2017 annual report - bca.cv4f61db7d-e068-490e-aa1e-ab8612e425a6}.pdf · francisco pinto machado...
TRANSCRIPT
2017 Annual Report
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Contents
1. GOVERNING BODIES ....................................................................................................................... 5
2. DEPARTMENTS AND BRANCH OFFICE NETWORK .......................................................................... 6
3. SHARE CAPITAL ............................................................................................................................... 9
6. INTERNATIONAL AND NATIONAL ENVIRONMENT ....................................................................... 12
6.1. INTERNATIONAL .................................................................................................................... 12
6.2. NATIONAL .............................................................................................................................. 15
6.2.1. General Information ................................................................................................... 15
6.2.2. Financial System ......................................................................................................... 17
6.2.3. BCA in the System ....................................................................................................... 19
7. STRATEGIC VISION ........................................................................................................................ 21
8. COMMERCIAL ACTIVITY ................................................................................................................ 23
8.1. FUNDS ................................................................................................................................... 23
8.2. LOAN ...................................................................................................................................... 25
8.2.1. Constraints on lending activity ................................................................................... 25
8.2.2. Analysis of Granted Loans .......................................................................................... 25
9. OTHER ACTIVITIES ........................................................................................................................ 28
9.1. HUMAN RESOURCES ............................................................................................................. 28
9.2. RISK MANAGEMENT, INTERNAL AUDIT AND CONTROL ........................................................ 32
9.3. MARKETING AND PUBLIC RELATIONS ................................................................................... 36
9.4. OTHER SUPPORTING ACTIVITIES ........................................................................................... 40
10. ANALYSIS OF ECONOMIC-FINANCIAL SITUATION ...................................................................... 42
10.1. BALANCE SHEET ................................................................................................................... 42
10.2. INCOME STATEMENT .......................................................................................................... 46
10.3. ANALYSIS OF THE RATIOS .................................................................................................... 48
10.4. PRUDENTIAL RATIOS ........................................................................................................... 49
11. APPROPRIATION OF NET INCOME .............................................................................................. 51
12. CORRESPONDENT BANKS ........................................................................................................... 52
13. NOTES ......................................................................................................................................... 54
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1. GOVERNING BODIES
The Ordinary General Meeting of Banco Comercial do Atlântico (BCA), held on October 25th 2015,
elected, in accordance with article 13 of its Articles of Association, the majority of the members from
the Governing Bodies, that were completed with the election verified in the Extraordinary General
Meeting of October 29, 2015. The Governing Bodies are thus composed of:
General Meeting
Chairman: Miguel António Ramos
Vice-Chairman: Salomão Jorge Barbosa Ribeiro
Secretary: Dulce Patricia Dias Lopes Chantre
Board of Directors
The Board of Directors is appointed by the General Meeting and it includes a Chairman and six Board
Members, four of whom are non-executive members:
Chairman António José de Castro Guerra
Board Member Fernando Jorge do Livramento Santos da Moeda
Board Member Francisco Pinto Machado Costa
Board Member David Hopffer Cordeiro Almada
Board Member Carla Maria Moniz Brigham Gomes
Board Member José Rui Cruz Lopes Gomes
Board Member Manuel José Dias Esteves
Audit Board
Chairman: António José Nascimento Ribeiro
Member: Maria de Fátima Oliveira de Melo Fernandes Sanchas
Member: José Ricardo Vaz Fernandes Benoliel
Deputy Member: Francisco Sebastião Correia Teixeira
Deputy Member: Adelino Vital Fonseca
The Executive Board is appointed by the Board of Directors and it includes three members:
António José de Castro Guerra – Presidente
Fernando Jorge do Livramento Santos da Moeda
Francisco Pinto Machado Costa
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2. DEPARTMENTS AND BRANCH OFFICE NETWORK
Northern Commercial Department – DCN Gilda Monteiro Director
Southern Commercial Department - DCS Herminalda Rodrigues Director
Financial and International Department – DFI Amélia Figueiredo Director
Risk Management Department -DGR Filomena Figueiredo Director
Means and Channels Department – DMC Américo Andrade Director
Organization and Innovation Department - DOI Águeda Monteiro Director
IT Systems Department – DSI Luís Barbosa Director
Security and Logistics Department – DSL Adalberto Melo Director
Operational Support Department - DSO Anibal Moreira Director
Credit Recovery Office - GRE Nuno Cabral Coordinator
Human Resources Department – GRH Niva Barbosa – Head of Division Jacqueline Cruz – Head of Division
Internal Audit Department – DAI
Emanuel Miranda Diretor
Legal and Pre-Legal Office - GJC Dulce Lopes Coordinator
Compliance Supporting Office – GFC
Monica Sanches Coordinator
Marketing and Public Relations Office – GMR Paula Martins
Coordinator
Research and Studies Office Evaldo Lima Coordinator
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NORTHERN CORPORATE OFFICE Northern Corporate Office – GEN
Virgínia Correia Coordinator
SOUTHERN CORPORATE OFFICE Southern Corporate Office I – GES I
Sofia Barbosa Coordinator
Corporate Office Sal – GESA Southern Corporate Office II – GES II
Vera Zego Nelson Moreira Coordinator Coordinator
NORTHERN AREA BRANCHES
Elisa Santos Coordinator
SOUTHERN AREA BRANCHES
Luis Ramos Celmira Mendes Coordinator Coordinator
Type I Branches São Vicente Branch – ASV Maísa Sancha Crisóstomo
Manager
Type I Branches Praia Branch – APA
Janira Barbosa Andrade Manager
Agência de Santa Catarina – ASC Assomada Extension – ADA
Miguel Ângelo Tavares Ladim Manager
Type II Branches Boa Vista Branch – ABV
Valdine Monteiro Manager
Praça Nova Branch - PNA
Lidia Pereira Manager
Porto Novo Branch – APN
Elder Rodrigues Manager
Ribeira Grande Branch – ARG
Osvaldina Espírito Santo G. Brito Manager
Sal Branch – ASA Aeroporto Internacional Amílcar Cabral Counter
Carla Santos Manager
São Nicolau Branch – ASN Augusta Benilde Cruz Manager
Type II Branches Achada Santo António I Branch – ASTI
Romina Tavares Manager
Avenida Branch – AVE
Hercules Semedo Manager
São Filipe Branch - FOGO – AFG
Luis dos Reis Manager
Tarrafal Branch – ATA
Isabel Costa Manager
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Type III Branches Fonte Filipe Branch – AFF
António Evora Manager
Ponta do Sol Branch – APS Paúl Counter – APL (Ext. ARG)
Osvaldina Espirito Santo G. Brito Manager
Santa Maria Branch – ASM
Elizabeth Alexandre Manager
Tarrafal de São Nicolau Branch – ATS Manuel Freitas Manager
Type III Branches Achada Santo António II Branch – ASTII
Dulce Santos Manager
Achada S. Filipe Branch - ASF São Domingos Branch - PSD
Maria Borges Manager
Assomada Branch – ADA Cláudio Filipe Barros Mendonça
Manager Brava Branch – ABR
Ângela Rosa Manager
Chã de Areia Branch – ACA
Neusa Melo Manager
Maio Branch – AMA
Alexandrino Anes Manager
Mosteiros Branch – AMO
Luis dos Reis Manager
Palmarejo Grande Branch – APG
Joaquina Lopes Tavares Manager
Santa Cruz Branch – STC
José Moniz Manager
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3. SHARE CAPITAL
BCA has a Share Capital of 1,324,765,000 CVE (one billion, three hundred and twenty-four million,
seven hundred and sixty-five thousand Cabo Verdean escudos) held, as of December 31st 2017, by the
shareholders set out in the following table, which shows that the equity stakes of Caixa Geral de
Depósitos, SA/ Banco InterAtlântico, SA, INPS – Instituto Nacional de Previdência Social, Garantia –
Companhia de Seguros de Cabo-Verde, SA and Caixa Geral de Depósitos were qualified:
CVE
Shareholders Amount Percentage
CGD/INTERATLÂNTICO 697,446,000 52.65%
INPS 166,078,000 12.54%
CAIXA GERAL DE DEPOSITOS 89,504,000 6.76%
GARANTIA 76,322,000 5.76%
ASA - AEROPORTO E SEGURANÇA AÉREA, SA 28,780,000 2.17%
Employees 27,418,000 2.07%
Others Shareholders 239,217,000 18.05%
TOTAL 1,324,765,000 100.00%
Table 1-Share Capital 31/12/2017
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4. KEY INDICATORS
Variables Unit 2016 2017 Change
BALANCE
Total asset CVE Millions 84,520 89,106 5,4%
Total net asset CVE Millions 45,687 46,181 1.1%
Total liabilities CVE Millions 79,241 83,663 5,6%
Customers' loan CVE Millions 72,703 75,703 4,3%
Net worth CVE Millions 5,278 5.442 3,1%
Operating Account
Net Interest Income CVE Millions 1,978 2,027 2.5%
+ Non-Interest Income CVE Millions 588 742 26.2%
=Operating Income CVE Millions 2,566 2,769 7.9%
-Administratives Costs CVE Millions 1,887 1,926 2.1%
=Cash-Flow Exposure CVE Millions 679 843 24.2%
+ Income from subsidiaries exc. from cons. Assoc. CVE Millions 45 47 3.5%
-Depreciation for period CVE Millions 208 208 0.0%
-Impairment/ Net Provisions for period CVE Millions 98 390 298.0%
-Tax exc./Profits CVE Millions 74 57 -23.0%
= Net Income for period CVE Millions 344 235 -31.7%
RATIO
Overdue Credit/Customers loan % 13.8% 14.6%
Overdue Credit up to + 90 days/Customers loan % 13.2% 13.4%
Credit Impairment /Overdue Credit % 71.5% 75.2%
Credit Impairment and liabilities/Overdue Credit % 72.5% 74.5%
Customers loan/Customers Deposits % 52.9% 50.3%
Net Income/Own Capital (ROE) % 6.8% 4.4%
Net Income/Asset (ROA) % 0.4% 0.3%
Solvency Ratio % 15.78% 16.17%
Operating
(Cost-to-Income) inc. Pensions Funds % 81.6% 77.1%
(Cost-to-Income) exc. Pensions Funds % 70.8% 67.3%
Total Asset/ Total Asset Invested CVE Millions 187 194 3.7%
Total Credit and Deposit/Nº of Asset Employees CVE Millions 243 246 1.3%
Total Credit and Deposit/ Nº of branches CVE Millions 3,235 3,323 2.7%
Number of total Active employees Unit 453 460 1.5%
Number of Fixed Active employees Unit 396 379 -4.3%
Number of branches Unit 34 34 0.0%
Table 2 - Key Values and Indicators from Activity and Income
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5. MESSAGE FROM THE BOARD OF DIRECTORS
This Annual Report reflects clearly and objectively the most relevant activity of Banco Comercial do
Atlântico during the year 2017 and it is intended to be a document of analysis and support for all the
Bank's stakeholders.
In this sense, the Board of Directors reiterates its sincere gratitude to all BCA employees who, through
their mobilization, their professionalism and dedication, have made possible the results presented
here. We are sure that we will continue to count on the same dedication and professionalism of our
staff, in overcoming the challenges that lie ahead.
The Board of Directors also expresses its appreciation to all Shareholders, the General Assembly, the
Audit Board, the External Auditor, to Banco de Cabo Verde, to Auditoria Geral do Mercado de valores
Mobiliários, to Bolsa de Valores, for the competent cooperation in monitoring the day-to-day
management of the Bank.
To our customers, who are our reason for being, we thank you for the privilege of their trust and we
reiterate all our commitment to the satisfaction of their expectations in the relationship with the BCA,
by strengthening and making products compatible with their interests and needs, reinforcing ties of
loyalty, on the basis of trust, respect and common interests.
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6. INTERNATIONAL AND NATIONAL ENVIRONMENT
6.1. INTERNATIONAL
The IMF on 22 January 2018, during the World Economic Forum in Davos, Switzerland, upgraded the
estimates of the World Economic Forum (WEF) of October 2017. About 120 countries, which contribute
to more than ¾ of world GDP, registered positive product variations in 2017, evidencing the highest
synchronized world growth since 2010.
A better-than-expected performance of the economy in 2017 was reflected in the projection of an
average growth of the global economy of 3.7% in that year (+0.1 pp above the projections of Oct17)
and of 3.9% in 2018 and 2019 (+0.2 pp above previous projections).
The advanced economies are projected to have GDP
growth rates of 2.3% in 2017 and 2018 and 2.2% in 2019,
with revised initial estimates of 0.3 pp in 2018 and 0.4 pp
in 2019, reflecting a growth above that projected for the
United States of America, Germany, Japan and South
Korea, as a result of an increase in global demand and
investment.
For the US, GDP growth is expected to accelerate from 1.5% in 2016 to 2.3% in 2017. For 2018 the IMF
projects a growth of 2.7% (0.4 pp above the previous estimates), followed by a reduction of the growth
rate to 2.5% in 2019 (0.6 pp above previous estimates), reflecting the positive effects of the Senate-
approved fiscal package with short-term impact on investment.
The Eurozone should show a GDP growth rate in 2017 of 2.4% (+0.6 pp vs. 2016), 2.2% in 2018 and 2%
in 2019, with a revision of the initial estimates in a range of 0.3 pp, to be sustained by a more positive
performance from Germany, Italy and The Netherlands.
Banco de Portugal (BdP) in its Economic Bulletin of December 2017 upgraded the GDP estimates,
forecasting a growth of 2.6% in 2017, 2.3% in 2018 and 1.9% in 2019, with the Portuguese economy
benefiting from a favorable external environment.
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Emerging and developing economies are the biggest contributors to the growth of the Global Economy,
with GDP growth rates of 4.7% in 2017 (+ 0.3 pp vs. 2016), 4.9% in 2018 and 5% in 2019, maintaining
the October WEO projections unchanged, reflecting different dynamics in each country.
The Asian emergent economy presents the greatest contribution to this projection, with estimated growth
of 6.5% in 2017 and 2018 and 6.6% in 2019, with China standing out (6.6% in 2018 and 6.4% in 2019)
and India (7.4% in 2018 and 7.8% in 2019).
Growth recovery in sub-Saharan Africa from 2.7% in 2017 to 3.3% in 2018 and 3.5% in 2019 is close to
the initial estimates (-0.1pp in 2018 and + 0.1pp in 2019) with upward revisions to Nigeria and downward
to South Africa, where rising political uncertainty weighs on confidence and investment.
Data published in the Oct17 WEO point to the reduction of the unemployment rate in the Euro Zone to
9.2% in 2017 (-0.8 pp compared to 2016) and 8.7% in 2018. In the UK, the rate should be around 4.4%
in 2017 and 2018 (-0.5 pp vs. 2016), and in the US it could also reach 4.4% in 2017 (-0.5 pp vs. 2016)
and 4.1% in 2018.
Concerning the behavior of consumer prices in the Eurozone, it is expected to accelerate from 0.2% in
2016 to 1.5% in 2017 and 1.4% in 2018. In the United Kingdom the forecasts point to 0.7% in 2016 and
2.6% in 2017 and 2018. In the US, it is projected to be 1.3% for 2016 and an increase to 2.1% in 2017
and 2018.
Table 1 presents a summary of the key international macroeconomic indicators:
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Table 3- Evolution of Key International Macroeconomic Indicators
Despite the optimism reflected in the upward revision of world economic growth forecasts, the IMF
warns of downside risks, especially in the medium term.
The restriction of financing conditions, as inflation increases and monetary stimuli are withdrawn,
poses some risk of adverse reaction on the financial markets due to the impact of a faster than expected
increase in interest rates on asset prices and capital flows.
In addition, a more modest-than-expected reaction to the US tax cut could have repercussions on the
strength of external demand directed at the main trading partners of this country, putting some
pressure on forecasts of growth of the world economy.
The outcome of trade agreements under review, in particular NAFTA and the EU-UK negotiations, will
also have an impact on growth, as a potential increase in trade barriers could weaken investment and
reduce potential growth.
2016 2017p 2016 2017p 2016 2017p
Global Economy 3.2% 3.7% n.d n.d n.d. n.d.
Advanced Economies 1.7% 2.3% 0.8% 1.7% n.d. n.d.
USA 1.5% 2.3% 1.3% 2.1% 4.9% 4.4%
Euro Zone 1.8% 2.4% 0.2% 1.5% 10.0% 9.2%
Germany 1.9% 2.5% 0.4% 1.6% 4.2% 3.8%
Italy 0.9% 1.6% -0.1% 1.4% 11.7% 11.4%
Holanda 2.2% 3.1% 0.1% 1.3% 5.9% 5.1%
Japan 0.9% 1.8% -0.1% 1.4% 3.1% 2.9%
United Kingdom 1.9% 1.7% 0.7% 2.6% 4.9% 4.4%
Emerging Economies 4.4% 4.7% 4.3% 4.2% n.d. n.d.
Brazil -3.5% 1.1% 8.7% 3.7% 11.3% 13.1%
Russia -0.2% 1.8% 7.0% 4.2% 5.5% 5.5%
Emerging Asia 6.4% 6.5% 2.8% 2.6% n.d. n.d.
China 6.7% 6.8% 2.0% 1.8% 4.0% 4.0%
India 7.1% 6.7% 4.5% 3.8% n.d. n.d.
Sub-saharan Africa 1.4% 2.7% 11.3% 11.0% n.d. n.d.Sources: WEO - Word Economic Outlook - October 2017
WEO - Word Economic Outlook Update - January 2018
GDP InflaTtion Unemployment
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Other non-economic factors such as geopolitical tensions in Asia and the Middle East, elections in Brazil,
Colombia, Italy and Mexico as well as extreme weather conditions in Australia and sub-Saharan Africa
may have adverse economic effects and lead to lower-than-expected growth.
6.2. NATIONAL
6.2.1. General Information
In the General Government Budget for 2018, the Government of Cabo Verde forecasts GDP growth in
2017 in the range of 4% to 5% and an acceleration to the 5% to 5.5% interval in 2018, based on the
dynamics of the national tourism sector and consequently a good performance of the tertiary sector,
with emphasis on commerce, hotels and restaurants. There is also expected to be a contagion effect in
the secondary sector, namely in manufacturing and construction.
From the perspective of demand, economic growth is expected to be positively influenced by Gross
Fixed Capital Formation, as a result of the increase in Foreign Direct Investment (FDI), as well as of
national investments, taking into account the mechanisms created by the Government for the
improvement of the business environment and access to credit, and also by the increase in Private
Consumption, justified by the empowerment of families.
The economic evolution of the country also benefits from a context of recovery of world economic
activity, particularly in the Euro Zone, the country's main economic partner. The more favorable
external environment, in line with the IMF's most optimistic reviews, will have a positive impact on
tourist demand, and may also improve the execution of planned projects and favor the Emigrants
remittances.
In 2018, it is expected that the transmission of external to domestic inflation will be less than in 2017,
with values ranging from 0% to 1% expected. However, the lack of rain in 2017, which resulted in a bad
agricultural year, represents an upward risk to the general level of food prices.
BCV's monetary forecasts point to an increase in both the Monetary Mass and the Credit to the
Economy, with the Government considering that there is a positive risk for the credit in 2018, resulting
from several financial instruments foreseen in the State Budget for 2018 and that will facilitate access
to the credit market by micro, small, medium and large enterprises and also promote the
internationalization of Cabo Verdean companies. In 2017, the increase in the money supply, expressed
by the M2 aggregate, decelerated, from 8.4% in December 2016 to 4.9% in November 2017, as a result
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of the decrease in the Net International Reserves (-1.3% in November 2017 compared to + 20.8% in the
same period last year), despite the growth of credit to the Economy of 5.25% (5.2% in November 2016).
Regarding the external sector, in 2017, projections point to an increase in the current account deficit,
driven by a significant increase in imports. In 2018 a more moderate acceleration is expected. As a
result, the net reserves / imports ratio will reach 6 and 5.8 months in 2017 and 2018 respectively. It
should be noted that in order to finance the deficit in the Balance of Payments, it was necessary to
reduce the level of Reserve Assets by about -2 billion CVE by the 3rd Quarter of 2017, confirming the
less optimistic forecasts regarding the evolution of the external position.
For 2018, a budget deficit of 3.1% of GDP is expected, financed essentially from concessional external
resources. The Debt Stock Ratio is expected to reach 132.2% of GDP, with Budgetary consolidation and
debt sustainability continuing to be a major concern and challenge. In this line, the successive speeches
of the Government have emphasized the private initiative as a source of economic growth, and the
State has a role of regulator and creator of opportunities, since the margin to stimulate the economy
through more indebtedness is very small.
Table 1 – Key Macroeconomic Domestic Indicators (2018 State Budget)
Key macroeconomic indicators Units 2015 2016E 2017P 2018P
1- Domestic account and money
Asset GDP growth rate in % 1.0 3.8 [4.0;5.0] [5.0;5.5]
Annual Inflaction Rate floating rate in % 0.1 -1.4 [0.5;1.2] [0.0;1.0]
2- Monetary and Financial Sector
Money Supply floating rate in % 5.9 8.4 2.2 4.4
Real Economy floating rate in % 2.7 3.6 4.6 4.5
3- External Sector
Current Account In % GDP -3.2 -2.8 -9.7 -10.9
RIL/Importation Months 6.7 7.1 6.0 5.8
4-Public Finance
Budget Balance In GDP % -4.6 -3.5 -3.2 -3.1
External Debt Stock In GDP % 95.4 97.4 98.6 98.8
Internal Debt Stock In GDP % 29.0 32.2 33.3 33.4
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Global Debt Stock In GDP % 124.4 129.6 131.9 132.2
Source: MF, BCV, INE.
In January 2018 a team from the International Monetary Fund - IMF, after completing a visit to the
country, presented some conclusions about the Cabo Verdean economy, subject to approval by the
institution's Executive Board.
Contrary to the Government's most optimistic expectations, the IMF team estimates growth
acceleration from 4% in 2017 to 4.3% in 2018, stabilizing at 4% in the medium term.
The leader of the team says that the improvement in the pace of growth of the national economy
reflects a favorable international environment and the result of ongoing economic reforms. Growth in
2017 was underpinned by double-digit growth in tourist arrivals, credit growth in the private sector,
and increased consumer and business confidence, with the same factors expected to contribute to the
expected economic performance in 2018.
The team warns of the need to deepen the great fiscal consolidation effort underway, complete the
restructuring of state-owned enterprises and contain the growth of public debt.
The level of Non-Performing Loans (NPLs) and the low profitability of the Banking Sector is seen as a
threat to the stability of the financial sector, despite some improvement in the indicators of financial
stability. In addition, the resolution of high levels of NPL is indicated as a priority and it is recommended
to avoid further loosening of the write-off rules of irrecoverable loans.
6.2.2. Financial System
Banco de Cabo Verde - BCV continued its policy of monetary easing implemented since 2015, which
aimed at making monetary policy more effective and, at the same time, boosting the market and
fostering economic growth. In this sense, it reduced its reference interest rate in June, of absorption
and lending interest rate and discount window. It also implemented interventions in the Monetary
Regularization Securities (MRS) through fixed rate tenders, with placement at the Banco de Cabo
Verde's reference rate, in order to improve the effectiveness of monetary policy; Elimination of the
exemption to the Banking Financial Institutions of 1,000 million CVE on the Basis of Incidence of the
Minimum Reserves regime.
In 2017, among the legal and regulatory diplomas that were published, the following stand out:
Law 7/IX/2017 establishing the Guarantee and Deposits Fund.
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Notice 1/2017, which amends point 4 of Notice 4/2007 of 25 February 2008, providing that
for own funds matters, institutions shall ensure a total capital adequacy ratio of not less
than 12%.
Notice 3/2017 which establishes the general conditions for opening bank deposit accounts
at credit institutions, thereby amending BCV Notice 2/2011.
Notice No. 4/2017 which establishes the minimum requirements that the internal control
system of a financial institution must respect, and the responsibilities of the governing
body in this area.
Notice no. 5/2017, which defines the conditions, mechanisms and procedures required to
effectively fulfill the preventive duties of money laundering and terrorist financing with
respect to the provision of financial services subject to the supervision of Banco de Cabo
Verde.
Notice nº 6/2017 approving the Corporate Governance Code of financial institutions,
which establishes the criteria of good governance that are most relevant to the activity
carried out by financial institutions.
Notice No. 7/2017, which establishes the minimum content of the annual corporate
governance report of financial institutions.
Notice no. 8/2017 that regulates the management of the Deposit Guarantee Fund and
aims to regulate the operation of the management of the Deposit Guarantee Fund.
Notice no. 9/2017 about the value of the annual contribution to be delivered to the
Deposit Guarantee Fund by the participating institutions.
Notice no. 10/2017 amending Notice 4/2015, of July 10, which establishes the recovery
plan for Credit Institutions. It was considered necessary that the Credit Institutions include
in their respective recovery plans the framework of qualitative and quantitative indicators
that allow them to point out more easily the moment when the recovery measures
presented in the plan can be activated. It is then added that the institutions subject to this
are obligated to incorporate qualitative and quantitative indicators into their recovery
plans.
Notice no. 11/2017 amending Notice no. 5/2015 of 10 July on the resolution plan for credit
institutions. This notice shortens for a year the deadline at which the subject Credit
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Institutions, exempted from the obligation to present resolution plans, will have to request
a new waiver request.
6.2.3. BCA in the System
The Cabo Verdean financial system remains competitive although the number of Commercial Banks has
reduced from 8 to 7 due to the application of a resolution measure to Novo Banco.
BCA's loan market share decreased from 36.2% in 2016 to 33.6% in 2017 (data from November) and
increased in deposits, from 38.5% in 2016 to 39.3% in 2017 (data from November).
BCA maintained its commercial network unchanged in 2017 with 34 branches, including 4 Business
Offices.
The production of Vinti4 cards (debit cards) accounted for 37% of all network production in 2017 with
an increase of 4,308 cards (+ 10%) compared to the 2016 issuance. In relation to active cards in
circulation, with reference to December 31 2017, BCA had 76,520 units, totaling 34% of the total
network (35% in 2016).
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The year 2017 was the consolidation of the services BCADirecto Telephone (Contact Center) and
BCADirecto Mobile, which allow customers to obtain information, check and make transactions on their
accounts through the landline and also the mobile devices with Internet access.
BCA registered around 7 thousand new users / members of BCA Directo Multi-channel service (Internet,
Mobile and Telephone). BCA Directo service ended the year with 48 thousand active users (44 thousand
in 2016).
In 2017 BCA's ATM machine grew at a rate of 11% compared to the previous year, ending the year with
61 machines installed and active in the vinti4 network. In terms of market shares, there was a growth
of 2pp in the equipment installed in the vinti4 network, totaling 34%.
The Point of Sale (POS) supported by BCA
maintained the growing trend, reaching 2,059
installed and active equipment, which
represented a growth of 4% over the previous
year. In the meantime, the market share
remained at 31%, both with respect to the
equipment installed in the Vinti4 network, as
well as with regard to the number of transactions
carried out in the POS channel, with an improved
share in terms of amounts transacted in 1 pp.
The deposit machines remained unchanged, totaling 6 machines located in branches located in the
islands of Santiago, São Vicente and Sal.
This channel continued to have a very positive acceptance among customers, as evidenced by the
growth in number of deposits (+ 35%) and the amount of deposits (+ 34%), with approximately 85
thousand deposits totaling 1,7 million escudos.
BCA continued to be the only Bank in the country to offer its customers this complementary channel
to make their deposits with speed, security and convenience.
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7. STRATEGIC VISION
The perspectives of relative stability of the international environment and improvement of the
domestic environment, along with the acceleration of the rhythm of approach of the national
supervision of BCV to the international standards, configure the framework in which BCA will adjust
its strategy.
In this context, the strategic performance of BCA continues through the following vectors:
1. Final Strategic Goals:
a. Increase of Business Profitability through:
The improvement of Net Interest Income of loan operations
I. The increase of Loan-to Deposit Ration
II. A greater contribution of Non-Interest Income
b. Reduction of Cost-to-Income, through:
I. The Increase of the Operating Income
II. The improvement of Technical and Operational Efficiency
c. Strengthening of Solvency based on
I. A Commercial Policy sensitive to the capital risk and consumption of the operations
II. A prudent Dividend Policy
2. Specific Strategic Goals
a. Growth of the Regular Portfolio, through:
I. A greater Commercial Proactivity without prejudice to risk weighting and capital
consumption of operations
II. The improvement of the Quality of Service at branches
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III. A better Communication between the commercial network (branches) and
operational services
IV. Reducing the Response Time for internal and external customers
b. Reduction of the Non-Performing Loans Portfolio, through:
I. A particular attention to the First Signs of Default
II. More Sustainable Restructuring
III. Better Functional Articulation between GRE and GJC
c. More Proactivity (internal and external) in the management and alienation of the assets
in the portfolio (court proceedings and enforcement)
d. Improvement of Technical and Operational Efficiency.
I. Organizational Improvements
II. Control and reduction of Operational Costs.
III. Reduction of Operational Risk
IV. Improvement of Internal Control
V. New Investments, on a business-case basis
VI. Qualification of Human Resources
23
8. COMMERCIAL ACTIVITY
8.1. FUNDS
The focus on the quality of service provided to customers, product innovation, recognition by Cabo
Verdeans in the country and in the Diaspora, and the election of BCA as a Marca de Confiança (trusted
brand) make the Bank a reference in the national banking market.
The balance of Customer Deposits reached 75.2 billion CVE, an increase of 4.5% compared to 2016, and
continues to demonstrate the trusted in the BCA brand. This evolution was evidenced by the increase
in Demand Deposits by 18.4% and the Savings Deposits by 7.5%. The Time Deposits decreased at the
rate of 5.7%.
The table below illustrates the evolution of Customer Funds:
In terms of customer segment, the BCA Deposits belong mostly to Individual Customers with a weight
of 81.4% (81.5% in December 2016), an increase of 4.4%. Business Deposits also increased compared
to 2016. Total Emigrant Deposits represent 49.2% of the total BCA Deposits Portfolio and grew 4%
compared to December 2016.
Table 5- Customers' Funds
(CVE Millions)
Absolute Relative
Deposits 71,930 75,178 3,248 4.5%
Demand Deposits 28,184 33,383 5,199 18.4%
Term Deposits 39,770 37,520 -2,250 -5.7%
Savings Deposits 3,976 4,275 300 7.5%
Type 2016 2017Change
2017 Annual Report
24
Absolute Relative
Demand Deposit
Residents 18,456 21,319 2,863 15.5%
Emigrants 6,708 9,136 2,428 36.2%
Non- residents 3,019 2,927 -92 -3.0%
Total 28,184 33,383 5,199 18.4%
Term Deposit
Residents 13,379 12,434 -945 -7.1%
Emigrants 28,876 27,857 -1,019 -3.5%
Non- residents 1,491 1,504 13 0.9%
Total 43,746 41,795 -1,951 -4.5%
Total Deposits 71,930 75,178 3,248 4.5%
Table 6-Customers' Deposits by type
Change2016 2017
(CVE Millions)
Type
Absolute Relative
Companies
Demand Deposit 10,265 10,983 718 7.0%
Term Deposit 3,036 2,989 -47 -1.6%
Total 13,301 13,972 671 5.0%
Private
Demand Deposit 17,918 22,399 4,481 25.0%
Term Deposit 36,735 34,531 -2,204 -6.0%
Savings Deposit 3,976 4,275 299 7.5%
Total 58,629 61,206 2,577 4.4%
Total Deposits 71,930 75,178 3,248 4.5%
Segments 2016 2017
Table- 7 Customers' Deposit by segment
Change
(CVE Millions)
25
8.2. LOAN
8.2.1. Constraints on lending activity
The activity of BCA in 2017 has been influenced by the resumption of economic dynamics, with some
business opportunities sustained by good market prospects, with an impact on credit demand and
competition among banks for good operations that are emerging.
The Central Bank, in June 2017, aimed at stimulating credit to the economy, adopted a set of monetary
easing measures, namely the reduction of the reference interest rate by 200 basis points, from 3.5% to
1.5%; the reduction of the deposit facility rate from 0.25% to 0.1%; the decrease in rates of lending
facility and discount window in the same amount as the reference interest rate, since they are indexed
to these, going from 6.5% to 4.5% and 7.5% to 5.5% respectively; the implementation of Monetary
Regularization Securities interventions through fixed rate tenders, with placement at Banco de Cabo
Verde's reference rate, in order to improve the effectiveness of monetary policy; the elimination of the
exemption to the Banking Financial Institutions of 1,000 million CVE on the Base of Incidence of the
regime of Required Reserves.
In response to the policies of the Central Bank, BCA decided in September to reduce the asset´s interest
rates, which had an impact in the last quarter of the year, with the increase in demand for loans from
customers. For 2018, in light of favorable economic growth prospects and investor optimism, loan is
expected to grow at a faster rate.
8.2.2. Analysis of Granted Loans
Total new loans granted in 2017, including restructured loans, totaled approximately 8.4 billion CVE,
slightly more than 2016 at 0.8% (64 million CVE), with loans granted to households during the year to
increase by 16.9%, compared to the year 2016. It shall be noted the increase of 14.5% and 18.1% in the
new production of home loans for Permanent Private Residence and Income and in loans for Other
Purposes.
Of note is the decrease in the business segment, despite the strong commitment on loans granted to
SMEs under the credit line launched in 2014.
The following table shows the evolution of new loan granted by customer segments.
2017 Annual Report
26
8.2.3. Loan Portfolio Analysis
The balance of the performing loan portfolio, without business loans, amounted to 32.3 billion CVE, a
decrease of 1.5% (494 million CVE) compared to the previous year. The favorable evolution in the stock
of loan to households by 2.1% is a reflection of the increase in new operations, both in home loans for
permanent own housing and in loans for other purposes. In the business segment, the portfolio
changed by -5.9%, due to the decrease in new operations and also in the normal and early amortization
of certain loans with significant amount.
Including Loan and Past Due Interest, Income Receivable and Public and Private Bonds, the Total Loan
portfolio to Customers increased by 1.3% over the same period of the previous year. Public debt
securities rose 13.8% and 1.1 billion escudos. The balance of public and private bonds declined by 10
Absolute Relative 2016 2017
Companies 5,172 4,694 -478 -9.2% 61.7% 55.6%
Short term 2,692 2,764 72 2.7% 32.1% 32.7%
M/L term 2,480 1,930 -550 -22.2% 29.6% 22.9%
Private 3,210 3,752 542 16.9% 38.3% 44.4%
Mortgage 1,090 1,248 158 14.5% 13.0% 14.8%
Expenditure Credit 2,120 2,504 384 18.1% 25.3% 29.6%
Total granted loans 8,382 8,446 64 0.8% 100.0% 100.0%
Table 8- Loans, including restructured loans by customer segments
(CVE Millions)
Segments 2016 2017Change Structure
(CVE Millions)
Absolute Relative 2016 2017
Corporate 14,623 13,754 -869 -5.9% 44.6% 42.6%
Short term 2,004 1,586 -418 -20.9% 6.1% 4.9%
M/L term 12,618 12,168 -450 -3.6% 38.5% 37.7%
Individuals 18,166 18,541 374 2.1% 55.4% 57.4%
Mortgage 11,952 11,906 -46 -0.4% 36.5% 36.9%
Credit lease 1,828 1,618 -210 -11.5% 5.6% 5.0%
Consumers' credit 4,387 5,016 629 14.3% 13.4% 15.5%
Total Performing Loan 32,789 32,295 -494 -1.5% 100.0% 100.0%
Table 9- Performing Loan Portfolio by Segments
Segments 2016 2017Change Structure
27
million, justified by the liquidation of the installments of some bonds, despite the entry of new
subscriptions.
Despite the increased effort in prudent risk management, the adoption of preventive measures, the
permanent monitoring of customers with higher exposures in order to optimize the quality of the loan
portfolio, non-performing loans amounted to 5.3 billion CVE, representing a year-on-year increase of
2,5%.
The increase in non-performing loans occurred in the Business segment, at a rate of 5.3%. The
representativeness of each segment in 2017 is shown in the following graph.
(CVE Millions)
Absolute Relative
Performing loan 32,789 32,295 -494 -1.5%
Short Term 2,490 2,213 -277 -11.1%
Medium and Long Term 30,299 30,082 -217 -0.7%
Overdue Credit and Interest 5,265 5,525 260 4.9%
Public/Private Bonds 3,470 3,460 -10 -0.3%
Public Debt Securities 7,915 9,004 1,089 13.8%
Other Income Receivable 301 256 -45 -15.0%
Revenues inc/ Deferred Income -234 -242 -8 3.6%
Total loan portfolio 49,507 50,297 790 1.6%
Table 10-Customers loan portfolio
Credit 2016 2017Change
2017 Annual Report
28
The accumulated balance of the Loan Impairment, which includes the impairment of the obligations of
private companies, totaled PTE 4,1 billion, representing a variation of 7.8% and PTE 297,000, and
coverage of Loan Loss Due to Impairment of 74, 5%.
9. OTHER ACTIVITIES
9.1. HUMAN RESOURCES
As of December 31, 2017, the total number of active staff was 463 employees, 381 of whom had
permanent contract and 82 had term contract. It also had 11 inactive employees (8 of unpaid leave, 1
of unlimited leave, 1 in public service and 1 in sick leave).
Admissions, Terminations, Leaves and Retirement
Twenty-six new employees were hired and six terminations occurred (4 at the initiative of the Bank and
2 at the employee's initiative).
It should be noted that a total of 12 employees entered into retirement, one of whom was in inactive
status.
Distribution by Gender
With regard to Gender, Women corresponded to 63.7% and Men to 36.3% of total active employees.
Distribution by Functional Groups
2016 2017 2016 2017
Permanent Employees 396 379 Retirees 164 173
Fixed-Term Contracts 57 81 Rescissions/indemnified 5 6
On secondment 0
On leave 6 9
Sick leave 2 1
Absence- other reasons 1 1
TOTAL 453 460 TOTAL 178 190
Table 11-Distribution of Employees
Active Inactive
29
Regarding the distribution by Functional Groups, 47.2% of the employees performed Technical
functions, 22.6% held Management positions, 14.1% Auxiliary and Support functions, 10.4% were
Multi-functions, and 5.7 % performed administrative functions.
Distribution by Level of Education
At the level of literacy, there is an increase in the number of employees holding a bachelor degree, to
49.9% of the total. It is also observed that the percentage of employees with Polytechnic Higher
Education maintained at 2.2%, and those who hold Technical-Vocational Education increased to 5.8%,
27.4% with Secondary Education and 14.7% with Basic Education. It is observed the maintenance and
reinforcement of the decreasing tendency of the number of employees with academic qualifications of
Basic and Secondary level versus the increase of the same with higher education levels.
Training and Professional Qualification
In 2017 BCA invested in 58 training sessions reaching a total of 768 participants, with a total workload
of 7,076 hours.
Training was carried out in several areas and with great impact on the Bank's activity, of which the
following stand out: Course on protection of personal data; Workshop on - Legislation on financial
instrument markets; Seminar "Internal Audit and Control"; Motivation and teamwork; General and
operational FACTA; Governance model for operational risk; Results-oriented management; Money
laundering and terrorist financing; International foundation level for compliance officer function;
No. % No. %
Primary 75 16.6% 68 14.8%
Secondary 131 28.9% 127 27.6%
Vocational 30 6.6% 27 5.9%
Polytechnic 10 2.2% 10 2.2%
University 207 45.7% 228 49.6%
TOTAL 453 100% 460 100%
Table 12-Educational Qualifications
2016 2017
2017 Annual Report
30
Techniques for decision-making in the management of financial institutions; Workshop on risk
management and internal control; Workshop on
ICAAP & ILAAP; AML - Program Breakdown. The
Western Union case dissected; International
accounting standards; Contract management;
Complaints management; Internships at Caixa
Geral de Depósitos.
It should be noted the great investment made in
training in the areas of Risk Management and Internal Control and Compliance.
Of the training sessions carried out, 25 were in the country (out of company) covering 101 employees,
with a workload of 3,420 hours, while in the country (in the company) 25 sessions were carried out
covering 648 participants, with a workload of 3,003 hours.
In terms of training abroad, 19 employees
participated in 8 training courses in Caixa Geral
de Depósitos and in the Bank Training Institute
in areas such as Impairment, International
Accounting Standards, Document
Management, Risk Management, Money
Laundering and Terrorism Financing, with
workload of 653 hours. Compared to 2016, there was an increase in the number of training sessions
and the number of workload.
During the year 2017 a total of 12 professional internships were provided. Of the six placements offered
in 2016, three were converted into fixed-term contracts in 2017, one was terminated and two
continued the internship for the same year, with BCA's role as a partner in the country's development
in job creation, especially among the young.
With regard to the participation in the academic qualification, throughout the year, the bank supported
three employees in Bachelor's and Master's program.
BCA Participation in the GMC – Global Management Challenge
31
The year 2017 was highlighted by the results achieved by BCA in the Global Management Challenge
Competition - giving shape to an axis of the Strategic Plan of BCA related to the improvement of the
quality of Human Resources and the promotion of talents.
Global Management Challenge is a negotiation competition, created 37 years ago, that operates in a
competitive environment between virtual companies and is, above all, a training tool that enables
participants to develop management skills but also behavioral skills.
In March 2017 a team made up of BCA Employees won the first place in the 1st Edition of the Global
Management Challenge in Cabo Verde, qualifying for the final of the World Competition that was held
in Qatar and counted with the participation of countries of four continents (Africa, Europe, Asia and
America). This achievement also earned the recognition of the Government of Cabo Verde to the BCA’s
Team, for having managed to lead the country to participate, for the first time, in the international
elimination of this important competition of management strategy.
In October 2017, BCA participated in the "2nd Edition of the Global Management Challenge CGD
Internacional 2017/2018". In this intra-group initiative, aimed only at Caixa Geral de Depósitos Group
employees, BCA was represented by three teams from the Sal, São Vicente and Santiago Islands. For
BCA, the result of the competition could not be better: the teams of Praia and S. Vicente were cleared
for the final and the team of the island of São Vicente was the winner of this edition, which was
attended by twenty three teams, representing thirteen CGD Group Units.
Social Benefit for Employees
The employees of the Bank's Private Social Security System, retired employees, and their families have
benefited, in the country, from clinical diagnosis, general and specialist clinic visits, ocular and stomatal
prostheses, infirmary treatments, surgeries and hospitalizations.
Also, under the protocol between BCA and SAMS - Serviços de Apoio Médico e Social dos Sindicatos
dos Bancários do Sul e Ilhas, de Portugal - 105 Terms of Responsibility and 8 Prior Authorizations were
issued, totaling 636 treatments for the benefit of these collaborators, namely.
There were eight evacuations abroad for the benefit of employees of the Private System, including an
accompanying person, and the Bank continued to bear the costs of an evacuee and an escort who
remain in Portugal.
2017 Annual Report
32
In the Country, 20 beneficiaries of the Social Security System and three companions were evacuated to
Praia and S. Vicente. Medical expenses in the country amounted to approximately 32 million CVE and
abroad totaled approximately 7 million CVE.
The Bank continued to support its employees and pensioners through the lending policy, namely for
the acquisition or construction of permanent own housing.
In addition to the HRD routine tasks, it is worth emphasizing the strong commitment of this OE in
fulfilling its responsibilities related to the Compliance function. In this regard, in close collaboration
with the GFC, DSI and ISD, and STIF a diagnosis was made of the legal, regulatory and procedural
compliance of the Video Surveillance Systems and the Access and Attendance Control System installed
in the different installations and BCA’s buildings, and the aspects considered risk enhancers of non-
compliance with BCA Code of Conduct, internal regulations and other applicable legislation with the
Comissão Nacional de Proteção de Dados (CNPD) were identified and remedied.
9.2. RISK MANAGEMENT, INTERNAL AUDIT AND CONTROL
Risk Management
In 2017, two structural projects for the Bank were implemented: the implementation of the Risk
Management Function and the adoption of IFRS 9. The main objectives of these projects are to ensure
that the BCA's risk management system is adequate and effective, ensuring that all material risks of the
activity carried out are duly identified, evaluated, monitored and controlled and also advise and present
complete and pertinent information to the Board of Directors and the Fiscal Board on the relevant risks
associated with BCA activity.
As part of the process of reviewing the risk management framework, and in particular with regard to
the implementation of the Risk Management Function, the Internal Regulations of the Risk
Management Function were adopted, in order to comply with article 16 of BCV Notice No. 4/2017 of
Sep0717 - Internal Control System.
Likewise, it was necessary to determine the BCA Risk Adjustment Factor (RAF), in accordance with the
Risk Adjustment Governance Model approved by the BCA's Board.
33
In 2017, the Risk Management Department continued to coordinate the fulfillment of the Internal
Capital Adequacy Assessment Process (ICAAP), in a process that is transversal to BCA's various
Organizational Units and allows an in-depth self-assessment of the institution's main risks.
Credit Risk
As of July 31, 2017, in compliance with the international standards requirements, we marked on the
core system the concept of Non-Performing Exposure (NPE), that is, defaulted loans, whose definition
and scope was also revised, and with individual impairment attributed, and the Non-Performing Loan
(NPL) corresponds to the subset of the loan and advance agreements, thus excluding securitized loans
and off-balance sheet exposures.
As a recurring activity, the Risk Factors underlying
the impairment loss model ((PI – Probability of
Impairment, PD – Probability of Default and LGD -
Loss Given Default) were updated, and an
improvement of the PIs and PDs was recorded,
translating a presumed improvement in the
portfolio, but diluted, due to the negative impact
of late recovery, which implied a strengthening of
LGD's.
Loan Recovery
Monitoring and recovery of non-performing loan operations is one of the key areas for the bank's good
performance and sustainability. In this sense, the organic structure includes a Loan Recovery Office,
with the responsibility of monitoring and promoting the recovery of all loan operations in default for
more than 60 days. In cases where it is not possible to recover by negotiation, the Loan Recovery Office
proposes to activate the legal mechanisms available to BCA for coercive collection, namely judicial
enforcement.
The year was also marked by the reinforcement of Loan Recovery Office's collaboration with the Legal
and Litigation Office, resulting in the recovery of loans that were already in judicial execution phase, by
promoting the end of the executive process, through the adjudication of assets. Other situations and
procedures have been identified that will have a positive impact on BCA's defaults portfolio in 2018.
2017 Annual Report
34
Liquidity Risk
In the fiscal year 2017 there were no significant changes in the liquidity conditions. The Bank continued
to evolve in a favorable way in reference to liquidity and unfavorable manner to the profitability of the
business. While on the liabilities side the growth of the Balance was supported by Demand Deposits,
on the assets side the increase was mainly due to the amount invested in Investments in Financial
Institutions and Public Debt Securities, with a reduction of the Loan portfolio in normal situation, better
paid asset. Thus, despite the strategies adopted, it was not possible to return to the stagnation of the
loan portfolio, translating into very low loan to deposit ratio.
Interest Rate Risk
The Interest Rate Risk was monitored thru the
quarterly analysis of the evolution of the Loan
Portfolio with indexed interest rate and the
evolution of the internal and external Indexes, as
well as the Repricing Gap.
Prudential maps also produced for BCV, namely
the monthly Map for the preparation of the Stress-
Tests and the semi-annual Map of calculation of the impact of interest rate risk on the Net Position and
the Net Interest Income.
Exchange Rate Risk
Exchange Rate Risk was monitored by monthly analysis of the exchange position, exchange rates and
revaluation results of the USD, the main international currency subject to exchange rate risk. The
exposure of the Foreign Currency Portfolio was also monitored through the Value-at-Risk analysis
Report. A quarterly report was also produced which briefly summarizes the main aspects of the
abovementioned reports for submission to the Executive Board.
Exchange positions rarely exceeded the limits set for the various currencies that make up the portfolio,
with most of the excesses resulting from sporadic increases in the volume of orders made at the
branches. All the excesses were promptly justified and corrected, ensuring a seamless process of
exchange risk management.
35
Compliance Risk
BCA has formally instituted a Compliance Function which is characterized by being an independent,
permanent and effective function of compliance control of the obligations arising from laws,
regulations, rules of conduct, ethical principles and other duties to which BCA is subject. It promotes
the mitigation of Compliance risks and the implementation of adequate measures to solve deficiencies
or detected failures, in close collaboration with other BCA and CGD structures.
Management of the Compliance Function is the responsibility of all the Structure Bodies, under the
coordination of the Compliance Function Support Office, which is also responsible for safeguarding the
proper execution of procedures for the prevention of money laundering and financing of terrorism, as
well as the prevention of market abuse crimes.
As in the previous year, 2017 was also characterized by a strong intervention in information
technologies to support compliance and money laundering activities, requiring a series of adaptations
to the system, implementation of new modules and acquisitions of own support platforms (FACTA,
Profiling, Live).
Operational Risk
In the Fiscal year that just ended, the process of consolidating operational risk management continued,
namely in the implementation of the different tools associated with the corporate management model,
which includes a set of structural and instrumental challenges.
At the structural level, the operational risk area was separated from the internal control area, and the
latter became part of the Internal Audit Department, and in the instrumental field, emphasis was placed
on training sessions for the institution's employees, in addition to the improvement of the corporate
tools used in the management of operational risk, with a direct impact on the monitoring and mitigation
of the same ones.
Internal Audit and Control
The Internal Audit Department was created in February 2017, resulting from the transformation of the
Audit and Inspection Office, due to the need for the Bank to strengthen and align this function with the
best international practices.
2017 Annual Report
36
With the approval of the new statute, the Department now has two offices, namely, the Office of Audit
and Inspection and the Office of Internal Control. What was intended with the new department is the
implementation of a true internal audit function on the one hand, and, on the other hand, the
integration of the internal control function in the Department of Internal Audit.
During the first months after its creation, in addition to the routine tasks, the Department was
committed to creating and approving the following instruments: Internal Regulation of the Audit
Function; Internal Audit Manual and the Multi-Year Plan of activities and Budget for the triennium
2017-2019.
The branches activities were monitored during the year by the auditors, in accordance with the
established routines, in which each auditor is responsible for monitoring a group of branches. Another
very important task was the investigation of customer complaints, taking into account the importance
of providing a quality service to customers and the timely detection of any nonconformities. However,
the main focus, especially in the last 4 months of the year, was the audit actions carried out, a total of
51, of which 12 were branches and 39 were cases. In this sense, we highlight the auditing of the Bank's
information systems started in the last quarter of the year, using specialized external auditing. Some
process audit actions only end in the first two months of 2018.
The Internal Control Office monitored and supported the different areas in the resolution of the
deficiencies identified in the scope of the review of the Internal Control System carried out in 2016 and
2017 and also in the resolution of the deficiencies identified by the internal auditors and Fiscal Board.
9.3. MARKETING AND PUBLIC RELATIONS
In 2017, the focus was strengthened on the transversal and integrated offer of products, services and
channels, along with social responsibility and the management of customer complaints, with a positive
impact on the brand and contributing to the consolidation of BCA's market positioning.
Communication
Institutional Campaign
At the beginning of the year an institutional campaign was launched in response to the strategic
guidelines for strengthening BCA’s brand positioning, focusing on distribution channels. This campaign
focused on the valuation of the Bank's differentials presented several situations of real life experience
37
and its interconnection with the Bank as a channel available in several dimensions, and it was casted
by employees.
The signature of the “Kel Ke di Nôs Nu ta da Valor” campaign,
which was also the motto for the jingle, sought to express the
values that BCA gives to the people who have made and will be
part of this Bank. A Bank that has always in mind to think about
what people need, seeking to align their needs to the new times.
Throughout the year 2017 BCA organized and participated (when
promoted by the City Councils) in meetings with the Emigrants on
vacation in Cabo Verde. In these meetings, BCA focused on the
various channels available for interaction with the customer
residing abroad, as well as the advantages of having their data
updated in the Bank's Database and the delivery of proof of
emigrant status to obtain the tax benefits that the State of Cabo Verde grants this segment.
Products Campaign
Still in the scope of the reinforcement of the communication and
with the purpose of assisting the commercial network to meet the
commercial goals, actions were developed associated with
strategic products, namely:
Home Loan, with the objective of making the product more
competitive and adequate to the current situation, the offer was
reformulated for the residents in the country, creating special
price differential conditions aimed at different customer needs,
namely for the acquisition of houses, associated with a
communication and ad campaign, called "BCA Nos Kasa", present
in different social media and in the Bank's internal channels.
In addition to maintaining the Loans linked to protocols with several Commercial Stores, from the
islands of Santiago, São Vicente and Sal, BCA deepened the relational strategy by promoting flexible
access to Consumer Loan, adapting it according to the employment relationship and professional
profile of the customer.
2017 Annual Report
38
The Credit Line for Small and Medium Enterprises was reinforced by
more than 2 Billion CVE, totaling 5 billion escudos, made available on
preferential terms since 2014, and the "5 Billion CVE for SMEs"
Campaign was launched, with a view to publicizing not only the
strengthening of the Line of credit, but also the lowering of the
interest rate of the product.
Financing to support economic and social development was
available, within the scope of microcredit, based on agreements
established directly with several Associations. In addition, BCA
strengthened its participation in the initiatives of public entities
aimed at boosting microcredit financing through the signing of a Protocol with the Ministério das
Finanças and the Associação Profissional das Instituições de micro-finanças de Cabo Verde (APIMF) -
CV).
Claims Management
BCA continually strives to provide its customers with quality services based on high ethical standards,
facing all complaints presented as an opportunity to continuously improve the quality of service and
deepen customer relations.
In 2017, there was a decrease in the total number of complaints processes, 21% compared to the
number received in 2016, which contributed to improvements in some of the complaints filed in 2016.
Regarding the deadline for reply, it should be noted that 78% of the new complaints were answered
within 10 working days or less.
Given the quality, transparency and rigor that BCA prints in the commercialization of its products and
services, throughout the year, awareness raising actions and proposals to improve processes, aimed at
eliminating, from the root, the causes of the complaints presented.
Social Responsibility
Campaign "Less Alcohol More Life"
BCA signed a protocol with the Coordination Commission of the Campaign "Less Alcohol More Life",
assuming, for three years (2017-2019), the sponsorship of said campaign. The Campaign "Less Alcohol
More Life" - promoted by a Commission formed by the Presidency of the Republic, Ministry of Health
39
and Social Security, Ministry of Education, Family and Social Inclusion and the World Health
Organization - aims to prevent and reduce abusive use of alcoholic beverages through actions that
provide behavioral changes.
Fundação Cabo-verdiana de Ação Social Escolar - FICASE
The "School Kit Distribution Campaign 2017", which has been endorsed by BCA for 8 years, and which
extends throughout the country, made it possible to provide 15,250 Kits to students in need from the
1st to the 6th grades, benefiting, thus, thousands of Cabo Verdean families.
4th World Forum of Local Economic Development
This event which was supported by BCA and brought together, in Cabo Verde, national and foreign
experts. It counted with the participation of about two thousand participants, from high entities to
students, national and foreign. This Forum is part of an ongoing process to facilitate dialogue and
promote exchanges on Local Economic Development with a view to combating rising inequalities and
achieving more equitable and sustainable development for all.
Festa das Bandeiras, São João Feast, Carnival and Tabanca
Festa das Bandeiras of São Filipe on the island of Fogo, the Festivities of São João in Porto Novo, the
Carnival and Tabanca which are cultural manifestations present in several islands of Cabo Verde and
are part of the cultural heritage of the country, had the support of BCA. These festivities count on the
participation of thousands of citizens who include the Cabo Verdean emigrants residing in the diaspora,
many of them BCA Customers.
Sponsorship
BCA Literature Prize
The book "Rua Antes do Céu" by Poet José Luis Tavares, winner
of the 1st edition of the BCA Literature Prize was launched in
2017. This work "Rua Antes do Céu" competed for the prize
along with more than thirty works by Cabo Verdean writers
residing in the country and abroad.
2017 Annual Report
40
The BCA Literature Prize - which as of 2017 changed the name to Corsino Fortes Prize - was created
under a partnership between the BCA and the Academia Cabo-verdiana de Letras (ACL), and aims to
award an unpublished work of a Cabo Verdean author in the field of literature.
Also, within the scope of this partnership, was launched in 2017, the project " Reedição de Livros de
Autores Cabo-Verdianos Consagrados " sponsored by BCA, with the reprint of the work "Antologia de
Ficção Cabo-verdiana Vol. I Pré-Claridosos" by Arnaldo França.
Atlantic Music Expo – AME
The 5th edition of the Atlantic Music Expo, an initiative of the
Ministry of Culture and Creative Industries, which has BCA as
Bronze Sponsor - had dozens of concerts with free access to
the population, conferences, showcases and a hundred music
professionals who gathered during the three days of the event
with the objective of exposing their products and reflecting on their area of activity.
With this partnership, which has lasted for four years, the BCA brand has increased its reputation
among its target audience and has strengthened the promotion of the economic and cultural dynamics
of Cabo Verde and its music in the world.
9.4. OTHER SUPPORTING ACTIVITIES
In 2017, BCA continued to focus on improving the quality of customer service, reinforcing alternative
means to the branch to obtain information and make payments and other banking operations.
With regard to strengthening the external image of the Bank and improving the working conditions of
employees, some works have been completed to improve branches. In addition, the conditions were
established in terms of installation and furniture, to start the important projects of Centralization and
Digitalization of the Archive. BCA is now able to scan and sort about 12,000 documents per day, with
scanning aligned with processes. The great challenge is not only to recover the history, but to reduce
the very production of the documents at their origin.
Aligned with one of the strategic vectors of BCA, cost containment, the information systems area
simplified the technology used through MPLS (Multiprotocol Label Switching), with unmistakable
operational gains and financial savings in the order of 25 %, without neglecting security.
41
During 2017, some correspondents requested the termination of relations with the Bank, based mainly
on their policy of discontinuing their presence in Africa and also the high cost of maintaining the
accounts.
In order to respond to this situation, operations were diverted to other correspondents, in particular
CGD (Caixa Geral de Depósitos) and BofA (Bank of America), seeking to avoid compromising the quality
of service provided to customers.
The year ended with a network of 21 correspondents covering 17 countries and multiple operations in
different currencies (USD, EUR, EUR, CHF, CAD, DKK, SEK, NOK, JPY, ZAR and CNY).
In January 2017 a new Organic Unit was implemented: the Research and Analysis Office. The main
objective of this new structure is to deepen the knowledge of BCA and its relationship with the external
environment, producing information to assist in the definition of strategies and decision making. It also
has as an attribution to increase the culture of knowledge sharing in BCA and to stimulate the
organizational communication, to promote the commitment of the employees in the pursuit of the
goals defined for each period.
In this sense, in addition to completing the bureaucratic aspects of the installation process, the new
unit produced a set of new reports to follow the contextual and transactional environment of BCA and
introduced improvements in the quality of information from other existing analyzes.
In terms of communication, among the presentations made to diversified audience, it is worth
mentioning the dissemination and analysis of BCA's accounts, which sought to cover employees from
all the islands and had an enthusiastic adherence of more than half of the total number of active
employees of the Bank.
2017 Annual Report
42
10. ANALYSIS OF ECONOMIC-FINANCIAL SITUATION
10.1. BALANCE SHEET
In December 2017, BCA's net assets reached 89 billion CVE, an increase of 5.4% (+4.6 billion CVE) in
relation to the value recorded in December 2016. This evolution was contributed by an increase of
30.1% (+5.5 billion CVE) under the caption Investments in Credit Institutions and Other Assets by 63.7%
(+1.3 billion CVE), this latter due to the credit recognized by the State related to the tax impact and
previously recorded under the caption Current Assets.
43
Loans and Advances to Customers
The Global Loans Portfolio, net of impairments, amounted to 46.1 billion CVE, higher than the balance
registered in December 2016 at 1% and about 494 million CVE, reflecting some recovery, especially in
the last quarter of 2017. This growth was contributed by the Cabo Verdean Public Debt Securities
Portfolio, which grew 13.8% in 2017 and recorded a cumulative balance of 9 billion CVE, corresponding
to 10.1% of BCA's net assets.
Absolute Relative
Asset
Cash and Deposits at Central Banks 7,845 6,325 -1,520 -19.4%
Balances due from other Banks 652 603 -49 -7.5%
Available-for-sale Financial Assets 6,654 6,535 -119 -1.8%
Loans and advances to Credit Institutions 18,123 23,586 5,463 30.1%
Loans and advances to Customers 45,687 46,181 494 1.1%
Other Tangible net Assets 2,176 2,050 -126 -5.8%
Intangible Assets 53 62 9 17.0%
Investment Proprieties 1 1 0 0.0%
Investments in associated companies 337 321 -16 -4.7%
Current tax Assets 902 14 -888 -98.4%
Deferred tax Assets 3 3 100.0%
Other Assets 2,090 3,425 1,335 63.9%
Total Assets 84,520 89,106 4,586 5.4%
Liabilities
Resources of Other Credit Institutions 565 1,553 988 174.9%
Resources of customers and other debts 72,703 75,862 3,159 4.3%
Provisions 5,219 5,309 90 1.7%
Current tax liabilities 73 67 -6 -8.2%
Deferred tax liabilit ies 197 206 9 4.6%
Subordinated liabilities 99 -99 -100.0%
Other Liabilities 385 666 281 73.0%
Total liability 79,241 83,663 4,422 5.6%
SHAREHOLDERS' EQUITY 5,278 5,442 164 3.1%
of which : Net Income 344 235 -109 -31.7%
TOTAL 84,520 89,106 4,586 5.4%
Consolidated Balance Sheet
(CVE Millions)
2016 2017Change
2017 Annual Report
44
The accumulated balance of the Loan Impairment, which includes impairment on the bonds of private
companies, reached 4.1 billion CVE and represented a coverage rate of 74.51%.
Securities Portfolio
The balance of the Securities Investments portfolio, which includes the Available-for-Sale Securities,
namely the Consolidated Financial Mobilization Securities, and the share in Promotora and in the
companies not supervised by BCV - Sociedade Cabo-verdiana de Tabacos, Sita, Fundo Gari and Visa,
totaled 6.5 billion CVE. The investments in consolidated financial mobilization securities, in the amount
of 6.4 billion CVE, represented 98.4% of this caption.
Customer’s Funds
The Customer Funds portfolio, including deposits from financial institutions, showed a year-on-year
growth of 5.7% and 4.2 billion, reflecting the preference of its broad and stable customer base, reaching
a cumulative balance of 77.4 billion CVE. The weight of Customer Funds in the bank's net assets in
December 2017 was 88.4%, compared to 86% in 2016.
The deposits from emigrants grew by 1.4 billion CVE (+ 4%) compared to 2016, going from 35.5 billion
to 36.9 billion. This growth reflects the loyalty of our diaspora to the BCA brand and reinforces the
existing level of trust. The increase in the emigrant Demand Deposits by 36.2% and 2.4 billion CVE was
decisive for the growth. It should be noted that the weight of the Emigrants Deposits in the Bank's Total
Deposits decreases slightly from 49.5% in 2016 to 49.2%.
Absolute Relative
Demand Deposit 6,708 9,136 2,428 36.2%
Savings Deposit 2,867 3,131 264 9.2%
Term Deposit 26,009 24,726 -1,283 -4.9%
Total Emigrants 35,584 36,993 1,409 4.0%
TOTAL DEPOSIT 71,930 75,178 3,248 4.5%
Emigrant Weight/Total 49.5% 49.2%
Account headings 2016 2017Change
Deposits from Emigrants
(CVE Millions)
45
Provision for Risks and Costs
The Provision for Costs with the Retirement and Survival Pension Fund reached a total of 5 billion CVE
(4.9 billion CVE in 2016), + 108 million CVE.
The normal contribution of the workers and BCA to the Costs for Retirement and Survival Pensions
amounts to 46.6 million, of which 17.2 million of the employees 29.3 million of the bank. The uses for
payment to the retired and pre-retired totaled 220.1 million. It should be noted that the costs borne
by the bank, which include the normal costs and those related to interest costs and current service
costs, for the Pension and Survival Fund reached 290 million, with a direct impact on personnel costs.
Shareholders’ Equity
The Bank's shareholders’ equity increased by 3.1% and 164 million in 2017, as a result of the combined
effect of the incorporation in reserves of 75% of the Net Profit of 2016.
2017 Annual Report
46
10.2. INCOME STATEMENT
Net Income
BCA recorded a negative variation of 31.7%, about 109 million CVE, reaching 235 million CVE, negatively
justified by the increase in impairment/provisions of 298.9% and about 292.3 million CVE and by
operating costs 1.8% and 39 million CVE. On the positive side, the variation in total operating income
was 7.9% and 203 million CVE, despite the continuous decrease in the rate of return on investments in
Consolidated Financial Mobilization Securities of only 0.17%. The evolution of the net income for the
last four years is shown below.
(CVE Millions)
Absolute Relative
Interest and similar income 3,635 3,469 (166) -4.6%
Interest and similar expenses 1,657 1,442 (215) -13.0%
Net interest income 1,978 2,027 49 2.5%
Income from equity instruments 18 12 (6) -33.3%
Income from services and commissions 424 464 40 9.4%
Costs of services and commissions 44 55 11 25.0%
Income from foreign exchange revaluations 113 110 (3) -2.7%
Income from disposals of other assets 12 (8) (20) -166.7%
Other operating income 64 219 155 242.2%
Net Interest Income 588 742 154 26.2%
Operating Income 2,566 2,769 203 7.9%
Employees Costs 1,273 1,288 15 1.2%
General Administractive Costs 614 638 24 3.9%
Depreciation for period 208 208 - 0.0%
Operating Costs 2,095 2,134 39 1.9%
Impairment of other assets net of reversals and recoveries - (64) (64) 100.0%
Net Impairment form Other Financial Assets 98 454 356 363.3%
Income from subsidiaries exc. from consolidation 45 47 2 3.5%
Income before tax 418 292 (126) -30.1%
Current Tax 74 57 (17) -23.0%
Net Income 344 235 (109) -31.7%
2016 2017
Table 15 - Income Statement
Change
47
Graphic 1 - Net Income Evolution - CVE Millions
Net Interest Income
The Net Interest Income increased by 49 million and 2.5% over the same period last year, totaling 2,027
million CVE, justified by the more significant decrease in Interest and Similar Charges than Interest and
Similar Income. Thus, despite the decrease in receivable interest at 4.6% and 166 million CVE, the
decrease in interest paid on customer deposits was 13% and 215 million CVE, contributing to the
favorable performance of Net Interest Income. However, the variation in the interest rate of securitized
loans of -7.7% and in the recovery of interest and expenses in -43.9%, thus contributing to the decrease
in interest received. It should be noted that the increase by the price and volume effect on interest on
investments in credit institutions in 17.9%. Also contributing to the favorable evolution of this margin
were the increases in interest rates on very short-term investments in the Central Bank at 11.4%.
Non-interest Income
The Non-Interest Income amounted to 742 million CVE, an increase of 26.2% and 154 million CVE with
respect to December 2016. This favorable evolution is the result of the recognition of the debt by the
State relative to the tax whose impact was of 171 million CVE, and also of the increase in net
commissions by 7.7% and 29.4 million CVE. Profitability in equity instruments and results of foreign
exchange management developed unfavorably by -36.9% and -2.8% respectively.
Total Operating Income
The positive evolution of the Net Interest Income and Non-Interest Income, translated into a Total
Operating Income of 2,769 million CVE in 2017, up from 7.9% in the previous year and about 203 million
CVE.
297
369344
235
2014 2015 2016 2017
2017 Annual Report
48
Operating Costs
Despite being one of BCA's strategic objectives for the current year, Operating Costs reversed the
downward trend recorded in previous years and increased 1.8%, totaling 2,134 million CVE. The
increase in Personnel Costs was a reflection of a number of factors, namely the salary increase of 0.5%
granted in 2017, the entry of 26 new employees and termination of 18 employees (12 for retirement
and 6 terminations), and the normal career progression. On the other hand, an unemployment benefit
rate was implemented for the employees enrolled in INPS to cover the unemployment benefit.
General Administrative Expenses also increased 3.9% and million CVE justified by the costs in the areas
of protection of the bank (Compliance, Risk Management and Audit Department). The additional costs
incurred with projects related to these areas were about 19.9 million CVE.
Amortizations for the Year amounted to 208 million CVE, the same amount recorded in December 2016.
The table below shows the composition of Operating Costs, as well as their evolution:
10.3. ANALYSIS OF THE RATIOS
Return on Assets (ROA) and Shareholders' Equity (ROE) reached 0.27% and 4.39%, respectively, against
0.4% and 6.8% in 2016, a direct consequence of the decrease in Net Income for the Year.
The Cost-to-Income ratio, which relates Operating Costs to Total Operating Income, increased favorably
to 77% in 2017 (81.6% in 2016), reflecting the increase in Total Operating Income. Excluding the Pension
Fund effect, Cost-to-Income would be 67.3% in 2017 (70.8% in 2016).
Absolute Relative
Employees Costs 1,273 1,288 15 1.2%
Remunerations 850 865 15 1.8%
Mandatory Social Costs 398 400 2 0.5%
Retirement and Survival Pensions 279 269 -10 -3.7%
Optional and Other Social Costs 25 23 -2 -8.0%
General Administrative Expenditures 614 638 24 3.9%
Depreciations 208 208 0 0.0%
TOTAL Operating Cost 2,095 2,134 39 1.9%
Change
Table 16-Operating Costs
2016 2017Accounts heading
(CVE Millions)
49
The ratio Personnel Expenses/ Total Operating Income improved from 49.6% to 46.5%.
In the Risk indicators, it should be noted the behavior of the ratio Non-performing loans /Total Loan
reached 14.6% in 2017, against 13.8% in 2016, as a consequence of the increase in the non-performing
portfolio, and the coverage ratio by Impairments on non-performing loan that reached a comfortable
level of 75.2% in 2017 against 71.5% in 2016.
The loan-to-deposit ratio measured by Customer Loans in reference to Customer Funds remains very
low and decreased to 50.3% (52.9% in 2016) due to the decrease in the loan portfolio and the increase
in deposits.
10.4. PRUDENTIAL RATIOS
In terms of prudential ratios, BCA has a good performance and solidity, with shareholders’ equity of
4.9 billion CVE. With these shareholders’ equity, the fixed assets coverage ratio remains quite high,
being 215.12% in 2017 (204.81% in 2016).
The Solvency Ratio, according to Banco de Cabo Verde regulations, reached 16.17%, well above the
minimum of 12% required of the Cabo Verdean commercial banks.
The ratio between Public Debt Securities and Deposits reached 11.98%, which is higher than that
required by BCV, which determines that investments in Public Debt Securities of Financial Institutions
may not be less than 5% of the total liabilities by Deposits.
As regards the total amount of loans, the risks of which are subject to Concentration Limits, BCA
holds, in absolute terms, 3 billion CVE, a value also lower than that stipulated by BCV, whose
aggregate limit cannot exceed eight times its shareholders’ equity, i.e. 39.6 billion CVE. The maximum
concentration limit for an entity in December is one billion CVE, less than the 25% (1,239.7 million
CVE) of Shareholders’ equity required by the Central Bank.
The following table shows the evolution of Prudential Ratios in the last three years:
2017 Annual Report
50
Graphic 3- Prudential Ratio Evolution
CVE millions
Ratio Unit 2015 2016 2017
Sharesholder Equity Millions 4,865,904 4,942,827 4,959,499
Fixed Asset Coverage % 227.24% 204.8% 215.12%
Solvency Ratio % 15.70% 15.78% 16.17%
Prudential Ratio Evolution
4.865,904 4.942,83 4.959,49
15,70%15,78%
16,17
0
0,02
0,04
0,06
0,08
0,1
0,12
0,14
0,16
0,18
2015 2016 2017
0
1000
2000
3000
4000
5000
6000
Fundos Próprios Rácio de SolvabilidadeShareholders equity Solvability Ratio
51
11. APPROPRIATION OF NET INCOME
For the Net Income for the year, in the amount of 235.224.495$00 (Two Hundred and Thirty-Five, Two
Hundred and Twenty-four Thousand, Four Hundred and Ninety-Five escudos), the Board of Directors
decides to propose to the shareholders the following appropriation of the net income:
Net Income 235,224,495
Legal Reserve (10%) 23,522,450
Other Reserves (65%) 152,895,922
Dividends Distribution (25%) 58,806,123
2017 Annual Report
52
12. CORRESPONDENT BANKS
Portugal
Caixa Geral de Depósitos SA – Lisbon
NOVO BANCO – Lisbon
Banco Português de Investimento SA –
Porto
Banco Santander Totta SA – Lisbon
Holland
ING Bank NV – Amesterdam
Luxembourg
Bank Internacional à Luxembourg SA–
Luxembourg
Bank et Caisse d'Epargne d'Etat –
Luxembourg
United Kingdom
Lloyds Bank PLC – London
Austria
Bank of Austria Creditanstald – Vienna
Sweden
Nordea Bank AB (publ) – Stockholm
Norway
DnB NOR Bank ASA – Oslo
United States of America
Bank of America – New York
France
Caixa Geral de Depósitos SA – Paris
Italy
Intesa Sanpaolo SPI – Milan
UniCrédito Italiano SPA – Milan
Béegium
IngBelgium SA/NV – Brussels
China
BNU-banco National Ultramarino – Macao
Switzerland
UBS Swiss Bank Corporation AG – Zurik
Spain
Banco Sabadell SA TSB – Sabadell
Denmark
JyskeBank A/S – Copenhagem
Japan
Bank of Tokyo Mitsubishi UFJ Ltd – Tokyo
53
2017 Annual Report
54
13. NOTES
55
CVE
Asset
Cash and deposits at central banks 6,325,076,498 6,325,076,498
Balances due from other banks 603,215,783 603,215,783
Available-for-sale financial assets 6,545,356,359 10,841,439 6,534,514,920
Loans and advances to credit institutions 23,586,202,456 23,586,202,456
Loans and advances to customers 50,297,262,710 4,116,647,605 46,180,615,105
Investment properties 1,529,000 103,600 1,425,400
Other tangible assets 4,072,952,098 2,022,947,230 2,050,004,868
Intangible assets 352,700,297 290,547,267 62,153,030
Investments in associated companies320,973,259 320,973,259
Current tax assets 14,184,635 14,184,635
Deferred tax assets 3,244,675 3,244,675
Other assets 3,684,550,978 260,391,423 3,424,159,556
Liabilities
Resources from other credit institutions 1,553,008,681
Resourcess from customers and other debts 75,861,912,316
Provisions 5,309,464,079
Current tax liabilities 67,004,136
Deferred tax liabilities 205,590,895
Subordinated liabilities 0
Other liabilities 666,463,915
Total Liabilities 83,663,444,022
Capital
Capital 1,318,647,814
Revaluation reserves 13,171,638
Other reserves and retained earnings 3,875,282,216
Net Income for period 235,224,495
Total Capital 5,442,326,163
Total Liabilities + Capital 89,105,770,185
Head Accountant Financial and International Headmistress Chairman ( substituting)
……………………… …………………………………... ………………………………
Maria de Fátima N.Évora Amélia Figueiredo Francisco Costa
December 1, 2017
Banco Comercial do Atlântico, S.A
Balance Sheet on 31/12/2017
Value before
Provisions,
Impairment and
Depreciation
Total Assets
Net Value
Provisions,
Impairments and
Depreciation
6,701,478,56495,807,248,749 89,105,770,185
Account headings
2017 Annual Report
56
CVE
Interest and similar income 3,468,943,373
Interest and similar expenses 1,441,880,274
Net interest income 2,027,063,099
Income from equity instruments 11,522,536
Income from services and commissions 464,337,704
Costs of services and commissions 54,961,893
Income from available-for-sale financial assets 0
Income from foreign exchange revaluations 109,543,908
Income from disposals of other assets -7,723,428
Other operating income 219,301,230
Total operating income 2,769,083,156
Employee costs 1,287,671,763
General administrative costs 637,973,470
Depreciation for period 207,884,457
Provisions net of recoveries and cancellations -64,358,040
Impairment of other financial assets net of reversals and recoveries 423,140,667
Net Impairment from other financial assets 31,345,253
Income from subsidiaries exc. from consolidation, associates and jointly controlled entities 46,580,243
Income before tax 292,005,829
Income tax 56,781,334
Current 56,781,334
Defererred
Net income 235,224,495
Head Accountant Financial and International Headmistress Chairman (substituting)
……………………… ……………………………… …………………………
Maria de Fátima N.Évora Amélia Figueiredo Francisco Costa
Banco Comercial do Atlântico, S.A
Income Statement on 31/12/2017
Description Amount
57
Banco Comercial do Atlântico, S.A Cost to Income - Operating Cost / Operating Income
CVE
Net Interest Income 1,978,127,813 2.027.063.099 2,5% 48.935.286
+ Non-Interest Income 587,763,899 742.020.057 26,2% 154.256.158
= Total Operating Income 2,565,891,712 2.769.083.156 7,9% 203.191.444
Total operating income
Account headings 2016 2017
Change
Relative Absolute
CVE
Relative Absolute
Administrative costs 1,886,885,897 1.925.645.233 2,1% 38.759.336
Depreciation 207,902,415 207.884.457 0,0% -17.958
= Operating Cost 2,094,788,312 2.133.529.690 1,8% 38.741.378
Operating costs
Account headings 2016 2017Change
Cost to Income - inc. pension funds 81.6% 77,0%
Cost to Income - exc. pension funds 70.8% 67,3%
Account headings 2016 2017
Cost-to- Income
2017 Annual Report
58
Banco Comercial do Atlântico, S.A
Structure Ratio
Amounts % Amounts %
1-Short term loans to customers 2,997,054,747 7.9% 2,669,813,364 7.1%
38,053,976,749 37,819,432,130
2-Medium /long term loans to customers 35,056,922,002 92.1% 35,023,362,433 92.6%
38,053,976,749 37,819,432,130
3-Non-performing loan/loan to customers 5,264,844,517 13.8% 5,524,597,303 14.6%
38,053,976,749 37,819,432,130
4-Impairment on non-performing loan/non-performing loan 3,762,068,016 71.5% 4,073,921,613 73.7%
5,264,844,517 5,524,597,303
5-Loan to customers/Deposits 38,053,976,749 52.9% 37,819,432,130 50.3%
71,929,552,606 75,177,903,745
6-Loan to customers/Term Deposits 38,053,976,749 87.0% 37,819,432,130 90.5%
43,746,022,960 41,795,355,305
7-Performing loan/Term deposit 32,789,132,232 75.0% 32,294,834,827 77.3%
43,746,022,960 41,795,355,305
8-Short term loan/Term deposit 2,997,054,747 6.9% 2,669,813,364 6.4%
43,746,022,960 41,795,355,305
9-Medium-long term credit//term deposits 35,056,922,002 80.1% 35,023,362,433 83.8%
43,746,022,960 41,795,355,305
10-Demand deposits/total deposits 28,183,509,646 39.2% 33,382,548,440 44.4%
71,929,552,606 75,177,903,745
11-Term deposits/total deposits 43,746,022,960 60.8% 41,795,355,305 55.6%
71,929,552,606 75,177,903,745
Account headings2016 2017
CVE
Amounts % Amounts %
1-R0E=Net income/shareholder’s equity 344,159,347 6.8% 235.224.495 4,4%
5,074,610,152 5,360,341,567
2-ROA=Net income/average assets 344,159,347 0.4% 235.224.495 0,3%
82,679,178,706 86,812,694,494
3-ML = Net income/income 344,159,347 5.4% 235.224.495 3,9%
6,399,901,722 5,955,627,357
4-RA = Income/assets 6,399,901,722 7.6% 5,955,627,357 6,7%
84,519,618,803 89.105.770.185
6-MF=(Interest income-interest costs) / assets 1,973,274,258 2.3% 2.027.063.099 2,3%
84,519,618,803 89.105.770.185
Account headings2016 2017
Performance ratios
59
ROE = Return on equity
ROA = Return on assets
ML = Profit margin
RA = Assets turnover
MF = Net interest income
Banco Comercial do Atlântico, S.A
CVE
Amounts % Amounts %
1-Total Deposit/assets 71,929,552,606 85.1% 75.177.903.745 84,4%
84,519,618,803 89.105.770.185
2-Loans to customers / assets 38,053,976,749 45.0% 37.819.4332.130 42,4%
84,519,618,803 89.105.770.185
3-Short term loans/assets 2,997,054,747 3.5% 2.669.813.364 3,0%
84,519,618,803 89.105.770.185
4-Medium-long term loans/assets 35,056,922,002 41.5% 35.023.362.433 39,3%
84,519,618,803 89.105.770.185
5-Loans to customers/ total Deposit 38,053,976,749 52.9% 37.819.4332.130 50,3%
71,929,552,606 75.177.903.745
Liquidity ratios
Account headings 2016 2017
CV MillionsCVE
MillionsAmounts
CVE
Millions
1-Loans and deposits/active employees 109,983,529 242,789 112.997.336 245.646
453 460
2-Total operating income/active employees 2,565,892 5,664 2.769.083 6.020
453 460
3-Loans and deposits/no. Branches 109,983,5293,234,810
112.997.3363.323.451
34 34
Account headings
2016 2017
Productivity indicators
2017 Annual Report
60
1. ROE % 6.8% 4,4%
2. ROA % 0.4% 0,3%
3. Cost/income exc. pension fund % 70.8% 67,3%
4. Volume of non-performing loan CVE Millions 5,264,845 5.524.597%
5. Solvency ratio % 15.78% 16.17%
6. TIER 1 (base shareholder's equity/weighted assets) % 16.31% 17.50%
7. Loans-to-deposits ratio % 52.90% 50.31%
8. Productivity per employee (Net income/number of employees) CVE Millions 760 511
8.1.Business revenue (loan and deposits)/no. employees CVE Millions 242,789 245.646
8.2.Total operating income/no. employees CVE Millions 5,664 6.020
9. Fixed assets coverage % 204.81% 215.12%
10. Shareholders' equity CVE Millions 4,942,827 4,959,499
Key indicators Unit 2016 2017
61
BOARD OF DIRECTORS 2017
Chairman Dr. António José de Castro Guerra
Board Member Fernando Jorge do Livramento Santos da Moeda
Board Member Francisco Pinto Machado Costa
Board Member David Hopffer Cordeiro Almada
Board Member Carla Maria Moniz Brigham Gomes
Board Member José Rui Cruz Lopes Gomes
Board Member Manuel José Dias Esteves
2017 Annual Report
62
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REPORT AND OPINION OF THE AUDIT BOARD YEAR ENDING 2017
DEAR SHAREHOLDERS BANCO COMERCIAL DO ATLÂNTICO, S.A. I- ACTIVITY REPORT OF THE AUDIT BOARD Under the terms of the legislation in force, the regulations of Banco de Cabo Verde (BCV) and the mandate conferred upon it, the Audit Board hereby submits its Report on the audit activity developed during the year ended December 31, as well as its Opinion on the Management Report, Accounts and Proposal for Appropriation of Net Income, as submitted by the Board of Directors of Banco Comercial do Atlântico, SA (BCA). During 2017, and in accordance with the 2017 Activity Plan that it approved (Annex I), the Audit Board regularly monitored the activity of the Bank, verifying, to the extent deemed necessary, the equity amounts, accounting records and the supporting documents which comply with the legal provisions and the statutes of the company. During the period, the Audit Board held seven formal meetings, and held 24 working meetings with Directorates to comply with the 2017 Activity Plan, as listed in Annex II. The President of the Audit Board also participated in five meetings of the Board of Directors, at the invitation of its Chairman. He also participated in the three General Assembly Meetings, one of which was convened to present a proposal for the election of the new External Auditor for the years 2017-2020. The Board took note of, analyzed and issued an Opinion on the Report on the Internal Control System prepared by BCA pursuant to Banco de Cabo Verde Notices 2/1995 and 5/1999 and no. 5/2008 of Banco de Portugal, the Supervisory Body of the majority shareholder, and monitored the progress of the BCA Internal Control System. The Audit Board also proceeded to the quarterly follow-up of the deficiencies maps of the Internal Control System, with a special focus on the areas of greater risk, and the evolution of the plans for the mitigation of the risks. The Board met periodically with the various bodies of BCA, the Compliance Function and the departments, DAI, DFI, DMC, DOI, ISD, DSL and DGR, and reviewed the sufficiency of the policies and processes in force in Corporate Governance matters and Internal Control. It analyzed and discussed with GEA, the distribution of results by branch, with special emphasis on the local generation of the total operating income. Already this year, pursuant to AGMVM regulation 1/2016 and Notices 6 and 7/2017 (and its annex I), the Audit Board issued its opinion on the Corporate Governance Report (CGR) approved by the Board of Directors on 02.26.2018. The CGR was prepared by BCA, in accordance with the legal framework in force, namely article 131 of the Securities Market Code, article 133 of Law 61 / VIII2014, paragraph 4 of Notice 4/2014, article 5 of Regulation 1/2009 of AGMVM, the Government Code of Securities Issuers admitted to trading and the aforementioned AGMVM regulation nº1/2016 and Notices 6 and 7/2017. In order to have a well-structured opinion on the state of the Corporate Governance and its adequacy to the aforementioned legal framework, the Audit Board, in addition to the aforementioned regular meetings with the various Departments, in particular the Control Functions, carried out the following diligences:
Informed about the applicable internal regulations.
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Made questions that considered pertinent in the meetings of the Board of Directors, or in direct contacts with the CEO.
Analyzed the provisions of the CGR and confronted it with Annex I of Regulation 1/2016 and Annex I of Notice No. 7/2017.
As part of its audit activity, the Audit Board continued in 2017 the task of quarterly review of settlement accounts and the semiannual analysis of correspondent banks accounts. Likewise, it assessed the monthly balance sheets and took into account the analysis of any material changes in account balances. As part of the monitoring of the Internal Audit function, the Audit Board has witnessed the progress made since the appointment of the new Director, progress that goes from the creation of a Department that gives support to FAI, and DAI, to the progressive strategic alignment with the best practices. In effect, the Operating Regulations, the Organic Structure Manual, were published, and BCA adhered to the rules imposed by the Corporate Internal Audit Management Manual. The Audit Board actively collaborated with DAI in the process of choosing an entity to perform an Independent Audit on several macroprocesses to prevent failures in the scope of conflict of interest. Also considered were the Multi-Year Audit Function Plan and its Activity Report from January to November. The Audit Board participated actively with the GFC in the development of the Irregular Practices Communication System, which was concluded with the publication of OS nº 18/2017. Following the expiration of the term of the contract with the External Auditor, PWC, the President of the Audit Board, in accordance with corporate guidelines, led the selection process for a new Auditor for the period 2017/2020 with the support of the CGD Group, and that deserved the approval of the Audit Board. The proposal was submitted to the General Assembly, convened for this purpose, which made a unanimous decision based on the shareholders present. The choice fell on the international company EY, and the result of the decision translates into a great reduction of annual costs, compared to the previous period. The Audit Board met 3 times with previous External Auditors (PricewaterhouseCoopers) and once with new ones, EY. Already this year, on 02.21.2018, EY sent, for analysis, a document with the preliminary conclusions of Audit, referring to December 31, The Bank Services provided all the clarifications and information requested of them. In general, it can be said that the 2017 Activity Plan of the Audit Board has been fulfilled, as planned.
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II- OPINION ON THE REPORT AND ACCOUNTS The Audit Board analyzed the Financial Statement of Banco Comercial do Atlântico, SA, as of December 31, 2017, which includes the Balance Sheet, Income Statement, Statement of Changes in Shareholders' Equity, Statement of Comprehensive Income, the Statement of Cash Flows and the respective Annexes, which, in compliance with the legal and statutory provisions, reflect the position of the accounting records at the end of the year, correctly presenting the Bank's financial situation, as stated in the Audit Report, only with an emphasis on the change in benefits set out in the current employee pension plan occurred in November 2013. The Auditor justifies the aforementioned emphasis on the fact that the Bank was prosecuted twice by a Bank employee and the Union of Workers of the Financial Institutions of Cabo Verde with a view to declaring the nullity of the amendments made to its Statute of Personnel in relation to retirement benefits. The valuation criteria adopted in the preparation of the accounts correspond to the correct valuation of the assets. The Audit Board also reviewed the Management Report presented by the Bank's Board of Directors, as well as its proposal for the Appropriation of the net income. The Report that accurately reflects the activity developed in pursuit of the defined strategy allows highlighting the following: II.1- Management indicators In terms of the Income Statement, the Bank's net income was 235 billion CVE, a year-on-year decline of 31.7%, influenced by the significant increase in impairment / provisions, by 363.3% and by increase in operating costs by 1.9%, while Pre-Tax Profit fell by 30.1%. Within this framework, the following items are highlighted:
- Net interest income + 2,5%
- Non-interest income + 26.2%
- Total Operating income + 7.9%
The indicators that characterize BCA's profitability and solvency have the following values: - Return on Shareholders' Equity (ROE) 4.4%, - Return on Assets (ROA) 0.3% - Cost-to-income ratio 77.1% (with Pension Fund) - Cost-to-income ratio 67.3% (without/Pension Fund) - Solvency 16.17% (legal minimum 12%) This led to an improvement in the Bank's equity position, reflected in the growth rates of the following items: - Total assets 5.4% - Total Net Loan 1.1% - Customer funds 4.3%. - Net Income 3.1% The total loan portfolio, net of impairments, totaled 46,181 million CVE, an increase of 1.0%. The active loan portfolio, without business loans, amounted to 32,295 million CVE, a decrease of 1.5% compared to the previous year.
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There was an increase of 4.9% in loans and overdue interest, which amounted to 5,525 million CVE, representing 68.9% of business loans and 28.9% of loans to individuals.
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II.2- Risk Management and Control Functions
In the scope of Risk Management and the process of reviewing the CGD Group's risk
management framework, in which BCA is part of, in particular with regard to the
implementation of the Risk Management Function, they proceeded to the adoption,
through internal regulations, of the Internal Regulations of the Risk Management
Function and of the Corporate Model of the Risk Management Function.
There is a functional dependency of the Risk Management Function/BCA of the Risk
Management Function/CGD, as well as the obligation of periodic reports and execution
of guidelines issued by CGD, aiming at a consolidated and global assessment of the
Group's risk profile.
In terms of risk profile, it was necessary to define the BCA Risk Adjustment Factor,
(RAF), according to CGD guidelines and in accordance with the Risk Adjustment
Governance Model approved by BCA's Board of Directors.
The Risk Management Department is responsible to evaluate and control credit,
market, liquidity, interest rate and exchange risks.
With respect to Compliance Risk, it was verified that the Compliance Function Office,
have undergone significant improvements in its processes and working methods, with
the periodic elaboration of internal control reports for the management body with
indication of possible defaults and measures to correct them. The Irregular Practices
Communication System was implemented in 2017, as provided for in Law No. 62 / VIII
/ 2014.
It is worth noting the strong intervention in the information technologies to support the
activities of compliance and money laundering.
With regard to Operational Risk, we verified the implementation of different tools
associated to the corporate management model with impact on the monitoring and
mitigation of the operating risk. Due to segregation of duties, the operational risk area
was separated from the internal control area, the latter being integrated into the Internal
Audit Department.
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The Compliance function is one of the pillars of the internal control system and in the
process of alignment with the corporate management of the CGD Group, several
regulations have been adopted, not only for the operation of the unit, but also for
international good management practice of Risk Compliance, Prevention of Money
Laundering Financing of Terrorism and Prevention of Market Abuse and Corruption.
Within the scope of the Audit and Internal Control function, accountability for operational
risk management is recorded, in line with the guidelines of the shareholder Caixa Geral
de Depósitos. These changes aim to significantly improve the performance of this
central BCA Activity Control Function.
In this process of policy alignment with the Parent company we assisted, in 2017, the
alteration of its organic functions to a Department structure. The Corporate Internal
Audit Function Regulation, the Internal Audit Manual and the Multi-Year Activities Plan
2017-2020 were also approved and published. The Internal Audit Department
submitted for the consideration of the Management and Supervisory Bodies the Annual
Activity Report and the Annual Report on Audit Questions with a summary of the main
deficiencies identified and the recommendations made.
It periodically reports to CGD's Board of Directors and Internal Audit Department a
status report on the degree of compliance with the Annual Activity Plan and on the main
conclusions reached in carrying out the audit actions.
II.3-Technology and Innovation
Within the framework of the management of the internal control system, the IT
Department is responsible for the preparation of an annual report in which it reports the
weaknesses detected in the risks of information systems and the action plans
implemented or proposed to mitigate them.
OPINION AND PROPOSALS
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The legal formalities and the articles of association were complied with on the rendering of accounts and supervision of the Bank. In this context, and based on the information provided by the Management Board of BCA, the Audit Board is of the opinion that the Financial Statements referred to above and the Management Report, as well as the Proposal for the Appropriation of Net Income, are in accordance with the accounting provisions and statutory, for the approval of the General Meeting of Shareholders. In accordance with the foregoing, the Audit Board is of the opinion that the General Shareholders' Meeting:
a) Approve the Annual Report for the year 2017, presented by the Board of Directors;
b) Approve the Appropriation of Net Income proposal; c) Conduct a general appraisal of the Company's Management and Supervisory bodies, and draw the necessary conclusions. The Audit Board wishes to express to the Board of Directors, and to the Bank's Services, its highest appreciation for the collaboration. In the same way, the External Auditor is also thanked for the support. City of Praia, 14 March 2018 THE AUDIT BOARD _______________________________________________ António José do Nascimento Ribeiro President _______________________________________________ Maria de Fátima Oliveira de Melo Fernandes Sanchas Board Member _______________________________________________ José Ricardo Vaz Fernandes Benoliel Board Member Annex: - Audit Board 2017 Activity Plan; - Detailed map of the 24 meetings held with BCA’s Department.
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BANCO COMERCIAL DO ATLÂNTICO, S.A.
BALANCE SHEET AS OF DECEMBER 31 2017 AND 2016
(Amounts expressed in thousand of Cabo Verde Escudos)
2017 2016
Gross Impairment Net Net
Notes Asset and Depreciation Asset Asset LIABILITIES AND SHAREHOLDERS' EQUITY Notes 2017 2016
Cash and Deposits at Central Banks 3 6,325,076 6,325,076 7,844,629 Resources of other credit institutions 14 1,553,009 565,333
Cash due from other Banks 4 603,216 603,216 652,322 Resources of customer and other debts 15 75,861,912 72,702,613
Available-for-sale financial assets 5 6,545,356 10,841 6,534,515 6,653,619 Provisions 16 5,309,464 5,219,115
Loans and advances to credit institutions 6 23,586,202 23,586,202 18,122,622 Current tax liabilities 12 67,004 73,220
Loans and advances to customers 7 50,297,263 4,116,648 46,180,615 45,687,044 Defered tax liabilities 12 205,591 197,342
Investment property 8 1,529 104 1,425 1,425 Other subordinate liabilities 17 - 99,088
Other tangible assets 9 4,072,952 2,022,947 2,050,005 2,175,841 Other liabilities 18 666,464 384,551
Intangible assets 10 352,700 290,547 62,153 52,981 Total liabilities 83,663,444 79,241,262
Investments in associated companies 11 320,973 320,973 336,963 Capital 19 1,318,648 1,318,648
Current tax assets 12 14,185 14,185 901,641 Reserves and fair value 20 13,172 10,074
Deferred tax assets 12 3,245 3,245 56 Other reserves 20 5,050,159 4,780,353
Other assets 13 3,684,551 260,391 3,424,160 2,090,476 Retained earnings 20 (1,174,877) (1,174,877)
Total assets 95,807,249 6,701,479 89,105,770 84,519,620 Income for the year 20 235,224 344,159
Total shareholders' equity 5,442,326 5,278,357
Total liabilities and shareholder's equity 89,105,770 84,519,619
ASSET
The accompanying notes are an integral part of these financial statements.
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BANCO COMERCIAL DO ATLÂNTICO, S.A.
INCOME STATEMENTS FOR THE YEARS
ENDED DECEMBER 2017 AND 2016
(Amounts expressed in thousands of Cabo Verde Escudos)
Notes 2017 2016
Interest and similar income 21 3,468,943 3,635,144
Interest and similar expenses 22 (1,441,880) (1,657,017)
NET INTEREST INCOME 2,027,063 1,978,128
Income from equity instrument 23 11,523 18,256
Income form services and fees 24 464,338 423,864
Expenses with services and commissions 24 (54,962) (43,913)
Income from available-for-sale assets - -
Income from foreign exchange revaluation 25 109,544 112,740
Income from the sale of other assets 26 (7,723) 12,370
Other operating income 27 219,301 64,447
OPERATING INCOME 2,769,083 2,565,892
Employee expenses 28 (1,287,672) (1,272,607)
General administrative costs 30 (637,973) (614,278)
Depreciation and ammortizations for the year 9 e 10 (207,884) (207,902)
Provisions net of cancellations and recoveries 16 64,358 -
Impairment of ther financial assets net of cancellations and recoveries 16 (423,141) (82,011)
Impairment of ther assets net of reversals and recoveries 16 (31,345) (15,796)
Income from subsidaries and associates measured thru MEP 11 46,580 45,025
INCOME BEFORE TAXES 292,006 418,321
Taxes
Current 12 (56,781) (74,162)
Deferred 12 -
(56,781) (74,162)
Income for the Year 235,224 344,159
Average number of ordinary shares issued 31 1,324,765 1,324,765
Earnings per Share 31 0.18 0.26
The accompanying notes are an integral part of these financial statements.
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BANCO COMERCIAL DO ATLÂNTICO, S.A.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY BANCO COMERCIAL DO ATLÂNTICO, S.A.
FOR THE YEARS ENDED DECEMBER 31 2017 AND 2016 STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
(Amounts expressed in thousands of Cabo Verdean Escudos) FOR THE FISCAL YEARS ENDING ON DECEMBER 31 2016 AND 2015
(Amounts in thousands of Cabo Verdean Escudos)
Other reserves and retained earnings
Fair value Legal Other Retained Income for Total
Notes Capital reserves reserves Reserves earnings Total the Year Shareholders' equity
Balances as at December 31 2015 19,20 1,318,648 15,620 778,195 3,564,447 (1,174,876) 3,167,766 368,830 4,870,864
Distribution of income for the year 2015:
Incorporation of reserves 36,883 239,739 276,622 (276,622) -
Dividend distribution - (92,208) (92,208)
Other transactions 12,940 12,940 12,940
Comprehensive income for the year - -
Changes in fair value, net of taxes (5,546) - (5,546)
Remeasurements of defined benefits plan 148,148 148,148 148,148
Net income for the year - 344,159 344,159
Balances as at December 31 2016 19,20 1,318,648 10,074 815,078 3,965,274 (1,174,876) 3,605,476 344,159 5,278,357
Distribution of income for the year 2016:
Incorporation of reserves 34,416 223,704 - 258,120 (258,120) -
Dividend distribution - (86,039) (86,039)
Other transactions 4,443 4,443 4,443
Other comprehensive income - -
Changes in fair value, net of taxes 3,098 - 3,098
Remeasurements of defined benefits plan 7,245 7,245 7,245
Net income for the year - 235,224 235,224
Balances as at December 31 2017 19,20 1,318,648 13,172 849,494 4,200,666 (1,174,876) 3,875,284 235,224 5,442,328
The accompanying notes are an integral part of these financial statements.
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BANCO COMERCIAL DO ATLÂNTICO, S.A.
STATEMENTS OF OTHER COMPREHENSIVE INCOME FOR THE YEARS
ENDED DECEMBER 31 2017 AND 2016
(Amounts expressed in thousands of Cabo Verde Escudos)
Notes 2017 2016
Other comprehensive income
Account headings which will not be reclassified on the statement of income
Remeasurements of defined benefits plan (Note 2.3)
Change in period 29 9,723 198,856
Fiscal effect 12 (2,479) (50,708)
Account headings which may be reclassified on the statement of income
Changes to the fair value of available-for-sale financial assets
Change in period 20 1,231 (7,444)
Fiscal effect 12 (314) 1,898
Other comprehensive income 8,161 142,602
Income for the year 235,224 344,159
Total comprehensive income for the year 243,385 486,762
The accompanying notes are an integral part of these financial statements.
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BANCO COMERCIAL DO ATLÂNTICO, S.A.
STATEMENTS OF CASH FLOW FOR THE YEARS
ENDED DECEMBER 31, 2017 AND 2016
(Amounts expressed in thousands of Cape Verdean Escudos)
Notes 2017 2016
Cash flows from operating activities
Income from interest and commissions 3,928,568 3,920,277
Payment of interest and commissions (1,611,474) (1,795,766)
Recovery of overdue credit and interest 100,886 161,287
Foreign exchange income (1,026,791) 145,027
Payments to employees and suppliers (1,597,204) (1,517,802)
Pensions and medical assistance payments (220,543) (218,411)
Other income / (payments) for operating activity 824,460 (7,726)
Payments of income tax -
Operating income before changes in operating assets 397,902 686,885
(Increases) decreases in operating assets:
Investments in credit institutions (5,448,880) 2,349,985
Loans and advances to customers 135,537 (247,660)
Public debt securities (1,088,675) (1,106,487)
Other assets 315,396 38,687
(6,086,622) 1,034,524
Increases (decreases) in operating liabilities
Funds from Central banks and other credit institutions 987,787 (203,486)
Funds from customers 3,273,751 3,694,052
Other liabilities 282,671 (24,920)
4,544,208 3,465,646
Net cash from operating activities (1,144,511) 5,187,055
Cash flows from investing activities
(Increases) decreases in investment assets:
Investments in subsidiaries, associates and joint ventures
Intangible assets (19,112) (37,848)
Other tangible assets (423,361) (234,480)
Dividends received 203,318 188,654
Net cash from investing activities (239,155) (83,674)
Cash flows from financing activities
Dividends distributed (86,040) (92,207)
Other subordiante liabilities (98,952) (98,904)
Net cash from financing activities (184,992) (191,112)
Increase (decrease) net of cash and equivalents (1,568,658) 4,912,269
Cash and cash equivalents at the beginning of the year 3 8,496,951 3,584,682
Cash and cash equivalents at the end of the year 3 6,928,292 8,496,951
The accompanying notes are an integral part of these financial statements.
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1. INTRODUCTORY NOTE Banco Comercial do Atlântico, S.A. (Bank) is a commercial bank, constituted by a separation of the assets of the Bank of Cabo Verde, under the terms of Decree-Law no. 43/93, of July 16. As part of the privatization process of credit institutions and financial companies with public capital, and in accordance with Resolution No. 46/99 of September 27 of the Council of Ministers, the Group comprised of Caixa Geral de Depósitos, SA and Banco Interatlântico, SARL held the majority of the Bank's share capital. As of December 2005, the Bank's shares were listed on the Cabo Verde Stock Exchange. The Bank's corporate object is the exercise of banking activities, including all accessories, related
or similar operations compatible with these activities and permitted by law. The Bank is headquartered in the city of Praia, Republic of Cabo Verde, with a network of 34
branches to carry out its operations. The Bank's financial statements as of December 31, 2017 were approved by the Board of
Directors on February 26, 2018 and are pending approval by the General Shareholders' Meeting. However, the Board of Directors of the Bank believe that they will be approved without any significant changes.
2. BASIS OF PRESENTATION AND ACCOUNTING POLICIES 2.1. Basis of presentation The Bank's financial statements have been prepared under the assumption of operations
continuity, based on books and accounting records maintained in accordance with the principles set forth in International Financial Reporting Standards (IFRS), pursuant to Notice No. 2/2007, of 19 November, issued by the Bank of Cabo Verde.
2.2. Accounting Policies a) Accrual Basis
Incomes and expenses are recognized in accordance with the accrual basis principle and are recorded as they are generated, regardless of when they are paid or received.
b) Translation of balances and transactions into foreign currencies
The items included in the Bank's financial statements are measured using the currency of the economic environment in which it operates (functional currency). The Bank's individual financial statements and the notes attached are presented in escudos of Cabo Verde, unless otherwise stated, the functional and presentation currency of the Bank.
Monetary assets and liabilities denominated in foreign currency are translated into Cape
Verdean Escudos at the Bank's average exchange rate on the last business day of each month. Transactions in currencies other than the Cape Verdean escudo are converted into the functional currency using the exchange rates at the date of the transactions. Exchange differences determined in the exchange rate translation are reflected in the income statement for the year, except for those arising from non-monetary amounts, such as shares, classified as available for sale, whose fair value changes are recorded in shareholder´s equity.
Changes in the fair value of equity instruments in foreign currency classified as available-for-sale financial assets are distinguished between exchange variations
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BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
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resulting from changes in the amortized cost of the instrument and other changes in the book value of the instrument. Exchange differences on changes in amortized cost are recognized in the income statement, while other differences in accounting value are recognized in other comprehensive income.
In 2017 and 2016, the Cabo Verde Escudo exchange rate against the Euro remained flat
at 1 Euro / 110,265 Cabo Verde Escudos. At December 31, 2017 and 2016, the exchange rate against the US Dollar (USD) was as follows:
2017 2016 1 USD 92,543 105,633 c) Financial Instruments
i) Financial assets
Financial assets are recognized at their respective fair value at the agreement date added the costs directly attributable to the transaction. The Bank has no trading assets or other assets recorded at fair value through profit or loss, so that upon initial recognition financial assets are classified in one of the following IAS 39 categories:
a) Loans and accounts receivable
These are financial assets with fixed or determinable payments which are not listed in an active market. This category includes loans and advances to customers (including securitized corporate loans), amounts receivable from other credit institutions and other balances receivable, recognized in “Other assets”. It also includes debt securities issued by the state of Cabo Verde as they were acquired in a primary market by the bank, essentially to be held until maturity and the fact that there is no active secondary market.
These assets are initially recognized at fair value, net of any commissions
included in the effective interest rate, plus all incremental costs directly attributable to the transaction. The assets are subsequently recognized in the balance sheet at their amortized, net of impairment losses.
These financial assets are not recognized on the balance sheet when (i) the
contractual rights of the Bank in respect of the respective contractual cash flows expire, (ii) the Bank transfers (substantially) all risks and rewards associated with the holding of these financial instruments; or (iii) although the bank retained a portion, but not substantially all the risks and rewards associated with its detention, control over financial assets was transferred.
Interest recognition Interest is recognized by the effective interest rate method, which enables
amortized cost to be calculated and interest to be split up over the period of the operations. The effective interest rate is the rate used to discount the estimated future cash flows associated with the amount of the financial instrument, enabling its present value to be matched to the value of the
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financial instrument on the initial recognition date.
Non-performing loans and cancellations of capital and interest
Interest on non-performing loans not supported by a real guarantee is cancelled three months after an operation’s maturity date or first overdue payment. Unrecognized interest on the above mentioned credits is only recognized in the period in which they are collected being registered under the item “Interest and similar income”. According to the policies in force in the bank, the total amount of principal owed on operations with instalments in arrears is classified as non-performing loans 30 days after its due date. The bank periodically writes off uncollectible loan loans by use of impairment after a specific assessment by the department responsible for loans monitoring and recovery and the approval by the Board of Directors. Any recoveries of loans previously written-off are recognized in the income statement under “Impairment of other financial assets, net of reversals and recoveries”. Thus, loan write-off only occurs after i) the entire loan has been due; (Ii) the collection efforts considered adequate have been developed; And (iii) expectations of credit recovery are very low, leading to an extreme scenario of total impairment.
b) Financial assets available for sale
This category includes the following financial instruments not classified in “Loans and accounts receivable”, which are initially designated as financial assets available for sale, or that the Bank may intend to maintain for an indefinite period:
Corporate stocks;
Consolidated Financial Investment Securities. Available-for-sale financial assets, are measured at fair value, except for equity instruments not listed in an active market and whose fair value cannot be reliably measured, which are recorded at cost. Gains or losses from the change of the fair value are recorded directly in equity under “Reserves of fair value.” At the time of sale, or if impairment is determined, the accumulated changes at fair value are transferred to income or expense for the year and are recorded under “Income from available for sale financial assets” or “Impairment of other financial assets, net of reversals and recoveries,” respectively. Dividends and income from equity instruments classified in this category are recorded as income under “Income from equity instruments” when the bank´s right to receive them has been established. The interest incomes from these financial instruments are recognized through the effective interest rate method. Income receivable from Consolidated Financial Investment Securities is recognized in the balance sheet in “Available-for-sale financial assets”. Fair Value
As referred to above, financial assets recorded as “Available-for-sale financial assets” are measured at their fair value. The fair value of a financial instrument corresponds the amount by which a financial asset or liability can be sold or settled among independent, informed parties, interested in the transaction under normal market conditions. The fair value of financial instruments is determined based on the following
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BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
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criteria:
The closing price at the balance sheet date, for instruments traded in active markets;
For non-traded variable-yield securities in active markets (including unlisted or low liquidity securities), internal valuation models and techniques are used, which take into account the market data that would be used to define a price for the financial instrument, reflecting market interest rates and volatility, as well as the liquidity and credit risk associated with the instrument.
c) Transfers among categories
The Bank proceeds to the transfer of non-derivative financial assets with fixed or determinable payments and defined maturities from the category of available-for-sale financial assets to the category of held-to-maturity financial assets provided that it has the intention and ability to hold these assets until maturity.
d) Financial Instruments Compensation
Financial liabilities are not recognized when the underlying obligation is settled, expired or is cancelled. Financial assets and liabilities are presented in the balance sheet at their net value when there is a legally enforceable right to offset the amounts recognized and there is an intention to settle them at their net value or to realize the asset and settle the liability simultaneously. The enforceable legal right cannot be contingent on future events, and must be enforceable in the normal course of the BCA activity, as well as in case of default, bankruptcy or insolvency of the Group or the counterparty.
e) Impairment of financial assets Financial assets at amortized cost
The Bank periodically performs impairment tests on its financial assets at amortized cost,
i.e. loans and amounts receivable. Signs of impairment are assessed separately in the case of financial assets with
significant individual exposure and collectively when the available assets, whose debtor balances are not individually relevant.
The following events are considered to be signs of impairment:
A breach of contractual clauses such as interest or principal in arrears;
A record of defaults in the financial system;
Existence of operations in force resulting from credit restructuring or credit restructuring negotiations in progress;
Difficulties on a level of the capacity of partners and management, i.e.
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when leading partners or key employees leave the company or in the event of disputes between partners;
A debtor’s or debt issuing entity’s significant financial difficulties;
The strong probability of a debtor’s or debt issuing entity’s bankruptcy;
The worsening of a debtor’s competitive position;
A track record of collections suggesting that the nominal value will not be fully recovered.
The bank performs individual tests for customers with liabilities greater than a tCVE.
20.000 or companies which are overdue for more 180 days. Whenever signs of impairment on separately assessed assets are identified, any
impairment loss comprises the difference between the present values of expected future cash flows (recoverable value), discounted at the asset’s effective original interest rate and book value at the time of analysis.
Assets which are not included in a specific analysis are included in a collective
impairment analysis and classified in like-for-like groups with similar risk characteristics (based on the characteristics of the counterparty and credit type). Future cash flows are estimated on historical information on defaults on and recoveries of assets with similar characteristics.
These assets are impaired when i) there is objective evidence of impairment resulting
from one or more events that occurred after the initial recognition of the financial instruments, and ii) when this event (or events) has an impact on the level of future cash flows of these instruments, which can reasonably be estimated.
For this purpose, the bank has defined the following segments for its loan portfolio:
Corporate loans
Mortgage loans
Consumer loans
Loans to small businesses
Loans to the public sector
Loans to companies of the Group
Guarantees provided
Other individual loans
Separately analyzed assets on which no objective signs of impairment have been
identified were also included in collective impairment assessments, as described in the preceding paragraph.
Impairment losses, calculated in the collective analysis, include the time effect of the
discounting of estimated cash flows receivable on each operation at the balance sheet date.
The amount of the impairment assessed is recognized in costs in “Impairment of other
financial assets net of reversals and recoveries” and recognized separately in the balance sheet as a deduction from the amount of the respective assets.
Available-for-sale financial assets
As referred to in the note 2.2. c), available-for-sale financial assets are recognized at fair value with changes in fair value being recognized in the “Fair value reserve” equity account heading.
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
84
At each reporting date of the balance sheet, the Bank analyses the existence of
impairment losses on available-for-sale financial assets. Whenever there is objective evidence of impairment, accumulated capital losses
recognized in reserves are transferred to costs for the year in the form of impairment losses and recognized in “Other financial asset impairment net of reversals and recoveries”.
In addition to the above referred signs of impairment on financial assets at amortized cost, IAS 39 also provides for the following specific signs of impairment on equity instruments:
Information on significant changes having an adverse effect on the technological, market, economic or legal environment in which the issuing entity operates, indicating that the cost of the investment may not be recovered;
A significant or prolonged decline in market value below cost.
As impairment losses on equity instruments cannot be reversed, any unrealized capital
gains arising after the recognition of impairment losses are recognized in the “Fair value reserve”. Impairment, recognized in profit and loss for the year, is always considered to exist on any additional capital losses. Impairment losses on debt instruments are reversed by income for the period, whenever the fair value of these instruments increases in the future, and provided that this increase is due to events occurring after the events that led to the recognition of impairment losses.
The Bank also performs periodic impairment analyses on financial assets recognized at
cost, i.e. unlisted equity instruments whose fair value cannot be reliably measured. The recoverable value, in this case, is the best estimate of the future cash flows receivable on the asset, discounted at a rate which adequately reflects the risk attached to holding the asset.
The amount of the impairment loss is recognized directly in profit and loss for the year. Impairment losses on such assets cannot be reversed.
Impairment losses recorded by the Bank are reversed against the results of the year, in
future periods, when assessments of the estimated losses are reduced, or even when they are no longer verified.
f) Financial Liabilities The Bank classifies its financial instruments as financial liabilities when there is a
contractual obligation for its liquidation to be made through the delivery of money, or another financial asset, regardless of its legal form. Financial liabilities are not recognized when the underlying obligation is settled, expires or is cancelled.
Financial liabilities are recognized on their agreement dates, at their respective fair value, net of the costs directly attributable to the transaction. Financial liabilities include funds from credit institutions and customers and subordinated and incurred liabilities for payment of services or purchase of assets, recognized under “Other liabilities.”
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Sale operations with repurchase agreements, namely Treasury Bonds and Treasury
Bills, are recognized under “Funds from customers and other loans,” with the corresponding securities being recognized under the Bank’s portfolio.
Financial liabilities are valued at amortized cost being the interests, recognized in
accordance with the effective interest method. If the Bank repurchases debt issued, it is not recognized on the Balance Sheet, being the
difference between the book value of the balance and the repurchase value recognized in the period results.
g) Assets received through credit recovery
Properties and other auctioned assets acquired through recovery of non-performing loans and that are not available for immediate sale are recorded at auction value when the legal proceedings have been completed, under the “Other assets” item. These assets are not amortized. Valuations of properties received by credit recovery are conducted periodically. If the appraised value is less than the book value, impairment losses are recorded. In determining impairment, the Bank also considers the age of the properties in portfolio. When the book value of non-current assets corresponds to fair value less costs to sell, the fair value level of the IFRS 13 hierarchy corresponds mostly to level 3. Upon the sale of auctioned assets, these are written-off, with any gains or losses recognized under “Other operating income”.
h) Investment Properties
These are properties held for the purpose of obtaining income through lease and/or revaluation.
Investment properties are initially recognized at acquisition cost, and the transaction
costs directly related and incurred with their acquisition are included in their valuation. Investment properties are not depreciated and are subsequently valued at fair value, determined periodically based on expert valuations. Changes in fair value are recognized in the income statement under "Other operating income".
At December 31, 2017 and 2016, this item was entirely comprised of lands. i) Others tangible assets
Other tangible assets are recognized at their acquisition cost, net of accumulated depreciation and impairment losses. The acquisition cost includes the purchase price of the asset, the expenses directly attributable to its acquisition and the costs incurred with the preparation of the asset so that it is placed in its condition of use. The costs of repair, maintenance and other expenses associated with their use are recognized as a cost for the year, in "General Administrative Expenses".
Depreciation is recognized on a straight line basis over the assets’ estimated useful lives,
comprising the period in which the asset is expected to be available for use, which is:
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
86
Years of useful life
Property for own use 50 Equipment: Furniture and office material 8 Machines and tools 5 - 6
Computer equipment 4 Interior fittings 8 Transport material 3 a 5 Security equipment 8 Other equipment 5
For assets acquired after 2015, the applicable rates are those set out in the Official
Bulletin No. 52 of August 28 2015, namely: Years of useful life
Property for own use 33 Transport material 3 e 7 Computer equipment 3 Security equipment 3 e 10
Land is not depreciated.
The cost of works on and improvements to property used by the Bank under operating leases is capitalized in this account heading and depreciated over an average period of 10 years. Expenses incurred with the dismantling or removal of assets installed in third-party properties are considered as part of the initial cost of the respective assets, when they constitute significant amounts.
Depreciation is recognized as a cost for the period. Tests are periodically carried out to identify signs of impairment on other tangible assets,
in accordance with the IAS36 standards – “Impairment of Assets”. Impairment losses are recognized in profit and loss in “Impairment of other assets net of reversals and recoveries” whenever the net book value of tangible assets is higher than their recoverable value (greater than the value in use, calculated based on the present value of the estimated future cash flows, arising from the continued use and disposal of the asset at the end of the defined useful life, and the fair value less estimated costs of sale). Impairment losses may be reversed and also have an impact on profit and loss in the event of a subsequent increase in an asset’s recoverable value, up to the limit of the value of the asset if it had never been imputed impairment losses.
The calculation of depreciation takes into account an estimate of the residual value of the
equipment, particularly in the case of vehicles. The useful lives of the assets are reviewed in each financial report so that the depreciation practiced is in accordance with the consumption patterns of the assets. Changes to useful lives are treated as a change in accounting estimates and are applied prospectively.
The Bank makes an annual assessment of the adequacy of its tangible assets’ estimated
useful lives.
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j) Intangible Assets
This account heading essentially comprises the cost of acquiring, developing or preparing software used to further the Bank’s activities. Internally generated assets, including internal development expenditure, are recorded as expenses when incurred, whenever it is not possible to distinguish the research phase from the development phase, or it is not possible to reliably determine the costs incurred at each stage or the probability of economic benefits to the entity. Intangible assets are recognized at their acquisition cost, net of accumulated amortization and impairment losses. Depreciation is recognized on a straight line basis over the assets’ estimated useful lives, which is normally 3 years. Software maintenance costs are recognized as a cost for the period in which they are incurred.
k) Investments in subsidiaries, associates and joint ventures
This account heading includes investments in subsidiaries. Subsidiaries are all entities (including structured entities) over which the Bank has control. The Bank controls an entity when it is exposed to, or has rights over, variable returns through the power it exercises over the relevant activities of the entity. This item also includes companies in which the Bank has significant influence but over which it does not exercise effective control over its management ("associates"). Significant influence is assumed whenever the Bank's share is between 20% and 50% of the capital or voting rights or, if less than 20%, the Bank is a member of the management board and has a direct influence on the definition of relevant company policies. These assets are recognized under the equivalent equity method. Under this method, investments are initially valued at acquisition cost, which is subsequently adjusted based on the effective percentage of the Bank in changes in equity (including results) of associates / subsidiaries.
When the share of losses attributable to the Bank is equivalent to or exceeds the amount of financial participation in subsidiaries and associated companies, the latter recognizes additional losses if it has assumed obligations or if it has made payments to these entities. Unrealized gains and losses between the Bank and its subsidiaries and associates are eliminated in proportion to the Bank's interest in these entities. Unrealized losses are also eliminated unless the transaction gives additional evidence of impairment of the transferred asset.
The accounting policies of subsidiaries and associates are amended, whenever
necessary, to ensure that they are applied consistently with those of the Bank.
l) Income Taxes
At December 31, 2017, the Bank is subject to the Corporate Income Tax Code (IRPC Code) at a rate of 25% and a fire rate of 2% on the calculated tax, which corresponds to
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
88
an aggregate tax rate of 25.5%. As of December 31, 2016, the Bank was subject to the Single Income Tax (IUR), with an aggregate tax rate of 25.5%. The total of taxes on profits recognized in the income statement includes current and deferred taxes.
Current taxes
Current tax is calculated based on taxable profit for the year, which differs from accounting income due to adjustments made to taxable income resulting from costs or income that are not relevant for tax purposes or that will only be considered in other accounting periods, based on taxes rules in force.
Deferred taxes
Deferred tax consists of the impact on tax recoverable/payable in future periods resulting from temporary deductible or taxable differences between the book value of assets and liabilities and their fiscal basis, used to assess taxable profit. Whereas deferred tax liabilities are normally recognized for all temporary taxable differences, deferred tax assets are only recognized to the extent that it is probable that sufficient future taxable profit allowing the use of the corresponding deductible tax differences or carry-back of tax losses will be generated. Deferred tax assets are not recognized in cases in which their recoverability may be questioned on account of other situations, including issues regarding the interpretation of current tax legislation. Notwithstanding, deferred taxes relating to the initial recognition of goodwill and temporary differences that do not result from concentrations of business activities and which have not originated in the initial recognition of assets and liabilities in transactions that do not affect the accounting income or taxable profit, are not recognized. The main situations originating temporary differences at the Bank level are the recognition of liabilities with employee benefits and the valuation of available-for-sale financial assets.
Deferred taxes are calculated at the tax rates expected to be in force on the temporary differences’ reversal date, comprising the full or substantially approved rates at the balance sheet date.
Income tax (current or deferred) is recognized in profit and loss for the year, except for cases in which the originating transactions have been recognized in other shareholders’ equity accounts (for example, in the case of revaluation of financial assets available for sale). The corresponding tax, in these situations, is also recognized as a charge to equity, not affecting the year´s result.
m) Provisions and contingent liabilities
A provision is set up whenever there is a present (legal or constructive) obligation resulting from past events likely to entail a future outflow of resources and when this may
89
be reliably assessed. The amount of the provision comprises the best estimate of the amount of the liability to be paid at the balance sheet date. Provisions are measured at the present value of estimated costs to pay the obligation using a pre-tax interest rate, which reflects the market valuation for the discount period and the risk of the provision in question. Whenever one of the criteria is not met, or the existence of the obligation is conditional on the occurrence (or non-occurrence) of a future event, the Bank shall disclose such fact as a contingent liability, unless the assessment required of the withdrawal of funds for payment is considered remote. If it is not probable the future expenditure of resources, it is a contingent liability. Contingent liabilities are only subject to disclosure, unless the possibility of their realization is remote.
The provisions related to legal proceedings, opposing the Bank to third parties, are set up in accordance with the internal risk assessments carried out by Management, with the support and advice of its legal advisors. The Bank recognizes a provision for onerous contracts, on the date on which, for the current contract, it is determined that the cost of meeting the obligation assumed exceeds the estimated economic benefits. This analysis is carried out contract by contract according to the information provided by the project managers. The Bank recognizes a provision, whenever it has assumed the obligation to return premises leased to third parties, in which it has made works or implemented assets, according to the conditions in which they were at the date of the beginning of the lease. The provision is calculated based on the estimate of the costs to be incurred with the dismantling, and the period in which it is estimated to be carried, considering the negotiated lease term. Reinforcements and reversals of provisions related to lawsuits are recognized under "Provisions net of reversals and annulment".
n) Financial guarantees Contracts that require the issuer to make payments to compensate the holder for losses incurred as a result of breaches of the contractual terms of debt instruments, namely the payment of their principal and / or interest, are considered as financial guarantees. The financial guarantees issued are initially recognized at fair value. Subsequently, these guarantees are measured at the higher of the fair value initially recognized and (ii) the amount of any obligation arising from the guarantee agreement, measured at the balance sheet date. Any variation in the amount of the obligation associated with financial guarantees issued is recognized in the income statement.
o) Employee benefits Liabilities for employee benefits are recognized in accordance with IAS 19 – “Employee benefits”. The main benefits granted by the Bank include retirement and survivors’ pensions and healthcare costs.
i) Pension and healthcare liabilities
The Bank's retirement pension liabilities are regulated, yet under a transitional
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
90
regime, by the Banco de Cabo Verde Staff Regulations of December 1, 1990, with the changes introduced in 2013 (Note 29). Pursuant to these statutes, the Bank assumes responsibility for the payment of retirement pensions to employees who meet the conditions set forth in this document. In accordance with the applicable regime, the Bank and its employees contribute 11% and 6%, respectively, of the payroll (excluding holiday and Christmas allowances). It is also the responsibility of the Bank to allocate the additional amounts necessary to fully cover the liabilities. The Bank does not have responsibilities with the employees who became effective as of July 1998, since these are covered by the general social security regime, under the terms of the labor contracts entered into. The Bank also assumed a commitment to pay a portion of the health care costs of its employees, the employees who became effective until June 1998. For this purpose, the Bank and its employees contribute monthly amounts of 4% and 2%, respectively, of the payroll. The liability recognized in the balance sheet relating to defined benefit plans corresponds to the present value of the liabilities. Total liabilities are calculated annually by specialized actuaries, using the Unit Credit Projected method and adequate actuarial assumptions (Note 29). The rate used for liabilities discounting procedures is based on market interest rates on investment grade corporate bonds (or, in their absence, public debt securities), denominated in the currencies in which the liabilities are paid and with similar periods to maturity to the average settlement period on liabilities. In 2013, following the entry into force of the revision of IAS 19 - Employee benefits, the Bank began to recognize actuarial gains and losses directly in equity. In order to cover pension liabilities, the Bank has a provision for pensions and similar charges, recognized under "Provisions for employee benefits expenses - retirement pensions" in liabilities. The liabilities defined based on the actuarial valuation of the estimated expenses with health expenses are recognized under "Provisions for employee benefits expenses - medical care" (Note 16). The year´s cost of retirement and health care costs, including the cost of current services and the cost of interest, is recognized in the net amount under "Personnel costs". The Bank recognizes through income and costs the effect of curtailments occurred in defined benefit plans, which incorporates any change resulting from the present value of the defined benefit obligation. The Bank considers the existence of a curtailment whenever:
a) It is demonstrably committed to materially reducing the number of
employees covered by a plan; or
b) It changes the terms of a defined benefits plan in such a way as for a
material element of the future service of present employees to cease to
qualify for benefits, or only qualify for reduced benefits.
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The impact of employees’ retirement prior to the standard retirement age, defined in the actuarial study is directly recognized in costs. Gains and losses generated by the settlement of a defined benefit plan are recognized in the income statement when the settlement occurs. Expenses for past liabilities resulting from the implementation of a new plan or from accrued benefits are recognized immediately in the Bank's results.
ii) Short-term benefits
Short term benefits, including employees’ productivity bonuses, are recognized on an accrual basis in “Employee costs”. The bank has not set up any provision for its employees’ vacation subsidies
owing to the fact that the right to such benefits is acquired in the year in which
they are enjoyed/ received by employees.
Termination benefits are recognized when the Bank ceases employment before
the normal retirement date, or when an employee accepts termination of
employment in exchange for these benefits. The Bank recognizes liability for
termination benefits on the latest of the following dates: in which the Bank can
no longer withdraw the benefit offer; Or in which the Bank recognizes the costs
of a restructuring in the context of the recording of provisions. Benefits due for
more than 12 months after the end of the reporting period are discounted to their
present value.
p) Commissions
Commissions relating to credit operations which essentially comprise commissions
charged on the issue and management of credit, are recognized by the application
of the effective interest rate method over the lifetime of the operations,
notwithstanding the time when they are charged and are recognized in “Interest and
similar income – commissions received associated with amortized cost”.
Commissions associated with guarantees provided, documentary credit and card
annuities, are deferred on a straight line basis over the corresponding period, with
other commissions being recognized in income when received.
Commissions for services performed are usually recognized as income across the
period of performance of the service or as a lump sum if resulting from single acts.
q) Securities and other items held under custody
Securities and other items held under custody, i.e. customers' securities, are recognized in off-balance sheet accounts, at nominal value.
r) Cash and cash equivalents
For the preparation of its cash flow statements, the Group considers “Cash and cash equivalents” as the “Cash and claims on central banks” and “Claims on other credit institutions” total, corresponding to financial instruments that can be immediately mobilized, or with maturities equal to or less than 3 months, and with a reduced risk of change in fair value.
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
92
s) Shareholder´s Equity
The common shares are classified in equity, when realized. The unrealized portion of the capital is not subject to registration. When there are, the costs inherent to the issuance of new shares are presented in equity, as a deduction from capital inflows. In the case of a capital increase, the issue premium corresponds to the difference between the subscription value and the nominal value. Supplementary capital contributions are recognized in Shareholders' Equity, when there is no defined repayment period, are not subject to interest and comply with the other recognition conditions in the equity account heading.
t) Distribution of dividends The distribution of dividends is recognized as a liability in the Company's financial statements, in the period in which the dividends are approved by the shareholder at a General Meeting.
u) Operating Segments On an annual basis, the Bank prepares segment information for the purpose of reporting to the accounts of the consolidated activity of Caixa Geral de Depósitos. The operating segments defined for this reporting are as follows:
-Corporate Finance - includes the activity related to the management of Public Debt securities, domestic corporate bonds, equity instruments and Consolidated Financial Mobilization Securities.
-Trading and sales – comprises the activity related to the management of investments and availability at other credit institutions.
-Payment and settlement – includes the activity related to credit and debit transactions.
-Commercial Bank – Includes the activity of raising funds from companies. This segment includes loans, current accounts, discounts of bills, as well as credit to the public sector.
-Retail Bank – Comprises banking activity with individuals. Included in this segment are consumer credit, housing loans, as well as deposits raised with individuals.
-Others – Other activities not included in any of the previous categories.
v) Critical accounting estimates and more relevant judgmental issues for the application of
accounting policies
The application of the above described accounting policies requires the Bank´s Board of Directors to make estimates. The following are the estimates with the greatest impact in the Bank's financial statements
Assessment of impairment losses on loans and other amounts receivable
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The assessment of impairment losses on loans is based on the methodology defined in note 2.2. e). Impairment on separately analyzed assets, is, accordingly, based on a specific assessment by the Bank, based on its knowledge of a customer’s situation and the guarantees associated with the operations in question.
The assessment of impairment on a collective basis is based on historical parameters for
comparable types of operations, considering default and recovery estimates. The use of alternative methodologies and other assumptions and estimates could imply recognition of impairment losses, other than those currently recorded.
The Bank considers that impairment assessed by this methodology, presented in Note 7)
enables the risks on its loan portfolio to be adequately recognized, in line with the rules defined by IAS 39.
Assessment of impairment losses on available-for-sale financial assets
As described in note 2.2. c) i) b), capital losses deriving from the valuation of such
assets are recognized as a charge to “Revaluation reserves”. Whenever objective
evidence of impairment exists, accrued capital losses recognized in revaluation
reserves should be transferred to costs for the year.
Assessments of impairment losses on equity instruments measured at historical cost
may be subjective. The bank decides whether or not impairment exists on such
assets based on a specific analysis at each balance sheet date, pursuant to the
definitions of IAS 39 (see note 2.2. d)). The impairment on financial assets available
for sale is presented in Note 5.
Measurement of financial instruments not traded in active markets
Under IAS 39, the Bank measures some financial instruments recognized as financial assets available for sale at fair value. The valuation models and techniques described in note 2.2. c), in accordance with IFRS 13 – fair value, are used to measure financial instruments not traded in liquid markets. The measurements obtained comprise the best estimate of the fair value of the referred to instruments at the balance sheet date (refer to Note 5).
Employee benefits
As referred to in the note 2.22. o), the Bank’s liabilities for its employees’ postemployment and other long term benefits are assessed on an actuarial basis. The actuarial appraisals incorporate, inter alia, financial and actuarial assumptions on mortality, disability, salary and pension growth, respective asset yields and discount rates. The assumptions adopted are the Bank’s and its actuaries’ best estimates of the future performance of the respective variables (see Note 29).
Assessment of income tax
Income tax (current and deferred) is assessed by the Bank on the basis of the rules defined by the current tax legislation in force. In some cases, however, tax legislation may not be sufficiently clear and objective and may give rise to different interpretations. Although the amounts recognized, in such cases, represent the best understanding of the bank, on the correctness of their operations, they may be questioned by the Tax Authorities.
With the entry into force on January 1, 2015 of the Corporate Income Tax Code (IRPC
Code), the Bank considered its interpretation of the changes imposed by the IRPC Code,
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
94
namely with respect to the deductibility of costs with impairment for Loan and employee benefits, considering that, for tax purposes, the impairments calculated in accordance with IAS 39 and the impact of the transition to the new Code would be accepted. It is the Board of Directors 'understanding that the criteria and assumptions adopted are in accordance with the legislation in force and that any differences in interpretation would only result in reclassifications between current and deferred taxes, without impact on the Bank's results and shareholders' equity as of December 31 2016 and 2015.
As mentioned in Note 12, on December 31, 2017, there were no unforeseen
contingencies related to corrections made by the Tax Authorities to the taxable income of previous years, since, through the signature of a Protocol signed on August 9, 2017 between the Ministry Finance and BCA, it was recognized by the State to BCA, with reference to the period 2005-2014 and, in addition, as a result of the definitive determination of the taxable amount for the years 2009 to 2014, the right to reimbursement of taxes Actually Paid and Not Due , in the amount of CVE 1,073,423,609, as well as the right to the Return of two Bank Guarantees in the amount of CVE 233,044,734.
Deferred tax assets are recognized to the extent that future taxable income is expected to
exist. Both deferred tax assets and deferred tax liabilities are calculated based on Cape Verdean tax legislation - changes in management's interpretation of this legislation may influence the deferred taxes recognized in the Bank's accounts.
w) Earnings per share - basic and diluted
Basic earnings per share are calculated by dividing net income attributable to shareholders of the Bank by the weighted average number of common shares in circulation, excluding the average number of own shares held by the Bank. For the calculation of diluted earnings per share, the weighted average number of common shares in circulation is adjusted to reflect the effect of all potential dilutive common shares, such as those resulting from convertible debt and stock options granted to employees. The dilution effect results in a reduction in earnings per share, resulting from the assumption that the convertible instruments are converted or that the options granted are exercised.
3. CASH AND DEPOSITS AT CENTRAL BANKS This account heading comprises the following:
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Demand deposits at Bank of Cabo Verde aim at meeting the minimum cash reserve requirements.
In accordance with Bank of Cabo Verde’s provisions, these assets correspond to 15% of the average actual liabilities in domestic and foreign currency for residents and emigrants. As of 2014, it was fixed a minimum daily rate of 20% of the amount of minimum reserves that financial institutions should keep in the demand deposits account.
In the years 2017 and 2016, these deposits were not remunerated. As of January 1, 2018, these
provisions corresponded to 13% of the average of the effective responsibilities in the national and foreign currency, for residents and emigrants.
4. BALANCES DUE FROM OTHER BANKS This account heading comprises the following:
Checks pending settlement comprise the checks of customers of other banks sent for clearing.
These amounts are collected in the first few days of the subsequent month. 5. AVAILABLE-FOR-SALE FINANCIAL ASSETS This account heading comprises the following:
2017 2016
Cash
. Domestic currency 635,634 572,391
.Foreign currency 444,466 488,263
Demand deposit at Banco de Cabo Verde
. Domestic currency 5,243,987 6,782,946
.Foreign currency 990 1,029
6,325,076 7,844,628
2017 2016
Demand deposits
At credit institutions in Cabo Verde
.Caixa Económica de Cabo Verde - 994
At credit institutions abroad
.Caixa Geral de Depósitos, S.A. 211,358 126,575
.Novo Banco, S. A 13,602 84,321
.Unicredito Italiano SpA 35,109 19,699
.Citibank 26,503
.Others 198,683 255,423
458,752 513,514
Cheques pending settlement:
Domestic cheques 109,541 108,718
Foreign cheques 31,131 26,259
140,672 134,977
Other Funds 3,791 3,831
603,216 652,322
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
96
At December 2017 and 2016, the financial instruments recognized under the category of financial assets available for sale comprised the following:
The Consolidated Financial Mobilization Securities (TCMF) were issued following the
64 / V / 98 law, which approved the creation of the "International Support for Cabo Verde Stabilization Trust Fund". Under the terms of this law, the Fund is managed by the Bank of Portugal and constitutes an autonomous asset and as such is the only entity to be liable for the debts, burdens and liabilities resulting from its existence, operation and organization.
The investment policy of the Fund is defined by a representative of the Government of Cabo
Verde, together with the management entity, with the purpose of valuing its assets and being guided by criteria of security and profitability.
The TCMF resulted from the conversion of Cabo Verde's Treasury Bonds that were past due and
recorded at the nominal value of the securities delivered. According to Law No. 70 / V / 98 of August 17, the main characteristics of these securities are as
follows: - TCMFs are perpetual notes issued by the State of Cabo Verde through the Treasury and
incorporate the right to receive 90% of the Fund's annual net income. In this regard, the Bank records in each year the income relating to income receivable from TCMF, under "Income from equity instruments" (Note 23);
- The State compromises to acquire the TCMF within a maximum period of twenty years from
2017 2016
Consolidated financial investment securities
. Fair value 6,433,170 6,433,170
. Income receivable 27,107 150,369
6,460,277 6,583,539
Equity instruments 85,079 80,921
Impairment (Note 16) (10,841) (10,841)
6,534,515 6,653,619
2017 2016
Balance sheet Balance sheet
% of Acquisition value Fair value value Fair value
equity stake cost (net) reserve Impairment (net) reserve Impairment
(Nota 20) (Nota 17) (Nota 21) (Nota 17)
Equity instruments valued at fair value
Consolidated financial investment securities 56.49% 6,433,170 6,460,277 - - 6,583,539 -
Visa International Service Association n.d. 1,313 18,993 17,680 - 14,835 14,139 -
Equity instruments valued at historical cost
A Promotora, Sociedade de Capital de Risco de Cabo Verde, S.A.R.L.11.11% 50,000 39,159 - ( 10,841) 39,159 - ( 10,841)
Sociedade Cabo Verdiana de Tabacos, S.A. 0.65% 10,133 10,133 - - 10,133 - -
Fundo G.A.R.I. 0.19% 4,203 4,203 - - 4,203 - -
SITA - Sociedade Industrial de Tintas, S.A.R.L. 0.63% 1,750 1,750 - - 1,750 - -
66,086 55,244 - ( 10,841) 55,245 - - ( 10,841)
6,500,569 6,534,514 17,680 ( 10,841) 6,653,619 14,139 ( 10,841)
Security
97
the date of approval of the Law, in terms and conditions to be defined by the Government; - During the first three years of existence, TCMF could only be transacted between credit
institutions duly authorized to carry out their activity in Cabo Verde. Between the fourth and seventh year, each credit institution could annually transmit 25% of the total TCMF it held at the end of the third year. From the eighth year, TCMF can be transacted without restrictions.
6. LOANS AND ADVANCES TO CREDIT INSTITUTIONS This account heading comprises the following:
7. LOANS AND ADVANCES TO CUSTOMERS This account heading comprises the following:
2017 2016
Investments in Cabo Verde
. In the Banco de Cabo Verde:
- Monetary regularization securities - 267,000
- Monetary intervention securieties 1,100,000 738,000
- Very short terms investments 16,800,000 14,000,000
17,900,000 15,005,000
Investments in credit institutions abroad
. Very short term investments
- Caixa Geral de Depósitos, S.A. 323,901 381,296
- Novo Banco, S.A. -
. . Term deposits
- Caixa Geral de Depósitos 5,336,030 1,820,954
- Novo Banco, S.A - 882,120
. Escrow accounts
- Other credit institutions abroad 23,998 27,392
5,683,928 3,111,762
Interest receivable 6,342 6,112
Deferred income ( 4,068) ( 252)
23,586,202 18,122,622
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
98
At December 31, 2017 and 2016, the account heading "Other loans and receivables (securitized)"
2017 2016
Short term domestic loans:
. Commercial discounts
. Current account credit 1,831,041 1,924,842
. Overdrafts in Demand deposit 92,380 117,509
. Credit cards 132,393 128,122
Medium and long term domestic loans
. Loans 28,068,857 28,449,890
Short term foreign loans
. Commercial discounts
. Current account credit -
. Overdrafts in Demand deposit 1,362 724
. Credit cards 7,031 5,678
Medium and long term foreign loans
. Loans 280,374 268,732
. Current account credit 63,426 59,119
Other loans amounts receivable (securitised) 3,459,568 3,469,639
Employee loans 1,817,970 1,834,516
35,754,403 36,258,771
Interest receivable 134,155 180,087
Commissions and other deferred income ( 243,659) ( 233,607)
Deferred costs 1,866 1,934
Overdue credit and interest 5,524,597 5,264,845
41,171,362 41,472,030
Impairment on loans and advances to customers (Note 16) ( 4,116,648) ( 3,819,549)
37,054,714 37,652,481
Public debt securities
Nominal value 9,004,099 7,915,424
Interest receivable 121,802 119,139
9,125,901 8,034,563
46,180,615 45,687,044
99
reflects the value of domestic companies corporate bonds of recognized under "Loans and receivables" (Note 2.2.c) i) a )). These obligations are as follows:
The bonds issued by Electra – Empresa de Electricidade e Águas, S.A.R.L. and IFH – Imobiliária, Fundiária e Habitat, S.A., are backed by the state of Cabo Verde. Bonds issued by ASA – Empresa Nacional de Aeroportos e Segurança Aérea, S.A., presented on December 31 2015, had as guarantee a comfort letter issued by the state of Cabo Verde.
At 31 December 2017, the bonds issued by Sociedade de Gestão de Investimentos, Lda. and
Cabo Verde Fast Ferry, S.A. were in default on their coupon payments since August 2013 and
August 2011, respectively. However, in 2016 the restructuring of the bond loan of CVFF was
negotiated, maturing in 2024, with a significant reduction in interest rates.
Regarding the issuer SOGEI, a project was presented for the conversion of bonds into
investment units a Closed Investment Fund to be created, which is still under discussion.
Loans to employees on December 31, 2017 and 2016 are remunerated at low interest rates.
At 31 December 2017 and 2016, performing loans and bonds guaranteed by the state of Cabo
Verde totaled mCVE 3,122,986 and mCVE 3,165,135 respectively, and the performing loan
guaranteed by a letter of comfort totaled tCve 385.130 e tCve 512.477, respectively.
At December 31, 2017 and 2016, gross credit to customers, including loans and interest
overdue and excluding "Other loans and receivables - securitized", public debt, accrued
interest, commission and deferred costs, presented the following structure by sectors of
activity:
Security 2017 2016 Maturity
Electra - Empresa de Electricidade e Águas, S.A.R.L. - Tranche B - 663,751 14-06-2017
Electra - Empresa de Electricidade e Águas, S.A.R.L. - Tranche C 1,458,220 1,458,220 14-06-2027
Electra - Empresa de Electricidade e Águas, S.A.R.L. - Tranche E 982,727 15-12-2025
Electra - Empresa de Electricidade e Águas, S.A.R.L. - Tranche D 318,976 637,951 27-07-2020
Câmara Municipal da Praia 278,502 299,925 23-07-2030
IFH - Imobiliária, Fundiária e Habitat, S.A. - Tranche C 178,731 178,731 06-01-2019
ASA - Empresa Nacional de Aeroportos e Segurança Aérea, S.A. 149,253 25-08-2027
Câmara Municipal do Sal 93,160 104,805 15-07-2025
Sociedade de Gestão de Investimentos, Lda. 66,569 66,569 18-02-2017
Cabo Verde Fast Ferry, S.A. 59,687 59,687 31-07-2024
3,585,824 3,469,639
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
100
31.12.2017
General government and state-owned companies
Private companies and individuals Total
Outstanding Loan Outstanding Overdue Outstanding Overdue
Loan Overdue Total Loan loan Total Loan Loan Total
Companies
Agriculture, animal husbandry, hunting and forestry - 33,972,736 386,525 34,359,261 33,972,736 386,525 34,359,261
Fisheries - 13,149,706 8,004,399 21,154,105 13,149,706 8,004,399 21,154,105
Extractive industries - - 47,075,294 3,151,983 50,227,277 47,075,294 3,151,983 50,227,277
Extractive industries exc. energy goods - 0 - - - -
Extractive industries inc./ exception of energy goods - 47,075,294 3,151,983 50,227,277 47,075,294 3,151,983 50,227,277
Manufacturing 74,891,203 74,891,203 750,441,948 180,241,249 930,683,197 825,333,151 180,241,249 1,005,574,400
Food, beverages and tobacco industries - 324,784,331 119,846,940 444,631,271 324,784,331 119,846,940 444,631,271
Textile industry - 18,225,162 1,419,924 19,645,086 18,225,162 1,419,924 19,645,086
Leather and leather goods - - - - -
Wood, cork and its goods industries - 32,855,908 37,451,310 70,307,218 32,855,908 37,451,310 70,307,218
Paper pulp, card and art edition and print industries 74,891,203 74,891,203 - 74,891,203 - 74,891,203
Manufactoring of coke, petrol goods., processed and Nuclear fuel - - - - -
Production of chemicals and synthetic or artifical fibres - - - - -
Manufacture of basic pharmaceutical products and preparations - - - - -
Manufacturing of and rubber goods and plastic materials - 29,194,652 29,194,652 29,194,652 - 29,194,652
Manufacture of other non-metallic minerals - 29,693,749 29,693,749 29,693,749 - 29,693,749
Basic metallurgical and metallic products industries - 1,924,082 3,816,747 5,740,829 1,924,082 3,816,747 5,740,829
Manufacture of machines and tools - - - - -
Manufacture of furniture and mattresses - 797,081 1,429,658 2,226,739 797,081 1,429,658 2,226,739
Manufacturing of electric and optics tools - - - - -
Manufacturing of transport material - - - - -
Non specified manufacturing industries - 312,966,983 16,276,670 329,243,653 312,966,983 16,276,670 329,243,653
Production and distribution of electricity, water and gas 33,307,346 33,307,346 25,994,461 - 25,994,461 59,301,807 - 59,301,807
Construction - 1,575,775,656 348,637,182 1,924,412,838 1,575,775,656 348,637,182 1,924,412,838
Wholesale, retail, repairs of motor vehicles/bikes and personal and domestic goods - 2,621,735,429 583,355,630 3,205,091,059 2,621,735,429 583,355,630 3,205,091,059
Accomodation and restaurants - 2,113,001,598 227,306,989 2,340,308,587 2,113,001,598 227,306,989 2,340,308,587
Transport, warehousing and communications 21,392,192 21,392,192 515,912,515 225,172,539 741,085,054 537,304,707 225,172,539 762,477,246
Information and communication activities - 428,208,455 51,187,597 479,396,051 428,208,455 51,187,597 479,396,051
Financial activities - 12,124,877 12,124,877 12,124,877 - 12,124,877
Financial brokerage excluding insurance and pension funds - - - - -
Insurance, pension funds and complementary social security activities - 12,124,877 12,124,877 12,124,877 - 12,124,877
Support activities of financial brockerage - - - - -
Real estate, rentals and service provider companies - 788,680,194 1,951,270,216 2,739,950,409 788,680,194 1,951,270,216 2,739,950,409
Real estate - 788,680,194 1,951,270,216 2,739,950,409 788,680,194 1,951,270,216 2,739,950,409
Other activities - - - - -
Scientific, technical consultancy and other similiar activities - 120,560,697 83,829,825 204,390,522 120,560,697 83,829,825 204,390,522
Administrative activities and support services 620,977,721 620,977,721 - 620,977,721 - 620,977,721
Public administration, defence and mandatory social security 2,590,376,032 149,608 2,590,525,640 2,380,573 2,380,573 2,592,756,605 149,608 2,592,906,213
Education - 13,043,011 75,802 13,118,813 13,043,011 75,802 13,118,813
Health and social security - 549,396,226 46,842,884 596,239,111 549,396,226 46,842,884 596,239,111
Other activities and collective, social and personal services - 801,709,105 97,325,621 899,034,726 801,709,105 97,325,621 899,034,726
Households with maids - - - - -
International organisations and other extraterritorial institutions - - - - -
3,340,944,495 149,608 3,341,094,103 10,413,162,479 3,806,788,439 14,219,950,919 13,754,106,975 3,806,938,048 17,561,045,022
Individuals
Housing - 13,456,273,037 1,137,973,854 14,594,246,891 13,456,273,037 1,137,973,854 14,594,246,891
Others - 5,084,454,815 453,429,068 5,537,883,883 5,084,454,815 453,429,068 5,537,883,883
- - - 18,540,727,852 1,591,402,922 20,132,130,774 18,540,727,852 1,591,402,922 20,132,130,774
3,340,944,495 149,608 3,341,094,103 28,953,890,332 5,398,191,361 34,352,081,694 32,294,834,827 5,398,340,970 37,693,175,797
101
8. INVESTMENT PROPERTIES
On December 31, 2017 and 2016, this account heading is comprised of land held by the Bank,
reclassified as "Other tangible assets" in the transition to the IFRS.
9. OTHER TANGIBLE ASSETS The movement in "Other tangible assets" in the years 2017 and 2016 was as follows:
31.12.2016
Total
Outstanding Overdue Outstanding Overdue Outstanding Overdue
Loan Loan Total Loan Loan Total Loan Loan Total
Companies
Agriculture, animal husbandry, hunting and forestry - - 22,884 367 23,251 22,884 367 23,251
Fisheries - - 11,566 8,004 19,571 11,566 8,004 19,571
Extractive industries - - 49,948 14,064 64,011 49,948 14,064 64,011
Extractive industries exc. energy goods - - 49,948 14,064 64,011 49,948 14,064 64,011
Manufacturing 78,440 - 78,440 1,137,205 184,663 1,321,868 1,215,645 184,663 1,400,308
Food, beverages and tobacco industries - 508,565 123,086 631,651 508,565 123,086 631,651
Textile industry - 19,237 483 19,720 19,237 483 19,720
Leather and leather goods - - - - - - -
Production of chemicals and synthetic or artif ical f ibres - 44,059 - 44,059 44,059 - 44,059
Manufacture of basic pharmaceutical products and preparations - - - - -
Manufacture of other non-metallic minerals - 27,500 - 27,500 27,500 - 27,500
Basic metallurgical and metallic products industries - 56,568 8,695 65,263 56,568 8,695 65,263
Manufacture of machines and tools - - - - -
Manufacture of furniture and mattresses - 14,031 14,199 28,230 14,031 14,199 28,230
Production and distribution of electricity, w ater and gas 48,767 48,767 385,661 - 385,661 434,428 - 434,428
Construction 84,111 84,111 1,018,419 149,614 1,168,033 1,102,530 149,614 1,252,144
Wholesale, retail, repairs of motor vehicles/bikes and personal and domestic goods - - 2,488,884 572,516 3,061,400 2,488,884 572,516 3,061,400
Accomodation and restaurants - - 1,796,289 26,234 1,822,523 1,796,289 26,234 1,822,523
Transport, w arehousing and communications 33,291 33,291 1,305,581 521,446 1,827,027 1,338,873 521,446 1,860,319
Information and communication activities - - - - - -
Financial activities - - 394,692 - 394,692 394,692 - 394,692
Financial brokerage excluding insurance and pension funds - - 392,404 - 392,404 392,404 - 392,404
Insurance, pension funds and complementary social security activities - 2,288 - 2,288 2,288 - 2,288
Real estate, rentals and service provider companies - - 1,483,050 1,987,606 3,470,657 1,483,050 1,987,606 3,470,657
Real estate - 1,483,050 1,987,606 3,470,657 1,483,050 1,987,606 3,470,657
Scientif ic, technical consultancy and other similiar activities - - 261,529 72,139 333,669 261,529 72,139 333,669
Administrative activities and support services - - - - - -
Public administration, defence and mandatory social security 1,553,698 117 1,553,815 4,089 - 4,089 1,557,787 117 1,557,904
Education - - 19,172 28 19,201 19,172 28 19,201
Health and social security - - 320,041 6,452 326,493 320,041 6,452 326,493
Other activities and collective, social and personal services 1,187,570 1,187,570 935,533 72,104 1,007,637 2,123,103 72,104 2,195,208
Households w ith maids - - 2,226 782 3,009 2,226 782 3,009
International organisations and other extraterritorial institutions - - - - - -
2,985,877 117 2,985,994 11,636,771 3,616,021 15,252,792 14,622,648 3,616,138 18,238,786
Individuals
Housing - 13,779,514 1,159,815 14,939,328 13,779,514 1,159,815 14,939,328
Others - 4,386,971 488,891 4,875,862 4,386,971 488,891 4,875,862
- - - 18,166,484 1,648,706 19,815,191 18,166,484 1,648,706 19,815,191
2,985,877 117 2,985,994 29,803,256 5,264,727 35,067,983 32,789,132 5,264,845 38,053,977
General government and state-ow ned
companies Private companies and individuals
2017
Balance on 31.12.2016
Depreciation
and accumulated Depreciation Sales and Net
Gross impairment Reclassi- for write-offs Amount
Amount losses Increases Transfers fications period (net) in 2017
Property for own use
Land 75,034 - - - - - - 75,034
Buildings 2,283,940 (694,962) 1,223 45,422 - (43,602) - 1,592,022
Works on rented buildings 408,732 (302,759) - - - (28,032) - 77,941
Equipment
Office furniture and material 245,754 (192,974) 7,860 3,275 4,247 (15,639) (24) 52,499
Machines and tools 46,516 (41,354) 2,858 - - (2,461) (1) 5,559
IT equipment 256,797 (183,896) 5,973 4,205 (3,937) (44,402) (1,288) 33,450
Interior installations 175,631 (150,167) 2,585 6,561 - (10,349) (25) 24,236
Transport material 199,124 (127,756) 23,050 - - (20,599) (2,050) 71,770
Security equipment 140,342 (74,339) 9,152 23,175 510 (21,264) - 77,577
Other equipment 136,428 (116,009) 8,545 8,776 (310) (9,274) 103 28,260
Tangible assets in progress 91,758 - 25,631 (91,940) (2,517) - (11,276) 11,657
4,060,056 (1,884,215) 86,877 (525) (2,007) (195,621) (14,561) 2,050,005
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
102
As of December 31, 2017 and 2016, tangible assets in progress refer mainly to works underway at the
Bank´s branches and to the acquisition of computer equipment that had not yet been operational at the end of the year.
As of December 31, 2017 and 2016, the Bank has recorded impairment for own-real estate
properties in the amount of tCve. 37,671 (Note 16). 10. INTANGIBLE ASSETS The movement in "Intangible assets" in the years 2017 and 2016 was as follows:
11. INVESTIMENTS IN ASSOCIATED COMPANIES As of December 31, 2017 and 2016, the balance of this account heading was as follows:
2016
Balance on 31.12.2015
Depreciation
and accumulated Depreciation Sales Net
Gross impairement Transfers Reclassi- for writte-offs Amount
Amount losses Increases fications period (net) in 2016
Property for own use
Land 75,034 - - - - - - 75,034
Buildings 2,090,996 (661,650) 84,236 108,708 - (37,084) 3,772 1,588,977
Works on rented buildings 408,732 (271,557) - - - (31,202) - 105,973
Equipment
Office furniture and material 251,780 (181,746) 887 - - (17,990) (151) 52,780
Machines and tools 46,992 (40,108) 1,175 - - (2,896) - 5,162
IT equipment 559,350 (460,820) 6,650 17,269 (275) (49,213) (60) 72,901
Interior installations 177,282 (138,307) 890 - - (14,267) (135) 25,464
Transport material 195,028 (134,569) 32,880 2,720 - (22,442) (2,249) 71,369
Equipamento de segurança 128,127 (58,769) 3,419 8,707 45 (15,569) - 65,959
Other equipment 135,613 (111,890) 557 5,137 - (8,998) - 20,419
Tangible assets in progress 119,487 - 124,571 (142,827) (45) - (9,384) 91,803
4,188,421 (2,059,417) 255,266 (287) (275) (199,660) (8,208) 2,175,841
2017Balance on 31.12.2016 Sales and Net
Gross Accumulated Transfers Reclassi- Depreciations writte-offs AmountAmount Depreciation Increases fications for period (net) on 2017
Processing equipmentautomatic data(Software) 303,816 (280,595) 8,350 6,981 - (12,249) - 26,303Other intangible assets 13 (13) - 525 (510) (15) - -
Intangible assets in progress 29,760 - 13,072 (6,981) - - - 35,850
333,589 (280,608) 21,421 525 (510) (12,264) - 62,153
2016
Balance on 31.12.2015 Net
Gross Accumulated Transfers Reclassi- Depreciations Amount
Amount Depreciation Increases fications for period on 2016
Processing equipment
automatic data (Software) 286,631 (272,353) 1,957 15,228 (8,242) 23,221
Other intangible assets 13 (13) - - - -
Intangible assets in progress 9,097 - 35,605 (14,942) - 29,760
295,740 (272,366) 37,562 287 - (8,242) 52,981
103
Garantia - Companhia de Seguros de Cabo Verde, S.A.R.L.
On 30 April 2014, the bank disposed of 20,000 shares comprising 10% of the share capital of
Garantia – Companhia de Seguros de Cabo Verde, S.A.R.L. (Garantia), for the amount of
mCVE 123,497 giving it an equity stake of 25%, and the operation generated a capital gain of
mCVE 66,884.
On 8 May 2014, Garantia sold 89,504 of the bank’s shares comprising 6.576% of its share
capital to Caixa Geral de Depósitos, S.A. (CGD) for the amount of tCVE 313,635, reducing its
equity stake in the bank from 12.5% to 5.76%. The operation reduced the value of the balance
sheet by tCVE 22,376, recognized as a charge to shareholder’s equity. The disposal of the
equity investment also originated capital gains in Garantia’s accounts, recognized by the bank
as a charge to shareholders’ equity in proportion to its equity stake in Garantia amounting to
around tCVE 56,000.
This cross investment is taken into consideration for the assessment of the value of the bank’s
investment in Garantia.
SISP - Sociedade Interbancária e Sistema de Pagamentos, S.A.R.L.
The bank classified its SISP investment as an investment in associates, notwithstanding the
fact that it was only 10%, as the board of directors considers that the fact that the bank sits on
the board gives it significant influence over SISP’s activity and is therefore in conformity with
the dispositions of IAS 28 – Investments in associates.
Promoleasing – Sociedade de Locação Financeira, Sociedade Unipessoal Anónima, S.A.
The bank subscribed for 14,700 Promoleasing – Sociedade de Locação Financeira Unipessoal
Anónima, S.A. (company) shares, representing 49% of its share capital in 2010, for a nominal
amount of mCVE 1 per share. This company began to operate in 2010.
In 2015, the Bank acquired 15,300 shares of Promoleasing for tCve 15,300, and held the entire
capital stock on December 31, 2015 and 2016.
2017
% equity Acquisition Book Net Profit / Sharesholder's
Entity stake cost value Date assets (loss) Equity
Garantia - Companhia de Seguros de CaboVerde, S.A.R.L. 25% 100,000 243,121 31-12-2017 2,904,326 121,943 1,166,886
SISP - Sociedade Interbancária e Sistema de Pagamentos, S.A.R.L. 10% 10,000 77,852 31-12-2017 1,436,795 199,500 775,926
CVGARANTE - Sociedade de Garantia Mútua, S.A. 15% 15,000 - 31-12-2017
Promoleasing, Sociedade de Locação Financeira, Sociedade
Unipessoal Anónima, S.A. 100% 30,000 -
155,000 320,973
% equity Acquisition Book Net Profit / Sharesholder's
Entity stake cost value Date assets (loss) Equity
Garantia - Companhia de Seguros de CaboVerde, S.A.R.L. 25% 100,000 225,188 31-12-2016 2,900,377 115,184 1,102,031
SISP - Sociedade Interbancária e Sistema de Pagamentos, S.A.R.L. 10% 10,000 67,612 31-12-2016 1,231,774 168,313 676,120
CVGARANTE - Sociedade de Garantia Mútua, S.A. 15% 15,000 11,466 31-12-2016 77,153 (6,510) 76,445
Promoleasing, Sociedade de Locação Financeira, Sociedade
Unipessoal Anónima, S.A. 100% 30,000 32,697 31-12-2016 364,034 314 32,697
155,000 336,963
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
104
CVGARANTE - Sociedade de Garantia Mútua, S.A.
Pursuant to the provisions of Article 1 of Ordinance No. 28/2013 of May 15, was authorized the creation of CVGARANTE - Sociedade de Garantia Mútua, S.A. (Company) with the capital stock of tCve 100,000. It is a mutual guarantee society whose corporate object is to carry out financial operations for the benefit of micro, small and medium-sized enterprises with a view to promoting and facilitating their access to finance both within the financial system and in capital market. The Bank subscribed 15,000 shares with a value of tCve. 15,000, corresponding to 15% of the Company's capital. Under the terms of the Shareholders Agreement, the shareholders of the Company's credit institutions grant SPMG - Sociedade de Investimento, S.A., with a put option on the company’s shares at their nominal value, to be exercised annually with reference to 31 December. On 23 December 2013, an application for a permit for the company to begin its operations, dated 18 December 2014, was submitted to the Banco de Cabo Verde. Information on the balance sheet value of these investments in 2016 and 2015 and respective
impact in the bank’s financial statements is set out below:
12. INCOME TAX
On December 31, 2017, the Bank was subject to the Income Tax Code for Corporates (IRPC Code) at the rate of 25%, and a fire brigade tax of 2% of the calculated tax, which corresponds to an aggregate tax rate of 25.5% As of December 31 2016, the Bank was subject to the Single Income Tax (IUR), at the aggregate tax rate of 25.5%.
The balances income taxes of assets and liabilities and deferred tax assets and liabilities at
December 31, 2017 and 2016 were as follows:
Garantia SISP CVGARANTE Promoleasing Total
Balance on 31 December 2015 203,179 61,118 12,383 31,896 308,577
Movements recognised directly as a charge to shareholders' equity -Income generated by associates -Dividends received -
Balance on 31 December 2015 203,179 61,118 - 12,383 - 31,896 - 308,577
Movements recognised directly as a charge to shareholders' equity 9,203 (1,733) 487 7,957Income generated by associates in reference to previous years 28,796 16,831 (916) 314 45,025Income generated by associates (15,992) (8,603) (24,595)Dividends received
Balance on 31 December 2016 225,188 67,612 - 11,467 - 32,697 - 336,964
Movements recognised directly as a charge to shareholders' equity (11,467) (32,697) (44,164)Income generated by associates in reference to previous years 5,964 5,964Income generated by associates for the fiscal year 29,247 19,950 49,197Dividends received (17,278) (9,709) (26,986)
-Balance on 31 December 2017 243,121 77,852 - - - - - 320,973
105
The detail and movement in deferred taxes in the years 2017 and 2016 were as follows:
2017 2016
Current tax assets IUR recoverable in 2017 14,185. IUR recoverable in 2016 - 2,470. IUR recoverable in 2015 - 38,719. IUR recoverable in 2014 - 9,913. IUR recoverable in 2013 - 16,519. IUR recoverable in 2012 - 60,534. IUR recoverable in 2011 - 60,522. IUR recoverable in 2010 - 146,894. IUR recoverable in 2009 - 172,845. IUR recoverable in 2008 - 114,517. IUR recoverable in 2006 - 120,912. IUR recoverable in 2005 - 54,646
14,185 798,491
Withholdings for the year. Fiscal Year 2016 - 4,314. Fiscal Year 2014 - 21,485. Fiscal Year 2013 - 24,682. Fiscal Year 2012 - 20,044. Fiscal Year 2011 - 32,626
14,185 901,642
Current tax liabilities 67,004 73,220
Deferred tax assetsFor temporary differences 3,245 56
Deferred tax liabilities For temporary differences (205,591) (197,342)
(202,346) (197,286)
2017
Change in
Balance on Sharesholder's Balance on
31.12.2016 Equity Income 31.12.2017
Conversion adjustments to IFRS - - - -
Movements recognised in reserves
Actuarial deviations for healthcare
and medical assistance (193,973) (2,479) - (196,452)
Valuation of investments in associates (7,762) (1,521) - (9,283)
Valuation of investments in associates (3,448) (1,060) - (4,508)
(205,183) (5,061) - (210,244)
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
106
Pursuant to Decree-Law no. 14/2010, of April 26, the transition impacts to the IFRS, calculated with reference to January 1, 2008, with effects on equity, which are considered fiscally relevant under the IUR regulation, contributed to the formation of the taxable income in equal parts for a period of five years.
The reconciliation between the nominal rate and the effective tax rate verified in the years 2017 and 2016 can be demonstrated as follows:
With the entry into force on January 1, 2015 of the Corporate Income Tax Code (IRPC Code), the Bank considered its interpretation of the changes imposed by the IRPC Code, namely with respect to the deductibility of costs with impairment for Credit and employee benefits, considering that, for tax purposes, the impairments calculated in accordance with IAS 39 and the impact of the transition to the new Code would be accepted. It is the Board of Directors 'understanding that the criteria and assumptions adopted are in accordance with the legislation in force and that any differences in interpretation would only result in reclassifications between current and deferred taxes, without impact on the Bank's results and shareholders' equity as of December 31 2017 and 2016.
Balance on Sharsholder's Balance on
31.12.2015 Equity Income 31.12.2016
Conversion adjustments to IFRS
Movements recognised in reserves
Actuarial deviations for healthcare
and medical assistance (143,265) (50,708) - (193,973)
Valuation of investments in associates (12,745) 4,983 (7,762)
Valuation of available-for-sale financial assets (5,346) 1,898 (3,448)
-
(161,356) (43,827) (205,183)
2017 2016
Income before tax 292,006 418,321
Income tax assessed at nominal rate 25.50% 74,462 25.50% 106,672Fiscal benefits:Income from Consolidated Financial Investment Securities -0.87% (2,555) -1.04% (4,358). Capital gains on disposals of equity stakes
Income from bonds admitted to listing -14.18% (41,404) -10.79% (45,135) Donations -0.26% (770) -0.16% (657). Dividends -4.30% (12,545) -2.78% (11,635). Other -0.15% (447) -0.16% (654)Expenses not accepted for fiscal purposes 13.45% 39,267 4.45% 18,611
Tax loss / (Deduction of tax loss) 0.00% 0.07% 275
Income tax for the year 19.18% 56,008 15.09% 63,119
Tax on benefict purposes 0.00% - 2.16% 9,027Autonomous Taxation 0.26% 773 0.48% 2,016
Interest payable 19.44% 56,781 15.57% 74,162
107
Under the legislation in force until December 31, 2014, the Bank benefited from exemptions related to the following income:
• Income from Consolidated Financial Mobilization Securities;
• Dividends received; and
• Income from bonds, other than public debt, admitted to listing on the Cabo Verde Stock Exchange, for three years after its effective start. These yields, depending on the year of issue, also benefit from reduced tax rates.
For this reason, the tax burden presented by the Bank up to the year ended December 31, 2014 was lower than the normal tax rate.
With the entry into force of the IRPC Code in fiscal year 2015, the Bank no longer benefited from exemptions on certain income, except for the Consolidated Financial Mobilization Securities, whose income remained exempt, as these securities were obtained before 31 Of December 2014.
The IRPC Code foresees that tax losses carried forward from previous years calculated in the scope of the IUR could be deducted in the following three years under the previous regime in force.
On March 8, 2017 the Bank received a communication from Direção Nacional da Receita do Estado (DNRE) where it is stated that, considering the existence of grounds in the tax law that support BCA's claim of deductibility of the costs of pensions and health incurred and presented in the above period, grants BCA the right to deduct them. It should be noted that this communication reinforces the decision of Tribunal Fiscal e Aduaneiro de Sotavento, of November 4, 2016, when it considered BCA appeal totally valid, nullifying the act of fixing the taxable amount of 2013 and corresponding settlement, as above Mentioned.
Meanwhile, on August 9, 2017, an Agreement was signed between the Ministry of Finance and BCA, in which the debt was recognized in respect of Taxes actually paid by BCA and Non-Due or Guaranteed, relating to extraordinary contributions to BCA’s Private Pension System, with reference to the period 2005-2014, totaling the value of CVE 1,073,423,609, which should be amortized over a period of 07 years, starting on 01.01.2018 and at the interest rate of 3.5% per year. In the scope of the same Agreement, two Bank Guarantees were also returned to BCA in the amount of CVE 233,044,734. 13. OTHER ASSETS This account heading comprises the following:
2005 2014 2015 2016 2017 Total
Pension and healthcare adjustments 54,646 - - - -
Other adjustments - - - - -
54,646 - - -
Current tax assets
- IUR recoverable 54,646 14,185 14,185
- Withholdings for the year - - -
54,646 14,185 14,185
Guarantees provided - - - - - -
Tax credit - - - - - -
54,646 14,185 14,185
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
108
Subsidies to be received from the state of Cabo Verde are for credit and deposits and have been calculated in accordance with the legislation in force in Cabo Verde. The balances recognized comprise the amounts claimed by the bank since early 2000. The reimbursement of these amounts is being negotiated with Direção Geral do Tesouro, which have confirmed the total balance as of December 31
2016, in the total amount of tCve 1.093.247. On August 9, 2017 an Agreement was signed between the Ministry of Finance and BCA, in which it was stated that the amount of CVE 1,093,247,797 should be amortized over a period of 12 years, starting on 01.01.2018 and at the interest rate of 4.375% per year.
The following table provides information on property received as payment in kind, at 31
December 2017 and 2016, in accordance with its date of acquisition by the bank:
2017 2016
Other assets
Auctioned goods 1,138,726 1,131,980
Works of art 10,923 10,923
Gold, precious metals, coins and medallions 742 762
Debtors and other investments
Sundry debtors
.State 1,151,009 213,364
.Other entities 215,967 41,348
Subsidies receivable
.State 1,093,248 875,623
.Other entities 3,473 6,138
Advances to suppliers of fixed assets 13,776 5,949
Deferred expenses
Insurance 38,046 37,968
Others 18,640 12,885
3,684,551 2,336,939
Impairment of other assets (Note 16):
Property received in kind (159,232) (187,790)
Other assets (101,159) (58,673)
(260,391) (246,463)
3,424,160 2,090,476
109
The following table sets out Information on movements in recovered properties in 2017:
The net book value of these properties at December 31, 2017 and 2016 amounts to tCve 1,138,726 and tCve 1,131,980, respectively.
In 2017, net losses on the sale of properties obtained by loan recovery amounted to tCVE 9,816
(capital gains of tCve 2,092) (Note 26).
14. RESOURCES OF OTHER CREDIT INSTITUTIONS
This account heading comprises the following:
2017 2016Year of Gross Net Gross Net
aquisition Amount Impairment Amount Amount Impairment Amount
prior to 2012 36,471 (36,293) 178 60,457 (60,457) -2012 - - - - -2013 26,909 (13,411) 13,497 26,823 (13,411) 13,4112014 40,378 (10,062) 30,316 54,714 (13,679) 41,0362015 963,551 (96,066) 867,485 968,430 (96,843) 871,5872016 21,685 (3,400) 18,285 21,555 (3,400) 18,1552017 49,733 - 49,733
1,138,726 (159,232) 979,494 1,131,980 (187,790) - 944,190
Gross Amount Imparidades
Gross
Amount
Impairment
s
Lands 882,656 (104,725) - - - 882,656 (104,725)Residential buildings 120,601 (72,166) 53,269 (7,318) - 3,674 166,552 (68,492)
Other buildings 128,723 (10,899) - (39,205) - 24,884 89,518 13,985
Vehicles - - - - - - -1,131,980 (187,790) 53,269 (46,523) - 28,558 1,138,726 (159,232)
Balance on 31.12.2017Balance on 31.12.2016Recoveries Disposals Transfers
Impairmen
t
losses(net)
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
110
On December 9, 2009, the Bank, Banco Interatlântico and Banco Caboverdiano de Negócios
contracted a second line of credit with the French Development Agency for a maximum amount of
10,000,000 Euros to support development projects of the municipalities of economic and social
character, to repay in 10 years, as of June 30, 2014, in semiannual installments of capital and
interest. This loan bears interest at a rate indexed to the 6-month Euribor plus a spread of 0.68%.
As of December 31, 2017 and 2016, the Bank had this line used in 1,934,052.35 and 2,820,271.87
Euros (tCve 213,258 and 310,977, respectively), recorded under "Loans from International
Financial Institutions"
15. RESOURCES OF CUSTOMER AND OTHER LOANS This account heading comprises the following:
2017 2016
Demand deposits
Credit institutions in the country 1,219,257 80,973 Credit institutions abroad 34,808 92,586 Term deposits
Credit institutions in the country 85,170 80,170 LoansFrom international financial organizations 213,258 310,976 Interest payable 516 628
1,553,009 565,333
111
Except for specific situations defined under board of directors’ guidelines, no interest was paid on demand deposits, at 31 December 2017 and 2016.
16. PROVISIONS AND IMPAIRMENT The movement in provisions and impairment of the Bank during the years 2017 and 2016 was as
follows:
2017 2016
Savings accounts
Emigrants 3,130,621 2,866,901
Residents 1,144,747 1,108,863
4,275,368 3,975,763
Other demand deposits
Other demand deposits
Residents 21,189,901 18,308,328
Emigrants 9,136,270 6,708,186
Non-Residents 2,909,494 3,006,292
33,235,665 28,022,806
Mandatory deposits 146,884 160,703
33,382,548 28,183,510
Other term deposits
Term deposits
Emigrants 24,726,466 26,009,366
Residents 11,289,112 12,269,814
Non-Residents 1,504,409 1,491,080
37,519,987 39,770,260
Other funds
Securities sold under repurchase agreements:
Treasury bonds (Note 7) 100 100
Cheques and orders payable 52,439 27,059
75,230,442 71,956,692
Interest payable 631,470 745,922
75,861,912 72,702,613
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
112
17. SUBORDINATED LIABILITIES
During the 2010 fiscal year, the bank issued 500,000 subordinated bonds with a nominal value
of tCVE 1 each in 2010. Under the terms and conditions defined in the issuance, the loan has
a maturity of 7 years and bears interest at a nominal interest rate starting at 5.75% for the 1st
and 2nd coupon and rising to 6.25% for the 7th coupon. The principal is reimbursed in half
yearly payments of tCVE 50,000 from the 5th half year (inclusive). However, there is an early
repayment option two years after the date of issuance and every six months following the said
date, with the payment of a premium of 0.5% on the nominal value of the bonds to be
redeemed.
In the year 2017 tCve 100,000 was amortized from the value of the subordinated bonds (in 2016
2017
Net Written-off
Balance on appropriation Employee Balance on loan
31.12.2016 in income costs Uses Others 31.12.2017 recoveries
(Nota 28) (Nota 29)
Impairment
Impairment of loans to customers (Note 7) 3,819,549 460,584 (109,078) (54,408) 4,116,648 37,444
Impairment of available-for-sale 10,841 - - - - 10,841
financial assets (Note 5)
Impairment of other tangible assets (Note 9) 37,671 - - - - 37,671
Impairment of other assets (Note 13) 246,463 16,710 - (812) (1,970) 260,391
4,114,524 477,295 - (109,891) (56,377) 4,425,551
Provisions
Provisions for the costs of
employee benefits: (Note 29)
Retirement pensions 4,908,721 - 319,773 (220,114) 8,300 5,016,680
Medical assistance 260,671 - 9,703 (23,956) (10,011) 236,407
5,169,392 - 329,476 (244,070) (1,711) 5,253,087
Judicial processes - - - - 1,970 1,970
Provisions by signature loan - - - - 54,408 54,408
Fiscal contingencies 49,723 (49,723) - - - 0
5,219,115 (49,723) 329,476 (244,070) 54,667 5,309,464
9,333,639 427,572 329,476 (353,961) (1,710) 9,735,015
2016
Net Written-off
Balance on appropriation Employee Balance on loan
31.12.2015 in income costs Uses Others 31.12.2016 recoveries
(Note 28) (Note 29)
Impairment
Impairment of loans to customers (Note 8) 4,023,047 130,216 (333,713) 3,819,549 48,205
Impairment of available-for-sale 10,841 10,841 -
financial assets (Note 5)
Impairment of other tangible assets (Note 10) 37,671 37,671 -
Impairment of other assets (Note 14) 239,785 15,796 - (9,118) 246,463 -
4,311,344 146,012 - (342,831) - 4,114,525 48,205
Provisions
Provisions for the costs of
employee benefits: (Note 29)
Retirement pensions 4,962,620 - 326,995 (209,936) (170,958) 4,908,721 -
Medical assistance 287,199 - 7,716 (6,346) (27,898) 260,671 -
5,249,819 - 334,711 (216,282) (198,856) 5,169,392 -
Fiscal contingencies 49,723 - - - - 49,723 -
5,299,542 - 334,711 (216,282) (198,856) 5,219,115 -
9,610,886 146,012 334,711 (559,113) (198,856) 9,333,640 48,205
113
the amount also corresponded to tCve 100,000), and the bond was fully amortized as of 12.21.2017, as it had been foreseen.
18. OTHER LIABILITIES This account heading comprises the following:
The account heading "Other settlement accounts" includes interbank compensation made on the last day of 2017, which is cleared the following month.
19. CAPITAL
The bank’s share capital, at 31 December 2017 and 2016, comprised 1,324,765 shares with
a nominal value of CVE 1 thousand each, fully subscribed for and paid up.
Information on the bank’s equity structure, at 31 December 2017 and 2016, is set out below:
2017 2016
Creditors
Funds - active account 144,600 134,783
Funds - Escrow account 2,242 17,495
Other liabilities
Tax withholdings at source 52,068 42,652
Social welfare 17,026 14,266
Others (37,512) 8,680
Expenses payable
Employee costs
.Productivity bonuses 24,602 42,442
.Untaken vacation 2,500
General administrative expenditure 13,432 13,115
Others 49,427 36,986
Deferred income
Card annuities 23,445 21,332
Loan commissions issued on current account 14,400 13,036
Guarantees provided 4,948 6,610
Others 8 -
Liabilities to be settled 5,869 4,870
Other settlement accounts 349,410 28,283
666,464 384,551
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
114
A resolution was passed at the general meeting of stockholder of 25 March 2009, increasing
the bank’s share capital by tCVE 324,765, through an issuance of 324,765 category B shares
with a nominal value of one thousand Cabo Verde escudos each, fully paid up in cash. The
bank incurred expenses of tCVE 6,117, which, under IAS 32 were recognized directly in
shareholders’ equity to be deducted from the “Capital” account heading.
Main Shareholders with special rights Until 16 December 2014, the 132,476 shares owned by the state of Cabo Verde constituted a “golden
share” that (whatever their number) entitled their holders the right of veto on resolutions on the
company’s affairs relative to amendments to its articles of association when implying a loss of the state
shareholder’s prerogatives under its “golden share”, merger, demerger, transformation and dissolution
of the company and the approval of its strategic plan.
The special rights attributed to these shares owned by the state of Cabo Verde were eliminated
with the approval of decree law 67/2014, with the shares being classified as ordinary and
freely tradable.
Transferability of shares
Up to 16 December 2014, 525,000 of the 1,324,765 shares comprising the share capital were
nominative, i.e. they could only be held by the purchasers of the indivisible block (Caixa Geral
de Depósitos/Banco Interatlântico group). These shares could not be assigned, disposed of
or encumbered by CGD/BI, in any way, with also any legal agreement to transfer or tending to
transfer the ownership thereof without the permission of the government. Under resolution
077/2014 of 07 October, the status of these shares was changed and also culminated with a
change of BCA’s articles of association. Accordingly, BCA’s share capital then comprised
1,324,765 (one million three hundred and twenty four thousand seven hundred and sixty five)
nominative and bearer shares, with a nominal value of CVE 1,000 (1 thousand) each,
distributed as follows: a) 525,000 (five hundred and twenty five thousand) nominative shares;
b) 799,765 (seven hundred and ninety nine thousand seven hundred and sixty five) bearer
shares.
Both bearer and nominative shares can now be owned by national or international singular or
collective persons whether or not domiciled on national territory.
At 20February2015 the state ceased to have any qualified investment following the disposal
of its shareholding in the Cabo Verde stock exchange.
2017 2016
Number Number
Entity of shares % of shares %
Caixa Geral de Depósitos, S.A. e Banco Interatlântico, S.A.R.L. 697,446 52.65% 697,446 52.65%
Caixa Geral de Depósitos, S.A. 89,504 6.76% 89,504 6.76%
Estado de Cabo Verde ("Golden Share") - - - -
INPS- Instituto Nacional de Previdência Social 166,078 12.54% 132,492 10.00%
Garantia, Companhia de Seguros de Cabo Verde, S.A.R.L. 76,322 5.76% 76,322 5.76%
Others shareholders 295,415 22.30% 329,001 24.83%
1,324,765 100.0% 1,324,765 100.00%
115
20. RESERVES, RETAINED EARNINGS AND PROFIT FOR THE YEAR
On December 31 2017 and 2016, the account headings reserves, retained earnings and profit for the year comprised of:
Legal Reserves Under the legislation in force in Cabo Verde (Law No. 62/VIII of April 23, Article 42), a minimum of 10% of annual net income must be appropriated to legal reserve. This reserve is not distributable, except in case of the Bank’s liquidation, and it may be used to increase capital or to cover losses when other reserves are exhausted.
2017 2016
Fair value reserves
Reserves resulting from fair value measurement of
- Available-for-sale financial assets (Note 5) 17,680 13,522
- Others
17,680 13,522
Deferred tax reserves
- Temporary differences resulting from fair
value measurement (Note 12) (4,508) (3,448)
13,172 10,074
Other reserves and retained earnings
Legal reserve 849,493 815,077
Other reserves
. Actuarial deviations for pension fund and medical assistance liabilities (Note 30) 770,403 760,680
. Deferred tax reserves for actuarial deviations (Note 12) (196,452) (193,973)
. Other reserves 3,626,716 3,398,569
4,200,667 3,965,276
Retained earnings (1,174,877) (1,174,877)
3,888,455 3,615,550
Net income for period 235,224 344,159
4,123,678 3,959,710
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
116
21. INTEREST AND SIMILAR INCOME
This account heading is comprised of:
22. INTEREST AND SIMILAR EXPENSES
This account heading is comprised of:
2017 2016
Interest on loans to customers
. Domestic credit 2,532,765 2,660,434
. Foreign loans 29,027 29,886
. Employee loans 57,514 56,835
. Non-performing loans 15,518 21,344
Interest on other loans and receivables (securitised) 606,244 588,266
Recovery of interest and expenses on non-performing loans 63,442 113,082
Interest on investments at Banco de Cabo Verde
. Monetary intervention securities 11,217 2,758
. Monetary regulation securities 358 721
. Treasury bills - 14
. Very short terms investments 22,194 26,811
Interest on investments in other credit institutions abroad 13,391 11,266
Other interest and similar income 23 115
Commissions received associated with amortised cost 117,250 123,612
3,468,943 3,635,144
117
23. INCOME FROM EQUITY INSTRUMENTS This account heading comprises the following:
24. INCOME AND COSTS OF SERVICES AND COMMISSIONS These account headings comprise the following:
2017 2016
Interest on demand deposits
. Banco de Cabo Verde 1
Interest on sale operations with repurchase agreement
. Treasury bonds 6 6
Interest on saving accounts
. Emigrants 111,256 108,922
. Residents - Youth saving 52,794 52,328
Interest on term deposit
. Emigrants 925,421 1,033,094
. Residents 311,100 400,353
. Non-residents 30,584 38,580
. Other credit institutions in the country 711 2,354
Other credit institutions abroad 5,054
Other interests and similar costs 4,489 21,072
Paid commissions associated with the amortized cost 466 307
1,441,880 1,657,016
2017 2016
Income from consolidated financial
investment securities 10,018 17,089
Dividends:
. Sociedade Caboverdiana de Tabacos, S.A. 1,299 974
. SITA - Sociedade Industrial de Tintas, S.A.R.L. 152 121
. Visa International Service Association 54 71
11,523 18,256
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
118
25. INCOME FROM FOREIGN EXCHANGE REVALUATIONS This account heading comprises the following:
26. INCOME FROM DISPOSALS OF OTHER ASSETS This account heading comprises the following:
2017 2016
Income from services and commissions
Payment orders received 108,988 83,662Guarantees and sureties provided 47,859 61,910Commissions on payment orders issued 78,985 71,405Annuities on ATM network (Vinti4 and Visa 87,353 46,463Western Union commissions 26,988 23,637
Collections 15,280 15,355Documentary credit 6,162 13,001Other 92,723 108,431
464,338 423,864
Expenses with services and commissions
SISP - Sociedade Interbancária
e Sistemas de Pagamentos, S.A.R.L. (7,273) (9,525)Visa International Service Association (29,670) (21,203)Correspondent banks' commissions (17,956) (12,916)
Other (62) (269)(54,962) (43,913)
2017 2016
Profit Losses Net Profit Losses Net
Foreign exchange income 89,249 (6,893) 82,357 90,916 (15,398) 75,518
Income from banknotes and coins 42,331 (15,143) 27,187 59,266 (22,044) 37,222
131,580 (22,036) 109,544 150,182 (37,441) 112,740
119
27. OTHER OPERATING INCOME These account headings comprise the following:
28. EMPLOYEE COSTS This account heading comprises the following:
Account heading "Social charges - Medical care" includes health expenses incurred by the Bank with its employees in the assets and the cost related to healthcare liabilities with employees at retirement age (Note 29). In 2017 and 2016, the Bank had the following staff and Board Members:
2017 2016
Other operating income
Miscellaneous services
. Service fee 62 72
.Others 15,522 15,768
Reimbursement of expenses
. Postage 1,627 1,723
. Others 33,364 34,705
Outros 208,776 26,304
259,352 78,573
Other operating expenses
Other taxes (30,269) (11,516)
Contributions and donations (527) (509)
Losses on misplacements, robbery or falsification of money (547) (356)
Fines and other legal penalties (10) (12)
Others (8,697) (1,733)
(40,050) (14,126)
219,301 64,447
2017 2016
Remuneration of employees 836,037 795,030
Remuneration of management and fiscal bodies 28,916 28,916
Productivity bonuses - 25,846
Social costs/charges
. Retirement pensions (Note 29) 298,281 309,398
.Medical assistance 25,383 21,092
.Social welfare 72,996 64,513
.Others 3,316 3,252
Other employee costs 22,743 24,559
1,287,672 1,272,607
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
120
As of December 31, 2017 and 2016, the numbers presented above include 57 and 51 employees with
a fixed-term contract, respectively. 29. RETIREMENT PENSIONS AND OTHER EMPLOYEE BENEFITS
29.1 Retirement Pensions
The bank has agreed to pay retirement pensions to its employees, assessed on the basis of
their salary on retirement (note 2.2m). Actuarial studies, in respect to 31 December 2017 and
2016, were carried out by Fidelidade - Companhia de Seguros, S.A. to assess retirement
pension liabilities on current employment and the past services of active employees. The
hypotheses and technical bases used in these studies were as following
In 2017 the bank changed the discount rate used in the actuarial study which was 5.%.
A comparison between the actuarial and financial assumptions used to assess the
Bank’s pension’s costs, for 2017 and 2016, and the effective amounts is set out in the
following table:
2017 2016
Board members 7 7
Directors 10 9
Line management 94 91
Technical Staff 217 200
Administrative Staff 74 81
Auxialliary Staff 65 72
467 460
Permanent employees 379 396
Term contract 81 57
460 453
2017 2016
Actuarial method Project Unit Credit Project Unit Credit
Mortality table TV 73/77 TV 73/77
Disability table EVK 80 EVK 80
Discount rate 5.00% 5.25%
Wages growth rate 2.50% 2.50%
Pension growth rate 0.5% 0.5%
Retirement age
62 years of
age or 39
years of
service
62 years of
age or 39
years of
service
121
In November 2013, the bank’s Board of Directors decided to change the bank’s workers’
current pension plan, for sustainability purposes, introducing new rules to assess retirement
benefits:
- Change in the retirement age from 58 or 35 years of service to 62 or 39 years of
service, considering a transition period for members having reached the age of 58
by 2017;
- Pensionable wage of basic wage plus seniority payments;
- Amount of pension calculated on the basis of the average pensionable wage of
the last 5 years;
- Amount of pension equal to 90% of the average pensionable wage of the last 5
years.
The pension plan changes resulted in a reduction of tCVE 914,405 in liabilities with
reference to 31 December 2013, recognized in profit and loss for the period.
Liabilities for past services to the bank, at 31 December 2017 and 2016, in accordance
with the actuarial studies, amounted to:
The actuarial studies do not consider workers with fixed-term employment contracts
and employees subscribed with Instituto Nacional de Previdência Social, as the bank
does not have any retirement liabilities with such employees.
The movement in the amount of pension liabilities during 2017 and 2016 was as follows:
2016
Assumptions Asset Assumptions Asset
Wages Growth 2.50% 2.24% 2.50% 1.59%
Pension growth rate 0.50% -2.16% 0.50% -0.06%
2017
2017 2016
Number of Number of
people Liabilities people Liabilities
Active and former employees 168 2,096,932 179 2,134,358
Retirees and pre-retirees 191 2,752,296 186 2,627,902
Pensioners 25 163,048 19 141,036
Restructuring fund 2 4,403 2 5,425
Total 386 5,016,680 386 4,908,721
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
122
The following is a breakdown of actuarial deviations in 2017:
29.2 Healthcare
To assess its post-employment healthcare liabilities, the Bank obtained actuarial
assessments from a specialized entity in respect of 31 December 2017 and 2016. The
hypotheses and technical bases used in this study were as follows:
In November 2013, the bank’s Board of Directors decided to change the bank’s workers’
current pension plan, for sustainability purposes, introducing new rules to assess retirement
benefits:
- Change in the retirement age from 58 or 35 years of service to 62 or 39 years of
service, considering a transition period for members having reached the age of 58
by 2017;
- Pensionable wage of basic wage plus seniority payments;
- Amount of pension calculated on the basis of the average pensionable wage of
the last 5 years;
- Amount of pension equal to 90% of the average pensionable wage of the last 5
years.
Balance on 31 December 2015 4,962,620
Employee contributions 17,597
Cost recognized by the bank (Note 28) 309,398
Pensions paid (209,936)
Actuarial deviations (170,958)
Balance on 31 December 2016 4,908,721
Employee contributions 16,536
Cost recognized by the bank (Note 28) 298,281
Pensions paid (219,363)
Actuarial deviations 12,505
Balance on 31 December 2017 5,016,680
Change in actuarial assumptions
.Change in the discount rate
.Change in the growth rates of pensions 141.889
Difference between assumptions and realised values:
. Crescimento de pensões e salários 129.394
.Others
2017 2016
Mortality table TV 73/77 TV 73/77
Technical rate 5.00% 5.25%
Wages growth rate 2.5% 2.5%
Medical expenses inflation rate 3.0% 3.0%
123
The impact of the changes in the medical plan deriving from the change in the
retirement age from 58 or 35 years of service to 62 or 39 years of service resulted in a
reduction of tCVE 28,513 in liabilities in respect of 31 December 2014.
Based on these studies, at 31 December 2017 and 2016 healthcare liabilities relating
to healthcare for the Bank’s employees and respective family members after retirement
age, tCve. 236.407 and tCve. 260.671, respectively (Note 16).
The following table provides information on healthcare liability movements in 2017 and
2016:
29.3 Actuarial deviations
Information on deferred actuarial deviations movements for 2017 and 2018 is set out below:
Balance on 31 December 2014 293,941
Employee contributions 9,821
Cost recognized by the bank 10,496
Impact of change of medical assistance plan (Note 17)
Medical expenses paid (20,123)
Actuarial deviations (6,936)
Balance on 31 December 2015 287,199
Employee contributions 13,738
Cost recognized by the bank (6,346)
Impact of change of medical assistance plan (Note 17)
Medical expenses paid (6,022)
Actuarial deviations (27,898)
Balance on 31 December 2016 260,671
Employee contributions 12,217
Cost recognized by the bank 9,703
Impact of change of medical assistance plan (Note 17)
Medical expenses paid (23,956)
Actuarial deviations (22,228)
Balance on 31 December 2017 236,407
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
124
With the change in the accounting policy referred to in Note 2.2.m), accrued actuarial deviations, at 31 December 2012 have been deducted in the “Other reserves and retained earnings” account heading.
30. GENERAL ADNINISTRATIVE COSTS This heading breaks down as follows:
Pensions Medical Assistance Total
Balances on 31 December 2014 (677,387) 198,180 (479,209)
Actuarial deviations in period (75,678) (6,936) (82,614)
Balance on 31 December 2015 (753,065) 191,244 (561,824)
Actuarial deviations in period (170,958) (27,898) (198,856)
Balance on 31 December 2016 (924,023) 163,346 (760,680)
Actuarial deviations in period 12,505 (22,228) (9,723)
Balances on 31 December 2017 (911,518) 141,118 (770,403)
125
31. EARNINGS PER SHARE Basic earnings per share
Basic earnings per share are calculated by dividing the income attributable to the Bank's shareholders by the weighted average number of common shares circulating during the year / period.
2017 2016
Conservation and repair 109,860 99,902
SISP expenses 93,763 99,684
Water, gas and electricity 70,484 72,849
Communications and postage costs 45,547 52,336
Valuables transport 40,980 38,072
Security and surveillance 35,287 35,512
Consultants and external auditors 33,983 22,040
MSCC(Medit Smart Cards Compan) 28,133 16,703
Stationery and consumables 27,506 20,721
Rents and leases 25,645 27,777
Advertising and publishing 23,582 30,007
Cleaning services 11,432 9,317
External Evaluators 9,600 6,892
Staff training 9,499 10,785
Condo expenses 9,324 10,773
Insurance 8,847 11,241
Transports 7,621 5,523
Fuels 7,287 7,366
Stationery and consumables 4,399 5,726
Allowances 4,337 4,062
Judicial and litigation 4,000 3,220
Accommodation expenses 3,708 2,600
Technical assistance 3,516 3,108
Expenses with Promoleasing 2,444 2,980
Periodic maintenance 2,436 806
Representation expenses 1,585 1,485
Publications 970 889
Others 12,198 11,901
637,973 614,278
(thousands of CVE )
31.12.2017 31.12.2016
Income for the year 235,224 344,159
Average number of ordinary shares issued 1,324,765 1,324,765
Income per share 0.18 0.26
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
126
Diluted earnings per share
Diluted earnings per share are calculated by adjusting the effect of all potential dilutive common shares to the weighted average number of circulating common shares and net income attributable to the Bank's shareholders. Diluted earnings per share do not differ from basic earnings per share.
32. CONTINGENT LIABILITIES AND COMMITMENTS Contingent liabilities associated with banking activity are recognized in off-balance sheet account
headings, as follows:
Contingent Liabilities
Several legal actions involving the bank, for contingent liabilities, were pending at 31
December 2017. Reference should be made to the action resulting from the November 2013
change to the employees’ pension plan in force in the bank, with the aim of ensuring its
sustainability; These changes originated a reduction of tCVE 914,405 in liabilities with
reference to 31 December 2013 (note 29). In 2014 two legal actions were brought against
the bank by one of its employees and the Union on Financial Institution Workers of Cabo
Verde (Sindicato dos Trabalhadores das Instituições Financeiras de Cabo Verde), for the
purpose of declaring the nullity of the changes made to its employee statutes as regards
post-retirement benefits. The bank contested these actions in July 2014 and currently awaits
the ruling of the Praia labor court. A 05.05.2017 o BCA foi notificado da Sentença do Juízo
do Trabalho do Tribunal Judicial da Comarca da Praia, considerando procedente a
reclamação dos queixosos. Porém, a 15.05.2017 o BCA interpôs um RECURSO DE
APELAÇÃO para o Tribunal de Relação de Sotavento, com efeito suspensivo da decisão do
Juízo do Trabalho. Ainda, em decorrência da sentença e da nova ação intentada por um
grupo de trabalhadores considerados parte ilegítima na ação movida pelo Sindicato, o
Banco apresentou a sua contestação em 17/07/2017.
The bank’s Board of Directors, based on information provided by its lawyers and the
arguments and reasoning set out in the contestation, considers it will win the referred actions.
33. OPERATING SEGMENTS
On an annual basis, the Bank prepares segment information for the purpose of reporting
2017 2016
Any contingent liabilities
. Guarantees and sureties 2,593,235 3,892,247
. Active documentary credit 78,366 513,376
2,671,601 4,405,623
Deposit and custody of securities 14,622,016 25,514,067
17,293,616 29,919,690
127
to the accounts of the consolidated activity of Caixa Geral de Depósitos. The operating segments defined for this reporting, which are in accordance with IFRS 8 and are voluntarily presented:
-Corporate Finance - includes the activity related to the management of Public Debt securities, domestic corporate bonds, equity instruments and Consolidated Financial Mobilization Securities.
-Trading and sales – comprises the activity related to the management of investments and availability at other credit institutions.
-Payment and settlement – includes the activity related to credit and debit transactions.
-Commercial Bank – Includes the activity of raising funds from companies. This segment includes loans, current accounts, discounts of bills, as well as credit to the public sector.
-Retail Bank – Comprises banking activity with individuals. Included in this segment are consumer credit, housing loans, as well as deposits raised with individuals.
-Others – Other activities not included in any of the previous categories.
The following tables provide information on the Bank’s operating segments at 31 December 2017
and 2016:
2017
Corporate Trading Payments and Commercial Retail
Finance and sales settlements banking banking Others Total
Interest and similar income 606,244 47,183 - 1,208,683 1,606,834 - 3,468,943
Interest and similar costs (5,765) - (266,669) (1,169,447) - (1,441,880)
NET INTEREST INCOME 606,244 41,419 - 942,014 437,387 - 2,027,063
Income from equity instruments 11,523 - - - - 11,523
Income from services and commissions - 134,797 83,273 45,663 200,605 - 464,338
Costs of services and commissions - (25,229) (29,670) - (62) - (54,962)
Income from available-for-sale financial assets - - - - - - -
Income from foreign exchange revaluations - 109,544 - - - - 109,544
Income from disposals of other assets - - - - - (7,723) (7,723)
Other operating income - - - - - 219,301 219,301
TOTAL OPERATING INCOME 606,244 272,053 - 53,602 - 987,677 - 637,930 211,578 2,769,083
Provisions and impairment net of reversals and recoveries - - - (181,652) (241,489) 33,013 (390,128)
606,244 272,053 53,602 806,026 396,440 244,591 2,378,955
Other expenditure and income (2,143,731)
Other expenditure and income 235,224
Cash and cash equivalents at central banks - 6,325,076 - - - - 6,325,076
Cash and cash equivalents at other credit institutions - 603,216 - - - - 603,216
Available-for-sale financial assets - 6,534,515 - - - - 6,534,515
Investments in credit institutions - 23,586,202 - - - - 23,586,202
Loans and advances to customers 12,684,122 - - 14,379,826 19,116,667 - 46,180,615
Funds from other credit institutions - 1,553,009 - - - - 1,553,009
Funds from customers and other loans - - - 14,066,346 61,795,567 - 75,861,912
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
128
The Bank's entire activity is carried out in the Republic of Cabo Verde. 34. RELATED ENTITIES CGD Group, INPS – Instituto Nacional de Previdência Social, associates, and Management Bodies
(Board of Directors) Companhia de Seguros Garantia e SISP are considered to be entities related with the bank.
The bank’s financial statements, at 31 December 2017 and 2016, include the following
balances and transactions with related entities, excluding management bodies:
2016
Corporate Trading Payments and Commercial Retail
Finance and sales settlements banking banking Others Total
Interest and similar income 588,266 41,683 - 1,355,174 1,650,021 - 3,635,144
Interest and similar costs (421) (8,263) - (302,908) (1,345,425) - (1,657,017)
NET INTEREST INCOME 587,846 33,420 - 1,052,266 304,596 - 1,978,128
Income from equity instruments 18,256 - - - - - 18,256
Income from services and commissions - 107,307 70,417 45,232 200,908 - 423,864
Costs of services and commissions - (22,441) (21,203) - (269) - (43,913)
Income from available-for-sale financial assets - 112,740 - - - - 112,740
Income from foreign exchange revaluations - - - - - 12,370 12,370
Income from disposals of other assets - - - - - 64,447 64,447
Other operating income -
TOTAL OPERATING INCOME 606,102 231,026 - 49,214 - 1,097,498 - 505,235 76,817 2,565,892
Provisions and impairment net of reversals and recoveries(907) - - (36,573) (44,530) (15,796) (97,807)
605,194 231,026 49,214 1,060,925 460,705 61,021 2,468,084
Other expenditure and income (2,123,925)
Other expenditure and income 344,159
Cash and cash equivalents at central banks - 7,844,629 - - - - 7,844,629
Cash and cash equivalents at other credit institutions - 652,322 - - - - 652,322
Available-for-sale financial assets - 6,653,618 - - - - 6,653,618
Investments in credit institutions - 18,122,622 - - - - 18,122,622
Loans and advances to customers 11,327,582 - - 15,550,615 18,808,847 - 45,687,044
Funds from other credit institutions - 565,333 - - - - 565,333
Funds from customers and other loans - - - 13,360,284 59,342,330 - 72,702,613
129
2017
Banco
INPS CGD Interatlântico Promoter Associates
Assets:
Cash and cash equivalents at central banks and other credit institutions 221,590
Investments in credit institutions 5,666,260
Public debt securities
Available-for-sale financial assets 50,000
Loans and advances to customers 53,620 12,125
Invest. In subsidiaries excl.Consol.Assoc. and joint undertakings. 320,973
Other assets 2,910 650 3,706
Impairment (10,841) (680)
Liabilities:
Funds from other credit institutions (27,445) (2,290) (177,917)
Funds from customers and other loans (2,145,666) (405) (85,241)
Other liabilities (2,489) (15,845)
Equity:
Other reserves and retained income (20,309)
Off balance-sheets:
Guarantees received 42,903 150,000 29,829
Guarantees provided 92,543
Income:
Interest and similar income (13,172)
Income and equity instruments
Income from shares (49,197)
Expenditure:
Interest and similar costs (28,516) (270)
Costs of services and commissions 1,193 7,273
General administrative expenditure 9,324 92,796
Impairment of other financial assets net of reversals and recoveries 1,192
2016
Grupo Caixa Geral de Depósitos
Cape Verde Banco
State CGD Interatlântico Promoter Associates
Assets:
Cash and cash equivalents at central banks and other credit institutions - 146,857 - - -
Investments in credit institutions - 2,206,779 - - -
Public debt securities - - - - -
Available-for-sale financial assets - - - 50,000 -
Loans and advances to customers - - - 65,896 325,359
Other assets - - 1,918 809 7,211
Impairment - - - ####### (13,558)
Liabilities:
Funds from other credit institutions - (90,629) (7,138) - (135,289)
Funds from customers and other loans (1,886,751) - - (14) (92,601)
Other liabilities - - - (2,828) (9,627)
Off balance sheets:
Guarantees received - 59,626 - 150,000 -
Guarantees provided - - - - -
Income:
Interest and similar income - (9,551) - - -
Interest and similar costs - - - - -
Expenditure:
Interest and similar costs (19,821) - - - (2,348)
Costs of services and commissions - 3,466 - - 9,525
General administrative expenditure - - - 11,607 102,664
Impairment of other financial assets net of reversals and recoveries - - - - 3,184
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
130
Transactions with related entities are generally made on the basis of market values on the
respective dates.
Management Bodies
In 2017, the costs incurred relating to remuneration and other benefits granted to members of the Bank’s Board of Directors amounted to tCVE. 28.916 (tCVE. 34.916 for year 2016). On December 31, 2017 and 2016, loans granted to the members of the Board of Director amounted to tCVE. 79.704 e tCve. 87.065, respectively.
35. DISCLOSURES RELATING TO FINANCIAL INSTRUMENTS Management policies for the financial risks involved in the Bank’s activity BCA's activities are exposed to a variety of financial risk factors, including the effects of changes in market prices: exchange rate risk, credit risk, liquidity risk and cash flow risk associated with interest rates, among others. The Bank's risk management is controlled by the financial department in accordance with policies approved by the Board of Directors. In this sense, the Board of Directors has defined in writing the main principles of global risk management, as well as specific policies for some areas, such as the coverage of interest rate risk, liquidity risk and credit risk coverage. The Board of Directors defines the principles for risk management as a whole and policies covering specific areas such as exchange rate risk, interest rate risk, credit risk, the use of derivatives and other non-derivative financial instruments, as well as the investment of excess liquidity. The risk limits and exposure levels are defined and approved by the Board of Directors taking into account the Bank's global strategy and market position. Foreign exchange risk The Financial and International Department oversees the bank’s foreign exchange position on a daily basis, always pursuant to the objective of eliminating losses.
The Cabo Verde escudo to euro exchange rate was fixed at €1 = 110.265 Cabo Verde escudos, resulting from a convertibility agreement between Cabo Verde and Portugal and is therefore not considered by the Bank of Cabo Verde for foreign exchange purposes.
Following are the disclosures required by IFRS 7 for the main types of risk inherent to the Bank's activity Market, liquidity and interest rate risk The Market Risk and Liquidity Office is responsible for the implementation of methods and techniques for improving the management quality of the risks involved in the bank’s balance sheet.
131
Market risk As the financial sector in Cabo Verde does not, as yet, have a developed capital market and there is no over the counter market, investment alternatives to financial instruments essentially comprise bonds and shares.
The bank has a portfolio of financial assets with a certain level of representativeness in asset terms, set up more for investment rather than a trading objective. Liquidity and interest rate risk Liquidity control is the responsibility of DFI (Financial and International Department) which oversees the balances of correspondent banks and those of the Bank of Cabo Verde. DFI is responsible for performing operations in financial markets, selling assets denominated in foreign currency and the operations necessary to refinance the bank or for the investment of liquidity surpluses with a careful management approach in order to avoid situations of default with the Bank of Cabo Verde. As the minimum Cash Requirements ratio in Cabo Verde’s banking sector is 15%, banks, in the event of difficulties, are more capable of meeting their commitments to customers. Also, and in accordance with official notice 8/2007 of 19 November, issued by the Bank of Cabo Verde, DFI also calculates the liquidity ratios required to hedge its liabilities over the periods of seven, thirty, ninety days and one year. The Risk Management Department also produces, once in a while, analyses on interest rates and the assets and liabilities structure, in particular the loans and advances portfolio granted to customers with indexed interest rates. As of December 31, 2017 and 2016, the contractual residual terms of the financial instruments are as follows:
2017 2017
Residuals periods to maturity
Up to Up to Up to Up to Up to Up to Up to Over
1 month 3 months 6 months 1 year 3 year 5 years 10 years 10 years Total
Assets
Cash and cash equivalents at central banks 6,325,076 6,325,076
Cash and cash equivalents at other credit institutions603,216 603,216
Investments in credit institutions 17,334,656 2,362,627 1,000,096 2,888,824 23,586,202
Loans to customers (gross) 1,830,791 - 1,307,182 - 1,635,237 - 2,886,252 - 7,059,502 - 8,307,548 - 15,566,825 - 11,703,926 50,297,263
26,093,739 3,669,808 2,635,334 5,775,075 7,059,502 8,307,548 15,566,825 11,703,926 80,811,757
Liabilities
Funds from Central banks and other credit institutions(1,254,481) - (65,022) - (69,051) - (48,875) - (115,579) (1,553,008)
Funds from customers and other loans (38,224,627) (6,673,930) (8,283,061) (20,952,437) (1,727,857) (75,861,912)
Other subordinated liabilities -
(39,479,108) (6,738,952) - (8,352,112) - (21,001,312) - (1,843,436) - - - - - - (77,414,921)
Difference (13,385,369) - (3,069,144) - (5,716,778) - (15,226,237) - 5,216,066 - 8,307,548 - 15,566,825 - 11,703,926 3,396,837
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
132
Credit risk Credit risk is one of the most relevant risks for the Bank’s activity and is closely linked with the possibility of the occurrence of financial losses deriving from counterparty defaults, notably large enterprises, small and medium sized enterprises, small business promoters, individual customers and financial institutions. The Risk Management Department (DGR) analyses the credit risk of companies and individual customers with accrued liabilities of more than tCVE 20,000.
DGR is responsible for issuing risk assessments on proposals prepared by the commercial area,
which are sent for the consideration of the executive committee. DGR also performs a six-monthly
analysis of the bank’s credit portfolio, with a view to comprehending the behavior of risk categories,
mortgage loans and evolution of customer deposits.
Credit risk
Maximum exposure to credit risk
Information on the bank’s maximum exposure to credit risk, at 31 December 2017 and 2016
is set out below:
Quality of loans granted to customers
Information on the gross balance sheet value of loans granted to customers, guarantees
2016
Residuals periods to maturity
Up to Up to Up to Up to Up to Up to Up to Over
1 mês 3 meses 6 meses 1 year 3 years 5 years 10 years 10 years Total
Assets
Cash and cash equivalents at central banks 7,844,629 7,844,629
Cash and cash equivalents at other credit institutions 652,322 652,322
Investments in credit institutions 15,651,338 2,443,883 27,401 18,122,622
Títulos de dívida pública
Investments in credit institutions 813,785 1,598,154 2,042,830 4,600,380 6,943,962 9,195,542 10,444,177 13,867,763 49,506,593
24,962,074 4,042,037 2,042,830 4,627,781 6,943,962 9,195,542 10,444,177 13,867,763 76,126,166
Liabilities
Funds from Central banks and other credit institutions (173,751) (8,923) (39,989) (48,913) (293,757) (565,333)
Funds from customers and other loans (32,693,780) (7,494,962) (7,152,882) (5,959,437) (19,401,552) (72,702,613)
Other subordinated liabilities (49,544) (49,544) (99,088)
(32,867,531) (7,503,885) - (7,242,415) - (6,057,894) - (19,695,309) - - - - - - (73,367,034)
Difference (7,905,457) - (3,461,848) - (5,199,585) - (1,430,113) - (12,751,347) - 9,195,542 - 10,444,177 - 13,867,763 76.126.166
2017 2016
Investments in credit institutions 23,586,202 18,122,622
Loans to customers 46,180,615 45,687,044
69,766,817 63,809,666
Guarantees and sureties 2,593,235 3,892,247
Active documentary credit 78,366 513,376
2,671,601 4,405,623
Maximum exposure 72,438,418 68,215,289
133
provided and documentary credit, excluding other credit and amounts receivable - securitized
and accrued interest, at 31 December 2017 and 2016, is set out below:
2017
Classification according to the impairment model
Performing Non-performing Credit in
Loan Loan "Default" Other balances Total
Companies
Corporate Loans
Outstanding 9,025,804,706 1,490,495,965 1,309,100,705 11,825,401,376
Overdue 7,440,701 2,592,443 3,127,529,119 3,137,562,263
9,033,245,407 1,493,088,408 4,436,629,824 - 14,962,963,639
Corporate guarantees and
documentary credit
Outstanding 2,649,221,498 2,649,221,498
2,649,221,498 - - - 2,649,221,498
Retail
Mortgage
Outstanding 12,995,868,491 209,278,846 1,108,598,584 14,313,745,920
Overdue 3,656,021 3,164,866 265,829,789 272,650,676
12,999,524,512 212,443,712 1,374,428,372 - 14,586,396,596
Consumer loans
Outstanding 1,967,304,497 37,806,334 27,701,338 2,032,812,169
Overdue 526,304 983,149 9,478,781 10,988,234
1,967,830,801 38,789,483 37,180,119 - 2,043,800,403
Small businesses
Outstanding 799,621,969 8,325,386 120,901,175 928,848,530
Overdue 384,159 237,567 108,472,821 109,094,547
800,006,128 8,562,953 229,373,996 - 1,037,943,077
Other Loans
Outstanding 2,042,580,968 114,382,169 136,059,755 2,293,022,893
Overdue 32,810,993 1,958,207 137,036,390 171,805,590
2,075,391,962 116,340,376 273,096,145 - 2,464,828,482
Guarantees provided
Outstanding 22,050,000 22,050,000
Public sector
Outstanding 2,598,511,499 - 2,598,511,499
Overdue 149,608 - 149,608
2,598,661,107 - - - 2,598,661,107
Total outstanding loans 32,100,963,627 1,860,288,700 2,702,361,557 - 36,663,613,884
Total overdue loans 44,967,786 8,936,232 3,648,346,899 - 3,702,250,918
Total loans 32,145,931,414 1,869,224,932 6,350,708,456 - 40,365,864,802
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
134
The following classifications were used for the preparation of the above tables:
2016
Classification according to the impairment model
Performing Non-performing Credit in
Loan Loan Default Other balances Total
Companies
Corporate Loans
Outstanding 8,481,389 2,617,230 1,165,836 - 12,264,455
Overdue 5,914 16,612 3,593,493 - 3,616,020
8,487,303 2,633,843 4,759,329 - 15,880,475
Corporate guarantees and
documentary credit
Outstanding 4,363,268 9,317 223 - 4,372,808
4,363,268 9,317 223 - 4,372,808
Retail
Mortgage
Outstanding 13,272,424 142,457 296,805 - 13,711,687
Overdue 4,180 36,575 1,122,560 - 1,163,315
13,276,605 179,032 1,419,365 - 14,875,001
Consumer loans
Outstanding 1,519,227 20,957 22,593 - 1,562,777
Overdue 429 1,254 12,604 - 14,288
1,519,656 22,211 35,197 - 1,577,064
Small businesses
Outstanding 673,195 2,533 20,234 - 695,961
Overdue 250 1,111 226,158 - 227,519
673,445 3,644 246,391 - 923,480
Other Loans
Outstanding 1,881,376 228,235 87,006 - 2,196,617
Overdue 28,167 11,100 204,318 - 243,585
1,909,542 239,335 291,324 - 2,440,202
Guarantees provided
Outstanding 32,586 - - - 32,586
Public sector
Outstanding 2,358,136 204 - - 2,358,340
Overdue 117 - - - 117
2,358,253 204 - - 2,358,457
Guarantees provided
Outstanding 228 - - - 228
Total outstanding loans 32,581,829 3,020,933 1,592,697 - 37,195,230
Total overdue loans 39,058 66,653 5,159,133 - 5,264,844
Total off-balance sheet 4,396,083 9,317 223 - 4,405,623
Total loans 32,620,887 3,087,586 6,751,830 - 42,460,074
135
• “Performing loans”
- Corporate: loans without any overdue payments or with balances overdue up to 30 days
- Individual customers: loans without any overdue payments or with balances overdue
up to 7 days
• “Non-performing loans”
- Corporate: loan balances overdue between 30-90 days;
- Individual customers: loan balances overdue between 7-90 days;
• “Loans in default” – loans with balances overdue more than 90 days. In the case of
corporate loans, if a customer has at least one operation with overdue payment for more
than 90 days, the full amount of the customer’s exposure to the bank is reclassified to this
category. Also included are restructured loans classified as “Credit in default” on the
restructuring date and which have still not gone through the quarantine period.
• In addition, overdue credit only includes the amounts of the operations or payments due
and unpaid on the reference date. The “Non-performing loan” account heading, in note 7,
includes the full amount receivable on operations with overdue amounts.
Companies Individual - Individual - Public
Mortgage Others Sector Total
Net of individual overdues nor impairment 9,844,166,529 13,335,804,140 5,069,781,893 2,598,661,107 30,848,413,669
With overdues but net of individual impairment 297,604,700 1,049,331,372 371,259,532 - 1,718,195,605
Less than 30 days -
30 to 90 days 16,327,188 68,130,435 17,805,504 102,263,126
91 to 180 days 21,028,931 49,487,997 16,442,661 86,959,588
181 to 360 days 40,375,055 81,251,990 28,685,660 150,312,705
more than 360 days 219,873,527 850,460,950 308,325,708 - 1,378,660,185
Loans with individual impairments 7,470,413,907 201,261,084 127,580,537 - 7,799,255,528
Less than 30 days 4,034,443,631 132,399,344 112,213,904 4,279,056,880
30 to 90 days 58,079,350 58,079,350
91 to 180 days -
181 to 360 days 315,194,040 315,194,040
more than 360 days 3,062,696,885 68,861,740 15,366,633 3,146,925,258
Total 17,612,185,137 14,586,396,596 5,568,621,963 2,598,661,107 40,365,864,802
2017
Companies Individual - Individual - Public
Mortgage Others Sector Total
Net of individual overdues nor impairment 9,664,087,202 13,573,923,030 4,451,720,908 2,356,271,934 30,046,003,074
With overdues but net of individual impairment 266,849,098 1,047,541,660 407,477,035 - 1,721,867,793
Less than 30 days - -
30 to 90 days 30,721,540 38,326,173 13,939,819 82,987,532
91 to 180 days 21,196,580 54,652,741 12,241,253 88,090,573
181 to 360 days 42,010,025 81,537,250 48,003,143 171,550,418
more than 360 days 172,920,953 873,025,497 333,292,820 1,379,239,270
Loans with individual impairments 10,322,346,957 253,536,647 114,134,410 2,413,296 10,692,431,310
Less than 30 days 7,027,631,162 144,248,463 95,947,538 2,413,296 7,270,240,459
30 to 90 days 41,908,284 41,908,284
91 to 180 days 28,024,118 983,363 29,007,481
181 to 360 days 17,136,234 50,374,546 22 67,510,801
more than 360 days 3,207,647,159 58,913,638 17,203,487 3,283,764,284
Total 20,253,283,257 14,875,001,337 4,973,332,353 2,358,685,230 42,460,302,177
2016
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
136
Fair Value
Assets and Liabilities at the fair value of the Bank are valued according to the following fair value hierarchy set forth in IFRS 13 - Fair Value Measurement:
Market Quotation Values (Level 1)
This category includes financial instruments with quotations available in official markets and those in which there are entities that regularly disclose transaction prices for these instruments traded in liquid markets. The priority in prices used is given to those observed in official markets, in cases where there is more than one official market the option falls on the main market where these financial instruments are transacted.
The Bank considers as market prices those disclosed by independent entities, assuming that they act in their own economic interest and that such prices are representative of the active market, whenever possible use prices provided by more than one entity (for a Determined assets and / or liabilities).
Valuation methods with observable market parameters / prices (level 2)
In this category, financial instruments valued using internal models, such as discounted cash flow models and option valuation models, are considered, which require the use of estimates and require judgments that vary according to the complexity of the products being valued. Nevertheless, the Bank uses as inputs in its models, variables made available by the market, such as interest rate curves, credit spreads, volatility and indexes on prices. It also includes instruments whose appreciation is obtained through quotations disclosed by independent entities but whose markets have lower liquidity. In addition, the Bank uses as observable variables in the market those that result from transactions on similar instruments and that are observed with a certain recurrence in the market.
Valuation methods with non-observable market parameters (level 3)
This level includes valuations determined using internal valuation models or quotes provided by third parties but whose parameters are not observable in the market.
The fair value of financial assets and liabilities measured at fair value is as follows:
137
The following table shows the comparison between the fair value and the book value of the main financial assets and liabilities held at amortized cost on December 31, 2017 and 2016.
(thousands of CVE )
31.12.2017
Available-for-
sale
financial
assets
Total
Balance in the beginning of the period 14 835 14 835
Entry
Change in value 4 158 4 158
Balance in the end of the period 18 993 18 993
(CVE Millions)
(Level 1) (Level 2) (Level 3)
31 December 2017
Cash and deposits at central banks 6,325,076 - 6,325,076 - 6,325,076
Balances due from other banks 603,216 - 603,216 - 603,216
Available-for-sale financial assets (shares) a) 6,515,522 - - 6,515,522 6,515,522
Loans and advances to credit institutions 23,586,202 - 23,586,202 - 23,586,202
Loans and advances to customers 46,180,615 - - 46,180,615 46,180,615
Held-to-maturity investments - - - - -
Public income issuers - - - - -
Other Issuers' Bonds - - - - -
Financial Assets 83,210,632 - 30,514,495 52,696,137 83,210,632
Resources of other credit institutions 1,553,009 - 1,553,009 - 1,553,009
Resources of customers and other debts 75,861,912 - 75,861,912 - 75,861,912
Subordinated liabilities - - - - -
Financial liabilities 77,414,921 - 77,414,921 - 77,414,921
(Level 1) (Level 2) (Level 3)
31 December 2016
Cash and deposits at central banks 7,844,629 - 7,844,629 - 7,844,629
Balances due from other banks 652,332 - 652,332 - 652,332
Available-for-sale financial assets (shares) a) 6,653,619 - - 6,653,619 6,653,619
Loans and advances to credit institutions 18,122,622 - 18,122,622 - 18,122,622
Loans and advances to customers 45,687,044 - - 45,687,044 45,687,044
Financial Assets 78,960,246 - 26,619,583 52,340,663 78,960,246
Resources of other credit institutions 565,333 - 4,325,688 - 4,325,688
Resources of customers and other debts 72,702,613 - 72,702,613 - 72,702,613
Subordinated liabilities 99,088 - 99,088 - 99,088
Financial liabilities 73,367,034 - 77,127,389 - 77,127,389
Assets / Liabilities
recognized at
amortized cost
Fair Value
Market Quote
Valuation models
with observable
market
Valuation models
with parameters not
observable in the Total Fair Value
a) Assets at acquisition cost net of impairment. These assets refer to equity instruments issued by unlisted entities for which no recent market transactions have been identified and their
fair value can not be reliably estimated.
a) Assets at acquisition cost net of impairment. These assets refer to equity instruments issued by unlisted entities for which no recent market transactions have been identified and their
fair value can not be reliably estimated.
Assets / Liabilities
recognized at
amortized cost
Fair Value
Market Quote
Valuation models
with observable
market
parameters/prices
Valuation models
with parameters not
observable in the
market Total Fair Value
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
138
Cash and cash equivalents at central banks, Cash and cash equivalents at other credit institutions, Loans and advances at credit institutions These assets are very short-term and therefore the balance sheet value is a reasonable estimate of the fair value. Loan to customers The fair value of loans to customers is estimated based on the update of expected cash flows of principal and interest, considering that the installments are paid on the contractually defined dates. The expected future cash flows from homogeneous loan portfolios, such as mortgages, are estimated on a portfolio basis. The discount rates used are the current rates charged for loans with similar characteristics. Funds from other credit institutions and Customer funds and other loans These liabilities are very short-term and therefore the balance sheet value is a reasonable estimate of their fair value. Sensitivity analysis - Interest rate At 31 December 2017 and 2016, the impact on fair value of interest rate risk-sensitive financial instruments, excluding derivative financial instruments, of parallel shifts in the benchmark interest rate curve of 50, 100 and 200 basis points "(Bps), respectively, can be demonstrated by the following tables:
The impact of a shift of 50, 100 and 200 bps on the reference interest rate curves of sensitive assets and
liabilities corresponds to the scenarios used internally by management bodies to monitor exposure to interest
rate risk
The table below shows the effect on the projected net interest income for 2016 and 2015, respectively, of a
parallel shift in the interest rate curves of 50, 100 and 200 bps that index financial instruments sensitive to
changes in interest rates:
2017
- 200 bp - 100 bp - 50 bp + 50 bp + 100 bp + 200 bp
Customer loans (gross balance) 1,410,150 672,630 328,725 (314,484) (615,598) (1,180,869)
Total sensitive asset 1,410,150 672,630 328,725 (314,484) (615,598) (1,180,869)
2016
- 200 bp - 100 bp - 50 bp + 50 bp + 100 bp + 200 bp
Customer loans (gross balance) 1,542,161 735,195 359,205 (343,468) (672,164) (1,288,748)
Total sensitive asset 1,542,161 735,195 359,205 (343,468) (672,164) (1,288,748)
Net interest income projection
- 200 bp - 100 bp - 50 bp + 50 bp + 100 bp + 200 bp
Fiscal year 2017 (544,721) (272,361) (136,180) 136,180 272,361 544,721
Fiscal year 2016 (625,545) (312,772) (156,386) 156,386 312,772 625,545
139
In the determination of the impacts presented in the table above, it was considered that the assets and
liabilities sensitive to the interest rate on the balance sheet on the reference dates of the calculation would
remain stable throughout the years 2017 and 2016, respectively, renewing them, whenever applicable,
considering the market conditions prevailing on those renewal dates and the average spread of the
outstanding operations on December 31, 2017 and 2016.
It should be noted that the information contained in the previous tables refers to a static scenario, not taking
into account changes in the strategy and interest rate risk management policies that the Bank may adopt as a
consequence of changes in the reference interest rates.
Exchange rate risk
Decomposition of financial instruments by currency
As of December 31, 2017 and 2016, financial instruments have the following currency breakdown:
2017
CVE Euros US Dollars Other Total
Assets
Cash and cash equivalents at central banks 5,882,088 378,321 45,814 18,929 6,325,152
Cash and cash equivalents at other credit institutions 109,541 354,694 119,464 19,518 603,217
Available-for-sale financial assets (gross amount) 6,545,356 - - - 6,545,356
Investments in credit institutions 17,895,932 4,411,972 1,278,298 - 23,586,202
Public debt securities - - - - -
Loans to customers (gross) 49,018,707 1,278,555 - - 50,297,262
Investments in subsidiaries, associates and joint ventures 316,249 - - - 316,249
Other net assets 2,113,583 - - - 2,113,583
Accumulated impairment (4,404,605) - - - (4,404,605)
77,476,851 - 6,423,542 - 1,443,576 - 38,447 85,382,416
Liabilities
Funds from other credit institutions (1,319,141) (219,234) (14,634) (1,553,009)
Funds from customers and other loans (73,274,692) (1,154,316) (1,425,783) (7,121) (75,861,912)
Other subordinated liabilities - - - -
Other liabilities (659,859) (5,050) (1,555) (666,464)
(75,253,692) - (1,378,600) - (1,441,972) - (7,121) (78,081,385)
Net exposure 2,223,159 - 5,044,942 - 1,604 - 31,326 - 7,301,031
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
140
36. CAPITAL MANAGEMENT
Capital management in BCA is based on the following general principles:
- Meet the regulatory requirements established by Banco de Cabo Verde, supervisory body of banking activity in
the country;
- To generate an adequate profitability, with creation of value for the shareholder, providing a remuneration of
the capitals invested;
- Sustaining the development of the activity, maintaining a solid capital structure, capable of responding to the
Bank's growth strategies;
- Ensure the reputation of the Institution by preserving the integrity of the operations practiced in the course of
its activity.
The adequacy of the capital to the Bank's risk profile is monitored and controlled by the application of the laws
that regulate the Financial System in Cabo Verde, with particular emphasis on Banco de Cabo Verde Notice No.
4/2007, which establishes the basis for calculating the Solvency Ratio, having incorporated the Market Risk and
Operational Risk in the calculation of this ratio, in addition to reformulating the procedures for determining the
contribution of Credit Risk.
According to Notice no. 4/2007, the Solvency Ratio is obtained by applying the following formula:
[FP / (VAPRC + VAPRTC + VEAPRO)] x100
In which:
FP - Value of Own Funds, determined according to Notice nº3 / 2007.
VAPRC - Value of Assets Weighted by Credit Risk.
VAPRTC - Value of Assets Weighted by Exchange Rate Risk.
VEAPRO - Equivalent Value in Assets Weighted by Operational Risk.
The Solvency Ratio is calculated by the Financial and International Department (DFI), specifically by the
Planning and Management Control Division (DPG), with the contribution of the International and Liquidity
Division (DIL) regarding the determination of the Value of Weighted Assets by the Exchange Rate Risk.
The procedures for determining the variables that make up this Ratio are defined in Notice no. 3/2007 (Own
2016
CVE Euros US Dollars Other Total
Assets
Cash and cash equivalents at central banks 7,361,706 363,633 87,226 32,065 7,844,629
Cash and cash equivalents at other credit institutions 109,712 416,857 99,669 26,085 652,322
Available-for-sale financial assets (gross amount) 6,664,460 - 6,664,460
Investments in credit institutions 15,004,748 2,263,412 854,462 - 18,122,622
Public debt securities - - - - - -
Loans to customers (gross) 47,771,484 1,735,109 - - 49,506,593
Investments in subsidiaries, associates and joint undertakings 336,963 - - - 336,963
Other assets (gross amount) 2,279,912 - 57,027 - 2,336,939
Accumulated impairment (4,076,854) - - - (4,076,854)
75,452,130 - 4,779,011 - 1,098,383 - 58,150 - 81,387,674
Liabilities
Funds from other credit institutions (253,400) (310,977) (956) - (565,333)
Funds from customers and other loans (70,480,723) (1,175,922) (1,039,148) (6,821) (72,702,613)
Other subordinated liabilities (99,088) - - - - - (99,088)
Other liabilities (379,711) (4,832) (7) (384,550)
(71,212,922) - (1,491,731) - (1,040,111) - (6,821) - (73,751,585)
Net exposure 4,239,208 3,287,280 58,272 51,329 7,636,089
141
Funds) and in Annexes 1, 2 and 3 of Notice no. 4/2007 (Assets Weighted by Credit Risk, Assets Weighted by
Market Risk and Assets Weighted by Operating Risk).
Notice nº3 / 2007 defines the negative and positive components for the calculation of Own Funds, obtained from
the sum of the Basic Own Funds with the Complementary Own Funds and their respective adjustments, through
deductions defined by Banco de Cabo Verde.
The following table shows the composition of the Bank's Regulatory Capital as of December 31, 2017:
The above table shows that the final value of Shareholder´s Equity derives from the sum of
the two major referred to aggregates, i.e. core capital Tier 1 and 2, excluding some
deductions provided for by the Bank of Cabo Verde.
Core capital comprises the bank’s most stable capital and its main components are share
capital, reserves, retained earnings, net income for the year and the transition’s impacts
comprising the costs of employee benefits, resulting from the adoption of the International
Financial Reporting Standards (IFRS), or more precisely IAS 19 - Employee benefits;
In fact, the assimilation of the referred standards implied the adoption of a transitory regime
for the assessment of core capital tier 1, in the quest for a harmonious change from the
former to the current accounting rules, without major interference to prudential rules.
In addition to stipulating that the value of Shareholder´s Equity should be more than the
minimum share capital required by law, official notice 4/2007 also rules that an adequate
ratio between shareholders’ equity and assets and off-balance sheet items, weighted by their
Paid up capital 1,318,648
Share issue premiums and other securities -
Legal, statutory and other reserves comprising non-appropriated income 4,476,209
Retained positive earnings from past years
Retained positive earnings from last year
Provisional positive income for current year 235,224
573,950 Minority
shareholder
s' interests
Sub-total 6,604,031
Intangible assets 62,153
Negative retained earnings from past years 1,174,877
Negative earnings from last year
Provisional negative earnings for current year
Additional provisions
Negative revaluation reserves
Equity
Positive differences from the first consolidation (1)
Sub-total 1,237,030
BASIS SHAREHOLDER'S EQUITY PRIOR TO THE APPLICATION OF THE TRANSITIONAL REGIME 5,367,001
ELIGIBLE BASIS SHAREHOLDER'S EQUITY 5,367,001
Legal revaluation reserves for tangible fixed assets
Subordinated loans and preference shares - -
Other revaluation reserves 6,586
Other items
COMPLEMENTARY SHAREHOLDER'S EQUITY 6,586 6,586
SHAREHOLDER'S EQUITY BEFORE DEDUCTIONS 5,373,587
Investments to be deducted:
More than 10% of capital 39,159
Less than or equal to 10% of capital 96,846 - 39,159
Fixed assets received in payment for own credit 374,929 - 374,929
Shareholder's equity to be used as specific hedges (sub-paragraph 12 of no. 11 of official notice 9/99)
Liquidity deficit (item 2 no. 15 of official notice 8/2007) -
SHAREHOLDER'S EQUITY FOR THE CALCULATION OF CONCENTRATION RISK 4,959,499
Part exceeding the risk concentration limits (sub-paragraph d) no.12 official notice 3/2007) -
SHAREHOLDER'S EQUITY 4,959,499
(1) Only for the assessment of shareholder's equity on a consolidated and an adjusted consolidation basis.
-
Foreign exchange translation reserves and investment hedges on operating units abroad
Positive actuarial deviations (corridor method) - not recognized in profit and loss reserves
Negative actuarial deviations (corridor method) and costs of past services recognized in profit and loss reserves
Positive revaluation differences in first application - Equity accounting method (1)
Transitional regime of item 4 of no. 5 of official notice 3/2007 - impact on transition to basis shareholder's equity still to be
recognized
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
142
respective risks should be permanently observed. This relationship is defined by the
Solvency Ratio, which the minimum value is 10%.
As the above table shows, the bank’s total shareholders’ equity of CVE 4.959.499 thousand
at 31 December 2017, were higher than the legally required minimum share capital and
sufficient to maintain an adequate ratio between assets and off-balance sheet elements
weighted by risk translating into a solvency ratio of 15.78%.
As the Bank of Cabo Verde’s regulations on capital adequacy are based on the Basel I
Accord, several practices brought in under Basel II are not, as yet, required. These include
the implementation of a self-assessment system and the assessment of an internal capital
level in line with the risk profile or even the use of external ratings for an assessment of credit
risk weighting factors.
However, taking into consideration that the Supervisory Authority has decided to adopt
international best practice standards, the main Basel II recommendations applicable to the
situation in Cabo Verde, are likely to be assimilated in the near future.
37 - IFRS Disclosures - New standards as at December 31, 2017:
1 New standards and interpretations applicable for the year
As a result of the endorsement by the European Union (EU), the following issues, revisions,
amendments and improvements to standards and interpretations have occurred, effective as of 1
January 2017.
a) EU-endorsed revisions, amendments and improvements to standards and interpretations with no
effect on the Bank's financial statements:
IAS 7 Disclosure Initiative
The amendments to IAS 7 are part of the IASB's Disclosure Initiative project and help users of financial
statements to better understand changes in the entity's debt. The amendments require an entity to
disclose changes in its liabilities related to financing activities, including changes in cash flows and
non-cash flows (such as unrealized foreign exchange gains and losses).
The amendments are applicable for accounting periods beginning on or after 1 January 2017. Entities
do not need to disclose comparative information.
IAS 12 Recognition of deferred tax assets for unrealized losses - amendments to IAS 12
The IASB issued amendments to IAS 12 to clarified the accounting for deferred tax assets for
unrealized losses on debt instruments measured at fair value.
The amendments clarified that an entity should consider whether the country's tax rules restrict the
sources of taxable income against which deductions can be made upon the reversal of a deductible
temporary difference. In addition, the amendments provide guidance on how an entity should
determine its future taxable income and explain the circumstances under which such taxable income
may include the recovery of certain assets for a value greater than their carrying amount.
The amendments are applicable for accounting periods beginning on or after 1 January 2017.
143
However, in the initial application of these amendments, changes in the initial equity for the earliest
comparative period presented can be recognized in the initial retained earnings for the most recent
comparative period presented (or another equity component, as appropriate), without allocating these
changes between the initial retained earnings and other equity components. Entities applying this
option shall disclose this fact.
Annual improvements for the 2014-2016 cycle
In the annual improvements for the 2014-2016 cycle, the IASB introduced the following improvement,
effective as of 1 January 2017:
IFRS 12 Disclosures of interests in other entities
This improvement clarified that, in addition to those in paragraphs B10 to B16, the IFRS 12 disclosure
requirements apply to an entity's interests in subsidiaries, joint ventures or associates (or part of its
interest in joint ventures or associates) that are classified (or are included in a group for sale that is
classified) as held for sale. This improvement is effective for periods beginning on or after 1 January
2017 and should be applied retrospectively.
2 New standards and interpretations already issued but not yet mandatory
The standards and interpretations recently issued by the IASB whose application is mandatory only in
periods beginning after July 1, 2017 or later, and which the Bank has not adopted in advance, are as
follows:
(a) Already endorsed by the EU:
IFRS 15 Revenue from contracts with customers
This standard applies to all revenue from contracts with customers, replacing the following existing
standards and interpretations: IAS 11 - Construction Contracts, IAS 18 - Revenue, IFRIC 13 -
Customer Loyalty Programs, IFRIC 15 - Agreements for the Construction of Real Estate, IFRIC 18 -
Transfers of Assets from Customers, and SIC 31 - Revenue - Barter Transactions Involving Advertising
Services). The standard applies to all revenue from contracts with customers, unless the contract is in
the scope of IAS 17 (or IFRS 16 - Leases, when applied).
It also provides a model for recognizing and measuring sales of some non-financial assets, including
disposals of property, equipment and intangible assets.
This standard highlights the principles that an entity must apply when it measures and recognizes
revenue. The basic principle is that an entity should recognize revenue for an amount that reflects the
consideration it expects to be entitled to in exchange for the goods and services promised under the
contract.
The principles of this standard should be applied in five steps: (1) identify the contract with the
customer, (2) identify the performance obligations in the contract, (3) determine the transaction price,
(4) allocate the transaction price to the performance obligation in the contract, and (5) recognize the
revenue when the entity meets a performance obligation.
The standard requires an entity to use professional judgment when applying each of the steps of the
model, taking into account all relevant facts and circumstances.
This standard also specifies how to account for incremental costs in obtaining a contract and expenses
directly related to the performance of a contract.
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
144
The standard should be applied in periods beginning on or after 1 January 2018. The standard may be
applied retrospectively and entities may choose whether to apply to the full retrospective approach or
the modified retrospective approach. Earlier application is permitted.
Clarification to IFRS 15
In April 2016, the IASB issued amendments to IFRS 15 to address various matters related to the
standard's implementation.
The following are the amendments that were introduced:
1. Clarified when a promised product or service is distinct under the contract;
2. Clarified how to apply the principal versus agent application guidance, including the
measurement unit for evaluation, how to apply the control principle in a service transaction,
and how to restructure the indicators;
3. Clarified when an entity's activities significantly affect the intellectual property (IP) to which the
customer is entitled, which is one of the factors in determining whether the entity recognizes
the revenue from a license over time or at a moment in time.
4. Clarified the scope of exceptions for sales-based and usage-based royalties related to IP
licenses (royalty constraint) when no other goods or services are promised in the contract. Add
two practical opportunities in the IFRS 15 transition requirements: (a) contracts completed
under the full retrospective approach; and (b) changes in transition contracts.
These clarifications should be applied simultaneously with the application of IFRS 15 for accounting
periods beginning on or after 1 January 2018. Earlier application is permitted provided that it is properly
disclosed. The clarifications may be applied retrospectively and the entities can choose whether to
apply the full retrospective approach or the modified retrospective approach.
Impact: This standard is more demanding than the current standard and there are more guides for
applying the standard. The disclosures are also more extensive.
IFRS 9 Financial instruments
This standard can be summarized by subject as follows:
Financial asset classification and measurement
1. All financial assets are measured at fair value at the date of initial recognition, adjusted for
transaction costs if the instruments are not accounted for at fair value through profit or loss
(FVTPL). However, customer accounts without a significant financing component are initially
measured at their transaction value, as defined in IFRS - 15 revenue from contracts with
customers.
2. Debt instruments are subsequently measured based on their contractual cash flows and the
business model within which such instruments are held. If a debt instrument has contractual
cash flows that are only payments of principal and interest on the principal amount outstanding
and it is held within a business model in order to hold the assets to collect contractual cash
flows, then the instrument is recorded at amortized cost. If a debt instrument has contractual
cash flows that are exclusively payments of principal and interest on the principal amount
outstanding and it is held within a business model whose purpose is to collect contractual cash
flows and to sell financial assets, then the instrument is measured at fair value through other
comprehensive income (FVTOCI) with subsequent reclassification in earnings.
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3. All other debt instruments are subsequently accounted for by FVTPL. In addition, there is an
option that allows financial assets to be designated as FVTPL at initial recognition, if this
eliminates or significantly reduces significant accounting decompensation in profit or loss.
4. Equity instruments are generally measured at FVTPL. However, entities have an irrevocable
option, on an instrument-by-instrument basis, to present the changes in the fair value of non-
trade instruments in the statement of comprehensive income (without subsequent
reclassification to profit or loss).
Classification and measurement of financial liabilities
1. For financial liabilities designated as FVTPL using the fair value option, the amount of the
change in the fair value of these financial liabilities that is attributable to changes in credit risk
shall be presented in the statement of comprehensive income. The remainder of the change in
fair value shall be presented in profit or loss, unless the presentation of the change in fair value
relative to the credit risk of the liability in the statement of comprehensive income will create or
increase an accounting decompensation in profit or loss.
2. All other IAS 39 requirements for classifying and measuring financial liabilities were carried
forward to IFRS 9, including the rules for separating embedded derivatives and the criteria for
using the fair value option.
Impairment
1. Impairment requirements are based on an expected credit loss (ECL) model, which replaces
the IAS 39 incurred loss model.
2. The ECL model shall apply to: (i) debt instruments accounted for at amortized cost or at fair
value through other comprehensive income, (ii) most loan commitments, (iii) financial
guarantee contracts, iv) contract assets under IFRS 15 and (v) lease receivables under IAS 17
- Leases.
3. Generally, entities are required to recognize ECLs for 12 months or a lifetime, depending on
whether there has been a significant increase in credit risk since the initial recognition (or when
the commitment or guarantee was entered into). For accounts receivable from customers
without a significant financing component, and depending on an entity's accounting policy for
other customer credits and lease receivables, a simplified approach can be applied in which
the lifetime ECLs are always recognized.
4. ECL measurement shall reflect a probability-weighted outcome, the effect of the time value of
money, and be based on reasonable and supportable information that is available without
undue cost or effort.
Hedge accounting
1. Hedge effectiveness tests should be prospective and may be qualitative, depending on the
complexity of the hedge, without the 80% - 125% test.
2. A risk component of a financial or non-financial instrument may be designated as the hedged
item if the risk component is separately identifiable and reliably measurable.
3. The time value of an option, the forward element of a forward contract and any foreign
currency basis spread may be excluded from the designation as hedging instruments and
accounted for as hedging costs.
4. Larger sets of items may be designated as hedged items, including tier designations and some
net positions.
The standard is applicable for accounting periods beginning on or after 1 January 2018. Earlier
application is permitted provided it is properly disclosed. The application varies according to the
standard’s requirements, being partially retrospective and partially prospective.
Impact: The IFRS application can change the measurement and presentation of financial instruments,
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
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depending on their underlying cash flows and the business model under which they are held.
Impairment will generally result in early recognition of impairment losses.
The new hedge accounting model may also lead to more instruments being accounted for as hedging
instruments.
Application of IFRS 9 with IFRS 4 - Amendments to IFRS 4
The amendments address some of the issues raised by the implementation of IFRS 9 prior to the
implementation of the new insurance contract standard that the IASB will issue to replace IFRS 4.
Temporary exemption from IFRS 9
1. The temporary exemption from IFRS 9 option is available to entities whose activity is
predominantly related to insurance.
2. This temporary exemption allows these entities to continue applying IAS 39 while they
postpone IFRS 9 application to no later than 1 January 2021.
3. This prevalence shall be assessed at the commencement of the annual reporting period
preceding April 1, 2016 and before IFRS 9 is implemented. Additionally, this prevalence
assessment can only be reviewed in rare situations.
4. Companies applying this temporary exemption will have to make additional disclosures.
The overlap approach
1. This approach is an option for entities that adopt IFRS 9 and issue insurance contracts to
adjust their gains or losses to eligible financial assets; in reality, that results in applying IAS 39
to these eligible financial assets.
2. The adjustments eliminate the accounting volatility that may arise from applying IFRS 9 without
the new insurance contracts standard.
3. Under this approach, an entity may reclassify amounts of gains or losses to other
comprehensive income (OCI) items for designated financial assets.
4. An entity must present a separate line for the impacts of this overlap adjustment in the income
statement, as well as in the statement of comprehensive income.
The temporary exemption is applicable for the first time for accounting periods beginning on or after 1
January 2018. An entity may opt for the overlap approach when it first applies IFRS 9 and apply this
approach retroactively to designate financial assets at the transition date to IFRS 9. The entity shall
change the comparatives to reflect the overlap approach if, and only if, it changes the comparatives
when applying IFRS 9.
Impact: The overlap approach requires companies to derive some volatility from the income statement
which may arise if they apply IFRS 9 together with IFRS 4.
When they apply the temporary exemption, companies still have to make disclosures required by IFRS
9.
Annual improvements for the 2014-2016 cycle
In the annual improvements for the 2014-2016 cycle, the IASB has introduced the following
improvements that shall be applied retrospectively and are effective as of 1 January 2018 (earlier
adoption is permitted provided it is properly disclosed).
IFRS 1 First time adoption of IFRS
This improvement eliminates the short-term exemption for first time adopters stated in paragraphs E3-
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E7 of IFRS 1, because it already served its purpose (which related to exemptions from certain
disclosures of financial instruments under IFRS 7, exemptions in terms of employee benefits and
exemptions in terms of investment entities).
This improvement is effective for periods beginning on or after 1 January 2018.
IAS 28 Clarification that the measurement of investees at fair value through profit or loss is a choice
that is made on an investment-by-investment basis
The improvement clarified that:
1. A company that is a venture capital company or other qualifying entity may, at initial
recognition and on an investment-by-investment basis, choose to measure its investments in
associates and/or joint ventures at fair value through profit or loss.
2. If a company that is not itself an investment entity holds an interest in an associate or joint
venture that is an investment entity, the company may, when applying the equity method,
choose to maintain the fair value that those investees apply when measuring subsidiaries.
Annual improvements for the 2014-2016 cycle
This option is taken separately for each investment on the later date between (a) the initial recognition
of the investment in that investee; (b) the investee becomes an investment entity; and (c) the investee
becomes a parent company.
IFRS 16 Leases
The scope of IFRS 16 includes the leases of all assets, with some exceptions. A lease is defined as a
contract, or part of a contract, that transfers the right to use a good (the underlying asset) for a period
of time in exchange for a value.
IFRS 16 requires lessees to account for all leases based on the on-balance model, similarly to the way
IAS 17 treats finance leases. The standard recognizes two exceptions to this model: (1) low-value
leases (e.g. personal computers) and short-term leases (i.e., with a lease term of less than 12 months).
At the lease commencement date, the lessee shall recognize the liability related to the lease payments
(i.e. the lease liability) and the asset representing the right to use the underlying asset during the lease
period (i.e. the right of use or
ROU).
Lessees shall separately recognize the cost of interest on the lease liability and the depreciation of the
ROU.
Lessees shall also remeasure the lease liability upon the occurrence of certain events (such as a
change in the lease period, a change in future payments that result from a change in the reference rate
or the rate used to determine such payments). The lessee shall recognize the amount of
remeasurement of the lease liability as an adjustment in the ROU.
The lessee's accounting remains substantially unchanged from the current treatment under IAS 17.
The lessor continues to classify all leases using the same IAS 17 principles and distinguishing between
two types of leases: operational and financial leases.
The standard should be applied for accounting periods beginning on or after 1 January 2019. Earlier
application is permitted provided that IFRS 15 is also applied. The standard may be applied
retrospectively and entities may choose whether to apply the full retrospective approach or the
modified retrospective approach.
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
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Impact: For the lessor, the pattern of recognition of lease costs will be accelerated. Some of the key
ratios, such as EBITDA, financial ratios, In the cash flow statement, lease payments will be considered
within financing activities. The disclosures will be more extensive.
IFRS 10 and IAS 28: Sales or contributions of assets between an investor and its associate/joint
venture
The amendments seek to resolve the conflict between IFRS 10 and IAS 28 when there is loss of
control of a subsidiary that is sold or transferred to an associate or joint venture.
The amendments to IAS 28 introduce different recognition criteria for the effects of sales or
contributions of assets between an investor (including its consolidated subsidiaries) and its associate
or joint venture, depending on whether or not the transactions involve assets that constitute a business
as defined in IFRS 3 - Business Combinations.
When transactions constitute a business combination as required, the gain or loss must be recognized
in full in the investor's income statement for the year. However, if the transferred asset is not a
business, the gain or loss shall continue to be recognized only to the extent that it relates to other
(unrelated) investors.
In December 2015, the IASB decided to postpone the date of application of this amendment until any
amendments resulting from the research project on the equity method are finalized. Earlier application
of this amendment is still permitted and must be disclosed. Changes should be applied prospectively.
Impact: The amendments eliminate the diversity in practice, giving preparers of financial statements a
set of principles applicable to these transactions. However, there is still professional judgment in the
definition of a business.
IFRS Practice Statement 2: Making Materiality Judgments
Companies are allowed to apply the Practice Statement (PS) guidelines when preparing financial
statements that are prepared at any time after September 14, 2017.
The PS contains non-mandatory guidelines for companies to make materiality judgments when
preparing financial statements. The PS also helps readers of financial statements understand how the
entity makes its materiality judgments when preparing the financial statements.
The PS contains guidelines on three main areas:
1. General characteristics of materiality.
2. A four-step process that can be used when judging materiality in financial statement
preparation. This process describes how the entity assesses whether certain information is
material for the purpose of recognition, measurement, presentation and disclosure.
3. How to make materiality judgments in specific circumstances, such as information on prior
periods, errors and ratios, and in the context of interim reporting.
4. In addition, the PS discusses the interaction between the materiality judgments that a company
has to make and the local laws and regulations.
The PS includes illustrative examples of how companies can apply the guidelines provided therein.
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Impact: The amendments eliminate the diversity in practice, giving preparers of financial statements a
set of principles applicable to these transactions. However, there is still professional judgment in the
definition of a business.
b) Not yet endorsed by the EU:
Annual improvements for the 2015-2017 cycle
In the annual Improvements for the 2015-2017 cycle, the IASB introduced improvements in four
standards, as summarized below:
IFRS 3 Business Combinations - Previously held interest in a joint operation
1. The amendments clarified that, when an entity obtains control of a joint operation, it must apply
the business combination requirements in stages, including remeasuring the previously held
interest in the assets and liabilities of the joint operation to its fair value.
2. In doing so, the acquirer remeasures its previously held interest in that joint operation.
3. This amendment shall apply to business combinations for which the acquisition date is on or
after the beginning of the first reporting period commencing on or after 1 January 2019. Earlier
adoption is permitted.
IFRS 11 Joint Arrangements - Previously held interest in a joint operation
1. A party that participates but does not have joint control in a joint operation may obtain joint
control over a joint operation whose activity constitutes a business as defined in IFRS 3. This
amendment clarified that the previously held interest should not be remeasured.
2. This amendment shall apply to transactions in which the entity obtains joint control that occur
on or after the beginning of the first reporting period commencing on or after 1 January 2019.
Earlier adoption is permitted.
IAS 12 Income tax - income tax consequences of payments on financial instruments classified as
equity instruments
1. These amendments clarified that income tax consequences are directly associated with the
transaction or past event that generated distributable income to shareholders. Consequently,
the company recognizes tax impacts in the income statement, in the comprehensive income or
in another equity instrument, in accordance with the entity's past recognition of such
transactions or events.
2. These amendments shall apply for accounting periods beginning on or after 1 January
2019. Earlier adoption is permitted. When the entity applies these amendments for the first
time, it shall apply them to the income tax consequences recognized on or after the beginning
of the earliest comparative period.
IAS 23 Borrowing costs - borrowing costs eligible for capitalization
1. The amendment clarified that an entity considers as part of overall loans any loan originally
obtained to develop the qualifying asset, when substantially all the activities necessary to
prepare the asset for its intended use or for sale are complete.
2. The amendments shall apply to borrowing costs incurred on or after the beginning of the
reporting period in which the company adopts these amendments.
3. These amendments shall apply for accounting periods beginning on or after 1 January 2019.
Earlier adoption is permitted.
IFRS 17 Insurance contracts
IFRS 17 applies to all insurance contracts (i.e. life, non-life, direct insurance and reinsurance),
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
150
irrespective of the type of entity issuing them, as well as to certain guarantees and certain financial
instruments with discretionary participation features. Some exceptions will apply.
The general objective of IFRS 17 is to provide an accounting model for insurance contracts that is most
useful and consistent for issuers.
In contrast to the IFRS 4 requirements, which are based on previously adopted local accounting
policies, IFRS 17 provides a comprehensive model for insurance contracts covering all relevant
accounting aspects. The core of IFRS 17 is the general model that is supplemented by:
1. A specific adaptation for contracts with direct participation features (variable fee approach);
and
2. A simplified approach (premium allocation approach), especially for shorter-term contracts.
The main features of the new accounting model for insurance contracts are:
1. A measurement of the present value of future cash flows, incorporating an explicit risk
adjustment, remeasured every reporting period (the fulfillment cash flow);
2. A Contractual Service Margin (CSM) that is equal and opposite to any day one gain in the
fulfillment cash flows of a group of contracts, representing the unearned profitability of the
insurance contract to be recognized in profit or loss over the service period (i.e. coverage
period);
3. Certain changes in the expected present value of future cash flows are adjusted against the
CSM and thereby recognized in profit or loss over the remaining contract service period;
4. The effect of changes in discount rates will be reported in either profit or loss or other
comprehensive income, depending on the company's accounting policy;
5. A presentation of insurance revenue and insurance service expense in the Statement of Other
Comprehensive Income is based on the concept of services rendered during the period;
6. Amounts that the policyholder will receive, regardless of whether an insured event happened
(non-distinct investment components) are not presented in the income statement, but are
recognized directly in the balance sheet;
7. Insurance service results (earned revenue less incurred claims) are presented separately from
the insurance finance income or expense; and
8. Extensive disclosures to provide information on the recognized amounts from insurance
contracts and the nature and extent of risks arising from these contracts.
IFRS 17 is effective for accounting periods beginning on or after 1 January 2021, with comparative
figures being required. Earlier application is permitted provided that the company also applies IFRS 9
and IFRS 15 on or before the date it first applies IFRS 17. The IASB decided on a retrospective
approach for estimating the CSM on the transition date.
However, if full retrospective application, as defined by IAS 8 for a group of insurance contracts, is
impracticable, the company must choose one of the following two alternatives:
1. Modified retrospective approach - based on reasonable and supportable information available
without undue cost and effort to the company; certain modifications are applied to the extent
full retrospective application is not possible, but still with the objective to achieve the closest
outcome to retrospective application possible;
2. Fair value approach - the CSM is determined as the positive difference between the fair value
determined in accordance with IFRS 13 Fair Value Measurement and the fulfillment cash flows
(any negative difference would be recognized in retained earnings at the transition date).
If a company cannot obtain reasonable and supportable information necessary to apply the modified
retrospective approach, it must apply the fair value approach.
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Impact: IFRS 17, together with IFRS 9, will have a significant impact on insurance companies (on the
systems and processes used to produce financial information).
This new model will have a significant impact on profit and total equity, increasing volatility.
IFRIC 22 Foreign currency transactions and advance consideration
This interpretation clarified that, when determining the spot exchange rate to be used in the initial
recognition of an asset, expense or income (or part of it) associated with the derecognition of non-
monetary assets or liabilities related to an advance consideration, the transaction date is the date on
which the entity initially recognizes the non-monetary asset or liability related to an advance
consideration.
If there are multiple payments or receipts of an advance consideration, the entity shall determine the
transaction date for each payment or receipt.
A company may apply this interpretation on a full retrospective application basis.
Alternatively, it may apply this interpretation prospectively to all assets, expenses and income within its
scope that are initially recognized on or after:
(i) The beginning of the reporting period in which the entity applies the interpretation for the first time;
or
(ii) The beginning of the reporting period presented as a comparative period in the financial statements
for the period in which the entity applies the interpretation for the first time.
Earlier adoption is permitted provided it is properly disclosed.
Impact: The amendments eliminate the diversity in practice in the recognition of a related asset,
income or expense (or part of it) when derecognizing a non-monetary asset or liability related to the
advance received or paid in foreign currency.
IFRIC 23 - Uncertainty Over Income Tax Treatments
In June 2017, the IASB issued IFRIC 23 - Uncertainty Over Income Tax Treatments (Interpretation),
which clarified how to apply the recognition and measurement requirements in IAS 12 - Income Tax
when there is uncertainty over income tax treatment.
The Interpretation addresses the accounting for income tax when the tax treatment involves
uncertainty and affects the application of IAS 12. The Interpretation does not apply to taxes or levies
outside the scope of IAS 12, nor does it specifically include requirements relating to interest or
penalties associated with uncertain tax treatments. The Interpretation specifically addresses the
following:
1. Whether a company considers uncertain tax treatment separately;
2. The assumptions that a company makes about the examination of tax treatments by taxation
authorities;
3. How a company determines taxable profit (tax loss), the tax bases, unused tax losses, unused
tax credits and tax rates;
4. How a company considers changes in facts and circumstances.
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
152
A company shall determine whether to consider each uncertain tax treatment separately or together
with one or more uncertain tax treatments based on which approach better predicts the resolution of
the uncertainty.
The Interpretation is applicable for accounting periods beginning on or after 1 January 2019.
Impact: The application of this interpretation will be more complex for multinational companies
operating in multi-complex tax environments. Companies must also ensure that they have a process in
place that allows them to obtain the information they need to apply the interpretation in a timely
manner.
IFRS 2 Classification and Measurement of Share-based Payment Transactions - Amendments to IFRS
2
The IASB issued amendments to IFRS 2 as regards the classification and measurement of share-
based payment transactions. These amendments address three key areas:
Vesting conditions
Their effects on the measurement of cash-settled share-based payment transactions. The
amendments clarified that the approach used to account for vesting conditions when
measuring equity-settled share-based payment transactions also applies to cash-settled share-
based payments.
Classification of share-based payment transactions with net settlement features for withholding
tax obligations
This amendment adds an exception to address the narrow situation where the net settlement
arrangement is designed to meet a company’s obligation, under tax laws or regulations, to
withhold a certain amount in order to meet the employee’s tax obligation associated with the
share-based payment.
This amount is then transferred, normally in cash, to the tax authorities on the employee’s
behalf. To fulfill this obligation, the terms of the share-based payment arrangement may permit
or require the entity to withhold the number of equity instruments that are equal to the
monetary value of the employee's tax obligation from the total number of equity instruments
that otherwise would have been issued to the employee upon exercise (or vesting) of the
share-based payment (known as the net share settlement feature).
Classification of share-based payment transactions with net settlement features for withholding
tax obligations (cont.)
When a transaction meets this criterion, it is not divided into two components, rather it is
classified in its entirety as an equity-settled share-based payment transaction, if would have
been so classified in the absence of the net share settlement feature.
Accounting for a modification to the terms and conditions of a share-based payment
transaction that changes its classification from cash-settled to equity-settled
The amendment clarified that, if the terms and conditions of a cash-settled share-based
payment transaction are modified, with the result that it becomes an equity-settled share-based
payment transaction, the transaction is accounted for as an equity-settled transaction from the
date of the modification.
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Any difference (be it a debt or a credit) between the carrying amount of the liability
derecognized and the amount recognized in equity on the modification date is recognized
immediately in profit or loss.
The amendments are applicable for accounting periods beginning on or after 1 January 2018. At the
adoption date, companies must apply the amendments without changing the comparatives. But
retrospective application is permitted, provided the three amendments are applied and another criterion
is met. Earlier application is permitted.
Impact: The amendments are intended to eliminate the diversity in practice, but they are narrow in
scope and address specific areas of classification and measurement.
Transfers of Investment Property (amendments to IAS 40)
The amendments clarified when an entity shall transfer a property, including properties under
construction or development to, or from, investment properties.
The amendments determine that a change in use occurs when the property meets, or ceases to meet,
the definition of investment property and there is evidence of change in use.
A mere change in the management's intention to use the property is not evidence of change in use.
The amendments are applicable for accounting periods beginning on or after 1 January 2018.
An entity shall apply the amendments prospectively to changes in use occurring on or after the
beginning of the accounting period in which the entity applies these amendments for the first time.
Entities shall re-evaluate the classification of the properties held at that date and, if applicable,
reclassify the property to reflect the conditions that existed at that date.
Retrospective application is only permitted if it is possible to apply it without it being affected by events
that occurred after the date of its application.
Earlier application is permitted provided it is properly disclosed.
Impact: The amendments eliminate the diversity in practice.
Prepayment features with negative compensation - Amendments to IFRS 9
Under IFRS 9, a debt instrument can be measured at amortized cost or at fair value through other
comprehensive income, provided that the contractual cash flows are "solely payments of principal and
interest on the principal amount outstanding" (the SPPI criterion) and the instrument is held within the
appropriate business model for that classification.
The amendments to IFRS 9 clarified that a financial asset passes the SPPI criterion regardless of the
event or circumstance that cause the early termination of the contract and irrespective of which party
pays or receives reasonable compensation for the early termination of the contract.
The basis for conclusion to this amendment clarifies that the early termination can result from a
contractual term or from an event outside the control of the parties to the contract, such as a change in
law or regulation leading to the early termination of the contract.
Modification or exchange of a financial liability that does not result in the derecognition of the
liability.
In the basis for conclusion of the amendment, the IASB also clarifies that the requirements in IFRS 9
for adjusting the amortized cost of a financial liability when a modification (or exchange) does not result
2017 Annual Report
BANCO COMERCIAL DO ATLÂNTICO, S.A.
NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2016
(Amounts expressed in thousands of Cabo Verde Escudos - tCve.)
154
in derecognition are consistent with those applied to the modification of a financial asset that does not
result in derecognition.
This means that the gain or loss arising on modification of a financial liability that does not result in
derecognition, calculated by discounting the change in contractual cash flows at the original effective
interest rate, is immediately recognized in profit or loss.
The IASB made this comment in the basis for conclusions to the amendment as it felt that the existing
requirements in IFRS 9 provided an adequate basis for companies to account for modifications and
exchanges of financial liabilities and that no formal amendment to IFRS 9 was needed in respect of this
issue.
Impact: The amendment is intended to apply where the prepayment amount approximates to unpaid
amounts of principal and interest. This implies that prepayments at current fair value, or at an amount
that includes the fair value of the cost to terminate an associated hedging instrument, will normally
satisfy the SPPI criterion only if other elements of the change in fair value, such as the effects of credit
risk or liquidity, are small.
This amendment is effective for accounting periods beginning on or after 1 January 2019.
The amendment is required to be applied retrospectively. This amendment provides specific transition
provisions if it is only applied in 2019 rather than in 2018 with the remainder of IFRS 9. Earlier adoption
is permitted.
Impact: This amendment applies to IFRS 9 (it does not apply to IAS 39). A company that does not
apply this accounting in accordance with IAS 39 will have an impact on the adoption of IFRS 9.
Long-term interests in Associates and Joint Ventures - Amendment to IAS 28
The amendments clarified that an entity shall apply IFRS 9 for long-term interests in associates or joint
ventures to which the equity method is not applied, but which are in substance part of the net
investment in that associate or joint venture (long term interests). This clarification is relevant since it
implies that the IFRS 9 expected loss model should be applied to such investments.
The IASB also clarified that, by applying IFRS 9, an entity does not take into account any losses from
that associate or joint venture or impairment losses on the net investment that are recognized as an
adjustment to the net investment arising from the application of IAS 28.
To illustrate how entities should apply the requirements in IAS 28 and IFRS 9 for long-term interests,
the IASB published illustrative examples when it issued this amendment.
This amendment is effective for accounting periods beginning on or after 1 January 2019. The
amendment shall be applied retrospectively, with some exceptions. Earlier adoption is permitted and
must be disclosed.
Impact: This amendment seeks to remove the ambiguity in the wording of the standard.
38. SUBSEQUENT EVENTS
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On December 28, 2017, BCA received a payment order in favor of a large company to settle its loan
with BCA in the amount of 1,102,650,000.00. However, the regularization of the loan was only made
on January 2, 2018, and the impact of the cancellation of the Impairment was also only verified in
2018.