Our Bank. Our People.
Annual
Report
2023
ANNUAL REPORT 2023
Contents
Overview
2023 Highlights
Message from the Chairman and CEO
Our Business
Our Vision, Mission and Core Values
Performance Review
Financial Performance
Our Community
Our People
Our Customers
Our Risk Management Framework
Corporate Governance Statement
Board of Directors
Executive Team
Corporate Governance Framework
Board Governance
Board Committees
Risk Management and Compliance
Assurance and Control
Culture and Conduct
Continuous Disclosure
Commitment to Shareholders
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/
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.
Compliance with ASX and PNGX Corporate Governance Recommendations
Remuneration Report
Financial Statements
Shareholder Information
Honouring the Legacy
Corporate Directory
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATION 2023
Highlights
FINANCIAL
OPERATIONAL
K890m
Statutory NPAT
-18%
K2.8b
Total Income
8%
K37.0b
Total Assets
10%
K16.7b
Gross Loans
12%
K1.43
FY23 Full Year Dividend
-18%
38.5%
Cost to Income Ratio
+50bps
24.4%
Capital Adequacy
-70bps
21.5%
Return on equity
-610bps
1 Measures representation at Executive and Senior Management level.
2 Staff count as at 31st December 2023.
3 Approved investments over three years to upgrade our operational and technological capabilities.
4 Active branch count as at 31st December 2023.
41%
Women in Leadership 1
4.6k
Employed Staff 2
3.3m
Customer Accounts
6.2k
Shareholders
K345m
Capital Investments 3
120+
Branch Network 4
300+
Agent Network
4
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023 Message from
the Chairman & CEO
Earlier this year, we both commenced
our new roles at BSP. Our reflections
and highlights for 2023 are overall very
positive. This can largely be attributed to
the great support from our customers,
shareholders and employees across all
the countries in which we operate.
We inherited the leadership of a well-
run institution that is the largest bank
in the South Pacific. The team at BSP
was well placed to deal with the impact
in our region of global volatility, rising
interest rates and inflation and, closer to
home, the implementation of a new core
banking system.
Against this backdrop we delivered
a well-balanced result, with revenue
growth across all key business lines of
the Group totaling 8%. Our operating
expense grew 10% for the year, which
was anticipated given the increased
investment in technology. This increase
in revenue and expenses delivered
underlying profit growth of 8%, to K1.7
billion. Nevertheless, BSP’s statutory
net profit after tax (NPAT) declined by
18%, due largely to a K209m negative
impact on NPAT from the increase in the
Papua New Guinea company income tax
rate from 2023.
efficiencies, an enhanced customer
experience, and entrenching our already
leading position in banking in the region
across 2024 and beyond from this K500
million investment.
After some initial system challenges,
we are pleased to note that our
monthly digital and EFTPOS terminal
transactions grew by double-digits in
2023. This is the result of our efforts to
migrate customers to digital channels
that best meet their needs. We continue
to invest in our digital offerings, as
well as new offerings that will provide
our customers with banking services
comparable to leading offerings in other
competitive markets.
Strategy
To maintain our market leading position
in the South Pacific, we are investing
now to lay the foundation for growth,
with the following areas of focus:
• Delivering an exceptional customer
•
experience;
Significant investments in risk and
compliance; and
• Realising the ongoing benefits of our
new core banking system.
Technology and digital uplift
Our customers and their banking
needs remain the key focus for BSP.
The Group’s investment in our new
core banking system in Papua New
Guinea was a pivotal milestone for
the bank. We not only replaced our
legacy systems, but modernised our
technology architecture, which has
enabled us to more effectively cater to
the needs of our customers. We thank
our PNG customers for their patience
during our 2023 implementation. We
are committed to delivering operational
In short, our ultimate objective is for
our bank to offer “world class” services
in our region. Consequently, we have
embarked on a program to invest in
key enablers of our strategy, including
new investments to deepen customer
relationships right across the Group.
Our investment in technology will
enable us to use data more effectively
to better understand customer needs
and manage risks. Some of the actions
we have taken have already resulted in
positive outcomes, for example in our
ability to pre-approve loans originated
via digital channels. We have also
significantly reduced branch waiting
times in the second half of 2023, and set
up dedicated business banking centres
in key urban locations to support our
customers.
We have also partnered with the PNG
government to leverage its business loan
program, which it has made available on
favourable terms to small businesses in
the country to help stimulate economic
growth.
One of our key strategic priorities also
involves a substantial step up in activity
to support the development of our
people at BSP, including by investing in
our new “BSP Academy”.
Board renewal
We were pleased to announce the
appointment of Ian Tarutia to the BSP
Board in April 2023. Ian held senior
executive roles within the superannuation
industry, with more than 30 years at
Nasfund Limited, most recently as its Chief
Executive Officer.
Ian’s appointment followed the retirement
of the late Sir Kostas Constantinou, OBE
as Chairman. Sir Kostas joined as a
Director of BSP in 2009 and was appointed
Chairman of the Board in 2011. During
his tenure as Chairman, BSP achieved
many significant milestones including the
expansion of BSP’s banking operations
through acquisitions in several Pacific
countries, as well as BSP’s dual listing on
the Australian Securities Exchange (ASX)
in 2021. On behalf of the BSP Board and
all shareholders, we recognise the late Sir
Kostas for his significant contributions in
this period.
The BSP Board will continue to uphold its
high standard of governance to ensure the
delivery of our strategic priorities.
Strong operating results, capital and
dividends
The improvement in the Bank’s 2023
operating performance noted earlier,
was achieved with the cost to income
ratio increasing marginally to 38.5%
and the net interest margin remaining
relatively stable. We continue to
prudently grow our balance sheet, with
total assets increasing by 9.5% to K37
billion, supported by a robust 12%
growth in net lending. BSP has also
grown significantly stronger, holding
more than twice as much Tier 1 capital
and total assets as we did a decade
ago. This strength is a key source of
competitive advantage for BSP, giving
us the financial capacity and confidence
to invest for our customers and our
shareholders. It also gives us the ability
to cushion the impact of economic
challenges, which inevitably emerge
from time to time in our markets. In
light of the above financial results, we
declared a final dividend of K1.06 for
2023, bringing our full year dividend to
K1.43. The 18% dividend reduction
is on account of the reduction in net
profit resulting from the increase in the
company tax rate in 2023.
Outlook
The fundamentals of our South Pacific
economies are improving with strong
growth in 2023 and this trend is expected
to continue in 2024, right across the
region.
Business investment in PNG is also
increasing as PNG is entering an
investment “super-cycle”, with “mega-
projects” of over K100 billion either being
renewed, or in the pipeline.
Given this favourable economic setting,
we are confident BSP has the talented
people and financial strength to execute
our strategy effectively. We have a robust
investment programme underway, as we
maintain a prudent balance sheet, and
Left to Right:
Robert Bradshaw and Mark Robinson
disciplined risk management, to support
development in our region and deliver on
our goal to offer “world class” services.
Finally, on behalf of the Board and
management, we would like to thank
you for your ongoing support as
shareholders. We also thank BSP’s
4,600 employees for your hard work and
commitment to serving our customers.
Mr Robert G. Bradshaw
Chairman
Mr Mark T. Robinson
Group Chief Executive Officer and
Managing Director
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Our
Business
Our Vision, Mission
and Core Values
Our vision
To be the leading financial services provider in our chosen
markets, helping customers, staff, shareholders and
communities prosper.
Our mission
To create value for our stakeholders, by delivering innovative
and cost effective financial services.
Our 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 our 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.
BSP provides a range of financial
services in PNG, Fiji, Solomon Islands,
Samoa, Tonga, Cook Islands and
Vanuatu. BSP serves both retail and
corporate customers through its banking
operations, and provides non-banking
services, such as life insurance and
funds management.
Our bank was established in 1957 in
Port Moresby, as a branch of National
Australia Bank that was subsequently
renamed to BSP upon its sale. In 2001,
BSP purchased the state owned Papua
New Guinea Banking Corporation to
create the largest Bank in PNG, and
listed on the PNGX a few years later
in 2003. Other acquisitions followed,
including CBA’s Colonial Bank in Fiji and
a number of Westpac businesses across
the South Pacific. We listed on the ASX
in 2021 and trade under the ticker “BFL”.
We have grown to be the largest financial
services company in the South Pacific.
Consequently, we have the strength
and size to cushion the impacts of the
challenges we face from time to time, but
our position also allows us to be a strong
advocate and partner for important
economic developments in the South
Pacific to the benefit of our communities,
as well as our shareholders.
Collectively, the Group’s 4,600
employees serve our over 3 million
customers from across the South
Pacific. BSP remains the largest South
Pacific bank, with the most extensive
distribution network. Our branch
network is complemented by a large
electronic banking system that meets the
banking needs of our customers.
Lending Market Share
Deposit Market Share
PNG
Solomon
Islands
Cook
Islands
Tonga
Samoa
Fiji
Vanuatu
#1
#1
#2
#1
#1
#1
#4
44.0%
35.5%
29.2%
35.2%
26.6%
12.6%
65.6%
PNG
#1
64.9%
55.0%
50.6%
44.5%
39.9%
Solomon
Islands
Cook
Islands
Tonga
Samoa
Fiji
Vanuatu
#1
#1
#1
#1
#1
#4
23.8%
14.7%
Net Operating Income
Net Profit After Income Tax
K2,822m
Total Group
operating income
PNG Bank
74%
Pacific Markets
22%
Non-Bank Entities
4%
K890m
Group NPAT
PNG Bank
61%
Pacific Markets
31%
Non-Bank Entities
8%
8
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Financial
Performance
Overview
BSP’s excellent operating performance is
underpinned by strong lending, deposit and
payments fundamentals delivering revenue
growth across all Group key business lines. At
the same time, we continue to invest in growth
enablers, such as technology and people, to
maintain our competitive position and offer world
class services.
DIVIDEND
K1.43
-18%
Per share, full year
The Board declared a final dividend of K1.06,
bringing our full year dividend to K1.43. The 18%
reduction is mainly on account of the increase in the
company tax rate in 2023.
NET PROFIT AFTER TAX
Statutory NPAT
K890m
-18%
on FY22
Statutory profit fell 18% from FY22, owing to an increase
in loan impairments, following the reversal of COVID-19
provisions in the prior two years, and the significantly higher
company tax rate (45%).
Underlying NPAT
K1,099m1
-4%
on FY22
Underlying profit remained relatively stable, easing by 4%,
after excluding all material changes to our tax obligations.
1 Underlying NPAT excludes tax expense of K209m,
impacted by change in company income tax rate to 45%
LOAN IMPAIRMENT AND PROVISIONS
Impairment expenses
K182m
+188m
on FY22
Provisions to loans
4.3%
no change on FY22
An increase in loan impairments in 2023, following the reversal of provisions in the prior two years.
NET INTEREST MARGIN (NIM)
CAPITAL ADEQUACY
5.65%
-30bps
on FY22
24.4%
-70bps
on FY22
With the exception of reduced investment yields from
government securities, Group NIM was largely stable.
Our capital measures are strong, with capital adequacy
comfortably above 20%, which is much higher than the 12%
regulatory requirement.
VOLUME GROWTH
+10%
to
K9.8b
Business loans
+12%
to
K2.6b
Retail mortgages
+23%
to
K2.2b
Unsecured personal loans
10
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023 Delivering for Shareholders
We maintained our long dividend history and our
policy of paying out between 70% and 75% of our
statutory profit as dividends. Based on the BSP
share price at the end of 2023, the dividend yield
remained in double digits.
10- YEAR ANNUAL DIVIDEND AND PAYOUT RATIO
Shares
467m
6,165
Shareholders
97%
South Pacific ownership
BSP'S TOTAL SHAREHOLDER RETURN
232%
22%
12%
10%
107%
73%
34%
160%
72%
2023
5 Year
10 Year
Share price appreciation
Shareholder dividends paid
70%
75%
76%
76%
76%
75%
75%
75%
75%
70%
-610bps
-90bps
RETURN ON EQUITY
RETURN ON ASSETS
6
7
.
0
6
8
.
0
4
0
.
1
3
2
.
1
7
3
.
1
4
3
.
1
0
3
.
1
3
7
.
1
4
7
.
1
3
4
.
1
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Dividend per share (K)
Dividend Payout ratio
29.7%
27.6%
21.5%
3.7%
3.4%
2.5%
Dec 21
Dec 22
Dec 23
Dec 21
Dec 22
Dec 23
Return on equity, has fallen from 27.6% in FY22, to 21.5% in FY23. Our
reduced NPAT of K890m, coupled with our growth in capital, were the key
drivers of the reduction. However, our returns remain significantly higher
than regional peers.
Return on assets declined 90bps to 2.5% in FY23. Our strong growth in
assets, along with the fall in NPAT, contributed to the decline.
12
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023 Profit and Loss Trends
Operating Income
Our profit has grown from K507m to K890m since
2014, we now hold substantially more capital against
our assets than we did a decade ago.
Statutory NPAT
K890m
-18%
on FY22
NPAT
ROE
+75%
890
Km
507
A$213m
A$374m
FY14
FY23
PGK [millions]
Revenue
Net interest income
FX income
Fee income
Insurance / other income
Operating expense
Operating profit
Impairment expense 2
Profit before tax
Tax3
NPAT
29.7%
%
-820bps
21.5%
FY14
FY23
FY221
2,603
1,745
362
419
77
989
1,614
-5
1,619
534
1,085
FY23
2,822
1,845
458
428
91
1,087
1,735
182
1,553
663
890
Change
8%
6%
26%
2%
18%
10%
8%
large
-4%
24%
-18%
1 Comparative for prior periods have been restated to reflect the modified retrospective transition to the new accounting
standard IFRS 17 ( Insurance contracts ), which came into effect on 1 January 2023.
2 2022 negative impairment expense driven by COVID-19 provision releases.
3 FY22 tax expense includes Additional Company Tax, which is presented as an operating expense in the financial statement.
Volume growth in all core lines of our business, translated into revenue growth across the Group of 8%. Operating expenses were up by 10%, driven mainly
by inflation, as well as our increased technology spend to support the delivery of our strategic priorities. Taken together, the Group delivered an 8% increase in
operating profit.
Operating income
K2,822m
+8.4%
on FY22
2,603
100
120
+8.4%
2,822
Net interest income
up 5.7%, loan
volume growth of
12%
Margin reduced by
31bps
Driven by strong
FX income growth
[26%]
A$1,185m
Net interest
income
Other operating
income
FY23
A$1,065m
FY22
Total income for the Group grew by 8.4%
in 2023 to K2.8 billion, with a strong
contribution from our Pacific markets.
Net interest income growth was primarily
driven by a healthy 12% increase in lending
volumes.
Non- interest income also contributed
positively, driven by a 26% growth in FX
income, due to higher inflows.
Electronic banking income grew by 22%, a
reflection of the double-digit growth in the use
of our digital channels.
595
-6
-1
-24
565
NIM
5.65%
Bps
FY22
Lending
Funding
Investments
FY23
-30bps
on FY22
BSP’s NIM is wider than what is seen in
Investment security yields have fallen since
banks in more developed markets. This is
2022, and 2023 saw most of the investment
mainly on account of the mix of our assets,
portfolio being repriced at these lower rates.
where only 15% of our loan book is invested
in lower risk residential mortgages.
The 30bps erosion of our NIM in 2023
was largely driven by a reduced yield on
investment securities, driven by strong
market liquidity.
We managed our lending and funding mix to
ensure margin erosion across our book was
limited to a modest 7bps.
14
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Operating Expenses
Credit Quality and Provisions
Operating expenses
K1,087m
+9.9%
on FY22
Cost to income
38.0%
989
16
24
19
21
Increased
system cost
and additional
staff to support
the new core
banking
system
Higher
volumes in
Pacific markets
post
COVID-19
recovery
Salary inflation
Km
A$415m
FY22
Technology
Cards
Inflation
To optimise
operational
processing
and
strengthen
competitive
positioning
Modernisation
Strategy
18
Investments
in risk and
compliance
Infrastructure
maintenance
Operational
losses
Legal
provision
releases
Others
Impairment expenses
K182m
+K188m
on FY22
Delinquency Rates
4.1%
+90bps
on FY22
Cost to income
38.5%
+9.9%
1,087
A$457m
FY23
The Group experienced a relatively large K188m
movement in impairment expenses from FY22 to
FY23 and we note the following:
Operating expense lifted 9.9% for FY23, an anticipated increase given the
higher investment in technology, including higher amortisation costs following
capitalisation of our new core banking system.
Higher card costs were also incurred, owing to higher volumes, particularly
in our wider Pacific Markets businesses, as international visitor numbers
rebounded, with corresponding increase in card income.
Wages growth was also a key driver of our expense increase, as we continued to
invest heavily in our people.
Despite this expenditure growth, our cost-to-income ratio was relatively
steady, at 38.5% for the year.
Provisions to Loans
4.3%
No Change
on FY22
IMPAIRMENT EXPENSE
182
Km
-43
FY21
-5
FY22
FY23
•
•
•
FY21 and FY22 contained large impairment
releases post COVID-19. FY23 did not
have any carry forward provisions available
for release, and provisions were aligned to
underlying customer risk grades.
FY23 includes a single specific provision
of K28m for an exposure, which is fully
secured.
FY23 also contains a K40m uplift in
impairments connected with our unsecured
personal loan portfolio, which is partially
attributed to a larger asset book, but
does reflect some level of deterioration in
credit quality in a challenging economic
environment.
Delinquency rates and gross impaired assets also
lifted sharply in 2023. However, excluding the
single fully secured loan that has transferred to
non-accrual status, the normalised delinquency
rate reduces to 3.2%, which is in line with prior
year trends.
DELINQUENCY RATE
90+ days, as a percentage of total loans
4.1%
3.1%
3.2%
%
Dec 21
Dec 22
Dec 23
PROVISIONS TO LOANS
5.1%
4.3%
4.3%
%
Dec 21
Dec 22
Dec 23
16
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Balance Sheet Strength
Loan Book Mix
Gross Loans
K16.7b
+12.3%
on FY22
+12.3
Kb
14.4
FY21
14.9
FY22
16.7
FY23
Deposits
+10.8%
K29.8b
+10.8%
on FY22
Total Assets
K37.0b
+9.5%
on FY22
Capital Adequacy
24.4%
-70bps
on FY22
23.9
Kb
26.9
29.8
Dec 21
Dec 22
Dec 23
+9.5%
30.4
33.8
37.0
Kb
Dec 21
Dec 22
Dec 23
-70bps
25.4%
25.1%
24.4%
12%
%
Dec 21
Dec 22
Dec 23
Total assets grew by 9.5% to K37b, with a strong 12% growth
in lending. This was funded by a corresponding 11% increase
Our capital measures are strong, with capital adequacy
comfortably above the 12% regulatory requirement.
in deposits, which is predominantly domestic funding.
A feature of our balance sheet remains the high levels of
deposit funding, with a corresponding low loan to deposit ratio
of 56%, reflecting our capacity to increase lending.
Retail
Mortgages, 15%
Unsecured
Personal, Loans
13%
Others,
6%
Business
Overdrafts,
7%
Business
Segment
~66%
Business
Loans, 59%
All our key loan product categories experienced strong growth in 2023. Our
business loan segments represents ~ 66% of our loan book. Retail mortgages
make up around 15% and provides significant opportunity for growth.
Unsecured personal loans constitute 13% of the loan book and saw a
strong growth of 23% during the year.
+10%
A$3.9b
8.9
9.8
+12%
A$1.0b
+23%
A$0.9b
Kb
2.3
2.6
1.8
2.2
Business Loans
Retail Mortgages
Unsecured Personal Loans
18
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Our
Community
We strive to support our communities
through sponsorships, donations,
community projects and volunteer
activities.
has also grown to include mentoring
and training of local small-to-medium
enterprises in Fiji and PNG as we seek
to add value to our communities through
encouraging smart financial decision-
making.
Sponsorships
BSP actively sponsors community
initiatives, corporate events, and sporting
activities throughout the South Pacific
spending K4.8 million on sponsorships
in 2023. Sponsorship highlights include
the School Kriket Program, the Morobe
Show, the Business Council of PNG, and
the Institute of Internal Auditors among
others.
Below are some of the organisations we
supported through our donations and
sponsorship in PNG in 2023.
Our contributions are aimed at
addressing community needs and
supporting initiatives in sports,
education and health among other
aspects of community development.
BSP is embedded in the communities
we serve, with branches located in the
most remote areas of the South Pacific.
It is our privilege to give back to our
communities and contribute to their
development beyond the provision of
banking services.
2023 Donations & Community
Projects in the South Pacific
2023 Sponsorships in the
South Pacific
K2.8m K4.8m
Donations & Community Projects
In 2023, we focused our donations
and community projects in the areas
of digital inclusion, health, education,
water sanitation and hygiene, and
sports and recreation. Our community
projects are carried out by our staff
across our South Pacific markets
volunteering their time to make a
tangible contribution to the community.
Charitable donations and community
projects in 2023 totalled K2.8 million
to charitable causes in the South
Pacific. We donated in cash and in-kind
support to organisations and groups
who work in the spaces of health,
gender-based violence advocacy and
financial literacy. These causes, among
others, have a far-reaching impact on
the wellbeing and quality of life in our
communities.
The Go Green Campaign, BSP’s
flagship program for environmental
conservation, was carried out for
the 14th year in a row. As part of
the campaign, we donated to nature
conservation and recycling challenges
or initiatives, and donated to activities to
commemorate World Environment Day.
We understand that our communities
across the South Pacific share a deep
cultural and spiritual connection to
nature and the environment, and we
strive to make efforts to enrich these
deep connections.
The BSP Group remains dedicated in our
advocacy against family sexual violence
(FSV) and gender-based violence (GBV)
in all its forms. BSP fosters partnerships
and donates to organisations that
support survivors facing domestic
violence. We also support advocacy
groups to provide counselling, legal aid,
and other support services to survivors.
Our partnership continued in 2023
with community groups that provide
awareness to teens and adolescents
on healthy relationships, consent
and identifying forms of violence. We
continue to advocate against GBV and
seek to promote safe and inclusive
schools, workplaces, and communities.
Financial literacy and sound decision-
making among financial services
consumers is a matter of particular
importance to the BSP Group. As a
responsible lender and advocate of
financial inclusion in our markets, we
recognise the importance of informed
and financially prudent customers in
order to ensure the sustained prosperity
of our communities. We support
financial literacy programs for all ages
as part of this obligation to responsible
banking. This includes partnering with
the Brisbane Broncos to visit schools
and communities, supporting advocacy
groups and government initiatives, and
donating the time and expertise of our
staff to speak to community groups
on financial literacy. Our commitment
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023 Our People
BSP is focused on creating a safe and
fulfilling workplace culture for our people in
order to deliver outcomes for our community,
customers, and shareholders. Our approach
and these desired outcomes are underpinned
by our core values: Integrity, Leadership,
People, Community, Professionalism,
Quality and Teamwork.
grew from 21% in 2022 to 36% in 2023.
Senior leadership across the Group
as a whole is 41% female, which is
an improvement from 39% in 2022.
We continue to invest in the careers
of up-and-coming female leaders and
our succession pipeline in supervisory
and middle management positions has
55% and 59% female representation,
respectively.
Staff Development
Learning and development programs
are offered to our staff to enable
career progression and professional
development. The training is facilitated
both internally and externally and is
accessed based on business need,
role relevance, and the individuals’
career ambitions. The Group invests
in diplomas, degrees and professional
study programs for certificates and
accreditations in order to enhance the
capabilities of our people. In 2023, our
people benefitted from a combined
15,718 days of training and 54% of these
training hours were accessed by women.
We have established the BSP
Academy to upskill our talent across
the South Pacific. The Academy
provides structured skills development,
leadership training that is in line with
agile and modern ways of working and
best practices.
As we work towards our modernisation
strategy, the BSP Academy ensures that
current and emerging talent within the
Group can drive sustained success in
the ever-evolving banking landscape.
Our organisational structure was
reviewed in 2023 in order to more
adequately pursue the Group’s
“Modernising for Growth” strategy, as
we build a world class bank. We are
now better aligned to our desired future
state and to ensure clearer division of
responsibilities and greater accountability
around our various initiatives. Throughout
this process, we worked to support our
people and ensure a smooth transition to
our new structure.
Following the conclusion of the PNG
core banking system replacement,
staff who were engaged in the project
were reassigned to roles throughout the
bank. This allowed us to embed subject
matter experts in key areas of the new
core banking system into various teams
across the bank, ensuring we retain the
learnings, context, and talent to continue
delivering value to our customers.
Employee support and capability
enhancement is crucial for our
“Modernising for Growth” strategy. To
ensure nimble and specialised support for
our staff, a dedicated business unit was
created to assist staff through training,
welfare and resourcing. This focused
support for our staff helps to ensure that
our people on the frontline can execute on
BSP’s service delivery goals.
Our ambition is to remain the employer
of choice throughout the South Pacific.
A review of our suite of employee-related
policies is ongoing to ensure global best
practice and compliance with social
governance requirements in our markets.
Recalibrations are in train to enhance our
staff complaints handling, development,
recruitment, and performance appraisal
procedures.
Wellbeing
Employee wellbeing is important
for ensuring a robust and motivated
workforce. We provide care and support
for our people in matters of physical,
mental, social, and financial wellbeing.
Our health and wellness initiatives
encourage physical fitness and aim to
promote teamwork and collaboration
outside of the work environment. We also
run programs on stress management and
mental health acknowledging that this
is key to the long-term wellbeing of our
people.
Our staff across the South Pacific wear
black every Thursday as part of our
#BlackThursday Campaign to signify
the Group’s stance against all forms
of gender-based violence (GBV) and
family sexual violence (FSV). Our
people are provided with access to case
management and support resources
for incidents of GBV and FSV. We also
have referral and disciplinary processes
for staff who are perpetrators. We
continue to seek ways to enhance our
response to GBV and FSV, and we
invest in resources and partnerships to
better support survivors and rehabilitate
perpetrators.
Whistleblower and grievance reporting
channels are available for our people
to raise complaints. Under our
Whistleblower Policy, the reporting
channels and associated procedures
are established to ensure fairness, due
process, confidentiality, and protection
from reprisals. We also provide support
to our people in matters of workplace
conflict resolution, harassment, and
sexual misconduct cases. We strive to
ensure integrity and professionalism in
the workplace and work to protect our
people from all forms of harassment.
Diversity and Equal Opportunity
Having a diverse workforce with unique
perspectives contributes to our ability
to add value to our stakeholders across
all our markets. We understand that
respect for differences in gender,
perspectives, and cultures is important
given the markets we serve. We work to
ensure fair and equitable treatment of all
our people regardless of gender, race,
ethnicity, religion, sexual orientation,
or political opinion. We are an equal
opportunity employer striving to deal with
fairness and uphold the value of quality
in matters of recruitment and promotion.
The diversity of our people allows us
to address challenges and capitalise
on opportunities with the appropriate
nuance and respect.
Our workforce is well balanced, with an
equal male and female representation.
Female voices and perspectives in
decision-making is important to BSP
and we strive for equal participation
in leadership roles. While female
representation on the Group Board
remained at 43% in 2023, female
representation among our Executives
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023 Our
Customers
In this modern-era, the way people
do banking is constantly evolving, as
developments in financial technology
now allow for a seamless and more
personalised banking experience for
individuals. This growing digitisation of
services has fostered new expectations
of efficient and reliable services. To
enhance our customer experience and
service delivery, we are strengthening
our digital footprint and revitalising our
service propositions to modernise for
growth.
Our broad branch footprint across the
region has provided much-needed
banking services to underbanked
communities. Our physical presence
is important for customers to access
banking services in some of these
areas. Our renewed strategic approach
will enrich our commitment to provide
inclusive banking by delivering a low
cost-to-serve and fit-for-purpose delivery
model to enhance our service reach to
rural communities.
We have implemented “queue busting”
pilot initiatives designed to reduce
service waiting times which have borne
promising results. Our extended banking
hours and dedicated lending and
business banking centres, in key urban
areas, have contributed to sharp decline
in branch waiting times in the second half
of 2023. Our ability to pre-approve digital
loans has reduced approval wait times
improving the speed of our lending.
To augment our in-branch service
delivery, we have restructured our Retail
Banking operations to better align with
customer segment needs. This is to
ensure the appropriate focus and care
We aim to expand on the initiatives
piloted in 2023 and continue to invest in
our digital capabilities in order to better
support different customer needs in each
of our segments and modernise PNG’s
cash economy. Our goal is ensuring
fit-for-purpose products and services,
and empowering our customers through
technology to access banking services
to support themselves, their business,
and their families.
is provided to suit the unique needs of
our customer segments. Leveraging our
technology platforms, we established
a team to focus on creating a seamless
omni-channel experience through our
digital channels and meet the needs
of our “customers of the future”. We
continue to work towards enhancing the
customer experience as the financial
needs of our customers become more
varied and sophisticated.
Partnering with leading global firms,
we execute against our digital roadmap
and process simplification agenda to
create a seamless experience for our
customers across all segments. We are
investing in technology and specialised
talent to develop data-driven insights to
support our marketing, risk decisioning,
and operational efficiency to provide
value to our customers. We are also
making efforts to educate and transition
customers to our more convenient digital
channels.
Our Business Banking customers
are a key segment of focus, given
the economic and social benefit that
the success of SMEs can have in our
markets. Our dedicated SME team run
extensive SME training and mentoring
programs for locally-owned SMEs,
including women-led businesses, in
partnership with the Australian Business
Volunteers (ABV). Through our ABV
partnership, our SME customers are
given free training on how to manage
finances, plan for expansion, and put
in place governance measures in order
to achieve future success. BSP and
ABV co-designed the “Your Enterprise
Scheme (YES) Grow” program in
PNG and the “Together, Helping to
build a Resilient, Inclusive and Vibrant
Economy” (THRIVE) program in Fiji,
with aspirations for expansion of similar
programs into all our markets.
Our Corporate Banking operations
support our business customers’
working capital and capital expenditure
needs. As economic prospects for
our home market of PNG look more
promising with the slated resource
projects, BSP is well position with the
skills, experience, and local expertise
to support our customers’ financial and
capital investment needs. We continue
to support our customers in undertaking
multi-year capital expenditure programs
and financing needs across the Pacific in
various sectors.
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023 Our Risk Management
Framework
Our Risk Management Framework (RMF) outlines BSP’s key risks processes. The Board approved Group Risk Appetite
Statement (GRAS) sets the risk limits the Bank operates within to deliver our strategy. The RMF includes a number of risk types
(strategic, financial and non-financial), each with their own specific frameworks to identify, assess, govern and manage their
unique risks.
Our material risks are those the Bank is placing extra focus on mitigating, due to their potential to materially impact the Bank,
customers, shareholders and the community, now or in the future.
1. Group Risk
Appetite Statement
2. Identify and
Assess Risks
3. Manage and
Control Risks
4.Govern and
Monitor
1.Group Risk Appetite Statement
The Board approved GRAS is set at a level that the
Board expects management to operate within, to
achieve desired business outcomes:
3.Manage and control risks
We implement measures to manage and control risks
within appetite, such as:
Preserving capital adequacy
•
• Maintaining liquidity
•
Achieving targeted performance
2.Identify and assess risks
BSP uses multiple techniques to identify and
measure the risks it is exposed to such as:
• Risk and Control assessments
•
Emerging enterprise wide risk assessment
BSP sponsored Bilas exhibition,
Australian Museum
•
•
•
Limits, delegated authorities and approval
processes
Policies and procedures
Issues and incidents
4.Govern and monitor
The Board and its Committees:
• Oversee BSP's system of internal controls and
compliance
• Review reports on the measurement of risk,
adequacy and effectiveness of BSP's risk
management and internal control systems
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Enterprise wide risks
ENTERPRISE WIDE RISKS
Non-financial risks
Business disruption
risks
Technology risks
Transaction
processing risks
Cyber risks
Compliance risks
Interests rate risks
Project risks
Information Security
risks
AML & CTF risks
Financial crime
risks
People risks
Physical assets, safety
and security risks
How we manage risk
Our risk management approach ensures
consistent and effective management
of risk and provides for appropriate
accountability and oversight. Risk
management is enterprise wide, applying
to all entity levels and is a crucial element
in the execution of BSP’s strategy.
Our enterprise wide risks represents
the risks that are core to our Group
business. We organise these into
strategic, financial and non-financial
risk categories and annually identify key
enterprise risks. These top enterprise
risks have a focused management
oversight given they represent potential
material impacts to the strategy. We scan
the environment for changes to ensure
that our risk universe remains relevant.
The enterprise wide risk is managed
through the lifecycle from identification
to reporting. Our assessment process
includes quantification of risks under
normal and stressed conditions up to,
and including, recovery and resolution.
Risk exposures are managed through
different techniques and are monitored
against a risk appetite that supports our
strategy. We manage and allocate capital
efficiently to grow shareholder value
while ensuring that regulatory capital
requirements are met.
Our governance structure enables
oversight and accountability through
appropriate mandated board and
management committees. The three
lines of defence model is used to
maintain a sound risk culture with
an emphasis on our policies and
procedures.
This is all underpinned by a control
environment defined in our risk
governance and management standards
and policies. Through the embedding of
our values and code of conduct policies,
compliance training and whistle-blower
programs.
BSP GROUP BOARD
REMUNERATION
& NOMINATION
COMMITTEE
BOARD AUDIT &
COMPLIANCE COMMITTEE
BOARD
RISK COMMITTEE
CHIEF EXECUTIVE OFFICER
EXECUTIVE
COMMITTEE (EXCO)
FINANCIAL RISK COMMITTEES
NON-FINANCIAL RISK COMMITTEES
Executive
Committee
Group Asset and
Liability Committee
(GALCO)
Credit Risk
Committee
Losses
from failure
of counter-
parties to pay
their debts to
BSP
Audit &
Compliance
Committee
Operational
Risk
Committee
Fines or
Sanctions
from Non-
Compliance
with Laws and
Regulations
Losses from
inadequate or
failed internal
processes,
systems or
people
Technology
Risk
Committee
Disruption
to business
operations
from software,
hardware and/or
communication
failures
Disclosure
Committee
Incorrect and
selective or
inadvertent
disclosure of
material market
sensitive
information
Liquidity
Risk
Market
Risk:
• Interest
rate risk
• Foreign
exchange
risk
Sub-risk
Types:
• Financial
Crime
Compliance
Risk
• Regulatory
and
Licensing
Obligations
Risk
Sub-risk
Types:
• Fraud Risk
• People Risk
• Business
Disruption
Risk
• Transaction
Processing
Risk
• Legal Risk
Sub-risk
Types:
• Cybersecurity
Risk
• Data
Management
Risk
• IT Disaster
Recovery
Planning
Sub-risk
Types:
• Regulatory
Compliance
Risk
• Financial
Reporting
Compliance
Risk
• Reputation
Risk
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023 Material Risks
Risk Description
How we manage this risk
The Board and management are placing additional focus on managing a number of our material, financial and non-financial risk
types, due to their potential impact to BSP, our customers, shareholders and the community.
Risk Description
How we manage this risk
Credit Risk
Inability of customers to
meet loan obligations and or
current /prospective threat to
BSP’s earnings and capital
as a result of a counterparty’s
failure to comply with a
financial or other contractual
obligation.
We manage our credit risk by maintaining a culture of responsible lending and a robust risk
policy and control framework.
•
•
Processes are in place that identify, assess and control credit risk in relation to the
loan portfolio for loan impairment;
Defining, implementing and continually re-evaluating risk appetite under actual and
stressed conditions.
• Monitoring our credit risk exposure relative to approved limits;
•
•
Ensuring that there is independent monitoring of credit risk and its mitigation
independently of the business functions; and
Adequate provisioning held in compliance with IFRS9.
Technology
Risk
Technology risk relates
to any threat to BSP’s
critical operating
systems, data and
business processes that
deliver banking services
We manage technology risk by monitoring the condition of systems to minimise outages
or failure of critical systems and technology infrastructure that can impact the services we
provide to our customers.
•
•
•
•
•
Software lifecycle management tools and processes are implemented to ensure
controlled software and configuration deployment across all environments including
production;
Key Vendors are actively engaged in continued issue resolution and management via
Managed Services contracts;
BSP’s crisis management framework and crisis response teams provide the structure
to ensure a coordinated response to disruption incidents;
Business Continuity and Disaster Recovery Plans are in place and renewed and tested
annually; and
The IT Steering Committee provide oversight of specific Technology and Information
Security risks.
Operational
Risk
This risk arises when
there is direct or indirect
loss resulting from human
factors, inadequate or
failed internal processes,
systems or external
events.
We seek to manage and reduce operational risk to optimise the customer experience
while supporting BSP’s strategy, reputation and financial performance. We recognise that
operational risk is inherent in our business activities and that it is not always cost effective or
possible to attempt to eliminate all operational risks. Operational risks of material significance
are expected to be infrequent and we will seek to reduce the likelihood and impact of these.
Within this context, the management of operational risk has two key objectives:
•
•
To minimise the impact of losses suffered in the normal course of business and to avoid
or reduce the likelihood of suffering an extreme loss; and
To improve the effective and efficient management of BSP while minimising operational
risks.
Anti-Money
Laundering
and
Counter
Terrorism
Financing
(AML & CTF)
Non-compliance with
the AML/CTF Act in the
jurisdictions where BSP
operates.
Our compliance with anti-money laundering and combating the financing of terrorists (AML/
CTF) regulations in the countries where we operate is continually being enhanced through:
•
•
•
Execution of AML/CTF controls during the new customer onboarding, customer risk
review and correspondent banking relationship management processes;
Staff training and awareness undertaken to ensure that staff are aware of Policies and
Procedures and the significance of conducting specialised review for customers;
Enhanced Customer Due Diligence for High Risk and Politically Exposed Persons are
undertaken; and
• We will continue expanding and optimising our transaction monitoring and detection
capabilities.
The potential danger
or harm arising from
unauthorised access,
use, disclosure,
disruption, modification,
or destruction of digital
information. This risk can
originate from various
sources, including:
• Cyber attacks;
• Data breaches;
• Malware; and
• Other security incidents
that compromise the
confidentiality, integrity,
and availability of
sensitive information
Information
Security Risk
30
Cyber risk remains a key industry threat as perpetrators continue to become more
sophisticated. In response, BSP has committed to the continued enhancement of its security
capability to ensure that the associated risks remain within the risk appetite and managed
through:
•
•
•
•
Security Monitoring;
Security Testing, including Internal/External system penetration testing to identify
vulnerabilities;
Continuing awareness on Information Security policies and staff training on emerging
cyber security threats; and
PCI DSS compliant with security processes and procedures to secure payment card
data.
People Risk
Inadequate succession
planning may lead to key-
person dependency on critical
job roles, or in leadership
positions.
BSP has placed key emphasis on an effective succession planning program.
•
•
•
Competitive retention packages and programs ensuring that BSP remains the
employer of choice in the market.
BSP proactively responds to best market practices that aids to maintain its position
as the market leader.
Targeted staff development, training and certification based on training needs
analysis undertaken by business units.
Regulatory /
Compliance
Risk
Failure to comply with legal,
regulatory and prudential
obligations. Exposure
to regulatory fines for
non-compliance of laws/
regulations.
We have documented compliance plans and established Compliance Obligations registers
to ensure we comply with the legal, regulatory and prudential obligations in all the countries
we operate and this process is overseen by our Management Audit and Compliance
Committee.
•
•
•
Update, capture and understand requirements of the obligations register.
Transparent, open and honest engagement with regulators.
All employees complete mandatory compliance training.
Project Risk
Refers to an uncertain event
or condition that, if it occurs,
will affect the project and may
result in the inability to deliver
within budget and agreed
timelines.
Interest Rate
Risk
The possibility for BSP to
experience loss in earnings
due to factors that affect the
overall performance of the
financial markets resulting
from changes to the interest
rates and foreign exchange
(FX) rates.
BSP has a Project Management Office with the aim of delivering programs of work aligned
to the BSP’s strategic objectives including:
•
Ensuring deliverables are achieved across the programs;
• Managing the benefits realisation process for delivered projects and programs; and
•
Optimising the use of staffing and other resources to achieve the above.
Project risk is further managed by ensuring that:
•
•
Policies and Procedures are in place to manage project governance;
Project issues, risks, dependencies and constraints that may impact
implementation are managed;
• Monthly meetings held to monitor programs; and
•
Projects are supported by Executive Management and progress oversight by Board.
Risk limits are set and reviewed at least annually and in line with our defined risk appetite.
The criteria for setting risk limits include relevant market analysis, market liquidity and
business strategy. This limit structure comprises the following types of market risk limits:
•
•
•
•
•
•
•
Value at Risk (VaR) limits;
Position and sensitivity (Non-VaR) limits;
Stress testing for foreign currency, interest rate and liquidity risk;
Tracking performances against approved Group Risk Appetite and Policy limits
daily/monthly;
Balance sheet impact on loans and deposits; and
The above process is overseen by our Group Asset & Liabilities Committee and
reported to Executive Committee and Board.
Loan portfolio is denominated in local currency and on variable interest rate.
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023 Board of
Directors
BSP Board visits the Australia Museum's
"Bilas" exhibition sponsored by BSP
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023 Board of
Directors
ROBERT G. BRADSHAW LLB
Chairman,
Non – Executive Director.
MARK T. ROBINSON
Group Chief Executive Officer and
Managing Director.
SYMON G. BREWIS-WESTON, (HONS),
MAPPFIN
Non-Executive Director.
FAAMAUSILI DR. MATAGIALOFI
LUA’IUFI, BA, MSC, PHD
Non-Executive Director.
Robert Bradshaw was appointed to the
BSP Board in September 2017 and served
as Chairman of the Remuneration and
Nominations Committee from 2019 until
his appointment as Board Chairman in
February 2023. Robert holds a Bachelor of
Law Degree and is a graduate of AICD.
Mark T. Robinson was appointed Group
CEO of BSP Financial Group Limited
(BSP) in November 2022 and commenced
work in March 2023. He is a senior financial
services executive and globally experi-
enced banking Chief Executive Officer with
more than thirty years’ experience across
developed and emerging markets.
Symon Brewis-Weston was appointed
to the BSP Board in April 2021 and is a
member of BSP's Board Risk Committee
and Remuneration and Nominations
Committee. Symon has extensive interna-
tional experience in financial services and
a deep understanding of consumer and
business markets in the Asia Pacific region.
Faamausili Dr. Matagialofi Lua’iufi was
appointed to the board in December 2016
and is Chair of the Remuneration and
Nominations Committee (RNC). She is
an experienced public sector practitioner
and consultant, Matagialofi holds a PhD in
Management, a Masters in Management
Sciences and a Bachelor of Arts in
Sociology and Political Science.
STUART A. DAVIS, LLB, GAICD
Non-Executive Director.
Stuart Davis was appointed to the BSP
Board in August 2017 and is currently
Chair of the Board Risk Committee (BRC)
and a member of the Board Audit and
Compliance Committee. During Stuart's
long career at HSBC bank, he was CEO of
their India, Australia and Taiwan opera-
tions. Stuart holds a Bachelor of Law
Degree and ia a graduate of AICD.
PATRICIA FRANCES TAUREKA-
SERUVATU, LLB, MAICD
Non - Executive Director.
Patricia Taureka-Seruvatu is a Lawyer by
profession, admitted to practice law in
Papua New Guinea in 1988. Patricia holds
a Bachelor of Laws from the University
of PNG. She was appointed to the Board
in April 2022 and currently serves as a
member of the Board Audit and Compliance
Committee and the Remuneration and
Nominations Committee.
FRANK D. BOURAGA , CPA, MAICD
Non - Executive Director.
ARTHUR SAM, BCOMM, CPA
Non - Executive Director.
PRISCILLA KEVIN, BSCS, MAICD
Non - Executive Director.
IAN A. TARUTIA
Non - Executive Director.
Frank Dobi Bouraga was appointed to
the Board in December 2020 and 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, Frank
was the Country Managing Partner for
Ernst & Young Papua New Guinea for five
years as an audit and business advisory
services partner.
Arthur Sam was appointed to the BSP
Board in July 2016. Arthur is the Chair
of the Board Audit and Compliance
Committee and also a member of the
Board Risk Committee. He is a qualified
and experienced accountant registered,
with over 15 years working for global
accounting firms. Arthur is also a member
of AICD.
Priscilla Kevin was appointed to the BSP
Board in April 2020 and is a member of
the Board Risk Committee. Priscilla is an
IT professional specialising in Enterprise
Resource Planning (ERP) Support
Advisory. She holds a Bachelor's Degree
in Computer Science from PNG University
of Technology. Priscilla is also a member
of AICD.
Ian Tarutia was appointed a Director in April
2023 and currently serves as a member
of both the Board Audit and Compliance
Committee and the Board Risk Committee.
Ian is an experienced corporate executive,
with a strong back ground in superan-
nuation. Ian holds both a Bachelor of
Business Economics and Master of
Business Administration. He is a member
of AICD.
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Executive
Team
RONESH DAYAL
Group Chief Financial Officer
NUNI KULU
Group Chief Operating Officer
DANIEL FAUNT
Group General Manager Retail
PETER BESWICK
Group General Manager Corporate
MIKE HALLINAN
Group Chief Risk Officer
Ronesh was appointed Group Chief Financial
Officer (GCFO) in June 2020. He has over 20
years of experience in the financial services
industry, covering both the Life Insurance and
Banking businesses. Ronesh holds a Bachelor
of Arts Degree with double majors in Accounting
and Financial Management and Information
Systems. He is the President of Certified
Practicing Accountants (CPA) Australia – PNG
Branch, a member of CPA Australia, CPA PNG
and the Fiji Institute of Chartered Accountants.
Nuni was appointed Group Chief Operating
Officer (GCOO) in April 2023. Prior to this
role, Nuni was General Manager Digital. She
joined the former PNG Banking Corporation
as a graduate and held numerous roles with
Treasury and Retail Banking during the course
of her career. She has completed leadership
and management training at Melbourne
Business School and INSEAD College in
France. Nuni has a Bachelor of Commerce
from the Australian National University.
Daniel was appointed Group General
Manager Retail Bank in December 2020.
Daniel is responsible for managing BSP’s
extensive Retail Branch Network, Digital
Banking services, ATM operations and
Group Marketing. Prior to joining BSP,
Daniel held various senior management
roles for ANZ in PNG, Australia and the
Pacific. Daniel holds a MBA in Economics
from Deakin University and a Bachelor of
Business in Banking and Finance from the
Queensland University of Technology.
Peter 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 CBA, National
Australia Bank and Bank of New Zealand;
holding senior executive positions in Risk
Management and Business Development.
Mr. Beswick qualified as a Chartered
Accountant with PwC and has completed
a Masters of Business Administration with
Macquarie University in Australia.
Mike was re-appointed as Group Chief
Risk Officer (GCRO) in March 2023. Mike’s
professional career expands over 40 years
in banking and finance, holding various
senior positions in Risk Management and
Senior Relationship Executive roles with
CBA, specifically managing corporate
and institutional relationships. Mike is
a qualified CPA and is a Fellow of the
Australian Bankers Institute.
ROHAN GEORGE
Group General Manager Treasury & Markets
HARI RABURA
Group General Manager People & Culture
MARYANN LAMEKO-VAAI
General Manager Pacific Markets
VANDHNA NARAYAN
Group General Manager Compliance
RICHARD NICHOLLS
Group Chief Information Officer
Rohan is Group General Manager Treasury &
Markets, has extensive knowledge in developed
and emerging financial markets. His experience
spans 40 years, covering fixed income, foreign
exchange, commodities and structured
derivatives markets. Prior to joining BSP, Rohan
worked at ANZ as Head of Global Markets,
Cambodia & Laos, and at Westpac as Treasurer
PNG & PINS. Rohan holds a Master of Applied
Finance from Macquarie University and is
accredited by the Australian Financial Markets
Association.
Hari was appointed Group General Manager
for People & Culture in April 2016. She has
over 20 years’ experience in implementing
and delivering HR strategies, policies, and
services that create, support and sustain
a high performance culture. 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 was appointed as General
Manager Pacific Markets in June 2022.
With over 20 years of experience in
leadership and financial management.
Maryann achieved a significant career
milestone by becoming the first female
Country Head for BSP Samoa and led the
team that captured Samoa’s market leader
position. Maryann holds a Bachelor of
Commerce from Auckland University and is
a Chartered Accountant under the Samoa
Institute of Accountants and CPA Australia.
Vandhna was appointed Group General
Manager Compliance in February 2021.
Vandhna oversees the BSP Group’s AML
Business Units and the Regulatory and
Policy Compliance BU, with adminis-
trative oversight over the Internal Audit
and Credit Inspection BUs. Vandhna is a
qualified Barrister and Solicitor and holds
a Bachelors in Law (VUW, New Zealand),
and a Masters in Human Rights Law and
Policy (UNSW, Australia).
Richard was appointed Group Chief
Information Officer (GCIO) in May 2023.
Richard has over 30 years of senior
technology management experience in
the financial services industry, having held
senior technology delivery and support
roles in Investment and Retail Banking in
United Kingdom, Australia, Philippines and
Papua New Guinea. Richard graduated
from the University of New South Wales
with a Bachelor of Electrical Engineering.
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Corporate
Governance Framework
Board
Governance
The Board, Management and staff of BSP are aware of their
responsibilities to the people of Papua New Guinea and the
countries within the Pacific in which BSP operates. 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.
This Corporate Governance Statement has been approved by
the Board and is current as at 31 December 2023.
The BSP Financial Group Limited 1 (BSP) is committed
to maintaining high standards of corporate governance
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 Board ensures that BSP complies with the requirements
of the Papua New Guinea Companies Act 1997, Australian
Corporations Act 2001 (Cth), PNGX Listing Rules, PNGX
Corporate Governance Code for Listed Issuers, the ASX
Listing Rules and the ASX Corporate Governance Principles
and Recommendations (4th Edition).
BSP also complies with the various regulations on corporate
governance that are issued by the central banks in the
countries within which BSP operates. These currently include:
• The Bank of Papua New Guinea (BPNG) Banking
Prudential Standard BPS 300: Corporate Governance
(issued under Section 27 of the Banks and Financial
Institutions Act 2000);
• The Reserve Bank of Fiji Banking Supervision Policy
Statement No. 11: Governance (Oct 2007);
• The National Reserve Bank of Tonga Prudential
Statement No. 9 (revised 2014): Governance;
• The Financial Supervisory Commission of the Cook
Islands Banking Prudential Statement BPS09:
Governance Risk Management (June 2019);
• The Central Bank of Samoa Prudential Statement 1
(January 2021);
• The Reserve Bank of Vanuatu International Bank
Prudential Guideline No. 10 Management of Financial
Institutions: Fit & Proper Requirements; and
• The Central Bank of Solomon Islands Prudential
Guideline No. 14 on Corporate Governance (July 2019).
1 In this Corporate Governance Statement, a reference to ‘BSP’, ‘BSP Group’, ‘the Bank’, ‘the Company’, ‘the Group’, ‘our’, ‘us’, and ‘we’ is to BSP Financial
Group Limited ARBN: 649 704 656 (ASX: BFL | PNGX: BSP) and its subsidiaries unless it clearly means just BSP Financial Group Limited.
Roles and Responsibilities of the Board
The roles and responsibilities of the Board are defined in the
Board Charter, which distinguishes between matters reserved
for the Board and those that are delegated to Management with
the Board retaining oversight.
• with the assistance of the Board Audit and Compliance
Committee, selecting and recommending to the
Shareholders the appointment of external auditors; and
• approving the financial statements.
With the support of its Committees, the Board is responsible to
the shareholders for the overall performance of BSP, including
its strategic direction, establishing goals for management
and monitoring the achievement of those goals with a view to
optimising BSP’s performance and increasing shareholder
value.
The Board has delegated a number of these responsibilities
to its various Committees, the Committees and their
responsibilities are detailed in the Board Committees section of
this Report
The Board has delegated to Management responsibility for:
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 setting an
appropriate remuneration package;
• developing the annual operating and capital expenditure
budgets for Board approval and monitoring performance
against these budgets;
• developing and implementing strategies within the
framework approved by the Board and providing the Board
with recommendations on key strategic issues;
• appointing management below the level of General
Manager and preparing and maintaining succession plans
for these senior roles;
• endorsing appropriate policy settings for Management;
• developing and maintaining effective risk management
policies and procedures; and
• keeping the Board and the market fully informed of
material developments.
• 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 behaviour;
• approving acquisitions and disposals of material to the
business;
• establishing authority levels;
• setting Directors’ remuneration through the Remuneration
and Nominations Committee;
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Board
Governance
continued
Board Composition
The maximum number of Directors prescribed by the BSP Constitution and approved by the Shareholders is ten. As at 31 December
2023, there were ten Directors and their details are set out below:
Director
Date of Appointment
Length of Service
(as at 31 December 2023)
Status
Robert G. Bradshaw
13 September 2017
6 years 3 months
Non-Executive, Independent
Mark T. Robinson
1 March 2023
10 months
Executive, Non-Independent
Arthur Sam
13 July 2016
7 years 5 months
Non-Executive, Independent
Faamausili Dr. Matagialofi Lua’iufi
1 December 2016
7 years
Non-Executive, Independent
Stuart A. Davis
11 August 2017
6 years 4 months
Non-Executive, Independent
Ian A. Tarutia
21 April 2023
8 months
Non-Executive, Non-Independent
Priscilla Kevin
15 April 2020
3 years 8 months
Non-Executive, Independent
Frank D. Bouraga
30 December 2020
3 years
Non-Executive, Independent
Symon G. Brewis-Weston
13 April 2021
2 years 8 months
Non-Executive, Independent
Patricia F. Taureka-Seruvatu
13 April 2022
1 year 8 months
Non-Executive, Independent
Independence and Conflict of
Interest
Directors of BSP avoid conflicts of interest, by declaring
their interest and refraining from involving themselves in the
consideration of matters where a conflict might arise. BSP’s
Corporate Governance Principles and Managing Conflicts
of Interest Policy requires Directors to disclose any new
directorships and equity interests at each Board Meeting.
Chair
The Board Chair is an independent Non-Executive Director that
must be elected by the Directors and not have been a former
executive officer of BSP or the CEO in the last 3 years. The
Chair can hold the position for a maximum of six consecutive
years unless there are exceptional circumstances in which
prior approval of the prudential regulator is required.
The Chair’s responsibilities include:
The Company Secretary maintains a running register of each
Director’s interests to ensure that a majority of the Board is
independent. Directors are deemed to be independent if they
are judged free from any material or other business relationship
with BSP that would compromise their independence.
Prior to appointment, all Directors are required to provide
information to the Board for it to assess their independence. In
assessing the independence of Directors, the Board takes into
consideration the following:
•
•
•
•
•
•
the Director is not an executive of the Group;
the Director is not a substantial shareholder of BSP
or otherwise associated directly with a substantial
shareholder of BSP;
the Director has not within the last three years been a
material consultant or a principal of a material professional
adviser to BSP, or an employee materially associated with
a service provider;
the Director is not a material supplier to BSP, or a material
consultant to BSP, or an employee materially associated
with a material supplier or customer;
the Director has no material contractual relationship with
BSP other than as a Director of BSP; 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 interests of BSP.
This information is assessed by the Board to determine
whether 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.
BSP fully complies with the requirements of the BPNG
Prudential Standard 4/2003 – Limits on Loans to Related
Parties and details of Related Party Transactions are
summarised in Financial Note 35 of this Annual Report, while
Directors’ Information on pages 136 to 140 of this Annual
Report provides details of the Directors’ Interests.
• ensuring all new Board members are fully aware of their
duties and responsibilities;
• providing effective leadership on BSP’s strategy;
• presenting the views of the Board to the public;
• ensuring the Board meets regularly throughout the year,
and that minutes are taken and recorded accurately;
• setting the agenda of meetings and maintaining proper
conduct during meetings; and
• reviewing the performance of Non-Executive Directors.
Company Secretary
The BSP 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.
Key responsibilities of the Company Secretary include:
• Finalising the agenda for each Board and Committee
meeting in conjunction with the respective Chairman;
• Ensuring the timely completion and circulation of board
and committee papers ahead of scheduled meetings;
• Collation of the Board meeting minutes, capturing key
discussion points and resolutions for review and approval
at the next Board meeting;
• Advising the Board of relevant statutory matters and
ensuring compliance of the same;
• Maintaining a record of Directors’ dealings in securities,
declarations of interests and potential conflicts; and
• Assisting with arranging Director induction and
professional development.
The Company Secretary plays a pivotal role in carrying out the
administrative function of the Board and is one of the Board’s
main liaison with Management and external stakeholders.
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023 Board
Governance
continued
Director Appointment, Election
and Re-election
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
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.
Director Induction and
Professional Development
BSP has a program for inducting new Directors and providing
appropriate professional development opportunities for
Directors that are managed by the RNC.
Upon joining the Board, new Directors are provided with a
Letter of Appointment setting out the terms of the appointment,
a Board induction pack and undertake a comprehensive
induction program. The Letter of Appointment specifies the
term of appointment, BSP’s expectations regarding 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 compliance with BSP’s key corporate
governance policies. The induction program involves a one-
on-one meeting with the Board Chair, respective Committee
Chairs and Senior Management to help new Directors develop
an understanding of BSP’s history, culture and operations.
As part of the induction pack, new Directors receive copies of
BSP’s key corporate governance policies and the annual Board
and Committee calendar.
Director development is encouraged by the Board as part of
its efforts to remain robust and cognisant. Whilst Directors
are encouraged to identify and advise of courses that are of
interest, the RNC provides regular updates to the Board on
director development options available. Should a Director wish
to undertake a particular course as part of his/her development,
BSP covers the associated costs. Director development
sessions are also held regularly and scheduled in line with
Committee meetings.
New Directors are encouraged to undertake the Australian
Institute of Company Directors’ Effective Directors course.
A Director is normally appointed for an initial term of three
years and the end of the term, the Director becomes eligible for
reappointment by the Shareholders for a further term of three
years and, if not reappointed, retires automatically. A Director
is normally not permitted to hold office for a period exceeding
three terms of three years, or nine years, whichever is the
lesser.
In accordance with the Constitution and BSP’s Fit & Proper
Policy, the Board gives careful consideration to setting the
criteria for new Director appointments. These appointments are
then recommended to shareholders. The Board has delegated
the initial screening process involved to the RNC, which in
accordance with the RNC Charter, may seek independent
advice on possible new candidates for Directorships. All
Directors must be satisfied that the best candidate has been
selected.
BSP undertakes appropriate checks before appointing a
person as a Director, or offering them to shareholders as a
candidate for election. We have appropriate procedures in
place to ensure material information relevant to a decision to
elect or re-elect a Director is disclosed in notices of meeting
provided to shareholders. This includes a brief background of
the Director and details of any other material directorships the
Director may have.
For initial election, BSP provides a statement that the Director
has satisfied the ‘fit and proper person’ assessment by
BPNG. For re-election, a statement concerning the term of
the office currently served by the Director is included. If the
Board considers a Director to be independent, it states so in its
recommendation in the Notice of Meeting.
Nominees of the Board and/or Shareholders must meet the
‘fit and proper person’ criteria outlined in BPNG Banking
Prudential Standard BPS310: Fit and Proper Requirements
before they can take their place on the Board. This includes an
assessment of the person’s:
• Honesty, integrity reputation, good character and fairness;
• Education, competence, capacity, capability; and
• Financial soundness.
Review of Board Performance
BSP has a process for periodically evaluating the performance
of the Board, its Committees and individual Directors.
This review is done annually with oversight from the RNC and
is a process by which the Board regularly assesses its own
performance in meeting its responsibilities. It also includes an
assessment of the contribution of each individual Director. The
Board is aware of the need:
•
•
•
to continually identify areas for improvement;
to ensure that it meets the highest standards of corporate
governance; and
for the Board and each Director to make an appropriate
contribution to the Group’s objective of providing value to
all its stakeholders.
This performance review is facilitated by an external
consultant.
Executive and
Senior Management
Similar to Directors, BSP’s Executive and Senior Management
also enter into employment contracts with BSP, which set
out key information such as their terms of employment,
position, duties, reporting lines, remuneration, and termination
arrangements.
The Board with the assistance of the RNC, sets the
performance targets for the GCEO and other members
of Executive and Senior Management, under BSP’s
employee incentive arrangements set out in their respective
employment contracts. The long-term and short-term incentive
arrangements are administered by the RNC, with performance
against the relevant targets assessed periodically throughout
the year and a formal evaluation is undertaken annually with the
last assessment undertaken in 2023.
Gender Diversity
As at 31 December 2023, 30% of BSP’s Board comprises of
female Directors as three (3) of our ten Directors are women.
A summary of the gender spread within BSP as at 31
December 2023 is set out in the table below:
A Balanced Approach
BSP believes in the fair remuneration of all its employees from
Directors through to Management and Staff. As its Executive
and Senior Management teams are responsible for driving
the Company’s vision, reporting to the Board and ensuring
operational excellence, competitive remuneration packages are
used to retain and attract the best talent available.
Remuneration for Non-Executive Directors is assessed giving
regard to a number of factors including the current fee cap and
performance and contribution of each individual Non-Executive
Director, with all these benchmarked against that of similar
industry participants.
The Remuneration Report in pages 54 to 65, gives a summary of
the remuneration policy adopted by BSP.
The Board remains committed in promoting gender diversity
across all levels of the Company and a copy of BSP’s Equality,
Diversity and Inclusion Policy is available on the Company’s
website.
Category
Board
Executive Management
Senior Management
Middle Management
Branch Management
Customer Service Officers
Entry Level
Specialist and Support Staff
Female
Male
3
4
73
391
187
761
62
835
7
7
141
273
101
631
277
859
Total ( excluding Board )
2,313
2,289
Total
10
11
214
664
288
1,392
339
1,694
4,602
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023 Board
Committees
Meetings and Attendance
During 2023, four Committees of the Board were in operation,
whose functions and powers were governed by their respective
Charters. These Committees were the Board Audit and
Compliance Committee (BACC), Board Risk Committee
(BRC), the Remuneration and Nominations Committee (RNC)
and the Disclosure Committee (DC).
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
Committees are scheduled regularly during the year, aligning
with Board meeting dates. The Board has a policy of rotating
its meetings between locations both in Papua New Guinea
and abroad where BSP 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 and Company
Secretary, determines meeting agendas. Meetings provide
regular opportunities for the Board to assess BSP’s
management of financial, strategic and major risk areas.
To help ensure that all Directors are able to contribute
meaningfully, papers are provided to Board members one week
in advance of the meeting. Broad ranging discussion on all
agenda items is encouraged with healthy debate seen as vital
to the decision making process.
Membership of the Committees and a record of attendance
at Committee meetings during 2023 are detailed in the table
below. Remuneration details are provided in the Remuneration
Report from page 54 to 65 and the Financial Note 36 -
Directors’ and Executive Remuneration on page 123.
Committee Structure
Committee members are chosen for the skills, experience and
other qualities they bring to the respective Committees. At
the next Board meeting following each Committee meeting,
the Chair of the respective Committee gives the Committee’s
report to the Board.
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 and policies, controls and
procedures;
• BSP’s internal audit process;
•
•
•
•
•
the effectiveness of internal controls;
the controls and effectiveness of BSP's compliance
obligations;
the systems for ensuring operational efficiency and cost
control;
the systems for approval and monitoring of expenditure
including capital expenditure; and
the processes for monitoring compliance with laws and
regulations (both in PNG and in overseas jurisdictions,
where BSP operates) and the implementation of Board
decisions by management.
Membership of the BACC is formed amongst the Non-
Executive Directors, excluding the 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 specialised skills to assist
the BACC. The chair of the BACC must be an appropriately
experienced independent Non-Executive Director, other than
the Chair (or other Board committee chair).
The BACC must meet at least four times annually and special
meetings may be convened as required. Minutes of all BACC
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);
• 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 specialised skills to assist the BRC.
The chair of the BRC must be an appropriately experienced
independent 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 BRC
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 recommendations requiring Board action.
Remuneration and Nominations
Committee (RNC)
The RNC assists the Board 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 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 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 packages are in place and reviewed regularly;
to ensure that the Board itself maintains an appropriate
mix of skills and experience necessary to fulfil its
responsibilities to shareholders while maintaining a world
class Corporate Governance regime; and
• Board succession planning and recommendation to the
Board for appointment of new directors.
The RNC is comprised of three Non-Executive Directors. The
chair of the Remuneration and Nominations Committee must
be one of the independent Directors, other than the Chair of the
Board.
The RNC must meet at least once annually and special
meetings may be convened as required. Minutes of all RNC
meetings must be recorded and tabled at the subsequent RNC
meeting. The RNC regularly reports to the Board at the earliest
possible Board meeting after each RNC meeting about any
matters that should be brought to the attention of the Board
and any recommendations requiring Board action.
Director
Board
BACC
BRC
Sir Kostas G. Constantinou
Robert Bradshaw
Mark Robinson
Arthur Sam
Stuart Davis
Frank Bouraga
Symon Brewis-Weston
Priscilla Kevin
Ian Tarutia
Faamausili Dr. Matagialofi Lua’iufi
Patricia Taureka-Seruvatu
Independent Committee Members (ICMs)
Vele Rupa
Serena Sasingian
Paul Morgan
1/1
7/7
7/7
7/7
7/7
7/7
7/7
7/7
5/5
7/7
7/7
2/3
-
-
-
-
6/6
6/6
6/6
6/6
2/2
2/2
2/2
-
2/2
-
3/3
3/6
-
-
6/6
6/6
6/6
-
6/6
6/6
4/4
-
-
2/3
4/6
3/3
RNC
-
1/1
-
-
-
-
4/4
2/2
-
6/6
6/6
-
-
-
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023 Board
Committees
continued
Disclosure Committee (DC)
Board Skills Matrix
BSP has in place a Board skills matrix that was developed
following a Board assessment undertaken in 2019. Skills that
form part of this matrix include Risk Management, Regulatory/
Government Policy, Business and Financial acumen,
experience as a Non-Executive Director, Remuneration and
Corporate Governance.
Since 2019, subsequent appointments to fill vacancies have
been made giving regard to this matrix. In doing so, the Board
ensures it has a broad range of skills, experience and expertise
that enables it to meet its objectives. 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.
Established by the Board, the DC comprises of the Chair (or in
his/her absence, another Non-Executive Director), the Group
Chief Executive Officer, the Group Chief Financial Officer, the
Group Chief Risk Officer and the Company Secretary. The
chair of the Disclosure Committee is the most senior Director
present. The members of the DC may vary from time to time,
but will consist of at least a Non-Executive Director, two
Executive Employees (not including the Company Secretary)
and the Company Secretary.
The Disclosure Committee is responsible for, among other
things:
• approving the release of any announcement to PNGX and
ASX 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 rumour or media speculation; and
• overseeing the Disclosure Officer’s administration of the
Continuous Disclosure Policy.
Unlike other Committees, the DC is not required to have
scheduled meetings throughout the year, but meets regularly
whenever a market disclosure is required.
Each Committee member should be capable of making
a valuable contribution to the respective Committee and
membership is reviewed annually by the Board, with this
forming part of the Board’s annual performance review.
Risk Management
And Compliance
Approach to Risk
Management
Risk Management Roles
and Responsibilities
The Group’s risk management activities are aimed at achieving
the Group’s objectives, goals and strategy. In consultation with
the Executive Committee, the Board determines BSP’s risk
appetite and risk tolerance, which is reflected in the Group Risk
Appetite Statement. These benchmarks are used in the risk
identification, analysis and risk evaluation processes.
The Board has delegated to the BRC the responsibility
of annually reviewing the risk management framework.
This framework requires ongoing risk identification and
management across all areas and functions within the Group.
It is a requirement that the Executive Committee annually
review the top Group enterprise wide risks and present the
report and remediation plan to BRC for recommendation to the
Board for approval. This review allows the Group to reassess
the top inherent risks in the business and provides Senior
Management the opportunity to review processes to ensure
adequate controls and resources are in place to manage these
risks. It also provides the Board a high-level view of the risks
threatening the business objectives of BSP Group.
The Board regularly review the system of internal controls
which cover the management of financial, operational,
environmental, and social risk and compliance. The Board
are satisfied that these controls are appropriate. A detailed
summary of our risks and the management of those risks can
be found in our risk disclosure section on pages 27-31 of this
annual report.
The overall responsibility for risk management lies with the
Board and it accepts responsibility for ensuring it has a clear
understanding of the types of risks inherent in the Group’s
activities.
BSP implements a formal system of financial and operational
delegation from the Board to the GCEO and from the GCEO to
General Managers. These delegations reflect the Group’s risk
appetite and cascade down to managers who have skills and
experience to exercise them judiciously.
The Board defines the accountabilities (including delegated
approval, control authorities, and limits), and reporting and
monitoring requirements for the risk management process.
The severity of risks identified in the management process
are recorded in the risk registers and determine the approval,
control authorities, and limits. The Board undertakes an annual
review of the Group’s Enterprise Wide Risks.
The Board has adopted guidelines with the help of
management analysis, covering the maximum loss exposure
the Group is able and willing to assume. These guidelines
are detailed in the Group’s Risk Appetite Statement and Risk
Policy and Procedures Manual, which have been approved
by the Board. The Board has also delegated to the BRC
responsibility for overview of loss control and for overseeing
the risk management function.
The BRC is responsible for receiving reports and providing
regular updates and recommendations to the Board on the
risk management activities of the Group, especially relating
to risk issues that are outside of the authority of the Group’s
Executive Committee and other delegated Committees to
approve.
46
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023 Assurance
and Control
Financial Statements and
Corporate Reports
The BACC reviews the half-year and full-year financial
statements to determine whether they are complete and
consistent with the information known to Committee members
and to assess whether the financial statements reflect
appropriate accounting principles. In particular it:
• pays attention to complex and/or unusual transactions;
•
focuses on judgmental areas, for example those involving
valuation of assets and liabilities, provisions, litigation
reserves and other commitments and contingencies;
• meets with management and the external auditors to
review the financial statements and the results of the audit;
and
Additionally, all General Managers and Country Heads provide
monthly reports regarding the following:
• assessment and documentation of the risks and internal
control procedures in the respective Strategic Business
Units;
• any changes in business, operations and computer
systems and the risks that may arise from those changes
have been identified;
• appropriateness and operating efficiency of the risk
management and internal compliance and control
systems; and
•
identification and remedial action (if required) of any
weaknesses in the risk management and internal
compliance and control systems.
• 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.
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 the 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.
The Board recognizes that in certain circumstances, individual
Directors may need to seek independent professional advice,
at the expense of BSP, on matters arising in the course of
their duties. Any advice so received is made available to other
Directors. Any Director seeking such advice is required to
give prior notice to the Chair of his or her intention to seek
independent professional advice.
BSP does not release its half-year accounts unless they have
been reviewed by the external auditors. The full-year financial
statements are not released unless they have been audited by
the external auditors and approved by both the BACC and the
Board.
All other market announcements and corporate reports are
reviewed and approved by the Disclosure Committee (DC) prior
to lodgement with the respective stock exchanges.
Management
Assurance
The Board is provided with regular reports about BSP’s
financial condition and operating performance. Annually, the
GCEO and the Group Chief Financial Officer certify to the
Board that:
•
•
•
in their opinion, the financial records of the Group have
been properly maintained;
in their opinion, the financial statements comply with the
appropriate accounting standards and give a true and fair
view of the financial position and performance of BSP; and
their opinions above have been formed on the basis of a
sound system of risk management and internal control
applying to BSP, which is operating effectively.
External
Audit
Internal
Audit
The BACC is responsible for making recommendations to the
Board on appointment and terms of engagement of BSP’s
external auditors. The selection is made from appropriately
qualified auditors in accordance with Board policy.
BSP has an internal audit function. Upon Management’s
recommendation, the BACC approves the appointment of the
Head of Internal Audit, who functionally reports to the BACC.
The BACC also meets regularly with the Head of Internal Audit.
The Board submits the name of the external auditors to
Shareholders for ratification on an annual basis. In line with
BPNG Prudential Standard 7/2005 – External Auditors, the
signing partner in the external audit firm must be rotated every
five years.
The BACC reviews annually the performance of the external
auditors and where appropriate, makes recommendations
to the Board regarding the continuation or otherwise of their
appointment, consistent with the Prudential Standards while
ensuring their independence is in line with Board policy.
There is a review of the external auditor’s proposed audit scope
and approach, to ensure there are no unjustified restrictions.
Meetings are held separately with the external auditors to
discuss any matters that the BACC or the external auditors
believe should be discussed privately. The external auditor
attends meetings of the BACC at which the external audit, half
yearly and annual reviews are agenda items.
The BACC ensures that significant findings and
recommendations made by the external auditors are promptly
received and discussed, and that Management responds to
recommendations by the external auditors in a timely manner.
The duly appointed external audit firm may not be engaged
by BSP to provide specialist advisory or consultancy services
while also being engaged for services to conduct BSP’s
annual audit and related services. Services related to the
preparation of BSP’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. BSP’s external audit firm is currently
PricewaterhouseCoopers (PwC). Representatives of PwC
will attend the Annual General Meeting in May 2024 and be
available to answer Shareholder questions regarding the 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
scope of work carried out by the Internal Audit function stems
from the annual Internal Audit Plan, which the BACC reviews
and approves. The BACC also reviews the qualifications
of internal audit personnel and endorses the appointment,
replacement, reassignment or dismissal of the internal auditors.
The BACC meets separately with the internal auditors to
discuss any matters that the BACC, or the internal auditors,
believe should be discussed privately. The Head of Internal
Audit has direct access to the BACC and the Board. The BACC
ensures that significant findings and recommendations made
by the internal auditors are received and discussed promptly,
and that Management responds to recommendations by the
internal auditors on a timely basis.
Compliance
The BACC reviews the effectiveness of the systems for
monitoring compliance with all legal and regulatory obligations
and the Company Constitution. It also reviews the results
of Management’s investigation and follow-up (including
disciplinary action) of any fraudulent acts, or non-compliance.
The BACC obtains regular updates from Management
regarding compliance matters, and satisfies itself that all
regulatory compliance matters have been considered in the
preparation of the financial statements.
The Committee also undertakes reviews of the findings from
any examinations by regulatory agencies undertaken. The
Chair of the BACC has the right to approach a regulator directly
in the event of a prudential issue arising.
The Bank and the Group, to the best of the Directors’
knowledge, has not engaged in any activities which materially
contravene laws and regulations in relevant jurisdictions.
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023 Culture and
Conduct
Core Values
Code of Conduct
Whistleblowing
Restrictions of Trading
BSP’s comprehensive corporate governance framework is
underpinned by its 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.
• Professionalism – we commit ourselves to continual self-
development to achieve standards of excellence in our
performance.
• 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
This is encompassed in the Group’s Statement of Vision,
Mission and Values, which is approved by the Board and acts
as a guide for all employees in the day-to-day performance of
their individual functions within the Group.
BSP acknowledges the need for Directors and employees
at all levels to observe the highest standards of ethical
behaviour when undertaking business. To this end, the Board
has adopted a Group-wide Code of Conduct for Directors,
Management and all Staff whilst further stipulating that
each Director comply with the Code. To ensure the ongoing
maintenance of high standards of corporate behaviour, the
Board encourages Senior Management to periodically issue
staff communications to reinforce both the Code and Core
Values Statements.
All Directors are encouraged to maintain membership of an
appropriate Directors’ Association to keep abreast of current
trends in Directors’ duties, responsibilities and corporate
governance issues. Training on the Code is carried out annually
across the Group and all Directors, Management and Staff are
required to submit declarations attesting full understanding of
and compliance with the Code.
Reports of breaches of the Code are regularly provided to
Senior Management and noted at the BRC meetings.
Anti-Bribery and Anti-Corruption
BSP has a zero tolerance approach to bribery and corruption
and this is reinforced by its Anti-Bribery and Anti-Corruption
Policy. BSP recognises that acts of bribery and corruption
are detrimental to the growth and prosperity of our business,
the individuals and organisations we affiliate with and the
communities that we operate in. As a business, BSP is
mindful of the consequences of bribery and corruption, which
may result in both financial and reputational loss, alongside
imposition of regulatory sanctions.
Compliance with the policy by Management and Staff remains
closely monitored, with regular updates on breaches and material
incidents reported under the policy provided to management and
the BACC.
BSP is committed to a culture in which it is safe and acceptable
for employees, customers and suppliers to raise concerns
about poor or unacceptable practices, irregularities, corruption,
fraud and misconduct. The Group has adopted a Fraud
& Whistleblower Policy that is designed to support and
encourage staff to report in good faith matters such as:
Directors and Management of the Group are subject to trading
restrictions set out in the Papua New Guinea Capital Market
Act 2015 for buying, selling or subscribing for securities in
the Group if they are in possession of inside information. This
includes information, which is not generally available, and, if it
were generally available, a reasonable person would expect to
have a material effect on the price or value of BSP securities.
• unacceptable practices;
•
irregularities, or conduct, which is an offence or a breach
of laws of the countries in which BSP operates in (actions
and decisions against the laws of relevant countries
including non-compliance);
• corruption;
•
fraud;
• misrepresentation of facts;
• decisions made and actions taken outside established
BSP policies and procedures;
• sexual harassment;
• abuse of delegated authorities;
• misuse of Group assets.
Similar to the Code of Conduct, breaches or material incidents
reported under the Fraud and Whistleblower Policy are
reported during BRC meetings.
Furthermore, Directors and Management may only trade in the
securities of the Group, subject to the foregoing insider trading
restrictions, during each of the trading windows specified
in BSP’s Securities Dealing Policy. Senior Management is
required to request approval from the GCEO ahead of trading,
who in turn will keep the Chair of the Board appraised of
management activities. Directors are also subject to similar
restrictions and must seek approval from the Chair prior to
conducting any trades. Other actions such as hedging, margin
lending and speculative short term trading are also prohibited
under the policy.
50
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023 Compliance with ASX and PNGX
corporate governance
recommendations
This statement has been approved by the Board of BSP
Financial Group Limited and is current as at 31 December
2023. BSP's Appendix 4G (a checklist that cross references
the disclosures in this Statement to the ASX Corporate
Governance Principles and Recommendations) is available in
the Corporate Governance section of the BSP website.
BSP continues to work towards complying with Standards
15, 16 and 17 under the newly issued PNGX Corporate
Governance Code. BSP has engaged independent
Environmental, Social and Governance (ESG) specialists
to understand the most important environmental and social
risks and impacts towards which resources would be most
appropriately directed. The specialists have employed an
evidence base approach upon which to prioritise BSP’s
environmental and social risks and opportunities and assist in
drafting BSP’s inaugural Sustainability Policy.
In addition, our executive team commenced the integration
of ESG into BSP’s corporate strategy during 2024, and
the establishment of an action plan and governing body /
assignment of accountabilities for its operationalisation.
Continuous
Disclosure
BSP’s continuous disclosure regime, set by its Continuous
Disclosure Policy, is fundamental to the rights of Shareholders
to receive information concerning their securities. An important
aspect of BSP’s approach to shareholder communication
is to comply with the continuous disclosure regime and to
implement a best practice disclosure policy.
The Board has delegated the responsibility of reviewing
and approving market announcements to the DC. Following
approval by the DC, market announcements are issued to the
respective exchanges for release to market. Ordinarily, these
announcements are reviewed and approved by the Board
ahead of issue and release, however in instances where an
urgent or unexpected matter arises that warrants immediate
disclosure, the DC reviews and approves for release with other
Board members notified accordingly following release. In those
instances, formal ratification of DC approval takes place at the
next Board meeting.
Commitment to
Shareholders
BSP commits to dealing fairly, transparently and openly with
both current and prospective Shareholders using available
channels and technologies to communicate widely and
promptly. Information about the Company including an
overview, our history, Board and Management are available on
the website. Our website also contains information on corporate
governance including all of BSP’s charters and policies.
BSP is dedicated to facilitating participation in Shareholder
meetings and dealing promptly with shareholder enquiries. Our
Shareholder Communications Policy focuses on compliance
with disclosure obligations, whilst aspiring to be at the forefront
of best practice in disclosure. Our approach for communicating
with Shareholders is to communicate concisely and accurately:
After confirmation of release to the market, all market
announcements are immediately posted to BSP’s website.
As at 31 December 2023, all market announcements made
by BSP since 2018 are currently available on the website.
Where BSP provides financial results’ briefings to analysts or
the media, these briefings are published on the BSP 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.
BSP’s insider trading rules are important adjuncts to the
continuous disclosure regime in ensuring that Shareholders
are given fair access to material information regarding
securities. BSP seeks to limit the opportunity for insider trading
in its own securities through its Securities Dealing Policy.
Directors and Senior Management at these events, and any
presentation material provided at these events are released
as announcements to the market prior to commencement and
subsequently uploaded to BSP’s website.
The Company’s Annual General Meeting is another shareholder
forum used to communicate financial performance and
strategies, in line with disclosure policies. BSP gives great
consideration to its shareholders and hosts its Annual General
Meeting at a central location that is accessible and can cater
for large audiences. Significant effort is made to ensure
shareholders can participate and a meeting guide with sufficient
information on how to join, vote and participate accompanies
the notice of meeting.
•
the BSP strategy;
• how we implement that strategy; and
•
the financial results consequent upon our strategy and its
implementation.
It is noted that the thresholds at which shareholders may
demand a poll are low and provide assurance to shareholders
wishing to invoke the “one security one vote” principle and
wishing to have substantial resolutions decided by a poll.
To facilitate effective communication between BSP, its
shareholders, potential investors, analysts and other financial
markets participants, BSP conducts periodic market briefings,
which include half and full year results announcements.
BSP also hosts events and attends conferences and
forums regularly. Stakeholders are given access to BSP
BSP gives Shareholders the option to send and receive
communications from BSP and its share registries
electronically. In recent years, we have increased efforts to go
paperless and continue to encourage shareholders to provide
email addresses by which they can receive digital copies of all
shareholder communications.
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023 Remuneration
Report
1.0
Executive Summary
The aim of the Remuneration Report (Report) is to provide details that the Board believes are essential for shareholders
to understand BSP Financial Group Limited’s remuneration framework. This is intended to deliver specific operating
financial and non-financial outcomes. There is no statutory requirement for Remuneration Reporting under International
Financial Reporting Standards (IFRS) and as a PNG incorporated entity, BSP is not required to have this remuneration
report audited.
2.0
Message from the Remuneration and Nominations Committee Chairman
Short Term Incentive (STI) outcomes
All BSP Group employees received performance-based
short-term incentives in line with approved comprehensive
operational and financial key performance indicators
(KPIs) of the STI, plan as outlined in Section 5.1 of this
Report.
Long Term Incentive (LTI) outcomes
BSP offers a long-term incentive (LTI) plan that utilises
Earnings Per Share (EPS) as the basis for a matrix to
calculate LTI payout. For the 2022-2023 LTI, the Earnings
per Share (EPS) threshold was determined by adjusting
the Statutory NPAT of K890.2 million by K209.0 million, to
account for the increase in corporate tax rate change from
30% to 45%. This adjustment led to an amended NPAT
of K1,099.2 million, exceeding the threshold for 50% of
performance rights. Consequently, the LTI plan vested,
and eligible staff received their payments as outlined in
Section 5.2 of this Report.
I hope you find this Remuneration Report informative. On
behalf of the Remuneration and Nomination Committee
I would also like to thank you for your support as a BSP
shareholder.
Faamausili Dr. Matagialofi Lua’iufi
Chair BSP Board Remuneration and Nominations
Committee
I am delighted to present the 2023 Remuneration Report
for BSP Financial Group Limited (BSP) on behalf of the
Remuneration and Nominations Committee (RNC) and
the Board.
The Report focuses on the remuneration structure and
outcomes for our Key Management Personnel (KMP) for
BSP, which includes Non-Executive Directors and Group
Executives. Group Executives are BSP employees who
have the authority and responsibility to plan, direct, and
oversee BSP's operations.
Our Remuneration Strategy
At BSP, we view our people as our most important asset.
The objective of our remuneration strategy is to ensure
that we can attract and retain talented employees by
offering market competitive remuneration, with variable
remuneration outcomes aligned with the financial
performance of BSP. Section 4 of this Report provides a
detailed overview of our fixed and variable remuneration
structure, including any additional benefits.
Governance is a fundamental part of our remuneration
culture, with the Board approving any executive
remuneration packages that are endorsed by the RNC in
accordance within BSP remuneration guidelines. Further
information on our governance framework can be found in
Section 7 of this Report.
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. Further information on our approach to Non-
Executive Director remuneration can be found in Section 8
of this Report.
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023 3.0 Key Management Personnel
4.0 Executive Remuneration Framework
In 2023, 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.
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.
Position
KMP Term
Name
Board Members
Sir Kostas G. Constantinou, OBE1
Robert G. Bradshaw2
Chairman
Chairman
Arthur Sam
Stuart A. Davis
Faamausili Dr. Matagialofi Lua’iufi
Priscilla Kevin
Frank D. Bouraga
Symon G. Brewis-Weston
Patricia F. Taureka-Seruvatu
Ian A. Tarutia3
Director
Director
Director
Director
Director
Director
Director
Director
Executives
Mark T. Robinson4
Ronesh Dayal
Nuni Kulu5
Frank van der Poll6
Mike Hallinan7
Roger Hastie8
Peter Beswick
Rohan George
Hari Rabura
Daniel Faunt
Vandhna Narayan
Richard Nicholls9
Group Chief Executive Officer
Group Chief Financial Officer
Group Chief Operating Officer
Group Chief Operating Officer
Group Chief Risk Officer
Group Chief Risk Officer
Group General Manager Corporate Banking
Group General Manager Treasury & Markets
Group General Manager Human Resources
Group General Manager Retail Banking
Group General Manager Compliance
Group Chief Information Officer
Maryann Lameko-Vaai
General Manager Pacific Markets
Mary Johns10
Jamie-Lee Loh11
Company Secretary
Acting Company Secretary
1 Sir Kostas G. Constantinou OBE resigned 28 February 2023
2 Robert Bradshaw, appointed Chairman 1 March 2023
3 Ian Tarutia, appointed 21 April 2023
4 Mark T Robinson, appointed 1 March 2023
5 Nuni Kulu, appointed 27 April 2023
6 Frank Van der Poll, resigned 26 April 2023
7 Mike Hallinan, appointed 27 March 2023 in an acting role
as Group Chief Risk Officer
8 Roger Hastie, resigned 16 March 2023
9 Richard Nicholls, appointed 1 March 2023
10 Mary Johns, resigned 14 July 2023
11Jamie-Lee Loh, appointed 15 July 2023
Part year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Part year
Part year
Full year
Full year
Part year
Part year
Part year
Full year
Full year
Full year
Full year
Full year
Part year
Full year
Part year
Part year
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
Executives
Year
Salary
Short-term
incentive
Value of
benefits
Final
entitlement
Long-term
incentive
Leave
Encashment
Total
Robin Fleming
2023
-
-
Group Chief Executive
Officer
2022
4,103
2,480
Mark T. Robinson
2023
3,090
2,686
Group Chief Executive
Officer
2022
-
-
-
55
38
-
Ronesh Dayal
2023
1,497
354
159
Group Chief Financial
Officer
2022
1,308
420
161
Frank van der Poll
2023
849
Group Chief Operating
Officer
2022
1,470
Michael Hallinan
Group Chief Risk Officer
Roger Hastie
Group Chief Risk Officer
2023
2022
2023
2022
1,096
530
350
638
-
374
263
-
-
200
93
97
-
17
7
59
Peter Beswick
2023
1,361
349
114
Group General Manager
Corporate Banking
2022
1,228
364
116
Rohan George
2023
1,250
Group General Manager
Treasury & Markets
2022
1,102
301
326
59
61
Hari Rabura
2023
1,001
224
164
Group General Manager
People & Culture
2022
974
257
186
Daniel Faunt
2023
1,361
303
204
Group General Manager
Retail
2022
1,237
372
208
-
-
-
-
826
1,653
5,895
15,012
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
233
670
-
670
-
-
-
376
233
564
196
564
154
444
233
564
-
-
-
5,814
-
2,243
142
2,701
263
1,203
204
2,815
-
1,359
471
1,018
178
535
-
-
-
-
1,273
2,057
2,272
1,807
50
2,103
-
1,543
72
1,933
-
2,101
97
2,478
56
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023 4.0
Executive Remuneration (continued)
4.3
Benefits
Executive Remuneration – Non-Statutory Disclosure (continued)
Name
Year
Salary
Executives (continued)
Vandhna Narayan
Group General Manager
Compliance
2023
2022
1,127
974
Richard Nicholls
Group Chief Information
Officer
2023
2022
1,219
-
Nuni Kulu
Group Chief Operating
Officer
2023
2022
1,090
974
Maryann Lameko-Vaai
General Manager Pacific
Markets
2023
2022
1,078
196
Mary Johns
Company Secretary
Jamie-Lee Loh
Acting Company
Secretary
2023
2022
2023
2022
289
513
122
-
Short-
term
incentive
Value of
benefits
Final
entitlement
Long-
term
incentive
Leave
Encashment
Total
303
258
292
-
286
278
303
-
-
139
29
-
33
34
52
-
119
112
156
11
49
87
37
-
-
-
-
-
-
-
-
-
-
-
-
-
202
444
213
-
188
444
183
-
-
246
18
-
-
15
-
-
-
-
-
-
552
57
-
-
1,665
1,725
1,777
-
1,682
1,808
1,720
207
891
1,042
205
-
Note: Remuneration reflected in the table above relates to the period the staff member was in a KMP role. Contracts are in AUD,
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
and contractual benefits. The purpose of fixed pay is to attract and retain employees by paying market competitive pay
for the role, skills and experience required by the business. This may include salary, fixed pay allowance housing benefits
and other cash allowances in accordance with local market practices. These payments are fixed and do not vary with
performance.
4.2
Short Term Incentive (STI)
STI’s are incentives that BSP awards to staff at a given time of up to one year. BSP refers to the STI as the Annual
Performance based bonus scheme. The scheme focuses on rewarding employees for performance and is paid at the
end of each calendar year for all staff excluding Executives (Group Chief Executive Officer, Strategic Business Unit
General Managers and Country Heads) who are paid in March the following year after annual accounts are released.
This incentive is determined by the employees’ individual performance and the overall BSP Group performance, based
on the achievement of Key Performance Indicators (KPIs). KPIs are split between:
i.
ii.
iii.
iv.
v.
58
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; and
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.
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 (LTI) Plan
BSP also has a LTI for certain senior employees. BSP’s LTI 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 LTI assists in the recruitment, retention and motivation of
Executives, Senior Managers and Critical and High Performing employees of the BSP Group. The LTI 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 LTI 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
2021 were vested in 2023.
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 LTI cycle
As recommended by
RNC and approved by
Board each LTI 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 prior year.
Participants are personally responsible for any income tax liability in respect of payments made under the LTI. 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 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 GMs and
approved by the Group CEO.
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4.6
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:
5.1
Short Term Incentive (STI) Outcomes (continued)
The table below shows the STI outcomes for FY23.
i. Medical Cover for all staff;
ii. Life Insurance;
iii. Superannuation; and
iv. 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:
i. Short and Long-Term Incentive Plans;
ii. Leadership and Management Development Program (LMDP); and
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 80 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
FY19
890,363
190.6
37.7%
FY20
FY21
FY22
FY23
806,218
1,075,218
1,084,7201
890,2152
172.6
37.4%
230.1
37.5%
232.2
38.0%
190.5
38.5%
1 Underlying NPAT on which STI was assessed, excludes one-off tax credits of K135 million and K190 million Additional Company Tax expense.
Further, the above excludes K4.0 million credit, reflecting the modified retrospective transition to the new accounting standard IFRS 17 (Insurance
contracts), which came into effect on 1 January 2023.
2 Underlying NPAT on which STI was assessed, excludes a tax expense of K209 million as a consequence of the change in corporate income tax
rate from 30% to 45%.
The table below details the bonus pool measures and outcomes for the financial year.
Target Area
Weighting
Measure
Outcomes
Group
Performance
15%
Achieve budgeted NPAT and
Cost to income ratio
Implementation of critical
strategic imperatives
50%
Various deliverable targets to be
achieved
60
Individual Assessment
35%
Various Key Performance
indicators
The Group’s NPAT, adjusted for the increase
in company tax rate to 45% was 8% below
budget. Consequently the bonus pool
was reduced to 80%, except for the CEO,
whereby the Board granted 100% of STI
entitlement giving regard to exceptional
leadership demonstrated during the year.
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.
Objectives set in these areas were met.
Name
Title
Current Executives
STI
Awarded
K’000
STI as %
of Gross
Base
Maximum
STI
K’000
Actual
STI % of
Maximum
STI
Mark T. Robinson
Group Chief Executive Officer
2,686
Ronesh Dayal
Group Chief Financial Officer
Mike Hallinan
Group Chief Risk Officer
Nuni Kulu
Group Chief Operating Officer
Peter Beswick
Group General Manager Corporate
Banking
Rohan George
General Manager Treasury & Markets
Hari Rabura
Group General Manager People &
Culture
Daniel Faunt
Group General Manager Retail
Vandhna Narayan
Group General Manager Compliance
Maryann Lameko-
Vaai
General Manager Pacific Markets
Richard Nicholls
Group Chief Information Officer
Jamie-Lee Loh
Acting Company Secretary
354
263
286
349
301
224
303
303
303
292
29
70%
23%
24%
23%
22%
23%
22%
20%
23%
25%
21%
24%
2,686
100%
466
329
375
466
392
309
466
403
367
426
37
76%
80%
76%
75%
77%
73%
65%
75%
83%
69%
80%
Note: Percentage of annual gross salary are converted at the AUD exchange rate at date of payment.
5.2
2023 LTI Outcomes
The 2023 LTI reward matrix was approved in November 2021. BSP’s LTI 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 LTI rights is subject
to achievement of the target EPS for 2023, which is calculated using the 2023 Group NPAT budget as the baseline with
payments based on specified percentages of maximum rights, if 2023 EPS outcome is within the payment band as
detailed in the table below.
2023 Hurdles on EPS
EPS target to
achieve
Target NPAT
(million)
Percentage of Performance rights to
exercise
107.5%>
102.5%>
97.5%>
202.3
192.9
183.4
K945.00
K901.05
K857.09
150%
100%
50%
LTI vesting (%)
FY19
100%
FY20
100%
FY21
0%
FY22
150%
FY23
50%
The Group achieved a NPAT of K890.21 million and EPS was recorded at 190.50 toea, above the 50 percent budget,
but below 100 percent EPS and NPAT hurdles set by the Board. Based on these outcomes, the Board determined that
50% LTI will be vested and paid for the 2023 financial year. 2023 EPS targets to achieve were adjusted to consider the
increase in the tax rate of 45% from 30%.
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2023 LTI Outcomes (Continued)
The table below shows the LTI outcomes for FY23
Name
Title
Current Executives
Mark T. Robinson
Group Chief Executive Officer
Ronesh Dayal
Mike Hallinan
Nuni Kulu
Peter Beswick
Rohan George
Hari Rabura
Daniel Faunt
Group Chief Financial Officer
Group Chief Risk Officer
Group Chief Operating Officer
Group General Manager Corporate Banking
General Manager Treasury & Markets
Group General Manager People & Culture
Group General Manager Retail
Vandhna Narayan
Group General Manager Compliance
Maryann Lameko-Vaai
General Manager Pacific Markets
Richard Nicholls
Jamie-Lee Loh
Group Chief Information Officer
Acting Company Secretary
LTI
Awarded
K’000
LTI as % of
Gross Base
-
233
-
188
233
196
154
233
202
183
213
18
-
15%
-
15%
15%
15%
15%
15%
15%
15%
15%
15%
Note: Percentage of annual gross salary are converted at the AUD exchange rate at date of payment.
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 3 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 which has a 6-month notice period
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 enables the group to also achieve alignment between
risk, performance and reward.
62
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. The shareholders approved an increase in the Directors’ fee pool to
PGK6.0million at the May 2023 Annual General Meeting effective 1 January 2024. Total payments to directors for the
2023 financial year within the fee pool were as follows:
All amounts are expressed in K'000
Name of Director
Sir Kostas G. Constantinou, OBE
Robert G. Bradshaw
Stuart A. Davis
Dr Matagialofi Lua'iufi
Symon G. Brewis-Weston
Arthur Sam
Priscilla Kevin
Frank D. Bouraga
Patricia F. Taureka-Seruvatu
Ian A. Tarutia
Total
Base
Fee
Chair-
person
BACC
Fee
BRC
Fee
RNC
Fee
Bank
Total
Sub.
Fees
Total
Fees
70
365
365
365
365
365
365
365
365
225
70
318
-
-
-
-
-
-
-
-
-
-
25
-
25
38
-
25
13
13
3,214
388
138
-
-
38
-
25
25
25
-
-
13
125
-
9
-
34
-
-
13
-
25
-
81
140
692
427
399
415
427
402
390
402
250
75
-
-
120
-
-
-
-
-
-
215
692
427
519
415
427
402
390
402
250
3,946
195
4,140
63
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023 BSP Financial Group Limited
and Subsidiaries
ARBN 649 704 656
Financial Statements
31 December 2023
64
65
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
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 2023. In order to comply with the provisions of the Companies Act 1997, the Directors report as
follows:
Principal activities
The principal activity of the BSP Financial Group Limited (BSP) is the provision of commercial banking and financial services throughout
Papua New Guinea (PNG) and the Asia Pacific region. The Group’s activities also include fund management and life insurance business
services. BSP is a company listed on the PNG Exchange Markets (PNGX) and the Australian Stock Exchange (ASX), incorporated
under the Companies Act of Papua New Guinea, and is an authorised Bank under the Banks and Financial Institutions Act of Papua New
Guinea. The Group is also licensed to operate in 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 2023, the Group’s profit after tax was K890.215 million (2022: K1,084.720 million). The Bank’s profit
after tax was K800.826 million (2022: K1,045.279 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 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 totaling K831.813 million were paid in 2023 (2022: K788.906 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 2023:
Mr Robert G. Bradshaw
Mr Stuart A. Davis
Mrs Patricia F. Taureka-Seruvatu
Mr Mark T. Robinson
Dr Matagialofi Lua’iufi
Mr Ian A. Tarutia
Mr Arthur Sam
Ms Priscilla Kevin
Mr Symon G. Brewis-Weston
Mr Frank D. Bouraga
Details of directors’ tenure and directors and executives’ remuneration during the year are provided in Note 36 of the Notes to the
Financial Statements. The Group CEO Mark T. Robinson was the only executive director.
The acting company secretary is Jamie-Lee Loh.
Independent auditor’s report
The financial statements have been audited and should be read in conjunction with the independent auditor’s report on page 126. 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 K7.577 million (2022: K5.942 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 21st day of February 2024.
Statements of Comprehensive Income
for the Year Ended 31 December 2023
All amounts are expressed in K’000
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
Note
Consolidated
Bank
2023
2022
(restated)
2023
2022
3
3
4
4
31
6
5
7
7
29
29
29
29
1,962,928
1,834,996
1,849,145
1,727,733
(118,097)
(89,936)
(110,447)
(78,578)
1,844,831
1,745,060
1,738,698
1,649,155
427,592
488,719
61,236
419,042
394,686
43,875
385,346
384,767
469,894
408,442
-
-
2,822,378
2,602,663
2,593,938
2,442,364
(182,195)
5,359
(165,562)
15,170
(1,086,790)
(989,263)
(1,002,105)
(912,980)
-
(190,000)
-
(190,000)
1,553,393
1,428,759
1,426,271
1,354,554
(663,178)
(344,039)
(625,445)
(309,275)
890,215
1,084,720
800,826
1,045,279
94,112
(53,434)
48,551
(28,345)
615
-
38,349
1,581
(82)
42
615
-
28,048
1,581
(82)
-
133,076
(51,893)
77,214
(26,846)
1,023,291
1,032,827
878,040
1,018,433
Earnings per share - basic and diluted (toea)
8
190.5
232.2
171.4
223.7
Comparatives for prior periods have been restated to reflect the modified retrospective transition to the new accounting standard IFRS 17
(Insurance contracts), which came into effect on 1 January 2023.
The attached note forms an integral part of these financial statements
Mr Robert G. Bradshaw
Chairman
Mr Mark T. Robinson
Group Chief Executive Officer & Managing Director
66
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Statements of Financial Position
as at 31 December 2023
All amounts are expressed in K’000
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 contract 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
Minority interests
Total shareholders’ equity
Total equity and liabilities
Note
Consolidated
Bank
2023
2022
(restated)
2023
2022
3,306,085
3,761,635
2,430,613
3,041,858
1,779,677
1,737,981
1,595,587
1,665,094
3,803,598
4,128,340
3,768,110
4,097,350
2,841,812
2,517,159
2,699,236
2,418,532
6,373,451
4,789,153
5,741,162
4,210,845
16,013,022
14,249,401
14,802,133
13,077,909
1,034,741
958,036
765,075
745,692
32,387
28,664
-
-
329,288
342,611
1,437,226
1,238,706
32,387
390,635
323,233
680,138
28,664
399,361
336,108
573,811
36,951,287
33,751,686
33,228,309 30,595,224
363,665
272,272
604,785
529,592
29,835,111
26,919,361
27,911,977
25,194,893
1,249,512
1,067,694
-
-
1,197,889
1,392,030
1,072,358
1,282,484
61,780
48,427
-
-
32,707,957
29,699,784
29,589,120
27,006,969
372,110
372,110
372,110
372,110
3,415,689
3,359,184
2,963,899
2,991,169
Comparatives for prior periods have been restated to reflect the modified retrospective transition to the new accounting standard IFRS 17 (Insurance
contracts), which came into effect on 1 January 2023.
The attached notes form an integral part of these financial statements.
Mr Robert G. Bradshaw
Chairman
Mr Mark T. Robinson
Group Chief Executive Officer &
Managing Director
Statements of Changes in Shareholders' Equity
for the Year Ended 31 December 2023
All amounts are expressed in K’000
GROUP
Balance as at 1 January 2022
Transition to IFRS 17 impact
Note
Share
capital
Reserves
Retained
earnings
(restated)
Minority
interests
Total
372,133
396,929
3,025,125
778
3,794,965
31
-
-
36,251
-
36,251
Restated balance beginning of year
372,133
396,929
3,061,376
778
3,831,216
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 change in PNG tax rate
BSP Life policy reserve
Balance at 31 December 2022
Net profit
Other comprehensive income
Total comprehensive income
Dividends paid during the year
Gain attributable to minority interests
Total transactions with owners
Transfer from asset revaluation reserve
Others
BSP Life policy reserve
Balance at 31 December 2023
Other comprehensive income
Total comprehensive income
Dividends paid during the year
Share buyback
Total transactions with owners
Transfer from asset revaluation reserve
Impact of change in PNG tax rate
BSP Life policy reserve
Balance at 31 December 2022
Net profit
Other comprehensive income
Total comprehensive income
Dividends paid during the year
Total transactions with owners
Transfer from asset revaluation reserve
BSP Life policy reserve
Balance at 31 December 2023
-
-
-
-
(23)
-
(23)
-
-
-
-
1,084,720
(51,893)
-
(51,893)
1,084,720
-
-
-
1,084,720
(51,893)
1,032,827
(788,729)
(177)
(788,906)
-
-
-
-
(5,414)
(23,068)
-
(126)
(788,855)
5,270
-
3,327
(3,327)
-
126
(51)
-
-
-
(23)
-
(788,929)
(144)
(23,068)
-
372,110
319,881
3,359,184
727
4,051,902
-
-
-
-
-
-
-
-
-
-
890,215
133,076
133,076
-
-
-
(1,632)
1,053
2,452
-
890,215
(831,616)
(171)
(831,787)
1,632
(1,103)
(2,452)
-
-
-
890,215
133,076
1,023,291
(197)
(831,813)
171
(26)
-
(831,813)
-
-
-
-
(50)
-
372,110
454,830
3,415,689
701
4,243,330
372,133
276,833
2,728,885
-
-
-
-
(23)
(23)
-
-
-
-
1,045,279
(26,846)
-
(26,846)
1,045,279
-
-
-
(5,270)
(23,068)
(784,938)
-
(784,938)
5,270
-
3,327
(3,327)
372,110
224,976
2,991,169
-
-
-
-
-
-
-
-
800,826
77,214
77,214
-
-
(1,462)
2,452
-
800,826
(827,106)
(827,106)
1,462
(2,452)
372,110
303,180
2,963,899
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,377,851
1,045,279
(26,846)
1,018,433
(784,938)
(23)
(784,961)
-
(23,068)
-
3,588,255
800,826
77,214
878,040
(827,106)
(827,106)
-
-
3,639,189
28
28
29
29
28
29
29
28
28
29
29
28
29
29
Equity attributable to the members of the company
4,242,629
4,051,175
3,639,189
3,588,255
Balance as at 1 January 2022
454,830
319,881
303,180
224,976
BANK
701
727
-
-
Net profit
4,243,330
4,051,902
3,639,189
3,588,255
36,951,287
33,751,686
33,228,309 30,595,224
68
The attached notes form an integral part of these financial statements
69
Comparatives for prior periods have been restated to reflect the modified retrospective transition to the new accounting standard IFRS 17
(Insurance contracts), which came into effect on 1 January 2023.
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Statements of Cash Flows
for the Year Ended 31 December 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
Consolidated
Bank
2023
2022
(restated)
2023
2022
(restated)
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.
1,811,037
1,823,009
1,737,885
1,717,557
A. Basis of Presentation and General Accounting Policies
All amounts are expressed in K’000
Note
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
7
9
950,266
(125,932)
266,148
737,974
(78,673)
235,092
(166,366)
(144,191)
-
(190,000)
884,782
(91,395)
792,563
(61,174)
-
-
-
-
-
(190,000)
(894,619)
(1,160,925)
(939,286)
(1,119,853)
1,574,228
1,443,925
1,411,419
1,364,327
(1,443,252)
(852,167)
(1,501,138)
(290,437)
(814,895)
(255,308)
(170,641)
(169,652)
(75,588)
(852,957)
(805,127)
(73,007)
2,450,609
3,250,081
2,388,419
3,056,061
336,869
256,378
244,222
171,559
Net cash flow from operations before income tax
2,457,376
3,113,670
2,212,026
2,860,856
Income taxes paid
7
(705,969)
(455,500)
(677,287)
(432,995)
Net cash flow from operating activities
1,751,407
2,658,170
1,534,739
2,427,861
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
Payment of interest on borrowings
Repayment of principal on borrowings
32
28
28
(1,207,993)
(210,708)
(1,193,155)
(74,798)
(120,568)
(82,549)
(52,313)
1,513
-
4,129
-
(39,289)
(81,848)
1,493
(224,827)
(103,531)
(52,299)
4,127
-
(10,563)
(1,363,827)
(379,460)
(1,312,799)
(387,093)
-
(23)
-
(23)
(831,813)
(788,906)
(827,106)
(784,938)
(9,533)
(14,395)
(9,533)
(14,395)
(246,479)
-
(246,479)
-
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 2023
The following standards, amendments and interpretations to existing standards became applicable for the first time during the
accounting period beginning 1 January 2023.
•
IFRS 17, Insurance Contracts. This standard replaced IFRS 4, which permitted a wide variety of practices in accounting for
insurance contracts. IFRS 17 fundamentally changes the accounting by all entities that issue insurance contracts. Refer to
Note 31 Insurance.
• Narrow scope amendments to IAS 1, Practice statement 2 and IAS 8. 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. 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 IAS 12 - International tax reform. These amendments give companies temporary relief from accounting for
deferred taxes arising from the Minimum Tax Implementation Handbook international tax reform. The amendments also
introduce targeted disclosure requirements for affected companies.
The above changes did not have any material impact on the Group except for IFRS 17 impact on the life insurance business.
Net cash flow used in financing activities
(1,087,825)
(803,324)
(1,083,118)
(799,356)
Net increase/(decrease) in cash and cash equivalents
(700,245)
1,475,386
(861,178)
1,241,412
Standards, amendments and interpretations issued but not yet effective for the year ended 31 December 2023 or
adopted early
Exchange rate movements on cash and cash equivalents
194,998
(125,999)
105,233
(86,796)
Cash and cash equivalents at the beginning of the year
5,227,344
3,877,957
4,177,360
3,022,744
Cash and cash equivalents at the end of the year
9
4,722,097
5,227,344
3,421,415
4,177,360
Comparative period amount have been reinstated to conform to presentation in the current year.
The attached notes form an integral part of these financial statements.
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:
•
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.
70
71
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
1. Financial Statements Preparation (continued)
A. Basis of Presentation and General Accounting Policies (continued)
•
•
•
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. The amendments also aim to improve information an entity provides related to liabilities subject to these conditions.
Amendment to IAS 7 and IFRS 7 - Supplier finance (effective 1 January 2024 - with transitional reliefs in the first year). These
amendments require disclosures to enhance the transparency of supplier finance arrangements and their effects on an
entity’s liabilities, cash flows and exposure to liquidity risk. The disclosure requirements are the IASB’s response to investors’
concerns that some companies’ supplier finance arrangements are not sufficiently visible, hindering investors’ analysis.
Amendments to IAS 21 - Lack of Exchangeability (1 January 2025 - early adoption is available). An entity is impacted by the
amendments when it has a transaction or an operation in a foreign currency that is not exchangeable into another currency at
a measurement date for a specified purpose. A currency is exchangeable when there is an ability to obtain the other currency
(with a normal administrative delay), and the transaction would take place through a market or exchange mechanism that
creates enforceable rights and obligations.
New IFRS sustainability disclosure standards effective after 1 January 2024
•
•
IFRS S1, ‘General requirements for disclosure of sustainability-related financial information (effective 1 January 2024 - This
is subject to endorsement by the Accounting Standards Board of PNG). This standard includes the core framework for the
disclosure of material information about sustainability-related risks and opportunities across an entity’s value chain.
IFRS S2, ‘Climate-related disclosures’ (effective 1 January 2024 - This is subject to endorsement by the Accounting
Standards Board of PNG). This is the first thematic standard issued that sets out requirements for entities to disclose
information about climate-related risks and opportunities.
B. Consolidation
The Financial Statements incorporate the assets and liabilities of all controlled entities of the Group as at 31 December 2023, and
their results for the year then ended.
Controlled entities are those over which the Group has the power to govern financial and operating policies, generally
accompanied by a shareholding that commands the majority of voting rights, and are commonly referred to as subsidiaries.
Subsidiaries are accounted for at acquisition under the acquisition method of accounting, where:
•
•
•
consideration transferred is measured at the 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 Statements 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.
72
1. Financial Statements Preparation (continued)
C. Foreign currency (continued)
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 Statements 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
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, and note 22 setting out the key sensitivities of the
ECL 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.
73
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
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 Pacific Markets 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, Cambodia and Lao. Inter segment adjustments reflect elimination entries
in respect of inter segment income and expense allocations including funds transfer pricing.
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.
Consolidated
All amounts are expressed in K’000
Analysis by segments
Year ended 31 December 2023
Net interest income
Other income
Net insurance income
Total operating income
Operating expenses
Impairment expenses
Profit before income tax
Income tax
Net profit after income tax
Assets
Liabilities
Net assets
Year ended 31 December 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 (restated)
Liabilities (restated)
Net assets (restated)
74
PNG
Bank
Pacific
Markets
Non-Bank
Entities
Adjust Inter
Segments
Total
1,479,288
666,830
-
329,803
279,243
-
35,406
26,263
60,642
334
1,844,831
(56,025)
594
916,311
61,236
2,146,118
609,046
122,311
(55,097)
2,822,378
(836,291)
(242,190)
(161,378)
1,148,449
(559,079)
589,370
(9,523)
357,333
(84,976)
272,357
(17,807)
(11,294)
9,498
(1,086,790)
-
(182,195)
93,210
(45,599)
1,553,393
(19,123)
-
74,087
(45,599)
(663,178)
890,215
25,964,685
10,560,798
2,264,240
(1,838,436)
36,951,287
(23,119,456)
(9,165,332)
(1,652,013)
1,228,844
(32,707,957)
2,845,229
1,395,466
612,227
(609,592)
4,243,330
PNG
Bank
Pacific
Markets
Non-Bank
Entities
(restated)
Adjust Inter
Segments
Total
(restated)
1,432,559
622,690
-
278,906
240,044
-
33,212
25,683
44,182
383
1,745,060
(74,689)
(307)
813,728
43,875
2,055,249
518,950
103,077
(74,613)
2,602,663
(759,305)
(217,264)
14,816
(5,698)
(190,000)
1,120,760
(255,511)
865,249
-
295,988
(69,391)
226,597
(18,609)
(3,759)
-
5,915
(989,263)
-
-
5,359
(190,000)
80,709
(68,698)
1,428,759
(19,137)
-
(344,039)
61,572
(68,698)
1,084,720
24,245,059
9,310,447
1,944,540
(1,748,360)
33,751,686
(21,307,155)
(8,110,824)
(1,379,091)
1,097,286
(29,699,784)
2,937,904
1,199,623
565,449
(651,074)
4,051,902
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
Total interest income
Less: Interest expense
Customer deposits
Other banks
Other borrowings
Total interest expense
Net interest income
Consolidated
Bank
2023
2022
2023
2022
1,315,235
1,190,929
1,204,163
1,084,078
419,474
154,207
7,638
31,393
34,981
369,239
241,058
5,799
12,552
15,419
418,144
154,168
7,588
42,698
22,384
367,895
240,997
5,798
16,735
12,230
1,962,928
1,834,996
1,849,145
1,727,733
100,397
11,729
5,971
118,097
73,228
13,065
3,643
89,936
82,088
22,719
5,640
110,447
59,219
16,029
3,330
78,578
1,844,831
1,745,060
1,738,698
1,649,155
1 Group interest income includes K23.428million (Bank K19.788million) recognised on impaired loans (Stage 3) to customers, 2022: K18.611million
(Bank K14.487million). The Group takes up required provisions on such interest income as detailed in the accounting policy in note 15.
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).
75
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
4. Non-Interest Income (continued)
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
2023
2022
2023
2022
157,779
20,711
213,387
35,715
188,823
22,683
174,298
33,238
144,225
17,981
197,975
25,165
173,453
19,924
169,171
22,219
427,592
419,042
385,346
384,767
457,707
362,333
399,362
4,535
26,477
5,153
27,200
4,535
65,997
319,773
5,153
83,516
488,719
394,686
469,894
408,442
Notes to the Financial Statements
for the Year Ended 31 December 2023
5. Operating Expenses (continued)
All amounts are expressed in K’000
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
Consolidated
Bank
2023
2022
2023
2022
95,241
215,183
80,733
46,383
4,646
42,802
68
128,047
167,404
77,714
38,991
4,334
11,791
1,853
106,732
104,122
80,763
193,086
74,773
46,122
4,326
44,101
64
99,832
114,492
152,744
71,633
38,734
3,735
11,059
1,853
97,753
591,788
534,256
543,067
492,003
388,356
368,778
358,855
340,750
19,973
14,276
72,397
18,484
10,169
57,576
18,065
13,186
68,932
495,002
455,007
459,038
1,086,790
989,263
1,002,105
16,722
9,232
54,273
420,977
912,980
1 Foreign exchange related income includes gains and losses from spot and forward contracts and translated foreign currency assets and liabilities.
6. Impairment of Financial Assets
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.
76
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 the available specific provision for loan impairment in the period in which they are classified as
irrecoverable. Subsequent recoveries and reductions in provisions are credited to the provision for loan losses in the Statement of
Comprehensive Income.
General provisions for impairment are maintained to cover expected losses unidentified at balance date in the overall portfolio
of Loans and receivables from customers. The provisions are determined having regard to the level of risk weighted assets,
economic conditions, the general risk profile of the credit portfolio, past loss experience and a range of other criteria. The amount
necessary to bring the provisions to their assessed levels, after write-offs, is charged to the Statement of Comprehensive Income.
The Group assesses on a forward-looking basis the ECL associated with its debt instrument assets carried at amortised cost and
with the exposure arising from loan commitments and financial guarantee contracts. The Group recognises a loss allowance for
such losses at each reporting date. The measurement of ECL reflects:
•
•
an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes; and
reasonable and supportable information that is available without undue cost or effort at the reporting date about past events,
current conditions and forecasts of future economic conditions.
Note 15 provides more detail of how the expected credit loss allowance is measured.
Impairment expense/(release) of financial assets by asset class is as follow:
Loans and receivables from customers ( note 15 )
Treasury and Central Bank Bills ( note 12 )
Other financial assets ( note 14 )
172,615
(644)
10,224
182,195
(2,667)
(5,114)
2,422
(5,359)
155,917
(12,514)
(583)
10,228
(5,114)
2,458
165,562
(15,170)
77
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
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.
7. Income Tax (continued)
All amounts are expressed in K’000
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 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 is 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 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
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.
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 45% (2022:30%) of Bank profit before tax
Tax calculated at respective subsidiary tax rates
Expenses not deductible for tax purposes
Tax loss not recognized
Income not recognised for tax purposes
Impact of PNG tax rate change1
Adjustment to prior year estimates
Consolidated
Bank
2023
2022
2023
2022
664,841
1,643
666,484
(3,306)
433,410
46,914
480,324
(754)
634,630
411,729
(6,909)
627,721
(2,276)
35,110
446,839
(2,033)
-
(135,531)
-
(135,531)
663,178
344,039
625,445
309,275
641,822
39,000
9,138
8,610
406,366
641,822
406,366
28,498
60,025
6,278
-
-
3,270
58,502
-
-
(32,086)
(20,843)
(17,371)
(18,029)
-
(135,531)
-
(135,531)
(3,306)
(754)
(2,276)
(2,033)
663,178
(344,039)
625,445
309,275
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
Consolidated
Bank
2023
2022
2023
2022
(2,507)
(30,399)
(4,104)
(30,263)
(664,841)
(433,410)
(634,630)
(411,729)
3,064
(1,652)
24,241
681,728
40,033
82,861
180,896
44,058
(684)
22,671
5,661
141
20,927
434,573
(2,507)
63,427
179,539
37,838
(1,048)
29,679
2,283
4,893
-
-
-
-
677,287
40,836
432,995
(4,104)
76,335
58,446
176,949
174,847
42,580
(193)
79,741
35,986
(1,439)
77,285
(86,715)
(51,091)
(73,854)
(42,998)
(541)
24,962
(1,168)
37,008
(541)
22,216
(1,168)
35,149
267,508
294,184
323,233
336,108
329,288
(61,780)
267,508
294,184
(1,643)
(242)
-
(24,791)
267,508
342,611
(48,427)
294,184
229,827
(46,914)
4,907
112,463
(6,099)
323,233
336,108
-
-
323,233
336,108
336,108
6,909
7
-
(19,791)
261,795
(35,110)
2,860
112,463
(5,900)
294,184
323,233
336,108
1 The PNG Government levied the Additional Company Tax (the Tax) applicable to financial year 2022. The Tax was a flat K190 million on any bank that has
over 40% market share of financial assets. The Tax was non-deductible for tax purposes, and had a direct impact on BSP’s net profit after tax for 2022.
On 2 December 2022, the PNG 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 all PNG Commercial Banks from 30% to 45%, effective 1 January
2023. The tax rate change for financial year 2023 increased tax expenses by K209 million, with a corresponding reduction in Group profits.
78
79
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
8. Earnings per Ordinary Share
Accounting Policy
Earnings per share is determined by dividing the profit or loss attributable to owners of the Bank by the weighted average number
of participating shares outstanding during the reporting year, adjusted for shares which are bought back by BSP.
All amounts are expressed in K’000
Net profit attributable to shareholders (K’000)
Weighted average number of ordinary shares in use (000)
Basic and diluted earnings per share (expressed in toea)
Consolidated
Bank
2023
2022
(restated)
2023
2022
890,215
467,220
190.5
1,084,720
800,826
1,045,279
467,223
232.2
467,220
171.4
467,223
223.7
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
890,215
663,178
1,084,720
800,826
1,045,279
344,039
625,445
309,275
1,553,393
1,428,759
1,426,271
1,354,554
80,733
46,383
(2,356)
182,195
9,247
68
77,714
38,991
(3,515)
(5,359)
(9,888)
1,853
74,773
46,122
(2,038)
165,562
8,908
64
71,633
38,734
(2,508)
(15,170)
(10,410)
1,853
Net changes in assets and liabilities
(295,435)
(84,630)
(308,243)
(74,359)
Operating cash flow before changes in operating assets and liabilities
1,574,228
1,443,925
1,411,419
1,364,327
Cash and cash equivalents
Notes to the Financial Statements
for the Year Ended 31 December 2023
Financial Instruments: Financial Assets
Accounting Policy
Recognition
Loans and receivables are recognised on settlement date, when cash is advanced to the borrowers.
Modification of loans
The Group sometimes renegotiates or otherwise modifies the contractual cash flows of loans to customers. When this happens,
the Group assesses whether or not the new terms are substantially different to the original terms. The Group does this by
considering, among others, the following factors:
•
if the borrower is in financial difficulty, whether the modification merely reduces the contractual cash flows to amounts the
borrower is expected to be able to pay.
• whether any substantial new terms are introduced, such as a profit share/equity-based return that substantially affects the
risk profile of the loan.
significant extension of the loan term when the borrower is not in financial difficulty.
significant change in the interest rate.
change in the currency the loan is denominated in.
insertion of collateral, other security or credit enhancements that significantly affect the credit risk associated with the loan.
•
•
•
•
If the terms are substantially different, the Group derecognises the original financial asset and recognises a ‘new’ asset at fair
value and recalculates a new effective interest rate for the asset. The date of renegotiation is consequently considered to be the
date of initial recognition for impairment calculation purposes, including for the purpose of determining whether a significant
increase in credit risk has occurred. However, the Group also assesses whether the new financial asset recognised is deemed
to be credit-impaired at initial recognition, especially in circumstances where the renegotiation was driven by the debtor being
unable to make the originally agreed payments. Differences in the carrying amount are also recognised in 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.
For the purposes of the cash flow statement, cash and cash equivalents comprise the following balances with less than 90 days
maturity.
Classification and measurement
Cash and balances with Central Banks (note 10)
3,306,085
3,761,635
2,430,613
3,041,858
Amounts due from other banks (note 11)1
Amounts due to other banks (note 17)
1,779,677
(363,665)
1,737,981
1,595,587
1,665,094
(272,272)
(604,785)
(529,592)
4,722,097
5,227,344
3,421,415
4,177,360
1 Amounts due from other banks includes deposits of K61.242 million (2022: K57.856 million) held with counter-party banks that are not available for use by the Group.
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.
80
81
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
Financial Instruments: Financial Assets (continued)
Classification and measurement (continued)
Financial Instruments: Financial Assets (continued)
Derivative financial instruments and acceptances
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
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.
If the debt instruments have contractual cash flows which represent SPPI on the principal balance outstanding they are classified
at:
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.
•
•
•
amortised cost if they are held within a business model whose objective is achieved through holding the financial asset to
collect these cash flows; or
fair value through other comprehensive income (FVOCI) if they are held within a business model whose objective is achieved
either through collecting these cash flows or selling the financial asset; or
FVIS if they are held within a business model whose objective is achieved through selling the financial asset.
Debt instruments are measured at FVIS where the contractual cash flows do not represent SPPI on the principal balance
outstanding or where it is designated at FVIS to eliminate or reduce an accounting mismatch. Debt instruments at amortised cost
are initially recognised at fair value and subsequently measured at amortised cost using the effective interest rate method. They
are presented net of provisions for expected credit losses determined using the ECL model.
Debt instruments at FVOCI are measured at fair value with unrealised gains and losses recognised in other comprehensive
income except for interest income, impairment charges and foreign exchange gains and losses, which are recognised in the
Statement of Comprehensive Income. Impairment on debt instruments at FVOCI is determined using the ECL model and is
recognised in the Statement of Comprehensive Income with a corresponding amount in other comprehensive income. There
is no reduction of the carrying value of the debt security which remains at fair value. The cumulative gain or loss recognised in
other comprehensive income is subsequently recognised in the Statement of Comprehensive Income when the instrument is
derecognised.
Debt instruments at FVIS are measured at fair value with subsequent changes in fair value recognised in the Statement of
Comprehensive Income.
Equity securities
Equity securities are measured at FVOCI where they:
•
•
are not held for trading; and
an irrevocable election is made by the Group.
Otherwise, they are measured at FVIS.
Equity securities at FVOCI are measured at fair value with unrealised gains and losses recognised in other comprehensive
income, except for dividend income which is recognised in the Statement of Comprehensive Income.
10. Cash and Operating Balances with Central Banks
All amounts are expressed in K’000
Notes, coins and cash at bank
Consolidated
Bank
2023
2022
2023
2022
707,416
574,100
612,198
506,296
Balances with Central Banks other than statutory deposit
2,598,669
3,187,535
1,818,415
2,535,562
At 31 December
3,306,085
3,761,635
2,430,613
3,041,858
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
70,304
61,316
70,307
61,316
1,709,373
1,676,665
1,525,280
1,603,778
1,779,677
1,737,981
1,595,587
1,665,094
3,857,037
4,210,746
3,827,169
4,189,940
(36,488)
(21,969)
(69,522)
(22,613)
(37,205)
(21,854)
(70,153)
(22,437)
3,798,580
4,118,611
3,768,110
4,097,350
5,018
9,729
-
-
3,803,598
4,128,340
3,768,110
4,097,350
22,613
(644)
21,969
27,727
(5,114)
22,613
22,437
(583)
21,854
27,551
(5,114)
22,437
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.
13. Cash Reserve Requirement with Central Banks
Equity securities at FVIS are measured at fair value with subsequent changes in fair value recognised in the Statement of
Comprehensive Income.
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% (2022: 10%), Fiji 10% (2022: 10%), Solomon
Islands 5% (2022: 5%), Samoa 4.5% (2022: 4.5%), Tonga 10% (2022: 10%) and Vanuatu 5.25% (2022: 5.25%).
82
83
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
14. Other Financial Assets
15. Loans and Receivables from Customers (continued)
All amounts are expressed in K’000
2023
2022
2023
2022
Consolidated
Bank
Accounting Policy (continued)
Lease financing
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
5,815,175
4,273,842
5,774,422
4,233,877
(33,460)
(23,236)
(33,260)
(23,032)
5,781,715
4,250,606
5,741,162
4,210,845
277,876
313,860
246,719
291,828
-
-
-
-
6,373,451
4,789,153
5,741,162
4,210,845
23,236
10,224
33,460
20,814
2,422
23,236
23,032
10,228
33,260
20,574
2,458
23,032
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
Consolidated
Bank
2023
2022
(restated)
2023
2022
1,329,034
977,113
1,266,512
187,292
198,969
165,604
915,566
161,562
12,320,061
10,928,676
11,550,128
10,220,097
2,888,873
2,786,758
2,465,798
2,364,110
Gross loans and receivables from customers net of unearned interest
16,725,260
14,891,516
15,448,042 13,661,335
Less allowance for losses on loans and receivables from customers
(712,238)
(642,115)
(645,909)
(583,426)
At 31 December
16,013,022
14,249,401
14,802,133
13,077,909
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 K97.057 million (Bank K83.055 million), 2022: K77.227 million
(Bank K64.997 million) provision taken up for interest recognised on stage 3 loans.
84
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:
All amounts are expressed in K’000
2023
2022
2023
2022
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
12,203
190,300
34,501
185,781
11,214
164,258
32,514
143,911
202,503
220,282
175,472
176,425
(1,114)
(14,097)
(15,211)
187,292
(4,441)
(16,872)
(21,313)
198,969
(1,094)
(8,774)
(9,868)
(4,340)
(10,523)
(14,863)
165,604
161,562
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
11,089
176,203
187,292
30,060
168,909
198,969
10,120
28,174
155,484
133,388
165,604
161,562
Allowance for Expected Credit Losses
Accounting Policy
Impairment under IFRS 9 applies to all financial assets at amortised cost, 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 recorded within other liabilities.
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.
85
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
15. Loans and Receivables from Customers (continued)
15. Loans and Receivables from Customers (continued)
Allowance for Expected Credit Losses (continued)
Allowance for Expected Credit Losses (continued)
Model stages
The three stages are as follows:
Stage 1: 12 months ECL - performing
For financial assets where there has been no significant increase in credit risk since origination, a provision for 12 months ECL is
recognised.
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
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.
The Group does not apply the low credit risk exemption which assumes investment grade facilities do not have a significant increase
in credit risk.
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.
Probability weighting of each scenario
Expected life
In considering the 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 the exposure to credit losses to the contractual notice
period. For these facilities, lifetime is based on historical behaviour.
Movement between stages
Assets may move in both directions through the stages of the impairment model. Assets previously in stage 2 may move back to
stage 1 if it is no longer considered that there has been a significant increase in credit risk. Similarly, assets in stage 3 may move
back to stage 1 or stage 2 if they are no longer assessed to be non-performing.
Off-Balance Sheet amounts
Any off-balance sheet items, such as loan commitments, are considered for impairment both on an individual and collective basis.
Definition of default
The definition of default used in measuring expected credit losses is aligned to the definition used for internal credit risk
management purposes. The default occurs when there are indicators that a debtor is unlikely to fully satisfy contractual credit
obligations to the Group, or the exposure is 90 days past due. Financial assets, including those that are well secured, are
considered credit impaired for financial reporting purposes when they meet the definition of default. In subsequent periods, any
recoveries of amounts previously written-off are credited to credit impairment charge in the Statement of Comprehensive Income.
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.
86
The Group considers three future macroeconomic scenarios including a base case scenario along with upside and downside
scenarios. Probability weighting of each scenario is determined by management considering the risks and uncertainties surrounding
the base case scenario, as well as specific portfolio considerations where required. This is further expanded in note 22.
•
Base case scenario
This scenario utilises external economic forecasts used for strategic decision making and forecasting, 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.
87
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
15. Loans and Receivables from Customers (continued)
Allowance for Expected Credit Losses (continued)
The loss allowance recognised in the period is impacted by a variety of factors, as described below and as detailed in the following
table:
All amounts are expressed in K’000
Provision for impairment
Consolidated
Bank
2023
2022
2023
2022
Movement in allowance for losses on loans and receivables from customers:
Balance at 1 January
Net new and increased provisioning / (release of provisions)
642,115
92,654
725,533
33,128
583,426
74,710
667,524
23,086
Loans written off against provisions / (write back of provisions no longer required)
(22,531)
(116,546)
(12,227)
(107,184)
At 31 December
712,238
642,115
645,909
583,426
Provision for impairment is represented by;
Collective provision for on balance sheet exposure
Individually assessed or specific provision
Total provisions for on balance sheet exposure
Collective provision for off balance sheet exposure
At 31 December
Loan impairment expense
Net collective provision funding
Net new and increased individually assessed provisioning
Total new and increased provisioning/(release of provisions)
Recoveries
Net write off
At 31 December
365,935
291,497
657,432
54,806
345,363
225,671
571,034
71,081
341,734
252,688
321,014
194,877
594,422
515,891
51,487
67,535
712,238
642,115
645,909
583,426
(1,640)
94,294
92,654
(77,833)
157,794
172,615
(25,282)
58,410
33,128
(165)
(16,239)
74,875
74,710
39,325
23,086
(64,121)
(75,569)
(62,057)
28,326
(2,667)
156,776
26,457
155,917
(12,514)
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 have been reflected as transfers from Stage 1 to
Stage 2.
Notes to the Financial Statements
for the Year Ended 31 December 2023
15. Loans and Receivables from Customers (continued)
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
1 January 2022
Transfers to/ (from)
Stage 1
Stage 2
Stage 3
Net financial assets originated
IFRS 17 restatement
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
Movements due to risk parameter and other changes
Total net P&L charge/ (release) during 2022
Loans written off against provision/(write back of provision no longer required)
31 December 2022
EAD - Loans and receivables from customers
1 January 2023
Transfers to/(from)
Stage 1
Stage 2
Stage 3
Net financial assets originated
Total movement in EAD during the year
31 December 2023
ECL - Loans and receivables from customers
1 January 2023
Transfers to/(from)
Stage 1
Stage 2
Stage 3
Net financial assets originated
Transfers between stages
Movements due to risk parameter and other changes
Total net P&L charge/ (release) during 2023
Stage 1
(restated)
Stage 2
Stage 3
Total
(restated)
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)
661,939
(119,452)
-
-
(119,452)
1,146,031
(558,934)
(44,610)
542,487
13,059,927
1,350,157
481,432
14,891,516
217,763
178,386
277,077
673,226
(5,483)
57,458
-
(39,979)
(12,763)
19,476
18,709
-
4,622
(61,822)
78
(11,292)
(10,863)
9,782
(69,495)
861
4,364
(78)
22,910
6,190
30,893
65,140
-
-
-
(28,361)
(17,436)
60,151
14,354
-
(116,546)
(116,546)
236,472
108,891
225,671
571,034
13,059,927
1,350,157
481,432
14,891,516
(351,029)
270,059
462,385
(641,612)
-
4,254
80,970
179,227
(4,254)
-
-
-
2,214,747
(308,028)
(72,975)
1,833,744
2,326,103
(675,327)
182,968
1,833,744
15,386,030
674,830
664,400
16,725,260
236,472
108,891
225,671
571,034
(6,107)
29,682
-
63,176
(24,219)
(28,165)
5,286
(45,015)
147
3,265
10,640
11,882
34,367
(13,795)
821
15,333
(147)
(17,460)
48,779
41,031
88,357
(22,531)
291,497
-
-
-
48,981
35,200
24,748
108,929
(22,531)
657,432
89
88
Loans written off against provision/(write back of provision no longer required)
-
-
31 December 2023
270,839
95,096
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
15. Loans and Receivables from Customers (continued)
Financial Instruments: Financial Liabilities
Total off balance sheet exposures are predominantly classified under stage 1 as at balance date.
Accounting Policy
Recognition
All amounts are expressed in K’000
2023
Stage 1
2022
Stage 1
Gross
Exposure
Provisions
Gross
Exposure
Provisions
Financial liabilities are recognised when an obligation arises.
Classification and subsequent measurement
Balance 1 January
4,593,667
71,081
3,284,336
Increase/(decrease) in exposure to expected credit losses
(1,092,541)
(16,275)
1,309,331
Balance at 31 December
3,501,126
54,806
4,593,667
52,307
18,774
71,081
Write-off policy
The Group writes off financial assets, in whole or in part, when it has exhausted all practical recovery efforts and has concluded
there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include (i) ceasing
enforcement activity and (ii) where the Group’s recovery method is foreclosing on collateral and the value of the collateral is such
that there is no reasonable expectation of recovering in full.
The Group may write-off financial assets that are still subject to enforcement activity. The Group still seeks to recover amounts it is
legally owed in full, but which have been partially written off due to no reasonable expectation of full recovery.
16. Other Assets
All amounts are expressed in K’000
Financial assets
Funds in transit and other assets1
Intercompany account
Prepayments
Accounts receivable
Accrued income
Tax receivable
Non-financial assets
Inventory
Investment in Joint Ventures
Intangible assets
Investment properties
At 31 December
1 Funds in transit includes interbank transactions which are in the process of clearance.
Consolidated
Bank
2023
2022
2023
2022
357,551
259,610
281,819
208,837
-
40,605
6,321
11,818
40,033
-
47,293
5,021
7,846
-
5,068
31,793
4,519
10,216
40,836
4,476
39,665
2,023
6,315
-
456,328
319,770
374,251
261,316
31,872
303,617
282,243
363,166
25,227
270,111
294,397
329,201
-
-
29,615
26,127
276,272
286,368
-
-
980,898
918,936
305,887
312,495
1,437,226
1,238,706
680,138
573,811
Financial liabilities are classified as subsequently measured at amortised cost, except for:
•
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 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 guarantee contracts and loan commitments
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss
it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument. Such
financial guarantees are given to banks, financial institutions and others on behalf of customers to secure loans, overdrafts and
other banking facilities.
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.
90
91
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
17. Amounts Due to Other Banks
20. Contingent Liabilities and Commitments (continued)
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
2023
2022
2023
2022
155,078
208,587
154,877
117,395
155,100
449,685
154,899
374,693
363,665
272,272
604,785
529,592
26,845,460
24,075,220
25,598,031
23,049,105
2,989,651
2,844,141
2,313,946
2,145,788
29,835,111
26,919,361
27,911,977 25,194,893
The deposits are diversified across industries and regions with the maturity profile of deposits included in note 23.
19. Other Liabilities
All amounts are expressed in K’000
Creditors and accruals
Provision for income tax
Items in transit and all other liabilities
Lease liability
Borrowings
Insurance liabilities
Other provisions
At 31 December
Consolidated
Bank
2023
2022
(restated)
2023
2022
131,693
181,433
92,135
107,497
-
428,128
279,816
-
152,600
205,652
2,507
340,793
285,581
246,480
114,294
220,942
-
541,337
251,468
-
-
4,104
463,625
256,957
246,479
-
187,418
203,822
1,197,889
1,392,030
1,072,358
1,282,484
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.
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.
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) had 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.
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
2023
2022
2023
2022
238,236
286,312
238,851
311,483
230,572
267,390
238,302
297,149
2,976,617
4,043,398
2,819,050
3,871,846
3,501,165
4,593,732
3,317,012
4,407,297
Commitments for capital expenditure
Amounts with firms commitments, and not reflected in the accounts
44,585
42,348
16,358
31,963
Legal Proceedings
A number of legal proceedings against the Group were outstanding as at 31 December 2023. For all litigation exposure where
a loss is probable, an appropriate provision has been made. Based on information available at 31 December 2023, the Group
estimates a contingent liability of K16.4 million (2022: K29.6 million) in respect of these proceedings.
92
93
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
21. Risk Management Framework and Controls
All business operations must deal with a variety of operational and financial risks. The business activities of a bank expose it to very
critical and specific risks, which are principally related to the Group's primary financial intermediary role in the financial markets,
including the use of financial instruments including derivatives. These risks (risk of an adverse event in the financial markets that may
result in loss of earnings) include liquidity risk, foreign exchange risk, interest rate risk and credit risk.
The Group accepts deposits from customers at both fixed and floating rates and for various periods and seeks to earn above average
interest margins by investing these funds in high quality assets. These margins are achieved and increased by consolidating short-
term funds and lending for longer periods at higher rates whilst maintaining sufficient liquidity to meet all claims that might fall due.
The Group also seeks to optimise its interest margins by obtaining above average returns, net of provisions, through lending to
commercial and retail borrowers with a range of credit standing. In addition to directly advancing funds to borrowers, the Group also
enters into guarantees and other commitments such as letters of credit, performance bonds, and other bonds.
The Group also enters into transactions denominated in foreign currencies. This activity generally requires the Group to take foreign
currency positions in order to exploit short term movements in the foreign currency market. The Board places limits on the size of
these positions. The Group also has a policy of using offsetting commitments for foreign exchange contracts, effectively minimising
the risk of loss due to adverse movements in foreign currencies.
Risk in the Group is managed through a system of delegated limits. These limits set the maximum level of risk that can be assumed
by each operational unit and the Group as a whole. The limits are delegated from the Board of Directors to executive management
and hence to the respective operational managers.
The risk management framework establishes roles, responsibilities and accountabilities of the Asset and Liability Committee, the
Credit Committee, the Operational Risk Committee and the Executive Committee, the specific management committees charged
with the responsibility for ensuring the Group has appropriate systems, policies and procedures to measure, monitor and report
on risk management. The framework also includes policies and procedures which detail formal feedback processes to these
management committees, to the Board Audit and Compliance Committee, Board Risk Committee and ultimately to the Board of
Directors.
22. Credit Risk and Asset Quality
22.1 Credit risk
Notes to the Financial Statements
for the Year Ended 31 December 2023
22.
Credit Risk and Asset Quality (continued)
22.1
Credit risk (continued)
22.1.1 Credit risk measurement
Credit risk grading
The Group uses an internal credit risk grading system that reflects its assessment of the probability of default of individual
counterparties. Borrower and loan specific information collected at the time of application (such as disposable income, and
level of collateral for retail exposures; and turnover and industry type for wholesale exposures) is fed into this rating model. This
is supplemented with external data such as credit bureau scoring information on individual borrowers. In addition, the models
enable expert judgement from the Group Chief Risk Officer to be fed into the final internal credit rating for each exposure. This
allows for considerations which may not be captured as part of the other data inputs into the model.
The Group’s rating method comprises 11 rating levels for instruments not in default (1 to 11) and three default classes (12 to 14).
The master scale assigns each rating category a specified range of probabilities of default, which is stable over time. The rating
methods are subject to an annual validation and recalibration so that they reflect the latest projections in the light of all actually
observed defaults.
Group Internal Scale
S&P Letter Grade
Description
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
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.
22.1.2 Expected credit loss measurement
Credit risk is managed by analysing the risk spread across various sectors of the economy and ensuring risk is diversely spread
across personal and commercial customers. Individual exposures are measured using repayment performance, reviews and
statistical techniques. Comprehensive credit standards and approval limits have been formulated and approved by the Credit
Committee. The Credit Committee (reporting to the Board through the Group Chief Executive Officer) is responsible for the
development and implementation of credit policy and loan portfolio review methodology. The Credit Committee is the final arbiter of
risk management and loan risk concentration.
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).
94
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.
95
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
22.
Credit Risk and Asset Quality (continued)
22.1
Credit risk (continued)
The following diagram summarises the impairment requirements under IFRS 9.
Change in credit quality since initial recognition
Stage 1
Stage 2
Stage 3
(Initial recognition)
(Significant increase in credit risk since
initial recognition)
(Credit-impaired assets)
12-month expected credit losses
Lifetime expected credit losses
Lifetime expected credit losses
The key judgements and assumptions adopted by the Group in addressing the requirements of the standard are discussed below:
22.1.2.1 Significant increase in credit risk
The Group considers a financial instrument to have experienced a significant increase in credit risk when one or more of the
following quantitative, qualitative or backstop criteria have been met:
• Qualitative Criteria - if the instrument meets one or more of the following criteria:
- Significant adverse changes in business, financial and/or economic conditions in which the borrower operates.
- Actual or expected forbearance or restructuring.
- Actual or expected significant adverse change in operating results of the borrower.
- Significant change in collateral value (secured facilities only) which is expected to increase risk of default.
- Early signs of cash flow/liquidity problems such as delay in servicing of trade creditors/loans.
• Quantitative criteria - applies to performing loans risk graded at 10 or 11 as per 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 risk grades 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 2023.
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.
Notes to the Financial Statements
for the Year Ended 31 December 2023
22. Credit Risk and Asset Quality (continued)
22.1 Credit risk (continued)
The criteria above have been applied to all financial instruments held by the Group and are consistent with the definition of default
used for internal credit risk management purposes. The default definition has been applied consistently to model the Probability of
Default (PD), Exposure at Default (EAD) and Loss given Default (LGD) throughout the Group’s expected loss calculations.
An instrument is considered to no longer be in default (i.e. to have cured) when it no longer meets any of the default criteria for
a consecutive period of six months. This period of six months has been determined based on an analysis which considers the
likelihood of a financial instrument returning to default status after cure using different possible cure definitions.
22.1.2.3 Measuring ECL – Explanation of inputs, assumptions and estimation techniques
The Expected Credit Loss (ECL) is measured on either a 12-month (12M) or Lifetime basis depending on whether a significant
increase in credit risk has occurred since initial recognition or whether an asset is considered to be credit-impaired. Expected
credit losses are the product of the Probability of Default (PD), Exposure at Default (EAD), and Loss Given Default (LGD), defined
as follows:
•
•
•
The PD represents the likelihood of a borrower defaulting on its financial obligation (as per “Definition of default and credit-
impaired” above), either over the next 12 months (12M PD), or over the remaining lifetime (Lifetime PD) of the obligation.
EAD is based on the amounts the Group expects to be owed at the time of default, over the next 12 months (12M EAD) or
over the remaining lifetime (Lifetime EAD). For example, for a revolving commitment, the Group includes the current drawn
balance plus any further amount that is expected to be drawn up to the current contractual limit by the time of default, should
it occur.
Loss Given Default (LGD) represents the Group’s expectation of the extent of loss on a defaulted exposure. LGD varies by
type of counterparty, type and seniority of claim and availability of collateral or other credit support. LGD is expressed as a
percentage loss per unit of exposure at the time of default (EAD).
Forward-looking economic information is also included in determining the 12-month and lifetime PD, EAD and LGD. These
assumptions vary by product type. Model adjustments are also included within the ECL allowance. Model adjustments are
used in circumstances where it is judged that the existing inputs, assumptions and model techniques do not capture all relevant
risk factors. The emergence of new macroeconomic, microeconomic factors, changes to parameters or credit risk data not
incorporated into current parameters are examples of such circumstances.
22. Credit Risk and Asset Quality
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.
96
97
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
22.
Credit Risk and Asset Quality (continued)
22.1
Credit risk (continued)
Economic variable assumptions
The period-end assumptions used for the ECL estimate as at 31 December 2023 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 (%)
Base
Upside
Downside
Base
Upside
Downside
Base
Upside
Downside
Base
Upside
Downside
Change in Non-Energy Index (%)
Base
(Per World Bank commodities
price forecast)
Change in the Proportion of
Downgrades (%)
Upside
Downside
Base
Upside
Downside
2023
2.5%
2.6%
2.2%
-2.5%
-2.6%
-2.2%
-1.0%
0.0%
-2.0%
-4.5%
-4.7%
-4.3%
-3.1%
-3.3%
-2.9%
-7.04%
-15.0%
15.0%
2024
3.2%
3.3%
3.2%
-3.2%
-3.3%
-3.2%
-0.7%
-0.7%
-0.6%
-0.2%
-0.2%
-0.2%
2025
3.2%
3.7%
2.7%
-3.2%
-3.7%
-2.7%
-0.7%
-0.7%
-0.6%
-0.2%
-0.2%
-0.2%
2026
3.2%
3.7%
2.7%
-3.2%
-3.7%
-2.7%
-0.7%
-0.7%
-0.6%
-0.2%
-0.2%
-0.2%
2027
3.2%
3.7%
2.7%
-3.2%
-3.7%
-2.7%
-0.7%
-0.7%
-0.6%
-0.2%
-0.2%
-0.2%
Notes to the Financial Statements
for the Year Ended 31 December 2023
22.
Credit Risk and Asset Quality (continued)
22.1
Credit risk grading (continued)
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
2023
712,238
644,209
760,560
2022
642,115
618,244
675,118
Sensitivity of provisions for impairment to SICR assessment criteria
•
•
If 1% of Stage 1 credit exposures as at 31 December 2023 was included in Stage 2, provisions for impairment would
approximately increase by K8.022 million for the bank. (31 December 2022 K6.804 million).
If 1% of Stage 2 credit exposures as at 31 December 2023 was included in Stage 1, provisions for impairment would
approximately decrease by K0.247 million for the bank. (31 December 2022 K0.506 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:
Loan to value ratio band.
Retail – Groupings for collective measurement
•
• Risk grade.
•
Product type (e.g. Residential/Buy to Let mortgage, Overdraft, Credit Card).
The weightings assigned to each economic scenario at 31 December 2023 were as follows:
22.1.3 Credit risk exposure
Scenario
Weight
Base
50%
Upside
10%
Downside
40%
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.
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.
All amounts are expressed in K’000
2023
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)
ii)
GDP given the significant impact on business performance and collateral valuations;
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.
ECL staging
Credit grade
Standard monitoring
Special monitoring
Default
Gross carrying amount
Loss allowance
Net carrying amount
Stage 1
12-month
15,386,030
-
-
15,386,030
(270,839)
15,115,191
Stage 2
Lifetime
304,629
370,201
-
674,830
(95,096)
579,734
Stage 3
Lifetime
-
-
664,400
664,400
(291,497)
372,903
2022
(restated)
Total
Total
15,690,659
13,946,528
370,201
664,400
463,556
481,432
16,725,260
14,891,516
(657,432)
(571,034)
16,067,828
14,320,482
98
99
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
22. Credit Risk and Asset Quality (continued)
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 K9,635.724 million (2022: K8,415.066 million) is classified
as Stage 1 with a credit grade of ‘standard monitoring’. Total loss allowance carried against this balance is K55.429 million (2022:
K45.849 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
2023
2022
313,860
291,828
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.
Notes to the Financial Statements
for the Year Ended 31 December 2023
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 2023 is as follows:
Consolidated
As at 31 December 2023
All amounts are expressed in K’000
Overdrafts
Term loans
Mortgages
Lease
financing
Total
2022
(restated)
Neither past due nor impaired
1,217,827
10,969,735
2,368,997
162,331
14,718,890
13,378,960
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
49,741
30,181
79,922
1,178
1,877
7,058
21,172
31,285
551,542
377,051
928,593
4,985
106,118
48,637
261,993
421,733
203,976
112,162
316,138
6,689
22,478
68,924
105,647
203,738
14,145
3,172
17,317
819,404
522,566
652,100
379,024
1,341,970
1,031,124
98
682
178
6,686
7,644
12,950
131,155
124,797
395,498
664,400
18,197
54,157
55,601
353,477
481,432
Total gross loans and receivables
from customers
1,329,034
12,320,061
2,888,873
187,292
16,725,260
14,891,516
Less impairment provisions
(39,776)
(515,890)
(146,654)
(9,918)
(712,238)
(642,115)
Net loans and receivables from customers
1,289,258
11,804,171
2,742,219
177,374
16,013,022
14,249,401
Longer-term finance and lending to corporate entities are generally secured; revolving individual credit facilities are generally
unsecured.
22.1.5 Credit related commitments
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.
Financial assets that are credit-impaired and related collateral held in order to mitigate potential losses are shown below:
Consolidated at 31 December 2023
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 2022
Total credit-impaired assets
Gross
exposure
Impairment
allowance
Carrying
amount
Fair value of
collateral held
17,899
11
49,377
191,381
372,365
26,763
6,604
664,400
8,680
6
31,036
71,944
167,169
9,327
3,335
291,497
9,219
5
18,341
119,437
205,196
17,436
3,269
372,903
41,008
12
46,992
248,929
387,323
24,814
1,169
750,247
481,432
225,671
255,761
541,121
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.
100
Impairment allowance is assessed for each counterparty giving regard to collateral held for the respective exposure.
101
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
22. Credit Risk and Asset Quality (continued)
22.1.6 Economic sector risk concentrations
Economic sector risk concentrations within the customer loan portfolio are as follows:
Consolidated
As at 31 December 2023
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
2023
7,759,590
4,331,761
696,574
367,284
3,810
1,216,261
429,990
1,207,752
%
48
27
4
2
-
8
3
8
2022
(restated)
7,064,702
3,710,391
789,757
295,804
1,680
899,744
411,601
1,075,722
%
50
26
5
2
-
6
3
8
Net loan portfolio balance
16,013,022
100
14,249,401
100
22.1.7 Loan segment concentration
Concentration by customer loan segments is as follows:
Consolidated
As at 31 December 2023
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
2023
9,224,479
2,234,612
4,553,931
%
58
14
28
2022
(restated)
8,434,651
2,107,445
3,707,305
16,013,022
100
14,249,401
%
59
15
26
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
23. Liquidity Risk
2023
396,008
24,733
420,741
2022
406,444
10,000
416,444
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.
102
23. Liquidity Risk (continued)
Short-term mismatch of asset and liability maturity at 31 December 2023
The maturity profile of material Assets and Liabilities as at 31 December 2023 is shown in the following schedule. The
mismatching of maturity of assets and liabilities indicates an apparent negative net “current” asset position. However, as stated
in the preceding paragraph, mismatched positions are established and managed to achieve profit opportunities that arise from
them, particularly in a normal yield curve environment. Accordingly, this mismatched maturity position is considered manageable
by the Group, and does not impair the ability of the Group to meet its financial obligations as they fall due.
Maturity of assets and liabilities
All amounts are expressed in K’000
Consolidated
As at 31 December 2023
Assets
Cash and balances with Central Banks
Amounts due from other banks
Treasury and Central Bank bills
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
All amounts are expressed in K’000
Consolidated
As at 31 December 2022
(restated)
Assets
Cash and balances with Central Banks
Amounts due from other banks
Treasury and Central Bank bills
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
Up to 1
Month
1-3
Months
3-12
Months
1-5
Years
Over 5
Years
Total
3,858,283
1,463,862
36,256
6,096,831
1,467,440
-
307,699
715,087
301,977
71,666
28,640
8,116
2,726,254
3,351,832
1,020,700
-
-
364,318
7,539,375
4,568,393
2,260,974
6,147,897
-
-
1,779,677
3,841,915
3,135,371
20,425,386
3,616,630
10,744,829
12,922,672
1,396,429
7,135,542
12,472,086
9,012,975
42,939,704
227,366
27,548,734
-
1,495,712
197,383
29,469,195
(16,546,523)
39,862
774,518
-
1,098
-
815,478
580,951
71,739
1,401,126
-
540,418
8,269
24,698
329,766
152,613
126,696
-
-
363,665
438,841
30,492,985
127,203
279,816
77,825
2,241,749
-
205,652
2,021,552
633,773
643,869
33,583,867
5,113,990
11,838,313
8,369,106
9,355,837
Up to 1
Month
1-3
Months
3-12
Months
1-5
Years
Over 5
Years
Total
4,246,913
1,339,623
291,680
3,934,576
1,122,765
-
222,611
1,257,910
533,715
64,574
-
176,409
2,611,958
1,453,757
773,640
-
-
38,260
8,188,976
3,786,755
2,031,911
-
-
6,278,824
1,738,643
4,199,808
4,316,365
18,427,389
3,019,453
8,767,187
10,935,557
2,078,810
5,015,764
12,013,991
9,367,729
39,411,851
104,008
23,752,714
-
1,351,662
207,572
34,468
411,366
-
24,181
350
123,084
1,194,609
-
896,695
10,074
-
849,498
158,946
89,957
350
-
261,560
1,121,055
27,329,242
126,635
61,760
5,102
285,581
2,424,255
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
103
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
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 Committee and Board Audit
and Compliance Committee.
25. Foreign Exchange Risk
Foreign exchange risk is the risk to earnings caused by a change in foreign exchange rates on open currency positions. The
objective of foreign exchange risk management within the Group is to minimise the impact on earnings of any such movement.
The Group accepts foreign currency denominated transactions and therefore has exposure to movements in foreign currency.
The Group has a policy to offset these transactions to minimise daily exposure. As foreign exchange contracts generally consist
of offsetting commitments, they involve only limited foreign exchange risk to the Group and material loss is not envisaged.
Currency concentration of assets, liabilities and off-balance sheet items
All amounts are expressed in K’000
Consolidated
As at 31 December 2023
Assets
PGK
FJD
SBD
USD
Other
Total
Cash and balances with Central Banks
2,776,705
1,500,354
823,272
12,575
1,034,991
Amounts due from other banks
Treasury and Central Bank bills
43,070
380,822
3,751,720
-
4,880
21,431
796,861
-
554,044
30,447
6,147,897
1,779,677
3,803,598
Loans and receivables from customers
10,293,112
4,036,379
476,469
280,171
926,891
16,013,022
Other financial assets
Other assets
Total assets
Liabilities
5,765,279
567,619
-
1,586,730
1,012,874
101,820
-
-
40,553
132,218
6,373,451
2,833,642
24,216,616
7,498,048
1,427,872
1,089,607
2,719,144
36,951,287
Amounts due to other banks
(39,162)
(247,495)
-
-
(77,008)
(363,665)
Customer deposits
Other liabilities
Total liabilities
(20,770,906)
(4,565,672)
(1,073,168)
(880,186)
(2,545,179)
(29,835,111)
(747,358)
(1,624,178)
(55,959)
(3,814)
(77,872)
(2,509,181)
(21,557,426)
(6,437,345)
(1,129,127)
(884,000)
(2,700,059)
(32,707,957)
Net on-balance sheet position
2,659,190
1,060,703
298,745
205,607
19,085
4,243,330
Off-balance sheet position
Credit commitments
-
-
-
1,775,078
1,442,267
49,880
913
-
(874)
39
233,901
3,501,126
104
25. Foreign Exchange Risk (continued)
All amounts are expressed in K’000
Consolidated
As at 31 December 2022 (restated)
Assets
PGK
FJD
SBD
USD
Other
Total
Cash and balances with Central Banks
3,351,605
1,363,312
729,436
Amounts due from other banks
Treasury and Central Bank bills
358,026
341,180
4,087,085
-
42,515
20,209
12,914
623,121
-
821,527
373,139
21,046
6,278,794
1,737,981
4,128,340
Loans and receivables from customers
9,173,225
3,328,978
466,063
246,479
1,034,656
14,249,401
Other financial assets
Other assets
Total assets
Liabilities
4,225,197
1,484,599
524,194
893,426
-
-
71,742
1,009
39,762
117,241
4,789,153
2,568,017
22,679,737
6,451,090
1,329,965
883,523
2,407,371
33,751,686
Amounts due to other banks
(7,732)
(238,581)
884
-
(26,843)
(272,272)
Customer deposits
Other liabilities
Total liabilities
(18,943,375)
(3,889,006)
(994,653)
(578,985)
(2,513,342)
(26,919,361)
(713,599)
(1,417,103)
(50,319)
(248,841)
(78,289)
(2,508,151)
(19,664,706)
(5,544,690) (1,044,088)
(827,826)
(2,618,474)
(29,699,784)
Net on-balance sheet position
3,015,031
906,400
285,877
Off-balance sheet position
Credit commitments
1
-
-
3,083,199
1,268,322
60,828
55,697
(4,503)
-
(211,103)
4,051,902
4,567
181,318
65
4,593,667
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
USD strengthening by 5% ( 2022 - 5%)
USD dollar weakening by 15% ( 2022- 15%)
AUD strengthening by 5% ( 2022 - 5%)
AUD dollar weakening by 15% ( 2022 - 15%)
2023
2022
Impact on profit
or loss
Impact on
equity
Impact on profit
or loss
(713)
1,768
128
(316)
(713)
1,768
128
(316)
(2,023)
5,013
330
(817)
Impact on
equity
(2,023)
5,013
330
(817)
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 positions 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 2023 stated at the face value of the respective contracts are:
All amounts are expressed in K’000
As at 31 December 2023
Selling
Buying
As at 31 December 2022
Selling
Buying
USD
AUD
EURO
GBP
JPY
Other
Total
FCY
Kina
FCY
Kina
FCY
Kina
FCY
Kina
(991)
(3,695)
1,236
4,608
(913)
(3,214)
-
-
(21)
(52)
178
453
(200)
(478)
-
-
-
-
149
614
(27)
(102)
-
-
-
-
-
-
-
-
-
-
(100,324)
(2,645)
1,241
33
-
-
-
-
(1,075)
(4,008)
1,269
4,731
(201)
(708)
1,297
4,567
-
(10,400)
-
10,439
-
(4,502)
-
4,567
105
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023 Notes to the Financial Statements
for the Year Ended 31 December 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
26. Interest Rate Risk
26. Interest Rate Risk (continued)
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.
Interest sensitivity of assets, liabilities and off balance sheet items – re-pricing analysis
All amounts are expressed in K’000
Consolidated
As at 31 December 2023
Assets
Up to 1
Month
1-3
Months
3-12
Months
1-5
Years
Over 5
Years
Non-interest
bearing
Cash and balances with Central Banks
Amounts due from other banks
Treasury and Central Bank Bills
Cash reserve requirement with Central Banks
1,060,602
1,123,433
15,982
-
Loans and receivables from customers
5,470,385
-
276,504
707,187
-
109,640
231,671
81,322
-
102,205
3,080,429
-
-
-
-
-
-
-
-
-
2,363,761
5,118,239
2,872,444
870,822
3,348,886
1,889,050
2,245,483
277,535
-
2,841,812
78,553
-
958
-
-
2,687,468
33,022
63,894
7,767,318
1,406,324
6,418,175
8,467,125
4,761,494
8,130,851
155,666
9,521,996
39,862
953,752
71,739
1,395,089
-
3,942
21
-
9,681,604
(1,914,286)
993,635
412,689
24,698
203,826
266,846
-
-
47
69,960
-
71,700
17,760,401
1,904,850
263,490
1,466,900
495,370
70,007
20,000,441
4,951,275
7,971,755
4,691,487
(11,869,590)
Cash and balances with Central Banks
Amounts due from other banks
Treasury and Central Bank Bills
1,663,083
990,825
316,880
-
-
227,268
101,843
1,231,168
2,580,222
Cash reserve requirement with Central Banks
-
Loans and receivables from customers
11,038,003
-
130,196
241,052
55,613
196,801
297,579
598,963
2,185,566
614,391
2,941,689
-
18,844
261,618
795,220
90,260
14,503,171
1,885,297
3,895,419
5,146,099
1,232,168
-
-
-
-
85,070
2,013,482
-
-
-
418,045
70
2,517,159
35,055
-
2,105,721
7,089,532
-
9,972,184
6,053
7,597
39,409
621,816
1,091
336
168,996
1,261,635
11
-
-
442,642
203,032
-
9,985,834
662,652
1,430,642
645,674
-
63,867
510,552
110,743
14,110,532
1,966,279
-
213,009
621,295
610,873
16,353,687
(9,264,155)
Interest sensitivity gap
4,517,337
1,222,645
2,464,777
4,500,425
106
Other financial assets
Other assets
Total assets
Liabilities
Amounts due to other banks
Customer deposits
Other liabilities
Other provisions
Total liabilities
Interest sensitivity gap
Consolidated
As at 31 December 2022 (restated)
Assets
Other financial assets
Other assets
Total assets
LIABILITIES
Amounts due to other banks
Customer deposits
Other liabilities
Other provisions
Total liabilities
72
-
-
Given the profile of assets and liabilities as at 31 December 2023 and prevailing rates of interest, a 1% increase in rates will result
in a K29.012 million (2022: K42.682 million) increase in net interest income, whilst a 1% decrease in rates will result in a K70.518
million (2022: K62.266 million) decrease in net interest income.
27. Fair Values of Financial and Non-Financial Assets and Liabilities
There is no material difference between the fair values and carrying values of the financial assets and liabilities of the Group.
The table below analyses the Group’s financial instruments carried at fair value, by levels in the fair value hierarchy.
The different levels have been defined as follows:
•
•
•
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e.
as prices) or indirectly (i.e. derived from prices).
Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs).
All amounts are expressed in K’000
Consolidated
As at 31 December 2023
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
Insurance contract liabilities
Total liabilities
As at 31 December 2022
c) Financial assets
Equity securities
Treasury bills
Government inscribed stock
Non-Financial Assets
Land and buildings
Investment properties
Aircraft subject to operating lease
Total Assets
a) Financial liabilities
Insurance contract liabilities
Total liabilities
Consolidated
Financial assets at fair value through profit and loss
Opening balance
Total gains and losses recognised in:
- Profit and loss
- Other comprehensive income
- Purchases
- Disposals
- Translation movements
Closing balance
Level 1
Level 2
Level 3
Total
-
-
-
-
-
-
-
-
-
308,085
5,018
277,876
-
-
-
590,979
-
-
Level 1
Level 2
286,512
9,729
246,719
-
-
-
542,960
-
-
-
-
-
-
-
-
5,775
-
-
582,448
363,166
32,387
983,776
(1,249,512)
(1,249,512)
Level 3
(restated)
5,316
-
-
509,039
329,201
28,664
872,220
313,860
5,018
277,876
582,448
363,166
32,387
1,574,755
(1,249,512)
(1,249,512)
Total
(restated)
291,828
9,729
246,719
509,039
329,201
28,664
1,415,180
-
-
(1,067,694)
(1,067,694)
(1,067,694)
(1,067,694)
2023
872,220
(31,582)
51,029
58,372
(1,628)
48,379
996,790
2022
(restated)
835,468
(23,162)
14,566
84,235
(1,917)
(36,970)
872,220
107
There were no changes in valuation technique for Level 3 recurring fair value measurements during the year ended 31 December 2023.
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
27. Fair Values of Financial and Non-Financial Assets and Liabilities (continued)
29. Retained Earnings and Other Reserves
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 observable 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.
Number of shares in '000s, Book value in K'000
Number of shares
At 1 January 2022
Share buyback
At December 2022/31 December 2023
467,226
(6)
467,220
Book value
372,133
(23)
372,110
The share-buyback scheme ceased in 2022 and there were no movements in 2023.
Dividends on ordinary shares
Dividends on ordinary shares are recognised in equity in the period in which they are declared.
All amounts are expressed in K’000
Interim ordinary dividend (2023: 37 toea; 2022: 34 toea)
Final ordinary dividend (2022: 140 toea; 2021: 134 toea)
Consolidated
Bank
2023
2022
2023
2022
174,010
657,803
831,813
159,350
629,556
788,906
172,869
654,237
827,106
158,796
626,142
784,938
Retained earnings
All amounts are expressed in K’000
At 1 January
Transition to IFRS 17 impact
Net profit for the year
Final dividends paid
Interim dividends paid
Disposal of assets - transfer from asset revaluation
Other
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
Other reserves
All amounts are expressed in K’000
Movement in reserves for the year:
Asset revaluation reserve
At 1 January
Net asset revaluation increment
Transfer asset revaluation reserve to retained earnings
Impact of PNG tax rate change
Release of deferred tax on disposal of assets
At 31 December
Consolidated
Bank
2023
3,359,184
-
890,215
(657,606)
(174,010)
1,632
(1,103)
(2,452)
(171)
2022
(restated)
3,025,125
36,251
1,084,720
(629,379)
(159,350)
5,270
-
(3,327)
(126)
2023
2022
2,991,169
2,728,885
-
800,826
(654,237)
(172,869)
1,462
-
(2,452)
-
-
1,045,279
(626,142)
(158,796)
5,270
-
(3,327)
-
3,415,689
3,359,184
2,963,899
2,991,169
134,205
635
21,578
62,388
236,024
454,830
96,873
635
21,578
59,936
140,859
319,881
110,381
635
-
62,388
129,776
303,180
Consolidated
2023
2022
Bank
2023
96,873
38,349
(1,632)
-
615
134,205
123,732
42
(5,414)
(23,068)
1,581
96,873
83,180
28,048
(1,462)
-
615
110,381
83,180
635
-
59,936
81,225
224,976
2022
109,937
-
(5,270)
(23,068)
1,581
83,180
108
109
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023 Notes to the Financial Statements
for the Year Ended 31 December 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
29. Retained Earnings and Other Reserves (continued)
30. Capital Adequacy (continued)
All amounts are expressed in K’000
Capital reserve
At 1 January
At 31 December
Statutory insurance reserve
At 1 January
BSP Life policy reserve
Fiji Government green bond revaluation
At 31 December
Foreign currency translation reserve
At 1 January
Movement during the year
Other
At 31 December
Equity component of convertible notes
Consolidated
2023
635
635
59,936
2,452
-
62,388
140,859
94,112
1,053
236,024
2022
635
635
56,691
3,327
(82)
59,936
194,293
(53,434)
-
Bank
2023
635
635
59,936
2,452
-
62,388
81,225
48,551
-
140,859
129,776
2022
635
635
56,691
3,327
(82)
59,936
109,570
(28,345)
-
81,225
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 2023, the Group’s total capital adequacy ratio and leverage capital ratio satisfied the capital adequacy criteria for a
‘well-capitalised’ bank. The minimum capital adequacy requirements set out under the standard are: Tier 1 8%, total risk based
capital ratio 12% and the leverage ratio 6%.
The measure of capital used for the purposes of prudential supervision is referred to as base capital. Total base capital varies
from the balance of capital shown on the Statement of Financial Position and is made up of tier 1 capital (core) and tier 2 capital
(supplementary). Tier 1 capital is obtained by deducting from equity capital and audited retained earnings (or losses), intangible
assets including deferred tax assets. Tier 2 capital cannot exceed the amount of tier 1 capital, and can include subordinated loan
capital, specified asset revaluation reserves, un-audited profits (or losses) and a small percentage of general loan loss provisions.
The leverage capital ratio is calculated as Tier 1 capital divided by total assets on the balance sheet.
Risk weighted assets are derived from on-balance sheet and off-balance sheet assets. On balance sheet assets are weighted for
credit risk by applying weightings (0, 20, 50 and 100 per cent) according to risk classification criteria set by the BPNG. Off-balance
sheet exposures are risk weighted in the same way after converting them to on-balance sheet credit equivalents using BPNG
specified credit conversion factors.
The Group's capital adequacy level is as follows (unaudited):
All amounts are expressed in K’000
2023
2022 (restated)
2023
2022 (restated)
Balance Sheet / Notional Amount
Risk-Weighted Amount
Balance sheet assets ( net of provisions )
Currency
Loans and receivables from customers
Investments and short term securities
All other assets
Off-balance sheet items
Total
Capital ratios
a) Tier 1 capital
Total Capital
b) Leverage Capital Ratio
6,147,897
15,860,708
10,061,461
4,881,221
3,501,165
6,278,794
14,146,147
8,966,141
4,360,604
4,593,732
46,447
12,585,215
336,077
2,736,323
212,668
53,355
11,336,781
282,880
2,407,984
228,950
40,452,452
38,345,418
15,916,730
14,309,950
3,496,941
3,881,320
3,318,424
3,641,473
22.0%
24.4%
9.6%
23.2%
25.1%
10.0%
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
The Group’s consolidated Financial Statements include the assets, liabilities, income and expense 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. Insurance Contract products are provided by BSP Life (Fiji) Limited and BSP Life (PNG) Limited (collectively referred
to in this note as the Company.)
IFRS 17 ‘’Insurance contracts” (effective 1 January 2023) replaces IFRS 4. IFRS 17 has fundamentally changed 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.
Summary of Measurement Approach
The company uses different measurement approaches, depending on the type of contracts as noted below:
Product classification
Measurement Model
Component of Contracts Issued
Participating Base Products
Riders of Participating Base Products
Non-Participating Contract (including associated riders)
Insurance contracts with
Direct participating features
Insurance contracts
Insurance contracts
VFA
GMM
GMM
Reinsurance Contracts held
Term Life and Disability - Surplus Reinsurance
Term Life and Disability - Catastrophe Insurance Cover
Reinsurance contract held
Reinsurance contract held
GMM
PAA
110
111
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023 Notes to the Financial Statements
for the Year Ended 31 December 2023
31. Insurance (continued)
The Company does not have any reinsurance contract issued, that qualify as insurance contacts under IFRS 17.
IFRS 17 defines a General Measurement Model (GMM) to use for valuing Insurance Contracts, with two modifications of this
model applicable under certain circumstances. The GMM requires the projection of future cash flows related to insurance
contracts using current financial and non-financial assumptions. 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 that the Company earns from the Insurance Contracts, which depend on the
underlying assets' performance.
The Premium Allocation Approach (PAA) is a simplified model which does not require future projections to satisfy the
requirements under IFRS 17, provided that the Insurance Contracts sold are profitable.
A. Definitions and Classifications
Insurance contracts are contracts by which the Company accepts significant insurance risk from a policyholder by agreeing to
compensate the policyholder if a specified uncertain future event adversely affects the policyholder. This assessment is made on
a contract-by-contract basis at the contract issue date.
The Company assess, on a group of contract basis, whether participating contracts meet the definition of insurance contracts
with direct participating features. The Company uses its judgement to assess whether the amount expected to be paid to the
policyholder constitutes a substantial share of fair value returns from the underlying items and whether the variable cash flows
represent a substantial proportion of the cash flows.
B. Level of aggregation applied to Insurance Contracts
IFRS 17 requires insurance contracts to be recognised and measured in groups. The grouping of individual contracts under IFRS
17 is performed to limit the offsetting of profitable contracts against onerous ones regarding how insurers manage and evaluate
their business performance. A portfolio of Contracts is defined based on Contracts that have similar risks and are managed
together. The Portfolio is further divided into groups based on the year of issue and the expected level of profitability.
The Company 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).
C. Recognition
The Company recognises groups of insurance contracts from the earliest of the following:
•
•
•
the beginning of the coverage period;
the date when the first payment from a policyholder in the group becomes due; and
the date when a group of contracts becomes onerous.
D. Contract boundary
The Company includes in the measurement of a group of insurance contracts all the future cash flows expected to arise within
the boundary of each of the contracts in the group. In determining the cash flows within the boundary of an insurance contract,
the Company assesses whether it arises from substantive rights and obligations that exist during the reporting period in which
the Company can compel the policyholder to pay the premiums or the Company has the substantive obligation to provide the
policyholder with services.
Cash flows outside the insurance contract boundary relate to future insurance contracts and are recognised when those contracts
meet the recognition criteria.
Notes to the Financial Statements
for the Year Ended 31 December 2023
31. Insurance (continued)
Fulfilment cash flows (FCF)
The FCF are the current unbiased and probability-weighted estimates of the present value of the future cash flows, including a
risk adjustment for non-financial risk. The Company considers a range of scenarios to establish a full range of possible outcomes
without undue cost or effort about the amount, timing and uncertainty of expected future cash flows to arrive at the probability
weighted value. The estimates of future cash flows reflect conditions existing at the measurement date including assumptions at
that date regarding the future.
Discount rates
The time value of money and financial risk is measured separately from the expected future cash flows with changes in financial
risks recognised in the profit or loss at the end of each reporting period. The Company measures the time value of money for all
portfolios of participating, non-participating and riders using a point estimator given the maturity of the market and the lack of
availability of market data.
Expected cash flows that vary based on the returns on any financial underlying items are discounted using the top- down
approach. The discount assumption is set using the expected earnings on the assets supporting the liability and this has
been determined using market observed reference assets and the anticipated margin for each asset category relative to the
performance of the reference asset.
Risk adjustment for non-financial risk
The Company measures the compensation it would require for bearing the uncertainty about the amount and timing of cash
flows arising from insurance contracts, other than financial risk separately as an adjustment for non-financial risk. The Company
uses cost of capital method in estimating the risk adjustment. The cost of capital approach uses the basis that Company’s risk
preference is based on the capital that it requires to hold which is appropriate for the non-financial risks that are relevant to IFRS
17 measurement objectives.
Contractual service margin (CSM)
The CSM is a component of the overall carrying amount of a group of insurance contracts representing unearned profit the
Company will recognise as it provides insurance contract services over the coverage period.
Coverage Period
The Company determines, at initial recognition, the group’s coverage units and allocates the group’s CSM based on the coverage
units provided in the period. The Company determines coverage units as follows:
•
•
For the Participating Base product, the coverage unit is linked to the bonus declared on these contracts, as this is the more
significant service provided under the contract.
For all the other portfolios, the coverage being provided is death cover linked to a predetermined amount, which is the sum
insured. The sum insured will be used as the coverage unit
Insurance acquisition cash flows
The Company includes insurance acquisition cash flows in the measurement of a group of insurance contracts if they are directly
attributable either to the individual contracts in a group, or to the group itself, or the portfolio of insurance contracts to which
the group belongs. The Company estimates at a portfolio level insurance acquisition cash flows not directly attributable to the
group but directly attributable to the portfolio and then allocates them to the group of newly written and renewed contracts on a
systematic and rational basis.
E. Measurement of insurance contract issued
ii) Subsequent measurement for contracts other than PAA
i) Measurement on initial recognition for contracts other than PAA
A group of insurance contracts are measured on initial recognition as the sum of the expected fulfilment cash flows within the
contract boundary and the contractual service margin representing the unearned profit in the contract relating to services that will
be provided under the contracts.
Subsequent to initial recognition, at the end of each reporting period, the carrying amount of the group of insurance contracts
will reflect a current estimate of the liability for remaining coverage (LRC) as at that date and a current estimate of the liability for
incurred claims (LIC).
112
113
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
31. Insurance (continued)
31. Insurance (continued)
The LRC represents the Company’s obligation to investigate and pay valid claims under existing contracts for insured events that
have not yet occurred, and amounts that relate to other insurance contract services not yet provided, comprising of the fulfilment
cash flows relating to future service and the CSM yet to be earned.
The CSM at the end of the reporting period is equally allocated to each of the coverage units provided in the current period and
expected to be provided in the future. The CSM recognised in the profit or loss reflects the amount of CSM allocated to the
coverage units provided during the period.
The LIC includes the Company’s liability to pay valid claims for insured events that have already incurred, other incurred insurance
expenses arising from past coverage service and includes the liability for claims incurred but not yet reported. It also includes
the Company’s liability to pay amounts the Company is obliged to pay the policyholder under the contract, including repayment
of investment components, when a contract is derecognised. The current estimate of LIC comprises of the fulfilment cash flows
related to current and past service allocated to the group at the reporting date.
Changes in fulfilment cash flows
iv) Onerous Contracts
The onerous assessment is done on an individual contract level assessing future expected cash flows on a probability- weighted
basis including a risk adjustment for non-financial risk. On initial recognition, the contracts expected to be loss making are
grouped together and such groups are measured and presented separately. Once contracts are allocated to a group, they are
not re-allocated unless they are substantively modified. For Participating Base Products, the onerous assessment takes into
consideration the cashflow between the contracts in the Group of Contracts.
At the end of each reporting period, the Company updates the fulfilment cash flows to reflect the current estimates of the
amounts, timing and uncertainty of future cash flows and discount rates.
A group of insurance contracts become onerous when the adjustment to the CSM exceeds the amount of CSM and the Company
recognises the excess in insurance service expenses and records it as a loss component of the LRC.
As all cashflows form a part of the underlying items for Participating Base Products, any experience adjustment or change in the
estimate of future cash flow will impact future services, hence all items impact CSM.
After a loss component is recognised, the Company allocates any subsequent changes in FCF of the LRC on a systematic basis
between the loss component and the LRC excluding the loss component.
Recognition of the CSM in profit or loss
F. Contracts measured under the fair value
CSM amount is released to profit or loss in each period during which the insurance contract services are provided.
The CSM amount to be released in each reporting period is determined as the coverage unit provided for the period as a
percentage of the total expected coverage unit, applied to the CSM at the end. The total number of coverage units in the group
is determined by considering for each contract the quantity of benefits provided under the contract and the expected coverage
period. The total coverage unit, except for Participating Base Contracts, is calculating by applying the discounted future coverage
unit as the risk free discount rate.
The CSM at the end of the reporting period is equally allocated to each of the coverage units provided in the current period and
expected to be provided in the future. The CSM recognise in the profit or loss the amount of CSM allocated to the coverage units
provided during the period. The CSM for reinsurance contracts held is released to the profit or loss as services are received from
the reinsurer in the period.
iii) Subsequent measurement for Reinsurance contracts other than PAA
Changes in fulfilment cash flows
At the end of each reporting period, the Company updates the fulfilment cash flows to reflect the current estimates of the
amounts, timing and uncertainty of future cash flows and discount rates.
Experience adjustment
Experience adjustments in relation to current or past service are recognised in the profit or loss, hence, incurred claims
(including incurred but not reported) and other incurred insurance service expenses are included in the profit or loss. Experience
adjustments in relation to future service are included in adjustments to the CSM.
The carrying amount of the CSM is adjusted at the end of the reporting period to reflect changes in the FCF applying the same
approach as for insurance contracts issued, expect that the change in carrying amount can cause the CSM to be negative.
Recognition of the CSM in profit or loss
CSM amount is released to profit or loss in each period during which the insurance contract services are provided.
The CSM amount to be released in each reporting period is determined as the coverage unit provided for the period as a
percentage of the total expected coverage unit, applied to the CSM at the end. The total number of coverage units in the group
is determined by considering for each contract the quantity of benefits provided under the contract and the expected coverage
period. The total coverage unit, except for Participating Base Contracts, is calculating by discounted future coverage unit at the
risk free discount rate.
The Company applied the fair value approach for those contracts issued more than 5 years prior to the date of transition. This
decision was made noting the significant time and effort needed to construct the transaction data required at the level to apply the
requirements of IFRS 17 prior to this period.
Level of aggregation
The Company included contracts issued prior to January 2018 into one group split by portfolios of insurance contracts and
applied the fair value approach as at December 2017.
Fair valuation of liabilities of insurance contracts
The fair value of liabilities has been determined per IFRS 13 Fair Value Measurement. There are no recent transactions or
comparable markets for life insurance liabilities. In measuring the fair value, the approach taken is:
•
•
The discounted value of projected cash flows relating to in-force life insurance contracts using assumptions reflecting past
and expected future experience from the perspective of a potential purchaser.
Plus allowance for the cost of holding statutory capital that a market participant acquiring the contracts would be required
to bear.
Using a risk-adjusted discount rate to reflect the perspective of a potential purchaser.
Measurement at the transition date
In applying the fair value approach, the CSM of the LRC was estimated as the difference between the fair value and the fulfilment
cash flows of the group of insurance contracts as of December 2017. Post 2017, the full retrospective approach was adopted
to determine the transition balance. In determining fair value, the Company followed the requirements of IFRS 13 Fair Value
Measurement except for that standard’s requirement in relation to demand features (that fair value cannot be less than the
amount repayable on demand), because that would contradict the IFRS 17 requirement to incorporate cash flows on a probability-
weighted basis.
Fulfilment cash flows
The fulfilment cash flows were estimated prospectively as at the transition date.
Contractual service margin
The CSM was estimated to be the difference between the fair value of a group of insurance contracts, measured in accordance
with IFRS 13 as described above, and its FCF as at the transition date.
114
115
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
31. Insurance (continued)
Accounting Policy
(a) Recognition and measurement
Long-term insurance contracts
These contracts insure human life events (for example death, survival, disability, and critical illness) over a long duration sold and
are underwritten by BSP (Fiji) Life Limited and BSP (PNG) Life Limited. Guaranteed benefits paid on occurrence of the specified
insurance event are fixed and for participating policies declared bonuses are also payable. Most of the policies have maturity and
surrender benefits.
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 recognition and measurement of these contracts have been determined in accordance with IFRS 17. Short term contracts are
not a material part of the BSP Financial Groups operations.
(b) Methods and assumptions
Key assumptions used in determining the Policy Liabilities of the Group are as follows:
(i) Discount rates
For contracts which have a DPF, the discount rate used is linked to the assets which back those contracts. For Fiji for the year
ended 31 December 2023 this was 4.946% per annum (2022: 5.198% per annum), based on current 10-year government bond
yields and expected earnings from the investment portfolio. For contracts without DPF and Accident Business, a rate of 3.90%
per annum was used at 31 December 2023 (2022: 3.95% per annum). These rates were based on the 10-year government bond
rate as published by the Reserve Bank of Fiji.
(ii) Investment and maintenance expenses
Future maintenance and investment expenses are based on the budgeted expenses. Future inflation has been assumed to be
3.5% per annum (2022: 3.5% per annum) for determining future expenses.
(iii) Taxation
The rates of taxation enacted or substantially enacted at the date of the valuation are assumed to continue into the future.
(iv) Mortality and morbidity - Fiji
Projected future rates of mortality for insured lives are based on the Fiji Mortality Statistics table FJ90-94 Male. These are then
adjusted for the Company’s own experience. Mortality rates used are as follows by gender and insured amount:
Notes to the Financial Statements
for the Year Ended 31 December 2023
31. Insurance (continued)
in accordance with the policy conditions which allow for shareholders to share in allocations at a maximum rate of 20%. For
business written between 1995 and 1998 the shareholder receives 11% of profits.
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.
The FCF include a projection of the declaration of future bonuses and their impact on claims. The supportable bonus rate that
emerges from the Margin on Service valuation (valuation method for policyholder profit/bonus management) as at 31st December
2023 for Participating Business is used as the IFRS 17 assumption. The policyholder retained earnings is added to the Insurance
Contract Liability.
(c) Reinsurance
Contracts entered into by the Company with reinsurers under which the Company is compensated for losses on one or more
contracts issued by the Company, 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 the profit or loss when they become due and payable in accordance with the reinsurance
agreements.
Reinsurance recoveries are recognised as claim recoveries under profit or loss. This is netted off against the claim expenses.
Reinsurance premiums are recognised as Reinsurance Expenses.
Financial Information
The accounting policies of the consolidated entity, which have been applied in determining the financial information shown above,
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 subsidiary’s accounts. The consolidated profit includes insurance profit and investment earnings on
shareholder’s funds.
All amounts are expressed in K’000
Insurance revenue
Insurance service expenses
Insurance service result from insurance contracts issued
Net expenses from reinsurance contracts
Insurance service result
Life Insurance
Other Activities
45,093
(23,559)
21,534
(1,450)
20,084
118,647
118,647
(105,331)
(105,331)
33,400
-
-
-
33,400
38,944
(37,077)
1,867
(1,353)
514
355
355
-
-
869
107,760
11,103
(91,896)
27,836
2023
(Total)
84,037
(60,636)
23,401
(2,803)
20,598
119,002
119,002
(105,331)
(105,331)
34,269
107,760
11,103
(91,896)
61,236
2022
(restated)
77,712
(59,840)
17,872
(1,688)
16,184
98,552
98,552
(87,286)
(87,286)
27,450
94,127
6,547
(84,249)
43,875
• Male and sum insured above $200,000: 48% (2022: 48%) for base products and 65% (2022: 48%) for rider products
Insurance finance income – investments
of the FJ90-94 Male table for participating business in Statutory Fund 1.
• Male and sum insured up to $200,000: 20% (2022: 48%) for base products and 65% (2022: 48%) for rider products of
the FJ90-94 Male table for participating business in Statutory Fund 1.
Female: An age setback of 3 years is applied to the Male rates above.
•
(v) Rates of discontinuance
Best estimate assumptions for the incidence of withdrawal and discontinuance vary by product and duration and are based on the
Group’s experience which is reviewed regularly. Rates used in 2023 were the same as 2022 rates.
(vi) Basis of calculation of surrender values
Surrender values are determined by the Company. There have been no changes to surrender bases during the period (or the prior
periods).
(vii) Discretionary participating business
For most participating business, bonus rates are set such that, over long periods, the returns to contract holders are
commensurate with the investment returns achieved on the pool of assets which provide security for the contract, together with
other sources of profit arising from this business. Profits from these policies are split between contract holders and shareholders
Net investment income
Insurance finance income/(expense) for
insurance contracts issued
Net insurance finance expenses
Net insurance and investment result
Net income from subsidiaries
Other Income
Other Operating Expenses
Net insurance operating income
116
117
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
31. Insurance (continued)
The reconciliation of the Life insurance contract liabilities is as follows:
Liability for remaining coverage
All amounts are expressed in K’000
Excluding
loss
component
Loss
component
Policy
Loans*
Liability for
incurred claims
Total
2023
Total
2022
Opening contract assets
(5,177)
-
-
-
(5,177)
(9,289)
Opening insurance contract liabilities
1,173,979
1,181
(121,342)
13,876
1,067,694
1,005,064
Net opening balance
1,168,802
1,181
(121,342)
13,876
1,062,517
995,775
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(34,187)
(30,883)
(7,017)
(8,388)
(3,889)
(985)
(45,093)
(40,256)
3,895
14,943
17,232
-
-
-
3,895
3,895
-
191
578
(338)
8,425
7,301
23,559
24,773
(21,534)
(15,483)
-
118,994
102,531
145,475
-
-
Changes in the statement of profit or loss and OCI
Insurance revenue
Contracts under the full retrospective approach
Contracts under the fair value approach
Contracts under the full retrospective
approach post transition
Insurance revenue
Insurance service expenses
(34,187)
(7,017)
(3,889)
(45,093)
-
-
-
-
Incurred claims and other insurance service expenses
11,257
(209)
-
-
8,425
19,682
(25,411)
118,953
(145,475)
63,870
-
191
-
(18)
(18)
41
-
67
Adjustments to liabilities for incurred claims
Losses and reversal of loss on onerous contracts
Insurance acquisition cash flows
-Acquisition expenses
Insurance service expenses
Insurance service result
Insurance finance expenses from insurance
contracts recognised in profit and loss
Investment components excluded from insurance
revenue and insurance service expenses
Effect of movements in exchange rates
Total changes in the statement
of profit or loss and OCI
Cash flows
Premiums received
Insurance acquisition cash flows
Claims and other insurance service expenses paid
Others
Total cash flows
Net closing balance
11,937
90
(6,925)
149,975
155,077
38,643
222,143
(25,736)
(11,113)
-
185,294
-
-
-
-
-
-
-
(2,320)
(5,126)
(7,446)
-
-
222,143
198,406
(25,736)
(22,368)
(151,896)
(165,329)
(141,310)
-
(5,126)
(6,629)
(151,896)
25,952
28,099
1,366,033
1,271
(135,713)
11,955
1,243,546 1,062,517
Closing contract assets
(5,966)
-
-
-
(5,966)
(5,177)
Closing insurance contract liabilities
1,371,999
1,271
(135,713)
11,955
1,249,512
1,067,694
Net closing balance
1,366,033
1,271
(135,713)
11,955
1,243,546 1,062,517
* Policy loans and Other Insurance related assets that are transferred at face value to LRC.
118
Notes to the Financial Statements
for the Year Ended 31 December 2023
31. Insurance (continued)
Insurance and Financial Risk Management
The Company 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 Company maintains sufficient capital at a level which exceeds the
minimum solvency requirements prescribed by the Reserve Bank of Fiji.
The Company is exposed to financial as well as insurance risks. The Group’s risk management strategy is set by the Board of
Directors through the following sub-committees:
•
•
BSP Life (Fiji) Limited Investment Governance Committee (IGC) (Market Risk) and
Board Audit and Compliance Committee (Operational and Other Risk).
Implementation of the 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 Company 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 number and amount of claims and benefits will vary from year to year from the level
established using actuarial methods.
The Company's objectives in managing risks arising from the 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
to use reinsurance as a component of insurance risk management strategy.
The nature of the 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
Details of Contract
Terms and Conditions
Nature of Compensation
for Claims
Key Variables that affect
the timing and uncertainty
of Future Cash Flows
Non-participating life
insurance contracts
with fixed and
guaranteed terms (Term
Life and Disability)
Life insurance contracts
with discretionary
participating benefits
(endowment and
whole of life)
Benefits paid on death, ill
health or maturity that are fixed
and guaranteed and not at
the discretion of the insurer.
Premiums may be guaranteed
through the life of the
contract, guaranteed for a
specified term or variable at
the insurer’s discretion.
These policies include a clearly
defined initial guaranteed sum
which is payable on death.
The guaranteed amount
is a multiple of the amount
that is increased throughout
the duration of the policy
by the addition of regular
bonuses annually which, once
added, are not removed.
Benefits, defined by the
insurance contract, are
determined by the contract,
and are not directly affected by
the performance of underlying
assets or the performance
of the contracts as whole.
• Mortality
• Morbidity
•
•
Discontinuance rates
Expenses
Benefits arising from the
discretionary participation
feature are based on the
performance of a specified
pool of contracts or a
specified type of contract.
• Market rates on underlying assets
• Mortality
• Morbidity
• Market risk
•
•
Discontinuance rates
Expenses
• Market rates on underlying assets
119
(6,925)
605
57,617
(48,405)
Terms and conditions of insurance contracts
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023 Notes to the Financial Statements
for the Year Ended 31 December 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
31. Insurance (continued)
32. Investment in Subsidiaries
Insurance and Financial Risk Management
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 the large sums assured on certain individuals. The largest exposures all relate
to mortality. The largest single exposure for the Life business is K14.0m of which K13.5m is reinsured (2022: K11.9m of which
K11.5m is reinsured). For BSP Life PNG, the largest single exposure is K11.1 million of which K11.0 million is reinsured (2022:
K10.6 million of which K10.5 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 Company’s Life Insurance business is reviewed regularly.
Transition approach adopted
The liability for Insurance contracts required restatement as of 1 January 2022 (transition date).
The quantitative impact of transitioning to IFRS 17 is illustrated in the opening reconciliation table of the combined balance sheet
of BSP Life Fiji and BSP Life PNG below:
All amounts are expressed in K’000
Assets
Financial assets at amortised cost - policy loans
Financial assets at amortised cost - outstanding premiums
All other assets
Total Assets
Liabilities and equity
Policy liabilities
Other liabilities - unearned premiums
Other liabilities - premium in advance
Outstanding claims
Outstanding claims (IBNR)
Insurance contract liabilities
Reinsurance contract liabilities
All other liabilities
Total liabilities
Total shareholders' equity
Total liabilities and equity
As reported
IFRS 4
31 Dec 2021
IFRS 17
Movement
111,341
23,297
-
-
1,431,937
1,431,937
(111,341)
(23,297)
-
1,566,575
1,431,937
(134,638)
-
-
-
-
-
(1,131,975)
(19,434)
(6,031)
(19,330)
(3,746)
1,005,064
1,005,064
1,131,975
19,434
6,031
19,330
3,746
-
813
92,908
5,376
92,908
1,274,237
1,103,348
292,338
328,589
1,566,575
1,431,937
4,563
-
(170,889)
36,251
(134,638)
The adoption of IFRS 17 resulted in an overall reduction to total assets of K134.6 million, total liabilities of K170.9 million, and
increase in total equity net off foreign exchange of K36.3 million on the transition balance sheet as at 1 January 2022. This was
largely caused by the change in profit recognition patterns and discount rates.
120
Name of subsidiary
Principal activity
BSP Capital Limited
BSP Life (Fiji) Limited
BSP Life (PNG) Limited
Fund Management/
Investment Banking
Life Insurance
Life Insurance
BSP Convertible Notes Limited
Capital Raising
BSP Finance Limited
Credit Institution
BSP Platform Pacific Limited
Digital Technology
Bank of South Pacific Tonga Ltd
Bank South Pacific (Samoa) Ltd
Bank South Pacific Vanuatu Ltd
Bank
Bank
Bank
At 31 December
Represented by:
At 1 January
BSP Platform Pacific Limited conversion from Joint Venture
Additional capital / (divestment of shares)
At 31 December
33. Investment in Joint Ventures
Place of
incorporation and
operation
Ownership %
Balance of investment
2023 2022
PNG
Fiji
PNG
Fiji
PNG
PNG
Tonga
Samoa
Vanuatu
100%
100%
100%
100%
100%
100%
100%
98.7%
100%
2,448
87,599
25,000
371
94,479
395
71,611
70,712
38,020
2,448
87,599
25,000
371
103,600
-
71,611
70,712
38,020
390,635
399,361
399,361
388,798
395
(9,121)
390,635
-
10,563
399,361
Name of Joint Venture
Suva Central Ltd
Richmond Ltd
BSP Finance Cambodia Plc
BSP Finance Lao
Platform Pacific Ltd 1
Principal activity
Property rental
Hotel operations
Asset financing
Asset financing
Digital solutions
Place of
incorporation
and operation
Fiji
Fiji
Cambodia
Lao
PNG
Ownership %
2023
50%*
2022
50%*
50%* 61.3%**, 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.
1Fully owned subsidiary in 2023.
All amounts are expressed in K’000
Joint Ventures
Investment in Joint Ventures
(Disposal of)/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
Consolidated
2023
2022
Bank
2023
270,111
(39,510)
14,904
58,112
303,617
734,386
(432,283)
302,103
28,742
29,370
58,112
224,323
10,563
(11,850)
47,075
270,111
622,520
(345,205)
277,315
42,066
5,009
47,075
26,127
-
546
2,942
29,615
94,016
(41,001)
53,015
2,942
-
2,942
2022
26,980
-
(1,050)
197
26,127
90,894
(40,772)
50,122
197
-
197
121
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
Other
34. Fiduciary Activities
The Group especially through BSP Capital Limited conducts investment fund management and other fiduciary activities as
responsible entity, trustee, custodian or manager for investment funds and trusts, including superannuation. These funds are not
consolidated, as the Group does not have direct or indirect control. Where the funds incur liabilities in respect of these activities,
and the primary obligation is incurred in an agency capacity for the fund or clients rather than its own account, a right of indemnity
exists against the assets of the applicable fund or trust. As these assets are sufficient to cover the liabilities and it is therefore not
probable that the Group will be required to settle the liabilities, the investments in the assets and liabilities of these activities are
not included in the Financial Statements
35. Related Party Transactions
Related parties are considered to be enterprises or individuals with whom the Group is especially related because either they or
the Group 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 2023, balances and transactions of accounts for Directors, including
companies in which directorships were held by BSP directors, were as follows:
All amounts are expressed in K’000
Customer Deposits
Opening balances
Net movement
Closing balance
Interest paid
Loans and receivables from customers
Opening balances
Loans issued
Interest
Charges
Loan repayments
New Director
Outgoing Director
Closing balance
Consolidated
2023
2022
150,256
(67,484)
82,772
12
636,622
67,500
45,596
12
(132,117)
834,409
(557,108)
894,914
33,019
117,237
150,256
20
628,858
112,781
18,028
1,018
(124,063)
-
-
636,622
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 2023, staff account balances were as follows:
Housing loans
Other loans
Cheque accounts
Savings accounts
122
195,907
65,568
261,475
10,085
6,923
17,008
208,449
68,600
277,049
6,414
12,486
18,900
Notes to the Financial Statements
for the Year Ended 31 December 2023
36. Directors and Executive Remuneration
Directors’ remuneration
Directors of the company received remuneration including benefits during 2023 as detailed below:
All amounts are expressed in Kina
Total remuneration
Name of Director
Sir K.G. Constantinou, OBE
M.T. Robinson1
R.G. Bradshaw
S.G. Brewis-Weston
E. B. Gangloff
A. Sam
Dr. M. Lua’iufi
S.A. Davis
P. Kevin
F.D. Bouraga
P.F. Taureka-Seruvatu
I.A. Tarutia
Shareholder Approved Cap
Meetings
attended/
total held
1/1
7/7
7/7
7/7
-
7/7
7/7
7/7
7/7
7/7
7/7
5/5
Appointed/
(Resigned)
2023
Bank
2023
Subsidiaries
2023
Total
2022
Total
(Feb 2023)
140,326
75,000
215,326
861,304
Mar 2023
-
692,274
414,864
(Apr 2022)
-
427,364
399,239
427,364
402,364
389,864
402,364
Apr 2023
249,538
-
-
-
-
-
-
-
692,274
318,152
414,864
330,652
-
171,576
427,364
343,152
120,000
519,239
425,652
-
-
-
-
-
427,364
343,152
402,364
390,652
389,864
305,652
402,364
146,576
249,538
-
3,945,561
195,000
4,140,561
3,636,520
4,500,000
4,500,000
1 Managing Director / Group Chief Executive Officer receives no fees for his services as Director during the year. Other members of BSP executive management who
serve as directors of subsidiaries of BSP Group receive no fees for their services as Director.
Executive Remuneration
The specified executives as at 31 December 2023 were:
Mark Robinson
Nuni Kulu
Hari Rabura
Ronesh Dayal
Rohan George
Maryann Lameko-Vaai
Peter Beswick
Richard Nicholls
Daniel Faunt
Vandhna Narayan
All amounts are expressed in K’000
Year
2023 remuneration
2022 remuneration
Salary
16,226
18,182
Short term
incentive
Value of
benefits
Long term
incentive
Leave
encashment
Final
entitlement1
5,405
6,000
1,247
1,510
2,564
7,844
993
7,096
-
826
Total
26,435
41,458
1 Final entitlements paid were for executives who resigned or retired from the Bank in 2022 and constitutes statutory leave payouts .
123
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Notes to the Financial Statements
for the Year Ended 31 December 2023
37. Events Occurring After Balance Sheet Date
The PNG Government levied a flat K190 million Additional Company Tax (the Tax) on any bank that has over 40% market share of
financial assets, applicable to financial year 2022. The Tax was non-deductible for tax purposes and had a direct impact on BSP’s
net profit after tax for 2022. The K190 million tax was paid on 30 September 2022 into an escrow account held with Bank of Papua
New Guinea, pending the outcome of BSP’s legal challenge to the Tax. On 19 February 2024, BSP entered into a settlement of the
judicial review of the PNG Government's imposition of the Tax with the Commissioner General of Internal Revenue Commission
(IRC). The terms of the settlement cover the whole of the amount held in escrow as follows:
1. K95 million will be refunded to BSP; and
2.
the balance of K95 million will be paid to the IRC as full and final settlement of the litigation concerning the imposition of the
Tax.
The settlement is conditional upon consent of the Attorney General of Papua New Guinea, the superannuation funds who formally
supported the judicial review by BSP and, once those are provided, final consent of the Supreme Court of Justice of Papua New
Guinea. A period of approximately a month is contemplated to obtain these consents.
The expected financial outcome is for BSP to receive K95 million by mid-2024.
38. Remuneration of Auditor
All amounts are expressed in K’000
Financial statement audits
Other services
Consolidated
Bank
2023
6,925
553
7,478
2022
5,363
523
5,886
2023
4,611
517
5,128
2022
4,350
488
4,838
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.
Notes to the Financial Statements
for the Year Ended 31 December 2023
36. Directors and 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
560 – 570
570 – 580
580 – 590
2023
No.
125
122
84
70
68
51
38
32
27
25
17
20
19
14
26
5
10
8
7
9
5
8
5
5
4
6
3
5
3
4
4
3
6
5
6
1
2
8
7
5
2
3
-
5
2
2
4
2
4
2022
No.
138
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
1
5
5
Remuneration
K,000
2023
No.
2022
No.
Remuneration
K,000
2023
No.
2022
No.
590 – 600
600 – 610
610 – 620
620 – 630
630 – 640
640 – 650
650 – 660
660 – 670
670 – 680
680 – 690
690 – 700
710 – 720
720 – 730
730 – 740
750 – 760
760 – 770
770 – 780
780 – 790
790 – 800
810 – 820
820 – 830
830 – 840
840 – 850
850 – 860
860 – 870
870 – 880
880 – 890
900 – 910
910 – 920
920 – 930
940 – 950
950 – 960
960 – 970
990 – 1000
1000 – 1010
1010 – 1020
1040 – 1050
1050 – 1060
1070 – 1080
1090 – 1100
1100 – 1110
1110 – 1120
1120 – 1130
1130 – 1140
1140 – 1150
1160 – 1170
1200 – 1210
1230 – 1240
1240 – 1250
1
5
5
4
2
1
1
1
2
1
2
1
1
2
1
2
1
-
-
1
2
-
-
1
2
2
-
-
2
-
1
-
-
2
1
1
1
1
-
-
3
-
2
1
-
2
1
-
1
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
-
-
1
-
-
1
-
1260 – 1270
1270 – 1280
1280 – 1290
1300 – 1310
1310 – 1320
1320 – 1330
1330 – 1340
1340 – 1350
1350 – 1360
1360 – 1370
1370 – 1380
1380 – 1390
1400 – 1410
1410 – 1420
1430 – 1440
1440 – 1450
1460 – 1470
1470 – 1480
1480 – 1490
1520 – 1530
1530 – 1540
1550 – 1560
1560 – 1570
1640 – 1650
1720 – 1730
1740 – 1750
1760 – 1770
1780 – 1790
1800 – 1810
1810 – 1820
1840 – 1850
1860 – 1870
1870 – 1880
1880 – 1890
1930 – 1940
2080 – 2090
2100 – 2110
2250 –2260
2270 – 2280
2280 – 2290
2360 – 2370
2430 – 2440
2480 – 2490
2500 – 2510
2700 – 2710
2750 – 2760
2810 – 2820
3190 – 3200
15010-15020
Total
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
2
-
1
1
-
1
-
-
-
-
1
1
1
-
-
1
-
-
1
-
-
1
-
1
-
1
1
-
-
1
-
1
-
1
-
1
984
883
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.
124
125
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023 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 2023, 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 2023 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 2023, 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 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 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
126
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
•
These matters are further described
in the Key audit matters section of
our report.
IT systems and controls
• 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
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.
127
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023 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
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
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.
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
• The identification of exposure for which there has been a
significant increase in credit risk
• Assumptions used in the expected credit loss model such
as valuation of collateral and assumptions made on future
values, financial condition of counterparties and forward
looking macroeconomic factors.
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.
• Assessment of the reasonableness of the key outputs of the expected
credit loss model, as well as key judgements and assumptions used
by management
• Testing the key fields identified to have an impact on the expected
credit loss provision by agreeing these back to source documentation
• Examining
the model methodology
for consistency and
appropriateness for loans and advances in Stage 1 and Stage 2. This
included evaluation of the appropriateness of the estimates made
on the Probability of Default, Loss Given Default and Exposure at
Default
• For Stage 3 loans and advances, procedures over the credit watch
list and delinquencies, and evaluation of assumptions made in the
valuation of collateral and recovery cash flows.
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.
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 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.
128
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
This page has been intentionally left blank.
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 2023:
• 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
21 February 2024
130
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023 Shareholder
Information
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.
Issues of further shares
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.
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
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.
The Directors may from time to time
determine dividends to be distributed to
members according to their rights and
interests.
BSP’s Constitution states that the
minimum number of directors is three
and the maximum is ten.
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 ten years
are disclosed in the Performance Review
section of this Annual Report.
Liquidation
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.
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.
SHARE BUY BACKS
Subject to the provisions of the
Companies Act and the Listing Rules,
BSP may buy back shares by itself on
terms and at times determined by the
Directors.
132
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OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023 Top 20 Shareholders
Unmarketable Parcels
As at 31 December 2023, the twenty largest fully paid shareholders of the Company were:
Rank
Shareholder
Total Holding
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Kumul Consolidated Holdings
Nambawan Super Limited
Petroleum Resources Kutubu Limited
The Fiji National Provident Fund
National Superannuation Fund Limited
Credit Corporation (PNG) Limited
Motor Vehicles Insurance Limited
Comrade Trustee Services Limited
The Catholic Bishops Conference Inc
Capital Nominees Limited
Samoa National Provident Fund
Lamin Trust Fund
Kina Nominees Limited
Mineral Resources Ok Tedi No 2 Limited
Unit Trust Of Samoa (Trust)
Sky Finance Limited
Mineral Resources Star Mountains
Solomon Islands National Provident Fund
Gas Resources Gigira Limited
Nominees Niugini Limited
84,811,597
47,702,160
46,153,840
46,040,545
45,318,417
36,294,081
31,243,736
12,456,052
11,620,000
7,714,312
4,451,940
3,653,700
3,519,847
3,496,449
3,291,061
3,053,090
2,628,373
2,500,001
2,392,853
2,369,495
%
18.15%
10.21%
9.88%
9.85%
9.70%
7.77%
6.69%
2.67%
2.49%
1.65%
0.95%
0.78%
0.75%
0.75%
0.70%
0.65%
0.56%
0.54%
0.51%
0.51%
As at 31 December 2023, the BSP Share Price was K13.70 on the PNGX and A$5.42 on the ASX. There were 326 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.
Escrow Shares
As of 31st December 2023, there were 130,465,437 restricted BSP shares held by PNG Registries Limited in Escrow.
Shareholder Name
Security Type
Escrow Shares
Effective Date
Kumul Consolidated Holdings
Fully Paid Ordinary Shares
Kumul Consolidated Holdings
Fully Paid Ordinary Shares
Petroleum Resources Kutubu Limited
Fully Paid Ordinary Shares
Total Escrow Shares
40,540,541
43,771,056
46,153,840
130,465,437
6/04/2018
6/04/2018
18/11/2016
Directors' Interest in Share of BSP
Directors’ who hold shares in BSP are:
Director
Ian Tarutia
Shares Held
3,000
Percentage of
Issued Capital
0.00%
Other Shareholders
66,508,430
14.24%
TOTAL
467,219,979
Fair treatment of shareholders
Distribution of Shareholding
As at 31 December 2023, the Company had 6,165 shareholders. The distribution of shareholding is as follows:
Range
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Total
134
Number of Security
Holders
Percentage of
Security Holders
Number of
Securities
Percentage of
Issued Capital
4,924
735
134
236
136
6,165
79.8%
11.9%
2.2%
3.9%
2.2%
1,302,091
1,609,624
1,005,929
8,864,016
454,438,319
467,219,979
0.3%
0.3%
0.2%
1.9%
97.3%
The company has made every effort to ensure the equitable treatment of shareholders to the best of its ability and in line with what
is required by relevant laws, rules, and regulations.
135
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023 Directors' Interests
No Director
Background
1 Robert
Bradshaw.
Chairman, Non
– Executive
Director since
2017.
Appointed
Chairman
February 2023
Robert Bradshaw was appointed to the BSP Board
in September 2017 and served as Chair of the
Remuneration and Nominations Committee from 2019
until his appointment as Board Chair in February 2023.
Mr. Bradshaw holds a Bachelor of Laws (with Honours,
First Class) from the University of Papua New Guinea
and has practiced law for almost 30 years. He was
formerly a Partner in the firm Blake Dawson Waldron
(now Ashurst) and commenced practice on his own,
as Bradshaw Lawyers in 2005. Mr. Bradshaw has been
involved in different areas of law, particularly in resource
development, industrial relations, banking and finance
and commercial litigation.
Directorships
& Interests
Director
Entity
BSP Financial Group Limited
Koitaki CC Limited
Wahgi Arabicas Limited
Shareholder
Koitaki CC Limited
Wahgi Arabicas Limited
Owner
Waghi Valley Country Club
The Kofi Club
Koitaki Country Club
Bradshaw Lawyers
Papua New Guinea Law Society
Australian Institute of Company
Directors
Papua New Guinea Institute of
Directors
BSP Financial Group Limited
Rangiora Capital Management
Limited
Invicta Capital Partners Limited
BSP Life (Fiji) Limited
BSP Finance (Fiji) Pte Limited
Bank South Pacific (Samoa) Limited
Activegraf Inc
Army & Navy Club (London)
University Club (New York)
Oriental Club (London)
Christchurch Club
Institute of Directors (UK)
BSP Financial Group Limited
Solvar Limited
Mercurien Pty Limited
Mr. Bradshaw has served as a Director and Chair on the
board of several other companies.
Member
2 Mark Robinson
Group Chief
Executive Officer
& Managing
Director.
Executive
Director
commencing
March 2023
Mark T. Robinson was appointed BSP’s Group CEO
in November 2022 and commenced in March 2023.
He is a senior financial executive with over 30 years’ of
experience in developed and emerging markets.
Director
Mr. Robinson’s previous roles include CEO of
Commercial Bank International in the United Arab
Emirates, CEO of ANZ Banking Group’s operations
in Southeast Asia, and he has held numerous senior
executive roles with Citibank including in India, Russia,
Turkey and Hungary.
He has a Bachelor of Arts from the University of Chicago
and a Master of Business Administration from the
University of Chicago’s Booth School of Business
Administration from the University of Chicago’s Booth
School of Business.
Advisory Board
Member
Member
Symon Brewis-
Weston, BEcon,
MAppFin
Non-Executive
Director.
Director since
April 2021
Symon Brewis-Weston was appointed to the BSP
Board in April 2021 and is a member of BSP's Board
Risk Committee and Remuneration and Nominations
Committee. Mr. Brewis-Weston has extensive international
experience in financial services and a deep understanding
of consumer and business markets in the Asia Pacific
region.
Director
Mr. Brewis-Weston was formerly CEO & Executive Director
at Humm Group Ltd (2016-2018) , 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.
Symon also served as Chairman of Stockco Ltd, an
Australian livestock financier from 2019-2022.
Mr. Brewis-Weston held various senior leadership positions
at CBA for 15 years. He spent 6 years leading CBA’s
Indonesia operations and also in China developing the
company’s Chinese banking strategy. In 2015, Mr. Brewis-
Weston received the United Nation’s Global CEO Women
Empowerment Principle’s Leadership Award for his
contribution to the enhancement of diversity and women’s
empowerment in the workplace.
Mr. Brewis-Weston holds a Bachelor of Economics (Hons)
and a Master of Applied Finance from Macquarie University.
3
136
No Director
Background
Directorships
& Interests
Entity
Faamausili Dr.
Matagialofi
Lua’iufi, BA,
MSc, PhD
Non-Executive
Director.
Director since
December 2016
Stuart Davis,
LLB, GAICD
Non-Executive
Director.
Director since
August 2017
4
5
Faamausili Dr. Matagialofi Lua’iufi was appointed
to the Board of BSP in December 2016 and is
currently Chair of the Remuneration and Nominations
Committee (RNC).
Director
BSP Financial Group Limited
BSP Finance Ltd
Bank South Pacific (Samoa) Limited
Paradise Consulting
Shareholder
Paradise Consulting
Member
Samoa Institute of Directors
Samoa Human Resource Institute
Australian Institute of Company
Directors
Papua New Guinea Institute of
Directors
An experienced public sector practitioner and
consultant, Faamausili Dr. Lua’iufi holds 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 Samoa 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, Organizational Development,
Performance Management and Governance.
Faamausili Dr. Lua’iufi is a member of the Australian
Institute of Company Directors, member of the Papua
New Guinea Institute of Directors, Samoa Institute
of Directors and Samoa Human Resource Institute.
From 2007 to 2012, Faamausili Dr. Lua’iufi was the
Pacific Residential Scholar of the Australia New
Zealand School of Government and was responsible
for the development of emerging young Pacific public
sector leaders.
Stuart Davis was appointed to the BSP Board in
August 2017 and is currently Chair of the Board Risk
Committee (BRC) and a member of the Board Audit
and Compliance Committee.
Director
BSP Financial Group Limited
Next DC Limited
PayPal Australia Pty Limited
Appen Limited
Member
Australia India Business Council
Avondale Golf Club
Asia Society Australia
Papua New Guinea Institute of
Directors
Mr. Davis is also currently a Non-Executive director of
ASX 100 company NextDC Ltd, where he serves as
Chair of its Remuneration Committee and a member
of its Audit and Risk Committee. He is also a Non-
Executive Director of Appen Limited and PayPal
Australia Ltd where he is Chair of its Risk Committee.
Mr. Davis previously was CEO of HSBC Bank in India
from 2009 to 2012, one of the largest foreign banks in
India with staff of 8,000 and pretax earnings in excess
of USD800 million. Prior to that appointment, he was
CEO of HSBC Bank in Australia from 2002 to 2009 and
CEO of HSBC in Taiwan from 1999 to 2002, having
joined the HSBC Group in 1981.
Mr. Davis previously served as a member of the
Australian Bankers Association from 2003 to 2009,
being Deputy Chair from 2006 to 2009, was Chair of
the British India Chamber of Commerce in Mumbai
and Chair of the Taiwan British Chamber of Commerce
in Taipei. He holds a Bachelor of Law Degree from
the University of Adelaide and is a Graduate of the
Australian Institute of Company Directors.
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Board of Directors
No Director
Background
6
Patricia Taureka-
Seruvatu, LLB,
MAICD
Non-Executive
Director.
Director since
April 2020
Mrs. Patricia Taureka-Seruvatu is a Lawyer by
profession, admitted to practice law in Papua New
Guinea (PNG) in 1988. Mrs. Taureka-Seruvatu holds
a Bachelor of Laws from the University of PNG. She
was appointed to Board in April 2022 and currently
serves as a member of the Board Audit and Compliance
Committee and the Remuneration and Nominations
Committee.
Directorships
& Interests
Director
BSP Financial Group Limited
Naita Designs and Management
Services Limited
Shareholder
Naita Designs and Management
Services Limited
7
Frank Bouraga,
CPA, MAICD
Non-Executive
Director.
Director since
December 2020
Mrs Taureka-Seruvatu has over 30 years’ experience
in the legal, superannuation, property, commercial and
corporate services in PNG. She is a member of the
Papua New Guinea Institute of Company Directors and
the Australian Institute of Company Directors.
Member
She is currently employed as the General Counsel &
Company Secretary for Dirio Gas & Power Company
Limited. Prior to this, Mrs. Taureka Seruvatu previously
served as Company Secretary for Nambawan Super
Limited from 2001 to 2019.
Frank Bouraga was appointed to the BSP Board in
December 2020. Since his appointment to the Board,
he has joined as a Member of the Board Audit and
Compliance Committee.
Director
Mr. Bouraga is a CPA Papua New Guinea qualified
professional accountant with over 26 years in accounting
practice and is currently a partner in Assurance and
Business Advisory Services with SBC Solutions. Prior to
SBC Solutions, Mr. Bouraga was the Country Managing
Partner for Ernst & Young Papua New Guinea for 5 years
as an audit and business advisory services partner. He
also worked with PricewaterhouseCoopers for over
7 years and worked with Star Business Consultants
between 2004 and 2011.
Mr. Bouraga is also a director of the PNG Cancer
Foundation and the PNG Hunters, and is a member of
Certified Practicing Accountants (CPA PNG) and the
Australian Institute of Company Directors (AICD). He
holds a Bachelor of Business (Accounting) from Central
Queensland University.
Papua New Guinea Law Society
Papua New Guinea Women
Lawyers’ Association
Papua New Guinea Institute of
Directors
Australian Institute of Company
Directors
BSP Financial Group Limited
Inside Out Limited
Star Management Services
Limited
Star No.57 Limited
PNG Hunters Rugby Football Club
Inc. Board
Papua New Guinea Cancer
Foundation Inc
Pacific Uniforms Limited
Shareholder
Inside Out Limited
Member
Star Management Services
Limited
Lalokau FM Limited
Star No.57 Limited
Certified Practicing Accountants
Papua New Guinea (CPA PNG)
Accounting Registration Board of
PNG
Australian Institute of Company
Directors
Papua New Guinea Institute of
Directors
Entity
No
Director
Background
Directorships
& Interests
Entity
8
Arthur Sam,
BComm, CPA,
GAICD
Non-Executive
Director.
Director since July
2016
Arthur Sam was appointed to the BSP
Board in July 2016 and served on the Board
until his resignation on 29 February 2024.
Prior to his resignation, Mr. Sam was the
Chair of the Board Audit and Compliance
Committee and also a member of the Board
Risk Committee.
Director
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 specializing 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.
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
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
Joint Owner
Sam Kiak Tubangliu Certified Practising
Accountants
Member
Certified Practicing Accountants of Papua
New Guinea
Papua New Guinea Institute of Directors
138
139
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Directorships
& Interests
Director
Entity
BSP Financial Group Limited
In4net Ltd
Registered Office
BSP Waigani Head Office
Section 34, Allotment 6 & 7
Klinki Street, Waigani Drive
Port Moresby, NCD
Papua New Guinea
PO Box 78
Port Moresby, NCD
Papua New Guinea
PNG Exchange for BSP Shares
PNGX Markets Limited
Office 2, Level 1, Monian Tower
Douglas Street,
Port Moresby, NCD
Papua New Guinea
PO Box 1531
Port Moresby, NCD
Papua New Guinea
PNG Share Registry
PNG Registries Limited
Level 4, Cuthbertson House
Cuthbertson Street,
Port Moresby, NCD
Papua New Guinea
PO Box 1265
Port Moresby, NCD
Papua New Guinea
Shareholder
In4net Ltd
Telephone: +675 320 1212
Telephone: +675 320 1980
Telephone: +675 321 6377
Board/Council
Member
PNG Institute of National
Affairs Council
PNG University of Technology
Industrial Advisory Board
Australian Registered Office
Ashurst
South Tower
Level 16, 80 Collins Street,
Melbourne, Victoria 3000
Australia
Telephone: +61 3 9679 3000
Australian Exchange for BSP Shares
ASX Limited
Exchange Centre
20 Bridge Street,
Sydney, NSW 2000
Australia
Telephone: +61 2 8298 8260
Australian Share Registry
Link Market Services Limited
World Square
Level 12, 680 George Street,
Sydney, NSW 2000
Australia
Telephone: +61 1300 554 474
Exchange & Registry for BSP Convertible Notes
South Pacific Stock Exchange & Central Share Registry
Shop 1 & 11, Sabrina Building
Victoria Parade, Suva
Fiji
GPO Box 11689
Suva, Fiji
Telephone: +679 330 4130
Board of Directors
No Director
Background
9
Priscilla Kevin,
BSCS, MAICD
Non-Executive
Director.
Director since April
2020
10
Ian Tarutia, OBE,
FAICD, FPNGID
Non-Executive
Director.
Director since April
2023
Priscilla Kevin was appointed to the BSP Board in April
2020. Since her appointment to the Board she has joined
as a Member of the Board Risk Committee and was
previously a member of the Remuneration & Nominations
Committee from April 2020 to April 2023.
Ms. Kevin is an IT professional and entrepreneur
specialising in Enterprise Resource Planning (ERP)
Support Advisory. Ms. Kevin has over 20 years ICT
industry experience providing ICT consultancy and
support to a range of businesses as well as government
bodies. Since 2018, Ms. Kevin served as an Independent
Committee Member of the BSP Board Risk Committee.
Ms. Kevin is a board member of PNG Digital ICT Cluster
Inc. and a member of the PNG University of Technology’s
Industrial Advisory Board (IAB). Ms. Kevin is also a
working group committee member of the Centre of
Excellence for Financial Inclusion and is a Council
Member of the Institute of National Affairs (INA).
She holds a Bachelor of Science in Computer Science
from the PNG University of Technology, is an ICANN
fellow and an alumni of the U.S IVLP and East West Center
Schidler College of Business Changing Faces. Ms Kevin
also serves as a non-executive director on the board of
BSP Finance (Fiji) Pte Limited since her appointment
in 2022 and is a member of the Australian Institute of
Company Directors (AICD).
Member
Mr. Tarutia was appointed a Director in April 2023 and
currently serves as a member of both the Board Audit and
Compliance Committee and the Board Risk Committee.
Director
Mr Tarutia is an experienced corporate executive for over
25 years with a strong back ground in superannuation,
finance, banking, investments, governance and strategic
management. He is also an experienced board room
director with over 18 years’ experience on various public
and private sector Boards in PNG, Australia and the Pacific
region. He was CEO of National Superannuation Fund
of Papua New Guinea (Nasfund) for 15 years from July
2007 until he retired on the 31 March 2023 and established
NCSL in 2003 for Nasfund members which is the largest
savings & loan society in the Pacific today by membership
size. Today he runs his consultancy practice and is the
current President of the Papua New Guinea Chamber
of Commerce & Industry. He is a former President of
the Papua New Guinea Institute of Directors and former
Chairman of the Pacific Islands Investment Forum, an
organization of superannuation funds in the Pacific and
New Zealand.
Mr. Tarutia holds both a Bachelor of Business Economics
and Master of Business Administration from the University
of Papua New Guinea. He is a graduate of the Australian
Institute of Company Directors and holds a Diploma in
Financial Markets from the Securities Institute of Australia
and a Diploma in Economic Policy Analysis from the
PNG National Research Institute. He is also a graduate
of the prestigious Harvard Business School Advanced
Management Program (AMP 185) and is a Fellow of the
Australian Institute of Company Directors and a Fellow of
the Papua New Guinea Institute of Directors.
PNG Digital Information and
Communications Technology
(ICT) Cluster Inc.
PNG Women in Science,
Technology, Engineering and
Mathematics Association Inc.
PNG Computer Society Inc.
Centre of Excellence for
Financial Inclusion (CEFI)
Digital Financial Services
Working Group Committee
Australian Institute of Company
Directors
PNG Institute of Directors
Pacific Islands Chapter of the
Internet Society
BSP Financial Group Limited
Kumul Consolidated Holdings
Limited
NASFUND Contributors
Savings & Loans Society
CloudApp Laboratories Limited
Save the Children Australia
Immigration & Citizenship
Authority Board
National Broadcasting
Corporation Limited
Shareholder
BSP
Board / Council
Member
Seychelles Limited
PNG Chamber of Commerce &
Industry
Association of Superannuation
Funds of PNG
Pacific Islands Investment
Forum
140
141
OVERVIEWCORPORATE GOVERNANCE STATEMENTFINANCIALSTATEMENTSPERFORMANCE REVIEWREMUNERATION REPORTSHAREHOLDERINFORMATIONANNUAL REPORT 2023
Honouring
the Legacy
Late Sir Kostas G. Constantinou, OBE
1957-2023
In memoriam of the late Sir Kostas
Constantinou, we honour a distinguished
leader and philanthropist, who passed away
on June 17 2023 in Brisbane, Australia, at
the age of 66. Throughout his distinguished
career, late Sir Kostas exemplified a
remarkable entrepreneurial spirit and
steadfast dedication to empowering the
community.
The health and firm foundation that BSP has
today, is reflective of his strong thoughtful
leadership. During his tenure as BSP’s
Chairman, BSP achieved many significant
milestones. These milestones include, the
expansion of BSP’s banking operations
in several Pacific countries, establishing
a new life insurance business in Papua
New Guinea, and BSP’s dual listing on the
Australian Securities Exchange (ASX) in
2021.
Furthermore, the late Sir Kostas was
committed to giving back to the community
and made significant contributions to the
development of Papua New Guinea through
his business acumen, and promoted
corporate social responsibility and
philanthropy.
The BSP Board, employees, shareholders
and communities we operate in, are
immensely grateful to late Sir Kostas for his
mentorship, friendship and commitment. His
legacy will continue to inspire and guide us,
as we navigate the ever-evolving business
landscape with integrity and purpose.
God bless you and your family. Rest in
Eternal Peace.
142
Corporate Directory
Head Office
BSP Financial Group Limited
Waigani Head Office
Section 34, Allotment 6&7, Klinki Street, Waigani Drive
PO Box 78, Port Moresby, NCD, Papua New Guinea
Email
servicebsp@bsp.com.pg
Telephone
(+675) 320 1212
Website
www.bsp.com.pg
Fiji
Level 12, BSP Suva Central Building
Corner of Renwick Road & Pratt Street,
Suva, Fiji
Telephone
(+679) 132 888 (within Fiji)
(+679) 321 4300 (outside Fiji)
Solomon Islands
Level 2, Heritage Park Head Office
Mendana Avenue
PO Box 37, Honiara,
Solomon Islands
Telephone
(+677) 21874
Samoa
Main Branch,
Beach Road
PO Box 1860, Apia,
Samoa
Telephone
(+685) 66100
BSP Life Fiji
Level 7 BSP Life Centre, Thomson Street,
Suva, Fiji
Telephone
(+679) 132 700
Vanuatu
Port Vila Branch,
Kumul Highway
PO Box 32, Port Vila, Vanuatu
Telephone
(+678) 22084
Tonga
Nuku'alofa Branch, Taufa'ahau Road
PO Box 924, Nuku’alofa, Tonga
Telephone
(+678) 22084
Cook Islands
Rarotonga Branch,
Main Road Avarua
PO Box 42, Rarotonga, Cook Islands
Telephone
(+682) 22014
BSP Life PNG
Level 2, Waigani Banking Centre
PO Box 78, Port Moresby, National Capital
District, Papua New Guinea.
Telephone
(+675) 3056214
BSP Convertible Notes Limited
Level 12, BSP Suva Central Building,
Corner of Renwick Road & Pratt Street,
Suva, Fiji
Telephone
(+679) 321 4412
ANNUAL REPORT 2023
OUR BANK. OUR PEOPLE.
Annual Report 2023
Our Bank. Our People.
www.bsp.com.pg