Strategic report

Standard Chartered is a leading

international bank.
Our heritage and values are expressed in our
brand promise, Here for good. Our operations
reflect our purpose, which is to drive commerce
and prosperity through our unique diversity.

Contents
Strategic report
02 Who we are and what we do
04 Chairman’s statement
07 Chief Executive Officer’s statement
11 Retail Banking
14 Wealth Management
16 Corporate and Institutional Banking, Client Coverage
18 Community investment
20 Board of Directors
22 Executive Management
24 The Head office journey
26 Directors’ report
28 Corporate governance

About this report

Sustainability reporting
We adopt an integrated approach to corporate
reporting, embedding non-financial information
throughout our Annual Report.

More information is also available

in our Sustainability Summary
at sc.com/sustainabilitysummary

Alternative performance measures

The Group uses a number of alternative performance
measures in the discussion of its performance. These
measures exclude certain items which management
believes are not representative of the underlying
performance of the business and which distort
period-on-period comparison. They provide the
reader with insight into how management measures
the performance of the business.

For more information please visit sc.com

@StanChart
linkedin.com/company/standard-chartered-bank
facebook.com/standardchartered

Standard Chartered — Annual Report 2020 1

Strategic report

At Standard Chartered our purpose is to

Who we are drive commerce and prosperity through
and what we do our unique diversity. Our businesses serve
three client segments
Our client segments Local
1. 2.
Retail Banking Commercial Banking
Serving our personal, Private and (CB)
Business Banking Clients

Operating income Supporting our local corporations

4
and medium-sized enterprises
K321m Operating income

K56m

Total operating income

Global
1

K1,161m 2
3.
Corporate &
Institutional Banking(CIB)
Serving large corporations, governments,
banks and investors.

Operating income
3
K122m

4. Central & other items Operating income

K662m

Guiding and supporting our businesses

Our client-facing businesses are supported by our global
functions, which work together to ensure the Group’s operations
run smoothly and consistently with our legal and regulatory
Global function obligations, our purpose and our risk appetite.
Human Resources Operations Corporate Affairs & Brand
Enables business performance through Responsible for all client operations, and Marketing
recruiting, developing and engaging end-to-end, and ensures the needs of our Manages the Group’s communications
colleagues. clients are at the centre of our operational and engagement with stakeholders in
framework. The function’s strategy is order to protect and promote the Group’s
Legal supported by consistent performance reputation, brand and services.
Enables sustainable business and protects metrics, standards and practices that are
the Group from legal-related risk. aligned to client outcomes.
Group Internal Audit
An independent function whose primary
Technology & Innovation Country CFO role is to help the Board and Executive
Responsible for the Group’s operations, Comprises seven support functions: Management to protect the assets,
systems development and technology Finance, Treasury, Strategy, Investor reputation and sustainability of the Group.
infrastructure. Relations, Corporate Development, Supply
Chain and Property.
Conduct, Financial Crime
Risk and Compliance
Responsible for the sustainability of our Enables sustainable business by delivering
business through good management of risk the right outcomes for our clients and our
across the Group and ensuring that business is markets by driving the highest standards in
conducted in line with regulatory expectations. conduct, fighting financial crime and
compliance.

2 Standard Chartered — Annual Report 2020

 Strategic report
We are committed to promoting economic and social development
Valued behaviours in the markets we serve, doing so sustainably and equitably in line
with our purpose and three valued behaviours. Below are the three
valued behaviours on which we anchor our purpose.

Never settle Better together Do the right thing

• We recognise that there can be • We set, and regularly review, • Our Prohibited Activities List
challenges in balancing standards for clients via our details those activities we will
environmental, social and Position Statements, in order to not support. Where clients or
economic needs and continually manage environmental and suppliers breach this or show
ask ourselves questions to ensure social challenges based on insufficient progress in aligning
we get this right. international good practice. We to our Position Statements, we
expect our clients to meet these will decline transactions or exit
standards. relationships.

Standard Chartered — Annual Report 2020 3

Strategic report

I remain deeply passionate about our formidable

Chairman’s global brand and what we stand for. Despite the
tough operating environment in 2020, as Standard
statement Chartered Bank Zambia Plc, our remarkable resilience
and agility enabled us to uphold our exceptional
Annual Report 2020 service standard through our talented and well-
equipped people, our unique global proposition and
our unrivaled digital platforms. We demonstrated
that we are truly ‘Here for good’ by staying close
to our clients and other key stakeholders, including
our valued communities throughout the various
challenges, most notably the COVID-19 pandemic.
We firmly focused on the delivery of our strategic objectives
aligned with the Group strategy in the context of the challenging
operating environment in 2020. Standard Chartered Bank
Zambia Plc made significant strides in the digital agenda
and recorded the highest digital adoption and year on year
increase across the Standard Chartered Group under Retail
Banking. Furthermore, the E-Tax system was successfully
integrated with the Zambia Revenue Authority (ZRA) for
Domestic Tax Payments under Corporate and Institutional
Banking, Client Coverage (CIB). Following the great success of
our digital innovations, we continued the network optimisation
Caleb M Fundanga
journey and embarked on the closure of two branches by 30
Chairman
September 2020, and a further five branches by 31 December
2020.

Given the continued constrained operating environment of the

Bank in 2020, protecting the foundations of the Bank remained
“Despite the tough operating critical. The Board closely engaged with the Management team
and provided the requisite guidance and support. Efforts were
environment in 2020, as Standard largely focused on following through the ongoing de-risking
Chartered Bank Zambia Plc, initiatives across both Retail Banking (RB) and Corporate,
Commercial and Institutional Banking (CCIB), Client Coverage
our remarkable resilience and and utilising our digital innovations to continue efficiently
serving our clients in the wake of the COVID-19 pandemic.
agility enabled us to uphold our
exceptional service standard 2020 Economic Overview
through our talented and well- The year 2020 was marked by the outbreak of the COVID-19
pandemic. This pandemic had both health and economic
equipped people, our unique impacts that materially affected the global economy. Zambia
was not spared of the effects.
global proposition and our
The Zambian Economy contracted by circa 4.2 per cent,
unrivalled digital platforms.” bogged down by the impact of the pandemic. The industries
that contracted the most were Wholesale Trade, Retail Trade,
Hospitality and Construction. Monetary policy softened during
(Loss) /earnings per share the year in a bid to mitigate the adverse economic impacts
of the COVID-19 pandemic. The monetary policy rate was
Earnings per share reduced to 8.00 per cent. Additional monetary policy measures

2020: (K0.029)
2019: K0.007
undertaken to counter the effects of the pandemic were the
K10bn stimulus package issued by the Bank of Zambia.

The government defaulted on its Eurobond obligations

after skipping a coupon payment in October 2020. Prior to
this default, the government had asked holders of its USD3
Dividend per share billion Eurobonds to accept a six-month standstill on coupon
payments while it worked on a debt-restructuring strategy.
This request was not favourably received by the Bondholders.

2020: Nil
2019: Nil
In 2020, the FX market experienced some stress especially
beginning in July. A significant reduction in USD supply was
observed in the market, resulting in most buyers being serviced
on an order basis. Due to this stress, the kwacha closed the year
33 per cent weaker than prior year at K21.20 to the USD.

During the year, Inflation remained above the government’s

6-8 per cent target range. The December 2020 year-on-year
increase was the highest recorded at 19 per cent. Factors
affecting the upward movement included food prices,
electricity and fuel costs and a depreciating local currency.

4 Standard Chartered — Annual Report 2020

Zambia’s copper production was expected to close the year From the Management team, Ms Musonda Musakanya, Chief

Strategic report
at 920,000 metric tons from 800,000 metric tons in 2019. Operations Officer, Zambia and Ms Mwaya Siwale, Country
Furthermore, Copper saw a resurgent performance in 2020, Head of Transaction Banking, Zambia resigned in December
touching a high unseen since 2013 at USD 8,238 per tonne (in 2020 to pursue other opportunities. I would like to take this
the first week of January 2021) opportunity to recognize and appreciate the tremendous
contributions from both Ms Musakanya and Ms Siwale and to
Finally, to close the year, a Statutory Instrument (SI Number
equally wish them every success in their future endeavours.
125 of 2020) was introduced, adding petrol and diesel to the
zero-rated Value Added Tax schedule. This move was meant I am delighted to recognise Audrey Malama, Country
to cushion the impact of the effects of Kwacha depreciation on Technology Manager, who has been appointed to act as
the fuel pump price. Country Chief Operations Officer, Zambia and Kasanga
Sondoyi, who has been appointed to act as Head of Transaction
Risk Governance Banking, Zambia. I would also like to recognise Christine
Matambo, who was appointed Acting Corporate Affairs and
2020 presented heightened risks given the onset of the Brand Marketing Head for South and Southern Africa effective
COVID-19 pandemic amidst the pre-existing macro-economic 1 January 2021.
challenges. Our robust risk management approach enabled us
to navigate the risks in our operating environment proactively
Awards, Thought Leadership and Brand
and effectively. As part of our Enterprise Risk Management
Framework (“ERMF”), we continued to identify current and Promotion
future risks, we discussed and analysed these risks, and we took
The Bank was awarded the ‘Best Consumer Digital Bank
prompt actions as appropriate. Given the volatile external
in Zambia 2020’ for the seventh consecutive year by the
environment, a key aspect of our approach to business was
prestigious Global Finance Awards, which is testament to our
strategic risk management, which entailed more rigorous
unrivalled world-class digital platforms.
management of the alignment with the Bank’s Risk Appetite.

As Standard Chartered Bank Zambia Plc, we believe that risk The Bank launched a new programme - Futuremakers
management is the responsibility of each one of our people. We ‘Youth to Work’ in September 2020. Futuremakers is the new
continued to self-identify and assess risks across our businesses Bank community strategy, which has 3 pillars; Education,
and functions to ensure that the Bank remained safe for our Employability and Entrepreneurship. It aims to; i) Empower
clients, our people and other stakeholders. We invested time young people to be work-ready, and ii) Support 30 SMEs
to learn from our experiences and ensured that we utilised the through training and placing of the youths to help their
lessons learnt to deliver lasting change. businesses to grow through youth placements. Youth to Work is
funded by the Standard Chartered Foundation in three African
Against the backdrop of the challenging macro-economic markets, Zambia, Uganda and Ghana.
environment worsened by the COVID-19 pandemic, a number
of Principle Risk Types were elevated and required closer The Bank also launched the ‘Women in Technology’ (WiT)
monitoring. Country Risk, and incidentally, Credit Risk were programme aimed at supporting the economic well-being of
elevated throughout 2020, driven by the slowdown in economic Zambian women through helping to scale-up their businesses
activity, and domestic economic pressure stemming from weak through technology. In partnership with BongoHive Zambia,
local currency, the elevated inflation levels, and the Country’s the Bank has made an investment of USD150,000 to support
external debt levels. innovation-driven entrepreneurship for start-up ventures,
training and mentorship for the women-led businesses. Five
Information and Cyber Security (“ICS”) continues to be a key successful businesses from the incubation phase will receive
risk across financial services and other industries. In 2020, we USD10,000 each and continued support to help them scale-up
embarked on internal ICS awareness campaigns to equip their businesses.
our people to better manage potential ICS threats and we
also continued to invest in our infrastructure. Financial Crime A number of Thought Leadership pieces were promoted in
and Conduct remain key focus areas. We continue to make 2020, which centred around current and emerging trends
strides in building an effective and sustainable Financial Crime impacting the business environment. These included;
Compliance programme and managing our Conduct Risks
through our Country Conduct Plan. We also enhanced our Ÿ Where will the jobs of the future be? (Chief Executive Officer)
vigilance across our Operational Risk profile in 2020 given the Ÿ How banks can take advantage of digitisation (Head,
risks presented by the new ‘Work From Home’ arrangements Consumer, Private and Business Banking)
implemented as part of the Bank’s internal COVID -19 response.
Ÿ The impact of COVID-19 pandemic on productivity (Chief
Standard Chartered Group currently recognises Climate Risk Executive Officer)
as a material cross-cutting risk in line with the Group’s focus Ÿ Are we future-fit? (Chief Executive Officer)
on emerging risks. We define Climate Risk as the potential
for financial loss and non-financial detriments arising from The Bank played an active role towards COVID-19 pandemic
climate change and society’s response to it. We will continue to relief efforts, donating over USD350,000 towards various
align our business focus with Climate Risk themes accordingly. interventions including;

The Board and Management Ÿ Donations to WaterAid Zambia to rehabilitate water

facilities in 5 schools across Lusaka and for the provision
Ms. Venus Hampinda, who served as an Executive Director of foot-operated hand washing tanks to underprivileged
– Finance (ED) on the Board of Standard Chartered Bank communities;
Zambia Plc and as the Bank’s Chief Financial Officer resigned Ÿ A donation to Save the Children Zambia towards producing
from the Board on 12th March 2020. I would like to recognise her child-friendly COVID-19 pandemic awareness materials
valuable contributions to the Board during her tenure and wish and ensuring that vulnerable children in select rural areas
her continued success in her future endeavours. I would like to have access to hand hygiene preventative measures;
welcome Mr. Kelvin Bwalya, who replaced Ms. Hampinda. Mr. Ÿ A donation to Lusaka Eye Hospital for Personal Protective
Bwalya has been with the Bank since 29th April 1998 and joined Equipment (PPEs) and hand sanitisers.
the Board effective 1st April 2020. I wish him all the success in
his new role.

Standard Chartered — Annual Report 2020 5

Strategic report

Chairman’s Economic Outlook

statement continued The year 2021 will come with a lot of challenges. The resurgent
Covid 19 pandemic and discussions around debt restructuring
will be only two of those challenges, especially that all these
Ÿ A donation to United Nations Children Fund (UNICEF) will be happening in an election year.
to support remote education via TV, radio, and mobile
With respect to key economic variables, the government is
platforms and child protection measures for vulnerable
targeting GDP growth of 1.8 per cent for 2021 and over 3.0
children in Zambia.
per cent by 2022. The resurgence of the new strain of Covid
In 2020, we showcased our new Head Office building progress 19 pandemic in early 2021 is likely to put pressure on achieving
and finally made the official move in November 2020. This new these GDP targets.
investment into our Head Office building re-affirms the Bank’s
The kwacha is projected to remain under pressure in 2021,
commitment to Zambia, its clients and communities.
given limited USD availability compared to client orders and
the weak reserve position. The Government has put in place
Financial Highlights the purchasing of gold to augment the reserves. On the local
currency side, we expect the market to continue being liquid
The 2020 performance was delivered against a very
to boost the financial sector stability. We also expect to see
challenging macroeconomic environment and strict adherence
an increase in spending on account of the Presidential and
to accounting standards. This resulted in restrictions on
Parliamentary Elections that will take place in August 2021.
business performance such as enhanced impairments. The
financial results reflect the Bank’s strategy of de-risking,
Inflation for the year is expected to remain above the 6-8 per
digitization and maximising returns. The negative returns of
cent target range. A weakening Kwacha is expected to put
-6 per cent on shareholder’s investments for the year ended 31
pressure on inflation and so are any changes to energy prices.
December 2020 (compared to 2 per cent in 2019) are on the
A good harvest would moderate these adverse impacts.
back of a 7 per cent increase in revenue, which was negated by
a 27 per cent increase in costs on account of initiatives aimed A matter of interest in 2021 will be a possible Eurobond
at reducing our long term costs coupled with investments in restructuring and potential broad debt restructuring with
digitization. other lenders. This is likely to be a prerequisite for an IMF-
funded programme, which would anchor reforms and improve
One of the significant factors that contributed to the Bank’s
confidence for the country.
performance were impairments which continued on an
upward trajectory at the same level as in the prior year. The Industry Outlook
Bank is fully compliant with the requirements of International
Financial Reporting Standards. The continued downgrading of The Banking sector in Zambia remains resilient in the face of
the Country by external Rating Agencies had an adverse effect the continuing macro-economic challenges. Building on from
on the Bank’s internal Country rating resulting in the Bank the lessons learnt and adjustments made to adapt to the
taking on significantly higher Expected Credit Losses. We have volatility which persisted in 2020, industry players will be better
continued to de-risk and scale down on high risk exposures in prepared to face further uncertainty and volatility anticipated
view of the deteriorating macro-economic trends. in 2021. The Targeted Medium-Term Refinancing Facility which
was rolled out in April 2020 as one of the policy interventions to
The Statement of Financial Position remains robust, with strong address the deteriorating macro-economic environment and
liquidity and a healthy capital adequacy ratio. Our foundations the impact of COVID -19 pandemic, along with other relevant
remain strong with significant investments in digital platforms policy pronouncements, will remain key pillars in securing the
as well as initiatives under Corporate and Institutional Banking, stability of the Banking sector.
Client Coverage to grow Operating Accounts (OPAC) amid the
COVID 19 pandemic and the new ways of working. Conclusion
We are not yet in the clear as the prevailing challenges persist, The year 2020 presented unique challenges for the entire
but we are confident that the foundations of the Bank remain Financial Services industry given the far-reaching impact of
strong and we remain optimistic that our economy will recover. the COVID-19 pandemic across various sectors of the economy.
The recovery of the economy, is expected to lead to improved As Standard Chartered Bank Zambia Plc, given the internal
performance of the Banking and Financial services sector, de-risking we had initially embarked on in 2019, as well as the
resulting in a release of some of the huge provisions we have investments we made into our digital capabilities, we were able
taken on as a Bank. to uphold our balance sheet resilience, while effectively serving
our clients largely through leveraging our digital innovations
Overall, the performance was below budget and whilst we are and the strength of our global network.
unable to shape the external environment, there is room to
continue to grow strongly, in a safe and sustainable manner. The strategy of Standard Chartered Bank Zambia Plc is
Our strategy and vision as a Bank has always been clear. We constantly aligned with inherent current and emerging risks,
constantly look at evolving and enhancing not only efficiency as well as the internal Risk Appetite, with a sharp focus on
but client experience as well. We set a very challenging maximising shareholder’s returns whilst putting clients first,
strategy for 2020, our aim was to secure the foundation and serving the communities we operate in, and being a good
emerge as the leading Bank for Digital solutions, whilst driving corporate citizen with all relevant regulatory bodies.
better collaboration across our teams, enhancing synergies
and leveraging off our global network.

Caleb M Fundanga

Chairman
26 February 2021

6 Standard Chartered — Annual Report 2020

Chief Executive

Strategic report
The year 2020 was characterised by heightened
risks occasioned by the COVID-19 pandemic and
Officer’s statement consequently, the worsening of the pre-existing
macro-economic challenges. Riding on our agility
and resilience which we have been steadily building
over the years, our core priorities as Standard
Chartered Bank Zambia Plc in 2020 centred largely
around our response to the prevailing challenging
macro-economic picture. These core priorities
included;
Ÿ The health and safety of our people and clients, something
we have upheld from the onset of the COVID-19 pandemic
in Zambia and throughout its evolution to date.
Ÿ Protecting the foundations of the Bank with respect to
capital and liquidity through de-risking and scaling back
on high-risk exposures and sectors.
Ÿ Keeping the Bank running and augmenting the resilience
built so far.
Ÿ Leveraging our digital platforms and innovations to keep
serving clients safely and driving business momentum.

The Bank delivered a resilient performance in 2020; Capital

Herman Kasekende and liquidity levels remain strong and the statement of
Managing Director and Chief financial position continues to grow. We have stepped up our
Executive Officer digitisation and innovation efforts and transforming not only
how we work but also how we serve our clients.

The Bank recorded an increase in revenue of only 7 per cent

“The Bank delivered a resilient compared to 2019 which was mainly on account of increased
income from investment securities (52 per cent increase year
performance in 2020. Our capital on year), this was negated by an 11 per cent decline on interest
income from loans and advances which was on account of
and liquidity levels remained the Bank’s de-risking exercise notably of the personal loan
book in RB, rationalizing limits in CCIB and the running down
strong and the statement of and exiting of the Commercial Banking business. Non funded
income reduced by 12 per cent year on year on account of
financial position continued reduced activities.
to grow. We stepped up our The Bank booked a high level of Expected Credit Losses in
line with prior year. This is on the back of the Bank’s robust
digitisation and innovation efforts expected credit loss modelling (ECL) in alignment with
international financial reporting standards which take
and continued to transform into consideration several factors including external and
internal sovereign downgrades. The Bank is among the few
how we serve our clients.” in the industry who are booking provisions on investments
in government securities, which inception to date amounts
to ZMW 251m. In addition, based on our own internal ECL
modelling, we are the first in the market to book provisions on
Total revenue
statutory reserve deposits.

2020: K 1,161m
The Bank’s operating expenses were up 27 per cent year on
year, on account of human capital restructuring costs and
other costs relating to Personal Protective Equipment ['PPE’]
2019: K 1,071 m
for COVID-19 pandemic. The depreciation of the kwacha also
largely affected foreign currency denominated costs which
grew by 52 per cent year on year. The Bank further expensed
some of the costs associated with the move to the new
Head Office which resulted in premises and equipment costs
Total (loss)/profit after tax growing by 93 per cent year on year.

The current tax credit is on account of increased defered tax

credit charged to statement of profit and loss, bringing the

2020: (K48m)
2019: K 12m
loss after tax to ZMW 48m.

Standard Chartered — Annual Report 2020 7

Strategic report

Chief Executive Officer’s

Retail Banking (RB)
statement continued
We recorded a stellar performance under the RB business,
with the operating profit increasing by 159 per cent year on
year despite the volatile economic environment worsened by
the COVID-19 pandemic.

In 2020, we continued to enhance our digital offering with

Statement of financial position and Liquidity
some notable strides being the revamp of the website for
better client experience, the addition of foreign account
Loans and advances to customers dropped by 24 per cent in
opening feature on our SC Mobile App, and the inclusion of
line with the Bank’s strategy to de-risk and tail manage low
the one-time account transfer functionality.
returning assets which resulted in the personal loan book
reduction of 27 per cent year on year.
Standard Chartered Bank Zambia Plc attained the
highest digital adoption rate in the Group for RB clients, an
Customer deposits increased 31 per cent with an increase in
achievement well aligned with our digital drive. Against this
both the RB and CCIB client accounts.
backdrop of a healthy digital adoption and a world class
digital offering, we further optimized our branch network and
The Bank remains well capitalised with the capital adequacy
closed a further six branches to remain with three branches as
ratio being above the required minimum by 663 basis points
at December 2020.
but 34 basis lower than 2019 due to increased risk weighted
assets and lower retained earnings in the current year. We
Effective 1 January 2021 the operating model for Retail
will continue to leverage on our cost optimisation initiatives
Banking was restructured by combining two Value Centres,
and enhanced revenue momentum supported by a strong
Unsecured Value Centre, and the Deposit and Secured Asset
statement of financial position and dedicated team. In
Value Centre to create a more integrated and efficient
addition, the Bank will at the same time, maintain the right
business for superior client service. Furthermore, the Universal
enterprise risk framework and robust controls, to not only
Banker role was introduced by combining the role of a Teller
generate sustainable returns but to safeguard the prevailing
and Customer Service Manager into one (Universal Banker)
foundations for future growth as well.
to equip our people with relevant future skills. The New model
will be called Consumer, Private and Business Banking (CPBB).
Focus on risk, conduct and controls continued to be of key
importance, given the heightened risks presented by our new
Our People
ways of working, particularly working from home as one of the
pandemic mitigating measures. Vigilance across all Principal
Standard Chartered Bank Zambia Plc closed 2020 with 408
Risk Types (PRTs) was enhanced through the governance
employees. The Bank continued to align its People strategy
structures both at country level and within the businesses and
to the Group’s refreshed strategic priorities, underpinned by
functions. The Risk and Audit teams also continued to provide
a performance-oriented and innovative culture. In supporting
support and helpful insights in this regard.
the business strategy, our people strategy continues to be a
focal point for the Bank.
Corporate, Commercial and Institutional Banking,
Client Coverage (CCIB) The Group strategy in 2019 to create a worldwide Digital
Bank necessitated a further reduction of headcount in 2020
In 2020 the COVID-19 pandemic and unfavourable economic in Consumer, Private and Business Banking (Retail Banking)
conditions had a negative impact on Corporate and and Operations, Technology and Information department,
Institutional Banking’s revenue. Our ability to grow revenue and the closure of a further eight branches in 2020. There
from FX sales was hindered by reduced FX liquidity in the was a headcount reduction in Corporate and Institutional
economy. Despite this, the Financial Markets division did show Banking to align with the reduced scale of business, and in
an improvement due to the strategy to limit the dependency Human Resources following changes in structure. Due to the
on Corporate Term Deposits thereby reducing the interest branch closures and resultant effect on some of the units that
expense. supported the RB Business, the Bank undertook a redundancy
exercise and released a number of staff in the year 2020.
In a year filled with disruption, the importance of investment
into technology became more critical than ever before. Despite the transformation that has already been executed,
Notable successes for CCIB included the integration of the there are a number of new initiatives planned to ensure a
Straight 2 Bank platform with the Zambia Revenue Authority future-fit organisation through:
system for Domestic Tax payments. We were also able to
further enhance our digital offering, through the introduction Ÿ Workforce reskilling and retooling – This will be a three-
of soft tokens and drive uptake from 2 per cent at start of the year agenda aimed at using existing infrastructure i.e. a
year to 52 per cent as at December 2020. This enabled our strong learning culture to deliver ‘reskilling’ colleagues
customers to generate their One Time Pin using their mobile into roles where we have the greatest demand for the
phones and transact without need for a physical token from future. The HR function will continue to work with the
the bank to be issued. We will continue to invest in our systems Business functions to ensure that we have a Future Ready
to ensure that we are able to support our clients better in the Workforce.
new normal.
Ÿ Our new approach to performance, reward, recognition
Our aspiration for 2021 is to increase joint customer focused and talent (Project Oscar) – We are executing a full
engagement with product partners to ensure better launch across the Bank in 2022. This work is a key enabler
understanding of our clients’ needs. We will look to ‘Deliver our to deliver on our cultural aspirations – to be innovative,
global network’ by supporting our CCIB clients operating in inclusive and be a high performing Bank.
key sectors such as mining, energy and agro - manufacturing.

8 Standard Chartered — Annual Report 2020

 Strategic report
Ÿ Future Workplace, Now – This is a new programme that Outlook for 2021
will be rolled out across the Bank. As a continuation, the
efforts exhibited on account of a number of emerging The macro-economic variables in 2021 are projected to
people risks as a result of the pandemic will continue to remain under pressure, coupled with the resurgence of
be the focus, with continued focus on overall wellbeing the COVID -19 pandemic, as well as 2021 being an election
and specifically areas like mental health. The Bank will year. Progress around debt restructuring discussions and an
continue to work on Inclusion to ensure that the workplace International Monetary Fund (IMF) funded programme could
is transformed to be the best place to work. positively impact the economic trajectory in 2021.

Ÿ Continuing the journey to digitise and improve technology Having proactively and effectively managed risk,
interfaces in HR with the objective of delivering best-in- appropriately reshaped the business, and refocused around
class Employee Experience. The focus will be continued the right business opportunities, we are optimistic about
enhancement of the HR systems so as to increase adoption the Bank’s continued sustainable growth and profitability to
/ satisfaction from our digital HR channels. deliver healthy returns to shareholders, and prosperity for our
clients.
Ÿ Finally, continuing the work on the Cultural Transformation
of the Bank. The Bank will continue to build a strong Summary
culture. The focus will be on leveraging off the work we
have done to become a truly purpose-led organisation Given the unprecedented circumstances of 2020, with
with bold aspirations and working with ‘senior leaders’ to significant and in some instances, lasting impacts on
get a higher level of ambition across the firm and a strong communities, businesses, families, and economies, we will
culture of excellence. continue to focus on being ‘Here for good’ through preserving
and enhancing our resilience and agility in order to safeguard
Community Investment the Bank and remain relevant to our clients, our shareholders,
our communities, and other stakeholders. I give tribute to
As Standard Chartered Bank Zambia Plc, we continued to be our valued clients for their firm commitment to Standard
a force for good in the communities we operate by supporting Chartered Bank and our shareholders for their unwavering
various COVID-19 pandemic relief efforts with our total support.
community investment in this regard being over USD350,000.
It would be remiss of me to not pay tribute to our clients and
We also held Virtual Youth Mentorship Sessions on Leadership, staff that fought a brave and gallant fight against COVID-19
Personal Branding and Savings & Investments facilitated pandemic. We also remember those we lost to this pandemic
by the CEO, Head of Wealth Management, and Head of and thank the brave frontline staff who delivered over and
Corporate Affairs, Brand & Marketing. beyond their call of duty.

Herman Kasekende
Managing Director and Chief Executive Officer
26 February 2021

Standard Chartered — Annual Report 2020 9

10 Standard Chartered — Annual Report 2020
 Our Strategy
Retail Banking

Strategic report
In 2020 Consumer, Private and Business Banking
(RB) heightened the focus on client engagements
using data analytics and enhancing our digital
channels to serving our clients in Business, Priority
and Personal Banking segments.

We remain confident that our RB strategy and priorities will

deliver:

1. A profitable business with a well-diversified and optimised

statement of financial position.
2. A sustainable and scalable distribution network with
digital touch points as its core channels.
3. A ‘wow’ client experience through our diverse product
suite and world class digital capabilities.

To improve client engagements even during the pandemic,

bi-monthly client Webinars were held with selected clients
and we carried out a tail management exercise in Business
Banking segment to optimise the portfolio. We provided
a platform to virtually interact and stay close to our clients
and helped them grow their wealth even during these trying
times, this is a clear demonstration of our brand promise of
“Here for good”.

Deep Pal Singh In 2020 the business successfully enhanced our digital
Head of Consumer, Private and Business channels capabilities: the website was revamped to improve
Banking, Zambia and Southern Africa client browsing experience and data analytics. A referral
functionality was introduced on the SC Mobile App to allow
clients to invite their friends and families; foreign account
opening was added on our SC Mobile App as well as the one-
“We provided a platform time account transfer functionality. This further complements
our drive to deliver best in class Digital capabilities on the
existing Mobile and Online platforms.
to virtually interact and
To manage Asset portfolio risk exposure for the Government
stay close to our clients of the Republic of Zambia (GRZ) employees under stressed
and challenging macro-economic factors in the market, we

and helped them grow ran a successful settlement campaign which saw the GRZ
Personal Loan portfolio exposure reduce from 68 per cent to
about 48 per cent.
their wealth even during To enhance staff accountability and efficiency in the day
these trying times, this to day running of the business and in line with our people
agenda RB restructured its operation model in 2020 by

is a clear demonstration combining Unsecured Asset Value Centre Unit and the
Deposit & Secured Asset Value Centre unit into one with one
General Manager responsible for the Deposit & Asset Value
of our brand promise Centre . Further the Universal Banker role was introduced to
upskill our staff and set them up for future roles in the Bank by
of “Here for good” combining the role of a Teller and Customer Service Manager
into one (Universal Banker). This is proof that at the core of
our business, we continue to demonstrate that we are not
only interested in improving the digital capabilities but also
the skills of our staff.

With our improved digital platforms, we have seen our

client adoption improve to 81 per cent making us the best
in Standard Chartered Bank Group. 88 per cent of our
transactions are serviced on our digital platforms compared
to only 12 per cent in the physical branches, of which 60
per cent are cash deposit. Furthermore, we have seen an
improvement in digital account acquisition by three times
per month over what we used to acquire under paper based
on-boarding in 2019 even during the COVID-19 pandemic
environment showing the resilience and proof of concept of
our digital investment.

Standard Chartered — Annual Report 2020 11

Strategic report Retail Banking

Retail Banking continued 2021 Outlook

To smoothly complete the transition to a new Omni Channel
model which runs on a light physical branch network presence
complimented by our state-of-the-art digital alternative
Business optimised its branch network to align to the core channels.
growth cities by closing eight branches as at end of December
2020 to remain with 3 branches - one in Kitwe and two in The enhanced digital capabilities are currently able to
Lusaka. This clearly speaks to our strategy of having a digital provide 70 plus service request online with no need to visit the
service business model which is robust and easy to scale. physical branch, these services include:
Innovations like card delivery for both new accounts and
replacements have proved that we can operate efficiently Ÿ Account opening
and be able to service our clients even in places we have Ÿ Card replacement and PIN change
exited or never had a physical presence. Ÿ Bank transfers
Ÿ Mobile Money wallet funds transfer
Awards Ÿ Credit Card repayment
Ÿ Utility Bill payment
The Business was recognised for its outstanding digital Ÿ Loan repayments
capabilities and received the most prestigious award of
“The Best Consumer Digital Bank 2020” by Global Finance. The closure of branches is also part of the transition to the
We have won this award seven times in a row, clearly Omni Channel model through a tiered client service approach
demonstrating that we are indeed trendsetters. model. This is because the branches are high value assets to
be used for complex high value segments client interactions
2020 Overview through the Staff relationship management channel, while
migrating the mass segment to the digital self-service
The RB business delivered a strong performance in 2020 under channel.
challenging conditions. Liabilities grew by 49 per cent year on
year on the back of improved acquisition through our digital We are confident this business model built thus far is well
platform. We recorded growth in local currency deposits positioned for future business sustainability in 2021 and
from our new Business Banking clients whom we have stayed beyond.
closer to and embraced in the pandemic environment. The
asset book as per strategy was halved, Assets dropped 46 To deliver yet another strong performance in 2021 our strategy
per cent due to de-risking strategy of Personal Loans for GRZ will be driven by seven clear underlying principles:
employee portfolio.
1. Pivot to a Mobile-led Omni Channel engagement model
Depreciation of the kwacha by about 51 per cent year on
year and impact of COVID -19 pandemic led to slow down 2. Operate a differentiated model for Affluent, Personal and
in business activities and exerted pressure on the revenue Business Clients.
performance coupled with restructuring and optimisation 3. Deliver superior experience & build brand value
during the year. As a result of this revenue declined by 29 per
cent year on year. 4. End game is not zero physical branches, but instead
repositioning branches as targeted high impact assets in
a channel construct which has digital at the core
Risk
5. Participate in alternate business models e.g. Agency
The RB Risk and Control Environment remained strong Banking
in 2020. The business passed all reviews and audits with 6. Transition to ‘Pay as we go’ investment model
an acceptable or well-controlled rating, including the
COVID-19 pandemic Regulatory review. Prudent asset book 7. All new products will be introduced primarily on digital
management and de-risking was cardinal in 2020 with the channels
pandemic affecting normal business operations in a market
already challenged with the macro-economic factors. In all We will continue to keep the RB business sustainable and
the reviews and risk measures undertaken, Management profitable in the years to come.
demonstrated ownership and understanding of risks facing
the business along with ensuring a robust mechanism for
identifying and addressing control weaknesses.

12 Standard Chartered — Annual Report 2020

Standard Chartered — Annual Report 2020 13
Strategic report Wealth Management

in the global economy, recovering corporate earnings and

Wealth Management divergent monetary policies across some emerging and

developed economies which should have been clearly
supportive factors for risk assets. The COVID-19 pandemic
turned most of this scenario on its head except for the
supportive environment for risk assets in capital markets due
to robust policy responses. Despite the challenging social
and physical circumstances our clients faced in 2020, capital
markets rallied significantly, and this supported a strong set
of results for Wealth Management.

 Revenues grew overall by around 17 per cent over the

previous year and this growth was driven predominantly
by higher Investment Services and Wealth Management
lending sales in the Consumer, Private and Business Banking
business. Income from Investments Services and Wealth
Management lending sales significantly grew on average.
In Investment Services, the assets under management
for our clients, grew by around 40 per cent year on year
and the number of clients also grew significantly. The
success recorded in our Investment Services and Wealth
Management lending sales was driven by superior
products and strengthened client relationships.

 Our Relationship Managers and Investment Advisors

continued to help our clients invest millions of dollars of
Olusegun Omoniwa
Head of Wealth Management assets in both local and global capital markets. They
also held several strategic engagement sessions online
as a result of the need for social distancing with clients to
ensure they were kept abreast of key trends in the market
“It is often worth reminding and the investment landscape.
ourselves that markets are
 In 2020 we further enhanced our wealth solution offering
mechanisms that discount the as we continued to see interest in investment diversification
by partnering with professional investment managers from
future, not the past. While 2020 around the world while supporting significant investments
has proven to be an unusual year into local capital markets. We also closed a gap in offering
wealth protection through our partnership with Marsh
in many ways, we believe it is Zambia to offer clients short term insurance solutions for
their homes and motor vehicles.
important to keep this forward-
looking perspective in mind
when looking ahead to 2021.”
Outlook for 2021
It is often worth reminding ourselves that markets are
Our Strategy mechanisms that discount the future, not the past.
We offer superior investment advice, products and While 2020 has proven to be an unusual year in many
services to help our clients grow, manage and protect ways, we believe it is important to keep this forward-
their wealth. We offer our clients a comprehensive looking perspective in mind when looking ahead to
2021.
range of investment advice and solutions through
our award-winning online and mobile channels and Investing in 2020 was defined by the rapid spread of the
branches, as well as face-to-face support through COVID-19 pandemic, its resulting negative impact on
our Investment Advisors, Insurance and Treasury growth and the subsequent policy response. However,
Specialists. Our approach is to understand our a spate of positive reports on potential COVID-19
pandemic vaccines, some of which are now approved,
clients’ financial goals and/or needs and then help
mean markets are already starting to look ahead to a
them build an investment portfolio that reflects their post-COVID-19 pandemic environment.
aspirations. In addition, we help our clients protect
themselves, their families and businesses against In our assessment, a post-COVID-19 world is likely to
risks on life using tailored insurance solutions, which be supportive for risky assets in 2021. This is reflected
are offered in partnership with Sanlam Life Insurance in our preference for equities and credit over cash and
bonds. An end to ‘man-made’ restrictions on economic
and Marsh Zambia Limited. activity raises the prospect of a return to pre-COVID-19
pandemic activity levels once the vaccination
2020 Overview
programme is widespread. Continued ultra-supportive
At the start of the year our aim was to help our clients At
monetary and fiscal policies should help accelerate this
the start of the year our aim was to help our clients through
process. We will continue to support our clients to take
what we believed would be a balancing act. Balancing the
advantage of the opportunities that will arise thorough
anticipated stabilising growth and reducing trade conflict
timely and professional access to relevant markets in
2021.

14 Standard Chartered — Annual Report 2020

Standard Chartered — Annual Report 2020 15
Strategic report Corporate & institutional banking

Corporate and
Institutional Banking,
Client Coverage
2020 Overview
2020 proved to be a difficult year for our business, where
revenue was negatively impacted by the economic
headwinds. This was exacerbated by the slowdown in
economic activity due to Covid 19 worldwide pandemic.
The tight FX liquidity in the economy resulted in declining
revenue on our Financial Markets line. However, as we
moved our focus from Corporate Term Deposits, we were
able to reduce the interest expense.

The business reported a loss in 2020 due to the significant

Loan Impairments. This is following the internal sovereign
downgrade which resulted in an increase in the Expected
Credit Loss provision taken. Furthermore, with the
implementation of IFRS 9 which adopts a forward-
looking approach to impairments (Expected Credit Loss)
Emmy Kumwenda as opposed to the incurred loss model, CIB booked a
Head of Global Banking and Financial
significant amount under impairments on the Corporate
Institutions
book which further affected the profitability of the
segment. As per IFRS requirements, every new loan on
boarding comes with an impairment whether a default is
expected or not.
“A key focus remains to To manage the risks faced by the business we proceeded

improve the experience to de-risk the portfolio by reducing limits on names with
exposures above the single borrower’s limit.

of our clients by Despite the challenges highlighted, the business was able
to achieve some key successes in 2020
acceleration of the Key successes in 2020 included:
digitization strategy.”  Demonstrated the strength of our network proposition
with a solution for a UAE based SCB client operating
in the energy sector, in this solution we successfully
closed the first tranche of bond discounting. Our
unique solution involved converting the receivables
Our Strategy
due to the client into marketable securities and
subsequently selling down the risk to our Investor
The focus for Corporate and Institutional
clients.
Banking remains to support our clients with
their transaction banking, corporate finance,  Provided Working Capital Support of ZMW308m to
CIB clients operating in key sectors such as energy
financial markets and borrowing needs across
and agro- manufacturing.
more than 60 markets, providing solutions to
clients in Zambia and most active trade corridors.  Successful integration of Straight 2 Bank platform
We intend to achieve this by increasing joint with the Zambia Revenue Authority system for
Domestic Tax payments.
customer focused engagement with product
partners to ensure higher customer retention.  Enhanced our digital offering through the introduction
of mobile soft tokens allowing clients to log onto
The business is split between Global Subsidiaries and Straight 2 Bank platform using their mobile phones
Financial Institutions to ensure delivery of our global without requiring issuance of physical tokens.
network to multinational corporates, government entities, Utilization was successfully driven up from 2 per cent
banks and investors operating or investing in Zambia. A at the start of year to 52 per cent as at December
key focus remains to improve the experience of our clients 2020.
by acceleration of the digitalization strategy.

16 Standard Chartered — Annual Report 2020

Strategic Priorities for 2021

Strategic report
Commercial Banking
Our aspiration is to be a Bank that provides our clients
with world-class services and products, leveraging on the 2020 Overview
diversity of our people, products, and network strength.
In 2020 our focus shifted entirely to the Corporate
In 2021, our Strategic priorities will be: & Institutional Banking (CIB) business, due to our
refreshed strategic priorities demonstrated by our
 Further accelerate digitization of the portfolio through decision to refine our market participation from
the roll-out of Straight 2 Bank Next Generation to all 2 segments (Corporate and Institutional Banking
CIB clients. and Commercial Banking) to one (Corporate
and Institutional Banking). The performance of
 Grow the Local Currency asset book by lending to Commercial Banking reflected this shift out of the
Global corporates with satisfactory parental backing segment with revenue declining compared to the
previous year, however even during the movement
 Continue to leverage on the Chinese corridor by out of the segment the team was able to close out
targeting growth on Cash and Financial Markets lines one-off deals in Financial Markets and contributed
with added focus on providing solutions for Chinese to increased income from Foreign exchange
Renminbi transfer. transactions.
 Deliver sustainable growth for clients by
understanding their agendas, providing trusted
advice and data-driven analytical insights.

Standard Chartered — Annual Report 2020 17

Strategic report Community Investment

rehabilitated the water supply network and installed retro-

Community fit WASH infrastructure for five (5) schools in Lusaka. These
facilities will also serve local communities of up to 2,500

Investment people.

We joined national efforts to increase testing for COVID-19

by supporting the Centre for Infectious Disease Research
in Zambia (CIDRZ) with USD50,000 to purchase over
2,000 testing kits, which were distributed to health centres
countrywide. In addition, we supported the production and
distribution of over 14,000 re-usable masks produced by
women-led SMEs through our USD50,000 partnership with
the United Nations Development Programme (UNDP).

Due to the pandemic, schools were closed and most opted for
virtual learning sessions. However, in the more vulnerable and
remote areas of the country, this was not a viable option due
to several reasons such as infrastructure and affordability.
Through our partnership with the United Nations Children
Fund (UNICEF), we supported remote education via TV,
radio and mobile platforms and child protection measures
for vulnerable children in Zambia. This donation was worth
USD200,000. Other notable support towards COVID-19
relief included USD10,000 to Save the Children Zambia to
support educational efforts in rural areas; and USD7,000
to the Lusaka Eye Hospital to support Personal Protective
Christine Matambo
Head of Corporate Affairs, Brand & Marketing
Equipment (PPEs) to healthcare workers so that their eye
healthcare work continued.

Futuremakers by Standard Chartered

Futuremakers by Standard Chartered is our global initiative
“In 2020, Standard Chartered to tackle inequality and promote economic inclusion across
Bank Zambia Plc supported our markets. At a global level, our aim is to raise USD50
million between 2019 and 2023 to empower the next
the needs of our communities generation to learn, earn and grow. The Bank’s approach to
tackle inequality and promote greater economic inclusion
by investing over USD350,000 is to extend opportunities to people through our business,
operations and community programmes regardless of social
as part of our COVID-19 background and gender. Standard Chartered Bank Zambia
Plc launched Futuremakers in September 2020 and is now
Emergency response.” running three programmes, Youth To Work, SC Women In Tech
Incubator Programme and Goal. Futuremakers is supported
by the Standard Chartered Foundation.

Support for Youth - Youth to Work Programme

This is a new programme that will develop opportunities
Community Investment to support young people to become job ready. Launched
in September in partnership with Challenges Worldwide,
The world experienced an unprecedented time in the Youth to Work programme will place young people
2020 due to the COVID-19 pandemic and Zambia strategically in businesses to support Small and Medium
Enterprises (SMEs), while fostering wider skills development
was not spared from its impact, which affected for them. In Zambia, 50 young people joined the programme
businesses, education, health and the economy which will include training, mentorship and placement in
at large. Whilst physical interaction was greatly SMEs for 5 months.
impeded, the Bank did not relent in our support
to the markets and communities in which we Support for Women – Standard Chartered
operate. In 2020, Standard Chartered Bank Zambia Women In Tech Incubator Programme.
Plc supported the needs of our communities by
In November 2020, Standard Chartered Bank Zambia Plc
investing over USD350,000 as part of our COVID-19 partnered with BongoHive to launch the Women in Tech
Emergency response. Incubator programme. With an investment of USD150,000,
it is envisioned to align with calls for more diversity in
COVID-19 emergency response technology and for more opportunities for women to develop
entrepreneurial and leadership expertise. Women In Tech will
The Bank supported better sanitation and hand washing support the economic and social development of Zambian
practices by donating USD50,000 towards the WaterAid women through innovation-driven entrepreneurship and will
Zambia Kutuba campaign with hand washing facilities that achieve this by providing women in technology and other
were placed in public areas. In addition, the Bank supported business sectors with an enabling environment for starting
WaterAid Zambia’s BackToSchool WASH projects which up ventures, training, mentorship, coaching and access to

18 Standard Chartered — Annual Report 2020

investment and seed funding. This will be done through Liverpool Football Club

Strategic report
an incubation programme that will enable discovering,
validating, building and growing technology start-ups To promote Standard Chartered’s global sponsorship of
with women founders. Five successful businesses from the Liverpool Football Club, we were proud to host the annual
incubation phase will receive seed funding (USD10,000 Liverpool 5-a-side football tournament – The SC Trophy. For
each), as well as the combined support from BongoHive and 2020, 30 teams comprising our clients and key stakeholders
Standard Chartered Bank Zambia Plc to graduate from the participated in the first round of the tournament for which
programme and facilitate linkages with networks to grow the grand prize is a once-in-a-lifetime opportunity to travel
and scale-up their businesses. to Anfield – the home of Liverpool Football Club. However,
due to COVID-19, the tournament was postponed in order
Goal Programme to adhere to the prescribed health and safety protocols.
The continued hosting of this tournament demonstrates our
The Goal Girls initiative has, since its inception in 2011, support to football in Zambia. In early 2020, we were able
empowered over 20,000 Zambian adolescent girls with to send the 2019 SC Trophy Champions, Law Association of
life skills training using the power of sport. In 2020 alone, Zambia, to the United Kingdom to watch Liverpool Football
we reached over 3,000 girls through training sessions. Bank Club play live at Anfield.
employees continued to impart their financial knowledge
and skills to conduct mentorship sessions to the girls through All in all, despite the COVID-19 pandemic, the Bank continued
virtual sessions. to support our communities, especially through relief efforts. I
would like to thank all our staff, partners and key stakeholders
Virtual Mentorship & Volunteering for their continued support throughout the year.

With the onset of the COVID-19 pandemic, all physical

interaction was minimised. Senior leadership extended
themselves to the community by virtually mentoring 100
young people on topical issues such as leadership, career
development, personal branding and growth mindset. Other
members of staff took to reading to differently abled children
at Cheshire homes in virtual settings.

Standard Chartered — Annual Report 2020 19

Strategic report Board of Directors

Board of Directors Committee Key

A
R
Committee Chair shown in green
Board Audit Committee
Board Risk Committee
L
R Board Loans Reviews Committee
R
RN Board Remuneration and Nominations
Committee

Caleb Fundanga was the Executive He served as Director on the Board of and his PhD at the University of
Director of the Macro Economic and the African Export and Import Bank Konstanz in the Federal Republic of
Financial Management Institute in Cairo, Egypt from 2002 to 2013. He Germany.
(MEFMI) since July, 2014 until end was also a member of the Executive
September 2018. MEFMI is a regional Committee of the Board during this Dr. Fundanga is currently the
capacity building institution in period. Chancellor at the University of Lusaka.
the areas of macroeconomic and
financial management based in Prior to joining the Bank of Zambia, he Age: 68 years
Harare, Zimbabwe. Its main clients had worked as Senior Advisor to the
are central banks and ministries of President of the African Development Other Boards:
finance and planning. Bank (1998-2002) and as Executive
Director of the African Development • Partnership for Making Finance
Prior to joining MEFMI, he had worked Bank (1995-1998). Before joining Work for Africa Advisory Council
as Governor of the Bank of Zambia the African Development Bank, he based at the African Development
for the period 2002 to 2011. Among served as Permanent Secretary for Bank in Abidjan, Cote d’Ivoire)
the many accolades bestowed upon the Ministry of Finance, Cabinet
him during this period are: Central Office and the National Commission • APlus General Insurance – Chairman
Bank Governor of the Year for Africa for Development Planning of the • Commonwealth Partnership for
and Global Award by the Banker Republic of Zambia. He started Technology Management (Smart
magazine, a sister publication to the his work experience as Economics partners, based in London) –
Caleb M Fundanga (68) Financial Times of London in January Lecturer at the University of Zambia. Member
2007; African Central Bank Governor
Independent Non Executive of the Year 2007 by Emerging Markets Dr. Fundanga obtained his Bachelor’s Shares in SCBZ – 11,068
Director magazine which he received in Degree in Economics at the
Washington DC; and African Central University of Zambia. He obtained
Board Chairman Bank Governor of the Year 2008 by his Master’s Degree at the University
the Annual Meetings Daily of Nigeria. of Manchester in the United Kingdom
Appointed: 01/04/17
RN

Robin Miller was born in Zambia He has also been, in the past, a He serves as Board Risk Committee
and completed his education with a member of the Board of the Zambia Chairman at Standard Chartered
BSc in Accounting and International Wildlife Authority, Chairman of Bank Zambia Plc.
Finance from the International Centre ‘The Post’ newspaper, a member
for Accounting Research at Lancaster of the Government of the Republic Age: 61 years.
University (UK). In the UK he worked of Zambia/European Union Trade
at Coopers and Lybrand, as well as Enterprise Support Facility, and Other Board Directorships:
the Virgin Group of Companies. Upon was the founding Chairman of the
his return to Zambia, he took up the Tourism Council of Zambia. In 2015 he
position of Managing Director of City assisted in the creation of and was
Investments Limited, as well as that of the founding President of the Zambia • City Investments Limited
Managing Director of Farmers House, Property Owners Association.
now renamed Real Estate Investments
• Lilayi Development Company
Zambia PLC. Robin is a trustee of the David Limited
Shepherd Wildlife Foundation/Game
Robin is a Director of a number Rangers International.
• Zariant Zambia Limited
of Zambian institutions, including
Standard Chartered Bank Zambia Robin resigned as Managing Director
Robin Peter Steuart Miller Shares in SCBZ - NIL
Plc and City Investments Limited. of Real Estate Investments Zambia
(61) Robin retired as Chairman of Madison PLC in 2015 after 20 years in that R A
General Insurance Company Limited position. He was appointed to the
in 2018. Standard Chartered Bank Zambia Plc
Independent Non Executive Board on 7 August 2012.
Director
Appointed: 07/08/12

Kapambwe Doreen Chiwele is a 2000. Kapambwe Doreen joined portfolio largely inclusive of the firm’s
Chartered Global Management NAPSA in 2002 as Director Finance banking and financial institutional
Accountant (United Kingdom), and and Administration (later in 2007 clients. Kapambwe Doreen has also
holds a Bachelor of Accountancy reverting to Director Finance), and worked as Accountant at the United
degree from the University of was a member of the initial and States Agency for International
Zambia - Ndola campus (renamed subsequent Executive Management Development, among others.
Copperbelt University). She is a fellow Teams. She was with NAPSA for 13
of both the Chartered Institute of years (up to 31 December 2015), in Kapambwe Doreen has previously
Management Accountants, as well which period the pension fund grew served as Board member in the public
as the Zambia Institute of Chartered to be the largest in the country. sector. She was appointed to the
Accountants. With over 30 years Standard Chartered Bank Zambia Plc
progressive professional experience, Prior to joining NAPSA, Kapambwe Board on 1 October 2016. She serves as
of which sixteen have been at Finance Doreen was Chief Financial and Chairperson of the Audit Committee
Director/Chief Financial Officer Administration Officer of the Zambia of Standard Chartered Bank Zambia
level, her roles over the years have Information and Communications Plc.
at various points included finance, Technology Authority (ZICTA), then
treasury, investment, administration, named Communications Authority. Age: 57
and audit. The Authority was established under
Kapambwe Doreen Chiwele an Act of Parliament, to among other Other Board Directorships:
(57) Kapambwe Doreen is currently things, regulate the communications • KIME Social Development And
operationalising Beacons field technology sector. She was the first Advocacy
Independent Non Executive Agriculture Limited, a family entity holder of the office and went on
where she is a Director. Prior to this, to serve for four years after joining • Lubu Road School (Retired 31
Director she was employed as Director Finance in November 1998. Other entities December 2020)

Appointed: 01/10/16 of the National Pension Scheme Kapambwe has served in include Shares in SCBZ: 1,681
Authority (NAPSA), a statutory KPMG Zambia, a firm of public
pension scheme which replaced the accountants, where she served A R
RN
Zambia National Provident Fund from 1994 to 1998. She rose to the
and became operational in February position of Audit Manager, with a

20 Standard Chartered — Annual Report 2020

 Mr. Munakopa L. Sikaulu is a partner in the Law of Banking and Finance the Council of the Law Association of

Strategic report
in SLM Legal Practitioners, a leading and has advised and represented Zambia.
financial commercial law practice in local, regional and international
Zambia. He is the holder of a Bachelor banks, financial institutions and Age: 47 years
of Laws degree from the University companies on various transactions
of Zambia where he graduated in in Zambia as well as in commercial Other Board Directorships:
1995 and a Master of Laws degree litigation matters. Mr. Sikaulu is a
in Banking and Finance from the member of the Law Association Hollard Insurance Zambia Limited
London School of Economics where of Zambia, the International Bar Zambia Reinsurance Plc
he graduated in 2000. Mr. Sikaulu is Association and Commonwealth Pearl of Health Hospital Limited
an advocate of 20 years standing Lawyers Association. He chairs the
having been called to the Bar in 1996 Hollard Insurance Limited board Belgravia Services Limited
after successfully completed studies and also serves on a number of Baswe Limited
Munakopa Sikaulu (47)
at the Zambia Institute of Advanced other boards which include Zambia Brentwood Estates Limited
Independent Non Executive Legal Studies. Reinsurance PLC (formerly Prima Re-
Director insurance PLC) and Pearl of Health Shares in SCBZ: NIL
A Zambian national, Mr. Sikaulu Hospital Limited and has previously
Appointed: 01/08/17 has vast experience of commercial served on the board of Entreprenuers
L
R R

activities in Zambia. He is specialised Financial Centre Zambia Limited and

J. Kweku Bedu-Addo is the Chief senior Corporate & Institutional Bank He holds a BS in Agricultural
Executive Officer for South and roles in Ghana and West Africa, Economics from University of Ghana,
Southern Africa in August 2017, Zambia and Singapore. Legon a and Master's Degree in
responsible for South Africa, Angola, Economic Policy Management at
Botswana, Mauritius, Zambia and Other significant affiliations include Columbia University, New York.
Zimbabwe. immediate past Chairman of
the Ghana Stock Exchange, Vice Kweku was appointed to the Board
Kweku’s career has spanned Public Chairman of the Ghana Fixed Income of Standard Chartered Bank Zambia
Policy, International Development, Market, Chairman, Institute of Applied Plc in 2018.
and Banking & Finance. He worked Sciences at the University of Ghana,
in the Ministry of Finance in the 1990s Member, University of Ghana Business Age: 53
during the implementation of Ghana’s School Advisory Board and Vice
Structural Adjustment Program. President of the Ghana Association Other board Directorships:
of Bankers. He is currently the Vice
He joined Standard Chartered Bank Chairman of the International Banks Ÿ Standard Chartered Bank
J. Kweku Bedu-Addo (53) Ghana in 2000 and rose to become Association in South Africa and a Botswana
Chief Executive Officer the first Ghanaian Chief Executive in Board Member of Bankers Association
the Bank’s 124-year history in Ghana of South Africa, BASA. Shares in SCBZ: NIL
Appointed: 03/04/18 in 2010. Prior to this, he held several A

Herman Kasekende holds a Post Herman joined Standard Chartered of the Bankers Association of Zambia
Graduate Degree in International Bank in 1998 and has held various and as well as a council member of
Economics and Finance. Herman was positions in different functions. the Zambia Institute of Banking and
appointed to the Standard Chartered These include Regional Head of Financial Services (ZIBFS).
Bank Zambia Plc Board on 1st February SME Products & Solutions – Africa,
2017. Standard Chartered Bank Kenya; Age: 54 years
and as Head of Consumer Banking
Other Boards – NIL
Prior to becoming Chief Executive at Standard Chartered Bank Uganda.
Officer of Standard Chartered Bank Shares in SCBZ – NIL
Zambia Plc, Herman was the Chief Herman chaired the Oil and Gas
Executive Officer and Managing Technical Working Group (TWG)
Director of Standard Chartered Bank under the Presidential Investors’
Herman Kizito Kasekende Uganda. Herman has a wealth of Round Table (PIRT) in Uganda and L
R R
(54) knowledge on SMEs, Retail Banking was an advisor on the Uganda
Director /Chief Executive and Corporate and Institutional Chamber of Mines and Petroleum
Officer Banking. Board. He is currently the Chairman

Appointed: 27/02/17

Appointed to the Board on 01 April Prior to his current appointment, Age: 46 years
2020, Kelvin Bwalya joined Standard Kelvin served on the Group Aspire
Chartered Bank Zambia Plc in 1998, programme as Aspire Champion Other Boards – NIL
served in several capacities within Africa and Middle East. He has
Finance Department, becoming undertaken assignments within the Shares in SCBZ – NIL
Financial Controller in 2008. Group across multiple projects in key
He then held various positions markets including Kenya, Ghana,
within the Group, these include: Angola, Singapore and India.
Product Specialist for the Finance
Transformation (FT) programme in He is a member of the Chartered
L
R R
Standard Chartered Bank Singapore, Institute of Management Accountants
Kelvin Bwalya (46 ) FT Programme and Projects Manager (CIMA) and Zambia Institute of
Director Finance and Africa and Middle East, and Head CoE Chartered Accountants (ZICA).
Change Africa in Standard Chartered
Administration /Chief Global Finance Services (GFS).
Financial Officer
Appointed: 01/04/20

Standard Chartered — Annual Report 2020 21

Strategic report Executive Management

Executive Management Team

Herman Kasekende
Managing Director and Chief
Executive Officer

Kelvin Bwalya Christine Matambo Kabwe Mwaba

Executive Director Finance and Head of Corporate Affairs, Brand Head of Financial Markets – Southern
Administration /Chief Financial and Marketing Africa (excluding South Africa) and Head of
Officer Treasury Markets Southern Africa

Deep Pal Singh Rose N Kavimba Olusegun Omoniwa

Head of RB – Zambia and Head, Legal and Company Head of Wealth Management -
Southern Africa Secretary Zambia and Southern Africa

Fanwell Phiri Emmy Kumwenda Simon Burutu

Country Chief Risk Officer Head,Corporate and Institutional Senior Credit Officer
Banking (CIB) Zambia and Southern Africa

Peter Zulu Mutu Mubita Marshal Shampongo

Head of Conduct, Financial Head of Human Resources Head of Internal Audit
Crime and Compliance.

22 Standard Chartered — Annual Report 2020

Standard Chartered — Annual Report 2020 23
Strategic report The year in pictures

The Head Office Journey

24 Standard Chartered — Annual Report 2020

Standard Chartered — Annual Report 2020 25
Strategic report Directors’ report

Directors’ report
Month Number Month Number
January 546 July 477
February 506 August 475
March 494 September 473
The directors are pleased to submit their report and April 476 October 470
the audited consolidated and separate financial May 475 November 471
statements for the year ended 31 December 2020, of June 474 December 408
Standard Chartered Bank Zambia Plc (“the Bank”)
and its subsidiary, Standard Chartered Bank Zambia Property and equipment
Securities Services Nominees Limited (together “the The Group purchased property and equipment amounting to
Group”). ZMW 34, 387, 000 (2019: ZMW18, 587, 000) during the year.
In the opinion of the directors, the carrying value of property
Standard Chartered Plc and equipment is not less than their recoverable value.
Standard Chartered Plc (“the ultimate parent”) is the ultimate
holding company of the Group, incorporated and registered Results
in England and Wales, as a Company limited by shares. Its The results for the year are set out in the consolidated and
ordinary shares are listed on the London and Hong Kong separate statement of profit or loss and other comprehensive
Stock Exchanges and it has Indian Depository Receipts income on page 40.
representing ordinary shares listed on the Bombay and
National Stock Exchanges in India. It is consistently ranked Directors
among the top 25 companies on the FTSE-100 by market
For the period under review, Ms. Venus Hampinda resigned
capitalisation.
from the Board as Executive Director- Finance and
Administration and was replaced by Mr. Kelvin Bwalya. There
Standard Chartered Bank Zambia Plc were no other changes to the directorate during the period
Standard Chartered Bank Zambia Plc is a public company under review. A full list of directors is available on pages 20-21
incorporated in the Republic of Zambia on 11 November 1971
to take over the business of Standard Bank Limited, which Secretariat
had operated in Zambia since 1906. The Group is engaged in
There was no change to the Secretariat in 2020.
the business of consumer and commercial banking as well as
the provision of other financial services. Directors’ interests in ordinary shares
The beneficial interest of Directors and their families in the
Articles of Association Ordinary shares of the Bank were as follows:
The Articles of Association of the Group may be amended by
Special Resolution of the shareholders. Dr. Caleb Fundanga - Board Chairman has 11,068 shares in
Standard Chartered Bank Zambia Plc.
Results and dividend
At a board meeting held on 26 February, 2021, the Directors Director Doreen Kapambwe Chiwele has 1,681 shares in
did not recommended any dividend for the year ended 31 Standard Chartered Bank Zambia Plc.
December 2020 owing to the performance of the Bank in
2020. Activities
The Group engages principally in the business of commercial
Share capital banking in its widest aspects and in the provision of related
During the year 2020, the paid up primary capital of the Bank services. The Group also runs successful securities services
was ZMW416, 745,000. The authorised share capital of the business.
Bank was ZMW450, 000,000. The Bank has issued ZMW416, Related party transactions
745,000 ordinary shares with a nominal value of ZMW0.25
per share. Related party transactions are disclosed in note 45 to the
consolidated and separate financial statements.
Gifts and donations
The Group identifies with the aspirations of the community Directors’ emoluments and interests
and the environment in which it operates. During the year,
Directors’ emoluments and interests are disclosed in note 45
the Group made donations of ZMW4,651,000 to charitable
to the consolidated and separate financial statements.
organisations and events.

Number of employees and remuneration Directors’ induction and on-going development

The average number of people employed by the Group during The Bank believes that induction and ongoing development
the year was 445. The total remuneration paid to employees of the Board members is necessary to ensure that the directors
during the year amounted to ZMW 330, 667, 000 (2019: ZMW have the requisite knowledge and understanding of the Bank
328, 665, 000) and the total number of employees was as and the market that it operates in for them to effectively
follows: carry out their roles as directors. During the year 2020, given
the challenges presented to physical meetings for trainings,
the Board held virtual engagements with other Standard
Chartered Directors globally which enhanced Board linkages
was part of ongoing development.

26 Standard Chartered — Annual Report 2020

Shareholder concerns Restricted Transactions

Strategic report
Shareholders are encouraged to raise any concerns they may There are no restricted transactions as defined under Part
have with any of the board directors or with the Company VII of the Banking and Financial Services Act, No. 7 of 2017
Secretary on the following email address: except as such as have been expressly permitted by the Bank
Rose.Kavimba@sc.com. of Zambia.

Electronic communication Health and safety

The annual report notice of AGM and dividend circulars are The Bank has health and safety standards, policies and
available electronically and in hard copy. Shareholders that procedures to safeguard the occupational health, safety and
would like to receive their corporate documents electronically welfare of its employees, customers and contractors working
can contact the Bank’s transfer agents at the below address: within the premises. In addition, the Bank has a dedicated
Health, Safety and Environment Manager.

Corpserve Transfer Agents Limited Relevant audit information

6 Mwaleshi Road, Olympia Park As far as the directors are aware, there is no relevant audit
PO Box 37522, Lusaka, Zambia information of which the Bank’s auditor, Ernst and Young, is
Tel: 00260 211 256969/70 unaware. The directors have taken all reasonable steps to
ascertain any relevant audit information and ensure that the
Fax: 00260 211 256975 auditors are aware of such information.
Email: info@corpservezambia.com.zm
Auditors
Group code of conduct A resolution proposing the re-appointment of EY Zambia as
auditors of the Group, and authorising the directors to fix their
The board has adopted the ultimate parent company’s remuneration will be put to the Annual General Meeting.
code of conduct relating to the lawful and ethical conduct
of business and this is supported by the ultimate parent
company’s core values. All directors and employees of the
Bank have committed to the code and are all expected
to observe high standards of integrity and fair dealing in
relations to all our stakeholders including customers, staff
and regulators. The Board members jointly and severally
recommitted to the code of conduct on 27 November 2020. By order of the board
Rose N. Kavimba
Research and development Company Secretary
During the year, the Bank did not incur any research and 2 February 2021
development cost.

Standard Chartered — Annual Report 2020 27

Strategic report Corporate Governance

experience which enable them to operate as a cohesive unit.

Corporate They each bring independent judgement and considerable
knowledge to the board’s discussions and are committed

Governance
to the collective decision-making processes. The Board is
collectively responsible for the long-term success of the Bank
and providing strategic direction and leadership within a
framework of effective controls. The Board considers both
the impact of its decisions and its responsibilities to all its
stakeholders, including the Bank’s employees, shareholders,
regulators, suppliers, the environment and the communities
in which the Bank operates in Zambia.

The Board discharges some of its responsibilities directly and

delegates certain other responsibilities to its Committees to
assist it in carrying out its functions of ensuring independent
oversight. The Board Charter which clearly outlines the
Boards terms of reference and matters reserved for the Board
was adopted in 2018 in accordance with the Bank of Zambia
Corporate Governance Directives and is reviewed annually.
This ensures that the Board provides oversight, guidance and
review of the Bank’s performance and strategy.

The Board Charter and the Terms of reference for each

Board Committee are reviewed regularly against Corporate
governance regulations and industry best practice. The Board
Rose Kavimba also delegates authority for the operational management of
Company Secretary the Bank’s business to the Bank’s Chief Executive Officer and
his Executive Committee for matters which are necessary for
the effective day-to-day running and management of the
Our Approach business.

The Board has responsibility for the overall management of

Disclosure
the company and is primarily accountable to the shareholders
for proper conduct of the business of the company and the
The Board has the overall responsibility of ensuring
management of the relationships with its various stakeholders.
that the highest standards of corporate governance In fulfilling its primary responsibility, the Board is aware of the
are maintained and adhered to by the Bank. Our importance of achieving a balance between conformance to
directors confirm that during the 2020 financial year, governance principles and economic performance.
the Bank ensured substantive compliance with the
The Board has access to professional advice as and when
Bank of Zambia and the LuSE Corporate Governance needed. Further, Executive Management is accountable to
codes. The Board and senior management continue the Board for the development and implementation of the
to engage in discussions with the LuSE with regard Bank’s strategy and policies. The Board regularly reviews
to the 25% public float requirement. Bank performance, matters of strategic concern and any
other matters it regards material and necessary to fulfill this
Standard Chartered Bank Zambia Plc (“Standard Chartered”) mandate.
is one of the Group’s largest businesses in the Africa and
Middle East region and one of the oldest, having been in The Board meets quarterly and additional meetings are
existence for over 114 years in Zambia. It is a public company convened as and when required. The Board held 8 meetings
incorporated in the Republic of Zambia on 11 November during the 2020 financial year and had a formal schedule
1971 to take over the business of Standard Bank Zambia of matters specifically reserved for its decisions. Generally,
Limited, which had operated in Zambia since 1906. Standard members of the Management Team are invited to attend
Chartered was the first bank in Zambia to list on the Lusaka part of the meetings to ensure effective interactions with the
Stock Exchange on 30th November 1998. Board. Given the pandemic during the year 2020, the Board
met mostly virtually to adhere to the Country and Bank’s
Our Board Covid prevention guidelines and measures.

To drive the Bank’s purpose of driving commerce and The Board also undertakes a number of informal sessions
prosperity through our unique diversity, we have in place and interactions, which allows Board members to discuss
a Board that is diverse, experienced and driven. The Board areas of business, strategy and the external environment
presently comprises 7 members; 2 Executive Directors and with members of the Management Team and different
5 Non-Executive directors, 4 of whom are Independent stakeholders, including other Board members from the
Non-Executive Directors. In 2020 Ms. Hampinda stepped Standard Chartered Group globally.
down from the Board as executive Director Finance and
Administration. The board would like to congratulate Venus Board Committees
on her appointment and express their sincere thanks and
gratitude for her outstanding leadership and devotion to the To enable the Board use its time most effectively, it is
Bank during her tenure. Ms. Hampinda was replaced by Mr. supported by four sub committees through which the Board
Kelvin Bwalya. performs its oversight functions and they play an important
role in supporting the Board.
Collectively, the directors have a diverse range of skills and
These are the Board Audit Committee, the Board Risk
Committee, the Board Loans and Review Committee and

28 Standard Chartered — Annual Report 2020

the Board Remuneration and Nominations Committee. All Board Remuneration and Nomination Committee

Strategic report
the Board Committees are chaired by an Independent Non-
Executive Director. The Board Remuneration and Nomination Committee
comprises of two (2) members both Independent Non-
Board Audit Committee Executive Directors. The Committee on behalf of the board
oversees and is accountable for the implementation and
The Board Audit Committee is comprised of three (3) Non- operation of the Bank’s remuneration policies and procedures.
Executive Directors. It exercises oversight, on behalf of the It periodically reviews the Company’s remuneration policy
Board, of the Bank’s financial, audit, internal financial control to ensure continued compliance with country laws and
and non-financial crime issues. The primary role of the regulations. The Committee also reviews succession plans for
Committee is to ensure the integrity of the financial reporting the Board and Management.
process and supporting internal controls and to maintain a
sound risk management environment as stipulated by the The Committee is also responsible for the Board Evaluation
Bank of Zambia Corporate Governance Directives and other Review and makes recommendations for the remuneration of
financial regulations. Directors. This Committee is chaired by the Board Chairman,
Dr. Fundanga.
It also oversees the independence and objectivity of the
Bank’s external auditors and, on a quarterly basis, reviews The Committee met twice times during year in 2020.
audit reports from the Group Internal Audit function on the
arrangements established by management for ensuring Board Effectiveness Review
adherence to risk management, control and governance
processes. Group Internal Audit monitors compliance with The Board regularly assesses its performance against roles
policies and standards and the effectiveness of internal and responsibilities and focuses on continuously improving
control structures across the Group through its programme it effectiveness and efficiency. The Remunerations and
of business audits. The work of Group Internal Audit is Nominations Committee of the Board provided oversight on
focused on the areas of greatest risk as determined by a the process of the independent, externally facilitated review
risk-based assessment methodology. of the Board and its Committees This process is led by the
Board Chairman with the support of the Company Secretary.
The Committee met five times during the year and was
chaired by an Independent Non-Executive Director, Engagements and Trainings Undertaken by the
Mrs. Kapambwe Doreen Chiwele. In line with Corporate Board in the year under review
Governance directives, the Committee also meets at
least once a year with the External Auditors, the Head The Bank has a robust engagement and training plan for
of Compliance, Head of Internal Audit, Head of Legal, the Board. In 2020, the Board had various engagements with
Chief Financial Officer and the Chief Risk Officer without different stakeholders which also saw the Board Chairman
management present. attend the AME Chairmen’s conference hosted virtually
by the Standard Chartered AME CEO. Further, the Board
Board Risk Committee annually engages with the Group Audit Committee and
Group Risk Committee Chairmen to discuss focus areas for
The Board Risk Committee is comprised of two (2) the Bank’s Audit and Risk Committees. The Remuneration
Independent Non-Executive Directors, and one (1) Executive Committee had its inaugural meeting with the Standard
Director. The Committee exercises oversight and review of Chartered Group remuneration and Nominations Committee
principal risks including credit, market, capital and liquidity, in September 2020.
operational and country risk.
Director Induction and Continuous Education.
The Bank’s business is conducted within a developed control
framework, underpinned by policy statements, written Th Bank has a comprehensive induction program and all
procedures and control manuals. This ensures that there are directors receive a full formal and tailored induction on
written policies and procedures to identify and manage risk, joining the Board to ensure that they are provided with the
including operational risk, country risk, liquidity risk, regulatory knowledge and material to add value from an early stage.
risk, legal risk, reputational risk, market risk and credit risk. The All inductions are supplemented with a detailed handbook
Board has established a management structure that clearly which includes information on a broad range of matters
defines roles, responsibilities and reporting lines. Delegated relating to the role of being a director on a Zambia Board
authorities are documented and communicated. as well as detail of applicable legislation, regulation, related
procedures and best practice.
The Committee met 4 times during the year and was chaired
by Independent Non-Executive Director Mr. Robin Miller. The The induction is conducted through a series of in-depth
Chief Risk Officer presents a quarterly report which updates briefs and one on one sessions with various stakeholders.
the Committee on the Key Risks. These sessions include meeting senior management, select
clients and other key stakeholders. We also encourage the
Board Loans Review Committee directors to attend some board meetings prior to their formal
appointment as part of the socialization process.
The Board Loans Review Committee comprises of three (3)
Directors and chaired by an Independent Non- Executive The Company Secretary supports the induction process to
Director, Munakopa Sikaulu. The Committee exercises acts as a facilitator for these sessions. The induction process
oversight on behalf of the Board on all matters incidental to is undertaken within the first six to nine months of a director’s
credit and loan approvals, applications and advances made appointment. Induction was provided to Mr. Kelvin Bwalya
by the Bank and makes recommendations to the Board on after his appointment.
the company’s overall credit risk appetite. The Committee
met 4 times during the year. The Company also reviews with each Independent Non-
Executive Director their continuing training needs and it is the
Company’s intention that each Independent Non-Executive
Director continues to receive training on a continuing basis.

Standard Chartered — Annual Report 2020 29

Strategic report Directors’ report

Conflicts of Interest to observe high standards of integrity and fair dealing in

relation to customers, staff and regulators in the communities
The Board has adopted a robust Conflict of Interest Policy in which the Group operates. The Board recommitted to the
which is reviewed every two years. Code of Conduct on 27 November 2020.

All Directors have a duty to avoid conflicts of interest. This duty Regulatory Compliance
applies to any situation that could reasonably be expected to
give rise to a conflict. Standard Chartered Bank Zambia Plc strives to ensure
that the business is managed sustainably, through
Board members hold external directorships and other exemplary governance, compliance and financial crime risk
outside business interests and recognize the benefits greater management practices that continue to meet both local and
boardroom exposure gives our directors. We closely monitor international standards. The local management ensures that
the number of directorships our Directors take on to satisfy high ethical standards are maintained in the business model
ourselves that all of our Board Members comply with the at all times.
requirements of the Bank of Zambia Corporate Governance
Directives which require full disclosure of all business Annually, Compliance, Conduct and Financial Crimes risk
relationships held by Directors as well as any transactions assessments are performed to inform the necessary and timely
that may pose a conflict of interest. We also monitor that all mitigation initiatives for a sustainable business that ensures
appointments will not adversely impact their role at Standard positive outcome for our clients by ensuring risks are timely
Chartered Bank Zambia Plc. identified and managed. In addition, the Bank continues
to ensure that all staff are re-trained on a periodic basis to
Our Directors are clear on how they should manage their ensure that they always operate within the set standards of
outside interests and how these may conflict with their duties the highest conduct and compliance requirements. These
as a Director of Standard Chartered Bank Zambia Plc. During initiatives have very strong sponsorship and support of senior
on boarding and continuously during their tenure, they are management and the board of directors on an ongoing basis.
reminded of their obligations and duties as directors. Details
of the directors’ external directorships can be found in their Our Stakeholders – Regulatory Authorities
biographies on pages 20-21.
The Bank engaged the local regulatory authorities and
All actual or potential conflicts of interest should be and are contributed to a fully functioning financial sector in Zambia
reported to the Company Secretary together with details of by sharing best practice and the global economic trends.
any benefits received. Before committing to an additional
appointment, directors confirm the existence of any potential The Bank continuously strives to operate by the highest
or actual conflicts and provide the necessary assurance that ethical standards of business conduct and supports the
the appointment will not adversely impact their ability to stakeholders in ensuring financial inclusion is achieved
continue to fulfill their role as a director of the bank. through various innovative digital product and services that
meet the ever changing client lifestyle especially with the
Any Non-Executive Director invited to take up an additional COVID-19 pandemic outbreak that has necessitated non-
commitment such as another directorship or other outside physical banking services being preferred. On a day-to-day
interest, seeks the Chairman’s agreement and notifies the basis, the Compliance function is responsible in identifying
Company Secretary prior to taking up that appointment. and disseminating all the regulatory developments that
impact the bank by working with the relevant process owners
If Directors are unsure of whether a situation or benefit could
to ensure compliance is achieved.
give rise to a conflict of interest, they are required to contact
the Company Secretary for advice and guidance. The Due to the COVID-19 pandemic, the banking industry has
Company Secretary will then report any potential conflicts of employed various virtual digital ways of engaging with the
interest to the Board. regulators while being safe to avoid the risk of exposure to
the virus. In 2020, the majority of the engagements have been
Our Board members commit sufficient time in discharging
through virtual means with all the regulators in Zambia.
their responsibilities. During the year 2020, the Board
meeting attendance by the Board was on average 95.87%, a
clear demonstration of the Board members commitment and
ability to provide additional time.

Code of Conduct
The Board has adopted the Group Code of Conduct relating Rose Kavimba
to the lawful and ethical conduct of business and this is Company Secretary
supported by the Group’s core values. The Code of Conduct
26 February 2021
is reviewed every two years and committed to annually.
The Group Code of Conduct has been communicated to
all Directors and employees, all of whom are expected

30 Standard Chartered — Annual Report 2020

 STANDARD CHARTERED BANK ZAMBIA PLC

Strategic report
RECORD OF ATTENDANCE OF BOARD /BOARD COMMITTEE MEETINGS
HELD IN 2020
BOARD OF DIRECTORS’ MEETINGS
No. of Board Meetings 1/2020 2/2020 3/2020 4/2020 5/2020 6/2020 7/2020 8/2020 Total
2020 (Adhoc ) (Main Board) (PRE-AGM) (AGM) (PRE-AGM) (AGM) (Main (Board
Board) Strategy)

Date of Meeting 28/02/20 29/03/20 29/05/20 29/08/20 03/09/20 04/09/20 13/11/20 27/11/20 8
14:00 09:00 09:00 10:00 10:00 10:00 10:00 09:00
HILTON HOTEL SCBZ VIRTUAL SCBZ SCBZ SCBZ SCBZ SCBZ SCBZ
VIRTUAL VIRTUAL VIRTUAL VIRTUAL

Caleb M Fundanga √ AP √ √ √ √ √ √ 7
(Board Chairperson)

Robin Miller AP √ √ √ √ √ √ √ 7

Herman Kasekende √ √ √ √ √ √ √ √ 8

Kapambwe Doreen √ √ √ √ √ √ √ √ 8
Chiwele

Munakopa Sikaulu √ √ √ √ √ √ √ √ 8

Kweku Bedu- Addo VC √ √ √ VC √ AP AP 6

Venus Hampinda √ N/A N/A N/A N/A N/A N/A N/A 1

Kelvin Bwalya N/A N/A √ √ √ √ √ √ 6

Rose Kavimba √ √ √ √ √ √ √ √ 8
(Secretariat)
NOTE THAT MS. VENUS HAMPINDA RESIGNED FROM THE BOARD EFFECTIVE 12TH MARCH 2020 AND MR KELVIN BWALYA WAS APPOINTED

EFFECTIVE 1ST APRIL 2020.

BOARD AUDIT COMMITTEE (AC) MEETINGS

No. of AC Meeting 2020 1/2020 2/2020 3/2020 4/2020 6/2020 Total

Adhoc 25/03/20 28/05/20 20/08/20 13/11/20

Date of Meeting
24/02/20 09:00 09:00 09:00 09:00 5
SCBZ Board Room SCBZ VIRTUAL SCBZ VIRTUAL SCBZ VIRTUAL SCBZ VIRTUAL

Kapambwe Doreen Chiwele

√ √ √ √ √ 5
(Chairperson)

Venus Hampinda √*BI N/A N/A N/A N/A 1

Kelvin Bwalya N/A √*BI √*BI √*BI √*BI 4

Robin Miller √ √ √ √ √ 5

Kweku Bedu-Addo VC √ VC VC VC 5
NOTE: CEO/MD AND CFO ARE NOT MEMBERS AND ONLY ATTEND AC BY INVITATION

• *BI – By Invitation

BOARD LOAN REVIEW COMMITTEE (LRC) MEETINGS

No. of CC Meeting 2020 1/2020 2/2020 3/2020 4/2020 Total

Date of Meeting 25/03/20 28/05/20 29/08/20 13/11/20 4

11:00 11:00 11:00 11:00
SCBZ VIRTUAL SCBZ VIRTUAL SCBZ VIRTUAL SCBZ VIRTUAL

Munakopa Sikaulu √ √ √ √ 4
(Chairperson)

Herman Kasekende √ √ √ √ 4

Kevin Bwalya √*BI √ √ √ 4

Standard Chartered — Annual Report 2020 31

Strategic report Corporate Governance

BOARD RISK COMMITTEE (RC) MEETINGS

No. of RC Meeting 2020 1/2020 2/2020 3/2020 4/2020 Total

Date of Meeting 25/03/20 28/05/20 29/08/20 13/11/20

14:00 14:00 14:00 14:00 4
SCBZ VIRTUAL SCBZ VIRTUAL SCBZ VIRTUAL SCBZ VIRTUAL

Robin Miller (Chairperson) √ √ √ √ 4

Munakopa Sikaulu √ √ √ √ 4

Herman Kasekende √*BI √*BI √*BI √*BI 4

Kelvin Bwalya √*BI √*BI √*BI √*BI 4

NOTE: CEO/MD AND CFO ARE NOT MEMBERS AND ONLY ATTEND
RC BY INVITATION

BOARD REMUNERATION AND NOMINATIONS COMMITTEE (RNC) MEETINGS

No. of RC Meeting 2020 1/2020 2/2020 TOTAL

Date of Meeting 26/03/20 13/11/20 2

16:00 16:00
SCBZ SCBZ
VIRTUAL VIRTUAL

Caleb Fundanga (Chairperson) √ √ 2

Doreen Kapambwe Chiwele √ √ 2

NOTE: CEO/CFO ARE NOT MEMBERS AND ONLY ATTEND RNC BY INVITATION
KEY:
√ : Attended in person.
× : Absent.
AP: Apologies
VC : Video Conference.
(: Dialled in.
BI: By Invitation
D: Delegated
AC: Acting Committee Chairperson

STANDARD CHARTERED BANK ZAMBIA PLC

Total
Total
Physical Attendance Attendance Attendance
Designation Name Meetings per cent Remarks
Attendance - Virtual By Audio (In Person, VC
invited for
& Audio)
Chairman/INED Caleb Fundanga *10 2 7 N/A 9 90% Apologies noted for one
Board meeting.

INED Robin Miller * *17 2 14 N/A 16 94% Apologies noted for Adhoc
meeting on 28 Feb 2020.

INED Kapambwe D Chiwele **15 13 N/A 15 100% Attended all meetings

invited for.
2

INED Munakopa Sikaulu *16 2 14 N/A 16 100% Attended all meetings

invited for.

NED Kweku Bedu-Addo **12 NA 10 N/A 10 83% Apologies noted for Q4

Main Board and Board
Strategy.
ED/CEO Herman Kasekende *16 2 14 N/A 16 100% Attended all meetings
invited for.

ED/CFO Venus Hampinda *2 2 N/A N/A 2 100% Attended all meetings

invited for.

ED/CFO Kelvin Bwalya *13 1 12 NA 13 100% Attended all meetings

invited for.

* Includes 1 adhoc meeting.

** Includes 2 adhoc meetings.
Note: Due to Covid-19, majority of the meetings were held virtually in adherence to Country and Group Covid-19 preventive measures.

32 Standard Chartered — Annual Report 2020

Standard Chartered — Annual Report 2020 33
34 Standard Chartered — Annual Report 2020
Standard Chartered
Bank Zambia Plc
Consolidated and separate
financial statements
for the year ended 31
December 2020

Contents
36 Directors’ responsibilities in respect of the
preparation of consolidated and separate
financial statements
37 Independent auditor’s report
40 Consolidated and separate statement of
income or loss and other comprehensive income
41 Consolidated and separate statement of
financial position
42 Consolidated and separate statement of
changes in equity
43 Consolidated and separate statement of cash
flows
44 Notes to the consolidated and separate
financial statements
123 Appendix – Five-year summary
124 Principal Addresses
125 Branch Network
126 Dividend
127 Notice of 50th Annual General Meeting
129 Form of Proxy

Standard Chartered — Annual Report 2020 35

Financial statements Notes to the financial statements

Directors’ responsibilities in respect of the

preparation of consolidated and separate
financial statements
The Companies Act no. 10 of 2017 requires the Directors to prepare financial statements for each financial year that present
fairly the state of the financial affairs of the Company as at the end of the financial year and of its profit or loss. It also
requires the Directors to ensure that the company keeps proper accounting records that disclose, with reasonable accuracy,
the financial position of the company. They are also responsible for safeguarding the assets of the company. The Directors are
further required to ensure the Group adhere to the corporate governance principles or practices contained in Sections 82 to
122 of Part VII of the Companies Act no. 10 of 2017.

The Directors accept responsibility for the annual financial statements, which have been prepared using appropriate
accounting policies supported by reasonable estimates, in conformity with International Financial Reporting Standards and
the requirements of the Companies Act no. 10 of 2017. The Directors further accept responsibility for the maintenance of
accounting records that may be relied upon in the preparation of the financial statements, as well as designing, implementing
and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from
material misstatement whether due to fraud or error.

The Directors are of the opinion that the financial statements give a true and fair view of the financial affairs of the Group and
of its profit or (loss) in accordance with International Financial Reporting Standards and the requirements of the Companies
Act no. 10 of 2017. The Directors further report that they have implemented and further adhered to the corporate governance
principles or practices contained in Sections 82 to 122 of Part VII of the Companies Act no. 10 of 2017.

Nothing has come to the attention of the Directors to indicate that the Group will not remain a going concern for at least
twelve months from the date of this statement.

Approval of the financial statements

The financial statements of the Company as indicated above, were approved by the Directors on 26th February, 2021 and are
signed on its behalf by:

C. Fundanga H. Kasekende
Chairman Managing Director

K. Bwalya
Executive Director - Finance and Administration

36 Standard Chartered — Annual Report 2020

Building a better
working world

Independent Auditor’s Report to the Shareholders of

Standard Chartered Bank Zambia Plc
Opinion
We have audited the consolidated and separate financial statements of Standard Chartered Bank Zambia Plc (“the Group and
Bank”) set out on pages 40 to 122 which comprise the consolidated and separate statement of financial position as at 31 December
2020, and the consolidated and separate statements of profit or loss and other comprehensive income, changes in equity and cash
flows for the year then ended and notes to the consolidated and separate financial statements, including a summary of significant
accounting policies.

In our opinion, the consolidated and separate financial statements give a true and fair view of the consolidated and separate financial
position of Standard Chartered Bank Zambia Plc as at 31 December 2020 and its consolidated and separate financial performance
and consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards
and the requirements of the Zambia Companies Act no. 10 of 2017, the Banking and Financial Services Act and Securities Act of
Zambia.

Basis for Opinion

Financial statements
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of
the Group and Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional
Accountants (including International Independence Standards) (IESBA Code) and other independence requirements applicable to
performing audits in Zambia. We have fulfilled our other ethical responsibilities in accordance with the IESBA Code, and in accordance
with other ethical requirements applicable to performing the audit of Standard Chartered Bank Zambia Plc. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the

Financial statements
consolidated and separate financial statements of the current year. These matters were addressed in the context of our audit
of the consolidated and separate financial statements as a whole and in forming our opinion thereon and we do not provide
a separate opinion on these matters.

The key audit matters set out below relate to our audit of both the consolidated and the separate financial statements.

Expected credit losses

See note 7.9 financial assets and financial liabilities accounting policy, 7.9.1 loans and advances accounting policy, note 8
use of judgements and estimates, note 29 loans and advances to customers and note 48 credit risk section of the financial
risk management.
Key audit matter How the matter was addressed Key audit matter How the matter was addressed
The impairment of loans and advances to customers Our audit procedures included the following:
is estimated by the Directors and requires significant Ÿ We tested the design and implementation and operating
judgement to determine the impairment allowance effectiveness of key controls over:
based on the expected credit losses (ECL).
- approval of credits origination of loans and advances;
Key areas of judgement include: and
- Interpretation of the requirements to determine - approval of loan risk ratings and credit rate monitoring
impairment under IFRS 9 which is reflected in the assessments performed by management.
Bank’s expected credit loss model.
Ÿ With the support of our internal valuation specialist, we
- The identification of exposures with significant evaluated the assumptions, inputs and formulas used in the
deterioration in credit quality. modelling techniques such as Probability of Default (PD), Loss
- Assumptions used in the expected credit loss model Given Default (LGD) and Exposure at Default (EAD) against
such as the expected future cash flows and forward the requirements of IFRS 9.
looking macroeconomic factors (such as foreign Ÿ We assessed the data inputs such as macroeconomic factors
exchange rates, inflation and gross domestic used in the ECL model and compared them to independent
product (GDP)). statistical analyses for reasonableness.

Standard Chartered — Annual Report 2020 37

Financial statements Notes to the financial statements

- The measurement of modelled provisions, which Ÿ We assessed the appropriateness of transfers between
is dependent upon key assumptions relating to stages by testing on a sample basis whether financial assets
probability of default (“PD”), loss given default transferred from stage 1 to stage 2 or stage 3 respectively,
(“LGD”) and exposure at default (“EAD”) met the Bank’s definition of significant increase in credit risk.
Due to the significant judgement applied by the Ÿ We examined a sample of exposures and performed
Directors, in determining the expected credit losses of procedures to evaluate the expected credit loss calculation
loans and advances to customers was considered to for exposures assessed on an individual basis by recalculating
be a key audit matter the expected credit loss.
Ÿ We examined a sample of exposures for completeness by
checking that all exposures were included in the ECL model
with reference to minutes of loan committee meetings and
other supporting documentation.
Ÿ We assessed the adequacy of the disclosure made in the
financial statements against the requirements of IFRS 9
Financial Instruments

Other Information
The Directors are responsible for the other information. The other information is included in pages 1 to 39 and comprises the
Annual report, the Directors’ report and other supplementary information as required by the Zambia Companies Act no. 10
of 2017 and all other information included in the Annual Report. Other information does not include the consolidated and
separate financial statements and our auditor’s report thereon.
Our opinion on the consolidated and separate financial statements does not cover the other information and we do not
express an audit opinion or any form of assurance conclusion thereon.
In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other
information and in doing so, consider whether the other information is materially inconsistent with the consolidated and
separate financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If,
based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Other matter
The consolidated and separate financial statements of Standard Chartered Bank Zambia Plc for the year ended December 31,
2019, were audited by another auditor who expressed an unmodified opinion on those financial statements on 11 March,2020.

Responsibilities of the Directors for the Consolidated and Separate Financial Statements
The Directors are responsible for the preparation of the consolidated and separate financial statements that give a true and
fair view in accordance with International Financial Reporting Standards and the requirements of the Zambia Companies
Act no. 10 of 2017 , the Banking and Financial Services Act and Securities Act of Zambia and for such internal control as the
directors determine is necessary to enable the preparation of consolidated and separate financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the consolidated and separate financial statements, the Directors are responsible for assessing the Group’s
and the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the Directors either intend to liquidate the Group and/or the Bank or to cease
operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Consolidated and Separate Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a
whole are free from material misstatement, whether due to fraud or error and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these consolidated and separate financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism
throughout the audit. We also:

Ÿ Identify and assess the risks of material misstatement of the consolidated and separate financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting
from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
Ÿ Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Bank’s
internal control.
Ÿ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the Directors.
Ÿ Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt
on the Group’s and the Bank’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we
are required to draw attention in our auditor’s report to the related disclosures in the consolidated and separate financial
38 Standard Chartered — Annual Report 2020
 statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and/or the
Bank to cease to continue as a going concern.
Ÿ Evaluate the overall presentation, structure and content of the consolidated and separate financial statements, including
the disclosures and whether the consolidated and separate financial statements represent the underlying transactions
and events in a manner that achieves fair presentation.
Ÿ Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Group to express an opinion on the consolidated and separate financial statements. We are responsible for
the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear
on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of
the consolidated and separate financial statements of the current year and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequence
of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

Zambia Companies Act no. 10 of 2017.

In accordance with section 259 (3) of the Zambia Companies Act no. 10 of 2017 we consider and report that:

Financial statements
Ÿ there is no relationship, interest or debt we have with the Company; and
Ÿ there were no serious breaches of corporate governance principles or practices by the Directors. The statement is made on
the basis of the corporate governance provisions Act, Part VII - Corporate Governance of the Zambia Companies Act no.
10 of 2017, Banking and Financial Services Act of Zambia
In accordance with Section 97(2) of the Banking and Financial Services Act of Zambia, we consider and report that:

Ÿ The Bank made available all necessary information to enable us to comply with the requirements of this Act;
Ÿ The Bank has complied with the provisions, regulations rules and regulatory statements specified in or under this Act; and
Ÿ There were no transactions or events that came to our attention that affect the wellbeing of the Bank that are not
satisfactory and require rectification including:

Financial statements
a) transactions that are not within the powers of the Bank or which is contrary to this Act; or
b) a non-performing loan that is outstanding, has been restructured or the terms of the repayment have been extended,
whose principal amount exceeds five per cent or more of the regulatory capital of the Bank.
Securities Act of Zambia

As required by Part III, Rule18 of the Securities (accounting and financial reporting requirements) Rules of the Securities Act
Zambia, we report that:

Ÿ The annual consolidated and separate financial statements have been properly prepared in accordance with Securities
and Exchange Commission rules.
Ÿ The Bank has, through the financial year, kept proper accounting records in accordance with the requirements of the
Securities and Exchange Commission rules.
Ÿ The consolidated and separate statement of financial position and statement of profit or loss and other comprehensive
income are in agreement with the Company records.
Ÿ We have obtained all the information and explanations which, to the best of our knowledge are belief, are necessary for the
purpose of our audit.

EY Zambia
Chartered Accountants

The engagement partner on the audit resulting in this independent auditor’s report is;

Mark Libakeni 29 March 2021

Partner
Practicing Certificate Number: AUD/F000397 Lusaka
Standard Chartered — Annual Report 2020 39
Financial statements Notes to the financial statements

Consolidated and separate statement of income or loss

and other comprehensive income
for the year ended 31 December 2020
Group and Bank
2020 2019
Note K’000 K’000

Interest income calculated using the effective interest rate method 10 1,178,202 1,070,316
Interest expense calculated using the effective interest rate method 11 (421,389) (351,599)
Net interest income 756,813 718,717
Fee and commission income 12 189,743 203,808
Fee and commission expense 12 (37,747) (30,954)
Net fee and commission income 151,996 172,854
Net trading income 13 146,403 154,630
Credit Loss expense on financial assets 14 (293,252) (303,730)
Net gains on financial instruments at fair value through profit or loss 15 110,418 25,207
Other operating income - 12,937
Operating Income 872,378 780,615
Other operating loss 16 (4,518) -

Personnel expenses 17 (330,667) (328,665)

Lease interest expense 44.2 (8,828) (3,848)
Depreciation, amortisation, premises and equipment expenses (177,655) (101,517)
Other Impairment 14.2 (20,536) -
Other expenses 18 (372,548) (280,798)
Other operating expenses (910,234) (714,828)
(Loss)/Profit before income tax (42,374) 65,787
Income tax expense 19(a) (5,704) (53,501)
(Loss) /Profit for the year (48,078) 12,286
Other comprehensive income, net of income tax
Items that may be reclassified to profit or loss:
Fair value reserves
Investment securities at FVOCI - Net change in fair value 19(c) 177,950 187,675
Related taxes 19(c) (62,282) (65,686)
Other comprehensive income for the year, net of income tax 115,668 121,989
Total comprehensive (Loss)/Income for the year 67,590 134,275
(Loss)/Earnings per share
Basic and diluted earnings (Loss)/Earnings per share (Kwacha) 20 (0.029) 0.007

The notes on pages 44 to 122 are an integral part of these financial statements.

40 Standard Chartered — Annual Report 2020

Consolidated and separate statement of financial
position
as at 31 December 2020

Group Bank
2020 2019 2020 2019
Note K’000 K’000 K’000 K’000
Assets
Cash and cash equivalents 42 5,251,892 3,381,132 5,251,892 3,381,132
Cash on hand and balances at Bank of Zambia 22 2,095,891 1,582,665 2,095,891 1,582,665
Loans and advances to banks 23 - 101,999 - 101,999
Pledged assets 24 100,000 100,000 100,000 100,000
Derivative financial instruments 27 4,590 45,273 4,590 45,273
Investment securities 28 3,542,091 2,049,415 3,542,091 2,049,415
Investment in subsidiary 25 - - 5 5
Loans and advances to customers 29 2,410,457 3,131,664 2,410,457 3,131,664
Other assets 30 357,185 379,626 357,185 379,626
Assets held for sale 32 9,761 - 9,761 -

Financial statements
Property and equipment 31 179,158 119,397 179,158 119,397
Current tax assets 19(d) - 43,283 - 43,283
Deferred tax assets 19(e) 165,707 80,297 165,707 80,297
Intangible assets 33 70,138 52,688 70,138 52,688
Total assets 14,186,870 11,067,439 14,186,875 11,067,444
Liabilities
Amounts payable to group banks 42 325,740 229,489 325,740 229,489
Amounts payable to non-group banks 42 21,266 12,297 21,266 12,297

Financial statements
Derivative financial instruments 27 8,548 41,740 8,548 41,740
Deposits from customers 34 12,214,521 9,289,297 12,214,521 9,289,297
Dividends payable 21 4,896 5,146 4,896 5,146
Current tax liabilities 19(d) 22,127 - 22,127 -
Other liabilities 35 615,974 584,755 615,979 584,760
Subordinated liabilities 38 84,680 56,600 84,680 56,600
Provisions 36 78,703 105,290 78,703 105,290
Total liabilities 13,376,455 10,324,614 13,376,460 10,324,619
Equity
Share capital 39 416,745 416,745 416,745 416,745
Statutory reserves 12,285 12,285 12,285 12,285
Fair value reserves 246,343 130,675 246,343 130,675
Credit reserves 9,261 8,523 9,261 8,523
Capital contribution 62,312 62,312 62,312 62,312
(Accumulated loss)/retained earnings 63,469 112,285 63,469 112,285
Total equity 810,415 742,825 810,415 742,825
Total liabilities and equity 14,186,870 11,067,439 14,186,875 11,067,444

These financial statements were approved by the Board of directors on 26 February, 2021 and were signed on its behalf by:

C. Fundanga H. Kasekende K. Bwalya R. Kavimba

Chairman Managing Director Director Finance and Administration Company Secretary

The notes on pages 44 to 122 are an integral part of these financial statements.

Standard Chartered — Annual Report 2020 41

Financial statements Notes to the financial statements

Consolidated and separate statement

of changes in equity
for the year ended 31 December 2020

Share-based
Share Statutory Fair value Credit Capital Retained
Group and Bank payment Total
capital reserves reserves reserves Contribution earnings
reserve
K’000 K’000 K’000 K’000 K’000 K’000 K’000 K’000
Balance at 1 January 2019 416,745 12,285 8,686 54,131 - 17,312 104,392 613,551
Profit for the year - - - - - - 12,286 12,286
Other Comprehensive income net of
income tax

Fair value reserve on FVOCI -

investment securities- - - - - - - -
- Net change in fair value - - 121,989 - - - - 121,989
Total comprehensive income for the
year - - 121,989 - - - 12,286 134,275
Transfers - - - (45,608) - - (45,608) -
Transactions with owners, recognised
directly in equity - -
Capital contribution 45,000 (45,000) -
Dividends (note 21) - - - - - - (5,001) (5,001)
872
Share based payment transactions - - - 872 - -
Distribution of share based payments - - - - (872) - (872) -
Total contributions by and
distributions to
Owners - - - - - 45,000 (50,001) (5,001)
Balance at 31 December 2019 416,745 12,285 130,675 8,523 - 62,312 112,285 742,825
Group and Bank
Balance at 1 January 2020 416,745 12,285 130,675 8,523 - 62,312 112,285 742,825
Loss for the year - - - - - - (48,078) (48,078)
Other comprehensive income net of
income tax
Fair value reserve on investment
securities at FVOCI
- Net change in fair value - - 115,668 - - - - 115,668
Total comprehensive income for the
year 115,668 (48,078) 67,590
Transfers - - - 738 - - (738) -
Transactions with owners, recognized
directly in equity
Dividends (note 21) - - - - - - - -
Share based payment transactions - - - - 492 - 492 -
Distribution of share-based payments - - - - (492) - (492) -
Total contributions by and -
distribution to owners - - - - - - -
Balance at 31 December 2020 416,745 12,285 246,343 9,261 - 62,312 63,469 810,415

Fair value reserve Retained earnings

The fair value reserve comprises the fair value movement of financial Retained earnings are the brought forward recognised income
assets classified as fair value through other comprehensive income net of expenses of the Group plus current year profit attributable
FVOCI (previously as available-for-sale). Gains and losses including to shareholders less distribution to shareholders.
Expected Credit Loss (ECL) are deferred to this reserve until such
time as the underlying asset is sold. Statutory reserves
Statutory reserves comprises amounts prescribed under statutory
Credit reserve instrument No. 21 of 1995: The Banking and Financial Services
The credit reserve is a loan loss reserve that relates to the excess/ (Reserve Account) Regulations
deficit of impairment provision as required by the Banking and
Financial Services Act of Zambia over the impairment provision Share based payment reserve
computed in terms of International Financial Reporting Standards. Sharesave is an all-employee plan where participants (including
executive directors) are able to open a savings contract to fund
Capital contribution the exercise of an option over shares The share based payment
The capital contribution reserve relates to the franchise value arising reserve relates to equity options exercised of which employees of
from the acquisition of the Security Services business and the 2019 Standard Chartered Bank Zambia Plc participate.
majority dividend that was retained by the Group after the necessary
approvals were obtained. The franchise value is the amount paid on The notes on pages 44 to 122 are an integral part of these
behalf of the Bank by Standard Chartered Plc for the acquisition of financial statements.
the Security Services business. Included in the capital contribution is
the majority shareholder’s 2018 final dividend declared which was
retained on approval as additional capital for the Group.

42 Standard Chartered — Annual Report 2020

Consolidated and separate statement of cash flows
for the year ended 31 December 2020

Group and Bank

2019
2020
Note K’000
K’000
Restated*
(Loss)/Profit before tax (42,374) 65,787
Other non-cash items included in profit before tax
Depreciation of property, equipment and right-of-use assets 42,848 29,747
Amortisation of intangible 20,593 13,945
Equity settled share based payments transaction 17a (492) 872
Impairment losses and reversals 14.1 293,252 303,730
Other impairment 14.2 20,536 -
Gain on disposal of assets (1,114) 8,595
Fair value (gains)/losses (64,771) -
Effect of exchanges rate fluctuations on subordinated loan capital 42 28,080 8,900
Net Interest income (756,813) (718,717)
(460,255) (287,141)

Financial statements
Change in:
Statutory reserve deposits with the central bank (418,078) (904,378)
Financial assets held for trading - (5,000)
Due from banks 101,999 (101,999)
Derivative financial instruments 40,683 17,240

Loans and advances to customers 721,207 (245,343)

Other assets 22,438 (64,287)

Due to customers 2,925,224 1,085,145

Derivative financial instruments (33,193) (4,108)

Provisions (26,587) 37,191

Other liabilities 31,220 24,415

3,364,914 (161,123)
Interest received 1,125,201 1,113,781
Interest paid (490,011) (332,387)
635,190 781,394
Cash generated from operating activities before taxation 3,539,848 333,129
Income tax paid (32,536) (171,638)
Net cash generated from operating activities 3,507,312 161,491

Investing activities
Purchase of property and equipment (34,387) (18,563)
Proceeds from the sale of property and equipment 5,174 9,606
Purchase of intangible assets (58,579) -
Investment in government securities (3,272,976) (2,318,026)
Proceeds from maturity/sale of investment securities 1,780,300 2,300,320
Net cash flows (used in)/from investing activities (1,580,468) (26,663)
Financing activities
Premises, Motor vehicle and equipment lease liability principal payment (33,543) (7,047)
Dividends paid - (5,001)
Net cash flows from/(used in) financing activities (33,543) (12,048)
Net increase in cash and cash equivalents 1,893,301 122,780
Cash and cash equivalents at the beginning of the the year 42 3,817,633 3,678,489
Effects of exchange rate fluctuation on cash held 35,047 16,364
Total cash and cash equivalents at the end of the year 42 5,745,981 3,817,633

*Prior year total cashflows adjusted to factor in reclassifications during the year, see Note 42.1
Standard Chartered — Annual Report 2020 43
Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements
for the year ended 31 December 2020

1 Corporate information Applicability

to the Group
Standard Chartered Bank Zambia Plc (“Bank”) provides
Yes No
consumer, Private and Business banking, corporate banking
Effective 1 January 2020 x
and wealth management services.
Definition of a Business – Amendments to IFRS 3 x
Standard Chartered Bank Zambia Plc (“Bank”) is a Bank Interest Rate Benchmark Reform – Amendments
to IFRS 9, IAS 39 and IFRS 7 x
domiciled in Zambia. The Bank’s registered office is Standard
Definition of Material – Amendments to IAS 1
Chartered House, Stand 4642, Corner of Mwaimwena Road
and IAS 8 x
and Addis Ababa Drive, Lusaka.
The Conceptual Framework for Financial
Reporting x
These consolidated and separate financial statements
Effective after 1 June 2020
comprise the Bank and its subsidiary, Standard Chartered
Nominees Zambia Limited (collectively the ‘Group’). The COVID-19-Related Rent Concessions –
Amendment to IFRS 16 x
Group is primarily involved in wholesale and retail banking.
Effective after 1 January 2021
2 Basis of preparation Interest Rate Benchmark Reform – Phase 2 –
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and
IFRS 16 x
The consolidated and separate financial statements have
Effective 1 January 2022
been prepared on a historical cost basis, except for
Reference to the Conceptual Framework –
derivative financial instruments, other financial assets and
Amendments to IFRS 3 x
liabilities held for trading and financial assets and liabilities
Property, Plant and Equipment: Proceeds before
designated at fair value through profit or loss (FVPL) and
Intended Use – Amendments to IAS 16 x
debt and equity instruments at fair value through other
Onerous Contracts – Costs of Fulfilling a
comprehensive income (FVOCI) all of which have been
Contract – Amendments to IAS 37 x
measured at fair value.
AIP IFRS 1 First-time Adoption of International
Financial Reporting Standards – Subsidiary as a
3 Statement of compliance first-time adopter x
AIP IFRS 9 Financial Instruments – Fees in the
These consolidated and separate financial statements have '10 per cen' test for derecognition of financial
been prepared in accordance with International Financial liabilities x
Reporting Standards (IFRS) and the requirements of the AIP IAS 41 Agriculture – Taxation in fair value
Companies Act, the Banking and Financial Services Act and measurements x
the Securities Act of Zambia. Effective 1 January 2023
IFRS 17 Insurance Contracts x
The Bank has one subsidiary, Standard Chartered Nominees
Classification of Liabilities as Current or Non-
Limited, which is dormant and accordingly the Group’s current - Amendments to IAS 1 (This will not
consolidated and separate statements of profit and loss have a material impact as the Group reports its
and other comprehensive income, changes in equity and Assets and Liabilities in order of liquidity) x
cash flows are substantially the same as the Bank. Postponed indefinitely
Sale or Contribution of Assets between an
4 Presentation of financial statements Investor and its Associate or Joint Venture -
Amendments to IFRS 10 and IAS 28 x
The Group presents its statement of financial position
in order of liquidity based on the Group’s intention and 5.1.1 Definition of Material – Amendments to IAS 1 and IAS 8
perceived ability to recover/settle the majority of assets/ The amendments provide a new definition of material
liabilities of the corresponding financial statement line that states ‘information is material if omitting ,misstating
item. An analysis regarding recovery or settlement within 12 or obscuring it could reasonably be expected to influence
months after the reporting date (current) and more than 12 decisions that the primary users of the general purpose
months after the reporting date (non current) is presented in financial statements make on the basis of those financial
Note 39. statements which provide financial information about
a specific reporting entity. The amendments clarify that
5 Changes in accounting policies and disclosures materiality will depend on the nature or magnitude of
information, either individually or in combination with other
5.1. New and amended standards and interpretations information in the context of the financial statements.
A misstatement of information is material if it could
The were new standards issued which were effective for reasonably be expected to influence decisions made by the
primary users. These amendments had no impact on the
annual periods beginning on or after 1 January 2021 with
consolidated and separate financial statements nor is there
earlier adoption permitted. expected to be any future impact on the group.
The Group has not early adopted any standards, 5.1.1 IBOR reforms phase 2
interpretations or amendments that have been issued but IBOR reform Phase 2 includes a number of reliefs and
not yet effective. additional disclosures. The reliefs apply upon the transition
of a financial instrument from an IBOR to a risk-free-rate
Several other amendments and interpretations apply for the (RFR).
first time in 2020, but do not have an impact on the Groups Changes to the basis for determining contractual cash flows
consolidated and separate financial statements. as a result of interest rate benchmark reform are required as
a practical expedient to be treated as changes to a floating
interest rate, provided that, for the financial instrument, the
transition from the IBOR benchmark rate to RFR takes place
on an economically equivalent basis.
The Group has not yet adopted IBOR reforms.
44 Standard Chartered — Annual Report 2020
Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020
flows considering all contractual terms of the financial
instrument, but not ECL. For purchased or originated
6 Basis of consolidation credit-impaired financial assets, a credit-adjusted
effective interest rate is calculated using estimated
The consolidated and separate financial statements future cash flows including ECL.
comprise the financial statements of the Group and its The calculation of the effective interest rate includes
subsidiary. transaction costs and fees and points paid or received
that are an integral part of the effective interest rate.
The Bank has one subsidiary, Standard Chartered Nominees
Transaction costs include incremental costs that are
Limited, which is dormant and according to Groups
directly attributable to the acquisition or issue of a
consolidated and separate statements of profit and loss
financial asset or financial liability.
and other comprehensive income, changes in equity and
cash flows are substantially the same as the Bank. 7.2.2 Amortised cost and gross carrying amount

7 Summary of significant accounting policies The ‘amortised cost’ of a financial asset or financial liability
is the amount at which the financial asset or financial
7.1 Foreign currency translation liability is measured on initial recognition minus the principal
repayments, plus or minus the cumulative amortisation using
7.1.1 Functional and presentation currency the effective interest method of any difference between that
initial amount and the maturity amount and for financial
These consolidated and separate financial assets, adjusted for any expected credit loss allowance.
statements are presented in Zambian Kwacha

Financial statements
(“Kwacha”), which is the Group’s functional currency. The ‘gross carrying amount of a financial asset’ is the
All amounts have been rounded to the nearest amortised cost of a financial asset before adjusting for
thousand, except when otherwise indicated. any expected credit loss allowance
7.2.3 Calculation of interest income and expense
7.1.2. Transactions and balances
Interest expense presented in the statement of profit or loss
Transactions in foreign currencies are translated into the and OCI includes:
respective functional currency of the Group at the spot
exchange rates at the date of the transactions.  financial liabilities measured at amortised cost; and

Monetary assets and liabilities denominated in foreign Interest income and expense on all trading assets and
currencies are translated into the functional currency at liabilities are considered to be incidental to the Group’s
the exchange rate at the reporting date. The foreign trading operations and are presented together with all other
currency gain or loss on monetary items is the difference changes in the fair value of trading assets and liabilities in net
between the amortised cost in the functional currency at trading income (see Note 13).
the beginning of the year, adjusted for effective interest
and payments during the year and the amortised cost The effective interest rate of a financial asset or financial
in the foreign currency translated at the spot exchange liability is calculated on initial recognition of a financial asset
rate at the end of the year. or a financial liability. In calculating interest income and
expense, the effective interest rate is applied to the gross
Non-monetary assets and liabilities that are measured carrying amount of the asset (when the asset is not credit-
at fair value in a foreign currency are translated into the impaired) or to the amortised cost of the liability. The effective
functional currency at the exchange rate when the fair interest rate is revised as a result of periodic re-estimation of
value is determined. cash flows of floating rate instruments to reflect movements
in market rates of interest.
Non-monetary items that are measured based on
historical cost in a foreign currency are translated using However, for financial assets that have become credit-
the spot exchange rate at the date of the transaction. impaired subsequent to initial recognition, interest income
is calculated by applying the effective interest rate to the
Foreign currency differences arising on translation are amortised cost of the financial asset. If the asset is no longer
generally recognised in profit or loss. However, foreign credit-impaired, then the calculation of interest income
currency differences arising from the translation of reverts to the gross basis.
equity investments in respect of which an election has
been made to present subsequent changes in OCI, are For financial assets that were credit-impaired on initial
recognised in OCI. recognition, interest income is calculated by applying the
credit-adjusted effective interest rate to the amortised cost of
7.2 Recognition of interest income the asset. The calculation of interest income does not revert to
a gross basis, even if the credit risk of the asset improves.
7.2.1 Effective interest rate
Interest in suspense on stage 3 financial assets will not be
Interest income and expense are recognised in profit or recognised as a catch-up when the financial assets cures to
loss using the effective interest method. The ‘effective stage 2 or stage 1.
interest rate’ is the rate that exactly discounts estimated
future cash payments or receipts through the expected For information on when financial assets are credit-impaired,
life of the financial instrument to: see Note 46.
Interest income and expense calculated using the effective
 the gross carrying amount of the financial asset; or interest method presented in the statement of profit or loss
 the amortised cost of the financial liability. and OCI includes interest on financial assets and financial
When calculating the effective interest rate for financial liabilities measured at amortised cost:
instruments other than purchased or originated credit-
 interest on investment instruments measured at FVOCI;
impaired assets, the Group estimates future cash

Standard Chartered — Annual Report 2020 45

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

7 Summary of significant accounting policies (continued) processed and are structured as either a fixed rate per
transaction processed or at a fixed per percentage of
7.2.3 Calculation of interest income and expense (continued) the underlying cardholder transaction. The variable
 Net gains on financial assets and financial liabilities at interchange fees are allocated to each distinct day, based
FVTPL are presented in net gains from other financial on the number and value of transactions processed that
instruments at FVTPL (see Note 15). day, and the allocated revenue is recognised as the entity
performs.
 Other income presented in the statement of profit or loss
and OCI includes interest income on finance leases Services provided where the Group’s performance
obligations are satisfied at a point in time are recognised
7.3 Fees and commission once control of the services is transferred to the customer.
This is typically on completion of the underlying transaction
The Group earns fee and commission income from or service or, for fees or components of fees that are linked
a diverse range of financial services it provides to its
to a certain performance, after fulfilling the corresponding
customers. Fee and commission income is recognised at
an amount that reflects the consideration to which the performance criteria. These include fees and commissions
Group expects to be entitled in exchange for providing arising from negotiating or participating in the negotiation
the services. of a transaction for a third party, such as the arrangement/
participation or negotiation of the acquisition of shares
The performance obligations, as well as the timing of their or other securities, or the purchase or sale of businesses,
satisfaction, are identified, and determined, at the inception
brokerage and underwriting fees. The Group has a single
of the contract.
performance obligation with respect to these services, which
When the Group provides a service to its customers, is to successfully complete the transaction specified in the
consideration is invoiced and generally due immediately contract.
upon satisfaction of a service provided at a point in time
or at the end of the contract period for a service provided Brokerage fees: The Group buys and sells securities on
over time behalf of its customers and receives a fixed commission for
each transaction. The Group’s performance obligation is to
The Group has generally concluded that it is the principal execute the trade on behalf of the customer and revenue is
in its revenue arrangements because it typically controls recognised once each trade has been executed (i.e., on the
the services before transferring them to the customer. trade date). Payment of the commission is typically due on
the trade date.
The disclosures of significant accounting judgments, estimates
7.4 Net trading income
and assumptions relating to revenue from contracts with
customers are provided in Note 8. Net trading income’ comprises gains less losses related to trading
assets and liabilities and includes all realised and unrealised
7.3.1.Fee and commission income from services where performance
fair value changes, interest, dividends and foreign exchange
obligations are satisfied over time
differences.
Performance obligations satisfied over time include
asset management, custody and other services, where 7.5 Net gains on financial instruments at FVTPL
the customer simultaneously receives and consumes the Net income from other financial instruments at FVTPL relates
benefits provided by the Group’s performance as the Group
to non-trading derivatives held for risk management purposes
performs.
relationships and financial assets and financial liabilities
The Group’s fee and commission income from services where designated at FVTPL. It includes all realised and unrealised
performance obligations are satisfied over time include the fair value changes, interest, dividends and foreign exchange
following: differences.
Custody fees: The Group earns a fixed annual fee for providing its 7.6 Net gain/ loss on derecognition of financial assets measured at
customers with custody services, which include the safekeeping amortised cost or FVOCI
of purchased securities and processing of any dividend income
Net loss on derecognition of financial assets measured at
and interest payments. As the benefit to the customer of the
amortised cost includes loss (or income) recognised on sale or
services is transferred evenly over the service period, these fees
derecognition of financial assets measured at amortised costs
are recognised as revenue evenly over the period, based on
calculated as the difference between the book value (including
time-elapsed.
impairment) and the proceeds received.
Loan commitment fees: These are fixed annual fees
7.7 Financial instruments – initial recognition
paid by customers for loan and other credit facilities with
the Group, but where it is unlikely that a specific lending 7.7.1 Date of recognition
arrangement will be entered into with the customer and
the loan commitment is not measured at fair value. The Financial assets and liabilities, with the exception of
Group promises to provide a loan facility for a specified loans and advances to customers and balances due to
period. As the benefit of the services is transferred to the customers, are initially recognised on the trade date,
customer evenly over the period of entitlement, the fees are i.e., the date on which the Group becomes a party
recognised as revenue on a straight-line basis. Payment of to the contractual provisions of the instrument. This
the fees is due and received monthly in arrears. includes regular way trades, i.e., purchases or sales of
financial assets that require delivery of assets within
Interchange fees: The Group provides its customers with the time frame generally established by regulation or
credit card processing services (i.e., authorisation and convention in the marketplace. Loans and advances to
settlement of transactions executed with the Group’s customers are recognised when funds are transferred
credit cards) where it is entitled to an interchange fee for to the customers’ accounts. The Group recognises
each transaction (i.e., when a credit cardholder purchases balances due to customers when funds are transferred
goods and services from merchants using the Group’s credit to the Group.
card). The fees vary based on the number of transactions

46 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

7 Summary of significant accounting policies (continued) condition or location of the asset or the extent to which
it relates to items that are comparable to the valued
7.7 Financial instruments – initial recognition (continued) instrument. However, if such adjustments are based on
unobservable inputs which are significant to the entire
7.7.2 Initial measurement of financial instruments measurement, the Group will classify the instruments as
Level 3.
The classification of financial instruments at initial
recognition depends on their contractual terms and  Level 3 financial instruments − Those that include one
the business model for managing the instruments. or more unobservable input that is significant to the
measurement as whole.
Financial instruments are initially measured at their
fair value except in the case of financial assets and The Group evaluates the levelling at each reporting period
financial liabilities recorded at FVTPL, transaction on an instrument by instrument basis and reclassifies
costs are added to, or subtracted from, this amount. instruments when necessary, based on the facts at the end
Trade receivables are measured at the transaction of the reporting period.
price.
7.9 Financial assets and liabilities
7.7.3 Day 1 profit or loss
7.9.1 Due from banks, Loans and advances to customers
When the transaction price of the instrument
differs from the fair value at origination and the fair The Group measures Due from banks, Loans and
value is based on a valuation technique using only advances to customers and other financial
investments at amortised cost only if both of the

Financial statements
inputs observable in market transactions, the Group
recognises the difference between the transaction following conditions are met:
price and fair value in net trading income. In those
 The financial asset is held within a business model
cases where fair value is based on models for which with the objective to hold financial assets in order
some of the inputs are not observable, the difference to collect contractual cash flows
between the transaction price and the fair value is
deferred and is only recognised in profit or loss when  The contractual terms of the financial asset give
the inputs become observable, or when the instrument rise on specified dates to cash flows that are solely
is derecognised. payments of principal and interest (SPPI) on the
principal amount outstanding. The details of these
7.7.4 Measurement categories of financial assets and liabilities conditions are outlined below.

The Group classifies all of its financial assets based on the 7.9.1.1 Business model assessment
business model for managing the assets and the asset’s
contractual terms, measured at either: The Group determines its business model at the level
that best reflects how it manages groups of financial
assets to achieve its business objective:
 Amortised Cost as explained in Note 7.2.2.
 FVOCI as explained in Note 7.9.4  The risks that affect the performance of the
business model (and the financial assets held
 FVTL as set out in Note 7.9.3. within that business model) and, in particular, the
way those risks are managed.
Financial liabilities, other than loan commitments and
financial guarantees, are measured at amortised cost or  How managers of the business are compensated
at FVTPL when they are held for trading and derivative
(for example, whether the compensation is based
instruments or the fair value designation is applied
on the fair value of the assets managed or on the
contractual cash flows collected).
7.8 Determination of fair value

In order to show how fair values have been derived, financial The business model assessment is based on
instruments are classified based on a hierarchy of valuation reasonably expected scenarios without taking ‘worst
techniques, as summarised below: case’ or ‘stress case’ scenarios into account. If cash
flows after initial recognition are realised in a way that
 Level 1 financial instruments − Those where the inputs is different from the Group ‘s original expectations,
used in the valuation are unadjusted quoted prices the Group does not change the classification of the
from active markets for identical assets or liabilities remaining financial assets held in that business model,
that the Group has access to at the measurement date. but incorporates such information when assessing
The Group considers markets as active only if there are newly originated or newly purchased financial assets
sufficient trading activities with regards to the volume
going forward.
and liquidity of the identical assets or liabilities and
when there are binding and exercisable price quotes
available on the statement of financial position date. 7.9.1.2 The SPPI test

 Level 2 financial instruments − Those where the inputs As a second step of its classification process the Group
that are used for valuation and are significant, are assesses the contractual terms of the financial asset to
derived from directly or indirectly observable market identify whether they meet the SPPI test.
data available over the entire period of the instrument’s
life. Such inputs include quoted prices for similar assets ‘ Principal’ for the purpose of this test is defined as the
or liabilities in active markets, quoted prices for identical fair value of the financial asset at initial recognition
instruments in inactive markets and observable inputs and may change over the life of the financial asset.
other than quoted prices such as interest rates and
yield curves, implied volatilities, and credit spreads.
In addition, adjustments may be required for the

Standard Chartered — Annual Report 2020 47

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

7 Summary of significant accounting policies (continued)  The contractual terms of the financial asset meet the
SPPI test
7.9 Financial assets and liabilities (continued)
FVOCI debt instruments are subsequently measured at
7.9.1.2 The SPPI test (continued) fair value with gains and losses arising due to changes in
fair value recognised in OCI. Interest income and foreign
The most significant elements of interest within a lending exchange gains and losses are recognised in profit or
arrangement are typically the consideration for the loss in the same manner as for financial assets measured
time value of money and credit risk. To make the SPPI at amortised cost as explained in Note 7.2.2. The ECL
assessment, the Group applies judgement and considers calculation for debt instruments at FVOCI is explained in
relevant factors such as the currency in which the financial Note 7.13. Where the Group holds more than one investment
asset is denominated, and the period for which the interest in the same security, they are deemed to be disposed of on a
rate is set. first–in first–out basis. On derecognition, cumulative gains or
losses previously recognised in OCI are reclassified from OCI
In contrast, contractual terms that introduce a more than to profit or loss.
de minimis exposure to risks or volatility in the contractual
cash flows that are unrelated to a basic lending 7.9.5 Equity instruments at FVOCI
arrangement do not give rise to contractual cash flows
that are solely payments of principal and interest on the Upon initial recognition, the Group occasionally elects
amount outstanding. In such cases, the financial asset is to classify irrevocably some of its equity investments as
required to be measured at FVPL. equity instruments at FVOCI when they meet the definition
of definition of equity under IAS 32 Financial Instruments:
7.9.2 Derivatives recorded at fair value through profit or loss Presentation and are not held for trading. Such classification
is determined on an instrument-by instrument basis.
A derivative is a financial instrument or other contract with
all three of the following characteristics: Gains and losses on these equity instruments are never
recycled to profit. Dividends are recognised in profit or loss
 Its value changes in response to the change in a as other operating income when the right of the payment
specified interest rate, financial instrument price, has been established, except when the Group benefits
commodity price, foreign exchange rate, index of prices
from such proceeds as a recovery of part of the cost of
or rates, credit rating or credit index, or other variable,
provided that, in the case of a non-financial variable, the instrument, in which case, such gains are recorded in
it is not specific to a party to the contract (i.e., the OCI. Equity instruments at FVOCI are not subject to an
‘underlying’). impairment assessment.

 It requires no initial net investment or an initial net 7.9.6 Debt issued and other borrowed funds
investment that is smaller than would be required for
other types of contracts expected to have a similar After initial measurement, debt issued and other borrowed
response to changes in market factors. funds are subsequently measured at amortised cost.
Amortised cost is calculated by taking into account any
 It is settled at a future date. discount or premium on issued funds, and costs that are an
integral part of the EIR. A compound financial instrument
7.9.3 Financial assets or financial liabilities held for trading which contains both a liability and an equity component is
separated at the issue date.
The Group classifies financial assets or financial liabilities as
held for trading when they have been purchased or issued 7.9.7 Financial assets and financial liabilities at fair value
primarily for short-term profit-making through trading through profit or loss
activities or form part of a portfolio of financial instruments
that are managed together, for which there is evidence of a Financial assets and financial liabilities in this category are
recent pattern of short-term profit taking. Held-for-trading those that are not held for trading and have been either
assets and liabilities are recorded and measured in the designated by management upon initial recognition or are
statement of financial position at fair value. mandatory required to be measured at fair value under
IFRS 9. Management only designates an instrument at FVPL
Changes in fair value are recognised in net trading income. upon initial recognition when one of the following criteria
Interest and dividend income or expense is recorded in net
are met. Such designation is determined on an instrument-
trading income according to the terms of the contract, or
by-instrument basis:
when the right to payment has been established.
 The designation eliminates, or significantly reduces, the
Included in this classification are debt securities, equities,
inconsistent treatment that would otherwise arise from
short positions and customer loans that have been acquired
measuring the assets or liabilities or recognising gains or
principally for the purpose of selling or repurchasing in the
losses on them on a different basis.
near term.
Or
7.9.4 Debt instruments at FVOCI
The liabilities are part of a group of financial liabilities,
The Group classifies debt instruments at FVOCI when both
which are managed and their performance evaluated
of the following conditions are met:
on a fair value basis, in accordance with a documented
 The instrument is held within a business model, the risk management or investment strategy
objective of which is achieved by both collecting
contractual cash flows and selling financial assets

48 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

7.9 Financial assets and liabilities (continued) 7.11 Derecognition of financial assets and liabilities

7.9.7 Financial assets and financial liabilities at fair value 7.11.1 Financial assets
through profit or loss (continued)
The Group derecognises a financial asset when the The
Financial assets and financial liabilities at FVPL are recorded Group derecognises a financial asset when the contractual
in the statement of financial position at fair value. Changes rights to the cash flows from the financial asset expire or it
in fair value are recorded in profit and loss with the exception transfers the rights to receive the contractual cash flows in a
of movements in fair value of liabilities designated at FVPL transaction in which substantially all of the risks and rewards
due to changes in the Group’s own credit risk. Such changes of ownership of the financial asset are transferred or in
in fair value are recorded in the Own credit reserve through which the Group neither transfers nor retains substantially
OCI and do not get recycled to the profit or loss. all of the risks and rewards of ownership and it does not
retain control of the financial asset.
Interest earned or incurred on instruments designated
at FVPL is accrued in interest income or interest expense, On derecognition of a financial asset, the difference
respectively, using the EIR, taking into account any discount/ between the carrying amount of the asset (or the carrying
premium and qualifying transaction costs being an integral amount allocated to the portion of the asset derecognised)
part of instrument. Interest earned on assets mandatorily and the sum of (i) the consideration received (including any
required to be measured at FVPL is recorded using the new asset obtained less any new liability assumed) and (ii)
contractual interest rate, as explained in Note 7.2.3. any cumulative gain or loss that had been recognised in OCI
Dividend income from equity instruments measured at FVPL is recognised in profit or loss.

Financial statements
is recorded in profit or loss as other operating income when
the right to the payment has been established. Any cumulative gain/loss recognised in OCI in respect
of equity investment securities designated as at FVOCI
7.9.8 Financial guarantees, letters of credit and undrawn loan is not recognised in profit or loss on derecognition of
commitments such securities. Any interest in transferred financial
assets that qualify for derecognition that is created or
The Group issues financial guarantees, letters of credit and retained by the Group is recognised as a separate asset
loan commitments or liability.
Financial guarantees are initially recognised in the financial The Group enters into transactions whereby it transfers
statements (within Provisions) at fair value, being the
assets recognised on its statement of financial position
premium received. Subsequent to initial recognition, the
Group’s liability under each guarantee is measured at the but retains either all or substantially all of the risks and
higher of the amount initially recognised less cumulative rewards of the transferred assets or a portion of them. In
amortisation recognised in the consolidated and separate such cases, the transferred assets are not derecognised.
statement of profit or loss and other comprehensive income Examples of such transactions are securities lending
and an ECL allowance as set out in Note 45. and sale-and-repurchase transactions.

The premium received is recognised in the consolidated In transactions in which the Group neither retains nor
and separate statement of profit or loss and other transfers substantially all of the risks and rewards of
comprehensive income in Net fees and commission income ownership of a financial asset and it retains control over
on a straight line basis over the life of the guarantee. the asset, the Group continues to recognise the asset to
the extent of its continuing involvement, determined by the
Undrawn loan commitments and letters of credits are
commitments under which, over the duration of the extent to which it is exposed to changes in the value of the
commitment, the Group is required to provide a loan with transferred asset.
pre-specified terms to the customer. Similar to financial
guarantee contracts, these contracts are in the scope of In certain transactions, the Group retains the obligation
the ECL requirements. to service the transferred financial asset for a fee. The
transferred asset is derecognised if it meets the derecognition
The nominal contractual value of financial guarantees, criteria. An asset or liability is recognised for the servicing
letters of credit and undrawn loan commitments, where contract if the servicing fee is more than adequate (asset) or
the loan agreed to be provided is on market terms, are not is less than adequate (liability) for performing the servicing.
recorded on in the statement of financial position. .
7.11.2 Financial liabilities
The nominal values of these instruments together with the
corresponding ECL are disclosed in Note 45
The Group derecognises a financial liability when its
contractual obligations are discharged or cancelled, or
7.10 Reclassification of financial assets and liabilities
expire.
The Group does not reclassify its financial assets subsequent
to their initial recognition, apart from the exceptional
circumstances in which the Group acquires, disposes of,
or terminates a business line. Financial liabilities are never
reclassified

Standard Chartered — Annual Report 2020 49

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

7 Summary of significant accounting policies (continued) 7.13.1 The calculation of ECL

7.12 Offsetting of financial assets and financial liabilities The Group calculates ECL based on four probability-
weighted scenarios to measure the expected cash
Financial assets and financial liabilities are offset and the shortfalls, discounted at an approximation to the EIR. A
net amount presented in the statement of financial position cash shortfall is the difference between the cash flows
when and only when, the Group currently has a legally that are due to an entity in accordance with the contract
enforceable right to set off the amounts and it intends and the cash flows that the entity expects to receive.
either to settle them on a net basis or to realise the asset
and settle the liability simultaneously. The mechanics of the ECL calculations are outlined
below and the key elements are, as follows:
Income and expenses are presented on a net basis only
when permitted under IFRS, or for gains and losses arising  PD The Probability of Default is an estimate of the
from a group of similar transactions such as in the Group’s likelihood of default over a given time horizon. A
trading activity default may only happen at a certain time over the
assessed period, if the facility has not been
7.13 Impairment of financial assets previously derecognised and is still in the portfolio.

The Group recognises loss allowances for ECL on the  EAD The Exposure at Default is an estimate of
the exposure at a future default date, taking into
following financial instruments that are not measured at
account expected changes in the exposure after the
FVTPL: reporting date, including repayments of principal and
interest, whether scheduled by contract or otherwise,
 financial assets that are investment securities; expected drawdowns on committed facilities, and
 loans and advances to customers accrued interest from missed payments.
 loans and advances to banks
 restricted balances with the Central Bank  LGD The Loss Given Default is an estimate of the
 lease receivables; loss arising in the case where a default occurs at a
 financial guarantee contracts issued; and loan given time. It is based on the difference between
commitments issued. the contractual cash flows due and those that the
lender would expect to receive, including from the
No impairment loss is recognised on equity investments. realisation of any collateral or credit enhancements
that are integral to the loan and not required to be
The Group measures loss allowances at an amount equal recognised separately, as set out in Note 7.14. It is
to lifetime ECL, except for the following, for which they are usually expressed as a per centage of the EAD.
measured as 12-month ECL:
When estimating the ECL, the Group considers four
 investment securities that are determined to have scenarios (a base case, an upside, a mild downside
low credit risk at the reporting date; and (downside 1) and a more extreme downside (downside
 other financial instruments (other than lease 2)). Each of these is associated with different PDs, EADs
receivables) on which credit risk has not increased and LGDs, when relevant, the assessment of multiple
significantly since their initial recognition. scenarios also incorporates how defaulted loans are
expected to be recovered, including the probability
The Group considers a investment security to have low that the loans will cure and the value of collateral or the
credit risk when its credit risk rating is equivalent to the amount that might be received for selling the asset.
globally understood definition of ‘investment grade’. The
Group does not apply the low credit risk exemption to any With the exception of credit cards and other revolving
other financial instruments. facilities, for which the treatment is separately set
out in the maximum period for which the credit losses
 12-month ECL are the portion of ECL that result from are determined is the contractual life of a financial
default events on a financial instrument that are
possible within the 12 months after the reporting instrument unless the Group has the legal right to call
date. Financial instruments for which a 12-month it earlier. impairment losses and releases are accounted
ECL is recognised are referred to as ‘Stage 1 financial for and disclosed separately from modification losses or
instruments’. Financial instruments allocated to stage 1 gains that are accounted for as an adjustment of
have not undergone a significant increase in credit risk the financial asset’s gross carrying value
since initial recognition and are not credit impaired.
7.13.2 Measurement of ECL
 Life-time ECL are the ECL that result from all possible
default events over the expected life of the financial ECL are a probability-weighted estimate of credit losses.
instrument or the maximum contractual period of They are measured as follows:
exposure. Financial instruments for which a lifetime
ECL is recognised but which are not credit-impaired are  financial assets that are not credit-impaired at the
referred to as ‘Stage 2 financial instruments’. Financial reporting date: as the present value of all cash
instruments allocated to Stage 2 are those that have shortfalls (i.e. the difference between the cash flows
experienced a significant increase in credit risk since due to the entity in accordance with the contract and
initial recognition but are not credit-impaired. the cash flows that the Group expects to receive);

 Financial instruments for which lifetime ECL are  financial assets that are credit-impaired at the reporting
recognised and that are credit-impaired are referred date: as the difference between the gross carrying
to as ‘Stage 3 financial instruments’. amount and the present value of estimated future
cash flows;

50 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

7 Summary of significant accounting policies (continued) and there are no other indicators of impairment. In
addition, a retail loan that is overdue for 90 days or more
7.13 Impairment of financial assets (continued) is considered credit-impaired even when the regulatory
definition of default is different.
7.13.2 Measurement of ECL (continued)
In making an assessment of whether an investment in
 undrawn loan commitments: as the present value of sovereign debt is credit-impaired, the Group considers
the difference between the contractual cash flows the following factors.
that are due to the Group if the commitment is drawn
down and the cash flows that the Group expects to  The market’s assessment of creditworthiness as
receive; and reflected in the bond yields.
 financial guarantee contracts: the expected payments  The rating agencies’ assessments of creditworthiness.
to reimburse the holder less any amounts that the
Group expects to recover.  The country’s ability to access the capital markets for
new debt issuance.
7.13.3 Restructured financial assets
 The probability of debt being restructured, resulting
If the terms of a financial asset are renegotiated or in holders suffering losses through voluntary or
mandatory debt forgiveness.
modified or an existing financial asset is replaced with a
new one due to financial difficulties of the borrower, then 7.13.5 Presentation of allowance for ECL in the statement of
an assessment is made of whether the financial asset financial position

Financial statements
should be derecognised and ECL are measured as follows.
 If the expected restructuring will not result in Loss allowances for ECL are presented in the statement of
derecognition of the existing asset, then the expected financial position as follows:
cash flows arising from the modified financial asset
are included in calculating the cash shortfalls from the  financial assets measured at amortised cost: as a
existing asset. deduction from the gross carrying amount of the
assets;
 If the expected restructuring will result in derecognition
of the existing asset, then the expected fair value of  loan commitments and financial guarantee contracts:
the new asset is treated as the final cash flow from the generally, as a provision;
existing financial asset at the time of its derecognition.
This amount is included in calculating the cash  where a financial instrument includes both a drawn
shortfalls from the existing financial asset that are and an undrawn component and the Group cannot
discounted from the expected date of derecognition identify the ECL on the loan commitment component
to the reporting date using the original effective separately from those on the drawn component: the
interest rate of the existing financial asset. Group presents a combined loss allowance for both
components. The combined amount is presented as
7.13.4 Credit-impaired financial assets a deduction from the gross carrying amount of the
drawn component. Any excess of the loss allowance
At each reporting date, the Group assesses whether over the gross amount of the drawn component is
financial assets carried at amortised cost and investment presented as a provision; and
financial assets carried at FVOCI and finance lease
receivables are credit impaired (referred to as ‘Stage 3  investment instruments measured at FVOCI: no loss
financial assets’). A financial asset is ‘credit impaired’ allowance is recognised in the statement of financial
when one or more events that have a detrimental impact position because the carrying amount of these assets
on the estimated future cash flows of the financial asset is their fair value. However, the loss allowance is
have occurred. disclosed and is recognised in the fair value reserve.

Evidence that a financial asset is credit-impaired includes 7.13.6 Write-off

the following observable data:
Loans and investment securities are written off (either
 significant financial difficulty of the borrower or issuer; partially or in full) when there is no reasonable expectation
 a breach of contract such as a default or past due of recovering a financial asset in its entirety or a portion
event; thereof. This is generally the case when the Group
 the restructuring of a loan or advance by the Group on determines that the borrower does not have assets or
terms that the Group would not consider otherwise; sources of income that could generate sufficient cash
 it is becoming probable that the borrower will enter flows to repay the amounts subject to the write-off. This
bankruptcy or other financial reorganisation; or assessment is carried out at the individual asset level.
 the disappearance of an active market for a security Recoveries of amounts previously written off are included
because of financial difficulties. in ‘impairment losses on financial instruments’ in the
 Sovereign downgrades and internal country downgrades statement of profit or loss and OCI.
A loan that has been renegotiated due to a deterioration Financial assets that are written off could still be subject to
in the borrower’s condition is usually considered to be enforcement activities in order to comply with the Group’s
credit-impaired unless there is evidence that the risk of not procedures for recovery of amounts due.
receiving contractual cash flows has reduced significantly

Standard Chartered — Annual Report 2020 51

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

7 Summary of significant accounting policies (continued) 7.16 Write off

7.13 Impairment of financial assets (continued) Financial assets are written off either partially or in
their entirety only when the Group has no reasonable
7.13.7 Financial guarantee contracts held expectation of recovering a financial asset in its entirety
or a portion thereof. If the amount to be written off is
The Group assesses whether a financial guarantee greater than the accumulated loss allowance, the
contract held is an integral element of a financial asset difference is first treated as an addition to the allowance
that is accounted for as a component of that instrument or that is then applied against the gross carrying amount.
is a contract that is accounted for separately. The factors Any subsequent recoveries are credited to credit loss
that the Group considers when making this assessment expense.
include whether:
7.17 Cash and cash equivalents
 the guarantee is implicitly part of the contractual terms
of the debt instrument; Cash and cash equivalents include notes and coins on hand
 the guarantee is required by laws and regulations that unrestricted balances held with Central Banks and highly liquid
govern the contract of the debt instrument; financial assets with original maturities of three months or less
from the acquisition date that are subject to an insignificant risk
 the guarantee is entered into at the same time as and of changes in their fair value, and are used by the Group in the
in contemplation of the debt instrument; and management of its short-term commitments
 the guarantee is given by the parent of the borrower or
another company within the borrower’s group. Cash and cash equivalents are carried at amortised cost in the
statement of financial position.
If the Group determines that the guarantee is an integral
element of the financial asset, then any premium payable in 7.18 Leases
connection with the initial recognition of the financial asset
is treated as a transaction cost of acquiring it. The Group The Group assesses at contract inception whether a contract
considers the effect of the protection when measuring the is, or contains, a lease. That is, if the contract conveys the right
fair value of the debt instrument and when measuring ECL. to control the use of an identified asset for a period of time in
exchange for consideration.
If the Group determines that the guarantee is not an integral
element of the debt instrument, then it recognises an asset 7.18.1 As a lessee
representing any prepayment of guarantee premium and a
The Group applies a single recognition and measurement
right to compensation for credit losses. A prepaid premium
approach for all leases, except for short-term leases and leases
asset is recognised only if the guaranteed exposure neither
of low-value assets. The Group recognises lease liabilities to
is credit-impaired nor has undergone a significant increase
make lease payments and right-of-use assets representing the
in credit risk when the guarantee is acquired. These assets
right to use the underlying assets.
are recognised in ‘other assets’. The Group presents gains
or losses on a compensation right in profit or loss in the line Right-of-use assets
item ‘impairment losses on financial instruments.
The Group recognises right-of-use assets at the
7.14 Credit enhancements: collateral valuation and financial commencement date of the lease (i.e., the date the
guarantees underlying asset is available for use). Right-of-use assets are
measured at cost, less any accumulated depreciation and
To mitigate its credit risks on financial assets, the Group impairment losses, and adjusted for any remeasurement
seeks to use collateral, where possible. The collateral of lease liabilities. The cost of right-of-use assets includes
comes in various forms, such as cash, securities, letters of the amount of lease liabilities recognised, initial direct
credit/guarantees, real estate, receivables, inventories, costs incurred, and lease payments made at or before the
other non-financial assets and credit enhancements such commencement date less any lease incentives received.
as netting agreements. Collateral, unless repossessed, Right-of-use assets are depreciated on a straight-line
is not recorded on the Group’s statement of financial basis over the lease term.
position. Cash flows expected from credit enhancements
which are not required to be recognised separately by Lease liabilities
IFRS standards and which are considered integral to the
contractual terms of a debt instrument which is subject The commencement date of the lease, the Group
to ECL, are included in the measurement of those ECL. On recognises lease liabilities measured at the present value
this basis, the fair value of collateral affects the calculation of lease payments to be made over the lease term. The
of ECL. Collateral is generally assessed, at a minimum, at lease payments include fixed payments (less any lease
incentives receivable), variable lease payments that
inception and re-assessed on a quarterly basis. However,
depend on an index or a rate, and amounts expected
some collateral, for example, cash or securities relating to
to be paid under residual value guarantees. The lease
margining requirements, is valued daily
payments also include the exercise price of a purchase
option reasonably certain to be exercised by the Group
7.15 Collateral repossessed
and payments of penalties for terminating the lease, if
In its normal course of business, the Group engages the lease term reflects exercising the option to terminate.
external agents to recover funds from the repossessed Variable lease payments that do not depend on an index
assets, generally at auction, to settle outstanding debt. Any or a rate are recognised as expenses in the period in which
surplus funds are returned to the customers/obligors. As a the event or condition that triggers the payment occurs.
result of this practice, the residential properties under legal
repossession processes are not recorded on the statement
of financial position.

52 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

7 Summary of significant accounting policies (continued) and ability to complete the development and use the software
in a manner that will generate future economic benefits
7.18 Leases and that it can reliably measure the costs to complete the
development. The capitalised costs of internally developed
7.18.2 As a lessor software include all costs directly attributable to developing the
software and capitalised borrowing costs and are amortised
Leases in which the Group does not transfer substantially over its useful life. Internally developed software is stated
all the risks and rewards incidental to ownership of an at capitalised cost less accumulated amortisation and any
asset are classified as operating leases. accumulated impairment losses.

The Group does not lease out any assets. Subsequent expenditure on software assets is capitalised only
when it increases the future economic benefits embodied in
7.19 Property, equipment and right-of-use assets the specific asset to which it relates. All other expenditure is
recognised in profit or loss as it is incurred.
Recognition and measurement
Software is amortised on a straight-line basis in profit or loss over
Items of property and equipment are measured at cost its estimated useful life, from the date on which it is available
less accumulated depreciation and any accumulated for use. The estimated useful life of software for the current and
impairment losses. Purchased software that is integral to comparative periods is three to five years.
the functionality off the related equipment is capitalised as Amortisation methods, useful lives and residual values are
part of that equipment. reviewed at each reporting date and adjusted if appropriate.

Financial statements
If significant parts of an item of property and equipment Property and equipment may be classified as work-in-progress
have different useful lives, then they are accounted for if it is probable that future economic benefits will flow to the
as separate items (major components) of property and Group and the cost can be measured reliably. Typically these
equipment. are items that have not yet been brought to the location and/
or condition necessary for it to be capable of operating in the
Any gain or loss on disposal of an item of property and
manner intended.
equipment is recognised in profit or loss.
Amounts held within work-in-progress that are substantially
Subsequent costs
complete, in common with other fixed assets, are required to
Subsequent expenditure is capitalised only if it is probable be assessed for impairment (see section B7). Where asset lives
that the future economic benefits associated with the are short (technological assets for example) and the assets
expenditure will flow to the Group. Ongoing repairs and are held as WIP for a significant period, impairment (through
maintenance are expensed. technological obsolescence) is more likely to occur. In such
situations, if the assets are generic in nature and do not require
Depreciation significant modification to bring them into use, it would be more
appropriate to hold the assets within fixed assets and amortise
Depreciation is calculated to write off the cost of items
them.
of property and equipment less their estimated residual
values using the straight-line method over their estimated Assets that would typically fall into this category are PCs,
useful lives and is generally recognised in profit or loss. screens and other items that require little modification to bring
Land is not depreciated. them into use.
The estimated useful lives for the current and comparative In general, assets should not be held in work in progress for a
years are as follows: significant period unless it relates to a significant construction
project (a building for example).
Properties up to 50 years
7.21 Assets Held for Sale
Improvements to properties shorter of the life of the lease, or
up to 50 years The Group classifies non-current assets and disposal groups as
Equipment and motor vehicles 3 to 10 years held for sale if their carrying amounts will be recovered principally
through a sale transaction rather than through continuing use.
Right Of Use Assets 1 to 6 years
Non-current assets and disposal groups classified as held for
sale are measured at the lower of their carrying amount and
Depreciation methods, useful lives and residual
fair value less costs to sell. Costs to sell are the incremental costs
values are reviewed at each reporting date and
directly attributable to the disposal of an asset (disposal group),
adjusted if appropriate.
excluding finance costs and income tax expense.
7.20 Intangible assets, goodwill and Work in Progress (WIP)
The criteria for held for sale classification is regarded as met
Goodwill only when the sale is highly probable, and the asset or disposal
group is available for immediate sale in its present condition.
Goodwill arising on the acquisition of subsidiaries is measured Actions required to complete the sale should indicate that
at cost less accumulated impairment losses. it is unlikely that significant changes to the sale will be made
Software and WIP or that the decision to sell will be withdrawn. Management
must be committed to the plan to sell the asset and the sale
Software acquired by the Group is measured at cost less expected to be completed within one year from the date of the
accumulated amortisation and any accumulated impairment classification.
losses.
Property and equipment and intangible assets are not
Expenditure on internally developed software is recognised depreciated or amortised once classified as held for sale.
as an asset when the Group is able to demonstrate: that the
Assets and liabilities classified as held for sale are presented
product is technically and commercially feasible, its intention
separately as current items in the statement of financial
position.

Standard Chartered — Annual Report 2020 53

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

7 Summary of significant accounting policies (continued) 7.24 Provisions

7.22 Impairment of non-financial assets A provision is recognised if, as a result of a past event,
the Group has a present legal or constructive obligation
At each reporting date, the Group reviews the carrying amounts that can be estimated reliably and it is probable that an
of its non-financial assets (other than investment properties outflow of economic benefits will be required to settle the
and deferred tax assets) to determine whether there is any obligation. Provisions are determined by discounting the
indication of impairment. If any such indication exists, then the expected future cash flows at a pre-tax rate that reflects
asset’s recoverable amount is estimated. Goodwill is tested current market assessments of the time value of money
annually for impairment. and the risks specific to the liability. The unwinding of the
discount is recognized as finance cost.
For impairment testing, assets are grouped together into the
smallest group of assets that generates cash inflows from 7.25 Taxes
continuing use that is largely independent of the cash inflows Income tax expense comprises current and deferred tax. It is
of other assets or CGUs. Goodwill arising from a business recognised in profit or loss except to the extent that it relates to
combination is allocated to CGUs or groups of CGUs that are items recognised directly in equity or in OCI.
expected to benefit from the synergies of the combination.
Current tax
The ‘recoverable amount’ of an asset or CGU is the greater of
its value in use and its fair value less costs to sell. ‘Value in use’ is Current tax is the expected tax payable or receivable on the
based on the estimated future cash flows, discounted to their taxable income or loss for the year and any adjustment to
present value using a pre-tax discount rate that reflects current the tax payable or receivable in respect of previous years. It
market assessments of the time value of money and the risks is measured using tax rates enacted or substantially enacted
specific to the asset or CGU. at the reporting date. Current tax also includes any tax arising
from dividends.
An impairment loss is recognised if the carrying amount of an
asset or CGU exceeds its recoverable amount. Deferred tax

The Group’s corporate assets do not generate separate cash Deferred tax is recognised in respect of temporary differences
inflows and are used by more than one CGU. Corporate assets between the carrying amounts of assets and liabilities for
are allocated to CGUs on a reasonable and consistent basis financial reporting purposes and the amounts used for
and tested for impairment as part of the testing of the CGUs to taxation purposes.
which the corporate assets are allocated. Deferred tax is not recognised for:
Impairment losses are recognised in profit or loss. They are  temporary differences on the initial recognition of
allocated first to reduce the carrying amount of any goodwill assets or liabilities in a transaction that is not a business
allocated to the CGU and then to reduce the carrying amounts combination and that affects neither accounting nor
of the other assets in the CGU on a pro rata basis. taxable profit or loss;
 temporary differences related to investments in
An impairment loss in respect of goodwill is not reversed. For subsidiaries to the extent that it is probable that they
other assets, an impairment loss is reversed only to the extent will not reverse in the foreseeable future; and
that the asset’s carrying amount does not exceed the carrying
 taxable temporary differences arising on the initial
amount that would have been determined, net of depreciation recognition of goodwill.
or amortisation, if no impairment loss had been recognised.
Deferred tax assets are recognised for unused tax losses, unused
7.23 Deposits, debt securities issued and tax credits and deductible temporary differences to the extent
subordinated liabilities that the Group is able to control the timing of the reversal of
temporary differences and it is probable that they will not reverse
Deposits, investment securities issued and subordinated in the foreseeable future. Deferred tax assets are reviewed at
liabilities are the Group’s sources of debt funding. each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realized.
When the Group sells a financial asset and simultaneously Unrecognised deferred tax assets are reassessed at each
enters into an agreement to repurchase the asset (or a reporting date and recognised to the extent that it has become
similar asset) at a fixed price on a future date (sale and probable that future taxable profits will be available against
repurchase agreement), the arrangement is accounted which they can be used.
for as a deposit and the underlying asset continues to be
recognised in the Group’s financial statements. Deferred tax is measured at the tax rates that are expected to
be applied to temporary differences when they reverse, using
The Group classifies capital instruments as financial tax rates enacted or substantively enacted at the reporting date
liabilities or equity instruments in accordance with the and reflects uncertainty related to income taxes, if there any.
substance of the contractual terms of the instruments.
The measurement of deferred tax reflects the tax consequences
Deposits, investment securities issued and subordinated that would follow from the manner in which the Group expects,
liabilities are initially measured at fair value minus at the reporting date, to recover or settle the carrying amount
incremental direct transaction costs and subsequently of its assets and liabilities. For this purpose, the carrying amount
measured at their amortised cost using the effective of investment property measured at fair value is presumed to
interest method. Except where the Group derecognizes be recovered through sale and the Group has not rebutted this
liabilities at fair value through profit or loss. presumption.
Deferred tax assets and liabilities are offset only if certain criteria
are met.

54 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

7 Summary of significant accounting policies (continued) Equity settled options or share awards are calculated at the
time of grant based on the fair value of the equity instruments
7.26 Employee benefits granted. The grant date fair value is not subject to the change
of the fair value of equity instruments granted based on
Defined contribution plan market prices. In the absence of market prices, the fair value
of the instrument is estimated using an appropriate valuation
A defined contribution plan is a post - employment benefit technique, such as a binomial option pricing model.
plan under which an entity pays fixed contributions into
a separate entity and will have no legal or constructive A Share Options Reserve is maintained for the transactions
obligation to pay further amounts. Obligations for relating to share options and other share based payments;
contributions to defined contribution pension plans are
recognised as expense in profit or loss when they are due in  For equity settled share options, a credit is recognised
respect of service rendered before the end of the reporting within the Share Option Equity Reserve [which forms
period. Prepaid contributions are recognised as an asset part of retained earnings], matching the P&L charge
to the extent that a cash refund or a reduction in future for these options, together with any tax recognised
directly in equity.
payments is available.
 On exercise of the option, the share option reserve
Retirement benefits for members of staff are provided may be classified to share premium and share capital
through a defined contribution fund. if shares are issued to satisfy the award and cash is
received on settlement.
The Group contributes 10% of employees’ basic pay to

Financial statements
the defined contribution pension fund. Obligations for 7.27 Share capital and reserves
contributions to the defined contribution pension plans are
due in respect of services rendered before the end of the Incremental costs directly attributable to the issue of new
reporting period. shares are shown in equity as a deduction, net of tax, from
the proceeds.
Termination benefits
7.28 Earnings per share
Termination benefits are recognised as an expense when
the Group is demonstrably committed, without realistic The Group presents basic and diluted EPS data for its
possibility of withdrawal, to a formal detailed plan to ordinary shares. Basic EPS is calculated by dividing the profit
terminate employment before the normal retirement or loss that is attributable to ordinary shareholders of the
date. Termination benefits for voluntary redundancies are Group by the weighted-average number of ordinary shares
recognised if the Group has made an offer encouraging outstanding during the period. Diluted EPS is determined by
voluntary redundancy, it is probable that the offer will be adjusting the profit or loss that is attributable to ordinary
accepted and the number of acceptances can be estimated shareholders and the weighted-average number of ordinary
reliably. shares outstanding for the effects of all dilutive potential
ordinary shares, which comprise share options granted to
Short – term employee benefits employees.
Short-term employee benefit obligations are measured on 7.29 Statutory Reserve deposits
an undiscounted basis and are expensed as the related
service is provided. A liability is recognised for the amount Statutory deposits are held with Bank of Zambia, as a
expected to be paid under short-term cash bonus or profit- minimum reserve requirement. They are not available for the
sharing plans if the Group has a present legal or constructive Group’s daily business. The reserve represents a requirement
obligation to pay this amount as a result of past service by the Central Bank and is a per centage of the Group’s local
provided by the employee and the obligation can be and foreign currency liabilities to the public plus Vostro
estimated reliably. account balances. They are held in local currency and
foreign currency (USD).
Share based payments
ECL on these deposits arises when the balance is classified
The Group’s employees participate in a number of share with credit grading (CG) 13 due to an internal downgrade.
based payment schemes operated by Standard Chartered Plc, The exposure at default (ED), loss given default (LGD) and
the ultimate holding company of Standard Chartered Bank probability of default (PD) will all be determined based on
Zambia Plc. the prevailing fundamentals at the time of the downgrade
Participating employees are awarded ordinary shares in 7.30 Segment reporting
Standard Chartered Plc in accordance with the terms and
conditions of the relevant scheme. An operating segment is a component of the Group that
engages in business activities from which it may earn
In addition, employees have the choice of opening a three-year revenues and incur expenses, including revenues and
or five-year savings contract. Within a period of six months expenses that relate to transactions with any of the Group’s
after the third or fifth anniversary, as appropriate, employees other components. All operating segments’ operating
may purchase ordinary shares of Standard Chartered Bank Plc. results are reviewed regularly by the Group’s CEO (who
The price at which they may purchase shares is at a discount is the chief operating decision maker) to make decisions
of up to twenty per cent on the share price at the date of about resources to be allocated to the segment and assess
invitation. There are no performance conditions attached to its performance and for which discrete financial information
options granted under all employee share save schemes. is available (see note 9).

Standard Chartered — Annual Report 2020 55

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

8 Significant accounting Judgements, estimates and  financial assets that are investment securities;
assumptions  lease receivables;
 financial guarantee contracts issued; and
The preparation of the Group’s consolidated and separate  loan commitments issued.
financial statements requires management to make
judgements, estimates and assumptions that affect No impairment loss is recognised on equity investments.
the reported amount of revenues, expenses, assets and
liabilities, and the accompanying disclosures, as well as the 8.3 Going concern
disclosure of contingent liabilities. Uncertainty about these
assumptions and estimates could result in outcomes that The Group management has made an assessment of its
require a material adjustment to the carrying amount of ability to continue as a going concern and is satisfied that it
assets or liabilities affected in future periods. In the process has the resources to continue in business for the foreseeable
of applying the Group’s accounting policies, management future. Furthermore, management is not aware of any
has made the following judgements and assumptions material uncertainties that may cast significant doubt on
concerning the future and other key sources of estimation the Group’s ability to continue as a going concern. Therefore,
uncertainty at the reporting date, that have a significant risk the financial statements continue to be prepared on the
of causing a material adjustment to the carrying amounts going concern basis
of assets and liabilities within the next financial year.
Despite the unpredictability of the potential impact of the
Estimates and underlying assumptions are reviewed on outbreak of COVID-19 Pandemic, the Group has remained
an ongoing basis. Revisions to estimates are recognised liquid throughout the year with sufficient cash to meet
prospectively. its day-to-day needs. The Group’s liquidity ratios have
remained above the required minimum and there has been
8.1 Judgements heightened observance of the liquidity levels in order not to
fall below the requirements. Through various governance
Information about judgments made in applying accounting forums, the Group has ensured that any emerging risks are
policies that have the most significant effects on the identified, discussed and mitigating actions put in place in
amounts recognised in the consolidated and separate order to preserve the operations of the Group. The Group’s
financial statements is included in the following notes. capital ratios have equally remained above the minimum of
10% set by the regulator, a clear sign of the Group’s resilience
 Note 45: establishing the criteria for determining and keenness in ensuring that both clients and the Group
whether credit risk on the financial asset has increased are protected from the effects of risks that might emerge as
significantly since initial recognition, determining a result of the pandemic.
methodology for incorporating forward-looking
information into measurement of Expected Credit Loss 8.4 Fair value of financial instruments
(ECL) and selection and approval of models used to
measure ECL. The fair value of financial instruments is the price that would
 Notes 7.9: classification of financial assets: assessment be received to sell an asset or paid to transfer a liability in an
of the business model within which the assets are held orderly transaction in the principal (or most advantageous)
and assessment of whether the contractual terms of market at the measurement date under current market
the financial asset are SPPI on the principal amount conditions (i.e., an exit price) regardless of whether that
outstanding. price is directly observable or estimated using another
valuation technique. When the fair values of financial
8.2 Assumptions and estimation uncertainties assets and financial liabilities recorded in the statement of
financial position cannot be derived from active markets,
Information about assumption and estimation uncertainties they are determined using a variety of valuation techniques
that have significant risk requiring a material adjustment in that include the use of valuation models. The inputs to
year ended 31 December 2020 is issued in following notes: these models are taken from observable markets where
possible, but where this is not feasible, estimation is required
 Note 7.13: impairment of financial instruments: in establishing fair values. Judgments and estimates include
determining inputs into the ECL measurement considerations of liquidity and model inputs related to items
model, including key assumptions used in estimating such as credit risk (both own and counterparty), funding
recoverable cash flows and incorporation of forward- value adjustments, correlation and volatility.
looking information.
 Note 7.7: measurement of the fair value of financial 8.5 Deferred tax assets
instruments with significant unobservable inputs.
 Note 7.25: recognition of deferred tax assets: availability Deferred tax assets are recognised in respect of tax losses to
of future taxable profits against which to carry-forward the extent that it is probable that future taxable profit will
tax losses can be used. be available against which the tax losses can be utilised.
 Note 33: impairment testing or CGU’s containing Although in Zambia tax losses can only be utilised for 5
goodwill; key assumptions underlying recoverable years, judgement is required to determine the amount of
amounts deferred tax assets that can be recognised, based on the
 Note 7.24: recognition and measurement of likely timing and level of future taxable profits, together with
contingencies: key assumptions about the likelihood future tax-planning strategies.
magnitude of an outflow of resources.

The Group recognises loss allowances for ECL on the

following financial instruments that are not measured at
FVTPL:

56 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

8 Significant accounting Judgements, estimates and both the staff from Standard House and Northend Cairo
assumptions (continued) road. The old buildings including the equipment, furniture
and fittings are classified as assets held for sale. The Board
8.6 Provisions and other contingent liabilities. considered the buildings and the equipment, furniture and
The Group operates in a regulatory and legal environment fittings to meet the criteria to be classified as held for sale
that, by nature, has a heightened element of litigation for the following reasons:
risk inherent to its operations. As a result, it is involved in
Ÿ Both buildings and the equipment, furniture and fittings
various litigation, arbitration and regulatory investigations
are available for immediate sale and can be sold to the
and proceedings both in Zambia and in other jurisdictions,
buyer in their current condition
arising in the ordinary course of the Group’s business.
Ÿ The actions to complete the sale were initiated and
When the Group can reliably measure the outflow of expected to be completed within one year from the
economic benefits in relation to a specific case and date of initial classification
considers such outflows to be probable, the Group records a Ÿ Potential buyers for the buildings have been identified
provision against the case. Where the probability of outflow and negotiations as at the reporting date are at an
is considered to be remote, or probable, but a reliable advanced stage
estimate cannot be made, a contingent liability is disclosed. Ÿ The shareholders approved the plan to sell on 28
However, when the Group is of the opinion that disclosing February 2020
these estimates on a case-by-case basis would prejudice
their outcome, then the Group does not include detailed, For more details on the assets held for sale, refer to Note 32.

Financial statements
case-specific disclosers in its financial statements.
9 Segment information
Given the subjectivity and uncertainty of determining the
probability and amount of losses, the Group takes into a. Basis for segmentation
account a number of factors including legal advice, the
The Group manages and reports its business through three
stage of the matter and historical evidence from similar
main strategic business units. These operating units offer
incidents. Significant judgement is required to conclude on
different products and services and are managed as separate
these estimates.
segments of the business for purposes of internal reporting. The
8.7 Assets held for sale results of the units segments are reviewed on a monthly basis by
the Chief Executive Officer. The following summary describes
On 11 February 2020, the Board of Directors announced its the operations of each of the Group’s reportable segments:
decision to relocate to the new Head Office located at Stand
4642, Corner of Mwaimwena Road and Addis Ababa Drive,
Lusaka, a newly constructed building which accommodate

Corporate Includes the Group’s trading, corporate finance activities, loans, trade finance, cash management, deposits and other
and transactions with corporate customers. The segment also includes financial markets which is the Treasury unit which
Institutional undertakes the Group’s management and centralized risk management activities through borrowings, issue of investment
Banking securities, use of derivatives for risk management purposes and investing in liquid assets such as short term placements and
corporate government securities.

The Treasury arm of Financial Markets is disclosed separately as Other Banking. A significant portion of income under Other
Banking comes from interest income on Investment Securities. .
Retail Includes three client segments namely; Personal, Priority and Business Clients. The segment provides Current Accounts,
Banking (RB) Savings Accounts, Term deposits, Personal Installment Loans, Mortgages, Trade Finance, Overdraft and Business Loans (for
Business Clients that have annual turnover of K 64 million and below). Consumer, Private and Business Banking also provide
Bancassurance, Investment services and Foreign currency services. RB Clients manages the entire distribution network for
the bank which includes various client touch points such as branches, mobile banking, online Banking and the client contact
center
Commercial The Commercial Banking segment manages mid-sized companies that fall between the Consumer, Private and Business
Banking Banking and Corporate and Institutional Banking. The sector is the engine room that drives economic growth across all
economies globally and offers clients with a different value proposition.

Segment capital expenditure is the total cost incurred during the period to acquire property and equipment.
The Group only operates in Zambia.

Standard Chartered — Annual Report 2020 57

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

9 Segment information (continued)

b. Profit segments

Group Corporate &

institutional Commercial Retail Other
Banking Banking Banking banking Total
2020 Note K’000 K’000 K’000 K’000 K’000

External revenue
Interest revenue calculated using the
effective interest method 10 90,635 22,642 376,364 688,561 1,178,202
Interest expense calculated using the
effective interest method 11 (109,588) (2,420) (244,410) (64,971) (421,389)

Net Interest income (18,953) 20,222 131,954 623,590 756,813

Fee and commission income 12 21,559 11,044 158,863 (1,723) 189,743

Fee and commission expense 12 (5,954) (4) (28,281) (3,508) (37,747)

Net Fee and commission income 15,605 11,040 130,582 (5,231) 151,996

Net trading income 13 18,741 24,536 58,493 44,633 146,403

Credit loss expense on financial
assets 14 (159,993) 14,558 (4,483) (143,334) (293,252)
Net income from financial assets at
fair value through profit or loss 15 110,418 - - - 110,418

Other operating income 16 (4,132) - 480 (866) (4,518)

Total segment income (38,314) 70,356 317,026 518,792 867,860

Operating expenses 18 (313,122) (18,306) (456,591) (101,679) (889,698)

Other Impairment 14.2 (13,476) - (7,060) - (20,536)

Segment (loss)/profit before
taxation (364,912) 52,050 (146,625) 417,113 (42,374)

Income tax expense 19a - - - (5,704) (5,704)

(Loss)/Profit for the year (364,912) 52,050 (146,625) 411,409 (48,078)

Total Assets 1,503,467 151,970 1,226,808 11,304,625 14,186,870

Total Liabilities 5,999,960 348,265 5,561,717 1,466,513 13,376,455

58 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

9 Segment information (continued)

b. Profit segments (continued)

Group Corporate &
institutional Commercial Retail Other
Banking Banking Banking Banking Total

2019 Note K’000 K’000 K’000 K’000 K’000

External revenue
Interest revenue calculated using the
effective interest method 10 75,794 72,812 415,933 505,777 1,070,316
Interest expense calculated using the
effective interest method 11 (159,843) (6,396) (160,118) (25,242) (351,599)

Net interest income (84,049) 66,416 255,815 480,535 718,717

Fee and commission income 12 18,904 20,493 164,411 - 203,808

Fee and commission expense 12 (2,026) (859) (23,172) (4,898) (30,954)

Financial statements
Net fee and commission income 16,878 19,634 141,240 (4,898) 172,854

Net trading income 13 88,145 19,179 47,542 (236) 154,630

Credit loss expense on financial assets 14 20,859 (54,512) (111,908) (158,169) (303,730)
Net income from financial assets at
fair value through profit or loss 15 25,207 - - - 25,207

Other income 16 - - - 12,937 12,937

Total segment income 67,040 50,717 332,688 330,170 780,615

Operating expenses 18 (217,950) (83,109) (360,131) (53,638) (714,828)

Other Impairment 14.2 - - - - -

Segment (Loss)/Profit before taxation (150,910) (32,392) (27,442) 276,531 65,787

Income tax expense 19a - - - - (53,501)

Profit for the year - - - - 12,286

Total assets 997,313 1,080,608 1,537,293 7,452,225 11,067,439

Total Liabilities 4,957,749 945,527 3,727,433 693,905 10,324,614

Standard Chartered — Annual Report 2020 59

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

9 Segment information (continued)

b. Profit segments (continued)

Bank
Corporate &
institutional Commercial
Banking Banking Retail Banking Other banking Total

2020 Note K’000 K’000 K’000 K’000 K’000

External revenue
Interest revenue calculated using
the effective interest method 10 90,635 22,642 376,364 688,561 1,178,202
Interest expense calculated using
the effective interest method 11 (109,588) (2,420) (244,410) (64,971) (421,389)
Net Interest income (18,953) 20,222 131,954 623,590 756,813
Fee and commission income 12 21,559 11,044 158,863 (1,723) 189,743
Fee and commission expense 12 (5,954) (4) (28,281) (3,508) (37,747)
Net Fee and commission income 15,605 11,040 130,582 (5,231) 151,996
Net trading income 13 18,741 24,536 58,493 44,633 146,403
Credit loss expense on financial
assets 14 (159,993) 14,558 (4,483) (143,334) (293,252)
Net income from financial assets
at fair value through profit or loss 15 110,418 - - - 110,418

Other Income 16 (4,132) - 480 (866) (4,518)

Total segment income (38,314) 70,356 317,026 518,792 867,860
Operating expenses 18 (313,122) (18,306) (456,591) (101,679) (889,698)
Other Impairment 14.2 (13,476) - (7,060) - (20,536)
Segment (Loss)/ Profit before
taxation (364,912) 52,050 (146,625) 417,113 (42,374)
Income tax expense 19a - - - (5,704) (5,704)
(Loss) /Profit for the year (364,912) 52,050 (146,625) 411,409 (48,078)
Total Assets 1,503,472 151,970 1,226,808 11,304,625 14,186,875
Total Liabilities 5,999,965 348,265 5,561,717 1,466,513 13,376,460

60 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

9 Segment information (continued)

b. Profit segments (continued)

Bank
Corporate &
institutional Commercial Retail Other
Banking Banking Banking banking Total
2019 Note K’000 K’000 K’000 K’000 K’000
External revenue
Interest revenue calculated using the effective
interest method 10 75,794 72,812 415,933 505,777 1,070,316
Interest expense calculated using the effective
interest method 11 (159,843) (6,396) (160,118) (25,242) (351,599)
Net interest income (84,049) 66,416 255,815 480,535 718,717

Financial statements
Fee and commission income 12 18,904 20,493 164,411 - 203,808
Fee and commission expense 12 (2,026) (859) (23,171) (4,898) (30,954)
Net fee and commission income 16,878 19,634 141,240 (4,898) 172,854
Net trading income 13 88,145 19,179 47,542 (236) 154,630
Credit loss expense on financial assets 14 20,859 (54,512) (111,908) (158,169) (303,730)
Net income from financial assets at fair value
through profit or loss 15 25,207 - - - 25,207
Other income 16 - - - 12,937 12,937
Total segment income 67,040 50,717 332,689 330,169 780,615
Operating expenses 18 (217,950) (83,109) (360,131) (53,638) (714,828)
Other Impairment 14.2 - - - - -

Segment (Loss)/Profit before taxation (150,910) (32,392) (27,442) 276,531 65,787

Income tax expense 19a - - - - (53,501)
Profit for the year - - - - 12,286

Total assets 997,318 1,080,608 1,537,293 7,452,225 11,067,444

Total Liabilities 4,957,754 945,527 3,727,433 693,433 10,324,619

Standard Chartered — Annual Report 2020 61

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

10 Interest income
Group and Bank
2020 2019
K’000 K’000

Cash and short term funds 27,952 78,439

Investment securities 652,687 430,228
Loans and advances 497,563 561,649
Total interest income calculated using the effective interest rate 1,178,202 1,070,316
Interest income includes interest on impaired loans and advances of K68,734 (2019 K600,000).

11 Interest expense

Group and Bank

2020 2019
K’000 K’000

Deposits from customers 391,758 326,018

Placements 26,017 22,537
Subordinated loan Capital 3,614 3,044
Total interest expense 421,389 351,599

12 Net fee and commission income

Group and Bank

2020 2019
K’000 K’000

Consumer, Private and Business banking customer fees 158,863 164,411

CIB credit related fees 21,559 18,904
Commercial banking 9,321 20,493
Total fee and commission income 189,743 203,808
Consumer, Private and Business banking fees and commission expenses (28,281) (23,334)
CIB credit customer fees (5,954) (2,027)
Commercial banking fees and commission expenses (4) (858)
Other banking (3,508) (4,735)
Total fee and commission expenses (37,747) (30,954)
Net fee and commission income 151,996 172,854

Performance obligations and revenue recognition policies

Fee and commission income from contracts with customers is measured based on the consideration specified in a contract with a customer.
The Group recognises revenue when it transfers control over a service to a customer.
The following table provides information about the nature and timing of the satisfaction of performance obligations in contracts with
customers, including significant payment terms and the related revenue recognition policies.

Type of service Nature and timing of satisfaction of performance obligations, including signifi- Revenue recognition under IFRS 15
cant payment terms

Consumer and The Group provides banking services to consumer, commercial and corporate Revenue from account service and
corporate bank- customers, including account management, provision of overdraft facilities, foreign servicing fees is recognised over time as
ing service credit currency transactions, credit card and servicing fees. the services are provided.
customer fees Fees for ongoing account management are charged to the customer’s account on
a monthly basis. The Group sets the rates separately for consumer and corporate Revenue related to transactions is
banking Commercial customers an annual basis. recognised at the point in time when the
transaction takes place.
Transaction-based fees for interchange, foreign currency transactions and over-
drafts are charged to the customer’s account when the transaction takes place.
Servicing fees are charged on a monthly basis and are based on fixed rates re-
viewed annually by the Group.

62 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

13 Net trading income

Group and Bank

2020 2019
K’000 K’000
Foreign currency transaction gains less losses 149,108 138,053
(Losses)/gains arising from dealing securities (50,418) 16,338
98,690 154,391

Dealing profits 328 239

Realised gains on disposal of investment securities held at FVOCI 47,385 -
Net trading income 146,403 154,630

14 Credit Loss
14.1 Impairment of Financial Instruments

Financial statements
Group and Bank
Stage 1 Stage 2 Stage 3 Total
2020 K’000 K’000 K’000 K’000
Due from Banks - - - -
Statutory Reserves 67,629 - - 67,629
Loans and advances to customers (953) 143,637 1,222 143,906
Debt instruments - 75,703 - 75,703
Financial Guarantees 457 1,907 - 2,364
Loan commitments 69,457 (65,092) (715) 3,650
Total Impairment loss 136,590 156,155 507 293,252
Credit amounts in the profit and loss stagewise amounts are releases while debits are charges.

Group and Bank

Stage 1 Stage 2 Stage 3 Total

2019 K’000 K’000 K’000 K’000
Due from Banks (20) - - (20)
Loans and advances to customers 17,335 90,828 37,349 145,512
Debt instruments 173,686 (15,517) - 158,169
Financial Guarantees 244 (344) - (100)
Loan commitments 3,709 (3,465) 75 (169)
Total Impairment loss 194,954 71,502 37,274 303,730

14.2 Other Impairment

2020 2019
K’000 K’000

Software 7,060 -
Goodwill 13,476 -
Total 20,536 -

Standard Chartered — Annual Report 2020 63

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

15 Net gains on financial instruments at fair value through profit or loss

Group and Bank
2020 2019
K’000 K’000

Government bonds 110,418 25,207

16 Other operating income

Group and Bank
2020 2019
K’000 K’000

Gain on disposal of property and equipment 1,114 7,835

Other (loss)/income (5,632) 5,102
Total other (loss)/income (4,518) 12,937

The loss largely relates to prior year operating event on account of non-funded income.

17 Personnel expenses
Group and Bank
2020 2019
K’000 K’000

Wages and salaries 169,603 203,898

Social security costs 5,418 5,419
Pension costs - Defined contribution pension plan (Note 7.26) 12,938 13,828
Other staff costs 65,127 59,866
Equity settled share-based payment transactions (492) 872
Redundancy and severance 78,073 44,782
Total 330,667 328,665
Other staff costs include training, travel costs and other staff related costs.

(a) Share-based payment transactions

The holding company (Standard Chartered Plc) operates a number of share based payments schemes for its directors and
employees in which employees of Standard Chartered Bank Zambia Plc participate. These schemes are as outlined below. Through
a recharge arrangement Standard Chartered Bank Zambia Plc reimburses the group for grant date fair value. The amount charged
to the statement of changes in equity during the year was (K492, 000) (2019: K872, 000) and the corresponding amount is in
liabilities. The holding company has the obligation to deliver to the respective participants the Standard Chartered Plc’s ordinary
shares under the various schemes.

The amount reported in other comprehensive income are as follows:

Group and Bank
2020 2019
K’000 K’000

Restricted share scheme 677 655

Share save scheme (1,169) 217
Total expense recognised as personnel expenses (492) 872

(b) Restricted share scheme

The restricted share scheme (RSS) is used as incentive plan to motivate and retain high performing staff at any level of the
organisation. It is also used as a vehicle for deferring part of bonuses of certain employees. 50% of the award vests two years after
the date of grant and the balance after three years. The awards can be exercised within seven years of the grant date. The value
of shares awarded in any year to any individual may not exceed two times their basic annual salary. The remaining life of the
scheme is eight years. For awards, the fair value is based on the market value less an adjustment to take into account the expected
dividends over the vesting period. The shares awarded are for SCB Group PLC.

64 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

17 Personnel expenses (continued)

(b) Restricted share scheme (continued)
The number of share options is as follows:

Group and Bank

Number of
options Number of options
2020 2019

Outstanding at the beginning of the reporting period 15,583 10,944

Exercised during the year (4,926) (3,313)
Granted during the year 4,563 7,952
Outstanding at 31 December 15,220 15,583
Exercisable at 31 December 97 97

(c) Share save scheme

Under the share save scheme, employees have the choice of opening a three-year or five-year savings contract. Within a period of

Financial statements
six months after the third or fifth anniversary, as appropriate, employees may purchase ordinary shares in the holding company or
take all their money in cash. The price at which they may purchase shares is at a discount of up to 20 per cent of the share price at
the date of invitation. There are no performance conditions attached to options granted under the employee share save scheme.
Options are valued using a binomial option-pricing model.

The number of share options is as follows:

Group and Bank
Number of Number of
options options
2020 2019
Outstanding at the beginning of the reporting period 27,465 33,256
Exercised during the year (392) (1,970)
Expired during the year (12,838) (19,111)
Granted during the year 11,970 15,290
Outstanding at 31 December 26,205 27,465
Exercisable at 31 December 1,308 420

The closing share price as at 31 December 2020 was GBP712.4.

18 Operating expenses

Group and Bank

2020 2019
K’000 K’000

Depreciation of property and equipment 63,480 43,779

Premises and equipment costs 114,175 61,586
Release of lease prepayment for leasehold land 13 14
Communication expenses 15,966 13,053
Recharges from group companies 165,730 109,295
Advertising and marketing 15,630 14,443
Statutory audit of SCB 4,183 2,789
Non-audit services 404 261
Finance lease cost 8,828 3,848
Regulatory fees 21,412 17,128
Legal and professional fees 65,350 44,346
Other operating expenses 83,860 75,621
Total 559,031 386,163
Included in other operating expenses is travel costs, consultancy costs, security services, insurance and donations.

Standard Chartered — Annual Report 2020 65

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

19 Income tax expense

Group and Bank
2020 2019
K’000 K’000
a) Current tax expense
Current tax charge 149,486 147,402
Under provision in prior years 3,910 12,567
153,396 159,969
Deferred tax
Origination and reversal of temporary difference (139,363) (106,468)
Adjustments in respect to prior years (8,329) -
Total income tax (credit)/expense 5,704 53,501

The income tax (credit)/expense for the current year is subject to agreement with the Zambia Revenue Authority.

b) Reconciliation of effective tax rate:

Group and Bank

2020 2019
K’000 K’000
(Loss)/Profit before tax % (42,374) % 65,787
Tax calculated at the tax rate of 35% (2019: 35%): 35 (14,831) 35 23,026
Under provision in prior years -9 3,910 19 12,567
Adjustments in respect to prior years 20 (8,329) - -
Non-deductible expenses -6 24,954 27 17,908
Total income tax (credit)/expense in profit or loss 40 5,704 81 53,501

c) Net fair value reserves

The fair value reserve comprises the fair value movement of financial assets classified as fair value through other comprehensive
income FVOCI (previously as available-for-sale). Gains and losses including Expected Credit Loss (ECL) are deferred to this reserve
until such time as the underlying asset is sold. The amount below show the fair value reserves and their relate taxes.

Group and Bank

2020 2019

Tax Net Tax Net

Before tax effect of tax Before tax effect of tax
K’000 K’000 K’000 K’000 K’000 K’000
FVOCI investment securities 177,950 (62,282) 115,668 187,675 (65,686) 121,989

d) Current income tax movement in the statement of financial position:

Group and Bank
2020 2019
K’000 K’000
Current tax liabilities at the beginning of the year (43,283) 31,442
Current income tax charge 149,486 147,402
Tax Refund 39,372 -
Payments made during the year (127,358) (234,694)
Under provision in prior years 3,910 12,567

Current tax (assets)/liabilities (22,127) (43,283)

Included in payments made during the year is advance income tax of K55,449,404 (2019: K63,055,792 000) on withholding tax
on investment securities withheld at source.

66 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

19 Income tax expense (continued)

e) Deferred taxation
Deferred taxation is calculated on all temporary differences using an effective tax rate of 35% (2019: 35%). Deferred tax assets
and liabilities are attributable to the following:

Group and Bank Group and Bank

2020 2019
Assets Liabilities Net Assets Liabilities Net
K’000 K’000 K’000 K’000 K’000 K’000
Property and equipment 4,703 - 4,703 962 - 962
Other provisions 60,674 - 60,674 32,371 - 32,371
FVOCI investment securities - (132,644) (132,644) - (70,362) (70,362)
Allowance for loan losses 116,659 - 116,659 59,415 - 59,415
Right Of Use Asset (IFRS 16 Leases) 4,762 - 4,762 2,553 - 2,553
Impairment on investment securities 87,883 - 87,883 55,358 - 55,358

Financial statements
Impairment on statutory reserves 23,670 - 23,670 - - -
298,351 (132,644) 165,707 150,659 (70,362) 80,297

2020 Group and Bank

Opening Recognised Recognised

Balance in profit or loss in equity Closing Balance
K’000 K’000 K’000 K’000

Property and equipment 962 3,741 - 4,703

Other provisions 32,371 28,303 - 60,674
FVOCI investment securities (70,362) - (62,282) (132,644)
Allowance for loan losses 59,415 57,244 - 116,659
Right Of Use Asset (IFRS 16 Leases) 2,553 2,209 - 4,762
Impairment on Investment securities 55,388 32,525 - 87,883
Impairment on statutory reserves - 23,670 - 23,670
80,297 147,692 (62,282) 165,707

Included in other provisions are provisions and other liabilities.

2019 Group and Bank

Opening Recognised Recognised in Closing

Balance in profit or loss equity Balance
K’000 K’000 K’000 K’000
Property and equipment (660) 1,622 - 962
Other provisions 22,142 10,229 - 32,371
FVOCI investment securities (4,676) - (65,686) (70,362)
Allowance for loan losses 22,314 37,101 - 59,415
Right Of Use Asset (IFRS 16 Leases) - 2,553 - 2,553
Impairment on Investment securities - 55,358 - 55,358
Intangible assets 395 (395) - -
39,515 106,468 (65,686) 80,297

Standard Chartered — Annual Report 2020 67

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

20 (Loss)/Earnings per share

Group and Bank Group and Bank

2020 2019
Weighted Weighted Per
average Per average Share
Number of share Number of amount
Loss shares amount Profit shares Kwacha

K’000 ’000 Kwacha K’000 ’000 K’000

Basic and diluted (Loss)/earnings (48,078) 1,666,981 (0.029) 12,286 1,666,981 0.007

The calculation of the basic earnings per share is based on the net profit attributable to ordinary shareholders ((loss)/profit after
taxation) divided by the weighted average number of ordinary shares in issue during the year. There were no dilutive potential
ordinary shares at 31 December 2020 (2019: nil) and basic earnings per share equals diluted earnings per share with no reconciling
items.
21 Dividends payable
Group and Bank
2020 2019
K’000 K’000
Balance at 1 January 5,146 4,572
No interim dividends for 2020 and 2019 were declared (Dividend paid in 2019 related
to 2018 final dividend for minority shareholders) - (5,001)
Less: dividends paid during the year 10% minority share - 5,001
Dividend claims (250) 574
Balance at 31 December 4,896 5,146
Dividends are recognised in the period in which they are declared. The directors did not declare any dividend for 2020 (2019:K
Nil)
22 Cash on hand and balances at Bank of Zambia
Group and Bank
2020 2019
K’000 K’000
Cash on hand 841,095 414,805
Statutory deposit 1,254,796 904,378
Total cash on hand and bank balances at Bank of Zambia 2,095,891 1,319,183
Clearing account with Bank of Zambia - 263,482
2,095,891 1,582,665
The statutory deposit held with Bank of Zambia, as a minimum reserve requirement, is not available for the Group’s daily business.
The reserve represents a requirement by the Central Bank and is a per centage of the Group’s local and foreign currency liabilities
to the public plus Vostro account balances. At 31 December 2020 the per centage was 9% (2019: 9%).

22.1 Expected Credit Losses no statutory reserve deposits at Bank of Zambia

See accounting policy 7.29

2020 2019
Stage 1 Stage 2 Total Stage 1 Stage 2 Total
K’000 K’000 K’000 K’000 K’000 K’000
ECL on reserves
Balance at 1 January - - - - - -
New financial assets originated or purchased - 67,629 67,629 - - -
Net remeasurement of loss allowance - - - - - -
Foreign exchange movements - - - - - -
Balance at 31 December - 67,629 67,629 - - -
The continued downgrading of the Country by external Rating Agencies had an adverse effect on the Bank’s internal Country rating
resulting in the Bank taking on significantly higher Credit Loss provisions including ECL on statutory reserve deposits.

68 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

23 Loans and advances to banks

See accounting policy note 7.9.1

There were no loans and advances to banks as at 31 December 2020.

2020 2019
K’000 K’000

Loans and advances to local banks - 102,000

Less impairment allowance - (1)
Total - 101,999

24 Pledged assets
Group and Bank
2020 2019
K’000 K’000

Treasury bills 100,000 100,000

Financial statements
The pledged assets presented in the table above are those financial assets that may be repledged or resold by counterparties.
These transactions are conducted under terms that are usual and customary to standard lending and securities borrowing and
lending activities. These treasury bills are held as collateral at the Zambia Electronic Clearing House.

25 Investment in subsidiary company

Bank
2020 2019
Ownership K’000 K’000

Standard Chartered Nominees Zambia Limited 100% 5 5

These are equity investments in private companies that do not have a quoted market price in an active market and are carried at cost less
impairment. No dividends are expected from them in the foreseeable future and consequently there are no determinable future cash flows.
It is not possible to determine the possible range of estimates within which the fair value of these investments is likely to lie.
There are no significant restrictions on the ability of subsidiaries to transfer funds to the Group in form of cash dividends or repayments of
loans or advances.
In terms of the Zambia Companies Act, 2017, No. 10 the name and address of the subsidiaries’ principal office is: Standard Chartered
Nominees Zambia Limited domiciled at Standard Chartered House, Stand No 4642, corner of Mwaimwena Road and Addis ababa drive,
Lusaka.

Standard Chartered — Annual Report 2020 69

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

26 Financial assets and financial liabilities

Classification of financial assets and financial liabilities

See accounting policies in note 7.9.

The following table provides a reconciliation between line items in the statement of financial position and categories of financial
instruments
Group and Bank
Mandatorily at Total carrying
FVTPL Amortised Cost FVOCI amount
2020 Note K’000 K’000 K’000 K’000

Financial Assets
Cash and cash equivalents 42 - 5,251,892 - 5,251,892
Cash on hand and balances with Bank of
Zambia 22 - 2,095,891 - 2,095,891
Pledged assets 24 - - 100,000 100,000

Investment securities 28 29,050 - 3,513,041 3,542,091

Derivative financial instruments 27 4,590 - - 4,590
Loans and advances to banks 23 - - - -
Loans and advances to customers 29 - 2,410,457 - 2,410,457
Other receivable - 215,775 - 215,775
Total 33,640 9,974,015 3,613,041 13,620,696
Financial Liabilities
Amounts payable to group banks 42 - 325,740 - 325,740
Amounts payable to non-group banks 42 - 21,266 - 21,266
Deposits from customers 34 - 12,214,521 - 12,214,521
Derivative financial instruments 27 8,548 - - 8,548
Subordinated liabilities 38 - 84,680 - 84,680
Other Payables - 292,740 - 292,740
Total 8,548 12,938,947 - 12,947,495

70 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

26 Financial assets and financial liabilities (continued)

Classification of financial assets and financial liabilities (continued)

Group and Bank

Mandatorily at Total carrying
FVTPL Amortised cost FVOCI amount
2019 Note K’000 K’000 K’000 K’000

Financial Assets

Cash and cash equivalents 42 - 3,381,132 - 3,381,132

Cash on hand and balances with Bank of Zambia 22 - 1,582,665 - 1,582,665

Pledged assets 24 - - 100,000 100,000
Investment securities 28 67,984 - 1,981,431 2,049,415
Derivative financial instruments 27 45,273 - - 45,273
Loans and advances to banks 23 - 101,999 - 101,999

Financial statements
Loans and advances to customers 29 - 3,131,664 - 3,131,664
Other receivables - 119,738 - 119,738
Total 113,257 8,317,198 2,081,431 10,511,886
Financial Liabilities
Amounts payable to group banks 42 - 229,489 - 229,489
Amounts payable to non-group banks 42 - 12,297 - 12,297
Deposits from customers 34 - 9,289,297 - 9,289,297
Derivative financial instruments 27 41,740 - - 41,740
Subordinated liabilities 38 - 56,600 - 56,600
Other Payables - 381,145 - 381,145
Total 41,740 9,968,828 - 10,010,568

Included in other receivables are overdrawn suspense accounts, transfer pricing entries and other suspense receivable accounts while other
payables include accruals, lease liabilities and unclaimed cashier orders.

27 Derivative financial instruments

The table below analyses the positive and negative fair values of the Bank’s derivative financial instruments. All fair value movements on
derivative financial instruments are recognized in the profit or loss.

Group and Bank Group and Bank

2020 2019
Assets Liabilities Assets Liabilities
K’000 K’000 K’000 K’000
Interest rate swap 1,659 1,010 7,349 7,199
Cross currency swap 2,931 7,538 37,924 34,541

Total 4,590 8,548 45,273 41,740

Standard Chartered — Annual Report 2020 71

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

28 Investment securities
Group and Bank
2020 2019
K’000 K’000

Investment securities at fair value through profit or loss 29,050 67,984

FVOCI investment securities 3,513,041 1,981,431

Total 3,542,091 2,049,415

Group and Bank Group and Bank

Fair value through profit or
2020 2019
loss

Treasury Government Treasury Government

bills bonds Total bills bonds Total
K’000 K ’000 K ’000 K ’000 K ’000 K ’000

Of which mature:

Within one year - - - - - -

Within one to five years - 29,050 - - 67,984 67,984

Total - 29,050 - - 67,984 67,984

Group and Bank Group and Bank

2020 2019
Fair value through other
comprehensive income
Equity
shares and Equity shares
Treasury trade Government Treasury and trade Government
Bills Investments bonds Total Bills Investments bonds Total
K’000 K’000 K’000 K’000 K’000 K’000 K’000 K’000

Of which mature:

Within one year 3,413,665 - - 3,413,665 1,050,484 - - 1,050,484

Within one to five years - - 98,868 98,868 - - 930,439 930,439
More than five years - 508 - 508 - 508 - 508
Total 3,413,665 508 98,868 3,513,041 1,050,484 508 930,439 1,981,431

72 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

28 Investment securities (continued)

28.1 Investment securities at FVOCI

Group and Bank

Stage 1 Stage 2 Stage 3 Total

31 December 2020 K’000 K’000 K’000 K’000

Assets

Grade 1-11: Low-fair risk - 3,542,091 - 3,542,091

Grade 12: Substandard - - - -

Grade:13 Doubtful - - - -
Grade 14 Loss - - - -

Financial statements
Carrying amount 3,542,091 3,542,091

Loss allowance - (251,099) - (251,099)

- 3,290,992 - 3,290,992

Stage 1 Stage 2 Stage 3 Total

31 December 2019 K’000 K’000 K’000 K’000

Assets

Grade 1-11: Low-fair risk 1,880,123 169,292 - 2,049,415

Grade 12: Substandard - - - -

Grade:13 Doubtful
Grade 14 Loss - - - -

Carrying amount 1,880,123 169,292 2,049,415

Loss allowance (145,022) (30,374) (175,396)

1,735,101 138,918 - 1,874,019

Standard Chartered — Annual Report 2020 73

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

28 Investment securities (continued)

28.2 Impairment allowance for investment securities

Stage 1 Stage 2 Stage 3 Total

2020 K’000 K’000 K’000 K’000

Investment securities at FVOCI

Balance at 1 January 145,022 30,374 - 175,396

- Transfer to Stage 1 - - - -

- Transfer to Stage 2 (145,022) 145,022 - -

- Transfer to Stage 3 - - - -

Net re-measurement of loss allowance - 175,396 - 175,396

-

New financial assets originated or purchased - 161,893 - 161,893

Financial assets that have been derecognised - - - -

(Write off)/recoveries - - - -

Unwind of discount -

Foreign exchange movements - (86,190) - (86,190)

-

Balance as at 31st December 2020 - 251,099 - 251,099

Stage 1 Stage 2 Stage 3 Total

2019 K’000 K’000 K’000 K’000

Investment securities at FVOCI

Balance at 1 January - (17,228) - (17,228)

- Transfer to Stage 1 23,043 (23,043) - -

- Transfer to Stage 2 (36,982) 36,982 - -

- Transfer to Stage 3 - - - -

Net re-measurement of loss allowance (13,939) (3,289) - (17,228)

-

New financial assets originated or purchased 147,642 35,037 - 182,679

Financial assets that have been derecognised - - - -

(Write off)/recoveries - 14,143 - 14,143

Foreign exchange movements 11,319 (15,517) - (4,198)

-

Balance as at 31st December 2019 145,022 30,374 - 175,396

74 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

29 Loans and advances to customers

2020 2019
K’000 K’000
Corporate Lending 1,333,245 578,792
Commercial Lending 221,221 1,156,382
Consumer Lending 1,195,138 1,583,458
2,749,604 3,318,632
Less impairment allowance (339,147) (186,968)
Total 2,410,457 3,131,664

29.1 Loans and advances to customers

Group and Bank Group and Bank

2020 2019

Financial statements
Gross Impairment Carrying Gross Impairment Carrying
amount allowance amount amount allowance amount
K’000 K’000 K’000 K’000 K’000 K’000
Consumer, Private and Business
Banking:
Mortgage lending 119,474 (1,124) 118,350 141,279 (2,296) 138,983
Personal loans 985,850 (88,216) 897,634 1,346,850 (109,639) 1,237,211
Overdrafts 89,814 (10,480) 79,334 95,329 (1,807) 93,522
1,195,138 (99,820) 1,095,318 1,583,458 (113,742) 1,469,716
Commercial Banking:
Term loans 151,560 (43,864) 107,696 892,631 (36,913) 855,718
Overdrafts 69,661 (14,454) 55,207 263,751 (27,244) 236,507
221,221 (58,318) 162,903 1,156,382 (64,157) 1,092,225
Corporate & Institutional
Banking:
Term loans 470,890 (103,474) 367,416 107,016 (3,619) 103,397
Overdrafts 862,355 (77,535) 784,820 471,775 (5,450) 466,325
1,333,245 (181,009) 1,152,236 578,791 (9,069) 569,723
Total 2,749,604 (339,147) 2,410,457 3,318,631 (186,968) 3,131,664

Standard Chartered — Annual Report 2020 75

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

29 Loans and advances to customers (continued)

29.2 Impairment for Loans and advances to customers

Group and Bank 2020 2019

Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
K’000 K’000 K’000 K’000 K’000 K’000 K’000 K’000

Loans and advances to

customers amortised cost

Balance at 1 January 19,075 116,770 51,123 186,968 19,354 34,157 10,244 63,755

- Transfer to Stage 1 225,772 (225,772) - - 43,623 (43,623) - -

- Transfer to Stage 2 (166,833) 237,194 (70,361) - (61,312) 72,014 (10,702) -

- Transfer to Stage 3 - (127,306) 127,306 - - (48,467) 48,467 -

Net re-measurement of
loss allowance 78,014 887 108,068 186,968 1,665 14,081 48,009 63,755

New financial assets

originated or purchased 155,438 175 120 155,733 54,851 - - 54,851

Financial assets that have

been derecognised (3,088) (1,446) (126,610) (131,144) (1,186) (4,946) (36,815) (42,947)

(Write off)/recoveries - - (99,567) (99,567) - - (80,177) (80,177)

Foreign exchange and

other movements (98,222) 158,039 167,340 227,157 (36,255) 107,635 120,106 191,486

Balance as at 31st
December 2020 132,142 157,654 49,351 339,147 19,075 116,770 51,123 186,968

76 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

29 Loans and advances to customers (continued)

29.2 Impairment for Loans and advances to customers (continued)

2020
Stage 1 Stage 2 Stage 3 Total
K’000 K’000 K’000 K’000
Loans and advances to customers at
amortised cost
Retail Banking customers
Balance at 1 January 17,980 84,024 11,738 113,742
- Transfer to Stage 1 190,716 (190,716) - -
- Transfer to Stage 2 (101,869) 115,406 (13,537) -
- Transfer to Stage 3 - (93,367) 93,367 -
Net remeasurement of loss allowance 106,827 (84,653) 91,568 113,742

Financial statements
New financial assets originated or
purchased 83,576 174 120 83,870
Financial assets that have been
derecognised ฀ (3,088) (1,446) (53,070) (57,604)
(Write off)/recoveries - - (30,586) (30,586)
Foreign exchange and other movements (97,943) 92,749 (4,408) (9,602)
Balance as at 31st December 2020 89,372 6,824 3,624 99,820

2019
Stage 1 Stage 2 Stage 3 Total
K’000 K’000 K’000 K’000
Loans and advances to customers at
amortised cost
Retail Banking customers
Balance at 1 January 18,632 6,241 1,586 26,459
- Transfer to Stage 1 12,438 (12,438) - -
- Transfer to Stage 2 (29,287) 34,977 (5,690) -
- Transfer to Stage 3 - (36,397) 36,397 -
Net remeasurement of loss allowance 1,783 (7,617) 32,293 26,459
New financial assets originated or purchased 31,291 - - 31,291
Financial assets that have been
derecognised (1,182) (3,411) (7,998) (12,591)
(Write off)/recoveries - - (35,515) (35,515)
Foreign exchange and other movements (13,912) 95,052 22,958 104,098
Balance as at 31st December 2019 17,980 84,024 11,738 113,742

Standard Chartered — Annual Report 2020 77

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

29 Loans and advances to customers (continued)

29.2 Impairment for Loans and advances to customers (continued)

Stage 1 Stage 2 Stage 3 Total

2020 K’000 K’000 K’000 K’000

Loans and advances to customers at amortised cost

Corporate and Institution Banking

Balance at 1 January 505 5,023 3,541 9,069
- Transfer to Stage 1 27,809 (27,809) - -
- Transfer to Stage 2 (61,553) 116,712 (55,159) -
- Transfer to Stage 3 - (12,159) 12,159 -
Net re-measurement of loss allowance (33,239) 81,767 (39,459) 9,069
New financial assets originated or purchased 68,843 1 - 68,844
Financial assets that have been derecognised - - (10,534) (10,534)
(Write off)/recoveries - - (39,076) (39,076)
Foreign exchange and other movements 7,162 66,751 78,792 152,705
Balance as at 31st December 2020 42,766 148,519 (10,277) 181,008

Stage 1 Stage 2 Stage 3 Total

2019 Note K’000 K’000 K’000 K’000
Loans and advances to customers at amortised cost
Corporate and Institution Banking
Balance at 1 January 686 26,563 768 28,017
- Transfer to Stage 1 18,132 (18,132) - -
- Transfer to Stage 2 (345) 345 - -
- Transfer to Stage 3 - (11,727) 11,727 -
Net re-measurement of loss allowance 18,473 (2,951) 12,495 28,017
New financial assets originated or purchased 4,005 - - 4,005
Financial assets that have been derecognised - - (2,424) (2,424)
(Write off)/recoveries - - (44,661) (44,661)
Foreign exchange and other movements (21,973) 7,974 38,131 24,132
Balance as at 31st December 2019 505 5,023 3,540 9,069

78 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

29 Loans and advances to customers (continued)

29.2 Impairment for Loans and advances to customers (continued)

Stage 1 Stage 2 Stage 3 Total

2020 K’000 K’000 K’000 K’000
Loans and advances to customers at amortised cost
Commercial Banking customers
Balance at 1 January 588 27,724 35,845 64,157
- Transfer to Stage 1 7,247 (7,247) - -
- Transfer to Stage 2 (3,411) 5,076 (1,665) -
- Transfer to Stage 3 - (21,780) 21,780 -
Net re-measurement of loss allowance 4,424 3,773 55,960 64,157
New financial assets originated or purchased 3,019 - - 3,019

Financial statements
Financial assets that have been derecognised - - (63,006) (63,006)
Write offs - - (29,905) (29,905)
Foreign exchange and other movements (7,442) (1,461) 92,956 84,053
Balance as at 31st December 2020 1 2,312 56,005 58,318

Stage 1 Stage 2 Stage 3 Total

2019 K’000 K’000 K’000 K’000
Loans and advances to customers at amortised cost
Commercial Banking customers
Balance at 1 January
- Transfer to Stage 1 39 1,350 7,890 9,279
- Transfer to Stage 2 13,053 (13,053) - -
- Transfer to Stage 3 (31,683) 36,695 (5,012) -
Net re-measurement of loss allowance - (343) 343 -
New financial assets originated or purchased 19,556 - - 19,556
Financial assets that have been derecognised (7) (1,535) (26,393) (27,935)
Foreign exchange and other movements (370) 4,610 59,017 63,257
Balance as at 31st December 2019 588 27,724 35,845 64,157

30 Other assets

Group and Bank

2020 2019
K’000 K’000
Prepayment of operational costs 2,101 6,230
Sundry debt 138,936 73,696
Other assets – acceptance - 179,962
Sundry and other receivables 216,148 119,738
Total 357,185 379,626

Standard Chartered — Annual Report 2020 79

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

31 Property and equipment

Group and Bank
Equipment Capital
Property and Right of and motor work-in-
improvements use assets vehicles progress Total
K’000 K’000 K’000 K’000 K’000
Cost
At 1 January 2019 17,269 - 117,240 11,057 145,566
Recognition of right of use on Initial application
of IFRS 16 - 3,787 - - 3,787
Transfer to/(from) WIP - - 499 (499) -
Additions - 67,260 10,237 8,326 85,823
Disposals (685) - (768) - (1,453)
Capitalised software reclassified to intangible
(note 33) - - (25,327) - (25,327)
Effects of movement in exchange rates (411) - - - (411)
At 31 December 2019 16,173 71,047 101,881 18,884 207,985
At 1 January 2020 16,173 71,047 101,881 18,884 207,985
Transfer to/(from) WIP - - - - -
Additions - 110,300 *30,437 * 3,950 144,687
Disposals (81) (22,128) (13,970) (17,195) (53,374)
Assets held for sale(Note 32) (12,620) - (44,661) - (57,281)
Effects of movement in exchange rates - 6,154 - - 6,154
At 31 December 2020 3,472 165,373 73,687 5,639 248,171
Accumulated depreciation and impairment losses
At 1 January 2019 5,729 - 74,863 - 80,592
Recognition of right of use on Initial application
of IFRS 16 - 86 - - 86
Depreciation Charge for the year 382 8,339 21,026 - 29,747
Disposal (229) - (213) - (442)
Capitalised software reclassified to intangible asset
(note 33) - - (21,445) - (21,445)
Effects of movement in exchange rates (430) 480 - - 50
At 31 December 2019 5,452 8,905 74,231 - 88,588
At 1 January 2020 5,452 8,905 74,231 - 88,588
Depreciation Charge for the year 372 28,192 14,324 - 42,888
Disposal (28) (8,478) (9,981) - (18,487)
Assets held for sale(Note 32) (4,397) - (43,123) - (47,520)
Effects of movement in exchange rates - 3,544 - - 3,544
At 31 December 2020 1,399 32,163 35,451 - 69,013
Carrying amounts
At 31 December 2020 2,073 133,210 38,236 5,639 179,158
At 31 December 2019 10,721 62,142 27,650 18,884 119,397

32 Held for Sale

See accounting policy 8.7
Property and improvements Equipment Fixture and fittings Total
K’000 K’000 K’000
Cost
Balance at 31 December 2020 12,620 44,661 57,281
Accumulated depreciation
Balance at 31 December 2020 4,397 43,123 47,520
Carrying amounts
Balance at 31 December 2020 8,223 1,538 9,761

Assets held for sale are carried at lower of carrying amount and fair value less cost to sale. Assets held for sale are under RB and Property.
There were no assets held for sale in 2019.

80 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

33 Intangible assets

Customer Capitalised
Relationship Goodwill software Total
Cost K’000 K’000 K’000 K’000

Balance at 1 January 2019 33,691 13,476 - 47,167

Cost transfer from property and
equipment (note 31) - - 25,327 25,327

Acquisitions - - 49,275 49,275

33,691 13,476 74,602 121,769

Balance at 1 January 2020 33,691 13,476 74,602 121,769

Acquisitions - - 58,579 58,579

Impairment (13,476) (8,645) (22,121)

Balance at 31 December 2020 33,691 - 124,536 158,227

Financial statements
Accumulated amortisation and
impairment losses

Balance at 1 January 2020 33,691 - - 33,691

Amortisation transfer from property
and equipment - - 21,445 21,445

Amortisation for the year - - 13,945 13,945

At 31 December 2019 33,691 - 35,390 69,081

Balance at 1 January 2020 33,691 - 35,390 69,081

Amortisation for the year - - 20,593 12,885

Impairment (1,585) (1,585)

Balance at 31 December 2020 33,691 - 54,398 88,089

Carrying amounts

At 31 December 2020 - - 70,138 70,138

At 31 December 2019 - 13,476 39,212 52,688

Impairment testing for cash-generating units (CGU) containing goodwill

For the purposes of impairment testing, the entire goodwill is allocated to the Corporate and Institutional Banking unit

The entire goodwill was impaired in 2020 (2019: nil)

The recoverable amounts for the Corporate and Institutional Banking CGU has been calculated based on their value in use,
determined by discounting the future cash flows to be generated from the continuing use of the CGU. Value in use was determined
in a similar manner as in 2019.

Ÿ Key assumptions used in the calculation of the value in use were the following: Cash flows were projected based on forecasts
and budgets for short/medium term growth (one to five years) using budgets compiled in November of the current year
through to the end of November for the following year. The cash flows for a further 20 years are extrapolated using a
constant growth rate of 2% (in line with the annual GDP). The long-term growth rate management used is based on a
forecast for a ten-year average GDP for country specific units; or global GDP for business specific units and is applied after
the latest approved budget (one to five years) up to twenty years. The forecast period is based on the Group’s long-term
perspective with respect to the operations of this CGU. After factoring in the above assumptions, the carrying amount was
found to be impaired hence the write off of the goodwill. This was on the back of constraints on the performance of the Group
due to challenging microeconomic fandamentals and increased ECL.

Ÿ Management uses pre-tax cash flows hence applies a pre-tax discount rate to the cash flows to nullify the double effect of
tax from the impairment calculation in determining the recoverable amount of CGU. The resultant net present value derived
based on this methodology will be like that, had post tax discount rates been applied to post tax cash flows. Since the CGU
is a business unit then Standard Chartered Bank Zambia Plc’s Weighted Average Cost of Capital (2X sub debt rate) is used
and is adjusted for systemic risk of the specific CGU.

Impairment on software relates to a Retail Banking program which was not deployed in the Africa and the Middle East markets
which resulted in an impairment.

Standard Chartered — Annual Report 2020 81

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

34 Deposits from customers

Group and Bank

2020 2019
K’000 K’000
Consumer, Private and Business Banking

Savings accounts 596,062 509,312

Term deposits 1,305,908 1,048,173
Current deposit 3,623,215 2,135,981
5,525,185 3,693,466
Corporate and Institutional Banking
Savings accounts 3,382 2,787
Term deposits 1,686,259 1,572,683
Current deposit 4,676,593 3,096,952
6,366,234 4,672,422
Commercial Banking
Savings accounts 3,047 20,485
Term deposits 15,228 53,002
Current deposits 304,827 849,922
323,102 923,409
Total 12,214,521 9,289,297

Group and Bank

2020 2019
K’000 K’000
Repayable on demand 10,451,472 7,166,181
Repayable with agreed maturity dates or periods of notice, by residual maturity:
- Three months or less 844,412 344,608
- Between three months and one year 583,030 1,700,843
- After one year 335,607 77,665
Total 12,214,521 9,289,297

Included in deposits from customers were deposits amounting to K720,034,779 (2019: K504,258,000) held as collateral
for irrevocable commitments under import letters of credit.

35 Other liabilities

Group Bank

2020 2019 2020 2019

K’000 K’000 K’000 K’000

Settlement and clearing accounts 31,362 81,315 31,362 81,315

Lease Liability (refer to note 44) 163,640 69,438 163,640 69,438

Accrued expenses 76,575 85,594 76,575 85,594

Accounts payable and sundry creditors 292,494 155,510 292,499 155,515

Unearned fee and commissions 51,903 12,932 51,903 12,932

Acceptances - 179,966 - 179,966

Total 615,974 584,755 615,979 584,760

82 Standard Chartered — Annual Report 2020
Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

36 Provisions

Operational risk Litigation Restructuring Total

K’000 K’000 K’000 K’000
Balance at 1 January 2019 - 40,673 27,426 68,099
Arising during the year 244 15,395 43,691 59,330
Utilisation - - (21,895) (21,895)
31 December 2019 244 56,068 49,222 105,534
Arising during the year - 26,943 84,864 111,807
Utilisation - (6,524) (132,114) (138,638)
31 December 2020 244 76,487 1,972 78,703
There was no unwinding of discount for the liabilities during the period under review.
Legal proceedings
There were some legal proceedings outstanding against the Group at 31 December 2020. Provisions have been made in the financial
statements in respect of such claims, based on professional advice and management’s best estimates of the settlement amount. The timing
of any outflows in the form of any settlement is uncertain.

Financial statements
Restructuring provisions relate to final payments due to employees whose positions have been declared redundant as at 31 December
Operational risk provisions exclude litigation and regulatory enforcement and include liabilities arising from the breakdown of internal
processes and controls or from external events resulting in economic outflow.

37 Financial guarantees, letters of credit and commitments

The Group provides loan commitments, letters of credit and financial guarantees for performance of customers to third parties. These
agreements have fixed limits and are generally renewable annually. Expirations are not concentrated in any period. The amounts
reflected in the table for guarantees and letters of credit represent the maximum accounting loss that would be recognised at the
reporting date if counterparties failed completely to perform as contracted. Only fees and accruals for probable losses are recognised
in the statement of financial position until the commitments are fulfilled or expire. Many of the contingent liabilities will expire without
being advanced in whole or in part. Therefore, the amounts do not represent expected future cash out flows.

Group and Bank 1 year 2 – 5 years Total

2020 K’000 K’000 K’000
Loans commitments 805,040 - 805,040
Guarantees 102,649 478,815 581,464
Letters of credit - - -
Total 907,689 478,815 1,386,504

Group and Bank 1 year 2 – 5 years Total

2019 K’000 K’000 K’000
Loans commitments 406,473 - 406,473
Guarantees 192,646 215,579 408,225
Letters of credit 10 - 10
Total 599,129 215,579 814,708

Standard Chartered — Annual Report 2020 83

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

37 Financial guarantees, letters of credit and commitments (continued)

37.1 Capital commitments

The table below shows the Group’s capital commitments.

There were no capital commitments as at 31st December 2020.

2019
Vendor Name Description of service/goods Amount
K’000
Complete Enterprise Solutions Local Area Network (LAN) infrastructure 10,857
NetOne Information Technology Limited Global work station technologies 2,445
ISON Technologies Limited Voice technology 2,863
Complete Enterprise Solutions Provision of laptops 1,308
Total 17,473

38 Subordinated liabilities
Group and Bank

2020 2019
K’000 K’000
At 1 January 2020 56,600 47,700
Exchange difference 28,080 8,900
At 31 December 2020 84,680 56,600

The terms and conditions of the subordinated loan are as follows:

The interest charge is 3.93% above 3 months LIBOR payable on a quarterly basis. The loan is to be fully repaid in one installment on 31st
October 2024. The outstanding amounts reflected on the statement of financial position are the Kwacha equivalent of USD4 million.
Interest payable as at 31 December 2020 amounting to K 3,613,433 (2019: K3,044, 000) is included in accruals and other payables.

The Group applied for additional subordinated loan from the parent company and all approvals for the injection have been received.
The draw down will be made as per business requirements. There was no draw down as at 31 December 2020.

The Group has not had any defaults of interest or other breaches with respect to its subordinated loan during the year ended 31 December
2020 (2019: no defaults).

39 Share capital

Bank Number of Number of Ordinary

ordinary Ordinary ordinary Shares
shares shares shares capital
(million) K’000 (million) K’000
Authorized 2020 2020 2019 2019
At 1 January - ordinary shares of K0.25
Issued during the year
Standing consolidation 1,800 450,000 1,800 450,000
At 31 December - ordinary shares of K0.25 1,800 450,000 1,800 450,000
Issued and fully paid
At 31 December 1,667 416,745 1,667 416,745
At 1 January Ordinary shares of K0.25 1,667 416,745 1,667 416,745

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per
share at meetings of the Group.

84 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

40 Maturity analysis of assets and liabilities

The table below shows an analysis of assets and liabilities presented according to when they are expected to be
recovered or settled.

2020 2019

Within 12 After 12 Within 12 After 12

months months Total months months Total
K’000 K’000 K’000 K’000 K’000 K’000

Assets
Cash and cash equivalents 5,251,892 - 5,251,892 3,381,132 - 3,381,132
Cash on hand and balances
at Bank of Zambia 2,095,891 - 2,095,891 1,582,665 - 1,582,665
Pledged assets 100,000 - 100,000 100,000 - 100,000

Financial statements
Derivative financial
instruments 4,590 - 4,590 45,273 - 45,273
Loans and advances to banks - - - 101,999 - 101,999
Loans and advances to
customers 1,205,097 1,205,360 2,410,457 1,568,446 1,563,218 3,131,664
Investment securities 3,517,046 25,045 3,542,091 1,617,846 431,569 2,049,415
Investment in subsidiaries - - - - - -
Assets held for sale 9,761 - 9,761 - - -
Property and equipment - 179,158 179,158 - 119,397 119,397
Intangible assets - 70,138 70,138 - 52,688 52,688

Current tax assets - - - 43,283 43,283

Deferred tax assets 165,707 - 165,707 - 80,297 80,297
Prepayments and other
receivables 357,185 - 357,185 379,626 - 379,626
Total assets 12,707,169 1,479,701 14,186,870 8,820,270 2,247,169 11,067,439

Liabilities
Amounts payable to group
banks 325,740 - 325,740 229,489 - 229,489
Amounts payable to non
group banks 21,266 - 21,266 12,297 - 12,297
Derivative financial
instruments 8,548 - 8,548 41,740 - 41,740
Deposits from customers 11,915,093 299,428 12,214,521 9,211,632 77,665 9,289,297
Dividends payable 4,896 - 4,896 5,146 - 5,146
Subordinated liabilities - 84,680 84,680 - 56,600 56,600

Provisions 2,216 76,487 78,703 49,222 56,068 105,290

Current tax liabilities 22,127 - 22,127 - - -
Accruals and other payables 615,974 - 615,974 584,755 - 584,755
Total liabilities 12,915,860 460,595 13,376,455 10,134,281 190,333 10,324,614
Net (208,691) 1,019,106 810,415 (1,314,013) 2,056,837 742,825

Standard Chartered — Annual Report 2020 85

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

41 Capital management
Regulatory capital
The Bank’s main objectives when managing capital are:
Ÿ to comply with the capital requirements set by the Banking and Financial Services Act;
Ÿ to safeguard the Group’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and
benefits for other stakeholders; and
Ÿ to maintain a strong capital base to support the development of its business.
The Bank’s regulatory capital is analysed into two tiers:
Ÿ primary (Tier 1) capital, which includes paid-up common shares, retained earnings, statutory reserves less adjustment of assets of little
or no realisable value.
Ÿ secondary (Tier 2) capital, which includes qualifying subordinated term debt and revaluation reserves limited to a maximum of 40%.
The maximum amount of total secondary capital is limited to 100% of primary capital.
Capital adequacy and use of regulatory capital are monitored regularly by management, employing techniques based on the guidelines
developed and maintained by the Bank of Zambia for supervisory purposes. The required information is filed with the Bank of Zambia on a
monthly basis. In implementing current capital requirements, Bank of Zambia requires banks to:
Ÿ maintain primary or Tier 1 capital of not less than 5% of total risk weighted assets plus risk-weighted items not recognised in the
statement of financial position; and
Ÿ to maintain a minimum 10% ratio of total capital to total risk-weighted assets plus risk-weighted items not recognised in the statement
of financial position or hold a minimum of K520 million whichever is higher;
There was no change in the capital regulation during the year under review.

Computation of regulatory capital position at 31 December Bank

2020 2019
K’000 K’000
I Primary (Tier 1) Capital
(a) Paid-up common shares 416,745 416,745
(b) Capital contributed 62,312 62,312
(c) (Accumulated losses)/retained earnings 63,469 112,285
(d) Statutory reserves 12,285 12,285
(e Sub-total A (items a to g) 554,811 603,627
Less:
(e) Goodwill and other intangible assets (70,138) (52,688)
(f) Net unrealized gains on FVOCI 246,343 130,675
(g) Sub-total B (items i to m) 176,205 77,987
Other adjustments
Provisions - -
Assets of little or no realised value (2,101) (5,827)
(p) Sub-total C (other adjustments) (2,101) (5,827)
(p) Total primary capital [ h – ( n to o)] 728,915 675,787
II Secondary (tier 2) capital
(a) Eligible subordinated term debt 84,680 56,600

(b) Total secondary capital 84,680 56,600

III Eligible secondary capital 84,680 56,600
(The maximum amount of secondary capital is limited to 100% of primary capital)
IV Eligible total capital (I(p) + III) (Regulatory capital) 813,595 732,387
V Minimum total capital requirement (10% of total on and off balance sheet risk weight-
ed assets) 520,000 520,000
VI Excess (IV minus V) 293,595 212,387

Risk weighted assets 4,890,381 4,315,168

Tier 1 Capital ratio 14.90% 15.66%
Total Capital ratio 16.63% 16.97%

86 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

42 Additional cashflow information

Cash and cash equivalents at end of year
2020 Notes 2020 2019
K’000 K’000
Cash on hand 22 841,095 678,286

Cash and short term funds at group Banks 4,276,747 3,005,685

Cash and short term funds at non group Banks 22,495 21,697
Placements with foreign non group banks 952,650 353,750
Total cash and cash equivalents as per statement of 5,251,892 4,059,418
financial position

Amounts payable to group Banks (325,740) (229,489)

Amounts payable to non group Banks (21,266) (12,297)
Total cash and cash equivalents as per statement of

Financial statements
cash flows 5,745,981 3,817,632

Changes in liabilities arising from financing activities

Opening balance 56,600 47,700
Cash flow items:
FX movement 28,080 8,900
Ending balance 84,680 56,600

42.1 Reclassification in the cash flow statement

During the course of the year, the Bank reclassified statutory reserves from cash and cash equivalents. The reclassification
has been made because the statutory reserve deposit is not available for the day to day use in the management of the
business. The amount of K904,379,000 has been reclassified from cash and cash equivalents and movements therein are
now presented in changes in operating activities. The reclassification has been made retrospectively by adjusting the
affected line items of previously issued financial statements.

Standard Chartered — Annual Report 2020 87

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

43 Contingent liabilities and commitments

43.1 Financial guarantees, letters of credit and other undrawn commitments
The nominal values of Financial guarantees, letters of credit are disclosed together with their ECL impacts in Note .48

The Group provides loan commitments, letters of credit and financial guarantees for performance of customers to third
parties. These agreements have fixed limits and are generally renewable annually. Expirations are not concentrated in any period.
The amounts reflected in the table for guarantees and letters of credit represent the maximum accounting loss that would be
recognised at the reporting date if counterparties failed completely to perform as contracted. Only fees and accruals for probable
losses are recognised in the statement of financial position until the commitments are fulfilled or expire. Many of the contingent
liabilities will expire without being advanced in whole or in part. Therefore, the amounts do not represent expected future cash out
flows.

43.2 Legal claims

The Group operates in a regulatory and legal environment that, by nature, has a heightened element of litigation risk inherent
in its operations. As a result, the Group is involved in various litigation, arbitration and regulatory proceedings, in Zambia in the
ordinary course of its business. The Group has formal controls and policies for managing legal claims. Based on professional legal
advice, the Group provides and/or discloses amounts in accordance with its accounting policies described in Note 7.24. At year
end, the Group had several unresolved legal claims.

At year end, the Group had several unresolved corporate and employee related legal claims .

The Directors are aware that any amounts noted with respect to the on-going cases are only an estimate as the final liability is
dependent on the conclusion of the underlying legal proceedings or disputes’.

44 Leases
The Group has entered into commercial leases for premises, equipment and motor vehicles. The leases have an average life of
between three and five years. There are no restrictions placed upon the lessee by entering into these.

The Group has several lease contracts that include extension and termination options. These options are negotiated by
management to provide flexibility in managing the leased-asset portfolio and align with the Group’s business needs.
Management exercises significant judgement in determining whether these extension and termination options are reasonably
certain to be exercised (refer to Note 7.18).
a. Leases as lessee (IFRS 16)
The Group leases a number of branch and office premises and motor vehicles. The leases typically run for a period of 1-6 years,
with an option to renew the lease after that date. For some leases, payments are renegotiated every lease renewal to reflect
market rentals. Some leases provide for additional rent payments that are based on changes in local price indices.
The Group also leases IT equipment with contract terms of 1 year. These leases are short-term and/or leases of low-value items.
The Group has elected not to recognise right-of-use assets and lease liabilities for these leases.
Previously, these leases were classified as operating leases under IAS 17.

88 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

44 Leases (continued)
a. Leases as lessee (IFRS 16) (continued)
Information about leases for which the Group is a lessee is presented below.
i. Right-of-use assets and depreciation
Right-of-use assets and depreciation relate to leased branch and office premises that are presented within property and
equipment (see note 31)

Right-of-use assets

Group and Bank

2020 2019
Branch Branch
and office Motor and office Motor
premises Vehicle Total premises Vehicle Total
K’000 K’000 K’000 K’000 K’000 K’000
Balance at 1 January 18,437 52,610 71,047 3,701 - 3,701
Additions 79,397 30,903 110,300 14,650 52,610 67,260
Disposals (17,319) (4,809) (22,128) - - -

Financial statements
Effect of movement in exchange rates 6,154 - 6,154 86 - 86
Balance at 31 December 86,669 78,704 165,373 18,437 52,610 71,047

Depreciation Group and Bank

2020 2019
Branch Branch
and office Motor and office Motor
premises Vehicle Total premises Vehicle Total
K’000 K’000 K’000 K’000 K’000 K’000
Balance at 1 January 7,300 1,605 8,905 - - -
Depreciation charge 6,920 21,272 28,192 6,820 1,605 8,425
Disposal (8,478) - (8,478) - - -
Effect of movement in exchange rates 3,544 - 3,544 480 - 480
Balance at 31 December 9,286 22,877 32,163 7,300 1,605 8,905
ii) Amounts recognised in statement of income or loss
2020 2019
K’000 K’000
Depreciation 28,192 8,425
Lease interest expense 8,828 3,848
Expenses relating to short term leases 9,283 6,868
Expenses relating to low value assets - 2,935
iii) Maturity Analysis
i. The following tables set out a maturity analysis of lease liabilities held as at 31 December 2020
Group and Bank
Non property 2020
Between one year and Between two years and
One year or less two years five years More than five years Total
K’000 K’000 K’000 K’000 K’000
9,285 12,974 34,274 24,634 81,167

Non property 2019

Between one year and Between two years and
One year or less two years five years More than five years Total
K’000 K’000 K’000 K’000 K’000
3,178 8,468 39,512 - 51,157

Property leases 2020

Between one year and Between two years and
One year or less two years five years More than five years Total
K’000 K’000 K’000 K’000 K’000
854 3,761 77,692 166 82,473

Property leases 2019

Between one year and Between two years and
One year or less two years five years More than five years Total
K’000 K’000 K’000 K’000 K’000
1,616 4,152 7,075 - 12,843
Lease liabilities are reported within other liabilities on the statement of financial position (see note 35)

Standard Chartered — Annual Report 2020 89

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

44 Leases (continued)
iv) Extension options
Some leases of office premises contain extension options exercisable by the Group up to one year before the end of the non-cancellable
contract period where practicable, the Group seeks to include extension options in new leases to provide operational flexibility. The
extension options held are exercisable only by the Group and not by the lessors. The Group assesses at lease commencement date
whether it is reasonably certain to exercise the extension options. The Group reassesses whether it is reasonably certain to exercise
the options if there is a significant event or significant changes in circumstances within its control.
v) Impact on Financial Statement
The total cash outflow during the year for premises and motor vehicle leases was K35 million.
45 Related parties
a. Parent and controlling party
The Group is controlled by Standard Chartered Holdings (Africa) BV (incorporated in The Netherlands) which owns 90% of the shares.
The other shares are widely held. The ultimate parent of the Bank is Standard Chartered Plc (incorporated in the United Kingdom). The
Group has a related party relationship with its holding company, fellow subsidiaries, non-executive directors, executive directors and
key management personnel. Key management personnel include all Management Committee Members and Unit Heads.
b. Related party transactions
A number of banking and other transactions are entered into with related parties in the normal course of business. These include
loans, deposits, foreign currency and other transactions for services, such as consulting services that the parent and other related
companies provide from time to time and which are charged at market rate. The volumes of related party transactions, outstanding
balances at the year end, and the related interest expense and income for the year are as follows:
Group transactions
Group and Bank
2020 2019
Note
K’000 K’000
Amounts due from group companies 42 4,276,747 3,005,684
Amounts due to group companies 42 (325,740) (229,489)
Total 3,951,007 2,776,195
Included in group transactions are placements made and received from group related entities. These are entered into at fixed interest
rates and maturity periods.

Income and expenditure

Group and Bank
2020 2019
K’000 K’000
(165,730) (28,530)
Recharges and other expenses
Commissions and net interest income 23,879 47,235

Total (141,851) 18,705

c. Directors and key management personnel transactions

Loans
Group and Bank Group and Bank
2020 2019
Connected Key Connected Key
Executive entities to management Executive entities to management
directors directors staff Total directors directors staff Total
K’000 K’000 K’000 K’000 K’000 K’000 K’000 K’000
Loans outstanding
at 1 January 1,433 16,744 17,326 35,503 522 17,302 13,208 31,032
Loans issued during
the year 1,127 9,990 2,363 13,480 1,298 3,687 9,348 14,333
Relocated/ resigned
/ promoted (1,116) - (3,727) (4,843) - (1,395) (1,395)
Loan repayments
during the year (484) (6,351) (2,008) (8,843) (387) (4,245) (3,835) (8,467)
Loans outstanding
at 31 December 960 20,383 13,954 35,297 1,433 16,744 17,326 35,503

Executive directors 960 - - 960 1,433 - - 1,433

Non executive
directors - 20,383 - 20,383 - 16,744 - 16,744
Interest and fee
income earned: 142 1,368 1,444 2,954 33 1,167 177 1,377
90 Standard Chartered — Annual Report 2020
Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

45 Related parties (continued)

c. Directors and key management personnel transactions
Loans (continued)
Loans to non-executive directors are made under commercial terms in the ordinary course of the Group’s business. Loans to executive
directors are made on the same terms as those of other employees of the Group.
No ECL is recognized on these loans as the LGD is insignificant as the loans are secured through salary payments.
At 31 December 2020 there were no loan obligations to Independent Non executive directors in their personal capacity.
At 31 December 2020, the total amounts to be disclosed under Zambia Companies Act, 2017, No. 10 about loans and advances
were as follows;
Loan
Opening Issued repayments Amount
Balance during the during the outstanding 31 Average
1Jan 2020 year year Dec 2020 interest
Name of borrower K’000 K’000 K’000 K’000 Rate (%) Composition

Executive director A 317 445 (395) 367 11% Personal loan and Credit card

Financial statements
Executive director B -
outgoing 1,116 - (1,116) - 10% Personal loan and Mortgage
Executive director B – Mortgage, Personal loan and
Incoming. - 682 (89) 593 9.67 Credit card

Officer A 278 600 (89) 789 10% Personal loan

Mortgage, Personal loan and
Officer B 4,249 - (140) 4,109 9% Credit card
Mortgage, Personal loan and
Officer D 778 450 (520) 708 10% Credit card
Mortgage, Personal loan and
Officer E 3,838 - (163) 3,675 10% Credit card

Officer F 1,428 449 (311) 1,566 11% Personal loan and Credit card

Officer G 285 407 (306) 386 11% Personal loan and Credit card

Officer H 2,502 - (2,502) - 10% Mortgage and Credit card

Mortgage, Personal loan and
Officer I 2,502 448 (409) 2,541 9% Credit card
Mortgage, Personal loan and
Officer J 1,225 - (1,225) - 9% Credit card

Officer K - 9 (6) 3 12% Credit card

Officer L 243 - (64) 179 11% Mortgage and Credit card

18,761 3,490 (7,335) 14,916

Other than as disclosed in the Annual Report and Accounts, there were no other transactions, arrangements or agreements
outstanding for any directors, connected person or officer of the Company which have to be disclosed under the Act.

Deposits
Group and Bank Group and Bank

2020 2019
Connected Connected
Executive entities to Management Executive entities to Management
directors directors staff Total directors directors staff Total
K’000 K’000 K’000 K’000 K’000 K’000 K’000 K’000
Deposit at 1
January 96 457 1,193 1,746 126 2,944 754 3,824
Net movement 839 2,421 3,749 7,009 (30) (2,487) 439 (2,078)
Deposits at 31
December 935 2,878 4,942 8,755 96 457 1,193 1,746

Standard Chartered — Annual Report 2020 91

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

45 Related party transactions (continued)

c. Directors and key management personnel transactions (continued)
Group and Bank
2020 2019
K’000 K’000
Salaries and allowances and short term benefits 51,343 41,001
Pension contributions 3,477 2,917
Total 54,820 43,918

Group and Bank

2020 2019
K’000 K’000
Directors’ remuneration
Executive directors
Salaries and allowances 6,952 6,291
Pension contributions 428 401
Total 7,380 6,692

Non-executive directors Group and Bank

2020 2019
K’000 K’000
Fees and benefits 1,268 1,044

Disposal of assets

There were no Group assets sold to the non-executive directors (2019: nil).

46 Events after reporting date

There are no events after the reporting date that require disclosure in these financial statements.

However, the Group continues to monitor the impact of the COVID-19 pandemic on its operations and its capacity to generate
revenue and continue being viable. The Group has put in place measures to protect both staff and clients from the pandemic
and ensure there is no or minimal disruptions to its operations.

At the date of preparation of these financial statements, there were no issuances of debt or equity or re-financing
undertaken.

47 Fair values measurement

47.1. Valuation principles

Fair value is the price that would be received to sell an asset or paid to transfer a liability between market participants in an orderly
transaction in the principal (or most advantageous) market at the measurement date under current market conditions (i.e., an exit
price), regardless of whether that price is directly observable or estimated using a valuation technique.
In order to show how fair values have been derived, financial instruments are classified based on a hierarchy of valuation techniques, as
explained in below;
The Group measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making the
measurements.
Ÿ Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical instruments
Ÿ Level 2: Inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly
(i.e. derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar
instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation
techniques in which all significant inputs are directly or indirectly observable from market data.
Ÿ Level 3: Inputs that are unobservable. This category includes all instruments for which the valuation technique includes inputs
not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category
includes instruments that are valued based on quoted prices for similar instruments for which significant unobservable adjustments
or assumptions are required to reflect differences between the instruments.

92 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

47 Fair values of financial instruments (continued)

47.2. Valuation governance (continued)

The Group has established control and framework for the measurement of fair values. This framework includes a Product Control
function, which is independent of front office management and reports to the Chief Financial Officer and which has overall responsibility
for independently verifying the results of trading and investment operations and all significant fair value measurements. Specific controls
include:
Ÿ Verification of observable pricing;
Ÿ Re-performance of model valuations;
Ÿ A review and approval process for the new models and changes to the model involving both Product Control and Group Market Risk;
Ÿ Quarterly calibration and back-testing of models against observed market transactions;
Ÿ Analysis and investigation of significant daily valuation movements; and
Ÿ Review of significant unobservable inputs, valuation adjustments and significant changes to the fair value measurement of Level 3
instruments compared with the previous month, by a committee of senior Product Control and Group Market Risk personnel
When third party information, such as broker quotes or pricing services, is used to measure fair value, Product Control assesses and
documents the evidence obtained from the third party parties to support the conclusion that the valuations meet the requirements of
IFRS. This include;

Financial statements
Ÿ Verifying that the broker or pricing service is approved by the Group for use in pricing the relevant type of financial instrument;
Ÿ Understanding how the fair value has been arrived at, the extent to which it represents actual market transactions and
whether it presents a quoted price in an active market for an identical instrument;
Ÿ When prices for similar instruments are used to measure fair value, understanding how these prices have been adjusted to
reflect characteristics of the instrument subject to measurement; and
Ÿ If any number of quotes for the same financial instrument has been obtained, then understanding how fair value has been
obtained using those quotes.

47.3. Financial instruments measured at fair value - fair value hierarchy

The table below analyses financial instruments measured at fair value at the end of the reporting period, by the level in the fair value
hierarchy into which the fair value measurement is categorised:

Group and Bank

Level 1 Level 2 Level 3 Total
31 December 2020 K’000 K’000 K’000 K’000

Assets
Pledged assets - 100,000 - 100,000
Derivative financial assets - 4,590 - 4,590
Investment securities - 3,542,091 - 3,542,091
Liabilities

Derivative financial instruments - 8,548 - 8,548

Level 1 Level 2 Level 3 Total

31 December 2019 K’000 K’000 K’000 K’000
Assets
Pledged assets - 100,000 - 100,000
Derivative financial assets - 45,273 - 45,273
Investment securities - 2,049,415 - 2,049,415
Liabilities
Derivative financial instruments - 41,740 41,740
Level 2: the fair value is determined using valuation models with directly or indirectly market observable inputs.
Major groups of assets and liabilities classified as level 2: corporate and other government bonds and debt instruments, over the counter
derivatives and Asset Backed Securities which are included in the Liquid Assets List of the Bank of Zambia.
Investment securities: the investment securities designated as FVOCI are carried at fair value. The fair value is determined based on a Mark-
to-Market (MTM) approach, which involves revaluation of cash flows based on the market yield curve maintained by Group Market Risk.
Derivative financial instruments: derivative financial instruments are carried at fair value which is determined based on a discounted cash
flow approach. The cash flows are discounted at a discount factor that is based on observable market data maintained by Group Market
Risk.
There were no transfers from level 1 to level 2 fair values.
Standard Chartered — Annual Report 2020 93
Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

47 Fair values of financial instruments (continued)

47.4 Financial instruments not measured at fair value

The carrying amount approximates the fair value for the below financial instruments at the reporting date
Group and Bank Total fair value
K’000

31 December 2020 Note

Assets
Cash on hand and balances with Bank of Zambia 22 2,095,891
Loans and advances to Banks 23 -
Cash and cash equivalents 42 5,251,892
Loans and advances to customers 29 2,410,457
Other assets 30 357,185
Liabilities
Amounts payable to group banks 42 325,740
Amounts payable to non-group banks 42 21,266
Deposits from customers 34 12,214,521
Dividends payable 21 4,896
Other liabilities 35 615,974
Subordinated liabilities 38 84,680

Total fair value

31 December 2019 K’000
Assets
Cash on hand and balances with Bank of Zambia 22 1,582,665
Loans and advances to banks 23 101,999
Cash and cash equivalents 42 3,381,132
Loans and advances to customers 29 3,131,664
Other assets 30 379,626
Liabilities
Amounts payable to group banks 42 229,489
Amounts payable to non-group banks 42 12,297
Deposits from customers 34 9,289,297
Dividends payable 21 5,146
Other liabilities 35 584,755
Subordinated liabilities 38 56,600

94 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

47 Fair values of financial instruments 48 Risk Management

(continued)
48.1 Introduction and risk profile
47.5 Valuation techniques
This note presents information about the Group’s exposure
Valuation techniques include net present value and to financial risks and the Group’s management of capital.
discounted cash flow models, comparison with similar
instruments for which observable market prices exist, For information on the Group’s financial risk management
Black-Scholes and polynomial option pricing models and framework, see note 48 to the financial statements.
other valuation models. Assumptions and inputs used in
valuation techniques include risk-free and benchmark Whilst risk is inherent in the Group’s activities, it is managed
interest rates, credit spreads and other premia used through an Enterprise Risk Management Framework
in estimating discount rates, bond and equity prices, (ERMF), including ongoing identification, measurement
foreign currency exchange rates, equity and equity index and monitoring, and subject to risk limits and other
prices and expected price volatilities and correlations. controls. The ERMF:
The objective of valuation techniques is to arrive at a fair
value determination that reflects the price of the financial Ÿ establishes common principles and standards for the
instruments at the reporting date that would have been management and control of all risks, and to inform
determined by market participants acting at arm’s length. behaviour across the organisation;
Ÿ provides a shared framework and language to
Where available, the fair value of loans and advances improve awareness of risk management processes

Financial statements
is based on observable market transactions. Where and provides clear accountability and responsibility
observable market transactions are not available, fair for risk management.
value is estimated using valuation models, such as
discounted cash flow techniques. Input into the valuation The core components of the ERMF include our risk principles
techniques includes expected lifetime credit losses, and standards, principal risk types, definitions of roles
interest rates, prepayment rates and primary origination and responsibilities, and governance structure. In 2017 we
or secondary market spreads. For collateral-dependent completed a thorough review of our ERMF which included
impaired loans, the fair value is measured based on the changes in our Principal Risk Types and strengthening of
value of the underlying collateral. Input into the models the three lines of defence.This process of risk management
may include data from third party brokers based on OTC is critical to the Group’s continuing profitability and each
trading activity and information obtained from other individual within the Group is accountable for the risk
market participants, which includes observed primary exposures relating to his or her responsibilities. The Group
and secondary transactions. To improve the accuracy is exposed to credit risk, liquidity risk and market risk, the
of the valuation, estimate for consumer and smaller latter being subdivided into trading and non–trading risks.
commercial loans, homogeneous loans are grouped into It is also subject to country risk and various operating and
portfolios with similar characteristics such as vintage, business risks.
LTV ratios, the quality of collateral, product and borrower
type, prepayment and delinquency rates and default 48.2 Risk management structure
probability.
The Chief Risk Officer, supported by assessment from the
The fair value of deposits from banks and customers Head of Compliance must ensure that the Group submits
is estimated using discounted cash flow techniques, a Country level Risk Management Framework (“RMF”) for
applying the rates that are offered for deposits of similar recommendation by the Executive Risk Committee and
maturities and terms. The fair value of deposits payable approval by the Board or Board level committee at least
on demand is the amount payable at the reporting date. annually and within 12 months of the implementation of
The carrying amounts of financial assets and liabilities are any changes to the Group level ERMF.
representative of the Group’s position at 31 December 2020
and are in the opinion of the directors not significantly
different from their respective fair values due to generally
short periods to maturity dates. Fair values are generally
determined using valuation techniques or where available,
published price quotations from an active market.

Standard Chartered — Annual Report 2020 95

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

48.2 Risk management structure (continued)

To ensure the effectiveness of the Enterprise Risk Management Framework roles and responsibilities for risk management are defined
under a Three Lines of Defence model as shown below;

Lines of Defence Definition Key responsibilities include

First The businesses and functions • Propose the risks required to undertake revenue-generating
engaged in or supporting revenue activities
generating activities that own and • Identify, monitor, and escalate risks and issues to Second Line and
manage risks. Senior Management and promote a healthy risk culture and good
conduct.
• Manage risks within Risk Appetite, set and execute remediation
plans (where applicable) and ensure laws and regulations are being
complied with.
Second The control functions independent of • Identify, monitor, and escalate risks and issues to the Chief Risk
the First Line that provides oversight Officer, the Senior Management and the Board and promote a
and challenge of risk management to healthy risk culture and good conduct.
provide confidence to the Chief Risk • Oversee and challenge First Line risk taking activities and review
Officer, the Management Team and First Line risk proposals and make decisions.
the Board.
Third The independent assurance provided • Independently assess whether management has identified the key
by the Internal Audit Function, of the risks in the business and whether these are reported and governed in
effectiveness of controls that support line with the established risk management processes.
First Line’s risk management of • Independently assess the adequacy of the design of controls and
business activities, and the processes their operating effectiveness.
maintained by the Second Line.

The Group’s Treasury is responsible for managing its assets and liabilities and the overall financial structure. It is also primarily
responsible for the funding and liquidity risks of the Group.

The Group’s policy is that risk management processes throughout the Group are audited annually by the Internal Audit function,
which examines both the adequacy of the procedures and the Group’s compliance with them. Internal Audit discusses the results of all
assessments with management and reports its findings and recommendations to the Board Audit Committee.

48.3 Risk mitigation and risk culture

As part of its overall risk management, the Group uses derivatives and other instruments to manage exposures resulting from changes
in interest rates, foreign currencies, equity risks, credit risks, and exposures arising from forecast transactions. The Group actively uses
collateral to reduce its credit risks (see below).

The Chief Risk Officer (“CRO”) maintains a dynamic risk scanning process with inputs on the internal and external risk environment, as
well as potential threats and opportunities from business and client perspective. This process is managed by the CRO with input from
the Risk Framework Owners, and the Businesses. This is in addition to the risk identification as part of the Strategy Review process.

The CRO oversees the principal risk types and the sub-types that are inherent to the strategy and business model through the dynamic
risk scanning process considers near term emerging risks on the horizon that can be measured and mitigated to some extent, and
uncertainties that are longer term matters that should be on the radar but not yet fully measurable. The CRO considers new risks or
reprioritised existing risks and outputs from the dynamic risk scanning process as part of the Strategy Review.

96 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

48 Risk Management (continued) 48.6 Credit risk

48.4. Risk measurement and reporting systems Credit risk is the risk that the Group will incur a loss because its
customers or counterparties fail to discharge their contractual
The Group’s risks are measured using a method that reflects obligations. The Group manages and controls credit risk by
both the expected loss likely to arise in normal circumstances setting limits on the amount of risk it is willing to accept for
and unexpected losses, which are an estimate of the ultimate individual counterparties and by monitoring exposures in
actual loss based on statistical models. The models make use relation to such limits.
of probabilities derived from historical experience, adjusted to
reflect the economic environment. The Group also runs worst- Credit risk is monitored by the credit risk department of
case scenarios that would arise in the event that extreme the Group’s independent Risk Controlling Unit. It is their
events which are unlikely to occur do, in fact, occur. responsibility to review and manage credit risk, including
environmental and social risk for all types of counterparties.
Monitoring and controlling risks is primarily performed based Credit risk consists of line credit risk managers who are
on limits established by the Group. These limits reflect the responsible for their business lines and manage specific
business strategy and market environment of the Group as portfolios and experts who support both the line credit risk
well as the level of risk that the Group is willing to accept, manager, as well as the business with tools like credit risk
with additional emphasis on selected industries. In addition, systems, policies, models and reporting.
the Group’s policy is to measure and monitor the overall risk-
bearing capacity in relation to the aggregate risk exposure The Group has established a credit quality review process to
across all risk types and activities. provide early identification of possible changes in the
creditworthiness of counterparties, including regular collateral
Information compiled from all of the businesses is processed in revisions. Counterparty limits are established by the use
order to analyse, control and identify risks on a timely basis.

Financial statements
of a credit risk classification system, which assigns each
This information is presented and explained to the Board of counterparty a risk rating. Risk ratings are subject to regular
Directors, the Risk Committee, and the head of each business revision. The credit quality review process aims to allow the
division. Group to assess the potential loss as a result of the risks to
which it is exposed and take corrective actions.
The report includes aggregate credit exposure, credit metric
forecasts, hold limit exceptions, VaR, liquidity ratios and risk 48.6.1. Derivative financial instruments
profile changes. On a monthly basis, detailed reporting of
industry, customer and geographic risks takes place. Senior Credit risk arising from derivative financial instruments is, at
management assesses the appropriateness of the allowance any time, limited to those with positive fair values, as recorded
for credit losses on a monthly basis. The Supervisory Board on the statement of financial position. In the case of credit
receives a comprehensive risk report once a quarter which is derivatives, the Group is also exposed to, or protected from,
designed to provide all the necessary information to assess the risk of default of the underlying entity referenced by the
and conclude on the risks of the Group. derivative. However, to reflect potential losses, the Group
applies portfolio-based debit and credit value adjustments.
At all levels of the Group’s operations, specifically tailored risk
reports are prepared and distributed in order to ensure that With gross–settled derivatives, the Group is also exposed
all business divisions have access to extensive, necessary and to a settlement risk, being the risk that the Group honors its
obligation, but the counterparty fails to deliver the counter
up–to–date information.
value.
It is the Group’s policy to ensure that a robust risk awareness is
embedded in its organisational risk culture. Employees are 48.6.2. Credit–related commitments risks
expected to take ownership and be accountable for the risks
the Group is exposed to that they decide to take on. The The Group makes available to its customers guarantees
Group’s continuous training and development emphasises that may require that the Group makes payments on their
that employees are made aware of the Group’s risk appetite behalf and enters into commitments to extend credit lines to
and they are supported in their roles and responsibilities to secure their liquidity needs. Letters of credit and guarantees
monitor and keep their exposure to risk within the Group’s (including standby letters of credit) commit the Group to make
risk appetite limits. Compliance breaches and internal audit payments on behalf of customers in the event of a specific
findings are important elements of employees’ annual ratings act, generally related to the import or export of goods. Such
and remuneration reviews. commitments expose the Group to similar risks to loans and
are mitigated by the same control processes and policies.
48.5. Risk governance and risk management 48.6.3. Impairment assessment
strategies and systems
The references below show where the Group’s impairment
48.5.1 Excessive risk concentration assessment and measurement approach is set out in this
report. It should be read in conjunction with the Summary of
Concentrations arise when a number of counterparties are significant accounting policies.
engaged in similar business activities, or activities in the same
geographical region, or have similar economic features that 48.6.3.1 Definition of default, impaired and cure
would cause their ability to meet contractual obligations to be
similarly affected by changes in economic, political or other The Group considers a financial instrument defaulted for ECL
conditions. calculations in all cases when the borrower becomes 90 days
past due on its contractual payments.
Concentrations indicate the relative sensitivity of the Group’s
performance to developments affecting a particular industry It is the Group’s policy to consider a financial instrument as
or geographical location.
‘cured’ and therefore re-classified out of Stage 3 when
none of the default criteria have been present for at least 12
In order to avoid excessive concentrations of risk, the Group’s
consecutive months. The decision whether to classify an asset
policies and procedures include specific guidelines to focus on
as Stage 2 or Stage 1 once cured depends on the updated
maintaining a diversified portfolio. Identified concentrations
credit grade, at the time of the cure, and whether this indicates
of credit risks are controlled and managed accordingly.
Selective hedging is used within the Group to manage risk there has been a significant increase in credit risk compared
concentrations at both the relationship and industry levels. to initial recognition. The Group’s criterion for ‘cure’ for ECL
purposes is less stringent than the 24 months requirement for
forbearance which is explained in Note 7.13.
Standard Chartered — Annual Report 2020 97
Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

48 Risk Management (continued)

For individually significant financial assets within Stage 3,
Group Special Asset Management (GSAM) will consider all
48.6.3.1 Definition of default, impaired and cure judgements that have an impact on the expected future
(continued) cash flows of the asset. These include: the business prospects,
industry and geo-political climate of the customer, quality of
A period may elapse from the point at which instruments realisable value of collateral, the Group’s legal position relative
enter lifetime expected credit losses (stage 2 or stage 3) to other claimants and any renegotiation/ forbearance/
and are reclassified back to 12 month expected credit losses modification options. The difference between the loan
(stage 1). For financial assets that are credit-impaired (stage carrying amount and the discounted expected future cash
3), a transfer to stage 2 or stage 1 is only permitted where the flows will result in the stage 3 credit impairment amount. The
instrument is no longer considered to be credit-impaired. An future cash flow calculation involves significant judgements
instrument will no longer be considered credit-impaired when and estimates. As new information becomes available and
there is no shortfall of cash flows compared to the original further negotiations/forbearance measures are taken the
contractual terms. estimates of the future cash flows will be revised and will have
an impact on the future cash flow analysis.
For financial assets within stage 2, these can only be
transferred to stage 1 when they are no longer considered to For financial assets which are not individually significant,
have experienced a significant increase in credit risk. such as the Consumer, Private and Business Banking portfolio
or small business loans, which comprise a large number
Where significant increase in credit risk was determined using of homogenous loans that share similar characteristics,
quantitative measures, the instruments will automatically statistical estimates and techniques are used, as well as credit
transfer back to stage 1 when the original PD based transfer scoring analysis.
criteria are no longer met. Where instruments were transferred
to stage 2 due to an assessment of qualitative factors, the Consumer, Private and Business Banking clients are considered
issues that led to the reclassification must be cured before credit impaired where they are more 90 days past due. RB
the instruments can be reclassified to stage 1. This includes products are also considered credit impaired if the borrower
instances where management actions led to instruments files for bankruptcy or other forbearance programme, the
being classified as stage 2, requiring that action to be resolved borrower is deceased or the business is closed in the case of
before loans are reclassified to stage 1. a small business, or if the borrower surrenders the collateral,
or there is an identified fraud on the account. Additionally, if
A forborne loan can only be removed from the disclosure the account is unsecured and the borrower has other credit
(cured) if the loan is performing (stage 1 or 2) and a further accounts with the Group that are considered credit impaired,
two year probation period is met. the account may also be credit impaired.

In order for a forborne loan to become performing, the The information below provides an indicative mapping of how
following criteria have to be satisfied: the Group’s internal credit risk grades relate to PD and for the
Corporate portfolio, to external sovereign credit ratings.
Ÿ At least a year has passed with no default based upon
the forborne contract terms Corporate and institutional and Commercial
Ÿ The customer is likely to repay its obligations in full
without realising security The institutional and commercial portfolio of the Group is
Ÿ The customer has no accumulated impairment against comprised of loans and advances to banks, public sector
amount outstanding entities, sovereigns, corporates and other businesses.
Ÿ Subsequent to the criteria above, a further two year
probation period has to be fulfilled, whereby regular
payments are made by the customer and none of the
Grading
exposures to the customer are more than 30 days past
CIB Average PD (%)
due.
1-5 Investment 0.39 BBB-
48.6.3.2 The Group’s internal rating and PD 6-8 Sub investment 1.37 BBB-
estimation process 9-11 Sub investment 1.39 BBB-
12 GSAM 68.9 BBB-
For Corporate and Institutional, Commercial and banking, 13-14 GSAM -Default 80.5 BBB-
borrowers are graded by credit risk management on a credit
grading (CG) scale from CG1 to CG14 with 1-5 Investment, 6-11
Sub Investment, 12 GSAM and 13-14 Default. Once a borrower CB Average PD (%)
starts to exhibit credit deterioration, it will move along the
credit grading scale in the performing book and when it is 1-5 Investment 0 BBB-
classified as CG12 the credit assessment and over sight of 6-8 Sub investment 0 BBB-
the loan will normally be performed by Group Special Assets 9-11 Sub investment 13.77 BBB-
Management (GSAM). 12 GSAM 25.59 BBB-
Borrowers graded CG12 exhibit well-defined weaknesses in 13-14 GSAM -Default 100 BBB-
areas such as management and/or performance but there
is no current expectation of a loss of principal or interest.
Where the impairment assessment indicates that there will be
a loss of principal on a loan, the borrower is graded a CG14
while borrowers of other credit impaired loans are graded
CG13. Instruments graded CG13 or CG14 are regarded as non-
performing loans, i.e. Stage 3 or credit impaired exposures.

98 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

48 Risk Management (continued) Where the contractual terms of a financial asset have
been modified due to financial difficulties (forbearance,
for example) and the asset has not been derecognised, a
48.6.3.2 The Group’s internal rating and PD modification loss is recognised as part of ‘Impairment’ in the
estimation process (continued) statement of income or loss and other comprehensive income.
The loss represents the difference between the present value
RB
of the cash flows before and after the modification, discounted
The consumer portfolios are comprised of mortgage at the original effective interest rate. Unlike IAS 39, however,
lending, personal loans and credit cards. no loss allowance is recorded in the statement of financial
position,vas the modification loss is offset against the gross
Grading carrying amount of the asset.

2020 2019 For debt instruments held at FVOCI, the statement of financial
position amount reflects the instrument’s fair value, with the
Grade 11: Low-fair risk 2.36% 2.2%
expected credit loss allowance held as a separate reserve
Grades 12–14: Substandard, within other comprehensive income.
doubtful, loss 100% 100%
ECL allowances on off-balance sheet instruments are held as
liability provisions to the extent that the drawn and undrawn
components of loan exposures can be separately identified.
48.6.3.3 Exposure at default and Loss given Otherwise they will be reported against the drawn compo-
default nent.

Financial statements
The definition of default is aligned to the regulatory definition Write-offs of credit impaired instruments
and considered to occur when an asset is 90 days or more past
due on contractual payments of principal and/or interest or is
and reversal of impairment
considered unlikely to pay without realisation of any collateral
To the extent a financial debt instrument is considered
held.
irrecoverable, the applicable portion of the gross carrying
value is written off against the related loan provision. Credit
To the extent that assets are credit-impaired at the point
impaired financial debt instruments are graded 12-14 on the
of initial recognition, they are classified as purchased or
Group’s internal credit grading system. Such loans are written
originated credit-impaired. An expected credit loss allowance
off after all the necessary procedures have been completed,
is not recognised at initial recognition. Any changes in lifetime
it is decided that there is no realistic probability of recovery
expected losses after initial recognition are charged or credited
and the amount of the loss has been determined. Subsequent
to the statement of income or loss and other comprehensive
recoveries of amounts previously written off decrease the
income through ‘Impairment’.
amount of the provision for loan impairment in the statement
of income or loss and other comprehensive income. If, in a
The measurement of expected credit losses across all
subsequent period, the amount of the credit impairment loss
stages is required to reflect an unbiased and probability
decreases and the decrease can be related objectively to an
weighted amount that is determined by evaluating a range
event occurring after the credit impairment was recognised
of reasonably possible outcomes using reasonable and
(such as an improvement in the debtor’s credit rating), the
supportable information about past events, current conditions
previously recognised credit impairment loss is reversed by
and forecasts of future economic conditions.
adjusting the provision account. The amount of the reversal
To account for the potential non-linearity in credit losses, is recognised in the statement of income or loss and other
multiple forward-looking scenarios are incorporated into comprehensive income.
the range of reasonably possible outcomes for all material
portfolios. The Group uses a Monte Carlo approach to simulate Measurement of ECL
a set of 50 scenarios around the Group’s central forecast to
incorporate the potential non-linearity. Expected credit losses are computed as unbiased, probability
weighted amounts which are determined by evaluating a
The period considered when measuring expected credit loss range of reasonably possible outcomes, the time value of
is the shorter of the expected life and the contractual term money, and considering all reasonable and supportable
of the financial asset. The expected life may be impacted by information including that which is forward looking.
prepayments and the maximum contractual term by extension
options. For certain revolving portfolios, including credit cards, For material portfolios, the estimate of expected cash shortfalls
the expected life is assessed over the period that the Group is determined by multiplying the probability of default (PD)
is exposed to credit risk (which is based on the length of time with the loss given default (LGD) with the expected exposure
it takes for credit facilities to be withdrawn) rather than the at the time of default (EAD). There may be multiple default
contractual term. events over the lifetime of an instrument. For Retail Banking
loan portfolios, the Group has adopted simplified approaches
For stage 3 financial assets, the determination of lifetime based on historical roll rates or loss rates.
expected credit losses will be similar to the IAS 39 approach; for
example, loan loss allowances within Corporate & Institutional Forward-looking economic assumptions are incorporated
Banking will be based on the present value of estimated future into the PD, LGD and EAD where relevant and where they
cash flows for individual clients. The estimated cash flows will, influence credit risk, such as GDP growth rates, interest rates,
however, be based on a probability range of scenarios. Where house price indices and commodity prices among others.
the cash flows include realisable collateral, the values used will These assumptions are incorporated using the Group’s most
incorporate forward-looking information. likely forecast for a range of macroeconomic assumptions.
These forecasts are determined using all reasonable and
supportable information, which includes both internally
developed forecasts and those available externally and are
consistent with those used for budgeting, forecasting and
capital planning.

Standard Chartered — Annual Report 2020 99

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

48 Risk Management (continued) The expected credit loss attributed to these instruments is held
as a separate reserve within OCI and is recycled to the profit and
loss account along with any fair value measurement gains or
48.6.3 Impairment assessment (continued) losses held within FVOCI when the applicable instruments are
derecognized.
To account for the potential non-linearity in credit losses, Expected credit loss on loan commitments and financial
multiple forward-looking scenarios are incorporated into guarantees is recognised as a liability provision. Where
the range of reasonably possible outcomes for all material a financial instrument includes both a loan (i.e. financial
portfolios. For example, where there is a greater risk of asset component) and an undrawn commitment (i.e. loan
downside credit losses than upside gains, multiple forward- commitment component) and it is not possible to separately
looking economic scenarios are incorporated into the identify the expected credit loss on these components, expected
range of reasonably possible outcomes, both in respect of credit loss amounts on the loan commitment are recognised
determining the PD (and where relevant, the LGD and EAD) together with expected credit loss amounts on the financial
and in determining the overall expected credit loss amounts. asset. To the extent the combined expected credit loss exceeds
These scenarios are determined using a Monte Carlo the gross carrying amount of the financial asset, the expected
approach centred around the Group’s most likely forecast of credit loss is recognised as a liability provision.
macroeconomic assumptions.

The period over which cash shortfalls are determined is

Recognition
generally limited to the maximum contractual period for
which the Group is exposed to credit risk. However, for 12 months expected credit losses (Stage 1)
certain revolving credit facilities, which include credit cards
or overdrafts, the Group’s exposure to credit risk is not limited Expected credit losses are recognised at the time of initial
to the contractual period. For these instruments, the Group recognition of a financial instrument and represent the lifetime
estimates an appropriate life based on the period that the cash shortfalls arising from possible default events up to 12
Group is exposed to credit risk, which includes the effect of months into the future from the statement of financial position
credit risk management actions such as the withdrawal of date. Expected credit losses continue to be determined on this
undrawn facilities. basis until there is either a significant increase in the credit risk
of an instrument or the instrument becomes credit impaired. If
For credit-impaired financial instruments, the estimate of cash an instrument is no longer considered to exhibit a significant
shortfalls may require the use of expert credit judgement. As increase in credit risk, expected credit losses will revert to being
a practical expedient, the Group may also measure credit determined on a 12-month basis.
impairment on the basis of an instrument’s fair value using an
observable market price.
48.6.3.4 Significant increase in credit risk
The estimate of expected cash shortfalls on a collateralised
financial instrument reflects the amount and timing of cash If a financial asset experiences a significant increase in credit risk
flows that are expected from foreclosure on the collateral less (SICR) since initial recognition, an expected credit loss provision
the costs of obtaining and selling the collateral, regardless of is recognised for default events that may occur over the lifetime
whether foreclosure is deemed probable. of the asset.

Cash flows from unfunded credit enhancements held are Significant increase in credit risk is assessed by comparing the
included within the measurement of expected credit losses risk of default of an exposure at the reporting date to the risk
if they are part of, or integral to, the contractual terms of the of default at origination (after taking into account the passage
instrument (this includes financial guarantees, unfunded risk of time). Significant does not mean statistically significant nor
participations and other non-derivative credit insurance). is it assessed in the context of changes in expected credit loss.
Although non-integral credit enhancements do not impact Whether a change in the risk of default is significant or not is
the measurement of expected credit losses, a reimbursement assessed using a number of quantitative and qualitative factors,
asset is recognised to the extent of the expected credit losses the weight of which depends on the type of product and
recorded. counterparty. Financial assets that are 30 or more days past
due and not credit-impaired will always be considered to have
Cash shortfalls are discounted using the effective interest rate experienced a significant increase in credit risk. For less material
(or credit-adjusted effective interest rate for POCI instruments) portfolios where a loss rate or roll rate approach is applied to
on the financial instrument as calculated at initial recognition compute expected credit loss, significant increase in credit risk is
or if the instrument has a variable interest rate, the current primarily based on 30 days past due.
effective interest rate determined under the contract.
Quantitative factors include an assessment of whether there has
been significant increase in the forward-looking probability of
Instruments Location of expected credit loss default (PD) since origination. A forward-looking PD is one that
provisions is adjusted for future economic conditions to the extent these
are correlated to changes in credit risk. We compare the residual
Financial assets held at amortised cost less provisions: netted lifetime PD at the statement of financial position date to the
against gross carrying value residual lifetime PD that was expected at the time of origination
for the same point in the term structure and determine whether
Ÿ Financial assets held at FVOCI – Investment securities both the absolute and relative change between the two exceeds
Other comprehensive income (FVOCI expected credit loss predetermined thresholds. To the extent that the differences
Reserve) between the measures of default outlined exceed the defined
Ÿ Loan commitments thresholds, the instrument is considered to have experienced a
Ÿ Provisions for liabilities and charges significant increase in credit risk.
Ÿ Financial guarantees
Qualitative factors assessed include those linked to current
Ÿ Provisions for liabilities and charges
credit risk management processes, such as lending placed on
non-purely precautionary early alert (and subject to closer
Investment and treasury securities classified as FVOCI are hekd monitoring).
at fair value on the face of the statement of financial position.
100 Standard Chartered — Annual Report 2020
Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

48 Risk Management (continued) As a general indicator, credit risk of a particular exposure is

deemed to have increased significantly since initial recognition
if, based on the Group’s quantitative modelling:
48.6.3.4 Significant increase in credit risk
(continued) SICR is assessed in the context of an increase in the risk of
a default occurring over the remaining life of the financial
instrument when compared with that expected at the time of
A non-purely precautionary early alert account is one which initial recognition for the same period. It is not assessed in the
exhibits risk or potential weaknesses of a material nature context of an increase in the expected credit loss.
requiring closer monitoring, supervision, or attention by
management. Weaknesses in such a borrower’s account, if The Group uses a number of qualitative and quantitative
left uncorrected, could result in deterioration of repayment measures in assessing SICR. Quantitative measures relate to the
prospects and the likelihood of being downgraded. Indicators relative and absolute changes in the lifetime PD compared with
could include a rapid erosion of position within the industry, those expected at initial recognition. Qualitative factors include
concerns over management’s ability to manage operations, placement of loans on non-purely precautionary early alert,
weak/deteriorating operating results, liquidity strain and classification as higher risk (CG 12) or where principal and/or
overdue balances among other factors. interest payments are 30 days or more past due.

Further, SICR will be considered when major sovereign rating

Credit impaired (or defaulted) exposures agencies significantly downgrade a country and there is a 50%
(Stage 3) drop in copper prices. The Group has significant exposures to
the mines and their capacity to meet their obligations will be

Financial statements
Financial assets that are credit impaired (or in default) represent affected. This is applicable for all segments.
those that are at least 90 days past due in respect of principal
and/or interest. Financial assets are also considered to be credit 48.6.4. Analysis of inputs to the ECL model under
impaired where the obligors are unlikely to pay on the occurrence multiple economic scenarios
of one or more observable events that have a detrimental impact
on the estimated future cash flows of the financial asset. It may The Group incorporates forward-looking information into both
not be possible to identify a single discrete event but instead the the assessment of whether the credit risk of an instrument
combined effect of several events may cause financial assets to has increased significantly since its initial recognition and the
become credit impaired. measurement of ECL.

Evidence that a financial asset is credit impaired includes A Monte Carlo simulation is used on the macroeconomic
observable data about the following events: variables to generate multiple economic scenarios for the
purpose of reflecting the non-linearity of losses where these
Ÿ Significant financial difficulty of the issuer or borrower; exist on individual portfolios
Ÿ Breach of contract such as default or a past due event;
Ÿ For economic or contractual reasons relating to the The approach follows the following steps:
borrower’s financial difficulty, the lenders of the borrower
have granted the borrower concession/s that lenders would 1. Using Monte Carlo simulation, multiple economic states of
not otherwise consider. This would include forbearance the world are generated using a base case macroeconomic
actions; forecast and a covariance matrix developed using historical
Ÿ Pending or actual bankruptcy or other financial macroeconomic data
reorganisation to avoid or delay discharge of the borrower’s
obligation/s; and 2. 50 scenarios are generated to provide robust and stable
Ÿ The disappearance of an active market for the applicable results while ensuring ability to meet reporting timelines.
financial asset due to financial difficulties of the borrower. Due to the central nature of the ECL estimate we see
diminishing returns from further marginal runs
Irrevocable lending commitments to a credit impaired obligor
that have not yet been drawn down are also included within 3. Each of these economic states are run through the
the stage 3 credit impairment provision to the extent that the calculation engine to generate:
commitment cannot be withdrawn.
a) A weighted average PD term structure for the significant
Loss provisions against credit impaired financial assets are deterioration assessment
determined based on an assessment of the recoverable cash b) A weighted average 12-month and lifetime ECL
flows under a range of scenarios, including the realisation of
any collateral held where appropriate. The loss provisions held External information considered includes economic data and
represent the difference between the present value of the cash forecasts published by governmental bodies and monetary
flows expected to be recovered, discounted at the instrument’s authorities such as the International Monetary Fund and
original effective interest rate and the gross carrying value of the selected private-sector and academic forecasters.
instrument prior to any credit impairment.
Periodically, the Group carries out stress testing of more extreme
shocks to calibrate its determination of the upside and downside
Determining whether credit risk has increased representative scenarios. A comprehensive review
significantly is performed at least annually on the design of the scenarios by
a panel of experts that advises the Group’s senior management.
The Group assesses whether credit risk has increased significantly
The Group has identified and documented key drivers of credit
since initial recognition at each reporting date. Determining
risk and credit losses for each portfolio of financial instruments
whether an increase in credit risk is significant depends on the
and using an analysis of historical data, has estimated
characteristics of the financial instrument and the borrower and
relationships between macro-economic variables and credit risk
the geographical region. What is considered significant differs
and credit losses.
for different types of lending, in particular between wholesale
and consumer.

Standard Chartered — Annual Report 2020 101

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

48 Risk Management (continued) Forborne loans

48.6.4. Analysis of inputs to the ECL model under Forborne loans are those loans that have been modified in
multiple economic scenarios (continued) response to a customer’s financial difficulties.

The key drivers for credit risk for wholesale portfolios are: Forbearance strategies assist clients who are temporarily
GDP growth, unemployment rates and interest rates. For in financial distress and are unable to meet their original
exposures to specific industries and/or regions, the key contractual repayment terms. Forbearance can be initiated
drivers also include relevant commodity and/or real estate by the client, the Group or a third party including government
prices. The key drivers for credit risk for consumer portfolios sponsored programmes or a conglomerate of credit
are: unemployment rates, house prices and interest rates. institutions. Forbearance may include debt restructuring
such as new repayment schedules, payment deferrals, tenor
48.6.5 Overview of modified and forborne loans extensions, interest only payments, lower interest rates,
forgiveness of principal, interest or fees, or relaxation of loan
Modified financial assets covenants.

Where the original contractual terms of a financial asset Forborne loans that have been modified (and not
have been modified for credit reasons and the instrument derecognised) on terms that are not consistent with those
has not been derecognised, the resulting modification loss readily available in the market and/or where we have
is recognised within credit impairment in the statement granted a concession compared to the original terms
of income or loss and other comprehensive income within of the loans are considered credit impaired if there is a
a corresponding decrease in the gross carrying value of detrimental impact on cash flows. The modification loss
the asset. If the modification involved a concession that (see Classification and measurement – Modifications) is
the Group would not otherwise consider, the instrument is recognised in the profit or loss within credit impairment and
considered to be credit impaired and is considered forborne. the gross carrying value of the loan reduced by the same
amount. The modified loan is disclosed as ‘Loans subject to
Expected credit loss for modified financial assets that forbearance – credit impaired’.
have not been derecognised and are not considered to
be credit-impaired will be recognised on a 12-month basis, Loans that have been subject to a forbearance modification,
or a lifetime basis, if there is a significant increase in credit but which are not considered credit impaired (not classified
risk. These assets are assessed to determine whether there as CG13 or CG14), are disclosed as ‘Forborne – not credit
has been a significant increase in credit risk subsequent to impaired’. This may include amendments to covenants
the modification. Although loans may be modified for non- within the contractual terms.
credit reasons, a significant increase in credit risk may occur.
48.6.6 Analysis of risk concentration
In addition to the recognition of modification gains and losses,
the revised carrying value of modified financial assets will impact The Group monitors concentrations of credit risk by sector.
the calculation of expected credit losses, with any increase or An analysis of concentrations of credit risk from loans and
decrease in expected credit loss recognised within impairment. advances and investment securities is shown below.

Group and Bank

Loans and advances to customers Investment securities
2020 2020 2019
2019
K’000 K’000 K’000
Carrying amount 2,410,457 3,131,664 3,542,091 2,049,415
Corporate and Commercial:
Agriculture 384,684 487,338 - -

Commerce 396,408 380,458 - -

Financial services 4,458 23,406 - -
Mining and quarrying 180,352 236,765 - -
Manufacturing 151,435 241,287 - -
Transport, Storage 6,092 9,677 - -
Construction 191,710 191,457 - -
Investment Securities - - 3,542,091 2,049,415
Consumer:
Mortgages 118,350 140,879 - -
Unsecured lending 976,968 1,420,397 - -
Total 2,410,457 3,131,664 3,542,091 2,049,415

102 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

48 Risk Management (continued)

48.6 Credit risk (continued)

48.6.6 Analysis of risk concentration (continued)
The following table sets out information about the credit quality of financial assets measured at amortised cost, FVOCI and
FVTPL investments securities. Unless specifically indicated, for financial assets, the amounts in the table represent gross
carrying amounts. For loan commitments and financial guarantee contracts, the amounts in the table represent the amounts
committed or guaranteed, respectively.

Explanation of the terms ‘Stage 1’, ‘Stage 2’ and ‘Stage 3’ is included in Note 48.6.3.3.

There were no loans and advances to banks during 2020.

2019
Notes Stage 1 Stage 2 Stage 3 Tota
K’000 K’000 K’000 K’000
Loans and advances to banks at amortised cost- gross

Financial statements
carrying amount
Grade 1-11: Low-fair risk 102,000 - - 102,000
Gross carrying amount 102,000 - - 102,000
Loss Allowance 23 (1) - - (1)
101,999 - - 101,999

2020

Stage 1 Stage 2 Stage 3 Total

Notes K’000 K’000 K’000 K’000
Loans and advances to customers at amortised cost
Grade 1-11: Low-fair risk 1,464,709 1,026,137 49,272 2,540,118
Grade 12: Substandard - - 505 505
Grade:13 Doubtful - - 68,369 68,369
Grade 14 Loss - - 140,613 140,613
Gross carrying amount 1,464,709 1,026,136 258,759 2,749,604
Loss allowance 29 (132,142) (157,654) (49,351) (339,147)
1,332,567 868,482 209,408 2,410,457

2019

Stage 1 Stage 2 Stage 3 Total

Notes K’000 K’000 K’000 K’000
Loans and advances to customers at amortised cost
Grade 1-11: Low-fair risk 2,208,780 1,013,955 6,470 3,229,205
Grade 12: Substandard - - - -
Grade:13 Doubtful - - 164 164
Grade 14 Loss - - 89,263 89,263
Gross carrying amount 2,208,780 1,013,955 95,897 3,318,632
Loss allowance 29 (19,076) (116,768) (51,124) (186,968)
2,189,704 897,187 44,773 3,131,664

Standard Chartered — Annual Report 2020 103

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

48 Risk Management (continued)

48.6 Credit risk (continued)

48.6.6 Analysis of risk concentration (continued)

Investment securities
2020
Note Stage 1 Stage 2 Stage 3 Total
K’000 K’000 K’000 K’000
Grade 1-11: Low-fair risk - 3,542,091 - 3,542,091
Carrying amount 25 - 3,542,091 - 3,542,091
Loss allowance - (251,099) - (251,099)
- 3,290,992 - 3,290,992

2019
Stage 1 Stage 2 Stage 3 Total
K’000 K’000 K’000 K’000
K’000
Grade 1-11: Low-fair risk 1,880,123 169,292 - 2,049,415
Carrying amount 25 1,880,123 169,292 - 2,049,415
Loss allowance (145,022) (30,374) - (175,396)
1,735,101 138,918 - 1,874,019

Loan commitments 2020

Stage 1 Stage 2 Stage 3 Total
Note K’000 K’000 K’000 K’000
Grade 1-11: Low-fair risk 570,610 234,430 - 805,040
Carrying amount 37 570,610 234,430 - 805,040
Loss allowance 592 16,901 - 17,493
571,202 251,331 - 822,533

Financial guarantee contracts

Grade 1-11: Low-fair risk 495,338 74,482 11,644 581,464
Carrying amount 37 495,338 74,482 11,644 581,464
Loss allowance 1 2,433 - 2,434
495,339 76,915 11,644 583,898

Loan commitments 2019

Stage 1 Stage 2 Stage 3 Total
K’000 K’000 K’000 K’000
Grade 1-11: Low-fair risk 276,052 130,421 - 406,473
Carrying amount 37 276,052 130,421 - 406,473
Loss allowance 3,545 2,904 - 6,449
279,597 133,325 - 412,922

Financial guarantee contracts

Grade 1-11: Low-fair risk 155,406 33,950 - 189,356
Carrying amount 37 155,406 33,950 - 189,356
Loss allowance 96 - - 96
155,502 33,950 - 189,452

104 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

48 Risk Management (continued) risk of default and applying experienced credit judgement.
Credit risk grades are defined using qualitative and quantitative
factors that are indicative of risk of default. These factors vary
48.6 Credit risk (continued) depending on the nature of the exposure and the type of
borrower.
48.6.7 Amounts arising from ECL
Credit risk grades are defined and calibrated such that the risk
Techniques used to compute impairment amounts use models of default occurring increases exponentially as the credit risk
which analyse historical repayment and default rates over deteriorates so, for example, the difference in risk of default
a time horizon. Where various models are used, judgement is between credit risk grades 1 and 2 is smaller than the difference
required to analyse the available information provided and between credit risk grades 2 and 3.
select the appropriate model or combination of models to use.
Each exposure is allocated to a credit risk grade on initial
Expert credit judgement is also applied to determine whether recognition based on available information about the borrower.
any post-model adjustments are required for credit risk Exposures are subject to ongoing monitoring, which may result
elements which are not captured by the models. in an exposure being moved to a different credit risk grade. The
monitoring typically involves use of the following data.
The Group allocates each exposure to a credit risk grade based
on a variety of data that is determined to be predictive of the

Corporate and institutional and Commercial Consumer exposures All exposures

Financial statements
- Information obtained during the periodic review - internally collected data on - Payment record - this includes
of customer file e.g. audited financial statements, customer behavior - e.g. utilisation overdue status as well as a range of
management accounts, budgets and projections. of credit card facilities. variables about payment ratios.
Examples of areas of particular focus are: gross
profit margins, financial leverage ratios, debt service
coverage, compliance with covenants, quality of
management, senior management changes.

- Data from credit reference agencies, press articles, - External data from credit reference - Utilisation of the granted limit.
changes in external credit ratings. agencies, including industry-
standard credit scores.

- Actual and expected significant changes in the - Existing and forecast changes in
political, regulatory and technological environment business, financial and economic
of the borrower or its business activities. conditions.

Consumer Book has no client within investment grade and the approach is to cap it to the country sovereign rating which was at 11A.

Generating the term structure of PD

Credit risk grades are a primary input into the determination of the term structure of PD for exposures. The Group collects performance and
default information about its credit risk exposures analysed by type of product and borrower as well as by credit risk grading. For some portfolios,
information purchased from external credit reference agencies is also used.

The Group employs statistical models to analyse the data collected and generate estimates of the remaining lifetime PD of exposures and how
these are expected to change as a result of the passage of time.

Write-offs of credit impaired instruments and reversal of impairment

To the extent a financial debt instrument is considered irrecoverable, the applicable portion of the gross carrying value is written off against the
related loan provision. Credit impaired financial debt instruments are graded 12-14 on the Group’s internal credit grading system. Such loans
are written off after all the necessary procedures have been completed, it is decided that there is no realistic probability of recovery and the
amount of the loss has been determined. Subsequent recoveries of amounts previously written off decrease the amount of the provision for loan
impairment in the statement of income or loss and other comprehensive income. If, in a subsequent period, the amount of the credit impairment
loss decreases and the decrease can be related objectively to an event occurring after the credit impairment was recognised (such as an
improvement in the debtor’s credit rating), the previously recognised credit impairment loss is reversed by adjusting the provision account. The
amount of the reversal is recognised in the statement of income or loss and other comprehensive income.

Standard Chartered — Annual Report 2020 105

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

48 Risk Management (continued)

48.6 Credit risk (continued)
48.6.7 Amounts arising from ECL (continued)

Group and Bank 2020 2019

Note Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
K’000 K’000 K’000 K’000 K’000 K’000 K’000 K’000
Loans and advances to banks
amortised cost
Balance at 1 January - - - - - - - -
- Transfer to Stage 1 - - - - - - - -
- Transfer to Stage 2 - - - - - - - -
- Transfer to Stage 3 - - - - - - - -
Net re-measurement of loss
allowance - - - -
New financial assets originated or
purchased 1 - - 1
Financial assets that have been
derecognised - - - -
(Write off)/recoveries - - - - - -
Unwind of discount - - - - - - - -
Foreign exchange and other
movements - - - - - - - -

Balance as at 31st December 2020 - - - - 1 - - 1

Group and Bank 2020 2019

Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total K’000
K’000 K’000 K’000 K’000 K’000 K’000 K’000
Loans and advances to
customers amortised cost
Balance at 1 January 19,075 116,770 51,123 186,968 19,354 34,157 10,244 63,755
- Transfer to Stage 1 225,772 (225,772) - - 43,623 (43,623) - -
- Transfer to Stage 2 (166,833) 237,194 (70,361) - (61,312) 72,014 (10,702) -
- Transfer to Stage 3 - (127,306) 127,306 - - (48,467) 48,467 -
Net re-measurement of loss
allowance 78,014 886 108,068 186,968 1,665 14,081 48,009 63,755

New financial assets originated

or purchased 155,438 175 120 155,733 54,851 - - 54,851

Financial assets that have been

derecognised (3,088) (1,446) (126,610) (131,144) (1,186) (4,946) (36,815 (42,947)

(Write off)/recoveries - - - - - - (80,177) (80,177)

Unwind of discount - - (99,567) (99,567) - - - -

Foreign exchange and other

movements (98,223) 158,040 167,340 227,157 (36,255) 107,635 120,106 191,486

Balance as at 31st December

2020 132,141 157,654 49,351 339,147 19,075 116,770 51,123 186,968
Gross carrying amounts in the loans and advances reduced year on year by 17% on account of the derisking of the personal loan book and
exiting of the Commercial Banking business. This reduced the Financial assets that have been Derecognised by over 100% mainly in the RB
and CB segments.
The increase in impairments for the CIB segment was mainly on account of both the internal country downgrade and sovereign downgrade
coupled with increased loan exposures. The downgrades increased the credit risk of customers in the CIB segment particularly for clients
without parental guarantee, impairments for CIB went up by over 100% year on year while RB and CB impairments reduced by 12% and 9%
respectively.
Included in foreign exchange and other movements are changes in risk parameters, loss and allowances.

106 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

48 Risk Management (continued)

48.6 Credit risk (continued)

48.6.7 Amounts arising from ECL (continued)

2020
Stage 1 Stage 2 Stage 3 Total
Note K’000 K’000 K’000 K’000
Loans and advances to customers at amortised cost
Retail Banking customers
Balance at 1 January 17,980 84,024 11,738 113,742
- Transfer to Stage 1 190,716 (190,716) - -
- Transfer to Stage 2 (101,869) 115,406 (13,537) -
- Transfer to Stage 3 - (93,367) 93,367 -
Net remeasurement of loss allowance 106,827 (84,653) 91,568 113,742

Financial statements
New financial assets originated or purchased 83,576 174 120 83,870
Financial assets that have been derecognised (3,088) (1,446) (53,070) (57,604)
(Write off)/recoveries - - (30,586) (30,586)
Foreign exchange and other movements (97,943) 92,749 (4,408) (9,602)
Balance as at 31st December 2020 29 89,372 6,824 3,624 99,820

2019
Stage 1 Stage 2 Stage 3 Total
Note K’000 K’000 K’000 K’000
Loans and advances to customers at amortised cost
Retail Banking customers
Balance at 1 January 18,632 6,241 1,586 26,459
- Transfer to Stage 1 12,438 (12,438) - -
- Transfer to Stage 2 (29,287) 34,977 (5,690) -
- Transfer to Stage 3 - (36,397) 36,397 -
Net remeasurement of loss allowance 1,783 (7,617) 32,293 26,459
New financial assets originated or purchased 31,291 - - 31,291
Financial assets that have been derecognised (1,182) (3,411) (7,998) (12,591)
(Write off)/recoveries - - (35,515) (35,515)
Foreign exchange and other movements (13,912) 95,052 22,958 104,098
Balance as at 31st December 2019 29 17,980 84,024 11,738 113,742

Standard Chartered — Annual Report 2020 107

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

48 Risk Management (continued)

48.6 Credit risk (continued)

48.6.7 Amounts arising from ECL (continued)

2020
Stage 1 Stage 2 Stage 3 Total
Note K’000 K’000 K’000 K’000
Loans and advances to customers at amortised cost
Corporate and Institution Banking
Balance at 1 January 505 5,023 3,541 9,069
- Transfer to Stage 1 27,809 (27,809) - -
- Transfer to Stage 2 (61,553) 116,712 (55,159) -
- Transfer to Stage 3 - (12,159) 12,159 -
Net re-measurement of loss allowance (33,239) 81,767 (39,459) 9,069
New financial assets originated or purchased 68,843 1 - 68,844
Financial assets that have been derecognised - - (10,534) (10,534)
(Write off)/recoveries - - (39,076) (39,076)
Foreign exchange and other movements 7,162 66,751 78,792 152,705
Balance as at 31st December 2020 29 42,766 148,519 (10,277) 181,008

2019
Stage 1 Stage 2 Stage 3 Total
Note K’000 K’000 K’000 K’000
Loans and advances to customers at amortised cost
Corporate and Institution Banking

Balance at 1 January 686 26,563 768 28,017

- Transfer to Stage 1 18,132 (18,132) - -
- Transfer to Stage 2 (345) 345 - -
- Transfer to Stage 3 - (11,727) 11,727 -
Net re-measurement of loss allowance 18,473 (2,951) 12,495 28,017

New financial assets originated or purchased 4,005 - - 4,005

Financial assets that have been derecognised - - (2,424) (2,424)
(Write off)/recoveries - - (44,661) (44,661)
Foreign exchange and other movements (21,973) 7,974 38,131 24,132
Balance as at 31st December 2019 29 505 5,023 3,540 9,069

108 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

48.6 Risk Management (continued)

48.6 Credit risk (continued)

48.6.7 Amounts arising from ECL (continued)

2020
Stage 1 Stage 2 Stage 3 Total
K’000 K’000 K’000 K’000
Loans and advances to customers at amortised Note
cost
Commercial Banking customers
Balance at 1 January 588 27,724 35,845 64,157
- Transfer to Stage 1 7,247 (7,247) - -
- Transfer to Stage 2 (3,411) 5,076 (1,665) -
- Transfer to Stage 3 - (21,780) 21,780 -
Net re-measurement of loss allowance 4,424 3,773 55,960 64,157

Financial statements
New financial assets originated or purchased 3,019 - - 3,019
Financial assets that have been derecognised - - (63,006) (63,006)
Write offs - - (29,905) (29,905)
Foreign exchange and other movements (7,442) (1,461) 92,956 84,053
Balance as at 31st December 2020 29 1 2,312 56,005 58,318

2019
Stage 1 Stage 2 Stage 3 Total
K’000 K’000 K’000 K’000
Loans and advances to customers at amortised Note
cost

Commercial Banking customers

Balance at 1 January 39 1,350 7,890 9,279

- Transfer to Stage 1 13,053 (13,053) - -

- Transfer to Stage 2 (31,683) 36,695 (5,012) -

- Transfer to Stage 3 - (343) 343 -

Net re-measurement of loss allowance (18,591) 24,649 3,221 9,279

New financial assets originated or purchased 19,556 - - 19,556

Financial assets that have been derecognised (7) (1,535) (26,393) (27,935)

Foreign exchange and other movements (370) 4,610 59,017 63,257

Balance as at 31st December 2019 29 588 27,724 35,845 64,157

Standard Chartered — Annual Report 2020 109

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

48.6 Risk Management (continued)

48.6 Credit risk (continued)

48.6.7 Amounts arising from ECL (continued)

2020
Stage 1 Stage 2 Stage 3 Total
K’000 K’000 K’000 K’000
Investment securities at FVOCI
Balance at 1 January 145,022 30,374 - 175,396
- Transfer to Stage 1 - - - -
- Transfer to Stage 2 (145,022) 145,022 - -
- Transfer to Stage 3 - - - -
Net re-measurement of loss allowance - 175,396 - 175,396
New financial assets originated or purchased - 161,893 - 161,893
Financial assets that have been derecognised - - - -
(Write off)/recoveries - - - -
Unwind of discount -
Foreign exchange and other movements - (86,190) - (86,190)
-
Balance as at 31st December 2020 - 251,099 - 251,099

2019
Stage 1 Stage 2 Stage 3 Total
K’000 K’000 K’000 K’000
Investment securities at FVOCI
Balance at 1 January - (17,228) - (17,228)
- Transfer to Stage 1 23,043 (23,043) - -
- Transfer to Stage 2 (36,982) 36,982 - -
- Transfer to Stage 3 - - - -
Net re-measurement of loss allowance (13,939) (3,289) - (17,228)
New financial assets originated or purchased 147,642 35,037 - 182,679
Financial assets that have been derecognised - - - -
(Write off)/recoveries - 14,143 - 14,143
Foreign exchange and other movements 11,319 (15,517) - (4,198)
-
Balance as at 31st December 2019 145,022 30,374 - 175,396

110 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

48 Risk Management (continued)

48.6 Credit risk (continued)

48.6.7 Amounts arising from ECL (continued)

See accounting policy 7.29

2020 2019
Stage 1 Stage 2 Total Stage 1 Stage 2 Total
K’000 K’000 K’000 K’000 K’000 K’000

ECL on statutory reserves

Balance at 1 January - - - - -

New financial assets originated or purchased - 67,629 67,629 - -

Net remeasurement of loss allowance - - - - -

Foreign exchange and other movements - - - - -

Financial statements
Balance at 31 December - 67,629 67,629 - -

2020 2019
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
K’000 K’000 K’000 K’000 K’000 K’000 K’000 K’000
Loan commitments and financial
guarantee contracts

Balance at 1 January 3,641 2,903 - 6,544 496 2,180 2,676

- - - -

- Transfer to Stage 1 1,956 (1,956) - - 312 (312) - -

- Transfer to Stage 2 (75,197) 75,197 - - (4,842) 4,842 - -

- Transfer to Stage 3 - (715) 715 - - (75) 75 -

Net remeasurement of loss allowance (69,600) 75,429 715 6,544 (4,034) 6,635 75 2,676
New loan commitments and financial
guarantees 74,188 - - 74,188 4,434 - - 4,434
Foreign exchange and other
movements (3,994) (56,096) (715) (60,805) 3,241 (3,732) (75) (566)

Balance at 31 December 594 19,333 - 19,927 3,641 2,903 - 6,544

Standard Chartered — Annual Report 2020 111

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

48 Risk Management (continued)

48.6 Credit risk (continued)

48.6.7 Amounts arising from ECL (continued)

The following table provides a reconciliation between:
• amounts shown in the below tables are reconciling opening and closing balances of loss allowance per class of
financial instrument; and
• the ‘impairment losses on financial instruments’ line item in the consolidated and separate financial statements of
profit or loss and other comprehensive income.

2020 Loan
Cash and commitments
balances Loans and Loans and and financial
at Bank of advances advances to Investment guarantee
Zambia to banks customers securities contracts Total
K’000 K’000 K’000 K’000 K’000 K’000
Net remeasurement of
loss allowance - - 119,208 89,206 (71,373) 137,041
New financial assets
originated or purchased 67,629 - 155,734 160,897 77,387 461,647

Total 67,629 - 274,942 250,103 6,014 598,688

Recoveries of amounts
previously written off - (131,036) (174,400) - (305,544)

Total 67,629 - 143,906 75,703 6,014 293,252

2019 Loan
commitments
Loans and Loans and and financial
advances advances to Investment guarantee
to banks customers securities contracts Total
K’000 K’000 K’000 K’000 K’000
Net remeasurement of
loss allowance - 133,608 (7,283) (7,302) 119,023
New financial assets
originated or purchased (20) 54,851 165,452 7,371 227,654

Total (20) 188,459 158,169 69 346,677

Recoveries of amounts
previously written off - (42,947) - - (42,947)

Total (20) 145,512 158,169 69 303,730

112 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

48 Risk Management (continued)

48.6 Credit risk (continued)

48.6.8 Collateral held and other credit enhancements

The Group holds collateral and other credit enhancements against certain of its credit exposures. The following table sets out
the principal types of collateral held against different types of financial assets.

Principal type of collateral

Note 2020 2019 held
Total Total
K’000 K’000

Investment securities 28 3,542,091 2,049,415 None

Trading derivative assets 27 4,590 45,273 None

Loans and advances to consumer customers

Mortgage lending 119,474 141,279 Residential property

Financial statements
Personal loans 936,289 1,294,005 None

Credit cards 43,988 44,840 None

Auto loans 5,573 8,005 None

Overdraft 89,814 95,329 None

29 1,195,138 1,583,458

Loans and advances to commercial and

corporate Industrial customers

Term loans 622,450 999,647

Overdrafts 932,016 735,526

Commercial property,
floating charges over
29 1,554,466 1,735,173 corporate assets

The general creditworthiness of a corporate and Institutional arrangement or similar agreement that covers similar
and commercial customer tends to be the most relevant financial instruments, irrespective of whether they are
indicator of credit quality of a loan extended to it. offset in the statement of financial position.
However, collateral provides additional security and the
Group generally requests that corporate and institutional 48.6.10 Impaired loans and advances and investment
and commercial borrowers provide it. The Group may securities
take collateral in the form of a first charge over real
estate, floating charges over all corporate assets and For details of impaired financial assets see note 48.6.3.
other liens and guarantees.
48.7 Liquidity risk and funding management
Because of the Group’s focus on corporate and Institutional
and commercial customers’ creditworthiness, the Group Liquidity risk is defined as the risk that the Group does
does not routinely update the valuation of collateral not have sufficient liquid financial resources to meet
held against all loans to corporate and Institutional obligations associated with financial liabilities that are
and commercial customers. Valuation of collateral is settled by delivering cash or another financial asset.
updated when the loan is put on a watch list and the
loan is monitored more closely. For credit-impaired loans, Liquidity risk arises because of the possibility that the
the Group obtains appraisals of collateral because it Group might be unable to meet its payment obligations
provides input into determining the management credit when they fall due as a result of mismatches in the
risk actions. timing of the cash flows under both normal and
stress circumstances. Such scenarios could occur
48.6.9 Offsetting financial assets and financial liabilities when funding needed for illiquid asset positions is not
available to the Group on acceptable terms. To limit
There are no financial assets and financial liabilities that this risk, management has arranged for diversified
are offset in the Group’s statement of financial position funding sources in addition to its core deposit base,
or that are subject to an enforceable master netting and adopted a policy of managing assets with liquidity
in mind and monitoring future cash flows and liquidity
on a daily basis.

Standard Chartered — Annual Report 2020 113

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

48 Risk Management (continued) compliance with the liquidity limit established by the Bank
of Zambia. The ratios during the year were as follows:
48.7 Liquidity risk and funding management
(continued) Core liquid asset ratios Group and Bank
2020 2019
The Group has developed internal control processes and
contingency plans for managing liquidity risk. Assets and At 31 December 79% 45%
Liabilities Committee (ALCO) is responsible for managing Average for the period 71% 47%
the Group’s liquidity risk through comprehensive policies,
governance and review procedures, stress testing, Maximum for the period 96% 63%
monitoring of limit sets to ensure these are in line with the 38% 35%
Minimum for the period
overall liquidity risk appetite and strategy of the Group.
The treasury department of the group is responsible for The minimum required by Bank of Zambia for core liquid assets is
working with other departments within the Group to ensure
9% (2019: 9%).
the liquidity risk strategy is executed. This incorporates an
assessment of expected cash flows and the availability
of high-grade collateral which could be used to secure The concentration of funding requirements at any one date or from
additional funding, if required. any one source is managed continuously. A substantial proportion
of the Group’s deposit base is made up of current and savings
The Group maintains a portfolio of highly marketable and accounts and other short term customer deposits.
diverse assets that are assumed to be easily liquidated in
the event of an unforeseen interruption in cash flow. The Advances to deposit ratios Group and Bank
Group also has lines of credit that it can access to meet
liquidity needs. Net liquid assets consist of cash, short– 2020 2019
term bank deposits and liquid debt securities available for
immediate sale, less deposit for banks and other issued
At 31 December 20% 33%
securities and borrowings due to mature within the next
month. Average for the period 24% 36%
Maximum for the period 34% 39%
The key measure used by the Group for managing
liquidity risk is the ratio of net liquid assets to deposits Minimum for the period 18% 31%
from customers. For this purpose net liquid assets are
considered as including cash and cash equivalents and The Group stresses the importance of current accounts and savings
investment securities for which there is an active and liquid accounts as sources of funds to finance lending to customers. They
market less any deposits from banks, other borrowings and are monitored using the advances to deposit ratio, which compares
commitments maturing within the next month. A similar, loans and advances to customers as a per centage of core customer
but not identical calculation is used to measure the Group’s current accounts and savings accounts, together with term funding
with a remaining term to maturity in excess of one year.
The following table provides an analysis of the financial liabilities of the Group into relevant maturity groupings:

One
Gross month to Three months One to More than
Carrying Nominal Less than three to five five
2020 amount outflow one month months one year years years
K’000 K’000 K’000 K’000 K’000 K’000 K’000
Non-derivative liabilities
Amounts payable to group banks 325,740 325,740 44,459 154,261 127,020 - -
Amounts payable to non-group
banks 21,266 21,266 21,266 - - - -
Deposits from customers 12,214,521 12,219,930 10,456,881 844,412 583,030 335,607 -
Lease liabilities 163,640 190,871 - 7 11,819 179,045 -
Other payables 129,101 129,101 129,101 - - - -
Subordinated liabilities 84,680 102,306 - - - - 102,306
Total non-derivative liabilities 12,938,948 12,989,214 10,651,707 998,680 721,869 514,652 102,306
Derivative liabilities
Derivative financial instruments 8,548 8,548 8,548 - - - -
Total derivative liabilities 8,548 8,548 8,548 - - - -
Off Balance sheet financial
liabilities
Loan commitments 805,040 805,040 - - 805,040 - -
Guarantees 581,464 581,464 21,241 2,758 78,651 445,743 33,071
Letters of credit - - - - - - -

Off Balance sheet financial

liabilities 1,386,504 1,386,504 21,241 2,758 883,691 445,743 33,071

114 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

48 Risk Management (continued)

48.7 Liquidity risk and funding management (continued)

Group and Bank

Gross One month Three One to More than

Carrying Nominal Less than to three months to five five
2019 amount outflow one month months one year years years
K’000 K’000 K’000 K’000 K’000 K’000 K’000
Non-derivative liabilities
Amounts payable to group banks 229,489 229,489 56,768 87,822 70,750 14,149 -
Amounts payable to non-group 12,297 12,297 12,297 - - - -
banks
Deposits from customers 9,289,297 9,342,945 7,219,829 344,608 1,700,843 77,665 -
Lease liabilities 64,000 70,919 - - 5,311 65,608 -

Financial statements
Other payables 317,145 317,145 317,145 - - - -
Subordinated liabilities 56,600 73,123 - - - - 73,123
Total non-derivative liabilities 9,968,828 10,045,918 7,606,039 432,430 1,776,904 157,422 73,123
Derivative liabilities
Derivative financial instruments 41,740 41,740 41,740 - - - -
Total derivative liabilities 41,740 41,740 41,740 - - - -
Off Balance sheet financial
liabilities
Loan commitments 406,473 406,473 - - 406,473 -
Guarantees 408,025 408,025 3,290 42,063 147,293 211,659
Letters of credit 10 10 10 - - -
Off Balance sheet financial
liabilities 814,508 814,508 3,300 42,063 553,766 211,659

48.7.1 Analysis of encumbered and unencumbered assets

Below is the analysis of the Group’s encumbered and unencumbered assets that would be available to obtain additional funding as
securities. For this purpose, encumbered assets are:

Ÿ Assets which have been pledged as collateral (e.g., which are required to be separately disclosed under IFRS 7)

Or

Ÿ Assets that an entity believes it is restricted from using to secure funding, for legal or other reasons, which may include market
practice or sound risk management. Restrictions related to the legal position of certain assets, for example, those held by
consolidated securitisation vehicles or in pools for covered bond issuances, may vary in different jurisdictions

Standard Chartered — Annual Report 2020 115

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

48 Risk Management (continued)

48.7 Liquidity risk and funding management (continued)

48.7.1 Analysis of encumbered and unencumbered assets (continued)

Unencumbered assets are the remaining assets that the Group owns.

Encumbered Unencumbered
Pledged Available
as as
collateral Uncollateralised collateral Uncollateralised Total
2020 K’000 K’000 K’000 K’000 K’000
Cash on hand and balances at
Bank of Zambia - - 773,435 1,322,456 2,095,891
Pledged assets - - - 100,000 100,000
Derivative financial instruments - - - 4,590 4,590
Loans and advances to
customers - - - 2,410,457 2,410,457
Investment securities - - - 3,542,091 3,542,091
Assets held for sale 9,761 9,761
Property and equipment - - - 179,158 179,158
Prepayments and other
receivables - - - 77,846 77,846
Total - - 773,435 7,646,359 8,419,794
Pledged
as Available as
collateral Uncollateralised collateral Uncollateralised Total
2019 K’000 K’000 K’000 K’000 K’000
Cash on hand and balances at
Bank of Zambia 678,207 904,458 1,582,665
Pledged assets - - - 100,000 100,000
Derivative financial instruments - - - 45,273 45,273
Loans and advances to banks - - - 101,999 101,999
Loans and advances to
customers - - - 3,131,664 3,131,664
Investment securities - - - 2,049,415 2,049,415
Property and equipment - - - 119,397 119,397
Prepayments and other
receivables - - - 52,688 52,688
Total - - 678,207 6,504,894 7,183,101

48.8 Market risk

Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables
such as interest rates, foreign exchange rates and equity prices. The Group classifies exposures to market risk into either trading (the
Trading book) or non–trading (the Banking book) portfolios and manages each of those portfolios separately.

48.8.1 Exposure to Interest rate risk - non-trading portfolios

The Group’s operations are subject to the risk of interest rate fluctuations to the extent that interest-earning assets (including
investments) and interest-bearing liabilities mature or reprice at different times and/or in differing amounts. In the case of floating
rate assets and liabilities the Group is also exposed to basis risk, which is the difference in repricing characteristics of the various
floating rate indices. Asset-liability risk management activities are conducted in the context of the Group’s sensitivity to interest
rate changes.

116 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

48 Risk Management (continued)

48.8 Market risk (continued)

48.8.1 Exposure to interest rate risk - non-trading portfolios (continued)

The table below indicates the effective interest rates at the reporting date.
The effective interest rates for principal financial assets and financial liabilities averaged as follows:
Group and Bank
2020 2019
K USD K USD
Financial assets (%) (%) (%) (%)
Government bonds 33.32 - 30.11 -
Treasury bills 24.29 - 23.81 -
Loans and advances 24 6 23.38 6.88
Staff mortgages and other loans 10 - 10.00 10.00
Financial liabilities
Placements with other banks - 0.96 13.36 2.29

Financial statements
Customer deposits 0.44 0.01 1.48 0.38

The management of interest rate risk against interest rate gap limits is supplemented by monitoring the sensitivity of the Group’s
financial assets and financial liabilities to various standard and non-standard interest rate scenarios. Standard scenarios that
are considered on a monthly basis include a 5% and 10% parallel rise in all yield curves and a 2.5% and 7.5% parallel fall in all yield
curves. An analysis of the Group’s sensitivity to an increase or decrease in market interest rates, assuming no asymmetrical movement
in yield curves and a constant financial statement position, is as shown below:

Interest rate movements affect reported equity in the following ways:

Ÿ Retained earnings arising from increases or decreases in net interest income and the fair value changes reported in profit or loss.

Ÿ Fair value reserves arising from increases or decreases in fair values of FVOCI financial instruments reported directly in other
comprehensive income.

Standard Chartered — Annual Report 2020 117

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

48 Risk Management (continued)

48.8 Market risk (continued)

48.8.1 Exposure to interest rate risk - non-trading portfolios (continued)

Overall non-trading interest rate risk positions are managed by Financial markets, which use investment securities, advances to banks,
deposits from banks and derivative instruments to manage the overall position arising from the Group’s non-trading activities.

Group and Bank

Fixed rate instruments

Less than Three Between
Zero rate Floating rate three months to one and
Total instrument instruments months one year five years
2020 K’000 K’000 K’000 K’000 K’000 K’000

Assets
Cash on hand and balances at
Bank of Zambia 2,095,891 2,095,891 - - - -
Cash and cash equivalents 5,251,892 2,182,242 - 2,117,000 952,650 -
Investment securities 3,542,091 508 - 762,483 2,754,108 24,992
Derivative financial instruments 4,590 - - 4,590 - -
Loans and advances to banks - - - - - -
Loans and advances to customers 2,410,457 - 2,410,457 - - -
Total assets 13,304,921 4,278,641 2,410,457 2,884,073 3,706,758 24,992
Liabilities
Amounts payable to group banks 325,740 44,459 - 154,261 127,020 -
Amounts payable to non-group
banks 21,266 21,266 - - - -
Deposits from customers 12,214,521 9,848,972 602,500 844,412 583,030 335,607
Derivative financial instruments 8,548 - - 8,548 - -
Subordinated liabilities 84,680 - 84,680 - - -
Lease liabilities 163,640 163,640 - 6 10,133 153,501
Total liabilities 12,818,395 10,078,337 687,180 1,007,227 720,183 489,108
Gap 486,526 (5,799,696) 1,723,277 1,876,846 2,986,575 (464,116)

Impact of increase in 5% 86,164 - 86,164 - - -

interest rate 10% 172,328 - 172,328 - - -
Impact of decrease in 2.5% (43,082) - (43,082) - - -
interest rate 7.5% (129,246) - (129,246) - - -

The following is a summary of the Group’s interest rate gap position on non- trading portfolios.

On the impact, a positive means increase in the profit and equity and negative means reduction in the profit and equity. Therefore
a 5% increase in interest rates would increase the profitability and equity by K86,164. Fair value changes arising from increase or
decrease in fair value of FVOCI instruments are recorded directly in equity.

118 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

48 Risk Management (continued)

48.8 Market risk (continued)

48.8.1 Exposure to interest rate risk - non-trading portfolios (continued)

The following is a summary of the Group’s interest rate gap position on non- trading portfolios. (continued)

Group and Bank Fixed rate instruments

Floating Less than Three Between

Zero rate rate three months to one and
Total instrument instruments months one year five years

2019 K’000 K’000 K’000 K’000 K’000 K’000

Assets

Financial statements
Cash on hand and balances at
Bank of Zambia 1,582,665 1,582,665 - - - -

Cash and cash equivalents 3,381,132 308,650 - 2,718,732 353,750 -

Investment securities 2,049,415 508 - 767,239 850,099 431,569

Derivative financial instruments 45,273 - - 45,273 - -

Loans and advances to banks 101,999 - 101,999 - - -

Loans and advances to

customers 3,131,664 - 3,131,664 - - -

Total assets 10,292,148 1,891,823 3,233,663 3,531,244 1,203,849 431,569

Liabilities

Amounts payable to group banks 229,489 56,768 - 87,821 70,750 14,150

Amounts payable to non-group

banks 12,297 12,297 - - - -

Deposits from customers 9,289,297 6,633,597 532,584 344,608 1,700,843 77,665

Derivative financial instruments 41,740 - - 41,740 - -

Subordinated liabilities 56,600 - 56,600 - - -

Lease liabilities 64,000 64,000 - - 4,793 59,207

Total liabilities 9,693,423 6,766,662 589,184 474,169 1,776,386 151,022

Gap 598,725 (4,874,839) 2,644,479 3,057,075 (572,537) 280,547

Impact of increase in 132,224 - 132,224 - -

interest rate 264,448 - 264,448 - - -

Impact of decrease in (66,112) - (66,112) - - -

interest rate (198,336) (198,336) - - -

On the impact, a positive means increase in the profit and equity and negative means reduction in the profit and equity. Therefore
a 5% increase in interest rates would increase the profitability and equity by K132,224. Fair value changes arising from increase or
decrease in fair value of FVOCI instruments are recorded directly in equity.

Standard Chartered — Annual Report 2020 119

Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

48 Risk Management (continued)

48.8 Market risk (continued)

48.8.2 Currency risk

The Group is exposed to currency risk through transactions in foreign currencies. The Group’s transactional exposures give rise to foreign
currency gains and losses that are recognised in the statement of profit or loss and other comprehensive income. These exposures
comprise the monetary assets and monetary liabilities of the Group, as follows (in Zambian Kwacha terms):

Group and Bank

2020 K USD GBP ZAR Euro Others Total
K’000 K’000 K’000 K’000 K’000 K’000 K’000

Monetary assets 6,419,875 5,871,464 923,246 117,550 772,602 180,473 14,285,210

Monetary liabilities (5,493,997) (6,497,825) (45,590) (58,520) (778,135) (166,007) (13,040,074)
Net position 925,878 (626,361) 877,656 59,030 (5,533) 14,466 1,245,136
Impact of 5%
depreciation of the local
currency (31,318) 43,883 2,951 (277) 15,239
Impact of 10%
depreciation of the local
currency (62,636) 87,766 5,902 (554) 30,478

A 10% depreciation in local currency will have an K30m impact on the statement of financial position's net position.

Group and Bank

2019 K USD GBP ZAR Euro Others Total
K’000 K’000 K’000 K’000 K’000 K’000 K’000

Monetary assets 5,049,770 4,206,420 1,272,287 29,449 144,215 17,485 10,719,626

Monetary liabilities (4,422,111) (4,963,149) (34,274) (31,571) (420,832) (6,844) (9,878,781)

Net position 627,659 (756,729) 1,238,013 (2,122) (276,617) 10,641 840,845

Impact of 5%
depreciation of the local
currency (36,035) 58,953 (101) (13,172) 9,645
Impact of 5%
depreciation of the local
currency (68,794) 112,547 (193) (25,147) 18,413

A 10% depreciation in local currency will have an K18m impact on the statement of financial position's net position.

In respect of monetary assets and liabilities in foreign currencies that are not economically hedged, the Group ensures that its
net exposure is kept to an acceptable level by buying and selling foreign currencies at spot rates when considered appropriate.

120 Standard Chartered — Annual Report 2020

Notes to the consolidated and separate financial
statements (continued)
for the year ended 31 December 2020

48 Risk Management (continued)

48.8 Market risk (continued)

48.8.2 Currency risk (continued)

The following exchange rates applied during the year:

Group and Bank

Average rate Reporting rate
2020 2019 2020 2019
K K K K
USD 19.17 12.67 21.17 14.15
GBP 24.74 16.32 28.89 18.68
ZAR 1.25 0.88 1.44 1.01
EUR 19.99 14.30 25.98 15.89

As at the reporting date, net currency exposures representing more than 10% of the Group’s equity were as follows.

Financial statements
Group and Bank 2020 2019
K’000 K’000
USD (626,362) (756,729)
GBP 877,656 1,238,013

48.9 Country risk

Country risk is the risk that an occurrence within a country 48.10 Operational and business risk
could have an adverse effect on the Group, directly b y
impairing the value of the Group or indirectly through Operational Risk (OR) is the potential for loss arising from
an obligor’s ability to meet its obligations to the Group. inadequate or failed internal processes and systems,
Generally, these occurrences relate, but are not limited, to: human error or from the impact of external events, including
legal risks. These risks are primarily mitigated through the
- sovereign events such as defaults or restructuring;
deployment of a strong and reliable system of controls.
- political events such as contested elections or
referendums;
The Operational Risk Type Framework (ORTF) sets out the
- restrictions on currency movements;
approach to measure and assess OR control effectiveness
- non–market currency convertibility;
- regional conflicts; across the Group. All risks, regardless of risk type, are
- economic contagion from other events such as sovereign required to be assessed in line with the ORTF. The ORTF
default issues or regional turmoil; also sets out the overall risk management approach for all
- banking and currency crisis; and Risk Types not designated as Principal Risks.
- natural disasters.
The Group aims to manage operational risks to ensure that
The Group manages its Country Risk exposures following operational losses (financial or reputational), including
the principle of diversification across geographies. Risk any related to conduct of business matters, do not cause
Appetite focusses on monitoring Gross Country Risk material damage to the Group’s franchise. Adherence to
exposure to a single country as a per centage of aggregated this Operational Risk Appetite (RA) statement is monitored
Gross Country Risk exposure across all countries. Overall through several Board-approved metrics with breach and
concentration is managed through a 15% cap to avoid over- escalation thresholds.
concentration in one country. Furthermore, concentration
risks to certain sectors and tenor concentration risks are The levels of inherent and residual risk are assessed for
assessed as part of the Country Risk Appetite Mandates all risks in the Group. Inherent risk is an expression of the
(“CRAM”). exposure arising as a consequence of the business activity
in the absence of any mitigation. Residual risk is the level
The Country Risk function monitors exposures through the of risk remaining after mitigation is applied. Mitigation
Country Risk Dashboard, which includes a broad range of can include a combination of controls, insurance and/
indicators (in addition to Credit Risk exposure) including or business volume reduction. The process owner is
intragroup, issuer risk, and equity investments. responsible for ensuring that necessary mitigation is taken
to maintain residual risk within the Group’s tolerance.
When the risk outlook for a country changes, Country Risk
will promptly initiate an out-of-cycle review to ensure the The Group reviews external and internal events to identify
sovereign rating and Country Risk limits accurately capture improvements to its control environment. Events that result
our assessment of the risks facing the Group. in either financial or non-financial impacts are recorded.
Root Cause Reviews are conducted for significant OR
events to identify incremental control enhancements for
implementation.
Standard Chartered — Annual Report 2020 121
Financial statements Notes to the financial statements

Notes to the consolidated and separate financial

statements (continued)
for the year ended 31 December 2020

48 Risk Management (continued) Determination of whether the Group remains within

risk appetite is through monitoring of approved metrics
48.10 Operational and business risk (continued) which includes, but is not limited to, applicable material
regulations which have not been implemented in a timely
The Country Head of Operational Risk is responsible for manner, tracking of regulatory enforcement actions and
Operational Risk in country. The Country Non-Financial breaches as well as monitoring the Group’s relationship
Risk Committee (CNFRC) oversees the management of with its key college of regulators.
operational risk and ensures that it meets the standards
of the ORTF. The CNFRC meets regularly to review the The Group’s ongoing efforts to manage compliance with
Group’s significant risks and to ensure appropriateness applicable laws and regulation follows a cycle of activities
and adequacy of mitigating action plans. The CEO is the detailed in the CRTF. Key activities include but not limited
chairman of the CNFRC. to:

Ÿ Risk assessment: Periodic risk assessments

48.11 Compliance risk incorporating both a qualitative and quantitative
review are undertaken for each compliance risk area
Compliance risk is the potential for penalties or loss to
the Group or for an adverse impact to Group’s clients, Ÿ Policies, Standards and controls: Policy ownership and
stakeholders or to the integrity to markets operated responsibility for defining standards and controls for
in through a failure on our part to comply with laws or each compliance risk area is allocated to the function
regulations. with the appropriate expertise to manage that risk. An
annual evidence-based attestation of the effectiveness
of policies must be made by policy owners as part of
The Compliance function develops and deploys relevant
the Enterprise Risk Management Framework (ERMF)
policies and standards setting out requirements and effectiveness review process.
controls for adherence by the Group to ensure continued
compliance with applicable laws and regulations. The Ÿ Training and communication: Regulatory requirements
Compliance Risk Type Framework (“CRTF”) sets out the are often complex and span multiple businesses,
overall risk management approach for Compliance Risk. functions and jurisdictions. Many elements of
Compliance risk are difficult to control solely through
The Compliance Risk Framework Owner relies on the preventative or detective controls and so the provision
compliance risk assessment, control standard setting, of appropriate training and communication is a core
control monitoring and compliance assurance activities, element of the management of Compliance risk.
to ensure that the CRTF and its underpinning policies are This includes communicating controls and stating
how we expect our staff to act when executing their
operating as expected to mitigate the risk that they cover. responsibilities.
Appropriate processes and controls are used as primary
tools to mitigate Compliance risk. To do so, the requirements Ÿ Effectiveness review: The Compliance function is
set out in the Operational Risk Type Framework are followed responsible for performing an annual effectiveness
to ensure a consistent approach to the management of review of the RTF and supporting policies.
processes and controls. Furthermore, the effectiveness of
the CRTF and its underpinning policies are reviewed and Ÿ Information and analysis: Management information
attested to on an annual basis. is an essential support tool for planning and decision-
making. Compliance also uses management
The Group has no appetite for breaches in laws and information to drive its risk and governance reporting.
Compliance is continually seeking to improve methods
regulations; whilst recognising that regulatory non- of analysing the information available to determine if
compliance cannot be entirely avoided, the Group strives there are trends in regulatory development or areas
to reduce this to an absolute minimum. within the Group’s controls that require attention.

122 Standard Chartered — Annual Report 2020

Appendix

Five year summary

2020 2019 2018 2017 2016

K’000 K’000 K’000 K’000 K’000
Restated

Operating profit before impairment provisions 250,878 369,517 470,171 498,142 583,168
Net impairment provisions against loans and advances (293,252) (303,730) (55,784) (41,138) (20,580)

(Loss)/Profit before taxation (42,374) 65,787 414,387 457,004 562,588

(Loss) Profit attributable to shareholders (48,078) 12,286 230,051 209,549 347,179

Financial statements
Loans and advances to customers 2,410,457 3,131,664 2,886,321 2,612,689 2,758, 591
Total assets 14,186,870 11,067,439 9,746,335 8,799,379 8,210,943

Deposits from customers 12,214,521 9,289,297 8,204,152 7,304,664 6,797,789

Shareholders’ funds 810,415 613,551 798,082 752,473 647,030

Earnings per ordinary share

Basic earnings per share (Kwacha) (0.029) 0.007 0.138 0.126 0.208
Dividends per share (Kwacha) (0.03) 0.01 0.14 0.13 0.20

Ratios

Post-tax return on ordinary shareholders’ funds (6%) 2% 37% 35% 49%

Basic cost/income ratio 78% 67% 58% 54% 45%

Note that this table does not form part of the audited financial staments

Standard Chartered — Annual Report 2020 123

Financial statements Notes to the financial statements

Principal Addresses
Head Office
Standard Chartered Bank Zambia Plc
Kabwe Mwaba
Standard Chartered House,
Head of Financial Markets – Southern Africa (excluding
Stand No 4642, corner of Mwaimwena Road
South Africa) and Head of Treasury Markets Southern
and Addis ababa road.
Africa
P.O. Box 32238
Lusaka, Zambia 10101
Standard Chartered Bank Zambia Plc
Tel: +260 (211) 422000-15
Stand No 4642, corner of Mwaimwena Road
and Addis ababa road P.O. Box 32238, Lusaka
Executive Management Team Tel: +260 (211) 422251
Herman Kasekende
Managing Director and Chief Executive Officer Peter Zulu
Head of Conduct, Financial Crime and Compliance.
Standard Chartered Bank Zambia Plc
Stand No 4642, corner of Mwaimwena Road Standard Chartered Bank Zambia Plc
and Addis ababa road. Stand No 4642, corner of Mwaimwena Road
P.O. Box 32238, Lusaka and Addis ababa road P.O. Box 32238, Lusaka
Tel: +260 (211) 422401 Tel: +260 (211) 422513

Kelvin Bwalya Mutu Mubita

Executive Director Finance and Administration/ Chief Head of Human Resources
Financial Officer
Standard Chartered Bank Zambia Plc
Stand No 4642, corner of Mwaimwena Road
Standard Chartered Bank Zambia Plc
and Addis ababa road.
Stand No 4642, corner of Mwaimwena Road
P.O. Box 32238, Lusaka
and Addis ababa road.
Tel: +260 (211) 422301
P.O. Box 32238, Lusaka
Tel: +260 (211) 422147
Rose Kavimba
Head, Legal & Company Secretary
DeepPal Singh
Head of Consumer, Private and Business Banking Standard Chartered Bank Zambia Plc
Stand No 4642, corner of Mwaimwena Road
Standard Chartered Bank Zambia Plc
and Addis ababa road.
Stand No 4642, corner of Mwaimwena Road
P.O. Box 32238, Lusaka
and Addis ababa road.
Tel: +260 (211) 422512
P.O. Box 31353, Lusaka
Tel: +260 (211) 422700
Fanwell Phiri
Country Chief Risk Officer
Emmy Kumwenda
Head,Corporate and Institutional Banking (CIB) Standard Chartered Bank Zambia Plc
Stand No 4642, corner of Mwaimwena Road and Addis
Standard Chartered Bank Zambia Plc ababa road
Stand No 4642, corner of Mwaimwena Road Tel: +260 (211) 422700
and Addis ababa road P.O. Box 31353, Lusaka
Tel: +260 (211) 422625 Christine Matambo
Head of Corporate Affairs, Brand & Marketing
Olusegun Omoniwa
Standard Chartered Bank Zambia Plc
Head of Wealth Management - Zambia and Southern
Stand No 4642, corner of Mwaimwena Road
Africa
and Addis ababa road P.O. Box 32238, Lusaka
Tel: +260 (211) 422402
Standard Chartered Bank Zambia Plc
Stand No 4642, corner of Mwaimwena Road
Marshal Shampongo
and Addis ababa road P.O. Box 31353, Lusaka
Head of Internal Audit
Tel: +260 (211) 422625
Standard Chartered Bank Zambia Plc
Simon Burutu
Stand No 4642, corner of Mwaimwena Road
Senior Credit Officer
and Addis ababa
Standard Chartered Bank Zambia Plc P.O. Box 31353, Lusaka
Stand No 4642, corner of Mwaimwena Road Tel: +260 (212) 312227
and Addis ababa road P.O. Box 32238, Lusaka Tel: +260 (212) 422480-89
Tel: +260 (211) 422238

124 Standard Chartered — Annual Report 2020

Branch Network

LUSAKA
Lusaka Head Office Branch
P.O. Box 32238, Lusaka
Tel: +260 (211) 422051/56

Northend Branch
P.O. Box 31353, Lusaka
Tel: +260 (211) 422600-20

United Nations (UN) Agency Branch

P.O. Box Lusaka 33610
Tel: +260 (211) 386200
Priority Banking- Lusaka

COPPERBELT
Zambia Way Branch
P.O. Box 20061, Kitwe

Financial statements
Tel: +260 (212) 422750-80

Standard Chartered — Annual Report 2020 125

Financial statements Notes to the financial statements

Dividend
At a Board meeting held on 26 February 2021, the directors did not recommend any dividend payout for the
year 31 December 2020 owing to constraints on the current year performance.

By Order of the Board

Rose Kavimba
Company Secretary
26 February 2021

126 Standard Chartered — Annual Report 2020

 STANDARD CHARTERED BANK ZAMBIA PLC
[Incorporated in the Republic of Zambia]
Company registration number: 6525
Share Code: SCZ
ISIN: ZM0000000094
[“SCZ” or “the Bank”]

NOTICE OF THE 50TH ANNUAL GENERAL MEETING

Notice is hereby given that the 50th Annual General Meeting of the fully paid-up shareholders of Standard Chartered
Bank Zambia Plc in respect of the period ended 31 December 2020, will be held virtually on https://eagm.creg.co.zw/
eagm/login.aspx on Friday, 30 April 2021 at 10:00 hours. The voting at the Annual General Meeting will be conducted
electronically on https://eagm.creg.co.zw/eagm/login.aspx.

Financial statements
All shareholders are encouraged to make arrangements to participate in the Annual General Meeting through the
eAGM link provided.

The meeting is convened to transact the following business:

1. Call to order, tabling proxies, and announcement regarding quorum

2. Resolution 1 – Adoption of Minutes

To confirm, adopt and sign the Minutes of the AGM held on 4 September 2020.

3. Resolution 2- Adoption of Chairman’s Report, Directors’ Report and Financial Statements

To receive, approve and adopt the Financial Statements for the year ended 31 December 2020 and the reports of
the Chairman, Directors and Auditors.

4. Resolution 3 – Dividend

To approve a recommendation from the Board of Directors not to declare a dividend for the year ended 31
December 2020.

5. Resolution 4 – Amendment of Articles of Association

To approve by Special Resolution the Amendment of Articles 56, 115 & 122 of the Articles of Association of the Bank
to Align it to the Companies Act no. 10 of 2017 of the Laws of Zambia.

6. Resolution 5 – Appointment of Auditors

To appoint EY as auditors from the conclusion of this Annual General Meeting until the conclusion of the next
Annual General Meeting and to authorize the Directors to set their remuneration.

7. Resolution 6 – Appointment and Re-Appointment of Directors

To re-elect each of Caleb M Fundanga, Robin P Miller, Doreen Kapambwe Chiwele, Munakopa Sikaulu, Kweku
Bedu-Addo, Herman Kasekende and Kelvin Bwalya, who retire by rotation in terms of the Companies Act, and who,
being eligible, offer themselves for re-election.

8. Resolution 7 – Remuneration of the Directors

To authorize the Board to fix the remuneration of the Directors.

9. To transact any other business that may properly be transacted at the Annual General Meeting.

A member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend, speak,
and, on a poll, vote in his/her stead. Proxy forms are available from the Company Secretary.

Standard Chartered — Annual Report 2020 127

Financial statements Notes to the financial statements

Notes:

i. The proceedings of the Meeting will be streamed live through the following link, and shareholders are required to
register in advance.

https://eagm.creg.co.zw/eagm/login.aspx

ii. Shareholders and proxies are requested to Sign Up now. Please sign up onto the link with the credentials that shall
be forwarded to you via email and phone.

The key steps to follow are as given below:

a. Sign up on the (“eAGM platform”) given.

b. Log into the (“eAGM platform”) and register to attend the meeting

iii. To sign up for the Meeting, a shareholder must have a working email and an active cell phone number.

iv. The window for signing up for the Meeting shall be open on Monday, 12 April 2021 and automatically close at the
commencement of the Meeting on Friday, 30 April 2021 at 10:00 hours. Registration will commence at 08:00 hours
on the day of the meeting. A shareholder who does not register before the start of the meeting will not be able to
do so when the meeting starts.

v. After registering, a shareholder will be allowed to join the meeting.

vi. To fully participate in the AGM, a shareholder must have a reliable internet connection.

vii. Queries on how to log into the Meeting, registration or on the voting process can be channelled to the
Corpserve Transfer Agents on info@Corpservezambia.com.zm or james@Corpservezambia.com.zm: Or phone
+260950968435, +260955899375, +260979946143

viii. A member entitled to attend and vote at the meeting is entitled to appoint any person (whether a member of the
Company or not) to attend and, on a poll, to vote in his/her stead. Proxy forms are obtainable from the Company
Secretary and must be lodged at the Registered Office of the Company, 5th floor, Standard Chartered House,
Corner Nasser/ Mwaimwena roads, Rhodespark , or emailed to Rose.Kavimba@sc.com. before the commencement
of the AGM.

By Order of the Board

Rose N Kavimba
Company Secretary

Issued in Lusaka, Zambia on 31 March 2021

Lusaka Securities Exchange Sponsoring Broker

T | +260-211-232456
E | advisory@sbz.com.zm
W | www.sbz.com.zm
Stockbrokers Zambia Limited (SBZ) is a member of the Lusaka Securities Exchange and
is regulated by the Securities and Exchange Commission of Zambia

First Issued on 31 March 2021

128 Standard Chartered — Annual Report 2020

 FORM OF PROXY

…………….............……. 2021

I/We, ……………………..........................…………………………… (full names in block letters) of ………...........................................................………….

…………………………………………………………………………………….....................................................................………….............................................………………

member/members of Standard Chartered Bank Zambia Plc, hereby appoint

…………………………………………………………………………………….....................................................................………….............................................………………

of ………………………………………………………....................................................................…………………………….............................................……………………...

as my/our proxy to attend and speak, on poll, vote instead of me/us at the Fiftieth Annual General Meeting of the

Financial statements
Company, to be held on Friday, 30 April 2021 and at every Adjournment thereof:
In favour Against
Resolution 1 – To confirm, adopt and sign the minutes of the AGM held on 4 September 2020.

Resolution 2 – To receive, approve and adopt the Chairman’s Report,

Directors’ Report and Financial Statements for the year ended 31 December 2020.

Resolution 3 – To approve a recommendation from the Board Of Directors

not to pay a dividend for the year ended 31 December 2020. Remuneration.

Resolution 4 – To approve by Special Resolution the Amendment of Articles 56, 115 & 122
of the Articles of Association of the Bank to Align it to the Zambia Companies Act No. 10 of 2017
of the Laws of Zambia.

Resolution 5 – Re-appointment of EY as Auditors For 2021-22 and to authorize the directors

to fix their Remuneration.

Resolution 6 – (i) Confirm the appointment of the following as Director:

Caleb Fundanga

Munakopa Sikaulu

Kweku Bedu-Addo

Robin P Miller

Herman Kasekende

Kapambwe Doreen Chiwele

Kelvin Bwalya

Resolution 7: To authorise the Board to fix their remuneration.

Signature(s) ………………………………………………..…...….......…………

Certificate Number(s) …………………………..…………………………...

Standard Chartered — Annual Report 2020 129

Financial statements Notes to the financial statements

NOTE:

The Form of Proxy shall be:

a) In the case of an individual, signed by the appointer or by his Attorney.

b) In the case of a corporation, signed either by an Attorney or Officer of the Corporation on its behalf or be given
under its common seal.

Shareholders are encouraged to deposit their instruments of proxy at the Registered Office of the Company.

130 Standard Chartered — Annual Report 2020

 Financial statements

Standard Chartered — Annual Report 2020 131

Financial statements Notes to the financial statements

132 Standard Chartered — Annual Report 2020