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Loans commitments and financial guarantees contracts | 12 Months Ended
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Dec. 31, 2017
Disclosure of loans commitments and financial guarantees contracts [Abstract] |
Disclosure of loans commitments and financial guarantees contracts [Text Block] |
6. | Loans commitments and financial guarantees contracts
In the normal course of business, to meet the financing needs of its customers, the Bank is party to loans commitments and financial guarantees contracts. These instruments involve, to varying degrees, elements of credit and market risk in excess of the amount recognized in the consolidated statement of financial position. 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 loans commitments and financial guarantees contracts are as follows:
|  | December 31, 2017 |  | December 31, 2016 |
Confirmed letters of credit |  |  | 273,449 |  |  | 216,608 |
Stand-by letters of credit and guaranteed – Commercial risk |  |  | 168,976 |  |  | 176,177 |
Credit commitments |  |  | 45,578 |  |  | 10,250 |
Total |  |  | 488,003 |  |  | 403,035 |
The remaining maturity profile of the Bank’s outstanding loans commitments and financial guarantees contracts is as follows:
Maturities |  | December 31, 2017 |  | December 31, 2016 |
Up to 1 year |  |  | 457,168 |  |  | 399,257 |
From 1 to 2 years |  |  | 257 |  |  | - |
From 2 to 5 years |  |  | 30,000 |  |  | 3,200 |
More than 5 years |  |  | 578 |  |  | 578 |
|  |  | 488,003 |  |  | 403,035 |
Loans commitments and financial guarantees contracts classified by issuer’s credit quality indicators are as follows:
Rating(1) |  | December 31, 2017 |  | December 31, 2016 |
1-4 |  |  | 151,934 |  |  | 145,255 |
5-6 |  |  | 336,069 |  |  | 193,368 |
7 |  |  | - |  |  | 64,412 |
8 |  |  | - |  |  | - |
9 |  |  | - |  |  | - |
10 |  |  | - |  |  | - |
Total |  |  | 488,003 |  |  | 403,035 |
(1) Current ratings as of December 31, 2017 and 2016, respectively.
The breakdown of the Bank’s loans commitments and financial guarantees contracts exposure by country risk is as follows:
|  | December 31, 2017 |  | December 31, 2016 |
Country: |  |  |  |  |  |  |
Argentina |  |  | 7,546 |  |  | - |
Bolivia |  |  | 200 |  |  | 190 |
Brazil |  |  | - |  |  | - |
Canada |  |  | 425 |  |  | 160 |
Chile |  |  | 15,000 |  |  | - |
Colombia |  |  | 91,020 |  |  | 78,815 |
Costa Rica |  |  | 19,848 |  |  | 2,250 |
Dominican Republic |  |  | - |  |  | 26,787 |
Ecuador |  |  | 252,800 |  |  | 172,522 |
El Salvador |  |  | 767 |  |  | 1,305 |
Guatemala |  |  | 11,788 |  |  | 7,000 |
Honduras |  |  | 890 |  |  | 1,170 |
Mexico |  |  | 35,643 |  |  | 11,118 |
Panama |  |  | 31,260 |  |  | 39,756 |
Paraguay |  |  | 22 |  |  | - |
Peru |  |  | 17,618 |  |  | 42,764 |
Switzerland |  |  | - |  |  | 1,000 |
United Kingdom |  |  | - |  |  | 70 |
Uruguay |  |  | 3,176 |  |  | 18,128 |
Total |  |  | 488,003 |  |  | 403,035 |
Letters of credit and guarantees The Bank, on behalf of its client’s 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 letter of credit, the Bank will. The Bank provides stand-by letters of credit and guarantees, which are issued on behalf of institutional clients in connection with financing between its clients 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 client’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 clients. 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. The allowances for credit losses related to loans commitments and financial guarantees contracts are as follows:
|  | Stage 1 (1) |  | Stage 2 (2) |  | Stage 3 (3) |  | Total |
Allowance for expected credit losses as of December 31, 2016 |  |  | 1,143 |  |  | 4,633 |  |  | - |  |  | 5,776 |
Transfer to lifetime expected credit losses |  |  | (1) |  |  | 1 |  |  | - |  |  | - |
Transfer to credit-impaired instruments |  |  | - |  |  | - |  |  | - |  |  | - |
Transfer to 12-month expected credit losses |  |  | - |  |  | - |  |  | - |  |  | - |
Net effect of changes in reserve for expected credit loss |  |  | (54) |  |  | 853 |  |  | - |  |  | 799 |
Instruments that have been derecognized during the year |  |  | (971) |  |  | - |  |  | - |  |  | (971) |
Changes due to instruments recognized as of December 31, 2016: |  |  | (1,026) |  |  | 854 |  |  | - |  |  | (172) |
New instruments originated or purchased |  |  | 1,241 |  |  | - |  |  | - |  |  | 1,241 |
Allowance for expected credit losses as of December 31, 2017 |  |  | 1,358 |  |  | 5,487 |  |  | - |  |  | 6,845 |
|  | Stage 1 (1) |  | Stage 2 (2) |  | Stage 3 (3) |  | Total |
Allowance for expected credit losses as of December 31, 2015 |  |  | 2,914 |  |  | 2,510 |  |  | - |  |  | 5,424 |
Transfer to lifetime expected credit losses |  |  | (646) |  |  | 693 |  |  | - |  |  | 47 |
Transfer to credit-impaired instruments |  |  | - |  |  | - |  |  | - |  |  | - |
Transfer to 12-month expected credit losses |  |  | - |  |  | - |  |  | - |  |  | - |
Net effect of changes in reserve for expected credit loss |  |  | (748) |  |  | 1,756 |  |  | - |  |  | 1,008 |
Instruments that have been derecognized during the year |  |  | (2,631) |  |  | (326) |  |  | - |  |  | (2,957) |
Changes due to instruments recognized as of December 31, 2015: |  |  | (4,025) |  |  | 2,123 |  |  | - |  |  | (1,902) |
New instruments originated or purchased |  |  | 2,254 |  |  | - |  |  | - |  |  | 2,254 |
Allowance for expected credit losses as of December 31, 2016 |  |  | 1,143 |  |  | 4,633 |  |  | - |  |  | 5,776 |
| (1) | 12-month expected credit losses.
| (2) | Lifetime expected credit losses.
| (3) | Credit-impaired financial assets (lifetime expected credit losses).
The reserve for expected credit losses on loans commitments and financial guarantees contracts reflects the Bank’s Management estimate of expected credit losses items such as: confirmed letters of credit, stand-by letters of credit, guarantees and credit commitments.

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