Credit Union Annual Report 2021 V2 - Flipbook - Page 79
THE CAYMAN ISLANDS CIVIL SERVICE ASSOCIATION (CICSA)
CO-OPERATIVE CREDIT UNION LIMITED
NOTES TO FINANCIAL STATEMENTS (continued)
July 31, 2021
22. Financial risk management (continued)
The table below illustrates the sensitivity of the Credit Union’s net income of a reasonably possible +/-10% change in
equity prices for the investments held at the year-end:
2021
Change in equity price of investments
+ 10%
- 10%
$
$
278,177
(278,177)
2020
$
$
270,422
(270,422)
vi. Interest rate risk
Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market
interest rates.
Cash at bank, fixed deposits, members’ deposits and loans are subject to interest rate risk. To mitigate this risk, the
Credit Union places funds on fixed deposits for periods of less than one year at prevailing rates of interest. The Credit
Union manages its cash flow interest rate risk on its loan book, by issuing all loans at fixed rates of interest. The Credit
Union’s overall exposure to interest rate risk is low due to the fact that its ‘Members’ shares’ liabilities are non-interest
bearing (Note 9) but may attract a discretionary periodic dividend proposed by the Board of Directors based on the income
of the Credit Union. The maximum dividend level is limited as described in Note 9.
The table below illustrates the sensitivity of the Credit Union’s net income of reasonably possible changes in interest rates
for loans, deposits placed with banks, and members’ deposits (comprising regular saving and term deposits). Since
loans to members are issued at fixed rates, the sensitivity to interest rates on loans are based on the variation in the
composition of the loan book as the Credit Union issues different types of loans based on collateral specific criteria,
rather than variations in interest rates.
2021
2020
Interest earned on loans
+ 0.05%
- 0.05%
$
$
160,858
(160,858)
$
$
143,646
(143,646)
Interest earned on fixed deposits
+ 0.10%
- 0.10%
$
$
87,671
(87,671)
$
$
54,213
(54,213)
Interest paid on member deposits:
+ 0.50%
- 0.50%
$
$
113,518
(113,518)
$
$
121,003
(121,003)
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