445		-	(39,609)	(165,362)	(1,084,105)
Total			(533,650)	14,215,297		114,423		144,770	(32,495)	(148,056)	13,760,289
Recoveries of amounts previously written-off				-		(694,117)	-		-	-	-	(694,117)
Total			(533,650)	13,521,180		114,423		144,770	(32,495)	(148,056)	13,066,172
							75

Bank 31 December 2020

Net remeasurement of loss allowance

New financial assets originated or purchased Financial assets that have been derecognised

Total

Recoveries of amounts previously written-off

FIMBank Group Annual Report & Financial Statements 2020

Balances with			Financial assets
the Central			at fair value
Bank of Malta,	Loans and	Loans and	through other
treasury bills	advances	advances	comprehensive	Investments at	Contingent
and cash	to banks	to customers	income	amortised cost	liabilities	Commitments	Total
USD	USD	USD	USD	USD	USD	USD	USD
125,521	(116,470)	26,730,773	(4,283)	-	163	(16,261)	26,719,443
27,179	663,559	7,214,310	71,666	70,674	4,784	165,568	8,217,740
-	(316,654)	(127,617)	(87,534)	(179,444)	(9,959)	56,693	(664,515)
152,700	230,435	33,817,466	(20,151)	(108,770)	(5,012)	206,000	34,272,668
-	-	(268)	-	-	-	-	(268)

Total

152,700

230,435

33,817,198

(20,151)

(108,770)

(5,012)

206,000

34,272,400

Bank 31 December 2019

			Financial assets
			at fair value
	Loans and	Loans and	through other
	advances	advances	comprehensive	Investments at	Contingent
	to banks	to customers	income	amortised cost	liabilities	Commitments	Total
	USD	USD	USD	USD	USD	USD	USD
Net remeasurement of loss allowance	(374,259)	11,309,811	8,933	144,770	(2,470)	(56,027)	11,030,758
New financial assets originated or purchased	154,224	3,284,012	83,045	-	9,521	70,120	3,600,922
Financial assets that have been derecognised	(427,989)	189,092	22,445	-	(39,609)	(165,362)	(421,423)
Total	(648,024)	14,782,915	114,423	144,770	(32,558)	(151,269)	14,210,257

FIMBank Group Annual Report & Financial Statements 2020

The Group writes off a loan/security balance (and any related allowances for impairment losses) when it has been unequivocally determined that the loan/security is uncollectible. This determination is reached after considering information such as the occurrence tion, that proceeds from collateral will not be sufficient to pay back the entire exposure, or that future recoverability efforts are deemed

unfeasible.

The table below shows the gross carrying value of loans written-off. Net carrying amounts of loans written-off are disclosed in Note 5.2.1.4.

	Group		Bank
	2020	2019	2020	2019
	USD	USD	USD	USD
Loans and advances to customers
Written-off	19,528,228	629,352	9,612,544	629,352

Loans are typically secured either by cash collateral, property (including shipping vessels), credit insurance cover, bank guarantees, corporate guarantees, personal guarantees, pledged goods or some combination thereof. Each collateral type is given a weighting determined by internal policy. These collaterals are reviewed periodically by management both in terms of exposure to the Bank and the Group and also to ensure the validity and enforceability of the security taken. Estimates of fair value are also updated periodically together with such reviews. Collateral usually is not held against investment securities, and no such collateral was held at 31 December 2020 and 2019.

An estimate of the fair value of collateral and other security enhancements held against financial assets is shown below:

Group	31 December 2020
		Loans and	Loans and
		advances to	advances to	Commitments	Contingent
		banks	customers	outstanding	liabilities	Total
		USD	USD	USD	USD	USD
Cash or quasi cash	4,799,198	126,854,935	10,944,353	715,848	143,314,334
Property	-	91,388,359	-	-	91,388,359
Other		-	106,926,074	7,753,880	-	114,679,954
		4,799,198	325,169,368	18,698,233	715,848	349,382,647
Group	31 December 2019
		Loans and	Loans and
		advances to	advances to	Commitments	Contingent
		banks	customers	outstanding	liabilities	Total
		USD	USD	USD	USD	USD
Cash or quasi cash	21,584,584	109,486,329	7,955,839	869,439	139,896,191
Property	-	87,809,922	-	-	87,809,922
Other		-	93,542,978	7,224,448	-	100,767,426
		21,584,584	290,839,229	15,180,287	869,439	328,473,539
Bank	31 December 2020
		Loans and	Loans and
		advances to	advances to	Commitments	Contingent
		banks	customers	outstanding	liabilities	Total
		USD	USD	USD	USD	USD
Cash or quasi cash	4,799,198	73,240,246	10,944,353	715,848	89,699,645
Property	-	91,388,359	-	-	91,388,359
Other		-	106,926,074	15,542,302	-	122,468,376
		4,799,198	271,554,679	26,486,655	715,848	303,556,380
		77

FIMBank Group Annual Report & Financial Statements 2020

Bank 31 December 2019

	Loans and	Loans and
	advances to	advances to	Commitments	Contingent
	banks	customers	outstanding	liabilities	Total
	USD	USD	USD	USD	USD
Cash or quasi cash	21,584,584	47,561,335	7,955,839	869,439	77,971,197
Property	-	86,252,361	-	-	86,252,361
Other	-	90,771,207	11,575,163	-	102,346,370
	21,584,584	224,584,903	19,531,002	869,439	266,569,928

With the exception of cash collateral, as disclosed in this Note and in Notes 32 and 33, the Group and Bank do not carry financial instruments which are subject to offsetting in the Statements of Financial Position. Group entities have a legal enforceable right to offset such collaterals against the respective facilities for which the collateral is taken. At 31 December 2020 and 2019, all financial assets and respective collaterals are disclosed separately in the Financial Statements without any offsetting.

See Accounting Policy 3.10.8.

When determining whether the risk of default on a financial instrument has increased significantly since initial recognition, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both t and

including forward-looking information.

The objective of the assessment is to identify whether a significant increase in credit risk has occurred for an exposure by comparing:

the remaining lifetime PD as at the reporting date; with
the remaining lifetime PD for this point in time that was estimated at the time of initial recognition of the exposure (adjusted where relevant for changes in prepayment expectations).

The Group uses three criteria for determining whether there has been a significant increase in credit risk:

quantitative test based on changes in internal credit ratings and changes in PD of obligors;
qualitative indicators; and
a backstop of 30 days past due.

The Group assesses whether credit risk has increased significantly since initial recognition at each reporting date. Determining whether an increase in credit risk is significant depends on the characteristics of the financial instrument and the borrower, and the geographical region.

As a general indicator, credit risk of a particular exposure is deemed to have increased significantly since initial recognition if, based lling, there is a two-grade deterioration from the rating at origination.

The credit risk may also be deemed to have increased significantly since initial recognition based on qualitative factors linked to the processes that may not otherwise be fully reflected in its quantitative analysis on a timely basis. This will be the case for exposures that meet certain heightened risk criteria, such as placement on a watch list. Such qualitative factors are

based on its expert judgment and relevant historical experiences.

As a backstop, the Group considers that a significant increase in credit risk occurs no later than when an asset is more than 30 days past due. Days past due are determined by counting the number of days since the earliest elapsed due date in respect of which full payment has not been received. Due dates are determined without considering any grace period that might be available to the borrower.

FIMBank Group Annual Report & Financial Statements 2020

The Group applies a further backstop when the rating of the obligor reaches a level that is equivalent to a facility in arrears. A significant increase in credit risk occurs where the obligor is internally rated below 7-.

If there is evidence that there is no longer a significant increase in credit risk relative to initial recognition, then the loss allowance on an instrument returns to being measured as 12-month ECL. Some qualitative indicators of an increase in credit risk, such as delinquency or forbearance, may be indicative of an increased risk of default that persists after the indicator itself has ceased to exist. In these cases, the Group determines a probation period during which the financial asset is required to demonstrate good behaviour to provide evidence that its credit risk has declined sufficiently. When contractual terms of a loan have been modified, evidence that the criteria for recognising lifetime ECL are no longer met includes a history of up-to-date payment performance against the modified contractual terms.

IFRS 9 allows low credit risk expedient for the purpose of allocating stages to the exposures based on the significant increase in credit risk of the exposures. Under this expedient, an entity may assume that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date.

The Group applies this practical expedient to investment grade (BBB- and better) exposures.

The Group allocates each exposure to a credit risk grade based on a variety of data that is determined to be predictive of the risk of default and applying experienced credit judgement. Credit risk grades are defined using qualitative and quantitative factors that are indicative of risk of default. These factors vary depending on the nature of the exposure and the type of borrower.

Credit risk grades are defined and calibrated such that the risk of default occurring increases exponentially as the credit risk deteriorates so, for example, the difference in risk of default between credit risk grades 1 and 2 is smaller than the difference between credit risk grades 2 and 3.

l credit agency rating, or expert judgement based on the information available for the obligor. Exposures are subject to ongoing monitoring, which may result in an exposure being moved to a different credit risk grade. The monitoring typically involves use of the following data:

• information obtained during periodic review of customer files e.g. audited financial statements, management accounts, budgets and projections. Examples of areas of particular focus are: gross profit margins, financial leverage ratios, debt service coverage, compliance with covenants, quality of management and senior management changes;

data from credit reference agencies, press articles and changes in external credit ratings;
actual and expected significant changes in the political, regulatory and technological environment of the borrower or in its business activities;

• payment record this includes overdue status as well as a range of variables about payment ratios;

requests for and granting of forbearance; and
existing and forecast changes in business, financial and economic conditions.

external

Grading	12-monthweighted-average PD	External rating
Grades 1 to 4- low risk	0.23%	Aaa-Baa3
Grades 5+ to 5- fair risk	0.87%	Ba1-Ba3
Grades 6+ to 7 substandard	8.89%	B1-Caa2
Grades 7- to 8- doubtful	28.01%	Caa3-Ca
Grades 9 to 10 loss	100.00%	C

The term structure of PDs follows a two-

official credit rating-scale table. Following this, the resultant credit rating is conver

rate estimates of the remaining lifetime PD of exposures and how these are expected to change as a result of the passage of time based

FIMBank Group Annual Report & Financial Statements 2020

The Group considers a financial asset to be in default when:

the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realising security (if any is held);
the borrower is more than 90 days past due on any material credit obligation to the Group. Overdrafts are considered as being past due once the customer has breached an advised limit or been advised of a limit smaller than the current amount outstanding; or

•

y to pay

its credit obligations.

In assessing whether a borrower is in default, the Group considers indicators that are:

qualitative: e.g. breaches of covenant;
quantitative: e.g. overdue status and non-payment on another obligation of the same issuer to the Group; and
based on data developed internally and obtained from external sources.

Inputs into the assessment of whether a financial instrument is in default and their significance may vary over time to reflect changes in circumstances. The Group has implemented the definition of default as per Article 178 of the CRR which stipulates that a default shall be considered to have occurred when either or both of the following criteria are present: there are material credit obligations due by the obligor which are more than 90 days past due and / or the obligor is considered as unlikely to pay its credit obligations without the realization of collateral. This definition is used for the purpose of measuring ECL and identifying assets as having undergone a significant increase in credit risk or being credit-impaired.

The Group incorporates forward-looking information into both the assessment of whether the credit risk of an instrument has increased significantly since its initial recognition and the measurement of ECL.

The Group formulates three economic scenarios: a base case, which is the median scenario assigned a 40% probability of occurring, and two less likely scenarios, one upside and one downside, each assigned a 30% probability of occurring. Economic data for each of data in onal statistical offices and by third party aggregators such as the is

composed of a number of calculations that develop into relationships across series within each national economy. The parameters used by the model are estimated using econometric techniques through observable historical covariation over the macroeconomic time series.

case forecast and alternative scenarios. The upside and downside scenario will present hypothetical events that push the economy away from the base case outlook. The base case forecast and the two alternative scenarios are each assigned probability based on a distribution of average growth.

TM model to link credit-risk factors to macroeconomic variables using the following information for each counterparty: industry, country and sensitivity of the counterparty to systemic risk. The Group has identified and documented key drivers of credit risk and credit losses. The key drivers of credit risk for portfolios are: GDP growth, unemployment rates and equity prices. For exposures to specific industries and/or regions, the key drivers also include relevant commodity prices, such as oil prices. The Group uses economic data from twelve different geographies which broadly represent the exposures carried by the Group at reporting date. In cases where a specific country exposure is not available within these twelve geographies, the exposure would be linked to the geography with the closest economic structure and credit risk.

FIMBank Group Annual Report & Financial Statements 2020

The economic scenarios for the top five geographies used as at 31 December 2020 included the following key indicators for the years ending 31 December 2021 to 2025.

			Year-on-year change
Country: Malta		2021	2022	2023	2024	2025
Equity	Base	32%	11%	0%	2%	2%
	Upside	44%	9%	-2%	0%	2%
	Downside	-5%	24%	14%	6%	4%
GDP growth	Base	15%	5%	3%	2%	2%
	Upside	18%	5%	3%	2%	2%
	Downside	10%	5%	3%	3%	3%
Country: United Arab Emirates		2021	2022	2023	2024	2025
Equity	Base	4%	10%	6%	5%	5%
	Upside	11%	8%	4%	4%	6%
	Downside	-21%	24%	16%	4%	1%
Oil price	Base	25%	16%	4%	2%	4%
	Upside	38%	16%	3%	2%	4%
	Downside	-38%	23%	44%	12%	10%
Country: Germany		2021	2022	2023	2024	2025
Equity	Base	8%	-5%	-6%	6%	6%
	Upside	24%	-7%	-9%	0%	4%
	Downside	-28%	13%	8%	10%	8%
GDP growth	Base	4%	3%	2%	2%	1%
	Upside	7%	3%	2%	2%	1%
	Downside	-1%	4%	3%	2%	2%
Country: Egypt		2021	2022	2023	2024	2025
Equity	Base	40%	12%	5%	7%	7%
	Upside	51%	13%	6%	6%	7%
	Downside	6%	12%	17%	10%	9%
GDP growth	Base	5%	6%	6%	6%	6%
	Upside	9%	6%	6%	6%	6%
	Downside	1%	6%	7%	7%	6%
Country: Italy		2021	2022	2023	2024	2025
Equity	Base	5%	0%	-1%	8%	9%
	Upside	20%	-2%	-4%	5%	8%
	Downside	-26%	14%	7%	11%	11%
Eurozone GDP	Base	5%	3%	2%	2%	2%
	Upside	8%	3%	2%	2%	2%
	Downside	0%	3%	3%	3%	2%
Eurozone unemployment	Base	0%	-7%	-6%	-3%	-2%
	Upside	-7%	-7%	-4%	-1%	-1%
	Downside	23%	-3%	-8%	-9%	-7%

The ECL is sensitive to judgements and assumptions made regarding formulation of forward-looking scenarios and how such scenarios are incorporated into the calculations. Management performs a sensitivity analysis on the ECL recognised on material classes of its assets.

The tables below show the loss allowance on loans and advances to corporate and retail customers assuming each forward-looking scenario (e.g. base case, upside and downside) were weighted 100% instead of applying scenario probability weights across the three scenarios. For ease of comparison, the tables also include the probability-weighted amounts that are reflected in the Financial Statements.

FIMBank Group Annual Report & Financial Statements 2020

Group 31 December 2020
		2020
	Upside	Base Case	Downside	Probability-
				weighted
	USD	USD	USD	USD
Gross exposure	1,480,400,820	1,480,400,820	1,480,400,820	1,480,400,820
Loss allowance	103,116,506	103,690,952	108,752,530	106,106,391
Proportion of assets in Stage 2	12.89%	13.02%	25.94%	14.65%

Group 31 December 2019
		2019
	Upside	Base Case	Downside	Probability-
				weighted
	USD	USD	USD	USD
Gross exposure	1,444,044,465	1,444,044,465	1,444,044,465	1,444,044,465
Loss allowance	78,330,475	78,816,774	80,939,968	79,986,722
Proportion of assets in Stage 2	13.13%	13.57%	25.38%	13.02%

Bank 31 December 2020
		2020
	Upside	Base Case	Downside	Probability-
				weighted
	USD	USD	USD	USD
Gross exposure	1,673,141,985	1,673,141,985	1,673,141,985	1,673,141,985
Loss allowance	79,610,103	80,057,579	84,310,063	82,260,870
Proportion of assets in Stage 2	7.16%	7.16%	16.40%	7.89%

Bank 31 December 2019

		2019
	Upside	Base Case	Downside	Probability-
				weighted
	USD	USD	USD	USD
Gross exposure	1,595,684,037	1,595,684,037	1,595,684,037	1,595,684,037
Loss allowance	49,119,005	49,406,532	50,819,629	50,289,036
Proportion of assets in Stage 2	5.95%	5.95%	15.32%	5.54%

orig

as the knowledge of the counterparty by the Bank consolidates through time.

FIMBank Group Annual Report & Financial Statements 2020

The Group has established policies requiring limits on counterparties and countries, and controls in relation to concentration to specific sectors, and industries, thus ensuring a more diversified on- and off- balance sheet lending portfolios.

Single-name counterparty limits follow the prudential rules emanating from the CRR which apply maximum limits for large exposures. A large exposure is defined as a consolidated exposure to a single entity or an economic group that exceeds 10% of a bank's regulatory capital. The maximum limit for non-institutions is 25% of regulatory capital. The maximum limit for institutions is 25% of its regulatory capital or EUR1 capital a reasonable limit shall be determined by the Group which however shall not exceed 100% of regulatory capital. It must also be noted that a further prudential rule-of-thumb followed by the Group on large exposures is that initial lending limits for new

t the nner,

Concentration risk by geographical region is monitored by the BCC and supervised by the BRC. The Group monitors concentrations c

is espective local currency. The currency of the obligation may become unavailable to the borrower regardless of its particular condition. The policy governing country risk

concentration defines a ceiling - for each individual country exposure, which is linked to the rating granted to each country by international rating agencies. The ceiling increases (up to a maximum of 100% of the y. As for single-name limits, country limits do not

automatically increase to the pre-

political risk conditions. Group entities put forward their business request and counterparty approval requests to the Group Head of Risk following a thorough review from the local risk managers.

institution

geographies and hence diversified by virtue of the country limit policy specified in the above paragraph, which usually guarantee/confirm the payment risk of the importers under international trade finance operations. Exposure to particular sectors is monitored indirectly through monitoring of the trends of the underlying commodities. Exposure to corporate entities in many cases consists of bridge financing towards a sale of goods/commodities which will eventually settle from receivables generated from the buyers of goods, bank letters of credit, or even settled directly by the customer. Depending on the sector of exposure an overall sector

with such limits being reviewed regularly. These include specialised sectors such as ship demolition financing, which is collateralised through a mortgage on each vessel financed, and real estate project financing, which is collateralised by a mortgage over property.

As the Group carries out activities with counterparties in emerging markets, there are certain risk factors which are particular to such activities and which require careful consideration by prospective investors since they are not usually associated with activities in more developed markets. Such exposure relates to the risks of major political and economic changes including but not limited to, higher price volatility, the effect of exchange control regulations and the risks of expropriation, nationalisation and/or confiscation of assets. The ineffectiveness of the legal and judicial systems in some of the emerging markets, including those in which the Group is carrying out activities, may pose difficulties for the Group in preserving its legal rights.

The BCC approves country limits after these are presented with reports covering the political and economic situations for each of the countries to which a limit is issued.

FIMBank Group Annual Report & Financial Statements 2020

		Group	Bank
		2020	2019	2020	2019
		USD	USD	USD	USD
Balances with the Central Bank of Malta,
	treasury bills and cash
-	Europe	319,287,524	208,277,004	319,267,749	208,259,407
Trading assets
-	Europe	106,398,354	115,805,653	-	-
-	Sub-Saharan Africa	103,085,874	100,481,833	-	-
- Middle East and North Africa (MENA)	111,732,865	93,822,923	-	-
- Commonwealth of Independent States (CIS) region	12,460,725	4,021,477	-	-
-	Others	118,648,729	146,106,650	-	-
Loans and advances to banks
-	Europe	138,051,074	198,548,214	137,859,088	198,407,197
-	Sub-Saharan Africa	11,644,118	28,825,848	11,644,118	27,351,122
- Middle East and North Africa (MENA)	26,406,481	10,160,832	24,723,229	595,289
- Commonwealth of Independent States (CIS) region	2,244,044	5,144,917	2,194,777	5,094,100
-	Others	14,793,860	3,398,384	2,942,855	904,042
Loans and advances to customers
-	Europe	257,553,603	275,792,298	517,069,974	517,630,855
-	Sub-Saharan Africa	1,571,746	1,289,127	271,886	663,075
- Middle East and North Africa (MENA)	188,352,048	221,007,034	170,774,887	202,440,438
-	Others	144,518,329	151,801,698	91,717,613	90,418,481
Financial assets at fair value through profit or loss
-	Europe	20,385,323	125,342,798	20,385,323	125,342,798
Financial assets at fair value through other
	comprehensive income
-	Europe	153,327,686	79,367,556	153,327,686	79,367,556
Investments at amortised cost
- Middle East and North Africa (MENA)	9,839,457	9,785,496	9,839,457	9,785,496
Contingent liabilities
-	Europe	1,569,969	1,703,116	43,906,453	58,431,943
- Middle East and North Africa (MENA)	340,449	2,969,802	340,449	2,969,802
-	Others	-	226,909	-	226,909
Commitments
-	Europe	59,312,946	61,297,970	67,286,011	74,940,507
-	Sub-Saharan Africa	17,779,903	27,570,682	13,189,724	9,815,860
- Middle East and North Africa (MENA)	3,561,524	23,277,066	5,125,218	14,170,113
-	Others	24,389,083	53,794,202	19,644,813	44,099,947

		1,847,255,714	1,949,819,489	1,611,511,310	1,670,914,937

			FIMBank Group Annual Report & Financial Statements 2020
The following	sector concentrations:
			Group	Bank
		2020	2019	2020	2019
			USD	USD	USD	USD
Balances with the Central Bank of Malta,
	treasury bills and cash
-	Financial intermediation	245,686,037	208,277,004	245,666,262	208,259,407
-	Other services	73,601,487	-	73,601,487	-
Trading assets
-	Industrial raw materials	65,792,606	79,728,153	-	-
-	Wholesale and retail trade	41,668,103	52,150,130	-	-
-	Financial intermediation	232,900,663	243,651,637	-	-
-	Other services	111,965,175	84,708,616	-	-
Loans and advances to banks
-	Financial intermediation	193,139,577	246,078,195	179,364,067	232,351,750
Loans and advances to customers
-	Industrial raw materials	276,957,626	314,428,716	134,351,441	154,569,590
-	Shipping and transportation	2,612,759	3,387,065	156,895	950,688
-	Wholesale and retail trade	172,658,864	176,029,398	151,900,007	143,599,304
-	Financial intermediation	52,532,220	76,496,919	382,836,339	410,157,121
-	Real estate activities	29,404,238	28,037,066	58,237,698	57,329,379
-	Other services	57,830,019	51,510,993	52,351,980	44,546,767
Financial assets at fair value through profit or loss
-	Financial intermediation	20,332,246	125,289,721	20,332,246	125,289,721
-	Other services	53,077	53,077	53,077	53,077
Financial assets at fair value through other
	comprehensive income
-	Shipping and transportation	5,008,684	-	5,008,684	-
-	Financial intermediation	65,199,200	21,706,342	65,199,200	21,706,342
-	Other services	83,119,802	57,661,214	83,119,802	57,661,214
Investments at amortised cost
-	Financial intermediation	9,839,457	9,785,496	9,839,457	9,785,496
Contingent liabilities
-	Industrial raw materials	613,359	579,726	613,359	579,726
-	Wholesale and retail trade	396	471,358	396	416,732
-	Financial intermediation	790,453	3,365,798	43,539,680	60,557,035
-	Real estate activities	25,995	14,935	25,995	14,935
-	Other services	480,215	468,010	67,472	60,226
Commitments
-	Industrial raw materials	38,175,330	50,890,138	44,621,725	50,013,767
-	Shipping and transportation	-	-	57,646	-
-	Wholesale and retail trade	21,452,255	40,612,723	19,648,317	37,896,579
-	Financial intermediation	22,145,958	47,600,957	21,441,523	28,279,979
-	Real estate activities	18,255,332	24,932,635	18,255,332	24,932,635
-	Other services	5,014,581	1,903,467	1,221,223	1,903,467

		1,847,255,714	1,949,819,489	1,611,511,310	1,670,914,937

FIMBank Group Annual Report & Financial Statements 2020

Counterparty credit risk is defined as the risk that a counterparty to an over-the-counter derivative transaction may default before completing the settlement of the transaction. An economic loss might occur if the transaction has a positive economic value at the time of default.

Use of derivatives within the Group is limited to hedging balance-sheet positions, hedging capital investments, interest rate hedging on behalf of LFC and, to a lesser extent, to satisfy customer requests unit is responsible for the internal management of such instruments. In addition, LFC via ISDA (International Swaps and Derivatives Association) agreements between the Bank and selected Protection Buyers, over the years have sold Loan Credit Default Swaps

cided to

cease the sale of new LCDS and product was phased out by the reporting date.

Such a risk is monitored through the setting up of counterparty limits to capture the position and settlement risks associated with forward and other derivative instruments. The Group has in place operational procedures to mitigate these risks. Counterparty credit risk is assigned a capital charge using the mark-to-market method, based on the residual maturities of the contracts.

for all non-DvP trades. The Group faces settlement risk due to the fact that few financial transactions are settled simultaneously or on a same day basis. Consequently, the Group could suffer a loss if the counterparty fails to deliver on settlement date.

In order to mitigate against this risk, the Group has in place settlement lines where a limit is placed on the maximum settlement exposure against a single counterparty. These limits are reviewed at least annually. Through the setting of these limits, the Group ensures that it is not over-exposed to individual counterparties as a result of non-settlement of transactions. In addition, daily reconciliations are made on all accounts held with correspondent banks to match transactions recorded on the various operating systems, and any mismatches are investigated. This ensures timely detection of any non-settlement by counterparties so that appropriate steps are taken to correct the issue.

Foreign exchange lending risk is the risk that borrowers default due to movements in foreign exchange rates. The Group lends primarily in USD, but the customers of the Group may not necessarily operate in USD. As a result, foreign exchange rate movements owers. In the event that the currency of lending appreciates when compared to their currency

Trade finance facilities are provided to customers that operate in USD. In fact, this is observed at initial stages of on-boarding. However, in situations where this is not the case, the Group does not have specific mitigation measures to address FX lending risk but accepts such risk as part of its business.

Liquidity risk is the risk that the Group may be unable to meet its obligations as they become due because of an inability to liquidate assets or obtain adequate funding or that it cannot easily unwind or offset specific exposures without significantly lowering market prices because of inadequate market depth or market disruptions.

t includes both the risk of being unable to fund assets at appropriate maturities and rates as well as the risk of being unable to liquidate an asset at a reasonable price and in an appropriate time frame. The Group raises funds from deposits, other financial institutions (by means of loans and money market placements), by issuing promissory notes and similar paper and through increases in share capital and plough back of profits.

In response to the impact of COVID-19, the Group significantly increased its stock of high-quality liquid assets and from May 2020 onwards maintained its Liquidity Coverage Ratio above 200% to mitigate the risk of unexpected liquidity outflows or shortfalls; well above the regulatory minimum of 100%.

FIMBank Group Annual Report & Financial Statements 2020

Liquidity risk is managed by maintaining significant levels of liquid funds, and identifying and monitoring changes in funding required to meet business goals driven by management.

te asset and liability management policies, monitoring their application and reviewing financial information on the basis of which investment and funding decisions are taken. The daily application of the asset and liability management policies rests with the Treasury unit of the Group.

meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the

The Treasury unit receives information from other business units regarding the liquidity profile of their financial assets and liabilities and details of other projected cash flows arising from projected future business. Treasury then maintains a portfolio of short-term liquid assets, largely made up of short-term liquid investment securities, loans and advances to banks and other inter-bank facilities, to ensure that sufficient liquidity is maintained within the Group as a whole. The liquidity requirements of business units and subsidiaries are met through short-term loans from Treasury to cover any short-term fluctuations and longer term funding to address any structural liquidity requirements.

When an operating subsidiary is subject to a liquidity limit imposed by its local regulator, the subsidiary is responsible for managing its overall liquidity within the regulatory limit in co-ordination with Treasury. Treasury monitors compliance of all operating subsidiaries with local regulatory limits on a daily basis.

The daily liquidity position is monitored and regular liquidity stress testing is conducted under a variety of scenarios covering both normal and more severe market conditions. All liquidity policies and procedures are subject to review and approval by ALCO. Daily reports cover the liquidity position of both the Bank and operating subsidiaries. A summary report, including any exceptions and remedial action taken, is submitted regularly to ALCO.

The key measures used by the Group for managing liquidity risk are the following:

alendar day stress period. Net liquidity outflows are calculated by deducting the Group's liquidity inflows from its liquidity outflows. During a 30- day stressed period, the Group should be able to convert quickly its liquid assets into cash without recourse to central bank liquidity or public funds, which may result in its liquidity coverage ratio falling temporarily below the required minimum level. The regulatory LCR minimum requirement is 100%.

Details of the reported Group LCR at the reporting date and during the reporting period were as follows:
	2020	2019
At 31 December	241%	125%
Average for the year	217%	135%
Maximum for the year	348%	166%
Minimum for the year	111%	107%

FIMBank Group Annual Report & Financial Statements 2020

Group - 31 December 2020

		Gross nominal				Between 6
	Carrying	inflow/	Less than	Between 1	Between 3	months	Between 1	More than
	amount	(outflow)	1 month	& 3 months	& 6 months	& 1 year	& 2 years	2 years
	USD	USD	USD	USD	USD	USD	USD	USD
Assets
Balances with the Central Bank of Malta, treasury
bills and cash	319,287,524	319,269,288	245,667,800	40,492,695	23,303,759	9,805,034	-	-
Trading assets	452,326,547	474,594,995	20,160,865	73,094,244	120,746,166	164,246,820	62,945,831	33,401,069
Derivative assets held for risk management	991,624	991,624	381,065	255,757	154,494	103,641	-	96,667
Loans and advances to banks	193,139,577	193,709,545	77,835,418	25,758,577	24,834,507	62,765,055	321,211	2,194,777
Loans and advances to customers	591,995,726	605,559,596	336,552,900	102,270,292	46,567,201	22,753,339	38,461,848	58,954,016
Financial assets at fair value through profit or loss	20,385,323	20,385,323	20,385,323	-	-	-	-	-
Financial assets at fair value through other
comprehensive income	153,327,686	160,275,795	5,064,560	12,960,170	-	-	13,475,035	128,776,030
Investments at amortised cost	9,839,457	11,263,445	42,365	122,993	247,353	498,806	512,472	9,839,456
Total assets	1,741,293,464	1,786,049,611	706,090,296	254,954,728	215,853,480	260,172,695	115,716,397	233,262,015
Liabilities
Derivative liabilities held for risk management	(1,629,434)	(1,629,434)	(1,132,648)	(244,993)	(150,815)	(100,978)	-	-
Amounts owed to banks	(429,443,480)	(430,887,545)	(163,498,527)	(56,955,028)	(37,119,197)	(63,488,093)	(48,668,548)	(61,158,152)
Amounts owed to customers	(1,101,570,295)	(1,104,632,613)	(606,230,681)	(231,909,341)	(101,532,513)	(160,850,140)	(3,220,960)	(888,978)
Debt securities in issue	(50,832,661)	(51,007,014)	(15,963,617)	(16,637,317)	(18,406,080)	-	-	-
Other liabilities finance lease liabilities	(2,416,376)	(2,569,346)	(36,045)	(159,098)	(402,576)	(403,344)	(562,599)	(1,005,684)
Total liabilities	(1,585,892,246)	(1,590,725,952)	(786,861,518)	(305,905,777)	(157,611,181)	(224,842,555)	(52,452,107)	(63,052,814)

Liquidity gap			(80,771,222)	(50,951,049)	58,242,299	35,330,140	63,264,290	170,209,201

FIMBank Group Annual Report & Financial Statements 2020

Group - 31 December 2019

		Gross nominal				Between 6
	Carrying	inflow/	Less than	Between 1	Between 3	months	Between 1	More than
	amount	(outflow)	1 month	& 3 months	& 6 months	& 1 year	& 2 years	2 years
	USD	USD	USD	USD	USD	USD	USD	USD
Assets
Balances with the Central Bank of Malta, treasury
bills and cash	208,277,004	208,261,619	208,261,619	-	-	-	-	-
Trading assets	460,238,536	490,022,990	25,065,329	55,206,348	112,247,451	131,632,989	106,717,069	59,153,804
Derivative assets held for risk management	142,249	142,249	86,505	-	-	-	-	55,744
Loans and advances to banks	246,078,195	248,202,568	234,773,164	425,530	4,660,818	1,961,822	922,503	5,458,731
Loans and advances to customers	649,890,157	671,335,008	279,427,397	99,306,847	79,465,509	123,077,055	32,873,864	57,184,336
Financial assets at fair value through profit or loss	125,342,798	125,342,798	125,342,798	-	-	-	-	-
Financial assets at fair value through other
comprehensive income	79,367,556	82,621,895	-	-	-	19,798,111	17,446,444	45,377,340
Investments at amortised cost	9,785,496	10,737,475	-	-	-	-	-	10,737,475
Total assets	1,779,121,991	1,836,666,602	872,956,812	154,938,725	196,373,778	276,469,977	157,959,880	177,967,430
Liabilities
Derivative liabilities held for risk management	(187,700)	(187,700)	(187,700)	-	-	-	-	-
Amounts owed to banks	(452,291,304)	(453,732,235)	(269,885,180)	(79,526,297)	(48,051,363)	(11,176,877)	-	(45,092,518)
Amounts owed to customers	(1,057,824,242)	(1,058,784,730)	(694,198,977)	(276,816,407)	(37,274,749)	(44,585,955)	(3,619,033)	(2,289,609)
Debt securities in issue	(79,550,865)	(79,919,268)	(40,581,327)	(16,872,863)	(22,465,078)	-	-	-
Other liabilities finance lease liabilities	(2,991,633)	(3,238,625)	(43,796)	(49,923)	(332,723)	(488,853)	(880,520)	(1,442,810)
Total liabilities	(1,592,845,744)	(1,595,862,558)	(1,004,896,980)	(373,265,490)	(108,123,913)	(56,251,685)	(4,499,553)	(48,824,937)

Liquidity gap			(131,940,168)	(218,326,765)	88,249,865	220,218,292	153,460,327	129,142,493

FIMBank Group Annual Report & Financial Statements 2020

Bank - 31 December 2020

		Gross nominal				Between 6
	Carrying	inflow/	Less than	Between 1	Between 3	months	Between 1	More than
	amount	(outflow)	1 month	& 3 months	& 6 months	& 1 year	& 2 years	2 years
	USD	USD	USD	USD	USD	USD	USD	USD
Assets
Balances with the Central Bank of Malta, treasury
bills and cash	319,267,749	319,249,513	245,648,025	40,492,695	23,303,759	9,805,034	-	-
Derivative assets held for risk management	1,019,288	1,019,288	408,729	255,757	154,494	103,641	-	96,667
Loans and advances to banks	179,364,067	179,930,399	64,089,061	25,758,577	24,834,507	62,732,266	321,211	2,194,777
Loans and advances to customers	779,834,360	808,734,682	473,744,363	75,208,801	27,134,682	74,703,307	45,048,056	112,895,473
Financial assets at fair value through profit or loss	20,385,323	20,385,323	20,385,323	-	-	-	-	-
Financial assets at fair value through other
comprehensive income	153,327,686	160,275,795	5,064,560	12,960,170	-	-	13,475,035	128,776,030
Investments at amortised cost	9,839,457	11,263,445	42,365	122,993	247,353	498,806	512,472	9,839,456
Total assets	1,463,037,930	1,500,858,445	809,382,426	154,798,993	75,674,795	147,843,054	59,356,774	253,802,403
Liabilities
Derivative liabilities held for risk management	(1,629,434)	(1,629,434)	(1,132,648)	(244,993)	(150,815)	(100,978)	-	-
Amounts owed to banks	(387,900,641)	(388,772,600)	(149,626,584)	(37,049,483)	(35,420,335)	(56,849,498)	(48,668,548)	(61,158,152)
Amounts owed to customers	(1,037,118,337)	(1,038,776,823)	(582,675,126)	(218,933,161)	(92,973,520)	(140,446,968)	(3,103,390)	(644,658)
Other liabilities finance lease liabilities	(2,864,380)	(2,960,976)	(753,262)	(20,993)	(173,546)	(824,183)	(776,474)	(412,518)
Total liabilities	(1,429,512,792)	(1,432,139,833)	(734,187,620)	(256,248,630)	(128,718,216)	(198,221,627)	(52,548,412)	(62,215,328)

Liquidity gap			75,194,806	(101,449,637)	(53,043,421)	(50,378,573)	6,808,362	191,587,075

FIMBank Group Annual Report & Financial Statements 2020

Bank - 31 December 2019

		Gross nominal				Between 6
	Carrying	inflow/	Less than	Between 1	Between 3	months	Between 1	More than
	amount	(outflow)	1 month	& 3 months	& 6 months	& 1 year	& 2 years	2 years
	USD	USD	USD	USD	USD	USD	USD	USD
Assets
Balances with the Central Bank of Malta, treasury
bills and cash	208,259,407	208,244,022	208,244,022	-	-	-	-	-
Derivative assets held for risk management	96,285	96,285	40,541	-	-	-	-	55,744
Loans and advances to banks	232,351,750	234,456,148	223,812,087	409,079	3,392,496	461,252	922,503	5,458,731
Loans and advances to customers	811,152,849	851,778,519	496,226,459	72,592,308	47,696,468	94,198,992	34,931,492	106,132,800
Financial assets at fair value through profit or loss	125,342,798	125,342,798	125,342,798	-	-	-	-	-
Financial assets at fair value through other
comprehensive income	79,367,556	82,621,895	-	-	-	19,798,111	17,446,444	45,377,340
Investments at amortised cost	9,785,496	10,737,475	-	-	-	-	-	10,737,475
Total assets	1,466,356,141	1,513,277,142	1,053,665,907	73,001,387	51,088,964	114,458,355	53,300,439	167,762,090
Liabilities
Derivative liabilities held for risk management	(193,691)	(193,691)	(193,691)	-	-	-	-	-
Amounts owed to banks	(405,072,025)	(405,781,969)	(244,946,232)	(66,613,053)	(45,357,260)	(3,931,701)	-	(44,933,723)
Amounts owed to customers	(978,134,002)	(979,094,652)	(642,456,007)	(264,552,634)	(25,928,589)	(40,248,780)	(3,619,033)	(2,289,609)
Other liabilities finance lease liabilities	(3,629,816)	(3,832,990)	(56,514)	(9,609)	(170,883)	(782,904)	(1,722,969)	(1,090,111)
Total liabilities	(1,387,029,534)	(1,388,903,302)	(887,652,444)	(331,175,296)	(71,456,732)	(44,963,385)	(5,342,002)	(48,313,443)

Liquidity gap			166,013,463	(258,173,909)	(20,367,768)	69,494,970	47,958,437	119,448,647

FIMBank Group Annual Report & Financial Statements 2020

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises four types of risk: foreign exchange risk, interest rate risk, position risk and other price risk. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.

In response to the impact of COVID-19, the Group enhanced monitoring and strengthened the way these risks are managed as noted below. Furthermore, these risks are tracked by the Asset-Liability Committee on a monthly basis using various metrics and by the

The Gr	bond portfolio (other price risk) is largely comprised of investments in bonds issued by the governments of countries in
	or

the purposes of liquidity management, albeit profit on bonds may be crystallised from time-to-time, and ECB initiatives to support the Eurozone has moderated volatility in these assets and maintained liquidity.

The forfaiting portfolio (position risk) is comprised of assets originating from banks and companies operating in many market sectors in a very broad range of countries, the majority of which are emerging markets. The Group regularly updates its mark-to-market positions and recording the unrealized and realized profits and losses. COVID-19 has introduced increased volatility, however the performance of this portfolio remained within risk parameters and well within the stress tests applied as part of the regular ICAAP process; where stresses applied in 2020 were adjusted to reflect the expected impact of COVID-19.

The Group manages its interest rate risk using an in-house Interest Rate Risk in the Banking Book model that considers the maturity mismatch for its primary currencies and the effect the 6 European Central Bank mandated interest rate shock scenarios have

on Net Interest Income and the Economic Value of Equity Foreign exchange risk is managed at a Group level with a relatively low tolerance for open market positions with currency hedges purchased as necessary.

Foreign exchange risk is attached to those monetary assets and monetary liabilities of the Group that are not denominated in the functional currency of the Group. Transactional exposures give rise to foreign currency gains and losses that are recognised in the Statements of Profit or Loss. Currency risk is mitigated by a closely monitored currency position and is managed through matching within the foreign currency portfolio and capital hedging.

However, mismatches could arise where the Group enters into foreign exchange transactions (for example, foreign currency swaps) which could result in an on-balance sheet mismatch mitigated by an off-balance sheet hedging contract. Other mismatches are allowed up to an established threshold, and any excesses are regularised immediately. The Group ensures that its net exposure is kept to an acceptable level by buying and selling foreign currencies spot or forward rates when considered appropriate.

FIMBank Group Annual Report & Financial Statements 2020

Group - 31 December 2020

	In reporting			Other
All amounts are expressed in USD	currency	EUR	INR	currencies	Total
Assets
Balances with the Central Bank of Malta,
treasury bills and cash	4,247	319,275,218	245	7,814	319,287,524
Trading assets	294,254,934	148,996,727	-	9,074,886	452,326,547
Loans and advances to banks	35,088,241	145,957,692	9,249,938	2,843,706	193,139,577
Loans and advances to customers	269,047,917	290,268,588	20,143,552	12,535,669	591,995,726
Financial assets at fair value through
profit or loss	53,077	20,332,246	-	-	20,385,323
Financial assets at fair value
through other comprehensive income	55,918,787	97,408,899	-	-	153,327,686
Investments at amortised cost	-	-	-	9,839,457	9,839,457
Other assets	7,026,566	2,165,000	11,331,012	889,444	21,412,022
Liabilities
Amounts owed to banks	(275,097,578)	(149,502,499)	-	(4,843,403)	(429,443,480)
Amounts owed to customers	(257,889,811)	(829,213,854)	(110,517)	(14,356,113)	(1,101,570,295)
Debt securities in issue	-	(50,832,661)	-	-	(50,832,661)
Other liabilities	(9,436,899)	(4,701,201)	(1,050,602)	(2,223,322)	(17,412,024)
Net on balance sheet financial position	118,969,481	(9,845,845)	39,563,628	13,768,138	162,455,402
Notional amount of derivative
Instruments held for risk
management	55,208,397	2,675,108	(44,800,000)	(13,083,505)	-
Net foreign exchange exposure		(7,170,737)	(5,236,372)	684,633

The USD44.8m (2019: USD40.0m) derivative instruments are held by the Bank to manage the risk of INR foreign exchange risk that occurs on consolidation.

FIMBank Group Annual Report & Financial Statements 2020

Group - 31 December 2019

	In reporting			Other
All amounts are expressed in USD	currency	EUR	INR	currencies	Total
Assets
Balances with the Central Bank of Malta,
treasury bills and cash	5,373	208,263,536	241	7,854	208,277,004
Trading assets	319,190,715	140,447,393	-	600,428	460,238,536
Loans and advances to banks	37,024,254	199,857,129	2,246,107	6,950,705	246,078,195
Loans and advances to customers	297,494,661	315,181,718	23,032,166	14,181,612	649,890,157
Financial assets at fair value through
profit or loss	105,867,474	19,422,247	-	-	125,289,721
Financial assets at fair value
through other comprehensive income	22,419,829	56,947,727	-	-	79,367,556
Investments at amortised cost	-	-	-	9,785,496	9,785,496
Other assets	8,834,866	7,084,735	17,734,757	22,588	33,676,946
Liabilities
Amounts owed to banks	(293,257,796)	(152,217,963)	(2,852,343)	(3,963,202)	(452,291,304)
Amounts owed to customers	(289,021,846)	(752,239,631)	(4,437)	(16,558,328)	(1,057,824,242)
Debt securities in issue	(15,146,130)	(64,404,735)	-	-	(79,550,865)
Other liabilities	(13,145,448)	(4,766,905)	(1,441,753)	(2,809,405)	(22,163,511)
Net on balance sheet financial position	180,265,952	(26,424,749)	38,714,738	8,217,748	200,773,689
Notional amount of derivative
Instruments held for risk
management	22,065,817	26,391,675	(40,000,000)	(8,457,492)	-
Net foreign exchange exposure		(33,074)	(1,285,262)	(239,744)

Bank - 31 December 2020

	In reporting			Other
All amounts are expressed in USD	currency	EUR	INR	currencies	Total
Assets
Balances with the Central Bank of Malta,
treasury bills and cash	-	319,265,738	-	2,011	319,267,749
Loans and advances to banks	32,291,779	145,850,466	-	1,221,822	179,364,067
Loans and advances to customers	420,765,401	348,452,118	-	10,616,841	779,834,360
Financial assets at fair value through
profit or loss	53,077	20,332,246	-	-	20,385,323
Financial assets at fair value through other
comprehensive income	55,918,787	97,408,899	-	-	153,327,686
Investments at amortised cost	-	-	-	9,839,457	9,839,457
Other assets	52,319	1,759,381	4,127	1,073,961	2,889,788
Liabilities
Amounts owed to banks	(261,066,423)	(126,714,602)	-	(119,616)	(387,900,641)
Amounts owed to customers	(218,545,685)	(810,464,365)	-	(8,108,287)	(1,037,118,337)
Other liabilities	(3,550,538)	(3,968,296)	-	(299,705)	(7,818,539)
Net on balance sheet financial position	25,918,717	(8,078,415)	4,127	14,226,484	32,070,913
Notional amount of derivative
Instruments held for risk
management	55,208,397	2,675,108	(44,800,000)	(13,083,505)	-
Net foreign exchange exposure		(5,403,307)	(44,795,873)	1,142,979
	94

FIMBank Group Annual Report & Financial Statements 2020

Bank - 31 December 2019

	In reporting			Other
All amounts are expressed in USD	currency	EUR	INR	currencies	Total
Assets
Balances with the Central Bank of Malta,
treasury bills and cash	-	208,256,185	-	3,222	208,259,407
Loans and advances to banks	32,069,617	198,225,444	-	2,056,689	232,351,750
Loans and advances to customers	456,005,434	350,991,204	-	4,156,211	811,152,849
Financial assets at fair value through
profit or loss	105,920,550	19,422,248	-	-	125,342,798
Financial assets at fair value through other
comprehensive income	22,419,829	56,947,727	-	-	79,367,556
Investments at amortised cost	-	-	-	9,785,496	9,785,496
Other assets	404,210	6,342,406	-	40,254	6,786,870
Liabilities
Amounts owed to banks	(272,856,621)	(131,825,284)	-	(390,120)	(405,072,025)
Amounts owed to customers	(240,413,058)	(730,851,200)	-	(6,869,744)	(978,134,002)
Other liabilities	(5,441,329)	(7,016,504)	(264,923)	(451,625)	(13,174,381)
Net on balance sheet financial position	98,108,632	(29,507,774)	(264,923)	8,330,383	76,666,318
Notional amount of derivative
Instruments held for risk
Management	22,065,817	26,391,675	(40,000,000)	(8,457,492)	-
Net foreign exchange exposure		(3,116,099)	(40,264,923)	(127,109)

The following exchange rates were applied during the year:

Reporting date

Average rate mid-spot rate

2020 2019 2020 2019

1 EUR	1.1398	1.1195	1.2271	1.1233
1 INR	0.0135	0.0142	0.0137	0.0140

A 7% strengthening of the following currencies against the US Dollar at 31 December would have increased/(decreased) equity and/or profit or loss by amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.

	Group		Bank
		Profit or		Profit or
	Equity	loss	Equity	loss
	USD	USD	USD	USD
2020
EUR	(501,951)	(501,951)	(378,231)	(378,231)
INR	(366,546)	-	(3,135,711)	(3,135,711)
Other currencies	47,924	47,924	80,009	80,009
2019
EUR	(2,315)	(2,315)	(218,127)	(218,127)
INR	(89,968)	-	(2,818,545)	(2,818,545)
Other currencies	(16,782)	(16,782)	(8,898)	(8,898)

A 7% weakening of the above currencies against the US Dollar at 31 December would have an equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

FIMBank Group Annual Report & Financial Statements 2020

Position risk in traded debt instruments refers to the risk of adverse effects on the value of positions in the trading book of general movements in market interest rates or prices or movements specific to the issuer of a security.

Interest rate risk on positions not included in the trading book (i.e. IRRBB) refers to the risk to earnings or Gro to movements in interest rates. The risk impacts the earnings and equity of the Group as a result of changes in the economic value of

its assets, liabilities and off-o interest rate fluctuations to the extent that interest-earning assets and interest-bearing liabilities mature or re-price at different times or at different amounts.

Accordingly, interest rate risk in the non-trading book is managed on a monthly basis, through the use of maturity/re-pricing schedules that distribute interest-bearing assets and liabilities into different time bands. Such computations are done separately for USD and EUR and given that transactions held in such currencies are material when compared to the rest of the banking book portfolio. The determination of each instrument into the appropriate time period is dependent on the contractual maturity (if fixed rate) or time remaining to their next re-pricing date (if floating rate). This met

ty of

equity valuation to changes in interest rates.

A positive, or asset-sensitive, gap arises when assets (both on- and off-balance sheet) exceed liabilities in the corresponding time n the level of interest. To the contrary, a negative, or liability-sensitive, gap implies that net interest income could decrease as a result of an

increase in interest rates.

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FIMBank plc published this content on 08 April 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 April 2021 11:49:05 UTC.

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