Loans commitments and financial guarantees contracts

12 Months Ended

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.