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ai1606871160127_AR2020_Inside Cover_Front & Back.pdf 1 02/12/2020 11:06:11 am
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OUR BANK OUR PEOPLE
www.bsp.com.pg
Our Mission
To create value for our stakeholders by
delivering innovative and cost effective
financial services.
CONTENT
Strategic Report
Chairman’s Report
A Brief History of BSP
Board of Directors
Group CEO’s Report
Group Historical Summary
Contributions by BSP to PNG
Group Highlights
Sales
Operations & Support
Broader Group Highlights
Cook Islands
Fiji
Samoa
Solomon Islands
Tonga
Vanuatu
Subsidiaries
BSP Finance
BSP Capital
BSP Life
Corporate Governance
Corporate Governance Report
Remuneration Report
Financial Statements
Directors’ Report
Statements of Comprehensive Income
Statements of Financial Position
Statements of Changes in Shareholders’ Equity
Statements of Cash Flows
Notes to the Financial Statements
Independent Auditor’s Report
Shareholder Information
Directors’ Information
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28
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67
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69
115
120
124
Management Teams
Executive Management
Broader Group
Overseas and Subsidiaries Directory
Subsidiaries
PNG Branch Managers and Directory
Corporate Social Responsibility
126
128
132
133
134
136
138
Sunset shot, Rabaul, East New Britain
Photo by Rocky Roe Photographics
OUR CORE VALUES
TEAMWORK
We work with, and
for, each other; we
progress together.
COMMUNITY
We respect, value and
support the communities
in which we operate.
PROFESSIONALISM
We commit ourselves
to continual
self-development to
achieve standards of
excellence in our
performance.
QUALITY
We are commited to
excellence whilst
striving for continous
improvement in
products and services.
PEOPLE
We respect and
value our people
and our customers.
LEADERSHIP
We inspire, we
change, and we live
our values, and lead
by example.
INTEGRITY
We are honest,
committed, trustworthy
and reliable in our
dealings with our
customers and each
other.
APRA Disclaimer:
BSP is not authorised under the Banking Act 1959 (Commonwealth of Australia) and is not supervised by the Australian Prudential Regulation
Authority (APRA). BSP’s products are not covered by the depositor protection provisions in section 13A of the Banking Act 1959 and will not be
covered by the financial claims scheme under Division 2AA of the Banking Act 1959.
Chairman’s
Report
Sir Kostas Constantinou, OBE
The majority of 2020 has been uniquely difficult for the customers
and communities we serve. BSP, like most South Pacific businesses,
has had to manage unprecedented disruption, without doubt the
greatest since its landmark amalgamation in 2002.
While BSP and our people were confronted with a number of
challenges in 2020, I am proud of how we responded, given the
critical role we play in supporting South Pacific economies and our
communities. Despite these challenges, BSP continued to perform
well, experiencing a small decline (9.5%) in 2020 profitability to
K806m. This strong profit result was achieved while we maintained
capital discipline and prudent balance sheet management, ensuring
our commitment to financial strength across all capital, funding and
liquidity metrics. We finished 2020 with a capital adequacy ratio of
23.2% (2019 = 22.0%) and leverage ratio of 10.3% (2019 =10.5%),
ratios that remain well in excess of the 12% and 6% prudential
requirements respectively.
STRATEGY
As raised in last year’s annual report, my fellow directors and I are
pleased to report that BSP’s diversification strategy initiated in 2015
continues to gather momentum. Today, less than three-quarters of
BSP’s profit is generated by our PNG banking operations, illustrating
the strong progress our offshore branches and subsidiaries are
making.
Our offshore banking business growth has continued, with five (5) of
the six (6) operations now ranked “number one” in lending volumes
in the countries they operate in, enhancing BSP’s position as the
South Pacific’s leading bank.
Further, our Cambodia and Lao Asset Finance joint ventures are
performing well and we anticipate future growth prospects in these
markets. With our focus on delivering sustainable growth, we will
continue to adopt a measured approach to exploring future asset
finance growth opportunities within the Mekong Delta.
motivation for pursuing a listing on ASX is to gain access to new
sources of capital. Despite BSP being listed on the PNGX since 2003,
there are a number of natural market constraints that BSP faces in
sourcing new forms of equity capital. Accordingly, BSP is considering
an ASX listing as a means of mitigating some of these constraints.
An ASX listing will also facilitate increased liquidity for BSP's
shareholders.
PREPARING FUTURE LEADERS
BSP’s Leadership and Management Development Program
(LMDP) has been in place since 2014 and identifies future leaders
in emerging, developing and senior role categories for internal
secondments and development training in Australia and Singapore
to provide participants with the skills necessary to take on more
senior roles within BSP.
Pleasingly, all 33 LMDP participants successfully completed their
online programs from the INSEAD and the Melbourne Business
Schools. Further, seven (7) participants were provided opportunities
to present to the Board during 2020.
Notable LMDP participant promotions during 2020 included:
• Dennis Konu – Deputy General Manager Customer Experience &
Retail Support
• Peter Komon – Deputy General Manager Retail Sales & Customer
Service
• Raymond Logona – Senior Relationship Manager Corporate
• Bertha Auwi – Head of Paramount Banking
• Futua Singirok – Head of Financial Risk Management
• Kami Gawi – Head of Business Controllers
• Ngairinga Kotrine – Relationship Manager, Cook Islands
• Villiwalaka Roalakona – Head of Project Management Office
BOARD RENEWAL
Given BSP’s success to date, we will maintain this strategic direction
and as advised in my October 2020 PNGX announcement, we have
begun to assess a potential dual listing on the ASX. BSP's primary
Board renewal remains a continuing process and in April, we
welcomed Priscilla Kevin, who joined as a BSP Director. Priscilla is an
IT professional and entrepreneur specialising in Enterprise Resource
4
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeams LOAN MARKET SHARE
DEPOSIT MARKET SHARE
PNG
Solomon Islands
Tonga
Cook Islands
65%
52%
41%
38%
Samoa
30%
Fiji
26%
Vanuatu
15%
Rank
1
1
1
1
1
1
4
PNG
Solomon Islands
Cook Islands
Tonga
Samoa
Fiji
65%
53%
47%
43%
29%
26%
Vanuatu
17%
Rank
1
1
1
1
1
2
4
Planning (ERP) Support Advisory. She has been an Independent
Committee Member of the BSP Board Risk & Compliance Committee
since 2018.
Priscilla’s appointment maintains the Board’s diversity, as she
replaces Freda Talao who resigned at the end of 2019 having served
her term under the Bank of PNG guidelines.
In July we farewelled Augustine Mano, who resigned as a BSP
Director after almost six years. Augustine Mano served the Board
with distinction and his insightful contributions and understanding of
the oil and gas sector in PNG were invaluable.
In December, Frank Bouraga was appointed to BSP’s Board. Frank is
a CPA-PNG qualified Professional Accountant with over 25 years in
accounting practice presently being Partner Assurance and Business
Advisory with SBC Solutions. Prior to SBC Solutions, Frank was the
Country Managing Partner for Ernst & Young PNG for 5 years as
an audit and business advisory services partner. He also worked
with PWC for over 7 years and was previously with Star Business
Consultants between 2004 and 2011.
Frank has been an Independent Committee Member of BSP’s Board
Audit Committee since October 2018.
FINANCIAL PERFORMANCE
Our revenue performance was slightly down compared to prior year
with a small (1.2%) decrease in income to K2.15 billion. However,
the result was not unexpected, given COVID-19 economic and
operational impacts, coupled with delays to key domestic resource
projects producing a challenging period for PNG, our largest market.
Recognising this challenge, cost control measures were employed
that reduced operating expenditure by 2.0% to K803 million in 2020.
An increase in loan impairment expenses to K201 million in 2020,
which were predominantly COVID-19 related, was the key reason for
BSP Group’s net profit after tax decreasing by 9.5% over the previous
year, falling to K806 million from 2019’s profit of K890 million.
OUTLOOK
The global roll out of COVID-19 vaccinations during 2021 will permit
some degree of normalcy to international travel which will provide
much needed support for the hotel and airline industries and will
stimulate the PNG economy and economies across the Pacific.
The recent announcements from Total and the PNG government
confirming Papua LNG will be progressing in early 2021 will benefit
many and permit businesses to commence planning for future LNG
related activity.
With the vaccine rollout, Papua LNG announcement, coupled with
Porgera mine and Wafi-Golpu (K18.4b) negotiations progressing well,
we are expecting a much-improved 2021 on the back of these major
projects proceeding in the near term.
Given the above, the Board and myself are confident BSP will have
the economic conditions, people and financial strength to execute
effectively against its strategy.
Finally, on behalf of the Board, I would like to thank our more than
4,300 people for their hard work in arguably our most challenging
year and how they responded admirably to the benefit of our
customers, community and shareholders.
Sir Kostas Constantinou, OBE
BSP Group Chairman
5
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeams A brief history of BSP
BSP is the leading bank in PNG and has a long and proud track record of serving the needs of customers in PNG and other countries across the South
Pacific. BSP’s operations date back to 1957, when it was founded in Port Moresby as a branch of National Bank of Australasia Ltd. In 1993, a consortium
of PNG businesses acquired the bank and created the first and only PNG private sector owned bank at that time.
BSP merged with the state-owned Papua New Guinea Banking Corporation (PNGBC) in 2002, creating the largest bank in PNG. Other acquisitions followed,
including Habib Bank in Fiji in 2006, National Bank of Solomon Islands in 2007 and Colonial National Bank and Colonial Fiji Life Insurance businesses in
2009. In 2015 and 2016, BSP completed the acquisition of Westpac’s operations in Cook Islands, Samoa, Solomon Islands, Tonga and Vanuatu, significantly
expanding and strengthening BSP’s geographic reach. In 2014, BSP Finance was launched in Fiji then in PNG in 2015, followed by Cambodia and Solomon
Islands in 2017 and Lao in early 2020.
BSP Life PNG commenced its operations in January 2018.
Today, BSP continues to be a leading force in PNG and the South Pacific markets with the largest branch network, and is a pioneer in bringing financial
innovation and technology to the region.
Our reach in the Asia-Pacific Region
BRANCH
77 Branches
201 Agents
SUB-BRANCH
40 Sub-Branches
4,000+ Staff
STAFF
554 ATMs
11,033 EFTPoS
6
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeams Key milestones in BSP’s development
Commenced opera�ons in Port
Moresby in May 1957 as a branch
of Na�onal Bank of Australasia Ltd.
1957
1974
BSP incorporated as Bank of South
Pacific Ltd, a wholly owned subsidiary
of the Australian parent.
Na�onal Investment Holdings Ltd, a
na�onally owned company, acquired BSP
from Na�onal Australia Bank.
1993
2002
Merged with the state owned Papua
New Guinea Banking Corpora�on
(PNGBC).
BSP is listed on the Port Moresby
Stock Exchange.
2003
2006
Established a presence in Fiji through
the acquisi�on of Habib Bank Ltd’s Fiji
opera�ons, which were rebranded to
BSP.
Acquired the Na�onal Bank of Solomon
Islands Ltd and rebranded to BSP.
2007
2009
Acquired Colonial Na�onal Bank
and Colonial Fiji Life Insurance Ltd
from Commonwealth Bank of
Australia and rebranded to BSP and
BSP Life, respec�vely.
Commenced BSP Finance (Fiji) Ltd in
2014 and commenced BSP Finance
(PNG) Ltd in 2015.
2014-2015
2015-2016
Acquired Westpac’s opera�ons in
Solomon Islands, Cook Islands, Samoa,
Tonga and Vanuatu.
Commenced Asset Finance opera�ons in
Cambodia in May 2017 (rebranded to
BSP Finance Cambodia Ltd in January
2018) and commenced BSP Finance
(Solomon Islands) Ltd in September
2017.
2017
2018
Commenced a life insurance
business in Papua New Guinea
on January, 2018.
Asset Finance Business
established in Lao in 2020.
2020
7
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeams SIR KOSTAS G. CONSTANTINOU, OBE
Chairman. Non - Executive Director
since April 2009. Appointed Chairman
February 2011.
Sir Kostas is a prominent business figure in Papua
New Guinea (PNG), holding a number of high level
public sector and private sector appointments.
He is Chairman of various companies, including
Airways Hotel and Apartments Ltd, Lamana
Hotel Ltd, Lamana Development Ltd, Bank of
South Pacific Ltd and Air Niugini Limited. He is
a Director of Alotau International Hotel, Gazelle
International Hotel in Kokopo, Loloata Island
Resort Ltd, Coastwatchers Court Ltd, Waigani
Assets Ltd, OPH Ltd, Rangeview Heights Ltd
in Papua New Guinea, Heritage Park Hotel in
Solomon Islands, Taumeasina Island Resort in
Samoa, Good Taste Company in New Zealand and
Oil Search Ltd. Sir Kostas is also Vice President
of the Employers Federation of PNG, Honorary
Consul for Greece and Cyprus in Papua New
Guinea and Trade Commissioner of Solomon
Islands to PNG.
ROBIN FLEMING, CSM, MBA, MMGT
Group Chief Executive Officer. Director
since April 2013.
Robin Fleming was appointed GCEO of Bank
of South Pacific Ltd in April 2013. Before his
appointment as GCEO, he had been Deputy
GCEO and Chief Risk Officer since 2009. Prior to
that, Mr Fleming held senior executive roles as
Chief Risk Officer, General Manager Corporate
& International, and Head of Risk Management
with BSP. Prior to the merger of BSP and PNGBC,
Mr Fleming held senior management roles with
PNGBC. He has worked in PNG for over 35 years
and holds an MBA and a Master of Management
from Charles Sturt University. Mr Fleming was
made a Companion of the Star of Melanesia (CSM)
in 2015 by the PNG Government for services to
banking and the community.
Board of
Directors
8
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeams ERNEST BRIAN GANGLOFF, CPA,
MAICD, MIIA, PNGID
Non - Executive Director. Director since
November 2013.
ROBERT BRADSHAW, LLB
Non - Executive Director. Director since
September 2017
Ernest Gangloff is an Accountant, registered
with CPA PNG and the Accountants’ Registration
Board. Ernest has extensive experience in the
areas of risk management, internal audit and
corporate governance. He has over 30 years
professional experience with over 15 years in
senior management positions. Mr. Gangloff
retired as Partner with Deloitte in May 2013, and
established Gangloff Consulting in June 2013. Mr
Gangloff is an Adjunct Professor of Accounting
at the University of Papua New Guinea and
specialises in Risk Management and Governance.
Robert Bradshaw was appointed to the BSP Board
in September 2017. He is a Lawyer by profession,
admitted to practice law in Papua New Guinea
(PNG) in 1995. Mr Bradshaw holds a Bachelor of
Laws from the University of PNG and has practised
law for over 20 years. He was formerly a Partner
in the firm Blake Dawson Waldron (now Ashurst).
He commenced practice on his own as Bradshaw
Lawyers in 2005. Mr Bradshaw has been involved
in different areas of law, particularly in resource
development, industrial relations, banking and
finance and commercial litigation.
GEOFFREY J. ROBB, BA, MBA, OAM,
MAICD, GAICD
Non - Executive Director. Director since
April 2012.
Geoffrey Robb is a highly qualified and experienced
banker, having occupied several senior executive
positions including Head of Resource Finance
at Bank of America, Global Head of Acquisition
Finance and Head of Complex and Strategic
Transactions with ANZ Banking Group. As Head
of Bank of America in Melbourne, he led resource
financings with BHP, CRA, Elders Resources,
Bougainville Copper, Ok Tedi and Porgera. He
holds MBAs from the International Management
Institute Geneva and Macquarie University.
Mr Robb has travelled extensively in emerging
markets and has received the Medal of the Order
of Australia for his services to mountaineering
and charity. He is also on the Board of BSP Capital
Ltd and Bank South Pacific Tonga Ltd.
9
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeams Board of
Directors
(continued)
10
ARTHUR SAM, BComm, CPA, MAICD,
GAICD
Non - Executive Director. Director since
2016.
is a qualified and experienced
Arthur Sam
accountant, registered under CPA PNG. He holds
a Bachelor of Commerce from the University
of Papua New Guinea, and is a graduate of the
Australian Institute of Company Directors. He
is the Audit and Managing Partner of Sam Kiak
Tubangliu Certified Practising Accountants. Mr
Sam previously worked with global accounting
firms PricewaterhouseCoopers, Deloitte and
Ernst & Young in managerial roles specialising in
external and internal audit and risk management.
Prior to joining the Board of BSP, he served on the
NASFUND Board Audit and Risk Committee and
the PNG Accountants Registration Board. Mr Sam
is also the Chair of the Board Risk Committee.
FAAMAUSILI DR. MATAGIALOFI
LUA’IUFI, BA, MSC, PhD
Non - Executive Director. Director since
December 2016.
Faamausili Dr M. Lua’iufi is an experienced Public
Sector practitioner and consultant. She holds
a PhD in Management, an MSc in Management
Sciences and a BA in Sociology and Political
Science. Prior to establishing her own consultancy
firm in late 2008, she worked in the Samoa Public
Service Commission Office for 25 years, almost 12
of those years as Chief Executive Officer. Under her
stewardship, the Samoa Public Service undertook
various change management programmes to
improve service delivery. Faamausili served in
many Government SOE Boards in her capacity as
CEO.
in
Since becoming a consultant
late 2008,
she has performed more than 50 consultancy
assignments in the domains of Human Resources
Management, Organisational Development,
Performance Management and Governance.
She has performed consultancies in just about
every Pacific island country and also worked very
closely with most Pacific Island countries when
she was a CEO. Currently a Councilor, member
of the Executive Committee and member of the
Finance Committee of the National University
of Samoa. She is a Director of the Bank of South
Pacific Board and a member of the Remuneration
and Nominations Committee. She is a member
of the Australian Institute of Company Directors,
member of the PNG Institute of Directors, Samoa
Institute of Director and Samoa Human Resource
Institute. She was the Pacific Residential Scholar
(2007-2012) of the Australia New Zealand School
of Government (ANZSOG) responsible for the
development of emerging young Pacific Public
Sector leaders.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeams STUART DAVIS, LLB, GAICD
Non - Executive Director. Director since
August 2017
PRISCILLA KEVIN, BSCS, MAICD
Non - Executive Director. Director since
April 2020
FRANK BOURAGA, CPA, MAICD
Non - Executive Director. Director since
December 2020
is an
Priscilla Kevin
IT professional and
entrepreneur specialising in Enterprise Resource
Planning (ERP) Support Advisory. Ms Kevin has
over 15 years ICT industry experience providing
ICT consultancy and support to a range of
businesses as well as government bodies. Since
2018, Ms Kevin served as an Independent
Committee Member (ICM) of the BSP Board Risk
Committee.
She holds a Bachelor's Degree in Computer
Science from PNG University of Technology and is
an advocate and founder for PNG Women in STEM
& Digital ICT Cluster Org promoting local talent,
entrepreneurship, investment and innovation.
Frank Bouraga is a CPA-PNG qualified Professional
Accountant with over 25 years in accounting
practice presently being Partner Assurance and
Business Advisory with SBC Solutions. Prior to
SBC Solutions, Frank was the Country Managing
Partner for Ernst & Young PNG for 5 years as an
audit and business advisory services partner.
He also worked with PWC for over 7 years and
was previously with Star Business Consultants
between 2004 and 2011.
Frank Bouraga has been an
Independent
Committee Member of BSP's Board Audit &
Compliance Committee since October 2018.
Stuart Davis is currently a Non-Executive director
and Chairman of the Audit and Risk Committee of
ASX 200 company NextDC Ltd, which builds and
operates Data Centres in Australia, Non-Executive
Director and Chairman of the Risk Committee of
PayPal Australia Ltd, and Non-Executive Director
and member of the Board Audit and Compliance
Committee and Board Risk Committee of Bank
South Pacific. Mr Davis previously was CEO of
HSBC Bank in India from 2009 to 2012, one of the
largest foreign banks in India with staff of 8,000
and pretax earnings in excess of USD 800 million.
Prior to that appointment, he was CEO of HSBC
Bank in Australia from 2002 to 2009 and CEO of
HSBC in Taiwan from 1999 to 2002, having joined
the HSBC Group in 1981. Mr Davis previously
served as a member of the Australia Bankers
Association from 2003 to 2009, being Deputy
Chairman from 2006 to 2009, was Chairman of the
British India Chamber of Commerce in Mumbai
and Chairman of the Taiwan British Chamber of
Commerce in Taipei. He holds a Bachelor of Law
Degree from the University of Adelaide and is a
Graduate of the AICD.
11
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeams Group CEO’s
Report
Robin Fleming, CSM
Group Chief Executive Officer
2020 was a most difficult year for all countries and businesses globally and Papua New Guinea and the South Pacific countries in which BSP operates were
no exception. BSP’s 2020 financial results have been influenced by the impact of COVID-19 on our customers and our staff. Net Profit after tax for the
group was K806.2m which was 9.5% lower than 2019 directly as a result of COVID-19. Dealing with the implications of the global transmission of COVID-19
was both a major challenge for BSP, but also one of our achievements for the year. The travel and movement restrictions that were introduced by most
countries worldwide and all countries in which BSP operates had financial implications for many of our Corporate and Retail customers and BSP was able
to respond with support packages of varying terms and periods for those customers who were affected.
In PNG, following a reduction of 2% in the Bank of PNG monetary policy
signaling rate, the Kina Facility Rate (KFR), as a Government led stimulus
support measure, BSP reduced its Indicator Lending Rate by 1% across all
variable rate loan products and every new fixed rate loan product funded
after 1 April 2020. The transmission effect of the change in the (KFR) is
minimal, however the clear intent of the Bank of Papua New Guinea and
the Government was for commercial banks to provide support for borrowers
with a lower cost of borrowing and also some form of repayment relief.
BSP was the only bank in PNG to reduce its interest rates across all its
lending products. This came at the cost of interest income but it was a
strong measure of support for our customers by BSP. We were able to keep
all our branches and sub branches open during the state of emergency and
customers were able to have access to their funds despite many movement
restrictions, and in some provinces, restrictions on operating hours. BSP also
provided support to our staff with Personal Protective Equipment (PPE) and
preservation of employment at a time when other businesses looked to scale
back employment and remuneration conditions and reduce costs.
Giving regard to the poor transmission effect of the KFR, the Bank of Papua
New Guinea also lowered the Cash Reserve Requirement (CRR) which is a
monetary policy tool to reduce the levels of surplus liquidity in the system
(calculated as a percentage of each bank's total deposits) from 10% to 7%.
As the deposits maintained in the CRR earn zero interest, by lowering the
CRR banks were able to address any liquidity risk that may have occurred as
business conditions became more difficult and to invest surplus liquidity with
the Government in higher yielding Covid Bonds.
2020
2020 vs 2019
Profit [NPAT, Km]
Net assets [Kb]
806
3.4
Cost-to-income ratio [%]
37.4
Capital adequacy ratio [%]
Earnings per share [toea]
Dividend per share [toea]
Market Capitalisation [Kb]
23.2
172.6
121.0
5.6
-9.5%
+10.2%
- 33 bps
+ 120 bps
- 9.4%
- 12.9%
+1.9%
In Papua New Guinea the main sectors affected by COVID-19 were hotel,
transport, retail and the oil and gas sector. With severe restrictions on
international travel, airlines revenues contracted significantly as did hotel
occupancies. The Retail sector experienced lower sales during the periods
of curfews and restrictions on movement and gatherings of people, and the
oil and gas sectors saw the prices of their commodities fall to historic lows as
supply far exceeded demand.
Cook Islands, Fiji, Samoa, Solomon Islands, Tonga and Vanuatu all saw their
tourist arrivals cease overnight which had broad based flow on effects to all
sectors in their economies, and unemployment increased. Fiji in particular
experienced a significant drop in economic output and GDP fell by almost
20%. There were varying ranges of GDP reductions in other countries but
12
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeams "BSP was the only bank in PNG to reduce its lending interest rates across all its lending products. This came at the cost of interest income but it was a strong
measure of support for our customers by BSP" Robin Fleming, CSM, Group Chief Executive Officer.
the common theme was contraction in most sectors, lower employment
and Government and Central Bank encouragement for banks to support
customers. Cambodia and Lao were also affected but were somewhat more
resilient.
BSP’s support for borrowers across all countries, in consultation with central
banks, involved 3 months repayment holidays for customers directly affected
by COVID-19. For certain customers in sectors more significantly impacted
by COVID-19, interest was capitalised for specific periods and for other
customers the repayment relief periods extended beyond 3 months if central
banks supported these measures. Our message to borrowers was that BSP
would provide support with repayment relief, but this was time bound and
finite, and it was in the interests of both lender and borrowers that in time
relief was regularised with commencement of repayments once cashflow
permitted.
In large part the majority of borrowers were able to resume normal loan
repayments by the end of 2020. There were some exceptions for sectors
more severely affected and in some countries, again with the support of
central banks, whilst repayment support was provided, BSP also undertook
regular and ongoing portfolio reviews and adopted a balanced approach to
credit provisions, with additional provisions taken up to reflect the change in
risk profile of a number of our borrowers. These additional provisions were
taken up in large part at the half year review and further assessments of
adequacy of provisions was undertaken in the final quarter for all countries.
Retail in every country was at the forefront of direct customer support
throughout the year, and this was all the more evident during the COVID-19
curfew and movement restriction periods. Personal protective equipment
was supplied to staff and social distancing protocols introduced in and
around our branches. In certain towns in Papua New Guinea, including Port
Moresby, there were movement restrictions as well as temporary bans on
public transport. Accordingly, BSP hired buses to transport staff to and
from work, with the buses operating in accordance with limitations on the
numbers of people permitted in buses. In Port Moresby business continuity
was enhanced with key operational staff being segregated from our Waigani
Head Office and temporarily located at a commercial site leased specifically
for the COVID-19 BCP. This also permitted more effective social distancing in
our many head office departments.
Our staff were most supportive of BSP’s efforts to maintain banking services
to as many people as possible during the year, but especially during the
COVID-19 lockdown and State of Emergency periods that accompanied
COVID-19 related health and biosecurity measures. Equally BSP recognised
the need to provide additional support to our staff, over and above work place
health and safety measures, such as personal protective equipment (masks
and gloves), sanitisers and social distancing. Specifically, BSP preserved all
staff benefits, maintained staffing levels, provided flexibility for sick leave
without normal medical documents and took external environmental factors
outside of the control of management into consideration when assessing
short term incentive payments for staff.
Under the circumstances, BSP’s 2020 financial performance was therefore
much better than would have been contemplated at the beginning of the year,
when the COVID-19 pandemic struck. Corporate banking in PNG especially,
but also in most other countries, continued to increase market share and
our relationship management teams maintained close and continuous
contact with our customers. BSP PNG continues to be the dominant bank
in the country with a lending market share of 65% and in each of the other
countries we have market share of 38% in Cook Islands, 26% in Fiji, 30% in
Samoa, 52% in Solomon Islands, and 41% in Tonga. Our Vanuatu business at
15% continues to progress strategies focused on domestic currency lending
to increase their market share.
The other important component of our COVID-19 support relates to
shareholders and dividends. Our board deliberated at some length on the
issue of dividend payments, as the timing of the dividend decision coincided
with guidance advices by various banking regulators that capital soundness
should take priority over dividend payments. When considering the payment
quantum, our board took into account the fact that the dividend related
to a final dividend for a 31 December 2019 financial year, which predated
COVID-19, that the Bank was well capitalised with total risk weighted capital
of K3.095bn or 23.2%, and that the dividend payment to shareholders would
also be a form of stimulus at a time of reduced economic activity.
13
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeams Group CEO’s Report
(continued)
A final dividend of 96 toea per share was approved by the board taking the
total dividend payout to 70.6% which was just within the dividend policy
range of 70% to 75% of prior year earnings. Total dividends paid were
K569.4m with a dividend yield of 11.17%. With a shareholder base that is
almost 90% Papua New Guinean and includes Kumul Consolidated Holdings
(18.1%), each of the three superannuation funds in PNG being Nambawan
Super (12.1%), Nasfund (9.7%), Comrade Trustees (2.7%) as well as Fiji
National Provident Fund (8.7%), Solomon Islands National Provident Fund
(0.5%) and Samoa Provident Fund (0.6%) many workers around the Pacific
benefit from BSP’s financial performance and dividend distributions.
COVID-19 also added to delays to the implementation of our Oracle banking
system. This multi-year, multi-country project was immediately impacted
by international travel restrictions which prevented our offshore based
consultants and vendors from being able to travel to and from Papua
New Guinea as frequently as would normally be required with a project
of such significance. Like all businesses we were able to take advantage
of video conferencing and other similar technology to maintain progress
with the project, but the effectiveness of offshore support was not at the
level required to prevent timeline slippage. Our BSP Core Banking project
team progressed with online training and process familiarisation and walk
throughs with our staff in Vanuatu in anticipation of a Vanuatu go live in the
first half of 2021.
For many years now BSP has been at the forefront of development of
digital products that provide customers with the option to do more of their
banking transactions outside of a branch. With the social distancing that
accompanied COVID-19 health security measures, more of our customers
took up this option and our mobile banking transactions increased year on
year by 18.1m (102.8m) which represents a 21% uplift.
BSP’s Digital SBU also progressed substantively a fintech joint venture with
our technical partners Truteq that will deliver BSP the capability to offer our
retail customers access to online services with BSP merchants without the
need to have a scheme card. This development will open up online business
Our staff were most supportive of BSP’s efforts to maintain banking
services to as many people as possible during the year.
Retail in every country was at the forefront of direct customer support
throughout the year, and this was all the more evident during the
COVID-19 curfew and movement restriction periods.
BSP started a Black Thursday support campaign for survivors of family sexual violence.
14
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeams At an executive level in 2020, Group CFO Eddie Ruha, Group COO Robert Loggia and Group GM Retail Paul Thornton all retired. Each contributed
significantly to BSP’s performance. Pictured, Retail staff at Paul Thornton's farewell.
trading for many BSP merchants and expand the offering to an exponentially
larger market of BSP customers. Our Digital team also delivered a payment
solution for our smaller merchants that offers payment using the SMS
messaging capability of BSP’s mobile banking platform, which in a country
that still has low levels of smart phone usage, provides more access to
cashless digital banking.
At an executive level during the year our Group CFO Eddie Ruha, Group
Chief Operating Officer Robert Loggia and Group General Manager Retail
Paul Thornton all retired after 8, 10 and 10 years respectively. Each of them
contributed significantly to BSP’s performance and growth during their time
with BSP and we thank them for their commitment to BSP.
We were very fortunate to benefit from an approach to succession planning
that enabled BSP to select capable replacements internally with Ronesh
Dayal being appointed to Group Chief Financial Officer, Frank Van Der Pol to
Group Chief Operating Officer and Daniel Faunt to Group General Manager
Retail. Kili Tambua was appointed to the role of General Manager Offshore
Branches to fill the role vacated by Daniel Faunt. It is worth special mention
that the management of the Retail SBU is now fully Papua New Guinean with
Daniel as General Manager and his Deputy General Mangers Dennis Konu
and Peter Komon.
Kili Tambua, Dennis Konu and Peter Komon have all benefited from
participation in BSP’s Leadership Management Development Program, which
has the objective of identifying future leaders within BSP and providing them
with leadership and specialist skills training to assist them meet their career
goals and also to improve BSP’s succession planning capabilities. During the
course of this program that was initiated in 2015, 66 staff have participated
in the program, with 30 male and 36 female and 32 staff (17 females and 15
males) have received internal promotions either during or after participation
in the leadership program which reflects positively on development of the
future leaders of BSP.
BSP’s involvement in the community continued with 62 projects across the
region completed in 2020 with a theme of supporting hospitals, education
with digital literacy and following COVID-19 supplementary assistance on
washing hygiene. Every branch participated in the projects and these greatly
benefited the communities we operate in. Following a high profile gender-
violence based death in PNG in the middle of 2020, BSP started a Black
Thursday support campaign for survivors of family sexual violence, which
includes counselling and in need access to a safe house by way of the Bel Isi
program which BSP is a founding member. Advocacy of positive community
attitudes is important to BSP and our staff that have embraced the initiative
wholeheartedly across the group.
Our board led by our Chairman Sir Kostas Constantinou maintained effective
oversight of BSP’s operational performance, risk management systems and
governance whilst also ensuring the board determined strategic objectives
for BSP were actively monitored and managed. Their guidance and support,
which in the immediate COVID-19 period involved far more regular video
board and committee meetings, greatly assisted with BSP’s achievements in
2020.
In closing, our staff in all of our businesses and each of the countries in which
we operate, are to be congratulated for their efforts and support in delivering
a sound financial outcome in what was an unprecedented year.
Robin Fleming, CSM
Group Chief Executive Officer
Digital Banking
Our Digital team also delivered a payment solution
for our smaller merchants that offers payment using
the SMS messaging capability of BSP’s mobile banking
platform, which in a country that still has low levels of
smart phone usage, provides more access to cashless
digital banking.
15
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeams
South Pacific
market leader
We continue to grow and build scale in pursuit of
sustainable market leadership
Vanimo
Aitape
WEST SEPIK
Wewak
EAST SEPIK
Lorengau
MANUS
NEW IRELAND
Kavieng
EAST NEW BRITAIN
Rabaul
Lihir
Kokopo
LENDING
DEPOSIT
K13.5b
In lending
K21.7b
In deposits
DIVIDENDS PAID
K569m
Dividends paid
MARKET
CAPITALISATION
K5.61b
Market Capitalisation
Tabubil
Kiunga
MADANG
Madang
ENGA
Porgera
JIWAKA
HELA
Tari
Wabag
WHP
Mt. Hagen
Mendi
SHP
Kundiawa
CHIMBU
Goroka
EHP
Kainantu
Moro
MOROBE
WEST NEW BRITAIN
Bialla
Kimbe
WESTERN
PROVINCE
GULF
Lae
Lae Top Town
Bulolo
Lae Market
Lae Commercial Centre
Daru
Popondetta
NORTHERN
Buka
AUTONOMOUS
REGION OF
BOUGAINVILLE
Arawa
NATIONAL
CAPITAL
DISTRICT
Port Moresby
Boroko Banking Centre
Gordons Commercial
Waigani Drive
Waigani Banking Centre
Vision City
Habour City
Motukea
CENTRAL
Alotau
MILNE BAY
FIJI
Labasa
VANUA LEVU
Taveuni
Savusavu
TARO
Lomaloma
Gizo
Noro
Munda
SOLOMON IS.
VANUATU
Auki
Honiara
Honiara
Point Cruz
Ranadi
Espiritu Santos
Port Vila
COOK IS.
TONGA
Vava’u
Rarotonga
Nuku’ alofa
Nabowalu
Rakiraki
Tavua
Lautoka
Ba
Nadi
Korovou
VITI LEVU
Sigatoka
Navua
Ovalau
Suva
Suva Central
Dominion House
Pacific House
Centre Point
Vunisea
SAMOA
Salelologa
Apia
Apia
Vaitelei
Branch
Laos
Cambodia
16
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeams Lorengau
MANUS
Vanimo
Aitape
WEST SEPIK
Wewak
EAST SEPIK
ENGA
Porgera
Wabag
Tabubil
Kiunga
HELA
Tari
MADANG
Madang
JIWAKA
WHP
Mt. Hagen
WEST NEW BRITAIN
Bialla
Kimbe
Mendi
SHP
Kundiawa
CHIMBU
Goroka
EHP
Kainantu
MOROBE
Moro
NEW IRELAND
Kavieng
EAST NEW BRITAIN
Rabaul
Lihir
Kokopo
Buka
AUTONOMOUS
REGION OF
BOUGAINVILLE
Arawa
Laos
Cambodia
WESTERN
PROVINCE
GULF
Lae
Bulolo
Lae Top Town
Lae Market
Lae Commercial Centre
Daru
Popondetta
NORTHERN
NATIONAL
CAPITAL
DISTRICT
Port Moresby
Boroko Banking Centre
Gordons Commercial
Waigani Drive
Waigani Banking Centre
Vision City
Habour City
Motukea
CENTRAL
Alotau
MILNE BAY
FIJI
Labasa
VANUA LEVU
Taveuni
Savusavu
TARO
SOLOMON IS.
VANUATU
Nabowalu
Rakiraki
Tavua
Lautoka
Korovou
Ba
Nadi
VITI LEVU
Sigatoka
Navua
Ovalau
Suva
Suva Central
Dominion House
Pacific House
Centre Point
Vunisea
SAMOA
Salelologa
Apia
Apia
Vaitelei
Lomaloma
Gizo
Noro
Munda
Auki
Honiara
Honiara
Point Cruz
Ranadi
Espiritu Santos
Port Vila
COOK IS.
TONGA
Vava’u
Rarotonga
Nuku’ alofa
Branch
17
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeams Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Teams
Corporate Social
Responsibility
Historical
Summary
18
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020
Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Corporate Social
Teams
Responsibility
Historical Summary
BSP Group NPAT
K806.2m
9.5% decrease from 2019
Dividend paid per Share
K1.21
12.9% decrease from 2019
Capital adequacy
23.2%
120 bps increase from 2019
Profit and Loss (K’000)
2017
2018
2019
2020
Net interest income
1,277,676
1,380,796
1,391,784
1,447,012
Non interest income
720,674
784,909
779,566
698,638
Bad and doubtful debt (expense)/
recovery
(77,678)
(82,440)
(99,183)
(201,273)
Other operating expenses
(852,148)
(887,097)
(819,248)
(802,542)
Operating Profit
Profit before tax
Income tax expense
Profit/(loss) after tax
Dividends (toea)
Dividends paid per share1
Balance Sheet (K’000)
1,068,524
1,196,168
1,252,919
1,141,835
1,068,524
1,196,168
1,252,919
1,141,835
(311,521)
(352,096)
(362,556)
(335,617)
757,003
844,072
890,363
806,218
111.0
127.0
139.0
121.0
Net loans and advances
11,209,493
12,530,649
13,200,807
13,506,660
Total assets
Deposits
Capital
Performance Ratios
Return on Assets
Return on Equity
Expense/Income
Key Prudential Ratios
Capital adequacy
Liquid Asset Ratio
Leverage ratio
22,369,861
23,081,223
24,527,118
27,523,437
17,901,692
18,232,766
19,339,056
21,654,024
2,628,335
2,872,135
3,117,033
3,433,605
3.5%
30.6%
42.6%
24.5%
36.9%
10.0%
3.7%
30.7%
41.0%
22.9%
33.6%
10.3%
3.7%
29.7%
37.7%
22.0%
30.0%
10.5%
3.1%
24.6%
37.4%
23.2%
32.6%
10.3%
Exchange rates (One (1) PNG Kina buys):
US Dollar
AUS Dollar
0.3095
0.3965
0.2970
0.4208
0.2935
0.4188
0.2850
0.3700
1BSP has adopted the practice of paying an interim dividend based on half year results, in October of
each year, and paying a final dividend based on audited full year results, after the end of the financial
year, and no later than the end of the second quarter of the succeeding year.
Contributions by BSP to PNG
Taxes paid to PNG
Government
K295m
Income Tax Payment (2020)
All Amounts are expressed in K'000
2017
2018
2019
2020
Company income taxes paid to PNG Government
257,210
354,947
361,987
294,695
Other taxes paid to PNG Government
(IWT, FCWT, BWT)
8,214
10,018
16,872
9,327
GST paid and not able to be recouped
22,101
25,337
15,821
14,519
Donations and Sponsorhips
5,217
6,482
5,581
3,839
Total
292,742
396,784
400,261
322,380
19
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Teams
Corporate Social
Responsibility
Group
Highlights
BSP’s involvement in the
community continued with 62
projects across the region
20
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020
21
Sales
Retail Banking | Corporate Banking | Digital | Treasury
12 Million
Digital Transactions
88% of total transactions
were via digital channels.
64% via mobile phones.
135,000
New Customers
Growth geographically
widespread
44%
Increased FX Market
Share in PNG
Banks FX Turnover increased
by 5% in 2020
BSP Group FX turnover fell
0.5%, while PNG’s FX market
turnover contracted by 2.1%
2.5 Million
BSP Account Holders
Over 25,000 SME Accounts
3 SME Banking Centres
RETAIL BANKING
The year 2020 was a challenging year for Retail Banking as it was for many of
our customers who were impacted by the effects of the COVID-19 pandemic.
BSP supported our customers with a range of loan repayment relief programs
as well as the provision of interest rate reductions across all our products.
BSP Retail staff have continued to exhibit a steadfast commitment to
delivering services throughout PNG.
Retail banking continues to experience growth across its operations
notwithstanding various domestic travel restrictions and curfews that were in
force at times during the year. Customer acquisition, system improvements,
reduced interest rates, fee reductions and customer focus were the catalysts
for the SBU’s consistent operating performance during 2020.
A total of 135,000 new customers joined BSP in 2020, with this growth being
consistent with that achieved in past years. The growth was geographically
widespread reflecting the fact that BSP operates the largest branch network
in Papua New Guinea, with 78 branches and sub branches in every province
and most districts. Our approach to financial inclusion has been the
foundation for customer growth over a number of years.
During 2020, BSP continued to invest in Digital technology to provide our
customers with low-cost digital offerings including our USSD Mobile Banking
platform and Mobile App platform. Customer transaction volumes through
these channels increased by 22% in 2020. Overall, customer transactions
volumes across all digital, electronic and “over-the-counter” channels
increased by 8% during 2020 with 88% of those transactions being through
digital or electronic channels.
Lending activity was somewhat constrained in 2020 due to the impact of
COVID-19 on the economy. Despite this, BSP continues to remain the market
leader and maintains its strong commitment toward Papua New Guinea’s
economic growth through home ownership and wealth creation. BSP was
the only bank to pass on interest rate reductions for all its retail lending
products and whilst there was a significant financial impact to BSP, the
decision reflects BSPs continued commitment to supporting its customers
through good and bad times.
BSP continues to offer a pathway for Small Business operators to move from
the cash economy into the formal financial sector and like all BSP operations,
customer participation is widely spread across Papua New Guinea, including
rural areas. BSP’s support of the sector through the PNG Governments
K100m SME guarantee facility is a further reflection of its commitment.
Our Paramount banking division continues to maintain a strong partnership
with the PNG National Government and all other levels of Government
in PNG. The banking relationship with the Government has been and will
continue to be a major focus of Paramount Banking’s activities.
F X
22
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 BSP Retail staff have continued to exhibit a steadfast commitment to
delivering services throughout PNG.
During 2020, BSP continued to invest in Digital technology to provide
our customers with low cost digital offerings including our USSD Mobile
Banking platform and Mobile App platform.
Toward the end of 2020, BSP also farewelled its Group General Manager
Retail, Paul Thornton following 43 years of service to the banking sector in
PNG. With the appointment of Daniel Faunt as the Group General Manager
Retail along with Deputy General Managers Peter Komon and Dennis Konu,
all 1,460 staff in the PNG Retail SBU are Papua New Guineans which reflects
BSP‘s continued promotion of nationals in senior leadership roles and is a
testament to the investment that BSP continues to make in its people.
Retail’s continued investment into the community were highlighted by
the delivery of over 100 wash stations by 35 of our branches. This support
consisted of water tanks and sinks for many communities in PNG in response
to the COVID-19 pandemic. In addition, 40 of our branches also delivered
additional projects by equipping schools and hospitals with much needed
equipment, each worth around K30,000.00.
2021 is shaping up to be a transformational year with the expected rollout
of BSP’s new core banking system (Flexcube) in Vanuatu followed by Papua
New Guinea. The introduction of Flexcube will ensure Retail will be able to
further improve its service to its customers and introduce a truly world class
banking system to PNG.
BSP CORPORATE
BSP's Corporate relationship teams are located in Port Moresby, Lae, Mt.
Hagen, Madang and Kokopo to provide convenient access for the bank's
corporate customers.
Corporate's top priority is customer satisfaction and the pandemic has
highlighted this commitment with a renewed focus on ensuring our
customers were assisted during these challenging times. Corporate ensured
that there was clear communication with customers on the available relief
packages, and reduced interest rates on all variable rate products by 1
per cent to show the Bank's commitment to its customers. Corporate’s
continued commitment to customer service was a significant factor in BSP
PNG recording a 2 per cent increase in lending market share in PNG and
enjoying similar successes in the other countries in which BSP operates.
The relationship managers also worked closely with BSP Digital to get our
customers online so their staff could work remotely during the pandemic,
and importantly, stay safe.
DIGITAL
The enhancement of the Bank's payment system for businesses and
customers has produced significant growth in payments via mobile banking
and contactless card payments and has been pivotal to the increase in the
online presence of local business and government entities who have now
added digital payments to their list of payment options.
Despite the trading restrictions necessitated by the Covid-19 pandemic, BSP
has remained committed to being a digital enabler in the market by providing
local businesses with cost-effective payment solutions for merchants and
customers to engage in business online, which has proved to be a much
needed economic stimulus during the pandemic. BSP's continually expanding
digital offerings makes it easier for customers and merchants to engage in
e-commerce and this has been particularly helpful for SME businesses who
now have the means to reach a wider market.
The launch of Mobile Merchants as a service added new functionality to
Mobile Banking which, in addition to enabling customers to pay for goods
and services with participating merchants, has now enabled the digital
payment of school fees at primary, secondary and tertiary education facilities
throughout the country. Merchants now have an alternative cost-effective
platform and can advocate for digital payments as an alternative to cash.
incorporates API
Digital's offering also
integration for business and
governments who can access data and payment details from their accounts
in real-time to improve operational efficiency. These measures will lead to
greater financial inclusion as customers begin to utilise the Bank's alternative
payment solutions.
TREASURY
PNG Treasury foreign exchange (FX) earnings remained in line with prior
year results, with 2020 being another challenging year as import demand
exceeded export supply of foreign currency. These difficult trading conditions
persisted throughout the year.
The official Bank of Papua New Guinea (BPNG) rate of exchange fell by 2.9%
gradually over the year to finish at USD 0.2850. BSP PNG FX market share
increased 0.5% in 2020 to 44%. BSP Group FX turnover fell 0.5%, while PNG’s
FX market turnover contracted by 2.1%.
BSP continued to invest surplus domestic kina in liquidity government
securities. Movements in the Government debt yield curve reflected
evolving fiscal conditions. The 28 day Central Bank Bills fell from 1.39% to
1.33%, 91 day Treasury Bills from 2.50% to 2.07%, 182 day Treasury Bills from
4.68% to 4.44%, whilst one (1) year Treasury Bills rose from 7.08% to 7.20%.
Yields on longer dated Government issued Inscribed Stock were generally
stable.
Operationally, PNG Treasury continues to mitigate risk and actively focuses
on providing technical training, which encompasses weekly technical
training (Australian Financial Markets Association Foreign Exchange Markets
Accreditation), regulatory and internal compliance training, on the job cross
training and sales training. The strong focus on training of staff development
will continue in 2021.
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StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Operations
and Support
Group Risk Management | Finance and Planning | Operations & Information Technology |
Human Resource | Group Compliance
GROUP RISK MANAGEMENT
Effective risk management continues to underpin the delivery of BSP’s vision.
BSP’s Board approved Group Risk Appetite Statement establishes the risk
appetite parameters that BSP is prepared to assume and manage in pursuit of
its business objectives. The GCEO and the Executive team are responsible for
implementing BSP’s Risk Management Strategy and frameworks, ensuring
appropriate policies, controls, procedures and processes for identifying and
managing risk in all activities are in place.
BSP’s Credit Business Unit is responsible for underwriting and monitoring
of the BSP loan portfolio within the Group Risk Appetite Statement
parameters. In addition to overall credit quality, Credit oversees compliance
with credit policies, procedures and underwriting standards, stress testing
and adequacy of loan provisioning, monitoring sector concentration limits,
management of environmental and social risks and loan portfolio reporting.
Key credit policies and procedures are reviewed on an ongoing basis to
ensure BSP is aligned with the banking regulatory, compliance and industry
environment and preserves prudent credit risk management standards.
BSP remained responsive to the current economic environment through
our Relationship Managers in maintaining close customer contact in
understanding their financial position and circumstances in provision of
loan relief package and determination of internal risk grading. In addition
to individual rating assessment, the portfolio was subject to stress testing,
reporting and monitoring by Credit Committee. BSP undertook industry
reviews focused on industries deemed most exposed to COVID-19, which
included accommodation, property, construction and tourism with
customers in these sectors and reassessment of risk grades assigned to
accommodate a post COVID-19 potential impact. The BSP loan portfolio
outlook retains a level of uncertainty for our customers and we continue to
actively manage inherent risk, which are fully reflected in our risk grading.
BSP economic outlook scenarios were adjusted with increased weighting
applied from 30% to 40% to the downside case for provisioning purposes.
The economic outlook for the downside case is more pessimistic than the
prior year with a more cautious approach applied to reflect the impact of
COVID-19 on our customers. Total customers loan balances at 31 December
2020 on COVID-19 support packages was K1.6bn with ECL of K92m.
Credit Risk training and staff development remained a key focus during the
year. Through designated training resources and the use of virtual classrooms,
the team’s staff in all countries benefited from a structured credit-training
program focused on enhancing BSP’s credit risk culture through consistent
application and implementation of key policy and procedures supporting
prudent Credit decision outcomes.
BSP’s Operational Risk Business Unit is responsible for the identification,
measurement, mitigation, monitoring and reporting of Operational Risks
and this is a joint effort among all the process owners from the business,
operations and other support units across BSP Group. This unit also focuses
on the continuous improvement of the general processes, controls and
strengthening of the first and second line of defenses for BSP Group.
The launch of Mobile Merchants as a service, added a new
functionality to Mobile Banking, whereby customers pay school fees
to schools and for goods and services.
BSP continues to offer a pathway for Small Business operators to move
from the cash economy into the formal financial sector.
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StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 2021 is shaping up to be a transformational year with the expected rollout of BSP’s new core banking system (Flexcube) in Vanuatu followed by
Papua New Guinea.
During 2020, risks associated with the business, information technology,
electronic banking and other products and services implemented during the
year were identified and added to the relevant Risk Registers.
The objective of Group Operational Risk in 2021 is focused on continuing
the identification and inventory of risks as BSP‘s businesses grow. The
implimentation of the SBU’s strategic projects will ensure that risks are
measured, controlled and communicated in a timely manner to the Executive
Management and the Board. This will allow BSP to continue growing with
proper controls of identified risks.
FINANCE AND PLANNING
2020 was a challenging year due to the uncertainties surrounding COVID-19,
however despite the challenges encountered, the Finance and Planning SBU
continued to improve its processes and seek efficiency gains by centralizing
critical areas such as purchasing and accounts payable. In addition, the team
was focused on being more dynamic in terms of scenario assessments,
forecasting and budgeting.
With the increased emphasis on risks, the SBU saw the opportunity to create
a Financial Risk Management team, formerly known as ‘Middle Office’. The
team now incorporates an Operational Risk and Compliance Officer who
monitor compliance and operational risk issues in Finance and Planning.
Further work was carried out to prepare the team for a more automated
future with the advent of Core Banking. This included training on SQL and the
greater use of databases to assist in reconciliation and reporting. Additionally
staff were upskilled and cross-functional training has commenced to ensure
staff are able to function in other areas within the team.
The core banking replacement project has also been a key area of focus
with major deliverables being PFT (profitability calculation and reporting)
and FTP (Funds Transfer Pricing) to be finalised before Vanuatu go-live. Data
Migration is also critical and the team continue to crosscheck reconciliations
and ensure accuracy and completeness of financial data migration from ICBS
to Flexcube.
The team continues to enhance its general ledger reconciliation and
monitoring capability across the Group. This has assisted with the successful
completion of financial audits by our external auditors with clean audit
outcomes produced in a timely manner.
The Procurement team continue to focus on reviewing various suppliers
as well as looking for cost effective solutions for various products and
services, with an aim to provide greater cost savings for BSP. The Accounts
Payable team continues to concentrate on improving supplier reporting,
reconciliations, improving dialogue, and relationships with external suppliers
and internal stakeholders.
presentations, reporting cycles and coordinating the delivery of Board
mandated strategic priorities across the Group. Processes for planning,
Investor Presentations, monitoring and reporting of strategic initiatives
were also enhanced in 2020; while the team’s analytical capabilities are
continuously improving, the strategy team continues to recognise the
opportunity to deliver improved insights to its key business units.
Leadership capabilities within the team continue to be recognised, with the
finance SBU promoting a good number of staff in 2020. Furthermore, staff
who have consistently demonstrated exemplary job performance in going
beyond their normal scope of duties were also recognised and awarded the
Best Employee Awards through its i-care reward initiative in 2020.
The team bid farewell to outgoing Group CFO, Mr. Eddie Ruha. Eddie
worked in PNG for about 30 years, eight of which were with BSP contributing
immensely to the growth of the BSP Group through dedication and
commitment. Mr. Ronesh Dayal, CFO for PNG Bank succeeded Eddie as the
Group CFO. Ronesh is an experienced and detail-oriented CFO with over 17
years' experience in the financial services industry. His wealth of experience
and leadership capabilities has seen him advance rapidly into management
positions. The Board thanked Eddie for his contribution to BSP and endorsed
the appointment of Ronesh as Group CFO.
OPERATIONS AND INFORMATION TECHNOLOGY
BSP Bank’s operation extends across seven different countries. Operations
& IT SBU is responsible for all back-office operations, and ensures the needs
of our clients are at the center of our operational framework. The function’s
strategy supports the consistent performance metrics, standards and
practices that are aligned to client outcomes.
Operations and IT passed several strategic milestones, which included the
implementation of EMV 3-D secure for our issued Visa Cards in our Offshore
Branches thus adding an additional layer of security for online transactions.
As part of BSP Bank’s drive to be Payment Card Industry (PCI) compliant,
PNG and the Offshore Branches introduced a new data security application
referred to as Data Loss Prevention (DLP). This added security gives BSP
the ability to control and stop sensitive information from leaving the Bank.
Furthermore, to improve the Bank’s customer experience, BSP introduced
Agency Banking on EFTPoS terminals allowing customers to deposit,
withdraw or perform balance enquiries at the Bank’s Agent Locations.
Following the successful launch of SWIFT GPI in November 2019, which
allows BSP to send and receive funds quickly and securely to and from
anyone, anywhere in the world with full transparency over where a payment
is at any given moment, BSP launched SWIFT Universal for the Offshore
Branches. This brings its Offshore Branches into the SWIFT GPI world.
The Strategy team continues to manage strategic planning process, investor
In addition, Operations & IT delivered a number of upgrades positively
impacting the customer experience; ATM software upgrades in PNG and our
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StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Operations
and Support
(continued)
Group Risk Management | Finance and Planning | Operations & Information Technology |
Human Resource | Group Compliance
Offshore Branches, KunduPei upgrade for improved and more streamlined
processing of customer pay files and payments. We also upgraded our Cards
/ Merchant Fraud Management System (Proactive Risk Manager) moving
to an online system where suspicious transactions are managed in a more
timely manner.
Information Technology has delivered on a number of key facility,
infrastructure and application upgrades that will significantly improve
overall reliability and systems availability. These include Data Centre Power
and Cooling improvements as well as upgrading of Backup and Storage
Infrastructure for PNG. All Desktops have been upgraded to standardised
Windows 10 with all applications packaged for consistent delivery across
the countries we operate in. PNG’s Internet Banking platform infrastructure
and PNG’s Payment Switch were upgraded and additional nodes have been
added to the environment to provide a robust platform.
The COVID-19 pandemic had a detrimental impact on the program delivery
of the new core banking system. Likewise, the restrictions on travel imposed
by governments worldwide including PNG, India, Australia and Vanuatu
affected vendors and BSP staff traveling abroad and within PNG. The
effectiveness of the dislocated global teams have reduced the team’s ability
to keep the project on track leading to implementation delays.
The team continues to work with small and medium-sized fintechs together
with our Digital SBU, to drive greater innovation in front office and back
office activities.
HUMAN RESOURCE
Human Resources SBU was part of the Crisis Management Team whose top
priority was to keep up with the evolving uncertainty surrounding COVID-19.
This involved providing timely guidance and assistance to employees,
providing the right communication channels, arranging transportation, and
ensuring staff across the group were provided with appropriate Personal
Protective Equipment.
The sudden shift in work culture has brought with it new challenges which
have been faced by altering the way we work. The Human Resource SBU
has championed initiatives such as the BSP Learning Portal which has been
used for internal training. Additionally, digital meeting tools such as Zoom
has changed the way meetings are conducted within the group.
A highlight in 2020 was the utilization of the BSP Learning Portal to conduct
the new Core Banking Flexcube training for the Vanuatu staff in readiness for
Go-live. The Learning Portal was further used to measure staff understanding,
awareness and competency levels to enhance the overall learning experience
and capabilities during this training. Anti-Money Laundering and Compliance
training policies and processes for the Group were also conducted using
the Learning portal. An additional highlight was BSP winning the National
Superannuation Fund Award in recognition for “Most Compliant in Benefits
Payment” in Category A for the second consecutive year.
The team continue to work with small and medium-sized fintechs
together with our Digital SBU has to drive greater innovation in front
office and back office activities.
BSP continues to remain the market leader and maintains its strong
commitment toward Papua New Guinea’s economic growth through
home ownership and wealth creation.
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StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020
Wells Fargo Excellence Award
Bank South Pacific (BSP) was awarded the
Wells Fargo Operations Excellence Award. The
award, as such, is a recognition and affirmation
of the speed and quality improvements in
payment processing operations and that BSP
have managed to keep up with international
standards and customer’s demands.
Wells Fargo is the fourth largest bank in the
United States of America and is among BSP’s
prominent correspondent banks for dollar
payments, and provides BSP with high-quality
payment processing, seamless and efficient
servicing and outstanding customer service.
Despite the challenges, BSP continued with the Leadership and Management
Development Program (LMDP) and the Graduate Development Program
(GDP). Both programs annually continue to serve as a hub for nurturing our
future leaders. All LMDP participants took virtual classes in 2020 in lieu of
face-to-face training. The GDP program continued to provide graduates with
essential skills and competencies to assimilate them into the BSP culture.
BSP conducted its Group-wide Staff Engagement Survey and Training Needs
Analysis survey in-house for the first time. Results and reports of the surveys
were received in real-time and data analytics were accurately collated on
time for reporting to management.
Internal Audit Business Unit independently evaluates and reports the
effectiveness of BSP Group’s risk management, controls, and governance
processes. It does this by conducting regular risk-based audits of BSP’s Papua
New Guinea and offshore branch, sub-branch and agency network, and its
technology, operations and support functions. One hundred and seventy
three (173) audits were completed across all countries and subsidiaries
in 2020, with a focus on adherence to AML/CTF policies and Central Bank
requirements. Key areas audited throughout the year included Operational
Risk and Compliance management, Market and Liquidity Risk Management,
fees, rates and charges charged to customers, and compliance with AML/CTF
Act across all countries where BSP operates.
Credit Inspection Business Unit independently assesses loan submissions,
compliance with credit policies, procedures, and portfolio quality assurance
in order to enhance the standard of credit decisioning by detecting any
material shortcomings in assessment, approval, management, control and
reporting of credit and counterparty risk. Credit Inspection coverage in 2021
will increase across all loan portfolios within the BSP Group.
GROUP COMPLIANCE
Group Compliance consists of four (4) business units: Compliance, Anti-
Money Laundering (AML), Internal Audit, and Credit Inspection.
The Compliance Business Unit ensures compliance risk is effectively
managed and all applicable laws, regulations, standards, guidelines and rules
are adhered with. In addition, it ensures compliance with all AML/CTF laws
and guidelines to avoid criminal and regulatory sanctions and to minimize
the risk of the Bank been used for money laundering and terrorist financing.
The Anti-Money Laundering Business Unit in line with the increased
domestic and international focus in compliance and AML/CTF has further
strengthened this function throughout 2020 by more than doubling its
team size, all of whom are ACAMS trained, and introducing industry leading
technology to detect and prevent financial crime. A major focus has been
developing a compliance culture through the organisation with all staff
required to complete at least two AML trainings during the year.
Graduate Development Program (GDP) 2020
Despite the challenges, BSP continued
with the Leadership and Management
Development Program (LMDP) and the
Graduate Development Program (GDP).
Both programs continue to serve as a hub
for nurturing future leaders each year.
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StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020
Broader
Group
Our success is predicated upon the
dedication of BSP staff delivering
superior services to our customers,
and the strength of our culture
has been reflected in the way we
embed a values-driven approach to
our work.
28
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeams 29
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Broader Group
Cook Island | Fiji | Samoa | Solomon Island | Tonga | Vanuatu
NPAT
NZD 3.3m
1% decrease from 2019
NPAT
FJD 49.2m
6% decrease from 2019
COOK ISLANDS
Despite the COVID-19 related challenges in 2020, BSP Cook Islands
has delivered a creditable financial result in 2020, a Net Profit after Tax
(NPAT) of NZD 3.30m was achieved, representing a 1% decrease on 2019.
Results in key revenue lines were down due to border closures affecting
the tourism industry; however, these were offset by savings in operating
expenses including administration, computing and channel expenses as
well as impairment and interest gains on settlement of non-performing
assets.
A challenging economic environment and subdued credit conditions has
subsequently seen contraction in loans and with government introducing
significant economic stimulus measures total deposits have also reduced.
Although the outlook for 2021 is looking more positive with an uplift of
border restrictions expected in the second quarter. BSP is cautiously
optimistic the majority of the contraction can be reversed through various
strategic and growth initiatives in 2021.
BSP Cook Islands actively supports and provides banking service to
the business community across the private, public sector and local
communities. In 2020 BSP Cook Islands assisted government develop
and administer much needed economic stimulus programs to support
individuals and business throughout the COVID-19 pandemic. Further
investment has been undertaken to expand services, which now includes
2 branches, 14 ATMs, 450 EFTPoS and 10 agents. Participation in BSP
financial literacy programs continues to increase with over 2,000 attendees
completing the program in 2020 as part of our financial inclusion program
to support and educate the youth of our communities with vital financial
skills around budgeting and saving.
In 2021, BSP is confident of improved economic conditions as the Cook
Islands Government looks to ease border restrictions and relaunch the
tourist sector. BSP’s focus is to support customers and industry through
the looming transition to normality post COVID-19 and we look forward
to introducing several new e-channel initiatives providing customers
opportunities to reduce costs and maximize returns through operational
efficiencies particularly with the introduction of an online internet payment
gateway. Preparation in anticipation of Project Compass is well underway
and diligent management of the balance sheet, whilst capitalising on cost
reduction opportunities will also be key focuses as we move into what will
be an interesting 2021.
FIJI
BSP Fiji business was greatly influenced by the effects of COVID-19 in 2020.
The Fijian economy suffered a significant setback with GDP contractiing
by 19%; the highest in its modern history. This was underpinned by the
complete loss of receipts in the Tourism industry when all borders were
shut down. The domino effect was felt by businesses heavily dependent on
tourism, including downstream operators. This resulted in the adjustment
of its business plans with focus redirected from an aggressive growth
strategy to that of protecting asset quality by working closely with all
customers that experienced immediate financial hardship.
Despite the economic setback and weeks of lockdown in the two cities,
BSP Fiji delivered a Net Profit after Tax (NPAT) of FJD 49.21m, lower than
2019 actuals by 6%. Despite the many challenges imposed by COVID-19,
BSP Fiji achieved the number one ranking in August, measured by Loans
and Advances market share.
The 2020 financial results evidence a 7% drop in total income primarily
from lower loan volumes, reduced FX and Electronic channel income lost
due to the absence of tourists. This, coupled with a large take up in General
provisions directly associated with over 10,000 customers provided with
COVID-19 financial hardship relief assistance, has impacted the banks’
30
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeams NPAT
WST 13.6m
12% decrease from 2019
NPAT
SBD 74.3m
21% decrease from 2019
profitability. Nevertheless, the lower income was offset with cost savings
of 5% against 2019 from various cost containment initiatives that included
productivity gains through various process rationalisations. BSP Fiji did
not retrench any staff or place any employee on reduced hours or salaries,
which was very well received by our staff members.
BSP Fiji remained committed to providing banking services to business,
government and local communities across the country. As a corporate
citizen, our social responsibility extends through various community
projects carried out yearly creating value to members of local communities.
over 450 EFTPoS terminals. The use of BSP EMV chip enabled products has
enhanced security and provided a convenient technology solution for our
customers, in an era where social distancing and remote work has become
the new norm.
We remained committed to our community via numerous projects
throughout the year and promoted awareness on the importance of good
hygiene and healthy living. BSP’s main community project in 2020 involved
the renovation and building of new bathroom facilities at the Poutasi
Falealili District Hospital.
BSP Fiji was first in the market to launch an Internet Payment Gateway (IPG)
accepting proprietary cards coupled with the rollout of enhanced EFTPoS
terminals. BSP Fiji made a large investment in an AML monitoring tool in
line with its commitment to curtail money-laundering activities and to
assist the Bank with AML/CTF regulations and legislations compliance.
Our success is predicated upon the dedication of BSP staff delivering
superior services to our customers, and the strength of our culture has
been reflected in the way we embed a values-driven approach to our work.
Staff in both Samoa and PNG and all our customers are to be acknowledged
for their support, making possible good results in 2020.
Above all, the Bank continued with strengthening its risk management and
corporate governance compliance by undertaking various online training
and aligning operating policies, procedures and processes to that of the
Group.
SAMOA
The economic outlook for Samoa looks challenging as we anticipate
deflationary levels and negative GDP growth in 2021. BSP’s strategic
focus therefore for 2021 will be committed to helping our customers and
community rebuild post-COVID-19 and harness any growth opportunities
though operational efficiencies and the overall customer experience as we
strive to maintain our number one position in Samoa.
BSP Samoa has delivered a stable financial performance in 2020, despite
significantly demanding economic conditions. Net Profit after Tax of WST
13.6m generated good Return on Equity of 15% and Return on Assets of
2.3%. These results were achieved whilst maintaining acceptable asset
quality and a strong Balance Sheet position, as prevailing global conditions
continued to challenge our economy.
Customer retention has been achieved through resilient customer care
and a reliable electronic footprint that include 26 ATMs, 41 agencies and
SOLOMON ISLANDS
2020 was a challenging year for businesses and the economy in general in
Solomon Islands.
In view of the COVID-19 outbreak, the Solomon Islands Government
restricted all international travel in March 2020 and took a number of steps
to protect its citizens including sending most of the Public Service back to
their home villages.
31
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Broader Group
(continued)
Cook Island | Fiji | Samoa | Solomon Island | Tonga | Vanuatu
NPAT
TOP 9.9m
11% decrease from 2019
Solomon Islands remained COVID-19 free until late September 2020
however thankfully there have been no cases of community transmissions
and all positive cases have been incoming overseas nationals identified in
quarantine.
of the new Core Banking system, which is just around the corner, focus
will be on Digital Channels, with the view to move as many customers as
possible on to this, which are the best on the market in the country.
The pandemic had a significant effect on the Solomon Islands economy
especially when the economy started to weaken in the second half of
2019; this meant that business opportunities were limited during 2020.
The Central Bank of Solomon Islands estimated GDP growth for 2020 at
(-3.9%), a reduction in the growth rate of and rebounding to growth of
2% in 2021. However, if there is an outbreak of COVID-19 in the Solomon
Islands community they estimate 2021 could be as low as 5%.
BSP Solomon Islands recorded a NPAT of SBD 74.29m for 2020. This is a
reduction of 21% on 2019 and is a result of the depressed economy that
started in 2019 and then was compounded by COVID-19.
Additionally, increased competition in the FX market and the establishment
of the Development Bank of Solomon Islands has affected its NPAT results.
However, BSP has continued to remain the dominant Financial Institution
in the Solomon Islands and continues to hold over 50% of the loan and
deposit portfolio in the country.
This year saw a competitor close its remaining Provincial branch and
close down its phone banking service leaving BSP as the only Financial
Institution with Branches and Agencies outside the country’s capital
Honiara and the only Financial Institution offering a phone banking
solution to all consumers.
TONGA
BSP Tonga maintained its number one position in a challenging year,
with a market share of over 40% across both Lending and Deposits.
Notwithstanding the ongoing impact of COVID-19, Tonga delivered a Net
Profit after Tax of TOP 9.88m a decline of 11% from 2019 performance.
This result is reflective of reduced market sentiment and ongoing border
closures impacting lending growth, down 3% from the previous year.
Effective cost management saw favourable performances across operating
expenses and an improved cost of funds position. The inflow of aid into
the Kingdom (for COVID-19 and TC Gita recovery) has seen a high level of
liquidity in the market, resulting in deposit growth of 23%.
The expansion of Tonga’s digital footprint remained a key priority with
increases in Banking Agents (59%), ATMs (17%) and EFTPoS terminals
(9%), giving customer’s better access to their accounts. Two additional
MoneyGram agents were onboarded in 2020, complementing the ‘out of
country’ marketing campaign, which ran throughout the year contributing
13% to Tonga’s income position. Despite COVID-19 restrictions, Tonga
remained committed to promoting financial
inclusion, delivering
60 Financial Literacy workshops, across communities attended by
approximately 2,000 people.
BSP Tonga offered COVID-19 packages to 110 customers (TOP 68m), with
majority resuming regular repayments following the 6-month relief.
2021 will likely see continued challenges for Solomon Islands but the team
are confident that staff are up to the challenge. With the introduction
The Bank continued its commitment to the community with sponsorship
of key local events including KAVA IDOL, USP debate competition and
BSP Fiji was first in the market to launch Internet Payment
Gateway (IPG) .
Customer retention has been achieved through resilient customer
care and a reliable electronic footprint
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BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeams NPAT
VUV 106.8m
43% decrease from 2019
partnerships with local not for profit organisations – Women’s Crisis Centre,
NRL and Leitis Association to support the ‘Black Thursdays’ campaign. A
Family Sexual Violence Action Committee (FSVAC) was also established to
support staff.
Despite a tough year, staff have remained resilient and committed to
delivering outstanding services to meet the needs of our customers and
our communities.
VANUATU
Vanuatu will be the first country in which BSP operates to implement the
new Core Banking System (Oracle FLEXCUBE) in April 2021. The benefits
of the new Core Banking System will include standardisation of business
processes within the group, improved timelines through automated
regulatory and management reporting, web based solutions, common
training across the group, greater level of customer centricity, operational
control, product flexibility and operating efficiency whilst reducing the
overall cost of maintaining the core banking infrastructure. Originally
scheduled to Go-live in October 2020 the timeline for the rollout has been
affected by COVID-19 restrictions that have affected travel and resource
availability.
BSP Vanuatu continues to focus on expanding our banking services and
being an active corporate member in the community. With 25 ATMs, 27+
active agents and 426 EFTPoS terminals, BSP Vanuatu works to support
communities and bring banking services to all Vanuatu population
segments in our 3 key island markets of Efate, Santo and Tanna. Our
expanding footprint along with our financial literacy programs and active
participation in the Government led Financial Inclusion Task Force allows
us to work in conjunction with government initiatives, to bring financial
inclusion to both the under banked and unbanked population.
Opened in March 2019, the Freswota Branch continues to increase in
customer numbers and transactions and provide Port Vila customers with a
viable second branch alternative – the only 2nd branch offering in the Port
Vila market. Coupled with the operationalisation of our disaster recovery
site BSP Vanuatu is well placed to support our continual expansion in the
market.
BSP Vanuatu also actively participates in the community as one of the major
investors and employers in Vanuatu. With a strong focus on corporate
responsibility, BSP Vanuatu plays an active role in supporting the broader
business community, including backing government led initiatives and
promoting go green projects within schools and local communities. BSP
Vanuatu also actively gives back to the community through our community
projects, which this year included a refurbishment of the sluice room in the
Children’s Ward at the Port Vila Central Hospital and the rebuilding of the
Osnalmok Disability Centre on Tanna.
With a heavy reliance on tourism and the closure of borders, the Vanuatu
economy in 2020 was materially impacted by COVID-19. With GDP
projected at (9.8%) (ADB Forecast) the economic contraction resulted in
loss of jobs and economic pressures on many tourism reliant businesses.
This had a material impact on BSP Vanuatu’s financial result. Financially,
BSP Vanuatu declared a Net Profit after Tax of VUV 106.78m in 2020,
with performance behind budget due to COVID-19 related implications of
lower income generation and credit quality. The outlook for 2021 will be
dependent on the timing of borders re-opening for international travel, the
speed at which the tourism industry can rebound and government support
and facilitation to make this happen.
Vanuatu’s expanding footprint along with our financial literacy has
allowed BSP to bring financial inclusion to the under banked and
unbanked population.
The expansion of Tonga’s digital footprint remained a key priority
with increases in Banking Agents, giving customer’s better access
to their accounts.
33
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Subsidiaries
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ANNUAL REPORT 2020 BANK OF SOUTH PACIFIC LTDStrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeams 35
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Subsidiaries
PGK 5.9m
Full Year Profit
FJD 3.9m
Full Year Profit
USD 3.6m
Full Year Profit
SBD 25.5m
Loan Portfolio in 2020
BSP FINANCE
Papua New Guinea
BSP Finance PNG achieved a full year profit of PGK 5.9m in 2020. Continued
delays in key resource projects and the impacts of the global pandemic
resulted in only marginal growth in profitability compared to the prior
year. Despite the difficulties, we managed to maintain a good book quality
by prudent management and staying close to our customers through this
period.
In late 2020, we delivered a new Consumer Vehicle Loan product to the
market. In 2021, we will continue to grow our business through leveraging
relationships with key stakeholders and providing innovative products and
services to our customers. Internally, the business will continue to review
all its procedures to gain further efficiencies, whilst continuing to explore
improvements in available technologies and systems.
Fiji
In 2020, BSP Finance Fiji achieved a full year profit of FJD 3.9m.
The pandemic hit the country hard, particularly in the tourism industry.
With the economy already facing headwinds, this could not have come at
a more difficult time for Fiji. Throughout this period, we were able to offer
our customers relief packages, and we will continue to work closely and
support our customers in the year ahead. Our people have shown great
resilience during these difficult times, which puts us in a strong position to
rebound and grow the business in 2021.
Cambodia
The business reported a profit of USD 3.6m in 2020 that met budget
expectations set by the board. This was achieved despite the impacts of the
global pandemic, albeit Cambodia avoided the worst-case predictions due
to a well-managed response from the government. A delay in establishing
funding lines slowed growth in the loan portfolio to USD 48m.
We remain one of the leading asset finance companies in Cambodia, despite
BSP Finance PNG managed to maintain a good book quality by
prudent management and staying close to our customers through
this period.
BSP Finance in PNG delivered a new Consumer Vehicle Loan product
to the market.
36
ANNUAL REPORT 2020 BANK OF SOUTH PACIFIC LTDStrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeams We will continue to grow our business through leveraging relationships with key stakeholders and providing innovative products and services to
our customers.
PGK 1.8m Profit
Funds under management grew
6.9%
FJD 15.6m Profit
Investment portfolio grew
6.7% to FJD 815m in 2020
PGK 0.5m Profit
Inforce Annual Premium grew
16% to K16.5m in 2020
a very competitive market and we are now poised to grow the business in
2021 with funding in place and a focused local team of professionals.
clients following the divestment of
stockbroking business had successfully transitioned in mid-2020.
its stockbroking business. The
Solomon Islands
BSP Finance Solomon Islands has grown its loan portfolio steadily during
2020 and achieved above budget expectations to reach SBD 25.5m at year
end. This growth along with a strong sales pipeline sees us poised to deliver
solid profit growth in 2021.
Whilst the economic conditions are not ideal in SI, we provide a niche
financial service that is unmatched in the country, with a speed to market
focus. We will continue to leverage our relationship with BSP and other
stakeholders to grow market share and deliver shareholder returns.
Lao
In February 2020, BSP Finance acquired 50% of Devco Lao Leasing Co.
Ltd in partnership with our joint venture partner, RMA Group. We have
undertaken to align the business processes with the rest of the BSP Finance
group, and train our staff. This has been a challenging process, not only
during a global pandemic that curtailed the ability for senior management
to travel to Vientiane, but also in a challenging regulatory environment.
As a result, our plans to recapitalise the business and fund its growth have
been delayed. We look forward to a name change to BSP Lao Leasing Co.
and resolving the funding issues in the very near future. This will see the
business thrive and deliver on the expectations of shareholders in 2021.
BSP CAPITAL
2020 was another positive year for BSP Capital delivering a profit of PGK
1.8m up from PGK 0.9m in 2019. Funds under Management also grew 6.9%
to PGK 7.6b at the end of December 2020.
The business focused on providing financial services to its institutional
The onset of the coronavirus saw the delay of some advisory transactions
and pursuit of other client prospects; however, we look forward to making
progress on these opportunities in 2021 as the economic outlook improves.
BSP LIFE
Fiji
Leading into 2020, the strategic focus for the BSP Life Fiji (Group) was
to enhance customer engagement, drive digital and product innovation,
expand distribution, and accelerate investments-related initiatives to
support business growth. With the new core system introduced in 2018
fully functional, an added focus area was operational excellence to
optimise use of resources, remove non-value adding activity, reduce costs
and improve service outcomes. Encompassing this strategy was continued
emphasis on Risk and Compliance. A 3-year plan with specific imperatives
underpinned the strategy to ensure effective execution.
COVID-19 had a major impact on the Fijian economy in 2020. At a macro
level, GDP shrunk by approximately 20%, driven primarily by border
closures, which had a significant impact on tourism, Fiji’s largest economic
driver. Over 100,000 jobs were lost with widespread impact given our
small population of close to 900,000. Given the reduced revenue flows,
Government was forced to increase borrowing, and a subdued economic
environment persisted throughout the year.
Major risks identified at the onset of the pandemic included: potential
drain on the Inforce book (premiums received) for both the Life and
Health Insurance businesses, a slowdown in sales, constrained cash flow,
pressure on IT platforms to support remote working arrangements, staff
morale, decline in the value of the private equity investments (particularly
in tourism), decline in listed equity investments, decline in property values,
and low term deposit returns.
37
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Subsidiaries (continued)
The pre-COVID Shareholder profit budget for 2020 was FJD 14.7m for
the Life business and FJD 1.5m for the Health business, with a Group
consolidated total of FJD 16.8m. Various re-forecasts were conducted
throughout the year with the final reforecast Group consolidated of FJD
10.3m. Actual results closed at FJD 15.3m for Life and FJD 1.0m for Health
with a consolidated Group result of FJD 15.6m, down 7% on budget and up
51% on the final reforecast a pleasing result and testament to the resilience
of the business and its staff.
For the Life business, key contributors to profit included the launch of a
new single-premium product in April. In 9 months, this product achieved
FJD 15.5m in sales, up 25% on budget. This injection of cash assisted
the business maintain cash flow above required levels and supported
investments related initiatives. Sales on standard products closed at
FJD 11.5m, below budget but above reforecast, a satisfactory outcome
considering external challenges.
Costs were well contained, down 12% on budget with a recruitment freeze,
withdrawal of non-essential operational and capital expenditure, leave
liability reduced, amongst a raft of cost containment measures. To mitigate
the risk of Inforce depletion, there was increased customer engagement
with options made available to assist retention of policies supplemented
by a special relief package for those who lost jobs. Pleasingly, Life In-force
grew by over FJD 3m for the year (versus a potential decline of FJD 8m)
eclipsing the FJD 80m mark for the first time. Since BSP’s acquisition of the
business from Colonial in 2010, Inforce has grown by close to 80%. Inforce
market share as at end September 2020 (based on Reserve Bank statistics)
is 55% and is anticipated to grow marginally when full year results are
released. This is a turnaround from 45% ten years ago.
The Investments portfolio grew by 6.7% from FJD 760m last year to FJD
815m this year, passing the FJD 800m mark for the first time. This contrasts
with the potential significant reduction that could have occurred had the
portfolio been heavily reliant on only a few asset classes, including Tourism.
The portfolio has more than doubled over the last ten years from its base
of FJD 375m at the time of acquisition. The growth in 2020 is particularly
pleasing and is reflective of the sound and balanced nature of the fund.
Despite the reduction in Tourism investments, the balance of the fund
grew, providing overall net growth. The resilience built up over recent years
has enabled continued growth in a depressed environment. BSP Life is the
second largest institutional investor in Fiji, second only to the National
Provident Fund.
The Health business faced challenges with border closures limiting
overseas medical evacuations to New Zealand, which is more expensive
than destinations like India. A few air ambulance cases were also processed
in 2020 hiking claims costs. On Inforce, staff layoffs meant lower numbers
of insureds for large Groups, depleting premium income. Aggressive
competition continued with competitors using price to win business. The
business purposefully retained its strategy of focusing on value, not price,
and built on its strong service reputation. Closer customer engagement
supported this strategy enabling a satisfactory year-end outcome. The
business has produced consecutive profits in the last five years compared
to the consecutive losses sustained in the prior 3 years.
Digital innovation supported both businesses providing the tools to
communicate effectively with customers over the lockdown period and
through the remainder of the year. From a low base of less than 10%,
we now have 70% of customers on e-mail receiving regular updates. A
new website was launched in March with increased online advertising
and launch on social media later in the year. This has supported brand
awareness, sales and business retention. A new customer self-service
The year 2020 started with the launch of the eagerly anticipated, endowment insurance product - Wantok Delite.
38
ANNUAL REPORT 2020 BANK OF SOUTH PACIFIC LTDStrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeams Leading into 2020, strategic focus for the BSP Life Fiji (Group) was to enhance customer engagement, drive digital and product innovation, expand
distribution, and accelerate investments-related initiatives to support business growth.
portal and live chat facility were other innovations that improved customer
engagement. Internally, real-time dashboards were introduced to produce
overnight results for key business metrics that now support effective
decision-making.
The outlook for 2021 is challenging with border closures in place for the
foreseeable future. The effects of a category 5 tropical cyclone in late 2020
will add further economic and social pressures. For the BSP Life Fiji Group,
the focus is on staying the course and building on the platforms in place.
Whilst 2020 results were pleasing, the immediate future remains uncertain
so the urgency and effective execution of set strategies remain an ongoing
focus.
PNG
The year 2020 started with the launch of the eagerly anticipated,
endowment insurance product - Wantok Delite, which is a long-term savings
and protection insurance product. It had taken two years to launch this
product, which included establishing the business processes, recruitment
and training of staff and agents and the launch of the life insurance system.
BSP Life PNG is the only insurer in PNG to sell an endowment insurance
product.
While the business was optimistic of achieving its strategic objectives for
the year, its plans have been derailed by COVID-19. The lockdowns and
social distancing requirements made it difficult for our agents to go out
and sell our Wantok Delite Product. In addition, most brokers preferred
to renew the Group Term Life cover with existing insurers, which affected
the business’s ability to grow the Group Term Life portfolio. The business
was further challenged due to being unable to secure good reinsurance
support. The existing reinsurer approves individual schemes hence due to
COVID-19, that support was placed on hold for over six months during the
year.
Despite the setbacks, the business has issued over 610 Wantok Delite
policies with annual premiums of PGK 1.4m whilst the Wantok Group
Term Life new business for the year stood at PGK 0.9m. BSP Life’s financial
performance is expected to be on budget and both solvency and capital
adequacy ratios are tracking above targets.
On 7 December 2020, BSP life successfully launched its new website. The
website is instrumental for growth as it includes information about the
business, its products and its operations and an online quote calculator,
which is the key feature of the website. The premium quote calculator
is a first for PNG and will assist more Papua New Guineans acquire a life
insurance cover.
During the year, the company collaborated with the Centre for Excellence
in Financial Inclusion (CEFI) and other insurance players in a nationwide
insurance awareness campaign, which was targeted at
increasing
awareness on insurance and how it can be used to mitigate risks. As
part of the corporate social responsibility and BSP life’s first community
project. The team contributed PGK 30, 000 of medical and refurbishment
items to the emergency department at the Port Moresby General Hospital
(POMGEN).
BSP Life's strategic focus for 2021 we be on delivering rapid premium income
growth from the Wantok Group Term Life and Wantok Delite endowment
product, and continue capacity building for staff and agents through regular
and targeted training programs. To increase our geographical footprint in
Papua New Guinea, BSP life will be launching its new sales office in Lae in
April 2021 and Mount Hagen in January 2022.
Wantok Delite
BSP Life issued over 610 Wantok Delite policies
with annual premiums of PGK 1.4m whilst the
Wantok Group Term Life new business for
the year stood at K0.9m. BSP Life’s financial
performance is expected to be on budget and
both solvency and capital adequacy ratios are
tracking above targets.
39
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Teams
Corporate Social
Responsibility
Corporate
Governance
Report
Governance Report
Remuneration Report
40
ANNUAL REPORT 2020 BANK OF SOUTH PACIFIC LTD
Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Corporate Social
Teams
Responsibility
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020
41
Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Teams
Corporate Social
Responsibility
Corporate Governance Report
BSP has adopted an approach to corporate
governance that is underpinned by our
Core Values of Integrity, Leadership,
People,
Quality,
Professionalism,
Teamwork and Community.
This approach is supported by a comprehensive framework of corporate
governance principles and policies. The BSP Board has demonstrated
its commitment to developing and maintaining a standard of corporate
governance that seeks to match global practice. The Board ensures that
it complies with the requirements of the PNG Exchange Markets (PNGX).
The Board, management and staff of BSP are very much aware of their
responsibilities to the people of Papua New Guinea and the various
countries that BSP operates in. The Board has adopted a statement of
Corporate Governance Principles which outlines the approach BSP has
adopted to corporate governance. These Corporate Governance Principles
provide a framework that helps to ensure that BSP deals fairly and openly
with all its stakeholders – regulators, shareholders , customers and staff
alike.
packages;
• appointing the Company Secretary and setting an appropriate
remuneration package;
• endorsing appropriate policy settings for management;
• reviewing Board composition and performance;
• reviewing the performance of management;
• approving an annual strategic plan and an annual budget for BSP and
monitoring results on a regular basis;
• ensuring that appropriate risk management systems are in place, and
are operating to protect BSP’s financial position and assets;
• ensuring that BSP complies with the law and relevant regulations, and
conforms with the highest standards of financial and ethical behaviour;
• approving acquisitions and disposals material to the business;
• establishing authority levels;
• setting Directors’ remuneration via the Remuneration and Nomination
Committee;
• selecting, with the assistance of the Board Audit Committee, and
recommending to Shareholders, the appointment of external auditors;
and
• approving financial statements.
A number of these responsibilities have been delegated by the Board
to various Committees. The Committees and their responsibilities are
detailed in the Board Committee section.
BSP’s Corporate Governance Principles are available in the Investor
Relations section of BSP’s website at www.bsp.com.pg.
The Board has delegated to management responsibility for:
BSP also complies with the Prudential Standards/Statements dealing with
corporate governance issued by the regulators/central banks in the various
countries that it operates in. These Prudential Standards/Statements
currently include: -
• The Bank of Papua New Guinea (BPNG) Banking Prudential Standard
BPS 300: Corporate Governance (issued under Section 27 of the Banks
and Financial Institutions Act 2000).
• The Reserve Bank of Fiji Banking Supervision Policy Statement No. 11:
Governance (Oct 2007).
• The National Reserve Bank of Tonga Prudential Statement No. 9 (revised
2014): Governance.
THE BOARD OF DIRECTORS
Roles and Responsibility of the Board
The roles and responsibilities of the Board are defined in the Board Charter.
This document also details the matters reserved for the Board and matters
that have been delegated to management with oversight by the Board.
The Board, with the support of its Committees, is responsible to the
Shareholders for the overall performance of BSP, including its strategic
direction; establishing goals for management; and monitoring the
achievement of those goals with a view to optimising BSP performance
and increasing shareholder value. The key functions of the Board are:
• setting overall strategy of BSP, including operating, financial, dividends,
and risk management;
• appointing the Chief Executive Officer and setting an appropriate
remuneration package;
• appointing General Managers and setting appropriate remuneration
• developing the annual operating and capital expenditure budgets for
Board approval, and monitoring performance against these budgets;
• developing and
implementing strategies within the framework
approved by the Board, and providing the Board with recommendations
on key strategic issues;
• appointing management below the level of General Manager and
preparing and maintaining succession plans for these senior roles;
• developing and maintaining effective risk management policies and
procedures; and
• keeping the Board and the market fully
informed of material
developments.
Membership, Expertise, Size and Composition of the Board
The Corporate Governance Principles affirm that the majority of the Board
should be independent.
Directors of BSP are meticulous in handling situations where there could
potentially be conflicts of interest, by declaring their interest in advance,
and absenting themselves from any consideration of matters where a
conflict might arise. The BSP’s Corporate Governance Principles require
Directors to disclose any new directorships and equity interests at each
Board Meeting.
The maximum number of Directors, as prescribed by the Constitution
approved by Shareholders, is ten. At the date of this report there are ten
Directors, with nine Non - Executive all of whom (including the Chairman)
are considered by the Board to be independent; and the Chief Executive
Officer who is not considered to be independent by reason of being
an Executive of BSP. BSP in the ordinary course of business conducts
transactions with Directors, their spouses, parents and children and/
or parties which any of them control. These transactions include loans,
42
ANNUAL REPORT 2020 BANK OF SOUTH PACIFIC LTD
Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Corporate Social
Teams
Responsibility
deposits, and foreign currency transactions. Such transactions are carried
out on commercial terms at market rates and do not require shareholder
approval under Papua New Guinea Company Law. Where they involve loans,
procedures follow BSP’s standard credit approval and review processes
which do not have any involvement of Directors, and BSP holds security
in accordance with its standard procedures. As a result, BSP considers that
Directors are able to maintain their independence even where a Director
is a party to a transaction of this kind because they would not have been
involved in the approval process for that transaction.
Appointment Letter specifies the term of appointment, BSP’s expectations
in relation to time commitment and Committee work, the Director’s
remuneration arrangements, the Director’s disclosure and confidentiality
obligations, the Director’s insurance and indemnity entitlements, and BSP’s
key corporate governance policies.
BSP’s Senior Management also enter into employment contracts which set
out their terms of employment, including their position, duties, reporting
lines, remuneration and termination arrangements.
Under the Constitution, at each Annual General Meeting (AGM) one-third
of the BSP’s Directors, in addition to any Director appointed during the
year, excluding the Chief Executive Officer, must offer themselves for re-
election by the Shareholders.
Role and Selection of the Chairman
The Chairman is elected by the Directors and holds the position for a
maximum of six consecutive years unless in a certain exceptional instance.
The role includes:
A Director is normally appointed for an initial term of three years. At the end
of the term of three years, the Director will become eligible for reappointment
by the Shareholders for a further term of three years and, if not reappointed,
retires automatically. A Director is not permitted to hold office for a period
exceeding three terms of three years or nine years, whichever is the lesser.
Details regarding the length of service of each Director are set out in the
“Board of Directors” section.
The Board has undertaken a renewal and succession planning process in
recent years with the aim of maintaining a proactive and effective Board
in line with the directions of the BSP Group. The Board has implemented
an independent Board evaluation process to underpin the assessment of
its performance.
BSP has a Board skills matrix process. These skills include Risk Management,
Regulatory/ Government Policy, business and financial acumen, experience
as a Non-Executive Director, remuneration and corporate governance.
The Board, therefore, has a broad range of skills, experience and expertise
that enables it to meet its objectives. Details of the Directors’ business
backgrounds and experience are provided on pages 8 - 11. The Board
accepts that it has a responsibility to Shareholders to ensure that it
maintains an appropriate mix of skills and experience (without gender bias)
within its membership.
Consequently, the Board gives careful consideration to setting criteria for
new appointments it may recommend to Shareholders in accordance with
the Constitution. It has delegated the initial screening process involved to
its Remuneration and Nomination Committee which, in accordance with
its Charter, may seek independent advice on possible new candidates for
Directorships. All Directors must be satisfied that the best candidate has
been selected.
BSP undertakes appropriate checks before appointing a person as a
Director or offering them to Shareholders as a candidate for election,
and has appropriate procedures in place to ensure material information
relevant to a decision to elect or re-elect a Director is disclosed in notices
of meeting provided to Shareholders.
Nominees of the Board and/or Shareholders must meet the ‘fit and proper
person’ criteria outlined in BPNG Banking Prudential Standard BPS310: Fit
and Proper Requirements before they can take their place on the Board.
BSP has a program for inducting new Directors and providing appropriate
professional development opportunities for Directors.
On joining the Board, new Directors are provided with an Appointment
Letter setting out the terms of the appointment, a Board induction pack
and undertake a comprehensive induction program. In particular, the
• ensuring all new Board members are fully aware of their duties and
responsibilities;
• providing effective leadership on BSP’s strategy;
• presenting the views of the Board to the public;
• ensuring the Board meets regularly throughout the year, and that
minutes are taken and recorded accurately;
• setting the agenda of meetings and maintaining proper conduct during
meetings; and
• reviewing the performance of Non-Executive Directors.
Director Independence and Conflict of Interest
Directors are determined to be independent if they are judged to be free
from any material or other business relationship with BSP that would
compromise their independence.
Prior to appointment, Directors are required to provide information to the
Board for it to assess their independence.
In assessing the independence of Directors, the Board will consider a
number of criteria including:
• the Director is not an executive of the Group;
• the Director is not a substantial shareholder of BSP or otherwise
associated directly with a substantial shareholder of BSP;
• the Director has not within the last three years been a material
consultant or a principal of a material professional adviser to BSP, or an
employee materially associated with a service provider;
• the Director is not a material supplier to BSP, or a material consultant
to BSP, or an employee materially associated with a material supplier
or customer;
• the Director has no material contractual relationship with BSP other
than as a Director of BSP;
• the Director is free from any interest and any business or other
relationship which could, or could reasonably be perceived to, materially
interfere with the Director’s ability to act in the best interests of BSP.
This information is assessed by the Board to determine whether on balance
the relationship could, or could reasonably be perceived to, materially
interfere with the exercise of the Director’s responsibilities. Materiality is
assessed on a case-by-case basis.
As noted earlier, the Board is cognisant of the need to avoid conflicts of
interest and it has in place policies and procedures for the reporting of
any matter, which may give rise to a conflict between the interests of a
Director and those of BSP. These arrangements are designed to ensure that
the independence and integrity of the Board are maintained.
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BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Corporate Governance Report
BSP fully complies with the requirements of the BPNG Prudential Standard
4/2003 – Limits on Loans to Related Parties.
Subsidiaries and Country Managers for further consultation, and to discuss
issues associated with the fulfilment of their roles as Directors.
Related Party Transactions are summarised in Financial Note 34. The
Directors’ information on page 122 provides details of the Directors’
Interests.
Meetings of the Board and Attendance
Scheduled meetings of the Board are held at least six times a year, and the
Board meets on other occasions as necessary to deal with matters requiring
attention. Meetings of Board Committees are scheduled regularly during
the year. The Board has a policy of rotating its meetings between locations
where the Group has a significant presence. On these occasions the Board
also visits company operations and meets with local management and key
customers.
The Chairman, in consultation with the Chief Executive Officer, determines
meeting agendas. Meetings provide regular opportunities for the Board to
assess BSP’s management of financial, strategic and major risk areas. To
help ensure that all Directors are able to contribute meaningfully, papers
are provided to Board members one week in advance of the meeting.
Broad ranging discussion on all agenda items is encouraged, with healthy
debate seen as vital to the decision making process.
Financial Note 36, Directors’ and Executive remuneration, provides
attendance details of Directors at Board meetings during 2020.
The Board recognises that in certain circumstances, individual Directors
may need to seek independent professional advice, at the expense of BSP,
on matters arising in the course of their duties. Any advice so received
is made available to other Directors. Any Director seeking such advice is
required to give prior notice to the Chairman of his or her intention to seek
independent professional advice.
Company Secretary
The Company Secretary, through the Chairman, is directly accountable to
the Board for proper functioning of the Board. Each Director may seek the
advice of the Company Secretary. Under the Constitution, the Company
Secretary may only be appointed or removed by the Board.
BOARD COMMITTEES
Board Committees and Membership
During 2020, four Committees of the Board were in operation whose
functions and powers were governed by their respective charters.
These Committees were the Board Audit and Compliance Committee
(BACC), Board Risk Committee (BRC), the Remuneration and Nomination
Committee (RNC) and the Disclosure Committee. Membership of the
Committees and a record of attendance at Committee meetings during the
year are detailed in table below.
Review of Board Performance
Remuneration details are provided in Financial Note 36.
Consistent with Recommendation 1.6, BSP has a process for periodically
evaluating the performance of the Board, its Committees and individual
Directors. The key findings of the 2020 Performance Review are available in
Investor Relations section of BSP’s website at www.bsp.com.pg.
The Remuneration and Nomination Committee reviews at least annually
the processes by which the Board regularly assesses its own performance
in meeting its responsibilities. It is intended to extend the assessment
of the Board as a whole to include an assessment of the contribution of
each individual Director. The Board is cognisant of the need to continually
identify areas for improvement; to ensure that it meets the highest
standards of corporate governance; and for the Board and each Director
to make an appropriate contribution to the Group’s objective of providing
value to all its stakeholders. The performance review is facilitated annually
by an external consultant.
The Board with the assistance of the Remuneration and Nomination
Committee sets the targets for the Chief Executive Officer and Senior
Management members under BSP’s employee incentive arrangements
described below. These incentive arrangements are administered by the
Remuneration and Nomination Committee. Performance against the
relevant targets is assessed periodically throughout the year and a formal
evaluation is undertaken annually.
Board Access to Information and Advice
All Directors have unrestricted access to company records and information
and receive regular detailed financial and operational reports to enable
them to carry out their duties.
The General Managers of each PNG Strategic Business Unit, Heads of
Subsidiaries and Country Managers make regular presentations to the
Board on their areas of responsibility.
The Chairman and the other Non-Executive Directors have the opportunity
to meet with the Chief Executive Officer, General Managers, Heads of
44
Membership of Board Committees during 2020:
Board Audit & Compliance Commitee *
Geoff Robb
Ernest Gangloff
Arthur Sam
Stuart Davis
Frank Bouraga1
Board Risk Committee *
Geoff Robb
Ernest Gangloff
Arthur Sam
Charles Lee1
Priscilla Kevin1
Stuart Davis
Remuneration and Nomination Committee
Robert Bradshaw
Faamausili Dr Matagialofi Lua’iufi
Augustine Mano2
Priscilla Kevin2
6/6
6/6
6/6
6/6
6/6
6/6
6/6
6/6
6/6
6/6
6/6
7/7
6/7
1/7
1/7
1Charles Lee was appointed by the Board as an Independent Committee Member (ICM)
of the Board Risk Committee (BRC) for Board development purposes. Frank Bouraga and
Priscilla Kevin are non executive and non directors, appointed by the board for board
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsANNUAL REPORT 2020 BANK OF SOUTH PACIFIC LTD development purposes. Priscilla Kevin was appointed as a Director in April 2020 and Frank
Bouraga was appointed as Director in December 2020.
2Augustine Mano retired as a Director on 1 July 2020 and as a member of the Remuneration
& Nomination Committee and was replaced by Priscilla Kevin as a Committee Member of
the Remuneration Committee.
* Board members who attend BACC to discuss the year end and half year accounts.
* During 2019 the Board allocated the responsibility of compliance to the BAC which was
renamed BACC with BRCC now BRC focusing on risk issues. The amendment was to provide
enhanced monitoring of BSP's Compliance Risk, AML/CTF & regulatory requirements.
Sir Kostas G. Constantinou is not a member of any Board Committee.
The names and relevant qualifications and experience of Committee
members, and the number of times the Committees met and the number
of meetings each member attended, are set out in the “Board of Directors”
section.
Board and Committee Charters
BSP’s Board and Committee Charters are available in the Investor Relations
section of BSP’s website at www.bsp.com.pg. The BACC and BRC Charters
were updated to reflect the changed responsibilities.
Committee Structure
Committee members are chosen for the skills, experience and other
qualities they bring to the Committee. At the next Board meeting following
each Committee meeting, the Board is given a report by the Chairman of
the respective Committees and minutes of the meeting are tabled.
Board Audit & Compliance Committee
The BACC assists the Board to discharge its responsibilities of oversight and
governance in relation to financial and audit matters. The responsibilities
of the BACC include monitoring:
• the integrity of BSP’s financial statements and their independent audit;
• the financial reporting principles and policies, controls and procedures;
• BSP’s internal audit process;
• the effectiveness of internal controls;
• the controls and effectiveness of BSP's compliance obligations;
• the systems for ensuring operational efficiency and cost control;
• the systems for approval and monitoring of expenditure including
capital expenditure; and
• the processes for monitoring compliance with laws and regulations
(both in PNG and in overseas jurisdictions, where BSP operates) and the
implementation of Board decisions by management.
Membership of the BACC is formed amongst the Non-Executive Directors,
excluding the Chairman. The BACC must have a minimum of three Non-
Executive Directors, the majority of whom must be independent. The
Board may also appoint to the BACC additional individuals who are not
executives or members of the Board who have specialised skills to assist
the BACC. The chairman of the BACC must be an appropriately experienced
independent Non-Executive Director, other than the Chairman (or other
Board committee chairman).
The BACC must meet at least four times annually and special meetings
may be convened as required. All meetings must be minuted and tabled
at the subsequent BACC meeting. The BACC regularly reports to the Board
at the earliest possible Board meeting after each BACC meeting about
any matters that should be brought to the attention of the Board and any
recommendations requiring Board action.
Board Risk Committee
The Board Risk Committee assists the Board to discharge its responsibilities
of oversight and governance in relation to the implementation of BSP’s risk
management framework. The responsibilities of the BRC are to:
• review and monitor the principles, policies, strategies, processes and
control frameworks for the management of risk (such as credit risk,
market risk, liquidity risk, operational risk, cyber security, reputational
risk and other risks that may arise including COVID-19);
• oversee BSP’s risk profile and risk management strategy, and
recommend BSP’s risk appetite statement.
Membership of the BRC is formed amongst the Non-Executive Directors,
excluding the Chairman. The BRC must have a minimum of three Non-
Executive Directors, the majority of whom must be independent. The
Board may also appoint to the BRC additional individuals who are not
executives or members of the Board who have specialised skills to assist
the BRC. The chairman of the BRC must be an appropriately experienced
independent Non-Executive Director, other than the Chairman (or other
Board committee chairman).
The BRC must meet at least four times annually and special meetings
may be convened as required. All meetings must be minuted and tabled
at the subsequent BRC meeting. The BRC regularly reports to the Board
at the earliest possible Board meeting after each BRC meeting about any
matters that should be brought to the attention of the Board and any
recommendations requiring Board action.
Remuneration and Nomination Committee
The RNC assists BSP in fulfilling its oversight responsibilities regarding the
remuneration, succession and recruitment of Directors, Executives and
other BSP employees. The responsibilities of the RNC are:
• to oversee the selection and appointment of a Chief Executive Officer,
and setting of an appropriate remuneration and benefits package for
recommendation to the full Board;
•
• to determine and review appropriate remuneration and benefits of
Directors for recommendation to the full Board, and subsequently to
the shareholders;
in conjunction with the Chief Executive Officer, to identify and maintain
a clear succession plan for the Executive Management Team, ensuring
an appropriate mix of skills and experience as well as appropriate
remuneration and benefits packages are in place and reviewed
regularly; and
• to ensure that the Board itself maintains an appropriate mix of skills and
experience necessary to fulfill its responsibilities to shareholders while
maintaining a world class Corporate Governance regime.
The RNC is comprised of three Non-Executive Directors. The Chairman
of the Remuneration and Nomination Committee must be one of the
independent Directors, other than the Chairman of the Board.
Each member should be capable of making a valuable contribution to the
Committee, and membership is reviewed annually by the Board.
A review of the performance of Committee members will form part of the
Board’s performance review.
Disclosure Committee
The Board has established a disclosure committee comprising of the
Chairman (or in his absence another Non-Executive Director), the GCEO,
the Group Chief Financial Officer of BSP, the Group Chief Risk Officer and
the Company Secretary (Disclosure Committee). The chairman of the
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Disclosure Committee is the most senior Director present. The members of
the Disclosure Committee may vary from time to time, but will consist of at
least a Non-Executive Director, two Executive Employees (not including the
Company Secretary) and the Company Secretary.
The Disclosure Committee is responsible for, among other things:
(a) approving the release of any announcement to PNGX, other than:
(i) an announcement that relates to a matter which is both material and
strategically important, which will require approval by the Board; or
(ii) procedural matters such as notice of changes to equity securities or
directors’ holdings, which will require approval by the Disclosure
Officer;
(b) considering whether BSP is obliged or is required to respond to a market
rumour or media speculation; and
(c) overseeing the Disclosure Officer’s administration of the Continuous
Disclosure Policy.
Annual Financial Statements
The BACC reviews the annual financial statements to determine whether
they are complete and consistent with the information known to
Committee members and to assess whether the financial statements
reflect appropriate accounting principles. In particular it:
• pays attention to complex and/or unusual transactions;
•
focuses on judgmental areas, for example those involving valuation
of assets and liabilities; provisions; litigation reserves; and other
commitments and contingencies;
• meets with management and the external auditors to review the
financial statements and the results of the audit; and
• satisfies itself as to the accuracy of the financial accounts, and signs off
on the financial accounts of BSP before they are submitted to the Board.
External Audit
The BACC is responsible for making recommendations to the Board on
appointment and terms of engagement of BSP’s external auditors. The selection
is made from appropriately qualified auditors in accordance with Board policy.
The Board submits the name of the external auditors to Shareholders for
ratification on an annual basis. In line with the Prudential Standard of the BPNG,
the signing partner in the external audit firm must be rotated every five years.
The Committee reviews annually the performance of the external auditors
and, where appropriate, makes recommendations to the Board regarding the
continuation or otherwise of their appointment, consistent with the BPNG’s
Prudential Standard No. 7/2005 - External Auditors, while ensuring their
independence is in line with Board policy.
There is a review of the external auditor’s proposed audit scope and approach,
to ensure there are no unjustified restrictions. Meetings are held separately with
the external auditors to discuss any matters that the Committee or the external
auditors believe should be discussed privately. The external auditor attends
meetings of the BACC at which the external audit and half yearly review are
agenda items.
The Committee ensures that significant findings and recommendations made by
the external auditors are received and discussed promptly, and that management
responds to recommendations by the external auditors in a timely manner.
The duly appointed external audit firm may not be engaged by BSP to provide
specialist advisory or consultancy services to a bank while that same auditor/
audit firm is engaged for services to conduct BSPs annual audit and related
services. Services related to the preparation of a bank’s corporate tax return are
not prohibited. The external auditor is invited to the Annual General Meeting of
Shareholders and is available to answer relevant questions from Shareholders.
The BPNG Prudential Standards provide for a tri-partite meeting between BPNG,
the external auditors, and BSP, if required.
BSP’s external audit firm
is currently PricewaterhouseCoopers (PwC).
Representatives of PwC will attend the next Annual General Meeting in May
2021, and be available to answer shareholder questions regarding the audit.
Internal Audit
BSP has an
internal audit function. The BACC approves, on the
recommendation of management, the appointment of the Head of Internal
Audit. The Committee meets regularly with the Head of Internal Audit.
Reviews are undertaken of the scope of the work of the internal audit
function to ensure no unjustified restrictions or limitations have been
placed upon the Internal Audit Business Unit. The BACC also reviews the
qualifications of internal audit personnel and endorses the appointment,
replacement, reassignment or dismissal of the internal auditors.
The BACC meets separately with the internal auditors to discuss any
matters that the Committee, or the internal auditors, believe should be
discussed privately. The internal auditor has direct access to the BACC
and to the full Board. The Committee ensures that significant findings
and recommendations made by the internal auditors are received and
discussed promptly, and that management responds to recommendations
by the internal auditors on a timely basis.
Compliance
The BACC reviews the effectiveness of the systems for monitoring
compliance with all legal and regulatory obligations and the Constitution.
It also reviews the results of management’s investigation and follow-up
(including disciplinary action) of any fraudulent acts, or non-compliance.
The Committee obtains regular updates from management and BSP’s
legal officers regarding compliance matters, and satisfies itself that all
regulatory compliance matters have been considered in the preparation of
the financial statements.
Reviews the findings of any examinations by regulatory agencies are
undertaken and the Chairman of the BACC has the right to approach a
regulator directly in the event of a prudential issue arising.
RISK MANAGEMENT
Approach to Risk Management
The Group’s Risk Management activities are aligned to the achievement
of the Group’s Objectives, Goals and Strategy. The Board, in consultation
with the Executive Committee, determines the Group’s risk appetite and
risk tolerance and this is expressed in the Group Risk Appetite Statement.
These benchmarks are used in the risk identification, analysis and risk
evaluation processes.
The Board or a Committee reviews the risk management framework at
least annually.
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StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsANNUAL REPORT 2020 BANK OF SOUTH PACIFIC LTD BSP recognises the following major risks:
Risk Management Roles and Responsibilities
Credit Risk: The potential for financial loss where a customer or counter
party fails to meet its financial obligation to the Group.
IT Risk: The current and potential threat to earnings, capital or reputation
as a result of a failure of information systems managed, maintained and
operated by the Bank.
Market Risk: The potential financial loss arising from the Group’s activities
in financial, including foreign exchange, markets.
Liquidity Risk: The risk of failure to adequately meet cash demand in the
short term.
Interest Risk: Risk to earnings from movement in interest rates.
Compliance AML Risk: The risk of loss or penalties imposed by a regulator
for non compliance with regulations, prudential standards and policies.
Operational Risk: The risk of loss resulting from inadequate or failed
internal processes, people, or from external events, including legal.
Cyber Risk: Targetted hacking, leakage/theft of customer confidential
information, unauthorised financial transactions, random attacks including
malware, phisihing and ransomware .
The Credit Committee monitors credit risk. The Group Asset & Liability
Committee monitors market risk, interest risk, and liquidity risk, and
operational risk is monitored by the Operational Risk Committee.
Compliance and AML is monitored by the Compliance and AML business
unit, including the maintenance of a risk register system that has been
implemented across the Group. The Executive Committee and the Board
overview the highest tier of risks within these risk registers.
The Group’s Risk Management Policy ensures that the Group has in
place acceptable limits for the risks identified by employees. The risk
management approach encompasses the following:
• defining the types of risks that will be addressed by each functional or
policy area (i.e. credit risk, interest rate risk, liquidity risk, operational
risk, Infosec)
• ensuring that mechanisms for managing (identifying, measuring,
and controlling) risk are implemented and maintained to provide for
organisation-wide risk management;
• developing information systems to provide early warning, or immediate
alert, of events or situations that may occur, or already exist, that could
create one or more types of risk for the Group;
• creating and maintaining risk management tools, including those
requested by the Board, such as policies, procedures, risk registers,
controls and independent testing, management and training, and
planning;
instituting and reviewing risk measurement techniques that Directors
and management may use to establish the Group’s risk tolerance,
risk identification approaches, risk supervision or controls, and risk
monitoring processes;
•
• developing processes for those areas that represent potential risks; and
• establishing appropriate management reporting systems regarding
these risks so individual managers are provided with a sufficient level
of detail to adequately manage and control the Group’s risk exposures.
The Board accepts responsibility for ensuring it has a clear understanding of
the types of risks inherent in the Group’s activities. Therefore, responsibility
for overall risk management in BSP is vested with the Board. However,
every employee from Executive Management to the newest recruit has a
responsibility and a part to play in the process.
There is a formal system of financial and operational delegations from
the Board to the Group Chief Executive Officer, and from the Group Chief
Executive Officer to the General Managers. These delegations reflect the
Group’s risk appetite, and are cascaded down to managers who have skills
and experience to exercise them judiciously.
The Board defines the accountabilities (including delegated approval/
control authorities/limits) and reporting/monitoring requirements for
the risk management process. The severity of risks identified in the risk
identification, analysis and evaluation processes, and noted in the SBU Risk
Registers, is used to determine the approval/control authorities/limits. The
Board undertakes an annual review of the Group’s Enterprise Risks.
The Board has adopted guidelines, with the help of management analysis,
covering the maximum loss exposure the Group is able and willing to assume.
These guidelines are detailed in the Group’s Risk Appetite Statement and
Risk Policy and Procedures Manual which have been approved by the
Board. The Board has also delegated to the BRC responsibility for overview
of loss control and for overseeing the risk management function.
The BRC is responsible for receiving reports and providing regular updates
and recommendations to the Board on the risk management activities of
the Group, especially relating to risk issues that are outside of the authority
of the Group’s Executive Committee and other delegated Committees to
approve.
Management Assurance
The Board is provided with regular reports about BSP’s financial condition
and its operating performance. Annually, the Group Chief Executive Officer
and the Group Chief Financial Officer certify to the Board that:
•
•
in their opinion, the financial records of the Group have been properly
maintained;
in their opinion, the financial statements comply with the appropriate
accounting standards and give a true and fair view of the financial
position and performance of BSP; and
• their opinions above have been formed on the basis of a sound system
of risk management and internal control applying to BSP, which is
operating effectively;
• Additionally all General Managers and Country Heads provide bi-annual
statements attesting that;
• they have assessed and documented the risks and internal control
procedures in their Strategic Business Unit;
• they have identified any changes in business, operations and computer
systems and the risks that may arise from those changes;
• the risk management and internal compliance and control systems are
appropriate and operating efficiently and effectively; and
• any weaknesses in the risk management and internal compliance and
control systems have been identified and remedial action taken.
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Corporate Governance Report
ETHICAL BEHAVIOUR
BSP acknowledges the need for Directors and employees at all levels to
observe the highest standards of ethical behaviour when undertaking BSP
business. To this end, the Board has adopted:
• a Code of Conduct for both Directors and members of the Executive
Management Team of the Group and stipulated that each Director
comply with the Code; and
• a Corporate Mission, Objectives, and Core Values Statement which
establishes principles to guide all employees in the day to day
performance of their individual functions within the Group.
Further, Directors and management may only trade in the securities of
the Group, subject to the foregoing insider trading restrictions, during
each of the eight weeks following the announcements of half yearly
profit and yearly profit or the date of issue of a prospectus. Management
should discuss proposed share trades with the Chief Executive Officer in
advance, who in turn will keep the Chairman of the Board appraised of
management activities. Directors should discuss proposed share trades
with the Chairman in advance.
In addition, Directors and management must not trade in any other entity
if inside information on such entity comes to the attention of the Director
or management by virtue of holding office as an Officer of the Group.
While BSP’s Corporate Governance Principles provides that the Board must
ensure it maintains an appropriate mix of skills and experience without
gender bias.
BSP’s Code of Conduct also requires its employees to act with high
standards of honesty, integrity, fairness and equity in all aspects of their
employment with BSP.
To ensure the maintenance of high standards of corporate behaviour on an
ongoing basis, the Board encourages Senior Management to periodically
issue staff Toksaves to reinforce both the Code and Core Values Statements.
All Directors are encouraged to maintain membership of an appropriate
Directors’ Association to keep abreast of current trends in Directors’ duties,
responsibilities and corporate governance issues.
BSP is committed to a culture in which it is safe and acceptable for
employees, customers and suppliers to raise concerns about poor or
unacceptable practices, irregularities, corruption, fraud and misconduct.
The Group has adopted a whistle-blowing policy that is designed to support
and encourage staff to report in good faith matters such as:
• unacceptable practices;
•
irregularities or conduct which is an offence or a breach of laws of the
countries in which BSP operates in (actions and decisions against the
laws of relevant countries including non-compliance);
• corruption;
•
fraud;
• misrepresentation of facts;
• decisions made and actions taken outside established BSP policies &
procedures;
• sexual harassment;
• abuse of Delegated Authorities;
• misuse of Group assets;
• disclosures related to miscarriages of justice;
• health and safety risks, including risks to the public as well as other
employees;
• damage to the environment;
• other unethical conduct;
•
• abuse of power, or use of the Group’s powers and authority for any
failure to comply with appropriate professional standards;
unauthorised purpose or personal gain; and
• breach of statutory codes of practice.
BSP’s Code of Conduct for Employees and Directors is available at www.
bsp.com.pg in the Investor Relations section.
Directors and management of the Group are subject to Securities Act 1997
restrictions for buying, selling or subscribing for securities in the Group
if they are in possession of inside information, i.e. information which is
not generally available and, if it were generally available, a reasonable
person would expect to have a material effect on the price or value of the
securities of the Group.
MARKET DISCLOSURE
The Group’s continuous disclosure regime is fundamental to the rights
of Shareholders to receive information concerning their securities. An
important aspect of the Group’s shareholder communication policy is to
comply with the continuous disclosure regime and to implement best
practice disclosure policy. BSP has adopted a Continuous Disclosure Policy.
This is available at www.bsp.com.pg in the Investor Relations section.
Market announcements are posted to BSP’s website immediately after
release to the market. All market announcements made by BSP since 2017
are currently available on the website. Where BSP provides financial results’
briefings to analysts or media, these briefings are published on the website
as soon as possible after the event. In any event, no material information
which has not been previously released to the market is covered in such
briefings. The material upon which the briefing is based (such as slides or
presentations) is released to the market prior to the briefing.
The Group’s insider trading rules are important adjuncts to the continuous
disclosure regime in ensuring that Shareholders are given fair access to
material information regarding securities. BSP seeks to limit the opportunity
for insider trading in its own securities through its continuous disclosure
policies and the dealing rules applying to its employees and Directors. BSP
has adopted a Securities Dealing Policy. This is available at www.bsp.com.
pg in the Investor Relations section.
SHAREHOLDER COMMUNICATIONS
BSP commits to dealing fairly, transparently and openly with both current
and prospective Shareholders using available channels and technologies to
communicate widely and promptly. BSP commits to facilitating participation
in shareholder meetings, and dealing promptly with shareholder enquiries.
Our Shareholder Communication Policy is built around compliance with
disclosure obligations and aspiring to be at the forefront of best practice
in disclosure. Our framework for communicating with Shareholders is to
concisely and accurately communicate:
• the BSP strategy;
• how we implement that strategy; and
• the financial results consequent upon our strategy and
its
implementation.
The Group uses shareholder forums such as the Annual General Meeting,
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StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsANNUAL REPORT 2020 BANK OF SOUTH PACIFIC LTD
and quarterly investor briefings, within disclosure policies, to communicate
financial performance and strategies.
BSP’s Shareholder Communication Policy is available at www.bsp.com.pg
in the Investor Relations section.
BSP gives Shareholders the option to send and receive communications
from BSP and its share registry electronically. Since 2017, BSP and its share
registry have used technology to facilitate the participation of Shareholders
in meetings.
To facilitate effective communication between BSP and its Shareholders,
potential investors, analysts and other financial markets participants, BSP
conducts periodic market briefings, including half and full year results
announcements and attendance at conferences. Shareholders, potential
investors, analysts and other financial markets participants are given
access to BSP Directors and Senior Management at these events, and
the presentation material provided at these events announcement to
the market prior to commencement and subsequently uploaded to BSP’s
website.
The Board, management and staff of BSP are very much aware of their
responsibilities to the people of Papua New Guinea and the various
countries that BSP operates in. Pictured: Customers at new Yangoru
Sub-Branch, East Sepik Province.
The Group’s continuous disclosure regime is fundamental to the rights of Shareholders to receive information concerning their securities.
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StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Teams
Corporate Social
Responsibility
Remuneration
Report
50
ANNUAL REPORT 2020 BANK OF SOUTH PACIFIC LTD
Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Corporate Social
Teams
Responsibility
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020
51
51
Remuneration Report
1.0
Message from the Remuneration and Nominations Committee Chairman
The aim of the Remuneration Report is to provide details that the Board believes are essential for shareholders to understand BSP’s
remuneration framework. This is intended to deliver specific operating financial and non-financial outcomes. There is no statutory requirement
for Remuneration Reporting under International Accounting Standards (IAS).
2.0
Message from the Remuneration and Nominations Committee Chairman
I am pleased to present on behalf of the Remuneration and Nominations
Committee (RNC) and of the Board, the annual Remuneration Report
for Bank South Pacific (BSP) Limited. BSP recognises that our staff are
the most valuable asset in its business and ensures that remuneration
and benefits are fair and competitive in the market. This is highlighted
in the fact that despite the economic challenges and reduced business
activities in 2020, all staff were paid performance based short term
incentives reflective of BSPs performance and the contribution of
staff across broad based operational and financial key performance
indicators.
The RNC, comprising of three Non-Executive Directors and a Chairman,
are assisted by non-voting management including the Group Chief
Executive Officer (GCEO), Group General Manager Human Resources
and the Company Secretary. The RNC annual activities are based
on the RNC charter and covers the various aspects or focus areas
including Compliance and Governance, Remuneration Management,
Succession Planning, Recruitment and Performance Management for
Board Directors, Non-Executive Directors and Executive Management.
In the first section, the report discloses the Key Management
Personnel (KMP) for BSP. The KMP comprises of the Non-executive
Directors and the Group Executives. These are people within BSP with
the authority and responsibility for planning, directing and controlling
the activities of BSP. The KMP listing consists of both current Non-
executive Directors, Group Executives and non-executive directors
and group executives who left BSP in 2020. The Board ultimately
approves RNC endorsed executive remuneration packages annually
in line with the remuneration guidelines. BSP remuneration for
executives comprises of a fixed component and a risk component. The
fixed component takes into the account the nature of the role, pay
levels in the market, and the individual and business performance,
whereas the at risk component is a combination of short-term and
long-term incentives.
The report discusses the remuneration strategy in detail with a
key focus on individual aspects of remuneration including; fixed
long-term
remuneration, short-term
incentive plan,
incentives,
performance based bonus and non-performance based bonus. The
main purpose of this strategy is to attract and retain employees by
paying market competitive remuneration for roles and being provided
with incentives and benefits as an additional reward for being an
employee of BSP. The additional incentives and benefits that fall under
the categories stated above consists of cash rewards, salary reviews,
staff discount on lending interest rates for both personal and home
loans, opportunities to participate in leadership programs, learning
and development opportunities and job promotion and appointment
opportunities. These initiatives are geared towards retaining the
services of staff occupying critical roles and high potential employees
for a longer term.
In November 2015, the Board approved a long term incentive that
uses EPS as a proxy for the share price and with a payment matrix that
adjusts the LTI payment relative to the EPS hurdle. No LTI is payable if
the EPS is below 79.99 % of the hurdle rate and maximum payable is
100%. BSP reported a net profit after tax of K806 million for 2020 and
as the lower threshold of the hurdle rate was not met the LTI were not
vested and no payments were made.
BSP’s non-Executive Directors are remunerated on a fixed basis within
an aggregate Directors’ fee pool. They are not paid any retirement
or superannuation benefits nor do they participate in any employee
incentive schemes.
In recognition of employees’ efforts during this challenging pandemic
year, the BSP Board approved the payment of the 2020 Performance
Bonus to all employees. The Board understands that the failure
to achieve financial targets was solely due to the economic effects
of COVID-19, which was beyond the control of management All
employees including Executives were rewarded with an 80% of bonus
that employees would otherwise be eligible for.
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3.0
Key Management Personnel
The remuneration of Key Management Personnel (KMP) for Bank of South Pacific Limited (BSP) is disclosed in this Report. In 2020, KMP
comprised the GCEO, Group Executives and Non-executive Directors as set out in the table below. KMP is defined as those persons having
authority and responsibility for planning, directing and controlling the activities of an entity, directly or indirectly, including any director
(whether executive or otherwise) of that entity.
Name
Position
KMP Term
Board Members
Sir Kostas G. Constantinou, OBE
Chairman
Ernest Brian Gangloff
Robert Bradshaw
Geoffrey J Robb
Arthur Sam
Stuart Davis
Dr. Matagialofi Faamausili Lua’iufi
Priscilla Kevin
Frank Bouraga
Augustine Mano
Executives
Robin Fleming, CSM
Frank van der Poll
Ronesh Dayal
Mike Hallinan
Peter Beswick
Rohan George
Hari Rabura
Daniel Faunt
Nuni Kulu
Kili Tambua
Andy Roberts
Former Group Executives
Robert Loggia
Eddie Ruha
Paul Thornton
Christophe Michaud
Adam Fenech
Director
Director
Director
Director
Director
Director
Director
Director
Director
Group Chief Executive Officer
Group Chief Operating Officer
Group Chief Financial Officer
Group Chief Risk Officer
Group General Manager Corporate Banking
Group General Manager Treasury
General Manager Human Resources
Group General Manager Retail Bank
General Manager Digital
General Manager Offshore Branches
General Manager BSP Finance Limited
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Part year 1
Part year 2
Part year 3
Full year
Part year 4
Part year 5
Full year
Full year
Full year
Full year
Full year 6
Full year
Part year 7
Part year 8
Group Chief Operating Officer
Group Chief Financial Officer
Resigned 30 October 20
Resigned 29 May 20
Group General Manager Retail Banking
Resigned 1 December 20
General Manager BSP Finance Limited
Resigned 30 June 20
Group General Manager Compliance
Resigned 17 November 20
1.
2.
3.
4.
5.
6.
7.
8.
Priscilla Kevin, newly appointed Director as at 6 April 2020
Frank Bouraga, newly appointed Director as at 20 December 2020
Augustine Mano, resigned on 30 June 2020
Frank van der Poll was Deputy Chief Operating Officer, appointed to Group Chief Operating Officer on 1 November 2020
Ronesh Dayal was Chief Financial Officer - PNG, appointed to Group Chief Financial Officer on 11 June 2020
Daniel Faunt was General Manager Offshore Branches, appointed to Group General Manager Retail Bank on 2 December 2020
Kili Tambua was Deputy General Manager for Retail Sales, appointed to General Manager Offshore Branches on 2 December 2020.
Andy Roberts appointed as General Manager BSP Finance Limited on 17 August 2020.
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BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeams Remuneration Report
4.0
Executive Remuneration
BSP remuneration policy for Executives is comprised of a fixed component and an at risk component that is a combination of short term and
long term incentives.
Remuneration packages are reviewed by the RNC, and details are approved by the Committee to the Board.
Fixed remuneration is reviewed annually taking into account the nature of the role, comparable market pay levels, and individual and business
performance.
Executives who serve as Directors of subsidiaries of BSP receive no fees for their service as a Director.
Executive Remuneration – Non-Statutory Disclosure
All amounts are expressed in K’000
Name
Year
Salary
Short-term
incentive
Value of
benefits
Long-term
incentive
Leave
Encash-
ment
Final
Entitle-
ments
Total
Current Executives
Robin Fleming
2020
3,856
934
Group Chief Executive
Officer
2019
3,659
1,751
Rohan George
Group General
Manager Treasury
Peter Beswick
General Manager
Corporate Banking
Michael Hallinan
Group Chief Risk
Officer
Daniel Faunt
Group General
Manager Retail Bank
Nuni Kulu
General Manager
Digital
Hari Rabura
General Manager
Human Resource
Ronesh Dayal
Group Chief Financial
Officer
Andy Roberts
General Manager
BSP Finance Limited
2020
1,172
2019
1,080
2020
1,189
2019
1,095
2020
1,189
2019
1,095
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
982
887
850
739
812
747
728
-
379
-
189
254
102
213
150
206
171
175
134
169
98
105
123
-
29
-
57
31
63
48
121
104
55
42
197
161
117
100
172
143
130
-
28
-
-
1,557
-
489
-
304
-
309
-
309
-
250
-
211
-
211
-
-
-
-
-
-
-
-
-
-
-
-
97
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,847
7,487
1,424
1,686
1,412
1,721
1,394
1,721
1,350
1,473
1,198
1,218
1,082
1,206
981
-
435
-
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All amounts are expressed in K’000
Name
Year
Salary
Short-term
incentive
Value of
benefits
Long-term
incentive
Leave
Encash-
ment
Final
Entitle-
ments
Total
2020
2019
2020
2019
89
-
106
-
13
-
22
-
105
-
54
-
-
-
-
-
-
-
-
-
-
-
-
-
207
-
182
-
Frank van der Poll
Group Chief
Operating Officer
Kili Tambua
General Manager
Offshore Branches
Former Executives for 2020
Name
Year
Salary
Short-term
incentive
Value of
benefits
Long-term
incentive
Leave
Encash-
ment
Final
Entitle-
ments
Robert Loggia
Group Chief
Operating Officer
Paul Thornton
General Manager
Retail Bank
Edward Ruha
Group Chief Financial
Officer
2020
2019
2020
2019
2020
2019
Christophe Michaud
2020
General Manager
BSP Finance Limited
2019
Adam Fenech
General Manager
Compliance
TOTAL
TOTAL
2020
2019
2020
2019
1,408
1,501
1,134
1,095
753
1,321
475
901
894
255
-
273
248
164
-
321
-
155
-
-
200
218
35
27
23
55
27
41
82
7
16,016
14,375
2,213
3,788
1,466
977
-
423
-
309
-
373
-
254
-
-
-
4,510
Total
2,249
2,415
1,988
1,595
1,148
2,072
641
-
571
-
372
-
361
863
-
92
-
1,352
1,068
262
-
-
-
-
-
-
-
-
-
-
97
489
2,037
-
21,829
24,139
Note: Remuneration reflected in the table above relates to the period the staff member was in a KMP role.
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4.1
Fixed Remuneration
BSP’s fixed remuneration comprises of cash salary, salary sacrifice, employer superannuation contributions for citizen staff and contractual
benefits. The purpose of fixed pay is to attract and retain employees by paying market competitive pay for the role, skills and experience
required of the business. This may include salary, fixed pay allowance, cash in lieu of 3 months notice and other cash allowances in accordance
with local market practices. These payments are fixed and do not vary with performance.
4.2
Short Term Incentive (STI)
STI are incentives that BSP awards to all staff at a given time of up to one year. BSP refers to the STI as the Annual Performance based bonus
scheme. The scheme focuses on rewarding high-performing employees and is paid at the end of each calendar year for all staff excluding
Executives (Group Chief Executive Officer, Strategic Business Unit General Managers, and Deputy General Managers) and Country Heads who
are paid in March the following year after audited accounts are available.
This incentive is determined by the staff’s individual performance and the overall BSP Group performance, based on the achievement of Key
Performance Indicators (KPIs). KPIs are split between;
i.
ii.
iii.
iv.
v.
vi.
Net Profit After Tax (NPAT) budget,
Target cost to income ratio,
Individual Strategic Business Unit (SBU) performance including achieving SBU budget,
Implementation of critical strategic imperatives,
Important SBU performance matrices.
Specific individual KPI’s such as promoting vision and values, staff training, customer survey outcomes, staff engagement survey
feedback and the like.
Management also takes into consideration whether the SBU is a customer facing SBU or not.
4.3
Benefits
These values cover accommodation, airfares, motor vehicle, school fees, club fees and club memberships based on industry wide practice and
amount vary annually depending on market rates.
4.4
Long Term Incentive Plan (LTIP)
BSP also has a LTIP for certain senior employees. BSP’s LTIP is designed to align executive compensation to shareholder interests and to reward
Executives (includes Deputy General Managers and Country Heads), Senior Managers and high potential employees such as Leadership and
Management Developing Program participants for their contribution to long-term financial results that drive shareholder value. The LTIP assists
in the recruitment, retention and motivation of Executives, Senior Managers and Critical and High Performing employees of the BSP Group. The
LTIP is a two (2) year performance based plan which starts its performance cycle on the 1 January of the first year and ends on 31 December
of the second year.
Key features under LTIP include;
i.
ii.
The Group Earnings Per Share (EPS) is the performance measure or the proxy to share price.
The vesting period is two years based on BSP Financial Year (FY) cycle. For example, performance rights issued in 2019 will be vested
in 2021.
Number
Approved EPS
Hurdles
EPS target to
be achieved
Target NPAT
Percentage of Perfor-mance Rights
to exercise
1
2
3
107.5%>
102.5%>
97.5%
As recommended by RNC and
approved by Board each LTIP
cycle
As recommended by RNC
and approved by Board
each LTIP cycle
150% of Performance rights
100% of Performance rights
50% of Performance rights
Exercising the performance rights is subject to the condition that BSP’s net profit after tax (NPAT) for the vesting year is above BSP’s NPAT in
the issuing year.
Participants are personally responsible for any income tax liability in respect of payments made under the LTIP. If a participant resigns their
employment for health reasons or retires prior to vesting, awards may be made in full or pro rata at the time of exit, at the discretion of the
Board. If a participant resigns or their employment is terminated on disciplinary grounds prior to the vesting, awards are not granted.
BSP offers all its employees rewards/benefits that are performance based and non-performance based in-line with each staff’s roles and
responsibilities.
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Performance Based
Performance based benefits are awarded to employees when Key Performance Indicators (KPI) are met. This is inclusive of the following:
i.
Short Term Incentive
The BSP staff bonus (cash bonus) is purely performance driven and is focused solely on staff achieving KPI objectives at the end of
each financial year. All staff excluding Senior Executives are paid at the end of each year whilst Senior Executive bonuses are paid in
March the following year after the audit is completed.
Each staff performance is rated from 1 to 5 in order of the performance exceeding target to very poor performance respectively.
ii.
Annual Salary Review
In line with the performance bonus rating scale above, BSP also conducts annual salary reviews each year. Staff salaries are reviewed
and adjusted based on the performance rating scored in the prior year’s performance review and the Consumer Price Index rate
for a particular jurisdiction.
iii.
Staff Loans - National Staff Home Ownership Scheme and Unsecured Personal Loans
BSP offers its staff concessional lending rates to staff who have satisfactorily completed the probation period and have formally
been appointed a permanent employee status.
iv.
Leadership and Management Development Program (LMDP)
BSP LMDP is a three year program derived specifically for high potential employees who have been identified as possible successors
to senior and executive management roles. Participants are nominated by their SBU GMs and approved by the Group CEO.
In order to be selected to participate in the program, candidates must at least score a minimum objective rating of 3 or better in
the last three years. Continuation in the program will be determined by the staff’s active participation and individual performance
objective rating of 3 or better each year.
v.
Learning and Development
Performance ratings are also considered for staff who wish to seek BSP sponsored trainings internally and externally. A minimum
rating of 3 or better is considered subject to the SBU General Manager’s endorsement.
vi.
Job Promotions and Appointments
BSP also considers staff individual performance objective ratings when in the process of filling internal vacancies, internal job
promotions and appointments. Staff who had achieved very poor performance results in the last three years are not considered for
internal promotional appointments.
4.6
Non-Performance Based
Non-Performance based benefits are not determined by the staff’s performance and are applicable to all staff. These benefits include the
following:
i.
ii.
iii.
iv.
v.
Medical Cover for all staff
Life Insurance
Superannuation
Leave Management (Sick Leave, Annual Leave, Flexi Leave and Long Service Leave, Maternity Leave)
Specialist allowances for critical roles
4.7
Retention Plan
As part of BSPs retention strategy, BSP has developed a number of initiatives to ensure staff occupying critical roles and high potential
employees are better rewarded in order to retain their services for BSP for a long term. These initiatives include:
i.
ii.
iii.
Short and Long-Term Incentive Plans
Leadership and Management Development Program (LMDP)
National Staff Home Ownership Scheme
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Remuneration Report
5.0
Linking performance & reward outcomes – Variable Remuneration
The Group’s policy is to pay executive STI subsequent to the full audit of the financial statements. The Board determined that a STI award
of approximately 80 percent of the target was appropriate for all staff and KMP after assessing performance across group and divisional/
individual performance measures, with a particular risk overlay. The senior executive team strongly executed the Group’s strategic agenda
and demonstrated sound leadership, moving to adapt to new ways of operating while preserving efficiency and providing our clients with
committed support.
5.1
Short Term Incentive (STI) Outcomes
The Group’s financial performance is summarised in the table below together with its relationship to the aggregate amount of
Short Term Incentives (STI) paid to Executives. This section discloses STI for the various years relative to the financial performance
for those years.
FY16
FY17
FY18
FY19
FY20
Net Profit After Tax K 000
643,451
757,003
844,072
890,363
806,218
Earnings per Share
Cost to income ratio
137.7
42.9%
162.0
42.6%
180.6
41.0%
190.6
37.7%
172.6
37.4%
KMP STI Awarded vs 5 Year NPAT
(PGK millions)
FY16
FY19
FY17
FY18
FY20
200
300
400
500
600
700
800
900
1,000
1,100
NPAT
i
d
a
P
I
T
S
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
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5.1
Short Term Incentive (STI) Outcomes
The below table details the bonus pool measures and outcomes for the financial year.
Target Area
Weighting
Measure
Outcomes
Group
Performance
15%
Achieve budgeted NPAT
and Cost to income ratio
Implementation
of critical strategic
imperatives
50%
Various deliverable
targets to be achieved
Individual
Assessment
35%
Various Key Performance
indicators
The Group’s NPAT was below budget. However, target cost
to income ratio was achieved due to strict cost containment
measures to offset reduced income levels. There were no
reductions to any employee fixed remuneration and benefits
as part of the cost reduction initiatives.
Key strategic imperatives for the year focused around
expanding the Group’s digital coverage and capability,
expanding to new markets, upgrading the current core
systems and improving compliance. These targets were
partially met during the year. Despite the various challenges
considerable progress has been made in a number of critical
imperatives.
Generally objectives in these areas were met. Despite
COVID-19 the executive management team and the overall
workforce demonstrated great commitment during this
period.
The table below shows the STI outcomes for FY20 relative to target opportunities.
Name
Title
Robin Fleming
Group Chief Executive Officer
Rohan George
Group General Manager Treasury
Peter Beswick
General Manager Corporate Banking
Michael Hallinan
Group Chief Risk Officer
Daniel Faunt
Group General Manager Retail Bank
Nuni Kulu
General Manager Digital
Hari Rabura
General Manager Human Resource
Ronesh Dayal
Group Chief Financial Officer
Andy Roberts
General Manager
Frank van der Poll
Group Chief Operating Officer
Kili Tambua
General Manager Offshore Branches
STI
Awarded
K’000
STI as % of
Gross Base
Maximum
STI
K’000
Actual
STI % of
Maximum
STI
934
189
102
150
172
134
98
211
80
148
132
22%
15%
8%
11%
13%
15%
11%
14%
7%
9%
14%
2,886
388
393
393
390
268
268
467
323
467
289
32%
49%
26%
38%
44%
50%
37%
45%
24%
32%
46%
Note: STI awarded reflects full year 2020 payments including former BSP roles for new KMP’s.
5.2
2020 LTI Outcomes
The 2020 LTIP reward matrix was approved in November 2018. BSP’s LTIP uses the earnings per share (EPS) as a proxy for BSP’s share price as
a determinant for achieving long term value for shareholders. Vesting of the LTIP rights is subject to achievement of the target EPS for 2020,
which is calculated using the 2020 group NPAT budget as the baseline with payments based on specified percentages of the maximum rights,
if 2020 EPS is within the payment band as detailed in the table below.
2020 Hurdles on EPS
EPS target to achieve
Target NPAT
Percentage of Performance rights to exercise
107.5%>
102.5%>
97.5%>
215
205
192
K1,005.2 million
K958.5 million
K911.7 million
150%
100%
50%
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Percentage of LTI vesting over the last five years
Percentage of LTI vesting over the last five years
100%
100%
100%
100%
100%
100%
100%
100%
50%
50%
100%
100%
0%
0%
FY16
FY16
FY17
FY17
FY18
FY18
FY19
FY19
FY20
FY20
The Group achieved a net profit of K806m and EPS was recorded at 172.60 and these were lower than the EPS and NPAT target set above.
Based on these outcomes the Board determined that no LTI will be vested and paid for the 2020 financial year.
6.0
Employment Agreements
KMP Contracts
Contracts for Senior Management and Executives other than the Group CEO are for a three year term in most cases. Further extensions are
subject to business requirements and employee performance.
GCEO employment agreement
The Group CEO’s contractual arrangement is a three year contract. The Board approves the GCEO’s employment contract.
7.0
Remuneration Policy and Government Framework
BSP recognizes that staff are the most valuable asset of BSP. The Group ensures that remuneration and benefits are fair and competitive in
the market. The remuneration strategy is supported by objectives applicable to all employees and include:
i.
ii.
Business results, including performance against strategic objectives and metrics in the Group’s risk assessment/position and
compliance with AML/CTF regulations;
Performance against Groups strategic objectives set out in performance scorecards. Core aspects of the Group’s risk assessments
are also incorporated into the scorecards of Executive Directors and the Board and cascaded down to the Strategic Business Units;
iii. Adherence to the Group’s values, business principles, Group-risk related policies and procedures and international standards
iv.
v.
Individual performance; and
Local Market position and practice.
The above key features of the remuneration framework enable the group to also achieve alignment between risk, performance and reward.
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Remuneration and Nominations Committee (RNC)
The RNC assists BSP in fulfilling its oversight responsibilities regarding the remuneration, succession and recruitment of Directors,
Executives and other BSP employees. The responsibilities of the RNC are:
•
•
•
•
to oversee the selection and appointment of a Group CEO, and setting of an appropriate remuneration and benefits
package for recommendation to the full Board;
to determine and review appropriate remuneration and benefits of Directors for recommendation to the full Board, and
subsequently to the shareholders;
in conjunction with the Group CEO, to identify and maintain a clear succession plan for the Executive Management
ensuring an appropriate mix of skills and experience as well as appropriate remuneration and benefits packages are in
place and reviewed regularly; and
to ensure that the Board itself maintains an appropriate mix of skills and experience necessary to fulfill its responsibilities
to shareholders while maintaining a world class Corporate Governance regime.
The RNC is comprised of three Non-Executive Directors. The Chairman of the RNC must be one of the independent Directors, other
than the Chairman of the Board.
Each member should be capable of making a valuable contribution to the Committee, and membership is reviewed annually by the
Board.
A review of the performance of Committee members will form part of the Board’s performance review.
8.0
Non-Executive Director Remuneration
Non-Executive Directors are remunerated on a fixed basis within an aggregate Directors’ fee pool approved periodically by shareholders.
Under the Constitution, the Board determines the total amount paid to each Non-Executive Director as remuneration, subject to the aggregate
amount not exceeding the amount fixed by the Shareholders.
Directors may also be reimbursed their reasonable travel and other expenses incurred in attending to BSP business. Directors may also receive
additional remuneration if they perform any additional services at the request of the Board.
Non-Executive Directors are not paid any retirement or superannuation benefits, nor do they participate in any share or share option programs
or the employee incentive schemes described below.
8.1
Fee Pool
As mentioned above, BSPs Non-Executive Directors are remunerated on a fixed basis within an aggregate Directors “Fee Pool”
approved periodically by Shareholders. Shareholders are required to approve any change to this aggregate amount. The current
Shareholder approved fee pool is PGK 4.5million. Total payment to directors for the 2020 financial year within the fee pool was as
follows:
All amounts are expressed in K’000
Name of Director
Base Fee
Chair-
person
BACC
Fee
BRC
Fee
RNC
Fee
Kostas Constantinou
280,652
280,652
Robert Bradshaw
Stuart Davis
280,652
280,652
Dr Matagialofi Lua’iufi
280,652
Geoff Robb
Ernie Gangloff
Arthur Sam
Priscilla Kevin
Augustine Mano
Frank Bouraga
Total
280,652
280,652
280,652
210,489
207,989
-
Bank Total
Sub. Fees
Total Fees
-
561,304
300,000
861,304
-
-
-
-
37,500
318,152
25,000
25,000
-
330,652
-
-
-
-
25,000
34,375
305,652
60,000
340,027
120,000
343,152
60,000
333,777
239,339
-
-
-
-
-
-
25,000
37,500
25,000
-
-
40,400
25,000
28,125
28,850
-
-
6,250
214,239
45,000
-
40,400
-
40,400
318,152
330,652
365,652
460,027
403,152
333,777
239,339
259,239
-
-
-
-
-
-
-
-
-
2,383,042
280,562
152,900
106,975
103,125
3,026,604
585,000
3,611,604
61
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Group
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Financial
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Responsibility
Financial
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Directors' Report
Statements of Comprehensive Income
Statements of Financial Position
Statements of Changes in Shareholders’ Equity
Statements of Cash Flows
Notes to the Financial Statements
Independent Auditor's Report
62
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BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020
63
Directors’ Report
for the year ended 31 December 2020
The Directors take pleasure in presenting the Financial Statements of the Bank of South Pacific Limited and its subsidiaries (Bank and the Group) for the
year ended 31 December 2020. In order to comply with the provisions of the Companies Act 1997, the Directors report as follows:
Principal activities
The principal activity of the Bank of South Pacific Limited (BSP) is the provision of commercial banking and finance services throughout Papua New Guinea
and the Asia Pacific region. The Group’s activities also include fund management and life insurance business services. BSP is a company listed on the
PNG Exchange Markets (PNGX), incorporated under the Companies Act of Papua New Guinea, and is an authorised Bank under the Banks and Financial
Institutions Act of Papua New Guinea. The Group is also licensed to operate in the Solomon Islands, Fiji, Cook Islands, Samoa, Tonga, Vanuatu, Cambodia
and Laos. The registered office is at Section 34, Allotment 6 & 7, Klinki Street, Waigani Drive, Port Moresby.
Review of operations
For the year ended 31 December 2020, the Group’s profit after tax was K806.218 million (2019: K890.363 million). The Bank’s profit after tax was K759.452
million (2019: K845.828 million).
The Directors are of the view that there are reasonable grounds to believe that the Bank and the Group will be able to pay their debts as and when
they become due and payable; and the attached financial statements and notes thereto are in accordance with the PNG Companies Act 1997, including
compliance with accounting standards and give a true and fair view of the financial position and performance of the Bank and the Group.
The results of the Bank and the Group operations during the financial year have, in the opinion of the Directors, not been materially affected by items of
an abnormal nature, other than those disclosed in the financial statements.
In the opinion of the Directors, no circumstances have arisen, that make adherence to the existing method of valuation of assets or liabilities of the Bank
and the Group misleading or inappropriate.
At the date of this report the Directors are not aware of any circumstances that would render the values attributed to current assets in the financial
statements misleading.
No contingent liability other than that disclosed in the notes to the attached financial statements has become enforceable, or is likely to become
enforceable, within a period of twelve months from the date of this report, that will materially affect the Bank and the Group in its ability to meet
obligations as and when they fall due.
Dividends
Dividends totalling K569.355 million were paid in 2020 (2019: K653.940 million). A detailed breakup of this is provided in Note 28.
Directors and officers
The following were directors of the Bank of South Pacific Limited at 31 December 2020:
Sir K Constantinou, OBE Mr. R Fleming, CSM Mr. S Davis
Mr. R Bradshaw
Mr. A Sam
Mr. G Robb, OAM
Ms. P Kevin Mr. E B Gangloff
Dr. F Lua’iufi
Mr. F Bouraga
Details of directors’ tenure and directors and executives’ remuneration during the year are provided in Note 36 of the Notes to the Financial Statements.
The Group CEO Robin Fleming is the only executive director.
The company secretary is Mary Johns.
Independent auditor’s report
The financial statements have been audited and should be read in conjunction with the independent auditor’s report on page 113. Details of amounts
paid to the auditors for audit and other services are shown in Note 37 of the Notes to the Financial Statements.
Donations and sponsorships
Donations and sponsorship by the Group during the year amounted to K4.582 million (2019: K5.581 million).
Change in accounting policies
Changes to accounting policies that impacted the Group's result during the year are included in Note 1(A) of the Notes to the Financial Statements.
For, and on behalf of, the Directors.
Dated and signed in accordance with a resolution of the Directors in Port Moresby this 24th day of February 2021.
Sir Kostas G. Constantinou, OBE
Chairman
Robin Fleming, CSM
Group Chief Executive Officer/Managing Director
64
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020
Statements of Comprehensive Income
for the Year Ended 31 December 2020
Consolidated
Bank
All amounts are expressed in K’000
Note
2020
2019
2020
2019
Interest income
Interest expense
Net interest income
Net fee and commission income
Other income
Net insurance operating income
Net operating income before impairment and operating
expenses
Impairment on financial assets
Operating expenses
Profit before income tax
Income tax expense
Net profit for the year
Other comprehensive income
Items that may be subsequently reclassified to profit or loss:
Translation of financial information of foreign operations to
presentation currency
Items that will not be reclassified to profit or loss:
Recognition of deferred tax on asset revaluation reserve
movement
Fair value gain / (loss) on re-measurement of investment
securities
Net movement in asset revaluation
Other comprehensive income, net of tax
Total comprehensive income for the year
Earnings per share - basic and diluted (toea)
3
3
4
4
31
6
5
7
29
29
29
29
8
1,591,992
1,585,773
1,477,343
1,477,235
(144,980)
1,447,012
345,179
323,934
29,525
(193,989)
1,391,784
384,761
364,130
30,675
(126,059)
1,351,284
311,619
330,214
-
(180,464)
1,296,771
346,951
373,366
-
2,145,650
2,171,350
1,993,117
2,017,088
(201,273)
(802,542)
1,141,835
(335,617)
806,218
(99,183)
(819,248)
1,252,919
(362,556)
890,363
(189,011)
(730,885)
1,073,221
(313,769)
759,452
(88,092)
(740,729)
1,188,267
(342,439)
845,828
97,995
10,620
53,381
5,493
6,190
3,642
6,190
3,664
72
(14)
72
(14)
(18,914)
85,343
891,561
172.6
(5,719)
8,529
898,892
190.6
(20,055)
39,588
799,040
162.5
(5,714)
3,429
849,257
181.0
The attached notes form an integral part of these Financial Statements.
65
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Statements of Financial Position
as at 31 December 2020
All amounts are expressed in K’000
Note
2020
2019
2020
2019
Consolidated
Bank
ASSETS
Cash and operating balances with Central Banks
Amounts due from other banks
Treasury and Central Bank bills
Cash reserve requirement with Central Banks
Other financial assets
Loans and receivables from customers
Property, plant and equipment
Asset subject to operating lease
Investment in subsidiaries
Deferred tax assets
Other assets
Total assets
LIABILITIES
Amounts due to other banks
Customer deposits
Insurance policy liabilities
Other liabilities
Deferred tax liabilities
Total liabilities
SHAREHOLDERS’ EQUITY
Ordinary shares
Retained earnings
Other reserves
10
11
12
13
14
15
7
16
17
18
31
19
7
28
29
29
2,897,195
1,187,461
2,841,006
1,559,284
1,816,564
1,022,469
2,459,497
1,766,601
2,379,542
1,130,805
2,801,339
1,475,103
1,510,406
997,816
2,420,088
1,693,300
3,242,225
2,121,071
2,653,577
1,572,755
13,506,660
13,200,807
12,058,241
11,819,970
895,476
36,434
-
290,484
1,067,212
879,942
48,133
-
250,846
961,188
691,634
36,434
385,078
284,605
537,186
698,755
48,133
378,263
246,086
505,281
27,523,437
24,527,118
24,433,544
21,890,853
126,270
83,931
229,098
162,145
21,654,024
19,339,056
20,104,351
17,981,756
1,043,990
1,230,172
35,376
890,147
-
-
1,065,409
1,066,198
946,329
31,542
-
-
24,089,832
21,410,085
21,399,647
19,090,230
372,189
372,310
372,189
372,310
2,622,249
2,394,382
2,360,983
2,173,836
438,516
346,513
300,725
254,477
Equity attributable to the members of the company
3,432,954
3,113,205
3,033,897
2,800,623
Minority interests
Total shareholders’ equity
Total equity and liabilities
651
3,828
-
-
3,433,605
3,117,033
3,033,897
2,800,623
27,523,437
24,527,118
24,433,544
21,890,853
The attached notes form an integral part of these Financial Statements.
Sir Kostas G. Constantinou, OBE
Chairman
Robin Fleming, CSM
Group Chief Executive Officer/Managing Director
66
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Statements of Changes in Shareholders’ Equity
for the Year Ended 31 December 2020
All amounts are expressed in K’000
Note
Share capital
Reserves
Retained
earnings
Minority
interests
Total
Bank
Balance as at 1 January 2019
372,364
252,384
Net profit
Other comprehensive income
Total comprehensive income
Dividends paid during the year
Share buyback
Total transactions with owners
Transfer from asset revaluation reserve
BSP Life policy reserve
Balance at 31 December 2019
Net profit
Other comprehensive income
Total comprehensive income
Dividends paid during the year
Share buyback
Total transactions with owners
Transfer from asset revaluation reserve
BSP Life policy reserve
Balance at 31 December 2020
Group
Balance as at 1 January 2019
Net profit
Other comprehensive income
Total comprehensive income
Dividends paid during the year
Share buyback
Gain attributable to minority interests
Total transactions with owners
Transfer from asset revaluation reserve
BSP Life policy reserve
Balance at 31 December 2019
Net profit
Other comprehensive income
Total comprehensive income
Dividends paid during the year
Share buyback
Gain attributable to minority interests
Acquisition of minority interest
Total transactions with owners
Transfer from asset revaluation reserve
BSP Life policy reserve
Balance at 31 December 2020
28
28
29
29
28
28
29
29
28
28
29
29
28
28
29
29
-
-
-
-
(54)
(54)
-
-
372,310
-
-
-
-
(121)
(121)
-
-
372,189
-
3,429
3,429
-
-
-
(4,933)
3,597
254,477
-
39,588
39,588
-
-
-
(1,032)
7,692
300,725
372,364
339,320
-
-
-
-
(54)
-
(54)
-
-
372,310
-
-
-
-
(121)
-
(121)
-
-
372,189
-
8,529
8,529
-
-
-
-
(4,933)
3,597
346,513
-
85,343
85,343
-
-
-
-
(1,032)
7,692
438,516
The attached notes form an integral part of these Financial Statements.
1,976,138
845,828
-
845,828
(649,466)
-
(649,466)
4,933
(3,597)
2,173,836
759,452
-
759,452
(565,354)
-
(565,354)
741
(7,692)
2,360,983
2,156,873
890,363
-
890,363
(653,940)
-
(250)
(654,190)
4,933
(3,597)
2,394,382
806,218
-
806,218
(569,191)
-
(2,209)
-
(571,400)
741
(7,692)
2,622,249
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,600,886
845,828
3,429
849,257
(649,466)
(54)
(649,520)
-
-
2,800,623
759,452
39,588
799,040
(565,354)
(121)
(565,475)
(291)
-
3,033,897
3,578
2,872,135
-
-
-
-
-
250
250
-
-
890,363
8,529
898,892
(653,940)
(54)
-
(653,994)
-
-
3,828
3,117,033
-
-
-
(164)
-
2,209
(5,222)
(3,177)
-
-
806,218
85,343
891,561
(569,355)
(121)
-
(5,222)
(574,698)
(291)
-
651
3,433,605
67
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Statements of Cash Flows
for the Year Ended 31 December 2020
All amounts are expressed in K’000
Note
2020
2019
2020
2019
Consolidated
Bank
CASH FLOW FROM OPERATING ACTIVITIES
Interest received
Fees and other income
Interest paid
Amounts paid to suppliers and employees
Operating cash flow before changes in operating assets
& liabilities
Net (increase)/ decrease in:
Loans and receivables from customers
Cash reserve requirements with the Central Banks
Bills receivable and other assets
Net increase/ (decrease) in:
Customer deposits
Bills payable and other liabilities
Net cash flow from operations before income tax
Income taxes paid
Net cash flow from operating activities
CASH FLOW FROM INVESTING ACTIVITIES
Sale/(purchase) of government securities
Expenditure on property, plant and equipment
Expenditure on software development costs
Proceeds from disposal of property, plant and equipment
Additional funding of subsidiaries
Net cash flow from/ (used in) investing activities
CASH FLOW FROM FINANCING ACTIVITIES
Share buyback
Dividends paid
Principal repayments of borrowings
Proceeds from borrowings
Subordinated debt securities matured
Net cash flow used in financing activities
Net (decrease)/increase in cash and cash equivalents
Exchange rate movements on cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and Cash Equivalents at the end of the year
1,556,496
1,605,387
1,443,885
1,480,232
697,930
(89,307)
(886,940)
779,565
(167,913)
(776,812)
641,246
(71,615)
719,567
(153,354)
(756,232)
(646,339)
9
1,278,179
1,440,227
1,257,284
1,400,106
(448,960)
207,317
(39,982)
(737,195)
(81,058)
(201,387)
(371,177)
(644,594)
218,197
33,310
(71,265)
(98,089)
2,314,968
1,106,290
2,122,595
1,022,586
218,669
3,530,191
(372,872)
3,157,319
(184)
(36,312)
(207,231)
1,526,693
(383,287)
1,143,406
3,223,897
1,401,513
(346,003)
(363,837)
2,877,894
1,037,676
(1,502,663)
429,961
(1,462,073)
561,386
(63,945)
(46,530)
1,787
(82,780)
(52,108)
7,076
-
-
(45,994)
(46,330)
1,787
(6,815)
(1,611,351)
302,149
(1,559,425)
(79,249)
(49,979)
7,076
(30,666)
408,568
(121)
(569,355)
(113,418)
242,215
-
(54)
(653,940)
(61,153)
33,670
(75,525)
(121)
(54)
(565,354)
(649,466)
(113,418)
(61,153)
242,215
33,670
-
(75,525)
(440,679)
(757,002)
(436,678)
(752,528)
1,105,289
97,995
2,755,102
3,958,386
688,553
10,620
2,055,929
2,755,102
881,791
693,716
53,381
5,493
2,346,077
1,646,868
3,281,249
2,346,077
7
32
28
28
19
9
9
The attached notes form an integral part of these Financial Statements.
68
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 1. FINANCIAL STATEMENTS PREPARATION
The principal accounting policies adopted in the preparation of these
Financial Statements are set out below. These policies have been
consistently applied to all the periods presented unless otherwise
stated. The assets and liabilities are presented in order of liquidity on the
Statements of Financial Position.
A. Basis of Presentation and General Accounting Policies
The Financial Statements of the Bank of South Pacific Limited and the
Group are prepared in accordance with International Financial Reporting
Standards as issued by the International Accounting Standards Board and
interpretations of these standards issued by the International Financial
Reporting Interpretations Committee. They are prepared on the basis of
the historical cost convention, as modified by the revaluation of certain
non-current assets, financial instruments and liabilities.
Estimates and assumptions have been used to achieve conformity with
generally accepted accounting principles in the preparation of these
financial statements. These assumptions and estimates affect balances of
assets and liabilities, contingent liabilities and commitments at the end of
the reporting period, and amounts of revenues and expenses during the
reporting period. Whilst the estimates are based on management's best
knowledge of current events and conditions, actual results may ultimately
differ from those estimates.
The financial statements are presented in Papua New Guinea Kina,
expressed in thousands of Kina, as permitted by International Financial
Reporting Standards.
Standards, amendments and interpretations effective in the year ended
31 December 2020
The following standards, amendments and interpretations to existing
standards became applicable for the first time during the accounting
period beginning 1 January 2020.
•
Notes to the Financial Statements
for the Year Ended 31 December 2020
modification. Lessees can elect to account for such rent concessions
in the same way as they would if they were not lease modifications. In
many cases, this will result in accounting for the concession as variable
lease payments in the period(s) in which the event or condition that
triggers the reduced payment occurs.
Standards, amendments and interpretations issued but not yet effective
for the year ended 31 December 2020 or adopted early
The following standards, amendments and interpretations to existing
standards have been published and are mandatory for the entity’s
accounting periods beginning on or after 1 January 2021 or later periods,
but the entity has not early adopted them:
• Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate
Benchmark Reform – Phase 2 (effective1 January, 2021) - The Phase
2 amendments address issues that arise from the implementation of
the reforms, including the replacement of one benchmark with an
alternative one.
• A number of narrow-scope amendments to IFRS 3, IAS 16, IAS 37
and some annual improvements on IFRS 1, IFRS 9, IAS 41 and IFRS 16
(effective 1 January, 2022).
- Amendments to IFRS 3, ‘Business combinations’ update a reference in
IFRS 3 to the Conceptual Framework for Financial Reporting without
changing the accounting requirements for business combinations.
- Amendments to IAS 16, ‘Property, plant and equipment’ prohibit
a company from deducting from the cost of property, plant and
equipment amounts received from selling items produced while
the company is preparing the asset for its intended use. Instead, a
company will recognise such sales proceeds and related cost in the
income statement.
- Amendments to
IAS 37,
‘Provisions, contingent
liabilities and
contingent assets’ specify which costs a company includes when
assessing whether a contract will be loss-making.
IFRS 17 ‘Insurance contracts” (effective 1 January 2023) replaces IFRS
4. IFRS 17 will fundamentally change the accounting by all entities that
issue insurance contracts and investment contracts with discretionary
participation features.
• Amendments to IFRS 3 – definition of a business. This amendment
revises the definition of a business. According to feedback received by
the IASB, application of the current guidance is commonly thought to
be too complex, and it results in too many transactions qualifying as
business combinations.
• Amendments to IAS 1 and IAS 8 on the definition of ‘material’. These
amendments to IAS 1, ‘Presentation of financial statements’, and IAS 8,
‘Accounting policies, changes in accounting estimates and errors’, and
consequential amendments to other IFRSs:
- use a consistent definition of materiality throughout IFRSs and the
-
-
Conceptual Framework for Financial Reporting
clarify the explanation of the definition of material; and
incorporate some of the guidance in IAS 1 about immaterial
information
• Amendments to IFRS 9, IAS 39 and IFRS 7 – interest rate benchmark
reform. These Phase 1 amendments provide relief in relation to hedge
accounting and interest rate benchmark reform and have the effect
that IBOR reform should not generally cause hedge accounting to
terminate. Any hedge ineffectiveness should continue to be recorded in
the income statement. Given the pervasive nature of hedges involving
IBOR based contracts, the relief will affect companies in all industries
who do hedge accounting.
• Amendment to IFRS 16, ‘Leases’ – Covid-19 related rent concessions.
As a result of the coronavirus (COVID-19) pandemic, rent concessions
have been granted to lessees. Such concessions might take a variety of
forms, including payment holidays and deferral of lease payments. This
amendment provides an optional practical expedient for lessees from
assessing whether a rent concession related to COVID-19 is a lease
B. Consolidation
The Financial Statements incorporate the assets and liabilities of all
controlled entities of the Group as at 31 December 2020, and their results
for the year then ended.
Controlled entities are those over which the Group has the power to govern
financial and operating policies, generally accompanied by a shareholding
that commands the majority of voting rights, and are commonly referred
to as subsidiaries.
Subsidiaries are accounted for at acquisition under the acquisition method
of accounting, where:
• consideration transferred is measured at fair value of assets transferred,
•
equity issued and liabilities assumed;
identifiable net assets are recorded initially at acquisition, at their fair
values;
• any excess of the acquisition cost over the relevant share of identifiable
net assets acquired is treated as goodwill, and any deficiency is
recognised directly in the Statement of Comprehensive Income.
All intercompany transactions and balances are eliminated.
C. Foreign currency
The Financial Statements of the Group are presented in the currency of the
primary economic environment in which the entity operates (its functional
69
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Measurement of expected credit loss allowance for financial assets
measured at amortised cost in line with IFRS 9 is an area that requires the
use of complex models and significant assumptions about future economic
conditions and credit behaviour (e.g. the likelihood of customers defaulting
and the resulting losses). Explanation of the inputs, assumptions and
estimation techniques used in measuring Expected Credit Losses (ECL) is
further detailed in note 15, which also sets out key sensitivities of the ECL
to changes in these elements.
A number of significant judgements are also required in applying the
accounting requirements for measuring ECL, such as:
• Determining criteria for significant increase in credit risk;
• Choosing appropriate models and assumptions for the measurement
•
•
of ECL;
Establishing the number and relative weightings of forward-looking
scenarios for each type of product/market and the associated ECL; and
Establishing groups of similar financial assets for the purposes of
measuring ECL.
Detailed information about the judgements and estimates made by the
Group in the above areas are set out in note 15.
Impact of COVID-19
The COVID-19 pandemic and the measures put in place domestically and
globally to control the spread of the virus have had a significant impact on
global economies and financial markets. As a result, this has increased the
uncertainty and judgement required in relation to our critical accounting
assumptions and estimates, primarily relating to expected credit losses as
there is a higher than usual degree of uncertainty associated with these
assumptions and estimates, the actual economic conditions are likely to
be different from those forecast which may significantly impact accounting
estimates included in these financial statements. The impact of COVID-19
is discussed further in each of the related notes.
Notes to the Financial Statements
for the Year Ended 31 December 2020
currency). For the purpose of these Financial Statements, the results and
financial position of the Bank are expressed in Papua New Guinea kina,
which is the Bank’s functional and presentation currency.
In preparing the Financial Statements, transactions in currencies other
than the entity’s functional currency (foreign currencies) are recorded at
the rates of exchange prevailing on the dates of the transactions. At each
balance sheet date, monetary items denominated in foreign currencies
are retranslated at the rates prevailing at the balance sheet date. Non-
monetary items carried at fair value that are denominated in foreign
currencies are retranslated at the rates prevailing on the date when the fair
value was determined. Non-monetary items that are measured in terms of
historical cost in a foreign currency are not retranslated.
Foreign operations
On consolidation, the assets and liabilities of the consolidated entity’s
overseas operations are translated at exchange rates prevailing at the
reporting date. Income and expense items are translated at the average
exchange rates for the period unless exchange rates fluctuate significantly.
Exchange differences arising, if any, are recognised in the foreign currency
translation reserve, and recognised in profit or loss on disposal of the
foreign operation.
D. Critical accounting estimates and judgments
The application of the Group’s accounting policies requires the use of
estimates and assumptions. If different assumptions or estimates were
applied, the resulting values would change, impacting the net assets and
income of the Group.
This note provides an overview of the areas that involve a higher degree
of judgement or complexity, and major sources of estimation uncertainty
that have a significant risk of resulting in a material adjustment within the
next financial year. Detailed information about each of these estimates
and judgements is included in the related notes together with information
about the basis of calculation for each affected line item in the financial
statements.
The areas involving significant estimates and judgments are:
•
Estimation of current tax liability in the multiple tax jurisdictions - note
7
Estimated impairment of financial or non-financial assets – note 12, 14
and 15
•
• Estimated insurance liability – note 31
•
Estimation of fair value of financial and non-financial assets and
liabilities – note 27
70
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Notes to the Financial Statements
for the Year Ended 31 December 2020
Financial Performance
2. SEGMENT REPORTING
Accounting Policy
Segments are reported in a manner consistent with the internal reporting provided to the Group’s chief operating decision maker. This reflects the
way the Group’s businesses are managed, rather than the legal structure of the Group.
For management purposes, segment information determination is based on the risks involved with the provision of core banking services and products
and the Bank and Group’s management reporting system. The main business lines/segments for management purposes are banking services, split into
PNG Bank and Offshore Banks and non-banking services which comprise insurance operations, fund management and asset financing activities. The
Bank and Group’s business segments operate in Papua New Guinea, Fiji, Solomon Islands, Cook Islands, Tonga, Samoa, Vanuatu, Laos and Cambodia.
Inter segment adjustments reflect elimination entries in respect of inter segment income and expense allocations including funds transfer pricing.
Consolidated
All amounts are expressed in K’000
Analysis by segments
Year ended 31 December 2020
Net interest income
Other income
Net insurance income
Total operating income
Operating expenses
Impairment expenses
Profit before income tax
Income tax
Net profit after income tax
Assets
Liabilities
Net assets
Year ended 31 December 2019
Net interest income
Other income
Net insurance income
Total operating income
Operating expenses
Impairment expenses
Profit before income tax
Income tax
Net profit after income tax
Assets
Liabilities
Net assets
PNG Bank
Offshore Banks
Non-Bank
Entities
Adjust Inter
Segments
Total
1,148,684
496,137
-
1,644,821
(581,448)
(146,472)
916,901
(274,985)
641,916
263,807
196,194
-
460,001
(207,639)
(48,845)
203,517
(50,191)
153,326
32,289
24,344
32,246
88,879
(18,755)
(5,956)
64,168
(10,441)
53,727
2,232
1,447,012
(47,562)
(2,721)
(48,051)
5,300
-
(42,751)
-
(42,751)
669,113
29,525
2,145,650
(802,542)
(201,273)
1,141,835
(335,617)
806,218
18,579,915
8,566,675
1,921,829
(1,544,982)
27,523,437
(16,104,050)
(7,463,833)
(1,418,414)
896,465
(24,089,832)
2,475,865
1,102,842
503,415
(648,517)
3,433,605
1,115,454
542,027
-
1,657,481
(582,740)
(58,555)
1,016,186
(297,480)
718,706
241,808
243,347
-
485,155
30,772
18,496
34,999
84,267
3,750
1,391,784
(54,979)
748,891
(4,324)
30,675
(55,553)
2,171,350
(220,439)
(20,393)
4,324
(819,248)
(36,244)
228,472
(58,085)
170,387
(4,384)
59,490
(6,991)
52,499
-
(99,183)
(51,229)
1,252,919
-
(362,556)
(51,229)
890,363
16,841,489
7,527,333
1,728,459
(1,570,163)
24,527,118
(14,495,105)
(6,565,047)
(1,274,339)
924,406
(21,410,085)
2,346,384
962,286
454,120
(645,757)
3,117,033
71
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Notes to the Financial Statements
for the Year Ended 31 December 2020
3. NET INTEREST INCOME
Accounting Policy
Interest income and expense are recognised in the Statement of Comprehensive Income on an accrual basis using the effective interest rate (“EIR”)
method. The EIR method calculates the amortised cost of a financial instrument by discounting the financial instrument’s estimated future cash receipts
or payments to their present value and allocates the interest income or interest expense, including any fees, costs, premiums or discounts integral to the
instrument, over its expected life.
Interest income includes coupons earned on Government inscribed stock, accrued discount and premium on Treasury and Central Bank bills.
Interest income is recognised for Stage 1 and Stage 2 financial assets measured at amortised cost by applying the EIR to gross carrying amounts of the
financial instruments. For Stage 3 financial instruments, interest income is recognised by applying EIR on the net carrying value of the financial instrument.
Expenses associated with the borrowing of funds are charged to the Statement of Comprehensive Income in the period in which they are incurred.
Net interest income
All amounts are expressed in K’000
Interest income
Consolidated
Bank
2020
2019
2020
2019
Loans, advances and other receivables from customers1
1,199,823
1,238,453
1,084,444
1,125,395
Other financial assets - inscribed stock
Treasury and Central Bank bills
Cash and balances with Central Bank
Other
Less: Interest expense
Customer deposits
Other banks
Subordinated debt securities
220,328
163,332
6,138
2,371
198,484
141,573
6,189
1,074
219,956
162,287
8,005
2,651
198,164
140,086
9,714
3,876
1,591,992
1,585,773
1,477,343
1,477,235
136,688
8,292
-
144,980
178,053
12,396
3,540
193,989
116,387
9,672
-
126,059
162,912
14,012
3,540
180,464
1,447,012
1,391,784
1,351,284
1,296,771
1Group interest income includes K20.511m (Bank K18.915m) recognized on impaired loans (Stage 3) to customers, 2019: K13.079m (Bank K12.957m). The Group
takes up required provisions on such interest income as detailed in the accounting policy in note 15.
72
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Notes to the Financial Statements
for the Year Ended 31 December 2020
4. NON-INTEREST INCOME
Accounting Policy
Fee and commission income
Fees and commissions are generally recognised on an accrual basis when the performance obligation is satisfied (i.e. service has been provided). Other
non-risk fee income which includes facility fees include certain line fees and fees for providing customer bank accounts. They are recognised over the term
of the facility/period of service on a straight-line basis.
All other risk related fees that constitute cost recovery are taken to income when levied. Income which forms an integral part of the effective interest rate
of a financial instrument is recognised using the effective interest method and recorded in interest income (for example, loan origination fees).
Foreign exchange income or losses
Realised and unrealised gains or losses from foreign currency trading, or from changes in the fair value of the trading assets and liabilities are recognised
as income in the Statement of Comprehensive Income in the period in which they arise.
All amounts are expressed in K’000
Net Fee and commission income
Product related
Trade and international related
Electronic banking related
Other
Other income
Foreign exchange related1
Operating lease rentals
Other
Consolidated
Bank
2020
2019
2020
2019
178,512
19,320
116,514
30,833
345,179
288,203
7,503
28,228
323,934
182,220
21,259
143,801
37,481
384,761
327,705
7,503
28,922
364,130
163,186
18,185
112,572
17,676
311,619
260,181
7,503
62,530
330,214
169,131
20,366
132,861
24,593
346,951
291,308
7,503
74,555
373,366
1Foreign exchange related income includes gains and losses from spot and forward contracts and translated foreign currency assets and liabilities.
73
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Notes to the Financial Statements
for the Year Ended 31 December 2020
5. OPERATING EXPENSES
Accounting Policy
Salaries and related on-costs include annual leave, long service leave, employee incentives and relevant taxes. Staff expenses are recognised over the
period the employee renders the service. Long service leave is discounted to present value using assumptions relating to staff departure, leave utilisation
and future salary.
Superannuation expense includes expenses relating to defined contribution plans. Defined contribution expense is recognized in the period the service
is provided.
Premises and equipment expenses include depreciation, which is calculated using the straight-line method over the asset’s estimated useful life. The
right-of-use assets are recognized under IFRS 16. Leases are depreciated over the shorter of the lease term or the useful life of the underlying asset, with
the depreciation presented within depreciation of Property, Plant and Equipment.
Computing expenses are recognised as incurred, unless they qualify for capitalization as computer software due to the expenditure generating probable
future economic benefits. If capitalised, computer software is subsequently amortised over its estimated useful life. The Group assesses, at each balance
sheet date, useful lives and residual values and whether there is any objective evidence of impairment. If an asset's carrying value is greater than its
recoverable amount, the carrying amount is written down immediately to its recoverable amount.
Other expenses are recognised as the relevant service is rendered. Operating expenses related to provisions are recognised for present obligations arising
from past events where a payment to settle the obligation is probable and can be reliably estimated.
Consolidated
Bank
2020
2019
2020
2019
109,703
109,719
75,202
25,597
4,234
10,775
640
86,179
422,049
95,246
125,412
80,959
28,173
3,639
2,318
1,975
87,940
425,662
99,115
93,899
68,257
25,375
3,538
10,349
640
80,424
381,597
90,694
111,245
63,405
22,577
3,044
1,654
1,975
83,442
378,036
301,887
312,239
275,676
286,004
14,787
10,890
52,929
380,493
802,542
15,531
10,929
54,887
393,586
819,248
13,358
10,061
50,193
349,288
730,885
14,133
10,320
52,236
362,693
740,729
Operating Expenses
All amounts are expressed in K’000
Administration
Computing
Depreciation
Amortisation of computer development costs
Non-executive directors costs
Non-lending losses
Fixed asset impairment expenses
Premises and equipment
Staff costs
Wages and salaries
Defined contribution plans
Statutory benefit contributions
Other staff benefits
74
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Notes to the Financial Statements
for the Year Ended 31 December 2020
6. IMPAIRMENT OF FINANCIAL ASSETS
Accounting Policy
Impairment
All Loans and receivables from customers are subject to continuous management review. If there is an expectation that the Group will not be able to
collect amounts due under the terms of the loan, provision is recognised equivalent to lifetime ECL. All bad debts are written off against available specific
provision for loan impairment in the period in which they are classified as irrecoverable. Subsequent recoveries are credited to the provision for loan
losses in the Statement of Comprehensive Income.
General provisions for impairment are maintained to cover expected losses unidentified at balance date in the overall portfolio of Loans and receivables
from customers. The provisions are determined having regard to the level of risk weighted assets, economic conditions, the general risk profile of the
credit portfolio, past loss experience and a range of other criteria. The amount necessary to bring the provisions to their assessed levels, after write-offs,
is charged to the Statement of Comprehensive Income.
The Group assesses on a forward-looking basis the ECL associated with its debt instrument assets carried at amortised cost and with the exposure
arising from loan commitments and financial guarantee contracts. The Group recognises a loss allowance for such losses at each reporting date. The
measurement of ECL reflects:
• An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
• 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.
Note 15 provides more detail of how the expected credit loss allowance is measured.
Impairment on financial assets by asset class as follows:
All amounts are expressed in K’000
Loans and receivables from customers (note 15)
Treasury and Central Bank Bills (note 12)
Other financial asset (note 14)
Consolidated
Bank
2020
2019
2020
2019
183,352
8,125
9,796
201,273
101,882
(1,865)
(834)
99,183
171,200
7,949
9,862
189,011
90,861
(1,865)
(904)
88,092
7. INCOME TAX
Accounting Policy
Current Tax
Current tax is calculated by reference to the amount of income taxes
payable or recoverable in respect of the taxable profit or tax loss for the
period. It is calculated using tax rates and tax laws that have been enacted
or substantively enacted by the reporting date. Current tax for current and
prior periods is recognised as a liability (or asset) to the extent that it is
unpaid (or refundable).
Deferred tax
Deferred tax is accounted for using the balance sheet liability method.
Temporary differences are differences between the tax base of an asset or
liability and its carrying amount in the Statement of Financial Position. In
principle, deferred tax liabilities are recognised for all taxable temporary
differences. Deferred tax assets are recognised to the extent that it is
probable that sufficient taxable amounts will be available against which
deductible temporary differences or unused tax losses and tax offsets can
be utilised. However, deferred tax assets and liabilities are not recognised
if the temporary differences giving rise to them arise from the initial
recognition of assets and liabilities which affects neither taxable income
nor accounting profit.
Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply to the period(s) when the asset and liability giving
rise to them are realised or settled, based on tax rates (and tax laws)
that have been enacted or substantively enacted by the reporting date.
The measurement of deferred tax liabilities and assets 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.
Deferred tax assets and liabilities are offset when they relate to income
taxes levied by the same taxation authority and the Group intends to settle
its current tax assets and liabilities on a net basis.
Current and deferred tax for the period
Current and deferred tax is recognised as an expense or income in the
Statement of Comprehensive Income, except when it relates to items
credited or debited directly to equity, in which case the deferred tax is also
recognised directly in equity.
Critical accounting assumptions and estimates
The Group operates in multiple tax jurisdictions and significant judgement
is required in determining the current tax liability in the multiple tax
jurisdictions. There are many transactions with uncertain tax outcomes
and provisions are determined based on the expected outcomes.
75
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Notes to the Financial Statements
for the Year Ended 31 December 2020
7. INCOME TAX (Continued)
All amounts are expressed in K’000
Income tax expense
Current tax
Deferred tax
Current year
Adjustment to prior year estimates
Tax calculated at 30% of bank profit before tax
Tax calculated at respective subsidiary tax rates
Expenses not deductible for tax
Tax loss not recognised
Income not recognized for tax purposes
Adjustment to prior year estimates
Tax recoverable
At 1 January
Income tax provision
Adjustment to prior year estimates
Other tax related items
Foreign tax paid
Tax payments made
At 31 December
Specific allowance for losses on Loans and receivables from customers
General allowance for losses on Loans and receivables from customers
Employee related provisions
Prepaid expenses
Other provisions
Property, plant and equipment
Unrealised foreign exchange gains
Accruals
At 31 December
Represented by:
Deferred tax asset
Deferred tax liability
At 31 December
Deferred taxes movement:
At 1 January
Current year movement
Adjustment to prior year estimates
Other movements
At 31 December
76
Consolidated
Bank
2020
2019
2020
2019
366,976
(36,156)
330,820
4,797
335,617
321,966
14,664
7,233
1,024
(14,067)
4,797
335,617
368,467
(8,675)
359,792
2,764
362,556
356,480
10,759
6,072
5,548
(19,067)
2,764
362,556
343,853
(32,452)
311,401
2,368
313,769
348,760
(9,510)
339,250
3,189
342,439
321,966
356,480
-
845
-
(11,410)
2,368
313,769
-
995
-
(18,225)
3,189
342,439
27,588
12,753
30,275
17,020
(366,976)
(368,467)
(343,853)
(348,760)
(138)
(459)
20,321
352,551
32,887
67,101
162,889
25,361
(1,156)
42,279
(65,333)
(957)
24,924
255,108
290,484
(35,376)
255,108
579
(564)
18,412
364,875
27,588
56,215
137,768
26,721
(1,349)
47,422
(70,969)
(1,876)
25,372
219,304
250,846
(31,542)
219,304
-
(6)
-
346,003
32,419
64,594
155,764
23,785
(1,213)
46,649
(23,300)
(957)
19,283
284,605
1,004
(2,826)
-
363,837
30,275
53,558
131,960
25,944
(1,323)
45,396
(30,223)
(1,876)
22,650
246,086
284,605
246,086
-
-
284,605
246,086
219,304
208,444
36,156
4,935
(5,287)
8,675
2,185
-
246,086
32,452
2,368
3,699
234,391
9,510
2,185
-
255,108
219,304
284,605
246,086
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Notes to the Financial Statements
for the Year Ended 31 December 2020
8. EARNINGS PER ORDINARY SHARE
Accounting Policy
Earnings per share is determined by dividing the profit or loss attributable to owners of the Bank by the weighted average number of participating shares
outstanding during the reporting year, adjusted for shares which are bought back by BSP.
All amounts are expressed in K’000
Net profit attributable to shareholders (K’000)
Weighted average number of ordinary shares in use (000)
Basic and diluted earnings per share (expressed in toea)
Consolidated
Bank
2020
2019
2020
2019
806,218
467,235
172.6
890,363
467,242
190.6
759,452
467,235
162.5
845,828
467,242
181.0
Basic earnings per ordinary share is calculated by dividing the net profit attributable to shareholders by the weighted average number of ordinary shares
in issue during the year. Bank of South Pacific Limited has no dilutive potential ordinary shares. Consequently, basic earnings per ordinary share equals
diluted earnings per share.
9. RECONCILIATION OF OPERATING CASH FLOW
All amounts are expressed in K’000
2020
2019
2020
2019
Reconciliation of operating profit after tax to operating cash flow before changes in operating assets
Consolidated
Bank
Operating profit after tax
Add: Tax expense
Operating profit before income tax
Major non cash amounts
Depreciation
Amortisation of computer development costs
Net (Gain)/loss on sale of fixed assets
Impairment on financial assets
Movement in payroll provisions
Impairment of fixed assets
Net changes in assets and liabilities
806,218
335,617
890,363
362,556
759,452
313,769
845,828
342,439
1,141,835
1,252,919
1,073,221
1,188,267
75,202
25,597
(707)
201,273
(3,795)
640
80,959
28,173
(2,088)
99,183
9,956
1,975
68,257
25,375
(587)
189,011
8,104
640
(161,866)
(30,850)
(106,737)
63,405
22,577
33
88,092
8,391
1,975
27,366
Operating cash flow before changes in operating assets & liabilities
1,278,179
1,440,227
1,257,284
1,400,106
Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise the following balances with less than 90 days maturity.
Cash and balances with Central Banks (note 10)
Amounts due from other banks (note 11)1
Amounts due to other banks (note 17)
2,897,195
1,187,461
(126,270)
3,958,386
1,816,564
1,022,469
(83,931)
2,755,102
2,379,542
1,130,805
(229,098)
3,281,249
1,510,406
997,816
(162,145)
2,346,077
1The Group undertakes thorough compliance and due diligence reviews before entering into any correspondent banking relationships. Amounts due from
other banks includes deposit of K51.609 million held with counter-party Banks that are not available for use by the Group.
77
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Notes to the Financial Statements
for the Year Ended 31 December 2020
Financial Instruments: Financial Assets
Accounting Policy
Recognition
Loans and receivables are recognized on settlement date, when cash is
advanced to the borrowers.
Modification of loans
The Group sometimes renegotiates or otherwise modifies the contractual
cash flows of loans to customers. When this happens, the Group assesses
whether or not the new terms are substantially different to the original
terms. The Group does this by considering, among others, the following
factors:
•
If the borrower is in financial difficulty, whether the modification
merely reduces the contractual cash flows to amounts the borrower is
expected to be able to pay.
•
• Whether any substantial new terms are introduced, such as a profit
share/equity-based return that substantially affects the risk profile of
the loan.
Significant extension of the loan term when the borrower is not in
financial difficulty.
Significant change in the interest rate.
•
• Change in the currency the loan is denominated in.
•
Insertion of collateral, other security or credit enhancements that
significantly affect the credit risk associated with the loan.
If the terms are substantially different, the Group derecognises the original
financial asset and recognises a ‘new’ asset at fair value and recalculates
a new effective interest rate for the asset. The date of renegotiation
is consequently considered to be the date of initial recognition for
impairment calculation purposes, including for the purpose of determining
whether a significant increase in credit risk has occurred. However, the
Group also assesses whether the new financial asset recognised is deemed
to be credit-impaired at initial recognition, especially in circumstances
where the renegotiation was driven by the debtor being unable to make
the originally agreed payments. Differences in the carrying amount are also
recognised in profit or loss as a gain or loss on de-recognition.
If the terms are not substantially different, the renegotiation or modification
does not result in de-recognition, and the Group recalculates the gross
carrying amount based on the revised cash flows of the financial asset
and recognises a modification gain or loss in profit or loss. The new gross
carrying amount is recalculated by discounting the modified cash flows at
the original effective interest rate (or credit-adjusted effective interest rate
for purchased or originated credit-impaired financial assets).
De-recognition
Financial assets are de-recognised when the rights to receive cash flows
from the asset have expired.
There may be situations where the Group has partially transferred the
risks and rewards of ownership and has neither transferred nor retained
substantially all the risks and rewards of ownership. In such situations, the
asset continues to be recognised on the balance sheet to the extent of the
Group’s continuing involvement in the asset.
78
Classification and measurement
Financial assets are grouped into the following classes: cash and balances
with central banks and financial assets measured at fair value through
income statement (FVIS), investment securities, loans, other financial
assets and life insurance assets.
Financial assets are classified based on a) the business model within which
the assets are managed, and b) whether the contractual cash flows of the
instrument represent solely payment of principal and interest (SPPI).
The Group determines the business model at the level that reflects how
groups of financial assets are managed. When assessing the business
model the Group considers factors including how performance and risks
are managed, evaluated and reported and the frequency and volume of,
and reason for, sales in previous periods and expectations of sales in future
periods.
When assessing whether contractual cash flows are SPPI, interest is defined
as consideration primarily for the time value of money and the credit risk
of the principal outstanding. The time value of money is defined as the
element of interest that provides consideration only for the passage of
time and not consideration for other risks or costs associated with holding
the financial asset. Terms that could change the contractual cash flows so
that they may not meet the SPPI criteria include contingent and leverage
features, non-recourse arrangements, and features that could modify the
time value of money.
Debt instruments
If the debt instruments have contractual cash flows which represent SPPI
on the principal balance outstanding they are classified at:
•
amortised cost if they are held within a business model whose
objective is achieved through holding the financial asset to collect
these cash flows; or
fair value through other comprehensive income (FVOCI) if they are
held within a business model whose objective is achieved either
through collecting these cash flows or selling the financial asset; or
FVIS if they are held within a business model whose objective is
achieved through selling the financial asset.
•
•
Debt instruments are measured at FVIS where the contractual cash flows
do not represent SPPI on the principal balance outstanding or where it is
designated at FVIS to eliminate or reduce an accounting mismatch. Debt
instruments at amortised cost are initially recognised at fair value and
subsequently measured at amortised cost using the effective interest rate
method. They are presented net of provisions for expected credit losses
determined using the ECL model.
Debt instruments at FVOCI are measured at fair value with unrealised
gains and losses recognised in other comprehensive income except for
interest income, impairment charges and foreign exchange gains and
losses, which are recognised in the Statement of Comprehensive Income.
Impairment on debt instruments at FVOCI is determined using the ECL
model and is recognised in the Statement of Comprehensive Income
with a corresponding amount in other comprehensive income. There is
no reduction of the carrying value of the debt security which remains at
fair value. The cumulative gain or loss recognised in other comprehensive
income is subsequently recognised in the Statement of Comprehensive
Income when the instrument is derecognised.
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Notes to the Financial Statements
for the Year Ended 31 December 2020
Debt instruments at FVIS are measured at fair value with subsequent
changes in fair value recognised in the Statement of Comprehensive
Income.
in fair value recognised in the Statement of Comprehensive Income.
Derivative financial instruments and acceptances
Equity securities
Equity securities are measured at FVOCI where they:
• are not held for trading; and
• an irrevocable election is made by the Group.
Otherwise, they are measured at FVIS.
Equity securities at FVOCI are measured at fair value with unrealised gains
and losses recognised in other comprehensive income, except for dividend
income which is recognised in the Statement of Comprehensive Income.
The cumulative gain or loss recognised in other comprehensive income is
not subsequently recognised in the Statement of Comprehensive Income
when the instrument is disposed.
Equity securities at FVIS are measured at fair value with subsequent changes
10. CASH AND OPERATING BALANCES WITH CENTRAL BANKS
Forward foreign exchange contracts entered into for trading purposes are
initially recognised at fair value and subsequently re-measured at fair value
based upon the forward rate. Gains and losses on such contracts are taken
to the Statement of Comprehensive Income.
Acceptances comprise undertakings by the Group to pay bills of exchange
drawn on customers. The Group expects most acceptances to be settled
simultaneously with the reimbursement from the customers. Customer
acceptances are accounted for as off-balance sheet transactions and are
disclosed as contingent liabilities and commitments.
The Group does not actively enter into or trade in complex forms of
derivative financial instruments such as currency and interest rate swaps
and options.
All amounts are expressed in K’000
Notes, coins and cash at bank
Balances with Central Banks other than statutory deposit
At 31 December
11. AMOUNTS DUE FROM OTHER BANKS
Items in the course of collection
Placements with other banks
At 31 December
12. TREASURY AND CENTRAL BANK BILLS
Treasury and Central Bank bills – face value
Unearned interest
Less allowance for impairment
Financial assets carried at fair value through profit and loss
Treasury bills
At 31 December
Allowance for impairment
At 1 January
Provision/(release) for impairment
At 31 December
Consolidated
Bank
2020
2019
2020
2019
466,069
2,431,126
2,897,195
513,241
1,303,323
1,816,564
412,729
1,966,813
2,379,542
496,694
1,013,712
1,510,406
11,944
1,175,517
1,187,461
29,692
992,777
1,022,469
11,944
1,118,861
1,130,805
29,693
968,123
997,816
2,940,164
2,513,084
2,908,416
2,478,589
(91,413)
(15,839)
(50,788)
(7,714)
(91,414)
(15,663)
(50,787)
(7,714)
2,832,912
2,454,582
2,801,339
2,420,088
8,094
4,915
-
-
2,841,006
2,459,497
2,801,339
2,420,088
7,714
8,125
15,839
9,579
(1,865)
7,714
7,714
7,949
15,663
9,579
(1,865)
7,714
79
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Notes to the Financial Statements
for the Year Ended 31 December 2020
13. CASH RESERVE REQUIREMENT WITH CENTRAL BANKS
The Bank and the Group complies with the Cash Reserve Requirement (“CRR”) set by the regulatory authorities of the jurisdictions that it operates in. The
CRR specifies that a bank must hold an amount equal to a percentage of its total customer deposits in the form of cash in an account maintained by the
respective Central Banks. The Bank and Group complies with this requirement on an ongoing basis. CRR requirements applicable for each jurisdiction at
balance date were: PNG 7% (2019: 10%), Fiji 10% (2019: 10%), Solomon Islands 5% (2019: 7.5%), Samoa 4.5% (2019: 4.5%), Tonga 10% (2019: 10%) and
Vanuatu 5.25% (2019: 5.25%).
14. OTHER FINANCIAL ASSETS
All amounts are expressed in K’000
Inscribed stock – issued by Central Bank
Less allowance for impairment
Financial assets carried at fair value through profit and loss:
Government inscribed stock
Equity securities
At 31 December
Allowance for impairment
At 1 January
Provision/(release) for impairment
At 31 December
15. LOANS AND RECEIVABLES FROM CUSTOMERS
Accounting Policy
Consolidated
Bank
2020
2019
2020
2019
2,696,749
1,357,845
2,668,385
1,577,701
(14,966)
(5,170)
(14,808)
(4,946)
2,681,783
1,352,675
2,653,577
1,572,755
291,042
269,400
513,024
255,372
-
-
-
-
3,242,225
2,121,071
2,653,577
1,572,755
5,170
9,796
14,966
6,004
(834)
5,170
4,946
9,862
14,808
5,850
(904)
4,946
Loans are originated by providing funds directly to the borrower and are recognised when cash is advanced to borrowers. Loans are subsequently
measured at amortised cost using the effective interest rate method where they have contractual cash flows which represent SPPI on the principal
balance outstanding and they are held within a business model whose objective is achieved through holding the loans to collect these cash flows. They
are presented net of any provisions for ECL.
All amounts are expressed in K’000
Overdrafts
Lease financing
Term loans
Mortgages
Policy loans
Consolidated
Bank
2020
2019
2020
2019
812,271
278,813
1,008,876
295,381
737,484
246,595
933,819
258,659
10,340,695
9,903,563
9,503,636
9,114,411
2,813,399
2,605,311
2,350,019
2,159,668
105,193
88,280
-
-
Gross loans and receivables from customers net of reserved interest
14,350,371
13,901,411
12,837,734
12,466,557
Less allowance for losses on loans and receivables from customers
(843,711)
(700,604)
(779,493)
(646,587)
At 31 December
13,506,660
13,200,807
12,058,241
11,819,970
The spread of the loans are detailed in the maturity analysis table in Note 22. The loans are well-diversified across various sectors and are further analysed
in Note 22. Allowance for losses includes K50.082m (Bank K44.963m), 2019: K29.976m (Bank K28.192m) provision taken up for interest recognized on
stage 3 loans.
Lease financing
The Bank and the Group provide lease financing to a broad range of clients to support financing needs in acquiring movable assets such as motor vehicles
and plant and equipment. Finance leases are included within Loans and receivables from customers and are analysed as follows:
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StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Notes to the Financial Statements
for the Year Ended 31 December 2020
Consolidated
Bank
2020
2019
2020
2019
54,550
253,168
307,718
(2,290)
(26,615)
(28,905)
278,813
52,260
226,553
278,813
23,152
309,154
332,306
(1,319)
(35,606)
(36,925)
295,381
21,833
273,548
295,381
49,863
220,139
270,002
(2,115)
(21,292)
(23,407)
246,595
47,748
198,847
246,595
19,241
269,514
288,755
(1,116)
(28,980)
(30,096)
258,659
18,125
240,534
258,659
15. LOANS AND RECEIVABLES FROM CUSTOMERS (continued)
All amounts are expressed in K’000
Gross investment in finance lease receivable
Not later than 1 year
Later than 1 year and not later than 5 years
Unearned future finance income
Not later than 1 year
Later than 1 year and not later than 5 years
Present value of minimum lease payments receivable
Present value of minimum lease payments receivable is analysed as follows:
Not later than 1 year
Later than 1 year and not later than 5 years
At 31 December
Allowance for Expected Credit Losses
Accounting Policy
Stage 2: Lifetime ECL – performing
Impairment under IFRS 9 applies to all financial assets at amortised costs,
lease receivables and credit commitments.
For financial assets where there has been a significant increase in credit
risk since origination but where the asset is still performing, a provision for
lifetime ECL is recognised.
The ECL determined under IFRS 9 is recognised as follows:
Stage 3: Lifetime ECL – non-performing
•
Loans (including lease receivables), debt securities at amortised cost
and due from subsidiaries: as a reduction of the carrying value of the
financial asset through an offsetting provision account;
• Credit commitments: as a provision
For financial assets that are non-performing a provision for lifetime ECL is
recognised. Indicators include a breach of contract with the Group such
as a default on interest or principal payments, a borrower experiencing
significant financial difficulties or observable economic conditions that
correlate to defaults on a group of loans.
Measurement
Collective and individual assessment
The Group calculates the provisions for ECL based on a three stage
approach. ECL are a probability-weighted estimate of the cash shortfalls
expected to result from defaults over the relevant timeframe. They are
determined by evaluating a range of possible outcomes and taking into
account the time value of money, past events, current conditions and
forecasts of future economic conditions.
The models use three main components to determine the ECL including:
•
Probability of default (PD): the probability that a counterparty will
default;
Loss given default (LGD): the loss that is expected to arise in the event
of a default; and
Exposure at default (EAD): the estimated outstanding amount of credit
exposure at the time of the default.
•
•
Model stages
The three stages are as follows:
Stage 1: 12 months ECL - performing
For financial assets where there has been no significant increase in credit
risk since origination, a provision for 12 months ECL is recognised.
Expected credit losses are estimated on a collective basis for exposures in
Stage 1, Stage 2 and Stage 3 exposures below specified thresholds and on
an individual basis for Stage 3 exposures that meet specified thresholds.
Expected life
In considering the lifetime time frame for expected credit losses in stages 2
and 3, the standard generally requires use of the remaining contractual life
adjusted where appropriate for prepayments, extension and other options.
For certain revolving credit facilities which include both a drawn and
undrawn component (e.g. credit cards and revolving lines of credit), the
Group’s contractual ability to demand repayment and cancel the undrawn
commitment does not limit our exposure to credit losses to the contractual
notice period. For these facilities, lifetime is based on historical behaviour.
Movement between stages
Assets may move in both directions through the stages of the impairment
model. Assets previously in stage 2 may move back to stage 1 if it is no
longer considered that there has been a significant increase in credit risk.
Similarly, assets in stage 3 may move back to stage 1 or stage 2 if they are
no longer assessed to be non-performing.
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for the Year Ended 31 December 2020
15. LOANS AND RECEIVABLES FROM CUSTOMERS (continued)
Off-Balance Sheet amounts
Any off-balance sheet items, such as loan commitments, are considered for
impairment both on an individual and collective basis.
Definition of default
The definition of default used in measuring expected credit losses is aligned
to the definition used for internal credit risk management purposes. The
default occurs when there are indicators that a debtor is unlikely to fully
satisfy contractual credit obligations to the Group, or the exposure is 90
days past due. Financial assets, including those that are well secured, are
considered credit impaired for financial reporting purposes when they
meet the definition of default. In subsequent periods, any recoveries of
amounts previously written-off are credited to credit impairment charge in
the Statement of Comprehensive Income.
the current COVID-19 relief packages has not, in isolation, been treated as
an indication of SICR. The Group has classified these relief packages into
different categories of risk, which have been assessed for an increased
likelihood of a risk of default to determine whether a SICR has occurred.
The Group does not apply the low credit risk exemption which assumes
investment grade facilities do not have a significant increase in credit risk.
Probability weighting of each scenario.
The Group considers three future macroeconomic scenarios including a
base case scenario along with upside and downside scenarios. Probability
weighting of each scenario is determined by management considering
the risks and uncertainties surrounding the base case scenario, as well as
specific portfolio considerations where required. This is further expanded
in note 22.
Critical accounting assumptions and estimates
• Base case scenario
Key judgements include when a significant increase in credit risk has
occurred and estimation of forward looking macroeconomic information.
Other factors which can impact the provision include the borrower’s
financial situation, the realisable value of collateral, the Group’s position
relative to other claimants, the reliability of customer information and the
likely cost and duration of recovering the loan.
This scenario utilises external economic forecasts used for strategic
decision making and forecasting.
• Upside scenario
This scenario represents a modest improvement on the base case
scenario.
• Downside scenario
This scenario represents a moderate recession.
Significant increase in credit risk
Forward looking macroeconomic information
Determining when a financial asset has experienced a significant increase
in credit risk since origination is a critical accounting judgement which
is primarily based on changes in internal customer risk grades since
origination of the facility. Judgement is involved in setting the rules to
determine whether there has been a significant increase in credit risk since
initial recognition of a loan, resulting in the financial asset moving from
‘stage 1’ to ‘stage 2’, this increases the ECL calculation from an allowance
based on the probability of default in the next 12 months, to an allowance
for lifetime expected credit losses. Subsequent decreases in credit risk
combined with transition from stage 2 to stage 1 may similarly result in
significant changes in the estimate. The setting of precise trigger points
requires judgement. The change in an internal customer risk grade is based
on both quantitative and qualitative factors. The change in the internal
customer risk grade that the Group uses to represent a significant increase
in credit risk is based on a sliding scale. This means that a higher credit
quality exposure at origination would require a more significant downgrade
compared to a lower credit quality exposure before it is considered to have
experienced a significant increase in credit risk.
A backstop is applied and the financial instrument is considered to have
experienced a significant increase in credit risk if the borrower is more than
30 days past due on its contractual payments.
Customers in hardship arrangements are normally treated as an indication
of a significant increase in credit risk but the deferral of payments under
The measurement of ECL for each stage and the assessment of significant
increase in credit risk consider information about past events and current
conditions as well as reasonable and supportable projections of future
events and economic conditions. The estimation of forward-looking
information is a critical accounting judgement. The macroeconomic
variables used in these scenarios, based on current economic forecasts,
include (but are not limited to) change in real gross domestic product
growth rates and unemployment rates.
The macroeconomic scenarios are weighted based on the Group’s best
estimate of the relative likelihood of each scenario. The weighting applied
to each of the three macroeconomic scenarios takes into account historical
frequency, current trends, and forward looking conditions.
The macroeconomic variables and probability weightings of the three
macroeconomic scenarios are subject to the approval of the Group Chief
Financial Officer and Group Chief Risk Officer.
Where appropriate, adjustments will be made to modelled outcomes to
reflect reasonable and supportable information not already incorporated
in the models.
Judgements can change with time as new information becomes available
which could result in changes to the provision for expected credit losses.
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StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Notes to the Financial Statements
for the Year Ended 31 December 2020
15. LOANS AND RECEIVABLES FROM CUSTOMERS (continued)
The loss allowance recognised in the period is impacted by a variety of factors, as described below and as detailed in the following table:
All amounts are expressed in K’000
Provision for impairment
Consolidated
Bank
2020
2019
2020
2019
Movement in allowance for losses on loans, advances and other receivables from customers:
Balance at 1 January
Net new and increased provisioning
Loans written off against provisions / (Write back of provisions no longer
required)
At 31 December
Provision for impairment is represented by
Collective provision for on balance sheet
Individually assessed or specific provision
Total provisions for on balance sheet exposure
Collective provision for off balance sheet exposure
At 31 December
Loan impairment expense
Net collective provision funding
Net new and increased individually assessed provisioning
Total new and increased provisioning
Recoveries during the year
Net (write back) / write off
At 31 December
700,604
143,823
(716)
843,711
517,456
272,821
790,277
53,434
843,711
79,045
64,778
143,823
(56,495)
96,024
183,352
633,567
79,064
(12,027)
700,604
429,932
223,299
653,231
47,373
700,604
17,552
61,512
79,064
(64,042)
86,860
101,882
646,587
132,807
99
779,493
477,553
250,278
727,831
51,662
779,493
77,377
55,430
132,807
(54,633)
93,026
171,200
589,238
65,049
(7,700)
646,587
394,382
206,721
601,103
45,484
646,587
13,478
51,571
65,049
(58,178)
83,990
90,861
The loss allowance recognised in the period is impacted by a variety of factors, as described below:
• Transfers between Stage 1 and Stages 2 or 3 due to financial instruments experiencing significant increases (or decreases) of credit risk or becoming
credit-impaired in the period, and the consequent “step up” (or “step down”) between 12-month and Lifetime ECL;
• Net financial assets originated, which includes additional allowances for new financial instruments recognised during the period, net of releases for
financial instruments de-recognised in the period;
• Movement in risk parameters and other changes arising from regular refreshing of inputs to models, foreign exchange retranslations for assets
denominated in foreign currencies and other movements;
• Management temporary adjustments taken up during the reporting period relating to the impact of COVID-19 on ECL have been reflected as transfers
from Stage 1 to Stage 2.
The impact of the factors on the groups exposure and loss allowance is detailed in the following table:
EAD - Loans and receivables from customers
Stage 1
Stage 2
Stage 3
Total
1 January 2019
Transfers to/(from)
Stage 1
Stage 2
Stage 3
Net financial assets originated
Total movement in EAD during 2019
31 December 2019
11,560,656
1,253,275
350,285
13,164,216
(413,939)
334,851
135,032
(187,033)
-
697
56,142
36,394
(847)
858,825
(32,641)
(50,286)
579,918
115,874
41,403
(22,946)
(15,607)
(150)
775,898
737,195
12,140,574
1,369,149
391,688
13,901,411
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StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Notes to the Financial Statements
for the Year Ended 31 December 2020
15. LOANS AND RECEIVABLES FROM CUSTOMERS (continued)
All amounts are expressed in K’000
ECL – Loans and receivables from customers
Stage 1
Stage 2
Stage 3
Total
1 January 2019
Transfers to/(from)
Stage 1
Stage 2
Stage 3
Net financial assets originated
Movements due to risk parameter and other changes
Total net P&L charge during 2019
Loans written off against provision/(write back of provision no longer
required)
31 December 2019
EAD - Loans and receivables from customers
1 January 2020
Transfers to/(from)
Stage 1
Stage 2
Stage 3
Net financial assets originated
Total movement in EAD during the year
31 December 2020
ECL – Loans and receivables from customers
1 January 2020
Transfers to/(from)
Stage 1
Stage 2
Stage 3
Net financial assets originated
Movements due to risk parameter and other changes
Total net P&L charge during 2020
Loans written off against provision/(write back of provision no longer
required)
31 December 2020
185,687
231,124
179,222
596,033
(11,328)
5,278
-
33,979
(25,868)
2,061
52,332
(25,077)
71
911
(17,177)
11,060
16,866
13,013
(54)
2,063
24,216
56,104
-
-
187,748
242,184
(12,027)
223,299
57,870
(6,786)
17
36,953
(18,829)
69,225
(12,027)
653,231
12,140,574
1,369,149
391,688
13,901,411
(1,087,236)
979,312
81,201
(153,301)
-
1,158
89,196
57,290
(1,422)
576,289
(45,644)
(47,883)
(429,746)
781,525
97,181
(18,728)
(14,810)
(264)
482,762
448,960
11,710,828
2,150,674
488,869
14,350,371
187,748
242,184
223,299
653,231
(31,099)
1,296
-
38,744
(12,912)
(3,971)
122,691
(20,265)
93
(6,917)
(4,107)
91,495
19,936
13,204
(108)
5,694
11,512
50,238
111,528
(5,765)
(15)
37,521
(5,507)
137,762
-
-
(716)
(716)
183,777
333,679
272,821
790,277
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StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Notes to the Financial Statements
for the Year Ended 31 December 2020
15. LOANS AND RECEIVABLES FROM CUSTOMERS (continued)
Total off balance sheet exposures are predominantly classified under stage 1 as at balance date.
All amounts are expressed in K’000
1 January
Net increase/(decrease)
At 31 December
Write-off policy
2020
Stage 1
2019
Stage 1
Gross
exposure
Loss
allowance
Gross
exposure
Loss
allowance
2,567,433
47,373
2,232,389
416,711
6,061
335,044
2,984,144
53,434
2,567,433
37,534
9,839
47,373
The Group writes off financial assets, in whole or in part, when it has exhausted all practical recovery efforts and has concluded there is no reasonable
expectation of recovery. Indicators that there is no reasonable expectation of recovery include (i) ceasing enforcement activity and (ii) where the Group’s
recovery method is foreclosing on collateral and the value of the collateral is such that there is no reasonable expectation of recovering in full.
The Group may write-off financial assets that are still subject to enforcement activity. The Group still seeks to recover amounts it is legally owed in full,
but which have been partially written off due to no reasonable expectation of full recovery.
16. OTHER ASSETS
All amounts are expressed in K’000
Financial Assets
Funds in transit and other assets1
Accrued interest – Government inscribed stock
Accrued interest – loans and receivables from customers
Intercompany account
Outstanding premiums
Prepayments
Accounts receivable
Tax receivable
Non-Financial Assets
Inventory
Investment in Joint Ventures
Intangible Assets
Investment properties
At 31 December
1 Funds in transit includes interbank transactions which are in the process of clearance.
Consolidated
Bank
2020
2019
2020
2019
140,638
61,272
75,289
-
21,030
38,723
4,642
32,887
194,315
37,446
63,620
-
17,681
32,524
3,571
27,588
102,794
146,054
60,688
66,305
3,026
-
33,921
2,938
32,419
36,709
56,826
6,960
-
27,815
2,254
30,275
374,481
376,745
302,091
306,893
11,649
202,546
220,846
257,690
692,731
1,067,212
17,837
202,040
196,206
168,360
584,443
961,188
-
27,879
207,216
-
235,095
537,186
-
20,787
177,601
-
198,388
505,281
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StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Notes to the Financial Statements
for the Year Ended 31 December 2020
Financial Instruments: Financial Liabilities
Accounting Policy
Recognition
Financial liabilities are recognised when an obligation arises.
Classification and subsequent measurement
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. If an exchange of debt instruments or modification of
terms is accounted for as an extinguishment, any costs or fees incurred
are recognised as part of the gain or loss on the extinguishment. If the
exchange or modification is not accounted for as an extinguishment, any
costs or fees incurred adjust the carrying amount of the liability and are
amortised over the remaining term of the modified liability.
Financial liabilities are classified as subsequently measured at amortised
cost, except for:
Financial guarantee contracts and loan commitments
•
Financial liabilities arising from the transfer of financial assets which did
not qualify for de-recognition, whereby a financial liability is recognised
for the consideration received for the transfer. In subsequent periods,
the Group recognises any expense incurred on the financial liability;
and
• Financial guarantee contracts and loan commitments
Financial guarantee contracts are contracts that require the issuer to make
specified payments to reimburse the holder for a loss it incurs because a
specified debtor fails to make payments when due, in accordance with the
terms of a debt instrument. Such financial guarantees are given to banks,
financial institutions and others on behalf of customers to secure loans,
overdrafts and other banking facilities.
De-recognition
Financial liabilities are derecognised when they are extinguished (i.e. when
the obligation specified in the contract is discharged, cancelled or expires).
The exchange between the Group and its original lenders of debt
instruments with substantially different terms, as well as substantial
modifications of the terms of existing financial liabilities, are accounted for
as an extinguishment of the original financial liability and the recognition
of a new financial liability. 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
Financial guarantee contracts are initially measured at fair value and
subsequently measured at the higher of:
• The amount of the loss allowance (calculated as described in note 15);
The premium received on initial recognition less income recognised in
•
accordance with the principles of IFRS 15.
Expected credit loss on loan commitments provided by the Group are
measured as the amount of the loss allowance (calculated as described in
note 15). The Group has not provided any commitment to provide loans
at a below-market interest rate, or that can be settled net in cash or by
delivering or issuing another financial instrument.
For loan commitments and financial guarantee contracts, the loss
allowance is recognised as a provision liability.
17. AMOUNT DUE TO OTHER BANKS
All amounts are expressed in K’000
2020
2019
2020
2019
Consolidated
Bank
Vostro account balances
Other borrowings
At 31 December
18. CUSTOMER DEPOSITS
On demand and short term deposits
Term deposits
At 31 December
57,529
68,741
126,270
47,083
36,848
83,931
76,185
152,913
229,098
66,786
95,359
162,145
17,990,094
15,322,280
17,097,544
14,605,182
3,663,930
4,016,776
3,006,807
3,376,574
21,654,024
19,339,056
20,104,351
17,981,756
The deposits are diversified across industries and regions with the maturity profile of deposits included in note 23.
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StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 19. OTHER LIABILITIES
All amounts are expressed in K’000
Insurance liabilities
Premiums received in advance
Outstanding claims
Claims incurred but not reported (IBNR)
Other insurance liabilities
At 31 December
Creditors and accruals
Items in transit and all other liabilities
Borrowings1
Other provisions
At 31 December
Notes to the Financial Statements
for the Year Ended 31 December 2020
Consolidated
Bank
2020
2019
2020
2019
29,144
23,894
2,146
151,491
206,675
104,891
463,555
245,614
209,437
6,329
18,679
2,297
132,768
160,073
184,941
399,916
116,817
203,662
-
-
-
-
-
70,801
554,437
245,614
195,346
1,230,172
1,065,409
1,066,198
-
-
-
-
-
122,218
520,720
116,817
186,574
946,329
1A loan amounting to K242.215 million (USD 70 million) was drawn down in 2020 with quarterly interest repayments commencing in the third
quarter. The Bank pre-paid an existing obligation of K78.215 million (USD 22.5 million) at the same time.
20. CONTINGENT LIABILITIES AND COMMITMENTS
Commitments for capital expenditure
Amounts with firm commitments, and not reflected in the accounts
44,120
55,829
29,753
51,313
Off balance sheet financial instruments
Letters of credit
Guarantees and indemnities issued
Commitments to extend credit
At 31 December
97,420
289,579
121,600
366,170
96,366
290,123
117,057
341,373
2,599,995
2,088,924
2,509,139
2,003,881
2,986,994
2,576,694
2,895,628
2,462,311
Contingent liabilities includes forward exchange contracts of K2.880m which is not part of the credit exposure.
Legal Proceedings
A number of legal proceedings against the Group were outstanding as at 31 December 20. Based on information available at 31 December 2020, the
Group estimates a contingent liability of K17.7 million (2019: K15.8 million) in respect of these proceedings.
The Bank operates in a number of regulated markets and is subject to regulatory reviews and inquiries. From time to time these may result in fines
or other regulatory enforcement actions. As at reporting date there are no matters of this nature for which the Bank expects to result in a material
economic outflow of resources.
87
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for the Year Ended 31 December 2020
Risk Management
21. RISK MANAGEMENT FRAMEWORK AND CONTROLS
All business operations must deal with a variety of operational and
financial risks. The business activities of a bank expose it to very critical
and specific risks, which are principally related to the Group's primary
financial intermediary role in the financial markets, including the use of
financial instruments including derivatives. These risks (risk of an adverse
event in the financial markets that may result in loss of earnings) include
liquidity risk, foreign exchange risk, interest rate risk and credit risk.
The Group accepts deposits from customers at both fixed and floating rates
and for various periods and seeks to earn above average interest margins
by investing these funds in high quality assets. These margins are achieved
and increased by consolidating short-term funds and lending for longer
periods at higher rates whilst maintaining sufficient liquidity to meet all
claims that might fall due.
The Group also seeks to optimise its interest margins by obtaining above
average returns, net of provisions, through lending to commercial and
retail borrowers with a range of credit standing. In addition to directly
advancing funds to borrowers, the Group also enters into guarantees and
other commitments such as letters of credit, performance bonds, and
other bonds.
The Group also enters into transactions denominated in foreign currencies.
This activity generally requires the Group to take foreign currency positions
in order to exploit short term movements in the foreign currency market.
The Board places limits on the size of these positions. The Group also has
a policy of using offsetting commitments for foreign exchange contracts,
effectively minimising the risk of loss due to adverse movements in foreign
currencies.
Risk in the Group is managed through a system of delegated limits.
These limits set the maximum level of risk that can be assumed by each
operational unit and the Group as a whole. The limits are delegated
from the Board of Directors to executive management and hence to the
respective operational managers.
The risk management framework establishes roles, responsibilities and
accountabilities of the Asset and Liability Committee, the Credit Committee,
the Operational Risk Committee and the Executive Committee, the specific
management committees charged with the responsibility for ensuring
the Group has appropriate systems, policies and procedures to measure,
monitor and report on risk management. The framework also includes
policies and procedures which detail formal feedback processes to these
management committees, to the Board Audit and Compliance Committee,
Board Risk Committee and ultimately to the Board of Directors.
22. CREDIT RISK AND ASSET QUALITY
22.1 Credit risk
The Group incurs risk with regard to loans and receivables due from
customers and other monies or investments held with financial institutions.
Credit risk is the likelihood of future financial loss resulting from the failure
of clients or counter-parties to meet contractual obligations to the Group
as they fall due.
Credit risk is managed by analysing the risk spread across various sectors
of the economy and by ensuring risk is diversely spread by personal and
commercial customer. Individual exposures are measured using repayment
performance, reviews and statistical techniques. Comprehensive credit
standards and approval limits have been formulated and approved by
88
the Credit Committee. The Credit Committee (which reports to the Board
through the Executive and Chief Executive Officer) is responsible for the
development and implementation of credit policy and loan portfolio
review methodology. The Credit Committee is the final arbiter of risk
management and loan risk concentration.
The Group has in place processes that identify, assess and control
credit risk in relation to the loan portfolio, to assist in determining the
appropriateness of provisions for loan impairment. These processes also
enable assessments to be made of other classes of assets that may carry
an element of credit risk. The Group assigns quality indicators to its credit
exposures to determine the asset quality profile.
22.1.1 Credit risk measurement
Loans and advances (incl. loan commitments and guarantees)
The estimation of credit exposure for risk management purposes is
complex and requires the use of models, as the exposure varies with
changes in market conditions, expected cash flows and the passage of
time. The assessment of credit risk of a portfolio of assets entails further
estimations as to the likelihood of defaults occurring, of the associated
loss ratios and of default correlations between counterparties. The Group
measures credit risk using Probability of Default (PD), Exposure at Default
(EAD) and Loss Given Default (LGD).
Credit risk grading
The Group uses an internal credit risk grading system that reflects its
assessment of the probability of default of individual counterparties.
Borrower and loan specific information collected at the time of application
(such as disposable income, and level of collateral for retail exposures;
and turnover and industry type for wholesale exposures) is fed into this
rating model. This is supplemented with external data such as credit
bureau scoring information on individual borrowers. In addition, the
models enable expert judgement from the Group Chief Risk Officer to be
fed into the final internal credit rating for each exposure. This allows for
considerations which may not be captured as part of the other data inputs
into the model.
The Group’s rating method comprises 11 rating levels for instruments not
in default (1 to 11) and three default classes (12 to 14). The master scale
assigns each rating category a specified range of probabilities of default,
which is stable over time. The rating methods are subject to an annual
validation and recalibration so that they reflect the latest projections in the
light of all actually observed defaults.
Group Internal Scale
S&P Letter Grade
Description 2020
1
2
3
4
5
6
7
8
9
BBB+
BBB
BBB-
BB+
BB
BB-
B+
B
B-
Standard Monitoring
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Notes to the Financial Statements
for the Year Ended 31 December 2020
22. CREDIT RISK AND ASSET QUALITY (continued)
22.1.1 Credit risk measurement(continued)
Group Internal Scale
S&P Letter Grade
Description 2020
10
11
12
13
14
CCC+
CCC
CCC-
D-I
D-II
Special Monitoring
Substandard
Doubtful
Loss
22.1.2 Expected credit loss measurement
IFRS 9 outlines a ‘three-stage’ model for impairment based on changes in
credit quality since initial recognition, as summarised below:
• A financial instrument that is not credit-impaired on initial recognition
is classified in ‘Stage 1’ and has its credit risk continuously monitored
by the Group.
•
If a significant increase in credit risk (‘SICR’) since initial recognition
is identified, the financial instrument is moved to ‘Stage 2’ but is not
yet deemed to be credit-impaired. Please refer to note 22.1.2.1 for a
description of how the Group determines when a significant increase
in credit risk has occurred.
•
If the financial instrument is credit-impaired, the financial instrument
is then moved to ‘Stage 3’. Please refer to note 22.1.2.2 for a
description of how the Group defines credit-impaired and default.
Financial instruments in Stage 1 have their ECL measured at an
amount equal to the portion of lifetime expected credit losses that
result from default events possible within the next 12 months.
Instruments in Stages 2 or 3 have their ECL measured based on
expected credit losses on a lifetime basis. Please refer to note
22.1.2.3 for a description of inputs, assumptions and estimation
techniques used in measuring the ECL.
• A pervasive concept in measuring ECL in accordance with IFRS 9 is
that it should consider forward-looking information. Note 22.1.2.3
includes an explanation of how the Group has incorporated this in its
ECL models.
The following diagram summarises the impairment requirements
under IFRS 9.
Change in credit quality since initial recognition
Stage 1
(Initial recognition)
Stage 2
Stage 3
(Significant increase in credit risk since initial
recognition)
(Credit-impaired assets)
12-month expected credit losses
Lifetime expected credit losses
Lifetime expected credit losses
The key judgements and assumptions adopted by the Group in addressing the requirements of the standard are discussed below:
22.1.2.1 Significant increase in credit risk
The Group considers a financial instrument to have experienced a significant
increase in credit risk when one or more of the following quantitative,
qualitative or backstop criteria have been met:
•
Qualitative Criteria - if the instrument meets one or more of the
following criteria:
- Significant adverse changes in business, financial and/or
economic conditions in which the borrower operates
- Actual or expected forbearance or restructuring
- Actual or expected significant adverse change in operating results of
the borrower
- Significant change in collateral value (secured facilities only) which is
expected to increase risk of default
- Early signs of cash flow/liquidity problems such as delay in servicing
of trade creditors/loans
•
•
Quantitative criteria - applies to performing loans risk graded at 10 or
11 as per BSPs credit rating system which are ‘watch list’ categories.
By definition, these have experienced a SICR event since inception
hence need to be classified as Stage 2, with lifetime PDs applicable.
This criteria applies regardless of whether loans in these two RGs are
in arrears or not.
Backstop - A backstop is applied and the financial instrument
considered to have experienced a significant increase in credit risk
if the borrower is more than 30 days past due on its contractual
payments. The Group has not used the low credit risk exemption for
any financial instrument in the year ending 31 December 2020.
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22. CREDIT RISK AND ASSET QUALITY (continued)
22.1.2.2 Definition of default and credit-impaired assets
The Group defines a financial instrument as in default, which is fully aligned with the definition of credit- impaired, when it meets one or more of the following
criteria:
Quantitative criteria
The borrower is more than 90 days past due on its contractual payments.
Qualitative criteria
The borrower meets unlikeliness to pay criteria, which indicates the borrower is in significant financial difficulty. These are instances where:
• The borrower is in long-term forbearance
• The borrower is deceased
• The borrower is insolvent
• The borrower is in breach of financial covenant(s)
• An active market for that financial asset has disappeared because of financial difficulties
• Concessions have been made by the lender relating to the borrower’s financial difficulty
•
•
It is becoming probable that the borrower will enter bankruptcy
Financial assets are purchased or originated at a deep discount that reflects the incurred credit losses.
The criteria above have been applied to all financial instruments held by the Group and are consistent with the definition of default used for internal credit
risk management purposes. The default definition has been applied consistently to model the Probability of Default (PD), Exposure at Default (EAD) and Loss
given Default (LGD) throughout the Group’s expected loss calculations.
An instrument is considered to no longer be in default (i.e. to have cured) when it no longer meets any of the default criteria for a consecutive period of six
months. This period of six months has been determined based on an analysis which considers the likelihood of a financial instrument returning to default
status after cure using different possible cure definitions.
22.1.2.3 Measuring ECL – Explanation of inputs, assumptions and estimation techniques
The Expected Credit Loss (ECL) is measured on either a 12-month (12M) or Lifetime basis depending on whether a significant increase in credit risk has
occurred since initial recognition or whether an asset is considered to be credit-impaired. Expected credit losses are the product of the Probability of
Default (PD), Exposure at Default (EAD), and Loss Given Default (LGD), defined as follows:
• The PD represents the likelihood of a borrower defaulting on its financial obligation (as per “Definition of default and credit-impaired” above), either
over the next 12 months (12M PD), or over the remaining lifetime (Lifetime PD) of the obligation.
• EAD is based on the amounts the Group expects to be owed at the time of default, over the next 12 months (12M EAD) or over the remaining lifetime
(Lifetime EAD). For example, for a revolving commitment, the Group includes the current drawn balance plus any further amount that is expected to
be drawn up to the current contractual limit by the time of default, should it occur.
Loss Given Default (LGD) represents the Group’s expectation of the extent of loss on a defaulted exposure. LGD varies by type of counterparty, type
and seniority of claim and availability of collateral or other credit support. LGD is expressed as a percentage loss per unit of exposure at the time of
default (EAD).
•
Forward-looking economic information is also included in determining the 12-month and lifetime PD, EAD and LGD. These assumptions vary by product
type. Model adjustments are also included within the ECL allowance. Model adjustments are used in circumstances where it is judged that the existing
inputs, assumptions and model techniques do not capture all relevant risk factors. The emergence of new macroeconomic, microeconomic factors,
changes to parameters or credit risk data not incorporated current parameters are examples of such circumstance.
The Group used statistical models to convert historical PDs into forward looking lifetime PDs. The conversion process looks at the historical relationship
between long-term PDs for a particular year and the observed (annual) default rate for the same year (called the ‘Z-factor’) and a set of systematic
factors for the year. The Group has performed historical analysis and identified the key economic variables (systematic factors) impacting credit risk and
expected credit losses which are as follows:
• GDP Growth (%)
• Change in Unemployment (%)
• Change in Equity Index (%)
• Change in Energy Index (%)
• Change in Non-Energy Index (%)
• Change in the Proportion of Downgrades (%)
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for the Year Ended 31 December 2020
22. CREDIT RISK AND ASSET QUALITY (continued)
22.1.2.3 Measuring ECL – Explanation of inputs, assumptions and estimation techniques (continued)
These are then compared to the expected systematic factors and long-term PDs for a future year to estimate the PiT PDs for that future year. Forecasts of
these economic variables (the “base economic scenario”) are provided by the Group’s Strategy team and provide the best estimate view of the economy
over the next five years. Z-factors are estimated for five years based on forecast systematic data and all future years from year 6 are adjusted using Z-
factors which diminish in magnitude from the one estimated for year 5.
Economic variable assumptions
The period-end assumptions used for the ECL estimate as at 31 December 2020 are set out below. The scenarios “base”, “upside” and “downside” were
used for all portfolios.
Economic Variable
GDP Growth (%)
Change in Unemployment
(% total lab force) (%)
Change in Equity Index (%)
Change in Energy Index (%)
Change in Non-Energy Index (%)
(Per World Bank commodities price forecast)
Change in the Proportion of Downgrades (%)
Scenario
Base
Upside
Downside
Base
Upside
Downside
Base
Upside
Downside
Base
Upside
Downside
Base
Upside
Downside
Base
Upside
Downside
2021
3.40%
3.65%
1.20%
2022
3.40%
3.65%
2.90%
-3.00%
-2.00%
-4.00%
-3.00%
0.00%
0.00%
10.07%
10.58%
9.57%
2.45%
2.57%
2.33%
-0.24%
-0.24%
-0.25%
-0.25%
-0.23%
-0.23%
2023
3.40%
3.65%
3.00%
-2.00%
-3.00%
0.00%
2.39%
2.51%
2.27%
-0.24%
-0.25%
-0.23%
2024
3.40%
3.65%
2.80%
-2.00%
-3.00%
0.00%
2.34%
2.45%
2.22%
-0.24%
-0.25%
-0.23%
2020
3.40%
3.65%
1.20%
-3.00%
-4.00%
0.00%
-3.51%
-3.54%
-3.51%
7.75%
8.14%
7.36%
0.12%
0.13%
0.11%
3.32%
-2.00%
10.00%
The weightings assigned to each economic scenario at 31 December 2020 were as follows:
Scenario
Weight
Base
50.00%
Upside
10.00%
Downside
40.00%
Other forward-looking considerations not otherwise incorporated within the above scenarios, such as the impact of any regulatory, legislative or political
changes, have also been considered, but are not deemed to have a material impact and therefore no adjustment has been made to the ECL for such
factors. This is reviewed and monitored for appropriateness on an annual basis.
Sensitivity Analysis
The most significant assumptions affecting the ECL allowance are as follows:
i) GDP given the significant impact on business performance and collateral valuations; and
ii) Change in proportion of downgrades given that it is “BSP specific” and addresses potential signs of stress both within credit markets in general and in
client specific portfolios.
iii) Change in scenario weighting given the uncertainty surrounding the economic impact of COVID-19.
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for the Year Ended 31 December 2020
22. CREDIT RISK AND ASSET QUALITY (continued)
22.1.2.3 Measuring ECL – Explanation of inputs, assumptions and estimation techniques (continued)
Set out below are the changes to the ECL as at 31 December 2020 that would result from reasonably possible changes in these parameters from the actual
assumptions used in the Group’s economic variable assumptions:
All amounts are expressed in K’000
GDP Growth Rate
2020
[-25%]
37,287
(GDP growth rate assumptions tested at 75% and 110% for all 3 scenarios)
Change in proportion of downgrades
[-7%]
(945)
[+10%]
(11,041)
[+20%]
8,533
((Upside scenario increased from -2% to-7% (2019:-5%), downside scenario increased from 10% to 20%)
2019
[-20%]
42,060
[-5%]
(1,088)
[+10%]
(19,342)
[+20%]
5,662
All amounts are expressed in K’000
Change in Scenario weighting
2020
2019
(39,735)
(32,714)
(Upside scenario increased from 10% to 20%, downside scenario decreased from 40% to 20% and base scenario increased from 50% to 60%).
Change in Scenario weighting
11,090
-
(Upside scenario decreased from 10% to 5%, downside scenario increased from 40% to 45% and base scenario remaining at 50%).
22.1.2.4 Grouping of instruments for losses measured on a collective basis
For expected credit loss provisions modelled on a collective basis, a grouping of exposures is performed on the basis of shared risk characteristics, such
that risk exposures within a group are homogeneous.
In performing this grouping, there must be sufficient information for the group to be statistically credible. Where sufficient information is not available
internally, the Group has considered benchmarking internal/external supplementary data to use for modelling purposes. The characteristics and any
supplementary data used to determine groupings are outlined below:
Retail – Groupings for collective measurement
•
Loan to value ratio band
•
Risk Grade
Product type (e.g. Residential/Buy to Let mortgage, Overdraft, Credit Card)
•
22.1.3 Credit risk exposure
22.1.3.1 Maximum exposure to credit risk – Financial instruments subject to impairment
The following table contains an analysis of the credit risk exposure of financial instruments for which an ECL allowance is recognised. The gross carrying
amount of financial assets below also represents the Group’s maximum exposure to credit risk on these assets.
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for the Year Ended 31 December 2020
22. CREDIT RISK AND ASSET QUALITY (continued)
22.1.3.1 Maximum exposure to credit risk – Financial instruments subject to impairment (continued)
All amounts are expressed in K’000
ECL staging
(PGK’000)
Credit grade
Standard monitoring
Special monitoring
Default
Gross carrying amount
Loss allowance
Net carrying amount
Stage 1
12-month
11,710,828
-
-
11,710,828
(183,777)
11,527,051
2020
Stage 2
Lifetime
1,676,312
474,362
-
2,150,674
(333,679)
1,816,995
Stage 3
Lifetime
-
-
488,869
488,869
(272,821)
216,048
2019
Total
Total
13,387,140
13,006,714
474,362
488,869
14,350,371
(790,277)
13,560,094
503,009
391,688
13,901,411
(653,231)
13,248,180
Information on how the Expected Credit Loss (ECL) is measured and how the three stages above are determined is included in note 15 ‘Expected credit
loss measurement’. The gross carrying amount includes off balance sheet items which are in scope for impairment.
The total balance of investment securities measured at amortised cost (K5,936.049 million) is classified as Stage 1 with a credit grade of ‘standard
monitoring’. Total loss allowance carried against this balance is K30.805 million.
The following table contains an analysis of the maximum credit risk exposure from financial assets not subject to impairment (i.e. FVPL):
Maximum exposure to credit risk
All amounts are expressed in K'000
Trading assets
• Equity Securities
2020
2019
269,400
255,372
22.1.3.2 Collateral and other credit enhancements
The Group employs a range of policies and practices to mitigate credit risk.
The most common of these is accepting collateral for funds advanced.
The Group has internal policies on the acceptability of specific classes of
collateral or credit risk mitigation.
The Group prepares a valuation of the collateral obtained as part of the
loan origination process. This assessment is reviewed periodically. The
principal collateral types for loans and advances are:
• Mortgages over residential properties;
• Charges over business assets such as premises, inventory and accounts
receivable; and
• Charges over financial instruments such as debt securities and equities.
Longer-term finance and lending to corporate entities are generally
secured; revolving individual credit facilities are generally unsecured.
Collateral held as security for financial assets other than loans and advances
depends on the nature of the instrument. Debt securities, treasury and
other eligible bills are generally unsecured, with the exception of asset-
backed securities and similar instruments, which are secured by portfolios
of financial instruments.
The Group’s policies regarding obtaining collateral have not significantly
changed during the reporting period and there has been no significant
change in the overall quality of the collateral held by the Group since the
prior period.
The Group closely monitors collateral held for financial assets considered
to be credit-impaired, as it becomes more likely that the Group will take
possession of collateral to mitigate potential credit losses.
93
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for the Year Ended 31 December 2020
22. CREDIT RISK AND ASSET QUALITY (continued)
22.1.3.2 Collateral and other credit enhancements (continued)
Financial assets that are credit-impaired and related collateral held in order to mitigate potential losses are shown below:
Consolidated
31 December 2020
All amounts are expressed in K'000
Credit-impaired assets
Loans to individuals:
• Overdrafts
• Credit cards
• Term loans
• Mortgages
Loans to corporate entities:
• Large corporate customers
• Small and medium-sized enterprises (SMEs)
• Others
Gross
exposure
Impairment
allowance
Carrying
amount
Fair value of
collateral held
7,730
1,758
5,972
389
198
191
13,685
-
21,399
9,252
12,147
25,031
100,294
40,996
59,298
159,690
274,994
179,981
83,475
588
40,464
172
95,013
43,011
215,659
137,283
416
1,351
Total credit-impaired assets
488,869
272,821
216,048
552,699
31 December 2019
Total credit-impaired assets
391,688
223,299
168,389
413,838
22.1.4 Credit Quality – Prudential guidelines
The Bank of Papua New Guinea has maintained a revised prudential standard for asset quality since October 2003. The revised standard specifies more
detailed criteria for the classification of loans into various grades of default risk and corresponding loss provision levels as a consequence of those
gradings.
An analysis by credit quality of loans outstanding at 31 December 2020 is as follows:
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for the Year Ended 31 December 2020
22. CREDIT RISK AND ASSET QUALITY (continued)
22.1.4 Credit Quality – Prudential guidelines (continued)
Consolidated
31 December 2020
All amounts are expressed in K'000
Overdrafts
Term loans
Mortgages
Lease financing
Policy loans
Total
Neither past due nor impaired
747,218
9,699,015
2,441,397
264,445
105,193
13,257,268
Past due but not impaired
- Less than 30 days
- 30 to 90 days
Individually impaired loans
- Less than 30 days
- 30 to 90 days
- 91 to 360 days
- More than 360 days
48,722
3,727
52,449
5,226
-
776
6,602
12,604
244,109
167,932
412,041
4,216
20,684
88,930
115,809
229,639
133,554
92,966
226,520
7,113
8,118
16,431
113,820
145,482
4,594
2,734
7,328
109
238
976
5,717
7,040
-
-
-
-
-
-
-
-
430,979
267,359
698,338
16,664
29,040
107,113
241,948
394,765
Total gross loans and receivables from
customers
Less impairment provisions
Net loans and receivables from
customers
812,271
(43,962)
10,340,695
2,813,399
(737,439)
(50,801)
278,813
(11,509)
105,193
14,350,371
-
(843,711)
768,309
9,603,256
2,762,598
267,304
105,193
13,506,660
22.1.5 Credit related commitments
These instruments are used to ensure that funds are available to a customer
as required. The Group deals principally in the credit related commitments
set out below.
Guarantees and standby letters of credit, which represent irrevocable
assurances that the Group will make payments in the event that a customer
cannot meet its obligations to third parties, carry the same risk as loans.
Documentary and trade letters of credit are written undertakings by the
Group on behalf of a customer, authorising a third party to draw drafts
on the Group for specified amounts under specified terms and conditions.
They are collateralised by the underlying shipments of goods to which they
relate and therefore carry less risk than a conventional loan.
to extend credit
Commitments
represent undrawn portions of
authorisations to extend credit in the form of loans, guarantees or letters
of credit. Whilst the potential exposure to loss equates to the total
undrawn commitments, the likely amount of loss is less than the total
commitment since the commitments to extend credit are contingent
upon customers maintaining specific credit standards. The Group
monitors the term to maturity of these commitments because longer term
commitments generally carry a greater degree of credit risk than shorter
term commitments.
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Notes to the Financial Statements
for the Year Ended 31 December 2020
22. CREDIT RISK AND ASSET QUALITY (continued)
22.1.6 Economic sector risk concentrations
Economic sector risk concentrations within the customer loan portfolio are as follows:
Consolidated as at 31 December
All amounts are expressed in K’000
Commerce, finance and other business
Private households
Government and public authorities
Agriculture
Transport and communication
Manufacturing
Construction
Net loan portfolio balance
22.1.7 Loan segment concentration
Concentration by customer loan segments are as follows:
Consolidated as at 31 December
Corporate / Commercial
Government
Retail
Net loan portfolio balance
22.1.8 Impact of overlays on the provision for ECL
2020
7,123,057
3,232,599
157,811
434,215
1,218,790
383,725
956,463
%
53
24
1
3
9
3
7
2019
7,159,863
2,987,459
252,134
327,151
%
54
23
2
2
1,311,306
10
332,344
830,550
3
6
13,506,660
100
13,200,807
100
2020
8,025,709
2,247,793
3,233,158
%
59
17
24
2019
7,703,341
2,510,817
2,986,649
%
58
19
23
13,506,660
100
13,200,807
100
The following table attributes the breakup between modelled ECL and other economic overlays. Where there is increased uncertainty regarding the
required forward-looking economic conditions under IFRS 9, or limitations of the historical data used to calibrate the models to current stressed
environments, overlays are typically used to address areas of potential risk not captured in the underlying modelled ECL.
Modelled provision for ECL
Overlays
Total
22.1.8.1 COVID-19 overlay
2020
433,620
137,270
570,890
2019
401,704
74,445
476,149
Where there is increased uncertainty regarding the required forward-looking economic conditions under IFRS 9, or limitations of the historical data used
to calibrate the models to current stressed environments, overlays are used to address areas of potential risk not captured in the underlying modelled
ECL.
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StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Notes to the Financial Statements
for the Year Ended 31 December 2020
22. CREDIT RISK AND ASSET QUALITY (continued)
22.1.8.1 COVID-19 overlay (continued)
The COVID-19 pandemic has had, and continues to have, an impact on
businesses around the world and the economic environments in which
they operate. There also exists significant uncertainty regarding the
duration and severity of COVID-19 impacts and the associated disruption
to the economy and our customers. While the impacts on the broader
economy are included in the assumptions used in the economic scenarios
and the weightings applied to these scenarios, these general economy wide
impacts may not fully reflect the specific impact on individual customers,
and therefore the potential risk is not captured in the underlying modelled
ECL. As overlays require the application of expert judgment, they are
documented and subject to comprehensive internal governance and
oversight.
The Group’s COVID-19 overlay as of 31 December 2020 is K138.08 million.
The repayment holiday and interest only arrangements are normally
treated as an indication of a significant increase in credit risk but the
repayment holidays under the current COVID-19 relief packages in isolation
have not been treated as an indication of SICR.
As highlighted by the IASB in its guidance document ‘IFRS 9 and COVID-19’
issued on 27 March 2020, in these changed circumstances it may not
be appropriate to apply previously established approaches to assessing
significant increase in credit risk for payment holidays in a mechanistic
manner.
These relief packages are available to customers who require assistance
because of COVID-19 and who otherwise had up to date payment status
prior to the onset of COVID-19. The relief packages allow for repayment
holidays for up to 6 months. During this period, the deferred interest
will be capitalized and the deferred principal along with the capitalized
interest, will be repaid over the remaining term of the loan. These
packages have been designed to provide short-term cash flow support
while the most significant COVID-19 restrictions are in place. Further
extensions were based on local Central Banks approvals. The extension will
not be automatic and will require up-to-date financial information on each
borrower to confirm that there is a reasonable prospect to repay the loan.
As the situation has evolved since March 2020, the Group has classified the
relief packages into different categories of risk. Each of these categories
are assigned a corresponding IFRS 9 staging level based on whether SICR
is deemed to have occurred because of the increased likelihood of a risk
of default. The group has identified a proportion of relief packages as
higher credit risk and has identified a SICR event to have occurred on these
customers. An overlay estimation has been done on this base of customers.
The Group continues to monitor our lending portfolios closely and
reassess our provisioning levels as the situation around COVID-19 evolves.
At the cessation of the COVID-19 support packages, it is likely that some
customers will move into Stage 2.
22.1.8.2 COVID-19 relief packages
The customers under COVID-19 relief packages at 31 December 2020 is K1.626 billion. These loans and the related provision for ECL are as follows:
All amounts are expressed in K’000
Total Credit Exposures
Expected Credit Loss
Stage 1
Stage 2
Stage 3
Total
659,147
966,858
-
1,626,005
48,021
44,003
-
92,024
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for the Year Ended 31 December 2020
23. LIQUIDITY RISK
Liquidity risk is the risk of being unable to meet financial obligations as they fall due. The Board, through the Asset and Liability Committee, sets liquidity
policy to ensure that the Group has sufficient funds available to meet all its known and potential obligations.
The matching and controlled mismatching of the maturities and interest rates of assets and liabilities is fundamental to the management of banking
activities. An unmatched position potentially enhances profitability, but can also increase the risk of losses.
Short-term mismatch of asset and liability maturity at 31 December 2020
The maturity profile of material Assets and Liabilities as at 31 December 2020 is shown in the following schedule. The mismatching of maturity of
assets and liabilities indicates an apparent negative net “current” asset position. However, as stated in the preceding paragraph, mismatched positions
are established and managed to achieve profit opportunities that arise from them, particularly in a normal yield curve environment. Accordingly, this
mismatched maturity position is considered manageable by the Group, and does not impair the ability of the Group to meet its financial obligations as
they fall due.
Maturity of assets and liabilities
Consolidated
All amounts are expressed in K'000
As at 31 December 2020
Up to 1 month
1 - 3 months
3 - 12 months
1 - 5 years
Over 5 years
Total
Assets
Cash and balances with Central Bank
Treasury and Central Bank bills
Amounts due from other banks
Loans, advances and other receivables from
customers
Other financial assets
Total assets
Liabilities
3,973,012
611,384
1,092,892
2,038,752
2,390,783
-
-
616,990
1,702,704
59,819
34,750
-
2,533
-
483,467
4,277
4,456,479
2,937,888
-
1,187,461
324,571
351,479
2,360,167
736,769
5,917,381
2,027,860
5,875,628
16,516,499
1,897,463
7,404,354
10,106,823
1,352,859
4,834,390
7,947,774
8,260,835
32,502,681
Amounts due to other banks
12,478
89,738
24,054
18,616,789
971,280
1,583,504
-
2,379,124
198,939
-
428
875
-
5,287
4,311
-
413,582
44,968
9,725
249
-
126,270
346,655
21,931,810
164,038
209,006
106,883
2,501,447
5,063
209,437
21,207,330
1,062,321
1,617,156
468,524
622,639
24,977,970
(11,100,507)
290,538
3,217,234
7,479,250
7,638,196
7,524,711
8,109,293
2,070,054
5,164,106
6,685,164
6,261,178
28,289,795
16,040,140
1,194,142
1,802,509
719,961
2,021,445
21,778,197
(7,930,847)
875,912
3,361,597
5,965,203
4,239,733
6,511,598
Customer deposits
Lease liability
Other liabilities
Other provisions
Total liabilities
Net liquidity gap
As at 31 December 2019
Total assets
Total liabilities
Net liquidity gap
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for the Year Ended 31 December 2020
24. OPERATIONAL RISK
Operational risk is the potential exposure to unexpected financial or non-financial losses arising from the way in which the Group conducts its business.
Examples of operational risks include employee errors, systems failures, fire, floods, or similar losses to physical assets, fraud, or criminal activity.
Operational risk is managed through formal policies, documented procedures, business practices and compliance monitoring.
An operational risk management function is responsible for the maintenance of these policies, procedures practices and monitoring the organization’s
compliance with them. The Operational Risk Committee coordinates the management process across the organization.
An independent internal audit function also conducts regular reviews to monitor compliance with approved BPNG standards and examines the general
standard of control.
The Operational Risk Committee and the internal audit function mandatorily report to the Board Risk and Compliance Committee.
25. FOREIGN EXCHANGE RISK
Foreign exchange risk is the risk to earnings caused by a change in foreign exchange rates on open currency positions. The objective of foreign exchange
risk management within the Group is to minimise the impact on earnings of any such movement.
The Group accepts foreign currency denominated transactions and therefore has exposure to movements in foreign currency. The Group has a policy to
offset these transactions to minimise daily exposure. As foreign exchange contracts generally consist of offsetting commitments, they involve only limited
foreign exchange risk to the Group and material loss is not envisaged.
Currency concentration of assets, liabilities, and off-balance sheet items
Consolidated
All amounts are expressed in K'000
As at 31 December 2020
PGK
FJD
SBD
USD
Other
Total
Assets
Cash and balances with Central Banks
Treasury and Central Bank bills
Amounts due from other banks
2,150,591
2,778,202
115,956
1,059,431
12,116
330,746
Loans and receivables from customers
7,917,985
3,305,723
2,662,225
1,388,100
551,794
733,124
Other financial assets
Other assets
Total assets
Liabilities
636,025
19,114
14,000
513,556
159
57,722
2,370
-
384,461
528,501
608,062
31,574
4,456,479
2,841,006
342,298
1,187,461
1,240,895
13,506,660
-
28,047
3,242,225
1,594
109,066
2,289,606
17,013,059
5,992,934
1,240,576
916,926
2,359,942
27,523,437
Credit commitments
31 December 2019
Total Assets
Total Liabilities
Amounts due to other banks
(75,598)
(36,677)
(10,031)
-
(3,964)
(126,270)
Customer Deposits
Other liabilities
Total liabilities
(14,225,150)
(3,712,304)
(926,891)
(549,558)
(2,240,121)
(21,654,024)
(527,650)
(1,416,424)
(30,238)
(265,584)
(69,642)
(2,309,538)
(14,828,398)
(5,165,405)
(967,160)
(815,142)
(2,313,727)
(24,089,832)
Net on-balance sheet position
2,184,661
827,529
273,416
101,784
Off-balance sheet position
25,393
-
-
(155,724)
2,267,067
556,094
46,965
-
46,215
137,131
116,868
3,433,605
6,800
2,986,994
15,207,153
4,941,049
1,193,401
740,480
2,445,035
24,527,118
(13,326,239)
(4,424,064)
(946,797)
(655,738)
(2,057,247)
(21,410,085)
Net on-balance sheet position
1,880,914
516,985
246,604
84,742
Off-balance sheet position
Credit commitments
798
-
-
(139,868)
1,879,065
517,433
60,433
-
387,788
140,009
119,763
3,117,033
939
2,576,694
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for the Year Ended 31 December 2020
25. FOREIGN EXCHANGE RISK (continued)
The following table presents sensitivities of profit or loss and equity to possible changes in exchange rates applied at the end of the reporting period,
relative to the functional currency of the respective Group entities, with all other variables held constant:
All amounts are expressed in K'000
At 31 December 2020
At 31 December 2019
Impact on profit or loss
Impact on equity
Impact on profit or loss
Impact on equity
USD strengthening by 5% (2019 – 1%)
USD dollar weakening by 15% (2019 – 1%)
AUD strengthening by 5% (2019 – 1%)
AUD dollar weakening by 15% (2019 – 1%)
7,664
(2,068)
(399)
108
7,664
(2,068)
(399)
108
356
(349)
(36)
35
356
(349)
(36)
35
In the normal course of trading, the Group enters into forward exchange contracts. The Group does not actively enter into or trade in, complex forms of
derivative financial instruments such as currency and interest rate swaps and options.
Exposures in foreign currencies arise where the Group transacts in foreign currencies. This price risk is minimised by entering into counterbalancing po-
sitions for material exposures as they arise. Forward and spot foreign exchange contracts are used.
Forward exchange contracts outstanding at 31 December 2020 stated at the face value of the respective contracts are:
All amounts are expressed in respective FCY'000 AND K’000
As at 31 December 2020
USD
AUD
EURO
GBP
JPY
Other
Total
Selling
Buying
As at 31 December 2019
Selling
Buying
FCY
Kina
FCY
Kina
FCY
Kina
FCY
Kina
(47,232)
(165,728)
2,851
10,004
(49,183)
(167,576)
8,132
27,708
(3,567)
(9,641)
18,660
50,438
(2,529)
(6,039)
14,800
35,338
(1,069)
(4,610)
30
129
(900)
(3,437)
20
76
(5)
(22)
40
191
(21)
(88)
1,200
5,125
(86,102)
(2,929)
60,100
2,045
(181,179)
(5,525)
137,500
(844)
(2,962)
29,780
-
(185,892)
-
104,491
167,298
(2,110)
(7,188)
34,444
-
(189,853)
-
4,193
117,357
189,797
26. INTEREST RATE RISK
Interest rate risk in the balance sheet arises from the potential for a change in interest rate to have an adverse effect on the revenue earnings in the
current reporting period and future years. As interest rates and yield curves change over time the Group may be exposed to a loss in earnings due to the
effects of interest rates on the structure of the balance sheet. Sensitivity to interest rates arises from mismatches in the re-pricing dates, cash flows and
other characteristics of the assets and their corresponding liability funding.
These mismatches are actively managed as part of the overall interest rate risk management process governed by the Assets and Liabilities Committee
(ALCO), which meets regularly to review the effects of fluctuations in the prevailing levels of market interest rates on the financial position and cash flows
of the Group. The objective of interest rate risk control is to minimise these fluctuations in value and net interest income over time, providing secure and
stable sustainable net interest earnings in the long term. The table below illustrates the interest sensitivity of assets and liabilities at the balance date.
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for the Year Ended 31 December 2020
Non-interest
bearing
2,185,430
-
792,179
1,559,284
95,103
-
1,976,504
6,608,500
62,448
10,707,258
1,944,399
198,795
26. INTEREST RATE RISK (continued)
Interest sensitivity of assets, liabilities and off balance sheet items – re-pricing analysis
Consolidated
All amounts are expressed in K'000
As at 31 December 2020
Up to 1 month
1-3 months
3-12 months
1-5 years
Over 5 years
Assets
Cash and Central Banks assets
Treasury and Central Bank bills
Amounts due from other banks
Statutory deposits - Central Banks
711,765
609,603
341,561
-
Loans and receivables from customers
10,874,738
-
590,534
51,540
-
112,213
209,532
98,510
-
1,631,207
2,181
-
397,917
577,043
583
-
5,386
-
-
-
4,276
-
-
321,126
1,705,563
1,258,350
757,641
-
-
642,205
11,463
13,191,335
1,062,329
2,608,931
1,584,862
2,467,480
Other Financial Assets
Other assets
Total assets
Liabilities
Amounts due to other banks
Customer deposits
Other liabilities
Other provisions
Total liabilities
Interest sensitivity gap
28,387
8,545,533
238
5,507
8,579,665
4,611,670
11,382
878,736
-
200
890,318
172,011
24,053
1,375,840
-
-
-
146,657
74,872
-
-
-
85,527
-
1,399,893
221,529
85,527
12,912,900
1,209,038
1,363,333
2,381,953
(6,304,400)
Interest sensitivity of assets, liabilities and off balance sheet items – re-pricing analysis
As at 31 December 2019
Total assets
Total liabilities
13,007,025
1,114,574
8,709,354
1,082,072
2,781,083
1,628,037
1,461,656
299,468
Interest sensitivity gap
4,297,671
32,502
1,153,046
1,162,188
376,863
73,019
303,844
5,785,917
9,618,135
(3,832,218)
Given the profile of assets and liabilities as at 31 December 2020 and prevailing rates of interest, a 100bps increase in market rates will result in a K46.4
million increase in net interest income, whilst a 100bps decrease in rates will result in a K54.4 million decrease in net interest income.
27. FAIR VALUES OF FINANCIAL AND NON-FINANCIAL ASSETS AND LIABILITIES
There is no material difference between the fair values and carrying values of the financial assets and liabilities of the Group.
The table below analyses the Group’s financial instruments carried at fair value, by levels in the fair value hierarchy.
The different levels have been defined as follows:
•
•
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices).
• Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs).
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for the Year Ended 31 December 2020
27. FAIR VALUES OF FINANCIAL AND NON-FINANCIAL ASSETS AND LIABILITIES (continued)
Consolidated
All amounts are expressed in K’000
Level 1
Level 2
Level 3
Total
a) Financial assets
Equity security
Treasury bills
Government inscribed stock
Non-financial assets
Land & Buildings
Assets subject to operating lease
Total assets
b) Financial liabilities
Policy liability
Total liabilities
As at 31 December 2019
a) Financial assets
Equity security
Treasury bills
Government inscribed stock
Non-financial assets
Land & Buildings
Assets subject to operating lease
Total assets
b) Financial liabilities
Policy liability
Total liabilities
Consolidated
Financial asset at fair value through profit & loss
Opening balance
Total gains and losses recognized in:
-Profit & loss
-Other comprehensive income
Closing balance
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
265,727
8,094
291,042
-
-
564,863
3,673
-
-
701,627
36,434
741,734
-
-
1,043,990
1,043,990
252,277
4,915
513,024
-
-
770,216
-
-
3,095
-
-
708,284
48,133
759,512
890,147
890,147
2020
3,095
578
-
3,673
269,400
8,094
291,042
701,627
36,434
1,306,597
1,043,990
1,043,990
255,372
4,915
513,024
708,284
48,133
1,529,728
890,147
890,147
2019
2,696
399
-
3,095
There were no changes in valuation technique for Level 3 recurring fair value measurements during the year ended 31 December 2020. Property, plant
and equipment represents commercial land and buildings owned by the Group based on valuations provided by independent valuers.
The valuation is based on the capitalisation method with an assessment of the property based on its potential earning capacity. There is an increased level
of uncertainty with the valuation obtained for the financial year 2020 accounts given the volatile economic climate driven by COVID-19. A higher degree
of caution should be attached to the valuation than would normally be the case, noting that the value is current at the date of the valuation only. The
assessed value may change materially and unexpectedly over a relatively short period of time due to the impact of COVID-19.
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All amounts are expressed in K’000
Level 1
Level 2
Level 3
Total
Consolidated
a) Financial assets
Equity security
Treasury bills
Government inscribed stock
Non-financial assets
Land & Buildings
Assets subject to operating lease
Total assets
b) Financial liabilities
Policy liability
Total liabilities
As at 31 December 2019
a) Financial assets
Equity security
Treasury bills
Government inscribed stock
Non-financial assets
Land & Buildings
Assets subject to operating lease
Total assets
b) Financial liabilities
Policy liability
Total liabilities
Consolidated
Opening balance
Total gains and losses recognized in:
-Profit & loss
-Other comprehensive income
Closing balance
Financial asset at fair value through profit & loss
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
265,727
8,094
291,042
564,863
252,277
4,915
513,024
770,216
-
-
-
-
-
-
-
-
3,673
701,627
36,434
741,734
1,043,990
1,043,990
-
-
-
-
3,095
708,284
48,133
759,512
890,147
890,147
2020
3,095
578
-
3,673
269,400
8,094
291,042
701,627
36,434
1,306,597
1,043,990
1,043,990
255,372
4,915
513,024
708,284
48,133
1,529,728
890,147
890,147
2019
2,696
399
-
3,095
Notes to the Financial Statements
for the Year Ended 31 December 2020
Capital and Dividends
28. ORDINARY SHARES
Accounting Policy
Share issue costs
External costs directly attributable to the issue of new shares are deducted from equity net of any related income taxes.
Number of shares in '000s, Book value in K'000
At 31 December 2018/1 January 2019
Share buyback
At 31 December 2019/1 January 2020
Share buyback
At 31 December 2020
Number of shares
Book value
467,246
(6)
467,240
(11)
467,229
372,364
(54)
372,310
(121)
372,189
In May 2014, the Directors introduced a share-buyback scheme of up to K15 million. The share-buyback commenced in July 2014 and was extended to
such time when the allocated K15 million buyback was utilised, or if the Board wishes, any time before that. As at 31 December 2020, a total of K9.313m
has been bought back under this scheme.
Dividends on ordinary shares
Dividends on ordinary shares are recognised in equity in the period in which they are declared.
Dividends for the year, declared after the balance sheet date, are dealt with in the subsequent events note.
All amounts are expressed in K’000
Dividends paid on ordinary shares
Interim ordinary dividend (2020: 25 toea; 2019: 38 toea)
Final ordinary dividend (2019: 96 toea; 2018: 101 toea)
Consolidated
Bank
2020
2019
2020
2019
117,604
451,751
569,355
177,551
476,389
653,940
116,808
448,546
565,354
177,551
471,915
649,466
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Notes to the Financial Statements
for the Year Ended 31 December 2020
29. RETAINED EARNINGS AND OTHER RESERVES
RETAINED EARNINGS
All amounts are expressed in K’000
2020
2019
2020
2019
Consolidated
Bank
2,394,382
806,218
(451,587)
(117,604)
741
(7,692)
(2,209)
2,156,873
890,363
(476,389)
(177,551)
4,933
(3,597)
(250)
2,173,836
759,452
(448,546)
(116,808)
741
(7,692)
-
1,976,138
845,828
(471,915)
(177,551)
4,933
(3,597)
-
2,622,249
2,394,382
2,360,983
2,173,836
129,063
142,819
115,828
130,725
635
21,578
52,267
234,973
438,516
142,819
(18,914)
(1,032)
6,190
129,063
635
635
44,503
7,692
72
52,267
136,978
97,995
234,973
635
21,578
44,503
136,978
346,513
149,829
(5,719)
(4,933)
3,642
142,819
635
635
40,920
3,597
(14)
44,503
126,358
10,620
136,978
635
-
52,267
131,995
300,725
130,725
(20,055)
(1,032)
6,190
115,828
635
635
44,503
7,692
72
52,267
78,614
53,381
131,995
635
-
44,503
78,614
254,477
137,708
(5,714)
(4,933)
3,664
130,725
635
635
40,920
3,597
(14)
44,503
73,121
5,493
78,614
At 1 January
Net profit for the year
Dividends paid
Interim Dividends paid
Disposal of assets – Asset revaluation
BSP Life policy reserve
Gain attributable to minority interest
At 31 December
Other reserves comprise:
Asset revaluation reserve
Capital reserve
Equity component of Fiji Class Shares
General reserve
Foreign currency translation reserve
Movement in reserves for the year:
Revaluation reserve
At 1 January
Asset revaluation increment/(decrement)
Transfer asset revaluation reserve to retained earnings
Deferred tax on disposal of properties
At 31 December
Capital reserve
At 1 January
At 31 December
General reserve
At 1 January
BSP Life policy reserve
Fiji Government green bond revaluation
At 31 December
Exchange reserve
At 1 January
Movement during the year
At 31 December
104
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Notes to the Financial Statements
for the Year Ended 31 December 2020
29. RETAINED EARNINGS AND OTHER RESERVES (continued)
Equity component of convertible notes
On 20 April 2010, the Group issued 3,064,967 Fiji Dollars (FJD) denominated mandatory convertible notes through its wholly owned subsidiary BSP
Convertible Notes Limited (BSP CN) at an issue price of FJD5.25 (K7.30) per note.
The notes mandatorily converted to Fiji Class Shares on 20 April 2013 based on a conversion ratio of 1:1. Key rights of Fiji Class Shareholders are as
follows:
(i) The right to receive dividend equal to the amount of dividend to be paid on BSP Ordinary Shares.
(ii) The same voting rights as a BSP Ordinary Share and effected through a special voting share held by the Chairman of BSP.
(iii) The Fiji Class Share may be exchanged on a one for one basis into BSP Ordinary Shares at a subsequent date and at the option of BSP on
the occurrence of certain prescribed events.
30. CAPITAL ADEQUACY
The Group is required to comply with various prudential standards issued
by the Bank of Papua New Guinea (BPNG), the official authority for the
prudential supervision of banks and similar financial institutions in Papua
New Guinea. Additionally, subsidiaries and branches in Fiji, Solomon
Islands, Cook Islands, Samoa, Tonga, Vanuatu, Cambodia and Laos are
required to adhere to prudential standards issued by the Reserve Bank of
Fiji (RBF), Central Bank of Solomon Islands (CBSI), The Financial Supervisory
Commission (FSC), Central Bank of Samoa (CBS), National Reserve Bank
of Tonga (NRBT), Reserve Bank of Vanuatu (RBV), the National Bank
of Cambodia (NBC) and Bank of Lao P.D.R.. One of the most critical
prudential standards is the capital adequacy requirement. All banks are
required to maintain at least the minimum acceptable measure of capital
to risk-weighted assets to absorb potential losses. The BPNG follows the
prudential guidelines set by the Bank of International Settlements under
the terms of the Basel Accord. The BPNG revised prudential standard
1/2003, Capital Adequacy, prescribes ranges of overall capital ratios to
measure whether a bank is under, adequately, or well capitalised, and also
applies the leverage capital ratio. The Group complies with the prevailing
prudential requirements for total capital and leverage capital. As at 31
December 2020, the Group’s total capital adequacy ratio and leverage
capital ratio satisfied the capital adequacy criteria for a ‘well-capitalised’
bank. The minimum capital adequacy requirements set out under the
standard are: Tier 1 8%, total risk based capital ratio 12% and the leverage
ratio 6%.
The measure of capital used for the purposes of prudential supervision is
referred to as base capital. Total base capital varies from the balance of
capital shown on the Statement of Financial Position and is made up of tier
1 capital (core) and tier 2 capital (supplementary). Tier 1 capital is obtained
by deducting from equity capital and audited retained earnings (or losses),
intangible assets including deferred tax assets. Tier 2 capital cannot exceed
the amount of tier 1 capital, and can include subordinated loan capital,
specified asset revaluation reserves, un-audited profits (or losses) and a
small percentage of general loan loss provisions. The leverage capital ratio
is calculated as Tier 1 capital divided by total assets on the balance sheet.
Risk weighted assets are derived from on-balance sheet and off-balance
sheet assets. On balance sheet assets are weighted for credit risk
by applying weightings (0, 20, 50 and 100 per cent) according to risk
classification criteria set by the BPNG. Off-balance sheet exposures are risk
weighted in the same way after converting them to on-balance sheet credit
equivalents using BPNG specified credit conversion factors.
The Group's capital adequacy level is as follows (unaudited):
All amounts are expressed in K’000
Balance sheet assets (net of provisions)
Currency
Loans and receivables from customers
Investments and short term securities
All other assets
Off-balance sheet items
Total
Capital Ratios
a) Tier 1 Capital
Total Capital
b) Leverage Capital Ratio
Balance sheet / notional amount
Risk-weighted amount
2020
2019
2020
2019
4,456,479
3,583,165
95,677
69,942
13,506,660
13,230,783
10,824,914
10,539,279
6,083,231
3,477,067
2,986,994
4,580,568
3,132,602
2,576,694
229,235
1,978,591
242,027
224,510
1,839,673
286,666
30,510,431
27,103,812
13,370,444
12,960,070
Capital (K’000)
Capital Adequacy Ratio (%)
2020
2019
2020
2019
2,787,626
3,095,927
2,526,509
2,848,773
20.8%
23.2%
10.3%
19.5%
22.0%
10.5%
105
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Notes to the Financial Statements
for the Year Ended 31 December 2020
Group Structure
31. INSURANCE
Life and General Insurance Business
The Group’s consolidated Financial Statements include the assets, liabilities,
income and expenses of the life and general insurance businesses. The
Group’s Insurance business is made up of Life Insurance Contracts, Medical
Insurance and Term Life Insurance.
The liability for long term insurance contracts (principally Life Insurance)
has been determined in accordance with LPS 1.04 Valuation of Policy
Liabilities, issued by the Australian Prudential Regulation Authority.
(a) Recognition and Measurement
Short Term Insurance Contracts
These contracts include the Term Life and Medical policies sold and
underwritten by BSP Health Care (Fiji) Limited and Term life policies sold
by BSP Life (PNG) Limited.
These contracts protect the Group’s customers from the consequences of
events such as death, disability and medical emergency. Benefits paid on
occurrence of the specified insurance event are either fixed or linked to
the extent of the economic loss suffered by the policyholder. There are no
maturity or surrender benefits.
For all these contracts, premiums are recognised as revenue (earned
premiums) proportionally over the period of coverage. The portion of
premium received on in-force contracts that relates to unexpired risks
at the Statement of Financial Position date is reported as the unearned
premium liability.
Premiums are shown before deduction of commission
Claims and loss adjustment expenses are charged to profit or loss as incurred
based on the estimated liability for compensation owed to contract holders
or beneficiary. They include direct and indirect claims settlement costs and
arise from events that have occurred up to the Statement of Financial
Position date even if they have not yet been reported to the Group. The
Group does not discount its liabilities for unpaid claims. Liabilities for
unpaid claims are based on the sum insured or cost of approved medical
services plus an allowance for claims incurred but not reported based on
statistical analysis and related claim expenses. Case estimates are used to
estimate the expected ultimate cost of more complex claims that may be
affected by external factors (such as court decisions).
The policy liability is calculated in a way that allows for the systematic
release of planned profit margins as services are provided to policy owners
and the revenues relating to those services are received (Margin on Services
methodology). Services used to determine profit recognition include the
cost of expected insurance claims and the allocation of future bonuses.
The liability is generally determined as the present value of all future
expected payments, expenses, taxes and profit margins reduced by the
present value of all future expected premiums and take into consideration
projected future bonuses. The liabilities are recalculated at each balance
date using best estimate assumptions. These assumptions are revisited
regularly and adjusted for actual experiences on claims, expense, mortality
and investment returns. The policy liabilities also include policy owner
retained earnings.
(b) Methods and Assumptions
Key assumptions used in determining the Policy Liabilities for policies for
the insurance business are as follows:
(i) Discount Rates
For contracts in Statutory Fund 1 which have a DPF, the discount rate used is
linked to the assets which back those contracts. For 31 December 2020 this
was 5.95% per annum. For contracts without DPF and Accident Business,
the Fiji Insurance business at 31 December 2020 used a rate of 5.95% per
annum. The pricing rates were used given market subjectivity. The PNG
life insurance business at 31 December 2020 used the accumulation
methodology for contracts without DPF.
ii) Investment and Maintenance Expenses
Future maintenance and investment expenses are based on the budgeted
expenses. Future inflation has been assumed to be 4.00% per annum for
determining future expenses for both the Fiji and PNG life business.
Long Term Insurance Contracts
iii) Taxation
These contracts insure human life events (for example death, survival,
disability and critical illness) over a long duration; and are sold and
underwritten by BSP Life (Fiji) Limited and BSP Life (PNG) Limited.
Guaranteed benefits paid on occurrence of the specified insurance event
are fixed and for participating polices declared bonuses are also payable.
Most of the policies have maturity and surrender benefits.
For all these contracts, premiums are recognised as revenue when they
become payable by the contract holder. Premiums are shown before
deduction of commission.
Approximately 90% of the above contracts in the Group’s portfolio contain
a Discretionary Participation Feature (DPF). This feature entitles the holder
to receive, as a supplement to guaranteed benefits, additional benefits in
the form of reversionary bonuses.
The rates of taxation enacted at the date of the valuation are assumed to
continue into the future for both the Fiji and PNG life business.
(iv) Mortality and Morbidity
The determination of the liabilities under long-term insurance contracts
is dependent on estimates made by the BSP Life (PNG) and BSP Life (Fiji).
Estimates are made as to the expected number of deaths for each of the
years in which the BSP Life (PNG and Fiji) are exposed to risk. The BSP Life
(Fiji) bases these estimates on standard industry and national mortality
tables that reflect recent historical mortality experience, adjusted, where
appropriate, to reflect the Group’s own experience.
The estimated number of deaths determines the value of the benefit
payments. The main source of uncertainty is that epidemics and wide-
106
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 31. INSURANCE (continued)
ranging lifestyle changes, such as in eating, smoking and exercise habits,
could result in future mortality being significantly worse than in the past
for the age groups in which BSP Life (Fiji) has significant exposure to
mortality risk. However, continuing improvements in medical care and
social conditions could result in improvements in longevity in excess
of those allowed for in the estimates used to determine the liability for
contracts where BSP Life (Fiji) is exposed to longevity risk. For contracts
without fixed mortality risk charges, it is assumed that BSP Life (Fiji) will be
able to increase mortality risk charges in future years in line with emerging
mortality experience.
Projected future rates of mortality for insured lives are based on the Fiji
Mortality Statistics table FJ90-94 Male, modified for local experience.
As there is no reliable mortality table available for PNG, BSP Life PNG
bases these estimates on an internal mortality table that has regard to
population and insured mortality in Fiji and the limited information relating
to mortality in PNG that is publicly available. This is reassessed each year
having regard to the company’s own experience. The estimated number of
deaths determines the value of the benefit payments. Mortality in PNG is
subject to considerable uncertainty from wide-ranging lifestyle changes,
such as in eating, smoking and exercise habits and epidemics that could
result in future mortality being significantly different than assumed.
(v) Rates of Discontinuance
Pricing assumptions for the incidence of withdrawal and discontinuance
vary duration.
(vi) Basis of Calculation of Surrender Values
Surrender values are based on the provisions specified in the policy
contracts and legislation. For the PNG life business, surrender values are
determined by the Company in accordance with the provisions specified in
the policy contracts and legislation.
(vii) Discretionary Participating Business
For most participating business, bonus rates are set such that, over long
All amounts are expressed in K’000
Net insurance premium income
Outward reinsurance expense
Net premium income
Investment income
Other income
Total operating income
Claims, surrenders and maturities
Claim recoveries
Net claims incurred
Notes to the Financial Statements
for the Year Ended 31 December 2020
periods, the returns to contract holders are commensurate with the
investment returns achieved on the pool of assets which provide security
for the contract, together with other sources of profit arising from this
business. Profits from these policies are split between contract holders
and shareholders in accordance with the policy conditions which allow for
shareholders to share in allocations at a maximum rate of 20%.
Assumed future bonus rates included in the liability for the long term
insurance contracts were set such that the present value of the liabilities
equates to the present value of assets supporting the business together
with assumed future investment returns, allowing for the shareholder's
right to participate in distributions.
(c) Reinsurance
Contracts entered into by the Group with Reinsurers under which the
Group is compensated for losses on one or more contracts issued by the
Group, are classified as reinsurance contracts.
As the reinsurance agreements provide for indemnification by the
Reinsurers against loss or liability, reinsurance income and expenses are
recognised separately in profit or loss when they become due and payable
in accordance with the reinsurance agreements.
Reinsurance recoveries are recognised as claim recoveries in profit or loss.
This is netted off against the claim expenses. Reinsurance premiums are
recognised as Reinsurance Expenses.
Insurance
The accounting policies of the consolidated entity, which have been applied
in determining the financial information shown below, are the same as
those applied in the consolidated financial statements. The summarised
income statement for BSP Life (Group) is presented below as per the
respective subsidiary accounts. The consolidated profit includes insurance
profit and investment earnings on shareholders fund.
Consolidated
2020
2019
199,172
(4,142)
195,030
220,666
158,390
(3,221)
155,169
210,325
995
2,723
416,691
368,217
(121,396)
(120,287)
194
(121,202)
550
(119,737)
107
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020
Notes to the Financial Statements
for the Year Ended 31 December 2020
31. INSURANCE (continued)
All amounts are expressed in K’000
Commission
Increase in policy liabilities
Interest expenses
Other operating expenses
Total operating expenses
Share of profit of associates and jointly controlled entities
Profit from ordinary activities before tax
Income tax expense/ (benefit) attributable to profit from ordinary activities
Consolidated
2020
2019
(15,776)
(74,324)
(564)
(148,765)
(239,429)
(26,535)
29,525
(6,642)
(14,312)
(59,746)
(513)
(148,710)
(223,281)
5,476
30,675
(3,471)
Profit after Income tax expense
22,883
27,204
The balance sheets as at 31 December 2020 categorised by Shareholder Fund and Assets Supporting Policy Liability are shown below. The allocation
between the two funds is maintained notionally as the funds are invested as a single pool of assets.
All amounts are expressed in K’000
Policy
Related Fund
Shareholder
Fund
Total
Policy Related
Fund
Shareholder
Fund
Total
Consolidated 2020
Consolidated 2019
Assets
Cash and Cash Equivalents
128,709
24,260
152,969
49,424
7,558
56,982
Equity security investments
Debt security investments
Property investments
Other assets
Total assets
Liabilities
Policy liabilities
Other liabilities
Total liabilities
Shareholders' equity
Equity & retained earnings
Total shareholders' equity
Total equity and liabilities
338,148
395,671
303,052
76,863
65,754
403,902
77,751
473,422
59,116
362,168
15,042
91,905
337,933
399,493
211,382
71,888
67,819
405,752
83,750
483,243
42,554
253,936
12,043
83,931
1,242,443
241,923
1,484,366
1,070,120
213,724
1,283,844
1,043,990
127,170
1,171,160
71,283
71,283
1,242,443
-
1,043,990
24,321
151,491
890,147
112,888
-
890,147
19,880
132,768
24,321
1,195,481
1,003,035
19,880
1,022,915
217,602
288,885
67,085
193,844
260,929
217,602
288,885
67,085
193,844
260,929
241,923
1,484,366
1,070,120
213,724
1,283,844
All amounts are expressed in K’000
Policy Liabilities
Opening balance
Translation movement
Increase in policy liabilities
Increase in policy liabilities on revaluation of land
Total policy liabilities
Insurance reserves are maintained in accordance with levels prescribed by the Regulators.
108
Consolidated
2020
2019
890,147
818,198
73,433
74,324
6,086
11,221
59,746
982
1,043,990
890,147
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Notes to the Financial Statements
for the Year Ended 31 December 2020
31. INSURANCE (continued)
Insurance and Financial Risk Management
The Group is committed to the management of risk to achieve sustainability
of service to its customers, employment of its staff and profits to its
shareholders and therefore, takes on controlled amounts of risk when
considered appropriate. The risk management framework is targeted at
ensuring that the Group maintains sufficient capital at a level which exceeds
the minimum solvency requirements prescribed by the Regulators.
The Group is exposed to financial as well as insurance risks. The Group’s
risk management strategy is set by the Board of Directors. Implementation
of risk management strategy and the day to day management of risk is the
responsibility of the Executive Management.
numbers and quantum of claims and benefits will vary from year to year
from the level established using actuarial methods.
The Group’s objectives in managing risks arising from insurance business
are:
• To ensure risk appetite decisions are made within the context of corporate
goals and governance structures;
• To ensure that an appropriate return on capital is made in return for
accepting insurance risk;
• To ensure that strong internal controls embed underwriting to risk within
the business;
• To ensure that internal and external solvency and capital requirements
are met; and
Insurance Risk
• To use reinsurance as a component of insurance risk management
The risk under any one insurance contract is the possibility that the insured
event occurs and the uncertainty of the amount of the resulting claim.
By the very nature of an insurance contract, this risk is random and is
unpredictable. The principal risk that the Group faces under its insurance
contracts is that the actual claims and benefit payments exceed the
carrying amount of the insurance liabilities.
This could occur because the frequency or severity of claims and benefits
are greater than estimated. Insurance events are random and the actual
strategy.
Terms and conditions of insurance contracts
The nature of terms of insurance contracts written is such that certain
external variables can be identified on which related cash flows for claim
payments depend. The table below provides an overview of the long-term
insurance contracts:
Type of Contract
Detail of Contract Terms and Conditions Nature of Compensation for Claims
Key Variables that affect the
timing and uncertainty of
Future Cash Flows
Non-participating life
insurance contracts with
fixed and guaranteed terms
(Term Life and Disability)
Life insurance contracts
with discretionary
participating benefits
(endowment and whole
of life)
Benefits paid on death, ill health or
maturity that are fixed and guaranteed
and not at the discretion of the insurer.
Premiums may be guaranteed through
the life of the contract, guaranteed for a
specified term or variable at the insurer’s
discretion.
These policies include a clearly defined
initial guaranteed sum which is payable
on death. The guaranteed amount is a
multiple of the amount that is increased
throughout the duration of the policy by
the addition of regular bonuses annually
which, once added, are not removed.
Benefits, defined by the insurance
contract, are determined by the contract
and are not directly affected by the
performance of underlying assets or the
performance of the contracts as whole.
- Mortality
- Morbidity
- Discontinuance rates
- Expenses
- Market rates on underlying
Benefits arising from the discretionary
participation feature are based on the
performance of a specified pool of
contracts or a specified type of contract.
assets
- Mortality
- Morbidity
- Market risk
- Discontinuance rates
- Expenses
- Market rates on underlying
assets
Variations in claim levels will affect reported profit and equity. The impact
may be magnified if the variation leads to a change in actuarial assumptions
which cannot be absorbed within the present value of planned margins for
a group of related products.
Insurance risk may arise through the reassessment of the incidence of
claims, the trend of future claims and the effect of unforeseen diseases or
epidemics. In addition, in the case of morbidity, the time to recovery may
be longer than assumed.
Concentrations of insurance risk arise due to:
- Large sums assured on certain individuals. The largest exposures all relate
to mortality. The largest single exposure for the Life business is K11.701m
of which K11.185m is reinsured (2019: K11.121m of which K9.533m is
reinsured). This relates to life insurance lines.
- The largest single lump sum exposure for the health insurance business is
K8.604m, of which K8.431m is reinsured. The largest single net exposure
is K1.067m. This relates to health insurance lines.
- Geographic concentrations due to employee Company schemes. The
largest single scheme exposure is K121.654m, of which K58.848m is
reinsured. BSP Life (PNG) participates in the Term Life reinsurance
programme.
Insurance risk is controlled by ensuring underwriting standards adequately
identify potential risk and diversify the type and amount of insurance risks
accepted, retaining the right to amend premiums on risk policies where
appropriate and through the use of reinsurance and proactive claims
handling. The experience of the Group’s Life Insurance business is reviewed
regularly.
109
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Notes to the Financial Statements
for the Year Ended 31 December 2020
32. INVESTMENT IN SUBSIDIARIES
Name of subsidiary
BSP Capital Limited
BSP Life (Fiji) Limited
BSP Life (PNG) Limited
Principal
activity
Fund Management/
Investment Banking
Life Insurance
Life Insurance
BSP Convertible Notes Limited
Capital Raising
BSP Finance Limited
Credit Institution
Bank of South Pacific Tonga Ltd
Bank South Pacific (Samoa) Ltd
Bank South Pacific Vanuatu Ltd
Bank
Bank
Bank
At 31 December
Represented by:
At 1 January
Additional capital
At 31 December
Place of incorporation
Balance of investment
and operation
Ownership %
2020
2019
PNG
Fiji
PNG
Fiji
PNG
Tonga
Samoa
Vanuatu
100%
100%
100%
100%
100%
100%
98.7%
100%
2,448
87,599
25,000
371
89,318
71,610
70,712
38,020
2,448
87,599
25,000
371
82,503
71,610
70,712
38,020
385,078
378,263
378,263
6,815
385,078
347,597
30,666
378,263
110
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Notes to the Financial Statements
for the Year Ended 31 December 2020
Other
33. FIDUCIARY ACTIVITIES
The Group especially through BSP Capital Limited conducts investment fund management and other fiduciary activities as responsible entity, trustee,
custodian or manager for investment funds and trusts, including superannuation. These funds are not consolidated, as the Group does not have direct or
indirect control. Where the funds incur liabilities in respect of these activities, and the primary obligation is incurred in an agency capacity for the fund
or clients rather than its own account, a right of indemnity exists against the assets of the applicable fund or trust. As these assets are sufficient to cover
the liabilities and it is therefore not probable that the Group will be required to settle the liabilities, the investments in the assets and liabilities of these
activities are not included in the Financial Statements.
34. RELATED PARTY TRANSACTIONS
Related parties are considered to be enterprises or individuals with whom the Group is especially related because either they or the Bank are in a position
to significantly influence the outcome of transactions entered into with the Group, by virtue of being able to control, dominate or participate in a fiduciary
capacity, in decision-making functions or processes. The Group conducted transactions with the following classes of related parties during the year:
• Directors and/or parties in which the director has significant influence
• Key management personnel and other staff and/or parties in which the individual officer has significant influence
A number of banking transactions are entered into with these related parties in the normal course of business, and include loans, deposits, property
rentals, share transfers and foreign currency transactions. These transactions are carried out on commercial terms and market rates. For the year ended
31 December 2020, balances and transactions of accounts for Directors, including companies in which directorships were held by BSP directors, were as
follows:
All amounts are expressed in K’000
Customer Deposits
Opening balances
Net movement
Closing balance
Interest paid
Loans and receivables from customers
Opening balances
Loans issued
Interest
Charges
Loan repayments
Outgoing Director
Closing balance
Consolidated
2020
2019
45,220
(17,921)
27,299
7
914,468
173,405
22,358
2,379
(160,040)
(313,776)
638,794
30,925
14,295
45,220
17
899,451
61,750
66,032
3,869
(116,634)
-
914,468
Subsidised transactions are provided for staff. Such transactions include marginal discounts on interest rates, and specific fee concessions. These benefits
are mainly percentage-based on market rates and fees, and as such, staff accounts are always subject to underlying market trends in interest rates and
fees. As at 31 December 2020, staff account balances were as follows:
Housing loans
Other loans
Cheque accounts
Savings accounts
220,407
80,979
301,386
6,159
15,671
21,830
192,749
68,197
260,946
6,643
20,824
27,467
111
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Notes to the Financial Statements
for the Year Ended 31 December 2020
35. EVENTS OCCURRING AFTER BALANCE SHEET DATE
There have been no adjusting events after the end of the reporting period.
36. DIRECTORS AND EXECUTIVE REMUNERATION
Directors’ remuneration
Directors of the company received remuneration including benefits during 2020 as detailed below:
All amounts are expressed in K’000
Total remuneration
Name of Director
Sir K. Constantinou, OBE
R. Fleming, CSM*
G. Robb, OAM
F. Talao
E. B Gangloff
A. Mano
A. Sam
Dr. F Lua’iufi
S. Davis
R. Bradshaw
P. Kevin
F. Bouraga
Shareholder Approved Cap
Meetings
attended /
total held
10/10
10/10
10/10
0/10
10/10
3/10
10/10
9/10
10/10
10/10
8/8
0/0
Appointed/
(Resigned)
2020
Bank
2020
Subsidiaries
2020
Total
-
-
-
561,304
300,000
861,304
-
-
-
340,027
120,000
460,027
(Dec 2019)
-
-
(Jun 2020)
-
-
-
-
Apr 2020
Dec 2020
343,152
214,239
333,777
305,652
330,652
318,152
239,339
40,400
-
60,000
45,000
-
60,000
-
-
-
-
-
403,152
259,239
333,777
365,652
330,652
318,152
239,339
40,400
2019 Total
921,304
-
463,152
378,152
403,152
340,652
330,652
305,652
330,652
305,652
-
-
3,026,694
585,000
3,611,694
4,500,000
3,779,020
4,500,000
* Managing Director / Chief Executive Officer receives no fees for his services as Director during the year. Other members of BSP executive management
who serve as directors of subsidiaries of BSP Group receive no fees for their services as Director.
Executive Remuneration
The specified executives as at 31 December 2020 were:
Robin Fleming, CSM
Nuni Kulu
Hari Rabura
Frank van der Poll
Peter Beswick
Andy Roberts
Ronesh Dayal
Rohan George
Daniel Faunt
Mike Hallinan
Kili Tambua
All amounts are expressed in K’000
Year
2020 executive remuneration
2019 executive remuneration
Salary
16,016
14,375
Short term
incentive
Value of
benefits
Long term
incentive
Leave
encashment
Final
entitlements1
2,213
3,787
1,466
979
-
4,509
97
489
2,037
-
Total
21,829
24,139
1Final entitlements paid were for executives who exited the Bank in 2020 and constitutes statutory leave pay outs.
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Notes to the Financial Statements
for the Year Ended 31 December 2020
36. DIRECTORS AND EXECUTIVE REMUNERATION (continued)
Executive remuneration
The number of employees or former employees whose income from the Bank was equal to or greater than K100,000 during the year, are classified in
income bands of K10,000 as follows:
Remuneration
K’000
100 – 110
110 – 120
120 – 130
130 – 140
140 – 150
150 – 160
160 – 170
170 – 180
180 – 190
190 – 200
200 – 210
210 – 220
220 – 230
230 – 240
240 – 250
250 – 260
260 – 270
270 – 280
280 – 290
290 – 300
300 – 310
310 – 320
320 – 330
330 – 340
340 – 350
350 – 360
360 – 370
370 – 380
380 – 390
390 – 400
400 – 410
410 – 420
420 – 430
430 – 440
440 – 450
450 – 460
460 – 470
470 – 480
480 – 490
490 – 500
500 – 510
510 – 520
520 – 530
2020
No.
122
71
76
43
47
33
19
25
26
21
13
20
13
9
12
10
11
4
5
3
12
1
9
3
1
4
1
4
3
5
7
3
5
4
3
3
2
4
3
6
2
-
6
2019
No.
Remuneration
K’000
2020
No.
2019
No.
Remuneration
K’000
2020
No.
2019
No.
53
61
47
31
29
17
20
23
16
11
15
14
9
8
16
4
4
5
-
5
4
5
-
2
1
2
2
5
-
1
2
1
11
2
3
1
4
3
2
4
3
2
4
530 – 540
540 – 550
550 – 560
560 – 570
570 – 580
580 – 590
590 – 600
600 – 610
610 – 620
620 – 630
630 – 640
640 – 650
650 – 660
660 – 670
680 – 690
690 – 700
700 – 710
710 – 720
720 – 730
730 – 740
740 – 750
750 – 760
760 – 770
770 – 780
780 – 790
790 – 800
810 – 820
820 – 830
840 – 850
850 – 860
860 – 870
870 – 880
880 – 890
890 – 900
900 – 910
910 – 920
930 – 940
960 – 970
970 – 980
980 – 990
990 – 1000
1000 – 1010
1020 – 1030
2
4
1
1
2
-
1
1
2
2
2
1
3
1
1
1
-
2
-
1
-
-
1
-
1
1
2
2
2
2
1
1
1
3
-
2
-
-
2
-
1
-
-
2
-
1
-
2
1
2
1
3
1
-
1
2
2
1
-
1
-
1
1
1
1
-
2
3
3
-
1
1
-
1
2
1
1
1
-
2
1
-
1
-
1
1
1030 – 1040
1050 – 1060
1060 – 1070
1070 – 1080
1080 – 1090
1090 – 1100
1100 – 1110
1110 – 1120
1120 – 1130
1130 – 1140
1140 – 1150
1150 – 1160
1170 – 1180
1180 – 1190
1190 –1200
1200 – 1210
1210 – 1220
1220 – 1230
1240 – 1250
1250 – 1260
1260 – 1270
1270 – 1280
1280 – 1290
1350 – 1360
1360 – 1370
1370 – 1380
1390 – 1400
1400 – 1410
1410 – 1420
1420 – 1430
1430 – 1440
1470 – 1480
1480 – 1490
1590 – 1600
1610 – 1620
1650 – 1660
1680 – 1690
1720 – 1730
1980 – 1990
2070 – 2080
2410 – 2420
2240 – 2250
4840 – 4850
7480 – 7490
Total
1
2
2
1
2
1
1
1
-
-
2
1
1
-
1
-
-
-
1
1
-
1
-
1
1
1
1
1
1
1
-
-
1
-
1
-
-
-
2
-
-
1
1
-
-
-
2
1
-
-
-
1
1
1
1
-
-
1
1
1
1
1
-
-
1
-
1
1
-
-
-
1
-
-
1
1
-
1
-
1
1
1
-
1
1
-
-
1
756
523
Remuneration disclosures have been updated to reflect entitlements applicable to respective years. Short term incentives and long term incentives for
executives are paid post availability of audited accounts in the subsequent year and have been aligned accordingly. Prior year disclosures were based on
the period each entitlement was received.
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Notes to the Financial Statements
for the Year Ended 31 December 2020
37. REMUNERATION OF AUDITOR
All amounts are expressed in K’000
Consolidated
Bank
Financial statement audits
Other services
2020
2019
2020
2019
5,054
434
5,488
4,347
514
4,861
3,749
434
4,183
3,126
463
3,589
The external auditor PricewaterhouseCoopers is also engaged in providing other services to the Bank and Group as required and as permitted by
prudential standards. The provision of other services included taxation.
114
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Strategic
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Independent auditor’s report
To the shareholders of Bank of South Pacific Limited
Report on the audit of the financial statements of the Bank and the Group
Our opinion
We have audited the financial statements of Bank of South Pacific Limited (the Bank), which comprise the statements of financial position as
at 31 December 2020, and the statements of comprehensive income, statements of changes in shareholders’ equity and statements of cash
flows for the year then ended, and the notes to the financial statements which include a summary of significant accounting policies and other
explanatory information for both the Bank and the Group. The Group comprises the Bank and the entities it controlled at 31 December 2020
or from time to time during the financial year.
In our opinion the accompanying financial statements:
•
•
comply with International Financial Reporting Standards and other generally accepted accounting practice in Papua New Guinea; and
give a true and fair view of the financial position of the Bank and the Group as at 31 December 2020, and their financial performance
and cash flows for the year then ended.
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 opinion.
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 Bank and Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for
Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements.
Our firm carries out other services for the Group in the areas of audit-related and tax advice services. The provision of these other services has not
impaired our independence as auditor of the Bank and the Group.
Our audit approach
An audit is designed to provide reasonable assurance about 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 financial statements.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking
into account the management structure of the Bank and the Group, their accounting processes and controls and the industries in which they operate.
PricewaterhouseCoopers, PwC Haus, Level 6, Harbour City, Konedobu, PO Box 484 Port Moresby, Papua New Guinea
T: (675) 321 1500 / (675) 305 3100, www.pwc.com/pg
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020
115
Materiality
Audit Scope
Key Audit Matters
• For the purpose of our audit of the Group we
used overall group materiality which represents
approximately 5% of the Group’s profit before
taxes.
• We applied this threshold, together with
qualitative considerations, to determine the
scope of our audit and the nature, timing and
extent of our audit procedures and to evaluate
the effect of misstatements on the financial
statements as a whole.
• We chose Group profit before taxes as, in our view,
it is the metric against which the performance of
the Group is most commonly measured and is a
generally accepted benchmark.
• We selected 5% based on our professional
judgement noting that it is also within the range
of commonly acceptable related thresholds.
• We (PwC Papua New Guinea) conducted the
audit over all of the Group’s operations in
Papua New Guinea (PNG) which is the most
significant to the Group, and directed the scope
of the audit of other subsidiaries included in
the Group financial statements sufficient to
express an opinion on the financial statements
as a whole.
• For the Group’s activities in Fiji, Solomon
Islands, Samoa, Tonga, Cambodia, Cook
Islands, and Vanuatu the audit work was
performed by other PwC network firms or other
firms operating under our instructions.
• Our audit focused on where the directors made
subjective judgements; for example, significant
accounting estimates involving assumptions
and inherently uncertain future events.
• Amongst other relevant topics, we
communicated
following key
the
audit matters to the Board Audit &
Compliance Committee:
• Loan loss provisioning
• IT General Control Environment
• These matters are further described
in the Key audit matters section of our
report.
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
for the current year. The key audit matters were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be key
matters to be communicated in our report. Further, commentary on the outcomes of the particular audit procedures is made in that context.
116
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How our audit addressed the key matter
Loan loss provisioning - Refer to Note 15 of the financial
statements for a description of the accounting policies
and to Note 22 for an analysis of credit risk
The procedures we performed to support our audit conclusions,
included:
Due to the magnitude of the loans and advances balances
and the extent of management judgement inherent in the
impairment calculations, impairment of loans and advances is
an area of significance in the current year audit of the Bank and
its subsidiaries.
IFRS 9 Financial Instruments (IFRS 9) is a complex accounting
standard which has required considerable judgement and
interpretation in its application.
The key areas of judgement included:
• The determination of the impairment in applying IFRS
9, which is reflected in the allowance for losses on loans,
advances and other receivables (refer to Note 15 and Note 22)
• The identification of exposure for which there has been a
significant increase in credit risk
• Assumptions used in the expected credit loss model such
as valuation of collateral and assumptions made on future
values, financial condition of counterparties, expected future
cash flows and forward looking macroeconomic factors
• The need to apply additional model adjustments to reflect
current or future external factors that are not appropriately
captured by the expected credit loss model
The developing COVID 19 pandemic has meant assumptions
regarding economic outlook and the consequential impact on
the Bank’s customers is uncertain, increasing the degree of
judgement required in calculating the loan loss provisions.
This includes judgements regarding the impact of COVID 19
on forward looking information, including variables used in
macroeconomic scenarios and their associated weightings.
IT General Control Environment
• Consideration of the appropriateness of accounting policies
and assessment of the loan impairment methodology applied,
compared to the requirements of IFRS 9. This included obtaining
an understanding and assessment of the reasonableness of the key
outputs of the model, as well as key judgements and assumptions
used by management in implementation of the model, the
mathematical accuracy of the IFRS 9 provisioning model and a
particular focus on the impact of COVID 19.
• Reviewing the design and operating effectiveness of key controls
around the credit origination processes, the credit monitoring
processes and the credit inspection unit’s customer loan file
reviews.
• Review of the impairment methodology to establish the critical
fields used in the computation of Stage 1 and Stage 2 provisions. On
a sample basis testing the critical fields identified to have an impact
on the expected credit loss provision by agreeing this back to source
documentation.
• For loans and advances in Stage 1 and Stage 2, critically examining
the model methodology for consistency and appropriateness. This
included evaluation of the appropriateness of the estimates made
on the Probability of Default, Loss Given Default and Exposure
at Default. This also included assessing the appropriateness of
probability-weighted and staging criteria.
• For Stage 3 loans and advances, audit procedures were carried out
over the completeness of the credit watch list and delinquencies,
assumptions made in the valuation of collateral and recovery cash
flows.
• For model adjustments, we considered the basis for and data
used to determine the adjustments. This included making an
independent assessment of both the credit environment and the
macro-environment in which the Group operates.
• For IFRS 9 related disclosures in the financial statements, we
reviewed the accuracy and completeness in line with the Bank’s
accounting policies and IFRS 9 requirements.
We focused on this area because the Group is heavily dependent
on complex IT systems for the capture, processing, storage and
extraction of significant volumes of transactions.
For significant financial statement line items, we gained an understanding
of the business processes, key controls and IT systems used to generate and
support those line items.
There are some areas of the audit where we seek to place reliance
on system functionality including certain automated controls,
system calculations and reports.
Where relevant to our planned audit approach, we assessed the design
and tested the operating effectiveness of the key ITGCs which support the
continued integrity of the in-scope IT systems.
Our reliance on these is dependent on the Group’s IT General
Control (ITGC) environment, in particular, user access mainte-
nance and changes to IT systems being authorised and made in an
appropriate manner.
Our procedures over ITGCs focused on user access and change management
and we also carried out tests, on a sample basis, of system functionality that
was key to our audit approach.
Where we identified design or operating effectiveness matters relating
to ITGCs and system functionality relevant to our audit, we performed
alternative or additional audit procedures.
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StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Information other than the financial statements and auditor’s report
The directors are responsible for the other information. The other information comprises the Directors’ Report (but does not include the financial
statements and the auditors’ report thereon), which we obtained prior to the date of this auditor’s report, and the annual report, which is expected to
be made available after that date. Our opinion on the financial statements does not cover the other information and we do not, and will not, express
any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information 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 on the other information that we obtained prior to the date of this auditor’s report,
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.
When we read the annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those
charged with governance.
Responsibilities of the directors for the financial statements
The directors are responsible, on behalf of the Bank for the preparation of financial statements that give a true and fair view in accordance
with International Financial Reporting Standards and other generally accepted accounting practice in Papua New Guinea and the Companies
Act 1997 and for such internal control as the directors determine is necessary to enable the preparation of the financial statements that give
a true and fair view and 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 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 Bank or the Group or to cease operations or have no realistic alternative but to do so.
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 the 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 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 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
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 of the Group. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for our audit opinion.
118
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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 communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
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 for the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless
law or regulations preclude 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
The Companies Act 1997 requires that in carrying out our audit we consider and report on the following matters. We confirm in relation to our audit
of the financial statements for the year ended 31 December 2020:
• We have obtained all the information and explanations that we have required;
•
In our opinion, proper accounting records have been kept by the Bank as far as appears from an examination of those records.
Who we report to
This report is made solely to the Bank’s shareholders, as a body, in accordance with the Companies Act 1997. Our audit work has been
undertaken so that we might state to the Bank’s shareholders those matters which we are required to state to them in an auditor’s report and
for no other purpose. We do not accept or assume responsibility to anyone other than the Bank and the Bank’s shareholders, as a body, for
our audit work, for this report or for the opinions we have formed.
PricewaterhouseCoopers
Peter Buchholz
Partner
Registered under the Accountants Act 1996
Port Moresby
24 February 2021
119
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Shareholder Information
The following is a summary of pertinent issues relating to shareholding in the Group. The Constitution of BSP may be inspected
during normal business hour at the Registered Office.
Rights attaching to Ordinary Shares
The rights attaching to shares are set out in Bank of South Pacific Limited’s
Constitution and in certain circumstances, are regulated by the Companies
Act 1997, the PNGX Listing Rules and general law. There is only one class
of share. All shares have equal rights. Other rights attached to ordinary
shares include:
General meeting and notices
Each member is entitled to receive notice of, and to attend and vote at,
general meetings of BSP and to receive all notices, accounts and other
documents required to be sent to members under BSP’s constitution, the
Companies Act or the Listing Rules.
Voting rights
At a general meeting of shareholders, every holder of fully paid ordinary
shares present in person or by an attorney, representative or proxy has one
vote on a show of hands (unless a member has appointed two proxies) and
one vote per share on a poll.
A person who holds a share which is not fully paid is entitled, on a poll, to a
fraction of a vote equal to the proportion which the amount paid bears to
the total issue price of the share.
Where there are two or more joint holders of a share and more than one
of them is present at a meeting and tenders a vote in respect of the share,
the Company will count only the vote cast by the member whose name
appears first in BSP’s register of members.
The Directors may decline to register a transfer of shares (other than a
proper transfer in accordance with the PNGX Business Rules) where
permitted to do so under the PNGX Listing Rules or the transfer would be
in contravention of the law. If the Directors decline to register a transfer,
BSP must give notice in accordance with the Companies Act and the PNGX
Listing rules, give the party lodging the transfer written notice of the refusal
and the reason for refusal. The Directors must decline to register a transfer
of shares when required by law, by the PNGX Listing Rules or by the PNGX
Business Rules.
Partly paid shares
The Directors may, subject to compliance with BSP’s constitution, the
Companies Act and the PNGX Listing Rules, issue partly paid shares upon
which there are outstanding amounts payable. These shares will have
limited rights to vote and to receive dividends.
Dividends
The Directors may from time to time determine dividends to be distributed
to members according to their rights and interests. The Directors may fix
the time for distribution and the methods of distribution. Subject to the
terms of issue of shares, each share in a class of shares in respect of which
a dividend has been declared will be equally divided. Each share carries the
right to participate in the dividend in the same proportion that the amount
for the time being paid on the share (excluding any amount paid in advance
of calls) bears to the total issue price of the share.
Dividend payouts over the last four years are disclosed in the Historical
Summary section of this Annual Report.
Issues of further shares
Liquidation
The Directors may, on behalf of BSP, issue, grant options over, or otherwise
dispose of unissued shares to any person on the terms, with the rights, and
at the times that the Directors decide. However, the Directors must act in
accordance with the restrictions imposed by BSP’s constitution, the PNGX
Listing Rules, the Companies Act and any rights for the time being attached
to the shares in any special class of those shares.
Subject to the terms of issue of shares, upon liquidation assets will be
distributed such that the amount distributed to a shareholder in respect
of each share is equal. If there are insufficient assets to repay the paid-up
capital, the amount distributed is to be proportional to the amount paid-
up.
Variation of rights
Directors
Unless otherwise provided by BSP’s constitution or by the terms of issue
of a class of shares, the rights attached to the shares in any class of shares
may be varied or cancelled only with the written consent of the holders
of at least three-quarters of the issued shares of that class, or by special
resolution passed at a separate meeting of the holders of the issued shares
of the affected class.
Transfer of shares
Subject to BSP’s constitution, the Companies Act and the PNGX Listing
Rules, ordinary shares are freely transferable.
The shares may be transferred by a proper transfer effected in accordance
with the PNGX Business Rules, by any other method of transferring or
dealing with shares introduced by PNGX and as otherwise permitted by
the Companies Act or by a written instrument of transfer in any usual
form or in any other form approved by either the Directors or PNGX that is
permitted by the Companies Act.
BSP’s Constitution states that the minimum number of directors is three
and the maximum is ten.
Appointment of directors
Directors are elected by the shareholders in general meeting for a term of
three years. At each general meeting, one third of the number of directors
(or if that number is not a whole number, the next lowest whole number)
retire by rotation. The Board has the power to fill casual vacancies on the
Board, but a director so appointed must retire at the next annual meeting.
Powers of the Board
Except otherwise required by the Companies Act, any other law, the PNGX
Listing Rules or BSP’s constitution, the Directors have the power to manage
the business of BSP and may exercise every right, power or capacity of BSP
to the exclusion of the members.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020
121
Shareholder Information (Continued)
Share buy backs
Subject to the provisions of the Companies Act and the PNGX Listing Rules, BSP may buy back shares by itself on terms and at times determined by the
Directors.
Officers’ indemnities
BSP, to the extent permitted by law, indemnifies every officer of BSP (and may indemnify any auditor of BSP) against any liability incurred by the person,
in the relevant capacity, to another person unless the liability arises out of conduct involving lack of good faith.
BSP may also make a payment in relation to legal costs incurred by these persons in defending an action for a liability, or resisting or responding to actions
taken by a government agency or a liquidator.
Twenty largest registered fully paid ordinary shareholders.
As at 31 December 2020, the twenty largest registered fully paid shareholders of the Company were:
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Kumul Consolidated Holdings Limited
Nambawan Super Limited
Petroleum Resources Kutubu Limited
NASFUND
The Fiji National Provident Fund
Credit Corporation (PNG) Limited
Motor Vehicles Insurance Limited
PNG Sustainable Development Program Limited
Teachers Savings and Loans Society
Comrade Trustee Services Limited
IFC Capitalization (Equity) Fund LP
International Finance Corporation
Lamin Trust Fund
Capital Nominees Limited
Credit Corporation Finance Limited
Samoa National Provident Fund
Mineral Resources OK Tedi No. 2 Limited
Solomon Islands National Provident Fund
Nominees Niugini Limited
Catholic Diocese of Kundiawa
Other Shareholders
Distribution of shareholding
As at 31 December 2020, the Company had 5,549 shareholders. The distribution of shareholdings is as follows:
Range (number)
1 to 1000
1001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and above
122
Share Held
84,811,597
56,499,584
46,153,840
45,318,417
40,547,063
33,294,081
31,243,736
23,827,156
15,317,366
12,456,052
4,213,877
4,213,877
3,518,132
3,279,230
3,000,000
2,984,804
2,890,000
2,500,001
2,369,495
2,217,798
46,572,875
467,228,981
%
18.15%
12.09%
9.88%
9.70%
8.68%
7.13%
6.69%
5.10%
3.28%
2.67%
0.90%
0.90%
0.75%
0.70%
0.64%
0.64%
0.62%
0.53%
0.51%
0.47%
9.97%
100%
Number of
Shareholders
Number of Shares
4,584
589
97
178
101
5,549
1,188,664
1,232,558
732,947
6,522,213
457,552,599
467,228,981
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsANNUAL REPORT 2020 BANK OF SOUTH PACIFIC LTD Unmarketable Parcels:
As at 31 December 2020, the BSP Share Price was K12.00. There were 583 shareholders (0.01% of total shareholdings) who held less than a marketable
parcel of BSP shares, being holdings of K1,000 or less in market value.
Interest in shares in the Bank
Directors hold the following shares in the Bank:
Director
R Fleming
Shares Held
93,000
%
0.00
Registered Office
Section 34, Allotment 6 & 7,
Klinki Street, Waigani Drive, Port Moresby.
National Capital District, PAPUA NEW GUINEA
Telephone: +675 322 9700
Australian Registered Office
Level 26
181 William Street, Melbourne VIC 3000
Australia
Home Exchange for BSP Shares
PNG Exchange Markets (PNGX)
PO Box 1531
PORT MORESBY
National Capital District, PAPUA NEW GUINEA
Telephone: +675 320 1980
Telephone: +679 330 4130
Share Registry
PNG Registries Ltd
PO Box 1265,
PORT MORESBY
National Capital District, PAPUA NEW GUINEA
Telephone: +675 321 6377
Home Exchange for BSP Convertible Notes
South Pacific Stock Exchange
GPO Box 11689
SUVA, FIJI
Australian Share Registry
Link Market Services Ltd
Level 12, 680 George Street, Sydney
NSW 2000
APRA Disclaimer:
BSP is not authorised under the Banking Act 1959 (Commonwealth of Australia) and is not supervised by the Australian Prudential Regulation Authority
(APRA). BSP’s products are not covered by the depositor protection provisions in section 13A of the Banking Act 1959 and will not be covered by the
financial claims scheme under Division 2AA of the Banking Act 1959
Waigani Drive Branchless banking Team David Manoka & Jeremiah
Baniyama at the UPNG mini Expo in 2020.
WBC Branch Manager Alex Kuna signing on PNGDF Major General
Gilbert Toropo, CBE onto the Home Loan Scheme.
123
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020
Directors’ Information
Name
Nature of Interest
Sir K. Constantinou, OBE
Director
Shareholder
Patron
Member
R. Fleming, CSM, MBA, MMGT
Director
Bank of South Pacific Ltd, BSP Capital Ltd, BSP Finance Ltd, Bank South Pacific Tonga
Ltd, Bank South Pacific (Samoa) Ltd, Bank South Pacific (Vanuatu) Ltd, Airways Hotel
& Apartment Ltd, Lamana Hotel Ltd, Lamana Development Ltd, Heritage Park Hotel
Ltd, Gazelle International Hotel Ltd, Oil Search Ltd, Alotau International Hotel Ltd,
Coastwatchers Court Ltd, Waigani Assets Ltd, Southern Seas Investments Ltd, Texas
Chicken South Pacific Ltd, Loloata Island Resort, OPH Ltd, Taumeasina Island Resort
in Samoa, Good Taste Company in New Zealand, Air Niugini, Vision Projects Ltd,
Hospitality Plus Hotels Ltd, C G A Properties Ltd, The Papua Hotel Development Ltd,
Airways Development Ltd, Airways Residences Ltd, Lamana Development (Samoa)
Ltd, Taumeasina Development Corporation Ltd, Taumeasina Villas Ltd, TC Nambawan
Ltd, TC Tupela Ltd, TC3 Ltd, TC4 Ltd, TC Faipela Ltd in New Zealand, TC Sikispela, TC
Faipela Ltd in Papua New Guinea, Hebou Constructions (PNG) Ltd, Monier Ltd, Poly
Allied Products Ltd, Tiare No. 23 Ltd, Six 97 Ltd, Oasis Apartments Ltd, Central Sand
Supplies Ltd and Anglicare Foundation
Airways Hotel & Apartment Ltd, Lamana Hotel Ltd, Lamana Development Ltd, Texas
Chicken South Pacific Ltd and K G Property Ltd
Burnet Institute and Kokoda Track Foundation
Australian Institute of Company Directors, PNG Institute of Directors, Anglicare
Foundation
Bank of South Pacific Ltd, BSP Capital Ltd, BSP Convertible Notes Ltd, BSP PNG
Holding Ltd, BSP Life (Fiji) Ltd, BSP Saleco Ltd, BSP Nominees Ltd, BSP Finance Ltd,
BSP Finance (PNG) Ltd, BSP Finance (Fiji) Ltd, BSP Health Care (Fiji) Ltd, Bank South
Pacific Tonga Ltd, Bank South Pacific (Samoa) Ltd, Bank South Pacific (Vanuatu) Ltd,
3 Kundu Services Pte Ltd, 3 Kundu Holdings PTE Ltd, BSP Finance (Solomon) Ltd, BSP
Life PNG Ltd, BSP Finance (Cambodia) Plc, Devco Leasing (Lao) PTE Ltd, Platform
Pacific Ltd
Shareholder
Bank of South Pacific Ltd, BSP Saleco Ltd
Member/Trustee
Australian Institute of Company Directors, PNG Institute of Directors, Anglicare
Foundation
A. Sam, BComm, CPA, MAICD,
GAICD
Director
Bank of South Pacific Ltd, Sam Kiak Tubangliu Certified Practising Accountants, Silver
Dawn Holdings Ltd
Shareholder
Sam Kiak Tubangliu Certified Practising Accountants, Silver Dawn Holdings Ltd
Member/Graduate
CPA PNG, PNG Institute of Directors, Australian Institute of Company Directors
S. Davis, LLB
Director
Bank of South Pacific Ltd, Next DC Ltd, PayPal Australia Ltd, Asia Society of Australia,
Australia India Business Council
Graduate/Member
Australian Institute of Company Directors, Avondale Golf Club Ltd
124
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsANNUAL REPORT 2020 BANK OF SOUTH PACIFIC LTD Name
Nature of Interest
R. Bradshaw, LLB
Director
Bank of South Pacific Ltd, Jiwaka Provincial Health Authority, Post PNG Limited
Shareholder
Member
Director
Koitaki CC Ltd, Koitaki Country Club, Wahgi Arabicas Ltd, Waghi Valley Country Club,
The Kofi Club, Songkan Ltd
Papua New Guinea Law Society
Bank of South Pacific Ltd, BSP Capital Ltd, Bank of South Pacific Tonga Ltd
Member/Graduate
Australian Institute of Company Directors
G. Robb, BA, MBA, OAM, MAICD,
GAICD
E. B. Gangloff, CPA, MAICD, MIIA,
PNGID
Director
Member
Bank of South Pacific Ltd, Gangloff Consulting Ltd, New Britain Palm Oil Ltd,
Sir Theophilus Constantinou Foundation, BSP Finance (Fiji) Ltd, Pacific Training
Consortium Ltd, Highlands Pacific Ltd
Institute of National Affairs (President), MSME Council Inc. (Vice President),
Australian Institute of Company Directors, Papua New Guinea Institute of Directors
(Founding member), CPA PNG, Institute of Internal Auditors, School of Business and
Public Administration, University of Papua New Guinea (Adjunct Professor).
Faamausili Dr. M. Lua’iufi, BA,
MSc, PhD
Director
Bank of South Pacific Ltd, Paradise Consulting, National University of Samoa
Shareholder
Paradise Consulting
Member
Executive Committee of the National University of Samoa, Samoa Institute of
Directors, British Institute of Consulting, Technical Advisor to the newly establsihed
Samoa Human Resources Institute (November 2018), Australian Institute of Company
Directors
P. KEVIN, BSCS, MAICD
Director
Bank of South Pacific Ltd, Institute of National Affairs (INA) Council, In4net Ltd, PNG
Digital ICT Cluster Inc., PNG Women in STEM Inc., PNG Computer Society Inc.
Shareholder
Employee
In4net Ltd
In4net Ltd
F. BOURAGA, CPA, MAICD
Director
Shareholder
Employee
Bank of South Pacific, Inside Out Ltd, Star Management Services Ltd, Papua New
Guinea Cancer Foundation, Star No.57 Ltd
Inside Out Ltd, Lalokau FM, Star Manage-ment Services Ltd, Star No.57 Ltd
SBC Solutions
125
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Teams
Corporate Social
Responsibility
Management
Teams
126
ANNUAL REPORT 2020 BANK OF SOUTH PACIFIC LTD
Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Teams
Corporate Social
Responsibility
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020
127
Executive
Management
Robin Fleming, CSM
Group Chief Executive Officer
FRANK W.M. van der POLL
Group Chief Operating Officer
RONESH DAYAL
Group Chief Financial Officer
Technology,
Information
Frank joined BSP in May 2019 as the Deputy
GCOO and commenced in the GCOO role on
1st November, 2020. Primary responsibilities
include
Project
Management Office, and Project Compass, BSP’s
Core Banking System upgrade, IT and has direct
responsibilities for Transaction Channel Support,
International Operations, Lending Support &
Collections, Customer Service & Contact Centre,
Support Services and Security Services. Frank
started his career in the Information Technology
field with various director roles at ICL/Fujitsu
and Gandalf Technologies (Data communication)
where he served as Vice President East, Middle
East & Africa. In 1997, Frank moved into the
Financial Services Industry; starting at Maduro
& Curiel’s Bank in the West Indies, Banque
Populaire du Rwanda and Standard Chartered
Southern Africa. Prior to joining BSP, Frank was
the Chief Executive Officer for the First Micro
Finance Bank Afghanistan.
Mr. Ronesh Dayal was appointed the Group
Chief Financial Officer on 11th June, 2020. Mr.
Dayal is an experienced and detail-oriented CFO
with over 17 years experience in the financial
services industry, having worked in the Life
Insurance and Banking businesses in Fiji and
Papua New Guinea.
He progressed into executive roles when he
was appointed as the CFO for BSP Fiji Branch
in December 2010 and was the first local CFO
for the Bank. He was later appointed to the
position of Deputy CFO - BSP PNG in 2014 when
he moved to Papua New Guinea, before being
appointed as the CFO for PNG Bank in 2017.
Mr. Dayal holds a Bachelor of Arts Degree with
double Majors in Accounting and Financial
Management and Information Systems from
the University of South Pacific. He is currently
the President of CPA Australia - PNG Branch and
acts as mentor to a number of BSP's Leadership
and Management Development program
participants. He is a member of Chartered
Accountants of CPA Australia, Chartered
Accountant of CPA PNG and Chartered
Accountant of The Fiji Institutes of Accountants.
Robin Fleming was appointed GCEO of Bank
of South Pacific Ltd in April 2013. Before his
appointment as GCEO, he had been Deputy
GCEO and Chief Risk Officer since 2009. Prior to
that, Mr Fleming held senior executive roles as
Chief Risk Officer, General Manager Corporate
& International, and Head of Risk Management
with BSP. Prior to the merger of BSP and PNGBC,
Mr Fleming held senior management roles with
PNGBC. He has worked in PNG for over 36 years
and holds an MBA and a Master of Management
from Charles Sturt University. Mr Fleming was
made a Companion of the Star of Melanesia
(CSM) in 2015 by the PNG Government for
services to banking and the community.
128
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsANNUAL REPORT 2020 BANK OF SOUTH PACIFIC LTD Daniel Faunt
Group General Manager Retail
Mr Faunt was appointed Group General Manager
Retail in December 2020 following the retirement
of Paul Thorton. He assumes responsbility for the
Group Retail Bank function econompassing the
management of the 81 branches and sub-branches
in PNG along with the Paramount Banking division
and Group Marketing. Mr Faunt was previously
the groups General Manager Offshore Branches
with responsibility over banking operations in
Fiji, Solomon Islands, Tonga, Samoa, Vanuatu and
Cook Islands.
Mr Faunt has more than 20 years of banking
experience in various senior management roles in
PNG, Australia and the Pacific. He holds a Masters
of Business Administration in Economics from
Deakin University and a Bachelor of Business
in Banking and Finance from the Queensland
University of Technology.
Peter Beswick
Group General Manager Corporate
Banking
Peter Beswick was appointed General Manager
of BSP Corporate Banking in June 2011. He has
over 25 years Banking and Finance experience,
covering Australia and South East Asia with
Commonwealth Bank of Australia, National
Australia Bank and Bank of New Zealand; holding
senior executive positions in Risk Management
and Business Development. Mr Beswick’s
most recent appointment has been CEO of a
national wholesale, import and retail business
in Australia. He has extensive experience in
the Finance, Government, Retail, Wholesale,
Telecommunications and Property
sectors,
with extensive knowledge in foreign exchange,
risk management and governance. Mr Beswick
qualified as a Chartered Accountant with PWC
and most recently completed an MBA with
Macquarie University in Australia.
Mike Hallinan
Group Chief Risk Officer
Mike Hallinan, was appointed Group Chief Risk
Officer, following Haroon Ali’s move to Fiji as
Country Head in 2018. Mr Hallinan, commenced
employment with BSP in 2013, as Chief Credit
Officer. His professional career expands over 40
years in Banking and Finance holding various
senior positions in Risk Management and Senior
Relationship Executive roles with Commonwealth
Bank of Australia, specifically managing corporate
and
including
government departments, both domestically and
internationally. Recent experience prior to joining
BSP included the financial industry group and
infrastructure project financing. Mike is familiar
with PNG having previously worked for the former
Papua New Guinea Banking Corporation holding
the position of Executive Manager Lending
Division. Mike is a qualified CPA and is a Fellow of
the Australian Bankers Institute.
relationships
institutional
129
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Executive
Management (Continued)
Rohan George
General Manager Treasury
Hari Rabura
General Manager Human Resources
KILI TAMBUA
General Manager Offshore Branches
structured
Rohan George was appointed General Manager
Treasury in February 2015. Mr George has
extensive knowledge in developed and emerging
financial markets. His experience spans over 30
years, covering fixed income, foreign exchange,
and
commodities
derivatives
markets. He
is passionate about financial
markets, managing market risk, liquidity risk and
providing value add solutions for clients. Prior to
joining BSP, Mr George worked at ANZ as Head
of Global Markets, Cambodia & Laos (5 years),
at Westpac as Treasurer PNG & PINS (8 years),
and at BNP Paribas Investment Management
in Sydney, as Head of Fixed Income. Mr George
holds a Master of Applied Finance degree from
Macquarie University and is accredited by both
the Australian Financial Markets Association and
the Sydney Futures Exchange.
Hari Rabura was appointed General Manager
Human Resource in April 2016. She first joined
BSP as a graduate trainee in 2001 and worked in
various positions within HR in BSP and various
private firms. Ms Rabura is the first female
employee to reach executive management level
as a General Manager in one of the key Strategic
Business Unit (SBU) within the organisation. She
is experienced in implementing and delivering
HR strategies, policies, and services that create,
support and sustain a high performance culture
in BSP. As a former member of the Leadership
and Management Development Program (LMDP)
in BSP, she has undergone General Management
training in INSEAD Business School in France and
Melbourne Business School in Australia.
Kili Tambua was appointed to GM OSB on 2
November 2020 overseeing banking operations in
Fiji, Solomon Islands, Tonga, Samoa, Cook Islands
and Vanuatu.
Kili's professional career expands over 29
years in Banking and Finance - including senior
management roles within Retail Banking. He holds
a Master’s degree in Business Administration
from the University of PNG and is an affiliate to
the Australian Institute of Banking & Finance.
130
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsANNUAL REPORT 2020 BANK OF SOUTH PACIFIC LTD Nuni Kulu
General Manager Digital
Vandhna Narayan
Group General Manager Compliance
Andy Roberts
General Manager BSP Finance Ltd
Nuni Kulu was appointed as General Manager
Digital effective as of 1st January, 2019. Her
appointment makes her the second female to
be appointed to the Executive of BSP as she
joins Hari Rabura, General Manager Human
Resources. Nuni joined the former PNG Banking
Corporate (PNGBC) as a graduate and has
undertaken numerous roles in Treasury and
Retail Banking during the course of her career.
She was a member of the BSP's Leadership
Development Program and has benefited
from leadership and management training at
Melbourne Business School and Insead College
in France. Nuni hails from Manus Province and
holds a Bachelor of Commerce attained at the
Australian National University with many years
of experience with PNGBC/BSP. She is now the
President of the Business Council of PNG.
in
Vandhna Narayan was appointed as Group
General Manager Compliance effective 23
February 2021. Vandhna oversees BSP’s Anti-
Money Laundering & Compliance; Internal Audit;
and Credit Inspection Business Units to ensure
BSP continues to meet its ongoing regulatory
obligations and advancements
industry
standards. Vandhna was formerly the Group Head
of Compliance and AML for BSP, and has also held
roles as General Manager Legal & Compliance for
BSP Life Fiji and Colonial National Bank Fiji (now
BSP Fiji). Vandhna is a qualified Solicitor (admitted
in Fiji, New Zealand and New South Wales) with
over 25 years diverse professional and leadership
experience, including 10 years in the Banking and
Insurance sector. Vandhna successfully completed
CBA’s Executive Development Program in 2010,
and holds a Bachelors Degree in Law from Victoria
University of Wellington, New Zealand, and a
Masters Degree in Human Rights Law and Policy
from the University of New South Wales.
Andy Roberts was appointed General Manager
of BSP Finance Ltd on 17 August 2020. Prior
joining BSP, Mr Roberts held various
to
management positions in equipment finance
and corporate banking with Westpac and NAB
in Australia in a career spanning 25 years. More
recently he spent just over 2 years with Credit
Corporation in PNG before joining BSP. Andy is
currently completing his Master of Business
Administration at Torrens University in Australia.
131
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132
COOK ISLANDS
Standing (L-R):
Henry Napa – Head of Operations
David Street – Country Head
Achaal Narayan – Manager Digital
Tokoa Harmon – Branch Manager
Seated (L - R):
Grace Tangata – Operational Risk and Compliance
Manager
Tutu Inamata – Business Manager
Gabe Raymond – Head of Finance
Chris Doran – Head of Corporate
FIJI
Standing (L-R):
Alvina Ali – General Manager Legal & Compliance
Esala Halafi – Head of Operational Risk & Compliance
Omid Saberi – Chief Information Officer
Ravindra Singh – General Manager Retail
Maikash Ali – General Manager Corporate
Sunil Rohit – Head of Credit
Seated (L - R):
William Wakeham – Chief Operating Officer
Haroon Ali – Country Head
Rajeshwar Singh – General Manager Corporate
Services & Chief Financial Officer
SAMOA
Standing (L - R):
Rodney Greed – Facilities Management and Project Manager
Maiava Iaeli Tovia-Leota – Business Manager
Edward Yee – Head of Corporate
Seated (L - R):
Epeli Racule – Head of Operations
Peti Leiataua – Manager Operational Risk
Shirley Greed – Head of Retail
Taitu’uga Maryann Lameko-Vaai – Country Manager
Jennifer Fruean – Head of Finance
Bharat Chovhan – Head of Treasury
SOLOMON ISLANDS
Standing (L - R):
David Anderson – Country Manager
Lucy Bonunga – Manager Operational Risk
Daniel Henson – Head of Corporate
Lynnette Taoti – Manager Lending Management Unit
Seated (L - R):
Freda Fa’aitoa – Manager Human Resources
Sharneet S Singh – Head of Finance
Genevieve Apusae – Manager Internal Audit
Dennis Suia – Manager Lending Support Unit
Lyn Fa’arodo – Manger E-banking
Winterford Maehau – Manager Information Services
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsANNUAL REPORT 2020 BANK OF SOUTH PACIFIC LTD
TONGA
Standing (L - R):
Emilio Tapueluelu – Head of Retail
Iunisi Polutele – Manager Operational Risk
Mele Ikahihifo Latu – Head of Treasury
Emele Hia – Head of Corporate
Meleana Fifita – Head of Operations
Emeline Fiefia – Training officer
Manavahe Seluini – AML and Compliance Officer
Seated (L - R):
Viliami Vailea – Head of Finance
Marcellina Wolfgramm Haapai – Country Head
Viliami Hia – Manager Loans Management Unit
VANUATU
Standing (L - R)
Ronal Prasad – Head of Finance
Nik Regenvanu – Country Head
Warren Bobbin – Head of Corporate
Josiah Kalfabun – Manager Compliance
Edmond Williamson – Manager Operational Risk
Seated (L - R)
Teresa Jordan – Head of Operations
Moana Korikalo – Head of Retail
Irene Tabi – Head of Treasury
Overseas and Subsidiaries Directory
Cook Islands
Country Head
Head of Corporate
Rarotonga Branch
Aitutaki Branch
David Street
Chris Doran
Tokoa Harmon
Rosa Henry
682 22829
682 22014
682 22014
682 31714
Fiji
Country Head
Damodar City Branch
Thomson St Branch
Nausori Branch
Pacific Harbour Branch(OIC)
Samabula Sales & Bus. Centre
Suva Central Branch
Ba Branch
Westfield Branch
Nadi Branch
Namaka Branch
Rakiraki Branch (OIC)
Sigatoka Branch
Tavua Branch (OIC)
Labasa Branch
Savusavu Branch (OIC)
Taveuni Branch
Samoa
Country Head
Retail Head
Apia Branch
Vaitele Branch
Salelologa Branch
Haroon Ali
Sanjani Devi
Shailendra Roy
Pio Vatanitawake
Ravikashni Prakash
Mereani Peters
Shalit Kumar
Reginald Kumar
Devendran Pillay
Ann Pesamino
Razia Tahir
Ronica Prakash
Nacanieli Vadei
Mohammed Azeem
Eka Takayawa
Vineeta Prasad
Anaseini Senivika
679 3214454
679 3342333
679 3314400
679 3478499
679 3452030
679 3387999
679 3314400
679 6674599
679 6661769
679 6700988
679 6627320
679 6694200
679 6500900
679 6681507
679 8811888
679 8850199
679 8880433
Maryanne Lameko - Vaai
Shirley Greed
Siuli Aiono
Folototo Leaumoana
Leilani Kelemete
685 66115
685 66170
685 66172
685 23005/685 23057
685 51208/ 685 51066
Solomon Islands
Country Head
Auki Branch
David Anderson
Lency Saeni
677 21874
677 40484
Gizo Branch
Heritage Park Branch
Honiara Central
Munda Branch
Noro Branch
Point Cruz Branch
Ranadi Branch
Tonga
Country Head
Nuku’alofa Branch
Vava’u Branch
Ha’apai Sub Branch
‘Eua Sub Branch
Vanuatu
Country Head
Head of Retail & Marketing
Santo Branch
Port Vila Branch
Tanna Branch
Freswota Branch
Subsidiaries
BSP Finance
Country Head (PNG)
Country Head (Fiji)
Country Head (Cambodia)
Country Head (Lao)
BSP Life
Country Head (Fiji)
Country Head (PNG)
BSP Capital
General Manager (PNG)
Clotilda Londeka
Joy Vave
Jeremy Bosukuru
Joseph Rabaua
Richard Bero
Saverio Votu
Tricia Tura
677 60539
677 21814
677 21222
677 62177
677 61222
677 21874
677 39403
Marcellina Wolfgramm Haapai 676 20807
676 20830
Mele Lily Cocker
676 71268
Sosefina Tangitau
676 60933
Ta’ufoou Maloni
Tokilupe Toe’api
676 50145
Nik Regenvanu
Moana Korikalo
Edwige Wensi
Danica Rapouel
Dolores Charlie
Lina Niatu
678 5580038
678 5580009
678 5580034
678 5580016
678 5580041
678 5580051
Adam Bailey
Krishna Raju
Buo Choeun
Panyathip Vongsouli
675 7024 5681
679 323 4451
855 (0) 2388 52064
856 (0) 20 55 538 682
Michael Nicola
Nilson Singh
679 326 1743
675 305 6361
Gheno Minia
675 309 8521
133
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020
Subsidiaries
134
BSP FINANCE HOLDING
Standing L-R
Sharon Andoiye – Quality Assurance Manager
Natasha Lagani – Financial Controller
Andy Roberts – General Manager
Janet Seta – Operational Risk and Compliance Manager
Sitting L-R
Anna Puri – Credit Manager
Remu Ruape – AML/CTF Compliance Officer
BSP FINANCE - PAPUA NEW GUINEA
Standing (L – R):
Connie Tauledo - Lending Support Officer
Richard Matanga - Accountant
Michael Timi - Snr Lending Officer
Adam Bailey - Country Manager
Jonah Luke - Collections Officer
Jina Charis Mark - Lending Officer
Rahab Kuiaha - Lending Support Officer
Sitting (L – R):
Delilah Tomala - Collections Officer
Roger Kauk - Team Leader Operations
Beverly Hamora - Receptionist
BSP FINANCE - FIJI
Standing (L-R):
Sanjeet Narsey – Finance Manager
Shelvina Sharon Lata – Accountant
Niranjan Singh – Compliance & Operations Risk
Mnagement Officer
Animul Sheryn Khan – Supervisor Lending Support
Sudeshwar Ram – Area Manager East
Sitting (L-R):
Shainesh Vikash Lal – Area Manager West
Krishna Raju – General Manager
Shirraz Narayan – Collections Supervisor
BSP FINANCE - CAMBODIA
Standing (L-R):
Kou Porlia – Senior Field Collection Officer
Heng Brosoer – Finance Manager
Morm Sreyhouch – Senior Lending Support
Seng Sokha – Head of Lending Sales
Khay Bunthoeurn – Operations Manager
Sitting (L-R):
Im Boromey – OR & Compliance & AML Supervisor
Buo Choeun – Country Head
Phum Sreyneang – Senior Lending Coordinator
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsANNUAL REPORT 2020 BANK OF SOUTH PACIFIC LTD BSP FINANCE - LAO
Standing(L-R):
Phonepaseuth Rattana – Collection Officer
Vilaiphone Silakoune – Loan & Recovery officer
Vatsrinh Vongsack – Finance Manager
Viengsavanh Danchampa – Operation Manager
Buangeun Sayavong – Lending Officer
Sitting (L-R):
Nampherng Luangchalern – Admin Assistant Officer
Vatthana Vannolath – Compliance Officer
Panyathip Vongsouli – Country Manager
Nith Chanthavongdeuane – Admin Administration Officer
BSP LIFE - FIJI
Standing (L - R):
Michael Nacola – Managing Director
Pramesh Sharma – Chief Investments Officer
Curtis Mar – General Manager Distribution & Marketing
Sitting (L - R):
Emily King – General Manager Legal & Compliance
Munendra Naidu – Chief Financial Officer
BSP LIFE - PNG
Standing (L - R):
Matthew Hasu – Head of Sales
Nilson Singh – Country Manager
Sitting (L - R):
Gynellevin Tanabi-Hemetsberger – Operations Manager
Doris Yenbari – Quality Assurance and Compliance Manager
BSP CAPITAL LTD
Standing (L - R):
Mabata Gabutu – QA & Compliance Manager
Gheno Minia – General Manager BSP Capital
Sitting (L - R):
Willie Konga – Manager, Funds Management
Theresa Kalivakoyo – Financial Controller
135
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 PNG Branch Managers
Mathew Danti
Aitape
Martin Gilo
Alotau
Rosemary Paula Seeto
Arawa
Dora Raphael
Bialla
Ruby Patu
Boroko
Julie Warren
Buka
Roslyne P. Kanini
Bulolo
Ruben Attai
Daru
Livikonimo Koki
Goroka
Antonia Dru
Gordons
Rawalo Rawalo
BSP Haus
Marco Hamen
Kainantu
Mathias Manawo
Kavieng
Betty Posangat
Kimbe
Ivy David
Kiunga
Joe Makinta
Kokopo
Rita Singut
Kundiawa
Bevilon Homuo
Lae Top Town
Gabriel Ak
Lae Market
Robinson Panako
Lae Commercial
Johnson Tetaga
Lihir
Ruth Kagl
Lorengau
Philip Solala
Mendi
Bau Kiso
Moro
Theresa Pilamp
Mt Hagen
Samuel Okti
Popondetta
Mary Koi
Porgera
Stanley Bole
Port Moresby
Kalat Tiriman
Rabaul
Dianne Rali
Tabubil
John Tomba
Tari
Delilah Kanit
Vanimo
Susie Yapen
Vision City
Thomas Tembil
Wabag
Alex Kuna
Waigani B/Centre
Madeleine Leka
Waigani Drive
Nelson Kerua
BSP First HC
Richard La’a
SME - Lae
Samuel Mulina
SME - Goroka
Carol Nokop
Waterfront
Premium Centre
Reuben Elijah
Area Manager
Highlands
Barry Namongo
Area Manager
Momase
Jeffrey Singer
Area Manager
NGI
Dennis Lamus
Area Manager
NCD
Billy Veveloga
Area Manager
Southern
136
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsANNUAL REPORT 2020 BANK OF SOUTH PACIFIC LTD Papua New Guinea Branch Directory
Aitape
Alotau
Arawa
Bialla
Boroko
BSP Haus
Buka
Bulolo
Daru
Goroka
Gordons
Kainantu
Kavieng
Kimbe
Kiunga
Kokopo
Kundiawa
Lae Top Town
Lae Market
Lae Commercial
Lihir
Lorengau
Madang
Mendi
Moro
Motukea
Mt Hagen
Popondetta
Porgera
Port Moresby
Rabaul
Tabubil
Tari
457 2042
Mathew Danti
641 1284
Martin Gilo
276 9244
Rosemary Paula Seeto
983 1095
Dora Raphael
303 4320
Ruby Patu
305 7135
Rawalo Rawalo
973 9042
Julie Warren
474 5331
Roselyn P. Kanini
645 9416
Ruben Attai
532 1633
Livikonimo Koki
302 5202
Antonia Dru
537 1251
Marco Hamen
9842082
Mathias Manowo
983 5166
Betty Posangat
649 1313
Ivy David
982 9088
Joe Makinta
535 1025
Rita Singut
473 9876
Bevilon Homuo
473 9609
Gabriel Ak
472 9088
Robinson Panako
986 4062
Johnson Tetaga
970 9244
Ruth Kagl
422 2477
Maureen Robert
549 1070
Philip Solala
276 1566
Bau Kiso / Ali Albert
Stanley Geno
321 7701
Theresa Pilamp 542 1877
629 7443
Samuel Okti
547 6900
Mary Koi
305 7104
Stanley Bole
982 1744
Kalat Tiriman
649 9179
Dianne Rali
276 1651
John Tomba
457 1025
547 1237
305 6102
302 5301
456 2344
305 7786
479 5676
532 1006
303 4354
302 5202
982 9068
422 2477
542 1877
305 7790
300 9131
305 6431
Vanimo
Wabag
Waigani
Waigani Drive
Wewak
Delilah Kanit
Thomas Tembil
Alex Kuna
Madeleine Leka
Robert Jomino
Susie Yapen
Richard La’a
Samuel Mulina
Sheila John
Antonia Dru
Kessie Guboro
Jennifer Passingan
Maggie Wara
Imelda Konabe
Pakar Tata
Carol Nokop
SME
Vision City
Lae
Goroka
Premium
Boroko
Gordons
Kokopo
Madang
Mt Hagen
Port Moresby
Waigani
Waterfront
BSP First
Gordons
Harbour City
Lae
Port Moresby
Therea Mulina
Nelson Kerua
Elizabeth Gavul
Jessie Toran
302 5245
305 7935
478 4949
305 7724
Regional Area Managers
Highlands
Momase
NCD
NGI
Southern
Reuben Elijah
Barry Namongo
Dennis Lamus
Jeffrey Singer
Billy Veveloga
542 2002
478 4998
305 7195
982 9088
305 7886
Sub Branch Directory
Aiyura
Banz
Buin
Chuave
Daulo
Gusap
Henganofi
Higaturu
Hoskins
Ialibu
Kabwum
Kamtai
Kerema
Kerevat
Kerowagi
Kinim
Kikori
Komo
Konos
Kupiano
Gomah Benson
Kessy Elly
Rosemary Paula Seeto
Shandah Bai
Kurai Gunurei
Vivian Sae
Rachael Saime
Stephanie Orovo
Genevieve Sela
Philemon Kumi
Inna Buneng
Josephine Kun
Toru Levo
Minamar Mathew
Gariki Towa
Malapun Bannick
Sam Yawehe
Mark Tom
Helen Warange
Andrew Baine Jnr
7230 8313
7100 9078
7106 3610
7197 6001
7100 6763
7091 1396
7100 7859
7100 3761/2
7031 2627
7041 1624
7346 1426
7243 4695
7100 2889
7190 8231
7100 9077
7100 7861
7276 1566
7104 0534
7197 6006
7288 4140
Laba
Lakurumau
Losuia
Maprik
Minj
Mutzing
Namatanai
Navo
Ningerum
Okapa
Padipadi
Palmalmal
Pangia
Simberi
Telefomin
Wakunai
Walium
Wapenamanda
Yangoru
Yonki
Auda Morea
Lorraine Koma
Lorna Solomon
Christian Tatu
James Mare
Gordon Robert
Mathew Tabakas
Hennah Brunim
Dewang Joseph
Arafat Tovari
Lelly Mick
Freda Nablup
Debra Poria
Rebecca Maragit
Jobartan Bickie
Melvin Kusa
Brenda Igusam
Feta Isin
Brendon Iromo
Usik Asino
7197 6008
7197 6005
7031 2617
7168 7815
7100 9076
7100 2488
7197 6007
7090 4272
7341 2207
7055 0955
7090 4463
7323 9181
7197 6003
7449 8381
7255 8421
7100 7856
7031 2127
7100 7862
7127 0000
7185 5768
137
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020
Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Teams
Corporate Social
Responsibility
Corporate
Social
Responsibility
138
ANNUAL REPORT 2020 BANK OF SOUTH PACIFIC LTD
Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Teams
Corporate Social
Responsibility
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020
139
Investing in Sports - BSP School Kriket Program
This multiple global award winning Junior Development program in Papua New Guinea has reached over over 1.5 million participation
from students in schools and communities since 2009. The BSP School Kricket program is by far the largest junior school program in the
country and BSP is committed to developing the sport of cricket in PNG.
In 2020, BSP Kriket Program was awarded the Global Cricket Award.
The program is very beneficial not only to schools but the communities as well. I’m very proud that through the program and the support
of our valuable partner BSP, we have produced some of the best players in the men’s National Team and also the Women’s Team.
"
"
GREG CAMPBELL, CRICKET PNG CEO
BSP delivers more than just banking to the communities, customers and the countries that
we operate in. We deliver balanced and sustainable outcomes for our customers, community,
people and shareholders.
We respect, value and support the communities in which we operate in. At the core of our
business, we know that, our people belong to a bigger community.
In 2020, BSP's Corporate Social Responsibility (CSR) contribution was over K4.6 million including
sponsorships and donations as a group.
Corporate Social Responsibility
Sponsorships and Donations groupwide
including BSP Subsidiaries
K4.6m
Corporate Social
Responsibility
Total amount invested in CSR in 2020 which
includes Sponsorships, Donations and
Community Projects in BSP Groupwide
Corporate Social Responsibility
Sponsorships and Donations in Papua New Guinea
K3.8m
Corporate Social
Responsibility
Total amount invested in CSR in 2020 which
includes Sponsorships, Donations, Go Green
Campaign and Community Projects in Papua
New Guinea
BSP Fiji supports Lifeline Fiji.
BSP Life Managing Director, Michael Nacola
handing over food vouchers to PS Housing
and Community Development, Sanjeeva
Perera.
BSP Vanuatu supports Promedical.
140
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsANNUAL REPORT 2020 BANK OF SOUTH PACIFIC LTD Our Sponsorships
Investing in Sports, Environment, Corporate
Events, Professional Development and Culture
& Tourism.
K1.4m
for Sponsorship in
Papua New Guinea
K313k
for Go Green Campaign
in Papua New Guinea
OUR SPONSORSHIPS
• Certified Practicing Accountants PNG
• PNG Human Resources Institute
• Business and Professional Women’s Club of
Port Moresby
• Haus Ples Ltd
• Port Moresby Bilum Mothers Association
• Young Professionals Network of PNG
• WNB Rugby League Franchise Board
• Brisbane Broncos Corporation Pty Ltd
• David Mead- BSP Brand Ambassador
• Rabaul Golf & Squash Club
• PNG Olympic Committee
• Papua New Guinea Volleyball Association Inc.
• Bulolo Golf Club
• BSP School Kricket Program
• Boroko Amateur Swimming Club
• Port Moresby FissPotts Rugby Football Club
• Pasifik Women Network
• Moresby Arts Theatre
• Port Moresby Nature Park
• Karimui Conservation Agriculture & Cultural
Show
Giving back to
the community
Nasautoka District School received
funding to upgrade their walkway and
shelter through BSP Fiji's Communituy
Project initiative.
Our Donations
Support Charities,
Hospitals,Orphanages
and other worthy
causes.
K864k
for Donations in
Papua New Guinea
OUR DONATIONS
• Burnet Institute
• Buk Bilong Pikinini
• PNG Kidney Foundation Inc.
• Operation Open Heart
• Kokoda Track Foundation
• Sir Theo Foundation
• Salvation Army
• PNG Cancer Foundation
• Friends of POM Gen
• Library for All Project Initiative
• Cheshire disAbility Services of PNG
• Port Moresby General Hospital
• Lamana Bush Fire Appeal
• Susu Mama's POM Inc.
• Hope for Poor Kids Care Inc.
• Rotary Club of Madang
• PNG Australian Alumni Association
• Project Yumi – Thomas Suaga Silasil Library
Contributing to education
ANNE-SOPHIE HERMANN, BbP FOUNDER AND CHAIR – BUK BILONG PIKININI
Donation of vehicle to PNG Kidney
Foundation.
141
"It is wonderful to see the children so engaged in our new numeracy program and we are grateful to BSP for their generous long-term support. The BSP team have developed a very clever real-life application program, which paired with the BbP curriculum will make the children little number experts."StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Community Projects
in Papua New Guinea
K11.36m
invested in community
Projects since 2009
projects for PNG in 2020
46
23 Education
23 Equipping Hospitals
K1.3m
invested in community Projects
for Papua New Guinea in 2020
105
Wash Stations
COVID-19 Response Project
As a part of the communities we live in, we would like to build these relationships and
strengthen our community involvement. BSP's Community Projects initiative provides an
avenue for each of our staff to contribute to make a difference. Since its inception in 2009,
we’re proud that every Branch Manager, Head of Department and Executive Management
and their teams have made a personal commitment to this program, devoting their own time,
backed by the resources of BSP.
Community Projects
in Papua New Guinea
Aitape
Construction of double classroom at Rome Primary
School
Alotau
Provision of medical equipment to Alotau Urban
Clinic
Arawa
Refurbishment and provision of mattresses for
Wakunai Health Centre Maternity Ward
Bialla
Donation of mattresses and baby cots to Bialla
Heath Centre Maternity Ward
Boroko
Refurbishment of library at Veifa'a High School
BSP Capital
Donation of medical equipment to Tokarara Clinic
BSP Finance
Provision of examination lights for Port Moresby
General Hospital Labour Ward
BSP Haus
Refurbishment and donation of computers, printer
and air conditioners for Badihagwa Secondary
School
BSP Life
Donation of medical equipement for POMGEN
Emergency ward
Buka
Provision of medical equipment for Buka Hospital
Bulolo
Donation of computers, printer and furniture for
Bayune Lutheran High School
Lae Corporate & BSP Finance
Water supply maintenance and donation of water
pump for Wampar Health Centre
Daru
Refurbishment & supply of medical equipment for
Daru Hospital Labour Ward
Digital
eLibrary set up for Kila Kila Secondary School
F&P, Credit & Risk, Treasury, Retail and Compliance
Purchase of 4 probe ultrasound scanner & minor
refurbishment of POM Gen Radiology Department
Gordons Commercial Branch
Completion of double classroom at Bomana Primary
School
Goroka
Donation of computers & printer for Ginitoka High
School
Kainantu
Renovation of the Kainantu District Hospital staff
room
Kavieng
Refurbishment of Lemakot Vocational school mess
Kimbe
Donation of medical equipment to Kimbe Hospital
Kiunga
Donation of a coulter counter machine for Kiunga
Rumginae Hospital
Kokopo
Refurbishment of classroom and donation of
computers to Tanaka Primary School
Kundiawa
Refurbishment of Chuave Secondary School ablution
block
Lae Commercial
Provision of medical equipment for Lae, Raunwara
and Salamanda Susu Mama clinics
Lae Market
Donation of computers & printer for Malahang
Secondary School library
Lae Top Town
Water project for Ragiampung Seventh Day
Adventist Primary School
Lihir
Provision of medical equipment for Palie Health
Centre
BSP Lae Top-Town Water project for Ragiampung Seventh Day Adventist
Primary School .
BSP Aitape Branch staff handover Handwash basin at Raihu District
hospital.
142
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsANNUAL REPORT 2020 BANK OF SOUTH PACIFIC LTD Corporate Social Responsibility
across the Pacific
K112k
CSR Spend in
Cook Is.
K148k
CSR Spend
in Samoa
K46k
CSR Spend in
Solomon Is.
K48k
CSR Spend in
Tonga
K240k
CSR Spend
in Fiji
K108k
CSR Spend in
Vanuatu
K25k
BSP Capital
K37k
BSP Life PNG
K110k
BSP Life Fiji
BSP takes pride in supporting professional groups, organisations, and worthy causes that are
important to our customers, employees and people throughout PNG and the Pacific.
BSP has built partnerships with various organising committees, events and charities who
champion, cultural unity, professional development, environment sustainability, education,
sports, health and well being.
K35k
BSP Finance Group
Community Projects
in Papua New Guinea (Continued)
Lorengau
Refurbishment of Library & Donation of computers
& printer for Ecom Secondary School
Madang
Refurbishment of classroom and donation of water
tank for Walium Primary School
Mendi
Refurbishment & provision of medical equipment
for Mogol Health Centre
Moro
Installation of solar system and provision of medical
equipment to Inu Aid Post
Mt Hagen
Provision of medical equipment for Mt Hagen
General Hospital
Operations & IT, HR & Corporate
Donation of portable ultrasound scanner for Gerehu
General Hospital
Port Moresby
Donation of computers and printer for Koki
Vocational Centre
Popondetta
Provision of medical equipment to Saiho Health
Centre
Porgera
Donation of medical equipement to Porgera District
Hospital
Rabaul
Completion of classroom for Malagan Primary
School
Tabubil
Renovation of Hauswin at Cheshire Home
Tari
Donation of computers and printer to Hoeba
Secondary School
Vanimo
Donation of computers and printer to Don Bosco
Secondary School
Wabag
Water tank donation and refurbishment of ablution
block at Yaibos Health Centre
Waigani Banking Centre
Donation of computers and printer for Tokarara
Secondary School
Waigani Drive
Donation of computers and printer to Limana
Vocational School
Wewak
Donation of computers and printer to St Andrews
Technical Vocational School
Marketing Committee/CEO Selection
eLibrary set up for De La Salle Secondary School
BSP Life PNG team with Emergency
Department team of POMGH.
BSP Capital GM Gheno Minia and his team
with Tokarara Clinic sister-in-charge Olive
Ume and NCD Health Staff in front of the
TB Consultation room.
Donation of computers and printers for Tokarara Secondary school by Waigani
Banking Centre.
BSP Staff with Group CEO Robin Fleming hand over Ultrasoud machine
and other equipment to POMGH CEO Dr Paki Molumi and his team.
143
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Community Projects in the Pacific
62 Community Projects
Delivered across the group
16 Projects delivered through
Offshore Branches in the
Pacific
5 Projects delivered
through SBUs
3 Projects delivered
through BSP
Subsidiaries
38 Projects delivered
through PNG
Branches
COOK ISLANDS
1 Project in Cook Islands
Traditional Arts Centre
Construction of toilet and bathroom and
volunteered time in a series of working bees to
clean and tidy the Arts Centre.
SAMOA
1 Project in Samoa
Falealili District Hospital
Building a new ablution block
David Street packing away local milled wood during a 3hr
working bee.
The official opening and handover ceremony was conducted
on the 22nd of December in the presence of the Hon. Minister
of Health Faimalotoa Kika Stowers-Ah Kau, Reverend Letone
Uili, High Chief of Poutasi, Tuatagaloa Joe Annandale and
Member of Parliament Aumua Isaia Lameko.
144
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsANNUAL REPORT 2020 BANK OF SOUTH PACIFIC LTD SOLOMON ISLANDS
4 Projects in Solomon Islands
Auki Branch
Auki Primary School classroom painting
Gizo Branch
Hand Wash station
Heritage Park Branch
Marara clinic water project
Ranadi
Built Ablution block for United Pentecostal church
FIJI
6 Projects in Fiji
Nausori Branch
The Reading Place at Namuka Village.
Pacific Harbour Branch
Hand washing station
Tavua Branch
Maintenance work and provision to solar power at Nadrau
Health Station.
Head Office
Construction of walkway at Nasautoka District School
Rakiraki Branch
Digitalisation at Malake District School
Savusavu Branch
Hand washing station and water tank at Nasavusavu
Special School.
TONGA
2 Projects in Tonga
Children’s Ward, Vaiola Hospital - Tonga
Tonga Youth Employment and Enterprising
(TYEE)
Donation of computers at Children’s Ward, Vaiola Hospital.
VANUATU
2 Projects in Vanuatu
Port Vila Branch
Vanuatu Central Hospital – Children’s ward
upgrade
Tanna Branch
Osnalmok Disable Organisation
Vanuatu Central Hospital – Children’s ward upgrade.
BSP also donated sports balls to help with the schools' PE
Program at various schools in Fiji.
145
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 #BlackThursday Campaign - Our Commitment to Social Well Being
In 2020, BSP launched its biggest social justice campaign in July, called the #BlackThursday
Campaign to Advocate for survivors of family and sexual violence (FSV) and gender based violence
(GBV) and create awareness on the issue. Staff and family created awareness by wearing black
every Thursday and continued to stand in solidarity against FSV & GBV.
The Bank is advocating a change in mind-set to represent resistance and resilience. BSP’s
#BlackThursday campaign symbolises the bank’s long standing commitment to empowering our
people with information that can support victims and survivors of FSV and GBV, and awareness that
can help the community to identify or stop violence in the family and community.
146
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsANNUAL REPORT 2020 BANK OF SOUTH PACIFIC LTD GO GREEN – Our Commitment to the environment.
BSP recognises the effect it has on the environment and is committed to promoting sustainable
ways to care for the environment.
Under the BSP GO GREEN Campaign, the bank observes, Earth Day and Earth Hour, and World
Environment Day.
Through BSP’s GO GREEN Campaign, BSP hosts the largest clean-up campaign in the Pacific,
conducted through over 120 schools across all Pacific Island countries that BSP operates in,
bringing together thousands of students to participate.
As part of our environment strategy, we support organisations and initiatives that foster an
understanding of environmental issues and provide practical support to building sustainable
communities.
Our GO GREEN Message is simple: 'Recycle, Reuse, Respect'
• Recycle: Collect and deposit discarded items at an operation where
these materials can be recycled into new products, e.g. scrap metal/
plastic buyers.
• Reuse: Remove wastes or 'patch up' damaged areas on an item or its
components, to use again for the same purpose.
• Respect: Dispose your unwanted items properly- tied up in bags &
put in a rubbish bin. Respect the environment.
147
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2020 Financial Literacy and Banking Education
Delivering Financial Literacy in PNG
With growth, comes added responsibilities of ensuring that our people, shareholders and
customers are empowered in financial literacy and banking education.
Financial Literacy and Banking Education is an important part of BSP’s contribution to the
communities that we operate in. These trainings are delivered by trained Financial Literacy
trainers, through BSP branches across the Pacific.
We reach schools, churches, organised community groups, businesses and corporate
organisations.
140
Qualified Financial Literacy
Trainers in branches in PNG.
6,440
Individuals participated in
Financial Literacy in PNG. 47%
were women.
Financial Literacy is also delivered in all countries that BSP operates in.
Pictured students from Cook Islands showing their certificate after a training.
230
Communities and organisations
reached since 2014.
148
StrategicReportGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsANNUAL REPORT 2020 BANK OF SOUTH PACIFIC LTD ai1606871160127_AR2020_Inside Cover_Front & Back.pdf 1 02/12/2020 11:06:11 am
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