Independent auditor's report and audited consolidated & separate financial statements of National Credit and Commerce Bank and its Subsidiaries As at & for the year ended 31 December 2021Hoda Vasi Chowdhury & Co Chartered Accountants Independent Auditor's Report to the Shareholders of National Credit and Commerce Bank Limited Report on the Audit of the Consolidated and Separate Financial Statements Opinion We have audited the consolidated financial statements of National Credit and Commerce Bank Limited and its subsidiaries (the “Group”) as well as the separate financial statements of National Credit and ‘Commerce Bank Limited (the “Bank”), which comprise the consolidated and separate balance sheets as at 31 December 2021 and the consolidated and separate profit and loss accounts, consolidated and separate statements of changes in equity and consolidated and separate cash flow statements for the year then ended, and notes to the consolidated and separate financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements of the Group and separate financial statements of the Bank give a true and fair view of the consolidated financial position of the Group and the separate financial position of the Bank as at 31 December 2021, and of its consolidated and separate financial performance and its consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as explained in note 2 and other applicable Jaws and regulations. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated and Separate Financial Statements section of our report. We are independent of the Group and the Bank in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), Bangladesh Securities and Exchange Commission (BSEC) and Bangladesh Bank, and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code and the Institute of Chartered Accountants of Bangladesh (ICAB) Bye Laws. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated and separate financial statements of the current period, These matters were addressed in the context of our audit of the consolidated and separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below our description of how our audit addressed the matter is provided in that context. Description of key audit matters ‘Our response to key audit matters Measurement of provision for loans and advances The process for estimating the provision for loans, advances and leases portfolio associated with credit risk is significant and complex. For the individual analysis for large exposure, provisions calculation consider the estimates of future business performance and the market value of collateral provided for credit transactions. For the collective analysis of exposure on portfolio basis, provision calculation and reporting are manually processed that deals with voluminous databases, assumptions and estimates | of complex design and implementation. We tested the design and operating effectiveness of key controls focu! ‘© Credit appraisal, loan disbursement procedures, monitoring and provisioning process; | Discuss alternate procedures applied by management where the borrower's latest audited financial statements is not available as per BRPD Circular no 04 dated 04 January 2021; Identification of loss events, including early warning and default warning indicators; and Reviewed quarterly Classification of Loans | At year end the Group reported total gross loans | (CL), and advances of BDT 192,114 million (2020: | Our substantive procedures in relation to the BDT 181,155 million) and provision for loans and | provision for loans and advances portfolio National Office : BTMC Bhaban (6" & 7" Floor),7-9 Karwan Bazar Commercial Area,Dhaka- 1215, Bangladesh CChattogram Office: Delwar Bhaban (4th Floor), 104 Agrabad Commercial Area, Chattogram-4100, Bangladesh 1Hoda Va: Chowdhury & Co | advances of BDT 8,936 million (2020: BDT 7,765 million). Furthermore as per BRPD circular no 50 dated 14 December 2021, additional 2% provision is required for clients who have taken the deferral facility under BRPD Circular no 19 dated 26 August 2021 and subsequent amendment and shown as special general provision- COVID 19 under other liabilities. We have focused on the following significant judgements and estimates which could give rise to material misstatement or management bias: © Completeness and timing of recognition of loss events in accordance with criteria set out in BRPD circular no 14, dated 23 September 2012 and BRPD circular no 03, dated 21 April 2019; For individually assessed provisions, the ‘measurement of the provision may be dependent on the valuation of collateral, estimates of exit values and the timing of cash flows; Provision measurement is primarily dependent upon key assumptions relating to probability of default, ability to repossess collateral and recovery rates. ‘comprised the following: © Reviewed the adequacy of the general and specific provisions in line with related Bangladesh Bank guidelin Assessed the methodologies on which the | provision amounts are based, recalculated the | provisions and tested the completeness and accuracy of the underlying information; Evaluated the appropriateness and presentation of disclosures against relevant accounting | standards and Bangladesh Bank guidelines. Finally, compared the amount of provision requirement as determined by Bangladesh Bank inspection team to the actual amount of provision maintained Considering continuing adverse impact of COVID 19, Bangladesh Bank has given certain flexibility from classification requirement for loans vide issuing various circulars such as BRPD 3 dated 31 January 2021, BRPD 4 and 5 dated 24 March 2021, BRPD 13 dated 27 June 2021, BRPD 19 dated 26 August 202] and BRPD 53 dated 30 December 2021 whereby Banks are allowed to keep a loan/customer as unclassified as long as the customer has paid 15% of the down payment duc for the year 2021 by 31 December 2021 The Bank has calculated required provision as per Bangladesh Bank letter DBI-3/122/2022-453 dated 28 March 2022 considering total classified loans and advances of BDT 866.54 crore (4.57%). [ See note # 9.1 and 14.5 to the financial statements Risk ‘Our response to the risk Interest income recognition Recognition and measurement of interest ineome involve complex IT environment as well as require critical estimates and judgment, Since interest income from loans and advances is one of the key performance indicators of the Bank there is an inherent risk of fraud and error in recognition of interest income. Moreover, as per Bangladesh Bank BRPD circular no. 53 dated 30 December 2021, considering future risk banks were allowed to recognize outstanding/ arrear interest income on loans where deferral facilities were given upon receiving at least 15% of the total receivable amount. ‘Accordingly, this has been considered as key audit matter. We tested the design and operating effectiveness of | key controls including automated control over recognition and measurement of interest on loans | and advances. For selected customers and loan files on sample basis we have also performed substantive test of details including recalculation and cutof testing to check accuracy of interest income Finally, we also conducted substantive analytical procedures to assess reasonableness of interest recognised during the year with reference to the product wise outstanding loan balances. [See note #22 to the financial statementsHoda Va: Chowdhury & Co Valuation of treasury bill and treasury bond The classification and measurement of T-Bill and ‘T-Bond require judgment and complex estimates. In the absence of a quoted price in an active market, the fair value of T-Bills and T-Bonds is determined using complex valuation techniques which may take into consideration direct ot indirect unobservable market data and complex pricing models which require an elevated level of judgment. We assessed the processes and controls put in place by the Bank to identify and confirm the existence of treasury bills and bonds. We obtained an understanding, evaluated the design and tested the operating effectiveness of the ey controls over the treasury bills and bonds valuation processes, including controls over market data inputs into. valuation models, model governance, and valuation adjustments. We tested a sample of the valuation models and the inputs used in those models, using a variety of techniques, including comparing inputs to available market data. Finally assessed the appropriateness and presentation of disclosures against relevant accounting standards and Bangladesh Bank guidelines. See note # 8 to the financial statements [Tmpairment assessment of unquoted investments In the absence of a quoted price in an active market, the fair value of unquoted shares and bonds, especially any impairment is calculated using valuation techniques which may take into consideration direct or indirect unobservable ‘market data and hence require an elevated level of judgment. We have assessed the processes and controls put in place by the Company to ensure all major investment decisions are undertaken through a proper due diligence process. We tested a sample of investments valuation as at 31 December 2021 and compared our results to the recorded value. Finally we assessed the appropriateness and presentation of disclosures against _ relevant accounting standards and Bangladesh Bank guidelines. See note # 8 to the financial statements TT systems and controls Our audit procedures have a focus on IT systems and controls due to the pervasive nature and complexity of the IT environment, the large volume of transactions processed in numerous locations daily and the relianee on automated and IT dependent manual controls. Our areas of audit focus included user access management, developer access to the production environment and changes to the IT environment. These are key to ensuring IT dependent and application based controls are operating effectively We tested the design and operating effectiveness of the Bank’s IT access controls over the information systems that are critical to financial reporting. We tested IT general controls (logical access, changes management and aspects of IT’ operational controls). This included testing that requests for access to systems were appropriately reviewed and authorized. We tested the Bank’s periodic review of access rights and reviewed requests of changes to systems for appropriate approval and authorization. We considered the control environment relating to various interfaces, configuration and other application layer controls identified as key to our audit j Legal and regulatory matters [We focused on this area because the Bank and its subsidiaries (the “Group”) operates in a legal and We obiained an understanding, evaluated the design and tested the operational effectiveness ofHoda Vasi Chowdhury & Co regulatory environment that is exposed to significant litigation and similar risks arising from disputes and regulatory proceedings. Such matters are subject to many uncertainties and the outcome may be difficult to predict. These uncertainties inherently affect the amount and timing of potential outflows with respect to the provisions which have been established and other contingent liabilities. Overall, the legal provision represents the Group’s and the Bank’s best estimate for existing legal matters that have a probable and estimable impact | on the Group’s financial position. the Bank’s key controls over the legal provision and contingencies process. We enquired to those charged with governance to obtain their view on the status of all sigr litigation and regulatory matters. We enquired of the Bank’s internal legal counsel for all significant litigation and regulatory matters and inspected internal notes and reports. We assessed the methodologies on which the provision amounts are based, recalculated the provisions, and tested the completeness and accuracy of the underlying information We also assessed the Bank’s provisions and contingent liabilities disclosure. ‘Carrying value of invesiments in subsidiaries by the Bank The Bank has invested in equity shares of two subsidiary companies namely, NCCB Securities and Financial Services Limited and NCCB Capital Limited. As at 31 December 2021 the carrying value of this investment is BDT 2,250 million. At the time of conducting our audit of the separate financial statements of the Bank we have considered the recoverable value of the Bank's investments in all the above subsidiaries stated at cost. Management has condueted__impairment assessment and calculated recoverable value of its individual subsidiaries in accordance with IAS 36. We have reviewed Management's analysis of impairment assessment and recoverable value calculation of subsi in accordance with IAS 36. In particular, our discussions with the Management were focused on the continued appropriateness of the value in use model, the key assumptions used in the model, the reasonably possible alternative assumptions, particularly where they had the most impact on the value in use calculation We also checked mathematical accuracy of the model, recalculated discount rate used within the model, inputs used in the determination of assumptions within the model were challenged and corroborating information was obtained with reference to external market information, third- party sources. We further observed that pursuant to the BSEC notification the subsidiary of the Bank has made partial provision against diminution in the value of investment and client margin loan as pet BSEC notification. Revaluation of property, plant and equipment The Bank in prior year has undertaken revaluation of its land and building. As a result of this revaluation exercise, an amount of BDT 330,745,603 is recognised as the fair value gain in revaluation reserve and resultant deferred tax liability is recognised at applicable rate, Determination of fair value in absence of any quoted price and active market require significant judgment We assessed the process of revaluation previously taken by the Bank. We reviewed revaluation report of the independent valuer along with relevant documents and discussed with management about any potential changes in revaluation assumptions since the last revaluation, in particular potential impact of COVID 19 and applied our judgment to see whether the fair value is still relevant. We checked related accounting treatments of fair value gain and associated deferred tax as recognized by the Bank. Reporting on other informationHoda Va: Chowdhury & Co Management is responsible for the other information. The other information comprises all of the information in the Annual Report other than the consolidated and separate financial statements and our auditors’ report thereon. The Annual Report is expected to be made available to us after the date of this auditor's report Our opinion on the consolidated and separate financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, on the other information obtained prior to the date of this audit report, we conclude that there is a material misstatement of this other information; we are required to report that fact. We have nothing to report in this regard. Responsibilities of Management and Those Charged with Governance for the Consolidated and Separate Financial Statements and Internal Controls Management is responsible for the preparation and fair presentation of the consolidated financial statements of the Group and also separate financial statements of the Bank in accordance with IFRSs as explained in note 2, and for such internal control as management determines is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, Whether due to fraud or error. The Bank Company Act, 1991 and the Bangladesh Bank Regulations require the Management to ensure effective intemal audit, internal control and risk management functions of the Bank. The Management is also required to make a self-assessment on the effectiveness of anti-fraud intemal controls and report to Bangladesh Bank on instances of fraud and forgeries. In preparing the consolidated and separate financial statements, management is responsible for assessing the Group's and the Bank's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group and the Bank or to cease operations, or has no realistic alternative but to do so, Those charged with governance are responsible for overseeing the Group’s and the Bank’s financial reporting process, Auditor’s Responsibilities for the Audit of the Consolidated and Separate Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion, Reasonable assurance is a high level of assurance, but is not a ‘guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement ‘when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and separate financial statements. [As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: ‘© Identify and assess the risks of material misstatement of the consolidated and separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. © Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. ‘© Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.Hoda Vasi Chowdhury & Co * Conclude on the appropriateness of management's use of the going concern basis of accounting, and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the Bank’s ability to continue as a going concem. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated and separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and the Bank to cease to continue as a going concern. © Evaluate the overall presentation, structure and content of the consolidated and separate financial statements, including the disclosures, 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. ‘We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other ‘matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors” report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on other Legal and Regulatory Requirements In accordance with the Companies Act, 1994, the Securities and Exchange Rules 2020, the Bank Company Act, 1991 and the rules and regulations issued by Bangladesh Bank, we also report that: (i) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit and made due verification thereof; (ii) to the extent noted during the course of our audit work performed on the basis stated under the ‘Auditor's Responsibility section in forming the above opinion on the consolidated financial statements and considering the reports of the Management to Bangladesh Bank on anti-fraud internal controls and instances of fraud and forgeries as stated under the Management's Responsibility for the financial statements and internal control: (a) internal audit, internal control and risk management arrangements of the Group as disclosed in the financial statements appeared to be materially adequate; (b) nothing has come to our attention regarding material instances of forgery or irregularity or administrative error and exception or anything detrimental committed by employees of the Group and its related entities {other than matters disclosed in these financial statements}; (iii) Consolidated financial statements of the Bank include two subsidiaries, namely NCCB Securities and Financial Services Limited and NCCB Capital Limited reflect total assets of BDT 278,774 million as at 31 December 2021 and net interest income of BDT 4,298 million for the year ended 31 December 2020. Out of these two subsidiaries of the Bank one subsidiary has been audited by(iv) w) wi) Hoda Vasi Chowdhury & Co other component auditors who have expressed unqualified audit opinion. However, NCCB Capital Limited has been audited by us. The results of these subsidiaries have been properly reflected in the Group’s consolidated financial statements; in our opinion, proper books of account as required by law have been kept by the Group and the Bank so far as it appeared from our examination of those books; the records and statements submitted by the branches have been properly maintained and consolidated in the financial statements; the consolidated balance sheet and consolidated profit and loss account together with the annexed notes dealt with by the report are in agreement with the books of account and returns; the expenditures incurred were for the purpose of the Bank’s business for the year, the consolidated financial statements have been drawn up in conformity with prevailing rules, regulations and accounting standards as well as related guidance issued by Bangladesh Bank; (ix) adequate provisions have been made for advance and other assets which are in our opinion, doubtful of recovery: (x) the information and explanations required by us have been received and found satisfactory; (xi) we have reviewed over 80% of the risk weighted assets of the Bank and spent over 7,050 person hours; and (xii) Capital to Risk-weighted Asset Ratio (CRAR) as required by Bangladesh Bank has been ‘maintained adequately during the year. SS an Wi, Sabbir Ahmed FCA, Partner Enrolment number: 770 DVC No: 2204240770AS660644 Hoda Vasi Chowdhury & Co Dhaka, 23 April 2022 Chartered AccountantsHoda Vasi Chowdhury & Co National Credit and Commerce Bank Limited and its Subsidiaries Consolidated Balance Sheet As at 31 December 2021 Note PROPERTY AND ASSETS, cash sia) In hand (including foreign currencies) Balance with Bangladesh Bank and ts agent banks) (including foreign currencies) Balance with other banks and financial institutions ta) In Bangladesh Outside Bangladesh Money at call and short notice 7 Investments 8a) Government Others Loans and advances ta) Loans, ash credits, overdrafts, ete Bills purchased & discounted Fixed assets including premises, furniture and fixtures Other assets Non-banking assets, TOTAL ASSETS ABILITIES AND CAPITAL abilities Borrowings from other banks, financial institutions and Deposits and other accounts current deposits and other accounts Bills payable Savings bank deposits Fixed deposits Teim deposits Other iailities [NCC Bank Subordinated and Perpetual Bonds 'Non-Convertible Subordinated Bonds Perpetual Bonds ‘TOTAL ABILITIES Shareholders’ equity Paid up capital Statutory reserve General reserve ‘Non-controling (Minorty interest Other reserve including assets revaluation reserve Foreign currency translation gairy(loss) reserve Surplus in prfit and loss account TOTAL SHAREHOLDERS’ EQUITY ‘TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY INET ASSETS VALUE PER SHARE 04a) 12(2) 32(3) 33 (a) a4(a) 15(a) 2021 2020 Taka Taka 11,919,043,306 13,988,739,499 2,254,884, 262 2,019,023,363 9,664,149,134 11,925,716.136 12,915,196,331 11,807,403,220 12,152,311,522, 11,608,604,505 762,884,810 198,798,715 3,409,757,795 803,002,000 49,587,730,012 43,680,844 481 39,732,674,095, 36,102,434,408 9,855,058,917, 7,878,410,073 192,114,415,599, 181,155,708,762 178,781,788,389 172,800,282,325 13,332,627,210 2,355,426 437 2,600,993,849 2,709,569,895 627,134,088, 4,938,298,789, 278,774,271,026 259080, 566,646 21,213,292,703 16,903,271,489 202,644,439,639 196,791,229,217 25 487,536,952 724,923,236,313 5,176,265,552 5,139,070,381 30,120,880,961 26,772,829,784 71,969,731,727 20,924,086,821 63,890,064 448 59,026,005,918 24,783,816,326 20,392,450,188 7,850,000,000 4,000,000,000, '3,200,000,000 %,000,000,000 4,650,000,000, 256,451,548 668, 10,168,709,670 9,683,081,550 10,162,348 209 656,383,250 1,065,462 1,793,319,770 22,322,722,358 21.95 238,086,950,803 1439264,810 3521234 10,162,388 203 108,533528 (98.7) 1563392385 9,040 565,506 20.61Hoda Vasi Chowdhury & Co 2021 2020 Tae Take ‘OFF BALANCE SHEET ITEM: Contingent labities Acceptances and endorsements 2a 33,930,922,863, 29,305,518,601 Letters of guarantee 212 31,782,545,829 29,772,694,200 Letters of credit issued 213 27,838,459,153, 18,406,036,266 Bill for collection a8 6,241,984,137 1,198 268,060 Other commitments Export development fund (EDF) 535,824 21,243,780 ‘TOTAL OFF BALANCE SHEETS ITEMS INCLUDING CONTINGENT LIABILITIES 99,794,457 806 79,703,760,807 ‘These financial statements should be read in conjunction with the annexed notes from 1 to 48 ea— a” . Me Oy uw S44. i / 4 Chairman Director Director See annexed auditor's report to the Shareholders ofthe date. Sade MK Sabbir Ahmed FCA, Partner DVC No: 220424077048 660644 Enrolment number: 770 Dated, Dhaka Hoda Vasi chowdhury & Co. 23 Api 2022 Chartered AccountantsHoda Vasi Chowdhury & Co National Credit and Commerce Bank Limited and its Subsidiaries Consolidated Profit and Loss Account For the year ended on 31 December 2021 2021 2020 Note Tala Toke Interest income 23{a)—13497,794514 15,919,163,127 Less: Interest paid on deposits and borrowings 2ala) 7,922,722,125 31)901,636,091 Net interest income 5.575,072,309, 1,297 728,306 Income from investments 2510) 3.649,476 803, 3.59500, 642 Commission, exchange and brokerage 25a) 1870877273 1,798,441,887 Other operating income za) 679,268,512 675,976,750, Total operating income ,774,698,977 O25 547 545 Salary and allowances 2310) 332,931,519, 7824 816,637 Rent, taxes, insurance electricity ete 2310) 534,779,405, 517423,247, Legal exenses a 177182,961 15225048, Postage, stamp, telecommunication etc 3ala) 62'987.700 63:310,185, Stationery ring, advertisement et 2a) 88,264,810 77,300,399 Chief Executive Office’ salary and allowances 2 16,560,968, 11735,854 Directors fees 8 other meeting related expenses ala) 3)674,500, 052,196 Auditor! fees 35a) 638,250 38,250 Charges on loan losses 356,651,295, 2751930 Repairsymeintenance amortization and depreciation of bark’sassets 36a) 432,183,577 451383.623, Other expenses 37le) 822,762,656 985,199.31 Total operating expenses 5260,727,569 2.965 48,641 Profit before provision 6.505 967 408 5,266 196,903 Provision fr loans anéacvances 2,005,114,503 3.240,567,537 Specie provision w4sala) [—2.066,668,369 620,059 General provsion 34s.(e) | (260,385,466) 370,479,468, Special general provision COVID-19 145.ale 198,791,000, 669,400,000.00 Provision fr off-balance sheet exposures 185(6) 96,685,448 : Provision for offshore banking unt 145(e) 48,676,429 29,502,322 Provision fo investment fuctuaton In shares 8313) : (120,000,000), Provision for other assets 142 44550,701, Prouison for star-up fund 143 : 52,442,503, Provision for nostro aezounts mu Total provisions 2150477 360 1207 368,068 Profit aftr provision for loans & advances and others items 355,490,028 Contabution to NCC Bank's CSR Fund 9 30,000,000 Profit before tax 77325 490,028 77028035,840 Provision for tax 1.820,792,637 1,795,158,432 Current tax 14 1 804,201,827 11658, 831,085 Deferred 3x 16,590,810, 136,327,387 Profit aftr tax for the year —_7s00597,390, __2733877.408 -tributable to: Shareholders’ ofthe bank F504 657,390 TERATT ADE Non-controing (Minorty) interest - : Balance of profit brought forward from lst year 202 144,402,675, 128,985,240 Total poft avaliable Z49,140,065- 362,562,648, Appropr statutory eserve BST BEOSI BLATT ABs General reserve ‘ : sss S Retained earings eas assis Earnings per share (EPS) 4310) 266 5 ‘These financial statements should be read in conjunction withthe annexed nates from 1 to 48 Gee aa S _ as ¥ aa: Se e chairman ~ Gieetor Director Managing Director 8 CEO SeeamesedaudtorsreporttotheSharetolesoftiedate, aN ‘sable Ahmed FCA, Partner OVC No: 22082407 70AS560648 Encalment number: 770 bated, Dhaka Hoda Vasi Chowdhury & Co, sangha Chartered Accountants 10Hoda Va: Chowdhury & Co National Credit and Commerce Bank Limited and its Subsidiaries Consolidated Cash Flow Statement For the year ended on 31 December 2021 2021 2020 Note Taka Tala 'A) Cash flows from operating activites Interest receipts 17,819,823,181, 17,240516,604 Interest payments (8,235,888,172) (22584,259,605) Dividend receipts 185,354,847 82,140,801 Fees & commission receipts 1,230278,245 1.119,122974 Recoveries of loans previously writen off 51,998,689 99,053,615 Cash pad to employees (3,008,454,813) (3.075,801,399) Cash pad to suppliers (232,199,451) (197,576,428) Income taxes paid (3,817,808 128) (1,960,953,668) Receipts from other operating activities 380) 1,198 516,182 1,354,565 495 Payments for other operating activites 39(0) (1,296 630,366) Operating cashflow before changes in operating assets and liabilities 780,177,808 Increase/(Oecrease) in operating asets 8 abilities: Purchase & sale of trading securities 2,141,756,084 (1,208,186,752) Loans and advances to customers (Other than banks) (21,315,358,061) 799,230,777 ther assets 40(a) (807,828,318) 973,264979 Deposit and borrowings from other banks 16,797,586,123, 4,283,386 889 Deposits from customers (Other than banks) (01,773,014.493) (4.362,413,682) Other fablties account of eustomers (559,206,487) (208,998,621) other liblties 41(a)___1,172,031,079 851,527,654 "Net Cash receipts from operating activites 1,584,060,421 1,916,969,101 8) Cash flows from investing activities Proceeds from sale of secures 2,790974,326 2,463,677,598 Payment for purchase of secures (10,738,744,737) (5,737,034,213) Purchase of property, plant and equipment (165,202,964) (251,315,433) Sales proceeds of fixed assets 10,563,118 22,508 Net cash used in investing activities (8.143.130.257) (3:523.349 450) €) cashflows fom financing activities Borrowings from other bank’ financial institutions and agents 5,105,346 268 3565,765,318 Issue/(cedumption) of ron-convertiblesuborcinated bonds (800,000,000) Issue of NCC Bank perpetual bonds 4650,000,000 Dividend paid (708,444,860) (1,394,068,355) Net cash receips/{payments) from financing activities 245,903,408 D) Net (decreazel/ increase in cath and cash-equivalents(A+B4C) 1,.686,851,573 £) Effects of exchange rate changes on ash and cash-equlvalents 1,164,233 (00,131) F) Cashand cash-equivalents atthe beginning ofthe year 26,565,758.718, 25,997,842.235 66} Cash and cash-equivalents atthe end ofthe year (OvE+F) 223) 25565, 758,718_ Net Operating Cash Flows Per Share These financial statements should be read in conjunction with the annexed notes from to 48 (Piya eae oe ay Gps ate Chairman Director Director ‘Managing Director & CEO Dated, Dhaka 23 Apri 2022 1Hoda Vasi Chowdhury & Co on 8 opaya sazeueN woma open murep ~ A / eae ee eae Ts one L Kae wS sat ere ‘esc‘st9’es6‘oz | See‘zee‘e9s't 607 |(tze's6) ‘B7zs'ees'sso't | sve'zot'ot | ver'tzy’ses’s OTs’ y97'6sv'6 OZ0z 49qwiazag TE Uo se aouejeg| wieeeceeree [occereesct | 6ot TavSBOT [ose ear9s9 [eve car or [ose Tao 63's | ocsteoc esr or aor soquso0q Te Uo Fe aurea 1098"rry GOL) [(098" vv "60Z) = = = (0207 JeaK By 105 puapinip yseD| = TOT TETTTST : : z [(098"vrr'602) 098" ry GOL evar eecvort lesvoreen tesroreen Tevore't iczoove' qecaimeaeoe | seeeeeast [eo uaa [aeseeseaot [wearer [rertaveess lomarere Te0e Kenver 10 uo se sone mI | owas, | ONeIRD auncooe soi pur | docunn) weeny: | ssn a anoso1 ho eo dn pe meporue revo ayord yy sniding menvet | jasseauprpu | yr9099 mers | reudesdn pred moNUE eon BEL UTSTUMOWY Tz0z 19quia29q TE UO papua seah ay3 405 ‘Auinb3 ul sadueyp jo wawarers parepyjosuoy SaLeIpIsqns Ss}! pue paywir] yueg e2saUIWOD pue ypasD jeUONeNHoda Vasi Chowdhury & Co eL zzoz dv ez eyeya ‘paved 01 Bsopana tuseueN sovauia wewey> 2 ) . _ + yn AF ) = ne san awh 2yueg 2tp Jo nba suapjoyoseys, a4) swuasaidos wowarers Aypinby a4 J024N594 29N feseeereeeee SereLToILoe [locv'esv'ave'e) | ca6'zrs'600T SeeOaT eave | COE GOES (GeH Kupnbh Wh] sov'evs ts¥95z s0e'9s6'60e'ts ass'erw'96e's€ [vr 600'v0e'TS foocr000'0s="7 070007008 = sze"sts'ebc've Eav99C Dore | OEVSIESCS | SO'STSTRE ess'sococt’s - z ess's9v 9215 TEFOREHOOTE | STOTT EY | CITSELTRT EY | TOTOIOUTETE | eae TeV OLTOR eoreerere'te g6esisecet | eroooreasz _[sv'esviic’s | verspe'asw'c | 0 Lor Li0's sue SUE THO WOT “59m BOTT VICBE TET TOVEWOL _[TESTWOOESTOS [DGCCGVEIETS [PAV EISUINEE [eI WOTELETD siosse (e01] 7 = = Sasso FU EGTOH TOT TEES ESCTETCIOT __[OROTHRTTE? | STORET TEST | TOF TTT OO rH E65'00977 Sees vo | Ser TST TEC Ors 6rs'6ee Terese Ts 665'StY' IT TOT OSE 900 EHNLE | caoce'ona'TE | e99'scooesw | cewacoea/ TE_| esO'ars TOT CIOEL 2856 oncenc'eie'st | ero'ser'eo'o | voo'tes set | oov’so'eve_|oze'sor'e6r'9 s6LUsC'60v'E = z = ‘S6LLSC6OVE Tee'ser'ste'zt - ‘000'000'00r coo'ove'sen’s | reessa'aze’s Shi Zane wu seotnea ‘966° €r0'6r6TE ve0'Tsv'9Ee'e zoe ceseas'e W529] sy reo. wer sieohs onoqy | wuorsieoks-t | uo sywuow zr-e | wuor sinvow Et eacaren suerrnse;| 1wew 240u 30N, ‘BELoTRUNOMY 1202 soquiao9q Tee Sv (sisAjeuy Ayamew Augen pue yssy) auawiarers Aypinbry parepijosuoy sovelpisqns si! pue pay] yueg a2sa WO pue yIpas9 |eUONeN,Hoda Vasi Chowdhury & Co National Credit and Commerce Bank Limited Balance Sheet ‘As at 31 December 2021 2021 2020 Note Take Taka PROPERTY AND ASSETS cash 5 11,919,083,386 13,944,739,499, In hand (including foreign currencies) 2,254,894,262 2,018,023,363 Balance with Bangladesh Bank and its agent bank (s) 9,664,149,134 11,925,716 136 (including foreign currencies) Balance with other banks and financial institutions 6 12,693,649,007 11754972247 In Bangladesh 11,530,768,188 11,586,173,532 Outside Bangladesh 762,884,810 198,798,715 Money at call and short notice 7 3,409,757,795, 804,002,000 Investments 8 49,297,598,713 43,482,024,431 Government 39,732,671,095 36,102,434 408 Others 9,564,927,618 1,379,590,023 Loans and advances 9 189,489,816,860 178,159,432,462 Loans, cash credits, overdrafts, ete 176,157, 189,650 169,804,006,025 Bills purchased & discounted 13,332,627,210 8,355,426 437 Fixed assets including premises, furnitures and fixtures 10 2,586,956,434 2,692,440,029 Other assets u 8,499,350,986 6,830,879,995 Non-banking assets - TOTAL ASSETS 277,894,173,191 257,668,490 663, LIABILITIES AND CAPITAL, Liabilities Borrowings from other banks, financial institutions and agents 2 21,178,628,213 16 835,287,260 Deposits and other accounts 3B 203,244,048 549, 197/021,114,755 Current deposits and other accounts 26,087,125,862 25,159,121,852 Bills payable 5,176,265,552 5,139,070,381 Savings bank deposits 30,120,880,961 26,772,828,784 Fixed deposits 71,968,731,727 80,924,086,821 Term deposits 69,890,004,448 59/026,005,918 Other liabilt 1“ 23,425,104,367 18,982,705,388, NCC Bank Subordinated and Perpetual Bonds 5 7,850,000,000 4,000,000,000, Non-Convertible Subordinated Bonds '3,200,000,000 4,000,000,000 Perpetual Bonds 4,650,000 000 5 TOTAL UABILITIES 255 697,817,129 236,839,107 402 Shareholders’ equity Paid up capital 162 10,168,709,670 9,459,264,810 Statutory reserve ” 9,693,081,550 8,835,421,234 General reserve 8 10,162,348 10,162,348 (ther reserve including assets revaluation reserve 19 656,383,350 1,085,533,528 Foreign currency translation gain/(loss) reserve 193 1,065,462 (98,773) ‘Surplus in profit and loss account 20 1,656 953,683 1439,100,111 ‘TOTAL SHAREHOLDERS! EQUITY 22,196,356,062 ‘TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY INET ASSETS VALUE PER SHARE 4 277,894,173,191 21.83 |Hoda Vasi Chowdhury & Co 2021 2020 Tata Teka (OFF BALANCE sHEer ITEMS Contingent abilities Acceptances and endorsements aa 33,930,922,863, 29,305,518,601, Letters of guarantee 22 31,782,545 829, 29,772,698,200 Letters of credit issued 213 27,838,459,153 19,406,036 166, Bil for clletion na 6,241,944,137 1.198 268,060 Other commitments Export development fund (€0F) 585,824 21,243,780 TOTAL OFF BALANCE SHEETS ITEMS INCLUDING CONTINGENT LIABILITIES 99,794,457,806 73,703,760;807, “These financial statements shouldbe red in conjunction with the annexed notes from 3to 48 Oe aw S. oy — / a CChaieman Director Director ‘Managing Director & CEO See annexed ausitor’s report to the Shareholders of the date Saku TKO, Sabbir Ahmed FCA, Partner Enrolment umber: 770 VC No: 220824077088660648 Hoda Vasi Chowdhury & Co. Dated, Dhaka Chartered Accountants 23 Apri 2022 15Hoda Vasi Chowdhury & Co National Credit and Commerce Bank Limited Profit and Loss Account For the year ended on 31 December 2021 note aon. 2020 Taka Interest income 2 s3si7es3952 —_15,955,058.062 (ess: teres pad on deposits and borrowings x Tai7226968 ___11618,65208 Net interest income De atoet Nee Income fom investoets 35 3ieou 67 182 Siszesoss? Commision exchange ane brokerage Fs 1655 205,252 1679470580 Other operating income 2 675.88.276 74361359 Tetal operating income Tisse.2, 70,373,000 Selryand allowances 2 2588 708568 276007882 Rent anes, surance lecricy et. Fe Spio41 258 503 858.05 Lepalerperses xo ‘.is29e1 15225088 Ponta, stamp, elecommunication et: 3 62309,898 62,790,285 Statonery, rnting aversemert ete 2 Br70986 Saag Chet enecstve Oficer salary and fees 3 16.660 968 11735854 Sector's fees & other mecting related expenses 3 $351,300 3748586 fuglos tes 5 575.000 75000 Charges on loan loses 356,551225 2731820 ops intenance amortization and deprecation of bak’ aes x 125387900 458205257 Other epenses, ” yea 372522 sess70.634 Total operating expenses 168 363 35 a7E 39.67 Prot before provaion 2367 78359 3700250535 Prowsion or lans ond advances 102128503 0.567537 Specie provision sasie) [208 cet.oco 555069 General provision 14516) ise 245.65) s70a73.468 Speci general provision COVIO-19 isi 356,701,000 | |___66,400,000.00 Provision fr of balance sheet exposures 14516) Sec8E AEs : Provsion for off shore banking unt raste) secre 23500322 Provaon for irvestmentfatution in shares a3 5 (120,000,000 Provsion or other sets 12 = ‘630,70. Provision for startup fund 13 : 52482508 Prowsion or oso accounts ret z : ‘otal provisions Toa aTSw TOTO Prot ater provision for loans & advances and others items Gis s01579 037.007 27 Conenbution to NC Bark’s C3 Fund us 39,000,000 3,000,000 Profit before tax 7358 301.573 p07 087.272 Provision fr tx 178737952 775380 348 Curent tax 143 yea 147182 TessOTS TEL Deferred tox waa 36550810 136527387 prof after tx forthe year 702,563 586 Tash Tuer Sorarce of pratt brought forward rom as year 203 congo eaaseel Total prot waite for dstrbuton ass amass Anprogriatons Sct reserve TROIS aaa Genera serve ae aa Retained earnings iss user avast Earnings pr shar (€°5) es “These financial statements should be rea in conjunction withthe annexed notes from 1 to 48. yea Kaw ou c ae ‘Chairman Director Director Managing Director & CEO see anesed auditor's reportothe tareoldersofthedate, San MRO, Sabbie Ahmed FCA, Partner Enrolment number: 770 Hoda Vasi Chowdhury & Co. Chartered accountants VC No: 22082807708S660648 Dated, Dhaka 23 April 2022 16Hoda Vasi Chowdhury & Co National Credit and Commerce Bank Limited Cash Flow Statement For the year ended on 31 December 2021 |A) Cash flows from operating activities Interest receipts Interest payments Dividend receipts Fees & commission receipts Recoveries on loans previously written off Cash paid to employees Cash paid to suppliers Income taxes paid Receipts from other operating activities Payments for other operating activities ‘Operating cash flow before changes in operating assets and liabilitis Increase/{decrease) in operating assets & liabilities Purchase & sale of trading securities Loans and advances to customers { Other than banks) Other assets DDepesits and borrowings from other banks Deposits from customers ( Other than banks) (Other liabilities account of customers Other liabilities Net cash receipts from operating activities Cash flows from investing activities Proceeds from sale of securities Payment for purchase of securities Purchase of property, plant and equipment Sales proceeds of fined assets Net cash used in investing activities ©) Cash flows from financing activities Borrowings from other bank's, financial institutions and agents Issve/|tedumption) of non-convertible subordinated bonds Issue of NOC Bank perpetual bonds Dividend paid in cash ‘Net cash receipts/(payments) from financing activities 1) Net increase/(decrease) in cash and cash-equivalents (ABC), ) Effects of exchange rate changes on cash and cash-equivalents F) Cash and cash-equivalents at the beginning of the year 6G) Cash and cash-equivalents atthe end of the year (D+E+F) ‘Net Operating Cash Flows Per Share Note 88 a a 2o21 2020 Taka Taka 17,839,732,619 17,276,412,580 (8,230,395,015)_(32,581,477,027) 150,438,980, 70,185,731 1,074,607,224 1,000,151,708 51,998,689 99,053,615 (2,968,383,847) (3,036,510,504) (206,544,798) (185,785,873) (1,777,787,083) (1,939,657,715) 1,395,232,896 1,352,950,295 (1,280,429,348) (2,273,055,541) 847,950,323 782,267,184 2,141,756,084 (1,208,186,752) (11,687,035,622) 374,372,593 (1,224,535,875) 978,954,885 15,830,899,862 4,346,063,397 (11,403,291,123) (4,343,212,615) (530,564,965) (279,103,764) 2,320,153,705 2,484,145,540 (10,253,667,190) (5,555,062,670) (64,522,583) (244,082,896) 10,486,168 284,038 (087,549,900) (3,623,735,928) 5 138,662,007 3,618,467,825 (200,000,000) : 4,650,000,000 : (703,444,860) (1,391,068,355) 3.279.217.1847, 2,227,399,471 1,517,735,220 612,610,833 4,164,233 (400,131) 26,513,327,746 25,901,117,044 25,032,227,198 726 513,327,746 130 1.98 ‘These financial statements should be readin conjunction with the annexed notes from 1 to 48 (pyr WS O% Awaw- / y chairman Director sted, Dhak 23 pr 2022 7 Si DirectorHoda Vasi a o uu @ > iS 5 <= sopaig sopand vewuyey> z ae f 3s —~ SABE eh ; uu ‘197’ EBE 67807 (rec"ee) ‘SzS'EESSBOT ‘Sve ZIT OT ‘ver Tev'sess ors pe esv'é ‘020z Jequieded TE UO se anuE|eg| 290'OSE'N6T CE 799590 t ‘Sve TIT OT 05S'T80°E69°6. 029°602'89T OF Tz0z Jaqwiadag TE UO se snue|eg| los8'vyv'602) * ~ 4 = ‘OZOZ 180A ay 205 PUPINP 4seD| eee ieee a ayy) paziuooas you (ss0))/uIe9 vone|sueN A>ua1IN9| we! (pausaysues 13H 7B WLH (spuOQ/siIq Asn lesrorezen lesrorezen jtzoowrn ETE ares — feseeraent — aera —frrreveews —[orsareave Tr Hamat Tow a we (supe suena | suomitomes | Ie elas Pinan Merny reL ur UnOUTY 10z saquia2eq TE UO papua seh ay) 404 ‘Ainbg uy saBueyp jo uawarers payuir] yueg arsauuW0D pue paid |eEuoNeNHoda Vasi ° 207 dv ez Ae eyeya ‘pared @ 3 E onzsopona ayseuen sopouia sopona veuseu g. a it 5 «pa be 8 ace i Sane er £ a u “jueg aun J fusnbo ssoprouoveys, sun swvaseidas woworers Ap feooasrseree [weer si Te eeaETIZ OOeTeEET TET ERT EOS leer-cxs'c69'sse__[eas'zas'zvs'es Bcc eow'oce'se Pisi90e ere'T9 0007000 0S8Z 00 000°059"F = poe ver'sev'ee___|eosrooe Taz" eeses0 ce fess'savocr's lose rerzes jess'soroct's [p66'280 790 86T TL OEE POU TE eseroreart __|earereterty [ror ov ore Te [sec tev 0199 fere'ves'ecr'te [sev'tea'tt6't GIs ET SESE VST'SE6'S6T'S evr esve facovess'9c06 uate g suonmnea jenUeUy “queG Jay WOH Bu gen arena Ta — arr eeH —ereareewer reroeree — reer =o : : SS 986 OSE 66r's rarozy rece 420} nevaaeaee BSE aR aie sara aerT DervesTr ar severe rao EIPRED UST Cr [tev ear se —[aroser cow ot —| wav tev eT aiesevzess aaa waivers —] ; ae Sea STOTT aes 3 Tea an SST TP setter [conor _[aosorsera __[aneresrs Leann sateen [veoravaece [ ror eesease 9 ats rar [wmseksoow | umorter | wmomouere | wmomouey TARE oto ‘veut 210W1 108 Brrorsunony ‘Tz0z sequiereg Tee sv (stshjeuy Aangeyy Anger pue y2ssv) quaworers Aupinbr paqwir] yueg aosaWWOD pue y1pas9 jeuONeNaa aaa 143 13a 1132 Hoda Vasi Chowdhury & Co National Credit and Commerce Bank Limited & Its Subsidiaries Notes to the Consolidated and Separate Financial Statements ‘As at and for the year ended 31 December 2021. Status of the Bank ‘The National Credit and Commerce Bank Limited (NCCBL i a scheduled commercial bank formed under Bank Company Act, {1981 and incorporated as a public banking company, limited by shares on 15th May 1993 with primary objective to carry on all kinds of banking business in and outside Baneladesh thevnegstered office of the Bank Is located at NCC Bank Bhaban, 13/1-2 Toyenbee Circular Road, Motiheel Commerca} ‘area, Dhaka-1000. It commenced its banking business with 16 branches from 17 May 1993 under the license letter no = ‘BCD{0)200/52-561/93 issued by Bangladesh Bank. Presently the Bank has 125 branches, 144 ATM all over Bangladesh and 62 (Two) collection booths at Uttara Model Town, Uttara, Dhaka and Mariknagar, North Golapbagh, Dhaka. The Bank has no overseas branch as at 31 December 2021. t carries out all banking activities through it branches in Bangladesh. The Bank vent for initial public offering in 1999 and is share is sted with Dhaka and Chittagong Stock Exchange Limited from 28 May 2000 and 26 May 2000 respectively as a publicly traded comoanv. Principal activities ‘The principal activites of the Bank are to provide all kinds of commercial banking services to is customers through itt branches following the provisions of the Banking Companies Act, 1991 (as amended up to 2018), Bangladesh Barks Directives and directives of other regulatory authorities Le, accepting customer deposits, lending to retall, small and medium enterprise (SME) and corporate customers, trade financing, lease fizancing, project financing, issuing letters of credit. interbank borrowing and lendine. dealie in government securities et. Offshore banking units offshore banking unit (OBU) is a separate business unit of NCC Bank Limited governed under the rules and guidelines of Bangladesh Bank. The Bank obtained permission for operation of offshore banking unis located at NCC Bank Shaban ranch & Agrabad Branch vide Bangladesh Bank letter no. BRPD (P-3)744(113)/2010-1688 dated on 02 May 2010 and subsequent approval yet to receive from Bangladesh Bank inline with the offshore banking policy issued by Bangladesh Bank vide BRPD circular no. 02 dated 25 February 2019 and amendment thereon. Our Offshore banking unit peration/transactions involve with fully foreign-owned enterprises in EP2s, PEPZs, £25 and Flktech Parks shal include al ormal financial services including accepting deposits, making short term loans/advances and investments, discounting bls, regotatng bil, esuing letter of crelt and guarantee etc. In addtion OBU discounts/purchase accepted usance/deferred bile against import from abroad and accepted usance/deferred export bil against direct and deemed exports. OB) condeets banking business activites inforelgn currencies, Separate financial statements of offshore banking unit are shown, in Annewure.0 Information regarding subsidiary «the Bank hes G2 (Two) fully owned subsidiary companies as at 31 December 2021. One of them isin operation on the Teporting date, Ths is NCCB Securities and Firanclal Services Limited. though the subscription of another fully owned Tbsiiary ‘NCCE Capital Limited’ has competed, full fledged operation of ths company is yet to start Information of subsidiary companies are given below: INCCB Securities and Financial Services Limited (NCCBSFSL) NCCB Securities and Financial Services Limited is @ subsidiary company of NCC Bank Limited incorporated as a private ompany, lnited by shares, on April 04, 2030 with the Registrar of Joint Stock Companies and Firms vide certfiate of incorporation no.©-83683/10 dated April 04, 2010 under the Companies Act-1994. NCCBSFSL commenced its operation thom March 07, 2011. The main objective of the company Isto act as a fll fledged stock broker & stock dealer to execute thoy end sell order and to maintain own portolio as wellas customers’ portfoio under the dcretion of customers, Financial statements for the year 2021 of the company are shown in Annexure-P. [NCCE Capital Limited (NCCBCL) NCCE Capita Limited (NCCBCL) is a subsidiary company of NCC Bank Limited incorporated as a private company, limited by Shares, en Apri 01, 2040 with the Registrar of Join Stock Companies and Firms vide certfiate of Incorporation no.C* 3629/10 dated Api 01, 2010 under the Companies, Act-1994. The main objective ofthe company is to provide full edged merchant banking services lke isue management, underwriting, advisory services & as and when regulators permits the company to cary out such activites as per ther guidelines. NCCBCL was nt in operation ti 31 December 2021 Financial statements of the company are shown in Annexure-Q. ‘Significant accounting policies and basis of preparation of financial statements Basis of preparation ‘The separate financial statements ofthe Bank as at and fr the year ended 31 December 2021 comprise those of Domestic onkirg Unt (Maln operations) and Offshore Banking Unit (08U) together referred to as ‘the Bank’, Consolidated financia} etemenes comprise those of the banklparent) and its subsidiaries together refered to as the group! and individual stjerred to 28 group eniies/subsidiares), Financial Statements of the Bank are prepared on a going concern basis under ‘he historeal cost convention and in accordance with First Schedule ofthe Bank Company Act 1991, as amended 2023, SSuPD Circular no, 14 dated 25 June 2003, other Bangladesh Bank circulars, International Accounting Standards, VASE) and Internetional Financial Reporting Standards (IFRSs) a8 adopted by the Institute of Chartered Accountants of Bangladesh, the Companies act, 3994, the Banglodesh Securities and Exchange Rules 1987 and guideline of Financial Reporting Cour (RC) Under Financial Reporting Aet, 2025, Wherever appropriate, such principles are explained in succeeding notes 20Hoda Vasi sxaksiventol Gorelonen Chowdhury & Co ‘The Financial Reporting Act, 2015 (FRA] was enacted in 2015, The Financial Reporting Council (FRC) under the FRA has been formed in 2017 and the council adopt IASs & IFRSs as standards vide gadget no-146/FRC/Admin/Gadget/2020/67 dated 02 November 2020 for preparing financial report. The Banking Companies Act, 1991 (as amended up to date) was amended to require banks to prepare their financial statements under such FRS. The consolidated and separate financial statements of the Group and the Bank have been prepared in accordance with International Financial Reporting Standards (\FRSs) a5 ‘adopted by the Institute of Chartered Accountants of Bangladesh (ICAB) and the requirements of the Banking Companies ‘Act, 1981 (3s amended up to date), the rules and regulations issued by Bangladesh Bank (88), the Companies Act 1994, the Securities and Exchange Rules 1987. Incase any requirement of the Banking Companies Act, 1991 (as amended up to date), and provisions and circulars issued by Bangladesh Bank differ with those of IFRSS, the requirements of the Banking Companies Act 1991 (as amended up to date}, and provisions and circulars issued by Bangladesh Bank shall prevail, Material departures from the requirements ofIFRSS ae as follows: i) Presentation of financial statements IFRS/IAS: As per IS 1: Presentation of Financial Statements, 2 complete set of financial statements comprises a statement of financial postion, a statement of profit or loss and other comprehensive income, a statement of changes in equity, ‘Statement of cashflows, notes comprising a summary of significant accounting policies and other explanatory information ‘and comparative information. IAS 1 has also stated the entity to disclose assets and labilties under current and non-current classification separately nit statement of financial postion. Bangladesh Bank: The presentation of the financial statements in prescribed format (e. balance sheet, profit and loss account, cash flow statement, statement of changes in equity, liquidity statement) and certain disclosures therein are {uided by the First Schedule (section 38) ofthe Bank Company Act 1991 (amendment up to date] and BAPD circular no. 18 dated 25 June 2003 and subsequent guidelines of Bangladesh Sank. Inthe prescribed format there is no option to present ‘assets and liabilities under current and noncurrentclasificatons. i) Investmentin shares and securities (Equity Share, Mutual Funds etc) TERS: As per requirements of IFRS 9 Financial Instruments, classification and measurement of investment in shares and ‘securities will depend on how these are managed (the entity's business model) and their contractual cash flow cheracterstcs. Based on these factors it would generally fall either under “at fair value through profit and loss account” or “inder “at far value through other comprehensive income” where any change in the fair value (as measured in accordance vith IFRS 13) atthe year-end s taken to profit and loss account or other comprehensive income respectively Bangladesh Banke As per BRPO ciculr no. 14 dated 25 June 2003 investments in quoted shares and unquoted shares are evalued at the year end at market price and as per net asset value (NAV)/book value of last audited balance sheet respectively. As per instruction of OOS circular letter no. 3 dated 12 March 2015 and 28 June 2025, investment in mutual fund (closed-end) is revalued at lower of cost and (higher of market value and 95% of NAV). As such, provision is made for any loss arising from diminution in value of investments (portfolio basis); otherwise investments are recognized at costs Provision should be made for any loss arising from diminution in value of investment; otherwise investments are recognized atcost. Revaluation gains/losses on Government Securities IFRS: as per requirement of IFRS 9 where securities will fall under the category of Far value through Profit and Loss ‘account, any change in the fair value of held for trading assets is recognizes through profit and loss account. Where eeurites are measured’at fair value through other comprehensive income then gins or losses shall be recognized in other Comprehensive income (OC), except for impairment gains of losses and foreign exchange gains and losses. The loss Sitowance arise from Impairment shall be recognized in OCI and shall not reduce the carrying amount of financial asets in the Financial Postion, Securities designated as amortized cost are measured at effective interest rate method and interest income is recognized through the profit and loss account. Bengledesh Banke Recording to Department of Offsite Supervision (DOS) Circular # 05, dated 26 May 2008 and subsequent Canieation in DOS Circular # 05, dated 28 January 2009 of Bangladesh Bank, loss on revaluation of Government securities {Tbil/T-bond) which are categorized as held for trading will be charged through Income accounts, but any gain on such Tevaluation should be recorded under revaluation reserve accounts. However, atthe year-end if there is any revaluation fain for any particular held for tracing T-bill /T- bonds, such gain canbe used to the extent of any revaluation loss for that particular held for trading T-ils/-bonds. T-ils/T-bonds designated as held to maturity are measured at amortized cost method but interest income / gain should be recognized through revaluation reserve. iv) Provision on loans and advances/investments IFRS: As per IFRS 9: Financial Instruments, an entity shall recognize an impairment allowance on loans and advances based don expected credit losses. At each reporting date, an entity shall meesure the impalrment allowance for loans and advances stan amount equal to the lifetime expected credit losses if the credit risk on these loans and advances has increased Slenticantly since intial recognition whether assessed on an individual or collective basis considering all reasonable information, including that which is forward-looking, For those loans and advances for which the credit risk has not increased sgnifcanty since initial recognition, at each reporting dat, an entity shall measure the impalrment allowance at namount equal to 12 month expected credit losses that may result from default events on such loans and advances that ‘are possible within 12 months after reporting date, aHoda Vasi Chowdhury & Co Bangladesh Bank: As per BRPD Circular #14, dated 23 September 2012, BRPO Circular #19, dated 27 December 2012, BAPD Cireular #05, dated 29 May 2013, BRPD Circular #16, ated 18 November 2014, BRPD Circular #08, dated 02 August 2035, {RPO Circular #15, dated 27 September 2017 and BRPD Circular #02, dated 20 February 2028, BRPD circular # 07 dated 2 June 2018, RPO circular #13 dated 18 October 2018, BRPD cular W dated 21 Apri 2019, BRPO circular #16 dated 21 July 2020, BRPO circular # 52 dated 20 October 2020, RPO circular # 5 dated 10 December 2020, BRPD circular # 52 dated 29 December 2021 a general provision at 0.25% to 2% under different categories of unclassified loans (standard and SMA loans) has to be maintained regardless of objective evidence of impairment. Also provision for substandard loan, doubtful loans and bad losses, should be provided at 20%, 50% and 100% respectively for loans and advances depending on the duration of overdue. Again as per BRPD Circular # 10, dated 18 September 2007 and BRPD Circular # 0, dated 03 Janvary 2018, a general provision at 1% should be provide for all of balance sheet exposures except general provision against the Lc for First Track Power Suooly Proiecs. ‘Mi Recognition of interest suspense TERS: Loans and advances to customers are generally classified at amortized cost as per IFRS 9: Financial Instruments and interest income i ecognized by using the effective interest ate method tothe gross carying amount over the term ofthe loan. Onee loan subsequently become credi-mpaired, the entity shall apply the effective interest rate to the amortized cost ofthese loans and advances. Bangladesh Bank: As per BRPD cicular no, 14 dated 23 September 2012, once a loan is assed, interest on such loans are not allowed to be recogrized as income, rather the corresponding amount needs to be credited to an interest in ‘suspense account, which s presented as labilty inthe balance sheet. vi) Other comprehensive income and appropriation of profit IFRS: As per IAS 1 ether comprehensive income (QC!) lt a component of financial statements or the elements of Ol are to te included ina single other comprehensive income statement. FAS do not require appropriation of profi tobe shown on the face ofthe statement of comprehensive income. ‘Bangladesh Bank: Bangladesh Sank has isued templates for financial statements which wil strictly be folowed by allbanks in Bangladesh. The templates of financial statements isued by Bangladesh Bank neither include other comprehensive income nor are the elements of other comprehensive income allowed to be included in a single other comprehensive income (OC!) statement. As such the Bank does not prepare the other comprehensive income statement. However, elements of OC if any ae shown in the statements of changes in equlty. vil Financial instruments presentation and disclosure tn several cases Bangladesh Bank guidlines categories, recognize, measure and present financial instruments differently from those prescribed in IFRS 8: Financial Instruments. As such full disclosure and presentation requirements of “IFRS 7: Financial instrument Disclosures" and "IAS 32: Financial Instruments-Presentation” cannot be made in the accounts vii Financial guarantees IFRS: As per IFRS 9: Flnancal Instruments financial guarantees are contracts that require the issuer to make specified pavments to reimburse the holder for a loss it incurs because a specified debtor fais to make payment when due in ccordance wit the original or modified terms of a debt instrument. Financial guarantee lables are recognized intially at ther far value plus tansection cost that are directly attributable to the Issue of the financial lables. The financial fuarartee lability is subsequently measured a the higher ofthe amount of los allowance for expected credit losses as per Impairment requirement and the amount Intaly cecognied less, income recognized in accordance withthe principles of IFRS 15. Financial guarantees are included within other labile. Bangladesh Bank: As per BRPD 14, financial guarantees such as letter of credit, letter of guarantee will be treated as off- balance sheet items. No liability s recognized for the guarantee except the cash margin. In) Cash and cash equivalent {FRS: Cash and cash equivalent items should be reported as cash iter as per IAS 7 ‘Bangladesh Bank: Some cash and cash equivalent items such as ‘money at cal on short notice’, treasury bil, Bangladesh Bank bil and prize bond are shown as cash and cash equivalents, Money at call on short notice presented on the face of the balance sheet, and treasury bills and prize bond are shown in investments, x) Repo and Reverse Repo transactions IFRS: As per IFRS 9: Financial Instruments, When an entity sells a financial asset and simultaneously enters into an ‘agreement to repurchase the asset (ora similar asst) at a fixed price on a future date (REPO), the arrangement is weated {5 @ loan and the underlying asset continues to be recognized at amortized cost in the entity's financial statements, The diference between selling price and repurchase price will be treated as Interest expense. The same rule applies to the Opposite side of the transaction (reverse repo).rest expense. Same rule applies to the opposite side of the transaction (reverse repo). ‘Bangladesh Bank: As per BRPD guidelines, when a bank sells a financial asset and simultaneously enters into an agreement to repurchase the asset (or a similar asset) at a fixed price on a future date (REPO or stock lending), the arrangement is accounted for as normal sales transactions and the financial assets are derecognized in the seller's book and recognized in the buyer's book. 222 23 24 Hoda Vasi Chowdhury & Co ai) Non-Banking Assets {FRS: No indication of non-banking asset i found in any IFRS. Bangladesh Bank: As per BRPD 24, there must be stated a face item named as non-banking asset. il) Cash flow statement IFRS: The Cashflow statement can be prepared using either the direct method or the indirect method. The presentation is selected to present these cash flows in a manner that is most appropriate for the business or industry. The method selected 's applied consistent Bangladesh Bank: As por BRPD 14, cashflow isthe mixture of direct and indirect methods. xii) Balance with Bangladesh Bank: (Cash Reserve Requirement) IFRS: Balance with Bangladesh Bank should be treated as other asset a itis not availabe for use in day to day operations as. per as 7 Bangladesh Bank: Balance with Bangladesh Bankis trated as cash and cash equivalents iv) Presentation of intangible asset IFRS: An intangible asset must be Identified and recognized, and the disclosure must be given as per AS 38. Bangladesh xu) Off-balance sheet items nk: There Is no regulation for intangible asets in BRPO 18. IFRS: There is no concept of off-balance sheet items in any IFRS; hence there is no requirement for disclosure of off-balance sheet items on the face of the balance sheet. ‘Bangladesh Bank: As per BRPD 14, off balance sheet items (e.g. Letter of credit, Letter of guarantee etc.] must be disclosed separately on the face ofthe balance sheet. aul) Loans and advances/Investments net of provision IFRS: Loans and advances/Investments should be presented net of provision. Bangladesh Bank: As per BRPD 14, provision on loans and advances are presented separately as liabilty and cannot be netted off against loans and advances. Going Concern basi of accounting ‘The accompanying financial statements have been prepared on a going concern assumption that the Bank will continue in operation over the foreseeable future. The bank has neither any intention nor any legal or regulatory compulsion to liquidate or curtail materiality the scale of any of Its operations. Key financial parameters (including liquidity, profitability, asset quality, provision sufficiency and capital adequacy) ofthe bank continued to demonstrate a healthy trend for a couple fof years. The rating outlook of the Bank as reported by all the rating agencies is Stable’, The management do not see any Issue with respect to going concern due to recent pandemic COVID-19. Besides, the management is not aware of any ‘material uncertainties that may cast significant doubt upon the Bank's ablity to continue as going concern, Basis of consolidation ‘The consolidated financial statements include the financial statements of NCC Bank Limited and its subsidiary companies - ICCB Securities and Financial Services Limited & NCCB Capital Limited. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards 10-"Consolidated Financial Statements”. The Consolidated Financial Statements are prepared to common financial ear ending 31 December 2021, Subsidiary Subsidiary isthe enterprise whichis controlled by the patent company. Control exists when the parent company has the power, directly and indirectly, to govern the financial and operating policies of an enterprise from the date that control commences until the date that control ceases. The financial statements of subsidiary are included in the consolidated financial statements from the date that the control effectively commences until the date that it control effectively ceases, Subsidiary company is consolidated using the purchase method of accounting, Transactions eliminated on consolidation all intra-group transactions, balances, Income and expenses are eliminated on consolidation. Profit and loss resulting from transactions is also eliminated on consolidation. Use of estimates and judgments In the preparation of financial statements, management requires to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amaunts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected. The key tem which involve these judgements, estimates and assumptions are discussed below: 2325 26 27 28 aaa aaa Hoda Vasi Chowdhury & Co Impairment losses on loans and advances 'n addition to the provision made for loans and advances based on the guidelines of Bangladesh Bank, the Bank reviews its loans and advances portfolio on a quarterly basis to assess whether a further allowance for impairment should be provided in the income statement. Judgements by the management is required in the estimation of these amaunts and such estimations are based on assumptions about a number of factors, though actual results may differ resulting in future changes to the provisions (Other key items where estimates or judgement were involve 2) Deferred Tax b) Useful ie of fixed assets and right of use of assets Revaluation of land & buildings 4) Defined benefit obligation-gratuty €) Lease liabilities f) Provision for taxation Functional and presentation currency ‘The financial statements are presented in Bangladeshi Taka whichis the Bank's functional currency. The functional currency of the Bank Off-shore banking unit is USD. Financial statements of OBL has been translate into the presentation currency, |e, Bangladeshi Taka (8DT) following the guidelines of 1AS 21: The Effect of Changes in Foreign Exchange Rates. wludes: Foreign currency transaction/transiation 2) Foreign currencies transaction/translation Foreign currency transactions are converted into equivalent taka using the ruling exchange rates on the dates of respective transactions as per 1AS-21 "The Effects of Changes in Forelgn Exchange Rates". Assets and liabiltis in foreign currencies at 231 December 2021 have been converted into Taka currency at the average of the prevailing buying and selling rates of the relevant foreign currencies at that date except “Balances with other Banks and Financial Institutions” which have been converted as per directives of Bangladesh Bank vide its circular no. BRPD(R) 717/2004-959 dated 21 November 2008, b) Commitments Contingent labilties / commitments for letters of credit and letters of guarantee denominated in foreign currencies are ‘expressed in BDT at the rates of exchange prevailing on the balance sheet date. Translation gains and losses ‘The resulting exchange transaction gains and losses are included in the profit and loss account, except those arising on the translation Cash flow statement Cash flow statement has been prepared in accordance with the BRPO Circular No. 14, dated June 25, 2003 Issued by the Banking Regulation & Policy Department of Bangladesh Bank. It reported cash flows during the year classified under operating activites, investing activities and financing activites. Liquidity statement ‘The liquidity statement of assets and liabilities as atthe reporting date has been prepared on residual maturity term as per the following bases 1) Balance with other banks and financial institutions, money at call and short notice, etc. are shown on the basis of thelr maturity erm; i) Investments are on the basis of thelr respective maturity; ii) Loans and advances / investments are on the bass of thelr repayment schedule; |v) Fixed assets are on the basis oftheir useful lives; \¥) Other assets are on the basis of thelr realization / amortization; \i) Borrowing from other banks, financial institutions and agents, etc. areas per thelr maturity / repayment terms; vill Deposits and other accounts are on the basis of thelr maturity term and past trend of withdrawal by the depositors; i) Provisions and ether lablties are on the bass of thelr payment / adjustments schedule. Reporting year ‘These financial statements cover the year from 01 January to 31 December 2021. Offsetting Financial assets and financial liabilities are offset and the net amount reported in the balance sheet when there isa legally enforceable right to offset the recognized amounts and there is an intention to settle on a net bass, realize the asset and settle the iabilty simultaneously ‘Assets and basis oftheir valuation ‘Cash and cash equivalents ‘Cash and cash equivalents include notes and coins on hand, balances held with Bangladesh Bank & other Banks and Fl and price bond which highly liquid financial asset which are subject to insignificant risk of changes in their fair value and are used by the bank management for its short-term commitments. 242aa2 2113 Hoda Vasi Chowdhury & Co Loans and advances 2 Loans and advances ar stated in the balance sheet on gross basis interest isclculated on a dally product basis but charged on quarterly basis and accounted for on accrual basis, Interest on classified loans and advances are kept in suspense account as per Bangladesh Bank instructions and such interests not accounted fr as income unt realized from borrowers [please refer Note- 9.11 (Interest isnot charged on bad and loss loans 2s per guidlines of Bangladesh Bank. Records of such interest amounts ar kept in separate memorandum accounts €) The Bank are providing concessional interest rare to its good borrowers. 4) Provision for loans and advances Is made on the basis of quarter-end review by the management following instructions contained in Bangladesh Bank BRPD Circular no.14 dated 23 September 2012 and BRPD Circular no.19 dated 27 December 2012, BRPO Circular no,5 dated 29 May 2013 BRPO Circular no.16 dated 18 November 2014.8APD circular no 12 dated 20, ‘August 2017, BRPD circular no 15 dated 27 September 2017, BRPD circular no 1 dated 3 January 2018, BRPO circular no 1 dated 20 February 2018, BRPD circular no 3 dated 21 April 2019, BRPD circular no $2 dated 20 October 2020, BRPD circular 10 56 dated 10 December 2020 and BRPD Circular no 52 dated 29 December 2021.The provision rates are given belo Particulars Standard | SMA Doubtful (OF) | Bad & Loss (BL) [Consumer financing - House building 1% 1% 20% 50% 100% [Consumer financing Loans or rofessional & Credit card Rad ia = iaead am [consumer financing - Other than house building, Loans for Professional & Credit | 2% ™ 20% 50% 100% cara [small and medium enterprise financing | 0.25% | 0.25% 3% 20% 100% [toans to BH, MBs ete ™% 2%, 20% 50% 100% [short Term Agriculture/Micro Credit 1% 1% 3% 3% 100% [a others creat 1% ws 20% 50% 100% Special general provision COVID-39 2% [NA NA WA NA [off balance sheet exposure a | wa NA NA WA €¢) Loans and advances with no realistic prospect of recovery have been written off against which full provisions are made and legal cases has been initiated. Detalled memorandum records forall such writen off accounts are maintained, Investments Al investments on securities are initially recognized at cost, being fair value ofthe consideration given, including acquisition charges associated with the investment. Premiums are amortized and discounts accredited, using the effective yield method ‘and are taken to discount income, The valuation methods of investments used are: Held to maturity (HTM) Investments which have fixed or determinable payments’ and are intended to be "held to maturity other than those that meet the definition of "held at amortized cost-others' are classified as held to maturity. These investments are subsequently Treasured at present value as per Bangladesh Bank guideline. Investments in securities have been revalued as mark to imarket as at 21 December 2021. The gain of revaluation from the held to maturity securities has been shown in the statement of changes in equity of 31 December 2021. Held for trading (HFT) Investments classified in this category are acquired principally forthe purpose of selling or repurchasing in shorttracing oF if designated a8 such by the management after intial recognition, investments are measured at fair value and any change in the far value is recognized inthe profit & loss account forthe year in which it arises. These investments are subsequently revalued at current market value on weekiy basis as per Bangladesh Bank guidelines. Revaluation gain has been shown In revaluation reserve account & revaluation loss has been shown in profit & loss account. Value of investments has been enumerated as follow: item [nitiat Recog: | Measurement Arter Reeog. Records/charaes (Government easury bile T™ Cost ‘Amortized Cost [Changes in value to equity reserve [Governmant treasury bils-HFT Cost Fair value Loss toP/L& gain to equity reserve [Government treasury bonds: HTM ‘cost “Amortized Cost [Changes in value to equity reserve [Government treasury bonds HET Cost Fairvalue Loss to PL & gin to equity reserve Prize bonds, Cost Cost [charges to Profit & Loss Account 252a 21s, Hoda Vasi Chowdhury & Co Investment in listed securities ‘These securities are bought and held primariy for the purpose of seling them in future or held for dividend income. Unrealized gains are not recognized in the profit and loss account. But provision for diminution in value of lvestment is provided inthe financial statements which market pice s below the cost price of investment. Provision against mutual fund Calculated as per 8.8 DOS Circular No-10 dated 28 June 2015 (Note-8.3) Investment in unquoted securities Investment in unquoted securities is reported a diminishing value based on NAV of those securities a8 on date. Adjustment 's gven for any shortage of book value over cost for determining the carrying amount of investment in unquoted securities Investment in subsidiary Investment in subsidiary Is accounted for under the cost method of accounting in the Bank's financial statements in accordance with the IRFS-10, Accordingly, Investment in subsidiary is stated in the Bank's balance sheet at cost, less impairment losses if any. Property, plant and equipment Recognition and measurement All fixed assets except land and buildings/office premises are stated at historical cost which land and building/oftice premises at revalued amount (whenever applicable) less accumulated depreciation as per 1AS -16" Property, Plant and Equipment’. The cost of acquisition of an asset comprises its purchase price and any directly attributable cost of bringing the assets to its working condition for ts intended use inclusive of inward freight, duties and non refundable taxes. Subsequent cost The cost of replacing part of such an item of fixed assets is recognized inthe carrying amount of an item of property, plant and equipment if itis probable that the future economic benefits embodied withthe part will flow to the company and the Cost of the item can be measured reliably. The cost of day to day servicing of fixed asset is recognized in profit and loss as incurred. Capital work in progress Some development work is under process is recognized and reported under fixed assets as per IAS 16 a5 capital work in progress until the construction work is completed and the asset is ready for intended use. This asset is stated at cost and depreciation of the asset willbe charged from the date ofits intended use, Depreciation Depreciation is charged for the year at the following rates on reducing balance method on all fixed assets other than vehicles and Computer Equipment on which straight line depreciation method i followed and no depreciation is charged on lands [Category of ‘Method of Depreciation Rate of depredation and N/A Nil Building OFice premises Reducing balance method 750%. Furniture & foture. Reducing balance method 1095 t0 20% [Machineries & equipment Reducing balance method 20% [Computer equipment ‘Straight ine method 20% [vehicles ‘Straightline method 20% ‘For additions during the year, depreciation is charged forthe remaining days of the year and for disposal, depreciation is charged up to the date of disposal 1) On disposal of fixed assets the cost ant (Floss on such disposal is reflected in the profit and loss account whi ‘of the assets and net sale proceeds. Intangible assets 1d accumulated depreciation are eliminated from the fixed assets schedule and gain ich is determined with reference tothe net book value 4) An intangible asset is recognized if tis probable that the future economic benefits that are attributable tothe asset will flow to the entity and the cost of assets can be measured reliably. +) Software represents the value of computer application software licensed fr use ofthe Bank, other than software applied to the operation software system of computers ntangi any impairment losses. Initial cost comprises license ‘expenditures that are incurred in customizing the software for its intended use. «) Software is being amortized using the following method and rates: ible assets are caried at its cost, less accumulated amortization and fees paid at the time of purchase and other directly attributable [Category of intangible assets ‘Method of Amortization Tate of amortization software ‘Suraight ine method 20% 262416 2an7 2a18 29 2ana0 Hoda Vasi Chowdhury & Co Other assets Provision for other assets Other assets have been classified as per BRPD circular no, 14 dated 25.06.2001 of Bangladesh Bank and necessary provisions have been made thereon accordingly and for item not covered under the circular, adequate provision have been made considering theie recoverability Securities purchased under resale agreement Securities purchased under re-sale agreements are treated as collateralized lending and recorded atthe consideration pald and interest accrued thereon. The amount lent shown as an aset either as loans and advances to customers or loans to other banks The diference between purchase price and resale pic i treated a interest receved and accrued evenly over the Iie of REPO agreement Receivables Receivables are recognized when there isa contractual ight to receive cash or anther financial asset from enother entity Inventories Inventories are measured as per IAS-2 Leases [NCCBL has applied 1FRS-16: Leases for the fist time with the date of inital application of 01 January 2019. As IFRS 16 supersedes 1A 17: Leases, the bank has made recogrition, measurement and cisclosure in the financial statements of 2023 both as Lessee and Lessor as per IFRS 16, Bank as lessee: The bank assesses at initiation ofa contract whether the contact i, or contains a lease, That is if the contract conveys the right to contol the use ofan identified aset for a year of time in exchange of consideration, then the bank consider the contract as lease contract. ‘The bankas a lessee applies a single recognition and measurement approach for al leases, except fr short-term leases, oF, and lease of low value of assets. The bank recognizes lease liabilities to make lease payment and rignt-of-use assets representing the right to use the underlying assets FF tenor of a lease contract does not exceed twelve months from the date of nitiation/appliction, the bank considers the Tease year as short termi ine wit the recognition threshold of ROU asets as per Fixed Asset policy ofthe bank. In case of Tow value of lease assets, the bank has set a materiality threshold whichis 0.10% of Total capital ofthe Bank. However, as its adopted forte fis time, the bank used aft threshold of 80T 20 milion and above! which is 0.062% of total capita of the bank 9s of 31 December 2021. The reason behind considering the materiality threshold of BDT 20 milion and above is thatthe bank operates many ATM booths, sub-branches with short and single contracts; recording of which as ROU assets vtould inate the balance sheet both in assets and lables. Moreover, frequent changes of those establishments would create misreporting as well as complexity in recording Right-of-use assets (ROU): “The bank recognizes the rght-o-use assets (ROU) atthe commencement date ofthe lease (Le, the date the underving asset is available for use). ROU assets are measured at cost less any accumulated depreciation and impairment of losses and adjusted for any measurement of lease lablties. The cost of ROU assets includes the amount of lease liabilities recognized, initial direct cost incurred, and lease payment made at or before the commencement date less any lease incentives fecelved. Right-ofuse assets are depreciated on a straight line basis over the lease term, or remaining year ofthe lease term. ‘The bank assessed all lease contracts live in 2021 and recognized as ROU of assets ofall leases, except short term and low value of assets as parameter guided by Bangladesh Bank and Banks’ own policy set as per IAS 16 and IFRS 16. As leases vider IFAS 16 has been first time adopted by the bank, the bank has followed modified retrospective approach of adoption with the date of intial application of O1 January 2019. Therefore, the bank considered a cut-off date beginning of the year soz and reassessed unadjusted advance payment and remaining lease year of each contract, ond recognized those in the jinencial statements for the year ended 31 December 2021 without giving retrospective impact in earlier presentation, The RoU assets are presented in the note 10.1 ofthese financial statements Lease Liabilities (Bank as a lessee): ‘at the commencement ofthe lease, the bank recognizes lease labilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed and variable lease payment (les any adjustment for intial payment), and amount is expected to be pald under residual value of guarantees. The lease payments aso include the aercise price of purchase option reasonably certain to be exercise by the bank and payment of penalties for terminating the lease, in 2021, the bank reassessed all lease payment of existing contracts for remaining year considering a cutoff date ie. OF January 2021. The lease liabilities are presented in the note 14.12 of these financial statements ‘The bank as lessor When the Bank acts as a lessor, it determines at lease Inception whether each lease is a finance lease or an operating lease ‘The Bank has no such lease in reporting date araan 2anz 2anas 2anaa 2a 23 245, 216 2a7 238 2a. Hoda Vasi Chowdhury & Co Non-banking assets Non-banking assets were acquired due to fallure of borrowers to repay the loan in time taken against mortgaged property. ‘The Bank has been awarded ownership of few mortgaged properties vide verdict under section 33(7) ofthe Artharin Adalat ‘Act, 2003. Such properties have not been recognized as non banking assets as value measurements of the properties yet to process. ‘Reconciliation of inter-bank and inter-branch account ‘Accounts with regard to inter-bank (in Bangladesh and outside Bangladesh) are reconciled regularly and there are no material differences which may affect the financial statements significantly Un-reconciled entries / balances in case of iter-branch transaction as a the reporting date are not material Materiality and aggregation ach material tem considered by the management as significant has been displayed separately in the financial statements. No amount has been set off, unless the Bank has a legal right to set off the amounts and intends to settle on net basis Income and expenses are presented on a net basis only when permitted by the relevant accounting standards. Comparative information Accounting polices have been consistently applied by the Bank and are consistent with those used in the previous year. Comparative information is rearranged wherever necessary to conform with the current presentation. Share capital Ordinary shares are classified as equity when there is no contractual obligation to transfer cash or other financial assets Statutory reserve ‘The Bank Companies Act, 2993 (Amended up to date) requires the bank to transfer not less than 20% of its current year profit before tax to reserve until such reserve equals to Bank's paid up capital Revaluation reserve ‘when an asset's carrying amount is increased as a result of a revaluation, the increased amount credited directly to equity under the heading of revaluation surplus/reserve as per IAS-16: "Property, Plant and Equipment”. The Bank revalved the assets of land and buildings last in 2012 which is absolutely own by the Bank and the increased amount transferred to revaluation reserve account accordingly. The tax effects on revaluation gain are measured and recognized in the financial statements as ver IAS-12 "Income Tax" 'Non-controlling (Minority) interest in subsidiary Non-controlling (Minority) interest in business is an accounting concept that refers to the portion of 2 subsidiary corporation's stock that is not owned by the parent corporation. The magnitude ofthe non-controling (Minority) interest in the subsidiary company is always less than SO% of outstanding shares; else the corporation would cease to be @ subsidiary of the parent. Non-controlling (Minority) interest belongs to other Investors and is reported on the consolidated balance sheet of the owing company to reflect the claim on assets belonging to other, non-controlling shareholders, Also, non controling (Minority) interest is reported on the consolidated income statement as a share of profit belonging to non- controlling (Minority) shareholders. Deposits and other accounts Deposits by customers and banks are recognized when the bank enters into contractual provisions of the arrangements withthe counterparties, which is generally on trade date, and intially measured at the consideration received. Borrowings from other banks, financial institutions and agents Borrowed fund Include call money deposits, borrowings from Bangladesh Bank and other Banks. They are stated in the balance sheet at amounts payable. interest pald/payable on these borrowings 's charged to the profit and loss account. Disclosures on borrowings against REPO are shown in Annexure-J, ‘Basis for valuation of liabilities and provisions Provision for taxation “The current tax payable is based on taxable profit for the year. Taxable profit aifers from profit as reported inthe Profit & oss Account because it excludes items of Income or expense that are taxable or deductible. The Bank's ibility for current taxis calculated using tax rates that have been enacted or substantively enacted before the date of balance sheet. Provision for current income tax has been made @ 37.50% on accounting profit made by the Bank after considering some ofthe add backs of income and disalowances of expenditure as per Income Tax Ordinance 1984, 282182 2183 2184 2185, Hoda Vasi Chowdhury & Co Deferred taxation Deferred tax labilties are the amount of income taxes payable in future years in respect of taxable temporary differences. Deferred tax assets are the amount of income taxes recoverable in future years in respect of deductible temporary differences. Deferred tax assets and liabilities are recognized for the future tax consequences of timing diference arising between the carrying values of assets, liabilities and their respective tax bases, Deferred tax assets & labllties are measured using tax rates and tax laws that have been enacted or substantially enacted at the balance sheet date. The impact on the account of changes in the deferred tax assets and liabilities has also been recognized in the profit and loss account as per |AS-12 "income Taxes". Disclosures on deferred taxes are shown in note-14.4.1. Retirement benefits to the employees ‘The retirement benefits accrued for the employees of the Bank as at reporting date have been accounted for in accordance with the provisions of 1AS-19 "Employee Benefits". The Bank operates retirement benefits scheme for its permanent ‘employees. Elements of which are as under: 2) Provident fund Provident fund benefits are given to the permanent employees’ of the Bank in accordance with Bank's service rules. Accordingly a trust of deed and provident fund rules were prepared. The Commissioner of Income Tax, Taxes Zone-08, Dhaka has approved the provident fund as a recognized provident fund within the meaning of section 2(52}, read with the provisions of part -B ofthe First Schedule of income Tax Ordinance 1984, The recognition took effect from 16.01.1992. The fund is operated by a Board of Trustees consisting 05 (five) members. All confirmed employees ofthe bank are contributing, 10% of their basic salary as subscription to the fund. The bank also contributes equal amount of the employees' contribution. interest earned from the investments is credited to the members account on yearly bass. ») Gratuity fund The bank has operated gratuity fund which was approved by National Board of Revenue on 17.09.2009. The fund Is operated Board of Trustees. Provision in respect of which is made annually covering al its permanent eligible employees as per AS-19 "Employee Benefits”, « Superannuation fund ‘The bank operates an employees’ Superannuation Fund Trust by a separate Board of Trustees consisting of 05 (Five) members. The death-cum survival benefits are given to the employees as per the elgiblity narrated inthe Trust Rules. The fund got recognition from the National Board of Revenue (NBR) effect from 01.01.2004 under the section 3 and 4 of part -A of First Schedule of Income Tax Ordinance 1984. The bank contributes to the fund annually as per Superannuation Fund Rules ofthe bank. 4) Benevolent fund NCCBL employees’ benevolent fund was established in the year 2007 for the welfare of the distressed employees and their dependents, The employees of the bank contribute to the fund at a rate applicable for each grade from their monthly salary. @) Workers profit ‘SRO-336-AIN/2010 dated 5-10-2010 Issue by the ‘Ministry of Labor and Employment’ and published in Bangladesh gazette ‘0n 7-10-2010 declares the status of business of certain institutions and companies like mobile operating companies, mobile network service providing company, all Govt. and Non-govt. money lending companies, all insurance companies etc. a8 “industrial Undertakings" for the purposes of Chapter-XV ofthe Bangladesh Labor Act, 2006 (as amended up to 2013) which deals with the workers" participation in company's profit by way of 'Workers Profit Participation Fund’ and "Welfare Fund’ ‘The Bangladesh Labor Act, 2005 (as amended up to 2013) requires the "Industrial Undertakings” to maintain provision for workers’ proft participation fund @ 5% on net profit. WPPF is not applicable for Banks & FI as per Notification no- '53,00,0000.311.22.002.17.230 dated 14-02-2017 issued by Ministry of Finance, Government of the Peoples Republic of Bangladesh, That's why no appropriation/provision has been made by the Bank in the reporting period against Workers Profit Participation Fund(WPPF) ticipation fund and welfare fund Provision for liabilities [provisions recognized in the balance sheet when the bank has a legal or constructive obligation of a result ofa past event and it is probable that an outflow of economic benefit will be required to settle the obligation in accordance with the IAS-37 "Provisions, Contingent Liabilities and Contingent Assets" Provision for off-balance sheet items off-balance sheet items have been disclosed under contingent labities and other commitments as per Bangladesh Bank guidelines. As per BRPD Circular no.10 dated September 18, 2007, BRPD Circular no.14 dated September 23, 2012 & BRPD Gireular n0.07 dated 21 June 2018 Banks are advised to maintain provision @ 1% against off-balance sheet exposure in addition tothe existing provisioning arrangement. 292386 239 2asa 2192 2193 2as4 2495 2.196 220 Hoda Vasi Chowdhury & Co Provision for NOSTRO accounts As per instructions contained in the circular letter no. FEPD (FEMOV/01/2005-577 dated September 13, 2005 issued by Foreign Exchange Policy Department of Bangladesh Bark, Banks are required to make provision regarding the un-adjusted debit balance of NOSTRO account aver more than three months as atthe reporting date in these financials. There is no un reconciled entry which are outstanding more than three months as at 31 December 2021. Revenue recognition NCC Bank Ltd. has applied IFRS 15 using the cumulative effect method and therefore the comparative information has not been restated and continues to be reported under IAS 18. However due to cumulative effect method, there was no adjustment required in the opening Retained Earnings. Under IFRS 15, revenue is measured based on the consideration specified in a contract witha customer and excludes amounts collected on behalf of third parties. The company recognizes revenue when it satisfies a performance obligation by transferring control over services to a customer. The company considers the terms of the contract and its customary business practices to determine the transaction price. The transaction price is the amount of consideration to which an entty expects to be entitled in exchange for transferring promised services, ‘to.a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. In the comparative year, revenue was measured atthe fair value of the consideration received or receivable. Revenue ‘was recognized when services rendered, to the extent it was probable that the economic benefits from the transactions would flow to the company and the revenue could be relably measured, Interest income In terms of the provision of the IFRS-15 "Revenue from contracts with customers" the interest income is recognized on ‘accrual basis. Interest on loans and advances ceases to be taken into income when such advances are classified. Iti than kept in interest suspense in a memorandum account. Interest on classified loans and advances is accounted for on a cash receiot basis Tnvestment income Interest income on investments is recognized on accrual basis, Capital gain on investments in shares is also Included in investment income. Capital gain is recognized when it is realized. Fees and commission income ‘The Bank recognizes revenue in the amount of any fee or commission to which it expects to be entitled in exchange for arranging for other parties to provide services. The Bank's fee or commission might be the net amount of consideration that it retains after paying the other party the consideration received in exchange for the goods or services to be provided by that party. Commission charged to customer on letters of credit and letters of guarantee is credited to income at the time of effectine the transactions Dividend income on shares Dividend income from an investment is recognized when the company's rights to receive payment is established (declared by the Annual General Meeting ofthe investee or otherwise) Interest paid and other expenses In terms ofthe provisions of IFRS, Interest and other expenses are recognized on accrual basis Dividend policy ‘The Bank’s policy is to maximize shareholders’ wealth. &s a result, the bank tries to allocate optimum dividend to the shareholders for each operational year, after payment of income tax, transfer of fund to regulatory reserve, provision for loans and advances, ete. The payment of dividend is made within the time prescribed by law and published in a newspaper. With respect to the Bank's subsidiary companies, the decison to declare a dividend payment Is atthe discretion of the Boards of Directors ofthat particular subsidiary and s dependent upon the net earnings of the subsidiary. Interim dividends recognize when they pay to shareholders. Final dividend is recognized when its approved by the shareholders, Final dividend distribution to the Company's shareholders are recognized as a liability in the financial statements in the period in which the dividend is approved by the shareholders at the Annual General Meeting and deducted from the shareholders equity when it is payable/paid in the year in which the shareholders right to receive the payment is established. Risk management ‘The risk ofthe Bank may be defined as the possibilty of losses, financial or otherwise, The risk management of the Bank covers six core risks ie. Credit Rsk, Internal Control & Compliance Risk, Money Laundering Risk, Asset Liability Management Risk (Balance Sheet Risk), Forelgn Exchange Risk and Information Technology Risk. AS a part of risk management, adequate capital is maintained against Credit Risk, Market Risk and Operational Risk under Basel-Il accord. Under the second pila of Basel, 9 Supervisory Review Process (SRP) team has been formed to review, monitor and maintain adequate capital considering all relevant risks. Quarterly Stress Testing is conducted to assess the impact of different risks associated with banking business on asset, liability & ultimately on capital and the report is submitted before the Board of Directors and to Bangladesh Bank regularly, The prime objective ofthe risk management s that the bank evaluates and takes well calculative business risks and there by safeguarding the barks capitals, its financial resources and profitability from various business risks through its own measures and through implementing Bangladesh Bank guidelines and following some of the best practices as under: 302204 2202 2203 2204 Hoda Vasi Chowdhury & Co Credit sk Itarises mainly from lending, trade finance, and leasing and treasury business. Crelt Rsk can be described as potential loss aries from the failure of a counter party to perform as per contractual agreement with the bank. The fallure may result from unwillingness of the counter party of decline in his or her financial condition there for the banks credit risk ‘management activities have been designed to address al these issues. ‘The Bank has segregated duties ofthe officers / executives involved in credit related activities, a separate corporate division has been formed at Head office which is entrusted with the duties of maintaining effective relationship withthe customers, marketing of credit products, exploring now business opportunities etc. moreover, credit approval, administration, ‘monitoring and recovery functions have been segregated. For this purpose, three separate units have been formed within the credit division these are a) Credit risk Management Unit b) Credit Administration Unit and c) Credit monitoring and recovery Unit. Credit risk management Unit is entrusted with the duties of maintaining assets quality, assessing risk in lending to a particular customer, sanctioning credit, formulating policy / strategy for lending operation, etc. Adequate provision has been made on classified loans is shown in Note 14.5 (a) [A thorough assessment is done before sanction of any crelt faciity at Credit Rsk Management Unit. The risk assessment includes borrower risk analysis, financial analysis, industry analysis, historical performance of the customer, security of the proposed credit facility, etc. The assessment process starts at Corporate Credit Division by the Relationship Manager / Officer and ends at Credit Risk Management Unit when it Is approved / declined by the competent authority. Credit approval authority has been delegated to the individual at executives. Proposals beyond their delegation are approved / eclined by the Executives Committee and / or the Management of the Bank. In determining Single borrower / large loan limit, the instructions of Bangladesh Bank are strictly followed. Internal ausit is conducted at yearly intervals to ensure compliance of Banks and Regulatory polices. Loans are classified as per Bangladesh Bank's guidelines. Concentration of sinele borrower/laree loan limit is shown in Annexure-C. Foreign exchange risk Foreign exchange risk is defined as the potential change in earning due to change in exchange rate. The foreign exchange risk of the Bank is minimal as all the transactions are carried out on behalf of the customers against underlying U/C ‘commitments and other remittance requirements. “Treasury Department independently conducts the transactions and the back office of treasury is responsible for verification of the deals and passing of their entries in the books of account. All foreign exchange transactions are revalued at Mark-to- Market rate as determined by Bangladesh Bank at the month-end. All NOSTRO accounts are reconciled on @ monthly basis and the management for its settlement reviews outstanding entry beyond 30 days, The position maintained by the bank at the end of day within the stipulated limit prescribed by the Bangladesh Bank. Liguicty risk Responsibility of managing and controling liquidity of the bank les with Asset Liability Committee (ALCO) that meets at least once in a month. Asset Liability Management (ALM) desk being primarily responsible for management of liquidity risk Closely monitors end controls liquidity requirements on a daily basis by appropriate coordination of funding activities. A ‘monthly projection of fund flows is reviewed in ALCO meeting regularly. On monthly basis, ALCO monitors liquidity management by examining key ratios, maximum cumulative outflow, upcoming funding requirement from all business nits, asset-lability mismatch etc, ALCO also monitors concentration of deposits on large situational depositors which is Volatile in nature. ALCO reviews liquidity requlrement of the Bank, the maturity of assets and liabilities, deposit anc lending, pricing strategy and the liquidity contingence plan. The primary objective of the ALCO is to monitor and avert significant volatility in Net interest Income (Nl) investment value and exchange earnings. Money Laundering Money Laundering Risk arises from non-compliance of money laundering related instructions of the regulatory body. I's consequence are dire & far reaching and may bein the form of financial penalty, reputation loss, legal harassment and even the risk of sustainability. Weakness in money laundering prevention and combating terrorist financing may lower the image of the Bank in local & global environment. it may also reduce the confidence of the stakeholders. For involvement in money laundering & terrorist financing, the regulatory bodies may impose restrictions in expansion of business and Bank may lose the market shave. Banks around the globe may be unwiling to establish correspondent banking relationship if money laundering prevention and combating financing of terrorism status are not up to the mark. The following Initiatives have been taken by our Bank to comply with the requirements of Bangladesh Financial intelligence Unit (BF1U), Bangladesh Bank. Central Compliance Committee (CCC) at Head Office, AML-CFT Division at Head Office, Branch Compliance Unit (BCU) at branch level have been formed headed by Chief Anti-Money Laundering Compliance Officer (CAMLCO) and Branch Anti- Money Laundering Compliance Officer (BAMLCO) respectively. We have divisional focal person to ensure AML/CFT Comoliance at divisional evel seine guetine on Are! Money Laundering (AML) and Combating Financing of Terrorism (CFT) has been revised & updated complying with BFIU of Bangladesh Bank’s instruction & circulars/crcular letters. Bank also has enacted Customer ‘Acceptance and Prevention of Trade Based Money Laundering Policy. atHoda Vasi Chowdhury & Co Uniform Account Opening Form was introduced where KYC is @ must. AS per Money Laundering Prevention Act-2012, Bangladesh Bank's instruction and BFIU Master Circular 26 date 16.05.2020 branches have been instructed to obtain complete & accurate Information of the clients while establishing banking relationship. Our HO, IT Business Division are ‘maintaining “Complete Customer Database” centrally. ‘Actual transactions are compared with Transaction Profile (TP) to identify abnormal and suspicious transaction(s). Branch {generates monthly Cash Transaction Report (CTR) for threshold amount Tk. 10 lacs & above, monitor these transactions for the purpose to identify the suspicious transaction and Bank submits the CTR to BFIU through goAML Software within given deadline. if Branches identify Suspicious Transaction by transaction symptoms & submit STR to AML-CFT Division, Head Office. after receiving STR/SAR activity AML-CFT Division sends Suspicious Transaction Report STR/Suspicious Activities Report SAR directly to BFIU of Bangladesh Bank using goAML web as per regulatory instructions. In accordance withthe instructions of BFIU, Banks provide the information of customer account within the stipulated time as er their requirement. if any account / amount are freezed bank confirms the same immediately to BFIU. Customers are graded on the bass of risk High Risk Customers are closely monitored and Enhanced Due Diligence is applied in this case. In case of trade transaction, branches and concerned employee of head office are advised to grade trade customer as per Trade Transaction Profile (TTP) as per TBML Guideline Self assessment is done by the branches and a summary report is prepared and submitted to the Managing Director & CEO ‘and thereafter to GFIU, Bangladesh Sank on haf- yearly basis. Independent Testing Procedure is done while conducting audit in the branches by ICC Division Audit Team, The same is summarized and placed before the Management and BFIU, Bangladesh Bank on half- yearly basis. ‘As per BFIU Circular 26 date 16.06.2020, branches have been instructed to apply Enhanced Due Diligence (EDD) in opening ‘& maintaining accounts of Politically Exposed Persons (PEPS), Influential Persons (Ps), thelr family members and close associates. Extensive training is being continuously imparted to the officials ofthe Bank to make them familiar with money laundering prevention and combating financing terrorism and to mitigate the risk arising there from. Inthe year 2021 total 703 training officials respectively were provided training on Anti Money Laundering & Combating Financing of Terrorism through outreach workshop & virtually. ur Training institute is also arranging training/ workshop on the AML-CFT isues on regular basis. Emphasis is given to prevent Trade fase Money Laundering (TBML|.Concem department of Head Office and Branches are ‘advised to take all possible measures to prevent Trade Base Money laundering in case of Import & Export and to comply the Bank in this regard accordingly NID verification has been introduced for verification the genuineness of national identity of the customers; Branches are ‘complying this fsue in respect of account open, trade finance, and walkin customers. \We have developed a Sanction Screening Software (Enfold) for all Branches & Head Office for screening UN, OFAC EU, UK- HMT & Local banned sanction lst. Our all branches and Head Office is now screening UNSC, US-OFAC, EU, UK-HMT Local banned sanction list at the time of Account Opening, Inward Foreign Remittance Payments and Opening of any L/C. We utiize SWIFT Sanction Screening Software for screening Foreign Natlonal/Entity/against L/C/, Import, Export & Foreign Remittance, Screening Mechanism is strictly followed for every customer and especialy any foreign transactions like import, export, foreign remittance, foreign guarantee & correspondent banking relationship through System software procured by the bank ‘Quarterly meeting of Central Compliance Committee (CCC) and Branch Compliance Unit (BCU) are arranged and the decisions are gradually implemented. Before establishing correspondent banking relationship, status on money laundering prevention and combating financing of terrorism of the respondent banks are obtained through 2 questionnaire developed by BFIU of Bangladesh Bank Correspondent banking relationships with any bank is established upon receipt of the desired information and subject to cur satisfaction pursue in the BFIU Circular 26 date 16.06.2020, {As @ part of precautionary measure and as per instruction of Central Bank, we do not establish Relationship Management [Arrangement (RMA) with any shell bank or any bank having banking relationship with any shell bank. Records of Accounts, supporting documents, Transactions, Instruments /vouchers & records of Walk-in Customers are maintained for all operating accounts & above documents are always maintained at least for 5 (ive) years after closure of ‘the account. In compliance of directives of the Board of Directors Central Compliance Committee (AML) of Head office sending compliance report on quarterly basis on Anti Money Laundering (AML) & Combating Financing of Terrorism (CFT) as per ‘Money Laundering Prevention Act-2032 (Amendment 2015) & Ant-Terrorism Act-2009 (Amendment 2013) and Bangladesh Financial Intelligence Unit (BFIU) instructions.2205 2206 2207 2208 221 Hoda Vasi Chowdhury & Co Operational risk Operational loss may arise from error and fraud due to lack of internal control and compliance. Management through Internal control and compliance division, controls operational procedure of the Bank. Internal control and compliance division undertakes yearly and special aust of the branches and departments at Head Office for review of the operation and compliance of statutory requirement. The Audit Committee of the Board subsequently reviews the reports of the Internal control and compliance division. Information technology [NCCBL follows the guideline stated in BRPD Circular no. 14 dated 23 October 2005 regarding “Guideline on Information and Communication Technology for Scheduled Banks’. T management deals with IT policy documentation, internal T audit, TT operation management covers the dynamics of technology operation management including change management, assets management and operating environment procedures management. The objective is to achieve the highest levels of technology service quality by minimum operational risk. Physical security involves providing environmental safeguards as ‘well as controling physical access to equipment and data. In order to ensure that information assets are protected against Fis, there are controls over 2) Password ) User 10 maintenance input 4) Network security €} Data encryption ‘Virus protection 8) Internet and e-mail ‘The Business Control Plan (8CP} is formulated to cover operational risk and taking into account the potential for wide area disasters, data center disasters and the recovery plan. The BCP takes into account the backup and recovery process. Market risk Interest rate risk Interest ate risk may arise either from trading portfolio and non-trading portfolio. The trading portfolio of the Bank consists ‘of Government treasury bills of 28 days maturity. The short-term movement in interest rate is negligible or nil. Interest rate Fisk of non-trading business arises from mismatches between the future yield of an asset and its funding cost. Asset lability ‘Committee (ALCO) monitors the interest rate movement on a regular basis. Equity risk Equity price risk isthe risk of losses caused by changes in equity prices. These losses could arise because of changes in the value of listed shares held directly by the bank. Price changes in the value of listed shares used as collateral for loans whether the loan was made for the purpose of buying the shares; and changes inthe value of unlisted shares. Reputation risk arising from money laundering incidences Money laundering risk is defined as the loss of reputation and expenses incurred as penalty for being negligent in prevention of money laundering, For mitigating the risks, the Bank has a designated Chief Compliance Officer at Head office ‘and Compliance Officers at branches, who independently review the transactions of the accounts to verify suspicious transactions. Manuals for prevention of money laundering have been established and transaction profile has been introduced, Trining is continuously given to all the category of Officers and Executives for developing awareness and skill {or Identifying suspicious activities / transactions. Earnings per share Basic earnings per share Basic earnings per share have been calculated in accordance with AS-33 "Earnings per Share” which has been shown on the face ofthe profit and oss account, This has been calculated by dividing the basic earning by the weighted average number of ordinary shares outstanding during the yea. Diluted earnings per share No diluted earnings per share Is required to be calculated for the year as there was no scope for dilution during the year under review. 33222 223 Hoda Vasi Chowdhury & Co Memorandum items Memorandum items are maintained to control all items of importance and for such transactions where the Bank has business responsibilty but no legal commitment. Stock of Traveler's Cheques (TC), Saving Certificates and other fall under the memorandum items. Compliance of international Accounting Standards (IASs) and International Financial Reporting Standards (IFRSs) ‘The Institute of Chartered Accountants of Bangladesh CAB) isthe official standard setting body as well as the regulator of accounting profession in the country. ICAB has adopted most of the International Accounting Standards (IASs) and International Financial Reporting Standards (\FRSs). While preparing the financial statements, NCC Bank has applied all the applicable of IASs & IFRSs for preparation and presentation of financial statements except described in note no. 2.1 as noted below: [Name of the TAS TASne Statue [Presentation of Financial Statements 1 Applied™ Inventories 2 N/A [statement of Cash Flows az Appied™ [Accounting Policies, Changes in Accounting EWtimates and EVrors z Applied levents after the Reporting vear 10 Applied income Taxes 2 ‘Applied property, Plant and Equipment 16 Applied [Employee Benefits 19 Applied [Accounting of Government Grants and Disclosure of Government Assistance 20 NIA [The Effects of changes in Foreign Exchange Rates 21 Applied [Borrowing Costs FE NIA [Related Party Disclosures 24 Applied [Accounting and Reporting by Retirement Benefit Plans 25. NIA [separate Financial Statements 27 ‘Applied investments in Associates and Joint Ventures 28 NA Financial Reporting in Hyperinflationary Economies 23 NA. Financial instruments: Presentation 32 Aopled™ Earnings Per Share. 33 ‘Applied interim Financial Reporting 34 Applieg Impairment of Assets 35 ‘Applied Provisions, Contingent Liabilities and Contingent Assets 37 Aopled™ intangible Assets 38 ‘Applied investment Property 20, N/A [Agriculture aL N/A (Name of the FAS TRS no. Status Fest time adoption of International Financial Reporting Standards 1 N/A [Share Based Payment 2 N/A [Business Combinations 3 Applied insurance Contract 4 NIA. Non-current Assets Held for Sale and Discontinued Operations 5 Applied” Exploration for and Evaluation of Mineral Resources, 6 NIA. Financial Instruments: Disclosure 7 Applied [Operating Segments 3 ‘Applied Financial Instruments 93 ‘applied (Consolidated Financial Statements 10, ‘Applied [int Arrangements a N/A Disclosure of interest n other entities 2 ‘Applied Fair Value Measurement 3 ‘Applied [Regulatory Deferral Accounts 7 NA. [Revenue from Contracts with Customers a5 ‘Applied Leases 36 ‘Applied™ [insurance Contracts 7 NAA * Subject to departure described in note 2.2. IAS and IFRS which are not applied due to compliance of the Bank Company ‘Act 1991, Rules and regulations and instructions issued by Bangladesh Bank time to time.224 225 2.26 227 228 229 Hoda Vasi Chowdhury & Co Regulatory and legal compliance ‘Te Bank complied withthe requicements of following regulatory and legal authorities 4) The Bank Company Act 1991 (Amended up to date); ) The Companies Act 1994; «Rules and regulations isved time to time by Bangladesh Bank; 4) The Bangladesh Securities and Exchange Rules 1987, The Bangladesh Securities and Exchange Ordinance 1969, The Securities and Exchange Commission Act 1993, The Bangladesh Securities and Exchange Commission (Public Issue) Rules up to date; | The Income Tax Ordinance 1984; {) The Value Added Tax and Supplementary Duty Act, 2012; 8) The Financial Reporting Ac, 2015, 1) Other laws & regulations as applicable Information about business segments Segments information is presented in respect ofthe group's busines. Business segments Business segments report consists of products and services whose risks and returns are ferent from those of other business segments. These segments comprise conventional banking including offshore banking unit, investment services INCCBSFSL & NCCBCL). Business segment report shown in Annexure-M Inter segment transactions, generally based on inter branch fund transfer measurements as determined by the management. income, expenses, asset, ables are specticaly identified with individual segments. Based on such allocetion segment balance sheet 2s at 31 December 2021 and segment profit and loss account for the year ended 31 December 2021 have been areoared. Events after the reporting year ‘The global outbreak of COVID 19 pandemic i considered a non-adjusting post balance sheet event for the Bank. While the coveral effect on the Bank’s business inthe year subsequent to the balance sheet date relating to the COVID 19 global pandemics stil evolving at this point, there has been limited impact onthe business since the outbreak. The directors and management are regularly monitoring the potential impact of the pandemic on the Bank as the situation continues to deteriorate but are confident that any foreseeable negative impact can be reasonably managed and have various scenario ans in lar All other material events after the reporting year have been considered and appropriate acjustments/declosures have been ‘made in the financial statements as per IAS 10 Events after the Reporting year. Board's recommendation for dividend distribution isa common item presented inthe note 48, Related party transaction Related party transaction is a transfer of resources, services or obligation between related parties, regardless of whether 2 price is charged. Deals disclosure shown in Annexure ‘Assets pledged as security ‘The bank has secure labilty 2s mentioned in notes 12.03 and there was assets pledge as securities agelnst abilities. Credit rating ofthe bank National Cesit and Commerce Bank Limited has been awarded "Bi" rating by Moody's, a world renowned rating agency. The assigned rating reflects the strength of NCCBL which is backed by its modest solvency & funcing, adequate liquidity, rmadest asset quality & capital base, improved proftabilty and complance cukure Year Date of Rating Tong term Shor Term, Rating conducted by 2021 24:01.2022 BL NP. Moody's investors Service ‘Credit Rating information & services Limited (CRISL) has affirmed “AA” (pronounced ‘Double A’) rating in the Long Term and ‘51-1 rating in the Short Term with stable Outlook to NCC Bank Limited based on audited financial of FY 2020 and other available information up to the date of rating declaration. Last seven years’ Credit Ratings of our Bank are given below: Year Date of Rating Tong term Shor Term, Rating conducted by 2021 24.06.2021 AA Ta Catan nforation & senior 2020 22.06.2020 AR Ta Emerging Credit Rating uted 2019 23.06.2018 AA, ST Emerging Credit Rating imited 2018 21.06.2018 Aa ST Emerging Credit Rating Limited 2017 21.06.2097 AA, sr Emerging Credit Rating Limited 2016. 28.06.2036 Aa. ART ‘Alpha Credit Rating Limited 2015, 30.06.2035 BA RD ‘Aipha Credit Rating Limited 35230 231 Hoda Vasi Chowdhury & Co BASEL Il implementation The BASEL Committee on Banking Supervision has published a new framework for calculating minimum capital requirement, known as 'Basel Il, The new guideline is structured around three pillar: () minimum capital requirement (on credit risk, market risk and operation risk, (i) supervisory review process and (ii) market discipline. Implementation of Basel 1! framework in Bangladesh will integrate the risk management process of the Bank and its capital adequacy requirement. Bangladesh Bank has formed a National Steering Committee and Coordination Committee for implementation ‘of BASEL Il in Bangladesh, As per the Committee decision BASEL I! has been fully implemented in Bangladesh from January 2011. The National Steering Committee has indicated that the folowing methodology of BASEL Ill would be followed in Banglades: |. Standardized method for credit and market risk. I. Basic indicator approach for operational isk Il Internal Ratings Base for credit risk has been applied from 2012 where prior permission from Bangladesh Bank would be required ‘The Bank's compliance with related pronouncements by Bangladesh Bank 2) Internal control ‘The objective of internal control is to ensure that management has reasonable assurance that (a) operations are effective, efficient and aligned with strategy, (b) financial reporting and management information is reliable, complete and timely accessible, [c) the entity is in compliance with applicable laws and regulations as well as its internal polices and ethical values including sustainability, and (d) assets of the company are safeguarded and frauds & errors are prevented or detected National Credit and Commerce Bank Limited has establihed an effective internal control system whose primary alm is to ensure the overall contral of risks and provide reasonable assurance that the objectives set by the bank wil be met. It is designed to develop a high level risk prevention culture among the personnel ofthe bank, establish as efficient and qualified ‘operating mode! of the bank, ensure reliability of internal and external information including accounting and financial information, secure the Bank's operations and assets, and comply with laws, regulatory requirements and internal policies ‘The Board of Directors of NCC Bank Limited, through its Audit Committee, yearly reviews the effectiveness of Bank's internal control system covering all the material controls, including financial, operational and compliance controls, risk management systems, the adequacy of resources, qualifications and experience of staf of the accounting and financial reporting function, training programs, budget, etc. Board Audit Committee reviews the actions taken on internal control |ssues identified by the internal & external auditors and regulatory authorities. it has ative oversight on the internal audit's independence, scope of work and resources and it also reviews the functions of internal Control & Compliance Division of Head Offic, particularly the scope of the annual aucit plan and frequency ofthe interna audit activites. b) Internal audit Internal Audit is the continuous and systematic process of examining and reporting on the activities of an organization Undertaken by the specially assigned staffs). Internal Auditor works as the Eyes & Ears of the management. It may therefore be used to bridge the gap between management and shop for. It can assure the management that the internal controls are adequate and in operations, the policies and systems laid down are being adhered to and accounting records provided by the lower level are correct. Internal Audit Mechanism is used as an important element to ensure good governance of NCC Bank Limited. Internal Audit ‘Activity of NCC Bank Limited is effective and it provides a number of important services to senior management. These include detecting and preventing fraud, testing internal control, and monitoring compliance with own policies & procedures, applicable rules & regulations instructions/guldelines of regulatory authority et. During the year 2021, ICCD conducted inspection on many of the Branches/Divsions of Head Office of the Bank and submitted reports and presented the findings of the audits/inspections. Necessary control measures and corrective actions hhave been discussed in the meetings of the Audit Committee of the Board and necessary steps have been taken according to the decision of the Committee for correct functioning of internal Controls & Compliance.42 Hoda Vasi Chowdhury & Co ) Fraud & forgeries The increasing wave of fraud and forgery cases in the banking sector in recent time calls for concerted steps in identifying ways for reducing or preventing frauds and forgeries by analyzing the causes and effect of frauds and forgeries, and prescribing effective control strategies for salvaging frauds in the banking sector. NCC Bank does always pay due attention ‘on antraud internal controls for prevention of fraud and forgery. The Bank has already implemented some strategies ike Financial Control Strategy, Personnel Control Strategy, Accounting Control Strategy, Credit Control Strategy, Cost Control Strategy, Administrative Control Strategy, Process Control Strategy tc. in order to strengthening the control system further Although itis not possible to eliminate all frauds because of the inherent limitations of internal Control System, the Board of Directors and management have taken all the measures to keep the operational risk in a very minimum level. Internal Control and Compliance Division (ICCD) assesses and evaluates the effectiveness of Bank's antfraud internal control ‘measures, recommends for further improvement in implementation of aforesaid strategies and reports to the Bangladesh Bank of effectiveness of controls at the end of each quarter following their prescribed format. ‘Audit committee ‘The Audit Committee of the Board of Directors ofthe Bank formed in accordance with Bangladesh Bank’s BRPO circular No. 41 dated 27 October 2013 and SEC Notfcation no. SEC/CMARCD/2006-158/129/Admin/¢4 dated August 7, 2012 on corporate Governance, the current committee is constituted with the following members of the Board as at 31 December 2021: 7 Status with al Name statuswiththe Bank |, nas" | Educational qualifications 1 [tr Norulislam Chowdhury, FCA | Independent Director | Chairman Se FA 2 [wr Md. Abul Bashar Director Member BS. (Mis), USA, 3_[Aha] Md. Nurun Newaz Director Member 4 [Ms.Tanzina Al Director Member Bachelor in Finance, USA 5 |Mr. Khairul Alam ChaWlader Director Member B.Com: [wr erat Husain, FOMAFCS: Tadapendent ovrector | Member FEMA, FOS ‘During the year, the Audit Committee of the Board conducted 11 (Eleven) meetings in which the important issues were discussed/reviewed, (Refer to the report ofthe Board Audit committee for details), General Number of employees Number of employees at 31 December 2021 was 2,176 who were in receipt of remuneration for that year which in the aggregate was not less than Tk. 35,000 per annum. Figures appearing in these financial statements have been rounded off to the nearest BOT. Previous year's figures, whenever considered necessary, have been rearranged and restated in order to conform current year's presentation Shanchaya patras are not reflected as off-balance sheet items inthe financial statements. 375a 52 sta) Hoda Va: Chowdhury & Co 2021 2020 Taka Taka cash ‘Cash in hand (Including foreign currencies) ‘On-shore banking unit Local currency 2,247, 053,763 1981,637,250 Foreign currencies 7,240,498 37,586,113, 7,754 894,262 7019,023,363. Offshore banking unit 25094262 Dia 023363 Balance with Bangladesh Bank and Its agent bank (s) (On-shore banking unit Localeurrency 3,074 510.42 TATO SSE BSS Foreign currencies 126,521,975, 2,082,615, 948, 9,201,032,416 11,553,074,633 Sonal Bank itd a5 agent of Bangladesh Bank (Local currency) 453,116,718, 372,681,503 77,925,736,136 f-shore banking unit Sees 11 905,776,135, 11,919,043,396 13,944, 739,499 ‘cash Reserve Requirement (CRR) cet Cash Reserve Requirement (CRR) has been calculated and maintained in accordance with the Section 33 of the Banking Companies Act, 1991 (amended up to 2013), DOS circular no.01 dated 19 January 2014,00S Circular Letter No.23, dated 07 October 2018 and MPD Circular no, 03 dated 09 April 2020 as well as gadget no-BRPO(P-3)/748(27)/2020-4086 dated 18-06-2020 . The cash reserve requirement (RR) of the Bank is based on time and demand liablities which is two months back of reporting month (i.e. CRR of December 2021 Is based on weekly average balance of October 2020) atthe rate of 3.5% on dally basis and 4% on biweekly basis has been calculated and maintained with Bangladesh Bank- current account. Reserves maintained by the bankas at 31 December 2021 are as follows: ‘Average total demand and time liabilities of October 2021 for DBO 795 583,407,250 ] [205 911,277,105 ‘Average total demand and time lablities of October 2021 for OB 3,965,067,150 1,301,577,255 ‘Total Average total demand and time liabilities of October 2021, 797,588,474,000____ 207,212,854,360 Daily basis: * Required Reserve (35% of total demand and time liabilities for DBO) 3.50% 77513258 7,206,894 685 Required Reserve (1.5% of total demand and time liabilities for 080) 150% 59,476,007 19,523,559, Total required reserve 834,895,261 7.226,418,358 ‘Actual reserve maintained as per Bangladesh Bank statement 420% 8.374.620.853, 9.211,610.236 ‘urplus/ (deficit) 0.78% 1,539,725 592 1,985,191,879 Bi-weekly Basis ‘The bank maintained excess cash reserve of Taka 148,$0,50,465/- In the ast fortnight of 2021 calculated by summing up excess cash reserve maintained over required CRR on Bi-weekly basis. Statutory Liquidity Ratio ( SUR) Statutory Liquidity Ratio (SLR) has been calculated and maintained in accordance with the Section 33 ofthe Banking Companies Act, 1991, (amended up to 2013), DOS circular no.02 dated 19 January 2014,008 Circular no. 26 dated 19 August 2019 and MPD circuler no, 02 dated 10 December 2013. The SLR of the Bank is also based on time and demand labilties which is two months beck of reporting month (ie. SLR of December 2021 is based on weekly average balance of October 2020) at the rate of 13% has been calculated ané maintained in the form of treasury bil, treasury bonds and debenture including FC balance with Bangladesh Bank. Reserves maintained by the bank asat 31 December 2021 are as follows: Required reserve 13%[ 25681301672 35937 671,067 Actual reserve held 22%[_43,002,665,295, 39,443,226,887 ‘urplus/ (deficit) 9% 17,321,363,523 12,505,55 ‘Actual reserve held for SLR Excess cash reserve $5585 200 349,177, 51200 Cash held 2,254,894,262, 2,019,023,363, Belance with Sonali Bank 463,116,718 372,641,503 Unencumbered approved securities 39,732,671,035 36,102,434,409 43,002,665,295, 39,443,226,887 Consolidated cash — Cash in hand [NCC Bank Limited (Notes ) 7358 594,762 2,019,023 368 NNCCB Securities and Financial Services Limited NCCB Capital Limited ITED TOSSES Balance with Bangladesh Bank and ts agent bank(s) NCC Bank Limited (Note-5 ) 3664 149,134 T1925, 716136 NNCCB Securities and Financial Services Limited 3 NCCB Capital Limited Besa Tia Tags 716136 11,9189,043,396, 13,944,739,499 38