18.

Financial instruments with off-balance sheet credit risk

In the normal course of business, to meet the financing needs of its customers, the Bank is party to financial instruments with off-balance sheet credit risk. These financial instruments involve, to varying degrees, elements of credit and market risk in excess of the amount recognized in the consolidated balance sheet. Credit risk represents the possibility of loss resulting from the failure of a customer to perform in accordance with the terms of a contract.

The Bank’s outstanding financial instruments with off-balance sheet credit risk were as follows:

(In thousands of US$)	December 31,
	2011		2010
Confirmed letters of credit		266,547		196,287
Stand-by letters of credit and guarantees - Commercial risk		18,899		38,410
Credit commitments		75,962		118,863
		361,408		353,560

As of December 31, 2011, the remaining maturity profile of the Bank’s outstanding financial instruments with off-balance sheet credit risk is as follows:

(In thousands of US$)
Maturities	Amount
Within 1 year		317,556
From 1 to 2 years		42,528
From 2 to 5 years		606
After 5 years		718
		361,408

As of December 31, 2011 and 2010 the breakdown of the Bank’s off-balance sheet exposure by country risk is as follows:

(In thousands of US$)
Country:	2011		2010
Argentina		92		-
Bolivia		944		-
Brazil		41,116		66,700
Chile		12,367		-
Colombia		2,396		-
Costa Rica		11,661		32,160
Dominican Republic		1,603		86
Ecuador		215,272		121,245
El Salvador		2,025		25
Guatemala		501		1,475
Honduras		400		430
Jamaica		295		125
Mexico		14,677		50,964
Panama		1,801		1,200
Paraguay		81		-
Peru		2,467		39
Spain		9,660		-
Switzerland		500		500
United States of America		21,780		-
Uruguay		-		170
Venezuela		21,770		78,441
		361,408		353,560

Letters of credit and guarantees

The Bank, on behalf of its client base, advises and confirms letters of credit to facilitate foreign trade transactions. When confirming letters of credit, the Bank adds its own unqualified assurance that the issuing bank will pay and that if the issuing bank does not honor drafts drawn on the credit, the Bank will. The Bank provides stand-by letters of credit and guarantees, which are issued on behalf of institutional customers in connection with financing between its customers and third parties. The Bank applies the same credit policies used in its lending process, and once issued the commitment is irrevocable and remains valid until its expiration. Credit risk arises from the Bank's obligation to make payment in the event of a customer’s contractual default to a third party. Risks associated with stand-by letters of credit and guarantees are included in the evaluation of the Bank’s overall credit risk.

Credit commitments

Commitments to extend credit are binding legal agreements to lend to customers. Commitments generally have fixed expiration dates or other termination clauses and require payment of a fee to the Bank. As some commitments expire without being drawn down, the total commitment amounts do not necessarily represent future cash requirements.