Contents

Chairman’s statement to the shareholders

FIMBank group performance 2021

Directors’ report

Statement of compliance with the principles of good corporate governance

Remuneration report

Financial statements:

Statements of financial position

Statements of profit or loss

Statements of other comprehensive income

Statements of changes in equity

Statements of cash flows

Notes to the financial statements

Statement by the directors pursuant to Capital Markets Rule 5.68

153

Independent auditors’ report

154

Schedules to the annual report

Statements of profit or loss – 5 year summary

167

Statements of financial position – 5 year summary

168

Cash flow statements – 5 year summary

169

Accounting ratios – 5 year summary

170

Directors and executive management

171

FIMBank Group Annual Report & Financial Statements 2021

Chairman’s statement to the shareholders

Dear Shareholder,

FIMBank’s performance in 2021 continued to be impacted by the negative economic trail left behind by the COVID-19 pandemic. As the world

works towards an exit from the pandemic, the effects of the measures and restrictions imposed by several countries around the world are expected

to continue impacting global economies. Although we have seen remarkable efforts with respect to the vaccination campaigns across the

continents, progress and recovery have been hindered by the emergence of new variants which, to varying extents, have led to a renewed rise in

case numbers. Inflationary pressures have also made their mark, and show no signs of stopping anytime soon, also in view of the recent invasion

of Ukraine by Russia.

Although 2021 displayed signs of recovery, world economies were still operating in the face of unprecedented challenges. In this regard, the Group

has also been impacted, as it confronts significant challenges related to global supply chains, supply-side bottlenecks, lockdowns and travel

restrictions, among others. Such challenges are expected to persist in characterising future developments. Research by the World Economic Forum

suggests that commodity price shocks, growing inflation and a fragmented energy transition are amongst the greatest threats to global trade in

2022. Throughout the pandemic, the FIMBank Group has strived to constantly monitor, evaluate and adapt in order to maintain effective and

efficient operations.

In this context, the year in review has served to highlight the Group’s financial and business resilience, as evidenced by the fact that we managed

to turn around a loss of USD47.0 million in 2020, to a contained deficit of USD3.6 million in 2021. Going forward our sights are firmly set on

profitability. We have spent the last year tailoring and implementing measures designed to strengthen the Group’s business fundamentals, which

should lead to a significant boost in performance. This, together with the energy we have been dedicating towards securing planned recoveries

and reducing the impact of non-performing exposures, will allow us to achieve our forecasted targets of sustainable profitability.

Maintaining high levels of operational and business continuity during such troubling times would not have been possible without the Group’s

consistent investment in advanced IT infrastructure. This has enabled our employees throughout our international network to work securely and

remotely from their own home. The deployment of the latest technology has also been a steady feature in the way we operate and interact both

internally, as well in relation to all our stakeholders. This is a reflection of our commitment to the digital transformation process which has been

taking place throughout the Group.

The situation remains one that demands constant monitoring to mitigate against emerging threats. In this uncertain environment, customer

centricity remains a fundamental pillar of our strategy. We see this mindset as critical to allow our people to create mutually beneficial solutions

for our wide-ranging clientele, seeing them not just as customers, but as partners in growth. We look at the future with optimism, underlined by a

commitment to continue enhancing our activities in markets where we have already have a presence, while strengthening our visibility in Malta,

our home market, by expanding our product offering to provide a wider spectrum of services to corporate clients. We strongly believe in our

capability in forging partnerships with our clients, and that the value of a dependable banking partner goes beyond the delivery of financial

solutions. To that end, we strive to provide a high-quality banking experience to our customers, by building relationships and offering products and

services designed to enable their business to grow and prosper.

Although developments in our operating environment induce a strong measure of prudence in our outlook for 2022, there is no doubt in the

confidence we place in the measures put in place by our GCEO, Adrian A. Gostuski, and his senior management team, aimed at leading the Group

towards operational success and sustainable growth and profitability.

Investor relations continue to play an important role for our institution, and throughout the year in review, we have continued to foster initiatives

aimed at engaging with all stakeholders. On behalf of the Board, I would like to take this opportunity to extend our sincere gratitude for the

constant demonstration of trust and loyalty by all our Shareholders, with a special mention going to our majority shareholder, the KIPCO Group,

for their solid and continued backing during these challenging times.

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.

Signed by John C. Grech (Chairman) on 13 April 2022

FIMBank Group Annual Report & Financial Statements 2021

FIMBank Group performance 2021

CEO’s message

FIMBank’s financial performance in 2021 continued to be materially impacted by COVID-19 and the new mutations of the virus. Although the

financial and operating performance of the Group improved significantly, this was hindered by the implementation of lockdowns as well as travel

restrictions, together with disruptions in global supply chains.

The pandemic left the global economy in disarray, upsetting supply chains across continents and leaving the world short of a plethora of goods,

ranging from machinery and microchips, to container vessels that transport goods across the seas. As a result, many suppliers have not been able

to keep up with the sudden surge in demand as economies have begun to reopen. Moreover, inflation has spiked in recent months, riding on a

surge in energy prices. Production bottlenecks are pushing prices even higher, raising fears that a combination of government stimuli and the

inevitable economic snapback will cause prices to overheat.

Overview of financial results

The FIMBank Group registered a post-tax loss of USD3.6 million for the financial year ended 31 December 2021, compared to a post-tax loss of

USD47.0 million in 2020. Despite the unprecedented health and economic crises brought on by the COVID-19 pandemic, the Group’s performance

continues to reflect its resilience, loss-absorbing capacity and capability to recover rapidly. During the period in review, the Group retained its focus

on safeguarding its capital and liquidity, which remain strong and well above regulatory minima. During 2021, the Group’s net operating revenues

rose by 6%, to USD41.2 million, while there was only a marginal increase of 4% in operating expenses, to reach USD40.5 million. The Group’s net

interest margins felt the impact of a persistently low global interest environment. As a result, net interest income dropped by 13% to USD24.9

million. This decrease was fully offset by the net fee and commission income, which increased by 21%, from USD9.0 million to USD10.8 million,

together with a USD3.0 million gain from trading assets.

At the end of the period under review, the Group’s total consolidated assets stood at USD1.79 billion, down by 2.5%, or USD45.6 million, when

compared to 2020.

The Group’s consolidated liabilities, standing at USD1.56 billion, reflected a 2.3% drop, equivalent to USD36.4 million, from the previous year. The

Group raised USD233 million in long term funding, by participating in the Targeted Longer-Term Refinancing Operations (TLTRO) launched by the

European Central Bank.

During the period under review, the Group’s strategy was revitalised to counter the new economic realities, as well as addressing developments on

the regulatory and compliance spheres. In line with its strong compliance-focused policy, the Group exited various business activities, jurisdictions,

and customer groups. A combination of factors impacted market demand, productivity and trade flows, which resulted in difficulties in the

origination of business within the context of the revised Group’s risk appetite. This was reflected in a reduction of trade finance business of USD51

million. Momentum was, however, restored towards the end of the year, when encouraging growth was registered, resulting in a higher factoring

balance to the tune of USD70 million.

During 2021, the Group was successful in recovering certain non-performing assets and has written-off some fully provided delinquent exposures.

These developments, along with other measures, have contributed to lower non-performing ratios. Management is committed to continue with

this recovery process. As at 31 December 2021, the Group’s CET1 ratio stood at 18.7% and the Group’s TCR at 18.7%. The average TCR for the year

was 19.5%, well above the regulatory requirement which includes the SREP add-on.

Throughout the period under review, the Group did not require recourse to any of the COVID-19 capital relief measures, which had been announced

by the ECB and the MFSA in 2020.

In November 2021, the Bank decided to close the Hellenic Branch in Greece, a process which was concluded in February 2022. This decision

complements the overarching strategy of simplifying and reducing complexities, allowing the Group to focus on consolidating its position in

specific target markets. Meanwhile, a Greek helpdesk has been set up in Malta in order to continue providing existing clients with a high level of

service.

FIMBank Group Annual Report & Financial Statements 2021

Business unit performance

London Forfaiting Company Ltd (“LFC”)

During the period under review the trade finance market was subdued and margins remained depressed. Continued low commodity prices and

increasing uncertainty in the market, arising from the repeated occurrences of COVID-19 outbreaks, gave rise to a challenging business

environment for LFC. Notwithstanding this, the fully owned subsidiary was able to navigate through the changes with little disruption and by the

end of the year matters were normalising.

Amidst these challenges, LFC only experienced isolated payment delays and by year-end there were nascent signs of a recovery as commodity

prices stabilised and began an upward trend. Interest rates were also trending upwards in all major currencies. LFC demonstrated its resilience by

registering a USD8.1 million profit for the year, an increase of 10% over the previous twelve-month period.

India Factoring and Finance Solutions Private Ltd (“India Factoring”)

India Factoring retained its leadership position in the provision of factoring services in India for the fourth consecutive year. The company continues

to support small and medium enterprises with tailor-made working capital solutions. Clients benefit from access to immediate liquidity, to smooth

out cash requirements, improve financial planning, and more importantly, optimise their financials. During 2021, India Factoring proved to be very

effective in onboarding new clients, growing and diversifying its portfolio and stabilising revenues. Despite the prevalent challenging environment,

the company increased its factoring portfolio and delivered an encouraging financial result for 2021.

The Egyptian Company for Factoring S.A.E. (“Egypt Factors”)

Egypt Factors experienced a slow first half of the year, mainly due to the second wave of the pandemic. However, it adapted successfully to the

current environment, and rebounded with steady growth during the second half of the year, with increased volumes exceeding the targets set for

the year, and with the company registering a profit for the year. During 2021, Egypt Factors received the highest rating for its import and export

factoring services in Africa and the Middle East, based on the Factors Chain International (FCI) survey results, collected from 400 members in 90

countries. Egypt Factors was the first licensed Egyptian company specialising in factoring services, and this prestigious award was seen as

recognising Egypt Factor’s pioneering role in the financial services sector in Egypt.

Investment in technology

Technology is a critical component of modern banking, and throughout the past years, FIMBank has continued to invest in this area. During the

year in review, we successfully completed the deployment of the second phase of our financial crime risk management platform. This allows for an

integrated solution encompassing anti-money laundering, and internal fraud support, allowing the Compliance function to manage even more

effectively money laundering risks. Moreover, the new platform provides advanced ‘Know Your Customer’ capabilities, and improved risk profiling,

risk scoring and transaction monitoring. We also completed all the groundwork for the upgrade of the Bank’s digital banking platform, FIMBank

Direct, a project that will be completed in 2022. With the new version of FIMBank Direct, we primarily aim to improve our customer’s digital journey

and increase functional capabilities. This channel will continue to provide an integrated solution where customers can manage their banking

requirements securely.

Our steady investment in technology platforms and infrastructure over the years has enabled the Bank to transition seamlessly to a remote working

model for our employees. Going forward, the office will continue to play an important role as a place of work, not least due to social factors such

as face-to-face collaboration, personal contact, and workplace interaction. The remote-working paradigm is however here to stay, albeit now

converting into a hybrid model. Regardless, the Bank already had policies in place to allow employees flexibility in this regard.

FIMBank Group Annual Report & Financial Statements 2021

Corporate Social Responsibility

In 2021, FIMBank contributed funds to the Research Trust of the University of Malta (RIDT) and the University of Malta to develop a research study

based on the findings and remains resulting from the excavation of deposits, retrieval of faunal material and extraction of speleothems. This

specialised research will require the valuable contribution of foreign scientists and should produce a series of major scientific peer-reviewed papers,

each of which will contribute to existing knowledge on the subject. The project is being conducted in tandem with the Superintendence of Cultural

Heritage.

Moreover, during the past year, FIMBank and its employees donated to several local philanthropic organisations, including Europa Donna, which

is dedicated to providing support to breast cancer survivors and to bring about awareness of breast cancer in Malta.

The Environmental, Social and Governance (ESG) standards are increasingly taking on an even greater significance and organisations have a

greater role to play. Businesses have a direct influence on the health of nations through their role as an employer, the products and services they

offer as well as their external influence on the environment and the communities in which they operate. The FIMBank Group acknowledges its

responsibility to share in the community's development and values. To this end we have engaged external consultants to assist us in implementing

an ESG framework within the organisation that will allow us to support the European Union ESG objectives and to manage the risks posed by

environmental change to the Group, its customers, and society as a whole. As we integrate ESG into our business strategy we will effectively

promote sustainability in the investment decision-making process, working towards a more resilient future.

Outlook and way forward

Developments arising from the pandemic remain one of the main elements that will need to continue to be monitored going forward. Despite the

implementation of comprehensive vaccination campaigns, the risk of the emergence of new COVID-19 variants continues to pose a threat to the

progress made. The gradual removal of restrictions in many countries lets us dare to hope that a transition to normality is more imminent.

Nevertheless, the pandemic has left the global economy in the shadow of two significant vulnerabilities, namely high inflation and volatile financial

markets. Russia’s recent invasion of Ukraine also carries additional and huge risks for a world economy that is yet to fully recover. The aftershocks

arising from the invasion could easily worsen both inflation and financial market volatility.

In a more local context, the immediate removal of Malta’s name from the Financial Action Task Force’s advanced monitoring list remains a priority.

This should come about through a commitment to have structures in place to safeguard Malta’s reputation and avoid a repeat occurrence. We are

confident that the country will demonstrate progress in its enforcement capabilities, in terms of its anti-money laundering and funding of terrorism

framework and proliferation financing. The Group will continue to monitor developments, while remaining prepared to adjust to any changes in

this respect.

Concluding remarks

In view of the challenging macroeconomic outlook, and amid concerns over high inflation and geopolitical uncertainty, FIMBank’s projections

remain grounded and cautious. The Group will continue to execute its strategy in search of business opportunities that match its risk appetite, on

the principle of risk adjusted returns. This will result in moderate growth in diversified product offerings in business lines that provide superior

returns. The Group’s Balance Sheet is more resilient than previous years, with lower legacy exposures and improved sustainable revenue

generation capabilities.

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. The Bank has also enhanced its support to customers during this time. This is in line with

our strong belief that once a relationship is created, the customer becomes an active stakeholder and an integral focal point for all decisions related

to financial products and multi-channel service delivery. Our objective will be for this commitment to customer centricity, to be seamlessly

integrated in a prudently designed ecosystem that guarantees realisation of mutual value. Customer centricity remains our primary mission and

will continue to underly a continuous group-wide endeavour for the provision of a superior customer experience.

Finally, I would like to take this opportunity to express my sincere thanks and gratitude to our Board of Directors, management and all our

employees for their dedication, hard work and support.

Signed by Adrian A. Gostuski (Chief Executive Officer) on 13 April 2022

FIMBank Group Annual Report & Financial Statements 2021

Directors’ report

For the year ended 31 December 2021

The Directors present their report together with the Audited Financial Statements of FIMBank p.l.c. (the “Bank”), and FIMBank Group of

Companies (the “Group”) for the year ended 31 December 2021. This report is prepared in accordance with Article 177 of the Companies Act, 1995

(Chapter 386, Laws of Malta, (“The Companies Act”)) 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 USD3,612,523 and USD663,219 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 30 and 31 and in the Review of Performance section within this report.

Group structure and principal activities

The Group comprises the Bank and its wholly owned subsidiaries, London Forfaiting Company Limited (“LFC”), FIM Business Solutions Limited

(“FBS”), FIM Property Investment Limited (“FPI”), The Egyptian Company for Factoring S.A.E. (“Egypt Factors”), FIM Holdings (Chile) S.p.A.

(“FHC”) and FIMFactors B.V. (“FIMFactors”). LFC and FIMFactors are themselves parents of a number of subsidiaries as set out in Note 26 to the

Financial Statements. The Group is supervised on a consolidated basis by the Malta Financial Services Authority (“MFSA”), whilst some of 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 a branch registered in Dubai International Finance Centre, United Arab Emirates, which is regulated by the Regulator in the UAE.

During the Board of Directors’ meeting held on 10 November 2021, a resolution was passed to close the Hellenic Branch in Greece. The closure

was finalised on 28 February 2022.

 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

corporate status in the various jurisdictions where they are providing the service. LFC’s activities include the trading of bills 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.

 FPI (100%), registered in Malta, owns and manages FIMBank’s Head Office and other properties leased from third parties. FPI is responsible for

facility management activities and the leasing of commercial and office space within Mercury Tower to related parties and third-party tenants.

 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. At reporting date FHC was in liquidation, which process was finalised

in March 2022.

 FIMFactors (100%), registered in the Netherlands, is the corporate vehicle for the Bank’s holdings in factoring subsidiaries and associated

companies. These are:

a. 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.

b. 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 2021

Review of performance

The financial period ended 31 December 2021 returned a loss of USD3.6 million for FIMBank Group, compared to a loss of USD47.0 million

registered in 2020. This performance shows the Group’s resilience and its ability to absorb a significant loss and recover in a relatively short period

of time. In line with the strategy, the Group has positioned itself to capture further improvements in its performance, which shall allow the Group

to reach its forecasted targets and improve profitably in a sustainable manner.

Throughout the year the global economy has shown a strong recovery as the COVID-19 vaccination programs were rolled-out. However, recovery

has proceeded at a slower pace than the world has hoped for, as new mutations in the COVID-19 virus have developed. The financial and operating

performance of the Group, although importantly improved, remained marked by the disruptions in global supply chains, supply-side bottlenecks,

lockdowns and travel restrictions among others.

Global fiscal policies remained strong and monetary policies remained expansionary particularly in U.S. and the EU, resulting into low interest rates

for the key operational currencies of the Group. The Group’s net interest margins felt the impact of this persistently low global interest

environment. Ongoing headwinds from low interest rates were however offset by higher fee income and improved valuations of trading assets and

other financial instruments.

The Group was successful in its effort to recover some legacy non-performing exposures and progress was made on other legacy clients for which

recovery is expected in the immediate or near future. The pandemic has had its impact on various legal jurisdictions causing delays in arbitration

proceedings.

The Group is reaping the tangible benefits of the de-risking process. This process commenced in year 2019 and while the key features are already

in place, further calibration continued throughout the year under review. Despite the ongoing global turmoil, the Group has classified only one new

exposure as non-performing, which was also non-material. In addition to the actual cash recoveries, the Group reviewed in depth the level of gross

non-performing exposures and written-off some fully provided exposures which were not expected to be recovered. This has not only improved

the Group’s asset quality ratios, but it will also allow management to focus on other ongoing recovery streams and on maintaining and growing

the performing portfolios.

The Group’s strategy has been revitalised to adapt to the new economic realities and to developments in the regulatory and compliance fronts.

Shifting away from business activities, jurisdictions and customer groups that do not comply with our improved compliance framework, the Group

focused on solidifying its foundations of trade finance, forfaiting, factoring and real estate business. This allows the Group to capture business

opportunities, the moment the right economic conditions present themselves, while maintaining the improved overall risk profile.

Continued low commodity prices, high market liquidity, depressed margins and market uncertainty gave rise to a challenging business

environment for LFC. However, the Company experienced only isolated payment delays during the year and by year-end business practices were

returning to normal. Forfaiting portfolio growth was cautious and limited by external and internal factors. LFC maintained its dynamic capability

to quickly upscale or downsize the portfolio given the right parameters. LFC’s resilience is substantiated by the USD8.1 million profits it returned

for 2021, representing a 10% increase from the previous year.

Despite the various challenges formed by the multiple waves of the COVID-19 virus, India Factoring managed to gradually increase its factoring

portfolio and exceeded the budget. The company closed the year with a profit after tax of USD1.9 million compared to a loss of USD1.1 million in

2020. The company onboarded new customers with robust financials and structures and continued to recover debt from legacy clients.

Egypt Factors had initially experienced a decline in its factoring portfolio due to the second pandemic wave, however, it picked-up and with steady

growth exceeded budgeted portfolio by year-end. The company returned a profit of USD0.5 million, which was 142% higher than previous year.

The company recorded recoveries and released some provisions for performing portfolios. In line with the rest of the Group, some fully provided

legacy exposures which were not expected to be recovered were written-off, allowing management to focus on growing the performing portfolio.

Throughout the period under review, the Group did not require to utilize any of the COVID-19 capital relief measures, which were announced by

the ECB and the MFSA in 2020. The Group’s capital position remained strong with an average Total Capital Ratio (“TCR”) of 19.5%. This was well

above the 17.5% minimum TCR requirement which includes the Supervisory Review and Evaluation Process (“SREP”) add-on. This relatively high

requirement had a direct impact on business volumes and revenues however, management is committed to operate above these requirements.

The MFSA concluded a SREP towards the end of the year under review, and a new decision has been issued and applicable as from 2022. The MFSA

recognised the improvements and refinements the Group and its management have developed on various fronts and therefore reduced the Pillar

2 Requirement (“P2R”) by 1.5% to 4.5% and upheld the Pillar 2 Guidance (“P2G”) at 1%. This creates space for the Group to originate additional

assets that fall within its risk appetite and that generate incremental revenue streams.

The Group maintained a strong liquidity position throughout the year with an average Liquidity Coverage Ratio (“LCR”) of 243% and an average

Net Stable Funding Ratio (“NSFR”) of 139%. Both liquidity metrics were well above the regulatory minimum requirement and the Group’s internal

risk appetite level.

FIMBank Group Annual Report & Financial Statements 2021

Statements of profit or loss

For the year ended 31 December 2021, the Group registered a post-tax loss of USD3.6 million compared to a post-tax loss of USD47.0 million in

2020. Group earnings per share were negative at US cents 0.74 (2020: negative US cents 8.98). 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

2021

2020

Movement

USD

Net interest income

24,868,755

28,643,150

(3,774,395)

Net fee and commission income

10,837,563

8,969,681

1,867,882

Net results from trading assets and other financial instruments

3,027,000

(397,564)

3,424,564

Net results from foreign currency operations

612,647

553,537

59,110

Dividend income

1,089,189

240,817

848,372

Other operating income

728,990

893,869

(164,879)

Net operating revenues

41,164,144

38,903,490

2,260,654

Operating expenses

(40,549,282)

(39,036,105)

(1,513,177)

Operating income/(loss) before net impairment

614,862

(132,615)

747,477

Net impairment losses

(1,907,796)

(35,677,319)

33,769,523

Operating loss after net impairment

(1,292,934)

(35,809,934)

34,517,000

Taxation

(2,319,589)

(11,222,821)

8,903,232

Loss for the period

(3,612,523)

(47,032,755)

43,420,232

Net operating revenues rose by 6% to USD41.2 million. Net interest income (NII) dropped by USD3.8 million (13%) year on year, to USD24.9 million.

While average volumes of interest-generating assets dropped by 3%, and average volumes of high liquid assets attracting lower or negative interest

rates increased by 25%, the drop in NII was predominantly due to the impact of low global interest rates and narrowing spreads. The low interest

environment and narrowing spreads had a negative impact on interest income which was USD4.7 million (11%) lower than previous year, however,

this was partially offset by the positive impact that low interest rates had on interest expense. Borrowing and deposit-taking costs decreased by

USD1.0 million (7%) year on year, despite that average volumes grew by 9%. At USD10.8 million, net fee income was USD1.9 million (21%) higher

than previous year, as in 2021 LFC saw the highest transaction turnover recorded since LFC’s acquisition by FIMBank.

The Group recognised net gains of USD3.0 million from trading assets and other financial instruments, compared to a net loss of USD0.4 million in

prior year. Despite the challenging market conditions and low interest rates, forfaiting assets were the main contributors, registering a USD1.9

million gain. This was USD2.6 million higher than 2020, even though average balances were slightly lower during the year under review. Realised

gains on financial assets at FVOCI at USD0.7 million were USD0.6 million (43%) lower than previous year. Gains on financial assets at FVTPL at

USD0.4 million were USD1.4 million higher than the fair value loss recognised in the previous year.

In 2021, the Group recorded a USD1.1 million dividend from its investment in an unlisted sub-fund of a local collective investment scheme. Net

results from foreign currency operations at USD0.6 million and other operating income at USD0.7 million were fairly stable compared to prior year.

Operating expenses were managed well with a 4% marginal increase to reach USD40.5 million. The Group continued investing in its human

resources through the attraction, retention and training of employees. Technological investments continued, particularly in the business and

regulatory space.

Driven by an improving credit environment, the Group recognised USD1.9 million net provisions for credit losses, compared to USD35.7 million

recognised in 2020, which was the year subjected to a number of COVID-19 related impairment events. On performing Stage 1 and Stage 2

exposures, USD2.3 million of provisions were released, on the basis of lower expected credit losses, lower probabilities of default and improving

macro-economic indicators. In comparison in 2020 the Group recorded an impairment charge of USD0.6 million.

During the year under review the Group has recovered over USD25.0 million of non-performing assets and recognised USD 1.4 million (2020:

USD1.1 million) recoveries in the Income Statement. The Group had also written-off USD21.4 million (2020: USD 10.9 million) of fully provided

non-performing exposures, on which the Group had no reasonable expectations of recovering the contractual cash flows. In the majority of cases,

the Group had not forgiven the debt and is not precluded from enforcing, selling, or transferring the credit to another entity. These developments

along with other measurements have helped the Group to lower its NPL Ratio by approximately 500 basis points within the year under review.

FIMBank Group Annual Report & Financial Statements 2021

The Group reversed USD15.8 million of Stage 3 provision. USD28.1 million were reversed upon recovery or write-off of non-performing exposures,

whereas USD12.3 million was a coverage increase for pre-existing non-performing exposures and coverage for legal fees incurred in the process of

recovering the Group’s delinquent portfolio.

The Group performed an impairment assessment of goodwill on two of its main subsidiaries (India Factoring and Egypt Factors). The concluded

value-in-use from the valuations for both entities, supported the carrying amount of these two entities, as well as the goodwill on the Group’s

Balance Sheet. The value-in-use was based on a long-range plan that takes into account the long-term subsidiaries’ prospects and business

volumes. In 2020 goodwill for India Factoring was impaired by USD2.7 million.

Though an external valuation was performed on the Group’s investment property, this did not result in any upward or downward movement as the

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

Financial position

At 31 December 2021, total consolidated assets stood at USD1.79 billion, down by USD45.6 million or 2.5% from end-2020. Average total

consolidated assets were 4% higher than the average for prior year.

Compared to previous year, the Group closed the year with higher balances in factoring (by USD70 million) and with lower balances in treasury

assets which includes HQLA (by USD55 million), trade finance (by USD51 million), trading assets (by USD12 million) and loans to banks (by USD11

million).

Throughout the year the Group upheld its strategy to hold strong liquidity and capital positions, as many economies faced pandemic resurgences.

Consequently, average balances for treasury assets were USD143 million higher than previous year.

Average factoring balances were also higher by USD28 million, whereas average balances were lower for trade finance (by USD35 million), loans

to banks (by USD7 million) and trading assets (by USD5 million). The Group continued with its strong compliance focused strategy, thus has exited

some business activities, jurisdiction and customer groups. The pandemic also had an impact on market demand, productivity and trade flows,

creating difficulties in originating new business within the Group’s risk appetite, monitoring transactions, completing documentation, and client

onboarding, among other issues. Though this combination of factors did not present the Bank with the right opportunities to grow some of its

portfolios earlier in the year, the Group gained momentum towards the end of the year and registered growth in areas that fall within the Group’s

risk appetite and compliance standards.

In performing its assessment on the carrying amounts of deferred tax, investment in subsidiaries and goodwill, management have weighed in the

course of the COVID-19 pandemic and the progress made with vaccination programs, the global low interest rate environment and signs of

increasing inflation rates, along with other factors having a significant impact on global economic activities. In their assessment, management

have concluded that these balance sheet items were carried in the Balance Sheet at the appropriate value, and therefore did not require an

impairment charge.

The Group had consolidated liabilities of USD1.56 billion as at 31 December 2021, a drop of USD36.4 million from prior year. Average balances for

2021 were higher than previous year by USD158 million for bank deposits and wholesale funding and lower for corporate and retail deposits (by

USD37 million) and debt securities in issue (by USD17 million). The Group raised long-term funding by participating in the Targeted Longer-Term

Refinancing Operations (TLTRO) launched by ECB in the wake of the COVID-19 pandemic. At as year-end this amounted to USD233 million.

Reflecting the loss for the year and other equity adjustments, total equity decreased by USD9.2 million to USD224.0 million. The Group’s share

capital remained unchanged throughout the year under review. At 31 December 2021 the Group’s CET1 ratio stood at 18.7% (2020: 18.5%) and the

Group’s TCR at 18.7% (2020: 18.5%).

Total consolidated commitments at USD153.6 million consist mainly of confirmed letters of credit, documentary credits, commitments to purchase

forfaiting assets and factoring commitments. As a consequence of Malta’s grey-listing by the Financial Action Task Force, the Bank suffered in

particular a reduction in letters of credit. Total consolidated contingent liabilities, principally consisting of outstanding guarantee obligations, stood

at USD2.0 million.

FIMBank Group Annual Report & Financial Statements 2021

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

risk arises in the normal course of the Group’s business. As the Group is mainly engaged in cross-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 adhere to the Group’s risk, governance and compliance frameworks as updated from time to time.

On 11 March 2020, the World Health Organisation declared that the novel Coronavirus (“COVID-19”) could be characterized as a 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 have

impacted all industries.

Further disclosures on the Group’s principal risks and uncertainties are provided in Note 5 of this Annual Report and the 2021 Pillar III Disclosures

Report published on the Bank’s website.

Outlook for 2022

While there was hope that the world conquers the pandemic also with good vaccination progress, new Covid-19 variants have emerged. Although

the recent signs indicate that the new variants are more manageable than what the world has seen in the past, pandemic development remain one

of the relevant items to observe over the course of the upcoming year. We are hopeful that the current situation, that of gradually removing

restrictions, will soon transform into a new norm which is sustainable and closer to ‘business-as-usual’, reducing the level of uncertainty caused by

the pandemic.

After the expansionary monetary measures introduced during the past years, reports of increasing inflation beyond the target levels emerged. The

policy reaction of Governments and Central Banks are another important indicator to follow. We are already observing increasing key interest

rates, which is in line with the market consensus expectation. The Group’s Balance Sheet structure is positioned favourably for the increasing

interest rates scenario.

While today’s interconnected world calls for close watch of the geopolitical situation and specific tensions which might impact among others global

supply chains, trade volumes and commodity prices, other Malta specific developments like the grey-listing have to be continually monitored and

addressed with due attention. Having noted this, the Group will continue executing its strategy pursuing business opportunities within its risk

appetite on the principle of risk adjusted returns. The Group’s Balance Sheet is more resilient than in previous years with lower legacy exposures

and improved sustainable revenue generating capabilities.

Within our customer centric focus, we project moderate growth in diversified product offerings, in business lines and in geographies that provide

superior returns and pose less risks, to generate consistent value to the organisation. Complex structures are being gradually eliminated and

business lines are being streamlined, including the closure of our Hellenic Branch in Greece. While simplifying the Group structure, we shall aim to

solidify our local presence in Malta.

The recent conclusion of the MFSA in the Supervisory Review and Evaluation Process (SREP) that resulted in a reduced Pillar 2 Requirement (P2R)

by 1.5% is welcomed by the Group. This result allows for growth in asset portfolios and creates an opportunity for the Group to convert its asset

origination power into incremental tangible revenue streams. In continuation of the 2021 success in decreasing the absolute amount of non-

performing assets and improvement in coverage ratios, the fully dedicated Recovery function shall support the Group in maintaining this

momentum. The frontline teams are also equipped to originate business that results in improved credit quality ratios and revenue generation.

In a context of developing regulatory framework including the very relevant ESG topic, the Group’s ongoing drive to improve governance and

controls shall be a source of future 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 2021

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 (2020: Nil).

Standard licence conditions and regulatory sanctions

During the year under review, no breaches of licence requirements occurred. Moreover, no regulatory sanctions were taken against the Bank.

Approvals at the annual general meeting of shareholders

The Bank convened its Annual General Meeting on 15 July 2021 and all statutory Ordinary Resolutions were approved.

Shareholder register information pursuant to Capital Markets Rule 5.64

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

a. 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;

b. 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 2021 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. (“BBK”)

44,394,499

8.50%

In addition to the Shareholders listed in the above table, as at 31 December 2021, 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;

d. the Bank’s Articles of Association do not contain more stringent provisions than the ones contained in the Companies Act governing the changes

or variations in the rights attached to shares;

e. in terms of Article 12 of the Bank’s Articles of Association, the rights attached to any class of shares may be varied either with the consent in

writing 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;

f. 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;

g. 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

h. 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 2021 the Bank had no securities with special control rights in accordance with the Capital Markets Rule 5.64.4.

FIMBank Group Annual Report & Financial Statements 2021

Events after the financial reporting date

On 28 February 2022, the Hellenic Branch in Athens, Greece was officially closed.

On 2 March 2022, FIM Holdings (Chile) S.p.A. was officially liquidated. FIM Holdings (Chile) S.p.A. was a wholly owned subsidiary registered in Chile

and served as the corporate vehicle for Latam Factors S.A., which entity was sold to third parties during 2018. FIM Holdings (Chile) S.p.A. was put

into liquidation during 2019 and its liquidation had no financial impact on the Financial Statements as at reporting date.

The conflict in Ukraine has prompted management to take the appropriate steps to monitor the possible impact this might have on the Group both

directly and indirectly. The Group’s direct exposure to Russia and Ukraine is limited, with USD1.3 million outstanding to a state-owned bank in

Ukraine. Several client limits were reduced and country limits were suspended. Increased monitoring was put in place on customers that could be

indirectly impacted by the war, either through their trading activity, commodity volatility, sanctions or other general impacts. A portfolio review

concluded that our clients are well positioned to absorb any impact from the current situation. We will continue to take appropriate actions as

needed, to protect the quality of the Group’s portfolio.

Going concern

As required by the Capital Markets Rule 5.62, upon due consideration of the Bank’s performance, financial position, capital adequacy and 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 CGC, NRC

Claire Imam Thompson CGC, BAC, BRC

Edmond Brincat BAC, NRC

Hussain Abdul Aziz Lalani BAC, BRC, BRIC

Majed Essa Ahmed Al-Ajeel CGC, NRC

Mohamed Fekih Ahmed BCC

Osama Talat Al-Ghoussein BRC Retired on 31 March 2022

Rabih Soukarieh BCC

Rogers David LeBaron CGC, NRC

Denotes membership of:

• Board Audit Committee (BAC)

• Board Credit Committee (BCC)

• Board Review and Implementation Committee (BRIC)

• Board Risk Committee (BRC)

• Corporate Governance Committee (CGC)

• Nomination and Remuneration Committee (NRC)

FIMBank Group Annual Report & Financial Statements 2021

Statement of responsibility

This Statement of responsibility is required in terms of the Capital Markets Rule 5.55.2 and set out in the form required by the Capital Markets 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

in achieving the objective of ensuring, as far as possible, the orderly and efficient conduct of the Bank’s business. This responsibility includes

establishing and maintaining controls pertaining to the Bank’s and the Group’s objective of preparing 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 and signed on its behalf by John C. Grech (Chairman) and Masaud M.J. Hayat (Vice Chairman) on 13 April

2022

Registered Address

Mercury Tower

The Exchange Financial and Business Centre

Elia Zammit Street

St. Julian’s STJ 3155

Malta

FIMBank Group Annual Report & Financial Statements 2021

Statement of compliance with the principles of good

corporate governance

For the year ended 31 December 2021

Introduction

Pursuant to the requirements of Capital Markets Rules 5.94 et seq of the Malta Financial Services Authority (the “MFSA”), the Board of Directors

(the “Board” or “Directors”) of FIMBank p.l.c. hereby details the extent to which the Code of Principles of Good Corporate Governance (the

“Principles”), published as Appendix 5.1 to Chapter 5 of the Capital Markets 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

The Board of Directors’ terms of reference 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:

a. exercising prudent and effective controls and ensuring that such controls are appropriately reviewed for effectiveness and monitored for

compliance on a regular basis;

b. determining the strategic aims and the organisational structure;

c. regularly reviewing management performance and ensuring that the Group has the appropriate mix of financial and human resources to run

its business;

d. being conversant with relevant statutory and regulatory requirements;

e. 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;

f. ensuring that systems and controls are in place to mitigate significant business risks and that exposures are identified and properly managed;

g. setting appropriate business standards, codes of corporate governance and ethical behaviour for all Directors and employees, as well as

monitoring their performance;

h. appointing the Group Chief Executive Officer (“GCEO”) who is entrusted with day-to-day management of the Group and its operations,

together with members of management; and

i. 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.

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

evaluation of the Board’s overall performance in addition to an 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 position of Director against the Bank’s requirements at the time. Subsequently, the proposal for an individual to become

a Director is assessed by the MFSA which reviews, inter alia, the individual’s competence to serve as Director against established ‘fit and proper’

criteria. In this connection, the individual is required to provide all information, including detailed personal and 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 GCEO.

FIMBank Group Annual Report & Financial Statements 2021

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

The roles of the Chairman and of the GCEO 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 GCEO is the most senior executive of the Group and is appointed by the Board of Directors. 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

The Bank’s Articles of Association (the “Articles”) contain detailed provisions (in Clauses 93 to 114) as to the manner of appointment 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 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, including identification as required by

Code Provision 3.2 for those Directors deemed independent as per the Capital Market Rules, are as follows:

Year when first appointed

John C. Grech (Chairman)

2004

Rogers David LeBaron 2006

Majed Essa Ahmed Al-Ajeel

2013

Masaud M.J. Hayat (Vice Chairman)

2013

Mohamed Fekih Ahmed

2013

Rabih Soukarieh

2013

Osama Talat Al-Ghoussein

2014

Edmond Brincat (Independent Director)

2017

Hussain Abdul Aziz Lalani

2017

Abdel Karim A.S. Kabariti

2020

Claire Imam Thompson * (Independent Director)

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.

The Board considered and resolved that all Non-Executive Directors meet the requisites for them to be deemed independent in view of the fact

that all Directors signed a written declaration of independence prior to the publication on this Annual Report. 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

Directors’ ability to consider appropriately the issues which are brought before the Board. In terms of Principle 3.4, each Non-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.

Another written declaration of independence shall be signed by all the Non-Executive Directors in April 2022. In addition to the declaration

provided, 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.

The Bank considers that the Directors have sufficient time to perform their duties and responsibilities in terms of law. The management body of

the Group is deemed to be the Board of Directors, which is appointed in accordance with the Bank’s Articles of Association.

FIMBank Group Annual Report & Financial Statements 2021

As at 31 December 2021, the Board of Directors consisted of:

Number of directorships held

(including FIMBank p.l.c. and its subsidiaries)

John C. Grech (Chairman)

Masaud M. J. Hayat (Vice Chairman)

Abdel Karim Kabariti

Claire Imam Thompson

Edmond Brincat

Hussain Abdul Aziz Lalani

Majed Essa Ahmed Al-Ajeel

Mohamed Fekih Ahmed

Osama Talat Al-Ghoussein

Rabih Soukarieh

Rogers David LeBaron

The directorships held by the Directors in non-EU entities are not subject to MFSA approval.

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.

In the first instance, the proceedings of Directors are regulated by the Bank’s Articles of Association. Meetings of the Board 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 2021. All Members of the Board were present for all five meetings except for Masaud M.J. Hayat, who was excused

in May and November and Abdel Karim A.S. Kabariti, who 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. In all other circumstances, the Directors are

expected to play a full and constructive role in the Group’s affairs. As soon as 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 with all past minutes of Board and Committee Meetings upon 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) or include the participation of

management (Board Audit Committee, Nomination and Remuneration Committee, Corporate Governance Committee, Board Credit 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 GCEO 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.

FIMBank Group Annual Report & Financial Statements 2021

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 GCEO and the Company Secretary. This usually covers legal and statutory responsibilities as well as a good overview of the Group’s business

and activities. Access to the services of the Company Secretary and resources of the Bank, including where necessary, independent professional

advice at the Bank’s expense, are also available.

Training sessions have been held in 2021 in order for Directors to have the necessary knowledge on their duties and responsibilities.

Moreover, the Board ensures that the GCEO maintains systems and procedures for the development and training of management and employees

generally, in order to retain the best quality employees, optimise on management and employee morale and to continue developing the succession

plan for senior management. The GCEO is responsible for the recruitment and appointment of senior management following the approval of the

Nomination and Remuneration Committee.

Principle 7: Evaluation of the board’s performance

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 self-evaluation

of the Board and its Committees and the addition of the two new Directors, led to some changes to the Committee composition. Details regarding

the changes to Committee composition have been disclosed under Principle 8: Changes to committee memberships during 2021. The last

evaluations from Directors were requested in the last quarter of 2021 and were presented to the Nomination and Remuneration Committee in

April 2022.

Principle 8: Board committees

The Bank’s Articles 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

 Board Audit Committee

 Board Risk Committee

 Assets Liabilities Committee

 Nomination and Remuneration Committee (further information can be found in the Remuneration Report on page 23)

 Board Credit Committee

 Corporate Governance Committee

Board review and implementation committee

The Board Review and Implementation Committee (“BRIC”) acts as the delegated authority 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 2021 are the following:

John C. Grech (Chairman)

Hussain Abdul Aziz Lalani ((Vice Chairman)

Adrian A. Gostuski (Non-Voting Member)

The Board Review and Implementation Committee met on nine occasions during 2021.

FIMBank Group Annual Report & Financial Statements 2021

Board audit committee

The Board Audit Committee (“BAC”) assists the Board of Directors in fulfilling its supervisory and monitoring responsibilities, according to detailed

terms of reference included in the Board Audit Committee Charter and which reflect the requirements of the Capital Markets Rules, as well as

current best practices and recommendations of good corporate governance. The terms of reference of the Board Audit Committee, as detailed in

the Board Audit Committee Charter include:

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

 the monitoring of the effectiveness of the Group’s internal control, internal audit, compliance and risk management systems;

 the maintenance of communication on such matters between the Board, management, External Auditors, and the Internal Audit and

Compliance functions;

 the monitoring and reviewing of the External Auditor’s independence, and in particular, the provision of additional services to the Bank;

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

 the performance of the Group’s Internal Audit and Compliance functions.

It is the responsibility of the Board Audit Committee to recommend the appointment of the Statutory Auditor in line with the Capital Markets Rules

5.127.6 and in accordance with Article 16 of the Statutory Audit Regulation. The Board Audit Committee also considers the nature of related party

transactions, vets and approves them. Both the Board Audit Committee’s and the Head of Internal Audit’s terms of reference clearly 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 Board Audit Committee Chairman at all times and attends all meetings. The Group Chief

Compliance Officer also has direct access to the Board Audit Committee Chairman and attends all meetings. In addition, the composition of the

Members of the Board Audit Committee includes two individuals who are also Members of the Board Risk Committee.

The Members of the Board Audit Committee as at 31 December 2021 are the following:

Edmond Brincat (Chairman – Independent Director)

Hussain Abdul Aziz Lalani (Vice Chairman)

Claire Imam Thompson (Member– Independent Director)

Rogers David LeBaron is a non-voting, permanent invitee of the BAC.

In line with Capital Markets Rule 5.117.4, the Chairman of the Board Audit Committee is appointed by the Board of Directors and with reference to

Capital Markets Rule 5.117.3, all Members of the Board Audit Committee are designated as competent in auditing and/or accounting as per

qualifications listed hereunder.

Edmond Brincat joined the GO Group in 1999, part of the team entrusted to set up and launch Go Mobile, Malta’s second mobile operator and in

2006 he was appointed as the Group’s Chief Finance Officer, a position he held until 31 January 2018. In February 2018, Edmond Brincat joined

SmartCity (Malta), a subsidiary of Dubai Holding LLC, and currently acts as the company’s Chief Executive Officer. Edmond Brincat obtained a

Bachelor of Arts degree in accounts from the University of Malta in 1991 and is a Certified Public Accountant and a Fellow of the Malta Institute of

Accountants.

Hussain Abdul Aziz Lalani is the Chief Executive Officer of United Gulf Bank (“UGB”), Bahrain and has worked extensively with the Board of

Directors on advisory transactions in his previous capacity as UGB’s Chief Financial Officer. Hussain Abdul Aziz Lalani is a Chartered Accountant

and a Certified Information Systems Auditor and holds a Bachelor of Commerce degree from the University of Karachi, Pakistan.

Claire Imam Thompson currently holds the position of Executive Vice President, Head of Global Trade, Enterprise Partnerships at Mastercard.

Claire Imam Thompson is an accountant by profession and also holds a Bachelor of Science (Hons) in Business Studies which she obtained from

the University of Bradford.

The Bank considers that the Committee Members as a whole have the relevant competence as required by the Capital Markets Rule 5.118, having

evaluated the balance of knowledge, skills, diversity and experience of the members of the Committee, thereby ensuring that they have the

requisite experience, personal abilities and integrity and that they adhere to sound professional practices.

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

The Board Audit Committee held nine meetings during 2021 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 seven of the Board Audit Committee Meetings (February 2021, April

2021, May 2021, August 2021 and December 2021). The External Auditors were only present for the agenda item which considered and discussed

the 2020 Statutory External Audit (February 2021), 2020 Annual Report (April 2021), 2020 Management Letter (April 2021), Interim Report for the

period ended 30 June 2021 (August 2021) and Statutory Audit Plan for Financial Year ending 31 December 2021 (December 2021).

FIMBank Group Annual Report & Financial Statements 2021

Board risk committee

The Board Risk Committee (“BRC”) is responsible for overseeing the Group’s risk management strategy, systems and policies, and 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, market, reputational and legal risk matters.

The Board Risk Committee Members as at 31 December 2021 are the following:

Hussain Abdul Aziz Lalani (Chairman)

Osama Talat Al-Ghoussein (Vice Chairman)

Claire Imam Thompson (Member)

During 2021, the Board Risk Committee met on thirteen occasions.

Assets liabilities committee

The Assets Liabilities Committee (“ALCO”) is a decision-making body responsible for allocating the Group’s assets and liabilities to meet the

Group’s risk and profitability objectives.

The ALCO is composed of representatives of senior management, vested with the power to make decisions. As at 31 December 2021, the voting

members of the ALCO were the following:

Zbigniew Makula (Chairman)

Adrian A. 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 2021, the Assets Liabilities Committee met on five occasions.

Board credit committee

The Board Credit Committee (“BCC”) is a Committee appointed by the Board of Directors of FIMBank. The Board Credit Committee 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

Committee. The Board Credit Committee 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

specified in the Group’s Credit Policy Procedures; and

 review and consider for approval country limit applications, within the guidelines specified in the Group’s Credit Policy Procedures.

The Board Credit Committee Members as at 31 December 2021 are the following:

John C. Grech (Chairman)

Rabih Soukarieh (Vice Chairman)

Mohamed Fekih Ahmed (Member)

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

During 2021, the Board Credit Committee met on seventeen occasions.

FIMBank Group Annual Report & Financial Statements 2021

Corporate governance committee

The purpose of the Corporate Governance Committee (“CGC”) is to review the Bank’s internal delegations, policies and procedures to ensure

compliance with legislative and regulatory requirements and alignment to industry’s best practice.

The Corporate Governance Committee Members as at 31 December 2021 are the following:

Majed Essa Ahmed Al-Ajeel (Chairman)

John C. Grech (Vice Chairman)

Abdel Karim A.S. Kabariti (Member)

Claire Imam Thompson (Member)

Rogers David LeBaron (Member)

During 2021, the Corporate Governance Committee met on four occasions.

Nomination and remuneration committee

The Nomination and Remuneration Committee (“NRC”) is currently composed of five members, one of whom is an independent director. The

Nomination and Remuneration Committee is governed by the NRC’s Charter as may be amended by the Board of Directors (“Board”) in line 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:

 presents recommendations to the Board regarding nomination to the Board’s membership in accordance with approved policies, standards,

and instructions on nomination regulations for the Board of Director’s membership;

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

Board of Directors’ structure and presents recommendations on the changes which can be performed in accordance with the Bank’s interest;

 performs an annual evaluation of the Board’s overall performance and the performance of each Member and the Board Committees; and

 conducts as and when required, including on an annual basis, suitability assessments of prospective/appointed Directors, officers holding a

senior management position and key function holders.

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

Remuneration Report.

The Nomination and Remuneration Committee Members as at 31 December 2021 are the following:

Masaud M.J. Hayat (Chairman)

Majed Essa Ahmed Al-Ajeel (Vice Chairman)

Abdel Karim A.S. Kabariti (Member)

Edmond Brincat (Member)

Rogers David LeBaron (Member)

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

During 2021, the Nomination and Remuneration Committee met on four occasions.

All members were present for all four meetings except for Majed Essa Ahmed Al-Ajeel who was excused for the April meeting. Abdel Karim A.S.

Kabariti was appointed as member in May 2021 and was excused for the May and December meetings.

Changes to committee membership during 2021

During 2021, Claire Imam Thompson was appointed Member of the Board Risk Committee and Edmond Brincat is no longer a Member of the Board

Risk Committee.

Claire Imam Thompson and Abdel Karim A.S. Kabariti were appointed Members of the Corporate Governance Committee.

Abdel Karim A.S. Kabariti was appointed Member of the Nomination and Remuneration Committee.

Claire Imam Thompson was appointed Member of the Board Audit Committee.

FIMBank Group Annual Report & Financial Statements 2021

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

2021 the Annual General Meeting of the Bank was held in July. 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 disclosures,

contains detailed information about the Group’s performance. Moreover, the Board ensures that the Annual General 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 the Group’s 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.

The Board complies with the provisions of the Bank’s Memorandum and Articles of Association, as well as all legislation, rules and regulations that

require it to maintain a fair and informed market in the Bank’s equity securities. It discharges its obligations by having in place, formal procedures

for dealing with potentially price-sensitive information and ensuring the proper conduct of its officers and employees 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 Capital Markets Rules. During 2021 the Bank issued fourteen announcements.

The Board also complies with the provisions of the Bank’s Articles of Association insofar as minority rights are concerned. In accordance with the

article 65 of the Bank’s Articles of Association, minority Shareholders may convene an Extraordinary General Meeting, in the 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 Capital Markets

Rules contains dealings restriction guidelines and reporting procedures to be observed by Directors, management and employees when dealing,

or prospecting to deal, in the Bank’s equity securities. Directors and employees are also notified by the Company Secretary of their obligations to

observe the restricted ‘time-windows’ accompanying the publication of half yearly and annual financial results during which no dealings in the

Bank’s equity securities are allowed.

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 Capital Markets 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 and 120 of the Bank’s Articles of Association.

In terms of the Articles of Association, in the event of a conflict-of-interest situation, real or potential, arising 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 shall include a suitable

record of such declaration and of the action taken by the individual Director concerned. In the event that such steps do not eliminate the grounds

for conflict then the Director should consider resigning. 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 integral part of the

Board Audit Committee’s terms of reference to provide oversight on related party transactions.

FIMBank Group Annual Report & Financial Statements 2021

The number of shares held in the Bank by Directors directly in their name as at 31 December 2021 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 Bank’s shareholding. No Shareholder is entitled to any automatic right to nominate or appoint a Director on the Board.

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.

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. Further details of corporate social responsibility initiatives undertaken by the Group in 2021 are explained in the CEO’s Message 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 Capital Markets 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

Principle 3 in Appendix 5.1 of the Capital Market Rules requires that the Board should be composed of executive and non-executive directors

including independent non- executives. The Board of Directors of FIMBank is comprised solely of Non-Executive Directors. This notwithstanding,

the Bank considers the non-compliance with this Principle not to be of concern in view of the fact that members of senior management and the

Group Chief Executive Officer attend Board Meetings by invitation depending on the agenda content and relevance. Furthermore, the Board

Review and Implementation Committee already consists of a mix of Non-Executive Directors and a member that forms part of the Bank’s Executive

Management. This provides the balance suggested in Principle 3.The Bank considers the non-compliance with principle 3.4 not to be of concern in

view of the fact that all Directors with the exception of two signed the written declaration of independence by 2021 and the other two signed a

written declaration in February 2022, whereby they all 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.

Principle 4: Succession policy for directors

Whereas Capital Markets Rule 4.2.7 calls on the Directors to develop a succession policy for the future composition of the Board, and ‘particularly

the executive component thereof, for which the Chairman should hold key responsibility’, this is considered to be not applicable in view of the fact

that the Board is composed solely of non-executive members. During the May and August NRC meetings of 2021, the Nomination and

Remuneration Committee discussed the management succession plan. The Nomination and Remuneration Committee ensures that a succession

plan for management is updated and outlines interim and long-term successors.

FIMBank Group Annual Report & Financial Statements 2021

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 Capital

Markets Rules, as set out 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 both the Chairman and Vice Chairman of the NRC

have signed a written declaration whereby they have declared that they undertake to maintain in all circumstances their independence of analysis,

decision and action.

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 Board Audit Committee, however, the Chairman of the Board of Directors is copied with all Internal

Audit Reports issued.

The Board has identified key features within the Group’s environment of internal controls to ensure compliance with the 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.

Capital Markets Rule 5.97.5 and Rule 5.97.8

Capital Markets Rule 5.97.5 and Rule 5.97.8 are not applicable. Whilst Capital Markets Rule 5.97.5 is not applicable, this information is found in the

Directors’ Report.

It is also hereby declared that the contents of the Directors’ Report and of this Statement of Compliance with the Principles of Good Corporate

Governance cover the requirements of the provisions of Capital Markets Rule 5.97.

Approved by the Board of Directors and signed on its behalf by John C. Grech (Chairman) and Masaud M.J. Hayat (Vice Chairman) on 13 April

2022

FIMBank Group Annual Report & Financial Statements 2021

Remuneration report

For the year ended 31 December 2021

This section incorporates the Statement of the Nomination and Remuneration Committee and the Directors’ Remuneration Report as required by

Chapters 5 and 12 of the Capital Markets Rules, respectively.

Statement of the Nomination and Remuneration Committee (as per

Section 8 of the Principles)

Terms of reference and membership

The Nomination and Remuneration Committee (“NRC”) is responsible for ensuring that the Directors and 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.

As at 31 December 2021, the NRC was composed of five members, Masaud M.J. Hayat (Chairperson), Majed Essa Ahmed Al-Ajeel (Vice-

Chairperson), Rogers David LeBaron, Edmond Brincat (Independent Member) and Abdel Karim A.S. Kabariti. John C. Grech and Adrian A. Gostuski

in their capacity as Chairman of the Group and Group Chief Executive Officer (“GCEO”) respectively, attended the NRC’s meetings as permanent

invitees, Simon Lay in his capacity as CEO of LFC was invited to present one agenda item in the NRC meeting held August 2021. The Group Chief

Human Resources Officer (“GCHRO”) 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 (Chairperson) 4

Majed Essa Ahmed Al-Ajeel (Vice-Chairperson) 3

Abdel Karim A.S. Kabariti (appointed as Member in May 2021) 1

Edmond Brincat (Member) 4

Rogers David LeBaron (Member) 4

The following matters were discussed and, or determined:

a. New independent Directors and Group appointed Directors;

b. Chairman’s role and performance;

c. Directors’ remuneration;

d. Board of Directors evaluation, Director’s self-assessment and Board Committees self-assessment;

e. NRC charter;

f. Board Committees memberships;

g. Remuneration Policy and CRD V;

h. Executive Management recruitment, appointments, performance, promotions, succession and remuneration;

i. Group salary review, bonus allocation and out of cycle increases/payments;

j. Succession planning for all entities;

k. Control functions (independence, recruitment, succession and performance);

l. Subsidiary CEOs;

m. HR Policies; and

n. NRC and Remuneration Policy statements for Annual Report.

FIMBank Group Annual Report & Financial Statements 2021

Remuneration statement

The NRC has the role of making recommendations on the Board of Directors’ remuneration. The guiding principle, as outlined in the Remuneration

Policy and the Remuneration Policy Supplement, is that the remuneration 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. Directors are remunerated through a fixed-

fee structure which varies according to whether the appointment is that of an Independent Director or otherwise and to whether the directors are

chairpersons or members of the other respective Board Committees.

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 15 July 2021, the Shareholders approved the maximum aggregate

emoluments of the Directors for the financial year ending 31 December 2021 at USD450,000 (2020: 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 specifically for Board of Directors

Meetings for the financial year ending 31 December 2021 amounted to USD204,918.

Code provision 8.A.5

For 2021, the total payments received by the Directors from the Bank and the Group were:

 fixed remuneration USD414,833

 variable remuneration Nil

 executive share options Nil

 expenses relating to meetings Nil

 fringe benefits USD1,032

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 EU/Maltese directives and regulations, including the

applicable Capital Requirements Directive V 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 as laid down by the Board of Directors. Unless the current economic

scenario changes materially, no new significant changes are envisaged for the financial year ending 2022.

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

 fixed remuneration;

 variable remuneration; and

 fringe benefits.

These components are combined to ensure an appropriate and balanced remuneration package that reflects the employee’s grade and

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

For 2021, the total payments received by Executive Management (members within the C-suite) from the Bank and the Group were:

 fixed remuneration USD1,943,103

 variable remuneration USD233,452

 executive share options granted Nil

 fringe benefits USD467,237

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

Remuneration Report and under the Remuneration Policy which can be found in the 2021 Pillar III Disclosures Report published on the Bank’s

website.

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 2021

Directors’ Remuneration Report (as per Capital Market 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 the

enactment of Directive EU2017/828 (often referred to as “SRD II”) and the consequential changes to the Capital Markets Rules, more specifically

Chapter 12 which deals with shareholders’ rights. The amounts disclosed reflect the Remuneration Policy Supplement (“Policy”) as approved by

the Annual General Meeting held on 30 November 2020 and published on the Bank’s website. The Policy was implemented without making any

derogations and, or deviations from the procedure for the implementation of the Remuneration Policy as defined in Chapter 12 of the Capital

Markets Rules.

The total remuneration of each individual Director is detailed in the tables below. The Non-Executive Directors only receive fixed fees per meeting

for their participation at Board and Committee level. Consequently, the percentage split between fixed and variable should be taken as 100% vs

0%. The tables include remuneration received by the Bank’s Directors, the GCEOs (former and current) from the Bank. They did not receive any

remuneration from the Bank’s subsidiaries. The Deputy CEO, also included in the tables below in line with the requirement of Chapter 12 of the

Capital Markets Rules, received all his remuneration from London Forfaiting Company Ltd (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 30 and 31 and in the Review of Performance section within the Director’s Report. These

did not impact the total remuneration of Directors. The Group’s approach 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 while remaining aligned to the

Group’s long-term strategy, risk appetite, sustainable performance and corporate values.

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

contributions.

Name of director

Directors remuneration

Notes

2021

2020

* Difference

USD

John C. Grech 101,032 98,240 2.84

No change in fee structure. Difference due to number of sittings held in

2021

Masaud M.J. Hayat 17,000 20,512 (17.12)

No change in fee structure. Difference due to number of sittings held in

2021 and 2020

Abdel Karim A.S. Kabariti 17,667 1,835 140.69

Remuneration for 2020 is for part year in quarter 4 and was only in respect

to his membership on the Board of Directors. Annualized % increase is

mainly due to fees for new memberships on CGC and NRC in 2021

Claire Imam Thompson

38,333

Started receiving fees in March 2021

Edmond Brincat 47,333 46,569 1.64

Difference due to two changes in Committee membership in 2021 and

2020 respectively

Hussain Abdul Aziz Lalani 36,750 34,857 5.43

No change in fee structure. Difference due to number of sittings held in

2021 and 2020

Majed Essa Ahmed Al-Ajeel 25,750 21,117 21.94

No change in fee structure. Difference due to number of sittings held in

2021 and 2020

Mohamed Fekih Ahmed 27,000 28,344 (4.74)

No change in fee structure. Difference due to number of sittings held in

2021 and 2020

Osama Talat Al-Ghoussein

19,000

19,308

(1.60)

No change in fee structure

Rabih Soukarieh 23,000 26,067 (11.77)

No change in fee structure. Difference due to number of sittings held in

2021 and 2020

Rogers David LeBaron

63,000

63,043

(0.07)

No change in fee structure

‘ * ‘ Differences also include fluctuation in rate of exchange.

Name of director

Position

John C. Grech

Chairperson FIMBank BoD, Chairperson LFC BoD, Chairperson BRIC, Chairperson BCC, Vice Chairperson CGC,

Permanent Invitee NRC

Masaud M.J. Hayat

Vice Chairperson BoD, Chairperson NRC

Abdel Karim A.S. Kabariti

Member BoD, Member CGC, Member NRC

Claire Imam Thompson

Member BoD (independent member), Member BAC, Member BRC, Member CGC

Edmond Brincat

Member BoD (independent member), Chairperson BAC, Member NRC

Hussain Abdul Aziz Lalani

Member BoD, Chairperson BRC, Vice Chairperson BAC, Vice Chairperson BRIC, Member LFC BoD

Majed Essa Ahmed 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 David LeBaron

Member BoD, Member CGC, Member NRC, Permanent Invitee BAC

FIMBank Group Annual Report & Financial Statements 2021

Name of executive

Executive remuneration

Notes

2021

2020

* Difference

USD

Adrian A. Gostuski 634,882 412,029 15.56

Remuneration for 2020 is for his part year in his capacity as AGCEO. **

Increase in remuneration in 2021 is mainly due to variable remuneration

and salary review following his confirmation in the capacity of GCEO

Simon Lay 782,889 727,920 7.55

Increase in remuneration in 2021 is mainly due to a one-time long service

award and national insurance contributions

Murali Subramanian

696,705

‘ * ‘ Differences also include fluctuation in rate of exchange.

‘ ** ‘ Adrian A. Gostuski was appointed as AGCEO on 30 March 2020 and GCEO on 7 April 2021.

Name of executive

Position

Adrian A. Gostuski

GCEO FIMBank, Chairperson MCC, Member ALCO, Member ERPC, Member ITSC, Member ORMC,

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

Murali Subramanian ***

GCEO FIMBank; Chairperson EXCO, Chairperson MCC, Member ALCO, Member ORMC,

Chairperson Egypt Factors BoD, Chairperson India Factoring BoD, Member FBS BoD, Member Brasil Factors

BOD, Member FBS BOD

‘ *** ‘ The definite contract of Murali Subramanian expired on 5 August 2020.

The Executives received all remuneration from the Bank with the exception of Simon Lay whose remuneration is received from a subsidiary of the

Bank.

FIMBank performance

Performance indicators

2021

2020

* Difference

USD

Operating income/(loss) before net impairment

614,682

(132,615)

563.51

Loss for the period

(3,612,523)

(47,032,755)

92.32

Gross non-performing assets

148,726,146

226,803,023

34.42

Average remuneration on full-time equivalent basis of employee

2021

2020

* Difference

USD

Employees of the Company

76,206

69,573

9.53

Employees of the Group

73,137

64,944

12.62

‘ * ‘ Percentages in respect of FIMBank Performance between 2021 and 2020 are being shown as positive given that all denote improvements.

FIMBank Group Annual Report & Financial Statements 2021

Remuneration for executives for the 2021

Fixed remuneration

Variable remuneration

Name of

executive

Base

salary Fees

Fringe

benefits

One-year

variable

Multi-

year

variable

Extraordinary

items

Pension

expense

Total

remuneration

Proportion of

fixed and variable

remuneration

USD

Adrian A. Gostuski

377,283

144,336

113,263

634,882

82% - 18%

Simon Lay

491,830

- 82,466

120,189

- - 88,404 782,889

85% - 15%

‘ * ‘ This amount includes USD32,411 awarded to Simon Lay as a long term service award.

‘ ** ‘ This amount corresponds to EUR100,000 as awarded by the NRC. This amount is converted to GBP, the currency in which the Director receives

his remuneration and thereafter converted to the reporting currency (USD).

The remuneration of the Non-Executive Directors is the same as reported in the tabulation above and comprises fees only, except for the case of

the Chairman of the Board of Directors whose total emoluments for the 2021 comprise USD100,000 in fees and USD1,032 in fringe benefits.

The variable remuneration awarded to the Executives during the reporting year (performance bonus in respect of financial year 2020) reflects their

overall 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 100% of the

maximum awardable performance bonus to both the GCEO and the Deputy CEO. This in view of the GCEO’s extraordinary efforts to strategically

redirect the Group towards a more sustainable business model and Deputy CEO’s material contribution in ensuring that LFC remains a profit-

making entity for the Group also in 2020.

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.

Denotes membership of:

 FIMBank Board of Directors (BoD)

 Board Audit Committee (BAC)

 Board Credit Committee (BCC)

 Board Review and Implementation Committee (BRIC)

 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 Capital Markets Rule 12.26N, the External Auditors have checked that all information, as required in terms of Appendix 12.1 of

Chapter 12 of the Capital Markets Rules, has been included in the Directors’ Remuneration Report within this Remuneration Report.

FIMBank Group Annual Report & Financial Statements 2021

Statements of financial position

As at 31 December 2021

Group

Bank

2021

2020

2021

2020

Note

USD

Assets

Balances with the Central Bank of Malta,

treasury bills and cash

239,998,839

319,287,524

239,982,048

319,267,749

Derivative assets held for risk management

841,688

991,624

841,688

1,019,288

Trading assets

439,985,203

452,326,547

Loans and advances to banks

198,488,576

193,139,577

182,458,548

179,364,067

Loans and advances to customers

628,912,340

591,995,726

745,564,139

779,834,360

Financial assets at fair value through

profit or loss

19,966,163

20,385,323

19,966,163

20,385,323

Financial assets at fair value through

other comprehensive income

162,408,54 2

153,327,686

162,408,542

153,327,686

Investments at amortised cost

9,914,754

9,839,457

9,914,754

9,839,457

Investments in subsidiaries

159,448,858

147,436,214

Property and equipment

30,910,454

32,166,816

1,965,249

3,507,509

Investment property

17,223,820

Intangible assets and goodwill

9,376,595

9,698,335

3,774,315

4,008,725

Current tax assets

1,280,465

1,397,553

66,667

76,225

Deferred tax assets

24,920,527

25,875,734

16,336,538

15,590,955

Other assets

4,244,384

6,390,301

3,848,321

5,570,562

Total assets

1,788,472,350

1,834,046,023

1,546,575,830

1,639,228,120

Liabilities and equity

Liabilities

Derivative liabilities held for risk management

1,499,026

1,629,434

1,533,556

1,629,434

Amounts owed to banks

563,553,044

429,443,48 0

497,633,356

387,900,641

Amounts owed to customers

934,096,196

1,101,570,2 95

838,675,598

1,037,118,337

Debt securities in issue

45,345,575

50,832,661

Current tax liabilities

567,144

337,725

Deferred tax liabilities

4,215,075

Provision for liabilities and charges

356,722

275,889

201,775

173,051

Other liabilities

14,859,385

12,583,335

7,921,481

7,645,488

Total liabilities

1,564,492,1 67

1,600,887,894

1,345,965,766

1,434,466,951

Equity

Share capital

261,221,882

Share premium

858,885

Reserve for general banking risks

2,218,995

3,358,738

2,218,995

3,358,738

Currency translation reserve

(10,941,184)

(10,011,229)

Fair value reserve

9,879,740

13,367,626

(1,074,305)

2,413,581

Other reserve

2,982,435

2,681,041

Accumulated losses

(42,869,373)

(39,027,680)

(65,296,434)

(65,772,958)

Total equity attributable to equity holders of the Bank

223,351,380

232,750,65 7

200,610,064

204,761,169

Non-controlling interests

628,803

407,472

Total equity

223,980,183

233,158,129

200,610,064

204,761,169

Total liabilities and equity

1,788,472,350

1,834,046,023

1,546,575,830

1,639,228,120

FIMBank Group Annual Report & Financial Statements 2021

Statements of financial position

As at 31 December 2021

Group

Bank

2021

2020

2021

2020

Note

USD

Memorandum items

Contingent liabilities

1,950,534

1,910,418

39,327,362

44,246,902

Commitments

153,618,234

105,043,456

107,469,111

105,245,766

The official middle rate of exchange issued by the European Central Bank between US Dollar and Euro as at 31 December 2021 was 1.1326 (2020:

1.2271).

The Notes on pages 38 to 152 are an integral part of these Financial Statements.

The Financial Statements on pages 28 to 152 were approved and authorised for issue by the Board of Directors on 13 April 2022.

Signed by John C. Grech (Chairman) and Masaud M.J. Hayat (Vice Chairman) on 13 April 2022

FIMBank Group Annual Report & Financial Statements 2021

Statements of profit or loss

For the year ended 31 December 2021

Group

Bank

2021

2020

2021

2020

Note

USD

Interest income

37,472,230

42,210,926

19,588,232

22,721,724

Interest expense

(12,603,475)

(13,567,776)

(10,457,006)

(11,482,001)

Net interest income

24,868,755

28,643,150

9,131,226

11,239,723

Fee and commission income

15,899,548

14,256,769

4,940,843

5,366,867

Fee and commission expense

(5,061,985)

(5,287,088)

(2,165,538)

(2,552,278)

Net fee and commission income

10,837,563

8,969,681

2,775,305

2,814,589

Net trading results

2,502,426

(121,164)

(594,353)

(831,244)

Net gain from other financial instruments carried

at fair value

1,137,221

277,137

1,137,221

277,137

Dividend income

1,089,189

240,817

16,989,049

7,240,817

Losses on lease modifications

(27,037)

Other operating income

728,990

893,869

133,940

120,725

Other operating expenses

(128,908)

(128,906)

Operating income before net impairment

41,035,236

38,903,490

29,416,445

20,861,747

Net impairment charge on financial assets

(1,907,796)

(32,990,319)

(3,699,557)

(34,272,400)

Impairment of goodwill

(2,687,000)

Impairment of investments in subsidiaries

(87,356)

(9,314,000)

Operating income/(expense)

39,127,440

3,226,171

25,629,532

(22,724,653)

Administrative expenses

(37,085,595)

(35,610,076)

(23,213,366)

(23,722,803)

Depreciation and amortisation

27/29

(3,334,779)

(3,426,029)

(2,965,967)

(2,962,370)

Total operating expenses

(40,420,374)

(39,036,105)

(26,179,333)

(26,685,173)

Loss before tax

(1,292,934)

(35,809,93 4)

(549,801)

(49,409,826)

Taxation

(2,319,589)

(11,222,821)

(113,418)

(6,566,776)

Loss for the year

(3,612,523)

(47,032,755)

(663,219)

(55,976,602)

Loss attributable to:

Owners of the Bank

(3,840,703)

(46,898,575)

(663,219)

(55,976,602)

Non-controlling interests

228,180

(134,180)

(3,612,523)

(47,032,755)

(663,219)

(55,976,602)

Earnings per share

Basic loss per share (US cents)

(0.74)

(8.98)

(0.13)

(10.71)

The Notes on pages 38 to 152 are an integral part of these Financial Statements.

FIMBank Group Annual Report & Financial Statements 2021

Statements of other comprehensive income

For the year ended 31 December 2021

Group

Bank

2021

2020

2021

2020

USD

Loss for the year

(3,612,523)

(47,032,755)

(663,219)

(55,976,602)

Other comprehensive expense:

Items that will not be reclassified to profit or loss:

Movement in fair value reserve:

– Property and equipment - net change in fair value

(399,566)

Items that are or may be reclassified subsequently to

profit or loss:

Movement in translation reserve:

– Foreign operations - foreign currency translation differences

(1,677,971)

(2,878,066)

Movement in fair value reserve:

– Debt investments in fair value through other comprehensive

income - net change in fair value

(3,484,283)

3,784,630

(3,484,283)

3,784,630

– Debt investments in fair value through other comprehensive

income - reclassified to profit or loss

(749,186)

(1,308,075)

(749,186)

(1,308,075)

Related tax

745,583

(420,207)

745,583

(420,207)

(5,165,857)

(821,718)

(3,487,886)

2,056,348

Other comprehensive (expense)/income, net of tax

(5,565,42 3)

(821,718)

(3,487,886)

2,056,348

Total comprehensive expense

(9,177,946)

(47,854,473)

(4,151,105)

(53,920,254)

Total comprehensive expense attributable to:

Owners of the Bank

(9,399,277)

(47,767,412)

(4,151,105)

(53,920,254)

Non-controlling interests

221,331

(87,061)

(9,177,946)

(47,854,473)

(4,151,105)

(53,920,254)

FIMBank Group Annual Report & Financial Statements 2021

Statements of changes in equity

For the year ended 31 December 2021

Group

Attributable to equity holders of the Bank

capital

premium

Reserve for

general

banking risks

Currency

translation

reserve

Fair value

reserve

Other

reserve

Accumulated

loss

Total

Non-

controlling

interests

Total

equity

USD

Balance at 1 January 2021

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

Total comprehensive expense

Loss for the year

(3,840,703)

228,180

(3,612,523)

Other comprehensive expense:

Fair value reserve:

–

Debt investments at fair value through other

comprehensive income - net change

in fair value

(2,738,700)

– Debt investments at fair value through other

comprehensive income - reclassified

to profit or loss

(749,186)

– Property and equipment - net change in fair value

(399,566)

Translation reserve:

– Foreign operations - foreign translation difference

(1,671,122)

(6,849)

(1,677,971)

Total other comprehensive expense

(1,671,122)

(3,487,886)

(399,566)

(5,558,574)

(6,849)

(5,565,423)

Total comprehensive expense

(1,671,122)

(3,487,886)

(4,240,269)

(9,399,277)

221,331

(9,177,946)

Transfer between reserves

(1,139,743)

741,167

398,576

Balance at 31 December 2021

261,221,88 2

858,885

2,218,995

(10,941,184)

9,879,740

2,982,435

(42,869,373)

223,351,380

628,803

223,980,183

FIMBank Group Annual Report & Financial Statements 2021

Statements of changes in equity

For the year ended 31 December 2020

Group

Attributable to equity holders of the Bank

capital

premium

Reserve for

general

banking risks

Currency

translation

reserve

Fair value

reserve

Other

reserve

Retained

earnings/

(Accumulated

loss) Total

Non-

controlling

interests

Total

equity

USD

Balance at 1 January 2020

261,221,88 2

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 expense

Loss for the year

(46,898,575)

(134,180)

(47,032,755)

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)

Translation reserve:

– Foreign operations - foreign translation difference

(2,925,185)

47,119

(2,878,066)

Total other comprehensive expense

(2,925,185)

2,056,348

(868,837)

47,119

(821,718)

Total comprehensive expense

(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

261,221,88 2

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 2021

Statements of changes in equity

For the year ended 31 December 2021

Bank

capital

premium

Reserve for

general

banking risks

Fair value

reserve

Other

reserve

Accumulated

losses

Total

equity

USD

Balance at 1 January 2021

261,221,882

858,885

3,358,738

2,413,581

2,681,041

(65,772,958)

204,761,169

Total comprehensive expense

Loss for the year

(663,219)

Other comprehensive expense:

Fair value reserve:

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

(2,738,700)

– Debt investments at fair value through other comprehensive income - reclassified to profit or loss

(749,186)

Total other comprehensive expense

(3,487,886)

Total comprehensive expense

(3,487,886)

(663,219)

(4,151,105)

Transfer between reserves

(1,139,743)

1,139,743

Balance at 31 December 2021

261,221,882

858,885

2,218,995

(1,074,305)

2,681,041

(65,296,434)

200,610,064

FIMBank Group Annual Report & Financial Statements 2021

Statements of changes in equity

For the year ended 31 December 2020

Bank

capital

premium

Reserve for

general

banking risks

Fair value

reserve

Other

reserve

Accumulated

losses

Total

equity

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)

Other comprehensive income:

Fair value reserve:

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

3,364,423

– Debt investments at fair value through other comprehensive income - reclassified to profit or loss

(1,308,075)

Total other comprehensive income

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 2021

Statements of cash flows

For the year ended 31 December 2021

Group

Bank

2021

2020

2021

2020

USD

Cash flows from operating activities

Interest and commission receipts

55,525,226

67,872,276

28,973,357

25,609,316

Exchange received/(paid)

8,927,656

(12,300,696)

9,317,492

(11,405,644)

Interest and commission payments

(12,647,022)

(37,471,828)

(13,639,330)

(13,793,109)

Payments to employees and suppliers

(34,541,419)

(36,713,674)

(21,384,875)

(27,271,356)

Operating profit /(loss) before changes in operating

assets/liabilities 17,264,441 (18,613,92 2) 3,266,644 (26,860,793)

Decrease/(Increase) in operating assets:

– Trading assets

11,562,138

11,620,752

– Loans and advances to customers and banks

(49,314,586)

(117,922,078)

9,902,960

(132,591,160)

– Other assets

1,887,605

4,763,352

1,878,571

4,068,416

(Decrease)/Increase in operating liabilities:

– Amounts owed to customers and banks

(102,639,099)

204,687,776

(114,492,171)

216,340,869

– Other liabilities

(40,600)

(2,133,345)

(31,993)

(1,965,939)

– Net advances from subsidiary companies

(19,141,340)

3,250,217

Net cash (absorbed by)/generated from operating activities

before income tax

(121,280,101)

82,402,535

(118,617,329)

62,241,610

Income tax paid

(409,062)

(829,093)

(115,683)

(393,419)

Net cash flows (used in)/from operating activities

(121,689,1 63)

81,573,442

(118,733,012)

61,848,191

Cash flows from investing activities

Proceeds to acquire financial assets at fair value

through other comprehensive income

(74,874,050)

(109,616,706)

(74,874,050)

(109,616,706)

Payments to acquire shares in subsidiary companies

(1,801,829)

Payments to acquire property and equipment

(518,656)

(477,381)

(399,511)

(142,744)

Payments to acquire intangible assets

(779,861)

(393,096)

(779,881)

(393,096)

Proceeds on disposal of financial assets at fair value

through profit or loss

160,770

105,639,259

160,770

105,639,259

Proceeds on disposal of financial assets at fair value

through other comprehensive income 50,918,619 49,246,582 50,918,619 49,246,582

Proceeds on disposal of property and equipment

9,751

328

9,751

Receipt of dividend

1,089,189

240,817

4,889,049

240,817

Net cash flows (used in)/from investing activities

(23,994,238)

44,639,803

(20,075,253)

43,172,283

(Decrease)/Increase in cash and cash equivalents c/f

(145,683,401)

126,213,245

(138,808,265)

105,020,474

FIMBank Group Annual Report & Financial Statements 2021

Statements of cash flows

For the year ended 31 December 2021

Group

Bank

2021

2020

2021

2020

USD

(Decrease)/Increase in cash and cash equivalents b/f

(145,683,401)

126,213,245

(138,808,265)

105,020,474

Cash flows from financing activities

– Net movement in debt securities

(5,490,217)

(28,492,240)

– Payment of lease liabilities

(1,139,127)

(967,167)

(1,787,096)

(997,729)

Net cash flows used in financing activities

(6,629,344)

(29,459,40 7)

(1,787,096)

(997,729)

(Decrease)/Increase in cash and cash equivalents

(152,312,745)

96,753,838

(140,595,361)

104,022,745

Analysed as follows:

– Effect of exchange rate changes on cash and cash equivalents

(24,586,990)

27,958,339

(26,036,980)

29,536,105

– Net (decrease)/increase in cash and cash equivalents

(127,725,75 5)

68,795,499

(114,558,381)

74,486,640

(Decrease)/Increase in cash and cash equivalents

(152,312,745)

96,753,838

(140,595,361)

104,022,745

Cash and cash equivalents at beginning of year

241,923,849

145,170,011

267,909,686

163,886,941

Cash and cash equivalents at end of year

89,611,104

241,923,849

127,314,325

267,909,686

FIMBank Group Annual Report & Financial Statements 2021

Notes to the financial statements

For the year ended 31 December 2021

Reporting entity

Financial assets at fair value through

Basis of preparation

other comprehensive income

Significant accounting policies

Investments at amortised cost

Changes in accounting policies

Investments in subsidiaries

Financial risk review

Property and equipment

Fair values of financial instruments

Investment property

Classification of financial assets and liabilities

Intangible assets and goodwill

Operating segments

Deferred taxation

Net interest income

Other assets

Net fee and commission income

Amounts owed to banks

Net trading results

Amounts owed to customers

Net gain from other financial instruments

Debt securities in issue

carried at fair value

Provision for liabilities and charges

Dividend income

Other liabilities

Other operating income

Equity

Administrative expenses

Non-controlling interest

Taxation

Contingent liabilities

Earnings per share

Commitments

Balances with the Central Bank of Malta,

Cash and cash equivalents

treasury bills and cash

Leases

Derivatives held for risk management

Related parties

Trading assets

Capital commitments

Loans and advances to banks

Financial commitments

Loans and advances to customers

Subsequent events

Financial assets at fair value through profit or loss

Ultimate parent company

FIMBank Group Annual Report & Financial Statements 2021

Notes to the financial statements

For the year ended 31 December 2021

Reporting entity

FIMBank p.l.c. (the “Bank”) is a company domiciled in Malta. The address of the Bank’s registered office is Mercury Tower, The

Exchange Financial and Business Centre, Elia Zammit Street, St. Julian’s STJ 3155, Malta. The Financial Statements of the Bank as at

and for the year ended 31 December 2021 comprise the Bank and its subsidiaries (together referred to as the “Group” and individually

as “Group entities”).

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 Organisation declared that the novel Coronavirus (“COVID-19”) could be characterized as a

pandemic. The impact of the outbreak was widespread across the globe and has distressed many countries including those markets

where the Group operates. The circumstances have forced 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 had an impact across all industries.

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 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 32-63-1186, issued by the

European Securities and Markets Authority on 29 October 2021, 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 13 April 2022.

FIMBank Group Annual Report & Financial Statements 2021

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”), which is the Bank’s functional currency.

In preparing these consolidated financial statements, management has made judgements, estimates and assumptions that affect the

application of the Group’s 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 estimates are recognised prospectively.

In preparing these Financial Statements, the significant judgments made by management in applying the Group’s 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 Solely Payments of Principle and Interest (“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 Losses (“ECL”) 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 2021 is set out below in relation to the impairment of financial instruments and in the following Notes in relation

to other areas:

 Accounting Policy 3.10.8 – impairment of financial instruments: key assumptions used in estimating recoverable cash flows;

 Note 2.4.2.1 – determination of the fair value of financial instruments with significant unobservable inputs;

 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 2021

A number of the Group’s 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

the Group’s Chief Financial Officer and 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

Group’s Assets Liabilities Committee and all valuations of financial instruments are reported to the Committee for review and approval.

Significant valuation issues are reported to the Group’s Board Audit 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 effect on the instrument’s valuation. This category also

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 2021

Significant accounting policies

The Group has consistently applied the following Accounting Policies to all periods presented in these Consolidated Financial

Statements, except as mentioned otherwise (Refer to Note 4).

The Group accounts for business combinations using the acquisition method when the acquired set of activities and assets meets the

definition of a business and 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 assets and activities

acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability to produce outputs.

The Group has an option to apply a ‘concentration test’ that permits a simplified assessment of 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 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 or loss.

Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that

meets the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within

equity. Otherwise, other contingent consideration is remeasured 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’s employees

(acquiree’s awards), then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration

transferred in the business combination. This determination is based on the market-based measure of the replacement awards

compared with the market-based measure of the acquiree’s awards and the extent to which the replacement awards relate to pre-

combination service.

Subsidiaries are entities controlled by the Group. The Group ‘controls’ an entity if it is exposed to, or has rights to, variable returns from

its involvement with the entity and has the ability to affect those returns through its power over the entity. 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 on which control

commences until the date on which control ceases.

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 Statements include the Group’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 2021

Non-controlling interests are measured initially at their proportionate share of the acquiree’s identifiable net assets at the date of

acquisition. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

A discontinued operation is a component of the Group’s business, the operations and cash flows of which can be clearly distinguished

from the rest of the Group and which:

1. represents a separate major line of business or geographic areas of operations;

2. is part of a single co-ordinated plan to dispose of a separate major line of business or geographic area of operations; or

3. 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 transactions, and any unrealised income and expenses (except for foreign currency transaction gains or losses)

arising from intra-group transactions, are eliminated. 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 fair value when control is lost.

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 2021

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.

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 2021

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

 interest on financial assets and financial liabilities measured at amortised cost;

 interest on debt instruments measured at fair value through other comprehensive income;

 negative interest on financial liabilities measured at amortised cost; and

 interest income on other financial assets at fair value through profit or loss.

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;

 interest expense on lease liabilities; and

 interest expense on other financial liabilities at fair value through profit or loss.

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.

If a loan commitment is not expected to result in the draw-down of a loan, then the related loan commitment fee is recognised on a

straight-line basis over the commitment period.

Other fees and commission income, including account servicing fees, sales commission, placement fees and syndication fees, are

recognised as the related services are performed.

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.

FIMBank Group Annual Report & Financial Statements 2021

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 cannot be readily determined, the Group’s incremental borrowing

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 or rate, if there is a change in the Group’s estimate of the amount expected to be

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-use assets in ‘property and equipment’ and lease liabilities in ‘other liabilities’ in the 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 2021

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.

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 expenses in ‘other expenses’.

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 2021

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. The fair value of a financial instrument at initial recognition is generally its

transaction price.

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

management’s strategy focuses on earning contractual interest revenue, maintaining a particular interest rate profile, matching 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;

 how the performance of the portfolio is evaluated and reported to the Group’s management;

 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 part of an overall assessment of how the Group’s

stated 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 2021

For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is 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;

 terms that limit the Group’s claim to cash flows from specified assets (e.g. 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-term fixed-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 collateral of the borrower limit the Group’s claim to cash flows of the

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;

 the Group’s risk of loss on the asset relative to a full-recourse loan;

 the extent to which the collateral represents all or a substantial portion of the borrower’s assets; and

 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 2021

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 2021

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

similar transactions such as in the Group’s trading activity.

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 2021

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.

If an asset or a liability measured at fair value has a bid price and an ask price, then the Group measures assets and long positions at a

bid price and liabilities and short positions at an ask price.

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

understood definition of ‘investment grade’.

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 financial instruments’.

FIMBank Group Annual Report & Financial Statements 2021

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-impaired are referred to as ‘Stage 2 financial instruments’.

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-impaired are referred to as ‘Stage 3 financial

instruments’.

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.

When discounting future cash flows, the following discount rates are used:

 financial assets other than purchased or originated credit-impaired (POCI) financial assets and lease receivables: the original

effective interest rate or an approximation thereof;

 POCI assets: a credit-adjusted effective interest rate;

 lease receivables: the discount rate used in measuring the lease receivable;

 undrawn loan commitments: the effective interest rate, or an approximation thereof, that will be applied to the financial asset

resulting from the loan commitment; and

 financial guarantee contracts issued: the rate that reflects the current market assessment of the time value of money and the risks

that are specific to the cash flows.

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.

In measuring expected credit losses (“ECL”), the Group relies on risk and economic data and modelling techniques provided by Moody’s

Analytics – 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, Omicron outbreak of COVID-19, vaccine efficacy;

 financial market conditions, geopolitical tensions, debt sustainability, pace of domestic recovery, fiscal stimulus;

 oil prices, interest rates, unemployment rates, GDP rates, global demand, supply chain disruptions, shortages and delays, surging

energy costs; and

 business bankruptcies, consumer and business confidence, stock, money and bond market sentiment, tourism and business travel.

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.

FIMBank Group Annual Report & Financial Statements 2021

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-impaired (referred to as ‘Stage 3 financial assets’). A financial asset is ‘credit-

impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have

occurred.

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 loan that has been renegotiated due to a deterioration in the borrower’s condition is usually considered to be credit-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.

POCI financial assets are assets that are credit-impaired on initial recognition. For POCI assets, lifetime ECL are incorporated into the

calculation of the effective interest rate on initial recognition. Consequently, POCI assets do not carry an impairment allowance on

initial recognition. The amount recognised as a loss allowance subsequent to initial recognition is equal to the changes in lifetime ECL

since initial recognition of the asset.

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-off are included in ‘net impairment charge on financial assets’ 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’s

procedures for 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.

FIMBank Group Annual Report & Financial Statements 2021

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.

Cash and cash equivalents include notes and coins on hand, unrestricted balances held with central banks and highly liquid financial

assets with original maturities of three months or less from the date of acquisition that are subject to an insignificant risk of changes in

their fair value, and are used by the Group in the management of its short-term commitments.

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 2021

The loans and advances to banks caption in the 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.

Loans and advances to customers caption in the 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,

and the underlying asset is not recognised in the Group’s financial statements.

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 2021

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

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 and equipment have different useful lives, then they are accounted for as separate items

(major components) of property and equipment.

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 if it is probable that the future economic benefits associated with 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.

FIMBank Group Annual Report & Financial Statements 2021

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.

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.

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.

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.

1. 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.

2. 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.

3. 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.

FIMBank Group Annual Report & Financial Statements 2021

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.

At each reporting date, the Group reviews the carrying amount of its non-financial assets, other than deferred tax assets and investment

property, to determine whether there is any indication of impairment. If any such indication exists then the asset’s 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 assets (the

“cash-generating unit” or “CGU”). Goodwill arising 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.

The Group’s corporate assets, 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

asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation,

if no impairment loss had been recognised.

Deposits, debt securities in issue and subordinated liabilities are the Group’s sources of debt funding.

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 continues

to be recognised in the Group’s financial statements.

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.

FIMBank Group Annual Report & Financial Statements 2021

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.

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.

FIMBank Group Annual Report & Financial Statements 2021

The grant date fair value of equity-settled share-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.

For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to

reflect such conditions and there is no true-up for differences between expected and actual outcomes.

The fair value of the amount payable to employees in respect of SARs, which are settled in cash, is recognised as an expense with a

corresponding increase in liabilities, over the period during which the employees become unconditionally entitled to payment. The

liability is remeasured at each reporting date and at settlement date based on the fair value of the SARs. Any changes in the liability

are recognised as personnel expenses in profit or loss

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 2021, 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

expenses, including revenues and expenses that relate to transactions with any of the Group’s other components, whose operating

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.

FIMBank Group Annual Report & Financial Statements 2021

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 Financial Statements.

The following amended standards are not expected to have a significant impact on the Group’s Financial Statements:

 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 12 – deferred tax related to assets and liabilities arising from a single transaction;

 amendments to IAS 16 – property, plant and equipment: proceeds before intended use;

 amendments to IAS 37 – onerous contracts – cost of fulfilling a contract;

 amendments to IFRS 3 – reference to conceptual framework;

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

 amendments to IFRS 17 – insurance contracts; and

 annual improvements to IFRS Standards 2018-2020.

Changes in accounting policies

Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) (the “Phase 2 amendments”)

became effective on 1 January 2021. While the amendments to IAS 39, IFRS 4 and IFRS 16 did not impact the Group, the amendments

to IFRS 9 has provided certain reliefs which the Group has applied on its transition to the IBOR Reform. The reliefs allow an entity, when

changing the basis for determining contractual cash flows for financial assets and liabilities that are necessary as a direct consequence

of IBOR Reform and which are considered economically equivalent, to not account for an immediate gain or loss in the income

statement, but instead to adjust the effective interest rate of the instruments. The Group has applied the practical expedient for the

‘Phase 2 amendments’ offered under IFRS9 on its contract modifications as a result of the IBOR Reform.

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

Financial risk review

This Note presents information about the Group’s exposure to financial risks, the Group’s objectives, policies and processes for

measuring and managing risk, and the Group’s management of capital.

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

a. credit risk:

 default risk;

 concentration risk;

 counterparty credit risk;

 settlement risk; and

 foreign exchange lending risk;

b. liquidity risk;

c. market risk:

 foreign exchange risk;

 interest rate risk in the banking book;

 position risk in the traded debt instruments; and

 price risk;

d. operational risk; and

e. reputational and conduct risk.

FIMBank Group Annual Report & Financial Statements 2021

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

normal course of both the Bank’s and the Group’s business. As the Group is mainly engaged in trade finance business, control over

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 of the

Group’s risk management strategy, systems and policies. The scope of the Committee’s responsibility covers the Bank and 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 Board Audit 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.

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 Group’s credit risk management practises adopted in the previous reporting period, in response to the COVID -19 pandemic

persisted during the year of review, with a more cautious approach maintained when measuring ECL. The Group’s assumption in

determining whether the credit risk of a financial instrument has increased 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.

FIMBank Group Annual Report & Financial Statements 2021

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 is

entrusted to the BCC which is responsible for overseeing adherence to the Group’s credit policy and for approving individual limits for

banks and corporates. The BCC has also delegated some credit approval authorities, up to limited amounts, to members of

management of the Bank and to risk committees set up at the subsidiaries. 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- balance sheet exposures are approved after a thorough review of the counterparties’ creditworthiness. Whilst any

external rating of the counterparty by established Credit Rating Agencies is taken into account, an internal rating is given to each obligor

and credit support provider. The Group has access to a host of analytical aids, including Moody’s CreditLens, which is used to assign

internal credit ratings. Whilst the credit review process makes use of the Moody’s tool, which is used to assess customers’ financial

statements and other qualitative data, 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 2021

Group – 31 December 2021

2021

12-month PD

ranges

Stage 1

Stage 2

Stage 3

Total

USD

Balances with the Central Bank of Malta,

treasury bills and cash

Grades 1 to 4- low risk

Grades 5+ to 5- fair risk

0.06% - 0.2%

0.26% - 0.26%

223,146,495

16,971,941

223,146,495

16,971,941

240,118,436

Loss allowance

(119,597)

Carrying amount

239,998,839

Loans and advances to banks

Grades 1 to 4- low risk

0.17% - 0.72%

111,995,895

Grades 5+ to 5- fair risk

0.92% - 3.55%

6,611,439

Grades 6+ to 7 substandard

1.27% - 9.23%

78,180,723

2,086,670

80,267,393

196,788,057

2,086,670

198,874,727

Loss allowance

(363,708)

(22,443)

(386,151)

Carrying amount

196,424,349

2,064,227

198,488,576

Loans and advances to customers

Grades 1 to 4- low risk

0.03% - 0.71%

26,462,373

7,434,690

33,897,063

Grades 5+ to 5- fair risk

0.2% - 1.67%

146,280,818

22,137,848

168,418,666

Grades 6+ to 7 substandard

0.35% - 7.39%

223,231,799

97,784,507

321,016,306

Grade 7- to 8- doubtful

2.07% - 100%

626,142

47,403,330

2,356,861

50,386,333

Grade 9 to 10 loss

100%

35,656

137,943,170

137,978,826

396,601,132

174,796,031

140,300,031

711,697,194

Loss allowance

(1,267,844)

(2,740,295)

(78,776,715)

(82,784,854)

Carrying amount

395,333,288

172,055,736

61,523,316

628,912,340

Financial assets at fair value through

other comprehensive income

Grades 1 to 4- low risk

0.02% - 0.23%

164,896,615

Carrying amount at cost

164,896,615

Carrying amount at fair value

162,408,542

Loss allowance

(82,065)

Investments at amortised cost

Grades 1 to 4- low risk

0.99%

9,972,376

Loss allowance

(57,622)

Carrying amount

9,914,754

Contingent liabilities

Grades 1 to 4- low risk

0.38% - 0.6%

100,294

Grades 5+ to 5- fair risk

0.2% - 2.38%

70,855

61,015

131,870

Grades 6+ to 7 substandard

0.54% - 4.44%

1,152,054

Grade 9 to 10 loss

100%

566,316

Carrying amount

1,323,203

61,015

566,316

1,950,534

Loss allowance

(823)

(161,243)

(162,066)

Commitments

Grades 1 to 4- low risk

0.06% - 0.6%

38,795,787

Grades 5+ to 5- fair risk

0.2% - 1.67%

44,960,903

Grades 6+ to 7 substandard

0.55% - 9.75%

69,390,613

470,931

69,861,544

Carrying amount

153,147,303

470,931

153,618,234

Loss allowance

(94,841)

(2,421)

(97,262)

FIMBank Group Annual Report & Financial Statements 2021

Group – 31 December 2020

2020

12-month PD

ranges

Stage 1

Stage 2

Stage 3

Total

USD

Balances with the Central Bank of Malta,

treasury bills and cash

Grades 1 to 4- low risk

0.08% - 0.51%

307,168,780

12,271,444

319,440,224

307,168,780

12,271,444

319,440,224

Loss allowance

(131,651)

(21,049)

(152,700)

Carrying amount

307,037,129

12,250,395

319,287,524

Loans and advances to banks

Grades 1 to 4- low risk

0.17% - 1.85%

109,041,004

Grades 5+ to 5- fair risk

1.20% - 3.71%

4,701,296

583

4,701,879

Grades 6+ to 7 substandard

2.18% - 12.71%

70,572,317

2,623,574

73,195,891

Grade 9 to 10 loss

100%

10,192,358

184,314,617

2,624,157

10,192,358

197,131,132

Loss allowance

(775,489)

(75,487)

(3,140,579)

(3,991,555)

Carrying amount

183,539,128

2,548,670

7,051,779

193,139,577

Loans and advances to customers

Grades 1 to 4- low risk

0.05% - 0.80%

14,320,509

8,418,899

22,739,408

Grades 5+ to 5- fair risk

0.27% - 2.38%

116,289,685

22,669,330

138,959,015

Grades 6+ to 7 substandard

1.00% - 28.01%

167,842,212

138,235,845

306,078,057

Grade 7- to 8- doubtful

7.43% - 43.25%

29,097,910

Grade 9 to 10 loss

100%

196,700,238

298,452,406

198,421,984

196,700,238

693,574,628

Loss allowance

(2,069,713)

(3,618,347)

(95,890,842)

(101,578,902)

Carrying amount

296,382,693

194,803,637

100,809,396

591,995,726

Financial assets at fair value through

other comprehensive income

Grades 1 to 4- low risk

0.02% - 0.51%

147,700,809

Carrying amount at cost

147,700,809

Carrying amount at fair value

153,327,686

Loss allowance

(71,827)

Investments at amortised cost

Grades 1 to 4- low risk

1.35%

9,910,131

Loss allowance

(70,674)

Carrying amount

9,839,457

Contingent liabilities

Grades 1 to 4- low risk

0.21% - 0.34%

418,921

Grades 5+ to 5- fair risk

0.28% - 3.05%

444,468

Grades 6+ to 7 substandard

1.78% - 14.4%

1,047,029

Carrying amount

1,910,418

Loss allowance

(9,611)

Commitments

Grades 1 to 4- low risk

0.04% - 0.23%

8,156,224

Grades 5+ to 5- fair risk

0.27% - 1.58%

48,548,128

Grades 6+ to 7 substandard

1.10% - 28.10%

44,800,227

3,538,877

48,339,104

Carrying amount

101,504,579

3,538,877

105,043,456

Loss allowance

(14,808)

(153,176)

(167,984)

FIMBank Group Annual Report & Financial Statements 2021

Bank – 31 December 2021

2021

12-month PD

ranges

Stage 1

Stage 2

Stage 3

Total

USD

Balances with the Central Bank of Malta,

treasury bills and cash

Grades 1 to 4- low risk

0.06% - 0.2%

223,129,704

Grades 5+ to 5- fair risk

0.26% - 0.26%

16,971,941

240,101,645

Loss allowance

(119,597)

Carrying amount

239,982,048

Loans and advances to banks

Grades 1 to 4- low risk

0.17% - 0.63%

110,813,293

Grades 6+ to 7 substandard

1.27% - 9.23%

70,214,711

1,798,907

72,013,618

181,028,004

1,798,907

182,826,911

Loss allowance

(345,928)

(22,435)

(368,363)

Carrying amount

180,682,076

1,776,472

182,458,548

Loans and advances to customers

Grades 1 to 4- low risk

0.04% - 0.71%

355,864,012

Grades 5+ to 5- fair risk

0.2% - 1.42%

105,212,988

16,868,547

122,081,535

Grades 6+ to 7 substandard

0.35% - 7.39%

152,994,192

57,893,853

210,888,045

Grade 7- to 8- doubtful

2.07% - 30.46%

7,149,724

Grade 9 to 10 loss

100%

35,656

118,502,153

118,537,809

614,071,192

81,947,780

118,502,153

814,521,125

Loss allowance

(1,663,749)

(2,051,951)

(65,241,286)

(68,956,986)

Carrying amount

612,407,443

79,895,829

53,260,867

745,564,139

Financial assets at fair value through

other comprehensive income

Grades 1 to 4- low risk

0.02% - 0.23%

164,896,615

Carrying amount at cost

164,896,615

Carrying amount at fair value

162,408,542

Loss allowance

(82,065)

Investments at amortised cost

Grades 1 to 4- low risk

0.99%

9,972,376

Loss allowance

(57,622)

Carrying amount

9,914,754

Contingent liabilities

Grades 1 to 4- low risk

0.38% - 0.6%

37,895,938

Grades 5+ to 5- fair risk

0.2% - 2.38%

70,854

61,015

131,869

Grades 6+ to 7 substandard

0.54% - 4.44%

733,239

Grade 9 to 10 loss

100%

566,316

Carrying amount

38,700,031

61,015

566,316

39,327,362

Loss allowance

(752)

(161,243)

(161,995)

Commitments

Grades 1 to 4- low risk

0.06% - 0.6%

19,960,002

Grades 5+ to 5- fair risk

0.2% - 1.67%

34,662,969

Grades 6+ to 7 substandard

0.55% - 9.75%

52,375,209

470,931

52,846,140

Carrying amount

106,998,180

470,931

107,469,111

Loss allowance

(37,358)

(2,422)

(39,780)

FIMBank Group Annual Report & Financial Statements 2021

Bank – 31 December 2020

2020

12-month PD

ranges

Stage 1

Stage 2

Stage 3

Total

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

307,149,005

12,271,444

319,420,449

Loss allowance

(131,651)

(21,049)

(152,700)

Carrying amount

307,017,354

12,250,395

319,267,749

Loans and advances to banks

Grades 1 to 4- low risk

0.17% - 0.7%

101,823,439

Grades 6+ to 7 substandard

2.18% - 12.37%

68,841,826

2,423,043

71,264,869

Grade 9 to 10 loss

100%

10,192,358

170,665,265

2,423,043

10,192,358

183,280,666

Loss allowance

(704,578)

(71,442)

(3,140,579)

(3,916,599)

Carrying amount

169,960,687

2,351,601

7,051,779

179,364,067

Loans and advances to customers

Grades 1 to 4- low risk

0.05% - 0.8%

6,213,969

498

6,214,467

Grades 5+ to 5- fair risk

0.27% - 2.24%

388,936,722

22,669,330

411,606,052

Grades 6+ to 7 substandard

1.16% - 27.59%

184,578,519

83,770,273

268,348,792

Grade 7- to 8- doubtful

7.43% - 43.25%

7,396,380

Grade 9 to 10 loss

100%

164,144,690

579,729,210

113,836,481

164,144,690

857,710,381

Loss allowance

(1,866,268)

(2,328,744)

(73,681,009)

(77,876,021)

Carrying amount

577,862,942

111,507,737

90,463,681

779,834,360

Financial assets at fair value through

other comprehensive income

Grades 1 to 4- low risk

0.02% - 0.51%

147,700,809

Carrying amount at cost

147,700,809

Carrying amount at fair value

153,327,686

Loss allowance

(71,827)

Investments at amortised cost

Grades 1 to 4- low risk

1.35%

9,910,131

Loss allowance

(70,674)

Carrying amount

9,839,457

Contingent liabilities

Grades 1 to 4- low risk

0.21% - 0.34%

418,921

Grades 5+ to 5- fair risk

0.28% - 3.05%

43,193,696

Grades 6+ to 7 substandard

1.78% - 14.4%

634,285

Carrying amount

44,246,902

Loss allowance

(5,067)

Commitments

Grades 1 to 4- low risk

0.17% - 0.23%

9,720,642

Grades 5+ to 5- fair risk

0.27% - 1.58%

58,717,340

Grades 6+ to 7 substandard

1.1% - 28.1%

33,268,907

3,538,877

36,807,784

Carrying amount

101,706,889

3,538,877

105,245,766

Loss allowance

(14,809)

(153,175)

(167,984)

FIMBank Group Annual Report & Financial Statements 2021

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

Group – 31 December 2021

2021

Stage 1

Stage 2

Stage 3

Total

USD

Loans and advances to banks

Current

196,788,057

2,063,270

198,851,327

Overdue < 30 days

23,400

Overdue > 30 days

Total

196,788,057

2,086,670

198,874,727

Loans and advances to customers

Current

357,154,217

150,204,216

507,358,433

Overdue < 30 days

39,446,915

15,646,321

55,093,236

Overdue > 30 days

8,945,494

140,300,031

149,245,525

Total

396,601,132

174,796,031

140,300,031

711,697,194

Group – 31 December 2020

2020

Stage 1

Stage 2

Stage 3

Total

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

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

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

Bank – 31 December 2021

2021

Stage 1

Stage 2

Stage 3

Total

USD

Loans and advances to banks

Current

181,028,006

1,775,507

182,803,513

Overdue < 30 days

23,400

Overdue > 30 days

Total

181,028,006

1,798,907

182,826,913

Loans and advances to customers

Current

584,475,445

65,703,700

650,179,145

Overdue < 30 days

29,595,747

15,082,474

44,678,221

Overdue > 30 days

1,161,606

118,502,153

119,663,759

Total

614,071,192

81,947,780

118,502,153

814,521,125

FIMBank Group Annual Report & Financial Statements 2021

Bank – 31 December 2020

2020

Stage 1

Stage 2

Stage 3

Total

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

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

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

In 2021, there were no overdue balances for ‘balances with the Central Bank of Malta and treasury bills’, ‘financial assets at fair value

through other comprehensive income’ and ‘investments at amortised cost’ (2020: Nil).

The following table sets out information about the credit quality of ‘trading assets’. The analysis has been based on Moody’s and Fitch

ratings.

Group

2021

2020

USD

Trading assets

Rated AAA

Rated AA- to AA+

4,312,015

Rated A- to A+

244,584

1,300,437

Rated BBB+ below

234,848,775

255,103,459

Unrated

204,891,844

191,610,636

Carrying amount

439,985,203

452,326,547

Loans with renegotiated terms are loans that have been restructured due to deterioration in the borrower’s financial position and where

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

in the Group’s forbearance policy which is in line with the EBA/GL/2018/06 Guidelines on management on non-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 asset’s credit risk has increased significantly reflects comparison of:

 its remaining lifetime ‘Probability of Default’ (“PD”) at the reporting date based on the modified terms; with

 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 2021

The Group renegotiates loans to customers in financial difficulties (referred to as ‘forbearance activities’) to maximise collection

opportunities and minimise the risk of default. Under the Group’s forbearance policy, loan forbearance is granted on a selective 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 Statements, ‘loans with renegotiated terms’ are defined as loans that have been

restructured due to a deterioration in the borrower’s financial position, for which the Group has made concessions by agreeing to terms

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

For financial assets modified as part of the Group’s forbearance policy, the estimate of PD reflects whether the modification has

improved or restored the Group’s ability to collect interest and principal and the Group’s previous experience of similar forbearance

action. As part of this process, the Group evaluates the borrower’s payment performance against the modified contractual terms 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 2021 and 2020 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.

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 such moratorium schemes to the Group’s facilities should 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 USD20,167,453 (2020:

USD27,715,364), of which USD4,330,159 are performing (2020: USD3,225,698), whilst USD15,837,294 (2020: USD24,489,666) are non-

performing with an extendible collateral value of USD1,979,638 (2020: USD234,923). Interest income recognised during 2021 in respect

to renegotiated and forborne assets amounts to USD854,315 (2020: USD896,923).

For the Bank, the aggregate amount of renegotiated and forborne loans at reporting date amounted to USD15,517,797 (2020:

USD13,957,686), of which USD1,948,525 (2020: USD nil) are performing, whilst USD13,569,272 (2020: USD13,957,686) are non-

performing with an extendible collateral value of USD1,964,585 (2020: USD234,923). Interest income recognised during 2021 in respect

to renegotiated and forborne assets amounts to USD396,968 (2020: USD195,283).

FIMBank Group Annual Report & Financial Statements 2021

Movement in forbearance activity during the year is as follows:

Group – 31 December 2021

2021

Stage 2

Stage 3

Total

USD

At 1 January

3,225,698

24,489,666

27,715,364

Additions

2,342,499

3,728,355

6,070,854

Recovered

(1,238,038)

(12,596,111)

(13,834,149)

Written-off

215,384

Reclassified

At 31 December

4,330,159

15,837,294

20,167,453

Group – 31 December 2020

2020

Stage 2

Stage 3

Total

USD

At 1 January

4,095,780

26,318,611

30,414,391

Additions

2,776,034

4,263,248

7,039,282

Recovered

(2,610,299)

(215,003)

(2,825,302)

Written-off

(6,913,007)

Reclassified

(1,035,817)

1,035,817

At 31 December

3,225,698

24,489,666

27,715,364

Bank – 31 December 2021

2021

Stage 2

Stage 3

Total

USD

At 1 January

13,957,686

Additions

1,948,525

2,972,186

4,920,711

Recovered

(3,360,600)

Written off

Reclassified

At 31 December

1,948,525

13,569,272

15,517,797

Bank – 31 December 2020

2020

Stage 2

Stage 3

Total

USD

At 1 January

1,634,801

20,180,830

21,815,631

Additions

904,866

Recovered

(1,634,801)

(215,003)

(1,849,804)

Written off

(6,913,007)

Reclassified

At 31 December

13,957,686

FIMBank Group Annual Report & Financial Statements 2021

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

 probability of default (“PD”);

 loss given default (“LGD”); and

 exposure at default (“EAD”).

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.

The methodology of estimating PDs is discussed below under the heading ‘generating the term structure of PD’.

LGD is the magnitude of the likely loss if there is a default. The Group uses LGD rates derived from Moody’s data for the credit 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 considering

the risk of default over the maximum contractual period (including any borrower’s extension options) over which it 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 modelling techniques provided by Moody’s

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.

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

FIMBank Group Annual Report & Financial Statements 2021

Group – 31 December 2021

2021

Stage 1

Stage 2

Stage 3

Total

USD

Balances with Central Bank of Malta, treasury bills

and cash

Balance at 1 January

131,651

21,049

152,700

Net remeasurement of loss allowance

(25,242)

New financial assets originated or purchased

19,318

Financial assets that have been derecognised

(6,130)

(21,049)

(27,179)

Balance at 31 December

119,597

Loans and advances to banks

Balance at 1 January

775,489

75,487

3,140,579

3,991,555

Transfer to Stage 1

166

(166)

Net remeasurement of loss allowance

(70,359)

(53,941)

(124,300)

New financial assets originated or purchased

263,977

1,063

265,040

Financial assets that have been derecognised

(605,269)

(1,349,148)

(1,954,417)

Interest and fee in suspense

(1,728,518)

Foreign exchange and other movements

(296)

(62,913)

(63,209)

Balance at 31 December

363,708

22,443

386,151

Loans and advances to customers

Balance at 1 January

2,069,713

3,618,347

95,890,842

101,578,902

Transfer to Stage 1

34,852

(34,852)

Transfer to Stage 2

(4,348)

4,348

Transfer to Stage 3

(88,319)

88,319

Net remeasurement of loss allowance

(621,888)

(583,301)

4,253,102

3,047,913

New financial assets originated or purchased

186,900

263,390

450,290

Financial assets that have been derecognised

(394,698)

(438,004)

2,457,793

1,625,091

Write-offs

(21,313,112)

Interest and fee in suspense

(4,629,946)

Foreign exchange and other movements

(2,687)

(1,314)

2,029,717

2,025,716

Balance at 31 December

1,267,844

2,740,295

78,776,715

82,784,854

Financial assets at fair value through other

comprehensive income

Balance at 1 January

71,827

Net remeasurement of loss allowance

(8,849)

New financial assets originated or purchased

34,115

Financial assets that have been derecognised

(15,028)

Balance at 31 December

82,065

Investments at amortised cost

Balance at 1 January

70,674

Net remeasurement of loss allowance

(13,052)

Balance at 31 December

57,622

Contingent liabilities

Balance at 1 January

9,611

Net remeasurement of loss allowance

(1,226)

New financial assets originated or purchased

212

161,243

161,455

Financial assets that have been derecognised

(7,774)

Balance at 31 December

823

161,243

162,066

Commitments

Balance at 1 January

14,808

153,176

167,984

Net remeasurement of loss allowance

(6,885)

New financial assets originated or purchased

94,840

2,421

97,261

Financial assets that have been derecognised

(7,922)

(153,176)

(161,098)

Balance at 31 December

94,841

2,421

97,262

FIMBank Group Annual Report & Financial Statements 2021

Group – 31 December 2020

2020

Stage 1

Stage 2

Stage 3

Total

USD

Balances with Central Bank of Malta, treasury bills

and cash

Balance at 1 January

Net remeasurement of loss allowance

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

542,278

117,390

2,559,841

3,219,509

Transfer to Stage 1

(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

Financial assets that have been derecognised

(346,075)

(26)

(346,101)

Interest and fee in suspense

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)

Interest and fee in suspense

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

Net remeasurement of loss allowance

(4,283)

New financial assets originated or purchased

71,666

Financial assets that have been derecognised

(87,534)

Balance at 31 December

71,827

Investments at amortised cost

Balance at 1 January

179,444

New financial assets originated or purchased

70,674

Financial assets that have been derecognised

(179,444)

Balance at 31 December

70,674

Contingent liabilities

Balance at 1 January

9,751

391

10,142

Net remeasurement of loss allowance

162

New financial assets originated or purchased

9,329

Financial assets that have been derecognised

(9,631)

(391)

(10,022)

Balance at 31 December

9,611

Commitments

Balance at 1 January

56,870

21,423

78,293

Transfer to Stage 2

(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)

Balance at 31 December

14,808

153,176

167,984

FIMBank Group Annual Report & Financial Statements 2021

Bank – 31 December 2021

2021

Stage 1

Stage 2

Stage 3

Total

USD

Balances with Central Bank of Malta, treasury bills

and cash

Balance at 1 January

131,651

21,049

152,700

Net remeasurement of loss allowance

(25,242)

New financial assets originated or purchased

19,318

Financial assets that have been derecognised

(6,130)

(21,049)

(27,179)

Balance at 31 December

119,597

Loans and advances to banks

Balance at 1 January

704,578

71,442

3,140,579

3,916,599

Net remeasurement of loss allowance

(6,814)

(50,070)

(56,884)

New financial assets originated or purchased

251,152

1,063

252,215

Financial assets that have been derecognised

(602,988)

(1,349,148)

(1,952,136)

Interest and fee in suspense

(1,728,518)

Foreign exchange and other movements

(62,913)

Balance at 31 December

345,928

22,435

368,363

Loans and advances to customers

Balance at 1 January

1,866,268

2,328,744

73,681,009

77,876,021

Transfer to Stage 1

1,485

(1,485)

Transfer to Stage 2

(4,348)

4,348

Transfer to Stage 3

(179)

179

Net remeasurement of loss allowance

(164,405)

(104,477)

3,903,892

3,635,010

New financial assets originated or purchased

202,441

96,335

298,776

Financial assets that have been derecognised

(237,692)

(271,335)

2,588,703

2,079,676

Write-offs

(18,533,957)

Interest and fee in suspense

1,539,148

Foreign exchange and other movements

2,062,312

Balance at 31 December

1,663,749

2,051,951

65,241,286

68,956,986

Financial assets at fair value through other

comprehensive income

Balance at 1 January

71,827

Net remeasurement of loss allowance

(8,849)

New financial assets originated or purchased

34,115

Financial assets that have been derecognised

(15,028)

Balance at 31 December

82,065

Investments at amortised cost

Balance at 1 January

70,674

Net remeasurement of loss allowance

(13,052)

Balance at 31 December

57,622

Contingent liabilities

Balance at 1 January

5,067

Net remeasurement of loss allowance

(1,226)

New financial assets originated or purchased

141

161,243

161,384

Financial assets that have been derecognised

(3,230)

Balance at 31 December

752

161,243

161,995

Commitments

Balance at 1 January

14,809

153,175

167,984

Net remeasurement of loss allowance

(6,885)

New financial assets originated or purchased

37,357

2,421

39,778

Financial assets that have been derecognised

(7,923)

(153,174)

(161,097)

Balance at 31 December

37,358

2,422

39,780

FIMBank Group Annual Report & Financial Statements 2021

Bank – 31 December 2020

2020

Stage 1

Stage 2

Stage 3

Total

USD

Balances with Central Bank of Malta, treasury bills

and cash

Balance at 1 January

Net remeasurement of loss allowance

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

Financial assets that have been derecognised

(316,628)

(26)

(316,654)

Interest and fee in suspense

461,295

Foreign exchange and other movements

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)

Interest and fee in suspense

4,983,165

Foreign exchange and other movements

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

Net remeasurement of loss allowance

(4,283)

New financial assets originated or purchased

71,666

Financial assets that have been derecognised

(87,534)

Balance at 31 December

71,827

Investments at amortised cost

Balance at 1 January

179,444

New financial assets originated or purchased

70,674

Financial assets that have been derecognised

(179,444)

Balance at 31 December

70,674

Contingent liabilities

Balance at 1 January

9,688

391

10,079

Net remeasurement of loss allowance

163

New financial assets originated or purchased

4,784

Financial assets that have been derecognised

(9,568)

(391)

(9,959)

Balance at 31 December

5,067

Commitments

Balance at 1 January

53,658

21,422

75,080

Transfer to Stage 2

(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)

Balance at 31 December

14,809

153,175

167,984

FIMBank Group Annual Report & Financial Statements 2021

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

 the ‘net impairment charge on financial assets’ line item in the Group’s Statements of Profit or Loss.

Group – 31 December 2021

Group – 31 December 2020

Balances with

the Central

Bank of Malta,

treasury bills

and cash

Loans and

advances

to banks

Loans and

advances

to customers

Financial assets

at fair value

through other

comprehensive

income

Investments

at amortised

cost

Contingent

liabilities Commitments

Other assets Total

USD

Net remeasurement of loss allowance

(25,242)

(124,300)

3,047,913

(8,849)

(13,052)

(1,226)

(6,885)

(63,139)

2,805,220

New financial assets originated or purchased

19,318

265,040

450,290

34,115

161,455

97,261

1,027,479

Financial assets that have been derecognised

(27,179)

(1,954,417)

1,625,091

(15,028)

(7,774)

(161,098)

56,624

(483,781)

Total

(33,103)

(1,813,677)

5,123,294

10,238

(13,052)

152,455

(70,722)

(6,515)

3,348,918

Recoveries of amounts previously written-off

(520,067)

(921,055)

(1,441,122)

Total

(33,103)

(2,333,744)

4,202,239

10,238

(13,052)

152,455

(70,722)

(6,515)

1,907,796

Balances with

the Central

Bank of Malta,

treasury bills

and cash

Loans and

advances

to banks

Loans and

advances

to customers

Financial assets

at fair value

through other

comprehensive

income

Investments

at amortised

cost

Contingent

liabilities

Commitments

Other assets

Total

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)

Total

152,700

191,871

32,508,549

(20,151)

(108,770)

(531)

202,787

63,864

32,990,319

FIMBank Group Annual Report & Financial Statements 2021

Bank – 31 December 2021

Bank – 31 December 2020

Balances with

the Central

Bank of Malta,

treasury bills

and cash

Loans and

advances

to banks

Loans and

advances

to customers

Financial assets

at fair value

through other

comprehensive

income

Investments at

amortised cost

Contingent

liabilities

Commitments

Total

USD

Net remeasurement of loss allowance

(25,242)

(56,884)

3,635,010

(8,849)

(13,052)

(1,226)

(6,885)

3,522,872

New financial assets originated or purchased

19,318

252,215

298,776

34,115

161,384

39,778

805,586

Financial assets that have been derecognised

(27,179)

(1,952,136)

2,079,676

(15,028)

(3,230)

(161,097)

(78,994)

Total

(33,103)

(1,756,805)

6,013,462

10,238

(13,052)

156,928

(128,204)

4,249,464

Recoveries of amounts previously written-off

(520,067)

(29,840)

(549,907)

Total

(33,103)

(2,276,872)

5,983,622

10,238

(13,052)

156,928

(128,204)

3,699,557

Balances with

the Central

Bank of Malta,

treasury bills

and cash

Loans and

advances

to banks

Loans and

advances

to customers

Financial assets

at fair value

through other

comprehensive

income

Investments at

amortised cost

Contingent

liabilities

Commitments

Total

USD USD USD

USD

Net remeasurement of loss allowance

125,521

(116,470)

26,730,773

(4,283)

163

(16,261)

26,719,443

New financial assets originated or purchased

27,179

663,559

7,214,310

71,666

70,674

4,784

165,568

8,217,740

Financial assets that have been derecognised

(316,654)

(127,617)

(87,534)

(179,444)

(9,959)

56,693

(664,515)

Total

152,700

230,435

33,817,466

(20,151)

(108,770)

(5,012)

206,000

34,272,668

Recoveries of amounts previously written-off

(268)

Total

152,700

230,435

33,817,198

(20,151)

(108,770)

(5,012)

206,000

34,272,400

FIMBank Group Annual Report & Financial Statements 2021

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

of significant changes in the borrower/issuer’s financial position such that the borrower/issuer can no longer pay the obligation, 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. Loss allowance on loans written-off are disclosed in Note 5.2.1.4.

Group

Bank

2021

2020

2021

2020

USD

Loans and advances to customers

Written-off

48,455,745

19,528,228

36,172,515

9,612,544

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 under default events. 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 2021 and 2020.

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

Group – 31 December 2021

Loans and

advances to

banks

Loans and

advances to

customers

Commitments

outstanding

Contingent

liabilities

Total

USD

Cash or quasi cash

2,528,428

145,348,195

9,709,661

767,158

158,353,442

Property

56,686,127

34,187,304

90,873,431

Other

98,725,704

9,003,395

107,729,099

2,528,428

300,760,026

52,900,360

767,158

356,955,972

Group – 31 December 2020

Loans and

advances to

banks

Loans and

advances to

customers

Commitments

outstanding

Contingent

liabilities

Total

USD

Cash or quasi cash

4,799,198

126,854,935

10,944,353

715,848

143,314,334

Property

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

Bank – 31 December 2021

Loans and

advances to

banks

Loans and

advances to

customers

Commitments

outstanding

Contingent

liabilities

Total

USD

Cash or quasi cash

2,528,428

61,798,827

9,709,661

767,158

74,804,074

Property

56,686,127

34,187,304

90,873,431

Other

98,724,487

9,003,395

107,727,882

2,528,428

217,209,441

52,900,360

767,158

273,405,387

FIMBank Group Annual Report & Financial Statements 2021

Bank – 31 December 2020

Loans and

advances to

banks

Loans and

advances to

customers

Commitments

outstanding

Contingent

liabilities

Total

USD

Cash or quasi cash

4,799,198

73,240,246

10,944,353

715,848

89,699,645

Property

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

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 under default events. At 31 December 2021 and

2020, 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

quantitative and qualitative information and analysis, based on the Group’s historical experience and expert credit assessment 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 on

the Group’s quantitative modelling, 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

Group’s credit risk management 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 2021

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 graded below 7- (see below grading table).

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. Loans and

advances to related entities generally classify as having a low credit risk for the purpose of determining ECL in the separate financial

statements.

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.

Each exposure is allocated to a credit risk grade on initial recognition using Moody’s CreditLens or external 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.

The table below provides an indicative mapping of how the Group’s internal credit risk grades relate to conditional PD and to external

credit ratings of Moody’s or their equivalent.

Grading

12-month weighted-average PD

External rating

Grades 1 to 4- low risk

0.19%

Aaa-Baa3

Grades 5+ to 5- fair risk

0.63%

Ba1-Ba3

Grades 6+ to 7 substandard

2.92%

B1-Caa2

Grades 7- to 8- doubtful

19.52%

Caa3-Ca

Grades 9 to 10 loss

100.00%

FIMBank Group Annual Report & Financial Statements 2021

The term structure of PDs follows a two-staged approach. In the first instance, internal credit risk grades are mapped to Moody’s official

credit rating-scale table. Following this, the resultant credit rating is converted into a Point in Time (“PIT”) PD term structure using

Moody’s ‘Rating to PIT PD’ converter. This is done through statistical models which analyse the data collected and generate estimates

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

obligor’s agency rating, country and industry information.

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

 it is becoming probable that the borrower will restructure the asset as a result of bankruptcy due to the borrower’s inability 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

the three scenarios, both historical and forecasted, are sourced from Moody’s Analytics on a quarterly basis. The historical data in

Moody’s Analytics’ model reflects economic data published by national statistical offices and by third party aggregators such as the

World Bank and the International Monetary Fund. Forecasting is done by Moody’s Analytics through its Global Macro Model which 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.

Moody’s Analytics regularly updates the base 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.

The Group uses Moody’s Analytics GCorr Macro

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 2021

The economic scenarios for the top five geographies used as at 31 December 2021 included the following key indicators for the years

ending 31 December 2022 to 2026.

Year-on-year change

Country: Malta

2022

2023

2024

2025

2026

Equity

Base

15%

Upside

33%

Downside

-17%

18%

19%

GDP growth

Base

Upside

Downside

-2%

Country: Germany

2022

2023

2024

2025

2026

Equity

Base

-1%

Upside

-3%

-4%

-2%

Downside

-15%

-1%

GDP growth

Base

Upside

Downside

-2%

Country: India

2022

2023

2024

2025

2026

Equity

Base

Upside

Downside

-21%

11%

GDP growth

Base

Upside

10%

Downside

-1%

Country: United Arab Emirates

2022

2023

2024

2025

2026

Equity

Base

Upside

-1%

Downside

-25%

14%

12%

Oil price

Base

-18%

-3%

Upside

-14%

Downside

-52%

31%

Country: Italy

2022

2023

2024

2025

2026

Equity

Base

Upside

12%

Downside

-24%

17%

10%

Eurozone GDP

Base

Upside

Downside

-3%

Eurozone unemployment

Base

-1%

-2%

Upside

-9%

-3%

Downside

24%

-3%

-6%

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 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. The model driven staging of exposures may

change under the different scenarios as described below and accordingly impact the extent of Stage 2 loans as a proportion of gross

exposure.

FIMBank Group Annual Report & Financial Statements 2021

Group – 31 December 2021

2021

Upside

Base Case

Downside

Probability-

weighted

USD

Gross exposure

1,478,640,043

Loss allowance

81,717,835

82,174,423

85,553,746

83,689,617

Proportion of assets in Stage 2

11.95%

12.00%

27.29%

12.00%

Group – 31 December 2020

2020

Upside

Base Case

Downside

Probability-

weighted

USD

Gross exposure

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%

Bank – 31 December 2021

2021

Upside

Base Case

Downside

Probability-

weighted

USD

Gross exposure

1,556,627,074

Loss allowance

67,858,994

68,276,647

71,676,987

69,786,408

Proportion of assets in Stage 2

5.41%

24.85%

5.41%

Bank – 31 December 2020

2020

Upside

Base Case

Downside

Probability-

weighted

USD

Gross exposure

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%

16.40%

7.89%

FIMBank Group Annual Report & Financial Statements 2021

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 EUR150 million whichever is the higher. Where the amount of EUR150 million is higher than 25% of the bank’s regulatory

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

counterparties are usually set at a much lower level than the Group’s legal lending limit. These limits might either remain at the original

level, based on ongoing credit research on the name, or build up towards the Group’s legal lending limit in a gradual manner, as the

knowledge of the counterparty by the Bank consolidates through time.

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

credit risk by geographic location based on the exposure country of the borrower (“country risk”). Country risk refers to risks associated

with the economic, social and political environment of the obligor’s exposure country. A component of country risk is transfer risk which

arises when a borrower’s obligation is not denominated in the respective 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 – in

terms of percentage of the Group’s Own Funds – 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 Bank’s Own Funds for investment

grade countries) with the rating of the country. As for single-name limits, country limits do not automatically increase to the pre-defined

ceiling, as the initial assessment is based on the country’s specific economic, financial and 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.

Concentration risk by sector is mitigated by the particular nature of the Group’s business, i.e. a specialised trade finance institution with

a focus on emerging markets. A significant portion of the Bank’s exposure relates to banks’ risk, located in a number of 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 limit might be assigned

by the Bank’s BCC, 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 2021

The following are the Group’s and Bank’s region concentrations:

Group

Bank

2021

2020

2021

2020

USD

Balances with the Central Bank of Malta,

treasury bills and cash

– Europe

239,998,839

319,287,524

239,982,048

319,267,749

Trading assets

– Europe

87,976,874

106,398,354

– Sub-Saharan Africa

95,475,315

103,085,874

– Middle East and North Africa (MENA)

86,337,206

111,732,865

– Commonwealth of Independent States (CIS) region

15,082,254

12,460,725

– Others

155,113,554

118,648,729

Loans and advances to banks

– Europe

162,271,327

138,051,074

161,959,210

137,859,088

– Sub-Saharan Africa

2,765,778

11,644,118

2,765,778

11,644,118

– Middle East and North Africa (MENA)

16,747,208

26,406,481

11,649,034

24,723,229

– Commonwealth of Independent States (CIS) region

1,614,058

2,244,044

1,597,336

2,194,777

– Others

15,090,205

14,793,860

4,487,190

2,942,855

Loans and advances to customers

– Europe

222,236,329

257,553,603

455,547,583

517,069,974

– Sub-Saharan Africa

1,461,080

1,571,746

305,572

271,886

– Middle East and North Africa (MENA)

223,829,636

188,352,048

193,609,028

170,774,887

– Others

181,385,295

144,518,329

96,101,956

91,717,613

Financial assets at fair value through profit or loss

– Europe

19,119,728

20,385,323

19,119,728

20,385,323

– Middle East and North Africa (MENA)

846,435

Financial assets at fair value through other

comprehensive income

– Europe

162,408,542

153,327,686

162,408,542

153,327,686

Investments at amortised cost

– Middle East and North Africa (MENA)

9,914,754

9,839,457

9,914,754

9,839,457

Contingent liabilities

– Europe

1,556,735

1,569,969

38,933,563

43,906,453

– Middle East and North Africa (MENA)

393,799

340,449

393,799

340,449

– Others

Commitments

– Europe

69,430,972

59,312,946

66,152,348

67,286,011

– Sub-Saharan Africa

38,809,596

17,779,903

10,160,559

13,189,724

– Middle East and North Africa (MENA)

16,502,518

3,561,524

17,499,492

5,125,218

– Others

28,875,148

24,389,083

13,656,712

19,644,813

1,855,243,185

1,847,255,714

1,507,090,667

1,611,511,310

FIMBank Group Annual Report & Financial Statements 2021

The following are the Group’s and Bank’s sector concentrations:

Group

Bank

2021

2020

2021

2020

USD

Balances with the Central Bank of Malta,

treasury bills and cash

– Financial intermediation

98,304,907

245,686,037

98,288,116

245,666,262

– Other services

141,693,932

73,601,487

141,693,932

73,601,487

Trading assets

– Industrial raw materials

71,443,833

65,792,606

– Shipping and transportation

665,080

– Wholesale and retail trade

46,268,358

41,668,103

– Financial intermediation

248,836,273

232,900,663

– Other services

72,771,659

111,965,175

Loans and advances to banks

– Financial intermediation

198,488,576

193,139,577

182,458,548

179,364,067

Loans and advances to customers

– Industrial raw materials

306,270,182

276,957,626

109,399,209

134,351,441

– Shipping and transportation

3,008,011

2,612,759

144,774

156,895

– Wholesale and retail trade

144,572,985

172,658,864

98,706,888

151,900,007

– Financial intermediation

64,111,105

52,532,220

414,106,815

382,836,339

– Real estate activities

32,052,981

29,404,238

57,273,782

58,237,698

– Other services

78,897,076

57,830,019

65,932,671

52,351,980

Financial assets at fair value through profit or loss

– Financial intermediation

19,913,086

20,332,246

19,913,086

20,332,246

– Other services

53,077

Financial assets at fair value through other

comprehensive income

– Shipping and transportation

11,059,246

5,008,684

11,059,246

5,008,684

– Financial intermediation

60,202,890

65,199,200

60,202,890

65,199,200

– Other services

91,146,406

83,119,802

91,146,406

83,119,802

Investments at amortised cost

– Financial intermediation

9,914,754

9,839,457

9,914,754

9,839,457

Contingent liabilities

– Industrial raw materials

293,676

613,359

293,676

613,359

– Wholesale and retail trade

372,754

396

372,754

396

– Financial intermediation

202,775

790,453

37,998,418

43,539,680

– Real estate activities

31,091

25,995

31,091

25,995

– Other services

1,050,238

480,215

631,423

67,472

Commitments

– Industrial raw materials

26,001,031

38,175,330

31,093,594

44,621,725

– Shipping and transportation

415,440

57,646

– Wholesale and retail trade

34,686,933

21,452,255

42,546,431

19,648,317

– Financial intermediation

65,024,247

22,145,958

19,691,378

21,441,523

– Real estate activities

12,082,711

18,255,332

12,082,711

18,255,332

– Other services

15,823,312

5,014,581

1,639,557

1,221,223

1,855,243,185

1,847,255,714

1,507,090,667

1,611,511,310

FIMBank Group Annual Report & Financial Statements 2021

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 (for example, for foreign exchange hedging). The Group’s Treasury

unit is responsible for the internal management of such instruments.

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.

Settlement risk arises through failed delivery versus payment (“DvP”) transactions and 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 could

negatively affect the Group’s borrowers. In the event that the currency of lending appreciates when compared to their currency of

operation, loan repayments may be more costly in real terms and may increase the Group’s probability of default.

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.

Liquidity risk arises in the general funding of the Group’s activities and the management of positions. It 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 maintained a strong liquidity profile with an elevated level of high-quality liquid

assets maintaining its Liquidity Coverage Ratio on average above 150% to mitigate the risk of unexpected liquidity outflows or

shortfalls; well above the regulatory minimum of 100%.

FIMBank Group Annual Report & Financial Statements 2021

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.

The Group’s ALCO is responsible for establishing appropriate 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.

The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its

liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s

reputation.

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:

The LCR is a ratio of the Group’s buffer of unencumbered high quality liquid assets to its net liquidity outflows over a 30 calendar 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%. Additional disclosures are included within the Pillar III Disclosures Report.

FIMBank Group Annual Report & Financial Statements 2021

Group - 31 December 2021

Carrying amount

Gross nominal

inflow/

(outflow)

Less than

1 month

Between 1

& 3 months

Between 3

& 6 months

Between 6

months

& 1 year

Between 1

& 2 years

More than

2 years

USD

Assets

Balances with the Central Bank of Malta, treasury

bills and cash

239,998,839

239,992,637

105,240,606

79,094,499

35,227,927

20,429,605

Trading assets

439,985,203

459,710,913

20,360,930

64,893,612

135,281,889

156,002,329

49,727,646

33,444,507

Derivative assets held for risk management

841,688

330,545

170,663

266,418

74,062

Loans and advances to banks

198,488,576

198,866,712

36,924,311

46,743,020

102,043,148

11,445,101

113,796

1,597,336

Loans and advances to customers

628,912,340

644,423,464

255,115,001

73,602,203

92,009,480

122,743,214

66,442,942

34,510,624

Financial assets at fair value through profit or loss

19,966,163

Financial assets at fair value through other

comprehensive income

162,408,542

169,616,733

5,143,337

3,022,131

5,007,838

14,246,625

142,196,802

Investments at amortised cost

9,914,754

11,422,623

751,869

10,670,754

Total assets

1,700,516,105

1,744,840,933

437,937,556

269,647,334

368,602,862

315,702,149

141,201,763

211,749,269

Liabilities

Derivative liabilities held for risk management

(1,499,026)

(988,530)

(167,245)

(254,632)

(70,904)

(17,715)

Amounts owed to banks

(563,553,044)

(563,657,262)

(235,068,025)

(91,023,200)

(84,021,494)

(75,742,540)

(55,663,470)

(22,138,533)

Amounts owed to customers

(934,096,196)

(935,314,919)

(459,948,649)

(219,389,020)

(108,880,494)

(145,136,626)

(1,144,523)

(815,607)

Debt securities in issue

(45,345,575)

(45,465,377)

(11,326,302)

(34,139,075)

Other liabilities – finance lease liabilities

(2,224,451)

(2,371,881)

(40,275)

(122,126)

(211,075)

(385,114)

(666,402)

(946,889)

Total liabilities

(1,546,718,292)

(1,548,308,465)

(707,371,781)

(344,840,666)

(193,367,695)

(221,335,184)

(57,492,110)

(23,901,029)

Liquidity gap

(269,434,225)

(75,193,332)

175,235,167

94,366,965

83,709,653

187,848,240

FIMBank Group Annual Report & Financial Statements 2021

Group - 31 December 2020

Carrying amount

Gross nominal

inflow/

(outflow)

Less than

1 month

Between 1

& 3 months

Between 3

& 6 months

Between 6

months

& 1 year

Between 1

& 2 years

More than

2 years

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

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

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)

(1,132,648)

(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 2021

Bank - 31 December 2021

Carrying amount

Gross nominal

inflow/

(outflow)

Less than

1 month

Between 1

& 3 months

Between 3

& 6 months

Between 6

months

& 1 year

Between 1

& 2 years

More than

2 years

USD

Assets

Balances with the Central Bank of Malta, treasury

bills and cash

239,982,048

239,975,846

105,223,815

79,094,499

35,227,927

20,429,605

Derivative assets held for risk management

841,688

330,545

170,663

266,418

74,062

Loans and advances to banks

182,458,548

182,743,756

28,891,686

46,734,928

93,976,423

11,429,587

113,796

1,597,336

Loans and advances to customers

745,564,139

770,306,022

159,339,704

159,912,767

188,631,659

134,341,041

58,087,355

69,993,496

Financial assets at fair value through profit or loss

19,966,163

Financial assets at fair value through other

comprehensive income

162,408,542

169,616,733

5,143,337

3,022,131

5,007,838

14,246,625

142,196,802

Investments at amortised cost

9,914,754

11,422,623

751,869

10,670,754

Total assets

1,361,135,882

1,394,872,831

313,751,913

291,056,194

321,876,427

171,282,133

83,118,530

213,787,634

Liabilities

Derivative liabilities held for risk management

(1,533,556)

(1,023,060)

(167,245)

(254,632)

(70,904)

(17,715)

Amounts owed to banks

(497,633,356)

(496,507,491)

(227,187,254)

(51,824,512)

(83,492,475)

(56,201,247)

(55,663,470)

(22,138,533)

Amounts owed to customers

(838,675,598)

(839,844,878)

(411,948,191)

(183,721,239)

(97,153,753)

(145,061,565)

(1,144,523)

(815,607)

Other liabilities – finance lease liabilities

(1,128,594)

(1,163,722)

(658,879)

(19,376)

(29,064)

(75,657)

(121,944)

(258,802)

Total liabilities

(1,338,971,104)

(1,339,049,647)

(640,817,384)

(235,732,372)

(180,929,924)

(201,409,373)

(56,947,652)

(23,212,942)

Liquidity gap

(327,065,471)

55,323,822

140,946,503

(30,127,240)

26,170,878

190,574,692

FIMBank Group Annual Report & Financial Statements 2021

Bank - 31 December 2020

Carrying amount

Gross nominal

inflow/

(outflow)

Less than

1 month

Between 1

& 3 months

Between 3

& 6 months

Between 6

months

& 1 year

Between 1

& 2 years

More than

2 years

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

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

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)

(1,132,648)

(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 2021

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.

The Group manages these risks as noted below and furthermore, they are tracked by the Asset-Liability Committee on a monthly basis

using various metrics and by the Board Risk Committee on a quarterly basis against the Bank’s Risk Appetite Statement.

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

European Union and European banks. It is to be noted that the Bank’s purchase of government and bank bonds is primarily for 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. 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 2021 assumes

ongoing concerns about the possible evolution of the COVID-19 pandemic that would prolong the economic contraction.

The Group manages its interest rate risk using an in-house Interest Rate Risk in the Banking Book (‘IRRBB’) 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 (‘NII’) and the Economic Value of Equity (‘EVE’). 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 2021

Group - 31 December 2021

All amounts are expressed in USD

In reporting

currency

EUR

INR

Other

currencies

Total

Assets

Balances with the Central Bank of Malta,

treasury bills and cash 4,291 239,990,565 158 3,825 239,998,839

Trading assets

310,064,673

120,605,927

9,314,603

439,985,203

Loans and advances to banks

10,235,233

172,362,945

10,903,665

4,986,733

198,488,576

Loans and advances to customers

324,059,128

255,073,849

22,847,679

26,931,684

628,912,340

Financial assets at fair value through

profit or loss 899,512 19,066,651 -

19,966,163

Financial assets at fair value

through other comprehensive income 54,820,240 107,588,302 -

162,408,542

Investments at amortised cost

9,914,754

Other assets

5,380,123

1,988,442

11,026,880

29,020

18,424,465

Liabilities

Amounts owed to banks

(384,742,995)

(160,511,176)

(2,691,699)

(15,607,174)

(563,553,044)

Amounts owed to customers

(197,385,930)

(726,303,696)

(111,369)

(10,295,201)

(934,096,196)

Debt securities in issue

(45,345,575)

Other liabilities

(11,571,439)

(5,247,466)

(933,321)

(2,280,631)

(20,032,857)

Net on balance sheet financial position

111,762,836

(20,731,232)

41,041,993

22,997,613

155,071,210

Notional amount of derivative

Instruments held for risk

management

49,855,270

13,722,001

(40,200,000)

(23,377,271)

Net foreign exchange exposure

(7,009,231)

841,993

(379,658)

The USD40.2m (2020: USD44.8m) 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 2021

Group - 31 December 2020

All amounts are expressed in USD

In reporting

currency

EUR

INR

Other

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

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)

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

Bank - 31 December 2021

All amounts are expressed in USD

In reporting

currency

EUR

INR

Other

currencies

Total

Assets

Balances with the Central Bank of Malta,

treasury bills and cash

239,981,630

418

239,982,048

Loans and advances to banks

8,101,051

172,052,595

2,304,902

182,458,548

Loans and advances to customers

434,938,420

298,133,587

12,492,132

745,564,139

Financial assets at fair value through

profit or loss

899,512

19,066,651

19,966,163

Financial assets at fair value through other

comprehensive income

54,820,240

107,588,302

162,408,542

Investments at amortised cost

9,914,754

Other assets

42,759

1,531,048

241,874

1,815,730

Liabilities

Amounts owed to banks

(350,701,479)

(146,891,877)

(40,000)

(497,633,356)

Amounts owed to customers

(130,845,258)

(707,174,512)

(655,828)

(838,675,598)

Other liabilities

(2,944,696)

(4,455,558)

(757,532)

(8,157,786)

Net on balance sheet financial position

14,310,549

(20,168,134)

23,500,720

17,643,184

Notional amount of derivative

Instruments held for risk

management

49,855,270

13,722,001

(40,200,000)

(23,377,271)

Net foreign exchange exposure

(6,446,133)

(40,199,951)

123,449

FIMBank Group Annual Report & Financial Statements 2021

Bank - 31 December 2020

All amounts are expressed in USD

In reporting

currency

EUR

INR

Other

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

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

The following exchange rates were applied during the year:

Average rate

Reporting date

mid-spot rate

2021

2020

2021

2020

1 EUR

1.1825

1.1398

1.1326

1.2271

1 INR

0.0135

0.0137

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

Equity

Profit or

loss

Equity

Profit or

loss

USD

2021

EUR

(490,646)

(451,229)

INR

58,940

(2,813,997)

Other currencies

(26,576)

8,641

2020

EUR

(501,951)

(378,231)

INR

(366,546)

(3,135,711)

Other currencies

47,924

80,009

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 2021

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 refers to the risk to earnings from the Group’s financial instruments, both in the trading and non-trading books, 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-balance sheet instruments. The Group’s operations are subject to 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 is managed through the use of maturity/re-pricing schedules that distribute interest-bearing assets and

liabilities into different time bands. 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 method also referred to as ‘gap

analysis’, will eventually portray the Group’s sensitivity of earnings. On the other hand, the modified duration method is used to

measure the sensitivity 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 band,

and this implies that the Group’s net interest income (and therefore capital) could decline as a result of a decrease in 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.

Interest rate risk in the banking book (IRRBB) is managed on a monthly basis. Additional disclosures are included within the Pillar III

Disclosures Report.

FIMBank Group Annual Report & Financial Statements 2021

100

Group – 31 December 2021

Less than

1 month

Between

1 & 3 months

Between

3 & 6 months

Between

6 months

& 1 year

More than

1 year

Non-interest

bearing

Total

USD

Assets

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

98,280,828

141,718,011

239,998,839

Trading assets

439,985,203

Loans and advances to banks

2,198,487

45,849,623

101,859,284

11,330,122

37,251,060

198,488,576

Loans and advances to customers

398,196,134

12,408,888

26,153,547

11,765,498

2,597

180,385,676

628,912,340

Financial assets at fair value through profit or loss

19,966,163

Financial assets at fair value through other comprehensive income

5,011,000

3,003,300

4,998,000

148,599,518

796,724

162,408,542

Investments at amortised cost

9,917,355

(2,601)

9,914,754

Other assets

88,797,933

Total assets

498,675,449

63,269,511

140,933,486

28,093,620

148,602,115

908,898,169

1,788,472,350

Liabilities

Amounts owed to banks

171,105,298

78,729,679

82,200,000

62,100,414

79,284,177

90,133,476

563,553,044

Amounts owed to customers

316,071,119

177,657,319

90,300,069

143,938,104

1,874,654

204,254,931

934,096,196

Debt securities in issue

11,285,407

33,940,299

119,869

45,345,575

Other liabilities

21,497,352

Equity

223,980,183

Total liabilities and equity

498,461,824

290,327,297

172,500,069

206,038,518

81,158,831

539,985,811

1,788,472,350

Less than

3 months

Between

3 & 6 months

Between

6 months

&1 year

More than

1 year

Non-interest

bearing

Total

USD

Assets

561,944,960

140,933,486

28,093,620

148,602,115

908,898,169

1,788,472,350

Liabilities

(788,789,121)

(172,500,069)

(206,038,518)

(81,158,831)

(539,985,811)

(1,788,472,350)

Interest sensitivity gap

(226,844,161)

(31,566,583)

(177,944,898)

67,443,284

368,912,358

Cumulative gap

(226,844,161)

(258,410,744)

(436,355,642)

(368,912,358)

Change in interest rate for the

period:

200bps increase

(3,402,662)

(315,666)

(296,575)

200bps decrease

3,402,662

315,666

296,575

FIMBank Group Annual Report & Financial Statements 2021

101

Group – 31 December 2020

Less than

1 month

Between

1 & 3 months

Between

3 & 6 months

Between

6 months

& 1 year

More than

1 year

Non-interest

bearing

Total

USD

Assets

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

245,785,027

73,502,497

319,287,524

Trading assets

93,941,083

155,650,395

85,556,941

89,255,904

23,685,472

4,236,752

452,326,547

Loans and advances to banks

32,396,387

25,770,033

25,156,461

61,927,844

47,888,852

193,139,577

Loans and advances to customers

365,698,846

33,083,018

20,341,094

2,890,995

56,770

169,925,003

591,995,726

Financial assets at fair value through profit or loss

20,385,323

Financial assets at fair value through other comprehensive income

5,006,000

12,369,616

134,749,568

1,202,502

153,327,686

Investments at amortised cost

9,855,453

(15,996)

9,839,457

Other assets

93,744,183

Total assets

752,682,796

226,873,062

131,054,496

154,074,743

158,491,810

410,869,116

1,834,046,023

Liabilities

Amounts owed to banks

84,817,155

46,317,155

36,524,926

61,616,721

110,442,999

89,724,524

429,443,480

Amounts owed to customers

451,946,805

201,037,001

101,183,012

143,614,995

3,631,871

200,156,611

1,101,570,295

Debt securities in issue

15,907,032

16,558,799

18,250,092

116,738

50,832,661

Other liabilities

19,041,458

Equity

233,158,129

Total liabilities and equity

552,670,992

263,912,955

155,958,030

205,231,716

114,074,870

542,197,460

1,834,046,023

Less than

3 months

Between

3 & 6 months

Between

6 months

&1 year

More than

1 year

Non-interest

bearing Total

USD

Assets

979,555,858

131,054,496

154,074,743

158,491,810

410,869,116

1,834,046,023

Liabilities

(816,583,947)

(155,958,030)

(205,231,716)

(114,074,870)

(542,197,460)

(1,834,046,023)

Interest sensitivity gap

162,971,911

(24,903,534)

(51,156,973)

44,416,940

(131,328,344)

Cumulative gap

162,971,911

138,068,377

86,911,404

131,328,344

Change in interest rate for the

period:

200bps increase

2,444,579

(249,035)

(85,262)

200bps decrease

(2,444,579)

249,035

85,262

FIMBank Group Annual Report & Financial Statements 2021

102

Bank – 31 December 2021

Less than

1 month

Between

1 & 3 months

Between

3 & 6 months

Between

6 months

& 1 year

More than

1 year

Non-interest

bearing

Total

USD

Assets

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

98,280,828

141,701,220

239,982,048

Loans and advances to banks

2,078,609

45,842,928

93,976,423

11,315,479

29,245,109

182,458,548

Loans and advances to customers

633,423,204

15,814,564

18,687,760

1,558,934

76,079,677

745,564,139

Financial assets at fair value through profit or loss

19,966,163

Financial assets at fair value through other comprehensive income

5,011,000

3,003,300

4,998,000

148,599,518

796,724

162,408,542

Investments at amortised cost

9,917,355

(2,601)

9,914,754

Other assets

186,281,636

Total assets

733,782,641

66,668,492

125,584,838

17,872,413

148,599,518

454,067,928

1,546,575,830

Liabilities

Amounts owed to banks

138,500,000

50,000,000

82,200,000

57,570,506

79,284,177

90,078,673

497,633,356

Amounts owed to customers

309,414,846

177,657,319

95,529,674

143,968,176

1,874,654

110,230,929

838,675,598

Other liabilities

9,656,812

Equity

200,610,064

Total liabilities and equity

447,914,846

227,657,319

177,729,674

201,538,682

81,158,831

410,576,478

1,546,575,830

Less than

3 months

Between

3 & 6 months

Between

6 months

& 1 year

More than

1 year

Non-interest

bearing

Total

USD

Assets

800,451,133

125,584,838

17,872,413

148,599,518

454,067,928

1,546,575,830

Liabilities

(675,572,165)

(177,729,674)

(201,538,682)

(81,158,831)

(410,576,478)

(1,546,575,830)

Interest sensitivity gap

124,878,968

(52,144,836)

(183,666,269)

67,440,687

43,491,450

Cumulative gap

124,878,968

72,734,132

(110,932,137)

(43,491,450)

Change in interest rate for the

period:

200bps increase

1,873,185

(521,448)

(306,110)

200bps decrease

(1,873,185)

521,448

306,110

FIMBank Group Annual Report & Financial Statements 2021

103

Bank – 31 December 2020

Less than

1 month

Between

1 & 3 months

Between

3 & 6 months

Between

6 months

& 1 year

More than

1 year

Non-interest

bearing

Total

USD

Assets

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

245,785,027

73,482,722

319,267,749

Loans and advances to banks

32,347,523

25,770,033

25,156,461

61,927,844

34,162,206

179,364,067

Loans and advances to customers

629,690,759

28,578,930

15,704,363

8,812

5,030,340

100,821,156

779,834,360

Financial assets at fair value through profit or loss

20,385,323

Financial assets at fair value through other comprehensive income

5,006,000

12,369,616

134,749,568

1,202,502

153,327,686

Investments at amortised cost

9,855,453

(15,996)

9,839,457

Other assets

177,209,478

Total assets

922,684,762

66,718,579

40,860,824

61,936,656

139,779,908

407,247,391

1,639,228,120

Liabilities

Amounts owed to banks

61,000,000

36,500,000

35,000,000

55,295,006

110,442,999

89,662,636

387,900,641

Amounts owed to customers

450,562,302

201,037,001

97,871,004

143,647,576

3,631,871

140,368,583

1,037,118,337

Other liabilities

9,447,973

Equity

204,761,169

Total liabilities and equity

511,562,302

237,537,001

132,871,004

198,942,582

114,074,870

444,240,361

1,639,228,120

Less than

3 months

Between

3 & 6 months

Between

6 months

& 1 year

More than

1 year

Non-interest

bearing

Total

USD

Assets

989,403,341

40,860,824

61,936,656

139,779,908

407,247,391

1,639,228,120

Liabilities

(749,099,303)

(132,871,004)

(198,942,582)

(114,074,870)

(444,240,361)

(1,639,228,120)

Interest sensitivity gap

240,304,038

(92,010,180)

(137,005,926)

25,705,038

(36,992,970)

Cumulative gap

240,304,038

148,293,858

11,287,932

36,992,970

Change in interest rate for the

period:

200bps increase

3,604,561

(920,102)

(228,343)

200bps decrease

(3,604,561)

920,102

228,343

FIMBank Group Annual Report & Financial Statements 2021

104

An increase of 200 basis points at the reporting date would result in a decrease in equity and profit or loss for the Group by the amounts

shown below. However, for the Bank this increase would result in an increase in equity and profit or loss by the amounts shown below.

This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

Group

Bank

Equity

Profit or loss

Equity

Profit or loss

USD

2021

(4,014,903)

1,045,626

2020

2,110,282

2,456,116

A decrease of 200 basis points at the reporting date would have equal but opposite effect on the above instruments to the amounts

shown above, on the basis that all other variables remain constant.

A fundamental reform of major interest rate benchmarks is being undertaken globally, replacing some interbank offered rates (“IBOR”)

with alternative nearly risk-free rates (“RFR”), referred to as ‘IBOR reform’. The Group has significant exposure to certain IBORs on its

financial instruments that are being reformed as part of these market-wide initiatives.

The main risks to which the Group has been exposed as a result of IBOR reform are operational. For example, the renegotiation of loan

contracts through bilateral negotiation with customers, updating of contractual terms, updating of systems, revision of operational

controls related to the reform, as well as managing related tax and accounting implications and regulatory risks. Financial risk is

predominantly limited to interest rate risk.

The Group established an IBOR Conversion Steering Committee to manage its transition to alternative rates. The objectives of the

IBOR Committee include evaluating the extent to which loans advanced, loan commitments, liabilities, derivatives and leases reference

IBOR cash flows, whether such contracts need to be amended as a result of IBOR reform and how to manage communication about

IBOR reform with counterparties.

The Group has engaged an external consultancy company to conduct respective impact analysis and provide strategic

recommendations and best practices on how to efficiently conduct this transition. Following the recommendations received, the Group

has implemented an IBOR conversion project, appointing an IBOR Conversion Steering Committee, Program Manager, Project

Manager and Project Team, which consists of senior and experienced representatives from main areas of the Group. The respective

comprehensive project plan was prepared and executed by the Project Team, who have been collaborating with other business

functions as needed. The IBOR Committee provides periodic updates to the Board Review and Implementation Committee (“BRIC”).

For contracts indexed to an IBOR that mature after the expected cessation of the IBOR rate, the IBOR Committee has established

policies to amend the contractual terms. These amendments include the addition of fallback clauses or replacement of the IBOR rate

with an alternative benchmark rate.

The Bank’s risk exposure that is directly affected by the interest rate benchmark reform predominantly comprises its trade finance and

real estate loans, factoring agreements and its forfaiting portfolio which are measured at amortised cost or at fair value through profit

or loss. Such instruments are, in the absolute majority, denominated in USD, EUR and GBP and have floating rates linked to IBOR. The

value of such financial instruments in the books of the Group is extensive, although several contracts have short term tenures which

matured before the end of 2021 and therefore were not affected by the IBOR Reform since LIBOR rates were available until 31

December 2021.

The IBOR Conversion Steering Committee approved a policy requiring that, with effect from 5 October 2021:

 all newly originated floating-rate contracts denominated in EUR and GBP, to be referenced to €STR, EURIBOR and SONIA forward

looking term-rates;

 existing floating-rate contracts denominated in EUR and GBP, to be converted to €STR, EURIBOR and SONIA forward looking term-

rates by 31 December 2021;

 a flexible approach to be adopted allowing for new contracts denominated in USD to be referenced to either LIBOR or SOFR until

full market readiness is detected.

FIMBank Group Annual Report & Financial Statements 2021

105

The Group initiated communication with counterparties, confirming the specific changes being implemented. The Group continues to

engage with industry participants and counterparties to ensure an orderly transition to risk free rates and to minimise the risks arising

from transition.

The table below sets out the IBOR rates that the Group had exposure to, the new benchmark rates to which these exposures have or are

being transitioned:

Currency

Benchmark before reform

Benchmark after reform

USD

USD LIBOR

SOFR

EUR

EURO EURIBOR

EURIBOR reformed

EUR

EONIA

€STR

GBP

GBP LIBOR

SONIA

In March 2021, the Financial Conduct Authority (FCA), as the regulator of ICE (the authorised administrator of LIBOR), announced that

after 31 December 2021 LIBOR settings for sterling, euro and the one-week and two-month US dollar settings will either cease to be

provided or no longer be representative. The remaining US dollar settings will either cease to be provided or no longer be representative

after 30 June 2023.

The following table contains details of all the financial instruments held by the Group, which have transitioned to risk free rates or

currently being transitioned to risk free rates at 31 December 2021:

As at 31 December 2021

Carrying amount

Of which:

subject to IBOR

reform

Of which:

subject to IBOR

reform and have yet

to transition to an

alternative

benchmark interest

rate

USD

Non-derivative assets measured at amortised cost

Balances with Central Bank, treasury bills & cash

EUR

240,110,161

GBP

3,407

USD

4,291

Other

577

240,118,436

Financial assets at amortised cost

Other

9,972,376

Financial assets at fair value through OCI

EUR

107,588,301

USD

54,820,241

162,408,542

Loans and advances to banks

EUR

172,362,946

66,969

GBP

1,982,529

USD

10,603,872

443,361

Other

13,925,380

198,874,727

510,330

Loans and advances to customers

EUR

277,837,174

180,889,850

GBP

8,855,894

3,002,396

USD

371,458,011

142,211,804

103,884,269

Other

53,546,115

711,697,194

326,104,050

103,884,269

Non-derivative assets measured at fair value through

profit or loss

Trading Assets

EUR

120,605,928

GBP

9,314,603

USD

310,064,672

182,993,967

439,985,203

182,993,967

FIMBank Group Annual Report & Financial Statements 2021

106

The following table contains details of all the financial instruments held by the Bank, which have transitioned to risk free rates or

currently being transitioned to risk free rates at 31 December 2021:

As at 31 December 2021

Carrying amount

Of which:

subject to IBOR

reform

Of which:

subject to IBOR

reform and have yet

to transition to an

alternative

benchmark interest

rate

USD

Non-derivative assets measured at amortised cost

Balances with Central Bank, treasury bills & cash

EUR

240,101,227

GBP

418

240,101,645

Financial assets at amortised cost

Other

9,972,376

Financial assets at fair value through OCI

EUR

107,588,301

USD

54,820,241

162,408,542

Loans and advances to banks

EUR

172,052,595

66,969

GBP

1,915,736

USD

8,469,417

443,361

Other

389,163

182,826,911

510,330

Loans and advances to customers

EUR

320,824,100

267,823,661

GBP

13,139,243

1,934,870

USD

480,557,782

361,884,515

323,556,980

814,521,125

631,643,046

323,556,980

FIMBank Group Annual Report & Financial Statements 2021

107

The Group is also exposed to price risk on other assets (i.e. other than traded debt instruments) that arises out of changes in market

values not related to changes in interest rates or foreign currency. Generally, these would be factors directly related to the issuer’s or

exposure’s financial stability and performance.

The Group is exposed to price risk which arises from debt investments measured at fair value through other comprehensive income, as

well as equity investments measured at fair value through profit or loss. Price risk is deemed to be less relevant for the forfaiting

portfolio. Investments recorded at fair value through other comprehensive income and fair value through profit or loss are both

measured by reference to their market values in active markets.

For marketable securities, price risk is mainly mitigated by investing in a diversified portfolio of instruments in industries and regions

where the Group has specialised knowledge and expertise. The marketable securities portfolio is monitored on a daily basis and

decisions to sell assets prior to or to hold until maturity depends on the Group’s outlook of the underlying assets as well as liquidity

requirements and profit opportunity arising out of the disposal of an instrument. Changes in the market value of marketable securities

would directly impact equity.

The financial assets designated at fair value through profit or loss include equity shares in sub-funds of a local collective investment

scheme. It is assumed that units held in the funds are not easily liquidated, particularly under stress, hence these investments are

considered as non-high quality liquid assets (“non-HQLAs”). Additionally, the financial assets designated at fair value through other

comprehensive income include a mixture of HQLA and non-HQLAs. All things being equal, the less liquid the assets are, the more their

susceptibility to price risk.

Group

Bank

2021

2020

2021

2020

USD

Financial assets at fair value through profit or loss

19,966,163

20,385,323

19,966,163

20,385,323

Financial assets at fair value through other

comprehensive income

162,408,542

153,327,686

162,408,542

153,327,686

Trading assets

439,985,203

452,326,547

A 10% increase in the price at the reporting date would have increased equity and profit or loss by the amounts shown below. This

analysis assumes that all other variables, in particular interest rates, remain constant.

Group

Bank

Equity

Profit or loss

Equity

Profit or loss

USD

2021

62,235,991

45,995,137

18,237,471

1,996,616

2020

62,603,956

47,271,187

17,371,301

2,038,532

A decrease in the price of securities at the reporting date would have had an equal but opposite effect to that shown above, on the basis

that all other variables remain constant.

FIMBank Group Annual Report & Financial Statements 2021

108

The Group defines operational risks as the risk of loss resulting from inadequate or failed internal processes, people or IT systems, or

from external events. When policies, processes or controls fail to perform, there is potential of business disruption which can lead to

financial losses. Operational risk exposures are managed through the implementation of a common framework for the identification,

assessment, reporting, control and monitoring of operational risk. The Group invested in technology to manage and mitigate against

operational risk and a strong operational risk awareness is embedded in the culture of the Group.

The Group cannot expect to eliminate all operational risk but its main objective is to maintain such risk within acceptable levels and

parameters. Although the prime responsibility of establishing detailed processes to identify, assess, monitor and report operational

risks in accordance with the Operational Risk Management (“ORM”) policy, lies with the Business/Support Unit head functions and the

appointed Operational Risk Champion in each department, an independent Operational Risk Management Unit (“ORMU”) within Risk

Management Group and a senior management Operational Risk Management Committee (“ORMC”) exist to oversee and embed the

operational risk culture within the Group. Each of the respective roles and responsibilities are covered under the Group ORM policy

which was approved by the Board.

The Group maintains an operational risk management system that facilitates the recording of: operational risk incidents, the root

causes of incidents; and, where appropriate, action plans to correct incidents and prevent future recurrences. The ORMU assesses the

identified reported operational risk exposure and recommends measures to manage and mitigate such risks. Any significant

operational lapses are escalated and discussed in ORMC for review of corrective measures to be eventually considered.

The Group has in place an enterprise wide Operational Risk Management framework to measure, control, improve and monitor the

operational risks that the organisation faces. The Group states its tolerance for Operational Risk in the Group Risk Appetite Framework

and performance against this metric is tracked by the ORMC and, BRC.

As part of the Enterprise Risk Management Framework (“ERM”), the Group maintains a Business Continuity Management Program

(“BCM”). The BCM falls within the ERM of the Group. The BCM addresses the set of operational risks where environmental factors or

poor operational controls raise the potential for loss of or damage to the Group’s operations (including people, information,

infrastructure and premises). The objectives of the programme are to protect group employees, assets and reputation; ensure

availability of services; identify responsibilities; and meet stakeholders’ expectations. Critical systems and procedures are regularly

tested, to ensure continued improvement.

Two key components of operational risk are IT risk and legal risk. In view of the importance to monitor and mitigate both risks they are

considered separately below.

Information Technology (“IT”) risk comes about as a result of internal and external events arising from the use and changes to

technology that enable and service business processes due to the potential impact to the latter from threats in the general security

landscape. Inadequate information technology and processing, inadequate IT strategy and policy or inadequate use of the Group’s

information technology may all increase IT risk beyond levels that are acceptable to the organisation.

The Group has an IT Steering Committee, the main aim of which is to ensure that strategic decisions relating to IT (including cyber

security) are aligned with the overall Group’s business strategy.

The Group adopts various measures to manage IT risk and strives to keep up to date with the changes and developments in the IT

environment. The Group is also constantly on the look-out for new risks and vulnerabilities with the aim to safeguard the business and

Group against these risks.

The Group has well established policies and procedures aimed at regulating the use of technology assets which, amongst others,

safeguards against information security breaches. The Group also operates a contingency site for systems that are classified as mission

critical. The Group is committed to ongoing development and testing of its Business Continuity Plan to ensure awareness, relevance

and effectiveness, and to maintain effective IT controls to reduce losses caused by system disruption or unauthorised use.

FIMBank Group Annual Report & Financial Statements 2021

109

The Group is exposed to legal risk as a result of the different legal systems used in the different jurisdictions in which it operates. To

mitigate this risk, it seeks legal opinions from the jurisdictions in which it intends to operate, in order to ascertain its potential liabilities

when doing business there, including the extent to which an adverse judgement might result in excessive or punitive damages.

With reference to documentation, the Group endeavours to ensure that for each transaction a detailed due diligence is carried out and

that documentation is always tailored to the legal requirements of the jurisdiction in which the transaction takes place by seeking local

legal advice to ascertain which formalities have to be followed locally to ensure a valid transaction.

The Group has an independent Legal Department deputed to the function of identifying, assessing, monitoring and

controlling/mitigating the legal risks which the Group is likely to encounter in its day-to-day activities across the jurisdictions in which

it operates.

Compliance and Financial crime risk may arise from operational failure, failure to comply with relevant legislations and regulations –

including but not limited to: Anti–Money Laundering (“AML”) and Combating the Financing of Terrorism (“CFT”), Sanctions

Regulations and Banking Regulations. These can include acts of misconduct or omissions on the part of its Directors and/or officers

and/or representatives overseas, even in matters which are unrelated to their mandate or position within the Group. The impact to the

Group for non-compliance with the applicable regulations can be substantial and can include formal enforcement actions, monetary

penalties, informal enforcement actions, and enhanced supervisory monitoring. All employees, officers and directors have a

responsibility to conduct business ethically and with integrity, in line with Bank’s Compliance Manual and related policies.

To this purpose, detailed AML, CFT and fraud documentation policies and procedures, a robust Customer Acceptance Policy as well as

strong oversight by the Group’s Board and management have been devised. These policies and procedures are updated regularly to

reflect the latest changes in regulations, legislation and related guidance.

The Group uses qualitative research tools to assess the adequacy of prospective clients and transactions and implemented Anti-Money

Laundering software for the screening of incoming and outgoing messages and payments as well as rating of corporate and business

relationships. Through these procedures, the Group is able to identify transactions and clients which pose a higher risk compared to

others. These include Politically Exposed Persons, clients and transactions deriving from non-compliant jurisdictions and

correspondent banking. In addition, reputational risk is also indirectly mitigated through the setting of country limits. Some of the

criteria used in setting up a transaction limit for particular countries are closely related to reputational risk, including issues relating to

the political environment such as the fairness and frequency of election processes and access to power and effectiveness in reforming

political systems and implementing economic agendas.

The Group also conducts extensive training on sanctions, AML and CFT regulations and policies.

Conduct risk is defined as the current or prospective risk of losses to an institution arising from inappropriate supply of financial services

including cases of wilful or negligent misconduct. Conduct risk covers a wide range of issues and may arise from many business

processes and products. Examples of conduct risk are: collusion, market manipulation, overcharging customers or not treating them

fairly; selling complex products to unsophisticated clients; setting overly aggressive sales targets; and failure to manage conflicts of

interest, amongst others. An employee’s misconduct may lead to not only material losses but also reputational damage.

The Bank promotes a culture of openness, transparency and fairness in respect of both employee-employee and employee-client

interactions in addition to having in place a number of policies and procedures to govern conduct risk. Such controls include product

design and approval processes, client selection criteria, treating customers fairly guidelines, employee conduct policies and others. The

Bank also ensures that there are adequate controls governing systems access and transactional approvals to ensure that all activity is

appropriately authorized and in line with its expectations.

FIMBank Group Annual Report & Financial Statements 2021

110

Reputational risk at FIMBank is defined as the risk of possible damage to the Bank’s brand and reputation, and the associated risk to

earnings, capital or liquidity arising from any association, action or inaction, which could be perceived by stakeholders to be

inappropriate, unethical or inconsistent with the Bank’s values and beliefs. Reputational risk could be particularly damaging for the

Group since the nature of its business requires maintaining the confidence and trust from its employees, shareholder, depositors,

creditors, and from the public in general. The ensuing damage to the Bank’s reputation can be significant and can result in loss of

customers, increased costs and ultimately, a reduction in income. Other than third parties, employees through their words and deeds,

can also cause damage to the Bank’s brand.

Much like conduct risk, the Bank controls its reputational risk through the promotion of an internal culture that is cognisant of such risk

and the existence of policies and procedures mitigating the risk. The Bank ensures that it maintains strong procedures and controls

governing customer and counterparty vetting (KYC, KYCC, etc.) and makes use of market leading automated systems for mitigating

risks associated with financial crime to ensure that the Bank is not inadvertently supporting criminal activity.

The Group’s regulatory capital consists of Common Equity Tier 1 (“CET1”) capital, which includes ordinary share capital, related share

premiums, retained earnings, reserves and NCI after adjustment for dividends proposed after the year-end and deductions for goodwill,

intangible assets and other regulatory adjustments relating to items that are included in equity but are treated differently for capital

adequacy purposes.

The Group’s policy is to maintain a strong capital base to maintain investor, creditor and market confidence and to sustain the future

development of the business. The impact of the level of capital on shareholders’ returns is also recognised and the Group recognises

the need to maintain a balance between the higher returns that might be possible with greater gearing and the advantages and security

afforded by a stronger capital position.

The Group and its individually regulated operations have complied with all externally imposed capital requirements. The Group adheres

to the requirements set out in the Capital Requirements Regulation (“CRR”) and Capital Requirements Directive (“CRD IV”), constituting

the European implementation of the Basel accord of 2010.

Pillar I covers credit, market, and operational risks which provides the minimum capital requirements as a percentage of risk-weighted

assets, while Pillar II (Supervisory Review and Evaluation Process) involves both banks and regulators taking a view on whether a bank

should hold additional capital against risks not covered in Pillar I. Part of the Pillar II process is the Internal Capital Adequacy Assessment

Process (“ICAAP”) which is the Bank’s self-assessment of risks not captured by Pillar I.

2021 Pillar III Disclosures Report published on the Bank’s website includes additional regulatory disclosures in terms of Banking Rule

BR/07/2014 ‘Publication of annual report and audited financial statements of credit institutions authorised under the Banking Act, 1994’.

FIMBank Group Annual Report & Financial Statements 2021

111

Group

Bank

2021

2020

2021

2020

USD

Own funds

Tier 1

Paid up capital instruments

261,221,882

Share premium

858,885

(Accumulated losses)/Retained earnings

(42,869,371)

(39,027,680)

(65,296,438)

(65,772,958)

Other reserves

4,139,983

9,697,570

3,825,730

8,453,359

Deductions:

Goodwill accounted for as intangible asset

(5,605,349)

(5,664,745)

Other intangible assets

(456,370)

(1,420,907)

(445,851)

(1,408,920)

Deferred tax liabilities associated to other intangible assets

Deferred tax asset that rely on future profitability and

arise from temporary differences (3,273,047)

(3,287,818) -

Market value of assets pledged in favour of

Depositor Compensation Scheme (4,433,866)

(5,098,388) (4,433,866)

(5,098,388)

Insufficient coverage for non-performing exposures

(297,448)

Value adjustments due to the requirements for

prudent valuation (624,701)

(628,661) (344,199)

(328,112)

Other transitional adjustments

4,765,539

6,614,306

1,984,150

2,777,810

Common equity tier 1

213,426,137

223,264,444

197,370,293

200,703,558

Total tier 1

213,426,137

223,264,444

197,370,293

200,703,558

Total tier 2

Total own funds

213,426,137

223,264,444

197,370,293

200,703,558

FIMBank Group Annual Report & Financial Statements 2021

112

Fair values of financial instruments

The Group’s Accounting Policy on fair value measurements is discussed in Accounting Policy 3.10.7.

The determination of fair value for financial assets and liabilities for which there is no observable market price requires the use of

valuation techniques as described in Accounting Policy 3.10.7. For financial instruments that trade infrequently and have little price

transparency, fair value is less objective, and requires varying degrees of judgement depending on liquidity, concentration, uncertainty

of market factors, pricing assumptions and other risks affecting the specific instrument. The fair value framework and hierarchy that

reflects the significance of the inputs used in measuring financial instruments is set out in Note 2.4.2.1.

Valuation techniques include net present value and discounted cash flow models, comparison to similar instruments for which market

observable prices exist, and other valuation models. Assumptions and inputs used in valuation techniques include risk-free and

benchmark interest rates, credit spreads and other premia used in estimating discount rates, bond and equity prices, foreign currency

exchange rates, and expected price volatilities and correlations.

The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the

asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date.

The Group uses widely recognised valuation models for determining the fair value of common and more simple financial instruments,

like interest rate and currency swaps that use only observable market data and require little management judgement and estimation.

Observable prices and model inputs are usually available in the market for listed debt securities and exchange traded derivatives and

simple over-the-counter derivatives like currency rate swaps. Availability of observable market prices and model inputs reduces the

need for management judgement and estimation and, also reduces the uncertainty associated with determination of fair values.

Availability of observable market prices and inputs varies depending on the products and markets and is prone to changes based on

specific events and general conditions in the financial markets.

For more complex instruments, the Group uses proprietary valuation models, which are usually developed from recognised valuation

models. Some or all of the significant inputs into these models may not be observable in the market and, are derived from market prices

or rates or are estimated based on assumptions. Example of instruments involving significant unobservable inputs include certain loans

and securities for which there is no active market. Valuation models that employ significant unobservable inputs require a higher degree

of management judgement and estimation in the determination of fair value. Management judgement and estimation are usually

required for selection of the appropriate valuation model to be used, determination of expected future cash flows on the financial

instrument being valued, determination of probability of counterparty default and prepayments and selection of appropriate discount

rates.

Fair value estimates obtained from models are adjusted for any other factors, such as liquidity risk or model uncertainties, to the extent

that the Group believes that a third-party market participant would take them into account in pricing a transaction. Fair values reflect

the credit risk of the instrument and include adjustments to take account of the credit risk of the Group entity and the counterparty

where appropriate.

FIMBank Group Annual Report & Financial Statements 2021

113

The table below analyses financial instruments measured at fair value by the level in the fair value hierarchy into which the fair value

measurement is categorised.

Level 1

Level 2

Level 3

Total

Note

USD

Assets

Derivative assets held for risk management:

– foreign exchange

841,688

Trading assets

439,985,203

Financial assets at fair value through profit or loss

53,077

19,913,086

19,966,163

Financial assets at fair value through other

comprehensive income

162,408,542

Liabilities

Derivative liabilities held for risk management:

– foreign exchange

1,499,026

Level 1

Level 2

Level 3

Total

Note

USD

Assets

Derivative assets held for risk management:

– foreign exchange

991,624

Trading assets

452,326,547

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

153,327,686

Liabilities

Derivative liabilities held for risk management:

– foreign exchange

1,629,434

Level 1

Level 2

Level 3

Total

Note

USD

Assets

Derivative assets held for risk management:

– foreign exchange

841,688

Financial assets at fair value through profit or loss

53,077

19,913,086

19,966,163

Financial assets at fair value through other

comprehensive income

162,408,542

Liabilities

Derivative liabilities held for risk management:

– foreign exchange

1,499,026

– interest rate

34,530

FIMBank Group Annual Report & Financial Statements 2021

114

Level 1

Level 2

Level 3

Total

Note

USD

Assets

Derivative assets held for risk management:

– foreign exchange

991,624

– interest rate

27,664

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

153,327,686

Liabilities

Derivative liabilities held for risk management:

– foreign exchange

1,629,434

Transfers of financial instruments between different levels of the fair value hierarchy, if any, are recorded as of the end of the reporting

period. There were no transfers in or out of Level 3 during the reporting period.

The following table shows a reconciliation from the opening balances to the closing balances for fair value measurements in Level 3 of

the fair value hierarchy.

Trading

assets

Financial assets at

fair value through

profit or loss

Total

USD

Balance at 1 January 2021

452,326,547

20,332,246

472,658,793

Total gains and losses in profit or loss

651,802

388,035

1,039,837

Purchases

623,419,539

898,492

624,318,031

Settlements

(627,692,362)

(143,654)

(627,836,016)

Effects of movement in exchange rates

(8,720,323)

(1,562,033)

(10,282,356)

Balance at 31 December 2021

439,985,203

19,913,086

459,898,289

Trading

assets

Financial assets at

fair value through

profit or loss

Total

USD

Balance at 1 January 2020

460,238,536

125,289,721

585,528,257

Total gains and losses in profit or loss

(1,300,287)

(670,197)

(1,970,484)

Purchases

471,299,660

Settlements

(490,598,518)

(106,000,000)

(596,598,518)

Effects of movement in exchange rates

12,687,156

1,712,722

14,399,878

Balance at 31 December 2020

452,326,547

20,332,246

472,658,793

FIMBank Group Annual Report & Financial Statements 2021

115

Financial assets at

fair value through

profit or loss

USD

Balance at 1 January 2021

20,332,246

Total gains and losses in profit or loss

388,035

Purchases

898,492

Settlements

(143,654)

Effects of movement in exchange rates

(1,562,033)

Balance at 31 December 2021

19,913,086

Financial assets at

fair value through

profit or loss

USD

Balance at 1 January 2020

125,289,721

Total gains and losses in profit or loss

(670,197)

Purchases

Settlements

(106,000,000)

Effects of movement in exchange rates

1,712,722

Balance at 31 December 2020

20,332,246

The change in unrealised gains or losses for the year included in profit or loss relating to those assets held at 31 December 2021

amounted to USD296,438 (2020: USD 802,723).

These gains and losses are recognised in profit or loss as ‘Net gain from other financial instruments carried at fair value’.

The below sets out information about significant unobservable inputs used at 31 December 2021 in measuring financial instruments

categorised as Level 3 in the fair value hierarchy.

The ‘trading assets’ portfolio represent forfaiting assets, that is the discounting of receivables generated from an export contract on a

without recourse basis. The assets would be evidenced by a number of different debt instruments including bills of exchange,

promissory notes, letters of credit and trade or project related syndicated and bi-lateral loan (financing) agreements.

The Group establishes fair value of its trading assets using a valuation technique based on the discounted expected future principal and

interest cash flows. The discount rate is an estimate based on current expected credit margin spreads and interest rates at the reporting

date. Inputs to valuation technique reasonably represent market expectation and measures of risk-return factors inherent in the

financial instrument.

The Group uses the LIBOR yield curve as of each reporting date, plus an adequate credit margin spread to discount the trading assets

held. At 31 December 2021, the interest rates used range between 0.98% and 19.30% (2020: between 2.06% and 10.27%).

The effect of a one-percentage point increase/(decrease) in the interest rate on trading assets at 31 December 2021 would

increase/(decrease) the Group equity by approximately USD2,835,580 (2020: USD1,115,543).

FIMBank Group Annual Report & Financial Statements 2021

116

As at December 2021, ‘financial assets at fair value through profit or loss’ mainly represent holdings in two sub-funds and a foreign

holding company, as follows:

 an unlisted sub-fund of a local collective investment scheme regulated by the MFSA, which is independently run by an investment

manager licensed and regulated by the Financial Conduct Authority in London. The sub-fund invests in sustainable energy plants

with returns generated throughout the life of each plant.

The fair value is measured by the Group based on periodical net asset valuations prepared by the scheme’s independent

administrator. The sub-fund’s assets are marked to fair market value. Assets are marked at observable traded prices where that is

possible. Where there is no observable price, the assets are marked in accordance with best market practice. This may involve the

use of models and forward projections. Inputs and assumptions used in these models may be subjective and could include a number

of highly judgemental uncertainties including the projected valuations of the individual plants and the future potential income from

each plant.

The effect of a ten-percentage point increase/(decrease) in the net asset value of the sub-fund at 31 December 2021 would

increase/(decrease) the Bank and Group equity by approximately USD1,737,699 (2020: USD1,851,723).

 an unlisted sub-fund of a local collective investment scheme regulated by the MFSA, which is independently run by an investment

manager licensed and regulated by the Financial Conduct Authority in UK. The sub-fund invests in a variety of investments, with

relative complex structures and limited liquidity.

The fair value is measured by the Group based on periodical net asset valuations prepared by the scheme’s independent

administrator. The sub-fund’s assets are marked to fair market value. Assets are marked at observable traded prices where that is

possible. Where there is no observable price, the assets are marked in accordance with best market practice. This may involve the

use of models and forward projections. Inputs and assumptions used in these models may be subjective and could include a number

of highly judgemental uncertainties including the projected valuations of the individual assets and the future potential income from

each asset.

The effect of a ten-percentage point increase/(decrease) in the net asset value of the sub-fund at 31 December 2021 would

increase/(decrease) the Bank and Group equity by approximately USD168,967 (2020: USD181,502).

 A foreign holding company registered in the State of Kuwait. The fair value is measured by the Group based on a market price

quoted by a custodian.

The effect of a ten-percentage point increase/(decrease) in the net asset value of the equity shares at 31 December 2021 would have

increased/(decreased) the Bank and Group equity by approximately USD84,643.

FIMBank Group Annual Report & Financial Statements 2021

117

Classification of financial assets and liabilities

The following tables provide a reconciliation between line items in the Statements of Financial Position and categories of financial

instruments.

Mandatorily

at fair value

through

profit or loss

Designated

at fair value

through

profit or loss

Fair value

through other

comprehensive

income debt

instruments

Amortised

cost

Total

carrying

amount

USD

Balances with the Central Bank of

Malta, treasury bills and cash -

239,998,839 239,998,839

Derivative assets held for risk

management 841,688 -

841,688

Trading assets

439,985,203

Loans and advances to banks

198,488,576

Loans and advances to customers

628,912,340

Financial assets at fair value through

profit or loss

19,913,086

53,077

19,966,163

Financial assets at fair value through

other comprehensive income

162,408,542

Investments at amortised cost

9,914,754

Total financial assets

460,739,977

53,077

162,408,542

1,077,314,509

1,700,516,105

Derivative liabilities held for risk

management

1,499,026

Amounts owed to banks

563,553,044

Amounts owed to customers

934,096,196

Debt securities in issue

45,345,575

Total financial liabilities

1,499,026

1,542,994,815

1,544,493,841

FIMBank Group Annual Report & Financial Statements 2021

118

Mandatorily

at fair value

through

profit or loss

Designated

at fair value

through

profit or loss

Fair value

through other

comprehensive

income debt

instruments

Amortised

cost

Total

carrying

amount

USD

Balances with the Central Bank of

Malta, treasury bills and cash

319,287,524

Derivative assets held for risk

management

991,624

Trading assets

452,326,547

Loans and advances to banks

193,139,577

Loans and advances to customers

591,995,726

Financial assets at fair value through

profit or loss

20,332,246

53,077

20,385,323

Financial assets at fair value through

other comprehensive income

153,327,686

Investments at amortised cost

9,839,457

Total financial assets

473,650,417

53,077

153,327,686

1,114,262,284

1,741,293,464

Derivative liabilities held for risk

management

1,629,434

Amounts owed to banks

429,443,480

Amounts owed to customers

1,101,570,295

Debt securities in issue

50,832,661

Total financial liabilities

1,629,434

1,581,846,436

1,583,475,870

Mandatorily

at fair value

through

profit or loss

Designated

at fair value

through

profit or loss

Fair value

through other

comprehensive

income debt

instruments

Amortised

cost

Total

carrying

amount

USD

Balances with the Central Bank of

Malta, treasury bills and cash

239,982,048

Derivative assets held for risk

management

841,688

Loans and advances to banks

182,458,548

Loans and advances to customers

745,564,139

Financial assets at fair value through

profit or loss

19,913,086

53,077

19,966,163

Financial assets at fair value through

other comprehensive income

162,408,542

Investments at amortised cost

9,914,754

Total financial assets

20,754,774

53,077

162,408,542

1,177,919,489

1,361,135,882

Derivative liabilities held for risk

management

1,533,556

Amounts owed to banks

497,633,356

Amounts owed to customers

838,675,598

Total financial liabilities

1,533,556

1,336,308,954

1,337,842,510

FIMBank Group Annual Report & Financial Statements 2021

119

At 31 December 2021 and 31 December 2020, the fair value of the financial assets measured at amortised cost is approximately equal

to the carrying amount. The approximate fair value is based on the following:

 ‘balances with Central Bank of Malta, treasury bills and cash’ and ‘investments at amortised cost’

The majority of these assets reprice or mature in less than one hundred eighty days. Hence their fair value is not deemed to differ

materially from their carrying amount at the respective reporting dates.

 ‘loans and advances to banks’ and ‘loans and advances to customers’

Loans and advances to banks and 

financial reporting date. 80% of the Group’s loans and advances to banks and customers are all repayable within a period of less

than 12 months and the interest is re-priced to take into account changes in benchmark rate. As a result, the carrying amount of

loans and advances to customers is a reasonable approximation of fair value.

 ‘amounts owed to banks’, ‘amounts owed to customers’ and ‘debt securities in issue’

The majority of these liabilities reprice or mature in less than one year. Hence their fair value is not deemed to differ materially from

their carrying amount at the respective reporting dates.

The Group’s debt securities in issue are subject to fixed and variable interest rates. Interest rates on debt securities are further

disclosed in Note 34.

Mandatorily

at fair value

through

profit or loss

Designated

at fair value

through

profit or loss

Fair value

through other

comprehensive

income debt

instruments

Amortised

cost

Total

carrying

amount

USD

Balances with the Central Bank of

Malta, treasury bills and cash

319,267,749

Derivative assets held for risk

management

1,019,288

Loans and advances to banks

179,364,067

Loans and advances to customers

779,834,360

Financial assets at fair value through

profit or loss

20,332,246

53,077

20,385,323

Financial assets at fair value through

other comprehensive income

153,327,686

Investments at amortised cost

9,839,457

Total financial assets

21,351,534

53,077

153,327,686

1,288,305,633

1,463,037,930

Derivative liabilities held for risk

management

1,629,434

Amounts owed to banks

387,900,641

Amounts owed to customers

1,037,118,337

Total financial liabilities

1,629,434

1,425,018,978

1,426,648,412

FIMBank Group Annual Report & Financial Statements 2021

120

Operating segments

The group has five significant reportable segments (trade finance, forfaiting, factoring, real estate and treasury) which are represented

by different Group entities.

Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit

before tax, as included in the internal management reports that are reviewed by Executive Management. Segment profit is used to

measure performance as management believes that such information is the most relevant in evaluating the results of certain segments

relative to other entities that operate within these industries.

In the table below, ‘interest income’ is disclosed gross of interest expense since it represents the revenue measure used by Executive

Management in assessing the performance of each segment. ‘Net interest income’ is disclosed in Note 9, including further analysis of

its components.

Trade finance

Forfaiting

Factoring

Real estate

Treasury

Total

USD

External revenue

Interest income

2,812,731

17,533,106

9,398,610

4,058,183

3,670,705

37,473,335

Net fee and commission income

1,130,896

5,900,173

3,588,083

750,030

442,476

11,811,658

Net trading results

1,431,007

1,071,419

2,502,426

Net gain from other

financial instruments

1,137,221

Dividend income

1,089,189

5,032,816

24,864,286

12,986,693

4,808,213

6,321,821

54,013,829

Reportable segment (loss)/profit

before income tax

(8,643,915)

6,944,840

(4,060,541)

2,170,415

1,604,540

(1,984,661)

Reportable segment assets

177,212,662

444,928,907

446,963,427

54,242,483

590,666,529

1,714,014,008

Reportable segment liabilities

71,353,439

94,101,409

144,015,176

1,243,193,425

1,552,663,449

Trade finance

Forfaiting

Factoring

Real estate

Treasury

Total

USD

External revenue

Interest income

3,813,627

20,568,391

8,768,549

4,967,958

1,068,750

39,187,275

Net fee and commission income

2,001,284

4,645,973

3,394,903

881,770

682,226

11,606,156

Net trading results

(121,164)

Net gain from other

financial instruments

277,137

Dividend income

240,817

6,055,728

25,214,364

12,163,452

5,849,728

1,906,949

51,190,221

Reportable segment (loss)/profit

before income tax

(34,110,787)

5,365,965

(5,185,365)

2,123,915

(2,260,476)

(34,066,748)

Reportable segment assets

230,740,331

459,398,105

322,815,443

93,693,321

651,047,518

1,757,694,718

Reportable segment liabilities

76,380,384

90,020,926

75,157,615

1,323,043,782

1,564,602,707

FIMBank Group Annual Report & Financial Statements 2021

121

The financial position and performance of items not falling within any of the significant reportable segments is grouped as ‘other’, and

this includes items of non-core activities mainly related to the letting of property to third parties and IT solutions.

2021

2020

USD

Revenues

Total revenue for reportable segments

54,013,829

51,190,221

Consolidated adjustments

(975,515)

(3,543,716)

Other revenue

600,397

4,824,761

Consolidated revenue

53,638,711

52,471,266

Profit or loss

Total loss for reportable segments

(1,984,661)

(34,066,748)

Other gains/(losses)

1,614,235

(1,585,424)

(370,426)

(35,652,172)

Effect of other consolidation adjustments on segment results

(922,508)

(157,762)

Consolidated loss before tax

(1,292,934)

(35,809,934)

2021

2020

USD

Assets

Total assets for reportable segments

1,714,014,008

1,757,694,718

Other assets

74,448,793

76,125,320

1,788,462,801

1,833,820,038

Effect of other consolidation adjustments on segment results

9,549

225,985

Consolidated assets

1,788,472,350

1,834,046,023

Liabilities

Total liabilities for reportable segments

1,552,663,449

1,564,602,707

Other liabilities

12,575,017

38,476,799

1,565,238,466

1,603,079,506

Effect of other consolidation adjustments on segment results

(746,299)

(2,191,612)

Consolidated liabilities

1,564,492,167

1,600,887,894

FIMBank Group Annual Report & Financial Statements 2021

122

In presenting information on the basis of geographical areas, revenue is based on the geographical location of customers, and assets

are based on the geographical location of the assets – separately disclosing countries which exceed 10% of the total.

External revenues and net trading

results

2021

2020

USD

Malta

9,069,378

9,716,486

India

6,176,542

5,648,251

Other countries (individually less than 10%)

38,392,791

37,106,528

53,638,711

52,471,265

Malta

Other countries

Total

2021

2020

2021

2020

2021

2020

USD

Non-current assets

52,762,681

54,539,884

4,748,188

4,549,087

57,510,869

59,088,971

‘Non-current assets’ include ‘property and equipment’, ‘investment property’ and ‘intangible assets and goodwill’.

Net interest income

Group

Bank

2021

2020

2021

2020

USD

Interest income

On negative interest Central Bank of Malta funding

634,925

559,670

634,925

559,670

On loans and advances to banks

601,227

749,343

194,887

359,886

On loans and advances to customers

17,670,854

19,083,222

11,820,430

13,529,312

On loans and advances to subsidiary companies

5,904,351

7,022,253

18,907,006

20,392,235

18,554,593

21,471,121

On forfaiting assets

17,531,585

20,568,088

On financial assets at fair value through

other comprehensive income

500,599

745,196

500,599

745,196

On investments at amortised cost

372,810

410,919

372,810

410,919

On other trade finance activities

160,230

94,488

160,230

94,488

37,472,230

42,210,926

19,588,232

22,721,724

Interest expense

On amounts owed to banks

4,168,473

3,903,190

2,723,464

2,899,533

On amounts owed to customers

6,281,151

7,570,083

6,281,151

7,570,084

On debt securities in issue

685,627

1,086,043

On amounts owed to subsidiary companies

1,343

402

On Central Bank of Malta funding and negative interest deposits

933,065

743,346

933,065

743,346

On negative interest treasury balances

459,337

154,374

459,337

154,374

On lease liability with third parties

75,822

110,740

17,022

22,470

On lease liability with subsidiaries

41,624

91,792

12,603,475

13,567,776

10,457,006

11,482,001

Net interest income

24,868,755

28,643,150

9,131,226

11,239,723

Included in Group and Bank are ‘interest income’ and ‘interest expense’ payable to the parent company and other related companies

(see Note 43).

FIMBank Group Annual Report & Financial Statements 2021

123

Net fee and commission income

Group

Bank

2021

2020

2021

2020

USD

Fee and commission income

Credit related fees and commission

2,017,411

2,012,475

2,000,046

1,991,286

On letters of credit

1,025,129

792,183

1,059,076

882,437

On factoring

5,262,546

4,228,617

832,564

1,021,866

On forfaiting

6,650,820

5,530,736

On IT solutions

95,000

Charged to subsidiaries

252,731

111,120

Other fees

943,642

1,597,758

796,426

1,360,158

15,899,548

14,256,769

4,940,843

5,366,867

Fee and commission expense

Correspondent banking fees

311,282

602,791

235,845

541,759

Credit related fees and commission

548,121

764,614

316,437

410,551

On forfaiting

924,623

1,177,298

On factoring

2,110,498

1,565,628

1,076,934

902,724

Insurance cover

1,146,048

1,153,417

506,173

618,281

Charged by subsidiaries

10,158

55,623

Other fees

21,413

23,340

19,991

23,340

5,061,985

5,287,088

2,165,538

2,552,278

Net fee and commission income

10,837,563

8,969,681

2,775,305

2,814,589

Included in Group and Bank are ‘fee and commission income’ and ‘fee and commission expense’ payable to the parent company and

other related companies (see Note 43).

Net trading results

Group

Bank

2021

2020

2021

2020

USD

Net trading income/(expense) from assets held for trading

1,889,779

(680,804)

Foreign exchange rate results

1,554,424

1,809,201

1,392,276

2,145,012

Net results on derivatives held for risk management

(941,777)

(1,249,561)

(1,986,629)

(2,976,256)

2,502,426

(121,164)

(594,353)

(831,244)

Net gain from other financial instruments carried at fair value

Group

Bank

2021

2020

2021

2020

USD

Investment securities

Equity investments at fair value through profit or loss

388,035

(1,030,938)

388,035

(1,030,938)

Debt investments at fair value through

other comprehensive income 749,186 1,308,075 749,186 1,308,075

1,137,221

277,137

1,137,221

277,137

FIMBank Group Annual Report & Financial Statements 2021

124

Dividend income

Group

Bank

2021

2020

2021

2020

USD

Dividend income from equity investments at

fair value through profit or loss 1,089,189 240,817 1,089,189 240,817

Dividend income from subsidiary undertaking

15,899,860

7,000,000

1,089,189

240,817

16,989,049

7,240,817

Other operating income

Group

Bank

2021

2020

2021

2020

USD

Rental income from leased property

720,996

891,314

124,189

120,703

Profit on disposal of property and equipment

7,994

2,533

9,751

Other non-trading income

728,990

893,869

133,940

120,725

Administrative expenses

Group

Bank

2021

2020

2021

2020

USD

Personnel expenses

25,949,981

24,914,693

14,792,481

14,766,236

Expenses relating to short-term leases and

leases of low-value assets 252,975 204,920 123,132 92,039

Other administrative expenses

10,882,639

10,490,463

7,202,358

7,583,904

Recharge of services rendered by subsidiaries

1,095,395

1,280,624

37,085,595

35,610,076

23,213,366

23,722,803

No ‘expenses relating to short-term leases and leases of low-value assets’ for the Bank were payable to subsidiary companies (2020:

USD2,872).

Included in ‘other administrative expenses’ of the Bank and Group for the financial year ended 31 December 2021 are the following fees

charged by the Group Statutory Auditors:

Audit services

Other assurance

services

Tax

advisory services

Other

non-audit services

2021

2020

2021

2020

2021

2020

2021

2020

USD

By the auditors of the parent

411,952

323,796

160,143

174,566

13,311

9,658

6,976

14,880

By the auditors of subsidiaries

293,723

322,990

112,133

51,648

2,803

2,770

485

All fees are inclusive of indirect taxes.

FIMBank Group Annual Report & Financial Statements 2021

125

Group

Bank

2021

2020

2021

2020

USD

Directors’ emoluments

414,414

388,320

414,414

359,977

Staff costs:

- wages, salaries and allowances

24,112,170

23,190,904

13,817,936

13,833,820

- defined contribution costs

1,423,397

1,335,469

560,131

572,439

25,949,981

24,914,693

14,792,481

14,766,236

The average number of persons employed during the year was as follows:

Group

Bank

2021

2020

2021

2020

No. of

employees

Executive and senior managerial

Other managerial, supervisory and clerical

277

296

152

162

Other staff

324

345

174

186

In May 2019, the Annual General Meeting authorised the Board of Directors of the Bank to issue and allot up to a maximum of

10,000,000 Equity Securities over a period of five years limitedly, for the purpose of implementing the Employee Share Award Scheme

Rules.

During 2021 and 2020 the Bank has not awarded shares under the Employee Share Award Scheme.

India Factoring has an Employee Stock Option Plan (ESOP), under which it has granted 2,844,000 options to the eligible employees of

the company on the basis of their service and other eligibility criteria. The ESOP is monitored by India Factoring Employee Welfare

Trust, a shareholder of India Factoring.

At 31 December 2021, the company had 2,152,800 (31 December 2020: 2,152,800) outstanding share options, at an exercise price of

INR10/option (31 December 2020: INR10/option).

FIMBank Group Annual Report & Financial Statements 2021

126

Taxation

Group

Bank

2021

2020

2021

2020

USD

Current tax

(721,589)

(1,010,351)

(113,418)

(566,776)

Deferred tax

- deferred tax assets

(1,598,000)

(10,212,470)

(6,000,000)

Taxation

(2,319,589)

(11,222,821)

(113,418)

(6,566,776)

Before tax

Tax benefit

Net of tax

USD

Items that will not be reclassified to profit or loss

Movement in fair value reserve (property and equipment)

(399,566)

Items that are or may be reclassified subsequently to profit or loss

Movement in translation reserve:

- Foreign currency translation differences for foreign operations

(1,677,971)

Movement in fair value reserve (debt instruments):

- Net change in fair value

Fair value movement

(3,494,521)

745,583

(2,748,938)

Loss allowance

10,238

(3,484,283)

745,583

(2,738,700)

- Net amount reclassified to profit or loss

Fair value movement

(749,186)

(6,311,006)

745,583

(5,565,423)

FIMBank Group Annual Report & Financial Statements 2021

127

Before tax

Tax expense

Net of tax

USD

Items that are or may be reclassified subsequently to profit or loss

Movement in translation reserve:

- Foreign currency translation differences for foreign operations

(2,878,066)

Movement in fair value reserve (debt instruments):

- Net change in fair value

Fair value movement

5,916,567

(420,207)

5,496,360

Amortisation

(2,111,785)

Loss allowance

(20,152)

3,784,630

(420,207)

3,364,423

- Net amount reclassified to profit or loss

Fair value movement

(1,308,075)

(401,511)

(420,207)

(821,718)

Before tax

Tax benefit

Net of tax

USD

Items that are or may be reclassified subsequently to profit or loss

Movement in fair value reserve (debt instruments):

- Net change in fair value

Fair value movement

(3,494,521)

745,583

(2,748,938)

Loss allowance

10,238

(3,484,283)

745,583

(2,738,700)

- Net amount reclassified to profit or loss

Fair value movement

(749,186)

(4,233,469)

745,583

(3,487,886)

Before tax

Tax expense

Net of tax

USD

Items that are or may be reclassified subsequently to profit or loss

Movement in fair value reserve (debt instruments):

- Net change in fair value

Fair value movement

5,916,567

(420,207)

5,496,360

Amortisation

(2,111,785)

Loss allowance

(20,152)

3,784,630

(420,207)

3,364,423

- Net amount reclassified to profit or loss

Fair value movement

(1,308,075)

2,476,555

(420,207)

2,056,348

FIMBank Group Annual Report & Financial Statements 2021

128

Group

Bank

2021

2020

2021

2020

USD

Loss before tax

(1,292,934)

(35,809,934)

(549,801)

(49,409,826)

Tax income using the domestic income tax rate of 35%

452,527

12,533,477

192,430

17,293,439

Tax effect of:

Non-deductible expenses

(21,590)

(108,982)

(1,296)

(74,326)

Non-deductible capital loss

(940,450)

(30,575)

(3,259,900)

Non-taxable income

412,622

90,488

5,946,167

2,534,286

Unrecognised temporary differences

(4,769,976)

(24,123,723)

(6,146,421)

(22,690,463)

Investment tax credit

22,762

Different tax rates on capital gains

(332)

Different tax rates in foreign jurisdictions

1,607,160

1,303,607

(73,391)

(369,812)

Taxation

(2,319,589)

(11,222,821)

(113,418)

(6,566,776)

Earnings per share

The calculation of basic loss per share has been based on the following results attributable to ordinary shareholders and weighted

average number of ordinary shares outstanding.

Group

Bank

2021

2020

2021

2020

USD

Loss attributable to Equity Holders of the Bank

(3,840,703)

(46,898,575)

(663,219)

(55,976,602)

2021

2020

No. of shares

Weighted average number of ordinary shares at 31 December (basic)

522,443,763

FIMBank Group Annual Report & Financial Statements 2021

129

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

Group

Bank

2021

2020

2021

2020

USD

Cash

24,079

26,531

7,288

6,756

Balances with the Central Bank of Malta

98,381,107

245,785,027

98,381,107

245,785,027

Treasury bills

141,713,250

73,628,666

141,713,250

73,628,666

Loss allowance

(119,597)

(152,700)

(119,597)

(152,700)

239,998,839

319,287,524

239,982,048

319,267,749

‘Balances with the Central Bank of Malta’ include a reserve deposit of EUR8,451,100 (USD9,571,979) (2020: EUR9,131,084

(USD11,205,159) in terms of Regulation (EC) No: 1745/2003 of the European Central Bank.

At 31 December 2021, ‘treasury bills’ included assets with a carrying amount of USD141,713,250 (2020: USD56,448,644) pledged in

favour of third parties under borrowing arrangements.

Derivatives held for risk management

Group

Bank

2021

2020

2021

2020

USD

Derivative assets held for risk management

- foreign exchange

841,688

991,624

841,688

991,623

- interest rate

27,665

841,688

991,624

841,688

1,019,288

Derivative liabilities held for risk management

- foreign exchange

(1,499,026)

(1,629,434)

(1,499,026)

(1,629,434)

- interest rate

(34,530)

(1,499,026)

(1,629,434)

(1,533,556)

(1,629,434)

Trading assets

‘Trading assets’ represent forfaiting assets held by London Forfaiting Company Limited and comprise bills of exchange, promissory

notes and transferable trade related loans. These assets are held for short-term trading.

At 31 December 2021, there were no ‘trading assets’ pledged in favour of third parties under reverse-repos or borrowing arrangements

(2020: Nil).

FIMBank Group Annual Report & Financial Statements 2021

130

Loans and advances to banks

Group

Bank

2021

2020

2021

2020

USD

Repayable on call and at short notice

35,044,550

38,558,675

27,011,814

32,298,834

Term loans and advances

22,489,142

44,245,546

14,474,062

36,654,921

57,533,692

82,804,221

41,485,876

68,953,755

Pledged in favour of third parties

141,341,035

114,326,911

141,341,035

114,326,911

Gross loans and advances to banks

198,874,727

197,131,132

182,826,911

183,280,666

Loss allowance

(386,151)

(3,991,555)

(368,363)

(3,916,599)

Net loans and advances to banks

198,488,576

193,139,577

182,458,548

179,364,067

‘Pledged in favour of third parties’ is comprised exclusively of assets pledged in favour of third parties under borrowing arrangements.

See Note 43 for balances due from related parties.

Loans and advances to customers

Group

Bank

2021

2020

2021

2020

USD

Repayable on call and at short notice

479,749,066

387,390,649

199,573,375

192,412,375

Term loans and advances

226,756,238

300,689,617

226,749,228

300,663,190

706,505,304

688,080,266

426,322,603

493,075,565

Pledged in favour of third parties

5,191,890

5,494,363

5,191,890

5,494,363

Amounts owed by subsidiary companies

383,006,632

359,140,454

Total loans and advances to customers

711,697,194

693,574,629

814,521,125

857,710,382

Loss allowance

(82,784,854)

(101,578,903)

(68,956,986)

(77,876,022)

Net loans and advances to customers

628,912,340

591,995,726

745,564,139

779,834,360

‘Pledged in favour of third parties’ include an amount of USD365,808 (2020: USD328,797) pledged in favour of the Single Resolution

Fund and USD4,705,713 (2020: USD5,098,385) pledged in favour of the Depositor Compensation Scheme.

‘Amounts owed by subsidiary companies’ include facilities that are unsecured and repayable on demand. Pricing of facilities is

dependent on the currency of funding and market conditions.

During 2021, a stage 3 loan was partially settled by transfer of 7,609,907 shares in Tawazun Holding Company (KSC) (refer to Note 23).

See Note 43 for balances due from other related parties.

FIMBank Group Annual Report & Financial Statements 2021

131

Financial assets at fair value through profit or loss

At reporting date, the Group and Bank held an investment in two unlisted sub-funds of a local collective investment scheme regulated

by the MFSA, which is independently run by an investment manager licensed and regulated by the Financial Conduct Authority in

London. An investment amounting to USD17,376,985 (2020: USD18,517,229) in Sustainable Investment Fund, a sub-fund that invests

in sustainable energy plants with returns generated throughout the life of each plant and an investment amounting to USD1,689,666

(2020: USD1,815,017) in Global Opportunities Fund, a sub-fund that invests in a variety of investments, with relative complex structures

and limited liquidity.

At reporting date, the Group and Bank holds more than 50% of the units in Sustainable Investment Fund. However, these shares do not

carry any voting rights in relation to management and control of the sub-fund. The Group and Bank do not have the power to direct the

relevant activities of the sub-fund or to affect the amount of own returns. As a result, the Group and Bank is not consolidating the

investment and is measuring it at fair value through profit or loss.

During 2020, the Group and Bank has redeemed all the units in Trade Finance Fund. 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. This redemption has

resulted in a realised loss of USD360,741 for the Bank and the Group.

During 2021, the Group and Bank acquired 0.777% equity shares in a foreign holding company, Tawazun Holding Company (KSC),

through a debt settlement agreement. The settlement value has been determined by reference to the fair value of the acquired equity

shares amounting to USD898,492 (Refer to Note 22).

Financial assets at fair value through other comprehensive

income

‘Financial assets at fair value through other comprehensive income’ is comprised exclusively of debt instruments.

At 31 December 2021, ‘financial assets at fair value through other comprehensive income’ included assets with a carrying amount of

USD121,958,073 (2020: USD127,809,734) pledged in favour of third parties under borrowing arrangements.

Investments at amortised cost

Group

Bank

2021

2020

2021

2020

USD

Debt investments at amortised cost

9,972,376

9,910,131

9,972,376

9,910,131

Loss allowance

(57,622)

(70,674)

(57,622)

(70,674)

9,914,754

9,839,457

9,914,754

9,839,457

FIMBank Group Annual Report & Financial Statements 2021

132

Investments in subsidiaries

Bank

2021

2020

USD

At 1 January

147,436,214

147,948,385

Additional investment in London Forfaiting Company Limited

12,100,000

7,000,000

Additional investment in FIMFactors B.V.

1,801,829

Movement in impairment of investments

(87,356)

(9,314,000)

At 31 December

159,448,858

147,436,214

Name of company

Country of

incorporation

Nature of

business

Equity

interest

Bank

2021

2020

2021

2020

USD

FIM Business Solutions Limited

Malta

IT services

provider

100

5,000

FIM Property Investment Limited

Malta

Property

management

100

1,005,749

London Forfaiting Company Limited

United Kingdom

Forfaiting

100

106,466,435

94,366,435

The Egyptian Company for Factoring S.A.E.

Egypt

Factoring

100

11,664,983

FIMFactors B.V.

Netherlands

Holding

company

100

40,306,690

40,394,046

FIM Holdings (Chile) S.p.A.

Chile

Holding

company

100

159,448,858

147,436,214

The carrying amount of the ‘investments in subsidiaries’ is stated net of impairment, amounting to USD50,055,426 (2020:

USD49,968,070), in relation to FIMFactors B.V., The Egyptian Company for Factoring S.A.E. and FIM Holdings (Chile) S.p.A.

The Bank, indirectly through FIMFactors B.V. controls India Factoring and Finance Solutions Private Limited, incorporated in India, to

carry out the business of factoring in India. As at December 2021, the Bank held 88.16% (2020: 88.16%) shareholding.

The Bank, indirectly through London Forfaiting Company Limited controls London Forfaiting International Limited, a holding company

incorporated in the United Kingdom. As at December 2021, the Bank held 100% (2020: 100%) shareholding.

In turn, London Forfaiting International Limited controls the following subsidiaries:

Name of company

Country of incorporation

Nature of business

Equity interest

2021

2020

London Forfaiting Americas Inc.

United States of America

Marketing

100

London Forfaiting do Brasil Ltda.

Brazil

Marketing

100

At each reporting date the Bank carries out an impairment assessment to calculate the recoverable amounts of its investment in

subsidiaries and determine the possibility of an impairment loss. At reporting date this was particularly important in light of the wide-

ranging impact of the COVID-19 pandemic. The Bank has carried out the assessment to detect any indication of impairment with the

existing and possible pandemic effects in mind. In performing this assessment, the Bank considered the expected drops in business

volumes and other adverse impacts the pandemic could have on the subsidiaries and the industries, geographies and economies they

operate it. This assessment was carried out on the basis of the underlying performance of each subsidiary. The resulting net impairment

loss for the year amounted to USD87,356 (2020: USD9,314,000).

The assumptions and methodology applied in determining the recoverable amount of a CGU are disclosed in Note 29.2.1.

FIMBank Group Annual Report & Financial Statements 2021

133

Property and equipment

Freehold

Land

Buildings

Computer

system

Improvement

to premises

Computer

equipment

Others

Total

USD

Cost

At 1 January 2020

7,759,088

26,546,212

1,955,011

1,293,994

4,153,477

3,013,312

44,721,094

Additions

469,044

63,994

189,302

80,413

802,753

Disposals

(26,911)

(8,368)

(35,279)

Lease modifications that decrease

the scope of the lease

(389,108)

Effect of movement in

exchange rates -

(15,587)

(4,927) (6,342) (4,001) (30,857)

At 31 December 2020

7,759,088

26,610,561

1,955,011

1,353,061

4,309,526

3,081,356

45,068,603

At 1 January 2021

7,759,088

26,610,561

1,955,011

1,353,061

4,309,526

3,081,356

45,068,603

Reclassification

(265,512)

(120,402)

(385,914)

Additions

955,519

8,682

408,652

69,608

1,442,461

Disposals

(115,789)

(121,548)

(237,337)

Lease modifications that decrease

the scope of the lease

(77,605)

Effect of movement in

exchange rates

(11,563)

(4,101)

(3,934)

(2,583)

(22,181)

At 31 December 2021

7,493,576

27,356,510

1,955,011

1,357,642

4,598,455

3,026,833

45,788,027

Depreciation

At 1 January 2020

2,365,377

1,955,011

449,079

3,509,126

2,656,032

10,934,625

Charge for the year

1,733,562

202,863

312,867

121,080

2,370,372

Release on disposals

(26,911)

(8,040)

(34,951)

Lease modifications that decrease

the scope of the lease

(358,371)

Effects of movement in

exchange rates -

(1,949) -

(1,042) (3,940) (2,957) (9,888)

At 31 December 2020

3,738,619

1,955,011

650,900

3,791,142

2,766,115

12,901,787

At 1 January 2021

3,738,619

1,955,011

650,900

3,791,142

2,766,115

12,901,787

Reclassification

1,713

11,939

13,652

Charge for the year

1,686,817

187,629

306,845

111,420

2,292,711

Release on disposals

(114,032)

(121,548)

(235,580)

Lease modifications that decrease

the scope of the lease

(77,605)

Effects of movement in

exchange rates

(8,442)

(3,024)

(3,540)

(2,386)

(17,392)

At 31 December 2021

5,339,389

1,955,011

835,505

3,982,128

2,765,540

14,877,573

Carrying amounts

At 1 January 2020

7,759,088

24,180,835

844,915

644,351

357,280

33,786,469

At 31 December 2020

7,759,088

22,871,942

702,161

518,384

315,241

32,166,816

At 31 December 2021

7,493,576

22,017,121

522,137

616,327

261,293

30,910,454

Carrying amount had the assets

been carried at cost

At 31 December 2021

4,816,132

15,630,217

522,137

614,478

251,662

21,834,626

As at 31 December 2021, ‘buildings’ includes right-of-use assets of USD2,163,727 (2020: USD2,189,052) related to leased branches and

office premises (see Note 42).

FIMBank Group Annual Report & Financial Statements 2021

134

Buildings

Computer

system

Improvement

to premises

Computer

equipment

Others

Total

USD

Cost

At 1 January 2020

5,815,093

1,955,011

710,821

3,224,642

2,042,438

13,748,005

Additions

110,340

126,548

16,196

253,084

Lease modifications that increase

the scope of the lease

(44,278)

At 31 December 2020

5,881,155

1,955,011

710,821

3,351,190

2,058,634

13,956,811

At 1 January 2021

5,881,155

1,955,011

710,821

3,351,190

2,058,634

13,956,811

Additions

382,305

17,206

399,511

Release on disposals

(53,890)

Lease modifications that increase

the scope of the lease

33,840

At 31 December 2021

5,914,995

1,955,011

710,821

3,733,495

2,021,950

14,336,272

Depreciation

At 1 January 2020

1,581,687

1,955,011

343,747

2,766,644

1,871,857

8,518,946

Charge for the year

1,603,720

49,544

219,327

57,765

1,930,356

At 31 December 2020

3,185,407

1,955,011

393,291

2,985,971

1,929,622

10,449,302

At 1 January 2021

3,185,407

1,955,011

393,291

2,985,971

1,929,622

10,449,302

Charge for the year

1,625,813

48,947

230,782

46,134

1,951,676

Release on disposals

(53,890)

Lease modifications that increase

the scope of the lease

23,935

At 31 December 2021

4,835,155

1,955,011

442,238

3,216,753

1,921,866

12,371,023

Carrying amounts

At 1 January 2020

4,233,406

367,074

457,998

170,581

5,229,059

At 31 December 2020

2,695,748

317,530

365,219

129,012

3,507,509

At 31 December 2021

1,079,840

268,583

516,742

100,084

1,965,249

As at 31 December 2021, ‘buildings’ is comprised exclusively of right-of-use assets related to leased branches and office premises (see

Note 42).

FIMBank Group Annual Report & Financial Statements 2021

135

Land and buildings are revalued by an independent, professionally qualified architect in accordance with Accounting Policy 3.17.1.

Valuations of land and buildings are done using the ‘investment income approach’ whereby market value is derived by capitalising at

an appropriate yield rate, the annual income produced, should the property be leased out to third parties. The income is based on actual

rental income as per current lease agreements. To determine the reasonableness of the actual rates being used a comparison is then

drawn between the actual rates and rental rates of other properties, taking cognisance of the location, size, layout, and planning and

energy performance considerations.

The land and premises were revalued on 31 December 2021.

The valuation contains a ‘valuation uncertainty’ clause as defined in the European Valuation Standards 2016, and in line with the ‘Kamra

tal-Periti’ Valuation Standards COVID-19 Guidance Note (May 2020), due to the market disruption caused by the COVID-19 pandemic,

which resulted in a reduction in transactional evidence and market yields. This clause does not invalidate the valuation but implies that

there is more uncertainty than under normal market conditions. Accordingly, the valuer cannot attach as much weight as usual to

previous market evidence for comparison purposes, and there is an increased risk that the price realised in an actual transaction would

differ from the value conclusion.

Property fair value measurement is classified as Level 3 (see Note 2.4.2.1). Significant unobservable inputs used in the valuation of these

properties is the rental income and the percentage capitalisation rate which indicates the multiplier relationship between net rental

income and property value. Further details about these significant inputs are summarised in the table below:

Valuation technique

Significant

unobservable inputs

Range of

unobservable inputs

per annum

Inter-relationship between key

unobservable inputs and fair

value measurements

Office space

Investment income

approach

Rental value per

square metre

€282 to €523

The higher the rate per square

metre the higher the fair value

Investment income

approach

Capitalisation rate 6.0%

The higher the capitalisation rate

the lower the fair value

Parking space

Investment income

approach

Rental value per

square metre

€65 to €125

The higher the rate per square

metre the higher the fair value

Investment income

approach

Capitalisation rate 7.5%

The higher the capitalisation rate

the lower the fair value

Stores and ancillary

Investment income

approach

Rental value per

square metre

€105 to €175

The higher the rate per square

metre the higher the fair value

Investment income

approach

Capitalisation rate 9.0%

The higher the capitalisation rate

the lower the fair value

Investment property

Group

2021

2020

USD

Cost

At 1 January

17,223,820

Fair value movements

At 31 December

17,223,820

Carrying amounts

Cost

7,049,357

Net fair value gains

10,174,463

Carrying amount

17,223,820

‘Investment property’ comprises a number of areas within the Group Head Office building in St. Julian’s, Malta which are available for

rent to third parties.

FIMBank Group Annual Report & Financial Statements 2021

136

Investment property is revalued by an independent professionally qualified architect in accordance with Accounting Policy 3.18. The

valuation of investment property is prepared using only the ‘investment income approach’, whilst the ‘comparative value approach’ is

only considered as a validation technique.

Under the ‘investment income approach’, the market value is derived by capitalising at an appropriate yield rate, the annual income

produced, should the property be leased out to third parties. The income is based on actual rental income as per current lease

agreements. To determine the reasonableness of the actual rates being used a comparison is then drawn between the actual rates and

rental rates of other properties, taking cognisance of the location, size, layout, and planning and energy performance considerations.

Under the ‘comparative value approach’ the market value of the property is estimated by selecting an appropriately adjusted price per

unit (€/square metre) based on transactions in comparable properties located in proximity to the property.

The investment property was last revalued on 31 December 2021.

The valuation contains a ‘valuation uncertainty’ clause as defined in the European Valuation Standards 2016, and in line with the ‘Kamra

tal-Periti’ Valuation Standards COVID-19 Guidance Note (May 2020), due to the market disruption caused by the COVID-19 pandemic,

which resulted in a reduction in transactional evidence and market yields. This clause does not invalidate the valuation but implies that

there is more uncertainty than under normal market conditions. Accordingly, the valuer cannot attach as much weight as usual to

previous market evidence for comparison purposes, and there is an increased risk that the price realised in an actual transaction would

differ from the value conclusion.

Property fair value measurement is classified as Level 3 (see Note 2.4.2.1). Significant unobservable inputs used in the valuation of these

properties is the rental income and the percentage capitalisation rate which indicates the multiplier relationship between net rental

income and property value. Further details about these significant inputs are summarised in the table below:

Valuation technique

Significant

unobservable inputs

Range of

unobservable inputs

per annum

Inter-relationship between key

unobservable inputs and fair

value measurements

Office space

Investment income

approach

Rental value per

square metre

€282 to €523

The higher the rate per square

metre the higher the fair value

Investment income

approach

Capitalisation rate 6.0%

The higher the capitalisation rate

the lower the fair value

Retail space

Investment income

approach

Rental value per

square metre

€290 to €300

The higher the rate per square

metre the higher the fair value

Investment income

approach

Capitalisation rate 7.5%

The higher the capitalisation rate

the lower the fair value

Stores and ancillary

Investment income

approach

Rental value per

square metre

€105 to €175

The higher the rate per square

metre the higher the fair value

Investment income

approach

Capitalisation rate 9.0%

The higher the capitalisation rate

the lower the fair value

FIMBank Group Annual Report & Financial Statements 2021

137

Intangible assets and goodwill

Goodwill

Software

Total

USD

Cost

At 1 January 2020

14,943,886

10,834,645

25,778,531

Additions

488,096

Effects of movement in exchange rates

(310,195)

(4,169)

(314,364)

At 31 December 2020

14,633,691

11,318,572

25,952,263

At 1 January 2021

14,633,691

11,318,572

25,952,263

Additions

779,861

Release on disposals

(2,266,153)

Effects of movement in exchange rates

(210,149)

(2,826)

(212,975)

At 31 December 2021

14,423,542

9,829,454

24,252,996

Accumulated amortisation and impairment losses

At 1 January 2020

6,437,802

6,232,848

12,670,650

Charge for the year

1,055,796

Impairment loss

2,687,000

Effects of movement in exchange rates

(155,857)

(3,661)

(159,518)

At 31 December 2020

8,968,945

7,284,983

16,253,928

At 1 January 2021

8,968,945

7,284,983

16,253,928

Charge for the year

1,042,068

Release on disposals

(2,266,153)

Effects of movement in exchange rates

(150,753)

(2,689)

(153,442)

At 31 December 2021

8,818,192

6,058,209

14,876,401

Carrying amounts

At 1 January 2020

8,506,084

4,601,797

13,107,881

At 31 December 2020

5,664,746

4,033,589

9,698,335

At 31 December 2021

5,605,350

3,771,245

9,376,595

FIMBank Group Annual Report & Financial Statements 2021

138

Software

USD

Cost

At 1 January 2020

8,583,508

Additions

393,096

At 31 December 2020

8,976,604

At 1 January 2021

8,976,604

Additions

779,881

At 31 December 2021

9,756,485

Accumulated amortisation

At 1 January 2020

3,935,866

Charge for the year

1,032,013

At 31 December 2020

4,967,879

At 1 January 2021

4,967,879

Charge for the year

1,014,291

At 31 December 2021

5,982,170

Carrying amounts

At 1 January 2020

4,647,642

At 31 December 2020

4,008,725

At 31 December 2021

3,774,315

For the purposes of impairment testing, goodwill is allocated to the Group’s CGUs as follows:

Group

2021

2020

USD

India Factoring

- cost, net of exchange differences

12,292,542

12,502,691

- accumulated impairment, net of exchange differences

(8,818,192)

(8,968,945)

Egypt Factors

- cost

2,131,000

5,605,350

5,664,746

In 2020, the CGUs have been affected by the COVID-19 pandemic, which resulted in an impairment of USD2,687,000 on one of the

CGUs. In 2021 a similar assessment was carried out and the Bank concluded that no impairment is required. When calculating the

recoverable amount, the additional uncertainty and adverse impact of COVID-19 were taken into account by adjusting the expected

cash flows. Management’s expectations reflect performance to date and are based on its experience in times of recession and

consistent with the assumptions that a market participant would make.

FIMBank Group Annual Report & Financial Statements 2021

139

The recoverable amount of this CGU was based on its value-in-use, determined using the ‘income approach’ to business valuations.

This approach provides an estimate of the present value of the monetary benefits expected to flow to the owners of the business. It

requires projection of the cash flows that the business is expected to generate. These cash flows are then converted to their present

value by means of discounting, using a rate of return that accounts for the time value of money and the appropriate degree of risk in

the investment. The value of the business, or recoverable amount, is the sum of the discounted cash flows.

At reporting date, the recoverable amount was determined to be higher than the carrying amount of the CGU and the carrying amount

of goodwill was deemed to be appropriate.

Financial projections for a ten-year period form the basis for the discounted cash flow analysis used to determine value-in-use. These

projections were based on expectations of future outcomes, taking into account past experience adjusted for the anticipated revenue

cumulative annual growth rate of 25.6% (2020: 23.9%). Revenue growth was projected taking into account the updated business model

of the entity and the estimated growth over the projection period. Management has approved the forecasts, relating to the business

carried out by India Factoring, which are based on a strategy to grow the business in a changing market landscape, whilst ensuring an

effective operational and control environment.

In 2021, the terminal value or the value attributed to the CGU beyond the explicit forecast period, was estimated using a ‘gordon growth

model’. This determination assumed a long-term growth rate of 5.0% (2020: 5.0%), which is considered appropriate considering the

industry and economy growth estimates.

The ‘income approach’ requires the application of an appropriate discount rate that reflects the risks of the cash flows. As the valuation

discounts cash flows available to equity shareholders, the valuation model adopts the ‘cost of equity’ as the discount rate.

IAS 36 - Impairment of Assets, requires pre-tax cash flows to be discounted using pre-tax discount rate. The pre-tax discount rate cannot

be obtained by grossing up the post-tax discount rate by the standard rate of tax, as the pre-tax rate needs to take into account the

post-tax discount rate, the timing of the future cash flows and the useful life of the asset or CGU. The pre-tax discount rate is estimated

by an iterative process which is used to solve for a rate that, when applied to the pre-tax cash flows, results in the same total invested

capital value of the CGU as estimated based on the post-tax cash flows.

As at 31 December 2021, the pre-tax and post-tax discount rate for the CGU were 22.1% (2020: 20.0%) and 18.0% (2020: 16.5%)

respectively. The post-tax discount rate (representing the cost of equity) applied on valuation date is based on the rate of 10-year

government bonds issued by the Government in India and in the same currency as the cash flows, adjusted for a risk premium to reflect

both the increased risk of investing in equities generally and the systemic risk of the specific entity.

The key assumptions described above may change as economic, political and market conditions change. An adverse movement in a

key assumption may lead to an impairment of goodwill. The break-even post tax discount rate, that is the rate at which the recoverable

amount would be equal to the carrying amount of the CGU, is 18.6% (2020: 16.5%). At the constant discount rate used the break-even

long-term growth rate that would reduce the recoverable amount to the carrying amount of the CGU is 3.3% (2020: 5.0%).

Whilst it is inherent that actual results may differ from those budgeted, and such variations may be significant, the Directors believe

that the business plan can be supported, such that the Group will recover the recoverable amount of goodwill post impairment charges,

as recognised at 31 December 2021.

FIMBank Group Annual Report & Financial Statements 2021

140

The recoverable amount of this CGU was based on its value-in-use in accordance with the requirements of IAS 36. This approach

provides an estimate of the present value of the monetary benefits expected to flow to the owners of the business. It requires projection

of the cash flows that the business is expected to generate. These cash flows are then converted to their present value by means of

discounting, using a rate of return that accounts for the time value of money and the appropriate degree of risk in the investment. The

value of the business, or recoverable amount, is the sum of the discounted cash flows.

At reporting date, the recoverable amount was determined to be higher than the carrying amount of the CGU and the carrying amount

of goodwill was deemed to be appropriate.

Financial projections for a five-year period form the basis for discounted cash flow analysis used to determine value-in-use. These

projections were based on expectations of future outcomes based on past experience, adjusted for a revenue cumulative annual growth

rate of 21.5% (2020: 16.9%). Revenue growth was projected by taking into consideration the updated business model of the entity and

the estimated growth over the projection period. Management has approved the forecasts, relating to the business carried out by Egypt

Factoring, which are based on a strategy to grow the business in a changing market landscape, whilst ensuring an effective operational

and control environment.

The terminal value, or the value attributed to the CGU beyond the explicit forecast period, was estimated assuming a long-term growth

rate of 3.0% (2020: 3.0%), which is considered appropriate considering the industry and economy growth estimates.

The value-in-use estimate requires the application of an appropriate discount rate that reflects the risks of the cash flows. As the

valuation discounts cash flows available to equity shareholders, the valuation model adopts the “cost of equity” as the discount rate.

IAS 36 requires pre-tax cash flows to be discounted using pre-tax discount rate. As Egypt Factors is a free-trade zone entity which profits

are exempt from tax, the pre-tax and post-tax discount rates are identical.

As at 31 December 2021, the discount rate for the CGU was 12.0% (2020: 12.0%). The discount rate (representing the cost of equity)

applied on valuation date is based on the rate of the Central Bank of Egypt, representing the functional currency and equity of the

company, adjusted for a risk premium to reflect both the increased risk of investing in equities generally and the systemic risk of the

specific entity.

The key assumptions described above may change as economic, political and market conditions change. Whilst the recoverable amount

is higher than the carrying amount, an adverse movement in a key assumption may lead to an impairment of goodwill. The break-even

post tax discount rate, that is the rate at which the recoverable amount would be equal to the carrying amount of the CGU, is 15.3%

(2020: 16.0%). At the constant discount rate used on 31 December 2021, the break-even long-term growth rate that would reduce the

recoverable amount to the carrying amount of the CGU is -2.3% (2020: -3.7%).

Whilst it is inherent that actual results may differ from those budgeted, and such variations may be significant, the Directors believe

that the business plan can be supported, such that the Group will recover such goodwill at least at the amount stated.

FIMBank Group Annual Report & Financial Statements 2021

141

Deferred taxation

Group

Bank

2021

2020

2021

2020

USD

Deferred tax assets

Tax effect of temporary differences relating to:

- excess of capital allowances over depreciation

(665,157)

(666,297)

(735,325)

- allowances for uncollectibility

6,216,552

6,955,456

6,810,121

- changes in fair value of financial instruments

1,408,167

662,584

1,408,167

662,584

- unabsorbed capital allowances

622,026

- unabsorbed tax losses

17,252,983

18,216,009

8,145,593

- other temporary differences

85,956

Total deferred tax assets

24,920,527

25,875,734

16,336,538

15,590,955

Deferred tax liabilities

Tax effect of temporary differences relating to:

- fair valuation of property and equipment

2,837,170

- fair valuation of investment property

1,377,905

Total deferred tax liabilities

4,215,075

In years 2020 and 2021, the Bank’s growth was impacted by the continuation of the de-risking process, which had started in 2019, as

well as the COVID-19 pandemic. After the Bank has assessed the probability of future taxable profits, the Bank established that it will

generate enough future taxable profits to absorb the carrying amount of recognised tax losses and temporary differences and therefore

has not written-off any of its recognised deferred tax asset (2020: USD 6.0million).

During 2020 a subsidiary had also written-off USD2.8 million of recognised deferred tax asset, which was related to the recoverability

of tax losses having a finite expiry date. In 2021, after assessing the probability of future taxable profits, the subsidiary concluded that

it will generate enough future taxable profits to absorb the carrying amount of the recognised tax losses and temporary differences and

therefore no write-off was required.

At financial reporting date, the Bank had unutilised tax losses and temporary differences that were unrecognised, amounting to

USD101.2 million. In addition, other Group entities had unutilised tax losses and tax credits that were unrecognised, amounting to

USD38.0 million and USD0.7 million respectively. Unrecognised unabsorbed tax losses amounting to USD9.4 million carried in a group

entity, have an expiry period ranging between 31 March 2024 to 31 March 2025.

FIMBank Group Annual Report & Financial Statements 2021

142

Opening

balance

Recognised in

other

comprehensive

income

Recognised in

profit or loss

Effect of

movement in

exchange rates

Closing

balance

USD

2021

Excess of capital allowances over depreciation

(666,297)

2,313

(1,173)

(665,157)

Allowances for uncollectibility

6,955,456

(740,330)

1,426

6,216,552

Changes in fair values of financial instruments

662,584

745,583

1,408,167

Unabsorbed capital allowances

622,026

Unabsorbed tax losses

18,216,009

(859,983)

(103,043)

17,252,983

Other temporary differences

85,956

25,875,734

745,583

(1,598,000)

(102,790)

24,920,527

2020

Excess of capital allowances over depreciation

(676,574)

11,653

(1,376)

(666,297)

Allowances for uncollectibility

21,961,232

(14,655,489)

(350,287)

6,955,456

Changes in fair values of financial instruments

1,036,187

(420,207)

46,604

662,584

Unabsorbed capital allowances

625,183

(3,157)

622,026

Unabsorbed tax losses

13,694,998

4,434,523

86,488

18,216,009

Other temporary differences

132,560

(46,604)

85,956

36,773,586

(420,207)

(10,212,470)

(265,175)

25,875,734

Opening

balance

Recognised in

other

comprehensive

income

Recognised in

profit or loss

Effect of

movement in

exchange rates

Closing

balance

USD

2021

Excess of capital allowances over depreciation

(735,325)

Allowances for uncollectibility

6,810,121

Changes in fair values of financial instruments

662,584

745,583

1,408,167

Unabsorbed capital allowances

622,026

Unabsorbed tax losses

8,145,593

Other temporary differences

85,956

15,590,955

745,583

16,336,538

2020

Excess of capital allowances over depreciation

(738,479)

3,157

(3)

(735,325)

Allowances for uncollectibility

12,810,116

(6,000,000)

6,810,121

Changes in fair values of financial instruments

1,036,187

(420,207)

46,604

662,584

Unabsorbed capital allowances

625,183

(3,157)

622,026

Unabsorbed tax losses

8,145,595

(2)

8,145,593

Other temporary differences

132,560

(46,604)

85,956

22,011,162

(420,207)

(6,000,000)

15,590,955

FIMBank Group Annual Report & Financial Statements 2021

143

Opening

balance

Recognised in

other

comprehensive

income

Recognised in

profit or loss

Closing

balance

USD

2021

Changes in fair value of investment property

and property and equipment

(4,215,075)

2020

Changes in fair value of investment property

and property and equipment (4,215,075)

(4,215,075)

Other assets

Group

Bank

2021

2020

2021

2020

USD

Accounts receivable and prepayments

3,927,217

4,068,509

3,575,093

3,304,376

Accrued income

49,832

85,470

68,552

60,925

Indirect taxation

242,947

1,624,916

181,705

1,532,250

Other assets

24,388

611,406

22,971

673,011

4,244,384

6,390,301

3,848,321

5,570,562

‘Accounts receivable and prepayments’ includes an amount of USD1,045,631 (2020: USD940,905) related to subsidiaries of the Bank.

‘Accrued income’ includes an amount of USD43,843 (2020: USD28,030) related to subsidiaries of the Bank.

See Note 43 for balances due to related parties.

Amounts owed to banks

Group

Bank

2021

2020

2021

2020

USD

Term loans and deposits

476,598,906

340,866,049

410,679,218

299,323,210

Repayable on demand

86,954,138

88,577,431

86,954,138

88,577,431

563,553,044

429,443,480

497,633,356

387,900,641

The Group includes balances amounting to USD15,092,139 (2020: USD16,478,809) and the Bank includes balances amounting to

USD15,092,139 (2020: USD16,478,809) held as collateral for irrevocable commitments. Pledges are generally conducted under terms

that are usual and customary for standard borrowing contracts.

See Note 43 for balances due to related parties.

FIMBank Group Annual Report & Financial Statements 2021

144

Amounts owed to customers

Group

Bank

2021

2020

2021

2020

USD

Term deposits

679,438,958

788,095,645

679,438,958

788,095,646

Repayable on demand

254,657,238

313,474,650

151,700,283

247,803,193

934,096,196

1,101,570,295

831,139,241

1,035,898,839

Amounts owed to subsidiaries

7,536,357

1,219,498

934,096,196

1,101,570,295

838,675,598

1,037,118,337

The Group and the Bank have deposits amounting to USD54,068,183 (2020: USD50,430,746) and USD55,986,370, (2020:

USD50,430,746), respectively, held as collateral for irrevocable commitments. Pledges are generally conducted under terms that are

usual and customary for standard borrowing contracts. ‘Amounts owed to subsidiaries’ include facilities that are interest-free,

unsecured and repayable on demand.

See Note 43 for balances due to related parties.

Debt securities in issue

2021

2020

USD

Opening balance

50,832,661

79,550,865

Drawdowns

109,118,677

122,720,858

Repayments

(114,605,763)

(151,439,062)

Closing balance

45,345,575

50,832,661

‘Debt securities in issue’ comprise of promissory notes with a tenor of up to one year. The Group’s effective interest rate ranges between

1.50% and 1.70% (2020: 1.00% and 1.75%).

Provision for liabilities and charges

Group

Bank

2021

2020

2021

2020

USD

Expected credit loss provision on contingent liabilities

161,997

5,067

161,997

5,067

Expected credit loss provision on commitments

97,333

172,528

39,778

167,984

Provision for restoration costs

97,392

98,294

356,722

275,889

201,775

173,051

Other liabilities

Group

Bank

2021

2020

2021

2020

USD

Creditors and accruals

11,469,573

9,006,242

6,311,826

4,186,288

Deferred fee income

664,106

618,860

26,300

108,064

Indirect taxation

104,391

112,029

57,896

56,924

Lease liabilities

2,224,450

2,416,376

1,128,593

2,864,380

Other liabilities

396,865

429,828

396,866

429,832

14,859,385

12,583,335

7,921,481

7,645,488

‘Creditors and accruals’ include an amount of USD 30,647 (2020: Nil) payable to subsidiaries of the Bank. See Note 43 for balances due

to related parties.

FIMBank Group Annual Report & Financial Statements 2021

145

Equity

2021

2020

Shares of 50 US cents

USD

Authorised

Ordinary shares at 31 December

1,000,000,000

500,000,000

1,000,000,000

500,000,000

Issued and fully paid up

Ordinary shares at 31 December

522,443,763

261,221,882

522,443,763

261,221,882

Ordinary shares

2021

2020

No of shares

On issue at 1 January

522,443,763

On issue at 31 December

522,443,763

The share premium represents the excess, net of issue costs, over the nominal value of shares, received through a number of capital

raising initiatives including new equity from strategic shareholders, rights issues, scrip dividend and allotment of shares under the

executive share option schemes. This reserve is non-distributable.

The reserve for general banking risks is a regulatory reserve created by virtue of Banking Rule 9 - Measures Addressing Credit Risks

Arising from the Assessment of the Quality of Asset Portfolios of Credit Institutions authorised under the Banking Act 1994. Under this

Rule, banks are required to calculate a regulatory allocation which would be equal to their level of non-performing exposures (gross of

any collateral but reduced for suspended interest) reduced by the specific impairment allowance as calculated and disclosed in these

Financial Statements. An amount ranging between 2.5% and 5.0% of the regulatory allocation is then appropriated to the ‘reserve for

general banking risks’.

The currency translation reserve consists of exchange differences arising on the translation of the net investment in foreign operations

and the fair value changes on the hedging of net investment in foreign operations.

The fair value reserve comprises:

 the cumulative net change in the fair value of revalued property; and

 the cumulative net change in the fair value of debt securities measured at fair value through other comprehensive income until the

assets are derecognised or reclassified. This amount is increased by the amount of loss allowance.

Amounts recognised in fair value reserve are net of deferred tax.

The reserve consists of amounts representing the difference between the net proceeds received on the sale of own shares, net of the

relative acquisition costs and the share issue costs by a subsidiary undertaking.

FIMBank Group Annual Report & Financial Statements 2021

146

No dividends were declared or paid during the year (2020: Nil). As none of the reserves are available for distribution, the Board of

Directors will not be recommending the payment of a dividend for the financial year ended 31 December 2021.

The transfer between reserves represents amounts transferred from retained earnings to the ‘reserve for general banking risks’ and

‘other reserves’ in accordance with regulatory requirements, and a restatement of the amounts attributed over the years to ‘non-

controlling interest’ consequent to dilution of holdings in India Factoring.

At 31 December 2021, the Bank had accumulated losses of USD65,296,434 (2020: USD65,772,958).

Non-controlling interest

The following table summarises the information relating to the Group’s subsidiary that has a material non-controlling interest (“NCI”),

before any intra-group eliminations:

India Factoring

Acquisition date

31 March 2014

NCI percentage

11.84%

USD

Total assets

219,950,862

Total liabilities

(177,470,440)

Net assets

42,480,422

Carrying amount of NCI

628,803

Profit for the year

1,927,198

Profit allocated to NCI

228,180

Net decrease in cash and cash equivalents

(5,155,389)

India Factoring

Acquisition date

31 March 2014

NCI percentage

11.84%

USD

Total assets

145,466,659

Total liabilities

(104,220,150)

Net assets

41,246,509

Carrying amount of NCI

407,472

Loss for the year

(1,133,283)

Loss allocated to NCI

(134,180)

Net increase in cash and cash equivalents

10,237,823

‘Non-controlling interest’ includes a restatement from ‘retained earnings’ of the amounts attributed over the years, consequent to

dilution of holdings in India Factoring.

FIMBank Group Annual Report & Financial Statements 2021

147

Contingent liabilities

‘Contingent liabilities’ comprise of guarantee obligations incurred on behalf of third parties. Guarantees issued to subsidiaries amount

to USD37,795,644 (2020: USD42,749,228).

As at December 2021, an expected credit loss allowance, determined in accordance with IFRS 9, amounting to USD162,066 (2020:

USD9,611) for the Group and USD161,995 (2020: USD5,067) for the Bank, was recognised and presented within ‘provision for liabilities

and charges’.

Commitments

Group

Bank

2021

2020

2021

2020

USD

Commitments to purchase assets

Undrawn credit facilities

70,437,057

73,013,249

70,437,057

72,221,019

Confirmed letters of credit

37,269,149

13,321,329

16,123,849

21,267,521

Documentary credits

7,540,705

3,103,424

7,540,705

3,103,424

Factoring commitments

13,367,500

8,653,802

Commitment to purchase assets

58,371,323

15,605,454

Commitments to sell assets

Commitment to sell assets

(20,000,000)

153,618,234

105,043,456

107,469,111

105,245,766

The Group has total sanctioned limits to customers amounting to USD1,951,786,983 (2020: USD1,942,816,642). The Bank has

confirmed USD5,461,395 (2020: USD7,946,191) of documentary credits in favour of subsidiary companies.

As at December 2021, an expected credit loss allowance, determined in accordance with IFRS 9, amounting to USD97,262 (2020:

USD167,984) for the Group and USD39,780 (2020: USD167,984) for the Bank, was recognised and presented within ‘provision for

liabilities and charges’.

See Note 43 for ‘commitments’ to related parties.

Cash and cash equivalents

Balances of cash and cash equivalents as shown on the Statements of Financial Position are analysed as follows:

Group

Bank

2021

2020

2021

2020

USD

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

239,956,890

319,440,224

239,940,100

319,420,449

Loans and advances to banks

34,534,224

59,511,564

26,501,486

51,882,865

Amounts owed to banks

(184,880,010)

(137,027,939)

(139,127,261)

(103,393,628)

Cash and cash equivalents at end of year

89,611,104

241,923,849

127,314,325

267,909,686

Adjustment to reflect balances with contractual maturity of

more than three months

(214,676,733)

(158,940,228)

(202,507,085)

(157,178,511)

As per statements of financial position

(125,065,629)

82,983,621

(75,192,760)

110,731,175

Analysed as follows:

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

239,998,839

319,287,524

239,982,048

319,267,749

Loans and advances to banks

198,488,576

193,139,577

182,458,548

179,364,067

Amounts owed to banks

(563,553,044)

(429,443,480)

(497,633,356)

(387,900,641)

(125,065,629)

82,983,621

(75,192,760)

110,731,175

FIMBank Group Annual Report & Financial Statements 2021

148

Leases

The Group leases a number of branch and office premises that are accounted for in accordance with IFRS 16 provisions. The leases run

for a period ranging from two to sixteen years. Some leases have an option to renew the lease after that date. Some leases provide for

additional rent payments that are based on changes in local price indices.

The Group also leases some other office premises, motor vehicles and IT equipment, which are low in value and/or short-term. The

Group has elected not to recognise right-of-use assets and lease liabilities for these leases.

Information about leases for which the Group is a lessee is presented below.

Right-of-use assets relate to leased office premises that are presented within ‘property and equipment’ (see Note 27).

Group

Bank

Office premises

2021

2020

2021

2020

USD

Balance at 1 January

2,189,053

2,910,720

2,695,748

4,233,406

Depreciation charge for the year

(946,008)

(1,002,665)

(1,625,813)

(1,603,720)

Additions

923,805

325,372

110,340

Lease modifications that increase the scope

of the lease

9,905

Lease modifications that decrease the scope

of the lease

(30,737)

(44,278)

Effect of movement in exchange rates

(3,123)

(13,637)

Balance at 31 December

2,163,727

2,189,053

1,079,840

2,695,748

The Bank’s right-of-use assets include the lease of office premises from a subsidiary.

Group

Bank

Office premises

2021

2020

2021

2020

USD

Balance at 1 January

2,416,376

2,991,633

2,864,380

3,629,816

Additions

923,805

325,372

110,340

Lease modifications that increase the scope

of the lease -

36,941 -

Lease modifications that decrease the scope

of the lease -

(30,737) -

(45,771)

Lease termination costs transferred to provision

for restoration cost -

(98,294) -

Interest expense

75,822

110,740

58,646

115,756

Payments

(1,139,127)

(967,167)

(1,787,096)

(997,729)

Effect of movement in exchange rates

(52,426)

84,829

(44,278)

51,968

Balance at 31 December

2,224,450

2,416,376

1,128,593

2,864,380

The Bank’s lease liabilities include the lease of office premises from a subsidiary.

FIMBank Group Annual Report & Financial Statements 2021

149

Group

Bank

2021

2020

2021

2020

USD

Interest on lease liabilities

75,822

110,740

58,646

114,262

Expenses relating to short-term leases

229,221

187,828

103,051

68,572

Expenses relating to leases of low-value assets,

excluding short-term leases of low-value assets

23,754

17,092

20,081

23,467

Some leases of office premises contain extension options exercisable by the Group up to twelve months before the end of the non-

cancellable contract period. Some extension options held are exercisable only by the Group and not by the lessors. The Group assesses

at lease commencement date whether it is reasonably certain to exercise the extension options. The Group reassesses whether it is

reasonably certain to exercise the options if there is a significant event or significant changes in circumstances within its control.

The Group leases out its investment property. The Group has classified these leases as operating leases, because they do not transfer

substantially all of the risks and rewards incidental to the ownership of the assets. Note 28 sets out information about the operating

leases of investment property.

Rental income recognised by the Group during the year ended 31 December 2021 was USD0.72 million (2020: USD0.89 million).

The following table sets out a maturity analysis of lease payments, showing the undiscounted lease payments to be received after the

reporting date:

Group

Bank

2021

2020

2021

2020

USD

Less than one year

583,518

703,312

25,058

150,350

Between one and five years

457,628

601,106

250,583

Total

1,041,146

1,304,418

25,058

400,933

FIMBank Group Annual Report & Financial Statements 2021

150

Related parties

The Bank has a related party relationship with its significant shareholders, subsidiaries, directors, executive officers and companies

forming part of the KIPCO Group. For the purpose of this Note, significant shareholders include all shareholders (and their connected

parties) holding at least five percent of the issued share capital of the Bank.

The aggregate values of transactions and outstanding balances related to the parent and subsidiaries of the parent company were as

follows:

Parent

Subsidiaries of parent

2021

2020

2021

2020

Note

USD

Assets

Derivative assets held for risk management

96,667

Loans and advances to banks

Loans and advances to customers

42,259,198

45,650,284

Investments at amortised cost

9,972,376

9,910,131

Liabilities

Derivative liabilities held for risk management

17,715

Amounts owed to banks

1,306,953

Amounts owed to customers

40,647,843

41,404,324

2,583

2,658

Statements of profit or loss

Interest income

1,815,398

2,117,999

Interest expense

(9,342)

Fee and commission income

120

315

3,861

Fee and commission expense

(6,216)

(6,156)

Net trading results

(114,382)

40,923

Administrative expenses

(326,800)

(232,392)

The aggregate values of transactions and outstanding balances related to the shareholder having significant influence, subsidiary of

shareholder having significant influence and other related companies were as follows:

Shareholder having

significant influence

Subsidiary of shareholder

having significant influence

Other related companies

2021

2020

2021

2020

2021

2020

Note

USD

Assets

Loans and advances to banks

47,629

115,255

11,326,311

22,542,889

Loans and advances to customers

42,733,988

40,738,038

Liabilities

Amounts owed to banks

10,002,778

22,550,135

Amounts owed to customers

2,920,956

18,904

Other liabilities

730

Statements of profit or loss

Interest income

16,706

43,949

1,503,255

1,073,397

Interest expense

(54,793)

(304,095)

(260,323)

(14)

Fee and commission income

47,333

49,092

Fee and commission expense

(99)

(763)

Net trading results

(101,477)

216,016

Administrative expenses

(11,095)

FIMBank Group Annual Report & Financial Statements 2021

151

Directors

Executive officers

2021

2020

2021

2020

Note

USD

Assets

Loans and advances to customers

1,114

8,647

Other assets

1,066

1,446

Liabilities

Amounts owed to customers

655,413

595,528

340,822

709,525

Statements of profit or loss

Interest income

111

Interest expense

(8,125)

(7,145)

(1,569)

(2,550)

Fee and commission income

160

115

Administrative expenses - remuneration

(414,833)

(360,760)

(2,176,655)

(2,979,087)

Administrative expenses - other long-term benefits

(1,032)

(963)

(467,237)

(757,123)

Administrative expenses - short-term employee benefits

(46,855)

Administrative expenses - others

(11,173)

(855)

(20,970)

Directors of the Group control less than 1 per cent of the voting shares of the Bank (2020: less than one per cent).

Other related parties

2021

2020

Note

USD

Liabilities

Amounts owed to customers

352,460

369,028

Statements of profit or loss

Interest expense

(5,205)

(16,241)

Fee and commission income

Other related party transactions relate to family members of Directors of the Group.

Information on amounts related to subsidiary companies are reported in Notes 9, 10, 11, 13, 15, 21, 22, 31, 32, 33, 36, 39 and 40 of these

Financial Statements.

Capital commitments

At financial reporting date the Group had the following commitments:

2021

2020

USD

Authorised and contracted

201,375

711,000

Authorised but not contracted

312,827

138,729

514,202

849,729

FIMBank Group Annual Report & Financial Statements 2021

152

Financial commitments

At financial reporting date the Group had the following commitments:

2021

2020

USD

Authorised and contracted

5,002,794

4,834,532

Authorised but not contracted

1,040,570

959,141

6,043,364

5,793,673

Subsequent events

On 28 February 2022, the Hellenic Branch in Athens, Greece was officially closed.

On 2 March 2022, FIM Holdings (Chile) S.p.A. was officially liquidated. FIM Holdings (Chile) S.p.A. was a wholly owned subsidiary

registered in Chile and served as the corporate vehicle for Latam Factors S.A., which entity was sold to third parties during 2018. FIM

Holdings (Chile) S.p.A. was put into liquidation during 2019 and its liquidation had no financial impact on the Financial Statements as

at reporting date.

The conflict in Ukraine has prompted management to take the appropriate steps to monitor the possible impact this might have on the

Group both directly and indirectly. The Group’s direct exposure to Russia and Ukraine is limited, with USD1.3 million outstanding to a

state-owned bank in Ukraine. Several client limits were reduced and country limits were suspended. Increased monitoring was put in

place on customers that could be indirectly impacted by the war, either through their trading activity, commodity volatility, sanctions

or other general impacts. A portfolio review concluded that our clients are well positioned to absorb any impact from the current

situation. We will continue to take appropriate actions as needed, to protect the quality of the Group’s portfolio.

Ultimate parent company

The ultimate parent company of FIMBank p.l.c. is Kuwait Projects Company (Holding) K.S.C.P. (“KIPCO”) a company registered in

Kuwait. The registered address is KIPCO Tower, Khalid Bin Al Waleed Street, Sharq, Kuwait City.

The immediate parent company is United Gulf Holding Company B.S.C. (“UGH”), a holding company licensed by the Ministry of

Industry, Commerce and Tourism in Bahrain. The registered address is PO Box 5565, Diplomatic Area, UGB Tower, Manama, Kingdom

of Bahrain.

FIMBank Group Annual Report & Financial Statements 2021

153

Statement by the directors pursuant to Capital

Markets Rule 5.68

For the year ended 31 December 2021

We, the undersigned, declare that to the best of our knowledge, the Financial Statements set out on pages 28 to 152 prepared in accordance with

the requirements of International Financial Reporting Standards as adopted by the EU give a true and fair view of the assets, liabilities, financial

position and profit or loss of the Bank and its subsidiaries included in the consolidation taken as a whole and that this report includes a fair review

of the development and performance of the business and the position of the Bank and its subsidiaries included in the consolidation taken as a

whole, together with a description of the principal risks and uncertainties that they face.

Signed on behalf of the Board of Directors by John C. Grech (Chairman) and Masaud M.J. Hayat (Vice Chairman) on 13 April 2022

FIMBank Group Annual Report & Financial Statements 2021

154

Independent auditors’ report

To the shareholders of FIMBank p.l.c.

Report on the audit of the financial statements

Opinion

We have audited the financial statements of FIMBank p.l.c. (the “Bank” or the “Company”) and of the Group of which the Company is the

parent, which comprise the statements of financial position as at 31 December 2021, the statements of profit or loss and other comprehensive

income, changes in equity and cash flows for the year then ended, and notes, comprising significant accounting policies and other explanatory

information.

In our opinion, the accompanying financial statements:

a. give a true and fair view of the financial position of the Bank and the Group as at 31 December 2021, and of their financial performance and

their cash flows for the year then ended in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the EU; and

b. have been properly prepared in accordance with the provisions of the Companies Act, 1995 (Chapter 386, Laws of Malta) (the “Act”) and the

Banking Act, 1994 (Chapter 371, Laws of Malta) (the “Banking Act”) and, additionally, specifically in relation to those of the Group, with the

requirements of Article 4 of the Regulation on the application of IFRS as adopted by the EU.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities under those standards are further

described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We are independent of the Company

in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants

(including International Independence Standards) (IESBA Code), together with the ethical requirements that are relevant to our audit of the

financial statements in accordance with the Accountancy Profession (Code of Ethics for Warrant Holders) Directive issued in terms of the

Accountancy Profession Act (Chapter 281, Laws of Malta), and we have fulfilled our other ethical responsibilities in accordance with these

requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our

opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of

the current year (selected from those communicated to the audit committee), and include a description of the most significant assessed risks

of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit

strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the

context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on

these matters.

We summarise below the key audit matters, together with our response by way of the audit procedures we performed to address that matter

in our audit, and key observations arising with respect to such risks of material misstatement.

FIMBank Group Annual Report & Financial Statements 2021

155

Independent auditors’ report

To the shareholders of FIMBank p.l.c.

Assessment of the carrying amounts of goodwill at group level and investment in subsidiaries at

company level

Accounting policy notes 2.4.2, 3.1.1, 3.1.2, 3.16, 3.19 and 3.20 to the financial statements and notes 26 and 29 for further disclosures.

Goodwill’ (Group: USD5,605,349); and ‘Investment in subsidiaries’ (Company: USD159,448,858).

‘Investment in subsidiaries’ includes, among others, the investment in The Egyptian Company for Factoring S.A.E. (referred to as “Egypt

Factors”) and, indirectly through FIM Factors B.V., the investment in India Factoring and Finance Solutions Private Limited (referred to as “India

Factoring”), to which the key audit matter relates.

The Group

The Group holds goodwill relating to the acquisition of the interests in Egypt Factors and India Factoring (the “components”). Both components

are separately identified by the Group as cash generating units (“CGU” or ”CGUs”), in line with the applicable financial reporting framework, as

they generate cash-inflows for the Group that are largely independent of the cash inflows generated by other assets or groups of assets.

At Group level, an assessment of each CGU is required annually by the relevant financial reporting framework to establish whether the

recoverable amount is at least equal to the carrying amount, and therefore, whether any impairment should be recorded. Significant judgement

is required in determining the recoverable amount of each CGU, namely due to the (i) inherent uncertainty in forecasting the future cash flows;

and the (ii) judgement required in determining the appropriate discount rates and expected long term growth rates applied to those cash flows

in arriving at the value-in-use (being the basis on which the carrying amount is determined). The impact of COVID-19 has resulted in

unprecedented economic conditions, which in turn heightens the level of judgement required to determine the inputs used in calculating the

recoverable amount of each CGU.

The Company

‘Investments in subsidiaries’ are carried at cost less any impairment losses in the Company’s statement of financial position. That financial

statement caption includes the components to which those CGUs relate (Egypt Factors and India Factoring). Any impairment relating to those

CGUs may result in the Company’s investment in subsidiaries being impaired should such impairment result in the recoverable amount of the

related investment being lower than its carrying amount.

Our response

For each of the CGUs, as part of our procedures:

 we evaluated the reasonableness of the data used in the preparation of the cash flow forecasts (in the main, projected factoring volumes

and margins) with reference to our understanding of the components’ historical trends and the continued impact of COVID-19 during the

year;

 we involved our valuation specialist to assist us in assessing the valuation of India Factoring and of Egypt Factors (performed by experts

engaged by the Group in the respective jurisdiction). Involvement included assessing (i) the appropriateness of the selected valuation model;

and (ii) whether the discount rates and the expected long-term growth rates applied to the cash flow forecasts were within a reasonable

range by comparison with market data consisting mainly of the respective country Gross Domestic Product growth rate and rate of inflation;

 we assessed the impact of reasonable possible changes in the key assumptions in the valuation model including discount rates and expected

long term growth rates used for estimating the recoverable amounts of each CGU in concluding on the impairment assessment, and

assessed whether there were any indicators of management bias in the selection of those assumptions; and

 we compared the Group’s and Company’s 2021 budgets with the actual performance for the reporting period, and made enquiries as to the

reasons for any significant variations identified and assessed the reasonableness of the explanations provided, by corroborating these

against our knowledge of the Group.

We have no key observations to report, specific to this matter.

FIMBank Group Annual Report & Financial Statements 2021

156

Independent auditors’ report

To the shareholders of FIMBank p.l.c.

Recoverability of recognised deferred tax assets

Accounting policy note 3.9 to the financial statements and note 30 for further disclosures.

‘Deferred tax assets’ (Group: USD24,920,527 and Company: USD16,336,538).

The Group and the Company recognised deferred tax assets in respect of the future benefit of net deductible temporary differences and

accumulated tax losses. In accordance with the applicable financial reporting framework, the recognition of those deferred tax assets is

permitted to the extent that it is probable that future taxable profits will be available against which these assets can be used. Such restrictions

are more pronounced in certain jurisdictions, in which the Group operates, where the carry forward of losses to future periods are time-barred.

The recognition of deferred tax assets, therefore, requires significant judgement in estimating future profitability (and the extent of taxable

profits) based on business plans drawn up by the directors. Due to estimation uncertainty, the projected relief of the tax losses, for which the

deferred tax assets are recognised, might be materially different from the amount ultimately relieved.

Our response

As part of our procedures:

 we assessed the applicability of enacted and substantively enacted tax laws that support the recognition of the deferred tax assets;

 we evaluated the assumptions underlying the Company’s and its subsidiaries’ projections used to support the recognition of the deferred

tax asset having regard to (i) our understanding of the respective jurisdiction and applicable fiscal legislation; and (ii) the current pipeline of

new business;

 specifically in relation to carry forward losses subject to time-barring, we also assessed the impact of reasonable possible changes in the

underlying assumptions of the forecasts, including the impact of COVID-19, on the Group’s ability to utilise the losses before their expiry;

and

 we compared the Group’s and Company’s 2021 budgets with the actual performance for the reporting period, and made enquiries as to the

reasons for any significant variations identified and assessed the reasonableness of the explanations provided, by corroborating these

against our knowledge of the Group and by evaluating the sales pipeline and evidencing a significant shift in lower risk business as a result

of the Group’s continued de-risking process.

We have no key observations to report, specific to this matter.

FIMBank Group Annual Report & Financial Statements 2021

157

Independent auditors’ report

To the shareholders of FIMBank p.l.c.

Measurement of impairment allowances on loans and advances measured at amortised cost,

including off-balance sheet elements of the allowance

Accounting policy note 3.10.8 to the financial statements and notes 2.4.1, 2.4.2, 5.2.1.1, 5.2.1.4, 21, 22, and 35 for further disclosures.

Expected credit loss allowance on loans and advances to banks at amortised cost (Group: USD198,874,727 and Company: USD182,826,911)

amounted to USD386,151 - Group and USD368,363 - Company.

Expected credit loss allowance on loans and advances to customers at amortised cost (Group: USD711,697,194 and Company: USD814,521,125)

amounted to USD82,784,854 - Group and USD68,956,986 - Company.

Expected credit loss provision on off-balance sheet credit exposures (Group: USD155,568,768 and Company: USD146,796,473) amounted to

USD259,328 - Group and USD559,775 - Company.

Subjective estimate

The calculation of Expected Credit Loss (“ECL”) involves significant judgement and estimates. Of all the Group’s financial instruments, the

most significant impact in terms of complexities around the measurement of the ECL and of the materiality of the resultant allowances was in

relation to the Group’s lending activities to banks and customers (and the related off-balance sheet elements). In that regard, our key areas of

audit focus in the Group’s calculation of the ECL were the following:

 Model estimation - Inherently judgmental modelling is used to estimate ECLs which involve determining ‘Probabilities of Default’ (“PD”),

‘Loss Given Default’ (“LGD”), and ‘Exposures at Default’ (“EAD”). In particular, the PD models are the key drivers of the Group’s ECL

calculation and are therefore the most significant judgmental element of the Group’s ECL modelling approach.

 Economic scenarios - Significant judgment is applied in determining the selection of (i) forward-looking macroeconomic scenarios, (ii) the

associated scenario probabilities and (iii) the material economic variables which drive the scenarios and the related weightings, especially

when considering the current uncertain economic environment as a result of COVID-19.

 Qualitative adjustments to the model-driven ECL results may be raised by the Group to address known impairment model limitations or

emerging trends. Estimating those adjustments also involves significant judgement.

 Identification of a significant increase in credit risk (“SICR”) is also a key area of judgement within the Group’s ECL calculation, which was

heightened as a result of COVID-19 as the application of the SICR criteria determines whether a twelve month or lifetime provision is

recorded.

 Individually assessed as stage 3 exposures may be materially misstated if individual impairments are not appropriately identified and

estimated. The calculation of expected credit losses includes a range of estimates of future cash flows and valuation of collateral, which are

inherently uncertain and judgemental.

The disclosures regarding the application of IFRS 9 are key to explaining the key judgements made, as referred to in this key audit matter, and

inputs used to generate the IFRS 9 ECL results.

FIMBank Group Annual Report & Financial Statements 2021

158

Independent auditors’ report

To the shareholders of FIMBank p.l.c.

Our response

As part of our procedures:

 we assessed the design and implementation as well as the operating effectiveness of controls within the ECL process with respect to (a) the

approval of the credit application by the Credit Committee or the delegated authority (depending on monetary value); and (b) the review

of ECL provision levels and movements by the Head of Finance and the Chief Risk Officer;

 we involved our financial risk modelling specialists in evaluating:

o the appropriateness of the Group’s selected IFRS 9 impairment methodologies within the ECL model by reference to the sensitivity

analysis as performed by the Group with respect to the ECL model results; and

o the appropriateness of the SICR criteria used; and

 we involved our economics specialists to assist in assessing:

o the appropriateness of the Group’s methodology for determining the macroeconomic scenarios used and the reasonableness of the

probability weightings applied to them;

o the relevance of the key macroeconomic variables used in the ECL model; and

o the reasonableness of the Group’s consideration of the ECL impact of the economic environment due to COVID-19.

Specifically in relation to a sample of performing loans (‘stage 1’ and ‘stage 2’), we:

 performed testing over key data elements (EAD, PD and LGD) impacting the ECL calculations to assess the accuracy of information used;

and

 performed tests to determine whether a significant increase in credit risk was appropriately identified by the Group, including ‘days past

due’.

Specifically in relation to a sample of loans and advances discussed in the Board Risk Committee and the Credit Committee (the “focus

exposures”), including those not otherwise automatically captured by the ECL model as non-performing loans (‘stage 3’):

 we performed credit reviews focusing on the borrowers’ ability to repay from normal operations, the performance history of the account

and receipts after the financial reporting date; and

 in the case of non-performing loans, we evaluated the appropriateness of the inputs, particularly the LGD and discount rates used in the

ECL model. In cases where the LGD involved the realisation of collateral, we corroborated the extendible value of collateral with external

data sources.

We assessed management’s determination for the need of any post model adjustments required to capture possible model defects.

We assessed whether the disclosures in relation to IFRS 9 adequately explain the key judgements made and significant inputs used in the

recognition of expected credit losses as at the end of the financial reporting period.

We have no key observations to report, specific to this matter.

FIMBank Group Annual Report & Financial Statements 2021

159

Independent auditors’ report

To the shareholders of FIMBank p.l.c.

Valuation of unquoted assets measured at fair value

Accounting policy notes 2.4.2, 3.10.9 and 3.12 to the financial statements and notes 20 and 23 for further disclosures.

Shares in two sub-funds of a local unlisted collective investment scheme (Bank and Group: USD19,066,651) included within ‘Financial assets

designated at fair value through profit or loss’; and ‘Trading assets’ (Group: USD439,985,203).

The fair value of certain financial assets held by the Group is determined through the application of valuation techniques that involve the

exercise of judgement, and the use of assumptions based on limited observable market data. Covid-19 has resulted in markets being more

volatile. The level of judgement surrounding the valuation of unquoted assets increased due to the heightened market volatility. These

unquoted assets relate primarily to:

 the equity instruments in the form of shares (classified as financial assets at fair value through profit or loss) held in two sub-funds of a local

unlisted collective investment scheme (‘the Funds’) which hold assets that cannot be valued through observable market data; and

 the trading assets, held by London Forfaiting Company Limited (“LFC”), that represent forfaiting assets (discounted receivables generated

from an export contract) whose valuation incorporates significant unobservable inputs.

Our response

For equity instruments held in the Funds we performed the following:

 we assessed the audited financial information of the Funds and quarterly net asset value as published by the fund administrator;

 we evaluated available financial information in relation to direct exposures held by the Funds and assessed replies to further enquiries in

relation to these direct exposures; and

 we considered other relevant publicly available information.

In relation to forfaiting financial assets, as part of our procedures:

 we assessed the design and implementation as well as the operating effectiveness of the following controls:

o Approval levels for all deals;

o Authorisation of accounting instructions; and

o Management review control – Review of rationale of risk margin.

 we involved our valuation specialist to independently reprice a sample of fixed and floating forfaiting assets in order to determine a range

of the fair value, for the purpose of testing LFC’s methodology. The final sample included counterparties and contracts covering each

country and industry in the forfaiting assets portfolio where exposure was material;

 we tested a sample of exposures covering all countries and industries within the residual population, by challenging LFC as to the validity of

the assumptions used in setting the risk premium within the discount rate by assessing consistency with publicly available information and

information from other sources;

 we tested the accuracy of the LIBOR rates and other inputs (such as the average life at value date, average LIBOR) employed by LFC by

comparing the LIBOR rates with information available to the public from tested sources, and other inputs to data within the forfeiting

system; and

 we also back tested a sample of disposals during the year to determine the appropriateness of the prior period valuations. This was achieved

by comparing the disposal price of the asset with the latest fair value, at end of the month prior to sale of the asset to determine whether

those fair values were appropriate.

We have no key observations to report, specific to this matter.

FIMBank Group Annual Report & Financial Statements 2021

160

Independent auditors’ report

To the shareholders of FIMBank p.l.c.

Other information

The directors are responsible for the other information which comprises:

 the ‘Chairman’s Statement to the Shareholders’;

 the ‘FIMBank Group Performance 2021’;

 the ‘Directors’ Report’;

 the ‘Statement of Compliance with the Principles of Good Corporate Governance’;

 the ‘Remuneration Report’;

 the ‘Statement by the Directors pursuant to Capital Markets Rule 5.68’; and

 the ‘Schedules to the annual report’

but does not include the financial statements and our auditors’ report thereon.

Our opinion on the financial statements does not cover the other information and, other than in the case of the directors’ report on which we

report separately below in our ‘Opinion on the Directors’ Report’, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information, and, in doing so, consider whether

the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to

be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information,

we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the directors for the financial statements

The directors are responsible for the preparation of financial statements that (a) give a true and fair view in accordance with IFRS as adopted

by the EU, and (b) are properly prepared in accordance with the provisions of the Act and the Banking Act, and, additionally, specifically in

relation to those of the Group, with the requirements of Article 4 of the Regulation on the application of IFRS as adopted by the EU. The

directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are

free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Company’s and the Group’s ability to continue as a going

concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either

intend to liquidate the Company and/or the Group or to cease operations, or have no realistic alternative but to do so.

The directors are also responsible for overseeing the financial reporting process.

FIMBank Group Annual Report & Financial Statements 2021

161

Independent auditors’ report

To the shareholders of FIMBank p.l.c.

Auditors’ responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,

whether due to fraud or error, and to issue an auditors’ report that includes our opinion. ‘Reasonable assurance’ is a high level of assurance,

but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected

to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit.

We also:

 Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit

procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The

risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,

forgery, intentional omissions, misrepresentations, or the override of internal control.

 Consider the extent of compliance with those laws and regulations that directly affect the financial statements, as part of our procedures

on the related financial statement items. For the remaining laws and regulations, we make enquiries of directors and other management,

and inspect correspondence with the regulatory authority, as well as legal correspondence. As with fraud, there remains a higher risk of

non-detection of other irregularities (whether or not these relate to an area of law directly related to the financial statements), as these

may likewise involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls.

 Obtain an understanding of internal control relevant to the audit 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 Company’s and the Group’s internal control.

 Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by

the directors.

 Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained,

whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s and the Group’s

ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’

report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions

are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the

Company and/or the Group to cease to continue as a going concern.

 Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial

statements represent the underlying transactions and events in a manner that achieves fair presentation.

 Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to

express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the

Group audit. We remain solely responsible for our audit opinion.

We communicate with the audit committee regarding, among other matters, the planned scope and timing of the audit and significant audit

findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the audit committee with a statement that we have complied with relevant ethical requirements regarding independence, and

communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where

applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with the audit committee, we determine those matters that were of most significance in the audit of the

financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law

or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not

be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest

benefits of such communication.

FIMBank Group Annual Report & Financial Statements 2021

162

Independent auditors’ report

To the shareholders of FIMBank p.l.c.

Opinion on the directors’ report

The directors are responsible for preparing a directors’ report in accordance with the provisions of article 177 of the Act and other applicable

legal requirements, and is to include a statement that the Company is a going concern with supporting assumptions or qualifications as

necessary, as required by Capital Markets Rule 5.62 issued by the Listing Authority in Malta.

We are required to consider whether the information given in the directors’ report for the accounting period for which the financial statements

are prepared is consistent with those financial statements; and, if we are of the opinion that it is not, we shall state that fact in our report. We

have nothing to report in this regard.

Pursuant to article 179(3) of the Act, other than for the non-financial information that is exclusively required to be disclosed by paragraph 8 of

the Sixth Schedule of the Act with respect to the Bank, and paragraph 11 of the Sixth Schedule of the Act with respect to the Group (and on

which we report separately below in our ‘Report on Other Legal and Regulatory Requirements’), we are also required to:

 express an opinion on whether the directors’ report has been prepared in accordance with the applicable legal requirements; and

 state whether, in the light of the knowledge and understanding of the entity and its environment obtained in the course of our audit of the

financial statements, we have identified material misstatements in the directors’ report, giving an indication of the nature of any such

misstatements.

Pursuant to Capital Markets Rule 5.62 of the Capital Markets rule issued by the Listing Authority in Malta, we are required to review the

directors’ statement in relation to going concern.

In such regards:

 in our opinion, the directors’ report has been prepared in accordance with the applicable legal requirements;

 we have not identified material misstatements in the directors’ report; and

 we have nothing to report in relation to the statement on going concern.

Report on other legal and regulatory requirements

Matters on which we are required to report by the Act, specific to public-interest

entities

Pursuant to article 179B(1) of the Act, we report as under matters not already reported upon in our ‘Report on the Audit of the Financial

Statements’:

 we were first appointed as auditors by the shareholders on 8 November 1994, and subsequently reappointed at the Company’s general

meetings for each financial period thereafter. The period of total uninterrupted engagement is twenty-seven years;

 our opinion on our audit of the financial statements is consistent with the additional report to the audit committee required to be issued by

the Audit Regulation (as referred to in the Act); and

 we have not provided any of the prohibited services as set out in the Accountancy Profession Act.

FIMBank Group Annual Report & Financial Statements 2021

163

Independent auditors’ report

To the shareholders of FIMBank p.l.c.

Matters on which we are required to report by the Banking Act and by exception by

the Act

Pursuant to article 31(3)(a), (b) and (c) of the Banking Act, in our opinion:

 we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purpose of

our audit;

 proper books of account have been kept by the Bank so far as appears from our examination thereof; and

 the Bank’s financial statements are in agreement with the books of account.

Furthermore, we have nothing to report in respect of the above matters, where the Act requires us to report to you by exception pursuant to

articles 179(10) and 179(11).

Pursuant to article 31(3)(d) of the Banking Act, in our opinion and to the best of our knowledge and belief and, on the basis of the explanations

given to us, the financial statements give the information required by law in force in the manner so required.

FIMBank Group Annual Report & Financial Statements 2021

164

Independent auditors’ report

To the shareholders of FIMBank p.l.c.

Report on compliance with the requirements of the Commission Delegated

Regulation (EU) 2018/815 supplementing Directive 2004/109/EC (the “ESEF

Regulation”), by reference to Capital Markets Rule 5.55.6 issued by the Listing

Authority

We have undertaken a reasonable assurance engagement in accordance with the requirements of Directive 6 issued by the Accountancy Board

in terms of the Accountancy Profession Act, 1979 (Chapter 281, Laws of Malta), the Accountancy Profession (European Single Electronic

Format) Assurance Directive, on the Group’s Annual Report and Financial Statements for the year ended 31 December 2021, prepared in a

single electronic reporting format.

Responsibilities of the directors for compliance with the requirements of the ESEF Regulation

As required by Capital Markets Rule 5.56A, the directors are responsible for the preparation of the Annual Report and Financial Statements in

XHTML format, including the specified mark-ups, in accordance with the requirements of the ESEF Regulation.

In addition, the directors are responsible for such internal control as they determine is necessary to enable the preparation of the Annual Report

and Financial Statements that is in compliance with the requirements of the ESEF Regulation.

Auditors’ responsibilities to report on compliance with the requirements of the ESEF Regulation

Our responsibility is to obtain reasonable assurance about whether the Annual Report and Financial Statements in XHTML format, including

the specified mark-ups, comply in all material respects with the ESEF Regulation based on the evidence we have obtained.

In discharging that responsibility, we:

 obtain an understanding of the entity’s financial reporting process, including the preparation of the Annual Report and Financial

Statements, in accordance with the requirements of the ESEF Regulation;

 perform validations to determine whether the Annual Report and Financial Statements has been prepared in accordance with the

requirements of the technical specifications of the ESEF Regulation; and

 examine the information in the Annual Report and Financial Statements to determine whether all the required mark-ups therein have been

applied and whether, in all material respects, they are in accordance with the requirements of the ESEF Regulation.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion, the Annual Report and Financial Statements for the year ended 31 December 2021 has been prepared, in all material respects,

in accordance with the requirements of the ESEF Regulation, by reference to Capital Markets Rule 5.55.6.

The Principal authorised to sign on behalf of KPMG on the audit resulting in this independent auditors’ report is Noel Mizzi.

Signed by Noel Mizzi on 13 April 2022

KPMG

Registered Auditors

FIMBank Group Annual Report & Financial Statements 2021

165

Independent auditors’ report

To the shareholders of FIMBank p.l.c.

Report required by Capital Markets Rules 5.98 and 12.26N issued

by the Malta Financial Services Authority (the “MFSA”)

We were engaged by the Directors of FIMBank p.l.c. (the “Bank”) to report on the disclosures of specific elements in the Statement of compliance

with the principles of good corporate governance and the Remuneration report (the “Disclosures”) as at 31 December 2021 as to whether they are

in compliance with the corporate governance regulations and information to be provided in the Remuneration report set out in the Capital Markets

Rules issued by the MFSA (the “Capital Markets Rules”). More specifically, we are required to report on the Disclosures in the form of an

independent reasonable assurance conclusion about whether:

a. in light of our knowledge and understanding of the Bank and its environment obtained in the course of the statutory audit, we have identified

material misstatements with respect to the information referred to in Capital Markets Rules 5.97.4 (dealing with the Bank’s internal control and

risk management systems in relation to the financial reporting process) and 5.97.5 (where a takeover bid applies). Where material

misstatements are identified in relation to those requirements, we shall, in addition to our conclusion, provide an indication of the nature of

such misstatements;

b. the Disclosures include the other information required by Capital Markets Rule 5.97, insofar as it is applicable to the Bank; and

c. the Disclosures include the information required by Appendix 12.1, ‘Information to be provided in the Remuneration Report’, to Chapter 12 of

the Capital Markets Rules (as applicable).

Responsibilities of the Directors

The Directors are responsible for preparing and presenting the Disclosures in accordance with the requirements of the Capital Markets Rules.

This responsibility includes designing, implementing and maintaining internal control as they determine is necessary to enable the preparation and

presentation of the Disclosures that are free from misstatement.

The directors are also responsible for preventing and detecting fraud and for identifying and ensuring that the Bank complies with laws and

regulations applicable to its activities. The directors are responsible for ensuring that personnel involved in the preparation and presentation of the

Disclosures are properly trained, systems are properly updated and that any changes in reporting relevant to the Disclosures encompass all

significant business units.

Our Responsibilities

Our responsibility is to examine the Disclosures prepared by the Bank and to report thereon in the form of an independent reasonable assurance

conclusion based on the evidence obtained. We conducted our engagement in accordance with International Standard on Assurance Engagements

3000 (Revised), Assurance Engagements Other Than Audits or Reviews of Historical Financial Information (“ISAE 3000”) issued by the International

Auditing and Assurance Standards Board. That standard requires that we plan and perform our procedures to obtain reasonable assurance about

whether the Disclosures are properly prepared and presented, in all material respects, in accordance with the requirements set out in the relevant

Capital Markets Rules.

The firm applies International Standard on Quality Control 1 Quality Control for Firms that Perform Audits and Reviews of Historical Financial

Information, and Other Assurance and Related Services Engagements and, accordingly, maintains a comprehensive system of quality control

including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and

regulatory requirements.

We have complied with the independence and other ethical requirements of the International Ethics Standards Board for Accountants’

International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), together with the ethical

requirements that are relevant to our assurance engagement in accordance with the Accountancy Profession (Code of Ethics for Warrant Holders)

Directive issued in terms of the Accountancy Profession Act (Chapter 281, Laws of Malta), and we have fulfilled our other ethical responsibilities in

accordance with these requirements and the IESBA Code.

The procedures selected and our determination of the nature, timing and extent of those procedures, will depend on our judgment, including the

assessment of the risks of material misstatement of the preparation and presentation of the Disclosures whether due to fraud or error.

FIMBank Group Annual Report & Financial Statements 2021

166

Independent auditors’ report

To the shareholders of FIMBank p.l.c.

In making those risk assessments, we have considered internal control relevant to the preparation and presentation of the Disclosures in order to

design assurance procedures that are appropriate in the circumstances, but not for the purposes of expressing a conclusion as to the effectiveness

of the Bank’s internal control over the preparation and presentation of the Disclosures. Reasonable assurance is less than absolute assurance.

We are not required to, and we do not, consider whether the directors’ statements on internal control and risk management systems cover all the

risks and controls in relation to the financial reporting process or form an opinion on the effectiveness of the Bank’s corporate governance

procedures or its risks and control procedures, nor on the ability of the Bank to continue in operational existence. Our opinion in relation to the

disclosures pursuant to Capital Markets Rules 5.97.4 and 5.97.5 (as appropriate) is based solely on our knowledge and understanding of the Bank

and its environment obtained in forming our opinion on the audit of the financial statements.

As part of this engagement, we have not performed any procedures by way of audit, review or verification of the Disclosures nor of the underlying

records or other sources from which the Disclosures were extracted.

Other Information

We also read the other information included in the Annual Report and Financial Statements that contains the Disclosures, and our report thereon,

in order to identify material inconsistencies, if any, with the Disclosures. We have nothing to report in this regard.

Conclusion

Our conclusion has been formed on the basis of, and is subject to, the matters outlined in this report.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion.

In our opinion:

a. in light of our knowledge and understanding of the Bank and its environment obtained in the course of the statutory audit, we have not

identified material misstatements with respect to the information requirements referred to in Capital Markets Rules 5.97.4 and 5.97.5;

b. the Disclosures include the other information required by Capital Markets Rule 5.97; and,

c. the Disclosures include the information required by Appendix 12.1 to Chapter 12 of the Capital Markets Rules.

The Principal authorised to sign on behalf of KPMG on the work resulting in this assurance report is Noel Mizzi.

Signed by Noel Mizzi on 13 April 2022

KPMG

Registered Auditors

FIMBank Group Annual Report & Financial Statements 2021

167

Schedule I

Statements of profit or loss

2021

2020

2019

2018

2017

USD

Interest income

19,588,232

22,721,724

30,311,233

35,303,561

28,323,748

Interest expense

(10,457,006)

(11,482,001)

(14,037,860)

(19,139,771)

(17,738,857)

Net interest income

9,131,226

11,239,723

16,273,373

16,163,790

10,584,891

Fee and commission income

4,940,843

5,366,867

7,753,143

12,849,903

11,048,533

Fee and commission expense

(2,165,538)

(2,552,278)

(3,078,283)

(2,799,252)

(2,482,765)

Net fee and commission income

2,775,305

2,814,589

4,674,860

10,050,651

8,565,768

Net trading results

542,868

(554,107)

3,107,935

2,632,452

(3,031,664)

Dividend income

16,989,049

7,240,817

43,591,794

17,660,271

10,446,343

Losses on lease modifications

(27,037)

Other operating income

133,940

120,725

118,904

125,068

87,088

Other operating expenses

(128,906)

Operating income before net impairment losses

29,416,445

20,861,747

67,766,866

46,632,232

26,652,426

Net impairment (charge)/reversal on financial assets

(3,699,557)

(34,272,400)

(14,210,257)

(15,514,849)

1,790,863

Impairment of investments in subsidiaries

(87,356)

(9,314,000)

(1,455,270)

(2,558,752)

Operating income/(expense)

25,629,532

(22,724,653)

53,556,609

29,662,113

25,884,537

Administrative expenses

(23,213,366)

(23,722,803)

(20,305,701)

(23,787,047)

(24,785,664)

Depreciation and amortisation

(2,965,967)

(2,962,370)

(2,896,531)

(1,022,470)

(922,457)

Total operating expenses

(26,179,333)

(26,685,173)

(23,202,232)

(24,809,517)

(25,708,121)

(Loss)/Profit before tax

(549,801)

(49,409,826)

30,354,377

4,852,596

176,416

Taxation

(113,418)

(6,566,776)

(765,433)

(1,115,249)

(60,598)

(Loss)/Profit for the year

(663,219)

(55,976,602)

29,588,944

3,737,347

115,818

FIMBank Group Annual Report & Financial Statements 2021

168

Schedule II

Statements of financial position

2021

2020

2019

2018

2017

USD

Assets

Balances with the Central Bank of Malta,

treasury bills and cash

239,982,048

319,267,749

208,259,407

151,891,005

208,147,513

Derivative assets held for risk management

841,688

1,019,288

96,285

109,727

722,256

Loans and advances to banks

182,458,548

179,364,067

232,351,750

321,550,241

203,552,663

Loans and advances to customers

745,564,139

779,834,360

811,152,849

730,708,445

581,529,952

Financial assets at fair value through profit or loss

19,966,163

20,385,323

125,342,798

173,438,374

Financial assets at fair value through other

comprehensive income

162,408,542

153,327,686

79,367,556

87,468,166

Investments at amortised cost

9,914,754

9,839,457

9,785,496

9,923,499

Investments available-for-sale

261,244,798

Investments in subsidiaries

159,448,858

147,436,214

147,948,385

102,595,614

94,050,884

Property and equipment

1,965,249

3,507,509

5,229,059

968,472

1,035,490

Intangible assets

3,774,315

4,008,725

4,647,642

4,669,342

2,736,599

Current tax assets

66,667

76,225

226,886

1,052,348

Deferred tax assets

16,336,538

15,590,954

22,011,162

22,599,041

23,303,267

Other assets

3,848,321

5,570,563

8,824,153

7,352,443

9,005,794

Prepayments and accrued income

7,054,755

Total assets

1,546,575,830

1,639,228,120

1,655,243,428

1,613,274,369

1,393,436,319

Liabilities and equity

Liabilities

Derivative liabilities held for risk management

1,533,556

1,629,434

193,691

2,928,925

723,454

Amounts owed to banks

497,633,356

387,900,641

405,072,025

398,815,757

393,247,791

Amounts owed to customers

838,675,598

1,037,118,337

978,134,002

961,292,743

815,812,570

Debt securities in issue

14,849,948

Subordinated liabilities

50,000,000

Provision for liabilities and charges

201,775

173,051

85,159

269,784

Other liabilities

7,921,481

7,645,488

13,077,128

5,708,599

793,060

Accruals and deferred income

7,818,090

Total liabilities

1,345,965,766

1,434,466,951

1,396,562,005

1,383,865,756

1,268,394,965

Equity

Share capital

261,221,882

252,720,107

157,265,562

Share premium

858,885

9,275,773

173,113

Reserve for general banking risks

2,218,995

3,358,738

2,323,486

1,242,511

608,284

Fair value reserve

(1,074,305)

2,413,581

357,233

758,254

81,501

Other reserve

2,681,041

Accumulated losses

(65,296,434)

(65,772,958)

(8,761,104)

(37,269,073)

(35,768,147)

Total equity

200,610,064

204,761,169

258,681,423

229,408,613

125,041,354

Total liabilities and equity

1,546,575,830

1,639,228,120

1,655,243,428

1,613,274,369

1,393,436,319

Memorandum items

Contingent liabilities

39,327,362

44,246,902

61,628,654

67,466,612

57,601,096

Commitments

107,469,111

105,245,766

143,026,427

158,386,020

254,253,843

FIMBank Group Annual Report & Financial Statements 2021

169

Schedule III

Cash flow statements

2021

2020

2019

2018

2017

USD

Net cash flows (used in)/from

operating activities

(118,733,012)

61,848,191

28,447,866

(115,353,903)

20,694,088

Cash flows from investing activities

Payments to acquire financial assets at

fair value through profit or loss - - (2,469,245) (18,092,429) -

Payments to acquire financial assets at fair value

through other comprehensive income (74,874,050) (109,616,706) (84,984,922) - -

Payments to acquire financial assets at

amortised cost -

(9,881,423) -

Payments to acquire shares in

subsidiary companies -

(1,801,829) (5,352,772) - (10,304,042)

Payments to acquire shares in other investments

(35,210)

Payments to acquire property and equipment

(399,511)

(142,744)

(372,658)

(344,451)

(195,368)

Payments to acquire intangible assets

(779,881)

(393,096)

(951,219)

(2,543,743)

(727,136)

Proceeds on disposal of financial assets at

fair value through profit or loss 160,770 105,639,259 50,000,000 - -

Proceeds on disposal of financial assets at fair

value through other comprehensive income 50,918,619 49,246,582 93,035,159 15,000,000 -

Proceeds on disposal of available-for-sale

financial assets -

- 62,397,260

Proceeds from maturity of investments

held-to-maturity -

- 27,543,320

Proceeds on disposal of property and equipment

9,751

3,551

2,674

Receipt of dividend

4,889,049

240,817

4,628,411

7,472,717

10,207,806

Cash flows (used in)/generated from

investing activities

(20,075,253)

43,172,283

53,536,305

(8,424,539)

88,924,514

Cash flows from financing activities

Issue of share capital

84,887

54,557,207

98,077

Net movement in debt securities

(14,834,943)

14,834,942

Payment of lease liabilities

(1,787,096)

(997,729)

(2,354,026)

Net cash flows (used in)/from

financing activities

(1,787,096)

(997,729)

(17,104,082)

69,392,149

98,077

(Decrease)/Increase in cash and cash equivalents

(140,595,361)

104,022,745

64,880,089

(54,386,293)

109,716,679

Cash and cash equivalents at beginning of year

267,909,686

163,886,941

99,006,852

153,393,145

43,676,466

Cash and cash equivalents at end of year

127,314,325

267,909,686

163,886,941

99,006,852

153,393,145

FIMBank Group Annual Report & Financial Statements 2021

170

Schedule IV

Accounting ratios

2021

2020

2019

2018

2017

Net interest income and other operating income to total assets

2.05

1.43

4.28

3.06

2.09

Operating expenses to total assets

(1.69)

(1.63)

(1.40)

(1.54)

(1.84)

(Loss)/Profit before tax to total assets

(0.04)

(3.01)

1.83

0.30

0.01

Pre-tax return on capital employed

(0.27)

(24.13)

11.73

2.12

0.14

(Loss)/Profit after tax to equity

(0.33)

(27.34)

11.44

1.63

0.09

2021

2020

2019

2018

2017

Weighted average number of shares in issue (000’s) *

522,444

514,568

459,637

329,878

Net assets per share (US cents) *

38.40

39.19

50.27

49.91

37.91

Basic earnings per share (US cents) *

Basic

(0.13)

(10.71)

5.75

0.81

0.04

Diluted

(0.13)

(10.71)

5.75

0.81

0.04

‘ * ‘ Weighted average number of shares in issue and ratios for 2017 to 2018 have been restated to reflect the number of shares in issue as a result

of the 2019 bonus issue of shares.

FIMBank Group Annual Report & Financial Statements 2021

171

Directors and executive management

Board of Directors John C. Grech (Chairman)

Masaud M.J. Hayat (Vice Chairman)

Abdel Karim A.S. Kabariti

Claire Imam Thompson

Edmond Brincat

Hussain Abdul Aziz Lalani

Majed Essa Ahmed Al-Ajeel

Mohamed Fekih Ahmed

Osama Talat Al-Ghoussein (retired on 31 March 2022)

Rabih Soukarieh

Rogers David LeBaron

Company Secretary Andrea Batelli

Registered Address Mercury Tower

The Exchange Financial and Business Centre

Elia Zammit Street

St. Julian’s STJ 3155

MALTA

Contact Number Tel: +356 2132 2100

Executive Management

FIMBank p.l.c.

Group Chief Executive Officer Adrian A. Gostuski

First Executive Vice President Simon Lay Deputy Chief Executive Officer

Executive Vice Presidents Andrea Batelli Group General Counsel,

Head of Investor Relations & Company Secretary

Julio Bonifacino Chief Investment Officer, Structuring Executive

& Advisor to the GCEO

Juraj Beno Group Chief Financial Officer

Thomas Dodd Group Chief Compliance Officer & MLRO

Ronald Haverkorn Group Chief Risk Officer

London Forfaiting Company Limited

Chief Executive Officer Simon Lay

Company Secretary William Ramzan Head of Finance

India Factoring and Finance Solutions (Private) Limited

Chief Executive Officer Ravi Valecha

Company Secretary Swati Zawar Manager – Compliance

The Egyptian Company for Factoring S.A.E.

Chief Executive Officer Ahmed Shaheen

Company Secretary Mohamed Gamaleldien Head of Legal