Consolidated Annual Report 2015

BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED CONSOLIDATED ANNUAL REPORT 2015 66 BARBADOS PUBLIC WORKERS' CO-OPERATIVE CREDIT UNION LIMITED Notes to the Consolidated Financial Statements For the year ended March 31, 2015 (Expressed in Barbados dollars) 54 25. Financial Risk Management…(continued) 25.2 Credit risk...(continued) Loans with renegotiated terms and the Group’s forbearance policy…(continued) The revised terms usually include extending maturity, changing timing of interest payments and amendments to the terms of loan covenants. All loans are subject to the forbearance policy. Once the loan is restructured it remains in this category independent of satisfactory performance after restructuring. The Groupʼs Credit Committee regularly reviews reports on forbearance activities. Write-off policy The Group writes off a loan or an investment debt security balance, and any related allowances for impairment losses, when it is determined that the loan or security is uncollectible. This determination is made after considering information such as the occurrence of significant changes in the borrowerʼs/issuerʼs financial position such that the borrower/issuer can no longer pay the obligation, or that proceeds from collateral will not be sufficient to pay back the entire exposure. For smaller balance standardised loans, write-off decisions generally are based on a product-specific past due status. Commitments and guarantees To meet the financial needs of customers, the Group enters into various irrevocable commitments and contingent liabilities. Even though these obligations may not be recognised on the statement of financial position, they do contain credit risk and are therefore part of the overall risk of the Group. 25.3 Liquidity risk and funding management Liquidity risk is defined as the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Liquidity risk arises because of the possibility that the Group might be unable to meet its payment obligations when they fall due under both normal and stressed circumstances. To limit this risk, management has arranged diversified funding sources in addition to its core deposit base, and adopted a policy of managing assets with liquidity in mind and of monitoring future cash flows and liquidity on a daily basis. The Group has developed internal control processes and contingency plans for managing liquidity risk. This incorporates an assessment of expected cash flows and the availability of high grade collateral which could be used to secure additional funding if required. The Group maintains a portfolio of highly marketable and diverse assets that are assumed to be easily liquidated in the event of an unforeseen interruption of cash flow. The Group also has committed lines of credit that it can access to meet liquidity needs. In addition, the Group maintains a statutory deposit with the Central Bank of Barbados. Analysis of financial liabilities by remaining contractual maturities The table below summarises the maturity profile of the undiscounted cash flows of the Groupʼs financial liabilities as of March 31, 2015 and March 31, 2014 on the basis of their earliest possible contractual maturity.