ECCB 2016/2017 Annual Report

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ECCB ANNUAL REPORT 2016/2017

Eastern Caribbean Central Bank Notes to the Financial Statements March 31, 2017 (expressed in Eastern Caribbean dollars)

EASTERN CARIBBEAN CENTRAL BANK NOTES TO THE FINANCIAL STATEMENTS

(expressed in Eastern Caribbean dollars)

March 31, 2017

3. Financial risk management … continued i) Strategic Risk

The Bank is in the process of finalizing a strategic plan to guide its operation over the period 2017- 2021. This plan is hinged on four (4) basic pillars which reflect the purpose of the Bank, namely:

a. Financial sector stability and development; b. Fiscal and debt sustainability; c. Growth, competitiveness and employment; d. Organizational effectiveness.

It is recognized that effective delivery of the strategic initiatives as contained in the plan is heavily dependent on the supporting policies and operations which have attendant risks. These risks may be influenced by a wide range of internal and external factors, including an inappropriate use of resources or a fundamental change in the circumstances on which the assumptions were predicated. The Bank has therefore identified specific monitoring frameworks and reporting lines to minimize any negative impact of a perceived or actual failure to deliver on its strategic objectives. j) Critical accounting estimates and judgements The Bank’s financial statements and its financial result s are influenced by accounting policies, assumptions, estimates and management judgement, which have to be made in the course of preparation of the financial statements. All estimates and assumptions required in conformity with IFRS are best estimates undertaken in accordance with the applicable standard. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities within the next financial year are discussed below. Estimated pension obligation The present value of the retirement benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. Any changes in these assumptions will impact the carrying amount of the pension asset. The assumptions used in determining the net cost (income) for pensions include the discount rate. The Bank determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash flows expected to be required to settle the pension obligations. The Bank considers the interest rates of high-quality instruments, normally long-term government bonds that are denominated in Eastern Caribbean currency which is the currency in which the benefits will be paid and that have terms of maturity approximating the terms of the related pension liability. Other key assumptions for pension obligations are based on current market conditions.

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