Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
n. Auditors
Messrs KPMG Professional Services, having
satisfied the relevant corporate rules on their
tenure in office have indicated their willingness to
continue in office as auditors to the company. In
accordance with section 357 (2) of the Companies
and Allied Matters Act, Cap C.20 Laws of
Federation of Nigeria 2004 therefore, the auditor
will be re-appointed at the next annual general
meeting of the company without any resolution
being passed.
By Order of the Board
Mrs Olufunmilayo Adedibu
Company Secretary
44 Marina
Lagos State
Nigeria
FRC/2014/NBA/00000005887
8 March 2018
FCMB Group Plc Annual Report and Accounts 2017 49
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Statement of Directors’ Responsibilities in
Relation to the Financial Statements
for the year ended 31 December 2017
The directors accept responsibility for the preparation of the annual financial statements that give a
true and fair view in accordance with International Financial Reporting Standards (IFRS) and in the
manner required by the Companies and Allied Matters Act, Cap C20, Laws of the Federation of Nigeria
2004, the Financial Reporting Council of Nigeria Act, 2011, the Banks and Other Financial Institutions
Act, Cap B3, Laws of the Federation of Nigeria, 2004 and relevant Central Bank of Nigeria regulations.
The directors further accept responsibility for maintaining adequate accounting records as required
by the Companies and Allied Matters Act, Cap C20, Laws of the Federation of Nigeria 2004, and for
such internal control as the directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement whether due to fraud or error.
The directors have made an assessment of the Company’s ability to continue as a going concern and
have no reason to believe that the Company will not remain a going concern in the year ahead.
Dr Jonathan Long Ladi Balogun
Chairman Group Chief Executive
FRC/2013/IODN/00000001433 FRC/2013/IODN/00000001460
8 March 2018 8 March 2018
50 FCMB Group Plc Annual Report and Accounts 2017
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Audit Committee Report
For the financial year ended 31 December 2017 to The Audit Committee comprises the following
the members of FCMB Group Plc. Non-Executive Directors and Shareholders’
representatives:
In compliance with section 359 (6) of the
Companies and Allied Matters Act, Cap C20, (i) Evangelist Akinola Soares
Laws of the Federation of Nigeria 2004, the Chairman/Shareholders’ representative
Central Bank of Nigeria Code of Corporate
Governance and the Securities and Exchange (ii) Alhaji S B Daranijo
Commission Code of Corporate Governance for Shareholders’ representative
Public Companies in Nigeria, we have reviewed
the Audit Report for the year ended 31 December, (iii) Mr Akeem Batula
2017 and hereby state as follows: Shareholders’ representative
1. The scope and planning of the audit were (iv) Mr Bismarck Rewane
adequate in our opinion; Non-Executive Director
2. The account and reporting policies of the (v) Mr Olusegun Odubogun
Group conformed with the statutory Non-Executive Director
requirements and agreed ethical practices;
(vi) Mr Olutola Mobolurin
3. T he internal control system was constantly Non-Executive Director
and effectively monitored;
The Group’s Head, Internal Audit, Babajide
4. T he whistle blowing channel run by an Odedele (FRC/2014/ICAN/00000006880) acts
external and independent third party was as secretary to the Committee.
found adequate;
5. The external auditor’s management controls
report received satisfactory response from
Management; and
6. The gross value of related party loans as at
31 December 2017 was N18.09 billion
(31 December 2016: N14.70 billion). All related
party loans are performing.
Evangelist Akinola Soares, FCNA
Chairman, Audit Committee
FRC/2013/ANAN/00000004356
7 March 2018
FCMB Group Plc Annual Report and Accounts 2017 51
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Independent Auditor’s Report
To the Shareholders of FCMB Group Plc Basis for Opinion
Report on the Audit of the Consolidated and We conducted our audit in accordance with
Separate Financial Statements International Standards on Auditing (ISAs). Our
responsibilities under those standards are further
Opinion described in the Auditor’s Responsibilities for
the Audit of the consolidated and separate
We have audited the consolidated and separate Financial Statements section of our report. We
financial statements of FCMB Group Plc (“the are independent of the Group and Company
Company”) and its subsidiaries (together, “the in accordance with the International Ethics
Group”), which comprise the consolidated and
separate statement of financial position as at Standards Board for Accountants’ Code of Ethics
31 December 2017, and the consolidated and for Professional Accountants (IESBA Code)
separate statement of profit or loss and other together with the ethical requirements that are
comprehensive income, consolidated and relevant to our audit of the consolidated and
separate statement of changes in equity and separate financial statements in Nigeria and we
consolidated and separate statement of cash have fulfilled our other ethical responsibilities
flows for the year then ended, and a summary in accordance with these requirements and the
of significant accounting policies and other IESBA Code. We believe that the audit evidence
explanatory information, as set out on pages
58 to 217. we have obtained is sufficient and appropriate to
provide a basis for our opinion.
In our opinion, the accompanying consolidated Key Audit Matters
and separate financial statements give a true
and fair view of the consolidated and separate Key audit matters are those matters that, in our
financial position of the Company and its professional judgment, were of most significance
subsidiaries as at 31 December 2017, and of its in our audit of the consolidated and separate
consolidated and separate financial performance financial statements of the current period. These
and its consolidated and separate cash flows matters were addressed in the context of our
for the year then ended in accordance with audit of the financial statements as a whole, and
International Financial Reporting Standards in forming our opinion thereon, and we do not
(IFRSs) and in the manner required by the provide a separate opinion on these matters.
Companies and Allied Matters Act, Cap C.20,
Laws of the Federation of Nigeria, 2004 and The key audit matters described below apply
the Financial Reporting Council of Nigeria Act, to the audit of the consolidated and separate
2011, the Banks and other Financial Institutions financial statements.
Act, Cap B3, Laws of the Federation of Nigeria,
2004 and relevant Central Bank of Nigeria (CBN)
Guidelines and Circulars.
52 FCMB Group Plc Annual Report and Accounts 2017
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Impairment of loans and advances granted Procedures
to customers
Our audit procedures included but were not
The impairment of loans and advances granted limited to the following:
to customers is an area of significance for
our audit due to the level of judgment and We evaluated and tested the key controls over
uncertainty involved in both the timing of the impairment determination process such
recognition and estimation of the key parameters as the credit committee reviews of loans and
for the estimation of the recoverability of the advances and management’s monitoring of the
loan balances. The allowance for impairment performance of loans and advances, including
recognized, represents management’s best timely identification of impairment triggers.
estimate of the losses incurred within the loan
portfolio, determined on an individual basis for For Individually significant loans that were
loans and advances above a specific threshold assessed for specific impairment, we tested
and on a collective basis for a portfolio of loans the completeness of the loans identified
with similar or homogeneous characteristics. by the Group as high risk by considering
risk factors such as magnitude of the
Individually significant loans are assessed for outstanding exposure, the current level of
specific impairment. The specific impairment past due obligations and our knowledge
allowance on these significant loans is of the credit risk in the specific industries
determined based on the magnitude of the and sectors. For the balances deemed to be
outstanding exposure, and the current level specifically impaired, we re-performed the
of past due obligations on the loans. Specific calculations of impairment and compared
impairment allowance levels are determined by the key data inputs to relevant sources for
comparing the carrying amount of the loans to example, we compared the collateral values
the present value of estimated future cash flows used to the respective valuation reports for
(including the fair value of pledged collaterals) reasonableness, compared discount rates
discounted using the effective interest rate of the to the effective interest rate of the loan and
loan. Impairment assessment for all other loans, compared projected cash flows to historical
including individually significant loans which inflows in customers’ accounts.
were assessed to be unimpaired, is performed
collectively, with the key assumptions being: the We identified and evaluated the appropriateness
probability of a loan becoming past due and of any changes to management’s collective
subsequently defaulting and the rate of recovery impairment assessment methodology during
on loans that are past due and in default. the year, including whether there was any
indication of management bias in developing
the collective impairment assessment.
FCMB Group Plc Annual Report and Accounts 2017 53
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Independent Auditor’s Report
In relation to the loans that were collectively Procedures
assessed for impairment, we tested the
Group’s impairment model for reasonableness. Our procedures included the following:
We re-performed the calculation using the
Group’s impairment model, in order to assess We assessed the components that gave
the accuracy of the collective impairment rise to the deferred tax asset to determine
charge recorded. The assumptions inherent in whether they were valid and in line with the
the Group’s collective impairment model were requirements of the accounting standards
assessed against our understanding of the and tax laws.
Group. We assessed the methodology used
by the Group to estimate the likelihood of We further assessed management’s forecasts
default for loans and advances with different of future taxable profits by checking that
profiles and recalculated these default rates assumptions used in the Group’s projection of
based on our cumulative knowledge of taxable income were reasonable and reflects
the Group’s actual historic experience and the Group’s historical performance trend,
current circumstances. We also evaluated the business model and the Group’s future
the historical accuracy and reliability of the plans and that there was no evidence of
Group’s collective impairment estimates by management bias in making those estimates.
determining whether these estimates have
been consistent with subsequent actual losses The Group’s accounting policy and note on
and write-offs identified on individual assets. deferred tax is shown in note 2j(ii) and note
31 respectively.
We assessed the disclosures in relation
to impairment of loans and advances in Information Other Than the Financial Statements
the consolidated and separate financial and Audit Report Thereon
statements with reference to the requirements
of the prevailing accounting standards. The Directors are responsible for the other
information which comprises the Directors’
The Group’s notes on impairment of loans and report, Statement of Directors’ responsibilities,
advances and related disclosures on credit risk Corporate governance report, Audit Committee
are shown in notes 24 (c) and 3 (b) respectively. report, Report of the external consultants on
the performance of the Board of Directors,
Recoverability of deferred tax assets Management Certification of Financial
Statements and Other national disclosures,
At the reporting date the Group had significant but does not include the consolidated and
recognised and unrecognised deferred tax separate financial statements and our audit
assets arising from unused tax losses, unutilised report thereon. Other information also includes
capital allowances and collective impairment information about FCMB Group Plc, the archives
allowance on loans and advances. The Group’s of the Founder, Chairman’s statement, Managing
determination of the recoverability of deferred Director’s report, 2017 awards won, Operating
tax assets involves significant judgment and high Companies performance highlights, Sustainability
estimation uncertainty as the Group supports the report, Board evaluation report, Notice of Annual
recoverability of the deferred tax assets mainly General Meeting and list of branches which would
with estimates of future taxable profits. be obtained after the date of the auditor’s report.
54 FCMB Group Plc Annual Report and Accounts 2017
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Our opinion on the consolidated and separate Group or to cease operations, or have no realistic
financial statements does not cover the other alternative but to do so.
information and we do not express any form of
assurance conclusion thereon. Auditor’s Responsibilities for the Audit of the
Consolidated and Separate Financial Statements
In connection with our audit of the consolidated
and separate financial statements, our Our objectives are to obtain reasonable assurance
responsibility is to read the other information about whether the consolidated and separate
and in doing so, consider whether the other financial statements as a whole are free from
information is materially inconsistent with the material misstatement, whether due to fraud or
consolidated and separate financial statements or error, and to issue an auditor’s report that includes
our knowledge obtained in the audit or otherwise our opinion. Reasonable assurance is a high level
appears to be materially misstated. If, based on of assurance, but is not a guarantee that an audit
the work we have performed, we conclude that conducted in accordance with ISAs will always
there is a material misstatement of this other detect a material misstatement when it exists.
information, we are required to report that fact. Misstatements can arise from fraud or error and
We have nothing to report in this regard. are considered material if, individually or in the
aggregate, they could reasonably be expected to
Responsibilities of the Directors for the influence the economic decisions of users taken
Consolidated and Separate Financial Statements on the basis of these financial statements.
The Directors are responsible for the preparation As part of an audit in accordance with ISAs,
of consolidated and separate financial statements we exercise professional judgment and maintain
that give a true and fair view in accordance with professional scepticism throughout the audit.
International Financial Reporting Standards We also:
(IFRSs) and in the manner required by the
Companies and Allied Matters Act, Cap C.20, Identify and assess the risks of material
Laws of the Federation of Nigeria, 2004 and the misstatement of the consolidated and
Financial Reporting Council of Nigeria Act, 2011 separate financial statements, whether
and the Banks and other Financial Institutions due to fraud or error, design and perform
Act, Cap B3, Laws of the Federation of Nigeria, audit procedures responsive to those risks,
2004 and relevant Central Bank of Nigeria (CBN) and obtain audit evidence that is sufficient
Guidelines and Circulars, and for such internal and appropriate to provide a basis for our
control as the directors determine is necessary opinion. The risk of not detecting a material
to enable the preparation of financial statements misstatement resulting from fraud is higher
that are free from material misstatement, whether than for one resulting from error, as fraud
due to fraud or error. may involve collusion, forgery, intentional
omissions, misrepresentations, or the override
In preparing the consolidated and separate of internal control.
financial statements, the directors are responsible
for assessing the Group and Company’s ability Obtain an understanding of internal control
to continue as a going concern, disclosing, as relevant to the audit in order to design
applicable, matters related to going concern audit procedures that are appropriate in the
and using the going concern basis of accounting circumstances, but not for the purpose of
unless the directors either intend to liquidate the expressing an opinion on the effectiveness of
the Group and Company’s internal control.
FCMB Group Plc Annual Report and Accounts 2017 55
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Independent Auditor’s Report
Evaluate the appropriateness of accounting We communicate with the Audit Committee
policies used and the reasonableness of regarding, among other matters, the planned
accounting estimates and related disclosures scope and timing of the audit and significant audit
made by the directors. findings, including any significant deficiencies in
internal control that we identify during our audit.
Conclude on the appropriateness of
directors’ use of the going concern basis of We also provide the Audit Committee with a
accounting and, based on the audit evidence statement that we have complied with relevant
obtained, whether a material uncertainty ethical requirements regarding independence,
exists related to events or conditions that and to communicate with them all relationships
may cast significant doubt on the Group and and other matters that may reasonably be
Company’s ability to continue as a going thought to bear on our independence, and where
concern. If we conclude that a material applicable, related safeguards.
uncertainty exists, we are required to draw
attention in our auditor’s report to the related From the matters communicated with the Audit
disclosures in the consolidated and separate Committee, we determine those matters that
financial statements or, if such disclosures were of most significance in the audit of the
are inadequate, to modify our opinion. Our consolidated and separate financial statements
conclusions are based on the audit evidence of the current period and are therefore the key
obtained up to the date of our auditor’s audit matters. We describe these matters in our
report. However, future events or conditions auditor’s report unless law or regulation precludes
may cause the Group and Company to cease public disclosure about the matter or when, in
to continue as a going concern. extremely rare circumstances, we determine that a
matter should not be communicated in our report
Evaluate the overall presentation, structure because the adverse consequences of doing so
and content of the consolidated and separate would reasonably be expected to outweigh the
financial statements, including the disclosures, public interest benefits of such communication.
and whether the consolidated and separate
financial statements represent the underlying
transactions and events in a manner that
achieves fair presentation.
Obtain sufficient appropriate audit evidence
regarding the financial information of the
entities or business activities within the Group
to express an opinion on the consolidated
financial statements. We are responsible for
the direction, supervision and performance of
the group audit. We remain solely responsible
for our audit opinion.
56 FCMB Group Plc Annual Report and Accounts 2017
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Report on Other Legal and Regulatory
Requirements
Compliance with the requirements of Schedule
6 of the Companies and Allied Matters Act, Cap
C.20, Laws of the Federation of Nigeria, 2004
In our opinion, proper books of account have
been kept by the Group and Company, so far as
appears from our examination of those books and
the Group and Company’s statement of financial
position and statement of profit or loss and other
comprehensive income are in agreement with the
books of account.
Compliance with Section 27 (2) of the Banks and
the other Financial Institutions Act Cap B3, Laws
of the Federation of Nigeria, 2004 and Central
Bank of Nigeria circular BSD/1/2004
(i) The Group paid penalties in respect of
contravention of the Central Bank of Nigeria
guidelines during the year ended 31 December
2017. Details of penalties paid are disclosed in
note 48 to the financial statements.
(ii) Related party transactions and balances
are disclosed in note 45 to the financial
statements in compliance with the Central
Bank of Nigeria circular BSD/1/2004.
Ayodele H Othihiwa, FCA
FRC/2012/ICAN/00000000425
For: K PMG Professional Services
Chartered Accountants
22 March 2018
Lagos, Nigeria
FCMB Group Plc Annual Report and Accounts 2017 57
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Consolidated and Separate Statements of Profit
or Loss and Other Comprehensive Income
for the year ended 31 December 2017
GROUP COMPANY
Note 2017 2016 2017 2016
N’000 N’000 N’000 N’000
Gross earnings 176,351,973 4,654,135
169,881,972 2,529,399
Interest and discount income 7 132,357,044 125,109,035 886,565 475,474
Interest expense
8 (61,831,909) (55,575,527) - -
Net interest income
70,525,135 69,533,508 886,565 475,474
Fee and commission income 10 21,629,896 17,683,439 --
Fee and commission expense (13) (66)
10 (5,407,537) (3,502,052) (13) (66)
Net fee and commission income
16,222,359 14,181,387
Net trading income 11 2,398,916 5,687,047 594,366 -
Net income from other financial instruments
at fair value through profit or loss 12 111,891 21,635 - -
Other income 13 13,384,225 27,850,817 1,048,468 4,178,661
15,895,032 33,559,499 1,642,834 4,178,661
Other operating income
Net impairment loss on financial assets 9 (22,667,506) (35,522,071) - (105,589)
Personnel expenses 14 (23,432,304) (24,804,401) (265,056) (218,167)
Depreciation and amortisation expenses 15 (24,362)
General and administrative expenses 16 (5,259,712) (4,474,071) (22,013) (361,969)
Other operating expenses 17 (26,071,421) (25,654,064) (423,579) (194,372)
(13,976,040) (10,841,139) (278,519) 3,749,611
Results from operating activities 1,540,219
11,235,543 15,978,648
Share of post tax result of associate 28(a) 226,849 272,749 - -
Profit before minimum tax and income tax 11,462,392 16,251,397 1,540,219 3,749,611
Minimum tax 19 (996,366) (988,364) - -
Income tax expense
19 (1,055,822) (924,151) (15,333) (19,351)
Profit for the year
9,410,204 14,338,882 1,524,886 3,730,260
Other comprehensive income 25(h) 1,056,631 4,219,475 - -
Items that will be reclassified subsequently 1,255,530 (96,379) - -
to profit or loss 2,312,161 4,123,096 - -
Foreign currency translation differences for
foreign operations
Net change in fair value of available-for-sale
financial assets
Other comprehensive income for the year, 2,312,161 4,123,096 - -
net of tax 11,722,365 18,461,978 1,524,886 3,730,260
TOTAL COMPREHENSIVE INCOME
FOR THE YEAR
58 FCMB Group Plc Annual Report and Accounts 2017
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
GROUP COMPANY
Note 2017 2016 2017 2016
N’000 N’000 N’000 N’000
Profit attributable to: 9,401,286 14,338,882 1,524,886 3,730,260
Equity holders of the Company 8,918 - - -
Non-controlling interests
9,410,204 14,338,882 1,524,886 3,730,260
Total comprehensive income attributable to: 11,712,702 18,461,978 1,524,886 3,730,260
Equity holders of the Company 9,663 - - -
Non-controlling interests
11,722,365 18,461,978 1,524,886 3,730,260
Basic and diluted earnings per share (Naira) 18
0.48 0.72 0.08 0.19
The accompanying notes are an integral part of these consolidated and separate financial statements.
FCMB Group Plc Annual Report and Accounts 2017 59
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Consolidated and Separate Statements
of Financial Position
as at 31 December 2017
GROUP COMPANY
Note 2017 2016 2017 2016
N’000 N’000 N’000 N’000
20
ASSETS 21 103,888,007 108,104,632 146,366 5,817,754
Cash and cash equivalents 22(a) 109,638,559 139,460,914 - -
Restricted reserve deposits 23 - -
Trading assets 24 23,936,031 9,154,198 - -
Derivative assets held for risk management 26 - 1,018,912 - -
Loans and advances to customers 25 659,937,237 - -
Assets pledged as collateral 27 649,796,726 59,107,132
Investment securities 28 61,330,157 128,441,676 5,109,140 4,844,200
Investment in subsidiaries 29 125,594,702 118,140,772
Investment in associates 30 153,428,659 -
Property and equipment 31 - 846,512 - 418,577
32 - 32,283,226 38,022 59,468
Intangible assets
Deferred tax assets 33,402,173 9,672,530 - 882
Other assets 7,971,990 - -
14,920,960 16,779,119 748,575
Total assets 8,233,563 1,172,778,078 131,636,805 2,084,532
131,366,185
27,604,320
1,186,179,155
LIABILITIES 22(b) 21,616,660 6,255,933 - -
Trading liabilities 23 - 770,201 - -
Derivative liabilities held for risk management 33 - -
Deposits from banks 34 6,355,389 24,798,296 - -
Deposits from customers 35 689,860,640 657,609,807 - -
Borrowings 36 109,434,970 132,094,368 - -
On-lending facilities 37 - -
Debt securities issued 38 42,534,316 42,199,380 - -
Retirement benefit obligations 19(v) 54,691,520 54,481,989 59,915 44,582
Current income tax liabilities 31 - -
Deferred tax liabilities 39 70,364 17,603 303,630 416,864
Provisions 40 3,860,163 2,859,562 1,628,663 804,757
Other liabilities 1,992,208 1,266,203
106,821 65,902
Total liabilities 5,222,471 2,343,010
63,458,211 70,409,033
997,211,525 993,905,084
60 FCMB Group Plc Annual Report and Accounts 2017
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
GROUP COMPANY
Note 2017 2016 2017 2016
N’000 N’000 N’000 N’000
41(b)
EQUITY 42 9,901,355 9,901,355 9,901,355 9,901,355
Share capital 42 115,392,414 115,392,414 115,392,414 115,392,414
Share premium 42 30,266,964 32,458,239
Retained earnings 33,044,691 21,120,986 4,350,828 4,806,213
Other reserves - -
Total Equity attributable to owners of
the Company 188,605,424 178,872,994 129,644,597 130,099,982
Non-controlling Interest 362,206 - - -
Total liabilities and equity 188,967,630 178,872,994 129,644,597 130,099,982
1,186,179,155 1,172,778,078 131,636,805 131,366,185
The financial statements and the accompanying notes and significant accounting policies were
approved by the Board of Directors on 8 March 2018 and signed on its behalf by:
Dr Jonathan A D Long Ladi Balogun Kayode Adewuyi
Chairman Group Chief Executive Chief Financial Officer
FRC/2013/IODN/00000001433 FRC/2013/IODN/00000001460 FRC/2014/ICAN/00000006884
FCMB Group Plc Annual Report and Accounts 2017 61
62 FCMB Group Plc Annual Report and Accounts 2017 GROUP Consolidated and Separate Introduction
Statements of Changes in Equity
Share Share Retained Statutory SSI Translation Available- Regulatory Non- Total
capital premium earnings reserve for-sale risk controlling equity for the year ended 31 December 2017
N’000 N’000 reserve reserve reserve N’000
N’000 N’000 N’000 reserve Interest
N’000 N’000 N’000 N’000
Balance at 9,901,355 115,392,414 32,458,239 7,753,811 - 5,795,630 1,293,023 6,278,522 - 178,872,994 Operating
1 January 2017 Review
Balance on recognition ----- - - 352,542 352,542
of subsidiary
- - 9,401,286 - - - - - 8,918 9,410,204 Corporate
Profit for the year Governance
Other comprehensive
income - - - - - 1,056,631 - - - 1,056,631 Financial
Foreign currency Statements
translation differences - - - - - - 1,254,784 - 746 1,255,530
for foreign operations - - 9,401,286 - - 1,056,631 1,254,784 - 9,663 11,722,365
Net change in fair value
of available-for-sale - - (1,134,000) 1,134,000 ------ Other National
financial assets - - - 8,478,290 - - Disclosures
Total comprehensive
income for the year - - (8,478,290) -
Transfer between - - (1,980,271) - - - - - - (1,980,271) Shareholder
reserves Information
Transfer to statutory 9,901,355 115,392,414 30,266,964 8,887,811 - 6,852,261 2,547,807 14,756,812 362,206 188,967,630 Branches and Account
reserve Opening Information
Transfer from
regulatory risk reserve
Transactions with
owners recorded
directly in equity
Dividend paid
Balance at
31 December 2017
GROUP Introduction
Share Share Retained Statutory SSI Translation Available- Regulatory Non- Total
capital premium earnings reserve for-sale risk controlling equity
N’000 N’000 reserve reserve reserve N’000
N’000 N’000 N’000 reserve Interest
N’000 N’000 N’000 N’000
Balance at 9,901,355 115,392,414 17,181,437 6,014,583 - 1,576,155 1,389,402 10,935,941 - 162,391,287 Operating
1 January 2016 Review
- - 14,338,882 - - - - - - 14,338,882
Profit for the year
Other comprehensive - - - - - 4,219,475 - - - 4,219,475 Corporate
income Governance
Foreign currency
translation differences - - - - - - (96,379) - - (96,379) Financial
for foreign operations Statements
Net change in fair value - - 14,338,882 - - 4,219,475 (96,379) - - 18,461,978
of available-for-sale
FCMB Group Plc Annual Report and Accounts 2017 financial assets - - (1,739,228) 1,739,228 ---- -- Other National
Total comprehensive - - 4,657,419 - - - - (4,657,419) -- Disclosures
income for the year
- - (1,980,271) - ---- - (1,980,271) Shareholder
Transfer between - 5,795,630 1,293,023 6,278,522 - 178,872,994 Information
reserves 9,901,355 115,392,414 32,458,239 7,753,811
Transfer to statutory
reserve
Transfer from
regulatory risk reserve
Transactions with
owners recorded
directly in equity
Dividend paid
Balance at
31 December 2016
63 Branches and Account
Opening Information
64 FCMB Group Plc Annual Report and Accounts 2017 COMPANY Consolidated and Separate Introduction
Statements of Changes in Equity
Share Share Retained Statutory SSI Translation Available- Regulatory Non- Total
capital premium earnings reserve for-sale risk controlling equity for the year ended 31 December 2017 continued
N’000 N’000 reserve reserve reserve N’000
N’000 N’000 N’000 reserve Interest
N’000 N’000 N’000 N’000
Balance at 9,901,355 115,392,414 4,806,213 - - - - - - 130,099,982 Operating
1 January 2017 Review
- - 1,524,886 - - - - - - 1,524,886
Profit for the year - - 1,524,886 - - - - - - 1,524,886 Corporate
Total comprehensive Governance
income for the year
- - (1,980,271) - - - - - (1,980,271)
Transactions with
owners recorded 9,901,355 115,392,414 4,350,828 - - - - - - 129,644,597 Financial
directly in equity Statements
Dividend paid
Balance at
31 December 2017
Other National
Disclosures
Shareholder
Information
Branches and Account
Opening Information
COMPANY Introduction
Share Share Retained Statutory SSI Translation Available- Regulatory Non- Total
capital premium earnings reserve for-sale risk controlling equity
N’000 N’000 reserve reserve reserve N’000
N’000 N’000 N’000 reserve Interest
N’000 N’000 N’000 N’000
Balance at 9,901,355 115,392,414 3,056,224 - - - - - - 128,349,993 Operating
1 January 2016 Review
Profit for the year - - 3,730,260 - - - - - - 3,730,260 Corporate
- - 3,730,260 - - - - - - 3,730,260 Governance
Total comprehensive
income for the year
Transactions with - - (1,980,271) - - - - - - (1,980,271)
owners recorded
directly in equity
Dividend paid
Balance at Financial
Statements
31 December 2016 9,901,355 115,392,414 4,806,213 - - - - - - 130,099,982
The accompanying notes are an integral part of these consolidated and separate financial statements.
FCMB Group Plc Annual Report and Accounts 2017 Other National
Disclosures
Shareholder
Information
65 Branches and Account
Opening Information
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Consolidated and Separate Statements
of Cash Flows
for the year ended 31 December 2017
GROUP COMPANY
Note 2017 2016 2017 2016
N’000 N’000 N’000 N’000
Cash flows from operating activities 9,410,204 14,338,882 1,524,886 3,730,260
Profit for the year
Adjustments for:
Net impairment loss on financial assets 9 22,667,506 35,522,071 - 105,589
Fair value (gain)/loss on financial assets held
for trading 50(i)
(50,317) 54,622 --
Net income from other financial instruments
at fair value through profit or loss 12
(111,891) (21,635) - -
Depreciation and amortisation 15 5,259,712 4,474,071 22,013 24,362
(Gain)/loss on disposal of property and 13 (1,040,777) 1,408,352 (46) (570)
equipment (19,357) 769,929 - (42,387)
(272,749) -
(Gain)/loss on disposal of investment securities 13 (226,849) -
Share of profit of associates 28(a)
Loss on previously held equity interest in 13 106,569 - - -
associate company (8,722,791) (29,310,033) (208,384) (1,883,509)
(70,525,135) (69,533,508) (886,565)
Unrealised foreign exchange gains 13 (793,045) (475,474)
(567,166) (448,538) (2,252,195)
Net interest income 50(x) 2,052,188 1,912,515 15,333
(41,768,104) (41,106,021) (325,808) 19,351
Dividend income 13 (774,574)
Tax expense 19
Changes in operating assets and liabilities
Net decrease/(increase) in restricted reserve
deposits 50(xi)
29,822,355 (13,908,596) - -
Net decrease derivative assets held for risk 50(xii) - 971,983 - -
management (14,674,659) (6,997,345) - -
Net increase trading assets 50(xiii) - -
1,335,957 (659,134)
Net decrease/(increase) loans and advances
to customers 50(xiv) - -
13,685,485 (64,883,315) - -
Net decrease/(increase) in other assets 50(xv) 5,524,076 4,924,296
15,360,727 (6,255,933) - -
Net decrease/(increase) in trading liabilities 50(xvi) (18,442,907) 19,337,258 - -
Net (decrease)/increase in deposits from banks 50(xvii) - -
(113,234) (10,453)
Net increase/(decrease) in deposits from 50(xviii) 32,250,833 (42,606,899) 815,669 218,622
customers 1,712,584 (1,225,539)
Net (decrease)/increase in on-lending facilities 50(xix) (1,407,618) 7,758,788
Net decrease in derivative liabilities held for 50(xx) (770,201) (1,073,123)
risk management 2,879,461 (535,973)
(8,014,690) (16,685,977)
Net increase/(decrease) in provision 50(viii) 14,444,758 (161,060,857)
Net (decrease)/increase in other liabilities 50(vii)
66 FCMB Group Plc Annual Report and Accounts 2017
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
GROUP COMPANY
Interest received Note 2017 2016 2017 2016
Interest paid N’000 N’000 N’000 N’000
Dividends received 50(ii)
VAT paid 50(iii) 147,430,320 137,414,576 886,565 475,474
Income taxes paid 50(xxii) (63,000,614) (55,753,584) - -
50(iv)
Net cash generated from/(used in) 19(v) 567,166 448,538 228,417 2,252,195
operating activities (916,195) (884,172) (1,727) -
(410,944) (1,935,705) - -
98,114,491 (81,771,204) 2,825,839 1,502,130
Cash flows from investing activities
Investment in subsidiaries - - (7,035,353) -
(6,663,504) (3,868,517) (357) (68,305)
Purchase of property and equipment 29 -
(329,067) (302,185) -
Purchase of intangible assets 30(a)
Purchase of intangible assets – 30(a) (1,091,969) (927,242) - -
work-in-progress 2,374,084 247,912 720 27,271
(122,338,995) (318,858) (2,442,000)
Proceeds from sale of property and equipment 50(ix) (79,557,022)
Acquisition of investment securities 50(v)
Proceeds from sale and redemption of 50(v) 59,101,963 77,322,034 57,907 42,387
investment securities (68,947,488) (7,085,020) (7,295,941) (2,440,647)
Net cash used in investing activities
Cash flows from financing activities 35(c) (1,980,271) (1,980,271) (1,980,271) (1,980,271)
Dividend paid 35(c) 10,298,880 33,996,484 - -
Proceeds from long term borrowing 50(xxi) (43,184,244) (68,348,938) - -
Repayment of long term borrowing - -
Proceeds from debt securities issued - 5,104,000
(34,865,635) (31,228,725) (1,980,271) (1,980,271)
Net cash used in financing activities
Net decrease in cash and cash equivalents (5,698,632) (120,084,950) (6,450,373) (2,918,788)
Cash and cash equivalents at start of year 47 108,104,632 180,921,698 5,817,754 7,231,196
Effect of exchange rate fluctuations on cash 1,505,347
and cash equivalents held 50(vi) 1,482,007 47,267,884 778,985 5,817,754
Cash and cash equivalents at end of year 47 103,888,007 108,104,632 146,366
The accompanying notes are an integral part of these consolidated and separate financial statements.
FCMB Group Plc Annual Report and Accounts 2017 67
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Notes to the Consolidated and Separate
Financial Statements
for the year ended 31 December 2017
1 Reporting Entity guidelines. The IFRS accounting policies have
been consistently applied to all periods presented.
FCMB Group Plc was incorporated in Nigeria as a
financial holding company on November 20, These consolidated and separate financial
2012, under the Companies and Allied Matters statements were authorised for issue by the
Act, in response to the CBN’s Regulation on the Board of directors on 8 March 2018.
Scope of Banking Activities and Ancillary Matters
(Regulation 3). (ii) Basis of measurement
The principal activity of FCMB Group Plc is to These consolidated and separate financial
carry on business as a financial holding company, statements have been prepared on the historical
investing in and holding controlling shares in, as cost basis except for the following material items
well as managing equity investments in Central in the statement of financial position:
Bank of Nigeria approved financial entities. The
Company has six direct subsidiaries; First City Non-derivative financial instruments, at fair
Monument Bank Limited (100%), FCMB Capital value through profit or loss are measured at
Markets Limited (100%), CSL Stockbrokers Limited fair value.
(100%), CSL Trustees Limited (100%), FCMB
Microfinance Bank Limited (100%) and Legacy Available-for-sale financial assets are measured
Pension Managers Limited (88.22%). at fair value through other comprehensive
income (OCI). However, when the fair value of
FCMB Group Plc is a company domiciled in the available-for-sale financial assets cannot
Nigeria. The address of the company’s registered be measured reliably, they are measured at
office is 44 Marina, Lagos. These audited reports cost less impairment.
for the year ended 31 December 2017 comprise
the Company and its subsidiaries (together Financial assets and liabilities held for trading
referred to as the ‘Group’). are measured at fair value.
2 Significant Accounting Policies Derivative financial instruments are measured
at fair value.
The Group has consistently applied the following
accounting policies to all periods presented in (iii) Functional and presentation currency
these consolidated and separate financial
statements, unless otherwise stated. These consolidated and separate financial
statements are presented in Naira, which is the
The principal accounting policies adopted in the Company’s functional currency. Except where
preparation of these financial statements are set indicated, financial information presented in Naira
out below: has been rounded to the nearest thousand.
(a) Basis of Preparation (iv) Use of estimates and judgements
(i) Statement of compliance The preparation of the consolidated and separate
financial statements in conformity with IFRS
The consolidated and separate financial requires management to make judgments,
statements have been prepared in accordance estimates and assumptions that affect the
with International Financial Reporting Standards application of policies and reported amounts of
(IFRSs) as issued by International Accounting assets and liabilities, income and expenses. The
Standard Board (IASB) in the manner required by estimates and associated assumptions are based
the Companies and Allied Matters Act, Cap C20, on historical experience and various other factors
Laws of the Federation of Nigeria 2004, the that are believed to be reasonable under the
Financial Reporting Council of Nigeria Act, 2011, circumstances, the results of which form the basis
the Banks and Other Financial Institutions Act, of making the judgments about carrying values
Cap B3, Laws of the Federation of Nigeria, and of assets and liabilities that are not readily
relevant Central Bank of Nigeria circulars and apparent from other sources. Actual results may
differ from these estimates.
68 FCMB Group Plc Annual Report and Accounts 2017
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Estimates and underlying assumptions are (iii) Loss of control
reviewed on an ongoing basis. Revisions to
accounting estimates are recognized in the On the loss of control, the Group derecognises
period in which the estimate is revised and in any the assets and liabilities of the subsidiary, any
future periods affected. non-controlling interests and the other
components of equity related to the subsidiary.
Information about significant areas of estimation Any surplus or deficit arising on the loss of
uncertainties and critical judgments in applying control is recognised in statement of profit or
accounting policies that have the most significant loss. If the Group retains any interests in the
effect on the amounts recognised in the previous subsidiary, then such interests is
consolidated financial statements are described measured at fair value at the date that control is
in note 4. lost. Subsequently, that retained interest is
accounted for as an equity-accounted investee or
(b) Basis of Consolidation in accordance with the Group’s accounting for
financial instruments.
(i) Subsidiaries
Changes in the Group’s interest in a subsidiary
Subsidiaries are investees controlled by the that do not result in a loss of control are
Group. The Group ‘controls’ an investee if it is accounted for as equity transactions.
exposed to, or has the rights to, variable returns
from its involvement with the investee and has (iv) I nvestments in associates (equity-
the ability to affect those returns through its accounted investees)
power over the investee. The Group reassesses
whether it has control if there are changes to one Associates are those entities in which the Group
or more of elements of control. This includes has significant influence, but not control, over the
circumstances in which protective rights held financial and operating policies. Significant
become substantive and lead to the Group having influence is presumed to exist when the Group
power over an investee. holds between 20 and 50 percent of the voting
power of another entity.
The financial statements of subsidiaries are
included in the consolidated financial statements Investments in associates are accounted for using
from the date that control commences until the the equity method (equity-accounted investees)
date that control ceases. Investment in and are recognised initially at cost. The cost of
subsidiaries are measured at cost less impairment the investment includes transaction costs.
in the Company’s separate financial statements.
The consolidated financial statements include the
(ii) Special purpose entities Group’s share of the profit or loss and other
comprehensive income of equity-accounted
Special purpose entities (SPEs) are entities that investments, after adjustments to align the
are created to accomplish a narrow and well- accounting policies with those of the Group, from
defined objective such as the execution of a the date that significant influence commences
specific borrowing or lending transaction. A SPE until the date that significant influence ceases.
is consolidated if, based on an evaluation of the
substance of its relationship with the Group and When the Group’s share of losses exceeds its
the SPE’s risks and rewards, the Group concludes interest in an equity-accounted investee, the
that it controls the SPE. carrying amount of that interest, including any
long-term investments, is reduced to zero, and
The Group established FCMB Financing SPV Plc, the recognition of further losses is discontinued
Nigeria as a special purpose entity to raise capital except to the extent that the Group has an
from the Nigerian capital markets or other obligation or has made payments on behalf of
international market either by way of a stand-alone the investee.
issue or by the establishment of a programme.
Accordingly, the financial statements of FCMB
Financing SPV Plc have been consolidated.
FCMB Group Plc Annual Report and Accounts 2017 69
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Notes to the Consolidated and Separate
Financial Statements
for the year ended 31 December 2017 continued
(v) Transactions eliminated on consolidation of available-for-sale equity instruments, which
are recognised in other comprehensive income.
Intra-group balances and any unrealised income
and expenses arising from intra-group (ii) Foreign operations
transactions, are eliminated in preparing the
consolidated financial statements. Unrealised The assets and liabilities of foreign operations,
gains arising from transactions with equity- including goodwill and fair value adjustments
accounted investees are eliminated against the arising on acquisition, are translated to Naira at
investment to the extent of the Group’s interest in the spot exchange rates at the reporting date.
the investee. Unrealised losses are eliminated in The income and expenses of foreign operations
the same way as unrealised gains, but only to the are translated to Naira at spot exchange rates at
extent that there is no evidence of impairment. the dates of the transactions.
(vi) Non-controlling interest Foreign currency differences are recognised in
other comprehensive income, and presented in
Non-controlling interest are measured at their the foreign currency translation reserve, except
proportionate share of the acquiree’s identifiable to the extent that the translation difference is
net assets at the date of acquisition. Changes in allocated to non-controlling interests (NCI). When
the Group’s interest in a subsidiary that do not a foreign operation is disposed of such that control
result in a loss of control are accounted for as is lost, the cumulative amount in the translation
equity transactions. reserve related to that foreign operation is
reclassified to statement of profit or loss as part
(c) Foreign Currency of the gain or loss on disposal. When the Group
disposes of only part of its interest in a subsidiary
(i) Foreign currency transactions that includes a foreign operation while retaining
control, the relevant proportion of the cumulative
Transactions in foreign currencies are translated amount is reattributed to non-controlling interests.
into the respective functional currencies of the
operations at the spot exchange rates at the When the settlement of a monetary item
dates of the transactions. receivable from or payable to a foreign operation
is neither planned nor likely in the foreseeable
Monetary assets and liabilities denominated in future, foreign currency gains or losses arising
foreign currencies at the reporting date are from such item are considered to form part of a
translated into the functional currency at the spot net investment in the foreign operation and are
exchange rates as at that date. The foreign recognised in other comprehensive income, and
currency gain or loss is the difference between presented in the translation reserve in equity.
amortised cost in the functional currency at the
beginning of the year, adjusted for effective (d) Interest
interest and payments during the year, and the
amortized cost in foreign currency translated at Interest income and expense on financial
the spot exchange rate at the end of the year. instruments are recognised in the statement of
profit or loss using the effective interest method.
Non-monetary assets and liabilities denominated
in foreign currencies that are measured at fair The effective interest rate is the rate that exactly
value are translated into the functional currency discounts the estimated future cash payments
at the spot exchange rate at the date that the fair and receipts through the expected life of the
value was determined. Non-monetary assets and financial asset or liability (or, where appropriate,
liabilities that are measured in terms of historical the next repricing date) to the carrying amount
cost in a foreign currency are translated using the of the financial asset or liability. When calculating
exchange rate at the date of the transaction. the effective interest rate, the Group estimates
future cash flows considering all contractual
Foreign currency differences arising on translation terms of the financial instruments but not future
are recognised in statement of profit or loss, credit losses.
except for differences arising on the translation
70 FCMB Group Plc Annual Report and Accounts 2017
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
The calculation of the effective interest rate loan commitment fees are recognised on a
includes contractual fees and points paid or straight-line basis over the commitment period.
received, transaction costs, and discounts or
premiums that are an integral part of the effective Other fees and commission expense relates
interest rate. Transaction costs are incremental mainly to transaction and service fees, which are
costs that are directly attributable to the expensed as the services are received.
acquisition, issue or disposal of a financial asset
or liability. (f) Net Trading Income
Interest income and expense presented in the Net trading income comprises gains less losses
statement of profit or loss and other related to trading assets and liabilities, and includes
comprehensive income include: all realised and unrealised fair value changes,
dividends and foreign exchange differences.
Interest on financial assets and liabilities (g) N et Income from Other Financial Instruments
measured at amortised cost calculated on an at Fair Value Through Profit or Loss
effective interest rate basis.
Net income from other financial instruments at
Interest on available for sale investment fair value through profit or loss relates to fair
securities calculated on an effective interest value gains or losses on non-trading derivatives
rate basis. held for risk management purposes that do not
form part of qualifying hedge relationships and
Interest income and expense on all trading assets financial assets and liabilities designated at fair
and liabilities are considered to be incidental to value through profit or loss. It includes all realised
the Group’s trading operations and are presented and unrealised fair value changes, interest,
together with all other changes in the fair value of dividends and foreign exchange differences.
trading assets and liabilities in net trading income.
(h) Dividend Income
(e) Fees and Commission
Dividend income is recognised when the right to
Fees and commission income and expenses that receive income is established. Dividends on
are integral to the effective interest rate on a trading equities are reflected as a component of
financial asset or liability are included in the net trading income. Dividend income on long
measurement of the effective interest rate which term equity investments is recognised as a
is used in the computation of Interest Income. component of other operating income.
Fees, such as processing and management fees
charged for assessing the financial position of the (i) Leases
borrower, evaluating and reviewing guarantees,
collateral and other security, negotiation of (i) Lease payments – Lessee
instruments’ terms, preparing and processing
documentation and finalising the transaction are Payments made under operating leases are
an integral part of the effective interest rate on a recognised in statement of profit or loss on a
financial asset or liability and are included in the straight-line basis over the term of the lease.
measurement of the effective interest rate of Lease incentives received are recognised as an
financial assets or liabilities. integral part of the total lease expense, over the
term of the lease.
Other fees and commission income, including Minimum lease payments made under finance
loan account servicing fees, investment leases are apportioned between the finance
management and other fiduciary activity fees, expense and the reduction on the outstanding
sales commission, placement fees and syndication liability. The finance expense is allocated to each
fees, are recognised as the related services are period during the lease term so as to produce a
performed. When a loan commitment is not constant periodic rate of interest on the remaining
expected to result in the draw-down of a loan, balance of the liability.
FCMB Group Plc Annual Report and Accounts 2017 71
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Notes to the Consolidated and Separate
Financial Statements
for the year ended 31 December 2017 continued
Contingent lease payments are accounted for by assessed at 30% statutory rate of total profit
revising the minimum lease payments over the whereas Education tax is computed as 2% of
remaining term of the lease when the lease assessable profit while NITDA levy is a 1% levy on
adjustment is confirmed. Profit Before Tax of the Company and the
subsidiary companies.
(ii) Lease assets – Lessee
Current income tax and adjustments to past
Assets held by the Group under leases that years tax liability is recognised as an expense for
transfer to the Group substantially all of the risks the period except to the extent that the current
and rewards of ownership are classified as finance tax relates to items that are charged or credited
leases. The leased asset is initially measured at an in other comprehensive income or directly to
amount equal to the lower of its fair value and the equity. In these circumstances, current tax is
present value of the minimum lease payments. charged or credited to other comprehensive
Subsequent to initial recognition, the asset is income or to equity (for example, current tax on
accounted for in accordance with the accounting available-for-sale investments).
policy applicable to that asset.
The Group evaluates positions stated in tax
Assets held under other leases are classified as returns; ensuring information disclosed are in
operating leases and are not recognised in the agreement with the underlying tax liability.
Group’s statement of financial position.
(ii) Deferred tax
(iii) Lease assets – Lessor
Deferred tax is recognised in respect of temporary
If the Group is the lessor in a lease agreement differences between the carrying amounts of
that transfers substantially all of the risks and assets and liabilities for financial reporting
rewards incidental to ownership of the asset to purposes and the amounts used for taxation
the lessee, then the arrangement is classified as a purposes. Deferred tax is not recognised for:
finance lease and a receivable equal to the net
investment in the lease is recognised and temporary differences on the initial recognition
presented within loans and advances (see (o)) of assets or liabilities in a transaction that is
not a business combination and that affects
Finance charges earned are computed using the neither accounting nor taxable profit or loss;
effective interest method which reflects a
constant periodic return on the investment in the temporary differences related to investments
finance lease. Initial direct costs paid are in subsidiaries to the extent that it is probable
capitalized to the value of the lease amount that they will not reverse in the foreseeable
receivable and accounted for over the lease term future; and
as an adjustment to the effective rate of return.
taxable temporary differences arising on the
(j) Income Tax initial recognition of goodwill.
Income tax expense comprises current and Where the Group has tax losses that can be
deferred tax. Current and deferred tax are relieved only by carry-forward against taxable
recognised in statement of profit or loss except profits of future periods, a deductible temporary
to the extent that they relate to items recognised difference arises. Those losses carried forward
directly in equity or in other comprehensive income. are set off against deferred tax liabilities carried
in the consolidated statement of financial position.
(i) Current income tax
The measurement of deferred tax reflects the tax
Income tax payable is calculated on the basis of consequences that would follow the manner in
the applicable tax law in the respective jurisdiction which the Group expects, at the end of the
and it consists of Company Income Tax, Education reporting period, to recover or settle the carrying
tax and NITDA levy. Company Income tax is amount of its assets and liabilities.
72 FCMB Group Plc Annual Report and Accounts 2017
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Deferred tax is measured at the tax rates that are (k) Financial Assets and Financial Liabilities
expected to be applied to temporary differences
when they reverse, using tax rates enacted or (i) Recognition
substantively enacted at the reporting date.
The Group initially recognises loans and advances,
Deferred tax assets and liabilities are offset if deposits, bonds, treasury bills and other
there is a legally enforceable right to offset securities on the date that they are originated.
current tax liabilities and assets, and they relate All other financial assets and financial liabilities
to taxes levied by the same tax authority on the (including assets and liabilities designated at
same taxable entity or on different tax entities, fair value through profit or loss) are initially
but they intend to settle current tax liabilities and recognised on the trade date at which the Group
assets on a net basis or their tax assets and becomes a party to the contractual provisions of
liabilities will be realised simultaneously. the instrument.
Additional taxes that arise from the distribution All financial assets or financial liabilities are
of dividend by the Group are recognised at the measured initially at their fair value plus or minus
same time as the liability to pay the related transaction costs, except in the case of financial
dividend is recognised. These amounts are assets and financial liabilities recorded at fair
generally recognised in statement of profit or loss value through profit or loss. Subsequent
because they generally relate to income arising recognition of financial assets and liabilities is at
from transactions that were originally recognised amortised cost or fair value.
in statement of profit or loss.
(ii) Classification
A deferred tax asset is recognised for unused tax Financial assets
losses, tax credits and deductible temporary The classification of financial instruments depends
differences to the extent that it is probable that on the purpose and management’s intention for
future taxable profits will be available against which the financial instruments were acquired
which it can be utilised. Deferred tax assets are and their characteristics. The Group classifies its
financial assets in the following categories:
reviewed at each reporting date and are reduced
to the extent that it is no longer probable that the loan and receivables
related tax benefit will be realised.
Unrecognised deferred tax assets are reassessed held to maturity
at each reporting date and recognised to the available-for-sale
extent that it has become probable that future at fair value through profit or loss and within
taxable profits will be available against which
the category as:
they can be used.
(iii) Tax exposures held for trading; or
In determining the amount of current and deferred designated at fair value through profit or loss.
tax, the Group takes into account the impact of
uncertain tax positions and whether additional See notes 2(m), (o), and (p).
taxes and interest may be due. This assessment
relies on estimates and assumptions and may Financial liabilities
involve a series of judgments about future events. The Group classifies its financial liabilities as
New information may become available that causes measured at amortised cost or fair value through
the Group to change its judgment regarding the profit or loss.
adequacy of existing tax liabilities; such changes
to tax liabilities will impact tax expense in the
period that such a determination is made.
FCMB Group Plc Annual Report and Accounts 2017 73
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Notes to the Consolidated and Separate
Financial Statements
for the year ended 31 December 2017 continued
(iii) De-recognition involvement, determined by the extent to which
it is exposed to changes in the value of the
Financial assets transferred asset.
The Group derecognises a financial asset when Financial liabilities
the contractual rights to the cash flows from the
financial asset expire, or when it transfers the The Group derecognises a financial liability
rights to receive the contractual cash flows on when its contractual obligations are discharged,
the financial asset in a transaction in which cancelled or expire.
substantially all of the risks and rewards of
ownership of the financial asset are transferred. (iv) Offsetting
Any interest in transferred financial assets that is
created or retained by the Group is recognised as Financial assets and liabilities are set off and the
a separate asset or liability. net amount presented in the statement of
financial position when, and only when, the Group
On derecognition of financial asset, the difference has a legally enforceable right to set off the
between the carrying amount of the asset (or the amounts and it intends either to settle them on a
carrying amount allocated to the portion of the net basis or to realise the asset and settle the
asset transferred), and the sum of (i) the liability simultaneously.
consideration received (including any new asset
obtained less any new liability assumed) and (ii) Income and expenses are presented on a net basis
any cumulative gain or loss that had been only when permitted under IFRS, or for gains and
recognised in other comprehensive income is losses arising from a group of similar transactions
recognised in statement of profit or loss. such as in the Group’s trading activity.
The Group enters into transactions whereby it (v) Amortised cost measurement
transfers assets recognised on its statement
of financial position, but retains either all or The amortised cost of a financial asset or liability
substantially all of the risks and rewards of the is the amount at which the financial asset or
transferred assets or a portion of them. If all or liability is measured at initial recognition, minus
substantially all risks and rewards are retained, principal repayments, plus or minus the
then the transferred assets are not derecognised. cumulative amortisation using the effective
Transfers of assets with retention of all or interest method of any difference between the
substantially all risks and rewards include, for initial amount recognised and the maturity
example, securities lending and repurchase amount, minus any reduction for impairment.
transactions.
(vi) Fair value measurement
In transactions in which the Group neither retains
nor transfers substantially all the risks and ‘Fair value’ is the price that would be received to
rewards of ownership of a financial asset and it sell an asset or paid to transfer a liability in an
retains control over the asset, the Group orderly transaction between market participants
continues to recognise the asset to the extent of at the measurement date in the principal or, in its
its continuing involvement, determined by extent absence, the most advantageous market to which
to which it is exposed to changes in the value of the Group has access at that date. The fair value
the transferred asset. of a liability reflects its non-performance risk.
The rights and obligations retained in the transfer When available, the Group measures the fair
are recognised separately as assets and liabilities value of an instrument using the quoted price in
as appropriate. In transfers where control over an active market for that instrument. A market is
the asset is retained, the Group continues to regarded as active if transactions for the asset or
recognise the asset to the extent of its continuing liability take place with sufficient frequency and
volume to provide pricing information on an
ongoing basis.
74 FCMB Group Plc Annual Report and Accounts 2017
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
If there is no quoted price in an active market, generally recognised as standard within the
then the Group uses valuation techniques that industry. Valuation models are used primarily to
maximises the use of relevant observable inputs value derivatives transacted in the over-the-
and minimises the use of unobservable inputs. counter market, unlisted debt securities and
The chosen valuation technique incorporates all other debt instruments for which markets were
of the factors that market participants would take or have become illiquid. Some of the inputs to
into account in pricing a transaction. these models may not be market observable and
are therefore estimated based on assumptions.
The best evidence of the fair value of a financial The impact on net profit of financial instrument
instrument at initial recognition is normally the valuations reflecting non-market observable
transaction price – i.e. the fair value of the inputs (level 3 valuations) is disclosed in the Note
consideration given or received. If the Group to the accounts.
determines that the fair value at initial recognition
differs from the transaction price and the fair In cases when the fair value of unlisted equity
value is evidenced neither by a quoted price in an instruments cannot be determined reliably, the
active market for an identical asset or liability nor instruments are carried at cost less impairment.
based on a valuation technique that uses only The fair value for loans and advances as well as
data from observable markets, then the financial liabilities to banks and customers are determined
instrument is initially measured at fair value, using a present value model on the basis of
adjusted to defer the difference between the fair contractually agreed cash flows, taking into
value at initial recognition and the transaction account credit quality, liquidity and costs. The fair
price. Subsequently, that difference is recognised values of contingent liabilities correspond to their
in statement of profit or loss on an appropriate carrying amounts.
basis over the life of the instrument but no later
than when the valuation is wholly supported by The fair value of a demand deposit is not less
observable market data or the transaction is than the amount payable on demand, discounted
closed out. from the first date on which the amount could be
required to be paid.
If an asset or a liability measured at fair value has
a bid price and an ask price, then the Group The Group recognises transfers between levels
measures assets and long positions at a bid price of the fair value hierarchy as of the end of
and liabilities and short positions at an ask price. the reporting period during which the change
Portfolios of financial assets and financial has occurred.
liabilities that are exposed to market risk and
credit risk that are managed by the Group on the (vii) I dentification and measurement of
basis of the net exposure to either market or
credit risk are measured on the basis of a price impairment
that would be received to sell a net long position
(or paid to transfer a net short position) for a Assets classified as loan and advances and held-
particular risk exposure. Those portfolio level to-maturity investment securities;
adjustments are allocated to the individual assets
and liabilities on the basis of the relative risk At each reporting date the Group assesses
adjustment of each of the individual instruments whether there is objective evidence that financial
in the portfolio. assets not carried at fair value through profit or
loss are impaired. A financial asset or a group of
For more complex instruments, the Group uses financial assets is impaired when objective
internally developed models, which are usually evidence demonstrates that a loss event has
based on valuation methods and techniques occurred after the initial recognition of the
assets(s), and that the loss event has an impact
on the future cash flows of the asset(s) that can
be estimated reliably.
FCMB Group Plc Annual Report and Accounts 2017 75
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Notes to the Consolidated and Separate
Financial Statements
for the year ended 31 December 2017 continued
Objective evidence that financial assets are and the present value of estimated future cash
impaired can include; flows (excluding future credit losses that have not
been incurred) discounted at the financial asset’s
(a) a breach of contract, such as a default or original effective interest rate. The carrying amount
delinquency in interest or principal payments; of the asset is reduced through the use of an
allowance account and the amount of the loss is
(b) s ignificant financial difficulty of the issuer or recognised in the consolidated statement of profit
obligor; or loss. If a loan or held-to-maturity investment has
a variable interest rate, the discount rate for
(c) t he lender, for economic or legal reasons measuring any impairment loss is the current
relating to the borrower’s financial difficulty, effective interest rate determined under the
granting to the borrower a concession that contract. As a practical expedient, the Group may
the lender would not otherwise consider; measure impairment on the basis of an instrument’s
fair value using an observable market price.
(d) it becomes probable that the borrower
will enter bankruptcy or other financial The calculation of the present value of the estimated
reorganisation; future cash flows of a collateralized financial asset
reflects the cash flows that may result from
(e) t he disappearance of an active market for foreclosure less costs for obtaining and selling the
that financial asset because of financial collateral, whether or not foreclosure is probable.
difficulties; or
For the purposes of a collective evaluation of
(f) o bservable data indicating that there is a impairment, financial assets are grouped on the
measurable decrease in the estimated future basis of similar credit risk characteristics (that is,
cash flows from a portfolio of financial assets on the basis of the Group’s grading process that
since the initial recognition of those assets, considers asset type, industry, geographical
although the decrease cannot yet be identified location, collateral type, past-due status and other
with the individual financial assets in the relevant factors). Those characteristics are relevant
portfolio, including: to the estimation of future cash flows for groups
of such assets by being indicative of the debtors’
(i) adverse changes in the payment status of ability to pay all amounts due according to the
borrowers in the portfolio; and contractual terms of the assets being evaluated.
(ii) n ational economic conditions that correlate Future cash flows in a group of financial assets
with defaults on the assets in the portfolio. that are collectively evaluated for impairment
are estimated on the basis of the contractual
The Group first assesses whether objective cash flows of the assets in the group and
evidence of impairment exists individually for historical loss experience for assets with credit
financial assets that are individually significant, risk characteristics similar to those in the group.
and individually or collectively for financial assets Historical loss experience is adjusted on the basis
that are not individually significant. If the Group of current observable data to reflect the effects
determines that no objective evidence of of current conditions that did not affect the
impairment exists for an individually assessed period on which the historical loss experience is
financial asset, whether significant or not, it based and to remove the effects of conditions in
includes the asset in a group of financial assets the historical period that do not currently exist.
with similar credit risk characteristics and
collectively assesses them for impairment. Assets Estimates of changes in future cash flows for
that are individually assessed for impairment and groups of assets should reflect and be directionally
for which an impairment loss is or continues to be consistent with changes in related observable
recognised are not included in a collective data from period to period (for example, changes
assessment of impairment. in unemployment rates, property prices, payment
The amount of the loss is measured as the
difference between the asset’s carrying amount
76 FCMB Group Plc Annual Report and Accounts 2017
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
status, or other factors indicative of changes reversed through the statement of profit or loss. If,
in the probability of losses in the Group and in a subsequent period, the fair value of a debt
their magnitude). The methodology and instrument classified as available for sale increases
assumptions used for estimating future cash and the increase can be objectively related to an
flows are reviewed regularly by the Group to event occurring after the impairment loss was
reduce any differences between loss estimates recognised in statement of profit or loss, the
and actual loss experience. impairment loss is reversed through the statement
of profit or loss. Assets classified as available for
When a loan is uncollectible, it is written off sale are assessed for impairment in the same
against the related allowance for loan impairment. manner as assets carried at amortised cost.
Such loans are written off after all the necessary
procedures have been completed and the amount (l) Cash and cash equivalents and restricted
of the loss has been determined. Impairment deposits
charges relating to loans and advances to banks
and customers are classified in loan impairment Cash and cash equivalents include bank notes
charges whilst impairment charges relating to and coins on hand, unrestricted balances held
investment securities (held to maturity categories) with central banks and highly liquid financial
are classified in ‘Net gains/(losses) from financial assets with original maturities of less than three
instruments at fair value’. months, which are subject to an insignificant risk
of changes in their fair value, and are used by the
If, in a subsequent period, the amount of the Group in the management of its short-term
impairment loss decreases and the decrease can commitments. Cash and cash equivalents are
be related objectively to an event occurring after carried at amortised cost in the statement of
the impairment was recognised (such as an financial position. Restricted reserve deposits are
improvement in the debtor’s credit rating), the restricted mandatory reserve deposits held with
previously recognised impairment loss is reversed the Central Bank of Nigeria, which are not
by adjusting the allowance account. The amount available for use in the Banking subsidiary’s and
of the reversal is recognised in the statement of Group’s day-to-day operations. They are
profit or loss. calculated as a fixed percentage of the Banking
subsidiary’s deposit liabilities.
Assets classified as available for sale
For the purposes of the statement of cash flow,
The Group assesses at reporting date whether cash and cash equivalents include cash and non-
there is objective evidence that a financial asset restricted balances with central banks.
or a group of financial assets is impaired. In the
case of equity investments classified as available (m) Financial assets and liabilities at fair value
for sale, a significant or prolonged decline in the through profit or loss
fair value of the security below its cost is objective
evidence of impairment resulting in the recognition This category comprises two sub-categories:
of an impairment loss. In general, the Group financial assets classified as held for trading, and
considers a decline of 20% to be “significant” and financial assets designated by the Group as at fair
a period of nine months to be “prolonged”. If any value through profit or loss upon initial recognition.
such evidence exists for available-for-sale financial
assets, the cumulative loss – measured as the Financial liabilities for which the fair value option
difference between the acquisition cost and the is applied are recognised in the consolidated
current fair value, less any impairment loss on that statement of financial position as ‘Financial
financial asset previously recognised in statement liabilities designated at fair value through profit
of profit or loss – is removed from equity and or loss’. Fair value changes relating to financial
recognised in the statement of profit or loss. liabilities designated at fair value through profit
Impairment losses recognised in the statement of or loss are recognised in ‘Net gains on financial
profit or loss on equity instruments are not instruments designated at fair value through
profit or loss’.
FCMB Group Plc Annual Report and Accounts 2017 77
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Notes to the Consolidated and Separate
Financial Statements
for the year ended 31 December 2017 continued
(i) Trading assets and liabilities circumstances arising from a single event that is
unusual and highly unlikely to recur in the near-
Trading assets and liabilities are those assets and term. In addition, the Group may choose to
liabilities that the Group acquires or incurs reclassify financial assets that would meet the
principally for the purpose of selling or repurchasing definition of loans and receivables out of the
in the near term, or holds as part of a portfolio that held-for-trading or available-for-sale categories if
is managed together for short-term profit. the Group has the intention and ability to hold
these financial assets for the foreseeable future
Trading assets and liabilities are initially recognised or until maturity at the date of reclassification.
and subsequently measured at fair value in the
statement of financial position with transaction Reclassifications are made at fair value as of the
costs recognised in statement of profit or loss. All reclassification date. Fair value becomes the new
changes in fair value are recognised as part of net cost or amortised cost as applicable, and no
trading income in statement of profit or loss. reversals of fair value gains or losses recorded
before reclassification date are subsequently
(ii) D esignation at fair value through profit made. Effective interest rates for financial assets
reclassified to loans and receivables and held-to-
or loss maturity categories are determined at the
reclassification date. Further increases in
The Group designates certain financial assets estimates of cash flows adjust effective interest
upon initial recognition as at fair value through rates prospectively.
profit or loss (fair value option). This designation
cannot subsequently be changed. According to (n) Assets Pledged as Collateral
IAS 39, the fair value option is only applied when
the following conditions are met:
the application of the fair value option reduces Financial assets transferred to external parties
or eliminates an accounting mismatch that that do not qualify for de-recognition (see k(iii))
would otherwise arise or are reclassified in the statement of financial
position from investment securities to assets
the financial assets are part of a portfolio of pledged as collateral, if the transferee has
financial instruments which is risk managed received the right to sell or re-pledge them in the
and reported to management on a fair event of default from agreed terms. Initial
value basis. measurement of assets pledged as collateral is at
fair value, whilst subsequent measurement is
Financial assets for which the fair value option is based on the classification of the financial asset.
applied are recognised in the consolidated and Assets pledged as collateral are designated as
separate statement of financial position as available for sale or held to maturity. Where the
‘Financial assets designated at fair value’. Fair assets pledged as collateral are designated as
value changes relating to financial assets available for sale, subsequent measurement is at
designated at fair value through profit or loss are fair value through equity. Assets pledged as
recognised in ‘Net gains on financial instruments collateral designated as held to maturity are
designated at fair value through profit or loss’. measured at amortised cost.
(iii) R eclassification of financial assets (o) Loans and Advances
and liabilities
Loans and receivables are non-derivative financial
The Group may choose to reclassify a non- assets with fixed or determinable payments that
derivative financial asset held for trading out of are not quoted in an active market and that the
the held-for-trading category if the financial asset Group does not intend to sell immediately or in
is no longer held for the purpose of selling it in the near term.
the near-term. Financial assets other than loans
and receivables are permitted to be reclassified Loan and receivables from customers and others
out of the held for trading category only in rare include:
78 FCMB Group Plc Annual Report and Accounts 2017
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
those classified as loan and receivables; investments would result in the reclassification of
all held-to-maturity investments as available-for-
finance lease receivables; and sale, and prevent the Group from classifying
investment securities as held-to-maturity for the
other receivables (other assets). current and the following two financial years.
However, sales and reclassifications in any of the
Loan and receivables are initially measured at fair following circumstances would not trigger a
value plus incremental direct transaction costs, reclassification to available-for-sale:
and subsequently measured at their amortised
cost using the effective interest method. Sales or reclassifications that are so close to
maturity that changes in the market rate of
When the Group is the lessor in a lease agreement interest would not have a significant effect on
that transfer substantially all of the risks and the financial asset’s fair value.
rewards incidental to ownership of the asset to
the lessee, the arrangement is classified as a Sales or reclassifications after the Group
finance lease and a receivable equal to the net has collected substantially all the asset’s
investment in the lease is recognised and original principal.
presented within loans and advances.
When the Group purchases a financial asset and Sales or reclassification attributable to non-
simultaneously enters into an agreement to resell recurring isolated events beyond the Group’s
the asset (or a substantially similar asset) at a control that could not have been reasonably
fixed price on a future date (“reverse repo or anticipated.
borrowing”), the arrangement is accounted for as
a loan or advance, and the underlying asset is not (ii) Fair value through profit or loss
recognised in the Group’s financial statements.
Loans and advances are initially measured at fair The Group designates some investment securities
value plus incremental direct transaction costs, at fair value with fair value changes recognised
and subsequently measured at their amortised immediately in statement of profit or loss.
cost using the effective interest method.
(iii) Available-for-sale
(p) Investment Securities
Available-for-sale investments are non-derivative
Investment securities are initially measured at fair investments that are not designated as another
value plus, in case of investment securities not at category of financial assets. Unquoted equity
fair value through profit or loss, incremental securities whose fair value cannot be reliably
direct transaction costs and subsequently measured are carried at cost. All other available-
accounted for depending on their classification for-sale investments are carried at fair value.
as either held for trading, held-to-maturity, fair
value through profit or loss or available-for-sale. Interest income is recognised in the statement of
profit or loss using the effective interest method.
(i) Held-to-maturity Dividend income is recognised in statement of
profit or loss when the Group becomes entitled
Held-to-maturity investments are non-derivative to the dividend. Foreign exchange gains or losses
assets with fixed or determinable payments and on available-for-sale debt security investments
fixed maturity that the Group has the positive are recognised in statement of profit or loss.
intent and ability to hold to maturity, and which
are not designated at fair value through profit or Other fair value changes are recognised directly in
loss or available-for-sale. other comprehensive income until the investment
is sold or impaired whereupon the cumulative
Held-to-maturity investments are carried at gains and losses previously recognised in other
amortised cost using the effective interest comprehensive income are recognised in the
method. A sale or reclassification of more than statement of profit or loss as a reclassification
insignificant amount of held-to-maturity adjustment.
FCMB Group Plc Annual Report and Accounts 2017 79
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Notes to the Consolidated and Separate
Financial Statements
for the year ended 31 December 2017 continued
A non-derivative financial asset may be The assets’ carrying values and useful lives are
reclassified from the available-for-sale category reviewed, and written down if appropriate, at each
to the loans and receivable category if it date of the consolidated statement of financial
position. Assets are impaired whenever events or
otherwise would have met the definition of loans
and receivables and if the Group has the intention changes in circumstances indicate that the carrying
and ability to hold that financial asset for the amount is less than the recoverable amount; see
foreseeable future or until maturity. note (t) on impairment of non-financial assets.
(q) Derivatives Held for Risk Management (ii) Subsequent costs
Purposes
The cost of replacing part of an item of property or
Derivatives held for risk management purposes equipment is recognised in the carrying amount of
include all derivative assets and liabilities that are the item if it is probable that the future economic
not classified as trading assets or liabilities. benefits embodied within the part will flow to
Derivatives are recognised initially at fair value in the Group and its cost can be measured reliably.
the statement of financial position, while any The carrying amount of the replaced part is
attributable costs are recognised in the statement derecognised. The costs of the day-to-day servicing
of profit or loss when incurred. Subsequent to of property and equipment are recognised in the
initial recognition, derivatives are measured at statement of profit or loss as incurred.
fair value with fair values changes recognised in
statement of profit or loss. (iii) Depreciation
(r) Property and Equipment Depreciation is recognised in the statement of
profit or loss on a straight-line basis to write
(i) Recognition and measurement down the cost of each asset, to their residual
values over the estimated useful lives of each
Items of property and equipment are measured part of an item of property and equipment.
at cost less accumulated depreciation and
impairment losses. Cost includes expenditures Items classified as work in progress are not
that are directly attributable to the acquisition of depreciated till the asset is available for use.
the asset. Purchased software that is integral to
the functionality of the related equipment is Depreciation begins when an asset is available
capitalised as part of the equipment. for use and ceases at the earlier of the date
that the asset is derecognised or classified as
When parts of an item of property or equipment held for sale in accordance with IFRS 5. A non-
have different useful lives, they are accounted for current asset or disposal group is not depreciated
as separate items (major components) of while it is classified as held for sale. Leasehold
property and equipment. land is not depreciated.
Items of work in progress are recognised at cost The estimated useful lives for the current and
less any observable impairment. A review for comparative periods of significant items of
impairment is carried out when circumstances or property and equipment are as follows:
situations suggests that the asset carrying
amount may not be recoverable. Impairment loss Leasehold land Indefinite
is recognized when the current asset value is less Buildings 50 years
than the cost. Leasehold improvement Over the shorter of
the useful life of the
The gain or loss on disposal of an item of property Motor vehicles item or lease term
and equipment is determined by comparing the Furniture, fittings 4 years
proceeds from disposal with the carrying amount and equipment 5 years
of the item of property and equipment and are Computer equipment
recognized net within other income in the 4 years
statement of profit or loss.
80 FCMB Group Plc Annual Report and Accounts 2017
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Depreciation methods, useful lives and residual include the carrying amount of goodwill relating
values are reassessed at each reporting date and to the entity sold.
adjusted if appropriate.
(ii) Software
(iv) De-recognition
Software acquired by the Group is stated at cost
When an item of work in progress is completed less accumulated amortisation and accumulated
and is available for use, the asset is de-classified impairment losses.
to the relevant class of the asset under property
and equipment. An item of property and Subsequent expenditure on software assets is
equipment is derecognised on disposal or when capitalised only when it increases the future
no future economic benefits are expected from economic benefits embodied in the specific asset
its use or disposal. Any gain or loss arising on de- to which it relates. All other expenditure is
recognition of the asset (calculated as the expensed as incurred.
difference between the net disposal proceeds
and the carrying amount of the asset) is included Amortisation is recognised in the statement of
in the statement of profit or loss in the year the profit or loss on a straight-line basis over the
asset is derecognised. estimated useful life of the software, from the
date that it is available for use since this most
(s) Intangible Assets closely reflects the expected pattern of
consumption of the future economic benefits
(i) Goodwill embodied in the asset. The maximum useful life
of software is four years.
Goodwill represents the excess of the cost of the
acquisition over the Group’s interest in the net Amortisation methods, useful lives and residual
fair value of the identifiable assets, liabilities values are reviewed at each reporting date and
and contingent liabilities of the acquired adjusted if appropriate.
subsidiaries at the date of acquisition. When
the excess is negative, it is recognised (t) Impairment of Non-Financial Assets
immediately in the statement of profit or loss;
Goodwill on acquisition of subsidiaries is included The Group’s non-financial assets with carrying
in intangible assets. Subsequent to initial amounts other than investment property and
recognition, goodwill is measured at cost less deferred tax assets are reviewed at each reporting
accumulated impairment losses. date to determine whether there is any indication
of impairment. If any such indication exists then
Subsequent measurement the asset’s recoverable amount is estimated. For
goodwill and intangible assets that have indefinite
Goodwill is allocated to cash-generating units useful lives, the recoverable amount is estimated
or groups of cash-generating units for the each year at the same time.
purpose of impairment testing. The allocation is
made to those cash-generating units or groups of An impairment loss is recognised if the carrying
cash-generating units that are expected to amount of an asset or its cash-generating
benefit from the business combination in which unit exceeds its recoverable amount. A cash-
the goodwill arose identified in accordance with generating unit is the smallest identifiable
IFRS 8. Goodwill is tested annually as well as asset group that generates cash flows that
whenever a trigger event has been observed for largely are independent from other assets and
impairment by comparing the present value of groups. Impairment losses are recognised in the
the expected future cash flows from a cash statement of profit or loss. Impairment losses
generating unit with the carrying value of its net recognised in respect of cash-generating units
assets, including attributable goodwill and carried are allocated first to reduce the carrying amount
at cost less accumulated impairment losses. of any goodwill allocated to the units and then to
Impairment losses on goodwill are not reversed. reduce the carrying amount of the other assets in
Gains and losses on the disposal of an entity the unit (group of units) on a pro rota basis.
FCMB Group Plc Annual Report and Accounts 2017 81
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Notes to the Consolidated and Separate
Financial Statements
for the year ended 31 December 2017 continued
The recoverable amount of an asset or cash- other deposits or deposits due to customers, as
generating unit is the greater of its value in use appropriate. Securities purchased under
and its fair value less costs to sell. In assessing agreements to resell (reverse repos’) are recorded
value in use, the estimated future cash flows are as money market placements. The difference
discounted to their present value using a pre-tax between sale and repurchase price is treated as
discount rate that reflects current market interest and accrued over the life of the
assessments of the time value of money and the agreements using the effective interest method.
risks specific to the asset.
Securities lent to counterparties are also retained
An impairment loss in respect of goodwill is not in the financial statements. Securities borrowed
reversed. In respect of other assets, impairment are not recognised in the financial statements,
losses recognised in prior periods are assessed at unless these are sold to third parties, in which
each reporting date for any indications that the case the purchase and sale are recorded with the
loss has decreased or no longer exists. An gain or loss included in trading income.
impairment loss is reversed if there has been a
change in the estimates used to determine the (w) Provisions
recoverable amount. An impairment loss is
reversed only to the extent that the asset’s Provisions for restructuring costs and legal claims
carrying amount does not exceed the carrying are recognised when: the Group has a present
amount that would have been determined, net of legal or constructive obligation as a result of past
depreciation or amortisation, if no impairment events; it is more likely than not that an outflow
loss had been recognised. of resources will be required to settle the
obligation; and the amount has been reliably
(u) Deposits, Debt Securities Issued, Onlending estimated. The Group recognises no provisions
Facilities and Borrowings for future operating losses.
Deposits, debt securities issued, onlending (x) F inancial Guarantees and Loan Commitments
facilities and borrowings are the Group’s sources
of funding. When the Group sells a financial asset Financial guarantees are contracts that require
and simultaneously enters into a “repo” or the Group to make specified payments to
“lending” agreement to repurchase the asset (or reimburse the holder for a loss it incurs because a
a similar asset) at a fixed price on a future date, specified debtor failed to make payment when
the arrangement is accounted for as borrowing, due in accordance with the terms of the debt
and the underlying asset continues to be instrument. Loan commitments are firm
recognised in the Group’s financial statements. commitments to provide credit under pre-
specified terms and conditions.
Deposits, debt securities issued, onlending Liabilities arising from financial guarantees or
facilities and borrowings are initially measured at commitments to provide a loan at a below-
fair value plus transaction costs, and subsequently market interest rate are initially measured at fair
measured at their amortised cost using the value and the initial fair value is amortised over
effective interest method, except where the
Group chooses to carry the liabilities at fair value the life of the guarantee or the commitment. The
through profit or loss. liability is subsequently carried at the higher of
this amortised amount and the present value of
(v) Sale and Repurchase Agreements
any expected payment to settle the liability when
Securities sold subject to repurchase agreements a payment under the contracts has become
(‘repos’) remain on the statement of financial probable. Financial guarantees and commitments
position; the counterparty liability is included in to provide a loan at a below-market interest rate
amounts due to other banks, deposits from banks, are included within other liabilities.
82 FCMB Group Plc Annual Report and Accounts 2017
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
(y) Employee Benefits constructive obligation to pay this amount as a
result of past service provided by the employee
(i) Defined contribution plans and the obligation can be estimated reliably.
A retirement benefit obligation is a defined (z) Share Capital and Reserves
contribution plan. A defined contribution plan is a
post-employment benefits plan under which an (i) Share issue costs
entity pays fixed contributions into a separate
entity and has no legal or constructive obligation Incremental costs directly attributable to the
to pay further amounts. In line with the Pension issue of an equity instrument are deducted from
Reform Act 2014, the Group and its employees the initial measurement of the equity instrument.
make a joint contribution, 18% (10% by the
company and 8% by the employees) of basic (ii) Dividend on the Company’s ordinary shares
salary, housing and transport allowance to each
employee’s retirement savings account Dividends on ordinary shares are recognised in
maintained with their nominated pension fund equity in the period in which they are approved
administrators. Obligations for contributions to by the Company’s shareholders. Dividends for
defined contribution plans are recognised as the year that are declared after the date of the
personnel expenses in statement of profit or loss consolidated statement of financial position are
in the period during which related services are dealt with in the subsequent events note.
rendered. Prepaid contributions are recognised Dividends proposed by the Directors but not yet
as an asset to the extent that a cash refund or a approved by members are disclosed in the
reduction in the future payments is available. financial statements in accordance with the
requirements of the Companies and Allied
(ii) Termination benefits Matters Act of Nigeria.
Termination benefits are recognised as an Where the Company or other members of the
expense when the Group is demonstrably Group purchase the Company’s share, the
committed, without realistic possibility of consideration paid is deducted from total
withdrawal, to a formal detailed plan to either shareholders’ equity as treasury shares until they
terminate employment before the normal are cancelled. Where such shares are
retirement date, or to provide termination subsequently sold or reissued, any consideration
benefits as a result of an offer made to encourage received is included in shareholders’ equity.
voluntary redundancy. Termination benefits for
voluntary redundancy are recognised as an (aa) Earnings Per Share
expense if the Group has made an offer of
voluntary redundancy, it is probable that the offer The Group presents basic earnings per share
will be accepted, and the number of acceptances (EPS) data for its ordinary shares. Basic EPS is
can be estimated reliably. If benefits are payable calculated by dividing the profit or loss
more than 12 months after the reporting date, attributable to ordinary shareholders of the
then they are discounted. Company by the weighted average number of
ordinary shares outstanding during the period.
(iii) Short-term employee benefits Diluted EPS is determined by adjusting the profit
or loss attributable to ordinary shareholders and
Short-term employee benefit obligations are the weighted average number of ordinary shares
measured on an undiscounted basis and are outstanding for the effects of all dilutive potential
expensed as the related service is provided. A ordinary shares, which comprise share options
liability is recognised for the amount expected to granted to employees.
be paid under short-term cash bonus or profit-
sharing plans if the Group has a present legal or
FCMB Group Plc Annual Report and Accounts 2017 83
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Notes to the Consolidated and Separate
Financial Statements
for the year ended 31 December 2017 continued
(ab) Segment Reporting the new accounting policies, assumptions,
judgements and estimation techniques
Segment results that are reported to the Executive employed are subject to change until the
Management Committee (being the chief Group finalizes its first financial statements
operating decision maker) include items directly that include the date of initial application
attributable to a segment as well as those that
can be allocated on a reasonable basis. although parallel runs were carried out in the
Unallocated items comprise mainly corporate last quarter of 2017, the new systems and
assets (primarily the Company’s headquarters), associated controls in place have not been
head office expenses, and tax assets and liabilities. operational for a more extended period;
(ac) N ew Standards, Interpretations and the Group is refining and finalizing its models
Amendments to Existing Standards That for expected credit loss (ECL) calculations.
Are Not Yet Effective
IFRS 9 implementation strategy
A number of new standards, amendments to
standards and interpretations are effective for The Group’s IFRS 9 implementation process is
annual periods beginning after 1 January 2018, governed by a steering committee whose
and have not been applied in preparing these members include representatives from risk,
consolidated financial statements. Those that finance, operations and IT functions. The steering
may be relevant to the Group are set out below. committee meets monthly to challenge key
The Group does not plan to adopt these assumptions, approve decisions and monitor the
standards early. progress of the implementation work across the
Group, including evaluation of whether the project
(i) Adoption of IFRS 9 Financial Instruments has sufficient resources. Also the services of an
independent consultant was engaged to help
In July 2014, the IASB issued IFRS 9 Financial evaluate, assess and monitor the implementation.
Instruments (IFRS 9), which addresses impairment,
classification, measurement and hedge The Group has completed the preliminary impact
accounting. IFRS 9 is effective for the Group for assessment and most of the accounting analysis
the financial year beginning 1 January 2018. and has worked on the design and build of
models, systems, processes and controls. An
Guidance relating to the adoption of IFRS 9 has application, VBox was deployed managed by
been provided by the Central Bank of Nigeria Manticore to help in the implementation.
(CBN) in its Guidance Note to Banks and Discount
Houses on the Implementation of IFRS 9 Financial Classification and Measurement of Financial
Instruments in Nigeria (CBN Guideline). The CBN Assets and Liabilities
Guideline was considered in the determination of
the allowance for credit losses. Based on 31 Debt Instruments
December 2017 data and current implementation
status, we estimate the adoption of IFRS 9 will The new standard requires that the Group classify
lead to an additional impairment approximately debt instruments based on its business model for
range between N11.66 billion and N14.84 billion managing the assets and the contractual cash
before tax driven by the impairment requirements flow characteristics of those assets. The Business
of IFRS 9. The above assessment is preliminary model refers to how an entity manages its
because not all transition work has been finalized. financial assets to generate cash flows. Debt
The actual impact of adoption of IFRS 9 on 1 instruments will be measured at fair value through
January 2018 may change because: profit and loss unless certain conditions are met
that permit measurement at fair value through
IFRS 9 will require the Group to revise its other comprehensive income (FVOCI) or
accounting processes and internal controls amortized cost. Debt instruments that have
and these changes are not yet complete; contractual cash flows representing only
84 FCMB Group Plc Annual Report and Accounts 2017
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
payments of principal and interest will be eligible Impairment of Financial Assets, Loan
for classification as FVOCI or amortized cost. Commitments and Financial Guarantee Contracts
Gains and losses recorded in other comprehensive
income for debt instruments will be recognized in IFRS 9 introduces a new expected credit loss
profit or loss only on disposal. (ECL) impairment framework for all financial
assets and certain off-balance sheet loan
Equity Instruments commitments and guarantees. The new ECL
framework will result in an allowance for expected
Equity instruments would be measured at fair credit losses being recorded on financial assets
value through profit or loss unless we irrevocably regardless of whether there has been an actual
elect to measure them at fair value through other loss event. This differs from the current approach
comprehensive income (FVOCI). Future unrealized where the allowance recorded on performing
gains and losses on fair value through profit or loans is designed to capture only losses that have
loss equity instruments will be recorded in income. been incurred, whether or not they have been
specifically identified.
Based on the Group preliminary high-level
assessment of possible changes to the IFRS 9 replaces the ‘incurred loss’ model in IAS
classification and measurement of financial assets 39 with a forward-looking ‘expected credit loss’
held as at 31 December 2017, the Group’s current (ECL) model. This will require considerable
expectation is that: judgement over how changes in economic factors
affect ECLs, which will be determined on a
Trading assets are classified as held-for- probability-weighted basis.
trading and measured at FVTPL under IAS 39
would in general also be measured at FVTPL The new impairment model applies to the
under IFRS 9; following financial instruments that are not
measured at fair value through profit or loss:
Loans and advances to banks and customers
that are classified as loans and receivables financial assets that are debt instruments;
and measured at amortized cost under IAS 39
would in general also be measured at loans and receivables; and
amortized cost under IFRS 9;
loan commitments and financial guarantee
Debt securities that are classified as held-to- contracts issued.
maturity investment securities and measured
at amortized cost under IAS 39 would in Under IFRS 9, no impairment loss is recognized
general also be measured at amortized cost on equity investments.
under IFRS 9;
Under IFRS 9, the Group will recognize loss
Debt securities that are classified as available- allowances at an amount equal to lifetime ECL,
for-sale under IAS 39 may, under IFRS 9, be except in the following cases, where the amount
measured at amortized cost, FVOCI or FVTPL, recognized will be 12-month ECL:
depending on the particular circumstances.
debt investment securities that are determined
Quoted equity securities classified as to have low credit risk at the reporting date;
available-for-sale and measured at FVOCI and
under IAS 39 would generally be measured at
FVTPL under IFRS 9. Other financial instruments (other than lease
receivables) on which credit risk has not
Unquoted equity securities at cost under increased significantly since their initial
available-for-sale investments under IAS 39 recognition.
may, under IFRS 9, be measured at amortized
cost, FVOCI or FVTPL, depending on the
particular circumstances.
FCMB Group Plc Annual Report and Accounts 2017 85
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Notes to the Consolidated and Separate
Financial Statements
for the year ended 31 December 2017 continued
The assessment of whether credit risk on financial to recognize losses that have been incurred but
asset has increased significantly will be on critical not reported on performing loans. We always will
judgements in implementing the impairment see less impairment than before based on the PD
model of IFRS 9. Loss allowance for lease curve over 12 months, always starting with 0%.
receivables will always be measured at an amount
equal to lifetime ECL. 12-months ECL are the Stage 2 – When a financial asset experiences a
portion of ECL that results from default events on SIR subsequent to origination but is not credit
a financial instrument that are possible within the impaired, it is considered to be in Stage 2. This
12 months after the reporting date. requires the computation of ECL based on
lifetime PD that represents the probability of
Measurement of ECL default occurring over the remaining estimated
life of the financial asset. Impairments are higher
ECLs are a possibility-weighted estimate of credit in this stage because of an increase in risk and
losses and will be measured as follows: the impact of a longer time horizon being
considered compared to 12 months in Stage 1. We
Financial assets that are not credit-impaired see slight increase in impairment based on the
at the reporting date: the present value of all Life Time consideration.
cash shortfalls (i.e. the difference between the
cash flows due to the entity in accordance Stage 3 – Financial assets that have an objective
with the contract and the cash flows that the evidence of impairment will be included in this
Group expects to receive); stage. Similar to Stage 2, the allowance for credit
losses will continue to capture the lifetime
Financial assets that are credit-impaired at expected credit losses. The impairment
the reporting date: the difference between requirements of IFRS 9 are complex and require
the gross carrying amount and the present management judgments, estimates and
value of estimated future cash flows; assumptions, particularly in the areas of assessing
whether the credit risk of an instrument has
Undrawn loan commitments: the present value increased significantly since initial recognition
of the difference between the contractual and incorporating forward-looking information
cash flows that are due to the Group if the into the measurement of ECLs. The calculation is
commitment is drawn down and the cash similar to what it was before.
flows that the Group expects to receive; and
In the result the increase comes from stage 2, but
Financial guarantee contracts: the expected is partially offset by the decrease in stage 1.
payments to reimburse the holder less any
amounts that the Group expects to recover. Definition of default
IFRS 9 Impairment model uses a three stage Under IFRS 9, the Group will consider a financial
approach based on the extent of credit asset to be in default when:
deterioration since origination:
Stage 1 – 2-month ECL applies to all financial the borrower is unlikely to pay its credit
assets that have not experienced a significant obligations to the Group in full, without
increase in credit risk (SIR) since origination and recourse by the Group to actions such as
realizing collaterals (if any is held); or
are not credit impaired. The ECL will be computed
using a 12-month PD that represents the the borrower is more than 90 days past due
probability of default occurring over the next 12 on any material credit obligation to the Group.
months. For those assets with a remaining Overdrafts are considered past dues once the
customer has breached an advised limit or
maturity of less than 12 months, a PD is used that been advised of a limit that is smaller than the
corresponds to remaining maturity. This Stage 1 current amount outstanding.
approach is different from the incurred loss
approach, which estimates a collective allowance
86 FCMB Group Plc Annual Report and Accounts 2017
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Significant increase in credit risk (SIC) lead to a change in the estimate of the associated
PD. PDs will be estimated considering the
Under IFRS 9, when determining whether the contractual maturities of exposures and
credit risk (i.e. risk of default) on a financial estimated prepayment rates.
instrument has increased significantly since initial
recognition, the Group will consider reasonable Loss given default (LGD) is the magnitude of the
and supportable information that is relevant and likely loss if there is a default. The Group plans to
available without undue cost or effort, including estimate LGD parameters based on the history of
both quantitative and qualitative information recovery rates of claims against defaulted
and analysis based on the Group’s historical counterparties. It expects the LGD models to
experience, expert credit assessment and consider the structure, collateral, seniority of
forward-looking information. claim, counterparty industry and recovery costs
of any collateral that is integral to the financial
The Group will primarily identify whether a asset. The Group expects to calibrate LGD
significant increase in credit risk has occurred for estimates for different economic scenarios and,
an exposure by comparing: for real estate lending, to reflect possible changes
in property prices. They will be calculated on a
the remaining lifetime probability of default discounted cash flow basis using the effective
(PD) as at the reporting date; with interest rate as the discounting factor.
the remaining lifetime PD for this point in time Exposure at default (EAD) represents the
that was estimated on initial recognition of expected exposure in the event of a default. The
the exposure. Group expects to derive the EAD from the current
exposure to the counterparty and potential
Inputs into measurement of ECL changes to the current amount allowed under the
contract including amortization. The EAD of a
The key inputs into the measurement of ECL are financial asset will be the gross carrying amount
likely to be the term structures of the following at default. For lending commitments and financial
variables: guarantees, the EAD will consider the amount
drawn, as well as potential future amounts that
probability of default (PD); may be drawn or repaid under the contract,
which will be estimated based on historical
loss given default (LGD); observations and forward-looking forecasts. For
some financial assets, the Group expects to
exposure at default (EAD). determine EAD by modelling the range of
possible exposure outcomes at various points in
In general, the Group expects to drive these time using scenario and statistical techniques.
parameters from internally developed statistical
models and other historical data. They will be
adjusted to reflect for forward-looking
information as described above.
Probability of default (PD) estimates are As described above, and subject to using a
estimates at a certain date, which the Group maximum of 12-month PD for financial assets for
expects to calculate based on statistical rating which credit risk has not significantly increased,
models, and assessed using rating tools tailored the Group will measure ECL considering the risk
to the various categories of counterparties and of default over the maximum contractual period
exposures. These statistical models are expected (including any borrower’s extension options) over
to be based on internally compiled data which it is exposed to credit risk, even if, for risk
comprising both quantitative and qualitative management purposes, the Group considers a
factors. Where it is available, market data may longer period. The maximum contractual period
also be used to derive the PD for large corporate extends to the date at which the Group has the
counterparties. If a counterparty or exposure right to require repayments of an advance or
migrates between ratings classes, then this will
terminate a loan commitment or guarantee.
FCMB Group Plc Annual Report and Accounts 2017 87
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Notes to the Consolidated and Separate
Financial Statements
for the year ended 31 December 2017 continued
For retail overdrafts and credit card facilities that more pessimistic outcomes. The Group plans also
include both a loan and an undrawn commitment to periodically carry out stress testing of more
component, the Group will measure ECL over a extreme shocks to calibrate its determination of
period longer than the maximum contractual these other representative scenarios.
period if the Group’s contractual ability to
demand repayment and cancel the undrawn The Group is in the process of identifying and
commitment does not limit the Group’s exposure documenting key drivers of credit risk and credit
to credit losses to the contractual notice period. losses for each portfolio of financial instruments
These facilities do not have a fixed term or and, using an analysis of historical data, estimating
repayment structure and are managed on a relationships between macro-economic variables
collective basis. The Group can cancel them with and credit risk and credit losses.
immediate effect but this contractual right is not
enforced in the normal day-to-day management, Hedge Accounting
but only when the Group becomes aware of an
increase in credit risk at the facility level. This IFRS 9 introduces a new hedge accounting model
longer period will be estimated taking into that expands the scope of hedged items and risks
account the credit risk management actions that eligible for hedge accounting and aligns hedge
the Group expects to take and that serve to accounting more closely with risk management.
mitigate ECL. These include a reduction in limits, The new model no longer specifies quantitative
cancellation of the facility and/or turning the measures for effectiveness testing and does not
outstanding balance into a loan with fixed permit hedge de-designation. The Group does
repayment terms. not apply hedge accounting and therefore does
not expect any changes to the financial
Forward-looking information (FLI) statements in respect of the new requirements on
hedge accounting.
The Group will incorporate forward-looking Disclosures
information into both its assessment of whether
the credit risk of an instrument has increased IFRS 9 will require extensive new disclosures, in
significantly since its initial recognition and its particular about credit risk and ECLs.
measurement of ECL. Based on advice from the
Risk Management Committee and consideration Transition impact
of a variety of external actual and forecast
information, the Group intends to formulate a The Group will record an adjustment to its
‘base case’ view of the future direction of relevant 1 January 2018 retained earnings to reflect the
economic variables as well as a representative application of the new requirements at the
range of other possible forecast scenarios. This adoption date and will not restate comparative
process would involve developing two or more periods. The Group estimates the IFRS 9 transition
additional economic scenarios and considering amount will result to an additional impairment
the relative probabilities of each outcome. between N11.66 billion and N14.84 billion and Tier
External information may include economic 1 capital ratio between 100 to 120 basis points as
data and forecasts published by governmental at 1 January 2018. The estimated impact relates
bodies and monetary authorities, supranational primarily to the implementation of the ECL
organizations and selected private-sector and requirements. The Group will continue to review,
academic forecasters. revise, refine and revalidate the impairment
models and related process controls.
The base case is expected to represent a most-
likely outcome and be aligned with information Impacts on Governance and Controls
used by the Group for other purposes, such as
strategic planning and budgeting. The other The Group has applied its existing governance
scenarios would represent more optimistic and framework to ensure that appropriate controls
and validations are in place over key processes
and judgments to determine the ECL. As part of
88 FCMB Group Plc Annual Report and Accounts 2017
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
the implementation, the Bank is in the process of Group’s revenue, including interest income,
sanitizing the existing internal controls and trading revenue and securities gains which are
implementing new controls where required in covered under IFRS 9 Financial Instruments. The
areas that are impacted by IFRS 9, including implementation of the standard is being led by
controls over the development and probability the Financial control department in coordination
weighting of macroeconomic scenarios, credit with the business segments. The areas of focus
risk data and systems, and the determination of a for the Group’s assessment of impact are fees
significant increase in credit risk. and commissions. The Group has been working
to identify and review the customer contracts
Impacts on Capital Planning within the scope of the new standard. While the
assessment is not complete, the timing of the
IFRS 9 will impact the reported capital as a result Group’s revenue recognition of fees and
of the adjustment recorded in shareholders’ commissions within the scope of this standard is
equity on adoption of the standard; this impact is not expected to materially change. The Group is
not expected to be significant. also evaluating the additional disclosures that
may be relevant and required.
(ii) I FRS 15, Revenue from contracts with
customers (iii) IFRS 16, Leases
IFRS 15 establishes a comprehensive framework This standard sets out the principles for the
for determining whether, how much and when recognition, measurement, presentation and
revenue is recognized. It replaces existing revenue disclosure of leases for both parties to a contract,
recognition guidance, including IAS 18 Revenue, i.e. the customer (‘lessee’) and the supplier
IAS 11 Construction Contracts and IFRIC 13 (‘lessor’). IFRS 16 eliminates the classification of
Customer Loyalty Programmes. leases as required by IAS 17 and introduces a
single lease accounting model. Applying that
The Group has completed an initial review of the model, a lessee is required to recognise:
potential impact of the adoption of IFRS 15 on its
consolidated financial statements. This focused assets and liabilities for leases with a term of
on a review of fee and commission income. The more than 12 months, unless the underlying
Group earns fee and commission income (other assets is of low value;
than fees included in the calculation of the
effective interest rate) on provision of the depreciation of lease assets separately from
following services; retail banking, corporate interest on lease liabilities in profit or loss.
banking, and financial guarantees issued.
For the lessor, IFRS 16 substantially carries
The Group will adopt the standard and its forward the lessor accounting requirements in
amendments in the financial year beginning on IAS 17. Accordingly, a lessor continues to classify
1 January, 2018 and plans to use the modified its leases or finance leases, and to account for
retrospective approach. Under this approach, the these two types of leases differently.
Group will recognize the cumulative effect of
initially applying the standard as an adjustment IFRS 16 introduces a single, on-balance sheet lease
to the opening balances of retained earnings as accounting model for lessees. A lessee recognizes
of 1 January, 2018, without restating comparative a right-of-use (ROU) asset representing its right
periods. Additional disclosures will be required in to use the underlying asset and a lease liability
order to explain any significant changes between representing its obligation to make lease
reported results and results had the previous payments. There are optional exemptions for
revenue standard been applied. short-term leases and leases of low-value items.
Lessor accounting remains similar to the current
The standard does not apply to revenue standard – i.e. lessors continue to classify leases
associated with financial instruments, and as finance or operating leases.
therefore, will not impact the majority of the
FCMB Group Plc Annual Report and Accounts 2017 89
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Notes to the Consolidated and Separate
Financial Statements
for the year ended 31 December 2017 continued
IFRS 16 replaces existing leases guidance, recognises the prepayment or deferred income
including IAS 17 Lease, IFRIC 4 Determining arising from the advance consideration.
whether an Arrangement contains a lease, SIC –
15 Operating Leases – incentives and SIC – 27 For transactions involving multiple payments or
Evaluating the Substance of Transactions receipts, each payment or receipt gives rise to a
involving the Legal Form of a Lease. separate transaction date. The interpretation
applies when the Group:
The standard is effective for annual periods
beginning on or after 1 January 2019. Early For transactions involving multiple payments or
adoption is permitted for entities that apply IFRS receipts, each payment or receipt gives rise to a
15 at or before the date of initial application of separate transaction date. The interpretation
IFRS 16. The Group is currently in the process of applies when the Group:
assessing the impact that the initial application
would have on its business. pays or receives consideration in a foreign
currency; and
Transition recognises a non-monetary asset or liability –
e.g. non-refundable advance consideration –
The Group currently plans to apply IFRS 16 before recognising the related item.
initially on 1 January 2019.
The Group will adopt the amendments for the
As a lessee, the Group can either apply the year ending 31 December 2018.
standard using a:
(v) I FRIC 23: Uncertainty over income tax
Respective approach; or treatments
modified retrospective approach with optional These amendments provide clarity on the
practical expedients. accounting for income tax treatments that have
yet to be accepted by the tax authorities.
The lessee applies the election consistently to all
of its leases. The Group has not yet determined The amendments clarifies that the key test for
which transition approach to approach. As a determining the amounts to be recognised in the
lessor, the Group is not required to make any financial statements is whether it is probable that
adjustments for leases except where it is an the tax authority will accept the chosen tax
intermediate lessor in a sub-lease. treatment; this could result in an increase in the
tax liability or a recognition of an asset depending
The Group has not yet quantified the impact on on the current practice of the Group.
its reported assets and liabilities of the adoption
of IFRS 16. The quantitative effect will depend on, The Group will adopt the amendments for the
inter alia, the transition method chosen, the year ending 31 December 2019.
extent to which the Group uses the practical
expedients and recognition exemptions, and any 3 Financial Risk Management
additional leases that the Group enters into. The
Group expects to disclose its transition approach (a) Introduction and Overview
and quantitative information before adoption.
Risk management at FCMB Group Plc is critical to
(iv) I FRIC 22: Foreign currency transactions and the attainment of the Group’s strategic business
advance consideration objectives. It provides the mechanism to identify
and explore growth opportunities and manage
The amendments clarifies the transaction date to inherent risks in operating and business
be used in determining the exchange rate for environments, ensure compliance with corporate
translation of foreign currency transactions governance standards and regulatory stipulations.
involving an advance payment or receipt. Our risk management practices are integrated,
structured, enterprise-wide and continuous
The amendments clarifies that the transaction across the Group for identifying and deciding on
date is the date on which the Group initially
90 FCMB Group Plc Annual Report and Accounts 2017
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
appropriate responses to, and reporting on, staff are supported through the Group’s whistle
opportunities and threats that may affect the blower program, which enables them to raise
achievement of the strategic business objectives. concerns in a confidential manner. The whistle
Based on its strategic business and operational blower program has been outsourced to ensure
objectives, the Group is exposed to a wide range independence, confidentiality and protection of
of risks such as credit, liquidity, market, the whistle blower.
operational, strategic, regulatory, reputational
and systemic risks. It has put in place a robust risk FCMB risk management philosophy
management framework, policies and processes
for the proactive identification, assessment, Overall, the Group’s enterprise risk management
measurement and management of such risks to (ERM) program is underpinned by a strong risk
ensure that they are managed within the Board management philosophy and culture, ensuring
approved risk appetite whilst also complying with that the risk management practices are
the regulatory requirements. embedded in strategy development and
implementation. The Group’s Risk Management
The Group has developed and periodically updates Philosophy is: “To continue to institutionalize
its capital management policy and capital plan to comprehensive risk practices that enable our
ensure that it operates within its risk capacity, stakeholders build and preserve wealth while
while optimising risk and return. The outcome of integrating our core values and beliefs enterprise
the business strategy and capital plan are part of wide to give us competitive advantage”.
the key considerations in the development of risk
appetite and they all work together to ensure The following are the guiding principles that FCMB
there is an equilibrium. The framework seeks to tries to entrench in its risk management process:
strengthen the administration and supervision of
the Group’s enterprise risk management and a) A common standard of risk management
ensure that the Group’s corporate governance values imbibed and consistently exhibited by
principles, risk philosophy and culture, risk everyone in the Group;
appetite and risk management processes are
implemented in line with the board’s expectations. b) Consistent drive to balance risk/opportunities
It also provides management with clear, and return;
comprehensive and unbiased analysis of the
adequacy, existence and effectiveness of internal c) Clear and consistent communication on risks;
controls and risk processes.
d) A business strategy that aligns risk and
In line with global standard, the Group sets its risk accountability;
tone from the top, adopting a strategy that
ensures individuals who take or manage risk e) The Group will always strive to understand
clearly understand it; the Group and its every new product, business or any type of
subsidiaries’ risk exposures are within the transaction with a view to addressing all the
appetites established by Board of Directors; risk risk issues;
taking decisions are in line with the business
strategy and objectives set by the Board of f) The Group will avoid products and businesses
Directors; the expected payoffs compensate for it does not understand.
the risks taken; risk taking decisions are explicit
and clear and sufficient capital is available to take FCMB shall seek to fully understand the risks and
risks. Personal accountability is reinforced by the rewards of transactions and only transactions
Group’s values, with staff expected to act with that meet the Group’s risk appetite and profile
courageous integrity in conducting their duties shall be undertaken.
even as competence is developed through
various training and development programs. Also, The chart below provides a link between the
Group’s business units and their principal risk
exposures. The risks have been assessed based
on the relative amount of capital allocation to
the various business lines and their revenue
generating ability.
FCMB Group Plc Annual Report and Accounts 2017 91
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Notes to the Consolidated and Separate
Financial Statements
for the year ended 31 December 2017 continued
Business units and risk exposures
GROUP
Corporate Banking Commercial Banking Retail Banking Investment Banking Trustees
Credit risk High Credit risk High Credit risk Medium Credit risk Low Credit risk Low
Operational Operational Operational Low Operational Operational
risk High risk Medium risk Low risk Medium risk Low
Market risk High Market risk Medium Market risk Market risk High Market risk Low
This chart presents the Group’s exposure to each banking. Market risk remained high in the period
of the risks, being its major risk exposures on a due to the increase in interest rate resulting from
business segment basis. The classification to high, monetary policy stance of the Central Bank of
medium and low is based on the relative amount Nigeria (CBN). The Trustee business has the least
of capital allocated to the businesses, their capital allocation due to low portfolio risk. The
revenue generating abilities and operational risks Group continues to identify and proactively
inherent in their related activities and processes. manage its various risk exposures at the
transaction and portfolio level, making sure that
As implied from this chart, credit risk is the largest appropriate mitigants are in place for the various
risk exposure of the Group, next to this is balance sheet exposures.
operational risk and then market risk. Market risk
resulting from devaluation of the Naira has The disclosures here therefore give details of the
reduced compared to the same period in the last Group’s exposures to these risks and the
financial year due to the boost in the liquidity of appropriate policies and processes for managing
the foreign exchange market on the back of the them accordingly, including a summary of the
introduction of importers and exporters’ foreign capital management practices of the Group.
exchange window. However, the CBN monetary
policy stance on interest rate has increased the Risk management framework
risk in the banking and trading book, with
significant impact in the banking book – the The Board of FCMB Group Plc has the risk
interest rate risk in the banking book (IRRBB). oversight role, setting and approving the risk
The monetary authority maintained high appetite and other capital management initiatives
benchmark rate during the financial year to to be implemented by the Executive Management
achieve exchange rate stability and inflation rate Committee. The Executive Management
reduction but not without its attendant implication Committee coordinates the activities of the sub-
on interest margin and resulting liquidity strains committees to provide support to the Board in
in the industry as most depositors moved their managing risk and ensuring that capital is
funds to the high yield government instruments. adequate and optimally deployed. The Boards of
FCMB Group Plc and its subsidiaries continue to
Corporate Banking, having the largest exposure align the business and risk strategy of the Group
to credit risk takes most of the capital allocation, through a well articulated appetite for all
followed by Commercial Banking, Retail Banking, significant risks and make sure (through
Investment Banking (treasury, brokerage, appropriate sub-committees) that all risk taking
advisory, asset management businesses, etc.) activities are within the set appetite or tolerance,
and Trustees. Despite the presence of failing which an appropriate remedial action
counterparty risks, credit risk is low for investment should be taken within a reasonable period. The
92 FCMB Group Plc Annual Report and Accounts 2017
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
responsibility for day-to-day management of alignment of the reward structures and the
these risks has been delegated to Executive maintenance and development of a supportive
Management through its related committees culture in relation to the management of risk,
(Risk Management Committee, Management which is appropriately embedded through
procedures, training and leadership actions. In
Credit Committee, Asset and Liability Committee, carrying out its responsibilities, the Risk
Investment Committee and Executive Committee is closely supported by the Chief Risk
Management Committee). The Risk Committee Officer and the Chief Financial Officer, together
focuses on risk governance and provides a strong with other business functions within their
forward-looking view of risks and their mitigation. respective areas of responsibility.
The Risk Committee is a sub-committee of the
Board and has responsibility for oversight; and The illustration below highlights material risk
advises the Board on, inter alia, the Group’s risk exposures of the Group and the respective
appetite, tolerance and strategy, systems of risk Board and Executive Management committees
management, internal control and compliance. responsible for oversight and risk control.
Additionally, the Risk Committee ensures the
Enterprise risk universe and governance structure
FCMB Group Risk Universe and Responsibility Matrix
Risk Credit Concentration Market Liquidity Operational Strategic Legal Reputational Compliance
universe risk risk risk risk risk
risk risk risk risk
Primary Head of Head of General Head of Chief
risk owner Operations Strategy Counsel Corporate Compliance
and Affairs Officer
Chief Risk Officer Treasurer Technology
Division
Secondary Chief Risk Officer Chief
risk owner Compliance
Officer
Management Management Credit Assets and Risk Management Committee Executive Management
committee Committee Liabilities Committee
Management
Committee
Risk Management Committee
Board Board Credit Committee Board Risk, Audit and Finance Committee Board of
committee Directors
Board of Directors
FCMB Group Plc Annual Report and Accounts 2017 93
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Notes to the Consolidated and Separate
Financial Statements
for the year ended 31 December 2017 continued
A three line defence system is in place for the and finance. These departments develop policies
management of enterprise risks as follows: and procedures, risk management processes and
controls, monitor and report on risks accordingly
(i) Risk taking: the Board of Directors, for prompt decision making. The Board of
supported by Executive Management, establishes Directors also play risk oversight role. Board Risk,
boundaries within which the Group takes risks. Audit and Finance Committee has oversight
It also establishes an appropriate control responsibility for all the risk exposures in the
environment in order to align risk taking and Group while the Board Credit Committee (BCC)
management with business objectives. The is responsible for the various credit risk exposures.
business lines and process owners take risks and
have the primary responsibility for identifying (iii) Risk assurance: independent assurance to the
and managing such risks. Board of Directors on the effective implementation
of the risk management framework and validates
(ii) Risk oversight: independent control function the risk measurement processes. There are two
over the business processes and related risks to complementary parts to this – the internal and
ensure that business and process owners operate external audit functions. The Board Risk, Audit
within defined appetite and approved policies and Finance Committee is also responsible for
and procedures. It is provided by functions such this independent assurance and assisted in its
as risk management, internal control, compliance, function by the internal and external auditors.
Details of the Group’s three line defence mechanism is described below:
Board Risk, Audit and Finance Committee
Executive Management, Management Risk Committees
Risk taking Risk oversight Risk assurance
(First line of defence) (Second line of defence) (Third line of defence)
• Business Line Management • Risk Management • Group Internal Audit
• Internal Control • External Audit
• Promotes risk culture • Compliance
• O wns the risk • FINCON • Provides independent
challenge to the levels of
management process • Develops policies and assurance provided by
and implements control standards the first and second
• R esponsible for daily levels of defence
management of risk • Develops the risk
management processes • Validates processes in
and controls risk management
framework
• Monitors and reports
on risk
94 FCMB Group Plc Annual Report and Accounts 2017
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
First line of defence meets on a periodic basis (monthly) to review all
risk exposures (including Key Risk Indicators,
(a) Board level credit portfolio reports, market risk exposures,
etc.) and recommends risk mitigating strategies/
I. The Board of Directors sets the appetite for actions. The RMC is also responsible for portfolio
risk and ensures that senior management and planning, capital management, review and
individuals responsible for managing risks possess management of external issues and policies
sound expertise and knowledge to undertake risk affecting the business of the Group and oversight
management functions within the Group. for all enterprise risk management initiatives.
II. The Board Risk, Audit and Finance Committee II. The Management Credit Committee (MCC)
(BRAFC) and, as necessary, the subsidiaries’ risk appraises and approves loans and other credit
committees provide direct oversight for related transactions as stated in the Group’s
enterprise risk management and acts on behalf of credit policy. The committee endorses the credit
the Board on all risk management matters. The policy and ensures full compliance with the Board
BRAFC ensures that all the decisions of the Board approved credit policy. The MCC reviews and
on risk management are fully implemented and considers credit requests above the delegated
that risk exposures are in line with agreed risk approval limits of the approving authorities for
appetite. The committee also reviews the approval. The committee also reviews and
enterprise risk management framework on a manages portfolio risk in order for the credit
periodic basis to ensure its appropriateness and portfolio to remains healthy and in compliance
continued usefulness in line with the size, with the Board approved appetite and all
complexity and exposure of the Group to risks regulatory requirements.
and compliance with regulatory requirements.
The BRAFC is also responsible for assessing the III. The Asset and Liability Committee (ALCO) is
adequacy and scope of internal controls, audit of responsible for managing the composition and
the financial statements and overall compliance. pricing of the assets and liabilities, making policy
The Committee meets every quarter. decisions, and providing direction/oversight for
market and liquidity risk management practices.
III. The Board Credit Committee’s (BCC) function
is more transactional. It approves amendments to (c) Business unit management level
the Group’s credit policy, changes in target market
or risk acceptance criteria, large exposure requests I. Business Unit Management, as a risk originator,
within pre-defined limits, exceptional approvals has first line responsibility for and ownership of
where necessary, specific provisions, credit write- risks. The Business Units take on risks within set
offs and remedial/corrective measures. The BCC boundaries and manage the risks taken on a day
also reviews the credit portfolio to ensure they to day basis to protect the Group from the risk
are appropriately managed for portfolio risk of loss.
exposures such as correlation risk, concentration
risk, cyclicality of collateral values and any II. Each Business Unit has a dedicated
reputational and contagion effects. Operational Risk Committee responsible for
reviewing critical/significant risks and
(b) Executive management level recommending appropriate remedial measures.
The Committee reviews the outcome of Risk and
I. The Risk Management Committee (RMC) is a Control Self-Assessment (RCSA) for their
management committee, which reports to the respective business units, major risk exposures as
Board Risk, Audit and Finance Committee and measured by their Key Risk Indicators/Key
has direct responsibility for implementing the Control Indicators, agrees action plans and
enterprise risk management framework and assigns responsibilities for resolving identified
related policies approved by the BRAFC. The RMC issues and exposures.
FCMB Group Plc Annual Report and Accounts 2017 95
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Notes to the Consolidated and Separate
Financial Statements
for the year ended 31 December 2017 continued
Second line of defence (iii) Risk mitigation: the Group will acknowledge
the risk and take steps to reduce the risk
Risk Management is an independent control likelihood and/or impact. Some of the steps
function with primary responsibility for the that can be taken to mitigate the impact or
following: likelihood of a risk occurring includes:
Risk strategy – development of the risk – Formulation of policy or enhancement.
management strategy in alignment with overall
growth and business strategy of the Group. – Clarity and strengthening of accountabilities.
Risk compliance – ensuring compliance with – Improvement of processes.
risk strategy, risk appetite at enterprise and
business unit levels. – S trengthening/implementation of new
controls.
Risk advisory – identification, measurement,
management and disclosure of all – Education and training program.
significant risk exposures and providing
recommendations/guidance on risk taking – Expert advice.
and exposures.
The mitigation steps may be Directive,
Risk control – proactive management of all Preventative, Detective or Corrective controls.
risks to minimize losses and capital erosion. Detective control entails monitoring of the
The Group could take various control activities that can lead to the incident in order
measures to address identified risk exposures to detect any early warning signal and
such as follows: respond to it in time.
(i) Risk avoidance: the Group could make (iv) Risk transfer: the Group will try to shift
decisions that will attempt to isolate it from the burden from its shoulders to another
further contact with such risks. The decision party. Some common practices involved in
could affect a new or existing strategy, product risk transfer include insurance contract,
or business. Some examples of risk avoidance performance bonds, guarantees, warrantees
include opting not to expand its branches, and outsourcing. The relevant business unit
refusing to lend to a customer because of poor should however include the new risks arising
understanding of the business or industry from these arrangements such as service level
and/or closing/relocating a branch because of performance and contract management, in its
high incidence of armed robbery or other risk universe.
operational losses. Risk avoidance could be a
proactive avoidance (not going into the (v) Risk sharing: the Group will share the risk
activity in the first place) or abandonment with another party in order to reduce any
(dropping the activity after embarking on it). possible loss. Examples include loan
syndication, joint-venture arrangement
(ii) Risk acceptance: the Group will among others.
acknowledge the risk. However, it will not take
any measures to halt the likelihood of such a The Risk Management Division:
situation occurring or to minimize the risk
associated with it. The Group shall adopt this The Risk Management Division is a major line of
approach where certain risks remain defence in the management of risks in the Group
outstanding after avoidance, transfer or and its subsidiaries. The division assists executive
mitigation responses have been taken or management with the identification, assessment,
where the risks in question are minor or management, monitoring and reporting of all the
unavoidable and any response is not likely to risks within the Group. It recommends appropriate
be cost-effective compared to the possible risk management polices for the consideration
cost of bearing the risk impact. and approval of the Board, through the various
executive risk management committees and
coordinates the Group’s ERM activities. Key
responsibilities of the division include:
96 FCMB Group Plc Annual Report and Accounts 2017
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
a) E nsure the implementation of the ERM f) Act as a key contact for senior management
framework (including specific risk management who may wish to request ad hoc reviews/
frameworks and policies) and other related investigations.
initiatives across the Group and its subsidiaries.
g) Ensure that laws, regulations and supervisory
b) F acilitate the identification, assessment, requirements are complied with including
monitoring, management and reporting of risk consequence management.
exposures in the Group and its subsidiaries.
h) Provide holistic view of risks across the Group
c) Collect, process, verify, monitor and distribute and its subsidiaries.
risk information across the Group including to
the senior management, the Board, regulators i) M ake recommendations with respect to
and other stakeholders. capital allocation, pricing and reward/
sanctions based on risk reports.
d) C ollaborate with market facing units in
designing new products. j) Provide and promote risk awareness and
education on risk.
e) P rovide senior management with practical
and cost effective recommendations for
mitigating risks.
The organisational structure of the Risk Management Division is shown in the diagram below:
Chief Risk Officer
Credit Administration Enterprise Monitoring and MIS Credit Underwriting
Credit administration Risk Management Loan monitoring
Business & operational (specialised & Corporate underwriting
Credit bureau Regional underwriting
Credit documentation risk non-specialised loan) (Lagos & South West)
Market & liquidity risk Portfolio monitoring Regional underwriting
Information security Collateral management
(South East, South
Risk policy Insurance South & North)
Risk asset audit & MIS
FCMB Group Plc Annual Report and Accounts 2017 97
Introduction Operating Corporate Financial Other National Shareholder Branches and Account
Review Governance Statements Disclosures Information Opening Information
Notes to the Consolidated and Separate
Financial Statements
for the year ended 31 December 2017 continued
The Group also has a robust Collection and and efficient control environment that ensures
Recovery team, which reports to the Business, minimal operational losses from frauds, errors,
with dotted reporting line to Risk Management. operational gaps, and other irregularities. It
The department compliments the post- monitors control activities and ensure
disbursement monitoring responsibilities through compliance with minimum control standards
effective enforcement of credit covenants and defined by the Board.
approval terms.
The Compliance team ensures the Group fully
(b) Internal Control and Compliance Division complies with the spirit and letter of laws,
corporate governance standards, all
The Internal Control and Compliance Division is regulatory requirements such as Know Your
primarily charged with the following: Customer (KYC), Anti-Money Laundering
(AML) regulations and indeed all requirements
The Internal Control and Compliance teams of the Central Bank of Nigeria (CBN) and
work hand-in-hand. Internal control is directly other authorities such as Nigerian Deposit
responsible for enforcing and confirming Insurance Corporation (NDIC), Securities and
compliance with group-wide policies, Exchange Commission, Nigerian Stock
procedures and internal controls. It conducts Exchange, National Pension Commission
routine control checks across all businesses among others.
and processes. It is responsible for effective
The Internal Control and Compliance Division is functionally structured as shown in the chart below:
Chief Compliance Officer
Internal Control Compliance
Head Office Control Corporate Governance, Regulatory
Regional Control and Legal Compliance
System Control and Business AML/CFT Programme Management
Continuity Management and Reporting
Transactions and Exceptions Monitoring
Branches and Subsidiaries Compliance
Coordination and Sanctions Management
Zonal Compliance
Subsidiaries Compliance
98 FCMB Group Plc Annual Report and Accounts 2017
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