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Financial instruments with off-balance sheet credit risk
 12 Months Ended
Dec. 31, 2012
Commitments and Contingencies Disclosure [Abstract]  
Financial instruments with off-balance sheet credit risk
19.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, 
  2012  2011 
Confirmed letters of credit  106,415   266,547 
Stand-by letters of credit and guarantees - Commercial risk  25,167   18,899 
Credit commitments  103,294   75,962 
   234,876   361,408 
 

 

 

 

 

 

 

 

As of December 31, 2012, 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  219,421 
From 1 to 2 years  1,000 
From 2 to 5 years  13,791 
After 5 years  664 
   234,876 

 

As of December 31, 2012 and 2011 the breakdown of the Bank’s off-balance sheet exposure by country risk is as follows:

 

(In thousands of US$)   
Country: 2012  2011 
Argentina  -   92 
Bolivia  820   944 
Brazil  23,630   41,116 
Chile  6,084   12,367 
Colombia  9,098   2,396 
Costa Rica  1,000   11,661 
Dominican Republic  1,535   1,603 
Ecuador  79,760   215,272 
El Salvador  625   2,025 
Guatemala  180   501 
Honduras  562   400 
Jamaica  -   295 
Mexico  27,289   14,677 
Panama  58,219   1,801 
Paraguay  -   81 
Peru  2,843   2,467 
Spain  -   9,660 
Switzerland  -   500 
United States of America  -   21,780 
Venezuela  23,231   21,770 
   234,876   361,408 

 

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.