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2.5 FOREIGN CURRENCIES
Assets and liabilities in foreign currencies are translated into Singapore dollars at the exchange rates prevailing at balance sheet date. Income and expense items are translated into Singapore
dollars at the average exchange rates for the year.
2.6 CASH AND CASH EQUIVALENTS
Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand and deposits held at call with
the central banks.
2.7 LOANS AND ADVANCES
Loans and advances are carried at recoverable amounts i.e., outstanding balances after deduction of provisions for bad and doubtful debts.
Loans are classified in accordance with MAS’ guidelines as well as internal loan grading policies. These classifications, and underlying collateral valuations, are used to determine the
amount of provision required. MAS’ guidelines require banks to classify their loan portfolios into five categories – two categories for performing loans Pass and Special Mention and three
categories for classified, or non-performing loans Substandard, Doubtful or Loss.
When concessions are granted to the original terms of the loan for reasons that related to the financial difficulties of the borrower, the loan is considered a Restructured Loan. A
Restructured Loan is generally graded as Substandard or worse. Restructured Loans are not
returned to performing status until specific conditions have been met, including there being no longer any reasonable doubt regarding the timely collection of principal and interest and there
having been a reasonable period of sustained performance under the restructured terms.
2.8 PROVISION FOR LOAN LOSSES
Provision for loan losses comprise specific provisions against certain loans and advances and a general provision on total loans and advances.
A specific provision is made when a loan is classified as Substandard or worse and there is insufficient collateral security or other unencumbered assets available to repay loans in full.
Specific provisions are based on several factors including: loan amount, other commitments to the borrower, the borrower’s payment history and business prospects, collateral value, and the
estimated costs to obtain repayment. The actual percentage provided depends on management’s judgement and whether the loan is graded “Substandard”, “Doubtful”, or “Loss”. Substandard
loans will generally have a specific provision of 10 to 49 of the unsecured principal amount. Doubtful
loans will typically have a specific provision of 50 to less than 100 of the unsecured principal amount, and Loss grade loans are provisioned at 100 of the unsecured
principal amount. Interest on Substandard and worse loans is provisioned at 100 of the accrued amount.
8 General provisions are maintained for losses that can reasonably be expected to arise, based on
historical experience, from the existing overall loan portfolio over its remaining life but which are not yet identifiable. In determining the level of general provision, reference is also made to
country conditions, the composition of the portfolio and industry practices.
In the case of loans managed on an individual basis, bad debts are written off against provisions when recovery action has been instituted and the losses can be determined with reasonable
certainty. For loans managed on a portfolio basis, unsecured bad debts are written off against provisions when amounts owing are 180 days past due while secured bad debts are written off to
provisions when the collateral has been disposed of or sold. DBS Bank continues to make every effort to recover amounts owing, even after write-offs have been recorded.
2.9 DEBT SECURITIES AND EQUITIES
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