ADVANCED BANK OF ASIA LIMITED

(Registration No. 00010593)

REPORT OF THE BOARD OF DIRECTORS

AND AUDITED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

ADVANCED BANK OF ASIA LIMITED

REPORT OF THE BOARD OF DIRECTORS AND AUDITED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

CONTENTS
Page(s)

Corporate information 1

Report of the Board of Directors 2-5

Independent auditor’s report 6-8

Statement of financial position 9

Statement of profit or loss and other comprehensive income 10

Statement of changes in equity 11

Statement of cash flows 12 - 13

Notes to the financial statements 14 - 107

CORPORATE INFORMATION

Bank Advanced Bank of Asia Limited

Registration No. 00010593

Registered office No. 141 146 148 148 ABCD & 162A Preah Sihanouk Blvd.,
No. 15 & 153 ABC Street No. 278, No. 171,
Street Preah Trasak Paem, Phum 4,
Sangkat Boeng Keng Kang Ti Muoy,
Khan Boeng Keng Kang, Phnom Penh,
Kingdom of Cambodia

Shareholders National Bank of Canada

Natcan Trust Company

Board of Directors Mr. Yves Jacquot Chairman

Mr. Dominic Jacques Director
Mr. Madi Akmambet Executive Director
Mr. Martin Ouellet Director
Mr. Christian St-Arnaud Director
Mr. Paolo Pizzuto Director
Mr. Etienne Chenevier Independent Director
Mr. Henri Calvet Independent Director
Mr. Guy Quaden Independent Director

Key managements Mr. Askhat Azhikhanov Chief Executive Officer

Mr. Zhiger Atchabarov Chief Operating Officer
Mr. Babu Ram Gyawali Chief Financial Officer
Mr. Galymzhan Temirov Chief Information Officer
Mr. Bibhu Pandey Chief Credit Officer
Mr. Sanzhar Abdullayev Chief Card and E-Payments Officer
Mr. Zokhir Rasulov Chief Digital Officer
Mr. Igor Zimarev Chief Marketing and CSR Officer,
Corporate Secretary
Mr. Torsten Kleine Buening Chief Risk Officer and Compliance
Advisor to the CEO
Ms. Romny Theam Chief External Affairs Officer
Ms. Ninlida Long Chief Cash Management Officer
Ms. Vithiea Ly Chief Human Resources Officer
Mr. Vichet Chhun Chief Retail Banking Officer
Mr. Chanrith Sar Chief Micro Business Loan Officer
Mr. Sinak Noy Chief Loan Recovery and Monitoring
Officer
Mr. Lida Sem Chief Medium and Large Business
Lending Officer
Mr. Sosen Eang Chief Legal Officer
Mr. Dalen Ath Chief Administrative Officer
Ms. Polinda Hean Chief International Business Officer
Mr. Kimkhun Pech Chief Security Officer
Mr. Tayzar Zaw Chief Information Security Officer

Auditors Deloitte (Cambodia) Co., Ltd.

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ADVANCED BANK OF ASIA LIMITED

STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2023

31 December 2023 31 December 2022

Note US$ KHR Million US$ KHR Million

ASSETS
Cash on hand 4 474,857,773 1,939,794 461,874,069 1,901,536
Balances with the NBC 5 1,144,610,187 4,675,733 1,384,213,047 5,698,805
Balances with other banks 6 1,476,824,428 6,032,828 483,070,473 1,988,801
Loans to customers 7 7,772,341,514 31,750,015 6,448,799,797 26,549,709
Investment securities 8 338,015,805 1,380,795 34,942,747 143,859
Property and equipment 9 84,871,929 346,702 66,067,387 271,999
Right-of-use assets 10 64,432,584 263,207 57,064,305 234,934
Intangible assets 11 16,555,112 67,628 16,296,439 67,092
Other assets 12 110,703,383 452,223 79,488,417 327,254

TOTAL ASSETS 11,483,212,715 46,908,925 9,031,816,681 37,183,989

LIABILITIES
Deposits from banks
and other financial
institutions 13 206,402,009 843,153 142,662,081 587,340
Deposits from customers 14 9,026,304,769 36,872,456 7,210,953,614 29,687,496
Borrowings 15 146,416,963 598,113 68,358,368 281,431
Subordinated debts 16 96,053,372 392,378 121,045,397 498,344
Current tax liabilities 17(a) 47,217,164 192,882 47,388,978 195,100
Lease liabilities 18 69,053,434 282,083 60,411,883 248,716
Deferred tax liabilities 17(b) 21,989,620 89,828 7,030,085 28,943
Other liabilities 19 91,202,990 372,564 61,875,549 254,742

TOTAL LIABILITIES 9,704,640,321 39,643,457 7,719,725,955 31,782,112

EQUITY
Share capital 20 1,100,000,000 4,493,500 660,000,000 2,717,220
Regulatory reserves 21 221,657,298 905,470 117,119,294 482,180
Retained earnings 456,915,096 1,847,347 534,971,432 2,168,158
Currency translation
differences - 19,151 - 34,319

TOTAL EQUITY 1,778,572,394 7,265,468 1,312,090,726 5,401,877

TOTAL LIABILITIES AND

EQUITY 11,483,212,715 46,908,925 9,031,816,681 37,183,989

The accompanying notes from pages 14 to 107 form an integral part of these financial statements.

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ADVANCED BANK OF ASIA LIMITED

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2023

Year ended Year ended

31 December 2023 31 December 2022
Note US$ KHR Million US$ KHR Million

Interest income 22 705,357,695 2,899,020 570,837,305 2,333,012

Interest expense 22 (198,826,322) (817,176) (91,580,099) (374,288)

Net interest income 506,531,373 2,081,844 479,257,206 1,958,724

Fee and commission income 23 80,751,090 331,887 71,617,717 292,702

Fee and commission expense 23 (38,491,191) (158,199) (27,659,831) (113,046)

Net fee and commission income 42,259,899 173,688 43,957,886 179,656

Other operating income 11,404,051 46,871 5,926,210 24,220

Personnel expenses 24 (111,619,676) (458,757) (98,756,492) (403,618)
Depreciation and amortisation 25 (27,312,492) (112,254) (23,503,694) (96,060)
Operating expenses 26 (51,090,387) (209,981) (41,565,653) (169,879)
Net impairment losses on
financial assets 27 (23,404,791) (96,194) (26,999,081) (110,345)

Profit before tax 346,767,977 1,425,217 338,316,382 1,382,698

Income tax expense 17(c) (70,286,309) (288,877) (76,038,145) (310,768)

Profit for the year 276,481,668 1,136,340 262,278,237 1,071,930

Other comprehensive income - (15,168) - 24,575

Total comprehensive income

for the year 276,481,668 1,121,172 262,278,237 1,096,505

The accompanying notes from pages 14 to 107 form an integral part of these financial statements.

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ADVANCED BANK OF ASIA LIMITED

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2023

Currency
Share capital Regulatory reserves Retained earnings translation Total
differences
US$ KHR Million US$ KHR Million US$ KHR Million KHR Million US$ KHR Million
Year ended 31 December 2022
At 1 January 2022 520,000,000 2,118,480 43,637,909 177,781 486,174,580 1,970,931 9,744 1,049,812,489 4,276,936
Profit for the year - - - - 262,278,237 1,071,930 - 262,278,237 1,071,930
Other comprehensive income –
currency translation differences - - - - - - 24,575 - 24,575
- - - - 262,278,237 1,071,930 24,575 262,278,237 1,096,505

Conversion of retained earnings 140,000,000 572,180 - - (140,000,000) (572,180) - - -

Transfers from retained earnings to
regulatory reserves - - 73,481,385 302,523 (73,481,385) (302,523) - - -
Currency translation differences - 26,560 - 1,876 - - - - 28,436
At 31 December 2022 660,000,000 2,717,220 117,119,294 482,180 534,971,432 2,168,158 34,319 1,312,090,726 5,401,877

Year ended 31 December 2023

At 1 January 2023 660,000,000 2,717,220 117,119,294 482,180 534,971,432 2,168,158 34,319 1,312,090,726 5,401,877
Profit for the year - - - - 276,481,668 1,136,340 - 276,481,668 1,136,340
Other comprehensive income –
currency translation differences - - - - - - (15,168) - (15,168)
- - - - 276,481,668 1,136,340 (15,168) 276,481,668 1,121,172

Conversion of retained earnings 250,000,000 1,027,500 - - (250,000,000) (1,027,500) - - -

Issued share capital 190,000,000 780,900 - - - - - 190,000,000 780,900
Transfers from retained earnings to
regulatory reserves - - 104,538,004 429,651 (104,538,004) (429,651) - - -
Currency translation differences - (32,120) - (6,361) - - - - (38,481)
At 31 December 2023 1,100,000,000 4,493,500 221,657,298 905,470 456,915,096 1,847,347 19,151 1,778,572,394 7,265,468

The accompanying notes from pages 14 to 107 form an integral part of these financial statements.

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ADVANCED BANK OF ASIA LIMITED

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2023

Year ended Year ended

31 December 2023 31 December 2022
Note US$ KHR Million US$ KHR Million
Cash flows from operating
activities
Profit before tax 346,767,977 1,425,217 338,316,382 1,382,698
Adjustments for:
Depreciation and amortisation 25 27,312,492 112,254 23,503,694 96,060
Net impairment losses on
financial assets 27 23,404,791 96,194 26,999,081 110,345
(Gains)/losses on disposals of
property and equipment
and intangible assets (12,180) (50) 203,260 831
Gains on lease modification (1,048) (4) (98,080) (401)
Net interest income 22 (506,531,373) (2,081,844) (479,257,206) (1,958,724)
(109,059,341) (448,233) (90,332,869) (369,191)
Changes in:
Balances with the NBC 240,383,852 987,978 (42,757,356) (174,749)
Balances with other banks (336,110,008) (1,381,412) (169,026,498) (690,811)
Loans to customers (1,327,638,186) (5,456,593) (1,187,267,626) (4,852,363)
Other assets (32,921,689) (135,308) (39,463,805) (161,289)
Deposits from banks and
other financial institutions 63,674,399 261,702 45,656,685 186,599
Deposits from customers 1,769,117,960 7,271,075 984,919,321 4,025,365
Other liabilities 29,048,034 119,387 10,433,330 42,641
Net generated from/(cash
used in) operations 296,495,021 1,218,596 (487,838,818) (1,993,798)

Interest received 674,728,847 2,773,136 552,015,044 2,256,085

Interest paid (149,131,324) (612,930) (73,759,304) (301,454)
Income tax paid (55,498,588) (228,099) (57,700,763) (235,823)
Cash generated from/(used
in) operating activities 766,593,956 3,150,703 (67,283,841) (274,990)

Cash flows from investing

activities
Purchase of investment
securities (638,310,929) (2,623,458) (1,212,831) (4,957)
Proceeds on sales of
investment securities 338,892,505 1,392,848 3,086,425 12,614
Purchases of property and
equipment (32,105,839) (131,955) (29,874,607) (122,098)
Purchases of intangible
assets (3,226,100) (13,259) (3,158,843) (12,910)
Proceeds on disposals of
property and equipment 12,180 50 152,743 624
Net cash used in investing
activities (334,738,183) (1,375,774) (31,007,113) (126,727)

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ADVANCED BANK OF ASIA LIMITED

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2023

Year ended Year ended

31 December 2023 31 December 2022
Note US$ KHR Million US$ KHR Million

Cash flows from financing

activities
Issuance of share capital 190,000,000 780,900 - -
Repayments of debt - - (20,698,045) (84,593)
securities in issue
Proceeds from borrowings 404,503,236 1,662,508 195,581,512 799,342
Repayments of borrowings (326,576,042) (1,342,228) (320,902,324) (1,311,528)
Repayments of subordinated
debts (25,000,000) (102,750) (27,000,000) (110,349)
Principal elements of lease
payments (12,713,957) (52,254) (10,948,907) (44,748)
Net cash generated from
/(used in) financing
activities 230,213,237 946,176 (183,967,764) (751,876)

Net Increase/(decrease) in
cash and cash equivalents 662,069,010 2,721,105 (282,258,718) (1,153,593)
Cash and cash equivalents at
the beginning of the year 673,065,533 2,771,010 955,324,251 3,891,991
Currency translation
differences - (38,090) - 32,612
Cash and cash equivalents
at the end of the year 28 1,335,134,543 5,454,025 673,065,533 2,771,010

Significant non-cash transactions

In 2023, there was a conversion of US$250 million of the Bank’s retained earnings to share capital
(2022: US$140 million).

The accompanying notes from pages 14 to 107 form an integral part of these financial statements.

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 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

1. REPORTING ENTITY

Advanced Bank of Asia Limited (“the Bank”) was incorporated in Cambodia on 25 October 1996 under
the Registration No. Co. 322/97E (renewed to No. 00010593) dated 25 October 1996, granted by the
Ministry of Commerce. On 28 November 2006, the Bank was granted a permanent banking license No.
14 from the National Bank of Cambodia (“NBC”). The parent and ultimate parent of the Bank is National
Bank of Canada, a bank incorporated in Canada.

The Bank is principally engaged in all aspects of banking business and the provision of related financial
services in the Kingdom of Cambodia. There have been no significant changes in the nature of these
principal activities during the year.

The registered office of the Bank is located at No. 141 146 148 148 ABCD & 162 A Preah Sihanouk Blvd.,
No. 15 and 153 ABC Street No. 278, No. 171 Street Preah Trasak Paem, Phum 4, Sangkat Boeng Keng
Kang Ti Muoy, Khan Boeng Keng Kang, Phnom Penh, Kingdom of Cambodia.

The financial statements of the Bank were authorised for issue by the Board of Directors on 20 March
2024.

2. MATERIAL ACCOUNTING POLICIES INFORMATION

2.1 Basis of accounting

The financial statements have been prepared in accordance with Cambodian International Financial
Reporting Standards (“CIFRSs”).

The financial statements have been prepared on a historical cost basis, except as disclosed in the
accounting policies below. Historical cost is generally based on fair value of the consideration given in
exchange for goods and services.

“Fair value” is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date in the principal or, in its absence,
the most advantageous market to which the Bank has access at that date. The fair value of a liability
reflects its non-performance risk.

When one is available, the Bank measures the fair value of an instrument using the quoted price in an
active market for that instrument. A market is regarded as “active” if transactions for the asset or
liability take place with sufficient frequency and volume to provide pricing information on an ongoing
basis. If there is no quoted price in an active market, then the Bank uses valuation techniques that
maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The
chosen valuation technique incorporates all of the factors that market participants would take into
account in pricing a transaction.

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 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

2. MATERIAL ACCOUNTING POLICIES INFORMATION (continued)

2.2 New and amended CIFRSs that are effective for the current period

The Bank adopted all the new and revised standards that are relevant to its operations. The adoption
of these new/revised standards does not result in changes to the Bank’s accounting policies and has
no material effect on the disclosures or on the amounts reported for the current or prior years except
for certain immaterial policy information and disclosure notes which have been removed in the current
year following the amendments to CIAS 1.

CIFRS 17 Insurance Contracts (including the June 2020 and

December 2021 Amendments to IFRS 17)
Amendments to CIAS 1 Presentation of Financial Statements and IFRS Practice
Statement 2 Making Materiality Judgements—Disclosure
of Accounting Policies
Amendments to CIAS 12 Income Taxes—Deferred Tax related to Assets and
Liabilities arising from a Single Transaction
Amendments to CIAS 12 Income Taxes—International Tax Reform—Pillar Two
Model Rules
Amendments to CIAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors—Definition of Accounting Estimates

2.3 New and revised CIFRS in issue but not yet effective

Certain amendments to accounting standards have been published that are not mandatory for 31
December 2023 reporting periods and have not been early adopted by the Bank. These amendments
are not expected to have a material impact on the Bank in the current or future reporting periods.

15
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

2. MATERIAL ACCOUNTING POLICIES INFORMATION (continued)

2.4 Functional and presentation currency

The Bank transacts its business and maintains its accounting records in two main currencies, Khmer
Riel (“KHR”) and United States Dollars (“US$”). Management has determined the US$ to be the Bank’s
functional and presentation currency as it reflects the economic substance of the underlying events
and circumstances of the Bank.

Transactions in currencies other than US$ are translated into US$ at the exchange rate ruling at the
dates of the transactions. Monetary assets and liabilities denominated in currencies other than US$ at
the reporting date are translated into US$ at the rates of exchange ruling at that date. Non-monetary
items carried at fair value that are denominated in foreign currencies are translated at the rates
prevailing at the date when the fair value was determined. Non-monetary items that are measured in
terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on translation are recognised in profit or loss.

Presentation in Khmer Riel

The translation of the US$ amounts into Khmer Riel (“KHR”) is presented in the financial statements to
comply with the Law on Accounting and Auditing dated 11 April 2016 using the closing and average
rates for the year, as announced by the National Bank of Cambodia.

Assets and liabilities for each statement of financial position presented are translated at the closing
rate ruling at each reporting date whereas income and expense items for each statement of profit or
loss and other comprehensive income and cash flow items presented are translated at the average
rate for the year then ended. All resulting exchange differences are recognised in other comprehensive
income (“OCI”).

The financial statements presented in KHR are based on the following applicable exchange rates per
US$1:

Closing rate Average rate

31 December 2023 4,085 4,110
31 December 2022 4,117 4,087

Rounding of amounts

Amounts in the financial statements have been rounded off to the nearest dollar and million Khmer
Riel (“KHR Million”) for US$ and KHR amounts, respectively.

2.5 Financial instruments

Financial assets and financial liabilities are recognised in the Bank’s statement of financial position
when the Bank becomes a party to the contractual provisions of the instrument. Financial assets and
financial liabilities are initially measured at fair value. Transaction costs that are directly attributable
to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the
fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets or financial liabilities at fair value
through profit or loss are recognised immediately in profit or loss.
16
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

2. MATERIAL ACCOUNTING POLICIES INFORMATION (continued)

2.5 Financial instruments (continued)

Financial assets

All financial assets are recognised and derecognised on a trade date where the purchase or sale of a
financial asset is under a contract whose terms require delivery of the financial asset within the
timeframe established by the market concerned, and are initially measured at fair value, plus
transaction costs. For all financial assets the amount presented on the statement of financial position
represent all amounts receivable including interest accruals.

Classification and subsequent measurement

A financial asset is measured at amortised cost if it meets both of the following conditions:

• the asset is held within a business model whose objective is to hold assets to collect
contractual cash flows; and
• the contractual terms of the financial asset give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal amount outstanding (“SPPI”).

Debt instruments that meet the following conditions are measured subsequently at fair value through
other comprehensive income (“FVTOCI”):
• The financial asset is held within a business model whose objective is achieved by both
collecting contractual cash flows and selling the financial assets
• The contractual terms of the financial asset give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal amount outstanding

By default, all other financial assets are measured subsequently at fair value through profit or loss
(“FVTPL”).

17
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

2. MATERIAL ACCOUNTING POLICIES INFORMATION (continued)

2.5 Financial instruments (continued)

Amortised cost and effective interest method

The effective interest method is a method of calculating the amortised cost of a debt instrument and
of allocating interest income over the relevant period.

For financial assets other than purchased or originated credit-impaired financial assets, the effective
interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and
points paid or received that form an integral part of the effective interest rate, transaction costs and
other premiums or discounts) excluding expected credit losses, through the expected life of the debt
instrument, or, where appropriate, a shorter period, to the gross carrying amount of the debt
instrument on initial recognition. For purchased or originated credit-impaired financial assets, a credit
adjusted effective interest rate is calculated by discounting the estimated future cash flows, including
expected credit losses, to the amortised cost of the debt instrument on initial recognition.

The amortised cost of a financial asset is the amount at which the financial asset is measured at initial
recognition minus the principal repayments, plus the cumulative amortisation using the effective
interest method of any difference between that initial amount and the maturity amount, adjusted for
any loss allowance. The gross carrying amount of a financial asset is the amortised cost of a financial
asset before adjusting for any loss allowance.

Interest income is recognised using the effective interest method for debt instruments measured
subsequently at amortised cost and at FVTOCI. For financial assets other than purchased or originated
credit-impaired financial assets, interest income is calculated by applying the effective interest rate to
the gross carrying amount of a financial asset, except for financial assets that have subsequently
become credit-impaired. For financial assets that have subsequently become credit-impaired, interest
income is recognised by applying the effective interest rate to the amortised cost of the financial asset.
If, in subsequent reporting periods, the credit risk on the credit-impaired financial instrument improves
so that the financial asset is no longer credit-impaired, interest income is recognised by applying the
effective interest rate to the gross carrying amount of the financial asset.

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 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

2. MATERIAL ACCOUNTING POLICIES INFORMATION (continued)

2.5 Financial instruments (continued)

Impairment of financial assets

The Bank recognises loss allowances for expected credit losses (“ECL”) on the following financial
instruments:

• Balances with other banks;

• Loans to customers;
• Debt investment securities;
• Deposits and other receivables;
• Loan commitments issued; and
• Financial guarantee contracts issued.

No impairment loss is recognised on equity investments.

A loss allowance for full lifetime ECL is required for a financial instrument if the credit risk on that
financial instrument has increased significantly since initial recognition. For all other financial
instruments, ECLs are measured at an amount equal to the 12-month ECL. More details on the
determination of a significant increase in credit risk are provided in Note 32.1.

ECLs are a probability-weighted estimate of the present value of credit losses. These are measured as
the present value of the difference between the cash flows due to the Bank under the contract and
the cash flows that the Bank expects to receive arising from the weighting of multiple future economic
scenarios, discounted at the asset’s effective interest rate (“EIR”).

19
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

2. MATERIAL ACCOUNTING POLICIES INFORMATION (continued)

2.5 Financial instruments (continued)

Impairment of financial assets (continued)

• For undrawn loan commitments, the ECL is the difference between the present value of the
difference between the contractual cash flows that are due to the Bank if the holder of the
commitment draws down the loan and the cash flows that the Bank expects to receive if the
loan is drawn down; and
• For financial guarantee contracts, the ECL is the difference between the expected payments
to reimburse the holder of the guaranteed debt instrument less any amounts that the Bank
expects to receive from the holder, the debtor or any other party.

The Bank measures ECL on a collective basis for portfolios of loans that share similar economic risk
characteristics. The measurement of the loss allowance is based on the present value of the asset’s
expected cash flows using the asset’s original EIR.

More information on measurement of ECL is provided in Note 32.1, including details on how
instruments are grouped when they are assessed on a collective basis.

Credit impaired financial assets

A financial asset is “credit-impaired” when one or more events that have a detrimental impact on the
estimated future cash flows of the financial asset have occurred. Credit-impaired financial assets are
referred to as Stage 3 assets. Evidence of credit-impairment includes observable data about the
following events:

• Significant financial difficulty of the borrower or issuer;

• A breach of contract such as default or past due event;
• The lender of the borrower, for economic or contractual reasons relating to the borrower’s
financial difficulty, having granted to the borrower a concession that the lender would not
otherwise consider; or
• The disappearance of an active market for a security because of financial difficulties.

It may not be possible to identify a single discrete event—instead, the combined effect of several
events may have caused financial assets to become credit-impaired. The Bank assesses whether debt
instruments that are financial assets measured at amortised cost are credit-impaired at each reporting
date. To assess if sovereign and corporate debt instruments are credit impaired, the Bank considers
factors such as bond yields, credit ratings and the ability of the borrower to raise funding.

20
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

2. MATERIAL ACCOUNTING POLICIES INFORMATION (continued)

2.5 Financial instruments (continued)

Credit impaired financial assets (continued)

A loan is considered credit-impaired when a concession is granted to the borrower due to a

deterioration in the borrower’s financial condition, unless there is evidence that as a result of granting
the concession the risk of not receiving the contractual cash flows has reduced significantly and there
are no other indicators of impairment. For financial assets where concessions are contemplated but
not granted the asset is deemed credit impaired when there is observable evidence of credit-
impairment including meeting the definition of default. Please see below for definition of default.

Definition of default

Critical to the determination of ECL is the definition of default. The definition of default is used in
measuring the amount of ECL and in the determination of whether the loss allowance is based on 12-
month or lifetime ECL, as default is a component of the Probability of Default (PD) which affects both
the measurement of ECLs and the identification of a significant increase in credit risk.

The Bank considers the following as constituting an event of default:

• the borrower has an internal credit rating of E or 10 or is past due more than 89 days for long
term loans and 30 days (2022: 59 days) for short term loans; or
• the borrower is unlikely to pay its credit obligations to the Bank in full.

This definition of default is used by the Bank for accounting purposes as well as for internal credit risk
management purposes and is broadly aligned to the regulatory definition of default.

When assessing if the borrower is unlikely to pay its credit obligation, the Bank takes into account both
qualitative and quantitative indicators. The information assessed depends on the type of the asset, for
example in corporate lending a qualitative indicator used is the breach of covenants, which is not
relevant for retail lending. Quantitative indicators, such as overdue status and non-payment on
another obligation of the same counterparty are key inputs in this analysis. The Bank uses a variety of
sources of information to assess default which are either developed internally or obtained from
external sources. More details are provided in Note 32.1. As noted in the definition of credit impaired
financial assets above, default is evidence that an asset is credit impaired. Therefore, credit impaired
assets will include defaulted assets, but will also include other non-defaulted given the definition of
credit impaired is broader than the definition of default.

21
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

2. MATERIAL ACCOUNTING POLICIES INFORMATION (continued)

2.5 Financial instruments (continued)

Significant increase in credit risk

The Bank monitors all financial assets, issued loan commitments and financial guarantee contracts that
are subject to the impairment requirements to assess whether there has been a significant increase in
credit risk since initial recognition. If there has been a significant increase in credit risk the Bank will
measure the loss allowance based on lifetime rather than 12-month ECL. The Bank’s accounting policy
is not to use the practical expedient that financial assets with ‘low’ credit risk at the reporting date are
deemed not to have had a significant increase in credit risk. As a result, the Bank monitors all financial
assets, issued loan commitments and financial guarantee contracts that are subject to impairment for
significant increase in credit risk.

In assessing whether the credit risk on a financial instrument has increased significantly since initial
recognition, the Bank compares the risk of a default occurring on the financial instrument at the
reporting date based on the remaining maturity of the instrument with the risk of a default occurring
that was anticipated for the remaining maturity at the current reporting date when the financial
instrument was first recognised. In making this assessment, the Bank considers both quantitative and
qualitative information that is reasonable and supportable, including historical experience and
forward-looking information that is available without undue cost or effort, based on the Bank’s
historical experience and expert credit assessment including forward-looking information.

Forward-looking information includes the future prospects of the industries in which the Bank’s
counterparties operate, obtained from International Monetary Funds, the World Bank and other
similar organisations, as well as consideration of various internal and external sources of actual and
forecast economic information. The Bank allocates its counterparties to a relevant internal credit risk
grade depending on their credit quality. The quantitative information is a primary indicator of
significant increase in credit risk and is based on the change in lifetime PD by comparing:

• the remaining lifetime PD at the reporting date; with

• the remaining lifetime PD for this point in time that was estimated based on facts and
circumstances at the time of initial recognition of the exposure.

The PDs used are forward-looking and the Bank uses the same methodologies and data used to
measure the loss allowance for ECL (please refer to Note 32.1).

Given that a significant increase in credit risk since initial recognition is a relative measure, a given
change, in absolute terms, in the PD will be more significant for a financial instrument with a lower
initial PD than compared to a financial instrument with a higher PD.

More information about significant increase in credit risk is provided in Note 32.1.

22
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

2. MATERIAL ACCOUNTING POLICIES INFORMATION (continued)

2.5 Financial instruments (continued)

Modification and derecognition of financial assets

A modification of a financial asset occurs when the contractual terms governing the cash flows of a
financial asset are renegotiated or otherwise modified between initial recognition and maturity of the
financial asset. A modification affects the amount and/or timing of the contractual cash flows either
immediately or at a future date. In addition, the introduction or adjustment of existing terms of
contract of an existing loan would constitute a modification even if these new or adjusted terms of
contract do not yet affect the cash flows immediately but may affect the cash flows depending on
whether the term of contracts is or is not met (e.g. a change to the increase in the interest rate that
arises when covenants are breached).

The Bank renegotiates loans to customers in financial difficulty to maximise collection and minimise
the risk of default. A loan forbearance is granted in cases where although the borrower made all
reasonable efforts to pay under the original contractual terms, there is a high risk of default or default
has already happened and the borrower is expected to be able to meet the revised terms. The revised
terms in most of the cases include an extension of the maturity of the loan, changes to the timing of
the cash flows of the loan (principal and interest repayment), reduction in the amount of cash flows
due (principal and interest forgiveness) and amendments to terms of contracts.

When the contractual terms of a financial asset are modified and the modification does not result in
derecognition, the Bank determines if the financial asset’s credit risk has increased significantly since
initial recognition by comparing:

• the remaining lifetime PD estimated based on data at initial recognition and the original
contractual terms; with
• the remaining lifetime PD at the reporting date based on the modified terms.

For financial assets modified as part of the Bank’s forbearance policy, where modification did not result
in derecognition, the estimate of PD reflects the Bank’s ability to collect the modified cash flows taking
into account the Bank’s previous experience of similar forbearance action, as well as various
behavioural indicators, including the borrower’s payment performance against the modified
contractual terms. If the credit risk remains significantly higher than what was expected at initial
recognition the loss allowance will continue to be measured at an amount equal to lifetime ECL. If a
forborne loan is credit impaired due to the existence of evidence of credit impairment (see above), the
Bank performs an ongoing assessment to ascertain if the problems of the exposure are cured, to
determine if the loan is no longer credit-impaired. The loss allowance on forborne loans will generally
only be measured based on 12-month ECL when there is evidence of the borrower’s improved
repayment behaviour following modification leading to a reversal of the previous significant increase
in credit risk.

23
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

2. MATERIAL ACCOUNTING POLICIES INFORMATION (continued)

2.5 Financial instruments (continued)

Modification and derecognition of financial assets (continued)

The Bank derecognises a financial asset only when the contractual rights to the asset’s cash flows
expire (including expiry arising from a modification with substantially different terms), or when the
financial asset and substantially all the risks and rewards of ownership of the asset are transferred to
another entity. If the Bank neither transfers nor retains substantially all the risks and rewards of
ownership and continues to control the transferred asset, the Bank recognises its retained interest in
the asset and an associated liability for amounts it may have to pay. If the Bank retains substantially
all the risks and rewards of ownership of a transferred financial asset, the Bank continues to recognise
the financial asset and also recognises a collateralised borrowing for the proceeds received.

Write-off

Loans and debt securities are written off in full when the Bank has no reasonable expectations of
recovering the financial asset (either in its entirety or a portion of it). This is the case when the Bank
determines that the borrower does not have assets or sources of income that could generate sufficient
cash flows to repay the amounts subject to the write-off. A write-off constitutes a derecognition event.
The Bank may apply enforcement activities to financial assets written off. Recoveries resulting from
the Bank’s enforcement activities will result in impairment gains, which will be presented in “other
operating income” in the statement of profit or loss.

Presentation of allowance for ECL in the statement of financial position:

Loss allowances for ECL are presented in the statement of financial position as follows:

• for financial assets measured at amortised cost: as a deduction from the gross carrying amount
of the assets; and
• for loan commitments and financial guarantee contracts: as a provision in other liabilities.

Financial liabilities

A financial liability is a contractual obligation to deliver cash or another financial asset or to exchange
financial assets or financial liabilities with another entity under conditions that are potentially
unfavourable to the bank.

Financial liabilities, including deposits from banks and other financial institutions and deposits from
customers, borrowings, subordinated debts, and lease liabilities, are initially measured at fair value,
net of transaction costs. These financial liabilities are subsequently measured at amortised cost using
the effective interest method.

24
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

2. MATERIAL ACCOUNTING POLICIES INFORMATION (continued)

2.5 Financial instruments (continued)

Financial liabilities (continued)

The effective interest method is a method of calculating the amortised cost of a financial liability and
of allocating interest expense over the relevant period. The EIR is the rate that exactly discounts
estimated future cash payments through the expected life of the financial liability, or, where
appropriate, a shorter period, to the net carrying amount on initial recognition.

Modification and derecognition financial liabilities

The Bank derecognises financial liabilities when, and only when, the Bank’s obligations are discharged,
cancelled or have expired. The difference between the carrying amount of the financial liability
derecognised and the consideration paid and payable is recognised in profit or loss.

Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer to make specified payments to
reimburse the holder for a loss that incurs because specified debtor fails to make payments when due
in accordance with the term of the debt instrument.

Financial guarantee contracts issued by the Bank are initially measured at their fair values and, if not
designated at fair value through profit or loss, are subsequently measured at the higher of:

• amount of loss allowance determined with CIFRS 9; and

• the amount initially recognised less, where appropriate, cumulative amount of income
recognised in accordance with the Bank’s revenue recognition policies.

The Bank has not designated any financial guarantee contracts at fair value through profit or loss.

Offsetting arrangements

Financial assets and financial liabilities are offset and the net amount presented in the statement of
financial position when the Bank has a legally enforceable right to set off the recognised amounts and
intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. A
right to set-off must be available today rather than being contingent on a future event and must be
exercisable by any of the counterparties, both in the normal course of business and in the event of
default, insolvency or bankruptcy.

2.6 Leases

The Bank assesses whether a contract is or contains a lease, at inception of a contract. The Bank
recognises a right-of-use asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term
of 12 months or less) and leases of low value assets. For these leases, the Bank recognises the lease
payments as an operating expense on a straight-line basis over the term of the lease unless another
systematic basis is more representative of the time pattern in which economic benefits from the leased
assets are consumed.

25
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

2. MATERIAL ACCOUNTING POLICIES INFORMATION (continued)

2.6 Leases (continued)

Lease liability

The lease liability is initially measured at the present value of the lease payments that are not paid at
the commencement date, discounted by using its incremental borrowing rate which is the rate of
interest that the Bank would have to pay to borrow over a similar term, and with a similar security, the
funds necessary to obtain an asset of a similar value to the right-of-use-asset in a similar economic
environment.

Lease payments included in the measurement of the lease liability comprise:

• fixed lease payments, less any lease incentives;

• payments of penalties for terminating the lease, if the lease term reflects the exercise of an
option to terminate the lease.

The lease liability is presented as a separate line in the statement of financial position.

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on
the lease liability (using the effective interest method) and by reducing the carrying amount to reflect
the lease payments made.

The Bank re-measures the lease liability (and makes a corresponding adjustment to the related right-
of-use asset) whenever:

• the lease term has changed, in which case the lease liability is re-measured by discounting the
revised lease payments using a revised discount rate.
• a lease contract is modified and the lease modification is not accounted for as a separate lease,
in which case the lease liability is re-measured by discounting the revised lease payments using
a revised discount rate at the effective date of the modification.

Right-of-use assets

The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease
payments made at or before the commencement day, less any lease incentives received and any initial
direct costs. They are subsequently measured at cost less accumulated depreciation and impairment
losses.

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the
underlying asset. The depreciation starts at the commencement date of the lease.

The right-of-use assets are presented as a separate line in the statement of financial position.

26
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

2. MATERIAL ACCOUNTING POLICIES INFORMATION (continued)

2.7 Property and equipment

Items of property and equipment are measured at cost less accumulated depreciation and
accumulated impairment losses, if any. The cost of a property and equipment item comprises its
purchase price and any directly attributable costs of bringing the asset to its working condition and
location for its intended use.

Where an item of property and equipment comprises major components having different useful lives,
the components are accounted for as separate items of property and equipment.

Subsequent expenditure is capitalised only when it is probable that future economic benefits, in excess
of the originally assessed standard of performance of the existing asset, will flow to the Bank. Ongoing
repairs and maintenance are expensed as incurred.

Depreciation is calculated to write off the cost of items of property and equipment less their estimated
residual values using the straight-line method over their estimated useful lives, and is recognised in
profit or loss.

The estimated useful lives of significant items of property and equipment are as follows:

Useful lives
Leasehold improvement 1-15 years
Office equipment, furniture and fixture 5 years
Motor vehicles 5 years
Computer and IT equipment 5-10 years

Work in progress is not depreciated until such time as the relevant assets are completed and put into
operational use.

Depreciation methods, useful lives and residual values are reviewed at each reporting date and
adjusted if appropriate.

Fully depreciated items of property and equipment are retained in the statements of financial position
until disposed of or written off.

An item of property and equipment is derecognised upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset. The gain or loss arising on the
disposal or retirement of an asset is determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in profit or loss.

27
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

2. MATERIAL ACCOUNTING POLICIES INFORMATION (continued)

2.8 Intangible assets

Intangible assets consist of software and licenses and are stated at cost less accumulated amortisation
and accumulated impairment losses, if any. Software can be either purchased from vendors or
internally generated.

Subsequent expenditure on software and licenses is capitalised only when it increases the future
economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed
as incurred.

Software and licenses are amortised on a straight-line basis in profit or loss over its estimated useful
life, from the date on which it is available for use. Software cost is amortised over the expected useful
lives of 3 to 20 years, and 5 years maximum for internally generated software.

Amortisation methods, useful lives and residual values are reviewed at each reporting date and
adjusted if appropriate.

2.9 Provisions

Provisions are recognised when the Bank has a present obligation (legal or constructive) as a result of
a past event, it is probable that the Bank will be required to settle the obligation, and a reliable
estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the
present obligation at the end of the reporting period, taking into account the risks and uncertainties
surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the
present obligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered
from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement
will be received and the amount of the receivable can be measured reliably.

28
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

2. MATERIAL ACCOUNTING POLICIES INFORMATION (continued)

2.10 Regulatory provisions and regulatory reserves

On 1 December 2017, the NBC issued a Prakas No. B7-017-344 on Credit Risk Grading and Impairment
Provisioning for ensuring appropriate recognition, measurement, provisioning and reporting of
impaired facilities of the institutions.

Facilities under this Prakas is defined as all loans and other financial products, whether reported on
balance sheet or off-balance sheet, provided by an Institution to a counterparty, which give rise to
credit risk exposure on the Institution.

According to the Prakas, the Bank is required to calculate the allowance for impaired facilities in
accordance with the regulatory provision simultaneously with the calculation in accordance with
CIFRSs. The allowance for impairment losses calculated in accordance with CIFRSs is to be recognised
and recorded. Excess amount of allowance calculated in accordance with regulatory provision
compared to the allowance calculated under CIFRSs shall be transferred from retained earnings to
regulatory reserves of the equity as disclosed in Note 21.

On 16 February 2018, the NBC issued Circular No. B7-018-001 clarifying on Implementation of Prakas
on Credit Risk Grading and Impairment Provisioning. According to the Circular, the Bank is required to
calculate the allowance for impaired facilities in accordance with regulatory provision of which facilities
are classified into five classes with allowance rates as follows:

29
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

2. MATERIAL ACCOUNTING POLICIES INFORMATION (continued)

2.10 Regulatory provisions and regulatory reserves (continued)

Classifications Number of days past due Allowance

General allowance
Short-term facilities (one year or less):
Normal 0-14 days 1%

Long-term facilities (more than one year):

Normal 0-29 days 1%

Specific allowance
Short-term facilities (one year or less):
Special mention 15-30 days 3%
Sub-standard 31-60 days 20%
Doubtful 61-90 days 50%
Loss 91 days or more 100%

Long-term facilities (more than one year):

Special mention 30-89 days 3%
Sub-standard 90-179 days 20%
Doubtful 180-359 days 50%
Loss 360 days or more 100%

The allowance is calculated as a percentage of the facility amount outstanding as at each reporting
period.

Reversal of regulatory reserves

When the impairment loss allowance calculated in accordance with regulatory provision is
subsequently less than that calculated under the CIFRSs, the regulatory reserve is reversed at the
amount that does not exceed the amount that would have been determined had no regulatory reserve
been recognised in prior years.

2.11 Net interest income

Interest income and expense for financial instruments are recognised in “Net interest income” as
“Interest income” and “Interest expense” in the profit or loss account using effective interest method.

The EIR is the rate that exactly discounts estimated future cash flows of the financial instrument
through the expected life of the financial instrument or, where appropriate, a shorter period, to the
net carrying amount of the financial asset or financial liability. The future cash flows are estimated
taking into account all the contractual terms of the instrument.

30
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

2. MATERIAL ACCOUNTING POLICIES INFORMATION (continued)

2.11 Net interest income (continued)

The calculation of EIR include all fees paid or received between parties to the contract that are
incremental and directly attributable to the specific lending arrangement, transaction costs, and all
other premium or discounts.

The interest income/interest expense is calculated by applying the EIR to the gross carrying amount of
non-credit impaired financial assets (i.e. at the amortised cost of the financial asset before adjusting
for any expected credit loss allowance), or to the amortised cost of financial liabilities. For the credit-
impaired financial assets, the interest income is calculated by applying the EIR to the amortised cost
of the credit-impaired financial assets (i.e. the gross carrying amount less the allowance for ECLs).

2.12 Net fee and commission income

Fee and commission income and expense include fees other than those that are an integral part of EIR
(please refer to Note 2.11).

Fee and commission income, including referral fees, renewal fees, commitment fees, remittance fees,
service charges, other fees and commissions on loans, and other fee income are recognised as the
related services are performed.

Fee and commission expense relate mainly to transaction and service fees, and are accounted as the
services received.

2.13 Short-term and other long-term employee benefits

Short-term employee benefits are recognised in respect of wages and salaries in the period the related
service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for
that service. A liability is recognised for the amount expected to be paid if the Bank has a present legal
or constructive obligation to pay this amount as a result of past service provided by the employees and
the obligation can be estimated reliably.

Long-term employee benefits are measured at the present value of the estimated future cash outflows
expected to be made by the Bank in respect of the service provided by the employee up to the
reporting date.

31
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

2. MATERIAL ACCOUNTING POLICIES INFORMATION (continued)

2.14 Income tax

Income tax expense comprises current and deferred tax.

Current tax

Current tax is the expected tax payable on the taxable income for the period using tax rates enacted
or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous
periods. Taxable profit differs from net profit as reported in profit or loss because it excludes items of
income or expense that are taxable or deductible in other years and it further excludes items that are
never taxable or deductible.

A provision is recognised for those matters for which the tax determination is uncertain but it is
considered probable that there will be a future outflow of funds to a tax authority. The provisions are
measured at the best estimate of the amount expected to become payable. The assessment is based
on the judgement of tax professionals within the Bank supported by previous experience in respect of
such activities and in certain cases based on specialist independent tax advice.

Deferred tax

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred
tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the
temporary difference arises from the initial recognition of goodwill or from the initial recognition
(other than in a business combination) of other assets and liabilities in a transaction that affects neither
the taxable profit nor the accounting profit.

Deferred tax assets are recognised for unused tax credits and deductible temporary differences to the
extent that it is probable that future taxable profits will be available against which the temporary
difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to
the extent that it is no longer probable that the related tax benefit will be realised.

32
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

2. MATERIAL ACCOUNTING POLICIES INFORMATION (continued)

2.14 Income tax (continued)

Deferred tax (continued)

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences
when they reverse, using tax rates enacted or substantively enacted at the reporting date.

The measurement of deferred tax reflects the tax consequences that would follow the manner in which
the Bank expects, at the reporting date, to recover or settle the carrying amount of its assets and
liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current
tax assets against current tax liabilities and when they relate to income tax levied by the same taxation
authority and the banks intends to settle its current tax assets and current tax liabilities on a net basis.

Current tax and deferred tax for the year

Current and deferred tax are recognised in profit or loss, except when they relate to items that are
recognised in other comprehensive income or directly in equity, in which case the current and deferred
tax are also recognised in other comprehensive income or directly in equity respectively.

2.15 Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, unrestricted balances held with the NBC, bank
deposits and highly liquid financial assets with original maturities of three months or less from the date
of acquisition that are subject to an insignificant risk of changes in fair value, and are used by the Bank
in the management of its short term commitments.

Cash and cash equivalents are carried at amortised cost in the statement of financial position.

3. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

The preparation of financial statements requires management to make judgments, estimates and
assumptions that affect the application of material accounting policies and the reported amounts of
assets, liabilities, and income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting
estimates are recognised in the period in which the estimates are revised and in any future periods
affected.

3.1 Critical judgments in applying material accounting policies

Information about judgements made in applying accounting policies that have the most significant
effects on the amounts recognised in the financial statements included the following:

33
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

3. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (continued)

3.1 Critical judgments in applying material accounting policies (continued)

Business model assessment

Classification and measurement of financial assets depends on the results of the SPPI and the business
model test (please see Note 2.5). The Bank determines the business model at a level that reflects how
groups of financial assets are managed together to achieve a particular business objective. This
assessment includes judgement reflecting all relevant evidence including how the performance of the
assets is evaluated and their performance measured, the risks that affect the performance of the assets
and how these are managed and how the managers of the assets are compensated. The Bank monitors
financial assets measured at amortised cost that are derecognised prior to their maturity to
understand the reason for their disposal and whether the reasons are consistent with the objective of
the business for which the asset was held. Monitoring is part of the Bank’s continuous assessment of
whether the business model, for which the remaining financial assets are held, continues to be
appropriate and if it is not appropriate whether there has been a change in business model and so a
prospective change to the classification of those assets.

Significant increase in credit risk

As explained in Note 32.1, ECLs are measured as an allowance equal to 12-month ECL for stage 1 assets,
or lifetime ECL for stage 2 or stage 3 assets. An asset moves to stage 2 when its credit risk has increased
significantly since initial recognition. In assessing whether the credit risk of an asset has significantly
increased the Bank takes into account qualitative and quantitative reasonable and supportable
forward-looking information.

Establishing groups of assets with similar credit risk characteristics

When ECLs are measured on a collective basis, the financial instruments are grouped on the basis of
shared risk characteristics. The Bank monitors the appropriateness of the credit risk characteristics on
an ongoing basis to assess whether they continue to be similar. This is required in order to ensure that
should credit risk characteristics change there is appropriate re-segmentation of the assets. This may
result in new portfolios being created or assets moving to an existing portfolio that better reflects the
similar credit risk characteristics of that group of assets. Re-segmentation of portfolios and movement
between portfolios is more common when there is a significant increase in credit risk (or when that
significant increase reverses) and so assets move from 12-month to lifetime ECLs, or vice versa, but it
can also occur within portfolios that continue to be measured on the same basis of 12-month or
lifetime ECLs but the amount of ECL changes because the credit risk of the portfolios differ.

Models and assumptions used

The Bank uses various models and assumptions in estimating ECL. Judgement is applied in identifying
the most appropriate model for each type of asset, as well as for determining the assumptions used in
these models, including assumptions that relate to key drivers of credit risk.

34
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

3. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (continued)

3.1 Critical judgments in applying the accounting policies (continued)

Determination of life of revolving credit facilities

The Bank measures ECL considering the risk of default over the maximum contractual period. However,
for financial instruments such as credit cards and overdraft facilities that include both a loan and an
undrawn commitment component, the Bank’s contractual ability to demand repayment and cancel
the undrawn commitment does not limit the Bank’s exposure to credit losses to the contractual notice
period. For such financial instruments the Bank measures ECL over the period that it is exposed to
credit risk and ECL would be mitigated by credit risk management actions, even if that period extends
beyond the maximum contractual period.

3.2 Key sources of estimation uncertainty

Information about key assumptions and estimation uncertainties that have the most significant effect
on the amounts recognised in financial statements includes the following:

Forward-looking information

The Bank establishes the number and relative weightings of forward-looking scenarios for each type
of product and determines the forward-looking information relevant to each scenario. When
measuring ECL the Bank uses reasonable and supportable forward-looking information, which is based
on assumptions for the future movement of different economic drivers and how these drivers will
affect each other. Further information on the credit quality analysis of the Bank is provided in note
32.1.

35
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

3. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (continued)

3.2 Key sources of estimation uncertainty (continued)

Management overlay

The Bank provides management overlay as an additional ECL under stressed scenarios due to
uncertainties of future economic outlook. Further information on the credit quality analysis of the Bank
is provided in note 32.1.3.

Probability of Default (PD)

PD constitutes a key input in measuring ECL. PD is an estimate of the likelihood of default over a given
time horizon, the calculation of which includes historical data, assumptions and expectations of future
conditions. Further information on the credit quality analysis of the Bank is provided in note 32.1.

Loss Given Default (LGD)

LGD is an estimate of the loss arising on default. It is based on the difference between the contractual
cash flows due and those that the lender would expect to receive, taking into account cash flows from
collateral and integral credit enhancements. Further information on the credit quality analysis of the
Bank is provided in note 32.1.

Taxes

The taxation system in Cambodia is characterised by numerous taxes and frequently changing
legislation, which is often unclear, contradictory and subject to interpretation. Often, different
interpretations exist among the numerous taxation authorities and jurisdictions. Taxes are subject to
review and investigation by a number of authorities, which are empowered by law to impose fines,
penalties and interest charges.

These factors may create potential tax exposures for the Bank. Management believes that they have
understood relevant tax regulations and adequately provided for tax liabilities based on their
interpretation of the current tax legislation. However, the relevant authorities may have different
interpretations and the effects could be significant. Further information on the tax contingencies is
provided in note 33.

36
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

4. CASH ON HAND

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million

Cash on hand 451,286,206 1,843,504 424,308,563 1,746,878

Cash items in process of collection 23,571,567 96,290 37,565,506 154,658

474,857,773 1,939,794 461,874,069 1,901,536

5. BALANCES WITH THE NBC

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million

Current
Current accounts 181,444,988 741,203 158,545,814 652,733
Negotiable Certificate of
Deposit (“NCD”) (i) 234,681,942 958,676 665,851,128 2,741,309
Reserve requirement (ii) 617,749,388 2,523,506 493,599,842 2,032,151
Non-current
Capital guarantee deposit (iii) 110,733,869 452,348 66,216,263 272,612

1,144,610,187 4,675,733 1,384,213,047 5,698,805

No impairment loss allowance is created against the balance with the NBC as management determines
that the credit risk on these facilities are minimal.

(i) Negotiable Certificate of Deposit

The Bank has pledged negotiable certificate of deposits amounting US$ 143,399,000 as collateral for
Liquidity-Providing Collateralised Operations (2022: US$ 63,799,000).

(ii) Reserve requirement

This is a reserve requirement which fluctuates depending on the level of the Bank’s customers’
deposits and non-residential borrowings. It is maintained in compliance with the NBC’s Prakas No. B7-
020-230 dated 18 March 2020 at the rate of 7% of customers’ deposits in KHR and currencies other
than KHR. On 9 January 2023, the NBC issued a notification letter no. B7-023-005 increased rate to 9%
for other currencies while maintain KHR currency at 7% from 1 January 2023 to 31 December 2023. On
23 November 2023, the NBC issued another notification letter no. B7-023-2621 reduced the rate on
other currencies to 7% and to maintain the same rate on KHR currency from 23 November 2023 till 31
December 2024.

(iii) Capital guarantee deposits

Under the NBC’s Prakas No. B7-01-136 dated 15 October 2001, the Bank is required to maintain a
statutory deposit of 10% of its registered capital. This deposit is not available for use in the Bank’s day-
to-day operations and is only refundable should the Bank voluntarily cease its operations in Cambodia.

37
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

6. BALANCES WITH OTHER BANKS

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million

Balances with other banks at

amortised cost 1,477,673,213 6,036,295 483,717,992 1,991,467
Impairment loss allowance (848,785) (3,467) (647,519) (2,666)

1,476,824,428 6,032,828 483,070,473 1,988,801

The gross carrying amounts are analysed as follows:

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million
(a) By type
Current accounts 24,984,211 102,061 5,200,336 21,410
Savings deposits 793,876 3,243 287,976 1,186
Overnight deposits 308,457,352 1,260,048 22,096,749 90,972
Term deposits 1,143,437,774 4,670,943 456,132,931 1,877,899

1,477,673,213 6,036,295 483,717,992 1,991,467

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million
(b) By currency
US Dollars 1,473,907,053 6,020,911 482,911,049 1,988,146
Khmer Riel 3,534,643 14,439 370,258 1,524
Others 231,517 945 436,685 1,797

1,477,673,213 6,036,295 483,717,992 1,991,467

38
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

6. BALANCES WITH OTHER BANKS (continued)

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million
(c) By maturity
Within 1 month 698,750,902 2,854,397 101,728,839 418,818
>1 to 3 months 263,726,035 1,077,321 45,216,656 186,157
>3 to 12 months 515,196,276 2,104,577 336,772,497 1,386,492

1,477,673,213 6,036,295 483,717,992 1,991,467

31 December 2023 31 December 2022

(d) By interest rate (per annum)
Current accounts 0.14% - 2.00% 0% - 0.14%
Savings deposits 0% - 0.25% 0% - 0.25%
Overnight deposits 2.00% - 5.29% 3.77% - 4.38%
Term deposits 4.50% - 7.50% 2.00% - 6.50%

7. LOANS TO CUSTOMERS

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million
At amortised cost
Commercial loans 6,564,013,658 26,813,996 5,480,080,316 22,561,491
Overdrafts 1,086,806,276 4,439,604 883,045,000 3,635,496
Consumer loans:
Housing loans 149,990,583 612,712 119,767,394 493,082
Staff loans 38,929,770 159,028 22,183,298 91,329
Vehicle loans 15,126,159 61,790 11,136,925 45,851
Personal loans 8,214,616 33,557 2,148,108 8,844
Credit cards 3,268,426 13,352 3,613,059 14,875
Total gross carrying amount 7,866,349,488 32,134,039 6,521,974,100 26,850,968
Impairment loss allowance (94,007,974) (384,024) (73,174,303) (301,259)

Net carrying amount 7,772,341,514 31,750,015 6,448,799,797 26,549,709

39
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

8. INVESTMENT SECURITIES

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million

Treasury bills at amortised

cost (*) 308,395,322 1,259,795 - -
Other investment securities at
amortised cost (**) 30,050,417 122,756 35,534,966 146,297
Total 338,445,739 1,382,551 35,534,966 146,297
Impairment loss allowance (429,934) (1,756) (592,219) (2,438)

338,015,805 1,380,795 34,942,747 143,859

(*) This represents investments in foreign treasury bills with terms ranging from 5 to 12 months and
fixed interest rates ranging from 5.28% to 5.40%.

(**) Included in the investment securities is an investment of US$30 million or about KHR 122,550
million on 20 December 2021 in Corporate Bond issued by Cambodia Airport Investment Co., Ltd. for
construction and development of Techo International Airport of the Cambodian Government with the
term 3 years and interest rate 5.50% per annum.

40
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

9. PROPERTY AND EQUIPMENT

Office
equipment, Computers
Leasehold furniture and Motor and IT Work in
improvement fixture vehicles equipment progress Total
US$ US$ US$ US$ US$ US$ KHR Million
31 December 2023
Cost
At 1 January 2023 34,145,655 17,830,307 1,998,231 57,630,862 3,469,816 115,074,871 473,763
Additions 927,919 1,366,032 633,358 22,344,249 6,834,281 32,105,839 131,955
Transfers 9,057,387 405,117 - 97,649 (9,560,153) - -
Reclassification 2,200 (4,422,967) - 4,420,767 - - -
Disposals (88,721) (230,313) (45,236) (872,575) - (1,236,845) (5,084)
Currency translation differences - - - - - - (4,453)

At 31 December 2023 44,044,440 14,948,176 2,586,353 83,620,952 743,944 145,943,865 596,181

Accumulated depreciation
At 1 January 2023 14,732,956 12,115,566 1,165,973 20,992,989 - 49,007,484 201,764
Depreciation 3,513,622 1,931,700 334,609 7,521,366 - 13,301,297 54,668
Reclassification 2,160 (3,067,708) - 3,065,548 - - -
Disposals (88,721) (230,313) (45,236) (872,575) - (1,236,845) (5,083)
Currency translation differences - - - - - - (1,870)

At 31 December 2023 18,160,017 10,749,245 1,455,346 30,707,328 - 61,071,936 249,479

Carrying amounts
At 31 December 2023 25,884,423 4,198,931 1,131,007 52,913,624 743,944 84,871,929 346,702

41
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

9. PROPERTY AND EQUIPMENT (continued)

Office
equipment, Computers
Leasehold furniture and Motor and IT Work in
improvement fixture vehicles equipment progress Total
US$ US$ US$ US$ US$ US$ KHR Million
31 December 2022
Cost
At 1 January 2022 28,453,942 15,801,453 1,796,171 41,274,900 360,947 87,687,413 357,239
Additions 335,804 1,712,995 536,640 16,681,745 10,607,423 29,874,607 122,098
Transfers 7,005,147 490,767 - 2,640 (7,498,554) - -
Disposals - - (334,580) (72,325) - (406,905) (1,663)
Write off (1,649,238) (174,908) - (256,098) - (2,080,244) (8,502)
Currency translation differences - - - - - - 4,591

At 31 December 2022 34,145,655 17,830,307 1,998,231 57,630,862 3,469,816 115,074,871 473,763

Accumulated depreciation
At 1 January 2022 12,453,780 9,694,061 1,214,695 16,681,094 - 40,043,630 163,138
Depreciation 3,677,896 2,581,909 246,830 4,637,942 - 11,144,577 45,548
Disposals - - (295,552) (72,326) - (367,878) (1,504)
Write off (1,398,720) (160,404) - (253,721) - (1,812,845) (7,409)
Currency translation differences - - - - - - 1,991

At 31 December 2022 14,732,956 12,115,566 1,165,973 20,992,989 - 49,007,484 201,764

Carrying amounts
At 31 December 2022 19,412,699 5,714,741 832,258 36,637,873 3,469,816 66,067,387 271,999

42
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

10. RIGHT-OF-USE ASSETS

The Bank leases assets including office buildings and motor vehicles. Information about leases for
which the Bank is a lessee is presented below.

Buildings Motor vehicles Total

US$ US$ US$ KHR Million
31 December 2023
Cost
At 1 January 2023 85,143,103 3,967,530 89,110,633 366,868
Additions 17,329,426 1,082,621 18,412,047 75,674
Disposals (1,427,876) (156,080) (1,583,956) (6,510)
Currency translation differences - - - (3,272)
At 31 December 2023 101,044,653 4,894,071 105,938,724 432,760

Accumulated depreciation
At 1 January 2023 28,954,289 3,092,039 32,046,328 131,934
Depreciation 10,092,795 950,973 11,043,768 45,390
Disposals (1,427,876) (156,080) (1,583,956) (6,510)
Currency translation differences - - - (1,261)
At 31 December 2023 37,619,208 3,886,932 41,506,140 169,553

Carrying amounts
At 31 December 2023 63,425,445 1,007,139 64,432,584 263,207

31 December 2022
Cost
At 1 January 2022 60,512,705 3,147,646 63,660,351 259,352
Additions 25,802,714 948,171 26,750,885 109,331
Lease modification (1,172,316) (128,287) (1,300,603) (5,316)
Currency translation differences - - - 3,501
At 31 December 2022 85,143,103 3,967,530 89,110,633 366,868

Accumulated depreciation
At 1 January 2022 21,474,846 2,292,267 23,767,113 96,827
Depreciation 8,809,606 849,336 9,658,942 39,476
Lease modification (1,330,163) (49,564) (1,379,727) (5,639)
Currency translation differences - - - 1,270
At 31 December 2022 28,954,289 3,092,039 32,046,328 131,934

Carrying amounts
At 31 December 2022 56,188,814 875,491 57,064,305 234,934

The average lease term is 8 years (2022: 8 years) for office buildings and 2 years for motor vehicles
(2022: 2 years).

Approximately 4% (2022: 17%) of the leases expired in the current financial year. The expired contracts
were replaced by new leases for identical underlying assets. This resulted in additions to right-of-use
asset of US$15.6 million in 2023 (2022: US$10.9 million). The maturity analysis of lease liabilities is
presented in Note 18.
43
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

10. RIGHT-OF-USE ASSETS (continued)

Amount recognised in profit or loss

Year ended Year ended

31 December 2023 31 December 2022
US$ KHR Million US$ KHR Million
Depreciation expense on right-of-
use assets (Note 25) 11,043,768 45,390 9,658,942 39,476
Interest expense on lease liabilities
(Note 22) 3,256,898 13,386 2,827,147 11,555
Expenses relating to leases of low-
value assets and short-term lease 4,666,586 19,180 3,599,936 14,713

18,967,252 77,956 16,086,025 65,744

As at 31 December 2023, the Bank entered into 8 lease agreements with lease term ranging from 2 to
10 years to rent properties, which had not commenced by the year-end and as a result, lease liabilities
and right-of-use assets have not been recognised at 31 December 2023 (2022: 4 agreements with lease
term ranging from 5 to 10 years). The aggregate future cash outflows to which the Bank is exposed in
respect of these contracts are as followed:

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million
Within 1 year 772,222 3,155 367,778 1,514
From 1 to 5 years 4,126,389 16,856 1,609,999 6,628
More than 5 years 6,816,055 27,844 4,354,221 17,926

11,714,666 47,855 6,331,998 26,068

44
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

11. INTANGIBLE ASSETS

Work in
Software Progress Total
US$ US$ US$ KHR Million
31 December 2023
Cost
At 1 January 24,710,963 - 24,710,963 101,735
Additions 1,096,100 2,130,000 3,226,100 13,259
Write off (29,032) - (29,032) (119)
Currency translation differences - - - (871)

At 31 December 25,778,031 2,130,000 27,908,031 114,004

Accumulated amortisation
At 1 January 8,414,524 - 8,414,524 34,643
Amortisation 2,967,427 - 2,967,427 12,196
Write off (29,032) - (29,032) (119)
Currency translation differences - - - (344)

At 31 December 11,352,919 - 11,352,919 46,376

Carrying amounts
At 31 December 14,425,112 2,130,000 16,555,112 67,628

31 December 2022
Cost
At 1 January 21,840,695 - 21,840,695 88,979
Additions 3,158,843 - 3,158,843 12,910
Write off (288,575) - (288,575) (1,179)
Currency translation differences - - - 1,025

At 31 December 24,710,963 - 24,710,963 101,735

Accumulated amortisation
At 1 January 5,953,347 - 5,953,347 24,254
Amortisation 2,700,175 - 2,700,175 11,036
Write off (238,998) - (238,998) (977)
Currency translation differences - - - 330

At 31 December 8,414,524 - 8,414,524 34,643

Carrying amounts
At 31 December 16,296,439 - 16,296,439 67,092

45
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

12. OTHER ASSETS

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million

Deposits and advance payments 54,545,040 222,816 32,226,414 132,676

Bakong receivables 24,410,711 99,718 25,218,004 103,823
Prepayment 13,032,319 53,237 8,858,207 36,469
Lawyer fee receivables 6,505,571 26,575 3,555,619 14,638
MasterCard/Visa Card/UPI and
MoneyGram receivables 6,449,946 26,348 5,423,901 22,330
Card supplies 4,100,511 16,751 2,686,067 11,059
Other receivables 4,034,789 16,482 2,501,375 10,298
Other investments 76,185 311 76,185 314
Impairment allowance of deposits
and other receivables (2,451,689) (10,015) (1,057,355) (4,353)

110,703,383 452,223 79,488,417 327,254

13. DEPOSITS FROM BANKS AND OTHER FINANCIAL INSTITUTIONS

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million

Demand deposits 95,955,940 391,980 34,877,849 143,592

Savings deposits 23,413,419 95,644 9,343,969 38,469
Fixed deposits 87,032,650 355,529 98,440,263 405,279

206,402,009 843,153 142,662,081 587,340

The above amounts are analysed as follows:

31 December 2023 31 December 2022
US$ KHR Million US$ KHR Million
(a) By currency
US Dollars 175,925,490 718,656 123,371,407 507,920
Khmer Riel 30,476,519 124,497 19,290,674 79,420

206,402,009 843,153 142,662,081 587,340

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million
(b) By maturity
Within 1 month 140,583,114 574,282 44,735,714 184,177
>1 to 3 months 5,254,055 21,463 5,163,968 21,260
>3 to 12 months 45,052,205 184,038 78,723,216 324,103
More than 12 months 15,512,635 63,370 11,983,621 49,337
Over 5 years - - 2,055,562 8,463

206,402,009 843,153 142,662,081 587,340

46
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

13. DEPOSITS FROM BANKS AND OTHER FINANCIAL INSTITUTIONS (continued)

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million
(c) By relationship
Non-related parties 206,402,009 843,153 142,662,081 587,340

31 December 2023 31 December 2022

(d) By interest rate (per annum)
Demand deposits 0.00% - 4.00% 0.00% - 2.00%
Savings deposits 0.00% - 1.00% 0.00% - 2.50%
Fixed deposits 1.50% - 8.00% 2.25% - 7.75%

14. DEPOSITS FROM CUSTOMERS

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million

Demand deposits 1,353,335,276 5,528,375 1,124,098,661 4,627,914

Savings deposits 4,767,874,307 19,476,767 4,219,743,401 17,372,684
Fixed deposits 2,902,795,067 11,857,918 1,861,307,503 7,663,003
Margin deposits 2,300,119 9,396 5,804,049 23,895

9,026,304,769 36,872,456 7,210,953,614 29,687,496

The above amounts are analysed as follows:

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million
(a) By currency
US Dollars 8,250,654,971 33,703,927 6,674,255,090 27,477,908
Khmer Riel 775,648,950 3,168,526 536,697,703 2,209,585
Euro 848 3 821 3

9,026,304,769 36,872,456 7,210,953,614 29,687,496

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million
(b) By maturity
Within 1 month 6,444,810,306 26,327,051 5,533,130,949 22,779,900
>1 to 3 months 533,849,685 2,180,776 276,835,941 1,139,734
>3 to 12 months 1,825,305,692 7,456,374 1,283,620,259 5,284,665
More than 12 months 222,339,086 908,255 117,366,465 483,197

9,026,304,769 36,872,456 7,210,953,614 29,687,496

47
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

14. DEPOSITS FROM CUSTOMERS (continued)

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million
(c) By relationship
Non-related parties 9,023,751,398 36,862,025 7,206,651,357 29,669,784
Related parties 2,553,371 10,431 4,302,257 17,712

9,026,304,769 36,872,456 7,210,953,614 29,687,496

31 December 2023 31 December 2022

(d) By interest rate (per annum)
Demand deposits 0.00% - 5.00% 0.00% - 5.00%
Savings deposits 0.00% - 5.00% 0.00% - 4.00%
Fixed deposits 1.00% - 10.00% 1.00% - 9.50%

15. BORROWINGS

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million

Borrowing at amortised cost

MLF (i) 24,491,877 100,049 - -
LPCO (ii) 115,808,959 473,080 62,723,879 258,234
Bank loan (iii) 6,116,127 24,984 5,634,489 23,197

146,416,963 598,113 68,358,368 281,431

(i) This represents 1 Marginal Lending Facility (MLF) provided by the NBC. The principal and
interest are payable on maturities with terms ranging from 1 to 7 days (2022: nil)
(ii) This represents 27 Liquidity-Providing Collateralised Operations (LPCOs) provided by the
NBC. The principal and interest are payable on maturities with terms ranging from 1 to 12
months (2022: 34 LPCOs with terms ranging from 3 to 12 months).
(iii) This represents bank loans obtained from Small and Medium Enterprise Bank of Cambodia
Plc. with terms ranging from 5 to 8 years (2022: 5 to 8 years).

The NCD in US dollars fully collateralise the LPCOs and MLF acquired from the NBC. Other borrowings
are unsecured. All the borrowings bear fixed interest rates ranging from 2.20% to 6.80% per annum
(2022: 2.00% to 6.76%).

48
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

16. SUBORDINATED DEBTS

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million

National Bank of Canada 96,053,372 392,378 121,045,397 498,344

The principal amounting to US$25,000,000 were repaid to the National Bank of Canada during the year
(2022: US$27,000,000) and there was no new drawn down during the year (2022: nil).

The above subordinated debts are unsecured and bear interest rates ranging from 7.37% to 9.40% per
annum (2022: 7.04% to 9.40% per annum), which have 7-year term.

17. INCOME TAX

(a) Current tax liabilities

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million

At the beginning of the year 47,388,978 195,100 46,957,236 191,304

Current income tax expense 55,326,774 227,393 58,132,505 237,588
Current income tax paid (55,498,588) (228,099) (57,700,763) (235,823)
Currency translation differences - (1,512) - 2,031

At the end of the year 47,217,164 192,882 47,388,978 195,100

(b) Deferred tax

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current
tax assets against current tax liabilities and when deferred taxes relate to the same fiscal authority.

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million

Deferred tax assets 21,474,137 87,722 7,799,760 32,112

Deferred tax liabilities (43,463,757) (177,550) (14,829,845) (61,055)

Net deferred tax (liabilities)/assets (21,989,620) (89,828) (7,030,085) (28,943)

49
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

17. INCOME TAX (continued)

(b) Deferred tax (continued)

Recognised Recognised in
1 in profit or 31 profit or loss 31
January loss during December during the December
2022 the year 2022 year 2023
US$ US$ US$ US$ US$
Deferred tax assets/
(liabilities)
Lease Liabilities - - - 13,810,687 13,810,687
Deferred revenue from
processing fees recognised 4,608,322 555,683 5,164,005 610,343 5,774,348
Deferred card fees 724,384 86,159 810,543 31,810 842,353
Management bonuses 4,248,345 (3,061,060) 1,187,285 (445,502) 741,783
Back pay seniority - - - 260,738 260,738
Unearned pinless top-up 19,600 5,201 24,801 19,427 44,228
Unrealised exchange gain or 16,354 596,771 613,125 (623,094) (9,969)
loss
Depreciable assets (2,047,683) (2,120,016) (4,167,699) (1,127,791) (5,295,490)
Interest in suspense (584,981) (2,374,226) (2,959,207) (3,176,243) (6,135,450)
Right-of-use assets - - - (12,905,998) (12,905,998)
Impairment loss allowance 3,891,214 (11,594,152) (7,702,938) (11,413,912) (19,116,850)
10,875,555 (17,905,640) (7,030,085) (14,959,535) (21,989,620)

In KHR Million equivalent 44,307 (73,180) (28,943) (61,484) (89,828)

(c) Income tax expense

Year ended Year ended

31 December 2023 31 December 2022
US$ KHR Million US$ KHR Million

Current income tax 55,326,774 227,393 58,132,505 237,588

Deferred tax expense/(benefit) 14,959,535 61,484 17,905,640 73,180

Income tax expense 70,286,309 288,877 76,038,145 310,768

The reconciliation of income tax expense computed at the statutory tax rate of 20% to the income tax
expense shown in the statement of profit or loss and other comprehensive income is as follows:

50
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

17. INCOME TAX (continued)

(c) Income tax expense (continued)

Year ended Year ended
31 December 2023 31 December 2022
US$ KHR Million US$ KHR Million

Profit before tax 346,767,977 1,425,217 338,316,382 1,382,698

Income tax at the rate of 20% 69,353,595 285,043 67,663,276 276,540

Tax effect of non-deductible
expenses 1,052,963 4,328 6,143,239 25,107
Unrecognised temporary
differences 370,751 1,524 1,492,510 6,100
(Over)/under provision in prior year (491,000) (2,018) 739,120 3,021

Income tax expense 70,286,309 288,877 76,038,145 310,768

18. LEASE LIABILITIES

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million
Maturity Analysis
Year 1 13,953,961 57,002 11,718,431 48,245
Year 2 12,962,976 52,954 10,335,250 42,550
Year 3 10,908,492 44,561 9,870,302 40,636
Year 4 10,015,142 40,912 9,015,221 37,116
Year 5 7,912,810 32,324 8,171,294 33,641
Onwards 28,780,356 117,567 24,257,108 99,867
84,533,737 345,320 73,367,606 302,055
Less: Unearned interest (15,480,303) (63,237) (12,955,723) (53,339)

69,053,434 282,083 60,411,883 248,716

19. OTHER LIABILITIES

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million

Accrued expenses 38,550,961 157,481 40,389,187 166,282

Outward cheques payable 23,571,567 96,290 - -
Remittance in process 14,441,382 58,993 8,955,550 36,870
Other payables 8,067,938 32,957 5,310,104 21,862
Unearned income 4,432,904 18,108 4,176,721 17,196
Other tax payable 1,502,542 6,138 2,687,699 11,065
Provision for off-balance sheets 635,696 2,597 356,288 1,467

91,202,990 372,564 61,875,549 254,742

51
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

20. SHARE CAPITAL

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million
Shares of US$1,000 each
Issued and fully paid 1,100,000,000 4,493,500 660,000,000 2,717,220

The details of shareholding were as follows:

31 December 2023 31 December 2022

% of Number of % of Number of
Ownership shares US$ Ownership shares US$

National Bank of Canada 99.9999% 1,099,999 1,099,999,000 99.9998% 659,999 659,999,000

Natcan Trust Company 0.0001% 1 1,000 0.0002% 1 1,000

100% 1,100,000 1,100,000,000 100% 660,000 660,000,000

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million

Balance at beginning of the year 660,000,000 2,717,220 520,000,000 2,118,480

Conversion of retained
earnings (*) 250,000,000 1,027,500 140,000,000 572,180
Issuance of share capital 190,000,000 780,900 - -
Currency translation differences - (32,120) - 26,560

1,100,000,000 4,493,500 660,000,000 2,717,220

(*) On 16 June 2023, the National Bank of Cambodia approved the conversion of US$250 million of
the Bank's retained earnings and allowed the bank to inject registered share capital by US$190 million,
bringing the total share capital to US$1,100 million, which is equivalent to 1,100,000 shares with par
value of US$1,000 per share. On 01 August 2023, Ministry of Commerce certified with the approval
letter from National Bank of Cambodia (2022: conversion of US$140 million of the Bank's retained
earnings).

21. REGULATORY RESERVES

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million

Balance at beginning of the year 117,119,294 482,180 43,637,909 177,781

Transfer from retained earnings 104,538,004 429,651 73,481,385 302,523
Currency translation differences - (6,361) - 1,876

221,657,298 905,470 117,119,294 482,180

52
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

22. NET INTEREST INCOME

Year ended Year ended
31 December 2023 31 December 2022
US$ KHR Million US$ KHR Million
Interest income from:
Loans to customers 634,297,769 2,606,964 548,076,029 2,239,987
Balances with the NBC and
other banks 58,997,318 242,479 20,457,410 83,609
Investment securities 11,914,428 48,968 2,097,105 8,571
Others 148,180 609 206,761 845

705,357,695 2,899,020 570,837,305 2,333,012

Interest expense on:

Deposits from banks and other
financial institutions 5,721,846 23,517 3,429,552 14,017
Deposits from customers 173,022,227 711,121 68,907,945 281,627
Borrowings 7,770,401 31,936 4,292,511 17,543
Subordinated debts 9,054,950 37,216 11,123,047 45,460
Lease liabilities 3,256,898 13,386 2,827,147 11,555
Debt securities - - 999,897 4,086

198,826,322 817,176 91,580,099 374,288

Net interest income 506,531,373 2,081,844 479,257,206 1,958,724

53
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

23. NET FEE AND COMMISSION INCOME

Year ended Year ended

31 December 2023 31 December 2022
US$ KHR Million US$ KHR Million
Fee and commission income
MasterCard, Visa and UPI cards 38,454,372 158,047 29,162,112 119,186
Inward and outward remittances 12,773,671 52,500 12,675,949 51,807
Pin-less top up 7,093,434 29,154 6,242,996 25,515
Loan commissions and early
settlement fees 6,574,193 27,020 8,049,796 32,900
Dormant fees 2,438,232 10,022 1,649,931 6,743
Special account number fees 2,105,302 8,653 2,842,247 11,616
Cable charges 2,062,874 8,478 896,085 3,662
Commission fee from insurance 1,932,385 7,942 2,549,593 10,420
E-wallet 1,758,506 7,227 3,103,182 12,683
Bakong transfers 1,551,140 6,376 1,604,909 6,559
Other fees (*) 4,006,981 16,468 2,840,917 11,611

80,751,090 331,887 71,617,717 292,702

Fee and commission expense

MasterCard, Visa and UPI cards 33,779,558 138,834 24,338,957 99,473
Fees and commission paid to other
banks and financial institutes
(“FIs“) 4,541,807 18,667 3,073,031 12,559
Other fees 169,826 698 247,843 1,014

38,491,191 158,199 27,659,831 113,046

Net fee and commission income 42,259,899 173,688 43,957,886 179,656

(*) Maintenance fee income amounting to US$78,911 or KHR322 million for the operations of cash
settlement agents was recognised during the year (2022: US$41,232 or KHR169 million).

54
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

24. PERSONNEL EXPENSES

Year ended Year ended

31 December 2023 31 December 2022
US$ KHR Million US$ KHR Million

Salaries and bonuses 99,117,048 407,371 90,021,467 367,918

Seniority payments 6,174,883 25,379 4,975,166 20,334
Other personnel expenses 6,327,745 26,007 3,759,859 15,366

111,619,676 458,757 98,756,492 403,618

For the year ended 31 December 2023, personnel expense of the Bank's staff, who are responsible for
the operations of cash settlement agents, amounting to US$39,919 or KHR164 million (2022:
US$31,974 or KHR131 million).

25. DEPRECIATION AND AMORTISATION

Year ended Year ended

31 December 2023 31 December 2022
US$ KHR Million US$ KHR Million

Property and equipment 13,301,297 54,668 11,144,577 45,548

Right-of-use assets 11,043,768 45,390 9,658,942 39,476
Intangible assets 2,967,427 12,196 2,700,175 11,036

27,312,492 112,254 23,503,694 96,060

55
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

26. OPERATING EXPENSES

Year ended Year ended

31 December 2023 31 December 2022
US$ KHR Million US$ KHR Million

Repairs and maintenance 15,510,775 63,749 11,711,767 47,866

Marketing and advertising 6,926,502 28,468 3,900,805 15,943
Office supplies 5,604,195 23,033 5,954,672 24,337
Rental expenses 4,666,586 19,180 3,599,936 14,713
Security expenses 3,881,344 15,952 3,424,460 13,996
Utilities expenses 3,328,075 13,678 2,620,954 10,712
Communication 2,498,700 10,270 2,103,444 8,597
Insurance expenses 1,618,927 6,654 1,328,033 5,428
Motor vehicle operation expenses 1,380,365 5,673 1,170,253 4,783
Travelling 1,089,561 4,478 566,917 2,317
Professional fees 908,420 3,734 1,197,585 4,895
License fees 791,837 3,254 749,828 3,065
Donation 642,524 2,641 747,447 3,055
Business meal and entertainment 623,195 2,561 348,439 1,424
Credit report (CBC) expenses 403,721 1,659 385,494 1,576
Board of Director fees 402,816 1,656 356,512 1,457
Membership fees (*) 200,663 825 110,185 450
Publication expenses 169,930 698 249,883 1,021
Other expenses 442,251 1,818 1,039,039 4,244

51,090,387 209,981 41,565,653 169,879

(*) For the year ended 31 December 2023, membership fee incurred for the operations of cash
settlement agents amounting to US$9,792 or KHR40 million (2022: US$9,676 or KHR40 million)

56
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

27. NET IMPAIRMENT LOSSES ON FINANCIAL ASSETS

Year ended Year ended

31 December 2023 31 December 2022
US$ KHR Million US$ KHR Million

Balances with other banks 201,267 827 (336,370) (1,375)

Loans to customers 21,692,068 89,154 27,265,066 111,432
Investment securities (162,285) (667) (18,416) (75)
Deposits and other receivables 1,394,334 5,731 5,227 21
Loan commitments and financial
guarantee contracts 279,407 1,149 83,574 342

23,404,791 96,194 26,999,081 110,345

28. NOTES TO THE STATEMENT OF CASH FLOWS

Cash and cash equivalents

For the purpose of the statement of cash flows, cash and cash equivalents comprise:

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million

Cash on hand 474,857,773 1,939,794 461,874,069 1,901,536

Balances with the NBC 181,444,988 741,203 178,563,458 735,146
Balances with other banks 678,831,782 2,773,028 32,628,006 134,328

1,335,134,543 5,454,025 673,065,533 2,771,010

Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of
three months or less, net of outstanding bank overdrafts. The carrying amount of these assets is
approximately equal to their fair value. Cash and cash equivalents at the end of the reporting period
as shown in the statement of cash flows can be reconciled to the related items in the reporting position
as shown above.

Changes in liabilities arising from financing activities

The table below details change in the Bank’s liabilities arising from financing activities, including both
cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows
were, or future cash flows will be, classified in the Bank’s statement of cash flows as cash flow from
financing activities.

57
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

28. NOTES TO STATEMENT OF CASH FLOWS (continued)

Changes in liabilities arising from financing activities (continued)

1 January Financing Other

2023 cash flows (i) New leases changes (ii) 31 December 2023
US$ US$ US$ US$ US$ KHR Million

Borrowings 68,358,368 77,927,194 - 131,401 146,416,963 598,113

Subordinated debts 121,045,397 (25,000,000) - 7,975 96,053,372 392,378
Lease liabilities 60,411,883 (12,713,957) 18,412,047 2,943,461 69,053,434 282,083

249,815,648 40,213,237 18,412,047 3,082,837 311,523,769 1,272,574

1 January Financing Other

2022 cash flows (i) New leases changes (ii) 31 December 2022
US$ US$ US$ US$ US$ KHR Million

Debt securities in
issue 21,310,996 (20,698,045) - (612,951) - -
Borrowings 197,399,626 (125,320,812) - (3,720,446) 68,358,368 281,431
Subordinated debts 148,027,962 (27,000,000) - 17,435 121,045,397 498,344
Lease liabilities 42,463,355 (10,948,907) 26,750,885 2,146,550 60,411,883 248,716

409,201,939 (183,967,764) 26,750,885 (2,169,412) 249,815,648 1,028,491

(i) The cash flows from financing activities makes up the net amount of proceeds from and
repayment of debt securities, borrowings, subordinated debts and lease liabilities in the
statement of cash flows.
(ii) Other changes include interest accrual and repayment of interest.

58
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

29. RELATED PARTIES

(a) Related parties and relationships

The related parties of and their relationships with the Bank are as follows:

Related parties Relationships

National Bank of Canada Parent and global ultimate parent shareholder
Key management personnel Executive management team of the Bank who make critical
decisions in relation to the strategic direction of the Bank.
ATA IT Limited Affiliate

(b) Related party balances

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million

Loans to management 4,256,295 17,387 8,177,466 33,667

Deposits by directors and

management 2,519,576 10,292 4,260,699 17,541

Subordinated debts from National

Bank of Canada 96,053,372 392,378 121,045,397 498,344

Deposits and placements with

National Bank of Canada 128,467,052 524,788 239,778,019 987,166

59
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

29. RELATED PARTIES (continued)

(c) Related party transactions

Year ended Year ended

31 December 2023 31 December 2022
US$ KHR Million US$ KHR Million

Interest income on loans to

management 350,546 1,441 358,583 1,466

Interest expense on deposits to

directors and management 56,305 231 44,857 183

Interest expense to National Bank

of Canada 9,054,950 37,216 11,123,047 45,460

Interest income from National

Bank of Canada 11,067,496 45,487 4,549,633 18,594

Purchases of property and

equipment from affiliate 861,709 3,520 677,822 2,770

Service charged from affiliate 1,935,246 7,905 1,238,032 5,060

(d) Directors and key management personnel remuneration

Year ended Year ended

31 December 2023 31 December 2022
US$ KHR Million US$ KHR Million

Short-term benefits 6,272,912 25,782 5,137,304 20,996

Long-term benefits 13,670,459 56,186 20,728,308 84,717
Total 19,943,371 81,968 25,865,612 105,713

60
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

30. LOAN COMMITMENTS AND FINANCIAL GUARANTEE CONTRACTS

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million

Unused portion of overdrafts 393,762,383 1,608,519 314,700,236 1,295,621

Unused portion of credit cards 24,709,603 100,939 12,527,776 51,577
Performance bonds 23,486,376 95,942 13,674,091 56,296
Payment guarantees 14,318,822 58,492 13,928,856 57,345
Letter of credits 9,198,805 37,577 13,298,274 54,749
Warranty bonds 718,290 2,934 346,241 1,425
Bid bonds 697,182 2,848 187,688 773
Securities - - 4,400,000 18,115
Other guarantees 2,131,489 8,707 237,000 976

469,022,950 1,915,958 373,300,162 1,536,877

As at 31 December 2023, the Bank has provided ECL for loan commitments and financial guarantee
contracts amounting to US$ 635,696 or KHR 2,597 million (2022: US$ 356,289 or KHR 1,467 million).

31. CURRENT AND NON-CURRENT

Management presents the financial statements based on liquidity. Information about short-term and
long-term of financial assets and financial liabilities are disclosed in the financial risk management
section. Property and equipment, right-of-use assets and intangible assets are non-current assets.
Deferred tax liabilities are non-current liability.

32. FINANCIAL RISK MANAGEMENT

The Bank’s Board of Directors has overall responsibility for the establishment and oversight of the
Bank’s risk management framework. The Board of Directors has established the Credit, Governance,
Compliance, Audit and Risk Committees, which are responsible for developing and monitoring the
Bank’s risk management policies in their specific areas. All committees have non-executive members
and report regularly to the Board of Directors on their activities.

The Bank’s risk management policies are established to identify and analyse the risks faced by the
Bank, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. The
Audit, Compliance and Risk Committees are responsible for monitoring compliance with the Bank’s
risk management policies and procedures, and for reviewing the adequacy of the risk management
framework in relation to the risks faced by the Bank.

Internal Audit undertakes both regular and ad-hoc reviews of risk management controls and
procedures, the results of which are reported to the Audit Committee for Board of Directors’ meeting.

The policies and procedures adopted by the Bank to manage the risks that arise in the conduct of their
business activities are as follows:

61
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.1 Credit risk management

Credit risk refers to risk of financial loss to the Bank if a counterparty to a financial instrument fail to
meet its obligations in accordance with the agreed terms and arises from balances with other banks,
investment securities, deposits and other receivables, loans to customers, loan commitments, and
financial guarantee contracts. The Bank considers all elements of credit risk exposure such as
counterparty default risk, geographical risk and sector risk, product risk and business type risk for risk
management purposes.

Credit Division is responsible for managing the Bank’s credit risk by:

• Formulating credit policies in consultation with business units, covering collateral

requirements, credit assessment, risk grading and reporting, documentary and legal
procedures, in accordance with CIFRSs and relevant NBC’s guidelines.
• Establishing the authorisation structure for the approval and renewal of credit facilities. The
holders of credit approval discretion, i.e. Board Credit Committee, Management Credit
Committee, Credit Committees in Head Office, and Branch Credit Committees are responsible
for approving loans to customers.
• Reviewing and assessing credit risk by setting the limit and monitoring all credit exposures in
excess of designated.
• Limiting concentrations of exposure to counterparties, geographies, industries, purposes,
sectors (for loans to customers and similar exposures).
• Developing and maintaining the Bank’s processes for measuring ECL that includes the
processes for:
o initial approval, regular refresh and back-testing of the models used;
o determining and monitoring significant increase in credit risk; and
o incorporation of forward-looking information.
• Reviewing compliance of branches with agreed exposure limits, including those for selected
industries and product types. Regular reports on the credit quality of portfolios may require
appropriate corrective action to be taken. These include reports containing estimates of ECL
allowances.
• Providing advice, guidance and specialist skills to branches to promote best practice
throughout the Bank in the management of credit risk.

Each branch is required to implement credit policies and procedures, with credit approval authorities
delegated from the Management Credit Committee. Branch Managers and Lending Managers in
branches report all risk-related matters to Head Office. Each branch is responsible for the quality and
performance of its credit portfolio and for monitoring and controlling all credit risks in its portfolios,
including those subject to Head Office’s approval.

The internal audit function performs regular audits making sure that the established controls and
procedures are adequately designed and implemented.

62
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.1 Credit risk management (continued)

32.1.1 Collateral held

The Bank holds collateral against loans to customers. The main type of collateral obtained by the bank
are:
• Residential properties such as lands and houses for hard and soft titles
• Cash deposits
• Other movable assets
• Financial guarantees

The Bank set Loan to Collateral Value (LTV) up to 80% as an eligible ratio for loan disbursement to
customers.

All financial instruments in the Banks subjected to the impairment requirements and recognition of
loss allowance have been covered under the Bank’s expected credit loss model regardless of the types
of collateral held.

32.1.2 Amounts arising from ECL

(a) Inputs, assumptions and techniques used for estimating impairment

The Bank recognises loss allowances for ECL on the following financial instruments that are not
measured at FVTPL:
• balances with other banks
• loans to customers
• Investment securities
• deposits and other receivables
• loan commitments; and
• financial guarantee contracts.

The Bank measures loss allowances at an amount equal to lifetime ECL, except other financial
instruments on which credit risk has not increased significantly since initial recognition, for which they
are measured as 12-month ECL.

63
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.1 Credit risk management (continued)

32.1.2 Amounts arising from ECL (continued)

(a) Inputs, assumptions and techniques used for estimating impairment (continued)

The Bank apply the low credit risk exemption to balances with NBC as guided by the NBC.

12-month ECL is the portion of the lifetime ECL that represent the expected credit losses that result
from default events on a financial instrument that are possible within 12 months after the reporting
date.

Lifetime ECL is the ECL that results from all possible default events over the expected life of the
financial instrument. Financial instruments for which a lifetime ECL is recognised but which are not
credit-impaired are referred to as ‘Stage 2 financial instruments’.

Credit-impaired financial assets

At each reporting date, the Bank assesses whether financial assets carried at amortised cost are
credit-impaired (referred to as ‘Stage 3 financial assets’). A financial asset is ‘credit-impaired’ when
one or more events that have a detrimental impact on the estimated future cash flows of the financial
asset have occurred.

Evidence that a financial asset is credit-impaired includes the following observable data:
• credit facility with internal credit risk rating of “E” or “10” or contractual payment is more than
89 days for long term loans and more than 30 days (2022: 59 days) for short term ones;
• where the borrower is declared disappeared, dead or suffering from a loss of capacity for civil
conduct;
• significant financial difficulty of the borrower or issuer;
• the restructuring of a loan by the Bank on terms that the Bank would not consider otherwise;
or
• it is becoming probable that the borrower will enter bankruptcy or other financial
reorganisation.

A loan that has been renegotiated due to a deterioration in the borrower’s condition is usually
considered to be credit-impaired unless there is evidence that the risk of not receiving contractual cash
flows has reduced significantly and there are no other indicators of impairment. In addition, a loan that
is overdue more than 89 days (long-term) and more than 30 days (2022: 59 days) (short-term) per
CIFRS rebuttable assumption is considered credit-impaired even when the regulatory definition of
default is different.

Credit-impaired loans to customers are graded as rate 10 (2022: E) in the Bank’s internal credit risk
grading.

64
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.1 Credit risk management (continued)

32.1.2 Amounts arising from ECL (continued)

(a) Inputs, assumptions and techniques used for estimating impairment (continued)

Credit risk grades

The Bank allocates each exposure to a credit risk grade based on a variety of data that is determined
to be predictive of the risk of default and applying experienced credit judgement. Credit risk grades
are defined using qualitative and quantitative factors. These factors vary depending on the nature of
the exposure and the type of borrower.

The Bank’s credit risk grades are defined based on a comprehensive evaluation of key risk metrics such
as Debt Service Ratio (DSR), Liability to Total Asset Ratio (L/A), Loan to Collateral Value (LTV), Past
Credit History, and an analysis of the customer’s business as well as the number of years that they
operate. These metrics are aggregated and analysed to calculate a scoring system for each borrower.
Based on this scoring, each borrower is assigned a risk rating i.e. from 1 to 10 that reflects their overall
credit risk.

The Bank use both the Days Past Due (DPD) and Internal Credit Risk Rating (CRR) as criterion for staging
purpose as follows:

Internal credit risk rating Days past due

Staging Type of loans
2023 2022 2023 2022
Long term 0 – 29
Stage 1 1–8 A, B, C 0 – 29
Short term 0 – 14
Long term 30 – 89 30 – 89
Stage 2 9 D
Short term 15 – 30 30 – 59
Long term > 89 > 89
Stage 3 10 E
Short term > 30 > 59

The downgrade of internal credit risk would be dependent on the DPD information and others red flags
such as restructuring loans or evidence of bankruptcy. Loans would only be upgraded after observation
of at least 3 consecutive installments (2022: 6 months for long term loans and 3 months for short term
loans).

Exposures are subject to ongoing monitoring, which may result in an exposure being moved to a
different credit risk grade. The monitoring typically involves the use of following data.
- Past repayment history;
- Financial conditions of counterparty;
- Business prospective and cash projection;
- Ability and willingness to pay;
- Economic environment; and
- Quality of documentation.

65
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.1 Credit risk management (continued)

32.1.2 Amounts arising from ECL (continued)

(a) Inputs, assumptions and techniques used for estimating impairment (continued)

Probability of Default (“PD”)

During 2022, PD is calculated using monthly migration matrices over past seven years data consisting
of 72 matrices. More granular approach is adopted by breaking Stage-1 in to “Bucket 0” with 0 days
past due and “Bucket-1” with 1-29 days past due loans.

In 2023, PD is calculated using the Cohort Analysis (Gamma) which is used to estimate the probability
of default for a portfolio of loans over time. It is based on the concept of a cohort, which is a group of
loans originated at the same time and assumes that the PD of each cohort evolves over time in a similar
way.

The approach uses the gamma function to model the evolution of PD over time and estimates the
parameters of the gamma function for each cohort using maximum likelihood estimation. This
approach provides flexibility in analysing different loan portfolios and time periods and allows for the
analysis of different loan characteristics, such as loan size or loan type, to gain insights into the
behaviour of different borrower segments over time.

The approach involves in collecting historical data, and then for each segmentation base on the INDUS
CODE creates cohort by capturing default trend at snapshot date taking into account the portfolio
average life cycle (seasoning), i.e. average of many historical cohorts, analyses multiple cohort ODR
curves at snapshot date and analyses the average marginal PD curve from multiple cohort curves.

Loss Given Default (“LGD”)

Active accounts for which the recovery is still ongoing have been included in LGD calculation based on
the LGD period workout analysis. Exposure for LGD calculation has been taken as on the default period
as revised from Exposure at Default (“EAD”) which used to increase over the period adopted in the
previous model. Industry level LGD is calculated which aligns to the segmentation used for PD
calculation.

66
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.1 Credit risk management (continued)

32.1.2 Amounts arising from ECL (continued)

(a) Inputs, assumptions and techniques used for estimating impairment (continued)

(i) Significant increase in credit risk

Definition of default

The Bank considers a financial asset to be in default when:

• the borrower is unlikely to pay its credit obligations to the Bank in full, without recourse by
the Bank to actions such as realising security (if any is held);
• the borrower is > 89 days past due days for long term loans and more than 30 days (2022: >59
days) for short term loans on any material credit obligation to the Bank; or
• it is becoming probable that the borrower will restructure the asset as a result of bankruptcy
due to the borrower’s inability to pay its credit obligations.
The Bank has adopted the practice of utilising and monitoring Credit Risk Rating (CRR) commencing
from the year 2022 onwards. Consequently, the definition of default for model development is split
into two distinct periods: one prior to 2022 and another from 2022 onwards. These periods are further
categorised based on the inclusion or exclusion of CRR within the default definition:
• Before 2022 (Prior to January 1, 2022): Default criteria consist of Day Past Due (DPD) and Loan
Classification
• From 2022 (From January 1, 2022 onwards): Default criteria encompass Day Past Due (DPD),
Loan Classification, and CRR.

67
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.1 Credit risk management (continued)

32.1.2 Amounts arising from ECL (continued)

(a) Inputs, assumptions and techniques used for estimating impairment (continued)

(ii) Incorporation of forward-looking information

The Bank analysed forward-looking information by using the statistical regression model for
assessment to see whether the credit risk of an instrument has increased significantly to the
measurement of ECL.

The scenario probability weightings applied in measuring ECL are as follows:

At 31 December 2023 2022

Scenario probability Base Upsides Downsides Base Upsides Downsides
weighting 50% 20% 30% 60% 20% 20%

The changes of scenario probability weightings were derived from judgmental approach. The Bank
adopted a conservative approach, which reflects volatile economic conditions amid inflation, rising
interest rate upon borrowers and lenders in the financial market, post-recovery period of financial
institutions from the recent Covid-19 pandemic, etc. This change is to assure that the Bank take a more
realistic and cautious view of the potential impact of credit risk on its financial position, thus
maintaining prudence.

Forward-looking information is used for both PD and LGD. See the following for more details on the
macroeconomic factors used for forward-looking PD and LGD.

Financial year 2023:

Segment Macroeconomic Factor(1)

Probability of Default (PD)
CSX Index
Agriculture Loan
Cambodia GDP growth rate (%)
CSX Index
Construction Loan Crude Oil Brent (USD)
Cambodia GDP growth rate (%)
USDKHR Currency (End month exchange rate)
Manufacturing Loan Interest Rate on Term Loans in USD (%)
Cambodia GDP growth rate (%)
Cambodia GDP growth rate (%)
Personal Loan
Crude Oil Brent (USD)
Crude Oil Brent (USD)
Real Estate Loan
Cambodia GDP growth rate (%)
Cambodia GDP growth rate (%)
Service Loan
Crude Oil Brent (USD)
Cambodia GDP growth rate (%)
Wholesale and Retail Loan
Crude Oil Brent (USD)
68
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.1 Credit risk management (continued)

32.1.2 Amounts arising from ECL (continued)

(a) Inputs, assumptions and techniques used for estimating impairment (continued)

(ii) Incorporation of forward-looking information (continued)

Financial year 2023:

Segment Macroeconomic Factor(1)

Loss Give Default (LGD)
Current account balance in USD
Portfolio level
Cambodia GDP growth rate (%)
(1)
All macroeconomic factors are based in the Cambodia context unless otherwise indicated.

Financial year 2022:

PD segment Macroeconomic Factor(1)

Agriculture Cambodia CPI - (cpi_2010_100)
Construction and Real Estate GDP at Current Price, Industry (YOY,%) – (gdp_industry)
Real Estate Rentals Cambodia GDP at Constant 2000 Price – (gdp_constant2000)
Manufacturing FDI Net Inflow - (fdi)
Wholesale and Retail Cambodia CPI - (cpi_2010_100)
Services GDP at Current Price, Industry (YOY,%) – (gdp_industry)
Personal Loan GDP at Current Price, Industry (YOY,%) – (gdp_industry)

(iii) Modified financial assets

The Bank renegotiates loans to customers in financial difficulties (referred to as restructure activities)
to maximise collection opportunities and minimise the risk of default. Under the Bank’s restructure
policy, loan is granted on a selective basis if the debtor is currently in default on its debt or if there is
a high risk of default, there is evidence that the debtor made all reasonable efforts to pay under the
original contractual terms and the debtor is expected to be able to meet the revised terms. The revised
terms usually include extending the maturity, changing the timing of interest payments and amending
the terms of loan covenants.

For financial assets modified as part of the Bank’s restructure policy, the estimate of PD reflects
whether the modification has improved or restored the Bank’s ability to collect interest and principal
and the Bank’s previous experience. As part of this process, the Bank evaluates the borrower’s
payment performance against the modified contractual terms and considers various behavioural
indicators.

Generally, restructure is a qualitative indicator of a significant increase in credit risk and an expectation
of restructure may constitute evidence that an exposure is credit-impaired. A customer needs to
demonstrate consistently good payment behaviour over a period of time before the exposure is no
longer considered to be credit-impaired/in default or the PD is considered to have decreased such that
the loss allowance reverts to being measured at an amount equal to Stage 1.
69
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.1 Credit risk management (continued)

32.1.2 Amounts arising from ECL (continued)

(a) Inputs, assumptions and techniques used for estimating impairment (continued)

(iv) Measurement of ECL

ECL is a probability-weighted estimate of credit losses. It is measured as follows:

• Financial assets that are not credit-impaired at the reporting date: as the present value of all
cash shortfalls (i.e. the difference between the cash flows due to the Bank in accordance with
the contract and the cash flows that the Bank expects to receive);
• Financial assets that are credit-impaired at the reporting date: as the difference between the
gross carrying amount and the present value of estimated future cash flows;
• Undrawn loan commitments a credit loss is the present value of the difference between the
contractual cash flows that are due to the Bank if the holder of the loan commitment draws
down the loan and the cash flows that the entity expects to receive if the loan is drawn down;
and
• For financial guarantee contracts payment only arise in the event of default of the debtor in
accordance with the terms of the debt instrument that is guaranteed. Accordingly, cash
shortfalls are the expected payments to reimburse the holder of the debt instruments for a
credit loss that incurs less any amount that the Bank expects to receive from the holder, the
debtor or any party

The Bank calculates the ECL by taking the gross carrying amount of financial assets multiplying by the
consolidated PD ratio and the LGD.
• ECL is the present value of all cash shortfalls over the remaining life, discounted at the EIR. For
each year throughout the financial instrument’s life, a forward-looking PD, LGD and EAD are
estimated. The estimates are multiplied with each other to estimate the losses for each of the
years. Then the estimates are discounted back to the reporting date using the EIR as the
discount rate. Without having material effect, the Bank considered contractual rate as EIR.
• To obtain 12-month ECL for Stage 1 Loans, the sum of ECL of each month, for next 12 months
is obtained.
• To obtain Lifetime ECL for Stage 2 and 3 Loans, the sum of ECL for each month, from the next
month to the last month of the loan’s lifetime is obtained.

70
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.1 Credit risk management (continued)

32.1.2 Amounts arising from ECL (continued)

(b) Loss allowance

The following table summarises the loss allowance as of the year-end by class of exposure/assets.

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million

Loss allowance by classes:

Balances with other banks 848,785 3,467 647,519 2,666
Loans to customers 94,007,974 384,024 73,174,303 301,259
Investment securities 429,934 1,756 592,219 2,438
Deposits and other receivables 2,451,689 10,015 1,057,355 4,353
Loan commitments and financial
guarantee contracts 635,696 2,597 356,288 1,467

98,374,078 401,859 75,827,684 312,183

The table below provides an analysis of the gross carrying amount of loans to customers by past due
status.

31 December 2023 31 December 2022

Gross carrying Gross carrying
amount Loss allowance amount Loss allowance
US$ US$ US$ US$

Loans to customers:
0-29 days 7,521,235,975 21,959,011 6,350,090,184 41,884,666
30-59 days 27,681,706 4,490,260 28,883,226 4,786,806
60-89 days 34,947,538 5,680,277 19,124,919 3,203,662
90-179 days 61,340,069 13,278,469 32,582,724 5,782,128
More than 180 days 221,144,200 48,599,957 91,293,047 17,517,041

Total 7,866,349,488 94,007,974 6,521,974,100 73,174,303

In KHR Million equivalent 32,134,039 384,024 26,850,968 301,259

71
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.1 Credit risk management (continued)

32.1.3 Credit quality analysis

The following table sets out information about the credit quality of financial assets measured at
amortised cost. Unless specifically indicated, for financial assets, the amounts in the table represent
gross carrying amounts. For loan commitments, the amounts in the table represent the amounts
committed.

31 December 2023
Stage 1 Stage 2 Stage 3 Total
US$ US$ US$ US$ KHR Million
Balances with other banks:
1: Very Remote 1,477,673,213 - - 1,477,673,213 6,036,295
Loss allowance (848,785) - - (848,785) (3,467)
Carrying amount 1,476,824,428 - - 1,476,824,428 6,032,828

Loans to customers:
1: Very Remote 5,997,372,778 - - 5,997,372,778 24,499,269
2: Remote 278,430,364 - - 278,430,364 1,137,388
3: Moderately Remote 260,967,900 - - 260,967,900 1,066,054
4: Very Low 518,785,064 - - 518,785,064 2,119,237
5: Low 179,910,460 - - 179,910,460 734,934
6: Moderately Low 89,631,629 - - 89,631,629 366,145
7: Moderate 53,187,497 - - 53,187,497 217,271
8: Moderately High 81,535,051 - - 81,535,051 333,071
9: High (Watch List) - 102,475,439 - 102,475,439 418,612
10: Very High (Default) - - 304,053,306 304,053,306 1,242,058
7,459,820,743 102,475,439 304,053,306 7,866,349,488 32,134,039
Loss allowance (27,238,590) (401,702) (66,367,682) (94,007,974) (384,024)
Carrying amount 7,432,582,153 102,073,737 237,685,624 7,772,341,514 31,750,015

Investment securities:
1: Very Remote 338,445,739 - - 338,445,739 1,382,551
Loss allowance (429,934) - - (429,934) (1,756)
Carrying amount 338,015,805 - - 338,015,805 1,380,795

Deposits and other

receivables:
1: Very Remote 41,884,050 - - 41,884,050 171,096
Loss allowance (2,451,689) - - (2,451,689) (10,015)
Carrying amount 39,432,361 - - 39,432,361 161,081

72
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.1 Credit risk management (continued)

32.1.3 Credit quality analysis (continued)

31 December 2023
Stage 1 Stage 2 Stage 3 Total
US$ US$ US$ US$ KHR Million

Loan commitments and

financial guarantee
contracts:
1: Very Remote 402,882,819 - - 402,882,819 1,645,775
2: Remote 22,702,966 - - 22,702,966 92,742
3: Moderately Remote 17,345,307 - - 17,345,307 70,856
4: Very Low 9,952,373 - - 9,952,373 40,655
5: Low 12,258,680 - - 12,258,680 50,077
6: Moderately Low 2,653,301 - - 2,653,301 10,839
7: Moderate 997,606 - - 997,606 4,075
8: Moderately High 1,506 - - 1,506 6
9: High (Watch List) - 300 - 300 1
10: Very High (Default) - - 228,092 228,092 932
468,794,558 300 228,092 469,022,950 1,915,958
Loss allowance (590,259) - (45,437) (635,696) (2,597)
Total amount 468,204,299 300 182,655 468,387,254 1,913,361

73
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.1 Credit risk management (continued)

32.1.3 Credit quality analysis (continued)

31 December 2022
Stage 1 Stage 2 Stage 3 Total

US$ US$ US$ US$ KHR Million

2023 Equivalent 2022 Grading
grading
Balances with
other banks:
1: Very Remote Grade A: Very good 483,717,992 - - 483,717,992 1,991,467
Loss allowance (647,519) - - (647,519) (2,666)
Carrying amount 483,070,473 - - 483,070,473 1,988,801

Loans to
customers:
1: Very Remote Grade A: Very good 5,808,978,896 - - 5,808,978,896 23,915,566
2: Remote Grade A: Very good 10,352,586 - - 10,352,586 42,622
3: Moderately
Remote Grade A: Very good 6,237,103 - - 6,237,103 25,678
4: Very Low Grade B: Good 204,162,137 - - 204,162,137 840,536
5: Low Grade B: Good 1,658,018 - - 1,658,018 6,826
6: Moderately Low Grade C: Satisfactory 37,455,910 - - 37,455,910 154,206
7: Moderate Grade C: Satisfactory 125,068,237 - - 125,068,237 514,906
8: Moderately High Grade C: Satisfactory 80,978,756 - - 80,978,756 333,390
9: High (Watch List) Grade D: Watch list - 58,024,551 - 58,024,551 238,887
10: Very High
(Default) Grade E: Default - - 189,057,906 189,057,906 778,351
6,274,891,643 58,024,551 189,057,906 6,521,974,100 26,850,968
Loss allowance (28,774,200) (8,596,536) (35,803,567) (73,174,303) (301,259)
Carrying amount 6,246,117,443 49,428,015 153,254,339 6,448,799,797 26,549,709

Investment
securities:
1: Very Remote Grade A: Very good 35,534,966 - - 35,534,966 146,297
Loss allowance (592,219) - - (592,219) (2,438)
Carrying amount 34,942,747 - - 34,942,747 143,859

74
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.1 Credit risk management (continued)

32.1.3 Credit quality analysis (continued)

31 December 2022
Stage 1 Stage 2 Stage 3 Total
US$ US$ US$ US$ KHR Million
2023 Equivalent 2022 Grading
grading
Deposits and other receivables:
1: Very Remote Grade A: Very good 19,152,372 - - 19,152,372 78,850
Loss allowance (1,057,355) - - (1,057,355) (4,353)
Carrying amount 18,095,017 - - 18,095,017 74,497

Loan commitments
and financial
guarantee
contracts:
1: Very Remote Grade A: Very good 360,991,276 - - 360,991,276 1,486,203
2: Remote Grade A: Very good - - - - -
3: Moderately
Remote Grade A: Very good - - - - -
4: Very Low Grade B: Good 2,279,996 - - 2,279,996 9,387
5: Low Grade B: Good - - - - -
6: Moderately Low Grade C: Satisfactory - - - - -
7: Moderate Grade C: Satisfactory 5,600,256 - - 5,600,256 23,056
8: Moderately High Grade C: Satisfactory - - - - -
9: High (Watch List) Grade D: Watch list - 19,541 - 19,541 80
10: Very High
(Default) Grade E: Default - - 9,092 9,092 37
368,871,528 19,541 9,092 368,900,161 1,518,763
Loss allowance (352,193) (2,417) (1,678) (356,288) (1,467)
Total amount 368,519,335 17,124 7,414 368,543,873 1,517,296

75
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.1 Credit risk management (continued)

32.1.3 Credit quality analysis (continued)

The below table sets out information about the overdue status of loans to customers in Stage 1, 2 and 3.

31 December 2023
Stage 1 Stage 2 Stage 3 Total
US$ US$ US$ US$ KHR Million
Loans to customers:

Not overdue 7,406,980,640 37,639,236 15,823,176 7,460,443,052 30,475,911

Overdue ≤ 29 days 52,840,103 6,692,917 1,259,902 60,792,922 248,339
Overdue > 29 days - 58,143,286 286,970,228 345,113,514 1,409,789

Total 7,459,820,743 102,475,439 304,053,306 7,866,349,488 32,134,039

31 December 2022
Stage 1 Stage 2 Stage 3 Total
US$ US$ US$ US$ KHR Million
Loans to customers:

Not overdue 6,209,281,667 14,872,829 47,308,288 6,271,462,784 25,819,613

Overdue ≤ 29 days 65,609,974 6,446,573 6,570,853 78,627,400 323,709
Overdue > 29 days - 36,705,149 135,178,767 171,883,916 707,646

Total 6,274,891,641 58,024,551 189,057,908 6,521,974,100 26,850,968

76
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.1 Credit risk management (continued)

32.1.3 Credit quality analysis (continued)

The table below shows the changes in the gross carrying amount of financial assets during the period
that contributed to changes in the loss allowance.

Balance with other banks at amortised cost

31 December 2023
Stage 1 Stage 2 Stage 3
12-month ECL Lifetime ECL Lifetime ECL Total
US$ US$ US$ US$ KHR Million
Gross carrying amounts
as at 1 January 2023 483,717,992 - - 483,717,992 1,991,467

New financial assets originated 19,400,186,501 - - 19,400,186,501 79,734,767

Financial assets that have been
derecognised (18,406,240,465) - - (18,406,240,465) (75,649,648)
Currency translation differences 9,185 - - 9,185 (40,291)
Gross carrying amount
as at 31 December 2023 1,477,673,213 - - 1,477,673,213 6,036,295

Loss allowance as at 31
December 2023 (848,785) - - (848,785) (3,467)

31 December 2022
Stage 1 Stage 2 Stage 3
12-month ECL Lifetime ECL Lifetime ECL Total
US$ US$ US$ US$ KHR Million
Gross carrying amounts
as at 1 January 2022 558,440,003 - - 558,440,003 2,275,084

New financial assets originated 478,463,827 - - 478,463,827 1,955,482

Financial assets that have been
derecognised (553,120,464) - - (553,120,464) (2,260,603)
Currency translation differences (65,374) - - (65,374) 21,504
Gross carrying amount
as at 31 December 2022 483,717,992 - - 483,717,992 1,991,467

Loss allowance as at 31
December 2022 (647,519) - - (647,519) (2,666)

77
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.1 Credit risk management (continued)

32.1.3 Credit quality analysis (continued)

Loans to customers at amortised cost

31 December 2023
Stage 1 Stage 2 Stage 3
12-month Lifetime Lifetime
ECL ECL ECL Total
US$ US$ US$ US$ KHR Million
Gross carrying amount
as at 1 January 2023 6,274,891,643 58,024,551 189,057,906 6,521,974,100 26,850,968

Changes in gross carrying

amount
Transfer to stage 1 39,934,638 (9,708,910) (30,225,728) - -
Transfer to stage 2 (61,130,449) 66,341,712 (5,211,263) - -
Transfer to stage 3 (130,142,937) (29,296,602) 159,439,539 - -

New financial assets originated 3,038,894,033 36,863,803 18,868,345 3,094,626,181 12,718,914

Financial assets that have been
derecognised (1,702,491,308) (19,725,455) (27,175,669) (1,749,392,432) (7,190,003)
Write off (134,877) (23,660) (699,824) (858,361) (3,528)
Currency translation differences - - - - (242,312)
Gross carrying amount
as at 31 December 2023 7,459,820,743 102,475,439 304,053,306 7,866,349,488 32,134,039

Loss allowance
as at 31 December 2023 (27,238,590) (401,702) (66,367,682) (94,007,974) (384,024)

78
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.1 Credit risk management (continued)

32.1.3 Credit quality analysis (continued)

Loans to customers at amortised cost (continued)

31 December 2022
Stage 1 Stage 2 Stage 3
12-month Lifetime Lifetime
ECL ECL ECL Total
US$ US$ US$ US$ KHR Million
Gross carrying amount
as at 1 January 2022 5,245,148,895 26,302,624 53,953,888 5,325,405,407 21,695,702

Changes in gross carrying

amount
Transfer to stage 1 7,538,744 (5,877,878) (1,660,866) - -
Transfer to stage 2 (44,800,600) 45,260,776 (460,176) - -
Transfer to stage 3 (114,512,644) (12,763,990) 127,276,634 - -

New financial assets originated 2,682,329,092 13,536,337 19,396,063 2,715,261,492 11,097,274

Financial assets that have been
derecognised (1,500,572,585) (8,374,819) (9,238,821) (1,518,186,225) (6,204,827)
Write off (239,259) (58,499) (208,816) (506,574) (2,070)
Currency translation differences - - - - 264,889
Gross carrying amount
as at 31 December 2022 6,274,891,643 58,024,551 189,057,906 6,521,974,100 26,850,968

Loss allowance
as at 31 December 2022 (28,774,200) (8,596,536) (35,803,567) (73,174,303) (301,259)

79
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.1 Credit risk management (continued)

32.1.3 Credit quality analysis (continued)

Investment securities at amortised cost

31 December 2023
Stage 1 Stage 2 Stage 3
12-month Lifetime Lifetime
ECL ECL ECL Total
US$ US$ US$ US$ KHR Million
Gross carrying amount
as at 1 January 2023 35,534,966 - - 35,534,966 146,297

New financial assets originated 648,412,186 - - 648,412,186 2,664,974

Financial assets that have been
derecognised (345,496,107) - - (345,496,107) (1,419,989)
Other changes (5,306) - - (5,306) (22)
Currency translation difference - - - - (8,709)
Gross carrying amount
as at 31 December 2023 338,445,739 - - 338,445,739 1,382,551

Loss allowance as at 31 December

2023 (429,934) - - (429,934) (1,756)

31 December 2022
Stage 1 Stage 2 Stage 3
12-month Lifetime Lifetime
ECL ECL ECL Total
US$ US$ US$ US$ KHR Million
Gross carrying amount
as at 1 January 2022 37,450,310 - - 37,450,310 152,573

New financial assets originated 1,220,388 - - 1,220,388 4,988

Financial assets that have been
derecognised (3,086,425) - - (3,086,425) (12,614)
Other changes (49,307) - - (49,307) (203)
Currency translation difference - - - - 1,553
Gross carrying amount
as at 31 December 2022 35,534,966 - - 35,534,966 146,297

Loss allowance as at 31 December

2022 (592,219) - - (592,219) (2,438)

80
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.1 Credit risk management (continued)

32.1.3 Credit quality analysis (continued)

Deposits and other receivables at amortised cost

31 December 2023
Stage 1 Stage 2 Stage 3
12-month Lifetime Lifetime
ECL ECL ECL Total
US$ US$ US$ US$ KHR Million
Gross carrying amount
as at 1 January 2023 19,152,372 - - 19,152,372 78,850

New financial assets originated 2,562,710,074 - - 2,562,710,074 10,532,738

Financial assets that have been
derecognised (2,539,428,817) - - (2,539,428,817) (10,437,052)
Other changes (551,898) - - (551,898) (2,268)
Currency translation differences 2,319 - - 2,319 (1,172)
Gross carrying amount
as at 31 December 2023 41,884,050 - - 41,884,050 171,096

Loss allowance as at 31 December

2023 (2,451,689) - - (2,451,689) (10,015)

31 December 2022
Stage 1 Stage 2 Stage 3
12-month Lifetime Lifetime
ECL ECL ECL Total
US$ US$ US$ US$ KHR Million
Gross carrying amount
as at 1 January 2022 13,083,598 - - 13,083,598 53,303

New financial assets originated 6,362,231 - - 6,362,231 26,002

Financial assets that have been
derecognised (163,177) - - (163,177) (667)
Other changes (130,280) - - (130,280) (532)
Currency translation differences - - - - 744
Gross carrying amount
as at 31 December 2022 19,152,372 - - 19,152,372 78,850

Loss allowance as at 31 December

2022 (1,057,355) - - (1,057,355) (4,353)

81
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.1 Credit risk management (continued)

32.1.3 Credit quality analysis (continued)

Loan commitments and financial guarantee contracts

31 December 2023
Stage 1 Stage 2 Stage 3
12-month Lifetime Lifetime
ECL ECL ECL Total
US$ US$ US$ US$ KHR Million
Total amounts committed
and guaranteed
as at 1 January 2023 368,871,528 19,541 9,092 368,900,161 1,518,763

Changes in gross carrying amount

Transfer to stage 1 27,223 (19,520) (7,703) - -
Transfer to stage 2 (315) 315 - - -
Transfer to stage 3 (155,442) - 155,442 - -

New loan commitments and new

financial guarantees originated 128,162,317 - - 128,162,317 526,747
Loan commitments and financial
guarantees that have been
derecognised (28,110,753) (36) 71,261 (28,039,528) (115,242)
Currency translation differences - - - - (14,310)
Total amounts committed and
guaranteed amount
as at 31 December 2023 468,794,558 300 228,092 469,022,950 1,915,958

Loss allowance as at 31 December

2023 (590,259) - (45,437) (635,696) (2,597)

82
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.1 Credit risk management (continued)

32.1.3 Credit quality analysis (continued)

Loan commitments and financial guarantee contracts (continued)

31 December 2022
Stage 1 Stage 2 Stage 3
12-month Lifetime Lifetime
ECL ECL ECL Total
US$ US$ US$ US$ KHR Million
Total amounts committed
and guaranteed
as at 1 January 2022 282,416,247 131 - 282,416,378 1,150,564

Changes in gross carrying amount

Transfer to stage 1 - - - - -
Transfer to stage 2 (73,373) 73,373 - - -
Transfer to stage 3 (37,392) (30) 37,422 - -

New loan commitments and new

financial guarantees originated 135,318,194 - - 135,318,194 553,045
Loan commitments and financial
guarantees that have been
derecognised (48,752,148) (53,933) (28,330) (48,834,411) (199,586)
Currency translation differences - - - - 14,740
Total amounts committed and
guaranteed amount
as at 31 December 2022 368,871,528 19,541 9,092 368,900,161 1,518,763

Loss allowance as at 31 December

2022 (352,193) (2,417) (1,678) (356,289) (1,467)

83
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.1 Credit risk management (continued)

32.1.3 Credit quality analysis (continued)

The tables below analyse the movement of the loss allowance of loans to customers during the year
on loans to customers.

Loss allowance – loans to customers at amortised cost

31 December 2023
Stage 1 Stage 2 Stage 3
12-month Lifetime Lifetime
ECL ECL ECL Total
US$ US$ US$ US$ KHR Million
Loss allowance as at 1 January
2023 28,774,200 8,596,536 35,803,567 73,174,303 301,259

Changes in loss allowance

Transfer to stage 1 7,002,415 (1,219,285) (5,783,130) - -
Transfer to stage 2 (326,643) 1,441,249 (1,114,606) - -
Transfer to stage 3 (1,316,574) (4,531,615) 5,848,189 - -

Net remeasurement of loss

allowance(1) (5,576,365) (1,885,022) 33,168,527 25,707,140 105,657
New financial assets originated 4,489,264 152,056 4,150,279 8,791,599 36,133
Financial assets that have been
derecognised (1,773,500) (2,130,088) (5,277,688) (9,181,276) (37,735)
Write off (34,207) (22,129) (427,456) (483,792) (1,988)
Other changes(2) (4,000,000) - - (4,000,000) (16,440)
Currency translation differences - - - - (2,862)

Loss allowance as at 31
December 2023 27,238,590 401,702 66,367,682 94,007,974 384,024

(1)
Includes the net remeasurement of loss allowances (after transfers) attributable mainly to
changes in volume and in the credit quality of existing loans.
(2)
This represents reversal of management overlay for the year ended 31 December 2023.

84
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.1 Credit risk management (continued)

32.1.3 Credit quality analysis (continued)

Loss allowance – loans to customers at amortised cost (continued)

31 December 2022
Stage 1 Stage 2 Stage 3
12-month Lifetime Lifetime
ECL ECL ECL Total
US$ US$ US$ US$ KHR Million
Loss allowance as at 1 January
2022 32,027,418 4,118,882 10,269,511 46,415,811 189,098

Changes in loss allowance

Transfer to stage 1 1,168,671 (841,424) (327,247) - -
Transfer to stage 2 (189,017) 286,721 (97,704) - -
Transfer to stage 3 (803,191) (2,059,859) 2,863,050 - -

Net remeasurement of loss

allowance(1) 647,001 6,047,106 21,163,426 27,857,533 113,854
New financial assets originated 2,951,766 1,815,073 3,798,978 8,565,817 35,008
Financial assets that have been
derecognised (1,300,965) (715,320) (1,708,183) (3,724,468) (15,222)
Write off (127,483) (54,643) (158,264) (340,390) (1,391)
Other changes(2) (5,600,000) - - (5,600,000) (22,887)
Currency translation differences - - - - 2,799

Loss allowance as at 31 December

2022 28,774,200 8,596,536 35,803,567 73,174,303 301,259

(1)
Includes the net remeasurement of loss allowance (after transfers) attributable mainly to changes
in volume and in the credit quality of existing loans.
(2)
This represents reversal of management overlay for the year ended 31 December 2022.

85
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.1 Credit risk management (continued)

32.1.4 Concentration of credit risk

The Bank monitors concentrations of credit risk by sector. An analysis of concentrations of credit risk from balances with other banks, loans to customers,
investment securities, deposits and other receivables and loan commitments and financial guarantee contracts are shown below.

31 December 2023
Loan
commitments
Deposits and and financial
Balances with Loans to Investment other guarantee
other banks customers securities receivables contracts Total
US$ US$ US$ US$ US$ US$ KHR Million

Carrying amount 1,476,824,428 7,772,341,514 338,015,805 39,432,361 (635,696) 9,625,978,412 39,322,122

Amount committed - - - - 469,022,950 469,022,950 1,915,959
Concentration by sector:
Wholesale and retail trade - 3,727,694,971 - - 264,452,341 3,992,147,312 16,307,922
Financial institution 1,476,824,428 171,015,956 287,541,027 26,069,202 1,312,449 1,962,763,062 8,017,888
Services - 1,130,114,321 - - 46,378,438 1,176,492,759 4,805,973
Real estate rental - 887,365,836 - 6,617,456 10,271,153 904,254,445 3,693,879
Construction and real estate
operation - 718,792,570 11,024,156 - 73,009,263 802,825,989 3,279,544
Manufacturing - 491,961,200 - - 44,592,407 536,553,607 2,191,821
Agriculture - 424,767,433 - - 2,775,433 427,542,866 1,746,513
Individual - 220,629,227 - 6,745,703 25,595,770 252,970,700 1,033,385
Other - - 39,450,622 - - 39,450,622 161,156

1,476,824,428 7,772,341,514 338,015,805 39,432,361 468,387,254 10,095,001,362 41,238,081

86
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.1 Credit risk management (continued)

32.1.4 Concentration of credit risk (continued)

31 December 2022
Loan
commitments
Deposits and and financial
Balances with Loans to Investment other guarantee
other banks customers securities receivables contracts Total
US$ US$ US$ US$ US$ US$ KHR Million

Carrying amount 483,070,473 6,448,799,797 34,942,747 18,095,017 (356,288) 6,984,551,744 28,755,400

Amount committed - - - - 368,900,161 368,900,161 1,518,762
Concentration by sector:
Wholesale and retail trade - 3,112,814,132 - - 197,278,752 3,310,092,884 13,627,652
Services - 974,775,067 - - 47,170,063 1,021,945,130 4,207,348
Real estate rental - 781,456,224 - 5,486,937 5,995,549 792,938,710 3,264,529
Construction and real estate operation - 634,383,130 29,495,080 - 65,887,743 729,765,953 3,004,446
Financial institution 483,070,473 48,935,340 4,250,710 11,470,171 614,689 548,341,383 2,257,521
Manufacturing - 368,742,271 - - 34,425,665 403,167,936 1,659,842
Agriculture - 346,872,212 - - 3,649,470 350,521,682 1,443,098
Individual - 180,821,421 - 1,137,909 13,521,942 195,481,272 804,796
Other - - 1,196,957 - - 1,196,957 4,928

483,070,473 6,448,799,797 34,942,747 18,095,017 368,543,873 7,353,451,907 30,274,160

87
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.2 Liquidity risk

Liquidity risk is the risk that the Bank does not have sufficient financial resources to meet its obligations
as they fall due, or will have to do so at an excessive cost. This risk arises from mismatches in the timing
of cash flows which is inherent in all banking operations and can be affected by a range of Bank-specific
and market-wide events.

32.2.1 Liquidity risk management

The Bank’s Board of Directors sets the Bank’s strategy for managing liquidity risk and oversight of the
implementation is administered by Board Risk Management Committee (BRMC). BRMC approves the
Bank’s liquidity policies created by the Risk division and acknowledged by Asset-Liability Committee
(ALCO). Treasury department manages the Bank’s liquidity position on a day-to-day basis and reviews
daily reports covering the liquidity position of Head office and branches. A summary report, including
any exceptions and remedial action taken, is submitted regularly to ALCO.

The Bank’s approach to managing liquidity is to ensure, as far as possible, that it will always have
sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions,
without incurring unacceptable losses or risking damage to the Bank’s reputation. The key elements
of the Bank’s liquidity strategy are as follows:

• Maintaining a diversified funding base consisting of customer deposits (both individual and
corporate) and maintaining contingency facilities.
• Carrying a portfolio of highly liquid assets, diversified by currency and maturity.
• Monitoring maturity mismatches, behavioral characteristics of the Bank’s financial assets and
financial liabilities, and the extent to which the Bank’s assets are encumbered and so not
available as potential collateral for obtaining funding.
• Stress testing of the Bank’s liquidity position against various exposures and country-specific
events.
• Minimise cost of foregone earnings on idle liquidity.

Treasury department receives information from other business units regarding the liquidity profile of
their financial assets and financial liabilities and details of other projected cash flows arising from
projected future business. Treasury department then maintains a portfolio of short-term liquid assets,
largely made up of inter-bank facilities, to ensure that sufficient liquidity is maintained within the Bank
as a whole. The liquidity requirements of branches are met through funds from Treasury department
to cover any short-term fluctuations and longer-term funding to address any structural liquidity
requirements.

Finance department monitors compliance with local regulatory limits on a monthly basis.

Regular liquidity stress testing is conducted by Risk Management Department under a variety of
scenarios covering historical depositors’ runoff to test compliance with regulatory and risk appetite
metrics under stressed conditions. Risk Management Department presented results of stress testing
and relevant recommendations to BRMC on quarterly basis or an ad hoc basis.

88
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.2 Liquidity risk (continued)

32.2.2 Exposure to liquidity risk

The key metric measure used by the Bank for managing liquidity risk is Liquidity Risk Coverage Ratio.
This ratio reflects the available cash inflows (including loans to be collected and balances with other
banks); cash outflows matured within 30 days (including amount to be paid to lenders, deposits from
financial institutions and corporates); and adjusted retail savings deposit as well as stock of eligible
liquid assets (cash on hand, all current accounts and reserve requirements with the NBC).

31 December 2023 31 December 2022

At end of year 133.05% 127.79%

Average for the year 127.71% 132.40%
Maximum for the year 134.98% 149.89%
Minimum for the year 111.41% 117.22%

32.2.3 Maturity analysis for financial assets and financial liabilities

The following tables set out the remaining contractual maturities of the Bank’s financial assets and
financial liabilities. The sum of the balances depicted in the maturity analysis do not reconcile with the
carrying amount of the assets/liabilities as disclosed in the statement of financial position. This is
because maturity analysis incorporates, on an undiscounted basis, all cash flows relating to principal.
The amount for issued loan commitments and financial guarantees contract is the maximum amount
that may be drawn down under the loan commitment, or called under the financial guarantees
contract, both included in the earliest possible period under these could be paid. The undiscounted
cash flows potentially payable under financial guarantees and similar contracts are classified on the
basis of the earliest date they can be called.

89
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.2 Liquidity risk (continued)

32.2.3 Maturity analysis for financial assets and financial liabilities (continued)

Gross nominal
Carrying inflow/ >1–3 > 3 – 12 >1–5 Over 5 No specific
amount (outflow) Up to 1 month months months years years maturity
US$ US$ US$ US$ US$ US$ US$ US$
31 December 2023
Financial assets by type
Non-derivative assets
Cash on hand 474,857,773 474,857,773 474,857,773 - - - - -
Balances with the NBC 1,144,610,187 1,145,660,165 247,141,494 25,131,638 145,637,645 - - 727,749,388
Balances with other banks 1,476,824,428 1,499,143,137 699,012,048 266,341,918 533,789,171 - - -
Loans to customers 7,772,341,514 10,283,128,789 254,114,244 469,985,512 1,829,031,788 4,805,304,044 2,924,693,201 -
Investment securities 338,015,805 346,510,480 - 139,955,709 206,554,771 - - -
Other assets 63,843,072 63,843,072 39,031,993 78,540 176,476 2,994,246 3,428,542 18,133,275

In US$ equivalent 11,270,492,779 13,813,143,416 1,714,157,552 901,493,317 2,715,189,851 4,808,298,290 2,928,121,743 745,882,663

In KHR Million equivalent 46,039,963 56,426,693 7,002,335 3,682,600 11,091,551 19,641,899 11,961,377 3,046,931

90
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.2 Liquidity risk (continued)

32.2.3 Maturity analysis for financial assets and financial liabilities (continued)

Gross nominal
Carrying inflow/ >1–3 > 3 – 12 >1–5 Over 5 No specific
amount (outflow) Up to 1 month months months years years maturity
US$ US$ US$ US$ US$ US$ US$ US$
31 December 2023
Financial liabilities by type
Non-derivative liabilities
Deposits from banks and
other financial
institutions (206,402,009) (213,587,895) (140,873,718) (5,598,517) (47,927,046) (19,188,614) - -
Deposits from customers (9,026,304,769) (9,214,752,791) (6,458,546,284) (560,451,458) (1,936,017,885) (259,737,164) - -
Borrowings (146,416,963) (149,599,663) (52,128,993) (39,045,703) (51,494,375) (3,644,118) (3,286,474) -
Subordinated debts (96,053,372) (119,502,629) - - (6,246,214) (113,256,415) - -
Lease liabilities (69,053,434) (84,533,728) (1,187,927) (2,361,725) (10,404,309) (41,799,419) (28,780,348)
Other liabilities (84,631,848) (84,631,848) - (37,463,752) (46,316,845) (410,285) (440,966) -
(9,628,862,395) (9,866,608,554) (6,652,736,922) (644,921,155) (2,098,406,674) (438,036,015) (32,507,788) -

Loan commitments and

financial guarantee
contracts - (469,022,950) (40,501,759) (71,110,051) (324,495,210) (32,915,930) - -

In US$ equivalent (9,628,862,395) (10,335,631,504) (6,693,238,681) (716,031,206) (2,422,901,884) (470,951,945) (32,507,788) -

In KHR Million equivalent (39,333,903) (42,221,054) (27,341,880) (2,924,987) (9,897,554) (1,923,839) (132,794) -

91
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.2 Liquidity risk (continued)

32.2.3 Maturity analysis for financial assets and financial liabilities (continued)

Gross nominal
Carrying inflow/ Up to 1 >1–3 > 3 – 12 >1–5 Over 5 No specific
amount (outflow) month months months years years maturity
US$ US$ US$ US$ US$ US$ US$ US$
31 December 2022
Financial assets by type
Non-derivative assets
Cash on hand 461,874,069 461,874,069 461,874,069 - - - - -
Balances with the NBC 1,384,213,047 1,393,175,414 202,511,766 160,805,846 470,257,960 - - 559,599,842
Balances with other banks 483,070,473 495,312,989 101,385,968 45,596,629 348,330,392 - - -
Loans to customers 6,448,799,797 9,479,197,071 263,122,942 534,372,526 2,225,511,884 4,095,945,821 2,360,243,898 -
Investment securities 34,942,747 37,172,522 - - 990,491 36,182,031 - -
Other assets 50,319,842 50,319,842 32,249,653 18,960 149,953 2,182,424 4,246,750 11,472,102

In US$ equivalent 8,863,219,975 11,917,051,907 1,061,144,398 740,793,961 3,045,240,680 4,134,310,276 2,364,490,648 571,071,944

In KHR Million equivalent 36,489,877 49,062,503 4,368,732 3,049,849 12,537,256 17,020,955 9,734,608 2,351,103

92
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.2 Liquidity risk (continued)

32.2.3 Maturity analysis for financial assets and financial liabilities (continued)

Gross nominal
Carrying inflow/ Up to 1 >1–3 > 3 – 12 >1–5 Over 5 No specific
amount (outflow) month months months years years maturity
US$ US$ US$ US$ US$ US$ US$ US$
31 December 2022
Financial liabilities by type
Non-derivative liabilities
Deposits from banks and
other financial
institutions (142,662,081) (149,659,029) (44,786,596) (5,364,775) (82,289,611) (14,978,319) (2,239,728) -
Deposits from customers (7,210,953,614) (7,305,434,464) (5,537,379,254) (284,103,615) (1,349,948,517) (134,003,078) - -
Borrowings (68,358,368) (71,842,018) (8,903,020) (19,142,400) (37,323,114) (1,232,652) (5,240,832) -
Subordinated debts (121,045,397) (155,741,600) - - (3,102,721) (83,238,230) (69,400,649) -
Lease liabilities (60,411,883) (73,367,606) (994,996) (1,946,871) (8,776,564) (37,392,066) (24,257,108) -
Other liabilities (54,654,841) (54,654,841) - (29,670,768) (14,377,717) (10,208,119) (398,237) -
(7,658,086,184) (7,810,699,558) (5,592,063,866) (340,228,429) (1,495,818,244) (281,052,464) (101,536,554) -

Loan commitments and

financial guarantee
contracts - (368,900,161) (30,321,827) (58,447,747) (257,397,829) (22,720,258) (12,500) -

In US$ equivalent (7,658,086,184) (8,179,599,719) (5,622,385,693) (398,676,176) (1,753,216,073) (303,772,722) (101,549,054) -

In KHR Million equivalent (31,528,341) (33,675,413) (23,147,362) (1,641,350) (7,217,991) (1,250,632) (418,077) -

93
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.2 Liquidity risk (continued)

32.2.3 Maturity analysis for financial assets and financial liabilities (continued)

The amounts in the table above have been compiled as follows:

Type of financial instrument Basis on which amounts are compiled

Financial assets Undiscounted cash flows, which include estimated interest collections.
Financial liabilities Undiscounted cash flows, which include estimated interest payments.
Loan commitments and Earliest possible contractual maturity
financial guarantee contracts

The significant mismatch in the timing and amount of cash flows in the one-month bucket highly made up of
large deposits from customers under current and savings accounts. With the strong position of the Bank, the
deposits could be retained and increased continuously to maintain the liquidity position.

As part of the management of liquidity risk arising from financial liabilities, the Bank holds liquid assets
comprising cash and cash equivalents, which can meet liquidity requirements. In addition, the Bank
maintains agreed lines of credit with other banks and could obtain additional financial support from the
parent bank, National Bank of Canada.

94
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.2 Liquidity risk (continued)

32.2.3 Maturity analysis for financial assets and financial liabilities (continued)

The following table sets out the carrying amounts of non-derivative financial assets and financial liabilities
expected to be recovered or settled less than 12 months after the reporting date.

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million

Financial assets
Cash on hand 474,857,773 1,939,794 461,874,069 1,901,536
Balances with the NBC 1,034,610,187 4,226,383 1,318,213,047 5,427,083
Balances with other banks 1,476,824,428 6,032,828 483,070,473 1,988,801
Loans to customers 2,044,819,582 8,353,088 1,684,857,644 6,936,559
Investment securities 338,015,805 1,380,795 1,004,875 4,137
Other assets 57,420,284 234,561 43,890,668 180,698

5,426,548,059 22,167,449 3,992,910,776 16,438,814

Financial liabilities
Deposits from banks and other financial
institutions 191,694,459 783,072 137,523,585 566,185
Deposits from customers 8,866,211,427 36,218,474 7,109,097,585 29,268,155
Borrowings 140,300,835 573,129 62,723,879 258,234
Subordinated debts 6,003,445 24,524 3,001,069 12,355
Lease liabilities 10,216,435 41,734 8,358,718 34,413
Other liabilities 83,780,597 342,244 44,048,486 181,348
9,298,207,198 37,983,177 7,364,753,322 30,320,690

Loan commitments 436,107,020 1,781,497 346,167,403 1,425,171

9,734,314,218 39,764,674 7,710,920,725 31,745,861

95
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.2 Liquidity risk (continued)
32.2.3 Maturity analysis for financial assets and financial liabilities (continued)

The following table sets out the carrying amounts of non-derivative financial assets and financial
liabilities expected to be recovered or settled more than 12 months after the reporting date.

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million
Financial assets
Balances with the NBC 110,000,000 449,350 66,000,000 271,722
Loans to customers 5,727,521,932 23,396,927 4,763,942,153 19,613,150
Investment securities - - 33,937,872 139,722
Other assets 6,422,788 26,237 6,429,174 26,469
5,843,944,720 23,872,514 4,870,309,199 20,051,063
Financial liabilities
Deposits from banks and other
financial institutions 14,707,550 60,080 5,138,496 21,155
Deposits from customers 160,093,342 653,981 101,856,029 419,341
Borrowings 6,116,128 24,984 5,634,489 23,197
Subordinated debts 90,049,927 367,854 118,044,328 485,988
Lease liabilities 58,836,999 240,349 52,053,165 214,303
Other liabilities 851,251 3,478 10,606,355 43,666
330,655,197 1,350,726 293,332,862 1,207,650

Loan commitments 32,915,930 134,462 22,732,758 93,591

363,571,127 1,485,188 316,065,620 1,301,241

32.2.4 Liquidity reserves

The Bank maintains a pool of liquid assets which represents the primary source of liquidity in stress
scenarios. Its composition is subject to limits designed to reduce concentration risks which are
monitored on an ongoing basis. The Bank’s liquidity reserves are analysed below.

31 December 2023 31 December 2022

Carrying Carrying
amount Fair value amount Fair value
US$ US$ US$ US$

Cash on hand 474,857,773 474,857,773 461,874,069 461,874,069

Balances with the NBC 799,194,376 799,194,376 652,145,656 652,145,656
Balances with other banks 1,476,824,428 1,476,824,428 483,070,473 483,070,473
Investment securities 307,535,454 307,535,454 5,447,668 5,447,668

Total liquidity reserves 3,058,412,031 3,058,412,031 1,602,537,866 1,602,537,866

In KHR Million equivalent 12,493,613 12,493,613 6,597,648 6,597,648

96
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.2 Liquidity risk (continued)

32.2.5 Financial assets available to support future funding

The following table sets out the availability of the Bank’s financial assets to support future funding.

Encumbered Unencumbered
Available
Pledged as as
collateral Other* collateral Other** Total
US$ US$ US$ US$ US$ KHR Million
31 December 2023
Cash on hand - - - 474,857,773 474,857,773 1,939,794
Balances with the
NBC 231,879,000 727,749,388 179,595,023 5,386,776 1,144,610,187 4,675,733
Balances with
other banks - - - 1,476,824,428 1,476,824,428 6,032,828
Loans to customers - - - 7,772,341,514 7,772,341,514 31,750,015
Investment
securities - - - 338,015,805 338,015,805 1,380,795
Other assets - - - 63,843,072 63,843,072 260,799

231,879,000 727,749,388 179,595,023 10,131,269,368 11,270,492,779 46,039,964

31 December 2022
Cash on hand - - - 461,874,069 461,874,069 1,901,536
Balances with the
NBC 63,799,000 559,599,842 755,176,856 5,637,349 1,384,213,047 5,698,805
Balances with
other banks - - - 483,070,473 483,070,473 1,988,801
Loans to customers - - - 6,448,799,797 6,448,799,797 26,549,709
Investment
securities - - - 34,942,747 34,942,747 143,859
Other assets - - - 50,319,842 50,319,842 207,166

63,799,000 559,599,842 755,176,856 7,484,644,277 8,863,219,975 36,489,876

* Represents assets that are not pledged but that the Bank believes it is restricted from using to
secure funding, for legal or other reasons. This includes capital guarantee deposit and reserve
requirement.
** Represents assets that are not restricted for use as collateral, but that the Bank would not
consider readily available to secure funding in the normal course of business.

97
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.3 Market risk

Market risk’ is the risk that changes in market prices – e.g. interest rates and foreign exchange rates–
will affect the Bank’s income or the value of its holdings of financial instruments. The objective of the
Bank’s market risk management is to manage and control market risk exposures within acceptable
parameters to ensure the Bank’s solvency while optimising the return on risk.

32.3.1 Market risk management

Overall authority for market risk is vested in BRMC at Board level and ALCO at management level.
BRMC sets up limits for each type of risk in aggregate and for portfolios (all portfolios are non-trading).
The Risk Management Department is responsible for the development of detailed risk management
policies (subject to review by BRMC and approval by Board of Directors). Treasury function implement
and manage the day-to-day market risk in the daily operation.

The Bank employs a range of tools to monitor and limit market risk exposures.

The following table sets out the allocation of assets and liabilities subject to market risk.

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million
Assets subject to market risk:
Cash on hand 474,857,773 1,939,794 461,874,069 1,901,536
Balances with the NBC 1,144,610,187 4,675,733 1,384,213,047 5,698,805
Balances with other banks 1,476,824,428 6,032,828 483,070,473 1,988,801
Loans to customers 7,772,341,514 31,750,015 6,448,799,797 26,549,709
Investment securities 338,015,805 1,380,795 34,942,747 143,859
Other assets 63,843,072 260,798 50,319,842 207,167

11,270,492,779 46,039,963 8,863,219,975 36,489,877

Liabilities subject to market risk:
Deposits from banks and other
financial institutions 206,402,009 843,153 142,662,081 587,340
Deposits from customers 9,026,304,769 36,872,456 7,210,953,614 29,687,496
Borrowings 146,416,963 598,113 68,358,368 281,431
Subordinated debts 96,053,372 392,378 121,045,397 498,344
Lease liabilities 69,053,434 282,083 60,411,883 248,716
Other liabilities 84,631,848 345,721 54,654,841 225,014

9,628,862,395 39,333,904 7,658,086,184 31,528,341

98
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.3 Market risk (continued)

32.3.2 Exposure to market risk

(i) Interest rate risk

The principal risk to which non-trading portfolios are exposed is the risk of loss from fluctuations in the
future cash flows or fair values of financial instruments or economic value of equity of the Bank
because of a change in market interest rates. Interest rate risk is managed principally through
monitoring interest rate gaps and by having pre-approved limits for repricing bands.

Risk Management Department conducts stress testing of interest rate risk and present its results and
relevant recommendations to BRMC on quarterly basis or an ad hoc basis.

Interest rate sensitivity measured by the longer effective rate of duration, the more sensitive the fund
is to shifts in the interest rate. Duration is an indicator of Net Asset Value will change as the interest
rate change. The Bank has no significant financial assets and liabilities with floating interest rates.
Balances with the NBC and with banks earn fixed interest for the period of the deposit and placement,
and loans to customers earn fixed interest based on outstanding balance over the agreed term.
Therefore, no sensitivity analysis for interest rate risk was presented.

The following is a summary of the Bank’s interest rate gap position. The interest rate repricing gap
table analyses the full-term structure of interest rate mismatches within the Bank’s balance sheet
based on the maturity date.

99
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.3 Market risk (continued)
32.3.2 Exposure to market risk (continued)
(i) Interest rate risk (continued)
Carrying >1–3 >1–5 Over 5 Non-interest
amount Up to 1 month months > 3 – 12 months years years sensitive
US$ US$ US$ US$ US$ US$ US$
31 December 2023
Financial assets
Cash on hand 474,857,773 - - - - - 474,857,773
Balances with the NBC 1,144,610,187 175,576,590 25,098,112 144,741,108 - - 799,194,377
Balances with other banks 1,476,824,428 686,040,727 263,726,035 515,196,276 - - 11,861,390
Loans to customers 7,772,341,514 105,787,616 229,903,323 799,939,665 1,184,174,354 5,452,536,556 -
Investment securities 338,015,805 - 138,244,611 199,771,194 - - -
Other assets 63,843,072 - - - - - 63,843,072
11,270,492,779 967,404,933 656,972,081 1,659,648,243 1,184,174,354 5,452,536,556 1,349,756,612
Financial liabilities
Deposits from banks and other financial
institutions 206,402,009 140,583,114 5,254,055 45,052,205 15,512,635 - -
Deposits from customers 9,026,304,769 6,106,017,449 533,849,685 1,825,376,634 222,339,086 - 338,721,915
Borrowings 146,416,963 51,624,085 38,217,347 50,459,403 3,287,575 2,828,553 -
Subordinated debts 96,053,372 - - 6,003,445 90,049,927 - -
Lease liabilities 69,053,434 - - - - - 69,053,434
Other liabilities 84,631,848 - - - - - 84,631,848
9,628,862,395 6,298,224,648 577,321,087 1,926,891,687 331,189,223 2,828,553 492,407,197

Interest rate repricing gap 1,641,630,384 (5,330,819,715) 79,650,994 (267,243,444) 852,985,131 5,449,708,003 857,349,415
In KHR Million equivalent 6,706,060 (21,776,399) 325,374 (1,091,689) 3,484,444 22,262,057 3,502,272

100
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.3 Market risk (continued)
32.3.2 Exposure to market risk (continued)
(i) Interest rate risk (continued)
Carrying Up to 1 >1–3 >1–5 Over 5 Non-interest
amount month months > 3 – 12 months years years sensitive
US$ US$ US$ US$ US$ US$ US$
31 December 2022
Financial assets
Cash on hand 461,874,069 - - - - - 461,874,069
Balances with the NBC 1,384,213,047 43,940,686 160,446,303 461,464,139 - - 718,361,919
Balances with other banks 483,070,473 96,214,182 45,216,656 336,772,497 - - 4,867,138
Loans to customers 6,448,799,797 68,866,547 169,493,238 690,433,826 1,000,847,418 4,519,158,768 -
Investment securities 34,942,747 - - 1,004,875 33,937,872 - -
Other assets 50,319,842 - - - - - 50,319,842
8,863,219,975 209,021,415 375,156,197 1,489,675,337 1,034,785,290 4,519,158,768 1,235,422,968
Financial liabilities
Deposits from banks and other financial
institutions 142,662,081 44,735,714 5,163,968 78,723,216 11,983,621 2,055,562 -
Deposits from customers 7,210,953,614 5,177,549,348 276,835,941 1,283,620,259 117,366,465 - 355,581,601
Borrowings 68,358,368 8,686,277 18,645,300 35,392,302 1,131,339 4,503,150 -
Subordinated debts 121,045,397 - - 3,001,068 68,026,878 50,017,451 -
Lease liabilities 60,411,883 - - - - - 60,411,883
Other liabilities 54,654,841 - - - - - 54,654,841
7,658,086,184 5,230,971,339 300,645,209 1,400,736,845 198,508,303 56,576,163 470,648,325

Interest rate repricing gap 1,205,133,791 (5,021,949,924) 74,510,988 88,938,492 836,276,987 4,462,582,605 764,774,643
In KHR Million equivalent 4,961,536 (20,675,368) 306,762 366,160 3,442,952 18,372,453 3,148,577

101
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.3 Market risk (continued)

32.3.2 Exposure to market risk (continued)

(ii) Foreign exchange risk

The Bank transacts business in various foreign currencies and therefore is exposed to foreign exchange
risk.

As at each reporting date, the carrying amounts of financial assets and financial liabilities denominated
in currencies other than the Bank’s functional currency are as follows:

US$ equivalent Total

KHR Others US$ KHR Million
31 December 2023
Financial assets
Cash on hand 81,081,403 88,676 81,170,079 331,580
Balances with the NBC 70,387,388 - 70,387,388 287,532
Balances with other banks* 3,534,643 231,518 3,766,161 15,385
Loans to customers* 803,401,735 - 803,401,735 3,281,896
Other assets* 32,907,593 922 32,908,515 134,431
991,312,762 321,116 991,633,878 4,050,824
Financial liabilities
Deposits from banks and
other financial institutions 30,476,519 - 30,476,519 124,497
Deposits from customers 775,648,950 848 775,649,798 3,168,529
Borrowings 140,569,223 - 140,569,223 574,225
Other liabilities 32,338,272 666,231 33,004,503 134,823
979,032,964 667,079 979,700,043 4,002,074

Net foreign exchange gap 12,279,798 (345,963) 11,933,835 48,750

* Excluding impairment loss allowance.

102
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.3 Market risk (continued)

32.3.2 Exposure to market risk (continued)

(ii) Foreign exchange risk (continued)

US$ equivalent Total

KHR Others US$ KHR Million
31 December 2022
Financial assets
Cash on hand 68,363,383 60,096 68,423,479 281,699
Balances with the NBC 52,127,674 - 52,127,674 214,610
Balances with other banks* 370,258 436,684 806,942 3,322
Loans to customers* 545,099,211 - 545,099,211 2,244,173
Investment Securities* 1,220,387 - 1,220,387 5,024
Other assets* 8,983,644 344 8,983,988 36,987
676,164,557 497,124 676,661,681 2,785,815
Financial liabilities
Deposits from banks and other
financial institutions 19,290,674 - 19,290,674 79,420
Deposits from customers 536,697,703 822 536,698,525 2,209,588
Borrowings 63,044,550 - 63,044,550 259,554
Other liabilities 5,516,186 245,231 5,761,417 23,720
624,549,113 246,053 624,795,166 2,572,282

Net foreign exchange gap 51,615,444 251,071 51,866,515 213,533

* Excluding impairment loss allowance.

As shown in the table above, the Bank is primarily exposed to changes in US$/KHR exchange rates. The
sensitivity of profit or loss to changes in the exchange rates arises mainly from financial instruments
denominated in KHR. However, management considers that impact from foreign currency rate
fluctuation is deemed minimal and thus, no sensitivity analysis for foreign currency exchange risk is
presented.

103
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32.4 Operational risk

32.4.1 Operational risk management

Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated
with the Bank’s processes, personnel, technology and infrastructure, and from external factors other
than credit, market and liquidity risks – e.g. those arising from legal and regulatory requirements and
generally accepted standards of corporate behaviour. Operational risks arise from all of the Bank’s
operations.

The Bank’s objective is to manage operational risk to balance the avoidance of financial losses and
damage to the Bank’s reputation with overall cost effectiveness and innovation. In all cases, Bank’s
policy requires compliance with all applicable legal and regulatory requirements.

The Bank’s Operational Risk Framework includes process, product and fraud reviews to identify
potential failure points where possible.

32.5 Capital risk

Capital risk is the risk that the Bank has insufficient capital resources to meet the minimum regulatory
requirements to support its credit rating and to support its growth and strategic options.

The Bank’s strategy is to maintain a strong capital base so as to maintain market confidence and to
sustain further development of the business. The impact of the level of capital on shareholder’s return
is also recognised and the Bank recognised the need to maintain a balance between the higher returns
that might be possible with greater gearing and advantages and security afforded by a sound capital
position.

The Bank’s lead regulator, the NBC, sets and monitors capital requirements for the Bank as a whole.

104
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.5 Capital risk (continued)

32.5.1 Capital risk management

As with liquidity and market risks, BRMC and ALCO is responsible for ensuring the effective
management of capital risk throughout the Bank.

Capital risk is measured and monitored using limits set calculated in accordance with NBC’s
requirements.

On 22 February 2018, the NBC issued a Prakas on Capital Conservation Buffer in Banking and Financial
Institutions. According to Article 22 of this Prakas, the institution shall comply with the provisions
related to the capital conservation buffer at least 50% of the conservation buffer requirement by 1
January 2019 and fully comply by 1 January 2020.

On 7 March 2018, the NBC issued a circular on the implementation of Prakas on Capital Buffer in
Banking and Financial Institutions, which determines the countercyclical capital buffer at a level of 0%
until a new announcement is released.

On 17 March 2020, the NBC issued an announcement No. B13-020-002 allowing Banks and Financial
Institutions to delay and maintain capital conservation buffer at 50% of total requirement to reduce
the impact from COVID-19 on Cambodian economic in accordance to Government policy.

On 7 December 2022, the NBC issued a letter No. B7-022-2378 requiring the Bank to always maintain
its solvency ratio at minimum 16% until further notice as the NBC considers the Bank as a large
institution that requires to maintain the solvency ratio at an appropriate level.

On 23 November 2023, the NBC issued a letter No. B7-023-2621 allowing banking and financial
institutions to continue to implement the capital conservation buffer at 1.25% (50% of total
requirement) until 31 December 2024 as jointly requested by the Association of Banks in Cambodia
and Cambodia Microfinance Association.

The Bank has complied with all externally imposed capital requirements throughout the year.

105
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

32. FINANCIAL RISK MANAGEMENT (continued)

32.5 Capital risk (continued)

32.5.1 Capital risk management (continued)

The table below summarise the composition of the Bank’s Regulatory Net Worth required by the NBC.

31 December 2023 31 December 2022

US$ KHR Million US$ KHR Million
Tier 1 capital
Share capital 1,100,000,000 4,493,500 660,000,000 2,717,220
Retained earnings 180,433,428 737,071 230,569,559 949,255
Audited net profit for the
last financial year 276,481,668 1,129,428 262,278,237 1,079,800
Less: Intangible assets (16,555,112) (67,628) (16,296,439) (67,092)
Less: Loans to related
parties (*) (4,250,739) (17,364) (8,167,556) (33,626)
1,536,109,245 6,275,007 1,128,383,801 4,645,557
Tier 2 capital
General provision based on
NBC Prakas 96,760,610 395,267 69,304,399 285,326
Subordinated debts (*) 96,000,000 392,160 121,000,000 498,157
Less: Equity participations in
banking and financial
institutions (76,185) (311) (76,185) (314)
192,684,425 787,116 190,228,214 783,169

Regulatory net worth 1,728,793,670 7,062,123 1,318,612,015 5,428,726

(*) This only represent the outstanding principal amount.

32.6 Fair value of financial assets and liabilities

The Bank does not hold any financial assets or liabilities which are measured at fair value through profit
or loss or at fair value through other comprehensive income. Fair value represents the price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. As verifiable market prices are not available for a significant
proportion of the Bank’s financial assets and liabilities. Fair values, therefore, have been based on
management assumptions according to the profile of the asset and liability base. Management
believes that the carrying amounts of the financial assets and liabilities included in the statement of
financial position are a reasonable estimation of their fair values.

106
 ADVANCED BANK OF ASIA LIMITED

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

33. TAX CONTINGENCIES

Tax audit for the year 2016:

On 1 April 2022, the General Department of Taxation (“GDT”) issued a notice of tax reassessment to
the Bank as a result of the comprehensive tax audit for the period 1 January to 31 December 2016 on
various items. The Bank has consulted and obtained a legal opinion of a professional law firm
supporting the management decision to object the tax reassessment report in terms of capital gain of
shareholders. Accordingly, the Bank submitted the objection letter dated 26 April 2022 to reject one
of the items which management believes that the Bank should not pay any additional tax as reassessed
by the tax auditor and requested to pay for the rest agreed items. On 5 August 2022, the GDT issued a
revised tax reassessment which allowed the Bank to make a payment on the agreed items and the
transaction was completed on 12 August 2022. As of date of this report, the GDT has yet to issue an
official response on the objected item as stated in the protest letter.

Tax Audit for the year 2017 and onward:

The tax audits for the period 1 January to 31 December of the year 2017 to 2020 are in progress and
there is no notice of tax reassessment as at the date of this report. The fiscal years from 1 January 2021
to the date of this report have not been audited by the GDT.

Management believes that it has adequately provided for tax liabilities based on its interpretation of
tax regulations.

107