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ECCB ANNUAL REPORT 2016/2017
EASTERN CARIBBEAN CENTRAL BANK
NOTES TO THE FINANCIAL STATEMENTS
(expressed in Eastern Caribbean dollars)
March 31, 2017
Eastern Caribbean Central Bank
Notes to the Financial Statements
March 31, 2017
(expressed in Eastern Caribbean dollars)
31
2. Summary of significant accounting policies
…continued
u) Foreign reserve assets
Under Article 24 (2) of the Eastern Caribbean Central Bank Agreement Act 1983, the Bank is
required to maintain a reserve of external assets not less than 60% of its notes and coins in
circulation, and other demand liabilities. The percentage of foreign reserve assets to demand
liabilities at March 31, 2017 was 97.39% (2016: 97.79%).
v) Commemorative coins
The nominal value of commemorative coins sold is excluded from the balance of ‘Notes and Coins
in circulation’ while the net proceeds from sales are included in the
statement of profit or loss.
w) Taxation
In accordance with Article 50 (8) (a) of the Eastern Caribbean Central Bank Agreement Act 1983,
the Bank’s income is exempt from any form of taxation.
In accordance with Section 5 sub-section (1) and (2) of the Eastern Caribbean Home Mortgage
Bank
(“ECHMB”)
Agreement Act, 1994 the ECHMB is exempt from stamp duties and corporation
tax. The Bank’s other associated company, the Eastern Caribbean Securities Exchange Limited
(
“
ECSE
”
) has applied to the Ministry of Finance for the renewal of its tax exempt status. The
previous 10-year exemption expired in May 2013. The request for a further extension is yet to be
granted by the Ministry of Finance.
3. Financial risk management
a) Introduction and overview
By its nature, the Bank’s activities are principally related to the use of financial instruments. The
strategy for using these financial instruments is embedded in the mission of the Bank to maintain
the stability of the Eastern Caribbean Dollar and the integrity of the banking system in order to
facilitate the balanced growth and development of member states.
The activities of the Bank require the analysis, evaluation, acceptance and management of some
degree of risk or combination of risks. In executing its duties as a central bank, there are significant
inherent risks which the Bank faces, both at the macro and micro levels of its operations. These
risks arise primarily through the Bank’s execution of its r
eserve management function, the
provision of banking services to governments and commercial banks and from the broad areas of
monetary policy, financial sector stability, management of the payment system and the daily
operational tasks undertaken to support these functions.
The Bank’s aim is therefo
re to achieve an appropriate balance between risk and the objectives of its
reserve management function which are; i) preservation of capital, ii) meeting liquidity
requirements and iii) realizing a satisfactory return. It also seeks to minimise potential adverse
effects on the Bank’s financial performance.