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Contents
Chairman’s statement to the shareholders
1
FIMBank group performance 2023
2
Directors’ report
5
Statement of compliance with the principles of good corporate governance
13
Remuneration report
24
Financial statements:
Statements of financial position
40
Statements of profit or loss
42
Statements of other comprehensive income
43
Statements of changes in equity
44
Statements of cash flows
48
Notes to the financial statements
50
Statement by the directors pursuant to Capital Markets Rule 5.68
194
Schedules to the annual report
Statements of profit or loss – 5 year summary
195
Statements of financial position – 5 year summary
196
Cash flow statements – 5 year summary
197
Accounting ratios – 5 year summary
198
Directors and executive management
199
FIMBank Group Annual Report & Financial Statements 2023
1
Chairman’s statement to the shareholders
Dear Shareholder,
As we close off another fiscal year, I take this opportunity to share my reflections on the Bank’s journey throughout the pas t twelve months. Although
the year brought about a number of challenges, we have once again demonstrated our resilience and commitm ent. The Bank’s unwavering focus
towards value creation for its clients and stakeholders enabled it to charter its path to offset the various obstacles faced during the year. The year
2023 unfolded within a global backdrop marked by elevated inflation levels, posing significant challenges for governments, central banks, individuals,
and businesses alike. The persistent conflict in Ukraine and escalating tensions in the Middle East as the year progressed were also main contributors
to global uncertainty.
For the period ending 31 December 2023, the FIMBank Group recorded a significant turnaround, registering a pre-tax profit of USD5.8 million, an
important development in comparison to the pre-tax loss of USD24.7 million in the previous year. Post-tax, the Bank achieved a break-even
performance, resulting in a profit of USD7,674. During 2023, the Group experienced considerable financial shifts, underscored by a 20% increase in
operating income, reaching USD54.8 million, supported by a favourable interest rate environment, alongside a 42% increase in net operating results
to USD11.4 million. In line with our efforts across the past years, the Group maintained a commitment to asset quality with a notable reduction in
net impairment losses and a decrease in the Non-Performing Loan Ratio. The turnaround that has been registered is a result of the ongoing recovery
efforts undertaken over the past years as the team worked relentlessly to improve the quality of our portfolio. The dedication of our Bank's
Management should not be underestimated. The role that they play is of crucial importance as we collectively strive towards the realisation of our
financial objectives.
While Group results mark a considerable improvement and demonstrate that a well-executed plan of action is starting to yield sustainable results,
it is crucial to convey that as Chairman, merely achieving break-even does not represent the slightest of our ambitions. With a strong foundation,
supported by an international network of offices in four continents and an expert team dedicated to excellence, we are uniquely positioned to
capitalise on our transformational efforts and achieve our aspirational goals. Looking ahead, we anticipate a promising 2024 with accelerated
performance improvements.
FIMBank also deems investor relations to be of utmost importance. Our actions in this respect are characterised by transparency and honesty.
Throughout the year, we have steadfastly upheld our commitment to actively engage with all our stakeholders. Central to our philosophy is the
principle of forthrightness, ensuring that both positive developments and challenges are communicated in a realistic manner, in keeping with the
professional standards expected of us.
It is with a sense of profound gratitude that I acknowledge the trust and loyalty our shareholders have shown us. I must extend special appreciation
to our majority shareholder, the KIPCO Group, for their resolute and continued support over the years. Their consistent backing has been
instrumental in helping us to navigate through the complexities of an ever-evolving landscape, providing encouragement as we continue to drive
towards our strategic ambitions.
I wish to take this opportunity to express my gratitude and appreciation to former CEO Mr. Adrian Gostuski for his commitment to strengthening
the foundation of the Bank, his dedication, and hard work during the last four years. His contribution will be remembered for years to come and
serves as a lasting testament to his leadership. I take this occasion to congratulate and welcome Mr. Mohammed Louhab, following his recent
appointment as Group Chief Executive Officer. I am confident that under the guidance of our new GCEO, the Bank will continue to build upon its
solid foundations and progress further in achieving sustainable results and complete its turnaround.
In closing, I wish to express my gratitude and appreciation to the Directors, Management, and employees of the FIMBank Group. We remain grateful
for their invaluable contribution and tireless efforts in executing our strategic objectives. Together, we have navigated another challenging year,
and I am confident in our collective ability to embrace and capitalise on the opportunities that lie ahead.
Signed by John C. Grech (Chairman) on 24 April 2024
FIMBank Group Annual Report & Financial Statements 2023
2
FIMBank Group performance 2023
CEO’s message
As we review the financial year ending 31 December 2023, it is with a sense of grounded optimism that I share our Group's performance details
with you. The financial year has been one of substantial improvement for FIMBank Group, marking a significant turnaround, posting a pre-tax profit
of USD5.8 million. This reflects a remarkable improvement from the previous year, where we reported a pre-tax loss of USD24.7 million. The financial
results of 2023 are the culmination of the efforts undertaken over the past years and serve as a strong indicator that the transformation that the
Group has undertaken is starting to yield results.
Midway through the year, our interim results indicated an encouraging upward trend in performance, suggesting the potential for an even more
favourable outcome by the end of the year. This was overshadowed by an increase in corporate tax, with the year-end results showing a modest
post-tax profit of USD7,674, effectively break-even. Notwithstanding, this remains a noteworthy recovery from the previous financial years.
I am pleased to report that for the fourth year running there are no new material non-performing loans. Banks with strong risk management,
diversified portfolios, and effective recovery processes are always better positioned to maintain lower non-performing ratios, and our objective is
to continue building on these positive recovery results in the years ahead. We are confident that our focus on robust risk management practices,
diversified portfolios, and efficient recovery processes will continue to enhance these ratios.
Since my appointment as Group Chief Executive Officer of the Bank on 30 November 2023, I have witnessed firsthand the resilience and
determination with which our team continues to overcome our existing challenges. As we look ahead, we see a stable business model that is poised
to capitalise on growth opportunities and business potential within the international and local markets. Our commitment to marching towards
sustainable growth, driven by our collective efforts, is aimed at forging a prosperous future that maximises shareholder valu e.
Overview of financial results
During this financial period, net interest income increased by 26% year on year, reaching USD55.2 million. This increase is primarily attributed to
the favourable interest rate environment, which allowed the Group to expand its interest margins. Moreover, the net fees and commission expense
saw a marked improvement, reducing to USD0.7 million, a decrease of USD1.2 million from the previous year. Operating results from the non-
trading portfolio increased by USD9.1 million to USD54.8 million, reflecting a growth of 20% over the previous year. The increase in operating results
from the non-trading portfolio reflects the successful execution of our diversified business strategy.
Turning our focus to trading performance, although we recorded a net trading loss of USD3.2 million for the year, this represents a significant
recovery from the previous year's USD6.9 million loss. The Group's trading operations encountered challenges stemming from the pervasive impact
of geopolitical unrest and fluctuations in economic policies within the primary markets we operate in. This situation was further exacerbated by the
default of an asset in our LFC subsidiary's trading book. Even in the face of these challenges, our strategic actions have been geared towards
minimizing impacts and ensuring financial stability. Through diligent planning and proactive measures, we remain steadfast in our commitment to
mitigating adverse effects and strengthening our financial resilience.
As of 31 December 2023, the Group’s total consolidated assets increased by 1.60% to USD1.58 billion, refl ecting a prudent yet strategic approach
to steadily managing our asset size and capital positions. The Group’s consolidated liabilities increased slightly to USD1.40 billion, following the shift
of focus towards broadening the Bank’s deposit base through a n enhanced emphasis on diversifying funding sources. During the period, customer
deposits increased by 6.7% to USD935 million. This was complemented by a strategic stance that actively promotes franchise deposits, targeting
stable, lower-cost deposits generated through our established reputation and strong customer relationships.
The Group’s Common Equity Tier 1 Ratio and TCR ratios stood at 18.3%, well above the overall capital requirements and supervi sory pillar two
guidance.
Achieving a 6.46% reduction in the Non-Performing Loan (“NPL”) Ratio demonstrates our commitment to maintaining a healthy and resilient
portfolio. This result is a testament to our rigorous management of assets and our successful efforts in reducing net impairment losses.
Our financial performance has demonstrated remarkable improvement that encourages us to build on these results. Our strategic initiatives are
setting the stage for sustainability. As we progress further in our journey, our focus remains on optimizing our operational efficiency, solidifying our
risk management framework, and expanding our revenue generation capabilities, delivering superior value to our customers and shareholders. The
diverse business units within the bank are actively demonstrating their strong capabilities in originating new business, with a robust pipeline of
transactions consistently being converted, showcasing a dynamic and healthy business origination environment.
FIMBank Group Annual Report & Financial Statements 2023
3
Business unit performance
Trade Finance
The Bank continues to prioritise Trade Finance as one of its core businesses. During the year, the Trade Finance team successfully maintained a
steady client base while also integrating a select group of new clients. This diligent approach culminated in a notable uptick in trade finance volumes.
A significant effort was devoted to enhancing operational efficiency throughout 2023, including updated risk frameworks, streamlined processes,
upgrading of technology, and revised policies. These strategic improvements were aimed at optimizing service delivery. FIMBank is renowned for
its expertise in maritime finance, offering tailored banking and finance services for the shipping industry from a base in Dubai. In response to
emerging market dynamics, the Bank renewed its focus on re-entering trade finance operations within a select number of African countries.
Following the strategic decision taken the previous year, the Greek portfolio was transferred to Malta, and during 2023 continued to be managed
by a dedicated team of factoring specialists. The portfolio size remains stable, and this realignment has led to notable performance improvements.
Corporate Finance
Beyond trade finance, the local lending activity began with the establishment of the Real Estate Finance unit in 2016, offering project financing for
residential and commercial projects in Malta. Over the past eight years, the Real Estate portfolio has consistently delivered positive results,
maintaining portfolio stability at the desired levels. After achieving success in this sector and securing a substantial market share, the Bank took a
significant step forward in 2023 with the launch of its Corporate Finance proposition. This initiative spearheaded the development of a
comprehensive suite of financial solutions tailored specifically for corporate clients. The corporate offering includes business loans, overdrafts,
general banking facilities, and revolving loans, aimed at meeting the diverse needs of businesses operating in Malta. This initiative has resulted in
stable growth and heightened visibility in the home market, positioning the Bank to capitalise on potential opportunities for increased business and
diversification. Corporate Finance is well-positioned to grow in a sustainable manner while reinforcing the Bank’s presence and visibility in its home
country.
London Forfaiting Company Ltd (“LFC”)
The year 2023 was a very successful one for LFC, which returned a net profit after tax of USD8.64 million (2022: USD0.73 million) to its shareholder.
LFC also embarked on a strategy of diversifying its portfolio last year. LFC takes a proactive approach to managing its non-performing assets, and
whilst there was one new non-payment in 2023, this was fully provided for during the year. LFC experienced a general increase in underlying interest
rates following the tightening of monetary policy in many of the developed and developing economies. This trend was particularly relevant in
countries where LFC operates, significantly contributing to an enhancement in the company's profitability in 2023. Significantly, LFC celebrates its
40th anniversary in 2024, and its ability to adapt to constant economic and operational changes in the environment where it operates stands as a
testament to its longevity, robustness, and resilient business model.
India Factoring and Finance Solutions Private Ltd (“India Factoring”)
During the year in review, India Factoring registered a profit of USD0.30 million, compared to a loss of USD0.70 million registered in 2022. India
Factoring retained its leadership position in the provision of factoring services in India for the sixth 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. In 2023, India Factoring maintained its portfolio at
a similar level to that of the previous year in spite of various challenges such as geopolitical tensions, inflationary trends, rising interest rates, etc.
Despite strong outperformance in terms of operational profit, the subsidiary experienced an increase in provisions and deferred tax asset charge,
which impacted the overall performance. The increase in provisions was on account of one legacy domestic relationship. The company’s
performance of its export book has been strong, and its current portfolio status remains excellent.
The Egyptian Company for Factoring S.A.E. (“Egypt Factors”)
Egypt Factors registered a profit of USD1.9 million and an increase in its factoring portfolio during 2023. The subsidiary was the first licensed Egyptian
company specializing in factoring services, it is considered a pioneer in the financial services sector in Egypt and maintained its leading market
position measured by market share. It has consistently maintained its premier market position, as evidenced by its substantial market share. Egypt
Factors has built a strong reputation for its responsiveness to client needs, primarily through providing high-quality accounts receivable
management. This approach supports suppliers in fulfilling buyer expectations.
FIMBank Group Annual Report & Financial Statements 2023
4
Investment in technology
Digital and technology serve as indispensable catalysts for modern banking, and FIMBank has wholeheartedly embraced this ethos through
continuous investment over the years. In 2023, we achieved several significant milestones in our digital transformation voyage. Among our top
priorities was the enhancement of our digital banking platform, FIMBank Direct, for which most of the work was concluded in 2023. Our primary
focus remains on enriching our customers' digital experiences and broadening the platform's functional capabilities, thereby empowering them to
seamlessly manage their banking needs with heightened security. Throughout 2023, we have made substantial progress in replacing the legacy
Group factoring operating system with a successful migration to a new platform for our India business. The Bank also embarked on a new payments
project hub which is set to be launched in 2024. This initiative falls in line with the Bank’s commitment to modernise its paym ents framework and
support industry changes. These enhancements further solidify our dedication to innovation and excellence in banking services.
Corporate Social Responsibility
At FIMBank we believe that our actions have a direct impact upon the community in which we operate. During the period of 2023, the Bank has
sought to embark on a number of initiatives to support organisations making valid contributions to society. The Bank, along with its employees,
collectively contributed to Puttinu Cares through an internal initiative that supplemented the Bank’s own charitable donation. FIMBank supported
Pink October and Movember initiatives aimed at raising awareness for men's and women's health. Bank employees were encouraged to wear pink
or blue at the workplace to show solidarity towards the cause and enjoyed some sweet baked treats, all while collecting donations for Hospice
Malta.
Earlier in the year, the Bank backed the Valletta Concours event as part of its CSR program, celebrating automotive heritage and cultural
preservation. This sponsorship fosters historical appreciation through the showcasing of vintage and classic automobiles, educational platforms for
enthusiasts of all ages, while also bolstering tourism. Such engagement reflects a dedication to CSR by investing in initiatives that enrich lives and
promote sustainable cultural practices and community involvement.
Environmental, Social and Corporate Governance principles (ESG)
The FIMBank Group acknowledges the growing importance of Environmental, Social, and Governance (“ESG”) standards and our responsibility in
advancing sustainable practices. As an organisation operating in various continents across the globe, we have a direct influence on the well-being
of individuals across numerous countries, evident through our role as an employer, the nature of our products and services, and our broader impact
on the environment and local communities.
At FIMBank, we pledge to embed ESG considerations into our business strategy, facilitating the integration of sustainability principles into our
decision-making processes. We are steadfast in our belief that by championing sustainable practices, we contribute to forging a more resilient future
for all stakeholders, including customers, shareholders, employees, and broader society. As we continue to embed ESG into our operational
framework, we strive to effect positive change and uphold our duty as a responsible corporate entity.
We have engaged external consultants to aid in implementing an ESG framework within our organisation. This framework serves to align our efforts
with the European Union's ESG objectives and proactively manage environmental risks affecting the Group, our clientele, and society at large.
Concluding remarks
Whilst recent results have shown that recent efforts spearheaded over the years are now starting to bear fruit, our business approach remains
grounded and cautious, as we acknowledge that we must undertake more work. The priorities for 2024 have been clearly defined: the maximisation
of revenues through high-quality, good-yielding assets across various verticals while emphasizing a heightened awareness toward our cost base.
Furthermore, assessing capital consumption is instrumental in achieving higher returns and strategically balancing our portfolios to ensure optimal
performance. I am confident that with an approach focusing on collective collaboration, we will achieve our objectives.
I extend my gratitude to our dedicated team, our Board of Directors, and our stakeholders for their unwavering support and commitment to our
vision. Together, we are poised for success in the years to come.
Signed by Mohammed Louhab (Chief Executive Officer) on 24 April 2024
FIMBank Group Annual Report & Financial Statements 2023
5
Directors’ report
For the year ended 31 December 2023
The Directors present their report together with the Financial Statements of FIMBank p.l.c. (the “Bank”), and FIMBank Group o f Companies (the
“Group”) for the year ended 31 December 2023. 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 profit after tax of USD7,674 and USD2,490,148 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
42 and 43 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”), and FIMFactors B.V. (“FIMFactors”).
LFC and FIMFactors are themselves parents of a number of subsidiaries as set out in Note 27 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 with the Dubai International Finance Centre, United Arab Emirates, which is regulated by the Regulator in the
United Arab Emirates.
• 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 b ills 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.
Please refer to Note 47 to the Financial Statements for information about the subsequent events of this entity.
• 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 part ies and third-party tenants.
• Egypt Factors (100%), registered in Egypt, is active in providing factoring services to Egyptian companies.
• 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, is to carry out the business of factoring in
India. India Factoring is regulated by the Reserve Bank of India: and
b. BrasilFactors S.A. (50%), is 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 2023
6
Review of performance
The financial period ending on 31 December 2023 marked a significant turnaround in both operating and financial performance for the Group. There
was a substantial shift from a pre-tax loss of USD24.7 million in the preceding financial period ending on 31 December 2022 to a pre-tax profit of
USD5.8 million in the current period. Furthermore, the Group achieved break-even post-tax, with a profit of USD7,674 for the financial period ending
on 31 December 2023, a remarkable improvement compared to the loss of USD26.7 million reported in the previous year.
The economic landscape in 2023 presented a myriad of simultaneous developments, making it quite complex to capture comprehensively. Amidst
the ongoing global recovery from the lingering effects of the COVID-19 pandemic, tensions continued to escalate in Eastern Europe, intensifying the
persisting cost-of-living crisis. Simultaneously, tensions heightened in the Middle East due to the Israel-Hamas conflict, leading to recent attacks on
shipping in the Red Sea that disrupted supply chains and sharply increased shipping costs.
Despite experiencing a faster-than-expected decline in inflation, it remained stubbornly high, prompting central banks to persist in raising interest
rates. This, in turn, increased borrowing costs and posed significant challenges for private individuals, corporations, and industries sensitive to
interest rates, such as manufacturing and business investment. Economic growth exhibited variability, with some economies surpassing expectations
while others remained subdued due to weak consumer sentiment and the lingering effects of high energy prices and inflationary pressures.
Nonetheless, there were discernible signs of supply-side expansion, including a broad-based increase in labour force participation, resolution of
pandemic-era supply chain disruptions, and decreasing delivery times.
The persistently high interest rate environment presents both advantages and drawbacks for the Group. On the positive side, it has contributed to
boosting the net interest margin, which reached USD55.2 million, as the rise in interest income surpassed the increase in interest expenses. Despite
the general negative impact of increasing interest rates on the fair valuation of trading assets, this effect was mitigated by a prudent risk focused
approach applied in managing the trading book. The average tenor of the trading book was kept short (under one year), and the majority of the
assets were linked to a floating rate, which helped mitigate any adverse effects from high interest rates.
The Group has persistently pursued the recovery of its legacy portfolio, yielding tangible results with a recovery exceeding USD16 million from
various non-performing clients. The ongoing de-risking efforts over the past few years have proven fruitful, with no material exposures classified as
non-performing for the third consecutive year. Furthermore, the Group conducted a thorough review of non-performing exposures, resulting in the
write-off of several fully provided exposures where remote recovery prospects were identified. This strategic action not only improved the Group's
asset quality and regulatory metrics, but also freed up Management’s resources to focus on other recovery initiatives while safeguarding and
improving the performing portfolio.
During the financial year ended 31 December 2023, Management has reconsidered its position on the reclassification of its long-term debt securities.
In 2022, the Group reclassified this portfolio from ‘Financial investments at fair value through other comprehensive income’ to ‘Financial investments
at amortised cost’. In 2023, the Group reclassified this portfolio back to ‘Financial investments at fair value through other comprehensive income’.
This decision followed various developments in the market surrounding interpretations of IFRS 9 requirements, in relation to reclassifications of
financial instruments between different classification and measurement categories. Please refer to Note 25.2 for further information on this
reclassification.
In the review period, the Group continued its medium-term strategy of refining its structure. Notably, efforts were directed towards finalising a
merger by acquisition between the Bank and FIM Business Solutions Limited, a process expected to conclude in 2024. This strategic initiative aims
to streamline the Group's business model and reduce operating expenses, aligning with its long-term objectives.
Notwithstanding the unpredictable operating environment due to ongoing conflicts in Eastern Europe and the Middle East, as well as monetary and
fiscal policies in its markets, LFC had an excellent year, closing with a USD11.3 million profit before tax compared to USD1.5 million in the previous
year. As a result of these strong financial results, LFC has fully utilized all of its deferred tax assets. Additionally, LFC closed the year with a trading
portfolio 16% lower than the previous year, reflecting the entity’s selective approach to emerging market exposures. LFC adopted a cautious
approach in managing its trading portfolio through sound credit assessment, insurance capacity, and enhanced oversight.
India Factoring maintained its factoring portfolio at a level similar to the previous year, while surpassing the previous year’s operating profits by
USD0.7 million. The entity increased its provision for a specific legacy group of connected clients due to delays in the recovery process while recorded
some recoveries and released some expected credit losses. As a result, the entity closed the year with a profit before tax of USD1.6 million, compared
to a loss of USD0.7 million incurred in the previous year. The entity strategically diversified its portfolio across various industries, with the majority
of the portfolio covered through import factor and credit insurance, effectively mitigating industry-specific risks. Furthermore, the successful
implementation of front-end software has significantly enhanced operational capabilities, including digital functionalities.
Throughout the year, India Factoring received numerous awards in India, recognizing excellence across various aspects of its business operations.
FIMBank Group Annual Report & Financial Statements 2023
7
Egypt Factors has observed a consistent invoice turnover in value terms, alongside a notable expansion in its factoring portfolio. Leveraging the
implementation of several government initiatives affecting trade, imports, and foreign currency in Egypt, the company capitalised on these
opportunities, resulting in a remarkable 50% increase in interest income. As a consequence, by the conclusion of 2023, Egypt Factors achieved a
substantial pre- and post-tax profit of USD1.9 million, marking a significant rise from the USD0.4 million reported in 2022.
The Group maintained a robust capital position throughout the year, with a Total Capital Ratio (“TCR”) of 18.3%, well exceeding the minimum
requirement of 16.1%. This surplus in capital provides the Group with an opportunity to pursue additional asset origination aligned with its risk
appetite, thereby generating incremental revenue streams. Anticipating further regulatory review, particularly the Supervisory Review and
Evaluation Process (“SREP”) by the MFSA, the Group expects a reduction in its Pillar 2 Requirement (“P2R”), which stood at 4.5% at year-end.
Moreover, the Group upheld a strong liquidity position, evidenced by an average Liquidity Coverage Ratio (“LCR”) of 288% and an average Net Stable
Funding Ratio (“NSFR”) of 141%. Both liquidity metrics comfortably surpassed regulatory minimums and the Group's internal risk appetite level,
underscoring its resilience and readiness to meet liquidity demands. Overall, these indicators affirm the Group's financial strength and adherence
to regulatory standards.
Statements of profit or loss
The Group registered a pre-tax profit of USD5.8 million for the financial period ending on 31 December 2023, compared to a pre-tax loss of USD24.7
million in the financial period ending on 31 December 2022. Post-tax, the Group reached break-even, with a marginal profit of USD7,674 for the
financial period ending on 31 December 2023. In the financial period ending on 31 December 2022, the Group suffered a loss of USD26.7 million.
Group earnings per share were negative at US cents 0.01 (2022: negative US cents 5.09). 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
2023
2022
Movement
USD
USD
USD
Net interest income
55,249,865
43,770,500
11,479,365
Net fee and commission expense
(739,577)
(2,004,678)
1,265,101
Dividend income
40,228
3,821,545
(3,781,317)
Fair Value Loss on Investment Property
(1,398,978)
-
(1,398,978)
Other operating income
1,665,027
163,542
1,501,485
Operating results from non-trading portfolio
54,816,565
45,750,909
9,065,656
Operating expenses
(43,840,601)
(38,262,423)
(5,578,178)
Income before net impairment and net trading results
10,975,964
7,488,486
3,487,478
Net trading results
(3,220,869)
(6,924,935)
3,704,066
Net impairment losses
(1,960,888)
(25,277,991)
23,317,103
Profit/(Loss) before taxation
5,794,207
(24,714,440)
30,508,647
Taxation
(5,786,533)
(1,957,610)
(3,828,923)
Profit/(Loss) for the year
7,674
(26,672,050)
26,679,724
The Group returned ‘O perating results from non-trading portfolio’ of USD54.8 million, exceeding last year’s results by USD9.1 million (20%). ‘Net
interest income’ rose by USD11.5 million (26%) year on year, to USD55.2 million, primarily due to higher interest rates allowing the Group to widen
its interest margins. ‘Net fees and commission expense’ at USD0.7 million improved from prior year by USD1.2 million.
During the year under review, the Group received a negligible amount of dividend from one of its investments, whereas in the previous year, the
Group had received USD3.8 million in dividends from its investment in unlisted sub-funds. However, 'Other operating income' includes a fair value
gain of USD0.8 million recognized on these investments in unlisted sub-funds, which are held at fair value through profit or loss, compared to a fair
value loss of USD0.3 million incurred in the previous year. Other elements of other operating income remained fairly stable.
The Group's investment property was subject to an external valuation, leading to a fair value loss of USD1.4 million. In December 2022, the same
property also underwent an external valuation, maintaining a stable value compared to the previous year.
FIMBank Group Annual Report & Financial Statements 2023
8
‘Operating expenses' for the year under review totalled USD43.8 million, marking a USD5.6 million (15%) increase from the previous financial year,
2022. In the prior year, the Group benefited from the depreciation of the Euro and the Pound Sterling against the US Dollar, as most expenses are
incurred in these currencies while the Group's functional currency is the US Dollar. During that year, this depreciation led to lower operating
expenses when converted back to USD. However, during 2023, both the Euro and the Pound Sterling appreciated against the US Dollar, reversing
the benefit observed in the previous year. Consequently, operating expenses incurred in these foreign currencies translated to higher expenses
when converted to the functional currency. Additionally, the Group faced higher costs in the transacted currencies due to inflationary pressures,
further contributing to the increase in operating expenses. Moreover, in 2023, the Bank recorded expenses related to the strategic transformation
project carried out by a highly reputable advisory firm as announced in previous publications.
'Net trading results' amounted to a loss of USD3.2 million, an improvement from the USD6.9 million loss in the prior year. The trading book, held at
the Group’s subsidiary LFC, was impacted by the default of an asset throughout 2023, which was party recovered from an insurance cover.
Additionally, the unpredictable operating environment resulting from the contagion effects of ongoing conflicts in Ukraine and Israel, as well as
monetary and fiscal policies from major markets, further affected net trading results.
Net impairment losses have normalized to USD2.0 million, a significant improvement from the USD25.2 million suffered in the previous year. The
Group reversed USD56.2 million of Stage 3 provisions, compared to USD13.4 million in 2022. Of this, USD60.3 million (2022: USD32.5 million) were
reversed due to write-offs or recoveries of non-performing exposures, while USD3.9 million (2022: USD19.5 million) was an increase in coverage for
legacy non-performing exposures and legal fees incurred during the recovery process.
Additionally, the Group recovered USD0.6 million in previously written-off debt, compared to USD1.6 million in 2022. The Group wrote off USD59.7
million of non-performing exposures in 2023, up from USD32.7 million in 2022. These write-offs were fully provided for in previous years, though
the Group still holds the option to enforce, sell, or transfer the credit to another entity.
These adjustments, along with other measures, led to a reduction of the NPL Ratio by approximately 6.5% within the review year to below 5%.
Management has made significant efforts over the past three years to decrease the NPL Ratio from 20% in 2020.
The Group also released USD0.7 million of Stage 1 and Stage 2 provisions for performing clients, in contrast to the USD1.9 million increase in
provisions seen in 2022. Additionally, the Group set aside USD0.4 million for liabilities and charges, compared to USD0.5 million in the previous year.
Notably, in 2022, the Group wrote off goodwill of USD5.2 million on Egypt Factors and India Factoring entirely. Consequently, no impairment
assessment of goodwill was necessary in 2023.
In 2023, provisions for tax for all Group entities amounted to USD5.8 million, compared to USD2.0 million in 2022. With the increased profitability
of the Group entities, some of the deferred taxation has been utilized. These entities have conducted assessments to ensure the recoverability of
the remaining recognized deferred tax assets before their finite expiry, where applicable.
Financial position
As of December 31, 2023, total consolidated assets amounted to USD1.58 billion, representing a USD25 million increase or 2% growth compared to
the end of 2022. However, the average total consolidated assets for the year were 12% lower than the previous year's average.
In comparison to the previous year, the Group closed the year with higher balances in treasury assets, including high-quality liquid assets (up by
USD96 million) and loans to banks (up by USD54 million). Conversely, there were lower balances in trading assets (down by USD70 million), factoring
assets (down by USD33 million), and trade finance (down by USD19 million).
Average loans to banks increased by USD27 million, reflecting the Group's strategic approach to managing risk. Despite the Group's ongoing efforts
to reduce exposure to higher-risk clients, the Financial Institutions portfolio has been cautiously managed in line with our prudent risk framework.
Nevertheless, there has been a con certed effort to attract business from jurisdictions and financial institutions that align with the Group’s risk and
compliance standards, while focusing on the portfolios’ risk adjusted returns.
The Group experienced a decline in average balances. Notably, factoring decreased by USD53 million, trading assets by USD29 million, and trade
and corporate finance by USD21 million. This reduction is primarily attributed to a cautious approach towards regulatory requirements, particularly
the Total Capital Ratio. Furthermore, the Group's ongoing strategic deployment of assets, marked by prudence in certain business activities,
jurisdictions, and customer segments, has further contributed to these declines. Additionally, market conditions affected by inflationary pressures
and geopolitical conflicts, such as those in Ukraine and the Middle East, have impacted demand and trade flows.
The average balances for treasury assets decreased by USD100 million. These assets comprise high-quality liquid assets and are primarily managed
to meet the Group's liquidity needs and regulatory liquidity ratios.
FIMBank Group Annual Report & Financial Statements 2023
9
The Group conducted an assessment on deferred tax assets and investments across its subsidiaries, affirming the adequacy of their carrying
amounts. During these assessments, Management considered various factors significantly influencing the global economy and the specific activities
of these assets.
An external valuation of the head office premises in St. Julians, which is partially recognized under 'Property, plant, and equipment' and partially
under 'Investment property,' indicated that the fair value of the 'Property, plant, and equipment' increased by USD0.8 million, while the fair value
of the 'Investment property' decreased by USD1.4 million.
As of December 31, 2023, the Group's consolidated liabilities totalled USD1.40 billion, reflecting an increase of USD16 million from the previous
year. However, average balances for 2023 were lower than the previous year by USD165 million. Particularly, average balances for bank wholesale
funding decreased by USD133 million.
Total equity increased by USD8.8 million to USD179.3 million, attributed to a USD1.2 million net fair value gain on 'Property, plant, and equipment'
and an USD8.1 million fair value gain on 'Financial investment s at fair value through other comprehensive income’. As of 31 December 2023, the
Group’s CET1 and TCR ratios stood at 18.3% (compared to 17.8% in 2022).
Total consolidated commitments amounted to USD147.8 million (compared to USD100.0 million in 2022), primarily comprising confirmed letters of
credit, documentary credits, commitments to purchase forfaiting assets, and undrawn credit facilities. Total consolidated contingent liabilities,
primarily composed of outstanding guarantee obligations, reached USD31.3 million (compared to USD14.7 million in 2022).
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.
Further disclosures on the Group’s principal risks and uncertainties are provided in Note 5 of this Annual Report and the 2023 Pillar 3 Disclosures
Report published on the Bank’s website.
Outlook for 2024
Global economic growth is forecasted to remain modest, initially slowing in the first half of the year before gaining momentum in the latter half.
The majority of economies are expected to grapple with the enduring effects of tightened monetary policies, compounded by weak trade dynamics
and subdued consumer and investor confidence. Despite regional variations, a gradual easing of inflation towards central bank targets is anticipated
across most economies. This deceleration in inflation is poised to bolster real incomes for households, thereby mitigating the extent of economic
downturns. Consequently, lower inflation rates should pave the way for central banks to contemplate reducing interest rates at some points
throughout the year.
The ongoing conflict in Ukraine shows no signs of diminishing in the near future. Tensions in the Middle East have the potential to escalate across
the broader region, a critical hub for oil and gas production. Furthermore, persistent attacks in the Red Sea, a key artery for global trade, are
compounding the challenges. These developments are fuelling fresh supply shocks to the global recovery, resulting in spikes in food, energy, and
transportation costs.
Taking these factors into account, the Group will proactively seek out business opportunities with a focus on achieving risk-adjusted returns, all
while maintaining alignment with its risk appetite and regulatory capital requirements. Following the cleanup efforts, the Group's balance sheet has
become more resilient, thanks to diminished legacy exposures and fortified, sustainable revenue streams.
Anticipated portfolio growth will likely be modest within our customer-centric approach. Our strategic priorities persist in emphasizing business
lines and geographical regions that present superior returns and lower risks, thereby ensuring consistent value generation for the Group. As we
progressively eliminate complex structures and streamline business lines, our presence in Malta continues to evolve and mature.
FIMBank Group Annual Report & Financial Statements 2023
10
The Group remains focused on improving its strategy to pursue our long-term objective of expanding and future-proofing our shareholders’ value.
We are progressing in this initiative with a highly reputable advisory firm, employing a holistic approach covering business lines, markets, products,
and building competitive advantage. Certain recommendations from this initiative are set to be implemented as soon as 2024. Furthermore,
significant importance is placed on the Group’s cost structure, IT and data architecture design and integration, as well as t he resources and
capabilities of the Group.
Another MFSA Supervisory Review and Evaluation Process (SREP), concluded in the early months of 2024, resulted in a 0.8% reduction of the Group’s
Pillar 2 requirement (P2R), a change welcomed by the Group. The MFSA acknowledged the Group’s improvements in profitability and its broadly
stable funding and liquidity profile. The Authority noted the constant efforts by Management to decrease the non-performing loan portfolio below
regulatory thresholds, and the Board has satisfactorily addressed the qualitative requirements and recommendations stemming from the SREP
performed in 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 (2022: 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 4 May 2023 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
2023 are as follows:
No of shares
% holding
United Gulf Holding Company B.S.C
420,019,110
80.40%
Burgan Bank K.P.S.C.
44,394,499
8.50%
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 gove rning 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 requires 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
FIMBank Group Annual Report & Financial Statements 2023
11
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 as 31 December 2023, the Bank had no securities with special control rights in accordance with the Capital Markets Rule 5.64.4.
Events after the financial reporting date
Merger
On 25 January 2024, the Bank issued a Company Announcement, announcing that as part of a streamlining initiative and corporate restructuring
exercise, the Bank’s Board of Directors has resolved to approve a merger by acquisition between the Bank, as the acquir ing company, and FIM
Business Solutions as the company being acquired (the “Merger”).
Please refer to Note 47 to the Financial Statements for more information.
Dividends Received
In March 2024, the Bank received a cash dividend of USD2.0 million from its wholly owned subsidiary London Forfaiting Company Limited.
There were no other material events or transactions which took place after the financial reporting date which would require disclosure in or
adjustment to this Annual Report and Financial Statements.
Going concern
As required by the Capital Markets Rule 5.62, upon due consideration of the Bank’s performance, financial position, capital a dequacy 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 Retired on 4 May 2023
Claire Imam Thompson CGC, BAC, BRC Resigned on 10 November 2023
Edmond Brincat BAC, NRC, BESG
Erich Schumacher BRC
Hussain Abdul Aziz Lalani BAC, BRC, BRIC, BESG
Majed Essa Ahmed Al-Ajeel CGC, NRC Retired on 4 May 2023
Mohamed Fekih Ahmed BCC Retired on 4 May 2023
Mohammed Louhab BCC, BESG
Rabih Soukarieh BCC
Rogers David LeBaron CGC, NRC Retired on 4 May 2023
Sunny Bhatia 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”)
• Board Environmental, Social and Governance Committee (“BESG”)
FIMBank Group Annual Report & Financial Statements 2023
12
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 respo nsibility includes
establishing and maintaining controls pertaining to the Bank’s and the Group’s objective of p reparing 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
During 2023, Ernst & Young Limited Malta were appointed as statutory auditors of the Group and Bank at the Annual General Meeting which was
held on 4 May 2023. Following such appointment, EY Malta and the Group/Bank mutually agreed to terminate their existing relationship and EY
Malta resigned from the engagement as statutory auditors of the Group and Bank. Accordingly, in January 2024, the Board of Directors of FIMBank
appointed PricewaterhouseCoopers (“PwC”) as the Group’s statutory auditors for the financial year ended 31 December 2023. The appointment of
PwC as the Group’s statutory auditors for the financial year ending 31 December 2024 will be proposed at the forthcoming Annual General Meeting.
Subject to the approval of the Shareholders, PwC will perform the statutory audit of the Group and Bank for the financial year ending 31 December
2024.
Approved by the Board of Directors and signed on its behalf by John C. Grech (Chairman) and Masaud M.J. Hayat (Vice Chairman) on 24 April
2024 as per Director’s Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Report and Financial Statements
2023.
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 2023
13
Statement of compliance with the principles of good
corporate governance
For the year ended 31 December 2023
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 Go vernance (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.
In relation to the requirement to state how the Bank has applied the main principles emanating from the Code of Principles of Good Corporate
Governance, the Bank has done so by complying with and taking cognisance of the associated provisions (that is, the supporting principles and Code
provisions), unless otherwise stated within this Statement of compliance with the principles of good corporate governance.
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 ha s
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 Bank is headed by an effective board which leads and controls the company. 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.
FIMBank Group Annual Report & Financial Statements 2023
14
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 evaluat ion 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.
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 Chairman
also facilitates the effective contribution of non-executive directors in particular and ensures constructive relations between executive and non-
executive directors. As the non-executive directors are not involved in the day-to-day running of the business, they can bring fresh perspectives and
contribute more objectively in supporting as well as constructively challenging and monitoring the Management team.
Whilst recognising that most shareholder contact is with the Chief Executive Officer and finance Director, the Chairman maintains sufficient contact
with major shareholders to understand their issues and concerns.
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 Bank’s strategy and running the day-to-day activities of the Group.
Principle 3: Board composition and appointment of directors
The Bank ensures that the Board is not so large as to be unwieldy. In this respect, the Board is of sufficient size that the balance of skills and
experience is appropriate for the requirements of the business and that changes to the Board’s composition ca n be managed without undue
disruption. The Board is composed of executive and non-executive Directors, including independent non-executives. The Bank’s Articles of
Association (the “Articles”) contain detailed provisions (in Clauses 93 to 114) as to the ma nner 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 Markets Rules, are as follows:
Year when first appointed
John C. Grech (Chairman)
2004
Rogers David LeBaron
2006
Retired on 4 May 2023
Majed Essa Ahmed Al-Ajeel
2013
Retired on 4 May 2023
Masaud M.J. Hayat (Vice Chairman)
2013
Mohamed Fekih Ahmed
2013
Retired on 4 May 2023
Rabih Soukarieh
2013
Edmond Brincat (Independent Director)
2017
Hussain Abdul Aziz Lalani
2017
Abdel Karim A.S. Kabariti
2020
Retired on 4 May 2023
Claire Imam Thompson (Independent Director)
2020
Resigned on 10 November 2023
Erich Schumacher
2022
Sunny Bhatia *
2023
Appointed on 4 May 2023
Mohammed Louhab **
2023
Appointed on 4 May 2023
‘ * ‘ Sunny Bhatia was appointed by the Shareholders on 4 May 2023 and regulatory approval was obtained on 23 August 2023.
‘ ** ‘ Mohammed Louhab was appointed by the Shareholders on 4 May 2023 and regulatory approval was obtained on 30 November 2023.
FIMBank Group Annual Report & Financial Statements 2023
15
Other than for their involvement in Board Committees as described below, all Directors hold office in a non-executive capacity with the exception
of Mohammed Louhab who is an Executive Director and the GCEO of the Bank.
The Board considered and resolved that all 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 Director has confirmed in writing to the Board that he/she undertook:
• to maintain in all circumstances his/her independence of analysis, decision and action;
• not to seek or accept any unreasonable advantages that could be considered as compromising his/her independence; and
• to clearly express his/her opposition in the event that he/she finds that a decision of the Board may harm the Bank.
Another written declaration of independence shall be signed by all the Directors in March 2024. 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.
As at 31 December 2023, the Board of Directors consisted of:
Number of directorships held
(including FIMBank p.l.c. and its subsidiaries)
John C. Grech (Chairman)
4
Masaud M. J. Hayat (Vice Chairman)
1
Edmond Brincat
8
Hussain Abdul Aziz Lalani
1
Rabih Soukarieh
1
Erich Schumacher
1
Sunny Bhatia
1
Mohammed Louhab
2
Directorships having an executive or non-executive role held within the same group have been counted as a single directorship.
Principles 4 and 5: Duties and proceedings of directors
The Board ensures that its level of power is known by all Directors and the Senior Management of the Bank. The Board also ensures that any
delegation of responsibilities and functions are clear and unequivocal. Independently of any powers and functions that the Directors may from time
to time validly delegate to Management, it remains a fundamental responsibility of Directors to monitor effectively the implementation of strategy
and policy by Management.
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 six meetings in 2023. All Members of the Board were present for all six meetings except for Abdel Karim A.S. Kabariti, who was
excused in May, Sunny Bhatia was excused in June and Edmond Brincat was excused in July. Sunny Bhatia attended three meetings, one meeting as
an invitee and two meetings as an approved Member of the Board. Mohammed Louhab attended five meetings, four meetings as an invitee and
one meeting as an approved Member of the Board. 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.
FIMBank Group Annual Report & Financial Statements 2023
16
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.
All Directors have access to the advice and services of the company secretary, who is responsible to the Board for ensuring that board procedures
are complied with.
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 th e 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 2023 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 MFSA 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 the Nomination and Remuneration Committee (“NRC”) as the Committee entrusted to perform this function. The NRC t hen 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.
In addition to the self-evaluation of the Board and its Committees, the Bank also conducts a suitability assessment using the Skills Matrix Template
to Assess the Collective Suitability of the Members of the Management Body. The latest assessment as completed in April 2023 did not indicate
that any changes were required. The only change in the membership composition was due to a direct replacement of a Director who resigned.
Details regarding the changes to Committee composition have been disclosed under Principle 8: Changes to committee memberships during 2023.
The last evaluations from Directors were requested in the last quarter of 2023 and were presented to the NRC in March 2024.
FIMBank Group Annual Report & Financial Statements 2023
17
Principle 8: Board committees
The Bank’s Articles of Association establish that the Directors may delegate certain powers, authorities and discretions to a ny person and/or
Committee appointed by them. The composition of such Committees, as well as the participation of Directors in 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
• Board Credit Committee
• Nomination and Remuneration Committee (further information can be found in the Remuneration Report on page 24)
• Corporate Governance Committee
• Board Environmental, Social and 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 activit ies 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 2023 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 seven occasions during 2023.
Board audit committee
The Board Audit Committee (“BAC”) assists the Board of Directors in fulfilling its supervisory and monitoring responsibilitie s, 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 one individual who is also a Member of the Board Risk Committee.
The Members of the Board Audit Committee as at 31 December 2023 are the following:
Edmond Brincat (Chairman – Independent Director)
Hussain Abdul Aziz Lalani (Vice Chairman)
In line with Capital Markets Rule 5.117.4, the Chairman of the Board Audit Committee is appointed by the Board of Directors. With reference to
Capital Markets Rule 5.117.3, which states that “at least one member of the audit committee shall be competent in accounting and/or auditing”,
the Bank notes that all Members of the Board Audit Committee are designated as competent in auditing and/or accounting as per the qualifications
listed hereunder.
FIMBank Group Annual Report & Financial Statements 2023
18
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 Financial Officer, a position he held until 31 January 2018. In February 2018, Edm ond 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.
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 thirteen meetings during 2023 and all Members were present for all thirteen meetings. The Group Head of Internal
Audit was also invited to attend and attended all thirteen meetings. The External Auditors were invited to seven Board Audit Committee Meetings
and were only present for the agenda items which considered and discussed the 2023 Statutory External Audit (February 2023), 2022 Annual Report
and Management Letter (March 2023), Parent Statutory Reporting Audit Update (May 2023), Interim Report for the period ended 30 June 2023
(July 2023 and two meetings in August 2023) and Statutory Audit for Financial Year ending 31 December 2023 (December 2023).
Board risk committee
The Board Risk Committee (“BRC”) is responsible for overseeing the Group’s risk management strategy, systems and policies, an d 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 2023 are the following:
Hussain Abdul Aziz Lalani (Chairman)
Erich Schumacher (Member)
During 2023, the Board Risk Committee met on nine 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 31st December 2023, the voting
members of the ALCO were the following:
Mohammed Louhab (Chairman)
Zbigniew Makula (Vice-Chairman)
Adrian A. Gostuski (Member)
Simon Lay (Member)
Ronald Haverkorn (Member)
Juraj Beno (Member)
Modesto Luengo (Member)
Jason Zammit (Head of Corporate Finance Malta, Marketing & Administration), 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) and Clinton Bonnici (ALCO Secretary) are non-voting, permanent invitees of the ALCO.
During 2023, the Assets Liabilities Committee met on six occasions.
FIMBank Group Annual Report & Financial Statements 2023
19
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 2023 are the following:
John C. Grech (Chairman)
Rabih Soukarieh (Vice Chairman)
Mohammed Louhab (Member)
Adrian A. Gostuski (former GCEO) and Modesto Luengo (GCRO) are non-voting, permanent invitees of the BCC.
During 2023, the Board Credit Committee met on three occasions.
Nomination and remuneration committee
The Nomination and Remuneration Committee (“NRC”) is currently composed of three members, one of whom is an independent director. The NRC
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. The responsibilities of the NRC include having oversight, informing, updating and deciding and/or making
recommendations to the Board on all matters regarding nomination and remuneration. These include:
• presenting recommendations to the Board regarding nomination to the Board’s membership in accordance with approved p olicies, standards,
and nomination regulations for the Board’s membership;
• performing an annual review of the needs required with regard to suitable skills for Board membership and performing an annual review of the
Board of Directors’ structure and presenting recommendations on the changes which can be performed in accordance with the Bank’s strategy;
• performing an annual evaluation of the Board’s overall performance and the performance of each Member and the Board Committee s;
• conducting as and when required, including on an annual basis, suitability assessments of prospective/appointed Directors, of ficers holding a
Senior Management position and key function holders;
• preparing/reviewing the Group Remuneration Policy and the Remuneration Policy Supplement in line with applicable regulations and legislation
and the principles of good corporate governance;
• overseeing the implementation and compliance with the Group Remuneration Policy and Supplement;
• assessing the mechanisms adopted to ensure that the remuneration process properly takes into account all types of risks, liquidity and capital
levels and that it promotes sound and effective risk management and is in line with the business strategy, objectives, corporate culture and
values, risk culture and long-term interest of the institution;
• monitoring the level and structure of Directors’ Remuneration by reviewing and updating when necessary, the individual remuneration to be
attributed to Directors, ensuring that they are consistent with the Remuneration Policy Supplement as approved by the Annual General Meeting;
• devising appropriate and annually reviewing remuneration packages which are: fair; equitable, gender neutral and in line with industry
benchmarks and the long-term interests of the Bank as needed to attract, retain and motivate Directors, the GCEO and Executives that hold the
knowledge, skills and abilities to lead the FIMBank Group;
• approving on an annual basis, the Group’s individual distribution of salary increases, promotions and bonuses, as may be reco mmended by the
GCEO;
• preparing a Remuneration Report for inclusion in the Annual Report; and
• reviewing and assessing at least annually the adequacy of the NRC Charter and confirming that all the responsibilities set out in the Charter have
been duly executed.
Details regarding the Remuneration Policy and remuneration related matters have been disclosed under the Remuneration Policy and Remuneration
Report.
FIMBank Group Annual Report & Financial Statements 2023
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The Nomination and Remuneration Committee Members as at 31 December 2023 are the following:
Masaud M.J. Hayat (Chairman)
Edmond Brincat (Vice Chairman)
Sunny Bhatia
John C. Grech (FIMBank Chairman) and Mohammed Louhab (GCEO) and Adrian Gostuski, former GCEO are non-voting, permanent invitees of the
NRC.
During 2023, the Nomination and Remuneration Committee met on 5 occasions.
Attendance for the meetings was regular except for two instances, one involving an exiting Director in May at the time when the AGM was
reappointing a new Board and the other instance was at the June meeting when a newly appointed Director was still pending regulatory approval.
Corporate governance committee
The purpose of the Corporate Governance Committee (“CGC”) is to review the Bank’s internal delegations, policies and procedur es to ensure
compliance with legislative and regulatory requirements and alignment to industry’s best practice.
The Corporate Governance Committee Members as at 31 December 2023 are the following:
John C. Grech (Chairman)
Sunny Bhatia (Member)
During 2023, the Corporate Governance Committee met on five occasions.
Board Environmental, Social and Governance Committee
The Board Environmental, Social and Governance Committee ("BESG") is responsible for assisting the Board in setting the Bank’s Environmental
Social and Governance (“ESG”) policies, strategy and following-up on its execution and periodic review to ensure its effectiveness as well as to
enhance the effectiveness of the Board’s supervision over any matters relating to ESGC. The Board Environmental, Social and G overnance Committee
terms of reference are included in the Board Environmental, Social and Governance Committee Charter.
The Members of the Board Environmental, Social and Governance Committee as at 31 December 2023 are the following:
Edmond Brincat (Chairman)
Hussain Abdul Aziz Lalani (Member)
Mohammed Louhab (Member)
The Board Environmental, Social and Governance Committee met on one occasion during 2023.
Changes to committee membership during 2023
During 2023, Rogers David LeBaron retired resulting in him no longer being a member of the Nomination & Remuneration Committee and the
Corporate Governance Committee.
Claire Imam Thompson resigned resulting in her no longer being a member of the Board Audit Committee, the Corporate Governance Committee,
and the Board Risk Committee.
Majed Essa Al-Ajeel retired resulting in him no longer being a member of the Nomination & Remuneration Committee and the Corporate Governance
Committee.
Abdel Karim Kabariti retired resulting in him no longer being a member of the Nomination & Remuneration Committee and the Corporate
Governance Committee.
Mohamed Fekih Ahmed resigned resulting in him no longer being a member of the Board Credit Committee.
Sunny Bhatia was thereafter appointed member of the Nomination & Remuneration Committee and the Corporate Governance Committee.
Mohammed Louhab was thereafter appointed member of the Board Credit Committee.
FIMBank Group Annual Report & Financial Statements 2023
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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 held normally during the first half of the
year. 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 2023 the Bank issued sixteen announcements.
The Board also complies with the provisions of the Bank’s Articles of Association insofar as minority rights are concerned. In accordance with article
65 of the Bank’s Articles of Association, minority Shareholders may convene an Extraordinary General Meeting, in the same man ner, 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 t heir obligations to
observe the restricted ‘time-windows’ accompanying the publication o f 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
Directors' primary responsibility is to act in the interest of the Bank and its shareholders as a whole irrespective of who appointed them to the
Board. 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 2023
22
The number of shares held in the Bank by Directors directly in their name as at 31 December 2023 is as follows:
John C. Grech (Chairman) * 1,760,000
Edmond Brincat Nil
Erich Schumacher * Nil
Hussain Abdul Aziz Lalani * Nil
Masaud M.J. Hayat (Vice Chairman) * Nil
Mohammed Louhab * Nil
Rabih Soukarieh * Nil
Sunny Bhatia * Nil
‘ * ‘ Aside from these direct interests in the shareholding of the Bank, these Directors are considered to be associated with com panies 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
We recognise that our social, environmental, and ethical conduct significantly impacts our reputation and the communities where we operate.
Therefore, we take our Corporate Social Responsibilities (“CSR”) seriously and consider them fundamental to FIMBank's corporate culture.
We are committed to advancing our policies and systems across the Group, ensuring that we comprehensively address and monitor all CSR aspects
relevant to our business. The Bank's CSR strategy, centred around our core values, reflects our commitment to our clients, shareholders, employees,
and the Maltese community, which has been home to FIMBank's head office since its inception in 1994.
Our CSR program aims to maximize and protect shareholder value while fostering socially responsible and ethically robust relationships with clients
and partners. It also seeks to promote policies that maintain a work environment where our employees can excel professionally and achieve a
healthy work-life balance. Additionally, the CSR program focuses on serving the communities in which we operate, especially in their social and
environmental well-being.
Our commitment to CSR ensures that we operate under the highest standards of good governance and ethics. We strive to provide a constantly
evolving range of services that meet the changing needs and expectations of our clients and business partners. Our CSR activities are designed to
attract and retain employees who are not only technically skilled but also uphold strong ethical values. We expect our CSR initiatives to provide
meaningful support to the local community, enhancing the social and environmental impacts of our business practices.
We achieve our CSR objectives through sound corporate governance, compliance practices, and increased transparency in reporting these activities.
Maintaining ethical policies and providing training ensures that all employees uphold the highest standards of integrity and trust. This is supported
by programs that manage the long-term development of our employees, fostering an environment for growth and excellence. Our CSR efforts focus
on corporate philanthropy that enhances quality of life. The success of our CSR also depends on proper risk management and implementing data
security and privacy programs to safeguard all stakeholders.
Further details about the CSR initiatives undertaken by the Group in 2023 are provided in the GCEO’s Message in the Annual Re port.
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.
FIMBank Group Annual Report & Financial Statements 2023
23
Principle 4: Succession policy for directors
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’. The NRC, during its August meeting, discussed Directors’
succession planning on the basis of an internet-based global market research which among others took into consideration factors like gender, and
experience in financial services, IT and ESG including experience at international level. During the August meeting of 2023, the NRC discussed the
annual employment market assessment related to Board succession planning as presented.
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 current Chairman of the Nomination and Remuneration Committee is not an independent member 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 the Chairman of the NRC has signed a written declaration whereby he has declared
that he undertakes to maintain in all circumstances his independence of analysis, decision and action. Furthermore, the Vice Chairman of the NRC
is deemed to be an Independent Director in terms of the Capital Market Rules.
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 24 April
2024 as per Director’s Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Report and Financial Statements
2023.
FIMBank Group Annual Report & Financial Statements 2023
24
Remuneration report
For the year ended 31 December 2023
This Section incorporates the Statement of the Board 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 board nomination and remuneration committee (as per
section 8 of the principles)
Terms of reference and membership
The Board Nomination and Remuneration Committee (“NRC”) is responsible for ensuring that the Directors and Executive Manageme nt of FIMBank
have the appropriate mix of skills, qualifications and experience necessary to fulfil their supervisory and management responsibilities. The NRC also
reviews the remuneration of the Board of Directors and that of Executive Management on an annual basis and ensures that it is in line with the EBA
Guidelines on Sound Remuneration Policies EBA/GL/2022/04, Banking Rule 21 on Remuneration Policies and Practices and principles of good
governance.
From 1st January up to the Annual General Meeting (“AGM”) held on 4th May 2023 the NRC was composed of five members, Masaud M.J. Hayat
(Chairperson), Edmond Brincat (Vice-Chairperson and Independent Member), and Directors Abdel Karim A.S. Kabariti, Majed Essa Ahmed Al-Ajeel,
and Rogers David LeBaron who did not re-submit their candidacy to the May 2023 AGM. As at 31 December 2023, the NRC was composed of three
members, Masaud M.J. Hayat (Chairperson), Edmond Brincat (Vice-Chairperson and Independent Member) and Sunny Bhatia, a newly appointed
Director by the shareholders at the May 2023 AGM. John C. Grech and Mohammed Louhab, in their capacity as Chairperson of the Bank and Group
Chief Executive Officer (“GCEO”) respectively, attended the NRC’s meetings as permanent invitees. Adrian A. Gostuski, who held the position of
GCEO until 30 November 2023 and was thereafter appointed as advisor to the new GCEO, also attended the NRC meetings held in 2023. The Group
Chief Human Resources Officer (“GCHRO”) acted as Board Committee Secretary.
Meetings
The Committee met five times during the period under review, which meetings were attended as follows:
Members Attended
Masaud M.J. Hayat (Chairperson) 5 out of 5
Edmond Brincat (Member) (Vice-Chairperson) 5 out of 5
Sunny Bhatia 2 out of 3 (excused in June)
Abdel Karim A.S. Kabariti 1 out of 2 (excused in May)
Majed Essa Ahmed Al-Ajeel 2 out of 2
Rogers David LeBaron 2 out of 2
FIMBank Group Annual Report & Financial Statements 2023
25
The following matters were discussed and, or determined:
a. Group appointed Directors;
b. Chairperson’s role and performance;
c. Directors’ remuneration;
d. Board of Directors evaluation, Director’s self-assessment and Board Committees self-assessment;
e. Board Committees: new ESG Committee and memberships;
f. NRC Charter: annual review and checklist;
g. Report and recommendations by Internal Audit on the review of the Group Remuneration Policy;
h. Group Remuneration Policy;
i. Executive Management: recruitment, appointments, performance, promotions, succession and remuneration;
j. Group salary review, bonus allocation and out of cycle increases/payments;
k. Succession planning for all entities;
l. Control functions: independence, recruitment, succession and performance;
m. Performance review of GCEO and performance bonus award;
n. HR Policies;
o. Remuneration Policy Statement, Statement of the NRC, Directors’ Remuneration Report for Annual Report and Pillar 3 Disclosure s;
p. Egypt Factors CEO’s new definite contract;
q. Suitability and Succession Policy and Skills Matrix Template;
r. Suitability assessment and succession of the Board, the GCEO and the Key Function Holders;
s. Sourcing of Independent non-executive Directors;
t. LFC Directors’ Remuneration;
u. Compensation and talent retention challenges; and
v. Review of the Recoveries function.
Remuneration statement
The NRC has the role of making recommendations to the Board of Directors on remuneration. Decisions taken by the NRC are presented by the NRC
Chairperson to the Board for ratification or otherwise. 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 Bank 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 Bank.
Across FIMBank, remuneration is based on the below principles:
• Sound and effective risk management to discourage risk-taking that exceeds the Bank’s risk appetite;
• Non-discriminatory practices, consistent with the acknowledged principles of diversity as listed in FIMBank’s Diversity Policy. T his includes the
principle that remuneration is gender neutral and thus all employees, independently of their gender are equally remunerated for work of equal
value. True merit determines all remuneration related decisions;
• Internal equity, with the application of fair distinction based on individual employee performance;
• External parity through an annual alignment exercise with local compensation data to ensure that the Bank’s remuneration packages are
competitive and in line with industry standards; and
• Affordability and sustainability, ensuring that the remuneration policy is in line with the Bank’s business strategy, business objectives, values
and long-term interests and incorporates measures to avoid conflicts of interest.
Remuneration policy
The Group Remuneration Policy is aligned with the principles emanating from the EU’s Capital Requirements Directive (‘CRD’), particularly in relation
to the monitoring of identified staff. As a basis for the compilation of the list of identified staff, the Bank refers to:
• the Commission Delegated Regulation (EU) 2021/923 (“MRT Regulation”);
• the EBA Guidelines on Sound Remuneration Policies (EBA/GL/2021/04) (“EBA Remuneration Guidelines”) as transposed into Banking Rule 21 on
Remuneration Policies and Practices (BR/21/2022) (“Banking Rule 21”); and
• Article 92(3) of Directive 2013/36/EU (“CRD IV"), as amended from time to time, including by Directive (EU) 2019/878 (“CRD V”) and as
transposed into Banking Rule 21.
Identified staff are employees who in their role and as part of their responsibilities are material risk takers (meaning that their professional activities
have a material impact on the Bank’s risk profile). The MRT Regulation establishes the qualitative and quantitative criteria to identify staff who are
material risk takers.
FIMBank Group Annual Report & Financial Statements 2023
26
The Bank’s Identified Staff includes the Management Body in its management or supervisory function and/or senior managers. The Management
Body in its management function includes the GCEO, the Deputy CEO and officers of the Bank who hold the grade Executive Vice President or higher
at FIMBank p.l.c. (the “Executive Management”). The Management Body in its supervisory function comprises the Directors of the Bank’s Board of
Directors. In relation to majority owned subsidiaries of the Bank, only the respective Chief Executive Officers (“CEOs”) are considered to be Identified
Staff, as the only function reporting directly to the GCEO.
The GCEO is appointed on a definite term contract which may vary from a one-year definite term contract to a three-year definite term contract.
The contract may be renewed for further definite term periods. The Deputy CEO is appointed pursuant to an indefinite term contract. The notice
periods applicable for both the GCEO and the Deputy CEO are in accordance with the prevailing legislation by which the respective employment
contract is governed in terms of jurisdiction. Members of the Executive Management of the Bank hold both definite and indefinite contracts with
varying notice periods, all of which are in line with locally applicable legislation. Directors are appointed pursuant to appointment letters. Their
appointment is for a period of one year renewed or otherwise at the subsequent Annual General Meeting of the Bank.
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.
Remuneration structure for non-executive directors
The total package payable to Non-Executive Directors consists of a fixed fee which is supplemented by additional fees payable inter alia with respect
to any memberships and/or chairpersonships of the different Board Committees. The fees also vary between Independent and Non-Independent
Directors. Board directorship fees to remunerate the Independent Directors are higher than that of Non-Independent Directors. This is mainly for
two reasons, the additional responsibility that Independent Directors have due to their required independence and because they do not receive any
other remuneration for employment positions within the KIPCO Group. The fees are reviewed annually in line with market conditions and the
maximum allocated budget requires the approval of the Annual General Meeting of the Bank.
Remuneration structure for executive directors and executive management
The remuneration structure of Executive Directors and Executive Management (together referred to as the “Executives”) compris es both fixed and
variable remuneration and is intended to attract, develop and retain a high-performing workforce while remaining aligned to FIMBank’s long-term
strategy, risk appetite, sustainable performance, good corporate governance, regulatory compliance, corporate values and long-term value creation
for shareholders. All compensation structures including those of the branches and the subsidiaries of FIMBank located in third countries are aligned
with the requirements emanating from the CRD unless local legislation in the respective jurisdiction mandates otherwise.
The NRC ensures that while its remuneration practices are compliant with existing EU/Maltese Directives and Regulations, including CRD and the
Capital Requirements Regulation (“CRR”), the remuneration packages reflect industry benchmarks. This makes it possible for the Bank to attract
and retain Executives with the right qualities and skills for the proper management of the Bank 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 to the Group
Remuneration Policy are envisaged for the financial year ending 2024.
The remuneration components for Executives are:
• fixed remuneration (including fringe benefits); and
• variable remuneration
These components are combined to ensure an appropriate and balanced remuneration package that reflects the employee’s grade and professional
activity. Executives are not entitled to discretionary supplementary pension or early retirement schemes. The tables below describe the element
and purpose of Executives’ compensation and how each element operates, as well as the maximum opportunity of each element and any applicable
performance measures.
FIMBank Group Annual Report & Financial Statements 2023
27
Fixed remuneration
Element and purpose of remuneration
Operation
Performance measures
Base Salary
To provide the basis of market-competitive overall
remuneration package. It provides a fixed
remuneration which is sufficient to recruit and
retain individuals of the necessary calibre.
This is determined by:
a. the role and grade of the individual director;
b. the base salary structure for other employees across FIMBank; and
c. external factors such as economic conditions and market.
The base salary of Executives engaged on indefinite contracts is reviewed annually or when required to include
any statutory payments.
The fixed remuneration component of Executives engaged on definite or fixed-term contracts is as stipulated in
the contract of employment and compensation therein is reviewed if and when the definite contract is renewed
for a further term/s. The Executive is entitled to any newly 27introduced statutory payments or adjustments to
existing ones.
The base salary does not vary
according to performance of the
individual and the Bank, according
to the FIMBank pay structure
approved annually by the NRC.
Fixed allowances and benefits
To ensure business continuity and assist
executives in carrying out their duties efficiently.
The benefits may include different cash allowances and/or non-cash benefits as detailed in the respective contract
of employment and/or as may be applicable depending on the role of the individual and the employing entity.
N/A
Variable remuneration
Element and purpose of remuneration
Operation
Performance measures
Performance Bonus
To motivate Executives in maximising individual,
departmental and FIMBank’s performance.
Executives may be entitled to a performance bonus. Employee performance is measured in the
interim and annual performance appraisal detailed in the Bank’s Performance Management Policy
and Procedure.
A performance bonus relates to the Executive’s perfo rmance as defined in the multi-year
assessment where applicable and the cash component is paid by April.
The individual rating is based on the Executive’s
overall performance which is centred on
performance targets and core behaviours
(leadership, people management, personal
effectiveness, creativity, innovation, holistic
approach, teamwork, communication and company
values).
FIMBank Group Annual Report & Financial Statements 2023
28
Variable remuneration (continued)
Element and purpose of remuneration
Operation
Performance measures
Employee Share Award Scheme
To create alignment between the interests of
Executives and shareholders through the delivery of
rewards in the Company Shares
In addition to a performance bonus, subject to performance appraisal and a multi-year assessment
where applicable, Executives may also be entitled to share awards as stipulated in the ESAS 2019-
2023.
Share awards are subject to malus and clawback provisions.
N/A
Exceptional Bonus
To motivate Executives in maximising individual,
departmental and FIMBank’s performance.
Executives may be entitled to an Exceptional Bonus to reward remarkable performance in the
individual’s role which goes beyond the individual’s call of duty.
N/A
Retention Bonus
To ensure business continuity and assist executives
in carrying out their duties efficiently.
Executives may be entitled to a Retention Bonus on condition that the employee remains in
employment for a period of 12 months or more from the date of award.
Retention bonuses may be paid only in exceptional circumstances such as in the case of a
restructuring, wind-down, after a change in control or to ensure the completion of major projects.
Retention bonuses must be justified based on,
amongst other things, the following factors:
a. concerns relating to the risk that certain
Executives may choose to leave FIMBank;
b. the reasons why the retention of that
Executive is crucial for FIMBank;
c. the consequences if the relevant Executive
leaves FIMBank; and
d. whether the awarded amount is necessary and
proportionate to retain the targeted
Executive.
Severance Payments
To close the employment relationship in case of
redundancy, termination by the employer and/or of
a potential legal dispute.
Severance payments may include redundancy payments, such as if the Bank terminates the
employment contract due to the failure of the institution or following a material reduction of its
activities or if the Bank and an Executive mutually agree on a settlement in case of a dispute.
Unless stipulated by local regulation, the maximum severance payment awarded may be of a
maximum of three (3) months’ base salary.
N/A
FIMBank Group Annual Report & Financial Statements 2023
29
Variable remuneration (continued)
Element and purpose of remuneration
Operation
Performance measures
Guaranteed/Sign-On Bonus
To motivate Executives in maximising individual,
departmental and FIMBank’s performance.
FIMBank may pay out a Guaranteed Bonus in the first year of employment.
The sign-on bonus is exceptional and can only be awarded once to the same single employee and
cannot be awarded again if the same employee receives a new contract from the same Group entity
or another entity with the scope of consolidation of the Group.
N/A
Buy-Out Compensation of Previous Employment
Contract
FIMBank may, in exceptional circumstances (where the deferred variable remuneration of a new
Executive was reduced or revoked by the previous employer because of the termination of the
contract), pay a buy-out compensation to on-board a new Executive.
N/A
NRC decisions are determined by the guidelines set by the Board of Directors when reviewing the Group budget. In line with Article 135-139 of Banking Rule 21 (BR21/2022) issued by the Malta Financial Services
Authority, the Bank ensures that any variable remuneration awarded is not detrimental to its sound and strong capital base. In the unlikely event that the soundness of the capital base may be at risk, this will be
escalated and presented to the NRC.
FIMBank Group Annual Report & Financial Statements 2023
30
Variable remuneration (continued)
The variable remuneration awarded to Executives is also subject to the below provisions emanating from the Remuneration Policy Supplement:
Clawback and Malus
Any variable remuneration is subject to clawback and malus. Malus will be capable of being applied in respect of deferred elements of variable remuneration at any
time during the applicable deferral period. Clawback will apply during the period of four (4) years from the date of award or until the end of the applicable retention
period, as applicable.
FIMBank reserves the right to apply clawback and malus on 100% of bonus paid and/or deferred, in the case of gross misconduct as defined in the Disciplinary Policy
and in the event that conditions stipulated in the performance targets in the subsequent two years are not met.
Total Maximum Variable
Remuneration
The total annual variable remuneration for Executives is capped at 100% of total fixed annual remuneration for each individual. This cap may be increased up to a
maximum of 200% to total fixed annual remuneration provided that a) such an increase is approved by the shareholders and b) the regulator is duly informed of the
recommendation and the underlying reasons for it.
Other requirements
By virtue of Paragraph 20 of Banking Rule 21, given that a) the Bank does not meet the definition of a large institution as defined in Article 4(1) of the CRR; and b) the
value of the Bank’s assets over the four-year period immediately preceding the current financial year is less than €5 billion, the following requirements emanating
from Article 94 of CRD V are not applicable to the Bank, namely:
1. the principle that a minimum of 50% of any variable remuneration shall consist of shares; and
2. the principle that at least 40% of variable remuneration is deferred over a period of not less than 4 to 5 years.
FIMBank Group Annual Report & Financial Statements 2023
31
Information on remuneration in terms of code provision 8.A.5 of the MFSA capital
markets rules
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 on 4 May 2023, the Shareholders approved the maximum aggregate emoluments of the
Non-Executive Directors for the financial year end ed 31 December 2023 at USD450,000 (2022: USD450,000). Executive Directors are only
remunerated as employees and do not receive any Directors’ fees. Directors, in their capacity as Directors of the Bank, are n ot entitled to profit
sharing, share options or pension benefits. The total fees paid specifically for Board of Directors Meetings for the financial year ended 31 December
2023 amounted to USD180,276, which is included as part of the total payments received by Non-Executive Directors disclosed below.
For 2023, the total payments received by the Non-Executive Directors from the Bank were:
• fixed remuneration USD388,106
• variable remuneration Nil
• executive share options Nil
• fringe benefits USD391
The fixed annual remuneration is inclusive of remuneration with respect to Committee/s memberships. In this respect, the Dire ctors’ emoluments
are within the limit approved by the Annual General Meeting of 4 May 2023.
For 2023, the total payments received by the GCEO, Deputy CEO and Executive Management from the Bank were:
• fixed remuneration USD2,243,555
• variable remuneration * USD461,788
• executive share options granted Nil
• fringe benefits USD594,573
' * ’ Variable remuneration represents the amounts attributable to the GCEO, Deputy CEO and Executive Management in respect of performance
year 2022, given that the variable remuneration in respect of the financial year ended 31 December 2023 will only be formally determined and
approved by the NRC subsequent to the reporting date.
Additional disclosures on the governance process related to the variable portion of remuneration have been made under the Dir ectors’
Remuneration Report and under the Section discussing the Remuneration Policy of the 2023 Pillar 3 Disclosures Report published on the Bank’s
website.
None of the Directors received any fees for holding the office of Director by the Bank's parent entities or any other related undertakings in respect
of services rendered to the FIMBank Group, except for Mohammed Louhab who, in the period during which he was a Non-Executive Director of the
Bank, was awarded USD199,228 by United Gulf Holdings (“UGH”) for the services he rendered to the FIMBank Group. In this respect, the Directors
believe that the requirements emanating from paragraph (c) of Appendix 12.1 of the Capital Markets Rules, which requires the disclosure of “any
remuneration from any undertaking belonging to the same group where the term group means parent undertaking and all its subsidiary
undertakings” applies at the level of FIMBank p.l.c., the Bank's parent entity, and its subsidiary undertakings respectively, taking cognisance of their
role as Directors of the Bank. Accordingly, no disclosure in respect of their remuneration for any services which they might be providing at parent
entity level is being made within this report.
FIMBank Group Annual Report & Financial Statements 2023
32
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 “SRDII”) and the consequential changes to the Capi tal 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 14 June 2022 and published on the Bank’s we bsite (refer to policy in full on
https://www.fimbank.com/en/remuneration-policy-supplement). The result of the vote at the Annual General Meeting when the Policy was last
approved was 428,017,041 votes in favour, 53,658,126 “as he prefers” votes, 2,864,52 2 votes against, votes 6,736,120 abstentions and 17,609
invalid votes 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 Policy is effective for three years since the date of approval and will therefore be subject to another approval in the 2025 Annual General
Meeting. Nevertheless, the Policy is reviewed annually to reflect any new regulatory requirements or changes in Policy. Any material amendments
are approved by the NRC prior to being submitted to the General Meeting for its binding vote. No changes to the Policy were made in 2023.
However, it is not excluded that an updated version of the Policy shall be proposed for approval in the upcoming Annual General Meeting should
the NRC approve any amendments in the interim.
In terms of the requirements within Appendix 12.1 of the Capital Markets Rules the following sub-sections of the Directors’ Remuneration Report
present the total remuneration paid to each Director in respect of the financial year ended 31 December 2023 (analysed further between fixed and
variable remuneration), as well as the annual change of remuneration of the Executive Directors, of the Bank’s performance, and of average
remuneration on a full-time equivalent basis of the Bank’s employees (other than directors) over the three most recent financial years.
Non-executive directors
The Bank’s approach to remuneration is that of ensuring that the B ank is able to attract and retain talented and high performing Directors by
recognising, valuing and fairly rewarding their contributions while remaining aligned to the Bank’s long-term strategy, risk appetite, sustainable
performance and corporate values.
The total remuneration of each individual director is detailed in tables below. Non-Executive Directors only receive fixed fees for their participation
at Board and Committee level. Consequently, the percentage split between fixed and variable should be taken as 100% vs 0%.
For information about the general performance and events of material importance of the Bank refer to the Statements of Profit or Loss and the
Statements of Other Comprehensive Income on pages 42 and 43 and in the Review of Performance section within the Director’s Report. These did
not impact the total remuneration of Non-Executive Directors.
The Non-Executive Directors did not receive any base salary, variable remuneration or compensation in respect of extraordinary items and pension
contributions during the financial year ended 31 December 2023. In addition, Non-Executive Directors are not entitled to profit-sharing
arrangements, share options, shares or pension benefits.
FIMBank Group Annual Report & Financial Statements 2023
33
Directors’ remuneration
Difference
Difference
Difference
Name of director
2023
2022
2021
2023 vs 2022
2022 vs 2021
2021 vs 2020
Notes
USD
USD
USD
%
%
%
John C. Grech
* 100,891
100,400
101,032
0.5
(0.6)
2.8
The change in fee structure reflects a marginal increase following the appointment as
Chairperson of the Corporate Governance Committee as from May 2023.
Masaud M.J. Hayat
19,750
19,750
17,000
0.0
16.2
(17.1)
No change in fee structure in 2023.
Abdel Karim A.S. Kabariti
9,000
13,500
17,667
100
(23.6)
92.8
No change in fee structure. The fees for 2023 represent fees payable in respect of services
rendered until April 2023. Excused for Board and Committees commitments up to AGM in May
when he ceased to hold the position of director. In 2022, Mr. Kabariti attended 50% of Board
and Committee meetings. Therefore, the annualisation of fees paid to Mr. Kabariti in 2023
(considering the cessation of directorship on 4 May 2023) would result in fees which are double
the fees received in respect of services rendered in 2022 (taking into consideration the
absenteeism at Board and Committee meetings).
Claire Imam Thompson
38,333
46,000
38,333
0.0
0.0
NA
No change in fee structure. Fees represent services rendered up to October 2023, in view of
the cessation of directorship on 10 November 2023 when Ms. Imam Thompson resigned. The
annualisation of fees paid to Ms. Imam Thompson in 2023 would result in fees which are in
line with those paid in respect of 2022.
Edmond Brincat
51,356
46,000
47,333
11.6
(2.8)
1.6
Change in fee structure following change in committees’ composition, inclusive of the creation
of the Board ESG (BESG) Committee in August and Mr. B rincat’s appointment as its
Chairperson, resulting in an increase of 11.6% in remuneration compared to 2022.
Erich Schumacher
19,000
11,083
-
0.0
NA
NA
In 2022, Mr. Schumacher was only remunerated for part of the year, given that Mr.
Schumacher was appointed as Director in June 2022. The annualisation of fees paid to Mr.
Schumacher in 2022 would result in fees which are in line with those paid in respect of 2023.
Hussain Abdul Aziz Lalani
39,417
36,750
36,750
7.3
0.0
5.4
Change in fee structure following change in committees' composition in August. Mr. Lalani
was appointed as a member of the BESG Committee, resulting in an increase of 7.3% in
remuneration compared to 2022.
Majed Essa Ahmed Al-Ajeel
13,750
27,750
25,750
0.0
7.8
21.9
The fees for 2023 represent fees payable in respect of services rendered until April 2023,
where Mr. Al-Ajeel attended all Board and Committee meetings until 4 May 2023, which is
the date when Mr. Al-Ajeel ceased to hold the position of Director. These fees reflect Mr Al-
Ajeel’s contribution to the Board and the Committees for the period. For the purposes of the
annual percentage change between 2023 and 2022, the annualisation of fees in 2023
considers the pro-rated services for Board and Committee meetings separately, where c. 50%
of Board and Committee meetings where Mr. Al-Ajeel participates had been held by 4 May
2023. The annualisation of fees paid in 2023 would result in fees which are in line with those
paid in respect of 2022.
‘ * ’ The remuneration of Non-Executive Directors comprises fees only, except for the case of the Chairperson of the Board of Directors whose total emoluments for 2023 comprise USD100,500 in fees and USD391
in fringe benefits.
FIMBank Group Annual Report & Financial Statements 2023
34
Directors’ remuneration (continued)
Difference
Difference
Difference
Name of director
2023
2022
2021
2023 vs 2022
2022 vs 2021
2021 vs 2020
Notes
USD
USD
USD
%
%
%
Mohamed Fekih Ahmed
10,833
27,000
27,000
0.0
0.0
(4.7)
The fees for 2023 represent fees payable in respect of services rendered until April 2023, where
the Director attended all Board and Committee meetings until 4 May 2023, which is the date
when Mr. Fekih ceased to hold the position of Director. These fees reflect the Mr. Fekih’s
contribution to the Board and the Committees for the period. For the purposes of the annual
percentage change between 2023 and 2022, the annualisation of fees in 2023 considers the
pro-rated services for Board and Committee meetings separately, where 50% of Board
meetings and 33% of Committee meetings where Mr. Fekih participates had been held by 4
May 2023. The annualisation of fees paid in 2023 would result in fees which are in line with
those paid in respect of 2022.
Mohammed Louhab
17,750
NA
NA
NA
NA
NA
Fees represent services rendered by Mr. Louhab from his appointment on 4 May 2023 to 30
November 2023, on which date the Director was appointed as GCEO and, in this respect, Mr.
Louhab’s appointment changed from a Non-executive Director to Executive Director. As from
September, following the creation of the BESG Committee in August, Mr. Louhab started
receiving an additional fee accordingly. For a detailed analysis of Mr. Louhab’s remuneration
as an Executive Director, please refer to the ‘Executive Directors and Deputy CEO’ section.
Rabih Soukarieh
27,000
24,750
23,000
8.0
8.7
(11.87)
No change in fee structure. Mr. Soukarieh attended all meetings in 2023. In this respect, the
increase in fees between 2022 and 2023 is due to the number of sittings attended in 2023.
Rogers David LeBaron
30,167
63,000
63,000
0.0
0.0
(0.1)
The fees for 2023 represent fees payable in respect of services rendered until April 2023, where
Mr. LeBaron attended all Board and Committee meetings until 4 May 2023, which is the date
when Mr. LeBaron ceased to hold the position of Director. These fees reflect Mr. LeBaron’s
contribution to the Board and the Committees for the period. For the purposes of the annual
percentage change between 2023 and 2022, the annualisation of fees in 2023 considers the
pro-rated services for Board and Committee meetings separately, where c. 48% of Board and
Committee meetings where Mr. LeBaron participates had been held by 4 May 2023. The
annualisation of fees paid in 2023 would result in fees which are in line with those paid in
respect of 2022.
Sunny Bhatia
11,250
NA
NA
NA
NA
NA
Fees represent services rendered by the Director from 23 August 2023 when regulatory
approval was granted.
Note: The remuneration attributable to Non-Executive Directors in respect of the financial year ended 31 December 2023 included in the table above represents the fixed remuneration attributable to
performance year 2023.
In addition to the above fees, Directors John C Grech, Eric Schumacher, Hussain Lalani and Mohammed Louhab were also awarded remuneration for their services as Directors on the LFC Board of Directors. The fees
awarded are: John C Grech (Chairperson) USD15,000, Erich Schumacher USD10,000, Hussain Lalani USD10,000 and Mohammed Louhab USD10,000.
FIMBank Group Annual Report & Financial Statements 2023
35
Directors’ remuneration (continued)
The positions held by the Bank’s Directors during the financial year ended 31 December 2023 are presented hereunder:
Name of director
Position
John C. Grech
Non-Executive Director, Chairperson FIMBank BoD, Chairperson LFC BoD, Chairperson BRIC, Chairperson BCC, Chairperson CGC, Permanent Invitee NRC
Masaud M.J. Hayat
Non-Executive Director, Vice Chairperson BoD, Chairperson NRC
Abdel Karim A.S. Kabariti
Non-Executive Director, Member BoD, Member BCGC, Member NRC – retired May 2023
Claire Imam Thompson
Independent Non-Executive Director, Member BoD (independent member), Member BAC, Member BRC, Member BCGC - resigned November 2023
Edmond Brincat
Independent Non-Executive Director, Member BoD (independent member), Chairperson BAC, Chairperson BESGC, Vice Chairperson NRC
Erich Schumacher
Non-Executive Director, Member BoD, Member BRC, Member LFC BoD
Hussain Abdul Aziz Lalani
Non-Executive Director, Member BoD, Chairperson BRC, Vice Chairperson BAC, Vice Chairperson BRIC, Member LFC BoD
Majed Essa Ahmed Al-Ajeel
Non-Executive Director, Member BoD, Chairperson BCGC, Vice Chairperson NRC, Member LFC BoD - retired May 2023
Mohamed Fekih Ahmed
Non-Executive Director, Member BoD, Member BCC, Member LFC BoD -retired May 2023
Rabih Soukarieh
Non-Executive Director, Member BoD, Vice Chairperson BCC
Rogers David LeBaron
Non-Executive Director, Member BoD, Member BCGC, Member NRC, Permanent Invitee BAC - retired May 2023
Sunny Bhatia
Non-Executive Director, Member BoD, BCGC, Member NRC
Mohamed Louhab
Non-Executive Director up to 30 November 2023, Executive Director as from 1 December 2023, Member BoD, Member BCC, Member BESGC, Non-voting Member BRIC, Member
LFC BoD and invitee on Board Committees
FIMBank Group Annual Report & Financial Statements 2023
36
Executive Directors and Deputy CEO
In accordance with Capital Markets Rules 12.2A, the disclosure of information in terms of Capital Markets Rules 12.26K and Appendix 12.1 to Chapter 12 of the Capital Markets Rules is applicable in respect of
remuneration payable to both the GCEO as well as the Deputy CEO.
In this respect, the tables below present information in respect of remuneration received by the Bank’s outgoing GCEO (Adrian A. Gostuski), the newly appointed GCEO (Mohammed Louhab) and the Deputy
GCEO (Simon Lay). Adrian A. Gostuski and Mohammed Louhab did not receive any remuneration from the Bank’s subsidiaries, whereas the Deputy CEO received all his remuneration from London Forfaiting
Company (LFC), where he holds the position of CEO of this subsidiary of the Bank.
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
USD
USD
USD
USD
USD
USD
USD
USD
Mohammed Louhab
33,357
-
13,492
NA
NA
9,716
-
56,565
NA
Adrian A. Gostuski
367,069
-
130,521
267,931
-
-
-
765,522
65% : 35%
Simon Lay
463,642
-
126,070
62,150
-
-
75,502
727,364
91.5% : 8.5%
‘ * ‘ the amounts in respect of officers in the position GCEO include: Travel, Accommodation, Car, Parking, Mobile, Pension Plan Allowances and Health, Personal Accident and Life insurance cover; the amount in
respect of the officer in the role of Deputy CEO include a Pension Plan Allowance and Health and Life insurance cover.
‘ ** ’ the amount reflects the relocation flights and other related costs.
‘ *** ‘ Note: The remuneration attributable to Directors in respect of the financial year ended 31 December 2023 included in the table above represents the fixed remuneration attributable to performance year
2023 and the variable remuneration attributable to performance year 2022. This is due to the fact that the variable remuneration will only be formally determined and approved by the NRC subsequent to the
reporting date. The same methodology has been applied in respect of the remuneration attributable to Directors in respect of the prior financial years.
The variable remuneration awarded to the above-mentioned persons during the reporting year (performance bonus in respect of financial year 2022) reflects their overall performance. In determining the variable
remuneration of both the GCEO and the 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 the aforementioned performance bonus to the outgoing GCEO and the Deputy
CEO. This in view of the outgoing 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 2022.
In accordance with the Group’s Remuneration Policy, no deferral requirements are applicable in respect of the variable remuneration awarded in respect of the financial year ended 31 December 2023. In addition,
the variable remuneration is payable in cash and, accordingly, no share-based remuneration was awarded to the GCEO or Deputy GCEO. Finally, none of the variable remuneration awarded in respect of the
financial year ended 31 December 2023 or the preceding financial years were reclaimed or adjusted, neither in the form of malus nor in the form of clawback.
FIMBank Group Annual Report & Financial Statements 2023
37
An analysis of the annual change of remuneration paid to Executive Directors and the Deputy CEO over the last three financial years is presented hereunder:
* Difference
* Difference
* Difference
Name of executive
** 2023
2022
2021
2023 vs 2022
2022 vs 2021
2021 vs 2020
Notes
USD
USD
USD
%
%
%
Mohammed Louhab
56,565
NA
NA
NA
NA
NA
Appointed GCEO with effect from 1 December 2023. Annualised total remuneration would
amount to USD562,168 (excluding one-time relocation payment and any future variable
remuneration which may be awarded).
Adrian A. Gostuski
765,521
787,996
634,882
2.9
24.1
21.1
For the purposes of calculating the annual percentage change between 2023 and 2022, the fixed
remuneration received in 2023 was annualised considering the cessation of GCEO position on 30
November 2023, which would have resulted in total remuneration amounting to USD810,733 or a
2.9% increase compared to 2022.
Simon Lay
727,364
861,899
782,889
(15.6)
10.1
7.6
The decrease in the remuneration of the Deputy CEO of USD 134,535 or 15.6% is mainly due to
lower variable remuneration received in 2023 compared to 2022.
‘ * ‘ Differences also include fluctuation in rate of exchange.
‘ ** ‘ Note: The remuneration attributable to Directors in respect of the financial year ended 31 December 2023 included in the table above represents the fixed remuneration attributable to performance year
2023 and the variable remuneration attributable to performance year 2022. This is due to the fact that the variable remuneration will only be formally determined and approved by the NRC subsequent to the
reporting date. The same methodology has been applied in respect of the remuneration attributable to Directors in respect of the prior financial years.
The positions held by the Bank’s Executive Directors and Deputy CEO during the financial year ended 31 December 2023 are pres ented hereunder:
Name of executive
Position
Mohammed Louhab
With effect from 1st December 2023: GCEO and Executive Director FIMBank as above, Chairperson ALCO, Chairperson NCIC, Chairperson MCC, Chairperson TC
Member ERPC, Member ITSC, Member ORMC
Adrian A. Gostuski
Up to 30th November 2023: GCEO FIMBank, Chairperson MCC, Chairperson ALCO, Chairperson NCIC, Chairperson TC
From 1st December 2023: Member MCC, Member ALCO, Member NCIC, Member TC, Member ERPC, Member ITSC, Member ORMC, Non-Voting Member BRIC
Full year 2023: 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
FIMBank Group Annual Report & Financial Statements 2023
38
Company performance and average remuneration of the Bank’s employees
In terms of the requirements within Appendix 12.1 of the Capital Markets Rules, the following tables present the annual change of the Bank’s performance and of average remuneration on a full-time equivalent
basis of the Bank’s employees (other than directors) over the three most recent financial years.
Performance indicators
2023
2022
2021
2020
Difference
2023 vs 2022
Difference
2022 vs 2021
Difference
2021 vs 2020
USD
USD
USD
USD
%
%
%
Operating income/(loss) before net impairment
6,290,495
4,206,308
3,237,112
(5,823,426)
49.5
* 29.9
* 155.6
Net profit/(loss for the period
2,490,148
(22,010,084)
(663,219)
(55,976,602)
(111.3)
** (3,218.7)
* 98.8
Gross non-performing assets
20,605,923
94,001,953
119,068,469
174,337,048
(78.0)
* 21.1
* 31.7
‘ * ‘ Percentages in respect of FIMBank Performance are being shown as positive given that they denote improvements in these metr ics.
‘ ** ’ Percentage in respect of FIMBank Performance is being shown as negative given that this figure denotes a deterioration in this metric.
Average remuneration on full-time equivalent basis of employee
2023
2022
2021
2020
Difference
2023 vs 2022
Difference
2022 vs 2021
Difference
2021 vs 2020
USD
USD
USD
USD
%
%
%
Employees of the Bank
74,684
77,158
79,792
75,851
(3.2)
(3.3)
5.2
FIMBank Group Annual Report & Financial Statements 2023
39
Denotes membership of:
• FIMBank Board of Directors (“BoD”)
• Board Audit Committee (“BAC”)
• Board Corporate Governance Committee (“BCGC”)
• Board Credit Committee (“BCC”)
• Board Environment, Social and Governance Committee (2BESGC”)
• Board Nomination and Remuneration Committee (“NRC”)
• Board Review and Implementation Committee (“BRIC”)
• Board Risk Committee (“BRC”)
• Asset Liabilities Committee (ALCO)
• Management Credit Committee (“MCC”)
• Emerging Risk and Provisioning Committee (“ERPC”)
• IT Steering Committee (“ITSC”)
• Operational Risk Management Committee (“ORMC”)
• Non-Credit Insurance Committee (“NCIC”)
• Transformation Committee (“TC”)
The Directors’ Remuneration R eport for 2022 was approved at the Annual General Meeting held on 4 May 2023 with the Resolution being passed
by 427,664,923 votes in favour, 52,603,658 “as he prefers” votes, 2,669,515 votes against and 2,583,354 abstentions. There we re no issues raised
on the Report during the said Annual General Meeting.
This Directors’ Remuneration Report in terms of Chapter 12 of the Capital Markets Rules is being put forward to an advisory v ote of the 2024 Annual
General Meeting in accordance with the requirements of the Capital Markets Rule 12.26 L.
In accordance with Capital Markets Rule 12.26N, the contents of the Directors’ Remuneration Report within this Remuneration R eport have been
reviewed by the external auditor to ensure compliance with the requirements emanating from Appendix 12.1 of the Capital Markets Rules.
FIMBank Group Annual Report & Financial Statements 2023
40
Statements of financial position
Group
Group

|  | 31 December | 31 December | 1 January
|  | 2023 | 2022 | 2022
|  |  | Restated | Restated
| Note | USD | USD | USD
Assets |  |  |  |
Balances with the Central Bank of Malta, treasury bills and cash | 19 | 353,010,186 | 216,867,325 | 239,998,839
Derivative assets held for risk management | 20 | 715,713 | 1,610,475 | 841,688
Trading assets | 21 | 374,177,108 | 444,583,661 | 439,985,203
Loans and advances to banks | 22 | 152,814,948 | 149,713,926 | 198,488,576
Loans and advances to customers | 23 | 431,342,074 | 484,528,057 | 511,919,402
Financial investments at fair value through profit or loss | 24 | 19,329,840 | 18,179,220 | 19,966,163
Financial investments at fair value through other comprehensive income | 25 | 140,755,780 | 143,189,022 | 162,408,542
Financial investments at amortised cost | 26 | 28,399,073 | 14,602,008 | 9,914,754
Property and equipment | 28 | 25,185,250 | 26,717,939 | 30,910,454
Investment property | 29 | 22,257,617 | 21,637,065 | 17,223,820
Intangible assets and goodwill | 31 | 2,623,987 | 3,096,854 | 9,376,595
Current tax assets |  | 1,910,849 | 1,498,194 | 1,280,465
Deferred tax assets | 32 | 19,000,479 | 22,001,417 | 24,920,527
Other assets | 33 | 9,161,060 | 7,911,490 | 9,315,905
Total assets |  | 1,580,683,964 | 1,556,136,653 | 1,676,550,933
Liabilities and equity |  |  |  |
Liabilities |  |  |  |
Derivative liabilities held for risk management | 20 | 626,476 | 578,779 | 1,499,026
Amounts owed to institutions and banks | 34 | 412,570,931 | 473,295,256 | 563,553,044
Amounts owed to customers | 35 | 934,738,942 | 876,187,765 | 822,174,779
Debt securities in issue | 36 | 27,543,864 | 15,451,068 | 45,345,575
Current tax liabilities |  | 1,631,829 | 250,624 | 567,144
Deferred tax liabilities | 32 | 4,266,961 | 4,097,858 | 4,215,075
Provision for liabilities and charges | 37 | 236,214 | 907,755 | 356,722
Other liabilities | 38 | 19,771,615 | 14,857,450 | 14,859,385
Total liabilities |  | 1,401,386,832 | 1,385,626,555 | 1,452,570,750
Equity |  |  |  |
Called up share capital | 39 | 261,221,882 | 261,221,882 | 261,221,882
Share premium | 39 | 858,885 | 858,885 | 858,885
Reserve for general banking risks | 39 | - | - | 2,218,995
Currency translation reserve | 39 | (14,337,472) | (13,717,527) | (10,941,184)
Fair value reserve | 39 | (4,677,868) | (14,077,514) | 9,879,740
Other reserve | 39 | 2,982,435 | 2,982,435 | 2,982,435
Accumulated losses | 39 | (67,269,892) | (67,240,656) | (42,869,373)
Total equity attributable to equity holders of the Group |  | 178,777,970 | 170,027,505 | 223,351,380
Non-controlling interests | 40 | 519,162 | 482,593 | 628,803
Total equity |  | 179,297,132 | 170,510,098 | 223,980,183
Total liabilities and equity |  | 1,580,683,964 | 1,556,136,653 | 1,676,550,933
Memorandum items |  |  |  |
Contingent liabilities | 41 | 31,281,753 | 14,673,092 | 7,022,055
Commitments | 42 | 147,803,707 | 100,001,463 | 153,618,234

FIMBank Group Annual Report & Financial Statements 2023
41
Statements of financial position
Bank
Bank
31 December
2023
31 December
2022
Restated
1 January
2022
Restated
Note
USD
USD
USD
Assets
Balances with the Central Bank of Malta, treasury bills and cash
19
352,997,057
216,852,467
239,982,048
Derivative assets held for risk management
20
812,609
1,610,475
841,688
Loans and advances to banks
22
114,325,243
125,882,432
182,458,548
Loans and advances to customers
23
618,118,225
718,910,427
724,767,858
Financial investments at fair value through profit or loss
24
19,329,840
18,179,220
19,966,163
Financial investments at fair value through other comprehensive income
25
140,755,780
143,189,022
162,408,542
Financial investments at amortised cost
26
28,399,073
14,602,008
9,914,754
Investments in subsidiaries
27
157,687,573
152,687,573
159,448,858
Property and equipment
28
2,994,784
4,770,241
1,965,249
Intangible assets
31
2,624,736
3,099,853
3,774,315
Current tax assets
-
-
66,667
Deferred tax assets
32
15,004,834
15,004,834
16,336,538
Other assets
33
7,747,110
6,830,284
8,919,842
Total assets
1,460,796,864
1,421,618,836
1,530,851,070
Liabilities and equity
Liabilities
Derivative liabilities held for risk management
20
626,476
818,031
1,533,556
Amounts owed to institutions and banks
34
333,498,402
386,787,784
497,633,356
Amounts owed to customers
35
951,166,330
869,220,415
822,950,838
Provision for liabilities and charges
37
90,135
121,209
201,775
Other liabilities
38
10,633,538
10,498,948
7,921,481
Total liabilities
1,296,014,881
1,267,446,387
1,330,241,006
Equity
Called up share capital
39
261,221,882
261,221,882
261,221,882
Share premium
39
858,885
858,885
858,885
Reserve for general banking risks
39
-
-
2,218,995
Fair value reserve
39
(17,382,450)
(25,501,836)
(1,074,305)
Other reserve
39
2,681,041
2,681,041
2,681,041
Accumulated losses
39
(82,597,375)
(85,087,523)
(65,296,434)
Total equity
164,781,983
154,172,449
200,610,064
Total liabilities and equity
1,460,796,864
1,421,618,836
1,530,851,070
Memorandum items
Contingent liabilities
41
42,331,477
38,670,533
44,398,883
Commitments
42
100,220,087
91,414,423
107,469,111
The official middle rate of exchange issued by the European Central Bank between US Dollar and Euro as at 31 December 2023 was 1.1050 (2022:
1.0666).
The Notes on pages 50 to 193 are an integral part of these Financial Statements.
The Financial Statements on pages 40 to 193 were approved and authorised for issue by the Board of Directors on 24 April 2024.
Approved by the Board of Directors and signed on its behalf by John C. Grech (Chairman) and Masaud M.J. Hayat (Vice Chairman) on 24 April
2024 as per Director’s Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Report and Financial Statements
2023.
FIMBank Group Annual Report & Financial Statements 2023
42
Statements of profit or loss
For the year ended 31 December

|  | Group |  | Bank |
|  | 2023 | 2022 | 2023 | 2022
|  |  | Restated |  | Restated
| Note | USD | USD | USD | USD
Interest income | 9 | 95,492,537 | 61,433,662 | 52,818,308 | 30,248,635
Interest expense | 9 | (40,242,672) | (17,663,162) | (33,156,902) | (13,509,191)
Net interest income | 9 | 55,249,865 | 43,770,500 | 19,661,406 | 16,739,444
Fee and commission income | 10 | 5,246,853 | 4,000,058 | 3,116,178 | 2,744,994
Fee and commission expense | 10 | (5,986,430) | (6,004,736) | (1,206,187) | (1,924,794)
Net fee and commission (expense)/income | 10 | (739,577) | (2,004,678) | 1,909,991 | 820,200
Net trading results | 11 | (3,220,869) | (6,924,935) | (921,644) | 1,411,029
Net gain/(loss) from equity investments measured at fair value through profit or loss | 12 | 768,541 | (337,257) | 768,541 | (337,257)
Dividend income | 13 | 40,228 | 3,821,545 | 12,221,863 | 10,321,545
Net changes in fair value of investment property | 29 | (1,398,978) | - | - | -
Other operating income | 14 | 921,017 | 865,004 | 328,330 | 566,474
Other operating expenses | 15 | (24,531) | (364,205) | (24,531) | (364,205)
Operating income before net impairment |  | 51,595,696 | 38,825,974 | 33,943,956 | 29,157,230
Net movement in expected credit losses and other credit impairment charges | 5 | (1,960,888) | (20,028,684) | (2,993,592) | (17,424,101)
Impairment of goodwill | 31 | - | (5,249,307) | - | -
Impairment of investments in subsidiaries | 27 | - | - | - | (8,261,536)
Operating income |  | 49,634,808 | 13,547,983 | 30,950,364 | 3,471,593
Administrative expenses | 16 | (40,664,264) | (35,160,839) | (24,824,525) | (22,139,252)
Depreciation and amortisation | 28/31 | (3,176,337) | (3,101,584) | (2,828,936) | (2,811,670)
Total operating expenses |  | (43,840,601) | (38,262,423) | (27,653,461) | (24,950,922)
Profit/(Loss) before tax |  | 5,794,207 | (24,714,440) | 3,296,903 | (21,479,329)
Taxation | 17 | (5,786,533) | (1,957,610) | (806,755) | (530,755)
Profit/(Loss) for the year |  | 7,674 | (26,672,050) | 2,490,148 | (22,010,084)
Profit/(Loss) for the year attributable to: |  |  |  |  |
Equity holders of the Bank |  | (30,812) | (26,590,278) | 2,490,148 | (22,010,084)
Non-controlling interests | 40 | 38,486 | (81,772) | - | -
|  | 7,674 | (26,672,050) | 2,490,148 | (22,010,084)
Earnings per share |  |  |  |  |
Basic earnings per share (US cents) | 18 | (0.01) | (5.09) |  |
The Notes on pages 50 to 193 are an integral part of these Financial Statements. |  |  |  |  |

FIMBank Group Annual Report & Financial Statements 2023
43
Statements of other comprehensive income
For the year ended 31 December

|  | Group |  |  | Bank
|  | 2023 | 2022 | 2023 | 2022
|  |  | Restated |  | Restated
|  | USD | USD | USD | USD
Profit/(Loss) for the year |  | 7,674 | (26,672,050) | 2,490,148 | (22,010,084)
Other comprehensive income: |  |  |  |  |
Items that will not be reclassified subsequently to profit or loss: |  |  |  |  |
Properties: |  |  |  |  |
- | Surplus arising on revaluation | 1,314,568 | - | - | -
- | Income tax | (34,308) | 470,277 | - | -
|  | 1,280,260 | 470,277 | - | -
Items that are or may be reclassified subsequently to Foreign operations - foreign currency translation differences | profit or loss: | (621,862) | (2,840,781) | - | -
Debt instruments at fair value through other comprehensive income: |  |  |  |  |
- | Fair value gains/(losses) | 8,119,386 | (23,095,827) | 8,119,386 | (23,095,827)
- | Income tax | - | (1,331,704) | - | (1,331,704)
|  | 7,497,524 | (27,268,312) | 8,119,386 | (24,427,531)
Other comprehensive income, net of tax |  | 8,777,784 | (26,798,035) | 8,119,386 | (24,427,531)
Other movements in comprehensive income |  | 1,576 | - | - | -
Total comprehensive income |  | 8,787,034 | (53,470,085) | 10,609,534 | (46,437,615)
Total comprehensive income attributable to: |  |  |  |  |
Equity holders of the Bank |  | 8,750,465 | (53,323,875) | 10,609,534 | (46,437,615)
Non-controlling interests |  | 36,569 | (146,210) | - | -
|  | 8,787,034 | (53,470,085) | 10,609,534 | (46,437,615)

FIMBank Group Annual Report & Financial Statements 2023
44
Statements of changes in equity
For the year ended 31 December 2023
Group

|  | Called up |  | Currency |  | Attributable to equity holders of the Bank |  |  | Non- |
|  | share | Share | translation | Fair value | Other | Accumulated |  | controlling | Total
|  | capital | premium | reserve | reserve 1 | reserve | losses | Total | interests | equity
|  | USD | USD | USD | USD | USD | USD | USD | USD | USD
Balance at 1 January 2023 (as restated) |  | 261,221,882 | 858,885 | (13,717,527) | (14,077,514) | 2,982,435 | (67,240,656) | 170,027,505 | 482,593 | 170,510,098
Total comprehensive income |  |  |  |  |  |  |  |  |  |
(Loss)/Profit for the year |  | - | - | - | - | - | (30,812) | (30,812) | 38,486 | 7,674
Other comprehensive income: |  |  |  |  |  |  |  |  |  |
- | Debt instruments at fair value through other |  |  |  |  |  |  |  |  |
| comprehensive income - fair value gains, net of tax | - | - | - | 8,119,386 | - | - | 8,119,386 | - | 8,119,386
- | Surplus arising on revaluation of properties, net of tax | - | - | - | 1,280,260 | - | - | 1,280,260 | - | 1,280,260
- | Foreign operations – foreign currency translation |  |  |  |  |  |  |  |  |
| differences | - | - | (619,945) | - | - | - | (619,945) | (1,917) | (621,862)
Total other comprehensive income |  | - | - | (619,945) | 9,399,646 | - | - | 8,779,701 | (1,917) | 8,777,784
Other movements in comprehensive income |  | - | - | - | - | - | 1,576 | 1,576 | - | 1,576
Total comprehensive income |  | - | - | (619,945) | 9,399,646 | - | (29,236) | 8,748,889 | 36,569 | 8,787,034
Balance at 31 December 2023 |  | 261,221,882 | 858,885 | (14,337,472) | (4,677,868) | 2,982,435 | (67,269,892) | 178,777,970 | 519,162 | 179,297,132

1
The fair value reserve as at 1 January 2023 has been restated to reflect the reversal of the reclassification of a portfolio of investments which was previously reported and measured at amortised cost and is now presented and measured
at fair value through other comprehensive income. Refer to Note 4 for an explanation of the impact.
FIMBank Group Annual Report & Financial Statements 2023
45
Statements of changes in equity
For the year ended 31 December 2022
Group

|  |  |  | Reserve for |  | Attributable to equity holders of the Bank |  |  |  |  |
|  | Called up |  | general | Currency |  |  |  |  | Non- |
|  | Share | Share | banking | translation | Fair value | Other | Accumulated |  | controlling | Total
|  | capital | premium | risks | reserve | reserve 2 | reserve | losses | Total | interests | equity
|  | USD | USD | USD | USD | USD | USD | USD | USD | USD | USD
Balance at 1 January 2022 (as previously | reported) | 261,221,882 | 858,885 | 2,218,995 | (10,941,184) | 10,954,045 | 2,982,435 | (42,869,373) | 224,425,685 | 628,803 | 225,054,488
Impact of reversal of reclassification of | investment portfolio (Note 4, 25.2) | - | - | - | - | (1,074,305) | - | - | (1,074,305) | - | (1,074,305)
Balance at 1 January 2022 (as restated) | 261,221,882 | 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
Total comprehensive income |  |  |  |  |  |  |  |  |  |
Loss for the year | - | - | - | - | - | - | (26,590,278) | (26,590,278) | (81,772) | (26,672,050)
Other comprehensive income: |  |  |  |  |  |  |  |  |  |
- | Debt instruments at fair value through |  |  |  |  |  |  |  |  |  |
| other comprehensive income - fair |  |  |  |  |  |  |  |  |  |
| value losses, net of tax (as restated) | - | - | - | - | (24,427,531) | - | - | (24,427,531) | - | (24,427,531)
- | Surplus arising on revaluation of |  |  |  |  |  |  |  |  |  |
| properties, net of tax | - | - | - | - | 470,277 | - | - | 470,277 | - | 470,277
- | Foreign operations - foreign currency |  |  |  |  |  |  |  |  |  |
| translation differences | - | - | - | (2,776,343) | - | - | - | (2,776,343) | (64,438) | (2,840,781)
Total other comprehensive income |  | - | - | - | (2,776,343) | (23,957,254) | - | - | (26,733,597) | (64,438) | (26,798,035)
Total comprehensive income |  | - | - | - | (2,776,343) | (23,957,254) | - | (26,590,278) | (53,323,875) | (146,210) | (53,470,085)
Transfer between reserves |  | - | - | (2,218,995) | - | - | - | 2,218,995 | - | - | -
Balance at 31 December 2022 (as restated) |  | 261,221,882 | 858,885 | - | (13,717,527) | (14,077,514) | 2,982,435 | (67,240,656) | 170,027,505 | 482,593 | 170,510,098

2
The fair value reserve as at 1 January 2022 and 31 December 2022 has been restated to reflect the reversal of the reclassification of a portfolio of investments which was previously reported and measured at amortised cost and is now
presented and measured at fair value through other comprehensive income. Refer to Note 4 for an explanation of the impact.
FIMBank Group Annual Report & Financial Statements 2023
46
Statements of changes in equity
For the year ended 31 December 2023
Bank
Called up
share
capital
Share
premium
Fair value
reserve
3
Other
reserve
Accumulated
losses
Total
equity
USD
USD
USD
USD
USD
USD
Balance at 1 January 2023 (as restated)
261,221,882
858,885
(25,501,836)
2,681,041
(85,087,523)
154,172,449
Total comprehensive income
Profit for the year
-
-
-
-
2,490,148
2,490,148
Other comprehensive income:
- Debt investments at fair value through other comprehensive income - fair value gains, net of tax
-
-
8,119,386
-
-
8,119,386
Total other comprehensive income
-
-
8,119,386
-
-
8,119,386
Total comprehensive income
-
-
8,119,386
-
2,490,148
10,609,534
Balance at 31 December 2023
261,221,882
858,885
(17,382,450)
2,681,041
(82,597,375)
164,781,983
3
The fair value reserve as at 1 January 2023 has been restated to reflect the reversal of the reclassification of a portfolio of investments which was previously reported and measured at amortised cost and is now presented and measured
at fair value through other comprehensive income. Refer to Note 4 for an explanation of the impact.
FIMBank Group Annual Report & Financial Statements 2023
47
Statements of changes in equity
For the year ended 31 December 2022
Bank
Called up
share
capital
Share
premium
Reserve for
general
banking
risks
Fair value
reserve
4
Other
reserve
Accumulated
losses
Total
equity
USD
USD
USD
USD
USD
USD
USD
Balance at 1 January 2022 (as previously reported)
261,221,882
858,885
2,218,995
-
2,681,041
(65,296,434)
201,684,369
Impact of reversal of reclassification of investment portfolio (Note 4, 25.2)
-
-
-
(1,074,305)
-
-
(1,074,305)
Balance at 1 January 2022 (as restated)
261,221,882
858,885
2,218,995
(1,074,305)
2,681,041
(65,296,434)
200,610,064
Total comprehensive income
Loss for the year
-
-
-
-
-
(22,010,084)
(22,010,084)
Other comprehensive income:
- Debt investments at fair value through other comprehensive income –
fair value losses, net of tax (as restated)
-
-
-
(24,427,531)
-
-
(24,427,531)
Total other comprehensive income
-
-
-
(24,427,531)
-
-
(24,427,531)
Total comprehensive income
-
-
-
(24,427,531)
-
(22,010,084)
(46,437,615)
Transfer between reserves
-
-
(2,218,995)
-
-
2,218,995
-
Balance at 31 December 2022 (as restated)
261,221,882
858,885
-
(25,501,836)
2,681,041
(85,087,523)
154,172,449
4
The fair value reserve as at 1 January 2022 and 31 December 2022 has been restated to reflect the reversal of the reclassification of a portfolio of investments which was previously reported and measured at amortised cost and is now
presented and measured at fair value through other comprehensive income. Refer to Note 4 for an explanation of the impact.
FIMBank Group Annual Report & Financial Statements 2023
48
Statements of cash flows
For the year ended 31 December

|  |  | Group |  | Bank
|  | 2023 | 2022 | 2023 | 2022
|  |  | Restated |  | Restated
|  | USD | USD | USD | USD
Cash flows from operating activities |  |  |  |  |
Interest and commission receipts |  | 99,410,908 | 66,446,604 | 52,462,009 | 40,370,717
Interest and commission payments |  | (39,953,513) | (13,534,811) | (27,268,050) | (12,382,986)
Payments to employees and suppliers |  | (36,383,127) | (36,264,817) | (24,275,402) | (22,429,122)
Operating profit/(loss) before changes in operating | assets/liabilities | 23,074,268 | 16,646,976 | 918,557 | 5,558,609
Decrease/(Increase) in operating assets: |  |  |  |
– | Loans and advances to customers and banks | 80,642,118 | 31,578,874 | 91,123,276 | 36,058,246
– | Other assets | (809,685) | (3,052,483) | (632,506) | (2,884,544)
(Decrease)/Increase in operating liabilities: |  |  |  |
– | Amounts owed to customers, institutions and banks | (14,330,127) | (7,758,320) | (18,089,097) | (13,640,792)
– | Other liabilities | 344,918 | (217,251) | 351,181 | (223,771)
– | Net inflows from balances with subsidiary companies | - | - | 46,022,425 | (13,749,925)
Cash flows from/(used in) trading assets: |  |  |  |
– | Payments to acquire trading assets | (772,551,650) | (812,766,912) | - | -
– | Proceeds on settlement of trading assets | 847,048,996 | 790,052,784 | - | -
Net cash generated from operating activities | before income tax | 163,418,838 | 14,483,668 | 119,693,836 | 11,117,823
Income tax paid |  | (1,762,645) | (1,282,984) | (806,755) | (476,091)
Net cash flows generated from operating activities | 161,656,193 | 13,200,684 | 118,887,081 | 10,641,732
Cash flows from/(used in) investing activities |  |  |  |
Payments to acquire financial investments at fair value | through other comprehensive income | - | (25,549,207) | - | (25,549,207)
Payments to acquire financial investments at amortised cost | (13,440,236) | (14,569,219) | (13,440,236) | (14,569,219)
Payments to acquire treasury bills at amortised cost | (288,263,020) | (429,590,021) | (288,263,020) | (429,590,021)
Payments to acquire shares in subsidiary companies | - | - | - | (252)
Payments to acquire property and equipment | (154,846) | (1,113,450) | (34,872) | (916,620)
Payments to acquire intangible assets | (490,433) | (318,308) | (490,433) | (318,308)
Proceeds on settlement of financial investments at fair value | through profit or loss | 249,464 | 127,493 | 249,464 | 127,493
Proceeds on maturity of financial investments at fair value | through other comprehensive income | 13,745,002 | 13,000,000 | 13,745,002 | 13,000,000
Proceeds on maturity of financial investments at amortised cost |  | - | 9,800,719 | - | 9,800,719
Proceeds on maturity of treasury bills at amortised cost |  | 288,934,098 | 296,265,806 | 288,934,098 | 296,265,806
Proceeds on disposal of property and equipment |  | 31,064 | 19,729 | 27,500 | 1,565
Receipt of dividends |  | 40,228 | 3,821,545 | 7,221,863 | 8,821,545
Net cash flows from/(used in) investing activities |  | 651,321 | (148,104,913) | 7,949,366 | (142,926,499)
Increase/(Decrease) in cash and cash equivalents c/f |  | 162,307,514 | (134,904,229) | 126,836,447 | (132,284,767)

FIMBank Group Annual Report & Financial Statements 2023
49
Statements of cash flows
For the year ended 31 December

|  |  | Group |  | Bank
|  | 2023 | 2022 | 2023 | 2022
|  |  | Restated |  | Restated
|  | USD | USD | USD | USD
Increase/(Decrease) in cash and cash equivalents b/f |  | 162,307,514 | (134,904,229) | 126,836,447 | (132,284,767)
Cash flows from/(used in) financing activities |  |  |  |  |
– | Proceeds on issue of debt securities | 38,142,327 | 72,331,491 | - | -
– | Payments to settle debt securities | (26,893,950) | (99,499,621) | - | -
– | Payment of lease liabilities | (830,369) | (700,703) | (1,450,567) | (1,330,082)
Net cash flows from/(used in) financing activities | 10,418,008 | (27,868,833) | (1,450,567) | (1,330,082)
Effect of realised exchange (losses)/gains arising from cash |  |  |  |
movements during the year | (15,762,409) | 29,242,289 | (7,268,046) | 15,912,422
Increase/(Decrease) in cash and cash equivalents | 156,963,113 | (133,530,773) | 118,117,834 | (117,702,427)
Analysed as follows: |  |  |  |  |
– | Effect of exchange rate changes on cash and cash equivalents | 2,900,384 | (15,406,845) | 3,401,372 | (14,867,995)
– | Net increase/(decrease) in cash and cash equivalents | 154,062,729 | (118,123,928) | 114,716,462 | (102,834,432)
Increase/(Decrease) in cash and cash equivalents |  | 156,963,113 | (133,530,773) | 118,117,834 | (117,702,427)
Cash and cash equivalents at beginning of year |  | (43,919,669) | 89,611,104 | 9,611,898 | 127,314,325
Cash and cash equivalents at end of year |  | 113,043,444 | (43,919,669) | 127,729,732 | 9,611,898

FIMBank Group Annual Report & Financial Statements 2023
50
Notes to the financial statements
For the year ended 31 December 2023
1
Reporting entity
25
Financial investments at fair value through
2
Basis of preparation
other comprehensive income
3
Material accounting policies
26
Financial investments at amortised cost
4
Comparative information
27
Investments in subsidiaries
5
Financial risk review
28
Property and equipment
6
Fair values of financial instruments
29
Investment property
7
Classification of financial assets and liabilities
30
Leases
8
Operating segments
31
Intangible assets and goodwill
9
Net interest income
32
Deferred taxation
10
Net fee and commission (expense)/ income
33
Other assets
11
Net trading results
34
Amounts owed to institutions and banks
12
Net gain/(loss) from equity investments measured
35
Amounts owed to customers
at fair value through profit or loss
36
Debt securities in issue
13
Dividend income
37
Provision for liabilities and charges
14
Other operating income
38
Other liabilities
15
Other operating expenses
39
Equity
16
Administrative expenses
40
Non-controlling interests
17
Taxation
41
Contingent liabilities
18
Earnings per share
42
Commitments
19
Balances with the Central Bank of Malta,
43
Cash and cash equivalents
treasury bills and cash
44
Related parties
20
Derivatives held for risk management
45
Capital commitments
21
Trading assets
46
Other commitments
22
Loans and advances to banks
47
Subsequent events
23
Loans and advances to customers
48
Ultimate parent company
24
Financial investments at fair value through profit or loss
FIMBank Group Annual Report & Financial Statements 2023
51
Notes to the financial statements
For the year ended 31 December 2023
1 Reporting entity
FIMBank p.l.c. (the “Bank”) is a company domiciled and incorporated 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 Bank is a credit i nstitution
licenced in Malta and is primarily involved in the provision of lending, trade finance and factoring services to corporate customers, as
well as the raising of deposits from corporate and retail customers.
The Bank and its subsidiaries, namely London Forfaiting Company Limited (“LFC”), FIMFactors B.V. (“FIMFactors”), The Egyptian
Company for Factoring S.A.E. (“Egypt Factors”), FIM Property Investment Limited and FIM Business Solutions Limited, are included in the
scope of consolidation as at and for the year ended 31 December 2023 and are referred to as the “Group” in these financial statements
and individually as “Group entities”.
In this respect, the consolidated financial statements of the Group as at and for the year ended 31 December 2023 comprise the Bank
and its subsidiaries, whereas the standalone financial statements of FIMBank p.l.c. reflect the financial results and financial position of
the Bank. All amounts have been rounded to the nearest thousand, unless otherwise stated.
2 Basis of preparation
2.1 Statement of compliance
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 and IFRS 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).
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.
The Financial Statements were authorised for issue by the Board of Directors on 24 April 2024.
2.2 Basis of measurement
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 investments measured at fair value through profit or loss;
• financial investments measured at fair value through other comprehensive income;
• freehold land and premises and improvement to premises within ‘Property and equipment’ at Group level; and
• investment property at Group level.
FIMBank Group Annual Report & Financial Statements 2023
52
2.3 Standards, interpretations and amendments to published standards effective in
2023
During the financial year ended 31 December 2023, the Group and Bank adopted amendments to existing standards that are mandatory
for accounting periods beginning on 1 January 2023. The Group and Bank have applied the following amendments for the first time in
the financial year commencing on 1 January 2023:
• Deferred tax relating to assets and liabilities arising from a single transaction – amendments to IAS 12;
• Income taxes: income tax reform – pillar two model rules – amendments to IAS 12;
• Definition of accounting estimates – amendments to IAS 8; and
• Disclosure of accounting policies – amendments to IAS 1.
The adoption of these revisions to the requirements of IFRSs as adopted by the EU did not have a significant effect on these Financial
Statements.
2.3.1 Deferred tax related to assets and liabilities arising from a single transaction
The Group has adopted Deferred Tax related to assets and liabilities arising from a single transaction (Amendments to IAS 12) from 1
January 2023. The amendments narrow the scope of the initial recognition exemption to exclude transactions that give rise to equal and
offsetting temporary differences – e.g. leases. For leases, an entity is required to recognise the associated deferred tax asset and
liabilities from the beginning of the earliest comparative period presented, with any cumulative effect recognised as an adjustment to
retained earnings or other components of equity at the date. For all other transactions the amendments apply to transactions that occur
after the beginning of the earliest period presented.
The Group previously accounted for deferred tax on leases by applying the ‘integrally linked’ approach, resulting in a similar outcome to
the amendments, except that the deferred tax asset or liability was disclosed on a net basis. Following the amendments, the Group
discloses a separate deferred tax asset and a deferred tax liability within the notes to the financial statements.
Accordingly, the impact of this change on the consolidated financial statements is insignificant. The key impact for the Group relates to
the disclosure of deferred tax asset and liabilities recognised (Refer t o Note 32).
2.3.2 Income taxes: income tax reform – pillar two model rules
On 20 December 2021, the Orgnisation for Economic Co-Operation and Development (“OECD”) released a framework for Pillar Two
Model Rules which aims to introduce a global minimum corporate tax rate of 15% applicable to multinational enterprise groups with
global revenue over €750 million. On 15 December 2022, the EU Council formally adopted the EU minimum tax directive by written
procedure and in most EU countries the new rules are expected to apply for accounting periods starting on or after 31 December 2023.
The Maltese Ministry for Finance and Employment announced that it will be applying the derogation that Article 50 of the EU Directive
allows. Therefore, no Income Inclusion Rule and no Undertaxed Payments Rule will apply until the derogation continues to hold. It was
also announced that no Qualified Minimum Domestic Top-up will apply in Malta at least in 2024.
The Group is within the scope of the OECD Pillar Two model rules. Since the Pillar Two legislation was not effective at the reporting date,
the group has no related current tax exposure. The Group applies the exception to recognising and disclosing information about deferred
tax assets and liabilities related to Pillar Two income taxes, as provided in the amendments to IAS 12 issued in May 2023.
Under the legislation, the Group is liable to pay a top-up tax for the difference between its Global Anti-Base Erosion Rules (“GloBE”)
effective tax rate per jurisdiction and the 15% minimum rate. All entities within the Group have an effective tax rate that exceeds 15%
for the financial year ended 31 December 2023, except for one subsidiary that operates in Egypt.
The Group is in the process of assessing its exposure to the Pillar Two legislation when it comes into effect. This assessment indicates
that for Egypt the average effective tax rate based on accounting profit is 0% for the annual reporting period to 31 December 2023.
However, although the average effective tax rate is below 15%, the Group might not be exposed to paying Pillar Two income taxes due
to the impact of specific adjustments envisaged in the Pillar Two legislation which give rise to different effective tax rates. Due to the
complexities in applying the legislation and calculating GloBE income, the quantitative impact of the enacted or substantively enacted
legislation cannot yet be estimated in a reliable manner. Even for those entities with an accounting effective tax rate above 15%, there
might still be Pillar Two tax implications. The Group has engaged tax specialists to assist it with applying the legislation.
FIMBank Group Annual Report & Financial Statements 2023
53
2.4 Standards, interpretations and amendments to published standards issued but
not yet effective
A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2024 and earlier
application is permitted. However, the Group and Bank have 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 and Bank’s Financial Statements:
• amendments to IAS 1 – presentation of financial statements: classification of liabilities as current or non-current;
• amendments to IAS 7 – statements of cash flows and IFRS 7 – financial instruments disclosures: supplier finance arrangements;
• amendments to IFRS 16 – leases: lease liability in a sale and leaseback; and
• amendments to IAS 21 – the effects of change in foreign exchange rates - lack of exchangeability.
2.5 Functional and presentation currency
These Financial Statements are presented in United States Dollars (“USD”), which is the Bank’s functional currency.
2.6 Use of judgements and estimates
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 r esults may
differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.
2.6.1 Judgements
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 3.9.2 – 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 Principal 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.
2.6.2 Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year
ending 31 December 2024 is set out below in relation to the impairment of financial instruments and in the following Notes in relation
to other areas:
• Accounting Policy 3.9.5 – impairment of financial instruments: key assumptions used in estimating recoverable cash flows;
• Note 5 – impairment of financial instruments: determining inputs into the ECL measurement model, including incorporation of
forward-looking information;
• Note 6.2 – determination of the fair value of financial instruments with significant unobservable inputs;
• Note 27.3 – impairment testing for CGUs: key assumptions underlying recoverable amounts; and
• Note 32 – recognition of deferred tax assets: availability of future taxable profit against which carry-forward tax losses can be used.
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3 Material accounting policies
The Group and Bank (where applicable) have consistently applied the following Accounting Policies to all periods presented in these
Financial Statements.
3.1 Basis of consolidation
3.1.1 Business combinations
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 activi ties 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.
3.1.2 Subsidiaries
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.
3.1.3 Interests in equity-accounted investees
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 Co nsolidated 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.
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3.1.4 Non-controlling interests
Non-controlling interests are initially measured 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 equ ity transactions.
3.1.5 Discontinued operations
A discontinued operation is a component of the Group’s business, the operations and cash flows of which can be clearly distin guished
from the rest of the Group and which:
• represents a separate major line of business or geographic area of operations;
• is part of a single coordinated plan to dispose of a separate major line of business or geographic area of operations; or
• 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.
3.1.6 Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised gains and losses (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.
3.1.7 Loss of control
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.
3.2 Foreign currency
3.2.1 Foreign currency transactions
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 the 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 3.9.2.1); and
• qualifying cash flow hedges to the extent that the hedge is effective.
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3.2.2 Foreign operations
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 currency translation reserve,
except to the extent that the translation difference is allocated to a non-controlling interest.
When a foreign operation is disposed of in its entirety or partially such that control is lost, the cumulative amount in the currency
translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the Group
disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, then the relevant proportion
of the cumulative amount is re-attributed to non-controlling interest.
3.3 Interest income and expense
3.3.1 Effective interest rate
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 POCI financial assets, the Group estimates future cash
flows considering all contractual terms of the financial instrument, but not ECL. For POCI 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.
3.3.2 Calculation of interest income and expense
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.
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 being applied on the gross carrying amount.
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.
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3.3.3 Presentation
Interest income calculated using the effective interest method presented in the Statement of Profit or Loss and OCI includes:
• interest on financial assets 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 investments at fair value through profit or loss.
Interest expense presented in the Statement of Profit or Loss and OCI includes:
• interest on financial liabilities measured at amortised cost;
• negative interest on financial investments 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.
3.4 Fee and commission income and expense
Fee 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, ar e
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.
3.5 Net trading results
Net trading results comprises net gains less / losses relating to trading assets 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.
3.6 Net gain or loss from other financial instruments at fair value through profit or loss
Net gain or loss from other financial instruments at fair value through profit or loss relates to 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.
3.7 Dividends
Dividend income is recognised when the right to receive income is established. Usually this is the ex-dividend date for equity securities.
3.8 Income tax
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, accounting for them in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and
recognising the related expenses in ‘Other expenses’.
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3.8.1 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.
3.8.2 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.
3.9 Financial assets and liabilities
3.9.1 Recognition and initial measurement
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 balance
sheet on the settlement date.
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.
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3.9.2 Classification
3.9.2.1 Financial assets
On initial recognition, a financial asset is classified as measured at amortised cost, fair value through other comprehensive income or
fair value through profit or loss.
A debt instrument 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 solely payments of principal and interest
(“SPPI”).
A debt instrument is measured at fair value through other comprehensive income (“FVOCI”) 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.
Business model assessment
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 in which 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 Gro up’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.
Assessment of whether contractual cash flows are solely payments of principal and interest
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).
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In some cases, loans made by the Group that are secured by collateral of the bo rrower 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.
Equity instruments have contractual cash flows that do not meet the SPPI criterion. Accordingly, all such financial assets are measured
at fair value through profit or loss (“FVTPL”) unless the Group designates these instruments at FVOCI upon initial recognition.
Reclassifications
The Group reclassifies debt instruments when and only when its business model for managing those assets changes. In such cases, the
instruments are reclassified in the period following which the Group changes its business model for managing financial assets.
Financial assets measured at amortised cost
Financial assets that are held to collect the contractual cash flows and which contain contractual terms that give rise on specified dates
to cash flows that are SPPI are measured at amortised cost. Such financial assets primarily comprise balances with Central Bank of Malta,
loans and advances to banks and customers, treasury bills classified within ‘Balances with Central Bank of Malta, Treasury Bills and cash’,
and financial investments measured at amortised cost.
The amortised cost of a financial asset 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.
Interest income from these financial assets is recognised in ‘Interest income’ using the effective interest rate method. Any gain or loss
arising on derecognition is recognised directly in profit or loss and presented in ‘Other operating income’, whereas foreign exchange
gains and losses are presented in ‘Net trading results’. Impairment losses are presented as a separate line item in the statement of profit
or loss.
Financial assets measured at fair value through other comprehensive income
Financial assets held within a business model that is achieved by both collecting contractual cash flows and selling and which contain
contractual terms that give rise on specified dates to cash flows that are SPPI are measured at FVOCI. These primarily comprise financial
investments measured at FVOCI.
For debt securities measured at FVOCI, unrealised gains and losses subsequent to initial recognition 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 recognised in ‘Interest income’;
• movements in loss allowances recognised in ‘Net impairment charge on financial assets’; and
• foreign exchange gains and losses recognised in ‘Net trading results’.
When a debt security measured at FVOCI is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from
equity to profit or loss.
Financial assets mandatorily measured at fair value through profit or loss
Debt instruments that do not meet the criteria for amortised cost or FVOCI are automatically classified and measured at FVTPL. A gain
or loss on a debt instrument that is subsequently measured at FVTPL is recognised in profit or loss and presented net within ‘Net trading
results’ in the period in which it arises.
Such financial assets comprise primarily Group’s trading assets, which are managed and whose performance is evaluated on a fair value
basis. Trading assets are acquired principally for the purpose of selling in the near term or to be held as part of a portfolio that is managed
together for short-term profit or position taking.
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The management of these assets by LFC is primarily focused on fair value information and uses that information to assess the assets’
performance and to make decisions. The contractual cash flows of the instruments are SPPI. However, these instruments are neither
held for the purpose of collecting contractual cash flows nor held both for collecting contractual cash flows and for sale. The collection
of contractual cash flows is only incidental to achieving the business model’s objective. Consequently, all trading assets are mandatorily
measured at FVTPL.
Trading assets 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.
In addition, equity investments that are not designated at FVOCI at initial recognition are also classified and mandatorily measured at
FVTPL. Changes in the fair value of financial assets measured at FVTPL are recognised in ‘Net gain/(loss) from equity investments
measured at fair value through profit or loss’ in the statement of profit or loss as applicable. Such instruments principally comprise the
Group’s investment in unlisted sub-funds and other equity investments classified within ‘Financial investments measured at fair value
through profit or loss'.
Derivatives held for risk management purposes
Derivatives are financial instruments that derive their value from the price of underlying items such as currency forwards or interest rate
swaps. Derivatives are recognised initially and are subsequently measured at fair value through profit or loss. Derivatives are classified
as assets when their fair value is positive or as liabilities when their fair value is negative.
The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures. In this respect, derivatives
held for risk management purposes are measured at fair value in the Statement of Financial Position, with gains and losses recognised
in ‘Net trading results’ in profit or loss.
Net investment hedges
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.
3.9.2.2 Financial liabilities
The Group classifies its financial liabilities, other than financial guarantees and loan commitments, as subsequently measured at
amortised cost. Financial liabilities measured at amortised cost principally comprise ‘Amounts owed to institutions and banks’ , ‘Amounts
owed to customers’, ‘Debt securities in issue’, together with ‘Creditors and accruals’ classified within ‘Other liabilities’.
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 consideration received is accounted for as a deposit, and the underly ing asset
continues to be recognised in the Group’s financial statements.
These financial 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 elect to carry any non-derivative liabilities at fair value
through profit or loss.
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When the Group designates a financial liability as at fair value through profit or loss, the change in the fair value of the liability
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 change in fair value of the liability 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.
3.9.3 Derecognition
3.9.3.1 Financial assets
The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire (see also
Accounting Policy 3.9.4), 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 consideration received (including any new asset obtained less any new liability assumed) is
recognised in profit or loss.
Any cumulative gain/loss recognised in OCI in respect of equity investment securities designated at FVOCI is not recognised in profit or
loss on derecognition of such securities. 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.
If 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, 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.
3.9.3.2 Financial liabilities
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.
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3.9.4 Modifications of financial assets and financial liabilities
3.9.4.1 Financial assets
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 3.9.3) and a new financial asset
is recognised at fair value plus any eligible transaction costs.
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 5.2.1.8 for write-off policy).
If the modification of a financial asset measured at amortised cost or FVOCI does not result in the 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 3.9.5), then the gain or loss is
presented together with impairment losses. In other cases, differences in the carrying amount are recognised in profit or loss as a gain
or loss on derecognition.
3.9.4.2 Financial liabilities
The Group derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially
different. The terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees
paid net of any fees received and discounted using the original effective interest rate, is at least 10% different from the discounted
present value of the remaining cash flows of the original financial liability. In addition, other qualitative factors, such as the currency that
the instrument is denominated in, changes in the type of interest rate, new conversion features attached to the instrument, and change
in covenants, are also taken into consideration.
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 n on-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 deemed to be substantial and therefore does not result in the derecognition of the liability,
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 recomputing the effective interest rate on the instrument.
Interest rate benchmark reform
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.
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3.9.5 Identification and measurement of impairment
The Group recognises loss allowances for expected credit losses (“ECLs”) in respect of the following financial instruments that are not
measured at fair value through profit or loss:
• financial assets that are debt instruments, principally comprising Balances with Central Bank of Malta, Treasury bills, loans and
advances to banks and customers, and financial investments measured at amortised cost or FVOCI;
• financial guarantee contracts; and
• loan commitments.
The Group recognises loss allowances in respect of the above portfolios of financial assets at each reporting date. No loss allowances
are recognised in respect of equity investments.
The Group measures loss allowances at an amount equal to lifetime ECL, except for the following, for which loss allowances are measured
as 12-month ECL:
• financial instruments 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 5.2.1.2).
The Group considers a financial instrument to have low credit risk when it is assigned a credit risk rating that is equivalent to the globally
understood definition of ‘investment grade’ by an external credit rating agency. Balances held with credit institutions in reputable
jurisdictions classified within ‘Loans and advances to banks’ and debt securities classified within ‘Financial investments measured at
amortised cost’ and ‘Financial investments measured at fair value through other comprehensive income’ are considered to have low
credit risk when the financial instrument is assigned an ‘investment-grade’ credit risk rating. The Group does not apply the low credit
risk exemption to any other financial instrument.
12-month ECL are the portion of lifetime ECL that result from default events on a financial instrument that are possible within 12 months
from the reporting date. Financial instruments for which a 12-month ECL is recognised are referred to as ‘Stage 1 financial instruments’.
Financial instruments allocated to Stage 1 have not undergone significant increase in credit risk since initial recognition and are not
credit-impaired.
Life-time ECL represent 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’.
3.9.5.1 Measurement of ECL
The measurement of ECL reflects:
• an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
• the time value of money; and
• reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current
conditions and forecasts of future economic conditions.
Loss allowances reflect a probability-weighted estimate of expected credit losses and 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 Group 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.
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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 measuring 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.
Note 5 provides more detail in respect of the methodology applied by the Group for the measurement of loss allowances.
3.9.5.2 Purchased or originated credit-impaired financial assets
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. 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.
3.9.5.3 Restructured financial assets
The Bank renegotiates loans and advances to customers in financial difficulties (referred to as “forbearance activities”) to maximise
collection opportunities and minimise the risk of default. 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 in respect of whether
the financial asset should be derecognised (see Accounting Policy 3.9.3) and the ECL is measured as follows:
• if the expected restructuring will not result in the derecognition of the existing asset, the expected cash flows arising from the
modified financial asset are included in the ECL calculation to estimate shortfalls from the existing asset. In this respect, the loss
allowance in respect of such exposures is estimated by reference to the expected cash flows arising from the modified financial asset.
(see Note 5.2.1.3); and
• if the expected restructuring will result in derecognition of the existing asset, the restructured asset is considered a ‘new’ financial
asset. Any new financial assets that arise following derecognition events as a result of substantial modification to the terms of the
instrument are classified as Stage 1 assets, unless the new financial asset is credit-impaired on initial recognition, in which case it will
be classified as a POCI financial asset. A loss is booked in profit or loss (normally as a write-off) since the new instrument is recognised
at fair value.
3.9.5.4 Credit-impaired financial assets
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 cas h 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.
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3.9.5.5 Financial guarantee contracts held
The Group assesses whether a financial guarantee contract held is an integral element of a financial asset that is accounted for as a
component of that instrument or is a contract that is accounted for separately. The factors that the Group considers when making this
assessment include whether:
• the guarantee is implicitly part of the contractual terms of the debt instrument;
• the guarantee is required by laws and regulations that govern the contract of the debt instrument;
• the guarantee is entered into at the same time as and in contemplation of the debt instruments; and
• the guarantee is given by the parent of the borrower or another company within the borrower’s group.
If the Group determines that the guarantee is an integral element of the financial asset, then any premium payable in connection with
the initial recognition of the financial asset is treated as a transaction cost of acquiring it. The Group considers the effect of the protection
when measuring the fair value of the debt instrument and when measuring ECL.
If the Group determines that the guarantee is not an integral element of the debt instrument, then it recognises an asset representing
any prepayment of guarantee premium and a right to compensation for credit losses. A prepaid premium asset is recognised only if the
guaranteed exposure is neither credit-impaired nor has undergone a significant increase in credit risk when the guarantee is acquired.
These assets are recognised under ‘Other assets’. The Group presents gains or losses on a compensation right in profit or loss in the line
item ‘Impairment losses on financial instruments’.
3.9.5.6 Presentation of allowance for ECL in the statement of financial position
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 the fair value reserve.
3.9.5.7 Write-off
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 movement in expected credit losses and other credit impairment
charges’ in the Statement of Profit or Loss. 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.
3.9.6 Offsetting
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.
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3.9.7 Fair value measurement
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 marke t
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 for which any unobservable inputs are judged to be insignificant in relation to the difference, 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 financial liability with a demand feature (e.g. 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 5.
3.10 Cash and cash equivalents
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.
3.11 Investments in subsidiaries, associates and jointly controlled entities
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 3.16).
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3.12 Property and equipment
3.12.1 Recognition and measurement
Items of property and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses.
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.
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 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.
When the use of a property changes such that it is reclassified as property and equipment, its fair value at the date of reclassification
becomes its cost for subsequent accounting.
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.
3.12.2 Subsequent costs
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.
3.12.3 Depreciation
Depreciation is recognised in profit or loss on a straight-line basis, allocating the cost / revalued amounts less estimated residual values
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:
• buildings 50 years
• Improvement to premises 14 years
• computer system 7 years
• computer equipment 4 years
• others 5 – 7 years
Depreciation methods, useful lives and residual values are reassessed at each financial year-end and adjusted if appropriate.
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3.12.4 Reclassification to investment property
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.
3.12.5 Derecognition
Property and equipment are derecognised upon disposal or when no future economic benefits are expected from its use. Any gain or
loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of
the asset) is included in profit or loss in the year during which the asset is derecognised.
3.13 Leases
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.
3.13.1 Group acting as a lessee
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 Grou p’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.
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3.13.1.1 Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term leases,
including leases of IT equipment. The Group recognises the lease payments associated with these leases as an expense on a straight-line
basis over the lease term.
3.13.2 Group acting as a lessor
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.
The Group applies the derecognition and impairment requirements in IFRS 9 to the net investment in the lease (see Accounting Policies
3.9.3 and 3.8.5). The Group further regularly views estimated unguaranteed residual values used in calculating the gross investment in
the lease.
3.14 Investment property
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 and equipment is sold, any related amount included in the revaluation
reserve (see Accounting Policy 3.12.4) 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.
3.15 Intangible assets and goodwill
3.15.1 Recognition and measurement
3.15.1.1 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.
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3.15.1.2 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 t o
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.
3.15.1.3 Other intangible assets
Other intangible assets, including customer relationships, that are acquired by the Group and have finite useful lives are measured at
cost less accumulated amortisation and any accumulated impairment losses.
3.15.2 Subsequent expenditure
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.
3.15.3 Amortisation
The cost of intangible assets less their estimated residual values is amortised 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 lives 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.
3.16 Impairment of non-financial assets
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.
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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.
3.17 Provisions
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.
3.18 Financial guarantees and loan commitments
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 at a below market interest rate 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 3.9.3 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.
3.19 Employee benefits
3.19.1 Defined contribution plans
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.
3.19.2 Share-based payment transactions
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 base d
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.
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3.20 Share capital
3.20.1 Ordinary shares
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.
3.20.2 Repurchase of share capital
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.
3.21 Earnings per share
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 31 December 2023 and 2022, basic and diluted earnings per share were equal.
3.22 Segment reporting
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incu r
expenses, including revenues and expenses that relate to transactions with any of the Group’s other components, whose operati ng
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.
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4 Comparative information
During the financial year ended 31 December 2022, the Group and Bank reclassified a portfolio of debt instruments which were
previously measured at fair value through other comprehensive income to a hold-to-collect business model, resulting in amounts being
reclassified and remeasured in accordance with IFRS 9 requirements in respect of financial instruments measured at amortised cost.
During the financial year ended 31 December 2023, Management decided to reverse the effect of the reclassification of this portfolio,
as explained in further detail in Note 25.2 of these Financial Statements.
In this respect, the comparatives for ‘Financial investments at fair value through other comprehensive income’ and ‘Financial
investments at amortised cost’ have been restated to reverse the effects of the reclassification of this portfolio. The impact of this
restatement is presented within Note 25.2 of these Financial Statements.
In addition to the above, the following amounts were also restated in the comparative information:
a. Loans and advances to customers - Factoring Receivables: For Factoring receivables which were originated on a non-recourse
basis, the Group previously recognised i) a receivable from the end debtor and ii) a receivable from and corresponding payable to
the client. Following a re-assessment of the accounting treatment by Management, it was determined that the Group should only
be recognising one receivable from the end debtor, to reflect the fact that the Group’s exposure to credit risk is solely to the end
debtor. In this respect, the receivable from and corresponding payable to the client have been reversed in the statement of
financial position as at 31 December 2022 and 1 January 2022.
b. Classification of fee and commission income / expense: During the financial year ended 31 December 2023, Management re-
assessed its financial reporting practices in relation to the presentation of certain interest income and expense in accordance with
the requirements emanating from IFRS 9 as well as the presentation of fee and commission income and expense in accordance
with the requirements emanating from IFRS 15. In this respect, certain elements of fee and commission income and expense which
were previously presented as part of the Group’s ‘Net fee and commission (expense) / income’ in the statement of p rofit or loss
were reclassified to ‘Net interest income’ given that it was determined that these should be reflected as an integral part of the
effective interest rate in accordance with IFRS 9. In this respect, these amounts have been reclassified to ‘Net interest income’ in
the statement of profit or loss for the financial year ended 31 December 2022.
c. Classification of balances with Central Bank of Malta: At 31 December 2022, money market placements with the Central Bank of
Malta were presented within ‘Loans and advances to banks’. Given the nature of these balances, these amounts were reclassified
to ‘Balances with the Central Bank of Malta’. At 1 January 2022 the Group had no money market placements with the Central Bank
of Malta.
d. Classification of cash balances pledged in favour of the Depositor Compensation Scheme and the Single Resolution Fund: At 31
December 2022 and 1 January 2022, these amounts were presented within ‘Loans and advances to customers’. Given the nature
of these balances, these amounts were reclassified to ‘Other assets’. In addition, following a re-assessment by Management in
respect of the possibility that such amounts become payable in the future, a contingent liability is also being reflected as described
in further detail in Note 41 of these Financial Statements.
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The impact of the restatements to the comparative information on the statement of financial position as well as the statement of profit
or loss is presented hereunder:
Group – 31 December 2022

|  | 31 December |  |  |
|  | 2022 |  |  | 31 December
|  | as previously | Impact of | Impact of | 2022
|  | reported | reclassification | remeasurement | as restated
Statements of financial position | Note | USD | USD | USD | USD
Assets |  |  |  |  |
Balances with the Central Bank of Malta, treasury bills and cash | 19 | 211,898,623 | 4,968,702 | - | 216,867,325
Loans and advances to banks | 22 | 154,682,628 | (4,968,702) | - | 149,713,926
Loans and advances to customers | 23 | 592,785,152 | (2,538,650) | (105,718,445) | 484,528,057
Other assets | 33 | 5,372,830 | 2,538,650 | - | 7,911,490
Liabilities |  |  |  |  |
Amounts owed to customers | 35 | 981,906,210 | - | (105,718,445) | 876,187,765
Memorandum items |  |  |  |  |
Contingent liabilities | 41 | 12,134,442 | 2,538,650 | - | 14,673,092
Statements of profit or loss for the financial |  |  |  |  |
year ended 31 December 2022 |  |  |  |  |
Interest income | 9 | 48,000,111 | 13,433,551 | - | 61,433,662
Fee and commission income | 10 | 18,019,213 | (14,019,155) | - | 4,000,058
Fee and commission expense | 10 | (6,590,340) | 585,604 | - | (6,004,736)

Group – 1 January 2022 |  |  |  |  |
|  | 1 January |  |  |
|  | 2022 |  |  | 1 January
|  | as previously | Impact of | Impact of | 2022
|  | reported | reclassification | remeasurement | as restated
Statements of financial position | Note | USD | USD | USD | USD
Assets |  |  |  |  |
Balances with the Central Bank of Malta, treasury bills and cash | 19 | 239,998,839 | - | - | 239,998,839
Loans and advances to banks | 22 | 198,488,576 | - | - | 198,488,576
Loans and advances to customers | 23 | 628,912,340 | (5,071,521) | (111,921,417) | 511,919,402
Other assets | 33 | 4,244,384 | 5,071,521 | - | 9,315,905
Liabilities |  |  |  |  |
Amounts owed to customers | 35 | 934,096,196 | - | (111,921,417) | 822,174,779
Memorandum items |  |  |  |  |
Contingent liabilities | 41 | 1,950,534 | 5,071,521 | - | 7,022,055

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Bank – 31 December 2022

|  | 31 December |  |  |
|  | 2022 |  |  | 31 December
|  | as previously | Impact of | Impact of | 2022
|  | reported | reclassification | remeasurement | as restated
Statements of financial position | Note | USD | USD | USD | USD
Assets |  |  |  |  |
Balances with the Central Bank of Malta, treasury bills and cash | 19 | 211,883,765 | 4,968,702 | - | 216,852,467
Loans and advances to banks | 22 | 130,851,134 | (4,968,702) | - | 125,882,432
Loans and advances to customers | 23 | 729,767,493 | (2,538,650) | (8,318,416) | 718,910,427
Other assets | 33 | 4,291,634 | 2,538,650 | - | 6,830,284
Liabilities |  |  |  |  |
Amounts owed to customers | 35 | 877,538,831 | - | (8,318,416) | 869,220,415
Memorandum items |  |  |  |  |
Contingent liabilities | 41 | 36,131,883 | 2,538,650 | - | 38,670,533
Statements of profit or loss for the financial |  |  |  |  |
year ended 31 December 2022 |  |  |  |  |
Interest income | 9 | 27,401,735 | 2,846,900 | - | 30,248,635
Fee and commission income | 10 | 6,177,499 | (3,432,505) | - | 2,744,994
Fee and commission expense | 10 | (2,510,399) | 585,605 | - | (1,924,794)

Bank – 1 January 2022

|  | 1 January |  |  |
|  | 2022 |  |  | 1 January
|  | as previously | Impact of | Impact of | 2022
|  | reported | reclassification | remeasurement | as restated
Statements of financial position | Note | USD | USD | USD | USD
Assets |  |  |  |  |
Balances with the Central Bank of Malta, treasury bills and cash | 19 | 239,982,048 | - | - | 239,982,048
Loans and advances to banks | 22 | 182,458,548 | - | - | 182,458,548
Loans and advances to customers | 23 | 745,564,139 | (5,071,521) | (15,724,760) | 724,767,858
Other assets | 33 | 3,848,321 | 5,071,521 | - | 8,919,842
Liabilities |  |  |  |  |
Amounts owed to customers | 35 | 838,675,598 | - | (15,724,760) | 822,950,838
Memorandum items |  |  |  |  |
Contingent liabilities | 41 | 39,327,362 | 5,071,521 | - | 44,398,883

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5 Financial risk review
5.1 Introduction and overview
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 traded debt instruments; and
• price risk;
d. operational risk (including IT and Legal risk); and
e. compliance and financial crime risk (including conduct and reputational risk).
5.1.1 Risk management framework
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. The Group is engaged in trade finance business, therefo re control over contingent
liabilities and commitments is fundamental since the risks involved are substantively the same as with on-balance sheet items.
The Group adopts the three lines of defence model as outlined in the below diagram.
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 task 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
Risk Management Department (“RMD”) is responsible for the implementation of the risk strategy approved by the Board as part of the
overall vision and strategy for the Group.
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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.
5.2 Credit risk
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.
5.2.1 Default Risk
Default risk is the possibility that a borrower, whether corporate or personal or other, is unable to repay credit obligations to the Group
when due.
Strict credit assessment and control procedures are in place in order to monitor such exposures. Overall responsibility for credit risk is
entrusted to the Board Credit Committee (“BCC”) which is responsible for overseeing adherence to the Group’s Credit Policy an d for
approving individual limits for banks and corporates. The BCC has also delegated limited credit approval authorities 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 consideration 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. Additionally, through country limits, the Group manages its exposure to any one economy.
The Group also monitors its risk on balances held with other banks and establishes limits for them. The risks associated with off-balance
sheet exposures arise from the normal course of banking operations. In the case of risks associated with off-balance sheet assets, the
Group exercises the same credit controls as those applied to on-balance sheet exposures and limits are established accordingly.
Credit risk is one of the main risks which needs to be managed and controlled by the RMD throughout the course of implementing the
strategy set by the Board. The RMD is responsible for ensuring that credit proposals give a true and fair view of the risks involved as well
as to control and monitor the execution of transactions in accordance with the terms of approval.
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In this respect, the RMD’s credit risk management responsibilities comprise the following:
• analysing credit risk and ensuring that it is maintained within parameters in line with the Group’s strategy;
• recommending portfolio risk limits for Management and BRC approval;
• monitoring risk positions against approved risk limits;
• understanding changes in credit trends, concentrations and portfolio risk profile;
• ensuring that all existing and new products offered by the Group which involve the booking of credit risk are appropriately assessed
by the unit which promotes the product and have passed through the Product Variation and New Product Approval process where
necessary;
• making recommendations to the relevant approval body for the establishment and renewal of country and obligor limits. To facilitate
this process, sufficient information must be submitted, including a rationale for the request and an appropriate analysis of the risks
and their mitigants, if any;
• monitoring the quality of the Group’s portfolio of assets and making recommendations regarding their credit grading;
• ensuring that all credit facility requests are assessed in a fair and independent manner;
• ensuring that appropriate policies and guidelines in relation to the monitoring and management of credit risk are established;
• disseminating the credit risk culture across the Group and ensuring that the highest standards are maintained;
• deploying tools and techniques to manage credit risk and measuring asset risk in relation to return; and
• providing timely and accurate credit information and analysis to key constituencies including Senior Management, Board members,
regulators, auditors, rating agencies and other external parties.
5.2.1.1 Maximum exposure to credit risk
The Group’s and Bank’s maximum credit risk exposure to on and off-balance sheet financial instruments, before taking account of any
collateral held or other credit enhancements, is presented in the following table. For financial assets recognised in the statement of
financial position, the maximum exposure to credit risk is equivalent to the carrying amount. For commitments and financial guarantees,
the maximum exposure to credit risk is equivalent to the full amount of the committed facilities.

|  | Group |  |  | Bank
|  | 2023 | 2022 | 2023 | 2022
|  |  | Restated |  | Restated
|  | USD | USD | USD | USD
Balances with the Central Bank of Malta, treasury bills and cash |  | 353,010,186 | 216,867,325 | 352,997,057 | 216,852,467
Loans and advances to banks |  | 152,814,948 | 149,713,926 | 114,325,243 | 125,882,432
Loans and advances to customers |  | 431,342,074 | 484,528,057 | 618,118,225 | 718,910,427
Financial investments at fair value through other comprehensive income |  | 140,755,780 | 143,189,022 | 140,755,780 | 143,189,022
Financial investments at amortised cost |  | 28,399,073 | 14,602,008 | 28,399,073 | 14,602,008
Other assets |  | 5,007,323 | 4,097,953 | 4,457,961 | 3,799,997
Off-balance sheet: |  |  |  |  |
- | Guarantees | 28,025,274 | 12,134,442 | 39,074,998 | 36,131,883
- | Commitments | 147,803,707 | 100,001,463 | 100,220,087 | 91,414,423
|  | 1,287,158,365 | 1,125,134,196 | 1,398,348,424 | 1,350,782,659

The following table contains an analysis of the maximum credit risk exposure from financial assets subject to credit risk but not subject
to impairment (i.e. financial assets measured at fair value through profit or loss).

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
| USD | USD | USD | USD
Derivative assets held for risk management | 715,713 | 1,610,475 | 812,609 | 1,610,475
Trading assets | 374,177,108 | 444,583,661 | - | -
Financial investments at fair value through profit or loss | 19,329,840 | 18,179,220 | 19,329,840 | 18,179,220
| 394,222,661 | 464,373,356 | 20,142,449 | 19,789,695

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5.2.1.2 Credit risk measurement
Measurement of credit risk considers that an exposure varies with changes in market conditions, expected cash flows and the passage
of time. The Bank’s models measure expected credit losses using probability of default (“PD”), exposure at default (“EAD”) and loss given
default (“LGD”) parameters.
Credit risk grades
The Group allocates each exposure to internal credit risk grades based on a variety of data that is determined to be predictive of the risk
of default and applying expert credit judgement. Credit risk grades are defined using qualitative and quantitative factors that are
indicative of default risk. These factors vary depending on the nature of the exposure and the type of borrower.
The Group manages the credit quality of its financial assets by using internal credit risk grades, which provide a progressively increasing
risk profile ranging from ‘1’ (best quality, less risky) to ‘10’ (non-performing). These internal credit risk grades are essential for the
assessment and measurement of credit risk in respect of exposures classified within the Group’s portfolios of financial asset s.
Credit risk grades are defined and calibrated such that the risk of default occurring increases exponentially as the credit risk deteriorates.
For example, the difference in default risk between credit risk grades 1 and 2 is smaller than the difference between credit risk grades 2
and 3.
The table below provides an indicative mapping of how the Group’s internal credit risk grades relate to conditional PD s and to external
credit rating scale applied by 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 | 1.90% | Ba1-Ba3
Grades 6+ to 7 high risk | 4.81% | B1-Caa2
Grades 7- to 8- substandard | 15.46% | Caa3-Ca
Grades 9 to 10 doubtful/loss | 100.00% | C

All on- and off- balance sheet exposures are approved after a review of the counterparty’s creditworthiness. Whilst any external rating
of the counterparty by established external credit rating agencies is taken into account, an internal credit risk grade is assigned to all
obligors.
Focusing specifically on loans and advances to customers, the Group has four lending portfolios:
• the Local Corporate Lending portfolio, predominantly comprising loans to the real estate activities sector in Malta;
• the Factoring Receivables portfolio, comprising portfolios of factored receivables (both on a non-recourse and recourse basis) in
Europe, India and the Middle East;
• the Trade Finance portfolio, comprising import and export finance facilities in Europe; and
• a portfolio of other facilities comprising syndicated senior secured facilities to international corporates and shipping finance facilities.
The Group uses Moody’s CreditLens to assign internal credit risk grades to exposures classified within the Local Corporate Lending and
Trade Finance portfolios using both quantitative and qualitative borrower-specific inputs. Specifically, for exposures classified within the
Local Corporate Lending portfolio, the internal credit risk grade is determined by reference to inputs related to the project being
financed, such as the property type, property valuation upon completion, project costs, and project complexity, whereas the internal
credit risk grade for exposures classified within the Trade Finance portfolio is determined by reference to quantitative (financial
statement) inputs and other qualitative inputs, such as the entity’s competitive position in the market and customer concentration level.
In both cases, the borrower and exposure specific inputs are benchmarked against an underlying dataset within Moody’s CreditL ens
model in order to assess the relative level of credit risk of the obligor.
Similarly, internal credit risk grades for exposures classified within the Factoring Receivables portfolio are determined using internally
developed scorecards by reference to quantitative (e.g. sales growth and net worth of the entity) and qualitative (e.g. industry and
market conditions) inputs. Finally, internal credit risk grades for syndicated facilities are also determined by reference to Moody’s
CreditLens whereas internal credit risk grades for shipping finance loans are determined by relationship managers on the basis of a
qualitative assessment.
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Each exposure is allocated to an internal credit risk grade on initial recognition, and is then subject to ongoing monitoring, which may
result in an exposure being moved to a different internal 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.
For exposures classified within Balances with Central Bank of Malta, financial investments measured at fair value through other
comprehensive income, financial investments measured at amortised cost and loans and advances to banks, an internal credit risk grade
is assigned on the basis of external credit ratings. In the event that an exposure is not rated, internal credit risk grades are assigned by
reference to the Moody’s CreditLens scorecard applied for the Local Corporate Lending portfolio and sovereign external credit ratings,
where relevant.
The three-stage model for staging
IFRS 9 outlines a ‘three-stage’ model for impairment based on changes in credit quality since initial recognition. The key driver of the
measurement of ECLs relates to the level of credit risk for each exposure and, as a result, an assessment of the change in credit risk over
the expected life of an asset is a core element in determining the staging criteria under IFRS 9. The three stages under IFRS 9 are as
follows:
• Stage 1 - Financial instruments that have not had a significant increase in credit risk (“SICR”) since initial recognition, or that have
“low credit risk” at the reporting date are cla ssified in Stage 1. 12-month ECLs are recorded to measure the expected losses that
result from default events that are possible within 12 months after the reporting date;
• Stage 2 - Financial instruments that have experienced a SICR since initial recognition are classified in Stage 2. Lifetime ECLs are
recorded to measure the expected losses that result from all possible default events over the expected life of the financial instrument;
and
• Stage 3 - Financial instruments that demonstrate objective evidence of impairment, and which are considered to be in default or
credit-impaired, are classified in Stage 3, also requiring the measurement of lifetime ECLs.
Purchased or originated credit-impaired (“POCI”) financial assets are those financial assets that are credit-impaired on initial recognition.
The ECL in respect of such exposures is always measured on a lifetime basis.
The following diagram summarises the impairment requirements under IFRS 9:
The key judgements and assumptions adopted by the Group in addressing the requirements of the standard are outlined below.
Significant increase in credit risk
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 historical experience, expert credit judgement and forward-looking
information.
The Group assesses whether credit risk has increased significantly since initial recognition at each reporting date by considering the
change in the risk of default occurring over the remaining life of the financial instrument. The assessment explicitly or implicitly compares
the risk of default occurring at the reporting date compared with that at initial recognition, taking into account information about past
events, current conditions and future economic conditions.
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The Group uses two principal criteria for determining whether there has been a significant increase in credit risk since initial recognition:
• a quantitative test based on changes in internal credit risk grades and, by extension, changes in conditional forward-looking point-in-
time (“PiT”) PDs of obligors; and
• qualitative indicators, primarily based on delinquency using a backstop of 30 days past due.
It is possible for multiple exposures to the same obligor to be classified under different stages. This may occur when the Group holds
exposures originated at differing points in time thereby potentially giving rise to differing default risk at initial recognition, causing a
variation in the relative increase in credit risk since origination between the different instruments.
Determining whether an increase in credit risk is significant depends on the characteristics of the financial instrument and the borrower,
as well as the geographical region in which the borrower operates.
For the purposes of the quantitative SICR assessment, the Group has adopted a ratings-based approach (i.e. based on notch
deterioration). Due to the lack of internal history of defaults, the Group uses a credit risk modelling solution developed by Moody’s in
case of the Local Corporate Lending, Trade Finance and syndicated lending exposures and an internally developed scorecard in case of
Factoring Receivables exposures in order to assign internal credit risk grades to obligors and facilities at the date of the credit risk
assessment. As explained previously, these internal credit risk grades are derived by: (i) benchmarking the obligor’s financial information
(in case of Trade Finance, Factoring Receivables and syndicated lending exposures) or project specific information (in case of Local
Corporate Lending exposures) with those of the underlying model dataset; and (ii) applying a qualitative scorecard to adjust the credit
score to better reflect obligor-specific peculiarities. Adjustments are also made to capture country- and industry-specific credit risk
characteristics impacting the credit risk of a particular obligor.
Borrower-specific credit scores are then mapped to an unconditional PiT PD. A forward-looking, probability weighted PiT PD estimated
by the model is determined through the application of multiple forward-looking macroeconomic scenarios and then mapped to an
implied default rating, which adopts Moody’s public ratings agency scale terminology from C up to Aaa. When performin g the SICR
assessment, the Group compares the implied rating at origination to the implied rating at the reporting date and determines t he
difference in notches between them. The Group’s staging criteria is therefore deemed to be based on a ratings/notch d eterioration
approach.
The quantitative SICR staging decision uses a relative threshold approach, which involves calculating the magnitude of the difference
between the reporting date rating and the origination date rating based on the deterioration in the number of notches between the two
ratings. 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-notch deterioration from the rating at origination.
Although the Group has adopted a ratings-based approach (i.e. based on notch deterioration) for its SICR assessment, each implied
rating is represented by an underlying PD. In this respect, the objective of the assessment is to identify whether a significant increase in
credit risk has occurred for an exposure by comparing the implied rating as at the reporting date with the implied rating at initial
recognition.
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
expert judgment and relevant historical experiences and exposures which are categorised on the watch list are downgraded to Stage 2.
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 a scheduled
payment has not been received. Due dates are determined without considering any grace period that might be available to the borrower.
The Group applies a further backstop when the rating of the obligor reaches a level that is equivalent to a facility in arrea rs. A significant
increase in credit risk occurs where the obligor is internally graded below 7-.
If there is evidence that there is no longer a significant increase in credit risk relative to initial recognition, the loss allowance on an
instrument, returns to being measured as 12-month ECL. Where the SICR was initially determined using the Group’s quantitative criteria
(i.e., deterioration in rating), the exposure is deemed to have cured only if there is evidence of an improvement in the implied default
rating (instrument should evidence an implied default rating which is at worst one notch lower than the original inception rating
(reflecting worse credit quality compared to the date of initial recognition but better credit quality compared to the two-notch
downgrade required to migrate an exposure into Stage 2) in order to trigger a reclassification from Stage 2 to Stage 1).
FIMBank Group Annual Report & Financial Statements 2023
83
Some qualitative SICR indicators, 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 the case of delinquency, any instrument that is no longer 30-days past due can only be
reclassified to Stage 1 when: (i) all contractual arrears have been remediated (Nil days past due); and (ii) no further non-payment has
been observed for a minimum of 90 days. In the case of forbearance, the Group determines a probation period of one year during which
an instrument classified in Stage 2 is required to demonstrate good behaviour to provide evidence that its credit risk has declined
sufficiently. In this respect, a Stage 2 exposure can only cure and be upgraded to Stage 1 if at least one year has passed since downgrade
to Stage 2 and if the borrower has demonstrated satisfactory performance throughout that period. 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 a low credit risk expedient for staging purposes. 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. The Group considers “low credit risk” to exist in case of selected financial instruments (for example listed
bonds and counterparties to which an external credit rating has been assigned by an external credit rating agency) with an investment
grade credit rating (BBB and better) assigned by at least one major external credit rating agency. Should the external credit rating of a
financial instrument fall below the investment grade threshold, the instrument is deemed to have suffered a SICR, at which point the
instrument will be re-classified as a Stage 2 exposure, moving from a 12-month to a lifetime ECL calculation.
Definition of default
In order to assess whether there has been an increase in credit risk of a financial instrument since initial recognition, changes in default
risk are considered over the remaining life of the financial instrument. The definition of default is therefore critical to the application of
IFRS 9 requirements. However, IFRS 9 does not specifically define default, but requires the Group to apply a definition that is consistent
with the definition used for internal credit risk management purposes.
The Group applies the definition of default in a consistent manner with internal credit risk management practice, which definition
considers both qualitative and quantitative factors. In this respect, 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 has 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 the following indicators:
• qualitative: factors which are taken into consideration include delinquency, breaches of covenant, forbearance measures and non-
payment on another obligation of the same issuer to the Group;
• quantitative: this is based on the ratings-based approach described earlier, with exposures having an implied rating of Ca or below
being treated as defaulted.
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 Capital Requirements Regulation 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 realisation of collateral. This definition is used for the purpose of measuring ECL and identifying assets as being
credit-impaired. Therefore, the definitions of credit-impaired and default are aligned so that Stage 3 exposures comprise loans that are
considered defaulted or otherwise credit-impaired.
Exposures which are classified as defaulted / credit-impaired are those that have been assigned an internal credit risk grade of 9 or 10.
Defaulted exposures may comprise forborne loans and advances to customers that have been subject to a change in contractual cash
flows as a result of a concession which the Group would not otherwise consider, and where it is probable that without the concession
the borrower would be unable to meet the contractual payment obligations in full, unless the concession is insignificant and there are
no other indicators of impairment. Forborne loans that are classified as credit-impaired will continue to be classified as such until there
is sufficient evidence to demonstrate a significant reduction in the risk of non-payment.
FIMBank Group Annual Report & Financial Statements 2023
84
An instrument not comprising of forborne loans and advances is considered to have cured from defaulted status when it no longer meets
any of the default criteria for a period of 12 consecutive months. When forbearance measures are extended to a defaulted instrument,
such instrument is considered to have cured from defaulted status when it no longer meets any of the default criteria for a period of 12
consecutive months, and thereafter becoming a ‘performing forborne’ exposure. Performing forborne exposures are cured to
performing status after 24 consecutive months of no events indicating financial distress.
5.2.1.3 Measurement of ECL
ECLs are measured on a 12-month or a lifetime basis depending on whether a SICR has occurred since initial recognition or whether an
asset is considered to be credit-impaired. Specifically, ECLs are the discounted product of the following variables:
• The probability of default (“PD”), which represents the likelihood of a borrower defaulting on its financial obligation (as per the
‘definition of default’ above), either over the next 12 months (“12-month PD”) or over the remaining lifetime (“lifetime PD”) of the
obligation;
• The loss given default (“LGD”), which represents the Group’s expectation of the extent of the loss on a defaulted exposure. LGD is
expressed as a percentage loss per unit of exposure at the time of default (“EAD”). The estimation of LGD considers the structure and
seniority of the claim, together with the nature and recoverability / enforceability of collateral and associated recovery costs; and
• exposure at default (“EAD”), which represents the expected exposure in the event of a default.
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.
In measuring ECLs, the Group adopts a credit risk modelling solution developed by Moody’s Analytics. When calculating the Group’s ECL,
special considerations are made to assess the impact of the current and forecasted economic conditions, as explained in further detail
in note 5.2.1.7. The ECL is determined by projecting the PD, EAD and LGD for each future month and for each individual exposure. These
three components are multiplied together and adjusted for the likelihood of survival (i.e. the exposure has not prepaid or defaulted in
an earlier month). This effectively calculates an ECL for each future period, which is then discounted back to the reporting date and
summed. The discount rate used in the ECL calculation is the original effective interest rate or an approximation thereof.
Probability of default
The term structure of PDs follows a two-staged approach. In the first instance, borrower-specific internal credit risk grades (derived
using the methodology described in note 5.2.1.2) are mapped to Moody’s official credit rating-scale table. Following this, the resultant
credit rating is converted into a PiT PD term structure using Moody’s ‘Rating to PiT PD’ converter, calibrated by reference to historical
default data observed in the market. 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
implied rating, as well as country and industry information.
“Unconditional” PiT PDs refer to the PD term structure based on historical information and prior to the application of forwar d-looking
macroeconomic scenarios. Multiple forward-looking macroeconomic scenarios are applied to the unconditional PiT PD term structure
to estimate a forward-looking probability-weighted “conditional” PiT PD at an obligor level.
PDs are determined upon origination date and at each subsequent reporting date at an obligor level rather than at a facility level.
Therefore, at any given date, multiple facilities attributable to the same obligor are assigned the same PD, reflecting the borrower’s
financial condition as at the date of the assessment. In this regard, different facilities with the same obligor originated at the same time
are expected to have an identical PD both at origination date as well as subsequent reporting dates. However, facilities with the same
obligor originated at different time intervals can have different PDs upon origination, reflecting the borrower’s financial condition and
credit risk at each respective origination date, whereas identical PDs are determined at each subsequent reporting date in respect of all
such facilities.
Loss given default
As described above, the LGD represents the magnitude of the likely loss in the event of a default event. It is based on the difference
between the contractual cash flows due and the cash flows that the Group expects to receive, whether from cash flows or from any
collateral. It takes into account the mitigating effect of collateral value at the time it is expected to be realised and the time value of
money. LGD for ECL measurement includes the expected impact of future economic conditions and discounting back from estimated
time of default to reporting date using the original EIR.
The Group applies unsecured LGD rates derived from statistical models developed by Moody’s by benchmarking exposure-specific
characteristics with the underlying dataset. The LGD model considers a series of variables including the debt structure, the country and
industry in which the borrower operates, seniority of the claim, and the borrower-specific PD.
FIMBank Group Annual Report & Financial Statements 2023
85
For exposures classified within the Local Corporate Lending portfolio, which are primarily secured by residential and / or commercial
real estate, the secured LGD is derived through the application of adjustments to the unsecured LGD to reflect the collateral value after
taking into consideration pre-determined haircuts.
For certain exposures classified within the Factoring Receivables portfolio, the Group purchases credit insurance cover or correspondent
factor import cover from foreign third-party underwriters, which provide insurance cover in respect of losses up to a pre-determined
percentage of each eligible receivable. Exposures classified within the Trade Finance portfolio are principally collateralised by bank
guarantees. In this respect, the secured LGD is derived through the application of adjustments to the unsecured LGD to reflect the
collateral value.
Syndicated loan exposures are typically unsecured, although there might be instances where specific collateral is requested by the
syndicate, such as charges over immovable property. Similarly, shipping finance loans are typically secured by the vessel being financed
as well as related vessel insurance cover. In such cases, the secured LGD is derived through the application of adjustments to the
unsecured LGD to reflect the collateral value after taking into consideration pre-determined haircuts.
In addition, exposures across all portfolios are in some instances also collateralised by cash pledges. In this respect, adjustments to the
unsecured LGD are also applied to reflect these credit risk mitigation techniques.
The same macroeconomic modelling elements used to derive PiT PDs are then used to determine conditional PiT LGDs. In this regard,
macroeconomic conditioning is applied to the LGD term structure through a modelled correlation between PD and LGD term structures.
Exposure at default
The EAD represents the expected exposure in the event of a default. The Group derives the EAD by reference to the current exposure
to the counterparty and estimates of potential further drawdowns in case of off-balance sheet commitments. The EAD of on-balance
sheet exposures is equal to the instrument’s gross carrying amount at the time of default. For lending commitments, the EAD includes
current and potential future amounts that may be drawn under the contract, whereby expected potential future drawdowns are
determined based on estimated credit conversion factors. For financial guarantees, the EAD reflects the probability that the financial
guarantee becomes payable.
The Group measures ECL considering the risk of default over the maximum contractual period (including any borrower’s extension
options) during which it is exposed to credit risk, even if, for credit risk management purposes, the Group considers a longer period. The
maximum contractual period is deemed to reflect the date on which the Group has the right to require repayment of an advance or
terminate a loan commitment or guarantee.
Judgemental adjustments
Where appropriate, the Group makes adjustments to the ECL estimate outside the Group’s regular modelling process to reflect
Management judgements. Changes to the assumptions underlying these judgemental adjustments could materially affect ECL within
the next 12 months. These adjustments include post-model adjustments (“PMA”) and overlays.
PMAs are 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. They are usually calculated and allocated at a granular level through modelled analysis,
calculated separately for each economic scenario and where appropriate used to adjust stage allocation outcomes. Overlays are
adjustments to the ECL model outputs that have been made outside the detailed ECL calculation and reporting process. These do not
meet the Group’s definition of PMAs because they are not calculated at granular level through modelled analysis.
The Group has internal governance frameworks and controls in place to assess the appropriateness of all judgemental adjustments. 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.
Judgemental adjustments to the ECL estimate are applied in order to factor in additional facts that are not fully incorporated into the
ECL models.
Total judgemental adjustments as at 31 December 2023 increased the loss allowance by USD1,941,961 (2022: USD1,281,670).
FIMBank Group Annual Report & Financial Statements 2023
86
Credit-impaired exposures
For exposures classified as Stage 3 (“defaulted”) exposures, the Group estimates the expected future cash flows on an individual basis
using a discounted cash flow (“DCF”) methodology. The expected future cash flows are based on Management’s estimates as at the
reporting date, reflecting reasonable and supportable assumptions and projections of future recoveries. Collateral is taken into account
if it is likely that the recovery of the outstanding amount will include realisation of collateral based on the estimated fair value of collateral
at the time of expected realisation, less costs for obtaining and selling the collateral. The cash flows are discounted at a reasonable
approximation of the original effective interest rate.
Estimated future cash flows are generally dependent on parameters or assumptions around borrowers’ operating cash flows,
judgements around the possible outcome of litigation and / or liquidation proceedings and out-of-court settlements, and recoveries
through the sale or repossession of collateral to determine a probability weighted recoverable amount of the loan.
5.2.1.4 Credit quality analysis
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 2023
87
Group – 31 December 2023

|  |  | 2023 |  |
| 12-month PD | Stage 1 | Stage 2 | Stage 3 | Total
| ranges | USD | USD | USD | USD
Balances with the Central Bank of Malta, treasury bills and cash |  |  |  |  |
Grades 1 to 4- low risk | 0.03% - 0.44% | 336,709,471 | - | - | 336,709,471
Grades 5+ to 5- fair risk | 0.36% - 0.36% | 16,384,741 | - | - | 16,384,741
|  | 353,094,212 | - | - | 353,094,212
Loss allowance |  | (84,026) | - | - | (84,026)
Carrying amount |  | 353,010,186 | - | - | 353,010,186
Loans and advances to banks |  |  |  |  |
Grades 1 to 4- low risk | 0.18% - 0.71% | 57,774,145 | - | - | 57,774,145
Grades 5+ to 5- fair risk | 0.39% - 1.36% | 28,897,955 | - | - | 28,897,955
Grades 6+ to 7 high risk | 1.03% - 5.33% | 61,678,406 | 4,373,226 | - | 66,051,632
Grade 7- to 8- substandard | 2.45% | - | 330,800 | - | 330,800
|  | 148,350,506 | 4,704,026 | - | 153,054,532
Loss allowance |  | (229,755) | (9,829) | - | (239,584)
Carrying amount |  | 148,120,751 | 4,694,197 | - | 152,814,948
Loans and advances to customers |  |  |  |  |
Grades 1 to 4- low risk | 0.09% - 0.96% | 14,877,147 | 8,532 | - | 14,885,679
Grades 5+ to 5- fair risk | 0.47% - 7.58% | 106,621,284 | 16,552,944 | - | 123,174,228
Grades 6+ to 7 high risk | 1.34% - 19.01% | 193,343,710 | 14,192,197 | - | 207,535,907
Grade 7- to 8- substandard | 11.65% - 23.98% | 33,480,002 | 44,064,180 | 3,667,626 | 81,211,808
Grade 9 to 10 doubtful/loss | 100% | - | - | 23,447,745 | 23,447,745
|  | 348,322,143 | 74,817,853 | 27,115,371 | 450,255,367
Loss allowance |  | (1,992,933) | (3,235,201) | (13,685,159) | (18,913,293)
Carrying amount |  | 346,329,210 | 71,582,652 | 13,430,212 | 431,342,074
Financial investments at fair value through other comprehensive income |  |  |  |  |
Grades 1 to 4- low risk | 0.03% - 0.5% | 140,755,780 | - | - | 140,755,780
Carrying amount at fair value |  | 140,755,780 | - | - | 140,755,780
Loss allowance |  | (83,233) | - | - | (83,233)
Financial investments at amortised cost |  |  |  |  |
Grades 1 to 4- low risk | 0.02% - 0.46% | 18,758,990 | - | - | 18,758,990
Grades 5+ to 5- fair risk | 2.25% | 9,771,244 | - | - | 9,771,244
|  | 28,530,234 | - | - | 28,530,234
Loss allowance |  | (131,161) | - | - | (131,161)
Carrying amount |  | 28,399,073 | - | - | 28,399,073
Guarantees |  |  |  |  |
Grades 1 to 4- low risk | 0.14% - 0.96% | 239,527 | - | - | 239,527
Grades 5+ to 5- fair risk | 0.42% - 2.99% | 24,272,567 | - | - | 24,272,567
Grades 6+ to 7 high risk | 1.48% - 18.65% | 3,483,111 | 30,069 | - | 3,513,180
Carrying amount |  | 27,995,205 | 30,069 | - | 28,025,274
Loss allowance |  | (7,501) | (50) | - | (7,551)
Commitments |  |  |  |  |
Grades 1 to 4- low risk | 0.16% - 0.78% | 40,457,254 | - | - | 40,457,254
Grades 5+ to 5- fair risk | 1.16% - 3.15% | 40,310,914 | 1,235,036 | - | 41,545,950
Grades 6+ to 7 high risk | 1.83% - 10.76% | 54,509,463 | 11,291,040 | - | 65,800,503
Carrying amount |  | 135,277,631 | 12,526,076 | - | 147,803,707
Loss allowance |  | (78,764) | (3,543) | - | (82,307)

FIMBank Group Annual Report & Financial Statements 2023
88
Group – 31 December 2022

|  |  | 2022 |  |
| 12-month PD | Stage 1 | Stage 2 | Stage 3 | Total
| ranges | USD | USD | USD | USD
Balances with the Central Bank of Malta, treasury bills and cash |  |  |  |  |
Grades 1 to 4- low risk | 0.11% - 0.61% | 201,055,654 | - | - | 201,055,654
Grades 5+ to 5- fair risk | 0.56% - 0.57% | 15,929,718 | - | - | 15,929,718
|  | 216,985,372 | - | - | 216,985,372
Loss allowance |  | (118,047) | - | - | (118,047)
Carrying amount |  | 216,867,325 | - | - | 216,867,325
Loans and advances to banks |  |  |  |  |
Grades 1 to 4- low risk | 0.16% - 0.82% | 53,973,155 | - | - | 53,973,155
Grades 5+ to 5- fair risk | 0.64% - 4.39% | 8,899,263 | - | - | 8,899,263
Grades 6+ to 7 high risk | 1.2% - 7.34% | 86,272,654 | - | - | 86,272,654
Grade 7- to 8- substandard | 5.38% | - | 1,011,069 | - | 1,011,069
|  | 149,145,072 | 1,011,069 | - | 150,156,141
Loss allowance |  | (425,805) | (16,410) | - | (442,215)
Carrying amount |  | 148,719,267 | 994,659 | - | 149,713,926
Loans and advances to customers |  |  |  |  |
Grades 1 to 4- low risk | 0.08% - 0.9% | 41,340,443 | 560,550 | - | 41,900,993
Grades 5+ to 5- fair risk | 0.38% - 3.53% | 136,285,389 | 15,840,557 | - | 152,125,946
Grades 6+ to 7 high risk | 2.52% - 32.46% | 150,749,736 | 67,155,643 | - | 217,905,379
Grade 7- to 8- substandard | 16.16% - 40.49% | 4,076,786 | 41,064,034 | - | 45,140,820
Grade 9 to 10 doubtful/loss | 100% | - | - | 102,531,826 | 102,531,826
|  | 332,452,354 | 124,620,784 | 102,531,826 | 559,604,964
Loss allowance |  | (1,807,610) | (3,738,804) | (69,530,493) | (75,076,907)
Carrying amount |  | 330,644,744 | 120,881,980 | 33,001,333 | 484,528,057
Financial investments at fair value through other comprehensive income |  |  |  |  |
Grades 1 to 4- low risk | 0.03% - 0.67% | 143,189,022 | - | - | 143,189,022
Carrying amount at fair value |  | 143,189,022 | - | - | 143,189,022
Loss allowance |  | (125,577) | - | - | (125,577)
Financial investments at amortised cost |  |  |  |  |
Grades 1 to 4- low risk | 0.05% | 4,835,740 | - | - | 4,835,740
Grades 5+ to 5- fair risk | 0.93% | 9,805,955 | - | - | 9,805,955
|  | 14,641,695 | - | - | 14,641,695
Loss allowance |  | (39,687) | - | - | (39,687)
Carrying amount |  | 14,602,008 | - | - | 14,602,008
Guarantees |  |  |  |  |
Grades 1 to 4- low risk | 0.29% - 0.84% | 91,324 | - | - | 91,324
Grades 5+ to 5- fair risk | 0.87% - 3.11% | 7,516,187 | 4,127 | - | 7,520,314
Grades 6+ to 7 high risk | 1.56% - 17.53% | 4,270,380 | 85,847 | - | 4,356,227
Grade 9 to 10 doubtful/loss | 100% | - | - | 166,577 | 166,577
Carrying amount |  | 11,877,891 | 89,974 | 166,577 | 12,134,442
Loss allowance |  | (43,668) | (107) | - | (43,775)
Commitments |  |  |  |  |
Grades 1 to 4- low risk | 0.16% - 0.94% | 5,902,394 | - | - | 5,902,394
Grades 5+ to 5- fair risk | 1.09% - 3.16% | 53,329,456 | - | - | 53,329,456
Grades 6+ to 7 high risk | 1.8% - 29.66% | 26,733,134 | 14,036,479 | - | 40,769,613
Carrying amount |  | 85,964,984 | 14,036,479 | - | 100,001,463
Loss allowance |  | (274,242) | (2,878) | - | (277,120)

FIMBank Group Annual Report & Financial Statements 2023
89
Bank – 31 December 2023

|  |  | 2023 |  |
| 12-month PD | Stage 1 | Stage 2 | Stage 3 | Total
| ranges | USD | USD | USD | USD
Balances with the Central Bank of Malta, treasury bills and cash |  |  |  |  |
Grades 1 to 4- low risk | 0.03% - 0.44% | 336,696,342 | - | - | 336,696,342
Grades 5+ to 5- fair risk | 0.36% - 0.36% | 16,384,741 | - | - | 16,384,741
|  | 353,081,083 | - | - | 353,081,083
Loss allowance |  | (84,026) | - | - | (84,026)
Carrying amount |  | 352,997,057 | - | - | 352,997,057
Loans and advances to banks |  |  |  |  |
Grades 1 to 4- low risk | 0.18% - 0.71% | 34,600,459 | - | - | 34,600,459
Grades 5+ to 5- fair risk | 0.39% - 1.36% | 21,922,395 | - | - | 21,922,395
Grades 6+ to 7 high risk | 1.16% - 5.33% | 53,314,041 | 4,373,226 | - | 57,687,267
Grade 7- to 8- substandard | 2.45% | - | 330,800 | - | 330,800
|  | 109,836,895 | 4,704,026 | - | 114,540,921
Loss allowance |  | (205,849) | (9,829) | - | (215,678)
Carrying amount |  | 109,631,046 | 4,694,197 | - | 114,325,243
Loans and advances to customers |  |  |  |  |
Grades 1 to 4- low risk | 0.14% - 0.96% | 326,508,825 | - | - | 326,508,825
Grades 5+ to 5- fair risk | 0.47% - 7.58% | 76,001,131 | 15,899,916 | - | 91,901,047
Grades 6+ to 7 high risk | 1.34% - 19.01% | 171,722,482 | 13,149,304 | - | 184,871,786
Grade 7- to 8- substandard | 15% - 21.07% | - | 7,017,657 | 3,667,626 | 10,685,283
Grade 9 to 10 doubtful/loss | 100% | - | - | 16,938,297 | 16,938,297
|  | 574,232,438 | 36,066,877 | 20,605,923 | 630,905,238
Loss allowance |  | (2,749,760) | (2,641,065) | (7,396,188) | (12,787,013)
Carrying amount |  | 571,482,678 | 33,425,812 | 13,209,735 | 618,118,225
Financial investments at fair value through other comprehensive income |  |  |  |  |
Grades 1 to 4- low risk | 0.03% - 0.5% | 140,755,780 | - | - | 140,755,780
Carrying amount at fair value |  | 140,755,780 | - | - | 140,755,780
Loss allowance |  | (83,233) | - | - | (83,233)
Financial investments at amortised cost |  |  |  |  |
Grades 1 to 4- low risk | 0.02% - 0.46% | 18,758,990 | - | - | 18,758,990
Grades 5+ to 5- fair risk | 2.25% | 9,771,244 | - | - | 9,771,244
|  | 28,530,234 | - | - | 28,530,234
Loss allowance |  | (131,161) | - | - | (131,161)
Carrying amount |  | 28,399,073 | - | - | 28,399,073
Guarantees |  |  |  |  |
Grades 1 to 4- low risk | 0.39% - 0.96% | 11,289,250 | - | - | 11,289,250
Grades 5+ to 5- fair risk | 0.42% - 2.99% | 24,272,567 | - | - | 24,272,567
Grades 6+ to 7 high risk | 1.48% - 18.65% | 3,483,112 | 30,069 | - | 3,513,181
Carrying amount |  | 39,044,929 | 30,069 | - | 39,074,998
Loss allowance |  | (7,778) | (50) | - | (7,828)
Commitments |  |  |  |  |
Grades 1 to 4- low risk | 0.16% - 0.78% | 6,727,973 | - | - | 6,727,973
Grades 5+ to 5- fair risk | 1.16% - 3.15% | 40,310,914 | 1,235,036 | - | 41,545,950
Grades 6+ to 7 high risk | 1.83% - 10.76% | 40,655,124 | 11,291,040 | - | 51,946,164
Carrying amount |  | 87,694,011 | 12,526,076 | - | 100,220,087
Loss allowance |  | (78,764) | (3,543) | - | (82,307)

FIMBank Group Annual Report & Financial Statements 2023
90
Bank – 31 December 2022

|  |  | 2022 |  |
| 12-month PD | Stage 1 | Stage 2 | Stage 3 | Total
| ranges | USD | USD | USD | USD
Balances with the Central Bank of Malta, treasury bills and cash |  |  |  |  |
Grades 1 to 4- low risk | 0.11% - 0.61% | 201,040,796 | - | - | 201,040,796
Grades 5+ to 5- fair risk | 0.56% - 0.57% | 15,929,718 | - | - | 15,929,718
|  | 216,970,514 | - | - | 216,970,514
Loss allowance |  | (118,047) | - | - | (118,047)
Carrying amount |  | 216,852,467 | - | - | 216,852,467
Loans and advances to banks |  |  |  |  |
Grades 1 to 4- low risk | 0.16% - 0.82% | 51,827,402 | - | - | 51,827,402
Grades 6+ to 7 high risk | 1.2% - 6.36% | 73,491,266 | - | - | 73,491,266
Grade 7- to 8- substandard | 5.38% | - | 981,535 | - | 981,535
|  | 125,318,668 | 981,535 | - | 126,300,203
Loss allowance |  | (406,843) | (10,928) | - | (417,771)
Carrying amount |  | 124,911,825 | 970,607 | - | 125,882,432
Loans and advances to customers |  |  |  |  |
Grades 1 to 4- low risk | 0.12% - 0.87% | 374,043,203 | - | - | 374,043,203
Grades 5+ to 5- fair risk | 0.38% - 3.16% | 107,707,494 | 15,683,049 | - | 123,390,543
Grades 6+ to 7 high risk | 2.96% - 32.46% | 139,237,803 | 49,388,541 | - | 188,626,344
Grade 7- to 8- substandard | 16.57% - 33.05% | - | 7,375,878 | - | 7,375,878
Grade 9 to 10 doubtful/loss | 100% | - | - | 93,835,376 | 93,835,376
|  | 620,988,500 | 72,447,468 | 93,835,376 | 787,271,344
Loss allowance |  | (1,730,647) | (2,562,047) | (64,068,223) | (68,360,917)
Carrying amount |  | 619,257,853 | 69,885,421 | 29,767,153 | 718,910,427
Financial investments at fair value through other comprehensive income |  |  |  |  |
Grades 1 to 4- low risk | 0.03% - 0.67% | 143,189,022 | - | - | 143,189,022
Carrying amount at fair value |  | 143,189,022 | - | - | 143,189,022
Loss allowance |  | (125,577) | - | - | (125,577)
Financial investments at amortised cost |  |  |  |  |
Grades 1 to 4- low risk | 0.05% | 4,835,740 | - | - | 4,835,740
Grades 5+ to 5- fair risk | 0.93% | 9,805,955 | - | - | 9,805,955
|  | 14,641,695 | - | - | 14,641,695
Loss allowance |  | (39,687) | - | - | (39,687)
Carrying amount |  | 14,602,008 | - | - | 14,602,008
Guarantees |  |  |  |  |
Grades 1 to 4- low risk | 0.12% - 0.84% | 24,095,625 | - | - | 24,095,625
Grades 5+ to 5- fair risk | 0.87% - 3.11% | 7,516,188 | 4,127 | - | 7,520,315
Grades 6+ to 7 high risk | 1.56% - 17.53% | 4,263,519 | 85,847 | - | 4,349,366
Grade 9 to 10 doubtful/loss | 100% | - | - | 166,577 | 166,577
Carrying amount |  | 35,875,332 | 89,974 | 166,577 | 36,131,883
Loss allowance |  | (75,317) | (107) | - | (75,424)
Commitments |  |  |  |  |
Grades 1 to 4- low risk | 0.16% - 0.94% | 6,455,110 | - | - | 6,455,110
Grades 5+ to 5- fair risk | 1.25% - 3.16% | 52,776,740 | - | - | 52,776,740
Grades 6+ to 7 high risk | 2.5% - 29.66% | 18,146,094 | 14,036,479 | - | 32,182,573
Carrying amount |  | 77,377,944 | 14,036,479 | - | 91,414,423
Loss allowance |  | (42,904) | (2,881) | - | (45,785)

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The following table sets out information about the overdue status of financial assets under Stages 1, 2 and 3:
Group – 31 December 2023

|  |  | 2023 |
| Stage 1 | Stage 2 | Stage 3 | Total
| USD | USD | USD | USD
Loans and advances to banks |  |  |  |
Current | 143,786,835 | 4,704,026 | - | 148,490,861
Overdue < 30 days | 4,563,671 | - | - | 4,563,671
Overdue > 30 days | - | - | - | -
Total gross carrying amount | 148,350,506 | 4,704,026 | - | 153,054,532
Loans and advances to customers |  |  |  |
Current | 286,929,554 | 38,938,409 | - | 325,867,963
Overdue < 30 days | 61,392,589 | 31,308,055 | - | 92,700,644
Overdue > 30 days | - | 4,571,389 | 27,115,371 | 31,686,760
Total gross carrying amount | 348,322,143 | 74,817,853 | 27,115,371 | 450,255,367

Group – 31 December 2022

|  | 2022 |  |
| Stage 1 | Stage 2 | Stage 3 | Total
| USD | USD | USD | USD
Loans and advances to banks |  |  |  |
Current | 149,145,072 | 1,011,069 | - | 150,156,141
Overdue < 30 days | - | - | - | -
Overdue > 30 days | - | - | - | -
Total gross carrying amount | 149,145,072 | 1,011,069 | - | 150,156,141
Loans and advances to customers |  |  |  |
Current | 282,933,798 | 121,255,571 | - | 404,189,369
Overdue < 30 days | 49,518,556 | 492,684 | - | 50,011,240
Overdue > 30 days | - | 2,872,529 | 102,531,826 | 105,404,355
Total gross carrying amount | 332,452,354 | 124,620,784 | 102,531,826 | 559,604,964

Bank – 31 December 2023

|  |  | 2023 |
| Stage 1 | Stage 2 | Stage 3 | Total
| USD | USD | USD | USD
Loans and advances to banks |  |  |  |
Current | 105,273,224 | 4,704,026 | - | 109,977,250
Overdue < 30 days | 4,563,671 | - | - | 4,563,671
Overdue > 30 days | - | - | - | -
Total gross carrying amount | 109,836,895 | 4,704,026 | - | 114,540,921
Loans and advances to customers |  |  |  |
Current | 547,798,597 | 22,954,067 | - | 570,752,664
Overdue < 30 days | 26,433,841 | 8,644,572 | - | 35,078,413
Overdue > 30 days | - | 4,468,238 | 20,605,923 | 25,074,161
Total gross carrying amount | 574,232,438 | 36,066,877 | 20,605,923 | 630,905,238

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Bank – 31 December 2022

|  | 2022 |  |
| Stage 1 | Stage 2 | Stage 3 | Total
| USD | USD | USD | USD
Loans and advances to banks |  |  |  |
Current | 125,318,668 | 981,535 | - | 126,300,203
Overdue < 30 days | - | - | - | -
Overdue > 30 days | - | - | - | -
Total gross carrying amount | 125,318,668 | 981,535 | - | 126,300,203
Loans and advances to customers |  |  |  |
Current | 589,669,783 | 71,855,938 | - | 661,525,721
Overdue < 30 days | 31,318,717 | 261,675 | - | 31,580,392
Overdue > 30 days | - | 329,855 | 93,835,376 | 94,165,231
Total gross carrying amount | 620,988,500 | 72,447,468 | 93,835,376 | 787,271,344

In 2023, there were no overdue balances for ‘Balances with the Central Bank of Malta and treasury bills’, ‘Financial investments at fair
value through other comprehensive income’ and ‘Financial investments at amortised cost’ (2022: 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 |
| 2023 | 2022
| USD | USD
Trading assets |  |
Rated A- to A+ | 22,310,275 | 5,447,684
Rated BBB+ or below | 242,218,978 | 263,545,485
Unrated | 109,647,855 | 175,590,492
Carrying amount | 374,177,108 | 444,583,661

5. 2.1.5 Reconciliation of gross carrying amounts and allowances for ECL
The following tables show reconciliations from the opening to the closing balance of the loss allowance by class of financial instrument:
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Group – 31 December 2023

|  | Non-credit impaired |  |  | Credit Impaired |  |  |
| Stage 1 |  | Stage 2 |  | Stage 3 |  | Total |
| Gross carrying | Allowance | Gross carrying | Allowance | Gross carrying | Allowance | Gross carrying | Allowance
| amount | for ECL | amount | for ECL | amount | for ECL | amount | for ECL
Loans and advances to customers | USD | USD | USD | USD | USD | USD | USD | USD
Balance at 1 January | 332,452,354 | (1,807,610) | 124,620,784 | (3,738,804) | 102,531,826 | (69,530,493) | 559,604,964 | (75,076,907)
Transfer to Stage 1 | 6,971,978 | (126,023) | (6,971,978) | 126,023 | - | - | - | -
Transfer to Stage 2 | (832,499) | 3 | 832,499 | (3) | - | - | - | -
Net remeasurement of loss allowance arising from stage transfers | - | (42,479) | - | (3,462) | - | - | - | (45,941)
Changes in risk parameters | - | (190,907) | - | 263,929 | - | (1,113,923) | - | (1,040,901)
New financial assets originated or purchased and further lending | 408,211,815 | (1,489,020) | 45,065,103 | (209,007) | 54,684 | (38,406) | 453,331,602 | (1,736,433)
Financial assets that have been repaid or partially repaid | (403,901,641) | 1,662,934 | (87,356,483) | 299,504 | (16,812,662) | 1,394,348 | (508,070,786) | 3,356,786
Write-offs | - | - | (65,007) | 26,711 | (59,663,556) | 56,149,594 | (59,728,563) | 56,176,305
Foreign exchange and other movements | 5,420,136 | 169 | (1,307,065) | (92) | 1,005,079 | (546,279) | 5,118,150 | (546,202)
Balance at 31 December | 348,322,143 | (1,992,933) | 74,817,853 | (3,235,201) | 27,115,371 | (13,685,159) | 450,255,367 | (18,913,293)

Group – 31 December 2022

|  | Non-credit impaired |  |  | Credit Impaired |  |  |
| Stage 1 |  | Stage 2 |  | Stage 3 |  | Total |
| Gross carrying | Allowance | Gross carrying | Allowance | Gross carrying | Allowance | Gross carrying | Allowance
| amount | for ECL | amount | for ECL | amount | for ECL | amount | for ECL
Loans and advances to customers | USD | USD | USD | USD | USD | USD | USD | USD
Balance at 1 January | 320,415,637 | (1,267,844) | 134,133,565 | (2,740,295) | 140,155,054 | (78,776,715) | 594,704,256 | (82,784,854)
Transfer to Stage 1 | 6,322,485 | (24,819) | (6,322,485) | 24,819 | - | - | - | -
Transfer to Stage 2 | (5,364,350) | 3,820 | 5,885,579 | (485,677) | (521,229) | 481,857 | - | -
Transfer to Stage 3 | - | - | (304,380) | 1,813 | 304,380 | (1,813) | - | -
Net remeasurement of loss allowance arising from stage transfers | - | (93,215) | - | 336,595 | - | 23,767 | - | 267,147
Changes in risk parameters | - | 526,220 | - | (940,622) | - | (2,027,017) | - | (2,441,419)
New financial assets originated or purchased and further lending | 374,613,473 | (1,148,374) | 49,891,502 | (229,265) | 6,827,172 | (183,080) | 431,332,147 | (1,560,719)
Financial assets that have been repaid or partially repaid | (349,840,884) | 161,387 | (52,986,986) | 297,467 | (4,166,719) | 1,099,422 | (406,994,589) | 1,558,276
Write-offs | - | - | - | - | (32,712,595) | 13,412,727 | (32,712,595) | 13,412,727
Foreign exchange and other movements | (13,694,007) | 35,215 | (5,676,011) | (3,639) | (7,354,237) | (3,559,641) | (26,724,251) | (3,528,065)
Balance at 31 December | 332,452,354 | (1,807,610) | 124,620,784 | (3,738,804) | 102,531,826 | (69,530,493) | 559,604,964 | (75,076,907)

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94
Bank – 31 December 2023

|  | Non-credit impaired |  |  | Credit Impaired |  |  |
| Stage 1 |  | Stage 2 |  | Stage 3 |  | Total |
| Gross carrying | Allowance | Gross carrying | Allowance | Gross carrying | Allowance | Gross carrying | Allowance
| amount | for ECL | amount | for ECL | amount | for ECL | amount | for ECL
Loans and advances to customers | USD | USD | USD | USD | USD | USD | USD | USD
Balance at 1 January | 620,988,500 | (1,730,647) | 72,447,468 | (2,562,047) | 93,835,376 | (64,068,223) | 787,271,344 | (68,360,917)
Transfer to Stage 1 | 18,021 | - | (18,021) | - | - | - | - | -
Transfer to Stage 2 | (832,479) | 3 | 832,479 | (3) | - | - | - | -
Net remeasurement of loss allowance arising from stage transfers | - | - | - | (3,462) | - | - | - | (3,462)
Changes in risk parameters | - | (859,172) | - | (156,717) | - | 121,343 | - | (894,546)
New financial assets originated or purchased and further lending | 337,283,426 | (1,372,156) | 27,933,694 | (11,111) | 54,684 | (38,406) | 365,271,804 | (1,421,673)
Financial assets that have been repaid or partially repaid | (396,312,437) | 1,212,212 | (65,168,753) | 65,564 | (15,182,710) | 1,280,426 | (476,663,900) | 2,558,202
Write-offs | - | - | (65,007) | 26,711 | (59,583,023) | 56,069,062 | (59,648,030) | 56,095,773
Foreign exchange and other movements | 13,087,407 | - | 105,017 | - | 1,481,596 | (760,390) | 14,674,020 | (760,390)
Balance at 31 December | 574,232,438 | (2,749,760) | 36,066,877 | (2,641,065) | 20,605,923 | (7,396,188) | 630,905,238 | (12,787,013)

Bank – 31 December 2022

|  | Non-credit impaired |  |  | Credit Impaired |  |  |
| Stage 1 |  | Stage 2 |  | Stage 3 |  | Total |
| Gross carrying | Allowance | Gross carrying | Allowance | Gross carrying | Allowance | Gross carrying | Allowance
| amount | for ECL | amount | for ECL | amount | for ECL | amount | for ECL
Loans and advances to customers | USD | USD | USD | USD | USD | USD | USD | USD
Balance at 1 January | 600,778,464 | (1,663,749) | 74,589,203 | (2,051,951) | 118,357,177 | (65,241,286) | 793,724,844 | (68,956,986)
Transfer to Stage 1 | 3,957,968 | (431) | (3,957,968) | 431 | - | - | - | -
Transfer to Stage 2 | (159,987) | - | 681,216 | (481,857) | (521,229) | 481,857 | - | -
Net remeasurement of loss allowance arising from stage transfers | - | - | - | 488,329 | - | - | - | 488,329
Changes in risk parameters | - | 384,082 | - | (541,489) | - | (1,157,112) | - | (1,314,519)
New financial assets originated or purchased and further lending | 371,417,048 | (647,590) | 24,861,234 | (65,375) | 6,764,122 | (183,080) | 403,042,404 | (896,045)
Financial assets that have been repaid or partially repaid | (339,546,202) | 197,041 | (23,006,984) | 96,337 | (4,467,856) | 233,802 | (367,021,042) | 527,180
Write-offs | - | - | - | - | (23,381,257) | 6,640,123 | (23,381,257) | 6,640,123
Foreign exchange and other movements | (15,458,791) | - | (719,233) | (6,472) | (2,915,581) | (4,842,527) | (19,093,605) | (4,848,999)
Balance at 31 December | 620,988,500 | (1,730,647) | 72,447,468 | (2,562,047) | 93,835,376 | (64,068,223) | 787,271,344 | (68,360,917)

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Group – 31 December 2023

|  | 2023 |  |
|  | Allowance for ECL |  |
| Stage 1 | Stage 2 | Stage 3 | Total
| USD | USD | USD | USD
Balances with the Central Bank of Malta, treasury bills |  |  |  |
and cash |  |  |  |
Balance at 1 January | 118,047 | - | - | 118,047
Net remeasurement of loss allowance | (46,750) | - | - | (46,750)
New financial assets originated or purchased |  |  |  |
and further lending | 76,808 | - | - | 76,808
Financial assets that have been repaid or partially repaid | (64,079) | - | - | (64,079)
Balance at 31 December | 84,026 | - | - | 84,026
Loans and advances to banks |  |  |  |
Balance at 1 January | 425,805 | 16,410 | - | 442,215
Net remeasurement of loss allowance | (57,382) | (10,753) | - | (68,135)
New financial assets originated or purchased |  |  |  |
and further lending | 93,845 | 9,653 | - | 103,498
Financial assets that have been repaid or partially repaid | (232,418) | (5,481) | - | (237,899)
Foreign exchange and other movements | (95) | - | - | (95)
Balance at 31 December | 229,755 | 9,829 | - | 239,584
Financial investments at fair value through other comprehensive income |  |  |  |
Balance at 1 January | 125,577 | - | - | 125,577
Net remeasurement of loss allowance | (38,948) | - | - | (38,948)
Financial assets that have been repaid or partially repaid | (3,396) | - | - | (3,396)
Balance at 31 December | 83,233 | - | - | 83,233
Financial investments at amortised cost |  |  |  |
Balance at 1 January | 39,687 | - | - | 39,687
Net remeasurement of loss allowance | 86,758 | - | - | 86,758
New financial assets originated or purchased |  |  |  |
and further lending | 4,716 | - | - | 4,716
Balance at 31 December | 131,161 | - | - | 131,161
Guarantees |  |  |  |
Balance at 1 January | 43,668 | 107 | - | 43,775
Net remeasurement of loss allowance | (36,006) | - | - | (36,006)
New financial assets originated or purchased |  |  |  |
and further lending | 137 | 50 | - | 187
Financial assets that have been repaid or partially repaid | (298) | (107) | - | (405)
Balance at 31 December | 7,501 | 50 | - | 7,551
Commitments |  |  |  |
Balance at 1 January | 274,242 | 2,878 | - | 277,120
Net remeasurement of loss allowance | 6,878 | - | - | 6,878
New financial assets originated or purchased |  |  |  |
and further lending | 70,320 | 3,543 | - | 73,863
Financial assets that have been repaid or partially repaid | (272,676) | (2,878) | - | (275,554)
Balance at 31 December | 78,764 | 3,543 | - | 82,307

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Group – 31 December 2022

|  | 2022 |  |
|  | Allowance for ECL |  |
| Stage 1 | Stage 2 | Stage 3 | Total
| USD | USD | USD | USD
Balances with the Central Bank of Malta, treasury bills |  |  |  |
and cash |  |  |  |
Balance at 1 January | 119,597 | - | - | 119,597
Net remeasurement of loss allowance | (46,311) | - | - | (46,311)
New financial assets originated or purchased |  |  |  |
and further lending | 64,079 | - | - | 64,079
Financial assets that have been repaid or partially repaid | (19,318) | - | - | (19,318)
Balance at 31 December | 118,047 | - | - | 118,047
Loans and advances to banks |  |  |  |
Balance at 1 January | 363,708 | 22,443 | - | 386,151
Transfer to Stage 1 | 9 | (9) | - | -
Net remeasurement of loss allowance | (31,409) | (4,860) | - | (36,269)
New financial assets originated or purchased |  |  |  |
and further lending | 343,470 | 5,483 | - | 348,953
Financial assets that have been repaid or partially repaid | (248,518) | (6,647) | - | (255,165)
Foreign exchange and other movements | (1,455) | - | - | (1,455)
Balance at 31 December | 425,805 | 16,410 | - | 442,215
Financial investments at fair value through other comprehensive income |  |  |  |
Balance at 1 January | 82,065 | - | - | 82,065
Net remeasurement of loss allowance | 42,275 | - | - | 42,275
New financial assets originated or purchased |  |  |  |
and further lending | 3,036 | - | - | 3,036
Financial assets that have been repaid or partially repaid | (1,799) | - | - | (1,799)
Balance at 31 December | 125,577 | - | - | 125,577
Financial investments at amortised cost |  |  |  |
Balance at 1 January | 57,622 | - | - | 57,622
New financial assets originated or purchased and further Lending | 39,687 | - | - | 39,687
Financial assets that have been repaid or partially repaid | (57,622) | - | - | (57,622)
Balance at 31 December | 39,687 | - | - | 39,687
Guarantees |  |  |  |
Balance at 1 January | 823 | - | 161,243 | 162,066
Net remeasurement of loss allowance | 72 | - | (158,039) | (157,967)
New financial assets originated or purchased |  |  |  |
and further lending | 43,399 | 107 | - | 43,506
Financial assets that have been repaid or partially repaid | (626) | - | - | (626)
Foreign exchange and other movements | - | - | (3,204) | (3,204)
Balance at 31 December | 43,668 | 107 | - | 43,775
Commitments |  |  |  |
Balance at 1 January | 94,841 | 2,421 | - | 97,262
Net remeasurement of loss allowance | 467 | - | - | 467
New financial assets originated or purchased |  |  |  |
and further lending | 270,362 | 2,878 | - | 273,240
Financial assets that have been repaid or partially repaid | (91,428) | (2,421) | - | (93,849)
Balance at 31 December | 274,242 | 2,878 | - | 277,120

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Bank – 31 December 2023

|  | 2023 |  |
|  | Allowance for ECL |  |
| Stage 1 | Stage 2 | Stage 3 | Total
| USD | USD | USD | USD
Balances with the Central Bank of Malta, treasury bills |  |  |  |
and cash |  |  |  |
Balance at 1 January | 118,047 | - | - | 118,047
Net remeasurement of loss allowance | (46,750) | - | - | (46,750)
New financial assets originated or purchased |  |  |  |
and further lending | 76,808 | - | - | 76,808
Financial assets that have been repaid or partially repaid | (64,079) | - | - | (64,079)
Balance at 31 December | 84,026 | - | - | 84,026
Loans and advances to banks |  |  |  |
Balance at 1 January | 406,843 | 10,928 | - | 417,771
Net remeasurement of loss allowance | (62,184) | (10,753) | - | (72,937)
New financial assets originated or purchased |  |  |  |
and further lending | 88,693 | 9,654 | - | 98,347
Financial assets that have been repaid or partially repaid | (227,503) | - | - | (227,503)
Balance at 31 December | 205,849 | 9,829 | - | 215,678
Financial investments at fair value through other comprehensive income |  |  |  |
Balance at 1 January | 125,577 | - | - | 125,577
Net remeasurement of loss allowance | (38,948) | - | - | (38,948)
Financial assets that have been repaid or partially repaid | (3,396) | - | - | (3,396)
Balance at 31 December | 83,233 | - | - | 83,233
Financial investments at amortised cost |  |  |  |
Balance at 1 January | 39,687 | - | - | 39,687
Net remeasurement of loss allowance | 86,758 | - | - | 86,758
New financial assets originated or purchased |  |  |  |
and further lending | 4,716 | - | - | 4,716
Balance at 31 December | 131,161 | - | - | 131,161
Guarantees |  |  |  |
Balance at 1 January | 75,317 | 107 | - | 75,424
Net remeasurement of loss allowance | (36,006) | - | - | (36,006)
New financial assets originated or purchased |  |  |  |
and further lending | 414 | 50 | - | 464
Financial assets that have been repaid or partially repaid | (31,947) | (107) | - | (32,054)
Balance at 31 December | 7,778 | 50 | - | 7,828
Commitments |  |  |  |
Balance at 1 January | 42,904 | 2,881 | - | 45,785
Net remeasurement of loss allowance | 6,878 | - | - | 6,878
New financial assets originated or purchased |  |  |  |
and further lending | 70,320 | 3,543 | - | 73,863
Financial assets that have been repaid or partially repaid | (41,338) | (2,881) | - | (44,219)
Balance at 31 December | 78,764 | 3,543 | - | 82,307

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Bank – 31 December 2022

|  | 2022 |  |
|  | Allowance for ECL |  |
| Stage 1 | Stage 2 | Stage 3 | Total
| USD | USD | USD | USD
Balances with the Central Bank of Malta, treasury bills |  |  |  |
and cash |  |  |  |
Balance at 1 January | 119,597 | - | - | 119,597
Net remeasurement of loss allowance | (46,311) | - | - | (46,311)
New financial assets originated or purchased |  |  |  |
and further lending | 64,079 | - | - | 64,079
Financial assets that have been repaid or partially repaid | (19,318) | - | - | (19,318)
Balance at 31 December | 118,047 | - | - | 118,047
Loans and advances to banks |  |  |  |
Balance at 1 January | 345,928 | 22,435 | - | 368,363
Net remeasurement of loss allowance | (28,640) | (4,860) | - | (33,500)
New financial assets originated or purchased |  |  |  |
and further lending | 336,589 | - | - | 336,589
Financial assets that have been repaid or partially repaid | (247,034) | (6,647) | - | (253,681)
Balance at 31 December | 406,843 | 10,928 | - | 417,771
Financial investments at fair value through other comprehensive income |  |  |  |
Balance at 1 January | 82,065 | - | - | 82,065
Net remeasurement of loss allowance | 42,275 | - | - | 42,275
New financial assets originated or purchased |  |  |  |
and further lending | 3,036 | - | - | 3,036
Financial assets that have been repaid or partially repaid | (1,799) | - | - | (1,799)
Balance at 31 December | 125,577 | - | - | 125,577
Financial investments at amortised cost |  |  |  |
Balance at 1 January | 57,622 | - | - | 57,622
New financial assets originated or purchased |  |  |  |
and further lending | 39,687 | - | - | 39,687
Financial assets that have been repaid or partially repaid | (57,622) | - | - | (57,622)
Balance at 31 December | 39,687 | - | - | 39,687
Guarantees |  |  |  |
Balance at 1 January | 752 | - | 161,243 | 161,995
Net remeasurement of loss allowance | 74 | - | (158,039) | (157,965)
New financial assets originated or purchased |  |  |  |
and further lending | 75,045 | 107 | - | 75,152
Financial assets that have been repaid or partially repaid | (554) | - | - | (554)
Foreign exchange and other movements | - | - | (3,204) | (3,204)
Balance at 31 December | 75,317 | 107 | - | 75,424
Commitments |  |  |  |
Balance at 1 January | 37,358 | 2,422 | - | 39,780
Net remeasurement of loss allowance | 467 | - | - | 467
New financial assets originated or purchased |  |  |  |
and further lending | 39,027 | 2,878 | - | 41,905
Financial assets that have been repaid or partially repaid | (33,948) | (2,419) | - | (36,367)
Balance at 31 December | 42,904 | 2,881 | - | 45,785

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 movement in expected credit losses and other credit impairment charges’ line item in the Group’s Statements of Profit or
Loss.
FIMBank Group Annual Report & Financial Statements 2023
99
Group – 31 December 2023

|  |  |  | Financial |  |  |  |
| Balances with |  |  | investments |  |  |  |
| the Central |  |  | at fair value |  |  |  |
| Bank of Malta, | Loans and | Loans and | through other | Financial |  |  |
| treasury bills | advances | advances | comprehensive | investments at |  |  |
| and cash | to banks | to customers | income | amortised cost | Guarantees | Commitments | Total
| USD | USD | USD | USD | USD | USD | USD | USD
Net remeasurement of loss allowance | (46,750) | (68,135) | 1,086,842 | (38,948) | 86,758 | (36,006) | 6,878 | 990,639
New financial assets originated or purchased and further lending | 76,808 | 103,498 | 1,736,433 | - | 4,716 | 187 | 73,863 | 1,995,505
Financial assets that have been repaid or partially repaid | (64,079) | (237,899) | (3,356,786) | (3,396) | - | (405) | (275,554) | (3,938,119)
Write-offs | - | - | 3,552,258 | - | - | - | - | 3,552,258
Total | (34,021) | (202,536) | 3,018,747 | (42,344) | 91,474 | (36,224) | (194,813) | 2,600,283
Recoveries of amounts previously written off | - | - | (639,395) | - | - | - | - | (639,395)
Total | (34,021) | (202,536) | 2,379,352 | (42,344) | 91,474 | (36,224) | (194,813) | 1,960,888

Group – 31 December 2022

|  |  |  | Financial |  |  |  |
| Balances with |  |  | investments |  |  |  |
| the Central |  |  | at fair value |  |  |  |
| Bank of Malta, | Loans and | Loans and | through other | Financial |  |  |
| treasury bills | advances | advances | comprehensive | investments at |  |  |
| and cash | to banks | to customers | income | amortised cost | Guarantees | Commitments | Total
| USD | USD | USD | USD | USD | USD | USD | USD
Net remeasurement of loss allowance | (46,311) | (36,269) | 2,174,272 | 42,275 | - | (157,967) | 467 | 1,976,467
New financial assets originated or purchased and further lending | 64,079 | 348,953 | 1,560,719 | 3,036 | 39,687 | 43,506 | 273,240 | 2,333,220
Financial assets that have been repaid or partially repaid | (19,318) | (255,165) | (1,558,276) | (1,799) | (57,622) | (626) | (93,849) | (1,986,655)
Write-offs | - | - | 19,299,868 | - | - | - | - | 19,299,868
Total | (1,550) | 57,519 | 21,476,583 | 43,512 | (17,935) | (115,087) | 179,858 | 21,622,900
Recoveries of amounts previously written off | - | - | (1,594,216) | - | - | - | - | (1,594,216)
Total | (1,550) | 57,519 | 19,882,367 | 43,512 | (17,935) | (115,087) | 179,858 | 20,028,684

FIMBank Group Annual Report & Financial Statements 2023
100
Bank – 31 December 2023
Bank – 31 December 2022

|  |  |  | Financial |  |  |  |
| Balances with |  |  | investments |  |  |  |
| the Central |  |  | at fair value |  |  |  |
| Bank of Malta, | Loans and | Loans and | through other | Financial |  |  |
| treasury bills | advances | advances | comprehensive | investments at |  |  |
| and cash | to banks | to customers | income | amortised cost | Guarantees | Commitments | Total
| USD | USD | USD | USD | USD | USD | USD | USD
Net remeasurement of loss allowance | (46,750) | (72,937) | 898,008 | (38,948) | 86,758 | (36,006) | 6,878 | 797,003
New financial assets originated or purchased and further lending | 76,808 | 98,347 | 1,421,673 | - | 4,716 | 464 | 73,863 | 1,675,871
Financial assets that have been repaid or partially repaid | (64,079) | (227,503) | (2,558,202) | (3,396) | - | (32,054) | (44,219) | (2,929,453)
Write-offs | - | - | 3,552,257 | - | - | - | - | 3,552,257
Total | (34,021) | (202,093) | 3,313,736 | (42,344) | 91,474 | (67,596) | 36,522 | 3,095,678
Recoveries of amounts previously written off | - | - | (102,086) | - | - | - | - | (102,086)
Total | (34,021) | (202,093) | 3,211,650 | (42,344) | 91,474 | (67,596) | 36,522 | 2,993,592

|  |  |  | Financial |  |  |  |
| Balances with |  |  | investments |  |  |  |
| the Central |  |  | at fair value |  |  |  |
| Bank of Malta, | Loans and | Loans and | through other | Financial |  |  |
| treasury bills | advances | advances | comprehensive | investments at |  |  |
| and cash | to banks | to customers | income | amortised cost | Guarantees | Commitments | Total
| USD | USD | USD | USD | USD | USD | USD | USD
Net remeasurement of loss allowance | (46,311) | (33,500) | 826,190 | 42,275 | - | (157,965) | 467 | 631,156
New financial assets originated or purchased and further lending | 64,079 | 336,589 | 896,045 | 3,036 | 39,687 | 75,152 | 41,905 | 1,456,493
Financial assets that have been repaid or partially repaid | (19,318) | (253,681) | (527,180) | (1,799) | (57,622) | (554) | (36,367) | (896,521)
Write-offs | - | - | 16,741,134 | - | - | - | - | 16,741,134
Total | (1,550) | 49,408 | 17,936,189 | 43,512 | (17,935) | (83,367) | 6,005 | 17,932,262
Recoveries of amounts previously written off | - | - | (508,161) | - | - | - | - | (508,161)
Total | (1,550) | 49,408 | 17,428,028 | 43,512 | (17,935) | (83,367) | 6,005 | 17,424,101

FIMBank Group Annual Report & Financial Statements 2023
101
5.2.1.6 Loans with renegotiated terms and the Group’s forbearance policy
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 loan modifications 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 3.9.
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 is based on the same methodology described in Note 5.2.1.2.
When modification results in derecognition, a new loan is recognised and allocated to Stage 1 (unless the exposure is deemed to be
credit-impaired at the time of derecognition, in which case the exposure will be classified as POCI).
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 select ive basis if
a) the debtor is currently in default or if there is a high risk of default; b) there is evidence that the debtor made all reasonable efforts
to pay under the original contractual terms; and c) the debtor is expected to be able to meet the revised terms.
The renegotiated terms usually relate to extensions to the contractual maturity, changes to the timing of interest payments and
amendments to the terms of loan covenants.
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 agreein g 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 term s 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 3.9.5). A renegotiated loan is typically presented as credit-impaired
when there has been a change in contractual cash flows as a result of a concession which the lender would otherwise not consider and
it is probable that, without the concession, the borrower would be unable to meet contractual payment obligations in full. Accordingly,
this will represent a significant concern regarding the borrower’s ability to meet contractual payments, and the loan will be classified as
credit-impaired, unless the concession granted is insignificant.
Renegotiated loans are classified as non-credit impaired where the renegotiation has resulted from significant concern about a
borrower’s ability to meet contractual payment terms, but contractual cash flows are expected to be collected in full followi ng the
renegotiation and no other unlikely-to-pay indicators are evident.
In the event that a forborne exposure is deemed to be credit-impaired, the renegotiated loan will continue to be disclosed as credit-
impaired until there is sufficient evidence to demonstrate a significant reduction in the risk of non-payment of future cash flows, and
there are no other indicators of impairment. In this respect, 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 credit risk is considered to have
decreased such that the exposure reverts to being classified as Stage 2 or Stage 1. In accordance with the Group’s policy, a loan typically
continues to be classified as renegotiated until maturity, early repayment or write-off.
For the Group, the aggregate amount of renegotiated and forborne loans at reporting date amounted to USD 17,918,227 (2022:
USD12,424,630), of which USD8,111,785 are fully collateralised Stage 2 exposures (2022: USD273,947) with an ECL allowance of USD Nil
(2022: USD Nil), whilst USD9,806,442 are Stage 3 exposures (2022: USD12,150,683) with an ECL allowance of USD6,482,231 (2022:
USD7,249,935) and an extendible collateral value of USD0 (2022: USD251,591). Interest income recognised during 2023 in respect of
renegotiated and forborne assets amounted to USD534,747 (2022: USD695,751).

FIMBank Group Annual Report & Financial Statements 2023 102 For the Bank, the aggregate amount of renegotiated and forborne loans at reporting date amounted to USD16,992,136 (2022: USD10,247,579), of which USD8,111,785 are fully collateralised Stage 2 exposures (2022: USD273,947) with an ECL allowance of Nil (2022: Nil), whilst USD8,880,351 are Stage 3 exposures (2022: USD9,973,632) with an ECL allowance of USD5,673,547 (2022: USD6,120,653) and an extendible collateral value of USD0 (2022: USD251,591). Interest income recognised during 2023 in respect of renegotiated and forborne assets amounted to USD431,581 (2022: USD315,193). Movement in forbearance activity during the year is as follows: Group – 31 December 2023 |  |  |
|  | 2023 |
| Stage 2 | Stage 3 | Total
| USD | USD | USD
At 1 January | 273,947 | 12,150,683 | 12,424,630
Additions | 7,855,466 | 234,957 | 8,090,423
Recovered | (17,628) | (2,539,684) | (2,557,312)
Written off | - | (39,514) | (39,514)
Reclassified | - | - | -
At 31 December | 8,111,785 | 9,806,442 | 17,918,227
Loss allowances | - | (6,482,231) | (6,482,231)

Group – 31 December 2022 |  |  |
|  | 2022 |
| Stage 2 | Stage 3 | Total
| USD | USD | USD
At 1 January | 4,330,159 | 15,837,294 | 20,167,453
Additions | - | 1,761,231 | 1,761,231
Recovered | (4,073,840) | (4,134,796) | (8,208,636)
Written off | - | (1,295,418) | (1,295,418)
Reclassified | 17,628 | (17,628) | -
At 31 December | 273,947 | 12,150,683 | 12,424,630
Loss allowances | - | (7,249,935) | (7,249,935)

Bank – 31 December 2023 |  |  |
|  | 2023 |
| Stage 2 | Stage 3 | Total
| USD | USD | USD
At 1 January | 273,947 | 9,973,632 | 10,247,579
Additions | 7,855,466 | 2,325 | 7,857,791
Recovered | (17,628) | (976,829) | (994,457)
Written off | - | (118,777) | (118,777)
Reclassified | - | - | -
At 31 December | 8,111,785 | 8,880,351 | 16,992,136
Loss allowances | - | (5,673,547) | (5,673,547)

Bank – 31 December 2022 |  |  |
|  | 2022 |
| Stage 2 | Stage 3 | Total
| USD | USD | USD
At 1 January | 1,948,525 | 13,569,272 | 15,517,797
Additions | - | 12,328 | 12,328
Recovered | (1,692,206) | (2,294,922) | (3,987,128)
Written off | - | (1,295,418) | (1,295,418)
Reclassified | 17,628 | (17,628) | -
At 31 December | 273,947 | 9,973,632 | 10,247,579
Loss allowances | - | (6,120,653) | (6,120,653)

FIMBank Group Annual Report & Financial Statements 2023
103
5.2.1.7 Incorporation of forward-looking information
The Group incorporates forward-looking information into both the assessment of whether the credit risk of an instrument has increased
significantly since initial recognition as well as the measurement of ECL, as described in more detail in Notes 5.2.1.2 and 5.2.1.3.
The macroeconomic modelling methodology used by the Group in the measurement of ECL in respect of Stage 1 and Stage 2 exposures
is based on a model developed by Moody’s that leverages updates in market data across industries and countries to estimate conditional
PiT PDs and LGDs by reference to observed and forecasted economic conditions.
The modelling methodology applied by the Group in the estimation of ECLs utilises macroeconomic correlation models to determine the
historical correlation of a borrower’s financial performance with overall macroeconomic conditions, with the correlation fact or being
estimated principally by reference to borrower size as well as the industry and country in which the borrower operates.
The Group uses Moody’s Analytics GCorr Macro
TM
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 identifies and
documents key drivers of credit risk and credit losses. The key drivers of credit risk for the Group’s portfolios are: GDP growth rates,
unemployment rates and equity prices. For exposures to specific industries and/or regions, the key drivers of credit risk 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 information in respect of a specific country exposure is not
available, the Group maps the exposure to the geographical region with the closest economic structure and credit risk drivers.
The Group applies three economic scenarios to capture non-linearity across portfolios in the estimation of ECLs: a base case, which is
the median scenario assigned a 40% probability of occurring, and two less likely scenarios, namely an upside and a downside scenario,
each assigned a 30% probability of occurrence. Moody’s Analytics regularly updates the base case forecast and alternative scenarios.
The upside and downside scenario represent hypothetical events that push the economy away from the base case outlook.
Forecasted economic data in respect of each of the three scenarios are sourced from Moody’s Analytics on a quarterly basis. The
historical data in the Group’s model reflects economic data published by national statistics offices and reputable third-party aggregators
such as the World Bank and the International Monetary Fund.
The economic scenarios are developed by Moody’s Analytics through a Global Macro Model used to establish 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. The scenarios are constructed in accordance with a target severity for each
scenario. The probability weights assigned to each scenario are calibrated by reference to their severity and on how well they
approximate possible future economic developments.
The model applies three possible scenarios covering a wide range of possible outcomes. Each scenario assumes different economic
circumstances, global oil prices, disruptions to global oil supply, winding down of extraordinary fiscal support, impact of high debt levels
and an ageing population on eurozone growth, increased (or decreased) tension levels over Russia’s invasion of Ukraine and the
escalation (or non-escalation) of Israel’s war on Hamas to a broader regional conflict. The main assumptions used in the model include
different levels of:
• geopolitical tensions, growth outlook, labour market conditions, pandemic resurgence/rebound, supply chain shortages;
• financial market conditions, debt sustainability, fiscal stimulus, consumer and business sentiment;
• oil prices, gas supply, surging energy costs, inflation, unemployment rates, GDP rates, input prices and demand for services; and
• deposit rates, bond yields, disposable income, interbank market rates, money and bond market sentiment.
As at 31 December 2023 and 31 December 2022, the projected macroeconomic paths in respect of the key macroeconomic variables
selected for the top five geographical regions applied in the ECL calculation across the three macroeconomic scenarios and for the five-
year forecasted period from the financial year ending 31 December 2024 to 2028 (2022: 31 December 2023 to 2027) are presented in
the following tables. Given that the Group and Bank present information in respect of the top five geographical regions in terms of
exposure amounts at each reporting date, different countries might be presented for different financial years in order to present
information which is relevant for the ECL calculation at each respective reporting date.
FIMBank Group Annual Report & Financial Statements 2023
104
31 December 2023

|  |  |  | Year-on-year change |  |
Country: Germany |  | 2024 | 2025 | 2026 | 2027 | 2028
Equity | Base | 8% | 2% | 3% | 3% | 2%
| Upside | 15% | 6% | 4% | 2% | 1%
| Downside | -29% | 29% | 14% | 5% | 2%
GDP growth | Base | 1% | 2% | 2% | 1% | 1%
| Upside | 3% | 2% | 2% | 1% | 1%
| Downside | -5% | 2% | 3% | 2% | 1%
Unemployment | Base | 0% | -3% | -2% | -2% | -2%
| Upside | -8% | -2% | 1% | 0% | -1%
| Downside | 18% | 3% | -11% | -8% | -4%
Country: Malta |  | 2024 | 2025 | 2026 | 2027 | 2028
Equity | Base | 9% | 12% | 13% | 11% | 8%
| Upside | 22% | 9% | 12% | 9% | 7%
| Downside | -22% | 31% | 26% | 13% | 9%
GDP growth | Base | 4% | 4% | 3% | 3% | 3%
| Upside | 7% | 4% | 3% | 3% | 3%
| Downside | -3% | 5% | 4% | 3% | 3%
Unemployment | Base | 25% | -1% | -4% | 0% | 0%
| Upside | 24% | -3% | -4% | 0% | 0%
| Downside | 40% | 1% | -13% | 0% | 1%
Country: India |  | 2024 | 2025 | 2026 | 2027 | 2028
Equity | Base | 11% | 7% | 7% | 8% | 7%
| Upside | 19% | 6% | 8% | 6% | 6%
| Downside | -26% | 22% | 19% | 12% | 6%
GDP growth | Base | 7% | 6% | 6% | 6% | 6%
| Upside | 9% | 7% | 7% | 6% | 6%
| Downside | -2% | 5% | 7% | 7% | 7%
Unemployment | Base | 1% | 0% | -1% | -1% | -1%
| Upside | -4% | 0% | 1% | 0% | 0%
| Downside | 34% | 5% | -15% | -11% | -5%
FX | Base | -1% | 1% | 0% | 0% | 1%
| Upside | -3% | 1% | 0% | 0% | 1%
| Downside | 4% | 1% | 0% | 0% | 1%
Country: Egypt |  | 2024 | 2025 | 2026 | 2027 | 2028
Equity | Base | 14% | 6% | 6% | 4% | 3%
| Upside | 30% | 3% | 4% | 1% | 2%
| Downside | -34% | 33% | 24% | 11% | 4%
GDP growth | Base | 4% | 6% | 5% | 5% | 5%
| Upside | 7% | 6% | 5% | 5% | 5%
| Downside | -1% | 6% | 6% | 6% | 5%
Unemployment | Base | 3% | 0% | 2% | 2% | 1%
| Upside | -3% | 1% | 5% | 4% | 1%
| Downside | 29% | -3% | -6% | -4% | -2%
Country: Italy |  | 2024 | 2025 | 2026 | 2027 | 2028
Equity | Base | 8% | 9% | 11% | 6% | 4%
| Upside | 17% | 9% | 9% | 4% | 4%
| Downside | -28% | 30% | 23% | 9% | 4%
Unemployment | Base | 3% | 3% | 1% | 0% | 0%
| Upside | 0% | 2% | 2% | 1% | 1%
| Downside | 35% | 4% | -6% | -5% | -3%
Eurozone GDP | Base | 1% | 2% | 2% | 2% | 1%
| Upside | 3% | 2% | 2% | 2% | 1%
| Downside | -5% | 2% | 3% | 2% | 1%

FIMBank Group Annual Report & Financial Statements 2023
105
31 December 2022

|  |  |  | Year-on-year change |  |
Country: Malta |  | 2023 | 2024 | 2025 | 2026 | 2027
Equity | Base | 1% | 8% | 10% | 9% | 7%
| Upside | 14% | 4% | 8% | 7% | 6%
| Downside | -28% | 26% | 24% | 12% | 7%
GDP growth | Base | 7% | 1% | 4% | 3% | 2%
| Upside | 9% | 1% | 4% | 3% | 2%
| Downside | 1% | 1% | 5% | 3% | 2%
Unemployment | Base | 12% | 3% | 2% | 1% | 1%
| Upside | 11% | 1% | 3% | 2% | 2%
| Downside | 24% | 15% | -1% | -3% | -3%
Country: Germany |  | 2023 | 2024 | 2025 | 2026 | 2027
Equity | Base | 5% | -2% | 4% | 4% | 3%
| Upside | 10% | 2% | 4% | 3% | 2%
| Downside | -31% | 23% | 15% | 6% | 2%
GDP growth | Base | 1% | 4% | 3% | 2% | 1%
| Upside | 3% | 4% | 3% | 2% | 1%
| Downside | -5% | 5% | 4% | 2% | 1%
Unemployment | Base | 3% | -3% | -2% | -1% | 0%
| Upside | -6% | -7% | 1% | 2% | 1%
| Downside | 35% | 0% | -9% | -6% | -5%
Country: India |  | 2023 | 2024 | 2025 | 2026 | 2027
Equity | Base | 6% | 4% | 4% | 2% | 2%
| Upside | 13% | 3% | 4% | 1% | 3%
| Downside | -16% | 12% | 8% | 4% | 3%
GDP growth | Base | 5% | 7% | 6% | 5% | 5%
| Upside | 7% | 8% | 7% | 5% | 5%
| Downside | -3% | 7% | 6% | 4% | 5%
Unemployment | Base | 5% | -1% | 0% | 0% | 0%
| Upside | 2% | -1% | 0% | 0% | 0%
| Downside | 12% | -2% | -2% | -2% | -1%
FX | Base | 2% | 1% | 1% | 1% | 1%
| Upside | 1% | 2% | 1% | 1% | 1%
| Downside | 6% | -1% | 0% | 1% | 1%
Country: United Arab Emirates |  | 2023 | 2024 | 2025 | 2026 | 2027
Equity | Base | -2% | -1% | 1% | 0% | 1%
| Upside | 4% | -3% | 0% | 0% | 1%
| Downside | -20% | 8% | 4% | 2% | 1%
Unemployment | Base | -7% | -10% | -4% | -1% | -1%
| Upside | -29% | 1% | 12% | -1% | -1%
| Downside | 21% | -20% | -9% | -6% | -3%
Oil price | Base | -11% | -15% | -1% | 1% | 1%
| Upside | -9% | -17% | -2% | 1% | 1%
| Downside | -34% | -3% | 13% | 1% | 2%
Country: Egypt |  | 2023 | 2024 | 2025 | 2026 | 2027
Equity | Base | 32% | 3% | 3% | 3% | 2%
| Upside | 50% | -2% | 0% | 1% | 2%
| Downside | -16% | 30% | 17% | 3% | 2%
GDP growth | Base | 6% | 5% | 5% | 5% | 5%
| Upside | 8% | 5% | 5% | 5% | 5%
| Downside | 1% | 5% | 6% | 6% | 5%
Unemployment | Base | -1% | 1% | 2% | 2% | 1%
| Upside | -5% | 2% | 4% | 2% | 1%
| Downside | -5% | 2% | 3% | 2% | 1%

FIMBank Group Annual Report & Financial Statements 2023
106
Sensitivity of ECL to future economic conditions
The ECL is sensitive to judgements and assumptions made in respect of the formulation and calibration of forward-looking
macroeconomic scenarios and how such scenarios are incorporated into the ECL calculation.
The level of estimation uncertainty and judgement as at 31 December 2023 remains elevated as a result of the economic effects of the
significant inflationary pressures and the ensuing elevated interest rate environment being currently experienced. The latter is the direct
consequence of a response by the European Central Bank (”ECB”) and other regulators from a monetary policy perspective, with
announced increases in interest rates designed to curb the spiralling effect of inflationary pressures.
In addition, the level of macroeconomic uncertainty is compounded by global geopolitical conflicts, in particular the ongoing military
conflict between Russia and Ukraine as well as the escalation of the military conflict between Israel and Hamas in the Middle East. In
this respect, the level of estimation uncertainty and judgement has remained high during 2023. Therefore, the underlying models and
their calibration, including how they react to forward-looking economic conditions, remain highly subjective. In this respect,
Management performs a sensitivity analysis on the ECL recognised in respect of material asset classes.
The tables below show the loss allowance assuming that 100% probability weights were assigned to each of the three forward-looking
macroeconomic scenarios (e.g. base case, upside and downside) instead of applying a weighted average ECL across the three
macroeconomic scenarios. For ease of comparison, the tables also include the probability-weighted amounts that are reflected in the
Financial Statements.
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Group – 31 December 2023

|  |  | 2023 |
| Upside | Base Case | Downside | Probability-
|  |  |  | weighted
| USD | USD | USD | USD
Loans and advances to customers |  |  |  |
Gross exposure | 450,255,367 | 450,255,367 | 450,255,367 | 450,255,367
Loss allowance | 16,996,812 | 17,728,585 | 21,341,671 | 18,913,293

Group – 31 December 2022

|  |  | 2022 |
| Upside | Base Case | Downside | Probability-
|  |  |  | weighted
| USD | USD | USD | USD
Loans and advances to customers |  |  |  |
Gross exposure | 559,604,964 | 559,604,964 | 559,604,964 | 559,604,964
Loss allowance | 74,945,575 | 75,368,976 | 76,983,861 | 75,076,907

Bank – 31 December 2023

|  |  | 2023 |
| Upside | Base Case | Downside | Probability-
|  |  |  | weighted
| USD | USD | USD | USD
Loans and advances to customers |  |  |  |
Gross exposure | 630,905,238 | 630,905,238 | 630,905,238 | 630,905,238
Loss allowance | 9,477,335 | 10,049,349 | 13,187,940 | 12,787,013

Bank – 31 December 2022

|  |  | 2022 |
| Upside | Base Case | Downside | Probability-
|  |  |  | weighted
| USD | USD | USD | USD
Loans and advances to customers |  |  |  |
Gross exposure | 787,271,344 | 787,271,344 | 787,271,344 | 787,271,344
Loss allowance | 68,027,484 | 68,291,356 | 69,406,260 | 68,360,917

5.2.1.8 Write-off policy
The Group writes off an exposure (and any related allowances for impairment losses) when it has been determined that the exposure is
partially or fully uncollectible. This determination is reached after considering information such as the occurrence of significant changes
in the borrower’s or issuer’s financial position such that the borrower or 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 in Note 5.2.1.5 shows the gross carrying value of loans written off during the financial years ended 31 December 2023 and 31
December 2022 and the reversal of related loss allowance.
FIMBank Group Annual Report & Financial Statements 2023
108
5.2.1.9 Collateral analysis
The Group employs a range of policies and practices to mitigate credit risk. The amount and type of collateral required depends on an
assessment of the credit risk of the counterparty. The Group’s Board established a policy regarding the acceptability of type s of collateral
and valuation parameters.
Loans are typically secured by cash collateral, property (including shipping vessels), credit insurance cover, bank guarantees, corporate
guarantees, personal guarantees, pledged goods or some combination thereof. A haircut is applied to each collateral type depending on
the haircuts 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 is usually not held against investment securities, and no such
collateral was held as at 31 December 2023 and 31 December 2022.
The nominal value is disclosed for all types of collateral other than for (a) shipping mortgages which are disclosed at the fair valuation
obtained from an independent third party and (b) property which is disclosed at the market value obtained from an independent third
party. An estimate of the fair value of collateral and other security enhancements held against financial assets is shown below:
FIMBank Group Annual Report & Financial Statements 2023
109
Group – 31 December 2023

| Gross carrying |  |  |  | Shipping | Insurance | Total | Net uncovered
| amount | Cash | Property | Guarantees | mortgages | cover | collateral | amount
| USD | USD | USD | USD | USD | USD | USD | USD
Loans and advances to customers |  |  |  |  |  |  |  |
Stage 1 | 348,322,143 | 26,402,184 | 69,988,324 | 79,334,188 | 29,500,000 | 21,643,209 | 226,867,905 | 121,454,238
Stage 2 | 74,817,853 | 4,368,835 | 8,784,388 | 2,805,735 | - | 9,955 | 15,968,913 | 58,848,940
Stage 3 | 27,115,371 | 1,155,046 | 3,119,493 | - | - | - | 4,274,539 | 22,840,832
| 450,255,367 | 31,926,065 | 81,892,205 | 82,139,923 | 29,500,000 | 21,653,164 | 247,111,357 | 203,144,010
Commitments |  |  |  |  |  |  |  |
Stage 1 | 135,277,631 | 2,028,970 | 59,157,272 | 25,758,372 | - | - | 86,944,614 | 48,333,017
Stage 2 | 12,526,076 | 7,406,256 | 2,892,495 | - | - | - | 10,298,751 | 2,227,325
Stage 3 | - | - | - | - | - | - | - | -
Guarantees | 147,803,707 | 9,435,226 | 62,049,767 | 25,758,372 | - | - | 97,243,365 | 50,560,342
Stage 1 | 27,995,205 | 10,028,880 | - | - | - | - | 10,028,880 | 17,966,325
Stage 2 | 30,069 | - | - | - | - | - | - | 30,069
Stage 3 | - | - | - | - | - | - | - | -
| 28,025,274 | 10,028,880 | - | - | - | - | 10,028,880 | 17,996,39 4

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110
Group – 31 December 2022

| Gross carrying |  |  |  | Shipping | Insurance | Total | Net uncovered
| amount | Cash | Property | Guarantees | mortgages | cover | collateral | amount
Loans and advances to customers | USD | USD | USD | USD | USD | USD | USD | USD
Stage 1 | 332,452,354 | 11,078,422 | 76,874,414 | 19,260,275 | 14,900,000 | 37,136,509 | 159,249,620 | 173,202,734
Stage 2 | 124,620,784 | 41,029,795 | 420,464 | 4,740,753 | - | 284,328 | 46,475,340 | 78,145,444
Stage 3 | 102,531,826 | 3,160,557 | - | - | - | 11,475,283 | 14,635,840 | 87,895,986
| 559,604,964 | 55,268,774 | 77,294,878 | 24,001,028 | 14,900,000 | 48,896,120 | 220,360,800 | 339,244,164
Commitments |  |  |  |  |  |  |  |
Stage 1 | 85,964,984 | 1,398,578 | 52,773,508 | 10,631,703 | - | - | 64,803,789 | 21,161,195
Stage 2 | 14,036,479 | 13,356,805 | - | - | - | - | 13,356,805 | 679,674
Stage 3 | - | - | - | - | - | - | - | -
Guarantees | 100,001,463 | 14,755,383 | 52,773,508 | 10,631,703 | - | - | 78,160,594 | 21,840,869
Stage 1 | 11,877,891 | 4,215,057 | - | - | - | - | 4,215,057 | 7,662,834
Stage 2 | 89,974 | 57,455 | - | - | - | - | 57,455 | 32,519
Stage 3 | 166,577 | - | - | - | - | - | - | 166,577
| 12,134,442 | 4,272,512 | - | - | - | - | 4,272,512 | 7,861,930

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111
Bank – 31 December 2023

| Gross carrying |  |  |  | Shipping | Insurance | Total | Net uncovered
| amount | Cash | Property | Guarantees | mortgages | cover | collateral | amount
Loans and advances to customers | USD | USD | USD | USD | USD | USD | USD | USD
Stage 1 | 574,232,438 | 26,402,184 | 69,988,324 | 24,727,608 | 29,500,000 | 13,537,521 | 164,155,637 | 410,076,801
Stage 2 | 36,066,877 | 4,368,835 | 8,784,388 | 563,079 | - | 2,925 | 13,719,227 | 22,347,650
Stage 3 | 20,605,923 | 1,155,046 | 3,119,493 | - | - | - | 4,274,539 | 16,331,384
| 630,905,238 | 31,926,065 | 81,892,205 | 25,290,687 | 29,500,000 | 13,540,446 | 182,149,403 | 448,755,835
Commitments |  |  |  |  |  |  |  |
Stage 1 | 87,694,011 | 2,028,970 | 59,157,272 | 17,558,372 | - | - | 78,744,614 | 8,949,397
Stage 2 | 12,526,076 | 7,406,256 | 2,892,495 | - | - | - | 10,298,751 | 2,227,325
Stage 3 | - | - | - | - | - | - | - | -
Guarantees | 100,220,087 | 9,435,226 | 62,049,767 | 17,558,372 | - | - | 89,043,365 | 11,176,722
Stage 1 | 39,044,929 | 10,397,443 | - | - | - | - | 10,397,443 | 28,647,486
Stage 2 | 30,069 | - | - | - | - | - | - | 30,069
Stage 3 | - | - | - | - | - | - | - | -
| 39,074,998 | 10,397,443 | - | - | - | - | 10,397,443 | 28,677,555

FIMBank Group Annual Report & Financial Statements 2023
112
Bank – 31 December 2022

| Gross carrying |  |  |  | Shipping | Insurance | Total | Net uncovered
| amount | Cash | Property | Guarantees | mortgages | cover | collateral | amount
Loans and advances to customers | USD | USD | USD | USD | USD | USD | USD | USD
Stage 1 | 620,988,500 | 11,078,422 | 76,874,414 | 19,040,859 | 14,900,000 | 37,136,509 | 159,030,204 | 461,958,296
Stage 2 | 72,447,468 | 41,029,795 | 420,464 | 4,740,750 | - | 284,328 | 46,475,337 | 25,972,131
Stage 3 | 93,835,376 | 3,160,557 | - | - | - | 11,475,283 | 14,635,840 | 79,199,536
| 787,271,344 | 55,268,774 | 77,294,878 | 23,781,609 | 14,900,000 | 48,896,120 | 220,141,381 | 567,129,963
Commitments |  |  |  |  |  |  |  |
Stage 1 | 77,377,944 | 1,398,578 | 52,773,508 | 10,631,703 | - | - | 64,803,789 | 12,574,155
Stage 2 | 14,036,479 | 13,356,805 | - | - | - | - | 13,356,805 | 679,674
Stage 3 | - | - | - | - | - | - | - | -
Guarantees | 91,414,423 | 14,755,383 | 52,773,508 | 10,631,703 | - | - | 78,160,594 | 13,253,829
Stage 1 | 35,875,332 | 4,208,195 | - | - | - | - | 4,208,195 | 31,667,136
Stage 2 | 89,974 | 57,455 | - | - | - | - | 57,455 | 32,519
Stage 3 | 166,577 | - | - | - | - | - | - | 166,577
| 36,131,883 | 4,265,650 | - | - | - | - | 4,265,650 | 31,866,232

FIMBank Group Annual Report & Financial Statements 2023
113
5.2.1.10 Offsetting financial assets and financial liabilities
With the exception of cash collateral, as disclosed in this Note and in Notes 33 and 35, the Group and Bank do not carry financial
instruments which are subject to offsetting in the Statements of Financial Position. Group entities have a legally enforceable right to
offset such collaterals against the respective facilities for which the collateral is taken under default events. At 31 December 2023 and
2022, all financial assets and respective collaterals are disclosed separately in the Financial Statements without any offsetting.
5.2.2 Concentration of credit risk
The Group has established policies requiring limits on counterparties and countries, and controls in relation to concentration to specific
sectors, and industries, thus ensuring more diversified on- and off- balance sheet lending portfolios.
Single-name counterparty limits follow the prudential rules emanating from the Capital Requirements Regulation 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 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 transfe r 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 investme nt 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 entitie s put forward
their business requests and counterparty approval requests to the Group Risk Management function 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 geog raphies 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
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 mor e
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 an analysis covering the political and economic situations for each of
the countries to which a limit is issued.
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114
The following are the Group’s and Bank’s region concentrations:

|  | Group |  |  | Bank
|  | 2023 | 2022 | 2023 | 2022
|  | USD | USD | USD | USD
Balances with the Central Bank of Malta, | treasury bills and cash |  |  |  |
– | Europe | 353,010,186 | 216,867,325 | 352,997,057 | 216,852,467
|  | 353,010,186 | 216,867,325 | 352,997,057 | 216,852,467
Trading assets |  |  |  |  |
– | Europe | 31,828,756 | 82,233,407 | - | -
– | Sub-Saharan Africa | 139,775,814 | 147,323,290 | - | -
– | Middle East and North Africa (MENA) | 110,850,563 | 98,619,466 | - | -
– | Commonwealth of Independent States (CIS) region | 16,246,223 | 5,099,800 | - | -
– | Others | 75,475,752 | 111,307,698 | - | -
|  | 374,177,108 | 444,583,661 | - | -
Loans and advances to banks |  |  |  |
– | Europe | 34,656,678 | 99,536,057 | 33,749,056 | 99,026,856
– | Sub-Saharan Africa | 45,171,224 | 5,106,346 | 45,171,224 | 5,106,346
– | Commonwealth of Independent States (CIS) region | 19,113,436 | 30,648,535 | 11,463,939 | 18,370,349
– | Middle East and North Africa (MENA) | 330,624 | 994,656 | 330,624 | 970,605
– | Others | 53,542,986 | 13,428,332 | 23,610,400 | 2,408,276
|  | 152,814,948 | 149,713,926 | 114,325,243 | 125,882,432
Loans and advances to customers |  |  |  |
– | Europe | 155,078,652 | 174,266,901 | 370,179,082 | 427,705,590
– | Sub-Saharan Africa | 52,698,508 | 16,747,725 | 51,842,806 | 15,592,890
– | Middle East and North Africa (MENA) | 133,279,528 | 200,960,130 | 101,208,100 | 184,557,632
– | Others | 90,285,386 | 92,553,301 | 94,888,237 | 91,054,315
|  | 431,342,074 | 484,528,057 | 618,118,225 | 718,910,427
Financial investments at fair value through profit or loss |  |  |  |
– | Europe | 18,688,853 | 17,426,377 | 18,688,853 | 17,426,377
– | Middle East and North Africa (MENA) | 640,987 | 752,843 | 640,987 | 752,843
Financial investments at fair value through other | comprehensive income | 19,329,840 | 18,179,220 | 19,329,840 | 18,179,220
– | Europe | 140,755,780 | 143,189,022 | 140,755,780 | 143,189,022
|  | 140,755,780 | 143,189,022 | 140,755,780 | 143,189,022
Financial investments at amortised cost |  |  |  |
– | Europe | 18,754,079 | 4,834,729 | 18,754,079 | 4,834,729
– | Middle East and North Africa (MENA) | 9,644,994 | 9,767,279 | 9,644,994 | 9,767,279
|  | 28,399,073 | 14,602,008 | 28,399,073 | 14,602,008
Guarantees |  |  |  |  |
– | Europe | 27,605,515 | 11,522,050 | 38,655,239 | 35,519,491
– | Middle East and North Africa (MENA) | 419,759 | 612,392 | 419,759 | 612,392
|  | 28,025,274 | 12,134,442 | 39,074,998 | 36,131,883
Commitments |  |  |  |  |
– | Europe | 72,422,491 | 59,212,388 | 72,422,491 | 59,765,103
– | Sub-Saharan Africa | 39,544,662 | 24,524,102 | 9,759,120 | 18,124,563
– | Middle East and North Africa (MENA) | 22,752,586 | 13,524,757 | 17,752,586 | 13,524,757
– | Others | 13,083,968 | 2,740,216 | 285,890 | -
|  | 147,803,707 | 100,001,463 | 100,220,087 | 91,414,423

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115
The following are the Group’s and Bank’s sector concentrations:

|  | Group |  | Bank |
|  | 2023 | 2022 | 2023 | 2022
|  | USD | USD | USD | USD
Balances with the Central Bank of Malta, treasury bills and cash |  |  |  |  |
– | Financial intermediation | 221,758,441 | 91,488,249 | 221,745,312 | 91,473,391
– | Public administration | 131,251,745 | 125,379,076 | 131,251,745 | 125,379,076
|  | 353,010,186 | 216,867,325 | 352,997,057 | 216,852,467
Trading assets |  |  |  |
– | Industrial raw materials | 37,734,232 | 51,798,300 | - | -
– | Shipping and transportation | 351,497 | 5,600,957 | - | -
– | Wholesale and retail trade | 16,995,057 | 35,115,323 | - | -
– | Financial intermediation | 239,193,354 | 248,681,065 | - | -
– | Public administration | 68,654,187 | 67,809,494 | - | -
– | Other services | 11,248,781 | 35,578,522 | - | -
|  | 374,177,108 | 444,583,661 | - | -
Loans and advances to banks |  |  |  |
– | Financial intermediation | 152,814,948 | 149,713,926 | 114,325,243 | 125,882,432
|  | 152,814,948 | 149,713,926 | 114,325,243 | 125,882,432
Loans and advances to customers |  |  |  |
– | Industrial raw materials | 183,171,375 | 172,578,767 | 55,658,839 | 72,815,848
– | Shipping and transportation | 966,513 | 2,031,586 | 673,989 | -
– | Wholesale and retail trade | 127,745,154 | 130,462,081 | 95,547,769 | 91,712,231
– | Financial intermediation | 52,927,880 | 52,683,256 | 383,386,425 | 412,921,413
– | Real estate activities | 46,908,035 | 53,353,107 | 77,308,258 | 79,530,116
– | Other services | 19,623,117 | 73,419,260 | 5,542,945 | 61,930,819
|  | 431,342,074 | 484,528,057 | 618,118,225 | 718,910,427
Financial investments at fair value through profit or loss |  |  |  |
– | Financial intermediation | 19,277,483 | 18,126,144 | 19,277,483 | 18,126,144
– | Other services | 52,357 | 53,076 | 52,357 | 53,076
|  | 19,329,840 | 18,179,220 | 19,329,840 | 18,179,220
Financial investments at fair value through other comprehensive income |  |  |  |
– | Shipping and transportation | 5,304,461 | 9,849,204 | 5,304,461 | 9,849,204
– | Financial intermediation | 39,578,149 | 46,564,488 | 39,578,149 | 46,564,488
– | Public administration | 95,873,170 | 86,775,330 | 95,873,170 | 86,775,330
|  | 140,755,780 | 143,189,022 | 140,755,780 | 143,189,022
Financial investments at amortised cost |  |  |  |
– | Financial intermediation | 17,060,289 | 14,602,008 | 17,060,289 | 14,602,008
– | Public administration | 11,338,784 | - | 11,338,784 | -
|  | 28,399,073 | 14,602,008 | 28,399,073 | 14,602,008
Guarantees |  |  |  |  |
– | Industrial raw materials | 8,129,749 | 2,302,822 | 8,129,749 | 2,302,822
– | Shipping and transportation | - | 180,000 | - | 180,000
– | Wholesale and retail trade | 368,564 | 368,564 | 368,564 | 368,564
– | Financial intermediation | 16,155,043 | 5,841,433 | 27,204,767 | 29,845,736
– | Real estate activities | 3,351,702 | 3,203,281 | 3,351,702 | 3,203,281
– | Other services | 20,216 | 238,342 | 20,216 | 231,480
|  | 28,025,274 | 12,134,442 | 39,074,998 | 36,131,883
Commitments |  |  |  |
– | Industrial raw materials | 39,245,995 | 27,960,496 | 28,382,235 | 27,960,496
– | Wholesale and retail trade | 20,733,217 | 1,476,405 | 20,733,217 | 1,476,405
– | Financial intermediation | 53,686,665 | 29,028,954 | 16,966,805 | 26,841,454
– | Real estate activities | 27,988,824 | 34,682,412 | 27,988,824 | 34,682,412
– | Public administration | - | 6,399,540 | - | -
– | Other services | 6,149,006 | 453,656 | 6,149,006 | 453,656
|  | 147,803,707 | 100,001,463 | 100,220,087 | 91,414,423

FIMBank Group Annual Report & Financial Statements 2023
116
5.2.3 Counterparty credit risk
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.
The use of derivatives within the Group is limited to hedging balance sheet positions, hedging capital investments, and interest rate
hedging on behalf of LFC. 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.
5.2.4 Settlement risk
Settlement risk arises through failed delivery versus payment (“DvP”) transactions and for all n on-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 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.
5.2.5 Foreign exchange lending risk
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 onboarding. 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.
5.3 Liquidity risk
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 primarily due to mismatches in the maturity profile of financial assets and liabilities, which exposes the Group to the
risk that it might not be able to meet its liabilities as they become due or will have to do so at excessive cost. Liquidity risk may also be
affected by the depth of the market in which the Group operates.
Liquidity risk is divided into two categories:
• Market liquidity risk: risk of losses arising from difficulties in accessing the market at the required time, price and volume.
• Funding liquidity risk: risk of losses arising from a timing mismatch in respect of the maturities of financial assets and liabilities,
resulting in a risk that the Bank does not meet obligations when due or will have to raise funding at higher than normal rate s.
FIMBank Group Annual Report & Financial Statements 2023
117
Liquidity risk arises in the general funding of the Group’s activities and t he 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 ongoing Russia/Ukraine conflict, the liquidity crisis seen in a number of small US banks and other geopolitical
headwinds, the Group maintained a strong liquidity profile with an elevated level of high-quality liquid assets maintaining its Liquidity
Coverage Ratio on average close to 300% to mitigate the risk of unexpected liquidity outflows or shortfalls, well above the regulatory
minimum of 100%.
5.3.1 Management of liquidity risk
Liquidity risk is managed by maintaining significant levels of liquid funds, and by identifying and monitoring changes in funding required
to meet business goals driven by Management.
The Group’s ALCO is respo nsible 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. The Treasury unit then maintains a portfolio of liquid assets,
largely made up of high-quality liquid investment securities, loans and advances to banks and other inter-bank facilities, to ensure that
sufficient liquidity is maintained. 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 coordination 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.
5.3.2 Exposure to liquidity risk
The key measures used by the Group for managing liquidity risk are presented below.
5.3.2.1 Liquidity coverage ratio (“LCR”)
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 quickly convert 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%. During the financial years ended 31 December 2023 and 2022, the LCR was in excess of both the regulatory
minimum and the risk appetite thresholds set by the Group and Bank. Additional disclosures are included within the Pillar 3 Disclosures
Report published on the Bank’s website.
FIMBank Group Annual Report & Financial Statements 2023
118
5.3.2.2 Net stable funding ratio (“NSFR”)
The NSFR ratio requires the Group to maintain a stable funding profile in relation to the composition of its assets and off-balance sheet
activities. By maintaining a stable funding structure the Group reduces the likelihood that disruptions to the regular sources of funding
will erode its liquidity position in a way that would increase the risk of failure, which will potentially lead to broader systemic stress. The
NSFR limits overreliance on short-term wholesale funding, encourages better assessment of funding risk across all on- and off-balance
sheet items, and promotes funding stability. During the financial years ended 31 December 2023 and 2022, the NSFR was in excess of
both the regulatory minimum and the risk appetite thresholds set by the Group and Bank. The regulatory minimum is set at 100%.
Additional disclosures are included within the Pillar 3 Disclosures Report.
5.3.2.3 Concentration risk with regards to liquidity management
In addition to monitoring overall liquidity risk via the LCR and NSFR, the Group also takes into consideration the proportion of total
funding arising from wholesale sources, the value of deposits raised from the top 10 bank, corporate and retail depositors, and the
concentration of deposits raised from Online De posit Platforms. The Group’s single largest source of deposits is an Online Deposit
Platform that aggregates deposits from a large number of individual retail depositors. These depositors place up to a maximum of
€100,000 with the Bank (to ensure the entire balance is covered under the Depositor Compensation Scheme) based on their assessment
of the country risk associated with Malta and the interest rate offered by the Bank. The Bank manages the volume of deposits via
adjustments to the offered rates to either encourage or discourage new deposits or the roll over of existing deposits. These additional
liquidity risk measures are managed on a day-to-day basis by the Treasury function, monitored by the Risk Management Department,
and reported to and overseen by the ALCO and Board Risk Committee.
FIMBank Group Annual Report & Financial Statements 2023
119
5.3.2.4 Residual contractual maturities of financial assets and liabilities
Group - 31 December 2023

|  | Gross nominal |  |  |  | Between 6 |  |  |
| Carrying | inflow/ | Less than | Between 1 | Between 3 | months | Between 1 | More than |
| amount | (outflow) | 1 month | & 3 months | & 6 months | & 1 year | & 2 years | 2 years | No maturity
| USD | USD | USD | USD | USD | USD | USD | USD | USD
Assets |  |  |  |  |  |  |  |  |
Balances with the Central Bank of Malta, treasury bills and cash | 353,010,186 | 353,071,229 | 232,384,310 | 63,022,868 | 33,015,391 | 16,239,560 | - | - | 8,409,100
Trading assets | 374,177,108 | 410,280,357 | 11,529,342 | 60,824,498 | 110,472,027 | 110,387,195 | 48,355,640 | 68,711,655 | -
Derivative assets held for risk |  |  |  |  |  |  |  |  |
management | 715,713 | 715,713 | 603,886 | 99,879 | - | 11,948 | - | - | -
Loans and advances to banks | 152,814,948 | 153,994,103 | 96,007,756 | 38,126,895 | 7,883,657 | 2,721,814 | - | 9,253,981 | -
Loans and advances to customers | 431,342,074 | 458,572,278 | 126,252,520 | 71,866,719 | 83,430,623 | 82,730,854 | 20,542,787 | 73,748,775 | -
Financial investments at fair value through profit or loss | 19,329,840 | 19,329,840 | - | - | - | - | - | - | 19,329,840
Financial investments at fair value through OCI | 140,755,780 | 147,651,397 | 5,103,566 | - | - | 12,903,183 | 28,142,988 | 101,501,660 | -
Financial investments at amortised cost | 28,399,073 | 32,497,878 | - | 2,458,798 | 5,653,384 | 9,513,458 | 3,505,613 | 11,366,625 | -
Total assets | 1,500,544,722 | 1,576,112,795 | 471,881,380 | 236,399,657 | 240,455,082 | 234,508,012 | 100,547,028 | 264,582,696 | 27,738,940
Liabilities |  |  |  |  |  |  |  |  |
Derivative liabilities held for risk |  |  |  |  |  |  |  |  |
management | (626,476) | (626,476) | (455,055) | (86,901) | - | (84,520) | - | - | -
Amounts owed to institutions |  |  |  |  |  |  |  |  |
and banks | (412,570,931) | (415,245,710) | (275,542,230) | (88,401,569) | (33,298,863) | (9,371,546) | - | (8,631,502) | -
Amounts owed to customers | (934,738,942) | (942,582,357) | (455,267,877) | (189,778,254) | (155,205,077) | (131,534,323) | (3,065,975) | (7,730,851) | -
Debt securities in issue | (27,543,864) | (27,940,439) | (5,524,862) | (11,049,724) | (11,365,853) | - | - | - | -
Other liabilities | (2,118,563) | (2,195,987) | (36,292) | (149,146) | (259,972) | (438,056) | (631,150) | (681,371) | -
Total liabilities | (1,377,598,776) | (1,388,590,969) | (736,826,316) | (289,465,594) | (200,129,765) | (141,428,445) | (3,697,125) | (17,043,724) | -
Liquidity gap |  |  | (264,944,936) | (53,065,937) | 40,325,317 | 93,079,567 | 96,849,903 | 247,538,972 |
Cumulative liquidity gap |  |  | (264,944,936) | (318,010,873) | (277,685,556) | (184,605,989) | (87,756,086) | 159,782,886 |

FIMBank Group Annual Report & Financial Statements 2023
120
Group - 31 December 2022

|  | Gross nominal |  |  |  | Between 6 |  |  |
| Carrying | inflow/ | Less than | Between 1 | Between 3 | months | Between 1 | More than |
| amount | (outflow) | 1 month | & 3 months | & 6 months | & 1 year | & 2 years | 2 years | No maturity
| USD | USD | USD | USD | USD | USD | USD | USD | USD
Assets |  |  |  |  |  |  |  |  |
Balances with the Central Bank of Malta, treasury bills and cash | 216,867,325 | 216,861,803 | 108,822,568 | 63,592,889 | 22,168,959 | 10,614,721 | - | - | 11,662,666
Trading assets | 444,583,661 | 469,233,392 | 28,003,387 | 72,891,424 | 151,358,755 | 131,317,048 | 62,839,537 | 22,823,241 | -
Derivative assets held for risk |  |  |  |  |  |  |  |  |
management | 1,610,475 | 1,610,475 | 862,905 | 390,260 | 303,465 | 53,845 | - | - | -
Loans and advances to banks | 149,713,926 | 151,314,871 | 80,502,652 | 48,263,070 | 920,536 | 11,784,675 | 970,605 | 8,873,333 | -
Loans and advances to customers | 484,528,057 | 507,794,578 | 214,092,284 | 46,103,882 | 58,056,341 | 108,967,963 | 26,979,078 | 53,595,030 | -
Financial investments at fair value through profit or loss | 18,179,220 | 18,179,220 | - | - | - | - | - | - | 18,179,220
Financial investments at fair value through OCI | 143,189,022 | 150,817,443 | - | 6,676,935 | 7,063,964 | - | 17,855,201 | 119,221,343 | -
Financial investments at amortised cost | 14,602,008 | 18,492,458 | - | - | 320,964 | 641,927 | 6,143,361 | 11,386,206 | -
Total assets | 1,473,273,694 | 1,534,304,240 | 432,283,796 | 237,918,460 | 240,192,984 | 263,380,179 | 114,787,782 | 215,899,153 | 29,841,886
Liabilities |  |  |  |  |  |  |  |  |
Derivative liabilities held for risk |  |  |  |  |  |  |  |  |
management | (578,779) | (578,779) | (136,858) | (55,634) | (293,218) | (93,069) | - | - | -
Amounts owed to institutions |  |  |  |  |  |  |  |  |
and banks | (473,295,256) | (476,046,125) | (301,209,084) | (66,349,306) | (34,049,116) | (44,745,856) | (21,061,410) | (8,631,353) | -
Amounts owed to customers | (876,187,765) | (879,068,723) | (463,010,495) | (185,413,108) | (80,572,219) | (138,390,126) | (10,512,968) | (1,169,807) | -
Debt securities in issue | (15,451,068) | (15,568,873) | - | (15,568,873) | - | - | - | - | -
Other liabilities | (2,704,717) | (3,042,967) | (12,927) | (110,642) | (216,219) | (475,271) | (866,614) | (1,361,294) | -
Total liabilities | (1,368,217,585) | (1,374,305,467) | (764,369,364) | (267,497,563) | (115,130,772) | (183,704,322) | (32,440,992) | (11,162,454) | -
Liquidity gap |  |  | (332,085,568) | (29,579,103) | 125,062,212 | 79,675,857 | 82,346,790 | 204,736,699 |
Cumulative liquidity gap |  |  | (332,085,568) | (361,664,671) | (236,602,459) | (156,926,602) | (74,579,812) | 130,156,887 |

FIMBank Group Annual Report & Financial Statements 2023
121
Bank - 31 December 2023

|  | Gross nominal |  |  |  | Between 6 |  |  |
| Carrying | inflow/ | Less than | Between 1 | Between 3 | months | Between 1 | More than |
| amount | (outflow) | 1 month | & 3 months | & 6 months | & 1 year | & 2 years | 2 years | No maturity
| USD | USD | USD | USD | USD | USD | USD | USD | USD
Assets |  |  |  |  |  |  |  |  |
Balances with the Central Bank of Malta, treasury bills and cash | 352,997,057 | 353,058,099 | 232,384,309 | 63,022,868 | 33,015,391 | 16,239,560 | - | - | 8,395,971
Derivative assets held for risk |  |  |  |  |  |  |  |  |
management | 812,609 | 812,609 | 700,782 | 99,879 | - | 11,948 | - | - | -
Loans and advances to banks | 114,325,243 | 115,441,453 | 58,455,595 | 38,126,895 | 7,875,752 | 1,729,230 | - | 9,253,981 | -
Loans and advances to customers | 618,118,225 | 648,124,541 | 116,830,361 | 102,597,981 | 256,609,008 | 78,137,786 | 20,542,787 | 73,406,618 | -
Financial investments at fair value through profit or loss | 19,329,840 | 19,329,840 | - | - | - | - | - | - | 19,329,840
Financial investments at fair value through OCI | 140,755,780 | 147,651,397 | 5,103,566 | - | - | 12,903,183 | 28,142,988 | 101,501,660 | -
Financial investments at amortised cost | 28,399,073 | 32,497,878 | - | 2,458,798 | 5,653,384 | 9,513,458 | 3,505,613 | 11,366,625 | -
Total assets | 1,274,737,827 | 1,316,915,817 | 413,474,613 | 206,306,421 | 303,153,535 | 118,535,165 | 52,191,388 | 195,528,884 | 27,725,811
Liabilities |  |  |  |  |  |  |  |  |
Derivative liabilities held for risk |  |  |  |  |  |  |  |  |
management | (626,476) | (626,476) | (455,055) | (86,901) | - | (84,520) | - | - | -
Amounts owed to institutions |  |  |  |  |  |  |  |  |
and banks | (333,498,402) | (334,541,899) | (241,844,225) | (57,762,015) | (22,436,754) | (3,867,403) | - | (8,631,502) | -
Amounts owed to customers | (951,166,330) | (959,014,206) | (451,792,246) | (189,778,254) | (174,979,244) | (131,667,636) | (3,065,975) | (7,730,851) | -
Other liabilities | (2,286,126) | (2,323,645) | (749,378) | (3,985) | (3,985) | (771,505) | (674,422) | (120,370) | -
Total liabilities | (1,287,577,334) | (1,296,506,226) | (694,840,904) | (247,631,155) | (197,419,983) | (136,391,064) | (3,740,397) | (16,482,723) | -
Liquidity gap |  |  | (281,366,291) | (41,324,734) | 105,733,552 | (17,855,899) | 48,450,991 | 179,046,161 |
Cumulative liquidity gap |  |  | (281,366,291) | (322,691,025) | (216,957,473) | (234,813,372) | (186,362,381) | (7,316,220) |

FIMBank Group Annual Report & Financial Statements 2023
122
Bank - 31 December 2022
The gross nominal inflow/outflow for financial assets and financial liabilities represent undiscounted cash flows based on the carrying amount and include the estimated interest payments. The time buckets in the
above tables are representative of this gross nominal inflow/outflow based on the residual contractual maturities.

|  | Gross nominal |  |  |  | Between 6 |  |  |
| Carrying | inflow/ | Less than | Between 1 | Between 3 | months | Between 1 | More than |
| amount | (outflow) | 1 month | & 3 months | & 6 months | & 1 year | & 2 years | 2 years | No maturity
| USD | USD | USD | USD | USD | USD | USD | USD | USD
Assets |  |  |  |  |  |  |  |  |
Balances with the Central Bank of Malta, treasury |  |  |  |  |  |  |  |  |
bills and cash | 216,852,467 | 216,846,944 | 108,822,567 | 63,592,889 | 22,168,959 | 10,614,721 | - | - | 11,647,808
Derivative assets held for risk |  |  |  |  |  |  |  |  |
management | 1,610,475 | 1,610,475 | 862,905 | 390,260 | 303,465 | 53,845 | - | - | -
Loans and advances to banks | 125,882,432 | 127,388,882 | 62,723,131 | 44,292,108 | 289,242 | 10,240,463 | 970,605 | 8,873,333 | -
Loans and advances to customers | 718,910,427 | 744,706,974 | 142,325,792 | 106,570,129 | 179,196,822 | 231,322,799 | 32,011,300 | 53,280,132 | -
Financial investments at fair value through profit or loss | 18,179,220 | 18,179,220 | - | - | - | - | - | - | 18,179,220
Financial investments at fair value through OCI | 143,189,022 | 150,817,443 | - | 6,676,935 | 7,063,964 | - | 17,855,201 | 119,221,343 | -
Financial investments at amortised |  |  |  |  |  |  |  |  |
cost | 14,602,008 | 18,492,458 | - | - | 320,964 | 641,927 | 6,143,361 | 11,386,206 | -
Total assets | 1,239,226,051 | 1,278,042,396 | 314,734,395 | 221,522,321 | 209,343,416 | 252,873,755 | 56,980,467 | 192,761,014 | 29,827,028
Liabilities |  |  |  |  |  |  |  |  |
Derivative liabilities held for risk |  |  |  |  |  |  |  |  |
management | (818,031) | (818,031) | (376,110) | (55,634) | (293,218) | (93,069) | - | - | -
Amounts owed to institutions |  |  |  |  |  |  |  |  |
and banks | (386,787,784) | (387,400,850) | (267,312,752) | (35,768,107) | (23,107,331) | (31,519,897) | (21,061,410) | (8,631,353) | -
Amounts owed to customers | (869,220,415) | (872,042,506) | (456,012,219) | (185,413,108) | (80,572,219) | (138,418,846) | (10,512,968) | (1,113,146) | -
Other liabilities | (3,490,312) | (3,583,821) | (698,520) | - | - | (715,521) | (1,456,463) | (713,317) | -
Total liabilities | (1,260,316,542) | (1,263,845,208) | (724,399,601) | (221,236,849) | (103,972,768) | (170,747,333) | (33,030,841) | (10,457,816) | -
Liquidity gap |  |  | (409,665,206) | 285,472 | 105,370,648 | 82,126,422 | 23,949,626 | 182,303,198 |
Cumulative liquidity gap |  |  | (409,665,206) |  |  |  |  |  |

(409,379,734)
(304,009,086)
(221,882,664)
(197,933,038)
(15,629,840)
FIMBank Group Annual Report & Financial Statements 2023
The following amounts are representative of the gross nominal inflows/outflows for the derivative instruments:
Group & Bank - 2023

|  |  |  | Between 6 |
| Less than | Between 1 | Between 3 | months |
| 1 month | & 3 months | & 6 months | & 1 year | Total
| USD | USD | USD | USD | USD
Derivatives |  |  |  |  |
Inflows | 30,255,212 | 32,325,281 | 4,192,441 | 20,002,727 | 86,775,661
Outflows | (30,030,539) | (32,445,437) | (4,180,658) | (19,981,056) | (86,637,690)
| 224,673 | (120,156) | 11,783 | 21,671 | 137,971

Group & Bank - 2022

|  |  |  | Between 6 |
| Less than | Between 1 | Between 3 | months |
| 1 month | & 3 months | & 6 months | & 1 year | Total
| USD | USD | USD | USD | USD
Derivatives |  |  |  |  |
Inflows | 38,879,304 | 44,716,383 | 15,942,546 | 11,570,218 | 111,108,451
Outflows | (38,370,493) | (44,482,358) | (15,932,354) | (11,557,404) | (110,342,609)
| 508,811 | 234,025 | 10,192 | 12,814 | 765,842

5.4 Market risk
Market risk is the risk that the fair value of a financial instrument or future cash flows derived therefrom fluctuate due to 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 management of market risk, which is described in further detail below, is tracked by ALCO using various metrics and by the BRC on
a quarterly basis against the Group’s Risk Appetite Statement.
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 that the six interest rate shock scenarios mandated by the European Central
Bank have on net interest income and the economic value of equity (“EVE”).
5.4.1 Foreign exchange risk
Foreign exchange risk is the risk that the value of a financial instrument fluctuates due to changes in foreign exchange rates. Foreign
exchange risk is related to monetary assets and liabilities of the Group and Bank that are not denominated in the functional currency.
Transactional exposures give rise to foreign currency gains and losses that are recognised in the Statements of Profit or Loss. The Group
and Bank manage this risk by ensuring that foreign currency denominated liabilities are matched to corresponding assets in the same
currency. Open currency positions are monitored closely and managed through matching of assets and liabilities denominated in the
same currency as well as through hedging.
Mismatches could arise where the Group enters into foreign exchange transactions 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, as specified in the
Treasury Policy and Hedging Policy, and any excesses are regularised immediately. Open foreign exchange positions are monitored by
the Treasury and Risk Management functions to ensure that mismatches remain within agreed parameters. The Group ensures that its
net exposure is kept to an acceptable level by entering into forward currency contracts when considered appropriate.
123
FIMBank Group Annual Report & Financial Statements 2023
124
Group - 31 December 2023
All amounts are expressed in USD

| In reporting |  |  | Other |
| currency | EUR | INR | currencies | Total
Assets |  |  |  |  |
Balances with the Central Bank of Malta, treasury bills and cash | 26,008,194 | 326,995,938 | 25 | 6,029 | 353,010,186
Trading assets | 200,298,344 | 171,679,279 | - | 2,199,485 | 374,177,108
Loans and advances to banks | 68,308,036 | 66,654,529 | 12,882,667 | 4,969,716 | 152,814,948
Loans and advances to customers | 190,371,781 | 185,303,365 | 24,412,566 | 31,254,362 | 431,342,074
Financial investments at fair value through profit or loss | 52,358 | 18,636,495 | - | 640,987 | 19,329,840
Financial investments at fair value through other comprehensive income | 36,432,838 | 104,322,942 | - | - | 140,755,780
Financial investments at amortised cost | 16,517,721 | 2,236,359 | - | 9,644,993 | 28,399,073
Other assets | 157,879 | 3,633,741 | 1,099,918 | 115,785 | 5,007,323
Liabilities |  |  |  |  |
Amounts owed to institutions and banks | (331,446,874) | (52,596,240) | (9,792,313) | (18,735,504) | (412,570,931)
Amounts owed to customers | (55,716,559) | (873,460,598) | (1,606) | (5,560,179) | (934,738,942)
Debt securities in issue | - | (27,543,864) | - | - | (27,543,864)
Other liabilities | (7,502,745) | (6,898,542) | (1,864,740) | (1,188,141) | (17,454,168)
Net on balance sheet financial position | 143,480,973 | (81,036,596) | 26,736,517 | 23,347,533 | 112,528,427
Notional amount of derivative instruments held for risk management | 20,808,471 | 31,636,970 | (30,024,203) | (22,421,238) |
Net foreign exchange exposure |  | (49,399,626) | (3,287,686) | 926,295 |

FIMBank Group Annual Report & Financial Statements 2023
125
Group - 31 December 2022
All amounts are expressed in USD

| In reporting |  |  | Other |
| currency | EUR | INR | currencies | Total
Assets |  |  |  |  |
Balances with the Central Bank of Malta, treasury bills and cash | 4,972,928 | 211,889,153 | 54 | 5,190 | 216,867,325
Trading assets | 256,046,083 | 164,524,398 | - | 24,013,180 | 444,583,661
Loans and advances to banks | 18,277,195 | 111,576,958 | 17,391,282 | 2,468,491 | 149,713,926
Loans and advances to customers | 253,710,493 | 188,821,633 | 17,080,447 | 24,915,484 | 484,528,057
Financial investments at fair value through profit or loss | 53,077 | 17,373,300 | - | 752,843 | 18,179,220
Financial investments at fair value through other comprehensive income | 46,888,196 | 96,300,826 | - | - | 143,189,022
Financial investments at amortised cost | 4,834,728 | - | - | 9,767,280 | 14,602,008
Other assets | 233,355 | 2,957,471 | 875,926 | 31,201 | 4,097,953
Liabilities |  |  |  |  |
Amounts owed to institutions and banks | (354,275,351) | (103,912,057) | (6,306,950) | (8,800,898) | (473,295,256)
Amounts owed to customers | (135,450,868) | (731,125,882) | (1,045,321) | (8,565,694) | (876,187,765)
Debt securities in issue | - | (15,451,068) | - | - | (15,451,068)
Other liabilities | (5,042,657) | (5,276,728) | (1,426,655) | (686,029) | (12,432,069)
Net on balance sheet financial position | 90,247,179 | (62,321,996) | 26,568,783 | 43,901,048 | 98,395,014
Notional amount of derivative instruments held for risk management | 38,533,240 | 34,935,032 | (30,749,974) | (42,718,298) |
Net foreign exchange exposure |  | (27,386,964) | (4,181,191) | 1,182,750 |

In addition to the positions shown in the tables overleaf, the Bank also has an exposure to Indian Rupees in respect of the investment in
India Factoring, which had a carrying amount of USD33.7 million as at 31 December 2023 and 31 December 2022. In this respect, the
Bank entered into forward foreign exchange derivative contracts to hedge its exposure to INR. As at 31 December 2023, the notional
amount of these derivative contracts amounts to USD30.0 million (2022: USD30.8 million).
FIMBank Group Annual Report & Financial Statements 2023
126
Bank - 31 December 2023
All amounts are expressed in USD

| In reporting |  |  |
| currency | EUR | Other currencies | Total
Assets |  |  |  |
Balances with the Central Bank of Malta, treasury bills and cash | 26,004,091 | 326,989,945 | 3,021 | 352,997,057
Loans and advances to banks | 47,335,276 | 65,971,956 | 1,018,011 | 114,325,243
Loans and advances to customers | 244,372,334 | 361,849,371 | 11,896,520 | 618,118,225
Financial investments at fair value through profit or loss | 52,358 | 18,636,495 | 640,987 | 19,329,840
Financial investments at fair value through other comprehensive income | 36,432,838 | 104,322,942 | - | 140,755,780
Financial investments at amortised cost | 16,517,721 | 2,236,359 | 9,644,993 | 28,399,073
Other assets | 150,034 | 4,188,660 | 119,267 | 4,457,961
Liabilities |  |  |  |
Amounts owed to institutions and banks | (280,898,394) | (52,596,240) | (3,768) | (333,498,402)
Amounts owed to customers | (75,093,701) | (875,641,852) | (430,777) | (951,166,330)
Other liabilities | (1,955,876) | (6,106,724) | (78,421) | (8,141,021)
Net on balance sheet financial position | 12,916,681 | (50,149,088) | 22,809,833 | (14,422,574)
Notional amount of derivative instruments held for risk management | 20,808,471 | 31,636,970 | (22,421,238) |
Net foreign exchange exposure |  | (18,512,118) | 388,595 |

Bank - 31 December 2022

| In reporting |  |  |
All amounts are expressed in USD | currency | EUR | Other currencies | Total
Assets |  |  |  |
Balances with the Central Bank of Malta, treasury bills and cash | 4,968,702 | 211,882,265 | 1,500 | 216,852,467
Loans and advances to banks | 14,672,630 | 109,803,182 | 1,406,620 | 125,882,432
Loans and advances to customers | 364,210,570 | 321,592,456 | 33,107,401 | 718,910,427
Financial investments at fair value through profit or loss | 53,077 | 17,373,300 | 752,843 | 18,179,220
Financial investments at fair value through other comprehensive income | 46,888,196 | 96,300,826 | - | 143,189,022
Financial investments at amortised cost | 4,834,728 | - | 9,767,280 | 14,602,008
Other assets | 275,793 | 3,476,485 | 47,719 | 3,799,997
Liabilities |  |  |  |
Amounts owed to institutions and banks | (299,275,979) | (87,502,890) | (8,915) | (386,787,784)
Amounts owed to customers | (136,013,243) | (731,260,640) | (1,946,532) | (869,220,415)
Other liabilities | (2,073,531) | (4,611,019) | (156,438) | (6,840,988)
Net on balance sheet financial position | (1,459,057) | (62,946,035) | 42,971,478 | (21,433,614)
Notional amount of derivative instruments held for risk management | 38,533,240 | 34,935,032 | (42,718,298) |
Net foreign exchange exposure |  | (28,011,003) | 253,180 |

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127
The following exchange rates against the US Dollar were applied during the year:

|  |  | Reporting date |
| Average rate |  | mid-spot rate |
| 2023 | 2022 | 2023 | 2022
1 EUR | 1.0813 | 1.0517 | 1.1050 | 1.0666
1 INR | 0.0121 | 0.0127 | 0.0120 | 0.0121

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 | Profit or | Bank | Profit or
| Equity | loss | Equity | loss
| USD | USD | USD | USD
2023 |  |  |  |
EUR | (3,457,974) | (3,457,974) | (1,295,848) | (1,295,848)
INR | (230,138) | - | (2,101,694) | (2,101,694)
Other currencies | 64,841 | 64,841 | 27,202 | 27,202
2022 |  |  |  |
EUR | (1,917,087) | (1,917,087) | (1,960,770) | (1,960,770)
INR | (292,683) | - | (2,152,498) | (2,152,498)
Other currencies | 82,793 | 82,793 | 17,723 | 17,723

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.
5.4.2 Position risk
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.
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 records the unrealised and realised profits and losses. The performance of this portfolio remained within the risk parameters and
within the stress tests applied as part of the regular ICAAP process; where the assessment applied in 2023 assumed a shock to credit
spreads and an additional shock relating to an unexpected change in interest rates.
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128
5.4.3 Interest rate risk
Interest rate risk refers to the risk to earnings from the Group’s financial instruments in the non-trading (i.e. banking book) to movements
in interest rates. The Group uses two complementary approaches to measuring Interest Rate Risk in the Banking Book (“IRRBB”):
• changes in economic value (i.e. economic value or EVE when assessing the change in value relative to equity); and
• changes in expected earnings (i.e. changes in forecast net interest income or NII).
The key difference between the two measures is that EVE calculates the change in the net-present value of the balance sheet under a
range of yield curve stress scenarios while NII looks at the change in expected earnings.
EVE measures the changes in the net present value of the interest rate sensitive instruments over their remaining life resulting from
interest rate movements, i.e. until all positions have run off. A run-off balance sheet is a balance sheet where existing non-trading book
positions amortise and are not replaced by any new business. In this way, EVE is a long-term measure, assessing the impact over the
remaining life of the balance sheet while NII is a short-medium term measure, assessing the impact to expected future profitability
within a given time horizon resulting from interest rate movements.
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 and equity.
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.
The IRRBB on a consolidated basis is managed on a monthly basis. Additional disclosures are included within the Pillar 3 Disclosures
Report published on the Bank’s website.
Whilst treasury bills are not interest-bearing instruments, their value is interest rate sensitive. The price of treasury bills at issuance is
reflective of the risk-free rates at the time of issuance. Within the following tables, treasury bills are not marked as non-interest bearing
and, instead, are replaced on maturity at a price that reflects a changed reference rate. This aligns the treatment of treasury bills in this
assessment with the IRRBB assessment detailed in the Pillar 3 Disclosures Report published on the Bank’s website.
The tables below are representative of the carrying amounts of the exposures subject to interest rate risk in the banking book broken
down by repricing dates.
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129
Group – 31 December 2023

|  |  |  | Between |  |  |
| Less than | Between | Between | 6 months | More than | Not subject to |
| 1 month | 1 & 3 months | 3 & 6 months | & 1 year | 1 year | interest rate risk | Total
| USD | USD | USD | USD | USD | USD | USD
Assets |  |  |  |  |  |  |
Balances with the Central Bank of Malta, treasury bills and cash | 240,701,293 | 63,022,868 | 33,015,391 | 16,239,560 | - | 31,074 | 353,010,186
Trading assets | 80,639,382 | 193,032,230 | 64,490,802 | 26,217,441 | 9,257,253 | 540,000 | 374,177,108
Loans and advances to banks | 94,213,686 | 37,935,502 | 7,885,432 | 2,680,135 | 8,360,926 | 1,739,267 | 152,814,948
Loans and advances to customers | 291,462,685 | 13,914,819 | 110,025,707 | 8,687,579 | 6,242,329 | 1,008,955 | 431,342,074
Financial investments at fair value through comprehensive income | 4,985,000 | - | - | 12,644,664 | 122,543,659 | 582,457 | 140,755,780
Financial investments at amortised cost | - | 2,392,239 | 14,593,174 | 9,152,734 | 1,985,111 | 275,815 | 28,399,073
| 712,002,046 | 310,297,658 | 230,010,506 | 75,622,113 | 148,389,278 | 4,177,568 | 1,480,499,169
Liabilities |  |  |  |  |  |  |
Amounts owed to institutions and banks | (283,644,872) | (81,653,270) | (32,099,448) | (3,867,403) | (8,517,194) | (2,788,744) | (412,570,931)
Amounts owed to customers | (427,615,143) | (186,247,544) | (170,838,046) | (109,646,533) | (26,698,463) | (13,693,213) | (934,738,942)
Debt securities in issue | (5,443,771) | (10,729,398) | (11,049,724) | - | - | (320,971) | (27,543,864)
| (716,703,786) | (278,630,212) | (213,987,218) | (113,513,936) | (35,215,657) | (16,802,928) | (1,374,853,737)
Interest sensitivity gap | (4,701,740) | 31,667,446 | 16,023,288 | (37,891,823) | 113,173,621 | (12,625,360) |
Cumulative gap |  | 26,965,706 | 42,988,994 | 5,097,171 | 118,270,792 | 105,645,432 |

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130
Group – 31 December 2022

|  |  |  | Between |  |  |
| Less than | Between | Between | 6 months | More than | Not subject to |
| 1 month | 1 & 3 months | 3 & 6 months | & 1 year | 1 year | interest rate risk | Total
| USD | USD | USD | USD | USD | USD | USD
Assets |  |  |  |  |  |  |
Balances with the Central Bank of Malta, treasury bills and cash | 120,465,036 | 63,592,889 | 22,168,959 | 10,614,721 | - | 25,720 | 216,867,325
Trading assets | 98,058,032 | 161,988,854 | 114,021,769 | 54,861,037 | 15,043,969 | 610,000 | 444,583,661
Loans and advances to banks | 81,249,139 | 57,895,785 | 603,159 | 1,460,729 | 8,026,240 | 478,874 | 149,713,926
Loans and advances to customers | 440,155,127 | 21,086,987 | 17,220,848 | 4,342,432 | 947,174 | 775,489 | 484,528,057
Financial investments at fair value through other comprehensive income | - | 6,577,400 | 7,019,394 | - | 128,908,538 | 683,690 | 143,189,022
Financial investments at amortised cost | - | - | 9,762,043 | - | 4,822,489 | 17,476 | 14,602,008
| 739,927,334 | 311,141,915 | 170,796,172 | 71,278,919 | 157,748,412 | 2,591,250 | 1,453,483,999
Liabilities |  |  |  |  |  |  |
Amounts owed to institutions and banks | (298,744,689) | (73,382,842) | (33,464,164) | (35,980,056) | (29,848,252) | (1,875,253) | (473,295,256)
Amounts owed to customers | (462,080,830) | (184,544,303) | (79,961,228) | (135,889,074) | (11,306,295) | (2,406,035) | (876,187,765)
Debt securities in issue | - | (15,419,088) | - | - | - | (31,980) | (15,451,068)
| (760,825,519) | (273,346,233) | (113,425,392) | (171,869,130) | (41,154,547) | (4,313,268) | (1,364,934,089)
Interest sensitivity gap | (20,898,185) | 37,795,682 | 57,370,780 | (100,590,211) | 116,593,863 | (1,722,018) |
Cumulative gap |  | 16,897,497 | 74,268,277 | (26,321,934) | 90,271,929 | 88,549,911 |

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131
Bank – 31 December 2023

|  |  |  | Between |  |  |
| Less than | Between | Between | 6 months | More than | Not subject to |
| 1 month | 1 & 3 months | 3 & 6 months | & 1 year | 1 year | interest rate risk | Total
| USD | USD | USD | USD | USD | USD | USD
Assets |  |  |  |  |  |  |
Balances with the Central Bank of Malta, treasury bills and cash | 240,701,293 | 63,022,868 | 33,015,391 | 16,239,560 | - | 17,945 | 352,997,057
Loans and advances to banks | 56,876,233 | 37,935,502 | 7,879,420 | 1,733,848 | 8,360,926 | 1,539,314 | 114,325,243
Loans and advances to customers | 452,436,857 | - | 156,471,975 | 5,281,294 | 2,149,494 | 1,778,605 | 618,118,225
Financial investments at fair value through other comprehensive income | 4,985,000 | - | - | 12,644,664 | 122,543,659 | 582,457 | 140,755,780
Financial investments at amortised cost | - | 2,392,239 | 14,593,174 | 9,152,734 | 1,985,111 | 275,815 | 28,399,073
| 754,999,383 | 103,350,609 | 211,959,960 | 45,052,100 | 135,039,190 | 4,194,136 | 1,254,595,378
Liabilities |  |  |  |  |  |  |
Amounts owed to institutions and banks | (239,953,166) | (56,599,448) | (22,099,448) | (3,867,403) | (8,517,194) | (2,461,743) | (333,498,402)
Amounts owed to customers | (449,500,336) | (186,247,544) | (170,838,046) | (109,776,533) | (26,698,463) | (8,105,408) | (951,166,330)
| (689,453,502) | (242,846,992) | (192,937,494) | (113,643,936) | (35,215,657) | (10,567,151) | (1,284,664,732)
Interest sensitivity gap | 65,545,881 | (139,496,383) | 19,022,466 | (68,591,836) | 99,823,533 | (6,373,015) |
Cumulative gap |  | (73,950,502) | (54,928,036) | (123,519,872) | (23,696,339) | (30,069,354) |

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132
Bank – 31 December 2022

|  |  |  | Between |  |  |
| Less than | Between | Between | 6 months | More than | Not subject to |
| 1 month | 1 & 3 months | 3 & 6 months | & 1 year | 1 year | interest rate risk | Total
| USD | USD | USD | USD | USD | USD | USD
Assets |  |  |  |  |  |  |
Balances with the Central Bank of Malta, treasury bills and cash | 120,465,036 | 63,592,889 | 22,168,959 | 10,614,721 | - | 10,862 | 216,852,467
Loans and advances to banks | 63,598,772 | 54,126,363 | - | - | 8,026,240 | 131,057 | 125,882,432
Loans and advances to customers | 679,034,772 | 14,982,597 | 16,497,328 | - | 5,637,778 | 2,757,952 | 718,910,427
Financial investments at fair value through other comprehensive income | - | 6,577,400 | 7,019,394 | - | 128,908,538 | 683,690 | 143,189,022
Financial investments at amortised cost | - | - | 9,762,043 | - | 4,822,489 | 17,476 | 14,602,008
| 863,098,580 | 139,279,249 | 55,447,724 | 10,614,721 | 147,395,045 | 3,601,037 | 1,219,436,356
Liabilities |  |  |  |  |  |  |
Amounts owed to institutions and banks | (265,211,752) | (34,800,000) | (23,464,164) | (31,996,587) | (29,848,253) | (1,467,028) | (386,787,784)
Amounts owed to customers | (455,085,104) | (184,544,303) | (79,961,228) | (135,917,390) | (11,306,297) | (2,406,093) | (869,220,415)
| (720,296,856) | (219,344,303) | (103,425,392) | (167,913,977) | (41,154,550) | (3,873,121) | (1,256,008,199)
Interest sensitivity gap | 142,801,724 | (80,065,054) | (47,977,668) | (157,299,256) | 106,240,495 | (272,084) |
Cumulative gap |  | 62,736,670 | 14,759,002 | (142,540,254) | (36,299,759) | (36,571,843) |

FIMBank Group Annual Report & Financial Statements 2023
133
5.4.3.1 Sensitivity analysis for financial instruments subject to interest rate risk
The tables below depict the changes in Economic Value of Equity and Net Interest Income from movement in stressed yield curves on a
consolidated basis and solo basis for the end of financial years 2023 and 2022. This analysis assumes that all other variables, in particular
foreign currency rates, remain constant. IRRBB is reported monthly on a consolidated basis, however Bank calculations are calculated
and presented as at year end. The IRRBB tool is in line with the latest EBA guidelines. Further information related to the measurement
of interest rate risk can be found in the Pillar 3 Disclosures Report.
2023

|  | Parallel | Short rates | Short rates |  |
| Parallel up | down | up | down | Steepener | Flattener
| USD | USD | USD | USD | USD | USD
Sensitivity of equity to interest rate |  |  |  |  |  |
movements |  |  |  |  |  |
Group | (7,487,322) | 4,281,044 | (80,259) | (338,276) | (3,885,533) | 1,154,989
Group (incl. Trading book) | (9,333,056) | 5,418,460 | (2,186,933) | 1,129,388 | (2,929,820) | (322,506)
Bank | (7,517,131) | 4,408,833 | (93,716) | (143,029) | (3,788,942) | 1,099,473
Sensitivity of net interest income to Interest rate movements |  |  |  |  |  |
Group | (4,682,140) | 2,340,881 | - | - | - | -
Group (incl. Trading book) | (369,710) | (1,672,173) |  |  |  |
Bank | (671,968) | 335,984 | - | - | - | -

2022

|  | Parallel | Short rates | Short rates |  |
| Parallel up | down | up | down | Steepener | Flattener
| USD | USD | USD | USD | USD | USD
Sensitivity of equity to interest rate |  |  |  |  |  |
movements |  |  |  |  |  |
Group | (7,847,213) | 4,702,306 | 347,833 | (1,157,497) | (4,951,725) | 1,700,982
Group (incl. Trading book) | (10,518,954) | 6,156,513 | (2,589,432) | 993,783 | (3,703,790) | (532,287)
Bank | (8,420,643) | 5,145,308 | 194,857 | (953,763) | (5,053,773) | 1,626,944
Sensitivity of net interest income to Interest rate movements |  |  |  |  |  |
Group | (5,231,995) | 2,615,997 | - | - | - | -
Group (incl. Trading book) | 204,884 | (1,203,213) |  |  |  |
Bank | 195,748 | (433,409) | - | - | - | -

The specified size of the interest rate shocks for the Group’s material currencies according to Annex 1 of the EBA Consultation Paper on
Draft Regulatory Technical Standards are as follows:

|  | EUR | USD
|  | in basis points | in basis points
Parallel up |  | +200 | +200
Parallel down |  | -200 | -200
Short rates up |  | +250 | +300
Short rates down |  | -250 | -300
Steepener | short rates down | -250 | -300
| long rates up | +100 | +150
Flattener | short rates up | +250 | +300
| long rates down | -100 | -150

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134
5.4.4 Price risk
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 th e issuer’s or
exposure’s financial stability and performance.
Other price risk arises from equity investments measured at fair value through profit or loss. Investments recorded at fair value through
profit or loss are measured by reference to their market values, ideally in active markets. 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.
Additionally, the financial assets measured at fair value through other comprehensive income include a mixture of high-quality liquid
assets and non high-quality liquid assets. All things being equal, the less liquid the assets are, the more their susceptibility to price risk.
The table below presents the carrying amount of the Group’s and Bank’s financial assets which are deemed to be exposed to price risk
as at 31 December 2023 and 2022:

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
| USD | USD | USD | USD
Financial investments at fair value through profit or loss | 19,329,840 | 18,179,220 | 19,329,840 | 18,179,220
Financial investments at fair value through other comprehensive income | 140,755,780 | 143,189,022 | 140,755,780 | 143,189,022
Trading assets | 374,177,108 | 444,583,661 | - | -

5.4.4.1 Sensitivity analysis for price risk
The Group and Bank hold portfolios of assets measured at fair value and, as such, any movements in market interest rates have an
impact on their capital base. The Group and Bank manage the risk attributable to these portfolios with risk sensitivities. In this respect,
a 10% increase in market 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 | USD | USD | USD
2023 | 53,426,273 | 39,350,695 | 16,008,562 | 1,932,984
2022 | 60,595,190 | 46,276,288 | 16,136,824 | 1,817,922

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.
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135
5.5 Operational risk
The Group defines operational risk 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 and 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 and the appointed
Operational Risk Champion in each department, an independent ORM Unit within Risk Management Group and a Senior Management
ORM Committee 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 ORM Unit 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 ORM Committee for review of corrective measures to be eventually considered.
The Group has in place an enterprise wide ORM 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 ORM Committee 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 t he 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 t ested, to ensure
continued improvement and ongoing operation following a business continuity event.
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.
5.5.1 IT risk
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.
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5.5.2 Legal risk
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 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 function devoted 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.
5.6 Climate related risk
The Group, like all financial institutions, is exposed to the risk of climate change. These climate related risks are potential negative
impacts on the Group’s own property, staff and activities or on tho se of its clients as a result of climate change. Climate related risks
have an impact on other key risk areas (i.e. credit risk, market risk, operational risk) but are treated as an independent risk category by
the European Central Bank and Malta Financial Services Authority.
Climate related risks can be grouped into two categories – physical risk and transition risk. Physical risks are those presented by acute
weather events, longer term changes in climate and rising sea levels. Transition risks are those resulting from an inability to adapt to
changing laws and regulations, consumer demand, and investor demand arising from measures to mitigate the impact of climate change.
The Group is in the process of developing an ESG transition plan which will seek to integrate climate and social factors into all aspects of
the business. During 2023 the Group established a sub-committee of the Board called the Board ESG Committee, which has been given
responsibility for overseeing the Group’s ESG related risks. Additionally, a Management ESG Committee was established for the purposes
of managing the incorporation of ESG considerations into the Group’s strategy, governance, risk management and monitoring
arrangements. The Board ESG and Management ESG Committees meet at least once quarterly, and more frequently as needs dictate.
5.7 Compliance and financial crime risk
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 AML 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.
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5.7.1 Conduct risk
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 Group 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
Group 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.
5.7.2 Reputational risk
Reputational risk at FIMBank is defined as the risk of possible damage to the Group’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 Group’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 of its employees, shareholders, depositors,
creditors, and from the public in general. The ensuing damage to the Group’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 Group’s brand.
Much like conduct risk, the Group 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 Group 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 Group is not inadvertently supporting criminal activity.
5.8 Capital management
The Group’s regulatory capital consists of Common Equity Tier 1 (“CET1”) capital, which includes ordinary share capital, related share
premium, 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 level of capital held has an impact on shareholders’ returns 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 adheres to the requirements set out in the Capital Requirements Regulation (“CRR”) and Capital Requirements Directive
(“CRD”).
Pillar I covers credit, market, and operational risks which provides the minimum capital requirements as a percentage of risk-weighted
assets. The Group utilises the Standardised Approach for credit risk and market risk, and the basic indicator approach for operational
risk in order to calculate the Pillar I minimum capital requirements. Pillar II 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.
In addition to the prescribed minimum regulatory capital requirements, Banking Rule BR/15: ‘Capital Buffers of Credit Insti tutions
authorised under the Banking Act 1994’ requires banks to hold additional buffers, namely the ‘capital conservation buffer’ an d the
‘countercyclical buffer’. Automatic restrictions on capital distributions apply if the Group’s CET1 capital falls bel ow the level of its
combined buffer requirement. The Group is required to maintain a conservation buffer of 2.5% and the institution-specific
countercyclical buffer to address macro-prudential or systemic risk, composed of CET1 capital. The countercyclical buffer is expected to
be set in the range of 0-2.5% of relevant credit exposure risk-weighted assets, whereby the rate shall consist of the weighted average of
the ‘countercyclical buffer’ rates that apply in the jurisdiction where the relevant exposures are located.
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In addition to the regulatory requirements stated above, the Group is expected to maintain a Pillar 2 Requirement (“P2R”) to be held in
excess of the minimum own funds requirement and to be maintained at all times in accordance with Article 104a of CRD V. In addition,
a Pillar 2 Guidance (“P2G”) made up entirely of CET1 capital is to be held over and above the Overall Capital Requirement (“OCR”).
The Group and its individually regulated operations have complied with all externally imposed capital requirements during the financial
years ended 31 December 2023 and 2022.
The 2023 Pillar 3 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’.
6 Fair values of financial instruments
The Group’s Accounting Policy on fair value measurements is discussed in Accounting Policy 3.9.7.
6.1 Valuation of financial instruments
The determination of fair value for financial assets and liabilities for which there is no observable market price requires the use of
valuation techniques. 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 6.2.
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 and interest 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.
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6.2 Determining fair values and Fair value hierarchy
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 instrume nt’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 28 – property and equipment; and
• Note 29 – investment property.
6.3 Financial instruments measured at fair value – fair value hierarchy
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.
Group – 31 December 2023

|  |  | Level 1 | Level 2 | Level 3 | Total
|  | Note | USD | USD | USD | USD
Assets |  |  |  |  |  |
Derivative assets held for risk management: |  |  |  |  |  |
– | foreign exchange | 20 | - | 715,713 | - | 715,713
Trading assets | 21 | - | - | 374,177,108 | 374,177,108
Financial investments at fair value through profit or loss | 24 | - | - | 19,329,840 | 19,329,840
Financial investments at fair value through other comprehensive income |  | 25 | 140,755,780 | - | - | 140,755,780
Liabilities |  |  |  |  |  |
Derivative liabilities held for risk management: |  |  |  |  |
– | foreign exchange | 20 | - | 626,476 | - | 626,476

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Group – 31 December 2022

|  |  | Level 1 | Level 2 | Level 3 | Total
|  | Note | USD | USD | USD | USD
Assets |  |  |  |  |  |
Derivative assets held for risk management: |  |  |  |  |  |
– | foreign exchange | 20 | - | 1,610,475 | - | 1,610,475
Trading assets | 21 | - | - | 444,583,661 | 444,583,661
Financial investments at fair value through profit or loss | 24 | - | - | 18,179,220 | 18,179,220
Financial investments at fair value through other comprehensive income |  | 25 | 143,189,022 | - | - | 143,189,022
Liabilities |  |  |  |  |  |
Derivative liabilities held for risk management: |  |  |  |  |
– | foreign exchange | 20 | - | 578,779 | - | 578,779

Bank – 31 December 2023

|  |  | Level 1 | Level 2 | Level 3 | Total
|  | Note | USD | USD | USD | USD
Assets |  |  |  |  |  |
Derivative assets held for risk management: |  |  |  |  |  |
– | foreign exchange | 20 | - | 715,713 | - | 715,713
– | interest rate | 20 | - | 96,896 | - | 96,896
Financial investments at fair value through profit or loss | 24 | - | - | 19,329,840 | 19,329,840
Financial investments at fair value through other comprehensive income |  | 25 | 140,755,780 | - | - | 140,755,780
Liabilities |  |  |  |  |  |
Derivative liabilities held for risk management: |  |  |  |  |
– | foreign exchange | 20 | - | 626,476 | - | 626,476

Bank – 31 December 2022

|  |  | Level 1 | Level 2 | Level 3 | Total
|  | Note | USD | USD | USD | USD
Assets |  |  |  |  |  |
Derivative assets held for risk management: |  |  |  |  |  |
– | foreign exchange | 20 | - | 1,610,475 | - | 1,610,475
Financial investments at fair value through profit or loss | 24 | - | - | 18,179,220 | 18,179,220
Financial investments at fair value through other comprehensive income |  | 25 | 143,189,022 | - | - | 143,189,022
Liabilities |  |  |  |  |  |
Derivative liabilities held for risk management: |  |  |  |  |
– | foreign exchange | 20 | - | 723,311 | - | 723,311
– | interest rate | 20 | - | 94,720 | - | 94,720

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 between the different levels in the fair value hierarchy during the reporting periods.
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6.4 Level 3 fair value measurements
6.4.1 Reconciliation
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.
Group – 31 December 2023

|  | Financial investments |
| Trading | at fair value through |
| assets | profit or loss | Total
| USD | USD | USD
Balance at 1 January 2023 | 444,583,661 | 18,179,220 | 462,762,881
Total gains and losses in profit or loss | (3,304,340) | 768,541 | (2,535,799)
Purchases | 772,551,650 | - | 772,551,650
Settlements | (847,048,996) | (249,464) | (847,298,460)
Effects of movement in exchange rates | 7,395,133 | 631,543 | 8,026,676
Balance at 31 December 2023 | 374,177,108 | 19,329,840 | 393,506,948

Group – 31 December 2022

|  | Financial investments |
| Trading | at fair value through |
| assets | profit or loss | Total
| USD | USD | USD
Balance at 1 January 2022 | 439,985,203 | 19,966,163 | 459,951,366
Total gains and losses in profit or loss | (5,289,526) | (337,257) | (5,626,783)
Purchases | 812,766,912 | - | 812,766,912
Settlements | (790,052,784) | (127,493) | (790,180,277)
Effects of movement in exchange rates | (11,288,887) | (1,322,193) | (12,611,080)
Write-off | (1,537,257) | - | (1,537,257)
Balance at 31 December 2022 | 444,583,661 | 18,179,220 | 462,762,881

Bank – 31 December 2023

| Financial investments
| at fair value through
| profit or loss
| USD
Balance at 1 January 2023 | 18,179,220
Total gains and losses in profit or loss (Note 12) | 768,541
Settlements | (249,464)
Effects of movement in exchange rates | 631,543
Balance at 31 December 2023 | 19,329,840

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Bank – 31 December 2022

| Financial investments
| at fair value through
| profit or loss
| USD
Balance at 1 January 2022 | 19,966,163
Total gains and losses in profit or loss (Note 12) | (337,257)
Settlements | (127,493)
Effects of movement in exchange rates | (1,322,193)
Balance at 31 December 2022 | 18,179,220

The change in unrealised gains or losses for the year included in profit or loss relating to those assets held at 31 December 2023
amounted to USD628,500 (2022: USD386,466).
These gains and losses are recognised in profit or loss as ‘Net gain/(loss) from equity investments measured at fair value through profit
or loss’.
6.4.2 Unobservable inputs used in measuring fair value
The below sets out information about significant unobservable inputs used at 31 December 2023 in measuring financial instruments
categorised as Level 3 in the fair value hierarchy.
6.4.2.1 Trading assets
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.
At 31 December 2023 and 31 December 2022, the Group used the Risk Free Rates (“RFR”) yield curve plus an adequate credit margin
spread to discount the trading assets held.
At 31 December 2023, the discount rates used range between 5.20% and 14.47% (2022: between 5.13% and 12.86%).
The effect of a one-percentage point increase/(decrease) in the interest rate on trading assets at 31 December 2023 would
increase/(decrease) the Group’s equity by approximately USD1,069,133 (2022: USD409,282).
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6.4.2.2 Financial investments at fair value through profit or loss
As at 31 December 2023, ‘Financial investments 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 the United Kingdom. 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 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 2023 would
increase/(decrease) the Bank and Group equity by approximately USD1,694,097 (2022: USD1,574,085).
• 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 the United Kingdom. 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 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 2023 would
increase/(decrease) the Bank and Group equity by approximately USD169,553 (2022: USD163,245).
• 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 2023 would
have increased/(decreased) the Bank and Group equity by approximately USD64,099 (2022: USD75,284).
6.4.3 Financial instruments not measured at fair value
At 31 December 2023 and 31 December 2022, the fair value of the below financial assets and liabilities 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’
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 customers are reported net of allowances to reﬂect the estimated recoverable amounts as at th e
financial reporting date. More than 80% of the Group’s loans a nd 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 banks and customers is a reasonable approximation of fair value.
• ‘Amounts owed to institutions and 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 ‘D ebt securities in issue’ are subject to fixed and variable interest rates. Interest rates on debt securities are disclosed in
Note 36.
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7 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.
Group – 31 December 2023
Group – 31 December 2022

| Mandatorily | Fair value |  |
| at fair value through other |  | Total
| through | comprehensive | Amortised | carrying
| profit or loss | income | cost | amount
| USD | USD | USD | USD
Balances with the Central Bank of Malta, treasury bills and cash | - | - | 353,010,186 | 353,010,186
Derivative assets held for risk management | 715,713 | - | - | 715,713
Trading assets | 374,177,108 | - | - | 374,177,108
Loans and advances to banks | - | - | 152,814,948 | 152,814,948
Loans and advances to customers | - | - | 431,342,074 | 431,342,074
Financial investments at fair value through profit or loss | 19,329,840 | - | - | 19,329,840
Financial investments at fair value through other comprehensive income | - | 140,755,780 | - | 140,755,780
Financial investments at amortised cost | - | - | 28,399,073 | 28,399,073
Total financial assets | 394,222,661 | 140,755,780 | 965,566,281 | 1,500,544,722
Derivative liabilities held for risk management | 626,476 | - | - | 626,476
Amounts owed to institutions and banks | - | - | 412,570,931 | 412,570,931
Amounts owed to customers | - | - | 934,738,942 | 934,738,942
Debt securities in issue | - | - | 27,543,864 | 27,543,864
Total financial liabilities | 626,476 | - | 1,374,853,737 | 1,375,480,213

| Mandatorily | Fair value |  |
| at fair value through other |  | Total
| through | comprehensive | Amortised | carrying
| profit or loss | income | cost | amount
| USD | USD | USD | USD
Balances with the Central Bank of Malta, treasury bills and cash | - | - | 216,867,325 | 216,867,325
Derivative assets held for risk management | 1,610,475 | - | - | 1,610,475
Trading assets | 444,583,661 | - | - | 444,583,661
Loans and advances to banks | - | - | 149,713,926 | 149,713,926
Loans and advances to customers | - | - | 484,528,057 | 484,528,057
Financial investments at fair value through profit or loss | 18,179,220 | - | - | 18,179,220
Financial investments at fair value through other comprehensive income | - | 143,189,022 | - | 143,189,022
Financial investments at amortised cost | - | - | 14,602,008 | 14,602,008
Total financial assets | 464,373,356 | 143,189,022 | 865,711,316 | 1,473,273,694
Derivative liabilities held for risk management | 578,779 | - | - | ˘
Amounts owed to institutions and banks | - | - | 473,295,256 | 473,295,256
Amounts owed to customers | - | - | 876,187,765 | 876,187,765
Debt securities in issue | - | - | 15,451,068 | 15,451,068
Total financial liabilities | 578,779 | - | 1,364,934,089 | 1,365,512,868

FIMBank Group Annual Report & Financial Statements 2023
145
Bank – 31 December 2023
Bank – 31 December 2022

| Mandatorily | Fair value |  |
| at fair value through other |  | Total
| through | comprehensive | Amortised | carrying
| profit or loss | income | cost | amount
| USD | USD | USD | USD
Balances with the Central Bank of Malta, treasury bills and cash | - | - | 352,997,057 | 352,997,057
Derivative assets held for risk management | 812,609 | - | - | 812,609
Loans and advances to banks | - | - | 114,325,243 | 114,325,243
Loans and advances to customers | - | - | 618,118,225 | 618,118,225
Financial investments at fair value through profit or loss | 19,329,840 | - | - | 19,329,840
Financial investments at fair value through other comprehensive income | - | 140,755,780 | - | 140,755,780
Financial investments at amortised cost | - | - | 28,399,073 | 28,399,073
Total financial assets | 20,142,449 | 140,755,780 | 1,113,839,598 | 1,274,737,827
Derivative liabilities held for risk management | 626,476 | - | - | 626,476
Amounts owed to institutions and banks | - | - | 333,498,402 | 333,498,402
Amounts owed to customers | - | - | 951,166,330 | 951,166,330
Total financial liabilities | 626,476 | - | 1,284,664,732 | 1,285,291,208

| Mandatorily | Fair value |  |
| at fair value through other |  | Total
| through | comprehensive | Amortised | carrying
| profit or loss | income | cost | amount
| USD | USD | USD | USD
Balances with the Central Bank of Malta, treasury bills and cash | - | - | 216,852,467 | 216,852,467
Derivative assets held for risk management | 1,610,475 | - | - | 1,610,475
Loans and advances to banks | - | - | 125,882,432 | 125,882,432
Loans and advances to customers | - | - | 718,910,427 | 718,910,427
Financial investments at fair value through profit or loss | 18,179,220 | - | - | 18,179,220
Financial investments at fair value through other comprehensive income | - | 143,189,022 | - | 143,189,022
Financial investments at amortised cost | - | - | 14,602,008 | 14,602,008
Total financial assets | 19,789,695 | 143,189,022 | 1,076,247,334 | 1,239,226,051
Derivative liabilities held for risk management | 818,031 | - | - | 818,031
Amounts owed to institutions and banks | - | - | 386,787,784 | 386,787,784
Amounts owed to customers | - | - | 869,220,415 | 869,220,415
Total financial liabilities | 818,031 | - | 1,256,008,199 | 1,256,826,230

FIMBank Group Annual Report & Financial Statements 2023
146
8 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.
8.1 Information about operating segments
Group – 2023

| Trade |  |  |  |  |
| finance | Forfaiting | Factoring | Real estate | Treasury | Total
| USD | USD | USD | USD | USD | USD
External revenue |  |  |  |  |  |
Interest income | 8,509,387 | 39,963,484 | 26,450,401 | 5,972,627 | 14,179,572 | 95,075,471
Net fee and commission income | 787,418 | (393,872) | (2,018,806) | 266,686 | 1,426,057 | 67,483
Net trading results | - | (2,311,622) | - | - | (909,247) | (3,220,869)
Net gain from equity investments measured |  |  |  |  |  |
at fair value through profit or loss | - | - | - | - | 768,541 | 768,541
Dividend income | 40,228 | - | - | - | - | 40,228
| 9,337,033 | 37,257,990 | 24,431,595 | 6,239,313 | 15,464,923 | 92,730,854
Reportable segment (loss)/profit |  |  |  |  |  |
before income tax | (7,500,796) | 5,239,554 | (5,334,734) | 838,713 | 5,644,155 | (1,113,108)
Reportable segment assets | 208,133,452 | 376,786,416 | 257,987,873 | 79,907,966 | 566,602,064 | 1,489,417,771
Reportable segment liabilities | 67,431,324 | 85,277,723 | 39,142,428 | - | 1,195,844,251 | 1,387,695,726

FIMBank Group Annual Report & Financial Statements 2023
Group – 2022

| Trade |  |  |  |  |
| finance | Forfaiting | Factoring | Real estate | Treasury | Total
| USD | USD | USD | USD | USD | USD
External revenue |  |  |  |  |  |
Interest income | 7,100,578 | 24,493,445 | 20,567,718 | 4,186,652 | 4,786,057 | 61,134,450
Net fee and commission income | 1,562,924 | (1,664,034) | (1,567,919) | 378,502 | 403,027 | (887,500)
Net trading results | - | - | - | - | (6,924,935) | (6,924,935)
Net loss from equity investments measured |  |  |  |  |  |
at fair value through profit or loss | - | - | - | - | (337,257) | (337,257)
Dividend income | 3,821,545 | - | - | - | - | 3,821,545
| 12,485,047 | 22,829,411 | 18,999,799 | 4,565,154 | (2,073,108) | 56,806,303
Reportable segment (loss)/profit |  |  |  |  |  |
before income tax | (26,699,125) | (2,392,144) | (6,446,742) | 2,820,656 | 736,079 | (31,981,276)
Reportable segment assets | 182,627,460 | 449,275,957 | 292,223,041 | 77,270,524 | 487,167,696 | 1,488,564,678
Reportable segment liabilities | 73,356,379 | 78,640,525 | 39,490,526 | - | 1,182,568,369 | 1,374,055,799

8.2 Reconciliations of reportable segment revenues, profit or loss, assets and liabilities
The financial position and financial performance of activities not falling within any of the significant reportable segments are grouped as
‘other’, and these include non-core activities mainly related to the letting of property to third parties and IT solutions.
Group

| 2023 | 2022
| USD | USD
Revenues |  |
Total revenue for reportable segments | 92,730,854 | 56,806,303
Consolidation adjustments | (389,995) | (817,965)
Other revenue | 921,017 | 865,004
Consolidated revenue | 93,261,876 | 56,853,342
Profit or loss |  |
Total loss for reportable segments | (1,113,108) | (31,981,276)
Other gains | 2,117,960 | 1,712,049
| 1,004,852 | (30,269,227)
Effect of other consolidation adjustments on segment results | 4,789,355 | 5,554,787
Consolidated profit/(loss) before tax | 5,794,207 | (24,714,440)

147
FIMBank Group Annual Report & Financial Statements 2023
148

| 2023 | 2022
| USD | USD
Assets |  |
Total assets for reportable segments | 1,489,417,771 | 1,488,564,678
Other assets | 71,846,826 | 74,133,687
| 1,561,264,597 | 1,562,698,365
Effect of other consolidation adjustments on segment financial position | 19,419,367 | (6,561,712)
Consolidated assets | 1,580,683,964 | 1,556,136,653
Liabilities |  |
Total liabilities for reportable segments | 1,387,695,726 | 1,374,055,799
Other liabilities | 12,849,534 | 15,137,817
| 1,400,545,260 | 1,389,193,616
Effect of other consolidation adjustments on segment financial position | 841,572 | (3,567,061)
Consolidated liabilities | 1,401,386,832 | 1,385,626,555

8.3 Geographical areas
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.
Group

| Consolidated revenue |
| 2023 | 2022
| USD | USD
Malta | 15,204,879 | 17,664,054
India | 12,264,518 | 9,509,807
Egypt | 11,701,172 | 6,514,887
Other countries (individually less than 10%) | 54,091,307 | 23,164,594
| 93,261,876 | 56,853,342

Group

| Non-current assets |
| 2023 | 2022
| USD | USD
Malta | 48,060,047 | 48,532,574
India | 647,296 | 877,226
Egypt | 558,072 | 747,513
Other countries (individually less than 10%) | 801,439 | 1,294,545
| 50,066,854 | 51,451,858

‘Non-current assets’ include ‘Property and equipment’, ‘Investment property’ and ‘Intangible assets’.
FIMBank Group Annual Report & Financial Statements 2023
149
9 Net interest income

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
|  | Restated |  | Restated
Interest income | USD | USD | USD | USD
On balances with the Central Bank of Malta and amounts owed to institutions * | 7,820,013 | 1,382,434 | 7,820,013 | 1,382,434
On loans and advances to banks | 2,694,747 | 1,278,124 | 1,918,045 | 613,716
On loans and advances to customers | 43,142,482 | 33,116,476 | 19,314,418 | 16,360,156
On loans and advances to subsidiary companies | - | - | 21,893,224 | 10,727,694
On trading assets | 39,962,687 | 24,491,993 | - | -
On financial investments at fair value through other comprehensive income | 702,406 | 699,457 | 702,406 | 699,457
On financial investments at amortised cost | 1,170,202 | 465,178 | 1,170,202 | 465,178
| 95,492,537 | 61,433,662 | 52,818,308 | 30,248,635
Interest expense |  |  |  |
On balances with the Central Bank of Malta and amounts owed to institutions * | 8,680,808 | 1,958,000 | 8,680,808 | 1,958,000
On amounts owed to institutions and banks | 9,576,451 | 7,973,737 | 3,088,051 | 4,268,371
On amounts owed to customers | 21,304,973 | 6,934,007 | 21,304,973 | 6,934,007
On debt securities in issue | 545,041 | 415,775 | - | -
On amounts owed to subsidiary companies | - | - | 22,361 | 1,365
On treasury bills purchased at a premium | 1,196 | 295,264 | 1,196 | 295,264
On lease liability owed to third parties (Note 30) | 134,203 | 86,379 | 45 | 6,018
On lease liability owed to subsidiary companies (Note 30) | - | - | 59,468 | 46,166
| 40,242,672 | 17,663,162 | 33,156,902 | 13,509,191
Net interest income | 55,249,865 | 43,770,500 | 19,661,406 | 16,739,444

The Group’s i nterest income recognised on credit-impaired loans and advances to customers during the financial year ended 31
December 2023, which is entirely included in ‘Interest income on loans and advances to customers’, amounted to USD1,720,738 (2022:
USD640,911).
The Banks’s interest income recognised on credit-impaired loans and advances to customers during the financial year ended 31
December 2023, which is entirely included in ‘Interest income on loans and advances to customers’, amounted t o USD1,956 (2022:
USD209,900).
During the financial year ended 31 December 2023, the Group and Bank reclassified amounts which were previously reported unde r
‘Net fee and commission (expense) / income’ to ‘Net interest income’, given that these form an integral part of the effective interest
rate. Refer to Note 4 for a description of the reclassification and the disclosure of the impact on ‘Net interest income’ reported for the
financial years ended 31 December 2023 and 31 December 2022.
‘ * ’ Until 2022, negative interest rates were applicable to ‘Balances held with the Central Bank of Malta’ and ‘Amounts owed to
institutions’. In this respect, negative interest payable in respect of balances held with Central Bank of Malta during the financial year
ended 31 December 2022 is presented within ‘Interest expense on balances with the Central Bank of Malta and amounts owed to
institutions’. Similarly, negative interest charged in respect of amounts owed to institutions during the financial year ended 31 December
2022 is presented within ‘Interest income on balances with the Central Bank of Malta and amounts owed to institutions’.
Included in the table above are ‘Interest income’ receivable from and ‘Interest expense’ payable to the parent company and other
related companies (refer to analysis of amounts in Note 44).
FIMBank Group Annual Report & Financial Statements 2023
150
10 Net fee and commission (expense)/income

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
|  | Restated |  | Restated
| USD | USD | USD | USD
Fee and commission income |  |  |  |
Business introductions and other services provided to clients of London Forfaiting Company Limited | 2,021,134 | 1,196,527 | - | -
Issuance and confirmation of letters of credit | 1,663,966 | 1,390,043 | 1,663,966 | 1,390,043
Issuance of guarantees and other fees and commissions |  |  |  |
receivable in respect of real estate lending | 657,666 | 434,083 | 662,108 | 434,083
Payment fees and other bank charges | 903,116 | 978,136 | 721,538 | 832,170
Administrative fees on factoring receivables | 971 | 1,269 | 963 | 88,698
Issuance of guarantees to subsidiary companies | - | - | 67,603 | -
| 5,246,853 | 4,000,058 | 3,116,178 | 2,744,994
Fee and commission expense |  |  |  |
Commissions paid to correspondent factors | 2,320,383 | 2,441,615 | 483,958 | 706,243
Agent fees and other administrative fees in respect of trading |  |  |  |
assets | 2,097,160 | 1,308,000 | - | -
Insurance fees in respect of factoring receivables | 774,977 | 1,436,318 | 382,658 | 752,072
Issuance of guarantees and other fees payable in respect of real |  |  |  |
estate lending | 487,456 | 460,164 | 135,017 | 158,163
Bank charges | 298,884 | 348,504 | 196,990 | 272,963
Commissions paid to subsidiary companies in respect of services |  |  |  |
rendered | - | - | - | 25,218
Other fees payable | 7,570 | 10,135 | 7,564 | 10,135
| 5,986,430 | 6,004,736 | 1,206,187 | 1,924,794
Net fee and commission (expense)/income | (739,577) | (2,004,678) | 1,909,991 | 820,200

During the financial year ended 31 December 2023, the Group and Bank reclassified amounts which were previously reported unde r
‘Net fee and commission (expense) / income’ to ‘Net interest income’, given that these form an integral part of the effective interest
rate. Refer to Note 4 for a description of the reclassification and the disclosure of the impact on ‘Net interest income’ rep orted for the
financial years ended 31 December 2023 and 31 December 2022.
Included in Group and Bank are ‘Fee and commission income’ receivable from and ‘Fee and commission expense’ payable to related
parties (see Note 44).
11 Net trading results

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
| USD | USD | USD | USD
Fair value movements on trading assets | (2,311,622) | (7,342,792) | - | -
Fair value movements on derivatives held for risk management | (1,905,241) | (401,130) | (2,265,273) | 581,584
Net income from foreign exchange activities | 995,994 | 818,987 | 1,343,629 | 829,445
| (3,220,869) | (6,924,935) | (921,644) | 1,411,029

‘Fair value movements on derivatives held for risk management’ include an amount of USD74,484 (2022: USD154,295) payable to
subsidiary companies of the Bank. See Note 44 for transactions with other related parties.
FIMBank Group Annual Report & Financial Statements 2023
151
12 Net gain/(loss) from equity investments measured at fair value
through profit or loss

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
| USD | USD | USD | USD
Investment securities |  |  |  |
Fair value movements on equity investments at fair value through profit or loss | 768,541 | (337,257) | 768,541 | (337,257)
| 768,541 | (337,257) | 768,541 | (337,257)

A reconciliation of the movement in the carrying amount of equity investments measured at fair value through profit or loss is presented
in Note 6.4.1.
13 Dividend income

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
| USD | USD | USD | USD
Dividend income from equity investments at fair value through profit or loss | 40,228 | 3,821,545 | 40,228 | 3,821,545
Dividend income from subsidiary companies | - | - | 12,181,635 | 6,500,000
| 40,228 | 3,821,545 | 12,221,863 | 10,321,545

14 Other operating income

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
| USD | USD | USD | USD
Rental income from leased property (Note 30) | 840,123 | 834,721 | - | 51,268
Gain on disposal of property and equipment (Note 28) | 31,064 | 18,519 | 27,500 | 355
Other non-trading income | 49,830 | - | 49,830 | -
Income receivable from subsidiary companies | - | - | 251,000 | 408,750
Gain on lease modifications (Note 30) | - | 11,764 | - | 106,101
| 921,017 | 865,004 | 328,330 | 566,474

Income from subsidiary companies relates to amounts received by the Bank during the financial years ended 31 December 2023 and 31
December 2022 for the provision of IT hosting services to subsidiary companies.
15 Other operating expenses

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
| USD | USD | USD | USD
Write-off of property and equipment (Note 28) | 21,455 | - | 21,455 | -
Fees payable on recoveries | - | 364,205 | - | 364,205
Other expenses | 3,076 | - | 3,076 | -
| 24,531 | 364,205 | 24,531 | 364,205

FIMBank Group Annual Report & Financial Statements 2023
152
16 Administrative expenses
16.1 Administrative expenses incurred during the year are analysed as follows:

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
| USD | USD | USD | USD
Personnel expenses (Note 16.2) | 25,176,736 | 24,130,665 | 13,743,575 | 13,403,083
Professional fees | 5,590,505 | 2,732,707 | 3,168,599 | 1,505,412
IT software and hardware maintenance | 3,924,983 | 3,010,896 | 3,332,988 | 2,740,378
Regulatory fees | 1,844,949 | 1,716,979 | 1,621,813 | 1,612,557
Travel and telecommunication costs | 1,021,006 | 816,182 | 532,084 | 475,854
Insurance | 532,452 | 591,439 | 334,609 | 376,831
Property and equipment maintenance | 521,283 | 313,758 | 82,948 | 79,795
Subscriptions to service providers | 409,804 | 360,255 | 292,488 | 268,598
Marketing and advertising expenses | 351,807 | 297,011 | 228,779 | 216,766
Recruitment and training | 178,902 | 165,284 | 108,379 | 74,757
Expenses relating to short-term leases and leases of low-value assets (Note 30) | 501,735 | 489,673 | 285,930 | 216,699
Expenses relating to short-term leases and leases of low-value assets – subsidiary companies (Note 30) | - | - | 22,830 | -
Recharge of services provided by subsidiary companies | - | - | 803,001 | 951,997
Other administrative expenses | 610,103 | 535,990 | 266,502 | 216,525
| 40,664,264 | 35,160,839 | 24,824,525 | 22,139,252

See Note 44 for transactions with other related parties.
Included in ‘Professional fees’ are the following fees charged by the Group and Bank Statutory Auditors in respect of the services
provided during the financial years ended 31 December 2023 and 31 December 2022:
Group

|  |  | Other assurance |  |  | Tax |  | Other
| Audit services |  | services |  |  | advisory services |  | non-audit services
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022
| USD | USD | USD | USD | USD | USD | USD | USD
By the auditors of the parent | 464,972 | 456,785 | 3,259 | 133,483 | - | 1,201 | 125,907 | 24,398
By the auditors of subsidiary |  |  |  |  |  |  |  |
companies | 604,282 | 188,487 | 34,661 | 128,095 | 9,240 | 12,843 | 5,154 | 2,987

Bank

|  |  | Other assurance |  |  | Tax |  | Other
| Audit services |  | services |  |  | advisory services |  | non-audit services
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022
| USD | USD | USD | USD | USD | USD | USD | USD
By the auditors of the parent | 325,967 | 446,779 | 3,259 | 133,483 | - | - | 125,907 | 24,398

During the current year, fees amounting to USD3,260 have been charged to the Bank by connected undertakings of the Bank’s auditor,
in respect of other assurance services relating to the Calculation of Contributions to the Single Resolution Fund. In addition, fees
amounting to USD1,281,466 have been charged to the Bank by connected undertakings of the Bank’s auditor, in respect of regulatory
advisory services and compliance services.
All fees are inclusive of indirect taxes.
FIMBank Group Annual Report & Financial Statements 2023
153
16.2 Personnel expenses incurred during the year

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
| USD | USD | USD | USD
Directors’ emoluments | 388,497 | 416,359 | 388,497 | 416,359
Staff costs: |  |  |  |
wages, salaries and allowances | 23,510,705 | 22,114,384 | 12,900,801 | 12,551,108
defined contribution costs | 1,177,534 | 1,099,922 | 454,277 | 435,616
end of service compensation (Note 37) | 100,000 | 500,000 | - | -
| 25,176,736 | 24,130,665 | 13,743,575 | 13,403,083

Defined contribution benefits
The Group and Bank also contribute towards an employee pension plan with no commitment beyond the payment of fixed contributions.
End of service compensation
As part of the Group’s strategic initiatives to further improve the operational structure of the subsidiary entities, a provi sion for
USD500,000 was recognised during the financial year ended 31 December 2022 in respect of end of service compensation granted to
the Chief Executive Officer of a subsidiary company, reflecting the estimated payments to the affected individual employee. This
provision was raised in respect of the planned termination of the employment contract of the above mentioned individual. During the
financial year ended 31 December 2023, the Group increased the provision by USD100,000 to reflect ongoing negotiations. This provision
was reclassified to ‘Other liabilities’ by 31 December 2023, in view of the fact that the agreement with the above mentioned individual
was finalised and the liability crystallised prior to year-end.
16.3 Average number of employees
The average number of persons employed during the year was as follows:

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
| No. of | No. of | No. of | No. of
| employees | employees | employees | employees
Executive and senior managerial | 40 | 40 | 24 | 24
Other managerial, supervisory and clerical | 274 | 275 | 148 | 150
Other staff | 8 | 8 | - | -
| 322 | 323 | 172 | 174

16.4 Executive share option schemes
FIMBank
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 2023 and 2022 the Bank has not awarded shares under the Employee Share Award Scheme.
FIMBank Group Annual Report & Financial Statements 2023
154
India Factoring
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 2023, the company had 2,152,800 (31 December 2022: 2,152,800) outstanding share
options, at an exercise price of INR10/option (31 December 2022: INR10/option).
During 2023, the entity’s Board of Directors approved the cancellation of the ESOP scheme. The entity has filed an application to the
National Company Law Tribunal for permission to cancel the shares held by India Factoring Employee Welfare Trust under ESOP scheme.
In view of the insignificance of the outstanding amount of share options at reporting date, the disclosure requirements emanating from
IFRS 2 – Share-based payment are deemed to be immaterial.
17 Taxation
17.1 Amounts recognised in profit or loss

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
|  | Restated |  | Restated
| USD | USD | USD | USD
Current tax | (2,809,884) | (633,297) | (806,755) | (530,755)
Deferred tax | (2,976,649) | (1,324,313) | - | -
Taxation | (5,786,533) | (1,957,610) | (806,755) | (530,755)

17.2 Amounts recognised in other comprehensive income
Group – 31 December 2023

|  | Tax (charge) |
| Before tax | /credit | Net of tax
| USD | USD | USD
Items that will not be reclassified subsequently to profit or loss |  |  |
Fair valuation of property | 1,314,568 | (34,308) | 1,280,260
| 1,314,568 | (34,308) | 1,280,260
Items that are or may be reclassified subsequently to profit or loss |  |  |
Foreign currency translation differences for foreign operations | (621,862) | - | (621,862)
| (621,862) | - | (621,862)
Fair valuation of debt instruments: |  |  |
- fair value movement | 8,161,730 | - | 8,161,730
- movement in loss allowance | (42,344) | - | (42,344)
| 8,119,386 | - | 8,119,386
| 8,812,092 | (34,308) | 8,777,784

In view of the assessment performed by Management to determine the recoverability of deferred tax assets in future periods, no
additional deferred tax was recognised in respect of foreign currency translation differences for foreign operations during the financial
year ended 31 December 2023. Refer to Note 32.2 for further details.
FIMBank Group Annual Report & Financial Statements 2023
155
Group – 31 December 2022 (Restated)

|  |  | Tax (charge) |
|  | Before tax | /credit | Net of tax
|  | USD | USD | USD
Items that will not be reclassified subsequently to profit or loss |  |  |  |
Fair valuation of property |  | - | 470,277 | 470,277
|  | - | 470,277 | 470,277
Items that are or may be reclassified subsequently to profit or loss |  |  |  |
Foreign currency translation differences for foreign operations |  | (2,840,781) | - | (2,840,781)
|  | (2,840,781) | - | (2,840,781)
Fair valuation of debt instruments: |  |  |  |
- | fair value movement | (23,139,340) | (1,331,704) | (24,471,044)
- | movement in loss allowance | 43,513 | - | 43,513
|  | (23,095,827) | (1,331,704) | (24,427,531)
|  | (25,936,608) | (861,427) | (26,798,035)

In view of the assessment performed by Management to determine the recoverability of deferred tax assets in future periods, no
additional deferred tax was recognised in respect of foreign currency translation differences for foreign operations during the financial
year ended 31 December 2022. Refer to Note 32.2 for further details.
In addition, due to the reversal of the reclassification of a portfolio of debt instruments, which resulted in the portfolio being reclassified
back to a ‘hold-to-collect-and-sell’ business model, the fair value movement presented in the table above has been res tated to show the
unrealised fair value movements in respect of this portfolio. However, the deferred tax charge which was recognised in the prior year
has not been restated in view of the decision made by Management not to recognise further deferred tax assets as at 31 December
2022. Refer to Note 32.2 for further details.
Bank – 31 December 2023

|  |  | Tax (charge) |
|  | Before tax | /credit | Net of tax
|  | USD | USD | USD
Items that are or may be reclassified subsequently to profit or loss |  |  |  |
Fair valuation of debt instruments: |  |  |  |
- | fair value movement | 8,161,730 | - | 8,161,730
- | movement in loss allowance | (42,344) | - | (42,344)
|  | 8,119,386 | - | 8,119,386

In view of the assessment performed by Management to determine the recoverability of deferred tax assets in future periods, no
additional deferred tax was recognised in respect of the cumulative unrealised fair value losses as at 31 December 2023. Refer to Note
32.2 for further details.
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156
Bank – 31 December 2022 (Restated)

|  |  | Tax (charge) |
|  | Before tax | /credit | Net of tax
|  | USD | USD | USD
Items that are or may be reclassified subsequently to profit or loss |  |  |  |
Fair valuation of debt instruments: |  |  |  |
- | fair value movement | (23,139,340) | (1,331,704) | (24,471,044)
- | movement in loss allowance | 43,513 | - | 43,513
|  | (23,095,827) | (1,331,704) | (24,427,531)

Due to the reversal of the reclassification of a portfolio of debt instruments, which resulted in the portfolio being reclassified back to a
‘hold-to-collect-and-sell’ business model, the fair value movement presented in the table above has been restated t o show the
unrealised fair value movements in respect of this portfolio. However, the deferred tax charge which was recognised in the prior year
has not been restated in view of the decision made by Management not to recognise further deferred tax assets as at 31 December
2022. Refer to Note 32.2 for further details.
17.3 Reconciliation of effective tax rate

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
|  | Restated |  | Restated
| USD | USD | USD | USD
Profit/(Loss) before tax | 5,794,207 | (24,714,440) | 3,296,903 | (21,479,329)
Tax income using the domestic income tax rate of 35% | (2,027,972) | 8,650,054 | (1,153,916) | 7,517,765
Tax effect of: |  |  |  |
Non-deductible expenses | (126,599) | (89,301) | (3,578) | (1,994)
Non-deductible capital loss | - | (1,837,258) | - | (2,891,538)
Non-taxable income | - | 1,337,541 | 4,263,572 | 3,612,541
Unrecognised temporary differences | (4,539,628) | (9,731,289) | (3,304,036) | (8,342,904)
Different tax rates in foreign jurisdictions | 907,507 | (287,700) | (608,797) | (424,625)
Other | 159 | 343 | - | -
Taxation | (5,786,533) | (1,957,610) | (806,755) | (530,755)

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157
18 Earnings per share
18.1 Basic earnings per share
The calculation of basic earnings per share has been based on the following results attributable to ordinary shareholders and weighted
average number of ordinary shares outstanding.
As at 31 December 2023 and 2022, basic and diluted earnings per share are equal.
18.2 Loss attributable to ordinary shareholders

| Group |
| 2023 | 2022
| USD | USD
Loss attributable to the equity holders of the Bank | (30,812) | (26,590,278)

18.3 Weighted average number of ordinary shares
Group

| 2023 | 2022
| No. of shares | No. of shares
Weighted average number of ordinary shares at 31 December | 522,443,763 | 522,443,763

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

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
|  | Restated |  | Restated
| USD | USD | USD | USD
Cash | 19,916 | 24,541 | 6,787 | 9,683
Balances with the Central Bank of Malta | 221,803,752 | 91,550,151 | 221,803,752 | 91,550,151
Treasury bills | 131,270,544 | 125,410,680 | 131,270,544 | 125,410,680
Loss allowance | (84,026) | (118,047) | (84,026) | (118,047)
| 353,010,186 | 216,867,325 | 352,997,057 | 216,852,467

‘Balances with the Central Bank of Malta’ include a minimum reserve deposit requirement of EUR7,598,371 converted to USD8,395,990
using the year-end spot exchange rate (2022: EUR9,249,484 converted to USD9,865,064 using the year-end spot exchange rate) in terms
of Regulation (EC) No: 1745/2003 of the European Central Bank. Loss allowance on the reserve deposit amounts to USD7,218 (2022:
USD7,564).
At 31 December 2023 and 31 December 2022, all of the Group’s and Bank’s ‘Treasury bills’ were pledged in favour of the European
Central Bank to secure funding. As at 31 December 2023, ‘Treasury bills’ with a carrying amount of USD89,327,367 (2022:
USD105,313,695) were utilised against these credit lines.
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158
20 Derivatives held for risk management

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
| USD | USD | USD | USD
Derivative assets held for risk management |  |  |  |
foreign exchange | 715,713 | 1,610,475 | 715,713 | 1,610,475
interest rate | - | - | 96,896 | -
| 715,713 | 1,610,475 | 812,609 | 1,610,475
Derivative liabilities held for risk management |  |  |  |
foreign exchange | (626,476) | (578,779) | (626,476) | (723,311)
interest rate | - | - | - | (94,720)
| (626,476) | (578,779) | (626,476) | (818,031)

See Note 44 for derivatives with related parties.
20.1 Net investment hedge
The Bank has an exposure to Indian Rupees (“INR”) in respect of the investment in India Factoring, which had a carrying amount of
USD33.7 million as at 31 December 2023 and 31 December 2022. In this respect, the Bank entered into forward foreign exchange
derivative contracts to hedge its exposure to INR. As at 31 December 2023, the notional amount of these derivative contracts amounts
to USD30.0 million (2022: USD30.8 million).
The Bank applies hedge accounting in respect of net investment in India Factoring to mitigate the risk of changes in spot exchange rates.
Hedging is undertaken using forward foreign exchange contracts where an economic relationship exists between the hedged net
investment and hedging instrument due to the foreign currency risk exposure.

|  | Carrying amount |  |  |  |
|  |  |  |  |  | Hedge
|  |  |  |  |  | ineffectiveness
|  |  |  | Amounts |  | recognised in
| Derivative | Derivative | Nominal | recognised | Change in | income
| assets | liabilities | amount | in OCI | fair value | statement
| USD | USD | USD | USD | USD | USD
2023 |  |  |  |  |  |
Indian rupee denominated foreign exchange | - | 98,017 | 30,024,203 | (370,022) | (369,918) | 104
2022 |  |  |  |  |  |
Indian rupee denominated foreign exchange | 329,325 | - | 30,749,974 | 1,378,685 | 1,371,469 | (7,216)

21 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 issued by foreign banks and other foreign issuers. These assets are held for short-term trading.
None of the trading assets were listed as at 31 December 2023 and 31 December 2022.
At 31 December 2023 and 31 December 2022, there were no ‘Trading assets’ pledged in favour of third parties under reverse-repos or
borrowing arrangements.
A reconciliation of the movement in the carrying amount of ‘Trading assets’ is presented in Note 6.4.1.
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159
22 Loans and advances to banks
Group

| 31 December 2023 | 31 December 2022 | 1 January 2022
|  | Restated | Restated
| USD | USD | USD
Unencumbered loans and advances to banks: |  |  |
Repayable on call and at short notice | 51,126,590 | 16,362,142 | 35,044,550
Term loans and advances | 76,778,698 | 35,034,095 | 22,489,142
Pledged in favour of third parties | 25,149,244 | 98,759,904 | 141,341,035
Gross loans and advances to banks | 153,054,532 | 150,156,141 | 198,874,727
Loss allowance | (239,584) | (442,215) | (386,151)
Net loans and advances to banks | 152,814,948 | 149,713,926 | 198,488,576

Bank

| 31 December 2023 | 31 December 2022 | 1 January 2022
|  | Restated | Restated
| USD | USD | USD
Unencumbered loans and advances to banks: |  |  |
Repayable on call and at short notice | 20,893,167 | 6,803,553 | 27,011,814
Term loans and advances | 68,498,510 | 20,736,746 | 14,474,062
Pledged in favour of third parties | 25,149,244 | 98,759,904 | 141,341,035
Gross loans and advances to banks | 114,540,921 | 126,300,203 | 182,826,911
Loss allowance | (215,678) | (417,771) | (368,363)
Net loans and advances to banks | 114,325,243 | 125,882,432 | 182,458,548

As at 31 December 2023 and 31 December 2022, loans and advances to banks ‘Pledged in favour of third parties’ represent amounts
pledged in favour of third party banks under borrowing arrangements or under collateral margin agreements in respect of derivatives
held for risk management purposes.
See Note 44 for balances due from related parties other than the Bank’s subsidiary companies.
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160
23 Loans and advances to customers
Group

| 31 December 2023 | 31 December 2022 | 1 January 2022
|  | Restated | Restated
| USD | USD | USD
Unencumbered loans and advances to customers: |  |  |
Repayable on call and at short notice | 248,664,594 | 317,248,781 | 367,827,649
Term loans and advances | 201,313,207 | 241,994,141 | 226,756,238
Pledged in favour of third parties | 277,566 | 362,042 | 120,369
Gross loans and advances to customers | 450,255,367 | 559,604,964 | 594,704,256
Loss allowance on loans and advances to customers | (18,913,293) | (75,076,907) | (82,784,854)
Net loans and advances to customers | 431,342,074 | 484,528,057 | 511,919,402

Bank

| 31 December 2023 | 31 December 2022 | 1 January 2022
|  | Restated | Restated
| USD | USD | USD
Unencumbered loans and advances to customers: |  |  |
Repayable on call and at short notice | 61,976,250 | 152,171,397 | 183,848,615
Term loans and advances | 201,313,207 | 241,994,141 | 226,749,228
Pledged in favour of third parties | 277,566 | 362,042 | 120,369
Loans and advances to subsidiary companies | 367,338,215 | 392,743,764 | 383,006,632
Gross loans and advances to customers | 630,905,238 | 787,271,344 | 793,724,844
Loss allowance on loans and advances to customers | (11,166,753) | (67,711,400) | (68,451,595)
Loss allowance on loans and advances to subsidiary companies | (1,620,260) | (649,517) | (505,391)
Net loans and advances to customers | 618,118,225 | 718,910,427 | 724,767,858

‘Pledged in favour of third parties’ is comprised exclusively of assets pledged in favour of third parties under borrowing ar rangements.
‘Loans and advances to subsidiary companies’ include facilities that are unsecured and repayable on demand. The pricing of such facilities
is dependent on the currency of funding and market conditions.
See Note 44 for balances due from related parties other than the Bank’s subsidiary companies, which amounts are included in the tables
above.
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161
24 Financial investments 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 the
United Kingdom. At 31 December 2023, the Group’s and Bank’s FVTPL assets comprise an investment amounting to USD16,940,971
(2022: USD15,740,852) in the 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 USD1,695,525 (2022: USD1,6 32,449) in the Global Opportunities
Fund, a sub-fund that invests in a variety of investments (including real estate), with relative complex structures and limited liquidity.
At reporting date, the Group and Bank held 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.
At reporting date, the Group and Bank held USD640,987 (2022: USD752,843) of equity shares in a foreign holding company, Tawazun
Holding Company (KSC), which were acquired through a debt settlement agreement in 2021.
At 31 December 2023, the Group and Bank held an investment in other unlisted equity shares with a fair value of USD52,357 (2022:
USD53,076).
A reconciliation of the movement in the carrying amount of equity investments measured at fair value through profit or loss is presented
in Note 6.3.1.
25 Financial investments at fair value through other comprehensive
income

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
|  | Restated |  | Restated
| USD | USD | USD | USD
Debt instruments: |  |  |  |
issued by the Government of Malta | 35,947,692 | 32,338,352 | 35,947,692 | 32,338,352
issued by foreign sovereigns | 55,328,079 | 53,636,259 | 55,328,079 | 53,636,259
issued by foreign corporates | 49,480,009 | 57,214,411 | 49,480,009 | 57,214,411
| 140,755,780 | 143,189,022 | 140,755,780 | 143,189,022
Loss allowance | (83,233) | (125,577) | (83,233) | (125,577)

At 31 December 2023 and 31 December 2022, all of the Group’s and Bank’s ‘Financial investments at fair value through other
comprehensive income’ were pledged in favour of the European Central Bank to secure funding. As at 31 December 2023, debt
instruments with a carrying amount of USD104,218,777 (2022: USD89,456,976) were utilised against these credit lines.
All financial investments at fair value through other comprehensive income were listed as at 31 December 2023 and 31 December 2022.
An analysis of credit risk in respect of these instruments is presented in Note 5 of these financial statements.
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162
25.1 Reconciliation of carrying amount

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
|  | Restated |  | Restated
| USD | USD | USD | USD
Opening balance | 143,189,022 | 162,408,542 | 143,189,022 | 162,408,542
Acquisitions | - | 25,549,207 | - | 25,549,207
Redemptions | (13,745,002) | (13,000,000) | (13,745,002) | (13,000,000)
Changes in fair value | 8,972,322 | (23,242,963) | 8,972,322 | (23,242,963)
Amortisation of premium or discount | (1,050,827) | (1,190,114) | (1,050,827) | (1,190,114)
Effects of movement in exchange rate | 3,390,265 | (7,335,650) | 3,390,265 | (7,335,650)
Closing balance | 140,755,780 | 143,189,022 | 140,755,780 | 143,189,022

25.2 IFRS 9 – Reclassification of long-term debt securities
During the financial year ended 31 December 2022, the Group and Bank changed the business model for its long-term debt securities
from ‘hold-to-collect-and-sell’ to ‘hold-to-collect’, leading to the reclassification of this portfolio from ‘Financial investments at fair value
through other comprehensive income’ to ‘Financial investments at amortised cost’. The reclassification was done to reflect a change in
the business model for managing these long-term securities, such as sovereign bonds, corporate bonds, and Malta Government Bonds,
to a held-to-collect business model in terms of IFRS 9. The Group and Bank based its decision on professional advice, industry practice
and information available at the time. In this respect, ‘Financial investments at fair value through other comprehensive income’
amounting to USD161,611,818 were reclassified to ‘Investments at amortised cost’ on 1 January 2022.
During the financial year ended 31 December 2023, this position was reconsidered by Management in the context of developments in
market interpretations of IFRS 9 requirements in relation to reclassifications of financial instruments between different classification
and measurement categories. In this respect, Management reperformed the assessment relating to the reclassification of this portfolio
of financial instruments in the context of these developments. Based on this assessment, the Group and Bank concluded that the
reclassification criteria emanating from IFRS 9 are no longer deemed to have been met during the financial year ended 31 December
2022. Accordingly, Management has decided to reverse the effects of the reclassification on the Group's and Bank’s Financial Positions.
The comparative financial information presented within these Financial Statements is being restated to apply this reversal
retrospectively.
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163
The effect of the reversal of the reclassification effected in 2022 on the Financial Statements of both the Group and Bank is summarised
below:

| 31 December |  |  |
| 2022 |  |  | 31 December
| as previously | Impact of | Impact of | 2022
| reported | reclassification | remeasurement | as restated
| USD | USD | USD | USD
Statements of financial position |  |  |  |
Assets |  |  |  |
Financial investments at amortised cost: |  |  |  |
debt investments at amortised cost | 182,756,964 | (168,132,745) | - | 14,624,219
interest accrued on debt investments at amortised cost | 701,166 | (683,690) | - | 17,476
loss allowance on debt investments at amortised cost | (165,264) | 125,577 | - | (39,687)
Financial investments at fair value through other comprehensive income: |  |  |  |
debt investments measured at FVOCI | - | 168,132,745 | (25,627,413) | 142,505,332
interest accrued on debt investments measured at FVOCI | - | 683,690 | - | 683,690
Equity |  |  |  |
Fair value reserve: |  |  |  |
valuation loss on debt investments measured |  |  |  |
at FVOCI | - | - | (25,627,413) | (25,627,413)
loss allowance on debt investments measured |  |  |  |
at FVOCI | - | 125,577 | - | 125,577
Statements of profit or loss for the financial year ended 31 December 2022 (as restated) |  |  |  |
Net movement in expected credit losses and other credit |  |  |  |
impairment charges: |  |  |  |
loss allowance on debt investments at measured |  |  |  |
amortised cost | (107,642) | 125,577 | - | 17,935
loss allowance on debt investments measured |  |  |  |
at FVOCI | 82,064 | (125,577) | - | (43,513)

FIMBank Group Annual Report & Financial Statements 2023
164

| 1 January |  |  |
| 2022 |  |  | 1 January
| as previously | Impact of | Impact of | 2022
| reported | reclassification | remeasurement | as restated
| USD | USD | USD | USD
Statements of financial position |  |  |  |
Assets |  |  |  |
Financial investments at amortised cost: |  |  |  |
Debt investments at amortised cost | 172,685,542 | (162,768,187) | - | 9,917,355
Interest accrued on debt investments at amortised cost | 851,745 | (796,724) | - | 55,021
Loss allowance on debt investments at amortised cost | (139,687) | 82,064 | - | (57,622)
Financial investments at fair value through other comprehensive income: |  |  |  |
Debt investments measured at FVOCI | - | 162,768,187 | (1,156,369) | 161,611,818
Interest accrued on debt investments measured at FVOCI | - | 796,724 | - | 796,724
Equity |  |  |  |
Fair value reserve: |  |  |  |
Valuation loss on debt investments measured |  |  |  |
at FVOCI | - | - | (1,156,369) | (1,156,369)
Loss allowance on debt investments measured |  |  |  |
at FVOCI | - | 82,064 | - | 82,064

The impact of the reclassification on the ‘Fair value reserve’ is presented in the statements of changes in equity for the financial year
ended 31 December 2022, including the impact of the reclassification on the opening equity balances as at 1 January 2022.
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165
26 Financial investments at amortised cost

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
|  | Restated |  | Restated
| USD | USD | USD | USD
Debt instruments: |  |  |  |
issued by foreign sovereigns | 7,667,576 | - | 7,667,576 | -
issued by foreign corporates | 20,862,658 | 14,641,695 | 20,862,658 | 14,641,695
Loss allowance | (131,161) | (39,687) | (131,161) | (39,687)
| 28,399,073 | 14,602,008 | 28,399,073 | 14,602,008

During the financial year ended 31 December 2023, the Group and Bank reversed the decision to reclassify a portfolio of debt
instruments, which was presented and measured as financial investments measured at amortised cost as at 31 December 2022. In this
respect, this portfolio was reclassified back to financial investments measured at fair value through other comprehensive income, as
described in further detail in Note 25.
At 31 December 2023 and 31 December 2022, all of the Group’s and Bank’s ‘Financial investments at amortised cost’ were pledged in
favour of the European Central Bank to secure funding. As at 31 December 2023, debt instruments with a carrying amount of
USD10,813,735 were utilised against these credit lines. As at 31 December 2022, no balances were outstanding against this collateral.
See Note 44 for financial investments issued by related parties.
All financial investments at amortised cost were listed as at 31 December 2023 and 31 December 2022, except for a debt instrument
issued by the ultimate parent entity of the Group. An analysis of credit risk in respect of these instruments is presented in Note 5 of
these financial statements.
26.1 Reconciliation of carrying amount

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
|  | Restated |  | Restated
| USD | USD | USD | USD
Opening balance | 14,602,008 | 9,914,754 | 14,602,008 | 9,914,754
Acquisitions | 13,440,236 | 14,569,219 | 13,440,236 | 14,569,219
Redemptions | - | (9,800,719) | - | (9,800,719)
Amortisation of premium or discount | 470,755 | 17,455 | 470,755 | 17,455
Effects of movement in exchange rate | (22,452) | (116,636) | (22,452) | (116,636)
Movement in loss allowance | (91,474) | 17,935 | (91,474) | 17,935
Closing balance | 28,399,073 | 14,602,008 | 28,399,073 | 14,602,008

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166
27 Investments in subsidiaries
27.1 Material subsidiaries

| Country of | Nature of |  | Equity |  |
Name of company | incorporation | business |  | interest |  | Bank
|  |  | 2023 | 2022 | 2023 | 2022
|  | IT services | % | % | USD | USD
FIM Business Solutions Limited | Malta | provider | 100 | 100 | 5,000 | 5,000
FIM Property Investment Limited | Malta | Property | 100 | 100 | 1,006,000 | 1,006,000
|  | management |  |  |  |
London Forfaiting Company Limited | United Kingdom | Forfaiting | 100 | 100 | 112,966,435 | 107,966,435
The Egyptian Company for Factoring S.A.E. | Egypt | Factoring | 100 | 100 | 10,023,448 | 10,023,448
FIMFactors B.V. | Netherlands | Holding | 100 | 100 | 33,686,690 | 33,686,690
|  | company |  |  |  |
|  |  |  |  | 157,687,573 | 152,687,573

The carrying amount of the ‘Investments in subsidiaries’ is stated net of impairment, amounting to USD66,144,660 (2022:
USD66,144,660), in relation to FIMFactors B.V. and The Egyptian Company for Factoring S.A.E (“Egypt Factors").
The Bank, indirectly through FIMFactors B.V., controls India Factoring and Finance Solutions Private Limited (“India Factoring”),
incorporated in India, to carry out the business of factoring in India. As at December 2023, the Bank held 88.16% (2022: 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 2023, the Bank held 100% (2022: 100%) shareholding.
In turn, London Forfaiting International Limited controls the following subsidiaries:

Name of company | Country of incorporation | Nature of business | Equity interest |
|  |  | 2023 | 2022
|  |  | % | %
London Forfaiting Americas Inc. | United States of America | Marketing | 100 | 100
London Forfaiting do Brasil Ltda. | Brazil | Marketing | 100 | 100

See Note 44 for related party balances and transactions.
27.2 Movement in carrying amount

| Bank |
| 2023 | 2022
| USD | USD
At 1 January | 152,687,573 | 159,448,858
Additional investment in London Forfaiting Company Limited | 5,000,000 | 1,500,000
Additional investment in FIM Property Investment Limited | - | 252
Impairment of investments in subsidiaries (refer to Note 27.3) | - | (8,261,536)
Write-off of FIM Holdings (Chile) S.p.A. | - | (1)
At 31 December | 157,687,573 | 152,687,573

During the financial year ended 31 December 2023, the Bank was paid a scrip dividend amounting to USD5,000,000 (2022: USD1,500,000)
by London Forfaiting Company Limited, through the issue of 5,000,000 (2022: 1,500,000) bonus shares at USD1 per share.
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27.3 Impairment assessment
At each reporting date, the Bank carries out an impairment assessment to calculate the recoverable amounts of its investment in
subsidiaries and determines the possibility of an impairment loss. The recoverable amount of the investment in subsidiaries is
determined based on the higher of ‘fair value less cost of disposal’ and ‘value-in-use’. No impairment losses were recognised during the
financial year ended 31 December 2023 (2022: USD8,261,536).
The recoverable amounts of the cash generating units (“CGUs”) fall in their entirety under Level 3 fair value hierarchy, as they are based
on valuation techniques that include unobservable inputs that have a significant effect on the valuation of the CGUs.
No impairment indicators were identified by the Bank in respect of its investment in London Forfaiting Company Limited and FIM
Property Investment Limited, whereas an impairment assessment was performed in respect of the Bank’s investment in India Factoring
and Egypt Factors, as disclosed in further detail hereunder.
27.3.1 India Factoring and Finance Solutions Private Limited
27.3.1.1 Impairment assessment as at 31 December 2023
As at 31 December 2023, the recoverable amount of this CGU is 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 is determined to be higher than the carrying amount of the CGU and therefore the carrying
amount is deemed to be appropriate.
The key assumptions used in the estimation of the recoverable amount using the ‘value-in-use’ approach applied in 2023 are as follows:
Financial projections
The financial projections for a ten-year period form the basis for the discounted cash flow analysis used to determine ‘value-in-use’.
These projections are based on expectations of future outcomes, taking into account past experience adjusted for the anticipated
revenue cumulative annual growth rate of 19.2%. Revenue growth is 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.
Terminal value
The terminal value or the value attributed to the CGU beyond the explicit forecast period is estimated using a ‘Gordon Growth Model’.
This determination assumes a long-term growth rate of 5.0%, which is considered appropriate considering the industry and economy
growth estimates.
Discount rate
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 holders, 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. The pre-tax and post-tax discount rate for the CGU were
18.1% and 15.0% 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.
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27.3.1.2 Impairment assessment as at 31 December 2022
As at 31 December 2022, the recoverable amount of this CGU was based on its ‘fair value less cost to dispose’, estimated using a market
comparison technique. In establishing the ‘fair value less cost to dispose’ of the CGU, Management estimated the cash flows that would
flow to the Bank in the event of a disposal of the CGU. In determining the ‘fair value less cost to dispose’, Management identified the
cash flows that they believe the CGU had the potential to generate in an orderly transaction with independent market participants using
a market multiple, within a short timeframe. Management has also taken into consideration other cash flows including recoveries of
non-performing assets and costs to dispose. As at 31 December 2022, the ‘fair value less cost to dispose’ was higher than the
investment’s ‘value-in-use’.
Based on the assessment performed by Management, an impairment loss amounting to USD6,620,000 was recognised in respect of the
Bank’s investment in India Factoring as at 31 December 2022.
The key assumptions used in the estimation of the recoverable amount using the ‘fair value less cost to dispose’ approach applied in
December 2022 were as follows:
Market multiple
The valuation model was based on market multiples derived from quoted prices of companies comparable to the CGU. Management
deemed it appropriate to determine a price to book multiple from within a range of multiples of comparable companies. The selection
of the appropriate multiple in arriving at the recoverable amount from within the range required judgement, considering qualitative and
quantitative factors specific to the measurement.
In this respect, Management concluded on a derived multiple of 1.0x as being the appropriate price to book ratio. At this multiple, the
recoverable amount was determined to be lower than the carrying amount of the CGU resulting in an impairment charge amounting to
USD6,620,000.
27.3.1.3 Valuation risks
The key assumptions described above may change as economic, political and market conditions change. 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 Bank will recover the investment in the CGU.
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27.3.2 Egypt Factors
The recoverable amount of this CGU is 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 is determined to be higher than the carrying amount of the CGU and therefore the carrying
amount is deemed to be appropriate. Based on the assessment performed by Management, an impairment loss amounting to
USD1,641,536 was recognised in respect of the Bank’s investment in Egypt Factors as at 31 December 2022.
Financial projections
Financial projections for a five-year period form the basis for discounted cash flow analysis used to determine ‘value-in-use’. These
projections are based on expectations of future outcomes based on past experience, adjusted for a revenue cumulative annual growth
rate of 3.8% (2022: 14.2%). Revenue growth is 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
Factors, which are based on a strategy to grow the business in a changing market landscape, whilst ensuring an effective operational
and control environment.
Terminal value
The terminal value, or the value attributed to the CGU beyond the explicit forecast period, is estimated using a ‘Gordon Growth Model’.
This determination assumes a long-term growth rate of 3.0% as at 31 December 2023 (2022: 3.0%), which is considered appropriate
considering the industry and economy growth estimates.
Discount rate
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 holders, the valuation model adopts the ‘cost of equity’ as the discou nt rate. IAS 36
requires pre-tax cash flows to be discounted using pre-tax discount rate.
As at 31 December 2023, the discount rate for the CGU is 21.46% (2022: 19.10%). The discount rate (representing the cost of equity)
applied on valuation date is based on the rate of 20-year US Government bonds 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. In 2022, the discount rate used was based on the rate of 10-year US Government bonds.
Valuation risks
The key assumptions described above may change as economic, political and market conditions change. 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 Bank will recover the investment in the CGU.
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28 Property and equipment
28.1 Reconciliation of carrying amount
Group

| Freehold |  | Right-of-use | Improvement | Computer |  |
| land | Buildings | assets | to premises | equipment | Others | Total
| USD | USD | USD | USD | USD | USD | USD
Cost |  |  |  |  |  |  |
At 1 January 2022 | 7,493,576 | 22,742,639 | 4,613,871 | 1,357,642 | 4,598,455 | 3,026,833 | 43,833,016
Reclassification of land and buildings to investment property | (1,011,055) | (4,158,209) | - | - | - | - | (5,169,264)
Additions | - | 23,351 | 689,363 | - | 882,633 | 207,466 | 1,802,813
Disposals | - | - |  | - | (2,221) | (92,775) | (94,996)
Lease modifications that increase the scope of the lease | - | - | 818,861 | - | - | - | 818,861
Lease modifications that decrease the scope of the lease | - | - | (94,720) | - | - | - | (94,720)
Derecognition of right-of-use asset upon termination of lease | - | - | (1,619,141) | - | - | - | (1,619,141)
Effect of movement in exchange rates | - | - | (61,366) | (24,574) | (24,175) | (15,473) | (125,588)
At 31 December 2022 | 6,482,521 | 18,607,781 | 4,346,868 | 1,333,068 | 5,454,692 | 3,126,051 | 39,350,981
At 1 January 2023 | 6,482,521 | 18,607,781 | 4,346,868 | 1,333,068 | 5,454,692 | 3,126,051 | 39,350,981
Reclassification of land and buildings to investment property | (299,423) | (724,151) | - | - | - | - | (1,023,574)
Fair Value Movement | (952,938) | (2,114,168) | - | - | - | - | (3,067,106)
Additions | - | 28,314 | 74,604 | 1,863 | 70,684 | 53,985 | 229,450
Disposals | - | - | - | - | - | (85,639) | (85,639)
Write-offs | - | - | - | (181,347) | (2,970,474) | (336,720) | (3,488,541)
Derecognition of right-of-use asset upon termination of lease | - | - | (41,120) | - | - | - | (41,120)
Effect of movement in exchange rates | 233,218 | 668,645 | 8,812 | (858) | 794 | 9,825 | 920,436
At 31 December 2023 | 5,463,378 | 16,466,421 | 4,389,164 | 1,152,726 | 2,555,696 | 2,767,502 | 32,794,887

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Group

| Freehold |  | Right-of-use | Improvement | Computer |  |
| land | Buildings | assets | to premises | equipment | Others | Total
| USD | USD | USD | USD | USD | USD | USD
Depreciation |  |  |  |  |  |  |
At 1 January 2022 | - | 2,889,245 | 2,450,144 | 835,505 | 3,982,128 | 2,765,540 | 12,922,562
Reclassification of buildings to investment property | - | (756,019) | - | - | - | - | (756,019)
Charge for the year | - | 756,057 | 704,919 | 135,119 | 370,539 | 142,368 | 2,109,002
Release on disposals | - | - |  | - | (2,221) | (91,565) | (93,786)
Lease modifications that decrease the scope of the lease | - | - | (83,170) | - | - | - | (83,170)
Derecognition of right-of-use asset upon termination of lease | - | - | (1,341,722) | - | - | - | (1,341,722)
Effects of movement in exchange rates | - | - | (61,323) | (22,819) | (23,527) | (16,156) | (123,825)
At 31 December 2022 | - | 2,889,283 | 1,668,848 | 947,805 | 4,326,919 | 2,800,187 | 12,633,042
At 1 January 2023 | - | 2,889,283 | 1,668,848 | 947,805 | 4,326,919 | 2,800,187 | 12,633,042
Reclassification of buildings to investment property | - | 217,536 | - | - | - | - | 217,536
Charge for the year | - | 660,267 | 769,270 | 131,643 | 435,605 | 216,252 | 2,213,037
Release on disposals | - | - | - | - | - | (85,639) | (85,639)
Write-offs | - | - | - | (160,686) | (2,970,474) | (335,926) | (3,467,086)
Derecognition of right-of-use asset upon termination of lease | - | - | (41,120) | - | - | - | (41,120)
Derecognition of depreciation upon revaluation of asset | - | (3,867,931) | - | - | - | - | (3,867,931)
Effects of movement in exchange rates | - | 100,845 | 1,147 | (879) | (7,955) | (85,360) | 7,798
At 31 December 2023 | - | - | 2,398,145 | 917,883 | 1,784,095 | 2,509,514 | 7,609,637
Carrying amounts |  |  |  |  |  |  |
At 1 January 2022 | 7,493,576 | 19,853,394 | 2,163,727 | 522,137 | 616,327 | 261,293 | 30,910,454
At 31 December 2022 | 6,482,521 | 15,718,498 | 2,678,020 | 385,263 | 1,127,773 | 325,864 | 26,717,939
At 31 December 2023 | 5,463,378 | 16,466,421 | 1,991,019 | 234,843 | 771,601 | 257,988 | 25,185,250
Carrying amount had the assets been carried at cost |  |  |  |  |  |  |
At 31 December 2023 | 3,540,684 | 11,721,100 | 1,991,019 | 234,843 | 769,750 | 248,358 | 18,505,754

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172
Group
During the financial year ended 31 December 2023, the Group reclassified land and buildings with a net carrying amount of USD1,241,110
(31 December 2022: USD4,413,245) to ‘Investment property’ to reflect a change in the use of part of the Group’s property which was
leased out to third parties.
During 2023, equipment which was fully depreciated was disposed of, giving rise to a gain on disposal amounting to USD31,064
recognised within ‘Other operating income’. In addition, during the financial year ended 31 December 2022, equipment with a net
carrying amount of USD1,210 was disposed of, giving rise to a gain on disposal amounting to USD18,519 recognised within ‘Other
operating income’.
In addition, property and equipment with a net carrying amount of USD21,455 were written off during the financial year ended 31
December 2023 given that these assets are no longer in use. No amounts were written off during the financial year ended 31 December
2022.
As at 31 December 2023, the Group’s right-of-use assets with a net carrying amount of USD1,991,019 (2022: USD2,678,020) relates to
the lease of office premises (see Note 30).
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Bank

| Right-of-use | Improvement | Computer |  |
| assets | to premises | equipment | Others | Total
| USD | USD | USD | USD | USD
Cost |  |  |  |  |
At 1 January 2022 | 5,914,995 | 710,821 | 3,733,495 | 2,021,950 | 12,381,261
Additions | 4,009,002 | - | 855,307 | 61,313 | 4,925,622
Release on disposals | - | - | (2,221) | (42,948) | (45,169)
Lease modifications that decrease the scope of the lease | (94,720) | - | - | - | (94,720)
Derecognition of right-of-use asset upon termination of lease | (5,638,486) | - | - | - | (5,638,486)
At 31 December 2022 | 4,190,791 | 710,821 | 4,586,581 | 2,040,315 | 11,528,508
At 1 January 2023 | 4,190,791 | 710,821 | 4,586,581 | 2,040,315 | 11,528,508
Additions | 74,512 | 1,863 | 14,633 | 18,376 | 109,384
Disposals | - | - | - | (55,568) | (55,568)
Write-offs | - | (181,347) | (2,970,474) | (336,720) | (3,488,541)
At 31 December 2023 | 4,265,303 | 531,337 | 1,630,740 | 1,666,403 | 8,093,783
Depreciation |  |  |  |  |
At 1 January 2022 | 4,835,155 | 442,238 | 3,216,753 | 1,921,866 | 10,416,012
Charge for the year | 1,420,098 | 42,080 | 314,016 | 42,706 | 1,818,900
Release on disposals | - | - | (2,221) | (41,738) | (43,959)
Lease modifications that decrease the scope of the lease | (83,170) | - | - | - | (83,170)
Derecognition of right-of-use asset upon termination of lease | (5,349,516) | - | - | - | (5,349,516)
At 31 December 2022 | 822,567 | 484,318 | 3,528,548 | 1,922,834 | 6,758,267
At 1 January 2023 | 822,567 | 484,318 | 3,528,548 | 1,922,834 | 6,758,267
Charge for the year | 1,409,743 | 40,641 | 376,874 | 36,128 | 1,863,386
Release on disposals | - | - | - | (55,568) | (55,568)
Write-offs | - | (160,686) | (2,970,474) | (335,926) | (3,467,086)
At 31 December 2023 | 2,232,310 | 364,273 | 934,948 | 1,567,468 | 5,098,999
Carrying amounts |  |  |  |  |
At 1 January 2022 | 1,079,840 | 268,583 | 516,742 | 100,084 | 1,965,249
At 31 December 2022 | 3,368,224 | 226,503 | 1,058,033 | 117,481 | 4,770,241
At 31 December 2023 | 2,032,993 | 167,064 | 695,792 | 98,935 | 2,994,784

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174
Bank
During 2023, equipment which was fully depreciated was disposed of, giving rise to a gain on disposal amounting to USD27,500
recognised within ‘Other operating income’. In addition, during the financial year ended 31 December 2022, equipment with a net
carrying amount of USD1,210 was disposed of, giving rise to a gain on disposal amounting to USD355 recognised within ‘Other operating
income’.
In addition, property and equipment with a net carrying amount of USD21,455 were written off during the financial year ended 31
December 2023 given that these assets are no longer in use. No amounts were written off during the financial year ended 31 December
2022.
None of the Bank’s assets classified in ‘Property and equipment’ are measured at fair value.
As at 31 December 2023, the Bank’s right-of-use assets with a net carrying amount of USD2,032,993 (2022: USD3,368,224) relates to
the lease of office premises (see Note 30).
28.2 Measurement of fair value
Land and buildings are revalued by an independent, professionally qualified architect in accordance with Accounting Policy 3.12.
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 2023.
The fair value measurement of property is classified as Level 3. 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:

|  |  | Range of | Inter-relationship between key
|  | Significant | unobservable inputs | unobservable inputs and fair
| Valuation technique | unobservable inputs | per annum | value measurements
| Investment income | Rental value per | €286 to €553 | The higher the rate per square
Office space | approach | square metre | (2022: €288 to €476) | metre the higher the fair value
| Investment income | Capitalisation rate | 6.25% | The higher the capitalisation rate
| approach | (2022: | 6.0%) | the lower the fair value
| Investment income | Rental value per | €82 to €233 | The higher the rate per square
Parking space | approach | square metre | (2022: €85 to €210) | metre the higher the fair value
| Investment income | Capitalisation rate | 7.0% | The higher the capitalisation rate
| approach | (2022: | 7.5%) | the lower the fair value
| Investment income | Rental value per | €64 to €200 | The higher the rate per square
Stores and ancillary | approach | square metre | (2022: €60 to €170) | metre the higher the fair value
| Investment income | Capitalisation rate | 8.0% | The higher the capitalisation rate
| approach | (2022: | 9.0%) | the lower the fair value

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175
29 Investment property
29.1 Reconciliation of carrying amount

| Group |
| 2023 | 2022
| USD | USD
At 1 January | 21,637,065 | 17,223,820
Reclassification from ‘Property and equipment’ | 1,241,110 | 4,413,245
Fair value movement | (1,398,978) | -
Effect of movement in exchange rates | 778,420 | -
At 31 December | 22,257,617 | 21,637,065
Carrying amount |  |
Cost | 15,207,960 | 13,966,850
Cumulative fair value movements | 7,049,657 | 7,670,215
Carrying amount | 22,257,617 | 21,637,065

‘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. The Group applies the fair value model to determine the carrying amount of investment property at reporting date.
During the financial year ended 31 December 2023, the Group reclassified land and buildings with a net carrying amount of USD1,241,110
(financial year ended 31 December 2022: USD4,413,245) to ‘Investment property’ to reflect a change in the use of part of the Group’s
property which was leased out to third parties.
Commitments in respect of investment property which were authorised but not yet contracted as at 31 December 2023 and 31
December 2022 are disclosed in Note 45. In addition, the Group has not capitalised any expenditure in relation to the investment
property.
29.2 Measurement of fair value
Investment property is revalued by an independent professionally qualified architect in accordance with Accounting Policy 3.14. The
valuation of investment property is prepared using 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.
The investment property was last revalued on 31 December 2023.
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176
The fair value measurement of investment property is classified as Level 3 in the fair value hierarchy. 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:

|  |  | Range of | Inter-relationship between key
|  | Significant | unobservable inputs | unobservable inputs and fair
| Valuation technique | unobservable inputs | per annum | value measurements
| Investment income | Rental value per | €286 to €553 | The higher the rate per square
Office space | approach | square metre | (2022: €288 to €476) | metre the higher the fair value
| Investment income | Capitalisation rate | 6.25% | The higher the capitalisation rate
| approach | (2022: | 6.0%) | the lower the fair value
| Investment income | Rental value per | €237 to €365 | The higher the rate per square
Retail space | approach | square metre | (2022: €85 to €210) | metre the higher the fair value
| Investment income | Capitalisation rate | 6.75% | The higher the capitalisation rate
| approach | (2022: | 7.50%) | the lower the fair value
| Investment income | Rental value per | €64 to €200 | The higher the rate per square
Stores and ancillary | approach | square metre | (2022: €60 to €170) | metre the higher the fair value
| Investment income | Capitalisation rate | 8.0% | The higher the capitalisation rate
| approach | (2022: | 9.0%) | the lower the fair value

30 Leases
30.1 Leases as lessee
The Group leases office premises 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.
30.1.1 Right-of-use assets
Right-of-use assets relate to leased office premises that are presented within ‘Property and equipment’ (see Note 28).

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
| USD | USD | USD | USD
Balance at 1 January | 2,678,020 | 2,163,727 | 3,368,224 | 1,079,840
Depreciation charge for the year | (769,270) | (704,919) | (1,409,743) | (1,420,098)
Additions | 74,604 | 689,363 | 74,512 | 4,009,002
Lease modifications that increase the scope of the lease | - | 818,861 | - | -
Lease modifications that decrease the scope of the lease | - | (11,550) | - | (11,550)
Derecognition of right-of-use asset upon termination of lease | - | (277,419) | - | (288,970)
Effect of movement in exchange rates | 7,665 | (43) | - | -
Balance at 31 December | 1,991,019 | 2,678,020 | 2,032,993 | 3,368,224

The Bank’s right-of-use assets include the lease of office premises from a subsidiary. There were no sub-leases of right-of-use assets
during the financial years ended 31 December 2023 and 31 December 2022.
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177
30.1.2 Lease liabilities

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
| USD | USD | USD | USD
Balance at 1 January | 2,704,717 | 2,224,450 | 3,490,312 | 1,128,593
Additions | 74,604 | 1,508,224 | 74,512 | 4,009,002
Lease modifications that decrease the scope of the lease | - | (300,733) | - | (406,621)
Interest expense | 134,203 | 86,379 | 59,513 | 52,184
Payments | (830,369) | (700,703) | (1,450,567) | (1,330,082)
Effect of movement in exchange rates | 35,408 | (112,900) | 112,356 | 37,236
Balance at 31 December | 2,118,563 | 2,704,717 | 2,286,126 | 3,490,312

The Bank’s lease liabilities include the lease of office premises from a subsidiary. No variable lease payments are applicable to the Group’s
and Bank’s liabilities in respect of the leased office premises.
30.1.3 Amounts recognised in profit or loss

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
| USD | USD | USD | USD
Interest on lease liabilities (Note 9) | 134,203 | 86,379 | 59,513 | 52,184
Gains on lease modifications (Note 14) | - | 11,764 | - | 106,101
Expenses relating to short-term leases (Note 16) | 494,121 | 461,064 | 307,621 | 193,124
Expenses relating to leases of low-value assets, excluding |  |  |  |
short-term leases of low-value assets (Note 16) | 7,614 | 28,609 | 1,139 | 23,575

Extension options
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.
30.2 Leases as lessor
30.2.1 Operating lease
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 29 sets out information about the operating
leases of investment property. Rental income recognised by the Group during the year ended 31 December 2023 was USD0.8 million
(2022: USD0.8 million) (refer to Note 14).
The following table sets out a maturity analysis of lease payments, showing the undiscounted lease payments to be received after the
reporting date:

| Group |
| 2023 | 2022
| USD | USD
Less than one year | 614,380 | 513,964
Between one and five years | 1,540,060 | 1,193,351
Total | 2,154,440 | 1,707,315

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178
31 Intangible assets and goodwill
31.1 Reconciliation of carrying amount
Group

| Goodwill | Software | Total
| USD | USD | USD
Cost |  |  |
At 1 January 2022 | 14,423,542 | 11,784,465 | 26,208,007
Additions | - | 318,308 | 318,308
Write-offs | (13,163,836) | - | (13,163,836)
Effects of movement in exchange rates | (1,259,706) | (3,895) | (1,263,601)
At 31 December 2022 | - | 12,098,878 | 12,098,878
At 1 January 2023 | - | 12,098,878 | 12,098,878
Additions | - | 490,433 | 490,433
Write-offs | - | (2,844,202) | (2,844,202)
Effects of movement in exchange rates | - | 277 | 277
At 31 December 2023 | - | 9,745,386 | 9,745,386
Accumulated amortisation and impairment losses |  |  |
At 1 January 2022 | 8,818,192 | 8,013,220 | 16,831,412
Charge for the year | - | 992,582 | 992,582
Write-offs | (13,163,836) | - | (13,163,836)
Impairment loss | 5,249,307 | - | 5,249,307
Effects of movement in exchange rates | (903,663) | (3,778) | (907,441)
At 31 December 2022 | - | 9,002,024 | 9,002,024
At 1 January 2023 | - | 9,002,024 | 9,002,024
Charge for the year | - | 963,300 | 963,300
Write-offs | - | (2,844,202) | (2,844,202)
Effects of movement in exchange rates | - | 277 | 277
At 31 December 2023 | - | 7,121,399 | 7,121,399
Carrying amounts |  |  |
At 1 January 2022 | 5,605,350 | 3,771,245 | 9,376,595
At 31 December 2022 | - | 3,096,854 | 3,096,854
At 31 December 2023 | - | 2,623,987 | 2,623,987

During the financial year ended 31 December 2023, the Group and Bank wrote off intangible assets which were fully amortised given
that this ‘Software’ is no longer in use. No write-offs were effected during the financial year ended 31 December 2022 in respect of
‘Software’.
FIMBank Group Annual Report & Financial Statements 2023
179
Bank

| Software
| USD
Cost |
At 1 January 2022 | 11,711,496
Additions | 318,308
At 31 December 2022 | 12,029,804
At 1 January 2023 | 12,029,804
Additions | 490,433
Write-offs | (2,844,202)
At 31 December 2023 | 9,676,035
Accumulated amortisation |
At 1 January 2022 | 7,937,181
Charge for the year | 992,770
At 31 December 2022 | 8,929,951
At 1 January 2023 | 8,929,951
Charge for the year | 965,550
Write-offs | (2,844,202)
At 31 December 2023 | 7,051,299
Carrying amounts |
At 1 January 2022 | 3,774,315
At 31 December 2022 | 3,099,853
At 31 December 2023 | 2,624,736

31.2 Impairment testing for CGUs containing goodwill
The Group wrote off any remaining goodwill during the financial year ended 31 December 2022 following an impairment assessment in
respect of its cash generating units (refer to Note 27 for further details in respect of the impairment assessment of India Factoring and
Egypt Factors). No additional goodwill was recognised by the Group during the financial year ended 31 December 2023.
For the purposes of impairment testing, goodwill wa s allocated to the Group’s cash generating units (“CGUs”) as follows:

| Group |
| 2023 | 2022
| USD | USD
India Factoring |  |
cost, net of exchange differences | - | 12,292,542
accumulated impairment, net of exchange differences | - | (12,292,542)
| - | -
Egypt Factors |  |
cost | - | 2,131,000
accumulated impairment | - | (2,131,000)
| - | -

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32 Deferred taxation
32.1 Analysis of deferred taxation

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
|  | Restated |  | Restated
| USD | USD | USD | USD
Deferred tax assets |  |  |  |
Tax effect of temporary differences relating to: |  |  |  |
excess of capital allowances over depreciation | (512,806) | (680,857) | (562,820) | (735,325)
expected credit loss allowances | 7,643,657 | 8,932,627 | 4,021,841 | 6,896,077
changes in fair value of financial instruments | 76,463 | 76,463 | 76,463 | 76,463
unabsorbed capital allowances | 622,026 | 622,026 | 622,026 | 622,026
unabsorbed tax losses | 11,168,547 | 13,051,158 | 10,758,727 | 8,145,593
lease liabilities | 374,928 | 2,218,747 | 800,144 | 597,709
right-of-use assets | (372,336) | (2,218,747) | (711,547) | (597,709)
Total deferred tax assets | 19,000,479 | 22,001,417 | 15,004,834 | 15,004,834
Deferred tax liabilities |  |  |  |
Tax effect of temporary differences relating to: |  |  |  |
fair valuation of property and equipment | 2,486,352 | 2,366,893 | - | -
fair valuation of investment property | 1,780,609 | 1,730,965 | - | -
Total deferred tax liabilities | 4,266,961 | 4,097,858 | - | -

Deferred taxes are calculated on all temporary differences under the liability method and are measured at the tax rates that are expected
to apply to the period when the asset is realised or the liability is settled based on tax rates (and tax laws) that have been substantively
enacted by the end of the reporting period. The principal tax rate used is 35% (2022: 35%), with the exception of:
• deferred taxation on the fair valuation of non-depreciable property, which is computed on the basis applicable to disposals of
immovable property mainly giving rise to a tax effect of 8% of the transfer value (2022: 8%);
• deferred taxation on unabsorbed tax losses and expected credit loss allowances relating to India Factoring, which is computed using
the applicable tax rate of 25.168% (2022: 25.168%); and
• deferred taxation on right-of-use assets and lease liabilities relating to London Forfaiting Company Limited, which is computed using
the applicable tax rate of 25% (2022: 19%).
The Group and Bank have concluded that the deferred tax assets will be recoverable using the estimated future taxable income based
on the approved business plans and budgets.
The recognised deferred tax assets and liabilities are expected to be recovered or settled principally after more than 12 months from the
end of the reporting period.
The losses can be carried forward indefinitely and have no expiry date, with the exception of tax losses arising in respect of India Factoring,
which expire within 8 years from the end of the financial year in which they arise.
32.2 Unrecognised deferred taxation
At financial reporting date, the Bank had unutilised tax losses and temporary differences in respect of which deferred taxation was
unrecognised, amounting to USD143.7 million (2022: USD134.0 million). In addition, other Group entities had unutilised and
unrecognised tax losses amounting to USD38.8 million (2022: USD34.0 million). Unrecognised unabsorbed tax losses amounting to
USD14.8 million carried in a Group entity, have an expiry period ranging between 31 March 2024 to 31 March 2025.
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32.3 Movements in temporary differences during the year
32.3.1 Deferred tax assets
Group

|  | Recognised in |  |  |
|  | other |  | Effect of |
| Opening | comprehensive | Recognised in | movement in | Closing
| balance | income | profit or loss | exchange rates | balance
| USD | USD | USD | USD | USD
2023 |  |  |  |  |
Excess of capital allowances over depreciation | (680,857) | - | 168,240 | (189) | (512,806)
Expected credit loss allowances | 8,932,627 | - | (1,270,510) | (18,460) | 7,643,657
Changes in fair values of financial instruments | 76,463 | - | - | - | 76,463
Unabsorbed capital allowances | 622,026 | - | - | - | 622,026
Unabsorbed tax losses | 13,051,158 | - | (1,888,237) | 5,626 | 11,168,547
Lease liabilities | 2,266,262 | - | (1,892,389) | 1,055 | 374,928
Right-of-use assets | (2,266,262) | - | 1,894,912 | (986) | (372,336)
| 22,001,417 | - | (2,987,984) | (12,954) | 19,000,479
2022 (Restated) |  |  |  |  |
Excess of capital allowances over depreciation | (665,157) | - | (8,971) | (6,729) | (680,857)
Expected credit loss allowances | 10,059,105 | - | (841,197) | (285,281) | 8,932,627
Changes in fair values of financial instruments | 1,408,167 | (1,331,704) | - | - | 76,463
Unabsorbed capital allowances | 622,026 | - | - | - | 622,026
Unabsorbed tax losses | 13,410,430 | - | (35,129) | (324,143) | 13,051,158
Lease liabilities | 2,274,845 | - | (56,098) | - | 2,218,747
Right-of-use assets | (2,218,747) | - | - | - | (2,218,747)
Other temporary differences | 29,858 | - | (29,858) | - | -
| 24,920,527 | (1,331,704) | (971,253) | (616,153) | 22,001,417

Bank

|  | Recognised in |  |  |
|  | other |  | Effect of |
| Opening | comprehensive | Recognised in | movement in | Closing
| balance | income | profit or loss | exchange rates | balance
| USD | USD | USD | USD | USD
2023 |  |  |  |  |
Excess of capital allowances over depreciation | (735,325) | - | 172,505 | - | (562,820)
Expected credit loss allowances | 6,896,077 | - | (2,874,236) | - | 4,021,841
Changes in fair values of financial instruments | 76,463 | - | - | - | 76,463
Unabsorbed capital allowances | 622,026 | - | - | - | 622,026
Unabsorbed tax losses | 8,145,593 | - | 2,613,134 | - | 10,758,727
Lease liabilities | 597,709 | - | 202,435 | - | 800,144
Right-of-use assets | (597,709) | - | (113,838) | - | (711,547)
| 15,004,834 | - | - | - | 15,004,834
2022 (Restated) |  |  |  |  |
Excess of capital allowances over depreciation | (735,325) | - | - | - | (735,325)
Expected credit loss allowances | 6,810,121 | - | 85,956 | - | 6,896,077
Changes in fair values of financial instruments | 1,408,167 | (1,331,704) | - | - | 76,463
Unabsorbed capital allowances | 622,026 | - | - | - | 622,026
Unabsorbed tax losses | 8,145,593 | - | - | - | 8,145,593
Lease liabilities | 653,807 | - | (56,098) | - | 597,709
Right-of-use assets | (597,709) | - | - | - | (597,709)
Other temporary differences | 29,858 | - | (29,858) | - | -
| 16,336,538 | (1,331,704) | - | - | 15,004,834

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182
32.3.2 Deferred tax liabilities
Group

|  | Recognised in |  | Effect of |
|  | other |  | movement in |
| Opening | comprehensive | Recognised in | exchange | Closing
| balance | income | profit or loss | rates | balance
| USD | USD | USD |  | USD
2023 |  |  |  |  |
Changes in fair value of investment property |  |  |  |  |
and property and equipment | (4,097,858) | (34,308) | 12,911 | (147,706) | (4,266,961)
2022 |  |  |  |  |
Changes in fair value of investment property |  |  |  |  |
and property and equipment | (4,215,075) | 470,277 | (353,060) | - | (4,097,858)

33 Other assets

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
|  | Restated |  | Restated
| USD | USD | USD | USD
Accounts receivable and prepayments | 5,273,208 | 5,001,366 | 4,004,424 | 3,999,635
Accrued income | 167,308 | 80,962 | 68,901 | 54,619
Indirect taxation receivable | 210,013 | 223,532 | 160,427 | 171,732
Cash pledged in favour of the Depositor Compensation Scheme | 2,811,005 | 2,149,970 | 2,811,005 | 2,149,970
Cash pledged in favour of the Single Resolution Fund | 445,474 | 388,680 | 445,474 | 388,680
Other assets | 254,052 | 66,980 | 256,879 | 65,648
| 9,161,060 | 7,911,490 | 7,747,110 | 6,830,284

‘Accounts receivable and prepayments’ includes an amount of USD758,925 (2022: USD1,106,078) related to subsidiary companies of the
Bank.
Cash amounting to USD2,811,005 (2022: USD2,149,970) has been pledged in favour of the Depositor Compensation Scheme. In addition,
cash amounting to USD445,474 (2022: USD388,680) has been pledged taking into account the Single Resolution Fund as an Irrevocable
Payment Commitment (“IPC”) in terms of the Recovery and Resolution Regulations (refer to Note 41).
See Note 44 for balances with related parties.
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183
34 Amounts owed to institutions and banks

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
| USD | USD | USD | USD
Term loans and deposits | 343,559,071 | 389,266,657 | 264,486,542 | 302,759,185
Repayable on demand | 69,011,860 | 84,028,599 | 69,011,860 | 84,028,599
| 412,570,931 | 473,295,256 | 333,498,402 | 386,787,784

The Group and Bank participate in Targeted Longer Term Refinancing Operations (“TLTROs”) and other liquidity providing operat ions
with the European Central Bank. In this respect, and as disclosed in the respective notes, ‘Treasury bills’, ‘Financial investments measured
at fair value through other comprehensive income’ and ‘Financial investments measured at amortised cost’ are pledged in favour of the
Central Bank of Malta as collateral in respect of these funding operations. As at 31 December 2023, the Gro up’s and Bank’s outstanding
amounts in respect of TLTROs and other liquidity providing operations are USD22,638,502 (2022: USD20,974,225) and USD148,252,792
(2022: USD98,325,205), respectively. These amounts are included within term loans and deposits in the table above.
‘Amounts owed to institutions and banks’ include balances amounting to USD35,667,488 (2022: USD21,296,527) which are held as
collateral in respect of term loans and advances to banks. Pledges are generally conducted under terms that are usual and customary
for standard borrowing contracts.
See Note 44 for balances due to related parties.
35 Amounts owed to customers
Group

| 31 December 2023 | 31 December 2022 | 1 January 2022
|  | Restated | Restated
| USD | USD | USD
Term deposits | 814,978,653 | 732,574,374 | 679,438,958
Repayable on demand | 119,760,289 | 143,613,391 | 142,735,821
| 934,738,942 | 876,187,765 | 822,174,779
Bank | 31 December 2023 | 31 December 2022 | 1 January 2022
|  | Restated | Restated
| USD | USD | USD
Term deposits | 814,978,653 | 732,574,374 | 679,438,958
Repayable on demand | 114,172,044 | 135,778,190 | 135,975,523
Amounts owed to subsidiary companies | 22,015,633 | 867,851 | 7,536,357
| 951,166,330 | 869,220,415 | 822,950,838

As at 31 December 2023, the Group and the Bank have customer deposits amounting to USD21,740,772 (2022: USD62,486,402) and
USD21,740,772 (2022: USD62,479,541), respectively, which are pledged in favour of the Group and Bank as collateral for loans and
advances to customers. Pledges are generally conducted under terms that are usual and customary for standard borrowing contracts.
‘Amounts owed to subsidiary companies’ include facilities that are interest-free, unsecured and repayable on demand, with the
exception of deposits amounting to USD2,226,354 (2022: USD110,355) which bear interest at a fixed rate of 2.5% - 3.9% (2022: 1.4% -
3.9%) per annum.
See Note 44 for balances due to related parties.
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184
36 Debt securities in issue
Group

| 2023 | 2022
| USD | USD
Opening balance | 15,451,068 | 45,345,575
Drawdowns | 38,142,327 | 72,331,491
Repayments | (26,893,950) | (99,499,621)
Movement in accrued interest | 288,991 | (87,889)
Effects of movement in exchange rate | 555,428 | (2,638,488)
Closing balance | 27,543,864 | 15,451,068

‘Debt securities in issue’ as at 31 December 2023 and 31 December 2022 comprise of unsecured promissory notes with a tenor of less
than one year. One of the promissory notes is subject to a fixed interest rate, whereas the remaining three promissory notes are subject
to a floating interest rate (linked to 3-month or 6-month Secured Overnight Financing Rate (“SOFR”)). The effective interest rate in
respect of ‘Debt securities in issue’ ranges between 5.3% and 6.085% (2022: 3.475% and 3.69%). In respect of two of the promissory
notes, the Group has an early repayment option. However, in view of the short-term maturity horizon of the promissory notes, the
potential impact of the Group exercising the option is deemed to be immaterial.
37 Provision for liabilities and charges

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
| USD | USD | USD | USD
Expected credit loss provision on guarantees | 7,551 | 43,775 | 7,551 | 43,777
Expected credit loss provision on guarantees |  |  |  |
- subsidiary companies | - | - | 277 | 31,647
Expected credit loss provision on commitments | 82,307 | 277,120 | 82,307 | 44,551
Expected credit loss provision on commitments |  |  |  |
- subsidiary companies | - | - | - | 1,234
Provision for end of service compensation | - | 500,000 | - | -
Provision for restoration costs | 92,093 | 86,860 | - | -
Other provisions | 54,263 | - | - | -
| 236,214 | 907,755 | 90,135 | 121,209

Expected credit loss in respect of off-balance sheet instruments
Provisions for liabilities and other charges comprises the recognition of expected credit losses in respect of off-balance sheet financial
guarantee contracts and commitments where the Group and Bank has become party to an irrevocable commitment, as defined under
IFRS 9 ‘Financial nstruments’. The movement in expected credit losses in respect of such instruments is disclosed within Note 5.
End of service compensation
As part of the Group’s strategic initiatives to further improve the operational structur e of the subsidiary entities, a provision for
USD500,000 was recognised during the financial year ended 31 December 2022 in respect of end of service compensation granted to
the Chief Executive Officer of a subsidiary company, reflecting the estimated payments to the affected individual employee. This
provision was raised in respect of the planned termination of the employment contract of the above mentioned individual. During the
financial year ended 31 December 2023, the Group increased the provision by USD100,000 to reflect ongoing negotiations. This provision
was reclassified to ‘Other liabilities’ by 31 December 2023, in view of the fact that the agreement with the above mentioned individual
was finalised and the liability crystallised prior to year-end.
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185
38 Other liabilities

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
| USD | USD | USD | USD
Creditors and accruals | 15,299,353 | 10,815,857 | 7,322,316 | 6,500,079
Deferred fee income | 1,124,775 | 1,052,870 | 442,924 | 277,566
Indirect taxation payable | 46,752 | 53,391 | - | 375
Lease liabilities (Note 30) | 2,118,563 | 2,704,717 | 2,286,126 | 3,490,312
Other liabilities | 1,182,172 | 230,615 | 582,172 | 230,616
| 19,771,615 | 14,857,450 | 10,633,538 | 10,498,948

‘Other liabilities’ include end of service compensation payable to an individual employee as at 31 December 2023 (2022: Nil), as described
in further detail in Note 37.
‘Deferred fee income’ include USD2,664 (2022: Nil) payable to subsidiary companies of the Bank. ‘Lease liabilities’ include USD2,211,725
(2022: USD3,372,506) payable to subsidiary companies of the Bank.
See Note 44 for balances due to related parties.
39 Equity
39.1 Share capital
Group and Bank

| 2023 |  | 2022 |
| Shares of 50 US cents |  | Shares of 50 US cents |
| Shares | USD | Shares | 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

Group and Bank

| Ordinary shares |
| 2023 | 2022
| No of shares | No of shares
On issue at 1 January | 522,443,763 | 522,443,763
On issue at 31 December | 522,443,763 | 522,443,763

39.2 Share premium
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.
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186
39.3 Reserve for general banking risks
The reserve for general banking risks was 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 were required to calculate a regulatory allocation which was 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 was then appropriated to the ‘Reserve for
general banking risks’. Following revisions to Banking Rule 9, banks are no longer required to hold this reserve and, as a result, the
amounts which were previously recognised within this reserve were reclassified to ‘Accumulated losses’ as at 31 December 2022.
39.4 Currency translation reserve
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.
39.5 Fair value reserve
The fair value reserve comprises:
• the cumulative change in the fair value of revalued property, net of income taxes; and
• the cumulative change in the fair value of debt securities measured at fair value through other comprehensive income until the
assets are derecognised or reclassified, net of income taxes and loss allowances.
39.6 Other reserve
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.
39.7 Dividends
No dividends were declared or paid in respect of the financial years ended 31 December 2023 and 31 December 2022. 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 2023.
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187
40 Non-controlling interests
The following table summarises the information relating to the subsidiary that has a material non-controlling interest (“NCI”), before
any intra-group eliminations:
31 December 2023

| India Factoring
Acquisition date | 31 March 2014
NCI percentage | 11.84%
| USD
Total assets | 129,328,698
Total liabilities | (91,715,879)
Net assets | 37,612,819
Carrying amount of NCI | 519,162
Net revenue for the year | 5,853,429
Net revenue for the year allocated to NCI | 693,046
Profit for the year | 325,047
Profit allocated to NCI | 38,486
Net increase in cash and cash equivalents | 11,156,992

31 December 2022

| India Factoring
Acquisition date | 31 March 2014
NCI percentage | 11.84%
| USD
Total assets | 222,968,423
Total liabilities | (185,531,925)
Net assets | 37,436,498
Carrying amount of NCI | 482,593
Net revenue for the year | 5,631,462
Net revenue for the year allocated to NCI | 666,765
Loss for the year | (690,648)
Loss allocated to NCI | (81,772)
Net decrease in cash and cash equivalents | (11,683,713)

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188
41 Contingent liabilities

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
| USD | USD | USD | USD
Payment commitments to the Depositor Compensation Scheme | 2,811,005 | 2,149,970 | 2,811,005 | 2,149,970
Payment commitments to the Single Resolution Fund | 445,474 | 388,680 | 445,474 | 388,680
Guarantees issued to banks | 14,687,080 | 4,518,391 | 14,687,080 | 4,518,391
Guarantees issued to customers | 13,338,194 | 7,616,051 | 13,338,194 | 7,609,191
Guarantees issued to subsidiary companies | - | - | 11,049,724 | 24,004,301
| 31,281,753 | 14,673,092 | 42,331,477 | 38,670,533

As at December 2023, an expected credit loss allowance, determined in accordance with IFRS 9, amounting to USD7,551 (2022:
USD43,775) for the Group and USD7,828 (2022: USD75,424) for the Bank, was recognised and presented within ‘Provision for liabilities
and charges’ in respect of guarantees issued by the Group and Bank.
Payment commitments to the Depositor Compensation Scheme (“DCS”) and the Single Resolution Fund (“SRF”) relate to possible future
contributions payable to the DCS and the SRF. The DCS provides compensation, up to certain limits, to eligible customers of credit
institutions that are unable, or likely to be unable, to pay claims against them. The DCS may impose a further contribution on the Group
and Bank to the extent the contributions imposed to date are not sufficient to cover the compensation due to customers in any future
possible collapse. The ultimate contribution to the industry as a result of a collapse cannot be estimated reliably. It is dependent on
various uncertain factors including the potential recovery of assets by the DCS, changes in the level of protected products (including
deposits and investments) and the population of DCS members at the time. At 31 December 2023, assets pledged in favour of the DCS
comprised of cash collateral amounting to USD2,811,005 (2022: USD2,149,970). The cash collateral is classified within 'Other assets' in
the statement of financial position. A contingent liability for an identical amount is disclosed in the table above to reflect the possibility
that this commitment becomes payable.
In addition, in accordance with article 70(3) of Regulation (EU) No 806/2014 of the European Parliament and of the Council of 15 July
2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the
framework of a Single Resolution Mechanism and a Single Resolution Fund and amending Regulation (EU) No 1093/2010, the available
financial means of the SRF may include irrevocable payment commitments which are fully backed by unencumbered collateral of low-
risk assets. The share of irrevocable payment commitments cannot exceed 30% of the total amount of contributions. At 31 December
2023, irrevocable payment commitments to the SRF amounted to USD445,474 (2022: USD388,680). The cash collateral is classified
within 'Other assets' in the statement of financial position. In addition, a contingent liability for an identical amount is disclosed in the
table above to reflect the possibility that this commitment becomes payable.
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189
42 Commitments

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
| USD | USD | USD | USD
Commitments to purchase assets |  |  |  |
Undrawn credit facilities | 72,943,304 | 60,774,694 | 72,943,304 | 60,774,694
Confirmed letters of credit | 10,217,120 | 21,083,250 | 10,217,120 | 19,448,466
Documentary credits | 17,059,663 | 6,389,064 | 17,059,663 | 6,389,064
Risk participations | - | 4,802,199 | - | 4,802,199
Commitment to purchase assets | 77,003,510 | 6,952,256 | - | -
Commitments to sell assets |  |  |  |
Commitment to sell assets | (29,419,890) | - | - | -
| 147,803,707 | 100,001,463 | 100,220,087 | 91,414,423

The Group has total sanctioned limits to customers amounting t o USD1,824,476,886 (2022: USD1,793,981,647). As at 31 December
2023, the Bank had no confirmed documentary credits in favour of subsidiary companies (2022: USD552,716). As at 31 December 2023,
an expected credit loss allowance, determined in accordance with IFRS 9, amounting to USD82,307 (2022: USD277,120) for the Group
and USD82,307 (2022: USD45,785) for the Bank, was recognised and presented within ‘Provision for liabilities and charges’.
In this respect, this disclosure presents information required by IFRS 7 – Financial Instruments: Disclosures in relation to credit related
commitments.
43 Cash and cash equivalents
Balances of cash and cash equivalents as shown on the Statements of Financial Position are analysed as follows:

| Group |  | Bank |
| 2023 | 2022 | 2023 | 2022
|  | Restated |  | Restated
| USD | USD | USD | USD
Balances with the Central Bank of Malta, treasury bills and cash | 221,812,510 | 91,573,516 | 221,799,380 | 91,558,657
Loans and advances to banks | 53,246,027 | 20,977,354 | 18,200,076 | 11,418,767
Amounts owed to institutions and banks | (162,015,093) | (156,470,539) | (112,269,724) | (93,365,526)
Cash and cash equivalents at end of year | 113,043,444 | (43,919,669) | 127,729,732 | 9,611,898
Adjustment to reflect balances with contractual maturity of more than three months | (19,789,241) | (62,794,336) | 6,094,166 | (53,664,783)
As per statements of financial position | 93,254,203 | (106,714,005) | 133,823,898 | (44,052,885)
Analysed as follows: |  |  |  |
Balances with the Central Bank of Malta, treasury bills and cash | 353,010,186 | 216,867,325 | 352,997,057 | 216,852,467
Loans and advances to banks | 152,814,948 | 149,713,926 | 114,325,243 | 125,882,432
Amounts owed to institutions and banks | (412,570,931) | (473,295,256) | (333,498,402) | (386,787,784)
| 93,254,203 | (106,714,005) | 133,823,898 | (44,052,885)

FIMBank Group Annual Report & Financial Statements 2023
190
44 Related parties
44.1 Identification of related parties
The majority shareholding of the Bank is held by United Gulf Holding Company B.S.C. (“UGH”), a subsidiary of Kuwait Projects Company
(Holding) K.S.C.P. (“KIPCO”) headquartered in Kuwait. All entities which are ultimately controlled by KIPCO, together with the other
minority shareholders and entities controlled by them, are considered to be related parties.
Key Management personnel of the Bank, being the Bank’s Directors and Executive Officers, and close family members of Key
Management personnel are also considered to be related parties. The Executive Officers, which form part of the Bank’s Executive
Committee, are referred to within the Statement of Compliance with the Principles of Good Corporate Governance.
44.2 Parent, shareholder having significant influence and other related companies
The aggregate values of transactions and outstanding balances related to the parent and subsidiary companies of the parent company
were as follows:
Zz

|  | Ultimate and immediate |  | Subsidiaries of immediate
|  | parent companies * |  | parent company **
| 2023 | 2022 | 2023 | 2022
| USD | USD | USD | USD
Assets |  |  |  |
Loans and advances to customers | 21,917,150 | 39,915,398 | - | -
Financial investments at amortised cost | 9,771,244 | 9,805,955 | - | -
Liabilities |  |  |  |
Derivative liabilities held for risk management | - | - | - | 44,026
Amounts owed to institutions and banks | - | - | 270,647 | 48,335
Amounts owed to customers | 30,830 | 47,294,349 | 2,433 | 2,508
Statements of profit or loss |  |  |  |
Interest income | 2,704,809 | 1,803,585 | - | -
Interest expense | (8,389) | (2,083) | - | (2,194)
Fee and commission income | 85 | 78 | 7,349 | 8,042
Fee and commission expense | (3,046) | (6,957) | - | -
Net trading results | - | - | 144,018 | (26,311)
Administrative expenses | - | - | (313,312) | (60,897)

‘ * ’Amounts presented in these columns represent balances and transactions with KIPCO and UGH
‘ ** ’Amounts presented in these columns represent balances and transactions with subsidiary companies of UGH
As at 31 December 2022, from the total in ‘Amounts owed to customers’ related to the parent, USD40,000,000 were held as collateral
against loans and advances to customers with a related company.
FIMBank Group Annual Report & Financial Statements 2023
191
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 |  | Subsidiary of shareholder |  |
|  | influence |  | having significant influence |  | Other related companies
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022
| USD | USD | USD | USD | USD | USD
Assets |  |  |  |  |  |
Loans and advances to banks | 350,751 | 96,550 | - | - | - | -
Loans and advances to customers | - | - | - | - | 30,000 | 40,414,656
Other assets | - | - | - | - | 1,431 | -
Liabilities |  |  |  |  |  |
Amounts owed to customers | - | - | - | - | 22,092 | 17,111
Other liabilities | - | - | - | - | 712 | 687
Statements of profit or loss |  |  |  |  |  |
Interest income | - | - | - | - | 145,040 | 1,517,135
Interest expense | - | (197,384) | - | (99,783) | - | -
Fee and commission income | - | - | - | - | 20 | 42,590
Fee and commission expense | - | - | - | (51,268) | (15,829) | (4,738)
Administrative expenses | (11,596) | - | - | - | - | -

44.3 Transactions with key management personnel

| Directors |  | Executive officers |
| 2023 | 2022 | 2023 | 2022
| USD | USD | USD | USD
Liabilities |  |  |  |
Amounts owed to customers | 853,071 | 732,829 | 49,567 | 336,545
Other liabilities | - | - | - | 1,920
Statements of profit or loss |  |  |  |
Interest income | - | - | - | 1
Interest expense | (14,075) | (8,752) | (719) | (1,227)
Fee and commission income | 240 | 240 | 16 | -
Administrative expenses - remuneration | (388,106) | (415,959) | (2,705,353) | (2,648,004)
Administrative expenses - other long-term benefits | (391) | (400) | (579,460) | (520,801)
Administrative expenses - short-term benefits | - | - | (15,113) | -
Administrative expenses - others | (18,366) | (39,444) | (59,175) | (48,534)

Directors of the Group control less than 1 per cent of the voting shares of the Bank (2022: less than one per cent).
FIMBank Group Annual Report & Financial Statements 2023
192
44.4 Other related party transactions

| Other related parties |
| 2023 | 2022
| USD | USD
Liabilities |  |
Amounts owed to customers | 468,100 | 342,901
Statements of profit or loss |  |
Interest expense | (8,252) | (5,199)

Other related party transactions relate to family members of Directors of the Group.
44.5 Transaction and balances with the Bank's subsidiary companies
Information on amounts related to subsidiary companies are reported in Notes 9, 10, 11, 13, 14, 16, 20, 23, 27, 33, 35, 37, 38, 41 and 42
of these Financial Statements.
45 Capital commitments
‘Capital commitments’ refer to expenditure of a capital nature that were authorised by the Group and Bank but not yet incurred or
payable. In this respect, this disclosure presents information required by IAS 16 – Property, Plant and Equipment and IAS 38 – Intangible
Assets.
At financial reporting date, the Group and Bank had the following commitments:

| Group |  |  | Bank
| 2023 | 2022 | 2023 | 2022
| USD | USD | USD | USD
Authorised and contracted | 205,395 | 170,382 | 200,000 | 120,000
Authorised but not contracted | 1,052,983 | 91,596 | 90,000 | 15,998
| 1,258,378 | 261,978 | 290,000 | 135,998

46 Other commitments
‘Other commitments’ refer to expenditure of an administrative nature that the Group and the Bank have authorised but have not yet
incurred since these relate to services which will be received subsequent to year end and therefore relate to future financial periods.
At financial reporting date, the Group and Bank had the following commitments:

| Group |  |  | Bank
| 2023 | 2022 | 2023 | 2022
| USD | USD | USD | USD
Authorised and contracted | 6,028,022 | 6,107,754 | 5,664,108 | 5,346,202
Authorised but not contracted | 678,127 | 1,076,717 | 670,116 | 1,068,985
| 6,706,149 | 7,184,471 | 6,334,224 | 6,415,187

FIMBank Group Annual Report & Financial Statements 2023
193
47 Subsequent events
47.1 Merger
On 25 January 2024, the Bank issued a Company Announcement, announcing that as part of a streamlining initiative and corporat e
restructuring exercise, the Bank’s Board of Directors has resolved to approve a merger by acquisition between the Bank, as the acquiring
company, and FIM Business Solutions Limited as the company being acquired (the “Merger”).
FIM Business Solutions Limited, is a company incorporated under the Laws of Malta, bearing company registration number C 36423 and
having its registered address at Mercury Tower, the Exchange Financial & Business Centre, Elia Zammit Street, San Giljan, STJ3155.
The Bank has obtained regulatory approval from the Malta Financial Services Authority in relation to the proposed Merger, which shall
in turn be carried out in accordance with the provisions of Part VIII, Title II of the Companies Act (Chapter 386 of the Laws of Malta).
Upon the Merger taking effect, the Bank shall succeed to all the assets, rights, liabilities, and obligations of FIM Business Solutio ns
Limited, which in turn, shall cease to exist.
The Board of Directors believes that the Merger is in the best interest of the Bank and renders the structure of the Group more effective
and efficient. The impact of the Merger on the financial position and financial performance of the Bank is deemed to be insignificant.
47.2 Dividends received
In March 2024, the Bank received a cash dividend of USD2.0 million from its wholly owned subsidiary London Forfaiting Company
Limited.
The Group has no other subsequent events to report.
48 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.

the requirements of International Financial Reporting Standards as adopted by the EU give a true and fair view of the assets, liabilities, financial FIMBank Group Annual Report & Financial Statements 2023 194 Statement by the directors pursuant to Capital Markets For the year ended 31 December 2023 We, the undersigned, declare that to the best of our knowledge, the Financial Statements set out on pages 40 to 193 prepared in accordance with Approved by the Board of Directors and signed on its behalf by John C. Grech (Chairman) and Masaud M.J. Hayat (Vice Chairman) on 24 April 2024 as per Director’s Declaration on ESEF Annual Financial Report subm itted in conjunction with the Annual Report and Financial Statements
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 Rule 5.68
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. 2023.

FIMBank Group Annual Report & Financial Statements 2023
195
Schedule I
Statements of profit or loss
Five-year summary – Bank
2023
2022
Restated
2021
2020
2019
USD
USD
USD
USD
USD
Interest income
52,818,308
30,248,635
19,588,232
22,721,724
30,311,233
Interest expense
(33,156,902)

|  | (13,509,191) | (10,457,006) | (11,482,001) | (14,037,860)
Net interest income | 19,661,406 | 16,739,444 | 9,131,226 | 11,239,723 | 16,273,373
Fee and commission income | 3,116,178 | 2,744,994 | 4,940,843 | 5,366,867 | 7,753,143
Fee and commission expense | (1,206,187) | (1,924,794) | (2,165,538) | (2,552,278) | (3,078,283)
Net fee and commission income | 1,909,991 | 820,200 | 2,775,305 | 2,814,589 | 4,674,860

Net trading results
(921,644)
1,411,029
542,868
(554,107)
3,107,935
Net gain/(loss) from equity instruments measured at fair
value
768,541
(337,257)
-
-
-
Dividend income
12,221,863
10,321,545
16,989,049
7,240,817
43,591,794
Other operating income
328,330
566,474
133,940
120,725
118,904
Other operating expenses
(24,531)
(364,205)
(155,943)
-
-
Operating income before net impairment
33,943,956
29,157,230
29,416,445
20,861,747
67,766,866
Net impairment charge on financial assets
(2,993,592)
(17,424,101)
(3,699,557)
(34,272,400)
(14,210,257)
Impairment of investments in subsidiaries
-
(8,261,536)
(87,356)
(9,314,000)
-
Operating income
30,950,364
3,471,593
25,629,532
(22,724,653)
53,556,609
Administrative expenses
(24,824,525)
(22,139,252)
(23,213,366)
(23,722,803)
(20,305,701)
Depreciation and amortisation
(2,828,936)
(2,811,670)
(2,965,967)
(2,962,370)
(2,896,531)
Total operating expenses
(27,653,461)
(24,950,922)
(26,179,333)
(26,685,173)
(23,202,232)
Profit/(Loss) before tax
3,296,903
(21,479,329)
(549,801)
(49,409,826)
30,354,377
Taxation
(806,755)
(530,755)
(113,418)
(6,566,776)
(765,433)
Profit/(Loss) for the year
2,490,148
(22,010,084)
(663,219)
(55,976,602)
29,588,944
FIMBank Group Annual Report & Financial Statements 2023
196
Schedule II
Statements of financial position
Five-year summary – Bank
2023
2022
Restated
2021
Restated
2020
2019
USD
USD
USD
USD
USD
Assets
Balances with the Central Bank of Malta,
treasury bills and cash
352,997,057
216,852,467
239,982,048
319,267,749
208,259,407
Derivative assets held for risk management
812,609
1,610,475
841,688
1,019,288
96,285
Loans and advances to banks
114,325,243
125,882,432
182,458,548
179,364,067
232,351,750
Loans and advances to customers
618,118,225
718,910,427
745,564,139
779,834,360
811,152,849
Financial investments at fair value through profit
or loss
19,329,840
18,179,220
19,966,163
20,385,323
125,342,798
Financial investments at fair value through other
comprehensive income
140,755,780
143,189,022
162,408,542
153,327,686
79,367,556
Financial investments at amortised cost
28,399,073
14,602,008
9,914,754
9,839,457
9,785,496
Investments in subsidiaries
157,687,573
152,687,573
159,448,858
147,436,214
147,948,385
Property and equipment
2,994,784
4,770,241
1,965,249
3,507,509
5,229,059
Intangible assets
2,624,736
3,099,853
3,774,315
4,008,725
4,647,642
Current tax assets
-
-
66,667
76,225
226,886
Deferred tax assets
15,004,834
15,004,834
16,336,538
15,590,954
22,011,162
Other assets
7,747,110
6,830,284
3,848,321
5,570,563
8,824,153
Total assets
1,460,796,864
1,421,618,836
1,546,575,830
1,639,228,120
1,655,243,428
Liabilities and equity
Liabilities
Derivative liabilities held for risk management
626,476
818,031
1,533,556
1,629,434
193,691
Amounts owed to institutions and banks
333,498,402
386,787,784
497,633,356
387,900,641
405,072,025
Amounts owed to customers
951,166,330
869,220,415
838,675,598
1,037,118,337
978,134,002
Provision for liabilities and charges
90,135
121,209
201,775
173,051
85,159
Other liabilities
10,633,538
10,498,948
7,921,481
7,645,488
13,077,128
Total liabilities
1,296,014,881
1,267,446,387
1,345,965,766
1,434,466,951
1,396,562,005
Equity
Share capital
261,221,882
261,221,882
261,221,882
261,221,882
261,221,882
Share premium
858,885
858,885
858,885
858,885
858,885
Reserve for general banking risks
-
-
2,218,995
3,358,738
2,323,486
Fair value reserve
(17,382,450)
(25,501,836)
(1,074,305)
2,413,581
357,233
Other reserve
2,681,041
2,681,041
2,681,041
2,681,041
2,681,041
Accumulated losses
(82,597,375)
(85,087,523)
(65,296,434)
(65,772,958)
(8,761,104)
Total equity
164,781,983
154,172,449
200,610,064
204,761,169
258,681,423
Total liabilities and equity
1,460,796,864
1,421,618,836
1,546,575,830
1,639,228,120
1,655,243,428
Memorandum items
Contingent liabilities
42,331,477
38,670,533
39,327,362
44,246,902
61,628,654
Commitments
100,220,087
91,414,423
107,469,111
105,245,766
143,026,427
FIMBank Group Annual Report & Financial Statements 2023
197
Schedule III
Cash flow statements
Five-year summary – Bank
2023
2022
2021
2020
2019
USD
USD
USD
USD
USD
Net cash flows generated from/(used in)
operating activities
111,619,035
26,554,154
(118,733,012)
61,848,191
28,447,866
Cash flows from investing activities
Payments to acquire financial investments at
fair value through profit or loss
-
-
-
-
(2,469,245)
Payments to acquire financial investments at fair
value through other comprehensive income
-
(25,549,207)
(74,874,050)
(109,616,706)
(84,984,922)
Payments to acquire financial investments at
amortised cost
(13,440,236)
(14,569,219)
-
-
-
Payments to acquire treasury bills at amortised
cost
(288,263,020)
(429,590,021)
-
-
-
Payments to acquire shares in subsidiary
companies
-
(252)
-
(1,801,829)
(5,352,772)
Payments to acquire shares in other investments
-
-
-
-
-
Payments to acquire property and equipment
(34,872)
(916,620)
(399,511)
(142,744)
(372,658)
Payments to acquire intangible assets
(490,433)
(318,308)
(779,881)
(393,096)
(951,219)
Proceeds on disposal of financial investments at
fair value through profit or loss
249,464
127,493
160,770
105,639,259
50,000,000
Proceeds on disposal of financial investments
at fair value through other
comprehensive income
13,745,002
13,000,000
50,918,619
49,246,582
93,035,159
Proceeds on disposal of financial investments at
amortised cost
-
9,800,719
-
-
-
Proceeds on disposal of treasury bills at
amortised cost
288,934,098
296,265,806
-
-
-
Proceeds on disposal of property and equipment
27,500
1,565
9,751
-
3,551
Receipt of dividend
7,221,863
8,821,545
4,889,049
240,817
4,628,411
Net cash flows generated from/(used in)
investing activities
7,949,366
(142,926,499)
(20,075,253)
43,172,283
53,536,305
Cash flows from financing activities
Issue of share capital
-
-
-
-
84,887
Net movement in debt securities
-
-
-
-
(14,834,943)
Payment of lease liabilities
(1,450,567)
(1,330,082)
(1,787,096)
(997,729)
(2,354,026)
Net cash flows used in financing activities
(1,450,567)
(1,330,082)
(1,787,096)
(997,729)
(17,104,082)
Increase/(Decrease) in cash and cash equivalents
118,117,834
(117,702,427)
(140,595,361)
104,022,745
64,880,089
Cash and cash equivalents at beginning of year
9,611,898
127,314,325
267,909,686
163,886,941
99,006,852
Cash and cash equivalents at end of year
127,729,732
9,611,898
127,314,325
267,909,686
163,886,941
FIMBank Group Annual Report & Financial Statements 2023
198
Schedule IV
Accounting ratios
Five-year summary – Bank
2023
2022
2021
2020
2019
%
%
%
%
%
Net interest income and other operating income to total assets
1.37
2.21
2.05
1.43
4.28
Operating expenses to total assets
(1.89)
(1.76)
(1.69)
(1.63)
(1.40)
Profit/(Loss) before tax to total assets
0.23
(1.51)
(0.04)
(3.01)
1.83
Pre-tax return on capital employed
2.00
(13.93)
(0.27)
(24.13)
11.73
Profit/(Loss) after tax to equity
1.51
(14.28)
(0.33)
(27.34)
11.44
2023
2022
2021
2020
2019
Weighted average number of shares in issue (000’s)
522,444
522,444
522,444
522,444
514,568
Net assets per share (US cents)
31.54
29.51
38.40
39.19
50.27
Basic earnings per share (US cents)
0.48
(4.21)
(0.13)
(10.71)
5.75
FIMBank Group Annual Report & Financial Statements 2023
199
Directors and executive management
Board of Directors John C. Grech (Chairman)
Masaud M.J. Hayat (Vice Chairman)
Edmond Brincat
Erich Schumacher
Hussain Abdul Aziz Lalani
Mohammed Louhab
Rabih Soukarieh
Sunny Bhatia
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 Mohammed Louhab
First Executive Vice President Simon Lay Deputy Chief Executive Officer
Executive Vice Presidents Adrian A. Gostuski Advisor to the CEO (Resigned on 6 April 2024)
Andrea Batelli Group General Counsel,
Head of Investor Relations & Company Secretary
Christine Coleiro Group Chief Human Resources Officer
Juraj Beno Group Chief Financial Officer
Modesto Luengo Group Chief Risk Officer
Ronald Haverkorn Advisor to the GCEO
Thomas Dodd Group Chief Compliance Officer & MLRO
London Forfaiting Company Limited
Chief Executive Officer Simon Lay
Company Secretary William Ramzan Chief Financial Officer
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

Independent auditor’s report

To the Shareholders of FIMBank p.l.c.

Report on the audit of the financial statements

Our opinion

In our opinion:

● The Group financial statements and the Parent Company (“the Bank”) financial statements (the “financial statements”) of FIMBank p.l.c. give a true and fair view of the Group and the Parent Company’s financial position as at 31 December 2023, and of their financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards (‘IFRSs’) as adopted by the EU; and

● The financial statements have been prepared in accordance with the requirements of the Maltese Banking Act (Cap. 371) and the Maltese Companies Act (Cap. 386).

##### Our opinion is consistent with our additional report to the Audit Committee.

##### What we have audited

FIMBank p.l.c.’s financial statements comprise:

● the Consolidated and Parent Company statements of financial position as at 31 December 2023;

● the Consolidated and Parent Company statements of profit or loss and statements of other comprehensive income for the year then ended;

● the Consolidated and Parent Company statements of changes in equity for the year then ended;

● the Consolidated and Parent Company statements of cash flows for the year then ended; and

● the notes to the financial statements, comprising material accounting policy information and other explanatory information.

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 Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

##### Independence

We are independent of the Group and the Bank in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code) together with the ethical requirements of the Accountancy Profession (Code of Ethics for Warrant Holders) Directive issued in terms of the Accountancy Profession Act (Cap. 281) that are relevant to our audit of the financial statements in Malta. We have fulfilled our other ethical responsibilities in accordance with these Codes.

To the best of our knowledge and belief, we declare that non-audit services that we have provided to the Bank and its subsidiaries are in accordance with the applicable law and regulations in Malta and that we have not provided non-audit services that are prohibited under Article 18A of the Accountancy Profession Act (Cap. 281).

The non-audit services that we have provided to the Bank and its subsidiaries, in the period from 1 January 2023 to 31 December 2023 are disclosed in note 16 to the financial statements.

Our audit approach

#####

##### Overview

| ● Overall group materiality: USD1,793,000, which represents 1% of net assets.
● The group audit engagement team performed a full scope audit on the financial statements of the Bank and FIM Property Investment Limited, which is one of the Bank’s subsidiaries, and performed specified audit procedures on certain account balances of London Forfaiting Company Limited. ● The other two significant components, namely FIMFactors B.V. (and its subsidiary India Factoring and Finance Solutions Private Ltd) and The Egyptian Company for Factoring S.A.E., were audited by other auditors. ● The group audit engagement team performed oversight procedures on the work of other auditors.
● Credit loss allowances in respect of loans and advances to customers of the Group and Bank ● Valuation of the Group’s trading assets measured at fair value ● Recoverability of deferred tax assets of the Group and Bank

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated financial statements. In particular, we considered where the directors made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

##### Materiality

The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements.

Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materiality for the consolidated financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements as a whole.

Overall group materiality | USD1,793,000
How we determined it | 1% of net assets
Rationale for the materiality benchmark applied | We chose net assets as the benchmark in view of the volatility of the Group’s profit before tax over the past five years. Moreover, in our view, the actual return attributable to equity holders is dependent on the adequacy of the Group’s capitalisation in view of the regulatory restrictions in respect of dividend distributions, while also being a generally accepted benchmark. In this respect, we considered net assets to be more reflective of the financial position and financial performance of the Group. We chose 1% which is within the range of quantitative materiality thresholds that we consider acceptable.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above USD89,650 as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

#### 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 period. 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.

Key audit matter | How our audit addressed the Key audit matter
Credit loss allowances in respect of loans and advances to customers of the Group and Bank Credit loss allowances in respect of loans and advances to customers represent management’s best estimate of expected credit losses (‘ECLs’) within the loan portfolios at the balance sheet date. The Group has four lending portfolios: · the Local Corporate Lending portfolio, predominantly comprising loans to entities within the real estate sector in Malta; · the Factoring Receivables portfolio, consisting of factored receivables (both on a non-recourse and recourse basis) originated in Europe, India and the Middle East; · the Trade Finance portfolio, comprising import and export finance facilities originated in Europe; and · a portfolio of other facilities including syndicated senior secured facilities to international corporates and shipping finance facilities. The measurement of ECLs in respect of loans and advances to customers requires a considerable level of judgement since the determination of ECLs is subject to a high degree of estimation uncertainty. In this respect, it is considered a key area of focus. The level of estimation uncertainty surrounding the measurement of ECLs in respect of the Group’s lending portfolios remained elevated during the financial year ended 31 December 2023 in view of the inflationary pressures and interest rate environment experienced internationally, as well as the geopolitical tensions as a result of the ongoing military conflict in Eastern Europe and escalation of hostility within the Middle East. This affected a number of components forming part of the ECL calculation, including the determination of staging, the modelling of expected default levels and loss severities, and the determination of forward-looking scenarios giving rise to heightened subjectivity requiring a higher level of expert judgement. Credit loss allowances relating to all loans and advances to customers are determined at an instrument level. Significant judgement is required in the development and/or calibration of the models designed to estimate ECLs on loans measured at amortised cost in accordance with the requirements of IFRS 9, which has become more pronounced due to the macroeconomic conditions being experienced and the complexities in the modelling aspects of the ECL calculation. In general, the Group calculates ECL by using the following key inputs: probability of default (PD), loss given default (LGD) and exposure at default (EAD). The maximum period considered when measuring ECL is the maximum period over which the Group is exposed to credit risk. In this respect, the EAD for exposures within the Group’s portfolios is based on contractual maturity. For non-defaulted (Stages 1 and 2) exposures, the Group uses a model developed by an external vendor in which key risk parameters, including both PDs and LGDs, are estimated using statistical models mainly by benchmarking exposure-specific characteristics against an underlying dataset. Specifically, the PDs and LGDs attributable to financial assets within the Group’s lending portfolios are determined by reference to the default and loss history of comparable borrowers with similar characteristics in terms of size, industry, country of operation and financial soundness of the borrower. PDs are computed taking cognisance of quantitative and qualitative model inputs, which are used to generate a borrower-specific credit score. For exposures classified within the Local Corporate Lending portfolio, the credit score is determined by reference to inputs related to the project being financed, such as the property type, property valuation upon completion, project costs and project complexity, whereas the credit scores for exposures classified within the Trade Finance portfolio, as well as syndicated and shipping finance loans, are determined by reference to financial statement inputs and other qualitative inputs, comprising the entity’s competitive position in the market and customer concentration level. Similarly, credit scores for exposures classified within the Factoring Receivables portfolio are computed using internally developed scorecards taking into account quantitative (for instance sales growth and net worth of the entity) and qualitative (such as industry and market conditions) inputs. Credit scores are then mapped to a rating scale, on the basis of which a Through-The-Cycle (‘TTC’) PD is assigned to each borrower. The rating scale to PD matrix is calibrated by reference to historical market default data sourced from external credit rating agencies. Accordingly, the Group’s ECL model estimates TTC PDs at a borrower level by benchmarking model inputs against those attributable to peers with similar credit risk characteristics and operating in the same industry. TTC PDs are then adjusted using a macroeconomic modelling tool to first reflect current macroeconomic conditions (deriving an unconditional Point-in-Time or PiT PD) and then to simulate the PD under multiple macroeconomic forecasts developed by the external vendor (deriving a conditional PiT PD). Similarly, the unsecured LGD is estimated at a facility level by benchmarking facility-specific model inputs against observed losses for facilities which are similar in nature. In this respect, the model is principally driven by the nature of the exposure (term vs. revolver), the relative ranking of the facility in the borrower’s capital structure, the country and industry in which the borrower operates, together with the borrower-specific PD. Secured loans and advances to customers are primarily secured by residential and/or commercial real estate, as well as cash pledges and, in the case of certain exposures within the Factoring Receivables portfolio, credit insurance cover purchased from foreign third party underwriters which provide cover in respect of losses up to a pre-determined percentage of each eligible receivable. In this respect, the secured LGD is derived through the application of adjustments to the unsecured LGD to reflect the collateral value after taking into consideration pre-determined haircuts. The same macroeconomic modelling elements used to transform TTC PDs to PiT PDs are then used to convert the TTC LGDs to conditional PiT LGDs. In this regard, macroeconomic conditioning is applied to the LGD term structure through a modelled correlation between PD and LGD term structures. Estimation uncertainty is particularly relevant in relation to the level of subjectivity and expert judgement required to develop macroeconomic forecasts to capture the potential movement in default levels and loss severities under multiple forward-looking scenarios. Specifically, the Group applies three macroeconomic scenarios to capture the current economic environment, reflecting management’s view of the range of potential outcomes. In this respect, the current economic conditions induce additional elements of complexity in determining the severity and likelihood of macroeconomic forecasts used in the Group’s ECL calculation across different countries and the extent to which these potential scenarios will impact PiT PD and LGD parameters. Staging is determined based on a combination of quantitative and qualitative criteria. Quantitative criteria comprise a comparison of model-calculated PDs/implied ratings as at reporting date with the calculated PDs/implied ratings upon origination. For exposures classified within the Local Corporate Lending portfolio as well as syndicated and shipping finance facilities, qualitative criteria for staging purposes are based on aspects such as the regular monitoring of the financial performance of borrowers and developments affecting the borrowers’ future abilities to repay. Factored receivables and Trade Finance facilities are not managed on a credit by credit basis due to the high volume of homogeneous exposures. In this respect, the Group’s internal credit risk management framework designed to identify Significant Increase in Credit Risk (‘SICR’) and Unlikeliness-to-Pay (‘UTP’) events in respect of such exposures is primarily based on delinquency. The Group applies a set of SICR and UTP criteria to determine staging on a qualitative basis, which require a significant element of judgement. For loans which are classified as Stage 3 (defaulted) exposures, judgement is required to estimate the expected future cash flows related to that loan. In this regard, the ECL calculation for defaulted exposures is driven by a process based on an internally developed discounted cash flow methodology. The measurement of ECLs for Stage 3 exposures is therefore dependent on parameters and assumptions including the estimation of cash flows under multiple scenarios, the determination of borrower-specific discount rates, and the weighting assigned to each scenario. Estimated future cash flows are generally based on parameters or assumptions around borrowers’ operating cash flows, judgements around the possible outcome of litigation and/or liquidation proceedings and out-of-court settlements, and recoveries through the sale or repossession of collateral to determine a probability weighted recoverable amount of the loan. In view of the above matters, the risk of misstatement in the estimation of ECLs in respect of Stage 3 loans and advances to customers, which is subjective in nature and inherently judgemental in respect of both timing of recognition of impairment and the estimation of the size of any such impairment, remains high. Accordingly, summarising the key areas relevant to the Group’s measurement of ECLs would include: · Allocation of exposures to stage 1, 2, or 3 using criteria in accordance with IFRS 9; · Accounting interpretations and modelling assumptions used to build the models that calculate the ECL; · Completeness and accuracy of data used to calculate the ECL; · Inputs and assumptions used to estimate the impact of multiple macroeconomic scenarios; and · Measurements of individually assessed provisions including the assessment of multiple scenarios. Relevant references in the Annual Report and Financial Statements: · Accounting policy: Note 3.9; · Note on Net movement in expected credit losses and other credit impairment charges: Note 5; · Credit risk: Note 5.2; and · Note on Loans and advances to customers: Note 23. | During our audit of the financial statements for the year ended 31 December 2023, we focused on the key drivers of the estimation of ECL. In this respect, we evaluated and tested the appropriateness of management assumptions and key parameters. Discussions with the Audit Committee included: the appropriateness of staging determined in respect of exposures that experienced credit deterioration during the year; the final ECL for Stage 1 and 2 exposures estimated by the vendor’s model; observations in respect of the methodology applied by the Group to estimate ECLs in accordance with the requirements emanating from IFRS 9, including the appropriateness of the models and staging criteria used by the Group as part of the ECL calculation; and impairment allowances in respect of exposures classified as Stage 3. In respect of the Group’s ECL models used for estimating credit loss allowances attributable to non-defaulted exposures, the appropriateness of the modelling methodology used was independently assessed by reference to the requirements of IFRS 9. In addition, the appropriateness of the key assumptions used in, and the conceptual soundness of, the adapted discounted cash flow model utilised for the estimation of credit loss allowances attributable to defaulted exposures were similarly assessed, particularly the methodology used to determine forecasted operating cash flows. ECL calculation for non-defaulted exposures We understood and critically assessed the model used by the Group to measure expected credit loss allowances on exposures classified within Stages 1 and 2. Our audit approach focused specifically on: obtaining comfort over the accuracy and completeness of model inputs, with the updating process being largely manual; assessing the reasonableness of the staging criteria applied by the Group, as well as the macroeconomic modelling aspect within the ECL model, especially in respect of the calibration of forward-looking economic scenarios within the ECL model; and backtesting the ECL outcome against publicly available information on observed default levels and expected default levels in the short-to-medium term. For the purpose of obtaining comfort on the credit loss allowances for Stage 1 and 2 exposures within the Group’s lending portfolios, emanating from a vendor model, we carried out the following substantive procedures: · Performed an overall assessment of the ECL provision levels by stage to determine if they were reasonable considering the Group’s portfolio, risk profile, credit risk management practices and the macroeconomic environment. · Tested a sample of exposures classified within the Local Corporate Lending portfolio, as well as syndicated and shipping finance facilities, to independently review the borrower’s financial performance and ability to meet loan repayments, and assess the appropriateness of the internal credit rating assigned by management. · Challenged the criteria used to allocate an asset to stage 1, 2 or 3 in accordance with IFRS 9 and tested assets in stage 1, 2 and 3 to verify that they were allocated to the appropriate stage. · Tested the completeness and accuracy of certain instrument-specific model data inputs utilised within the models for the purposes of the year end ECL calculation. Performed backtesting to obtain comfort on the level of ECL allowances for each specific portfolio by benchmarking ECL coverage against publicly available information for peer market participants. Benchmarked LGDs estimated by the model in respect of exposures classified within the Factoring Receivables and Trade Finance portfolios, as well as syndicated and shipping finance facilities, against publicly available information reflecting the loss experience in the market for instruments with comparable seniority within a borrower’s debt structure. For exposures classified within the Local Corporate Lending portfolio, we tested the accuracy of property valuations against source data and assessed the reasonableness of market value haircuts used as inputs to modelled LGDs on a sample basis. We also tested the accuracy of the Group’s data in respect of the status of perfection of collateral on a sample basis. For Factoring Receivables which are collateralised by credit insurance cover, we assessed the reasonableness of the LGD determined by reference to the terms of the credit insurance arrangement with third party underwriters. Performed a recalculation of the ECL for a sample of exposures across portfolios. For a sample of Factoring Receivables facilities which were past due by more than 90 days as at 31 December 2023, performed procedures to assess the recoverability of such exposures. Assessed the reasonableness of the multiple macroeconomic scenarios and variables. Specifically, we challenged the reasonableness of the severity of the multiple forward-looking macroeconomic scenarios used in the ECL calculation, as well as the appropriateness of the assigned probability weightings. ECL calculation for defaulted exposures For Stage 3 exposures, the appropriateness of provisioning methodologies and policies was independently assessed. For Stage 3 loans, we performed tests of detail to review and challenge the Group’s estimate of credit loss allowances, in light of the latest information on the borrower, together with the appropriateness of key parameters used. An independent view was formed on the level of credit loss allowances recorded based on the detailed loan and customer information available. Substantive procedures were performed on defaulted exposures in respect of the estimation of the size of the respective ECL provisions, as follows: · Reviewed the credit files of loans and advances classified within stage 3 to understand the latest developments at the level of the borrower and the basis of measuring the ECL provisions and considered whether key judgements (such as the appropriateness of the timing and level of expected cash flows by reference to the current status of litigation / liquidation proceedings) were appropriate given the borrowers’ circumstances. · Assessed the discount rate used to determine the present value of discounted cash flows. · Challenged the appropriateness of the Group’s methodology in respect of scenarios applied for the exposures referred to above, particularly in respect of the extent to which the Group considers multiple scenarios in determining the recoverability of stage 3 loans, by forming an independent view of the recoverability of stage 3 loans under different scenarios. · Tested the accuracy of key inputs and reperformed the impairment calculation used to derive expected cash flows under different scenarios. · Reviewed the perfection of collateral in line with the Group’s policy, where the exposure is secured by immovable property. Based on the evidence obtained, we formed a different view from that of management on the level of credit loss allowances recorded by management in respect of defaulted and non-defaulted exposures, but in our view the differences were within a reasonable range of outcomes.
Valuation of the Group’s trading assets measured at fair value At 31 December 2023, the Group’s assets included trading assets measured at fair value through profit or loss amounting to $374.2 million. These assets are not actively traded and, as such, are not quoted in an established market. The fair valuation of trading assets is determined through the application of an internally developed valuation model that involves the exercise of judgement and the use of assumptions based on limited observable market data. Key inputs used in the valuation methodology to discount expected future cash flows comprise: · instrument specific characteristics used to determine credit spreads, including counterparty creditworthiness and transaction currency; and · market risk-free rates determined by reference to contractual terms as well as interest rates observed in the market at reporting date. The Group’s trading assets are classified as Level 3 instruments in the fair value hierarchy given that their fair value is determined by reference to significant unobservable inputs. In this respect, the valuation of trading assets is deemed to represent a key audit matter. Relevant references in the Annual Report and Financial Statements: · Accounting policy: Note 3.9; and · Note on Trading assets: Note 21. | We involved our valuation experts, as appropriate, in performing our procedures in relation to the trading assets. As part of those procedures: · we evaluated the appropriateness of the valuation methodology used by the Group to determine the fair value of the trading assets; · we assessed the reasonableness of discount rates applied in the internally developed discounted cash flow model to determine the fair value of trading assets at reporting date. Specifically: o we assessed whether the instrument-specific credit spreads were within an appropriate range by reference to movements in instrument-specific external ratings (where available) and country external ratings on a sample basis; o we tested the appropriateness of market risk-free rates applied by the Group for the determination of discount rates to be used for the fair valuation of trading assets at reporting date across the portfolio; and · we tested the accuracy of inputs used in the discounted cash flow model at reporting date for a sample of assets by agreeing key inputs to contractual agreements; and · we determined the fair value of a sample of trading assets independently by reference to the discount rates assessed as outlined previously. In addition to the above, we also: · assessed the reasonableness of the Group’s valuation methodology by performing backtesting by reference to realised gains or losses on disposals of trading assets during the financial year ended 31 December 2023; and · recomputed realised fair value gains/losses for a sample of disposals. We also reviewed the appropriateness of the disclosures in respect of fair values of the trading assets in accordance with the requirements of IFRS 13. Based on the work performed, the valuation methodology as well as the assumptions and inputs used in the fair valuation of trading assets appear to be reasonable. In addition, the related disclosures are deemed to be appropriate.
Recoverability of deferred tax assets of the Group and Bank At 31 December 202 3, the Group and Bank had recognised deferred tax assets amounting to $19.0 million and $15.0 million respectively. The deferred tax assets are predominantly related to unutilised tax losses attributable to the Bank and one of its subsidiaries, India Factoring and Finance Solutions Private Ltd. In accordance with the requirements of IFRSs as adopted by the EU, deferred tax assets are recogni s ed only to the extent that it is probable that future taxable profits will be available, against which these tax benefits can be utilised. The recognition of deferred tax assets therefore requires significant judgement in estimating future taxable profits based on profit forecasts drawn up by management at the reporting date. The amount of deferred tax assets recognised in the financial statements is expected to be recovered within the foreseeable future. Such estimation uncertainty might lead to material differences between the projected period for utili s ation of tax losses compared to actual timing of utili s ation. In this respect, this area has been deemed to represent a key audit matter. Relevant references in the Annual Report and Financial Statements: · Accounting policy: Note 3.8; and · Note on Deferred taxation: Note 32. | As part of our audit procedures: · we reviewed the profitability projections prepared by management and evaluated the assumptions utilised in the preparation of taxable profit forecasts at the reporting date with reference to our understanding of the Group’s and Bank’s business, historical trends, and relevant documentation on the Group’s and Bank’s business strategy over the foreseeable future; · we reviewed the computation of taxable profits within the projections on the basis of tax laws (and tax rates) enacted by the reporting date and the expected utilisation of tax losses, and assessed whether these tax losses are expected to be utilised within a reasonable timeframe; and · we evaluated the adequacy of disclosures made in Notes 17 and 32 to the financial statements, including those regarding key assumptions. Based on the work performed, the carrying amount of deferred tax assets, as well as the related disclosures, appear to be consistent with the explanations and evidence obtained.

How we tailored our group audit scope

The Group is composed of six components: FIMBank p.l.c. (the “Parent Company” or “Bank”), and its subsidiaries FIM Property Investment Limited, London Forfaiting Company Ltd, FIMFactors B.V. (and its subsidiary India Factoring and Finance Solutions Private Ltd) and The Egyptian Company for Factoring S.A.E., which are determined to be financially significant entities. The figures of FIM Business Solutions Limited are deemed to be immaterial in the context of the Group results.

We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates.

The group audit engagement team carried out a full scope audit on the Bank and one of the Bank’s subsidiaries located in Malta, namely FIM Property Investment Limited. The group audit engagement team also performed specified audit procedures on certain account balances of another financially significant component, namely London Forfaiting Company Limited.

The financial statements of FIMFactors B.V. (and its subsidiary India Factoring and Finance Solutions Private Ltd) and The Egyptian Company for Factoring S.A.E. (the remaining subsidiaries within the Group), predominantly based in India and Egypt respectively, were audited by other auditors. In this respect, we issued instructions to the other auditors auditing these two components.

In establishing the overall audit approach to the Group audit, we determined the type of work that needed to be performed by us, as the Group audit engagement team, or by other auditors. For the work performed by other auditors operating under our instructions, we determined the level of involvement we needed to have in the audit work at those locations to be satisfied that sufficient audit evidence had been obtained for the purposes of our opinion. We ensured that our involvement in the work of other auditors, together with the additional procedures performed at the Group level, were sufficient to allow us to conclude on our opinion on the Group’s consolidated financial statements as a whole.

The audit engagement team of the Group performed all of this work by applying the overall materiality at the level of the Group’s consolidated financial statements, together with additional procedures performed on the consolidation. This gave us sufficient appropriate audit evidence for our opinion on the consolidate financial statements as a whole.

####

Other information

The directors are responsible for the other information. The other information comprises all of the information presented in the Annual Report and Financial Statements 2023 (but does not include the financial statements and our auditor’s report thereon).

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon except as explicitly stated within the Report on other legal and regulatory requirements.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above 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 and those charged with governance for the financial statements

The directors are responsible for the preparation of financial statements that give a true and fair view in accordance with IFRSs as adopted by the EU and the requirements of the Maltese Banking Act (Cap. 371) and the Maltese Companies Act (Cap. 386), and for such internal control as the directors 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 Group’s and the Bank’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 Group or the Bank or to cease operations, or have no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

Auditor’s 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 auditor’s 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.

● 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 Group’s and the Bank’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 Group’s or the Bank’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s 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 auditor’s report. However, future events or conditions may cause the Group or the Bank 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 those charged with governance 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 those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to 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 those charged with governance, 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 auditor’s 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.

Report on other legal and regulatory requirements

Report on compliance with the requirements of the European Single Electronic Format Regulatory Technical Standard (the “ESEF RTS”), by reference to Capital Markets Rule 5.55.6

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 (Cap. 281) - the Accountancy Profession (European Single Electronic Format) Assurance Directive (the “ESEF Directive 6”) on the Annual Financial Report of FIMBank p.l.c. for the year ended 31 December 2023, entirely prepared in a single electronic reporting format.

Responsibilities of the directors

The directors are responsible for the preparation of the Annual Financial Report, including the consolidated financial statements and the relevant mark-up requirements therein, by reference to Capital Markets Rule 5.56A, in accordance with the requirements of the ESEF RTS.

Our responsibilities

Our responsibility is to obtain reasonable assurance about whether the Annual Financial Report, including the consolidated financial statements and the relevant electronic tagging therein, complies in all material respects with the ESEF RTS based on the evidence we have obtained. We conducted our reasonable assurance engagement in accordance with the requirements of ESEF Directive 6.

Our procedures included:

● Obtaining an understanding of the entity's financial reporting process, including the preparation of the Annual Financial Report, in accordance with the requirements of the ESEF RTS.

● Obtaining the Annual Financial Report and performing validations to determine whether the Annual Financial Report has been prepared in accordance with the requirements of the technical specifications of the ESEF RTS.

● Examining the information in the Annual Financial Report to determine whether all the required taggings therein have been applied and whether, in all material respects, they are in accordance with the requirements of the ESEF RTS.

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 Financial Report for the year ended 31 December 2023 has been prepared, in all material respects, in accordance with the requirements of the ESEF RTS.

Other reporting requirements

The Annual Report and Financial Statements 2023 contains other areas required by legislation or regulation on which we are required to report. The Directors are responsible for these other areas.

The table below sets out these areas presented within the Annual Financial Report, our related responsibilities and reporting, in addition to our responsibilities and reporting reflected in the Other information section of our report. Except as outlined in the table, we have not provided an audit opinion or any form of assurance.

Area of the Annual Report and Financial Statements 2023 and the related Directors’ responsibilities | Our responsibilities | Our reporting
Directors’ report The Maltese Companies Act (Cap. 386) requires the directors to prepare a Directors’ report, which includes the contents required by Article 177 of the Act and the Sixth Schedule to the Act. | We are required to consider whether the information given in the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements. We are also required to express an opinion as to whether the Directors’ report has been prepared in accordance with the applicable legal requirements. In addition, we are required to state whether, in the light of the knowledge and understanding of the Bank and its environment obtained in the course of our audit, we have identified any material misstatements in the Directors’ report, and if so to give an indication of the nature of any such misstatements. | In our opinion: · the information given in the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and · the Directors’ report has been prepared in accordance with the Maltese Companies Act (Cap. 386). We have nothing to report to you in respect of the other responsibilities, as explicitly stated within the Other information section.
Statement of compliance with the principles of good corporate governance The Capital Markets Rules issued by the Malta Financial Services Authority require the directors to prepare and include in the Annual Financial Report a Statement of Compliance with the Code of Principles of Good Corporate Governance within Appendix 5.1 to Chapter 5 of the Capital Markets Rules. The Statement’s required minimum contents are determined by reference to Capital Markets Rule 5.97. The Statement provides explanations as to how the Bank has complied with the provisions of the Code, presenting the extent to which the Bank has adopted the Code and the effective measures that the Board has taken to ensure compliance throughout the accounting period with those Principles. | We are required to report on the Statement of Compliance by expressing an opinion as to whether, in light of the knowledge and understanding of the Bank and its environment obtained in the course of the audit, we have identified any material misstatements with respect to the information referred to in Capital Markets Rules 5.97.4 and 5.97.5, giving an indication of the nature of any such misstatements. We are also required to assess whether the Statement of Compliance includes all the other information required to be presented as per Capital Markets Rule 5.97. We are not required to, and we do not, consider whether the Board’s statements on internal control included in the Statement of Compliance cover all risks and controls, or form an opinion on the effectiveness of the Bank’s corporate governance procedures or its risk and control procedures. | In our opinion, the Statement of Compliance has been properly prepared in accordance with the requirements of the Capital Markets Rules issued by the Malta Financial Services Authority. We have nothing to report to you in respect of the other responsibilities, as explicitly stated within the Other information section.
Remuneration report The Capital Markets Rules issued by the Malta Financial Services Authority require the directors to prepare a Remuneration report, including the contents listed in Appendix 12.1 to Chapter 12 of the Capital Markets Rules. | We are required to consider whether the information that should be provided within the Remuneration report, as required in terms of Appendix 12.1 to Chapter 12 of the Capital Markets Rules, has been included. | In our opinion, the Remuneration report has been properly prepared in accordance with the requirements of the Capital Markets Rules issued by the Malta Financial Services Authority.
| Other matters prescribed by the Maltese Banking Act (Cap. 371) In terms of the requirements of the Maltese Banking Act (Cap. 371), we are also required to report whether: ● 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 of those books; ● the Bank’s financial statements are in agreement with the books of account; ● in our opinion, and to the best of our knowledge and according to the explanations given to us, the financial statements give the information required by any law which may from time to time be in force in the manner so required. | 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 of those books; · the Bank’s financial statements are in agreement with the books of account; and · to the best of our knowledge and according to the explanations given to us, the financial statements give the information required by any law in force in the manner so required.
| Other matters on which we are required to report by exception We also have responsibilities under the Maltese Companies Act (Cap. 386) to report to you if, in our opinion, adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us. We also have responsibilities under the Capital Markets Rules to review the statement made by the directors that the business is a going concern together with supporting assumptions or qualifications as necessary. | We have nothing to report to you in respect of these responsibilities.

Other matter – use of this report

Our report, including the opinions, has been prepared for and only for the Bank’s shareholders as a body in accordance with Article 179 of the Maltese Companies Act (Cap. 386) and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior written consent.

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Appointment

We were first appointed as auditors of the Group and Bank by a directors’ resolution on 17 January 2024 for the year ended 31 December 2023.

Fabio Axisa

Principal

For and on behalf of

PricewaterhouseCoopers

78, Mill Street

Zone 5, Central Business District

Qormi

Malta

24 April 2024