the Grenadines Ltd.

Notes to the Consolidated Financial Statement

For the Year Ended December 31, 2022

(in Eastern Caribbean dollars)

3. Financial Risk Management …..Cont’d

(b) Credit Risk …..Cont’d

Impairment and Allowance P olicies …..Cont’d

Financial instruments that are not already credit impaired are originated into stage 1 and a 12 -month expected credit loss provision is recognised.

Instruments will remain in stage 1 until they are repaid, unle ss they experience significant credit deterioration ( Stage 2) or they become credit impaired ( Stage 3).

Instruments will transfer to stage 2 and a lifetime expected credit loss provision recognised when there has been a significant increase in credit risk compared with what was expected at origination.

The framework used to determine a significant increase in credi t risk is set out above (page 30)

Stage 1

Stage 2

12 month expected credit lossperforming Lifetime expected credit loss -performing but significant increase in credit risk (SICR)

Maximum Exposure to Credit Risk

Stage 3

Credit impaired - nonperforming

Credit risk exposures relating to the financial assets in the statement of financial position:

The above table represents a worst -case scenario of credit risk exposure to the Group at December 31, 2022 and December 2021, without taking account of any collateral held or other credit enhancements attached thereto. For assets included “on” statement of financial position, the exposures set out above are based on net amounts.

As shown above 52% (2021: 52%) of the total maximum exposure is derived from loans and advances and commitments to customers; 10% (2021: 8%) represents investments in debt securities.