Annual Report Barbados Deposit Insurance Corporation / 2012 ANNUAL REPORT

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2 Annual Report 2012 Barbados Deposit Insurance Corporation / 2012 ANNUAL REPORT 1

3 ANNUAL REPORT / Barbados Deposit Insurance Corporation

4 Table of Contents MISSION & VISION OF THE BDIC...6 DEPOSIT INSURANCE COVERAGE...7 CHAIRMAN S MESSAGE...11 GENERAL REPORT...12 BOARD MEETINGS...13 MACROECONOMIC OVERVIEW...14 FINANCIAL OPERATIONS 2012 FINANCIAL PERFORMANCE REVIEW...16 STATE OF BANKING SYSTEM...16 OVERVIEW...16 ASSET GROWTH...16 PROFITABILITY AND CAPITAL...19 BOARD OF DIRECTORS INDEPENDENT AUDITORS REPORT...25 Barbados Deposit Insurance Corporation / 2012 ANNUAL REPORT 3

5 ANNUAL REPORT / Barbados Deposit Insurance Corporation

6 Letter of Transmittal May 31, 2013 The Hon. Christopher P. Sinckler Minister of Finance and Economic Affairs, Government Headquarters Bay Street Dear Minister: In accordance with Section 15 (1) of the Deposit Insurance Act , I have the honour to submit to you the 2012 Annual Report of the Barbados Deposit Insurance Corporation for the calendar year ending December 2012, a copy of the audited Corporation s Accounts as at December 2012, and a Statement of the Deposit Insurance Fund as at December 2012, duly certified by its Auditors. Yours sincerely Winston LeRoy Inniss QC Chairman Barbados Deposit Insurance Corporation / 2012 ANNUAL REPORT 5

7 MISSION & VISION OF THE BDIC The mandate of the Barbados Deposit Insurance Corporation is to: Provide deposit insurance and contribute to the stability of the financial system for the benefit of depositors while minimising its exposure to loss. The goals of the Barbados Deposit Insurance Corporation are: To protect small depositors from the risk of loss within the banking system in the event of institutional or systemic failure; and To contribute to ensuring the soundness and stability of the financial system as the primary provider of deposit insurance within the country ANNUAL REPORT / Barbados Deposit Insurance Corporation

8 DEPOSIT INSURANCE COVERAGE What is covered? Under Barbados deposit insurance system, depositors are guaranteed protection for their deposits up to a maximum of $25,000, per depositor, per bank. What is not covered? In accordance with the Barbados Deposit Insurance Act, , subsection 50(2), deposit insurance coverage is not extended to foreign currency deposits, letters of credit, standby letters of credit or instruments of a similar nature. Interbank deposits and deposits from affiliates are also not eligible for coverage under the Barbados Deposit Insurance Corporation s scheme. ABBREVIATIONS Barbados Deposit Insurance Corporation Barbados Deposit Insurance Fund Central Bank of Barbados International Association of Deposit Insurers Financial Sector Assessment Programme BDIC BDIF CBB IADI FSAP Barbados Deposit Insurance Corporation / 2012 ANNUAL REPORT 7

9 FINANCIAL AND STATISTICAL SUMMARY For the years ending December 31 Selected Items in $BDS unless otherwise stated Selected Balance Sheet Items Cash Investments Liabilities 201,717 33,430,000 39, ,459 27,780,000 23,334 Selected Income Statement Items Gross Income Premium Income Interest Income on Investments Operating Expenses Net Income 6,333,375 4,282,925 2,050, ,507 5,780,868 5,824,111 4,176,645 1,641, ,673 5,251,438 Member Institutions (number) Commercial Banks (Part II Companies) Domestic Trust and Finance Companies (Part III companies) Total number of institutions Other information Average insured deposits ($ millions)* Growth rate of insured deposits (%) 8, , Notes: * Total insured deposits are based on the average of the bank s deposit liabilities over four (4) quarters in a given year. The premia under the current ex-ante deposit insurance system are calculated based on deposit liabilities, one year prior ANNUAL REPORT / Barbados Deposit Insurance Corporation

10 MEMBERS OF THE DEPOSIT INSURANCE FUND At December 2012, there were thirteen (13) members of the Fund. These consisted of six (6) commercial banks, and seven (7) deposit-taking non-bank institutions. COMMERCIAL BANKS CIBC FirstCaribbean International Bank (Barbados) Ltd. Citicorp Merchant Bank Ltd. First Citizens Bank (Barbados) Limited RBC Royal Bank (Barbados) Limited Republic Bank (Barbados) Limited The Bank of Nova Scotia OTHER DEPOSIT-TAKING INSTITUTIONS Capita Financial Services Inc. CIBC FirstCaribbean International Trust and Merchant Bank (Barbados) Ltd. Consolidated Finance Co. Ltd. Globe Finance Inc. Republic Finance & Trust (Barbados) Corporation Royal Fidelity Merchant Bank & Trust (Barbados) Limited Signia Financial Group Inc. Barbados Deposit Insurance Corporation / 2012 ANNUAL REPORT 9

11 BOARD OF DIRECTORS Mr. W. LeRoy Inniss QC Mr. James Payne Mr. A. Charles Herbert Mr. Cleviston Haynes Mr. Martin Cox Mrs. Marlene Bayne Mr. Warrick Ward Chairman Deputy Chairman Director Director, Ex Officio, Nominee of the Governor of the Central Bank of Barbados Director, Ex Officio, Permanent Secretary Finance, Ministry of Finance & Economic Affairs Director, Ex Officio, Director, Bank Supervision, Central Bank of Barbados Director, Ex Officio, Chief Executive Officer, Barbados Deposit Insurance Corporation (Resigned May 2012) AUDITORS Brian F. Griffith & Co. BANKERS Central Bank of Barbados ADDRESS Level 5, Tom Adams Financial Centre, Spry Street, Bridgetown ANNUAL REPORT / Barbados Deposit Insurance Corporation

12 The Barbados Deposit Insurance Corporation (BDIC) celebrated its fifth year of operations this year. As we look back at the past five years of operation, we are continually mindful of the increasing importance and attention being placed by Deposit Insurance Corporations worldwide, on sound governance standards and practices. The Board and staff continue to ensure the strict adherence to and compliance with recognized best practices. The Board continues to provide oversight and full support to the staff in the implementation of these initiatives. Winston LeRoy Inniss, QC CHAIRMAN S Message The Barbados Deposit Insurance Corporation is one of the institutions which engenders an atmosphere of stability and confidence in the Barbadian financial system. Through our active involvement in the International Association of Deposit Insurers (IADI) and the Caribbean Regional Committee (CRC) of Deposit Insurers, the BDIC s knowledge base and exposure continue to expand. The partnerships formed and outreach at this level, have provided the opportunity for staff to keep abreast of international best practices. I wish to thank all stakeholders, especially my fellow Board members, who have given me great support during the past year, and the staff of the BDIC for their continued hard work and dedication. While I say welcome to Mr. Martin Cox the new representative of the Ministry of Finance and Economic Affairs, I take the opportunity to express my thanks to Mr. Ronald Bascombe the former representative of the Ministry of Finance and Economic Affairs and Mr. Warrick Ward the former Chief Executive Officer of the BDIC, for their valuable service during the early period of the Corporation s development. I wish them well for the future. Winston LeRoy Inniss QC Chairman Barbados Deposit Insurance Corporation Barbados Deposit Insurance Corporation / 2012 ANNUAL REPORT 11

13 General Report The Barbados Deposit Insurance Corporation (BDIC) was established on June 8, 2007 by an Act of Parliament, the Deposit Insurance Act The BDIC insures deposits at financial institutions licensed by the Central Bank of Barbados up to a prescribed limit. The BDIC is still in its embryonic stages and during 2012, it marked five years in operation. The focus of the BDIC during the year centred on pursuing its objectives of strengthening its operational capability while enhancing the awareness of depositors of the terms and conditions of the Barbados Deposit Insurance Scheme and generally promoting the public s awareness and the BDIC s visibility. Our member institutions were faced with a challenging environment but remained resilient. The BDIC continued to collaborate with the Central Bank of Barbados to monitor the economic and financial environment, as well as the risk profile and financial performance of individual members. In addition, a key focus during the year was to examine the infrastructure necessary for ensuring the BDIC s readiness in the event of a member or system failure by expanding its intervention and failure resolution capacity. This is an on-going project and efforts will be intensified in The BDIC s fund continued to build during 2012, the result of increased premium income and investment income. The operating expenses were contained below 2011 levels. At the end of 2012 the invesment portfolio had a weighted coupon of 6.6%. The BDIC continued to strengthen its relationship with our member institutions and this proved valuable in maintaining effective compliance by our members. On the international level, the BDIC remained active in the work of the International Association of Deposit Insurers (IADI) and the Caribbean Regional Committee (CRC). The mutual benefit achieved from membership of the deposit insurance community continues to be important, providing opportunities for an expansion of the knowledge base and professional development through on-site observations, special research projects and various other avenues for technical information exchange. During 2012, the Board held on-going discussion with respect to credit unions joining the Fund. In this regard, the Board submitted to the Ministry of Finance and Economic Affairs an interim report on the conditions for the admission of credit unions and the legislative changes that would be necessary if credit unions were admitted to the Fund. We believe that a well-informed public is critical to the maintenance of stability and confidence in the financial system. During the past year, the BDIC embarked on a public awareness campaign. Through a series of television and radio sponsored programmes, as well as the distribution of brochures at ANNUAL REPORT / Barbados Deposit Insurance Corporation

14 commercial banks and elsewhere, we were able to enhance our presence in the community. The initiative though small, brought increased awareness of the existence of a deposit insurance scheme in Barbados. This drive will continue into the coming financial year. Our website received increased traffic as a result of these initiatives, and continues to be a source of information on the operations of the BDIC to the public. The Chief Executive Officer resigned in May 2012 to take up a senior appointment elsewhere in the financial sector. The BDIC thanks Mr. Ward for his contribution and assistance to the Board. In the absence of the Chief Executive Officer, the Chairman exercised general oversight of the office with the able assistance of Ms. Debbie Skinner, whose support enabled the BDIC to maintain operations. It is expected that a Chief Executive Officer will be appointed in the near future. Board Meetings Section 4(i) of the Deposit Insurance Act , makes provision for the establishment of a Board of Directors of the Barbados Deposit Insurance Corporation (BDIC) which shall be responsible for the policy direction of the BDIC. The Act also stipulates that the minimum number of four (4) meetings of Board of Directors must be held each fiscal year. In addition to several other sub-committee meetings it organised, the Board met the stipulated legal requirement, and held four (4) Board Meetings during the year ending December Barbados Deposit Insurance Corporation / 2012 ANNUAL REPORT 13

15 MACROECONOMIC OVERVIEW Real economic activity is provisionally estimated to have been flat during This performance was influenced by a 3.5% contraction of the tourism sector which suffered sharp declines in long stay arrivals from the United Kingdom and United States markets which account for more than half of long stay arrivals. Output also contracted in the manufacturing and agriculture sectors but preliminary estimates indicate modest growth was registered in the non-export sectors. The prolonged slow economic recovery over the past three years continued to impact business cash flows and dampen employment prospects. As a result, the average unemployment rate for the year was estimated at 11.6%, almost half of a percentage point above that of calendar year The inflation rate moderated from near double digit levels the previous year. This improved outturn reflected the global slowdown in fuel and commodity prices, as well as the end of the pass-through effects of the 2010 increase in the VAT rate. At year-end 2012, the consumer price index was 2.4% higher than for the corresponding period the year before, while the twelve-month moving average rate of inflation fell to 4.5%. Despite the weak performance in the tourism sector, the external debt service ratio remained manageable while the import reserve cover improved to over 19 weeks of imports. Imports, mainly for consumer goods and machinery, declined and contributed to the improvement in the external current account balance. Private sector capital flows and proceeds from Government divestment in the banking sector financed the external current account deficit and contributed to an almost $38 million increase in the international reserves at the Central Bank. After its over-performance in FY , Government deviated from its Medium Term Fiscal Programme which targeted a phased achievement of a balanced budget by fiscal year 2016/17. Revenues fell below targeted levels by 2.1% for the April December period, reflecting lower personal taxes (10.4%) occasioned in part by tax adjustments introduced in Collections from value added taxes also declined by 2.5%, a result of the lower level of imports. Current expenditure increased by 2.1% on the basis of increased interest payments and transfers to Government entities. With the banking system remaining liquid, the result of weak loan demand and moderate deposit growth, the deficit was largely funded through domestic financing ANNUAL REPORT / Barbados Deposit Insurance Corporation

16 Table 1: Key Macroeconomic Indicators (% ) P GDP Growth Rate Inflation Rate Unemployment Rate a Fiscal Balance to GDP b External Current Account to GDP Net International Reserves (BDS $M) 1, , , , ,464.3 Import Reserve Cover (Weeks of Imports) Government Debt to GDP ratio External Debt Service ratio Source: Central Bank of Barbados P = Provisional a Average quarterly rate b Data for fiscal years 2008/09 to 2012/13 Barbados Deposit Insurance Corporation / 2012 ANNUAL REPORT 15

17 FINANCIAL OPERATIONS 2012 FINANCIAL PERFORMANCE REVIEW STATE OF BANKING SYSTEM Overview c. The sale by government and the private sector of their remaining shares in Republic Bank (Barbados) Limited to the parent bank Republic Bank Limited; and Barbados banking system, inclusive of the small deposit taking non-bank members of the Barbados Deposit Insurance Corporation, remained resilient during Banks continued to be liquid, profitable and well capitalised for credit risk, with capital adequacy ratios well in excess of the mandatory 8% ratio. Due to the sluggish economic environment, the sector remained challenged by an above average level of weak loans. However, recent stress tests carried out by the Central Bank of Barbados continue to suggest that it would take substantial negative shocks to reduce the least well-capitalised institutions below the statutory capital ratio. The banking environment was marked by several events in 2012 and as a result of which the number of BDIC members was reduced from 15 to 13, the changes were as follows: a. The merger of RBC Royal Bank Barbados Limited and RBTT Bank Barbados Limited which previously shared a common parent; b. The amalgamation of the Barbados Mortgage Finance Company with its parent Barbados National Bank, and the merger at that entity into Republic Bank (Barbados) Limited; d. The acquisition by First Citizens Bank, a Trinidad and Tobago Bank, of all the shares in Butterfield Bank (Barbados) Limited. The Central Bank of Barbados, which serves as the prudential regulator for the banking system, continued to upgrade the regulatory framework to ensure increased compliance with emerging international standards. New guidelines were issued to industry on credit risk management and consolidated supervision. In addition, the Bank issued guidance on its supervisory framework and its Intervention Policy. The latter provides general guidance on the procedures that the Bank will follow when it has concerns with the operations of one of its licensees. This guideline also sets out the timeframe for involving the BDIC in such circumstances. The Bank also intensified its work on the implementation of the Market Risk Amendments in preparation for the eventual adoption of Basel II. Asset Growth In 2012, the total asset base of BDIC member institutions grew by an estimated 10.3%, reaching $13.7 billion (Chart 1). This growth was largely driven by external treasury transactions ANNUAL REPORT / Barbados Deposit Insurance Corporation

18 at one bank, without which growth would have been contained to 2.2% compared to declines in each of the three preceding years. However, loans and advances, which registered modest growth in 2011 and which account for 52.4% of the asset base, declined marginally. With the transfer of the BMFC portfolio into the parent bank, commercial banks now account for 86.2% of loans compared to 80.7% in Asset Quality Over the past four years, the ratio of nonperforming loans to total loans has shown an upward trend, resulting from the economic downturn (See Chart 2). During 2012, such loans increased further, rising to 12.3%, up from 11.1% a year earlier. However, over 75% of the loans deemed to be non-performing remained in the substandard category. A substantial portion of the classified loans relate to the deterioration in the quality of two large hotel loans, resolution of which is expected to result in minimal loss to the sector. Historically, loan losses in the banking sector have been low and in 2012 preliminary data indicated that net losses stood at approximately one half of one per cent of total loans. As the asset quality of the sector deteriorated, provisioning levels were raised across the system. Chart 1 Total Assets by Class of Institution Barbados Deposit Insurance Corporation / 2012 ANNUAL REPORT 17

19 Chart 2 Classified Debt Deposit Base and Liquidity Deposits continue to represent the main source of funds for the sector and have been on an upward trend since December 2010 (See Chart 3). Domestic deposits grew by 4.8% during 2012, compared to the growth of 1.6% during As at December 31, 2012, the deposit Chart 3 Domestic Deposits ANNUAL REPORT / Barbados Deposit Insurance Corporation

20 base at BDIC institutions was approximately BDS$9.03 billion. By all indicators, the sector continued to be marked by relatively high levels of liquidity over the past five years. The loans to domestic deposits ratio fell to 79.2% while liquid assets as a percentage of total assets stood at 14.0% in Profitability and Capital Profits in the sector declined in 2012, reducing the return on assets to 1.0% from 1.2% the previous year. Both banks and non-banks remained adequately capitalised for credit risk and, as at year end, reported ratios in excess of the minimum capital adequacy ratios (CARs). Among commercial banks, the CARs ranged between 18.0%, to 22.1%, while in the non- banking sector the range widened, with the lowest being 11.2% compared to the statutory requirement of 8%. Licensees are expected to maintain ratios sufficiently in excess of the ratio so that rapid asset growth or shocks to earnings can be absorbed without reducing capital adequacy below statutory levels. Chart 4 Capital Adequacy and Risk Weighted Assets Barbados Deposit Insurance Corporation / 2012 ANNUAL REPORT 19

21 Key FSIs for the Domestic Banking System % p Solvency Capital adequacy ratio(car) a Liquidity Loan to deposit ratio Domestic deposits growth Liquid assets to total assets Credit risk Total assets (growth rate) Loans and advances (growth rate) Nonperforming loans ratio Foreign exchange risk Deposits in Foreign Exchange to total deposits Profitability Return on Equity Return on Assets Source: Central Bank of Barbados P = Provisional a Commercial banks only ANNUAL REPORT / Barbados Deposit Insurance Corporation

22 BOARD OF DIRECTORS Winston LeRoy Inniss, QC Chairman Mr. Justice Inniss is a Queen s Counsel who has practiced as an Attorney-at-Law since In 2001, he became a judge of the High Court in Barbados and served until his retirement in Mr. Justice Inniss was an independent member of the Senate of Barbados from 1991 to He has also served as a member of the Cave Hill Campus Council of the University of the West Indies from He is a past President of the Barbados Bar Association, and has served for many years as a member of the Judicial Council and the Community Legal Services Commission. At present, he is the President of Parent Education for Development in Barbados, (PAREDOS), Chairman of Police Complaints Authority and Chairman of the Financial Services Commission Appeal Tribunal. Barbados Deposit Insurance Corporation / 2012 ANNUAL REPORT 21

23 BOARD OF DIRECTORS James M. Payne, CA, FCMA Deputy Chairman Mr. Payne has several years of service in Government and the Private Sector. His professional experience in accounting, finance and tax advisory services covered a variety of clients as a Partner in a major international accounting firm for over two decades. In addition Mr. Payne is a member of the Institute of Chartered Accountants in Ontario Canada and a Fellow of the Chartered Institute of Management Accountants in the United Kingdom. Other professional memberships include the Institute of Chartered Accountants of Barbados, where he has served as President and Council Member. Martin Cox Director Mr. Cox is the Permanent Secretary (Finance) in the Ministry of Finance and Economic Affairs. He has been a Permanent Secretary since April, Mr. Cox is a Certified Management Accountant (CMA) and member of the Society of Management Accountants of Canada. He is also a graduate of the University of the West Indies (UWI). He is also a graduate of the University of the West Indies (UWI) and the University of Windsor, Canada ANNUAL REPORT / Barbados Deposit Insurance Corporation

24 BOARD OF DIRECTORS Marlene E. A. Bayne Director Mrs. Marlene Bayne is a career Central Banker, with over twenty years experience Chairman of the Financial Stability Analysis and Report Task Force. She represents the Central in the Bank Supervision Department. She Bank of Barbados at the Caribbean Group of served as a Senior Examiner, then Deputy Director and was appointed Director on March Banking Supervisors (CGBS), the Association of Banking Supervisors for the Americas (ASBA) 1, She has overall responsibility for and the Group of International Finance Centre developing and managing strategies to ensure Supervisors (GIFCs). effective supervision and regulation of financial institutions in the domestic and international banking sectors. Mrs. Bayne holds a Bachelor s degree and an MBA from the Cave Hill Campus, and the Cave Hill School of Business of the University of the Mrs. Bayne has served on several bank West Indies, respectively. committees, more recently serving as the Barbados Deposit Insurance Corporation / 2012 ANNUAL REPORT 23

25 BOARD OF DIRECTORS Cleviston Haynes Director Charles Herbert Director Mr. Cleviston Haynes is a Deputy Governor, Central Bank of Barbados. Previously he served as Adviser to the Governor of the Central Bank of Barbados and more recently as Director, Bank Supervision Department. A graduate of the University of the West Indies and the University of Western Ontario, he joined the Research Department of the Central Bank in 1980 as an Economist. He has also served as Technical Assistant to the Executive Director for Canada, Ireland and the Caribbean at the Executive Board of the International Monetary Fund (IMF) during the period He has authored a number of academic papers in local and international publications, including papers on monetary policy and financial sector issues in the Barbados economy. Mr. Herbert graduated from University of Edinburgh in 1978 and is a Fellow of the Institute of Actuaries and an Associate of the Society of Actuaries. He has worked in the field of insurance and employee benefits in the Caribbean since 1980, with clients in Barbados, Bermuda, Trinidad & Tobago, the Bahamas, and the Eastern Caribbean. Mr. Herbert specializes in employee benefit services, risk management for local organizations, actuarial services for the Caribbean insurance industry, and for the Barbados offshore financial services industry, as well as general actuarial services for government agencies in the areas of pension, health care and social security. He also acts as appointed actuary to various insurance companies. Mr. Herbert is a Principal of Eckler Ltd. He joined the firm in 1996 to manage and develop the Barbados office. The office has grown to a staff of 13 including 3 actuaries ANNUAL REPORT / Barbados Deposit Insurance Corporation

26 Brian F. Griffith & Co. CHARTERED ACCOUNTANTS Independent Auditors Report Page 1 To the Directors of Barbados Deposit Insurance Corporation We have audited the accompanying consolidated financial statements of Barbados Deposit Insurance Corporation, which comprise the consolidated statement of financial position as of December 31, 2012, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatements. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments; the auditor considers internal controls relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. BRIAN F. GRIFFITH B SC. (Econ.) F.C.C.A., M.B.I.M. 'HARRIETT HOUSE', SPRY STREET, BRIDGETOWN, BARBADOS, W.I. Source: Central Bank of Barbados TELEPHONE: (246) , , FAX: (246) Barbados Deposit Insurance Corporation / 2012 ANNUAL REPORT 25

27 Page 2 Opinion In our opinion the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Barbados Deposit Insurance Corporation as of December 31, 2012, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards. Brian F Griffith & Co. Chartered Accountants April 25, 2013 Bridgetown, Barbados ANNUAL REPORT / Barbados Deposit Insurance Corporation

28 Barbados Deposit Insurance Corporation Consolidated statement of financial position as at December 31, 2012 (Expressed in Barbados dollars) Notes $ $ ASSETS Non-current assets Property, plant and equipment 2(h) & 4 33,525 45,719 Investment securities 2(g) & 6 33,430,000 27,780,000 33,463,525 27,825,719 Current assets Cash and bank balances 7 201, ,459 Receivables 8 475, ,740 Prepaid expenses , ,256 Total assets 34,140,861 28,343,975 LIABILITIES AND EQUITY Current liabilities Payables and accruals 39,352 23,334 Total current liabilities 39,352 23,334 Equity Paid up capital 9 1,000,000 1,000,000 Deposit Insurance Fund 33,101,509 27,320,641 Total equity 34,101,509 28,320,641 Total equity and liabilities 34,140,861 28,343,975 The accompanying notes form part of these consolidated financial statements. Barbados Deposit Insurance Corporation / 2012 ANNUAL REPORT 27

29 Barbados Deposit Insurance Corporation Consolidated statement of changes in equity for the year ended December 31, 2012 (Expressed in Barbados dollars) Deposit Paid Up Capital Insurance Fund Total $ $ $ Balance at January 1, ,000,000 22,069,203 23,069,203 Total comprehensive income ,251,438 5,251,438 Balance at December 31, ,000,000 27,320,641 28,320,641 Total comprehensive income ,780,868 5,780,868 Balance at December 31, ,000,000 33,101,509 34,101,509 The accompanying notes form part of these consolidated financial statements ANNUAL REPORT / Barbados Deposit Insurance Corporation

30 Barbados Deposit Insurance Corporation Consolidated statement of comprehensive income for the year ended December 31, 2012 (Expressed in Barbados dollars) Notes $ $ Income Annual premiums 4,282,925 4,176,645 Interest earned 2,050,425 1,641,401 Other 25 6,065 Total income 6,333,375 5,824,111 Expenses Personnel costs , ,363 General and administrative costs , ,443 Depreciation 12,194 12,867 Total expenses 552, ,673 Total comprehensive income for the year 5,780,868 5,251,438 The accompanying notes form part of these consolidated financial statements. Barbados Deposit Insurance Corporation / 2012 ANNUAL REPORT 29

31 Barbados Deposit Insurance Corporation Consolidated statement of cash flows for the year ended December 31, 2012 (Expressed in Barbados dollars) Notes $ $ Cash flows from operating activities Total income from operations 5,780,868 5,251,438 Adjustments for: Depreciation 12,194 12,867 Interest income (2,050,425) (1,641,401) 3,742,637 3,622,904 Changes in operating assets and liabilities Decrease in prepaid expenses 57 0 Increase/(Decrease) in current liabilities 16,018 (1,395) Net cash from operating activities 3,758,712 3,621,509 Cash flows from investing activities Purchase of property, plant and equipment 0 (2,325) Purchase of investment securities (5,650,000) (5,170,000) Interest received 1,955,546 1,552,869 Net cash used in investing activities (3,694,454) (3,619,456) Increase in cash and cash equivalents for the year 64,258 2,053 Cash and cash equivalents, beginning of the year 137, ,406 Cash and cash equivalents, end of year 201, ,459 Cash and cash equivalents comprise: Cash and bank balances 201, , , ,459 The accompanying notes form part of these consolidated financial statements ANNUAL REPORT / Barbados Deposit Insurance Corporation

32 Brian F. Griffith & Co. CHARTERED ACCOUNTANTS Independent Auditors Report On The Deposit Insurance Fund Page 7 To the Directors of Barbados Deposit Insurance Corporation In accordance with Section 15, 1(b) of the Deposit Insurance Act, 2006, we have audited the statement of the Deposit Insurance Fund of the Barbados Deposit Insurance Corporation for the year ended December 31, Management s Responsibility for the Fund Management is responsible for the preparation and fair presentation of the Deposit Insurance Fund in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the fund that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor s Responsibility Our responsibility is to express an opinion on the Fund based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the Fund is free from material misstatements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion the statement of the Deposit Insurance Fund presents fairly, in all material respects, the financial position of the Fund as of December 31, 2012, and its financial performance for the year then ended in accordance with International Financial Reporting Standards. Brian F Griffith & Co. Chartered Accountants April 25, 2013 Bridgetown, Barbados BRIAN F. GRIFFITH B SC. (Econ.) F.C.C.A., M.B.I.M. 'HARRIETT HOUSE', SPRY STREET, BRIDGETOWN, BARBADOS, W.I. TELEPHONE: (246) , , FAX: (246) Barbados Deposit Insurance Corporation / 2012 ANNUAL REPORT 31

33 Barbados Deposit Insurance Corporation Statement of the Deposit Insurance Fund for the year ended December 31, 2012 (Expressed in Barbados dollars) $ $ Fund balance at beginning of year 27,320,641 22,069,203 Income Annual premiums 4,282,925 4,176,645 Interest earned 2,050,425 1,641,401 Other 25 6,065 Total income 33,654,016 27,893,314 Expenses 552, ,673 Fund balance at end of year 33,101,509 27,320,641 The accompanying notes form part of these consolidated financial statements ANNUAL REPORT / Barbados Deposit Insurance Corporation

34 Barbados Deposit Insurance Corporation Notes to consolidated financial statements December 31, 2012 (Expressed in Barbados dollars) 1. Incorporation and functions The Barbados Deposit Insurance Corporation is an independent statutory body established under the Deposit Insurance Act , which was proclaimed on June 8, The functions of the corporation are:- a) To manage the Deposit Insurance Fund and to provide through that Fund, insurance up to the insured limit against the loss of insured deposits. b) To levy the initial contributions and premiums in relation to the Fund in accordance with the Act. c) To charge any fees necessary for the administration of the Act. d) To act as a liquidator or manager of member institutions in accordance with the Act. e) To facilitate the reorganization or takeover of a member institution pursuant to the Financial Institutions Act in appropriate circumstances. f) To carry out any other function that is necessary for the management of the Fund. 2. Significant accounting policies a) Basis of preparation These consolidated financial statements have been prepared in accordance with and comply with International Financial Reporting Standards (IFRSs), and have been prepared under the historical cost convention as modified by the revaluation of financial assets. The accounting records reflect the activities of the Deposit Insurance Corporation and the resulting assets, liabilities, income and expenses of the Corporation and the related Deposit Insurance Fund it has been established to manage. Barbados Deposit Insurance Corporation / 2012 ANNUAL REPORT 33

35 Barbados Deposit Insurance Corporation Notes to consolidated financial statements December 31, 2012 (Expressed in Barbados dollars) 2. Significant accounting policies (continued) b) Use of estimates The preparation of financial statements in conformity with IFRSs requires management to make accounting estimates and assumptions that affect the application of the Corporation s accounting policies. Significant areas requiring the use of management estimates relate to the reported amounts of assets and liabilities and their impairment at the date of the financial statements and the reported amounts of income and expenditure during the reporting period. Although these estimates are based on management s best knowledge of current events and actions, actual results could differ from those estimated. c) Premium income Premiums are determined on the basis of applicable rates levied on average deposits held by member institutions at the end of each of the four quarters of the preceding calendar year. Premium income is recognized on the accrual basis and settlement terms for receipt of premiums require that members make two equal installments on February 15 and July 15 each year. d) Receivables Receivables are carried at original amounts less provision made for impairment of these receivables. A provision for impairment of receivables is based upon objective evidence that the Corporation will be unable to collect all amounts due according to the original terms of the receivables. e) Cash and cash equivalents Cash and cash equivalents consist of highly liquid investments with original maturities of twelve months or less and are carried in the statement of financial position at cost. For the purpose of the statement of cash flows, cash and cash equivalents comprise cash and bank balances. f) Payables and accruals Trade and other payables are stated at historical cost ANNUAL REPORT / Barbados Deposit Insurance Corporation

36 Barbados Deposit Insurance Corporation Notes to consolidated financial statements December 31, 2012 (Expressed in Barbados dollars) 2. Significant accounting policies (continued) g) Investment securities The corporation classifies investments as held-to-maturity financial assets. Management determines the appropriate classification of investments at the time of purchase. Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Corporation s management has positive intention and ability to hold to maturity. Where the Corporation sells other than an insignificant amount of held-to-maturity assets, the entire category would be compromised and reclassified as available-for-sale. h) Property, plant and equipment Property, plant and equipment are stated at historical cost less accumulated depreciation. Depreciation is provided on a straight-line basis at rates calculated to write off the cost of the assets over their estimated useful lives. The rates used are as follows:- Fixtures & fittings - 10% Office equipment - 15% Computer equipment - 25% The carrying values of the Corporation s assets are reviewed at each statement of financial position date or whenever events or circumstances indicate impairment in carrying value have occurred. Should impairment be indicated, recoverable value is estimated by management. i) Interest earned Interest earned is recognized in the statement of comprehensive income for all interest bearing instruments on an accrual basis unless deemed uncollectible. j) Financial instruments Financial instruments are contracts that give rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets and financial liabilities are recognized on the Corporation s statement of financial position when the Corporation becomes a party to the contractual provisions of the instrument. Barbados Deposit Insurance Corporation / 2012 ANNUAL REPORT 35

37 Barbados Deposit Insurance Corporation Notes to consolidated financial statements December 31, 2012 (Expressed in Barbados dollars) 2. Significant accounting policies (continued) k) Comparative information Where necessary, comparative figures have been reclassified to conform with the current presentation. These changes had no effect on the previously reported comprehensive income. l) Risk management i) Insurance risks the risks of loss associated with insuring deposits, including costs incurred in the event of an intervention in a failed or failing institution. ii) Credit risks the risks arising from a failure by counter parties to honour their obligation causing a reduction of the amount of future cash inflows from financial assets on hand at the statement of financial position date. iii) Financial risks the risks associated with managing the assets and liabilities of the Corporation, including those that appear on and off the statement of financial position. pro- iv) Operational risks the risks of loss resulting from inadequate or failed internal cesses, people or systems, or from external events. The corporation might be exposed to certain risks, classified as follows:- v) Reputation risks the risks of an event significantly affecting stakeholders perceived trust and confidence in the corporation, and which could result in financial or other loss to the corporation. The Act establishes a Board of Directors, which shall be responsible for an appropriate governance structure for the management of such risks. 3. Corporation taxes and Insurance Legislation The Corporation is exempt from the payment of corporation tax, stamp duty or any other impost and is also exempt from the provisions of the Insurance Act ANNUAL REPORT / Barbados Deposit Insurance Corporation

38 Barbados Deposit Insurance Corporation Notes to consolidated financial statements December 31, 2012 (Expressed in Barbados dollars) 4. Property, plant and equipment Fixtures & Fittings Office Equipment Computer Equipment Total 2012 $ $ $ $ Cost Balance at January 1, ,819 17,088 16,888 94,795 Additions Disposals Balance at December 31, ,819 17,088 16,888 94,795 Depreciation Balance at January 1, ,640 12,258 12,178 49,076 Charge for year 6,082 2,563 3,549 12,194 Disposals Balance at December 31, ,722 14,821 15,726 61,270 Net Book Value December 31, ,097 2,267 1,162 33,525 December 31, ,179 4,830 4,710 45, Central Bank of Barbados A current account is maintained with the Central Bank to which is charged the cost of goods and services provided to the Barbados Deposit Insurance Corporation by the bank. Barbados Deposit Insurance Corporation / 2012 ANNUAL REPORT 37

39 Barbados Deposit Insurance Corporation Notes to consolidated financial statements December 31, 2012 (Expressed in Barbados dollars) 6. Investment securities Maturity Date $ $ Barbados Government Debenture % Sept. 30, ,000,000 3,000, Barbados Government Treasury Note - 6.5% Sept. 30, ,800,000 8,800, Barbados Government Debenture % Dec. 31, , , Barbados Government Debenture % Sept. 30, , , Barbados Government Treasury Note - 6.0% Sept. 30, ,950,000 2,950, Barbados Government Debenture % Dec. 31, ,060,000 2,060, Barbados Government Debenture % Dec. 31, , , Barbados Government Debenture % Sept. 30, ,200,000 1,200, Barbados Government Debenture % July 31, , , Barbados Government Treasury Note % June 30, , , Barbados Government Treasury Note - 6.5% April 30, ,400,000 2,400, Barbados Agricultural Management Co. 6.0% Mar. 01, , , Barbados Agricultural Management Co. 6.5% Mar. 01, , , Barbados Government Debenture % Feb. 28, ,000,000 1,000, Barbados Government Debenture - 7.0% Aug. 31, ,250,000 2,250, Barbados Government Debenture % May 31, , , Barbados Government Treasury Note % Dec. 31, ,000 75, Barbados Government Debenture % Oct. 31, , , Barbados Government Debenture % Oct. 23, ,550,000 Barbados Government Debenture % Aug. 31, ,250,000 Barbados Government Debenture - 7.0% Oct. 31, ,000 Barbados Government Debenture % Sep. 30, ,250, Cash and bank balances 33,430,000 27,780, $ $ Central Bank of Barbados: Operating account 201, , Premium account 46 Cash on hand , , ANNUAL REPORT / Barbados Deposit Insurance Corporation

40 Barbados Deposit Insurance Corporation Notes to consolidated financial statements December 31, 2012 (Expressed in Barbados dollars) 8. Receivables $ $ Interest receivable 475, , Paid up capital Under Section 13, (1) of the Deposit Insurance Act, 2006, the capital of the corporation shall be a sum of not less than $1,000,000 which shall be subscribed by the Central Bank. 10. Personnel costs $ $ Administrative fees pension and health 2,552 2,552 Directors fees 54,600 52,800 Group life and health 5,222 8,015 National insurance 9,999 12,676 Pension scheme 14,198 16,965 Salaries and wages 143, ,555 Staff training Telephone allowance 625 1,500 Travelling and car maintenance , ,363 Barbados Deposit Insurance Corporation / 2012 ANNUAL REPORT 39

41 Barbados Deposit Insurance Corporation Notes to consolidated financial statements December 31, 2012 (Expressed in Barbados dollars) 11. General and administrative costs $ $ Advertising 9,663 2,928 Bank charges Computer supplies Conferences/official visits 22,889 51,317 Donations 650 1,850 Entertainment 3,858 3,157 Equipment rental Insurance 1,288 1,288 Internet, web development Investment fees 40,000 0 Miscellaneous 2,702 1,425 Newspapers and magazines Office rental 105, ,856 Office supplies 3,529 3,366 Postage and courier Printing and stationery 19,532 10,214 Professional fees 22,783 16,920 Public relations 38,370 10,510 Repairs and maintenance 1, Subscriptions 25,188 26,421 Telephone and fax 8,993 8, , , ANNUAL REPORT / Barbados Deposit Insurance Corporation

42 Notes Barbados Deposit Insurance Corporation / 2012 ANNUAL REPORT 41

43 Notes ANNUAL REPORT / Barbados Deposit Insurance Corporation

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