Notional values of credit derivatives do not accurately reflect their economic risks. They comprise both beneficiary and
guarantor buy and sell protection positions.
The Group generally has higher total notional amounts of protection bought than sold as credit derivatives are also used
to hedge risks from other instruments, including those from customer flows. The protection sold in credit derivatives are
largely matched with the protection bought through other credit derivatives or structured notes issued.
The Group actively monitors its counterparty credit risk in credit derivative contracts. More than 95 of the notional value of
the Group’s credit derivative positions as at 31 December 2011 is to 15 large, established names with which the Group
maintains collateral agreements.
3.5.2 CREDIT EQUIVALENT AMOUNTS FOR
COUNTERPARTY EXPOSURES
In millions 2011
Replacement cost 20,797
Potential future exposure 18,093
Gross credit equivalent amount 38,890
Comprising: Interest rate contracts
11,808 Credit derivative contracts
6,977 Equity contracts
109 Foreign exchange contracts and gold
19,964 Commodities contracts
32 Gross credit equivalent amount
38,890 Less: Effect of netting arrangement
18,902 Credit equivalent amount after netting
19,988 Less: Collateral amount
Eligible financial collateral 863
Other eligible collateral 11
Net credit equivalent amount 19,114
Counterparty credit exposure is mitigated by exposure netting through ISDA agreements and recognition of eligible collateral,
effects of which have been included in regulatory capital calculations where appropriate.
4 EQUITY EXPOSURES IN BANKING BOOK
4.1 SCOPE OF APPLICATION
The Group’s banking book equity investments consist of: • Investmentsheldforyieldandorlong-termcapitalgains;
• Strategicstakesinentitiesheldaspartofgrowthinitiatives andor in support of business operations.
The Group’s banking book equity investments are classified and measured in accordance with Financial Reporting Standards
and are categorised as either AFS investments or Investments in Associates. Refer to Notes 2.2 and 2.7 to the Financial
Statements for the Group’s accounting policies. Entities in which the Group holds significant interests are disclosed in Note 49 to
the Financial Statements.
4.2 CAPITAL TREATMENT
The Group has adopted the IRBA simple risk weight method to calculate regulatory capital for equity exposures in its
banking book.
The following tables summarise the Group’s equity exposures in the banking book, including investments in Tier 1 capital
instruments of financial institutions:
Deductions from
Exposures Tier 1 or
2011 Total
risk- Tier 2
In millions exposures
weighted Capital
Risk weights
300 1,195
1,195 –
400 1,195
1,195 –
Deducted 137
– 137
Total 2,527
2,390 137
Exposure- weighted
Exposures average risk risk-weighted
weight
a
2011 in millions
Major stake companies approved under section 32 of the Banking Act
819 326
Capital investments in financial institutions incorporated
in Singapore, approved, licensed, registered or otherwise regulated
by the Authority = 2 of Eligible Total Capital
32 300
Other equity exposures 1,539
364 Total
2,390 350
a Percentages disclosed are before the application of IRBA scaling factor
Details of the Group’s investments in AFS securities and Associates are set out in Notes 21 and 25 to the Financial
Statements respectively while realised gains arising from sale and liquidation of equity exposures are set out in Note 9 to the
Financial Statement.
The amount of unrealised gains for equity that have not been reflected in the Group’s income statement, but have been
included in Tier 2 Capital is 29 million.
BASEL II PILLAR 3 DISCLOSURES
Year Ended 31 December 2011
76
DBS Group Holdings Ltd its Subsidiaries
78 Consolidated Income Statement
79 Consolidated Statement of
Comprehensive Income
80 Balance Sheets
81 Consolidated Statement of Changes in Equity
82 Consolidated Cash Flow Statement
Notes to the Financial Statements 83
Domicile and Activities Summary of Significant Accounting Policies
91 Effects on Financial Statements on Adoption
of New or Revised FRS 92
Critical Accounting Estimates Income Statement
93 Net Interest Income
Net Fee and Commission Income 94
Net Trading Income Net Loss from Financial Instruments
Designated at Fair Value Net Income from Financial Investments
Other Income Employee Benefits
Other Expenses Allowances for Credit and Other Losses
95 Income Tax Expense
96 Earnings Per Ordinary Share
Balance Sheet: Assets 97
Measurement Basis of Financial Instruments 99
Cash and Balances with Central Banks Singapore Government Securities and Treasury Bills
Financial Assets at Fair Value through Profit or Loss 100
Loans and Advances to Customers 103
Financial Investments 104
Securities Pledged Subsidiaries
Joint Ventures Investments in Associates
Goodwill on Consolidation 105
Properties and Other Fixed Assets 107
Deferred Tax AssetsLiabilities 108
Other Assets Balance Sheet: Liabilities
108 Due to Non-Bank Customers
109 Financial Liabilities at Fair Value through
Profit or Loss 110
Other Liabilities 112
Other Debt Securities in Issue 113
Subordinated Term Debts Balance Sheet: Share Capital and Reserves
114 Share Capital and Treasury Shares
115 Other Reserves and Revenue Reserves
117 Non-controlling Interests
Off-Balance Sheet Information 118
Contingent Liabilities and Commitments 119
Financial Derivatives Additional Information
122 Cash and Cash Equivalents
Share-based Compensation Plans 124
Related Party Transactions 125
Fair Value of Financial Instruments 129
Credit Risk 137
Market Risk 139
Liquidity Risk 142
Capital Management 144
Segment Reporting 147
List of Subsidiaries, Joint Ventures, Associates and Special Purpose Entities
DBS Bank Ltd
151 Income Statement
152 Statement of Comprehensive Income
153 Balance Sheet
154 Notes to the Supplementary Financial Statements
156 Directors’ Report
160 Statement by the Directors
161 Independent Auditor’s Report
FINANCIAL STATEMENTS
77 DBS Annual Report 2011
In millions Note
2011 2010
Income Interest income
6,555 5,699
Interest expense 1,730
1,381 Net interest income
5 4,825
4,318 Net fee and commission income
6 1,542
1,397 Net trading income
7 698
915 Net loss from financial instruments designated at fair value
8 18
20 Net income from financial investments
9 454
310 Other income
10 130
146 Total income
7,631 7,066
Expenses
Employee benefits 11
1,712 1,422
Other expenses 12
1,591 1,503
Goodwill charges 26
– 1,018
Allowances for credit and other losses 13
722 911
Total expenses 4,025
4,854 Share of profits of associates
127 102
Profit before tax 3,733
2,314 Income tax expense
14 443
454
Net profit for the year 3,290
1,860 Attributable to:
Shareholders 3,035
1,632 Non-controlling interests
255 228
3,290 1,860
Basic earnings per ordinary share 15
1.30 0.70