Non-Consolidated Annual Report 2020

BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | NON-CONSOLIDATED ANNUAL REPORT 2020 67 BARBADOS PUBLIC WORKERS' CO-OPERATIVE CREDIT UNION LIMITED Notes to the Non-consolidated Financial Statements For the year ended March 31, 2020 (Expressed in Barbados dollars) 50 23. Financial Risk Management, continued Credit risk Credit risk is the risk that the Credit Union will incur a loss because its members or counterparties fail to discharge their contractual obligations. The Credit Union manages and controls credit risk by setting limits on the amount of risk it is willing to accept for individual counterparties and by monitoring exposures in relation to such limits. Credit risk exposures arise principally in lending activities that lead to loans and advances and investment activities that bring debt securities into the Credit Union’s asset portfolio. There is also credit risk in off-balance sheet financial instruments such as commitments. Loans and advances The Credit Union employs a range of policies and practices to mitigate credit risk relating to loans and advances. The most traditional of these is the taking of security for funds advanced. The principal collateral types for loans and advances within the Credit Union are: - Mortgages over residential properties - Charges over financial instruments such as debt securities and equities - Charges over business assets such as premises - Hypothecation of deposit balances It is the Credit Union’s policy to dispose of repossessed properties in an orderly fashion. The proceeds are used to reduce or repay the outstanding claims. The Credit Union does not occupy repossessed properties for business use. Financial investments Assessment of corporate investments (term deposits) Due to the lack of published market data for term deposits, the Credit Union's internally developed model used published credit rating scores for similar investees and / or Moody's published statistics to determine the cumulative probability of default (CPD) and loss given default (LGD) applied in the ECL on term deposits. The Credit Union currently has $33,873,871 (2019 – 35,841,115) in corporate investments. These investments are assessed on an entity level. Currently, these investments are held in the entities which are either regulated or trading on the Central Bank of Barbados or Financial Services Commission as per section 34 A of the Co-operative Society Act.