CONTENTS
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
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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6
8
12
18
19
20
22
24
28
30
30
31
32
32
33
34
36
37
38
40
41
48
59
60
61
62
63
64
65
112
118
122
Management Teams
Executive Management
Broader Group
Overseas and Subsidiaries Directory
Subsidiaries
PNG Branch Managers
PNG Branch and Sub Branch Directory
124
126
130
131
132
134
135
Corporate Social Responsibility
136
In this Annual Report, a reference to ‘BSP’, ‘BSP Group’, ‘the Bank’, ‘the Company’, ‘the Group’, ‘our’, ‘us’, and ‘we’ is to BSP Financial Group Limited
ARBN: 649704656 and its subsidiaries unless it clearly means just BSP Financial Group Limited. BSP’s Corporate Governance Statement is available
on the company’s website: www.bsp.com.pg/investor-relations/corporate-governance/
Our Vision
To be the leading financial services provider in our chosen markets,
helping customers, staff, shareholders and communities prosper.
Our Mission
To create value for our stakeholders, by delivering innovative and
cost effective financial services.
Our Core Values
INTEGRITY
We are honest, committed,
trustworthy and reliable in
our dealings with our
customers and each other.
LEADERSHIP
We inspire, we change, and
we live our values, and lead
by example.
PEOPLE
We respect and value our
people and our customers.
QUALITY
We are committed to
excellence whilst striving for
continuous improvement in
products and services.
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-develop-
ment to achieve standards
of excellence in our
performance.
Our reach in the
Asia-Pacific Region
BRANCH
75+ Branches
4,400+ Staff
STAFF
300+ Agents
550+ ATMs
SUB-BRANCH
40+ Sub-Branches
11,000+ EFTPoS
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
In a year epitomised by continued challenges, I am proud of the resilience of our people and the Group’s financial performance. It gives me
great pleasure to report on BSP’s strong financial and operating performance, with 2021 Group profit increasing by 33% to K1.075 billion.
I am delighted by how BSP’s employees continue to respond to
pandemic-related challenges and disruptions presented. Their
resilience and commitment has allowed BSP to continue to support
our customers and communities throughout the last financial year. I
am equally proud that we continue to play a critical role in supporting
and sustaining South Pacific economies.
Despite subdued economic conditions, BSP continues to perform
well, experiencing a 33% rebound in 2021, resulting in a record
profit of K1.075 billion. Our strong results were achieved by
maintaining capital discipline and ensuring prudent balance sheet
management. This was underpinned by our commitment to ensuring
the appropriate level of care across all capital, funding, and liquidity
metrics. We finished 2021 with a capital adequacy ratio of 25.7% and
a leverage ratio of 10.6%, which remains well over the 12.0% and
6.0% prudential requirements respectively.
The Board and I are pleased with the tighter operating discipline
across the Bank, with significantly increased investment in our
risk and compliance operations. Further, the Board recognises the
focus and diligence shown by management, with the continued
improvement in BSP’s financial crime risk capability and capacity.
DUAL LISTING ON THE ASX
A significant milestone was achieved with BSP’s admission to the
Australian Securities Exchange (ASX) on 25 May 2021. The listing is an
important part of a carefully considered strategy, aimed at pursuing
growth, while continuing to deliver high levels of customer service
and positive returns to shareholders.
It is the Board’s view that the dual listing will provide:
● access to capital to expand our business; and
● increased liquidity for our shareholders.
STRATEGY
BSP is making progress on our expansion strategy in new and existing
markets, and consolidating our position as the South Pacific’s leading
bank. Addressing the unbanked segments of PNG and Pacific markets
remains a central focus for the Board. We recognise that access to
banking services is key to unlocking the economic potential of the
people and communities where we operate. This is evidenced by
our investments in enabling physical and digital access to improve
banking service delivery.
BSP is strengthening our technological foundations by switching
to Oracle’s FLEXCUBE core banking system. This investment will
strengthen our defences against the growing global threat of financial
and cyber-crime, and consequently enables greater emphasis on
digital, data, and analytics.
The Board is committed to ensuring diversity in our workforce. Being
the leading bank in the South Pacific allows us to source the best
talent from across an array of cultures and backgrounds. BSP seeks
to develop our local people with the skills needed to not only remain
competitive in our expanding markets, but to also be innovative as
the Bank progresses into the future. The Board has also set targets
toward appropriate female representation in senior management
roles. This has translated into a key requirement in BSP’s Leadership
and Management Development Program, with females currently
making up over 55% of program participants. Further, training and
recruitment initiatives have been implemented to ensure BSP’s
digital, technology, compliance, and risk capability continues to
evolve to meet our future needs.
Ultimately, these investments and initiatives will underpin BSP’s
growth in markets across the Pacific and in Asia, while also keeping
the focus on our commitment to serve our community. The improved
profitability and performance in 2021 underscores our ambition to
exceed the needs of our customers, equip a diverse and talented
workforce, strive for innovation, and grow shareholder value.
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BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport
BOARD RENEWAL
OUTLOOK
Board renewal remains a continuing process and in April 2021, we
welcomed Symon Brewis-Weston, who joined as a BSP Director.
Mr. Brewis-Weston possesses extensive international experience
in financial services and a deep understanding of consumer and
business markets in the Asia-Pacific region. Mr. Brewis-Weston
held various senior leadership positions at CBA for 15 years. He
spent 6 years leading CBA’s Indonesia operations and also in China
developing the company's Chinese banking strategy. In 2015, Mr.
Brewis-Weston received the United Nation’s Global CEO Women
Empowerment Principle’s Leadership Award for his contribution to
the enhancement of diversity and women’s empowerment in the
workplace. Mr. Brewis-Weston holds a Bachelor of Economics (Hons)
and a Master of Applied Finance from Macquarie University.
At the same time, we farewelled Geoffrey Robb, who retired as a
BSP Director after completing his tenure in line with regulatory
requirements. Mr. Robb served with distinction with over 9 years
on the Board of BSP.
FINANCIAL PERFORMANCE
Our 2021 revenue increased by 10.3% to K2.4 billion. Revenue
growth drivers included earnings on investments and foreign
exchange income, which was up by 45.8% and 13.0% respectively.
Group expenditure increased by 10.0% to K889 million, largely as a
consequence of increased investment in employees and technology
to facilitate the transition to the FLEXCUBE core banking system in
2022.
Improving economic conditions have allowed us to realign provisions
for expected credit losses during the pandemic. This has resulted in
a reduction in our impairment expense from K201 million in 2020 to
a release of K43 million in 2021.
The global rollout of COVID-19 vaccinations during 2021 has
resulted in several neighbouring countries opening their borders to
international travellers, which will provide much-needed support for
the hotel and airline industries and will stimulate the PNG economy
and economies across the Pacific.
Recent PNG government announcements relating to major
projects indicate that negotiations are progressing well, and if
tangible agreements are concluded we could start seeing increased
investment in resource-adjacent industries. We are expecting
improved economic conditions on the back of these major projects
proceeding towards the end of 2022.
Finally, on behalf of the Board, I would like to thank you for your
ongoing support as shareholders. To BSP’s 4,400+ employees, we
thank you for your commitment in serving our customers well and
helping our communities during COVID-19 outbreaks that at the
same time significantly impacted your own lives. Given the above,
the Board and I are confident BSP will have the economic conditions,
people and financial strength to execute effectively against its
strategy.
Sir Kostas Constantinou, OBE
BSP Group Chairman
BSP Group CEO Robin Fleming
and BSP Group Chairman
Sir Kostas Constantinou at the
virtual ringing of the bell to
announce BSP Financial Group
Limited's listing on the ASX.
5
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport A brief history of BSP
BSP is the leading bank in the region and has a proud
record of serving the needs of its customers in PNG
and other countries across the South Pacific. BSP
dates back to 1957, when its operations commenced
in Port Moresby as a branch of the National Bank of
Australasia Ltd. In 1974, BSP was incorporated as Bank
of South Pacific Ltd, a wholly owned subsidiary of the
Australian parent.
In 1993, a consortium of PNG businesses acquired the
bank and created the first and only privately owned
bank in PNG at that time. BSP merged with the state-
owned Papua New Guinea Banking Corporation in
2002, creating the largest bank in PNG by market
share.
Other acquisitions followed, including Habib Bank
in Fiji in 2006, National Bank of Solomon Islands in
2007, Colonial Bank, and Colonial Fiji Life Insurance
Limited in 2009. In 2015 and 2016, BSP completed
the acquisition of Westpac’s operations in Cook
Islands, Samoa, Solomon Islands, Tonga and Vanuatu,
significantly broadening and strengthening BSP’s
geographic reach.
Today, BSP continues to be the market leader in PNG
and the South Pacific, with a large and diverse branch
network. BSP has also pioneered financial innovations
and technology in the region. In 2014, BSP Finance was
launched in Fiji followed by PNG in 2015, Cambodia
and Solomon Islands in 2017 and Lao in early 2020.
Eighteen years after listing on the Port Moresby
Stock Exchange (now PNGX Markets) in 2003, BSP
successfully
listed on the Australian Securities
Exchange (ASX) in 2021. The company name was
changed to BSP Financial Group Limited after the
listing to accurately capture our diversified service
offerings to our customers across the region. The BSP
slogan “We are You, We are BSP” was also changed to
“Our Bank, Our People”.
1974
BSP incorporated as Bank of South
Pacific Ltd, a wholly owned subsidiary
of the Australian parent.
1993
National Investment Holdings Ltd, a
nationally owned company, acquired
BSP from National Australia Bank.
2002
Merged with the state owned Papua New
Guinea Banking Corporation (PNGBC).
6
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Key milestones in
BSP’s development
1957
1974
1993
2002
2003
2006
2007
2009
Commenced opera�ons in Port
Moresby in May 1957 as a branch
of Na�onal Bank of Australasia Ltd.
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.
Merged with the state-owned Papua
New Guinea Banking Corpora�on
(PNGBC).
BSP is listed on the Port Moresby
Stock Exchange.
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.
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.
2014/2015
Commenced BSP Finance (Fiji) Ltd in
2014 and commenced BSP Finance
(PNG) Ltd in 2015.
2015/2016
Acquired Westpac’s opera�ons in
Solomon Islands, Cook Islands, Samoa,
Tonga and Vanuatu.
2017
2018
2020
2021
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.
Commenced a life insurance
business in Papua New Guinea
on January 2018.
Asset Finance Business
established in Lao in 2020.
BSP is listed on the Australian
Security Exchange (ASX) and name
changed from Bank of South Pacific
Limited to BSP Financial Group
Limited. BSP’s slogan was also changed
from “We are you, We are BSP” to
“Our Bank, Our People”.
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BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Board of
Directors
8
ROBIN FLEMING, CSM, MBA, MMGT
Group Chief Executive Officer. Director
since April 2013
Robin Fleming was appointed GCEO of BSP 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.
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. Sir
Kostas joined BSP in April 2009 as a non-executive
director and was appointed as the chairman of
the Board in February 2011.
Sir Kostas is the chairman of various companies,
including BSP, Airways Hotel and Apartments
Ltd, Lamana Hotel Ltd, Lamana Development
Ltd, Hebou Constructions (PNG) Limited, Monier
Limited and Air Niugini Limited.
Sir Kostas is a director of Gazelle International
in Kokopo, Loloata Island Resort Ltd,
Hotel
Coastwatchers Court Ltd, Waigani Assets Ltd, Moki
No.10 Limited, Heritage Park Hotel in Honiara,
Taumeasina Island Resort in Samoa, and Good
Taste Company in New Zealand. Sir Kostas is also
the Honorary Consul for Greece and Cyprus in
Papua New Guinea and the Trade Commissioner
of Solomon Islands to PNG.
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport 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 was appointed to the BSP Board
in November 2013. Mr. Gangloff is Chairman of
BSP's Board Audit & Compliance Committee and
a member of the Board Risk Committee.
Robert Bradshaw was appointed to the BSP Board
in September 2017. Mr. Bradshaw is Chairman of
the BSP Board Remuneration and Nominations
Committee.
Mr. Gangloff is an Accountant, registered with
CPA Papua New Guinea and the Accountants'
Registration Board. Mr. Gangloff has extensive
experience in the areas of risk management,
internal audit and corporate governance. He has
over 30 years of 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. Bradshaw holds a Bachelor of Laws from
the University of Papua New Guinea and has
practised law for over 20 years. He was formerly
a Partner in the firm Blake Dawson Waldron (now
Ashurst) and commenced practice in his own
firm, 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.
Mr. Bradshaw has served on a number of Boards
and is currently the Chairman of Post PNG Limited.
In addition to his BSP directorship, Mr. Gangloff is
a director of New Britain Palm Oil Ltd, Highlands
Pacific Ltd, Tower Insurance PNG Ltd and Business
Incubation Solution Ltd.
Mr. Gangloff is President of the Institute of
National Affairs Inc., an Adjunct Professor of
Accounting at the University of Papua New
Guinea and specialises in Risk Management and
Governance. He holds a Bachelor of Technology
(Accountancy), from the PNG University of
Technology.
SYMON BREWIS-WESTON, BECON
(HONS), MAPPFIN
Non - Executive Director. Director since
April 2021
Symon Brewis-Weston was appointed to the BSP
Board in April 2021 and is a member of BSP's
Board Audit & Compliance Committee and Board
Risk Committee. Mr. Brewis-Weston has extensive
international experience in financial services and
a deep understanding of consumer and business
markets in the Asia-Pacific region. He is a director
on the board of Money3 Corp. Ltd, StockCo
Australia Pty Ltd. and Timelio Pty Ltd.
Mr. Brewis-Weston was
formerly CEO of
FlexiGroup from 2016 to 2018. Prior to joining
FlexiGroup, he previously held the position of
CEO & Executive Director at Humm Group Ltd,
Executive GM-Corporate Financial Services at
Commonwealth Bank of Australia (CBA), Chief
Executive Officer at Sovereign Services Ltd (NZ).
and Chief Executive Officer at Sovereign Assurance
Co. Ltd (NZ). (both are subsidiaries of CBA).
Mr. Brewis-Weston held various senior leadership
positions at CBA for 15 years. He spent 6 years
leading CBA’s Indonesia operations and also
in China developing the company’s Chinese
banking strategy. In 2015, Mr. Brewis-Weston
received the United Nation’s Global CEO Women
Empowerment Principle’s Leadership Award for
his contribution to the enhancement of diversity
and women’s empowerment in the workplace.
Mr. Brewis-Weston holds a Bachelor of Economics
(Hons) and a Master of Applied Finance from
Macquarie University.
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BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Board of
Directors
(continued)
10
ARTHUR SAM, BComm, CPA, GAICD
Non - Executive Director. Director since
July 2016
Arthur Sam was appointed to the BSP Board in
July 2016. Mr. Sam has been a member of the
BSP Board Audit & Compliance Committee and is
currently Chairman of the Board Risk Committee.
Mr. Sam is a qualified and experienced accountant,
registered under CPA Papua New Guinea. 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.
Before going into private practice Mr. Sam spent
over 15 years working for global accounting firms
PricewaterhouseCoopers, Deloitte and Ernst &
Young in managerial roles specializing in external
and internal audit and risk management.
Prior to joining the Board of BSP, he served on
the NASFUND (the national superannuation
fund of Papua New Guinea) Board Audit and Risk
Committee and is a serving member of the Papua
New Guinea Accountants Registration Board.
During 2021 Mr. Sam was appointed Chairman
of Muyua Dal Ltd to represent the landowner
interest in the Woodlark Gold Project.
FAAMAUSILI DR. MATAGIALOFI
LUA’IUFI, BA, MSC, PhD
Non - Executive Director. Director since
December 2016
Faamausili Dr. Matagialofi Lua’iufi
is an
experienced public sector practitioner and
consultant. Faamausili Dr. M. Lua’iufi 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, Faamausili Dr. M. Lua’iufi worked in the
Samoa Public Service Commission Office for 25
years, with almost 12 of those years in the role of
CEO. Under her stewardship, the Samoa Public
Service undertook various change management
programmes to improve service delivery.
in many
Faamausili Dr. M. Lua’iufi served
Government state owned enterprise boards in
her capacity as CEO of the Samoa Public Service
Commission. Since becoming a consultant in late
2008, Faamausili Dr. M. Lua’iufi has performed
more than 50 consultancy assignments in the
domains of Human Resources Management,
Organisational Development,
Performance
Management and Governance.
Faamausili Dr. M. Lua’iufi is a member of the
Australian
Institute of Company Directors,
member of the Papua New Guinea Institute
of Directors, Samoa Institute of Directors and
Samoa Human Resource Institute. From 2007 to
2012, Faamausili Dr. M. Lua’iufi was the Pacific
Residential Scholar of the Australia New Zealand
School of Government and was responsible for
the development of emerging young Pacific
public sector leaders. Faamausili Dr. M. Lua'iufi is
a member of the Remuneration and Nominations
Committee.
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport
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
Priscilla Kevin was appointed to the BSP Board in
April 2019. Since her appointment to the Board
she has joined as a Member of the Remuneration
& Nomination Committee and is a member of the
Board Risk Committee.
Ms. Kevin is an 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 of the
BSP Board Risk Committee.
Ms. Kevin is a board member of PNG Digital ICT
Cluster Inc. and a member of the PNG University
of Technology’s Industrial Advisory Board (IAB).
Ms. Kevin is also working group committee
member of the Centre of Excellence for Financial
Inclusion and is a Council Member of the Institute
of National Affairs (INA).
Frank Bouraga was appointed to the BSP
Board in December 2020. Mr. Bouraga was an
Independent Committee Member of BSP's Board
Audit Committee since October 2018. Since his
appointment to the Board, he joined as a Member
of the Board Audit & Compliance Committee.
Mr. Bouraga is a CPA Papua New Guinea qualified
professional accountant with over 26 years in
accounting practice and is currently a partner in
Assurance and Business Advisory Services with
SBC Solutions. Prior to SBC Solutions, Mr. Bouraga
was the Country Managing Partner for Ernst &
Young Papua New Guinea for 5 years as an audit
and business advisory services partner. He also
worked with PricewaterhouseCoopers for over 7
years and worked with Star Business Consultants
between 2004 and 2011.
Mr. Bouraga is also a director of the PNG Cancer
Foundation and the PNG Hunters, and is a
member of Certified Practising Accountants (CPA
PNG) and the Australian Institute of Company
Directors (AICD). He holds a Bachelor of Business
(Accounting) from Central Queensland University.
Stuart Davis was appointed to the BSP Board
in August 2017 and is currently a member of
the Board Audit & Compliance and Board Risk
Committees of BSP.
Mr. Davis
is also currently a Non-Executive
director of ASX 100 company NextDC Ltd, which
builds and operates Data Centres in Australia and
is the Chairman of the Remuneration Committee
and member of the Audit and Risk Committee. He
is a Non-Executive Director of PayPal Australia Ltd
and Chairman of the Risk Committee.
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 USD800 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 Australian 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
Australian Institute of Company Directors.
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BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Group CEO’s
Report
Robin Fleming, CSM
Group Chief Executive Officer
In many ways, 2021 was a year of contrasts. From an operational perspective, our businesses around the Pacific and South East Asia had to deal with the
ongoing impact of COVID-19 on our staff and our customers, and the impact on economic activity in the countries we operate in. Financially, the BSP
Financial Group reported a record net profit after tax of K1.075 billion, the first time our group profit has exceeded K1.0 billion. This is an outstanding
achievement for any company, but especially a Papua New Guinean company, which our Board and staff are proud of, and which should be recognised as
such by our shareholders, and I will comment on key aspects of the result later in my report.
The COVID-19 pandemic continued to affect all of our customers and staff in
the countries in which BSP operates. With the resilience, which epitomises
the people of the Pacific, our customers adapted to the changes in business
conditions and operating environment brought about by COVID-19, and
our results reflected that increased transactional activity. BSP was also very
proud to be able to maintain full business operations throughout the year,
due to the commitment of our staff to our customers, notwithstanding the
ongoing waves of COVID-19 strains across most countries.
Domestic travel and movement restrictions eased in PNG and in most
countries, with some shorter-term movement mandates imposed as new
strains of COVID-19 re-emerged, or entered, the communities. International
travel restrictions eased in PNG towards the end of the year and Fiji
welcomed tourists in the last quarter of 2021, much to the relief of many of
our customers.
GDP growth was positive for most countries, recognising of course that this
growth was coming from a lower base after negative growth in 2020. Whilst
economic conditions in Papua New Guinea were for the large part relatively
flat from an overall lending growth perspective, transactional activity did
bounce back, which was reflected in fee revenue. Domestic liquidity in
PNG grew disproportionately to lending growth and some of this surplus
was invested in government and central bank securities for balance sheet
management and return on asset purposes. Foreign exchange activity saw
an improvement, which flowed on to higher FX revenue.
With economic activity recovering and business conditions improving from a
comparative year perspective, BSP undertook a detailed and granular review
of its customers credit risk ratings across all countries and all portfolios,
but especially for those customers for whom BSP had taken up additional
COVID-19 related provisions in 2020, by way of a model adjustment approach.
The outcome was a release of loan provisions that had been taken up the
prior year for COVID-19 related reasons, with this impairment adjustment
contributing around K118 million to BSP’s 2021 result.
Net profit after tax by entity is as follows:
Entity
PNG Bank (Km)
Cook Islands (NZDm)
Fiji (FJDm)
Samoa (WSTm)
Solomon Islands (SBDm)
Tonga (TOPm)
Vanuatu (Vtm)
Subsidiaries (Km)
2021 NPAT
2021 vs 2020
822.0
3.1
69.4
16.7
76.1
11.8
139.1
49.0
36.1%
-5.1%
41.0%
22.8%
2.5%
19.9%
30.2%
-0.2%
BSP’s Relationship Managers presence in all countries, together with our
knowledge and understanding of the business conditions in each country,
contributed to further increases in lending market share in all countries.
Consequently, BSP PNG’s lending market share increased to 66% and in each
of the other countries we have market share of 37% in Cook Islands, 26% in
Fiji, 30% in Samoa, 47% in Solomon Islands, 41% in Tonga, with Vanuatu at
13%.
12
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Our Retail teams in all countries kept all our branches open throughout the
year, despite COVID-19 in the community and despite the absence of our
staff due to COVID-19 during the various pandemic waves. We continued to
support our staff and over and above work place health and safety measures.
For example, personal protective equipment such as masks, gloves, sanitisers
and social distancing. Further, BSP preserved all staff benefits, maintained
and in certain areas increased staffing levels, provided flexibility for sick leave
without normal medical documents and strongly encouraged all staff to be
vaccinated. This included access to vaccinations on site where possible,
which in a number of countries was supported by government vaccination
mandates. In PNG, we achieved a 39.5% vaccination level with Cook Islands
at 91%, Fiji 100%, Samoa 95%, Solomon Islands 84%, Tonga 100% and
Vanuatu 30% with Cambodia at 100% and Lao 93%.
A final dividend of K1.34 per share was approved by the Board, taking the
total dividend payout to 75%, which was within the dividend policy range
of 70% to 75% of prior year earnings. Total dividends paid/ payable in
respect to 2021 profits were K811.9m, with a dividend yield of 14.4% based
on a share price of K12.25 on PNGX and 14.9% based on a share price of
AU$4.27 on ASX. With a shareholder base that is almost 90% Papua New
Guinean and includes Kumul Consolidated Holdings (18.2%), each of the
three superannuation funds in PNG being Nambawan Super (11.4%),
Nasfund (9.7%), Comrade Trustees (2.7%) as well as Fiji National Provident
Fund (8.7%), Solomon Islands National Provident Fund (0.5%) and Samoa
Provident Fund (0.6%) many workers around the Pacific benefit from BSP’s
outstanding financial performance and dividend distributions.
Earnings per share [toea]
Dividend yield [PNGX, %]
Share price [PNGX, Kina]
Dividend yield [ASX, %]
Share price [ASX, AU$]
2021
2021 vs 2020
230.1
14.4
12.25
14.9
4.27
33.3%
360bps
2.1%
-
-
In a milestone for our core banking system upgrade, BSP went live with
Oracle’s FLEXCUBE solution in Vanuatu in April 2021, despite COVID-19
related travel restrictions and quarantine and self-isolation requirements
both in Vanuatu and upon return to PNG. A team of 16 staff from our project
team travelled to Port Vila and spent 9 weeks in Vanuatu for training, go
live and post go live support. The conversion progressed smoothly and all
systems were ready for customers on the Monday after the go live weekend.
Unfortunately our customers have experienced some less than satisfactory
experiences with certain features of the operating system, which our task
force team have been working through to conclusion, with the assistance
from vendors Oracle. We apologise to those customers who were affected.
Additional technical staff, who have been difficult to recruit due to COVID-19
related travel restrictions, have been added to the project team in PNG and
all the strategic business units in PNG have increased the number of subject
matter experts assigned to the project. The new banking system remains as
BSP’s most critical project for 2022.
Activity across all our electronic and digital channels increased significantly
in 2021 with our mobile banking as well as internet banking transactions
continuing year on year increasing by 12.5 million and 1.5 million which
represents a 11% and 28% uplift respectively. BSP’s Digital SBU, with our
Fintech joint venture technical partner TruTeq, successfully delivered BSP
Pay, a payment solution that facilitates online business trading for registered
BSP merchants, with any BSP customer registered with BSP Pay – without the
need to have a scheme card issued. The Fintech JV, Platform Pacific Limited,
also built and delivered an Internet Payment Gateway (IPG) platform, which
enables businesses to carry out scheme card based e-commerce transactions.
In order to improve the effectiveness of our AML program, an additional
47 staff were recruited during 2021 across Retail, Corporate and our Group
Compliance SBU’s. This was complemented by systems enhancements and
group wide AML specific training, which involved board, management and
all staff. Board oversight of all AML activities was elevated and ongoing
improvement is an imperative for 2022.
Group CEO Robin Fleming in
discussions with Group COO
Frank van der Poll and BSP
Capital GM Gheno Minia during
the BSP brand relaunch.
13
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Group CEO’s Report
(continued)
There remained a strong focus on leadership development via our Leadership
Management Development Program. The program involves three (3) years
of targeted development and training for emerging, developing and senior
leaders across the group and during the course of 2021, 35 staff participated
in the program with 19 being female. International travel restrictions did
preclude attendance at business schools overseas, which is normally part of
the program, but staff were still able to undertake on line training with Insead
and Melbourne Business School, which was complimented with mentoring,
guest speaker sessions and attendance at Executive Committee and Board
meetings.
BSP’s community projects across all countries continued in 2021, 52 projects
across the region with themes of refurbishment of school sports areas,
solar for rural health, school desks and upgrading markets for SME’s. All our
staff are actively involved in these projects which represent tangibly BSP’s
commitment to the communities we work in and live in.
Our board led by our Chairman Sir Kostas Constantinou, provided leadership
and support during an operationally difficult year, whilst maintaining
oversight of BSP’s operational performance, risk management systems and
governance.
All of our staff contributed to the excellent outcome in 2021 and I thank them
for the ongoing commitment and support of BSP throughout the region.
Robin Fleming, CSM
Group Chief Executive Officer
BSP Group CEO Robin Fleming, Board Chairman Sir Kostas and staff at opening of Koroba Sub Branch.
14
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport 15
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport South Pacific
market leader
We continue to grow and build scale in pursuit of
sustainable market leadership
LENDING
DEPOSIT
K13.6bn
In net lending
K23.9bn
In deposits
DIVIDENDS PAID
K676.5m
Dividends paid
MARKET
CAPITALISATION
K5.7bn on PNGX
A$2.0bn on ASX
Market Capitalisation
PAPUA NEW GUINEA
Vanimo
Aitape
WEST SEPIK
Wewak
EAST SEPIK
Lorengau
MANUS
NEW IRELAND
Kavieng
EAST NEW BRITAIN
Rabaul
Lihir
Kokopo
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
Harbour City
Motukea
CENTRAL
Alotau
MILNE BAY
FIJI
Labasa
VANUA LEVU
Taveuni
Savusavu
TARO
SOLOMON IS.
VANUATU
Lomaloma
Gizo
Noro
Munda
Auki
Honiara
Honiara
Point Cruz
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
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport PAPUA NEW GUINEA
Vanimo
Aitape
WEST SEPIK
Wewak
Lorengau
MANUS
NEW IRELAND
Kavieng
EAST NEW BRITAIN
Rabaul
Lihir
Kokopo
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
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
Harbour 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
Espiritu Santos
Port Vila
COOK IS.
TONGA
Vava’u
Rarotonga
Nuku’ alofa
Branch
17
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Group Historical
Summary
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BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Group Historical Summary
BSP Group NPAT
K1.075bn
33.4% increase from 2020
Dividend paid per Share
K1.44
19.0% increase from 2020
Capital adequacy
25.7%
250 bps increase from 2020
Profit and Loss (K’000)
2018
2019
2020
2021
Net interest income
1,380,796
1,391,784
1,447,012
1,600,935
Non interest income
784,909
779,566
704,422
771,111
Impairment of financial assets
(82,440)
(99,183)
(201,273)
42,655
Other operating expenses
(887,097)
(819,248)
(808,326)
(888,842)
Profit before tax
1,196,168
1,252,919
1,141,835
1,525,859
Income tax expense
(352,096)
(362,556)
(335,617)
(450,641)
Profit after tax
Dividends (toea)
Dividends paid per share1
Balance Sheet (K’000)
844,072
890,363
806,218
1,075,218
127.0
139.0
121.0
144.0
Net loans and advances
12,530,649
13,200,807
13,581,153
13,631,275
Total assets
Deposits
Capital
Performance Ratios
Return on Assets
Return on Equity
Expense/Income
Key Prudential Ratios
Capital adequacy
Liquid Asset Ratio
Leverage ratio
23,081,223
24,527,118
27,523,437
30,446,268
18,232,766
19,339,056
21,654,024
23,934,835
2,872,135
3,117,033
3,433,605
3,794,965
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%
37.6%
23.2%
32.6%
10.3%
3.7%
29.7%
37.5%
25.7%
37.2%
10.6%
Exchange rates (One (1) PNG Kina buys):
US Dollar
AUS Dollar
0.2970
0.4208
0.2935
0.4188
0.2850
0.3700
0.2850
0.3927
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
K282m
Income Tax Payment (2021)
All amounts are expressed in K'000
2018
2019
2020
2021
Company income taxes paid to PNG Government
354,947
361,987
294,695
282,052
Other taxes paid to PNG Government
(IWT, FCWT, BWT)
10,018
16,872
9,327
8,031
GST paid and not able to be recouped
25,337
15,821
14,519
16,613
Donations and Sponsorships
6,482
5,581
3,839
3,723
Total
396,784
400,261
322,380
310,419
19
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Group
Highlights
20
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021
21
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Sales
Retail Banking | Corporate Banking | Digital | Treasury
RETAIL BANKING
2021 was a challenging year for Retail Bank and for our customers across
Papua New Guinea. The impact of COVID-19 was evident in many areas
of our business. However, Retail Bank was able to continue supporting
its customers. Despite the challenges faced by our staff, their resilience,
commitment, and dedication towards our customers was unwavering and
they are to be thanked for their efforts in 2021. We also take the opportunity
to remember our staff who we sadly lost in 2021 and to the many loved ones
that were affected by COVID-19. May their souls rest in eternal peace.
In terms of financial performance, Retail Bank has delivered an outstanding
year, finishing 27% ahead of its budget and 33% ahead of the 2020 result.
This performance was driven by a strategic focus in four (4) key areas: People
and Culture, Customer Centricity, Simplification and Risk.
Retail Bank's People and Culture focus was on embedding better execution
practices across the business and to deliver improved service outcomes for
our customers. This required a focus on training and development of our
staff in several areas. Pleasingly, several staff promotions were effected in
2021 to exemplify BSP’s ongoing drive to promote Papua New Guinean staff
into senior roles, and importantly this included two (2) females. Retail Bank,
which is now the largest Strategic Business Unit in the BSP Group, remains a
100% Papua New Guinean workforce, with over 54% of our 1,500 staff being
female.
BSP rebranded during 2021, with a refreshed logo and branding message:
“Our bank. Our people.” The rebranding reaffirms BSPs focus on our staff,
our customers, and our communities. Customer acquisition remained
strong, with more than 146,000 customer accounts opened during the year.
BSP opened two new branches in Koroba and Namatanai to reinforce our
continued commitment to PNG financial inclusion and its people. BSP now has
84 branches and sub-branches across PNG and we are the only commercial
bank operating in 21 locations where no other bank has a presence. Despite
constrained macro-economic conditions, Personal and Home Loan lending
remained strong and our Small Medium Enterprise business lent more than
K100 million to SME Customers under the Government Credit Enhancement
Support Facility Loans. Digital channel performance continued to go from
strength to strength, with Digital transactions increasing by more than
18% in 2021. Importantly, Retail and Digital were able to launch our BSP
Pay proprietary card online payment channel, as well as our BSP Internet
Payment Gateway (IPG) service during the year. On the community front,
Retail delivered 50 projects in each of the provinces we are located to assist
our local communities.
BSP's new Core banking system, FLEXCUBE, will roll out as anticipated in
PNG in 2022, with months of preparation from Retail Bank in the lead-up to
the implementation. Our staff are undergoing intensive training to ensure
our customers receive the full benefit of this banking system, through the
improved banking experience.
During the year, Retail increased its resourcing capability in the Anti-Money
Laundering Operational Risk, and Compliance areas, to assist with its ongoing
drive to meet all regulatory obligations. AML training and development was
a key focus, along with the remediation of matters identified by audit to
further strengthen our operations. Retail’s focus in 2022 will continue to
centre on elevating our compliance in all areas.
We thank all of our customers across PNG for their ongoing support. We
look forward to an exciting 2022, headlined by the rollout of our new Core
Banking system that will deliver an improved customer experience for all our
customers.
BSP CORPORATE
BSP Corporate maintained its leading position within PNG, meeting the
needs of its Commercial, Institutional, and Government customers, with an
overall lending market share of 67%.
Our experienced Relationship teams and product specialists in Papua
New Guinea have expert knowledge in transactional banking, lending,
infrastructure, digital and foreign exchange. Our specialists are located in key
regional locations like Mt Hagen, Madang, and Kokopo. Combined with a
key presence in Lae and Port Moresby, BSP Corporate provides convenient
access for the Bank's corporate customers.
As BSP continues to be the business partner of choice in the South Pacific,
customer satisfaction remains a priority. We conducted an online customer
survey, the results of which indicated BSP's high customer satisfaction
levels. Key highlights of the survey included strengths in foreign exchange,
versatility of products, and premium branch service. Other key features
include outstanding relationship management and trustworthy business
practice, and our regular customer visits. There has also been a focus on
providing support and communication through the pandemic.
Our Relationship Managers leveraged the largest retail branch network
across Papua New Guinea and the South Pacific to provide unrivalled reach
and versatility in our products. Relationship Managers also worked closely
with BSP Digital to provide online products, so that customers could work
remotely and maintain access to their banking needs.
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BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport
182 Million
Digital Transactions in PNG
43.31%
FX Market Share in PNG
86% of total transactions
were via digital channels.
60% via mobile phones.
FX earnings in 2021 rose PGK32.6 million from the
previous year while FX market share fell 0.91% to
43.31% in 2021.
The Banks FX turnover rose 5.2% while FX
market turnover rose 7.4% in 2021.
158,975
New Accounts in PNG
personal and non-personal customers
2.5 Million
BSP Account Holders in PNG
Over 60,000 SME Accounts
3 SME Banking Centres
DIGITAL
The key achievements for 2021 were the continued strong growth of digital
customer transactions in mobile banking, internet banking, BSP App and
online digital payments, which grew over 18% from the previous year.
Pleasingly, our Business Merchants are increasingly moving their customers’
shopping experiences online. Thereby embracing Digital capabilities for
online and mobile payments at a time when contactless payments was a
necessity for continued business operations.
Digital embarked on strategic partnerships that are aimed at enhancing the
customer experience and improving business efficiency. Partnerships with
Government Agencies and Private Businesses including Micro, Small and
Medium Enterprises (MSMEs), have seen Papua New Guinean’s rapidly
adapting to digital banking solutions and more businesses are investing in
E-Commerce as they too see the gains in efficiency and the additional sales
opportunities it brings.
BSP proudly launched 2 E-Commerce solutions, firstly BSP Pay which offers
PNG domestic merchants an online non-card-based E-Commerce People to
Business (P2B) payment integration for BSP Customers; and secondly, BSP
Internet Payment Gateway, both home-grown IPG solutions developed in
country for BSP by Platform Pacific Ltd, a joint-venture subsidiary of BSP.
Air Niugini was the first customer to sign up to BSP IPG, citing the service
provides a cost effective online payment solution that meets global standards
and reduces the dependency on offshore service providers.
Digital’s aspiration is to inform and connect by digital technology, the
collective business and consumers needs within various ecosystems of the
market. These low-cost digital payment services using mobile technology as
the cost effective platform for government, business and consumers across
the country.
With the above aspiration, we will continue to support innovative financial
solutions for customers and digital advocacy and change initiatives, that
propel design and delivery of suitable digital services to support and promote
financial inclusion, and allow market ecosystems to participate collectively as
consumers in the digital arena.
TREASURY
BSP Treasury fosters and enhances relationships with clients, providing
Financial Markets services, solutions, and ensuring clients remain aware of
the regulatory environment and its implications.
PNG Treasury Foreign Exchange (FX) earnings rose from the previous
year by 13%, reflecting stronger FX inflows from firmer commodity prices
(particularly Cocoa, Oil, Palm Oil, Copper, and Coffee), despite the closure
of the Porgera mine. Import demand again exceeded the export supply of
foreign currency, and these difficult trading conditions continued throughout
the year.
The official Bank of Papua New Guinea (BPNG) rate of exchange was
unchanged over the year at USD 0.2850. FX earnings in 2021 rose PGK32.6
million from the previous year while FX market share fell 0.91% to 43.31% in
2021. The Banks FX turnover rose 5.2% while FX market turnover rose 7.4%
in 2021.
The Bank continued to invest surplus funds in government securities.
Movements in the Government debt yield curve reflected evolving fiscal
conditions. The 28 day Central Bank Bills fell from 1.33% to 1.29%, 91 day
Treasury Bills fell from 2.07% to 1.96%, 182 day Treasury Bills fell from 4.44%
to 4.34%, whilst one (1) year Treasury Bills were unchanged at 7.20%. Yields
on longer-dated Government-issued Inscribed Stock were generally stable.
PNG Treasury continues to mitigate risk and actively aims at providing
technical training and empowering staff to continue their development
journey. Treasury dealing staff training encompasses weekly Technical
training (Australian Financial Markets Association Foreign Exchange Markets
Accreditation), regulatory and internal compliance training, and on-the-job
cross-training and sales training. The strong focus on training will continue
in 2022.
23
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Operations & 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
strategic objectives. 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 entire Executive
team is 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 that BSP is aligned with the banking regulatory, compliance, and
industry environment and preserves prudent Credit Risk Management
standards.
In addition to individual rating assessment, the portfolio is subject to stress
testing, reporting, and monitoring by the Credit Committee. BSP undertook
industry reviews focused on industries deemed most exposed to COVID-19,
which
included accommodation, property, airlines, construction, and
tourism. Customers in these sectors had their risk grades reassessed to
accommodate post-COVID-19 impacts. The BSP loan portfolio outlook retains
a level of uncertainty for our customers and we continue to actively manage
inherent risk, which is prudently reflected in our risk grading. The economic
outlook for the downside case is more optimistic than the prior year with an
expectation of border reopening and unrestricted travel to reflect a lessening
of COVID-19 impacts on our customers.
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. This enhancement
comes through consistent application and implementation of key policy and
procedures supporting considered Credit decision outcomes.
BSP’s Operational Risk Business Unit is responsible for the identification,
measurement, mitigation, monitoring, and reporting of Operational Risks.
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 defences for BSP Financial Group.
Operations & IT SBU is responsible
for all back-office operations and
ensures that the needs of our clients
are at the centre of our operational
framework.
24
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport
BSP Solomon Islands staff who are siblings chose to protect themselves, their families and colleagues from COVID-19 by getting vaccinated.
FINANCE AND PLANNING
Finance & Planning (F&P) SBU continues to effectively manage our
organisation's financial resources. Business forecasting is always important
when business conditions are subject to volatility, and the team has been
able to deliver this effectively to management and the Board.
their purchasing needs and remains an important point of contact when
dealing with existing goods and services providers. The Accounts Payable
team ensures that BSP’s accounts are settled on time and any disputes are
resolved amicably.
A key milestone for BSP during the year was the successful listing on the
Australian Securities Exchange (ASX). The listing presents access and
opportunities that the Bank can leverage to expand into new and existing
markets. It also provides liquidity to our Shareholders and gives us the
potential to diversify our investor base. The team played a key role in the
listing process, including the preparation of the Information Memorandum
and providing information required in the listing process. The team
stands ready to meet the new regulatory requirements and engage with
shareholders as a dual-listed, and locally grown bank.
Reporting teams continue to meet
internal and external reporting
requirements, providing support to various stakeholders as required. The
team’s involvement with the new core banking project is critical, as we look
into ways to achieve efficiency in our reporting function. The Procurement
and Purchasing team continue to support strategic business units with
The Strategy team continues to manage the strategic planning process,
investor presentations, and reporting cycles and coordinate 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 2021.
Staff upskilling continues to be our major focus as we head into 2022. We
envisage improved productivity and increased output and analysis with the
switch to the Bank’s new Core Banking platform. Leadership capabilities
within the team continues to be recognised with a number of promotions
in 2021. 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 BSP’s i-care
reward initiative introduced in 2020.
OPERATIONS & INFORMATION TECHNOLOGY
BSP’s Strategic Business Unit (SBU) Operations & Information Technology
covers seven countries. The SBU is responsible for all back-office operations
and ensures that the needs of our clients are at the centre of our operational
framework.
● We have also replaced our General Ledger reconciliation platform,
Accurate, with a state-of-the-art reconciliation tool that provides more
functionality in terms of reconciliation.
To support our retail and business customers we implemented the following
initiatives:
In addition to these projects, Operations has an ongoing commitment to
keep up with technology, which saw several system replacements and
upgrades this year, with larger projects including:
●
●
●
The replacement of the EMV chip’s on our current EMV Cards to the
mandated Visa standard, CVN-18, which ensures that we comply with
the world standards on new card issuance;
The upgrading of the EFTPoS software fleet in OSBs and PNG introduces
new security features as well as the enablement of 4G communications
and the finalizing the One Time Password enablement for our customers
with EMV cards for online secure payments;
●
●
BSP IT has been upgrading the domestic and international links for
all of BSP PNG Branches and international communication links to all
our Offshore Branches. We have provided 5 to 10 times the previous
bandwidth using the latest technology to enable BSP to provide more
efficient and effective services to all our customers; and
Installing and commissioning of a new, robust, and available
infrastructure platform across all systems hosted in PNG, providing
more resilience, efficiency along with significant performance uplifts.
The replacement of the AML screening tool, Microsoft with the
SWIFT Sanctions application. This allows for one platform support of
the applications by IT, thus ensuring efficient turnaround times on
international payments requiring AML checks and additional watch-list
capabilities; and
BSP's new core banking system was successfully implemented in Vanuatu
in April 2021. As is the case with complex core banking implementations,
BSP has experienced challenges following the implementation, which has
affected our customers as well. These issues are being addressed and our
next goal is the implementation of the new core banking system in Papua
New Guinea, targeted for the second half of 2022.
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BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Operations & Support
Group Risk Management | Finance and Planning | Operations &
Information Technology | Human Resource | Group Compliance
(continued)
HUMAN RESOURCE
Human Resources (HR) SBU provides strategic operational support through
its core management functions for all BSP employees within PNG and the
Offshore Branches (OSBs) and subsidiaries. In 2021 HR embarked on an
aggressive digital transformation exercise with four main project deliverables:
HR process automation, HR customer experience, paperless HR, and digital
learning experience.
Equally important was the continued coordination and management of
the COVID-19 situation, with ongoing staff assistance through the Crisis
Management Team (CMT) - with the primary objective to ensure regular
communication, strategic guidance, and timely assistance to all employees.
HR ensured that staff across the Group were better educated on the need to
fully vaccinate themselves and their families, by having access to vaccination
sites and COVID-19 testing facilities with ease.
Some crucial activities on employee health and wellness included, arranging
mobile vaccinations at convenient work locations, educational awareness
programs facilitated by leading doctors in PNG and health service providers,
procuring and distributing appropriate personal protective equipment,
weekly CMT meetings, and managing staff expectations.
COVID-19 continued to challenge our operations to alter our work culture
digitally. Consequently, many of our training programs, workshops, and
team/committee meetings were facilitated via video conferencing. Most
blended training courses included virtual delivery, BSP Learning Portal usage,
online assessments, staff feedback evaluation, and e-Certification.
In line with our digital imperatives, the main highlight in 2021 was
the introduction of a bi-monthly HR newsletter, HR Digest. Through
this communication medium, all HR digitally impacted projects were
communicated Group wide for improved BSP employee experience. The
Learning Portal was used during 2021 to measure staff understanding,
awareness, and competency levels in order to enhance the overall learning
experience and capabilities during training. Anti-money laundering, cyber
security, code of conduct, and various compliance training policies and
processes were also delivered using BSP Learning Portal and SharePoint.
HR continued to coordinate the Leadership and Management Development
Program (LMDP) and our Graduate Development Program (GDP). Nurturing
BSPs next generation of leaders is the ultimate objective of both programs.
Once again, LMDP virtual training continued in 2021.
In addition to the above, several digital surveys were conducted in 2021,
including a Group-wide Staff Engagement survey, HR Customer Service
survey, Lifestyle and Wellbeing awareness survey, LMDP survey, and Training
Needs Analysis survey with real-time results and reports received and data
analytics collated for management reporting purposes. These surveys are
crucial in optimizing our overall customer service delivery.
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BSP PNG Staff who attained their Diploma Certificates from IBBM with Group CEO Robin Fleming.
GROUP COMPLIANCE
Group Compliance, consisting of four (4) BUs operating in the second and
third line of defence, had a challenging 2021 due to pandemic-induced
absences and changes in leadership. These challenges were responded to by
the utilisation of new ways of working, and the strengthening of teams via
recruitment and training.
The critical need to enhance and uplift compliance with Anti-Money
Laundering and Counter-Terrorist Financing (AML/CTF) regulations and
policies saw further increases to the staff complement in the AML Unit,
building on from the strengthening of the function in 2019 and 2020.
There were 18 staff recruited in response to new AML roles created during
the year. The new positions created include additional Technical Analysts,
Training officers, a Training and Communications Manager, and a Technical
Manager.
AML Highlights in 2021 include the change over from FircoSoft to SWIFT
Sanctions and Payment Control Systems for sanctions monitoring across the
BSP Group. This change has increased BSP’s capacity to monitor and prevent
sanction breaches across its network.
The Compliance BU, which monitors the management of compliance risk
across the Group, focused on identifying areas of improvement in 2021,
for implementation in 2022 and onwards. Areas identified, which will be
concentrated on in 2022, include enhanced awareness across the Group
on regulatory compliance, and the identification of issues via effective
monitoring of obligations and controls.
The Internal Audit BU, which independently evaluates and reports on the
effectiveness of BSP Group’s risk management, controls, and governance
processes, completed 149 audits across all countries and subsidiaries in
2021. The focus of the audits was on adherence to AML/CTF Policies, Central
Bank requirements, and the overall operating effectiveness of key controls
within business processes.
The Internal Audit BU also implemented new ways of working, by revising
its current Audit Work Programs and conducting remote desktop audits.
To ensure that the audit teams across BSP Group are well informed of new
ways of auditing in the new normal, virtual training sessions were held and
facilitated by the Global Institute of Internal Auditor throughout 2021. The
Internal Audit BU also conducted surprise cash counts.
The Credit Inspection BU, which independently assesses loan submissions,
compliance with credit policies and procedures and portfolio quality
assurance, completed 22 reviews in 2021. Due to the pandemic, all credit
reviews were conducted remotely, which presented unique challenges.
All 18 Corporate PNG portfolios have been reviewed in the past 18 months,
along with all six Corporate OSB portfolios and three BSPF entities (PNG, Fiji
& Solomon Islands).
Group Compliance now has 94 staff across its four BUs, and its expanded
team will be the SBU’s key strength.
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BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021
29
Broader Group
Cook Islands | Fiji | Samoa | Solomon Islands | Tonga | Vanuatu
NPAT
NZD3.1m
5% decrease from 2020
NPAT
FJD69.4m
41% increase from 2020
30
COOK ISLANDS
Cook Islands’ tourism-dependent economy was negatively impacted by pandemic-related travel restrictions in
2021. Accordingly, BSP Cook Islands delivered a 2021 Net Profit after Tax (NPAT) of NZD3.1 million, (K7.7m)
representing a 5% decrease from 2020.
Similar to our 2020 results, key revenue lines were down on expectations, due to the border closures. However,
the business continued to remain focused on efficiencies and cost savings in key areas such as operating expenses,
including administration and telecommunications, computing, and channel expenses, to offset the reduction in
revenue.
The Cook Islands Government continued to support businesses throughout the pandemic with subsidies and
economic stimulus, and in addition has played a critical role in delivering key relief programs.
Subdued credit conditions in 2021 saw a further contraction in loans and total deposits, although the 2022
outlook is positive, with the announcement of a travel bubble with New Zealand commencing mid-January. BSP
Cook Islands is optimistic the current contraction trend will reverse due to more favourable economic conditions
and through various strategic and growth initiatives developed for 2022.
BSP Cook Islands actively supports and provides banking services to the business community across the private,
public sector, and local communities. These services include 2 branches, 14 ATMs, 450 EFTPoS and 10 agents,
many of which are in the outer islands. Participation in BSP financial literacy continues for the youth of the Cook
Islands. Plans are underway to implement a financial education program including basic book keeping for SMEs,
sole traders, and micro business and is also designed to encourage integration into the formal financial sector.
BSP is confident of improved economic conditions as the Cook Islands Government eases border restrictions in
January 2022. Despite a challenging 2021, staff remain committed and focused on supporting customers and
industry through the post COVID-19 transition.
FIJI
The Fijian economy was significantly impacted by the second wave of the COVID-19 Delta variant in 2021,
with a further GDP contraction of 4.1% forecasted following a 15.2% decline in 2020. The prolonged closure of
international borders and nil tourism receipts throughout 2021, and the high unemployment rate have hugely
influenced the local economy.
Despite the challenging economy, Fiji has made commendable progress with over 90% of its eligible adult
population fully vaccinated. This has become a key consideration in opening its international borders on
1st December 2021 and with promising bookings by tourists from Australia and the United States.
BSP Fiji delivered a Net Profit after Tax (NPAT) of FJD69.4 million (K117m), higher than 2020 actuals (FJD49.3m) by
41%. The result was buoyed by businesses not taking additional General Provisions (GP) for five months, and asset
growth from 3rd quarter offset with surplus GP released from the customers returning to pre-COVID repayment
arrangements, together with writing back of depreciation accruals.
BSP Fiji provided financial relief assistance to more than 11,000 customers with Loans & Advances totalling
circa FJD1.2 billion during the pandemic. Management continued with its focus on protecting asset quality, by
working closely with all customers that experienced prolonged financial hardship during 2021. Regular prudential
engagement with the Reserve Bank of Fiji and ongoing oversight and support from BSP Group Credit enabled BSP
Fiji to assess that provisioning requirements were in line with IFRS 9 accounting standards.
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport
NPAT
WST16.7m
23% increase from 2020
Despite strong competition between six banks in a small market, BSP secured the number one (#1) position
measured by Loans & Advances market share. In 2021, the Corporate SBU secured new medium to large “Blue
Chip” customers from other banks. This was achieved by taking a long-term view of the customer business, a high
standard of customer service, and professional relationships that BSP has established in the market.
The challenge of making banking services accessible to the Fijian population was achieved by ensuring the health
and safety of all staff remained paramount during the height of the pandemic’s second wave. Full implementation
and strict adherence to government-regulated COVID-19 safe workplace protocols and practices ensured customer
safety at all bank premises.
Investment in IT infrastructure and customer-centric banking applications continued, with the execution of
various IT projects to expand the digital footprint in the market. The Bank has been providing State-of-the-art
online banking facilities that now also include an Internet Payment Gateway (IPG) to facilitate online sales as many
merchants adopt new business models. BSP Fiji became the first Bank to roll out 30 new touch screen ATMs in the
market. In alignment with BSP Group's digital footprint, Fiji has successfully migrated its credit card customers from
MasterCard to Visa in 2021.
Compliance with AML/CTF policies, in line with its commitment to curtail money laundering activities, has remained
a key focus area for the bank.
SAMOA
BSP Samoa has delivered a robust financial performance in 2021, despite the Samoan economy contracting by
10%, as domestic economic activities continue to be adversely impacted by border restrictions. Net Profit After Tax
of WST16.7 million (K22.9m) generated a Return on Equity of 17.3% and Return on Assets of 2.7%. These results
were achieved through a prudent growth strategy, while maintaining acceptable asset quality and a strong balance
sheet position.
The economic outlook for Samoa continues to look challenging, with a slight improvement anticipated for 2022.
BSP’s strategic focus for 2022 will be committed to helping our customers and community rebuild and harness
growth opportunities through operational efficiencies and overall customer experience, as we strive to maintain
our number one (#1) position in Samoa.
Resilient customer care and a reliable electronic footprint that delivered innovative and cost-effective financial
services, remained key priorities for the Bank. The launch of the 3D Secure Authentication project provided an
enhanced, secured and convenient digital solution for our customers, who can now complete online purchases
using One Time Passwords (OTPs) received via their mobile phones. This feature complemented our Internet
Banking platform and a network of 26 ATMs, 45 agents, 400+ EFTPoS terminals.
BSP remained committed to our community via numerous projects throughout the year. In 2021, we contributed
to over 50 projects ranging from health, sports, tourism, environment, youth development, home for the elderly,
gender, and family violence, amongst many. Our key community project in 2021 focused on education, promoting
literacy through the construction of the new library for Vailele Primary School.
Our success is predicated upon our staff dedication towards delivering superior services to our customers. The
strength of our culture is reflected in the way we embed a values-driven approach to our work. The staff in both
Samoa and PNG and all our customers are acknowledged for their support of making possible good results in 2021.
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Broader Group
(continued)
Cook Islands | Fiji | Samoa | Solomon Islands | Tonga | Vanuatu
SOLOMON ISLANDS
The Solomon Islands experienced a challenging 2021 for businesses activity and the economy in general. International
borders remained restricted throughout the year, which mitigated the spread of COVID-19 throughout the country
however, the restrictions on travel have taken an economic toll. The local economy was also further affected by
the November riots in Honiara, which destroyed both public and private property, including the burning of BSP's
Ranadi Branch. The Central Bank of Solomon Islands (CBSI) estimated the impact of the riots to the economy at
SBD534 million. CBSI further estimated a subsequent contraction of GDP growth by 0.6% in 2021 and expected to
persist into 2022.
Subdued market credit appetite and growing system liquidity, saw competition intensifying and increased loans
portfolio pressure. Despite these pressures, BSP Solomon Islands maintains the highest loan and deposit market
share.
In light of the above, BSP Solomon Islands recorded a Net Profit after Tax (NPAT) of SBD76.1 million (K33.2m) for
2021, slightly higher than 2020 by 2.5%. Interest income reduced due to the loan book contracting, but improved
performances in FX and digital channels revenue lines were achieved in 2021. The 2021 cost increases were
primarily from the direct losses from the riots.
As the only Bank with branches in all provinces, BSP continued its commitment to the Solomon Islands. We have
increased BSP Agent numbers, expanded services by upgrading all ATMs, increased EFTPoS to over 300 terminals,
and improved our mobile banking experience. Expanding our digital footprint across the country is a key strategic
priority in 2022. In addition, loan rates were reduced for both retail (home and personal loans) and business
customers to proactively support our customers through the pandemic.
Our long serving Country Head, David Anderson, retired after 8 years as leader of our Solomon Island’s business.
David’s contributions were significant and he is to be congratulated for his efforts. Sandra Fore took over from
David towards the end of 2021 and Sandra is the first Papua New Guinean to be appointed Country Head of one
of our Pacific businesses.
BSP Solomon Islands remains committed to assisting customers and communities with improved services and
retaining its position as the Solomon Islands’ bank of choice.
TONGA
BSP Tonga Ltd delivered a Net Profit after tax of TOP11.9 million (K18.4m) in 2021, which is 20% (or TOP2m)
above its 2020 performance despite COVID-19 challenges. This outstanding result was driven by improved overall
operating income, attributed to Tongan diaspora remittances boosting MoneyGram commission (48.9%) and FX
Market (0.2%). Prudent cost and debt management, saw costs of TOP10 million – a saving of 2.9% throughout the
year.
BSP Tonga Ltd maintained its number one (#1) market share position, with over 40% both Lending and Deposits.
Extended border closures and slower market sentiment saw lending growth contract 5.2%, while deposits grew
25.4% from remittances and foreign aid.
BSP Tonga’s customer base grew by 7.4%, with over 37,400 selecting BSP Tonga Ltd as their preferred bank of
choice. During 2021, the reductions across interest rates and fees saw significant benefits passed onto customers.
BSP's COVID-19 relief package remained on offer, despite the positive market sentiment and diversification saw
minimal customers on relief. Digital education of customers and staff, coupled with additional investments in digital
devices across 2021. Consequently, we experienced an average increase of 85% in usage across ATM, EFTPoS, and
agency banking channels.
NPAT
SBD76.1m
2.5% increase from 2020
NPAT
TOP11.9m
20% increase from 2020
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BSP Solomon Islands new ATM at Lions Heat Street.
NPAT
VUV139.1m
30% increase from 2020
Sponsorship activity focused on grassroots projects particularly in the outer island, with contributions of school
desks, water tanks, and rubbish bins to the Ha’ano Public School in Ha’apai, similarly to ‘Eua and Vava’u town
centres. Expansion of our Go Green initiative saw over 30 rubbish bins donated to ‘Adele and Toloa College – two
of the oldest boys' schools in the Kingdom. This was in addition to the Bank’s 2021 Community Project – the
refurbishment of the St. Paul’s Hall, for small to medium female-led businesses, to connect and sell products in a
more prominent location.
Our support succession planning efforts, and establishment of the Family Sexual Violence Action Committee
(FSVAC), to demonstrate our commitment to the #BlackThursdays agenda has seen investments in our people
continuously improving in leadership training and job rotations throughout 2021.
Despite the challenges in 2021, our staff continue to remain resilient and committed to delivering outstanding
services to meet the needs of our customers and our communities.
VANUATU
In April 2021, Vanuatu was the first BSP branch to implement the new Core Banking System (Oracle FLEXCUBE).
The benefits of the new Core Banking System 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.
BSP Vanuatu continues to focus on expanding our banking services and being an active corporate member in the
community. With 26 ATMs, 24 active agents and 428 EFTPoS terminals, BSP Vanuatu works to support communities
and bring banking services to all Vanuatu’s population segments. We operate in the three key island markets of
Efate, Santo and Tanna. The Freswota branch has been operational since March 2019, with increasing customer
numbers and transactions, and provides Port Vila customers with a viable second branch alternative.
During this period of COVID-19 border closures, BSP Vanuatu has continued to actively participate in community
initiatives. 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 in 2021 included the rebuilding of a school playground in Freswota, part of a joint venture with
Kiwanis and Carbine Club Vanuatu.
We farewelled our Country Head, Nik Regenvanu, who has been in the role for three years, when he decided to
move to Canada for family reasons. Nik is to be congratulated for his contribution to BSP and we look forward to
welcoming our new Country Head, Graham Freely, in 2022.
During 2021, Vanuatu’s economy continued to be materially impacted by COVID-19. Borders remained closed
resulting in loss of jobs and the closure of many businesses. This has had a material impact on BSP Vanuatu’s
financial results. BSP Vanuatu declared a Net Profit after Tax of VUV139.1 million (K5m) in 2021, with performance
behind budget due to COVID-19 related implications of lower income generation and credit quality. The outlook for
2022 will be dependent on the timing of borders reopening for international travel, the speed at which the tourism
industry can rebound, and government support and facilitation.
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BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021
35
Subsidiaries
BSP Finance | BSP Life | BSP Capital
BSP FINANCE
Papua New Guinea
BSP Finance PNG achieved a full-year profit of K7.3 million in 2021, up 23% from 2020, despite headwinds in
the local economy through further delays of key resource projects and the continued impact of COVID-19 Delta
variant influencing some customers. Through prudent management of our credit risk and expenses, we were able
to deliver a satisfactory result.
In May 2021, we welcomed a new Country Manager, Simon Kepui, who has overseen a successful integration of
the Corporate Novated Lease book to the finance company. This product has aligned well with our current suite
of products and can be leveraged for future growth.
Our commitment to the community is important to us, and in 2021, we delivered much needed water supply
infrastructure to the health clinic attached to the prison in Bomana, Port Moresby. This project not only provides
water to the clinic and prison, but also to the surrounding residents.
In 2022, we look forward to growing the business through strategic partnerships developed over many years, and
investing in technology and our people.
Fiji
We achieved a full-year 2021 profit of FJD2.8 million (K4.8m), a reduction of 28% from 2020. During this time,
our people remained committed to helping customers and partners get through the pandemic and showed the
value of community in our people.
BSP Finance Fiji supported many with relief packages again in 2021 and worked hard to ensure our small business
customers could survive until the expected border opening in December. This will benefit the tourism industry
and the wider community, as Fiji opens to the world and gets back to work.
2022 will still see challenges as the economy recovers however, with 91% of the eligible population being fully
vaccinated, we are optimistic that our strategy will deliver growth opportunities and deliver a successful year
ahead.
Cambodia
Cambodia’s border remained closed in 2021 due to COVID-19 and the impact of the spread of the Delta variant.
When infections were peaking, much of the economy was in lockdown affecting many of our customers. Hence,
our team was forced to work from home and at times were rotating between home and office when restrictions
eased. Despite all of the challenges, we delivered an after tax profit of USD3.5 million (K12.4m), a 2% decrease
from the previous year, and our loan book (net) grew by 22%.
High vaccination rates in Cambodia have allowed the authorities to open borders to vaccinated travellers without
restriction. The economy is set to continue to grow and our business is well placed to achieve its 2022 goals.
We have a settled team in place and are fully funded for the anticipated growth in our business through strong
partnerships with our joint venture partner and other stakeholders.
PGK7.3m
Full Year Profit
FJD2.8m
Full Year Profit
USD3.5m
Full Year Profit
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BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport
Donation to Solomon Islands Football Federation - Left-Right; Joyce Nukumuna, SIFF rep. and players, Diana Tasion - Country Manager Tower
Insurance and SIFF Board Member and Imelda Samba - BSP Finance Country Manager.
SBD28.1m
Loan Portfolio in 2021
USD1.1m
Loan Portfolio in 2021
PGK1.0m
Full Year Profit
Solomon Islands
BSP Finance Solomon Islands suffered a net loss of SBD1.3 million (K0.4m) for the full year 2021, an increase on
the prior year (SBD0.2m). Strong headwinds in the economy further affected by the ongoing pandemic related
border closure and poor performing elements of the loan book hampered growth aspirations and affected
business profitability.
Imelda Samba from Papua New Guinea was appointed Country Manager and after a long wait to gain entry to the
country, she commenced duties in May 2021. We look forward to the Solomon Islands achieving targets through
ongoing partnerships with the Bank and other local suppliers. Our focus on growing the brand regionally will
deliver more opportunities, as we position ourselves as the preferred non-bank financier in the country.
Lao
Many milestones were reached during 2021 for the business in Lao. We were able to secure regulatory approvals
to change the name of the business to BSP Leasing Lao Co., Ltd (BSPLL) and introduce capital from the shareholders
to enable the business to trade and grow. Unfortunately, Lao, like many other countries, suffered greatly from the
spread of the COVID-19 Delta variant.
Cases were still high at the end of 2021, however the government is planning to open the borders in early 2022
after the successful launch of the China Lao railway, which connects Lao, the only landlocked country in South
East Asia, to China in the north and Thailand in the south. This will open up the country for more trade, attracting
additional flows from foreign investment to accelerate economic growth in Lao.
BSP Lao is looking forward to local and international restrictions easing, which will aid in our goal to grow the
business with our joint venture partner.
BSP CAPITAL
BSP Capital posted an after-tax profit of K1.0 million in 2021 compared to K1.9 million in 2020, reflecting difficult
trading conditions with several clients recalling their investments. The Funds under Management (FuM) saw
substantive adjustments including a 22% reduction in the overall portfolio to K6.5 billion, driven by redemptions
and portfolio adjustments by institutional clients. Notwithstanding the impact of COVID-19, BSP Capital was able
to extend both its key investment management mandates with Nasfund and Aon for another three years during
2021.
BSP Capital was also able to provide advice to BSP Financial Group relating to its secondary listing on the
Australian Securities Exchange (ASX) during the year. BSP was listed successfully in May 2021 and now trades
under the ticker symbol BFL on the ASX.
2022 will come with its challenges stemming from the persistent pandemic effects, and the ongoing
macroeconomic complexities, but we are confident of sustaining enhanced profitability in the near term.
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Subsidiaries
(continued)
BSP Finance | BSP Life | BSP Capital
PGK 0.6m
Full Year Profit
Wantok Delite Annual Premiums
K2.0m in 2021
Wantok Group Term Life
K0.4m in 2021
BSP LIFE
PNG
Effective compliance and risk management continue to underpin BSP Life’s vision and objectives. BSP Life
Board of Directors with the support of its Board Risk Committee and Board Audit Compliance Committee has
the oversight of risk management by ensuring appropriate resources, systems, policies, and processes are
allocated to assist mitigate the risks within the business.
The business was profitable for the second year running, with a profit of K0.6 million in 2021. Over the year,
the business has issued over 900 Wantok Delite policies with annual premiums of K2.0m, whilst the Wantok
Group Term Life new business for the year stood at K0.4m. BSP Life’s financial performance, and both solvency
and capital adequacy ratios, are tracking positively.
On 30 August 2021, BSP Life launched its second Sales Office in Lae, Morobe Province with 25 insurance
agents and two (2) full-time staff. The launch was a key milestone for BSP Life, as it endeavours to grow its
geographical footprints around PNG to drive insurance awareness, and make life insurance accessible through
its Wantok Delite Product.
BSP Life has been an active participant in various industry and business initiatives organised throughout
the year to drive policy changes, awareness, and other objectives that aim to contribute towards increasing
insurance awareness in PNG.
BSP Life's strategic focus for 2022 will continue to be on delivering premium income growth from its Wantok
Group Term Life and Wantok Delite endowment products, as well as capacity building for staff and agents
through regular and targeted training programs. To further increase our geographical footprint in Papua New
Guinea, BSP Life has planned to launch its third Sales Office in mid-2022.
BSP Life PNG Head of Sales
Mathew Hasu interacting with a
participant during an event.
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Fiji
BSP Life PNG Agents at Lae sales office.
FJD 15.8m
Full Year Profit
Investment portfolio grew
by 10% to FJD 803m in 2021
Despite the challenging environment, BSP Life (Fiji) showed resilience closing the year with a consolidated
shareholder profit of FJD15.8 million (K25.6m). Policyholder profit was FJD17.1 million.
The closure of Fiji’s borders impacted Fiji’s GDP, with a re-estimated contraction of 4.1% and over 100,000
people losing their jobs. A national vaccination campaign enabled over 90% of the target population to get
vaccinated paving the way for border openings and the resumption of international travel in December. This
will support economic recovery into 2022.
It was pleasing that BSP Life Fiji delivered sound results. Key highlights include:
1.
2.
3.
4.
5.
6.
7.
Life annual premium sales of FJD10.1 million.
Life single premium sales of FJD25.7 million on the back of sound product and distribution
strategies.
Market share of Life insurance grew to 57%.
The Investment portfolio grew by 8% from FJD747 million in 2020 to FJD803 million in 2021,
underpinned by a diversified range of assets. The adverse impact on tourism investments was
offset by improvements in other asset classes.
For the Health business, the focus on value and our strong service reputation supported a
satisfactory outcome. Sales closed at FJD4.4 million.
A dividend of FJD8.5 million was paid following the performance in 2020 and strong liquidity and
solvency positions.
An interim bonus declaration for policyholders was maintained at 2020 levels.
The outlook for 2022 is cautiously optimistic. Fundamentals are in place, however the BSP Life Fiji remains
susceptible to slow economic recovery, cautiousness around the National election and adverse impacts of the
third wave of COVID-19. The focus for the BSP Life Fiji remains anchored on making the current better and
building for the future supported by a clearly defined Board strategy and competent team.
39
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Teams
Corporate Social
Responsibility
Corporate
Governance
40
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021
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) and
the Australian Stock Exchange (ASX).
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.
BSP’s Corporate Governance Principles are available in the Investor
Relations section of BSP’s website at www.bsp.com.pg.
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 Financial Supervisory Commission of the Cook Islands Banking
Prudential Statement BPS09: Governance Risk Management (June
2019).
• The Central Bank of Samoa Prudential Statement 1 (January 2021).
• The Central Bank of Solomon Islands Prudential Guideline No. 14 on
Corporate Governance (July 2019).
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
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.
The Board has delegated to management responsibility for:
• 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,
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.
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021
41
Corporate Governance Report
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.
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
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.
The role includes:
• 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.
BSP fully complies with the requirements of the BPNG Prudential Standard
4/2003 – Limits on Loans to Related Parties.
Related Party Transactions are summarised in Financial Statements
Note 35. 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 seven times a year, and
the Board meets on other occasions as necessary to deal with matters
requiring attention. Meetings of Board Committees are scheduled
42
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReportBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021 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 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.
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 Statements Note 36, Directors’ and Executive remuneration,
provides attendance details of Directors at Board meetings during 2021.
Review of Board Performance
Consistent with Recommendation 1.6 of the ASX Corporate Governance
Principles and Recommendations (4th Edition), BSP has a process for
periodically evaluating the performance of the Board, its Committees and
individual Directors. The key findings of the 2021 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 Group 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
Subsidiaries and Country Managers for further consultation, and to discuss
issues associated with the fulfilment of their roles as Directors.
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
BOARD COMMITTEES
Board Committees and Membership
During 2021, 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.
Remuneration details are provided in Financial Statements Note 36.
Membership of Board Committee during 2021:
Board Audit & Compliance Committee
Geoffrey Robb1
Ernest Gangloff
Arthur Sam
Stuart Davis
Frank Bouraga
Symon Brewis-Weston2
Daniel Siaguru-Khaisir3
Gertrude Tamade4
Board Risk Committee
Geoffrey Robb1
Ernest Gangloff
Arthur Sam
Stuart Davis
Priscilla Kevin
Symon Brewis-Weston2
Vele Rupa5
Charles Lee6
Remuneration and Nomination Committee
Robert Bradshaw
Faamausili Dr. Matagialofi Lua’iufi
Priscilla Kevin
1/6
6/6
6/6
6/6
6/6
5/6
4/6
1/6
1/6
6/6
6/6
6/6
6/6
5/6
3/6
2/6
7/7
7/7
7/7
1 Geoffrey Robb retired as a non-executive Director on 12 April 2021 and as a member of
both the BACC and BRC.
2Symon Brewis-Weston was appointed as a Director on 13 April 2021 and as a member of
both BACC and BRC to replace Geoffrey Robb.
3 Daniel Siaguru-Khaisir was appointed by the Board on 25 May 2021 as an ICM of the BACC
for director professional development roles.
4 Gertrude Tamade was appointed by the Board on 25 May 2021 as an ICM of the BACC for
director professional development roles, and resigned on 30 July 2021.
5 Vele Rupa was appointed by the Board on 25 May 2021 as an ICM of the BRC for Board
development purposes.
6 Charles Lee’s tenure as an ICM on the BRC ceased on 5 May 2021.
The Disclosure Committee comprises of the Chairman, Group CEO, Group CFO, Group CRO
and Company Secretary. They meet as and when required to overview and approve any
disclosures to Market in compliance with the PNGX and the ASX Listing Rules.
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GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReportBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021 Corporate Governance Report
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
44
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 the
Chairman (or in his absence another Non-Executive Director), the Group
Chief Executive Officer, the Group Chief Financial Officer of BSP, the Group
Chief Risk Officer and the Company Secretary (Disclosure Committee). The
chairman of the 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.
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReportBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021 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.
is currently PricewaterhouseCoopers (PwC).
BSP’s external audit firm
Representatives of PwC will attend the next Annual General Meeting in May
2022, and be available to answer shareholder questions regarding the audit.
Internal Audit
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.
Review 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.
BSP recognises the following major risks:
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.
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.
Operational Risk: The risk of loss resulting from inadequate or failed
internal processes, people, or from external events, including legal.
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.
Cyber Risk: Targetted hacking, leakage/theft of customer confidential
information, unauthorised financial transactions, random attacks including
malware, phishing 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.
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GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReportBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021
Corporate Governance Report
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.
Risk Management Roles and Responsibilities
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.
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.
BSP’s Corporate Governance Principles provide that the Board must ensure
it maintains an appropriate mix of skills and experience without gender
bias.
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;
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GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReportBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021 • 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
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.
employees;
• damage to the environment;
• other unethical conduct;
• failure to comply with appropriate professional standards;
• abuse of power, or use of the Group’s powers and authority for any
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 Capital Markets
Act 2015 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.
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 Group 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.
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.
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’
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,
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. The
presentation materials provided at these events are released to the market
prior to commencement of the event and subsequently uploaded to BSP's
website.
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GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReportBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021
Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Teams
Corporate Social
Responsibility
Remuneration
Report
48
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021
Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Teams
Corporate Social
Responsibility
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021
49
Remuneration Report
1.0
Message from the Remuneration and Nominations Committee Chairman
The aim of the Remuneration Report (Report) is to provide details that the Board believes are essential for shareholders to understand BSP
Financial Group Limited’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 Financial Reporting Standards (IFRS) and as a PNG incorporated
entity, BSP is not required to have this remuneration report audited.
2.0
Message from the Remuneration and Nominations Committee Chairman
On behalf of the Remuneration and Nominations Committee (RNC)
and the Board, I am pleased to provide the Report for BSP Financial
Group Limited (BSP). At BSP, we recognize that our staff are the
most valuable asset in the business. We must therefore ensure that
remuneration and benefits are fair and competitive in the market.
It must be highlighted that despite challenges with the economy
and reduced business activities in 2021, all staff in the BSP Group
were paid performance based short term incentives consistent with
approved broad based operational and financial key performance
indicators (KPI).
The RNC comprises three Non-Executive Directors, and is assisted
by non-voting members of management which include: Group Chief
Executive Officer (GCEO), General Manager Human Resources and the
Company Secretary. The RNC’s annual activities are based on the RNC
charter and cover 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. The first section of
the Report discloses Key Management Personnel (KMP) for BSP. The
KMP comprises Non-Executive Directors and Group Executives. Group
Executives are staff within BSP with the authority and responsibility
for planning, directing and controlling the activities of BSP. The Board
approves RNC endorsed executive remuneration packages annually
in line with the remuneration guidelines. BSP remuneration for
executives comprises a fixed component and a risk component. The
fixed component takes into account the nature of the role, pay levels
in the market, and the individual and business performance, whereas
the 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
remuneration, short-term incentives, long-term incentive plan and
performance based bonus. The main purpose of the above 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 consist of salary reviews, staff discount on lending interest
rates for both personal and home loans, opportunity 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 the longer term.
In November 2015, the Board approved a long term incentive (LTI)
scheme that uses Earnings Per Share (EPS) as the benchmark for a
matrix that adjusts the LTI payment relative to the EPS hurdle. For
2021, BSP reported a net profit after tax of K1,075.22 million. This
was above the threshold for 150% of performance rights, accordingly
LTI was vested and payments were made to eligible staff.
BSP’s Non-Executive Directors are remunerated on a fixed basis
within an aggregate Directors’ fee pool. Directors are not paid any
retirement or superannuation benefits nor do they participate in any
employee incentive schemes or share option schemes.
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BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport 3.0
Key Management Personnel
In 2021, 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
Arthur Sam
Stuart Davis
Dr. Matagialofi Faamausili Lua’iufi
Priscilla Kevin
Frank Bouraga
Symon Brewis-Weston
Geoffrey J Robb
Executives
Robin Fleming, CSM
Ronesh Dayal
Frank van der Poll
Mike Hallinan
Peter Beswick
Rohan George
Hari Rabura
Daniel Faunt
Director
Director
Director
Director
Director
Director
Director
Director
Director
Group Chief Executive Officer
Group Chief Financial Officer
Group Chief Operating Officer
Group Chief Risk Officer
Group General Manager Corporate Banking
General Manager Treasury
General Manager Human Resources
Group General Manager Retail
Vandhna Narayan
Group General Manager Compliance
Nuni Kulu
Kili Tambua
Andy Roberts
Gheno Minia
Nilson Singh
Mary Johns
General Manager Digital
General Manager Offshore Branches
General Manager BSP Finance Limited
General Manager BSP Capital
Country Manager BSP Life PNG
Company Secretary
1.
2.
3.
Symon Brewis-Weston, newly appointed on 12 April 2021
Geoffrey J Robb, resigned on 12 April 2021
Vandhna Narayan appointed as Group General Manager Compliance on 23 February 2021
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Part year1
Part year2
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Part year 3
Full year
Full year
Full year
Full year
Full year
Full year
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4.0
Executive Remuneration
BSP's remuneration policy for Executives is comprised of a fixed component and an at risk component constituting a combination of short term
and long term incentives.
Remuneration packages are reviewed by the RNC and recommended for approval by 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
Encashment
Total
Current Executives
Robin Fleming
Group Chief Executive Officer
Ronesh Dayal
Group Chief Financial Officer
Frank van der Poll
Group Chief Operating Officer
Michael Hallinan
Group Chief Risk Officer
Peter Beswick
Group General Manager
Corporate Banking
Rohan George
General Manager
Treasury
Hari Rabura
General Manager
Human Resource
Daniel Faunt
Group General Manager
Retail
Vandhna Narayan
Group General Manager
Compliance
Nuni Kulu
General Manager Digital
52
2021
2020
2021
2020
2021
2020
2021
2020
4,115
3,856
1,553
728
1,553
89
1,308
1,189
2021
1,308
2020
1,189
2021
1,289
2020
1,172
2021
2020
892
812
2021
1,299
2020
2021
2020
2021
2020
982
860
-
892
850
2,667
934
406
123
333
13
332
150
349
102
350
189
231
98
326
171
247
-
242
134
55
57
159
130
46
105
53
55
117
121
61
63
203
172
198
197
28
-
113
117
1,778
-
666
-
666
-
561
-
561
-
553
-
383
-
557
-
-
-
383
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
97
8,615
4,847
2,784
981
2,598
207
2,254
1,394
2,335
1,412
2,253
1,424
1,709
1,082
2,380
1,350
1,135
-
1,630
1,198
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Executive Remuneration – Non-Statutory Disclosure
All amounts are expressed in K’000
4.0
Executive Remuneration (continued)
Executive Remuneration – Non-Statutory Disclosure (continued)
Name
Year
Salary
Short-term
incentive
Value of
benefits
Long-term
incentive
Leave
Encashment
Total
Current Executives
(continued)
Kili Tambua
General Manager
Offshore Branches
Andy Roberts
General Manager BSP
Finance Limited
Gheno Minia
General Manager BSP
Capital
Nilson Singh
Country Manager BSP
Life PNG
Mary Johns
Company Secretary
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
960
106
1,073
379
529
471
727
661
408
273
108
22
221
29
41
46
172
112
83
79
99
54
73
28
58
76
131
98
64
77
412
34
-
-
-
227
-
311
-
93
-
-
-
-
55
11
-
-
10
7
1,613
182
1,367
436
910
604
1,341
871
658
436
Note: Remuneration reflected in the table above relates to the period the staff member was in a KMP role. Contracts are in AUD and PGK
equivalent will vary based on exchange rate.
4.1
Fixed Remuneration
BSP’s fixed remuneration comprises cash salary, salary sacrifice for citizen staff, 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 by the business. This may include salary, fixed pay allowance housing benefits 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’s are incentives that BSP awards to 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 employees for performance 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 Country Heads) who are paid in March the following
year after annual accounts are released.
This incentive is determined by the employees’ 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, and
Specific individual KPI’s such as promoting vision and values, staff training, customer survey outcomes, staff engagement survey
feedback and the like.
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BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Remuneration Report
4.3
Benefits
These cover accommodation, airfares, motor vehicle, school fees, club fees and club memberships based on industry wide practice and
amounts 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 Development 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 commences on 1 January 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’s financial year 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 Performance 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 due to
health reasons or retires prior to vesting, awards may be made in full or pro rata at the time of exit, at the sole discretion of the Board. If a
participant resigns or their employment is terminated on disciplinary grounds prior to vesting, awards are not granted.
4.5
Performance Based
Performance based benefits are awarded to employees when Key Performance Indicators (KPI) are met. This is inclusive of the following:
i.
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 respective countries.
ii.
Staff Loans - National Staff Home Ownership Scheme and Unsecured Personal Loans
BSP offers its staff concessional lending rates to citizen staff who have satisfactorily completed the probation period and have
formally been appointed a permanent employee status.
iii.
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 performance rating of 3 or better
in the last three years. Continuation in the program will be determined by the staff member’s active participation and an individual
performance rating of 3 or better each year.
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Non-Performance Based
Non-Performance based benefits are not determined by the staff member’s performance and are applicable to all staff. These benefits include
the following:
i.
ii.
iii.
iv.
Medical Cover for all staff
Life Insurance
Superannuation
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 the 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
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 100 percent of the target was appropriate for all staff and KMP after assessing performance across Group and divisional/individual
performance measures. The senior executive team strongly executed the Group’s strategic agenda and demonstrated sound leadership.
5.1
Short Term Incentive (STI) Outcomes
The Group’s financial performance is summarized 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.
Net Profit After Tax (K'000)
Earnings per Share (toea)
Cost to income ratio
FY17
FY18
FY19
FY20
FY21
757,003
844,072
890,363
806,218
1,075,218
162.0
42.6%
180.6
41.0%
190.6
37.7%
172.6
37.4%
230.1
37.5%
The table below details the bonus pool measures and outcomes for the financial year.
Target Area
Weighting
Measure
Outcomes
Group
Performance
Implementation
of critical strategic
imperatives
15%
50%
Achieve budgeted NPAT and Cost
to income ratio
The Group’s NPAT was above budget and target cost to
income ratio was achieved.
Various deliverable targets to be
achieved
Key strategic imperatives for the year focused around
expanding the Group’s digital coverage and capability,
upgrading the current core systems and improving
compliance. Listing on the ASX was a key achievement as well.
Individual Assessment
35%
Various Key Performance
indicators
Objectives set in these areas were met.
55
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Remuneration Report
5.1
Short Term Incentive (STI) Outcomes (continued)
The table below shows the STI outcomes for FY21.
Name
Current Executives
Robin Fleming
Ronesh Dayal
Frank van der Poll
Michael Hallinan
Peter Beswick
Rohan George
Hari Rabura
Daniel Faunt
Title
Group Chief Executive Officer
Group Chief Financial Officer
Group Chief Operating Officer
Group Chief Risk Officer
Group General Manager Corporate Banking
General Manager Treasury
General Manager Human Resource
Group General Manager Retail
Vandhna Narayan
Group General Manager Compliance
Nuni Kulu
Kili Tambua
Andy Roberts
Gheno Minia
Nilson Singh
Mary Johns
General Manager Digital
General Manager Offshore Branches
General Manager BSP Finance Limited
General Manager BSP Capital
Country Manager BSP Life PNG
Company Secretary
STI
Awarded
K’000
STI as % of
Gross Base
Maximum
STI
K’000
Actual
STI % of
Maximum
STI
2,667
406
333
332
349
350
231
327
246
242
108
221
41
172
83
68%
27%
23%
27%
28%
29%
27%
26%
25%
29%
12%
22%
8%
25%
20%
2,667
100%
444
444
374
374
369
255
371
290
255
275
307
151
208
124
91%
75%
89%
93%
95%
91%
88%
85%
95%
39%
72%
27%
83%
67%
5.2
2021 LTI Outcomes
The 2021 LTIP reward matrix was approved in November 2019. 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 2021,
which is calculated using the 2021 Group NPAT budget as the baseline with payments based on specified percentages of maximum rights, if
2021 EPS outcome is within the payment band as detailed in the table below.
2021 Hurdles on EPS
EPS target to achieve
Target NPAT
Percentage of Performance rights to exercise
107.5%>
102.5%>
97.5%>
222.20
211.87
201.53
K1,037.97 million
K989.69 million
K941.41 million
150%
100%
50%
LTI vesting (%)
FY17
100%
FY18
100%
FY19
100%
FY20
0%
FY21
150%
The Group achieved a net profit after tax of K1,075.22 million and EPS was recorded at 230.1 toea, above the EPS and NPAT hurdles set by the
Board. Based on these outcomes, the Board determined that 150% LTI will be vested and paid for the 2021 financial year.
56
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Title
LTI
Awarded
K’000
LTI as % of
Gross Base
The table below shows the LTI outcomes for FY21
Name
Current Executives
Robin Fleming
Ronesh Dayal
Frank van der Poll
Michael Hallinan
Peter Beswick
Rohan George
Hari Rabura
Daniel Faunt
Group Chief Executive Officer
Group Chief Financial Officer
Group Chief Operating Officer
Group Chief Risk Officer
Group General Manager Corporate Banking
General Manager Treasury
General Manager Human Resource
Group General Manager Retail
Vandhna Narayan
Group General Manager Compliance
Nuni Kulu
Kili Tambua
Andy Roberts
Gheno Minia
Nilson Singh
Mary Johns
General Manager Digital
General Manager Offshore Branches
General Manager BSP Finance Limited
General Manager BSP Capital
Country Manager BSP Life PNG
Company Secretary
1,778
666
666
561
561
553
383
557
-
383
412
-
227
312
93
45%
45%
45%
45%
45%
45%
45%
45%
-
45%
45%
-
45%
45%
22%
6.0
Employment Agreements
KMP Contracts
Contracts for Senior Management and Executives are for a three year term. Initial contracts are open ended and subject to 3 months notice
based on performance and business requirements.
GCEO employment agreement
The Group CEO’s contractual term is agreed upon between the Board and the employee. 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 includes:
i.
Business results, including performance against strategic objectives and metrics in the Group’s risk assessment/position and
compliance with AML/CTF regulations;
Performance against the Group’s strategic objectives;
ii.
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 enables the group to also achieve alignment between risk, performance and reward.
57
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Teams
Corporate Social
Responsibility
Remuneration Report
7.1
Remuneration and Nominations Committee (RNC)
The RNC assists BSP in fulfilling its oversight responsibilities regarding the remuneration, succession planning and the board
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 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, diversity 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, diversity 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 an independent Director, 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 forms 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 are also 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.
8.1
Fee Pool
BSP 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 payments to directors for the 2021 financial year within the fee pool were as follows:
All amounts are expressed in Kina
Name of Director
Kostas Constantinou
Ernest Brian Gangloff 1
Robert Bradshaw 2
Arthur Sam 3
Stuart Davis
Dr Matagialofi Lua’iufi
Priscilla Kevin
Frank Bouraga
Symon Brewis-Weston 4
Geoff Robb 5
Total
-
-
Base Fee
Chair-
person
BACC
Fee
BRC
Fee
RNC
Fee
280,652
280,652
-
-
Bank Total
Sub. Fees
Total Fees
561,304
300,000
861,304
280,652
280,652
280,652
280,652
280,652
280,652
280,652
210,489
200,326
-
-
-
-
-
-
-
-
-
37,500
25,000
343,152
60,000
-
25,000
25,000
-
-
25,000
18,750
12,500
-
37,500
318,152
37,500
25,000
-
-
343,152
330,652
-
-
-
-
25,000
305,652
75,000
25,000
12,500
318,152
-
18,750
12,500
-
-
-
305,652
247,989
225,326
-
-
-
-
403,152
318,152
343,152
330,652
380,652
318,152
305,652
247,989
225,326
2,656,031
280,652
143,750
143,750
75,000
3,299,183
435,000
3,734,183
1 Includes additional as Chairman of BACC Committee
2 Includes additional as Chairman of RNC Committee
3 Includes additional as Chairman of BRC Committee
4 Fees represent period from April to December
5 Fees represent period from January to June
58
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021
Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Teams
Corporate Social
Responsibility
Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Teams
Corporate Social
Responsibility
Financial
Statements
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021
59
Directors’ Report
for the year ended 31 December 2021
The Directors take pleasure in presenting the Financial Statements of the BSP Financial Group Limited and its subsidiaries (Bank and the Group) for the
year ended 31 December 2021. In order to comply with the provisions of the Companies Act 1997, the Directors report as follows:
Principal activities
The principal activity of the BSP Financial Group Limited (BSP) is the provision of commercial banking and financial services throughout Papua New Guinea
(PNG) 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) and the Australian Stock Exchange (ASX), 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 Lao. 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 2021, the Group’s profit after tax was K1,075.218 million (2020: K806.218 million). The Bank’s profit after tax was
K1,036.455 million (2020: K759.452 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 K676.464 million were paid in 2021 (2020: K569.355 million). A detailed breakup of this is provided in Note 28.
Directors and officers
The following were directors of the BSP Financial Group Limited at 31 December 2021:
Sir K Constantinou, OBE Mr. R Fleming, CSM Mr. S Davis
Mr. R Bradshaw
Mr. A Sam
Mr. S Brewis-Weston
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 112. 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 K3.995 million (2020: K4.582 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 25thday of February 2022.
Sir Kostas G. Constantinou, OBE
Chairman
Robin Fleming, CSM
Group Chief Executive Officer/Managing Director
60
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport
Statements of Comprehensive Income
for the Year Ended 31 December 2021
All amounts are expressed in K’000
Note
2021
2020
2021
2020
Consolidated
Bank
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 of 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
1,707,610
1,591,992
1,592,605
1,477,343
(106,675)
1,600,935
372,304
363,755
35,052
(144,980)
1,447,012
350,963
323,934
29,525
(90,095)
1,502,510
338,344
379,365
-
(126,059)
1,351,284
317,403
330,214
-
2,372,046
2,151,434
2,220,219
1,998,901
42,655
(888,842)
1,525,859
(450,641)
1,075,218
(201,273)
(808,326)
1,141,835
(335,617)
806,218
51,138
(813,227)
1,458,130
(421,675)
1,036,455
(189,011)
(736,669)
1,073,221
(313,769)
759,452
(40,680)
97,995
(22,425)
53,381
1,566
6,190
1,566
6,190
15
560
72
(18,914)
15
-
(38,539)
85,343
(20,844)
1,036,679
891,561
1,015,611
230.1
172.6
221.8
72
(20,055)
39,588
799,040
162.5
Comparative period amounts have been restated to conform to presentation in the current year.
The attached notes form an integral part of these Financial Statements.
61
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Statements of Financial Position
as at 31 December 2021
All amounts are expressed in K’000
Note
2021
2020
2021
2020
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
Aircraft 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
32
7
16
17
18
31
19
7
28
29
29
2,807,628
1,310,247
4,644,603
1,719,870
2,897,195
1,187,461
2,841,755
1,559,284
2,203,587
1,152,073
4,617,566
1,627,849
2,379,542
1,130,805
2,801,505
1,475,103
4,079,167
3,302,748
3,457,639
2,714,099
13,631,275
13,581,153
12,286,416
12,123,752
926,205
32,671
-
269,344
1,025,258
895,476
36,434
-
290,484
931,447
720,376
32,671
388,798
261,795
436,598
691,634
36,434
385,078
284,605
410,987
30,446,268
27,523,437
27,185,368
24,433,544
248,792
126,270
336,101
229,098
23,934,835
21,654,024
22,342,318
20,104,351
1,132,176
1,295,983
39,517
1,043,990
1,230,172
35,376
-
-
1,129,098
1,066,198
-
-
26,651,303
24,089,832
23,807,517
21,399,647
372,133
372,189
372,133
372,189
3,025,125
2,622,249
2,728,885
2,360,983
396,929
438,516
276,833
300,725
Equity attributable to the members of the company
3,794,187
3,432,954
3,377,851
3,033,897
Minority interests
Total shareholders’ equity
Total equity and liabilities
778
651
-
-
3,794,965
3,433,605
3,377,851
3,033,897
30,446,268
27,523,437
27,185,368
24,433,544
Comparative period amounts have been restated to conform to presentation in the current year.
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
62
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Statements of Changes in Shareholders’ Equity
for the Year Ended 31 December 2021
All amounts are expressed in K’000
Note
Share capital
Reserves
Retained
earnings
Minority
Interests
Total
Bank
Balance as at 1 January 2020
372,310
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
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 2021
Group
Balance as at 1 January 2020
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
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 2021
28
28
29
29
28
28
29
29
28
28
29
29
28
28
29
29
-
-
-
-
(121)
(121)
-
-
372,189
-
-
-
-
(56)
(56)
-
-
372,133
372,310
-
-
-
-
(121)
-
-
(121)
-
-
372,189
-
-
-
-
(56)
-
(56)
-
-
372,133
The attached notes form an integral part of these Financial Statements.
254,477
-
39,588
39,588
-
-
-
(1,032)
7,692
300,725
-
(20,844)
(20,844)
-
-
-
(7,457)
4,409
276,833
346,513
-
85,343
85,343
-
-
-
-
-
(1,032)
7,692
438,516
-
(38,539)
(38,539)
-
-
-
-
(7,457)
4,409
396,929
2,173,836
759,452
-
759,452
(565,354)
-
(565,354)
741
(7,692)
2,360,983
1,036,455
-
1,036,455
(672,802)
-
(672,802)
8,658
(4,409)
2,728,885
2,394,382
806,218
-
806,218
(569,191)
-
(2,209)
-
(571,400)
741
(7,692)
2,622,249
1,075,218
-
1,075,218
(676,293)
-
(298)
(676,591)
8,658
(4,409)
3,025,125
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,800,623
759,452
39,588
799,040
(565,354)
(121)
(565,475)
(291)
-
3,033,897
1,036,455
(20,844)
1,015,611
(672,802)
(56)
(672,858)
1,201
-
3,377,851
3,828
3,117,033
-
-
-
(164)
-
2,209
(5,222)
(3,177)
-
-
651
-
-
-
(171)
-
298
127
-
-
806,218
85,343
891,561
(569,355)
(121)
-
(5,222)
(574,698)
(291)
-
3,433,605
1,075,218
(38,539)
1,036,679
(676,464)
(56)
-
(676,520)
1,201
-
778
3,794,965
63
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Statements of Cash Flows
for the Year Ended 31 December 2021
All amounts are expressed in K’000
Note
2021
2020
2021
2020
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
Purchase of government securities
Expenditure on property, plant and equipment
Expenditure on software development costs
Proceeds from disposal of assets
Additional funding of subsidiaries
Net cash flow from/ (used in) investing activities
CASH FLOW FROM FINANCING ACTIVITIES
Share buyback
Dividends paid
Repayments of borrowings
Proceeds from borrowings
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
1,649,780
1,556,496
1,536,527
1,443,885
749,454
(78,340)
703,714
(89,307)
714,698
(67,455)
647,030
(71,615)
(781,764)
(892,724)
(707,787)
(762,016)
9
1,539,130
1,278,179
1,475,983
1,257,284
(70,847)
(448,960)
(153,926)
(371,177)
(175,272)
(115,902)
207,317
(39,982)
(165,713)
(42,115)
218,197
33,310
2,497,195
2,314,968
2,407,943
2,122,595
143,169
218,669
25,896
(36,312)
3,817,473
(347,021)
3,470,452
3,530,191
(372,872)
3,157,319
3,548,068
3,223,897
(328,294)
(346,003)
3,219,774
2,877,894
(2,573,109)
(1,502,663)
(2,531,151)
(1,462,073)
(170,886)
(57,650)
6,254
-
(63,945)
(46,530)
1,787
-
(161,369)
(57,650)
6,167
(3,720)
(45,994)
(46,330)
1,787
(6,815)
(2,795,391)
(1,611,351)
(2,747,723)
(1,559,425)
(56)
(676,464)
(3,396)
(121)
(569,355)
(113,418)
(56)
(121)
(672,802)
(565,354)
(3,396)
(113,418)
-
242,215
-
242,215
(679,916)
(440,679)
(676,254)
(436,678)
(4,855)
1,105,289
(204,203)
881,791
(84,448)
3,958,386
3,869,083
97,995
(57,487)
53,381
2,755,102
3,958,386
3,281,249
2,346,077
3,019,559
3,281,249
7
32
28
28
19
9
9
Comparative period amounts have been restated to conform to presentation in the current year.
The attached notes form an integral part of these Financial Statements.
64
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Notes to the Financial Statements
for the Year Ended 31 December 2021
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 Financial Statements where required, presents restated comparative
information for consistency with the current year’s presentation in the
Financial Statements. 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 BSP Financial Group Limited 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 2021
The following standards, amendments and interpretations to existing
standards became applicable for the first time during the accounting
period beginning 1 January 2021.
● Amendments to IFRS 4, IFRS 7, IFRS 9 and IFRS 16 Interest Rate
Benchmark Reform – Phase 2 (effective 1.1.21) - The Phase 2
amendments address issues that arise from the implementation of
the reforms, including the replacement of one benchmark with an
alternative one.
● Amendment to IFRS 4,‘Insurance contracts’ – Deferral of IFRS 9.These
amendments change the fixed date of the temporary exemption in
IFRS 4 from applying IFRS 9, Financial instrument until 1 January 2023.
The above changes did not have any material impact on the Group.
Standards, amendments and interpretations issued but not yet effective
for the year ended 31 December 2021 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 2022 or later periods,
but the entity has not early adopted them:
● Amendment to IFRS 16, ‘Leases’ – Covid-19 related rent concessions
(effective 1.4.21). On 31 March 2021, the IASB published an additional
amendment to extend the date of the practical expedient from 30 June
2021 to 30 June 2022
● 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 1.1.22).
- 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 profit or loss.
- Amendments to
liabilities and
contingent assets’ specify which costs a company includes when
assessing whether a contract will be loss-making.
‘Provisions, contingent
IAS 37,
- Annual improvements make minor amendments to IFRS 1, ‘First-time
Adoption of IFRS’, IFRS 9, ‘Financial instruments’, IAS 41, ‘Agriculture’
and the Illustrative Examples accompanying IFRS 16, ‘Leases’.
● Amendments to IAS 1, Presentation of Financial Statements on
classification of liabilities (effective 1.1.23). These narrow-scope
amendments to IAS 1 clarify that liabilities are classified as either
current or non-current, depending on the rights that exist at the end of
the reporting period. Classification is unaffected by the expectations of
the entity or events after the reporting date (for example, the receipt of
a waiver or a breach of covenant). The amendment also clarifies what
IAS 1 means when it refers to the ‘settlement’ of a liability. Narrow
scope amendments to IAS 1, Practice statement 2 and IAS 8 (effective
1.1.23). The amendments aim to improve accounting policy disclosures
and to help users of the Financial Statements to distinguish between
changes in accounting estimates and changes in accounting policies.
● Amendment to IAS 12 – Deferred tax related to assets and liabilities
arising from a single transaction (effective 1.1.23). These amendments
require companies to recognise deferred tax on transactions that, on
initial recognition, give rise to equal amounts of taxable and deductible
temporary differences.
●
IFRS 17 ‘Insurance contracts” (effective 1.1.23) replaces IFRS 4. IFRS
17 will fundamentally change the accounting by all entities that issue
insurance contracts and investment contracts with discretionary
participation features.
B. Consolidation
The Financial Statements incorporate the assets and liabilities of all
controlled entities of the Group as at 31 December 2021, 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; and
● 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.
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BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Notes to the Financial Statements
for the Year Ended 31 December 2021
C. Foreign currency
The areas involving significant estimates and judgments are:
The Financial Statements of the Group are presented in the currency of the
primary economic environment in which the entity operates (its functional
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.
● Estimation of current tax liability in the multiple tax jurisdictions - Note
7
● Estimated impairment of financial or non-financial assets - Note 12, 14,
15 and 22
● Estimated insurance liability - Note 31
● Estimation of fair value of financial and non-financial assets and
liabilities - Note 27
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 in Note 22
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
D. Critical accounting estimates and judgments
measuring ECL.
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.
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.
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BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Notes to the Financial Statements
for the Year Ended 31 December 2021
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, Lao 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 2021
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 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
PNG Bank
Offshore Banks
Non-Bank
Entities
Adjust Inter
Segments
Total
1,294,979
574,806
-
272,321
201,129
-
1,869,785
473,450
(661,440)
(210,212)
42,896
1,251,241
(372,548)
878,693
4,649
267,887
(63,629)
204,258
32,504
30,023
36,850
99,377
(19,973)
(4,890)
74,514
(14,464)
60,050
1,131
1,600,935
(69,899)
(1,798)
(70,566)
736,059
35,052
2,372,046
2,783
(888,842)
-
(67,783)
-
(67,783)
42,655
1,525,859
(450,641)
1,075,218
21,190,992
8,853,168
1,991,562
(1,589,454)
30,446,268
(18,427,128)
(7,693,650)
(1,474,118)
943,593
(26,651,303)
2,763,864
1,159,518
517,444
(645,861)
3,794,965
1,148,684
501,921
-
263,807
196,194
-
1,650,605
460,001
32,289
24,344
32,246
88,879
2,232
1,447,012
(47,562)
(2,721)
674,897
29,525
(48,051)
2,151,434
(587,232)
(146,472)
916,901
(274,985)
641,916
(207,639)
(18,755)
5,300
(808,326)
(48,845)
203,517
(50,191)
153,326
(5,956)
64,168
(10,441)
53,727
-
(201,273)
(42,751)
1,141,835
-
(335,617)
(42,751)
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
67
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Notes to the Financial Statements
for the Year Ended 31 December 2021
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.
Interest income
All amounts are expressed in K’000
Loans and receivables from customers1
Other financial assets - inscribed stock
Treasury bills
Central Bank bills
Cash and balances with Central Banks
Other
Less: Interest expense
Customer deposits
Other banks
Consolidated
Bank
2021
2020
2021
2020
1,135,812
1,199,823
1,020,538
1,084,444
333,512
228,191
245
5,599
4,251
220,328
163,332
-
6,138
2,371
332,679
227,877
245
6,983
4,283
219,956
162,287
-
8,005
2,651
1,707,610
1,591,992
1,592,605
1,477,343
97,279
9,396
106,675
136,688
8,292
144,980
79,604
10,491
90,095
116,387
9,672
126,059
1,600,935
1,447,012
1,502,510
1,351,284
1Group interest income includes K17.860m (Bank K15.123m) recognised on impaired loans (Stage 3) to customers, 2020: K20.511m (Bank K18.915m). The Group
takes up required provisions on such interest income as detailed in the accounting policy in note 15.
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BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Notes to the Financial Statements
for the Year Ended 31 December 2021
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, includes 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
2021
2020
2021
2020
190,169
19,784
126,271
36,080
372,304
325,679
7,255
30,821
363,755
178,512
19,320
116,514
36,617
350,963
288,203
7,503
28,228
323,934
172,482
17,351
123,718
24,793
338,344
292,485
7,255
79,625
379,365
163,186
18,185
112,572
23,460
317,403
260,181
7,503
62,530
330,214
1Foreign exchange related income includes gains and losses from spot and forward contracts and translated foreign currency assets and liabilities.
69
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Notes to the Financial Statements
for the Year Ended 31 December 2021
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 recognised 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 recognised 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
2021
2020
2021
2020
119,217
137,784
78,818
30,238
4,236
6,066
1,042
87,169
464,570
115,487
109,719
75,202
25,597
4,234
10,775
640
86,179
427,833
107,088
122,245
72,099
30,038
3,611
5,577
1,042
80,851
422,551
104,899
93,899
68,257
25,375
3,538
10,349
640
80,424
387,381
341,315
301,887
313,356
275,676
16,711
9,734
56,512
424,272
888,842
14,787
10,890
52,929
380,493
808,326
14,986
8,752
53,582
390,676
813,227
13,358
10,061
50,193
349,288
736,669
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
70
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Notes to the Financial Statements
for the Year Ended 31 December 2021
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, a 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 and reductions in provisions 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; and
● Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and
forecasts of future economic conditions.
Note 15 provides more detail of how the expected credit loss allowance is measured.
Impairment expense/(release) of 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 assets (note 14)
Consolidated
Bank
2021
2020
2021
2020
(60,391)
11,888
5,848
(42,655)
183,352
8,125
9,796
201,273
(68,792)
11,888
5,766
(51,138)
171,200
7,949
9,862
189,011
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 are 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 transactions with uncertain tax outcomes and
provisions are determined based on the expected outcomes.
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for the Year Ended 31 December 2021
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 recognised for tax purposes
Adjustment to prior year estimates
Tax (payable)/receivable
At 1 January
Income tax provision
Adjustment to prior year estimates
Other tax related items
Foreign tax paid
Tax payments made
At 31 December
Deferred tax balances are represented by the tax effect of the following items:
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
72
Consolidated
Bank
2021
2020
2021
2020
415,373
34,424
449,797
844
450,641
437,439
29,996
2,428
1,238
(21,304)
844
450,641
366,976
(36,156)
330,820
4,797
335,617
321,966
14,664
7,233
1,024
(14,067)
4,797
335,617
391,340
30,832
422,172
(497)
421,675
343,853
(32,452)
311,401
2,368
313,769
437,439
321,966
-
846
-
(16,113)
(497)
421,675
-
845
-
(11,410)
2,368
313,769
32,887
27,588
32,419
30,275
(415,373)
(366,976)
(391,340)
(343,853)
4,753
324
15,239
331,782
(30,388)
62,662
130,000
28,329
(1,725)
17,203
(138)
(459)
20,321
352,551
32,887
67,101
162,889
25,361
(1,156)
42,279
(288)
652
-
328,294
(30,263)
59,186
123,125
26,350
(2,141)
51,115
-
(6)
-
346,003
32,419
64,594
155,764
23,785
(1,213)
46,649
(36,435)
(65,333)
(23,195)
(23,300)
1,617
28,176
(957)
24,924
1,617
25,738
(957)
19,283
229,827
255,108
261,795
284,605
269,344
(39,517)
229,827
255,108
(34,424)
(5,597)
14,740
290,484
(35,376)
255,108
219,304
36,156
4,935
(5,287)
261,795
284,605
-
-
261,795
284,605
284,605
(30,832)
785
7,237
246,086
32,452
2,368
3,699
229,827
255,108
261,795
284,605
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Notes to the Financial Statements
for the Year Ended 31 December 2021
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
2021
2020
2021
2020
1,075,218
467,228
230.1
806,218
467,235
172.6
1,036,455
467,228
221.8
759,452
467,235
162.5
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. BSP Financial Group 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
2021
2020
2021
2020
Consolidated
Bank
Reconciliation of net profit after tax to operating cash flow before changes in
operating assets
Net profit after tax
Add: Tax expense
Profit before income tax
Major non cash amounts
Depreciation
Amortisation of computer development costs
Net (gain) on sale of fixed assets
Impairment on financial assets
Movement in payroll provisions
Impairment of fixed assets
Net changes in assets and liabilities
1,075,218
450,641
806,218
335,617
1,036,455
421,675
759,452
313,769
1,525,859
1,141,835
1,458,130
1,073,221
78,818
30,238
(1,137)
(42,655)
27,788
1,042
75,202
25,597
(707)
201,273
(3,795)
640
72,099
30,038
(996)
68,257
25,375
(587)
(51,138)
189,011
16,438
1,042
8,104
640
(80,823)
(161,866)
(49,630)
(106,737)
Operating cash flow before changes in operating assets & liabilities
1,539,130
1,278,179
1,475,983
1,257,284
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)
2,807,628
1,310,247
(248,792)
3,869,083
2,897,195
1,187,461
(126,270)
3,958,386
2,203,587
1,152,073
(336,101)
3,019,559
2,379,542
1,130,805
(229,098)
3,281,249
1The Group undertakes thorough compliance and due diligence reviews before entering into any correspondent banking relationships. Amounts due from
other banks includes deposits of K57.653m (2020: K51.609m) held with counter-party Banks that are not available for use by the Group.
73
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport
Notes to the Financial Statements
for the Year Ended 31 December 2021
Financial Instruments: Financial Assets
Accounting Policy
Recognition
Loans and receivables are recognised 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.
74
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.
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Notes to the Financial Statements
for the Year Ended 31 December 2021
Debt instruments at FVIS are measured at fair value with subsequent
changes in fair value recognised in the Statement of Comprehensive
Income.
Equity securities at FVIS are measured at fair value with subsequent changes
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.
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 Statements 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 cumulative gain or loss recognised in other comprehensive income is
not subsequently recognised in the Statement of Comprehensive Income
when the instrument is disposed.
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.
10. CASH AND OPERATING BALANCES WITH CENTRAL BANKS
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 fair value
At 31 December
Allowance for impairment
At 1 January
Provision for impairment
At 31 December
Consolidated
Bank
2021
2020
2021
2020
501,800
2,305,828
2,807,628
466,069
2,431,126
2,897,195
445,489
1,758,098
2,203,587
412,729
1,966,813
2,379,542
11,141
1,299,106
1,310,247
11,944
1,175,517
1,187,461
11,114
1,140,959
1,152,073
11,944
1,118,861
1,130,805
4,788,065
(123,824)
(27,727)
2,940,913
(91,413)
(15,839)
4,769,438
(124,321)
(27,551)
2,908,582
(91,414)
(15,663)
4,636,514
2,833,661
4,617,566
2,801,505
8,089
8,094
-
-
4,644,603
2,841,755
4,617,566
2,801,505
15,839
11,888
27,727
7,714
8,125
15,839
15,663
11,888
27,551
7,714
7,949
15,663
Comparative period amounts have been restated to conform to presentation in the current year.
75
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Notes to the Financial Statements
for the Year Ended 31 December 2021
13. CASH RESERVE REQUIREMENT WITH CENTRAL BANKS
The Bank and the Group comply 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 comply with this requirement on an ongoing basis. CRR requirements applicable for each jurisdiction at
balance date were: PNG 7% (2020: 7%), Fiji 10% (2020: 10%), Solomon Islands 5% (2020: 5%), Samoa 4.5% (2020: 4.5%), Tonga 10% (2020: 10%) and
Vanuatu 5.25% (2020: 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 for impairment
At 31 December
Consolidated
Bank
2021
2020
2021
2020
3,519,022
2,757,272
3,478,213
2,728,907
(20,814)
(14,966)
(20,574)
(14,808)
3,498,208
2,742,306
3,457,639
2,714,099
289,732
291,227
291,042
269,400
-
-
-
-
4,079,167
3,302,748
3,457,639
2,714,099
14,966
5,848
20,814
5,170
9,796
14,966
14,808
5,766
20,574
4,946
9,862
14,808
Comparative period amounts have been restated to conform to presentation in the current year.
15. LOANS AND RECEIVABLES FROM CUSTOMERS
Accounting Policy
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
2021
2020
2021
2020
714,477
225,578
812,271
278,813
651,803
193,699
737,484
246,595
10,485,919
10,415,188
9,742,639
9,569,147
2,819,504
2,813,399
2,365,799
2,350,019
111,342
105,193
-
-
Gross loans and receivables from customers net of reserved interest
14,356,820
14,424,864
12,953,940
12,903,245
Less allowance for losses on loans and receivables from customers
(725,545)
(843,711)
(667,524)
(779,493)
At 31 December
13,631,275
13,581,153
12,286,416
12,123,752
Comparative period amounts have been restated to conform to presentation in the current year.
The spread of the loans is detailed in the maturity analysis table in Note 23. The loans are well-diversified across various sectors and are further analysed
in Note 22. Allowance for losses includes K66.522m (Bank K59.823m), 2020: K50.082m (Bank K44.963m) provision taken up for interest recognised 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:
76
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Notes to the Financial Statements
for the Year Ended 31 December 2021
15. LOANS AND RECEIVABLES FROM CUSTOMERS (CONTINUED)
Lease financing (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
Consolidated
Bank
2021
2020
2021
2020
32,597
216,054
248,651
(1,771)
(21,302)
(23,073)
225,578
30,826
194,752
225,578
54,550
253,168
307,718
(2,290)
(26,615)
(28,905)
278,813
52,260
226,553
278,813
31,713
182,207
213,920
(1,720)
(18,501)
(20,221)
193,699
29,993
163,706
193,699
49,863
220,139
270,002
(2,115)
(21,292)
(23,407)
246,595
47,748
198,847
246,595
Allowance for Expected Credit Losses
risk since origination, a provision for 12 months ECL is recognised.
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:
•
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; and
• Credit commitments: as a provision
Measurement
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
Stage 3: Lifetime ECL – non-performing
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.
Collective and individual assessment
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.
77
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Notes to the Financial Statements
for the Year Ended 31 December 2021
15. LOANS AND RECEIVABLES FROM CUSTOMERS (CONTINUED)
Allowance for Expected Credit Losses (continued)
Accounting Policy (continued)
Off-Balance Sheet amounts
The Group does not apply the low credit risk exemption which assumes
investment grade facilities do not have a significant increase in credit risk.
Any off-balance sheet items, such as loan commitments, are considered for
impairment both on an individual and collective basis.
Probability weighting of each scenario.
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.
Critical accounting assumptions and estimates
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.
Significant increase in credit risk
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.
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.
• Base case scenario
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.
Forward looking macroeconomic information
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.
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.
The loss allowance recognised in the period is impacted by a variety of
factors, as described below and as detailed in the following table:
Customers in hardship arrangements are normally treated as an indication
of a significant increase in credit risk but the deferral of payments under
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.
78
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Notes to the Financial Statements
for the Year Ended 31 December 2021
15. LOANS AND RECEIVABLES FROM CUSTOMERS (CONTINUED)
All amounts are expressed in K’000
Provision for impairment
Movement in allowance for losses on loans and receivables
from customers:
Balance at 1 January
Net new and increased provisioning / (release of provisions)
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/(release of provisions)
Recoveries during the year
Net (write back) / write off
At 31 December
Consolidated
Bank
2021
2020
2021
2020
843,711
(59,354)
(58,812)
725,545
396,161
277,077
673,238
52,307
725,545
(113,369)
54,015
(59,354)
(61,922)
60,885
(60,391)
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
779,493
(64,795)
(47,174)
667,524
359,988
257,109
617,097
50,427
667,524
(109,247)
44,452
(64,795)
(60,398)
56,401
(68,792)
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
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; and
● 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 Group’s exposure and loss allowance is detailed in the following table:
All amounts are expressed in K’000
EAD - Loans and receivables from customers
Stage 1
Stage 2
Stage 3
Total
1 January 2020
Transfers to/(from)
Stage 1
Stage 2
Stage 3
Net financial assets originated
Total movement in EAD during 2020
31 December 2020
12,177,004
1,369,149
405,110
13,951,263
(1,705,836)
1,614,388
87,533
(156,282)
-
1,383
91,448
68,749
(1,383)
-
-
-
1,180,095
(681,158)
(25,336)
473,601
(438,208)
778,331
133,478
473,601
11,738,796
2,147,480
538,588
14,424,864
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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 2020
Transfers to/(from)
Stage 1
Stage 2
Stage 3
Net financial assets originated
Transfers between stages
Movements due to risk parameter and other changes
Total net P&L charge / (release) during 2020
Loans written off against provision/(write back of provision no longer
required)
31 December 2020
EAD - Loans and receivables from customers
1 January 2021
Transfers to/(from)
Stage 1
Stage 2
Stage 3
Net financial assets originated
Total movement in EAD during the year
31 December 2021
ECL – Loans and receivables from customers
1 January 2021
Transfers to/(from)
Stage 1
Stage 2
Stage 3
Net financial assets originated
Transfers between stages
187,748
242,184
223,299
653,231
(7,413)
11,647
-
5,216
(21,203)
106
2,197
9,556
(106)
32,425
(10,655)
(10,286)
(9,832)
(30,799)
(3,972)
59,922
58,110
91,496
21,195
27,682
50,238
-
-
-
11,484
71,285
54,993
137,762
-
-
(716)
(716)
183,776
333,680
272,821
790,277
11,738,796
2,147,480
538,588
14,424,864
(682,884)
641,103
79,563
(117,944)
-
327
41,781
38,381
(327)
-
-
-
860,463
(761,875)
(166,632)
257,142
(238,389)
(86,797)
(68,044)
(68,044)
11,995,938
1,909,091
451,791
14,356,820
183,776
333,680
272,821
790,277
(31,926)
7,518
-
31,217
(11,499)
56
709
3,981
(56)
-
-
-
7,906
(1,778)
41,166
47,294
12,083
(68,904)
14,983
(41,838)
Movements due to risk parameter and other changes
38,405
(104,373)
2,285
(63,683)
Total net P&L charge/ (release) during 2021
33,986
(155,281)
63,068
(58,227)
Loans written off against provision/(write back of provision no longer
required)
31 December 2021
-
-
217,762
178,399
(58,812)
277,077
(58,812)
673,238
Comparative period amounts have been restated to conform to presentation in the current year.
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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
Balance 1 January
2021
Stage 1
2020
Stage 1
Gross
exposure
Provisions
Gross
exposure
2,984,144
53,434
2,567,433
Increase/(decrease) in exposure to expected credit losses
300,192
(1,127)
416,711
Balance at 31 December
3,284,336
52,307
2,984,144
Provisions
47,373
6,061
53,434
Write-off policy
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
Intercompany account
Outstanding premiums
Prepayments
Accounts receivable
Accrued income
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
2021
2020
2021
2020
203,749
140,638
-
21,678
42,217
3,562
3,619
-
274,825
16,363
224,323
236,577
273,170
750,433
1,025,258
-
21,030
38,723
4,642
796
32,887
238,716
11,649
202,546
220,846
257,690
692,731
931,447
136,355
5,261
-
37,788
1,715
434
-
181,553
-
26,980
228,065
-
255,045
436,598
102,794
3,026
-
33,921
2,938
794
32,419
175,892
-
27,879
207,216
-
235,095
410,987
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Financial Instruments: Financial Liabilities
Accounting Policy
Recognition
Financial liabilities are recognised when an obligation arises.
Classification and subsequent measurement
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.
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
is denominated in, changes in the type of interest rate, new conversion
17. AMOUNT DUE TO OTHER BANKS
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.
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);
or
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 is
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.
All amounts are expressed in K’000
2021
2020
2021
2020
Consolidated
Bank
Vostro account balances
Interbank account balances
At 31 December
18. CUSTOMER DEPOSITS
On demand and short term deposits
Term deposits
At 31 December
116,048
132,744
248,792
57,529
68,741
126,270
106,783
229,318
336,101
76,185
152,913
229,098
21,183,205
17,990,094
20,249,666
17,097,544
2,751,630
3,663,930
2,092,652
3,006,807
23,934,835
21,654,024
22,342,318
20,104,351
The deposits are diversified across industries and regions with the maturity profile of deposits included in note 23.
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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
Provision for Income Tax
Items in transit and all other liabilities
Lease liability
Borrowings
Other provisions
At 31 December
Consolidated
Bank
2021
2020
2021
2020
25,003
20,108
3,746
143,832
192,689
151,782
30,388
183,765
265,262
245,614
226,483
29,144
23,894
2,146
151,491
206,675
104,891
-
254,549
209,006
245,614
209,437
-
-
-
-
-
74,135
30,263
334,442
235,070
245,614
209,574
-
-
-
-
-
70,801
-
377,252
177,185
245,614
195,346
1,295,983
1,230,172
1,129,098
1,066,198
20. CONTINGENT LIABILITIES AND COMMITMENTS
The primary purpose of credit related commitments is to ensure that funds
are available to a customer as required. Guarantees and standby letters
of credit, which represent irrevocable assurances that the bank will make
payments in the event that a customer cannot meet its obligations to third
parties, carry the same credit risk as loans. Cash requirements under
guarantees and standby letters of credit are considerably less than the
amount of the commitment because the Group does not generally expect
the third party to draw funds under the agreement.
Commitments to extend credit represent the unused portions of
authorisations to extend credit in the form of loans, guarantees or letters
of credit. With respect to credit risk on commitments to extend credit, the
Group is potentially exposed to loss in an amount equal to the total unused
commitments. However, the likely amount of loss, though not difficult
to quantify, is considerably less than the total unused commitments
since most commitments to extend credit are subject to customers
maintaining approved specific credit standards. While there is credit risk
associated with the remainder of commitments, the risk is considered
to be modest, since it results from the possibility of unused portions of
loan authorisations being drawn by the customer and, second, from these
drawings subsequently not being repaid as due. The total outstanding
contractual amount of commitments to extend does not necessarily
represent future cash requirements, since many of these commitments
will expire or terminate without being funded.
FASU formal warning
The Bank received a Formal Warning from the Papua New Guinea Financial
Analysis and Supervision Unit (FASU) under Section 100 of the Anti-Money
Laundering and Counter Terrorist Financing Act 2015 (the Act) on 12 July
2021. This warning, which was set out in a media release later that day,
referred to sanctions relating to the remediation of the Bank’s Anti-Money
Laundering (AML) and Counter Terrorist Financing (CTF) program and an
independent audit of the program.
BSP acknowledges that it failed to conduct effective enhanced customer
due diligence reviews and that there were compliance gaps in its AML/
CTF Program.
In response to FASU’s Formal Warning, BSP has amended its AML/CTF
Policy, conducted Training on the Criminal Code Act and delivered an
ECDD Plan to FASU by the date required. An External Auditor has also been
appointed under Section 10 of the AML/CTF Act for an initial six month
period. Its independent audit commenced on 15th November 2021.
Since FASU’s first onsite review of BSP in March 2018, BSP has committed to
and implemented various improvements, involving significant investment
in systems and personnel, to its AML/CTF Program. Improvements
undertaken by BSP include a revision of governance structures to give
Directors enhanced oversight over the Compliance and AML functions;
increased AML staffing resources; updated Risk Assessments and Policies;
implementation of and enhancements to transaction monitoring systems;
improved customer documentation and identification procedures and
a comprehensive AML/CTF training program for staff who support the
AML/CTF Program, as well as an awareness program for all its staff. The
Board also monitors the effectiveness of its AML and CTF program through
internal and external audit reviews where specific compliance issues and
weaknesses are brought to the attention of the Board.
As the audit is a work in progress, further compliance issues may be
identified and reported to FASU and additional uplifting and strengthening
of the AML/CTF program may be required. As the audit is ongoing there
may be further findings which may result in penalties or further remedial
action. Any potential penalties cannot be reliably estimated at this time
and accordingly no provision has been raised for this matter.
The Group operates in a number of regulated markets and is subject to
regulatory reviews and inquiries. The potential outcome and total costs
associated with these regulatory reviews and inquiries and the remediation
processes for any issues identified in the future remain uncertain.
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20. CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)
Off balance sheet financial instruments
All amounts are expressed in K’000
Letters of credit
Guarantees and indemnities issued
Commitments to extend credit
Consolidated
Bank
2021
2020
2021
2020
182,535
257,304
2,844,497
3,284,336
97,420
286,729
2,599,995
2,984,144
179,998
246,901
2,747,793
3,174,692
96,366
290,123
2,509,139
2,895,628
Commitments for capital expenditure
Amounts with firm commitments, and not reflected in the accounts
51,427
44,120
42,120
29,753
Legal Proceedings
A number of legal proceedings against the Group were outstanding as at 31 December 2021. For all litigation exposure where a loss is probable, an
appropriate provision has been made. Based on information available at 31 December 2021, the Group estimates a contingent liability of K24.0m (2020:
K17.7m) 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.
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 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 the
Credit Committee. The Credit Committee (reporting to the Board through
the Group 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.
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22. CREDIT RISK AND ASSET QUALITY (CONTINUED)
22.1 Credit risk (continued)
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 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.
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.
22.1.1 Credit risk measurement
Group Internal Scale
S&P Letter Grade
Description
a) 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
22.1.2 Expected credit loss measurement
1
2
3
4
5
6
7
8
9
10
11
12
13
14
BBB+
BBB
BBB-
BB+
BB
BB-
B+
B
B-
CCC+
CCC
CCC-
D-I
D-II
Standard Monitoring
Special Monitoring
Substandard
Doubtful
Loss
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 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:
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22. CREDIT RISK AND ASSET QUALITY (CONTINUED)
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 2021.
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).
•
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for the Year Ended 31 December 2021
22. CREDIT RISK AND ASSET QUALITY (CONTINUED)
22.1.2.3 Measuring ECL – Explanation of inputs, assumptions and estimation techniques (continued)
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 into current parameters are examples of such circumstances.
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 (%)
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 2021 are set out below. The scenarios “base”, “upside” and “downside” were
used for all portfolios.
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 (%)
Base
Upside
Downside
Base
Upside
Downside
Base
Upside
Downside
Base
Upside
Downside
Base
Upside
Downside
Base
Upside
Downside
2022
2.4%
2.5%
1.5%
-2.4%
-2.5%
-1.5%
2023
2.6%
3.1%
2.1%
-2.6%
-3.1%
-2.1%
-14.81%
-1.60%
-15.55%
-1.68%
-14.07%
-1.52%
-5.32%
-3.61%
-5.58%
-3.79%
-5.05%
-3.43%
2024
2.6%
3.1%
2.1%
-2.6%
-3.1%
-2.1%
-1.75%
-1.84%
-1.67%
-1.14%
-1.20%
-1.09%
2021
3.0%
3.2%
2.3%
-3.0%
-3.2%
-2.3%
10.15%
11.15%
9.15%
0.53%
0.55%
0.50%
-3.84%
-4.03%
-3.64%
10.00%
-1.57%
15.00%
The weightings assigned to each economic scenario at 31 December 2021 were as follows:
Scenario
Weight
Base
50%
Upside
10%
Downside
40%
2025
2.6%
3.1%
2.1%
-2.6%
-3.1%
-2.1%
-8.04%
-8.44%
-7.63%
-5.68%
-5.97%
-5.40%
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for the Year Ended 31 December 2021
22. CREDIT RISK AND ASSET QUALITY (CONTINUED)
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;
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; and
iii) Change in scenario weighting given the uncertainty surrounding the economic impact of COVID-19.
Set out below are the changes to the ECL as at 31 December 2021 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
(GDP growth rate assumptions tested at 75% and 110% for all 3 scenarios)
Change in proportion of downgrades
(Upside scenario increased from -2% to-7% (2020:-7%), downside scenario increased from 10% to 25%
All amounts are expressed in K’000
Change in Scenario weighting
2021
2020
[-25%]
[+10%]
[-25%]
[+10%]
57,558
(20,118)
37,287
(11,041)
[-7%]
[+25%]
[-7%]
[+20%]
(1,175)
6,589
(945)
8,533
2021
2020
(18,292)
(39,735)
(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
5,428
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)
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for the Year Ended 31 December 2021
22. CREDIT RISK AND ASSET QUALITY (CONTINUED)
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.
All amounts are expressed in K’000
2021
ECL staging
Credit grade
Stage 1
12-month
Standard monitoring
11,995,938
Special monitoring
Default
Gross carrying amount
Loss allowance
Net carrying amount
-
-
11,995,938
(217,762)
11,778,176
Stage 2
Lifetime
1,377,719
531,372
-
1,909,091
(178,399)
1,730,692
Stage 3
Lifetime
Total
2020
Total
-
-
451,791
451,791
(277,077)
174,714
13,373,657
13,411,914
531,372
451,791
14,356,820
(673,238)
13,683,582
474,362
538,588
14,424,864
(790,277)
13,634,587
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 total balance of investment securities measured at amortised cost K8,307.087 million (2020: K5,936.049 million) is classified as Stage 1 with a
credit grade of ‘standard monitoring’. Total loss allowance carried against this balance is K48.541 million (2020: 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
22.1.3.2 Collateral and other credit enhancements
2021
2020
291,227
269,400
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.
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for the Year Ended 31 December 2021
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:
31 December 2021
Consolidated
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
Total credit-impaired assets
31 December 2020
Gross
exposure
Impairment
allowance
Carrying
amount
Fair value of
collateral held
8,733
506
23,192
125,343
210,396
82,618
1,003
451,791
3,246
506
8,856
54,982
167,989
41,046
452
277,077
5,487
-
14,336
70,361
42,407
41,572
551
174,714
12,353
-
44,157
187,138
199,520
139,991
1,149
Total credit-impaired assets
538,588
272,821
265,767
Impairment allowance is assessed for each counterparty giving regard to collateral held for the respective exposure.
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Notes to the Financial Statements
for the Year Ended 31 December 2021
22. CREDIT RISK AND ASSET QUALITY (CONTINUED)
22.1.4 Credit Quality – Prudential guidelines
The Bank of Papua New Guinea has maintained its prudential standard for asset quality since October 2003. The standard specifies detailed criteria for
the classification of loans into various grades of default risk and corresponding loss provision levels as a consequence of those grades.
An analysis by credit quality of loans outstanding at 31 December 2021 is as follows:
31 December 2021
Consolidated
All amounts are expressed in K'000
Overdrafts
Term loans
Mortgages
Lease financing
Policy loans
Total
Neither past due nor impaired
643,066
9,589,325
2,323,926
208,964
111,166
12,876,447
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
Total gross loans and receivables from
customers
Less impairment provisions
Net loans and receivables from
customers
22.1.5 Credit related commitments
56,579
3,294
59,873
2,730
1,317
2,695
4,796
11,538
529,456
204,312
733,768
3,241
11,914
35,244
112,427
162,826
134,630
90,354
224,984
4,160
9,202
28,540
228,692
270,594
4,598
5,359
9,957
84
243
189
6,141
6,657
-
-
-
-
-
176
-
176
725,263
303,319
1,028,582
10,215
22,676
66,844
352,056
451,791
714,477
(40,711)
10,485,919
2,819,504
(613,916)
(64,791)
225,578
(6,127)
111,342
14,356,820
-
(725,545)
673,766
9,872,003
2,754,713
219,451
111,342
13,631,275
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.
Commitments to extend credit 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 2021
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
At 31 December
All amounts are expressed in K’000
Commerce, finance and other business
Private households
Government and public authorities
Agriculture
Forestry
Transport and communication
Manufacturing
Construction
Net loan portfolio balance
22.1.7 Loan segment concentration
Concentration by customer loan segments are as follows:
Consolidated
At 31 December
Corporate / Commercial
Government
Retail
Net loan portfolio balance
2021
6,753,328
3,359,516
691,294
286,697
6,950
1,142,933
393,782
996,775
%
50
25
5
2
-
8
3
7
2020
7,019,483
3,232,599
532,611
218,774
18,708
1,218,790
383,725
956,463
%
51
24
4
2
-
9
3
7
13,631,275
100
13,581,153
100
2021
8,010,986
2,257,732
3,362,557
%
59
16
25
2020
8,099,278
2,247,793
3,234,082
%
59
17
24
13,631,275
100
13,581,153
100
22.1.8 Impact of overlays on the provision for ECL
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
2021
421,338
27,130
448,468
2020
433,620
137,270
570,890
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for the Year Ended 31 December 2021
22. CREDIT RISK AND ASSET QUALITY (CONTINUED)
22.1.8.1 COVID-19 overlay
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 2021 is K27.130million
(2020: K137.270 million), with a number of loans in this category now
regraded and captured in the model.
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.
22.1.8.2 COVID-19 relief packages
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 continues to evolve, 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 its lending portfolios closely and
reassess 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.
Loans to customers under COVID-19 relief packages at 31 December 2021 total K1.312 billion (2020: K1.626 billion). These loans and the related
provision for ECL are as follows:
Consolidated
As at 31 December
All amounts are expressed in K’000
Stage 1
Stage 2
Stage 3
Total
Total Credit
Exposures
Expected Credit
Loss
Total Credit
Exposures
Expected Credit
Loss
2021
405,530
906,002
-
1,311,532
2021
6,305
97,584
-
103,889
2020
659,147
966,858
-
1,626,005
2020
48,021
44,003
-
92,024
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for the Year Ended 31 December 2021
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 2021
The maturity profile of material Assets and Liabilities as at 31 December 2021 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
As at 31 December 2021
All amounts are expressed in K'000
Assets
Cash and balances with Central Banks
Treasury and Central Bank bills
Amounts due from other banks
Loans and receivables from customers
Other financial assets
Total assets
Liabilities
Amounts due to other banks
Customer deposits
Lease liability
Other liabilities
Other provisions
Total liabilities
Net liquidity gap
As at 31 December 2020
Total assets
Total liabilities
Net liquidity gap
Up to 1 month
1 - 3 months
3 - 12 months
1 - 5 years
Over 5 years
Total
3,250,483
684,883
1,149,441
3,513,262
1,033,342
-
-
-
1,277,015
704,187
3,347,907
35,172
4,697
4,527,498
4,776,846
112,936
457,643
58,828
47,870
2,060,498
467,057
-
-
1,310,247
7,170,220
2,825,907
4,195,707
17,397,330
3,554,446
7,939,580
9,631,411
1,333,594
5,923,332
10,031,299
9,031,865
35,951,501
188,130
22,262,175
-
1,178,999
238,151
19,404
383,273
-
1,110
14
21,328
917,373
-
619,546
716
117
19,813
248,792
208,683
44,968
276,866
326
323,006
24,094,510
220,294
265,262
94,767
17,664
2,171,288
256,871
23,867,455
403,801
1,558,963
530,960
675,544
27,036,723
(14,236,044)
929,793
4,364,369
9,500,339
8,356,321
8,914,778
10,106,823
1,352,859
4,834,390
7,947,774
8,260,835
32,502,681
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
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for the Year Ended 31 December 2021
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
As at 31 December 2021
All amounts are expressed in K'000
PGK
FJD
SBD
USD
Other
Total
Assets
Cash and balances with Central Banks
Treasury and Central Bank bills
Amounts due from other banks
2,035,632
4,553,645
117,035
1,076,401
54,352
349,727
Loans and receivables from customers
8,452,097
3,248,475
3,467,871
1,222,302
571,449
762,177
Other financial assets
Other assets
Total assets
Liabilities
719,126
17,658
62,458
474,271
46
83,213
3,520
-
409,899
309,443
-
84
692,819
18,948
4,527,498
4,644,603
371,128
1,310,247
1,146,989
13,631,275
39,801
4,079,167
185,702
2,253,478
19,848,582
6,062,581
1,356,772
722,946
2,455,387
30,446,268
Amounts due to other banks
(117,525)
(120,942)
(8,726)
-
(1,599)
(248,792)
Customer Deposits
Other liabilities
Total liabilities
(16,419,608)
(3,630,662)
(1,014,388)
(516,718)
(2,353,459)
(23,934,835)
(820,072)
(1,439,406)
(50,007)
(4,757)
(153,434)
(2,467,676)
(17,357,205)
(5,191,010)
(1,073,121)
(521,475)
(2,508,492)
(26,651,303)
Net on-balance sheet position
2,491,377
871,571
283,651
201,471
(53,105)
3,794,965
Off-balance sheet position
Credit commitments
54,206
-
-
(182,838)
2,412,952
739,143
30,079
-
120,230
102,162
(8,402)
3,284,336
31 December 2020
Total Assets
Total Liabilities
16,937,596
5,992,933
1,240,576
916,927
2,435,405
27,523,437
(14,752,933)
(5,165,406)
(967,160)
(815,143)
(2,389,190)
(24,089,832)
Net on-balance sheet position
2,184,663
827,527
273,416
101,784
46,215
3,433,605
Off-balance sheet position
25,393
-
-
(155,724)
Credit commitments
2,267,067
556,094
46,965
-
148,925
114,018
18,594
2,984,144
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for the Year Ended 31 December 2021
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
2021
2020
Impact on profit or loss
Impact on equity
Impact on profit or loss
Impact on equity
USD strengthening by 5% (2020 – 5%)
USD dollar weakening by 15% (2020 – 15%)
AUD strengthening by 5% (2020 – 5%)
AUD dollar weakening by 15% (2020 – 15%)
5,035
(1,359)
(215)
58
5,035
(1,359)
(215)
58
7,664
(2,068)
(399)
108
7,664
(2,068)
(399)
108
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 2021 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 2021
USD
AUD
EURO
GBP
JPY
Other
Total
Selling
Buying
As at 31 December 2020
Selling
Buying
FCY
Kina
FCY
Kina
FCY
Kina
FCY
Kina
(52,957)
(185,819)
848
57,186
(6,295)
(16,031)
30,946
78,804
(193)
(764)
140
556
USD
AUD
EURO
GBP
(47,232)
(165,728)
2,851
10,004
(3,567)
(9,641)
18,660
50,438
(1,069)
(4,610)
30
129
(10)
(47)
-
-
(5)
(22)
40
191
(86,884)
(2,648)
64,500
1,966
(530)
(1,861)
17,173
60,256
-
(207,170)
-
198,768
JPY
Other
Total
(86,102)
(2,929)
60,100
(844)
(2,962)
29,780
-
(185,892)
-
2,045
104,491
167,298
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 Liability 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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BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Notes to the Financial Statements
for the Year Ended 31 December 2021
26. INTEREST RATE RISK (CONTINUED)
Interest sensitivity of assets, liabilities and off balance sheet items – re-pricing analysis
Up to 1 month
1-3 months
3-12 months
1-5 years
Over 5 years
Non-interest
bearing
Consolidated
As at 31 December 2021
All amounts are expressed in K'000
Assets
Cash and Balances with Central Banks
assets
Treasury and Central Bank bills
Amounts due from other banks
Cash Reserve Requirement with Central
Banks
737,150
688,364
727,872
662,779
117,300
-
1
Loans and receivables from customers
11,471,141
106,614
Other Financial Assets
Other assets
Total assets
Liabilities
Amounts due to other banks
Customer deposits
Other liabilities
Other provisions
Total liabilities
Interest sensitivity gap
922,000
45,964
14,592,491
134,345
5,865,025
5,022
1,108
6,005,500
8,586,991
-
75,051
961,745
19,396
563,839
1,069
-
584,304
377,441
-
-
-
-
2,070,478
3,281,568
7,194
4,698
2,167
9
423,068
107,470
2,251
-
18
-
17
1,453,760
132,222
1,856,720
1,417,300
-
-
3,816,533
3,317,692
1,554,237
21,233
1,201,162
95
654
-
231,535
111,986
-
-
156
116,155
-
-
462,908
1,719,825
44,470
-
1,905,889
6,203,570
73,818
16,073,118
1,936,961
294,626
1,223,144
343,521
116,311
18,378,523
2,593,389
2,974,171
1,437,926
(12,174,953)
Interest sensitivity of assets, liabilities and off balance sheet items – re-pricing analysis
As at 31 December 2020
Total assets
Total liabilities
Interest sensitivity gap
Up to 1 month
1-3 months
3-12 months
1-5 years
Over 5 years
13,327,100
1,062,329
8,579,665
4,747,435
890,318
172,011
2,608,931
1,399,893
1,584,862
2,467,480
221,529
85,527
1,209,038
1,363,333
2,381,953
Non-interest
bearing
6,472,735
12,912,900
(6,440,165)
Given the profile of assets and liabilities as at 31 December 2021 and prevailing rates of interest, a 100bps increase in market rates will result in a K43.2
million increase in net interest income, whilst a 100bps decrease in rates will result in a K61.3 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 2021
27. FAIR VALUES OF FINANCIAL AND NON-FINANCIAL ASSETS AND LIABILITIES (CONTINUED)
Consolidated
As at 31 December 2021
All amounts are expressed in K’000
a) Financial assets
Equity security
Treasury bills
Government inscribed stock
Non-financial assets
Land & buildings
Investment properties
Aircraft subject to operating lease
Total assets
b) Financial liabilities
Policy liability
Total liabilities
Level 1
Level 2
Level 3
Total
-
-
-
-
-
-
-
-
-
286,520
8,089
289,732
-
-
-
584,341
4,707
-
-
524,920
273,170
32,671
835,468
291,227
8,089
289,732
524,920
273,170
32,671
1,419,809
-
-
(1,132,176)
(1,132,176)
(1,132,176)
(1,132,176)
As at 31 December 2020
Level 1
Level 2
Level 3
Total
a) Financial assets
Equity security
Treasury bills
Government inscribed stock
Non-financial assets
Land & buildings
Investment properties
Aircraft 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
- Purchases
- Disposals
- Translation movements
Closing balance
98
-
-
-
-
-
-
-
-
-
265,727
8,094
291,042
-
-
-
564,863
3,673
-
-
501,190
257,690
36,434
798,987
269,400
8,094
291,042
501,190
257,690
36,434
1,363,850
-
-
(1,043,990)
(1,043,990)
(1,043,990)
(1,043,990)
2021
798,987
(28,315)
18,088
61,942
(4,045)
(11,189)
835,468
2020
745,358
(39,463)
(2,480)
92,081
(16,655)
20,146
798,987
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport
As at 31 December 2020
Level 1
Level 2
Level 3
Total
Consolidated
As at 31 December 2021
All amounts are expressed in K’000
a) Financial assets
Equity security
Treasury bills
Government inscribed stock
Non-financial assets
Land & buildings
Investment properties
Aircraft subject to operating lease
Total assets
b) Financial liabilities
Policy liability
Total liabilities
a) Financial assets
Equity security
Treasury bills
Government inscribed stock
Non-financial assets
Land & buildings
Investment properties
Aircraft 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
- Purchases
- Disposals
- Translation movements
Closing balance
Financial asset at fair value through profit & loss
Notes to the Financial Statements
for the Year Ended 31 December 2021
Level 1
Level 2
Level 3
Total
27. FAIR VALUES OF FINANCIAL AND NON-FINANCIAL ASSETS AND LIABILITIES (CONTINUED)
There were no changes in valuation technique for Level 3 recurring fair value measurements during the year ended 31 December 2021. 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 2021 accounts given the volatile economic climate driven by COVID-19.
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
Number of shares
Book value
(1,132,176)
(1,132,176)
(1,132,176)
(1,132,176)
At 1 January 2020
Share buyback
At December 2020/1 January 2021
Share buyback
At 31 December 2021
467,240
(11)
467,229
(3)
467,226
372,310
(121)
372,189
(56)
372,133
In May 2014, the Directors introduced a share-buyback scheme of up to K15m. The share-buyback commenced in July 2014 and was extended to such
time when the allocated K15m buyback was utilised, or if the Board wishes, any time before that. As at 31 December 2021, a total of K9.369m 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.
(1,043,990)
(1,043,990)
(1,043,990)
(1,043,990)
All amounts are expressed in K’000
Dividends paid on ordinary shares
Consolidated
Bank
2021
2020
2021
2020
Interim ordinary dividend (2021: 39 toea; 2020: 25 toea)
Final ordinary dividend (2020: 105 toea; 2019: 96 toea)
183,388
493,076
676,464
117,604
451,751
569,355
182,218
490,584
672,802
116,808
448,546
565,354
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
286,520
8,089
289,732
584,341
265,727
8,094
291,042
564,863
-
-
-
-
-
-
-
-
-
-
4,707
524,920
273,170
32,671
835,468
-
-
-
-
3,673
501,190
257,690
36,434
798,987
2021
798,987
(28,315)
18,088
61,942
(4,045)
(11,189)
835,468
291,227
8,089
289,732
524,920
273,170
32,671
1,419,809
269,400
8,094
291,042
501,190
257,690
36,434
1,363,850
2020
745,358
(39,463)
(2,480)
92,081
(16,655)
20,146
798,987
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Notes to the Financial Statements
for the Year Ended 31 December 2021
29. RETAINED EARNINGS AND OTHER RESERVES
Retained earnings
All amounts are expressed in K’000
2021
2020
2021
2020
Consolidated
Bank
2,622,249
1,075,218
(492,905)
(183,388)
8,658
(4,409)
(298)
2,394,382
806,218
(451,587)
(117,604)
741
(7,692)
(2,209)
2,360,983
1,036,455
(490,584)
(182,218)
8,658
(4,409)
-
2,173,836
759,452
(448,546)
(116,808)
741
(7,692)
-
3,025,125
2,622,249
2,728,885
2,360,983
123,732
129,063
109,937
115,828
635
21,578
56,691
194,293
396,929
129,063
560
(7,457)
1,566
123,732
635
635
52,267
4,409
15
56,691
234,973
(40,680)
194,293
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
-
56,691
109,570
276,833
115,828
-
(7,457)
1,566
109,937
635
635
52,267
4,409
15
56,691
131,995
(22,425)
109,570
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
At 1 January
Net profit for the year
Final dividends paid
Interim dividends paid
Disposal of assets – asset revaluation
BSP Life policy reserve
Gain attributable to minority interest
At 31 December
Other reserves
Asset revaluation reserve
Capital reserve
Equity component of Fiji Class Shares
Statutory insurance reserve
Foreign currency translation reserve
At 31 December
Movement in reserves for the year:
Asset revaluation reserve
At 1 January
Asset revaluation increment/(decrement)
Transfer asset revaluation reserve to retained earnings
Deferred tax on disposal of assets
At 31 December
Capital reserve
At 1 January
At 31 December
Statutory insurance reserve
At 1 January
BSP Life policy reserve
Fiji Government green bond revaluation
At 31 December
Foreign currency translation reserve
At 1 January
Movement during the year
At 31 December
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for the Year Ended 31 December 2021
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 a 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 Lao 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 2021, 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
2021
2020
2021
2020
4,527,498
4,456,479
99,563
95,677
13,530,285
13,506,660
10,732,616
10,824,914
8,733,145
3,655,340
3,287,550
6,083,231
3,477,067
2,986,994
243,305
2,167,637
226,357
229,235
1,978,591
242,027
33,733,818
30,510,431
13,469,478
13,370,444
Capital (K’000)
Capital Adequacy Ratio
2021
2020
2021
2020
3,164,663
3,457,797
2,787,626
3,095,927
23.5%
25.7%
10.6%
20.8%
23.2%
10.3%
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%.
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for the Year Ended 31 December 2021
Group Structure
31. INSURANCE
Accounting Policy
Standards, amendments and interpretations issued but not yet effective
for the year ended 31 December 2021 or adopted early
IFRS 17 ‘Insurance contracts” (effective 1.1.23) replaces IFRS 4. IFRS 17 will
fundamentally change the accounting by all entities that issue insurance
contracts and
investment contracts with discretionary participation
features. The standard introduces substantial changes in the presentation
of the Financial Statements and disclosures introducing new balance sheet
and income statement line items and increased disclosure requirements
compared with existing reporting.
It introduces a model that measures the liability for groups of contracts
using three explicit components. Firstly the Group’s estimates of the present
value of future cash flows that are expected to rise over the duration of the
group of contracts. The cash flow estimate is based on the best estimate
assumption, which is neither conservative nor optimistic. Secondly, an
explicit risk adjustment has been introduced. This is compensation to
the shareholder for taking on the non-financial risk associated with an
insurance contract. The final component of the liability is the present value
of future shareholder profit; this is termed the contractual service margin.
The insurance liability changes over the term of the Group of contracts
as service is provided. The Profit or Loss of the Group of contracts is
categorised under Insurance Service Results, representing the profit
from managing insurance risk, and Net Investment Result, similarly from
managing investment-related risk.
The Group continues to assess the impact and formulate the changes
required for IFRS 17 as well as the impact of the limited amendments on
the implementation to date. As of 31 December 2021, it was not practicable
to quantify the potential impact on the Group’s financial position or
performance once these standards are adopted.
Medical and Life Insurance Business
The Group’s consolidated Financial Statements include the assets, liabilities,
income and expenses of the life and medical insurance businesses. The
Group’s Insurance business is made up of Life Insurance Contracts, Medical
Insurance and Term Life Insurance.
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 plus
a risk margin from 2021 for BSPHC 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 beneficiaries. 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 plus a risk margin for BSPHC.
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).
Long Term Insurance Contracts
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 Group’s life and general insurance entities will be adopting IFRS 17
‘Insurance contracts” (effective 1 January 2023), replacing IFRS 4.
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 Medical and Term Life policies sold and
underwritten by BSP Health Care (Fiji) Limited (BSPHC) 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 or 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.
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.
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for the Year Ended 31 December 2021
31. INSURANCE (CONTINUED)
(b) Methods and Assumptions
(v) Rates of Discontinuance
Key assumptions used in determining the Policy Liabilities for policies for
the insurance business are as follows:
PNG Pricing assumptions are used for the incidence of withdrawal and
discontinuance which vary by duration.
(i) Discount Rates
For BSP Life (Fiji) 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 2021 this was 4.423% per annum. For contracts without DPF
and Accident Business, the Fiji Insurance business at 31 December 2021
used a rate of 3.16% per annum. The pricing rates were used given market
subjectivity. For PNG life insurance business at 31 December 2021 this was
5.95%.
ii) Investment and Maintenance Expenses
Future maintenance and investment expenses are based on the budgeted
expenses. Future inflation has been assumed to be 3.50% per annum for
Fiji and 4.00% per annum for PNG life insurance for determining future
expenses.
iii) Taxation
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 businesses.
(iv) Mortality and Morbidity
The determination of the liabilities under long-term insurance contracts
is dependent on estimates made by 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. BSP Life (Fiji)
uses projected future rates of mortality for insured lives based on the Fiji
Mortality Statistics table FJ90-94 Male, modified for local experience. The
estimated number of deaths determines the value of the benefit payments.
The main source of uncertainty is that epidemics and wide-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.
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.
For BSP Life (Fiji), best estimate assumptions for the incidence of withdrawal
and discontinuance are used which vary by product and duration and are
based on experience which is reviewed regularly. Rates used in 2021 were
the same as 2020 rates.
(vi) Basis of Calculation of Surrender Values
For the PNG and Fiji 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
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 netted off against claim expenses in the profit
and loss. 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.
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Notes to the Financial Statements
for the Year Ended 31 December 2021
31. INSURANCE (CONTINUED)
All amounts are expressed in K’000
Net insurance premium income
Outward reinsurance expense
Net premium income
Investment income
Other income
Total operating income
Consolidated
2021
2020
228,911
(4,254)
224,657
189,907
3,795
418,359
199,172
(4,142)
195,030
220,666
995
416,691
Claims, surrenders and maturities
(119,946)
(121,396)
Claim recoveries
Net claims incurred
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
Profit after Income tax expense
1,195
(118,751)
(16,258)
(118,420)
(628)
(147,797)
(283,103)
18,547
35,052
(10,605)
24,447
194
(121,202)
(15,776)
(74,324)
(564)
(148,765)
(239,429)
(26,535)
29,525
(6,642)
22,883
The balance sheets as at 31 December 2021 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 2021
Consolidated 2020
Assets
Cash and Cash Equivalents
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
151,172
369,265
396,642
326,614
78,490
28,380
179,552
128,709
24,260
152,969
68,835
74,276
60,710
13,469
438,100
470,918
387,324
91,959
338,148
65,754
395,671
77,751
303,052
59,116
76,863
15,042
403,902
473,422
362,168
91,905
1,322,183
245,670
1,567,853
1,242,443
241,923
1,484,366
1,132,176
122,372
1,254,548
67,635
67,635
-
1,132,176
1,043,990
-
21,460
143,832
127,170
24,321
1,043,990
151,491
21,460
1,276,008
1,171,160
24,321
1,195,481
224,210
291,845
71,283
217,602
288,885
224,210
291,845
71,283
217,602
288,885
Total equity and liabilities
1,322,183
245,670
1,567,853
1,242,443
241,923
1,484,366
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for the Year Ended 31 December 2021
31. INSURANCE (CONTINUED)
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
Consolidated
2021
2020
1,043,990
890,147
(32,579)
118,420
2,345
73,433
74,324
6,086
1,132,176
1,043,990
Insurance reserves are maintained in accordance with levels prescribed by the Regulators.
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.
Insurance Risk
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
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
● To use reinsurance as a component of insurance risk management
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
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BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Notes to the Financial Statements
for the Year Ended 31 December 2021
31. INSURANCE (CONTINUED)
Insurance Risk (continued)
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 BSP Life (Fiji)
business is FJD 6.7m of which FJD 6.4m is reinsured (2020: FJD 6.8m
of which FJD 6.5m is reinsured). This relates to life insurance lines.
For BSP Life PNG, the largest single exposure is K12.5m of which
K12.4m is reinsured (2020: K10.4m of which K10.3m was reinsured).
The largest single lump sum exposure for the health insurance
business under BSP Life (Fiji) is FJD8.1m, which is fully reinsured.
The largest single net exposure is FJD 620k. This relates to health
insurance lines.
32. INVESTMENT IN SUBSIDIARIES
-
-
Geographic concentrations due to employee Company schemes.
The largest single scheme exposure for BSP Life (Fiji) is FJD 75.2m, of
which FJD 38.2m is reinsured. BSP Life (PNG) participates in a Term
Life reinsurance program.
The largest single group exposure across various locations for PNG
Life is K606m of which K295m is reinsured (2020: K552m of which
K248m was reinsured).
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.
Principal
activity
Place of incorporation
and operation
Balance of investment
Ownership %
2021
2020
PNG
Fiji
PNG
Fiji
PNG
Tonga
Samoa
Vanuatu
100%
100%
100%
100%
100%
100%
98.7%
100%
2,448
87,599
25,000
371
93,038
71,610
70,712
38,020
2,448
87,599
25,000
371
89,318
71,610
70,712
38,020
388,798
385,078
385,078
3,720
388,798
378,263
6,815
385,078
Name of subsidiary
BSP Capital Limited
BSP Life (Fiji) Limited
BSP Life (PNG) Limited
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
106
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for the Year Ended 31 December 2021
33. INVESTMENT IN JOINT VENTURES
Name of Joint Venture
Suva Central Ltd
Richmond Ltd
BSP Finance Cambodia Plc
BSP Finance Lao
Platform Pacific Ltd
Principal
activity
Place of incorporation
and operation
Property rental
Hotel operations
Asset financing
Asset financing
Digital solutions
Fiji
Fiji
Cambodia
Lao
PNG
Ownership %
2021
50%*
2020
50%*
61.3%**, 50%***
61.3%**, 50%***
50%*
50%*
50%*
50%*
50%*
50%*
The investments above are accounted for using the equity method.
* Both ownership and voting power held, ** ownership, *** voting power held.
All amounts are expressed in K’000
Joint Ventures
Investment in Joint Ventures
New investment during the year
Translation movement
Share of profit/(loss) for the year
Net investment in associate
Summarised financial information of Joint Ventures:
Total assets
Total liabilities
Net assets
Share of Profits
Group fair value alignment
Share of profit in Group
Consolidated
Bank
2021
2020
2021
2020
202,546
3,962
(5,624)
23,439
224,323
625,798
(370,290)
255,508
(2,228)
25,667
23,439
202,040
9,814
11,655
(20,963)
202,546
569,102
(315,564)
253,538
(1,434)
(19,529)
(20,963)
27,879
243
(943)
(199)
26,980
98,549
(44,609)
53,940
(199)
-
(199)
20,787
3,000
1,952
2,140
27,879
96,685
(43,184)
53,501
2,140
-
2,140
107
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Notes to the Financial Statements
for the Year Ended 31 December 2021
Other
34. 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.
35. 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 2021, 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
2021
2020
27,299
5,720
33,019
12
638,794
85,169
24,770
1,646
(121,521)
-
628,858
45,220
(17,921)
27,299
7
914,468
173,405
22,358
2,379
(160,040)
(313,776)
638,794
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 2021, staff account balances were as follows:
Housing loans
Other loans
Cheque accounts
Savings accounts
108
204,659
69,045
273,704
5,717
12,380
18,097
204,294
78,093
282,387
6,159
15,671
21,830
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Notes to the Financial Statements
for the Year Ended 31 December 2021
36. DIRECTORS AND EXECUTIVE REMUNERATION
Directors’ remuneration
Directors of the company received remuneration including benefits during 2021 as detailed below:
All amounts are expressed in Kina
Total remuneration
Name of Director
Sir K. Constantinou, OBE
R. Fleming, CSM*
G. Robb, OAM
S Brewis-Weston
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
Appointed/
(Resigned)
2021
Bank
2021
Subsidiaries
2021
Total
2020
Total
561,304
300,000
861,304
861,304
6/7
7/7
1/1
6/6
7/7
-
7/7
7/7
7/7
7/7
7/7
7/7
-
-
(Apr 2021)
Apr 2021
-
-
225,326
247,989
343,152
(Jun 2020)
-
-
-
-
-
343,152
305,652
330,652
318,152
318,152
305,652
-
-
-
60,000
-
-
75,000
-
-
-
-
-
-
225,326
460,027
247,989
403,152
-
343,152
380,652
330,652
318,152
318,152
305,652
-
403,152
259,239
333,777
365,652
330,652
318,152
239,339
40,400
3,299,183
435,000
3,734,183
4,500,000
3,611,694
4,500,000
* Managing Director / Group 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 2021 were:
Robin Fleming, CSM
Nuni Kulu
Hari Rabura
Nilson Singh
Frank van der Poll
Peter Beswick
Andy Roberts
Gheno Minia
Ronesh Dayal
Rohan George
Daniel Faunt
Mary Johns
Michael Hallinan
Kili Tambua
Vandhna Narayan
All amounts are expressed in K’000
Year
2021 executive remuneration
2020 executive remuneration
Salary
18,766
16,016
Short term
incentive
Value of
benefits
Long term
incentive
Leave
encashment
Final
entitlements1
6,109
2,213
1,456
1,466
7,151
-
99
97
-
2,037
Total
33,581
21,829
1Final entitlements paid were for executives who exited the Bank in 2020 and constitutes statutory leave payouts.
109
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Notes to the Financial Statements
for the Year Ended 31 December 2021
36. DIRECTORS AND EXECUTIVE REMUNERATION (CONTINUED)
Executive remuneration (continued)
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
2021
No.
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
530 – 540
540 – 550
95
87
71
63
48
37
28
26
19
19
18
13
15
13
12
11
7
7
6
7
3
4
6
3
4
4
3
3
6
3
8
1
4
3
2
2
5
4
4
4
4
3
2
-
3
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
2
4
Remuneration
K’000
2021
No.
2020
No.
Remuneration
K’000
2021
No.
2020
No.
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
830 – 840
840 – 850
850 – 860
860 – 870
870 – 880
880 – 890
890 – 900
900 – 910
910 – 920
930 – 940
950 – 960
960 – 970
970 – 980
980 – 990
990 – 1000
1010 – 1020
1030 – 1040
1040 – 1050
1050 – 1060
3
1
1
2
2
1
2
2
1
1
1
2
2
-
2
3
2
-
1
1
-
1
1
-
2
-
1
-
-
-
3
2
1
2
-
1
1
1
1
2
-
4
-
1
-
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
-
1
-
2
1060 – 1070
1070 – 1080
1080 – 1090
1090 – 1100
1100 – 1110
1110 – 1120
1130 – 1140
1140 – 1150
1150 – 1160
1170 – 1180
1190 – 1200
1210 – 1220
1220 – 1230
1230 – 1240
1240 – 1250
1250 – 1260
1260 – 1270
1270 – 1280
1320 – 1330
1340 - 1350
1350 – 1360
1360 – 1370
1370 – 1380
1380 – 1390
1390 – 1400
1400 – 1410
1410 – 1420
1420 – 1430
1480 – 1490
1490 - 1500
1500 – 1510
1530 – 1540
1540 – 1550
1610 – 1620
1670 – 1680
1730 – 1740
1820 – 1830
1980 – 1990
2230 – 2240
2240 – 2250
2270 – 2280
2310 – 2320
2590 – 2600
2780 – 2790
4840 – 4850
8610 – 8620
-
1
-
1
-
-
2
-
1
1
-
1
1
1
-
-
1
1
1
1
-
-
-
1
-
-
-
-
-
1
1
1
1
-
1
1
1
-
1
-
2
1
1
1
-
1
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
-
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.
Total
772
756
110
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Notes to the Financial Statements
for the Year Ended 31 December 2021
37. REMUNERATION OF AUDITOR
All amounts are expressed in K’000
Financial statement audits
Other services
Consolidated
Bank
2021
2020
2021
2020
5,025
710
5,735
5,054
434
5,488
4,031
667
4,698
3,749
434
4,183
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.
38. EVENTS OCCURRING AFTER BALANCE SHEET DATE
On 25 November 2021, the Minister for Treasury announced the introduction of a ‘Market Concentration Levy’ as part of Papua New Guinea’s 2022
national budget, effective 1 January 2022. The levy applies to any bank in PNG that has total assets that exceed 40% of total bank assets as published by
the Bank of PNG. BSP is the only PNG commercial bank that has more than 40% of the total bank assets. As reported in PNG’s 2022 budget the levy is a flat
amount, the calculation of which is not linked to profit or balance sheet size and will result in BSP paying an additional K190 million in levies from 2022.
The Income Tax (2022 budget) (Amendment) Bill which included this levy was certified by the Speaker of the National Parliament on 7 February 2022 and
was the final legal requirement to enact the Bill.
The levy is non-deductible for tax purposes and will have a direct impact of reducing BSP’s net profit after tax by K190 million from 2022 onwards. The full
amount of the levy will be recognised in the Statement of Comprehensive Income at the time BSP’s year to date net profit after tax exceeds K190 million.
It is expected therefore that the full levy will be recognised in the first half of 2022, which will have a material impact on the 6 month results ending 30
June 2022.
111
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Independent auditor’s report
To the shareholders of BSP Financial Group Limited
Report on the audit of the financial statements of the Bank and the Group
Our opinion
We have audited the financial statements of BSP Financial Group Limited (the Bank), which comprise the statements of financial position
as at 31 December 2021, 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 2021
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 2021, 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
112
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Materiality
Audit scope
Key audit matters
• Amongst other relevant topics, we
communicated the following key
audit matters to the Board Audit &
Compliance Committee:
• Loan loss provisioning
• IT systems and controls
• These matters are further described
in the Key audit matters section of
our report.
• 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 are 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, 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.
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.
113
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Key audit matter
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 and asset
quality
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 and forward
looking macroeconomic factors
The evolving COVID 19 pandemic has increased uncertainty
regarding economic outlook and the consequential impact
on the Bank’s customers, 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.
The procedures we performed to support our audit conclusions, included:
• 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 expected credit loss model, as well as key judgements
and assumptions used by management, the mathematical accuracy
of the 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 key fields
used in the computation of Stage 1 and Stage 2 provisions. On a
sample basis testing the key 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, 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 over the credit
watch list and delinquencies, and evaluation of assumptions made
in the valuation of collateral and recovery cash flows.
• For IFRS 9 related disclosures in the financial statements, review of
the accuracy and completeness in line with the Bank’s accounting
policies and IFRS 9 requirements.
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BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Key audit matter
IT systems and controls
How our audit addressed the key matter
The Group is heavily dependent on complex IT systems for
the capture, processing, storage and extraction of significant
volumes of transactions. This is critical to the recording
of financial information and the preparation of financial
statements of the Group. Accordingly, we considered this to be
a key audit matter.
For material financial statement transactions and balances, our
procedures included gaining an understanding of the business processes,
key controls and IT systems used to generate and support those financial
statement line items. These procedures included understanding and
identification of IT application controls and IT dependencies in manual
controls.
In common with all other major banks, user access management
controls and change management controls are important to
ensure any changes to IT systems are made in an appropriate
manner.
Where relevant to our planned audit approach, we, along with our IT
specialists, assessed the design and tested the effectiveness of certain
controls over the continued integrity of the in-scope IT systems that are
relevant to financial reporting. This involved assessing, where relevant
to the audit:
The Group’s controls over IT systems include:
• user access management over applications, operating systems
and databases;
• program development and system changes; and
• management of privileged user accounts.
• User access management: how users are on-boarded, reviewed and
removed on a timely basis from relevant IT applications, operating
systems and databases. We also examined how privileged access is
managed across IT systems.
• Change management: how changes are captured, documented, tested,
and authorised prior to migration into the production environment IT
systems. We also examined the appropriateness of users with access to
make changes to IT systems.
• IT operations: how error monitoring within systems is identified and
resolved. We also examined how system backups are configured and
monitored.
We also carried out tests, on a sample basis, of IT application controls
and IT dependencies in manual controls that were key to our audit
testing strategy. We performed these procedures in order to assess the
accuracy of relevant system calculations, key reports and the operation
of certain system enforced restricted access controls.
Where we identified design or operating effectiveness matters relating to
IT systems and application controls relevant to our audit, we performed
alternative or additional audit procedures.
115
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport 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 ability of the Group 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 International Standards on Auditing, 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.
116
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport • 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 financial statements. We are responsible for the direction, supervision and performance of the Group audit.
We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence, and 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 2021:
• 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
25 February 2022
117
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Shareholder
Information
118
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReportBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021 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 the BSP Financial Group Limited’s
Constitution and in certain circumstances, are regulated by the Companies
Act 1997, the PNGX Listing Rules and ASX Listing Rules (collectively 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 or ASX
Settlement Operating Rules) where permitted to do so under the 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 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 Listing
Rules, by the PNGX Business Rules, or by the ASX Settlement Operating
Rules.
Partly paid shares
The Directors may, subject to compliance with BSP’s constitution, the
Companies Act and the 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 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 Listing Rules,
ordinary shares are freely transferable.
The shares may be transferred by a proper transfer effected in accordance
with the PNGX Business Rules, ASX Settlement Operating Rules, or by any
other method of transferring or dealing with shares introduced by PNGX
and ASX, 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, PNGX or ASX 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 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.
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GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReportBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021 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 2021, the twenty largest registered fully paid shareholders of the Company were:
Total Holding
Percentage
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
National Superannuation Fund
Fiji National Provident Fund
Credit Corporation (PNG) Limited
Motor Vehicles Insurance Limited
PNG Sustainable Development Program Ltd
Teachers Savings and Loans Society
Comrade Trustee Services Limited
Capital Nominees Limited
IFC Capitalization (Equity) Fund LP
International Finance Corporation
Lamin Trust Fund
Credit Corporation (PNG) Limited (CC Finance Ltd)
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 2021, The Company had 5,675 shareholders. The distribution of shareholding 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
120
84,811,597
53,092,261
46,153,840
45,318,417
40,547,063
33,294,081
31,243,736
19,764,387
15,317,366
12,456,052
4,678,159
4,213,877
4,213,877
3,518,132
3,000,000
2,984,804
2,890,000
2,500,001
2,369,495
2,217,798
52,640,956
467,225,899
18.15%
11.36%
9.88%
9.70%
8.68%
7.13%
6.69%
4.23%
3.28%
2.67%
1.00%
0.90%
0.90%
0.75%
0.64%
0.64%
0.62%
0.54%
0.51%
0.47%
11.27%
100%
Number of
Shareholders
Number of Shares
4,653
599
107
198
118
5,675
1,213,198
1,263,227
797,474
7,279,688
456,672,312
467,225,899
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReportBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021 Unmarketable Parcels:
As at 31 December 2021, BSP's Share Price was K12.25 on PNGX and A$4.27 on ASX. There were 520 shareholders (0.01% of total shareholdings) who held
less than a marketable parcel of BSP shares, being equal to 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: +675 320 1212
Australian Registered Office
Level 16, 80 Collins Street
Melbourne, Victoria, 3000
Australia
PNG Exchange for BSP Shares
PNGX Markets Limited (PNGX)
PO Box 1531
Port Moresby
National Capital District
Papua New Guinea
Telephone: +675 320 1980
Australian Exchange for BSP Shares
ASX Limited
Exchange Centre
20 Bridge Street
Sydney NSW 2000
Australia
Home Exchange for BSP Convertible Notes
South Pacific Stock Exchange
GPO Box 11689
Suva, Fiji
Telephone: +679 330 4130
PNG Share Registry
PNG Registries Limited
PO Box 1265
Port Moresby
National Capital District
Papua New Guinea
Telephone: +675 321 6377
Australian Share Registry
Link Market Services Limited
Level 12, 680 George Street
Sydney, NSW 2000
Australia
121
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReportBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021
Directors’ Information
Name
Nature of Interest
Sir K. Constantinou, OBE
Director
Shareholder
Patron
Member
Others
R. Fleming, CSM, MBA, MMGT
Director
BSP Financial Group Limited, BSP Capital Limited, BSP Finance Ltd, Bank of
South Pacific Tonga Limited, Bank South Pacific (Samoa) Limited, Bank South
Pacific (Vanuatu) Limited, Airways Hotel Limited, Lamana Hotel Limited, Lamana
Development Limited, The Constantinou Group Projects Company Limited, Hospitality
Plus Hotels Limited, Gazelle International Hotel Limited, Southern Seas Investments
Ltd, CGA Properties Limited, Heritage Park Hotel Limited, The Papua Hotel and
Development Limited, Coastwatchers Court Limited, Airways Development Limited,
Airways Residences Limited, Waigani Asset Limited, Texas Chicken South Pacific Ltd,
Loloata Island Resort Ltd, Air Niugini Limited, Monier Limited, Poly Allied Products
Limited, Tiare No. 23 Limited, Hebou Constructions (PNG) Limited, Oasis Apartments
Limited, Central Sand Supplies Ltd, Moki No.10 Limited, Rouna Quarries Ltd, C G A
Properties Limited, Heritage Park Hotel Limited, Hospitality Plus Hotels (SI) Limited,
KG Property Investments Pty Ltd, Lamana Development (Samoa) Limited, Taumeasina
Development Corporation, Taumeasina Villas Limited, Good Taste Co Pty Limited, TC
Nambawan Limited, TC Tupela Limited, TC3 Limited, TC4 Limited, TC Faipela Limited,
TC Sikispela Limited
Airways Hotel Limited, Lamana Hotel Limited, Lamana Development Limited, The
Constantinou Group Projects Company Limited, Hospitality Plus Hotels Limited,
The Papua Hotel and Development Limited, Airways Development Limited, Airways
Residences Limited, Texas Chicken South Pacific Ltd, Monier Limited, Poly Allied
Products Limited, Tiare No. 23 Limited, KG Property Investments Pty Ltd
Burnet Institute, Kokoda Track Foundation
Australian Institute of Company Directors, Papua New Guinea Institute of Directors
Honorary Consul for Greece and Cyprus in Papua New Guinea, Trade Commissioner
of Solomon Islands to Papua New Guinea, Archdiocesan Finance Board
BSP Financial Group Limited, BSP Capital Limited, BSP Finance Ltd, BSP Finance (PNG)
Limited, BSP Life PNG Limited, BSP PNG Holdings Limited, BSP Nominees Limited,
Platform Pacific Limited, BSP Convertible Notes Limited, BSP Life (Fiji) Limited, BSP
Health Care (Fiji) Limited, BSP Finance (Fiji) Pte Limited, Bank South Pacific (Samoa)
Limited, Bank South Pacific (Vanuatu) Limited, Bank of South Pacific Tonga Limited,
BSP Finance (Solomon Islands) Limited, 3 Kundu Holding Pte. Ltd, 3 Kundu Services
Pte. Ltd, BSP Finance (Cambodia) PLC, BSP Leasing Lao Co., Ltd, Anglicare Foundation
Limited
Shareholder
BSP Financial Group Limited
Member/Trustee
Australian Institute of Company Directors, PNG Institute of Directors, Anglicare Foun-
dation
Member
Australian Institute of Company Directors, Papua New Guinea Institute of Directors
A. Sam, BComm, CPA, GAICD
Director
Joint Owner
Shareholder
BSP Financial Group Limited, Silver Dawn Holding Limited, WAM Shipping Limited,
Milne Bay Earthworks Limited, Muyua Dal Limited, Nikubai Kwayeb Investment
Limited, Nikubai Udanai Investment Limited, Nikwasis Ukwadew Investment Limited,
Sinawia Omalak Investment Limited, Dawet Investment Limited, Kumuluw Walau
Investment Limited, Kunutan Botunug Investment Limited, Kunutan Saweinak
Investment Limited, Lakeidog Latnawai Investment Limited, Lakeidog Mwatat
Investment Limited, Malas Dilgabuys Investment Limited, Malas Luwau Investment
Limited
Sam Kiak Tubangliu Certified Practising Accountants
Silver Dawn Holding Limited, Milne Bay Earthworks Limited, Nikubai Kwayeb
Investment Limited, Nikubai Udanai Investment Limited, Nikwasis Ukwadew
Investment Limited, Sinawia Omalak Investment Limited, Kumuluw Walau Investment
Limited, Kunutan Botunug Investment Limited, Kunutan Saweinak Investment Limited,
Lakeidog Latnawai Investment Limited, Lakeidog Mwatat Investment Limited, Malas
Dilgabuys Investment Limited, Malas Luwau Investment Limited
Member
Certified Practicing Accountants of Papua New Guinea, Papua New Guinea Institute
of Directors
Graduate
Australian Institute of Company Directors
122
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReportBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021 Name
S. Davis, LLB
R. Bradshaw, LLB
Nature of Interest
Director
Member
Graduate
Director
BSP Financial Group Limited, Next DC Limited, PayPal Australia Pty Limited, Asia
Society Australia
Australia India Business Council, Avondale Golf Club Ltd
Australian Institute of Company Directors
BSP Financial Group Limited, Post PNG Limited, Koitaki CC Limited, Wahgi Arabicas
Limited, Songkain Limited
Shareholder
Koitaki CC Limited, Wahgi Arabicas Limited, Songkain Limited
Owner
Member
Director
E. B. Gangloff, CPA, MAICD, MIIA,
PNGID
Waghi Valley Country Club, The Kofi Club, Koitaki Country Club
Papua New Guinea Law Society, Australian Institute of Company Directors
BSP Financial Group Limited, Gangloff Consulting Limited, New Britain Palm Oil
Limited, Pacific Training Consortium Limited, Highlands Pacific Limited, BSP Finance
(Fiji) Pte Limited, Business Incubation Solution Limited, Tower Insurance (PNG)
Limited
Shareholder
Gangloff Consulting Limited, Pacific Training Consortium Limited, Business Incubation
Solution Limited
Board/Council Member
Papua New Guinea Institute of National Affairs Council, MSME Council Inc., Sir
Theophilus Constantinou Foundation Inc.
Member
Australian Institute of Company Directors, Papua New Guinea Institute of Directors ,
Certified Practicing Accountants Papua New Guinea, Institute of Internal Auditors –
Papua New Guinea Chapter
Faamausili Dr. M. Lua’iufi, BA,
MSc, PhD
Director
BSP Financial Group Limited, BSP Finance Ltd, Bank South Pacific (Samoa) Limited,
Paradise Consulting
P. Kevin, BSCS, MAICD
Shareholder
Member
Director
Shareholder
Employee
Paradise Consulting
Samoa Institute of Directors, Australian Institute of Company Directors, Papua New
Guinea Institute of Directors, Samoa Human Resource Institute
BSP Financial Group Limited, In4net Ltd
In4net Ltd
In4net Ltd
Board/Council Member
Papua New Guinea Institute of National Affairs Council, Papua New Guinea University
of Technology Industrial Advisory Board (IAB)
Member
PNG Digital Information and Communications Technology (ICT) Cluster Inc.,
Papua New Guinea Women in Science, Technology, Engineering and Mathematics
Association Inc., Papua New Guinea Computer Society Inc., Center of Excellence
for Financial Inclusion (CEFI) Digital Financial Services Working Group Committee,
Australian Institute of Company Directors, Pacific Islands Chapter of the Internet
Society
Fellow
Internet Corporation for Assigned Names and Numbers
F. Bouraga, CPA, MAICD
Director
Shareholder
Employee
Treasurer
Member
BSP Financial Group Limited, Inside Out Limited, Star Management Services Limited,
Lalokau FM Limited, Star No.57 Limited, Tactical Solutions International Ltd. Papua
New Guinea Hunters Rugby Football Club Inc. Board
Inside Out Limited, Star Management Services Limited, Lalokau FM Limited, Mobo
Group of Companies Limited, Star No.57 Limited
SBC Solutions
Papua New Guinea Cancer Foundation Inc.
Certified Practicing Accountants Papua New Guinea (CPA PNG), Accounting
Registration Board of PNG, Australian Institute of Company Directors
S. Brewis Weston, BEcon(Hons),
MAppFin
Director
BSP Financial Group Limited, Money3 Corporation Limited, StockCo Australia Pty
Limited, Timelio Pty Limited
123
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReportBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021 Management Teams
124
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport 125
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport 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
and
Transaction
Channel
Operations,
Frank W.M. van der Poll joined BSP in
May 2019 as the Deputy GCOO and
commenced in the GCOO role on 1
November 2020. Primary responsibilities
include Information Technology, Project
Management Office,
Project
Compass, BSP’s Core Banking System
upgrade, IT and has direct responsibilities
Support,
for
International
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.
Ronesh Dayal was appointed the
Group Chief Financial Officer on 11
June 2020. Mr. Dayal is an experienced
and detail-oriented CFO with over
18 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.
Fleming was
Robin
appointed
GCEO of BSP 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.
126
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Faunt was
Daniel Faunt
Group General Manager
Retail
Daniel
appointed
Group General Manager Retail
in December 2020. He assumes
responsibility for the Group Retail
Bank function encompassing the
management of the 81 branches
in PNG along
and sub-branches
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
in Australia.
and retail business
He has extensive experience
in
the Finance, Government, Retail,
Telecommunications
Wholesale,
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.
Michael Hallinan
Group Chief Risk Officer
Rohan George
General Manager Treasury
in 2018.
Michael Hallinan, was appointed
Group Chief Risk Officer, following
Haroon Ali’s move to Fiji as Country
Head
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
institutional relationships 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.
Rohan George was appointed
in
General Manager Treasury
February 2015. Mr George has
extensive knowledge in developed
and emerging financial markets.
His experience spans over 30
income,
covering fixed
years,
foreign exchange, commodities
and structured 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.
127
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport
Executive Management
(Continued)
Kili Tambua
General Manager Offshore
Branches
Kili Tambua was appointed to
GM OSB on 2 November 2020
overseeing banking operations in
Fiji, Solomon Islands, Tonga, Samoa,
Cook Islands and Vanuatu.
-
Mr. Tambua'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.
Hari Rabura
General Manager Human
Resources
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.
Nuni Kulu
General Manager Digital
Nuni Kulu was appointed as General
Manager Digital effective as of 1
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
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.
training
128
in
Laundering
Vandhna Narayan
Group General Manager
Compliance
Vandhna Narayan was appointed
as Group General Manager
Compliance effective 23 February
2021. Vandhna oversees BSP’s
&
Anti-Money
Compliance; Internal Audit; and
Credit Inspection Business Units
to ensure BSP continues to meet
its ongoing regulatory obligations
industry
and advancements
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
successfully
sector.
completed
Executive
in 2010,
Development Program
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.
Vandhna
CBA’s
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Andy Roberts
General Manager BSP
Finance Ltd
Andy Roberts was appointed
General Manager of BSP Finance
Ltd on 17 August 2020. Prior
to joining BSP, Mr Roberts held
various 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.
Mary Johns LLB, OL, MAICD
BSP Company Secretary
Gheno Minia
General Manager BSP Capital
Nilson Singh
Country Manager BSP Life
Gheno Minia was
appointed
General Manager of BSP Capital
in June 2018, prior to that held
senior roles within BSP Capital’s
team. Gheno
Capital Advisory
came
through BSP’s Graduate
Development Program in 2008 and
has been with the company since.
Mr. Minia holds qualifications in
Business and Economics from the
University of Papua New Guinea
and recently attained post graduate
qualification
in Applied Finance
from Kaplan in Australia. He is an
Associate member of the Financial
Services Institute of Australasia.
Nilson Singh was appointed Country
Manager of BSP Life PNG Limited
on 27 August 2019. He has over 12
years of Life Insurance experience
through his various roles in the Fiji
and PNG Life Insurance businesses.
Prior to this, he worked in the
assurance division at PwC Fiji for 3
years.
in
He was
the
instrumental
establishment and launch of the life
insurance business in PNG and is
passionate about growing a saving
culture through the endowment
insurance products.
and
Mr. Singh holds a Bachelor of
Arts Degree with double Majors
Financial
in Accounting
Management
Information
and
Systems from the University of
South Pacific. He is a full member
of CPA Australia and CPA PNG and
a member of AICD. Nilson has a
Certificate IV in Life Insurance with
ANZIIF and currently completing the
Diploma in Life Insurance program.
Mary Johns has a Bachelor of
Laws from the University of Papua
New Guinea. She joined BSP as a
legal officer in July 2002 and was
appointed as Company Secretary in
2005.
She has previously served on Port
Moresby Chamber of Commerce,
the 2015 Pacific Games Organising
Committee Board and currently
serves on other not for profit
Boards such Capital Rugby Union,
PNG Women Lawyers Association
She
and Leadership PNG
received the Female Director of the
Year Award in 2014.
Inc.
In August 2015, as part of the Papua
New Guinea 40th Independence
awards, Mary was awarded the
Member of the Order of Logohu
("ML") for services to banking,
community and sports.
Since 2016 she served for 2 years as
an independent committee member
of the of People & Nominations
Committee of Oil Search Limited, 2
years on the Audit & Financial Risk
Committee and was a member of
the Sustainability Committee of Oil
Search Ltd. She is a current Director
of the CPL Group of Companies and
its joint venture subsidiary Jack’s
Retail (PNG) Ltd.
129
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Broader Group
COOK ISLANDS
(L-R):
Henry Napa – Head of Operations
Gabe Raymond – Compliance and AML Manager
Grace Tangata – Operational Risk and Compliance
Chris Doran – Head of Retail
David Street – Country Head
Tokoa Harmon – Branch Manager
Achaal Narayan – Manager Digital
Tutu Inamata – Business Manager
FIJI
(L-R):
Maikash Ali – General Manager Corporate
Charishma Kumar – Head of Treasury
Rajeshwar Singh – General Manager Corporate
Services and Chief Financial Officer
Vrinda Rao – Head of Operational Risk
Haroon Ali – Country Head
Sunil Rohit – Head of Credit
Alvina Ali – General Manager Legal and Compliance
Ravindra Singh – General Manager Retail
William Wakeham – Chief Operating Officer
Not in the photo:
Omid Sabeli – Chief Information Officer
SAMOA
Standing/Seated (L - R):
Peti Leiataua – Compliance & Risk Manager
Bharat Kumar Chovan – Head of Treasury
Jennifer Fruean – Head of Finance
Rodney Greed – Facilities Management & Project Manager
Maryann Lameko-Va’ai – Country Head
Edward Yee – Head of Corporate
Shirley Greed – Head of Retail
Epeli Racule – Head of Operations
Maiava Iaeli Tovia-Leota – Manager e-Banking
SOLOMON ISLANDS
Standing/Seated (L - R):
Winterford Maehau – Manager Information Services
Lynette Taoti – Manager Loans Management Unit
Giddings Qiqo – Head of Treasury
Alphonse Taoti – Head of Retail
Genevieve Apusae – Manager Operational Risk
Sandra Fore – Country Head
Freda Fa’aitoa – Manager Corporate Services
Mitchell Jayasinha – Head of Finance
Nesta Soaika – Operations Manager (Retail)
Joan Ramo – Operations Manager - International
Dennis Suia – Lending Support Manager
Lyn Fa'arodo – Manager e-Banking
Not in the photo:
Laurish Pio – Manager Compliance & AML
Emele Hia – Head of Corporate
130
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport TONGA
Front Row:
Marcellina Wolfgramm Haapai – Country Head
Second Row:
Viliami Vailea – Head of Finance
Third Row (L-R):
Tevita Vaha’I – Manager Asset Management
Nadiya Puloka – Acting Head of Treasury
Mele’ana Fifita – Head of Operations
Fourth Row (L-R):
Mele Latu – Acting Head of Corporate
Emilio Tapueluelu – Head of Retail
Iunisi Polutele – Operations Risk Manager
VANUATU
Standing (L-R):
Josiah Kalfabun – Manger Compliance
Jioji Konusi – Head of Corporate Banking
Ronal Prasad – Head of Finance
Seated (L-R):
Teresa Jordan – Acting Country Manager since
October 2021
Irene Tabi – Head of Treasury
Moana Korikalo – Head of Retail
Jeremy Bosukuru
Joseph Rabaua
Richard Bero
Unity Bainivalu
677 21222
677 62177
677 61222
677 21874
Marcellina Wolfgramm Haapai 676 20807
676 20830
Mele Lily Cocker
676 71268
Sosefina Tangitau
676 60933
Ta’ufoou Maloni
676 50145
Tokilupe Toe’api
Teresa Jordan
Moana Korikalo
Edwige Wensi
Danica Rapouel
Dolores Charlie
Lina Niatu
678 5580038
678 5580009
678 5580021
678 5580016
678 5580042
678 5580051
Simon Kepui
Krishna Raju
Imelda Samba
Buo Choeun
Panyathip Vongsouli
675 7024 5681
679 323 4451
677 27779
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
131
Overseas and Subsidiaries Directory
Cook Islands
Country Head
Head of Corporate
Rarotonga Branch
Aitutaki Branch
David Street
Chris Doran
Tokoa Harmon
Rosa Henry
682 22014
682 22014
682 22014
682 31714
Honiara Central
Munda Branch
Noro Branch
Point Cruz Branch
Fiji
Country Head
Damodar City Branch
Thomson St Branch
Nausori Branch
Pacific Harbour Branch
Samabula Branch
Suva Central Branch
Ba Branch
Westfield Branch
Nadi Branch
Namaka Branch
Rakiraki Branch
Sigatoka Branch
Tavua Branch
Labasa Branch
Savusavu Branch
Taveuni Branch
Samoa
Country Head
Retail Head
Apia Branch
Vaitele Branch
Salelologa Branch
Haroon Ali
Sanjani Devi
Shailendra Roy
Katrina Lal
Ravikashni Prakash
Mereani Peters
Shalit Kumar
Reginald Kumar
Devendran Pillay
Ann Pesamino
Razia Tahir
Ronica Prakash
Nacanieli Vadei
Mohammed Azeem
Sohnal Lata Karan
Vineeta Prasad
Anaseini Senivika
679 3214454
679 3214701
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
Gizo Branch
Heritage Park Branch
Sandra Fore
Lency Saeni
Liasa Leameana
Joy Vave
677 21874
677 40484
677 60539
677 21814
Tonga
Country Head
Nuku’alofa Branch
Vava’u Branch
Ha’apai Sub Branch
‘Eua Sub Branch
Vanuatu
Country Head (Acting)
Head of Retail & Marketing
Santo Branch
Port Vila Branch
Tanna Branch
Freswota Branch
Subsidiaries
BSP Finance
Country Head (PNG)
Country Head (Fiji)
Country Head (Solomon Islands)
Country Head (Cambodia)
Country Head (Lao)
BSP Life
Managing Director (Fiji)
Country Head (PNG)
BSP Capital
General Manager (PNG)
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport
Subsidiaries
BSP FINANCE HOLDING
Front row (L-R):
Bernadette Name'a – Finance Officer
Andy Roberts – General Manager
Remu Ruape – AML/CTF Compliance Officer
Sharon Andoiye – Quality Assurance Manager
Back row (L-R):
Natasha Lagani – Financial Controller
Anna Puri – Credit Manager
Janet Seta – Operational Risk and Compliance
Manager
BSP FINANCE - PAPUA NEW GUINEA
(L-R):
Michael Timi – Senior Lending Officer
Mary Vai – Lending Officer
Sonia Bayang – Receptionist
Delilah Tomala – Lending Support Officer
David Munaga – Head of Lending Sales
Freda Willyman – Administration Manager
Beverly Hamora – Collections Officer
Simon Kepui – Country Head
Dulcie Pilake – Collections & Recoveries Officer
Lulu Numiman – Accountant
Richard Matanga – Finance Manager
Andrew Mckiwa – Lending Officer
BSP FINANCE - FIJI
(L-R):
Sudeshwar Ram – Area Manager East
Niranjan Singh - Compliance & Operations
Risk Management Officer
Shainesh Lal – Area Manager West
Krishna Raju – Country Head
Sanjeet Narsey – Finance Manager
Shirraz Narayan - Collections Supervisor
Shelvina Sharon Lata – Accountant
BSP FINANCE - CAMBODIA
Standing (L-R):
Taing Sorida – Sale Supervisor
Hoeun Rothchandara – Internal Audit Manager
Khounh Kiny – Recovery Officer
Phin Nara – Finance Manager
Wet Sochea - Sale Supervisor
Seated (L-R):
Seng Sokha - Sale Manager
Sin Dany – Senior Collection Officer
Buo Choeun - Country Head
Morm Sreyhuoch - Senior Admin Support Officer,
Im Boromey - Compliance Supervisor (Resigned)
132
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport BSP FINANCE - LAO
(L-R):
Phonepaseuth Rattana – Collection Officer
Buangeun Sayavong – Lending Officer
Inthanom Vongchanh – Sales Team Supervisor
Nith Chanthavongdeuane – Administration
Officer
Panyathip Vongsouli – Country Head
Soubanh Phanyoulath – Accounts & Finance
Manager
Vathsana Bounphothisarn – AP Officer
Daomanivone Khanthavong – Lending Officer
Vilaiphone Silakoune – Loan & Recovery officer
Vongpaseuth Ratanavong – Credit Manager
BSP FINANCE - SOLOMON ISLANDS
(L-R):
Barbara Hou - Lending Support & AML/CTF
Officer
Imelda Samba – Country Manager
Veronica Buga – Lending Officer
BSP LIFE - FIJI
Standing (L-R):
Emily King – General Manager Legal &
Compliance
Michael Nacola – Managing Director
Seated (L-R):
Curtis Mar – General Manager Distribution &
Marketing
Munendra Naidu – Chief Financial Officer
BSP LIFE - PNG
(L-R):
Doris Yenbari – Quality Assurance and Compliance
Manager
Nilson Singh – Country Head
Miriam Liuna – Finance and Operations Manager
Mathew Hasu – Head of Sales
BSP CAPITAL LTD
(L-R):
Theresa Kalivakoyo – Financial Controller (Sitting)
Willie Konga – Manager, Funds Management
Gheno Minia – General Manager
Mabata Gabutu – QA & Compliance Manager
133
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Papua New Guinea Branch Managers
Mathew Danti
Aitape
Martin Gilo
Alotau
Rosemary Paula Seeto
Arawa
Dora Raphael
Bialla
Madeleine Leka
Boroko
Julie Warren
Buka
Roslyne P. Kanini
Bulolo
Ponsie Bannon
Daru
Marco Hamen
Goroka
Rawalo Rawalo
BSP Haus
Robert Jomino
Kainantu
Mathias Manawo
Kavieng
Betty Posangat
Kimbe
Ruben Attai
Kiunga
Kalat Tiriman
Kokopo
Rita Singut
Kundiawa
Bevilon Homuo
Lae Top Town
Gabriel Ak
Lae Market
Livikonimo Koki
Lae Commercial
Johnson Tetaga
Lihir
Ruth Kagl
Lorengau
Mary Koi
Madang
Merai Mundua
Mendi
Bau Kiso
Moro
Theresa Pilamp
Mt Hagen
Samuel Okti
Popondetta
Stanley Bole
Port Moresby
David Pilai
Rabaul
Henry Bayema
Tari
Dianne Rali
Tabubil
Delilah Kanit
Vanimo
Susie Yapen
Vision City
John Tomba
Wabag
Alex Kuna
Waigani B/Centre
Antonia Dru
Waigani Drive
Philip Solala
Wewak
Nelson Kerua
BSP First HC
Samuel Mulina
SME - Goroka
Desmond Lavong
SME - Lae
Reuben Elijah
Area Manager
Highlands
Barry Namongo
Area Manager
Momase
Ruby Arabella Patu
Area Manager
NGI
Dennis Lamus
Area Manager
NCD
Billy Veveloga
Area Manager
Southern
134
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Papua New Guinea Branch Directory
Aitape
Alotau
Arawa
Bialla
Boroko
BSP Haus
Buka
Bulolo
Daru
Goroka
BSP Haus Branch
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
Mathew Danti
Martin Gilo
Rosemary Paula Seeto
Dora Raphael
Madeleine Leka
Rawalo Rawalo
Julie Warren
Roselyn P. Kanini
Ponsie Bannon
Marco Hamen
Rawalo Rawalo
Robert Jomino
Mathias Manowo
Betty Posangat
Ruben Attai
Kalat Tiriman
Rita Singut
Bevilon Homuo
Gabriel Ak
Livikonimo Koki
Johnson Tetaga
Ruth Kagl
Mary Koi
Merai Mundua
Bau Kiso / Ali Albert
Gata Goasa
Theresa Pilamp
Samuel Okti
Kips Ponga
Stanley Bole
David Pilai
Dianne Rali Kome
Henry Bayema
Sub Branch Directory
Aiyura
Banz
Buin
Chuave
Gusap
Henganofi
Higaturu
Hoskins
Ialibu
Kabwum
Kamtai
Kerema
Kerevat
Kerowagi
Kinim
Kikori
Komo
Konos
Koroba
Kupiano
Laba
Semagrace Kumaro
Kessy Elly
Clara Itamai
Dkyman I Tangip
Vivian Sae
Rachael Saime
Letticia Gaia
Genevieve Sela
Philemon Kumi
Inna Buneng
Jeffery Kaupa
Toru Leva
Minamar Mathew
Leah Taia
Malapun Bannick
Yaweye Sam
Mark Tom
Helen Warange
Paul Philip Galopo
Andrew Baine Jnr
Heni Nao
457 2042
641 1284
276 9244
983 1095
303 4320
305 7135
973 9042
474 5331
645 9416
532 1633
305 7135
537 1251
984 2082
983 5166
649 1313
982 9088
535 1025
473 9876
473 9609
472 9088
986 4062
970 9244
422 2477
549 1070
276 1566
321 7699
542 1877
629 7443
547 6900
305 7606
982 1744
649 9179
276 1651
7230 8313
7100 9078
7100 7855
7197 6001
7091 1396
7100 7859
7009 6865
7031 2627
7041 1624
7346 1426
7371 6015
7091 2298
7100 2889
7100 9077
7100 7861
7201 9584
7362 0760
7197 6006
7104 2003
7288 4140
7197 6008
Vanimo
Wabag
Waigani
Waigani Drive
Wewak
Delilah Kanit
John Tomba
Alex Kuna
Antonia Dru
Philip Solala
SME
Vision City
Lae
Goroka
Premium
Boroko
Gordons
Kokopo
Madang
Mt Hagen
Port Moresby
Waigani
Waterfront
BSP First
Gordons
Harbour City
Lae
Port Moresby
Samuel Mulina
Desmond Lavong
Vacant
Pakar Tata
Mary Kaile
Kessie Guboro
Jennifer Passingan
Maggie Wara
Imelda Konabe
Dulcie Vogae
Susie Yapen
Ian Miria
Nelson Kerua
Elizabeth Gavul
Mari Guma
Regional Area Managers
Highlands
Momase
NCD
NGI
Southern
Reuben Elijah
Barry Namongo
Dennis Lamus
Ruby Arabella Patu
Billy Veveloga
Lakurumau
Losuia
Maprik
Minj
Mutzing
Namatanai
Navo
Ningerum
Okapa
Padipadi
Palmalmal
Pangia
Tambul
Telefomin
Simberi
Wakunai
Walium
Wapenamanda
Yangoru
Yonki
Lorraine Koma
Lorna Solomon
Christian Tatu
Jim Wayne Dale
Luther Kasi
Dickson Kevin
Hennah Brunim
Joseph Dewang
Arafat Tovari
Michael Tupagogo
Selina Kesivi
Karen James
Joseph Paul
Joycelyn Naik
Rebecca Maragit
Melvin Kusa
Brenda Igusam
Seta Isin
Emma Wangi
Solo Sabbie
457 1209
547 1237
305 6102
302 5301
456 2344
305 7786
479 5824
532 1006
303 4354
302 5202
982 9068
422 2477
542 1877
305 7943
300 9131
305 7786
305 6548
305 7935
478 4930
305 6550
542 2002
478 4998
305 7195
982 9088
305 7886
7197 6005
7031 2617
7168 7815
7100 9076
7100 2488
7197 6007
7091 9062
7341 2207
7055 0955
7090 4463
7323 9181
7197 6003
7100 7863
7255 8421
7449 8381
7100 7856
7031 2127
7198 6859
7031 4947
7185 5768
135
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport
Corporate Social
Responsibility
136
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021
137
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Our Bank. Our Contribution.
We are more than a Bank
CSR contribution in 2021
We recognise that as the dominant bank we have a special responsibility to our customers and the communities of which we
are both a part.
Our responsibility is an integral part of our strategy and our approach to corporate responsibility is integral to our strategies
for growth and development and is our committed approach to Corporate Responsibility.
We believe in the values of people, community, leadership, teamwork, professionalism, quality, integrity, respecting the fact
that as a leading financial services provider in our chosen markets - we belong to communities. Our people, our customers,
staff, shareholders and communities prosper when we give back.
We are using our branches and our people in line with this thinking - as agents of change.
BSP is committed to supporting quality initiatives with sustainable outcomes and does so through supporting partnerships,
sponsorships, donations, community projects and voluntary work with charities and community organisations.
138
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Our Contribution to Sports
BSP School Kriket Program
We have grown from strength to strength and so have our partners who deliver life changing and development
projects to communities.
The BSP School Kriket Program is the longest serving junior sport development program that BSP has supported.
This multiple award winning program, has produced some of country’s best players and reached over 580,000
children in over a thousand schools since 2017.
PNG Paralympic
BSP continued its association with the PNG Paralympic Committee. Our support sports gives everyone including athletes with
disabilities an equal opportunity to achieve their sporting aspirations. The support assisted Team PNG to the Tokyo Paralympic
Games in Tokyo, Japan.
BSP’s support over the years has enabled Para Athletes to take part in the 2015 Pacific Games in Port Moresby and the China
Open Athletics Championships in 2016 in Beijing, China.
“On behalf of the PNG Paralympic
from
Committee President and
the Tokyo bound team, I'd like to
acknowledge and thank BSP for
coming on board to support the team.
BSP has been a major supporter of
Paralympics in the past and so we are
thankful for their continuous support”
Susan Sere
PNG Paralympic Committee Chef de Mission
139
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Our Sponsorships & Partners
Banking and delivering financial services to our chosen markets has given BSP the most unique opportunity to reach more
communities than any other bank or financial services provider can. Our reach takes us to the most remote areas of Papua
New Guinea and other pacific island countries that BSP operates in, Fiji, Solomon Is, Vanuatu, Samoa, Tonga and Cook Islands.
As a responsible corporate organisation, we give back in Sponsorships, Donations and Charity work.
In Papua New Guinea, BSP invested over K1.4 million in sponsorships, over K1.5 million in donations and K1.5 million in
community projects.
Sponsorships
K1.4m
Donations
K1.5m
Community Projects
K1.5m
Top 10 Sponsorships & Donations in PNG
● Cricket PNG
● Macfarlane Burnet Institute of Medical Research
● Brisbane Broncos Corporation Pty Ltd
● Buk bilong Pikinini
● West New Britain - Kimbe Cutters Rugby League
● Port Moresby General Hospital
● Business Council of PNG
● David Mead - Brand Ambassador
● Operation Open Heart
● Sir Theo Foundation
140
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReportBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021 Our Sponsorships in the Pacific
Sponsorships & Donations in the Pacific
In the Pacific, BSP has also given back to the countries and communities in which we operate through Sponsorships,
Donations and Community Projects. K1.1 million has been invested in Sponsorships, Donations and Community
Projects across the Pacific.
BSP Contributions to the Pacific in 2021
Sponsorships
K565k
Donations
K396k
Community Projects
K120k
BSP Contributions in the Pacific since 2017
All amounts are expressed in K'000
BSP Contributions to the community
Fiji
Solomon Is.
Vanuatu
Samoa
Tonga
Cook Is.
Total
1,700
385
950
887
640
888
141
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReportBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021 Our Donations
Supporting worthy causes.
BSP is committed to delivering financial services to all countries and communities that we operate in. It is our belief that when our communities
prosper, our ecosystem thrives, and our customers, stakeholders, shareholders and businesses remain profitable.
Our donations reach organisations, charities, community groups and other worthy causes that contribute meaningfully to improving lives. It is our
hope, that we are able to enrich and empower for the better.
Our donations & sponsorships reach communities through organisations like:
142
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReportBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021 Health, Social Wellbeing & Education
Health & Wellbeing
We believe that one of the best ways of contributing to the growth and
development of the South Pacific is by ensuring it is a region of healthy
and happy individuals, families and communities.
Given the number and diversity of the communities that we serve
throughout Papua New Guinea and the South Pacific, we are extremely
well placed to identify these issues and make a major contribution, in the
areas of health, arts and culture, education and enterprise, environment and
community.
BSP’s groupwide Black Thursday Campaign, against Gender Based Violence is a
good example of the way in which branches, people, staff and family contribute
to creating awareness and making our communities and homes a safer place to
live in.
Sustainability & Environment
Beyond pure business and cost considerations, BSP is aware of the
part it can play in regard to climate change and its potential long-
term effects on the South Pacific and the planet.
As the greenest bank in the region, we understand, too, that these
concerns are shared by our customers and the communities we serve.
They expect and appreciate steps we take to be part of the solution.
Our Sustainability Strategy is firmly entrenched within the organisation
and community investment activities will help make this commitment
tangible to our customers, staff and other key stakeholders.
BSP is a member of the clean up the world campaign and observes the
annual Earth Day and Earth Hour.
GO
GREEN
143
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReportBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021 Our
Community
Contributions
11 Strategic Business Units
38 Branches
4 Off-Shore Branches
3 Subsidiaries
Investing over K1.6 million in the
communities in which we operate.
Improving everyday lives, making
our communities prosper.
BSP’s goal-orientated events and community
projects organised on a regular basis, can benefit
communities and change lives. Each of our Branches,
Strategic Business Units, Subsidiaries and Off Shore
Branches give back to their local community through
BSP’s Community Projects. All staff volunteer their
time, to contribute in community work to deliver
a project for their chosen community. Whether it
be refurbishing a classroom, installing new tanks,
donating desks, maintaining a basketball court, or
even installing new wash basins to promote washing
of hands, as our response to combat the spread of
COVID-19.
144
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReportBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021 Our Community Projects in 2021
38
Community Projects delivered through branches in Papua New Guinea.
Branch
Aitape
Alotau
Arawa
Bialla
Boroko
BSP First
BSP Haus
Buka
Bulolo
Daru
Gordons
Goroka
Kainantu
Kavieng
Kimbe
Kiunga
Kokopo
Project Recipient
Pes Sub Health Centre
Goilanai Primary School
Arawa Primary School
Selesege Primary School
Sabuia Primary School
St Paul's Primary School
Kupiano Primary School
Lonahan Primary School
Buang Health Centre
Project Description
Solar Kit for Light and Appliances to Pes Sub Health Centre
Refurbishment of Multipurpose Court at Goilanai Primary School
Provision of Desks for Arawa Primary School
Provision of school desks for Selesege Primary School
Provision of Desks for Sabuia Primary School
Refurbishment of St Paul's Primary School Ablution Block
Solar Power Installation for Kupiano Primary School
Provision of desks to Lonahan Primary School
Refurbishment of the Buang Health Centre
Daru Chalmers Primary School
Provision of Desks for Daru Primary School
Sacred Heart Primary School
Provision of Desks for Sacred Heart Primary School
Goroka Town Market Bustop
Refurbishment of Goroka Town Bus Stop
Kafetina Primary School
Kaselok Primary School
Sasavoro Health Centre
Montfort Primary School
Construction of Basketball Court at Kafetina Primary School
Ablution block renovation for Kaselok Primary School
Solar Power Installation at Sasavoro Health Centre
Provision of Desks for Montfort Primary School
Kokopo Anglicare Elementary School
Supply of school desks for Kokopo Anglicare Elementary School
Kundiawa
Pari Health Centre
Solar Power Kit Installation for Light and Appliances for Pari Health Centre
Lae Commercial
Labu Tale Primary School
Completion of Classroom building at Labu Tale Primary School
Lae Market
Bowali Primary School
Construction of Basketball Court at Bowali Primary School
Lae Top Town
Yambo village Aid Post
Refurbishment of Yambo village Aid Posts
Lihir
Lorengau
Madang
Mendi
Moro
Olekowa Primary School
Supply of school desks for Olekowa Primary School
SDA Lorengau Basketball Court
Refurbishment of the Lorengau Basketball Court
Kusbau Primary School
Munhiu Primary School
Kaipu Health Centre
Provision of desks for Kusbau Primary School
Provision of Desks for Munhiu Primary School
Solar Kit for Light and Appliances to Kaipu Health Centre
Mt Hagen
Minj T Primary School
Provision of Desks for Minj T Primary School
POM
St Therese Primary School
Minor renovation and Provision of Desks for St Therese Primary School
Popondetta
Ijika Primary School
Provision of desks for Ijika Primary School
Porgera
Rabaul
Tabubil
Tari
Vanimo
Wabag
Waigani BC
Waigani Dr
Wewak
Laiagam Police Station
Solar Power Installation at Laiagam Police Station
Tomatani Elementary School
Supply of desks for Tomatani Elementary School
Tabubil Primary School
Tari Admin Primary School
Lote Sub Health Centre
Refurbishment of the Tabubil Primary School Basket Ball Court and donation of desks
Provision of desks for Tari Admin Primary School
Installation of Solar Power for Lote Sub Health Centre
Mommers Oval Grand Stand
Construction of Mommers Oval Grand Stand
Kouderika Primary School
Provision of Desks for Kouderika Primary School
Kerema Town Basket Ball Court
Refurbishment of the Kerema Town Basketball Court
Mongniol Primary School
Desks donation for Mongniol Primary School
145
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReportBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021 Our Community Projects by SBUs &
BSP Subsidiaries
11
Community Projects delivered through SBU & Subsidiaries in Papua New Guinea.
SBU
Compliance
Corporate
Project Recipient
Project Description
Bavaroko Elementary School
Minor refurbishment and provision of desks
Boera Primary School
Provision of desks to Boera Primary School
Credit & Risk Management
Kwikila District Hospital
Provision of standby solar kit
Digital
Doa Health Centre
Installation of solar lights for Doa Health Centre
Finance & Planning
Vula'a Rivilina Elementary School
Supply of school desks
HR
Directorate of Social Change and Mental Health
Services
Donation of video conferencing equipment
Lae Corporate & BSP Finance
Busu Secondary School
Refurbishment of Science Lab
Marketing Committee/CEO
Selection
Gerehu Callen Services Education Resource
Centre
Classroom refurbishment and supply of school desks
Operations & IT
Kaugere Meri Seif Haus
Refurbishment of the Kaugere Meri Seif Haus
Retail
Treasury
Gaire Village roadside market
Refurbishment of the Gaire Fish Market
Tatana Village
Tatana Village netball and volleyball court refurbishment
3
Community Projects delivered through BSP Subsidiaries
Subsidiaries
BSP Capital
BSP Finance
BSP Life
Project Recipient
Total Junction Market
Bomana CIS Clinic
Project Description
Construction of the Total Junction Market Shelter
Provision of solar powered water pump, water tank and handwash station
to Bomana CIS Clinic
St. Charles Lwanga Secondary School
Refurbishment of the St. Charles Lwanga Secondary School Library
146
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReportBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021 Our Community Projects in the Pacific
4
Community Projects delivered through our branches in the Pacific.
SBU
Samoa
Tonga
Solomon Island -
Munda Branch
Solomon Island -
Gizo Branch
Project Recipient
Vailele Primary School
Ladies Connect
Project Description
Vailele Primary School Library refurbishment
Refurbishment of St Paul's Hall as an SME Centre
Madali Primary School
Donation of desks to Madali Primary School
Vonunu National Secondary School
Construction of basketball court for Vonunu National Secondary School
Financial Literacy and Banking Education
Delivering Financial Literacy in PNG
127
Cer�fied Financial
Literacy Trainers
since 2017
6,692
par�cipants since
2017
49%
3,328 female
par�cipa�on
since 2017
300+
students reached
in 2021 under the
Brisbane Broncos
Community Partnership
147
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReportBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021