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

(i) Capital Management

The Group’s objectives when managing capital, which is a broader concept than the ‘equity’ on the face of statement of financial position, are:

• To comply with the capital requirements of the Banking Act No. 4 of 2015.

• To comply with the capital requirements set by the regulators of the banking markets where the Group operates;

• To safeguard the Group’s ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders; and

• To maintain a strong capital base to support the development of its business.

Capital adequacy and the use of regulatory capital are monitored daily by the Group’s management, employing techniques based on the guidelines developed by the Eastern Caribbean Central Bank the “Authority” for supervisory purposes. The required information is filed with the Authority on a quarterly basis.

The Regulators requires each bank or banking group to hold the minimum level of the regulatory capital to the riskweighted asset (the ‘Basel capital adequacy ratio’) at or above the internationally agreed minimum of 8% of Tier 1 capital.

The Group’s regulatory capital as managed by its Treasury department is divided into two tiers:

• Tier 1 capital: share capital (net of any book value of the treasury shares), minority interests arising on consolidation from interests in permanent shareholders’ equity, retained earning s and reserves created by appropriations of retained earnings. The book value of goodwill is deducted in arriving at Tier 1 capital; and

• Tier 2 capital: qualifying subordinated loan capital, collective impairment allowances and unrealized gains arising on the fair valuation of equity instruments held at FVOCI and fixed asset revaluation reserves (limited to 50% of Tier 1 capital).

Investments in “associated companies” are deducted from Tier 1 and Tier 2 capital to arrive at the regulatory capital.

The risk-weighted assets are measured by means of a hierarchy of five risk weights classified according to the nature of − and reflecting an estimate of credit, market and other risks associated with − each asset and counterparty, taking into account any eligible collateral or guarantees. A similar treatment is adopted for off -balance sheet exposure, with some adjustments to reflect the more contingent nature of the potential losses.

The table below summarises the composition of regulatory capital and the ratios of the Group for the year ended December 31, 2022 and 2021. During those two years, the Group complied with all of the externally impose d capital requirements to which it is subject.