the Grenadines Ltd.

Notes to the Consolidated Financial Statement

For the Year Ended December 31, 2022

(in Eastern Caribbean dollars)

2. Summary of Significant Accounting Policies ……Cont’d

2.19 Leases …..Cont’d

Short-Term Leases and Leases of Low-Value Assets

The Bank has elected not to recognise right‑of‑use assets and lease liabilities for short‑term leases that have a lease term of 12 months or less and low‑value assets. The Bank recognises the lease payments associated with these leases as an expense on a straight‑line basis over the lease term

3. Financial Risk Management Financial Instruments

Financial instruments carried on the consolidated statement of financial position include cash resources, investment securities, loans and advances to customers, deposits with other banks, and deposits from banks, due to customers and borrowings. The particular recognition methods adopted are disclosed in the individual policy statement associated with each item.

(a) Strategy in using Financial Instruments

The Group’s activities expose it to a varie ty of financial risks and those activities involve the analysis, evaluation, acceptance and management of some degree of risk or combination of risks. Taking risk is core to the financial business, and the operational risks are an inevitable consequence of being in business. The Group’s aim is therefore to achieve an appropriate balance between risk and return and minimise potential adverse effects on the Group’s financial performance.

The Group’s risk management policies are designed to identify and analyse these risks, to set appropriate risk limits and controls, and to monitor the risks and adherence to limits by means of reliable and up -to-date information systems. The Group regularly reviews its risk management policies and systems to reflect chan ges in markets, products and emerging best practice.

Risk management is carried out by the Management Committee under policies approved by the Board of Directors. The Group’s Management Committee identifies, evaluates and hedges financial risks in close c o-operation with the Group’s operating units.

The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, and non -derivative financial instruments. In addition, the Internal Audit Department is responsible for the independent review of risk management and the control environment.

The most important types of risk are credit risk, liquidity risk, market risk and other operational ris k. Market risk includes currency risk and interest rate risk.