Banco Aliado Overseas Ltd. was incorporated under the International Business Corporations Act 1982 of Antigua and Barbuda, and the shareholders received a Class 1 banking licence as at February 8, 1995 to conduct international banking business. The shareholders agreed by way of a special resolution of the company dated June 14, 1995, to change the name from Banco Aliado Overseas Ltd to International Investment Bank Ltd.
The Bank office is located at Bryson´s Complex No. 1B, St. John’s Antigua. The registered office is Corporated & Trust Services (Caribbean) Limited, located FDICIC Building Lower Factory Road, P.O Box 990, St. John’s, Antigua.
International Investment Bank Ltd mainly offers selected customers of its Panamanian affiliate, Banco Aliado, access to international banking services. The primary services offered to the Bank’s customers are deposit accounts and credit facilities.
Market Discipline Disclosure
According to the establishment of a Disclosure Policy our institution in order to comply and promote greater transparency and market discipline by publishing and disclosing to market participants and outside stakeholders (including the public) increased and meaningful information pertaining to its operations and the management of its risks, as follows:
Financial Risk Management
A financial instrument is any contract that originates a financial asset in one entity and a financial liability or equity instrument in another entity. Activities at the Bank are mainly related to the use of financial instruments, and thus the statement of financial position is primarily composed of financial instruments.
The Risk Management Unit is responsible for establishing and overseeing the risk management policies of the financial instruments. In this respect, management of the Bank has established the committees of Assets and Liabilities and Auditing, to pursue the timely administration and monitoring of the risks to which the Bank is exposed.
Additionally, the Bank is subject to the regulations of the Financial Services Regulatory Commission of Antigua and Barbuda, concerning risk concentrations, liquidity, and capitalization, among others.
The Risk Management Unit, are supported with policies and procedures that monitor each of the risks identified and reflected in the risk manual. Additionally, the Risk Management Unit has an organizational structure that reports directly to the Board through the Risk Committee.
The Risk Committee is composed of directors and executives of the Bank and has among its main responsibilities:
• Monitor the maximum permissible exposure limits that reflect the risk appetite of the Bank.
• Review policies and management framework of all types of risk are met.
• Analyze the Bank's exposures to various risks and their interrelationships and suggest mitigating strategies when required.
• Report to the Board on the performance of the Bank's risks.
The Bank’s principal risks are those related to credit, liquidity, market and operations, and they are described as follows:
Credit risk is the risk that the debtor or issuer of a financial asset owned by the Bank does not fully and timely comply with any payment, in conformity with terms and conditions agreed upon when the financial asset was acquired or originated by the Bank.
• Risk analysis or pre - approval, which is carried out independently of the business, its objectives, are identify, evaluate and quantify the risk of the proposals are to determine the impact they will have on the credit portfolio of the Bank.
• A control area responsible for validating that the proposals are framed within the policies and limits of the Bank, to obtain the required approval according to the level of risk assumed and comply with the conditions agreed in the approval, at the settlement of the operation.
• The approval process takes place within the Credit Committees.
• A portfolio management process focused on following up trends risks at the Bank in order to anticipate any sign of impairment in the portfolio.
• Monitoring of the members of the Board of Directors through its participation in Credit Committee, Risk Committee and Audit Committee.
The factors of greatest risk exposure and information of the loan portfolio and investments in debt securities, disclosures as follows:
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Impairment of loans and investments in debt securities:
Management determines if there is objective evidence of impairment on loans and investments in debt securities, based on the following criteria established by the Bank:
• Breach of contract, such as a default or delinquency in interest or principal payments
• Cash flow difficulties experienced by the borrower
• Non-compliance with agreed contractual terms and conditions
• Initiation of bankruptcy procedures
• Decline in the borrower's competitive position; and
• Impairment of collateral value.
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Past due but not impaired:
Are considered past due but not impaired, without incurred losses, loans and investments in debt securities that have a level of guarantees and/or sufficient sources of payment to cover the carrying amount of the loan and investment.
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Renegotiated Loans:
Renegotiated loans are those which have been led to a restructuring due to any impairment in the debtor’s financial condition and when the Bank considers to grant any variation with respect to the credit original terms (balance, term, payment plan, rate and collaterals). These loans once they are restructured, are maintained in the same risk category that they have before the restructuring, notwithstanding if the debtor’s capacity improves after Bank’s restructuring.
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Write–off policy:
Loans are charged to losses when it is determined that they are uncollectible. This determination is made after an analysis of financial conditions made from the time the payment obligation was not performed and when it is determined that the guarantee is not sufficient for full payment of the facility granted.
The Bank holds collateral on loans to customers consist of mortgages on properties and other guarantees. Estimates of fair value are based on the value of the collateral as the loan term and are generally updated every three years. Security policies, including the required coverage on amounts borrowed, are set by the Board and reviewed periodically.
The Bank maintains collaterals to reduce credit risk, in order to ensure the collection of its financial assets exposed to credit risk. The geographical concentration of loans, letters of credit, is based on the location of the debtor and in the case of investments, the geographic concentration is based on the issuer’s location.
(b) Liquidity and Financing Risk
Liquidity risk is the risk that the Bank is unable to meet all its obligations. The Bank mitigates this risk by setting limits on the minimum proportion of funds that must be maintained in highly liquid instruments and composition limits interbank facilities and financing.
The Bank manages liquidity risk, considering placing their cash surpluses only in the form of short-term deposits in banks previously analyzed and approved by the Executive Committee and Credit Committee, rated by rating agencies worldwide and financial instruments with immediate liquidity.
The Risk Management Unit conducts the review of minimum liquidity of the Bank and the minimum liquidity required by law. This review is done weekly.
(c) Market risk
It is the risk that the value of a Bank’s financial asset is reduced as a result of changes in interest rates, foreign currency exchange rates, changes in the price of stocks or the effect of other financial variables beyond Bank’s control. The objective of market risk management is to manage and supervise market risk exposures, in order that they are maintained within the acceptable parameters optimizing the risk return.
Risk management policies establish compliance with limits per financial instrument, limits as to the maximum amount of loss requiring the closure of the positions causing such loss and the requirement that, otherwise approved by the Board of Directors, all the assets and liabilities should be substantially denominated in US dollars.
(d) Interest rate risk
Are the risks that future cash flows and the value of a financial instrument change due to fluctuations in the market interest rates. The Bank’s net interest margin may change as a result of unexpected changes in interest rates. In order to mitigate this risk, the Risk Management Unit has set limits to exposure to interest rate risks that might be assumed, which are approved by the Board of Directors. Compliance with these limits is monitored by the Assets and Liabilities Committee (ALCO) and the Risk Committee.
(e) Price Risk
It is the risk that the value of a financial instrument will fluctuate as a consequence of changes in market prices, regardless if these are caused by specific factors related to that particular instrument or its issuer, or by global factors that affect the whole market.
The Bank is exposed to price risk on those financial instruments that are classified as available for sale.
(f) Operational risk
Operational risk is the risk of incurring losses resulting from failures or inadequacies of internal processes, human resources and technological systems or from external events that are not related to financial risks such as those arising from legal and regulatory requirements and the behavior of corporate standards.
Operational Risk Unit has been designed based on a segregation of duties between process owners, executors, control areas and areas that are responsible for ensuring compliance with policies and procedures. Business units and services of the Bank assume active responsibility in the identification and communication for subsequent measurement, control and monitoring of operational risks and are responsible for understanding and managing these risks in their daily activities.
The Bank has adopted a methodology for evaluating business processes based on risk, which is to identify areas and key processes in relation to strategic objectives, identifying inherent risks in the business and diagramming the process cycle to identify risks and mitigating controls. This, supported by technological tools to document, quantify and monitor risks identified in the different processes through risk matrixes.
For this strategy, the Bank has implemented within the Operational Risk Unit the following:
• Macro - processing processes
• Macro - processes, event logs and incidents risks
• Strategies training to all staff
• Macro - management processes mitigation
The Internal Audit Department, through its programs, ensures compliance with the procedures and controls identified in coordination with the Operational Risk Unit monitors the severity of them. This strategy’s main objective is to add the maximum value to each of the activities of the organization, minimizing the likelihood of failures and losses.
