ECCB
ANNUAL REPORT 2014/2015
69
EASTERN CARIBBEAN CENTRAL BANK
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, 2015 was 96.52% (2014: 95.68%).
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 consolidated statement of income 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. The Bank’s subsidiary, CALMS Limited is also 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”), is exempt from corporation and other taxes.
By letter dated May 27, 2003, ECSE was granted a ten-year (10) tax holiday from corporation and other taxes. On May
24, 2012, the Company applied for a further ten-year (10) tax holiday. In the opinion of the Director of ECSE, there
should be no hindrance to the approval of this exemption.
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. These risks arise primarily through the Bank’s execution of its reserve management function and
the provision of banking services to governments and commercial banks. The Bank’s aim is therefore 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.
The Bank’s risk management policies are designed to identify and analyse these risks, to set appropriate risk limits and
controls, and to monitor the risks and adherence to limits by means of reliable and up-to-date information systems. The
Bank regularly reviews its risk management policies and systems to reflect changes in markets, products and emerging
best practices.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(expressed in Eastern Caribbean dollars)
March 31, 2015
