“
Our digital channels experienced exponential growth in
2022, especially on BSP’s Mobile Banking (*131#) service;
reaching over 11 million transactions a month and over
130 million transactions at the end of the year. Out of the
1.5 million BSP customers in PNG, around 380,000
customers use Mobile Banking every month.
”
Nuni Kulu, General Manager – Digital
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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Management Teams
Executive Management
Broader Group
Overseas and Subsidiaries Directory
Subsidiaries
PNG Branch Managers
PNG Branch and Sub Branch Directory
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Corporate Social Responsibility
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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.
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.
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-development
to achieve standards of
excellence in our
performance.
Chairman’s
Report
Sir Kostas Constantinou, OBE
4
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022
Chairman's Report
BSP’s mission, our reason to exist, is to help
our customers, employees, shareholders
and communities prosper, conveying the
role we play in supporting Papua New
Guinea and the South Pacific’s economic
growth. Accordingly, I am very pleased to
see that our customers, staff, communities
and shareholders are benefiting from BSP’s
record NPAT of K1.08 billion for 2022.
While 2022 has seen some positive changes
as we have learned to live with COVID-19,
geopolitical tensions, coupled with rising
costs and associated inflationary control
measures have created an environment of
growing global economic uncertainty.
to deliver these sustainable profits, while
at the same time maintaining capital
discipline and ensuring prudent balance
sheet management. We concluded 2022
with capital adequacy and leverage ratios
of 24.6% and 9.9% respectively, well above
minimum prudential requirements.
Our improved 2022 performance has allowed
the Board to declare a final dividend of K1.40
per share, taking the total full year dividend
to K1.74 per share. BSP Shareholders
will receive K813.5 million
in dividends
attributed to BSP’s 2022 performance. The
latter represents a 0.5% increase on 2021
dividends received by BSP shareholders.
Locally, the Additional Company Tax of K190
million was introduced in 2022, subsequently
replaced by an increase in all PNG banks’
company tax rate from 30% to 45%, effective
1 January 2023. We also maintained our
operations, with little disruption, after 84%
of Tonga's population was affected by the
January 2022 tsunami disaster, which caused
an estimated USD90 million in damages to
the country’s infrastructure.
Despite these external challenges, BSP
continues to demonstrate its resilience by
delivering a 5.7% improvement in underlying
2022 profitability to K1.14 billion, excluding
one-off tax impacts. Further, we continue
The Board is pleased with management’s
continued tightening of operating discipline
across the Group, with increased investment
in both our risk and compliance functions.
Pleasingly,
the Financial Analysis and
Supervision Unit (FASU) has advised BSP
that no penalties, or fines, will be levied in
relation to the most recent external audit
of BSP Group’s Anti-Money Laundering
and Counter Terrorist Financing (AML/CTF)
policies and procedures. FASU has advised
they will continue to monitor progress on
the execution of BSP’s initiatives designed to
improve the level of compliance with AML/
CTF policies and procedures.
STRATEGY
BSP continues to monitor and explore growth
opportunities in new and existing markets,
consolidating our position as the South
Pacific’s leading bank. When opportunities
present, our ASX listing will allow BSP to
raise foreign currency required to realise our
non-organic growth ambitions.
Our organic growth strategy
is running
parallel to the above. The provision of
market
leading banking services to the
large unbanked segments of PNG and
Pacific markets remains a central focus for
the Board. While we recognise that access
to banking services is key to unlocking
the economic potential of the people and
communities where we operate, a more
measured expansion is likely in PNG with the
increase in PNG Bank's corporate tax rate to
45%.
In the first half of 2023, BSP will significantly
improve its technological foundations by
switching to Oracle’s FLEXCUBE Core Banking
System. This half-a-billion kina investment
will strengthen our defences against the
growing global threat of financial and cyber-
crime and enable greater emphasis on
digital, data, and analytics.
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The Board visit to Kundiawa Branch|The Board is committed to ensuring diversity in our workforce and continually looks to increase
female representation in senior management roles.
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022
5
Chairman's Report
The Board is committed to ensuring diversity in
our workforce and continually looks to increase
female representation in senior management
roles. In 2022, we were represented with four
female Country Managers in Tonga, Samoa,
Solomon Islands and Lao. In addition, we
have four female General Managers in the
Group executive team, with responsibility for
Group Compliance, People & Culture, Digital,
and Offshore Branches.
BSP’s Leadership
and Management Development Program will
continue to provide a strong pipeline of future
female leaders, with females currently making
up over half of program participants. Further,
training and recruitment initiatives have been
implemented to ensure BSP’s digital, information
technology and cyber security capabilities
continue to evolve to meet our future needs.
BSP will only ever be as good as its people and
these investments and initiatives will underpin
BSP’s future growth in our markets across the
Pacific and in South East Asia.
BOARD RENEWAL
In April 2022, we welcomed Patricia Taureka-
Seruvatu as a Director of BSP. Patricia is a
highly experienced lawyer with over 30 years’
experience
superannuation,
property, commercial and corporate services
industries in PNG. She has previously served
legal,
the
in
as Company Secretary for Nambawan Super
Limited from 2001 to 2019 and is currently the
Company Secretary and General Counsel at
Dirio Gas & Power Company Ltd. She holds a
Bachelor of Laws from the University of Papua
New Guinea and is a member of the Australian
Institute of Company Directors and the Papua
New Guinea Institute of Directors.
At the same time, we farewelled Ernest Gangloff,
who retired as a BSP Director after completing
his tenure in line with regulatory requirements.
Ernest has served as a Board Member since
2013 and as Chairman of the Board Audit and
Compliance Committee since April 2017. He
added experience and contributed enormously
to
the strategic direction and successful
performance of BSP Group during the years of
his tenure.
I have been honoured to serve as BSP’s
Chairman since 2011, through a time when the
Bank’s earnings have increased by 128%, or K606
million, from K475 million in 2011 to K1.081
billion in 2022. At the same time, we addressed
a number of complex challenges, increased our
South Pacific and South East Asian footprint
and subsequently delivered positive outcomes
for our customers, people, communities and
shareholders.
It has been a privilege to work with my fellow
Directors, Managing Director and Group Chief
Executive Officer, Robin Fleming, and his
executive team. The timing is now right for
a smooth transition to BSP’s next Chairman,
Robert Bradshaw, to lead the Group on its next
growth phase. Robert has substantial board and
executive leadership experience, having served
on a number of Boards prior to being appointed
to the BSP Board in September 2017 and is
currently the Chairman of Post PNG Limited.
Prior to his appointment to Group Chairman,
Robert was Chairman of the BSP Board
Remuneration and Nominations Committee.
The Board and I would also like to acknowledge
the significant contribution of our former
Managing Director and Group Chief Executive
Officer Robin Fleming who has been able to
successfully deliver on the Board’s strategy and
its ambitious growth objectives. I would like to
thank Robin for serving three terms as Managing
Director and Group Chief Executive Officer,
retiring nine years after his appointment and 42
years in total with the Bank.
Following a rigorous and competitive global
executive search which considered highly
credentialed candidates globally and across the
Pacific region, Mark Robinson was selected by the
Board to succeed Robin. Mark’s previous roles
include Chief Executive Officer of Commercial
Bank International, a publicly listed bank based
Robert Bradshaw and Sir Kostas Constantinou|Bank earnings have increased from K475 million in 2011 to K1.081 billion in 2022 under
Sir Kostas' leadership.
6
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022 Chairman's Report
Chairman Sir Kostas Constantinou and Group CEO Robin Fleming|Robin retires after serving nine years as Group Chief Executive Officer
and 42 years with the Bank.
in the United Arab Emirates, Chief Executive Officer of ANZ Banking
Group’s operations for Southeast Asia and prior, numerous senior
executive roles with Citibank, including in India, Russia, Turkey and
Hungary. Mark has invaluable expertise across global emerging
markets in wholesale, retail and investment banking and is the ideal
person to lead the Group in its next phase of growth.
FINANCIAL PERFORMANCE
Our 2022 revenue increased by 9.6% to K2.6 billion. Revenue growth
drivers included higher volume related interest revenue, coupled
with better foreign exchange flows and fee income, which were up
by 8.8%, 11.2% and 13.1% respectively.
Group expenditure increased by 11.3% to K989.3 million, largely as a
consequence of increased investment in employees and technology
to facilitate the transition to the FLEXCUBE core banking system
in early 2023, coupled with increased resourcing in the Retail,
Operations and Compliance teams to support customer growth, and
higher property maintenance costs.
Improving economic conditions have contributed to better credit
quality, resulting in a net impairment credit of K5.4 million in 2022.
OUTLOOK
The PNG LNG’s construction phase from 2010 to 2014 had a material
impact on economic growth in PNG and the kina’s appreciation
over the period. Accordingly, recent announcements relating to the
Papua LNG and P’nyang LNG projects indicate that negotiations are
progressing well, and if a tangible agreement can be reached we could
start seeing increased investment in resource-adjacent industries in
2023, with Papua LNG construction expected to commence in early
2024.
Finally, as I will be retiring from the Board in early 2023, I would like
to thank you for your ongoing support as shareholders. I would also
like to recognise my fellow Directors who I have worked with since
joining the Board in 2009 and accepting the role of Chairman in 2011.
I see no impediments to BSP’s growth journey continuing, with its
4,500 exceptional people working hard for its growing BSP customer
base. Consequently, the Board and I are confident BSP will have
the economic conditions, people and financial strength to execute
effectively against its 2023 strategy and beyond.
The PNG economy and economies across the Pacific have benefited
from the opening of borders to international travellers. This resulted
in a strong rebound in Fiji’s banking activity and lending growth.
With all our markets forecast to return to growth in 2023, we see this
trend continuing over the short-term.
Sir Kostas Constantinou, OBE
BSP Group Chairman
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Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022 A Brief History of BSP
BSP is the leading bank in PNG 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 then in PNG in 2015, followed by Cambodia
and Solomon Islands in 2017, and Lao in early 2020. BSP
Life PNG commenced operations in 2018 and currently
offers a suite of products including life, endowment and
loan insurance products to the PNG market.
BSP listed on the Port Moresby Stock Exchange (now PNGX
Markets) in 2003, and successfully listed on the Australian
Securities Exchange (ASX) in 2021. The company name
was amended to BSP Financial Group Limited at the time
of the ASX listing.
BSP continues to invest in technology and the capabilities
of our staff, with advancements in data protection and
information technology in 2022. A key achievement is the
improvement of our 3D Secure Authentication protocol
in compliance with Payment Card Industry Data Security
Standards. BSP also continues to invest in Anti-Money
Laundering and Counter Terrorist Financing compliance
to cater to our growing customer base as the Group
expands in existing and new markets.
8
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022
Key milestones in BSP’s
development
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BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022
9
195719742002200620092015/201620181993200320072014/201520172020Commenced opera�ons in Port Moresby in May 1957, as a branch of Na�onal Bank of Australasia Ltd.BSP was incorporated as the 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.BSP merged with the state-owned Papua New Guinea Banking Corpora�on (PNGBC).BSP listed on the Port Moresby Stock Exchange (renamed to PNGX).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.Commenced BSP Finance (Fiji) Ltd in 2014 and commenced BSP Finance (PNG) Ltd in 2015. Acquired Westpac’s opera�ons in Solomon Islands, Cook Islands, Samoa, Tonga and Vanuatu.Commenced Asset Finance opera�ons in Cambodia in May 2017 (rebranded to BSP Finance Cambodia Ltd in January 2018) and commenced BSP Finance (Solomon Islands) Ltd in September 2017.Commenced a life insurance business in Papua New Guinea on January 2018.Established Lao Asset Finance Business in 2020.2021BSP listed on the AustralianSecuri�es 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”.
Board of Directors
SIR KOSTAS G. CONSTANTINOU, OBE
Chairman. Non - Executive Director since April 2009. Appointed Chairman in 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 Chair of the Board in February 2011. He is also Chair of the Disclosure Committee.
Separately from BSP, Sir Kostas is also the Chairman of its subsidiaries BSP Finance Limited, BSP Capital Limited,
Bank South Pacific (Vanuatu) Limited, Bank South Pacific (Samoa) Limited and Bank of South Pacific Tonga Limited.
Sir Kostas is also the Chairman of various other companies, Airways Hotel and Apartments Limited, Lamana Hotel
Limited, Lamana Development Limited, Hebou Constructions (PNG) Limited, Monier Limited and Air Niugini Limited
to name a few.
His other directorships include Gazelle International Hotel in Kokopo, Loloata Island Resort Ltd, Coastwatchers Court
Ltd, Waigani Assets Ltd, Moki No.10 Limited, Heritage Park Hotel in Honiara, Solomon Islands, Taumeasina Island
Resort in Samoa, and Good Taste Company in New Zealand. Aside from his many directorships, Sir Kostas is also the
Honorary Consul for Greece and Cyprus in Papua New Guinea and the Trade Commissioner of Solomon Islands to
PNG.
ROBIN GERARD FLEMING, CSM, MBA, MMGT
Group Chief Executive Officer. Director since April 2013
Robin Gerard Fleming was appointed Group CEO and Executive Director of BSP in April 2013, and he retired in
December 2022. He has served as Executive Director on a number of BSP’s subsidiaries including BSP Capital Limited,
BSP Finance Ltd, BSP Life (Fiji) Limited and Bank of South Pacific Tonga Limited.
Before his appointment as Group CEO, he was Deputy Group CEO and Chief Risk Officer since 2009. Prior to this role,
Mr. Fleming held senior executive roles, including General Manager Corporate & International, and Head of Risk
Management. Mr. Fleming also held senior management roles with Papua New Guinea Banking Corporation (PNGBC),
prior to its merger with BSP.
He has worked in PNG for over 40 years and holds a Master of Business Administration and a Master of Management
from Charles Sturt University.
Mr. Fleming was recognised by the PNG Government and made a Companion of the Star of Melanesia (CSM) in 2015,
for his services to banking and the community. He was also made Honorary Professor in Banking and Finance by the
University of Papua New Guinea’s School of Business and Public Policy in 2022, for his contribution to the country and
community, particularly in the area of banking and finance.
10
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022
Board of Directors
ROBERT BRADSHAW, LLB
Non - Executive Director. Director since September 2017
Robert George Bradshaw was appointed to the BSP Board in September 2017 and is currently Chair
of the BSP Board Remuneration and Nominations Committee.
Mr. Bradshaw holds a Bachelor of Laws (with Honors) from the University of Papua New Guinea
and has practiced law for over 25 years. He was formerly a Partner at the law firm Blake Dawson
Waldron (now Ashurst) and commenced practice in his own firm, Bradshaw Lawyers, in 2005. An
experienced litigator, Mr. Bradshaw has been involved in different areas of law, particularly in resource
development, industrial relations, banking and finance and commercial litigation.
Mr. Bradshaw was formerly the Deputy Chair of PNG Power Limited and is currently the Chair of Post
PNG Limited.
SYMON BREWIS-WESTON, BECON (HONS), MAPPFIN
Non - Executive Director. Director since April 2021
Symon George Brewis-Weston was appointed to the Board in April 2021 and is currently a member of
both the Board Audit and Compliance Committee and the Board Risk Committee.
Mr. Brewis-Weston possesses extensive international experience in financial services and a deep
understanding of consumer and business markets in the Asia-Pacific region. He is also a director on the
board of Money3 Corp. Ltd, Timelio Pty Ltd and Mercurien Pty Limited. He was formerly CEO of FlexiGroup
from 2016 to 2018. Prior to joining FlexiGroup, he held the positions of CEO & Executive Director at
Humm Group Ltd, Executive General Manager—Corporate Financial Services at Commonwealth Bank
of Australia (CBA), and Chief Executive Officer at Sovereign Assurance Co. Ltd (NZ), a subsidiary of CBA.
Mr. Brewis-Weston held various senior leadership positions at CBA for 15 years. He spent six 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.
11
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022
Board of Directors
12
FAAMAUSILI DR. MATAGIALOFI LUA’IUFI, BA, MSC, PHD
Non - Executive Director. Director since December 2016
Faamausili Dr. Matagialofi Lua'iufi was appointed as a Director in December 2016. Since joining BSP, Faamausili Dr.
Lua'iufi became a member of the Remuneration and Nominations Committee. In 2020, Faamausili Dr. Lua’iufi was
appointed to the board of BSP subsidiary BSP Finance Limited, and also in the same year appointed to the board of
Bank South Pacific (Samoa) Limited.
Faamausili Dr. Lua’iufi is an experienced public sector practitioner and consultant, holding a PhD in Management, a
Masters in Management Sciences and a Bachelor of Arts in Sociology and Political Science. Prior to establishing her
own consultancy firm in late 2008, Faamausili Dr. 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 Samoan Public Service
undertook various change management programs to improve service delivery.
Faamausili Dr. Lua’iufi served in many 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. Lua’iufi has performed
more than 50 consultancy assignments in the domains of Human Resources Management, Organisational
Development, Performance Management and Governance.
Faamausili Dr. Lua’iufi is a member of the Australian Institute of Company Directors, the Papua New Guinea Institute
of Directors, Samoa Institute of Directors and Samoa Human Resource Institute. From 2007 to 2012, Faamausili Dr.
Lua’iufi was the Pacific Residential Scholar of the Australia New Zealand School of Government and was a member
of the ANZSOG team responsible for the development of emerging young Pacific public sector leaders.
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 is currently the Chair of the Board Audit and
Compliance Committee and also a member of the Board Risk Committee.
Mr. Sam is a qualified accountant registered under CPA Papua New Guinea and has been in professional practice
for over 26 years. He is the Audit and Managing Partner of Sam Kiak Tubangliu Certified Practicing Accountants.
Before going into private practice, Mr. Sam spent over 15 years working for global accounting firms in senior roles
specialising in external and internal audit and risk management.
He holds a Bachelor of Commerce from the University of Papua New Guinea, and is a Graduate of the Australian
Institute of Company Directors.
Prior to joining the Board of BSP, he served on the National Superannuation Fund Limited’s Board Audit and Risk
Committee and is a serving member of the Papua New Guinea Accountants Registration Board. In 2021, Mr. Sam
was appointed Chair of Muyua Dal Ltd to represent the landowner interest in the Woodlark Gold Project in Milne
Bay Province.
FRANK BOURAGA, CPA, MAICD
Non - Executive Director. Director since December 2020
Frank Dobi Bouraga was appointed to the Board in December 2020, having previously served as an Independent
Committee Member of its Board Audit and Compliance Committee since October 2018, of which he remains a
member to date.
Mr. Bouraga is a qualified certified practicing accountant with over 28 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 SP Hunters, and is a member of Certified
Practicing Accountants and the Australian Institute of Company Directors. He holds a Bachelor of Business (Accounting)
from Central Queensland University.
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022 Board of Directors
STUART DAVIS, LLB, GAICD
Non - Executive Director. Director since August 2017
Stuart Arthur Davis was appointed to the BSP Board in August 2017 and is currently Chair of the Board
Risk Committee and a member of the Board Audit & Compliance Committee.
Mr. Davis is also a Non-Executive Director of ASX 100 company NextDC Ltd, which builds and operates
data centres in Australia and is the Chair of its Remuneration Committee and member of its Audit and Risk
Committee. He is a Non-Executive Director of PayPal Australia Ltd and Chairman of its Risk Committee.
Since March 2022, he has been a Non-Executive Director of ASX-listed company Appen Limited and a
member of its Audit and 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 pre-tax 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 served as a member of the Australia Bankers Association from 2003 to 2009 during which
time he was Deputy Chairman from 2006 to 2009. He was also Chairman of the British India Chamber of
Commerce in Mumbai and of the Taiwan British Chamber of Commerce in Taipei.
Mr. Davis holds a Bachelor of Law Degree from the University of Adelaide and is a Graduate of the
Australian Institute of Company Directors.
PRISCILLA KEVIN, BSCS, MAICD
Non - Executive Director. Director since April 2020
Priscilla Kevin was appointed to the BSP Board in April 2020 and is a member of both the Board Risk
Committee and the Remuneration and Nominations Committee. Ms. Kevin is also a director of its
subsidiary BSP Finance (Fiji) Pte Limited.
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.
She is a board member of PNG Digital ICT Cluster Inc., a member of the PNG University of Technology’s
Industrial Advisory Board, a working group committee member of the Centre of Excellence for Financial
Inclusion, and sits on the council of the Institute of National Affairs.
Ms. Kevin holds a Bachelor's Degree of Science in Computer Science (with merit) from the Papua New
Guinea University of Technology and is an advocate and founder for Papua New Guinea Women in STEM,
and PNG Digital ICT Cluster Inc., promoting local talent, entrepreneurship, investment and innovation.
PATRICIA FRANCES TAUREKA-SERUVATU, LLB, MAICD
Non - Executive Director. Director since April 2022
Patricia Frances Taureka-Seruvatu was appointed to the Board in April 2022 and is currently a member of
the Remuneration and Nominations Committee.
She is a lawyer by profession, holding a Bachelor of Laws from the University of PNG and having been
admitted to practice law in Papua New Guinea (PNG) in 1988.
Mrs. Taureka-Seruvatu has over 30 years experience in legal, superannuation, property, commercial and
corporate services in PNG. Mrs. Taureka-Seruvatu is a member of both the Papua New Guinea Institute
of Company Directors and the Australian Institute of Company Directors.
She is currently employed as the General Counsel & Company Secretary for Dirio Gas & Power Company
Limited. Prior to this, Mrs. Taureka-Seruvatu served as Company Secretary for Nambawan Super Limited
from 2001 to 2019.
13
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022 Group CEO'S
Report
Robin Fleming, CSM
Group Chief Executive Officer
14
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022 Following more than two years of COVID-19
related impacts on the lives and businesses
of our customers and our staff, travel
restrictions were eased and borders
largely re-opened over the course of 2022.
Consequently, the countries in which BSP
operates saw business conditions return
to a large degree of normalcy. Though
there were some lingering effects as a
consequence of controls related to health
security, which were designed to mitigate
the impact on health systems and reduce
the loss of life associated with COVID-19.
Pleasingly, everyone was able to return to a
way of life that did not have to deal with the
uncertainties and unknowns of COVID-19.
Borders reopened gradually, tentatively at first
then far more confidently without quarantine,
isolation or testing regimes, between Papua
New Guinea and Australia, between Fiji and
its major tourism markets, and for all other
countries throughout the course of the year,
resulting in BSP’s businesses maintaining their
strong profit trajectory in the majority of our
countries. Transactional activity rebounded
strongly, especially that associated with
tourism, and businesses again saw the need
for expansion and investment, which our
Retail and Corporate lending teams were
able to support. Foreign exchange flows grew,
which led to better revenue associated with
our Treasury teams.
both
contributed
Our 2022 statutory net profit outcome of
K1.08 billion, was an outstanding result and
all of our staff at BSP are to be congratulated
for their achievements. Improved business
conditions
directly
and indirectly to our net profit after tax.
The direct impact was a consequence of
increased business activity and more positive
business sentiment, and
indirectly with
favourable economic conditions and business
profitability returning. Our credit risk ratings
permitted specific COVID-19 related model
adjustments to be released, with BSP relying
on its risk rating model for determination of
credit provisions.
The financial result was even more pleasing
when it is recognised that this was despite the
PNG Government introducing the Additional
Company Tax of K190 million that applied
only to BSP in the banking sector. BSP has
challenged this tax by way of judicial review
in the Supreme Court of Papua New Guinea,
and we have been joined as interveners by
two of our largest shareholders, Nasfund
and Nambawan Super Limited. It is expected
that the review will be heard in the middle of
2023. The K190 million has been expensed in
our 2022 accounts, and pending the Supreme
Court decision the funds are held in an
escrow account with Bank of PNG, supported
by a legal agreement between BSP and the
Internal Revenue Commission of PNG.
Group CEO's Report
The Additional Company Tax of K190 million
that applied only to BSP, was changed in the
PNG Government’s 2023 Budget that was
passed by Parliament in November 2022,
with the Additional Company Tax having
a sunset clause that had the effect of it not
being applicable in 2023. It was replaced by
a change to the tax rate for PNG licensed
banks by the Bank of PNG, from 30% to 45%.
As the market was informed on 14 December,
the estimated financial impact of a higher
Company Tax rate based on 2022 results is
expected to be approximately K220 million,
noting that the K190 million Additional
Company Tax will not apply in 2023. There
was a one-off positive adjustment of K135
million to the carrying value of the deferred
tax assets in our balance sheet for the 2022
financial year and it is not expected that there
will be any further adjustments in 2023 of a
similar nature.
liquidity
to domestic
Economic conditions improved in all the
countries we operate in and any concerns
relating
slowly
dissipated throughout the year. Growth in
gross domestic product for PNG of 4.6%
reflected an economy that was benefitting
from higher energy prices globally and
increased activity associated with the 2022
general election. As was experienced in other
countries, a combination of higher energy
prices, higher commodity prices and supply
inflationary
side constraints did
lead to
GCEO Robin Fleming meeting staff|Mr. Fleming greeting staff during his PNG Independence Day visits to all branches in Port Moresby.
15
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022 Group CEO's Report
pressures, with the Bank of PNG moving its monetary policy signalling rate
up by 25 basis points to pre-empt inflationary concerns. BSP responded by
increasing it lending rates by 25 basis points for most products, other than
our home loan and personal loan products, while simultaneously adjusting
deposits rates upward by a similar amount. This had the intended effect of
changes in lending and deposit rates being neutral to net interest income.
Across the other countries, Fiji’s GDP growth was the standout at 15.6% and
the rapid resumption of tourist travel contributed to business confidence,
consumer demand and asset appreciation for the investments of our BSP
Life Fiji business.
BSP GROUP PROFITABILITY [PGKm]
Entity
PNG Bank
Cook Islands
Fiji
Samoa
Solomon Islands
Tonga
Vanuatu
Subsidiaries
2022 NPAT
2022 vs 2021
804.9
4.8
140.3
24.3
34.3
20.2
2.7
49.6
-2.1%
-32.9%
26.3%
11.1%
4.6%
13.4%
-21.1%
1.2%
BSP maintained or grew its market share in all key lending markets, with PNG
at 65%, Fiji 26%, Cook Islands 33%, Samoa 29%, Solomon Islands 45%, Tonga
38% and Vanuatu 12%. To maintain market share at close to 65% in PNG
for a number of years now is a great reflection on our team of Corporate
relationship managers and the level of service provided by them to our
business customers. Our Corporate team in Fiji were also able to move
to, and maintain the number one market share leadership position in the
most competitive market in the Pacific. This required a sound, cohesive
team-based strategy with support from Head Office and our Country
Manager Haroon Ali. His Corporate team capably executed the strategy that
consolidated BSP’s position as the undisputed market leader in Fiji.
PNG CHANNEL TRANSACTIONS [m]
Channel
ATM
Digital
2018
2019
2020
2021
2022 CAGR
37.0
40.6
38.7
36.7
35.2
90.9
119.7
137.3
156.6
183.7
-1%
19%
5%
Branches & Sub-Branches
16.4
17.6
17.0
18.0
19.8
Total
144.3
177.9
193.0
211.3
238.7
13%
BSP has developed a number of payment and funds transfer solutions,
which have proven extremely popular with our retail customers in particular
to the extent that we now process 15 million digital transactions a month
across our suite of Digital solutions, with our most popular channel being
our mobile USSD banking service. The growth over the past three years
has been significant and this reflects the commitment of Digital to develop
products and Retail to roll out to our customers all around the country. Whilst
transactional volume growth in mobile payments for merchants and mobile
payments for school fees have not been as rapid as the more traditional
mobile payment solutions, the ability for SMEs and schools to be able to
receive payments from customers who are registered for mobile banking will
reduce the system dependency on cash for payments over time.
16
Notwithstanding the increase in mobile and digital banking transactional
activity, population growth in PNG has required our Retail business to further
expand and enhance our physical banking presence in PNG. We opened a
new branch at Eriku in Lae, which adds to our existing three branches in
Lae, and which has six teller stations and six customer service stations with
26 staff in total. The branch layout is modern and allows for customers to
familiarise themselves with our digital offerings with Wi-Fi and concierge
support. BSP also opened a purpose built Retail lending centre in Port
Moresby with 37 staff, who will provide dedicated service for personal loan
customers and housing loan customers in Port Moresby. It is also hoped that
the lending centre will reduce congestion at our Port Moresby branches. BSP
has also commenced work in conjunction with our landlords on a second
branch in Dobel, Mt Hagen in Western Highlands province which, will also
provide full service banking for customers in the nearby Jiwaka province. The
Dobel branch is scheduled to open by the middle of 2023, while branches
at Maprik, Telefomin, Gerehu, Lae Lending Centre and Tari will be either
upgraded or are scheduled for construction.
Our progress with the Go-Live of our new Oracle FLEXCUBE banking system
continued during the course of 2022 and the conversion to FLEXCUBE is
planned for the first half of 2023. As would be expected with a project of this
magnitude, the program involved a team of more than 60 BSP staff in PNG,
with partner support from Oracle, JMR, and 4impact, among others. Great
emphasis has been placed on risk and issue management, whilst ensuring
momentum is maintained for an effective Go-Live. All businesses have
had system training and awareness, and dress rehearsals have involved all
staff across all aspects of the business. Equally, post Go-Live, the Board and
Management will be focused on benefit realisation to maximise productivity
gains, minimise software license duplication from multiple surround systems
that are now part of the integrated FLEXCUBE solution, and also move our
customers to more self-serve support available with the digital solution,
which will be known as the BSP Digital Hub.
As would be expected of any financial institution, BSP continued to invest in
staff and systems to enhance and improve on Anti-Money Laundering (AML)
and Compliance outcomes. This has involved recruitment and training of staff
in AML as we build a team of professional staff who have the expertise to
manage an AML program for the largest bank in the region. Board committee
and Board oversight has been maintained and improved to ensure that our
directors have a complete understanding of BSP’s AML posture, and their
involvement reflects their commitment to the AML program as well.
With borders reopening around the region, we were able to resume
in person training for the 36 participants, 26 of whom are female, of our
Leadership Management Development Program (LMDP). The training
included six LMDP participants attending Melbourne Business School. There
were also five internal secondments, and two international secondments
for three weeks with the Brisbane Broncos and Firstmac. The Leadership
Development Program has been a great success since it was started in 2014,
and most notably there have been four program participants developed and
promoted to General Manager roles. BSP is also proud to promote another
female, Maryann Lameko-Vaai, to the position of General Manager Offshore
branches. She joins Hari Rabura, Nuni Kulu, and Vandhna Narayan as General
Managers, supported by Company Secretary Mary Johns. Maryann had been
the Country Manager in Samoa prior to her promotion and she is the first
Samoan to be appointed a General Manager of the BSP Group.
One of the many things that differentiates BSP from many other businesses
is our support of community projects across all countries. This continued
in 2022, with 68 projects across the region with themes of refurbishment
of school sports areas, solar for rural health, school desks, and upgrading
markets for SMEs. All our staff are actively involved in these projects, which
shows BSP’s tangible commitment to the communities we where we live and
work.
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022
Group CEO's Report
New Eriku branch opening|Population growth in PNG has required our Retail business to further expand and enhance our physical
banking presence in PNG.
Our Board led by our Chairman, Sir Kostas Constantinou, continued
to provided leadership and support to management, whilst
maintaining oversight of BSP’s operational performance, risk
management systems and governance.
The efforts of our staff across the group cannot be understated and
without their commitment, BSP would not have been able to achieve
the results it did in 2022. I thank them for the ongoing support of
BSP’s vision and delivery of much needed banking services to our
customers across the region. I also thank my staff, the Executive,
the Board and Shareholders for their unwavering support during my
term as Managing Director and Group CEO of BSP.
Robin Fleming, CSM
Group Chief Executive Officer
Introducing our new Group CEO
BSP Financial Group announced on 3rd November, 2022 the
appointment of Mark T. Robinson as Group Chief Executive Officer.
Mr. Robinson is a senior financial services executive and globally experienced
banking Chief Executive Officer with more than thirty years experience across
developed, developing and emerging markets.
Mr. Robinson’s appointment followed a rigorous and competitive global executive
search, which considered highly credentialed candidates globally and across the
Pacific region.
Mr. Robinson’s previous roles include Chief Executive Officer of Commercial Bank
International, a publicly listed bank based in the United Arab Emirates, Chief
Executive Officer of ANZ Banking Group’s operations in Southeast Asia, and prior,
numerous senior executive roles with Citibank, including regional responsibility
for South Asia, based in India, and other regional roles while based in Russia,
Turkey and Hungary.
Mr. Robinson assumed his responsibilities on 1st March, 2023.
17
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022 South Pacific
market leader
We continue to grow and build scale in pursuit of
sustainable market leadership and profitability
LENDING
DEPOSIT
K14.4bn
In net lending
K26.9bn
In deposits
DIVIDENDS PAID
K788.9m
Dividends paid
MARKET
CAPITALISATION
K5.8bn on PNGX
A$2.3bn 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
Eriku
Bulolo
Lae Top Town
Lae Market
Lae Commercial Centre
Daru
Popondetta
NORTHERN
Buka
AUTONOMOUS
REGION OF
BOUGAINVILLE
Arawa
CENTRAL
Alotau
MILNE BAY
NATIONAL
CAPITAL
DISTRICT
Port Moresby
Boroko Banking Centre
Gordons Commercial
Harbour City
Motukea
NCD Lending Centre
Waigani Drive
Waigani Banking Centre
Vision City
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
18
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022 PAPUA NEW GUINEA
Vanimo
Aitape
WEST SEPIK
Wewak
Lorengau
MANUS
EAST SEPIK
ENGA
Porgera
Wabag
MADANG
Madang
JIWAKA
WHP
Mt. Hagen
WEST NEW BRITAIN
Bialla
Kimbe
Tabubil
Kiunga
HELA
Tari
Mendi
SHP
Kundiawa
CHIMBU
Goroka
EHP
Kainantu
Moro
WESTERN
PROVINCE
GULF
MOROBE
Lae
Bulolo
Eriku
Lae Top Town
Lae Market
Lae Commercial Centre
NEW IRELAND
Kavieng
EAST NEW BRITAIN
Rabaul
Lihir
Kokopo
Buka
AUTONOMOUS
REGION OF
BOUGAINVILLE
Arawa
LAOS
CAMBODIA
Daru
Popondetta
NORTHERN
CENTRAL
Alotau
MILNE BAY
NATIONAL
CAPITAL
DISTRICT
Port Moresby
Boroko Banking Centre
Gordons Commercial
Harbour City
Motukea
NCD Lending Centre
Waigani Drive
Waigani Banking Centre
Vision City
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
19
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022 Group Historical
Summary
20
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022 Group Historical Summary
Profit and Loss (K’000)
2019
2020
2021
2022
Net interest income
1,391,784
1,447,012
1,603,259
1,745,060
Non interest income
779,566
704,422
768,912
853,952
Impairment of financial assets
(99,183)
(201,273)
42,655
5,359
BSP Group NPAT
K1.081bn
0.5% increase from 2021
Dividend paid per
Share
K1.74
0.6% increase from 2021
Capital adequacy
24.6%
well above the regulatory
minimum of 12%
Other operating expenses
(819,248)
(808,326)
(888,967)
(989,263)
Additional company tax
-
-
-
(190,000)
Operating Profit
Profit before tax
Income tax (expense)
Profit/(loss) after tax
Dividends (toea)
Dividends per share
Balance Sheet (K’000)
Net loans and advances
Total assets
Deposits
Capital
Performance Ratios
Return on Assets
Return on Equity
Expense/Income
Key Prudential Ratios
Capital adequacy
Liquid Asset Ratio
Leverage ratio
1,252,919
1,141,835
1,525,859
1,425,108
1,252,919
1,141,835
1,525,859
1,425,108
(362,556)
(335,617)
(450,641)
(344,039)
890,363
806,218
1,075,218
1,081,069
134.0
130.0
173.0
174.0
13,200,807
13,581,153
13,623,496
14,368,853
24,527,118
27,523,437
30,443,122
33,890,104
19,339,056
21,654,024
23,943,355
26,919,361
3,117,033
3,433,605
3,794,965
4,013,053
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%
3.4%
27.7%
38.1%
24.6%
37.7%
9.9%
Exchange rates [One (1) PNG Kina buys]:
US Dollar
AUS Dollar
0.2935
0.4188
0.2850
0.3700
0.2850
0.3927
0.2840
0.4191
Contributions by BSP to PNG
All amounts are expressed in K'000
2019
2020
2021
2022
Company income taxes paid to PNG
Government
Other taxes paid to PNG Government
(IWT, FCWT, BWT)
GST paid and not able to be recouped
Donations and Sponsorships
361,987
294,695
282,052
389,541
16,872
15,821
5,581
9,327
14,519
3,839
8,031
16,613
3,723
9,254
20,213
4,896
Total
400,261
322,380
310,419
423,904
Taxes paid to PNG
Government
K389.5m
Income Tax Payment in 2022
21
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022 Group Highlights
22
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022
The provision of
market leading banking
services to the large
unbanked segments of
PNG and Pacific markets
remains a central focus.
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022
23
Group HighlightsBroader GroupSubsidiariesCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic Report
Sales
Retail Banking | Corporate Banking | Digital | Treasury
RETAIL BANKING
2.6 Million
BSP Account
Holders in PNG
Over 70,000 SME
Accounts
3 SME Banking Centres
1 Specialised Lending
Centre
CORPORATE
BANKING
67.6%
Lending market
share in PNG
24
The Retail Banking Strategic Business Unit (SBU)
delivered another outstanding year in 2022, with positive
outcomes achieved from both financial and non-financial
perspectives. This was due wholly to the 1,588 staff in
Retail Banking, whose commitment and dedication to
BSP and our customers remained unwavering and they
are to be thanked for their efforts.
Financially, Retail Banking’s contribution to Group profits
has increased from 35% to 40% over the past two years,
making it the largest income generator in the Group and
highlights its importance to BSP’s overall performance.
Retail Banking core Net Interest Income was up 20% on
2021, driven by strong growth in our Unsecured Personal
Lending book across the year and was a significant
contributor to the Group’s total loan book growth. Retail
Banking’s Paramount Division continued to be pivotal
in driving Group deposit levels and the SBU continues
to manage the majority of PNG Bank’s total deposit
holdings. Our focus on Small-to-Medium Enterprises
(SME) continued, with over K229.5 million in lending as
part of the Government’s Credit Enhancement Scheme
Loan program in 2022. Since the inception of the
program, BSP has now lent over K310.1 million to more
than 1,600 customers as part of this scheme.
Non-Interest Income grew by 20% on the 2021 result,
largely driven by strong uplift in Digital Income and
particularly Merchant Service Fees, with BSP continuing to
maintain its position as EFTPoS terminal of choice across
PNG. Digital banking remains a core focus for Retail, with
investment into new Internet Payment Gateways, BSP
Pay and Mobile Merchant technology continuing during
the year. Digital transactions grew by 17.3% on 2021 with
the Mobile Banking channel being the channel of choice
for customers.
Non-financially, there were numerous highlights achieved
in 2022. Retail Banking’s Risk and Compliance function,
which received increased resourcing in 2021, was able
to deliver on that investment with strong outcomes
achieved across our key compliance areas. On the People
front, our continued focus on staff development resulted
in further promotions of our national staff though the
year to exemplify BSP’s ongoing drive to promote Papua
New Guineans into senior roles. Retail Banking, which
is the largest SBU in the BSP Financial Group, remains
a 100% Papua New Guinean workforce with over 53%
being female. Retail Banking's Senior Leadership Group
now comprises over 60% female to highlight the gender
diversity that exists within the organization.
Customer acquisition remained strong with a further
141,000 new customer accounts opened during the
year across all our segments. To reflect BSP’s ongoing
commitment to supporting PNG, BSP opened new
Branches in Koroba in Hela Province; Namatanai in New
Ireland Province; Palmalmal in East New Britain Province;
Eriku, Lae in Morobe Province; and a new Lending Centre
in the National Capital District. In addition, we also
completed ground breaking ceremonies in Telefomin,
West Sepik Province and Dobel in Western Highlands
Province, both of which will open in 2023. BSP now has
86 branches and sub-branches operational across PNG
and BSP is the only commercial bank operating in 21
locations. During the year, we also commenced rollout
of 120 new ATMs as part of our ATM refresh exercise to
improve ATM uptimes for our customers, and invested
further in terminals as part of our capital expenditure
program. BSP now has 326 ATMs in operation and over
9,000 EFTPoS terminals on issue.
On the community front, Retail delivered 49 projects
valued at K1.6 million in each of the provinces we are
located, to assist our local communities. Group Marketing
Business Unit was also pivotal in our delivery of social
license to operate initiatives, with a total of K2.4 million
in sponsorship and donations provided in 2022.
In addition to our banking activities, Retail Banking has
been preparing both its staff and customers for the rollout
of BSP’s new Core Banking System, FLEXCUBE, in 2023.
Our staff undertook intensive training during the year,
utilising a combination of physical and virtual channels to
ensure we can deliver customers the full benefit of our
new banking system.
Looking ahead, 2023 will be a transformational year for
BSP and for Retail Banking, with the rollout of our new
Core Banking System, delivering many benefits for our
customers. Retail will be firmly focused on ensuring
customers receive the full benefit of our new world class
system and focus on improving our customer experience
in all areas.
We thank our 2.6 million account holders for their loyalty
and support and we look forward to an exciting 2023.
BSP Corporate Banking maintained its leading position
within PNG, meeting the needs of its Commercial,
Institutional, and Government customers, with an overall
lending market share of 67.6%.
lending,
Our experienced relationship teams and product
specialists have expert knowledge
in transactional
banking,
infrastructure, digital and foreign
exchange. Our teams are located in the key regional
locations in Mt Hagen, Madang, and Kokopo, combined
with corporate centres 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 annual online customer survey,
the results of which indicate that BSP has 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.
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 access to online products, so
that customers could work remotely and maintain access
to their banking needs.
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022
DIGITAL
184 Million
Digital transactions
in PNG in 2022
11 million USSD Mobile
Banking transactions per
month
TREASURY
42.4%
FX Market Share in PNG
FX earnings rose by PGK9.3
million from 2021.
The Bank's FX turnover rose
14.9% in 2022.
Sales
Retail Banking | Corporate Banking | Digital | Treasury
Vodafone. Additionally, the payment of bills
for PNG Power, purchasing of airline tickets
from Air Niugini, and NCDC and Water PNG
utility bills, as well as education fees and small
business retail goods and services are available.
To support the Group’s expansion of digital
initiatives, our fintech joint venture, Platform
Pacific Limited, has delivered a world class
Internet Payment Gateway service for BSP
and developed a bespoke non-card online
payment platform, BSP Pay, which enables
to digital online
unprecedented access
payments for BSP’s 2.6 million account holders.
Platform Pacific is a home grown PNG-staffed
and nationally managed company supporting
BSP in increasing the digitalisation of bank
products and customer digital experience.
Markets in PNG and across the Pacific region
will be able to access Platform Pacific, as a
vendor of digital services. Increasing use of our
mobile and online payments and other banking
services by customers, will continue to reduce
the need for customers to visit our branches.
In our market, a number of fintechs have
emerged and are working across industries to
implement digital solutions, which is a positive
direction towards digitalisation for the benefit
of all consumers.
The Bank continued to invest surplus funds
in Government securities. Movements
in
the Government debt yield curve reflected
evolving fiscal conditions, and preference for
raising low-cost offshore debt at the expense
of domestic debt. The 28-day Central Bank Bill
rates rose from 1.29% to 1.90%, 91-day Central
Bank Bill rose from 1.96% to 2.69%, 182-day
Treasury Bills fell from 4.34% to 2.75%, whilst
364-day Treasury Bills fell from 7.20% to 4.30%.
Yields on 5-year Government-issued Inscribed
Stock fell from 9.70% to 5.44%, while 10-year
Government-issued Inscribed Stock yields fell
from 9.90% to 6.28%.
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 2023.
Key achievements for BSP’s Digital Strategic
Business Unit (SBU) were in digitising customer
interactions to make banking easier and more
convenient for them. Our 2022 results speak
to an increasing appetite by businesses for
online platforms and mobile payments. More
customers took to digital offerings than the
previous year, which resulted in 184 million
digital transactions by the end of the year.
Significant effort was made in driving digital
awareness in 2022, acknowledging the need
to move more of our existing customers to
our digital platforms, and to increase the
take-up rates of our digital offerings when we
open accounts for our customers. There was
exponential growth during the year on our most
popular channel, Unstructured Supplementry
Service Data (USSD) mobile banking services in
PNG, reaching nearly 11 million transactions a
month and closing the year with a record high
of 128.4 million transactions. In 2022, around
380,000 customers used mobile banking every
month.
includes
Our Digital Enablement Plan
partnerships with Government, and
large
and small businesses to drive digital adoption
across the market. The Plan encourages our
customers to use digital offerings and educates
them on the features available, which include
top up for Digicel, bmobile-Telikom and
BSP’s Treasury Strategic Business Unit (SBU)
fosters and enhances relationships with clients,
providing Financial Markets services, solutions,
and ensuring clients remain aware of the
regulatory environment and its implications.
Treasury’s Foreign Exchange (FX) earnings
rose from the previous year by 4%, reflecting
stronger FX inflows from firmer commodity
prices (particularly Oil, Palm Oil, Copper,
Cocoa 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 fell 10 bps over the year to
USD0.2840, but rose against the Australian
dollar (AUD) by 10.5% (400 basis points) to
PGK/AUD 0.4200. The fall in the AUD to below
USD0.6200 in October was largely a USD story
driven by widening interest rate differentials
between the USA and Australia as the USA
tackled
inflationary concerns with more
urgency than Australia. The weakness in cross
currencies cushioned PNG’s non-USD imports
from large price rises.
FX earnings in 2022 rose by K9.3 million from
the previous year. The Bank's FX turnover rose
14.9%.
25
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Group HighlightsBroader GroupSubsidiariesCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic Report Operations & Support
Group Risk Management | Finance & Planning | Operations & Information Technology |
People & Culture | Group Compliance
GROUP RISK MANAGEMENT
is responsible
The Group Risk Management Strategic Business
Unit
the effective risk
for
management across the Group, which 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,
for
identifying and managing risk in all activities are
in place.
and processes
BSP’s Credit Business Unit is responsible for
underwriting and monitoring BSP’s loan portfolio
within the Group Risk Appetite Statement
parameters. In addition to overall credit quality,
Credit oversees compliance with credit policies,
procedures, underwriting standards, stress testing
and adequacy of loan provisioning, monitoring
sector concentration
limits, management of
environmental and social risks, and loan portfolio
reporting.
FINANCE & PLANNING
The Finance and Planning (F&P) Strategic Business
Unit continues to effectively manage the Group’s
financial resources. Business forecasting is also
important, when market conditions are subject to
volatility, and F&P staff have delivered accurately
and effectively to management and the Board to
support decision-making.
In preparation for the Go-Live date of BSP’s new
FLEXCUBE Core Banking System, F&P continues
to work with the Core Banking project team to
ensure critical elements of the projects are tested
thoroughly. The major focus has been to achieve
efficiency and automation
in our reporting
function. F&P personnel are actively involved
in the data migration and reconciliation process
to ensure a smooth transition and transparency
for audit and compliance. The team continues
to enhance its general ledger reconciliation and
monitoring capabilities across the Group. This
has assisted with the successful completion of
financial audits by our external auditors, with
clean audit outcomes produced in a timely
manner.
The Data Analytics team continues 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
26
Key credit policies and procedures are regularly
reviewed to ensure that BSP is aligned with the
banking regulator, 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. In 2022,
the economic outlook was generally positive
for borrowers previously affected by COVID-19
impacts, as a consequence of borders reopening.
BSP continues to work closely with borrowers
in impacted sectors, as they recover and deal
with some of the flow on effects specific to their
operations.
Credit Risk training and staff development
continued to be 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 an ongoing structured
credit training program, focused on enhancing
BSP’s credit risk culture. This enhancement
through consistent application and
comes
implementation of key policy and procedures
supporting considered credit decision outcomes.
Information Security Business Unit
BSP’s
is
responsible for protecting the confidentiality,
integrity and availability of information under the
control of BSP Financial Group and its Subsidiaries,
and implements appropriate security controls
and processes to protect its information assets.
Information Security also focuses on continuous
cyber security threat analysis, vulnerability
assessment, monitoring and testing to ensure
information assets are safeguarded from cyber
security threats.
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 the Group. This unit also focuses
on the continuous improvement of the general
processes and controls, and strengthening the
first and second line of defences for BSP Financial
Group.
function. The Management Reporting team have
also progressed well with testing various business
reporting tools of the new Core Banking System.
Two (2) dedicated external experts provided
valuable assistance during the testing period
in 2022, with staff being trained on the various
reporting functionalities of the new Core Banking
System. These tools will enhance the Group’s
reporting capabilities and enhance efficiency
when providing timely and accurate reports to
various stakeholders.
The Procurement and Purchasing team continues
to support strategic business units with their
purchasing needs and remain an important point
of contact when dealing with existing goods and
services providers. Working closely with them is
the Accounts Payable team, which ensures that
BSP’s accounts are properly vetted and settled on
time, and any disputes are resolved amicably.
The Strategy team continues to manage the
strategic planning process,
investor relations
engagements, and reporting cycles. They also
coordinate the delivery of Board-mandated
strategic priorities across the Group ensuring that
the roadmap for benefit realisation is in place
with Country Heads and Executive Management
reporting against Board targets.
The focus for the Financial Risk Management
team in 2022 was preparation for FLEXCUBE
Go-Live. This involved the secondment of a
senior staff member from the team to the Core
Banking project team who was actively involved
in ensuring that there is a smooth transition from
current Treasury systems to the new Core Banking
System. The team was also actively involved
in training and development with the Core
Banking project team and external consultants,
and through regular internal analytics training
in preparation for Go-Live. The addition of the
Oracle Financial Services Analytical Applications
Asset & Liability program, will ensure that
detailed reporting will be provided to the Group
Asset & Liability Committee.
Leadership capabilities within the SBU also
continue to be recognised with a number
of promotions in 2022. Two (2) of our team
completed BSP’s
Leadership Management
Development Program, with another team
member entering in 2023. With the Go-Live date
for the new Core Banking System set for early
2023, staff upskilling continues to be our major
focus. We envisage improved productivity and
increased output and analysis with the switch to
the bank’s new Core Banking platform, and we
are confident that our staff are equipped with the
knowledge necessary to utilise the new features
in 2023.
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022
Operations & Support
Group Risk Management | Finance & Planning | Operations & Information Technology |
People & Culture | Group Compliance
Ground breaking ceremony for Dobel Branch, Mt Hagen|To support our retail and business customers we have expanded our Retail
branch network, with new sites opened in Eriku in Lae, Morobe Province and Palmalmal in East New Britain Province.
OPERATIONS & INFORMATION TECHNOLOGY
The Operations & Information Technology
Strategic Business Unit (SBU) 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.
To support our retail and business customers
we have expanded our Retail branch network,
with new sites opened in Eriku in Lae, Morobe
Province and Palmalmal in East New Britain
Province. Furthermore, we opened a first
of its kind dedicated Lending Centre in Port
Moresby. Additional branches in Telefomin
in Sundaun Province, and Dobel in Mt Hagen,
Western Highlands Province are expected to
open in 2023.
To address the increasing power outages
in PNG affecting our branch network, we
have implemented an N+1 prime generator
redundancy configuration
for our most
affected branches. N+1 redundancy is a form
of resilience that ensures system availability in
the event of component failure.
To enable instant and frictionless payment
transactions anywhere in the world, we have
transformed our SWIFT platform and our
compliance services. This enhances BSP’s Anti-
Money Laundering screening capabilities and
exception management processes resulting in
faster processing of payment transactions.
To address evolving Cyber Security threats, we
have implemented significant improvements
to control our Technology environments.
is now
Our software patching process
automated, where newly released patches
can fix bugs and security flaws, and can help
to enhance applications with new features
and fix security vulnerabilities. We have
also upgraded our User Authentication
environments and implemented a Privileged
Access Management and Monitoring Tool,
to safeguard identities with special access or
capabilities.
In addition, we have ensured that our
Internet Payment Gateways are 3D Secure
2.0 compliant with the latest update of the
3D Secure authentication protocol that allows
issuing banks to verify credit card owners
during the transaction process. Verifying card
owners can transfer liability for fraud disputes
away from the merchants who utilise 3D
Secure.
Finally, we ensured that we are fully compliant
with the requirements of the Payment Card
Industry Data Security Standard (PCI DSS). The
PCI DSS is a set of requirements intended to
ensure that all companies that process, store,
or transmit credit card information maintain a
secure environment.
In order to provide services that are more
efficient to our customers across the Pacific, we
have upgraded our Domestic and International
Data Communication links. We now provide 5
to 10 times more bandwidth using the latest
technology. Simultaneously, we have installed
a new information technology infrastructure
platform across all systems hosted in PNG,
providing more resilience, efficiency and
significant performance improvements.
The implementation of a new reconciliation
tool will ensure that BSP continues to create
accurate, high-quality financial statements in
a shorter period, with a reduced number of
staff. Also, in driving continuous improvement,
our Lending Support Business Unit, processed
24% more loans compared to the previous
year with the same number of full time
employees.
Following the successful implementation in
Vanuatu, the implementation of our next
generation Core Banking System (Oracle
FLEXCUBE) for Papua New Guinea is well on
track. FLEXCUBE is built to be able to keep
up with the rapidly evolving customer and
market dynamics in this digital age. Staff are
trained on all new functionalities in order to
assist our clients and meet their expectations
for quality service. Our next generation Core
Banking System is built with three major
considerations in mind: cost effectiveness;
high-speed transaction systems; and future
digital readiness/resilience.
27
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Group HighlightsBroader GroupSubsidiariesCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic Report Operations & Support
Group Risk Management | Finance & Planning | Operations & Information Technology |
People & Culture | Group Compliance
PEOPLE & CULTURE
The People & Culture Strategic Business Unit
(SBU), formerly known as Human Resources
SBU, had the opportunity to rebrand in 2022.
The name change is to align with the outlook of
the SBU, however human resources is the core
function of the SBU.
People & Culture provides strategic support to the
BSP Group’s employees through its core business
functions. In 2022, our focus has been on
service, employee experience and progressively
embedding a digital approach as a business-
as-usual function in our daily operations. We
continued with project initiatives which leveraged
existing systems that could enhance the employee
experience. Our main highlight in this regard is the
implementation and use of the Eventbrite App for
our main BSP Family Fun Day event.
The overall delivery of our Health & Wellness
Program for 2022 to PNG employees was a
success with a 94% satisfaction rating. Our
staff within the Nation’s Capital were able to
participate in our Health & Wellness games and
our online educational health sessions facilitated
by licensed medical professionals. The challenges
with COVID-19 shifted our focus to mental health
awareness and well-being for our employees and
we intend to continue with similar initiatives in
2023 and beyond.
With an easing in COVID-19 restrictions allowing
most PNG staff to travel into Port Moresby for
face-to-face training, our new Employee Induction
Training for the year had a total 274 staff inducted,
with 47 in person attendees and eight via Zoom
from Vanuatu. We had a record number of 103 in
attendance for our final quarter induction for the
2022 which was held in November.
Under BSP’s iCare initiative, the 2022 Imperative
was the “Customer/Bank of the Future” with
activities geared towards this Imperative. The
successful completion of the 2022 Imperative
across the Group was a key highlight for our SBU.
Nine (9) iCare Champions from across the region
presented their highlights, challenges and process
in two Executive Committee
enhancements
meetings.
People & Culture delivered 10 projects in 2022 for
overall operational excellence. The priority was
the continued support to improve our Recruitment
Process with the digitisation of the Change of
Position Details Form that complements our initial
Internal Job Application process on SharePoint.
In line with our goal to improve service delivery,
digitised forms and communication touchpoints
were utilised via SharePoint, HR21 and the BSP
Learning Portal. In addition, the iChris version
upgrade in 2022 (version 8.25) streamlined
processes with a “one-stop processing” approach
for new hire processing and an enhancement to
the main self-service portal’s user interface. We
have had positive user experience feedback since
the upgrade in 2022.
People & Culture continued to manage and
coordinate the Leadership and Management
Development Program (LMDP) and our Graduate
Development Program. These two programs are
essential to the growth and development of BSP’s
next generation of senior leaders across the BSP
Group. We have had significant international
training this year under the LMDP with in-person
trainings in INSEAD Singapore and Melbourne
Business School.
People & Culture support extends to the Offshore
Branches (OSBs) and Subsidiaries. A key highlight
this year was the completion of benchmarking
Fiji Bank’s position titles and job grade alignment
to BSP Group. Since becoming part of the BSP
Group, Fiji Bank position titles and job grades
were not in line with the BSP Group. With this
alignment exercise, management is now able to
compare similar positions across the Group and
make decisions in line with respective positions
and job grades. The team’s focus for supporting
the OSBs and subsidiaries is to ensure our policies,
processes and practice is consistent across the BSP
Group. Other highlights for the OSBs include the
appointments of the General Manager Offshore
Branches and the Country Head for BSP Vanuatu
and BSP Samoa.
Moreover, all our scheduled online surveys were
conducted and completed with pleasing results in
2022. Our overall Group-wide Staff Engagement
Survey was a high 87% engagement level and
our Health & Wellness satisfaction survey result
was an all-time high 94% rating. Additional
surveys include our Customer Service Survey
that we have to improve by 10% in 2023. The
support to Corporate Banking SBU with their
overall customer satisfaction survey in 2022 was
an outstanding result at 80%. These surveys are
critical in measuring and optimising our overall
employee engagement, experience and service
delivery.
People & Culture Team|People & Culture continued to manage and coordinate the Leadership and Management Development Program (LMDP)
and our Graduate Development Program.
28
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022 Operations & Support
Group Risk Management | Finance & Planning | Operations & Information Technology |
People & Culture | Group Compliance
Core Banking staff training|Staff undergoing training for the new Core Banking System.
GROUP COMPLIANCE
Group Compliance Strategic Business Unit
(SBU) was restructured in 2022, to address
the challenging compliance environment in
Papua New Guinea and meet the evolving
compliance needs of the Group, in particular
the Financial Crime Compliance field.
Sanctions Management; and, Anti-Bribery
and Anti-Corruption. FCCM also works closely
with the Transaction Monitoring Business
Unit for Know Your Customer (KYC) activities,
training across the Group, Technical AML
activities, and Program Management.
Group Compliance now has five (5) Business
Units, with two (2) third line of defence
Business Units (Internal Audit and Credit
Inspection) and three (3) new second line
of defence Business Units (Regulatory and
Policy Compliance, Transaction Monitoring,
and Financial Crime and Compliance
Management)
previous
replacing
Compliance and Anti-Money Laundering
(AML) Business Unit.
the
The Transaction Monitoring Business Unit has
overall responsibility for BSP’s Transaction
Monitoring Program. The Business Unit carries
out real time sanctions and AML monitoring
of Foreign Exchange (FX) transactions, and
Day 2 Monitoring of all transactions, using
a combination of automated and manual
The
Transaction Monitoring
Transaction Monitoring Business Unit has 27
staff.
Systems.
The Financial Crime and Compliance
Management (FCCM) Business Unit has
22 staff and has overall responsibility for
Financial Crime Compliance Management in
BSP. This includes the overall management of
three (3) Programs: Anti-Money Laundering
and Counter Terrorist Financing (AML/CTF);
The Regulatory & Compliance Business
Unit, which monitors the management of
compliance risk across the Group, focused
on identifying areas of improvement in 2022,
for implementation in 2023 and onwards.
Areas identified, which will be concentrated
on in 2023, include enhanced awareness
across the Group on regulatory compliance,
and the identification of issues via effective
monitoring of obligations and controls. The
Regulatory & Compliance Business Unit is
structured into Integration and Monitoring
teams.
the
Internal Audit (IA) function covers
The
the entire BSP Financial Group including
subsidiaries and branches based offshore.
Internal Audit adheres to the principles
required by the International Standard for
the Professional Practice of Internal Auditing
(ISPPIA),
Internal Audit Definition,
and Code of Ethics. It provides assurance
and a systematic, disciplined approach
to evaluate and improve effectiveness of
risk management,
internal controls, and
governance processes. It reports to the
Board of Directors through the Board Audit
and Compliance Committee (BACC). It seeks
BACC’s approval for the annual audit plan,
provides updates on accomplishments,
reports results of audits conducted and tracks
resolution of audit findings.
laws and
For the year ended 31 December 2022, IA
completed 144 audits across the Group
focusing on the design and operational
effectiveness of internal controls, compliance
with
regulations, especially
those related to AML/CTF, and Central
Bank Prudential Guidelines or Standards
requirements. IA attests to the fulfilment of
its mandated responsibilities and provides
overall assurance on the effectiveness of
internal control, risk management and
governance processes for the year ended 31
December 2022.
The Credit Inspection Business Unit, which
loan submissions,
independently assesses
compliance with
and
procedures and portfolio quality assurance,
completed 35 reviews in 2022. Seven (7)
reviews were undertaken onsite whilst 28
were conducted remotely.
credit policies
All 13 PNG Corporate portfolios have been
reviewed in the past 12 months, along with
all nine (9) Corporate Offshore Branch (OSB)
portfolios, 12 PNG Retail and 1 BSP Finance.
Group Compliance has 104 staff across its five
Business Units, and its expanded team will be
the SBU’s key strength going into 2023 and
onward.
29
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Group HighlightsBroader GroupSubsidiariesCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic Report BSP continues to
monitor and explore
growth opportunities in
new and existing markets,
consolidating our position
as the South Pacific’s
leading bank.
Broader Group
30
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022
31
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiaries Broader Group
Cook Islands | Fiji | Samoa | Solomon Islands | Tonga | Vanuatu
Islands’ tourism dependent economy
Cook
picked up
in 2022, with the progressive
reopening of borders commencing in January.
Notwithstanding, it has been a challenging year
with BSP Cook Islands delivering a 2022 Net
Profit After Tax (NPAT) of NZD2.1 million, (K4.8
million) representing a 32.9% decrease from
2021, a result largely impacted by a one-off
payment of NZD1.3 million (K2.8 million) to the
Ministry of Finance & Economic Management to
settle an outstanding liability.
BSP Cook Islands actively supports and provides
banking services to the business community
across the private sector, public sector, and
local communities. These services include two
(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 and plans
are underway to implement concessional loan
schemes, designed to support the growth and
development of SMEs, sole traders, and micro-
business.
With the increase in visitor arrivals, key revenue
lines have improved and exceeded expectations,
income and
including merchant
foreign
exchange, although subdued credit conditions
have seen a contraction in total loans. The
business remains focused on efficiencies and
cost savings in key operating expenses, including
resourcing, premises and computing to help
offset the challenging trading environment.
The 2023 outlook for Cook Islands is positive,
with an increase in flights and the announcement
of new direct schedules, commencing in the
first half, linking Cook Islands to the key USA,
Northern Hemisphere, and Australian markets.
BSP Cook Islands is optimistic that visitor arrivals
will return to pre-COVID-19 levels and improve
economic conditions. The business is ready
to capitalise on the opportunities presented
through various strategic and growth initiatives
developed for 2023.
BSP is confident of continual improvement in
economic conditions in 2023, as the tourism
industry strengthens and despite a challenging
2022, our staff remain committed and focused
on supporting customers and industry through
the challenges presented in the post COVID-19
transition.
COOK ISLANDS
NPAT
NZD2.1m
32.9% decrease from 2021
FIJI
NPAT
FJD87.6m
26.3% increase from 2021
Fiji’s economic conditions improved significantly
in 2022, underpinned by higher visitor arrivals
after the reopening of international borders,
which boosted tourism. Further, consumption
spending was boosted by the recovery in local
employment and continued growth in inward
remittances throughout the year.
While the banking market in Fiji remains highly
competitive, BSP continues on the path of
sustaining its number one market share position,
with support and commitment from a highly
engaged workforce. Staff satisfaction remains
high, as evidenced from the Annual Employee
Engagement Survey results of 90%.
BSP Fiji delivered a NPAT of FJD87.6 million
(K140.3 million), higher than 2021 actuals
(FJD69.4 million) by 26.3%. In both 2021 and
2022, the audited results included the release of
net general provision of circa FJD12 million and
FJD10 million respectively.
The 2022 financial results evidence a 19.5%
increase in total income, primarily from lower
interest expenses on the back of a highly
successful cost of funds reduction strategy. This
was largely supported by high levels of system
the year.
liquidity maintained
Additionally, the bank recorded higher foreign
exchange and electronic channel income, linked
to the higher-than-anticipated recovery
in
business activities post opening of international
borders in December 2021. Operating expenses
remained below budget by 2.6% and broadly at
2021 levels, despite growth in business activity.
throughout
BSP Fiji has cemented its number one market
position through onboarding new corporate
customers, together with a successful customer
retention strategy. A big win for BSP Fiji was
onboarding one of Fiji’s largest 100% locally
owned and publicly listed investment companies
in April 2022.
32
that
Our key focus on expansion of BSP’s digital
footprint continued in 2022. Key investments
included the deployment of Fiji’s first Cash
Deposit ATM
instantaneously credits
deposits and the ongoing upgrade to the ATM
fleet, with new contactless and touchscreen NCR
ATMs. With these investments, our customers’
preference
conducting daily banking
electronically has driven increased usage of
our digital products. As part of a Government
initiative, BSP has successfully completed the
rollout of the National Payment System in
November 2022, which provides effective and
efficient inter-bank domestic payments.
in
BSP remains committed to its local communities
through helping revitalise health centres in
rurally remote areas, sponsored community
driven “Go Green” clean up campaigns and other
worthy causes or events that help change lives.
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022 Broader Group
Cook Islands | Fiji | Samoa | Solomon Islands | Tonga | Vanuatu
SAMOA
NPAT
WST18.6m
11.1% increase from 2021
Despite the Samoan economy contracting
by 6.0%, BSP Samoa has sustained business
strong
growth and delivered another
financial performance in 2022, on the back
of improved economic activities since the
reopening of the borders in the third quarter
of 2022. The NPAT of WST18.6 million (K24.3
million) generated a return on equity of 17.9%
and return on assets of 2.5%. The favourable
result was underpinned by good revenue
growth, with prudent cost management and
a solid balance sheet position. The reopening
of borders provided a positive trajectory for
foreign card transactions and improvement
in credit appetite. Despite the latter, Samoa’s
economic
impacted
environment has
delinquency levels. Accordingly, we continue
to focus on recovery plans to improve our
net bad debts position.
The economic outlook for Samoa is positive,
with recovery anticipated at the back of the
full year of the borders reopening. BSP’s
strategic focus for 2023 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 cement
our number one market position in Samoa.
Dedicated customer care and a reliable
electronic footprint that deliver innovative
and cost-effective financial services, remain
key priorities for the Bank. Customer service
helps
retain and strengthen customer
relationships, while our growing electronic
footprint includes 30 ATMs, 42 agents, and
501 EFTPoS terminals.
Samoa
remained
committed
BSP
to
its community via numerous projects
throughout the year. In 2022, we delivered
over 50 projects to various sectors of our
community. Our key community project
in 2022 focused on education, promoting
literacy through the provision of classroom
furniture, office administration equipment,
with literacy and numeracy materials for
Samatau Primary School.
Our success is built on the dedication of our
staff 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. With a
dedicated workforce and loyal customers,
BSP Samoa is well positioned to execute our
long-term strategic vision.
SOLOMON ISLANDS
NPAT
SBD79.6m
4.6% increase from 2021
BSP Solomon Islands reported a NPAT of
SBD79.6 million (K34.3 million) in 2022, an
increase of 4.6% on 2021. BSP continues
its market leadership, with the largest
market share position for both loans and
deposits. Solomon Islands experienced a
challenging start to 2022 across the market,
with the recovery from the impact of the
November 2021 riots and the countrywide
transmission of COVID-19. The latter forced
travel restrictions across the provinces
and affected the
international borders
reopening timeline.
The challenging market conditions also saw
a contraction in lending, leading to lower
interest income against budget. Despite
these challenges, we managed our non-
performing loan portfolio effectively, aided
by relief assistance offered to customers
heavily affected by COVID-19 and the
November 2021 riots.
to
Our adaption
the “new normal”
and increased awareness of our digital
offering, saw positive results in our foreign
exchange and digital revenue streams. BSP
Solomon Islands benefited from the influx
of tourists and professionals, through
higher FX income and transaction income
from increased usage of digital platforms.
lifted and
Mobility
internal borders were opened in July 2022,
which triggered increased business activity
in the market.
restrictions were
BSP Solomon Islands acknowledges the
efforts and commitments from all staff
members in serving our customers and
community. A number of key community
projects were completed and delivered
across the country, as we remain committed
to giving back to our communities.
Improved customer service and expanding
our digital footprint across the country,
remain our key priorities for 2023 and
beyond. With seven (7) Branches, 33 ATMs,
over 50 BSP Agents and more than 300
EFTPoS Terminals in Solomon Islands, we
remain committed to assisting customers
and communities prosper as their bank of
choice.
BSP Solomon Islands looks forward to an
even stronger 2023.
33
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiaries
Broader Group
Cook Islands | Fiji | Samoa | Solomon Islands | Tonga | Vanuatu
TONGA
NPAT
TOP13.4m
13.4% increase from 2021
Throughout 2022, the Kingdom of Tonga has
largely remained in a state of recovery, following
the eruption of the undersea volcano (Hunga
Tonga Hunga Haapai) on 15 January 2022, and
the subsequent tsunami which caused estimated
damages of USD90 million. Additionally,
extended border closures
in a
contraction in economic growth during 2022.
resulted
BSP Tonga Limited achieved a Net Profit After Tax
of TOP13.4 million (K20.2 million) in 2022, 13.4%
above its 2021 results. Overall income growth of
TOP3.3 million drove this performance, boosted
by the influx of foreign aid and remittances,
which saw solid outcomes across
foreign
exchange (39.6%), and slight
increases for
MoneyGram (0.1%). Channel income improved
(75.5%), with the reopening of Tonga’s border
in the third quarter of 2022. Overall expenses
remained 13.4% above plan, driven by higher-
than-expected inflation rates and administration
costs related to the FX levy (62.8% higher than
2021). Good debt management and recovery
efforts positively impacted results, as well as a
one off insurance payment of TOP0.47 million
(net impact), received for the Bank’s damaged
residential property.
both Lending and Deposits. Despite a contraction
(-4.8%) in lending, deposit volume continued to
grow (10.0%) as the economy gradually recovers
from COVID-19 and natural disaster.
Customer support throughout the year saw the
introduction of a discounted tsunami personal
loan, a reduction in the SME lending product for
contractors engaged in recovery activity, as well
as offering short-term lending relief to impacted
customers.
to support
Community and sponsorship efforts saw over
tsunami
TOP100,000 allocated
recovery and grassroots activities. This included
a TOP50,000 donation to the Government of
Tonga, to assist with the relocation of displaced
communities such as Mango Island; expansion
of the Bank’s Go Green initiative replacing over
70 damaged rubbish bins across the Nuku’alofa
foreshore; TOP20,000 support for Tonga Tertiary
Institute’s Public Library under the Bank’s
Community project; TOP10,000 partnership with
Tala, Tonga’s national netball team, ahead of the
2023 World Cup; and other monetary support
contributed to Tonga Rugby and Breast Cancer
events.
BSP’s customer base in Tonga grew by 6.7% to
39,954, with customers continuing to select
BSP as their bank of choice. This was further
supported by BSP’s retention of its number one
position, with over 40% market share across
Despite a difficult year, staff engagement
increased by 6%, reflecting the resilience and
dedication to delivering outstanding services,
meeting the needs of our customers and
communities.
NPAT
VUV109.8m
21.1% decrease from 2021
VANUATU
Vanuatu reopened its international borders on
1 July 2022, after borders were closed in March
2020. The community outbreak of COVID-19
prolonged the closure of international borders,
which saw no tourism income for over two (2)
years and had a significant impact on the local
economy. BSP Vanuatu provided financial relief
assistance to affected Corporate and Retail
customers during the border closure period. All
customers on relief packages are expected to
return to principal and interest repayments from
January 2023.
The challenging economic conditions impacted
the performance of BSP Vanuatu, as the bank
recorded a Net Profit After Tax of VUV109.8
million (K2.7 million), which was 21.1% lower
than 2021 results. The major driver of this
below-budget result was the unfavourable net
interest income, triggered by the contraction of
the performing loan books in 2022.
Operating expenses were managed well with
cost saving initiatives to offset the reduction
in our main revenue streams. Channel Income
picked up momentum after borders reopened
with increased foreign cards usage on our
devices.
BSP Vanuatu continues to expand banking
services through its various service touchpoints.
With 26 active ATMs and 400+ EFTPoS terminals,
BSP Vanuatu supports the economy by bringing
banking services
to all customers across
our points of representations. Anti-Money
Laundering and Counter Terrorist Financing
compliance was given key focus throughout the
year.
With a strong focus on corporate responsibility,
BSP Vanuatu delivered various community
service projects such as “Go Green” projects
within schools and local businesses. The major
community projects included a VUV1.0 million
donation to Pro-medical for medical supplies,
and a commitment to donate a generator to
Santo hospital which will be delivered and
installed in early 2023.
The new Country Head, Mr. Edward Yee, joined
the business from 30 November 2022. Edward
brings a wealth of Corporate Banking and People
Management experience to the organisation,
and we look forward to his leadership in 2023
and beyond.
With the economy in the recovery phase for
much of 2022, the key focus for 2023 will be loan
book growth and our digital footprint expansion,
important drivers of our main revenue
as
streams, as well as ensuring compliance with all
internal policies and regulatory requirements.
34
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022
...we recognise
that access to banking
services is key to
unlocking the economic
potential of the people
and communities where
we operate.
Subsidiaries
35
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiaries
BSP Finance Ltd | BSP Capital Ltd | BSP Life Ltd
BSP FINANCE LIMITED
Papua New Guinea
PGK5.8m
Full Year Profit in 2022
Fiji
FJD4.4m
Full Year Profit in 2022
Cambodia
USD3.3m
Full Year Profit in 2022
Solomon Islands
SBD0.2m
Full Year Profit in 2022
Lao
USD1.0m
Net Loss in 2022
Papua New Guinea
BSP Finance PNG achieved a full-year profit
of K5.8 million in 2022, down 20% from 2021.
In the early part of the 2022 financial year
some customers were still recovering from the
downturn in economic conditions. For some,
the lingering impact of COVID-19, closure of
the Porgera Mine and the delayed start to
other resource projects, hampered growth
prospects and slowed existing businesses.
Whilst the second half of the year saw an
improved environment and rapid rebound in
new business, it was not enough to bridge the
income gap experienced in the first half of the
year.
Country Manager, Brendan Casey, joined in
November to replace Simon Kepui. Brendan is
an experienced leader and has many years of
practice in a wide variety of financial services
businesses in Australia. Given the latter, Brendan
is already making strong progress in the PNG
market.
Our commitment to the community continued
in 2022 when we delivered the second phase of
our assistance to the health clinic and storage
facility attached to the Bomana prison, Port
Moresby. We were able to repair the building,
which was in need of a new roof, and it now
provides safe and secure storage for the food
supply in the prison, as well as shelter for other
offices including that of the prison priest.
In 2023, our business is poised to grow and has
gained momentum through the third and fourth
quarters of 2022 to ensure we have a solid start
to the new year.
Fiji
We achieved a full-year 2022 profit of FJD4.4
million (K7.2 million), an
improvement on
2021 of 57%. Like PNG, the business had a
slow start in 2022 due to natural disasters and
COVID-19-related economic impacts. However,
as the year progressed, many customers who
were supported during the COVID-19 period
recovered sufficiently to enable us to reverse
provisions, which led to an improved result.
With the borders open to international visitors,
Fiji saw a gradual and sustained improvement in
economic activity and the performance of the
business improved accordingly. Fiji led the way
in the Pacific in its response to COVID-19 and
this allowed the country to open and return to
normality.
With the economic recovery in full swing, we
expect our business to continue its growth and
we have set our strategy to this end.
Cambodia
industry
The asset and auto finance
is a
competitive environment with competition from
17 leasing companies, as well as commercial
banks providing similar products. Despite this,
the Cambodia business was able to write above-
budget sales volumes consistently with the
support of our joint venture partner and through
our reputation for quality service in Cambodia.
Much of the business was written at margins
which suffered due to rising cost of funds. Hence,
a Net Profit After Tax of USD3.3 million (K11.6
million), was a 5.6% decrease from the previous
year, despite our loan book growing by 28.4%.
In March, our Country Manager
left the
business and was replaced by Tilen Kheng who
commenced in June. Tilen was recruited from
within the industry and has experience in the
leasing business and local banks in Cambodia.
Through his leadership and strong focus on
service delivery, we aim to continue our growth
in 2023.
Solomon Islands
BSP Finance Solomon Islands made its first
profit of SBD0.2 million (K0.1 million) for the full
year 2022. We grew our market share by circa
37% while increasing new business by writing
good quality loans. As a result, we had very low
rates of non-performing loans that aided us in
achieving the budgeted net profit.
During the year, we grew our regional profile and
consolidated stakeholder relationships in the
industry, with our partners in auto dealerships
and heavy equipment sellers. These partnerships
and a commitment to best in industry service will
set up the Solomon Islands business to continue
its growth trajectory in 2023.
Lao
BSP Leasing Lao recorded a net loss of USD1.0
million in 2022.
In 2022, Lao borders progressively opened to
international travellers and the economy saw
steady growth in visitors in the second half of
the year. The China-Lao railway’s continued
operations and the planned energy-focussed
infrastructure projects in the pipeline provide
much optimism for the business in 2023 and
beyond.
The main strain on the economy—and in turn,
our business—has been historically high inflation
rates (up to 30%) and the depreciation of the Lao
Kip (LAK) against US dollar, which interrupted
the economic recovery in Lao and the finance
business.
BSP Lao has established a presence in the market
and has become the preferred financier for
many auto dealers. This momentum will enable
success as the economy continues to recover in
2023 and beyond.
BSP CAPITAL LIMITED
PGK0.6m
Full Year Profit in 2022
BSP Capital recorded a profit of K0.6 million,
compared to a profit of K1.0 million in the
prior year. 2022 was a challenging year for
the business with law and order issues as well
as delayed investment decisions related to
the National General Elections. Furthermore,
declining rates in the money markets resulted
in reduced bond market profitability, however
BSP Capital did manage to grow its Funds under
Management (FuM).
The Total FuM ended at K6.98 billion, up 6.9%
from 2021. The FuM in the Retail Segment grew
by 13.9% to finish the year at K704 million, whilst
the Wholesale Segment increased by 6.2% to
end the year at K6.3 billion.
36
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Subsidiaries
BSP Finance Ltd | BSP Capital Ltd | BSP Life Ltd
Income from Advisory services was also
impacted as investment deals were deferred
or otherwise fell through due to elevated
risks in the investment environment coupled
with higher inflation heading towards the
year end. We anticipate that the advisory
market will see momentum return in 2023,
as the economy recovers from these difficult
investment conditions.
BSP Capital continues to explore Funds
Management and Advisory opportunities
exemplified with the recent engagement by
Solomon Islands Provident Fund in late 2022
to provide Funds Management services. In
complementing BSP Capital’s aspirations to
explore new areas of growth, BSP Capital
has initiated a project to provide Fund
Administration services, which will include
licences from the regulator. The successful
implementation of
the project should
translate to stronger returns in the future.
BSP LIFE LIMITED
Fiji
FJD17.8m
Full Year Profit in 2022
FJD988.9 million
Investment portfolio
FJD80 million
Total benefits paid
in 2022
Papua New Guinea
PGK1.4m
Full Year Profit in 2022
K3.6 million
Wantok Delite Annual
Premiums
K1.8 million
Wantok Group Term Life
Fiji
BSP Life (Fiji) performed well in 2022,
capitalising on market opportunities,
whilst maintaining strong cost control and
progressing enterprise excellence initiatives.
Key highlights include:
In 2023, our focus will be to build on
the positive performance of the last few
years, continuing to enhance shareholder
and policyholder value, by delivering
service excellence. We will also focus on
strengthening our brand positioning through
digital innovation, supported by ongoing
investment in our people.
● Shareholder profit: FJD17.8 million, 12%
Papua New Guinea
higher than 2021
● Policyholder profit: FJD18.7 million
● Life annual premium sales: FJD13.7 million,
36% higher than 2021
● Life single premium sales: FJD27.4 million,
7% higher than 2021
● Health sales: FJD6.5 million, 46% higher
than 2021
● Shareholder dividend: FJD11 million
● Policyholder bonus: FJD36.8 million
● Market share annual premium: 58.5%,
grew by 1.4%
● Market share single premium: 34.2%,
grew by 16%
● Investment portfolio: FJD988.9 million,
grew by 10%
Total benefits paid exceeded FJD80 million,
averaging FJD1.5 million a week, underlining
the important contribution that the business
makes to Fiji. Of this, 77% was for living
benefits
including retirement, education,
business start-ups, and vacationing.
The Fijian economy rebounded well in 2022,
spurred by tourism, with the re-opening
of international borders. GDP growth was
estimated at 15.6% in 2022 following the
contraction of 15.2% in 2020 and 4.1% in
2021. Headline inflation is tracking at 5.4%.
The outlook for 2023 is generally positive,
however is contingent on the outcome of
the elections, inflation, and broader global
economic conditions.
The business was profitable for the second
year running, with a profit of K1.4 million
in 2022, over 100%
increase compared
to 2021. During the year, the business
issued approximately 1,500 Wantok Delite
Insurance policies with annual premiums of
over K3.6 million. Whilst the Wantok Group
Term Life Insurance new business for the
year stood at K1.8 million. BSP Life’s financial
performance, and both solvency and capital
adequacy ratios are tracking positively above
target.
Our inforce stands at K27.4 million as at 31
December 2022, a 38% increase compared
to 2021.
The business undertook an organisation
restructure in 2022, resulting in splitting
the Finance and Operations functions. A
new Business Development Manager role
was also created to provide further support
to the Sales Offices in driving sales for the
Endowment Insurance Product. As at 31
December 2022, the business had 22 full
time staff and 79 independently contracted
agents remunerated on a commission basis.
On 1 September 2022, BSP Life launched
its third Sales Office in Mt Hagen, Western
Highlands Province with 20 insurance agents
and two (2) full-time staff. The launch was a
key milestone for BSP Life, as it endeavours
to grow its geographical footprint around
PNG to drive
insurance awareness, and
make Life Insurance accessible and promote
financial literacy through its Wantok Delite
Insurance Product.
BSP Life continues to work on initiatives
to drive awareness on the benefits and
importance of life insurance to individuals
and corporates in PNG. One of the ways we
do it is through ensuring all eligible claims
are paid within 10 working days. During the
year the business paid over K10.6 million in
claims of which K1.8 million was recovered
through reinsurance.
The outlook for 2023 is optimistic, as the
business will start paying the survival benefit,
10% of the sum insured, on Endowment
policies that complete 3 years from 1 January
2023. This is expected to further boost our
sales drive, marketing the savings benefit of
the Endowment Product.
BSP Life's strategic focus for 2023 will
continue to be on delivering rapid premium
income growth from
its Wantok Group
Term Life and Wantok Delite Endowment
Products, expand product offering 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 fourth Sales Office in Kokopo by
June 2023.
37
Group HighlightsBroader GroupSubsidiariesCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Subsidiaries BSP has adopted an
approach to corporate
governance that is
underpinned by our core
values of Integrity, Leadership,
People, Professionalism,
Quality, Teamwork and
Community.
Corporate
Governance
38
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Corporate Governance Report
39
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesCorporate Governance Report BSP has adopted an
approach to corporate
governance that is
underpinned by our
core values of Integrity,
Leadership, People,
Professionalism, Quality,
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 PNGX
Markets (PNGX) and the Australian Securities
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:
• 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);
• Reserve Bank of Fiji Banking Supervision
Policy Statement No. 11: Governance
(October 2007);
• National Reserve Bank of Tonga Prudential
Statement No.9 (revised 2014): Governance;
• Financial Supervisory Commission of the
Cook Islands Banking Prudential Statement
BPS09: Governance Risk Management (June
2019);
• Central Bank of Samoa Prudential Statement
1 (January 2021);
• Reserve Bank of Vanuatu International Bank
Prudential Guideline No. 10 Management
Institutions: Fit & Proper
of Financial
Requirements; and
• Central Bank of Solomon Islands Prudential
Guideline No. 14 on Corporate Governance
(July 2019)
40
THE BOARD OF DIRECTORS
Roles and Responsibilities 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 the Board retaining oversight.
• 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.
including
With the support of its Committees, the Board is
responsible to the Shareholders for the overall
its strategic
performance of BSP
direction, establishing goals for Management
and monitoring the achievement of those goals
with a view to optimizing BSP performance and
increasing shareholder value. The key functions
of the Board are:
• setting the overall strategy of BSP regarding
operations, finance, dividends, and risk
management;
• appointing
the Group Chief Executive
Officer (GCEO) and setting an appropriate
remuneration package;
• appointing General Managers and setting
appropriate remuneration packages;
• appointing the Company Secretary and
remuneration
appropriate
an
setting
package;
• endorsing appropriate policy settings for
Management;
• reviewing
Board
composition
and
performance;
• reviewing the performance of Management;
• approving an annual strategic plan with
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
behavior;
• approving
acquisitions
material to the business;
• establishing authority levels;
• setting Directors’ remuneration via the
Remuneration and Nominations Committee;
• with the assistance of the Board Audit
and Compliance Committee, selecting and
recommending to the Shareholders the
appointment of external auditors; and
disposals
and
• approving the 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 of this
report.
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
the Board with
Board and providing
recommendations on key strategic issues;
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. 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 the
Shareholders is ten. At the date of this report,
there are ten directors; nine Non-Executive of
whom (including the Chair) are considered by
the Board to be independent; and the Group
Chief Executive Officer who is not considered
independent due to being an Executive of
BSP. BSP in the ordinary course of business
conducts transactions with Directors, their
spouses, parents and children and/or parties
that 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 when 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.
Under the Constitution, at each Annual General
Meeting (AGM) one third of BSP’s Directors
in addition to any Director appointed during
the year and excluding the GCEO must offer
themselves for re-election by the Shareholders.
A Director is normally appointed for an initial
term of three years. At the end of the term of
three years, the Director becomes eligible for re-
appointment by the Shareholders for a further
term of three years, and if not re-appointed
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 of this report.
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Corporate Governance Report 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,
corporate
governance.
remuneration
and
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 10 – 13 of
this report. 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 considers setting
criteria
it may
for new appointments
recommend to Shareholders in accordance
with the Constitution. It has delegated the
its
initial screening process
Remuneration and Nominations 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.
involved to
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 meetings provided to
Shareholders.
Nominees of the Board and/or Shareholders
must meet the “fit and proper person”
criteria
Banking
in
Prudential Standard BPS 310: Fit and Proper
Requirements before they can take their
place on the Board.
outlined
BPNG
BSP has a program for
inducting new
appropriate
and
Directors
professional development opportunities for
Directors.
providing
induction program.
On joining the Board, new Directors are
letter
provided with an appointment
setting out the terms of the appointment,
induction pack and undertake
a Board
a comprehensive
In
particular, the appointment letter specifies
the term of appointment, BSP’s expectations
in
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
relation
BSP’s key corporate governance principles.
BSP’s Senior Management also enter into
employment contracts which set out their
terms of employment,
their
position, duties, reporting lines, remuneration
and termination arrangements.
including
Role and Selection of the Chair
The Chair is elected by the Directors and
holds the position for a maximum of
six consecutive years unless in a certain
exceptional instance.
The role includes:
• 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
conduct during
maintaining proper
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 criteria that include
the following:
• the Director is not an executive of BSP;
• the Director
substantial
shareholder of BSP or otherwise
associated directly with a substantial
shareholder of BSP;
is not a
• 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 associated with a material
supplier or customer;
• the Director has no material contractual
relationship with BSP other than as a
Director of BSP; and
• 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 interest 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 cognizant 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 pages 120 – 121 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 the
Board Committees are scheduled regularly
during the year. The Board has a policy of
rotating
locations
its meetings between
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 Chair in consultation with the GCEO
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, board 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.
Attendance details of Directors at Board
meetings during 2022 is provided in Financial
Statements Note 36 – Directors and Executive
remuneration.
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 performance of
the Board, the Directors and its Committees
are assessed annually. An external consultant
was engaged to undertake a performance
evaluation in 2022, with the findings used
to further enhance the ongoing Board
succession and renewal plan.
41
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesCorporate Governance Report in meeting
The Remuneration and Nominations Committee
reviews at least annually the processes by
which the Board regularly assesses its own
performance
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 cognizant of the need to continuously
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. An external consultant facilitates
the performance review annually.
the assistance of
the
The Board with
Remuneration and Nominations Committee
sets the targets for the GCEO and Senior
Management members under BSP’s employee
incentive arrangements. The Remuneration
and Nominations Committee administers these
incentive arrangements. 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 Chair and other Non-Executive Directors
have the opportunity to meet with the GCEO,
General Managers, Heads of Subsidiaries and
Country Managers for further consultation and
to discuss issues associated with the fulfilment
of their roles as Directors.
in
that
recognises
certain
The Board
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
Chair of his or her intention to seek independent
professional advice.
Company Secretary
The Company Secretary through the Chair is
directly accountable to the Board for the proper
functioning of the Board. Each Director may seek
the advice of the Company Secretary. Under the
Constitution, the Company Secretary may only
be appointed or removed by the Board.
BOARD COMMITTEES
Board Committees and Membership
in operation whose
During 2022, four Committees of the Board
were
functions and
powers were governed by their respective
charters. These Committees were the Board
42
Audit and Compliance Committee
(BACC),
Board Risk Committee (BRC), Remuneration
and Nominations Committee (RNC) and the
Disclosure Committee (DC). Membership of
the Committees and a record of attendance at
Committee meetings during the year are detailed
in the table below. Remuneration details are
provided in Financial Statements Note 36 –
Directors' and Executive Remuneration.
Board Audit & Compliance
Committee
Ernest Gangloff1
Arthur Sam
Stuart Davis
Frank Bouraga
Symon Brewis-Weston
Serena Sasingian2
Paul Morgan3
Board Risk Committee
Ernest Gangloff1
Arthur Sam
Stuart Davis
Priscilla Kevin
Symon Brewis-Weston
Vele Rupa
Serena Sasingian
Paul Morgan
Remuneration and Nominations
Committee
Robert Bradshaw
Faamausili Dr. Matagialofi Lua’iufi
Priscilla Kevin
Patricia Taureka-Seruvatu4
1/6
6/6
6/6
6/6
6/6
4/6
3/6
1/6
6/6
6/6
6/6
6/6
5/6
4/6
3/6
7/7
7/7
7/7
4/7
1 Ernest Gangloff retired as a Director on 12 April 2022 and
as a member of both the BACC and BRC.
2Serena Sasingian was appointed by the Board on 09
February 2022 as an Independent Committee Member of
both the BACC and BRC for Board development purposes.
3 Paul Morgan was appointed by the Board on 25 February
2022 as an Independent Committee Member of both the
BACC and BRC for Board development purposes.
4 Patricia Taureka-Seruvatu was appointed as a Director
on 13 April 2022 to replace Ernest Gangloff and was
subsequently appointed a member of RNC on 20 July
2022.
Sir Kostas G. Constantinou, OBE is a member of
the Disclosure Committee only.
The names,
relevant qualifications, and
experience of Committee members, the number
of times the Committees met, and the number
of meetings each member attended are set out
in the Board of Directors section of this report.
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.
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 Chairs of the respective
Committees.
Board Audit and Compliance Committee
(BACC)
The BACC assists the Board to discharge its
responsibilities of oversight and governance
in relation to financial, audit and compliance
matters. The responsibilities of the BACC include
monitoring:
• the integrity of BSP’s financial statements
and their independent audit;
• the financial reporting principles, 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 Chair.
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
specialized skills to assist the BACC. The Chair of
the BACC must be an appropriately experienced
independent Non-Executive Director other than
the Chair (or another Board Committee Chair).
The BACC must meet at least four times annually
and special meetings may be convened as
required. Minutes of all meetings must be
recorded 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 (BRC)
The BRC 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); and
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Corporate Governance Report • 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
Chair. The BRC must have a minimum of three
Non-Executive Directors, the majority of
whom must be independent. The Board may
also appoint to the BRC additional individuals
who are not executives or members of the
Board who have specialized skills to assist
the BRC. The Chair of the BRC must be an
appropriately
independent
experienced
Non-Executive Director other than the Chair
(or other Board Committee Chair).
The BRC must meet at least four times
annually and special meetings may be
convened as required. Minutes of all
meetings must be recorded 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 recommendation requiring Board action.
Remuneration and Nominations
Committee (RNC)
The RNC assists BSP in fulfilling its oversight
responsibilities regarding the remuneration,
succession and recruitment of Directors,
Executives and other BSP employees. The
responsibilities of the RNC are:
• to oversee the selection and appointment
of the GCEO and setting an appropriate
remuneration and benefits package for
recommendation to the 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 GCEO, 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 package 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 four Non-Executive
Directors. The Chair of the RNC must be one
of the independent Directors, other than the
Chair of the Board.
Each member should be capable of making a
valuable contribution to the respective Board
Committee and membership is reviewed
annually by the Board.
A review of the performance of Committee
members forms part of the Board’s annual
performance review.
Disclosure Committee (DC)
The Board has established the DC comprising
of the Chair (or in his/her absence, another
Non-Executive Director), the GCEO, the
Group Chief Financial Officer, the Group Chief
Risk Officer, and the Company Secretary. The
Chair of the DC is the most senior Director
present. Membership 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 DC is responsible for, among other
things:
• approving
of
the
release
any
announcement to the ASX and PNGX,
other than:
- an announcement that relates to a
matter which is both material and
strategically
important, which will
require approval by the Board; or
- procedural matters such as notice
of changes to equity securities or
directors’ holdings which will require
approval by the Disclosure Officer;
• considering whether BSP is obliged or is
required to respond to a market rumor or
media speculation; and
• overseeing
administration
Disclosure Policy.
the Disclosure Officer’s
Continuous
the
of
Half-Year and Annual Financial
Statements
The BACC reviews the half-year and annual
financial statements to determine whether
they are complete and consistent with the
information known to the BACC members and
to assess whether the financial statements
reflect the appropriate accounting principles.
In particular, it:
• pays attention to complex and/or unusual
•
transactions;
focuses on judgmental areas, for example
involving valuation of assets
those
litigation
and
reserves and other commitments and
contingencies;
liabilities, provisions,
• 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
is
responsible
The BACC
for making
the Board on
to
recommendations
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
auditor to Shareholders for ratification on an
annual basis. In line with the BPNG Prudential
Standards, the signing partner in the external
audit firm must be rotated every five years.
The BACC annually reviews 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 no unjustified restrictions. Meetings
are held separately with the external
auditors to discuss any matters that the
BACC 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 BACC ensures that significant findings
and
the
recommendations made by
external auditors are received and discussed
promptly and that Management responds to
recommendations in a timely manner. The
duly appointed external audit firm may not
be engaged by BSP to provide specialized
advisory or consultancy services to a bank
while that same auditor/audit firm is engaged
for services to conduct BSP’s 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.
PricewaterhouseCoopers (PwC) is currently
BSP's external audit firm. Representatives
of PwC will attend the next Annual General
Meeting in May 2023 and be available to
answer shareholder questions regarding the
audit.
Internal Audit
BSP has an internal audit function. The
BACC approves on the recommendation of
Management, the appointment of the Head
of Internal Audit. The BACC meets regularly
with the Head of Internal Audit.
Reviews are undertaken of the scope of the
work of the internal audit function to ensure
no unjustified restrictions or limitations have
been placed upon the Internal Audit Business
Unit. The BACC also reviews the qualifications
of internal audit personnel and endorses the
appointment, replacement, reassignment or
dismissal of the internal auditors.
43
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesCorporate Governance Report Compliance
including malware, phishing and ransomware.
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
(including
investigation
disciplinary action) of any fraudulent acts or
non-compliance.
follow-up
and
regular updates
The BACC obtains
from
Management and BSP’s Legal Officers regarding
compliance matters and satisfies itself that
all regulatory compliance matters have been
considered in the preparation of the financial
statements.
Reviews of the findings of any examinations
by regulatory agencies are undertaken and the
Chair 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
BSP’s group risk management activities are
aligned with the achievement of the Group’s
objectives, goals and strategy. In consultation
with the Executive Committee, the Board
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 process.
The Board through the BRC reviews the risk
management framework annually.
BSP recognises the following major risks:
Credit Risk: The potential for financial loss
where a customer or counterparty fails to meet
its financial obligation to the Group.
IT Risk: The current and potential threat to
earnings and capital reputation as a result of
a failure of
information systems managed,
maintained and operated by the Group.
Market Risk: The potential financial loss arising
from the Group’s activities in financial markets
including foreign exchange.
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.
Laundering
Compliance and Anti-Money
Risk: The risk of loss or penalties imposed by a
regulator for non-compliance with regulations,
prudential standards and policies.
Operational Risk: The risk of loss resulting from
inadequate or failed internal processes, people
or from external events including legal claims.
Cyber Risk: Targeted hacking, leakage/theft of
customer confidential information, unauthorized
transactions and random attacks
financial
44
The Credit Committee monitors credit risk. The
Group Asset & Liability Committee monitors
market risk, interest risk and liquidity risk.
The Compliance Risk Committee monitors
laundering risk
compliance and anti-money
while the Operational Risk Committee monitors
operational risk and cyber risks. Monitoring is
done using a risk register system that has been
implemented across the Group. The Executive
Committee and the Board have overview of 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 the 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, cyber risk, etc.)
• ensuring that mechanisms for managing
(identifying, measuring and controlling) risk
are implemented and maintained to provide
for organization-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 more types of risk for the Group;
• creating and maintaining risk management
tools including those requested by the Board
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 approach, 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, the
responsibility for overall risk management in BSP
vests 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 GCEO and from the GCEO 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 which are noted in the
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 and Manual that
have been approved by the Board. The Board
has also delegated to BRC responsibility for the
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 those 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 GCEO and the Group
Chief Financial Officer certify to the Board that:
•
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 have been formed on the basis
of a sound system of risk management and
internal controls applying to BSP which is
operating effectively.
Additionally, all General Managers and Country
Heads provide bi-annual statements attesting
that:
• they have addressed and documented the
risks and internal control procedures in their
Strategic Business Units;
• 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 behavior when undertaking
BSP business. To this end, the Board has adopted:
• a Code of Conduct for both Directors and
Executive Management of the Group and
stipulated that each Director comply with the
Code; and
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Corporate Governance Report • a Corporate Mission, Objectives and
Core Values Statement that establishes
principles to guide all employees
in
the day-to-day performance of their
individual functions within the Group.
are in possession of inside information. This
includes information, which is not generally
available, and if it were, a reasonable person
would expect to have a material effect on the
price or value of BSP securities.
BSP’s Corporate Governance Principles
provide that the Board must ensure that it
maintains an appropriate mix of skills and
experience without gender bias.
Furthermore, Directors and Management
may only trade in BSP shares subject to the
foregoing insider trading restrictions during
each of the:
To ensure the maintenance of high standards
of corporate behavior on an ongoing basis,
the Board encourages Senior Management to
periodically issue staff Toksaves to reinforce
both the Code and Core Values Statement.
All Directors are encouraged to maintain a
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
irregularities,
or unacceptable practices,
corruption,
fraud and misconduct. The
Group has adopted a whistleblowing policy
that is designed to support and encourage
staff to report in good faith matters such as:
• unacceptable practices;
•
is an
irregularities or conduct which
offence or a breach of
laws of the
countries in which BSP operates (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 and procedures;
• sexual harassment;
• abuse of Delegated Authorities;
• misuse of Group assets;
• disclosures related to miscarriages of
justice;
• health and safety risks including risks to
the public as well as other employees;
• damage to the environment;
• other unethical conduct;
•
failure
professional standards;
to comply with appropriate
• abuse of power, or use of
the
Group’s powers and authority for any
unauthorized 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 the restrictions set out in the
Capital Market Act 2015 for buying, selling or
subscribing for securities in the Group if they
• twenty business days
following the
announcement of BSP’s half-year and full
year results; and
fourteen business days following the
announcement of BSP’s Quarter 1 and
Quarter 3 results.
•
Management should discuss proposed share
trades with the GCEO in advance who in turn
will keep the Chair of the Board appraised
of management activities. Directors should
discuss proposed share trades with the Chair
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
Shareholder
The Group’s continuous disclosure regime is
fundamental to the rights of Shareholders
information concerning their
to receive
important aspect of the
securities. An
Group’s
Communications
Policy is to comply with the continuous
disclosure regime and to implement best
practice disclosure policy. BSP has adopted
a Continuous Disclosure Policy which
is
available at www.bsp.com.pg in the Investor
Relations section.
Market announcements are posted on BSP’s
website immediately after release to the
market. All market announcements made
by BSP since 2017 are currently available on
the website. Where BSP provides financial
results briefings to analysts or the media,
these briefings are published on the website
as soon as possible after the event. In any
event, no material information, which has
not been previously released to the market,
is covered in such briefings. The material
upon which the briefing is based (such as
slides or presentations) is released to the
market prior to the briefing.
The Group’s
insider
trading rules are
to
in
the continuous
important adjuncts
that
ensuring
regime
disclosure
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 that
apply to its Employees and Directors. BSP has
adopted a Securities Dealing Policy, which is
available on www.bsp.com.pg in the Investor
Relations section.
SHAREHOLDER COMMUNICATIONS
BSP commits to dealing fairly, transparently
and openly with both current and prospective
channels
Shareholders using available
and technologies to communicate widely
and promptly. BSP commits to facilitating
participation in shareholder meetings and
dealing promptly with shareholder enquiries.
The Group’s Shareholder Communications
Policy
is built around compliance with
disclosure obligations and aspiring to be at
the forefront of best practice in disclosure.
BSP’s framework for communicating with
Shareholders is to concisely and accurately
communicate:
• the BSP strategy;
• how BSP implements the strategy; and
• the financial results consequent upon the
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 Communications 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 registries electronically. Since
2017, BSP and its share registries have used
technology to facilitate the participation of
Shareholders in meetings.
facilitate
To
communication
effective
between BSP and its Shareholders, potential
investors, analysts and other financial
markets participants, BSP conducts periodic
market briefings including half and full year
results announcements and attendance
at conferences. Shareholders, potential
investors, analysts and other financial
markets participants are given access to
BSP Directors and Senior Management at
these events and the presentation material
provided at these events is released to
market prior
to commencement and
subsequently uploaded to BSP’s website.
45
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesCorporate Governance Report Remuneration
Report
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BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Remuneration Report 1.0
Introduction
The aim of the Remuneration 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 2022
Remuneration Report (the Report) for BSP Financial Group
Limited (BSP).
BSP recognises that staff are the most valuable asset of our
business. BSP ensures that remuneration and benefits are fair
and competitive in the market. The remuneration framework is
supported by objectives applicable to our staff and includes:
a)
b)
c)
d)
e)
Business results, including performance against strategic
objectives and metrics in BSP’s risk assessment/position
and compliance with AML/CTF regulations;
Performance against BSP’s strategic objectives;
Adherence to BSP’s values, business principles, risk
mitigation policies and procedures and international
standards;
Individual performance; and
Local market position and practice.
The above key features of the remuneration framework enable
BSP to achieve alignment between risk, performance and
reward. Consistent with BSP’s record results for the financial
year 2022, BSP staff were paid performance based short-term
incentives, subject to set key performance indicators (KPIs)
being met. BSP was awarded the Best Performing Private
Sector Organisation with Best Practices in its Human Resources
& Information System category for the seventh consecutive
year. BSP is the only company in PNG that facilitates the payroll
function from PNG for its multi-national businesses across seven
countries.
The RNC comprises three Non-Executive Directors, and is assisted
by non-voting members of management. The responsibilities of
the RNC are:
a)
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 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 fulfil its
responsibilities to shareholders while maintaining a world
class Corporate Governance regime.
b)
c)
d)
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. 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, 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.
BSP, in recognising the value of its employees, has also launched
an Informal Housing Scheme with the aim of assisting staff
build houses on customary land in a recognised settlement or
village for owner occupancy. This is in addition to the First Home
Ownership Scheme facility, which is well utilized by our staff
members. The RNC committee approved annual salary increases
for eligible staff based off CPI rates applicable in respective
countries.
Following reopening of international boarders and easing of
travel restrictions, we had over 30 staff members fly into PNG
from all our locations across the Pacific, Cambodia and Laos
to attend the 2023 BSP Leadership Forum. Nine (9) out of the
31 were members of BSP's leadership management program
who had the privilege to attend the forum with BSP’s Senior
Management staff, Executives and Board Members. Among the
attendees was the incoming BSP GCEO Mr. Mark Robinson who
had taken time out of his personal time to attend the forum and
meet with leaders from the BSP Group.
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 2022, BSP reported a net profit after tax of K1,081.07
million. This included a one-off tax credit of K135 million and
an K190 million Additional Company Tax expense, given that
these were regulation driven changes post setting of the LTI
benchmarks, the Board approved for LTI targets to be measures
based on underlying results which was a profit of K1,136 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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Group HighlightsBroader GroupSubsidiariesCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Remuneration Report 3.0 Key Management Personnel
In 2022, 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 Gangloff1
Robert Bradshaw
Arthur Sam
Stuart Davis
Faamausili Dr. Matagialofi Lua’iufi
Priscilla Kevin
Frank Bouraga
Symon Brewis-Weston
Patricia Taureka-Seruvatu2
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 Chief Risk Officer
Group General Manager Corporate Banking
General Manager Treasury
General Manager People & Culture
Group General Manager Retail Banking
Group General Manager Compliance
General Manager Digital
General Manager Offshore Branches
General Manager Offshore Branches
General Manager BSP Finance Limited
General Manager BSP Capital
Country Manager BSP Life PNG
Company Secretary
Executives
Robin Fleming, CSM
Ronesh Dayal
Frank van der Poll
Mike Hallinan3
Roger Hastie4
Peter Beswick
Rohan George
Hari Rabura
Daniel Faunt
Vandhna Narayan
Nuni Kulu
Kili Tambua5
Maryann Lameko-Vaai6
Andy Roberts
Gheno Minia
Nilson Singh
Mary Johns
1 Resigned in April 2022
2 Appointed in April 2022
3 Resigned in April 2022
4 Commenced in the role in May 2022
5 Resigned from the role in October 2022
6 Commenced in the role in October 2022
Full year
Part year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Part year
Full year
Full year
Full year
Part year
Part year
Full year
Full year
Full year
Full year
Full year
Full year
Part year
Part year
Full year
Full year
Full year
Full year
48
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Remuneration Report 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
Final
entitlement
Long-
term
incentive
Leave
Encashment
Total
Executives
Robin Fleming
Group Chief Executive Officer
2022
2021
4,103
4,115
2,480
2,667
Ronesh Dayal
Group Chief Financial Officer
2022
2021
1,308
1,553
Frank van der Poll
Group Chief Operating Officer
2022
2021
1,470
1,553
Michael Hallinan
Group Chief Risk Officer
Roger Hastie
Group Chief Risk Officer
2022
2021
530
1,308
2022
2021
638
-
Peter Beswick
2022
1,228
Group General Manager
Corporate Banking
2021
1,308
Rohan George
General Manager Treasury
2022
2021
1,102
1,289
Hari Rabura
General Manager
People & Culture
2022
974
2021
892
Daniel Faunt
2022
1,237
Group General Manager
Retail
2021
1,299
Vandhna Narayan
2022
974
Group General Manager
Compliance
Nuni Kulu
General Manager Digital
2021
860
2022
2021
974
892
420
406
374
333
-
332
200
-
364
349
326
350
257
231
372
326
258
247
278
242
55
55
161
159
97
46
17
53
59
-
116
117
61
61
186
203
208
198
34
28
112
113
826
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,653
1,778
5,895
15,012
-
8,615
670
666
670
666
-
561
376
-
564
561
564
553
444
383
564
557
444
-
444
383
142
-
204
-
471
-
-
-
-
-
50
-
72
2,701
2,784
2,815
2,598
1,018
2,254
1,273
-
2,272
2,335
2,103
2,253
1,933
-
1,709
97
2,478
-
2,380
15
1,725
-
-
-
1,135
1,808
1,630
49
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Executive Remuneration (continued)
Executive Remuneration – Non-Statutory Disclosure (continued)
Name
Year
Salary
Short-
term
incentive
Value of
benefits
Final
entitlement
Long-
term
incentive
Leave
Encashment
Total
Executives (continued)
Kili Tambua
General Manager Offshore
Branches
Maryann Lameko-Vaai
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
2022
2021
2022
2021
731
960
196
-
2022
2021
1,015
1,073
2022
2021
2022
2021
2022
2021
501
529
688
727
513
408
194
108
104
99
-
-
109
221
42
41
187
172
139
83
11
-
73
73
73
58
56
131
87
64
-
-
-
-
-
-
-
-
-
-
-
-
241
412
-
-
444
-
219
227
301
311
246
93
48
34
1,318
1,613
-
-
-
-
45
55
-
-
57
10
207
-
1,641
1,367
880
910
1,232
1,341
1,042
658
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)
STIs 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 the 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.
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.
50
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Remuneration 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. The performance rights issued in 2020 were vested in
2022.
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 permanent employee status.
iii.
Leadership and Management Development Program (LMDP)
The 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. Medical Cover for all staff
ii.
iii.
iv.
Life Insurance
Superannuation
Specialist allowances for critical roles
4.7
Retention Plan
As part of BSP's 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:
Short and Long-Term Incentive Plans
Leadership and Management Development Program (LMDP)
i.
ii.
iii. 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
FY18
FY19
FY20
FY21
FY22
844,072
890,363
806,218
1,075,218
1,135,538*
180.6
41.0%
190.6
37.7%
172.6
37.4%
230.1
37.5%
243.0*
38.1%
*Underlying result excluding one-off tax credits of K135 million and K190 million Additional Company Tax expense.
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, achieving milestones with
respect to the upgrade of the current core
systems and improving compliance.
Individual Assessment
35%
Various Key Performance indicators Objectives set in these areas were met.
52
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Remuneration Report 5.1
Short Term Incentive (STI) Outcomes (continued)
The table below shows the STI outcomes for FY22.
Name
Current Executives
Title
STI
Awarded
K’000
STI as % of
Gross Base
Maximum
STI
K’000
Actual STI %
of Maximum
STI
Robin Fleming
Group Chief Executive Officer
2,480
Ronesh Dayal
Group Chief Financial Officer
Frank van der Poll
Group Chief Operating Officer
Roger Hastie
Peter Beswick
Rohan George
Hari Rabura
Daniel Faunt
Group Chief Risk Officer
Group General Manager Corporate Banking
General Manager Treasury
General Manager People & Culture
Group General Manager Retail Banking
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
420
374
200
364
326
257
372
258
278
194
109
42
187
139
68%
28%
25%
31%
28%
26%
26%
30%
26%
28%
26%
11%
9%
28%
28%
2,480
100%
447
447
250
374
376
296
376
296
296
232
296
146
201
152
94%
84%
80%
93%
87%
87%
99%
87%
94%
84%
37%
29%
93%
92%
5.2
2022 LTI Outcomes
The 2022 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 2022, which is calculated using the 2022 Group NPAT budget as the baseline with payments based on specified
percentages of maximum rights, if the 2022 EPS outcome is within the payment band as detailed in the table below. Given large
one-off tax impacts as a result of government regulation being introduced, the board approved LTI targets to be measured based on
underlying results, excluding one-off tax impacts as detailed in section 5.1 above.
2022 Hurdles on EPS
EPS target to achieve
Target NPAT
Percentage of Performance rights to exercise
107.5%>
102.5%>
97.5%>
212.02
202.16
192.30
K990.65 million
K994.57 million
K898.49 million
150%
100%
50%
LTI vesting (%)
FY18
100%
FY19
100%
FY20
100%
FY21
0%
FY22
150%
The Group achieved an underlying net profit after tax of K1,135.54 million and EPS was recorded at 243.0 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 2022
financial year.
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Group HighlightsBroader GroupSubsidiariesCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Remuneration Report 5.2
2022 LTI Outcomes (Continued)
The table below shows the LTI outcomes for FY22
Name
Current Executives
Robin Fleming
Ronesh Dayal
Title
Group Chief Executive Officer
Group Chief Financial Officer
Frank van der Poll
Group Chief Operating Officer
Roger Hastie
Peter Beswick
Rohan George
Hari Rabura
Daniel Faunt
Group Chief Risk Officer
Group General Manager Corporate Banking
General Manager Treasury
General Manager People & Culture
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
LTI
Awarded
K’000
LTI as % of
Gross Base
1,653
670
670
376
564
564
444
564
444
444
241
444
219
301
246
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
6.0
Employment Agreements
KMP Contracts
Initial contracts for Senior Management and Executives are for a three-year term. Subsequent contracts are open ended and subject to a three
months notice period, 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 recognises 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.
ii.
iii.
iv.
v.
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;
Adherence to the Group’s values, business principles, Group-risk related policies and procedures and international standards;
Individual performance; and
Local market position and practice.
The above key features of the remuneration framework enable the group to also achieve alignment between risk, performance and reward.
54
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Remuneration Report 7.1
Remuneration and Nominations Committee (RNC)
The RNC assists BSP in fulfilling its oversight responsibilities regarding 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 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 fulfil 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 2022 financial year within the fee pool were as follows:
All amounts are expressed in Kina
Name of Director
Base Fee
Chair-
person
BACC
Fee
BRC
Fee
RNC
Fee
Bank
Total
Sub. Fees
Total Fees
Sir Kostas Constantinou
280,652
280,652
-
-
561,304
300,000
861,304
Ernest Brian Gangloff1
Robert Bradshaw2
Arthur Sam3
Stuart Davis4
Dr. Matagialofi Lua’iufi
Priscilla Kevin
Frank Bouraga
Symon Brewis-Weston
Patricia Taureka-Seruvatu
140,326
280,652
280,652
280,652
280,652
280,652
280,652
280,652
140,326
-
-
-
-
-
-
-
-
-
-
31,250
25,000
-
6,250
25,000
25,000
-
18,750
12,500
171,576
-
-
-
37,500
318,152
31,250
37,500
-
-
343,152
343,152
-
-
-
-
171,576
318,152
343,152
343,152
425,652
-
25,000
305,652
120,000
25,000
18,750
330,652
60,000
390,652
-
25,000
-
-
305,652
330,652
-
6,250
146,576
-
-
-
305,652
330,652
146,576
Total
2,525,868
280,652
131,250
131,250
87,500 3,156,520
480,000
3,636,520
1 Fees represent period from January 2022 to April 2022
2 Includes additional fees as Chairman of RNC Committee
3 Includes additional fees as Chairman of BACC Committee
4 Includes additional fees as Chairman of BRC Committee
55
Group HighlightsBroader GroupSubsidiariesCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Remuneration Report Financial
Statements
56
Notes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 Economic conditions
improved in all the
countries we operate
in and any concerns
relating to domestic
liquidity slowly dissipated
throughout the year.
57
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesNotes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022
Directors’ Report
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 2022. 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 Securities 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 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 2022, the Group’s profit after tax was K1,081.069 million (2021: K1,075.218 million). The Bank’s profit after tax was
K1,045.279 million (2021: K1,036.455 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 K788.906 million were paid in 2022 (2021: K676.464 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 2022:
Sir K. Constantinou, OBE Mr. R. Fleming, CSM (retired 31 December 2022)
Mr. F. Bouraga
Mr. R. Bradshaw
Mr. S. Davis Ms. P. Kevin Mr. S. Brewis-Weston
Mr. A. Sam Dr. M. Lua’iufi Mrs. P. Taureka-Seruvatu
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 was 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 111. Details of amounts
paid to the auditors for audit and other services are shown in Note 38 of the Notes to the Financial Statements.
Donations and sponsorships
Donations and sponsorship by the Group during the year amounted to K5.942 million (2021: K3.995 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 22nd day of February 2023.
Sir Kostas G. Constantinou, OBE
Chairman
Mr. Arthur Sam
Board Audit and Compliance Committee
Chairman
58
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022
for the year ended 31 December 2022
Statements of Comprehensive Income
All amounts are expressed in K’000
Note
2022
2021
2022
2021
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
Additional company tax
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 reserve
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
7
29
29
29
29
8
1,834,996
1,710,501
1,727,733
1,593,872
(89,936)
1,745,060
419,042
394,686
40,224
(107,242)
1,603,259
370,468
363,392
35,052
(78,578)
(90,613)
1,649,155
1,503,259
384,767
408,442
-
338,171
378,786
-
2,599,012
2,372,171
2,442,364
2,220,216
5,359
42,655
15,170
51,138
(989,263)
(888,967)
(912,980)
(813,224)
(190,000)
1,425,108
(344,039)
1,081,069
-
(190,000)
-
1,525,859
(450,641)
1,075,218
1,354,554
(309,275)
1,045,279
1,458,130
(421,675)
1,036,455
(52,381)
(40,680)
(28,345)
(22,425)
1,581
1,566
1,581
1,566
(82)
42
15
560
(82)
-
15
-
(50,840)
(38,539)
(26,846)
(20,844)
1,030,229
1,036,679
1,018,433
1,015,611
231.4
230.1
223.7
221.8
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.
R
e
p
o
r
t
S
t
r
a
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g
c
i
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g
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G
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G
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B
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a
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r
i
S
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m
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s
i
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n
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m
a
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i
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S
h
a
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h
o
d
e
r
l
M
a
n
a
g
e
m
e
n
t
C
o
r
p
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a
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S
o
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a
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y
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022
59
for the year ended 31 December 2022
Statements of Financial Position
All amounts are expressed in K’000
Note
2022
2021
2022
2021
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
3,761,665
1,738,643
4,128,340
2,517,159
2,794,915
1,336,726
4,644,903
1,719,870
3,041,888
1,665,756
4,097,350
2,418,532
2,199,137
1,163,152
4,617,566
1,627,849
4,789,153
4,079,423
4,210,845
3,457,639
14,368,853
13,623,496
13,077,909
12,286,086
958,036
28,664
-
912,235
32,671
-
342,611
269,344
1,256,980
1,029,539
745,692
28,664
399,361
336,108
573,119
706,406
32,671
388,798
261,795
441,810
33,890,104
30,443,122
30,595,224
27,182,909
261,560
242,310
518,880
328,141
26,919,361
23,943,355
25,194,893
22,350,278
1,201,038
1,446,665
48,427
1,132,176
1,290,799
39,517
-
-
1,293,196
1,126,639
-
-
29,877,051
26,648,157
27,006,969
23,805,058
372,110
372,133
372,110
372,133
3,319,282
3,025,125
2,991,169
2,728,885
320,934
396,929
224,976
276,833
Equity attributable to the members of the company
4,012,326
3,794,187
3,588,255
3,377,851
Minority interests
Total shareholders’ equity
Total equity and liabilities
727
778
-
-
4,013,053
3,794,965
3,588,255
3,377,851
33,890,104
30,443,122
30,595,224
27,182,909
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
Mr. Arthur Sam
Board Audit and Compliance Committee
Chairman
6060
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022
Notes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022as at 31 December 2022 Statements of Changes in Shareholders’ Equity
All amounts are expressed in K’000
Note
Share
capital
Reserves
Retained
earnings
Minority
interests
Bank
Balance as at 1 January 2021
372,189
300,725
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
Net profit
Other comprehensive income
Total comprehensive income
Dividends paid during the year
Share buyback
Total transactions with owners
Transfer from asset revaluation reserve
Impact of PNG tax rate change
BSP Life policy reserve
Balance at 31 December 2022
Group
Balance as at 1 January 2021
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
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
Impact of PNG tax rate change
BSP Life policy reserve
Balance at 31 December 2022
28
28
29
29
28
28
29
29
29
28
28
29
29
28
28
29
29
29
-
-
-
-
(56)
(56)
-
-
-
(20,844)
(20,844)
-
-
-
(7,457)
4,409
372,133
276,833
-
-
-
-
(23)
(23)
-
-
-
-
(26,846)
(26,846)
-
-
-
(5,270)
(23,068)
3,327
2,360,983
1,036,455
-
1,036,455
(672,802)
-
(672,802)
8,658
(4,409)
2,728,885
1,045,279
-
1,045,279
(784,938)
-
(784,938)
5,270
-
(3,327)
372,110
224,976
2,991,169
372,189
438,516
-
-
-
-
(56)
-
(56)
-
-
-
(38,539)
(38,539)
-
-
-
-
(7,457)
4,409
372,133
396,929
-
(50,840)
(50,840)
-
-
-
-
(5,414)
(23,068)
3,327
-
-
-
(23)
-
(23)
-
-
-
2,622,249
1,075,218
-
1,075,218
(676,293)
-
(298)
(676,591)
8,658
(4,409)
3,025,125
1,081,069
-
1,081,069
(788,729)
-
(126)
(788,855)
5,270
-
(3,327)
R
e
p
o
r
t
S
t
r
a
t
e
g
c
i
i
H
g
h
l
i
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s
G
r
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p
G
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B
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d
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s
i
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r
n
a
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e
C
o
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S
t
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e
m
e
n
t
s
i
F
n
a
n
c
a
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l
I
f
n
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
M
a
n
a
g
e
m
e
n
t
C
o
r
p
o
r
a
t
e
S
o
c
a
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l
T
e
a
m
s
R
e
s
p
o
n
s
b
i
i
l
i
t
y
Total
3,033,897
1,036,455
(20,844)
1,015,611
(672,802)
(56)
(672,858)
1,201
-
3,377,851
1,045,279
(26,846)
1,018,433
(784,938)
(23)
(784,961)
-
(23,068)
-
3,588,255
3,433,605
1,075,218
(38,539)
1,036,679
(676,464)
(56)
-
(676,520)
1,201
-
3,794,965
1,081,069
(50,840)
1,030,229
(788,906)
(23)
-
(788,929)
(144)
(23,068)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
651
-
-
-
(171)
-
298
127
-
-
778
-
-
-
(177)
-
126
(51)
-
-
-
372,110
320,934
3,319,282
727
4,013,053
The attached notes form an integral part of these Financial Statements.
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022
61
for the year ended 31 December 2022
Statements of Cash Flows
All amounts are expressed in K’000
Note
2022
2021
2022
2021
Consolidated
Bank
CASH FLOW FROM OPERATING ACTIVITIES
Interest received
Fees and other income
Interest paid
Insurance premiums
Claims, surrenders and maturity payments
Additional company tax
Amounts paid to suppliers and employees
Operating cash flow before changes in operating assets
and liabilities
Net increase in:
Loans and receivables from customers
Cash reserve requirements with the Central Banks
Bills receivable and other assets
Net increase 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 used in investing activities
CASH FLOW FROM FINANCING ACTIVITIES
Share buyback
Dividends paid
Repayment of interest on borrowings
7
9
7
32
28
28
1,823,009
1,649,780
1,717,557
1,536,527
737,974
(78,673)
235,092
(144,191)
(190,000)
(939,286)
649,579
(78,340)
218,190
(118,316)
792,563
(61,174)
714,698
(67,455)
-
-
-
-
-
-
(190,000)
(781,764)
(894,619)
(707,787)
1,443,925
1,539,129
1,364,327
1,475,983
(852,167)
(814,895)
(169,622)
(63,068)
(852,957)
(153,596)
(175,272)
(120,182)
(805,127)
(165,713)
(73,007)
(47,326)
3,250,081
2,505,715
3,056,061
2,415,903
256,378
137,983
171,559
23,435
3,113,700
(455,500)
2,658,200
3,824,305
(347,021)
3,477,284
2,860,856
3,548,686
(432,995)
(328,294)
2,427,861
3,220,392
(210,708)
(2,573,665)
(224,827)
(2,531,151)
(120,568)
(52,313)
4,129
-
(156,914)
(57,650)
6,254
-
(103,531)
(147,398)
(52,299)
(57,650)
4,127
(10,563)
6,167
(3,720)
(379,460)
(2,781,975)
(387,093)
(2,733,752)
(23)
(788,906)
(14,395)
(56)
(23)
(56)
(676,464)
(784,938)
(672,802)
(3,396)
(14,395)
(3,396)
Net cash flow used in financing activities
(803,324)
(679,916)
(799,356)
(676,254)
Net increase/ (decrease) in cash and cash equivalents
Exchange rate movements on cash and cash equivalents
Cash and cash equivalents at the beginning of the year
1,475,416
(125,999)
3,889,331
15,393
1,241,412
(189,614)
(84,448)
(86,796)
(57,487)
3,958,386
3,034,148
3,281,249
Cash and Cash Equivalents at the end of the year
9
5,238,748
3,889,331
4,188,764
3,034,148
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.
62
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022
for the year ended 31 December 2022 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 2022
The following standards, amendments and interpretations to existing
standards became applicable for the first time during the accounting
period beginning 1 January 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 January 2022).
o 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.
o 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.
o Amendments to IAS 37, ‘Provisions, contingent liabilities and
contingent assets’ specify which costs a company includes
when assessing whether a contract will be loss-making.
o Annual improvements make minor amendments to IFRS 1,
‘First-time Adoption of IFRS’, IFRS 9.
● Amendment to
IFRS 16,‘Leases’ – COVID-19 related rent
concessions (effective 1 April 2021). 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.
IFRIC Agenda Decision - Lessor forgiveness of lease payments
(IFRS 9 and IFRS 16). In October 2022, the IASB finalised the IFRIC
agenda decision on lessor forgiveness of lease payments. The
agenda decision addresses the accounting from the perspective
of the lessor, and in particular:
o how the expected credit loss (‘ECL’) model in IFRS 9 should
be applied to the operating lease receivable when the lessor
expects to forgive payments due from the lessee under the
lease contract before the rent concession is granted.
o whether to apply the derecognition requirements in IFRS
9 or the lease modification requirements in IFRS 16 when
accounting for the rent concession.
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 2022 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 2023 or later
periods, but the entity has not early adopted them:
● Narrow scope amendments to IAS 1, Practice statement 2 and IAS
8 (effective 1 January 2023). 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 January
2023). 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.
● Amendment to IFRS 16 - Leases on sale and leaseback (effective
1 January 2024). These amendments include requirements for
sale and leaseback transactions in IFRS 16 to explain how an
entity accounts for a sale and leaseback after the date of the
transaction. Sale and leaseback transactions where some or
all the lease payments are variable lease payments that do not
depend on an index or rate are most likely to be impacted.
● Amendment to IAS 1 - Non current liabilities with covenants
(effective 1 January 2024). These amendments clarify how
conditions with which an entity must comply within twelve
months after the reporting period affect the classification of a
liability. They also add new disclosure requirements in relation to
covenants.
IFRS 17 ‘Insurance contracts’ (effective 1 January 2023) replaces
IFRS 4. IFRS 17 will fundamentally change the accounting by all
entities that issue insurance contracts and investment contracts
with discretionary participation features. Refer Note 31 for
further details.
●
B. Consolidation
The Financial Statements incorporate the assets and liabilities of all
controlled entities of the Group as at 31 December 2022, 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.
63
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesNotes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 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
measuring ECL
Detailed information about the judgements and estimates made by the
Group in the above areas is 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 had a significant impact
on global economies and financial markets. Since the reopening of
borders the economic outlook has improved across sectors, in which the
Group operates. These factors were taken into account in estimates and
judgements made by the Group.
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.
C. Foreign currency
The Financial Statements of the Group are presented in the currency of the
primary economic environment in which the entity operates (its functional
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, unless otherwise
stated.
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, are recognised in the foreign currency
translation reserve, and recognised in the Statement of Comprehensive
Income on disposal of the foreign operation.
D. Critical accounting estimates and judgments
The application of the Group’s accounting policies requires the use of
estimates and assumptions. If different assumptions or estimates were
applied, the resulting values would change, impacting the net assets and
income of the Group.
This note provides an overview of the areas that involve a higher degree
of judgement or complexity, and major sources of estimation uncertainty
that have a significant risk of resulting in a material adjustment within the
next financial year. Detailed information about each of these estimates
and judgements is included in the related notes together with information
about the basis of calculation for each affected line item in the financial
statements.
The areas involving significant estimates and judgments are:
● Estimation of current tax liability in the multiple tax jurisdictions - note
7
● Estimated impairment of financial or non-financial assets - note 12, 14,
15 and 22
● Estimated insurance liability - note 31
● Estimation of fair value of financial and non-financial assets and
liabilities - note 27
64
Notes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 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
PNG Bank
Offshore
Banks
Non-Bank
Entities
Adjust Inter
Segments
Total
Analysis by segments
Year ended 31 December 2022
Net interest income
Other income
Net insurance income
Total operating income
Operating expenses
Impairment expenses
Additional company tax
Profit before income tax
Income tax
Net profit after income tax
Assets
Liabilities
Net assets
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
1,432,559
622,690
-
278,906
240,044
-
2,055,249
518,950
(759,305)
(217,264)
14,816
(190,000)
1,120,760
(255,511)
865,249
(5,698)
-
295,988
(69,391)
226,597
33,212
25,683
40,531
99,426
(18,609)
(3,759)
-
77,058
(19,137)
57,921
383
1,745,060
(74,689)
(307)
813,728
40,224
(74,613)
2,599,012
5,915
(989,263)
-
-
(68,698)
-
(68,698)
5,359
(190,000)
1,425,108
(344,039)
1,081,069
24,245,059
9,311,075
2,082,330
(1,748,360)
33,890,104
(21,307,155)
(8,110,664)
(1,556,558)
1,097,326
(29,877,051)
2,937,904
1,200,411
525,772
(651,034)
4,013,053
1,294,979
580,590
-
274,645
193,146
-
1,875,569
467,791
32,504
30,023
36,850
99,377
1,131
1,603,259
(69,899)
(1,798)
733,860
35,052
(70,566)
2,372,171
(667,224)
(204,553)
(19,973)
2,783
(888,967)
42,896
1,251,241
(372,548)
878,693
4,649
267,887
(63,629)
204,258
(4,890)
74,514
(14,464)
60,050
-
42,655
(67,783)
1,525,859
-
(450,641)
(67,783)
1,075,218
21,196,785
8,844,229
1,991,562
(1,589,454)
30,443,122
(18,432,921)
(7,684,711)
(1,474,118)
943,593
(26,648,157)
2,763,864
1,159,518
517,444
(645,861)
3,794,965
65
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesNotes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 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 discounts and premiums 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.
All amounts are expressed in K’000
Interest income
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
Other borrowings
Consolidated
Bank
2022
2021
2022
2021
1,190,929
1,138,287
1,084,078
1,021,435
369,239
241,058
5,799
12,552
15,419
333,512
228,303
245
4,639
5,515
367,895
240,997
5,798
16,735
12,230
332,679
227,989
245
7,320
4,204
1,834,996
1,710,501
1,727,733
1,593,872
73,228
13,065
3,643
89,936
97,896
4,811
4,535
107,242
59,219
16,029
3,330
78,578
80,122
6,323
4,168
90,613
1,745,060
1,603,259
1,649,155
1,503,259
1Group interest income includes K18.611million (Bank K14.487 million) recognised on impaired loans (Stage 3) to customers, 2021: K17.860 million (Bank K15.123
million). The Group takes up required provisions on such interest income as detailed in the accounting policy in note 15.
66
Notes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 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
2022
2021
2022
2021
188,823
22,683
174,298
33,238
419,042
362,333
5,153
27,200
394,686
191,487
20,673
127,909
30,399
370,468
325,905
7,255
30,232
363,392
173,453
19,924
169,171
22,219
384,767
319,773
5,153
83,516
408,442
175,772
18,127
125,558
18,714
338,171
292,485
7,255
79,046
378,786
1Foreign exchange related income includes gains and losses from spot and forward contracts and translated foreign currency assets and liabilities.
67
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesNotes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 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
2022
2021
2022
2021
128,047
167,404
77,714
38,991
4,334
11,791
1,853
104,122
534,256
119,292
138,154
78,818
30,238
4,132
5,742
1,042
87,156
464,574
114,492
152,744
71,633
38,734
3,735
11,059
1,853
97,753
492,003
107,163
122,504
72,099
30,038
3,507
5,236
1,042
80,838
422,427
368,778
340,854
340,750
313,203
18,484
10,169
57,576
455,007
989,263
16,711
9,734
57,094
424,393
888,967
16,722
9,232
54,273
420,977
912,980
14,986
8,752
53,856
390,797
813,224
All amounts are expressed in K’000
Operating Expenses
Administration
Computing
Depreciation
Amortisation of software 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
68
Notes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 6. IMPAIRMENT OF FINANCIAL ASSETS
Accounting Policy
Impairment
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
●
conditions and forecasts of future economic conditions.
reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current
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
2022
(2,667)
(5,114)
2,422
(5,359)
2021
(60,391)
11,888
5,848
(42,655)
2022
(12,514)
(5,114)
2,458
(15,170)
2021
(68,792)
11,888
5,766
(51,138)
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.
69
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesNotes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 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
Impact of PNG tax rate change¹
Tax calculated at 30% of Bank profit before tax
Tax calculated at respective subsidiary tax rates
Expenses not deductible for tax purposes
Tax loss not recognised
Income not recognised for tax purposes
Impact of PNG tax rate change¹
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
Impact of PNG tax rate change¹
Other movements
At 31 December
70
Consolidated
Bank
2022
2021
2022
2021
433,410
46,914
480,324
(754)
(135,531)
344,039
406,366
28,498
60,025
6,278
(20,843)
(135,531)
(754)
344,039
415,373
34,424
449,797
844
-
450,641
437,439
29,996
2,428
1,238
(21,304)
-
844
450,641
411,729
35,110
446,839
(2,033)
(135,531)
309,275
406,366
-
58,502
-
(18,029)
(135,531)
(2,033)
309,275
391,340
30,832
422,172
(497)
-
421,675
437,439
-
846
-
(16,113)
-
(497)
421,675
(30,399)
32,887
(30,263)
32,419
(433,410)
(415,373)
(411,729)
(391,340)
5,661
141
20,927
434,573
(2,507)
63,427
179,539
37,838
(1,048)
29,679
4,742
324
15,239
331,782
(30,399)
62,662
130,000
28,329
(1,725)
17,203
4,893
-
-
432,995
(4,104)
58,446
174,847
35,986
(1,439)
77,285
(288)
652
-
328,294
(30,263)
59,186
123,125
26,350
(2,141)
51,115
(51,091)
(36,435)
(42,998)
(23,195)
(1,168)
37,008
1,617
28,176
(1,168)
35,149
1,617
25,738
294,184
229,827
336,108
261,795
342,611
(48,427)
294,184
229,827
(46,914)
4,907
112,463
(6,099)
294,184
269,344
(39,517)
229,827
255,108
(34,424)
(5,586)
-
14,729
229,827
336,108
261,795
-
-
336,108
261,795
261,795
(35,110)
2,860
112,463
(5,900)
336,108
284,605
(30,832)
785
-
7,237
261,795
Notes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 7. INCOME TAX (Continued)
1 The Additional Company Tax applies a flat K190 million on any bank that has over 40% market share of financial assets, which only applies
to BSP as it is the only bank whose market share exceeds 40%. The Tax is non-deductible for tax purposes, and has a direct impact on BSP’s
net profit after Tax. In line with accounting standards, the full amount of the Tax was taken up in the Statement of Comprehensive Income in
Quarter 1 2022 as the legislation makes BSP liable for the tax on 1 January 2022.
On 2 December 2022 the Government passed an amendment, which discontinued the Additional Company Tax effective 1 January 2023.
Simultaneously, a separate amendment was passed increasing the income tax rate for Commercial Banks from 30% to 45%, effective 1 January
2023. The Group’s closing deferred tax assets and liabilities have therefore been remeasured, taking into account the change in income tax rate
reflecting the rate of income tax that will apply when these deferred tax balances are realised. As a result, the net deferred tax asset position
in BSP has increased by K112.463 million, the asset revaluation reserve reduced by K23.068 million and a tax credit included in the Statement
of Comprehensive Income of K135.531 million.
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
2022
2021
2022
2021
Net profit attributable to shareholders (K’000)
1,081,069
1,075,218
1,045,279
1,036,455
Weighted average number of ordinary shares in use (000)
Basic and diluted earnings per share (expressed in toea)
467,223
231.4
467,228
230.1
467,223
223.7
467,228
221.8
Consolidated
Bank
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
Reconciliation of net profit after tax to operating cash flow before
changes in operating assets and liabilities
Net profit after tax
Add: Tax expense
Profit before income tax
Major non cash amounts
Depreciation
Amortisation of software costs
Net gain on sale of fixed assets
Impairment on financial assets
Movement in payroll provisions
Impairment of fixed assets
1,081,069
1,075,218
1,045,279
1,036,455
344,039
450,641
309,275
421,675
1,425,108
1,525,859
1,354,554
1,458,130
77,714
38,991
(3,515)
(5,359)
(9,888)
1,853
78,818
30,238
(1,137)
(42,655)
27,788
1,042
71,633
38,734
(2,508)
(15,170)
(10,410)
1,853
(74,359)
72,099
30,038
(996)
(51,138)
16,438
1,042
(49,630)
Net changes in assets and liabilities
(80,979)
(80,824)
Operating cash flow before changes in operating assets & liabilities
1,443,925
1,539,129
1,364,327
1,475,983
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)
3,761,665
1,738,643
(261,560)
5,238,748
2,794,915
1,336,726
(242,310)
3,889,331
3,041,888
1,665,756
(518,880)
4,188,764
2,199,137
1,163,152
(328,141)
3,034,148
1The Group undertakes thorough compliance and due diligence reviews before entering into any correspondent banking relationships. Amounts
due from other banks includes deposits of K57.856 million (2021: K57.653 million) held with counter-party banks that are not available for use
by the Group.
71
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesNotes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 Financial Instruments: Financial Assets
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.
●
●
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.
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 the Statement of Comprehensive Income 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 through the Statement
of Comprehensive Income. 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.
72
Notes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 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.
Equity securities
Derivative financial instruments and acceptances
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
income,
except for dividend income which is recognised in the Statement of
Comprehensive Income.
in other comprehensive
losses recognised
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.
Forward foreign exchange contracts entered into for trading purposes
are initially recognised at fair value and subsequently re-measured
at fair value based upon the forward rate. Gains and losses on such
contracts are taken to the Statement of Comprehensive Income.
Acceptances comprise undertakings by the Group to pay bills of
exchange drawn on customers. The Group expects most acceptances
to be settled simultaneously with the reimbursement from the
customers. Customer acceptances are accounted for as off-balance
sheet transactions and are disclosed as contingent liabilities and
commitments.
The Group does not actively enter into or trade in complex forms of
derivative financial instruments such as currency and interest rate
swaps and options.
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
2022
2021
2022
2021
574,130
3,187,535
3,761,665
494,058
2,300,857
2,794,915
506,326
2,535,562
3,041,888
441,364
1,757,773
2,199,137
9,219
1,729,424
1,738,643
11,141
1,325,585
1,336,726
9,219
1,656,537
1,665,756
11,114
1,152,038
1,163,152
4,210,746
(69,522)
(22,613)
4,788,065
(123,524)
(27,727)
4,189,940
(70,153)
(22,437)
4,769,438
(124,321)
(27,551)
4,118,611
4,636,814
4,097,350
4,617,566
9,729
8,089
-
-
4,128,340
4,644,903
4,097,350
4,617,566
27,727
(5,114)
22,613
15,839
11,888
27,727
27,551
(5,114)
22,437
15,663
11,888
27,551
73
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesNotes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 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 applicable for each jurisdiction at balance date
were: PNG 10% (2021: 7%), Fiji 10% (2021: 10%), Solomon Islands 5% (2021: 5%), Samoa 4.5% (2021: 4.5%), Tonga 10% (2021: 10%) and Vanuatu 5.25%
(2021: 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
15. LOANS AND RECEIVABLES FROM CUSTOMERS
Accounting Policy
Consolidated
Bank
2022
2021
2022
2021
4,273,842
3,519,022
4,233,877
3,478,213
(23,236)
(20,814)
(23,032)
(20,574)
4,250,606
3,498,208
4,210,845
3,457,639
246,719
291,828
289,988
291,227
-
-
-
-
4,789,153
4,079,423
4,210,845
3,457,639
20,814
2,422
23,236
14,966
5,848
20,814
20,574
2,458
23,032
14,808
5,766
20,574
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
2022
2021
2022
2021
977,113
198,969
714,180
225,578
915,566
161,562
651,263
193,699
10,928,676
10,474,249
10,220,097
9,742,849
2,786,758
2,823,680
2,364,110
2,365,799
119,452
111,342
-
-
Gross loans and receivables from customers net of reserved interest
15,010,968
14,349,029
13,661,335
12,953,610
Less allowance for losses on loans and receivables from customers
(642,115)
(725,533)
(583,426)
(667,524)
At 31 December
14,368,853
13,623,496
13,077,909
12,286,086
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 K75.227 million (Bank K64.997 million), 2021: K66.522 million (Bank K59.823 million) 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:
74
Notes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 15. LOANS AND RECEIVABLES FROM CUSTOMERS (CONTINUED)
Lease financing (continued)
All amounts are expressed in K’000
2022
2021
2022
2021
Consolidated
Bank
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
34,501
185,781
220,282
(4,441)
(16,872)
(21,313)
198,969
30,060
168,909
198,969
32,597
216,054
248,651
(1,771)
(21,302)
(23,073)
225,578
30,826
194,752
225,578
32,514
143,911
176,425
(4,340)
(10,523)
(14,863)
161,562
28,174
133,388
161,562
31,713
182,207
213,920
(1,720)
(18,501)
(20,221)
193,699
29,993
163,706
193,699
Allowance for Expected Credit Losses
Stage 1: 12 months ECL - performing
Accounting Policy
Impairment under IFRS 9 applies to all financial assets at amortised
costs, lease receivables and credit commitments.
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:
For financial assets where there has been no significant increase
in credit risk since origination, a provision for 12 months ECL is
recognised.
Stage 2: Lifetime ECL – performing
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.
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.
75
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesNotes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 15. LOANS AND RECEIVABLES FROM CUSTOMERS (CONTINUED)
Allowance for Expected Credit Losses (continued)
Accounting Policy (continued)
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.
Off-Balance Sheet amounts
Any off-balance sheet items, such as loan commitments, are considered for
impairment both on an individual and collective basis.
The Group does not apply the low credit risk exemption which assumes
investment grade facilities do not have a significant increase in credit risk.
Probability weighting of each scenario.
The Group considers three future macroeconomic scenarios including a
base case scenario along with upside and downside scenarios. Probability
weighting of each scenario is determined by management considering
the risks and uncertainties surrounding the base case scenario, as well as
specific portfolio considerations where required. This is further expanded
in note 22.
Definition of default
• Base case scenario
This scenario utilises external economic forecasts used for strategic
decision making and forecasting, resulting in the base case representing
comparable market average default rates.
• Upside scenario
This scenario represents a modest improvement on the base case
scenario, resulting in lower than market average default rates.
• Downside scenario
This scenario represents a moderate recession, with higher than
market average default rates.
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.
The loss allowance recognised in the period is impacted by a variety of
factors, as described below and as detailed in the following table:
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.
A backstop is applied and the financial instrument is considered to have
experienced a significant increase in credit risk if the borrower is more than
30 days past due on its contractual payments.
Customers in hardship arrangements are normally treated as an indication
of a significant increase in credit risk.
76
Notes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 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
Consolidated
Bank
2022
2021
2022
2021
725,533
33,128
(116,546)
642,115
345,363
225,671
571,034
71,081
642,115
843,711
(59,366)
(58,812)
725,533
396,149
277,077
673,226
52,307
725,533
667,524
23,086
(107,184)
583,426
321,014
194,877
515,891
67,535
583,426
779,493
(64,795)
(47,174)
667,524
359,988
257,109
617,097
50,427
667,524
Net collective provision funding
(25,282)
(113,369)
(16,239)
(109,247)
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
58,410
33,128
(64,121)
28,326
(2,667)
54,003
(59,366)
(61,922)
60,897
(60,391)
39,325
23,086
(62,057)
26,457
(12,514)
44,452
(64,795)
(60,398)
56,401
(68,792)
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 2021
Transfers to/(from)
Stage 1
Stage 2
Stage 3
Net financial assets originated
11,731,003
2,147,480
538,588
14,417,071
(757,134)
641,103
116,031
79,563
(117,944)
-
327
38,381
(327)
860,464
(761,875)
(166,631)
-
-
-
(68,042)
(68,042)
Total movement in EAD during 2021
182,893
(238,389)
(12,546)
31 December 2021
11,913,896
1,909,091
526,042
14,349,029
77
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesNotes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 15. LOANS AND RECEIVABLES FROM CUSTOMERS (CONTINUED)
All amounts are expressed in K’000
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
Stage 1
183,777
(31,926)
7,518
-
Stage 2
333,679
31,217
(11,499)
56
7,906
(1,778)
Stage 3
272,821
Total
790,277
709
3,981
(56)
41,154
-
-
-
47,282
12,083
(68,917)
14,996
(41,838)
Movements due to risk parameter and other changes
38,405
(104,372)
2,284
(63,683)
Total net P&L charge / (release) during 2021
33,986
(155,293)
63,068
(58,239)
Loans written off against provision/(write back of provision no longer
required)
31 December 2021
EAD - Loans and receivables from customers
1 January 2022
Transfers to/(from)
Stage 1
Stage 2
Stage 3
Net financial assets originated
Total movement in EAD during the year
31 December 2022
ECL – Loans and receivables from customers
1 January 2022
Transfers to/(from)
Stage 1
Stage 2
Stage 3
Net financial assets originated
Transfers between stages
-
-
(58,812)
217,763
178,386
277,077
(58,812)
673,226
11,913,896
1,909,091
526,042
14,349,029
(294,713)
223,927
521,995
(577,144)
-
1,330
70,786
55,149
(1,330)
-
-
-
1,038,201
(207,047)
(169,215)
1,265,483
(558,934)
(44,610)
661,939
661,939
13,179,379
1,350,157
481,432
15,010,968
217,763
178,386
277,077
673,226
(5,483)
4,622
861
-
57,459
(61,823)
4,364
-
-
78
(78)
-
(39,979)
(11,292)
22,910
(28,363)
(12,763)
(10,844)
6,190
(17,417)
Movements due to risk parameter and other changes
19,476
9,763
30,893
60,132
Total net P&L charge/ (release) during 2022
18,710
(69,496)
65,140
14,354
Loans written off against provision/(write back of provision no longer
required)
31 December 2022
-
-
(116,546)
(116,546)
236,473
108,890
225,671
571,034
78
Notes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 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
Increase/(decrease) in exposure to expected credit losses
Balance at 31 December
Write-off policy
2022
Stage 1
2021
Stage 1
Gross
exposure
3,284,336
1,309,331
4,593,667
Provisions
52,307
18,774
Gross
exposure
2,984,144
300,192
71,081
3,284,336
Provisions
53,434
(1,127)
52,307
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
Consolidated
Bank
2022
2021
2022
2021
Funds in transit and other assets1
258,819
208,316
Intercompany account
Outstanding premiums
Prepayments
Accounts receivable
Accrued income
Non-Financial Assets
Inventory
Investment in Joint Ventures
Intangible Assets
Investment properties
At 31 December
1,256,980
1,029,539
1 Funds in transit includes interbank transactions which are in the process of clearance.
338,044
279,106
260,624
186,765
-
19,065
47,293
5,021
7,846
-
21,678
42,501
3,562
3,049
25,227
270,111
294,397
329,201
918,936
16,363
224,323
236,577
273,170
750,433
208,145
4,476
-
39,665
2,023
6,315
141,433
5,261
-
37,788
1,849
434
-
26,127
286,368
-
312,495
573,119
-
26,980
228,065
-
255,045
441,810
79
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesNotes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 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
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.
17. AMOUNT DUE TO OTHER BANKS
All amounts are expressed in K’000
Vostro account balances
Interbank account balances
At 31 December
18. CUSTOMER DEPOSITS
On demand and short term deposits
Term deposits
At 31 December
Consolidated
Bank
2022
144,165
117,395
261,560
2021
116,048
126,262
242,310
2022
144,187
374,693
518,880
2021
106,783
221,358
328,141
24,075,220
21,170,919
23,049,105
20,236,820
2,844,141
2,772,436
2,145,788
2,113,458
26,919,361
23,943,355
25,194,893
22,350,278
The deposits are diversified across industries and regions with the maturity profile of deposits included in note 23.
80
Notes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 19. OTHER LIABILITIES
All amounts are expressed in K’000
2022
2021
2022
2021
Consolidated
Bank
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
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 has for some time been working to uplift and strengthen
the Group’s systems and processes to comply with the Anti-money
Laundering and Counter Terrorist Financing Act 2015 (AML and CTF).
BSP has implemented various improvements, involving significant
investment in systems and personnel, to its AML/CTF Program.
27,971
16,321
1,953
110,445
156,690
181,433
2,507
353,032
285,581
246,480
220,942
25,003
20,108
3,746
94,975
143,832
156,670
30,399
217,456
271,055
245,614
225,773
-
-
-
-
-
107,497
4,104
474,337
256,957
246,479
203,822
-
-
-
-
-
80,355
30,263
319,970
240,863
245,614
209,574
1,446,665
1,290,799
1,293,196
1,126,639
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. This is an
ongoing process and further uplifting and strengthening of the AML
and CTF program may be required.
The Financial Analysis and Supervision Unit (FASU) has advised BSP
on 22 December 2022 that no penalties or fines will be levied in
relation to the most recent external audit of BSP’s AML/CTF policies
and procedures. FASU have advised they will continue to monitor
progress on the execution of BSP’s Action Plan designed to improve
the level of compliance with AML/CTF policies and procedures.
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.
81
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesNotes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 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
2022
238,851
311,483
4,043,398
4,593,732
2021
182,535
257,304
2,844,222
3,284,061
2022
238,302
297,149
3,871,846
4,407,297
2021
179,998
246,901
2,747,793
3,174,692
Commitments for capital expenditure
Amounts with firm commitments, and not reflected in the accounts
42,348
51,427
31,963
42,120
Legal Proceedings
A number of legal proceedings against the Group were outstanding as at 31 December 2022. For all litigation exposure where a loss is probable, an
appropriate provision has been made. Based on information available at 31 December 2022, the Group estimates a contingent liability of K29.6 million
(2021: K24.0 million) in respect of these proceedings.
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 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.
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.
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.
82
Notes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 22. CREDIT RISK AND ASSET QUALITY (CONTINUED)
22.1 Credit risk (continued)
The Credit Committee is the final arbiter of risk management and loan
risk concentration.
The Group has in place processes that identify, assess and control
credit risk in relation to the loan portfolio, to assist in determining the
appropriateness of provisions for loan impairment. These processes
also enable assessments to be made of other classes of assets that may
carry an element of credit risk. The Group assigns quality indicators
to its credit exposures to determine the asset quality profile.
22.1.1 Credit risk measurement
Loans and advances (incl. loan commitments and guarantees)
The estimation of credit exposure for risk management purposes
is complex and requires the use of models, as the exposure varies
with changes in market conditions, expected cash flows and the
passage of time. The assessment of credit risk of a portfolio of assets
entails further estimations as to the likelihood of defaults occurring,
of the associated loss ratios and of default correlations between
counterparties. The Group measures credit risk using Probability of
Default (PD), Exposure at Default (EAD) and Loss Given Default (LGD).
Credit risk grading
The Group uses an internal credit risk grading system that reflects its
assessment of the probability of default of individual counterparties.
Borrower and loan specific information collected at the time of
application (such as disposable income, and level of collateral for
retail exposures; and turnover and industry type for wholesale
exposures) is fed into this rating model. This is supplemented with
22.1.2 Expected credit loss measurement
external data such as credit bureau scoring information on individual
borrowers. In addition, the models enable expert judgement from
the Group Chief Risk Officer to be fed into the final internal credit
rating for each exposure. This allows for considerations which may
not be captured as part of the other data inputs into the model.
The Group’s rating method comprises 11 rating levels for instruments
not in default (1 to 11) and three default classes (12 to 14). The master
scale assigns each rating category a specified range of probabilities of
default, which is stable over time. The rating methods are subject to
an annual validation and recalibration so that they reflect the latest
projections in the light of all actually observed defaults.
Group Internal Scale
S&P Letter Grade
Description
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:
83
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesNotes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 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 BSP’s 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 ended 31 December 2022.
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).
84
Notes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 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 2022 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
2023
3.3%
3.6%
3.1%
-3.3%
-3.6%
-3.1%
2024
3.5%
4.0%
3.0%
-3.5%
-4.0%
-3.0%
-11.9%
-11.9%
-12.5%
-12.5%
-11.3%
-11.3%
-3.2%
-3.4%
-3.0%
-3.2%
-3.4%
-3.0%
2025
3.5%
4.0%
3.0%
-3.5%
-4.0%
-3.0%
-11.9%
-12.5%
-11.3%
-3.2%
-3.4%
-3.0%
2026
3.5%
4.0%
3.0%
-3.5%
-4.0%
-3.0%
-11.9%
-12.5%
-11.3%
-3.2%
-3.4%
-3.0%
2022
2.9%
4.2%
2.7%
-2.9%
-4.2%
-2.7%
-8.0%
-7.0%
-9.0%
-12.4%
-13.0%
-11.8%
-8.8%
-9.3%
-8.4%
3.0%
-1.0%
15.0%
The weightings assigned to each economic scenario at 31 December 2022 were as follows:
Scenario
Weight
Base
50%
Upside
10%
Downside
40%
85
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesNotes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 22. CREDIT RISK AND ASSET QUALITY (CONTINUED)
22.1.2.3 Measuring ECL – Explanation of inputs, assumptions and estimation techniques (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
As described above, the Group applies 3 alternative macroeconomic scenarios (base, upside, downside scenarios) to reflect an unbiased probability
weighted range of possible future outcomes in estimating ECL.
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.
Set out below are approximate levels of provisions for impairment under the base and downside scenarios for the group assuming 100% weighting was
applied to each scenario holding all other assumptions constant.
All amounts are expressed in K’000
Reported probability weighted ECL
100% base scenario
100% downside scenario
2022
642,115
618,244
675,118
2021
725,533
671,627
746,914
Sensitivity of provisions for impairment to SICR assessment criteria
● If 1% of Stage 1 credit exposures as at 31 December 2022 was included in Stage 2, provisions for impairment would approximately increase by K6.804
million for the bank. (31 December 2021 K6.992 million).
● If 1% of Stage 2 credit exposures as at 31 December 2022 was included in Stage 1, provisions for impairment would approximately decrease by K0.506
million for the bank. (31 December 2021 K0.887 million).
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)
86
Notes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 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
2022
2021
ECL staging
Credit grade
Stage 1
12-month
Standard monitoring
13,179,379
Special monitoring
Default
-
-
Stage 2
Lifetime
886,601
463,556
-
Gross carrying amount
13,179,379
1,350,157
Loss allowance
(236,473)
(108,890)
Net carrying amount
12,942,906
1,241,267
Stage 3
Lifetime
-
-
481,432
481,432
(225,671)
255,761
Total
Total
14,065,980
13,291,616
463,556
481,432
15,010,968
(571,034)
14,439,934
531,372
526,041
14,349,029
(673,226)
13,675,803
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 K8,484.466 million (2021: K8,307.087 million) is classified as Stage 1
with a credit grade of ‘standard monitoring’. Total loss allowance carried against this balance is K45.849 million (2021: K48.541 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
2022
2021
291,828
291,227
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.
87
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22.1.3.2 Collateral and other credit enhancements (continued)
Financial assets that are credit-impaired and related collateral held in order to mitigate potential losses are shown below:
Consolidated
31 December 2022
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 2021
Gross
exposure
Impairment
allowance
Carrying
amount
Fair value of
collateral held
8,140
1,092
28,549
163,050
180,466
99,019
1,116
481,432
3,507
602
12,199
68,387
85,826
54,621
529
225,671
4,633
490
16,350
94,663
94,640
44,398
587
255,761
11,721
1,657
28,491
209,503
170,258
118,742
749
541,121
Total credit-impaired assets
526,042
277,077
248,965
584,308
Impairment allowance is assessed for each counterparty giving regard to collateral held for the respective exposure.
88
Notes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 22. CREDIT RISK AND ASSET QUALITY (CONTINUED)
22.1.4 Credit Quality – Prudential guidelines
The prudential standard maintained by the Bank of Papua New Guinea 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 2022 is as follows:
Consolidated
As at 31 December 2022
All amounts are expressed in K'000
Overdrafts
Term loans
Mortgages
Lease financing
Policy loans
Total
Neither past due nor impaired
873,620
10,069,538
2,257,914
177,888
118,800
13,497,760
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
52,195
456,461
4,980
262,841
57,175
719,302
4,017
2,000
739
39,562
46,318
8,562
19,820
25,753
85,701
139,836
133,679
107,690
241,369
5,540
32,221
28,079
221,635
287,475
9,765
4,165
13,930
78
116
1,030
5,927
7,151
-
-
-
619
-
33
-
652
652,100
379,676
1,031,776
18,816
54,157
55,634
352,825
481,432
Total gross loans and receivables
from customers
977,113
10,928,676
2,786,758
Less impairment provisions
(53,915)
(435,984)
(142,153)
198,969
(10,063)
119,452
15,010,968
-
(642,115)
Net loans and receivables from
customers
22.1.5 Credit related commitments
923,198
10,492,692
2,644,605
188,906
119,452
14,368,853
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.
89
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22.1.6 Economic sector risk concentrations
Economic sector risk concentrations within the customer loan portfolio are as follows:
Consolidated
As at 31 December
All amounts are expressed in K’000
Commerce, finance and other business
Private households
Government and public authorities
Agriculture
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
As at 31 December
All amounts are expressed in K’000
Corporate / Commercial
Government
Retail
Net loan portfolio balance
22.1.8 Impact of overlays on the provision for ECL
2022
7,184,154
3,710,391
789,757
295,804
1,680
899,744
411,601
1,075,722
%
50
26
5
2
-
6
3
8
2021
6,745,549
3,359,516
691,294
286,697
6,950
1,142,933
393,782
996,775
%
50
25
5
2
-
8
3
7
14,368,853
100
13,623,496
100
2022
8,554,103
2,107,445
3,707,305
%
60
15
25
2021
8,003,207
2,257,732
3,362,557
%
58
17
25
14,368,853
100
13,623,496
100
The following table attributes the breakup between modelled ECL and other economic overlays. Where there is increased uncertainty regarding the
required forward-looking economic conditions under IFRS 9, or limitations of the historical data used to calibrate the models to current stressed
environments, overlays are typically used to address areas of potential risk not captured in the underlying modelled ECL.
All amounts are expressed in K’000
Modelled provision for ECL (Stage 1 and 2)
Overlays
Total
2022
406,444
10,000
416,444
2021
421,326
27,130
448,456
90
Notes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 22. CREDIT RISK AND ASSET QUALITY (CONTINUED)
22.1.8.1 COVID-19 overlay
At the cessation of the COVID-19 support packages, loans that were
in this category have been regraded and captured in the model. As at
31 December 2022, there were no COVID-19 overlays (2021: K27.130
million).
(PD and LGD) are adjusted to incorporate reasonable and supportable
forward looking information about known or expected risks for
specific segments of portfolios and are captured through the model.
Management exercises credit judgement in assessing if an exposure
has experienced SICR and in determining the amount of impairment
provisions at each reporting date. Where applicable, credit risk factors
22.1.8.2 COVID-19 relief packages
There were no customers under COVID-19 relief packages at 31 December 2022 (2021: K1.312 billion):
Consolidated
As at 31 December
All amounts are expressed in K’000
Stage 1
Stage 2
Total
23. LIQUIDITY RISK
Total Credit
Exposures
2022
-
-
-
Expected Credit
Loss
Total Credit
Exposures
Expected Credit
Loss
2022
-
-
-
2021
405,530
906,002
1,311,532
2021
6,305
97,584
103,889
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 2022
The maturity profile of material Assets and Liabilities as at 31 December 2022 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.
91
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesNotes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 23. LIQUIDITY RISK (CONTINUED)
Maturity of assets and liabilities
Consolidated
As at 31 December 2022
All amounts are expressed in K'000
Up to 1 month
1 - 3 months
3 - 12 months
1 - 5 years
Over 5 years
Total
Assets
Cash and balances with Central Banks
4,246,913
-
-
-
2,031,911
Treasury and Central Bank bills
291,680
1,257,910
2,611,958
38,260
1,339,623
3,934,576
1,122,765
222,611
533,715
64,574
176,409
1,453,757
773,640
-
8,188,976
3,786,755
10,935,557
2,078,810
5,015,764
12,013,991
9,367,729
39,411,851
6,278,824
4,199,808
1,738,643
-
-
4,316,365
18,427,389
3,019,453
8,767,187
Amounts due from other banks
Loans and receivables from customers
Other financial assets
Total assets
Liabilities
Amounts due to other banks
104,008
34,468
123,084
-
-
261,560
Customer deposits
Lease liability
Other liabilities
Other provisions
Total liabilities
Net liquidity gap
Consolidated
As at 31 December 2021
Assets
23,752,714
411,366
1,194,609
849,498
1,121,055
27,329,242
-
1,351,662
207,572
-
24,181
350
-
896,695
10,074
158,946
89,957
126,635
285,581
61,760
2,424,255
350
5,102
223,448
25,415,956
470,365
2,224,462
1,098,751
1,314,552
30,524,086
(14,480,399)
1,608,445
2,791,302
10,915,240
8,053,177
8,887,765
Cash and balances with Central Banks
3,237,770
-
-
-
1,277,015
4,514,785
Treasury and Central Bank bills
685,183
704,187
3,347,907
35,172
4,697
4,777,146
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
1,149,441
3,513,262
1,033,598
112,936
74,349
-
-
1,336,726
457,643
2,052,719
7,170,220
4,195,707
17,389,551
58,828
467,057
2,825,907
3,554,446
7,939,836
9,619,254
1,333,594
5,942,032
10,031,299
9,031,865
35,958,044
188,130
22,262,175
-
1,178,999
238,151
19,404
383,273
-
1,110
14
14,846
925,893
-
614,361
716
117
19,813
242,310
208,683
44,968
276,866
326
323,006
24,103,030
220,294
265,262
94,767
17,664
2,166,103
256,871
23,867,455
403,801
1,555,816
530,960
675,544
27,033,576
(14,248,201)
929,793
4,386,216
9,500,339
8,356,321
8,924,468
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.
92
Notes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 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 2022
All amounts are expressed in K'000
PGK
FJD
SBD
USD
Other
Total
Assets
Cash and balances with Central Banks
3,351,635
1,363,312
Treasury and Central Bank bills
4,087,085
-
Amounts due from other banks
358,688
341,180
Loans and receivables from customers
9,173,225
3,448,430
4,225,197
1,484,599
524,194
911,700
Other financial assets
Other assets
Total assets
Liabilities
729,436
20,209
42,515
466,063
-
12,914
821,527
6,278,824
-
21,046
4,128,340
623,121
246,479
373,139
1,738,643
1,034,656
14,368,853
-
39,762
4,789,153
71,742
1,009
117,241
2,586,291
22,680,429
6,588,816
1,329,965
883,523
2,407,371
33,890,104
Amounts due to other banks
(7,732)
(227,869)
884
-
(26,843)
(261,560)
Customer deposits
(18,943,375)
(3,889,006)
(994,653)
(578,985)
(2,513,342)
(26,919,361)
Other liabilities
Total liabilities
(704,374)
(1,614,307)
(50,319)
(248,841)
(78,289)
(2,696,130)
(19,655,481)
(5,731,182)
(1,044,088)
(827,826)
(2,618,474)
(29,877,051)
Net on-balance sheet position
3,024,948
857,634
285,877
Off-balance sheet position
-
-
-
55,697
(4,502)
(211,103)
4,013,053
4,567
65
Credit commitments
3,083,199
1,268,322
60,828
-
181,318
4,593,667
Consolidated
As at 31 December 2021
Assets
Cash and balances with Central Banks
2,022,919
1,076,401
Treasury and Central Bank bills
Amounts due from other banks
4,553,945
117,035
54,352
349,727
Loans and receivables from customers
8,452,097
3,248,475
3,467,871
1,212,613
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
4,514,785
18,948
4,644,903
397,607
1,336,726
1,139,210
13,623,496
40,057
4,079,423
185,702
2,243,789
19,826,480
6,062,581
1,356,772
722,946
2,474,343
30,443,122
Amounts due to other banks
(117,525)
(120,942)
(8,726)
-
4,883
(242,310)
Customer deposits
(16,419,608)
(3,630,662)
(1,014,388)
(516,718)
(2,361,979)
(23,943,355)
Other liabilities
Total liabilities
(825,865)
(1,439,406)
(50,007)
(4,757)
(142,457)
(2,462,492)
(17,362,998)
(5,191,010)
(1,073,121)
(521,475)
(2,499,553)
(26,648,157)
Net on-balance sheet position
2,463,482
871,571
283,651
201,471
(25,210)
3,794,965
Off-balance sheet position
-
-
-
(120,110)
119,835
(275)
Credit commitments
2,412,952
739,143
30,079
-
102,162
3,284,336
93
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesNotes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 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
2022
2021
Impact on profit or loss
Impact on equity
Impact on profit or loss
Impact on equity
USD strengthening by 5% (2021 – 5%)
USD dollar weakening by 15% (2021 – 15%)
AUD strengthening by 5% (2021 – 5%)
AUD dollar weakening by 15% (2021 – 15%)
(2,023)
5,013
330
(817)
(2,023)
5,013
330
(817)
(1,502)
3,722
64
(159)
(1,502)
3,722
64
(159)
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 posi-
tions for material exposures as they arise. Forward and spot foreign exchange contracts are used.
Currency concentration of assets, liabilities, and off-balance sheet items
Forward exchange contracts outstanding at 31 December 2022 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 2022
Selling
Buying
As at 31 December 2021
Selling
Buying
FCY
Kina
FCY
Kina
FCY
Kina
FCY
Kina
26. INTEREST RATE RISK
USD
(913)
(3,214)
-
-
(32,988)
(115,746)
747
2,623
AUD
(200)
(478)
-
-
(492)
(1,252)
18,280
46,550
EURO
(27)
(102)
-
-
(53)
(208)
-
-
GBP
JPY
-
-
-
-
(10)
(47)
-
-
-
-
-
-
(21,915)
(668)
1,000
30
Other
(201)
(708)
1,297
4,567
(624)
(2,189)
20,130
70,632
Total
-
(4,502)
-
4,567
-
(120,110)
-
119,835
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.
94
Notes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 Other financial assets
Other assets
Total assets
Liabilities
Customer deposits
Other liabilities
Other provisions
Total liabilities
26. INTEREST RATE RISK (CONTINUED)
Interest sensitivity of assets, liabilities and off balance sheet items – re-pricing analysis
Consolidated
As at 31 December 2022
All amounts are expressed in K'000
Up to 1 month 1-3 months
3-12 months
1-5 years Over 5 years
Non-interest
bearing
Assets
Cash and Balances with Central Banks
1,663,113
-
-
Treasury and Central Bank bills
Amounts due from other banks
316,880
1,231,168
2,580,222
991,487
227,268
101,843
Cash Reserve Requirement with Central Banks
-
Loans and receivables from customers
11,157,455
-
130,196
241,052
55,613
466,912
27,468
-
-
-
-
85,070
2,013,482
-
-
-
70
418,045
2,517,159
35,055
-
-
598,963
2,185,566
614,391
2,941,689
261,618
795,220
-
18,844
108,534
2,105,721
14,623,315
1,885,297
3,895,419
5,146,099
1,250,442
7,089,532
Amounts due to other banks
-
39,409
168,996
9,972,184
621,816
1,261,635
6,053
7,597
1,091
336
11
-
-
442,642
203,032
-
-
53,155
510,552
14,110,532
110,743
2,103,324
-
263,943
9,985,834
662,652
1,430,642
645,674
621,295
16,530,954
Interest sensitivity gap
4,637,481
1,222,645
2,464,777
4,500,425
629,147
(9,441,422)
Assets
Cash and Balances with Central Banks
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
-
-
-
-
2,057,765
3,281,868
7,194
4,698
-
28,646
-
-
-
-
-
462,908
1,719,870
Loans and receivables from customers
11,471,141
106,614
415,289
1,453,760
132,222
44,470
Other financial assets
Other assets
Total assets
Liabilities
922,000
45,964
-
107,726
1,856,720
1,417,300
-
75,051
2,251
-
-
1,896,200
14,592,491
961,744
3,835,780
3,317,674
1,554,220
6,181,213
Amounts due to other banks
134,345
19,396
14,751
5,865,025
563,839
1,209,682
5,022
1,108
6,005,500
8,586,991
1,069
-
584,304
377,440
-
231,535
111,986
-
-
73,818
156
16,073,118
175,793
1,942,754
-
224,011
95
654
1,225,182
343,521
175,949
18,313,701
2,610,598
2,974,153
1,378,271 (12,132,488)
Customer deposits
Other liabilities
Other provisions
Total liabilities
Interest sensitivity gap
Given the profile of assets and liabilities as at 31 December 2022 and prevailing rates of interest, a 1% increase in rates will result in a K42.682
million increase in net interest income, whilst a 1% decrease in rates will result in a K62.266 million decrease in net interest income.
95
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesNotes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 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).
Level 1
Level 2
Level 3
Total
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
286,512
9,729
246,719
-
-
-
542,960
5,316
-
-
509,039
329,201
28,664
872,220
291,828
9,729
246,719
509,039
329,201
28,664
1,415,180
-
-
(1,201,038)
(1,201,038)
(1,201,038)
(1,201,038)
286,520
8,089
289,988
-
-
-
584,597
4,707
-
-
524,920
273,170
32,671
835,468
291,227
8,089
289,988
524,920
273,170
32,671
1,420,065
-
-
(1,132,176)
(1,132,176)
(1,132,176)
(1,132,176)
Consolidated
As at 31 December 2022
All amounts are expressed in K’000
a) Financial assets
Equity securities
Treasury bills
Government inscribed stock
Non-financial assets
Land and buildings
Investment properties
Aircraft subject to operating lease
Total assets
b) Financial liabilities
Policy liability
Total liabilities
As at 31 December 2021
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
96
Notes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022
Consolidated
As at 31 December 2022
All amounts are expressed in K’000
a) Financial assets
Equity securities
Treasury bills
Government inscribed stock
Non-financial assets
Land and buildings
Investment properties
Aircraft subject to operating lease
Total assets
b) Financial liabilities
Policy liability
Total liabilities
Level 1
Level 2
Level 3
Total
-
-
-
-
-
-
-
-
-
286,512
9,729
246,719
542,960
-
-
-
-
-
5,316
-
-
509,039
329,201
28,664
872,220
291,828
9,729
246,719
509,039
329,201
28,664
1,415,180
(1,201,038)
(1,201,038)
(1,201,038)
(1,201,038)
27. FAIR VALUES OF FINANCIAL AND NON-FINANCIAL ASSETS AND LIABILITIES (CONTINUED)
Consolidated
Financial assets at fair value through profit and loss
Opening balance
Total gains and losses recognised in:
- Profit & loss
- Other comprehensive income
- Purchases
- Disposals
- Translation movements
Closing balance
2022
835,468
2021
798,987
(23,162)
(28,315)
14,566
84,235
(1,917)
(36,970)
872,220
18,088
61,942
(4,045)
(11,189)
835,468
There were no changes in valuation technique for Level 3 recurring fair value measurements during the year ended 31 December 2022.
Property, plant and equipment represents commercial land and buildings owned and occupied. Investment properties represent land and
buildings owned and leased out by the Group. Assets subject to operating lease relate to aircraft owned and leased out by the Group. Property,
plant and equipment, Investment property and Assets subject to operating lease are valued based on valuations provided by independent
valuers.
The frequency of valuations complies with Group policy. The significant inputs used in preparing the valuations relate to:
● Selling prices of similar properties and aircraft
● Maintenance costs
● Replacement costs
The fair value of the land and buildings and aircraft are classified as level 3 within the fair value hierarchy due to the use of the above
mentioned unobservable inputs.
Sensitivities to reasonably possible changes in non-market observables valuation assumptions would not have a material impact on the
Groups' reported results.
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
At 1 January 2021
Share buyback
At December 2021/1 January 2022
Share buyback
At 31 December 2022
467,229
(3)
467,226
(6)
467,220
372,189
(56)
372,133
(23)
372,110
In May 2014, the Directors introduced a share-buyback scheme of up to K15 million. The share-buyback commenced in July 2014 and
extended to such time when the allocated K15 million buyback was utilised, or if the Board wishes, any time before that. As at 31 December
2022, a total of K9.388 million has been bought back under this scheme. The scheme ceased in July 2022 as approved by the Board.
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.
97
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesNotes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022
28. ORDINARY SHARES (CONTINUED)
All amounts are expressed in K’000
Dividends paid on ordinary shares
Interim ordinary dividend (2022: 34 toea; 2021: 39 toea)
Final ordinary dividend (2021: 134 toea; 2020: 105 toea)
29. RETAINED EARNINGS AND OTHER RESERVES
Retained earnings
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 comprise:
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
Impact of PNG tax rate change
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
98
Consolidated
2022
2021
Bank
2022
159,350
629,556
788,906
183,388
493,076
676,464
158,796
626,142
784,938
3,025,125
1,081,069
(629,379)
(159,350)
5,270
(3,327)
(126)
2,622,249
1,075,218
(492,905)
(183,388)
8,658
(4,409)
(298)
2,728,885
1,045,279
(626,142)
(158,796)
5,270
(3,327)
-
2021
182,218
490,584
672,802
2,360,983
1,036,455
(490,584)
(182,218)
8,658
(4,409)
-
3,319,282
3,025,125
2,991,169
2,728,885
96,873
635
21,578
59,936
141,912
320,934
123,732
635
21,578
56,691
194,293
396,929
83,180
109,937
635
-
59,936
81,225
224,976
635
-
56,691
109,570
276,833
123,732
129,063
109,937
115,828
42
(5,414)
(23,068)
1,581
96,873
635
635
56,691
3,327
(82)
59,936
560
(7,457)
-
1,566
123,732
635
635
52,267
4,409
15
56,691
-
(5,270)
(23,068)
1,581
83,180
635
635
56,691
3,327
(82)
59,936
-
(7,457)
-
1,566
109,937
635
635
52,267
4,409
15
56,691
Notes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 29. RETAINED EARNINGS AND OTHER RESERVES (CONTINUED)
All amounts are expressed in K’000
Foreign currency translation reserve
At 1 January
Movement during the year
At 31 December
Equity component of convertible notes
Consolidated
Bank
2022
2021
2022
2021
194,293
(52,381)
141,912
234,973
(40,680)
194,293
109,570
(28,345)
81,225
131,995
(22,425)
109,570
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 prescribes the leverage capital ratio. The Group
complies with the prevailing prudential requirements for total capital
and leverage capital. As at 31 December 2022, the Group’s total
capital adequacy ratio and leverage capital ratio satisfied the capital
adequacy criteria for a ‘well-capitalised’ bank. The minimum capital
The Group's capital adequacy level is as follows (unaudited):
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.
All amounts are expressed in K’000
Balance sheet assets (net of provisions)
Balance sheet / notional amount
Risk-weighted amount
2022
2021
2022
2021
Currency
6,278,824
4,541,264
53,355
99,563
Loans and receivables from customers
14,265,599
13,522,506
11,456,233
10,732,616
Investments and short term securities
All other assets
Off-balance sheet items
Total
8,966,212
4,379,469
4,593,732
8,733,701
3,645,651
3,284,061
282,880
2,426,317
228,950
243,305
2,167,637
226,357
38,483,836
33,727,183
14,447,735
13,469,478
99
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesNotes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 30. CAPITAL ADEQUACY (CONTINUED)
Capital Ratios
a) Tier 1 Capital
Total Capital
b) Leverage Capital Ratio
Capital (K’000)
Capital Adequacy Ratio (%)
2022
3,278,521
3,548,158
2021
3,164,663
3,457,797
2022
22.7%
24.6%
9.9%
2021
23.5%
25.7%
10.6%
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%.
Group Structure
31. INSURANCE
Accounting Policy
Medical and Life Insurance Business
The Group’s consolidated Financial Statements include the assets, liabilities,
income and expenses of the life and general insurance businesses. The
Group’s Insurance business is made up of Life Insurance Contracts, Medical
Insurance and Term Life Insurance.
The Group’s life and general insurance entities will be adopting IFRS 17
'Insurance contracts' (effective 1 January 2023), replacing IFRS 4. The new
standard 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.
(a) Recognition and Measurement
Short Term Insurance Contracts
and term-life contracts issued in Fiji, these include direct and indirect
claims settlement costs and arise from events that have occurred up to
the Statement of Financial Position date even if they have not yet been
reported to the Group. The Group does not discount its liabilities for
unpaid claims. Liabilities for unpaid claims are based on the sum insured or
cost of approved medical services plus an allowance for claims incurred but
not reported based on statistical analysis and related claim expenses. Case
estimates are used to estimate the expected ultimate cost of more complex
claims that may be affected by external factors (such as court decisions).
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.
These contracts include the Term Life and Medical policies sold and
underwritten by BSP Health Care (Fiji) Limited and Group Term life policies
sold by BSP Life (PNG) Limited.
For all these contracts, premiums are recognised as revenue when they
become payable by the contract holder. Premiums are shown before
deduction of commission.
These contracts protect the Group’s customers from the consequences of
events such as death, disability and medical emergency. Benefits paid on
occurrence of the specified insurance event are either fixed or linked to
the extent of the economic loss suffered by the policyholder. There are no
maturity or surrender benefits.
For all these contracts, premiums are recognised as revenue (earned
premiums) proportionally over the period of coverage. The portion of
premium received on in-force contracts that relates to unexpired risks
at the Statement of Financial Position date is reported as the unearned
premium liability.
Premiums are shown before deduction of commission.
Claims and loss adjustment expenses are charged to Statement of
Comprehensive Income as incurred based on the estimated liability for
compensation owed to contract holders or beneficiaries. For medical
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 liability for long term insurance contracts has been determined in
accordance with LPS 1.04 Valuation of Policy Liabilities, issued by the
Australian Prudential Regulation Authority.
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
100
Notes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 31. INSURANCE (CONTINUED)
consideration future bonuses. The liabilities are recalculated at each
balance date using best estimate assumptions. These assumptions
are revisited regularly and adjusted for actual experiences on claims,
expense, mortality, and investment returns. The policy liabilities also
include policy owner retained earnings.
(b) Methods and Assumptions
Key assumptions used in determining the Policy Liabilities for policies
for the insurance business are as follows:
(i) Discount Rates
For 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 2022 this was 4.537% per annum. For contracts
without DPF and Accident Business, the Fiji Insurance business at 31
December 2022 used a rate of 3.16% per annum. The pricing rates
were used given market subjectivity. For the PNG life insurance
business at 31 December 2022 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 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.
(v) Rates of Discontinuance
PNG Pricing assumptions are used for the incidence of withdrawal
and discontinuance which vary by duration.
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 2022 were the same as 2021 rates.
(vi) Basis of Calculation of Surrender Values
For the PNG and Fiji life businesses, 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 businesses, 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 recognised as claim recoveries in the
Statement of Comprehensive Income. This is netted off against
the claim expenses (PNG reports separately in their accounts).
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’
funds.
101
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesNotes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022
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
Claims, surrenders and maturities
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
Consolidated
2022
236,799
(4,643)
232,156
196,947
3,826
432,929
2021
228,911
(4,254)
224,657
189,907
3,795
418,359
(144,318)
(119,946)
3,354
1,195
(140,964)
(17,350)
(114,957)
(598)
(165,652)
(298,557)
46,816
40,224
(14,059)
26,165
(118,751)
(16,258)
(118,420)
(628)
(147,797)
(283,103)
18,547
35,052
(10,605)
24,447
The balance sheets as at 31 December 2022 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
Consolidated 2022
Consolidated 2021
33,582
72,162
59,619
68,026
14,032
247,421
222,424
478,515
395,052
452,420
99,349
151,172
369,265
396,642
326,614
78,490
28,380
68,835
74,276
60,710
13,469
1,647,760
1,322,183
245,670
1,567,853
Total
179,552
438,100
470,918
387,324
91,959
-
1,201,038
1,132,176
-
1,132,176
22,350
22,350
156,690
122,372
1,357,728
1,254,548
21,460
21,460
143,832
1,276,008
225,071
225,071
247,421
290,032
290,032
67,635
67,635
1,647,760
1,322,183
224,210
224,210
245,670
291,845
291,845
1,567,853
188,842
406,353
335,433
384,394
85,317
1,400,339
1,201,038
134,340
1,335,378
64,961
64,961
1,400,339
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
Total equity and liabilities
102
Notes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 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
2022
2021
1,132,176
1,043,990
(47,882)
114,957
1,787
(32,579)
118,420
2,345
1,201,038
1,132,176
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
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.
Benefits arising from the discretionary
participation feature are based on
the performance of a specified pool
of contracts or a specified type of
contract.
Key Variables that affect the
timing and uncertainty of
Future Cash Flows
- Mortality
- Morbidity
- Discontinuance rates
- Expenses
- Market rates on underlying
assets
- Mortality
- Morbidity
- Market risk
- Discontinuance rates
- Expenses
- Market rates on underlying
assets
103
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesNotes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 31. INSURANCE (CONTINUED)
Insurance and Financial Risk Management (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)
is FJD7.5 million of which FJD7.2 million is reinsured (2021: FJD6.7
million of which FJD6.4 million is reinsured). This relates to life
insurance lines. For BSP Life PNG, the largest single exposure is K10.6
million of which K10.5 million is reinsured (2021: K12.5 million of
which K12.4 million was reinsured).
● The largest single lump sum exposure for the health insurance
business under BSP Life (Fiji) is FJD10m, of which FJD9.9 million is
reinsured. The largest single net exposure is FJD0.62 million. This
relates to health insurance lines.
● Geographic concentrations due to employee company schemes. The
largest single scheme exposure for BSP Life (Fiji) is FJD72.9 million,
of which FJD29.0 million is reinsured. BSP Life (PNG) participates in a
Term Life reinsurance program
● The largest single group exposure across various locations for PNG
Life is K597 million of which K275 million is reinsured (2021: K606
million of which K295 million 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.
Accounting Standard Change: IFRS 17 Insurance Contracts
IFRS 17, 'Insurance Contracts' (effective 1 January 2023) replaces IFRS 4
Insurance Contracts to establish globally consistent principles for the
recognition, measurement, presentation, and disclosure of insurance
contracts issued. This will impact the financial results reported for the
activities of BSP Life. The new standard will more closely align the disclosure
of financial performance for life insurance companies with other financial
service providers. The underlying principles of determining the liability
relating to insurance contracts have not significantly changed compared to
the existing Margin on Service (MoS).
The level and detail of disclosure has increased and while the ultimate
profit earned from insurance contracts will not change, the timing of profit
recognition will differ.
Governance and Project Management
The adoption of IFRS 17 is a significant initiative for the BSP Life operations,
involving substantial resources and effort from the Finance, Actuarial
and Information Technology Teams. The 2023 Financial Statements will
contain the details of the accounting policies used to derive the financial
information along with the significant judgement applied in interpreting
the standard and applying this to the insurance contracts.
Measurement Model Applicable under IFRS 17
The standard introduces a model to measure the liability for groups of
contracts using three explicit components. Firstly, the estimated present
value of future cash flows expected to arise from a group of contracts.
104
The cash flow estimate is based on best estimate assumptions, which are
neither conservative nor optimistic. Secondly, an explicit risk adjustment
has been introduced: the required 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 standard defines a General Measurement Model (GMM) to use for
valuing insurance contracts. The GMM requires the projection of future
cash flows related to insurance contracts using current financial and non-
financial assumptions. This requirement is not significantly different to
the current MoS basis used for Life Insurance contracts, with some critical
changes noted below:
●
●
●
●
●
The level at which contract profit pooling is performed under IFRS 17
is more granular. The contract grouping is based on the nature of the
product, the year of issue and the expected profitability level, which
will provide more transparency and disclosure on the profitability of
new contracts issued each year.
Establishing future cash flow assumptions for expenses differs from
IFRS 4. Only expenses directly attributable to supporting insurance
contracts are included. All other expenses will be recognised as
incurred.
The unearned profit for insurance contracts is termed the
Contractual Service Margin (CSM). The principles of determining
the unearned profit are similar to MoS, but the profit recognition
patterns will differ.
The GMM model introduces a new element known as the Risk
Adjustment: compensation for bearing the uncertainty concerning
the amount and timing of cash flows. The GMM requires the risk
adjustment to be treated as a specific cash flow, decreasing the
expected profit recognised at contract origination. The annual
profit will be recognised through the release of the Contract Service
Margin and Risk Adjustment.
The two other modifications of the GMM are described below:
- The Variable Fee Approach (VFA), insurance contracts with direct
participation features are eligible to use this model. The model
allows for the variable nature of fees earned from insurance
contracts, which depend on the underlying assets' performance;
and
- The Premium Allocation Approach (PAA) is a simplified model
which does not require future projections to satisfy the
requirements under IFRS 17, provided the insurance contracts
are profitable. There are specific requirements for this model to
be applied, including the term of the insurance contract being no
more than 1 year.
Level of aggregation applied to Insurance Contracts
The standard requires insurance contracts to be recognised and measured
in groups. The aggregation of individual contracts is performed in a
manner to limit offsetting profitable contracts against onerous ones when
recognising financial performance. A portfolio of contracts is defined
based on contracts with similar risks and managed together. The portfolio
is further divided based on the year of issue and the expected level of
profitability. The level of profitability is classified as onerous, profitable
with no significant possibility of subsequently becoming onerous, and
remaining contracts. Aggregation has become much more granular, leading
to profit pooling amongst a smaller number of insurance contracts. The
application of this is noted below.
Long-Term Insurance Contracts
BSP Life issues two types of long-term products Participating and Non-
Participating products. The products falling under each category have
similar risks and have been managed together (risk transfer and risk
pooling).
Notes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 31. INSURANCE (CONTINUED)
Level of aggregation applied to Insurance Contracts (continued)
Short-Term Insurance Contracts
The aggregation of contracts for the general insurance business
is based on the characteristics of products, related risks, and key
features. Portfolio identification for BSP Health is straight forward,
as medical and term life contracts have their separate risk cover,
features, pricing mechanism, and claims management process.
For Term Life and Medical contracts, the contract duration is 12
months. The insurer retains the right to change terms and conditions,
including premium, at each renewal date.
Transition approach adopted
Insurance contracts will require restatement as of 1 January 2023
(transition date). As a result, the first full-year financial statements
presented under IFRS 17 will be for the year ending 31 December
2023, with comparatives required for 31 December 2022.
The first half-year financial statements presented will be for the
period ending 30 June 2023, with comparatives required for 30 June
32. INVESTMENT IN SUBSIDIARIES
2022. The full retrospective approach will be impracticable in some
cases, especially for older cohorts where assumptions cannot be
determined without hindsight.
Long-Term Insurance Contracts
The Group will apply the modified retrospective approach to
transition with the following key dates:
●
Fair valuation of insurance contracts up to 31 December 2017.
It is impracticable to apply the full retrospective approach
for the period before the implementation of BLIS (current
insurance administration system). The granular transaction data
required is not available prior to this date.
The retrospective approach will be applied to insurance
contracts issued by the Group after 1 January 2018.
●
Short-Term Insurance Contracts
A full retrospective approach will be adopted and is practical due to
the short 12-month contract.
Principal
activity
Place of incorporation
and operation
Balance of investment
Ownership %
2022
2021
Name of subsidiary
BSP Capital Limited
Fund Management/
Investment Banking
BSP Life (Fiji) Limited
BSP Life (PNG) Limited
Life Insurance
Life Insurance
BSP Convertible Notes Limited
Capital Raising
BSP Finance Limited
Credit Institution
Bank of South Pacific Tonga Ltd
Bank
Bank South Pacific (Samoa) Ltd
Bank
Bank South Pacific Vanuatu Ltd
Bank
At 31 December
Represented by:
At 1 January
Additional capital
At 31 December
PNG
Fiji
PNG
Fiji
PNG
Tonga
Samoa
Vanuatu
100%
100%
100%
100%
100%
100%
98.7%
100%
2,448
87,599
25,000
371
103,601
71,610
70,712
38,020
2,448
87,599
25,000
371
93,038
71,610
70,712
38,020
399,361
388,798
388,798
10,563
385,078
3,720
399,361
388,798
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 %
2022
50%*
2021
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.
105
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesNotes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 33. INVESTMENT IN JOINT VENTURES (CONTINUED)
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 profit/(loss) for the year
Group fair value alignment
Share of profit in Group
Other
34. FIDUCIARY ACTIVITIES
Consolidated
2022
2021
Bank
2022
224,323
10,563
(11,850)
47,075
270,111
622,520
(345,205)
277,315
42,066
5,009
47,075
202,546
3,962
(5,624)
23,439
224,323
625,798
(370,290)
255,508
(2,228)
25,667
23,439
26,980
-
(1,050)
197
26,127
90,894
(40,772)
50,122
197
-
197
2021
27,879
243
(943)
(199)
26,980
98,549
(44,609)
53,940
(199)
-
(199)
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 a 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 2022, balances and transactions of accounts for Directors, including companies in which directorships were held by BSP directors, were as
follows:
106
Notes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 35. RELATED PARTY TRANSACTIONS (CONTINUED)
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
Closing balance
Consolidated
2022
2021
33,019
117,237
150,256
20
628,858
112,781
18,028
1,018
(124,063)
636,622
27,299
5,720
33,019
12
638,794
85,169
24,770
1,646
(121,521)
628,858
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 2022, staff account balances were as follows:
Housing loans
Other loans
Cheque accounts
Savings accounts
208,449
68,600
277,049
6,414
12,486
18,900
204,659
69,045
273,704
5,717
12,380
18,097
107
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesNotes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 36. DIRECTORS AND EXECUTIVE REMUNERATION
Directors’ remuneration
Directors of the company received remuneration including benefits during 2022 as detailed below:
All amounts are expressed in Kina
Total remuneration
Name of Director
Sir K. Constantinou, OBE
R. Fleming, CSM¹
S. Brewis-Weston
E. B. Gangloff
A. Sam
Dr. M. Lua’iufi
S. Davis
R. Bradshaw
P. Kevin
F. Bouraga
P. Taureka-Seruvatu
G. Robb, OAM
Shareholder Approved Cap
Meetings
attended /
total held
7/7
7/7
7/7
1/1
7/7
7/7
7/7
7/7
7/7
7/7
4/4
-
Appointed/
(Resigned)
2022
Bank
2022
Subsidiaries
2022
Total
2021
Total
561,304
300,000
861,304
861,304
(Dec 2022)
-
Apr 2021
330,652
(Apr 2022)
171,576
343,152
305,652
343,152
318,152
330,652
305,652
Apr 2022
146,576
(Apr 2021)
-
-
-
-
-
120,000
-
-
60,000
-
-
-
3,156,520
480,000
-
330,652
171,576
343,152
425,652
343,152
318,152
390,652
305,652
146,576
-
247,989
403,152
343,152
380,652
330,652
318,152
318,152
305,652
-
-
225,326
3,636,520
4,500,000
3,734,183
4,500,000
¹Managing 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 2022 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
Roger Hastie
Vandhna Narayan
Maryann Lameko-Vaai
All amounts are expressed in K’000
Year
2022 executive remuneration
2021 executive remuneration
Salary
18,182
18,766
Short term
incentive
Value of
benefits
Long term
incentive
Leave
encashment
Final
entitlements1
Total
6,000
6,109
1,510
1,456
7,844
7,151
7,096
99
826
41,458
-
33,581
1Final entitlements paid were for executives who resigned or retired from the Bank in 2022 and constitutes statutory leave payouts.
108
Notes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022
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
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
550 – 560
2022
No.
138
2021
No.
95
82
84
65
49
32
40
24
32
22
15
26
19
9
13
14
5
7
5
7
8
9
5
-
3
2
6
4
5
1
2
6
7
2
6
2
4
6
5
7
2
1
4
3
2
3
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
3
Remuneration
2022
K’000
560 – 570
570 – 580
580 – 590
590 – 600
600 – 610
610 – 620
620 – 630
630 – 640
640 – 650
650 – 660
660 – 670
670 – 680
680 – 690
690 – 700
700 – 710
710 – 720
720 – 730
730 – 740
740 – 750
750 – 760
770 – 780
780 – 790
790 – 800
810 – 820
830 – 840
840 – 850
870 – 880
880 – 890
890 – 900
900 – 910
910 – 920
920 – 930
930 – 940
950 – 960
960 – 970
970 – 980
980 – 990
990 – 1000
1000 – 1010
1010 – 1020
1040 – 1050
1070 – 1080
1090 – 1100
1100 – 1110
1110 – 1120
1130 – 1140
No.
1
5
5
4
2
1
1
3
1
3
2
1
1
1
-
3
1
1
-
-
-
1
1
-
1
2
-
1
-
1
1
2
-
1
3
-
-
2
1
1
1
1
2
2
2
-
2021
No.
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
Remuneration
K’000
1140 – 1150
1150 – 1160
1170 – 1180
1210 – 1220
1220 – 1230
1230 – 1240
1260 – 1270
1270 – 1280
1280 – 1290
1300 – 1310
1310 – 1320
1320 – 1330
1340 – 1350
1350 – 1360
1380 – 1390
1390 – 1400
1400 – 1410
1410 – 1420
1440 – 1450
1460 – 1470
1480 – 1490
1490 – 1500
1500 – 1510
1530 – 1540
1540 – 1550
1640 – 1650
1670 – 1680
1720 – 1730
1730 – 1740
1740 – 1750
1800 – 1810
1820 – 1830
1860 – 1870
1930 – 1940
2100 – 2110
2230 – 2240
2240 – 2250
2270 – 2280
2280 – 2290
2310 – 2320
2480 – 2490
2590 – 2600
2700 – 2710
2810 – 2820
2780 – 2790
8610 – 8620
15010 – 15020
2022
No.
1
2021
No.
-
-
-
-
-
1
-
1
1
1
1
-
-
1
1
-
2
2
1
1
1
-
-
-
-
1
-
1
-
1
1
-
1
1
1
-
-
1
1
-
1
-
1
1
-
-
1
1
1
1
1
1
1
1
-
-
-
1
1
-
1
-
-
-
-
-
-
1
1
1
1
-
1
-
1
-
-
1
-
-
-
1
-
2
-
1
-
1
-
-
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
883
772
109
Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesNotes to the Financial StatementsBSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022for the year ended 31 December 2022 Notes to the Financial Statements
for the year ended 31 December 2022
37. EVENTS OCCURRING AFTER BALANCE SHEET DATE
There have been no adjusting or disclosing events after the end of the reporting period.
38. REMUNERATION OF AUDITOR
All amounts are expressed in K’000
Financial statement audits
Other services
Consolidated
Bank
2022
5,363
523
5,886
2021
5,025
710
5,735
2022
4,350
488
4,838
2021
4,031
667
4,698
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.
110
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022
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 2022, 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 2022 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 2022, 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
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BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiaries Materiality
Audit scope
Key audit matters
• Amongst other relevant topics, we
communicated the following key
audit matters to the Board Audit and
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.
112
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022 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
To assess the Group’s loan loss provisioning, we performed the
following audit procedures on a sample basis, amongst others:
• Obtained an understanding of the processes and controls relevant
to the credit origination and credit monitoring processes.
• Assessment of the reasonableness of the key outputs of the
expected credit loss model, as well as key judgements and
assumptions used by management.
• Evaluated the impairment methodology to establish the key fields
used in the computation of Stage 1 and Stage 2 provisions. 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.
• The identification of exposure for which there has been
a significant increase in credit risk
• 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.
• 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
IT systems and controls
We focused on this area because the Group is heavily
dependent on complex IT systems for the capture,
processing, storage and extraction of significant
volumes of transactions.
There are some areas of the audit where we seek to
place reliance on system functionality including certain
automated controls, system calculations and reports.
Our reliance on these is dependent on the Group’s IT
General Control (ITGC) environment, in particular,
user access maintenance and changes to IT systems
being authorised and made in an appropriate manner.
Where relevant to our planned audit approach, we assessed the
design and tested the operating effectiveness of the key ITGCs which
support the continued integrity of the in-scope IT systems.
Our procedures over ITGCs focused on user access and change
management and we also carried out tests, on a sample basis, of
system functionality that was key to our audit approach.
Where we identified design or operating effectiveness matters
relating to ITGCs and system functionality relevant to our audit, we
performed alternative or additional audit procedures.
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.
113
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiaries 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.
• 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.
114
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022 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 2022:
• 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
22 February 2023
115
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiaries Shareholder
Information
116
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022 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 hours 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.
Variation of rights
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.
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.
Directors
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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BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiaries Shareholder Information
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 2022, 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
Comrade Trustee Services Limited
PNG Sustainable Development Program Limited
The Catholic Bishops Conference Incorporated
Capital Nominees Limited
Teachers Savings and Loans Society Limited
Samoa National Provident Fund
Lamin Trust Fund
Mineral Resources OK Tedi No. 2 Limited
Credit Corporation Finance Limited
IFC Capitalization (Equity) Fund LP
International Finance Corporation
Mineral Resource Star Mountains Limited
Solomon Islands National Provident Fund
Other Shareholders
Distribution of shareholding
As at 31 December 2022, The Company had 5,870 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
118
84,811,597
47,942,778
46,153,840
45,318,417
40,547,063
33,294,081
31,243,736
12,456,052
11,748,156
10,000,000
5,504,302
5,131,979
4,451,940
3,653,700
3,496,449
3,000,000
2,746,741
2,746,741
2,628,373
2,500,001
18.15%
10.26%
9.88%
9.70%
8.68%
7.13%
6.69%
2.67%
2.51%
2.14%
1.18%
1.10%
0.95%
0.78%
0.75%
0.64%
0.59%
0.59%
0.56%
0.54%
67,844,033
467,219,979
14.51%
100.00%
Number of
Shareholders
Number of Shares
4,772
638
115
213
132
5,870
1,255,437
1,355,482
855,416
8,141,335
455,612,309
467,219,979
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022 Shareholder Information
Unmarketable Parcels:
As at 31 December 2022, the BSP Share Price was K12.41 on the PNGX and A$4.90 on the ASX. There were 515 shareholders (less than 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
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BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiaries
Directors' Information
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
Member
BSP Financial Group Limited
Australian Institute of Company Directors, Papua New Guinea Institute of Directors
Trustee
Anglicare Foundation
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
120
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022 Directors' Information
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, Appen
Limited
Australia India Business Council, Avondale Golf Club, Asia Society Australia, Papua
New Guinea Institute of Directors
Australian Institute of Company Directors
BSP Financial Group Limited, Post PNG Limited, Koitaki CC Limited, Wahgi Arabicas
Limited
Shareholder
Koitaki CC Limited, Wahgi Arabicas Limited
Owner
Member
Waghi Valley Country Club, The Kofi Club, Koitaki Country Club
Papua New Guinea Law Society, Australian Institute of Company Directors, Papua
New Guinea Institute of Directors
Faamausili Dr. M. Lua’iufi,
BA, MSc, PhD
Director
BSP Financial Group Limited, BSP Finance Ltd, Bank South Pacific (Samoa) Limited,
Paradise Consulting
Shareholder
Member
Paradise Consulting
Samoa Institute of Directors, Australian Institute of Company Directors, Papua
New Guinea Institute of Directors, Samoa Human Resource Institute
P. Kevin, BSCS, MAICD
Director
BSP Financial Group Limited, In4net Ltd
Shareholder
In4net Ltd
Board/Council
Member
Member
Papua New Guinea Institute of National Affairs Council, Papua New Guinea
University of Technology Industrial Advisory Board (IAB)
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., Centre of Excellence
for Financial Inclusion (CEFI) Digital Financial Services Working Group Committee,
Australian Institute of Company Directors, Pacific Islands Chapter of the Internet
Society, Papua New Guinea Institute of Directors
Fellow
Internet Corporation for Assigned Names and Numbers, United States International
Visitor Leadership Program
F. Bouraga, CPA, MAICD
Director
Shareholder
Employee
Member
Director
Director
Member
S. Brewis-Weston,
BEcon(Hons), MAppFin
P. Taureka-Seruvatu, LLB
BSP Financial Group Limited, Inside Out Limited, Star Management Services
Limited, Lalokau FM Limited, Star No.57 Limited, Papua New Guinea Hunters
Rugby Football Club Inc. Board, Papua New Guinea Cancer Foundation Inc.
Inside Out Limited, Star Management Services Limited, Lalokau FM Limited, Star
No.57 Limited
SBC Solutions
Certified Practicing Accountants Papua New Guinea (CPA PNG), Accounting
Registration Board of PNG, Australian Institute of Company Directors, Papua New
Guinea Institute of Directors
BSP Financial Group Limited, Solvar Limited, Timelio Pty Limited, Mercurien Pty
Limited
BSP Financial Group Limited
Papua New Guinea Institute of Directors, Australian Institute of Company
Directors, Papua New Guinea Law Society
121
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Teams
122
122
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2021
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Management Teams 123
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesManagement Teams Executive Management
Robin Fleming, CSM
Group Chief Executive Officer
Robin Fleming was appointed Group Chief Executive Officer (GCEO) of BSP in April 2013. Before being
appointed as GCEO, he had been Deputy GCEO and Chief Risk Officer since 2009. Prior to this, 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.
Ronesh Dayal
Group Chief Financial Officer
Ronesh Dayal was appointed the Group Chief Financial Officer (GCFO) 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 of
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 Chartered Accountant and a member of Certified Practising
Accountants (CPA) Australia, CPA PNG and The Fiji Institutes of Accountants.
Frank W. M. van der Poll
Group Chief Operating Officer
Frank W. M. van der Poll joined BSP in May 2019 as the Deputy Group Chief Operating Officer (GCOO)
and commenced in the GCOO role on 1 November 2020. Primary responsibilities include Information
Technology, Project Management Office, and Project Compass, BSP’s Core Banking System upgrade, and
has direct responsibilities for Transaction Channel Support, International Operations, Lending Support
& Collections, Customer Service & Contact Centre, Support Services and Security Services. Frank started
his career in the Information Technology field with various director roles at ICL/Fujitsu and Gandalf
Technologies (Data communication) where he served as Vice President Europe, 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 MicroFinance Bank-Afghanistan.
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BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Management Teams Executive Management
Daniel Faunt
Group General Manager Retail
Daniel Faunt was appointed Group General Manager Retail in December 2020. He assumes
responsibility for the Group Retail Bank function encompassing the management of the 81
branches and sub-branches in PNG along with the Paramount Banking division and Group
Marketing. Mr. Faunt was previously the Group's General Manager Offshore Branches with
responsibility over banking operations in Fiji, Solomon Islands, Tonga, Samoa, Vanuatu and
Cook Islands.
Mr. Faunt has more than 20 years of banking experience in various senior management roles
in PNG, Australia and the Pacific. He holds a Masters of Business Administration in Economics
from Deakin University and a Bachelor of Business in Banking and Finance from the Queensland
University of Technology.
Peter Beswick
Group General Manager Corporate Banking
Peter Beswick was appointed General Manager of BSP Corporate Banking in June 2011. He
has over 25 years banking and finance experience, covering Australia and South East Asia with
Commonwealth Bank of Australia, National Australia Bank and Bank of New Zealand; holding
senior executive positions in Risk Management and Business Development. Mr. Beswick’s
most recent appointment has been CEO of a national wholesale, import and retail business
in Australia. He has extensive experience in the finance, government, retail, wholesale,
telecommunications and property sectors, with extensive knowledge in foreign exchange,
risk management and governance. Mr. Beswick qualified as a Chartered Accountant with
PwC and most recently completed a Masters of Business Administration with Macquarie
University in Australia.
Roger Hastie
Group Chief Risk Officer
Roger Hastie was appointed to Group Chief Risk Officer (GCRO) role in April 2022 and is
responsible for the risk and governance framework and Legal Services in BSP. Prior to this
appointment, he held the position of BSP Chief Credit Officer since August 2018 providing
familiarity with BSP, and Pacific and Mekong business operations.
Roger has over 30 years banking and finance experience holding senior Risk Management and
Country Head roles in Australia, Singapore, Hong Kong and PNG for Commonwealth Bank,
Westpac and BSP. Roger’s leadership and strategic focus combined with attention to detail and
strong Credit and Risk knowledge is demonstrated through BSP’s continued strong financial
performance and effective risk management of inherent risk including through the pandemic.
Roger is a mentor to a number of BSP Leadership and Development program participants. He
holds a Graduate Diploma in Finance from the Securities Institute and accounting qualifications
from TAFE and is accredited with the Australian Bankers Institute, Risk Management Association
and Australian Institute of Company Directors.
Rohan George
General Manager Treasury
Rohan George was appointed General Manager Treasury in February 2015. Mr. George
has extensive knowledge in developed and emerging financial markets. His experience
spans over 30 years, covering fixed income, foreign exchange, 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.
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BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesManagement Teams Executive Management
Hari Rabura
General Manager People & Culture
Hari Rabura is the Group General Manager for People & Culture SBU (formerly Human Resources SBU). She
has over 20 years’ experience in implementing and delivering HR strategies, policies, and services that create,
support and sustain a high performance culture. PNG Human Resource Institute (PNGHRI) in recognising her
skills and experience awarded her the Best HR Practitioner in 2016 and 2018. She has held various roles at
PricewaterhouseCoopers (PwC) and Kina Bank, plus completed her General Management training in INSEAD
Business School in France and Melbourne Business School in Australia. She holds a Bachelor of Education from
the University of Goroka – PNG.
Maryann Lameko-Vaai
General Manager Offshore Branches
Maryann was appointed as General Manager Offshore Branches in June 2022, becoming the fourth female
BSP Executive. She joined the Bank (formerly Westpac Samoa) on 08 October 2012 as the Head of Finance
& Operations and in June 2015, after BSP’s acquisition of Westpac Samoa, she was appointed to the role of
Country Head - BSP Samoa. Her appointment to this role saw her as the first local female appointed as Country
Head (General Manager level) in Samoa. Maryann is a former participant of BSPs Leadership & Management
Development Program (LMDP) from 2016 to 2018 under the Senior Leaders Category. A significant milestone
since assuming the role as Country Head of BSP Samoa was cementing the market leader position from ANZ
who had dominated the banking industry in Samoa for over 40 years. Maryann has a Bachelor of Commerce
in Accounting from the University of Auckland, New Zealand and is a Chartered Accountant with the Samoa
Institute of Accountants and a Certified Public Account (CPA) with CPA Australia.nce.
Nuni Kulu
General Manager Digital
Nuni Kulu was appointed as General Manager Digital effective as of 1 January 2019. Her appointment
made her the second female to be appointed to the Executive of BSP as she joined Hari Rabura, General
Manager People & Culture. Nuni joined the former PNG Banking Corporation (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 BSP's Leadership Development Program and has benefited from leadership and management
training at Melbourne Business School and Insead College in France. Nuni hails from Manus Province and
holds a Bachelor of Commerce attained at the Australian National University with many years of experience
with PNGBC/BSP. She is now the President of the Business Council of PNG.
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 Laundering & Compliance; Internal Audit; and Credit Inspection
Business Units to ensure BSP continues to meet its ongoing regulatory obligations and advancements in
industry standards. Vandhna was formerly the Group Head of Compliance and AML for BSP, and has also
held roles as General Manager Legal & Compliance for BSP Life Fiji and Colonial National Bank Fiji (now
BSP Fiji). Vandhna is a qualified Solicitor (admitted in Fiji, New Zealand and New South Wales) with over
25 years diverse professional and leadership experience, including 10 years in the Banking and Insurance
sector. Vandhna successfully completed CBA’s Executive Development Program in 2010, and holds a
Bachelors Degree in Law from Victoria University of Wellington, New Zealand, and a Masters Degree in
Human Rights Law and Policy from the University of New South Wales.
126
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Management Teams Executive Management
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, ML, MAICD
BSP Company Secretary
She is a lawyer by profession and has been in legal practice in Papua New Guinea for 27 years.
She worked in private practice for 5 years and then joined Bank South Pacific Limited as a legal
officer in July 2002. She was appointed as Company Secretary in 2005 and currently holds that
role to date.
Gheno Minia
General Manager BSP Capital
Gheno Minia was appointed General Manager of BSP Capital in June 2018, prior to that held
senior roles within BSP Capital’s advisory business. Mr. Minia has been with the business for over
15 years after joining in 2008 through BSP’s graduate scheme. Mr. Minia holds post graduate
qualifications in Applied Finance from Kaplan and a Bachelors in Business and Economics from
the University of Papua New Guinea and is a Senior Associate of Financial Services Institute of
Australasia.
Nilson Singh
Country Manager BSP Life
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.
He was instrumental in the establishment and launch of the life insurance business in PNG and
is passionate about growing a saving culture through endowment insurance products.
Mr. Singh 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 a full member
of CPA Australia and CPA PNG and a member of Australian Institute of Company Directors.
Nilson has a Diploma of Life Insurance with Australian and New Zealand Institute of Insurance
and Finance.
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128
COOK ISLANDS
(L-R):
Henry Napa – Head of Operations
Michelle Foster – Head of Finance
David Street – Country Head
Chris Doran – Head of Retail
Grace Tangata – Operational Risk and Compliance
Gabe Raymond – Compliance and AML Manager
FIJI
(L-R):
William Wakeham – Chief Operating Officer
Charishma Kumar – General Manager Treasury
Omid Saberi – Chief Information Officer
Sunil Rohit – Head of Credit
Haroon Ali – Country Head
Rajeshwar Singh – General Manager Corporate
Services and Chief Financial Officer
Ravindra Singh – General Manager Retail
Alvina Ali – General Manager Legal and Compliance
Vrinda Rao – Head of Operational Risk
Maikash Ali – General Manager Corporate
SAMOA
(L - R):
Peti Leiataua – Operational Risk Manager
Edward Yee – Head of Corporate (Former)
Maiava Iaeli Tovia-Leota – Manager E Banking
Bharat Chovhan – Head of Treasury
Maryann Lameko-Vaai – Country Head (Former)
Epeli Racule – Head of Operations
Jennifer Fruean – Country Head
Ina Vaafusuaga – Business Manager
Shirley Greed – Head of Retail
SOLOMON ISLANDS
Standing (L - R):
Lyn Fa’arodo – Manager E-channels
Winterford Maehau – Manager Information services
Alphonse Taoti – Head of Retail
Viliami Hia – Senior Manager Asset Management
Denise Suia – Manager Lending Support Unit
Giddings Qiqo – Head of Treasury
Alafina Katovai – Manager Internal Audit
Seated (L - R):
Freda Fa’aitoa – Manager Corporate Services
Emele Hia – Head Of Corporate Banking
Sandra Fore – BSP SI Country Head
Joyce Nukumuna – Manager Operational Risk
Nester Soaika – Manager Retail Operations
Management
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Management Teams Broader Group
TONGA
Front Row:
Marcellina Wolfgramm Haapai – Country Head
Second Row(L-R):
Mele I Latu – Head of Treasury
Wendy Tongia – Compliance & AML Manager
Meleana Fifita – Head of Operations
Iunisi Polutele – Operational Risk Manager
Third Row (L-R):
Emilio Tapueluelu – Head of Retail
Viliami Vailea – Head of Finance
Tevita Vaha’I – Head of Corporate
VANUATU
Standing (L-R):
Jioji Konusi – Head of Corporate Banking
Teresa Jordan – Head of Operations
Irene Tabi – Head of Treasury
Edward Yee – Country Head
Moana Korikalo – Head of Retail
Josiah Kalfabun – Manger Compliance
Ronal Prasad – Head of Finance
Noro Branch
Point Cruz Branch
Commercial Bank
BSP First
Tonga
Country Head
Nuku’alofa Branch
Vava’u Branch
Ha’apai Sub Branch
‘Eua Sub Branch
Vanuatu
Country Head
Head of Retail
Santo Branch
Port Vila Branch
Tanna Branch
Freswota Branch
Joseph Rabawa
Unity Bainivalu
Philip Paneoa
Doris Saingoa
677 61222
677 21874
677 21874
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
Edward Yee
Moana Korikalo
Edwige Wensi
Danica Rapouel
Dolores Charlie
Clera Runte
678 5580038
678 5580009
678 5580021
678 5580016
678 5580042
678 5580057
Subsidiaries Directory
BSP Finance
Country Heads
PNG
Fiji
Solomon Islands
Cambodia
Lao
Brendan Casey
Krishna Raju
Imelda Samba
Kheng Tilen
Panyathip Vongsouli
675 722 91580
679 323 4451
677 27779
855 (0) 2322 2011
856 (0) 20 55 538 682
(L-R):
William Wakeham – Chief Operating Officer
Charishma Kumar – General Manager Treasury
Omid Saberi – Chief Information Officer
Sunil Rohit – Head of Credit
Haroon Ali – Country Head
Rajeshwar Singh – General Manager Corporate
Services and Chief Financial Officer
Ravindra Singh – General Manager Retail
Alvina Ali – General Manager Legal and Compliance
Vrinda Rao – Head of Operational Risk
Maikash Ali – General Manager Corporate
Overseas Directory
Cook Islands
Country Head
Head of Retail
Rarotonga Branch
Aitutaki Branch
David Street
Chris Doran
Tokoa Harmon
Rosa Henry
682 22014
682 22014
682 22014
682 31714
Shailendra Roy
Katrina Lal
Ravikashni Prakash
Rovil Chandra
Fiji
Country Head
Haroon Ali
Damodar City Branch Sanjani Devi
Thomson St Branch
Nausori Branch
Navua Branch
Samabula Branch
Suva Central Branch Mereani Peters
Reginald Kumar
Ba Branch
Devendran Pillay
Westfield Branch
Ann Pesamino
Nadi Branch
Razia Tahir
Namaka Branch
Ronica Prakash
Rakiraki Branch
Nacanieli Vadei
Sigatoka Branch
Mohammed Azim
Tavua Branch
Sohnal Lata Karan
Labasa Branch
Vineeta Prasad
Savusavu Branch
Anaseini Senivika
Taveuni Branch
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
Samoa
Country Head
Retail Head
Apia Branch
Vaitele Branch
Salelologa Branch
Jennifer Fruean
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 Joy Vave
Honiara Central
Munda Branch
Sandra Fore
Lency Saeni
Richard Bero
Saverio Votu
Janet Elsie Tiikwai
677 21874
677 40484
677 60539
677 21814
677 21222
677 62177
BSP Life
Managing Director (Fiji) Michael Nacola
Country Manager (PNG) Nilson Singh
BSP Capital
General Manager (PNG) Gheno Minia
679 3261 777
675 305 6361
675 309 8521
129
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesManagement Teams
Subsidiaries
130
BSP FINANCE HOLDING
Front row (L-R):
Remu Ruape – AML/CTF Compliance officer
Bernadette Name’a – finance officer
Sharon Andoiye – Quality Assurance Manager
Janet Seta – Operation Risk & Compliance
Manager
Back row (L-R):
Anna Puri – Credit Manager
Natasha Lagani-Ikosi – Financial controller
Andy Roberts – General Manager
Elina Sapulai – Business Analyst
Susan Asi – Compliance & ORM assistant
BSP FINANCE - PAPUA NEW GUINEA
(L-R):
David Munaga – Head of Lending Sales
Myley Kula – Head of Operations
Brendan Casey – Country Manager
BSP FINANCE - FIJI
(L-R):
Shirraz Narayan – Collections Supervisor
Sanjeet Narsey – Finance Manager
Kritika Kumar – Accountant
Niranjan Singh – Compliance & Operational Risk
Management Officer
Krishna Raju – Country Head
Shainesh Lal – Area Manager West
Kajal Raj – Lending Support Unit Supervisor
Sudeshwar Ram – Area Manager East
BSP FINANCE - CAMBODIA
Standing (L-R):
Morm Sreyhouch – Senior Lending Support Officer
Pang Marina – Senior Accountant
Pum Sodoeun – Senior Phone Collection Officer
Seng Sokha – Head of Lending Sales
Sin Dany – Senior Credit Assessment Officer
Khay Bunthoeun – Operations Manager
Kheng Tilen – Country Manager
Taing Sorida – Lending Supervisor
Eng Navy – Senior Operational Risk & Compliance
Officer
Phin Nara – Finance Manager
Heat Sokna – Phone Collection Officer
Tong Sophy – Senior Field Collection Officer
Brak Sambo – Internal Audit Manager
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Management Teams Subsidiaries
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
BSP FINANCE - SOLOMON ISLANDS
(L-R):
Barbara Hou – Lending Support & AML/CTF
Officer
Imelda Samba – Country Manager
Veronica Buga – Lending Officer
BSP LIFE - FIJI
(L-R):
Munendra Naidu – Chief Financial Officer
Michael Nacola – Managing Director
Craig Strong – Chief Investments Officer
Arieta Cama – GM Human Resources
Viresh Chandra – Chief Information and
Transformation Officer
Camari Turagarua – Chief Operations Officer
Curtis Mar – GM Distribution and Marketing
Insert:
Emily King – BSP Life GM Legal & Compliance
BSP LIFE - PNG
(L-R):
Nilson Singh – Country Manager
Adelaide Senior – Operations Manager
Mathew Hasu – Head of Sales
Doris Yenbari – Quality Assurance and
Compliance Manager
Seated (L-R):
Paulus Mane – Business Relationship Manager
and Jennifer Manimua – Finance Manager
BSP CAPITAL LTD
(L-R):
Gheno Minia – General Manager
Theresa Kalivakoyo – Business Controller
Willie Konga – Manager, Funds Management
131
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesManagement Teams
PNG Branch Managers
Mathew Danti
Aitape
Martin Gilo
Alotau
Rosemary Paula Seeto
Arawa
Dorah Raphael
Bialla
Madeleine Leka
Boroko
Julie Warren
Buka
Delilah Kanit
Bulolo
Ponsie Bannon
Daru
Roslyne P. Kanini
Eriku
Robinson Panako
Gordons C/Centre
Marco Hamen
Goroka
Jackie Bal
BSP Haus
Robert Jomino
Kainantu
Mathias Manowo
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
Mary Kaile
Lihir
Ruth Kagl
Lorengau
Mary Koi
Madang
Merai Mundua
Mendi
Bau Kiso
Moro
Ali Albert
Moro
Theresa Pilamp
Mt Hagen
Diana Guria
NCD Lending Centre
Samuel Okti
Popondetta
Kips Ponga
Pogera
Rawalo Rawalo
Port Moresby
David Pilai
Rabaul
Dianne Rali
Tabubil
Henry Bayema
Tari
Michelle Tukan
Vanimo
Alex Kuna
Waigani B/Centre
John Tomba
Wabag
Antonia Dru
Waigani Drive
Philip Solala
Wewak
Stanley Bole
SME - Vision City
Desmond Lavong
SME - Lae
Lucy Venove
SME - Goroka
Barry Namongo
Area Manager
Momase
Ruby Arabella Patu
Area Manager
NGI
Dennis Lamus
Area Manager
NCD
Billy Veveloga
Area Manager
Southern
Reuben Elijah
Area Manager
Highlands
132
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Management Teams PNG Branch Directory
Mathew Danti
Aitape
Martin Gilo
Alotau
Rosemary Paula Seeto
Arawa
Dora Raphael
Bialla
Madeleine Leka
Boroko
Jackie Bal
BSP Haus
Julie Warren
Buka
Delilah Kanit
Bulolo
Ponsie Bannon
Daru
Roselyn P. Kanini
Eriku
Gordons Commercial Robinson Panako
Goroka
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
Vanimo
457 2042
641 1284
276 9244
983 1095
303 4320
305 7135
973 9042
474 5331
645 9416
473 9900
302 5252
532 1633
Marco Hamen
537 1251
Robert Jomino
984 2082
Mathias Manowo
983 5166
Betty Posangat
649 1313
Ruben Attai
982 9088
Kalat Tiriman
535 1025
Rita Singut
473 9876
Bevilon Homuo
473 9609
Gabriel Ak
472 9088
Livikonimo Koki
986 4062
Mary Kaile
970 9244
Ruth Kagl
422 2477
Mary Koi
549 1070
Merai Mundua
276 1566
Bau Kiso / Ali Albert
Gata Goasa
321 7699
Theresa Pilamp 542 1877
629 7443
Samuel Okti
547 6900
Kips Ponga
305 7606
Rawalo Rawalo
982 1744
David Pilai
649 9179
Dianne Rali Kome
276 1651
Henry Bayema
457 1209
Michelle Tukan
Sub Branch Directory
Aiyura
Banz
Buin
Chuave
Gusap
Henganofi
Higaturu
Hoskins
Ialibu
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
Jeffery Kaupa
Toru Leva
Minamar Mathew
Leah Taia
Malapun Bannick
Yaweye Sam
Mark Tom
Helen Warange
Paul Philip Galopo
Vacant
Heni Nao
7230 8313
7100 9078
7100 7855
7197 6001
7091 1396
7100 7859
7009 6865
7031 2627
7041 1624
7371 6015
7091 2298
7100 2889
7100 9077
7100 7861
7201 9584
7362 0760
7197 6006
7104 2003
7288 4140
7197 6008
Wabag
Waigani
Waigani Drive
Wewak
John Tomba
Alex Kuna
Antonia Dru
Philip Solala
NCD Lending Centre Diana Guria
SME Business Centre
Vision City
Lae
Goroka
Stanley Bole
Desmond Lavong
Lucy Venove
Premium Banking Centre
Boroko
Gordons
Kokopo
Madang
Mt Hagen
Port Moresby
Waigani
Waterfront
Pakar Tata
Helen Gaius
Jacqueline Turliu
Leah Torry
Maggie Wara
Imelda Konabe
Dulcie Vogae
Susie Yapen
BSP First
Gordons
Harbour City
Lae
Port Moresby
Ian Miria
Nelson Kerua
Kutan Nawayap
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
Ezekiel Benny
Solo Sabbie
547 1237
305 6102
302 5301
456 2344
305 7557
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
133
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesManagement Teams
One of the key
things that differentiates
BSP from many other
businesses is our support
of community projects
across all countries.
Corporate Social
Responsibility
134
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Corporate Social Responsibility
135
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesCorporate Social Responsibility BSP hosts Leadership
and SME Immersion
The Community Partnership between
BSP and the Brisbane Broncos
commenced in 2020, focusing on
financial literacy and leadership
development.
We are more than a Bank
BSP's Corporate Social Responsibility
contribution in 2022
We understand that we have a special responsibility to our customers and the
communities in which we are part of.
Our core values of people, community, leadership, teamwork, professionalism,
quality and intergrity are at the heart of who we are as an organisation, and drives
our support for the communities in which we operate.
BSP is committed to supporting our communities sustainably through partnerships,
sponsorships, donations, community projects and voluntary work.
BSP Brand Ambassador and retired
PNG Kumuls Captain, David Mead, with
a young squash player from the Port
Moresby Racquets Club.
BSP supports Bel isi
Walk 2022
25th November is the International
Day for Ending of Violence Against
Women (EVAW) and Girls.
EVAW day is a globally recognised
day aimed at raising the profile of
issues related to violence against
women and girls. BSP joined major
donors and partners of the Bel isi
PNG Initiative including Santos,
Steamships, National Capital District
Commission, Business Coalition
for Women, Femili PNG and other
subscriber organisations in the
ongoing Bel isi PNG organised EVAW
Walk.
136
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Corporate Social Responsibility BSP School Kriket Program
BSP has supported the BSP School
Kriket program since 2018, reaching
over 750,000 children.
The Kriket program is not only
the longest serving Junior Sport
Development program, but has helped
to produce some of PNG's best male
and female cricketers.
Our Bank. Our Contribution.
Financial Literacy
Brisbane Broncos
The partnership will see the Brisbane
Broncos assist BSP in promoting the
Financial Literacy Program.
This program is aimed at helping
school children understand the basics
of budgeting and making better
financial decisions. Selected primary
and secondary schools within NCD and
around PNG took part in BSP's Financial
Literacy Program.
FSV & GBV Awareness
#blackthursdays
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
individuals, families and
and happy
communities.
groupwide
BSP’s
#blackthursdays
campaign against gender based violence
is a good example of the way in which
branches, staff, family and individuals
contribute to creating awareness and
making our communities and homes
safer places to live in.
137
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesCorporate Social Responsibility
PNG Swimming Inc.
BSP reaffirmed its commitment to PNG Swimming
Inc. for the BSP National Aquatic Excellence Program,
BSP/FINA Educational Clinic, and the FINA World
Competitions.
"The support has made it possible for us to continue
providing pathways for new swimmers, to develop skills
and a pathway to join the elite swimmers. This is a great
milestone achievement for PNG Swimming Inc."
Elizabeth Wells
President of Papua New Guinea Swimming Inc.
Our Sponsorships
BSP's network enables it to have a unique opportunity to access more communities
than any other bank in the Pacific region. Our reach takes us to the most remote
areas of Papua New Guinea and other Pacific island countries that BSP operates
in, Fiji, Solomon Islands, 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 K2.4 million in
sponsorships, over K800 thousand in donations and K1.6 million in community
projects.
Our sponsorships reach communities through organisations like:
● PNG Rugby Football League Inc. -
● PNG Volleyball Federation
Sponsorships
K2.4m
Donations
K879k
Community Projects
K1.6m
Orchids
● PNG Swimming Inc.
● SP PNG Hunters
● Cricket PNG
● Grass Skirt Project
● Business Council of PNG
● West New Britain Rugby League
● Rabaul Rugby League
● Strategic Communications Ltd
138
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Corporate Social Responsibility PNG Cancer Foundation
BSP supports the PNG Cancer Foundation (PNGCF)
Trupla Man Outreach Prevention & Education
Program.
“PNGCF is grateful that BSP continues to support
the foundation and shown good faith every year
since 2019, in backing the Trupla Man Outreach
Program and the Pinktober Women's Health
Awareness campaign.”
Priscillar Napoleon
PNG Cancer Foundation Executive Manager
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 successful.
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.
Buk Bilong Pikinini
BSP has invested over K2.4 million since
2012, assisting Buk bilong Pikinini (BbP) with
their operations, as well as maintaining and
sustaining the three libraries in Lae, Goroka
and Lorengau.
Hundreds of children have graduated from
the program with acquired skills and positive
behaviours.
Our donations reach communities through organisations like:
139
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesCorporate Social Responsibility Classroom refurbishment, Gabagaba
Primary School by Marketing
Committee/CEO Selection
The project saw the completion of a
classroom for special needs children.
“Students are often reluctant to go to
schools because the classrooms are
not conducive to learning. When you
come and help renovate and rebuild
facilities, it gives us the inspiration to
come into school and learn.”
Wyntauna Bagelo
Gabagaba Village Councillor.
Our Community Projects
Since 2009, BSP has invested over K14 million
in the communities in which we operate in.
Our aim is to improve everyday lives; making
communities prosper.
BSP’s goal-orientated events and community
projects are organised on a regular basis to
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 our staff volunteer their time, to
contribute in community work to deliver a
project for their community. Examples include,
refurbishing classrooms, installing new water
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.
Community Projects delivered
in Papua New Guinea in 2022.
26
Educa�on
17
Health &
Environment
6
Community
140
K14.95m
Funded Comunity
Projects since 2009
in PNG
K1.6m
Funded Community
Projects in 2022
in PNG
576
Comunity Projects
delivered since 2009
in PNG
68
Comunity Projects
Groupwide in 2022
Donation of Ultrasound scanner, mattresses and construction of waiting area for
Yampu Health Centre by Wabag Branch.
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Corporate Social Responsibility Our Community Projects in PNG
37
Community Projects delivered through branches in Papua New Guinea.
BSP Haus
Lealea Primary School - Solar Light Installation
Branch
Aitape
Alotau
Arawa
Bialla
Boroko
Buka
Bulolo
Daru
Gordons
Goroka
Kainantu
Kavieng
Kimbe
Kiunga
Kokopo
Kundiawa
Project Description
Branch
Project Description
Aitape Primary School - Renovation of School Ablution
Block
Lae Market
Lae Police Barracks Elementary School - Supply of
school desks
Samarai Island Primary School - Classroom
Refurbishment
Buin Health Centre - Solar Light Installation for
Children's Ward
Bubu Elementary School - Classroom Construction
Gereka Health Centre - Refurbishment and supply of
medical first aid kits
Lemanmanu Primary School - Hall Refurbishment
St. Steven Elementary School - Supply of School Desks
Karakara Primary School - Ablution Block Refurbishment
Mt Diamond Secondary School - Basketball/Netball
Court Refurbishment
Goroka General Hospital - Donation of Cervical Cancer
Screening Equipment
Uminufintenu Primary School - Supply of School Desks
Sacred Heart Primary School - Ablution Block
Refurbishment
Gloucester Secondary School - Solar Light Installation
Ningerum Sub Health Centre - Solar Light Installation
Takabur Primary School - Classroom Refurbishment
Lae Top
Town
Lihir
Sangan Primary School - Library Building Refurbishment
& eLibrary set up
Kul Destiny School - Supply of School Desks
Lorengau
Tong Island Health Centre - Solar Light Installation
Madang
Holy Spirit Primary School - Supply of School Desks
Mendi
Moro
Mt Hagen
Nipa Secondary School - Solar Light Installation
Soro Village - Basketball Court Refurbishment
St. John Bosco Primary School - Classroom
refurbishment, supply of school desks
POM
Kaparoko Primary School - Supply of School Desks
Popondetta
Bareji High School - Supply of School Desks and
Classroom Refurbishment
Porgera
Rabaul
Tabubil
Tari
Vanimo
Wabag
Porgera Secondary School - Basketball Court
Refurbishment
Rabaul Medical Clinic - Supply of medical equipment
Tabubil Secondary School - Extension of School Hall
Wabia Health Centre - Solar Light Installation and
Medical Equipment Supply
Lujan Home of Girls - Donation of Water Tanks
Yampu Health Centre - Donation of Ultrasound scanner
and mattresses
Kundiawa Callen Services- Donation of Water tanks and
Building Refurbishment
Waigani BC
Ororo Primary School - Supply of School Desks
Waigani Dr
Ruatoka Primary School - Supply of School Desks
Lae
Commercial
Mare Village - Aid Post Refurbishment
Wewak
Welkam na Bel isi Seif Haus - Extension of the Seif Haus
Set up of an e-Library for
students at Sangan Primary
School by BSP Lae TopTown
Branch.
School Head Teacher Yawising
Yatap and Board chairperson
Jesse Paul expressed their
appreciation, stressing that it
has been more than 10 years
since they last received any
sort of assistance.
141
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesCorporate Social Responsibility Pari Health Centre - Building Refurbishment and
Solar Light Installation by BSP Capital & BSP First.
Pari Village Clinic is one that serves a population
of 15,000 plus patients annually.
“This clinic in Pari plays a critical role in delivering
primary health care service. The challenge faced
by our clinics is facility maintenance. We thank
BSP for this project.“
Dr Steven Yennnie
CEO, NCD Provincial Health Authority
Our Community Projects across the Group.
9
Community Projects delivered by SBUs in Papua New Guinea.
SBU
Compliance
Corporate
Project Description
Callen Services - Minor Building Refurbishment and Donation of Office Furnishings
POMGEN Antenatal Clinic - Minor Building Refurbishment and Donation of Medical Equipment
Credit & Risk Management
Kuriva Primary School - Construction of Basketball Court
Digital
People & Culture
Pinu Aid Post - Minor Building Refurbishment & Solar Water Supply
PNG Flying Labs - Donation of ICT equipment
Lae Corporate & BSP Finance
Omili Primary School - Ablution Block Refurbishment
Marketing Committee/CEO Selection
Gabagaba Primary School - Classroom Refurbishment
Finance & Planning, Operations & Retail
POMGEN Maternity Ward - Refurbishment of the POMGEN Maternity Ward Ablution Block
Treasury
Tubusereia Health Centre - Building Refurbishment
Refurbishment of Port Moresby General Hospital
Maternity Ward Ablution blocks by Operations,
Retail, Finance & Planning SBUs.
Project ‘Helpim Mama Karim Haus’ was initiated
among BSP’s Operations & IT, Retail Banking and
Finance & Planning Strategic Business Units to
support Port Moresby General Hospital Labour
Ward which sees over 20 thousand deliveries per
year.
“Most of these patients come from very remote
areas and very under privileged circumstances who
access our services. Thank you BSP.”
Dr Hilda Tanimia
Acting Director - Obstetrics and Gynaecology Ward
142
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Corporate Social Responsibility Refurbishment of the Nawaicoba Health
Centre by Nadi Branch in Fiji.
The 5,000 residents of the community in
Nawaicoba, Nadi now have access to a
better health facility. Our team assisted with
providing a larger patient waiting area shielded
from the elements.
The Nawaicoba Health Centre Project was
handed over by BSP Group Chairman, Sir
Kostas Constantinou and CEO Robin Fleming
during the BSP Group Board visit in July 2022.
19
3
Community Projects through our branches in the Pacific.
Community Projects delivered through BSP Subsidiaries
Subsidiaries
BSP Capital & BSP First
BSP Finance
BSP Life
Project Description
Pari Health Centre - Building Refurbishment and Solar Light Installation
Bomana Correctional Facility - Welfare Building Refurbishment
Koiari Park Adventist Secondary School - eLibrary setup
BSP Finance Lao
BSP Finance Lao assisted the Disabled
Womens Development Centre.
BSP Finance Cambodia
BSP Finance Cambodia supported the
Run For Disable People & Poor Children
in Hospitals.
143
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesCorporate Social Responsibility Caption/Editorial/
Quote
Cook Islands
The Giving Tree
initiative that
encompasses the gift of giving for all our Cook Island
children in need.
is an amazing
BSP, along with support of sponsors and the general
public, gather for the 14th year running to deliver gifts
to over 600 children across 12 islands in the Pa Enua.
Our Contribution 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 with over K1 million invested across the Pacific in 2022.
Tonga
In Tonga, BSP assisted with over
TOP100,000 to support the tsunami
recovery and grassroots activities. This
included a TOP50,000 donation to the
Government of Tonga, to assist with the
relocation of displaced communities.
As part of BSP’s Go Green initiative BSP
replaced over 70 damaged rubbish bins
across the Nuku’alofa. TOP20,000 was
invested through BSP's Community Project
initiative for Tertiary Institute’s Public
Library while TOP10,000 partnership with
Tala, Tonga’s national netball team.
Fiji
BSP has a strong commitment to its local
communities through its Corporate Social
Responsibility initiatives in the areas of
health, education, environment, sports
and other worthy courses.
Pictured is BSP Life Fiji making their
donation to WOWS Kids Fiji, a local
charitable organisation that assists children
and families, living with cancer.
144
BSP’s former General Manager Offshore Branches, Kili Tambua presented
the cheque of K10,000 to Chairperson of PNG Tonga Relief Fundraising
Committee Mrs. Solaite Aeava.
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Corporate Social Responsibility Sponsorship & Donations in the Pacific
BSP Contributions to the Pacific in 2022
Sponsorships
K665k
Donations
K155k
Community Projects
K226k
Samoa
BSP Samoa delivered over 50 mini projects to various communities. Our key community project in 2022
focused on education, promoting literacy through the provision of classroom furniture, office administration
equipment, with literacy and numeracy materials for Samatau Primary School.
Vanuatu
BSP Vanuatu delivered various
community service projects, such as
“Go Green” projects within schools and
local businesses. The major community
projects included a VUV1.0 million
donation to Pro-medical for medical
supplies, and a commitment to donate a
generator to Santo hospital which will be
delivered and installed in early 2023.
145
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesCorporate Social Responsibility Financial Literacy & Banking Education
168,402
par�cipants since 2014
9,593
par�cipants in 2022
1,100+
students reached in 2022
under the Brisbane Broncos
Community Partnership
Delivering Financial Literacy in PNG
With growth comes added responsibilities of ensuring that our customers, especially in rural
areas, are empowered in financial literacy and banking education.
Financial Literacy and Banking Education is an important part of BSP’s contribution to the
communities that we operate in. This training is conducted by trained Financial Literacy
Trainers and delivered through BSP branches across Papua New Guinea.
We reach schools, churches, organised community groups, businesses and corporate
organisations.
BSP Financial Literacy delivered in Samoa.
Account opening for schools in PNG.
146
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Corporate Social Responsibility Our Commitment to the environment
Sustainability & Environment
As the green bank in the region, we understand that Environmental
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.
BSP Annual School Clean-up Event.
BSP Trash to Treasure Sculpture Festival.
147
BSP FINANCIAL GROUP LIMITED ANNUAL REPORT 2022Group HighlightsBroader GroupCorporate GovernanceFinancial StatementsShareholder InformationCorporate Social ResponsibilityManagement TeamsStrategic ReportSubsidiariesCorporate Social Responsibility “
Our digital channels experienced exponential growth in
2022, especially on BSP’s Mobile Banking (*131#) service;
reaching over 11 million transactions a month and over
130 million transactions at the end of the year. Out of the
1.5 million BSP customers in PNG, around 380,000
customers use Mobile Banking every month.
”
Nuni Kulu, General Manager – Digital