Professional Documents
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Annual Report 2014
Annual Report 2014
2014
2014
ANNUAL REPORT
2014
THE FIRST COMMERCIAL BANK OF MONGOLIA
2014
C O N T E N T
Vision, Mission and Value 05-06
Shareholders 07
Board of directors 08-11
Chief Executive officer 12-20
Corporate governance 21-22
Statement of economic environment and macro economy
23-24
2014
OUR VISION
To be nature-friendly Green E-Bank that supports
small and medium sized enterprises (SMEs)
OUR MISSION
To be the efficient bank with solid growth, potentially providing
reliable service with respect, business ethics and responsibility.
2014
2014
STAKEHOLDERS
The main stakeholder of the bank is Bishrelt Group LLC, one of the Mongolian largest
conglomerates, operating 15 subsidiary companies with 1700 employees and active operation
in business sectors including banking and finance, investment, securities, real state, trade and
service, manufacture, health, construction and infrastructure division.
Groups vision:
To be the company that contributes in Mongolian development, noticeably efficient to
Mongolian nations, fruitful to our shareholders, to be the strongest competitor and the best
partner of leading corporations of Asia Pacific countries. This is Bishrelt Groups main ambition
and aspiration for the future mission. They have reached todays place by defining our new
ideas to implement our dream as our mission, by announcing the method to fulfill our mission
as our slogan and by working honestly and actively. Further to fulfill the vision with the best
management solution to control the speed of economic development, connection of theory and
practice, activation of creative ideas.
Groups mission:
To honor the consumers, to introduce a new service and product that fulfill the customers
satisfaction, and to contribute the development of Mongolian economy and social treasury by
enterprising a promising manufactory based on intellectual advanced technology.
The company keeping pace with the global information era by using the best administrative
management in production and service, giving accelerated and quality service, preferring the
knowledge-based environment of transparency, paying special attention to the development of
companys infrastructure and information technology, using the worldwide brand technologies
and software in our activities.
As the Group defines its social responsibility policy, it is to protect the mother earth and
environment, and to solve the issues facing the society, such as: poverty, unemployment and
ecological problems.
Bishrelt Group LLC joined to the United Nation`s Global Compact in 2004 and has
started to work in compliance with its pre-figurative visions, informing them to public. As a
result of its business achievements and contribution of tax payments in state budget in 2004,
2005, 2006, 2008, 2010, 2011, 2012 and 2013 Bishrelt Group LLC has awarded by
honorary title Best Entity of Mongolia issued by Government of Mongolia and Mongolian
Chamber of Commerce, in 2007 awarded by title Best of the Best entities of Mongolia, in
2013 awarded by title CACCI Golden award cup of Asia and Pacific region best entities,
and listed as an one of TOP- 100 entities of Mongolia for last 10 years which demonstrate its
stable effort as being one of best entities of Mongolia.
BOARD OF
DIRECTORS
2014
09
CAPITAL BANK
ANNUAL REPORT 2014
First and foremost, at this time of performance review of 2014 of our bank, I would like to express my sincere gratitude
and greetings to our esteemed customers, deposit holders, international and domestic partners and colleagues for the continuous
support and cooperation. And wish you all great success on your future creative work on behalf of the Board of Directors and
its members. While I believe that our team can accomplish the objectives and goals of business plan and expand our efficient
collaboration in the coming year 2015.
The goal for the year 2014 was to Improve the skill and capacity of human resource and to become the leading entity
with good corporate governance. As a result of our community directing their efforts and implementing certain organizational
measures, we were able to expand the scope of banking activities, actively engage in a number of projects implemented by the
Government as well as other projects and programs within the framework of social responsibility policy. We have commended
on experiencing a higher growth rate of the key indicators compared to the previous year as a result of successful collaboration
with our customers, clients, business partners. Here I would like to underline that we are duly proud to be the only bank with
domestic investment.
I believe that you all will be satisfied to see the banks 2014 annual report and its major indicators performances.
The challenges we have faced during the implementation of our principal objectives in 2014 were the devaluation of
MNT rate in relation to foreign currencies and the sharp slowdown of economic growth which began since the second half of
2013. We have operated focusing on overcoming the challenges with less loss and failure.
Thus, our banks success, marched together with social development and successfully accomplished the goal set by, attained
a progress, are a direct expression of our joint efforts despite the influence of the countys social and economic crisis situation.
CAPITAL BANK
ANNUAL REPORT 2014
10
Last year, although it was under unfavorable situations, such as, our countrys economic growth has experienced slowdown,
inflation rate has increased compared to the previous year and purchasing power of MNT has weakened, our banks stockholders
has posted 20.0 billion MNT as subordinate payable with a condition to convert on shares which was an important step that
increased our banks risk capacity by 72.0%. Bank deposit has increased by 46.6% which enabled the increasing of banks
lending capacity. This enabled the possibility to successfully implement the goal set to increase the amount of loan grants to
SMEs.
During the reporting year, our banks loan portfolio has increased by 57.6%. As a result of this excellent performance,
the loan operation has shown its positive effect in maintaining banks sustainable development and raising the level of
profitability that increased our net income by 2.3 times more than the previous year in 2014. We have implemented several
innovating activities in our operation for maintaining transparency and enforcing appropriate governance principles implemented
by the Bank of Mongolia.
Corporate governance practice has become the attention around the world, and in this current situation where the best
methods of governance are more concerned, the Board of Directors have cooperated with International Finance Corporation,
member organization of World Bank, to improve corporate governance, to reduce risk, to promote profitability, to attract
new investments, and the policy documents which are the principle source of good governance have been reviewed to be
newly revised and amended. These documents have been an important step towards the objectives to be to lead by good
governance bank.
I encourage the bank colleagues to successfully implement the objectives for 2015 with dignity.
SINCERELY,
CHAIRMAN OF THE BOARD OF DIRECTORS
BATBAYAR. T
11
CAPITAL BANK
ANNUAL REPORT 2014
BOARD OF DIRECTORS
The Board of Directors /BOD/ has been newly assigned with 7 members on the shareholders meeting which was held on
24th March, 2014. Two of them are independent members, and it is consisted of highly skilled members with masters and
doctoral degrees in banking, finance and business management, as well as rich experience in working for banking and financial
organizations and lecturing banking and finance theories to university students for many years.
Auditing committee, integrated risk management committee, remuneration, nomination committee were established within BOD
and detailed plans are made to be executed by monthly, quarterly and annually schedule for each committee, and the members
have completed their plans according to their respective responsibilities. The discussing agenda for the meeting, the main
method of BODs operation, were reflected in the annual plan with definite period, and Board members were appointed for
the meeting preparation and the meetings were creatively organized. The meeting was held eight times during the reporting
year, and the critical issues such as credit, risk, personnel, information technology, prudential ratios requirements, and the
implementation of business plan were discussed. The CEO, Deputy CEOs, directors of departments, senior officers and other
officers of the bank who are related to those issues have attended the meetings, and recommendations and directions were
given to the malfunctioning or works that are need to be attentive in the future. Monitoring the performances which resulted
in constituting the banks normal operations was the stimulation for motivating the bank colleagues and directing them to the
right direction.
Furthermore, BOD members have made an on-site visit often to the departments, offices and units, to hear the employees
impression, and if necessary, include some of the issues in the meeting to be discussed in accordance with the plan which
resulted in attending the Management Committee Meeting of informing examination results of Assets and Liabilities Management
Committee, Risk Management Committee and Internal Auditing Committee Meeting, in order to give recommendations and
directions. Involving the BOD members in seminars and conference organized by Mongolian Banks Association in cooperation
with the Bank of Mongolia and International financing organizations, has been an important contribution in promoting innovation
activities in the BOD operations.
All the relevant regulations abided in the BOD level has been newly processed based on the advices of International Finance
Corporation and international best practices as well as reflecting the proposals of Board members and shareholders in order to
perfect the implementation of corporate governance principles which has become another step towards good governance.
The Board of Directors has been working accurately with the shareholder and executives of the bank. The necessary information
of Board of Directors has been located in the banks web site as implementing the transparency policy of proper governance.
MEMBERS:
GOOKHUU. SH
HEAD:
GOOKHUU. SH
C. AUDITING COMMITTEE:
HEAD:
MEMBERS:
NASANBAYAR. N
TSERENTOGOO. A
BOARD MEMBER
GANTUMUR. N
EXECUTIVE
MANAGEMENT
13
CAPITAL BANK
ANNUAL REPORT 2014
First of all, I would like to send my warm greetings to our honored customers, employees, shareholders and board
members of Capital Bank.
The year of 2014 has been an exceptional year with achievements and mistakes combined for the Mongolian banking sector.
In this competitive market of banking sector, the scope of our banks operation has been expanding year by year. The
investments in the product development and information technology has increased dynamically and the implementation of
international best practices by the virtue of defining the proper objectives have increased the banks competitive capacity and
made an influential impact on the maintenance of sustainable development.
Today, We became one of the column of Mongolian banking sector, there liable bank with 88 branches throughout Mongolia,
in 21 provinces, 3 cities, with approximately 600 professional employees and 400.000 customers, that provides all types of
modern banking products and services. For the past 2-3 years, Capital bank has been the leader among other commercial banks
by our performances. We have resolved policy level issues rapidly, major investments have been made with courage and have
accelerated our operation which resulted in making big changes in short term. We are, further, making continuous innovation,
change, improvements and developments as fast as integrating with this globalized electronic century, and awaiting for the new
initiatives and objectives to fulfill together.
According to the banks financial performances in 2014, our total asset has reached 817.4billion MNT by 47.3 percent
of increase from previous year, loan portfolio has reached 489.8 billion MNT by 58.2 percent, deposit has reached 325.0
CAPITAL BANK
ANNUAL REPORT 2014
14
billion MNT by 43.7 percent, net-profit of the bank has increased by 6.2 billion MNT and reached 9.0 billion MNT by 232
percent, respectively. Moreover, the banks equity has reached 79.0 billion MNT which is increased by 30.0 billion MNT or
70 percent.
Further, in accordance with other performances of last year, the number of customers has reached 348300, by 28900
customers or 9 percent, the number of card holders has reached 58258, by 13648 cardholders or 31 percent, the number
of internet banking customers has reached 4071, by 2718 customers or 201 percent, the number of customers involved in
Help News service has reached 28000, by 23942 customers or 590 percent, the number of ATMs has reached 59, by 28
ATMs or 90 percent, the number of merchant POS has reached 262, by 178 merchant POS or 211 percent of increase,
respectively.
In 2014, the bank has promoted the following new products and services in the market:
- New savings products with 14 month term for the apartment down payment.
- Advancement of gold
- UnionPay TravelMate card
- In the scope of corporate social responsibility, for the Mongolian population health we have signed the cooperation memorandum
with Seran hospital, one of the major representatives of health industry in South Korea, and initiated a discount service.
- Payment service which Mongolian telecom phone payment can be paid through the bank.
- Started an insurance brokerage services and it is enabled to deliver complex insurance service to the customers.
Furthermore, projects and programs initiated by the Mongolian Government, Bank of Mongolia, international organizations,
investment funds, governmental and non-governmental organizations were successfully implemented through our bank. As a
result, we have supported over 4000 small and medium sized enterprises to initiate or broaden their business operation, and
have disbursed loans with over 250 billion MNT, as well as created over 2000 new workplaces.
In addition, we have participated in the relevant selection processes in 2014 and have successfully implemented new projects
and programs as following:
15
CAPITAL BANK
ANNUAL REPORT 2014
- Urban sector development MON2301 project C component of Asian Development fund /only through Capital Bank and
State Bank/
- Concessional loan of Ulaanbaatar citys SME development fund /only through Capital Bank/
- Export promotion program-888 of Development bank and Government
- Leader sector promotion program of Development bank and Government
Our achievements have been evaluated by domestic and international organizations in 2014 and prestigious awards of banking
sector were granted to our bank. For instance: our bank has been awarded with BEST SME BANK of Mongolia-2014 from
Capital Finance International, prestigious world-class banking, finance and economic British magazine. The award is granted
to the leaders of banking and financial sector based on the comments of United Nations, World Bank, International Monetary
fund, World Trade organization and International Finance Corporation every year.
Global Sustainable Finance Conference is organized annually by European Organization for Sustainable Development and was
held in Germany from 12th to 13th June, 2014. The foresaid Organization has highly valued efforts and activities of Capital
bank, the first commercial bank of Mongolia in the fields of promoting green development and protecting environment, and
granted Certificate of Merit for Outstanding Sustainable Project Financing. The organization holds a survey around the worlds
financial organizations every year, and highlights the best banking and financial institutions by evaluating their operation results
and contributions towards environment and green development funding within each categories.
Mongolian commercial banks consider the economic benefits and risk assessments of the financing project concurrently with the
consideration of negative impact on environment and society, and remain to refuse finance projects with negative impact on
environment and society, to support initiative green products and services. Furthermore, Mongolian banks have integrated to
approve sustainable financing policy principals of Mongolia in order to lead other business sectors in sustainable development,
while adhering to the related principals and requirements on their internal operation. In 2014, our bank has successfully started
executing this operation as we have approved policy documentations, as well as, staff training is organized by stages that the
implementation process has began effectively.
The core business for 2014 was to improve the banks governance and to implement best practices of international corporate
governance. Since 2013, we have not only been in a consistent relationship with International Finance Corporation, involving
our executive level officials in governance training and conferences to advance their knowledge, but also it has been an
effective step to have collaborated in processing advisory services from the corporation to complete the governance policy
documentations. At the same time, it has been noticed day by day that the cooperation links between the departments of the
bank has been improving; as a result, their organizing works have positive effects on many activities and progresses.
By the end of 2014, our bank is ranked on the 7th place among the banking system, and belongs to the 2nd banking
group. This year, there is a demand for us to increase our rank in the system, conjointly, to improve the banks profitability.
Furthermore, the bank has maintained its asset increase during 2013-2014 when the economic growth was relatively decreased.
However, by the beginning of 2015, it is being definite that the deteriorating economic situation will have a negative impact
on the financial market, including the cash market.
In other words, it is considered to set up the business plan in the form to deliver our products and services to the customers
more closely and to make progress in all aspect of the operation. Additionally, the bank will work on transforming its traditional
methods into more electronic form, since banking services have become faster and prompt in their electronic form nowadays.
We have all the possibilities to attract new customers if we provide competitive e-banking services and correctly determine
the customers demand. Thus, we have planned to make major progresses in improving corporate governance, implementing
international best practices of governance, and further, implementing the global trend of sustainable finance policy and principals
and improving the banks monitoring environment for the coming year. Therefore, I would like to take this opportunity
to inform you that we have planned this year to be Proper development, innovation year to increase our positioning
in the market by directing the departments and offices function for the business growth and strategy implementation into
strengthening operational independency and role of the branches and units through promoting with policy.
CAPITAL BANK
ANNUAL REPORT 2014
16
In general, it is essential to improve the banks profitability, return on assets and competitiveness. It is directly related to the
employees effort, creativity and initiatives, as well as, it is required from the management team to have ethics and responsibility
to be a good example to lead with their knowledge, appropriate action and skillfulness, and to implement proper management.
Therefore, in 2015 and in the near future, we will work with our efforts to achieve our objectives of the business plan of
2015 by building good corporate governance and introducing the international best practice in our operation in order to
become the best bank with the best governance, best services and best employees.
SINCERELY,
CHIEF EXECUTIVE OFFICER
ARIUNBOLD. A
18
2014
EXECUTIVE MANAGEMENT
2014
19
19
CAPITAL BANK
ANNUAL REPORT 2014
CAPITAL BANK
ANNUAL REPORT 2014
20
21
CAPITAL BANK
ANNUAL REPORT 2014
CORPORATE GOVERNANCE
Corporate governance is the provision with the
purpose of maintaining the adequate levels of coordination
of activities among the shareholders, board of directors,
executive management and other participants. It ensures the
financial credentials of the companys business. Capital bank
has been significantly emphasizing the issues regarding the
implementation of appropriate corporate governance.
CAPITAL BANK
ANNUAL REPORT 2014
22
ECONOMIC
OVERVIEW
MACRO
ECONOMICS
CAPITAL BANK
ANNUAL REPORT 2014
24
ECONOMIC GROWTH
Depending on the complexity of the trade balance that happened
throughout the year 2014, the economic real growth reached
7.9% because the MNT rate was dropped by 20%, inflation
was increased with double digit numbers.
Moreover, policy developers have limited opportunity to further
promote the economic growth because economic instability
was originated and off-budget expense is unlikely to increase
significantly.
ECONOMIC SITUATION
The main indicator that directly reflects macro economy
outlook is the national currency, and it refers to products of
MNT and currency rate of other countries.
Since 2013, inflation rate has been maintaining high level
and it did not decrease to one digit number since 2014. This
indicator that reflects the macro economys stability is unable
to reach the targeted level of the Bank of Mongolia. MNT rate
decrease is also an indicator of economy complication. Currency
rate depreciation, which began in late 2013, is caused by trade
balance deficit and foreign direct investment decrease. The Bank of
Mongolia has been conducting the monetary contractionary policy
in order to stop the MNT rate depreciation, and as a result,
reduced the growth rate of foreign currency. During the crisis of
2008 2009, USD rate had 24% of increase, however, during
2013 2014, the USD rate has increased by 35.2%. Result
shows that Mongolian MNT rate has depreciated by 50% since
2011. From these performances, it can be concluded that macro
economy was in a complicated situation in 2014.
UNEMPLOYMENT
Based on the labor market data, unemployment rate remained stable and economic development slowdown scene is yet to be observed.
During this time of economic development depreciation, it is not mentioned in the official data of labor market, but it can affect the
employment that employers to reduce the working hours or provide unpaid leave.
MACRO ECONOMY OUTLOOK OF 2014:
- As the trade balance crisis continues, the real GDP of 2014 reached
15,472.87 billion, increased by 7.9 percent which is an indication of
slower growth than the previous years.
-Economic challenges affected most in the construction and trade
sector. Construction sector increased by 1.02 percent, but trade sector
decreased by 6.9 percent.
-Foreign trade turnover reached USD11 billion, increased by 2.6
percent compared to the previous year. However, foreign trade balance
deficit decreased by 125 and reached to USD 537.9 million, including;
export amount increased by 35.3 percent and reached to USD 5.8
billion, import amount decreased by 17.6 percent and reached to USD
5.2 billion.
-Consumer goods and services price increased for the nationwide by 0.8 percent from the previous month of December, 2014 and by
11.0 percent from the same period of the previous year.
-In 2014, there was a risk to have an economic crisis that the foreign investment was declined and foreign currency inflow was decreased
sharply that caused capital shortage in the economy which resulted disruption in lending, decrease overall money supply by absolute
amount, and the real GDP turned negative.
-Average rate of MNT against USD reached MNT1,883.0 by December, 2014 and decreased by 9.8 percent or MNT 168.74 from
the beginning of the reporting year.
CAPITAL BANK
ANNUAL REPORT 2014
25
FINANCIAL PERFORMANCE
Although Mongolian economy growth has slowed down and
impacted negatively on the financial performances of the banking
sector during the reporting year, our banks financial performance
has increased. Total assets has increased by 47 percent or MNT
263 billion and reached MNT 817.0 billion which was 39 percent
more that the growth of banking system and raised its share of
the market. Profit amount increased 2.3 times more compared to
2013 and reached to MNT 9 billion.
Capital bank met all the criteria of the Bank of Mongolia and other
relevant organizations. The Banks quality indicator, non-performance
loan rate was 2.5 percent which shows good performance out of
the banking system, in addition, liquidity ratio was 33 percent and
capital adequacy ratio was maintained with 16 percent. Promoting
the small and medium sized enterprises has become the most
significant issue for social and economy of Mongolia. As regards,
our bank have effectively implemented many projects and programs
to support small and medium sized enterprises in order to make
significant contribution for Mongolian economy development by
promoting national industry, small and medium sized enterprises and
business operators with our policy. For instance;
- Amendments have been made in the loan condition, becoming
more flexible; loan term is extended from 24 months to 36 months
in order to reduce the burden of drawing term, and interest rates
are lowered by stage.
- Loan repayment chart is flexibly determined based on the
customers business specifics, seasonal features.
- We have been cooperating with Credit Guarantee Fund for a
significant time with the aim to resolve the customers requested
loan amount without reduction due to lack of collateral.
We also have planned many activities to create financial maturity in
order to make the lender to become good customers and monitor
loan portfolio performance by advancing financial supervision and
continuously delivering comprehensive bank products and services
to customers.
350
300
325
120%
100%
98%
250
As a result:
326
220
47%
100
2%
2011
2012
Loan
40%
326
300
40%
30%
220
20%
70
58%
70%
60%
8.0
24
17
Loan
2013
Growth rate
2014
2013
232%
7.0
600
300%
500
250%
150%
30%
4.0
20%
3.0
100%
2.0
1.0
2.7
0.9
2011
50%
0.7
-21%
2012
Loan
0%
2013
Growth rate
2014
-50%
2014
Growth rate
350%
5.0
0%
2012
8.9
200%
10%
10
295%
6.0
40%
59%
2012
Loan
50%
41
40
2011
Growth rate
60
50
0%
2014
80%
58%
10%
100
0%
2013
70
2011
47% 50%
200
70%
60%
555
48%
400
20%
50
20
80%
817
500
60%
150
30
70%
600
200
80
800
700
80%
226
900
59%
59%
490
59%
400
59%
310
300
200
196
123
58%
58%
58%
58%
58%
100
-
59%
58%
58%
2011
2012
Loan
2013
Growth rate
2014
HUMAN
RESOURCES
MANAGEMENT
27
CAPITAL BANK
ANNUAL REPORT 2014
CAPITAL BANK
ANNUAL REPORT 2014
28
29
CAPITAL BANK
ANNUAL REPORT 2014
RISK MANAGEMENT
Corporate governance plays an important role for implementing risk management, and our bank has cooperated with International
Financial Corporation in governance sector. We have implemented the risk governance in accordance with their advice and defined as
following;
In 2014, foreign direct investment declined, trade balance crisis continues, and USD rate constantly increased and reaching MNT 1888.44
by the end of the year. Its impact reflected on the real economy, and economic growth /7.8 percent/ decreased compared to the
previous year, which it has become a major challenge for entrepreneurs and decision makers. Capital bank has insured financial stability
and increased profitability by successfully conducting the external and internal risk management in the transformation of key performance
of macro and micro economy.
EXCHANGE RISK
Risk tolerance
Maximum risk
Capital bank has conducted research on exchange risk assessment, oversight methods and samples in order to improve our operation and
the maximum amount of loss caused by exchange fluctuation is measured and supervised on a daily basis. Maximum amount of loss is
measured by EGARCH method and maximum amount of loss in extreme market conditions is measured by theory of extreme POT /
Peaks Over Threshold/ method, respectively.
Limit of loss from foreign exchange open position is MNT 89 million, and whether the maximum amount of potential loss in 10 days is
within this limit is monitored on a daily basis. According to the predictions made by the fourth quarter of 2014, there was no occasion
exceeding the loss limitation.
CAPITAL BANK
ANNUAL REPORT 2014
30
In addition to above mentioned methods of exchange risk assessment, Commercial team which is consisted of specialists and directors of
Treasury Department and Risk Management Department, also constantly monitors the economic and market transformation, and working
to prevent any potential risks.
LIQUIDITY RISK
In the framework of liquidity risk management, we steadily ensure the prudential criteria set by the Bank of Mongolia, as well as, we have
studied the liquidity criteria recommended from the International Central Bank and introduced it in our operation.
Prudential ratio
Liquidity ratio
33.3%
>25%
28.6%
>20%
10.1%
<25%
For instance, we have been ensuring the prudential ratios as we internally measure the LCR* ratio which is mentioned in the BASEL
III document. Also, liquidity scenario analysis, stress test and GAP analysis are regularly made and introduced in the Risk management
committee and Assets and Liability management committee, and it is used in the decision making process.
Liquidity sensitivity analysis /By 2014.12.31 /
Level
Low
Outflow
5% of deposit outflow
Medium
High
Explanation
In case of low scenario, when 5% of deposit outflows,
liquidity ratio decreases by 3 function and reaches 30%
from 33%.
In case of medium scenario, when 10% of deposit outflows, liquidity ratio decreases by 7 function and reaches
26% from 33%.
In case of high scenario, when 15% of deposit outflows,
liquidity ratio decreases by 11 function and reaches 22%
from 33%.
As it can be seen from the results of liquidity sensitivity analysis of 31st December, 2014, when Capital bank outflows the 10% of the
deposits with special conditions of market, it will be able to maintain the liquiditys prudential ratios.
CREDIT RISK
Capital bank has been forming the optimal loan portfolio and reducing the risk of default loans which causes the borrowers business
operations to fail due to external factors.
We have been conducting our operation by forming the optimal loan portfolio and maintaining the loan portfolio performance and loan
concentration in the rational level.
For this purpose, we have been measuring the borrowers operation and its impact on the loan portfolio depending on the economic
circumstances and have been taking the relevant actions, while adhering to the limitations adequate for our banks features and complying
with the principles set in accordance with international standards and authorized organizations regarding the credit operations.
Additionally, non-performing loan amount in the loan portfolio has been reducing in the recent years that we have promptly provided the
assessment and result on the loan portfolio quality and conducted appropriate measures as we have been automating the loan classification
and loan risk fund.
In order to implement the credit risk management effective and
accessible, we have updated the loan resolution authorizations in each
level of branches, units, Credit committee and BOD, and relevant
supervising system has been improved. We have taken relevant
measures as we have been quarterly reviewing the impact of economic
circumstances and its transformation on the business operations of
the borrowers and provisioning the complications that might arise for
their business operation. Moreover, we have successfully initiated the
operation to make a complete estimate for the environmental and social
risks in the loan operation, as well as, we have been implementing the
8 principles of finance. By implementing this operation, we further
promote the sustainable economic development, and also, it is very
effective in reducing the potential loan risk of the customers operation
and the bank.
31
CAPITAL BANK
ANNUAL REPORT 2014
OPERATIONAL RISK
Within the implementation of integrated policy of operational risk, our bank approved and started to implement Policy and strategy for
Operational risk management in the reporting year.
Capital bank has been implementing the operational risk by conducting risk assessment, research and analysis in each level of banks
product, services and operation, and determining the risk level, as well as developing risk reducing guidance and providing it to the
branches and units.
Furthermore, we have been conducting studies on methods of modern credibility, statistical techniques, calculation of internal and external
impact factors, and choose the samples and methods suitable for our bank in order to prevent potential risks by foreseeing and determining
the key performances of the risk
INSURANCE
Capital bank has become the fourth bank which obtains the license to conduct Bancassurance service on the Financial Regulatory Committee
meeting held on 29th January, 2014. Within the license, the bank is providing the banking products and services with the possibility to
combine with Bancassurance service to the citizens and customers through our branches and units spread across the country. Likewise,
the credit risk Bancassurance service is introduced in every level of the bank which created the possibility to use risk free loans for our
customers.
By choosing the Bancassurance service of Capital bank, clients will have the Bancassurance service with the most convenient terms, as well
as the following advantages:
Protection of properties from all types of potential risks
Getting comprehensive banking and Bancassurance services, products from one-point stop and saving your valuable time
Getting Bancassurance products and services that meet ones needs at most favorable terms available.
Our bank will aid our customers and citizens to prevent from any potential risks and overcome from the risks as we
have been introducing the importance of Bancassurance services and its advantages.
SUSTAINABLE FINANCING
In accordance with the decision to implement a program in order to accumulate the development system for Mongolian sustainable
financing, a working team consisted of all commercial banks, the Bank of Mongolia, Ministry of Environment and Green Development
and Financial Regulatory Committee was established in 2013. Within its cooperation, this operation was successfully initiated in 2014
and it was an important year that the policy documents were approved, as well as, the related activities started to be implemented in
the banking sector step by step.
Specifically, policy principles of Mongolian sustainable financing were approved with the aim for the commercial banks to assess the
economic benefits and risks of their financing projects, while managing the negative social and environment impacts into account, refuse
to finance project with negative impacts on the environment and society, to promote the initiatives of green product and services, as
well as, to adhere the principles and requirements related to their internal operation and to lead other business sectors into sustainable
development. Our bank illustrates the importance of sustainable financing that the environment and social risk management was newly
created in August, 2014 and has been successfully implementing the operation.
Furthermore, European Organization for sustainable development, a German organization, annually organizes the Global Sustainable
Financing conference and it was held on 12th - 13th June, 2014 in Germany. The foresaid Organization has highly valued efforts and
activities of Capital bank, First Commercial bank of Mongolia in the fields of promoting green development and protecting environment
and granted Certificate of Merit for Outstanding Sustainable Project Financing. In its survey of financial institution around the world,
the organization values the results of contributions for environmental and green development in each nomination and highlights the best
banks and financial institutions.
The banks of Mongolia, the key presenters of financial sector, may play an important role for the development of green economy in
Mongolia which is the means to reach the sustainable development and to reduce poverty. Therefore, we are cooperating to promote
the development and implementation of principles of considering environment and social issue for business resolutions and operations.
Even though, economic development and innovation create new opportunities and circumstances, we need to resolve air-water-soil pollution,
climate change, natural resources and water shortages, environmental degradation, over population, poverty and other issues in addition. In
this era where Mongolian rapid development is at its start, we aim to work in accordance with sustainable livelihood, education, health and
lifestyle while maintaining in line with environment protection, our unique nomadic culture, high value storage for the economic growth.
We are assured that our effort for determining the way to overcome the above mentioned challenges and our integrated ideas regarding
the healthy, safe and green living environment, will support the operations to make a decision adequate for the banks products, services,
business operations, partners and customers, and lead us to economic development which considers not only benefits, but also Mongolian
environment and social issues. We are aiming to become a sector which is the core for sustainable development as we make positive impact
on the economic sustainability and contribute in creating new vacant positions. This goal and effort is able to create the possibility to bring
our bank into international market and to increase the financing from investors. It has become more definite that when the customers
environment and social performance is inadequate, it is possible to put the bank into legal, credit, and further business reputational risks.
We consider that there will be negative impact on the environment and society if the above mentioned risks are not managed properly.
Thus, conducting environmental and social issue in our business and internal operation has become a critical matter to effectively manage
CAPITAL BANK
ANNUAL REPORT 2014
32
SUSTAINABLE DEVELOPMENT
Economy
Society
Environment
NON-SUSTAINABLE DEVELOPMENT
Economy
Society
Environment
the credit operation, customers, product types and reputation related risks. In addition, it is possible for the bank to promote sustainable
and green development and financial accessibility through the products and services recommended for the customers. We are confident
that we will achieve positive results as we focus more on these sectors.
33
CAPITAL BANK
ANNUAL REPORT 2014
INFORMATION TECHNOLOGY
We have been conducting in providing the banking products
with ease, ensuring the bank and customer data security, system
continuity and reliability, and to constitute the proper management
and control system of information technology as our mission.
CAPITAL BANK
ANNUAL REPORT 2014
34
TREASURY MANAGEMENT
We, Capital bank, properly implementing asset and liability
management, has ranked 3rd by asset growth between Mongolian
banks, total asset reaching MNT 817.4 billion. The Government
and BOM securities have increased by 42.3%, which is the 13.31%
of total asset. Total deposits increased by 45.5%, reaching MNT
747.7 billion and liquidity ratio reached 32.63%.
In order to closely monitor financial performance and condition,
we calculate the indicators such as the structure of assets and
liabilities, asset quality, liquidity, profitability and interest rates
regularly on a timely basis.
We have researched ratio indicators that international banks use
in order to measure liquidity performance and liquidity risk.
Accordingly, it has improved liquidity ratio by tuning the indicators
relative to its specific characteristics.
Capital bank has ensured adequate level of liquidity and maintained
the average appropriate level of reserve requirements set by BOM,
placing excess reserves to other banks and financial institutions
as overnight loans, interbank deposits, central bank deposits and
investing in Central bank short term securities.
We maintain the foreign currency risk in appropriate levels and
manage the foreign currency positions in accordance with the limits
set by the bank.
FOREX
TRADE FINANCE
35
CAPITAL BANK
ANNUAL REPORT 2014
HIGHLIGHTS
OF 2014
37
CAPITAL BANK
ANNUAL REPORT 2014
HIGHLIGHTS OF 2014
Capital bank is the first to become the FATCA compliant bank
from Mongolia.
Our bank has introduced the UnionPay Travelmate card as the
first bank in Mongolia.
We have received our license for conducting bancassurance
services on 29th January, 2014 from the regular meeting of
Financial Regulatory Committee.
SOCIAL RESPONSIBILITY
We have mentioned in our value that To Implement banks
social responsibility and make contribution to the development of
Mongolia
Within these objectives, the bank has efficiently implemented the
social responsibility for the contribution to the development of the
country and for the welfare of our customers and citizens as well
as for our future generation. Herein:
CAPITAL BANK
ANNUAL REPORT 2014
38
OUR
CUSTOMERS
CAPITAL BANK
ANNUAL REPORT 2014
40
MONLABEL LLC
Monlabel LLC was founded in 2004 and has been cooperating with Capital bank since 2007 for their supply of all the financial
needs. With the cooperation of Capital bank, the company purchased printing machine of international standard of high technology and
high capacity PW-260-R6C from LABELMEN MACHINERY LLC of Taiwan in December, 2007 for the first time in the label sector.
With the support of Capital Bank, the company installed printing machine LABELMEN PW-460-R6C, which has twice more capacity from
previous equipment and the capacity, reliability and efficiency of the company has improved. Furthermore, employment has been doubled
and it is possible to distribute high quality labels in domestic and foreign markets.
DENIMON LLC
Denimon LLC /denim is the main material for making jeans and mon means Mongolia/ was established in May, 2009. With the support
of financing from Capital Bank, the company has upgraded equipments of jeans industry and perform high quality design of jeans, tailoring
and washing. The company has successfully developed the Urban Jeans as Mongolian brand.
NYAMSULD LLC
In 2001,Nyamsuld LLC started its stable continuous operation of heat insulated windows and doors production. Since 2008 the
company has been constantly cooperating with Capital Bank. With the support of project finance from Capital bank, the company upgraded
its equipments and devices with a production capacity of 50 to 70 sq.m windows and doors daily. The Company uses products and
plastic material needed for producing high quality window from worlds leading brands such as Germanys Kommerling and Silverline,
lockage and hinges from Australian MACO and Germanys WINK HAUS, padding rubber from Germanys EPDM.
BANKS
OBJECTIVES SET
FORTH FOR THE
YEAR OF 2015
CAPITAL BANK
ANNUAL REPORT 2014
42
43
CAPITAL BANK
ANNUAL REPORT 2014
CORRESPONDENT BANKS
CORRESPONDENT BANKS
COMMERZ BANK AG
LOCATIONS
60261, KAISERSTRASSE 16, FRANKFURT
AM MAIN, GERMANY
SWIFT CODES
COBADEFF
400878518000EUR
400878518000AUD
30111810000000001626 /RUB/
IBECRUMM
30111840300000001626 /USD/
30111978900000001626 /EUR/
30111826900000001626 /GBP/
BOTKJPJT
635-0467650 /JPY/
0963-THR-050560010 /USD/
KOEXKRSE
0963-FRW-001000082 /KRW/
0963-THR-050560109 /AUD/
PCBCCNBJNME
NRA15014150500220100345 /
USD/
15001658408052502696 /CNY/
ICBKCNBJNMA
ABOCCNBJ050
HSSYCNBH
0610040629200094456USD
0610040629200094580CNY
05999914040000130 /USD
05999901040000145 /CNY/
001114236000000161/USD/
201101236000000142/CNY/
TRY IBAN:
TR840014300000000001042664
CAYTTRIS
USD IBAN:
TR030014300000000001042667
EUR IBAN:
TR600014300000000001056773
10
BANK OF CHINA
BKCHCNBJ
11
KOOKMIN BANK
CZNBKRSE
778400002965 /USD/
843-8-USD-01-8 /USD/
843-8-KRW-01-0 /KRW/
BRANCHES
AND ATM
LOCATION
45
CAPITAL BANK
ANNUAL REPORT 2014
The bank extends its banking service to customers through its 88 branches on dated on December 31, 2014 /including headquarter,
7 branches, 22 settlement centers, and 8 cashiers in Ulaanbaatar city, 23 branches , 18 settlement centers, and 9 cashiers in rural
area/.
With establishment of 24 new branches /8 branches in Ulaanbaatar city and 16 branches in rural area/ in 2014, the bank expands
the operation in all provinces in Mongolia successfully.
BRANCHES IN ULAANBAATAR CITY
HEAD OFFICE
Head office of Capital Bank, Sambuu street 43, Chingeltei district,
Ulaanbaatar, Mongolia
Tel: + 976 7000 1912 Fax: + 976 11-310833
Open hours: Monday Friday 09:00 18:00
Closed: Saturday and Sunday
CENTRAL BRANCH
Head office of Capital Bank, Sambuu street 43, Chingeltei district,
Ulaanbaatar.
Tel: + 976 7000 1912 Fax: + 976 11-310833
Open hours: Monday Friday: 09:00 18:00
Closed: Saturday and Sunday
BAYANGOL AREA
KHOROOLOL BRANCH
1st floor, Apex trading center, Sookhii shoe marketplace, 14th
khoroo, 3rd micro district, Bayangol disctrict, Ulaanbaatar.
Tel: + 976 7007 9002 Fax: + 976 7007 9002
Open hours: Monday Friday: 08:00 22:00 Saturday: 10:00
19:00
Closed: Sunday
CUSTOMS OF CITY SETTLEMENT CENTER
Building of Ulaanbaatar city Customs, Autority Tranporters street,
Bayangol district, Ulaanbaatar city
Tel: + 976 9611 9901 Fax: + 976 5011 9901
Open hours: Monday-Friday: 08:00-17:00 Saturday: 10:00-16:00
Closed: Sunday
TRAIN STATION SETTLEMENT CASHIER
2nd floor of Ulaanbaatar central station, 1st khoroo, Transporters
street, Bayangol district, Ulaanbaatar city
Tel: + 976 1800 1912
Open hours: Monday-Friday: 08:00-17:00 Saturday: 10:00-16:00
Sunday: 10:00-15:00
10TH KHOROOLOL SETTLEMENT CENTER
1st floor of Itgelt town, 10th khoroolol, 5th misrodistrict, Bayangol
district, Ulaanbaatar city
Tel: +976 9611 5003 Fax: + 976 5011 5003
Open hours: Monday-Friday: 09:00-18:00
Closed: Saturday and Sunday
MATERIAL IMPEX SETTLEMENT CASHIER
1st floor of Material Impex Co Ltd Building, 10th micro district,
Bayangol district, Ulaanbaatar city
Tel: + 976 5011 9924
Open hours: Monday-Friday: 09:00-18:00
Closed: Saturday and Sunday
CAPITAL TOWN SETTLEMENT CENTER
Capital Town, Modnii 2 street, Bayangol distirict, Ulaanbaatar
city
Tel: +976 1800 1912
Open hours: Monday-Friday: 09:00-18:00
Closed: Saturday and Sunday
CHINGELTEI AREA
STATE DEPARTMENT STORE BRANCH
2nd micro district, Sukhbaatar district, Ulaanbaatar city
Tel: + 976 1800 1912
Open hours: Monday-Friday: 09:00-18:00
Closed: Saturday and Sunday
CAPITAL BANK
ANNUAL REPORT 2014
BOTANIC SETTLEMENT CENTER
Botanic, 12st khoroo ,Bayanzurkh district, Ulaanbaatar city
Tel: 976-9611 9928
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
46
KHAN-UUL AREA
KHAN-UUL BRANCH
Building of Khangai institute, 3rd khoroo, Chinggis avenue, KhanUul district, Ulaanbaatar city
Tel: + 976 9611 9914 Fax: + 976 5011 9914
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
SUKHBAATAR AREA
BAGA TOIRUU BRANCH
1st floor, building 6, 4th khoroo, Chingeltei district, Ulaanbaatar
city
Tel: + 976 7007 9018
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
47
CAPITAL BANK
ANNUAL REPORT 2014
ZAMIIN-UUD BRANCH
1st floor of Gun service center, Zamiin-Uud soum, Dornogovi
province
Tel: 0252-45-43890, 70527996 Fax: 0252-45-43891
Open hours: Monday-Sunday 09:00-18:00
TRAIN STATION SETTLEMENT CASHIER
Passengers service center, Zamiin-Uud soum, Dornogobi province
Tel: 0252-45-43299
Open hours: Monday-Sunday 09:00-18:00
KHIL SETTLEMENT CASHIER
Controlling point, Zamiin-Uud soum, Dornogobi province
Tel: +976 1800 1912
Open hours: Monday-Sunday 09:00-19:00
E-TRANSSETTLEMENT CASHIER
Building of E-Trans LLC, Zamiin-Uud soum, Dornogobi province
Tel: + 976 1800 1912
Open hours Monday-Sunday 09:00-19:00
SOCIAL INSURANCE SETTLEMENT CASHIER
Social insurance department building, Zamiin-Uud
Dornogovi province
Tel: +976 1800 1912
Open hours: Monday-Sunday 09:00-19:00
soum,
ARKHANGAI BRANCH
Building of Mongolian Telecommunications, Erdenebulgan soum,
Arkhangai province
Tel: + 976 7033 3470 Fax: + 976 7033 3470
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
ORKHON BRANCH
Building 20, micro district 4, Khurenbulag Bag, Bayan-Undur soum,
Orkhon province
Tel: + 976 7035 7504 Fax: +976 7035 7505
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
DARKHAN BRANCH
Building 15, 6th micro district, 12th bag, Darkhan soum, DarkhanUul province
Tel: + 976 7037 7102 Fax: + 976 7032 7102
Open hours: Monday-Friday 09:00-18:00 Saturday 10:00-15:00
Closed: Sunday
CAPITAL BANK
ANNUAL REPORT 2014
48
SELENGE BRANCH
Building of Mongol Em Impex , Sukhbaatar soum, Selenge province
Tel: 7036-3752 Fax: 7036-3752
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
YARANT CASHIER
Buildingf of Yarant border point, Bulgan soum, Khovd province
Tel: + 976 7043 9939
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
KHUVSGUL BRANCH
Building of Capital bank, Murun city, Khuvsgul province
Tel: + 976 7038 8498 Fax: + 976 7038 8499
Open hours: Monday-Friday 09:00-18:00
Closed: Monday and Sunday
MURUN SETTLEMENT CENTRE
Bolor service center building, Murun soum, Khuvsgul province
Tel: + 976 1800 1912
Open hours: Tuesday-Sunday 09:00-18:00
Closed: Monday
BAYAN-ULGII BRANCH
4 zamiin uulzvar, Ulgiisoum, Bayan-Ulgii province
Tel: + 976 7042 2298 Fax: + 976 7042 2298
Open hours: Monday-Friday 08:00-17:00
Closed: Saturday and Sunday
ULGII SETTLEMENT CENTER
Bayan-Ulgii trade and service center, 5th bag, Ulgii soum BayanUlgii province
Open hours: Monday-Friday 10:00-18:00 Saturday 11:00-16:00,
Closed: Sunday
UVS BRANCH
Uvs pharmacy building, 3rd bag, Ulaangom soum, Uvs province
Tel: + 976 7045 4555 Fax: + 976 7045 4555
Open hours: Monday-Friday 08:00-17:00
Closed: Saturday and Sunday
BAYANKHONGOR BRANCH
1st floor of Bayankhongor Em Impex, building, 3rd bag,
Bayankhongor soum, Bayankhongor province
Tel: + 976 7044 4595 Fax: + 976 7044 4595
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
KHONGOR SETTLEMENT CENTER
Bayanmongol service center building, Bayankhongor soum,
Bayankhongor province
Tel: + 976 1800 1912
Open hours: Tuesday-Sunday 10:00-18:00
Closed: Monday
UVURKHANGAI BRANCH
Center pharmacy building, 5th bag, Arvaikheer soum, Uvurkhangai
province
Tel: +976 7032 4090 : + 976 7032 4090
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
DORNOD BRANCH
1st floor of To Van Hotel, 9th bag, Kherlen soum, Dornod province
Tel: +976 7058 - 4934 Fax: + 976 7058 - 4934
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
DORNOGOBI BRANCH
Service office building, Sainshand soum, Dornogobi soum
Tel: + 976 7052 - 3778
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
KHENTII BRANCH
Bayan-Erdes 1st floor, Temuujin street, Chinggis city, Khentii
province
Tel: + 976 7056 - 2811
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
SUKHBAATAR BRANCH
Unu-Enkhjin service center building, Baruun-Urt soum, Sukhbaatar
province
Tel: + 976 1800 1912
Open hours: Monday Friday 09:00-18:00
Closed: Saturday and Sunday
ZAVKHAN BRANCH
Building of Em Impex building, Uliastai soum, Zavkhan province
Tel: + 976 1800 1912
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
UV PROVINCE BRANCH
Building of Em Impex LLC, Zuunmod soum, Tuv province
Tel: + 976 7027 3455
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
DUNDGOBI BRANCH
Em Impex LLC building , Mandalgobi soum, Dundgobi province
Tel: + 976 1800 1912
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
BULGAN BRANCH
Em Impex LLC bulidng, Bulgan soum, Bulgan province
Tel: + 976 7034 4448
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
GOBISUMBER BRANCH
1st bag, Sumber soum, Gobisumber province
Tel: + 976 1800 1912
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
GOBI-ALTAI BRANCH
Capital bank building, Batsuuri street, Esunbulag soum, Gobi-Altai
province
Tel: + 976 1800 1912
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
49
CAPITAL BANK
ANNUAL REPORT 2014
BRANCH, UNIT
ADDRESS
Telmen market, 1st floor of Building#33, Railroad street, Peace Avenue, Micro district 2, Bayangol distirct
17 settlement centre
1st floor of Nomin Hypermarket, 32th toirog, micro district 12, Sukhbaatar district
17 settlement centre
Khan bank building, Khuchit shonkhor marketplace micro district 12, Chingeltei district
Minii zakh supermarket, 21st khoroolol, 19th micro district, SonginoKhairkhan district
1st floor of Skytel Plaza, Chingis Avenue-9, micro district 1, Sukhbaatar district
1st floor of Bishrelt hotel, Independence square, Sambuu street-43, micro distirct 4, Chingeltei district
Bayanzurkh settlement centre, Capital bank, Mongolian Peoples Party Building, micro district
10
11
12
13
14
1st floor of Well Mart trade center, micro district 18, Bayangol district
15
16
1st floor of Altjin bumbugur trade center, micro district 2, Chingeltei district
17
Narantuul credit centre, Capital Bank, Narantuul international trade centre, micro district 14, Bayanzurkh
district
18
19
Airport cashier
20
2nd floor of Sky department, Chingis khaan hotel building, Tokyo street, micro district 1, Bayanzurkh district
21
Minii zakh supermarket located in the east cross-roads, micro district 13, Bayanzurkh district
22
Soyombo cinema, Tsambagarav station, micro district 17, Songino Khairkhan district
23
24
Mini zakh supermarket, Sapporo, 1st khoroolol, micro district 17, SonginoKhairkhan district
25
50000 settlement centre, Capital bank, 2nd micro district, Chingeltei district
26
1st floor, Teddy trade centre, Newtell LLC builing, 2nd micro district, Chingeltei district
27
50000 branch
5th floor, State Department Store, 2nd micro district, Chingeltei district
28
Takhilt settlement center, Capital bank, 22nd micro district, SonginoKhairkhan district
29
Center branch
Head office, Capital Bank, Sambuu street, 3rd micro district, Chingeltei district
30
Khailaast settlement centre, Capital Bank, Khailaast 84 station, 15th micro district, Chingeltei district
31
Khan-Uul branch
1st floor Nomin United LLC, 2nd micro district, Khan-Uul district
32
Khan-Uul branch
33
Khan-Uul branch
34
Khan-Uul branch
35
Khoroolol branch
1st floor APEX trade center, 3rd khoroolol, 14th micro district, Bayangol district
36
Khoroolol branch
1st floor Bayangol department store, Ard Auysh 20th street, 8th micro district, Bayangol district
37
Building Governors office, Zamchdiin street, 4th micro district, Bayangol district
38
39
1st Information and technology park, 6th micro district, Sukhbaatar district
40
Tsaiz-16 branch
Tsaiz-16 branch, Capital Bank, Well Mart trade center, 16 khoroo, 16th micro district
41
Tsaiz-16 branch
42
Well Mart 22 trade center, Khuuchin 22nd tovchoo, 20th microdistirct , Songinokhairkhan district
43
Chingeltei settlement center, Capital Bank, Yargait street-23-373, 18th microdistict, Chingeltei district
BRANCH, UNIT
ADDRESS
CAPITAL BANK
ANNUAL REPORT 2014
50
44
Baganuur Branch
45
Baganuur Branch
Kherlen trade center, Natsagdorj.D street, 1st microdistirct, Baganuur district, Ulaanbaatar city
46
Bayan-Ulgii Branch
1st floor of Information and Communication networking stated owned company, 5th bag, Ulgii soum, BayanUlgii province
47
Gobisumber branch
Gobisumber settlement center, Capital Bank, 1st bag#56-1-2 Sumber soum, Gobisumber province
48
Darkhan branch
New Darkhan International trade center, 6th khoroolol, 12th bag, Darkhan soum, Darkhan-Uul province
49
Darkhan branch
Ikher mogoi trade center, Building of Delbe LLC, 5th bag, Darkhan soum, Darkhan-Uul province
50
Dornod branch
51
Dundgobi branch
52
Gobi-Altai branch
53
Zamiin-Uud branch
54
Zuun kharaa settlement centre, Capital Bank, Sangiin dalai service centre, 7th bag, Mandal soum,
Selenge province
55
rkhon branch
Bayan trade and service center, Uurkhaichin bag, Bayan-Undur soum, Orkhon province
56
Uvurkhangai branch
57
Umnugovi branch
Provincial diagnose and treatment centre, 1st bag, Dalanzadgad city, Uvurkhangai province
58
Sukhbaatar branch
Sukhbaatar branch, Capital Bank, Building Unu-Enkhjin LLC, 7th bag, Baruun-Urt soum, Sukhbaatar
province
59
Selenge branch
60
Tuv aimag branch, Capital bank, Trade street, Nomt 1st bag, Zuunmod soum, Tuv province
61
Uvs branch
62
Khovd branch
63
Khovd branch
Khovd branch, Capital Bank, Magsarjav bag, Jargalant soum, Khovd province
64
Khuvsgul branch
65
Arkhangai branch
66
Bulgan branch
67
Bayankhongor branch
State owned company building for Telecommunication networking, 1st bag, Bayankhongor soum,
Bayankhongor province
68
Khentii branch
69
Zavkhan branch
Temeetei pharmacy, Mongol Em Impex building, Jinst bag, Uliastai soum, Zavkhan aimag
AUDITED
FINANCIAL
STATEMENT
CAPITAL BANK
ANNUAL REPORT 2014
52
T. BATBAYAR
Chairman of BOD
A. ARIUNBOLD
Chief Executive Officer
B.YANJIN
Deputy CEO
53
CAPITAL BANK
ANNUAL REPORT 2014
CAPITAL BANK
ANNUAL REPORT 2014
54
Ulaanbaatar, Mongolia
Date: 31 mar 2015
PETER MARKEY
Director
55
CAPITAL BANK
ANNUAL REPORT 2014
CAPITAL BANK LLC
STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2014
Notes
2014
MNT000
2013
MNT000
3
4
71,127,906
(47,818,405)
23,309,501
35,741,098
(27,769,000)
7,972,098
5
5
2,111,568
(235,777)
1,875,791
1,234,505
(316,265)
918,240
9,140,125
34,325,417
11,913,877
20,804,215
(4,441,190)
29,884,227
(31,369)
20,772,846
Operating expenses
Share of loss in an associate
8
9
(18,534,627)
(684)
(17,938,386)
-
11,348,916
2,834,460
(2,411,566)
(141,623)
8,937,350
2,692,837
(420,258)
3,838,364
(383,836)
(420,258)
3,454,528
8,517,092
6,147,365
10
CAPITAL BANK
ANNUAL REPORT 2014
CAPITAL BANK LLC
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2014
2014
MNT000
2013
MNT000
11
12
13
14
14
9
15
16
17
18
19
78,009,528
67,092,377
16,605,013
9,717,063
99,090,725
499,316
490,839,049
49,374,711
2,035,214
2,507,883
1,670,958
817,441,837
77,681,714
33,675,589
12,752,355
18,570,354
57,854,431
310,952,250
31,824,090
2,413,436
2,806,203
6,275,543
110,653
554,916,618
20
21
22
23
13
24
130,844,588
39,293,695
324,957,560
249,974,576
1,401,020
500,504
888,655
747,860,598
74,615,549
226,170,741
208,747,545
2,297,183
1,657,129
33,000,000
23,083,353
13,497,886
69,581,239
33,000,000
4,391,960
3,652,675
41,044,635
817,441,837
554,916,618
Notes
ASSETS
Cash and balances with the central bank
Due from banks
Derivative financial instrument
Financial investments available-for-sale
Financial investments held-to-maturity
Investment in an associate
Loans and advances to customers
Property, plant and equipment
Intangible assets
Other assets
Assets held for sale
Prepaid tax
TOTAL ASSETS
LIABILITIES AND EQUITY
Due to banks
Repurchase agreements
Due to customers
Borrowed funds
Derivative financial instrument
Other liabilities
Corporate income tax payable
Deferred tax liability
TOTAL LIABILITIES
10
383,836
513,871,983
Ordinary shares
Other components of equity
Retained profits
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
56
3,034,270 #
(420,258)
(420,258)
3,454,528 #
3,454,528
Available-for sale
reserve
MNT000
49,083 #
19,512
(907,861)
937,432 #
(27,684)
612,682
352,434
MNT000
(Note 26)
Other reserves
- #
20,000,000 #
20,000,000
-
Subordinated
loan
MNT000
(Note 25)
13,497,886
907,861
8,937,350
8,937,350
3,652,675
(612,682)
2,692,837
1,572,520
Retained
earnings
MNT000
69,581,239
20,000,000
19,512
-
8,937,350
(420,258)
8,517,092
41,044,635
(27,684)
11,000,000
6,147,365
23,924,954
MNT000
Total equity
The accompanying notes form an integral part of the financial statements.#represents other components of equity of MNT 23,083,353,000(2013: MNT 4,391,960,000)
3
33,000,000
At 31 December 2014
33,000,000
At 31 December 2013
11,000,000
22,000,000
At 1 January 2013
Ordinary
shares
MNT000
(Note 25)
57
CAPITAL BANK
ANNUAL REPORT 2014
CAPITAL BANK
ANNUAL REPORT 2014
CAPITAL BANK LLC
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2014
Note
2014
MNT000
2013
MNT000
8
8
7
8
8
8
8
6
27
26
11,348,916
2,834,460
1,466,371
343,659
4,441,190
680,923
42,481
(6,149,841)
5,883,872
18,057,571
975,632
387,705
162,915
31,369
264,653
197,599
54,888
211,383
(8,998,158)
7,972,999
4,095,445
(4,740,506)
(190,211,862)
3,923,662
(788,644)
(12,589,167)
(120,870,189)
(6,275,543)
(254,577)
56,229,039
98,786,819
749,214
39,293,695
19,512
21,318,500
684
(1,634,207)
19,684,977
23,679,947
111,765,681
(568,463)
(7,552,510)
(27,684)
(8,597,060)
(149,693)
(8,746,753)
(54,369,288)
(500,000)
(19,019,164)
(5,745)
(73,894,197)
(31,713,845)
(13,879,673)
(193,050)
(45,786,568)
16
17
58
59
CAPITAL BANK
ANNUAL REPORT 2014
CAPITAL BANK LLC
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2014
Note
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of ordinary shares
Repayment of borrowed funds
Drawdown of borrowed funds
Drawdown of subordinated loan
Net cash flows generated from financing activities
25
23
23
25
27
2014
MNT000
2013
MNT000
(32,671,619)
73,898,650
20,000,000
61,227,031
11,000,000
(10,764,743)
127,066,467
127,301,724
7,017,811
72,768,403
121,815,950
49,047,547
128,833,761
121,815,950
51,637,549
23,607,203
199,315,986
31,745,519
CAPITAL BANK
2014
ANNUAL
REPORT
2014
CAPITAL BANK LLC
NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
1.
CORPORATE INFORMATION
Capital Bank LLC (the "Bank") is principally engaged in the business of banking and
financial services pursuant to License No. 1 issued by The Bank of Mongolia. There have
been no significant changes in the nature of these activities during the year.
The Bank is a limited liability company, incorporated and domiciled in Mongolia. The
registered address and the principal place of business of the Bank is Sambuugiin street- 43,
Ulaanbaatar 211238, Mongolia.
The Bank is 99.97% owned by Bishrelt Holding Co. Limited, a company incorporated in
Mongolia.
The financial statements of the Bank were authorised for issue by the Board of Governors in
accordance with a resolution of the Governors on 31 March 2015.
2.
ACCOUNTING POLICIES
2.1
Basis of preparation
The financial statements of the Bank have been prepared on a historical cost basis, except
for financial investments available-for-sale and derivative financial instruments that have
been measured at fair value. The financial statements are presented in Mongolian Tugrug,
which is denoted by the symbol MNT, and all values are rounded to the nearest thousand,
except when otherwise indicated.
Statement of compliance
The financial statements of the Bank have been prepared in accordance with International
Financial Reporting Standards (IFRS) as issued by the International Accounting Standards
Board (IASB).
Presentation of financial statements
The Bank presents its statements of financial position in order of liquidity. An analysis
regarding recovery or settlement within 12 months after the statement of financial position
date (current) and more than 12 months after the statement of financial position date (non
current) is presented in Note 30.
Financial assets and financial liabilities are offset and the net amount reported in the
statement of financial position only when there is a legally enforceable right to offset the
recognised amounts and there is an intention to settle on a net basis, or to realise the assets
and settle the liability simultaneously. Income and expenses are not offset in the statement
of comprehensive income unless required or permitted by any accounting standard or
interpretation, and as specifically disclosed in the accounting policies of the Bank.
60
61
61
62
CAPITAL
BANK
ANNUAL
2014
REPORT
2014
2.2
CAPITAL BANK
2014
ANNUAL
REPORT
2014
2.2
62
63
63
64
CAPITAL
BANK
ANNUAL
2014
REPORT
2014
2.3
CAPITAL BANK
2014
ANNUAL
REPORT
2014
2.3
Amendments to IFRS 11
IFRS 14
IFRS 15
Amendments to IAS 16
Amendments to IAS 16
Amendments to IAS 19
Amendments to IAS 27
Amendments to IAS 28
Amendments to IAS 38
Amendments to IAS 41
IFRIC 15
Annual Improvements
(2010-2012 cycle)
Annual Improvements
(2011-2013 cycle)
Annual Improvements
(2012-2014 cycle)
Financial Instruments 3
Consolidated Financial Statements- Sale or Contribution of
Assets between an Investor and its Associate or Joint
Venture 2
Joint Arrangements - Accounting for Acquisitions of
Interests in Joint Operations 2
Regulatory Deferral Accounts 2
Revenue from Contracts with Customers 3
Property, Plant and Equipment - Clarification of Acceptable
Methods of Depreciation and Amortization 2
Property, Plant and Equipment - Bearer Plants 2
Employee Benefits - Defined Benefit Plans: Employee
Contributions 1
Separate Financial Statements - Equity Method in Separate
Financial Statements 2
Investments in Associates and Joint Ventures - Sale or
Contribution of Assets between an Investor and its Associate
or Joint Venture 2
Intangible Assets - Clarification of Acceptable Methods of
Depreciation and Amortization 2
Agriculture - Bearer Plants 2
Agreements for the Construction of Real Estate 1
Amendments to a number of IFRSs issued in December 2013 1
Amendments to a number of IFRSs issued in December 2013 1
Amendments to a number of IFRSs issued in September 2014
2
The Bank is in the process of assessing if the adoption of these Standards and Interpretations in
the future periods will have material impact on its financial statements.
10
64
65
66
65
CAPITAL BANK
2014
ANNUAL
REPORT
2014
2.4
11
CAPITAL
BANK
2014
ANNUAL
REPORT
2014
CAPITAL BANK LLC
NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.
2.4
Date of recognition
All financial assets and liabilities are initially recognised on the trade date, i.e., the
date that the Bank becomes a party to the contractual provisions of the instrument.
This includes regular way trades: purchases or sales of financial assets that require
delivery of assets within the time frame generally established by regulation or
convention in the market place.
(ii)
(iii)
(iv)
12
67
66
67
68
CAPITAL
BANK
ANNUAL
2014
REPORT
2014
2.4
(v)
(vi)
13
CAPITAL BANK
2014
ANNUAL
REPORT
2014
CAPITAL BANK LLC
NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.
After initial measurement, amounts "Due from banks" and "Loans and advances to
customers" are subsequently measured at amortised cost using the EIR, less
allowance for impairment. Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees and costs that are an integral part of the
EIR. The amortisation is included in Interest and similar income in the statement of
comprehensive income. The losses arising from impairment are recognised in the
statement of comprehensive income in "Credit loss expense".
The Bank may enter into certain lending commitments where the loan, on
drawdown, is expected to be classified as held for trading because the intent is to sell
the loans in the short term. These commitments to lend are recorded as derivatives
and measured at fair value through profit or loss.
Where the loan, on drawdown, is expected to be retained by the Bank, and not sold
in the short term, the commitment is recorded only when it is an onerous contract
that is likely to give rise to a loss (e.g., due to a counterparty credit event).
(vii)
Borrowed funds
Financial instruments issued by the Bank that are not designated at fair value
through profit or loss, are classified as liabilities under "Borrowed funds", where the
substance of the contractual arrangement results in the Bank having an obligation
either to deliver cash or another financial asset to the holder, or to satisfy the
obligation other than by the exchange of a fixed amount of cash or another financial
asset for a fixed number of own equity shares.
After initial measurement, borrowings are subsequently measured at amortised cost
using the EIR. Amortised cost is calculated by taking into account any discount or
premium on the issue and costs that are an integral part of the EIR.
An analysis of the Banks borrowed funds is disclosed in Note 23.
14
68
69
70
69
CAPITAL BANK
2014
ANNUAL
REPORT
2014
2.4
15
CAPITAL
BANK
2014
ANNUAL
REPORT
2014
CAPITAL BANK LLC
NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.
2.4
Financial assets
A financial asset (or, where applicable a part of a financial asset or part of a group of
similar financial assets) is derecognised when:
The rights to receive cash flows from the asset have expired
The Bank has transferred its rights to receive cash flows from the asset or has
assumed an obligation to pay the received cash flows in full without material
delay to a third party under a passthrough arrangement; and either:
The Bank has transferred substantially all the risks and rewards of the
asset; or
The Bank has neither transferred nor retained substantially all the
risks and rewards of the asset, but has transferred control of the asset
When the Bank has transferred its rights to receive cash flows from an asset or has
entered into a passthrough arrangement, and has neither transferred nor retained
substantially all of the risks and rewards of the asset nor transferred control of the
asset, the asset is recognised to the extent of the Banks continuing involvement in
the asset. In that case, the Bank also recognises an associated liability. The
transferred asset and the associated liability are measured on a basis that reflects the
rights and obligations that the Bank has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset
is measured at the lower of the original carrying amount of the asset and the
maximum amount of consideration that the Bank could be required to repay.
(ii)
Financial liabilities
A financial liability is derecognised when the obligation under the liability is
discharged or cancelled or expires. Where an existing financial liability is replaced
by another from the same lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or modification is
treated as a derecognition of the original liability and the recognition of a new
liability. The difference between the carrying value of the original financial liability
and the consideration paid is recognised in the statement of profit or loss and
comprehensive income.
16
71
70
72
71
CAPITAL BANK
2014
ANNUAL
REPORT
2014
2.4
In the absence of a principal market, in the most advantageous market for the asset
or liability
The principal or the most advantageous market must be accessible to the Bank.
17
CAPITAL
BANK
2014
ANNUAL
REPORT
2014
CAPITAL BANK LLC
NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.
2.4
18
73
72
74
73
CAPITAL BANK
2014
ANNUAL
REPORT
2014
2.4
19
CAPITAL
BANK
2014
ANNUAL
REPORT
2014
CAPITAL BANK LLC
NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.
2.4
(iii)
Renegotiated loans
Where possible, the Bank seeks to restructure loans rather than to take possession of
collateral. This may involve extending the payment arrangements and the agreement
of new loan conditions. Once the terms have been renegotiated, any impairment is
measured using the original EIR as calculated before the modification of terms and
the loan is no longer considered past due. Management continually reviews
renegotiated loans to ensure that all criteria are met and that future payments are
likely to occur. The loans continue to be subject to an individual or collective
impairment assessment, calculated using the loans original EIR.
20
75
74
76
75
CAPITAL BANK
2014
ANNUAL
REPORT
2014
2.4
Collateral repossessed
The Banks policy is to determine whether a repossessed asset is best used for its
internal operations or should be sold. Assets determined to be useful for the internal
operations are transferred to their relevant asset category. Assets that are determined
better to be sold are immediately transferred to 'Assets held for sale'. Repossessed
assets where the Bank is yet to determine its use are retained under this
account.Repossessed assets are initially recognised at the lower of their fair values
less costs to sell and the amortised cost of the related outstanding loans on the date
of the repossession, and the related loans and advances together with the related
impairment allowances are derecognised from the balance sheet. Subsequently,
repossessed assets are measured at the lower of their cost and fair value less costs to
sell and are included in Assets held for sale.
Leases which do not transfer to the Bank substantially all the risks and benefits incidental to
ownership of the leased items are operating leases. Operating lease payments are
recognised as an expense in the statement of comprehensive income on a straight line basis
over the lease term.
Bank as a lessor
Leases where the Bank does not transfer substantially all the risk and benefits of ownership
of the asset are classified as operating leases. Initial direct costs incurred in negotiating
operating leases are added to the carrying amount of the leased asset and recognised over
the lease term on the same basis as rental income.
21
CAPITAL
BANK
2014
ANNUAL
REPORT
2014
CAPITAL BANK LLC
NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.
2.4
22
77
76
78
77
CAPITAL BANK
2014
ANNUAL
REPORT
2014
2.4
Revenue is recognised to the extent that it is probable that the economic benefits will flow
to the Bank and the revenue can be reliably measured. The following specific recognition
criteria must also be met before revenue is recognised.
(i)
23
CAPITAL
BANK
2014
ANNUAL
REPORT
2014
CAPITAL BANK LLC
NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.
2.4
(ii)
(iii)
Dividend income
Revenue is recognised when the Banks right to receive the payment is established,
which is generally when the shareholders approve the dividend.
(iv)
(11)
Cash and cash equivalents as referred to in the cash flow statement comprises cash on hand,
nonrestricted current accounts with central banks and amounts due from banks on demand
or with an original maturity of three months or less.
(12)
All items of property, plant and equipment are initially recorded at cost. Subsequent costs
are included in the assets carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to
the Bank and the cost of the item can be measured reliably. The carrying amount of any
replaced part is derecognised. All other repairs and maintenance are charged to the
statement of comprehensive income during the financial period in which they are incurred.
24
79
78
80
79
CAPITAL BANK
2014
ANNUAL
REPORT
2014
All items of property, plant and equipment are initially recorded at cost. Subsequent costs
are included in the assets carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to
the Bank and the cost of the item can be measured reliably. The carrying amount of any
replaced part is derecognised. All other repairs and maintenance are charged to the
statement of comprehensive income during the financial period in which they are incurred.
Subsequent to recognition, property, plant and equipment are stated at cost less accumulated
depreciation and any accumulated impairment losses. Depreciation is calculated using the
straight-line method to write down the cost of property and equipment to their residual
values over their estimated useful lives. Land is not depreciated. The estimated useful lives
are as follows:
Buildings
Office equipment
Vehicles
Computer hardware
10 to 40 years
10 years
10 years
3 years
The residual values, useful life and depreciation method are reviewed at each financial yearend to ensure that the amount, method and period of depreciation are consistent with
previous estimates and the expected pattern of consumption of the future economic benefits
embodied in the items of property, plant and equipment.
An item of property, plant and equipment is derecognised upon disposal or when no future
economic benefits are expected from its use or disposal. The difference between the net
disposal proceeds, if any and the net carrying amount is recognised in statement of
comprehensive income.
(14)
Intangible assets
The Banks other intangible assets include the value of computer software and licenses.
An intangible asset is recognised only when its cost can be measured reliably and it is
probable that the expected future economic benefits that are attributable to it will flow to the
Bank.
Intangible assets acquired separately are measured on initial recognition at cost. The cost of
intangible assets acquired in a business combination is their fair value as at the date of
acquisition. Following initial recognition, intangible assets are carried at cost less any
accumulated amortisation and any accumulated impairment losses.
25
CAPITAL
BANK
2014
ANNUAL
REPORT
2014
CAPITAL BANK LLC
NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.
2.4
The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible
assets with finite lives are amortised over the useful economic life. The amortisation period
and the amortisation method for an intangible asset with a finite useful life are reviewed at
least at each financial yearend. Changes in the expected useful life or the expected pattern
of consumption of future economic benefits embodied in the asset are accounted for by
changing the amortisation period or method, as appropriate, and they are treated as changes
in accounting estimates.
The amortisation expense on intangible assets with finite lives is presented as a separate line
item in the statement of comprehensive income.
Amortisation is calculated using the straightline method to write down the cost of
intangible assets to their residual values over their estimated useful lives as follows:
(14)
3-10 years
10 years
The Bank assesses at each reporting date whether there is an indication that an asset may be
impaired. If any indication exists, or when annual impairment testing for an asset is
required, the Bank estimates the assets recoverable amount. An assets recoverable amount
is the higher of an assets or Cash generating unit's (CGUs) fair value less costs to sell and
its value in use. Where the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present
value using a pretax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset. In determining fair value less costs to sell, an
appropriate valuation model is used. These calculations are corroborated by valuation
multiples, quoted share prices for publicly traded subsidiaries or other available fair value
indicators.
For assets excluding goodwill, an assessment is made at each reporting date as to whether
there is any indication that previously recognised impairment losses may no longer exist or
may have decreased. If such indication exists, the Bank estimates the assets or CGUs
recoverable amount. A previously recognized impairment loss is reversed only if there has
been a change in the assumptions used to determine the assets recoverable amount since the
last impairment loss was recognised. The reversal is limited so that the carrying amount of
the asset does not exceed its recoverable amount, nor exceeds the carrying amount that
would have been determined, net of depreciation, had no impairment loss been recognised
for the asset in prior years. Such reversal is recognised in the statement of profit or loss and
comprehensive income.Impairment losses relating to goodwill are not reversed in further
periods.
26
81
80
82
81
CAPITAL BANK
2014
ANNUAL
REPORT
2014
2.4
Financial guarantees
In the ordinary course of business, the Bank gives financial guarantees, consisting of letters
of credit, guarantees and acceptances. Financial guarantees are initially recognised in the
financial statements (withinOther liabilities) at fair value, being the premium received.
Subsequent to initial recognition, the Banks liability under each guarantee is measured at
the higher of the amount initially recognised less cumulative amortization recognised in the
statement of comprehensive income, and the best estimate of expenditure required to settle
any financial obligation arising as a result of the guarantee.
Any increase in the liability relating to financial guarantees is recorded in the statement of
profit or loss in Credit loss expense. The premium received is recognised in the statement of
profit or loss in Net fees and commission income on a straight line basis over the life of the
guarantee.
(16) Employee benefits
(i)
(ii)
(17)
Provisions
Provisions are recognised when the Bank has a present obligation (legal or constructive) as
a result of a past event, and it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable estimate can be made of the
amount of the obligation. The expense relating to any provision is presented in the statement
of profit or loss and comprehensive income net of any reimbursement.
27
CAPITAL
BANK
2014
ANNUAL
REPORT
2014
CAPITAL BANK LLC
NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.
2.4
Taxes
(i)
Current tax
Current tax assets and liabilities for the current and prior years are measured at the
amount expected to be recovered from or paid to the taxation authorities. The tax
rates and tax laws used to compute the amount are those that are enacted or
substantively enacted by the reporting date.
(ii)
Deferred tax
Deferred tax is provided on temporary differences at the reporting date between the
tax bases of assets and liabilities and their carrying amounts for financial reporting
purposes. Deferred tax liabilities are recognised for all taxable temporary
differences, except:
Where the deferred tax liability arises from the initial recognition of goodwill or
of an asset or liability in a transaction that is not a business combination and, at
the time of the transaction, affects neither the accounting profit nor taxable profit
or loss
In respect of taxable temporary differences associated with investments in
subsidiaries, where the timing of the reversal of the temporary differences can be
controlled and it is probable that the temporary differences will not reverse in the
foreseeable future
Deferred tax assets are recognised for all deductible temporary differences, carry
forward of unused tax credits and unused tax losses, to the extent that it is probable
that taxable profit will be available against which the deductible temporary
differences, and the carry forward of unused tax credits and unused tax losses can be
utilised except:
Where the deferred tax asset relating to the deductible temporary difference arises
from the initial recognition of an asset or liability in a transaction that is not a
business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss
In respect of deductible temporary differences associated with investments in
subsidiaries, deferred tax assets are recognised only to the extent that it is probable
that the temporary differences will reverse in the foreseeable future and taxable
profit will be available against which the temporary differences can be utilized
28
83
82
84
83
CAPITAL BANK
2014
ANNUAL
REPORT
2014
2.4
(19)
Assets held for sale are measured at the lower of their carrying amount and fair value less
costs to sell. Repossessed assets are classified as assets held for sale if their carrying
amounts will be recovered principally through a sale transaction rather than through
continuing use. This condition is regarded as met only when the sale is highly probable and
the asset or disposal group is available for immediate sale in its present condition,
management has committed to the sale, and the sale is expected to have been completed
within one year from the date of classification.
In the statement of profit or loss and comprehensive income of the reporting period, and of
the comparable period of the previous year, income and expenses from discontinued
operations are reported separately from income and expenses from continuing operations,
down to the level of profit after taxes, even when the Bank retains a noncontrolling interest
in the subsidiary after the sale. The resulting profit or loss (after taxes) is reported separately
in the statement of profit or loss and comprehensive income.
Property, plant and equipment and intangible assets once classified as held for sale are not
depreciated or amortised.
29
CAPITAL
BANK
2014
ANNUAL
REPORT
2014
CAPITAL BANK LLC
NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.
2.4
Dividends on ordinary shares are recognised as a liability and deducted from equity when
they are approved by the Banks shareholders. Interim dividends are deducted from equity
when they are declared and no longer at the discretion of the Bank.
Dividends for the year that are approved after the reporting date are disclosed as an event
after the reporting date.
(21)
Equity reserves
The reserves recorded in equity on the Banks statement of financial position include
Available-for-sale reserve, Other reserve and Regulatory reserve. Other reserve
represents appropriations of retained earnings, based on the decision of the Chief Executive
Officer of the Bank. The purpose of other reserve is to support the Bank employees social
activities. Regulatory reserve represents the difference in the loan loss provision amount
between IFRS and BOM regulations. Available-for-sale reserve constitutes fair value
changes arising from available-for-sale securities.
30
85
84
2014
2014
86